| Kittner v Eastern Mut. Ins. Co. |
| 2011 NY Slip Op 00074 [80 AD3d 843] |
| January 6, 2011 |
| Appellate Division, Third Department |
| Cary Kittner, Individually and as Assignee of Stuart Quimby, et al.,Respondents, v Eastern Mutual Insurance Company, Appellant. |
—[*1] Basch & Keegan, L.L.P., Kingston (Derek J. Spada of counsel), for respondents.
Egan Jr., J. Appeals (1) from an order of the Supreme Court (Pulver, Jr., J.), entered July 29,2009 in Greene County, which denied defendant's motion for summary judgment dismissing thecomplaint, and (2) from an order of said court, entered December 17, 2009 in Greene County,which denied defendant's motion to renew and/or reargue.
Plaintiff Design Science Toys, Ltd. (hereinafter DST) was a domestic corporation formed in1986 to design, manufacture and distribute toys. DST's officers were plaintiff Cary Kittner andher then husband, Stuart Quimby. In 2003, Kittner and Quimby, as sole principals, formedplaintiff QK Properties, LLC, which then purchased a building located in the Village of Tivoli,Dutchess County and rented it to DST to house its operations. In October 2005, QK sold thebuilding, but DST continued to store its inventory and equipment in a portion of the buildingwith the permission of its new owner. In December 2005, DST filed a chapter 7 bankruptcypetition and valued the equipment and inventory stored in the building at $5,052.93. DST'sbankruptcy proceeding was concluded the following month, with the trustee abandoning theequipment and inventory. DST then transferred its postbankruptcy assets to QK. In March 2006,a fire broke out at QK's former building, destroying it and QK's equipment and inventory thatwas still stored therein. Shortly after the fire, DST and QK made a claim under their insurancepolicy, which was issued by defendant. In a sworn statement in proof of loss signed by [*2]Kittner and Quimby, DST and QK valued the equipment andinventory loss at $212,427.[FN1]In October 2006, defendant denied plaintiffs' claim in full.
In January 2008, plaintiffs commenced this action. Defendant moved for summary judgmentdismissing the complaint, arguing, among other things, that Kittner lacked standing to recoverunder the insurance policy, that the insurance policy was rendered null and void because theproof of loss contained material misrepresentations and, in the alternative, that plaintiffs werejudicially estopped from claiming that the property was valued higher than the amount claimed inthe bankruptcy petition. Supreme Court denied that motion and defendant's subsequent motionfor leave to renew and/or reargue. Defendant now appeals from both orders.[FN2]We agree with defendant that Kittner lacked standing. "In New York, '[n]o contract or policy ofinsurance on property made or issued in this state . . . shall be enforceable exceptfor the benefit of some person having an insurable interest in the property insured' and an'insurable interest' is 'any lawful and substantial economic interest in the safety or preservation ofproperty from loss, destruction or pecuniary damage' " (Cassadei v Nationwide Mut. Fire Ins. Co., 21 AD3d 681, 682[2005], quoting Insurance Law § 3401). Here, defendant established its prima facieentitlement to summary judgment dismissing Kittner's claim based on lack of standing throughevidence that the insurance policy at issue only covers the business property of DST and QK, thenamed insureds (see Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853 [1985];Zuckerman v City of New York, 49 NY2d 557, 562 [1980]). In opposition, plaintiffsfailed to present sufficient evidence to create a question of fact as to Kittner's interest in theproceeds of the insurance policy (see Zuckerman v City of New York, 49 NY2d at 562).While it is true that in May 2008 Quimby, as president of DST, assigned all of DST's interests inany claims arising out of the fire loss to Kittner, she could only acquire those rights that DSTpossessed (see Matter of Stralem, 303 AD2d 120, 123 [2003]).[FN3]Because DST had, some two years earlier, already transferred all of its postbankruptcy assets toQK, DST had nothing to transfer. Accordingly, [*3]Kittner has noinsurable interest in the policy proceeds and, therefore, no standing to maintain thisaction.[FN4]Accordingly, defendant's motion seeking summary judgement based on Kittner's lack of standingshould have been granted (see Zuckerman v City of New York, 49 NY2d at 562).
Defendant also contends that the denial of its motion for summary judgment on the issue ofdamages was in error under the doctrine of judicial estoppel. We agree. " '[W]here a partyassumes a position in [one] legal proceeding and succeeds in maintaining that position, that partymay not subsequently assume a contrary position [in a second proceeding] because [its] interestshave changed' " (Popadyn v ClarkConstr. & Prop. Maintenance Servs., Inc., 49 AD3d 1335, 1336 [2008], quotingMcIntosh Bldrs. v Ball, 264 AD2d 869, 870 [1999]). Here, in conjunction with the filingof its petition in bankruptcy, DST valued its equipment and inventory at $5,052.93. Eight monthslater and after the intervening fire, DST and QK valued the same items at $212,427.
While plaintiffs attempt to explain the far lower bankruptcy valuation by pointing out that itstoys were sold unassembled to a small niche market around the world and thus the remaininginventory was difficult to value or market, their argument is unavailing because any suchdifficulties in valuation would be equally present, whether for bankruptcy or insurance claimpurposes. In any event, having overcome these obstacles and assumed a position as to the valueof the equipment and inventory in the prior bankruptcy proceeding, DST was judicially estoppedfrom claiming, eight months later, that the same equipment and inventory had a value some 40times that as previously asserted (see McIntosh Bldrs. v Ball, 264 AD2d at 870;Clifton Country Rd. Assoc. v Vinciguerra, 252 AD2d 792, 793 [1998]; Madden vCorey, 251 AD2d 257, 258 [1998]; Moore v County of Clinton, 219 AD2d 131, 135[1996], lv denied 89 NY2d 851 [1996]). Likewise, as assignee of DST's post-bankruptcyassets, QK is also judicially estopped from claiming valuations exceeding those listed in thebankruptcy proceeding (see Matter of International Ribbon Mills [Arjan Ribbons], 36NY2d 121, 126 [1975]; Secured Equities Invs. v McFarland, 300 AD2d 1137, 1138[2002]; Richard T. Blake & Assoc. v Aetna Cas. & Sur. Co., 255 AD2d 569, 570-571[1998]).
Next, a policy of insurance will be voided where the insured has " 'willfully and fraudulentlyplaced in the proofs of loss a statement of property lost which he [or she] did not possess, or hasplaced a false and fraudulent value upon the articles which he [or she] did own' " (Saks & Co.v Continental Ins. Co., 23 NY2d 161, 165 [1968], quoting Domagalski v Springfield Fire& Mar. Ins. Co., 218 App Div 187, 190 [1926]; see Ingarra v General Acc./PG Ins. Co. ofN.Y., 273 AD2d 766, 768 [2000]). However, "unintentional fraud or false swearing or thestatement of any opinion mistakenly held are not grounds for vitiating a policy" (SunbrightFashions v Greater N.Y. Mut. Ins. Co., 34 AD2d 235, 237 [1970], affd 28 NY2d 563[1971]; see Deitsch Textiles v New York Prop. Ins. Underwriting Assn., 62 NY2d 999,1001 [1984]). As the proponent for summary judgment, defendant bore the burden ofdemonstrating plaintiffs' material misrepresentation (see Precision Auto Accessories, Inc. v Utica First Ins. Co., 52 AD3d1198, 1200 [2008], lv denied 11 NY3d 709 [2008]). Here, while defendant relies onDST's bankruptcy [*4]filing listing the value of its property tototal $5,052.93, which is in sharp contrast to the $212,427 figure set forth in the proof of loss,defendant tendered no proof of plaintiffs' intent to defraud—"a necessary element to thedefense" (Deitsch Textiles v New York Prop. Ins. Underwriting Assn., 62 NY2d at1001). Accordingly, Supreme Court properly denied defendant's motion seeking summaryjudgment based on plaintiffs' alleged material misrepresentations.
Finally, in light of our determination, defendant's challenge to Supreme Court's denial of itsmotion for leave to renew, addressing QK's and Kittner's interests in the property, has beenrendered academic.
Cardona, P.J., Peters, Spain and Kavanagh, JJ., concur. Ordered that the order entered July29, 2009 is modified, on the law, without costs, by reversing so much thereof as (1) denieddefendant's motion for summary judgment dismissing the claim asserted by plaintiff Cary Kittnerand (2) denied defendant's motion limiting the damages recoverable based on the theory ofjudicial estoppel; motion granted to said extent and claim asserted by Kittner dismissed; and, asso modified, affirmed. Ordered that the appeal from the order entered December 17, 2009 isdismissed, as academic, without costs.
Footnote 1: After application of theinsurance deductible, however, the proof of loss listed the recoverable claim to be $91,250.
Footnote 2: Defendant concedes that thedenial of its motion to reargue is not appealable (see Mortgage Elec. Registration Sys., Inc. v Schuh, 48 AD3d 838,840 [2008], appeal dismissed 10 NY3d 951 [2008]). Furthermore, defendant's argument,advanced before Supreme Court, that it is entitled to summary judgment because plaintiffs failedto file a timely proof of loss is not addressed in defendant's brief and is, therefore, deemedabandoned (see Rochester Linoleum &Carpet Ctr., Inc. v Cassin, 61 AD3d 1201, 1202 n 1 [2009]).
Footnote 3: Contrary to defendant'sargument, while the insurance policy contains a provision that the "[a]ssignment of this policy isnot valid without [defendant's] written consent," this anti-assignment provision applies only toassignments before loss (see Globecon Group, LLC v Hartford Fire Ins. Co., 434 F3d165, 171 [2d Cir 2006]; Travelers Indem. Co. v Israel, 354 F2d 488, 490 [2d Cir 1965];Ardon Constr. Corp. v Firemen's Ins. Co. of Newark, N.J., 16 Misc 2d 483, 488 [1959],affd 11 AD2d 766 [1960]).
Footnote 4: The parties do not contestSupreme Court's determination that Kittner does not have standing to raise claims with respect toproperty owned by QK (see Limited Liability Company Law § 610; Katz v Katz, 55 AD3d 680, 684[2008]).