On June 2, 2025, Justice Masley of the New York County Commercial Division issued a decision in Gammon Collection Inc. v. Athena Art Fin. Corp., 2025 NY Slip Op. 31945(U), holding that a claim for conversion did not accrue until the defendant was on notice of the plaintiff’s claim of ownership, notwithstanding the defendant’s failure to conduct due diligence regarding ownership, explaining:
Under CPLR 214 (3), the statutory period of limitations for conversion and replevin claims is three years from the date of accrual. The date of accrual depends on whether the current possessor is a good faith purchaser or bad faith possessor. An action against a good faith purchaser accrues once the true owner makes a demand and is refused. This is because a good-faith purchaser of stolen property commits no wrong, as a matter of substantive law, until he has first been advised of the plaintiff’s claim to possession and given an opportunity to return the chattel. By contrast, an action against a bad faith possessor begins to run immediately from the time of wrongful possession and does not
require a demand and refusal. Thus, where replevin is sought against the party who converted the property, the action accrues on the date of conversion.The court turns to the issue of whether Athena is a bad faith possessor. Importantly, plaintiffs do not allege that Athena knew of plaintiffs’ ownership interest in the Painting at the tlme the Painting was pledged. Instead, they allege that Athena failed to conduct due diligence which would have revealed plaintiffs’ ownership of the Painting and encouraged Philbrick to pledge the collateral via Boxwood which would allow Athena to register and perfect its purported interest in the collateral as a secured creditor without any third party with a claim to that collateral having any way of learning that Athena had done so, or that its interest was subject to a competing claim. These allegations of lack of due diligence and structuring the transaction via Boxwood are insufficient to demonstrate that Athena is a bad faith possessor of the Painting. Indeed, Athena cites no cases where courts have interpreted the New York rule to impute bad faith upon current possessors who failed to conduct sufficient due diligence. Instead, the cases where courts found that a party was a bad faith possessor involved the possessor’s actual knowledge of another’s rights to a chattel.
. . .
Accordingly, based on the allegations of the complaint, the limitations period began to run upon plaintiffs’ demand and Athena’s refusal.
(Internal quotations and citations omitted).