In motion sequence 004, the defendant Susan Wind moves for summary judgment pursuant to CPLR 3212(a)(7) seeking dismissal of the fifth cause of action for conversion and the sixth cause of action for fraud as alleged against her in the complaint.

The plaintiff Gad Demry cross-moves to compel the production of certain documents and to amend the complaint pursuant to 3025(b) to include a seventh cause of action for aiding and abetting fraud as against Wind.

This is an action arising out of a failed fraudulent scheme allegedly perpetrated by the defendants Wind, Mishaan, MJM Capital Corp. ("MJM"), and Mizrahi, which resulted in Demry's loss of $155,500.

The Fraudulent Scheme ^[FN1]

Demry was introduced to Mishaan at the West Side Sephardic Minyan, located in Manhattan, New York, in 2004 or 2005 (Wind Aff., Exhibit E, 11:12-20). Mishaan presented himself to the members of the synagogue as a former White House employee and sophisticated businessman that had recently purchased a bank (id., 11:22-12:8).

In 2006, Mishaan approached Demry with an opportunity to invest in bridge mortgage [*2]loans with a high rate of return (id., 16:22-17:4). The investment was to be made through Mishaan's company MJM. On June 7, 2006, MJM and Demry executed an agreement ("Demry I") for his investment of $150,000 with MJM (Wind Aff., Exhibit C). On July 18, 2006, MJM executed a second agreement with Demry ("Demry II") for an additional investment of $125,000 with MJM (id., Exhibit D). Wind was not a signatory to Demry I or Demry II.

In late August 2006, Demry was having financial difficulties and he requested that Mishaan return his investment. Mishaan returned approximately $90,000 (id., Exhibit E, 35:6-36:16). On August 31, 2006, Mishaan gave Demry a check for $100,000 from the account of the defendant Frances Mizrahi, which was returned by the bank on September 6, 2006 due to insufficient funds in the account (id.; Complaint, ¶¶ 49-51). Upon being notified that the August 31, 2006 check was returned, Mishaan gave Demry another check for $100,000 from Commerce Bank on September 8, 2006, which was also returned (id.; Complaint, ¶¶ 54-6).

Demry notified Mishaan that the second check was returned for insufficient funds. Mishaan then sent a third check, also from Commerce Bank, for $135,000. However, this check was written against the same account as the second check and was returned to Demry because the account had been closed.

Wind's Relationship With Mishaan

Wind met Mishaan in 2004 at the West Side Sephardic Minyan. From 2004 until the present day, Mishaan has resided in Wind's co-op apartment, except from December 2006 to September 2007, when Mishaan was incarcerated. (Wind Aff., Exhibit F, 9:6-10:6).

While Mishaan lived with Ms. Wind, he helped pay for the maintenance fees of her co-op and for grocery expenses (Wind Aff., Exhibit F, 32:19-23). Additionally, Wind allowed Mishaan to deposit funds into her bank account, which she believed belonged to Mishaan at the time (Wind Aff., Exhibit F, 38:30-39:6). Although, Wind is the only person authorized to issue checks from her bank account, she would frequently issue checks for Mishaan, at his direction (Wind Aff., Exhibit F, 8:3-18, 70:1-21).

Despite the fact that Mishaan resided with Wind for almost two years, Wind represents that she never inquired about Mishaan's business affairs and is only aware that he told others he was in finance (Wind Aff., Exhibit F, 68:8-12).

In September 2006, Wind discovered that Mishaan had a "shady financial past" from her friend. As a result, she confronted him and learned that the funds he had previously deposited in her account belonged to Demry (Wind Aff., Exhibit F, 38:16-39:6). Wind testifies that she demanded Mishaan withdraw the funds from her account immediately (Wind Aff., Exhibit F, 46:5-48:1).

From December 2006 until September 2007, Mishaan was incarcerated for prior criminal activity, first in downtown Manhattan and then later, in upstate New York. Demry, unaware that Mishaan was incarcerated, tried to contact him by calling his cell phone, which was left at Wind's co-op (Wind Aff., Exhibit F, 92:23-93:1).

Wind answered Mishaan's cell phone and informed Demry that Mishaan was visiting his sick step-father in Baltimore, even though she knew that Mishaan was actually incarcerated (Wind Aff., Exhibit F, 94:23-95:10).

Unable to reach Mishaan by cell phone, Demry began hand delivering letters to Wind's co-op, and leaving the letters with her doorman. Typically, within 12 to 24 hours, Wind would [*3]deliver a reply in the form of a typed letter to Demry's doorman. Demry was informed by his doorman that the letters were being delivered by a woman matching Wind's description. (Wind Aff., Exhibit E, 42:5-25).

Wind testified that during Mishaan's incarceration, she would relay Demry's letters to him over the telephone. Wind would then transcribe Mishaan's response, sign his name, and deliver the letters to Demry's doorman. These exchanges occurred approximately six times (Wind Aff., Exhibit F, 97:10-99:20; Demry Aff., Exhibit 10).

On December 4, 2007, Demry commenced this action against Wind, MJM, Mishaan, and Mizrahi seeking $155,500 in damages.

Discussion

Wind moves for summary judgment dismissing the fifth cause of action for conversion and the sixth cause of action for fraud as alleged against her in the complaint.

Summary Judgment

Summary judgment is a drastic remedy which should only be granted if there are no material issues of disputed fact (Bautista v David Frankel Realty, 54 AD3d 549, 556 [1st Dept

2008]). In order to prevail on her motion, Wind must make a "prima facie showing of entitlement to judgment as a matter of law" (Silverman v Perlbinder, 307 AD2d 230, 230 [1st Dept 2003]).

Conversion

Wind argues that this action is meritless and that she is not liable for Mishaan's actions because she was not a participant in the underlying transaction between Demry and Mishaan. Additionally, Wind asserts that she was actively misled by Mishaan into believing that the funds he deposited in her account were actually his, and upon realizing that it belonged to Demry, she promptly demanded that the funds be removed from her account (Wind Aff., ¶ 10). Mishaan has submitted an affidavit largely confirming Wind's testimony (Mishaan Aff., ¶ 4).

Demry counters in opposition that Wind's testimony that the funds were withdrawn from her account is self-serving and not substantiated through documentary evidence, which raises triable issues of fact with respect to her credibility.

"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" (State of New York v Seventh Regiment Fund, 98 NY2d 249, 259 [2002]). "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 NY3d 43, 49-50 [2006][internal citations omitted]).

There is no dispute that the funds were deposited into Wind's bank account belong to Demry, and that thereafter, Wind issued checks from her bank account.

Wind has failed to submit any evidence, besides self-serving affidavits, to support her contention that she withdrew the funds from her account upon discovering that the funds belonged to Demry.

For instance, the record is devoid of any check or bank document demonstrating the withdrawal of Demry's funds from her bank account (id., 46:5-48:9). In fact, Wind does not recall issuing a check to remove the funds, only that it was removed (id., 46:5-22). [*4]

Moreover, Wind's testimony fails to provide any information with respect to the numerous checks previously issued from her bank account, which Wind admits only she issued. This raises additional triable issues regarding the dissipation of Demry's funds that must be resolved at trial (id., 69:24-71:15). Therefore, Wind's motion for summary judgment on the fifth cause of action for conversion is denied.

Fraud

Demry alleges that he was defrauded by the fraudulent scheme perpetrated by Wind and Mishaan. However, the record only supports a cause of action for fraud against Wind predicated on her misrepresentations to Demry that Mishaan was in Baltimore, and her delivery of the letters to Demry that she transcribed and signed with Mishaan's signature.

Demry raises numerous triable issues of fact with respect to the extent of Wind's participation in the fraudulent scheme. Wind admits in her deposition testimony that she was relaying the substance of Demry's letters to Mishaan during his incarceration, and that she was transcribing and delivering Mishaan's responses to Demry. Furthermore, Wind admits that she informed Demry that Mishaan was in Baltimore visiting his sick step-father, despite having knowledge of Mishaan's incarceration (Wind Aff., Exhibit F, 94:12-95:10).

Wind fails to properly respond to Demry's cause of action for fraud, leaving numerous triable issues unresolved. Instead, her briefs address a cause of action for aiding and abetting fraud. Consequently, Wind is denied summary judgment on the sixth cause of action for fraud.

Cross-Motion

Additionally, Demry cross-moves to compel the production of certain documents and to amend the complaint to include a seventh cause of action for aiding and abetting fraud against Wind.

Compel Discovery

Demry alleges that the documents he seeks were referenced by Wind during her deposition and are necessary to substantiate her testimony, including documents from her hard drive consisting of banking records and pictures of some stores (Demry Aff., Exhibit J).

Wind has responded that she has provided all documents that she has in her custody or control. In addition, she has provided an affidavit detailing her diligent search for the documents (Weissman Reply, Exhibit A).

It is well-established that "[a] trial court is vested with broad discretion regarding discovery..." (148 Magnolia, LLC v Merrimack Mut. Fire Ins. Co., 62 AD3d 486, 487 [1st Dept 2009]).

The documents in issue relate to Wind's defense and are therefore, clearly relevant to this instant action and must be produced if they exist. If these documents are no longer in Wind's possession, she must submit an affidavit detailing the circumstances in which the documents were lost or destroyed. In the event that her affidavit does not resolve the discovery issues, this Court shall conduct a hearing to determine her credibility. Therefore, Demry's motion to compel production of documents referenced by Wind during her deposition is granted.

Amend the Complaint

Additionally, Demry cross-moves for leave to amend the complaint to include a seventh cause of action for aiding and abetting fraud against Wind. [*5]

Demry has demonstrated that he has a meritorious cause of action based on Wind's alleged substantial participation in furthering Mishaan's fraudulent scheme.

Wind has not alleged any prejudice or surprise that would result from the amendment, but instead argues, that Demry's

cross-motion should be denied because Demry has failed to submit an affidavit of merit with the proposed amended complaint.

Wind bases her arguments on cases that are distinguishable, and involve a proposed amendment that seeks to raise a triable issue of fact to defeat a motion for summary judgment (see e.g. Marinelli v Smith, 260 AD2d 227, 228 [1st Dept 1999]; Sing Ping Cheung v City of New York, 234 AD2D 91 [1st Dept 1995]) . However, Demry's proposed amendments are not asserted in opposition to the motion for summary judgment.

"It is well settled that leave to amend a pleading shall be freely granted absent prejudice or surprise resulting from the delay (Ancrum v St. Barnabas Hosp., 301 AD2d 474, 475 [1st Dept 2003]). Therefore, absent any prejudice or surprise, Demry shall be permitted to amend his complaint.

Accordingly, it is

ORDERED that the defendant Susan Wind's motion for summary judgment is denied in its entirety, and it is further

ORDERED that the plaintiff Gad Demry's cross-motion to compel and amend the complaint is granted in its entirety, and it is further

ORDERED that the plaintiff Gad Demry shall serve the amended complaint within (45) days of the date of this decision with notice of entry thereof, and it is further

ORDERED that the defendant Susan Wind shall serve an answer to the amended complaint within 20 days from the date of said service, and it is further

ORDERED that the defendant Susan Wind shall produce the documents requested in the plaintiff Gad Demry's September 24, 2009 Notice to Produce, and to the extent any document is not produced, an affidavit detailing the circumstances in which the document was lost or destroyed shall be produced within (30) days of service of this order with notice of entry, and it is further

ORDERED that counsel are directed to appear for a status conference in Part 53 on September 30, 2010 at 10:00 a.m.

This constitutes the decision and order of this court.

Dated: September 14, 2010

ENTER:

_________________________

J.S.C.