Opinion
12353/03.
Decided May 28, 2004.
This is an action commenced by Penn Toyota, LTD (hereafter the plaintiff) against one Lawrence Troy an employee of the plaintiff (hereafter the defendant) alleging Mr. Troy converted funds placed in his custody as a result of an automobile sale. The plaintiff's second cause of action is for punitive damage against the defendant for his alleged, . . . wilful and deceptive nature in perpetrating the alleged conversion under the plaintiff's first cause of action.
The plaintiff prays for a money judgment on their first cause of action sounding in conversion for $9,000; and a money judgment in the sum of $15,000 on their second cause of action sounding in punitive damages. The plaintiff also made an oral motion at the end of its case and at the close of trial to conform the pleading to the proof adduced at trial pursuant to CPLR § 3025 (c), i.e., to amend the complaint to allege a third cause of action sounding in negligence.
The defendant submitted a Verified Answer and Counterclaim. The defendant in its Verified Answer denied the plaintiff's allegation of conversion, and entitlement to punitive damages. In the defendant's counterclaim against the plaintiff, it seeks the sum of $3,950.00 allegedly representing compensation, commissions and bonuses due the defendant as of February 4, 2003 when the defendant was discharged by the plaintiff.
The defendant opposed the plaintiff's post trial application to amend the pleadings pursuant to CPLR § 3025 (c) sounding in negligence. The Court permitted both parties to submit post trial memorandum of law. Based on the foregoing the Court makes the following findings of facts and conclusions of law.
Findings of Fact and Conclusions of Law
The Court finds that the defendant Lawrence Troy commenced employment with the plaintiff, automobile dealership, in May 1995 and continued such employment through February 4, 2003, when he was discharged. The defendant was employed by the plaintiff as an automobile salesperson. The defendant had been employed prior to May 1995 as an automobile salesperson at various dealerships on Long Island. The defendant had been trained at Penn Toyota in the procedure for closing a sale and accounting for the monies and other proceeds of the sale. Based on the credible evidence adduced at trial, the procedure employed at Penn Toyota required the salesperson taking the proceeds of the sale from the customer to place them in a plastic pouch and to transfer those proceeds to one of the dealership's sales manager, along with the sales documents and financing documents. These funds and documents were required to be taken to a sales manager located at a central location, the podium, at the dealership. Upon receipt of the proceeds the sales manager recorded them and gave the salesperson a receipt. The Court finds although the defendant testified that he maintained a record of each of his sales, he could not produce a copy or record of the sales transaction in question.
The Court finds further, the defendant customarily worked on his day off each week resulting in a six (6) day work week. The Court finds that a Mr. Joseph Terriaca visited Penn Toyota for the first time on November 2002 looking to purchase a vehicle. The particular vehicle Mr. Terriaca finally decided to purchase from Penn Toyota was a Toyota 4 Runner. The Court finds further, that the defendant was the salesperson who serviced Mr. Terriaca on the November 2002 visit. On January 16, 2003, the defendant prepared the sale and finance documents for the purchase of a Toyota 4 Runner, by Mr. Terriaca, and received a five hundred ($500.00) dollar deposit from Mr. Terriaca which was transferred to a Mr. Jeffrey Bonner one of the assistant sales managers at Penn Toyota in accordance with the dealerships procedure. The customer, Mr. Terriaca, was subsequently contacted by the defendant, by telephone, and advised that the 4 Runner would be available for delivery on January 31, 2003. Mr. Terriaca advised the defendant it would be a cash transaction and asked Mr. Troy how much cash could he bring. Mr. Troy advised the customer that the sum of cash ought to be less than $10,000 to avoid the preparation of reporting documents for the Internal Revenue Service. Mr. Terriaca advised the defendant he would bring a combination of cash and a certified check to satisfy the $37,000 balance on the transaction and avoid financing. Mr. Terriaca informed the defendant he would bring $9,000 in cash and the balance by a certified check. The delivery date was scheduled for Friday, January 31, 2003, the defendant arrived at the dealership at 3:00 p.m. to deliver three (3) vehicles which included Mr. Terriaca's 4 Runner. The Court finds the first two transactions transpired uneventfully. The defendant delivered the first two of the three transactions to the sales manager at the podium in accordance with the established procedure. The defendant delivered the plastic pouches of the first two transactions, containing the sales documents, finance documents, and whatever proceeds were paid with the transactions, to the sales manager at the podium at the dealership. As a general rule, the sales manager would have accepted the "deal" pouches from the defendant and signed or initialed the receipt book maintained by the dealership. According to the defendant's own testimony, it took him an hour to deliver the first vehicle on January 31, 2003, between 3:00 p.m. and 4:00 p.m. The defendant testified, and it is not disputed, that it took him a half an hour between 4:00 p.m. and 4:30 p.m., to deliver the second vehicle. With respect to the delivery of Mr. Terriaca's 4 Runner, the third delivery, it took the defendant approximately fifteen minutes, i.e., between 5:00 p.m. and 5:15 p.m. The defendant admitted, he was in a hurry to leave. This last sale which is the subject of the within action took place in the used car area of the dealership and not in the main show room as the other two transactions on January 31, 2003 had.
The Court finds there were two versions testified to at trial of what took place with respect to the documents and proceeds of this last sale and delivery to Mr. Terriaca. According to the defendant's testimony, Mr. Terriaca gave him $9,000 and a certified check as the balance of the purchase price of the 4 Runner on January 31, 2003. The defendant testified that he placed the purchase documents, cash of $9,000 and a certified check in a deal jacket (pouch) and placed it initially in an unsecured desk draw in the used car area of the dealership where he initiated this last transaction. The defendant testified further that he subsequently removed the deal jacket from the unsecured desk drawer, in the used car area, and placed it in his desk in the main showroom, under some books. However, the defendant testified, his desk draw was also unsecured. The defendant acknowledged he had a duty to deliver the deal jacket containing the sales documentation, $9,000 cash, and a certified check to the assistant sales manager at the podium while in the used car area said he was in a hurry to leave the dealership but did not do so.
The customer, Joseph Terriaca, testified that he observed Mr. Troy, put the transaction pouch, containing the cash and certified check, he had given him, in his jacket's inner breast pocket and left the showroom for two to three minutes then returned to show the witness the features on the 4 Runner. The Court finds that the defendant did not comply with the procedure which was in existence at the dealership which he was trained to follow. The defendant acknowledged he did not perform as he was trained on January 31, 2003 with regard to the Terriaca transaction. The Court finds, the defendant left the dealership shortly after the transaction and did not account for the $9,000. The defendant called in sick on the three succeeding days. He was terminated on February 4, 2003.
Issue of Law
The Court finds the legal issues raised by the facts of this case are: whether the defendant's conduct on January 31, 2003 constitutes and supports a legal conclusion of a conversion of the plaintiff's personal property, i.e., the $9,000 cash, and, if the Court finds that the defendant converted the plaintiff's personal property, whether the conduct was willful and deceptive in nature so as to warrant a basis for imposing punitive damages. The Court is also called on the determine whether the plaintiff ought to be permitted to amend it's complaint pursuant to CPLR § 3025 (c) to plead a cause of action in negligence.
Finally, the Court must determine whether the defendant has sustained its counterclaim for $3,950.00 for compensation, commission, and bonuses due him from the plaintiff.
The Law
On the issue of a conversion it has been held, "Conversion" is the unauthorized assumption and exercise of a right of ownership over goods belonging to another to the exclusion of the owner's rights. Meyer v. Price, 250 N.Y. 370, 380 (1929). Conversion has likewise been defined as any act of dominion wrongfully exerted over another's personal property in denial of or inconsistent with that person's rights in the property or as any unauthorized exercise of domain or control over property by one who is not the owner of the property which interferes with and is in defiance of a superior possessory right of another in the property. Galtieri v. Kramer; 232A.D.2d 369, 648, N.Y.S. 2d 144 (2d Dept. 1996); Kranz v. Town of Tusten, 236 A.D. 2d 675, 676, 653 N.Y.S. 2d 194 (2d Dept. 1997). A wrongful "intention" to possess the property of another, however, is not an essential element of conversion. General Elec. Co. v. American Export Isbrandtsen Lines, Inc. 37 A.D. 2d 959, 327 N.Y.S. 2d 93 (2d Dept. 1971). The Court in the latter case held, "Interferance with the right to posession is the essence of a conversion. . . . It is not necessary that one take actual physical possession of property to be guilty of conversion. . . . [A] wrongful intention to possess the property of another is not an essential element of a conversion. It is sufficient if the owner has been deprived of his property by the defendant's unauthorized act in assuming dominion and control. No manual taking of the property or application of it to the defendant's own use is required" at 959-960 supra. "The rule is clear that, to establish a cause of action in conversion, the plaintiff must show legal ownership or an immediate superior right of possession to a specific identifiable thing and must show that the defendant exercised an unauthorized dominion over the thing in question . . . or to the exclusion of the plaintiff's right. . . ." Independant Discount Corp. v. Jospeh Bressner, et al 47A.D. 2d 756, 365 N.Y.S. 2d 44 (2d Dept. 1975). "Tangible personal property or specific money must be involved", supra.
Pursuant to CPLR § 3025 (c) a party may make an oral application to amend their pleadings any time prior to judgment (before the close of the evidence) to conform "the pleadings to the proof" based on the evidence adduced at trial. Such an amendment at trial may be made to support an alternative and or additional cause of action Dittmar Explosives, Inc. v. A.E. Ottaviano, Inc., 20 N.Y. 2d 498, 502, 285 N.Y.S. 2d 55, 58 (1967). "Leave to amend a pleading is freely granted as a matter of discretion in the absence of prejudice or surprise" ( Stroock Stroock Lavan v. Beltramin; 157 A.D. 2d 590, 591 [citing Lodmis v. Civetta Corinno Constr. Corp., 54 N.Y. 2d 18; Fahey v. County of Ontario, 44 N.Y. 2d[1934])" James J. Rodgers v. Lenox Hill Hospital, 239 A.D. 2d 140, 141, 657 N.Y.S. 2d 616 (A.D. 1st Dept. 1997). In order to conserve judicial resources an examination of the underlying merits of the proposed cause(s) of action is warranted. (Brennan v. City of New York, 99 A.D.2d 445; East Asiatic Co. V. Corash, 34 A.D. 2d 432). "Leave to amend will be denied where the proposed oral pleading fails to state a cause of action" ( Megaris Furs v. Gimbel Bros., 172 A.D. 2d 209).
"The employer-employee relationship is one of contract, express or implied ( Meo v. Bloomgarden, 237 App Div 325, 327, app dsmd 262 NY 72) and, in considering the obligations of one to the other, the relevant law is that of master-servant and principal-agent ( see 9 Williston, Contracts [3d ed], § 1012, p. 13; Restatement, Agency 2d, § 2, Comment a, subd d). Fundamental to that relationship is the proposition that an employee is to be loyal to his employer and is prohibited from acting in any manner inconsistent with his agency or trust and is at all times bound to exercise the utmost good faith and loyalty in the performance of his duties' ( Lamdin v. Broadway Surface Adv. Corp., 272 NY 133, 138). Clearly, an employee must not seek to acquire indirect advantages from third persons for performing duties and obligations owed to his employe (9 Williston, Contracts [3d ed], § 1014C, p 72)' ( Western Elec. Co. v. Brenner, 41 NY2d 291, 295)." James J. Rodgers v. Lenox Hill Hospital, supra at 142. ". . . A breach of contract is not to be considered a tort must unless a legal duty independent of the contract itself has been violated. . . . The legal duty spring from circumstances extraneous to, and not constituting elements of, the contract, although it may be connected with and dependent upon the contract. Tunick v. Goldstein, 226 A.D. 2d 705, 642 NYS2d 539(2d Dept. 1996).
Analysis
Here, the evidence adduced at trial reveals the defendant was an automobile salesperson with more than (10) years of experience. The Court finds the defendant was employed by the plaintiff for approximately eight (8) years, and the defendant had been trained by the plaintiff in the procedure for accounting for the monetary funds and proceeds of an automobile sales transaction. The Court finds that in as much as the defendant was, unrefuted, and the evidence supported the finding that he was the plaintiffs top salesperson. Consequently, the defendant had, by virtue of being the top salesperson, delivered a large number of vehicle in sales transactions at the plaintiff's dealership and thereby evidencing his knowledge and performance of existing transaction procedure, and evidencing his knowledge of what was expected of him.
On January 31, 2003, the defendant departed from the procedure which he had been trained to follow in sales transactions, in accounting for the proceeds of the transaction, particularly with respect to the proceeds of the Terriaca sale of the 4 Runner. The defendant accepted from the customer, Joseph Terriaca, the cash sum of $9,000 along with a certified check for $27,907.17, which was the personal property of the plaintiff. The defendant did exercise dominion and control over the proceeds of the sale to Mr. Terriaca on January 31, 2003. Whether, the defendant placed these proceeds in his unsecured draw as he testified or placed the funds on his person as testified to by the customer, Mr. Joseph Terriaca, in either instance the defendant departed from the procedure for accounting for the proceeds of the sale of the plaintiff's property. At the moment of departure from procedure the plaintiff was exercising the unauthorized assumption and exercise of a right of ownership over the property of the plaintiff to the exclusion of the plaintiff. Meyers v. Price supra at 380. The defendant in his failure to take the proceeds of the Terriaca sale to the sales manager or assistant sales manager at the podium on January 31, 2003, extert an act of dominon wrongfully over the personal property of the plaintiff's inconsistent with the plaintiff's right to the $9,000 cash and certified check. This act in and of itself evidenced an unauthorized exercise of dominion and control over the funds by the defendant which interfered with and was in defiance of the plaintiff's superior right to those proceeds. Galtieri v. Kramer, supra at 369; Kranz v. Town of Tusten; supra at 676. A wrongful "intent" to possess the plaintiff's property on January 31, 2003, was not an essential element to constitute the conversion by the defendant. General Elec. Co. v. American Export Isbrandtsen Lines, Inc., supra. The mere interference by the defendant with the right to possession of the property is the essence of the conversion. . . . . General Elec. Co. v. American Export Isbrandtsen Lines, Inc., supra. The defendant's failure to follow the authorized procedure with respect to the proceeds of this Terriaca sale constituted an interference with the plaintiff's right to possession of the proceeds and thereby constituted the conversion. The defendant in this case did exercise physical possession of the proceeds and thereby, this unauthorized possession and interference constituted the conversion. General Elec. Co. v. American Export Isbrandtsen Lines, Inc., supra. The Court finds the defendant is liable to the plaintiff for conversion of the plaintiffs personal property on January 31, 2003, particularly the $9,000 cash he received from Mr. Joseph Terriaca for the purchase of the 4 Runner.
Conclusion
With respect to the measure of damages, the plaintiff seeks the sum of $9,000 which represents the sum of cash which was converted by the defendant on January 31, 2003. The plaintiff also seeks punitive damages in the sum of $15,000.00 in addition to the actual cash converted by the defendant.
The Court finds damages for the defendant's conversion of the plaintiff's property in this case ought to reflect the value of the property actually converted. Mullen v. Quinlan Co., 195 N.Y. 109, 435 N.Y.S. 2d 438. The plaintiff also seeks punitive damages or exemplary damages against the defendant. Punitive damages may be warranted where the circumstance of the conversion evidence the conversion was accomplished by malice or reckless or wilful disregard of the plaintiff's right (Manekas v. Allied Discount Co., 6 Misc 2d 1079.) Here, the evidence adduced at trial was not sufficient to demonstrate that the defendant acted with a malicious intent. Consequently, the Court does not believe punitive damages are warranted. Consequently, the plaintiff's pray for punitive damage is denied.
Plaintiff's Application Pursuant to CPLR § 3025 (c)
Here, the plaintiff made an oral application at the close of it evidence and again at the close of the defendant's defense and counter claim to amend the pleadings to the proof pursuant to CPLR § 3025 (c). Although "leave to so amend a pleading is freely granted as a matter of discretion in the absence of prejudice or surprise" ( Stroock Stroock Lavan v. Bettramin, supra), an examination of the plaintiff's post trial memorandum of law as well as the defendant's post trial memorandum of law reveals there is no legal basis for the plaintiff to sustain and action for negligence. Not one of the cases cited by the plaintiff supports plaintiff's negligence theory. The defendant's memorandum of law support the defendant's position that the relation between the plaintiff and the defendant was one of employer-employee relationship arising out of a contract, express or implied ( Meo v. Bloomgarden, 237 App. Div. 325, 327, app. dsmd 262 N.Y. 72) and, in considering the obligation of one to the other, the relevant law is that of master-servant and princpal-agent ( see 9 Williston, Contract [3ded], § 1012, p13) the obligations of the employee arise out of contract and therefore the misconduct does not give rise to the breach of an extraneous duty out side the contract, and therefore there is no basis to find the defendant's conduct to be negligent. Consequently, the plaintiff application to amend the pleading pursuant to CPLR § 3025 (c) to plead negligence is denied.
Defendant's Counterclaim
Here, the defendant seeks compensation, commission and bonuses from the plaintiff based on his performance in the sale and leasing of automobiles prior to January 31, 2003. The plaintiff's established policy of awarding commission and bonuses for sales performance. It has been held, "An employee whose actions are disloyal to the interests of his employer forfeits his right to compensation for services rendered by him ( Lamdin v. Broadway Surface Adv. Corp., 272 N.Y. 133). . . . However, the employer must demonstrate the misconduct of the employee occurred during the employment and prior to the period for which there is a claim for compensation ( see, Rodgers v. Lenox Hill Hospital, supra). Further, the misconduct must go to the essence of the employer-employee express or implied contract.
In the case at bar, the defendant claims a right to compensation, wages, commission and bonuses prior to January 31, 2003, the date of his conversion of the plaintiff's funds. As a general rule recovery of compensation by the employee is barred where the employer demonstrates the employee's act constitutes misconduct and unfaithfulness which substantially violates the contract of service ( Turner v. Kouwenhoven, 100 N.Y. 115, 120; see also, Sundland v. Korfund Co., 260 App. Div. 80 [1st Dept. 1940]). The employer has a complete defense only when it can prove "[f]lagrant acts of dishonesty . . . which seriously affect the master's interest, continual during the service" ( Pictorial Films v. Salzburg, 106 N.Y.S. 2d 626, 630 [Sup. Ct., NY County 1951]; emphasis in original)". Here, the defendant seeks $750.00 in wages for three weeks of salary at $250.00 per week prior to January 31, 2003, $200.00 in profit sharing based on delivery of 25 vehicles prior to January 31, 2003; and $3,000.00 in sales commissions for sales of vehicles delivered in January 2003 exclusive of the January 31, 2003 deliveries. The total sum demanded in the defendant's counterclaim is $3,950.00.
The Court finds that the plaintiff did have a policy of awarding commissions and bonuses to salespersons who delivered twenty-five(25) vehicles or more during a month. Further, the defendant offered evidence which was received demonstrating his weekly salary/wages were $250.00 per week. There was also credible evidence that the defendant was the second highest salesperson, if not the highest salesperson at the dealership. There was also evidence received as to the twenty-eight (28) sales and lease transactions consummated by the defendant in the month of January 2003 prior to the January 31, 2003 conversion for which the defendant seeks some $3,000 in commission.
The Court finds that while the defendant did breach his duty of loyalty and good faith to the plaintiff on January 31, 2003, the plaintiff has not been able to demonstrate that the defendant's misconduct occurred during his employment prior to the period for which the defendant is claiming the within compensation ( see, Rodgers v. Lenox Hill Hospital, supra). While the conversion on January 31, 2003 by the defendant can be said to have gone to the essence of the employer-employee express or implied contract, and was in fact a flagrant violation of the parties' relationship and warranted the defendant's discharge, there was no evidence adduced at trial demonstrating any other acts by the defendant during his employment which violated the defendant's duty of loyalty and faithfulness to the plaintiff ( Turner v. Kouwenhoven, supra). It was not demonstrated by the plaintiff that "[f]lagrant acts of dishonesty. . . . which seriously affected the master's interest [occurred or], continued during the service" ( Pictorial Films v. Salzburg, supra. . . .)" Consequently, the Court finds the defendant while liable for the single and flagrant act of conversion of the plaintiff's funds and personal property on January 31, 2003, it was not proven that the defendant had engaged in said conduct or any other similar conduct which would warrant his forfeiture of compensation prior to January 31, 2003.
The Court awards the defendant a money judgment as against the plaintiff in the sum of $3,950.00 with interest from January 30, 2003.
The plaintiff is awarded a money judgment against the defendant in the sum of $9,000.00 with interest and cost from January 31, 2003.
Both parties are directed to settle the order.
This constitutes the decision and order of this Court.
So ordered.