Clear Haven Inv. Fund, LP - Clear Haven Credit Opportunities Fund II Series v. ZAGS SPV 1 LLC

2025 NY Slip Op 31674(U)

• Court: New York Supreme Court, New York County
• Decided: May 7, 2025
• Docket: Index No. 654268/2024
• Status: Unpublished

Opinion

Clear Haven Inv. Fund, LP - Clear Haven Credit Opportunities Fund II Series v ZAGS SPV 1 LLC 2025 NY Slip Op 31674(U) May 7, 2025 Supreme Court, New York County Docket Number: Index No. 654268/2024 Judge: Andrew Borrok Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various New York State and local government sources, including the New York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication. FILED: NEW YORK COUNTY CLERK 05/07/2025 04:10 PM INDEX NO. 654268/2024 NYSCEF DOC. NO. 68 RECEIVED NYSCEF: 05/07/2025

SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: COMMERCIAL DIVISION PART 53 -----------------------------------------------------------------------------------X CLEAR HAVEN INVESTMENT FUND, LP - CLEAR INDEX NO. 654268/2024 HAVEN CREDIT OPPORTUNITIES FUND II SERIES,

Plaintiff, MOTION DATE 12/13/2024

-v- MOTION SEQ. NO. 003 ZAGS SPV 1 LLC,TORPAGO, INC.,BRENT JACKSON, JOHN DOE DECISION + ORDER ON MOTION Defendant.

-----------------------------------------------------------------------------------X

HON. ANDREW BORROK:

The following e-filed documents, listed by NYSCEF document number (Motion 003) 54, 55, 56, 57, 58, 59, 60, 61, 62, 63, 64, 65, 66, 67 were read on this motion to/for DISMISSAL .

This case involves a financing arrangement pursuant to which the parties expressly agreed to a

particular structure where one of the defendants would receive accounts receivable in a

Collection Account and which the plaintiff would have the ability to sweep, and the defendants

pursuant to a wholly separate account, the “Pre-Funding Account,” would extend credit to

certain customers.

Upon the foregoing documents and for the reasons set forth on the record (tr. 5.5.25), the

defendants’ motion to dismiss the third (Count III [breach of contract for breach of the

Receivables Purchase Agreement against Torpago]), fourth (Count IV [breach of the implied

covenant of good faith and fair dealing against ZAGS]), seventh (Count VII [conversion against

Brent Jackson and Torpago]), eighth (Count VIII [fraud against all defendants]), ninth (Count

IX [fraudulent transfer against all defendants]) and tenth (Count X [conspiracy against ZAGS,

654268/2024 CLEAR HAVEN INVESTMENT FUND, LP - CLEAR HAVEN CREDIT Page 1 of 5 OPPORTUNITIES FUND II SERIES vs. ZAGS SPV 1 LLC ET AL Motion No. 003

1 of 5 [* 1] FILED: NEW YORK COUNTY CLERK 05/07/2025 04:10 PM INDEX NO. 654268/2024 NYSCEF DOC. NO. 68 RECEIVED NYSCEF: 05/07/2025

Torpago and Mr. Jackson]) causes of action asserted in the amended complaint (NYSCEF Doc.

No. 56) pursuant to CPLR 3211(a)(1) and (7) is decided as set forth on the record including that:

1. The plaintiff confirmed that the fraud claim (Count VIII) was levelled against only Mr.

Jackson and Torpago and not against ZAGS. As against ZAGS, the plaintiff

acknowledged that it is in fact duplicative of the breach of contract claims. As such, it is

dismissed. For the avoidance of doubt, the defendants are not entitled to dismissal of the

fraud claim as against Mr. Jackson and Torpago. The plaintiff alleges, among other

things, that Torpago and Mr. Jackson submitted fraudulent compliance certifications and

borrowing base reports regarding the nature of one of Torpago’s clients, Rare Carat,

which operated a prefunded card and therefore did not generate receivables causing

damages recoverable only under a fraud theory. The fraud claim includes a different

measure of damages than the contract based claims and it is not duplicative of those

claims. The “documentary evidence” does not utterly refute this claim either. To wit,

and by way of example, the spreadsheet lists Rare Carat not as a prefunded account and

instead lists its card type as “charge” (NYSCEF Doc. No. 62).

2. The branch of the motion seeking dismissal of the claims predicated on piercing the

corporate veil of ZAGS to reach Torpago, Inc. is granted because the corporate form was

not abused as alleged to facilitate “the transaction attacked” (Remora Capital S.A. v

Dukan, 175 AD3d 1219, 1220 [1st Dept 2019]). As alleged, Torpago and Mr. Jackson

are alleged to have diverted the fund activity and otherwise perpetrated a fraud through

material misrepresentations about, among other things, the borrowing base which the

plaintiff materially relied on in continuing to permit the extension of credit and

654268/2024 CLEAR HAVEN INVESTMENT FUND, LP - CLEAR HAVEN CREDIT Page 2 of 5 OPPORTUNITIES FUND II SERIES vs. ZAGS SPV 1 LLC ET AL Motion No. 003

2 of 5 [* 2] FILED: NEW YORK COUNTY CLERK 05/07/2025 04:10 PM INDEX NO. 654268/2024 NYSCEF DOC. NO. 68 RECEIVED NYSCEF: 05/07/2025

preventing the sweeping of the collection account. Indeed, the plaintiff confirmed that

the claims brought against Mr. Jackson are not based on piercing the corporate veil. As

against Mr. Jackson, the contract based claims are solely asserted with respect to the

contractual obligations that he expressly understood. The fraud claims are based on his

role perpetrating the alleged misrepresentations and mis-directions of funds and transfers

to accounts of Torpago (i.e., the Pre-Funding Account) and the collection account of

ZAGS to which the plaintiff could sweep money. At this stage, the allegations do satisfy

CPLR 3016(b) (see Pludeman v N. Leasing Sys., Inc., 10 NY3d 486, 489 [2008]).

Finally, Mr. Jackson simply can not exculpate himself from his alleged fraudulent

conduct and exposure by asserting that he only acted as an officer as to the entities that he

undeniably controlled (see id. at 491).

3. With respect to the conversion (Count VII) and fraudulent conveyance (Count IX)

claims, the parties acknowledged that a certain payment (the Basatne Payment) was

mistakenly sent to a Torpago account by a non-party. This is not an account that the

plaintiff could sweep. As alleged, the Basatne Payment was transferred from one Torpago

account to another account outside of the reach of the plaintiff. This is sufficient at this

stage and the defendant is thus not correct that they are entitled to dismissal based on

their argument that the conversion claim is duplicative of the breach of contract claim.

Furthermore, the Court notes that it is unclear whether the Basatne Payment should be

included in the definition of “collection” under the parties’ agreement. In addition, to the

extent that at this stage and prior to discovery, the plaintiff only identifies the Basatne

Payment specifically, should they deem it appropriate, following discovery they may

amend their pleadings to add additional examples of conversion. To the extent that

654268/2024 CLEAR HAVEN INVESTMENT FUND, LP - CLEAR HAVEN CREDIT Page 3 of 5 OPPORTUNITIES FUND II SERIES vs. ZAGS SPV 1 LLC ET AL Motion No. 003

3 of 5 [* 3] FILED: NEW YORK COUNTY CLERK 05/07/2025 04:10 PM INDEX NO. 654268/2024 NYSCEF DOC. NO. 68 RECEIVED NYSCEF: 05/07/2025

discovery reveals no further instances of alleged conversion or that the conduct

surrounding the Basatne Payment does not effectuate a conversion, they can move for

summary judgment dismissal of this claim.

4. The conspiracy claim (Count X) is dismissed as a separate cause of action.

The Court has considered the parties’ remaining arguments and finds them unavailing.

Accordingly, it is hereby

ORDERED that the defendants’ motion to dismiss is decided as set forth on the record (tr.

5.5.25) and above; and it is further

ORDERED that the plaintiff is granted leave to amend its pleadings as set forth above and on the

record following discovery if appropriate; and it is further

ORDERED that the defendants are granted leave to move to renew their motion to dismiss

following discovery as set forth above and on the record if appropriate; and it is further

ORDERED that the parties shall order a copy of the transcript and upload it to NYSCEF; and it

is further

ORDERED that the plaintiff shall submit order.

654268/2024 CLEAR HAVEN INVESTMENT FUND, LP - CLEAR HAVEN CREDIT Page 4 of 5 OPPORTUNITIES FUND II SERIES vs. ZAGS SPV 1 LLC ET AL Motion No. 003

4 of 5 [* 4] FILED: NEW YORK COUNTY CLERK 05/07/2025 04:10 PM INDEX NO. 654268/2024 NYSCEF DOC. NO. 68 RECEIVED NYSCEF: 05/07/2025

5/7/2025 DATE ANDREW BORROK, J.S.C. CHECK ONE: CASE DISPOSED X NON-FINAL DISPOSITION

□ □ GRANTED DENIED X GRANTED IN PART OTHER

APPLICATION: SETTLE ORDER SUBMIT ORDER

□ CHECK IF APPROPRIATE: INCLUDES TRANSFER/REASSIGN FIDUCIARY APPOINTMENT REFERENCE

654268/2024 CLEAR HAVEN INVESTMENT FUND, LP - CLEAR HAVEN CREDIT Page 5 of 5 OPPORTUNITIES FUND II SERIES vs. ZAGS SPV 1 LLC ET AL Motion No. 003

5 of 5 [* 5]