| Knobel v Shaw |
| 2011 NY Slip Op 08988 [90 AD3d 493] |
| Dcmbr 13, 2011 |
| Appellate Division, First Department |
| Franklin Knobel, Appellant, v Doris Shaw, Individuallyand as Executrix of J. Stanley Shaw, Deceased, et al., Respondents, et al.,Defendants. |
—[*1] Davidoff Malito & Hutcher LLP, New York (Gary I. Lerner of counsel), forrespondents.
Order, Supreme Court, New York County (Charles E. Ramos, J.), entered on or aboutDecember 9, 2010, which granted the motion of defendants Doris Shaw (individually and asexecutrix of the estate of J. Stanley Shaw), Anthony Turzo, Lon Goldstein, Lisa Goldstein, theShaw Family Limited Partnership, Spin Realty LLC, and Sige Realty LLC to dismiss theamended complaint as time-barred, unanimously modified, on the law, to deny the motion ofMrs. Shaw (individually and as executrix), Turzo, and the Goldsteins as to the accounting causeof action; to deny the motion of Mrs. Shaw, as executrix, as to the breach of contract cause ofaction with respect to the six years preceding the commencement of this action; to deny themotion of Mrs. Shaw (individually and as executrix), the Goldsteins, and Turzo as to the breachof fiduciary duty cause of action with respect to their retention of all of the profits from theproperties at issue for the three years preceding the commencement of this action; to deny themotion of Mrs. Shaw, as executrix, as to the fraud cause of action with respect to Mr. Shaw'sstatements in 2004 and 2005 that the properties at issue were not generating income; to denydefendants' motion as to the declaratory judgment cause of action; to deny the motion of Mrs.Shaw (individually), Turzo, and the Goldsteins as to the unjust enrichment cause of action withrespect to their retention of all of the profits from the properties at issue for the six yearspreceding the commencement of this action; to deny the motion of Mrs. Shaw (individually),Turzo, and the Goldsteins as to the money had and received cause of action for the six yearspreceding the commencement of this action, and otherwise affirmed, without costs.
When using plaintiff's affidavit in opposition to defendants' motion "to remedy defects in thecomplaint" (Rovello v Orofino Realty Co., 40 NY2d 633, 636 [1976]), one can infer thatplaintiff and Mr. Shaw had a contractual agreement that plaintiff would identify which ofnonparty Bohack Corporation's properties could become profitable; in return, he would get ashare of the profits generated by the properties. The complaint alleges that his share is 31%.
Plaintiff has stated a cause of action for breach of contract against Mrs. Shaw, as [*2]executrix of Mr. Shaw's estate, but not against any of the otherdefendants, for he fails to identify any contract with them (see Harris v Seward Park Hous. Corp., 79 AD3d 425, 426 [2010];ESI, Inc. v Coastal Corp., 61 F Supp 2d 35, 73 [1999]; Crabtree v Tristar AutomotiveGroup, Inc., 776 F Supp 155, 166 [1991]). To the extent plaintiff's claim arises within sixyears of the commencement of this suit in November 2009, it is timely. Indeed, Mr. Shaw had a"recurring obligation" to pay plaintiff his 31% share of the profits generated by the properties atissue (Sirico v F.G.G. Prods., Inc.,71 AD3d 429, 435 [2010]); therefore, plaintiff's contract claim "accrued each time [Mr.Shaw] allegedly breached" this obligation (id.; see also Bulova Watch Co. v CelotexCorp., 46 NY2d 606, 611 [1979]).
Contrary to plaintiff's contention, defendants are not equitably estopped from asserting thestatute of limitations for those portions of his claim that predate November 2003 (six yearsbefore he commenced this action). "[E]quitable estoppel does not apply where themisrepresentation or act of concealment underlying the estoppel claim is the same act whichforms the basis of plaintiff's underlying substantive cause of action" (Kaufman v Cohen,307 AD2d 113, 122 [2003]). Here, the same wrongful acts underlie both plaintiff's estoppelargument and his underlying substantive claim—namely, Mr. Shaw's allegedmisrepresentations about the profitability of the properties at issue.
Plaintiff's unjust enrichment claim is time-barred to the extent it is based on his provision ofservices to Mr. Shaw in the 1970s (see CPLR 213 [1]; Sirico, 71 AD3d at 434).However, the part of the claim that is based on the individual defendants' keeping all the profitsfrom the properties for themselves is viable for the six years preceding the commencement of thisaction. Accepting plaintiff's allegations as true—as one must on this pre-answer motion todismiss—it would be contrary to equity and good conscience to permit the individualdefendants to keep 100% of the profits when plaintiff was entitled to 31%.
Because the money had and received cause of action is similar to the unjust enrichmentclaim, it is reinstated against the individual defendants for the six years preceding thecommencement of this action (seegenerally Insurance Co. of State of Pa. v HSBC Bank USA, 37 AD3d 251, 254-255[2007], revd on other grounds 10 NY3d 32 [2008]).
To the extent plaintiff alleges that Mr. Shaw misrepresented in 2004 and 2005 that theproperties at issue were not generating income, the fraud cause of action is timely and plaintiffhas stated a cause of action with respect to those statements (see CPLR 213 [8]; see Prichard v 164 Ludlow Corp., 49AD3d 408, 409 [2008]; see Kaufman, 307 AD2d at 119-120). The remaining partsof the cause of action—based on defendants' alleged conversion of plaintiff's interests innonparties Joton Realty Corp. and Sige Realty Co. and withholding of his share of theprofits—are time-barred (see Brick v Cohn-Hall-Marx Co., 276 NY 259, 263-264[1937]; Garber v Ravitch, 186 AD2d 361, 362 [1992], lv denied 81 NY2d 707[1993]).
Because plaintiff's fraud allegations are incidental to his breach of fiduciary duty claim andthe complaint primarily seeks money damages, a three-year statute of limitations applies to thebreach of fiduciary duty claim (see Kaufman, 307 AD2d at 118-119). The only parts ofplaintiff's claim that fall within three years of the commencement of this action are defendants'alleged transfers of profits to themselves and exclusion of plaintiff. Contrary to defendants'contention, plaintiff's claim states a cause of action. As plaintiff's attorney and acknowledgedholder of his 31% interest in Joton and Sige Realty Co., Mr. Shaw stood in a fiduciaryrelationship to him (Matter of Levy, 19 AD2d 413, 416 [1963]; see Matter ofElmezzi, 24 Misc 3d 1214[A], 2009 NY Slip Op 51449[U], *8 [2009]). The individualdefendants' argument that [*3]plaintiff cannot "establish" that hewas their business partner is inappropriate on a pre-answer motion to dismiss, especially sincethere is an absence of documentary evidence conclusively refuting plaintiff's claim.
Plaintiff's cause of action for an accounting is timely for at least the six years preceding thecommencement of this action, since the retention of profits is a continuing wrong (see e.g.Sadov Realty Corp. v Shipur H'Shechuna Corp., 202 AD2d 178, 179 [1994], lvdismissed 84 NY2d 923 [1994]). The cause of action is also viable even before November2003. Indeed, the statute of limitations against a fiduciary for an accounting "does not begin torun until the fiduciary has openly repudiated his or her obligation or the relationship has beenotherwise terminated" (Westchester Religious Inst. v Kamerman, 262 AD2d 131, 131[1999]; see also Matter of Barabash, 31 NY2d 76, 80 [1972]). Here, defendants did notsubmit documentary evidence definitively establishing that they had repudiated their obligationsto plaintiff or that their relationship had terminated before November 2003.
Plaintiff seeks a declaration that he possesses a 31% membership interest in Sige RealtyLLC, Spin, and their predecessors. This cause of action is similar to his claim for an accounting;therefore, it is timely (see generally Vigilant Ins. Co. of Am. v Housing Auth. of City of ElPaso, Tex., 87 NY2d 36, 40-41 [1995]).
Contrary to defendants' contention, laches does not bar the timely portions of plaintiff'sclaims. Indeed, defendants have not shown that plaintiff's delay in bringing the claims "hampered[their] ability to defend against [them]" (Sirico, 71 AD3d at 434). Moreover, as notedearlier, Mr. Shaw had a fiduciary relationship with plaintiff and there is no indication that heopenly repudiated that relationship; thus, he is not entitled to rely upon the defense of laches(Barabash, 31 NY2d at 82).
The constructive trust claim was properly dismissed as time-barred. Such a claim "isgoverned by the six-year statute of limitations provided by CPLR 213 (1), which commences torun upon occurrence of the wrongful act giving rise to a duty of restitution, and not from the timewhen the facts constituting the fraud are discovered" (Kaufman, 307 AD2d at 127).Plaintiff notes that "[t]he continuing performance doctrine applies to constructive trust claims"(Bice v Robb, 324 Fed Appx 79, 81 [2d Cir 2009]). However, his claim is not based onlost profits. Rather, it is based on Mr. Shaw's 1993 transfer of his and plaintiff's interest in SigeRealty Co. to Mrs. Shaw and the Goldsteins; the 1980 assignment of the drugstore lease fromJoton to Sige Realty Inc.; the subsequent assignment of the lease from Sige Realty Inc. to SigeRealty Co.; and [*4]the 2000 assignment of the lease from SigeRealty LLC—Sige Realty Co.'s successor—toSpin. These events all occurred more than six years before commencement of the action.Concur—Mazzarelli, J.P., Andrias, Renwick, Freedman and Manzanet-Daniels, JJ.