State v. Bronxville Glen I Associates

• Decision Date: 12 March 1992
• Citation: 581 N.Y.S.2d 189,181 A.D.2d 516
• Parties: The STATE of New York, Plaintiff-Respondent, v. BRONXVILLE GLEN I ASSOCIATES, et al., Defendants-Appellants, and Donald E. Robinson, et al., Defendants.
• Court: New York Supreme Court — Appellate Division

Page 189

581 N.Y.S.2d 189

181 A.D.2d 516

The STATE of New York, Plaintiff-Respondent, v. BRONXVILLE GLEN I ASSOCIATES, et al., Defendants-Appellants, and Donald E. Robinson, et al., Defendants.

Supreme Court, Appellate Division,

First Department.

March 12, 1992.

MEMORANDUM DECISION.

Order, Supreme Court, New York County (Edward Greenfield, J.), entered November 20, 1990, which, inter alia, denied defendants' motion pursuant to CPLR 3211(a)(5) for an order dismissing the first three causes of action in the complaint as time-barred, unanimously affirmed, without costs.

The sole issue presented on this appeal is the applicable statute of limitations for an action by the Attorney General pursuant to the Martin Act (General Business Law, Article 23-A) alleging investor fraud. We hold that the applicable period of limitation is six years pursuant to CPLR 213(8), and not three years pursuant to CPLR 214.

An action must be commenced within three years pursuant to CPLR 214(2) if it is based on a liability or penalty created or imposed by statute. The appropriate inquiry is whether or not liability would exist under New York law but for the enactment of the statute (see State v. Stewart's Ice Cream Co., 64 N.Y.2d 83, 484 N.Y.S.2d 810, 473 N.E.2d 1184; Sturgis v. Sullivan County Harness Racing Association, 98 A.D.2d 901, 470 N.Y.S.2d 892, app. denied, 61 N.Y.2d 608, 475 N.Y.S.2d 1026, 463 N.E.2d 1236). Liability is considered to be created by statute, for these purposes, if the statute establishes a unique species of liability entirely unknown at common law (see Bongiorno v. DIGI, Inc., 138 A.D.2d 120, 529 N.Y.S.2d 804).

Liability for investor fraud was not created by the Martin Act, but is recognized in case law predating that legislation (see, e.g., Reusens v. Gerard, 160 A.D. 625, 146 N.Y.S. 86, affd sub nom. de Ridder v. Gerard, 221 N.Y. 665, 117 N.E. 1065). Because the Martin Act did not create a liability nonexistent at common law, CPLR 214(2) does not apply, even though the Martin Act may expand the definition of fraud so as to create new liability in some instances (State v. Cortelle Corp., 38 N.Y.2d 83, 378 N.Y.S.2d 654, 341 N.E.2d 223). Moreover, the creation of additional penalties does not automatically bring a statutory cause of action within the three-year statute of limitations unless that new penalty imposes liability where previously there was none (see, e.g., City of New York v. Kingsview Homes, 70 A.D.2d 866, 418 N.Y.S.2d 62). We agree...