LAMPERT v. Mahoney Cohen Rashba & Pokart, P.C., etc., et al., Defendants-Respondents.

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Supreme Court, Appellate Division, First Department, New York.

Gertrude K. LAMPERT, etc., et al., Plaintiffs-Appellants, v. AMBASSADOR FACTORS CORPORATION, etc., et al., Defendants, Mahoney Cohen Rashba & Pokart, P.C., etc., et al., Defendants-Respondents.

Decided: November 23, 1999

SULLIVAN, J.P., WALLACH, RUBIN, SAXE and FRIEDMAN, JJ. Janis Ettinger, for Plaintiffs-Appellants. Ronald H. Alenstein, for Defendants-Respondents.

Order, Supreme Court, New York County (Carol Huff, J.), entered August 10, 1998, which, in an action seeking, as relevant to this appeal, damages for fraud against an accounting firm and its principal, granted such defendants' motion to dismiss the complaint as against them on the ground of res judicata, unanimously affirmed, without costs.

We agree with the IAS court that this Court's dismissal, pursuant to CPLR 3211(a)(7) and 3016(b), of plaintiffs' decedent's prior action for fraud and accounting malpractice against the moving defendants (Lampert v. Mahoney, Cohen & Co., 218 A.D.2d 580, 630 N.Y.S.2d 733) constitutes res judicata barring the instant action.   The two actions are based on the same transactions, and the dismissal of the prior action, to the extent based on the absence of any allegation in the prior complaint that the plaintiff had “undertake[n] an independent appraisal of the risk he was assuming” in the subject transactions (id., at 582, 630 N.Y.S.2d 733), was not merely for a technical pleading defect, but manifestly on the merits, based on a finding that plaintiff's failure to exercise such due diligence precluded him from prevailing on his fraud cause of action against such defendants, regardless of what other facts he might allege (see, Bluebird Partners v. First Fid. Bank, 259 A.D.2d 273, 686 N.Y.S.2d 5, 6, citing Feigen v. Advance Capital Mgt. Corp., 146 A.D.2d 556, 558-559, 536 N.Y.S.2d 786).   Even if this Court's dismissal of the prior action might not be deemed to have precluded plaintiffs' decedent from filing a second complaint alleging that he had conducted a due diligence investigation, the current complaint, in this respect, “fails to correct the defect or supply the omission determined to exist in the earlier complaint” (175 E. 74th Corp. v. Hartford Acc. & Indem. Co., 51 N.Y.2d 585, 590 n. 1, 435 N.Y.S.2d 584, 416 N.E.2d 584), and is therefore barred (see, Papa v. Burrows, 186 A.D.2d 375, 588 N.Y.S.2d 171, lv. denied 81 N.Y.2d 707, 597 N.Y.S.2d 937, 613 N.E.2d 969, citing Flynn v. Sinclair Oil Corp., 20 A.D.2d 636, 637, 246 N.Y.S.2d 360, affd. 14 N.Y.2d 853, 251 N.Y.S.2d 967, 200 N.E.2d 633; 10 Weinstein-Korn-Miller, N.Y.Civ.Prac. ¶ 5011.11, at 50-122).   Since the doctrine of res judicata requires dismissal of the instant action, we have no occasion to address the branch of defendants' motion seeking dismissal of the current complaint for legal insufficiency.