Opinion
2013-04-25
Michael JALIMAN, et al., Plaintiffs–Appellants, v. D.H. BLAIR & CO. INC., also known as Harris & Parks, Inc., Defendant–Respondent.
John Ciampoli, Albany, for appellants. Moses & Singer LLP, New York (Steven R. Popofsky of counsel), for respondent.
John Ciampoli, Albany, for appellants. Moses & Singer LLP, New York (Steven R. Popofsky of counsel), for respondent.
TOM, J.P., ACOSTA, ROMÁN, FEINMAN, CLARK, JJ.
Order, Supreme Court, New York County (Bernard J. Fried, J.), entered February 17, 2011, which (1) granted defendant's motion to reargue and, upon reargument, vacated its prior order, entered September 30, 2010, permitting plaintiffs to amend their complaint to add D.H. Blair Investment Banking Corp. (Investment Banking) as a defendant and to add a cause of action for fraudulent conveyance, and (2) denied as moot plaintiffs' cross motion for leave to amend, unanimously affirmed, without costs.
When the court made its September 2010 order, plaintiffs had not yet submitted their proposed amended complaint. Therefore, the court did not improvidently exercise its discretion ( see Foley v. Roche, 68 A.D.2d 558, 567, 418 N.Y.S.2d 588 [1st Dept. 1979] ) by granting reargument, even though defendant raised the statute of limitations for the first time on its motion to reargue.
The court properly found that plaintiffs' proposed fraudulent conveyance claim—based on the sale of assets from defendant to Investment Banking, allegedly without fair consideration—was time-barred. The affidavit that plaintiff Michael Jaliman submitted in opposition to defendant's motion to reargue clarified that plaintiffs were relying on Debtor and Creditor Law § 273. That statute involves constructive fraud, not actual fraud ( see Wall Street Assocs. v. Brodsky, 257 A.D.2d 526, 529, 684 N.Y.S.2d 244 [1st Dept. 1999] ). “New York law provides that a claim for constructive fraud is governed by the six-year limitation set out in CPLR 213(1), and that such a claim arises at the time the fraud or conveyance occurs” ( Wall St. Assoc. v. Brodsky, 257 A.D.2d 526, 530, 684 N.Y.S.2d 244 [1st Dept. 1999] ). The conveyance occurred in 1992. Thus, the statute of limitations on plaintiffs' fraudulent conveyance claim ran in 1998, more than a decade before they moved to amend their complaint in 2009. The court did not have to reach the issue of inquiry notice because that concept applies only to claims of actual—as opposed to constructive—fraud ( see e.g. Wall St. Assoc., 257 A.D.2d at 529, 684 N.Y.S.2d 244).
Even if, arguendo, plaintiffs had pleaded a fraudulent conveyance claim based on actual fraud, they had a duty of inquiry which arose in 1999, when they learned that defendant had been sold ( see generally Gutkin v. Siegal, 85 A.D.3d 687, 688, 926 N.Y.S.2d 485 [1st Dept. 2011]; TMG–II v. Price Waterhouse & Co., 175 A.D.2d 21, 22–23, 572 N.Y.S.2d 6 [1st Dept. 1991], lv. denied79 N.Y.2d 752, 580 N.Y.S.2d 199, 588 N.E.2d 97 [1992] ).
Second, even if, arguendo, plaintiffs' fraudulent conveyance claim was timely, the bare allegation in the amended complaint that “[t]here was a fraudulent conveyance of assets from [defendant] to Investment [B]anking” fails to state a cause of action for fraudulent conveyance ( see e.g. NTL Capital, LLC v. Right Track Rec., LLC, 73 A.D.3d 410, 412, 901 N.Y.S.2d 4 [1st Dept. 2010] ). In addition, plaintiffs' mere belief that defendant transferred assets to Investment Banking without fair consideration does not suffice ( see C & K Realty Co. v. ISFC Fabrics Corp., 66 A.D.2d 697, 698, 411 N.Y.S.2d 257 [1st Dept. 1978] ).
Third, even if—hypothetically—plaintiffs' fraudulent claim were both timely and properly pleaded, defendant and Investment Banking would be prejudiced by the addition of a new theory of liability because discovery on the original claims has been closed, a date for filing the note of issue has been set, and plaintiffs have sought to assert their new theory sixteen years after filing their original complaint ( see Panasia Estate, Inc. v. Broche, 89 A.D.3d 498, 932 N.Y.S.2d 340 [1st Dept. 2011]; Heller v. Louis Provenzano, Inc., 303 A.D.2d 20, 22–23, 756 N.Y.S.2d 26 [1st Dept. 2003] ).
We turn to the question of whether Investment Banking should be added as a defendant on plaintiffs' original claims, i.e. the claims other than fraudulent conveyance. The court has already allowed plaintiffs to add Harris & Parks Inc. as a defendant on the theory that Harris & Parks is defendant's successor. It would be odd if defendant had two successors (Harris & Parks and Investment Banking). In any event, plaintiffs' proposed amended complaint does not satisfy the requirements for successor liability set forth in Schumacher v. Richards Shear Co., 59 N.Y.2d 239, 244–245, 464 N.Y.S.2d 437, 451 N.E.2d 195 [1983]; plaintiffs have “failed to allege facts that would support [their] successor liability claim” ( Worldcom Network Servs. v. Polar Communications Corp., 278 A.D.2d 182, 183, 718 N.Y.S.2d 337 [1st Dept. 2000] ).
Plaintiffs' argument that they should be allowed to add Investment Banking as a defendant based on the relation back doctrine ( seeCPLR 203 [b] ) is improperly raised for the first time in their appellate reply brief ( see e.g. Shia v. McFarlane, 46 A.D.3d 320, 321, 847 N.Y.S.2d 530 [1st Dept. 2007] ). Were we to reach the merits, we would find that plaintiffs fail to satisfy the requirements of Buran v. Coupal, 87 N.Y.2d 173, 178, 638 N.Y.S.2d 405, 661 N.E.2d 978 [1995]. For example, defendant and Investment Banking are not united in interest because one is not vicariously liable for the other, even if they have the same officers ( see Valmon v. 4 M & M Corp., 291 A.D.2d 343, 344, 738 N.Y.S.2d 340 [1st Dept. 2002], lv. denied98 N.Y.2d 611, 749 N.Y.S.2d 3, 778 N.E.2d 554 [2002] ).
In light of our disposition, plaintiffs' request that we direct the IAS court to compel discovery on the transfer of assets from defendant to Investment Banking and the relationship between the two companies is moot. In any event, it would be improper because the order appealed from does not concern discovery.