Case Title: Frieda Sargiss v. Marlene Magarelli

Citation: 

Docket Number: 

State: new-york

Court: New York Appellate Court

Date: 2009-06-04T00:00:00Z

Document:
- 1 -
=================================================================
This opinion is uncorrected and subject to revision before
publication in the New York Reports.
-----------------------------------------------------------------
No. 93  
Frieda Sargiss, 
            Appellant, 
        v. 
Marlene Magarelli, &c., et al.,   
            Respondents, 
et al., 
            Defendants.
Myrna Felder, for appellant.
William H. Mulligan, Jr., for respondent Magarelli.
Walter L. Rich, for respondents Sargiss and Panrad
Automotive Industries, Inc.
LIPPMAN, Chief Judge:
In July 1996, in connection with divorce proceedings
prior to this action in which both parties were represented by
counsel, the decedent husband, Isaac G. Sargiss, provided his
wife, Frieda Sargiss, with a Statement of Net Worth.  The
statement listed "PANRAD" as an asset, but the statement did not
assign any value to that asset, leaving the space provided for
- 2 -
No. 93
- 2 -
that information blank.  Panrad Automotive Industries, Inc.
(Panrad) is a private corporation that owns two shopping centers. 
At one time shares in Panrad were owned by the decedent,
respondent Julius Sargiss (decedent's brother), and a third
person.  When and whether decedent's ownership interest in Panrad
ended before his death lies at the root of plaintiff's action.   
When asked at his deposition in January 1998 whether
he, at that time, owned shares in Panrad, the decedent testified
that he did not because he had sold his shares in Panrad to his
brother Julius for $250,000.00.  Decedent testified that Julius
paid him the $250,000.00 plus interest in 1993 pursuant to an
agreement the brothers had entered into in 1990.  Plaintiff and
decedent ultimately reached a stipulation as to how to divide
their assets in the divorce proceeding, and they were divorced in
the spring of 1998.  Decedent moved to California and had no
further contact with plaintiff after the divorce.
Isaac G. Sargiss died on March 25, 2004.  Shortly
thereafter, decedent's daughter discovered certain financial
documents in his California home which suggested that decedent
may not have sold his interest in Panrad to Julius, may have
misrepresented his assets in his July 1996 Statement of Net
Worth, and may have testified falsely at his January 1998
deposition.  Plaintiff commenced this fraud action in May 2005,
more than six years after the fraud was allegedly perpetrated but
less than two years from the discovery of the financial documents
- 3 -
No. 93
- 3 -
in decedent's California home.  
Plaintiff's complaint alleges, among other things, that
she relied on decedent's representations during the divorce
proceedings as to his net worth, that she was justified in
relying on those representations, that documents discovered after
decedent's death show that decedent misrepresented his net worth
in the divorce proceedings, that Julius, his wife Alice, and
Panrad aided in the fraudulent misrepresentations, and that
plaintiff would not have agreed to the 1998 stipulation if she
had known the truth regarding decedent's assets.  The executor of 
decedent's estate, Julius Sargiss, Alice Sargiss, and Panrad
moved to dismiss the complaint pursuant to CPLR 3211 on grounds
that the complaint did not plead fraud with sufficient
specificity as required by CPLR 3016 (b) and that the action was
untimely.             
When a plaintiff brings a cause of action based upon
fraud "the circumstances constituting the wrong shall be stated
in detail" (CPLR 3016 [b]).  "The purpose of section 3016 (b)'s
pleading requirement is to inform a defendant with respect to the
incidents complained of," thus, "[w]e have cautioned that section
3016 (b) should not be so strictly interpreted as to prevent an
otherwise valid cause of action in situations where it may be
impossible to state in detail the circumstances constituting a
fraud" (Pludeman v Northern Leasing Sys., Inc., 10 NY3d 486, 491
[2008][internal quotation marks and citation omitted]).  What is
- 4 -
No. 93
- 4 -
"[c]ritical to a fraud claim is that a complaint allege the basic
facts to establish the elements of the cause of action," and
although under CPLR 3016 (b) "the complaint must sufficiently
detail the allegedly fraudulent conduct, that requirement should
not be confused with unassailable proof of fraud" (id. at 492). 
"Necessarily, then, section 3016 (b) may be met when the facts
are sufficient to permit a reasonable inference of the alleged
conduct" (id.).  On a CPLR 3211 motion to dismiss, a court may
consider affidavits to remedy pleading problems (Leon v Martinez,
84 NY2d 83, 88 [1994]).
In connection with the motion to dismiss, the parties
submitted affidavits attaching relevant documents, including
certain of the financial documents found after decedent's death. 
These indicate, among other things, that after decedent testified
he had sold his shares to his brother Julius, he received a
salary of $100,000 from Panrad and debited more than $700,000
from Panrad's account.  Moreover, decedent never negotiated the
check given him in satisfaction of the interest to which he was
purportedly entitled under the brothers' agreement.  Plaintiff
has also submitted documents that seem to show that decedent was
understood to have a half-interest in Panrad's cash in 1999, and
that Julius asked decedent to reimburse him for half of a 1998
tax liability (thus indicating that Julius was claiming for tax
purposes income that in fact belonged to decedent).  To be sure,
defendants submitted evidence in the form of affidavits and
- 5 -
No. 93
- 5 -
documents to rebut plaintiff's assertions, but these merely raise
factual issues not properly decided on a motion to dismiss.   
The complaint and the accompanying affidavits are
sufficient to withstand scrutiny under CPLR 3016 (b) insofar as
they allege fraud as against decedent's estate, Julius Sargiss,
and Panrad.  Although plaintiff's "allegations of fraud were not
directly lodged against" Julius Sargiss and Panrad in the
complaint in the same detail as they were against the decedent,
"the indirect circumstantial inference" of Julius’s fraudulent
conduct and his "direct naming . . . with regard to the same
conduct alleged, under the circumstances," is sufficient
(Pludeman, 10 NY3d at 492 n 3).  If there was a fraudulent
scheme, Julius's knowledge of it and participation in it are
clear because it would have been impossible for decedent to carry
out the fraudulent scheme as alleged without Julius knowing of
the scheme and participating in it.  Plaintiff's allegations as
to Panrad are also sufficient to survive the motion to dismiss
given Panrad's involvement in allegedly improper payouts to
decedent based on an alleged continued ownership interest in the
corporation, not to mention that Julius, an indispensable
participant in the scheme as alleged, controls Panrad.       
There is, however, nothing asserted in the complaint or
in the parties' submissions on the motion to dismiss that
implicates Alice Sargiss in the alleged fraud, and, accordingly,
the complaint was properly dismissed as against her.            
- 6 -
No. 93
- 6 -
With respect to the timeliness of plaintiff's action, a
fraud-based action must be commenced within six years of the
fraud or within two years from the time the plaintiff discovered
the fraud or "could with reasonable diligence have discovered it"
(CPLR 213 [8]; see CPLR 203 [g]).  The inquiry as to whether a
plaintiff could, with reasonable diligence, have discovered the
fraud turns on whether the plaintiff was "possessed of knowledge
of facts from which [the fraud] could be reasonably inferred"
(Erbe v Lincoln Rochester Trust Co., 3 NY2d 321, 326 [1957]). 
"Generally, knowledge of the fraudulent act is required and mere
suspicion will not constitute a sufficient substitute" (id.). 
"Where it does not conclusively appear that a plaintiff had
knowledge of facts from which the fraud could reasonably be
inferred, a complaint should not be dismissed on motion and the
question should be left to the trier of the facts" (Trepuk v
Frank, 44 NY2d 723, 725 [1978]; see Erbe, 3 NY2d at 326).  There
is no indication that plaintiff had knowledge of the alleged
fraud prior to her daughter's discovery of certain financial
documents in decedent's California home after his death, and
there is no dispute that plaintiff commenced this action within
two years of this discovery.  Moreover, on the record before us,
it is unclear how plaintiff could have discovered the alleged
fraud earlier than she did.  
Accordingly, the order of the Appellate Division should
be modified, without costs, by remitting to Supreme Court for
- 7 -
No. 93
- 7 -
further proceedings in accordance with this Opinion, and, as so
modified, affirmed.
*   *   *   *   *   *   *   *   *   *   *   *   *   *   *   *   *
Order modified, without costs, by remitting to Supreme Court,
Westchester County, for further proceedings in accordance with
the opinion herein and, as so modified, affirmed.  Opinion by
Chief Judge Lippman.  Judges Ciparick, Graffeo, Read, Smith,
Pigott and Jones concur.
Decided June 4, 2009