DECISION AND ORDER The papers filed electronically as NYSCEF DOC# 19-31 were read on plaintiff’s motion for partial summary judgment as to the issues of liability for breach of fiduciary duties and unjust enrichment. The papers filed electronically as NYSCEF DOC # 33-66 were read on defendants’ cross-motion for leave to amend the Answer with Counterclaims and granting defendants summary judgment on their counterclaims. BACKGROUND In this action plaintiff seeks relief and damages based on allegations that plaintiff misappropriated corporate funds in breach of her fiduciary duties. The summons and complaint were filed on June 3, 2022. The complaint alleges that the defendant corporation is a closely-held private corporation with two shareholders, plaintiff, Scott Rausenberger, owner of 49 percent of the corporate stock and defendant, Melissa Adams, owner of 51 percent of the corporate stock. Plaintiff contends that Melissa Adams breached her fiduciary duty by transferring corporate monies to her own personal accounts without notice to plaintiff. The complaint alleges six causes of action and demands money damages in an amount to be determined at or before trial but not less than $200,000, declaratory relief and for a court supervised dissolution. Defendants filed an Answer with five affirmative defenses and four counterclaims on June 27, 2022. Defendants claim the same wrongdoing of plaintiff as alleged against defendant, Melissa Adams — misappropriation of corporate monies, breach of fiduciary duty, unjust enrichment — and as a fourth counterclaim, tortious interference with a contract. Plaintiff now moves for partial summary judgment as to liability on his Second and Fourth causes of action sounding in breach of fiduciary duty and unjust enrichment. Defendants oppose plaintiff’s motion and cross-move to amend their Answer to include an additional affirmative defense and granting them summary judgment on their counterclaims. DISCUSSION To establish a breach of fiduciary duty, the movant must prove the existence of a fiduciary relationship, misconduct by the other party and damages directly caused by that party’s misconduct (see Faith Assembly v. Titledge of N.Y. Abstract, LLC, 106 A.D.3d 47, 61 [2d Dept 2013]; Kurtzman v. Bergstol, 40 AD3d 588 [2d Dept 2007]). Here it is undisputed that a fiduciary relationship exists between the parties as sole shareholders of a corporation. The issue is whether there was any misconduct and resulting damages. Plaintiff alleges that Adams has failed and refused to fully account for corporate monies received, disbursed or distributed to herself or others. In his affidavit, plaintiff avers that Adams did make certain records available for his inspection on April 26, 2022 but that it was not all of the records. He further alleges that Adams transferred corporate monies into her personal or other business accounts without any notice to plaintiff. Although plaintiff states that the key facts are not in dispute and that the exhibits submitted with his motion clearly show such unauthorized transfers of corporate funds by Adams, there are no documents indicating any transfers of corporate funds into Adams personal accounts. More specifically there are no documents indicating that any transfer was unauthorized or in violation of Adams’ fiduciary duty. As the proponent of the motion for summary judgment Plaintiff is required to demonstrate that there are no material issues of fact in dispute and that he is entitled to judgment as a matter of law (Winegrad v. New York Univ. Med. Ctr., 64 N.Y.2d 851, 853 [1985]; Ostrov v. Rozbruch, 91 A.D.3d 147, 152 [1st Dept.2012]). Only when this burden is met, is the opposing party required to submit proof in admissible form sufficient to create a question of fact requiring a trial (Kosson v. Algaze, 84 N.Y.2d 1019 [1995]). Plaintiff has failed to establish, prima facie, that Adams breached her fiduciary duty. Plaintiff’s unjust enrichment claim concerns the same subject matter and seeks the same damages as his breach of fiduciary duty claim. As a result, plaintiff’s unjust enrichment cause of action is duplicative and must be dismissed. Defendants move for leave to amend their answer to assert an affirmative defense of lack of standing. CPLR 3025(b) provides that leave to amend a pleading “shall be freely given.” Accordingly, “leave should be given where the amendment is neither palpably insufficient nor patently devoid of merit, and the delay in seeking amendment does not prejudice or surprise the opposing party” (U.S. Bank, N.A. v. Primiano, 140 A.D.3d 857, 857 [2d Dept 2016]; see HSBC Bank v. Picarelli, 110 A.D.3d 1031, 1032 [2d Dept 2013]) “[T]he legal sufficiency or merits of a claim need not be examined unless such insufficiency or lack of merit is clear and free from doubt” (Edwards v. 1234 Pac. Mgt., LLC, 139 A.D.3d 658, 659 [2d Dept 2016]). “A determination whether to grant such leave is within the Supreme Court’s broad discretion, and the exercise of that discretion will not be lightly disturbed” (Gitlin v. Chirinkin, 60 A.D.3d 901, 902 [2d Dept 2009]; see Galanova v. Safir, 127 A.D.3d 686, 687 [2d Dept 2015]). Defendants’ assertion that plaintiff is not a shareholder is supported solely by Adams’ self-serving affidavit. Adams contends that plaintiff agreed to pay the legal cost for the corporation’s formation in exchange for 49 percent of the corporation’s shares. Defendants submit no shareholder agreement or document that sets forth either party’s contribution. In contradiction to their argument, it is undisputed that Adams considered plaintiff a stockholder of the corporation since its inception and was identified as a 49 percent stockholder on filed tax documents affirmed by Adams. Defendants are precluded from denying plaintiff’s shareholder status. Defendants also move for summary judgment on their counterclaims. Defendants assert four counterclaims sounding in misappropriation and conversion of corporate monies, breach of fiduciary duty, unjust enrichment and tortious interference with contractual relations. “The elements of tortious interference with contractual relations are (1) the existence of a contract between the plaintiff and a third party, (2) the defendant’s knowledge of the contract, (3) the defendant’s intentional inducement of the third party to breach or otherwise render performance impossible, and (4) damages to the plaintiff” (Bayside Carting v. Chic Cleaners, 240 A.D.2d 687, 688 [2d Dept 1997]; see Kronos, Inc. v. AVX Corp., 81 N.Y.2d 90, 94 [1993]). The Court of Appeals has recognized that “inducing breach of a binding agreement and interfering with a nonbinding ‘economic relation’ can both be torts, but that the elements of the two torts are not the same” (Carvel Corp. v. Noonan, 3 N.Y.3d 182, 189 [2004]). As stated in NBT Bancorp v. Fleet/Norstar Fin. Group: [T]he degree of protection available to a plaintiff for a [defendant's] tortious interference with contract is defined by the nature of the plaintiff’s enforceable legal rights. Thus, where there is an existing, enforceable contract and a defendant’s deliberate interference results in a breach of that contract, a plaintiff may recover damages for tortious interference with contractual relations even if the defendant was engaged in lawful behavior…Where there has been no breach of an existing contract, but only interference with prospective contract rights, however, plaintiff must show more culpable conduct on the part of the defendant (NBT Bancorp v. Fleet/Norstar Fin. Group, 87 N.Y.2d 614, 621 [1996] [internal citations omitted]; see Carvel Corp. v. Noonan, 3 N.Y.3d at 190; Guard-Life Corp. v. Parker Hardware Mfg. Corp., 50 N.Y.2d 183, 193-194 [1980]). Here, defendants allege plaintiff tortiously interfered with the corporation’s contract with Mr. Lu and in support of same submitted a copy of an unsigned agreement between defendant corporation and Mr. Lu dated January 2021 on a month-to-month basis. The executed agreement between plaintiff and Mr. Lu is dated February 2022. Defendants have failed to make a prima facie case for summary judgment on the fourth cause of action. The submissions are insufficient to establish the requisite culpable conduct on the part of plaintiff. Mr. Lu’s text message to Adams dated February 13, 2022 merely states that he was under the impression that “this is your joint decision.” In his opposition, plaintiff asserts that he advised Mr. Lu of Adams’ intention to discontinue her business relationship with plaintiff and then negotiated a new contract between Mr. Lu and his own company for the same services but at a lower price. In considering a motion for judgment as a matter of law, “the trial court must afford the party opposing the motion every inference which may properly be drawn from the facts presented, and the facts must be considered in a light most favorable to the nonmovant” (Szczerbiak v. Pilat, 90 N.Y.2d 553, 556 [1997]). “In making this determination, a court must not ‘engage in a weighing of the evidence,’ nor may it direct a verdict where ‘the facts are in dispute, or where different inferences may be drawn or the credibility of witnesses is in question’ “(Bzezi v. Eldib, 112 A.D.3d 772, 774 [2d Dept 2013], quoting Dolitsky v. Bay Isle Oil Co., 111 A.D.2d 366, 366,489 N.Y.S.2d 580). Here, viewing the evidence in the light most favorable to the plaintiff, a rational process existed by which the jury could find no culpable conduct on the part of the plaintiff. Defendants also allege the plaintiff was unjustly enriched by the misappropriation of corporate funds. Under New York law, “conversion takes place when someone, intentionally and without authority, assumes or exercises control over personal property belonging to someone else, interfering with that person’s right of possession. Two key elements of conversion are (1) plaintiff’s possessory right or interest in the property and (2) defendant’s dominion over the property or interference with it, in derogation of plaintiff’s rights.” (Colavito v. New York Organ-Donor Network, Inc., 8 N.Y.3d 43, 49-50 [2006] (citations omitted) “[C]onversion is concerned with [plaintiff's] superior right of possession of such property, not title ownership.” (Core Dev. Grp. LLC v. Spaho, 199 A.D.3d 447 [1st Dept. 2021]. Where the funds are held in specific escrow and allegedly misused or misapplied, plaintiffs may advance a claim for conversion. “Money, if specifically identifiable, may be the subject of a conversion action…[C]onversion occurs when funds designated for a particular purpose are used for an unauthorized purpose.” (Petrone v. Davidoff Hutcher & Citron, LLP, 150 A.D.3d 776, 777 [2d Dept. 2017] (citations omitted) (emphasis added). The tort of conversion has roots in common law. Claims for conversion of monies are allowed only if the funds in question were “separate, distinct, separately identifiable” and not commingled with other monies. Here, defendants claim that certain monies were misappropriated, but no claim that these monies were separate, distinct or could not be repaid by plaintiff. In fact, plaintiff contends that it was agreed between the parties that funds used as an advance and withdrawals taken would be paid back by deducting the amount from the party’s salary which would have been seen in the QuickBooks account which defendant has denied plaintiff access. Defendants have failed to establish their entitlement, prima facie, to summary judgment for misappropriation of corporate funds and unjust enrichment. Upon reading the foregoing papers and due consideration having been given, it is hereby ORDERED that plaintiff’s motion for partial summary judgment is denied; and it is further ORDERED that the Fourth cause of action for unjust enrichment is dismissed as duplicative; and it is further ORDERED that defendants’ cross-motion for summary judgment on the counterclaims is denied; and it is further ORDERED that defendants’ cross-motion to amend the answer is denied. ORDERED that an in-person settlement conference shall be held on DECEMBER 13, 2023 at 3:00 p.m., all parties and counsel are directed to appear. This decision constitutes the order of the Court as to Motions #1 and #2. Dated: October 26, 2023
