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HEIRS OF A JEWISH VIENNESE ART COLLECTOR, FRITZ GRUNDBAUM, KILLED BY THE NAZIS IN 1941, DEMONSTRATED THEY WERE ENTITLED TO POSSESSION OF CERTAIN ARTWORKS IN THE GRUNDBAUM COLLECTION WHICH WERE ALLEGEDLY LOOTED BY THE NAZIS (FIRST DEPT).

The First Department, in a comprehensive opinion by Justice Singh, determined that plaintiffs, heirs of Jewish Viennese art collector, Fritz Grunbaum, who was murdered by the Nazis in 1941, demonstrated they were entitled to certain artworks collected by Grundbaum and alleged to have been looted by the Nazis. The complex history leading to this lawsuit cannot be fairly summarized here:

” A conversion takes place when someone, intentionally and without authority, assumes or exercises control over personal property belonging to someone else, interfering with that person’s right of possession'” … . “Two key elements of conversion are (1) plaintiff’s possessory right or interest in the property; and (2) defendant’s dominion over the property or interference with it, in derogation of plaintiff’s rights” … . Where a party’s interests in property have been sold, there can be no interference with their property rights and a conversion claim may not be maintained … .

To state a cause of action for replevin, a plaintiff must establish a superior possessory right to property in a defendant’s possession … .

Here, we find that plaintiffs have made a prima facie showing of superior title to the Artworks based on evidence that establishes the following: (1) Grunbaum owned the Artworks prior to World War II; and (2) Grunbaum never voluntarily relinquished the Artworks. Reif v Nagy, 2019 NY Slip Op 05504, First Dept 7-9-19

 

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UNJUST ENRICHMENT CAUSE OF ACTION SHOULD NOT HAVE BEEN DISMISSED, CONVERSION DOES NOT LIE WHEN PROPERTY INVOLVED IS REAL PROPERTY (SECOND DEPT).

The Second Department, reversing (modifying) Supreme Court, determined plaintiffs’ unjust enrichment cause of action should not have been dismissed and noted that a conversion cause of action does not lie where the property involved is real property. The facts of the case are too complex to fairly summarize here. In a nutshell the plaintiffs, to avoid paying a broker’s fee, arranged to have defendants’ deceased father purchase real property on their behalf. Defendants (the Passalacquas) took out a mortgage on the property (Wells Fargo mortgage), in violation of the agreement defendants’ father had with plaintiffs, which plaintiffs paid off when they sold the property. Plaintiffs sought to recover the amount of the mortgage from the Passalacquas under unjust enrichment and conversion theories:

Here, the amended complaint sufficiently alleges that the Passalacquas were unjustly enriched, at the plaintiffs’ expense, by the plaintiffs’ payment of the Passalacquas’ debt to Wells Fargo, and that it would be against equity and good conscience to permit the Passalacquas to retain what is sought to be recovered … . To the extent that the Passalacquas contend that they used proceeds of the Wells Fargo mortgage to benefit the premises, that contention involves factual issues not properly resolved on a motion to dismiss the complaint pursuant to CPLR 3211(a)(7) … . Contrary to the determination of the Supreme Court, the plaintiffs do not have an adequate remedy at law by suing to enforce the consolidated note … . Further, even if the plaintiffs are entitled to assignment of the consolidated note from Wells Fargo, obtaining such an assignment would require an action in equity … . The unjust enrichment cause of action is also not barred by the existence of the plaintiffs’ contract of sale with the Passalacquas’ late father … .

Contrary to the Passalacquas’ contention, advanced as an alternative ground for affirmance … , the unjust enrichment cause of action was timely asserted. The parties agree that the unjust enrichment cause of action is subject to a six-year statute of limitations (see CPLR 213[1]). Such a cause of action accrues “upon the occurrence of the alleged wrongful act giving rise to the duty of restitution” … . Here, the amended complaint alleges that the plaintiffs’ payment to Wells Fargo was necessitated by the Passalacquas’ default in making payments on the consolidated note, which resulted in Wells Fargo’s acceleration of the debt and the threat of a foreclosure action. Accordingly, this cause of action accrued, at the earliest, in late 2010, when the Passalacquas stopped making payments on the Wells Fargo consolidated mortgage. Mannino v Passalacqua, 2019 NY Slip Op 03961, Second Dept 5-22-19

 

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COMPLAINT ALLEGED VALID CAUSES OF ACTION FOR AIDING AND ABETTING FRAUD AND AIDING AND ABETTING CONVERSION AGAINST A BANK WHICH PROVIDED A LETTER TO PLAINTIFF STATING DEFENDANT MAINTAINED ENOUGH IN HIS BANK ACCOUNTS TO COVER A POST-DATED CHECK FOR OVER $400,000 (FIRST DEPT).

The First Department, reversing Supreme Court, over a dissent, determined that plaintiff auction house stated causes of action for aiding and abetting fraud and aiding and abetting conversion against defendant bank HSBC. Defendant Stettner bid over $425,000 for antique jewelry and sought to pay with a post-dated check. At plaintiff’s request HSBC provided a letter attesting to Stettner’s good standing at the bank and stating that Stettner maintained a balance of between $1 and $20 million. Stettner’s check bounced. The dissent argued that the complaint did not allege the bank’s knowledge of the fraud and conversion:

“A plaintiff alleging an aiding-and-abetting fraud claim must allege the existence of the underlying fraud, actual knowledge, and substantial assistance” … . In turn, the elements of an underlying fraud are “a misrepresentation or a material omission of fact which was false and known to be false by defendant, made for the purpose of inducing the other party to rely upon it, justifiable reliance of the other party on the misrepresentation or material omission, and injury” … . …

Aiding and abetting conversion requires the existence of a conversion by the primary tortfeasor, actual knowledge, and substantial assistance… . “A conversion takes place when someone, intentionally and without authority, assumes or exercises control over personal property belonging to someone else, interfering with that person’s right of possession” … . William Doyle Galleries, Inc. v Stettner, 2018 NY Slip Op 08743, First Dept 12-20-18

 

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PLAINTIFF ENTITLED TO PREJUDGMENT INTEREST AT THE STATUTORY RATE IN THIS CONVERSION ACTION (SECOND DEPT).

The Second Department, reversing Supreme Court, determined plaintiff was entitled to interest at the statutory rate based on the value of the property at the time and place of conversion:

On a prior appeal in this action, this Court awarded summary judgment to the plaintiff, inter alia, on the cause of action to recover damages for conversion in the sum of $69,500, representing the amount of estate funds that were wrongfully converted by the defendant Rick Barrett. The Supreme Court subsequently entered an amended judgment that awarded the plaintiff the sum of $69,500 but failed to award prejudgment interest at the statutory rate of 9% per annum on that sum. The plaintiff appeals from so much of the amended judgment as failed to award prejudgment interest at the statutory rate on the $69,500 damages award.

“The usual measure of damages for conversion is the value of the property at the time and place of conversion, plus interest” … . Indeed, CPLR 5001(a) provides for the award of prejudgment interest upon sums awarded for the deprivation of or interference with another’s property, and relevant case law clearly establishes that such interest is properly awarded as part of the recovery on a cause of action sounding in conversion … . Moreover, interest is to be awarded at the statutory rate of 9% per annum … . Scotti v Barrett, 2018 NY Slip Op 07477, Second Dept 11-7-18

CONVERSION (PLAINTIFF ENTITLED TO PREJUDGMENT INTEREST AT THE STATUTORY RATE IN THIS CONVERSION ACTION (SECOND DEPT))/INTEREST (CONVERSION, PLAINTIFF ENTITLED TO PREJUDGMENT INTEREST AT THE STATUTORY RATE IN THIS CONVERSION ACTION (SECOND DEPT))/CPLR 5001 (PLAINTIFF ENTITLED TO PREJUDGMENT INTEREST AT THE STATUTORY RATE IN THIS CONVERSION ACTION (SECOND DEPT))

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COMPLAINT STATED CAUSES OF ACTION FOR CONVERSION AND TORTIOUS INTERFERENCE WITH A CONTRACT (SECOND DEPT).

The Second Department, modifying Supreme Court, determined the complaint (supplemented with affidavits) stated causes of action for conversion and tortious interference with contract which should not have been dismissed. Plaintiff, a dog trainer, purchased a dog and allegedly entered a contract with the seller of the dog (America' Best) to train the dog. Plaintiff and defendant were in a relationship at the time they agreed to purchase the dog. The complaint alleged that defendant took possession of the dog:

Two key elements of conversion are the plaintiff's (1) legal ownership or an immediate superior right of possession to a specific identifiable thing, and (2) the defendant's unauthorized dominion over the thing in question or interference with it, to the exclusion of the plaintiff's right… . Here, accepting the facts alleged in the complaint as true, and according the plaintiff the benefit of every possible favorable inference, the complaint sufficiently alleges that the plaintiff is the owner of the dog, that the defendant has unauthorized possession of the dog, and that the defendant has refused to return the dog.

… The elements of tortious interference with a contract are: “(1) the existence of a contract between plaintiff and a third party; (2) defendant's knowledge of the contract; (3) defendant's intentional inducement of the third party to breach or otherwise render performance impossible; and (4) damages to plaintiff” … . The complaint, as supplemented by the plaintiff's affidavits, sufficiently alleges the elements of a cause of action to recover damages for tortious interference with a contract, including that the defendant's intentional interference with the America's Best contract rendered performance impossible … . Nero v Fiore, 2018 NY Slip Op 06755, Second Dept 10-10-18

CONVERSION (COMPLAINT STATED CAUSES OF ACTION FOR CONVERSION AND TORTIOUS INTERFERENCE WITH A CONTRACT (SECOND DEPT))/TORTIOUS INTERFERENCE WITH CONTRACT (COMPLAINT STATED CAUSES OF ACTION FOR CONVERSION AND TORTIOUS INTERFERENCE WITH A CONTRACT (SECOND DEPT))/CIVIL PROCEDURE  (COMPLAINT STATED CAUSES OF ACTION FOR CONVERSION AND TORTIOUS INTERFERENCE WITH A CONTRACT (SECOND DEPT))/CPLR 3211 (COMPLAINT STATED CAUSES OF ACTION FOR CONVERSION AND TORTIOUS INTERFERENCE WITH A CONTRACT (SECOND DEPT))

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CLASS ACTION COMPLAINT ON BEHALF OF TENANTS ALLEGING LANDLORDS’ MISHANDLING OF SECURITY DEPOSITS SHOULD NOT HAVE BEEN DISMISSED (FOURTH DEPT).

The Fourth Department, reversing (modifying) Supreme Court, determined the complaint adequately pled a class action concerning defendants-landlords’ alleged mishandling of security deposits, including allegations of conversion and co-mingling:

… [P]laintiffs adequately alleged all of the prerequisites to class certification… . Plaintiffs alleged that the class of tenants consists of more than 200 members, thereby satisfying the numerosity requirement … . Plaintiffs also alleged that the common issue is whether, by commingling the security deposits of their tenants, defendants acted unlawfully, and that the individual issues are the amount of the security deposit and defendants’ entitlement to deductions therefrom… . Thus, we conclude that plaintiffs sufficiently alleged that the common issues predominate (see CPLR 901 [a] [2]). Regarding the typicality requirement, plaintiffs alleged that their claims arise from “the same course of conduct and are based on the same theories as the other class members” … . Plaintiffs also alleged that they can fairly and adequately protect the interests of the class inasmuch as they do not have conflicting interests with other class members.. . Plaintiffs satisfied the superiority requirement by alleging that the damages likely suffered by each of the tenants range between $475 and $4,500, and “the cost of prosecuting individual actions would deprive many of the putative class members of their day in court” … . …

… [T]the amended complaint adequately alleges a cause of action for conversion in violation of General Obligations Law § 7-103 … . …

… [T]he court erred in granting the motion with respect to the second cause of action, alleging that defendants violated Property Conservation Code of the City of Syracuse § 27-125, inasmuch as that section gives rise to a private cause of action … . …

…[T]the lease includes a clause requiring tenants to pay attorneys’ fees if they breach the lease and, pursuant to Real Property Law § 234, the tenant has the “same benefit [to attorneys’ fees as] the lease imposes in favor of the landlord” … . Rubman v Osuchowski, 2018 NY Slip Op 05416, Fourth Dept 7-25-18

CIVIL PROCEDURE (CLASS ACTION COMPLAINT ON BEHALF OF TENANTS ALLEGING LANDLORDS’ MISHANDLING OF SECURITY DEPOSITS SHOULD NOT HAVE BEEN DISMISSED (FOURTH DEPT))/LANDLORD-TENANT  (CLASS ACTION COMPLAINT ON BEHALF OF TENANTS ALLEGING LANDLORDS’ MISHANDLING OF SECURITY DEPOSITS SHOULD NOT HAVE BEEN DISMISSED (FOURTH DEPT))/MUNICIPAL LAW (CLASS ACTION COMPLAINT ON BEHALF OF TENANTS ALLEGING LANDLORDS’ MISHANDLING OF SECURITY DEPOSITS SHOULD NOT HAVE BEEN DISMISSED (FOURTH DEPT))/REAL PROPERTY LAW  (CLASS ACTION COMPLAINT ON BEHALF OF TENANTS ALLEGING LANDLORDS’ MISHANDLING OF SECURITY DEPOSITS SHOULD NOT HAVE BEEN DISMISSED (FOURTH DEPT))/CONVERSION (CLASS ACTION COMPLAINT ON BEHALF OF TENANTS ALLEGING LANDLORDS’ MISHANDLING OF SECURITY DEPOSITS SHOULD NOT HAVE BEEN DISMISSED (FOURTH DEPT))

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DEFENDANT’S ALLEGED FAILURE TO REPAY MONEY PAID BY PLAINTIFFS PURSUANT TO A CONTRACT WHICH HAD BEEN TERMINATED STATED A CAUSE OF ACTION FOR CONVERSION, FRAUD IN THE INDUCEMENT CAUSE OF ACTION PROPERLY DISMISSED BECAUSE IT WAS BASED UPON NON-ACTIONABLE FUTURE EVENTS AND NON-ACTIONABLE OPINION ON THE PART OF THE DEFENDANT (FIRST DEPT).

The First Department determined plaintiffs’ cause of action for conversion should not have been dismissed and the cause action for fraud in the inducement was based upon non-actionable future conduct or events and non-actionable opinion. Plaintiffs hired defendant for extensive renovation work. Plaintiffs terminated the contract based upon defendant’s allegedly fraudulent requests for payment which were not used for the claimed purposes. When plaintiffs terminated the contract they demanded the return of $400,000 of the $840,000 they had paid. Defendant returned only about $85,000 and did not provide an accounting:

When plaintiffs terminated the contract mid-construction and demanded a return of $400,000 of the $840,000 they had paid, defendant allegedly returned only $84,622.65, without providing an accounting, and allegedly diverted the balance of such monies to his personal use. These allegations sufficiently state a cause of action for conversion … .

Plaintiffs’ cause of action alleging fraud in the inducement was properly dismissed, as it is founded upon non-actionable promises of future conduct or events, rather than present fact … and non-actionable opinion of defendant as to his entity’s resources and capability of undertaking the luxury renovation work sought by plaintiffs … . Yablon v Stern, 2018 NY Slip Op 03650, First Dept 5-22-18

​CONTRACT LAW (DEFENDANT’S ALLEGED FAILURE TO REPAY MONEY PAID BY PLAINTIFFS PURSUANT TO A CONTRACT WHICH HAD BEEN TERMINATED STATED A CAUSE OF ACTION FOR CONVERSION, FRAUD IN THE INDUCEMENT CAUSE OF ACTION PROPERLY DISMISSED BECAUSE IT WAS BASED UPON NON-ACTIONABLE FUTURE EVENTS AND NON-ACTIONABLE OPINION ON THE PART OF THE DEFENDANT (FIRST DEPT))/CONVERSION (DEFENDANT’S ALLEGED FAILURE TO REPAY MONEY PAID BY PLAINTIFFS PURSUANT TO A CONTRACT WHICH HAD BEEN TERMINATED STATED A CAUSE OF ACTION FOR CONVERSION, FRAUD IN THE INDUCEMENT CAUSE OF ACTION PROPERLY DISMISSED BECAUSE IT WAS BASED UPON NON-ACTIONABLE FUTURE EVENTS AND NON-ACTIONABLE OPINION ON THE PART OF THE DEFENDANT (FIRST DEPT))/FRAUD IN THE INDUCEMENT (DEFENDANT’S ALLEGED FAILURE TO REPAY MONEY PAID BY PLAINTIFFS PURSUANT TO A CONTRACT WHICH HAD BEEN TERMINATED STATED A CAUSE OF ACTION FOR CONVERSION, FRAUD IN THE INDUCEMENT CAUSE OF ACTION PROPERLY DISMISSED BECAUSE IT WAS BASED UPON NON-ACTIONABLE FUTURE EVENTS AND NON-ACTIONABLE OPINION ON THE PART OF THE DEFENDANT (FIRST DEPT))

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CONVERSION THEORY DOES NOT APPLY TO REAL ESTATE OR INTANGIBLE PROPERTY.

The Second Department determined the causes of action for conversion should have been dismissed. Conversion applies only to personal property, not, as here, to real property and a business interest:

 

“A conversion takes place when someone, intentionally and without authority, assumes or exercises control over personal property belonging to someone else, interfering with that person’s right of possession” … . The subject matter of a conversion cause of action ” must constitute identifiable tangible personal property’; real property and interests in business opportunities will not suffice”… . Here, the first cause of action seeks to recover damages for conversion based upon [defendant’s] alleged interference with the right of the plaintiff C & B Enterprises, USA, LLC … , “to possession of its Property,” and the second cause of action seeks to recover damages for conversion based upon [defendant’s] alleged interference “with [the plaintiff[‘s]] right to possession of his ownership of C & B.” Inasmuch as the subjects of these causes of action are real property and [plaintiff’s] interest in a business, respectively, a cause of action in conversion does not lie … . C & B Enters. USA, LLC v Koegel, 2016 NY Slip Op 01281, 2nd Dept 2-24-16

 

CONVERSION (ACTION WILL NOT LIE RE INTANGIBLE PROPERTY OR REAL ESTATE)

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CONVERSION, REPLEVIN AND UNJUST ENRICHMENT CAUSES OF ACTION TIME-BARRED, CRITERIA EXPLAINED.

Plaintiff executor sued defendant, Delaine, under conversion, replevin and unjust enrichment theories for artwork which decedent, Arthur, was allegedly entitled to but which decedent never picked up from the warehouse where it was stored. The First Department determined the conversion, replevin and unjust enrichment causes of action were time-barred:

 

Under CPLR 214(3), the statutory period of limitations for conversion and replevin claims is three years from the date of accrual. The date of accrual depends on whether the current possessor is a good faith purchaser or bad faith possessor. An action against a good faith purchaser accrues once the true owner makes a demand and is refused … . This is “because a good-faith purchaser of stolen property commits no wrong, as a matter of substantive law, until he has first been advised of the plaintiff’s claim to possession and given an opportunity to return the chattel” … . By contrast, an action against a bad faith possessor begins to run immediately from the time of wrongful possession, and does not require a demand and refusal … . Thus, “[w]here replevin is sought against the party who converted the property, the action accrues on the date of conversion” … .

Here, plaintiff alleges that Delaine is a wrongful possessor of the Artwork by virtue of her retention thereof in defiance of this Court’s 1993 order. Accordingly, since Delaine was holding the Artwork in bad faith, the demand and return rule does not apply and the three-year limitations period commenced as of the date of the wrongful taking, which occurred when Delaine retained the Artwork after the issuance of our March 18, 1993 order. Thus, plaintiff’s conversion and replevin claims, filed in 2012, are untimely … . * * *

Unjust enrichment occurs when a defendant enjoys a benefit bestowed by the plaintiff without adequately compensating the plaintiff … . The statute of limitations for unjust enrichment generally accrues upon “the occurrence of the alleged wrongful act giving rise to restitution” … . Here, any alleged “enrichment” took place when Delaine retained possession of the Artworks following our 1993 decision. Accordingly, plaintiff’s unjust enrichment claim is also time-barred.  Swain v Brown, 2016 NY Slip Op 00574, 1st Dept 1-28-16

 

CRIMINAL LAW (COURT PROPERLY REFUSED TO DISQUALIFY A JUROR WHO STATED SHE COULD NOT DELIBERATE FURTHER BECAUSE SHE WAS EMOTIONALLY OVERWHELMED)/JURIES (COURT PROPERLY REFUSED TO DISQUALIFY A JUROR WHO STATED SHE COULD NOT DELIBERATE FURTHER BECAUSE SHE WAS EMOTIONALLY OVERWHELMED)/DISQUALIFICATION OF JUROR (COURT PROPERLY REFUSED TO DISQUALIFY A JUROR WHO STATED SHE COULD NOT DELIBERATE FURTHER BECAUSE SHE WAS EMOTIONALLY OVERWHELMED)

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LONG-ARM JURISDICTION DID NOT REACH AN AUDITING FIRM IN THE UK AND CONVERSION CAUSES OF ACTION FAILED BECAUSE THE CONVERTED FUNDS WERE NOT IDENTIFIABLE AFTER THEY HAD BEEN INVESTED.

In affirming Supreme Court’s dismissal of several complaints stemming from the defendants’ alleged involvement with investments managed by Bernard Madoff, the First Department determined New York jurisdiction did not extend to a firm in the UK (KPMG UK) which allegedly negligently audited Madoff Securities, and further determined conversion causes of action failed because the funds allegedly converted were not sufficiently identifiable after they had been invested:

 

The motion court correctly found that New York lacks personal jurisdiction over KPMG UK pursuant to CPLR 302(a)(3)(ii). While plaintiffs allege that KPMG UK committed a tort outside the state (negligently auditing nonparty Madoff Securities International, Ltd. [MSIL] in the United Kingdom), and their causes of action arise out of that tort, KPMG UK’s act did not cause injury to a person or property within the state. “[T]he situs of commercial injury is where the original critical events associated with the action or dispute took place, not where any financial loss or damages occurred”… .  * * *

Where, as here, a plaintiff alleges that a defendant converted money, the money “must be specifically identifiable and be subject to an obligation to be returned or to be otherwise treated in a particular manner” … . [Plaintiff] sent her money to Beacon Associates, which sent it to Madoff, who deposited it at JPMorgan. Even if, arguendo, [plaintiff’s] money was specifically identifiable when she sent it to Beacon Associates, there is no indication that Beacon Associates segregated it when it sent investors’ money to Madoff. By the time Madoff deposited investors’ money at JPMorgan, [plaintiff’s] investments would not have been specifically identifiable. McBride v KPMG Intl., 2016 NY Slip Op 00306, 1st Dept 1-19-16

 

CIVIL PROCEDURE (NEW YORK JURISDICTION DID NOT REACH UK FIRM ALLEGED TO HAVE NEGLIGENTLY AUDITED MADOFF SECURITIES)/CONVERSION (ALLEGEDLY CONVERTED FUNDS MUST BE IDENTIFIABLE, FUNDS NO LONGER IDENTIFIABLE AFTER INVESTMENT)

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