| Murphy v RMTS Assoc., LLC |
| 2010 NY Slip Op 02491 [71 AD3d 582] |
| March 25, 2010 |
| Appellate Division, First Department |
| Jane S. Murphy, Appellant, v RMTS Associates, LLC, etal., Respondents. |
—[*1] Cleary Gottlieb Steen & Hamilton LLP, New York (Molly M. Lens and Jeffrey A. Rosenthalof counsel), for respondents.
Order, Supreme Court, New York County (Charles E. Ramos, J.), entered February 19, 2008,which, insofar as appealed from, denied plaintiff's motion for partial summary judgment on herfourth and fifth causes of action for fraudulent conveyance, unanimously modified, on the law, tothe extent of dismissing such causes of action upon a search of the record. The Clerk is directedto enter judgment dismissing the complaint as against all defendants.
After establishing the validity of her claimed membership interest in defendant RMTSAssociates, LLC (Bartfield v RMTS Assoc., LLC, 11 AD3d 386 [2004], lvdenied 4 NY3d 708 [2005]), plaintiff commenced the instant action seeking, inter alia, avaluation of such interest. Thereafter, and with no notice to plaintiff, defendant Axon, RMTSAssociates' majority member, caused virtually all of RMTS Associates' assets to be transferred toa new limited liability company, RMTS, LLC, pursuant to an asset purchase agreement that hesigned on behalf of both the seller and the buyer. When plaintiff learned of this transfer, sheamended the complaint to include new causes of action for, inter alia, fraudulent conveyanceunder Debtor and Creditor Law §§ 273 and 276. Supreme Court, after referring thevaluation issues to a special referee, struck a balance in favor of plaintiff, to which the partiesagreed; the parties also agreed to the dismissal of all of plaintiff's claims other than the two forfraudulent conveyance.
After defendants paid the stipulated amount, resulting in the extinguishment of plaintiff'sinterest in RMTS Associates, plaintiff moved for partial summary judgment on her causes ofaction for fraudulent conveyance. Having already collected the full value of her interest inRMTS Associates, she sought counsel fees and punitive damages. Defendants opposed, arguingthat the fraudulent conveyance causes of action were rendered academic by the settlementbecause plaintiff had recovered the full amount of damages to which she is entitled. The IAScourt denied plaintiff's motion on the ground that there is an issue of fact as to whether thetransfer of the assets was an attempt to defraud plaintiff or merely to separate her from RMTSAssociates.
Plaintiff's motion should be denied, not because of any questions of fact, but becauseplaintiff cannot recover any additional damages under the fraudulent conveyance claims; [*2]accordingly, those claims are moot (Sygrove v Sygrove, 15AD3d 291 [2005]). As defendants argue in their brief without contradiction from plaintiff in herreply brief, plaintiff has abandoned the contention she advanced in Supreme Court that she isentitled to punitive damages and, pursuant to Debtor and Creditor Law § 276-a, attorneys'fees. In any event, she is entitled to neither. Even assuming the asset sale was surreptitious, itindisputably had the lawful effect of separating plaintiff from RMTS Associates and, in anyevent, the alleged fraud was not so gross and wanton as to justify an award of punitive damages(James v Powell, 19 NY2d 249, 260 [1967]). Because plaintiff was fully compensatedfor her interest in RMTS Associates without regard to the fraudulent conveyance claims, andthere is no reason to suppose that the asset sale itself caused plaintiff to incur additionalattorneys' fees (cf. Posner v S. Paul Posner 1976 Irrevocable Family Trust, 12 AD3d177, 179 [2004] [motion court "err(ed) in awarding fees for services not directly related to orinextricably intertwined with the fraudulent conveyance issue"]), we hold that the fraudulentconveyance claims cannot be prosecuted for the sole purpose of obtaining a finding of actualintent to deceive and thus an award of attorneys' fees. Under these circumstances, such an awardwould be tantamount to an award of punitive damages.
The mootness of the fraudulent conveyance claims is not affected by plaintiff's claim fornominal damages. Because she sustained actual damages for which she was fully compensated,the justification for an award of nominal damages—to provide a remedy for "a technicalinvasion of [a plaintiff's] right or a breach of defendant's duty . . . where theplaintiff has failed to prove actual damages or a substantial loss or injury to becompensated" (Brian E. Weiss, D.D.S., P.C. v Miller, 166 AD2d 283, 283 [1stDept 1990], affd 78 NY2d 979 [1991] [emphasis added])—is absent (see alsoKronos, Inc. v AVX Corp., 81 NY2d 90, 95 [1993] [nominal damages "are allowed in tortonly when needed to protect an important technical right" (emphasis added and internalquotation marks omitted)]).
As the fraudulent conveyance claims are moot, we affirm the denial of plaintiff's motion forpartial summary judgment. Searching the record, we determine that, for the same reason,summary judgment should be granted in favor of defendants dismissing the remaining fourth andfifth causes of action (Merritt Hill Vineyards v Windy Hgts. Vineyard, 61 NY2d 106,109-110 [1984] [Appellate Division has power to search record and award summary judgment toa nonmoving party that did not appeal]). Concur—Andrias, J.P., Nardelli, McGuire,Acosta and DeGrasse, JJ.