Frattarola v Swartz

[*1] Frattarola v Swartz 2016 NY Slip Op 51666(U) Decided on November 22, 2016 Supreme Court, Westchester County Ruderman, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on November 22, 2016
Supreme Court, Westchester County

Peter J. Frattarola, Jr., Plaintiff,

against

June Ann Swartz and GERALD N. SWARTZ, Defendants.



51176/2016



For the plaintiff:

James T. Scalise, Esq.

670 White Plains Road, Suite 325

Scarsdale, NY 914 722-4100

For the defendants:

Timothy P. Kebbe, Esq.

445 Hamilton Avenue, Suite 1102

White Plains, NY 914 733-7745
Terry Jane Ruderman, J.

The following papers were considered in connection with the defendants' separate pre-answer motions to dismiss the plaintiff's complaint:

Papers (Motion Seq. No. 1) Numbered

Notice of motion, affirmation, exhibits 1 - 5, memo of law - 1

Affirmation in opposition, exhibits A - D, memo of law - 2

Reply, exhibits 6 - 11 - 3

Papers (Motion Seq. # 2) Numbered

Notice of motion, affirmation, exhibits 1 - 10, memo of law - 1

Affirmation in opposition, exhibit A, memo of law - 2

Reply, exhibit 11, memo of law - 3

The defendants separately move for an order pursuant to, inter alia, CPLR 3211 dismissing the complaint. The plaintiff submits written opposition.

Plaintiff is a resident of Massachusetts. Defendant June Ann Swartz is plaintiff's paternal aunt; defendant Gerald Swartz, an attorney, is June Ann's husband and thus plaintiff's uncle. The complaint alleges, generally, that June Ann stole hundreds of thousands of dollars from the plaintiff, from funds payable to the plaintiff under a structured settlement. As asserted in the complaint, the plaintiff 's father died when he was nine years old, at which time the plaintiff's paternal grandmother, non-party Lucile Frattarola, became the plaintiff's legal guardian. A wrongful death lawsuit was commenced, with Lucile Frattarola as the nominal plaintiff, for which defendant Gerald Swartz received a referral fee in the amount of $60, 116.48. (Notice of motion, Seq. No. 1, Ex. 4). A structured settlement was approved, under which the plaintiff was to receive lump sum payments of over $500,000 commencing October, 2002, and monthly payments of over $3000 commencing October, 2006.

The complaint further alleges that plaintiff and his elderly grandmother relied on defendant June Ann Swartz for financial advice and guidance, and that she violated this confidence, taking advantage of the plaintiff's trust and age, and Lucile Frattarola's lack of business acumen. By concealing the structured settlement payments, it is alleged, the defendants were able to obtain the structured settlement payments and apply them to their own uses. In order to effectuate this scheme, June Ann opened a joint banking account with the plaintiff at First Union Bank (later becoming Wachovia Bank, and then Wells Fargo Bank), into which the structured settlement payments were deposited.[FN1] June Ann then falsely stated that she was personally paying the plaintiff's college tuition and room and board, while in fact she was using the plaintiff's own funds, which had been deposited into the joint account. Other payments to the plaintiff sent by mail to Lucile Frattarola's home were endorsed by June Ann, and deposited into the joint account, where June Ann had access to the funds for her personal benefit.

Over the course of almost a decade, June Ann allegedly stole hundreds of thousands of dollars. In October, 2014, June Ann told the plaintiff that Lucile Frattarola had saved some "secret" money for plaintiff, and sent the plaintiff a check in the amount of $150,000 drawn on the joint checking account. When the plaintiff became suspicious, June Anne created a false document which purported to be a letter from a non-existent attorney named "Christine." This false document listed only two lump sum distributions, in an evident attempt to conceal the size and frequency of the prior thefts, and to make it appear that the $150,000 was the first distribution received by the plaintiff. (Complaint, Mot. Seq. No. 2, Ex. 1 [Exhibit B to complaint].) Knowing that Lucile Frattarola and he had lived frugally on a modest income, plaintiff finally investigated the circumstances and discovered the misuse of the structured settlement funds.

This action was subsequently commenced on January 30, 2016.

Defendant Gerald Swartz now moves to dismiss the third and fourth causes of action (unjust enrichment and constructive trust), which are the only causes of action asserted against [*2]him. He contends that the complaint fails to allege the elements of these causes of action, and fails to allege facts in support, under CPLR 3013 [FN2] and 3211. In addition, Gerald Swartz argues that the documentary evidence conclusively establishes that the causes of action for unjust enrichment and constructive trust are barred by the six-year statute of limitations of CPLR 231(1).

Defendant June Ann similarly moves to dismiss the complaint. She argues that the various causes of action alleged are either not sufficiently pleaded, or are barred by the statute of limitations.

Analysis

Applicable Legal Standards

A motion to dismiss based on documentary evidence pursuant to CPLR 3211 (a) (1) may be granted only where the documentary evidence "utterly refutes" the plaintiff's factual allegations, resolves all factual issues as a matter of law, and conclusively disposes of the claims at issue. (Goshen v. Mutual Life Ins. Co. of NY, 98 NY2d 314, 326 — 327 [2002]; Rodeo Family Enters., LLC v. Matte, 99 AD3d 781, 782 [2d Dept. 2012].) To be considered "documentary evidence" within the meaning of CPLR 3211(a)(1), the evidence must be unambiguous and of undisputed authenticity. Judicial records, as well as documents reflecting out-of-court transactions, such as mortgages, deeds, leases and contracts, which in context are "essentially undeniable," qualify as "documentary evidence" in the proper case. (Fontanetta v. John Doe 1, 73 AD3d 78 [2d Dept. 2010].)

In considering the sufficiency of a pleading subject to a motion to dismiss for failure to state a cause of action under CPLR 3211 (a)(7), the court's role is to determine whether, accepting as true the factual averments of the complaint, plaintiff can succeed upon any reasonable view of the facts stated. (Campaign for Fiscal Equity v. State of New York, 86 NY2d 307, 318 [1995]). On a motion to dismiss a complaint pursuant to CPLR 3211(a)(7) all allegations in the complaint are deemed to be true; all reasonable inferences which can be drawn from the complaint and the allegations therein must be resolved in favor of the plaintiff. (Sokoloff v. Harriman Estates Dev. Corp., 96 NY2d 409, 414 [2001]). When analyzing the complaint in the context of a motion to dismiss, the court must discern whether the facts as alleged fit within any cognizable legal theory. (Sokoloff v. Harriman Estates Development Corp., supra at 414; Leon v. Martinez, 84 NY2d 83, 88 — 89 [1994].)

"When evidentiary material is considered on a motion to dismiss a complaint pursuant to CPLR 3211(a)(7), and the motion has not been converted to one for summary judgment, the criterion is whether the plaintiff has a cause of action, not whether he or she has stated one, and, unless it has been shown that a material fact as claimed by the plaintiff to be one is not a fact at all and unless it can be said that no significant dispute exists regarding it, dismissal should not eventuate." (Wells Fargo Bank N.A. v. E & G Dev. Corp., 138 AD3d 986, 986 — 987 [2d Dept. 2016] [citation omitted].)

[*3]Defendant Gerald Swartz's Motion to Dismiss

As noted above, the complaint alleges only two causes of action against defendant Gerald Swartz — constructive trust and unjust enrichment.

The elements of a cause of action to impose a constructive trust are (1) the existence of a confidential or fiduciary relationship, (2) a promise, (3) a transfer in reliance thereon, and (4) unjust enrichment. (Mazzei v. Kyriacou, 139 AD3d 823, 824 [2d Dept. 2016] [dismissing constructive trust cause of action on summary judgment where plaintiff failed to allege any promise, either express or implied, relating to the subject property, or any transfer in reliance on any promise relating to the property].) Contrary to the defendant's arguments, the existence of an uncle-nephew relationship, combined with the allegations of trust and reliance, establishes a confidential relationship. (Hairman v. Jhawarer, 122 AD3d 570 [2d Dept. 2014] [confidential relationship existed between nephew and uncle].) However, in the present case, the plaintiff has not alleged any promise made by defendant Gerald Swartz, or any transfer made by the plaintiff in reliance on any such promise. The cause of action for constructive trust therefore is not properly pleaded.[FN3]

The elements of a cause of action to recover for unjust enrichment are that: "(1) the defendant was enriched, (2) at the plaintiff's expense, and (3) that it is against equity and good conscience to permit the defendant to retain what is sought to be recovered." (Mobarak v. Mowad, 117 AD3d 998, 1001 [2d Dept. 2014] [citation omitted]). "The essential inquiry in any action for unjust enrichment or restitution is whether it is against equity and good conscience to permit the defendant to retain what is sought to be recovered." (Paramount Film Distrib. Corp. v. State of New York, 30 NY2d 415, 421 [1972].) Giving the plaintiff the benefit of all reasonable inferences which can be drawn from the complaint, and resolving the allegations in favor of the plaintiff, the complaint sufficiently alleges unjust enrichment. The allegations that hundreds of thousands of dollars were diverted by June Ann Swartz, and that at least some of the funds were used to pay the defendants' mortgage on their private residence in Harrison, Westchester County, and other funds were used to pay credit card and department store bills, raise an inference at this stage of the litigation that defendant Gerald Swartz was enriched to some degree by the alleged defalcations.

Defendant Gerald Swartz nevertheless argues that the cause of action for unjust enrichment is barred by the six-year statute of limitations. A cause of action alleging unjust enrichment is governed by the six-year statute of limitations of CPLR 213 (1), which generally begins to run upon the occurrence of the alleged wrongful act giving rise to the duty of restitution. (Williams-Guillaume v. Bank of Am., N.A., 130 AD3d 1016 [2d Dept. 2015].) The cause of action does not accrue from the time the facts constituting the fraud are discovered. (Coombs v. Jervier, 74 AD3d 724 [2d Dept. 2010], leave den. 16 NY3d 709 [2011].)

Plaintiff's cause of action for unjust enrichment against defendant Gerald Swartz is [*4]therefore dismissed to the extent it seeks damages for unjust enrichment as to events which occurred more than six years prior to the commencement of this action.[FN4]

Defendant June Ann Swartz's Motion to Dismiss

Defendant June Ann moves to dismiss the cause of action for fraud on the ground that plaintiff knew, or should have known, of the fraud long before 2014. In this regard, defendant relies on certain documents, including a letter received by plaintiff in 2002, when he was 17 years-old, advising him that he was to begin receiving structured settlement payments; an Allstate Financial Information Update Form dated October 16, 2002, which again advised plaintiff that he would be receiving structured settlement payments; and bank statements from the joint account sent to the plaintiff from 2002 through 2014. Defendant argues that the six-year statute of limitations for fraud began to run when plaintiff turned 18 in October, 2002, and thus expired in October, 2008.

A fraud cause of action must be commenced within six years of the fraud, or within two years from the time the plaintiff discovered the fraud, or could with reasonable diligence have discovered it, whichever is later. (Loeuis v. Grushin, 126 AD3d 761 [2d Dept. 2015].) "The test as to when a plaintiff should have discovered an alleged fraud is an objective one." (Prestandrea v. Stein, 262 AD2d 621, 622 [2d Dept.1999].) A plaintiff will be held to have discovered the fraud when it is established that plaintiff was possessed of knowledge of facts from which the fraud could be reasonably inferred. (Erbe v. Lincoln Rochester Trust Co., 3 NY2d 321, 326 [1957]; see Gorelick v. Vorhand, 83 AD3d 893 [2d Dept. 2011].)

Here, dismissal is not warranted in view of the fact that the plaintiff was a minor, or had just turned 18, when the operative notices were given to him concerning the commencement of the structured settlement payments directly to him.[FN5] Given plaintiff's alleged reliance on his aunt for financial advice and guidance, and plaintiff's sworn statement that it would not have been unusual to sign documents presented to him by his aunt, issues of fact exist as to whether he had sufficient notice of the events so as to have discovered the fraud earlier than he did. (See Trepuk v. Frank, 44 NY2d 723, 724 [1978] ["Reliance upon one's mother and fiduciary brother was understandable and the extraordinary delay in discovery is therefore equally understandable."]) Moreover, given "Aunt June's" alleged "cover story" that she was paying for plaintiff's tuition [*5]with her own funds, issues of fact exist as to whether the fact that plaintiff received account statements would have lead him to discover the fraud.

Similarly, the documentary evidence does not "utterly refute" the plaintiff's claims of fraud. Given the confidential relationship between the parties, a trier of fact could find that the plaintiff was too young or too reliant on defendant June Ann's representations to read or understand the import of the structured trust letters, or of the account statements. In this regard, plaintiff has alleged not only a familial relationship, but in addition, the complete reliance which he and his grandmother placed on his aunt to guide them in financial matters. (Reiner v. Reiner, 100 AD2d 872 [2d Dept. 1984] [family ties constitute a confidential relationship].)

A cause of action for conversion is ordinarily governed by a three-year statute of limitations. (CPLR 214[3]; Gold Sun Shipping v. Ionian Transp., 245 AD2d 420 [2d Dept. 1977] [three-year statute of limitations for conversion was applicable to conversion and fraud claims; the cause of action alleging fraud was merely incidental to the conversion cause of action, and the only purpose it served in the complaint was to avoid the statute of limitations].) Here, however, the cause of action alleging conversion is based upon fraud, and thus has not been demonstrated to be time-barred at this time, since it is governed by the fraud-based statute of limitations set forth in CPLR 213 (8). (See Loeuis v. Grushin, 126 AD3d 761 [2d Dept. 2015].)

The claims for unjust enrichment are limited to transactions which occurred within the six years preceding the filing of the complaint, as discussed in connection with the motion to dismiss made by defendant Gerald Swartz. Further, as stated in connection with defendant Gerald Swartz's motion, the cause of action for constructive trust is not properly pleaded, since plaintiff has not alleged any promise made by defendant June Ann Swartz, or any transfer made by the plaintiff in reliance on any such promise.

The cause of action for punitive damages is improper. (Dixon v. William Floyd Union Free Sch. Dist., 136 AD3d 972 [2d Dept. 2016] [New York State does not recognize an independent cause of action to recover punitive damages.])

The causes of action for declaratory judgment are duplicative of the fraud and conversion causes of action, and are dismissed. (Waterways at Bay Pointe Homeowners Assn., Inc. v. Waterways Dev. Corp., 132 AD3d 975 [2d Dept. 2015].)

The defendants' remaining contentions are either without merit or have been rendered academic by the foregoing determinations.

Based upon the foregoing, it is hereby,

ORDERED that the defendants' motions to dismiss are granted to the extent of dismissing the cause of action for constructive trust as to all defendants; dismissing the cause of action for punitive damages; dismissing the causes of action for declaratory judgment; and dismissing the cause of action for unjust enrichment only as to all events which occurred greater than six years prior to the commencement of this action; and the motions are otherwise denied; and it is further

ORDERED that defendants' time to answer is extended until 10 days after the defendants are served with notice of entry of this Order pursuant to CPLR 3211(f); and it is further

ORDERED that all parties appear in the Preliminary Conference Part on Monday, January 9, 2017 at 9:30 a.m., in room 811 of the Westchester County Courthouse located at 111 Dr. Martin Luther King, Jr., Boulevard, White Plains, New York, 10601.

This constitutes the Decision and Order of the Court.

Dated: White Plains, New York

November 22 , 2016

______________/s/_________________

HON. TERRY JANE RUDERMAN, J.S.C. Footnotes

Footnote 1:Some of the funds were deposited directly into the joint account by virtue of an authorization form notarized by defendant Gerald Swartz. In other instances, checks payable to plaintiff were retrieved from Lucile Frattarola's home by defendant June Ann Swartz, endorsed by her in plaintiff's name, and deposited into the joint account.

Footnote 2:That section provides, "Statements in a pleading shall be sufficiently particular to give the court and parties notice of the transactions, occurrences, or series of transactions or occurrences, intended to be proved and the material elements of each cause of action or defense."

Footnote 3:The cause of action for constructive trust, even if properly pleaded, would be barred by the statute of limitations as to any transaction which occurred more than six years prior to the commencement of this action. A constructive trust is equitable in nature and governed by a six-year statute of limitations. Where the constructive trustee acquired the property wrongfully, as here, the cause of action accrues on the date of acquisition. (DiRaimondo v. Calhoun, 131 AD3d 1194 [2d Dept. 2015].)

Footnote 4:To the extent defendant Gerald Swartz alleges that the claims are barred by documentary evidence, the court rejects this argument, as indicated in connection with defendant June Ann Swartz's motion. Nor does defendant Gerald Swartz explain why the entire cause of action for unjust enrichment should be dismissed based on the statute of limitations, as each new diversion of funds constitutes the occurrence of a wrongful act.

Footnote 5:To dismiss a cause of action pursuant to CPLR 3211(a)(5) on the ground that it is barred by the statute of limitations, a defendant bears the initial burden of establishing prima facie that the time in which to sue has expired. Once the defendant meets its prima facie burden, the burden then shifts to the plaintiff to raise a question of fact as to whether the statute of limitations was tolled or was otherwise inapplicable, or whether it actually commenced the action within the applicable limitations period. (See J.A. Lee Elec., Inc. v. City of New York, 119 AD3d 652, 653 [2d Dept. 2014].)