The following papers were considered in connection with Motion Sequence No.2 by defendant, The Putnam Community Foundation ("PCF") for an Order pursuant to CPLR 3211(a)(1), (a)(5) and (a)(7): (i) dismissing the complaint to the extent it seeks the remedy of "rescission" of the 2001 transfer of the Stoneleigh Avenue Parcels from plaintiff to the PCF, on the ground that the remedy of rescission is barred because plaintiff possesses an adequate remedy at law - monetary damages — and it would be impracticable, if not impossible, to restore the parties to the status quo that existed more than a decade ago, (ii) dismissing plaintiff's second cause of action for "unjust enrichment" and third cause of action for "constructive trust" on the basis that they are time-bared by the applicable statutes of limitation; (iii) dismissing plaintiff's second cause of action for "unjust enrichment" on the ground that it impermissibly arises out of an express agreement between the parties; (iv) dismissing plaintiff's third cause of action for "constructive trust" on the basis that no confidential or fiduciary relationship existed between plaintiff and the PCF; (v) dismissing plaintiff's first cause of action for "fraud" on the basis that, inter alia, it is time-barred and/or, alternatively, on the ground that there was no "reasonable reliance" as required [*2]by law and no material misrepresentation by PCF; and (vi) granting PCF such other and further relief as to the Court may seem just and proper; and the Cross-Motion (Sequence #3) by plaintiff, Putnam County, New York, ("Putnam Count") for an Order granting Putnam County leave to file an Amended Complaint pursuant to CPLR §3025(b), and granting Putnam County such other and further relief as this Court deems just and proper:

PAPERSNUMBERED

Motion Sequence 2

Motion/Affidavit/Exhibits A-AA (PCF)2A

Memorandum of Law In Support2B

Motion Sequence 3

Cross-Motion/Affidavit/Exhibits A-F (Putnam County) 3A

Memorandum of Law In Opposition3B

Reply Memorandum of Law (Putnam Hospital Ctr.)4A

Reply Memorandum of Law (PCF)4B

Putnam County, New York ("Putnam County") brings this action sounding in fraud (the first cause of action), unjust enrichment (the second cause of action), and constructive trust (the third cause of action), seeking compensatory damages and the rescission and annulment of the transfer of two parcels of real property located on Stoneleigh Avenue in the Town of Carmel, County of Putnam, State of New York (the "Stoneleigh Avenue Parcels") from Putnam County to the Putnam Community Foundation ("PCF"); restitution and/or such other equitable relief as may be just and proper; and the imposition of a constructive trust over the Stoneleigh Avenue Parcels and/or any funds realized from the sale of any portion of Stoneleigh Avenue Parcel II to Putnam Community Hospital or any other third party.

By virtue of the parties' November 2013 Stipulation Discontinuing Action with Prejudice as Against Defendant Putnam Hospital Center, Putnam Hospital Center is no longer in this action, its motion to dismiss (Motion Sequence #1) is deemed withdrawn, and the action is deemed moot as it relates to Parcel I and to any intended or anticipated sale of a portion of Parcel II to Putnam Hospital Center.

Currently before the Court, then, is PCF's pre-answer motion to dismiss and Putnam County's cross-motion for leave to serve and file an Amended Verified Complaint in the form attached to its moving papers.

There being no opposition, the Court hereby grants the [*3]cross-motion to amend the complaint and, as requested, the Court will proceed to determine PCF's motion to dismiss as it relates to the amended pleadings (see Livadiotakis v. Tzitzikalakis, 302 AD2d 369, 370 [2d Dept 2003]).

On April 6, 1999, then Senator Vincent Leibell, on behalf of PCF, appeared before the Putnam County Legislature and represented that PCF was ready, willing and able to construct 120 units of affordable senior housing on the approximately 43 acre Stoneleigh Avenue Parcels (the "Project"), then owned by Putnam County. Through Leibell's efforts and representations on PCF's behalf, including representations that PCF was going to construct the "Project" on the parcels, the Putnam County Legislature passed Resolution No. 64 on April 6, 1999, authorizing the sale of the Stoneleigh Avenue Parcels to PCF for $150,000.00 expressly "for use as an affordable senior housing project [] or such other use that is of service to the community". PCF acquired title by bargain and sale deed dated May 25, 2001, and recorded in the Office of the Putnam County Clerk on July 11, 2001. By any measure, the Project is far from completion and questions have been raised as to whether it can or will ever be built.

Among other things, through its Amended Verified Complaint Putnam County contends that PCF was dominated and controlled by Senator Leibell at all relevant times following PCF's inception and that the County was induced to convey the Stoneleigh Avenue Parcels to PCF for considerably less than their fair market value in reliance upon fraudulent misrepresentations made by Leibell on PCF's behalf. Putnam County also alleges that Senator Leibell knowingly and fraudulently deceived Putnam County by concealing his ulterior motive for developing the Stoneleigh Avenue Parcels through PCF, i.e., to use PCF as a vehicle to divert public monies to himself. Putnam County claims that such fraudulent misrepresentations and omissions are material and were reasonably relied upon by Putnam County in consummating the transfer of the Stoneleigh Avenue Parcels to PCF.

In 2005, and notwithstanding any stated intentions regarding the use and development of the parcels, PCF sold Parcel I, consisting of approximately 8 acres, to adjoining property owner, former defendant herein Putnam Hospital Center, for approximately $1.1 million. Thereafter, in February 2006, PCF submitted an application to the Town of Carmel Planning Board for subdivision approval for the development of the Project on Parcel II, now consisting of approximately 35 acres. A $2.0 million grant was applied for and secured from the Dormitory Authority of the State of New York ("DASNY") thereafter upon, among other things, various PCF representations regarding the proposed Project [*4]including its anticipated completion date. The Planning Board granted final site plan approval for the construction of the Project on June 24, 2009. Approximately $1.8 million in DASNY funds were received by PCF between June 1, 2009 and October 15, 2010.

On December 1, 2010, Senator Leibell resigned from the New York Senate, only to plead guilty four days later in Federal Court to felony charges of federal tax evasion for tax filing years 2003 through 2006 and, more importantly, obstruction of justice in connection with allegations of his shakedown of an attorney who performed legal work for PCF. Plaintiff contends that "Senator Leibell's abrupt resignation from public office and guilty plea enabled Putnam County to discover that it had been defrauded by Senator Leibell when it conveyed [the Parcels] to PCF in 2001" (Amended Complaint, Par. 59).

Putnam County further alleges that, in furtherance of its attempt to reap "another windfall" and as evidence that it has abandoned the Project, PCF applied to the Carmel Planning Board for subdivision approval of Parcel II in preparation of the sale of approximately 18 acres of Parcel II to former co-defendant Putnam Hospital Center.

According to Putnam County, and as things stood at the pleading stage, PCF has received over $1.8 million dollars in grant money from DASNY and is now in default of same, has contracted to sell off 18 acres of Parcel II, and has applied for the subdivision approval of Parcel II which effectively renders the Project defunct.

On a motion to dismiss pursuant to CPLR 3211, the pleading, here the Amended Verified Complaint, is to be afforded a liberal construction. The Court is to accept the facts as alleged therein as true, accord plaintiff the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory (Leon v. Martinez, 84 NY2d 83, 87-88 [1994][citations omitted]).

With respect to a CPLR 3211(a)(1) motion, "dismissal is warranted only if the documentary evidence submitted conclusively establishes a defense to the asserted claims as a matter of law" (Leon v. Martinez, supra at 88). More recently, in Fontanetta v. John Doe 1 (73 AD3d 78 [2nd Dept 2010]), the Appellate Division, Second Department, noted that, "to be considered documentary,' evidence must be unambiguous and of undisputed authenticity" (id. at 86). [*5]

RESCISSION

PCF's motion to prelude equitable relief in the form of rescission is denied as premature. The Court cannot conclude at this early stage of this action, that rescission is barred because plaintiff possesses an adequate remedy at law (monetary damages), or that it would be impracticable, if not impossible, to restore the parties to the status quo ante, as may be modified in the Court's discretion and in the interest of justice as the facts may ultimately dictate.

It is generally recognized that the equitable remedy of rescission "is to be invoked only when there is lacking complete and adequate remedy at law and where the status quo may be substantially restored" (Rudman v. Cowles Communications, Inc., 30 NY2d 1, 13 [1972] citing NY Jur., Cancellation of Instruments, §§ 2-4). Where restoration of the status quo is "impractical by a substantial change of position, or by the nature of the transaction at issue, the remedy of rescission will not be available" (Sokolow v. Lacher, 299 AD2d 64, 69 [1st Dept 2002][citations omitted]). The determination as to whether or not rescission is appropriate "is a matter of discretion" (Rudman, 30 NY2d at 13)." In determining whether money damages would be an adequate remedy, a trial court must consider, among other facts, the difficulty of proving damages with reasonable certainty and of procuring a suitable substitute performance with a damages award" (Sokoloff, supra at 415, 429).

In the end, however,

[i]t is within a court's inherent, equitable and discretionary powers to modify, in the interests of justice, an excessive award granted in a judgment (see, Brosnan v. Behette, 186 AD2d 165, lv denied 81 NY2d 706; Cervino v. Konsker, 91 AD2d 249, 253, appeal dismissed 59 NY2d 761; Oppenheim v. Melnick, 34 AD2d 784, lv denied 27 NY2d 730; Monette v. Bonsall, 29 AD2d 839; 10 Weinstein-Korn- Miller, NY Civ Prac ¶ 5015.12), to "adjust the equities between the parties [such] that unjust enrichment is avoided" (CPLR 3004), to deny rescission or other "equitable relief [where it] appears to be impossible or impracticable" (Ungewitter v. Toch, 31 AD2d 583, 584, affd 26 NY2d 687, quoting Doyle v. Allstate Ins. Co., 1 NY2d 439, 443), or, where plaintiff has established his [*6]entitlement to an impracticable equitable remedy, "[to] award damages in lieu of the desired equitable remedy" (Lusker v. Tannen, 90 AD2d 118, 125, quoting Doyle v. Allstate Ins. Co., supra, at 443).

Upon reaching the conclusion that it is premature to dismiss Putnam County's claim for rescission, the Court has considered, among other things, the fact that there has been a passage of almost 13 years since the conveyance of the Stoneleigh Avenue Parcels from the County to PCF, that various construction work and improvements were made by PCF to Parcel II, that PCF has entered into water and sewer service agreements, that it has applied for and received various local board approvals, that some nine years has passed since PCF conveyed Parcel I to Putnam Hospital Center which has since developed the site, and that various monies were lent and/or granted to PCF with respect to development of the Project which are still outstanding and constitute liens upon at least Parcel II. Nonetheless, Putnam County is entitled to have this issue fully developed so that the Court can reach a fair and equitable determination.

Rescission is an equitable remedy; therefore, whenever the court rescinds a contract, it has the duty to place the parties where they were before the vitiated contract was made (24 N.Y.Jur., Fraud and Deceit, § 223). Damages represent the actual loss sustained . . . If complete restoration is impossible the terms upon which rescission will be granted rest within the sound discretion of the court (Buffalo Builders Supply v. Reeb, 247 NY 170, 176, 159 N.E. 899, 901). The court should adjust the equities between the parties to avoid unjust enrichment (CPLR 3004) in order that no one be placed in a better position after rescission than when the contract was executed (50 NY Jur., Restitution §§51, 52; Ungewitter v. Toch, Supra ).

In any event, it cannot be said at this time whether, without fault on the part of Putnam County, PCF (through Leibell or otherwise) has, by its own acts, "complicated the case so that full restoration cannot be made" (Hammond v. Pennock, 61 NY 145, 152, citing Masson v. Bovet, 1 Denio, 69).

When, without fault on the part of the one defrauded . . ., it is impossible to restore the one guilty of the fraud to his original condition, the general rule of restoration is not strictly applied, because it would become a loophole for the escape of fraud. Equity makes a reasonable application of the rule by requiring whatever fair dealing requires under all the circumstances of the particular case, but it does not permit the rule to become a shield for wrongdoing.

A defendant who seeks dismissal of a complaint pursuant to CPLR 3211(a)(5) on the ground that it is barred by the statute of limitations bears the initial burden of proving, prima facie, that the time in which to sue has expired.' The burden then shifts to the nonmoving party to raise an issue of fact as to the applicability of an exception to the statute of limitations, or as to whether the statute of limitations was tolled, or the cause of action was interposed within the applicable limitations period [citations omitted].

The accrual date occurs "at the time the plaintiff possesses knowledge of facts from which the fraud could have been discovered with reasonable diligence'" (Oggioni v. Oggioni, 46 AD3d 646, 648 [2d Dept 2007][citations omitted]). With respect to the discovery rule, "[t]he two-year period begins to run when the circumstances reasonably would suggest to the plaintiff that he or she may have been defrauded, so as to trigger a duty to inquire on his or her part" (Shalik v. Hewlett Assoc., L.P., 93 AD3d 777, 778 [2d Dept 2012]). Furthermore, "[t]he burden of establishing that the fraud could not have been discovered before the two-year period prior to the commencement of the action rests on the plaintiff, who seeks the benefit of the exception" (Lefkowitz v. Appelbaum, 258 AD2d 563 [2d Dept 1999]).

PCF has come forward in the first instance with a showing that the cause of action for fraud is untimely when measured from April 6, 1999, the date on which Leibell allegedly misrepresented his intentions to the Putnam County Legislature that the Stoneleigh Avenue Parcels would be used to develop the Project or, at the latest, as measured from the January 12, 2006, filing of the deed effectuating the conveyance of Parcel I from PCF to Putnam Hospital Center. Said date, if used as the accrual date, would bar the County's fraud claim since it is more than six years before the May 16, 2012, commencement of this action (see CPLR 213[8], supra).

In response and reliance on the "discovery rule", Putnam County argues that the date of accrual should run from December 2010, when Leibell resigned from office and pled guilty in Federal Court. In this regard, the County asserts that the fraud claim does not rest solely on the "developmental trajectory" of the Stoneleigh Avenue Parcels. Rather, its fraud claim also rests on PCF's "acquiring and using the Stoneleigh Parcels so that [] Leibell could secure kickbacks . . ." As stated in paragraph "59" of the Amended Verified Complaint:

Senator Leibell's abrupt resignation from public office and guilty plea enabled Putnam County to discover that it has been defrauded by Senator Leibell when it conveyed the Stoneleigh Avenue Parcels to PCF in 2001. Prior thereto, Putnam County could not and did not discover Senator Leibell's fraudulent acts and omissions through the exercise of reasonable diligence.

Upon "tak[ing] the allegations in the complaint as true and resolv[ing] all inferences in favor of the plaintiff" (Is. ADC, Inc. v. Baldassano Architectural Group, P.C., 49 AD3d 815, 816 [2d Dept 2008] citing Sabadie v. Burke, 47 AD3d 913; Matter of Schwartz, 44 AD3d at 779), PCF's motion to dismiss the fraud claim as untimely is denied. "Where, as here, it does not conclusively appear that a plaintiff had knowledge of facts from which the fraud could reasonably be inferred, a complaint should not be dismissed on motion and the question should be left to the trier of facts'" (Gorelick v. Vorhand, 83 AD3d 893, 895 [2d Dept 2011][citation omitted]).

Denial, however, is with leave for PCF to assert the statute of limitations defense in its answer.

Fraud - CPLR 3211(a)(7); 3211(a)(1)

The Court denies PCF's motion to dismiss the fraud cause of action for lack of the requisite elements of misrepresentation of a material fact and "reasonable reliance".

Again, upon "liberally constru[ing] the pleadings, deem[ing] the allegations to be true and grant[ing] the plaintiff the benefit of every possible inference [citations omitted]" (Delaware County v. Leatherstocking Healthcare, LLC, 110 AD3d 1211, 1213 [3d Dept 2013]), the Court concludes that the fraud cause of action is sufficiently advanced as against PCF (see Dembeck v. 220 Cent. Park S., LLC, 33 AD3d 491, 492 [1st Dept.2006][misrepresentation or concealment of a material fact, falsity, scienter, justifiable reliance and resulting injury]), including the elements of misrepresentation and "reasonable reliance". This is especially so upon accepting the County's position, as it must, that Senator Leibell was acting on behalf of PCF. The allegations advanced in the complaint are such that it may be said that Leibell and PCF were "so enmeshed and intertwined" (Delaware County v. Leatherstocking Healthcare, LLC, 110 AD3d 1211, 1213 [3d Dept 2013]) that Leibell's actions should be imputed to PCF for all intents and purposes. The Court has considered and rejects, at least at this point in the proceedings, PCF's assertion that the language of Resolution 64 and/or the lack of deed restrictions mandates a different result.

To the extent that PCF seeks dismissal upon any further documentary evidence (CPLR 3211[a][1]), the motion is denied.

" [N]either affidavits, deposition testimony, nor letters are considered documentary evidence within the intendment of CPLR [*10]3211(a)(1)'" (Cives Corp. v. George A. Fuller Co., Inc., 97 AD3d at 714, 948 N.Y.S.2d 658, quoting Granada Condominium III Assn. v. Palomino, 78 AD3d 996, 997, 913 N.Y.S.2d 668; see Suchmacher v. Manana Grocery, 73 AD3d 1017, 900 N.Y.S.2d 686; Fontanetta v. John Doe 1, 73 AD3d at 86, 898 N.Y.S.2d 569).

Generally, a constructive trust may be imposed "[w]hen property has been acquired in such circumstances that the holder of the legal title may not in good conscience retain the beneficial interest" (Beatty v. Guggenheim Exploration Co., 225 NY 380, 386; 1 Scott, Trusts [3d ed], § 44.2, p 337; 4 Pomeroy's Equity Jurisprudence [5th ed], § 1053, p 119). In the development of the doctrine of constructive trust as a remedy available to courts of equity, the following four requirements were posited: (1) a confidential or fiduciary relation, (2) a promise, (3) a transfer in reliance thereon and (4) unjust enrichment (see Janke v. Janke, 47 AD2d 445, affd 39 NY2d 786; Vassel v. Vassel, 40 AD2d 713, affd 33 NY2d 533; Foreman v. Foreman, 251 NY 237; Sinclair v. Purdy, 235 NY 245; Ahrens v. Jones, 169 NY 555; Matter of O'Hara, 95 NY 403).

In any event, the four factors posited in Sharp v. Kosmalski, supra, although "useful" are not "rigidly limited" (Simonds v. Simonds, 45 NY2d 233, 241 [1978]).

A constructive trust will be erected whenever necessary to satisfy the demands of justice. Since a constructive trust is merely "the [*11]formula through which the conscience of equity finds expression" Beatty v. Guggenheim Exploration Co., 225 NY 380, 386, 122 N.E. 378, 380 . . . its applicability is limited only by the inventiveness of men who find new ways to enrich themselves unjustly by grasping what should not belong to them.

With that being said, the Court need not at this point determine whether or not and to what extent Leibell owed a fiduciary duty to the County and/or its citizens specifically in connection with the Stoneleigh Avenue Parcels and, if he did, whether same can be imputed to PCF in connection with the causes of action herein advanced and, if so, whether it can be said that such breach caused or contributed to any delay in the bringing of this action.

Facts essential for full consideration of this issue shall be addressed during discovery and, as such, PCF may assert said defense in its responsive pleading (see CPLR 3211[d]). The same holds true for PCF's statute of limitations defense.

A cause of action to impose a constructive trust is governed by a six-year statute of limitations and begins to accrue "upon the occurrence of the wrongful act giving rise to a duty of restitution and not from the time the facts constituting the fraud are discovered" (Soscia v. Soscia, 35 AD3d 841, 843 [2006] [internal quotation marks omitted] see CPLR 213 [1]). Where . . . the constructive trustee is alleged to have wrongly acquired the property, the accrual date is deemed to be the date of the alleged wrongful transfer of the property (see DeLaurentis v. DeLaurentis, 47 AD3d 750 [2008] Soscia v. Soscia, 35 AD3d at 843; Pisciotto v. Dries, 306 AD2d 262, 263 [2003] Mazzone v. Mazzone, 269 AD2d 574, 575 [2000]).

As such, PCF argues that the County's action accrued, at the [*12]latest, on May 25, 2001, the date on which the underlying deed from the County to PCF was recorded (see Zane v. Minion, 63 AD3d 1151, 1153 [2d Dept 2014][the statute of limitations is triggered when the constructive trustee acquires the property wrongfully, in which case the property is deemed held adversely from the date of acquisition]). It is well established, however, that "a defendant may be estopped to plead the Statute of Limitations where plaintiff was induced by fraud, misrepresentations or deception to refrain from filing a timely action" (Simcuski v. Saeli, 44 NY2d 442, 448-49 [1978]) where plaintiff can demonstration reasonable reliance on same (Zumpano v. Quinn, 6 NY3d 666, 674 [2013]).

Here, the Court finds that the County has met its burden of coming forward with a sufficient evidentiary showing that PCF should be estopped from invoking the statute of limitations defense (see Reiner v. Jaeger, 50 AD3d 761 [2d Dept 2013]), at least to the extent that PCF's motion in that regard must be denied at this early juncture. Denial is with leave for PCF to raise the statute of limitations defense in its answer, and for the parties to explore the underlying factual issues during the discovery stage of the action.

Only then can the Court determine, among other things, whether "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" in which case estoppel would not apply (Knobel v. Shaw, 90 AD3d 493, 494 [1st Dept 2011]) and, if not, whether or not and to what extent the actions of Leibell can be imputed to PCF for such purposes and, if so, whether due to the actions of Leibell and/or PCF, PCF can be equitably estopped from raising the statute of limitations defense.

The same holds true for the County's unjust enrichment claim. As argued by the County, there are still extant questions of fact which need to be explored during disclosure.

Finally, that aspect of PCF's motion seeking to dismiss the unjust enrichment claim as arising out of an express agreement between the parties is denied. Given the liberal construction afforded the pleadings, the presumption of truth thereof and every possible inference flowing therefrom (Delaware County v. Leatherstocking Healthcare, LLC, supra), the Court concludes that the County is advancing a claim based on corrupt and/or fraudulent conduct arising subsequent to the transfer of the Stoneleigh Avenue Parcels (see Sharp v. Kosmalski, 40 NY2d 119, 123 [1976][viable issue as to whether defendant's conduct subsequent to transfer of plaintiff's farm was in violation of the parties' relationship and, consequently, unjustly enriched defendant]). [*13]

Upon ruling as it has, the parties are reminded that, "[w]hether the complaint will later survive a motion for summary judgment, or whether the plaintiff will ultimately be able to prove its claims, of course, plays no part in the determination of a prediscovery CPLR 3211 motion to dismiss [citations omitted]" (Endless Ocean, LLC v. Twomey, Latham, Shea, Kelley, Dubin & Quartararo, 113 AD3d 587 [2d Dept 2014]).

NOTICE OF PENDENCY

PCF's challenge to the Notice of Pendency has admittedly been rendered moot upon the October 4, 2012, filing of an Amended Notice of Pendency.

Based upon the foregoing and there being no merit to any other arguments advanced in support of the motion to dismiss, it is hereby

ORDERED, that, the Court denies PCF's motion (i) dismissing the complaint to the extent it seeks the remedy of "rescission"; (ii) dismissing the second cause of action for "unjust enrichment" and third cause of action for "constructive trust" as time-barred; (iii) dismissing the second cause of action for "unjust enrichment" as impermissibly arises out of an express agreement between the parties; (iv) dismissing the third cause of action for "constructive trust" due to the absence of a confidential or fiduciary relationship between the parties; (v) dismissing the first cause of action for "fraud" as time-barred and/or, alternatively, for lack of "reasonable reliance" of a material misrepresentation; and (vi) striking the Notice of Pendency; and it is further,

ORDERED, that, denial is without prejudice to PCF asserting any such defenses in its answer; and it is further,

ORDERED, that, PCF shall serve its answer within twenty days of the date of this Decision & Order; and it is further,

ORDERED, that, the parties shall appear before the Court for a Preliminary Conference at 9:30 AM on April 28, 2014, or, alternatively, may request an earlier date or may use the Preliminary Conference date for settlement discussions, if the Court is so advised in advance.

The foregoing constitutes the Opinion, Decision, and Order of the Court.

Dated: Carmel, New York

March 12, 2014 [*14]

S/ __________________________________

HON. LEWIS J. LUBELL, J.S.C.