755 F.2d 239 (2nd Cir. 1985), 23, Durante Bros. and Sons, Inc. v. Flushing Nat. Bank

Docket Nº:23, Docket 84-7221.
Citation:755 F.2d 239
Party Name:DURANTE BROS. AND SONS, INC., Plaintiff-Appellant, v. FLUSHING NATIONAL BANK, Jack Farber and Richard Gelman, Defendants-Appellees.
Case Date:February 05, 1985
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit
 
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Page 239

755 F.2d 239 (2nd Cir. 1985)

DURANTE BROS. AND SONS, INC., Plaintiff-Appellant,

v.

FLUSHING NATIONAL BANK, Jack Farber and Richard Gelman,

Defendants-Appellees.

No. 23, Docket 84-7221.

United States Court of Appeals, Second Circuit

February 5, 1985

Argued Sept. 12, 1984.

Final Briefs Submitted Oct. 1, 1984.

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Myron Beldock, New York City (Jon B. Levison, Edward S. Graves, Beldock Levine & Hoffman, New York City, on brief), for plaintiff-appellant.

Milton S. Gould, New York City (Fran M. Jacobs, Peter C. Neger, Shea & Gould, New York City, on brief), for defendants-appellees.

Before LUMBARD, MANSFIELD, and KEARSE, Circuit Judges.

KEARSE, Circuit Judge:

Plaintiff Durante Bros. and Sons, Inc. ("Durante"), appeals from a final judgment of the United States District Court for the Eastern District of New York, Eugene H. Nickerson, Judge, 571 F.Supp. 489, entered after a jury trial, dismissing its complaint against defendants Flushing National Bank ("Flushing" or the "Bank"), Jack Farber, and Richard Gelman, alleging violations of, inter alia, the Racketeer Influenced Corrupt Organizations Act ("RICO"), 18 U.S.C. Sec. 1961, et seq. (1982), and the federal banking laws, 12 U.S.C. Sec. 1, et seq. (1982). The district court granted summary judgment dismissing certain of the RICO and banking law claims on the grounds that they were barred by statutes of limitations; it directed a verdict as to certain other claims for lack of proof; and it set aside a jury verdict against Flushing for fraud, on the ground that that verdict was unsupportable in light of the jury's verdict in favor of Farber on essentially the same claim of fraud. On appeal, Durante contends principally that the district court applied the incorrect statutes of limitations and that it erred in dismissing Durante's other claims for failure of proof and for inconsistency in the jury's verdicts. We find merit only in the contention that the court erred in dismissing the RICO claims on statute of limitations grounds, and we vacate the judgment dismissing counts 1, 3, and 5 of the complaint and remand for further proceedings on those claims.

I. BACKGROUND

  1. The Complaint

    The action, commenced on May 21, 1980, centers on certain loans made by Flushing from 1974 through 1976 to (1) Durante, (2) Louis Durante, Sr. ("Louis Sr."), father of Durante's sole stockholder, and (3) Jerder Realty Services, Inc. ("Jerder"), a real estate development company of which Louis Sr. was a principal. As set forth in somewhat greater detail in the discussion sections below, the amended complaint ("complaint") alleged that as the Bank's loans to Jerder soured, the Bank, Farber (its chairman, chief executive officer, and controlling shareholder), and Gelman (its executive vice president) conspired to offset Flushing's anticipated losses by causing the Bank to make loans to Durante at usurious rates of interest.

    The complaint contained six counts (1-6) asserting federal claims and eleven counts (7-17) asserting state law claims. The federal law claims included the assertions that various actions by the defendants constituted the collection of unlawful debts, in violation of RICO, 18 U.S.C. Secs. 1962(a), (c), and (d) (counts 1, 3, and 5); that defendants caused Flushing to charge unlawful rates of interest on the loans, in violation of 12 U.S.C. Sec. 85, and to falsify its records and its reports to regulatory agencies, in violation of 12 U.S.C. Sec. 161 and 18 U.S.C. Secs. 1005 and 1014 (1982) (counts 2 and 4); and that in mailing monthly bank statements and a letter to Durante, defendants repeatedly violated the mail fraud statute, 18 U.S.C. Sec. 1341 (1982), and thereby engaged in a pattern of racketeering activity, in violation of RICO, 18 U.S.C. Secs. 1962(a), (c), and (d) (count 6).

  2. The Pretrial Rulings

    Prior to trial, defendants moved to dismiss the six federal counts. They contended that counts 1, 3, and 5 were barred by the one-year statute of limitations found in N.Y.Civ.Prac. Law ("CPLR") Sec. 215(6) (McKinney 1972 & Supp. 1983-1984) and

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    that counts 2 and 4 either were barred by the two-year statute of limitations provided by 12 U.S.C. Sec. 86 or were brought under provisions that gave Durante no standing to sue. They contended that count 6 failed to state a claim upon which relief may be granted under RICO because the alleged mailings were not for the purpose of furthering the alleged scheme and hence did not violate the mail fraud statute, and therefore count 6 did not allege valid predicate acts upon which liability for "racketeering activity" could be premised. The district court granted the motions to dismiss as to counts 1 through 5, but denied the motion as to count 6.

    In a memorandum and order dated September 27, 1983, reported at 571 F.Supp. 489 (E.D.N.Y.1983), the court upheld the defendants' statute of limitations defenses and deferred decision on the issue of standing. With regard to RICO counts 1, 3, and 5, which asserted that defendants had engaged in the collection of unlawful debts, the court noted that RICO itself contains no statute of limitations provisions, and it therefore sought the most appropriate state statute of limitations. On the premise that an action based on the collection of an unlawful debt was most like a state law action for usury, the court concluded that the appropriate statute of limitations was that found in CPLR Sec. 215(6), which provides that actions to recover any overcharge of interest or to enforce a penalty for such an overcharge must be commenced within one year of the accrual of the cause of action. Since suit had been commenced some 2 1/2 years after the last alleged interest overpayment was made, the court found counts 1, 3, and 5 barred.

    The court rejected defendants' contention that count 6 of the complaint failed to state a claim under RICO. It ruled that the matter of whether or not the mailings of bank statements and letters were "for the purpose of executing" the alleged scheme was a question of fact that could not be decided on a motion for summary judgment.

    As to counts 2 and 4, the court held that the portions of those counts that claimed that Durante had been charged an unlawful rate of interest in violation of 12 U.S.C. Sec. 85 were analogous to a claim to recover damages arising out of the payment of usurious interest, and it therefore applied the one-year statute of limitations found in Sec. 215(6). As to the portions of counts 2 and 4 that asserted that defendants' falsification of records and reports violated 12 U.S.C. Sec. 161 and 18 U.S.C. Secs. 1005 and 1014, the court deferred its ruling on defendants' contention that Durante had no standing to complain of such acts, observing that the papers before it did not indicate that there was any causal connection between the alleged falsifications and the injury complained of. The court stated that it would rule on the motion to dismiss these claims after Durante had made an offer of proof as to causation.

    On October 3, 1983, just prior to the start of trial, the court held a hearing to permit Durante to make its offer of proof. Finding the offer insufficient, the court dismissed the remainder of counts 2 and 4. In addition, the court dismissed counts 10, 11, and 13 as state law usury claims barred by the statute of limitations, CPLR Sec. 215(6).

  3. Trial, the Directed Verdicts, and Judgment NOV

    The parties proceeded to trial on the remaining counts of the complaint. At the close of the evidence, the court directed a verdict for the defendants on counts 7 (conspiracy), 12 (duress), 14 (breach of fiduciary duty), 15 (negligence), 16 (breach of contract), and 17 (negligent misrepresentation). The only counts submitted to the jury were counts 6 (RICO racketeering), 8 (fraud by Farber), and 9 (fraud by the Bank).

    The jury, after deliberating for two days, returned a verdict in favor of the defendants on count 6, a verdict in favor of Farber on count 8, and a verdict of $175,000 in favor of Durante against the Bank on count 9. Flushing moved for judgment notwithstanding the verdict against it or

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    for a new trial. By a memorandum and order dated January 17, 1984, the court set aside the verdict on the ground that it was unsupportable in light of the jury's conclusion that Durante had failed to prove fraud on the part of Farber. The court declined to order a new trial, and judgment was entered in favor of defendants, dismissing the complaint in its entirety.

  4. Issues on Appeal

    On this appeal, Durante contends principally (1) that the court applied the wrong statutes of limitations in dismissing the RICO claims asserted in counts 1, 3, and 5 of the complaint and the banking claims under 12 U.S.C. Sec. 93 asserted in counts 2 and 4; (2) that the court erred in dismissing the remainder of counts 2 and 4 for lack of causation; (3) that the jury's verdict against the Bank on count 9 was not inconsistent with its verdict in favor of Farber on count 8, but that if there was an inconsistency, it did not warrant entry of judgment notwithstanding the verdict ("judgment NOV") but only the granting of a new trial; and (4) that there was sufficient evidence supporting counts 7, 12, 16, and 17 to require their submission to the jury. In addition, Durante asserts various claims of error in the court's evidentiary rulings and instructions to the jury. It asks that we remand for a new trial of all counts except counts 10, 11, and 13, or alternatively that we reinstate the verdict against the Bank on count 9.

    We find merit only in the contention that the court applied the wrong statute of limitations to the RICO claims asserted in counts 1, 3, and 5. Accordingly, the judgment dismissing those counts is vacated and the matter is remanded for further proceedings as set forth below.

    II. THE BANKING LAW CLAIMS

    In counts 2 and 4, Durante...

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