Cusimano v Schnurr  2016 NY Slip Op 01758  Decided on March 15, 2016 Appellate Division, First Department is a case of husband and wife versus Wife’s father and sister, and in true NY fashion, its all about real estate.

“As a brief summary, this case involves a series of disputes among family members who own a group of real estate businesses. Plaintiffs Rita Cusimano and Dominic J. Cusimano are husband and wife, and intervenors Bernard V. Strianese and Bernadette Strianese are Rita’s father and sister respectively. Rita and the Strianeses own or formerly owned, in various degrees, certain entities that invest in commercial real estate. Defendants Andrew V. Schnurr, CPA and Michael Gerard Norman, CPA are certified public [*2]accountants who, along with Michael Gerard Norman, CPA, P.C., Norman’s accounting firm (collectively, the accountants), are alleged to have provided accounting and tax services to plaintiffs and the various entities. The first entity is the Strianese Family Limited Partnership (FLIP), which had owned commercial property in Deer Park, New York, and now owns commercial property in Florida leased to a CVS Drug Store. The second entity is Berita Realty, LLC (Berita), which owns an interest in an entity that owns a Marriott Hotel in New York State. The third consists of two entities known collectively as the Seaview Corporations (Seaview), which own two commercial buildings in New York State.”

Read through the decision to see how a family tears itself apart.  For our purposes, two bedrock principles emerge:  the statute of limitations for breach of fiduciary duty and how accounting statutes of limitation are calculated.

“Contrary to the motion court’s conclusion, we find that a six-year statute of limitations applies to the breach of fiduciary duty claims against Bernard, Bernadette, and the Norman defendants (and to the aiding and abetting breach of fiduciary duty against the Norman defendants). In Kaufman v Cohen (307 AD2d 113, 118 [1st Dept 2003]), this Court explained that the applicable statute of limitations for breach of fiduciary duty depends upon the substantive remedy sought. Where the relief sought is equitable in nature, the six-year limitations period of CPLR 213(1) applies, but if the claim is for monetary relief, a three-year limitations applies (see Kaufman at 118).

“Nevertheless, . . . a cause of action for breach of fiduciary duty based on allegations of actual fraud is subject to a six-year limitations period” (id. at 119, citing Goldberg v Schuman, 289 AD2d 8 [1st Dept 2001]; Matter of Kaszirer v Kaszirer, 286 AD2d 598, 598-599 [1st Dept 2001]; Heffernan v Marine Midland Bank, 283 AD2d 337, 338 [1st Dept 2001]; Unibell Anesthesia v Guardian Life Ins. Co. Of Am., 239 AD2d 248 [1st Dept 1997]). An exception to this rule exists ” if the fraud allegation is only incidental to the claim asserted'” (Kaufman at 119, quoting Powers Mercantile Corp. v Feinberg, 109 AD2d 117, 120 [1st Dept 1985], affd 67 NY2d 981 [1986]). Thus, “where an allegation of fraud is not essential to the cause of action pleaded except as an answer to an anticipated defense of Statute of Limitations, courts look for the reality, and the essence of the action and not its mere name” (Kaufman at 119 [internal [*3]quotation marks omitted]).

Here, although the fiduciary duty claims seek monetary relief, the six-year limitations period applies because the claims sound in fraud. Plaintiffs alleged that the accountants and Bernard and Bernadette induced Rita to sell her stake in Seaview below the fair market value of the interest. Plaintiffs also alleged that with regard to Berita, the accountants and Bernard and Bernadette conspired to falsify tax filings so that plaintiffs incurred phantom taxes and the inability to claim losses in some years. In addition, plaintiffs alleged the accountants and Bernard and Bernadette created fraudulent promissory notes that appear to have gutted Berita of its equity. Further, plaintiffs alleged with regard to FLIP, the accountants and Bernard and Bernadette engaged in similar acts of tax fraud resulting in similar consequences for plaintiffs. Plaintiffs also alleged that the accountants and Bernard and Bernadette forged Rita Cusimano’s signature of checks and bank documents to move funds out of the companies.

These allegations, which sound in fraud, are not merely incidental to the breach of fiduciary duty claims, and thus, the applicable limitations period for plaintiffs’ breach of fiduciary claims is six years (see Kaufman at 119-121; see e.g. AQ Asset Mgt., LLC v Levine, 119 AD3d 457 [1st Dept 2014] [claims that defendant deceived sellers into signing the stock and sales proceeds distribution, and failing to disclose and misrepresenting full benefits accruing to defendant, including defendant’s personal interest in the sale proceeds, were sufficient to allege fraudulent conduct that defendant breached his fiduciary duty as to warrant a six-year limitations period]; New York State Workers’ Compensation Bd. v Consolidated Risk Servs., Inc., 125 AD3d 1250 [3d Dept 2015] [breach of fiduciary duty claim is subject to a six-year limitations period despite not seeking equitable relief, because defendants breached their fiduciary duties to the trusts by fraudulently concealing or misrepresenting the financial condition of the trusts]; Monaghan v Ford Motor Co., 71 AD3d 848 [2d Dept 2010] [breach of fiduciary cause of action against defendant stated an actual claim of fraud, which was not merely incidental to the breach of fiduciary duty claim and was subject to six-year statute of limitations]; Klein v Gutman, 12 AD3d 417 [2d Dept 2004] [cause of action alleging breach of fiduciary duty was based on allegations of actual fraud, and the applicable statute of limitations was six years]).”

Statute of limitations

“Plaintiffs’ argument that their accounting malpractice claims against the Norman defendants are tolled because of the continuous representation doctrine also is unavailing. Plaintiffs’ allegations that the Norman defendants continued to provide accounting and tax services for the relevant entities and individuals amount to nothing more than a series of discrete and severable transactions, and are not sufficient enough to toll the running of the statute of limitations (see Booth v Kriegal, 36 AD3d 312 [1st Dept 2006]; see also Williamson v PricewaterhouseCoopers LLP, 9 NY3d 1 [2007]).”