SUPREME COURT OF THE STATE OF NEW YORK
Appellate Division, Fourth Judicial Department
876
CA 11-00339
PRESENT: SCUDDER, P.J., CENTRA, FAHEY, GREEN, AND GORSKI, JJ.
STEVEN M. TUDISCO AND GENESEE VALLEY
LEASING, INC., PLAINTIFFS-APPELLANTS,
V MEMORANDUM AND ORDER
CARL DUERR AND CAROL DUERR,
DEFENDANTS-RESPONDENTS.
(APPEAL NO. 2.)
PIRRELLO, MISSAL, PERSONTE & FEDER, ROCHESTER (STEVEN E. FEDER OF
COUNSEL), FOR PLAINTIFFS-APPELLANTS.
WILLIAM S. RUBY, ROCHESTER, FOR DEFENDANTS-RESPONDENTS.
Appeal from an order of the Supreme Court, Monroe County (Kenneth
R. Fisher, J.), entered July 26, 2010. The order, inter alia, granted
defendants’ motion to “modify and/or resettle” an order entered April
27, 2010 pursuant to CPLR 2221 (a) and awarded defendants attorneys’
fees of $24,940.29.
It is hereby ORDERED that the order so appealed from is
unanimously modified on the law by vacating the amount of $41,000
awarded on the first counterclaim and substituting therefor the amount
of $35,100, vacating the award of attorneys’ fees, reinstating the
fourth and fifth causes of action in accordance with our decision
herein concerning the amount paid on the promissory note and granting
plaintiffs judgment on liability for those causes of action, and as
modified the order is affirmed without costs, and the matter is
remitted to Supreme Court, Monroe County, for further proceedings in
accordance with the following Memorandum: Plaintiffs commenced this
action seeking damages for, inter alia, the alleged conversion by
defendants of several pieces of construction equipment, including an
excavator with two buckets and a grapple attachment, two backhoes and
a bulldozer. Defendants asserted counterclaims for, inter alia, a
money judgment for the balance owed on a promissory note. Following a
nonjury trial, Supreme Court dismissed the complaint and granted
judgment in favor of defendants on the first counterclaim, i.e., for
the balance owed on the promissory note, and awarded them reasonable
attorneys’ fees with respect to the first counterclaim. Defendants
thereafter moved to “modify and/or resettle” that order pursuant to
CPLR 2221 (a), alleging that the court erred in stating that ownership
of the excavator had been transferred to defendants. Plaintiffs
cross-moved to “modify[ ]” the order pursuant to CPLR 2221 (a) on the
ground that the corrected statement of fact sought by defendants would
-2- 876
CA 11-00339
establish that defendants’ actions in taking possession of the
excavator constituted conversion. Plaintiffs appeal from an order
that granted the motion, denied the cross motion and awarded
attorneys’ fees to defendants.
Viewing the evidence in the light most favorable to defendants,
we conclude that there is no fair interpretation of the evidence
supporting the court’s determinations that defendants did not convert
the equipment in question, i.e., the excavator and three attachments,
the two backhoes and the bulldozer, and that the promissory note did
not constitute a security agreement (see generally Palermo v Taccone,
79 AD3d 1616, 1618-1620).
“ ‘[T]o establish a cause of action in conversion, the
plaintiff[s] must show legal ownership or an immediate superior right
of possession to a specific identifiable thing and must show that the
defendant[s] exercised an unauthorized dominion over the thing in
question . . . to the exclusion of the plaintiff[s’] rights’ ” (id. at
1619-1620). “ ‘A conversion takes place when someone, intentionally
and without authority, assumes or exercises control over personal
property belonging to someone else, interfering with that person’s
right of possession . . . Two key elements of conversion are (1) [the]
plaintiff[s’] possessory right or interest in the property . . . and
(2) [the] defendant[s’] dominion over the property or interference
with it, in derogation of [the] plaintiff[s’] rights’ ” (id. at 1620,
quoting Colavito v New York Organ Donor Network, Inc., 8 NY3d 43,
49-50).
With respect to the excavator, it is undisputed that Genesee
Valley Leasing, Inc. (Genesee Valley) owned the equipment and that
plaintiff Steven M. Tudisco was using the equipment to perform work on
property owned by defendant Carl Duerr in October 2004. It is also
undisputed that the excavator was thereafter moved by Carl Duerr to
other property owned by him and remained there until it was returned
to plaintiffs approximately four years later, during the pendency of
the instant action, in a severely damaged condition. At trial,
plaintiffs submitted photographs of the excavator taken when it was
refurbished at a cost of $44,000, i.e., three months before it was
removed by Carl Duerr to his property. Plaintiffs also presented the
testimony of Henry Wells, who inspected the excavator on behalf of the
non-party company from which plaintiffs leased the excavator before
purchasing it. Wells testified that he was familiar with how Tudisco
maintained equipment and that he had not observed other pieces of
equipment owned or used by plaintiffs in the condition that the
excavator was in when it was returned to plaintiffs, i.e., inoperable,
with broken windows and evidence of a fire in the engine compartment
where the hydraulics are located. The court admitted in evidence the
estimate to make the necessary repairs to the excavator in the amount
of $85,049. Defendants merely presented the testimony of Carl Duerr
that the excavator was damaged when he received it and the testimony
of a former employee of Genesee Valley that the company’s employees
were “hard” on equipment. With respect to the three attachments for
the excavator, Tudisco testified that they also were located on
defendants’ property when defendants removed the excavator. Although
-3- 876
CA 11-00339
Carl Duerr denied that he had the attachments in his possession, a
photograph taken on April 1, 2009 established that the 46-inch bucket
was located on defendants’ property. We therefore conclude that
plaintiffs established by a preponderance of the evidence that they
had a possessory right to the excavator and attachments and that
defendants interfered with that right in derogation of plaintiffs’
rights (see Palermo, 79 AD3d at 1620).
With respect to the two backhoes and the bulldozer, it is
undisputed that defendant Carol Duerr is the titled owner of that
equipment. Plaintiffs had leased the equipment from the
aforementioned non-party company, and Tudisco asked defendants for
assistance in purchasing it. The record establishes that, in order to
execute the transfer of the equipment to Carol Duerr, she paid
Syracuse Supply Company $100,000, plaintiffs paid Syracuse Supply
Company $16,000 and plaintiffs transferred the credit in the equipment
in the amount of $250,000 to Carol Duerr. The handwritten promissory
note, drafted in part by Carol Duerr, states in relevant part that
Tudisco would “borrow $100,000 and agree to pay it back by January 1,
2003. It is up to Carl . . . Duerr to keep the machinery or sue for
the money that is owed . . . Tudisco shall pay all legal fees incurred
in this transaction. Genesee Valley . . . is also liable for this
transaction.” In his own handwriting, Tudisco added that the minimum
payment per month would be $2,400, due and payable in full 18 months
from March 13, 2002. We agree with plaintiffs that they and others on
their behalf had paid a total of $64,900 on the promissory note when
defendants took possession of the two backhoes and bulldozer in early
October 2004, rather than $59,000, as the court found.
We conclude that the court’s finding that defendants “loaned”
plaintiffs the backhoes and bulldozer to permit Tudisco to generate
enough business to pay them back $100,000 and then withdrew their
permission to use the equipment “ ‘could not be reached under any fair
interpretation of the evidence’ ” (Treat v Wegmans Food Mkts., 46 AD3d
1403, 1404). The finding that plaintiffs had no possessory interest
in that equipment “ ‘produce[s] a result that is absurd, commercially
unreasonable [and is] contrary to the reasonable expectation of the
parties’ ” (Greenwich Capital Fin. Prods., Inc. v Negrin, 74 AD3d 413,
415). Instead, we conclude that the promissory note memorialized “an
agreement that creates or provides for a security interest” in the
equipment (UCC 9-102 [73]), which is “a commercially reasonable and
practical result” (Greenwich Capital Fin. Prods., Inc., 74 AD3d at
415). Indeed, “the provisions of [article 9 of the UCC] with regard
to the rights and obligations [of the parties to a security agreement]
apply whether title to collateral is in the secured party or the
debtor” (UCC 9-202). The promissory note provided Carl Duerr with
remedies available to a secured creditor, i.e., to keep the equipment
(see generally UCC 9-610; 9-620 [a] [1]), or to sue for the balance of
the money owed (see UCC 9-601 [a] [1]).
Plaintiffs presented the testimony of Wells, who leased the
backhoes and bulldozer to plaintiffs and thereafter sold them to Carol
Duerr. Wells had 40 years experience in leasing and selling
construction equipment and testified with respect to the value of
-4- 876
CA 11-00339
those three pieces of equipment as of September 2004. He testified
that one backhoe was valued at $46,000, the other backhoe was valued
at $48,000 and the bulldozer was valued at $115,000. Defendants
presented the testimony of a witness whom Carl Duerr hired to retrieve
one of the backhoes from plaintiffs. That witness testified that the
backhoe was inoperable and in severely damaged condition. Defendant
failed to present any testimony with respect to the condition of the
remaining backhoe and the bulldozer, and we therefore conclude that
plaintiff established by a preponderance of the evidence that the
value of the backhoes and the bulldozer exceeded the $41,000 that
defendants alleged was the amount owed on the promissory note.
Defendants had an obligation to enforce the security agreement in
good faith (see generally UCC 1-203). Defendants, however, retained
the backhoes and bulldozer without complying with the provisions of
the UCC, either by disposing of those pieces of equipment in a
commercially reasonable manner and paying any surplus to plaintiffs
(see UCC 9-610 [a], [b]; 9-615 [d] [1]), or by obtaining plaintiffs’
consent after the default to retain the equipment in satisfaction of
debt (see UCC 9-620 [a] [1]; [c]). We therefore conclude that,
because plaintiffs established that the value of the backhoes and the
bulldozer exceeded the amount that they owed on the promissory note,
plaintiffs had a possessory interest in that equipment and defendants’
dominion over it was in derogation of the rights of plaintiffs (see
generally Colavito, 8 NY3d at 49-50; Five Star Bank v CNH Capital Am.,
LLC, 55 AD3d 1279, 1281).
We also agree with plaintiffs that the court erred in awarding
attorneys’ fees to defendants beyond the scope of the indemnity
provision included in the promissory note (see generally Hooper Assoc.
v AGS Computers, 74 NY2d 487, 491). “ ‘[A] contract assuming th[e]
obligation [to indemnify with respect to attorneys’ fees] must be
strictly construed to avoid reading into it a duty [that] the parties
did not intend to be assumed’ ” (Zanghi v Laborers’ Intl. Union of N.
Am., AFL-CIO, 21 AD3d 1370, 1372, quoting Hooper Assoc., 74 NY2d at
491). In particular, “the language of an indemnity agreement ‘should
not be extended to include damages [that] are neither expressly within
its terms nor of such character that it is reasonable to infer that
they were intended to be covered under the contract’ ” (id.). Here,
pursuant to the promissory note, defendants are entitled to attorneys’
fees related to claims or counterclaims to enforce their rights under
the note (see Gizzi v Hall, 309 AD2d 1140, 1142). Thus, the court
erred in awarding defendants attorneys’ fees unrelated to the
enforcement of those rights, including attorneys’ fees related to the
causes of action for conversion of the construction equipment.
Further, because the affidavit of defendants’ attorney with respect to
his fees included only one amount representing the total fees
incurred, we are unable to determine the amount of attorneys’ fees
related to the enforcement of defendants’ rights under the promissory
note (see generally RLI Ins. Co. v Smiedala, 77 AD3d 1293, 1295).
We therefore modify the order by vacating the amount of $41,000
awarded on the first counterclaim, for the balance owed on the
promissory note, and substituting therefor the amount of $35,100,
-5- 876
CA 11-00339
vacating the award of attorneys’ fees, reinstating the fourth cause of
action and the fifth cause of action with the exception of the
reference to $59,000 having been paid to defendants in paragraph 33,
inasmuch as this Court has determined that plaintiffs paid $64,900 on
the promissory note, and granting judgment to plaintiffs on liability
with respect to those causes of action. We remit the matter to
Supreme Court to determine the amount of reasonable attorneys’ fees
incurred by defendants with respect to the enforcement of their rights
under the promissory note and to determine the amount of damages with
respect to the fourth and fifth causes of action, following further
proceedings if necessary.
Entered: November 10, 2011 Patricia L. Morgan
Clerk of the Court