Lawyers' Fund for Client Protection of the State of New York v. Gateway State Bank

• Decision Date: 22 May 1997
• Parties: , 35 UCC Rep.Serv.2d 922 LAWYERS' FUND FOR CLIENT PROTECTION OF THE STATE OF NEW YORK, Respondent, v. GATEWAY STATE BANK, Now Known as Staten Island Savings Bank, Appellant.
• Court: New York Supreme Court — Appellate Division

Page 705

658 N.Y.S.2d 705

239 A.D.2d 826, 35 UCC Rep.Serv.2d 922

LAWYERS' FUND FOR CLIENT PROTECTION OF THE STATE OF NEW YORK, Respondent, v. GATEWAY STATE BANK, Now Known as Staten Island Savings Bank Appellant.

Supreme Court, Appellate Division Third Department.

May 22, 1997.

Hall & Hall (Peter V. Coffey of Parisi, Englert, Stillman, Coffey & McHugh, Schenectady, of counsel), Staten Island, for appellant.

Dennis C. Vacco, Attorney-General (Troy J. Oechsner, of counsel), Albany, for respondent.

Before CARDONA, P.J., and MERCURE, WHITE, SPAIN and CARPINELLO, JJ.

WHITE, Justice.

Appeal from an order of the Supreme Court (Keegan, J.), entered May 3, 1996 in Albany County, which denied defendant's motion to dismiss the complaint for, inter alia, lack of standing.

In August 1984, Michael Mancuso murdered Evelina Mancuso, the mother of Michelle Mancuso, who was then under 18 years of age. Thereafter, pursuant to an order of Supreme Court, Kings County, dated July 11, 1989, an express trust was created for Michelle's benefit, the corpus being the proceeds of a life insurance policy on the life of Evelina Mancuso. Maria Guttadauria-Ellman was appointed trustee. In February 1990, the Prudential Insurance Company forwarded two checks made payable to "Maria Guttadauria-Elman, M.D. as trustee for the benefit of Michele Elman [sic]" (hereinafter the trustee) to John Gussow, the attorney representing the trustee. On March 6, 1990, Gussow forged the trustee's endorsement and deposited the checks' proceeds ($69,153.54) in his escrow account maintained in defendant's bank. Gussow then proceeded to withdraw and misappropriate the funds, leaving the trust unfunded. Upon learning of Gussow's defalcation in February 1993, the trustee filed a claim for $69,153.54 with plaintiff which paid it in full. As a condition of payment, the trustee executed two documents subrogating, assigning and transferring all of the claims she possessed against Gussow to plaintiff.

Plaintiff, as subrogee and assignee, commenced this action alleging causes of action in conversion, breach of contract for money had and received, breach of the debtor-creditor relationship and unjust enrichment. Defendant moved to dismiss the complaint claiming that plaintiff lacked standing, that the action was barred by the Statute of Limitations and that the complaint failed to state a cause of action. In the alternative, defendant sought a change of venue to either Richmond County or Kings County. Supreme Court denied the motion in its entirety, prompting this appeal.

Inasmuch as this action was not commenced until July 14, 1995, defendant contends that plaintiff's causes of action sounding in conversion and unjust enrichment are time barred. Supreme Court, applying the infancy tolling provisions embodied in CPLR 208, concluded they were not.

By its terms, CPLR 208 limits the applicability of the infancy tolling provisions to those instances where the infant is entitled to commence the action. An analysis of the pertinent substantive law discloses that the infant could not have maintained an action against defendant because she does not have a legal estate in the trust (see, Cohn v. United States Trust Co., 127 A.D.2d 523, 524, 512 N.Y.S.2d 37; see also, EPTL 7-2.1[a] ). Instead, the trustee was the only entity entitled to pursue this action (see, Modjeska v. Greer, 233 A.D.2d 589, 590, 649 N.Y.S.2d 734, 735) and, as she could not take advantage of the infancy tolling provision (see, McLaughlin, Practice Commentaries, McKinney's Cons Laws of N.Y., Book 7B, CPLR C208:1, at 385), CPLR 208 has no application to this case.

Without the tolling provision, plaintiff's cause of action for conversion is time barred since the three-year Statute of Limitations commenced running on the date the conversion took place (March 6, 1990) and not from the date of discovery or the exercise of diligence to discover (see, Vigilant Ins. Co. of Am. v. Housing Auth. of City of El Paso, Tex., 87 N.Y.2d 36, 44, 637 N.Y.S.2d 342, 660 N.E.2d 1121). Thus, we shall dismiss this cause of action. The cause of action for unjust enrichment remains viable, however, since it is governed by a six-year statute (see, Rosner v. Codata Corp., 917 F.Supp. 1009, 1021; Congregation Yetev Lev D'Satmar v. 26 Adar N.B. Corp., 192 A.D.2d 501, 503, 596 N.Y.S.2d 435).

Next, defendant argues that plaintiff lacks standing since there is no proof that the checks were delivered to the trustee. In order to assert the subject causes of action against a depositary bank, a payee must attain the status of a holder by obtaining actual or constructive possession of the negotiable instrument (see, State of New York v. Barclays Bank of N.Y., 76 N.Y.2d 533, 536, 561 N.Y.S.2d 697, 563 N.E.2d 11). The...