Federal Ins. Co. v. Fries

• Citation: 78 Misc.2d 805,355 N.Y.S.2d 741
• Parties: FEDERAL INSURANCE COMPANY v. Paul F. FRIES.
• Decision Date: 20 May 1974
• Court: New York City Court

Page 741

355 N.Y.S.2d 741

78 Misc.2d 805

FEDERAL INSURANCE COMPANY v. Paul F. FRIES.

Civil Court of the City of New York, New York County, Special Term.

May 20, 1974.

Hendler & Murray, New York City, for plaintiff.

James M. Montgomery, New York City, for defendant.

IRVING YOUNGER, Judge.

Several years ago, Herbert G. Fries died. A bank in Pennsylvania was his executor. The estate included various pieces of jewelry.

Defendant, a New York resident, was Mr. Fries' heir. On December 12, 1967, in Pennsylvania, the bank delivered to him five rings worth $3,200. Defendant sold them to a Pennsylvania jeweler five months later. He did not know that the bank had made a mistake. The rings were not part of Mr. Fries' estate; they were part of someone else's estate.

In August, 1969, the bank discovered its error and demanded that defendant return the rings. He did not. The bank thereupon applied to plaintiff, its surety company, to be made whole. Plaintiff paid the loss and took an assignment from the bank of the bank's claim against defendant. On March 22, 1971, plaintiff commenced this action, in which it seeks damages of $3,200 on account of defendant's conversion of the rings.

Each side now moves for summary judgment. The facts are conceded; the sole issue is whether the statute of limitations has run; and analysis starts with the cause of action.

I

Defendant did nothing consciously wrong. He accepted the rings and sold them without knowledge of the bank's error. We learn from the cases, however, that a converter need intend nothing evil. So long as he intends to deal with the property in a way which is in fact inconsistent with the plaintiff's right, he is a converter. Fouldes v. Willoughby, 8 M. & W. 540, 151 Eng.Rep. 1153 (1841); Allred v. Hinkley, 8 Utah 2d 73, 328 P.2d 726 (1958); Poggi v. Scott, 167 Cal. 372, 139 P. 815 (1914). See Restatement (Second), Torts, sec. 223, comment b.

Here, defendant intentionally took possession of the rings. The difficulty lies in the peculiar circumstance that he thought the bank was authorized to give him the rings, and so did the bank. Neither knew that defendant's possession of the rings was inconsistent with the bank's right. While there is no decision in point, analogy supplies the necessary authority. If a bona fide purchaser from a thief is liable in conversion to the thief's victim, Williams v. Merle, 11 Wend. 80 (N.Y.1831); Allred v. Hinkley, supra; Culp v. Signal Van & Storage, 142 Cal.App.2d Supp. 859, 298 P.2d 162 (1956), a bona fide recipient of property from one who has no power to transfer the property is also a converter. See Restatement (Second), Torts, sec. 229.

There are two views on the question when the conversion occurs. The majority rule is that the conversion is committed when the defendant takes possession of the property. Lovinger v. Hix Green Buick Co., 110 Ga.App. 698, 140 S.E.2d 83 (1964); McRae v. Bandy, 270 Ala. 12, 115 So.2d 479 (1959); Hovland v. Farmers Union Elevator Co., 67 N.D. 71, 269 N.W. 842 (1936); Hyde v. Noble, 13 N.H. 494 (1843); Restatement (Second), Torts, sec. 229, comment h. The minority rule is that the conversion is committed when the defendant fails to return the property on demand. Burckhalter v. Mitchell, 27 S.C. 240, 3 S.E. 225 (1887); Parker v. Middlebrook, 24 Conn. 207 (1855). Pennsylvania follows the majority rule. Barker v. Dinsmore, 72 Pa. 427 (1872). New York follows the minority rule. Gillet v. Roberts, 57 N.Y. 28 (1874).

Under Pennsylvania law, then, plaintiff's cause of action accrued on December 12, 1967, when defendant received the rings.

Under New York law, plaintiff's cause of action accrued in August, 1969, when defendant failed to respond to the bank's demand.

II

If 'accrual of the cause of action' be deemed procedural, the multi-state aspects of the case are irrelevant; the matter is automatically determined by the law of New York, the forum state. Restatement (Second), Conflict of Laws, sec. 122 et seq.; Leflar, American Conflicts Law 287--315 (1968). But if 'accrual of the cause of action' be deemed substantive, it is determined by the law of New York or of Pennsylvania, selected in accordance with New York's choice-of-law principles. Ibid.; Restatement (Second), Conflict of Laws, sec. 145.

The terms 'procedural' and 'substantive' are labels. Standing alone, they do not answer the question whether 'accrual of the cause of action' is procedural or substantive. Neither does any case. Still, by listing what has been held to be procedural--United States Mortgage and Trust Co. v. Ruggles, 258 N.Y. 32, 40, 179 N.E. 250, 252 (1932) (admissibility of evidence); Bank of China, Japan and Straits, Ltd. v. Morse, 168 N.Y. 458, 61 N.E. 774 (1901) (pleading); New York Life Insurance Co. v. Aitkin, 125 N.Y. 660, 26 N.E. 732 (1891) (form of action); Pope v. Terre Haute Car and Mfg. Co., 87 N.Y. 137 (1881) (service of process); Stoneman v. Erie Railway Co., 52 N.Y. 429 (1873) (capacity to sue); Wright v. Palmison, 237 App.Div. 22, 260 N.Y.S. 812 (2d Dep't 1932) (burden of proof); Harman v. City of Ft. Lauderdale, 134 Misc. 133, 234 N.Y.S. 196 (Sup.Ct., N.Y.Co.1929) (atachment); Colucci v. Lehigh Valley RR. Co., 121 Misc. 758, 202 N.Y.S. 717 (Sup.Ct., N.Y.Co.1923) (right to jury trial); Whittemore v. Adams, 2 Cow. 626 (N.Y.1824) (enforcement of judgment)--one finds a rule: matters dealing with the conduct of the litigation are procedural, and everything else substantive. See Pritchard v. Norton, 106 U.S. 124, 129, 1 S.Ct. 102, 27 L.Ed. 104 (1862) ('whatever relates merely to the remedy and constitutes part of the procedure is determined by the law of the forum'), quoted with approval in Franklin Sugar Refining Co. v. Lipowicz, 247 N.Y. 465, 469, 160 N.E. 916, 917 (1928). In this light, I hold that 'accrual of the cause of action' is properly characterized as substantive. The consequence is that it must be determined by the law of New York or of Pennsylvania, selected in accordance with New York's choice-of-law principles.

III

Before 1963, the New York choice-of-law principle for tort cases was Lex loci delictus--that is, although the forum was New York, the law applicable to the case was the law of the place of the tort. See Restatement (First), Conflict of Laws, sec. 384. That principle would have been useless here, for Pennsylvania law says that the tort occurred in Pennsylvania, where the rings were delivered to defendant; New York law says that it occurred in New York, where defendant failed to return them; and Lex loci delictus offers no basis for preferring one to the other.

In Babcock v. Jackson, 12 N.Y.2d 473, 240 N.Y.S.2d 743, 191 N.E.2d 279 (1963), New York discarded Lex loci delictus in favor of the 'center-of-gravity' or 'grouping-of-contacts' principle. Id. at 481, 240 N.Y.S.2d at 749, 191 N.E.2d at 283:

'The 'center of gravity' or 'grouping of contacts' doctrine adopted by this court in conflicts cases involving contracts impresses us as likewise affording the appropriate approach for accommodating the competing interests in tort cases with multi-State contacts. Justice, fairness and 'the best practical result' . . . may best be achieved by giving controlling effect to the law of the jurisdiction which, because of its relationship or contact with the occurrence or the parties has the greatest concern with the specific issue raised in the litigation.'

For applications of Babcock, see Dym v. Gordon, 16 N.Y.2d 120, 262 N.Y.S.2d 463, 209 N.E.2d 792 (1965); Macey v. Rozbicki, 18 N.Y.2d 289, 274 N.Y.S.2d 591, 221 N.E.2d 380 (1966); Farber v. Smolack, 20 N.Y.2d 198, 282 N.Y.S.2d 248, 229 N.E.2d 36 (1967); Miller v. Miller, 22 N.Y.2d 12, 290 N.Y.S.2d 734, 237 N.E.2d 877 (1968); Tooker v. Lopez, 24 N.Y.2d 569, 301 N.Y.S.2d 519, 249 N.E.2d 394 (1969); Neumeier v. Kuehner, 31 N.Y.2d 121, 335 N.Y.S.2d 64, 286 N.E.2d 454 (1972). Each of these was a personal injury or wrongful death action arising out of an accident. No New York case, so far as I have been able to discover, applies the grouping-of-contacts principle to a non- negligent tort such as conversion. But since the Court of Appeals has not intimated that its holding in Babcock is limited to negligence cases, the contacts must be grouped.

New York contacts. (1) Plaintiff is licensed to do business in New York. (2) Defendant is a New York resident. (3) Defendant failed to comply with the bank's demand for return of the rings in New York.

Pennsylvania contacts. (1) The bank is a Pennsylvania corporation. (2) It delivered the rings to defendant in Pennsylvania. (3) Defendant sold the rings to a Pennsylvania jeweler.

And where is the center of gravity? I hardly know, perhaps because I am trying to quantify the unquantifiable, see Judge Van Voorhis' dissent in Babcock v. Jackson, 12 N.Y.2d at 486, 240 N.Y.S.2d at 753, 191 N.E.2d at 286, or reasoning in a circle. See Ehrenzweig, Conflict of Laws 464 (1962). There is a further test. In Babcock and the subsequent cases, the Court of Appeals talks of social policy (but cf. Neumeier v. Kuehner, supra, seeming to revert to counting of specified types of contacts). Babcock v. Jackson, 12 N.Y.2d at 478, 240 N.Y.S.2d at 746, 191 N.E.2d at 281:

'(Lex loci delictus) has long since been discredited because it fails to take account of underlying policy considerations . . . More particularly, as applied to torts, the theory ignores the interest which jurisdictions other than that where the tort occurred may have in the resolution of particular issues.'

So we ask whether Pennsylvania's interest in having its law applied to this controversy is greater than New York's? Is New York's greater than Pennsylvania's? Again, I do not know. Neither state, to my mind, has the slightest interest in whose law is applied to this controversy. The reason is that, by contrast with the guest statutes involved in Babcock, Dym, Macey, Tooker, and Neumeier, supra, the owner's liability statute involved in Farber, supra, or the...