| Quadrozzi v Estate of Quadrozzi |
| 2012 NY Slip Op 06593 [99 AD3d 688] |
| October 3, 2012 |
| Appellate Division, Second Department |
| Patrick Quadrozzi, Respondent, v Estate of John Quadrozziet al., Appellants. |
—[*1] Rivkin Radler LLP, Uniondale, N.Y. (Evan H. Krinick, Norman L. Tolle, Cheryl F. Korman,and Merril S. Biscone of counsel), for respondent.
In a shareholder's derivative action, inter alia, to recover damages for breach of fiduciary dutyand corporate waste and to impose a constructive trust upon shares of stock in certaincorporations, the defendants appeal from an interlocutory judgment of the Supreme Court,Queens County (Grays, J.), dated June 23, 2010, which, upon a decision of the same court datedJune 10, 2009, made after a nonjury trial, is in favor of the plaintiff and against them imposing aconstructive trust on a 25% ownership interest in Quad Acquisition Corp., Maspeth ConcreteLoading Corp., Harlem Concrete Loading Corp., Manhattan West Concrete Loading Corp.,Edgewater Concrete Loading Corp., Red Hook Concrete Loading Corp., Maspeth Truck DepotCorp., and Gowanus Industrial Park, Inc., and directing an accounting of any distributions madeby those corporations to John Quadrozzi, Sr., his estate, or his heirs.
Ordered that the interlocutory judgment is affirmed, with costs.
In 1964, the decedent, John Quadrozzi, Sr. (hereinafter John Sr.), and his brother, WilliamQuadrozzi (hereinafter William), started a concrete and cement supply business, QuadrozziConcrete Corporation (hereinafter QCC). They subsequently established additional corporations,known as Quadrozzi Equipment Leasing Corp., Quadrozzi Enterprise Corp., Quadrozzi, Inc.,doing business as NYCEMCO, Quadrozzi Realty, Inc., Beach Channel Drive Lane Ent., Inc., andAmstel Recycling, Inc. (hereinafter collectively the original Quadrozzi companies).
In 1981, William retired and the youngest brother of John Sr. and William, the plaintiff,Patrick Quadrozzi (hereinafter Patrick), who had worked in the family business since 1968,assumed William's responsibilities handling the day-to-day operations. Patrick was given theshares in QCC owned by William and the original Quadrozzi companies.
Subsequently, in 1990, John Sr. purchased the assets of Certified Concrete Company [*2]and Transit Mix Concrete Corp., both of which were in bankruptcy.Those assets would eventually be held by newly formed corporations known as Quad AcquisitionCorp., Maspeth Concrete Loading Corp., Harlem Concrete Loading Corp., Manhattan WestConcrete Loading Corp., Edgewater Concrete Loading Corp., Red Hook Concrete LoadingCorp., and Maspeth Truck Depot Corp. (hereinafter collectively the Certified AcquisitionCompanies). To facilitate this purchase, John Sr. obtained a loan from North Fork Bank for aportion of the purchase price by mortgaging the assets of QCC and some of the other originalQuadrozzi companies. Further, both John Sr. and Patrick personally guaranteed the loan. Theremainder of the purchase price was paid by the forgiveness of a debt owed to one of the originalQuadrozzi companies. Despite this, John Sr. was the only person listed as a shareholder of theCertified Acquisition Companies.
Thereafter, in 1997, John Sr. purchased a grain terminal site, which was located on theBrooklyn waterfront, and was then organized as the defendant Gowanus Industrial Park, Inc.(hereinafter Gowanus). Patrick maintained that a portion of the purchase price was funded bymoney from QCC and some of the other original Quadrozzi companies. As with the CertifiedAcquisition Companies, John Sr. was listed as the sole shareholder of Gowanus.
In 2003, John Sr. became very ill and his wife, the defendant Theresa Quadrozzi (hereinafterTheresa), initiated a guardianship proceeding. In her petition, she claimed that John Sr. was thesole owner of the Certified Acquisition Companies and Gowanus. John Sr. died on March 28,2004.
In November 2005, Patrick commenced this action against the estate of John Sr. andnumerous corporations. Among other things, Patrick sought the issuance of shares representinghis 25% ownership interest in the Certified Acquisition Companies and Gowanus, damages forcorporate waste, damages for breach of fiduciary duty, the imposition of a constructive trust, andan accounting. Patrick alleged that, despite the fact that the record ownership of the CertifiedAcquisition Companies and Gowanus was vested solely in John Sr., John Sr. made impliedpromises that Patrick owned 25% of those entities. In support of his claim, Patrick pointed to thefact that he personally guaranteed a $5,000,000 loan in connection with the purchase of theCertified Acquisition Companies, and that the assets of some of the original Quadrozzicompanies were mortgaged as part of the financing. With respect to the acquisition of Gowanus,Patrick noted that John Sr. paid for this purchase in part by obtaining $1,350,000 in distributionsfrom QCC and other original Quadrozzi companies in addition to mortgaging real propertyowned by QCC and those original Quadrozzi companies.
The defendants contended, inter alia, that Patrick never had a major managing role in any ofthe subject companies, that he had received proportionate distributions from the corporations inwhich he did have an interest at the time when John Sr. received distributions, and that themoney John Sr. received to purchase the subject companies from QCC or the original Quadrozzicompanies became John Sr.'s money when it was deposited into his personal account. Thedefendants also claimed that Patrick was aware, at the time of the purchases of the CertifiedAcquisition Companies and Gowanus, that the stock was to be owned solely by John Sr. Further,they maintained that Patrick's claims were time-barred.
Upon conducting a nonjury trial, the Supreme Court found in favor of Patrick. Thedefendants appeal, and we affirm.
The equitable claim for the imposition of a constructive trust is governed by a six-year statuteof limitations, which begins to run upon the occurrence of the wrongful act from which a duty ofrestitution arises (see CPLR 213 [1]; Bodden v Kean, 86 AD3d 524, 525 [2011]; DeLaurentis v DeLaurentis, 47 AD3d750, 751 [2008]). "A determination of when the wrongful act triggering the running of theStatute of Limitations occurs depends upon whether the constructive trustee acquired theproperty wrongfully, in which case the property would be held adversely from the date ofacquisition, or whether the constructive trustee wrongfully withholds property [*3]acquired lawfully from the beneficiary, in which case the propertywould be held adversely from the date the trustee breaches or repudiates the agreement to transferthe property" (Maric Piping v Maric, 271 AD2d 507, 508 [2000] [internal quotationmarks and citations omitted]; see DeLaurentis v DeLaurentis, 47 AD3d at 751-752).
Here, the Supreme Court properly determined that the applicable limitations period did notbar Patrick's cause of action seeking the imposition of a constructive trust in his favor to theextent of awarding him a 25% ownership interest in the Certified Acquisition Companies. Thesix-year statute of limitations applicable to this cause of action did not begin to run until 2003,when Theresa, in the context of the guardianship proceeding she commenced on behalf of JohnSr., repudiated Patrick's purported acquisition of a 25% ownership interest in the CertifiedAcquisition Companies from John Sr. by alleging, in her guardianship petition, that John Sr.owned 100% of the Certified Acquisition Companies (see CPLR 213 [1]; Bodden vKean, 86 AD3d at 525; Sitkowski v Petzing, 175 AD2d 801, 802 [1991]).
Further, we agree with the Supreme Court that Patrick's cause of action seeking theimposition of a constructive trust with respect to Gowanus also is not time-barred. Here, thedefendants are estopped from raising the statute of limitations defense since a fiduciaryrelationship existed between Patrick and John Sr., who concealed from Patrick the fact thatPatrick did not have a recorded 25% ownership interest in Gowanus, a fact which John Sr. wasduty bound to disclose (see Zumpano vQuinn, 6 NY3d 666, 675 [2006]; Gonik v Israel Discount Bank of N.Y., 80 AD3d 437, 438 [2011];Gleason v Spota, 194 AD2d 764, 765 [1993]). Moreover, Patrick acted with duediligence in commencing this action after discovering that he purportedly had no ownershipinterest in Gowanus (see Simcuski v Saeli, 44 NY2d 442, 450-451 [1978]; cf. Julianv Carroll, 270 AD2d 457, 457 [2000]).
"A constructive trust is an equitable remedy, and may be imposed [w]hen property has beenacquired in such circumstances that the holder of the legal title may not in good conscience retainthe beneficial interest" (Rowe vKingston, 94 AD3d 852, 853 [2012] [internal quotation marks and citation omitted]; see LMT Capital Mgt., LLC v Gerardi,97 AD3d 546, 546 [2012]). The elements of a cause of action to impose a constructive trustare (1) the existence of a confidential or fiduciary relationship, (2) a promise, (3) a transfer inreliance thereon, and (4) unjust enrichment (see Sharp v Kosmalski, 40 NY2d 119, 121[1976]; Rowe v Kingston, 94 AD3d at 853; Poupis v Brown, 90 AD3d 881, 882 [2011]). "However, as theseelements serve only as a guideline, a constructive trust may still be imposed even if all of theelements are not established" (Rowe v Kingston, 94 AD3d at 853; see Simonds vSimonds, 45 NY2d 233, 243 [1978]).
"In reviewing a determination made after a nonjury trial, this Court's power is as broad asthat of the trial court, and it may render the judgment it finds warranted by the facts, taking intoaccount that in a close case the trial court had the advantage of seeing and hearing the witnesses"(BRK Props., Inc. v Wagner ZivPlumbing & Heating Corp., 89 AD3d 883, 884 [2011]; see Northern WestchesterProfessional Park Assoc. v Town of Bedford, 60 NY2d 492, 499 [1983]; Havel v Goldman, 95 AD3d 1174,1175 [2012]). Here, the Supreme Court properly concluded that Patrick satisfied the elements forthe imposition of a constructive trust in his favor with respect to a 25% ownership interest in theCertified Acquisition Companies and Gowanus. As relatives sharing a business relationship overseveral decades, Patrick and John Sr. shared a confidential relationship (see Henderson v Thorpe, 73 AD3d978, 979 [2010]; Matter of Arnold, 173 AD2d 699 [1991]). Moreover, the SupremeCourt's finding that John Sr. made implied promises to Patrick that the Certified AcquisitionCompanies and Gowanus were being acquired on behalf of both of them in accordance with theirhistory of joint ownership of QCC and the original Quadrozzi companies was warranted by thefacts (see Sinclair v Purdy, 235 NY 245, 254 [1923]; Henderson v Thorpe, 73AD3d at 979; Watson v Pascal, 65AD3d 1333, 1334 [2009]; Neuhauser v Polanco, 14 AD3d 674, 675 [2005]; Djamoos vDjamoos, 153 AD2d 871, 872 [1989]). In reliance on those implied promises, Patrick,among other things, personally guaranteed a $5,000,000 loan to purchase the CertifiedAcquisition Companies, allowed the debt owed to one of the original Quadrozzi companies to beused as a credit towards the purchase price of the Certified Acquisition Companies, agreed tomortgage the real property owned by another corporation in which he had an ownership interestin order to secure cash for the purchase of Gowanus, and allowed funds from QCC and anotherone of the original Quadrozzi companies to pay off the mortgage on Gowanus so [*4]that he could acquire Gowanus free of any encumbrances. As aresult, the defendants, as John Sr.'s heirs, would be unjustly enriched if permitted to remain inpossession of 100% of the shares of the Certified Acquisition Companies and Gowanus as part ofJohn Sr.'s estate (see Lipton vDonnenfeld, 5 AD3d 356, 358 [2004]; Matter of Wieczorek, 186 AD2d 204,205 [1992]; Matter of Arnold, 173 AD2d at 699-700). Since the Supreme Court'sdetermination was warranted by the facts, we decline to disturb it.
The defendants' remaining contentions are without merit. Eng, P.J., Skelos, Dickerson andAustin, JJ., concur.