Baratta v. Kozlowski

Citation94 A.D.2d 454,464 N.Y.S.2d 803
PartiesVincent J. BARATTA, Respondent, v. Edward V. KOZLOWSKI, et al., Appellants.
Decision Date27 June 1983
CourtNew York Supreme Court Appellate Division

Page 803

464 N.Y.S.2d 803
94 A.D.2d 454
Vincent J. BARATTA, Respondent,
Edward V. KOZLOWSKI, et al., Appellants.
Supreme Court, Appellate Division,
Second Department.
June 27, 1983.

Page 804

Winthrop, Stimson, Putnam & Roberts, New York City (Stephen A. Weiner, New York City, of counsel), for appellants Bank of Babylon and Irving Bank Corp.

Joseph J. Marcheso, New York City, for appellant Edward V. Kozlowski (relying on the brief submitted by the other appellants).

Lunney & Crocco, New York City (Michael J. McAllister and Andrew P. Saulitis, New York City, of counsel), for respondent.


LAZER, Justice.

The primary focus of these appeals is application of the Statute of Limitations when the same conduct or transaction produces separate causes of action sounding in tort and in contract. Asserting that the "essence" of the instant action is tort, defendants have unsuccessfully sought its dismissal, on the basis of untimeliness and other alleged defects and they now seek corrective relief from us. Resolution of the issues implicates the recent and portentous holding of the Court of Appeals in Video Corp. of Amer. v. Flatto Assoc., 58 N.Y.2d 1026, 462 N.Y.S.2d 439, 448 N.E.2d 1350.


From 1968 through 1975, the Bank of Babylon (the Bank) purchased and retained $120,000 worth of bonds at the direction and for the account of plaintiff. When return of the bonds was requested by plaintiff in November, 1976, Edward Kozlowski, the president of the Bank, admitted that he had utilized the bonds for his own purposes and that they would not be returned.

Page 805

When plaintiff, who was a director of the Bank, reported this state of facts to the Bank's counsel, he was advised not to press any claim because to do so would damage the Bank and ruin Kozlowski's career. Kozlowski subsequently requested time to make restitution, furnished plaintiff with a written admission of liability, and provided some small cash payments for a few months. At a later point--between July and October 1977--Kozlowski informed plaintiff that he would be unable to return the bonds or their proceeds.

In October of 1977, upon notifying the Bank counsel of his intention to report the embezzlement, plaintiff was told that Kozlowski had threatened to kill him if suit was brought. These threats to plaintiff's life were repeated to him by the lawyer in September, 1978 and December, 1980. Despite his earlier declaration of inability to pay, in January of 1980 Kozlowski renewed his promise of full restitution, paid the plaintiff $300 at that time, and returned $10,000 worth of bonds the following month. In the absence of further payments, however, plaintiff finally reported the embezzlement directly to the Bank in February of 1981, but his demand for restitution was rejected. By May of 1981, when plaintiff sued Kozlowski, the Bank and its parent company, Irving Bank Corporation, four and one-half years had elapsed since return of the bonds had first been requested. After commencement of the action, Kozlowski returned an additional $30,000 worth of bonds and pleaded guilty to grand larceny in the third degree. Still unaccounted for are $80,000 worth of bonds.


Plaintiff's 10 causes of action include claims for conversion, money had and received, breach of fiduciary duty, breach of contract, negligence and fraud. At the outset, we conclude that the complaint against the Irving Bank should be dismissed. The Irving Bank was not a party to any contract with plaintiff and it may not be held liable for the torts of its subsidiary because the complaint fails to allege that it exercised complete domination and control over the subsidiary (Billy v. Consolidated Mach. Tool Corp., 51 N.Y.2d 152, 432 N.Y.S.2d 879, 412 N.E.2d 934; Margolin v. Sonesta Int. Hotels Corp., 85 A.D.2d 548, 445 N.Y.S.2d 5). Subsequent references to the defendants in this opinion do not include the Irving Bank.

The crux of defendants' challenge to timeliness is that the essence of the action is tort and since more than three years elapsed between accrual of the tort claims and the institution of suit, the complaint must be dismissed. We reject the Bank's assertion that the action accrued when the bonds were converted because where there is a delivery of personal property "not to be returned specifically or in kind at a fixed time or upon a fixed contingency" an action for conversion does not accrue until there is a demand for return of the property (see CPLR 206, subd. par. 2; see, also, 1 Weinstein-Korn-Miller, N.Y.Civ.Prac., par. 206.02). Here, the bonds were not to be returned at a set time and accrual must therefore be computed from the time of demand in November, 1976, shortly after plaintiff learned of the wrong. Since the action was commenced four and one-half years after its causes of action accrued, we must decide whether it is the three-year Statute of Limitations governing conversion, negligence and breach of fiduciary duty (see CPLR 214, subds. 2, 3; Tobias v. Celler, 37 N.Y.S.2d 399, affd. 265 App.Div. 1065, 39 N.Y.S.2d 1020; Dinerman v. Sutton, 45 Misc.2d 791, 258 N.Y.S.2d 13) or the six-year statute governing contractual and quasi-contractual claims (see CPLR 213, subd. 2) that applies. Plaintiff argues, nonetheless, that this question need not be reached because Kozlowski's requests for delay, promises of restitution, threats of death, together with his admission of liability, estop defendants from raising time-bar as a defense. Only one of these contentions gives us pause.

While it is quite questionable whether mere oral promises can form the basis of estoppel in this State (see Scheuer v. Scheuer, 308 N.Y. 447, 126 N.E.2d 555;

Page 806

Shapley v. Abbott, 42 N.Y. 443), plaintiff relies on cases where estoppel was invoked against insurers who promised settlement and implied that the commencement of an action was unnecessary (see, e.g., Dupuis v. Van Natten, 61 A.D.2d 293, 402 N.Y.S.2d 242; Croop v. Odette, 29 Misc.2d 606, 219 N.Y.S.2d 805, affd. 14 A.D.2d 724, 218 N.Y.S.2d 532; Kyle v. Village of Catskill, 81 Misc.2d 1035, 367 N.Y.S.2d 158; Huggins v. Associated Hosp. Servs of N.Y., 53 Misc.2d 160, 278 N.Y.S.2d 169; Hover v. Claverack Grange # 934, 46 Misc.2d 113, 258 N.Y.S.2d 1015). There is no need to resolve that aspect of the estoppel question, however, because the instant promises were repudiated prior to the expiration of the Statute of Limitations while the plaintiff still had ample time to commence a tort action (see Simcuski v. Saeli, 44 N.Y.2d 442, 406 N.Y.S.2d 259, 377 N.E.2d 713; see, also, 509 Sixth Ave. Corp. v. New York City Tr. Auth., 24 A.D.2d 975, 265 N.Y.S.2d 429; Ann., 44 A.L.R.3d 760, 768-774; 43 A.L.R.3d 429, 453-454). When Kozlowski repudiated his earlier promises by telling plaintiff in the latter half of 1977 that he would neither return the bonds nor pay for them, not even one year had elapsed since the cause of action for conversion had accrued. Plaintiff's failure to bring suit within the two years remaining under the tort Statute of Limitations constituted a failure to exercise due diligence as a matter of law and estoppel based on the promises of payment is unavailable to defeat the defense of the Statute of Limitations (see 509 Sixth Ave. Corp. v. New York City Tr. Auth., 24 A.D.2d 975, 265 N.Y.S.2d 429 supra; Ball v. Utica Mut. Ins. Co. of Utica, 60 Misc.2d 459, 303 N.Y.S.2d 233 Di Biase v. A & D, Inc., 351 A.2d 865 Sabath v. Mansfield, 60 Ill.App.3d 1008, 18 Ill.Dec. 8, 377 N.E.2d 161 Ford v. Rogovin, 289 Mass. 549, 199 N.E. 719 Huhtala v. Travelers Ins. Co., 65 Mich.App. 581, 237 N.W.2d 567 Troutman v. Southern Railway Co., 296 F.Supp. 963 but see Arbutina v. Bahuleyan, 75 A.D.2d 84, 428 N.Y.S.2d 99 Redington v. Hartford Acc. & Indem. Co., 463 F.Supp. 83 ). Nor does Kozlowski's alleged renewal of his promise of full restitution in January, 1980 resuscitate the claim of estoppel, for by then the tort statute had run and renewal of the promises could not create a new estoppel or revive one that derived from earlier conduct (see 1 Williston, Contracts, § 186; 1A Corbin, Contracts, § 221).

We turn, then, to the more difficult aspect of the estoppel question--the effect of the death threats that were never repudiated and which continued for the two years following Kozlowski's repudiation of his promises of restitution. It is well settled that duress and undue influence are grounds for rescission of a contract where the complaining party is compelled to agree to the contract by means of a wrongful threat which precludes the exercise of free will (Muller Constr. Co. v. New York Tel. Co., 40 N.Y.2d 955, 390 N.Y.S.2d 817, 359 N.E.2d 328; Austin Instrument v. Loral Corp., 29 N.Y.2d 124, 324 N.Y.S.2d 22, 272 N.E.2d 533). Furthermore, when duress is part of the cause of action alleged, the limitations period is tolled until the termination of the duress (Pacchiana v. Pacchiana, 94 A.D.2d 721, 462 N.Y.S.2d 256 Kamenitsky v. Corcoran, 97 Misc. 384, 161 N.Y.S. 756, revd. on other grounds 177 App.Div. 605; Developments in the Law: Statutes of Limitations, 63 Harv.L.Rev. 1177, 1219; Duress or Undue Influence as Tolling or Suspending Statute of Limitations, Ann., 121 A.L.R. 1294). Although such...

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