Angel v. Strulovich: Three-Year Conversion Limitations Controls Conversion‑Based Constructive Trust Claims; Accrual at Initial Withholding of Investment Funds

Introduction

In Angel v. Strulovich (2025 NY Slip Op 04150), the Appellate Division, Second Department, resolves a recurring limitations issue in real estate investment disputes: when constructive trust claims are pleaded over alleged misdirection of investor funds, which statute of limitations applies and when does it accrue? The court holds that where the constructive trust theory “sounds in conversion” and the plaintiffs seek economic losses rather than a unique property interest, the shorter three-year limitations period governing conversion applies, and accrual occurs at the initial wrongful withholding of the funds—not when properties are later acquired or appreciated, and not when the misconduct is discovered.

The case arises from investors’ claims that their funds were supposed to be placed into “feeder LLCs” created to hold their investments for real estate projects, but were instead withheld or misapplied. Plaintiffs sued to impose constructive trusts on numerous properties, and, on reargument, asked the trial court to deem those constructive trust claims to be claims for equitable liens. The Supreme Court (Kings County) dismissed the constructive trust claims as time-barred and denied, without prejudice, the reargument request to recharacterize the claims. The Appellate Division affirmed.

Summary of the Judgment

The Second Department affirmed the dismissal, under CPLR 3211(a)(5), of plaintiffs’ causes of action seeking constructive trusts on 15 “recent properties” as time-barred.
The court held that a three-year statute of limitations applies because the constructive trust claims “sound in conversion” and legal remedies provide complete relief for the economic losses alleged, as opposed to recovery of any unique real property interest.
Accrual occurred when defendant Yechezkel Strulovich failed to infuse plaintiffs’ investment funds into the designated “feeder LLCs,” which were admittedly created to serve as the repository of those funds. That failure constituted the wrongful withholding that triggered the limitations clock, and it fell outside the applicable three-year period.
The court further held that a motion for leave to reargue cannot be used to recast constructive trust claims as equitable lien claims; such a shift requires a formal motion to amend the complaint. The denial was without prejudice to such an amendment.

Analysis

Precedents Cited and Their Influence

General standards for CPLR 3211(a)(5) statute of limitations motions:
- Sibrian v 244 Madison Realty Corp., 210 AD3d 1029; Franqui v Korol, 154 AD3d 742; Murray v Charap, 150 AD3d 752. These cases set out the burden-shifting framework: the movant must first establish that the time to sue has expired; the burden then shifts to the plaintiff to show tolling, an exception, or timely commencement.
Limitations period for constructive trust claims and the “essence of the claim” test:
- Morales v Rolon, 226 AD3d 765, articulates the baseline: constructive trust claims ordinarily fall under a six-year statute of limitations, running “at the time of the wrongful act giving rise to a duty of restitution,” regardless of discovery. It also explains accrual differences depending on whether the trustee acquired property wrongfully (adverse from acquisition) or lawfully acquired property but later refused to transfer (adverse from breach/repudiation).
- Gold Sun Shipping v Ionian Transp., 245 AD2d 420, and Hellman v Hoenig & Co., 244 AD2d 529, provide the carve‑out relied upon here: when a constructive trust theory “sounds in conversion” and legal remedies provide “full and complete relief,” the three-year conversion statute applies instead of six years. Hellman also underscores that courts look to the “essence of the claim” rather than its label.
- Contact Chiropractic, P.C. v New York City Transit Auth., 31 NY3d 187, from the Court of Appeals, reinforces the “essence over form” principle when selecting the applicable limitations period.
- Barone v Barone, 130 AD3d 765, and Zane v Minion, 63 AD3d 1151, are cited for the accrual framework distinguishing wrongful acquisition from wrongful withholding/repudiation in constructive trust contexts.
Adequacy of legal remedies and damages characterization:
- Feldman v Strulovich, 2022 WL 3447919 (SDNY), is invoked to characterize the plaintiffs’ alleged harm as economic (lost profits/appreciation) that can be fully redressed at law, rather than an interest in unique real property requiring equitable relief.
- Payrolls & Tabulating v Sperry Rand Corp., 22 AD2d 595, is cited for the proposition that whether the plaintiff can recover “all” alleged damages is not dispositive in determining the adequacy of legal remedies for limitations purposes.
Reargument is not a vehicle to change theories:
- Litton Loan Servicing, L.P. v Wasserman, 202 AD3d 1074, confirms that reargument may not be used to present new arguments or different theories not advanced originally; thus, the attempt to “deem” constructive trust claims to equitable lien claims was properly denied, without prejudice to a formal amendment.

Legal Reasoning

The Second Department’s reasoning proceeds in two decisive steps.

Which limitations period applies?
While a constructive trust claim normally carries a six-year period (CPLR 213[1]), the court applied the exception recognized in Gold Sun Shipping and Hellman: when, in substance, the claim is for conversion of money and legal remedies can provide complete relief, the three-year conversion statute governs. The plaintiffs expressly did not dispute that their constructive trust claims “sound in conversion.” The court emphasized that plaintiffs sought economic losses—lost appreciation or development profits—rather than recovery of “unique real property” as such. Under these facts, money damages would suffice. Quoting the “essence of the claim” principle, the court looked at what plaintiffs truly sought and concluded that the conversion-based three-year period is controlling.
When did the claim accrue?
Applying Morales v Rolon and related authorities, the court determined that accrual occurs at the wrongful act giving rise to the duty of restitution. Here, that act was the failure to place the investors’ money into the “feeder LLCs” created to receive those funds. That failure constituted wrongful withholding, triggering accrual then and there—well outside the three-year window by the time suit was brought. Notably, discovery of the wrong does not delay accrual for constructive trust claims, and plaintiffs did not establish tolling or any exception that would extend the period.

On the procedural issue, the court affirmed the denial—without prejudice—of plaintiffs’ attempt, on reargument, to reframe their constructive trust causes as equitable lien claims. Citing Litton Loan Servicing, the panel explained that reargument cannot be used to introduce “arguments different from those originally presented.” If plaintiffs wish to pursue equitable lien theories, the correct path is a motion to amend the pleading.

Impact and Forward-Looking Significance

Limitations discipline for investment misdirection cases: Where investors allege that funds intended for entities like “feeder LLCs” were withheld, this decision directs courts to apply a three-year period if the claim, in essence, is conversion seeking money damages. Plaintiffs must move swiftly; the clock starts at the moment of initial misdirection or withholding, not at later property acquisitions, resale events, or appreciations.
Pleading strategy: equitable versus legal relief: Litigants seeking the longer six-year period for constructive trust must plausibly allege a unique property interest that equity alone can protect, or otherwise show that legal remedies are inadequate. Purely economic-loss claims will invite the three-year conversion analysis. If equitable liens or other equitable theories are desired, they should be pleaded from the outset or promptly sought by amendment—not via reargument.
Accrual clarity for constructive trust claims: The opinion gives precise guidance on accrual: where property (or funds) is lawfully possessed but wrongfully withheld, accrual runs from breach or repudiation of the agreement to transfer; where property is wrongfully acquired ab initio, it runs from acquisition. Here, the failure to fund the “feeder LLCs” was the actionable breach/withholding event.
No “discovery rule” rescue: Reinforcing Morales, the court reiterates that constructive trust limitations run from the wrongful act “regardless of when it was discovered.” Plaintiffs must therefore vigilantly monitor investments and potential diversions.
Damages scope is not dispositive of limitations selection: By citing Payrolls & Tabulating, the court clarifies that plaintiffs cannot avoid the three-year period by arguing that not all their alleged losses are recoverable in an action at law. The focus is on the nature of the right and remedy, not maximal damages recoupment.

Complex Concepts Simplified

Constructive trust: An equitable remedy imposed by a court to prevent unjust enrichment, treating a defendant as if holding property in trust for the plaintiff because it was obtained or retained through wrongful conduct.
Equitable lien: A judicially recognized charge or encumbrance on specific property to secure payment of a debt or obligation. Unlike a constructive trust (which can entail transfer of title), an equitable lien typically secures payment from the property’s value.
Conversion: A legal claim for wrongful exercise of control over personal property (including money specifically identifiable or segregated) belonging to another. In New York, it carries a three-year statute of limitations.
Statute of limitations (SOL): The fixed time within which a lawsuit must be filed. Failing to sue within the applicable period permits dismissal under CPLR 3211(a)(5).
Accrual: The moment the law deems a claim to “arise,” thereby starting the limitations clock. For conversion-based constructive trust claims premised on withholding funds, accrual is at the initial withholding/breach.
“Essence of the claim” test: Courts classify a claim for limitations purposes based on its substance (what actually happened and what relief is sought), not the labels used in the pleading.
Feeder LLCs: Special-purpose entities created to receive and hold investor funds before deploying them into specific projects. Failure to deposit funds into such entities may constitute the “wrongful act” triggering accrual.
Motion to reargue vs. amendment: Reargument asks the court to reconsider an alleged misapprehension of facts or law and is not a vehicle to debut new theories. To change or add claims (e.g., from constructive trust to equitable lien), a party should move to amend the complaint.

Practice Pointers

Plead with precision: If the goal is to preserve a six-year window under a constructive trust theory, allege a unique property interest and why monetary relief is inadequate. Otherwise, expect a three-year conversion clock.
Identify the accrual point: Document when the alleged withholding or repudiation occurred (e.g., failure to fund a feeder LLC). Diarize the deadline accordingly.
Don’t rely on discovery: New York generally does not delay accrual of constructive trust claims based on later discovery of the wrong.
Amend, don’t reargue: To pivot from constructive trust to equitable lien (or vice versa), move to amend promptly rather than attempting the change on reargument.
Prepare for 3211(a)(5): Defendants should marshal transactional records showing the timing of the withholding; plaintiffs should be ready with any tolling or estoppel facts if they exist.

Conclusion

Angel v. Strulovich cements an important limitations rule for New York equity practice: when a constructive trust theory is, in essence, a conversion claim for economic losses, it is governed by the three-year conversion statute of limitations, and accrual is pegged to the initial wrongful withholding of funds—here, the failure to fund “feeder LLCs.” Courts will look beyond labels to the claim’s core and to the character of the harm and remedy. The opinion also reaffirms the procedural boundary that reargument is not a substitute for amendment. For participants in real estate syndications and other investment structures, the decision heightens the premium on early detection of fund diversions and on careful pleading choices that align the remedy sought with the applicable limitations period. In the broader legal context, the case reinforces the “essence of the claim” approach to SOL selection and supplies a clear accrual marker for financial-withholding scenarios in constructive trust litigation.