Court Opinion

ID: 5838071
Source: CourtListenerOpinion
Date Created: 2022-01-12 22:44:38.679866+00
Date Added: 2024-06-11T08:43:40.558378
License: Public Domain

OPINION OF THE COURT
Lynch, J.
At the close of the trial of this customer’s suit against his brokerage firm, the court charged the jury on four causes of action, breach of contract, negligence, fraud, and churning (inordinate trading to generate broker’s commissions), but it declined the defendant’s request for submission of a special verdict form to the jury. A general verdict was rendered awarding plaintiff $45,000 in compensatory damages and $30,-000 in punitive damages. Upon inquiry, the foreman stated that the jury had found against the defendant on the negligence and churning claims, but had found no fraud or breach of contract.
The plaintiff, a college graduate and holder of a master’s degree, is a resident of New Orleans and has most recently been employed as a merchant seaman. About 20 years ago he was employed as a stockbroker in New Orleans, where he gained some familiarity with the commodities market, having handled at least one commodities account. In 1975 he received $100,000 in insurance proceeds after his wife’s death, and, at the suggestion of a broker friend in Atlanta, he invested this in blue chip stocks that would provide him an income of $600 to $700 a month.
In March, 1975, he ran into Newman, a broker with the defendant’s New Orleans office whom he had known during his own time in the business. Plaintiff claims Newman convinced him to invest in commodities futures. Plaintiff also claims a long history of alcohol abuse and that following his wife’s death he was drinking a quart of whiskey a day. He testified that he had been drinking when he encountered Newman and that their conversation took place in a bar.
The plaintiff deposited $10,000 with Newman in a nondiscretionary account, that is, that all trades had to be approved by the plaintiff. Plaintiff testified that between then and November, 1976 when his account was closed Newman usually contacted him in a bar to discuss his trades. He stated that he was usually drunk during these conversations and could not remember most of them.
*293The first $10,000 was lost and plaintiff gave Newman a like amount. This, too, was lost and the plaintiff deposited some of his blue chip stocks as collateral for continued trading. Some of this was sold to cover more losses. By the time the account was closed, the plaintiff had lost $21,824.90 on trades and had been charged $23,926.52 for commissions and taxes and $532.11 in interest.
The customer’s agreement that plaintiff signed with the defendant when their business relationship commenced recited that "[t]his contract shall be governed by the laws of the State of New York”. Relying at least in part on this recitation the trial court held that New York law should apply to all of the causes of action. The defendant maintains that Louisiana law should have been applied to the tort causes of action.
That the parties agreed that their contract should be governed by an expressed procedure does not bind them as to causes of action sounding in tort (see Fantis Foods v Standard Importing Co., 63 AD2d 52, revd on other grounds 49 NY2d 317), and, as to the tort causes of action, there is no reason why all must be resolved by reference to the law of the same jurisdiction (Babcock v Jackson, 12 NY2d 473, 484).
The Court of Appeals has set down the following instruction for the resolution of choice of law problems (Matter of Crichton, 20 NY2d 124, 133-134):
"The choice of law decision we must make in this case should be guided by the same considerations that have guided our decisions in other choice of law cases [citations]. * * *
"The choice of law problem here should be resolved by an examination of the contacts which Louisiana and New York have with this controversy for the purpose of determining which of those jurisdictions has the paramount interest in the application of its law. As we noted in Dym v. Gordon (16 N Y 2d 120, 124), this process requires us 'first to isolate the issue, next to identify the policies embraced in the laws in conflict, and finally to examine the contacts of the respective jurisdictions to ascertain which has a superior connection with the occurrence and thus would have a superior interest in having its policy or law applied.’ [Citations.]”
 The first choice of law issue we must resolve is that of the availability of punitive damages. To do so we must look to the " 'law of the jurisdiction with the strongest interest in the resolution of the particular issue presented’ ” (James v Powell, *29419 NY2d 249, 259, quoting Babcock v Jackson, 12 NY2d 473, 484). Under New York law punitive damages are awarded in "singularly rare cases” (Garrity v Lyle Stuart, Inc., 40 NY2d 354, 360) where the "wrong complained of is morally culpable, or is actuated by evil and reprehensible motives” (Walker v Sheldon, 10 NY2d 401, 404). They are intended "to punish the wrongdoer for his misconduct and furnish a wholesome example” (Merrick v Four Star Stage Light., 60 AD2d 806, 807).
Louisiana has a strong policy against punitive damages (Vincent v Morgan’s Louisiana & Texas R. R. & S. S. Co., 140 La 1027; Fassitt v United T. V. Rental, 297 So 2d 283 [La]), and their recovery is never permitted unless authorized by special statute (Killebrew v Abbott Labs., 359 So 2d 1275, 1278 [La]; Alexander v Burroughs Corp., 359 So 2d 607 [La]). The policy underlying this position is that a plaintiff should recover only that which will fairly and reasonably compensate him (see Bacharach v Woolworth Co., 212 F Supp 83, 85).
The conclusion is evident that, plaintiff being a Louisiana domiciliary, that State has an interest in seeing that he receive only such damages as will fairly compensate him. At first glance, it would seem as easy to conclude that New York is interested in punishing the New York defendant for its misconduct and to provide a wholesome example. This would, however, ignore the obvious fact that it was not the New York defendant but its Louisiana agent, if anyone, who engaged in morally culpable conduct. The New York interest in punishing a wrongdoer would not be furthered here because this defendant has not been found possessed of evil or reprehensible motives. The New York interest in providing a wholesome example would' not be furthered here when all of the acts that would warrant punitive damages were restricted to Louisiana. Finally, even if we were to assume that New York has the stronger interest in the issue of punitive damages, they should not have been found here. Under our law, to hold an employer liable in punitive damages for the willful or wanton acts of an employee, it must be shown that the employer somehow participated in the reprehensible conduct or that he ratified the wrongdoing (Davey v D & Z Foods, 21 AD2d 860; Cohen v Varig Airlines, 85 Misc 2d 653, mod on other grounds 88 Misc 2d 998, mod on other grounds 62 AD2d 324).
We conclude that Louisiana law is applicable to the issue of punitive damages and that under that law they cannot be recovered here.
*295The next issue is referable to the negligence cause of action. In such actions New York has abandoned contributory negligence and assumption of risk for a form of comparative negligence (CPLR art 14-A), the purpose of which is to ameliorate the harsh result when a plaintiff is slightly negligent and fairly to apportion damages among the parties (Abbate v Big V Supermarkets, 95 Misc 2d 483, 485; Prosser, Law of Torts, 4th ed, § 67). Louisiana adheres to contributory negligence and assumption of risk (La Code Civ Pro, art 1005; Bass v Aetna Ins. Co., 370 So 2d 511 [La]), expressing the policy that no one is ever absolved from exercising reasonable and necessary care for his own safety (Normand v Piazza, 145 So 2d 110, 113).
 Examining the contacts of the respective jurisdictions (Matter of Crichton, 20 NY2d 124, supra), we find the only relevant one to be the domicile of the plaintiff. Thus, although New York might have an interest in having its comparative negligence law applied to protect a New York plaintiff, it has no interest in protecting a Louisiana plaintiff. Louisiana, however, does have an interest in having a Louisiana plaintiff conform to the standard of care imposed by its contributory negligence and assumption of risk laws. Louisiana is, then, the jurisdiction with the greater concern with this issue and its law should have been applied.
Under Louisiana law the plaintiff would have been barred from recovery on the negligence cause of action by his own acknowledged conduct. It is an established principle of the law of that State that voluntary intoxication cannot relieve an individual of responsibility for his own conduct (Barlow v City of New Orleans, 228 So 2d 47 [La]). "A voluntarily intoxicated person is bound to exercise the same degree of care for his own safety as is a sober person. If he places himself in a position of peril as a result of his intoxication and is injured, he is generally held to be guilty of negligence which is a bar to his recovery” (Pence v Ketchum, 314 So 2d 550, 552; see, also, Lee v Peerless Ins. Co., 175 So 2d 381 [La]). Since the plaintiff stresses that, due to his own intoxication, he did not know what was going on, he must be held guilty of contributory negligence as a matter of law, and be barred from recovery for any negligence on the defendant’s part.
The question is presented whether the Statute of Limitations to be applied to the churning cause of action—it is the only cause of action now remaining as a basis of the jury verdict—should be that of Louisiana or New York. Under *296CPLR 202, when a cause of action accrues outside of New York in favor of a nonresident, the court must compare the New York statute with that of the place of accrual and apply the shorter. The plaintiff contends that this borrowing statute, CPLR 202, is inapplicable for the reason that the cause of action accrued in New York.
In Sack v Low (478 F2d 360, 366) the court ruled that under New York law a cause of action in a securities suit accrued where the plaintiffs suffered loss and that this would be "where they lived and conducted their investment activities”. This holding jibes with a recent Court of Appeals decision that causes of action in negligence and strict products liability accrue in the place of injury (Martin v Dierck Equip. Co., 43 NY2d 583). By this reasoning the borrowing statute must be applied as the churning and its resultant loss would have occurred in Louisiana.
When we borrow the shorter one-year Louisiana statute, we must, however, take it "fully encumbered with all the foreign state’s rules as to tolls, disabilities, etc. The question is not simply how long is the foreign statute of limitations, but rather, is the action barred by the law of the foreign state” (Professor McLaughlin’s Practice Commentary to McKinney’s Cons Laws of NY, CPLR 202, par C202:3, citing Isenberg v Rainier, 145 App Div 256). In Louisiana, prescription (the name given there for the defense of the Statute of Limitations) is governed by the law of the place where the action is brought (Kirby Lbr. Co. v Hicks Co., 144 La 473; see, also, Martindale-Hubbell’s Louisiana Law Digest, p 1031). Thus, by a circuitous route the time expressed in the New York statute becomes controlling and the churning action would not be time barred.
Upon the trial the defendant did not appear to have contended, nor did it prove, that the substantive law of Louisiana respecting a churning cause of action is different from the New York law. (See 8 NY Jur, Conflict of Laws, § 8.) In the absence of this proof we may assume that it is the same (International Text Book Co. v Connelly, 206 NY 188, 201), or, at least, that the defendant has acquiesced in the application of the law of the forum (Watts v Swiss Bank Corp., 27 NY2d 270, 276).
 Notwithstanding uncontested application of New York law to the churning cause of action, it must be remanded for a new trial. First, since the jury reported only a general verdict *297of $45,000 compensatory damages covering the negligence and the churning causes of action, we have no way of knowing the damages attributed to the latter. Second, the record indicates that the jury may have been confused on the issue of fraud. It was charged on a cause of action for fraudulent inducement to trade in commodities. The separate churning cause of action had intent to defraud as one element charged. The jury stated without elaboration that it found no fraud. If it was referring to the fraudulent inducement cause of action only, it could validly find churning. If it was referring to the intent to defraud necessary to the churning cause of action, its finding of churning would be inconsistent.
Accordingly, the judgment of the Supreme Court, New York County (Naoel, J.), entered on June 13, 1979, awarding plaintiff $45,000 in compensatory damages and $30,000 in punitive damages should be reversed, on the law, and a new trial ordered with respect to the cause of action for churning, without costs and without disbursements.