Pursuant to CPLR 5225 (b) and 5227, petitioner, an assignee of judgments, seeks a turnover [*2]order against respondent 455 Central Park West, LLC, an entity that owed a debt to the judgment debtor, and against others, which are allegedly alter egos of 455 Central Park West LLC. The petition has been dismissed as to respondent Trustees of Columbia University.

The petition alleges that, in violation of restraining notices served upon them, the remaining respondents paid or arranged to be paid the debt that respondents owed to the judgment debtor, which ought to have been restrained as intangible property of the judgment debtor. The remaining respondents are all nondomiciliaries.

The remaining respondents cross-move to renew and reargue a prior decision of Justice Edward H. Lehner, who was previously assigned to this matter. In the context of whether renewal and reargument should be granted, respondents raise the issue of whether the Court may hold respondents liable for violation of the restraining notices, when at the time of service of the restraining notices, the out-of-state respondents lacked minimum contacts with the State of New York sufficient to satisfy due process.

Petitioner Doubet LLC is the assignee of three judgments entered in the Supreme Court in Nassau County in favor of Morris Silver against Douglas F. Palermo. Petitioner's Exhibit 1[Verified Petition, Ex 4]. Silver assigned his judgments to his wife, who assigned them to petitioner. Id.^[FN1] In February 2003, an attorney with an office in New York prepared the restraining notices on petitioner's behalf and served them upon respondents. Id. The restraining notices state the amounts then owing on each of the judgments (Petitioner's Exhibit 1 [Verified Petition, Ex 6]), and the combined total of the amount then owing was $2,537,436.81.

Restraining notices were served upon, among others, "MCL Companies" at an address in Chicago, Illinois; upon respondent Daniel E. McLean in Chicago, c/o MCL Companies; upon respondent 455 Central Park West LLC at an address in New York, New York and c/o MCL Companies in Chicago. Id. [Verified Petition, Ex 7] It does not appear from the record that respondent 455 Central Park West Inc. was served with a restraining notice. See Petitioner's Exhibit 1 [Verified Petition, Exs 6, 7]. Petitioner apparently did not domesticate the New York judgments in Illinois.

According to the petition, petitioner recovered $75,000 in a different turnover proceeding on December 20, 2003. Petitioner's Exhibit 1 [Verified Petition ¶ 7].

In 2004, Palermo moved to vacate his default in one of the actions, Silver v Summit Rovins & Feldesman, Sup Ct, Nassau County, Index No. 15237/90. By a stipulation dated January 26, 2004 between Silver and Doubet LLC with Palermo, and so-ordered by Justice Joseph Covello, those parties agreed to extend all restraining notices for "thirty (30) days subsequent to the receipt by plaintiff's and Doubet's attorneys of the Notice of Entry of the Order or Judgment memorializing the Court's decision on the motion [to vacate]." Verified Petition, Ex 8.

On July 29, 2004, respondent Columbia University allegedly paid Palermo a broker's fee of $1,564.816 in connection with real estate that Columbia University acquired from respondent 455 [*3]Central Park West LLC (the Columbia transaction).

Meanwhile, by order dated December 16, 2004, Justice Covello denied Palermo's application to vacate the judgment entered in Silver v Summit Rovins & Feldesman, Sup Ct, Nassau County, Index No. 15237/90.^[FN2] By order dated June 8, 2005, Justice Covello extended the restraining notices for "a period of one year from the date of the requested order. . ." Petitioner's Exhibit 1 [Verified Petition, Ex 11]. By decisions dated September 29, 2005, Justice Lawrence Brennan extended the restraining notices for yet another year. Petitioner's Exhibit 1 [Verified Petition, Ex 12]. The petition alleges that respondents 455 Central Park West LLC, 455 Central Park West Inc, MCL Companies of Chicago, Inc., and Daniel E. McLean (collectively, the McLean respondents) were served with the extensions of the restraining notices on October 17, 2005. Petitioner's Exhibit 1 [Verified Petition, Ex 13].

On October 14, 2005, Palermo filed a Chapter 7 bankruptcy petition in the United States District Court, Southern District of New York, In Re: Palermo, Case No. 05B 25081 (ASH). Petitioner commenced an adversary proceeding against Palermo in the bankruptcy proceeding.^[FN3] [*4]

On or about January 7, 2006, the McLean respondents allegedly paid Palermo, his nominees and assigns $437,000, because Palermo found a purchaser for real property, known as the River East Retail/Parking Complex in Chicago (the River East Transaction).

On June 14, 2006, petitioner commenced a turnover petition against Columbia University and the McLean respondents in the Supreme Court, New York County, Doubet LLC v Trustees of Columbia Univ., Index No. 108238/2006. By decision, order, and judgment dated October 24, 2006, Justice Lehner granted Columbia University's motion to dismiss the petition without prejudice for lack of service of the application upon Palermo, the judgment debtor, as required under CPLR 5225 (b).Petitioner's Exhibit 1 [Verified Petition, Ex 5]. Justice Lehner also stated that the approximately $1.5 million in fees payable to Palermo and his nominees (which Columbia allegedly agreed to pay) "was subsequently modified so that the Owner [455 Central Park West LLC] paid the fees that previously were to be paid by Columbia." Id. at 3. However, Justice Lehner's decision to dismiss the petition was based solely on lack of service upon Palermo of notice of the turnover proceeding.

Some time in 2007 (allegedly on January 14, 2007), petitioner filed a new turnover petition in the Supreme Court, Nassau County, which was later transferred to New York County and assigned to Justice Lehner. Columbia University and the McLean respondents separately cross-moved to dismiss the petition. The McLean respondents argued that Doubet's restraining notices were invalid, in that at the time of service of the restraining notices, respondent 455 Central Park West LLC did not have property of Palermo that was capable of being restrained by the notices.

By a decision dated August 28, 2007, Justice Lehner dismissed the petition, reasoning that petitioner failed to show payment by any of the respondents of any "debt" owing to Palermo or his controlled entities at the time the restraining notices were served. Petitioner's Exhibit 2 [Exhibit 6-M]. Justice Lehner ruled that there was no "debt" owing to Palermo because the obligation to pay Palermo fees was "clearly contingent on the closing of the sale of the units." Justice Lehner further stated, "if the proceeding were not being dismissed against all respondents, it would nevertheless be dismissed as against Columbia as based on the contractual agreements [,] it cannot be said that it paid any monies to Palermo." Id. at 6.

On reargument, Justice Lehner adhered to his prior determination dismissing the petition as against Columbia University, but vacated dismissal of the proceeding against the McLean respondents. Petitioner's Exhibit 2 [Exhibit 7-M] Justice Lehner ruled that, in light of the First Department's decision in JP Morgan Chase Bank, NA v Motorola, 47 AD3d 293 (1st Dept 2007), "a triable issue may exist as to whether the obligation of McLean to Palermo may be deemed a "debt," subject to enforcement proceedings under CPLR article 52. . ." Id. at 2. Justice Lehner directed the McLean respondents to serve an answer to the petition, and to contact the court should the parties wish to conduct discovery and cannot agree as to a schedule. Id. It appears that the parties conducted discovery. [*5]

The McLean respondents served a verified answer dated March 19, 2008 and asserted several affirmative defenses: (1) failure to state a claim upon which relief may be granted; (2) the petition was barred by the doctrines of estoppel, waiver, and unclean hands; (3) that the automatic bankruptcy stay barred the relief sought in the petition; (4) that the restraining notice served upon the McLean respondents was invalid at the time of service because the McLean respondents did not owe a debt to Palermo; (5) that the restraining notice served upon the McLean respondents was invalid at the time of service because the McLean respondents were not in possession of any property in which Palermo had an interest; (6) that the restraining notice served upon the McLean respondents was invalid at the time of service because it sought to restrain property located outside the State of New York; (7) that the restraining notice served upon the McLean respondents was invalid at the time of service because it sought to restrain the transfer of funds to entities other than Palermo; (8) Doubet does not have a property interest in the funds sought by the petition; and (9) the transfer of funds described in the petition took place after the restraining notice had expired. Petitioner's Exhibit 2 [[Exhibit 1-M, ¶¶ 94-139].

The verified answer of the McLean Respondents stated, in relevant part.

"At all relevant times, each of the 455 CPW Respondents was headquartered and domiciled in Illinois, and incorporated or organized either in Illinois or Delaware.

None of the 455 CPW respondents has ever had any office or employees in New York.

The party that was obligated to pay the contingent fees to Palermo's designees, 455 CPW LLC, was and is registered in Delaware and headquartered in Illinois.

Under New York law, property (including tangible property) that is located outside New York cannot be subject to a restraining notice. Under New York law, the situs of any contractual obligation in the domicile of the obligor.

Thus, Doubet's restraining notice was invalid, because it sought to restrain the transfer of property (the contingent fee obligation owed by 455 CPW LLC to Palermo's designees) that was located outside of New York."

By a decision dated October 13, 2009, Justice Lehner denied both petitioner's motion for summary judgment and the McLean respondents' cross motion for summary judgment. Stern Affirm., Ex 3. Justice Lehner noted that, in his prior decision, he found that a triable question existed as to [*6]whether the McLean respondents' contractual obligations to pay Palermo advisory fees were a "debt" under CPLR 5210 (a). In this decision, Justice Lehner ruled,

"Since the advisory fees were not past due, due upon demand, or certain to become due, they could not be considered a debt' under CPLR 5201 (a). However, as stated above in JP Morgan, a contingent future debt is subject to a levy as property' if the interest is assignable or transferrable. Here, the Advisory Service Agreement Amendments . . . indicate that those fee arrangements were assignable as the parties bound by the agreements included successors and assigns.' [citation omitted]. Thus, these advisory fees were property' under CPLR 5201 (b), and as a result, the restraining notices were effective when served in February 2003."

Justice Lehner also rejected the defense of unclean hands raised by the McLean respondents.

Nevertheless, Justice Lehner ruled that "there are other issues of fact which prevent this court from granting summary judgment at this juncture." Id. at 6. Justice Lehner stated that "an issue of fact remains as to whether [the McLean respondents] were served with the first one-year extension of the restraining notices in February 2004." Id.

"Second, in addition to the advisory fees from the Columbia Transaction, Doubet also seeks to recover additional fees from the South Boston Project and River East Chicago transactions. In regard to these matters, there are issues of fact as to whether the entities that paid the monies were listed on the restraining notices, as well as what entities made the payments, and whether those entities were subject to the restraining notices."

In the instant motion, petitioner moves for judgment against the McLean respondents for the fees paid to Palermo arising out of the Columbia and River East Transactions.^[FN4] Petitioner argues that "the only issues that Justice Lehner left open in connection with the Columbia Transaction was the issue of proof of service of the February 2004 extension of the Restraining Notices . . ." According to petitioner, documents affirmatively establish that the McLean respondents were served with the extension.

Petitioner also seeks attorneys fees' pursuant to Debtor & Creditor Law §§ 276 and 276-a. Petitioner maintains that all of the McLean respondents should be jointly and severally liable because [*7]"the entities constituting the McLean Respondents were operated as if they were one . . ." Stern Aff. ¶ 65.

The McLean respondents cross-move to renew and reargue Justice Lehner's October 13, 2009 decision. They contend that Justice Lehner misapplied Motorola and Koehler. They argue that, under a more recent decision of the Court of Appeals, intangible property such as contractual obligations are not subject to enforcement proceedings unless the obligor is served with a restraining notice in New York.

As a procedural matter, Article 4 of the CPLR envisions summary determination on the papers submitted, with a trial forthwith on triable issues of fact.^[FN5] A separate "motion" for a determination is unnecessary, although "the making of a pre-hearing motion for summary judgment is not prohibited." Alexander, Practice Commentaries, McKinney's Cons Laws of NY, Book 7B, CPLR C409, at 417. The Court deems petitioner's "motion for judgment pursuant to CPLR 409" as a motion seeking, in part, to "restore" the petition for final determination. Petitioner's motion was a necessary housekeeping measure to signal the end of discovery, to introduce into the record the discovery that the parties had conducted after Justice Lehner directed the McLean respondents to answer the petition, and to submit the proceeding for final determination. The petition had remained undecided as pending until petitioner brought the instant motion. The instant motion and cross motion and the proceeding were assigned to this Court because Justice Lehner had retired.

On its face, the petition seeks a judgment against the McLean respondents pursuant to CPLR 5225 (b) and 5227. Petitioner believed that a turnover proceeding was the proper enforcement mechanism "to obtain a money judgment for damages if the McLean respondents have failed to honor the [r]estraining [n]otices." Stern Reply Aff. ¶ 29.

CPLR 5225 (b) states,

"Upon a special proceeding commenced by the judgment creditor, against a person in possession or custody of money or other personal property in which the judgment debtor has an interest, or against a person who is a transferee of money or other personal property from the judgment debtor, where it is shown 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, the court shall require such person to pay the money, or so much of it as is sufficient to satisfy the judgment, to the judgment creditor . . ." (emphasis supplied).

"Upon a special proceeding commenced by the judgment creditor, against any person who it is shown is or will become indebted to the judgment debtor, the court may require such person to pay to the judgment creditor the debt upon maturity . . . , and [*8]to execute and deliver any document necessary to effect payment; or it may direct that a judgment be entered against such person in favor of the judgment creditor"

Here, the McLean respondents allegedly paid Palermo's fees in 2004 and in January 2006, before this turnover proceedings was commenced. Thus, CPLR 5225 (b) does not apply because petitioner does not allege that the McLean respondents were in possession of personal property of Palermo at the time the turnover proceedings were commenced. Neither were the McLean respondents transferees of Palermo's money or personal property. CPLR 5227 does not apply because, at the time of this turnover proceeding, the McLean respondents were not then currently indebted or were to become indebted to Palermo. According to petitioner, they had paid off their obligations to Palermo.

Therefore, the branch of the petition seeking a turnover order against the McLean respondents is denied.

Although a turnover proceeding does not lie against respondents, the Court of Appeals has held that "violation of the restraining notice by the party served is punishable by . . . a special proceeding under CPLR article 52 brought by the aggrieved judgment creditor." Aspen Industries, Inc. v Marine Midland Bank, 52 NY2d 575, 580 (1981). Because the petition seeks money damages against the McLean respondents for violation of the restraining notices, the Court will consider the petition as asserting a separate branch seeking such relief. See id.; see also Nardone v Long Is. Trust Co., 40 AD2d 697 (2d Dept 1972).

Petitioner claims that the McLean respondents allegedly violated the restraining notices when Palermo was paid a broker's fee in July 2004 for the Columbia Transaction, and when Palermo was paid a broker's fee in January 2006 for the River East Transaction.

In January 7, 2006, the McLean respondents allegedly paid Palermo, his nominees, and assigns $437,000, because Palermo found a purchaser for a River East retail/parking complex in Chicago (the River East Transaction). Petitioner claims that documentary evidence establishes that 455 Central Park West LLC paid the fee due to Palermo on the River East Transaction, which the McLean respondents dispute. The McLean respondents contend: (1) the fee was paid by MCL REC LLC, which was not listed on the restraining notice; (2) the restraining notices were rendered unenforceable by virtue of the automatic bankruptcy stay; and (3) this fee is currently being sought by the trustee in an adversary proceeding in Palermo's bankruptcy.

As the McLean respondents point out, Palermo filed for bankruptcy on October 14, 2005, raising the issue of whether the automatic stay invalidated the restraining notices. Petitioner contends that "The [McLean respondents'] suggestion that the restraining notice was rendered void and unenforceable by the automatic bankruptcy statute' [sic] is not the law" (Stern Reply Aff. ¶ 58), but petitioner cites no cases to support that contention.

As the McLean respondents indicate, in In Re Adomah (340 BR 453 [SD NY 2006]), a bankruptcy court ruled that a restraining notice served upon Bank of America to restrain funds of [*9]the debtor in bankruptcy became "void and of no effect" upon the subsequent filing of the bankruptcy petition. Judge Gropper reasoned,

"As the Second Circuit said in Rexnord Holdings, Inc. v. Bidermann, 21 F.3d 522, 527 (2d Cir.1994), the stay is effective immediately upon the filing of the petition, ... and any proceedings or actions described in section 362(a)(1) are void and without vitality if they occur after the automatic stay takes effect.' (citations omitted). Upon the filing of the petition, the restraining notice became void and of no effect. See 48th St. Steakhouse, Inc. v. Rockefeller Group, Inc. (In re 48th St. Steakhouse, Inc.), 835 F.2d 427, 431 (2d Cir.1987), cert. denied, 485 U.S. 1035, 108 S.Ct. 1596, 99 L.Ed.2d 910 (1988). As of the Petition Date, Bank of America had no legal obligation to abide by it."

By contrast, a justice of the New York State Supreme Court reached the opposite conclusion in Medi-Physics Inc. v Community Hospital of Rockland County, 105 Misc 2d 574, 575 (Rockland County Ct 1980). Justice Edelstein stated,

"[T]he stay provisions of section 362 of the Bankruptcy Code has no effect upon the restraining notice. A stay has the effect of suspending enforcement and may prevent the judgment creditor from coming into possession of the funds. A stay has no effect on a restraining notice which merely acts as an injunction. (Nardone v Long Is. Trust Co., 40 AD2d 697.)"

This Court finds In Re Adomah persuasive, and does not follow Medi-Physics Inc. The case that Justice Edelstein cites, Nardone v Long Island Trust Co. (40 AD2d 697 [2d Dept 1972], supra), did not involve the automatic bankruptcy stay, but rather an order staying the judgment creditor from enforcing his judgment pending a hearing on the motion to vacate the judgment. The Appellate Division in Nardone ruled, "In our opinion the stay contained in the ex parte order did not serve to suspend the effectiveness of the restraining notice. It merely prohibited petitioner from gaining actual possession of the judgment debtor's funds." Nardone, 40 AD2d at 697. This Court does not agree with Justice Edelstein that a stay of the enforcement of a judgment is analogous to the automatic bankruptcy stay. Although the automatic bankruptcy stay would stay enforcement proceedings against the debtor in bankruptcy, the purpose of the bankruptcy stay, its reach and effect under federal law, go well beyond that of a state court's order staying enforcement proceedings.

Therefore, Palermo's bankruptcy filing triggered an automatic stay that rendered the restraining notices ineffective during the bankruptcy stay. Accordingly, the alleged payment by the McLean respondents of the $437,000 fee in the River East Transaction does not constitute a violation of the restraining notices. The Court does not address the McLean respondents' remaining arguments that they did not violate the restraining notices with respect to the River East Transaction.

Respecting the Columbia Transaction, according to Daniel McLean, "At the closing of the sale on July 29, 2004, the parties agreed that 455 CPW LLC [455 Central Park West LLC], not Columbia, would pay the fees owed to Palermo's designees." Oberdier Affirm., Ex L [McLean Aff. ¶ 11]. The McLean respondents do not dispute that respondent 455 Central Park West LLC paid the fees arising out of the Columbia Transaction. See Respondents' Opp. Mem. at 4, 8 ("Even if the restraining notice had been violated, it would have been violated only by the Respondent that paid the allegedly restrained funds: the seller, 455 CPW LLC.").

Petitioner argues that "the only issues that Justice Lehner left open in connection with the Columbia Transaction was the issue of proof of service of the February 2004 extension of the Restraining Notices . . ." According to petitioner, documents affirmatively establish that the McLean respondents were served with the extension. See infra, III.B.3.

The McLean respondents cross-move to renew and reargue Justice Lehner's October 13, 2009 decision, which denied their cross motion for summary judgment dismissing the petition. Petitioner argues that reargument is untimely because Justice Lehner's October 13, 2009 decision was apparently entered on October 19, 2009, and notice of entry was apparently served on October 21, 2009. Stern Aff., Ex 3.

Assuming that the broker's fee paid constituted a "debt," the McLean respondents additionally argued before Justice Lehner that the "debt" was located outside the State of New York, and that property located outside New York cannot be restrained under CPLR 5222 (b). The McLean respondents asserted that, for the purposes of a restraining notice, the situs of the contractual obligation to pay a broker's fee would be determined by the principal place of business of 455 Central Park West, LLC, which assumed the obligation to pay the broker's fee, and that its principal place of business was in Illinois.

Justice Lehner rejected both arguments, ruling,

"It is clear that restraining notices cannot be utilized to reach assets in which the judgment debtor has no interest or to reach a debt which is not a fixed obligation.' However, [i]t has long been held that a contingent future debt, even if not subject to levy as debt' under CPLR 5201 (a), may be leviable as property' under CPLR 5201 (b).' JP Morgan Chase Bank, N.A. v Motorola, Inc., supra at p. 302. In order to be leviable as property,' the interest has to be assignable or transferrable. Id. at p. 303.

. . . Here, the Advisory Service Agreement Amendments . . . indicate that those fee agreements were assignable as the parties bound by the agreements included successors and assigns.'. . . thus, these advisory fees were property' under CPLR 5201 (b), and as a result, the restraining notices were effective when served in February 2003.

The McLean Respondents . . . argue that, even if the advisory fees were property,' such [*11]would be unattachable as out-of-state property. However, this is not an application for an attachment, but rather a turnover proceeding, pursuant to CPLR 5225 (b). In the recent Court of Appeals case, Koehler v Bank of Bermuda Limited, 12 NY3d 533 (2009), the court distinguished between the enforcement of money judgments under article 52, and attachments under article 62.

The court noted that CPLR article 52 contains no express territorial limitation barring entry of a turnover order that requires a garnishee to transfer money or property into New York from another state or country.' Id. at 539. Further the Court . . .concluded that a New York court with personal jurisdiction over a defendant may order him to turn over out-of-state property regardless of whether the defendant is a judgment debtor or garnishee.' (p. 451).

Thus, since the McLean Respondents do not dispute that this court has personal jurisdiction over them, it is irrelevant whether or not the property' subject to this turnover proceeding was located in New York."

Stern Aff., Ex 3, at 5 (emphasis supplied).

The McLean respondent contend on this cross motion that Justice Lehner misapplied Motorola and Koehler. They argue that, under a more recent decision of the Court of Appeals, Hotel 71Mezz Lender LLC v Falor (14 NY3d 303 [2010]), "intangible property such as contractual obligations are not subject to enforcement proceedings of any type unless the obligor is served with notice in New York." Respondents' Mem., at 13.

In Hotel 71 Mezz Lender LLC, the Court of Appeals upheld an attachment issued on a nondomiciliary garnishee of a defendant's intangible personal property, i.e., ownership/membership interests in limited liability companies. The Court of Appeals stated,

"when attachment is used to serve as a jurisdictional predicate, the following black letter principle must be adhered to: where personal jurisdiction is lacking, a New York court cannot attach property not within its jurisdiction.'

On the other hand, where a court acquires jurisdiction over the person of one who owns or controls property, it is equally well settled that the court[ ] can compel observance of its decrees by proceedings in personam against the owner within the jurisdiction.' . . .

Based on the foregoing, a court with personal jurisdiction over a nondomiciliary present in New York has jurisdiction over that individual's tangible or intangible property, even if the situs of the property is outside New York."

Hotel 71 Mezz Lender LLC, 14 NY3d at 311-312 (emphasis supplied).

The McLean respondents appear to argue that it logically follows from Hotel 71 Mezz Lender LLC that, if a court that does not have in personam jurisdiction over a nondomiciliary, then the court lacks jurisdiction over that nondomiciliary's tangible or intangible property located outside New York. As petitioner indicates, Hotel 71 Mezz Lender LLC involved an attachment, not a restraining notice. [*12]

Justice Lehner specifically declined to reach the question of whether the contractual obligation was located in New York or outside of New York, reasoning that the question was irrelevant because the court had acquired personal jurisdiction over the McLean respondents. However, in personam jurisdiction over the McLean respondents was acquired with the commencement and service of the turnover petition in 2006, long after 455 Central Park West LLC had already paid the broker's fee to Palermo's designees in July 2004. It does not follow that the Court's in personam jurisdiction over the McLean respondents when the turnover proceeding was commenced in 2006 ^[FN6] means that the Court had in personam jurisdiction over them when the restraining notices were served upon the McLean respondents in 2003.

Although CPLR 5222 (a) permits an attorney for the judgment creditor to issue a restraining notice without the court's involvement, it is legal process nonetheless. In that circumstance, the restraining notice is issued by the attorney "as an officer of the court." CPLR 5222 (a). Like any legal process, it is an assertion of the court's, and the state's, power. Although valid service is required, legal process is not effective, notwithstanding valid service, unless the state , and the court, has a sufficient jurisdictional basis over the person served. "The restraining notice operates like an injunction. Indeed, it is an injunction, issued by the attorney acting as an officer of the court." Siegel, Practice Commentaries, McKinney's Cons Laws of NY, Book 7B, CPLR C5222:4. Thus, the effect of a restraining notice is in the nature of a provisional remedy, like an injunction or an attachment; it is an assertion of state court jurisdiction over the garnishee.

The United States Supreme Court has held that "all assertions of state-court jurisdiction must be evaluated according to the standards set forth in International Shoe and its progeny." Shaffer v Heitner, 433 US 186, 212 (1977). As such, the issuance of the restraining notice must comport with the requirements of due process. "In determining whether a particular exercise of state court jurisdiction is consistent with due process, the inquiry must focus on the relationship among the defendant, the forum, and the litigation.'" Rush v Savchuk, 444 US 320, 327 (1980) (quoting Shaffer, 433 US at 204).

To allow a restraining notice to reach a garnishee holding property located anywhere in the world, if the garnishee lacks minimum contacts to the forum where the restraining notice is issued, would offend "traditional notions of fair play and substantial justice." International Shoe Co. v Washington, 326 US 310, 316 (1945). Under this scenario, it is likely that a garnishee would have no legal recourse to vacate the restraining notice in his or her own state (or foreign country), because the garnishee would not be able to acquire personal jurisdiction in his or her own state (or country) over the issuer of the restraining notice, who is outside the garnishee's state (or country).

Without due process limits on the territorial reach of a restraining notice, it would be fundamentally unfair for a party to issue a restraining notice that restrains property of a garnishee located anywhere in the world, with no minimum contacts to the forum where the restraining notice is issued, whereas the garnishee might only be able to challenge the validity of the restraining notice in the state where it was issued, instead of in forum where he or she was served.

National Union Fire Insurance Company of Pittsburgh, PA v Advanced Employment [*13]Concepts, Inc. (269 AD2d 101 [1st Dept 2000]) is instructive, even though it was concerned with the separate entity rule for bank branches,^[FN7] which is not at issue in this proceeding. In National Union, the account holder of bank accounts located in Florida obtained an order vacating a restraining order and an order of attachment issued against the garnishee bank, which had a branch located in New York. The account holder argued that the New York court was without authority to attach and restrain bank accounts located outside of New York. The Appellate Division, First Department affirmed the order vacating the restraining order, stating "it is clear that the accounts which the petitioner seeks to attach are not in the same jurisdiction as the New York office that petitioner served." Id. at 102. The Appellate Division reasoned that the separate entity rule for separate bank branches did not permit the bank account located in Florida to be considered within the State of New York based on the bank's New York office, and that exceptions developed in case law did not apply:

"To the extent that the petitioner requests that we extend the holdings of Digitrex and Limonium Maritime, S.A. to encompass all of a bank's branches, notwithstanding their physical location outside of this jurisdiction, we decline to do so and note that such an extension would require, in our view, a pronouncement from the Court of Appeals or an act of the Legislature."

The Appellate Division's application of the bank-branch separate entity rule was not new, but the Appellate Division's application of the rule in the context of whether it had jurisdiction over an account in a Florida bank branch is noteworthy. That is, the Appellate Division could have vacated the restraining notice simply because it was not served on the correct entity, irrespective of where that entity was located. Nevertheless, the Appellate Division went further. In light of the separate entity rule, the restraining notice was ineffective because the bank branch served was out of the jurisdiction, i.e., not subject to New York's in personam jurisdiction.

Some courts have questioned whether the bank-branch separate entity rule remains viable after the Court of Appeals's decision in Koehler v Bank of Bermuda Limited, 12 NY3d 533, supra. See Samsun Logix Corp. v Bank of China, 2011 WL 1844061, 6(Sup Ct, NY County 2011) (discussing cases). Here, this Court need not determine whether National Union Fire Insurance Company of Pittsburgh, PA would be decided differently today in light of Koehler.

National Union Fire Insurance Company of Pittsburgh, PA implicitly recognizes that whether a restraining notice issued by an attorney in New York may restrain tangible and intangible property located outside of New York depends on whether there is in personam jurisdiction over the garnishee. Koehler did not suggest otherwise. Indeed, the Court of Appeals stated in Koehler, "the key to the reach of the turnover order is personal jurisdiction over a particular defendant." Koehler, 12 NY3d at 540. Koehler held that a turnover order could direct a garnishee to turn over out of state assets because there was in personam jurisdiction over the garnishee. The Court of Appeals rejected the argument that the lack of in personam jurisdiction over the judgment debtor limited the court's jurisdiction over the garnishee to in rem jurisdiction. Koehler did not hold that a turnover order [*14]could direct a garnishee to turn over of state assets where in personam jurisdiction over the garnishee is lacking.

Justice Lehner saw that the reach of the restraining notice to intangible property outside of the State of New York depended on whether there was in personam jurisdiction over the McLean respondents. If the contractual obligation to pay a broker's fee is not located in New York, then the exercise of the restraining notice is consistent with due process only if there were in personam jurisdiction over the nondomiciliary garnishee. If in personam jurisdiction over the nondomiciliary garnishee were lacking, due process would not permit the New York court to exercise its power over that nondomiciliary garnishee with respect to any property located outside the State of New York.

The McLean defendants did not specifically raise lack of in personam jurisdiction as an affirmative defense to the turnover proceeding. Rather, they argued that the restraining notices were invalid because the situs of the subject intangible property was located outside of New York as a consequence of the McLean respondents being headquartered and domiciled in Illinois, and incorporated or organized either in Illinois or Delaware. Justice Lehner ruled that the restraining notices could reach outside of New York, and thus were valid, because of the court's jurisdiction over the McLean respondents in the turnover proceeding, and that the situs of the property was therefore irrelevant. Justice Lehner therefore did not determine the question of whether the McLean respondents had minimum contacts with New York when the restraining notices were served in 2003.

The issue of whether the contractual obligation was located in New York or outside of New York would be irrelevant only if the court had in personam jurisdiction over the McLean respondents when they were served with the restraining notices.^[FN8] Because Justice Lehner did not determine that issue, it is therefore appropriate to consider whether the contractual obligation was located in New York or outside of New York.

For purposes of jurisdiction, the situs of the contractual obligation "is the location of the party of whom performance is required by the terms of the contract." ABKCO Indus. v Apple Films, 39 NY2d 670, 675 (1976). Here, respondent 455 Central Park West LLC is a limited liability company organized under the laws of Delaware. See Oberdier Suppl. Affirm., Ex A. The McLean respondents assert that 455 Central Park West LLC maintains its principal office in Chicago, Illinois (Oberdier Suppl. Affirm. ¶ 3), and it appears that its mailing address is in Chicago. See Oberdier Suppl. Affirm., Exs C, D. Assuming, for the sake of argument, that the principal place of business of 455 Central Park West LLC is in Illinois, the situs of its contractual obligation to pay a broker's fee would therefore be outside the State of New York.

However, 455 Central Park West, LLC is a foreign corporation authorized to do business in the State of New York by the New York Secretary of State. See Oberdier Suppl. Affirm., Ex B. Its application for authority was filed on September 21, 2000, and the New York Secretary of State certified that, as of September 26, 2000, it was authorized to do business in the State of New York. Id. Because 455 Central Park West LLC is authorized do to business in New York, it consented to in personam jurisdiction in New York by its having filed the application and having received such authorization. Augsbury Corp. v Petrokey Corp., 97 AD2d 173, 175 (3d Dept 1983)(authorization [*15]to do business in the State and concomitant designation of the Secretary of State as its agent for service of process is consent to in personam jurisdiction); Genicom Corp. v Ekco Group, 160 AD2d 551 (1st Dept 1990); Muollo v Crestwood Vil.., 155 AD2d 420 (2d Dept 1989). Therefore, service of the restraining notice upon respondent 455 Central Park West LLC would have been a valid exercise of in personam jurisdiction over it, and as such, would have restrained all "property" that was the subject of the restraining notice, regardless of whether the property was located inside or outside the State of New York.

Thus, if this Court were to grant reargument, this Court would adhere to Justice Lehner's decision denying the McLean respondents' cross motion for summary judgment dismissing the petition, with respect to respondent 455 Central Park West LLC.

Notwithstanding the above, the Court is constrained to deny reargument as untimely. CPLR 2221 (d) provides that a motion to reargue "shall be made within thirty days after service of a copy of the order determining the prior motion, and written notice of its entry." Justice Lehner's October 13, 2009 decision was apparently entered on October 19, 2009, and notice of entry was apparently served on October 21, 2009. Stern Aff., Ex 3. The McLean respondents moved for reargument almost a year after receiving notice of entry of Justice Lehner's decision and after Justice Lehner's retirement. Although a late motion for reargument may be granted where an appeal has been taken from the decision, and where the appeal is still pending (see Itzkowitz v King Kullen Grocery Co., Inc., 22 AD3d 636, 638 [1st Dept 2005]), the McLean respondents do not dispute that they never perfected the appeal that they took from Justice Lehner's decision.^[FN9] Under these circumstances, the Court is constrained to deny reargument as untimely.

Renewal is also denied. Hotel 71 Mezz Lender LLC does not constitute a change in the law that would have changed Justice Lehner's determination. Hotel 71 Mezz Lender LLC did not overrule either Motorola or Koehler, which Justice Lehner cited to support his ruling.

It is undisputed that respondent MCL Companies of Chicago, Inc. is not a New York corporation, and the petition does not allege that it has any offices in New York. Petitioner's Exhibit 1 [Verified Petition ¶ 15]. It is also undisputed that respondent Daniel McLean does not reside in New York. There is no evidence that these respondents had any minimum contacts with the State of New York when they were served with the restraining notices.^[FN10] Because this Court is constrained to deny the McLean respondents' cross motion to renew and reargue Justice Lehner's decision, this Court may not here decide the issues of whether the exercise of the restraining notices upon respondents MCL Companies of Chicago, Inc. and McLean comported with due process. [*16]Accordingly, Justice Lehner's prior ruling that "the restraining notices were effective when served in February 2003" remains law of the case.

The ruling that the restraining notices were effective does not mean that respondents MCL Companies of Chicago, Inc. and McLean violated the restraining notices served upon them. Justice Lehner did not reach that issue.

As discussed previously, respondents MCL Companies of Chicago, Inc. and McLean did not bear the contractual obligation to pay the broker's fee. Petitioner has not demonstrated that MCL Companies of Chicago, Inc. and McLean had any intangible property or obligation that could have been restrained either upon service of the restraining notices served upon them, or at any time thereafter when the restraining notices were in effect.

Petitioner seeks to hold respondents MCL Companies of Chicago, Inc., McLean, and 455 Central Park West Inc. liable for 455 Central Park West LLC's violation of the restraining notice, under a theory of piercing the corporate veil and alter ego. Petitioner's Mem. at 3-5. Petitioner relies upon the deposition testimony of Marilyn Walsh. Petitioner claims that Walsh testified that "McLean controlled all of the entities constituting the McLean respondents." Petitioner also claims that Walsh testified that 455 Central Park West Inc. was the managing member of 455 Central Park West LLC.

"Generally . . . piercing the corporate veil requires a showing 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 or wrong against the plaintiff which resulted in plaintiff's injury.

While complete domination of the corporation is the key to piercing the corporate veil, especially when the owners use the corporation as a mere device to further their personal rather than the corporate business, such domination, standing alone, is not enough; some showing of a wrongful or unjust act toward plaintiff is required.' Indicia of a situation warranting veil-piercing include: (1) the absence of the formalities and paraphernalia that are part and parcel of the corporate existence, i.e., issuance of stock, election of directors, keeping of corporate records and the like, (2) inadequate capitalization, (3) whether funds are put in and taken out of the corporation for personal rather than corporate purposes, (4) overlap in ownership, officers, directors, and personnel, (5) common office space, address and telephone numbers of corporate entities, (6) the amount of business discretion displayed by the allegedly dominated corporation, (7) whether the related corporations deal with the dominated corporation at arms length, (8) whether the corporations are treated as independent profit centers, (9) the payment or guarantee of debts of the dominated corporation by other corporations in the group, and (10) whether the corporation in question had property that was used by other of the corporations as if it were its own.'"

Walsh appears to testify that 455 Central Park West Inc. was the non-managing member of 455 Central Park West, LLC. Stern Aff., Ex 6, at 9-10. Walsh did testify that McLean was the sole shareholder and president of 455 Central Park West, Inc. Id. at 9. She also testified that, "For all of the related McLean respondents, we had one lobby and one receptionist." Id. at 8-9. Finally, Walsh did testify that "MCL companies of Chicago, Inc. has no employees." Id. at 6.

However, the proof does not rise to the level of establishing that McLean abused the corporate form, or that MCL Companies of Chicago, Inc. and 455 Central Park West Inc. are alter-egos of 455 Central Park West LLC. "[C]losely associated corporations, even ones that share directors and officers, will not be considered alter egos of each other if they were formed for different purposes, neither is a subsidiary of the other, their finances are not integrated, assets are not commingled, and the principals treat the two entities as separate and distinct." Lee v Arnan Dev. Corp., 77 AD3d 1261, 1262 (3d Dept 2010) (citation omitted). Here, petitioner does not submit evidence of commingling of funds between the companies, or the commingling of McLean's own personal funds with his corporate entities.

Accordingly, so much of the petition that seeks to hold respondents MCL Companies of Chicago, Inc., 455 Central Park West Inc., and McLean liable for the violation of a restraining notice served upon 455 Central Park West LLC is denied.

Pursuant to CPLR 5222 (b), a restraining notice remains in effect "until the expiration of one year after the notice is served upon him or her, or until the judgment or order is satisfied or vacated, whichever event first occurs." CPLR 5240 provides that "The court may at any time, on its own initiative or the motion of any interest person . . .make an order . . . extending or modifying the use of any enforcement procedure."

As discussed above, in February 2003, petitioner served restraining notices upon respondents 455 Central Park West LLC, MCL Companies of Chicago, and McLean, which stated that there was a total of $2,537,436.81 then owing on the judgments. Petitioner's Exhibit 1 [Verified Petition, Ex 6]. By a stipulation dated January 26, 2004 between Silver and Doubet LLC with Palermo, and so-ordered by Justice Joseph Covello, those parties agreed to extend all restraining notices for "thirty (30) days subsequent to the receipt by plaintiff's and Doubet's attorneys of the Notice of Entry of the Order or Judgment memorializing the Court's decision on the motion [to vacate]." Petitioner's Exhibit 1[Verified Petition, Ex 8].

"In order to satisfy due process requirements, a sanction for violation of CPLR 5222 may be imposed only after proof of knowledge, actual or constructive, of the restraining notice." Security Trust Co. of Rochester v Magar Homes, 92 AD2d 714, 714 (4th Dept 1983). Justice Lehner denied petitioner's motion for summary judgment because of issues of fact as to whether the McLean respondents were properly served with the first one-year extension of the restraining notices in February 2004. On this motion, petitioner submits copies of certified mail receipts in support of its contention that the McLean respondents were served with the one-year extension and cites Walsh's deposition testimony. Although petitioner claims that an attorney handling the proceedings for Doubet in Nassau County sent the McLean respondents a copy of Justice Covello's order extending the restraining notices, it did not submit an affidavit from the attorney who purportedly prepared the mailing. [*18]

Given that this Court has dismissed the petition as against respondents MCL Companies of Chicago, 455 Central Park West, Inc., and Daniel McLean, this Court will examine only whether respondent 455 Central Park West, LLC was properly served with the one-year extension.

A certified mail receipt indicates that respondent 455 Central Park West, LLC was purportedly sent a piece of mail via certified mail to an address in New York, New York. Stern Aff., Ex 4. This certified mail receipt is not postmarked. Id. However, the corresponding return receipt for this certified mailing was signed and dated "2/11." Id. Another certified mail receipt, which is also not postmarked, indicates that respondent 455 Central Park West, LLC was sent a piece of mail via certified mail to an address in Chicago, Illinois, and the corresponding return receipt for this certified mailing was signed and dated "2/24/04." Id. At her deposition, Walsh was shown return receipts. Stern Aff., Ex 6 at 21.She was able to identify that a return receipt signed by "M. Geary," for a piece of mail sent via certified mail to Daniel McLean, was the receptionist's signature. Id. However, Walsh was then asked, "And looking at the others, you can't identify them as employees of the company, the MCL company," she answered, "That's correct." Id. at 22.

Although Walsh did not identify the signatures on the return receipts, petitioner has met its burden of establishing service of the extension of the restraining notice upon respondent 455 Central Park West LLC, based solely on the certified mail receipts and the signed return receipts. See Matter of State Farm Mut. Auto. Ins. Co.(Kankam), 3 AD3d 418, 419 (1st Dept 2004)("An addressee's signature on a certified mail return receipt supports a finding that the addressee received the notice.").The McLean respondents do not argue otherwise or submit any affidavits or testimony to raise a triable issue of fact.

As discussed above, it is undisputed that respondent 455 Central Park West LLC paid the broker's fee arising out of the Columbia Transaction due to Palermo's designees at the closing in July 2004, when the first one-year extension of the restraining notice was in effect. Therefore, petitioner has demonstrated that respondent 455 Central Park West LLC violated the restraining notice.

Contrary to the argument of the McLean respondents, petitioner is not required to show that respondent 455 Central Park West LLC willfully violated the restraining notice. Willfulness is required to hold respondent 455 Central Park West LLC in contempt for violating the restraining notice. However, in a proceeding seeking a money judgment against the garnishee for violating the restraining notice, proving willfulness is not required. Here, petitioner clearly states, "This is not and never was an action for contempt. It was a turnover proceeding under the specific provisions of Article 52 which permits Doubet to obtain a money judgment for damages if the McLean Respondents have failed to honor the Restraining Notices." Stern Reply Aff. ¶ 29

When a money judgment is sought for the violation, "there is no willfulness requirement for imposition of money damages, [but] there must at least be a showing of negligence in failing to comply with the restraining notice." Security Trust Co. of Rochester, 92 AD2d at 714; see also Siegel, Practice Commentaries, McKinney's Cons Laws of NY, Book 7B, CPLR C5222:10 ("The availability of a simple money action as an alternative to the contempt penalty, and with mere negligence as its permissible predicate, seems to avoid the issue [of determining willfulness].").

Under the circumstances presented, where petitioner has demonstrated that it served the restraining notice to 455 Central Park West LLC's business address in Chicago and that it was received; and that 455 Central Park West LLC made the later subject payment; petitioner has set [*19]forth sufficient evidence of negligence, i.e., that 455 Central Park West LCC did not use reasonable care to abide by the restraint. Respondent 455 Central Park West LLC has not made any evidentiary showing which would dispute either its knowledge of the restraint or its lack of care.

For respondent 455 Central Park West LLC's violation of the restraining notice, petitioner is entitled to recover damages and costs. Nardone, 40 AD2d at 697. The amount of damages is the amount that would have been available to satisfy the judgments assigned to petitioner. Id. Here, the entire amount of the broker's fee arising out of the Columbia Transaction could have been used to satisfy the judgments totaling more than $2.5 million, only $75,000 of which was satisfied in another turnover proceeding. The total broker's fee owed was $1,564,816, which is the sum of $1,361,640 due under a "Fee Agreement" and $203,176 due under a "Put Fee Agreement." Petitioner's Ex 1 [Verified Petition, Exs 28 and 29]. Therefore, petitioner is entitled to recover $1,564,816, plus costs from respondent 455 Central Park West LLC.

Petitioner seeks prejudgment interest on the amount of damages from July 29, 2004, when respondent 455 Central Park West LLC violated the restraining notice. "The right to interest is purely statutory and in derogation of the common law.'" Matter of Meloni v Goord, 267 AD2d 977, 978 (4th Dept 1999) (citation omitted). Here, petitioner cited no statute or case law under which it could recover prejudgment interest on the damages for violation of a restraining notice. Petitioner has not met its burden of demonstrating entitlement to prejudgment interest.

"in an action or special proceeding brought by a creditor . . . to set aside a conveyance by a debtor, where such conveyance is found to have been made by the debtor and received by the transferee with actual intent, as distinguished from intent presumed in law, to hinder, delay or defraud either present or future creditors, in which action or special proceeding the creditor . . .shall recover judgment, the justice . . . shall fix the reasonable attorney's fees of the creditor . . ."

In Federal Deposit Ins. Co. v Porco (75 NY2d 840, 842 [1990]), the Court of Appeals interpreted Debtor & Creditor Law §§ 278 and 279. The Court held, "Those sections did not, either explicitly or implicitly, create a creditor's remedy for money damages against parties who, like defendants here, were neither transferees of the assets nor beneficiaries of the conveyance." The Court of Appeals also rejected the argument that such a remedy was available under Debtor & Creditor Law § 273, holding, "the statute still cannot fairly be read as creating a remedy against nontransferees who, like defendants here, are not alleged to have dominion or control over those [*20]assets or to have benefited in any way from the conveyance." Id.

Citing Porco, the First Department dismissed a cause of action seeking to hold attorneys liable for a fraudulent conveyance "in violation of Article 10 of the Debtor and Creditor Law." The attorneys had assisted the judgment debtor with the "legal mechanics" of a transfer of shares of stock that the judgment debtor owned to family trusts controlled by the judgment debtor and his son. Appellate Division reasoned, "This transaction did not make the attorney defendants or the Rostolder defendants either transferees or beneficiaries of a conveyance of stock which can be set aside, and there is no remedy under this statute for money damages against these parties." Gallant v Kanterman 198 AD2d 76, 80 (1st Dept 1993). Although Gallant did not specifically mention Debtor and Creditor Law § 276, Gallant essentially ruled that Porco applied to all of Article 10 of Debtor and Creditor Law.

Here, the allegations do not fit into a claim of fraudulent conveyance. The McLean respondents are not transferees of any property of Palermo. Rather, the McLean respondents (who were garnishees) allegedly paid amounts owed to Palermo. The alleged payments by the McLean respondents to Palermo are not a "conveyance by the debtor" under Debtor and Creditor Law §§ 276 and 276-a. Because petitioner has not established that these alleged payments constituted fraudulent conveyances, petitioner is not entitled to any attorneys' fees in this special proceeding.

Accordingly, it is hereby

ORDERED that petitioner's motion for a judgment and other relief against respondents 455 Central Park West, LLC, 455 Central Park West, Inc., MCL Companies of Chicago, Inc., and Daniel E. McLean is granted only as to respondent 455 Central Park West LLC, and is otherwise denied; and it is further

ORDERED that the cross motion of respondents 455 Central Park West, LLC, 455 Central Park West, Inc., MCL Companies of Chicago, Inc., and Daniel E. McLean is denied; and it is furtherADJUDGED that the petition is granted only against respondent 455 Central Park West LLC, and is otherwise denied; and it is further

ADJUDGED that petitioner Doubet LLC, having an address at 14 Hemlock Street, Merrick, New York, do recover from respondent 455 Central Park West, LLC, having an address at 455 East Illinois Street, Chicago, Illinois, the amount of $1,564,816, together with costs and disbursements in the amount of $as taxed by the Clerk, for the total amount of $, and that the petitioner have execution therefor.

Dated: July 6, 2011

New York, New YorkENTER:

/s/

J.S.C.