VINCE PIZZA PLUS INC PLAINTIFF APPELLANT v. DION DEFEDERICIS DEFENDANT RESPONDENT (2026)

MEMORANDUM AND ORDER

It is hereby ORDERED that the judgment so appealed from is reversed on the law without costs, the motion is denied, and the complaint is reinstated.

Memorandum: Plaintiff appeals from an order granting defendant's motion to dismiss the complaint on the ground that the causes of action asserted here were barred by the doctrine of res judicata. We reverse.

On a prior appeal (DeFedericis v Vince’s Pizza Plus, Inc., 229 AD3d 1210, 1210 [4th Dept 2024]), defendant commenced an action seeking to recover wages that he allegedly was not paid while employed as the manager of plaintiff's pizzeria. Plaintiff answered defendant's complaint and asserted two counterclaims. Thereafter, defendant filed and served an amended complaint, which plaintiff did not timely answer; defendant moved for a default judgment; and plaintiff cross-moved for an extension of time to file an answer to the amended complaint (id.). The proposed answer to the amended complaint included the same counterclaims alleging, in essence: (1) that defendant converted funds belonging to plaintiff; and (2) that defendant breached his fiduciary duty related to the operation of the restaurant by closing it early and unnecessarily for personal reasons. Supreme Court denied the motion and granted the cross-motion (prior order) (id. at 1211). On appeal, we reversed the prior order, denied the cross-motion, and granted defendant's motion for a default judgment on the ground that plaintiff failed to adduce admissible evidence establishing a potentially meritorious defense (id.). In so doing, the counterclaims that were interposed in the first action were “ ‘terminated’ within the meaning of CPLR 205 (a) as of this Court's decision” in the prior appeal (Weksler v Weksler, 140 AD3d 491, 493 [1st Dept 2016]).

Following our decision on the prior appeal, plaintiff commenced this action asserting two causes of action that were identical to the counterclaims terminated by the prior action. Thereafter, a default judgment was entered in the prior action and, as noted, defendant moved to dismiss the complaint in this action based upon, inter alia, res judicata. Following entry of the order in this action granting that motion, the court entered a judgment dismissing the complaint with prejudice.

As a preliminary matter, we note that the order was subsumed in a final judgment entered shortly after entry of the order, and thus the proper appealable paper is the judgment rather than the order (see CPLR 5501 [a] [1]; 5512 [a]; LPCiminelli, Inc. v JPW Structural Contr., Inc., 217 AD3d 1380, 1380 [4th Dept 2023]; see generally Matter of Aho, 39 NY2d 241, 248 [1976]). Although plaintiff appeals from the order, we conclude that the appeal must be deemed taken from the judgment inasmuch as the appeal is timely, no prejudice has resulted, and the judgment has been furnished to us (see CPLR 5512 [a]; Tomaselli v Malagese, 242 AD3d 1562, 1563 [4th Dept 2025]).

With respect to the merits, it is well settled that “res judicata, or claim preclusion, bars successive litigation based upon the same transaction or series of connected transactions ․ if: (i) there is a judgment on the merits rendered by a court of competent jurisdiction, and (ii) the party against whom the doctrine is invoked was a party to the previous action, or in privity with a party who was” (Matter of People v Applied Card Sys., Inc., 11 NY3d 105, 122 [2008], cert denied 555 US 1136 [2009] [internal quotation marks omitted]). “Under New York's transactional approach to the rule, ‘once a claim is brought to a final conclusion, all other claims arising out of the same transaction or series of transactions are barred, even if based upon different theories or if seeking a different remedy’ ” (Matter of Josey v Goord, 9 NY3d 386, 389-390 [2007], quoting O’Brien v City of Syracuse, 54 NY2d 353, 357 [1981]; see Xiao Yang Chen v Fischer, 6 NY3d 94, 100 [2005]; Matter of Hunter, 4 NY3d 260, 269 [2005]). Consequently, “res judicata bars claims that were not actually decided in the prior action if they could have been decided in that action” (Zayatz v Collins, 48 AD3d 1287, 1290 [4th Dept 2008]; see Belton v Borg & Ide Imaging, P.C., 220 AD3d 1174, 1175 [4th Dept 2023]). Of note, the doctrine also applies “ ‘to an order or judgment taken by default which has not been vacated’ ” (Zayatz, 48 AD3d at 1289; see Parker v Hoefer, 2 NY2d 612, 616 [1957], cert denied 355 US 833 [1957]; Albanez v Charles, 134 AD3d 657, 658 [2d Dept 2015]).

However, “New York does not have a compulsory counterclaim rule” (Henry Modell & Co. v Minister, Elders & Deacons of Ref. Prot. Dutch Church of City of N.Y., 68 NY2d 456, 461 [1986], rearg denied 69 NY2d 741 [1987]; see CPLR 3011). Thus, a defendant who fails to bring a counterclaim in an action that results in an adverse judgment will be barred from bringing that same claim only if “ ‘the two causes of action have such a measure of identity that a different judgment in the second would destroy or impair rights or interests established by the first’ ” (Lot 1555 Corp. v Nahzi, 79 AD3d 580, 580 [1st Dept 2010], quoting Schuylkill Fuel Corp. v Nieberg Realty Corp., 250 NY 304, 307 [1929]; see Henry Modell & Co., 68 NY2d at 461-462; Wells Fargo Bank N.A. v Podeswik, 115 AD3d 207, 215-216 [4th Dept 2014]; Santiago v Lalani, 256 AD2d 397, 399 [2d Dept 1998]). Stated another way, “the permissive counterclaim rule operates to save from the bar of res judicata those claims for separate or different relief that could have been but were not interposed in the parties’ prior action so long as the second action is not based on a preexisting claim for relief that would impair the rights or interests established in the first action” (Rackowski v Araya, 152 AD3d 834, 835 [3d Dept 2017] [internal quotation marks omitted]; see Berry v Batash, 247 AD3d 1115, 1118 [2d Dept 2026]).

Inasmuch as the judgment sought by plaintiff in this action would not “ ‘destroy or impair rights or interests established’ ” by defendant's default judgment in the prior action (Lot 1555 Corp., 79 AD3d at 580), plaintiff's complaint is not barred by the doctrine of res judicata. The mere fact that a counterclaim may serve as an offset to lessen the net amount owed to a plaintiff is not, in and of itself, sufficient to “impair” the rights established as a result of a default judgment inasmuch as every counterclaim—to the extent established by a defendant—provides an offset to the initial claim (see generally Carpenter v Manhattan Life Ins. Co., 93 NY 552, 556-557 [1883]). If it did not, there would be no reason to assert it as a counterclaim.

We likewise agree with plaintiff that, contrary to the alternative grounds for affirmance asserted by defendant, its causes of action for conversion and breach of fiduciary duty were timely interposed. A cause of action for conversion has a three-year statute of limitations (see CPLR 214 [3]) and accrues on the date the conversion takes place (see Morrow v Brighthouse Life Ins. Co. of NY, 200 AD3d 1622, 1624 [4th Dept 2021]; see generally Colavito v New York Organ Donor Network, Inc., 8 NY3d 43, 49-50 [2006]). Similarly, plaintiff's cause of action for breach of fiduciary duty is also subject to a three-year statute of limitations (see CPLR 214 [4]) inasmuch as the complaint does not seek equitable relief but rather seeks monetary damages (see IDT Corp. v Morgan Stanley Dean Witter & Co., 12 NY3d 132, 139 [2009], rearg denied 12 NY3d 889 [2009]). Both causes of action accrued, at the latest, in May 2021 when defendant was last employed by plaintiff. Applying a three-year statute of limitations, plaintiff was required to commence this action, at the latest, by the end of May 2024. This action was not commenced until September 17, 2024, which is beyond the expiration of the three-year statute of limitations.

However, plaintiff initially interposed its counterclaims in November 2021, and reasserted those counterclaims in September 2023 as part of the amended answer that it served consistent with the court's prior order in the prior action. Inasmuch as those counterclaims were terminated within the meaning of CPLR 205 (a) by operation of this Court's decision in the prior appeal (DeFedericis, 229 AD3d at 1210-1211) and inasmuch as plaintiff commenced this action within six months after that decision, the complaint was timely filed (see Rubin v Napoli Bern Ripka Shkolnik, LLP, 151 AD3d 603, 604 [1st Dept 2017]; Weksler, 140 AD3d at 493).

All concur except Whalen, P.J., who dissents and votes to affirm in the following memorandum: I respectfully dissent. I agree with the majority that plaintiff's causes of action for conversion and breach of fiduciary duty are not barred by the doctrine of res judicata. I would nonetheless affirm the judgment dismissing those causes of action, each of which is subject to a three-year limitations period in light of the monetary remedy sought, based on defendant's alternative ground for affirmance, i.e., that the causes of action are untimely (see CPLR 214 [3], [4]; IDT Corp. v Morgan Stanley Dean Witter & Co., 12 NY3d 132, 139 [2009], rearg denied 12 NY3d 889 [2009]; Morrow v Brighthouse Life Ins. Co. of NY, 200 AD3d 1622, 1624 [4th Dept 2021]; see generally Parochial Bus Sys. v Board of Educ. of City of N.Y., 60 NY2d 539, 545-546 [1983]).

As the majority notes, defendant previously sued plaintiff to recover wages he allegedly was not paid while employed as the manager of plaintiff's pizzeria (DeFedericis v Vince’s Pizza Plus, Inc., 229 AD3d 1210, 1210 [4th Dept 2024]). Plaintiff initially answered the complaint and asserted, as counterclaims, the same two causes of action at issue in the present action. Plaintiff, however, failed to file a timely amended answer in response to defendant's amended complaint, resulting in defendant moving for a default judgment. Although Supreme Court granted plaintiff's cross-motion for an extension of time to file an answer, including the same counterclaims, to the amended complaint, this Court reversed that order, denied the cross-motion and granted the motion for a default judgment (id. 1211). Thus, the counterclaims were terminated due to plaintiff's own neglect in the prior action. The “neglect to prosecute” exception in CPLR 205 (a) is not limited solely to dismissals pursuant to CPLR 3216, and I conclude that, under the circumstances here, plaintiff may not now avail itself of CPLR 205 (a) to avoid dismissal on statute of limitations grounds (see Andrea v Arnone, Hedin, Casker, Kennedy & Drake, Architects & Landscape Architects, P.C. [Habiterra Assoc.], 5 NY3d 514, 520 [2005]).

Entered: July 24, 2026

Ann Dillon Flynn

Clerk of the Court