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Filner v. Shapiro

decided: December 29, 1980.

DORIS FILNER, PLAINTIFF-APPELLANT,
v.
SAMUEL SHAPIRO AND SOUTHWESTERN ALLOYS CORPORATION, DEFENDANTS-APPELLEES



Appeal from a judgment of the United States District Court for the Southern District of New York, following a nonjury trial before MacMahon, C.J., dismissing appellant's action for conversion, breach of contract, unjust enrichment and fraud. Reversed and remanded with instructions to enter judgment in favor of the plaintiff.

Before Timbers, Van Graafeiland and Newman, Circuit Judges.

Author: Van Graafeiland

On February 13, 1975, appellant Doris Filner entered into a letter agreement with Samuel Shapiro, president of Southwestern Alloys Corporation (Southwestern). The letter, dated February 9, 1975, was prepared on Shapiro's stationery and read as follows:

Dear Doris,

In accordance with our understanding, upon your wiring me funds in the amount of $200,000.00, I will act as your agent to purchase in your name a time certificate of deposit from the Southern Arizona Bank and Trust Company. This TCD shall thereafter be pledged to collateralize either a loan or letter of credit from the Southern Arizona Bank to Southwestern Alloys Corporation.

If the above is in keeping with your understanding, would you please signify by signing in the appropriate place below and transferring the $200,000.00 to my account number 328-4678 at the West Van Buren Branch of the Valley National Bank of Arizona in Phoenix.

Sincerely,

/s/ S. Shapiro

By February 13, appellant had transferred $200,000 to Shapiro's account.

On February 14, a Southwestern employee, under Shapiro's direction, used appellant's money to purchase a ninety-day time certificate of deposit from the Southern Arizona Bank and Trust Company (the Bank). However, on Shapiro's instructions the certificate was issued in Southwestern's name instead of Doris Filner's.

Southwestern borrowed $1,000,000 from the Bank and gave in return four promissory notes, three for $200,000 and one for $400,000. It pledged the certificate of deposit as collateral for note number 1196 which was for $200,000. Two of the other notes were secured by Southwestern's own money. The fourth was unsecured but guaranteed by Southwestern's chief operating officer, Ben Klimist.

On February 18, 1975, Southwestern loaned $1,000,000 to HRP Hotel Company (HRP), a limited partnership formed for the purpose of constructing a Hyatt Regency Hotel in Phoenix, Arizona. On May 13, 1975, when Southwestern's notes from the Bank became due, HRP was unable to repay its loan from Southwestern. Southwestern renewed its Bank notes until August 13, 1975, but found HRP in equally straitened circumstances on that day. Without waiting for the Bank to declare its notes in default, Southwestern paid them, using the proceeds of the certificate of deposit, which also had been renewed for ninety days, to pay note 1196. HRP never repaid Southwestern.*fn1

Appellant demanded the return of her money. When it was not forthcoming, she commenced this action, alleging conversion, breach of contract, unjust enrichment, and fraud. After a two-day trial, the district court, sitting without a jury, held that appellant had failed to prove that the loss of her money had resulted from appellees' wrongful use of it and that therefore appellant could not recover in either tort or contract. The court also held that appellees had substantially performed their contractual obligations. Finally, the district court held that appellant had abandoned the causes of action for fraud and unjust enrichment. It dismissed the complaint. We reverse.

Under the law of New York, which all parties cite as controlling, an agent who intermeddles with the property of his principal beyond the extent of his authority, with the intent to use or dispose of it so as to alter its condition or interfere with the owner's dominion, is guilty of conversion. Kittredge v. Grannis, 244 N.Y. 168, 176, 155 N.E. 88 (1926); Laverty v. Snethen, 68 N.Y. 522, 524 (1877); Fisher v. Title Guarantee and Trust Co., 262 App.Div. 293, 299, 28 N.Y.S.2d 410 (1941), aff'd, 287 N.Y. 275, 39 N.E.2d 237 (1942). Wrongful intent is unnecessary. All that the owner need show is that he has been deprived of his property by the defendant's unauthorized exercise of dominion and ...


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