Court Opinion

ID: 9823165
Source: CourtListenerOpinion
Date Created: 2023-09-01 09:46:12.727303+00
Date Added: 2024-06-11T07:39:15.468451
License: Public Domain

Kapnick, J.,
dissents in part in a memorandum as follows: I dissent only to the extent that I would affirm that portion of the motion court’s order granting defendants’ motion for summary judgment on their conversion counterclaim.1
Conversion is the “unauthorized assumption and exercise of the right of ownership over goods belonging to another to the exclusion of the owner’s rights”. (State of New York v Seventh Regiment Fund, 98 NY2d 249, 259 [2002] [internal quotation marks omitted]).2 Here, defendants established both elements of their conversion claim with respect to the funds transferred to the BNY Mellon account — their “possessory right or interest in the property,” and plaintiff’s “dominion over the property or interference with it, in derogation of [their] rights” (Colavito v *482New York Organ Donor Network, Inc., 8 NY3d 43, 50 [2006]). Although plaintiff’s possession of the funds was initially lawful, it ceased being lawful as a result of plaintiff’s refusal to return the funds upon defendants’ demand and its transfer of a portion of the funds to a separate bank account without defendants’ authorization.
I disagree with the majority’s conclusion that there is an issue of fact as to whether this conduct constitutes a conversion. Although “an action for conversion cannot be validly maintained where damages are merely being sought for breach of contract” (Peters Griffin, 88 AD2d at 884), “[t]he same conduct which constitutes a breach of a contractual obligation may also constitute the breach of a duty arising out of the contract relationship which is independent of the contract itself” (Hamlet at Willow Cr. Dev. Co., LLC v Northeast Land Dev. Corp., 64 AD3d 85, 112-113 [2d Dept 2009] [internal quotation marks omitted], lv dismissed 13 NY3d 900 [2009]; see also Sebastian Holdings, Inc. v Deutsche Bank AG., 78 AD3d 446, 447-448 [1st Dept 2010]). Here, the underlying contracts required that plaintiff “deposit all monies received by” plaintiff “for or on behalf of” defendants in a designated bank account (the operating accounts). While there was a contractual obligation to deposit funds belonging to defendants into the operating accounts, these funds were merely collected by plaintiff “for or on behalf of” defendants and entrusted to plaintiff in its role as defendants’ agent. As such, the funds belong to defendants regardless of the underlying contracts and plaintiff was obligated as a matter of common law to return the funds to their rightful owner upon request. Since defendants’ right to a return of the funds does not stem (solely) from the contracts, plaintiff’s refusal to return the funds upon request constitutes conversion as a matter of law.

. The motion court only granted defendants’ conversion counterclaim to the extent of the monies transferred to the BNY Mellon account, and severed the portion of the counterclaim relating to the remaining balance in the Operating Accounts because the court was not able to determine from the record the amount of the remaining balance, if any. The record shows that the amount of the remaining balance was not clearly discernible and further fact-finding is necessary to adjudicate that portion of the conversion counterclaim.

. “Money, if specifically identifiable, may be the subject of a conversion action” (Peters Griffin Woodward, Inc. v WCSC, Inc., 88 AD2d 883, 883 [1st Dept 1982]) and “[t]he funds of a specific, named bank account are sufficiently identifiable” (Republic of Haiti v Duvalier, 211 AD2d 379, 384 [1st Dept 1995]).