EVW Wins Multi-Million Dollar Appeal Before New York Appellate Division

Three attorneys from EVW’s litigation group worked collaboratively to secure from the Appellate Division, First Department, a modification of an adverse decision rendered in Supreme Court, New York County. The litigation was a suit on a promissory note given in connection with the sale of a multi-million dollar STOLI life insurance policy and the financing of the premium payments therefor. EVW represented the defendant in this litigation.

Defendant moved in the court below to amend her Answer based on facts which emerged from the conviction in federal court of the sole officer and shareholder of the plaintiff on charges of mail and wire fraud stemming from transactions closely related to the one in issue in this litigation. In all, Defendant sought to add five new affirmative defenses to her Answer. The three most important proposed new defenses were:

(1)    That the plaintiff could not employ the courts in order to recover the fruits of the crime for which its sole shareholder been convicted.

(2)    That the plaintiff’s sole shareholder had bribed and corrupted the trustee who had signed the promissory note which was being sued upon.

(3)    The defense of in pari delicto.

The court below denied the motion for leave to amend, in its entirety.

The primary basis for the decision of the lower court was the conclusion that all five of the proposed affirmative defenses were “devoid of merit.” The Appellate Division, however, modified the decision below by determining that the three affirmative defenses mentioned above did have merit. Moreover, the Appellate Division stated in its opinion that Defendant had already “demonstrated prima facie that there was a direct connection between the scheme to defraud of plaintiff’s principal and the promissory note plaintiff seeks to enforce and that the scheme was more than a small illegality.”

In so doing, the Appellate Division reaffirmed and reinforced the rule that a felon may not employ the courts to recover the fruits of his crimes. In addition, in ruling that we had already demonstrated prima facie the connection between the crimes which had led to the conviction and the note in suit, the Appellate Division determined that the facts supported the application of one of the affirmative defenses.

The attorneys who worked on the motion to the court below and the appeal were Rob Gross, Adam Rader and Steven W. Wolfe.


B.D. Estate Planning Corp v. Trachtenberg, 134 A.D.3d650 (2015)
22 N.Y.S.3d 202, 2015 N.Y. Slip Op. 09633

134 A.D.3d 650, 22 N.Y.S.3d
202, 2015 N.Y. Slip Op. 09633

This opinion is uncorrected and subject to revision before publication in the printed Official reports

*1 B.D. Estate Planning
Corp., Plaintiff-Respondent,
Marcy Trachtenberg, as Trustee of the Ellis
Limquee Family Insurance Trust, Defendant,
Carolyn Limquee, Defendant-Appellant

Supreme Court, Appellate Division,
First Department, New York
16509N 6510006/11
Decided on December 29, 2015

Mazzarelli, J.P., Sweeny, Manzanet-Daniels, Gische, JJ.

Eaton & Van Winkle, LLP, New York (Adam J. Rader of counsel), for appellant.
Strassberg & Strassberg, P.C., New York (Robert Strassberg of counsel), for respondent.
Order, Supreme Court, New York County (Shirley Werner, J.), entered March 16, 2015, which denied defendant Carolyn Limquee’s motion to amend her answer to plead the proposed fourth, seventh, and eighth affirmative defenses, and otherwise affirmed, without costs.

The record reflects that plaintiff’s sole owner, principal and employee was convicted, after a jury trial, of conspiracy to commit mail and wire fraud, and substantive mail fraud and substantive wire fraud in connection with a scheme to defraud insurance companies. Nevertheless, plaintiff seeks to enforce the provisions of a promissory note providing that it receive 50% of the death benefits payable under a policy on the life of Limquee’s late husband. The record indicates that this policy may have been part of the scheme to defraud that resulted in the criminal conviction of plaintiff’s principal.

As the Court of Appeals stated in McConnell v Commonwealth Pictures Corp. (7 NY2d 465, 469 [1960]), “(P)ublic policy closes the doors of our courts to those who sue to collect the rewards of corruption.” The court improperly denied Limquee leave to amend her answer to assert the affirmative defenses of “bribery and corruption” and recovery of fruits of crimes barred. Although the promissory note at issue is not illegal on its face, Limquee demonstrated prima facie that there was a direct connection between the scheme to defraud of plaintiff’s principal and the promissory note plaintiff seeks to enforce and that the scheme was more than a “small illegality” (see McConnell, 7 NY2d at 471). Although it appears that Limquee may have benefitted from the scheme, the court should not intervene to enable the wrongdoer to obtain additional fruits of its crime.

The proposed affirmative defense of in pari delicto was also permissible as an alternative or hypothetical pleading (see CPLR 3014; Finkelstein v Warner Music Group Inc., 14 AD3d 415 [1st Dept 2005]).

The remaining proposed affirmative defenses were defective in that Limquee was unable to demonstrate that she was damaged by the conduct alleged, as the court noted.





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