State of New York v. Cortelle Corp., 38 N.Y.2d 83 (1975)
Statutes that provide additional remedies or grant standing to sue for pre-existing wrongs do not create new liabilities subject to shorter statutory limitations periods.
Summary
The New York Attorney-General sued Cortelle Corp. for fraudulent practices related to real estate transactions, seeking restitution and corporate dissolution. The defendants argued that the three-year statute of limitations for liabilities created by statute barred some claims. The Court of Appeals held that the Attorney-General’s action was not based on liabilities created by statute, but on pre-existing common-law fraud. The statutes cited merely provided remedies and standing to the Attorney-General. Therefore, the longer six-year statute of limitations applied, and the dismissed causes of action were reinstated. The court emphasized that the essence of the claim, not its form, determines the applicable statute of limitations.
Facts
From 1966 to 1968, Berlin, acting through various corporations, acquired residential properties from distressed owners facing foreclosure. Berlin induced owners to convey title through sale-leaseback agreements, falsely representing that the deeds were collateral for loans and that titles would be reconveyed upon payment of a fee at the lease’s expiration. When owners tendered payment, the defendants refused to reconvey the titles, intending to obtain permanent ownership of the properties through fraud.
Procedural History
The Attorney-General initiated the action on January 26, 1972, seeking corporate dissolution and restitution under Business Corporation Law § 1101(a)(2) and Executive Law § 63(12). Special Term dismissed three causes of action based on the three-year statute of limitations. The Appellate Division affirmed. Both sides appealed by permission to the Court of Appeals.
Issue(s)
Whether the Attorney-General’s causes of action alleging fraudulent practices rely on liabilities created or imposed by statute, thus triggering the three-year statute of limitations under CPLR 214(2), or whether they are based on common-law fraud subject to a longer limitations period.
Holding
No, because the statutes cited by the Attorney-General did not create the underlying liabilities but merely provided additional remedies and standing to address pre-existing wrongs recognized under common law. The six-year residual statute of limitations applies.
Court’s Reasoning
The court reasoned that CPLR 214(2) applies to actions for wrongs not recognized in common or decisional law. The statutes authorizing the Attorney-General’s action did not create new claims but provided remedies and standing for a public officer to seek redress for a common type of fraud. Executive Law § 63(12) incorporates existing standards for fraudulent behavior. The complaint alleged willful misrepresentations to induce property transfers, constituting common-law promissory fraud. Business Corporation Law § 1101(a)(2) addresses abuse of corporate power, a wrong against the State traceable to English common law. The court stated, “That the statutes authorizing the Attorney-General to bring this action appear to be or are new to the law is not dispositive. As applied to the allegations in this case, they create no new claims but only provide particular remedies and standing in a public officer to seek redress on behalf of the State and others.” The court also emphasized the historical context, noting that section 1101 is the statutory successor to section 1798 of the former Code of Civil Procedure, which was held only to modify procedure and not create new liability, penalty, or forfeiture. Ultimately, the court determined that because the underlying actions were wrongful prior to and independent of the statutes in question, the causes of action were timely brought within the six-year period of limitation (CPLR 213, subd 1).