Pinnacle Capital, LLC v. O'Bleanis

2023 NY Slip Op 01540

Pinnacle Capital, LLC, respondent, v. Nathaniel O'Bleanis, etc., et al., appellants.

No. 2020-05595, Index No. 718426/19

Supreme Court of New York, Second Department

March 22, 2023

Steven G. Legum, Mineola, NY (Gina Biasi of counsel), for appellants.

Fox Rothschild, LLP, New York, NY (Matthew J. Schenker of counsel), for respondent.

CHERYL E. CHAMBERS, J.P., PAUL WOOTEN, JOSEPH A. ZAYAS, LILLIAN WAN JJ.

DECISION & ORDER

In an action, inter alia, to recover damages for conversion, the defendants appeal from an order of the Supreme Court, Queens County (Phillip Hom, J.), entered July 16, 2020. The order insofar as appealed from, denied the defendants' motion pursuant to CPLR 3211(a) to dismiss the complaint.

ORDERED that the order is reversed insofar as appealed from, on the law, with costs, and the defendants' motion pursuant to CPLR 3211(a) to dismiss the complaint is granted.

The plaintiff commenced this action, inter alia, to recover a payment of $280,000 it purportedly made to the defendants who are the co-trustees of a trust. According to the complaint, the defendants entered into an agreement with nonparty Bentzen Financial, LLC (hereinafter Bentzen), to sell to Bentzen the trust's interest in certain structured settlement annuity payments, in exchange for a lump sum payment of $280,000 (hereinafter the agreement). Bentzen then filed an order to show cause seeking court approval of the agreement, in accordance with the Structured Settlement Protection Act (General Obligations Law § 5-1701 et seq.; hereinafter SSPA). The complaint alleges that the plaintiff received a copy of what it believed was a valid court order approving the agreement (hereinafter the purported order). Based upon the purported order, the plaintiff allegedly "sent $280,000 of its funds to the [defendants] in anticipation of Bentzen or its assigns receiving the structured settlement payments." The complaint does not provide any further details as to why the plaintiff sent the sum of $280,000 to the defendants, nor does it articulate what relationship the plaintiff has with Bentzen or the defendants. The complaint further alleges that, after the funds were sent, the plaintiff and the defendants came to learn that the purported order had been forged, whereupon the plaintiff sought from the defendants either a return of the $280,000 or cooperation in obtaining a valid court approval of the agreement, but the defendants refused.

The complaint asserts causes of action to recover damages for conversion and unjust enrichment, and seeks declaratory relief and indemnification. The complaint seeks to "[r]equire the [defendants] to provide a detailed accounting of any profits generated out of the conduct described herein," seeks money damages in the sum of $280,000, plus attorneys' fees, expenses, costs, and pre- and postjudgment interest, or, in the alternative, a declaration that "the [agreement] is valid and proper and/or that the [defendants] may retain the Monies only upon issuance of a valid court order approving the [agreement]."

The defendants moved pursuant to CPLR 3211(a) to dismiss the complaint. In an order entered July 16, 2020, the Supreme Court, inter alia, denied the motion, and the defendants appeal.

"On a motion to dismiss a complaint pursuant to CPLR 3211(a)(7) the pleading is to be afforded a liberal construction, the court is to determine only whether the facts as alleged fit within any cognizable legal theory, and the facts pleaded are presumed to be true and are to be accorded every favorable inference" (Recine v Recine, 201 A.D.3d 827, 829-830; see Leon v Martinez, 84 N.Y.2d 83, 87-88; Louzon v Gentry Apts., Inc., 191 A.D.3d 776; Feggins v Marks, 171 A.D.3d 1014, 1015). "Dismissal of the complaint is warranted if the plaintiff fails to assert facts in support of an element of the claim, or if the factual allegations and inferences to be drawn from them do not allow for an enforceable right of recovery" (Connaughton v Chipotle Mexican Grill, Inc., 29 N.Y.3d 137, 142).

Here, the defendants demonstrated that the complaint fails to state a cause of action, on the ground that the plaintiff's claims are prohibited by the SSPA. Enacted in 2002, the purpose of the SSPA, as reflected in the legislative materials, was to establish "procedural safeguards for those who sell settlements that are awarded as a result of litigation," due to a recognition that "[m]any of the people who receive such settlements are being compensated for very serious, debilitating injuries, and have been unfairly taken advantage of in the past by the businesses that purchase their settlements" (Mem in Support, Bill Jacket, L 2002, ch 537 at 5). "Under this law, transfers such as the one at issue are prohibited unless approved by a court of competent jurisdiction based upon express findings, inter alia, that the transfer is in the best interest of the payee and that the discount rate, fees and expenses used to determine the net amount advanced are fair and reasonable" (Singer Asset Fin. Co., LLC v Melvin, 33 A.D.3d 355, 357; see General Obligations Law § 5-1706). In circumstances, such as here, where payment for a structured settlement transfer is made to the payee prior to the court's approval of the transfer, whether intentionally or due to a mistaken belief that the transfer had already been approved, a proposed transferee must seek nunc pro tunc approval of the transfer, and such approval is not guaranteed (see e.g. Matter of Stone St. Capital LLC v Shapiro, 47 Misc.3d 965, 967 [Sup Ct, Suffolk Co]; Matter of Stone St. Capital LLC v Holt, 45 Misc.3d 1207 [A], 2014 NY Slip Op 51487[U] [Sup Ct, NY County]; Matter of J.G. Wentworth Originations, LLC v Hall, 43 Misc.3d 837, 838 [Sup Ct, Yates County]).

Significantly the SSPA further provides that "[n]o payee who proposes to make a transfer of structured settlement payment rights shall incur any penalty, forfeit any application fee or other payment, or otherwise incur any liability to the proposed transferee or any assignee based on any failure of...