Gutkin v. Siegal

• Decision Date: 30 June 2011
• Parties: Bruce GUTKIN, Plaintiff–Appellant,v.Richard D. SIEGAL, et al., Defendants–Respondents,Schain Leifer Guralnick, et al., Defendants.
• Court: New York Supreme Court — Appellate Division

85 A.D.3d 687

926 N.Y.S.2d 485

2011 N.Y. Slip Op. 05629

Bruce GUTKIN, Plaintiff–Appellant,

v.Richard D. SIEGAL, et al., Defendants–Respondents,Schain Leifer Guralnick, et al., Defendants.

Supreme Court, Appellate Division, First Department, New York.

June 30, 2011.

Richardson & Patel, LLP, New York (David B. Gordon of counsel), for appellant.Rosenfeld & Kaplan, LLP, New York (Steven M. Kaplan of counsel), for respondents.TOM, J.P., SAXE, CATTERSON, MOSKOWITZ, ACOSTA, JJ.

Order, Supreme Court, New York County (Richard B. Lowe III, J.), entered September 30, 2010, as amended by order, same court and Justice, entered October 4, 2010, which, to the extent appealed from as limited by the briefs, granted the motion of defendants Richard D. Siegal and Palace Exploration Company to dismiss the first cause of action, unanimously affirmed, with costs.

In his first cause of action, for fraud, plaintiff alleges that defendants Siegal and Palace failed to disclose to him that the oil and gas drilling partnerships in which he invested between 1999 and 2002 would receive only a small portion of the generated revenue. Plaintiff alleges that he understood language in the prospect agreements to mean that the partnerships would receive 60% of the net drilling revenue. Plaintiff further alleges that he could not have discovered the fraud until he received deficiency notices in January 2008 concerning tax deductions he took as a result of the investments. In this regard, plaintiff asserts that in 2005, when he inquired as to why revenues were not what he expected, he was informed that drilling had not been very successful and that Siegal was perhaps not as adept in the oil and gas business as anticipated. Plaintiff commenced this action in January 2010.

An action based upon fraud must be commenced within the greater of 6 years from the date the cause of action accrued or 2 years from the time plaintiff discovered or, with reasonable diligence, could have discovered the fraud (CPLR 213[8] ). Here, plaintiff's claim was more than six years old at the time it was filed, and therefore time-barred, unless he did not discover or, with reasonable diligence, could not have discovered it before January 2008.

“The test as to when fraud should with reasonable diligence have been discovered is an objective one” ( Armstrong v. McAlpin 699 F.2d 79, 88 [2d Cir.1983] ). “ ‘[W]here the circumstances are such as to suggest to a person of ordinary intelligence the probability that he has been defrauded, a duty of inquiry arises, and if he omits that inquiry when it would have developed the truth, and shuts his eyes to the facts which call for investigation, knowledge of...