| Local No. 4, Intl. Assn. of Heat & Frost & Asbestos Workers v BuffaloWholesale Supply Co., Inc. |
| 2008 NY Slip Op 02362 [49 AD3d 1276] |
| March 14, 2008 |
| Appellate Division, Fourth Department |
| Local No. 4, International Association of Heat and Frost andAsbestos Workers, et al., Respondents, v Buffalo Wholesale Supply Co., Inc., Doing Business asNiagara Insulations, et al., Defendants, and Manufacturers and Traders Trust Company,Appellant. (Appeal No. 1.) |
—[*1] David B. Herrmann, Jr., Buffalo, for plaintiffs-respondents.
Appeal from an order of the Supreme Court, Erie County (Eugene M. Fahey, J.), enteredNovember 14, 2006. The order denied the motion of defendant Manufacturers and Traders TrustCompany to dismiss the amended complaint against it.
It is hereby ordered that the order so appealed from is unanimously affirmed without costs.
Memorandum: Plaintiffs, construction workers and the union representing them, commencedthis action seeking, inter alia, to recover statutory trust assets allegedly diverted in violation ofLien Law article 3-A. Plaintiffs alleged that defendant Buffalo Wholesale Supply Co., Inc., doingbusiness as Niagara Insulations (BWS), diverted trust assets that it held as a result of workperformed by plaintiffs on several construction projects in the Buffalo area. By their amendedcomplaint, plaintiffs joined, inter alia, Manufacturers and Traders Trust Company (M & T) as adefendant in certain causes of action. Plaintiffs subsequently filed a second amended complaintjoining Canfield Funding, LLC, doing business as Millennium Funding (Canfield), as adefendant in certain causes of action. According to plaintiffs, M & T loaned money to BWS andconspired with BWS to divert trust assets to enable BWS to repay that debt, and Canfield alsoconspired with BWS to divert trust assets by factoring certain receivables of BWS, which werethen diverted and used, inter alia, to repay the debt of BWS to M & T and to make payments tothe principals of BWS. In appeal No. 1, M & T appeals from an order denying its pre-answermotion to dismiss the amended complaint against it as time-barred and for failure to state a causeof action against it inasmuch as it was not a statutory trustee pursuant to Lien Law article 3-A.We note that the amended complaint subsequently was superseded by a second amendedcomplaint. In appeal No. 2, Canfield appeals from an order denying its preanswer motion todismiss the second amended complaint against it as time-barred. We affirm, although [*2]our reasoning differs from that of Supreme Court.
We agree with M & T in appeal No. 1 and with Canfield in appeal No. 2 (collectively,appellants) that this action is one "to identify and recover trust assets in the hands of any person[or entity] together with interest accrued thereon from the time of the diversion" (Lien Law§ 77 [3] [a] [i]), and thus is subject to the one-year statute of limitations set forth in LienLaw § 77 (2) (see Losco Group v Yonkers Residential Ctr., 276 AD2d 532, 533[2000]). We agree with plaintiffs, however, that there is an issue of fact whether the doctrine ofequitable estoppel prevents appellants from asserting the statute of limitations as a defense. "[A]defendant may be estopped to plead the Statute of Limitations where [a] plaintiff was induced byfraud, misrepresentation, or deception to refrain from filing a timely action" (Simcuski vSaeli, 44 NY2d 442, 448-449 [1978]; see also Pecoraro v M&T Bank Corp., 11 AD3d 950, 952 [2004]).Plaintiffs' second amended complaint alleges that appellants conspired with BWS to conceal thefact that they were diverting trust assets and, "[w]here concealment without actualmisrepresentation is claimed to have prevented a plaintiff from commencing a timely action, theplaintiff must demonstrate a fiduciary relationship . . . which gave the defendant anobligation to inform [the plaintiff] of facts underlying the claim" (Gleason v Spota, 194AD2d 764, 765 [1993]; see Zumpano vQuinn, 6 NY3d 666, 675 [2006]; Niagara Mohawk Power Corp. v Freed, 288AD2d 818, 819 [2001]). Although there are exceptions, "the question of whether a defendantshould be equitably estopped is generally a question of fact" (Putter v North Shore Univ. Hosp., 7 NY3d 548, 553 [2006]). Here,accepting as true and according every favorable inference to the allegations in the secondamended complaint, as we must in determining motions to dismiss pursuant to CPLR 3211(see MetLife Auto & Home v Basil Chevrolet, 303 AD2d 30, 31 [2002], affd 1NY3d 478 [2004]; Sokoloff v Harriman Estates Dev. Corp., 96 NY2d 409, 414 [2001]),we conclude that plaintiffs sufficiently alleged the existence of "a fiduciary relationship. . . which gave the [appellants] an obligation to inform [plaintiffs] of factsunderlying the claim" (Gleason, 194 AD2d at 765). Plaintiffs thus raised an issue withrespect to the applicability of the doctrine of equitable estoppel.
Contrary to the further contention of M & T in appeal No. 1, the court properly concludedthat the second amended complaint stated a cause of action against it because a lender that comesinto possession of trust assets is a statutory trustee and may be held liable for diverting thoseassets in violation of the Lien Law (seegenerally Aspro Mech. Contr. v Fleet Bank, 1 NY3d 324, 328-329 [2004], reargdenied 2 NY3d 760 [2004]). Canfield raises that same contention in appeal No. 2 for the firsttime in its reply brief, and thus it is not properly before us (see Ponzi v Ponzi, 45 AD3d 1327, 1328 [2007]; McCarthy v Roberts Roofing & Siding Co.,Inc., 45 AD3d 1375 [2007]; Turner v Canale, 15 AD3d 960 [2005], lv denied 5 NY3d702 [2005]). In any event, the second amended complaint alleges that Canfield had notice thatBWS was engaged in the construction business, and thus Canfield may be held liable fordiversion of statutory trust funds if indeed it had notice that the business to which it was lendingmoney was engaged in construction (seegenerally LeChase Data/Telecom Servs., LLC v Goebert, 6 NY3d 281, 289-292 [2006]).
We have considered appellants' remaining contentions and conclude that they are withoutmerit. In light of our decision, we need not consider plaintiffs' alternate grounds for affirmance.Present—Scudder, P.J., Martoche, Green and Gorski, JJ.