770 Owners Corp. v Spitzer

[*1] 770 Owners Corp. v Spitzer 2009 NY Slip Op 51968(U) [25 Misc 3d 1204(A)] Decided on September 21, 2009 Supreme Court, Kings County Demarest, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. As corrected in part through October 16, 2009; it will not be published in the printed Official Reports.

Decided on September 21, 2009
Supreme Court, Kings County

770 Owners Corp., Plaintiff,

against

Joseph Spitzer and Capital Management LLC, d/b/a Allstate Realty Associates, Defendants.



26835/08



Attorney for Plaintiff

Steven A. Morelli, Esq.

One Old Country Road, Suite 347

Carle Place, New York 11514

Attorney for Defendants

Raymond L. Vandenberg, Esq.

Vandenberg & Feliu, LLP

110 East 42nd Street, Suite 1502

New York, NY 10017

Carolyn E. Demarest, J.

Defendants Joseph Spitzer (Spitzer) and Capital Management LLC, d/b/a Allstate Realty Associates (Capital), move for an order, pursuant to CPLR 3211 (a) (1), (5) and (7), dismissing the plaintiff 770 Owners Corp.'s complaint and each cause of action alleged therein on the grounds that a defense is founded upon documentary evidence, that certain allegations are barred by the statute of limitations, and that the plaintiff fails to state a cause of action.

BACKGROUND770 Owners Corp. (plaintiff or the Co-op) is a cooperative corporation and the owner of the cooperative apartment building located at 770 Ocean Parkway in Brooklyn, New York [*2](the building) (¶ 2). Defendant Spitzer was allegedly the Co-op's president from 1989 to November 2006 (¶ 3) and the sole general partner of 770 Associates L.P., the Co-op sponsor and Co-op's largest shareholder holding 11,306 unsold shares.[FN1] On May 17, 1989 Spitzer allegedly hired defendant Capital Management d/b/a Allstate Realty Associates as the managing agent of the Co-op, an entity of which he was also the principal (Complaint ¶¶ 7-10).

Plaintiff's complaint enumerates several causes of action sounding in breach of fiduciary duty, corporate waste, conversion, unjust enrichment, imposition of a constructive trust, fraud in the inducement, fraudulent misrepresentation, fraudulent concealment, and accounting. All of these claims allegedly arise out of Spitzer and/or Capital's mishandling of a series of transactions during their tenure as president and managing agent of the Co-op. Plaintiff recites each transaction in the Complaint, claiming each as "common to all causes of action" but never matches particular transactions to particular causes of action.

The first transaction of which plaintiff complains is a 1996 lease with Sprint for space on the roof of the Co-op building (the "Sprint contract"). The Co-op was to receive revenues from Sprint's monthly rent. Plaintiff complains that Spitzer "fraudulently omitted these profits on Plaintiff's financial records from 1996 to 2001, and $60,000 remains unaccounted for." (Complaint ¶ 18).

The second transaction relied on by plaintiff is a 2002 loan Spitzer allegedly took out on behalf of the Co-op in the amount of $750,000 (the "2002 loan"). Plaintiff claims that, approximately one year later, Spitzer fraudulently misrepresented to the Board that $350,000 of that loan was repaid. However, plaintiff claims that defendants failed to account for approximately $250,000 of the loan.

Plaintiff also alleges that, in May 2006, Spitzer refinanced the Co-op's loans in the amount of $2,600,000 with National [Consumer] Cooperative Bank (NCCB) (the "NCCB loan" or "NCCB financing"). According to plaintiff, the Co-op by-laws required Spitzer to submit a loan term sheet to the board for approval. Although Spitzer submitted a term sheet, plaintiff claims that the terms presented to the Board were significantly different than the actual terms of the loan. In particular, plaintiff claims that the Board was not advised that the NCCB financing would entail significant prepayment penalties and the mandatory purchase of NCCB stock, nor was the Board advised that the financing proceeds would be used to pay outstanding real estate taxes and water charges (Complaint ¶¶ 23-29). Plaintiff further alleges that, had the Board known about those expenses, it would have refused to [*3]refinance with NCCB; that defendants [FN2] misrepresented and/or omitted material facts, unintentionally creating a false impression, for the purpose of inducing the board's approval of the NCCB financing and/or with intent to defraud it; and that plaintiff justifiably relied on such statements since defendants had a duty to disclose accurate financial information to plaintiff's Board (Complaint ¶¶ 32-34).

In addition to these major financial transactions, plaintiff further alleges that Spitzer "fraudulently wrote numerous checks" to Capital "without any formal loan agreements executed by the parties" and without board approval (Complaint ¶¶ 52-53). Spitzer also allegedly lent Co-op funds to the building superintendent in 2005 and 2006 without board approval. Plaintiff also claims that Spitzer has failed to pay maintenance on the 17 cooperative apartments he owned in August, September and October 2007, causing the Co-op to nearly be forced into bankruptcy.

Besides the direct allegations against Spitzer, plaintiff also enumerates a number of other transactions in the complaint for which "defendants" are collectively held accountable without specifying whether Spitzer or Capital was responsible. The Court assumes that all allegations are made against both defendants, as Spitzer was the sole principal of Capital at the same time he served as president of the Co-op. Specifically, plaintiff claims that (i) defendants purchased an insurance policy for the Co-op covering other properties owned or managed by defendants, thereby depriving the Co-op of $17,000 in potential savings (Complaint ¶¶ 35-36); (ii) defendants failed to timely pay the Co-op's real estate taxes, causing the Co-op to pay a total of $91,388 in penalties and interest (Complaint ¶ 37); (iii) defendants failed to pay at least $50,000 to the Co-op vendors (Complaint ¶ 41); (iv) defendants failed to account to the Co-op for a total of $6,204 in parking garage rents for the years 2004 and 2005 (Complaint ¶¶ 45 and 47); and (vi) the Co-op was charged a total of in excess of $10,000 for having insufficient funds in the bank accounts maintained by Spitzer on the Co-op's behalf (Complaint ¶¶ 50-51).

In December 2006, new members of the Co-op's Board of Directors (the Board) were elected, and Helena Auslander (Auslander) became the Co-op's new president (Complaint ¶ 12). Auslander caused the Co-op to replace Allstate with another managing agent and plaintiff subsequently commenced this action (Complaint ¶ 13).

DISCUSSION

Defendants move to dismiss pursuant to CPLR 3211(a)(1),(5) and (7). CPLR 3211 (a) (1) provides, in pertinent part, that "[a] party may move for judgment dismissing one or more causes of action asserted against him on the ground that . . . a defense is founded upon documentary evidence. . ." "Under CPLR 3211 (a) (1), a dismissal is warranted only if the documentary evidence submitted conclusively establishes a defense to the asserted claims as a matter of law" (Leon v Martinez, 84 NY2d 83, 88 [1994]; Douglas v Dashevsky, 62 [*4]AD3d 937, 938 [2d Dept 2009]). Thus, in order for defendants to prevail on their motion, the documentary evidence relied upon must be authenticated and conclusively establish a complete defense to the plaintiff's causes of action (Weiss v TD Waterhouse, 45 AD3d 763, 764 [2d Dept 2007]; see Neuschotz v Newsday Inc., 12 Misc 3d 1199 [A], 2006 WL 2446142, *2, 2006 NY Slip Op 51627 [U] [Sup Ct, Kings County 2006]).

CPLR 3211 (a) (5) provides, that "[a] party may move for judgment dismissing one or more causes of action asserted against him on the ground that . . . the cause of action may not be maintained because of . . . [the] statute of limitations . . ."

On a motion to dismiss pursuant to CPLR 3211 (a) (7), for failure to state a cause of action, the complaint must be liberally construed in the light most favorable to the plaintiff and all allegations must be accepted as true (see Leon, 84 NY2d at 87; Aberbach v Biomedical Tissue Services, Ltd., 48 AD3d 716, 717 [2d Dept 2008]). "Initially, the sole criterion is whether the pleading states a cause of action, and if from its four corners factual allegations are discerned which taken together manifest any cause of action cognizable at law a motion for dismissal will fail" (Guggenheimer v Ginzburg, 43 NY2d 268, 275 [1977]). Thus, "[w]hether a plaintiff can ultimately establish its allegations is not part of the calculus in determining a motion to dismiss" (EBC I, Inc. v Goldman, Sachs & Co., 5 NY3d 11, 19 [2005]).

In support of their motions, defendants have only submitted documentary evidence and memoranda of law. There are no competent affidavits by anyone with actual knowledge of the facts. Similarly, plaintiff submits no competent affidavits and relies solely on its complaint and memorandum of law.

Breach of Fiduciary Duty

Plaintiff's first cause of action against defendants is for breach of fiduciary duty. Plaintiff argues that Spitzer owed a fiduciary duty to the corporation by virtue of the fact that he was president of the Co-op until November 2006,[FN3] principal of the Co-op's managing agent Capital, and principal of the Co-op sponsor which is also the shareholder of the unsold shares of the Co-op.

In order to establish a breach of fiduciary duty, a plaintiff must prove the existence of a fiduciary relationship, misconduct by the defendant, and damages that were directly caused by the defendant's misconduct" (Kurtzman v Bergstol, 40 AD3d 588, 590 [2d Dept [*5]2007]). Directors or officers of a corporation stand in a fiduciary relationship to the corporation, must act in good faith and "owe the corporation their undivided loyalty and are not permitted to derive personal profit at the expense of the corporation." (Schachter v Kulik, 96 AD2d 1038, 1039 [2d Dept 1983]; Yu Han Young v Chiu, 49 AD3d 535, 536 [2d Dept 2008]).

As an alleged officer of the corporation Spitzer owed it a fiduciary duty (Schachter, 96 AD2d 1039). Defendant argues that plaintiff fails to plead its breach of fiduciary duty claim with particularity as required by CPLR 3016(b). There is no merit to this contention as the complaint is more than adequate. In opposition to the motion, plaintiff has enumerated, in detail, several transactions alleged in the complaint in which Spitzer allegedly acted improperly, to the Co-op's detriment. Specifically, plaintiff alleges, inter alia, that Spitzer omitted profits from the Co-op's financial records in regards to the Sprint contract, withheld or improperly reported the terms of the NCCB loan, purchased an improper insurance policy for the Co-op and either neglected or fraudulently mishandled a number of other transactions which allegedly almost forced the Co-op into bankruptcy.

Moreover, as outlined in the by-laws, these types of actions were within the ambit of the President's authority. Thus, taking the allegations in the complaint as true, to the extent plaintiff alleges that Spitzer, as a president and officer of the corporation, engaged in misconduct by entering into these transactions and failing to disclose certain terms or profits to the board to its detriment, plaintiff pleads a cause of action for breach of fiduciary duty (Kurtzman v Bergstol, 40 AD3d at 590).

Plaintiffs also plead a breach of fiduciary duty against defendant Capital, the managing agent of the building, alleging that it too mishandled a number of transactions. The Co-op's bylaws are silent as to the duty of the managing agent, as well as the President's authority to appoint a managing agent. However, depending on the duties delegated to it by the board of directors, a managing agent may owe a fiduciary duty to its building corporation (see Caprer v Nusbaum, 36AD3d 176, 192 [2d Dept 2006]). At this time an issue of fact exists as to what responsibilities the board delegated to Capital as its managing agent.

However, plaintiff does allege in the complaint that Spitzer hired Capital as the Co-op's managing agent and that Spitzer is its principal. Moreover, it is alleged that "Defendants" (implying both Spitzer and Capital) failed to meet a number of their management responsibilities. In Caprer, the Court found that a motion to dismiss a breach of fiduciary duty claim against the managing agent of a condominium should have been denied where the managing agent was alleged to be the alter ego of the board members of the condominium (Caprer, 36AD3d at 193). Taking the allegations in the complaint as true, Capital has allegedly aided and abetted Spitzer in the breach of his fiduciary duties. It is also implied that Capital is the alter-ego of Spitzer in that he hired, and is the principal of, Capital. Therefore, applying Caprer, plaintiff states a cause of action for breach of fiduciary duty against Capital (Caprer 36AD3d at 193; see also Velazquez v Decaudin, 49 AD3d 712, 716 [2d Dept 2008]). The motion to dismiss the breach of fiduciary duty claim for failure to state [*6]a cause of action is denied.

Defendants also argue, pursuant to CPLR 3211(a)(1), that the fiduciary duty claims should be dismissed based on documentary evidence. However, the documentary evidence submitted by defendants is only relevant to the allegations regarding some of the transactions at issue. These documents merely raise issues of fact but do not serve to conclusively establish that defendants did not breach their fiduciary duties. Thus, the motion to dismiss pursuant to CPLR 3211(a)(1) is similarly denied as to the breach of fiduciary duty claims.

Accounting (Seventh Cause of Action)

Plaintiff's seventh cause of action seeks "an accounting from Defendants of any and all revenues and profits earned as a result of their unlawful acts that are due and owing to [p]laintiff, including all revenues and profits earned from 1989 to November 2006, when [d]efendant Spitzer was president and when [d]efendant [Capital] was the managing agent" (Complaint ¶ 73).

"The right to an accounting is premised upon the existence of a confidential or fiduciary relationship and a breach of the duty imposed by that relationship respecting property in which the party seeking the accounting has an interest" (AHA Sales, Inc. v Creative Bath Prods., Inc., 58 AD3d 6, 23 [2d Dept 2008] [internal quotation marks and citation omitted]). Defendants contend that plaintiff fails to state a cause of action for an accounting because they cannot state a claim for breach of fiduciary duty. However, as discussed, plaintiff states a cause of action for breach of fiduciary duty against Spitzer and Capital. Therefore, plaintiffs motion to dismiss the cause of action for accounting pursuant to CPLR 3211(a)(7) is denied.

Defendants also contend that documentary evidence establishes that plaintiff has no claim for an accounting because Spitzer responded to the plaintiff's demand for an accounting, through his attorney, by letter dated April 25, 2007 (Vandenberg Aff., Ex. 2). While the letter does address many of the transactions listed in the complaint, it does not specifically account for "all revenues and profits earned from 1989 to November 2006," the accounting plaintiff demands in its complaint. (See Complaint ¶ 73). Therefore, an issue of fact exists as to whether defendants provided plaintiff with an adequate accounting and thus, since the documentary evidence does not conclusively establish that plaintiff's claim fails as a matter of law, the motion pursuant to CPLR 3211(a)(5) is denied as to plaintiff's cause of action for an accounting.

Corporate Waste (Second Cause of Action)

Plaintiff's second cause of action is for corporate waste. Pursuant to Business Corporation Law § 720 (a) (1) (B), an "action may be brought against one or more directors or officers of a corporation" with respect to "[t]he acquisition by himself, transfer to others, loss or waste of corporate assets due to any neglect of, or failure to perform, or other violation of his duties." "It is and has always been general law that a director may be held accountable for the waste of corporate assets whether intentional or negligent without limitation to transactions from which he benefits" (Rapoport v Schneider, 29 NY2d 396, 403 [*7][1972]). The determination of whether or not there is a waste of corporate assets is largely a question of fact (see Shapiro v Rockville Country Club, Inc., 22 AD3d 657, 658 [2d Dept 2005], lv denied 6 NY3d 705 [2006]).

However, it is clear from the statutory language that waste is merely one potential component of a breach of fiduciary duty. The second cause of action is therefore duplicative of the first and is dismissed.

Conversion/Unjust Enrichment (Third Cause of Action)

In its third cause of action plaintiff claims, inter alia, that (i) Spitzer converted $60,000 in profits from the Sprint contract and (iii) defendants converted $6,204 in parking garage profits. "The rule is clear that, to establish a cause of action in conversion, the plaintiff must show legal ownership or an immediate superior right of possession to a specific identifiable thing and must show that the defendant exercised an unauthorized dominion over the thing in question . . . to the exclusion of the plaintiff's rights . . . Tangible personal property or specific money must be involved" (Fiorenti v Central Emergency Physicians, PLLC, 305 AD2d 453, 453 [2d Dept 2003] [internal quotation marks and citation omitted]). It is not necessary to take physical possession of the property, but any exercise of dominion or control over another's property constitutes conversion (Ahles v Aztex Enterprises, Inc., 120 AD2d 903, 904 [2d Dept 1986]). Moreover, one who participates with a fiduciary in the misappropriation of funds may be liable for conversion as well (see Grace v Corn Exchange Bank Trust Co., 287 NY 94, 100-101 [1941]).

In this case plaintiff alleges that Spitzer and Capital have exercised and retained control over specifically identifiable sums which were rightfully the funds of the corporation and diverted by defendants. While these allegations may eventually prove only to support plaintiff's breach of fiduciary duty claim (see Schachter, 96 AD2d at 1039), and thus may be redundant, the pleading still supports a cause of action for conversion. (see Fitzpatrick House III, LLC v Neighborhood Youth & Family Services, 55 AD3d 664 [2d Dept 2008]).

Defendants argue that the conversion claim is barred by documentary evidence but do not submit any documentary evidence to refute the parking garage claim and submit only a three-page printout of Capital's "Lease Information/Rent Roll," dated November 22, 2006, in an attempt to refute the Sprint contract allegations. However, the rent roll does nothing more than list the amount of Sprint's rent as $1,273.08 per month. Defendants also submit the Sprint lease, signed by Spitzer, as the Co-op's president, which lists basement and roof space rent at the Co-op at the rate of only $1,200 per month, commencing in August 1996, for a period of five years (Vandenberg Aff., Ex. 9). Neither document establishes the amounts paid by Sprint or provide an accounting of the profits from the Sprint contract and, therefore, do not serve to mitigate plaintiff's allegations. Plaintiff states a claim for conversion which is not resolved by documentary evidence. The motions to dismiss the cause of action for conversion are denied.

Plaintiff also argues that "defendants have been unjustly enriched because defendants have inappropriately disposed of plaintiff's assets (Plaintiff's Brief at 9). "[T]o prevail on a [*8]claim of unjust enrichment, a party must show that (1) the other party was enriched, (2) at that party's expense, and (3) that it is against equity and good conscience to permit [the other party] to retain what is sought to be recovered." (Cruz v McAneney, 31 AD3d 54, 59 [2d Dept 2006] [internal quotation marks and citation omitted]). To the extent that plaintiff pleads that defendants retained the profits from various transactions which were rightfully the property of the Co-op, plaintiff pleads unjust enrichment. Moreover, defendants have not conclusively disproved the allegations with documentary evidence. Therefore, the motions to dismiss the third cause of action are denied.

Fraud-Based Claims (Fourth, Fifth, and Sixth Causes of Action)

In its fourth, fifth, and sixth causes of action, the plaintiff alleges fraud in the inducement, fraudulent misrepresentations, and fraudulent concealment, respectively. "In an action to recover damages for fraud, the plaintiff must prove 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" (Lama Holding Co. v Smith Barney Inc., 88 NY2d 413, 421 [1996]). In addition, "[w]here it is alleged that the defendant fraudulently concealed a material fact, the plaintiff must establish that the defendant had a duty to disclose the subject information" (Sitar v Sitar, 61 AD3d 739, 741 [2d Dept 2009]).

In connection with the NCCB financing, the complaint alleges that Spitzer knowingly submitted to the Board a false term sheet which omitted such material facts as the prepayment penalties and the NCCB stock purchase requirement (Complaint ¶¶ 25, 26, 33); that the Co-op Board justifiably relied on such term sheet in approving the NCCB financing (¶ 34); and that the Co-op suffered damages in the form of $359,946 in prepayment penalties and $28,000 in the NCCB stock purchase (Complaint ¶¶ 28, 30).

While only the fourth and fifth causes of action for fraud are alleged against Capital, plaintiff argues that defendants were responsible for collecting rent for the Co-op's garage and that defendants "fraudulently misrepresented" and/or failed to disclose the profits from the garage rent on the 2004 and 2005 Co-op financial statements resulting in "a pecuniary loss in the amount of approximately $6,204.00." (Plaintiff's Brief at 5). "There is no legitimate reason to question at the pleading stage the ability of the plaintiff to prove all of the essential elements of common-law fraud" (see Hamlet on Olde Oyster Bay Home Owners Assoc., 59 AD3d at 673 [internal quotation marks and citation omitted]). Although many of the fraud allegations are duplicative of the allegations which support plaintiff's breach of fiduciary duty claim, viewing the complaint as a whole in the light most favorable to plaintiff, the Court concludes that plaintiff has adequately alleged each of the requisite elements of the claims of fraud in the inducement, fraudulent misrepresentation, and/or fraudulent concealment against Spitzer with respect to, inter alia, the NCCB financing and Spitzer's allegedly unauthorized payments to Capital (see Farber v Breslin, 47 AD3d 873, 876-877 [2d Dept 2008]) and fraudulent misrepresentation and/or concealment against Capital either in its own capacity or as an agent of Spitzer. Accordingly, defendants' motions [*9]for dismissal of the fraud-related claims are denied.

Defendants also argue, pursuant to CPLR 3211(a)(1), that the fraud claims should be dismissed based on documentary evidence. As stated above, plaintiff alleges a basis for its fraud allegations with respect to some of the transactions alleged in the complaint and defendants submit no competent evidence to conclusively refute those claims. However, defendants proffer sufficient documentary evidence to refute the allegations in paragraphs 20-22 of the complaint in which plaintiff alleges that Spitzer took out a $750,000 loan on behalf of the Co-op in 2002 "and fraudulently misinformed the Board that $350,000.00 was repaid on that loan" one year later. (Complaint ¶¶ 20-21). To refute these allegations, defendants submit attorney closing statements, the bank pay-off letter, and copies of checks issued at the bank closing relevant to two loans secured a year apart. These documents clearly establish that in August 2002 the Co-op obtained a $350,000 unsecured credit line from Flushing Savings Bank (FSB) (Vandenberg Aff. Ex. 10). However, contrary to plaintiff's allegations, the $750,000 loan actually occurred one year later, in August 2003. According to a "statement of unsecured credit line closing," submitted by defendants, the Co-op obtained a $750,000 credit line from Independence Community Bank (ICB), not FSB, on August 19, 2003. The closing statement lists the disbursements of the $750,000 to the entities involved in the closing: FSB was given a "partial payoff" of the $350,000 credit line secured a year earlier and the balance of $434,718 was disbursed to 770 Owners Corp.

With respect to the FSB payoff, an annotation to the statement of unsecured credit line closing, and also a letter dated August 18, 2003, from FSB to 770 Owners Corp., show that 770 Owners Corp. actually owed FSB $311,394.61 at the time of the ICB refinancing. (See Vandenberg Aff., Exs. 11 and 12). A check in the amount of $300,000 from ICB to FSB dated August 19, 2003 accounts for the $300,000, and a check in the amount of $11,394.61 from Allstate (the d/b/a of Capital) to FSB dated August 21, 2003 accounts for the remaining $11,394.61 due to FSB. (Vandenberg Aff., Exs. 11, 12 and 13). With respect to the $434,718, defendants attach to their papers a check from ICB dated August 19, 2003, paid to the order of 770 Owners Corp. in the amount of $434,718, representing the balance (after closing expenses) of the ICB credit line proceeds (Vandenberg Aff., Ex. 13). Therefore, the transactions relating to the alleged $750,000 loan and the $350,000 repayment are fully accounted for in defendants' documentary evidence. Furthermore, in opposition to the motion, plaintiff does not dispute defendants' explanation of these transactions. Thus, those allegations which allege that Spitzer fraudulently misinformed the Co-op board that a $350,000 loan was repaid are conclusively refuted by documentary evidence. As a result, the Court strikes paragraphs 20-22 from the complaint.

Defendants' Motion to Dismiss Pursuant to CPLR 3211 (a) (5): Statute of Limitations

Defendants' motion pursuant to CPLR 3211(a)(5) is limited to allegations of breach of fiduciary duty, waste and fraud as premised upon the Sprint contract. The complaint alleges that Spitzer fraudulently omitted and concealed plaintiff's profits from the Sprint contract from 1996 to 2001 (Complaint ¶¶ 18-19). This action was commenced on [*10]September 24, 2008.

Breach of fiduciary duty claims are governed by a three or six-year statute of limitations depending on the relief sought (Wiesenthal v Wiesenthal, 40 AD3d 1078, 1079 [2d Dept 2007]; Weiss, 45 AD3d at 764 [finding that a three-year statute of limitations applies where the relief sought is money damages and a six-year statute of limitations applies where equitable relief is sought]). Depending on the circumstances, the statute of limitations begins to run when the fiduciary has repudiated his or her obligation or the relationship has terminated (Evangelista v Mattone, 44 AD3d 704, 704 [2d Dept 2007]; Weschester Religious Institute v Kamerman, 262 AD2d 131[1st Dept 1999]; see also Recine v Soil Solutions, Inc., 63 AD3d 710, 711 [2d Dept 2009]). From the facts provided, it is not possible to determine when Spitzer's fiduciary role terminated, if at all, so as to commence the running of the statute.

A fraud-based action must be commenced within the greater of six years from the date the cause of action accrued or two years from the time the plaintiff discovered the fraud or could with reasonable diligence have discovered it (see CPLR 213 [8] and 203 [g]). As the Court of Appeals recently held: "The inquiry as to whether a plaintiff could, with reasonable diligence, have discovered the fraud turns on whether the plaintiff was possessed of knowledge of facts from which the fraud could be reasonably inferred. Generally, knowledge of the fraudulent act is required and mere suspicion will not constitute a sufficient substitute. Where it does not conclusively appear that a plaintiff had knowledge of facts from which the fraud could reasonably be inferred, a complaint should not be dismissed on motion and the question should be left to the trier of the facts."

(Sargiss v Magarelli, 12 NY3d 527, 532 [2009][internal quotation marks and citations omitted]).

At this point in the litigation it is impossible to determine when plaintiff discovered the alleged fraud. The motion to dismiss the complaint, or any portion of it based upon the statute of limitations is denied.

CONCLUSION

The motion to dismiss the CPLR 3211(a)(5) motion is denied in its entirety. The CPLR 3211(a)(7) motion to dismiss the second cause of action for waste is granted. Defendants' CPLR 3211(a)(1) and (7) motions to dismiss are denied for all remaining causes of action except that paragraphs 20-22 are stricken from the Complaint. However, should questions of accountability for the ICB loan proceeds remain, leave is hereby granted to serve and file an amended complaint within thirty days of entry of this Decision and Order. The foregoing constitutes the decision and order of the court. [*11]

E N T E R,

J. S. C. Footnotes

Footnote 1:770 Associates L.P. later changed its identity from a limited partnership to a limited liability company known as 770 Ocean Associates LLC. Defendants allege that 770 Ocean Associates continues to hold the unsold shares in the Co-op.

Footnote 2: While the allegations concerning the NCCB financing initially address Spitzer, they later combine both Spitzer and Capital.

Footnote 3:The documents attached in support of defendants' motion suggest that Spitzer was a director of the co-op from its inception and appointed President at some later time. For example, the Fifteenth Amendment to the Offering Plan dated July 24, 1989 lists Spitzer as a director (Vandenberg Aff., Ex. 3). Moreover, Spitzer signed, as president, a resolution of the board of directors of the co-op dated May 16, 2006 (Vandenberg Aff., Ex. 16 ); Spitzer, as president, also signed a promissory note on behalf of the Co-op on May 17, 2006 (Vandenberg Aff., Ex. 17).