Walling v. Holman
| Decision Date | 19 September 1988 |
| Docket Number | Nos. 1314,D,1315,s. 1314 |
| Citation | 858 F.2d 79 |
| Parties | L. Metcalfe WALLING, Appellee-Cross-Appellant, v. Richard A. HOLMAN, Mary Holman, Wall Street Reports and Intelligence Bulletin, Inc., Defendants, Richard A. Holman, Wall Street Reports and Intelligence Bulletin, Inc., Appellants-Cross-Appellees. L. Metcalfe WALLING, Appellant, v. Richard A. HOLMAN, Wall Street Reports and Intelligence Bulletin, Inc., Defendants, Mary Holman, Appellee. ockets 88-7073, 88-7101. |
| Court | U.S. Court of Appeals — Second Circuit |
Samuel N. Greenspoon, Grutman, Miller, Greenspoon & Hendler, New York City, for appellants-cross-appellees Wall Street Reports and Intelligence Bulletin, Inc.
Richard A. Holman, New York City, pro se.
Cletus P. Lyman, Lyman & Ash, Philadelphia, Pa., for appellee-cross-appellant Walling.
Myles C. Cunningham, New York City, for appellee Mary Holman.
Before OAKES, MESKILL and PIERCE, Circuit Judges.
Appellants Richard Holman and Wall Street Reports and Intelligence Bulletin, Inc. ("Wall Street Reports") appeal from a judgment entered by the United States District Court for the Southern District of New York, Charles M. Metzner, Judge, holding them liable for the loss of furniture and other furnishings from a rented home in Bedford, New York, and awarding L. Metcalfe Walling, the homeowner, damages in the amount of $45,837 plus interest.
Appellants' principal arguments are that the district court erred in allowing the deposition of a witness, Ida C. Bellotti, to be read at trial, and that the evidence was insufficient to support the jury's verdict. Appellants also argue that New York Real Property Law Sec. 235-b(1) (McKinney 1988) prohibits recovery of certain damages related to the residential property, that the district court committed error in not dismissing Walling's action as time-barred under New York's three-year statute of limitations, that the court improperly pierced the corporate veil in holding appellant Richard Holman personally liable, and that the court improperly dismissed appellants' counterclaim as abandoned. On cross-appeal, Walling argues that the district court erred in refusing to charge the jury on defendants' contractual liability and on punitive damages and in dismissing appellee Mary Holman from the suit.
As to the cross-appeal, we find that the district court should have given a jury instruction on contractual liability, but that the jury's verdict was not affected by this failure. On Richard Holman's and Wall Street Reports' appeal, we affirm the judgment below except for certain damages awarded, which we reverse and remand to the district court for recomputation.
In July 1971, while L. Metcalfe Walling was living abroad, his son rented his father's furnished house in Bedford, New York, to Wall Street Reports as a weekend residence for the corporation's 100% stockholder, Richard Holman. When the lease expired on September 4, 1972, an informal rental arrangement continued between the parties. Letters negotiating rent increases and other terms of occupancy were directed to Richard Holman personally, and bills relating to the property were paid from both Holman's corporate accounts (including that of another wholly owned corporation, Wall Street Transcripts) and his personal funds. In 1978 Holman married Mary Holman, who sometimes accompanied him to the Walling residence.
In October 1979 Walling's niece, with his consent, removed some furniture from the house and reported to her uncle that the furniture and a piano remaining in the house were damaged. Walling testified that in 1979, when he last visited the property, he noticed that although the house still contained some of his furniture and part of his collection of objet d'art, other pieces were missing. In 1982 Richard and Mary Holman moved out of the house, leaving it empty except for the damaged piano. The roof had leaked, damaging the parquet floors, and a pool filter had to be replaced.
L. Metcalfe Walling commenced this suit on April 10, 1984, seeking recovery of damages based upon at least two 1 distinct theories: the defendants' contractual obligation to leave the house and furnishings in good repair, and the defendants' conversion of the personal property. Judge Metzner instructed the jury to award damages for injury to the house and to personal property in the possession of the plaintiff's niece if it found that the defendants had breached the lease by failing to surrender
items in the same condition as they were received, less reasonable wear and tear. He instructed the jury to award damages for missing personal property if it found that conversion had occurred, but he refused to charge the jury on punitive damages or on contractual recovery for the missing items. The jury found for the plaintiff, awarding a total of $45,837 as follows:
DISCUSSION
Appellants have expended considerable energy attempting to persuade this court that a "fraud on the Court" caused the district court's admission of the deposition of a witness, Ida C. Bellotti, on the ground that she was unable to attend because of infirmity. Plainly there was no such fraud, for the district court was aware that her infirmity was disputed. Appellants' trial counsel, contesting admission of the deposition, claimed to be "reliably informed that she [Bellotti] was playing golf" the previous week. Bellotti, however, testified at her deposition, under oath and in the presence of appellants' counsel, as to the nature of her difficulties, and the district court based its ruling on this testimony. Finally, any "fraud" would have been exposed (and any possible prejudice avoided) when the appellants produced Bellotti in person as their witness. The trial judge was then in a position to observe Bellotti's physical condition and to determine whether sanctions, including striking the deposition from the record, were appropriate. We consider his decision to forego such sanctions dispositive.
Appellants are precluded from challenging the sufficiency of the evidence because they failed to move for a directed verdict at trial in accordance with Fed.R.Civ.P. 50(b). See Oliveras v. American Export Isbrandtsen Lines, Inc., 431 F.2d 814, 816-17 (2d Cir.1970). We also dispose summarily of appellants' argument that the district court erred in dismissing with prejudice appellants' counterclaim for money expended on repairs. The counterclaim did not appear in the pretrial order, nor was any request made for a jury charge on the claim. Thus, dismissal on the ground of abandonment was proper. See Schenck v. Bear, Stearns & Co., 583 F.2d 58, 60 (2d Cir.1978).
Next, appellant Richard Holman, noting that the original lease was signed by the corporate defendant, Wall Street Reports, challenges the district court's ruling that he could be held personally liable under the lease for damage to the property. We affirm the district court for two reasons. First, as Judge Fuld wrote in Walkovszky v. Carlton, 18 N.Y.2d 414, 418, 223 N.E.2d 6, 8, 276 N.Y.S.2d 585, 588 (1966), where "the corporation is a 'dummy' for its individual stockholders who are in reality carrying on the business in their personal capacities for purely personal rather than corporate ends," the stockholders may be held personally liable for corporate debts. See Brunswick Corp. v. Waxman, 459 F.Supp. 1222, 1230 (E.D.N.Y.1978), aff'd, 599 F.2d 34 (2d Cir.1979). Here, the use of the corporation to rent a residence for the sole stockholder's use cannot limit Holman's personal liability. Second, the evidence presented at trial showed that Holman personally negotiated extensions of the lease with Walling and supports Judge Metzner's implicit finding that Holman and Wall Street Reports were jointly liable beyond the term of the original lease.
We do not, however, affirm the entire award. Certain damages, namely those relating to the condition of the realty when defendants vacated the premises, as a matter of law are not recoverable by the landlord. New York Real Property Law Sec. 235-b(1) creates a warranty of habitability in "every written or oral lease or rental agreement for residential premises." This appears to cover--at a minimum--the water damage to the floors caused by a leaky roof. The New York Court of Appeals has interpreted Sec. 235-b as a legislative remedy "to compel ... landlord[s] to make necessary repairs or provide essential services." Park West Management Corp. v. Mitchell, 47 N.Y.2d 316, 325, 391 N.E.2d 1288, 1292, 418 N.Y.S.2d 310, 314, cert. denied, 444 U.S. 992, 100 S.Ct. 523, 62 L.Ed.2d 421 (1979). See also, e.g., Kachian v. Aronson, 123 Misc.2d 743, 746-47, 475 N.Y.S.2d 214, 218, (N.Y.C.Civ.Ct.1984) (). We reject appellee Walling's contention that the warranty is limited to conditions that endanger life, health, and safety, because the...
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