Opinion
No. 303920/10.
2013-04-4
KS, Plaintiff, v. ES, Defendant. ES, Counterclaim and Cross-claim Plaintiff, v. KS, the Bank, and WS, Counterclaim and Cross-claim Defendants.
Jason Advocate, Advocate & Lichtenstein, LLP, New York City, for plaintiff. Peter Bronstein, Bronstein Van Veen LLC, New York City, for defendant.
Jason Advocate, Advocate & Lichtenstein, LLP, New York City, for plaintiff. Peter Bronstein, Bronstein Van Veen LLC, New York City, for defendant.
Daniel F. Flores, Wilson Elser Moskowitz Edelman & Dicker LLP, New York City, for cross-claim defendant, the Bank.
J. Gregory Saver & Abigail Snow, Satterlee Stephens Burke & Burke LLP, New York City, for cross claim defendant, WS.
ELLEN FRANCES GESMER, J.
This is a divorce action. By order dated December 5, 2011, the court granted leave to defendant ES (Wife) to: (1) file a Second Amended Answer; (2) join as party defendants the Bank, which has security interests in the former marital residence (the Apartment), and WS, the general counsel for a business owned by plaintiff KS (Husband), SE, LLC; and (3) to modify the caption as above.
On motion sequence 13, the Husband seeks an order pursuant to CPLR §§ 3211(a)(7) and 3016(b) dismissing the Wife's First through Sixth counterclaims, and her requests for counsel fees and punitive damages, in her Second Amended Answer.
FACTS
As this court has previously noted in its several pendente lite decisions and orders, the Husband and Wife were married on May 31, 1987. They have two sons, S, born on June 5, 1991 (now 21) and O, born on September 11, 1994 (now 18). The Husband is a successful real estate developer, although he claims to have fallen on hard times in recent years. The Wife is a homemaker and socialite, and is also the daughter of another prominent and successful real estate developer.
The Apartment
In January 2002, the Wife became the sole titled owner of the Apartment, which was the primary residence of the Wife, the Husband and their children until the parties separated in or about March 2010. The Apartment continues to be the Wife's and O's primary residence. It has been valued at approximately $26,000,000.
The 2007 Consolidation Loan
It is undisputed that, in or about November 2002, the Husband and the Wife executed two promissory notes totaling $5,000,000 with UST,
each of which was secured by a lien against the Apartment pursuant to a security agreement. On or about August 1, 2007, these notes were consolidated into a single UST note secured by a lien against the Apartment pursuant to a security agreement (the 2007 Consolidation Loan). The 2007 Consolidation Loan provided for the repayment to the Bank of approximately $4,800,000, with interest, over 30 years.
UST is the predecessor in interest to the Bank.
The SLC Security Agreement
It is also undisputed that, on March 15, 2006, the Bank issued a standby letter of credit (SLC) in the amount of $9,500,000 on the Husband's behalf in favor of the surety company for whom the Husband acted as indemnitor on a real estate development project. The SLC was secured by the Apartment pursuant to a security agreement dated September 23, 2005 (the SLC Security Agreement).
However, in her Second Amended Answer, the Wife claims that the Husband forged her signature on the SLC Security Agreement, and that she was not aware that it existed until approximately four years later, after commencement of this divorce action, when she received financial discovery in or about late 2010. In her affidavit on this motion, she also alleges that the Husband forged her signature on the accompanying Assignment of Lease and UCC–1 Authorization in connection with the SLC Security Agreement. The Husband denies the Wife's claim, and further claims that the SLC Security Agreement was, in any event, cancelled and returned by the beneficiary on October 10, 2008, without the beneficiary ever drawing down on the SLC.
At oral argument of this motion, the Wife's attorneys admitted that they had, by then, determined that the Wife had not suffered any damages as a result of the SLC Security Agreement.
The Bank and WS also took this position at oral argument of all three pending motions to dismiss the Wife's counter- and cross-claims.
Other Bank Loans
It is undisputed that the parties have experienced financial difficulties as a result of the downturn in the economy generally, and in the real estate market in particular, at the end of 2008. The Wife alleges that, by the end of 2008, the Husband had “certain sizeable loans [that were] improperly underwritten, or were not properly secured” with the Bank. The Husband does not specifically deny this, except to the extent that he claims that the SLC was not such a loan, as discussed above. Indeed, in his affidavit in support of the instant motion, he states that he had two unsecured loans with the Bank at the end of 2008, one for approximately $10,000,000, and another for approximately $2,500,000 (the Other Bank Loans).
The 2009 Loan
It is undisputed that, on January 6, 2009, each party executed a Durable General Power of Attorney in favor of WS (the POA), authorizing him to act on each party's behalf in connection with:
the execution and delivery of note, security agreement, UCC financing statement and all other documents necessary or appropriate in connection with a $12.8 MM loan made by the Bank to KS and ES secured by 845 shares of stock of the 740 Corporation allocated to [the Apartment], NY, N.Y. and the proprietary lease appurtenant thereto.
WS then attended the closing of a loan by the Bank in the amount of $12,800,000 secured by the Apartment (the 2009 Loan). Neither party attended the closing.
The Wife alleges in her Second Amended Answer that the Husband approached her in January 2009, and “lied to her and represented to [her] that the $12.8 million proceeds would refinance on advantageous terms the existing 2007 Consolidation loan, and that the remaining approximately $8 million in proceeds would be used as a sort of home equity loan, which the family could use to tide them over through the bad market.” The Wife claims that the Husband purposefully misled her to believe that the proceeds of the 2009 Loan would be used to pay off the 2007 Consolidation Loan, and deliberately kept from her that the 2007 Consolidation Loan would remain in place as a first lien against the Apartment, bringing the total amount of liens secured by the Apartment to over $17,000,000. The Wife further claims that she “trusted her [H]usband, who was solely responsible for handling the family's finances,” and that she “relied entirely on her [H]usband for all financial matters including those affecting the family” at that time. She claims that she “relied on his representations [about the 2009 Loan] but never would have done so” had she been aware that her signature had been forged on the SLC Security Agreement (and related documents), as alleged above. As a result of her trust and reliance, the Wife executed the POA. The Husband denies the Wife's claims.
It is undisputed that the 2009 Loan constitutes a second lien on the Apartment, that the proceeds were not used to pay off the 2007 Consolidation, but were instead used to pay off other existing loans that the Bank had made to the Husband,
except for $134,581 which went to the Bank as a fee in connection with the 2009 Loan, and $127,943.38, which went to the Husband. The Husband claims that the terms of the 2009 Loan are more favorable than the terms of the previously existing loans that were paid off by the 2009 Loan.
The Wife's Second Amended Answer states variously that the proceeds of the 2009 Loan were used to benefit the Husband and the Bank
He further claims that when he told the Wife that the 2009 Loan would benefit the family, he was referring to it being on more favorable terms than his other debts to the Bank, and not claiming either that the 2009 Loan would refinance the 2007 Consolidation Loan or provide cash to pay household expenses. However, the court cannot consider these factual claims on a motion to dismiss.
Events Following the 2009 Loan
The Wife alleges that, commencing in June 2009, the Husband stopped supporting her and the parties' children.
On October 30, 2009, the parties entered into a postnuptial agreement (the Postnuptial Agreement), in which they agreed, inter alia, that: (1) all property titled in the Wife's sole name on or after the date of execution, including the Apartment, shall be her separate property; (2) the Husband waived any right to such property; (3) in consideration for the Husband's “having encumbered ... 50% of the [Apartment], in contradiction of [the Wife's] wishes,” the Husband “has the full and sole responsibility for all the indebtedness on ... [the Apartment, and] further agrees to hold the Wife free and harmless from and indemnified against all debts, charges, obligations, liabilities and costs in connection with the indebtedness on [the Apartment],” unless it is sold and the debt is paid off. The Wife claims that the Postnuptial Agreement's reference to the Husband's having encumbered the Apartment against her wishes is an admission by the Husband of his wrongdoing in connection with the 2009 Loan.
On March 31, 2010, the Husband commenced the divorce action.
As this court found in its decision and order dated March 14, 2011, on March 1, 2010, the parties entered into another agreement (the Move-out Agreement), pursuant to which: (1) the Husband agreed to move out of the marital apartment; (2) each party agreed to be responsible for charges on credit cards in his or her sole name; and (3) the Wife agreed to make various payments to the Husband and on his behalf. The Move-out Agreement states that “the Wife represents that she is borrowing from her parents the sums necessary to make the payments to, and on behalf of, the Husband called for in this Agreement” and that the Wife's payments under the Move-out Agreement “are without prejudice to either party's claim that they are entitled to support from the other, and neither party may use these payments as evidence, or otherwise rely on these payments, to establish a right to support, or ability to pay support, in the future.”
On or about May 31, 2011, the Bank sent default letters to the Wife and the Husband regarding the 2007 Consolidation Loan and the 2009 Loan.
As this court found in its decision and order dated December 5, 2011, on June 17, 2011, the Bank filed an action in the U.S. District Court seeking declaratory relief that it has a first priority security interest lien against the Apartment. The Federal Court later dismissed the action on the grounds of abstention because of the pending New York State Supreme Court action before this court.
By order dated March 14, 2012, this court directed the Husband to: (1) pay to the Wife $5,000 per month as temporary child support, retroactive to September 1, 2010, plus $2,000 per month toward the carrying costs of the Apartment and a vacation home; (2) pay 40% of all tuition and school related expenses for the parties' children; and (3) maintain and continue in full force and effect all policies of life, medical and dental insurance that existed on the date of commencement of this action on behalf of the Wife and the parties' children.
The Wife's Second Amended Answer, dated December 16, 2011, interposes the following counterclaims against the Husband:
First Counterclaim: breach of fiduciary duty with regard to the SLC Security Agreement and the 2009 Loan, for which she seeks money damages equal to: all interest, fees, penalties and other costs associated with the SLC Security Agreement; all liens on the Apartment resulting from the 2009 Loan and all interest, fees, penalties and other costs related to such liens; attorneys' fees incurred in litigation in connection with the Wife's litigation as to the SLC Security Agreement and the 2009 Loan; attorneys' fees paid to WS with regard to the 2009 Loan; and punitive damages.
Second Counterclaim: aiding, abetting and conspiring with WS' breach of fiduciary duty in connection with the 2009 Loan, for which she seeks money damages in an amount equal to: all liens on the Apartment resulting from the 2009 Loan and all interest, fees, penalties and other costs related to such liens; attorneys' fees incurred in litigation in connection with the Wife's litigation regarding the 2009 Loan; attorneys' fees paid to WS with regard to the 2009 Loan; and punitive damages.
Third Counterclaim: fraud in connection with the 2009 Loan, for which she seeks money damages in an amount equal to: all liens on the Apartment resulting from the 2009 Loan and all interest, fees, penalties and other costs related to such liens; attorneys' fees incurred in litigation in connection with the Wife's litigation regarding the 2009 Loan; and attorneys' fees paid to WS with regard to the 2009 Loan.
Fourth Counterclaim: Conversion in connection with the SLC Security Agreement and the 2009 Loan, for which she seeks the same relief sought on her First Counterclaim.
Fifth Counterclaim: Unjust Enrichment in connection with the SLC Security Agreement and the 2009 Loan, for which she seeks imposition of a constructive trust on assets worth a total of $2,635,750.77 plus statutory interest; and punitive damages.
Sixth Counterclaim: Necessaries in connection with the Husband's alleged failure to support her and their children from June 2009 until entry of an order of child and spousal support, for which she seeks money damages “in an amount which is not presently determinable but which will be proved at the trial ... together with interest.”
ANALYSIS
On a motion to dismiss for failure to state a cause of action, the court must treat all allegations in the complaint as true, and give every favorable inference to plaintiffs to determine “whether the facts alleged fit within any cognizable legal theory” (Morone v. Morone, 50 N.Y.2d 481, 484 [1980];see also Lawrence v. Miller, 11 NY3d 588 [2009];Rovello v. Orofino Realty, 40 N.Y.2d 633 [1976];Blonder & Co., Inc. v. Citibank N.A., [1st Dept 2006] ). The court may also consider facts in the affidavit of the party opposing a motion to dismiss (Leon v. Martinez, 84 N.Y.2d 83 [1994];Rovello, supra ).
The Husband claims that the Wife failed to plead with the requisite particularity her first counterclaim for breach of fiduciary duty, her second counterclaim for aiding and abetting WS' breach of fiduciary duty, and her third counterclaim for fraud, as required by CPLR § 3016(b).
To make out a cause of action for fraud, the claimant must allege: (1) a representation of material fact; (2) the falsity of such fact; (3) scienter; and (4) justifiable reliance upon the misrepresentation resulting in injury (Small v. Lorillard Tobacco Co., 94 N.Y.2d 43, 57 [1999] ). To make out a cause of action for breach of fiduciary duty, the claimant must allege: (1) the existence of a fiduciary relationship; (2) misconduct; and (3) that the misconduct directly caused claimant's damages ( Daly v. Kochanowicz, 68 AD3d 78, 94 [2d Dept 2009] ). To make out a cause of action for aiding and abetting a breach of fiduciary duty, a party must allege: (1) a breach of fiduciary duty; (2) that the party against whom the claim is made knowingly induced or participated in the breach; and (3) damages resulting therefrom (Bullmore v. Ernst & Young Cayman Islands, 45 AD3d 461 [1st Dept 2007] ).
Where claims are based on “misrepresentation, fraud, mistake, wilful default, breach of trust or undue influence, the circumstances constituting the wrong shall be stated in detail” (CPLR § 3016[b] ). However, the Court of Appeals has stated that:
[t]he purpose of section 3016(b)'s pleading requirement is to inform a defendant with respect to the incidents complained of,' thus, [w]e have cautioned that section 3016(b) should not be so strictly interpreted as to prevent an otherwise valid cause of action in situations where it may be impossible to state in detail the circumstances constituting a fraud.' What is [c]ritical to a fraud claim is that a complaint allege the basic facts to establish the elements of the cause of action,' and although under CPLR 3016(b) the complaint must sufficiently detail the allegedly fraudulent conduct, that requirement should not be confused with unassailable proof of fraud.' Necessarily, then, section 3016(b) may be met when the facts are sufficient to permit a reasonable inference of the alleged conduct.'
(Sargiss v. Magarelli, 12 NY3d 527, 530 [2009] [quoting Pludeman v. Northern Leasing Sys., Inc., 10 NY3d 486, 491–492 [2008]];see also Houbigant, Inc. v. Deloitte & Touche LLP, 303 A.D.2d 92, 97–98 [1st Dept 2003] ).
With regard to the Wife's first through third counterclaims, the Husband argues that the Wife's pleadings fail to identify: (1) the nature of the Husband's alleged misrepresentations to her; (2) the time, place, and/or method of the alleged misrepresentations; (3) that she justifiably or reasonably relied on the Husband's alleged misrepresentations; and (4) the exact nature of her damages.
The court disagrees. The Second Amended Answer clearly alleges that the Husband “lied to her and represented to [her] that the $12 .8 million proceeds would refinance on advantageous terms the existing 2007 Consolidation loan, and that the remaining approximately $8 million in proceeds would be used as a sort of home equity loan, which the family could use to tide them over through the bad market;” that he did not tell her that the 2009 Loan would constitute a second lien on the Apartment, and that the proceeds would not be available for use by the family; that he obtained the SLC with a document on which he knew or should have known that her signature was forged; that he did not tell her that her signature had been forged on the SLC documents; and that he did not tell her that WS had a conflict of interest in acting as her attorney in fact, when the Husband approached her about the 2009 Loan and had her sign the POA. Therefore, her pleadings adequately state the nature of the Husband's alleged misrepresentations to her.
The Husband also argues that the Wife misunderstood what the Husband said to her about the 2009 Loan, and that when he told her that it would benefit' the family, he meant something other than that it would pay off the 2007 Consolidation Loan and make cash available to pay living expenses. However, that factual claim is not an appropriate basis for a motion to dismiss, where the only question is whether the pleadings make out a cause of action.
The Second Amended Answer states that the Husband's communication with the Wife about the 2009 Loan took place in January 2009. Therefore, the Wife's pleadings adequately state the time when the Husband made the alleged misrepresentations. Furthermore, the court disagrees with the Husband that the case he cites stands for the proposition that a pleading claiming fraud must state the method and/or place of the misrepresentation or be dismissed. In Eastman Kodak Co. v. Roopak Enter. (202 A.D.2d 220 [1st Dept 1994] ), the Appellate Division in the First Department found that a pleading failed to state a cause of action for fraud on three different bases, including that the pleadings did not state which of Eastman Kodak's numerous employees made the alleged misrepresentations, or where or when they were made ( id. at 222). However, the same court has upheld pleadings missing the time and place of the alleged misrepresentation where they provide “sufficient detail to inform defendants of the substance of the claims' “ (Kaufman v. Cohen, 307 A.D.2d 113, 120 [1st Dept 2003][quoting Bernstein v. Kelso & Co., 231 A.D.2d 314, 320 [1st Dept 1997]; see also Braddock v. Braddock, 60 AD3d 84, 99 [1st Dept 1997] [“a mere failure to plead with the ordinarily required particularity may sometimes be excused,” provided the elements of fraud can be made out from the pleading] ).
Here, the Wife's use of the word “approached” in her pleading implies that their communications about the 2009 Loan were oral, rather than written, as would be expected in communications between married people. If the Wife had a writing from the Husband containing the alleged misrepresentations, she would undoubtedly have attached it to her affidavit on this motion. Furthermore, nothing prevents the Husband from establishing through discovery whether or not such a writing exists, as well as the Wife's recollection of the time, place, and other particulars surrounding the parties' communication with each other about the 2009 Loan. Finally, since the Husband does not deny that he and the Wife communicated with each other about the 2009 Loan before they each signed the POA's, he is certainly aware of the method and place of such communication. Indeed, as the Wife points out, the Husband's execution of the Postnuptial Agreement, which refers to his “having encumbered ... 50% of the [Apartment], in contradiction of [the Wife's] wishes ...” indicates that he is well aware of the particulars of his communications with the Wife about the 2009 Loan. Under these circumstances, the Wife's pleading is “sufficient to permit a reasonable inference of the alleged conduct” ( Pludeman, supra at 491).
The Second Amended Answer states that the Wife “trusted her [H]usband, who was solely responsible for handling the family's finances,” and that she “relied entirely on her [H]usband for all financial matters including those affecting the family” at that time. She claims that she “relied on his representations [about the 2009 Loan] but never would have done so” had she been aware that her signature had been forged on the SLC Security Agreement. She alleges that the Husband's experience in real estate transactions was far greater than her own.
Therefore, the pleading adequately sets forth the Wife's reasonable reliance on the Husband's alleged misrepresentations. Furthermore, Perl v. Smith Barney, Inc. (230 A.D.2d 664 [1st Dept 1996] ), cited by the Husband, does not support of his claim of inadequate pleading in this regard, since the dismissal there of a complaint seeking damages based on fraud and breach of fiduciary duty was based on the rule that a broker does not ordinarily owe a fiduciary duty to a purchaser of securities. In contrast, it is axiomatic that transactions between spouses “involve a fiduciary relationship requiring the utmost of good faith” meriting “strict surveillance” by courts ( Christian v. Christian, 42 N.Y.2d 63, 72 [1977] ). Therefore, the court finds that the Wife has adequately pleaded her claim that she reasonably relied on the Husband's alleged misrepresentations.
The Husband's argument that the Wife's reliance on his statements in entering into the 2009 Loan was nevertheless unreasonable given her education and background in the real estate industry is a factual claim that is not an appropriate basis for a motion to dismiss the pleadings.
Finally, contrary to the Husband's claim, the Second Amended Answer makes clear the nature of the Wife's damages for each of the causes of action for fraud, breach of fiduciary duty, and aiding and abetting WS' breach of fiduciary duty, as discussed above in the facts section. Therefore, this is not a basis for dismissal of the Wife's counterclaims.
Finally, the Husband also cites to Celle v. Barclays Bank PLC (48 AD3d 301 [1st Dept 2008] ) in support of his claim that the Wife's fraud claim should be dismissed because it is duplicative of her claim against the Husband for breach of fiduciary duty. However, in Celle, the Appellate Division for the First Department upheld dismissal of the complaint where all of the claims were based on defendant investment bank's alleged failure to follow plaintiff account holder's oral instructions, but the written agreement between the parties stated that communications must be in writing to be effective. In doing so, the Court also noted that the fraud and breach of fiduciary duty claims were each duplicative of the breach of contract claim, which is consistent with a line of cases holding that, where the other claims based on the same facts as a contracts claim in a pleading are not extraneous to the contract, damages are recoverable under a contract measure of damages, and defendant did not owe a duty separate from the duty under the contract (Coppola v. Applied Electric Corp., 288 A.D.2d 41 [1st Dept 2001] ), and/or where other claims are duplicative of an insufficient breach of contract cause of action (River Glen Associates, Ltd. v. Merrill Lynch Credit Corp., 295 A.D2d 274 [1st Dept 2002] ), those claims should be dismissed. In contrast, in this case there is no breach of contract claim. Furthermore, although the Wife's breach of fiduciary duty against the Husband is based on the same essential facts and seeks the same relief as her fraud claim, the former claim is a necessary element of her claim against the Husband for aiding and abetting WS' breach of fiduciary duty ( Bullmore, supra ).
Therefore, the court declines to dismiss her first counterclaim on this basis.
WS and the Bank have each moved for dismissal of the Wife's causes of action as against them. The particulars of her claims as to those parties will be addressed in the court's determination of those motions.
The Husband argues that the Wife failed to properly plead a cause of action for necessaries, because, he claims, she has not included in her pleading either “the requisite proof” of the expenses and that they were necessary, or the exact amount of such expenses. The court disagrees. The Wife's Second Amended Answer states that the Husband failed and refused “to contribute any monetary support to his family, or to pay for expenses including, but not limited to” monthly mortgage, cooperative maintenance and utility bills, food, clothing, insurance premiums, college tuition, household staff wages, unreimbursed medical expenses, and attorneys' fees in connection with the foreclosure action brought against the parties' vacation home. Accordingly, the Wife has sufficiently pleaded a counterclaim against the Husband for necessaries. However, she may only seek necessaries from the Husband from June 2009 to the date of the Wife's first pleading in this action in which she sought spousal maintenance and child support, since the general rules is that, once a court has set the amount of support, the recipient spouse is limited to that amount (Turner v. Woolworth, 221 N.Y. 425 [1917];Karminski v. Karminski, 260 AD 491 [1st Dept 1940]; Friou v. Gentes, 11 A.D.2d 124, 126 [2d Dept 1960] ). Accordingly, the court denies the Husband's request that it dismiss the Wife's sixth counterclaim for necessaries.
The Husband asks in his instant Order to Show Cause that the Wife's claims for attorneys' fees, sought against him on her first through fourth counterclaims, be dismissed. However, he makes no legal argument in support of this request. Accordingly, it is denied.The court grants the Husband's motion to dismiss the Wife's fourth counterclaim for conversion and fifth counterclaim for unjust enrichment, for the reasons discussed below. In doing so, the court is mindful of the Court of Appeals' decision in Mahoney–Buntzman v.. Buntzman (2 NY3d 415 [2009] ), in which the court denied the Wife's claims for credits for payments of the Husband's support obligations to his first wife and the Husband's student loans, stating,
[t]his is not to say that every expenditure of marital funds during the course of the marriage may not be considered in an equitable distribution calculation. Domestic Relations Law § 236(B)(5)(d)(13) expressly and broadly authorizes the trial court to take into account “any other factor which the court shall expressly find to be just and proper” in determining an equitable distribution of marital property. There may be circumstances where equity requires a credit to one spouse for marital property used to pay off the separate debt of one spouse or add to the value of one spouse's separate property ( see e.g. Micha v. Micha, 213 A.D.2d 956, 957–958 [3d Dept 1995]; Carney v. Carney, 202 A.D.2d 907 [3d Dept 1994] ). Further, to the extent that expenditures are truly excessive, the ability of one party to claim that the other has accomplished a wasteful dissipation of assets' (Domestic Relations Law § 236[B][5][d][11] ) by his or her expenditures provides protection.
( Id. at 421 [citations in original] ). Similarly, here, the court's dismissal of the Wife's counterclaims for conversion and unjust enrichment is without prejudice to her raising at trial a claim of waste, or arguing at trial that any of the statutory equitable distribution factors weigh in favor of a particular distribution of marital property.
The elements of a cause of action for conversion are that: (1) the claimant had legal ownership or a superior right of possession of specific personal property; and (2) the party against whom the claim is made exercised unauthorized control over the property to the exclusion of the claimant's rights (Aetna Cas. & Sur. Co. v. Glass, 75 A.D.2d 786 [1st Dept 1980] ). The Wife's pleading alleges that she was the sole owner of all of the shares of stock appurtenant to the Apartment at the time that they were pledged as security for the 2009 Loan. It further alleges that the POA did not constitute her authorization to encumber the Apartment with a second loan, as the Husband argues, since she understood the 2009 Loan to be a refinancing of the 2007 Consolidation Loan that would also provide cash to pay family expenses, based on the Husband's alleged misrepresentations to her. However, the Postnuptial was executed after these events took place, and the Wife's Second Amended Answer does not allege any reason that the Apartment was her separate property prior to execution of the Postnuptial Agreement. Since property acquired during a marriage and prior to commencement of a divorce action is presumed to be marital property, regardless of title (DRL § 236[B][1][d][4] ), the Apartment was clearly marital property. Therefore, the Wife's conversion claim must fail, since she did not have a superior right to possession of the Apartment at the time of the Husband's alleged conversion' of it. The Wife argues that granting the Husband's request for dismissal of the conversion counterclaim on this basis would mean that “spouses could rob each other at will and escape ... liability by claiming that whatever they had stolen was marital property.” However, the inverse is more accurate: if the titled spouse could claim that the non-titled spouse had stolen' his or her personal property every time the non-titled spouse used that property during the marriage, the Domestic Relations Law and its recognition of marriage as an economic partnership ( O'Brien v. O'Brien, 66 N.Y.2d 476 [1985] ) would be completely undermined. Therefore, the Wife's counterclaim for conversion fails to state a cause of action, and is dismissed.
Similarly, the Wife's counterclaim for unjust enrichment must also be dismissed. The elements of unjust enrichment are: (1) that the party against whom the claim is made has been enriched; (2) at the claimant's expense; and (3) it would be against equity and good conscience to permit the other party to retain what the claimant seeks to recover (Mandarin Trading Ltd. v. Wildenstein, 16 NY3d 173, 182 [2011] ). The Wife's counterclaim for unjust enrichment is based on her allegation that the Husband conspired with the Bank and WS to obtain the Wife's consent to the 2009 Loan under false pretenses, and to use the proceeds to pay off the Husband's business debts to the Bank, rather than to pay off the 2007 Consolidation Loan and obtain cash to pay family expenses, as the Wife claims the Husband led her to believe would occur at the closing of the 2009 Loan. The Wife's Second Amended Answer does not claim that the debts that were paid off by the 2009 Loan were incurred prior to the marriage, or were otherwise the Husband's separate debts. Therefore, the Wife's pleading fails to show that the proceeds of the 2009 Loan enriched' the Husband any more than they did her, since it does not claim that the debts paid off were not marital ( see Mahoney–Buntzman, supra ). Accordingly, the Wife's unjust enrichment counterclaim against the Husband is also dismissed.
Finally, the Husband also argues that the Wife's claims for punitive damages, which she seeks against him
on her first counterclaim for breach of fiduciary duty and her second counterclaim for aiding and abetting WS' breach of fiduciary duty,
Curiously, the Husband's attorneys' memorandum of law in support of this request states that these claims should be dismissed as against WS. The court assumes that this is a typographical error, and that his intention was to seek their dismissal as against himself, since he does not have standing to seek their dismissal as against WS.
should be dismissed. In the first instance, the Husband appears to misread the Wife's requests for punitive damages as separate causes of action independent of her counterclaims against him. If this were the case, the Husband would be correct that no such cause of action exists ( Rocanova v. Equitable Life Assurance Soc., 83 N.Y.2d 603 [1994] ). However, her requests are clearly stated as damages on specific causes of action, so that argument fails. The Husband also argues that the Husband's alleged conduct—lying, deliberately misleading, and tricking the Wife into agreeing to encumber the family's home with an additional $12,500,000 of debt—fails to meet the standard for punitive damages. The Court of Appeals has held that punitive damages are appropriate where a party's behavior “evinces a high degree of moral turpitude and demonstrates such wanton dishonesty as to imply a criminal indifference to civil obligations” ( Ross v. Louise Wise Servs., inc., 8 NY3d 478, 489 [2007] ). This court finds that the Husband's conduct alleged in the Wife's Second Amended Answer certainly meets this standard for the purposes of a motion to dismiss. Accordingly, the court denies the Husband's request that it dismiss the Wife's requests for punitive damages against him.
The Wife's Second Amended Answer also seeks punitive damages on her fourth counterclaim for conversion and her fifth counterclaim for unjust enrichment, which the court has dismissed for the reasons discussed above.
In accordance with this decision, it is hereby
ORDERED that the Wife's fourth counterclaim for conversion and fifth counterclaim for unjust enrichment in her Second Amended Answer are dismissed; and it is further
ORDERED that the Wife's sixth counterclaim for necessaries against the Husband in her Second Amended Answer is limited to the period from June 2009 to the date of filing of her first pleading seeking spousal maintenance and child support; and it is further
ORDERED that all other relief requested but not granted above is denied.