Title: Continental National Bank v. Evans
Citation: 107 Ariz. 378, 489 P.2d 15
Docket Number: 10327
State: Arizona
Issuer: Arizona Supreme Court
Date: September 30, 1971

107 Ariz. 378 (1971) 489 P.2d 15 CONTINENTAL NATIONAL BANK, a national banking association, Appellant and Cross-Appellee, v. Robert J. EVANS et al., Appellees and Cross-Appellants. No. 10327. Supreme Court of Arizona, In Division. September 30, 1971. Rehearing Denied October 27, 1971. Murphy, Posner &amp; Franks, by John R. Franks, Phoenix, for appellant and cross-appellee. *379 Lawrence C. Cantor, Phoenix, for appellees and cross-appellants. CAMERON, Justice. This is an appeal from a judgment in favor of plaintiffs, Robert Evans and Andrew and Mary Evans, mother and father of Robert Evans, against the defendant Continental National Bank, which judgment was rendered after a jury verdict and acceptance of remittitur by the plaintiffs, Andrew and Mary Evans. Defendant, Continental National Bank, appealed as to Andrew and Mary Evans. Robert Evans, Andrew Evans and Mary Evans also appealed, but it would appear from the briefs filed herein that they have abandoned their appeal. We are therefore concerned only with the judgment as it affects the Continental National Bank and Andrew and Mary Evans, husband and wife. We are called upon to determine: Viewing the evidence most favorably to the prevailing party, Lane Title and Trust Company v. Brannan, 103 Ariz. 272, 440 P.2d 105 (1968), the facts necessary for a determination of this matter on appeal are as follows. A loan was made by the bank to Robert Evans on 4 February 1965 in the amount of $8,500. 303 shares of Jefferson National Life Insurance Company stock owned by Andrew and Mary Evans were deposited with the bank as security, and a "General Collateral Pledge Agreement" signed by all three parties. The pledge agreement contained the following provisions: Title to the stock was transferred to the name of Robert Evans for this purpose. On 4 February 1966, the loan was renewed for the same amount. Andrew Evans testified that the bank's representative told him that the bank would notify him and his wife before the stock would be sold. Mrs. Evans testified that the stock certificate had been signed over to Robert and given to the bank at the request of the officer of the bank. On 26 August 1966, an officer of the bank wrote to Robert Evans as follows: On 31 August 1966, Andrew and Mary Evans went to the bank and met with Young. Mr. Young testified that he told them that additional security was needed and that Andrew Evans asked for 60 days to get the security: Mr. Thayer Lindauer, attorney, testified that on behalf of the Evanses he discussed the situation with Mr. Young of the bank on two occasions around the end of August and early September. As to the first conversation, Mr. Lindauer testified: The bank applied the proceeds of the sale and the amount found in Robert's checking account to the amount due upon the note, leaving the amount of $2,010.69 plus interest still due and owing by Robert Evans to the bank. The jury returned a verdict of $1,000 in favor of Andrew and Mary Evans for general damages, and $15,000 punitive damages. The court ordered a remittitur, the remittitur was accepted, and the judgment was signed in favor of Andrew and Mary Evans for $78.24 general damages and $7,500 punitive damages. The defendant, Continental National Bank, on their counterclaim, recovered $2,010.69 plus $250 attorney's fees against the plaintiff Robert Evans. The appellant bank contends that appellees, Andrew and Mary Evans, had no title interest in and to the stock nor right to immediate possession thereof at the time of the sale of the stock by the bank and therefore had no standing to bring the action. With this we disagree. The testimony supported the contention that the stock was previously owned and pledged by Andrew and Mary Evans, and *381 was transferred to the name of Robert at the request of the bank. The evidence supports the contention that equitable title, however, remained with Andrew and Mary Evans. The stock, as pledged originally, was owned exclusively by Andrew and Mary Evans, and the note for which the stock was pledged was in the name of Robert Evans. The bank, after accepting the stock as collateral, requested that Andrew and Mary Evans transfer legal title to Robert Evans. Although the name on the stock certificate itself was changed to Robert, it was apparent that the appellees as between themselves did not consider title to be exclusively in Robert, but merely legal title to be in his name as security until the loan was repaid. The bank had full knowledge of these facts and cannot now rely exclusively upon the named owner of the stock to defeat the interest of the plaintiffs, Andrew and Mary Evans. With this special or equitable interest, Andrew and Mary Evans had standing to enter into an oral contract with the bank by which the bank would forbear selling the stock in return for which Andrew and Mary Evans would provide additional security should it be needed. We believe that there was standing to sue when the bank breached that agreement and that the trial court did not err in denying the bank's motion for directed verdict as to appellees Andrew and Mary Evans. Rule 15(b) of the Rules of Civil Procedure, 16 A.R.S., states: The purpose of this rule, allowing amendments of pleadings to conform to the evidence, is to permit the case to be ultimately tried on its merits so that the parties to the litigation may, in one trial, receive all relief to which they are entitled, Dixon v. Feffer, 84 Ariz. 308, 327 P.2d 994 (1958); Leigh v. Swartz, 74 Ariz. 108, 245 P.2d 262 (1952), and also to prevent a multiplicity of suits. The question of whether or not to permit amendment of pleadings to conform to the evidence is within the discretion of the trial court, and such amendments should be liberally allowed in the interests of justice. Beckwith v. Clevenger Realty Co., 89 Ariz. 239, 360 P.2d 596 (1961). This court has required the objecting party to show actual and not merely legal surprise before a court will be found to have abused its discretion in granting a motion to amend a pleading to conform to the evidence. In Re Estate of McCauley, 101 Ariz. 8, 415 P.2d 431 (1966). In the instant case the prayer of plaintiffs' complaint asked for the return of the stock. The testimony at the trial indicated that the stock had been sold and was not available. We find no error in the trial court allowing the plaintiffs to amend the complaint at the close of the evidence to allege damages based upon the sale of the stock. WAS THE DEFENDANT ENTITLED TO DAMAGES? A. Actual Damages The bank contends that there was no showing of actual damages and therefore nothing upon which to base punitive damages. The verdict of the jury was for $1,000 in general damages as to Andrew and Mary Evans. The trial court reduced the verdict by way of remittitur to $78.24, this amount being the amount of the brokerage fees in selling the stock which amount was deducted from the amount credited to the balance of the loan. Generally, actual damages must be shown before exemplary or punitive damages may be awarded. Craviolini v. Scholer &amp; Fuller Associated *382 Architects, 101 Ariz. 33, 415 P.2d 456 (1966). We hold that actual damages were shown and properly found. B. Punitive Damages There are two theories involved in this case one of contract and one of conversion. The bank contends that its action was not a conversion, but, if anything, a breach of a supplemental oral contract to give further notice before sale. Accepting this theory for the purposes of analysis, the authorities are generally in accord that punitive damages cannot be awarded for such a breach. 22 Am.Jur.2d, Damages, § 245; American Law Institute, Restatement of Law of Contracts, § 342; Williston on Contracts, Rev.Ed. § 1340; Sutherland on Damages, 4th Ed., Exemplary Damages § 390. The Evanses contend, however, that this was a conversion. While the bank admits it may be proper to award punitive damages in an action for conversion, the mere fact of actual damages and conversion does not mean that punitive damages must be awarded. There must be conduct on the part of the defendant amounting to aggravation, outrage, malice or willful and wanton misconduct. See Prosser, Torts, 3rd Ed. § 2; Lutfy v. Roper, 57 Ariz. 495, 115 P.2d 161 (1941); Nielson v. Flashberg, 101 Ariz. 335, 419 P.2d 514 (1966). This record, upon review, is insufficient to substantiate a finding of spite, ill will or willful and wanton misconduct. Thus, even under a conversation theory, punitive damages will not lie. The improper sale, while it may substantiate a conversion action, will not, absent further evidence, support a claim for punitive damages. See California Bank v. Daniel, 36 Ariz. 549, 288 P. 7 (1930). The matter is reversed as to the punitive damages between Andrew and Mary Evans and the Continental National Bank, and affirmed in all other respects, each party to bear their own costs. STRUCKMEYER, C.J., and LOCKWOOD, J., concur.