GUY F. LARSON, Administrator of the Estate of John N. Forister, deceased, Plaintiff-Appellant, v. QUANRUD, BRINK & REIBOLD, a corporation; A. E. BRINK; and THEODORE S. QUANRUD, as Administrator of the Estate of Theo. O. Quanrud, deceased, Defendants, and Quanrud, Brink & Reibold, a corporation, Defendant-Appellant.
File No. 7230
Dec. 30, 1950
May 15, 1951
47 NW2d 743
MORRIS, J.
Strutz, Jansonius & Fleck, for plaintiff-appellant.
There were other defendants, but QB & R is the only defendant remaining in the case. The action was dismissed as to the others by stipulation. QB & R denies the conversion and asserts several affirmative defenses. It claims that ownership of stock in question was transferred to it by John N. Forister during his lifetime. As a further defense QB & R alleges that John N. Forister, during his lifetime, borrowed certain sums of money from the defendant, represented by three promissory notes amounting to $8,500.00, upon which interest in the sum of $9,138.76 has accrued, making a total sum of $17,638.76, for which the corporation has a valid and subsisting lien against the corporate stock for which it is entitled to recoupment. As a final defense QB & R alleges that the heirs at law of John N. Forister, being his widow and his daughter, had knowledge of the assignment of the stock to the corporation more than twelve years prior to the commencement of this action, and during that time made no claim to any right or interest in the stock or offered
The plaintiff, by way of reply and as a defense to the corporation‘s plea of recoupment, alleges that the right of recoupment is barred by the statute of limitations because more than six years have elapsed since the execution of the notes; that the corporation has neglected and failed to petition for the appointment of an administrator, as a creditor, within the time allowed by statute; and that if QB & R has anything due it upon the transactions in question, its rights have now been waived by its neglect and failure to file a claim in the estate of John N. Forister, deceased, within the time allowed by law.
The trial court found that in 1930 and 1931, John N. Forister was the owner of forty shares of stock in QB & R; and that during those years he borrowed two sums of $4,000.00 each and one sum of $500.00 for which he gave his promissory notes, totaling $8,500.00, which bore interest at the rate of six per cent per annum; and that to secure payment of these notes he pledged his forty shares of stock by signing the transfer forms on the backs of the certificates in blank; and that the blanks have never been filled in. He further found that the pledge was never foreclosed and the notes were never paid. He found that while the pledge of stock was in effect, QB & R, on May 4, 1944, converted the forty shares of stock and the accrued dividends; that the stock was then worth $350.00 per share. He found against QB & R on the question of laches on the part of the Forister heirs. He found in favor of the corporation on the defense of recoupment and held that the statute of limitations had not run against its claim, and that it was not liable for double damages. Upon his findings the trial court reached the conclusion:
“That on May 4, 1944, the value of the forty (40) shares of stock was Fourteen Thousand ($14,000.00) Dollars; that on said date, the dividends accruing from 1931 to 1944 inclusive, amounted to Five Thousand Seven Hundred Sixty ($5,760.00) Dollars; and the corporation is entitled to a credit of Fifteen Thousand Six Hundred Ninety-seven ($15,697.00) Dollars. for principal
and interest to May 4, 1944, leaving a balance due the plaintiff of Four Thousand Sixty-three ($4,063.00) Dollars, with interest at four (4%) per cent per annum from May 4, 1944, the Court holding that the debts owed by J. N. Forister to defendant can be set up in mitigation of damages.”
The court ordered judgment in accordance with this conclusion and from that judgment both parties appeal.
Between February 10, 1930, and March 3, 1931, John N. Forister, then a stockholder and former officer of QB & R, borrowed $8,500.00 for which he gave three promissory notes bearing interest at 6 per cent. Two notes were for $4,000.00 each and one for $500.00. Four stock certificates representing ten shares each of capital stock of QB & R made out in the name of John N. Forister were assigned and transferred in blank by signing forms on the backs of the respective certificates. The forms were not otherwise filled out and indicated no assignee or date. These certificates were left in the possession of QB & R and an account set up on the books of the corporation known as “Forister account” to which were credited dividends that were declared from time to time on the stock and against which were charged the notes and interest. The practice of crediting stock dividends to the Forister account was begun in 1931 or 1932 and continued until May 4, 1944, when there was written across the face of two of the certificates “VOID-Transferred to No. 109” and across the face of the other two certificates “VOID-Transferred to No. 108” and new stock certificates issued to other individuals.
The trial court found that QB & R converted the forty shares of stock on May 4, 1944, by canceling the Forister stock certificates. The plaintiff contends that the stock had been pledged as security for the notes; that the pledge was never foreclosed; and that on the date in question title to the stock remained in Forister or his estate; and that the trial court is correct in his finding of conversion. QB & R contends that the stock, after being pledged, was later transferred to QB & R. Testimony as to the details, if any there were, that would throw light on the transaction is incompetent in this action under the provisions of
At the beginning of the trial it was stipulated that the facts alleged in paragraph eight of the answer are true. This paragraph reads as follows:
“Defendants allege that the said John N. Forister, during his lifetime, and between February 10, 1930 and March 3, 1931, borrowed the total of $8,500.00 from the defendant, Quanrud, Brink & Reibold, Inc., a corporation, giving to said corporation his promissory notes therefor, at the times and in the manner following: that said John N. Forister borrowed the sum of $4,000 on February 10, 1930, giving in return therefor his promissory note to said corporation, dated that day, promising to pay said sum of $4,000, with interest thereon at the rate of 6% per annum, on the 1st day of February, 1931; that said John N. Forister borrowed a further sum of $4,000 on March 25, 1930, giving in return therefor his promissory note to said corporation, dated that day, promising to pay said sum of $4,000, with interest thereon at the rate of 6% per annum, on the 1st day of February, 1931; that said John N. Forister borrowed a further sum of $500 on March 3, 1931, giving in return therefor his promissory note to said corporation, dated that day, promising to pay said sum of $500, with interest thereon at the rate of 6% per annum, on the 1st day of February, 1932. That said John N. Forister was then the owner and holder of forty shares of the capital stock of Quanrud, Brink & Reibold, Inc., a corporation, and that at the time of said borrowings, and as a part of the same transaction, said John N. Forister deposited said forty shares of stock as security for the repayment of said loans, each and all of them, and delivered said stock certificates into the possession of said Quanrud, Brink & Reibold, Inc., a corporation.”
QB & R contends that after the notes became due, the stock was worth less than the amount of the indebtedness and that
Elizabeth Forister Fields, widow of John N. Forister, testified over objection of counsel for QB & R, and gave substantially the following testimony: On or about October 1, 1947, Mr. A. E. Brink, then vice president, and now president of QB & R, came to the store in which Mrs. Fields was employed. He “told me that I had some money down at QB & R, and if I was interested in seeing the figures, he would bring them in to me on the following day.” Mrs. Fields said that she would be interested in looking at the figures. The following day he brought over a paper consisting of two sheets “for me to look at and we checked it over. . . . he offered me two thousand dollars for the paper as it stood. . . . I didn‘t understand it thoroughly and I didn‘t want to do anything until I talked to my son-in-law, Guy Larson.” The following evening Mr. Brink met with Mrs. Fields and Mr. Larson in the latter‘s office where the conversation was mostly talking over the figures. It was pointed out that they did not include dividends for 1945 and 1946. “He took his pencil and figured a little bit, for a very short time, and offered me four hundred dollars more, making it twenty-four hundred dollars.” The paper which had been shown to Mrs. Fields in the store was marked exhibit 1, offered in evidence, and tentatively received over the objection that it was a part of an attempted compromise settlement of a dispute. Counsel for QB & R then moved to strike from the record the entire testimony of the witness, Mrs. Fields, on the ground that it related to an attempted compromise and settlement. This motion was also tentatively overruled. The tentative rulings of the court regarding these matters were permitted to stand. Counsel for QB & R strenuously contend that the receipt of this evidence and its consideration by the trial court was error and that it should now be excluded from our consideration of the case on this appeal. The paper, exhibit 1, lists in two columns, interest and dividends for the years 1931 to 1944 inclusive with respect to $8,000.00, and also bears some figures relating to the $500.00 note which is not included in the
It appears from the testimony of Mrs. Fields that Mr. Forister did not inform his wife regarding his business transactions. After he severed his connections with QB & R, he entered upon another business venture that failed, and as a consequence he lost his entire fortune, including his home. When he died he left no apparent estate and no probate was had until the heirs discovered the existence of the claim for stock through the information imparted by Mr. Brink. After Forister‘s death his widow looked through his personal effects and through a deposit box at the bank and found no papers or figures pertaining to the stock in question. She denies all knowledge of the existence of the stock after her husband‘s death and made no inquiry about it at the offices of QB & R. It is clearly established that she made no claim for it of any kind until after her conversations with Mr. Brink.
A dissatisfied stockholder and former employee of QB & R had demanded an audit of the books of the company, which was arranged for. Mr. Brink testified in explanation of his first conversation with Mrs. Fields as follows:
“Well, we had some auditors there, and they informed us that the Forister estate was claiming interest in the stock which was formerly held by John N. Forister.
“Q. Where did they get that information?
“A. They informed us that they got it from Mr. John Musolf.
“Q. Did you then go to see Mrs. Fields?
“A. Yes.”
Mr. Musolf testified that he had been secretary of QB & R for about twenty years prior to 1947, and after the severance of his official connections with the company he demanded an audit. He told the auditors about the Forister stock but had no conver-
This court is in accord with the general rule that unaccepted offers of compromise are not admissible in evidence as admissions, but that admissions with respect to independent facts which are made during the course of compromise negotiations may be received in evidence. Grant v. Jacobs, 76 ND 1, 32 NW2d 881; Grabau v. Nurnberg, 39 ND 57, 166 NW 508; Gunther v. Baker, 48 ND 1071, 188 NW 575.
Counsel for QB & R argues that Mr. Brink‘s intention and not Mrs. Forister‘s assertion of a claim for stock or even her knowledge of it, determines whether his statements to her and his production of exhibit 1 constituted an offer or attempt to compromise. He quotes extensively from Starnes v. St. Joseph Railway, Light, Heat & Power Co., 22 SW2d 73. This case was decided by the Missouri Court of Appeals and later transferred to the Missouri Supreme Court. There is language in the Court of Appeals decision that tends to support the contention of QB & R on this point. The facts in that case are not similar to these before us. It was a slander suit based on a statement that the plaintiff had been fraudulently obtaining electricity. The plaintiff had paid the sum of $18.00 under protest for installing a new meter. The plaintiff was allowed to testify over objection that he called at the general offices of the defendant and discussed the matter and was later told that he would get his $18.00 back if he would sign a release. The Missouri Supreme Court without in any way approving or disapproving of the language used by the Court of Appeals briefly disposed of the point in question by saying:
“Defendant‘s offer to return the eighteen dollars in exchange for a full release from plaintiff was in terms an effort to compromise an existing difference, and plaintiff‘s above noted manner of refusal to accept plainly indicates that he so understood it. Such negotiations for a peaceful settlement are to be encouraged, and in event they fail testimony with reference thereto should be excluded on a trial of the cause.” Starnes v. St. Joseph Railway, Light, Heat & Power Co., 331 Mo 44, 52 SW2d 852.
“The true reason for excluding an offer of compromise is that it does not ordinarily proceed from and imply a specific belief that the adversary‘s claim is well founded, but rather a belief that the further prosecution of that claim, whether well founded or not, would in any event cause such annoyance as is preferably avoided by the payment of the sum offered. In short, the offer implies merely a desire for peace, not a concession of wrong done: . . . By this theory, the offer is excluded because, as a matter of interpretation or inference, it does not signify an admission at all. There is no concession of claim to be found in it, expressly or by implication.
“Conversely, if an express admission is in terms made, it is receivable, even though it forms part of an offer to compromise; and this much has long been well understood: . . . .”
Mr. Brink relates his first conversation with Mrs. Fields as follows:
“I asked Mrs. Fields if Mr. Forister ever explained to her about the QB & R stock. She said ‘Some but very little.’ . . . we had some conversation which didn‘t relate to that, and then I offered to give her some figures as to the interest and dividends, etc. for her information.”
The next day he gave her exhibit 1 and they had some further conversation about the matter.
“Mrs. Forister said she didn‘t know much about things of that kind and that she would like to talk it over with her son-in-law, Guy Larson.”
They then made arrangements for an evening meeting at Mr. Larson‘s office. According to Mr. Brink‘s own testimony, his conversations with Mrs. Forister were on the basis of furnishing her information as to certain facts represented by exhibit 1. Neither the circumstances nor his testimony indicates that at the time of the first two conversations with Mrs. Forister a controversy existed or that his acts constituted an attempt on his part to settle a claim against QB & R. The listing of dividends on exhibit 1 for the years from 1931 to 1944 inclu-
As to the meeting in Mr. Larson‘s office, the negotiations there entered into the realm of dispute and any proposal made by Mr. Brink in the nature of an offer of settlement was inadmissible under the rule that we have heretofore discussed and should have been excluded, and is excluded, from our consideration of this appeal.
We have reached the conclusion from a consideration of competent and relevant evidence in the record that the forty shares of stock of John N. Forister were pledged to QB & R as security for the payment of the three notes upon which he borrowed $8,500.00, and that the pledge was never foreclosed. When QB & R, on May 4, 1944, cancelled the stock certificates of John N. Forister and issued new certificates in lieu thereof to other individuals, it appropriated the stock without authority at law and thereby converted it.
The trial court found that the value of the stock was $350.00 per share, which finding is in accordance with the evidence. The court was therefore correct in reaching the conclusion that the value of the forty shares of stock on the date of conversion was $14,000.00.
The evidence also shows that no dividends were paid to John N. Forister or his estate. As dividends accrued, credit memos were issued in the amount of the respective dividends and credited to the Forister account. The dividends that accrued on the stock were the property of Forister or his estate and the record discloses no authority for applying them on his account or applying them to the payment of the principal or interest on the notes. We agree with the trial court‘s findings that the
The plaintiff contends that the trial court erred in allowing QB & R the amount of the principal and interest of the notes as a credit against the value of the stock and dividends, thus permitting recoupment for the amount of Forister‘s debt against the value of the property converted.
“The sale of any property in satisfaction of a lien, or in case of personal property, the wrongful conversion thereof by the person holding the lien, extinguishes the lien thereon. In an action for the conversion of personal property, the defendant may show in mitigation of damages the amount due on any lien to which the plaintiff‘s rights were subject and which was held or paid by the defendant or any person under whom he claims.”
In Steidl v. Aitken, 30 ND 281, 152 NW 276, LRA1915E 192, it is said that this section puts in statutory form the rule announced in Lovejoy v. Merchants’ State Bank, 5 ND 623, 67 NW 956, wherein these controlling principles are stated:
“First, that the rule of damages which declares that the value of the property wrongfully converted is presumed to be the measure of damages must be construed in the light of the principle of compensation; second, where a party, who has a lien on, or other special interest in, property, wrongfully converts it, he is liable for the value of the property, but is nevertheless, upon principles of equity, and to avoid circuity of action, entitled to recoup the value of the special property, and he may likewise mitigate the damage by limiting the plaintiff‘s recovery to an amount which will compensate him for the actual loss resulting from the conversion.”
“There are numberless decisions that when pledgees, mortgagees or persons having a lien convert a pledged chattel by selling it in an unauthorized way, they are entitled to retain the amount of their lien.” Sutherland on Damages, 4th ed, Sec 1138, Vol 4, page 4294.
To the same effect 53 Am Jur, Trover and Conversion, Section 120; 41 Am Jur, Pledge and Collateral Security, Sections 61 and 62.
The plaintiff contends that the rule allowing the defendant in a conversion action to mitigate damages in an action for conversion by a pledgee by proving the amount due on the lien does not apply because more than six years elapsed after the death of John N. Forister and before the defense was interposed and recovery on the notes was barred by the statute of limitations. This contention cannot be sustained. In this state the statute of limitations operates to bar the remedy and does not destroy the debt or affect remedies other than the one to which it applies. Colonial and U. S. Mortgage Co. v. Northwest Thresher Co., 14 ND 147, 103 NW 915, 70 LRA 814; Lincoln National Life Insurance Co. v. Kelly, 73 ND 622, 17 NW2d 906. When the conversion of the pledged property took place the lien was lost but not the debt. The statute (
The plaintiff argues that the defendant lost its right of mitigation by its failure to file a claim against the Forister estate. We do not think that on general principles a statutory right of mitigation is barred or lost by failure to file it as a claim against
As a general rule, an action for damages sounding in tort presents the basic question of what amount of money will fairly and justly compensate the plaintiff for the injury that he has received. If there are facts pertaining to the tort which tend to reduce the amount required to justly compensate the plaintiff for his injury, they may be shown by the defendant in mitigation of damages. 25 CJS, Damages, Sections 96 and 98; 15 Am Jur, Damages, Section 192.
The plaintiff contends that he is entitled to recover double the value of the stock and dividends converted by QB & R under these provisions of
“If any person, before the granting of letters testamentary or of administration, embezzles or alienates any of the moneys, goods, chattels, or effects of a decedent, he is chargeable therewith, and is liable in an action by the executor or administrator of the estate for double the value of the property so embezzled or alienated, to be recovered for the benefit of the estate.”
The trial court refused to hold QB & R liable for double the value of the stock and dividends under this statute, upon the theory that the conversion did not involve bad faith. We agree with the trial court in this respect. The fair implication of the evidence is that there was no intent to defraud the Forister estate. It is not claimed that QB & R embezzled the stock. If the stat-
Our statute is by no means unique. The same or similar statutes exist in Oklahoma, Minnesota, Montana, Oregon, Washington, and Vermont. Prior to 1907, California had an identical statute which was described as penal in its character in Beckman v. McKay, 14 Cal 251. Oklahoma appears to have taken the opposite view. Several Oklahoma cases are discussed in Sauls v. Whitman, 171 Okla 113, 42 P2d 275, wherein it is said:
“The statute requires no ‘wrongful’ intention and none is required, other than the intention to do the thing which the law forbids.”
The Minnesota statute is somewhat broader than ours in that it specifically covers conversion. In Owens v. Owens, 207 Minn 489, 292 NW 89, it is held that the statute is not penal “since it gives the same right as existed at common law and merely increases the damages payable to the party aggrieved.”
The Montana statute does not appear to have been construed and applied by the supreme court of that state. But in Regional Agricultural Credit Corp. v. Chapman, 129 F2d 435, the Circuit Court of Appeals, Ninth Circuit, had occasion to place its construction upon the Montana law. After citing most of the available cases on the question, that court said:
“We conclude that Section 10140 of the Revised Codes of Montana does not subject to liability for double the value of property alienated, one who acted in good faith, without intent
to deprive the estate of the value of such property. In the case at bar, the trial court made no finding that appellant acted in bad faith, nor does the record contain evidence which would have supported such a finding. It follows that the court erred in holding appellant subject to the terms of the statute.”
In Roys, Administrator v. Roys, 13 Vermont 543, the court refused to apply a similar statute to one who acted in good faith under color of legal right, supposing that he had good title, and said:
“To subject the defendant to the penalty, he must have acted from a wrong motive, and mala fide.”
In Springer v. Jenkins, 47 Or 502, 84 P 479, it is said:
“The statute is highly penal in its consequences, and was evidently intended to punish those who might wrongfully or in bad faith interfere with, convert to their own use, or dispose of the property of a deceased person, by mulcting them in double damages; and its language should, we think, be so construed. To subject a defendant to the penalty given by the statute, it should appear that he was an intermeddler, and acted from wrong motives or in bad faith; otherwise, the executor or administrator should be satisfied with the ordinary remedies given him by law.”
In Jackson v. Lamar, 67 Wash 385, 121 P 857, the court declined to apply the penalty against one who came into possession of property innocently and under a claim of ownership. In Delfelder v. Poston, 42 Wyoming 176, 293 P 354, the court had before it a statute almost the same in wording and identical in import with ours. After an enlightening analysis of many authorities, the court said: “We think it may fairly be deduced from the preponderance of authority, that in order to be subjected to the liability imposed by Section 6830, supra, the person who ‘alienates’ property of an estate must wrongfully transfer the same, acting in that respect from a wrong motive and mala fide.” See also Schoulder on Wills, Executors, and Administrators, Sixth Edition, Volume 4, Section 3583.
This is a case of simple conversion. It is not alleged, and the evidence does not show, that QB & R acted in bad faith, fraudulently or upon improper motives in cancelling the stock cer-
This action was commenced in November, 1947. QB & R argues that the plaintiff and the Forister heirs whom he is representing are guilty of laches because of their failure to assert any claim to the Forister stock for a period of years. This contention cannot be maintained. Laches does not arise from mere delay or lapse of time. In addition to the time element, the party against whom laches is sought to be invoked must be actually or presumptively aware of his rights and fail to assert them against a party who has in good faith permitted his position to become so changed that he cannot be restored to his former state. These requirements are not met in this case. The Forister heirs were not aware of their rights. Neither does it appear, either by direct evidence or by presumption, that failure
Neither party has questioned the trial court‘s computation, with one exception. The plaintiff asserts that if the court finds the defendant entitled to recoup the amount of its indebtedness in mitigation of damages, that interest should be allowed only during the lifetime of John N. Forister. The trial court allowed interest to the date of conversion. Plaintiff argues that the defendant had a right to petition for the appointment of an administrator and that as a potential creditor, QB & R should not be allowed interest during the time it failed to assert the right to institute probate proceedings. This is a novel theory supported by no citation of authorities. We find no decision or statute that would warrant the rule that a creditor is not entitled to interest on his claim against the estate of a deceased, after he has become authorized to apply for letters of administration.
The judgment appealed from is affirmed.
NUESSLE, C.J., BURKE, CHRISTIANSON and GRIMSON, JJ., concur.
MORRIS, Ch. J. On rehearing. We granted a rehearing in this case upon petition of the appellant. After reargument and a reconsideration of the issues discussed in the briefs and in the reargument, we adhere to our former opinion.
BURKE, SATHRE, CHRISTIANSON and GRIMSON, JJ., concur.