The following papers numbered 1 to 23 read on this motion by petitioner Portsmouth Settlement Company I, LLC for a judgment pursuant to CPLR 5239(1) establishing petitioner's client The Lifetrade Fund, B.V., as the owner and beneficiary of the life insurance policy issued by respondent Aviva USA Corporation on the life of Lester Dworman, free of any claim or demand by persons claiming to be creditors of the insured; (2) a mandatory injunction requiring Aviva USA Corporation to reinstate petitioner's client as the owner and beneficiary of said insurance policy, effective January 9, 2009 and for damages against respondents Aviva USA [*2]Corporation, Julian Panachyd, and Dworman Family Partners, L.P. plus costs; (3) specific performance of the purchase and sale agreement, requiring respondents Dworman Family Partners L.P., to post a bond or a cash deposit to satisfy the restraint of the garnishment notice and to substitute for the subject insurance policy, and an injunction requiring Panachyd to release said insurance policy from the restraining order and requiring Aviva USA Corporation to reinstate petitioner's client as the owner and beneficiary of said insurance policy; (4) a judgment against Panachyd in the sum of $75,000.00 in the event that the garnishment notice he served on Aviva USA Corporation is found to have been unlawful; (5) a judgment against Aviva USA Corporation in the sum of $75,000.00 in the event that the garnishment notice is found to have been lawful; (6) a judgment against Dworman Family Partners, L.P. in the sum of $95,000.00 if the garnishment is found to be valid and the underlying judgment is not satisfied by Dworman Family Partners, L.P.; (7) a judgment against Aviva USA Corporation in a sum of not less than $146,000.00 and potentially as great as $3,051,000.00; and (8) a judgment against Dworman Family Partners, L.P. in the sum of $821,000.00., plus interest from the dates of payment of the purchase price and of any premium installments.

On December 13, 2004, Aviva Life and Annuity Company of New York (Aviva New York), formerly known as Bankers Life Insurance Company of New York, issued a Flexible Premium Universal Life with Equity Indexed Feature Policy, Number xxxxxxxxxx, to Dworman Family Partners, L.P., insuring the life of Lester J. Dworman, then aged 85, with a face value of $3,000,000.00. In early 2006 the policy lapsed for non-payment of premium, and was thereafter reinstated on June 15, 2006. On August 11, 2006, a collateral assignment was placed on the policy in favor of the Bank of Richmond at the request of Dworman Family Partners L.P., which was later released.

Background:

The New York County Action:

On April 14, 2008, Aviva New York received a restraining notice to garnishee in connection with an action entitled Benjamin Jagendorf v Lester J. Dworman, d/b/a Leeway Co., a/k/a, Leeway Company, Index No. 610941/04 (Supreme Court, New York County). Mr. Jagendorf initially entered into a stipulation of settlement dated December 4, 2005, and following the defendants' default in fulfilling the terms of the settlement, he obtained a judgment on November 7, 2005, in the sum of $101,461.99. The restraining notice served on Aviva New York identified and sought to restrain "[a]ny insurance policy issued by you or Bankers Life Insurance Company of New York on which Lester Dworman is an owner, insured or beneficiary."

The Dworman Family Partners L.P.'s partnership agreement, effective November 15, 2004, identifies John A. Stehl, Jayne Greenwald and Martha E. Hathaway, as the general partners, and Lester J. Dworman as the limited partner. On March 15, 2005, Dworman [*3]Family Partners L.P., a Maryland limited partnership, filed a certificate of partnership with the State of Maryland dated December 12, 2004, which lists as general partners Jane Greenwald, Leveraged Gifting Partners LLC, a Delaware Limited Liability Company, John A. Stehl, Manager, and Martha E. Hathaway. On September 10, 2008, Dworman Family Partners, L.P. filed a certificate of amendment with the State of Maryland, stating that Martha E. Hathaway and Rodney Elam have resigned their positions as General Partner effective May 31, 2008, and that Lester J. Dworman and John A. Stehl were elected General Partners in their place, effective June 1, 2008.

Mr. Dworman, is listed the insurance application as the owner of Dworman Family Partners, L.P., and said application is co-signed by John Stehl, as General Partner of Dworman Family Partners, L.P. The subject life insurance policy was sent to "TR Dworman Family Partnership," at an address in Bethesda, Maryland. Aviva New York, in a sworn examination in the Jagendorf action, dated November 13, 2008, stated, in pertinent part, that the subject insurance policy's owner was "The Dworman Family Partnership," that the insured is Lester J. Dworman, and that the beneficiary is Lester Dworman Family Partnership, and that on February 5, 2006 the beneficiary was changed to Dworman Family Partners. It is undisputed that although Aviva New York did not use the designation L.P., the correct name of this entity is Dworman Family Partners L.P.(DFP).

On October 22, 2008, Aviva New York received a transfer of ownership form which sought to transfer the ownership of the subject life insurance policy from DFP to Lifetrade Fund, B.V.; a change of beneficiary which sought to name Lifetrade Fund B.V. as the primary beneficiary; and an assignment of life insurance policy as collateral in favor of Wachovia Capital Markets, LLC. In a letter dated November 10, 2009, Aviva New York informed DFP that it could not comply with the request to change the owner and beneficiary on the policy, in view of the Jagendorf restraining notice.

In a letter dated November 17, 2008, Stephen Gerrard Gorray, counsel for as TMC Financial LLC, advised Aviva New York that Lester Dworman as the legal and beneficial owner of the policy issued to the DFP had transferred all of his right, title and interest in the partnership, including his legal and beneficial ownership in the life insurance policy to TMC Financial LLC, pursuant to a purchase agreement dated September 30, 2005, and that the judgement obtained in the Jagendorf action was subsequent to said purchase agreement. Mr. Gorray requested that Aviva New York acknowledge that TMC had the right to own, sell and transfer or otherwise transact business relating to its ownership interest in the policy. Said purchase agreement identifies TMC Financial LLC, a Delaware limited partnership, and is executed by Lester Dworman and by John Stehl, General Partner, TMC Financial LLC.

Aviva New York, in response, sent a letter dated November 21, 2008 to Mr. Jagendorf's counsel requesting further information regarding Jagendorf's claim to the insurance policy. Aviva New York, also sent a letter dated November 21, 2008, stating that it had received his letter and the copy of the purchase agreement; that the insurer had been notified of the Jagendorf [*4]judgment and in response had placed a restriction on the policy; and that it could not determine with certainty whether the Jagendorf judgment precluded Mr. Dworman from transferring his ownership of the policy to TMC. Aviva New York informed Mr. Gorray that it was awaiting a response from Jagendorf's counsel, and that in the event the ownership change is allowed it would require further forms and documentation identifying the appropriate signatures for both DFP and TMC.

Mr. Gorray, on behalf of Lester J. Dworman, moved in the Jagendorf action by way of an order to show cause dated December 4, 2008 for an order vacating the restraining notice served by the judgment creditor on Aviva New York. The order to show cause has a return date of January 7, 2009, before Justice Joan Madden. Justice Madden required that the order to show cause and supporting papers be served by December 9, 2008 on upon Mr. Jagendorf's counsel, on the defendants, on DFP, and on "Aviva Life Insurance" at an address in Woodbury, New York. Justice Madden further ordered that "pending the hearing of this order to show cause, that Aviva Life and Annuity Company of New York is restrained and enjoined from taking any action in connection with policy number xxxxxxxxxx."

Mr. Gorray, in a letter dated December 9, 2008 and addressed to Aviva USA, in Des Moines, Iowa, informed this insurer that he had appeared in court before Judge Madden on December 4, 2008 "who signed an Order staying the action pertaining to the policy unless the parties resolve the matter or the Court makes a decision and order." Mr. Gorray enclosed a copy of the order, along with the supporting papers, and requested that the insurer's Woodbury office cooperate in the matter and comply with a subpoena to be served by Jagendorf's attorney regarding the insurer's file.

On January 7, 2009 counsel for the parties in the Jagendorf action appeared before Justice Madden, at which time the restraining notice remained in effect, and the parties were directed to appear again on January 13, 2009.

Mr. Gorray, in a letter dated January 9, 2009 and addressed to Aviva USA, in Des Moines, Iowa, informed this insurer that the matter regarding the restraining notice in the Jagendorf action had been resolved and that the restraining notice had been withdrawn by Jagendorf's counsel. Mr. Gorray urged the insurer to immediately comply with the request for ownership change regarding the subject insurance policy. Mr. Jagendorf's counsel, in an email sent on January 9, 2009 informed Aviva New York that Mr. Jagendorf did not object to the change in ownership of the subject insurance policy.

On January 9, 2009, Aviva New York received a fax from The Lifetrade Fund, B.V., which included an updated change of ownership and change of beneficiary forms dated January 9, 2009, requesting a change of the owner and beneficiary to The Lifetrade Fund, B.V. These forms list the owner of the policy as Dworman Family Partners, LP. The papers faxed to Aviva New York included a single page from a draft stipulation in the Jagendorf action which indicated that TMC would pay a portion of Lester Dworman's debt upon Jagendorf's counsel [*5]sending a letter to "Aviva" indicating that he did not object to the change of ownership.

On January 12, 2009, Aviva New York, in compliance with the requests it had received, sent two letters to The Lifetrade Fund, B.V., acknowledging receipt and recording the change of ownership of the policy to The Lifetrade Fund. B.V., and receipt and recording the change of the beneficiary of the policy to The Lifetrade Fund, B.V.

On January 13, 2009, the parties in the Jagendorf action appeared before Justice Madden, who issued a short form order stating that the motion was "granted in accordance with the stipulation of the parties and the subject restraining notice is vacated." TMC Financial LLC, pursuant to the stipulation of settlement, agreed to pay Mr. Jagendorf the sum of $45,000.00, in partial payment of the judgment, and Mr. Jagendorf agreed to notify Aviva that he did not object to the change of ownership. The settlement provided that upon receipt of confirmation by Aviva New York that the ownership was changed, plaintiff's attorney would release the funds to Mr. Jagendorf, and notify Aviva New York and the bank that the that the restraining notice was withdrawn.

The Prior Queens County Actions:

A. Julian Panachyd:

On March 30, 2007, Julian Panachyd commenced an action for summary judgment in lieu of a complaint entitled Julian Panachyd v Leeway Co. and Lester J. Dworman doing business as Leeway Co. (Supreme Court, Queens County Index No. 8232/2007). The defendants, in a so-ordered stipulation dated October 10, 2007, agreed to the entry of judgment in the sum of $95,000.00, and a judgment in that amount was filed with the county clerk on October 11, 2007. Said judgment remains unsatisfied.

On January 9, 2009, Mr. Panachyd's counsel's office telephoned Mr. Gorray and informed him that he intended to serve a restraining notice on Aviva New York. On January 13, 2009, Aviva New York received a Restraining Notice to Garnishee in connection with the Panachyd action, which identified the subject life insurance policy and stated that Lester Dworman is a "100% owner of Dworman Family Partners LP or Dworman Family Partners."

Aviva New York, in letters dated April 16, 2009, and addressed to DFP, The Lifetrade Fund, B.V., Mr. Gorray, Mr. Jagendorf's counsel and Mr. Panachyd's stated that it had previously placed a restriction on the insurance policy and that:

"following receipt of a Restraining Order filed by Benjamin Jagendorf on April 14, 2008. On January 9, 2009 we received several telephone calls from the parties that the matter had been settled and we received a letter and draft Stipulation by Daniel A. Fried, attorney for Benjamin Jagendorf stating Mr. Jagendorf had no objection to the change of ownership and beneficiary of Contract [xxxxxxxxxx] to Lifetrade Fund, BV." [*6]

"Aviva Life & Annuity of New York processed a change of ownership and beneficiary on January 12, 2009 naming Lifetrade Fund BV., as the new owner and beneficiary of the policy."

"On January 13, 2009 Terence J. Ricaforte faxed copies of a Restraining Order to Garnishee, Judgment and Stipulation related to litigation filed in 2007 entitled Julian Panachyd, Planintiff v Leeway Co. and Lester Dworman, d/b/a Leeway Co. The garnishment order names life insurance policy [xxxxxxxxxx] owned by Lester Dworman or Dworman Family Partners in which the judgment debtor has an interest."

"Due to the close proximity pf the ownership and beneficiary requests and receipt of the restraining order, Aviva will be reversing the ownership change to Dworman Family Partners and placing a legal restriction on the policy until the Court provides direction on ownership of the contract. We will consider effectuating the ownership change again upon agreement by the parties involved. Until then, Aviva will keep a restriction on the policy, which prohibits any account activity."

DFP and Mr. Dworman thereafter moved in the Panachyd action for an order vacating the restraining notice served on Aviva. Portsmouth Settlement Company I, for the benefit of The Lifetrade Fund, B.V., separately moved to intervene as a necessary party. Mr. Panachyd separately moved to disqualify Stephan Gorray as counsel for the defendants and the DFP, on the grounds that he had previously commenced the action on behalf of the plaintiff and obtained the $95,000.00 judgment against the defendants. These motions appeared on the court's motion calendar of August 19, 2009, and the Hon. Roger N. Rosengarten in a single order dated October 22, 2009, granted Portsmouth's motion to intervene and granted Panachyd's motion to disqualify Mr. Gorray. The court denied the motion to vacate the restraining notice served by Panachyd's counsel on Aviva New York, with leave to renew after the retention of new counsel and "upon the submission of documentary evidence demonstrating that there was indeed a sale of the insurance policy at issue; to wit, a copy of the cancelled check evidencing payment by Aviva Life[sic] of the $700,000.00 stated consideration or a copy of the defendants' bank statement evidencing that such a deposit was made and cleared in the defendants' bank account during the period in issue. Justice Rosengarten directed that the restraining order was to remain in effect pending further order of the court. There has been no further motion practice with regard to the restraining order in that action. Said restraining order therefore remains in effect.

B. Portsmouth Settlement Company I, LLC's First Special Proceeding:

On May 11, 2009, Portsmouth Settlement Company I, LLC for the benefit of The Lifetrade Fund, B.V., commenced a special proceeding pursuant to CPLR 5239, against respondents Aviva Life and Annuity Company of New York, Dworman Family Partners LP and Julian Panachyd, (Index Number 12256/2009) and moved for a judgment determining that it is the owner and beneficiary of the subject life insurance policy in accordance with the change of beneficiary documents executed by the Dworman Family Partners LP. [*7]

Justice Rosengarten, in an order dated November 10, 2009, denied said motion "without prejudice to renewal upon the submission of documents sufficient to demonstrate that petitioner was a bona fide purchaser for value of the policy in issue, including a copy of the cancelled check or proof of wire transfer evidencing the alleged purchase. Such proof is required amidst allegations that respondent Dworman Family Partners, L.P. transferred ownership of the policy to petitioners, without consideration, so as to hide assets and evade judgment creditors in violation of certain provisions of the law."

Justice Rosengarten, in his order of November 10, 2009 did not dismiss the petition. The petitioners, however, did not move to renew its motion.

C. Portsmouth's Second Special Proceeding:

On March 3, 2010 Portsmouth Settlement Company I, (Portsmouth) for the benefit of The Lifetrade Fund, B.V., commenced the within special proceeding pursuant to CPLR 5239, against respondents Aviva USA Corporation, who is identified in the caption as "an Iowa Corporation Writing Life Insurance In New York State under the Name Aviva Life and Annuity Company of New York"; Dworman Family Partners, L.P., "a Maryland limited partnership" and Julian Panachyd.

The petition seeks a judgment (1) establishing petitioner's client, The Lifetrade Fund, B.V., as the owner and beneficiary of the Dworman life insurance policy, free of any claim or demand by persons claiming to be creditors of the insured; (2) a mandatory injunction requiring Aviva to reinstate The Lifetrade Fund, B.V., as the owner and beneficiary of the Dworman policy, effective January 9, 2009 and for damages against respondents Aviva, Panachyd, and DFP, plus court costs; (3) a judgment of specific performance of the purchase and sale agreement, requiring respondent DFP to post a bond or a cash deposit to satisfy the restraint of the garnishment notice and to substitute for the Dworman policy, and for an injunction requiring Panachyd to release said insurance policy from the restraining order and requiring Aviva to reinstate petitioner's client as the owner and beneficiary of said insurance policy; (4) a judgment jointly and severally against Aviva, DFP and Panachyd for attorneys' fees incurred by petitioner in the amount of $58,024.54; (5) a judgment against DFP in the sum of $95,000.00 if the garnishment is found to be valid and the underlying judgment is not satisfied by DFP; (6) a judgment against Aviva in the sum of not less than $58,024.54, and potentially as great as the policy's death benefit from the date of such losses or payments; and (7) a judgment against DFP if equitable relief is not timely granted in the sum of $770,000.00, plus any premium installments required to be paid or necessarily paid by petitioner, plus interest from the dates of payment of the purchase price and any premium installments.

The court notes that the notice of petition seeks to recover as damages additional and greater sums than those set forth in the petition against Panachyd and Aviva. In view of the fact that no amendments have been made to the petition, the request for any additional sums shall be disregarded. [*8]

Portsmouth is a Delaware limited liability company with a principal place of business in Georgia. The Lifetrade Fund B.V. (Lifetrade) is an entity doing business in Curacao, Netherlands Antilles. On February 9, 2009, Lifetrade and Portsmouth entered into an assignment, lien and security agreement, which states that the assignor(Lifetrade) and assignee (Portsmouth) are respectively the customer and originator of an amended and restated origination agreement dated June 25, 2008; that pursuant to said agreement, the subject insurance policy was purchased by Portsmouth for the benefit of Lifetrade under a purchase and sale agreement effective August 11, 2008, between Portsmouth and Dworman Family Partners, LP as seller; and that Aviva acknowledged a change in ownership and beneficiary of the Dworman policy to Lifetrade and subsequently upon receipt of a garnishment restraining notice issued by a judgment creditor of Lester J. Dworman, Aviva reversed the change in ownership and beneficiary. The agreement states that in view of the current dispute as to the Dworman policy, and as Portsmouth was a party to the purchase and sale agreement to purchase the Dworman contract, Lifetrade assigns "all of its rights, title and interests in the Dworman policy, including all choses in action and contract rights with respect to the Dworman Policy" to Portsmouth in order to enable it to take and defend as the real party in interest all legal actions to be taken for the benefit of Lifetrade, and Lifetrade's lender, and "to reinstate Lifetrade on the books of Aviva as the owner and beneficiary of the Dworman policy, free of any claim of a creditor of the insured, and to recover costs and damages incidental or alternative to the aforesaid equitable relief."

Petitioner alleges that in the Summer 2008, DFP engaged a life settlement broker to assist it with soliciting offers for the purchase of the subject life insurance policy on the secondary life insurance market; that said broker contacted Aviva on August 14, 2008 and confirmed the coverage and terms of said policy and DFP conveyed this information to the petitioner; that on September 25, 2008 petitioner and DFP executed a purchase and sale agreement for the transfer of ownership and change of beneficiary on the subject policy in exchange for the sum of $770,000.00, net to the seller; that in the furtherance of said transaction, petitioner and the DFP on October 23, 2008 and January 9, 2009 submitted signed and dated change of ownership and beneficiary requests to Aviva; that on January 12, 2009, Aviva confirmed receipt and recording of a change in ownership and beneficiary on the subject policy to The Lifetrade Fund, B.V.; that on January 15, 2009, petitioner caused its client to close the transaction by issuing a check payable to the order of DFP in the sum of $700,000.00, for the purchase of the subject life insurance policy; that said check cleared the issuing party's bank account on January 20, 2009; that on January 13, 2009 Aviva received the restraining notice pertaining to the Panachyd judgment and that without notice to, or consent of petitioner, Aviva reversed the change of ownership and beneficiary, and so informed petitioner by ordinary mail on January 16, 2009.

Portsmouth asserts its "renewed" petition addresses Justice Rosengarten's order of November 9, 2009, as regards the issues of its purchase of the subject life insurance policy and damages. Petitioner has submitted a copy of a Lifetrade facsimile transmittal sheet sent to the Bank of New York, from Equity Trust Company Curacao N.V., dated January 13, 2009, marked "urgent," requesting the disbursement of funds in connection with the subject life insurance policy for Lifetrade from account xxxxxx in the amount of "$770,000 paid to seller per payment [*9]request form"; $74,201.75 wired to Portsmouth for fees and commission; $90,000 wired to Lifetrade management company for fees; and $30,000 wired to Portsmouth for overhead recovery.

Petitioner has submitted a single page check image archive with a copy of a bank check issued by The Bank of New York Mellon dated January 15, 2009 in the sum of $770,000.00, payable to Dworman Family Partners, L.P. The reverse side of the check is endorsed by "J Stehl as GP pay to LGP, LLC, J Stehl, manager and GP DFP." At the bottom of this page there are a series of boxes with headings, which read as follows: view selection: 1; posting date: 01/20/09; amount: $770,000.00; serial number: xxxxxxx; sequence number: xxxxxxxxxxxxxxxxxxxx; source: check; type: debit; status: post and description: check.

Petitioner has submitted copies of three forms entitled "SETTLEMENT STATEMENT AND PAYMENT REQUEST FORM" pertaining to the subject policy, which request payment by a bank check, payable to Dworman Family Partners L.P., all of which are dated January 12, 2009. The forms contain a seller signature line which are executed by " John Stehl, G.P.", "Grace Gallo, by John Stehl, her atty in fact" and "Lester J. Dworman, by John Stehl, his atty in fact."

Petitioner's counsel asserts that there is no dispute that petitioner purchased the subject insurance policy from the Dworman Family Partners L.P. for $700,000.00; that Aviva transferred the ownership of the policy; and that after the transaction was completed the Panachyd restraining notice was served, and Aviva "reversed" the transfer, without authority, thereby divesting petitioner of an asset it had purchased and owned.

In support of its claim for damages, petitioner has submitted copies of invoices it received from its counsel for legal services rendered from February 7, 2009 through June 5, 2009.

Respondent Aviva USA Corporation:

Aviva USA Corporation has served an answer and interposed fifteen affirmative defenses and a cross claim against the Dworman Family Partners LP and Julian Panachyd for common-law indemnification and contribution.

Dorothy McGrath, manager of new business, for Aviva Life and Annuity Company of New York (Aviva New York) states in her affidavit that Aviva New York is a subsidiary "several layers removed" from its parent corporation respondent Aviva USA Corporation; that the subject insurance policy was issued by Aviva New York and not Aviva USA Corporation; and that all of the correspondence and actions pertaining to said insurance policy were undertaken by Aviva New York, and not by Aviva USA Corporation. It is further asserted that petitioner is not entitled to recover damages or attorney's fees from neither Aviva USA or Aviva, pursuant to CPLR 5239.

[*10]Respondent Dworman Family Partners, L.P. (DFP):

DFP served an answer and interposed eight affirmative defenses, and a cross claim against Aviva USA Corporation and Julian Panachyd for common-law indemnification or contribution; a cross claim against respondent Aviva to recover legal fees for wrongful restraint and wrongful reversal of the ownership of the subject insurance policy; and a cross claim against Julian Panachyd to recover legal fees for wrongful issuance of a garnishment against the subject insurance policy.

DFP, in partial support and partial opposition to the petition, and support of its cross claims against respondents Aviva and Panachyd, requests that the court issue a declaration to the effect that petitioner's client, The Lifetrade Fund B.V., is the owner and beneficiary of the subject life insurance policy, free of any claim or demand by persons claiming to be the creditors of Lester J. Dworman; that the court grant petitioner's request for a mandatory injunction requiring respondent Aviva USA Corporation to reinstate The Lifetrade Fund B.V. as the owner and beneficiary of the policy effective January 9, 2009; that the court grant a judgment against respondent Aviva for damages arising out of the wrongful restraint of subject insurance policy and reversal of ownership of said policy; and that the court grant a judgment against respondent Panachyd for damages arising from the wrongful restraint of the subject policy based upon the issuance of the restraining notice that was served on Aviva.

Counsel for DFP asserts in his affirmation that from September 2008 through January 9, 2009, this entity sought to consummate the sale of the subject life insurance policy; that in furtherance of said sale petitioner and respondent DFP on October 23, 2008 and January 9, 2009 submitted signed and dated change of beneficiary and owner requests to respondent Aviva; that said policy was freely assignable to third parties by its owner DFP.; that on January 12, 2009, respondent Aviva confirmed receipt and recording of the change of ownership; that the subject policy expressly provides where there is a change of owner or beneficiary that "Upon receipt, any change takes effect on the date the request was signed"; that said policy provides that "To the extent allowed by law, benefits will be exempt from claims of creditors"; that the Panachyd restraining notice contained materially false statements and was not sent in good faith, as the policy was owned by the petitioner on that date and was previously owned by DFP, and not by Mr. Dworman individually; that the "proceeds and avails" of a life insurance policy are exempt from the claims of creditors of the insured in all events under Insurance Law § 3212(b)(2); and that although Aviva had actual knowledge of the ownership of said policy, it unilaterally and in contravention of its own policy reversed the ownership of said policy. Counsel further asserts that under Maryland law, Mr. Dworman, individually, had no interest in said policy, and therefore the restraining notice to the garnishee should be vacated.

DFP opposes petitioner's request for damages, and its request for specific performance of the purchase and sale agreement, requiring DFP to post a bond or a cash deposit to satisfy the restraint of the garnishment notice and to substitute for the subject insurance policy. It is asserted that if petitioner has sustained any damages, they are the result of the actions of Aviva and [*11]Panachyd, and not DFP. DFP asserts that it is entitled to damages against Panachyd pursuant to CPLR 5239, and that it is entitled to damages against Aviva for breach of contract.

Stephen Gorray, former counsel to DFP has submitted an affirmation in which he asserts Portsmouth's request for legal fees is excessive.

DFP has submitted a change of ownership form and a change of beneficiary form, each dated January 9, 2009, which requested that the owner of the subject insurance policy be changed from DFP to The Lifetrade Fund B.V. and that the beneficiary be changed from Lester J. Dworman to The Lifetrade Fund, B.V. Both of these forms are executed on behalf of DFP by John Stehl, General Partner. This respondent also submits a copy of the subject insurance policy, a copy of the letter from Aviva New York dated January 12, 2009 acknowledging receipt and recording of change of ownership on the policy, stating that the ownership had been changed to The Lifetrade Fund BV; a copy of the January 13, 2009 restraining notice to garnishee in the Panachyd action; and a copy of the letter from Aviva New York, dated January 13, 2009.

Respondent Julian Panachyd:

Respondent Julian Panachyd has asserted nine affirmative defenses in his answer, and interposed a cross claim against Dworman Family Partners L.P. and Aviva in which it is asserted that petitioner sustained damages, they were caused by these co-respondents.

Mr. Panachyd's counsel states his affirmation that the Panachyd judgment remains unpaid, and that Lester Dworman conspired with Gorray, Dworman Family Partners and TMC to avoid paying said judgment. Mr. Panachyd asserts that Portsmouth's request for attorneys and damages totaling $75,000.00, is premature as there has been no determination as to the validity of the restraining notice.

It is further asserted that petitioner may not recover damages against Mr. Panachyd as it cannot establish that the claim asserted in the restraining notice was fraudulent, as Mr. Panachyd is a judgment creditor of Lester Dworman. It is also asserted that Portsmouth was aware of the Jagendorf restraint; that the Panachyd judgment is a matter of public record; and that petitioner has not sustained any damages as a result of the Panachyd restraint, as it has not paid any premiums on the policy.

Finally, it is asserted that Portsmouth has not complied with Justice Rosengarten's order has it has not produced a valid cancelled check or bank statement showing that the $770,000.00 was deposited and cleared into Dworman Family Partners L.P.'s account.

Decision:

CPLR 5239 allows any interested person to commence a special proceeding to determine rights in the property or debt if brought prior to the application of property or debt by a sheriff or [*12]receiver to the satisfaction of a judgment.

Petitioner Portsmouth is an "interested person" within the meaning of CPLR 5239, as it has been assigned the right to commence this action by Lifetrade, and Lifetrade claims an ownership interest in the subject life insurance policy.

At the outset the court finds that Aviva USA Corporation is not a proper party respondent in this proceeding. Aviva USA Corporation is the parent corporation of Aviva New York. There is no evidence that respondent Aviva USA Corporation is authorized to do business in New York, or that it issued the subject policy. Although Mr. Gorray sent Aviva USA Corporation two letters in connection with the Jagendorf restraining order, there is no evidence that this corporation responded to those letters or that it controlled or directed the actions of Aviva New York, or that it made any changes to the owner and beneficiary of the subject insurance policy. Rather, the evidence presented establishes that the subject insurance policy was issued by Aviva New York; that the various requests to change the owner and beneficiary were made to Aviva New York; that Aviva New York entered into correspondence concerning said policy; and that Aviva New York initially changed the name of the owner and beneficiary of the policy and then "reversed" itself, and reinstated DFP as the owner and beneficiary of the insurance policy insuring the life of Lester J. Dworman.

Therefore, as respondent Aviva USA Corporation is not a proper party to proceeding, the petition and all cross claims against this respondent are dismissed. There is no evidence that Aviva New York was named and served as a respondent in this proceeding.

The court finds that the documentary evidence submitted is insufficient to establish that either Portsmouth or Lifetrade is the owner of the subject insurance policy. The documentary evidence refers to two separate agreements for the sale of the subject life insurance policy. In a letter to Aviva New York, dated November 17, 2008, TMC Financial LLC's counsel, Mr. Gorray asserted that on September 30, 2005 DFP sold the subject policy to TMC Financial Services, LLC, and sought to have Aviva New York recognize this sale. Mr. Gorray also asserted that Mr. Dworman was the owner of the subject policy. The contract of sale provided to Aviva New York was executed on behalf of TMC Financial Services LLC by John Stehl, a General Partner of TMC. John Stehl is also a general partner of DFP.

The February 9, 2009 assignment agreement between Portsmouth and Lifetrade refers to an origination agreement between these entities dated June 25, 2008 and states that the subject insurance policy was purchased by Portsmouth for the benefit of Lifetrade under a purchase and sale agreement between Portsmouth, as buyer, and DFP, as seller, effective August 11, 2008. Petitioner has not submitted a copy of said contract of sale and offers no explanation as to why there appears to be two contracts of sale with different purchasers for the same insurance policy.

Petitioner has also failed to sufficiently demonstrate that either Portsmouth or Lifetrade was a bona fide purchaser for value of the subject insurance policy. Petitioner has submitted a [*13]copy of a bank check from The Bank of New York Mellon, dated January 15, 2009, payable to DFP. This copy of the bank check has the word void repeated across its face, and no explanation is offered as to whether this is a non-negotiable record of the bank check, or a copy of the actual check issued by the bank, and why the word void appears on its face. The cryptic boxes and headings at the bottom of check image archive are not self-explanatory, and do not establish that the check was actually negotiated. Furthermore, the reverse side of the check shows that it was endorsed over by Stehl as a general partner of DFP, to another entity in which Stehl is also a general partner and manager. However, there is no evidence that these funds were deposited in any account or other wise paid to DFP, or any other entity.

It is noted that Mr. Stehl executed the settlement statement and payment request forms as attorney in fact for Lester J. Dworman and Grace Gallo, as well as endorsing the bank check. He also executed the forms requesting the change of beneficiary and ownership of the subject insurance policy. Petitioner, however, has not submitted an affidavit from a person with personal knowledge from the check issuing bank, and has not submitted an affidavit from Mr. Stehl.

Finally, petitioner has failed to demonstrate that Aviva New York could have effectuated a change of beneficiary and owner at the request of the DFP as of January 12, 2009. Regardless of the information provided to Aviva by Mr. Gorray and others on January 9, 2009, it appears that the restraining notice in the Jagendorf action was still in effect as of that date and remained in effect on January 12, 2009, the date Aviva New York initially changed the name of the beneficiary and owner of the subject policy. The court's electronic records reveal that Justice Madden did not issue an order vacating the restraining notice until January 13, 2009, the same date Aviva New York was served with the Panachyd restraining notice. At the time this activity took place, no determination had been made in the Panachyd action regarding the validity of the restraining notice, and pursuant to Justice Rosengarten's order the restraining notice remained in effect, pending further order of the court.

The Panachyd restraining notice recites that the judgment debtor Lester J. Dworman has "an interest in Life Insurance Policy No. xxxxxxxxxx insured in the name of any of the following: Lester Dworman, a/k/a Lester J. Dworman, Dworman Family Partners, LP or Dworman Family Partners, because Lester Dworman is 100% owner of Dworman Family Partners, LP or Dworman Family Partners." The documentary evidence submitted herein establishes that Lester Dworman and John Stehl are the general partners of the Dworman Family Partnership, L.P. Although there is some evidence that Grace Bello is also a general partner, she was not named in the original partnership agreement, partnership certificate, or amended partnership. In view of the fact that DFP consists of at least two and perhaps three partners, the statement set forth in the restraining notice that Mr. Dworman is a 100 percent owner of the partnership is incorrect. However, there is no evidence that either Mr. Panachyd, his counsel, or Aviva New York knew that Mr. Dworman had less than a 100 percent interest in the partnership at the time the restraining notice was served. It is noted that Mr. Gorray, in his November 17, 2008 letter to Aviva New York, had represented that Mr. Dworman was the legal and beneficial owner of the subject insurance policy. [*14]

Insurance Law § 3212(a)(1) provides that "[t]he term proceeds and avails,' in reference to policies of life insurance, includes death benefits, accelerated payments of the death benefit or accelerated payment of a special surrender value, cash surrender and loan values, premiums and dividends, whether used in reduction of premiums or in whatever manner used or applied, except where the debtor has, after issuance of the policy elected to receive the dividends in cash".

Insurance Law § 3212(b)(1) provides that "[i]f a policy of insurance has been or shall be effected by any person on his own life in favor of a third person beneficiary, or made payable otherwise to a third person, such third person shall be entitled to the proceeds and avails of such policy as against the creditors, personal representatives, trustees in bankruptcy and receivers in state and federal courts of the person effecting the insurance."

Insurance Law § 3212(b)(2) provides that "[i]f a policy of insurance has been or shall be effected upon the life of another person in favor of the person effecting the same or made payable otherwise to such person, the latter shall be entitled to the proceeds and avails of such policy as against the creditors, personal representatives, trustees in bankruptcy and receivers in state and federal courts of the person insured. If the person effecting such insurance shall be the spouse of the insured, he or she shall be entitled to the proceeds and avails of such policy as against his or her own creditors, trustees in bankruptcy and receivers in state and federal courts."

Insurance Law § 3212(e)(1) provides that "[e]very assignment or change of beneficiary is valid, except in cases of transfer with actual intent to hinder, delay, or defraud creditors, as defined by article ten of the debtor and creditor law. In such cases creditors shall have all the remedies provided by such article ten."

Here, the subject life insurance policy was purchased by DFP who named Mr. Dworman as the insured and DFP as the beneficiary. Therefore, as the policy is not Mr. Dworman's individual property, and as there is no evidence that after the policy was purchased DFP elected to receive dividends in cash, which were then made available to Mr. Dworman as a partner of DFP, the subject policy is not subject to Article 52 enforcement proceedings.

The judgment creditor, however, may have other recourse against Mr. Dworman's interest in DFP. To the extent that DFP may have changed the beneficiary and sold the subject insurance policy, the proceeds of the sale are partnership property. Since Lester Dworman would be entitled to a share of such partnership property, the judgment creditor, upon application to the court may obtain an order charging the interest of the indebted limited partner, which may be redeemed with respect to the separate property of the general partner(see Partnership Law § 111; accord, Maryland Code, Corporations and Associations, § 10-705). To the extent that the proceeds of sale may have been received by an entity other than DFP, the judgment creditor may avail himself of the provisions of the debtor and creditor law, with respect to Mr. Dworman's interest in his share of said proceeds.

Conclusion: [*15]

In view of the foregoing, petitioner's request for a judgment establishing that its client The Lifetrade Fund, B.V., is the owner and beneficiary of the subject life insurance policy, free of any claim or demand by persons claiming to be creditors of the insured is denied.

The petition and cross claims are dismissed as to respondent Aviva USA Corporation.

Petitioner's request for damages and costs against respondents Aviva USA Corporation, Julian Panachyd, and the Dworman Family Partnership, L.P., is denied.

Petitioner's request for specific performance of the purchase and sale agreement, requiring respondent DFP to post a bond or a cash deposit to satisfy the restraint of the garnishment notice and to substitute for the subject insurance policy, is denied.

Petitioner's request for an injunction requiring Panachyd to release said insurance policy from the restraining order and requiring Aviva USA Corporation to reinstate petitioner's client as the owner and beneficiary of said insurance policy, is granted solely to the extent that said restraining order is vacated.

Petitioner's request for a judgment against Panachyd in the sum of $75,000.00 is denied.

Petitioner's request for judgment against DFP in the sum of $95,000.00, and for an additional judgment against DFP in the sum of $821,000.00., plus interest, is denied.

This constitutes the judgment of the court.

Dated: 8/6/10

J.S.C.