Black Car & Livery Ins., Inc. v H & W Brokerage, Inc.
Annotate this CaseDecided on June 27, 2006
Supreme Court, Nassau County
Black Car and Livery Insurance, Inc., Judith G. Biedermann and Yonesh Biedermann, Plaintiffs,
against
H & W Brokerage, Inc., LARRY WALLACH, WILLIAM WALLACH, CHARLIE CRAFA, Defendants.
8615-04
Counsel for Plaintiff
Altman & Altman, Esqs.
1009 East 163rd Street
Bronx, New York 10459
Counsel for Defendant
(for Charles Crafa)
John A. Servider, Esq.
65-12 69th Place
Middle Village, New York 11379
Leonard B. Austin, J.
Plaintiff moves for leave to serve an amended complaint.
BACKGROUND
A. Factual
Black Car and Livery Insurance Inc. ("Black Car") is an insurance broker in the business of obtaining automobile insurance for medallion taxis, livery service cars, "black cars" and limousines. Judith Biedermann and Yonesh Biedermann (collectively
"Biedermann") are the principals of Black Car.
H & W Brokerage, Inc. ("H & W") was also an insurance broker in the same, or similar, business as Black Car.
By agreement dated February 14, 2000, Black Car and Biedermann purchased the right to earn commissions on approximately 1,200 insurance policies on which
H & W was the broker. All of these policies were renewable in February 2000.
Black Car paid $750,000 to purchase the renewal rights to these policies, the sum of $100,000 of which was paid on the execution of the letter of intent dated February 9, 2000; $150,000 of which was paid at closing and $500,000 of which was paid by promissory note made by Biedermann and guaranteed by Black Car. The promissory note was due and payable on April 30, 2000. As security on the note, Biedermann executed a confession of judgment which permitted H & W to enter a judgment against him in the event he defaulted in payment of the note.
Plaintiffs' allege that Defendant Charlie Crafa ("Crafa") was H & W's managing agent. As managing agent of H & W, Crafa received the premium payments from H & W's customers and paid the premiums to the insurance companies through which H & W had placed the insurance.
After Black Car acquired H & W's portfolio, Black Car retained Crafa as its general manager to oversee the renewal of the former H & W policies. As Black Car's managing agent, Crafa collected the premiums due on the policies and paid the premiums to the insurance companies that issues the policies.
Pursuant to the terms of the Purchase Agreement, Black Car was to receive the commissions earned on the February 2000 renewals of the former H & W policies. Black Car did not assume, and was not responsible for, payment of any premiums due on insurance policies obtained by H & W for the prior year. All payments received by
Black Car were to be applied to premiums on the renewal of the policies.
Black Car alleges that Crafa received payment on the February 2000 renewals of the policies of the H & W customers. He then issued payment to the insurance companies and directed the insurance companies to apply the payments to amounts owed by H & W for the previous year's premiums.
As a result of the premiums being used to pay prior year's premiums, Black Car did not receive the commissions on the renewal of the policies. This resulted in Black Car and Biedermann not having sufficient funds to pay the note when it came due. When Biedermann defaulted on the note, H & W entered the confession of him pursuant to the agreement.
B. Procedural
By order dated November 9, 2004, this Court dismissed the action against William Wallach. The action was voluntarily discontinued against Defendant Larry Wallach. H & W has not appeared. [*2]
By motion returnable on November 14, 2005, Crafa moved to dismiss the complaint. Plaintiffs cross-moved for leave to serve an amended complaint.
By order dated January 23, 2006, this Court granted Crafa's motion to dismiss the complaint and denied Plaintiffs' motion for leave to serve an amended complaint. However, the Court granted Defendants leave to renew their motion upon proper papers provided the motion was made within thirty (30) days of the Court's decision. This was done.
Plaintiffs cross-moves for leave to renew their application for leave to serve an amended complaint.
C. Renewal
The proposed amended complaint set forth three causes of action against Crafa; to wit: fraud, breach of fiduciary duty and breach of contract.
These causes of action are all premised upon Crafa's collection of premiums for the renewal of the H & W policies and the application of those funds to pay premiums and other financial obligations of H & W for the prior year.
Crafa prepared documents that reflected the amounts received, the amounts paid and the allocation of the amounts received between renewal of policies and amounts due to H & W. When these documents and schedules were being reviewed by Black Car's accountants, the accountants discovered certain discrepancies in the allocations being made by Crafa. In essence, Black Car alleges that, when it reviewed Crafa's work papers, schedules and the back-up, it discovered that Crafa was using funds received to pay renewal premiums to pay H & W expenses.
Crafa resigned as Black Car's general manager on May 25, 2000. Black Car alleges that, at a meeting held on July 12, 2000 attended by Crafa, Biedermann and Black Car's accountants, Crafa admitted that the allocation for checks sent to Empire Mutual Insurance Company was improper.
DISCUSSION
A. Motion to Amend - Standard
A party should be granted leave to serve an amended pleading in the absence of prejudice or surprise resulting from delay. Fahey v. County of Ontario, 44 NY2d 934 (1978); and Northbay Construction Co., Inc. v. Bauco Construction Corp., 275 AD2d 310 (2nd Dept. 2000); and CPLR 3025(b). The party opposing the amendment must demonstrate that there will be actual prejudice in permitting the service of an amended pleading. Edenwald Contracting Co., Inc. v. City of New York, 60 NY2d 957 (1983); Holchendler v. We Transport, Inc., 292 AD2d 568 (2nd Dept., 2002); and O'Neal v. Cohen, 186 AD2d 639 (2nd Dept., 1992).
To defeat a motion for leave to serve an amended pleading, the party opposing the amendment must demonstrate,"... some special right lost in the interim, some change of position or some significant trouble or expense that could have been avoided had the original pleading contained what the amended one now wants to add." Siegel, New York Practice 4th § 237. See also, Fulford v. Baker Perkins, Inc., 100 AD2d 861 (2nd Dept. 1984); and Wyso v. City of New York, 91 AD2d 661 (2nd Dept. 1982).
The Court will not consider the merits of the proposed amendment unless the proposed amendment is insufficient as a matter of law or totally devoid of merit. Sunrise Plaza Assocs., L.P. v. International Summit Equities Corp., 288 AD2d 300 (2nd Dept. 2001); and Norman v. Ferrara, 107 AD2d 739 (2nd Dept. 1985).
A party may not amend a complaint to assert a claim that is barred by the statue of [*3]limitations. See, Goldberg v. Camp Mikan-Recro, 42 NY2d 1029 (1977); and Truty v. Federal Bakers Supply Corp., 217 AD2d 951 (4th Dept. 1995).
B. Fraud
The acts which give rise to the claim for fraud took place between February 14, 2000 and May 25, 2000. During that time, Crafa received the payments, issued the checks in payment of the premiums and advised the insurance companies regarding the manner in which these payments were to be allocated. During that period, Crafa prepared the misleading and inaccurate documents which allegedly covered-up his misallocation of funds. Biedermann alleges in the proposed amended complaint that Crafa admitted the misuse of these funds in a meeting held on July 12 2000.
Defendants assert the amendment should be denied because the claims are barred by the statute of limitations. The statute of limitations on an action for fraud is six (6) years from the date the cause of action accrued or two (2) years from the time when the fraud could have reasonably been discovered. CPLR 213(8).
The Court cannot determine from a reading of the papers precisely when Crafa issued the payments to Empire Mutual and directed Empire Mutual to improperly apply the payments to obligations of H & W. Thus, at this juncture, the Court cannot determine if the claim is barred by the statute of limitations.
Furthermore, the cause of action for fraud would be deemed to have been interposed when the original and summons and complaint were served. A claim in an amended pleading is deemed to have been interposed at the time the original pleading was served unless the original pleading does not give notice of the transaction or transactions giving rise to the cause of action alleged in the amended pleading. CPLR 203(f).
The fraud claim is based upon the allegations that Crafa used money paid to Black Car to pay premiums on the renewal of the policies to pay expenses of H & W and then falsified records to cover-up his misuse of Black Car funds. While the original complaint is not a model pleading, it contains many, if not most, of the allegations relating to Crafa's misuse of Black Car funds to pay H & W expenses and his preparation of documents covering this up. Accordingly, the fraud claim is deemed to have been interposed when the action was commenced in March 2004. See, Jones v. Gelles, 125 AD2d 794 (3rd Dept. 1986). Such a claim is not barred by the statute of limitations.
Crafa has failed to establish any prejudice resulting from the amendment. Thus, Plaintiff should be permitted to serve an amended complaint alleging the cause of action for fraud.
C. Breach of Fiduciary Duty
If the allegations regarding Crafa are true, then Crafa unquestionably breached his fiduciary duty of good faith and loyalty to Black Car. Crafa was obligated to work in Black Car's best interest. Western Electric Co. v. Brenner, 41 NY2d 291 (1977); Wallack Freight Lines, Inc. v. Next Day Express, Inc., 273 AD2d 462 (2nd Dept. 2000); and Maritime Fish Products Inc. v. World-Wide Fish Products, Inc., 100 AD2d 81 (1st Dept. 1981). If Crafa used his employer's funds to pay expenses unrelated to his employer's business, he violated his fiduciary duty. Id.
The statute of limitations on a claim for breach of fiduciary duty in which money damages are demanded is three (3) years. Dignelli v. Berman, 293 AD2d 565 (2nd Dept., 2002); Kaszirer v. Kaszirer, 286 AD2d 569 (1st Dept. 2001); and Yatter v. William Morris Agency, Inc., 256 AD2d 260. [*4]
Even if this cause of action related back to the commencement of this action, the proposed cause of action for breach of fiduciary duty would still be time barred. Crafa's alleged misuse and misapplication of Black Car money occurred in 2000. This action was not commenced until March 2004, which is more than three (3) years after the claim for breach of fiduciary duty accrued.
Therefore, the motion to amend the complaint to allege a cause of action for breach of fiduciary duty must be denied.
D. Breach of Contract
In order to assert a cause of action for breach of contract, Plaintiff must specifically alleges the provisions of the contract upon which the claim is based. Peters v. Accurate Building Inspectors Division of Ubell Ent., Inc., - AD3d -, 2006 WL 1492179 (2nd Dept. 2006); and Sud v. Sud, 211 AD2d 423 (1st Dept. 1995). Defendant's proposed amended complaint fails to make such allegations.
The contract upon which Black Car is apparently basing this claim is the contract between Black Car and H & W. That agreement provides for the allocation of funds between past due and renewal premiums. Although Crafa signed that contract, he did so on behalf of H & W. For the reasons stated in this Court's January 23, 2006 order, Crafa cannot be held personally liable on that agreement, which he signed solely in his capacity as an representative of H & W.
An employee "...is prohibited from action in any manner inconsistent with his agency or trust and is at all times bound to exercise the utmost good faith and loyalty in the performance of his duties. Lamdin v. Broadway Surface Advertising Corp., 272 NY 133, 138 (1936). See also, Louis Capital Markets, L.P. v. Refco Group Ltd., 9 Misc 3d 283 (Sup. Ct. NY Co. 2005).
Crafa did not have a written employment contract with Black Car. The facts that give rise to this action relate to Crafa's acting in a manner inconsistent with the best interests of his employer and not a breach of any specific contractual obligation. As indicated above, the cause of action for breach of fiduciary duty is time barred. A cause of action for breach of contract, which has a six (6) year statute of limitations (CPLR 213[2]), is not. Plaintiffs are attempting to avoid or evade the statute of limitations by casting a cause of action for breach of fiduciary duty as a cause of action for breach of contract.
It is improper to attempt to cast a breach of fiduciary duty claim as a breach of contract action. See, Barrett v. Totoyan, 28 AD3d 331 (1st Dept. 2006). Thus, leave to amend the complaint to assert this cause of action must be denied.
Accordingly, it is,
ORDERED, that Plaintiff's motion for leave to serve an amended complaint is granted to the extent of permitting Plaintiff to serve an amended complaint alleging the fraud cause of action as set forth in the proposed amended complaint and is otherwise denied; and it is further,
ORDERED, that the amended complaint shall be deemed served, upon service of a copy of this order with notice of entry; and it is further,
ORDERED, that counsel for the parties are directed to appear for a status conference on August 3, 2006 at 9:30 a.m.
This constitutes the decision and order of this Court.
Dated: Mineola, NY _____________________________
June 27, 2006 Hon. LEONARD B. AUSTIN, J.S.C.
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