Conversion Claim Withstands Motion to Dismiss Even Though Plaintiffs Plead Alternate Arguments About Transferred Funds

In a Decision and Order, dated January 31, 2023, in Hieber Astoria, LLC v. Taverna, Index No. 650793/2022, Justice Andrew Borrok of the New York County Commercial Division denied Mr. Taverna’s motion to dismiss the conversion claim against him even though plaintiffs took the position that the funds which were taken from their entity and transferred to another entity were either converted or should be treated as their capital contributions in the new entity. The Court explained:

It does not matter that the Hiebers have taken the position that either the funds are converted or that the funds must solely be their (and not his) capital contributions in Hieber Reade Street because Mr. Taverna disputes that these transferred funds constitute capital contributions by the Hiebers and has in the other litigation (in which he claims he was not properly terminated) disputed that these amounts should be considered part of the Hiebers' capital account. Lastly, the Hiebers are not judicially estopped from arguing that this constitutes a conversion because how to characterize these transfers is and was disputed by the parties and the Court did not rely on the Hiebers' argument that this constituted a capital contribution by them in denying their motion that Mr. Taverna was properly terminated from the Hieber Reade Street partnership.

. . . .

The Defendants' argument that the allegedly converted funds were counted as capital contributions into Hieber Reade Street by Christina Hieber and Jennifer Hieber, such that they can not form the basis of conversion claims is unavailing. As discussed above, the Plaintiffs allege that Mr. Taverna looted their wholly owned entity to supply an entity in which he had an ownership interest with money so that he could overpay himself for work that was not done or done improperly. "Conversion is the unauthorized assumption and exercise of the right of ownership over another's property to the exclusion of the owner's rights" (Lemle v Lemle, 92 AD3d 494, 497, 939 N.Y.S.2d 15 [1st Dept 2012]). To the extent that the transfers were made outside of the three-year statute of limitations, however, the claims with respect to those transfers must be dismissed because conversion claims are not subject to a discovery rule (Gerschel v Christensen, 143 AD3d 555, 556, 40 N.Y.S.3d 41 [1st Dept 2016]).

The attorneys at Schlam Stone & Dolan frequently litigate cases involving the unlawful taking of money or property. Contact our attorneys at commercialdivisionblog@schlamstone.com if you or a client have questions regarding conversion claims.