Rutkin v. Reinfeld

• Decision Date: 25 January 1956
• Docket Number: Docket 23455.,No. 14,14
• Citation: 229 F.2d 248
• Parties: James RUTKIN, Plaintiff-Respondent, v. Joseph REINFELD, Samuel Bronfman and Allen Bronfman, individually, and as co-partners doing business under the style and name of Bronfman Interests and Browne-Vintners Co., Inc., Renfield Importers, Ltd., and Harold C. (Sonny) Levin, also known as Harold C. Renfield, Defendants-Appellants.
• Court: U.S. Court of Appeals — Second Circuit

229 F.2d 248 (1956)

James RUTKIN, Plaintiff-Respondent, v. Joseph REINFELD, Samuel Bronfman and Allen Bronfman, individually, and as co-partners doing business under the style and name of Bronfman Interests and Browne-Vintners Co., Inc., Renfield Importers, Ltd., and Harold C. (Sonny) Levin, also known as Harold C. Renfield, Defendants-Appellants.

No. 14, Docket 23455.

United States Court of Appeals Second Circuit.

Argued November 7, 1955.

Decided January 25, 1956.

Theodore Kiendl, New York City (Davis, Polk, Wardwell, Sunderland & Kiendl; William R. Meagher, New York City, of counsel, on the brief), for defendants-appellants Joseph Reinfeld, Renfield Importers, Ltd. and Harold C. (Sonny) Levin also known as Harold C. Renfield.

Lowell Wadmond, New York City (White & Case, Thomas Kiernan and William D. Conwell, New York City, of counsel, on the brief), for defendants-appellants Samuel Bronfman, Allen Bronfman and Browne-Vintners Co. Inc.

Maurice Edelbaum, New York City (Clarence Fried, Edwin F. Russo and Edward Halle, New York City, of counsel, on the brief), for plaintiff-respondent.

Before CLARK, Chief Judge, and LUMBARD and WATERMAN, Circuit Judges.

LUMBARD, Circuit Judge.

From a judgment against them on a jury verdict for $77,200, which with interest from January 15, 1947 totals $115,116.69, the four individual and two corporate defendants appeal on numerous grounds. We consider two of those grounds sufficient to require reversal of the judgment — namely, the failure to bring suit within the applicable limitation period and the fact that the plaintiff's claims for damages arise from alleged fraud concerning the fruits of partnerships conducted in violation of law.

The jury having found that the defendants had conspired to the plaintiff's injury as stated in the pleadings, a summary of the pleadings sufficiently poses the questions which are determinative of this appeal. Such evidence as is material to the two grounds of our decision will be further stated.

The 1948 Complaint and the 1951 Supplemental Complaint

On July 1, 1948 Rutkin filed his complaint invoking federal jurisdiction because of citizenship diverse from the defendants therein named, Joseph Reinfeld; Samuel, Abraham, Harry and Allen Bronfman; and Distillers Corporation Seagrams, Ltd. The complaint made these allegations: Rutkin and Reinfeld had been partners prior to May 1931 and had equal shares in a plan to purchase and operate L. L. & B. Distillers, Ltd., a distillery in Ontario, Canada. Reinfeld commenced negotiations with L. L. & B. to finance and purchase a controlling interest and on July 2, 1931 he agreed for the partnership to invest $500,000, including the purchase of a first and second mortgage on the distillery. He purchased the first mortgage and made payments on the second mortgage. On the next day Reinfeld conspired with Samuel and Allen Bronfman to enrich himself and them and to deprive Rutkin of his share of the profits. To induce Reinfeld to break his agreement with L. L. & B. the Bronfmans gave Reinfeld stock of Distillers-Seagrams and "other emoluments" and all agreed to keep this secret from Rutkin. This was of benefit to the Bronfmans because L. L. & B. was in competition with the Bronfman company, Distillers-Seagrams. The distillery was sold on the second mortgage foreclosure; the stock which Reinfeld had acquired was sold to a Bronfman nominee; and Reinfeld was to be indemnified against any loss or expense.

Reinfeld advised Rutkin that the partnership interest in L. L. & B. had been sold to the Bronfmans for the amount the partnership had paid for it and that it had been done in good faith. Reinfeld thus falsely represented the situation to Rutkin to prevent his inquiry so that the fraud was not discovered until May 27, 1946. Rutkin, never having received his share of the benefits from Reinfeld, asked $22,000,000 damages.

The supplemental complaint, filed November 13, 1951, joined Browne-Vintners Co., Inc., Renfield Importers, Ltd., and Harold C. Levin, also known as Harold C. Renfield, as additional defendants. It alleged that: Rutkin and Reinfeld as partners owned a majority interest in Reinfeld's name and in the names of dummies in the Browne-Vintners Co., Inc., a New York corporation in existence from 1933 until 1940 (referred to as Browne-Vintners Old). The defendants agreed in December 1940 that Reinfeld would cause the business and assets of Browne-Vintners Old, including the Cointreau, Piper Heidsieck and Remy Martin agencies which it held, to be sold to Distillers-Seagrams for an inadequate price, and the proceeds of the sale were distributed to the stockholders of Browne-Vintners. Reinfeld received secret emoluments which the defendants fraudulently concealed from the plaintiff. Rutkin did not discover until after July 1, 1948 that the Cointreau, Piper Heidsieck and Remy Martin agencies had been transferred to Renfield Importers, Ltd. of New York which was controlled by Reinfeld and defendant Harold C. Renfield, and Rutkin did not receive his share of these benefits. This transfer of the agencies was without Rutkin's knowledge and it was part of the consideration to Reinfeld for his 1931 double-dealing on the L. L. & B. transaction. Reinfeld concealed from Rutkin the extent of Rutkin's interest in Browne-Vintners Old and fraudulently caused Rutkin to execute a general release as a result of which certain payments were made to Rutkin.

Further allegations that the defendants caused Rutkin's conviction for violation of the federal income tax laws, Rutkin v. United States, 1952, 343 U.S. 130, 72 S.Ct. 571, 96 L.Ed. 833 are not pertinent here as they were dismissed by the trial judge.

The defendants' answers, in addition to general denials, pleaded affirmative defenses of the limitations statutes of New York and Canada, an assignment to Reinfeld of Rutkin's interest in Browne-Vintners Old and a release executed by Rutkin in 1943.

Upon the argument of motions to dismiss at the end of plaintiff's proof the defendants also urged the illegality of the L. L. & B. and the Browne-Vintners Old transactions, and this was again urged at the conclusion of all the evidence.

The trial judge, although he refused to submit to the jury special questions regarding the illegality of the L. L. & B. and the Browne-Vintners Old transactions as requested by counsel for the Bronfmans, did put to the jury special questions bearing upon the statutes of limitations defenses which the jury answered thus:

1. With respect to the L. L. & B. transaction:

(A) The claim arose December 15, 1931.

(B) Plaintiff became aware of the claim in May 1946.

(C) Plaintiff should have become aware of the claim in the exercise of reasonable care between December 1931 and December 1932.

2. With respect to the Browne-Vintners Old transaction:

(A) The claim arose December 20, 1940.

(B) Plaintiff did not become aware of the claim until January 1948.

(C) Plaintiff should have become aware of the claim in the exercise of reasonable care some time in 1947.

The trial judge, having reserved decision on the motions to dismiss made at the close of plaintiff's case, and later at the close of all the evidence, gave further consideration to those motions together with timely motions to set aside the verdict and enter judgment in favor of the defendants. He denied all the motions in an opinion reported at 122 F. Supp. 265.

The Application of the Statutes of Limitation

Since jurisdiction in this case is based on diversity of citizenship we must apply the New York law in determining which statute of limitations to apply. Klaxon Company v. Stentor Electric Manufacturing Co., 1941, 313 U.S. 487. Section 13 of the New York Civil Practice Act provides that where a cause of action accrues outside New York and the plaintiff is not a resident of New York, the claim cannot be asserted if barred by the limitations statute of either New York or the place where the action arose. Although it appears here that the L. L. & B. claim would be barred by a Canadian statute shorter than that of New York, we need not rule on that point since both claims asserted by the plaintiff are barred by the applicable New York statutes.

The trial judge applied the New York statute of six years, New York Civil Practice Act, § 48, subd. 5, to what he described as the jury's finding of a single conspiracy which continued from 1931 to 1947 and held that the statute ran from some time in 1947, the time when the jury found that the plaintiff in the exercise of reasonable care should have been aware of the Browne-Vintners Old transaction. The judge applied the rule of criminal conspiracy where the statute runs from the last overt act. We cannot agree with this application of the law to the facts of this case.

Section 11 of the New York Civil Practice Act provides that periods of limitation must be computed from "the time of the accruing of the right to relief by action, special proceeding, defense or otherwise * * *" The damage for which recovery may be had in a civil action is not the conspiracy itself but the injury to the plaintiff produced by specific overt acts. Nalle v. Oyster, 1913, 230 U.S. 165, 182, 33 S.Ct. 1043, 57 L.Ed. 1439; Lewis Invisible Stitch Mach. Co. v. Columbia Blindstitch Mach. Mfg. Corp., 2 Cir., 1936, 80 F.2d 862, 864. The charge of conspiracy in a civil action is merely the string whereby the plaintiff seeks to tie together those who, acting in concert, may be held responsible in damages for any overt act or acts. The person harmed by the conspiracy may bring suit as soon as the damage to him is inflicted; he obviously need not wait until the termination of the conspiracy which caused it. It is at the time of injury that the "right to relief by action" arises and the statute therefore begins to run at the moment such injury occurs. Momand v. Universal Film Exchanges, 1 Cir., 1948, 172 F.2d 37, 49, certiorari denied, 1949, 336 U.S. 967, 69 S.Ct. 939, 93...