further that it continued to make such advances to Rufer Associates even after the contract was terminated.
Apparently such a claim was filed by Posadas in the bankruptcy proceeding and was either rejected for lack of proper proof or was discharged by proportionate distribution of the available assets. Again the record does not supply the answer.
The Court is thus left with serious doubts about the fairness of the jury's verdict on the counterclaim for commissions. The undisputed evidence, indeed the evidence submitted by Posadas itself in its claim in bankruptcy, shows that it owed substantial commissions to Rufer Associates. The record does not show whether these unpaid commissions were exceeded by amounts which Rufer Associates owed to Posadas, or whether any part of the claim of Posadas survived the bankruptcy proceeding. If the evidence in the trial record does not furnish the answers to such questions, it clearly does not support the jury's verdict that no commissions were owed to Rufer Associates.
It is true that, even supplementing the trial record with the representations subsequently made in the motion papers, the competent evidence available to the Court does not permit it to determine whether Rufer would be entitled to a set off -- that is, whether the addition to the bankruptcy estate of the net amounts owed to Rufer Associates by Posadas would leave Rufer Associates, after full satisfaction of all the creditors' claims, with residual assets which would be available to Rufer, its sole shareholder.
Nevertheless the Court concludes that justice demands that a new trial be granted on the issues whether commissions were owed by Posadas to Rufer Associates and, if so, the net amount owed.
It may well be that the evidence at a new trial will show that no net amount was due to Rufer Associates because the amount of the commissions owed to it was exceeded by the amount owed to Posadas by Rufer Associates. It may also turn out that Rufer is not entitled to an equitable setoff because all the moneys collected from Posadas would have to be used to satisfy the residual claims of the creditors of Rufer Associates. But justice will be ill-served if the Court is denied access to all the facts relevant to the claim for setoff.
Rufer attacks the jury's verdict awarding punitive damages against him by contending that he acted on the advice of counsel and not with the malice and reckless disregard of the rights of Posadas which are required for such an award.
Posadas responds by pointing out that the opinion letter from the attorney approved the deposit of the reservation checks in an "escrow account," with the obvious objective of insuring their availability if and when it is determined that Rufer Associates was entitled to them.
Instead of waiting for such determination, Dukes withdrew the funds from the account, either at Rufer's direction or with his undoubted knowledge and approval, to pay the operating expenses of Rufer's wholly-owned corporation, including Rufer's salary.
The jury was instructed that it could award punitive damages only "if you find that Terence W. Rufer, the individual, acted maliciously and with reckless disregard of the rights of Posadas in the property" and that "punitive damages are awarded for the purpose of punishing someone whose conduct has been unusually blameworthy or egregious in order to create an example which will deter others from engaging in such conduct in the future." There was no exception to this change.
There was ample evidence from which a reasonable jury could have determined that, under this standard, an award of punitive damages was called for. For example:
-- On November 14, 1986, Rufer signed a signature card opening the account in the name of Rufer Associates "as agents for Posadas de Mexico," despite the fact that the agency relationship had been terminated two weeks earlier.
-- Rufer submitted to the bank a purported resolution of the board of directors of Rufer Associates which falsely stated that the opening of the account had been approved at a board meeting a week earlier and incorrectly identified Gerald Yurn as secretary of the corporation. In fact, there was no such meeting of the board, although the one other director, Edwin Howe, had approved the opening of an escrow account.
The Court therefore concludes that the jury's award of punitive damages should not be set aside.
Rufer's motion is denied insofar as it seeks a new trial with respect to the jury's verdict on the conversion claim and on the claim for punitive damages. The motion is granted to the extent of ordering a new trial on the issues of whether Posadas owed commissions to Rufer Associates and, if so, the net amount owed. The parties are directed to appear at a pre-trial conference in the Court's chambers, Room 1902 at 9:30 A.M. on Friday, March 27, 1992 to schedule further proceedings in the action.
William C. Conner
Senior United States District Judge
Dated: New York, New York
March 13, 1992