OPINION OF THE COURT
This appeal requires us to determine whether a three-year
On September 19, 1985 plaintiffs Gerald Kaufman and Stuart Seigel (plaintiffs) formed a partnership named SIG Partners (SIG) with defendant Irwin Cohen (Cohen). According to the written partnership agreement, SIG’s purpose was to engage in business for profit, including but not limited to the development of a commercial property known as the Falchi Building, located at 31-02 47th Avenue, Long Island City, New York. SIG and a subsidiary of its financing partner, East River Savings Bank (East River), formed a limited partnership known as 31-02 47th Avenue Associates, L.P. (31-02). On December 22, 1986, 31-02 purchased the Falchi Building with a $15 million mortgage from East River.
Despite multiple refinancings, 31-02 was unable to make a commercial success of the building. In early 1992, 31-02 defaulted on its outstanding $30,250,000 mortgage, held at the time by Equitable Life Assurance Society of the United States (Equitable). In May 1992, Equitable commenced a foreclosure action, and 31-02 failed to answer the complaint or raise any objection to the foreclosure proceeding. Following entry of judgment of foreclosure, the sale of the Falchi Building was publicly noticed for October 27, 1993.
Plaintiffs allege that “at or about the time of the foreclosure action,” Cohen represented to them that SIG’s partnership interest in 31-02 could not be salvaged, was not worth salvaging and that they should let the interest lapse. Plaintiffs further allege that Cohen’s representation was false, was known by Cohen to be false when made and that plaintiffs reasonably relied on Cohen’s representation as a partner and fiduciary.
On April 28, 1994, prior to the foreclosure sale, LIC Mortgage Corporation (LIC) purchased Equitable’s mortgage for $14,500,000, with funds supplied by defendant CMC Falchi Holding Co., L.L.C. (CMC), an entity in which Cohen allegedly has a direct or beneficial interest. On December 8, 1994, the Falchi Building was sold to LIC at public auction for $14,500,000. On March 10, 1995, LIC’s fee interest in the Falchi Building was transferred by referee’s deed to an affiliated entity, defendant Falchi Building Co., L.P. (Falchi L.P.).
In the ensuing six years, ownership of the Falchi Building was conveyed three more times. In July 1995, Falchi L.P. transferred its fee interest to its affiliate, defendant CMC.
On June 7, 2001, plaintiffs commenced the instant action alleging that defendant Cohen had misappropriated SIG’s opportunity to reacquire the Falchi Building, thereby breaching •his fiduciary duty to the SIG partnership and unjustly enriching himself and his new associates. Plaintiffs sought compensatory and punitive damages in the amount of $5 million, an accounting and the imposition of a constructive trust on all proceeds from the ownership, operation and sale of the Falchi Building that could be traced to Cohen’s participation in these activities. Plaintiffs sought to hold the remaining defendants liable for aiding and abetting Cohen’s breach of fiduciary duty. Subsequent to defendants’ motions to dismiss, plaintiffs served an amended complaint adding an eleventh cause of action for fraud against Cohen.
Defendants moved to dismiss the complaint on the grounds that the causes of action were barred by the statute of limitations and were substantively flawed. Plaintiffs opposed the motion.
Alternatively, the court ruled that even if a six-year statute of limitations applied, plaintiffs’ breach of fiduciary duty claims would still be time-barred because those claims accrued, at the latest, in December 1994, when LIC purchased the Falchi Building at public auction, and plaintiffs’ action was commenced more than six years later. The court also rejected plaintiffs’ equitable estoppel argument on the grounds that they had failed to show an affirmative wrong committed by defendants that was intended to delay plaintiffs from commencing timely action, and further, that they failed to allege wrongful conduct independent of that which formed the basis of the underlying claim.
The court dismissed plaintiffs’ fraud claim, finding the allegations of an affirmative misrepresentation and active concealment insufficient to satisfy the exacting pleading requirements of CPLR 3016 (b). It further held that the fraud claim was untimely, ruling that it was merely “incidental” to the breach of fiduciary duty claim, and was apparently added solely to avoid the three-year statute of limitations. However, even if the six-year statute of limitations for fraud actions, as well as the discovery accrual rule in CPLR 213 (8) and 203 (g), applied, the court ruled that the fraud claim was untimely since a letter sent to plaintiffs in April 1994, indicating that Cohen’s daughter was employed by the management company for LIC, the purchaser of Equitable’s mortgage, triggered a duty to investigate which would have led them to discover Cohen’s involvement. The court also found the equitable estoppel doctrine inapplicable to the fraud claim.
The court also dismissed the unjust enrichment cause of action as ancillary to the breach of fiduciary duty claim, and therefore subject to the three-year statute of limitations. It dismissed the accounting claim for failure to make a demand prior to commencing suit. As to the other defendants, the court dismissed the aiding and abetting claims on the grounds that the direct breach of fiduciary duty claim against Cohen had been dismissed, and because they were insufficiently pleaded.
On appeal, plaintiffs first argue that the IAS court erred in dismissing the breach of fiduciary duty claim as time-barred. They argue that the six-year statute of limitations in CPLR 213 (1), not the three-year statute of limitations in CPLR 214 (4), applies to their breach of fiduciary duty claim. They further contend that, in any event, defendants should be equitably estopped from asserting the statute of limitations defense due to their active concealment of Cohen’s role in misappropriating SIG’s opportunity to reacquire an interest in the Falchi Building. As we conclude that plaintiffs’ breach of fiduciary duty claims were timely, we modify to reinstate the first and second causes of action.
New York law does not provide any single limitations period for breach of fiduciary duty claims (Whitney Holdings, Ltd. v Givotovsky,
In the present case, plaintiffs’ complaint demands both legal and equitable relief. Plaintiffs’ first, second, third, fifth, sixth, eighth, ninth and eleventh causes of action seek money damages of not less than $5 million on theories of fraud, breach of fiduciary duty, aiding and abetting a breach of fiduciary duty and unjust enrichment. On the other hand, plaintiffs’ fourth, seventh, and tenth causes of action seek equitable relief in the form of an accounting and a constructive trust. Unfortunately, the case law provides no clear guidance on which limitations
Nevertheless, the case law in New York clearly holds that a cause of action for breach of fiduciary duty based on allegations of actual fraud is subject to a six-year limitations period (see Goldberg v Schuman,
An exception to this rule, and one relied upon by defendants and the IAS court here, is that “courts will not apply the fraud Statute of Limitations if the fraud allegation is only incidental to the claim asserted; otherwise, fraud would be used as a means to litigate stale claims” (Powers Mercantile Corp. v Feinberg,
The timeliness of plaintiffs’ breach of fiduciary duty claim, therefore, turns on the viability of plaintiffs’ fraud cause of action, an issue to which we now turn. The IAS court found that plaintiffs’ fraud cause of action did not meet the pleading requirements of CPLR 3016 (b), and speculated that it was added solely in response to defendants’ statute of limitations argument. To state a cause of action for fraud, a plaintiff must allege a representation of material fact, the falsity of the representation, knowledge by the party making the representation that it was false when made, justifiable reliance by the plaintiff and resulting injury (see Monaco v New York Univ. Med. Ctr.,
Alternatively, instead of an affirmative misrepresentation, a fraud cause of action may be predicated on acts of concealment
Plaintiffs’ fraud cause of action alleged that Cohen made the false representation that SIG’s partnership interest in 31-02 could not be salvaged at the same time when he was making plans to salvage such interest with third parties to the exclusion of plaintiffs; that Cohen knew the representation was false when made and that plaintiffs reasonably relied thereon; and that plaintiffs were damaged as a result. Plaintiffs also alleged that Cohen owed them a fiduciary duty, as partners, to disclose the opportunity to reacquire an interest in the Falchi Building, but that instead he intentionally and deliberately concealed his efforts to reacquire such interest with new financial partners. In our view, these allegations are not merely incidental to the breach of fiduciary duty claim, and, instead, state a valid cause of action for actual fraud by Cohen (see Erbe v Lincoln Rochester Trust Co.,
We disagree with the IAS court’s holding that plaintiffs’ fraud allegations failed to satisfy CPLR 3016 (b) because they failed to specify the exact date, time or the precise contents of Cohen’s misrepresentations, nor indicated how they came to rely on Cohen’s statements. While defendants are correct that CPLR 3016 (b) requires factual allegations in support of each element of fraud (see Monaco v New York Univ. Med. Ctr.,
Such is certainly the case here, where defendants’ dismissal motions prevented plaintiffs from obtaining discovery on the precise issues of each defendant’s knowledge and intent with respect to Cohen’s concealment of his role in reacquiring an interest in the Falchi Building (see Bernstein v Kelso & Co.,
In light of our holding that plaintiffs’ fraud cause of action is sufficiently pleaded and is not merely “incidental” to the breach of fiduciary duty cause of action, we hold that the applicable limitations period for both the breach of fiduciary duty and fraud causes of action is six years (see CPLR 213 [1], [8]; Goldberg v Schuman,
However, the Court of Appeals has held in the medical malpractice context that equitable estoppel does not apply where the misrepresentation or act of concealment underlying the estoppel claim is the same act which forms the basis of plaintiff’s underlying substantive cause of action (see Rizk v Cohen,
Nevertheless, plaintiffs’ argument for application of the fraud discovery accrual rule to their claims is persuasive. “A cause of action sounding in fraud must be commenced within 6 years from the date of the fraudulent act or 2 years from the date the party discovered the fraud or could, with due diligence, have discovered it” (Ghandour v Shearson Lehman Bros.,
The IAS court found that an April 28, 1994 letter sent to plaintiffs announcing Equitable’s assignment of its rights to the mortgage on the Falchi Building to LIC should have triggered a duty of inquiry on the part of plaintiffs that would have revealed Cohen’s involvement in attempting to reacquire the Falchi Building. The court’s conclusion was based on the fact that the letter directed that all further correspondence or payments be addressed to the new management company, ATC Management, Inc., to the attention of Cheryl Cohen, who is defendant Cohen’s daughter. However, in the proceedings below, plaintiff Kaufman submitted a supplemental affidavit stating that Cheryl Cohen’s employment with ATC Management raised no red flags as to defendant Cohen’s involvement with the new purchasers of the Falchi Building. The affidavit further explained that since Cohen had previously managed the building through an entity known as SIG Management Corp., it was not unusual that Cohen or his daughter would have remained involved in the management of the building for the new mortgagees. In any event, the letter itself makes no mention that Cohen himself was involved in the attempt to repurchase the building out of foreclosure with new partners.
In view of plaintiffs’ submissions, it was error for the IAS court to rule as a matter of law that they could have, with reasonable diligence, discovered the fraud in 1994 (see Yatter v William Morris Agency,
The IAS court dismissed plaintiff’s fourth cause of action for an accounting due to their failure to demand one prior to
In opposition to Cohen’s motion to dismiss, plaintiff Kaufman submitted an affidavit stating that he spoke to Cohen by telephone and demanded to know why he was “in” and they were “out” of the Falchi Building transaction. Plaintiff Seigel submitted an affidavit stating he too spoke to Cohen by telephone and demanded to know what Cohen was getting out of the Falchi Building and why he had cut his partners out. According to plaintiffs, after these communications, Cohen refused to communicate with them, and, accordingly, they concluded that a formal demand for an accounting would be futile. Giving plaintiffs’ allegations their most favorable intendment (see Arrington v New York Times Co.,
Plaintiffs’ fifth, sixth, eighth and ninth causes of action seek to hold the defendants other than Cohen (the Falchi defendants) liable for aiding and abetting Cohen’s breach of fiduciary duty. The IAS court dismissed these causes of action because they were derivative of the breach of fiduciary duty claim against Cohen, which it had dismissed as untimely, and also because the complaint failed to allege how the Falchi defendants knowingly participated in, or provided substantial
Our finding above that the primary breach of fiduciary duty causes of action against Cohen are indeed viable, of course, vitiates the IAS court’s holding that the derivative claims against the Falchi defendants should be dismissed. Nevertheless, the Falchi defendants’ substantive arguments concerning the flaws in plaintiffs’ aiding and abetting theory have merit. A claim for aiding and abetting a breach of fiduciary duty requires: (1) a breach by a fiduciary of obligations to another, (2) that the defendant knowingly induced or participated in the breach, and (3) that plaintiff suffered damage as a result of the breach (see S & K Sales Co. v Nike, Inc., 816 F2d 843, 847-848 [2d Cir 1987]; Whitney v Citibank, N.A., 782 F2d 1106, 1115 [2d Cir 1986], citing Wechsler v Bowman,
As we have already found that a breach of fiduciary duty has been adequately stated against Cohen, we now focus on the second element of knowing participation. Although a plaintiff is not required to allege that the aider and abettor had an intent to harm, there must be an allegation that such defendant had actual knowledge of the breach of duty (see S & K Sales Co. v Nike, Inc., 816 F2d at 848; In re Sharp Intl. Corp.,
While not unmindful of the inherent difficulty in pleading a defendant’s actual state of mind (see, Wight v Bankamerica Corp.,
A person knowingly participates in a breach of fiduciary duty only when he or she provides “substantial assistance” to the primary violator (see King v George Schonberg & Co.,
Here, the sum total of plaintiffs’ allegations concerning the Falchi defendants’ substantial assistance is that they “knowingly induced, aided and abetted Cohen’s said breach of fiduciary duty by assisting him to reacquire an interest in the Falchi Building and to conceal the same from plaintiffs.” As an initial matter, assisting Cohen in reacquiring an interest in the Falchi Building, not an unusual activity for those in the business of commercial real estate development, hardly constitutes assisting in a breach of fiduciary duty by itself. Moreover, the gravamen of this allegation is that the Falchi defendants concealed Cohen’s breach of fiduciary duty from the plaintiffs, Cohen’s former SIG partners, by failing to disclose it. Manifestly, as the Falchi defendants owed no fiduciary duty to plaintiffs, they were under no duty to report Cohen’s involvement to them, and no aider or abettor liability may be based thereon.
We also agree with the IAS court that the aiding and abetting claim is time-barred. We reject plaintiffs’ assertion that equitable estoppel or a discovery accrual rule is available with respect to the claims against the Falchi defendants. Since these defendants are not alleged to have made any representation, and further owed no fiduciary duty to plaintiffs, the aiding and abetting claim against them sounds in constructive fraud, not actual fraud. As noted above, the discovery accrual rule does not apply in cases alleging constructive fraud (see
The IAS court dismissed plaintiffs’ causes of action seeking to impose a constructive trust as time-barred and for failing to state a cause of action. Recognizing that the requirements for the equitable doctrine of a constructive trust are not rigidly limited (see Simonds v Simonds,
Nevertheless, we agree with the IAS court that this cause of action is time-barred. An action to impose a constructive trust is governed by the six-year statute of limitations provided by CPLR 213 (1), which commences to run upon occurrence of the wrongful act giving rise to a duty of restitution, and not from the time when the facts constituting the fraud are discovered (Mazzone v Mazzone,
Lastly, plaintiffs’ unjust enrichment cause of action was properly dismissed as time-barred. Even accepting plaintiffs’ argument that a six-year limitations period applies (CPLR 213 [1]), a claim for unjust enrichment accrues upon the occurrence of the alleged wrongful act giving rise to restitution (see Congregation Yetev Lev D’Satmar v 26 Adar N.B. Corp.,
Buckley, P.J., Nardelli, Mazzarelli and Williams, JJ., concur.
Judgment, Supreme Court, New York County, entered April 15, 2002, modified, on the law, the causes of action for fraud, breach of fiduciary duty and an accounting reinstated, and otherwise affirmed, without costs.
Notes
. Plaintiffs further allege that Cohen, the only member of the SIG partnership based in New York, was the de facto managing partner of SIG and was responsible for managing its daily operations.
. Plaintiffs also allege that defendant MC Holdings was affiliated with defendant CMC and that defendant Kislin was affiliated with both Falchi L.P. and CMC.
. We reject plaintiffs’ argument that the cause of action for breach of fiduciary duty accrued on March 10, 1995, when the Falchi Building was conveyed by referee’s deed from LIC to Falchi L.P. Generally, a cause of action for breach of fiduciary duty accrues at the time of the breach, which, in this case, occurred when Cohen misappropriated the partnership’s opportunity to reacquire the Falchi Building. This act was accomplished upon his new partners’ purchase of the building at public auction in December 1994.
. Although the discovery accrual rule does not apply in cases of constructive fraud (Monaco v New York Univ. Med. Ctr.,
. To the extent plaintiffs’ causes of action for breach of fiduciary duty are brought on behalf of the corporation SIG-L.L, the general partner of SIG and whose president was Cohen, the applicable limitations period is the six-year period in CPLR 213 (7), which governs actions “by or on behalf of a corpora