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BACHE HALSEY STUART INC. v. NAMM

March 13, 1978.

BACHE HALSEY STUART INC., Plaintiff,
v.
Arthur B. NAMM and Judy A. Namm, Defendants.



The opinion of the court was delivered by: GRIESA

GRIESA, District Judge.

This is an action by Bache Halsey Stuart Inc. ("Bache"), a brokerage firm, against two individuals, Mr. and Mrs. Arthur B. Namm, alleging violations of section 4b of the Commodity Exchange Act, 7 U.S.C. § 6b (1970), in connection with the opening and conduct of a commodities futures trading account in the name of Mrs. Namm's mother. Bache seeks to recover an account deficit of some $184,000. Bache also advances pendent state law claims, one in fraud and deceit and one in contract, and claims on these counts the right to recover costs, attorney's fees, and punitive damages of $500,000, as well as the account deficit. The Court denied motions to dismiss the plaintiff's claims on March 7, 1977.

 In their Answer and Counterclaims, each of the defendants advances a counterclaim against Bache. These counterclaims, grounded in the Commodity Exchange Act and pendent jurisdiction, seek some $973,000 for alleged overtrading by Bache of a commodities futures trading account of Mr. Namm's, and $42,000 for alleged overtrading of an account of Mrs. Namm's.

 The plaintiff has moved pursuant to Fed.R.Civ.P. 12(b)(6) to dismiss the counterclaims on two grounds: first, that they are barred by the statute of limitations, and second, that they are not supported by sufficient allegations of control over the accounts by Bache and of excessiveness of the trading of the accounts. In light of the Court's conclusion that the counterclaims are time barred, it is unnecessary to reach plaintiff's second ground for dismissal.

 The Commodity Exchange Act does not provide a limitation period for civil actions brought under its provisions. Thus, the federal courts must look to the limitation periods of their forum states governing the most nearly analogous cause of action. Johnson v. Railway Express Agency, Inc., 421 U.S. 454, 462, 95 S. Ct. 1716, 44 L. Ed. 2d 295 (1975).

 In applying the New York law, the first step is to determine the effect of the "borrowing statute," N.Y.Civ.Prac.Law § 202 (McKinney 1972):

 "An action based upon a cause of action accruing without the state cannot be commenced after the expiration of the time limited by the laws of either the state or the place without the state where the cause of action accrued, except that where the cause of action accrued in favor of a resident of the state the time limited by the laws of the state shall apply."

 Plaintiff argues that defendants' counterclaims are time barred because (1) defendants are residents of Connecticut, (2) the cause of action accrued in Connecticut, and (3) the Connecticut limitation period, which is shorter than the New York period, had lapsed before the counterclaims were interposed. These points will be considered in order below.

 Neither party to this action has requested a hearing on factual issues involved in the statute of limitations motion. Instead, the parties have elected to submit affidavits, and to have the Court treat the motion as one for summary judgment. See Defendants' Memorandum in Opposition, September 29, 1977, at 14. As set forth below, the Court finds that the affidavits are sufficient to resolve the necessary factual issues involved in the motion, and that on these issues "there is no genuine issue as to any material fact." Fed.R.Civ.P. 56(c). Thus, the Court shall exercise its discretion to "hear the matter on affidavits." Fed.R.Civ.P. 43(e).

 (1)

 As indicated in its last clause, New York's borrowing statute refers to a foreign state's limitation period only if the cause of action accrues in favor of a non-resident of New York. Defendants contend they are New York residents for purposes of section 202, and plaintiff contends they are not.

 An individual can have only one state of residence for purposes of the borrowing statute, and that is the state of his domicile. Banasik v. Reed Prentice Division, 34 A.D.2d 746, 310 N.Y.S.2d 127 (1970), aff'd mem., 28 N.Y.2d 770, 321 N.Y.S.2d 376, 269 N.E.2d 918 (1971); N.Y.Civ.Prac.Law § 202, Practice Commentary C202:2, at 81 (McKinney 1972) (J. McLaughlin). Thus, residence for purposes of the borrowing statute is a narrower term than residence for the many other purposes for which multiple residency is possible.

 It is well established that domicile entails not only residence in fact, but also intent to make that place of residence one's home. It is often necessary to examine the entire course of a person's conduct in order to draw the necessary inferences as to the relevant intent. See, e.g., Korn v. Korn, 398 F.2d 689 (3d Cir. 1968).

 The burden of proving residence within the meaning of the borrowing statute rests on defendants, who seek to benefit from New York's longer limitation period. See, e.g., Public Administrator v. ...


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