Defendant Muriel Siebert & Co., Inc. ("Siebert Co.") moves, pursuant to CPLR 3211(a)(7), to dismiss the complaint on the ground that it fails to state a cause of action against it. Plaintiffs oppose the motion.

Plaintiffs are Fay Fanta ("Fay"), a 98-year old widow, Hindalene Rosner as Executrix of the Estate ("Estate") of Egon Fanta ("Egon"), who died in 2006 at the age of 95, and Fanta, Inc. ("Fanta"), the corporation Fay and Egon owned. They bring this action to recover approximately $205,000.00 that was allegedly stolen from the corporation's investment account by defendant Symonize B. Griffith, a housekeeper and Egon's home health aide, and Andrew Griffith, her husband, who also worked for the Fantas. Plaintiffs assert that the Griffiths' two adult daughters, Ann Marie Griffith and Nancy Joseph, as well as Nancy's husband, Joseph Lester, assisted in the theft. Plaintiffs also name the investment brokerage firm, Siebert Co., as a defendant, claiming that it negligently allowed the unauthorized transfer of the funds, as well as JPMorgan Chase Bank, N.A. ("Chase"), the bank through which the funds were transferred.

Plaintiffs allege that Fanta and Egon each maintained an investment account at Siebert Co.'s New York retail brokerage office. Fanta's account was numbered WTF-693391, and Egon's account was numbered WTF-698679. Fanta's account included the following shares of publicly traded stock in certificate form:

A.6,000 shares of the common stock of General Electric Company ("GE Stock")

B.180 shares of the common stock of Southwestern Bell Corporation, now known as SBC Communications ("SBC Stock") [*2]

C.1,156 shares of the common stock of Bell Atlantic Corporation, now known as Verizon Communications ("Verizon Stock").

The stock certificates were endorsed in blank by Egon and delivered to Siebert Co. to be held in Fanta's account. At the same time the stock was delivered to Siebert Co., Fanta submitted a corporate resolution ("Corporate Resolution") and irrevocable stock power for each of the three stocks at issue. The Corporate Resolution stated that "Fay Fanta, who is the secretary of this corporation is hereby authorized to sell, assign and transfer [the stock] and to execute any and all instruments necessary, proper or desirable for this purpose."

Plaintiffs allege that, on October 17, 2005, Symonize Griffith and/or Andrew Griffith delivered to Siebert Co. an undated, typewritten letter ("Transfer Letter") on Egon's personal letterhead, which stated, in its entirety: "To Whom it May Concern/ Please move all the assets from [the Fanta] account WTF-693391 to [Egon's] account WTF-698679." The Transfer Letter bore Egon's forged signature.

Plaintiffs further maintain that upon receiving the forged letter, Siebert Co. transferred Fanta's stock into Egon's individual account. Thereafter, apparently pursuant to telephonic instructions, Siebert Co. sold the GE Stock, the SBC Stock and the Verizon Stock, and sent three checks, in the respective amounts of $204,686.20, $3,978.48, and $49,841.53, to Egon's personal account at Chase. The proceeds were then transferred, via checks drawn on Egon's account, to Egon and Fay's joint checking account at Chase.

Almost immediately, over $204,000 was transferred out of the joint account and into a Chase account owned by Symonize Griffith, which had been opened the previous day with one penny. An additional $49,000 was intercepted by plaintiffs before it was transferred to Symonize Griffith.

Plaintiffs contend that moving the funds pursuant to the Transfer Letter contravened Fanta's Corporate Resolution that was on file with Siebert Co. because there was no authorization by Fay for any transfer nor was there any new corporate resolution, stock power or other written corporate document authorizing removal of all of Fanta's corporate assets and their placement into Egon's personal account.

They assert causes of action against Siebert Co. for negligence (first cause of action), breach of contract (second cause of action), breach of fiduciary duty (third cause of action) and conversion (fourth cause of action).

Siebert Co. moves to dismiss on the ground that, even if, as plaintiffs allege, it was negligent in transferring the stocks to Egon's personal account and then selling them, nonetheless, the proceeds were sent to Egon's personal account at Chase, and therefore the plaintiffs were not damaged by Siebert Co.'s actions. Siebert Co. contends that plaintiffs' damages occurred after it no longer had anything to do with the stocks, and thus, that it is not the proximate cause of any loss. It seeks dismissal, arguing that it did not cause Fanta any damages, that intervening acts of criminality defeat all claims against it, that no fiduciary duty was owed and that there can be no recovery for conversion.

Oral argument was held before Justice Moskowitz, who dismissed the individual claims asserted by Fay and the Estate against Seibert Co. but not those maintained by Fanta (November 29, 2007 Transcript, at 11).

Siebert Co. argues that "regardless of the precise cause of action," it cannot be liable because Fanta did not suffer damages by reasons of its acts or omissions (Affidavit in Support ["Supp."], at ¶ 16). It contends that because the full value of Fanta's stock found its way to Egon or Fay's Chase accounts, it cannot be held legally responsible. It also asserts that the "intervening, superseding criminality of the Griffiths" breaks any causal nexus.

Fanta counters that Siebert Co. was negligent and breached its contract in transferring funds in violation of the Corporate Resolution it was duty bound to follow. It asserts that the Transfer Letter was clearly deficient, and should not have been honored, in that it was not on corporate stationery, was not certified by the corporate secretary, and did not contain a corporate seal.

The damages alleged in the complaint are that Fanta lost its stock and the proceeds from the stock. There is no indication that Fanta wanted the stock removed from its account or that it—the corporation—received proceeds from the stock's sale; thus, undoubtedly the complaint sufficiently alleges that Fanta was damaged.

The cases Siebert Co. cites are entirely inapposite (see Liberman v Worden, 268 AD2d 337 [1st Dept 2000] [funds were properly deposited]; Geotel, Inc. v Wallace, 162 AD2d 166 [1st Dept 1990] [checks were made payable to plaintiff's own brokerage account], appeal denied and dismissed 76 NY2d 917 [1990]; Davis Aircraft Products Co. v Bankers Trust Co., 36 AD2d 705 [1st Dept 1971] ["(s)ince plaintiff initially received the proceeds of the checks which defendant paid, it suffered no loss which is recoverable from defendant"]). Fanta never sought to have the stocks transferred from its account and the stocks were not simply moved from one of Fanta's own accounts into another. Instead, Fanta's stocks were allegedly wrongfully placed into the account of Egon, a Fanta shareholder. At that point, Fanta—a corporation distinct from its shareholders—suffered injury.

The individual defendants' allegedly criminal conduct, moreover, does not insulate Siebert Co. from liability either for negligence or for breach of contract.^[FN1] Significantly, Siebert Co.'s alleged negligence actually facilitated the criminal activity (contrast First National State Bank of N.J. v Irving Trust Co., 91 AD2d 543 [1st Dept 1982] [ordinarily one is not chargeable with damages simply for failure to anticipate a crime by a third party], affd 59 NY2d 991 [1983]; cf. Fidelity and Deposit Co. of Maryland v Chemical Bank New York Trust Co., 65 Misc 2d 619, 621 [App. Term 1970], affd 39 AD2d 1019 [1st Dept 1972]).

Breach of Fiduciary Duty

It is well-settled under New York law that "brokers for non-discretionary accounts do not owe clients a fiduciary duty" (see, e.g., Celle v Barclays Bank P.L.C., 48 AD3d 301, 301 [1st Dept 2008]). Here, it is undisputed that Siebert Co. maintained a nondiscretionary trading account on behalf of Fanta (see Memorandum of Law in Opposition to the Motion of Siebert Co. to Dismiss the [*4]Complaint ["Opp Mem"], at 7); thus, there can be no recovery for breach of fiduciary duty and that cause of action is dismissed.

Conversion

Conversion is the "unauthorized assumption and exercise of the right of ownership over goods belonging to another to the exclusion of the owner's rights" (Peters Griffin Woodward, Inc. v WCSC, Inc., 88 AD2d 883, 883 [1st Dept 1982]). Although Fanta lost dominion and control of the stock and its proceeds (see Opp Mem, at 14), Siebert Co. did not ever exercise a right of ownership over the stocks or the money that their sale generated. Thus, the conversion cause of action is dismissed as well.

Accordingly, it is

ORDERED that the motion to dismiss by Siebert Co. is granted to the limited extent that the claims against it by Fay and the Estate are dismissed, and Fanta's third (breach of fiduciary duty) and fourth (conversion) causes of action are dismissed as well, and it is further

ORDERED that the remainder of the action shall proceed.

This constitutes the Decision and Order of the Court.

Dated: New York, New York

July 11, 2008

E N T E R

Hon. Eileen Bransten