Gargano v. Morey

165 A.D.3d 889

86 N.Y.S.3d 595

Salvatore GARGANO, et al., appellants,

v.Michael MOREY, et al., defendants,Monroe Tractor & Implement Co., Inc., respondent.

2016–07228

Index No. 608026/15

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

Submitted - May 25, 2018

October 17, 2018

Luibrand Law Firm, PLLC, Latham, N.Y. (Kevin A. Luibrand of counsel), for appellants.

Carter, Conboy, Case, Blackmore, Maloney & Laird, P.C., Albany, N.Y. (Brienna L. Christiano of counsel), for respondent.

WILLIAM F. MASTRO, J.P., SANDRA L. SGROI, SYLVIA O. HINDS–RADIX, VALERIE BRATHWAITE NELSON, JJ.

DECISION & ORDER

In an action, inter alia, to impose a constructive trust, the plaintiffs appeal from an order of the Supreme Court, Nassau County (Robert A. Bruno, J.), entered May 25, 2016. The order, insofar as appealed from, granted those branches of the motion of the defendant Monroe Tractor & Implement Co., Inc., which were pursuant to CPLR 3211(a)(7) to dismiss the second, tenth, eleventh, and seventeenth causes of action.

ORDERED that the order is affirmed insofar as appealed from, with costs.

The plaintiffs allege that they invested the sum of $3,006,000 in a crushed stone mining operation, and that the defendants defrauded them of their investment. The defendant Monroe Tractor & Implement Co., Inc. (hereinafter Monroe), provided mining equipment for the operation.

Monroe made a pre-answer motion pursuant to CPLR 3211(a) to dismiss certain causes of action asserted against it. The causes of action at issue on this appeal are: (1) the second cause of action, seeking the imposition of a constructive trust against Monroe based on allegations that Monroe agreed to hold the plaintiffs' investment until an agreement was reached on what equipment to purchase and how to finance the purchase; (2) the tenth cause of action, seeking money had and received and alleging that Monroe received money from the plaintiffs, retained it, and benefitted from it; (3) the eleventh cause of action, alleging that Monroe was unjustly enriched in the sum of $2,191,000 at the expense of the plaintiffs; and (4) the seventeenth cause of action, sounding in quasi contract and alleging that the plaintiffs rendered performance at Monroe's request, resulting in Monroe's unjust enrichment.

In support of its motion to dismiss, Monroe submitted an affidavit of Scott Erb, a division manager of Monroe, who stated that Monroe's sole involvement in the mining operation was the provision of equipment to the defendant Grande Aggregates, LLC (hereinafter Grande Aggregates), which was paid for by the plaintiff Salvatore Gargano. Erb asserted that Monroe was aware that the defendants Gregory Grande and Sean Carroll were in business together with Gargano. Further, Erb asserted that Monroe received the sum of $250,000 on May 1, 2015, as a down payment for three machines used in mining, and that on June 10, 2015, Gargano wired Monroe an additional $1,941,000 for those machines. Monroe also submitted a purchase agreement between Grande Aggregates and Monroe dated June 8, 2015, for the purchase of those three machines.

In opposition, the plaintiffs submitted an affidavit of Gargano, who stated that Grande and Carroll approached him in 2014, claiming that they had control over a crushed stone mining operation on property owned by the defendant Michael Morey, and solicited money for an investment in the operation. Gargano asserted that Morey, Grande, and Carroll used his money to mine the property and then set up multiple paper entities to conceal assets and keep revenues out of the hands of the plaintiffs. Gargano stated that the defendant companies were all shell companies, with the exception of Monroe, which actually sold equipment.

In the order appealed from, the Supreme Court, inter alia, granted those branches of Monroe's motion which were pursuant to CPLR 3211(a)(7) to dismiss the second, tenth, eleventh, and seventeenth causes of action on the ground that the allegations against Monroe were conclusory.

The plaintiffs appeal. Their notice of appeal states that the appeal is "from so much" of the order as granted dismissal of the second, tenth, eleventh, and seventeenth causes of action. In its brief, Monroe seeks enforcement of this specific limitation of the appeal. Therefore, this limitation should be enforced (see Galanopoulos v. Galanopoulos , 152 A.D.3d 745, 747, 59 N.Y.S.3d 122 ), and our analysis is confined to those causes of action.

The elements of a constructive trust are (1) a confidential or fiduciary relationship, (2) a promise, (3) a transfer in reliance thereon, and (4) unjust enrichment (see Sharp v. Kosmalski , 40 N.Y.2d 119, 121, 386 N.Y.S.2d 72, 351 N.E.2d 721 ). A confidential or fiduciary relationship exists between two persons or entities when one of them is under a duty to act for or to give advice for the benefit of the other upon matters within the scope of the relation (see AG Capital Funding Partners, L.P. v. State St. Bank & Trust Co. , 11 N.Y.3d 146, 158, 866 N.Y.S.2d 578, 896 N.E.2d 61 ). Such a relationship exists where confidence is reposed on one side, and there is resulting superiority and influence on the other (see id. at 158, 866 N.Y.S.2d 578, 896 N.E.2d 61 ).

Where a party holds funds in escrow for another and serves as an escrow agent, a fiduciary relationship may be developed (see T.T.S.G., Inc. v. Kubic , 226 A.D.2d 132, 639 N.Y.S.2d 825 ). However, there must be evidence of an escrow agreement based upon words or conduct (see Great Am. Ins. Co. v. Canandaigua Natl. Bank & Trust Co. , 23 A.D.3d 1025, 1027, 804 N.Y.S.2d 177 ; see generally Baquerizo v. Monasterio , 90 A.D.3d 587, 933 N.Y.S.2d 869 ). The elements of an escrow agreement are an agreement...