Chaiken v. Eldon Emmor & Co., Inc.

• Decision Date: 10 August 1992
• Docket Number: No. 37A03-9102-CV-0032,37A03-9102-CV-0032
• Citation: 597 N.E.2d 337
• Parties: Irwin CHAIKEN and Ravinder Chopra, Appellants-Defendants, v. ELDON EMMOR & COMPANY, INC., Appellee-Plaintiff.
• Court: Indiana Appellate Court

Page 337

597 N.E.2d 337

Irwin CHAIKEN and Ravinder Chopra, Appellants-Defendants, v. ELDON EMMOR & COMPANY, INC., Appellee-Plaintiff.

No. 37A03-9102-CV-0032.

Court of Appeals of Indiana Third District.

Aug. 10, 1992.

Wanda E. Jones, Terrence M. Rubino & Associates, Munster, William H. Tobin, Ruman, Clements & Tobin, Hammond, for appellants-defendants.

Jerry A. Huelat, Rowe, Foley & Huelat, South Bend, for appellee-plaintiff.

HOFFMAN, Judge.

Appellants-defendants Irwin Chaiken and Ravinder Chopra appeal a jury verdict which awarded appellee-plaintiff Eldon Emmor & Company, Inc. (Eldon) monetary damages in the sum of $18,675.00 and punitive damages in the sum of $80,000.00. Eldon presents a cross-appeal based upon the trial court's determination that Chaiken and Chopra should be allowed to setoff the compensatory damages award due to Eldon's recovery from a non-party.

The evidence relevant to the appeal demonstrates that Eldon is a stock brokerage firm for which Chopra was employed as an account representative commencing in June 1980. Chaiken was a client of Eldon. Chaiken's account was ministered by Eldon's president and chief executive officer, Bill Bransky. In the latter portion of 1980, Bransky transferred Chaiken's account to Chopra to allow Chopra to build his clientele.

Pursuant to securities regulations, Eldon acted as an introducing firm. Eldon was required to utilize a correspondent broker to purchase stock. Also, Eldon was not allowed to hold stock certificates. Eldon forwarded its clients' certificates to the correspondent broker. In May 1981, Eldon changed to a different correspondent broker, Prudential-Bache (Bache). After the change, numerous errors occurred within Eldon's clients' accounts.

As Bransky became aware that errors were occurring, he and his former partner began working extended hours, seven days per week, in an attempt to identify the mistakes. Bransky also instructed the Eldon account representatives to check for errors. On October 1, 1981, Bransky hired Tom Dunleavy as controller. Dunleavy, who had been employed by the National Association of Security Dealers (NASD), began working 16 hours per day, seven days per week. Because mistakes continued to occur even after the initial conversion to Bache, the problem-solving task was further complicated.

In June 1981, 900 shares of National Semi-Conductor stock which had been purchased by an Eldon customer, Barry Barton, and Barton's mother, were mistakenly transferred into Chaiken's account. Chaiken had never purchased any Semi-Conductor stock.

Sometime between October and December 1981, Chopra discovered the mistake in Chaiken's account. Then, between January and April 1982, Chopra told Dunleavy that some of Chopra's customers had mistakenly received stock during the transfer. Chopra stated that because he considered the extra stock "goodies," he would not divulge the customers' names.

After reporting the discussion to Bransky, Dunleavy commenced a thorough search of Chopra's accounts which consumed approximately two to four weeks of Dunleavy's time. Bransky questioned Chopra about the errors. Chopra stated that he had no knowledge of mistaken transfers. When Dunleavy's intense investigation failed to reveal any errors, Dunleavy told Bransky that he believed the accounts were in order. Bransky concluded that Chopra's comments to Dunleavy were made in jest.

In May 1982, Chopra left Eldon to open his own brokerage firm. Chaiken transferred his account from Eldon to Chopra's firm. At the time the transfer was made, Chaiken's account contained only the 900 shares of Semi-Conductor which were mistakenly in his account and which were actually owned by the Bartons.

During a telephone conversation in June 1982, Chaiken informed Chopra that he wished to immediately sell the 900 shares of Semi-Conductor which he owned. Chaiken then met with Chopra in person. Chaiken gave Chopra an account statement listing Chaiken as the owner of the 900 shares of Semi-Conductor. Chopra prepared a transfer request which identified the stock to be transferred as the 900 shares of Semi-Conductor, allegedly owned by Chaiken. Chaiken signed an affirmation which certified that he was the owner of the stock.

Chopra forwarded the transfer request to his correspondent broker. Chopra's correspondent forwarded the request to Eldon's correspondent. Three days after Chopra's correspondent received the stock, Chaiken sold it for $18,225.00.

In May 1983, the Bartons sold options against the 900 shares of Semi-Conductor. When Bransky learned that Eldon had been given the stock certificates three years earlier, Bransky instituted a search for the missing stock. Bransky then discovered the mistake which had occurred in May 1981 during the transition to the new correspondent broker.

Bransky wrote to Chaiken and requested the return of the stock. Chaiken did not return the stock or its value. The Bartons were forced to cover the stock option sale with other funds.

Thereafter, the Bartons filed suit against Eldon in federal court in December 1983. Eldon filed third-party claims against Chaiken and Chopra. Then in March 1986, Eldon settled the claims initiated by the Bartons, whereupon federal court lost diversity jurisdiction. The federal court dismissed the third-party claims without prejudice in May 1986. In July 1986, Eldon filed the present action against Chaiken and Chopra in state court alleging fraud, conversion and negligence. Prior to trial, Eldon elected not to pursue the negligence count.

Prior to trial, Eldon requested a motion in limine regarding the settlement it accepted in a lawsuit filed against Bache in 1982. The lawsuit concerned the errors during the change in correspondent brokers, including the error in the Bartons' account. The trial court granted the motion.

After a trial by jury in October 1990, Eldon was awarded a verdict of $18,675.00 in compensatory damages and $80,000.00 in punitive damages. Thereafter, Chaiken and Chopra moved for relief from the judgment in November 1990. The motion for relief requested a setoff of the damages award based upon Eldon's July 1984 settlement of the lawsuit it initiated against Bache.

The trial court found that Eldon's claim against Chaiken and Chopra was paid in full and satisfied by the $80,000.00 settlement with Bache. The trial court awarded a setoff in the entire amount of the compensatory award but allowed the punitive damages award to stand. This appeal ensued.

As restated and consolidated, the issues raised by Chaiken and Chopra on appeal and by Eldon on cross-appeal are:

(1) whether the trial court erred in determining that Eldon's claims were not barred by the statute of limitations and that Eldon enjoyed standing to bring the lawsuit;

(2) whether the damages award is supported by sufficient evidence;

(3) whether eight of the final instructions contained misstatements of law and were unsupported by the evidence;

(4) whether Chaiken and Chopra are entitled to a new trial based upon improper closing argument by Eldon's counsel;

(5) whether the trial court erred in granting the motion to setoff compensatory damages based upon the settlement with Bache; and

(6) whether the trial court erred in sustaining the punitive damages award if the compensatory damages award was properly subject to setoff.

First, Chaiken and Chopra contend that Eldon's claims for conversion are barred by the two-year statute of limitations. Chaiken and Chopra dispute Eldon's assertion that the limitation period was extended in the present case based upon Chaiken's and Chopra's concealment of the action. The limitation period may be extended for a two-year period, commencing on the date of discovery, when an action is concealed. IND.CODE Sec. 34-1-2-9 (1982 Ed.). The statute provides:

"If any person liable to an action shall conceal the fact from the knowledge of the person entitled thereto, the action may be commenced at any time within the period of limitation after the discovery of the cause of action."

IND.CODE Sec. 34-1-2-9.

The type of concealment necessary for operation of the statute has long been defined:

" 'It must appear that some trick or artifice has been employed to prevent inquiry or elude investigation, or calculated to mislead and hinder the party entitled from obtaining information, by the use of ordinary diligence, that a right of action exists; or it must appear that the facts were misrepresented to or concealed from the party, by some positive acts or declarations, when inquiry was being made or information sought....' [Citation omitted]."

Basinger v. Sullivan (1989), Ind.App., 540 N.E.2d 91, 94.

As evidenced by his handwritten notation on Chaiken's account summary, Chopra discovered the mistake regarding the stock transfer sometime between October 1981 and December 1981. Chopra informed Dunleavy that he knew of mistakes but that he would not assist in tracing the errors because he considered them "goodies" for his clients. Despite aggressive efforts, Dunleavy did not locate the mistaken stock transfer. When Bransky confronted Chopra about the "goodies" remark, Chopra denied knowledge of errors and contended that the statement was made in jest. Because Dunleavy did not locate a mistake after at least two weeks of intense scrutiny of Chopra's accounts and because Chopra explained his comment and assured Bransky that he did not know of any errors, Dunleavy's and Bransky's attention was diverted from Chopra's accounts. Chopra's actions constituted affirmative steps to conceal the transfer error from Eldon.

Ultimately in June 1982, after Chopra discontinued his employment with Eldon and opened his own brokerage firm, Chaiken sought to sell the 900 shares of Semi-Conductor stock. With Chopra's assistance, Chaiken executed a document stating that he owned the stock. In an effort to discount evidence of his knowledge of the mistake, Chaiken contends that he did not notice the additional 900...