Nola Electric Co. v. Reilly

• Decision Date: 29 September 1949
• Citation: 93 F. Supp. 164
• Parties: NOLA ELECTRIC CO., Inc. v. REILLY.
• Court: U.S. District Court — Southern District of New York

93 F. Supp. 164

NOLA ELECTRIC CO., Inc. v. REILLY.

United States District Court S. D. New York.

April 26, 1948.

On Motion for Reargument September 29, 1949.

COPYRIGHT MATERIAL OMITTED

Weil, Gotshal & Manges, New York City, for plaintiff.

William J. Mahon, New York City, for defendant. Matthias F. Correa, New York City, of counsel.

RYAN, District Judge.

Defendant, prior to answer, moves to dismiss the amended complaint upon the grounds that the claim pleaded is barred by the statute of limitations and that it fails to state a claim upon which relief can be granted. Fed.Rules Civ.Proc., 12(b), 28 U.S.C.A.

The original complaint was filed on December 24, 1947 and was served upon defendant on January 20, 1948. The amended complaint was served on February 11, 1948.

Here, Nola Electric Co., Inc., a Louisiana corporation, sues John D. Reilly, a resident of this district, seeking judgment in the sum of $300,400.

Defendant, on this motion, urges that "the cause of action alleged in the amended complaint is barred by the three year statute of limitations," New York Civil Practice Act, § 49(7), "if it can be related back to the original complaint and by the six year statute if it cannot." New York Civil Practice Act, § 48(1).

The original complaint contained the following allegations:

On May 5, 1934, Monte E. Hart was president and majority stockholder of plaintiff corporation; defendant, Reilly was president of Todd Shipyards Corporation. Hart and Reilly were then and "for many years prior" "close personal friends." Defendant on said date "at request of plaintiff, purchased for the account of plaintiff 1700 shares of Todd Shipyards Corporation stock" and plaintiff paid defendant $46,671.21 for the stock so purchased. It was agreed at the time that the stock would be registered in the name of defendant "and would be so held until plaintiff should request the transfer and delivery of said stock to it, and that any dividends declared and paid upon said stock until such transfer and delivery to plaintiff would be held by defendant for the account of plaintiff." On January 16, 1942, plaintiff "duly demanded" that defendant "transfer and deliver said shares of stock and all of the accumulated dividends" and defendant refused so to do. The dividends are said to have amounted to $91,300 and the stock to have a market value of $209,100.

The claim as set forth in the original complaint was in conversion. It was alleged in paragraph "Tenth" that defendant "wrongfully and unlawfully converted to his own use and benefit said shares of stock and said accumulated dividends thereon." This claim in conversion was barred by the statute of limitations. N.Y.C.P.A. § 49(7).

The amended complaint is on a claim sounding not in tort, but in contract. The contract alleged is substantially on the same facts as those set forth in the original complaint, and there is only the additional allegation that the stock "would be held by defendant for the account of plaintiff." The breach of the contract alleged is also in substantially the same terms as that in the original complaint; but, there is added that the demand for the delivery of the stock and accumulated dividends paid thereon "in accordance with instructions then given by plaintiff to defendant" was made on January 16, 1942 "in accordance with the aforesaid agreement", and that "in breach and in violation of the aforesaid agreement" defendant failed and refused to deliver and account.

This action was begun with the filing of the complaint on December 24, 1947 and not with the service of it on defendant on January 20, 1948. Fed.Rules Civ.Proc. rule 3. The three year statute of limitations is not applicable, for the amended complaint pleads neither a conversion nor an implied contract arising out of a conversion. The theory of this action is now in contract — not in implied assumpsit — based upon a breach of the terms of an express agreement made on May 5, 1934. The breach alleged is the failure of defendant to deliver the stock and account for the accumulated dividends upon the demand alleged to have been made on January 16, 1942. Because there is here pleaded the breach of an express contract, Loughman v. Town of Pelham, 2 Cir., 1942, 126 F.2d 714 is not applicable. That this is so is indicated by what the court said there, 126 F.2d at page 719, "* * * The result may be different where there is a breach of an express contract to return upon demand property which has been converted by a bailee without the knowledge of the bailor. Ganley v. Troy City National Bank, 98 N.Y. 487."

The claim asserted in the amended complaint being in contract, the six year statute of limitations applies.

Plaintiff, having in the original complaint asserted a claim for conversion, is not now estopped from asserting, upon the same facts, a claim for a breach of the terms of an express contract. On this, Judge Cardozo wrote in Schenck v. State Line Telephone Co., 238 N.Y. 308, at page 311, 144 N.E. 592, 593, 35 A.L.R. 1149: "* * * An election of remedies presupposes a right to elect Henry v. Herrington, 193 N.Y. 218, 222, 86 N.E. 29, 20 L.R. A.,N.S., 249. It `is simply what its name imports; a choice, shown by an overt act, between two inconsistent rights, either of which may be asserted at the will of the chooser alone.' Bierce v. Hutchins, 205 U.S. 340, 346, 27 S.Ct. 524, 51 L.Ed. 828. If in truth there is but one remedy, and not a choice between two, a fruitless recourse to a remedy withheld does not bar recourse thereafter to the remedy allowed. As to this, there is nothing of uncertainty in the decisions in New York."

The amended complaint was not served until February 11, 1948, more than six years after the date of the alleged breach — on January 16, 1942 — of the express contract asserted. Unless the amended complaint can be related back to the original complaint it must be dismissed as barred by the statute of limitations.

Rule 15(c), Fed.R.Civ.P. provides: "* * * Whenever the claim or defense asserted in the amended pleading arose out of the conduct, transaction, or occurrence set forth or attempted to be set forth in the original pleading, the amendment relates back to the date of the original pleading."

A comparison of the allegations of the original complaint with those of the amended complaint shows no essential difference in the facts alleged. Both complaints seek recovery upon almost identical facts and upon the same contract. The theory upon which recovery is sought has been changed, but not the facts. The Supreme Court, prior to the amendment of the rules, in United States v. Memphis Cotton Oil Co., 288 U.S. 62, 53 S.Ct. 278, 281, 77 L.Ed. 619, quoted the holding of Mr. Justice Holmes in New York Central & H. R. R. Co. v. Kinney, 260 U.S. 340, 346, 43 S.Ct. 122, 67 L.Ed. 294, that, "* * * when a defendant has had notice from the beginning that the plaintiff sets up and is trying to enforce a claim against it because of specified conduct, the reasons for the statute of limitations do not exist, and we are of opinion that a liberal rule should be applied."

Judge Clark states of rule 15(c), supra (Clark on Code Pleading, 2d ed., 1947, 731): "* * * a change in legal theory only should not be considered the statement of a new cause. And unless there has been so great a change in the material operative facts that an entirely different fact situation is presented, the amendment should be allowed. This is the theory of the Federal Rules, which is reached through the device of relating back to the original complaint or defense any amendment stating a claim or defense arising out of the `conduct, transaction, or occurrence set forth or attempted to be set forth in the original pleading.'"

We conclude that the amended complaint does not state a new cause of action, Friederichsen v. Renard, 247 U.S. 207, 38 S.Ct. 450, 62 L.Ed. 1075, and that the amended complaint relates back to the date of the filing of the original complaint.

Defendant also urges that the period of limitations applicable to the claim pleaded must be computed, under § 15 of the New York Civil Practice Act, from May 15, 1934 — the date of the original transaction.

The worth of this contention is to be determined, of course, by considering the question of whether plaintiff's right to sue accrued on January 16, 1942 (the date of demand for delivery of the stock and payment of the accumulated dividends) or on May 5, 1934 (the date of the alleged agreement and contract).

Section 15 of the New York Civil Practice Act provides:

"Commencement of action where demand necessary. Where a right exists, but a demand is necessary to entitle a person to maintain an action, the time within which the action must be commenced must be computed from the time when the right to make the demand is complete except in one of the following cases:

"1. Where the right grows out of the receipt or detention of money or property by an agent, trustee, attorney, or other person acting in a fiduciary capacity, the time must be computed from the time when the person having the right to make the demand has actual knowledge of the facts upon which that right depends.

"2. Where there was a deposit of money not to be repaid at a fixed time but only upon a special demand, or delivery of personal property not to be returned specifically or in kind at a fixed time or upon a fixed contingency, the time must be computed from the demand."

The amended complaint alleges that the "stock would be held by defendant for the account of plaintiff * * * until plaintiff should request the transfer and delivery of said stock to it, and that any dividend declared and paid upon said stock until such transfer and delivery to plaintiff would be held by defendant for the account of plaintiff." Plaintiff is clearly within the second exception of section 15, supra. There is pleaded "a deposit of money not to be repaid at a fixed time but only upon a special demand" and "a...