The opinion of the court was delivered by: Irving Ben Cooper, District Judge.
Pursuant to plaintiff's motion, we bifurcated the action
with respect to the issues of liability and damages. The
liability issue was tried before this Court in April, 1986. At
the close of plaintiff's case, defendant Kaufman moved for a
directed verdict pursuant to Federal Rule of Civil Procedure
50, and defendant Anselmo moved to dismiss pursuant to Federal
Rule of Civil Procedure 41(b). We reserved decision on both
motions. In an opinion dated September 7, 1989, we found in
favor of plaintiff against defendant Anselmo on the grounds
that Anselmo had wrongfully converted the shares of
plaintiff's SICC stock; all claims against defendant Kaufman
were dismissed. Caballero v. Anselmo, 720 F. Supp. 1088
At that time we directed plaintiff and defendant Anselmo to
endeavor to agree upon a reasonable and proper amount of
damages, and to provide us with a proposed form of judgment
including such amount agreed upon within 60 days. The parties
were not able to reach an agreement on the amount of damages.
After numerous conferences, counsel agreed that another trial
was not necessary for the court to determine the legal damages
issues (letter to Court from Joseph F. Kelly, Jr., Esq. dated
November 7, 1990 and letter to Court from Lawrence L. Ginsburg
dated November 14, 1990) and submitted papers in support of
their respective positions regarding the formula for measuring
damages owing to plaintiff and whether plaintiff is entitled
to punitive damages as a result of the conversion. We shall
address each issue separately below. The facts of the case are
set out at length in our opinion, 720 F. Supp. 1088;
familiarity with them is assumed.
Plaintiff seeks recovery under alternative theories: she
argues that we should either impose a constructive trust upon
the stock and declare defendant a constructive trustee thereof
or apply a conversion theory of damages. Plaintiff argues that
under either theory she is entitled to judgment equal to the
highest value of the stock between the time of conversion and
the time of judgment, to wit, proceeds in the amount of $1.5
million resulting from a transaction that occurred in July,
1986 ("the July 1986 sale"). We will analyze each of
plaintiff's theories in turn.
Plaintiff argues that we should impose a constructive trust
upon the $1.5 million proceeds of the July, 1986 sale of
plaintiff's stock by Daniel Villanueva to a third party, and
determine that defendant Anselmo, as constructive trustee,
owes plaintiff the full amount. Plaintiff's Memorandum Of Law
In Furtherance Of The Assessment Of Damages at 11-14
("Plaintiff's Memo"). Defendant argues that we should not
impose a constructive trust because the application of a
constructive trust theory of damages is not appropriate in
conversion cases, and even if appropriate, a constructive
trust can only be imposed against entities who are in
possession of the converted property or the proceeds thereof.
In short, defendant argues that if we do declare him
constructive trustee, it can be only for the $15,000 proceeds
realized when he sold the stock to Kaufman in May, 1973.
Defendant Reynold V. Anselmo's Memorandum Of Law With Respect
To The Determination Of Damages at 9 ("Defendant's Memo"). For
the reasons set forth below, we agree with defendant to the
extent that the imposition of a constructive trust is not
appropriate in this action.
The constructive trust may be defined as a
device used by chancery to compel one who
unfairly holds a property interest to convey that
interest to another to whom it justly belongs. .
. . If the property has been sold the trust
attaches to its proceeds in the hands of the
defendant, or to the other property purchased by
defendant into which the original
property or its proceeds can be traced. . . .
If one has possession of personal property
under such circumstances that appropriation of it
to his own use . . . will make him guilty of the
tort of conversion . . ., the wronged person may
charge the converter as a constructive trustee of
the converted property or of cash proceeds or
property he receives by reason of a sale of the
Bogert, Law of Trusts and Trustees, § 471 at 3-5, § 476 at
125-132 (rev. 2d ed. 1978) (footnotes omitted).
A constructive trust will be imposed where "property has
been acquired in such circumstances that the holder of legal
title may not in good conscience retain the beneficial
interest." Beatty v. Guggenheim Exploration Co., 225 N.Y. 380,
386, 122 N.E. 378, 380 (1919); Scull v. Scull, 94 A.D.2d 29,
462 N.Y.S.2d 890 (1st Dep't. 1983), aff'd 67 N.Y.2d 926,
493 N.E.2d 238, 502 N.Y.S.2d 135 (1986); Coco v. Coco, 107 A.D.2d 21,
485 N.Y.S.2d 286 (2d Dep't. 1985).
Under New York law, the general legal requisites for
imposition of a constructive trust are (1) the existence of a
fiduciary or confidential relationship, (2) a promise, express
or implied, (3) a transfer in reliance on the promise, and (4)
unjust enrichment. Kopelman v. Kopelman, 710 F. Supp. 99, 102
(S.D.N.Y. 1989); Bankers Sec. Life Ins. Soc. v. Shakerdge,
49 N.Y.2d 939, 406 N.E.2d 440, 428 N.Y.S.2d 623 (1980); Hutton v.
Klabal, 726 F. Supp. 67 (S.D.N.Y. 1989). Generally, a
constructive trust must be proved by plaintiff by clear and
convincing evidence. Schmieder v. Hall, 421 F. Supp. 1208
(S.D.N.Y. 1976), aff'd, 545 F.2d 768 (2d Cir.), cert. denied,
430 U.S. 955, 97 S.Ct. 1601, 51 L.Ed.2d 805 (1977).
We approach our analysis of these factors with a certain
elasticity. The constructive trust remedy is flexible, and "it
has . . . been held that, `although the [above-mentioned]
factors are useful in many cases constructive trust doctrine
is not rigidly limited,' Simonds v. Simonds, 45 N.Y.2d 233,
241, [380 N.E.2d 189, 194] 408 N.Y.S.2d 359, 363 (1978), and a
constructive trust may be found even in the absence of these
prerequisites when . . . equity and common sense require."
S.E.C. v. Levine, 689 F. Supp. 317, 323 (S.D.N.Y. 1988). See
Lines v. Bank of America Nat. Trust & Sav. Assoc., 743 F. Supp. 176
(S.D. N.Y. 1990); Hornett v. Leather, 145 A.D.2d 814, 535
N.Y.S.2d 799 (3d Dep't. 1988), appeal denied, 74 N.Y.2d 603,
541 N.E.2d 425, 543 N.Y.S.2d 396 (1989); Reiner v.
Reiner, 100 A.D.2d 872, 874, 474 N.Y.S.2d 538, 541 (2d Dep't.
1984). However, in those instances, plaintiff must at least
show a promise and a transfer of property. Chipman v.
Steinberg, 106 A.D.2d 343, 483 N.Y.S.2d 256 (1st Dep't. 1984),
aff'd, 65 N.Y.2d 842, 482 N.E.2d 925, 493 N.Y.S.2d 129 (1985);
Plotnikoff v. Finkelstein, 105 A.D.2d 10, 482 N.Y.S.2d 730 (1st
We defer for a moment any discussion of whether a fiduciary
relationship existed between plaintiff and defendant, and we
turn to address the other factors. First, no promise was made
by defendant to plaintiff's father or to plaintiff. Defendant
made no promise to hold the stock for plaintiff's benefit, nor
was there a promise to convey the stock to a third party for
plaintiff's benefit. At most there was an agreement whereby
defendant and plaintiff's father agreed that plaintiff would
retain title to the stock and defendant would vote her
interest. This, we conclude, is insufficient to establish that
a promise had been made to plaintiff.
Second, plaintiff has not shown that she or her father made
a transfer at all. Even assuming that a voting right was
given, no transfer of title was made nor intended. The stock
remained in plaintiff's name while defendant had possession of
the stock or stock certificate. In order to establish a
constructive trust it is necessary to show that defendant
wrongfully obtained title rather than mere possession.
Edwards v. Rector, Church Wardens and Vestrymen of Trinity
Church in City of New York, 5 F. Supp. 335 (S.D.N.Y. 1933),
aff'd, 77 F.2d 884 (2d Cir. 1935), cert. denied, 296 U.S. 628,
56 S.Ct. 151, 80 L.Ed.
446. Based on the evidence and the arguments ...