| Cusack v American Defense Sys., Inc. |
| 2011 NY Slip Op 06015 [86 AD3d 586] |
| July 19, 2011 |
| Appellate Division, Second Department |
| Thomas Cusack, Respondent, v American DefenseSystems, Inc., Appellant, et al., Defendants. |
—[*1] Valli Kane & Vagnini, Garden City, N.Y. (Jesse C. Rose and Robert J. Valli, Jr., of counsel),for respondent.
In an action, inter alia, to recover damages for breach of contract and conversion, thedefendant American Defense Systems, Inc., appeals, as limited by its brief, from so much of anorder of the Supreme Court, Nassau County (Driscoll, J.), dated August 19, 2010, as grantedthose branches of the plaintiff's motion which were for summary judgment on so much of thefirst cause of action to recover damages for breach of contract as was based on its failure toafford the plaintiff a 30-day cure period and the opportunity to make a presentation with counselbefore its board of directors, and the fourth cause of action to recover damages for conversion ofcertain shares of stock, and for summary judgment dismissing its third counterclaim to rescindthe issuance of certain shares of stock to the plaintiff and denied, as academic, that branch of itsmotion which was for summary judgment on its third counterclaim.
Ordered that the order is modified, on the law, by deleting the provision thereof granting thatbranch of the plaintiff's motion which was for summary judgment on so much of the first causeof action to recover damages for breach of contract as was based on the failure of the defendantAmerican Defense Systems, Inc., to afford the plaintiff a 30-day cure period and the opportunityto make a presentation with counsel before its board of directors, and substituting therefor aprovision denying that branch of the motion; as so modified, the order is affirmed insofar asappealed from, without costs or disbursements.
To establish a cause of action to recover damages for conversion, a plaintiff must show legalownership or an immediate superior right of possession to a specific identifiable thing and mustshow that the defendant exercised an unauthorized dominion over the thing in question to theexclusion of the plaintiff's rights (seeMessiah's Covenant Community Church v Weinbaum, 74 AD3d 916, 919 [2010]). Here,the plaintiff satisfied his prima facie burden of establishing his entitlement to judgment as amatter of law on his fourth cause of action alleging the conversion of 900,000 shares of stock bythe defendant American Defense Systems, Inc. (hereinafter ADSI). The evidence the plaintiffpresented demonstrated that the shares in ADSI were issued to him as compensation for servicesrendered as a business and legal consultant and not as inducement to his subsequent employmentwith ADSI as an executive. This evidence included two letters written contemporaneously withthe issuance of the stock, as well as the plaintiff's employment contract with ADSI which, whilecontaining a paragraph relating to inducements, did not mention the receipt of stock. Further, theplaintiff demonstrated that ADSI exercised an unauthorized dominion over [*2]the stock by refusing to remove a legend restricting its transfer. Inopposition to this prima facie showing, the evidence ADSI presented raised only feigned issuesof fact (see Stancil v SupermarketsGen., 16 AD3d 402, 403 [2005]; see generally Alvarez v Prospect Hosp., 68NY2d 320, 324 [1986]). Therefore, the Supreme Court properly awarded summary judgment tothe plaintiff on his fourth cause of action alleging conversion. Concomitantly, the Supreme Courtproperly denied, as academic, that branch of ADSI's motion which was for summary judgment onits third counterclaim to rescind the issuance of those shares of stock to the plaintiff, and properlyawarded the plaintiff summary judgment dismissing that counterclaim.
However, the Supreme Court should not have granted that branch of the plaintiff's motionwhich was for summary judgment on so much of the first cause of action to recover damages forbreach of contract as was based on the failure of ADSI to afford the plaintiff a 30-day cure periodand the opportunity to make a presentation with counsel before its board of directors. Theplaintiff's breach of contract cause of action is inextricably intertwined with ADSI's first andsecond counterclaims to rescind the contract based on his alleged fraudulent inducement (seeMix v Neff, 99 AD2d 180, 183 [1984]). In deciding that branch of the plaintiff's motion forsummary judgment on his breach of contract cause of action, the Supreme Court found that anissue of fact existed as to whether the plaintiff fraudulently induced ADSI to offer himemployment as an executive when he failed to disclose that he was the subject of a GrievanceCommittee investigation. If the fact-finder concludes that ADSI was fraudulently induced, thenADSI would be entitled to rescind the contract. The effect of rescission is to declare the contractvoid from its inception and to put or restore the parties to status quo (see County of Orange vGrier, 30 AD3d 556, 557 [2006]; Dalessio v Kressler, 6 AD3d 57, 61 [2004]; Mix v Neff, 99AD2d at 182-183). Consequently, if the contract is rescinded, ADSI could not be in breach of itby failing to afford the plaintiff a 30-day cure period and the opportunity to make a presentationwith counsel before its board of directors. Accordingly, the Supreme Court should not havegranted that branch of the plaintiff's motion which was for summary judgment seeking suchrelief. Mastro, J.P., Florio, Belen and Chambers, JJ., concur.