Grunfeld v Kasnett

[*1] Grunfeld v Kasnett 2008 NY Slip Op 50420(U) [18 Misc 3d 1143(A)] Decided on March 4, 2008 Supreme Court, Kings County Demarest, 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 March 4, 2008
Supreme Court, Kings County

Joseph Grunfeld, et. al., Plaintiffs,

against

Binyumin Kasnett, et. al., Defendants.



21141/07



Attorney for Plaintiff

TED T MOZES, ESQ

16 GLADWYNE CT

SPRING VALLEY, NY 10977-1604

Attorney for Defendant

JOSEPH ZELMANOVITZ

STAHL & ZELMANOVITZ

747 3RD AVE

NEW YORK, NY 10017-2803

Carolyn E. Demarest, J.

Plaintiffs Joseph Grunfeld, David Greenfield, and Shmuel Grunfeld, the heirs of Baruch Grunfeld (Grunfeld) (collectively, plaintiffs), bring this action alleging a breach of fiduciary duty and conversion, and seeking an accounting, a turnover of profits, and the imposition of a constructive trust. Defendant Binyumin Kasnett (Kasnett)[FN1] moves for an [*2]order, pursuant to CPLR 3211, dismissing the third, fourth, and fifth causes of action of plaintiffs' complaint as against him.

In 1974, Grunfeld established a business, as a sole proprietor, which operated out of a storefront located at 4810 16th Avenue in the Boro Park section of Brooklyn, New York. The business was called Merkaz Tashmishel Stam (MTS), and was devoted solely to the business of selling, repairing, and checking religious articles, known as "STAM" (i.e., handwritten portions of Torah scrolls). In June 1981, Grunfeld, who was then approaching 70 years of age, moved to Israel. Plaintiffs claim that, at that time, Grunfeld entered into an agreement with Kasnett, who was an employee of MTS, whereby Kasnett would run the day-to-day business of MTS for Grunfeld, and Kasnett and Grunfeld, after deducting expenses, would equally share the profits of the business. Plaintiffs have not provided the court with a written agreement.

At the time of this alleged agreement between Grunfeld and Kasnett, Rosengarten was operating a wholesale business supplying these same religious articles. Plaintiffs assert that in July 1981, Rosengarten, Grunfeld, and Kasnett entered into an agreement (also apparently oral), which provided that both the wholesale and retail business would operate from the same premises. Pursuant to this alleged agreement, the expenses of the entire operation would be shared among Grunfeld, Kasnett, and Rosengarten. In addition, MTS would provide Rosengarten with the technical expertise for checking and repairing the religious articles, and MTS would purchase its written parchments from Rosengarten. It was also allegedly agreed that there would be no essential changes in the business operations without the consent of all of them. Approximately two years later, Kasnett, allegedly without prior discussion, opened a second location of MTS in the Flatbush section of Brooklyn. Grunfeld did not demand the closure of this second store.

On May 28,1984, Kasnett, unbeknownst to Grunfeld, moved the business of MTS into an existing book store, known as Frankel's Books, located at 4904 16th Avenue in Brooklyn. Plaintiffs assert that in return for relocating MTS to Frankel's Books, from which it then began operating as an adjunct to a book store, Kasnett, by deed dated May 28, 1984, received [*3]from the seller, Eva Frankel, a one-third interest in the 4904 16th Avenue real property, as joint tenants with Rosengarten and Mandel (who also each received a one-third interest). Plaintiffs allege that, thereafter, Kasnett transferred all or some portion of MTS to either Rosengarten or Mandel.

Plaintiffs claim that Kasnett had no authority to move or sell MTS, and that when Grunfeld became aware of what Kasnett had done, he demanded an accounting and a turnover of funds. According to plaintiffs, Kasnett wrote a letter [FN2], dated May 3, 1993, to Grunfeld, wherein Kasnett stated that he had sold only his own share of the partnership and not Grunfeld's share, and that he had made a mistake in thinking that Grunfeld had not remained a partner in the business. Kasnett, in this letter, asked Grunfeld for forgiveness for the aggravation he had caused Grunfeld in selling the business. Grunfeld died in Israel in September 1999, without resolving this matter with Kasnett.

Consequently, by summons and complaint filed on June 12, 2007, plaintiffs, as the alleged heirs of Grunfeld, brought this action against defendants. Plaintiffs' complaint alleges that the agreement between Kasnett and Grunfeld required Kasnett to keep meticulous records relating to the business and to turn over one-half of the profits of MTS. Plaintiffs' first cause of action for an accounting demands an accounting by Kasnett of the income, expenses, and profits of MTS. Plaintiffs' second cause of action for a turnover of funds requests an order directing Kasnett to turnover and pay one-half of the profits of MTS. Dismissal of these two causes of action is not sought by the instant motion.

Plaintiffs' third cause of action for conversion alleges that to date, Kasnett has not accounted for or turned over any monies since at least August 2001 and that Kasnett has converted Grunfeld's business profits in an amount to be determined upon a full accounting. Plaintiffs' fourth cause of action for "breach of duty upon sale" alleges that Kasnett admitted to purportedly "selling" Grunfeld's business without consulting Grunfeld and thus breached his duty as an employee of MTS and that any profits from this sale belong to Grunfeld and should be turned over. Plaintiffs' fifth cause of action alleges that a constructive trust should be placed on the assests or property realized by Kasnett from the conversion and/or sale of MTS. It seeks the imposition of a constructive trust on Kasnett's one-third interest in the 4904 16th Avenue real property obtained by Kasnett from the purported sale of the business. Plaintiffs also seek a judgment directing Kasnett to execute a deed conveying this property to plaintiffs. In addition, plaintiffs claim that any further profits realized from the sale should similarly have a constructive trust imposed on them.

As a threshold matter, this court notes that it is the executor or administrator of a decedent's estate, not his heirs, that have the duty to recover the estate's personal property (Ponnambalam v Sivaprakasapillai, 35 AD3d 571, 574 [2d Dept 2006]). In this case plaintiffs simply have brought this action in their own right alleging that they are the rightful heirs of Grunfeld and do not provide the court with Letters of Administration or allege that [*4]they are the executors of Grunfeld's estate or even that the estate itself is entitled to the relief requested. All of the causes of action arise out of alleged violations of a partnership agreement between Grunfeld and Kasnett. The plaintiffs do not allege that Kasnett breached any duty owed directly to them. In any event, notwithstanding these defects (not raised by the defendant but which would require dismissal of the complaint in its entirety for lack of capacity (see Ponnambalam, 35 AD3d at 573)), the causes of action contested on this motion to dismiss all fail on Statute of Limitations grounds.

Plaintiffs' third cause of action alleges that Kasnett converted "Grunfeld's business profits in an amount to be determined upon a full accounting" (Complaint ¶ 42). "[T]o 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" (Estate of Giustino v Estate of Delpizzo, 21 AD3d 523, 523 [2d Dept 2005] quoting Independence Discount Corp. v Bressner, 47 AD2d 756, 757 [2d Dept 1975]). Tangible personal property or a specific sum of money must be involved (Independence Discount Corp., 47 AD2d at 757). Moreover, when money is the subject of conversion it must be specifically identifiable, such as a bank account (Republic of Haiti v Duvalier, 211 AD2d 379, 384 [1st Dept 1995]).

Plaintiffs fail to state a cause of action for conversion because neither the complaint, nor the affidavits in opposition to this motion, assert that plaintiffs themselves are legal owners or have a superior right of possession to the MTS profits. Rather, they assert that Kasnett converted the profits to which Grunfeld was entitled as an alleged partner in the MTS business. The plaintiffs do not identify a tangible or specifically identifiable sum of money that was the subject of conversion, claiming, instead, an amorphous sum of profits from the MTS business "to be determined upon a full accounting" (Complaint ¶ 42). Therefore, plaintiffs fail to state a cause of action for conversion.

Moreover, even if plaintiffs were able to state a conversion cause of action on behalf of Grunfeld, it would be barred by the Statute of Limitations. Conversion is governed by a three-year Statute of Limitations (CPLR 214 [3]), which generally accrues at the time when the alleged conversion takes place (see Sporn v MCA Records, 58 NY2d 482, 488-489 [1983]; Two Clinton Sq. Corp. v Friedler, 91 AD2d 1193, 1194 [4th Dept 1983]). However, "where possession is originally lawful, a demand is necessary" and the cause of action accrues from the time that the plaintiff has the right to make a demand (Berman v Goldsmith, 141 AD2d 487, 487 [2d Dept 1988]; see Bernstein v La Rue, 120 AD2d 476, 477 [2d Dept 1984]; see also Johnson v Gumer, 94 AD2d 955, 955 [4th Dept 1983]; see also Pecoraro v M & T Bank Corp., 11 AD3d 950, 951 [4th Dept 2004]).

Here, plaintiffs allege that Kasnett was originally lawfully in possession of the business and entitled to share the profits of MTS (Complaint ¶ 15), but that his subsequent opening of another branch of MTS and the relocation of MTS to Frankel's bookstore violated the alleged profit sharing agreement between Grunfeld and Kasnett (Complaint ¶ 22-27). [*5]Plaintiffs allege in their third cause of action for conversion that defendant Kasnett "has not accounted for or turned over any monies since at least August 2001." Accepting this as the date upon which the claim for "conversion" of profits accrued, this claim is time-barred as plaintiffs did not commence suit until June of 2007, far in excess of the three year period allowed (CPLR 214[3]). As Grunfeld died in 1999 (apparently prior to the accrual of this claim, according to the complaint) even the right of a representative of this estate to maintain suit was precluded under the Statute of Limitations at the time this action was commenced. See CPLR 210[a].

Plaintiffs contend, however, that their third cause of action for conversion seeks the turnover of funds which were and continue to be converted and is not time-barred by the three-year Statute of Limitations of CPLR 214 (3). They assert that the funds sought include the revenue being generated in the present, which, they allege, belongs to the MTS business. "[T]he fact that plaintiffs may continue to suffer damages as a result of [Kasnett's earlier] acts is not relevant to the [S]tatute of [L]imitations determination" (Rabouin, 2005 NY Slip Op 52070 [U],*9; see also Ely-Cruikshank Co.v Bank of Montreal, 81 NY2d 399, 402-403 [1993]). There is no continuing wrong here; any retention of profits was simply a continuing effect of an earlier allegedly wrongful act (see Rabouin, 2005 NY Slip Op 52070 [U],*9). Thus, Kasnett's alleged subsequent diversions of profit do not extend the Statute of Limitations (see Amirthmasebi v Benyamini, 306 AD2d 363, 363-364 [2d Dept 2003]; Welwart v Dataware Elecs. Corp., 277 AD2d 372, 373 [2d Dept 2000]). Consequently, plaintiffs' third cause of action is time-barred and must be dismissed (see CPLR 214 [3]).

Plaintiffs' fourth cause of action is for breach of fiduciary duty premised upon the unauthorized sale of Grunfeld's interest in MTS. Plaintiffs do not allege that Kasnett owes a fiduciary duty to them. Assuming that Grunfeld and Kasnett were partners in MTS at the time of Grunfeld's death, and that Kasnett therefore did owe a fiduciary duty to Grunfeld, it is noted that under Partnership Law § 73, the estate of a partner is entitled to the value of a deceased partner's interest if the remaining partners continue the business without any settlement of accounts between the estate and the surviving partner (Partnership Law § 73; see also Birbaum v Birnbaum, 157 AD2d 177, 187 [4th Dept 1990][finding that "the estate is entitled to receive the profits attributable to the [remaining partner's] use of the estate's interest in the partnership, including appreciation in the value of that interest"]). As previously noted, however, it is the executor or administrator of a decedent's estate, not his heirs, that have the authority to recover the estate's personal property (Ponnambalam, 35 AD3d at 573). In this case, because plaintiffs do not allege that Kasnett breached a fiduciary duty to themselves and have not established standing as representatives of Grunfeld's estate, they fail to allege a cause of action for breach of fiduciary duty.

Moreover, any fiduciary duty cause of action brought on behalf of Grunfeld is time-barred. Breach of fiduciary duty is governed by a three-year Statute of Limitations where money damages are sought or a six-year Statute of Limitations where equitable relief is sought (see CPLR 213 [1]; CPLR 214[4]; see also Klein v Gutman, 12 AD3d 417, 419 [2d [*6]Dept 2004]; Kaufman v Cohen, 307 AD2d 113, 118 [1st Dept 2003]). A cause of action for breach of fiduciary duty accrues when the fiduciary openly repudiates his or her obligation (Evangelista v Mattone, 44 AD3d 704, 704 [2d Dept 2007]; see Matter of Barabash, 31 NY2d 76, 80 [1972]; Westchester Religious Inst. v Kamerman, 262 AD2d 131, 131 [1st Dept 1999]; Matter of Winne, 232 AD2d 956, 957-958 [3d Dept 1996]). Plaintiffs contend that Kasnett transferred Grunfeld's interest in MTS in May, 1984 and admitted, by letter dated May 3, 1993, to selling MTS without consulting Grunfeld. Taking the allegations in the complaint as true and resolving all inferences in favor of plaintiff, including the alleged admission contained in the disputed letter of May 3, 1993, Kasnett acknowledged repudiation of any alleged fiduciary duty to Grunfeld no later than 1993 (see Sabadie v Burke, 849 NYS2d 440, 440 {47 AD3d 913} [2d Dept 2008]). Regardless of the nature of the relief sought, the Statute of Limitations for a breach of fiduciary duty cause of action by Grunfeld against Kasnett had clearly run at the time this suit was commenced in 2007. The fourth cause of action must be dismissed.

Plaintiffs' fifth cause of action seeks to impose a constructive trust "on the assets or property realized by Kasnett from the conversion or theft of the business; i.e. the purported sale" (Complaint ¶ 53), including the real property at 4904 16th Avenue in Brooklyn. A cause of action to impose a constructive trust or equitable lien is subject to a six-year Statute of Limitations period (see CPLR 213 [1]; Mazzone v Mazzone, 269 AD2d 574, 574-575 [2d Dept 2000]), which "commences to run upon the occurrence of the wrongful act giving rise to a duty of restitution"(Ponnambalam, 35 AD3d at 574 citing Mazzone, 269 AD2d at 574-75; see also Kitchner v Kitchner, 100 AD2d 954, 954 [2d Dept 1984]). "A determination of when the wrongful act triggering the running of the Statute of Limitations occurs depends upon whether the constructive trustee acquired the property wrongfully, in which case the property would be held adversely from the date of the acquisition" (Morando v Morando, 41 AD3d 559, 561 [2d Dept 2007] [internal quotation marks omitted]; see also Marc Piping v Maric, 271 AD2d 507, 508 [2d Dept 2000]; Augustine v Szwed, 77 AD2d 298, 300-301 [4th Dept 1980]; Bey Constr. Co. v Yablonski, 76 AD2d 875, 876 [2d Dept 1980]), or "whether the constructive trustee wrongfully withholds property acquired lawfully from the beneficiary, in which case the property would be held adversely from the date the trustee breaches or repudiates the agreement to transfer the property" (Morando, 41 AD3d at 561 [internal quotation marks omitted]; see also Marc Piping, 271 AD2d at 508; Sitkowski v Petzing, 175 AD2d 801, 802 [2d Dept 1991]; Augustine, 77 AD2d at 301). Here, it is asserted that the real property was wrongfully acquired by Kasnett by deed dated May 28, 1984, more than six years before this action was commenced (see Mazzone, 269 AD2d at 574-575). Therefore, this cause of action is barred by the Statute of Limitations.

Plaintiffs argue that their fifth cause of action should not be time-barred because they seek the imposition of a constructive trust on all of the profits of the MTS business which continue to accrue to date. This argument must be rejected since, as plaintiffs concede, Kasnett had breached or repudiated his agreement at the time he sold the MTS business [*7]without Grunfeld's permission. The continuing nature of the losses does not affect the running of the statute (see Rabouin, 2005 NY Slip Op 52070 [U],*9). Thus, plaintiffs' fifth cause of action is time-barred (see CPLR 213 [1]).

Plaintiffs further claim that the doctrine of equitable estoppel should be applied here in order to toll the Statute of Limitations for their subject claims. The doctrine of equitable estoppel will prohibit the defendant from raising a Statute of Limitations defense "'where [the] plaintiff was induced by [the defendant's] fraud, misrepresentations or deception to refrain from filing a timely action'" and "the plaintiff . . . reasonabl[y] reli[ed] on the defendant's misrepresentations" (Zumpano v Quinn, 6 NY3d 666, 674 [2006], quoting Simcuski v Saeli, 44 NY2d 442, 449 [1978]; see also Putter v North Shore Univ. Hosp., 7 NY3d 548, 552-553 [2006]; Ponterio v Kaye, 25 AD3d 865, 868 [3d Dept 2006]; Doe v Holy See [State of Vatican City],17 AD3d 793, 794 [3d Dept 2005]; Pecoraro, 11 AD3d at 952). In order to invoke the doctrine of equitable estoppel, the plaintiff has "to establish that subsequent and specific actions by [the] defendant[ ] somehow kept [him or her] from timely bringing suit" (Zumpano, 6 NY3d at 674; see also Pahlad v Brustman, 8 NY3d 901, 902 [2007]; Putter, 7 NY3d at 552; Doe, 17 AD3d at 794). Plaintiffs argue, as a basis for invoking the doctrine of equitable estoppel, that Kasnett promised to repair the harm to Grunfeld in his May 3,1993 letter to Grunfeld. This letter, however, was written over 15 years ago (and while Grunfeld was still alive) and, thus, it cannot reasonably have continued to lull plaintiffs, during all of this time, into believing that Kasnett was going to make reparations.

Plaintiffs also contend, as a basis for equitable estoppel, that the agreement between Kasnett, Rosengarten, and Grunfeld required them to submit their disputes to arbitration before a religious tribunal, i.e., a Bes Din. They argue that Kasnett lured them into believing that he would appear before the Bes Din. This argument, however, must be rejected since plaintiffs do not allege that Kasnett had ever stated that he would appear before the Bes Din, nor has any written evidence of an agreement to arbitrate been supplied. Rather, plaintiffs assert that Kasnett has flagrantly refused to adjudicate the matter before a Bes Din and that there have even been "[r]abbinic contempt citations" issued. Thus, inasmuch as plaintiffs do not allege any specific misrepresentations by Kasnett which would have prevented them from commencing suit in a timely fashion, and as they had " timely awareness of the facts requiring [them] to make further inquiry before the [S]tatute of [L]imitations expired,'. . . an equitable estoppel defense to the [S]tatute of [L]imitations is . . . inappropriate as a matter of law'" (Pahlad, 8 NY3d at 902, quoting Putter, 7 NY3d at 553-554; see also Fromer v Fromer, 17 Misc 3d 1106 [A], 2007 NY Slip Op 51848 [U],*7 [2007]). Therefore, dismissal of plaintiffs' third, fourth, and fifth causes of action is required (see CPLR 3211 [a] [5]). [*8]

Accordingly, Kasnett's motion for an order, pursuant to CPLR 3211, dismissing plaintiffs' third, fourth, and fifth causes of action as against him, is granted. Counsel shall appear for conference in Commercial I at 11:00 am on April 2, 2008.

This constitutes the decision and order of the court.

E N T E R,

J. S. C. Footnotes

Footnote 1: The notice of motion was initially also brought by David Rosengarten (Rosengarten) and David Mandel (Mandel), who were originally named as defendants in plaintiffs' complaint, and the notice of motion had additionally sought the dismissal of plaintiffs' sixth cause of action and an order cancelling or vacating a notice of pendency which had been filed on June 12, 2007. Plaintiffs' sixth cause of action had requested a notice of pendency and an order enjoining the sale of real property, located at 4904 16th Avenue, in Brooklyn, New York. Plaintiffs predicated this sixth cause of action upon their allegation that Kasnett had received a one-third interest in that real property in return for relocating the business (in which plaintiffs claim an interest and which is the subject of this action) at that location. Plaintiffs had asserted this sixth cause of action against Rosengarten and Mandel on the sole basis that they were co-owners, as joint tenants with Kasnett, of this real property. The June 12, 2007 notice of pendency was cancelled by this court on September 26, 2007 (see CPLR 6501; 5303 Realty Corp. v O & Y Equity Corp., 64 NY2d 313, 322-323 [1984]). Plaintiffs withdrew their sixth cause of action at the oral argument of the motion, and they acknowledged, at that time, that dismissal of their sixth cause of action eliminates Rosengarten and Mandel from this action.

Footnote 2: Kasnett claims that this letter is a forgery by Greenfield. Greenfield, in response, denies this.