41 N.Y. 291 | NY | 1977
To be determined on this appeal is the Statute of Limitations appropriate to an action brought by an employer against an employee for money allegedly received by the latter in violation of his duty of loyalty to the former.
The complaint alleges that defendant, a senior contract specialist in the corporate realty department of plaintiff Western Electric Company, had among his duties the initiating and negotiating of contracts and business arrangements. It further alleges that, by virtue of his employment with Western Electric, defendant was instrumental in securing the award of a 1971 contract to the J. L. Williams Company to construct a building at Warrenville, Illinois, for lease by Western Electric. In consideration of his efforts in obtaining that award, it is alleged that defendant demanded payment to him by the J. L. Williams Company of $50,000 which he received in two installments of $25,000 each, one in August and the other in December of 1971. Western Electric asserts that by virtue of defendant’s position with the company, it was entitled to place reliance and trust in the integrity, competence, honesty and fidelity of defendant in respect to the duties which he owed Western Electric and that such duties and obligations were breached by reason of defendant’s aforedescribed conduct.
The complaint sets forth two causes of action. Paragraph "SEVENTEENTH” of the first provides "That by virtue of the breach of Defendant’s duties of faithfulness and trust owing to Western Electric his receipt of the aforesaid payment deprived
On his motion to dismiss, defendant argued that plaintiff’s cause of action is based upon tortious conduct for which the Statute of Limitations is three years and that this action, commenced in May of 1975, is time-barred. In denying that motion, Special Term accepted plaintiff’s argument that the basis of the complaint was defendant’s breach of his contract of employment and of the duties of trust and loyalty which flowed therefrom. Taking this view, plaintiff’s action was commenced well within the six-year limit. The Appellate Division affirmed, agreeing that the complaint sounds in contract, not in tort, but certified to this court the following question: "Was the order of the Supreme Court, as affirmed by this Court, properly made?”
The answer to the question posited is, in a word, yes. Contract, not tort, forms the basis of plaintiff’s causes of action.
While both parties agree that it is the gravamen or essence of the cause of action that determines the applicable Statute of Limitations (Brick v Cohn-Hall-Marx Co., 276 NY 259, 264; Corash v Texas Co., 264 App Div 292, 295), they differ in their analysis of the nature or essence of the claim. Defendant, citing section 25-b of the General Construction Law, contends that the cause of action is one for wrongful injury to property and thus governed by the three-year limitation of CPLR 214 (subd 4). Section 25-b of the General Construction Law, however, which provides that " 'Injury to property’ is an actionable act, whereby the estate of another is lessened”, specifically excepts from its definition injuries to property brought about by "the breach of a contract”. In support of a narrow reading of that exception, defendant cites Buyers v Buffalo Paint & Specialities (199 Misc 764). In Buyers, the court sought to determine whether two causes of action, one for breach of warranty and the other for negligence, were barred by the three-year Statute of Limitations. A key factor there was that the plaintiff sought, not "restitution of the contract price”, but
The situation in the instant case is also quite dissimilar from those in cases cited by defendant involving causes of action which stem from the breach of a defendant’s duty to use due care. In those cases the gravamen of the action is negligence and the claim is governed by the three-year period of CPLR 214 (see McLaughlin, Practice Commentaries, McKinney’s Cons Laws of NY, Book 7B, CPLR 213:2, p 326; 214:4, pp 428-429; see, e.g., Alyssa Originals v Finkelstein, 22 AD2d 701, affd 24 NY2d 976; Carr v Lipshie, 8 AD2d 330, 331, affd 9 NY2d 983).
Here, as plantiff argues, the basis of the lawsuit stems from a wrong resulting from defendant’s breach of his duty of loyalty as an employee. Absent the relationship between the parties, there would be no duty to be breached, no wrong, and, thus, no cause of action. In Bravo Knits v De Young (35 AD2d 932, 933), where the issue was the arbitrability of a claim such as this, that court commented: "Bearing in mind that the contract is one of employment and that the claims are that this defendant transgressed against the duties of loyalty inherent in the employer-employee relationship, it is clear that the controversy arises out of and relates to the contract which is the genesis of the relationship and the consequent duty. It is of no moment that the causes of action are framed in commercial tort.”
Accordingly, the order of the Appellate Division should be affirmed, with costs, and the certified question answered in the affirmative.
Chief Judge Breitel and Judges Jasen, Gabrielli, Jones, Wachtler and Fuchsberg concur.
Order affirmed, etc.