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Blue R v. Gems Inc. S.V. & V. Diamond Corp.

Supreme Court, New York County

December 16, 2016

Blue River Gems Inc., Plaintiff,
v.
S. V. & V. Diamond Corp., Michael Gross Diamonds Inc., Defendants.

          For Plaintiff: Weg and Myers P.C. by Dennis T. D'Antonio, Esq.

          For Defendant: Law Offices of Jacob Zelmanovitz by Jacob Zelmanovitz, Esq.

          David B. Cohen, JSC

         Blue River Gems, Inc. ("plaintiff") owned a gold and diamond necklace, that plaintiff valued at approximately $400, 000 (the "Necklace"). On August 8, 2013, plaintiff consigned the Necklace to defendant SV & V Diamond Corp. ("SV & V") pursuant to a written memorandum. When SV & V obtained the Necklace, the memorandum of consignment stated that the Necklace "remained the property of Blue River Gems" and that SV & V acquired "no right or authority to sell, hypothecate or otherwise dispose of the merchandise."

         On August 22, 2013, SV & V transferred the Necklace to defendant Michael Gross Diamonds Inc. ("MGD"). The nature of that transfer is the subject of dispute between the parties. Plaintiff and SV & V contend that the necklace was consigned (wrongfully) by SV & V to MGD and have attached a memorandum of consignment attesting to such. MGD disputes that the transfer was a consignment and states that the memorandum is a forgery. Instead, Michael Gross, the president of MGD, states that SV & V was indebted to MGD for more than $1, 000, 000 for diamonds that had been consigned by MGD to SV & V. MGD agreed that if SV & V gave the Necklace to MGD, MGD would return $340, 000 worth of memoranda of consignment in "satisfaction of a corresponding amount of [his] debt to MGD." Upon delivery of the Necklace, MGD gave him three memoranda "signifying the forgiveness of $339, 456.30" of debt. Thus, MGD argues that the transfer was not a consignment at all but an exchange of the Necklace for the diamonds.

         At some point, plaintiff learned that MGD had possession of the Necklace and sought return of the Necklace from MGD. Upon MGD's refusal to return the Necklace, plaintiff commenced the instant action. The complaint alleges against MGD two causes of action, one for conversion and one for unjust enrichment. The instant motion seeks summary judgment against MGD on the two causes of action.

         "A conversion takes place when someone, intentionally and without authority, assumes or exercises control over personal property belonging to someone else, interfering with that person's right of possession (State of New York v. Seventh Regiment Fund, 98 N.Y.2d 249, 746 N.Y.S.2d 637, 774 N.E.2d 702');">774 N.E.2d 702 [2002]). Two key elements of conversion are (1) plaintiff's possessory right or interest in the property (Pierpoint v. Hoyt, 260 NY 26, 182 N.E. 235');">182 N.E. 235 [1932]; Seventh Regiment Fund, 98 N.Y.2d at 259, 746 N.Y.S.2d 637, 774 N.E.2d 702');">774 N.E.2d 702) and (2) defendant's dominion over the property or interference with it, in derogation of plaintiff's rights" (Colavito v New York Organ Donor Network, Inc., 8 N.Y.3d 43, 49-50 [2006]). It is undisputed that plaintiff was the owner of the Necklace and that MGD now has possession of the Necklace and refuses to return it to plaintiff. The only question is whether MGD has some right to retain the Necklace.

         New York Uniform Commercial Code 2-403[2] provides "[a]ny entrusting of possession of goods to a merchant who deals in goods of that kind gives him power to transfer all rights of the entruster to a buyer in ordinary course of business." This provision protects a buyer in the ordinary course of business who purchases goods from a merchant. It is undisputed that plaintiff entrusted the Necklace to SV & V, however, the parties dispute both whether SV & V is a merchant and whether MGD is a buyer in the ordinary course of business. Thus, for MGD to defeat the motion for summary judgment and raise a genuine question as to whether it has a right to retain the Necklace under the entrustment statute, the Court must find a genuine issue of fact whether SV & V is a merchant and whether MGD is a buyer in the ordinary course of business.

         A merchant under the UCC is defined as:

a person who deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction or to whom such knowledge or skill may be attributed by his employment of an agent or broker or other intermediary who by his occupation holds himself out as having such knowledge or skill.

         Uniform Commercial Code Law § 2-104.

         A buyer in the ordinary course of business is defined as:

a person that buys goods in good faith, without knowledge that the sale violates the rights of another person in the goods, and in the ordinary course from a person, other than a pawnbroker, in the business of selling goods of that kind. A person buys goods in the ordinary course if the sale to the person comports with the usual or customary practices in the kind of business in which the seller is engaged or with the seller's own usual or customary practices.. A buyer in ordinary course of business may buy for cash, by exchange of other property. Buyer in ordinary course of business" ...

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