For The Sake Of The Children

The New York Appellate Division for the Second Judicial Department affirmed an order declining to dismiss an action against a law firm alleging conversion of funds that were not the property of the client to pay its fees

The plaintiff commenced this action to recover damages for conversion. He alleged in the verified complaint that the defendant, a law firm, represented his estranged wife, nonparty Mary Petrone, in a matrimonial action. As part of that action, Mary Petrone deposited the sum of $154,735.20 into an escrow account held by the defendant. The defendant was to hold those funds “merely [as] an escrow agent and/or custodian.” Thereafter, Mary Petrone terminated the defendant as her counsel. The complaint alleged that $100,000 of the funds deposited into the escrow account constituted monies belonging to the Petrones’ four children that had been gifted to the children by their great aunt, and were to be held by their parents, as guardians. The complaint further alleged that Mary Petrone informed the plaintiff and the justice presiding over the matrimonial litigation that the money deposited in the escrow account included the children’s funds, and that she demanded that the defendant return those funds. In August 2014, the defendant obtained a default judgment against Mary Petrone for unpaid legal fees. It thereafter removed funds from the subject escrow account and applied those funds to its default judgment against Mary Petrone. The plaintiff demanded that the defendant return the children’s funds, and the defendant refused.

The plaintiff alleged in the complaint that the defendant did not represent the children in the matrimonial action, did not have the right to convert the children’s money to satisfy a debt owed by Mary Petrone, and “intentionally interfered with the children’s right to the funds by exercising dominion and control over the funds, thereby depriving the children of possession or use of the funds.” The defendant moved pre-answer to dismiss the complaint pursuant to CPLR 3211(a)(1), (5), and (7). The Supreme Court denied the motion, and the defendant appeals.

Holding

Here, the complaint sufficiently alleges that the specific $100,000 fund was designated for the benefit of the children, and that it was, in effect, used by the defendant, who held such funds merely as an escrowee or custodian, for the payment of legal fees that were Mary Petrone’s obligation to pay. Contrary to the defendant’s contention, the fact that the children’s funds were commingled with other money in the escrow account does not preclude a cause of action for conversion.

(Mike Frisch)