Farkas v. Farkas

• Citation: 168 F.3d 638
• Decision Date: 23 February 1999
• Docket Number: D,No. 436,436
• Parties: Bruce FARKAS, as personal representative of the Estate of Ruth Farkas, Plaintiff-Appellee Cross-Appellant, Ruth Farkas, Plaintiff-Counter-Defendant, v. Arlene FARKAS, Defendant-Counter-Claimant-Appellant Cross-Appellee. ockets 98-7141(L), 98-7171(XAP).
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

Page 638

168 F.3d 638

Bruce FARKAS, as personal representative of the Estate of Ruth Farkas, Plaintiff-Appellee Cross-Appellant, Ruth Farkas, Plaintiff-Counter-Defendant, v. Arlene FARKAS, Defendant-Counter-Claimant-Appellant Cross-Appellee.

No. 436, Dockets 98-7141(L), 98-7171(XAP).

United States Court of Appeals, Second Circuit.

Argued Sept. 16, 1998.

Decided Feb. 23, 1999.

David Jaroslawicz, Jaroslawicz & Jaros, New York, N.Y., for Appellant.

Joseph Leshen, Philip Alba, P.C., West Islip, N.Y., for Appellee.

Before: CABRANES and POOLER, Circuit Judges, and TRAGER, District Judge. ^*

TRAGER, District Judge:

Plaintiff Ruth Farkas ("Ruth") originally brought this claim against defendant Arlene Farkas ("Arlene"), Ruth's estranged daughter-in-law, for conversion of a number of pieces of art which had resided for many years in the home of Arlene and Bruce, Ruth's son. Arlene then counterclaimed against Ruth for fraud and conversion of art, money, and other marital assets. Prior to trial, Ruth died. Following a jury verdict in which the jury found that Arlene had converted nothing, and that Ruth had converted art and other property worth $700,000, Bruce, as Ruth's representative, moved to set aside the verdict against her on the grounds that the suit had been brought after the expiration of the applicable statute of limitations and, in the alternative, that there was insufficient evidence as a matter of law to support the verdict.

The United States District Court for the Southern District of New York (Harold Baer, Jr., Judge ) held that Arlene's counterclaims were barred by the applicable New York statute of limitations and, accordingly, vacated that part of the jury's verdict which found Ruth liable for $700,000 worth of damages. See Farkas v. Farkas, No. 95 Civ. 8464, 1998 WL 3633 (S.D.N.Y. Jan.7, 1998). Arlene appeals from this decision. The district court also denied Ruth's motion for judgment as a matter of law or for a new trial on her conversion claims against Arlene. See Farkas v. Farkas, No. 95 Civ. 8464, 1998 WL 3595 (S.D.N.Y. Jan 7, 1998). Bruce, as Ruth's representative, cross-appeals from these decisions, and, in addition, seeks an affirmance on the alternate ground that Arlene's claims were insufficiently proven as a matter of law.

Background

(1)

Arlene Farkas was married to Bruce Farkas, the son of Ruth Farkas, in 1959. Sometime in 1990, after having lived together for thirty years, Bruce left Arlene. He had, by that time, entered into a bigamous marriage with Dolores D'Oca, with whom Bruce had had children, and to whom Bruce and his mother had given support for some period of time.

In 1992, Arlene commenced a divorce action against Bruce in New York Supreme Court. Bruce counterclaimed for divorce. In 1994, Ruth Farkas requested of Arlene that certain pieces of art be delivered to her from the home Arlene and Bruce had shared, and in which Arlene still lived. Ruth's position was that these works of art had been on loan to Bruce and Arlene, and Ruth now wanted them back. Arlene refused to give them up. Ruth then brought this action for conversion against Arlene in the Southern District of New York on the basis of diversity jurisdiction. Arlene responded that the works in question had been gifts from Ruth to the married couple over the course of their marriage; some of the artwork had been in the house for thirty years. Arlene also raised counterclaims against Ruth for fraud and conversion of marital assets, i.e., jewelry, artwork, and monies.

(2)

While Ruth's claim was a simple allegation of conversion of a number of pieces of art, Arlene's counterclaims for conversion and fraud were more complex. Arlene alleged in her first counterclaim that Ruth had entered into a "scheme" with Bruce to secrete Bruce's money in off-shore trusts and bank accounts; that Ruth had attempted to defraud Arlene by contriving to loan Bruce money which actually belonged to him; and, further, that Ruth had "funneled" marital assets to Bruce's second wife, Dolores D'Oca. Answer and Countercl. at pp 19, 20, 31, 35. The district court dismissed this claim of fraud as pleaded with insufficient particularity under Fed.R.Civ.P. 9. ¹ In her second counterclaim, Arlene re-alleged her previous claims, and further alleged that Ruth had "caused to be removed" a Dali painting, a Hassam painting, "and other valuable paintings and art" from the couple's apartment. Id. at p 34. In addition to the art listed in Arlene's counterclaim, her pre-trial order included claims for a Rodin sculpture, a home-equity loan, and a jeweled pin.

At trial, Arlene sought to establish Ruth's involvement in the following scheme: Ruth had given various pieces of art to the couple over the years; Bruce engineered the removal of the art from the marital home; Ruth and Bruce then arranged for the art to be sold and for the proceeds to go to Ruth, who in turn then lent the money to Bruce. Evidence to prove that Ruth and Bruce engaged in this scheme included a direct correlation between the amounts of money received from the sale of individual pieces of art and the amounts of money Ruth "lent" to Bruce. In addition, there were indications, and the jury presumably believed, that the documents produced by Ruth and Bruce to evidence the alleged loans of money and art had been created in anticipation of litigation. Moreover, at approximately the same time as a note for the alleged loans totaling $300,000 was executed, Ruth made a large gift of money for Bruce's benefit (over two million dollars) from her own resources. Finally, there were direct conflicts between Ruth's and Bruce's accounts of events. ²

The jury found that Ruth had participated in the conversion of the artworks by Dali, Hassam, and Rodin that she had previously given her son and daughter-in-law, as well as $400,000 from the home-equity loan. The jury did not find that Ruth had converted the disputed jeweled pin, and except for finding that the money from the home-equity loan had been converted in 1990, the jury, although requested to determine on what date the art had been converted, was unable to do so. Finally, the jury found that Arlene had not converted five pieces of art which Ruth had accused her of converting.

After the jury's verdict, as had been previously agreed to by the district court and the parties, the question whether or not the claims had been brought within the three year statute of limitations for conversion was put before the district court. The district court was also apparently left with the question whether or not equitable estoppel would bar Ruth's affirmative defense (to Arlene's counterclaims) of the statute of limitations. ³ In the end, the district court determined that Arlene had not presented sufficient evidence to sustain equitable estoppel as a bar to the statute of limitations, that the conversions had occurred, at the latest, in 1990, and that thus, the counterclaims, brought in 1995, were barred by the three year statute of limitations. Because of these findings of fact and legal conclusions, the district court did not find it necessary to discuss that portion of Ruth's motion which sought the setting aside of the jury's verdict as a matter of law (Fed.R.Civ.P. 50) on the ground that there was insufficient evidence on which to base a recovery.

(3)

Both parties have appealed on various grounds. Because we find that the district court misapprehended the standard for equitable estoppel under New York law, we remand the issue of estoppel back to the district court for further consideration under the correct standard. In so doing, while we find it unnecessary to address all of the numerous issues raised by Ruth and Arlene, we do discuss briefly Ruth's motion for judgment as a matter of law regarding the home-equity loan and two of the district court's evidentiary rulings.

Discussion

(1)

The district court set out a standard for asserting equitable estoppel more restrictive than the actual test under New York law. Because we find that there was more than ample evidence that Arlene could have met the proper standard had it been applied, we reverse the district court's vacatur of the jury verdict and remand for further proceedings employing the appropriate legal standard.

When addressing the equitable estoppel issue, the district court held:

Defendant has not alleged, nor produced evidence in support of the contention, that she was fraudulently precluded from filing suit. All defendant alleges is that "[t]hese facts did not come out until pre-trial testimony was given in the matrimonial case, which was less than three years from the date the counterclaims were issued." This allegation goes to the discovery of the relevant facts, not to any affirmative cover-ups by plaintiff. Defendant has failed to meet her burden and equitable estoppel is inappropriate here.

Farkas, 1998 WL 3633, at * 2 (citations omitted). The district court derived its standard for estopping a statute of limitations defense from two cases: General Stencils, Inc. v. Chiappa, 18 N.Y.2d 125, 127-128, 272 N.Y.S.2d 337, 339, 219 N.E.2d 169 (1966), and Smith v. Cutson, 188 A.D.2d 1034, 591 N.Y.S.2d 674, 675 (4th Dept.1992). See Farkas, 1998 WL 3633, at * 2. We do not agree that either case would forestall an estoppel in this case. If anything, the cases support Arlene's position.

In the Chiappa case, an employer brought a suit against his head bookkeeper alleging that the bookkeeper had stolen over $30,000 out of petty cash over approximately a nine-year period and had used his position to conceal his theft. The defendant in that case raised the statute of limitations for conversion as a defense, claiming that it barred a remedy for those conversions which had occurred more than three years before. The New York Court of Appeals ordered a new trial, holding that based on the defendant's concealment of the theft, equitable estoppel could bar defendant from relying on the statute of...