Opinion
June 6, 1991
Appeal from the Supreme Court, New York County (Edward Greenfield, J.).
The sole issue presented on this appeal is the applicable statute of limitations for an action by the Attorney-General pursuant to the Martin Act (General Business Law art 23-A) alleging investor fraud. We hold that the applicable period of limitation is six years pursuant to CPLR 213 (8), and not three years pursuant to CPLR 214.
An action must be commenced within three years pursuant to CPLR 214 (2) if it is based on a liability or penalty created or imposed by statute. The appropriate inquiry is whether or not liability would exist under New York law but for the enactment of the statute (see, State of New York v Stewart's Ice Cream Co., 64 N.Y.2d 83; Sturgis v Sullivan County Harness Racing Assn., 98 A.D.2d 901, lv denied 61 N.Y.2d 608). Liability is considered to be created by statute, for these purposes, if the statute establishes a unique species of liability entirely unknown at common-law (see, Bongiorno v D.I.G.I., Inc., 138 A.D.2d 120).
Liability for investor fraud was not created by the Martin Act, but is recognized in case law predating that legislation (see, e.g., Reusens v Gerard, 160 App. Div. 625, affd sub nom. de Ridder v Gerard, 221 N.Y. 665). Because the Martin Act did not create a liability non-existent at common-law, CPLR 214 (2) does not apply, even though the Martin Act may expand the definition of fraud so as to create new liability in some instances (State of New York v Cortelle Corp., 38 N.Y.2d 83). Similarly, the creation of additional penalties does not bring a statutory cause of action within the three-year statute of limitations (see, City of New York v Kingsview Homes, 70 A.D.2d 866). We agree with the court in Loengard v Santa Fe Indus. ( 573 F. Supp. 1355 [SD NY 1983]; see, Reile v United Technologies Corp., Fed Sec L Rep [CCH] ¶ 97,959 [US Dist Ct, ND NY, Mar. 27, 1981]; Campito v McManus, Longe, Brockwehl, 470 F. Supp. 986).
Contrary to defendants' argument, a three-year statute of limitations for actions to recover damages for injury to property (CPLR 214) would not apply as this statute would have been applicable only if there had been no allegations of fraud in the State's complaint (see, e.g., Shiffer v Bristol Myers Co., 68 A.D.2d 870). In fact, allegations of fraud are the heart of the State's complaint.
Concur — Milonas, J.P., Rosenberger, Ellerin, Kassal and Smith, JJ.