Opinion
652505/2019
07-21-2020
Richard BENSON-ARMER, Plaintiff, v. Anna SCHUCHMANN and RALEA Holding Corporation, Defendants.
Pashman Stein Walder Hayden PC, Hackensack, NJ (Joseph A. D'Avanzo of counsel), for plaintiff. Gertler Law Group LLC, Jericho, NY (Peter Richard Barbieri and Richard Glenn Gertler of counsel), for defendants.
Pashman Stein Walder Hayden PC, Hackensack, NJ (Joseph A. D'Avanzo of counsel), for plaintiff.
Gertler Law Group LLC, Jericho, NY (Peter Richard Barbieri and Richard Glenn Gertler of counsel), for defendants.
Gerald Lebovits, J.
Plaintiff, Richard Benson-Armer, was in a relationship with defendant Anna Schuchmann. This action involves a dispute between Benson-Armer, Schuchmann, and defendant RALEA Holding Corporation over loans Benson-Armer allegedly made to Schuchmann during their relationship, and Benson-Armer's pieces of art that Schuchmann allegedly converted after the relationship ended.
Benson-Armer's complaint asserts six causes of action, sounding in breach of contract, unjust enrichment, conversion, and replevin. Defendants now move to dismiss all six claims—the first and second and fifth and sixth under CPLR 3211 (a) (7), and the third and fourth under CPLR 3211 (a) (5).
The motion to dismiss is denied in its entirety.
BACKGROUND
Plaintiff and Schuchmann had a personal relationship from 2002 to 2015. Although the parties never married, they combined their finances from 2003 to 2008 and lived together until 2015. Plaintiff was the household's primary income earner. The parties have a son together, and each has daughters from previous relationships.
In July 2004, plaintiff and Schuchmann moved into three New York City cooperative apartments that Schuchmann possessed before the parties dated. Plaintiff alleges that to facilitate the move, the parties entered into a series of oral contracts in which he agreed to lend money to Schuchmann to pay off the mortgages on two of the cooperative apartments and to combine all three into a single cooperative. In return, plaintiff alleges, Schuchmann agreed to repay those loans upon her sale or disposition of the cooperatives.
Plaintiff claims that in May 2004 he lent Schuchmann $250,278.79 to pay the remainder of the mortgage on Apartment 304 at the Westmore, an apartment building on West 57th Street in Manhattan; and that in July 2004 he lent Schuchmann $320,000.00 to pay the remainder of the mortgage on Apartment 305 in the Westmore. Plaintiff also claims that from October 2004 to May 2005, he lent Schuchmann $451,786.00 to carry out construction and renovation work to combine Apartments 303, 304, and 305 for a shared family living space.
Plaintiff now alleges that in April 2015, Schuchmann sold the three apartments without notifying plaintiff and has since failed to repay him for the three loans, as she had (assertedly) contracted orally to do. (See NYSCEF No. 39 at 8.) Schuchmann denies that she entered into oral contracts with plaintiff about the apartments. She claims that plaintiff made the payments as a family expenditure. (See NYSCEF No. 32 at 8-10.)
Plaintiff further claims that in April 2008, he lent Schuchmann (individually or in her capacity as a RALEA officer and shareholder) $325,000.00 to buy certain real property located in California. Schuchmann allegedly agreed that she would repay the loan upon sale or disposition of the property. (See NYSCEF No. 39 at 9.) Plaintiff asserts that both RALEA and Schuchmann, individually and as a corporate officer and shareholder, are in anticipatory breach of their loan agreement. Schuchmann again denies the existence of any oral contract.
In this action, plaintiff also seeks to recover five pieces of art from Schuchmann: two framed lithographs by Nelson Mandela, known as "The Window" and "Hand of Africa," and three framed 3-D construction works by James Rizzi, known as "Uptown, Downtown, Eastside, Westside," "The Big Apple is Big on Good Food," and "You Can't Destroy Freedom." The parties previously owned the works of art together in a shared Harlem townhouse. (See NYSCEF No. 39 at 9.) In May 2015, as their personal relationship was ending, plaintiff moved out of the main residence of the townhouse and into its garden-level apartment. The artwork remained in the main residence. (See NYSCEF No. 39 at 9.)
Plaintiff alleges that in July 2016, Schuchmann vacated the townhouse and removed the five pieces of art without notifying him. Plaintiff further alleges that Schuchmann refused to return the artwork despite written demands to her (and her counsel) made in July and August 2016.
Plaintiff has sued Schuchmann and RALEA, asserting six causes of action: (i) breach of contract for the cooperative-apartment loans, for which he seeks $1,022,064 (plus interest) in damages; (ii) anticipatory breach of contract for the California loan, for which he seeks $325,000 (plus interest) in damages; (iii) replevin with respect to the five works of art (under which he seeks an order for their return); (iv) conversion with respect to the five works of art (under which he seeks damages); (v) unjust enrichment for the cooperative-apartment and California loans; (vi) imposition of a constructive trust over the amounts of the cooperative-apartment and California loans and over proceeds from the sale of the cooperative apartments.
Defendants move to dismiss the first and second causes of action, and the fifth and sixth causes of action, on the grounds that they fail to state a cause of action under CPLR 3211 (a) (7). And defendants move to dismiss the third and fourth causes of action under CPLR 3211 (a) (5) as untimely.
The motion to dismiss is denied.
DISCUSSION
I. The Branch of Defendants' Motion Seeking Dismissal of Benson-Armer's First and Second Causes of Action
Defendants move under CPLR 3211 (a) (7) to dismiss the first and second causes of action, which sound in breach of contract, for failure to state a cause of action.
A court considering a CPLR 3211 (a) (7) motion must "accept the facts as alleged in the complaint as true, accord plaintiffs the benefit of every possible inference, and determine only whether the facts as alleged fit within any cognizable legal theory." ( Leon v. Martinez, 84 NY2d 83, 87-88 [1994].) A defendant seeking dismissal under CPLR 3211 (a) (7) may submit documentary evidence in support of the motion to dismiss. (See Rovello v. Orofino Realty Co. , 40 NY2d 633 [1976].)
To state a breach-of-contract claim, a plaintiff must allege facts that sufficiently demonstrate the existence of a contract, the plaintiff's performance of the contract, the defendant's breach of the contract, and the resulting damages. (See Harris v. Seward Park Housing Corp. , 79 AD3d 425, 426 [1st Dept 2010].) An oral agreement may be enforceable "as long as its terms are clear and definite and the conduct of the parties evinces mutual assent sufficiently definite to assure that the parties are truly in agreement with respect to all material terms." ( Kramer v. Greene , 142 AD3d 438, 439 [1st Dept 2016] [internal quotation marks omitted].)
On the first cause of action, Benson-Armer asserts that Schuchmann breached the oral loans he made to her for the three cooperative apartments. On the second cause of action, he asserts that Schumann and RALEA are in anticipatory breach of the oral loan agreements regarding the California property. Schuchmann contests the sufficiency of Benson-Armer's allegations with respect to both loans. She also argues that Benson-Armer is judicially estopped even from claiming that he made any loans to her and to RALEA in the first place. This court concludes that Schuchmann's arguments regarding the loans are unpersuasive and that Benson-Armer's first two claims state a cause of action.
Benson-Armer's amended complaint alleges in support of the first cause of action that he lent Schuchmann money to pay for the mortgages and renovations at the three cooperative apartments; and that this loan was made on the (oral) understanding that she would repay him upon the sale or disposition of the properties. The parties agree that plaintiff paid for the mortgages and renovations and that Schuchmann sold the properties. Schuchmann contests only the existence of the loans. She claims she never would have agreed to an oral contract for loans because of the parties' shared financial situation. (See NYSCEF No. 32 at 8-9.) But that contention, standing alone, merely challenges the factual veracity of the allegations in Benson-Armer's complaint. This challenge would be a proper basis on which to grant a motion to dismiss at the pleading stage only if Schuchmann were to provide documentary evidence flatly contradicting the relevant allegations. (See Mark Hampton, Inc. v. Bergreen , 173 AD2d 220, 220-221 [1st Dept 1991].) She has not done so.
Schuchmann contends that Benson-Armer's second cause of action, for anticipatory breach of contract as to the California loan, has not sufficiently alleged a claim against her personally, in addition to RALEA. Schuchmann argues that she "did not purchase and does not own" the property bought with that alleged loan, and thus cannot be held personally liable on the loan. (NYSCEF No. 32 at 11.) To support this argument, she submits the California property deed, which is solely in RALEA's name. (See NYSCEF No. 34.)
Benson-Armer's second cause of action, however, does not allege that he loaned money to the "owner" of the California property. Instead, he alleges that he lent money to Schuchmann, "individually and/or in her capacity as officer and shareholder of RALEA Holding," to enable the purchase of the California property; and that the purchase was intended solely to afford Schuchmann's uncle with a rent-free residence (rather than for a legitimate business purpose). (NYSCEF No. 15 at 3-4.) Schuchmann has not introduced documentary evidence to definitively support her argument that her "involvement in the purchase" of the property instead "entirely in her capacity as the owner and officer of RALEA Holdings, not in her individual capacity." (NYSCEF No. 32 at 11.) The motion to dismiss the second cause of action on this ground is denied.
Defendants' judicial estoppel argument is based on prior Family Court litigation between Schuchmann and Benson-Armer. In 2016, Schuchmann sued Benson-Armer in Family Court for child support for their son. In that action, both parties submitted financial-disclosure affidavits that detailed their income, assets, and liabilities. Benson-Armer's calculation of income in his financial disclosure did not include the loans. Family Court, taking these financial disclosures into account, made an award of monthly child support to Schuchmann. Schuchmann argues now that Benson-Armer's omission of the loans from his financial disclosure judicially estops him from claiming in this action that he made the loans (and is entitled to damages for breach of the loan agreements). (See NYSCEF No. 32 at 7-8.) This court disagrees. Benson-Armer was not legally required to have included the loans in his financial disclosure; and he is not judicially estopped.
Judicial estoppel "precludes a party who assumed a certain position in a prior legal proceeding and who secured a judgment in his or her favor from assuming a contrary position in another action simply because his or her interests have changed." ( All Terrain Props. v. Hoy , 265 AD2d 87, 93 [1st Dept 2000] [internal quotation marks omitted).)
Here, the prior position on which Schuchmann relies was Benson-Armer's (asserted) failure to disclose certain income (the loans)—that is, his silence. But absent some obligation to disclose the loans, omitting them ordinarily would not be "sufficient to establish taking a position" in the Family Court proceeding. ( Matter of Estate of Costantino , 67 AD3d 1412, 1413 [4th Dept 2009].) This court concludes on this record that no such obligation existed.
In the Family Court proceeding, plaintiff was required to make a sworn statement of net worth—"the amount by which total assets including income exceed total liabilities including fixed financial obligations" and "shall include all income and assets of whatsoever kind and nature." (Family Court Act (FCA) § 424-a.) The calculation of income in a child-support action is determined under FCA § 413. In determining income derived from loans made by a parent, the court must look to the parent's "investment income reduced by sums expended in connection with such investment." ( Family Court Act § 413 [1] [b] [5] [ii].) And the "principal amounts of those loans" are considered "sums expended in connection with such investment." ( Fendick v. Fendick , 96 AD3d 1554, 1555 [4th Dept 2012] [internal quotation marks omitted].)
Thus, Benson-Armer's income derived from the (alleged) loans would not have been the face value of the loans themselves. Instead, it would have been limited to the interest, if any, that Schuchmann paid when repaying the principal amounts of the loans. And at the time of the Family Court case, Schuchmann had not repaid the alleged loans. In fact, plaintiff alleges that he did not yet know that Schuchmann had sold the cooperative apartments. (See NYSCEF No. 39 n. 4.) Thus, at the time of the disclosure, Benson-Armer's income from the loans for statutory purposes would have been $0. His omission of the loans from the disclosure does not qualify as having taken a position in a prior judicial proceeding—let alone one contrary to his present position. And the court's conclusion on this point is further strengthened by the fact that the standardized form plaintiff submitted for his financial disclosure did not require the disclosure of loans for which he was a creditor. (See NY Child Support Form 4-17.)
To be sure, the form did require a party to disclose loan obligations . (See NY Child Support Form 4-17 at 2.) But this court declines to hold that Benson-Armer is judicially estopped by his failure to challenge Schuchmann's (asserted) lack of disclosure of her indebtedness to him during the Family Court proceeding.
Benson-Armer is not judicially estopped from claiming that he loaned money to Schuchmann and RALEA and is entitled to damages for their (alleged) breaches of the loan agreements.
II. The Branch of Defendants' Motion Seeking Dismissal of Benson-Armer's Fifth and Sixth Causes of Action
As an alternative to the oral-contract claims in Benson-Armer's first and second causes of action, his fifth cause of action seeks damages for defendants' unjust enrichment in the amount of $1,347,064.79 for the four loans. Benson-Armer's sixth cause of action seeks a constructive trust over the alleged amount of the four loans (plus any additional proceeds from the sale of the cooperative apartments).
Defendants contend that these two causes of action should be dismissed on judicial-estoppel arguments. This contention fails for the reasons given above. Nor are these claims impermissibly duplicative of Benson-Armer's breach-of-contract claim for pleading purposes, given the "bona fide dispute as to the existence of a contract ... in the dispute in issue." ( Kramer v. Greene , 142 AD3d 438, 441-42 [1st Dept 2016].) Defendants' motion to dismiss Benson-Armer's fifth and sixth causes of action is denied.
III. The Branch of Defendants' Motion Seeking Dismissal of Benson-Armer's Third and Fourth Causes of Action
Plaintiff's third cause of action seeks an order of replevin mandating that Schuchmann return five artworks. Alternatively, Benson-Armer's fourth cause of action, sounding in conversion, seeks damages against Schuchmann in the event that she has sold or otherwise disposed of the artworks. (See NYSCEF No. 15 at 8.) Schuchmann moves under CPLR 3211 (a) (5) to dismiss these claims as barred by the statute of limitations. This court concludes that Schuchmann fails to establish at the pleading stage that Benson-Armer's replevin and conversion claims are untimely.
A defendant moving to dismiss under CPLR 3211 (a) (5) bears the burden of establishing when the applicable limitations period expired. In considering the motion, a court must take the allegations in the complaint as true and resolve all inferences in the plaintiff's favor. (See Benn v. Benn , 82 AD3d 548, 548 [1st Dept 2011].)
The statute of limitations for claims in replevin and conversion is three years from accrual. (See CPLR 214 [3].) When a party lawfully possesses the property at issue, a replevin or conversion claim against that party does not accrue until the (assertedly) true owner makes a demand for the return of the property and is refused. (See Employers' Fire Ins. Co. v. Cotton , 245 NY 102, 105-106 [1927] ; Cutler-Hammer, Inc. v. Troy , 283 AD 123, 125 [1st Dept 1953] ; accord Swain v. Brown , 135 AD3d 629, 631 [1st Dept 2016].) A claim "against a bad faith possessor," on the other hand, accrues "immediately from the time of wrongful possession," without need for "a demand and refusal." ( Swain , 135 AD3d at 631.)
Where "replevin is sought against the party who converted the property, the action accrues on the date of conversion." (Swain , 135 AD3d at 631 [internal quotation marks omitted].)
Here, Benson-Armer commenced this action on April 30, 2019. (See NYSCEF No. 1.) Thus, his replevin and conversion claims are timely if they accrued on or after April 30, 2016.
Plaintiff alleges that during the parties' relationship, the art at issue was in the main residence of the parties' shared Harlem townhouse. Plaintiff alleges that although he moved to the garden-level apartment of the townhouse in May 2015, he did not thereby relinquish ownership of—or access to—the artworks. (See NYSCEF No. 15 at 6-7.) Instead, plaintiff allegedly continued to enjoy full, unrestricted access to the art until July 2016, when Schuchmann allegedly moved out of the townhouse and took the artworks with her without first notifying plaintiff. (Id. at 7.) Plaintiff also alleges that he and his attorney made written demands for return of the art in July and August 2016, and that Schuchmann did not return the art upon demand.
On the allegations of plaintiff's complaint, Benson-Armer's causes of action in replevin and conversion accrued no earlier than July 2016—the point at which Schuchmann is alleged to have first interfered with Benson-Armer's access to the artworks. (See State v. Seventh Regiment Fund, Inc. , 98 NY2d 249, 259-260 [2002] [discussing accrual of claims for conversion].) Benson-Armer's claims therefore are timely.
Schuchmann argues that Benson-Armer's claims accrued no later than September 2015—the point at which, according to her, Benson-Armer had moved out of the townhouse into the garden apartment, retrieved property from the townhouse except the five artworks at issue, and no longer had access to that art. (See NYSCEF No. 32 at 13.) She contends, in essence, that if a conversion occurred, it had to have occurred in 2015 when she first denied Benson-Armer access to the art such that a further demand-and-refusal would have been superfluous. (Cf. Cotton , 245 NY at 106 [holding that the demand-and-refusal requirement does not apply when the defendant already "had full information relating to her own defect in title and the identity of the true owner"].)
This argument, though, relies on rejecting the factual allegations of the complaint—particularly the allegation that Benson-Armer retained full access to the artwork from May 2015 to July 2016. Doing so is not appropriate on a CPLR 3211 motion to dismiss in the absence of documentary evidence that clearly contradicts Benson-Armer's allegations. On this record, Schuchmann has not established that Benson-Armer commenced the action more than three years after accrual of his claims in replevin and conversion.
Although Schuchmann asserts that Benson-Armer's allegation that he still had access to the artwork is "directly contradicted by evidence" (NYSCEF No. 32 at 13 ), this court does not perceive a direct contradiction between the complaint's allegations and the evidence cited by Schuchmann (see id. at 13-14).
Accordingly, it is hereby
ORDERED that defendants' motion to dismiss under CPLR 3211 is denied.