Disabled Am. Veterans v Phillips

[*1] Disabled Am. Veterans v Phillips 2006 NY Slip Op 51772(U) [13 Misc 3d 1210(A)] Decided on September 19, 2006 Supreme Court, Nassau County Phelan, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 September 19, 2006
Supreme Court, Nassau County

Disabled American Veterans, Department of New York, Inc. and Lieutenant John J. French No. 125, Plaintiff(s),

against

Maxwell H. Phillips, Defendant(s).



15759/05

Thomas P. Phelan, J.

Motion by defendant for an order pursuant to CPLR 3212 granting him summary judgment on plaintiffs' causes of action is determined as provided herein.

This is an action for fraud, conversion, and for an accounting brought against defendant, who formerly served as treasurer of plaintiff Lieutenant John J. French No. 125 [DAV Chapter 125]. Plaintiffs' first cause of action (conversion) alleges, inter alia, that: "On or about the period of June 1996 through May 2001, the defendant wrongfully diverted the donations from plaintiffs' possession and converted them to his own use." Plaintiffs' attempt to voluntarily withdraw this cause of action is without consequence as it is neither executed by all parties nor tendered sufficiently early in the within proceeding so as to permit action thereon (see CPLR 3217(a) and (b)).

Plaintiffs' second cause of action (fraud) alleges, inter alia, that at various times commencing in 1995 defendant "represented to plaintiffs that [he] had been collecting money donations in the name of the plaintiffs" and had been forwarding the donations to various Veterans Administration medical centers. The last period of time alleged in this cause of action is "on or about June 2000 through May 2001." This cause of action further alleges that "at the time the defendant made the representations, the facts were that the above-referenced donations were never made by the defendant to the aforementioned Veterans Administration medical centers."

Plaintiffs' third cause of action (accounting) alleges, inter alia, that: "On or about July 15, 2003[,] defendant was removed from [plaintiff organizations] and was directed to turn over all books, documents and records, including bank records and any money collected in donations and not [*2]yet distributed, but defendant has failed and refused and still fails and refuses to turn over such books, documents and records, including bank records and any money collected in donations and not yet distributed." This cause of action further alleges that: "On numerous occasions, plaintiffs demanded that defendant account for all receipts and disbursements of money made by him during the time when he was plaintiffs' treasurer and adjutant, but defendant failed and refused and still fails and refuses to so account."

Defendant moves for summary judgment dismissing plaintiffs' first and second cause of action on the grounds that the applicable three (3) year statute of limitations set forth in CPLR Section 214 has expired.

This action was commenced on July 27, 2005 (CPLR 304). The three (3) year Statute of Limitations for conversion (CPLR 214 [3]) commenced running in this case when each diversion of funds took place (see General Stencils, Inc. v Chiappa, 18 NY2d 125, 127). As alleged by plaintiffs, the last diversion of funds occurred in May, 2001 over five years prior to this action being brought.

Accordingly, plaintiffs' first cause of action is dismissed as untimely.

Dismissal of plaintiffs' second cause of action for fraud is sought on the ground that, because the

purported fraud is merely incidental to the conversion cause of action, the same three (3) year statute of limitations applies, rather than the six (6) year statute of limitations set forth in CPLR Section 213(8). The Court agrees.

"[I]t is the gravamen or essence of the cause of action that determines the applicable Statute of Limitations [citations omitted]" (Western Electric Co. v Brenner, 41 NY2d 291, 293). As with plaintiffs' first cause of action, their second cause of action for fraud is predicated upon defendant's alleged conversion of donations he collected on behalf of plaintiffs. The six (6) year limitations period for fraud would apply to the fraud claim only if there would have been no injury to plaintiffs without the alleged fraud or if the alleged fraud resulted in damages over and above what plaintiffs could have recovered had they prevailed on their conversion cause of action. (See Ruffing v Union Carbide Corp., 308 AD2d 526, 527-528). In this regard, the Court notes that exactly the same money damages are sought in connection with the first and second causes of action.

Inasmuch as the fraud alleged is incidental to the conversion cause of action, plaintiffs' fraud cause of action is barred by the three (3) year limitations period as well. (See Rattenni v Cerreta, 285 AD2d 636, 637; Gold Sun Shipping v Ionian Transp., 245 AD2d 420, 421).

Defendant moves for summary judgment dismissing plaintiffs' third cause of action on a number of grounds. First, defendant contends that he "has, in fact, rendered a full accounting of all moneys received and disbursed by him as treasurer, as demanded in the Third Cause of Action." [*3]In this regard, counsel for defendant states that defendant has turned over all books and records sought by Plaintiffs' Combined Demands and Supplemental Notice of Discovery and Inspection and "the defendant has previously submitted annual financial reports to plaintiffs, as requested by plaintiffs and required by plaintiffs' By-Laws."

Second, defendant contends that he has made complete restitution. He states that: "The Attorney General's Office conducted a year long investigation of the Local Chapter 125 DAV finances, and reviewed all of the financial records of the chapter for the period from 1999-2003, and their conclusions were that only [$20,000.00] of Local Chapter 125 DAV funds over that period were allegedly diverted by [defendant] for [his] own personal use." While denying that he diverted any funds for his own use, he contends that he settled the matter with the Attorney General's Office by paying them restitution in the sum of $20,000.00, plus investigation costs in the sum of $2,000.00, rather than continue to fight given the legal expenses he was incurring.

Third, defendant contends that plaintiffs are not entitled to an accounting because the third cause of action fails "to allege the legal grounds for which the plaintiffs are entitled to an accounting (i.e. contractual right, breach of fiduciary duty, conversion, etc.) from the defendant."

Alternatively, defendant contends that since the Statute of Limitations for an equitable accounting is six (6) years (CPLR 213 [1]), defendant is not under any legal liability to account for the period of time before July of 1999.

Defendants' conceded status as treasurer of Plaintiff DAV Chapter 125 establishes his fiduciary relationship. The existence of a fiduciary relationship gives plaintiffs the absolute right to an accounting. (See Koppel v Wien, Lane & Malkin, 125 AD2d 230, 234; Di Terlizzi v Di Terlizzi, 92 AD2d 604, 606). Moreover, defendant's settlement with the Attorney General has no binding effect on plaintiffs and disclosure in this action is not yet complete. The Court does, however, agree that the accounting cause of action is governed by a six (6) year limitations period. (See CPLR 213 [1]; Matter of Behr, 191 AD2d 431; Matter of Mayo, 11 Misc 3d 1072A, 2006 NY Slip Op 50525U at p. 4). It necessarily follows that defendant cannot be compelled to account for any transaction occurring prior to July 27, 1999 six years prior to the commencement of this action.

Accordingly, plaintiffs' first and second causes of action are hereby severed and dismissed. That branch of defendant's motion seeking dismissal of plaintiffs' third cause of action is denied except as to accounting claims for the period preceding July 27, 1999.

Dismissal is without costs.

This decision constitutes the order of the court. [*4]

Dated:SEPTEMBER 19, 2006 THOMAS P. PHELAN

J.S.C.

Forster & Iannacone

Attorneys for Plaintiffs

75-12 Metropolitan Avenue

Middle Village, NY 11379-2639

Minerva & D'Agostino, P.C.

Attn: Ross M. Gerber, Esq.

Attorneys for Defendant

107 South Central Avenue

Valley Stream, NY 11580