Business Divorce

The Supreme Court of the State of New York sustained our client’s claim for conversion of investment capital as against an individual defendant in a joint venture.

PRESENT:

Honorable Reginald A. Boddie

Justice, Supreme Court

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REDACTED

Plaintiff

-against-

MICHAEL STRAUSS,

Defendant.

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Index No. 52512712022

Cal. No. 9, l0 MS 1, 3, Decision & Order

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The following e-filed papers read herein:

MS 1, MS 3

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NYSCEF Doc Nos.

8-12, 30-33

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Upon the foregoing papers. defendant Michael Strauss's motion to dismiss the complaint (motion sequence one) pursuant to CPLR 3211(a)(1), (3), (7) and (10), and plaintiff REDACTED cross-motion for leave to amend the complaint (motion sequence three) pursuant to CPLR 3025(b), are decided as follows:

Background

On or about March 3 I , 2021 , plaintiff, Sprout Mortgage, LLC ("Sprout"), and NV Mortgage LLC ("NV') executed an operating agreement ("Agreement") for Biscayne Mortgage, LLC ("Biscayne"). Defendant Michael Strauss signed the Agreement on behalf of Sprout as chief executive officer. Biscayne was formed for the sole purpose of engaging in the business of residential mortgage origination, and occasional commercial origination with the consent of the members with respect to properties in the State of Florida. According to the Agreement, plaintiff

Defendant argues that plaintiff's claim for conversion is baseless because its capital contribution was directed to Biscayne, not to defendant or Sprout, thus that any conversion claim regarding the contribution should be brought against Sprout by Biscayne. Defendant also argues that the conversion claim is insufficient because plaintiff failed to specify which asset was unlawfully controlled by defendant, lacking in detail regarding the nature, timing, and party responsible for the alleged conversion. Additionally, that plaintiff failed to establish defendant's unlawfuI taking of ownership to the exclusion of plaintiff's rights. Defendant contends that since the possession of the capital contribution is lawful in this case, a conversion claim can only be alleged when the property is not returned post a demand, which plaintiff also failed to allege.

In opposition, plaintiff argues that a conversion claim for money is valid when a specific and identifiable fund exists, and there is an obligation regarding its treatment. Plaintiff asserts that the complaint specifically alleges defendant inappropriately used plaintiff's capital contribution of $750,000 for his personal benefit.

Conversion is the unauthorized exercise of the right of ownership over property belonging to another to the exclusion of the owner's rights (State v Seventh Regiment Fund, Inc., 98 NY2d 249 12002) citing Vigilant Ins. Co. of Am. v Hous. Auth of City of El Paso, Tex., 87 NY2d 36 [995]). Money can be the subject of conversion when it can be described, identified, or segregated in the manner that a specific chattel can be and when it is subject to an obligation to be returned (see generally, Republic of Haiti v Duvalier, 2ll AD2d 379 [1st Dept 1995]; see also Hebrew lnstitute for the Deaf and Exceptional Children v. Kahana, l7 Misc. I I 10(A) [NY Sup 2007] ).

Here, plaintiff alleges that defendant misappropriated its capital contribution of $750,000 for his personal benefit. Such allegations sufficiently state a claim for conversion.

Defendant's cross-motion for leave to amend the complaint

ENTER:

Honorable Reginald A. Boddie

Justice. Supreme Court