Opinion
530TSN2004
11-02-2018
Jose BORGES, Plaintiff, v. Alfred PLACERES, Defendant.
Paul O'Dwyer, Esq., Law Office of Paul O'Dwyer, P.C., for Plaintiff Nestor Rosado, Esq., for Defendant
Paul O'Dwyer, Esq., Law Office of Paul O'Dwyer, P.C., for Plaintiff
Nestor Rosado, Esq., for Defendant
Dakota D. Ramseur, J.
Plaintiff/Judgment Creditor Jose Borges moved, pursuant to CPLR 5225 and 5240, to compel assignment of Defendant/Judgment Debtor Alfred Placeres's potential legal malpractice claim against Defendant's friend and former attorney to satisfy Plaintiff's judgment (motion sequence 023). In a June 27, 2018 decision and order, ( Borges v. Placeres , 60 Misc 3d 1033 [Civ Ct NY County 2018], the "Order"), the Court granted the motion and compelled assignment of the claim. Defendant now moves by order to show cause: (1) pursuant to CPLR 5015(a)(4), to vacate the Order nunc pro tunc for lack of jurisdiction; pursuant to CPLR 2221(d), to reargue the Order; and (3) for an order directing Plaintiff to withdraw the action commenced as assignee (mot seq 024). As detailed below, reargument is granted, and the Court adheres to its original determination.
New York County Supreme Court Index No. 15909/2018.
The Court is familiar with the facts and procedural history of this action, all of which are detailed in the Order, and incorporates them here.
I. Defendant's motion to vacate CPLR 5015 for lack of jurisdiction
Defendant argues, pursuant to CPLR 5015(a)(4), that the Court should vacate the Order because it lacked jurisdiction. Defendant is correct that both CPLR 5225(b) and CPLR 5227 require the commencement of a special proceeding. However, unlike CPLR 5225(b), which pertains to property not in a judgment debtor's possession, CPLR 5225(a) pertains to "[p]roperty in the possession of judgment debtor" and "requires only a "motion of the judgment creditor, upon notice to the judgment debtor, where it is shown that the judgment debtor is in possession or custody of money or other personal property in which he has an interest" (Order at 5; see Higgitt, Practice Commentaries, CPLR C5225:3; C5225:2 [Westlaw] ["If the judgment debtor has control of the property, wherever it is, and the court has personal jurisdiction over the judgment debtor, the court can compel the judgment debtor to deliver that property."] ). Accordingly, this branch of Defendant's motion to vacate/reargue is denied.
Defendant does not explicitly specify whether the Court lacked subject matter or personal jurisdiction (see Higgitt, Practice Commentaries, CPLR C5015:9 [Westlaw] ["Before a party can invoke this provision, it must be shown to involve 'jurisdiction' in the classic sense of power, either over the particular kind of dispute at issue or over a particular party sought to be affected."] ). To the extent that Defendant mentions both Plaintiff's failure to properly commence a special proceeding, a subject matter jurisdiction argument, (see Def Memo at 4), as well as the failure to follow the procedural steps required for a special proceeding, a personal jurisdiction argument, the latter is rendered moot based on the Court's finding that no special proceeding is required.
Counsel for Defendant correctly notes that the Court "muddied the water" through the Order's incorrect citation to CPLR 5225 (b) , a regretful error which the Court remedied in the published version of its decision and a subsequent email to counsel on August 2, 2018. The Court's error, however, is mitigated by two factors. First, as Defendant recognizes in this Order to Show Cause, the Order quoted the entire text of CPLR 5225 a , the relevant subsection (Order at 5; Def Order to Show Cause ¶ 3[D] ). Second, after the Court's August 2, 2018 email, Defendant had several more weeks to file a reply, extendable upon the parties' request.
The Court held that "[p]roperty in the possession of judgment debtor" included "future and/or unvested rights, including a legal malpractice claim which has not yet been filed" (Order at 5, citing CPLR 5201[b] ). Thus, reading the statutes together, the Court possessed jurisdiction to issue the Order because Plaintiff, a judgment creditor, properly filed a motion seeking property — the cause of action for legal malpractice — which Defendant possessed. To the extent that Defendant argues that the Court's invocation of CPLR 5227 also required a special proceeding, the Court cited that provision to illustrate that our legislature and courts have construed the CPLR's post-judgment enforcement provisions liberally (Order at 6). It was not, unlike CPLR 5225(a), the primary authority for the Court's holding.
II. Defendant's motion to reargue ( CPLR 2221[d] )
A. Assignment
Defendant's remaining arguments are made pursuant to CPLR 2221(d). The proponent of a motion to reargue must establish facts or law which the court overlooked or misapprehended in its original decision (see CPLR 2221[d][2] ); People v. D'Alessandro , 13 NY3d 216, 219 [2009] ). Defendant first argues that the Court engaged in "butchery of the plain language requirements of CPLR 5225(a)" by compelling assignment of the cause of action to Plaintiff rather than directing turnover to a sheriff for a sale at auction (Def Reply Memo at 40).
This portion of Defendant's motion is made under both CPLR 5015(a)(4) and 2221(d) arguments, the former because, in Defendant's view and without citation, the Order "transgressed statutory and constitutional due process limits" (Def Reply at 37). As Defendant's basis for reliance upon CPLR 5015(a)(4) is unclear, the Court addresses the contentions under CPLR 2221(d). Indeed, Defendant relies upon Greene Major Holdings, LLC v. Trailside at Hunter, LLC , (148 AD3d 1317, 1318 [3d Dept 2017] ), the relevant portion of which addressed Supreme Court's decision on a motion for reargument. In any event, Defendant's arguments under both provisions are essentially premised upon the same central argument: that the relief granted by the Court was without justification or based on an incorrect reading of the law. For the reasons detailed in this decision, the Court disagrees with both.
This is the first time that Defendant has asserted this argument, despite Plaintiff having explicitly argued in the original moving papers for either a direct assignment of the cause of action pursuant to CPLR 5225(a) and 5240 based on Defendant's conduct or assignment to the sheriff (see Def Exh B ¶¶ 18-21). In the original opposition papers, Defendant argued that the malpractice claim was unassignable for estoppel and statute of limitations reasons (Def Exh C at 11-18). Nevertheless, given that Defendant could not have previously challenged the specific relief granted by the Court before the Order was issued, the Court grants reargument on this issue.
As Defendant notes, CPLR 5225(a) does state that
"where it is shown that the judgment debtor is in possession or custody of money or other personal property in which he has an interest, the court shall order that the judgment debtor pay the money, or so much of it as is sufficient to satisfy the judgment, to the judgment creditor and, if the amount to be so paid is insufficient to satisfy the judgment, to deliver any other personal property, or so much of it as is of sufficient value to satisfy the judgment, to a designated sheriff " (emphasis added).
However, as the Court noted in the Order, CPLR 5240 permits a court, including Civil Court, "at any time, on its own initiative or the motion of any interested person, and upon such notice as it may require, make an order denying, limiting, conditioning, regulating, extending or modifying the use of any enforcement procedure" (Order at 6 [collecting cases] ). CPLR 5240 grants "substantial authority to order equitable relief" ( Distressed Holdings, LLC v. Ehrler , 113 AD3d 111, 120 [2d Dept 2013] ; Chrysler Fin. Services Americas LLC v. Morante , 50 Misc 3d 126(A) [App Term 1st Dept 2015] [Ling-Cohan, J., concurring] [stating that it would be "illogical for a party, already under jurisdiction of the Civil Court, to be forced to bring a separate proceeding in Supreme Court, to modify the very same judgment that is the subject of the Civil Court action"]; see also Legislative Studies and Reports, CPLR 5240 ["The section is stated as broadly as possible and is designed to replace the diverse, overlapping, overly technical and inconsistent provisions relating to the manner in which enforcement procedures may be modified, vacated and regulated"] ). Indeed, Defendant invokes the broad authority of CPLR 5240 in arguing that the Court should compel Plaintiff to withdraw the pending Supreme Court action (Def Reply Memo at 40).
"The court's broad discretionary power to use equity to prevent enforcement of a judgment is not unlimited, and it must balance the harm likely to result from execution, against the necessity of using that immediate means of attempted satisfaction" ( Colonial Sur. Co. v. Lakeview Advisors, LLC , 125 AD3d 1292, 1296 [4th Dept 2015] ). One factor to consider is whether a debtor is attempting to frustrate a creditor's attempts at collection ( Colonial Sur. Co. v. Lakeview Advisors, LLC , 93 AD3d 1253, 1256 [4th Dept 2012], citing Putnam County Nat. Bank of Carmel v. Pryschlak , 226 AD2d 358 [2d Dept 1996] [affirming Supreme Court's denial of protective order under CPLR 5240 where appellant "is attempting to frustrate the plaintiff's attempts to collect the money owed to the plaintiff by the appellant"] ).
In fact, Courts have, in recent years, authorized equitable remedies pursuant to CPLR 5240 where the value of property in a debtor's possession — like the cause of action assigned by the Order — is intangible or uncertain (see Sirotkin v. Jordan, LLC , 141 AD3d 670, 671-72 [2d Dept 2016] [finding that "the Supreme Court was not limited to considering the [creditor's] request for an order assigning [the debtor's] membership interest in the LLC," noting CPLR 5240's grant of "broad discretionary power to alter the use of procedures set forth in CPLR article 52," and affirming Supreme Court's decision to issue a charging order to the membership interest in the LLC of the judgment debtor rather than an assignment of the interest in the LLC] ). Turnover can be accomplished directly between the parties, without the necessity of a sheriff's sale (Arrowhead Capital Fin., Ltd. v. Seven Arts Entertainment, Inc. , 14 CIV. 6512 [KPF], 2017 WL 3394604, at *5 [SDNY Aug. 8, 2017] [finding, despite the fact that stock certificates "may ultimately prove worthless," that "[t]his property must be turned over to [p]laintiff pursuant to [CPLR] 5225[a] ).
Similarly, where property value is not only unclear but arguably ummarketable, thus rendering it "unlikely that a turnover to the sheriff would result in satisfying the judgment," courts have also directed turnover to a receiver to do any act "designed to satisfy the judgment" (see CPLR 5228 ; Udel v. Udel , 82 Misc 2d 882, 884 [Civ Ct NY County 1975] [on motion of creditor, appointing receiver "to do any act designed to satisfy the judgment, including dissolution of the corporation as provided in section 1511 and section 1001 of the Business Corporation Law"]; accord Hotel 71 Mezz Lender LLC v. Falor , 14 NY3d 303, 317 [2010] ["A receivership has been held especially appropriate when the property interest involved is intangible, lacks a ready market, and presents nothing that a sheriff can work with at an auction, such as the interest of a psychiatrist/judgment debtor in a professional corporation of which he is a member."] ). Moreover, the Court has "broad supervisory powers over the sheriff in conjunction with the enforcement of judgments," including the power to "direct the sheriff to dispose of, account for, assign , return or release all or any part of any property or debt, or the proceeds thereof" (Siegel/Reilly, Practice Commentaries, CPLR 5238 C5238:1 [emphasis added] ["The list of verbs contained in CPLR 5238 --dispose of, account for, assign, return, release, and in respect of both the property and the proceeds--is in this respect illustrative and not exclusive."]; New York City Civil Court Act § 701 ; see also CPLR 5233[c] ["The court may direct immediate sale or other disposition of property with or without notice if the urgency of the case requires."] [emphasis added] ).Here, principles of equity favor direct assignment of the legal malpractice claim to Plaintiff. First, the value of the claim is unclear, and thus may garner no bids of value at a sheriff's auction. Indeed, Defendant has argued vehemently, in the original motion and here, that the claim is worthless and urges the Court to order a sheriff's sale to permit the public, including Defendant, to engage in a valueless, time-consuming formality. Second, multiple courts have noted Defendant's obstruction of Plaintiff's efforts to pursue the judgment, particularly in relation to Defendant's only confirmed asset of potential value: the malpractice claim (see Order at 2). As recently as this Order to Show Cause, Defendant has stated — notably for the first time — that a sheriff's sale would afford the opportunity to "consider trying to borrow money (if he could) and buy [the malpractice cause(s) of action] for himself in order to protect his former attorneys (including a childhood friend) from frivolous and legally-baseless claims" (Def Memo at 16). In other words, Defendant disingenuously seeks another opportunity to continue to frustrate Plaintiff's collection efforts. Principles of equity, judicial economy, and public policy counsel against that outcome.
To the extent that Defendant relies upon Greene Major Holdings, LLC v. Trailside at Hunter, LLC , (148 AD3d 1317, 1319 [3d Dept 2017] ), that case is distinguishable. There, Supreme Court granted reargument on the basis that its order directed that shares of stock be turned over to plaintiff's attorney instead of a designated sheriff as required by the statute. However, Supreme Court also granted renewal, finding that the compelled assignor "no longer owned or possessed the common stock at issue," thus rendering assignment to any entity an impossibility (id. ). Additionally, the value of stock is more readily ascertainable, and therefore more appropriate for a sheriff's sale, than the legal malpractice cause of action here. Finally, that court was not confronted with the conduct present here.
Finally, in challenging the Court's modification of CPLR 5225(a), Defendant relies upon Commonwealth of N. Mariana Is. v. Can. Imperial Bank of Commerce , (21 NY3d 55, 59 [2013] ), to argue that the Court has improperly expanded CPLR 5225(a). Indeed, the Court of Appeals stated in that opinion that the "starting point is the language itself, giving effect to the plain meaning thereof. Where the statutory language is clear and unambiguous, the court should construe it so as to give effect to the plain meaning of the words used" (id. ).
That case, however, addressed CPLR 5225's definition of "possession or custody," finding that the lower court improperly grafted "control" onto the statute, thus expanding the property to be reached (id. ). The Court of Appeals did not address, however, CPLR 5240's "broad discretionary power to alter the use of procedures set forth in article 52" ( Sweeney, Cohn, Stahl & Vaccaro v. Kane , 33 AD3d 785, 787 [2d Dept 2006] [emphasis added] ). Here, the Court utilized CPLR 5240 to expand enforcement, not the scope of property sought ( Paz v. Long Is. R.R. , 241 AD2d 486, 487 [2d Dept 1997] ["The purpose of CPLR 5240 is to prevent unreasonable annoyance, expense, embarrassment, disadvantage, or other prejudice to any person or the courts ."] [emphasis added]; cf Kaplan v. Supak & Sons Mfg. Co. , 46 Misc 2d 574, 578-79 [Civ Ct NY County 1965] [denying request to excise the requirement of notice to debtor because it would create "serious constitutional problems"] ). Thus, the Court did not decimate CPLR 5225 with a "wrecking ball" (Def Memo at 19), it merely utilized the tool provided by the legislature, CPLR 5240. Accordingly, while reargument is granted, the Court adheres to its earlier determination, subject to the clarification above.
B. Collateral Estoppel
Finally, Defendant argues that the Court overlooked its earlier argument that Plaintiff's motion before the Bankruptcy Court sought assignment, thus precluding it from seeking the same assignment before this Court on res judicata grounds (Def Memo at 22, citing Def Exh C at 15-16). Defendant argues that the Bankruptcy Judge never granted the branch of Plaintiff's bankruptcy motion seeking assignment, thus "implicitly den[ying] it" (Def Memo at 23). Defendant further explains that "[p]er the transcript of the oral hearing on the motion held on March 10, 2016, Judge Bernstein can be seen not to have granted that motion branch for an assignment to [Plaintiff]" (id. ).
The Court did, however, consider and reject these arguments (see Order at 6-7). Specifically, the Court found that "Defendant's citation [to the record] is selective and incomplete; the transcript of the hearing reveals that the Bankruptcy Court determined only that the malpractice cause of action was abandoned to Defendant, and therefore no longer of the bankruptcy estate and unassignable by the Bankruptcy Court" (Order at 7). That is, res judicata requires a "final judgment on the merits of a claim by a court of competent jurisdiction " ( Sloth v. Constellation Brands, Inc. , 883 F Supp 2d 359, 375 [WDNY 2012], citing Cromwell v. County of Sac, 94 US 351, 352 [1877], Lawlor v. National Screen Service Corp., 349 US 322, 326 [1955] ).
The bar to subsequent claims, even those based on a different legal theory will not, however, apply where "the initial forum did not have the power to award the full measure of relief sought in the later litigation" ( Burgos v. Hopkins , 14 F3d 787, 790 [2d Cir 1994] ). Additionally, "[t]he dismissal of an action for mootness is a determination that the court lacks subject matter jurisdiction over the action, and thus is "not a final determination on the merits and, therefore, should not be accorded res judicata effect beyond the question decided therein" ( Hell's Kitchen Neighborhood Ass'n v. Bloomberg , 66 ERC 1525 [SDNY Nov. 1, 2007], citing Farkas v. New York State Dept. of Civ. Serv., 114 AD2d 563, 565 [3d Dept 1985] [finding that dismissal for mootness did not qualify as a final determination on the merits, and therefore could not have preclusive effect] ).
As the Order explained and as Plaintiff argues here, (Pl Memo at 10), the Bankruptcy Court found that it lacked jurisdiction to consider the assignment argument after abandonment, and explicitly declined to consider the merits of the argument (Pl Exh B 3:13-15, 17:21-25). The Bankruptcy Court found that abandonment "moot[ed] [Plaintiff's] request that the claim be assigned to him" (Pl Exh B 17:15-17). To the extent that Defendant, in reply, relies upon "judicially-noticeable ECF-filed documents available on PACER in both the bankruptcy and in the related adversary proceeding," (Def Reply Memo at 6, et seq ), the Court cannot consider documents which are not only submitted for the first time in a reply, but further in a reply in support of a motion for reargument. In any event, Defendant largely relies upon Plaintiff's complaint and the motion papers in the adversary proceeding to illustrate the scope of the issues, including assignment, which the parties, Defendant argues, had a full and fair opportunity to litigate. As the authorities above note, however, the full scope of the dispute is irrelevant if the court below found that it lacked jurisdiction to address the issues sought to be precluded. Accordingly, reargument is denied on Defendant's res judicata argument.
Defendant acknowledges that the Bankruptcy Court recognized its limited jurisdiction, arguing that the judge may have been mistaken (Def Reply Memo at 21). The Court does not address this contention.
III. Supreme Court action
Based on the Court's holding above, there is no basis to enjoin enforcement of the judgment. Accordingly, Defendant's request to compel Plaintiff to withdraw the pending Supreme Court action is denied as moot.
CONCLUSION/ORDER
Accordingly, it is hereby
ORDERED that Defendant's motion to vacate and reargue (motion sequence 024) is GRANTED solely to the extent that the branch of Defendant's motion seeking reargument on the issue of whether the Court erred in assigning the potential malpractice cause of action directly to Plaintiff rather than directing a turnover to the sheriff is GRANTED; and it is further
ORDERED that upon reargument, the Court adheres to its original determination; and it is further
ORDERED that all other branches of Defendant's motion are DENIED; and it is further
ORDERED that, within 10 days of receipt, Plaintiff shall serve this order with notice of entry upon all Defendants.
This constitutes the decision and order of the Court.