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