853 F.2d 710 (9th Cir. 1988), 87-2297, Bulgo v. Munoz

Docket Nº:87-2297, 87-2646.
Citation:853 F.2d 710
Party Name:Blue Sky Joseph BULGO, Plaintiff-Appellant, v. Frank MUNOZ, also known as Frank Munoz Martin, individually; Land & Construction Company, Inc., a Hawaii corporation; Paine Webber, Inc., formerly Paine, Webber, Jackson & Curtis, Inc.; Alex Lau, an individual, Defendants- Appellees.
Case Date:August 02, 1988
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit
 
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853 F.2d 710 (9th Cir. 1988)

Blue Sky

Joseph BULGO, Plaintiff-Appellant,

v.

Frank MUNOZ, also known as Frank Munoz Martin, individually;

Land & Construction Company, Inc., a Hawaii corporation;

Paine Webber, Inc., formerly Paine, Webber, Jackson &

Curtis, Inc.; Alex Lau, an individual, Defendants- Appellees.

Nos. 87-2297, 87-2646.

United States Court of Appeals, Ninth Circuit

August 2, 1988

Argued and Submitted July 12, 1988.

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John H. Boone, San Francisco, Cal., James M. Dombroski, Honolulu, Hawaii, for plaintiff-appellant.

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Richard R. Clifton, Cades Schutte Fleming & Wright, Paul A. Lynch, Case & Lynch, Honolulu, Hawaii, for defendants-appellees.

Appeal from the United States District Court for the District of Hawaii.

Before BROWNING, SNEED, and TROTT, Circuit Judges.

SNEED, Circuit Judge:

Joseph Bulgo's second amended complaint set forth six claims of misconduct pertaining to a securities transaction against Frank Munoz (Munoz), Land and Construction Co. (L & C), PaineWebber, Inc. (PaineWebber) and Alex Lau (Lau). Numerous rulings were made by the district court and certain special verdicts were returned by the jury. The result is that Bulgo's claims were rejected for various reasons and by different means. We affirm in all respects.

I.

FACTS AND PROCEEDINGS BELOW

Bulgo's six claims were against two pairs of defendants-appellees. One pair consists of Munoz and his corporation, L & C. The second pair consists of PaineWebber and its former employee Lau.

Bulgo and Munoz have a long-standing business and personal relationship. Munoz is president of L & C which maintained a securities trading margin account with PaineWebber that, in the manner of such accounts, permitted the purchase of stock on credit. Munoz offered Bulgo the use of the margin account for Bulgo's securities transactions.

Defendant Lau was PaineWebber's broker in charge of the L & C account. On December 1, 1982, Bulgo placed an order with Lau on the L & C margin account for the purchase of 3000 shares of Mattel stock. On December 9, 1982, Bulgo gave L & C a check for $50,000.00 toward the purchase of the stock, and L & C paid PaineWebber $50,000.00.

The value of the Mattel stock dropped by nearly fifty percent within days of the purchase. Bulgo refused to satisfy the balance of the margin account when billed by L & C on March 21, 1983. Bulgo refused collection attempts by L & C for the balance. L & C ordered the stock sold on May 1, 1984 and billed Bulgo for the balance owed, $26,500.01.

Bulgo contends that he was the victim of a scheme, under which he placed a order for Mattel stock on November 19, 1982 with Lau who then failed to execute the order. Bulgo asserts Munoz thereafter placed an order for the 3,000 shares of Mattel stock on December 1, 1982 with the intention of capturing the profits from any appreciation of the stock. According to Bulgo, Munoz and Lau defrauded Bulgo of the $50,000 in order to replenish the equity in L & C's margin account. Bulgo asserts that he did not even know that he had placed a margin order until he received the March 21, 1983 bill for the balance of the margin purchase. Bulgo contends that after receiving the bill, he contacted another PaineWebber employee, Elliott Luke, who told Bulgo that the account had been transferred to another brokerage house and that Bulgo should let the stock rise in price. Bulgo asserts that he did not understand that he had been the victim of a scheme until March 1985.

Bulgo's first two claims, set forth in his second amended complaint, alleged the defendants made fraudulent misrepresentations to Bulgo to induce him to buy the stock in violation of, first, federal securities law and, second, common law. The third claim alleged that defendants made negligent misrepresentations to plaintiff. The fourth alleged defendants breached fiduciary duties they owed the plaintiff. The fifth alleged the defendants' conduct violated Hawaii's state securities statute (Haw.Rev.Stat. Sec. 485-25) and Hawaii's unfair trade practices act (Haw.Rev.Stat. Sec. 480-2). The sixth claim alleged that the defendants converted plaintiff's $50,000 to their own use and benefit.

Munoz and L & C brought cross-claims against PaineWebber and Lau who, in turn,

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counterclaimed against Bulgo for contribution and cross-claimed against Munoz and L & C for contribution and indemnification. Munoz and L & C counterclaimed against Bulgo seeking recovery of the $26,500.01 balance from the margin purchase, plus costs and expenses.

On March 28, 1986, the district court dismissed Bulgo's unfair trade practices claim (Sec. 480-2) against PaineWebber on the ground that the statute does not apply to securities transactions. The district court at that point, however, refused to dismiss PaineWebber's counterclaim against Bulgo for contribution.

After denying summary judgment motions by both parties, a jury trial began on February 3, 1987. During the trial's course, the district court granted several directed verdicts, four of which Bulgo appeals. First, the district court granted a directed verdict against Bulgo's claim against Munoz and L & C under Hawaii's unfair trade practices act (Sec. 480-2). Next, the district court directed a verdict against Bulgo's claim under the Hawaii state securities statute (Sec. 485-25), because of a two-year statute of limitations period. Third, the district court directed a verdict against Bulgo's claims alleging fraud by Munoz and L & C. Fourth, the district court directed a verdict against Bulgo's claims for punitive damages against PaineWebber.

Bulgo's remaining claims (certain of those against PaineWebber and Lau) were submitted to the jury which, in a special verdict, found in favor of the defendants on all claims. The jury also found in favor of L & C on its counterclaim against Bulgo for the balance of the margin purchase. The resulting judgment entered on March 23, 1987 provided for recovery of that sum from Bulgo, and dismissed the PaineWebber counterclaim for contribution as moot.

The district court subsequently denied Bulgo's motions for a judgment notwithstanding the verdict and for a new trial. Bulgo appeals each of these rulings by the district court and argues that improper jury instructions on comparative responsibility and conversion were given. 1 Bulgo also appeals the grant of...

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