| Maya NY, LLC v Hagler |
| 2013 NY Slip Op 03621 [106 AD3d 583] |
| May 21, 2013 |
| Appellate Division, First Department |
| Maya NY, LLC, Appellant, v Daryl Hagler,Respondents. |
—[*1] Goldberg & Rimberg PLLC, New York (Steven A. Weg of counsel), forrespondents.
Order, Supreme Court, New York County (Bernard J. Fried, J.), entered April 5,2012, which, to the extent appealed from as limited by the briefs, granted defendants'motion to dismiss the third, sixth and ninth (in part) causes of action in the amendedcomplaint, unanimously modified, on the law, to the extent of reinstating the third andninth causes of action, and otherwise affirmed, without costs. Order, same court andJustice, entered July 17, 2012, which, insofar as appealed from as limited by the briefs,denied plaintiff's motion for leave to amend the fifth and eleventh causes of action in theamended complaint, unanimously affirmed, without costs.
Plaintiff alleges that defendants breached contractual obligations, or were unjustlyenriched, in connection with two transactions. In its third cause of action, plaintiff allegesthat defendants were unjustly enriched by a $250,000 "loan" made by plaintiff'spredecessor-in-interest to the corporate defendant N.E. Development, LLC, at therecommendation of defendant Hagler, the predecessor's accountant and financial taxplanner. Hagler formed N.E. Development as an investment vehicle/tax shelter for hisclients. The $250,000 loan was made in June 2004 and, according to plaintiff, defendantsorally agreed to repay the loan, with interest at the rate of 13% per annum, to plaintiff'spredecessor-in-interest. Repayment was due June 2005, 12 months after the loan wasmade. Defendants did not, however, repay the loan in full and plaintiff alleges that it wasnever notified by Hagler that the money was actually being treated by him as aninvestment in N.E. Development. Although the motion court applied a six-year statute oflimitations, it held that the cause of action was time-barred because it accrued on the datethat plaintiff made its initial payment in June 2004.
In its ninth cause of action, plaintiff alleges that defendants were unjustly enrichedwhen plaintiff's predecessor-in-interest, at Hagler's recommendation, "invested" a total of$202,500 (made in three payments across three years) in defendant Washington Partners,LLC, another entity in which Hagler had an interest. Although the motion courtdetermined that plaintiff had sufficiently pleaded its prima facie case for unjustenrichment, and that the third investment payment made on December 15, 2008 wasactionable, it found, by applying a three-year statute of limitations, that claims based onthe first $180,000 transfer of investment funds, in November [*2]2005, and the $7,500 transfer of investment funds, in June2007, were time-barred.
The basis of a claim for unjust enrichment is that the defendant has obtained abenefit that in "equity and good conscience" should be paid to the plaintiff (Mandarin Trading Ltd. vWildenstein, 16 NY3d 173, 182 [2011] [internal quotation marks omitted]). It isavailable only in unusual situations when the defendant has not breached a contract norcommitted a recognized tort, but circumstances create an equitable obligation runningfrom the defendant to the plaintiff (see Markwica v Davis, 64 NY2d 38 [1984]).Under New York law, there is no identified statute of limitations period within which tobring a claim for unjust enrichment, but where, as here, the unjust enrichment and breachof contract claims are based upon the same facts and pleaded in the alternative, a six-yearstatute of limitations applies (see Knobel v Shaw, 90 AD3d 493, 495 [1st Dept 2011]).
Plaintiff alleges that the use of its monies by defendants, after not fully repaying themoney loaned pursuant to an oral contract, bestowed an unintended benefit upon them.The alleged wrongful act occurred in June 2005, when the monies should have beenrepaid to plaintiff and not when plaintiff first advanced the funds. This action wascommenced in November 2010, within six years of June 2005, so that the third cause ofaction was timely brought and should not have been dismissed.
Like the third cause of action, the ninth cause of action for unjust enrichment isspecifically pleaded in the alternative to the breach of contract claims and was also timelybrought in November 2010. As a result, the Court erroneously dismissed Maya's unjustenrichment claims arising out of the November 2005 and June 2007 transfers by applyinga three-year statute of limitations when this cause of action is governed by a six-yearstatute of limitations. In arguing that a three-year limitations period applies to the ninthcause of action, defendants rely on cases involving allegations for unjust enrichmentstemming from tortious conduct, which is not the case here (cf. Board of Mgrs. of the Chelsea19 Condominium v Chelsea 19 Assoc., 73 AD3d 581 [1st Dept 2010]).
An action for conversion is subject to a three-year limitation period (seeCPLR 214 [3]; Sporn v MCA Records, 58 NY2d 482, 488-489 [1983]). Thecause of action normally accrues on the date the conversion takes place and not the dateof discovery or the exercise of diligence to discover (Vigilant Ins. Co. of Am. vHousing Auth. of City of El Paso, Tex., 87 NY2d 36, 44-45 [1995]). In its sixthcause of action, plaintiff alleges that Hagler was obligated to use the funds it entrusted tohim as a loan, but Hagler invested them instead. The latest date for the accrual of anaction for a conversion claim would be June 2005, the date plaintiff alleges thatrepayment of the loan was due. The conversion claim is untimely as it was brought morethan three years after the cause of action accrued.
Plaintiff's fifth and eleventh causes of action alleging accountant malpractice withrespect to the loan and investment transactions were properly dismissed as untimely. Athree-year statute of limitations applies (see CPLR 214 [6]; Williamson vPricewaterhouseCoopers LLP, 9 NY3d 1 [2007]), and such causes of actionaccrued at the time the negligent investment advice was given, or, at the very latest, whenHagler, without apparent explanation, failed to pay both the loan when due (on or aboutJune 23, 2005), and the initial payment on the investment that was due on or aboutNovember 28, 2006 (see Ackerman v Price Waterhouse, 84 NY2d 535, 541-542[1994]).
Furthermore, neither the amended complaint, nor the proposed second amendedcomplaint, offered any allegations to show that Hagler continuously representedplaintiff's predecessor with respect to the two transactions (see Zaref v Berk &Michaels, 192 AD2d 346, [*3]347-348 [1st Dept1993]), or that the parties had a "mutual understanding of the need for furtherrepresentation on the specific subject matter" (McCoy v Feinman, 99 NY2d 295,306 [2002]). There were no allegations as to how Hagler advised plaintiff's predecessoronce the due dates of the two transactions were reached. By plaintiff's own allegations,its predecessor was left perpetually "in the dark" about everything that had to do with thetransactions, including the fact that no written instruments were involved and Hagler hadautonomy to handle the transactions as he desired. The one-sided handling of theseinvestments does not support a finding of continuous representation.
We have considered plaintiff's remaining arguments and find them unavailing.Concur—Moskowitz, J.P., DeGrasse, Richter and Gische, JJ. [Prior CaseHistory: 35 Misc 3d 1210(A), 2012 NY Slip Op 50646(U).]