Court Opinion

ID: 9698636
Source: CourtListenerOpinion
Date Created: 2023-08-25 19:56:26.054535+00
Date Added: 2024-06-11T18:20:42.484310
License: Public Domain

KELLEY, Justice
(dissenting):
I respectfully dissent. The jury found that Kvamme defrauded Emlyn Jones, whose retirement from Kato Engineering Company was imminent as the result of his deteriorating health, when Kvamme represented that the 10 shares of Kato Engineering Company owned by Jones in 1966 were worth $5,500 and were being purchased by Kvamme on behalf of the company. That is the only claim of fraud. I agree that the evidence was sufficient to support the jury’s finding.1 But, I dissent as to the measure of damages applied by the majority.
If Emlyn, in fact, had the obligation upon retirement to sell his ten shares of stock back to the company, the redemption by the company obviously would have occurred within months of the time of his sale to Kvamme. As far as I have been able to ascertain from the record, all of the “evidence” in this case, with the exception of Kvamme’s own testimony at trial, testimony which, as the verdict makes clear, was unpersuasive to the jury, was to the effect that there existed among the employees of Kato Engineering a common understanding that upon retirement employees could not retain stock or transfer it to others upon retirement. Ernest Mueller specifically so testified, and his testimony was corroborated by the fact that William Cliff was unable to transfer stock to his son when he retired. The hearsay statements of Emlyn, admitted for the purpose of showing his state of mind or belief, indicated that he was aware of and shared that understanding. Fae Bateman, a 40-year employee and vice president of the company, testified that Kvamme himself had told him at the time of Cliff’s retirement that Cliff’s common stock had to go back to the company treasury and was not transferable to a family member. Emlyn’s nephew, Mueller, testified that from the company’s earliest days everyone knew he or she was required to sell back his or her stock on retirement, and that Emlyn specifically knew that. Both Lorraine Jones and Emlyn’s daughter testified that Emlyn believed the stock had to be sold back to the company, and Lorraine claims Peder Kvamme also so told her. To be sure, much of the recited testimony was presented by respondent in rebuttal to Peder Kvamme’s self-serving trial testimony in which he denied the existence of such a company policy. Nevertheless, the other testimony in this case, from those who were in position to have knowledge, confirms that the redemption policy existed in 1966. Emlyn Jones, other company employees, Emlyn’s wife and his daughter believed that the stock had to be sold, albeit to the corporation, then, or shortly thereafter, due to Emlyn’s pending retirement. That being true, and I have been unable to find any “evidence” in the record to dispute it, it appears to me that regardless of Kvamme’s fraud, Emlyn’s stock would have been redeemed by Kato Engineering in 1966 for its then true value — approximately $122,500. Had it been re*434deemed for that price, Emlyn and his survivors would have had that money and the income it generated thereafter. In effect, that is precisely what the jury restored to the Jones family — the value of the stock in 1966 and its increase from the date of the sale; but, in addition, the jury also awarded punitive damages of $46,000 as punishment to Kvamme for his fraud.
Had the stock been sold in 1966 to the corporation pursuant to the company’s redemption “policy,” presumably Emlyn would have been paid its value. When the corporation was sold many years later, he or his survivors would not then have been able to claim any part of any increment in its value. Moreover, had that scenario reflected the true situation, due to later acquisitions by Kvamme, unrelated to this transaction, ultimately Kvamme would have reaped the profit from the sale in 1978. The majority, in addition to affirming restitution in full, however, apparently would approve an additional penalty in excess of $½ million on the theory of unjust enrichment — even though had the 1966 transaction been as Emlyn then thought, and had he been paid the then true value of his stock, he or his survivors could have acquired nothing more. It seems to me that the missing link is causation. Nothing I find in the record justifies the assumption underlying the majority position, that had it not been for the fraud, Emlyn and his survivors would have realized this profit. Had Emlyn sold the stock back to the company in 1966, he would not have had the stock in 1978 to sell. Additionally, without the slightest doubt, many other factors contributed to the 1978 greatly inflated value of the corporation — factors which had nothing to do with Kvamme’s jury-found fraud. Therefore, I suggest that the majority’s reliance upon Janigan v. Taylor is misplaced. There, the alleged fraud related to a representation of the companies’ business prospects as those prospects might affect the value of stock — a completely different setting, in my opinion, than we are faced with here.
By its verdict the jury awarded Emlyn’s widow the true value of the stock at the time Emlyn sold it — less what Kvamme had paid him for it — for a net of $119,550. Additionally, the jury awarded $46,000 in punitive damages. Although the trial court rejected Lorraine’s claim for prejudgment interest, in order to make the legal remedy purely compensatory, in my view she should recover pre and post verdict interest on both the compensatory and punitive damages from the date of the fraud. If that is done, I suggest that she would be afforded an adequate legal remedy, which substantially would place her in a status quo ante, making it unnecessary to resort to an alleged equitable remedy of rescission, which in itself, as approved by the majority, results in an unexpected, and what in my view might be characterized as an undeserved, windfall.

. With respect to Kvamme’s alleged misrepresentation that the corporation was redeeming the stock, to some extent it was bottomed on hearsay statements of Emlyn, which the majority concludes were properly admitted as a hearsay rule exception to reflect Emlyn’s state of mind at the time of the transaction. There was other evidence, however, which would have supported a contrary conclusion — for example, that the stock was paid for not by the corporation, but rather by Kvamme’s personal check.