on the part of Cooper or Giusto could not have been the cause of Medicore's breach of contract.
Plaintiff also argues that Cooper and Giusto converted funds paid by Searle to Medicore and directed that these funds be used for improper purposes. As discussed below, however, plaintiff's claim for conversion is insufficient as a matter of law. Hence, plaintiff's argument that Cooper and Giusto are personally liable for Medicore's breach of contract as a result of acts outside the scope of their employment is without merit.
Plaintiff alleges, secondly, that Cooper and Giusto are personally liable for inducing Medicore's breach of contract because they both benefitted personally by directing payments to themselves or for their own personal benefit from funds paid by Searle to cover Medicore's out-of-pocket expenses for the Norpace symposium. Specifically, plaintiff alleges that the salary payments made to Cooper in Giusto were excessive, and that Cooper and Giusto directed certain other payments by Medicore that were improper.
Disbursement of corporate salaries and benefits falls within the function of a corporate officer, and does not render either Cooper or Giusto personally liable in tort. In order to establish the element of personal enrichment required to support a claim for tortious interference with contractual relations against Cooper or Giusto individually, plaintiff must prove that compensation clearly in excess of normal salary and benefits was paid out by Medicore under the direction of one or both of the individual defendants. Plaintiff's narrow claim that survives defendants' cross-motion for summary judgment, then, is based on the proposition that Cooper and Giusto abused their positions as officers and directors of Medicore to direct improper payments to themselves, and thereby prevented Medicore from discharging its duty to pay third party vendors for their services. Whether or not Cooper and Giusto improperly enriched themselves is a material issue of fact to be decided at trial. Accordingly, the parties' motions for summary judgment on plaintiff's claim for tortious interference with contractual relations are denied.
E. Plaintiff's Conversion Claim
Plaintiff's fifth cause of action is for conversion, and is brought against all defendants. Under New York law, conversion is defined as any act of dominion wrongfully exerted over another's personal property in denial of or inconsistent with his rights therein. Meese v. Miller, 79 A.D.2d 237, 436 N.Y.S.2d 496, 500 (App. Div. 1981); Atlanta Shipping Corp. v. Chemical Bank, 818 F.2d 240, 249 (2d Cir. 1987). Furthermore, it is well settled that an action will lie for the conversion of money where there is an obligation to return or otherwise treat in a particular manner the specific money in question, and such money can be described or identified in the same manner as a specific chattel. Payne v. White, 101 A.D.2d 975, 477 N.Y.S.2d 456, 458 (App. Div. 1984); Kubin v. Miller, 801 F. Supp. 1101, 1118 (S.D.N.Y. 1992). Nevertheless, New York courts are clear that money can be the subject of conversion and a conversion action only when it can be described, identified, or segregated in the manner that a specific chattel can be, and the mere failure to pay a debt is not a conversion of the money owing. See Marine Midland Bank v. John E. Russo Produce Co, 65 A.D.2d 950, 410 N.Y.S.2d 730, 733 (App. Div. 1978), modified on other grounds, 405 N.E.2d 205 (1980); Columbia Marine Servs., Inc. v. Reffet Ltd., 861 F.2d 18, 23 (2d Cir. 1988); Laurent v. Williamsburgh Sav. Bank, 28 Misc. 2d 140, 137 N.Y.S.2d 750, 754-55 (Sup. Ct. 1954); see generally 23 N.Y. Jur.2d, Conversion §§ 5, 12 (1982).
There is no evidence that Medicore was under any obligation under the terms of the letter agreement to create a specific account for funds paid to it by Searle to cover out-of-pocket expenses. To the contrary, such funds were paid to Medicore to "reimburse" it for such expenses, and there is nothing in the letter agreement that creates a means of identifying specific funds. Plaintiff's argument that these funds were paid to Medicore for a specific purpose misses the point; regardless of the purpose of such payments, Medicore was under no obligation to remit particular, identifiable funds to third party vendors or to segregate these funds in a separate account, and in some instances paid third party vendors before receiving reimbursement from Searle. Although plaintiff may be able to prove that defendants are liable in tort, as a matter of law it has failed to establish an essential element of its claim for conversion. Thus, defendants' motion for summary judgment on plaintiff's claim for conversion is granted with respect to all defendants.
F. Plaintiff's Punitive Damages Claim
Defendants have moved for summary judgment on plaintiff's demand for punitive damages. Defendants argue that plaintiff is not entitled to punitive damages on any of its claims. Under New York law, "punitive damages are appropriate in cases involving 'gross, wanton, or willful fraud or other morally culpable conduct.'" Action S.A. v. Marc Rich & Co., 951 F.2d 504, 509 (2d Cir. 1991) (quoting Borkowski v. Borkowski, 39 N.Y.2d 982, 387 N.Y.S.2d 233, 233, 355 N.E.2d 287 (1976) (mem.)), cert. denied, 112 S. Ct. 1763 (1992). Punitive damages should not be assessed if the defendant cannot be charged with malice, wrongful motive, willful or intentional misdoing, or reckless indifference. Krohn v. Agway Petroleum Corp., 168 A.D.2d 858, 564 N.Y.S.2d 797, 799 (App. Div. 1990). Furthermore, punitive damages are not generally available in breach of contract claims. Fort Howard Paper Co. v. William D. Witter, Inc., 787 F.2d 784, 793 (2d Cir. 1986); Thyssen, Inc. v. S.S. Fortune Star, 777 F.2d 57, 63 (2d Cir. 1985); Parke-Hayden, Inc. v. Loews Theatre Management Corp., 789 F. Supp. 1257, 1267 (S.D.N.Y. 1992). Punitive damages are recoverable, however, in actions based on tortious conduct that involves malice, oppression, wanton or reckless disregard of the plaintiff's rights, or other circumstances of aggravation. See Grau v. Eljay Real Estate Corp., 162 A.D.2d 320, 556 N.Y.S.2d 898, 899 (App. Div. 1990). See generally 36 N.Y. Jur.2d, Damages § 176 (1984).
In the case at bar, plaintiff has brought claims for fraudulent inducement of contract and tortious interference with contractual relations, and has tendered facts sufficient to bring these claims to trial. Whether defendants have committed tortious acts characterized by malice and wantonness sufficient to merit an award of punitive damages is a matter for the trier of fact. See Mar Oil, S.A. v. Morrissey, 982 F.2d 830, 844 (2d Cir. 1993) ("Under New York law, the imposition of punitive damages is left to the sound discretion of the finder of fact."). Accordingly, defendants' motion for summary judgment on plaintiff's demand for punitive damages is denied.
G. Defendants' Motion for Rule 11 Sanctions
Defendants argue that they are entitled to Rule 11 sanctions on the ground that all of plaintiff's claims are without merit and were intended solely to harass defendants Cooper and Giusto. Rule 11 states that sanctions may be imposed when papers submitted to the court are not sufficiently "grounded in fact" and "warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law," or if such papers are "interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation." Fed. R. Civ. P. 11. Defendants' demand for sanctions is wholly without merit. The Court has ruled that plaintiff is entitled to summary judgment on several of its claims and is entitled to bring additional claims to trial. Since most of plaintiff's claims are sufficiently supported to survive defendants' cross-motion for summary judgment, there are no grounds upon which to award sanctions. Cf. Rounseville v. Zahl, 13 F.3d 625, 1994 U.S. App. LEXIS 444 at *23-*24 (2d Cir. 1994) (all doubts are to be resolved in favor of the signor of the document that is the basis for Rule 11 sanctions). Accordingly, defendants' motion for Rule 11 sanctions is denied.
IT IS HEREBY ORDERED that plaintiff's motion for summary judgment on its claims for breach of contract and indemnification is GRANTED.
IT IS FURTHER ORDERED that plaintiff is awarded restitution in the amount of $ 108,175.42, representing the total amount remitted by Searle to Medicore for reimbursement of out-of-pocket expenses that was never paid to third parties. Of this sum, plaintiff is awarded $ 47,188.93 on the alternate grounds of restitution and indemnification.
IT IS FURTHER ORDERED that plaintiff's motion for summary judgment on its claim for damages in the amount of $ 110,500, which represents Medicore's management fee, is DENIED.
IT IS FURTHER ORDERED that plaintiff's motion for summary judgment on its claims for fraud, tortious interference with contractual relations, and conversion is DENIED.
IT IS FURTHER ORDERED that defendants' motion for summary judgment on plaintiff's claims for fraud and conversion is GRANTED with respect to all defendants.
IT IS FURTHER ORDERED that defendants' motion for summary judgment on plaintiff's claim for breach of contract, indemnification, fraudulent inducement of contract, tortious interference with contractual relations, and punitive damages is DENIED.
IT IS FURTHER ORDERED that defendants' motion for sanctions pursuant to Federal Rule of Civil Procedure 11 is DENIED.
IT IS FURTHER ORDERED that all discovery be completed within thirty days of the date of this Opinion and Order, and that the parties submit to this Court a Joint Pretrial Order within ten days thereafter.
DATED: New York, New York
February 13, 1994
David N. Edelstein