Rockefeller v. Statement Servs., Corp.

204 A.D.3d 920

167 N.Y.S.3d 516

In the Matter of James ROCKEFELLER, respondent,

v.STATEMENT SERVICES, CORP., appellant.

2019–08875

Index No. 614626/2018

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

Argued—February 1, 2022

April 20, 2022

The Law Offices of Jay S. Markowitz, P.C., Williston Park, NY, for appellant.

The Scher Law Firm, LLP, Carle Place, NY (Austin Graff of counsel), for respondent.

MARK C. DILLON, J.P., COLLEEN D. DUFFY, VALERIE BRATHWAITE NELSON, LINDA CHRISTOPHER, JJ.

DECISION & ORDER

In a proceeding pursuant to CPLR 5225(b) to compel the turnover of property owed to a judgment debtor, Statement Services, Corp. appeals from an order of the Supreme Court, Nassau County (Sharon M.J. Gianelli, J.), entered June 6, 2019. The order granted the petition and directed Statement Services, Corp. to turn over to the petitioner the sum of $200,265, plus statutory interest and attorneys’ fees, in satisfaction of a judgment against Barry J. Leon, Barry J. Leon CPA, P.C., Meadow Street Partners, LLC, and 40 HGD, L.P.

ORDERED that the order is affirmed, with costs.

In October 2018, the petitioner commenced this proceeding pursuant to CPLR 5225(b) against the respondent, Statement Services, Corp., seeking the turnover of funds to satisfy a judgment in the sum of $200,265, entered October 18, 2018 (hereinafter the judgment). The petitioner obtained the judgment against the respondent's president, Barry J. Leon, as well as Barry J. Leon CPA, P.C., Meadow Street Partners, LLC, and 40 HGD, L.P. (hereinafter 40 HGD), other entities controlled by Leon (hereinafter collectively the judgment debtors). The petition alleged that the judgment arose out of the judgment debtors’ failure to pay on the date due the sum of $200,000, which was one of several installment payments owed to the petitioner by the judgment debtors pursuant to a settlement agreement dated August 2, 2017 (hereinafter the agreement), between the petitioner and the judgment debtors. The agreement indicated that Leon executed confessions of judgment in favor of the petitioner, on behalf of the judgment debtors, in the event of any default in payment of the installments. The petition further alleged that the respondent was the alter ego of both Leon and 40 HGD and that the respondent was in possession of money in which the judgment debtors had an interest. In support of the petition, the petitioner submitted: a transcript of deposition testimony given by Leon in a prior action, in which Leon averred that he controlled all of the assets of the respondent; evidence that the respondent had paid a prior installment owed by the judgment debtors under the agreement; and bank records showing transfers of large sums of money between the respondent's account and personal accounts belonging to Leon and joint accounts of Leon and certain family members. The petitioner also established that Leon caused the respondent to pay the debts of 40 HGD, another judgment debtor.

In an order entered June 6, 2019, the Supreme Court granted the petition and directed the respondent to turn over the sum of $200,265, plus statutory interest and attorneys’ fees, in satisfaction of the judgment. The respondent appeals.

" CPLR 5225(b) provides for an expedited special proceeding by a judgment creditor to recover ‘money or other personal property’ belonging to a judgment debtor ‘against a person in possession or custody of money or other personal property in which the judgment debtor has an interest’ in order to satisfy a judgment" ( Matter of Signature Bank v. HSBC Bank USA, N.A., 67 A.D.3d 917, 918, 889 N.Y.S.2d 242 ; see Matter of Sirotkin v. Jordan, LLC, 141 A.D.3d 670, 671, 35 N.Y.S.3d 443 ). Such a proceeding may also be maintained "against a person who is a transferee of money or other personal property from the judgment debtor" ( CPLR 5225[b] ; see Matter of Goldberg & Connolly v. Xavier Constr. Co., Inc., 94 A.D.3d 1117, 1118, 943 N.Y.S.2d 178 ; Matter of Federal Deposit Ins. Corp. v. Conte, 204 A.D.2d 845, 846, 612 N.Y.S.2d 261 ). A petitioner must show "that the judgment debtor is entitled to the possession of such property or that the judgment creditor's rights to the property are superior to those of the transferee" ( CPLR 5225[b] ).

A proceeding pursuant to CPLR 5225(b) may be maintained under an alter ego theory (see Matter of Arben Corp. v. Durastone, LLC, 186 A.D.3d 599, 599–600, 129 N.Y.S.3d 441 ; Matter of Goldman v. Chapman, 44 A.D.3d 938, 939–940, 844 N.Y.S.2d 126 ). "Equity will intervene to ‘pierce the corporate veil’ and permit the assertion of claims against the individuals who control the corporation in order to avoid fraud or injustice" ( Matter of Edrich v. MMAL Corp., 134 A.D.3d 935, 936, 23 N.Y.S.3d 264 ). The party seeking to pierce the corporate veil must establish that "(1) the owners exercised complete domination of the corporation in respect to the transaction attacked; and (2) that such domination was used to commit a fraud...