Augstein v. Levey
3 A.D.2d 595 · Appellate Division of the Supreme Court of the State of New York · 1957
Facts
Plaintiffs alleged defendant Levey, a director, acquired 625 shares of Scophony stock in 1951 by exchanging Scophony assets and illegally transferred Scophony patents to Skiatron in 1949. Plaintiffs claimed Levey's later fraudulent statements should estop him from asserting the Statute of Limitations, despite having knowledge of the basic facts of the patent transfer and stock acquisition in 1949 via a prospectus.
Issue
What statute of limitations applies to a director's acquisition of corporate stock in exchange for corporate assets? Can a defendant be equitably estopped from asserting the statute of limitations due to later fraudulent statements, when the plaintiffs had knowledge of the basic facts of the alleged fraud years earlier?
Holding
The court held that the six-year statute of limitations applies to the 1951 stock acquisition by Levey, not the three-year statute, allowing plaintiffs to amend their complaint. The court also held that Levey was not estopped from asserting the statute of limitations for the 1949 patent transfer because plaintiffs had sufficient knowledge in 1949 to trigger a duty of inquiry, thus barring the second cause of action against him.
Rule
Claims to follow assets into the hands of a fiduciary, such as a director acquiring corporate stock, are subject to a six-year statute of limitations. Equitable estoppel to toll the statute of limitations based on fraud is not applicable when the claimant had knowledge of the basic facts of the alleged fraud, as a duty of inquiry arises, and later discovery of confirmatory evidence or false representations does not create estoppel.
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