Opinion
No. 01-CV-6258P.
March 31, 2005
DECISION ORDER
PRELIMINARY STATEMENT
Plaintiff, Miriam Borumand ("Borumand"), a resident of Rochester, New York, has filed suit against her former brother-in-law, Beijan Assar ("Assar"), a resident of Massachusetts, alleging conversion, fraud and breach of fiduciary duty. (Docket # 1). Federal jurisdiction is premised upon diversity of citizenship under 28 U.S.C. § 1332. The parties have consented to the disposition of this case by a magistrate judge pursuant to the provisions of 28 U.S.C. § 636(c).
The Complaint also named Zahar Assar, Beijan Assar's sister, as a defendant. Finding that the court lacked personal jurisdiction over her, the district court granted her motion to dismiss. (Docket # 10).
Borumand's Complaint alleges that in 1994 she gave $13,400 to Assar, who promised that he would use the money to purchase stock for her in the company by which he was employed, Helix Technologies Corporation ("Helix"). The Complaint further alleges that Assar purchased 2,288 Helix shares, which he held for Borumand. According to the Complaint, in July 2000, Borumand demanded possession of the stock, which she claims was then worth approximately $85,800. Assar allegedly refused to provide the stock and, as a result, Borumand filed suit on May 22, 2001, demanding judgment in the amount of $85,800 plus interest, as well as punitive damages and costs. (Docket # 1). A bench trial was conducted before this Court on December 8, 2003. (Docket # 25). For the following reasons, this Court awards judgment in favor of the defendant.
FACTUAL BACKGROUND
Three witnesses testified at trial: the plaintiff, the defendant and the defendant's sister, Zahar Assar. By stipulation, the defense also offered portions of the deposition testimony of Borumand's former husband, Medhi Shemirani. (Docket # 26).
Testimony of Miriam Borumand : Miriam Borumand first met Beijan Assar in 1991, when she moved from Belgium to live with her sister, Sharzad Borumand, in Washington, D.C. (Tr. 19). Assar was involved in a relationship with Sharzad and routinely traveled on weekends from his residence in Boston, Massachusetts to visit with Sharzad in Washington. (Tr. 20). Borumand's sister and Beijan Assar married at the end of 1991 and established residence in Boston. Following her sister's wedding, Borumand also relocated to Boston, where she lived with her daughter, Andel Nadim, until December 1992, when she moved to Rochester, New York. (Tr. 21).
The transcript of the trial conducted on December 8, 2003 is hereinafter referenced as "Tr. ___". (Docket # 26).
Borumand testified that during that time, Assar often encouraged her to purchase shares of Helix stock. (Tr. 21). Assar assured Borumand that investing in Helix was a good opportunity and informed her that, as an employee, he could buy the stock without commission and at a discounted price. (Tr. 22). As a result of Assar's encouragement, Borumand decided to invest in Helix. (Tr. 22).
On August 2, 1994, Assar, his wife and their daughter traveled to Rochester to visit with Borumand. While Assar was in Rochester, and in the presence of Sharzad Assar, Borumand wrote a check to Assar in the amount of $5,400, with the intent that he would use the money to purchase Helix stock for her. (Tr. 22-23, 47). The check was written on an account maintained in Borumand's name with Bay Bank in Massachusetts. (Plaintiff's Exhibit ("P.Ex.") 9). On October 24, 1994, when Assar again visited Borumand in Rochester, she issued a second check to him for $3,000 so that he could buy additional Helix stock for her. (Tr. 23). This check was written on a Citibank account maintained jointly by Borumand and her daughter, Andel Nadim. (P.Ex. 9). Neither this, nor the earlier check, bears any notation in the "memo" line or otherwise suggests the purpose of the transfer of funds from Borumand to Assar.
Borumand testified that approximately one month later in Rochester, she provided Assar with $5,000 in cash, again with the understanding that he would purchase additional Helix stock for her. (Tr. 23-24, 52). According to Borumand, she had $5,000 in cash at her home in Pittsford as a result of an "old habit to have some cash always available to my daughter," who was then in college in Rochester. (Tr. 50). She gave cash, as opposed to a check, to Assar because she did not have that amount in any bank account. (Tr. 52). At no time did Assar ever provide written confirmation to Borumand documenting his receipt of the $5,000 cash. (Tr. 48, 50).
On none of these three occasions did Borumand specify the dates on which Assar was to purchase the shares. When questioned concerning whether they had an agreement as to the price of the shares to be purchased, Borumand testified that she requested that Assar purchase them at $33 per share or "whatever the price was at that time." (Tr. 55). Moreover, Borumand never received any share certificates or other written record reflecting the purchase of any Helix securities, nor was she advised in writing or orally as to the precise number of shares she allegedly owned. (Tr. 48-49, 56). According to Borumand, after each transaction, she informed her husband that she had invested in Helix. (Tr. 47, 48, 51).
Borumand testified that after providing Assar with the funds to purchase the Helix stock, she followed the stock price every day and it consistently rose. (Tr. 24, 70). Indeed, Borumand asserted that she spoke with Assar about the stock on a weekly basis and asked him for verification of the purchases "all the time." (Tr. 62). By July of 2000, the value of the Helix shares she owned reached $88,000, according to Borumand. She testified that such value was calculated by multiplying the number of shares she owned, 2,288, by the July 2000 share price of $55. (Tr. 25-26). She admitted, however, that she knew neither the price of the shares purchased, nor the dates on which they were purchased; thus, she was unable to explain how she calculated the number of shares she owned to be 2,288. (Tr. 48, 55, 66-67).
In fact, had Borumand owned 2,288 shares, the total value of her shares, assuming a price of $55 per share, would have been $125,840, not $88,000 as she testified. Moreover, the July 2000 share price fluctuated between $27.50 and $44, not $55 as plaintiff testified. (P.Ex. 11). Even if plaintiff could establish that she owned 2,288 shares, the total value thus would have fluctuated between $62,920 and $100,672.
In 1995, Sharzad and Beijan Assar initiated divorce proceedings, and it was during this time that Borumand first requested that Assar provide her with the Helix shares, a request that she repeated "all the time." (Tr. 26). Assar failed to do so. In the course of the divorce proceedings, Borumand reviewed several settlement agreements between her sister and Beijan Assar. (Tr. 27-28). The first agreement, dated October 11, 1995, provided for the transfer from Assar to his wife of stock in "ABP Real Estate Corporation" in exchange for releases from his sister-in-law (Borumand), his mother-in-law (Vaggie Borumand) and Borumand's daughter (Andel Nadim). (Tr. 31; P.Ex. 2, ¶ 6). Specifically, the agreement provided:
The husband shall transfer to the wife any stock he owns in the ABP Real Estate [C]orporation, and the wife shall obtain releases and deliver them to the husband from the other shareholders of the corporation, and Mariam Broumand [ sic], Vaggie Broumand [ sic], and Nadim Andel [ sic] from any obligations he may have to them or the corporation arising from the corporation or any investments made on these individuals' behalf by the husband.
(P.Ex. 2, ¶ 6 (emphasis added)). Borumand testified that as of October 11, 1995, Assar's only obligation to her was the Helix stock he had agreed to purchase for her. (Tr. 31).
According to Borumand, ABP Real Estate Corporation, in which she did not have an interest, owned a condominium in Newport, Rhode Island, and Assar personally owned two condominiums in the same complex. (Tr. 30, 34, 80). Borumand testified that she agreed to release her interest in the Helix stock in exchange for the transfer from Assar to her sister of ABP stock and one of his condominiums. (Tr. 27, 33).
On cross-examination, Borumand testified for the first time that, in exchange for her release, she was also to receive from Assar a one-fourth interest in one of the Newport apartments. (Tr. 76-77). As Borumand admitted, such agreement is not reflected in the settlement agreement (Tr. 81), and Borumand did not introduce any documents evidencing such an agreement.
Borumand testified that, in accordance with the settlement agreement, she executed a release in favor of Assar which released him from "any and all claims, demands, damages, actions or causes of actions on account of or for any reason, including with regard to ownership of any real estate or the investment of any funds by [Assar]." (Tr. 31; P.Ex. 12). This release was never delivered, however. Rather, before the exchanges contemplated under the agreement could occur, it was discovered that Assar had purchased certain of the Newport condominiums with funds he had embezzled from Helix and, as a result, would face criminal charges. Borumand testified that she was led to believe that if Assar made restitution to Helix by transferring his interests in the condominiums to Helix's insurance company, he would receive a shorter term of imprisonment than he would if he did not make restitution. (Tr. 34-36).
Following this discovery, Assar and his wife executed an amended settlement agreement on August 8, 1996. (Tr. 37; P.Ex. 8). The amended agreement provided that the rights to two of the Newport condominiums would be conveyed to Chubb Insurance Group in order to satisfy Assar's obligations to Helix. In addition, the rights to the remaining condominium, as well as Assar's ABP stock, were to be transferred to his wife. (Tr. 37; P.Ex. 8). The amended agreement does not contain any provision requiring the delivery of any releases to Assar by Borumand or any other family members. According to Borumand, Assar advised her that while he was in prison, his sister, Zahar Assar, would hold the Helix shares he had purchased for her, which would then be returned to Borumand following his release from prison. (Tr. 35).
While Assar and Borumand's sister were involved in divorce proceedings, so too was Borumand. (Tr. 96-97). She testified that she was divorced in June 1997, during the period of Assar's incarceration. (Tr. 96). In the course of her divorce proceedings, Borumand signed a notarized financial disclosure statement. (Tr. 97). The statement begins as follows:
Mariam [Borumand] Shemirani, the Petitioner herein, being duly sworn, deposes and says that the following is an accurate statement as of February, 1996, of my net worth (assets of whatever kind and nature and wherever situated minus liabilities); statement of income from all sources; and statement of assets transferred of whatsoever kind and nature[.]
(Defendant's Exhibit ("D.Ex.") F). At the end of the detailed statement, directly above Borumand's signature line, the following representation appears, "The foregoing statements . . . have been carefully read by the undersigned, who states that they are true and correct." (D.Ex. F). Nowhere in that statement is Borumand's interest in or claim for Helix stock disclosed. (Tr. 97; D.Ex. F). Indeed, in the line for disclosure of "stocks, options and commodity contracts," the word "none" appears. (D.Ex. F at 4A).
Following Assar's release from prison, which Borumand testified occurred in 1998, Borumand again discussed the Helix stock with Assar on many occasions. (Tr. 39). Assar repeatedly represented to Borumand that his sister, Zahar Assar, was holding the Helix shares and that he would soon return to Borumand the stock or her money. (Tr. 35, 40). Borumand testified that near the time of her daughter's wedding in August 1999, she explicitly demanded that Assar return her money. (Tr. 40). Assar promised to provide Borumand with the money, but never did so. Borumand continued to press Assar about the stock, resulting in repeated promises by Assar that his sister would soon release the funds to her. (Tr. 40). At this point, Borumand testified, she lost faith that Assar would ever provide her with the stock. (Tr. 94). Despite her loss of faith, she continued to discuss the stock with Assar, who represented that he would return the shares to her following the completion of his probation term. (Tr. 40).
In February 2001, Borumand consulted an attorney who sent a letter to Beijan and Zahar Assar demanding $19,000 plus interest "for the five years" in satisfaction of Assar's obligations to Borumand. (Tr. 91; D.Ex. 400). The letter stated that Borumand previously had "advanced [Assar] money, and the proceeds of those funds when converted generated $19,000 in Helix stock." (Tr. 93; D.Ex. 400).
Testimony of Beijan Assar : Beijan Assar testified that, other than an eight-month period in 1997, he has resided in Brookline, Massachusetts with his sister, Zahar Assar, since the time of his divorce in 1994. (Tr. 125). From February 21, 1997 through October 15, 1997, Assar was incarcerated in a federal prison in Allentown, Pennsylvania. (Tr. 125-26). Assar testified that his imprisonment was the result of a conviction for bank fraud arising from his embezzlement of funds from his former employer, Helix Corporation. (Tr. 126). Specifically, Assar explained that during the period 1994 through early 1995, he used the funds that he had stolen from Helix to purchase interests in one and one-half condominium units in Newport, Rhode Island. The other half interest was held by plaintiff's and Sharzad's sister, Mitra. According to Assar, he also used his own funds to purchase an interest in another condominium in the same complex. (Tr. 126-27).
Assar's employment with Helix spanned the period between April 1984 and August 1995, when he was terminated. At the time of his termination, Assar held the position of Corporate Controller and Chief Accounting Officer. (Tr. 127). During his employment, Assar was issued options to purchase Helix stock at a predetermined exercise price. (Tr. 128). According to this testimony, Assar was free either to exercise the options and immediately sell the shares at the market price, or to exercise the options and hold the shares. (Tr. 128). He was not permitted, however, to exercise the options to purchase stock for another. (Tr. 128).
Assar testified that he exercised 2,000 of his stock options in July 1994 and immediately sold the shares, yielding net proceeds of approximately $13,000 or $14,000. (Tr. 134-35). Following the July 1994 exercise, Assar had only 200 stock options remaining. (Tr. 129-30). Assar exercised those remaining options in May 1995 and again sold the shares immediately. As a result, he received net proceeds in the amount of approximately $7,175. (Tr. 136-37). Assar testified that this exercise did not occur as a result of any agreement with Borumand. (Tr. 137).
Assar acknowledged receiving two checks from Borumand, but denied ever receiving $5,000 in cash from her. He testified, however, that such checks were intended as a personal loan to him because he and his wife were experiencing "financial difficulties." (Tr. 129). Assar further stated that the checks were received in Newport, Rhode Island, not in Rochester, New York, as claimed by Borumand. (Tr. 129, 131). Assar testified that he was not in Rochester on either August 7 or October 24, 1994. (Tr. 145, 148). According to Assar, he and Borumand never discussed the purchase of Helix stock at any time between his receipt of the checks from Borumand and his separation from his wife. (Tr. 131-32).
Assar recalled depositing the first check, dated August 7, 1994, on August 9, 1994, into a savings account held jointly with his former wife. (Tr. 131, 142-43). He deposited the second check, dated October 24, 1994, into a joint checking account at the same bank sometime during the end of October, 1994. (Tr. 131, 143). Assar testified that he did not withdraw the deposited funds in a lump sum, nor did he ever withdraw any of the money to purchase Helix stock. (Tr. 143-44).
Assar further testified that he traveled to Borumand's residence in Pittsford, New York on only two occasions. The first was for Borumand's wedding in 1992 or early 1993. The second was for a meeting with Borumand's former husband, Medhi Shemirani. (Tr. 138). That meeting occurred during the summer of 1994. According to Assar, on neither occasion did Borumand provide him with a check or cash. (Tr. 139-40).
In May 1995, Assar and his wife, Sharzad, commenced divorce proceedings. Assar testified that at that time he did not possess any Helix stock, nor did he hold any for the benefit of anyone else. (Tr. 151). Assar testified that he negotiated through counsel a property settlement agreement with his wife that would have transferred to her, among other assets, his stock in the ABP Corporation, which owned a condominium in Newport, Rhode Island. In return, he demanded to receive releases from his wife's family members, including Borumand, of any claims they may have had against him. According to Assar, plaintiff had a potential claim against him for the funds she loaned to him in August and October 1994, and was demanding either the return of the funds plus interest or the transfer to her of certain Persian rugs. (Tr. 153-55).
After the discovery of Assar's fraud against Helix, the settlement agreement was revised to transfer interests in two of the Newport condominiums to Helix's insurance company. While the amended agreement did not require the delivery of a release from Borumand, Assar testified that he received such a release from Borumand. (Tr. 157). However, neither the release, nor any documentation of the delivery of such a release, was offered by Assar.
According to Assar, the first written demand he received from Borumand relating to Helix stock was the February 2001 letter from her attorney demanding $19,000. (Tr. 158; D.Ex. 400).
Testimony of Zahar Assar : Beijan Assar's sister, Zahar Assar, also testified on behalf of the defense. (Tr. 111). Ms. Assar testified that her brother had been living with her since the time of his divorce, except for a period of time during which he was incarcerated. (Tr. 112). Zahar Assar never owned Helix stock, either in her own name or jointly with anyone else; nor did she ever see any Helix stock that Assar was holding for anyone else. (Tr. 115-16). Ms. Assar testified that at no time did she receive money from Borumand, nor did she receive money from her brother that he said came from Borumand. (Tr. 117).
According to Ms. Assar, Borumand never contacted her while her brother resided with her to discuss Helix stock. (Tr. 112, 115-16). Indeed, the first communication she received about the subject was the February 2001 letter from Borumand's attorney, to which she did not respond. (Tr. 114).
Deposition Testimony of Medhi Shemirani : By stipulation, defense counsel offered certain testimony from the deposition of Borumand's former husband, Medhi Shemirani ("Shemirani"). (Tr. 118). Shemirani testified that he was married to Borumand from 1993 until 1997. (Tr. 119). According to Shemirani, Beijan Assar and Sharzad, Borumand's sister, came to Rochester for his wedding to Borumand and stayed at his house. (Tr. 120). Subsequent to the wedding, Assar returned to Rochester and stayed at Shemirani's house on one or two occasions. (Tr. 120-21).
When asked if he knew whether Borumand owned any Helix stock during their marriage, Shemirani replied that he did not. (Tr. 121). Shemirani further testified that he did not recall ever hearing Borumand and Assar discuss Helix, nor did he ever discuss with Assar the purchase of Helix stock. (Tr. 122). Moreover, Shemirani testified that Borumand never advised him that she had purchased or attempted to purchase Helix stock through Assar. (Tr. 122).
DISCUSSION
I. Federal JurisdictionAs an initial matter, Assar challenges this Court's jurisdiction to hear this case. Federal jurisdiction is premised upon the diversity of citizenship between the parties under 28 U.S.C. § 1332. That statute provides:
Assar also has raised other affirmative defenses, including failure to comply with the statute of frauds and the applicable statutes of limitations. I decline to reach the merits of these defenses (other than the statute of limitations, which is discussed infra) in view of my determination that Borumand has failed to satisfy her burden of proof on any of her claims.
[D]istrict courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of interests and costs, and is between . . . citizens of different States.28 U.S.C. § 1332(a)(1).
Assar does not contest the diversity of the parties; rather, he claims that Borumand cannot satisfy the $75,000 jurisdictional minimum. "A party invoking the jurisdiction of the federal court has the burden of proving that it appears to a `reasonable probability' that the claim is in excess of the statutory jurisdictional amount." Tongkook Am., Inc. v. Shipton Sportswear Co., 14 F.3d 781, 784 (2d Cir. 1994) (quoting Moore v. Betit, 511 F.2d 1004, 1006 (2d Cir. 1975)). This burden, however, is easily met. Scherer v. Equitable Life Assurance Soc'y of the United States, 347 F.3d 394, 397 (2d Cir. 2003). Indeed, as the Second Circuit has recognized, there exists a "`rebuttable presumption that the face of the complaint is a good faith representation of the actual amount in controversy.'" Id. (quoting Wolde-Meskel v. Vocational Inst. Project Cmty. Servs., Inc., 166 F.3d 59, 63 (2d Cir. 1999)).
To defeat a claim of diversity jurisdiction, a party must rebut the "face-of-the-complaint" presumption by demonstrating "to a legal certainty" that the potential recovery falls short of the jurisdictional threshold. Id. (citations omitted). Specifically, "[t]he legal impossibility of recovery must be so certain as virtually to negative the plaintiff's good faith in asserting the claim." Id. (quoting Chase Manhattan Bank, N.A. v. American Nat. Bank and Trust Co. of Chicago, 93 F.3d 1064, 1070-71 (2d Cir. 1996 (quotation omitted)). Dismissal of the complaint on jurisdictional grounds is not warranted "[e]ven where [the] allegations leave grave doubt about the likelihood of a recovery of the requisite amount." Id. (quoting Zacharia v. Harbor Island Spa, Inc., 684 F.2d 199, 202 (2d Cir. 1982)).
For purposes of establishing diversity jurisdiction, the amount in controversy is measured as of the date the complaint is filed, and once jurisdiction has been established, it "cannot be ousted by subsequent events." Id. (citing Wolde-Meskel, 166 F.3d at 62). Moreover, "affirmative `defenses asserted on the merits' may not be used to whittle down the amount in controversy." Id. (quoting Zacharia, 684 F.2d at 202 (if affirmative defense could be used to reduce the amount in controversy, the jurisdictional basis would remain in doubt until final judgment)).
When resolving a jurisdictional challenge, consideration of the trial proof is not foreclosed, however. Rather, if such proof makes plain that "the plaintiff's `claim never could have amounted to the sum necessary to give jurisdiction[,] there is no injustice in dismissing the suit.'" Tongkook Am., Inc. v. Shipton Sportswear Co., 14 F.3d at 785 (quoting St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 290 (1938)).
Here, Borumand alleges in her Complaint that in 1994 she provided $13,400 to Assar in return for which he agreed to purchase Helix stock for her. The Complaint further alleges that Assar purchased 2,288 shares of Helix for Borumand, which she demanded possession of in July, 2000. At that time, according to the Complaint, the shares were worth a total of $85,800. Thus, on its face, the Complaint alleges an amount in controversy in excess of the $75,000 minimum.
The Complaint, which was filed in 2001, incorrectly alleges that the jurisdictional minimum is $50,000, rather than $75,000. (Docket # 1). In 1996, Congress raised the jurisdictional minimum from $50,000 to $75,000.
While the allegations in the Complaint plainly satisfy the jurisdictional requisites, the proof at trial renders the jurisdictional challenge a closer question. As the caselaw makes clear, resolution of the challenge turns not on whether the court finds that the plaintiff has satisfied her burden of proof as to the merits of her claims, see St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. at 289 ("[t]he inability of plaintiff to recover an amount adequate to give the court jurisdiction does not show [her] bad faith or oust the jurisdiction"); rather, it turns on whether the proof establishes that the plaintiff's "claim never could have amounted to the sum necessary to give jurisdiction." Id. at 290. Even under this liberal standard, defendant's challenge is not easily dismissed.
As discussed below, Borumand was never advised, nor did she know, the precise number of shares Assar allegedly purchased for her, the dates on which such purchases were made, or the prices at which the shares were purchased. She was thus unable to explain how she arrived at the 2,288 figure that the Complaint alleges was the total number of shares Assar held on her behalf. Nevertheless, I find that Borumand's inability to calculate the precise number of shares is not necessarily fatal to her jurisdictional claim. Rather, she could have satisfied the jurisdictional minimum through indirect proof. For example, the proof was clear as to the dates Borumand issued checks to Assar and reasonably clear as to the time frame of the cash transfer (approximately one month after she issued the second check). Assuming that Assar purchased the Helix shares at his option exercise price, Borumand would have owned a quantity of shares that in July 2000 could have been sold for an amount exceeding $75,000. Thus, because of that theoretical possibility, I cannot conclude from the trial proof that Borumand did not act in good faith when she asserted in her Complaint that the value of her claim exceeded $75,000. I thus reject Assar's jurisdictional challenge. Id. at 289 ("the sum claims by the plaintiff controls if the claim is apparently made in good faith").
Borumand offered conflicting testimony concerning whether she understood that Assar would purchase the shares for her at his discounted, exercise price or at the market price. ( See Tr. 22, 55).
In July 2000, the value of Helix common stock rose to a high of $44 per share. (P.Ex. 11).
Finding federal jurisdiction appropriate in this case, I note that in cases arising under diversity jurisdiction, the court must apply federal procedural law and the substantive law of the state in which it sits. Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938). Thus, in this matter, the applicable substantive law is that of the state of New York. See Schiavone Constr. Co. v. City of New York, 99 F.3d 546 (2d Cir. 1996).
II. Plaintiff's Legal Claims
Borumand's Complaint asserts three causes of action arising from her 1994 transfers of funds to Assar for the alleged purpose of purchasing Helix shares for her. Her first claim is for conversion, namely, that Assar converted property belonging to Borumand when, despite Borumand's demand in 2000, he refused to relinquish possession of Helix stock that he had purchased for her. Borumand's second claim is for fraud. Specifically, she contends that Assar defrauded her by repeatedly misrepresenting to her his intention to return to her the shares or the value of the shares. Borumand's final claim is for breach of fiduciary duty. That claim is premised upon Borumand's contention that Assar was acting as a fiduciary for her when he accepted funds from her, representing that he would buy Helix stock for her with those funds and return them to her on demand. His subsequent refusal to turn over to Borumand the value of the shares constituted a breach of his fiduciary duty to her, Borumand alleges. (Docket # 1). Borumand demands damages in the amount of $85,800 with interest, as well as punitive damages, for each of the three causes of action.
A. Conversion : Conversion is "an unauthorized assumption and exercise of the right of ownership over goods belonging to another to the exclusion of the owner's rights. Employers' Fire Ins. Co. v. Cotten, 245 N.Y. 102, 105 (1927) (citing Laverty v. Snethen, 68 N.Y. 522, 524 (N.Y. 1877)). See also Melnick v. Kukla, 239 N.Y.S. 16, 18 (N.Y.App.Div. 1930); Meese v. Miller, 436 N.Y.S.2d 496, 500 (N.Y.App.Div. 1981). "The test for conversion is whether a party exercises dominion or actually interferes with the property to the exclusion or in defiance of the plaintiff's rights." Meese v. Miller, 436 N.Y.S.2d at 500 (citations omitted). Simply stated, a claim of conversion arises upon the demand for the property by the plaintiff and a refusal to provide such property by the defendant. See Feld v. Feld, 720 N.Y.S.2d 35, 37 (N.Y.App.Div. 2001) (citations omitted).
To prove an action for conversion, the plaintiff must demonstrate that she owned, or had a superior legal right of possession to, the property alleged to have been converted, Meese v. Miller, 436 N.Y.S.2d at 500; proof that the plaintiff had an equitable interest, as opposed to legal right, in the property is insufficient. Hutchings v. Torrey, 119 N.Y.S.2d 119 (N.Y.Sup.Ct. 1953). So too is proof of a mere breach of contractual obligation. Id. (failure to repay a loan constitutes a breach of contract and does not amount to conversion). See also United Republic Ins. Co. v. Chase Manhattan Bank, 168 F.Supp.2d 8, 19 (N.D.N.Y. 2001) ("Conversion is not a valid claim for an enforcement of an obligation to pay money, or for the enforcement of a bargain") (citations omitted).
B. Fraud : Under New York common law, a plaintiff alleging fraud must demonstrate (1) a misrepresentation of material fact; (2) falsity of that representation; (3) scienter; (4) reliance; and (5) injury. Barclay Arms, Inc. v. Barclay Arms Assocs., 74 N.Y.2d 644, 646-47 (1989); Kline v. Taukpoint Realty Corp., 754 N.Y.S.2d 899 (N.Y.App.Div. 2003); Nottenberg v. Walber 985 Co., 554 N.Y.S.2d 217, 218 (N.Y.App.Div. 1990). "Essential to a fraud cause of action is the existence of a material misrepresentation made with the intention of inducing the plaintiff's reliance thereon." MS Partnership v. Wal-Mart Stores, Inc., 770 N.Y.S.2d 514, 516 (N.Y.App.Div. 2003). In addition, a plaintiff claiming fraud under New York common law must prove the elements of such fraud by clear and convincing evidence. Leucadia, Inc. v. Reliance Ins. Co., 864 F.2d 964, 971-72 (2d Cir. 1988).
To sustain a claim for fraud, a plaintiff must establish that she actually relied on the defendant's misrepresentation and that such reliance was reasonable. CPC Int'l Inc. v. McKesson Corp., 70 N.Y.2d 268, 285 (1987). "When a party has the means to discover the true nature of the transaction by the exercise of ordinary intelligence, and fails to make use of those means, [s]he cannot claim justifiable reliance on defendant's misrepresentations." Stuart Silver Assocs., Inc. v. Baco Dev. Corp., 665 N.Y.S.2d 415, 417 (N.Y.App.Div. 1997) (citations omitted).
C. Breach of Fiduciary Duty : In order to establish a claim for breach of fiduciary duty, a plaintiff must demonstrate "the existence of a fiduciary relationship, misconduct by [the] defendant, and that such misconduct `induced [the] plaintiff to engage in the transaction in question,' directly causing the loss about which [the] plaintiff complains." Colello v. Colello, 780 N.Y.S.2d 450, 454 (N.Y.App.Div. 2004). A mere promise, by itself, is insufficient to establish a fiduciary duty. Chipman v. Steinberg, 483 N.Y.S.2d 256 (N.Y.App.Div. 1984), aff'd, 65 N.Y.2d 842 (1985). "A fiduciary relationship only arises when one has reposed trust and confidence in the integrity and fidelity of another who thereby gains influence or assumes control and responsibility." Laikin v. Vaid, 2001 WL 1682873, *3 (N.Y.Sup.Ct. 2001) (citing Board of Managers of Fairways at North Hills Condominium v. Fairway at North Hills, 603 N.Y.S.2d 867 (N.Y.App.Div. 1993)).
III. Credibility Of The Parties
While the parties agree that Borumand issued two checks to Assar in August and October of 1994 in the amounts of $5,400 and $3,000, respectively, their agreement as to the material facts of this case ends there. Borumand asserts that in November of that year, she provided to Assar an additional sum of $5,000 in cash; Assar disputes that. Borumand claims that the funds transferred from her to Assar were to be used by him to purchase Helix stock for her; Assar contests that, asserting instead that the checks constituted a personal loan by Borumand to assist Sharzad and him during a time of financial difficulty. Borumand contends that each separate transfer of funds occurred at her home in Pittsford, New York; unsurprisingly, Assar disagrees, claiming that the checks were provided to him in Rhode Island and that he was not in New York on the dates on which the checks were written. In addition, Borumand maintains that she consistently requested written verification of the stock purchases Assar represented he had made for her; Assar disputes that she ever made any such request.
On this record, resolution of the legal issues cannot be achieved without first determining the credibility of the parties. Indeed, once that determination is made, resolution of the legal claims follows rather easily. It is the credibility finding, frankly, which is the more challenging inquiry. Having heard and considered the testimony of both the plaintiff and the defendant, and having evaluated their demeanor, I cannot say that one party's version of the events is credible and the other party's is not. If I could, this case would be far easier to decide. Instead, I am confronted with testimony offered by each party which, in material respects, I find unconvincing.
Beginning with Assar's testimony, I accept that at the time Borumand provided funds to Assar, he only had 200 Helix options remaining, having exercised the majority of his options earlier that year. Assuming that Assar's exercise price was below the market price, 200 shares would have cost less than the $5,400 sum that Borumand provided to Assar. While the defense places substantial emphasis on the fact that Assar possessed an insufficient number of options to satisfy any purported agreement with Borumand to purchase $5,400 worth of Helix shares, such emphasis is unwarranted. The possibility that Assar may have falsely represented to Borumand that he could and would purchase $5,400 worth of Helix shares for her, even knowing that he could not effectuate such an agreement, is entirely plausible considering the other events of his life at this time. As the trial proof conclusively demonstrated, during the same period of time, Assar was defrauding his employer, Helix, by embezzling funds, which he invested in real estate in Newport, Rhode Island.
Considering the gains that Assar testified he made from the exercise of his options in July 1994 and May 1995 (Tr. 135-37), it is a reasonable assumption that the exercise price was significantly below the market price at that time. Even if it were not, had Assar exercised his 200 options at the closing market price on the day following the receipt of the $5,400 check from Borumand, the cost would have been $5,050 — still below the $5,400 sum that Borumand provided him. ( See P.Ex. 10).
In addition to Assar's conviction for bank fraud, arising from events occurring contemporaneously with the events underlying this lawsuit, I find that Assar's credibility is further undercut by the apparent discrepancy between his testimony and the language of the property settlement agreement he negotiated prior to the discovery of his embezzlement. That agreement provided that in return for the transfer of certain property by Assar to his wife, she was to provide him with releases executed by her sister (Borumand), her mother and her niece (Borumand's daughter). Specifically, the agreement provided that the releases were "from any obligations [Assar] may have to them or [ABP Real Estate Corporation] arising from the corporation or any investments made on these individual's behalf by [Assar]." (P.Ex. 2).
According to Assar, the reason he insisted on the releases was to relieve him of his "liabilities" to Borumand and her daughter, which "included [the] two checks" Borumand had given him. (Tr. 153). Upon further questioning, Assar testified that at the time of his divorce from her sister, Borumand was demanding either the return of the money she had loaned him or the transfer to her of certain Persian rugs. (Tr. 155).
The difficulty I encounter in crediting Assar's explanation is that it is simply inconsistent with the language of the settlement agreement. The agreement refers, not to the release of any indebtedness, but to the release of obligations arising out of ABP Real Estate Corporation "or any investments made on these individuals' behalf by the husband." (P.Ex. 2 (emphasis added)). Indeed, such language is more consistent with Borumand's assertion that she gave money to Assar to purchase Helix stock for her.
As a final matter bearing on my evaluation of Assar's credibility, I find troubling his testimony concerning the amended settlement agreement. The trial proof demonstrates that the settlement agreement was modified after the discovery of Assar's fraud; the modifications were designed to transfer certain condominiums holdings to Helix's insurance company, rather than to Assar's wife, and to make offsetting adjustments in the amount of other property to be transferred to her. Unlike the original agreement, the amended agreement contains no obligation on Assar's wife to deliver to Assar releases from her relatives, including Borumand. Despite that explicit change and Assar's apparent inability to produce the original release, Assar testified that Borumand provided such a release to him. Indeed, his claim that Borumand provided him with a release constitutes one of his affirmative defenses, as well as the basis of an earlier motion to dismiss that was rejected by the district court. On the proof before me, I find Assar's testimony concerning the release both unconvincing and disquieting.
Contrary to plaintiff's contention, my conclusion that material portions of Assar's testimony are unworthy of belief does not ineluctably lead to the opposite conclusion that Borumand's testimony is worthy of belief. In her post-trial submission, plaintiff, characterizing Assar as "a man who isn't afraid to steal, cheat, and lie to get financial gain," argues that "[u]ltimately, this case comes down to an issue whether or not the court should trust [Assar's] version of the facts." (Docket # 29 at 8). I disagree. Simply because I have rejected Assar's version of events does not compel me to accept Borumand's. Rather, and especially because she is the party who carries the burden of proof, I must conduct an equally searching inquiry of her credibility. For the reasons explained below, that inquiry leads me to conclude that Borumand's testimony is also unpersuasive.
Borumand testified that on three separate occasions in the summer and fall of 1994 when Assar was visiting Rochester, she provided him with funds with which to purchase Helix stock, which was then to be held on her behalf. Borumand claimed to have transferred such funds in response to Assar's encouragement and assurances that Helix was a sound investment opportunity and that, as an employee, he could purchase the stock at a discounted price. However, despite the substantial amount of money Borumand paid for the stock, a total of $13,400, she never reduced her agreement with Assar to writing. Nor did she reach an agreement with him as to the specific and material terms of the arrangement, such as, for example, the price of the shares (including the amount of any discount available to Assar that would be passed to Borumand), the number of shares to be purchased or the dates on which such purchases would be made. Despite the absence of an agreement, or even an understanding on Borumand's part as to these terms, she testified that Assar purchased 2,288 shares for her. Without knowing either the price of the shares or the dates on which the purchases were made, Borumand never could have calculated the number of shares Assar allegedly held for her. Indeed, when pressed on the calculation, Borumand admitted that she could not explain how she had arrived at it.
Borumand testified that her sister, Sharzad, was present on the first of these occasions, but Sharzad was not called to testify by either side.
Also detracting from Borumand's credibility was her testimony concerning her failure to obtain any documentation verifying the stock's purchase. (Tr. 49-50, 61). Indeed, Borumand testified that after providing Assar with the initial check for $5,400, she requested that he provide her with written verification of the purchase. Despite Assar's failure to do so, Borumand wrote him another check in the amount of $3,000, to be used to purchase additional stock. Again, Borumand did not reduce her agreement to writing. Borumand testified that following this transaction, she requested written verification of the purchases "all the time." (Tr. 61). According to Borumand, Assar repeatedly assured her that he had the paperwork and that he would send it to her, but he never did so. Despite Assar's continued failure to provide documentation confirming the alleged second purchase, Borumand allegedly provided Assar with an additional $5,000 in cash, which she claimed she had at home, again to be used to purchase Helix stock.
Indeed, Borumand testified that over the next six years she consistently, but unsuccessfully, endeavored to obtain from Assar written verification of her ownership of Helix stock, even demanding possession of the shares as early as 1995. Although Assar failed to turn over the shares, and ignored her repeated requests for documentation of the purchases, Borumand asks this Court to credit her testimony, that (1) she did not conclude until 1999, the year her daughter married, that Assar would never relinquish possession of the shares to her and (2) she continued to believe, even as she testified at trial, that Assar did in fact purchase stock for her in 1994. (Tr. 40, 54). I decline to do so. Rather, I find unpersuasive her contention that over the three-year period following Assar's conviction for bank fraud and his divorce from her sister, she continued to trust Assar's repeated representations that he would turn over to her shares of common stock amounting to tens of thousands of dollars. Indeed, in the midst of this period, Borumand was divorced from her husband. Disclosure of her interest in or claim for such a substantial investment is entirely absent from her verified financial disclosure statement. I am hard pressed to reach any conclusion other than that Borumand either has advanced a claim before this Court that she knows is factually unsupported or that she attempted to conceal assets during her divorce proceedings. Either conclusion seriously detracts from her credibility.
Moreover, Borumand testified that each time she provided Assar with money, she informed Dr. Shemirani, her husband at the time, that she had invested in Helix. During his deposition, however, Shemirani testified that he did not know whether Borumand owned Helix stock at any time during their marriage. Specifically, Shemirani stated that Borumand never discussed with him the fact that she had purchased stock in Helix or that she was attempting to do so. Similarly, Shemirani did not recall that Borumand ever advised him that she was planning to give a check or cash to Assar. Nor did he recall any transactions between Borumand and Assar relating to the purchase of Helix stock.
In addition, as with Assar's testimony concerning the property settlement agreement, I also find certain of Borumand's testimony about the agreement implausible. Specifically, when questioned about her agreement to provide Assar with a release of all claims, she testified that she did so in return for his agreement to transfer certain condominium interests to her sister. She was motivated, she testified, by a desire to ensure that her sister and niece had a place to live following the divorce. On cross-examination, she testified that there was additional consideration for the release, namely, Assar's agreement to give her a one-fourth interest in one of the condominiums. Such an agreement is entirely absent from the property settlement agreement, which specifically refers to the release and the consideration therefore, and the release itself. Borumand admitted that this purported agreement is not documented in any writing, explaining that the release was "the only paper [Assar] let [her] sign." (Tr. 77). I find this testimony strains credulity and further calls into question Borumand's overall credibility.
Finally, the Court finds that the credibility of Borumand's claim is further diminished by the February 5, 2001 letter from Borumand's former counsel to Assar. (D.Ex. 400). In that letter, Borumand's counsel claimed that Borumand had advanced "money" to Assar, "the proceeds of [which] when converted generated $19,000 in Halix [ sic] stock." (D.Ex. 400). Based upon such assertion, Borumand demanded payment of $19,000 plus interest "for the five years." (D.Ex 400). First, plaintiff could not explain, nor could the court discern, any relationship between the $19,000 claimed in the letter and either the cost of the shares allegedly purchased in 1994 or the value of the shares in 2001. Borumand's testimony that the $19,000 figure represented a proposed compromise of her claim makes little sense considering that the letter constituted plaintiff's first formal demand from Assar and that the letter itself refers to $19,000 as the value of the stock. Second, the letter's reference to five years of interest is also inexplicable considering that the letter was dated over six years after the last of Borumand's alleged transfers of funds to Assar.
In evaluating the overall credibility of plaintiff's testimony, I am mindful that the ultimate burden of proof rests with the plaintiff. It is thus incumbent upon Borumand to establish her causes of action by the requisite legal standards. See, e.g., Leucadia, Inc. v. Reliance Ins. Co., 864 F.2d 964, 971-72 (2d Cir. 1988) (claim for conversion must be proven by preponderance of the evidence; claim for fraud, by contrast, must be proven by clear and convincing evidence) (citations omitted). She has not done so. While the full weight of the credible trial proof persuades me that Assar and Borumand more likely than not engaged in financial transactions that went beyond simple familial loans, I simply am unpersuaded that those transactions involved Helix stock. Having reached that determination, I cannot credit Borumand's more specific assertion — which is critical to each of her claims — that Assar represented that he would use the very funds that she transferred to him on three occasions in 1994 to purchase Helix stock for her.
IV. Determination of Borumand's Legal Claims
My finding that Borumand has failed to prove that Assar promised her that he would use the $13,400 she provided him to purchase Helix stock for her compels judgment in favor of the defendant on each of Borumand's three claims. First, in order to succeed on her conversion claim, Borumand must demonstrate by a preponderance of the evidence that Assar converted property belonging to her or as to which she had a superior possessory right. See Meese v. Miller, 436 N.Y.S.2d at 500. This she has not done. I cannot conclude that Assar ever purchased Helix stock for Borumand or, for that matter, that he even agreed to use the funds she gave him for the purpose. Having failed to prove that Assar possessed stock belonging to Borumand, or as to which she had a right of possession superior to his, her conversion claim fails on the merits.
I further find that her conversion claim fails for an alternative reason. The law is clear that a conversion claim accrues upon the plaintiff's demand for the property and the defendant's refusal of such demand. See Feld v. Feld, 720 N.Y.S.2d at 37. A refusal need not be unequivocally stated in words; rather, actions may be sufficient to constitute a refusal if they amount to "an overt and positive act of conversion." See, e.g., Heffernan v. Marine-Midland Bank, N.A., 727 N.Y.S.2d 60 (N.Y.App.Div. 2001). Here, Borumand testified that she demanded possession of the shares in 1995 and "all the time" thereafter. (Tr. 26). While, according to Borumand, Assar never explicitly informed her that he would not relinquish possession, he never in fact turned over the shares and continually maintained that he would do so at some future time. I conclude that by the time Borumand discovered that during the same period that Assar had been accepting funds from her, he had also been embezzling from Helix, she should have reasonably concluded that his failure to turn over the requested shares, let alone any written verification of the purchases, amounted to a refusal. Accordingly, I find that Borumand's claim for conversion accrued in 1996 and is thus barred by the applicable three-year statute of limitations. See N.Y.C.P.L.R. § 214(3); Feld v. Feld, 720 N.Y.S.2d at 37.
Similarly, Borumand's fraud claim fails on the merits for the simple reason that she has not established, and certainly not by clear and convincing proof, that Assar represented to her that he would use her funds to purchase Helix stock, which he would return to her on demand. I do not reach the issue of the falsity of such a representation because I find that Borumand has not established that Assar ever made such a promise.
As with the conversion claim, I also find that Borumand's fraud claim is untimely. Under the applicable statute of limitations, a plaintiff is required to file suit for fraud within six years from the date the cause of action accrued (here, six years from November 1994, or November 2000) or within two years from "the time the plaintiff . . . could with reasonable diligence have discovered it." N.Y.C.P.L.R. § 213(8); see Kaufman v. Cohen, 760 N.Y.S.2d 157, 167 (N.Y.App.Div. 2003). On these facts, Borumand, using reasonable diligence, should have discovered the fraud in 1996 when she learned, or shortly after she learned, that Assar had embezzled funds from his employer which he used for unauthorized purposes. Borumand's fraud claim is thus barred by the two-year discovery statute of limitations.
Borumand's final claim, a claim of breach of fiduciary duty, is equally unavailing. The purported fiduciary duty arises from Assar's alleged acceptance of funds from Borumand with the assurance that he would invest those funds on her behalf in Helix stock. My finding that Borumand has not proved that Assar provided such an assurance defeats this claim, even were I to conclude that such assurance, coupled with the relationship by marriage between the parties, would be sufficient to establish a fiduciary relationship. See, e.g., Crown Realty Co. v. Crown Heights Jewish Cmty. Council, 572 N.Y.S.2d 38, 39 (N.Y.App. Div. 1991) (existence of fiduciary or confidential relationship is a factual question); Mendel v. Hewitt, 555 N.Y.S.2d 899, 900 (N.Y.App.Div. 1990) (same). In addition, because the fraud statute of limitations applies to this cause of action as well, I find that it is barred for the reasons discussed above. See Kaufman v. Cohen, 760 N.Y.S.2d at 167 ("[t]he discovery accrual rule also applies to fraud-based breach of fiduciary duty claims").