HYPOSWISS PRIVATE BANK SA v. JLRE4 LLC (2026)

Order, Supreme Court, New York County (Jennifer G. Schecter, J.), entered on or about October 29, 2025, which, to the extent appealed from as limited by the briefs, granted a CPLR 3211(a)(7) motion to dismiss plaintiff's claims for conversion and money had and received against defendants JLRE4 LLC, JLRE 13th Street LLC, and Jonathan Leifer, and granted a CPLR 3211(a)(7) motion to dismiss plaintiff's claim for conversion against Shlomo Elia Investments Ltd. (SEI) and Shlomo Elia, unanimously modified, on the law, to the extent of reinstating the conversion and money had and received claims against the corporate entity defendants, and otherwise affirmed, without costs.

Plaintiff, a Swiss bank, brings this action on behalf of its client, Kadima Assets Limited.  In the late 2000s, Abraham Amos Lugassy, a former employee of plaintiff, began misappropriating clients' funds.  During Swiss criminal proceedings in 2024, Lugassy admitted to making fraudulent transfers, including the one at issue here.

The complaint alleges that in April 2022 Elia, on SEI's behalf, asked Lugassy to transfer $2 million from SEI's account to an account at Signature Bank owned by JLRE4, attaching an agreement under which SEI agreed to pay JLRE4 $2 million in exchange for a percentage interest in real property in New York. As there were allegedly insufficient funds in SEI's account, Lugassy opened a sub-account for Kadima, without Kadima's knowledge or consent, and wired $2 million of Kadima's funds to JLRE4's account.  A wire transfer confirmation sent to Ronen Shviki, “who works with and/or does work for ․ SEI” and is Elia's son-in-law, identified Kadima as the “Ordering Client.”  The complaint alleges that JLRE4's Signature Bank records would also identify Kadima as the counterparty to the transfer.  The complaint alleges that JLRE4 then used the $2 million to purchase the New York property through JLRE 13th Street, and that SEI and the JLRE defendants received a share of the revenue generated by the property.

As an initial matter, plaintiff abandons its appeal from the court's dismissal of the individual defendants by failing to raise any arguments as to their individual liability in either of plaintiff's briefs on appeal (see Madison Sullivan Partners LLC v PMG Sullivan St., LLC, 173 AD3d 437, 438 [1st Dept 2019] ).

However, the complaint states a claim for conversion against the corporate entity defendants.  Plaintiff adequately alleges that Kadima had a possessory right to the $2 million wired from Kadima's own sub-account and that defendants exercised dominion and control over the $2 million:  the JLRE defendants by receiving the $2 million and using it to purchase the property, and SEI by using the $2 million to invest in the property (see Colavito v New York Organ Donor Network, Inc., 8 NY3d 43, 49–50 [2006];  135 Bowery LLC v Beach Channel Shoppers Mart Co., LLC, 159 AD3d 457, 457 [1st Dept 2018] ).

Furthermore, the funds are “specifically identifiable” because they “constitute a specific sum ․ that is determinate, and reflects an ascertained amount” (Family Health Mgt., LLC v Rohan Devs., LLC, 207 AD3d 136, 145 [1st Dept 2022] ).  That the $2 million would have been “commingled” with other JLRE monies in its bank account does not defeat the conversion claim, as the “limited transfer[ ]” of the specific sum “did not render the funds at issue no longer specifically identifiable” (id. at 146–147).

Defendants' asserted lack of knowledge of Kadima's right to the $2 million does not defeat the conversion claim (see Passaic Falls Throwing Co. v Villeneuve–Pohl Corp., 169 AD 727, 728–729 [1st Dept 1915];  V & A Collection, LLC v Guzzini Properties Ltd., 46 F4th 127, 133–134 [2d Cir2022] ).  In any event, the complaint alleges that the corporate entity defendants knew or should have known that the money was Kadima's.  The complaint also adequately alleges that a pre-suit demand would have been futile (see State of New York v Seventh Regiment Fund, 98 N.Y.2d 249, 260 [2002];  SongByrd, Inc. v Estate of Grossman, 206 F3d 172, 183 [2d Cir2000], cert denied 531 US 824 [2000] ).

The allegations supporting the money had and received claim against JLRE4 and JLRE 13th Street are also sufficient to survive a motion to dismiss.  The complaint alleges that the JLRE defendants “received” and “benefitted from” Kadima's $2 million:  Lugassy wired the money directly to JLRE4's account, and JLRE4 used the money, pursuant to its agreement with SEI, to finance the purchase of the property through JLRE 13th Street (Manufacturers Hanover Trust Co. v Chemical Bank, 160 AD2d 113, 118 [1st Dept 1990], lv denied 77 NY2d 803 [1991] ).

Defendants' assertions that equity and good conscience support their retention of the money are insufficient to warrant dismissal at the pleading stage given the allegations that they had notice that the funds came from Kadima rather than SEI. The complaint does not allege that SEI was also a victim of Lugassy's fraud (cf.  SH575 Holdings L.L.C. v Reliable Abstract Co., 195 AD3d 429, 430–431 [1st Dept 2021] ).  Defendants' assertion that they detrimentally relied on the transfer, as well as defendants' invocation of the discharge for value rule, rely on affirmative defenses (see Manufacturers Hanover Trust Co., 160 AD2d at 118;  Citibank, N.A. v Brigade Capital Mgt., LP, 49 F4th 42, 58–59 [2d Cir2022] ) that are not grounds for dismissal at the pleading stage (see Garcia v Puccio, 17 AD3d 199, 201 [1st Dept 2005] ).

Nor should the complaint be dismissed for failure to join Lugassy (see CPLR 1001[a] ).  Although plaintiff may have a claim against Lugassy for his wrongdoing, “a plaintiff is free to choose [its] defendants” among multiple tortfeasors, and “joint tortfeasors are not necessary parties to an action” (Hasenzahl v 44th St. Dev. LLC, 203 AD3d 602, 603 [1st Dept 2022] [internal quotation marks and citations omitted, alterations adopted];  see also Carriafielio–Diehl & Assoc., Inc. v D & M Elec. Contr., Inc., 12 AD3d 478, 479 [2d Dept 2004] ).

Plaintiff did not abandon its claim against SEI by failing to argue in its opening brief that there is personal jurisdiction over SEI. Supreme Court's statement during oral argument that there were “issues” concerning personal jurisdiction did not amount to a holding on that ground, as the court's rationale for dismissal was that the complaint failed to state a claim on the merits.  Defendants' brief on appeal does not raise any substantive argument about personal jurisdiction.

We have considered defendants' additional arguments and find them unavailing.