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PETITIONER JUDGMENT-CREDITOR WAS ENTITLED TO THE TURNOVER OF CERTAIN REAL PROPERTY WHICH HAD BEEN FRAUDULENTLY TRANSFERRED TO A TRUST BY THE RESPONDENT JUDGMENT-DEBTORS, AS WELL AS THE CONTENTS OF RESPONDENTS’ SAFETY DEPOSIT BOX (SECOND DEPT).

The Second Department, reversing Supreme Court, determined petitioner was entitled to real property which was fraudulently transferred by respondents to a trust, as well as to the contents of respondents’ safety deposit box, to satisfy a judgment against respondents in the approximate amount of $338,000:

… [P]etitioner commenced this proceeding pursuant to CPLR article 52, seeking … the turnover of a safety deposit box maintained by the respondents Zakhar Brener and Ninel Krepkina and of certain residential real property owned by the respondent B and K Trust. * * *

… [P]etitioner established her prima facie entitlement to judgment as a matter of law on the cause of action seeking relief pursuant to Debtor and Creditor Law former § 273 by submitting evidence that Brener was insolvent at the time of the conveyance of the property, which was made without fair consideration … .  * * *

… [P]etitioner established her prima facie entitlement to judgment as a matter of law on the cause of action seeking relief pursuant to Debtor and Creditor Law former § 276. “Pursuant to Debtor and Creditor Law former § 276, every conveyance made with actual intent to hinder, delay, or defraud either present or future creditors is fraudulent. The requisite intent required by this section need not be proven by direct evidence, but may be inferred from the circumstances surrounding the allegedly fraudulent transfer” … . “In determining whether a conveyance was fraudulent, the courts consider the existence of certain common ‘badges of fraud,’ which include ‘a close relationship between the parties to the alleged fraudulent transaction; a questionable transfer not in the usual course of business; inadequacy of the consideration; the transferor’s knowledge of the creditor’s claim and the inability to pay it; and retention of control of the property by the transferor after the conveyance'” … . “A prime example of this type of fraud is where a debtor transfers his property to another while retaining the use thereof so as to continue . . . free from the claims of creditors” … . Here, the petitioner submitted, among other things, the Brener respondents’ answer, wherein they admitted that Brener continued to occupy and use the property with Krepkina. …

… [P]etitioner established her prima facie entitlement to judgment as a matter of law on the cause of action to direct Chase Bank to turn over of the contents of the safe deposit box maintained by Brener and Krepkina by submitting a letter establishing that Brener and Krepkina jointly held a safe deposit box at one of Chase Bank’s branches in Brooklyn … . Matter of Schiffman v Affordable Shoes, Ltd., 2025 NY Slip Op 02786, Second Dept 5-7-25

Practice Point: Consult this decision for a concise description of a CPLR Article 52 turnover proceeding by a judgment creditor against judgment debtors based in part upon respondents’ fraudulent transfer of real property to avoid creditors (Debtor and Creditor Law sections 273 and 276).

 

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THE COMPLAINT SUFFICIENTLY ALLEGED FACTS THAT WOULD SUPPORT PIERCING THE CORPORATE VEIL (SECOND DEPT).

The Second Department, reversing (modifying) Supreme Court, determined the cause of action alleging that the corporate veil should be pierced should not have been dismissed. The complaint alleged failure to adhere to LLC formalities, inadequate capitalization, commingling of assets, and the personal use of LLC funds:

“To survive a motion to dismiss the complaint, a party seeking to pierce the corporate veil must allege facts that, if proved, establish that the party against whom the doctrine is asserted (1) exercised complete domination over the corporation with respect to the transaction at issue, and (2) through such domination, abused the privilege of doing business in the corporate form to perpetrate a wrong or injustice against the plaintiff such that a court in equity will intervene” … . “Factors to be considered in determining whether an individual has abused the privilege of doing business in the corporate or LLC form include the failure to adhere to LLC formalities, inadequate capitalization, commingling of assets, and the personal use of LLC funds” … . “Additionally, the corporate veil will be pierced to achieve equity, even absent fraud, when a corporation has been so dominated by an individual or another corporation and its separate entity so ignored that it primarily transacts the dominator’s business instead of its own and can be called the other’s alter ego” … . “[A] fact-laden claim to pierce the corporate veil is unsuited for resolution on a pre-answer, pre-discovery motion to dismiss” … . Goldberg v KOSL Bldg. Group, LLC, 2025 NY Slip Op 01790, Second Dept 3-26-25

Practice Point: Here the allegations in the complaint that defendant failed to adhere to LLC formalities, inadequately capitalized the corporate entities, commingled assets, and personally used LLC funds sufficiently supported plaintiff’s seeking to pierce the corporate veil.

 

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TO SUFFICIENTLY ALLEGE THE APPLICABILITY OF THE FRAUD EXCEPTION TO THE FOUR-YEAR LOOKBACK FOR A “FRAUDULENT SCHEME TO INFLATE RENTS” ACTION, THE PLAINTIFF NEED NOT ALLEGE RELIANCE ON A FRAUDULENT REPRESENTATION; IT IS ENOUGH TO ALLEGE SUFFICIENT INDICIA OF FRAUD OR A COLORABLE CLAIM OF FRAUD (CT APP). ​

The Court of Appeals, reversing (modifying) the Appellate Division, in a full-fledged opinion by Judge Garcia, determined that to sufficiently allege the applicability of the fraud exception to the four-year statute of limitations (“lookback” period) in a “fraudulent scheme to inflate rents” action, a plaintiff need not allege satisfaction of each element of common-law fraud (including reliance), rather the plaintiff need only allege “sufficient indicia” of fraud:

… [T]he fraud exception serves a far different purpose than an allegation of common law fraud. The fraud exception, applicable only to an overcharge claim, simply allows for review of the rental history outside the four-year lookback period and then … “solely to ascertain whether fraud occurred—not to furnish evidence for calculation of the base date rent or permit recovery for years of overcharges barred by the statute of limitations” … . The exception operates to protect not only current tenants, who may or may not have relied on a fraudulent representation, but future tenants and the overall rent regulatory system. Requiring that a tenant show reliance on a landlord’s fraudulent representation would exempt an “unscrupulous landlord in collusion with a tenant” from the consequences of engaging in a scheme to evade the law’s protection … . Given the narrow purpose and scope of the fraud exception, there is no basis for imposing the pleading requirements of a common law fraud claim. Instead, we require plaintiffs to put forth “sufficient indicia of fraud” or a “colorable claim” of a fraudulent scheme but do not impose a burden to establish each element of a common law fraud claim.

… [T]o invoke the fraud exception, a plaintiff must allege sufficient indicia of fraud, or a colorable claim of a fraudulent scheme to evade the protections of the rent stabilization laws, to withstand a motion to dismiss on statute of limitations grounds. Such allegations must include more than an assertion that a tenant was overcharged—a mere allegation of a high rent increase is insufficient for the fraud exception to apply … We address only the reliance issue here. On remittal the Appellate Division should apply our established standard—assessing whether plaintiffs’ complaint alleges sufficient indicia of fraud or a colorable claim of a fraudulent scheme “to remove tenants’ apartment from the protections of rent stabilization” … . Burrows v 75-25 153rd St., LLC, 2025 NY Slip Op 01669, CtApp 3-20-25

Practice Point: Consult this opinion for insight into what the complaint must allege to invoke the fraud exception to the four-year lookback period for a “fraudulent scheme to inflate rents” action.

 

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THE DEFENDANT SCHOOL IN THIS CHILD VICTIMS ACT CASE DID NOT DEMONSTRATE WHEN PLAINTIFF COULD HAVE DISCOVERED THE ALLEGED FRAUD WHICH INDUCED HIM TO SIGN RELEASES; THEREFORE THIS FRUAD-BASED ACTION SHOULD NOT HAVE BEEN DISMISSED AS TIME-BARRED; THE COMPLAINT STATED CAUSES OF ACTION FOR FRAUDULENT INDUCEMENT AND FRAUDULENT CONCEALMENT (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the defendant school in this Child Victims Act case (1) did not demonstrate the fraud-based causes of action to set aside or rescind the releases signed by the plaintiff were time-barred and (2) was not entitled to dismissal of the fraudulent inducement and fraudulent concealment causes of action. Plaintiff alleged he would not have signed the releases had he known the guidance counsellor who allegedly sexually abused him would be allowed to continue in his employment, and he would not have signed the releases had he known there were other instances of sexual misconduct by the guidance counsellor of which the school was aware:  With respect to the statute of limitations for a fraud-based action, the court explained:

“A fraud-based action must be commenced within six years of the fraud or within two years from the time the plaintiff discovered the fraud or could with reasonable diligence have discovered it, whichever is later” (… see CPLR 203[g]; 213[8]). “The inquiry as to whether a plaintiff could, with reasonable diligence, have discovered the fraud turns on whether the plaintiff was possessed of knowledge of facts from which the fraud could be reasonably inferred” … . “Generally, knowledge of the fraudulent act is required and mere suspicion will not constitute a sufficient substitute. Where it does not conclusively appear that a plaintiff had knowledge of facts from which the fraud could reasonably be inferred, a [fraud-based cause of action] should not be dismissed on motion and the question should be left to the trier of facts” … . “Ordinarily, an inquiry into when a plaintiff should have discovered an alleged fraud presents a mixed question of law and fact” … .

Here, the defendant failed to establish that the causes of action to set aside or rescind the releases on the ground of fraud were time-barred pursuant to CPLR 3211(a)(5) … . “[T]here was no indication in the [amended complaint] or in the papers submitted by the defendant[ ] on [its] motion as to when the plaintiff became aware” of the alleged fraudulent conduct … . In any event, the plaintiff, in affidavits submitted in opposition to the motion, indicated that he learned of certain facts underlying the fraud-based causes of action in early 2021 … . The defendant failed to demonstrate that the plaintiff, by exercising reasonable diligence, could have discovered those facts at some point prior to the two-year period immediately preceding the commencement of this action … . Gormley v Marist Bros. of the Schs., Province of the United States of Am., 2025 NY Slip Op 01612, Second Dept 3-19-25

Practice Point: Here defendant did not demonstrate when plaintiff could or should have become aware of the defendant’s alleged fraud. Therefore the motion to dismiss the fraud-based action as time-barred should not have been granted.

Practice Point: Consult this decision for an explanation of what must be alleged to state causes of action for fraudulent inducement and fraudulent concealment in the context of setting aside or rescinding a release.

 

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HERE THE PLAINTIFF WAS IN PRIVITY WITH A NONPARTY WHICH WAS DEEMED TO HAVE HAD A “VICARIOUS DAY IN COURT” SUCH THAT THE DOCTRINE OF RES JUDICATA PRECLUDED PLAINTIFF’S ACTION (FIRST DEPT).

The First Department, reversing Supreme Court, in a full-ledged opinion by Justice Scarpulla, determined the doctrine of res judicata required dismissal of plaintiff’s fraudulent conveyance cause of action. The lawsuit concerned disputed ownership of precious gems. The opinion is fact-specific and too complex to fairly summarize here. With respect to the application of the res judicata doctrine, the court wrote:

This appeal stems from a dispute between precious gemstone traders. Plaintiff Shanghai Pearls & Gems, Inc. … alleges that defendants … improperly transferred gems they received on consignment from nonparty Diamond Corporation Capital Group, LLC (D&M). The transferred gems included the “Pink Diamond,” in which plaintiff held a one-third interest, and the “Kashmir Sapphire.” * * *

Although defendants’ settlement with D&M did not release plaintiff’s original one-third interest in the Pink Diamond, plaintiff’s fraudulent conveyance claims based on that interest should be dismissed because the claims are barred by res judicata. Pursuant to the doctrine of res judicata, a valid final judgment precludes “future actions between the same parties or those in privity with them on any claims arising out of the same transaction or series of transactions . . . , even if based upon different theories or if seeking a different remedy” … .

A determination that privity exists, in the context of res judicata, must be based on a “flexible analysis” of the relationship between the party and the nonparty in the previous litigation … . This analysis, in turn, requires courts to consider “whether the circumstances of the actual relationship, the mutuality of interests, and the manner in which the nonparty’s interest were represented in the earlier litigation established a functional representation such that the nonparty may be thought to have had a vicarious day in court” … .

Here, plaintiff was in privity with D&M vis-À-vis the assignment of the interests in the Pink Diamond and Kashmir Sapphire. D&M’s claims against defendants in the bankruptcy proceeding and plaintiff’s claims against defendants in this action “are closely related in time, space, motivation, or origin” such that the claims “arise out of the same transaction, and res judicata should apply” … . Shanghai Pearls & Gems, Inc. v Paul, 2025 NY Slip Op 01433, First Dept 3-13-25

Practice Point: Although this opinion is complicated and fact-specific, it provides useful insight into the flexibility of the “privity” element of the res judicata doctrine. Here the nonparty with which plaintiff was in privity was deemed to have had a “vicarious day in court” triggering the application of the res judicata doctrine to the plaintiff’s action.

 

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HERE THE MOTION TO RENEW, BASED UPON A CHANGE IN OR CLARIFICATION OF THE LAW, SHOULD HAVE BEEN GRANTED DESPITE THE APPELLATE RULING ON THE PRIOR ORDER (FIRST DEPT).

he First Department, reversing Supreme Court, determined defendant landlord’s motion to renew based upon a change in the law should have been granted}

On appeal, this Court agreed with defendant that the law as it existed prior to enactment of the Housing Stability and Tenant Protection Act of 2019 (HSTPA) applies in this case. However, we found that plaintiffs had raised a triable issue of fact as to whether the landlord engaged in a fraudulent scheme [to deregulate apartments]. Accordingly, we affirmed denial of defendant’s summary judgment motion.

In April 2023, defendant moved in Supreme Court for renewal of its summary judgment motion. Defendant argued that Casey v Whitehouse Estates, Inc. (39 NY3d 1104 [2023]) supported its position on the summary judgment motion. The motion court denied the motion to renew and did not reach the substantive issue raised by defendant.

Contrary to plaintiffs’ contention, a court of original jurisdiction may entertain a motion for leave to renew based on an alleged change in or clarification of the law, “even after an appellate court has rendered a decision” on the prior order … . Accordingly, defendant’s motion to renew its summary judgment motion should be granted. 435 Cent. Park W. Tenant Assn. v Park Front Apts., LLC, 2025 NY Slip Op 01157, First Dept 2-27-25

Practice Point: Even where the denial of summary judgment has been affirmed on appeal, a motion to renew based upon a change in or clarification of the law should be granted.​

 

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WHERE THE ONLY RELIEF SOUGHT FOR BREACH OF FIDUCIARY DUTY IS MONEY DAMAGES, THE STATUTE OF LIMITATIONS IS THREE YEARS (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the “breach of fiduciary duty” cause of action was subject to a three-year, not a six-year, statute of limitations and was time-barred:

“‘New York law does not provide a single statute of limitations for breach of fiduciary duty claims'” … . Rather, “[t]he statute of limitations for a cause of action sounding in breach of fiduciary duty is dependent on the relief sought” … . Generally, “[a] cause of action [alleging] breach of fiduciary duty is governed by a six-year statute of limitations where the relief sought is equitable in nature (see CPLR 213[1]), or by a three-year statute of limitations where the only relief sought is money damages (see CPLR 214[4])” … . “Moreover, where an allegation of fraud is essential to a breach of fiduciary duty claim, courts have applied a six-year statute of limitations under CPLR 213(8)” … . “The statute of limitations for a cause of action alleging a breach of fiduciary duty does not begin to run until the fiduciary has openly repudiated his or her obligation or the relationship has been otherwise terminated” … . Berejka v Huntington Med. Group, P.C., 2025 NY Slip Op 00942, Second Dept 2-19-25

Practice Point: Where the relief sought for breach of fiduciary duty is equitable, or where fraud is an essential element, the applicable statute of limitations is six years. Where the only relief sought is money damages, the applicable statute of limitations in three years.

 

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DEFENDANTS MOTION TO VACATE THE DEFAULT BASED UPON LAW OFFICE FAILURE AND PROOF OF A MERITORIOUS DEFENSE SHOULD HAVE BEEN GRANTED (THIRD DEPT).

The Third Department, reversing Supreme Court, determined defendants motion to vacate the default judgment based upon law office failure should have been granted:

In support of the motion to vacate, defendants affirmed that they had retained former counsel and that he had informed them that he would file an answer, but his office failed to do so. However, they did not become aware of this failure until they were served with the default. Although defendants could have provided stronger support by way of an affirmation from former counsel to better substantiate their claim of law office failure, this is not required. Markedly, plaintiff’s submissions in support of his application for costs — included in the record before this Court — establish that his counsel’s office was aware that defendants were represented. In fact, plaintiff’s counsel’s billing records specifically name former counsel and set forth that he was “attorney for defendant[s].” These billing records further demonstrate that plaintiff’s counsel had conversed with former counsel and been informed that an answer was being prepared. These facts, in conjunction with the short duration between entry of default in July 2023 and the subsequent motion to vacate in September 2023, establish that plaintiff was not prejudiced by the delay, and that defendants’ failure to file an answer was the result of law office failure and not willfulness on the part of defendants … . * * *

“To establish the existence of a potentially meritorious defense, defendants needed only to make a prima facie showing of legal merit, as the quantum of proof needed to prevail on a CPLR 5015 (a) (1) motion is less than that required when opposing a summary judgment motion” … . In consideration of this minimal standard of proof, defendants’ sworn assertions that plaintiff fraudulently induced them to enter the contract and then breached the contract before any breach on their part establishes a potentially meritorious defense … . Darling v Fernette, 2025 NY Slip Op 00507, Third Dept 1-30-25

Practice Point: Consult this decision for the criteria for vacating a default judgment based upon law officer failure, and for demonstrating a meritorious defense to a breach of contract action.

 

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IT WAS SUFFICIENTLY ALLEGED THE RELEASE WAS INDUCED BY FRAUD; THE COMPLAINT SHOULD NOT HAVE BEEN DISMISSED (FIRST DEPT).

The First Department, reversing Supreme Court, determined the complaint should not have been dismissed on the basis of the release because it was sufficiently alleged the release was induced by fraud:

Plaintiff’s complaint sufficiently alleges that the general release that was the basis for dismissal of the complaint was fraudulently induced based on defendant’s misrepresentations upon which plaintiff justifiably relied … . For example, the complaint alleges, among other things, that defendant induced plaintiff’s signature on the release by stating that if plaintiff did not sign, defendant would withdraw a New York Gaming Commission complaint that plaintiff had urged defendant to file, when, in fact, there was no complaint to withdraw because defendant had falsely represented he had filed the complaint.

Upon a “detailed analysis of whether plaintiff had sufficiently alleged the existence of overreaching or unfair circumstances such that enforcement of the general release[] would be inequitable” … , we concluded that dismissal of the complaint based on the release was not warranted. Jones v Jacobs, 2025 NY Slip Op 00377, First Dept 1-23-25

Practice Point: Here the complaint sufficiently alleged the release was induced by fraud. The complaint should not have been dismissed based on the release.​

 

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THE COMPLAINT AGAINST ATTORNEYS STATED A CAUSE OF ACTION FOR “DECEIT AND COLLUSION” PURSUANT TO JUDICIARY LAW 487 WHICH IS NOT THE SAME AS COMMON LAW FRAUD; THERE IS NO NEED TO SHOW A PARTY WAS MISLED BY THE ATTORNEY’S INTENTIONAL FALSE STATEMENTS (FOURTH DEPT).

The Fourth Department, reversing (modifying) Supreme Court, determined the complaint stated a cause of action against an attorney (Moore) for “deceit and collusion” within the meaning of Judiciary Law 487:

Judiciary Law § 487 provides, in pertinent part, that “[a]n attorney or counselor who . . . [i]s guilty of any deceit or collusion, or consents to any deceit or collusion, with intent to deceive the court or any party . . . [i]s guilty of a misdemeanor, and in addition to the punishment prescribed therefor by the penal law, he forfeits to the party injured treble damages, to be recovered in a civil action.” In essence, the statute “imposes liability for the making of false statements with scienter” … . However, “Judiciary Law § 487 is not a codification of common-law fraud and therefore does not require a showing of justifiable reliance” … . Stated another way, “liability under the statute does not depend on whether the court or party to whom the statement is made is actually misled by the attorney’s intentional false statement” … ; i.e., the statute “focuses on the attorney’s intent to deceive, not the deceit’s success” … .

… [P]laintiffs alleged in their amended complaint that, from the time he became the client’s attorney, Moore engaged in a pattern of conduct whereby he advocated for the validity of a fraudulent deed, and oversaw the revision of fraudulent surveys based upon that deed. Plaintiffs alleged that Moore was in possession of documents and correspondence establishing that the deed was the fraudulent product of the client and defendant Aaron I. Mullen, an attorney who had previously represented the client, and that Moore failed to disclose those items despite receiving a valid discovery demand for them. Plaintiffs also alleged that Moore instituted a CPLR article 78 proceeding based upon the allegedly fraudulent deed and that he attached the deed to the petition. Plaintiffs further alleged that Moore participated in the client’s fraud, and did so intentionally and with knowledge of the client’s fraud, to plaintiffs’ detriment of more than $100,000 in legal fees and expenses. Ostrander v Mullen, 2024 NY Slip Op 06461, Fourth Dept 12-20-24

Practice Point: A Judiciary Law 487 action against an attorney focuses on the attorney’s intent to deceive, not whether the deceit was successful.

 

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