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DEES v. ALLIED FID. INS. CO.

March 19, 1985

Dortha Dees, Individually and as Administratrix of the Estate of W. J. Dees, Plaintiff
v.
Allied Fidelity Insurance Company of Indiana, Defendant



The opinion of the court was delivered by: EISELE

 Garnett Thomas Eisele, U.S.D.J.

 Pending before the Court is the defendant's "Motion for Judgment Notwithstanding the Verdict and Alternate Motion for New Trial." In reaching the decisions expressed below, the Court has considered the motion, the plaintiff's response thereto, and the various briefs submitted by the parties. It has also reviewed the statements made by the Court to the jury during the trial and the jury instructions. Except for the issues raised with respect to the excessiveness of the verdict, the Court concludes that there is no merit in the defendant's contentions and feels that little discussion thereof is needed.

 Basically, the Court agrees with the arguments and the law cited by the plaintiff in connection with the issues raised.

 The Court has no quarrel with the law as stated by the defendant in its brief with respect to the standards to be applied and the factors to be considered in passing upon motions for judgment n.o.v. and in passing upon motions for a new trial.

 Although defendant argues strongly to the contrary, this case was pled and tried as an action in tort for conversion. It is true that the defendant came into the possession of the plaintiff's funds lawfully and pursuant to an agreement between the parties. However, it retained those funds without any legal justification for at least two years after it was required to return same. The evidence would clearly permit the jury to find that the defendant engaged in an outrageous course of conduct in dealing with Mrs. Dees from 1981 forward. The jury could find, and obviously did find, that the defendant engaged in affirmative acts of malicious conduct in retaining and refusing to return Mrs. Dees' property and by its conduct in making baseless demands upon her, temporizing and "playing games" with her while being fully aware of her dire economic circumstances. And the evidence would sustain the jury's finding that such actions by the defendant persisted in spite of multiple pleas and entreaties on behalf of Mrs. Dees for the return of all or at least some of her money.

 The case was neither alleged or tried as a breach of contract action. Defendant is not contending and cannot contend that it was holding the money pursuant to any provision of any contract. The defendant not only delayed for an unreasonable time in returning Mrs. Dees' funds; it never returned those funds even though, by the undisputed evidence and its own admissions, it was required by law to do so. It should be noted in passing that, under Arkansas law, liability in tort may co-exist with liability in contract arising out of the same events. The plaintiff chose to proceed on the basis of the tort.

 The final conversion of Mrs. Dees' BUF funds occurred not later than February 1982. Indeed, as to almost all of those funds, it is clear that they should have been returned much earlier. The brazenness of the defendant's conduct is obvious when one notes that the defendant never, either before or during the trial, offered to return the money it knew was due to the plaintiff. The jury could only assume that, without a court order, the defendant would persist in holding Mrs. Dees' funds because of its selfish interests. See discussion of the defendant's handling of BUF accounts, infra.

 One of the defendant's affirmative acts of misconduct was to insist, without any legal justification, upon Mrs. Dees executing a particular type of release that was not provided for or called for in its original agreement with Mrs. Dees and which it was clearly not entitled to under the law.

 The evidence showing the manner in which the defendant handled the BUF accounts (in the sum of millions of dollars) bore directly upon the motive of the defendant in improperly and unlawfully retaining such funds long beyond the dates when by law they should have been returned. The evidence would clearly permit the jury to not only find that the defendant's bank profited greatly, but that the defendant and its president indirectly benefited financially from the improper manner in which the defendant handled the BUF accounts.

 The defendant complains about the Court's ruling that it occupied a limited fiduciary relationship to the BUF account owners which would have required it to invest such funds at considerably higher, yet safe, returns. Its failure to discharge this duty resulted in substantial losses to the BUF account owners and created the conditions pursuant to which it could work out financial arrangements which were very advantageous to both its bank and to itself. The Court's ruling on this issue would have relatively little consequence financially to Mrs. Dees. It would have, in effect, called for a higher interest rate on her BUF accounts. The plaintiff, however, abandoned such claim and no such excess interest is included in the judgment. Nevertheless, the Court concludes that its rulings were correct with respect to the limited fiduciary obligations involved. Furthermore, since the issue was one that was raised and developed at the trial, the Court was correct in advising the jury of its ruling and that it was removing that issue from the jury's consideration. The Court believes, under the evidence, that its explanation to the jury was both correct and necessary so that the jury would not be confused as to whether or not it should deal therewith.

 Having reviewed the record, the Court finds that there was ample evidence to support the jury's liability determinations including those that would give rise to an award of punitive damages. Punitive damage under Arkansas law is available in a conversion case of this type where there is an intentional violation of a person's right to his property. Furthermore, the Court concludes that its instructions on the punitive damage issues were correct under Arkansas law and, in fact, somewhat more favorable to the defendant than required by Arkansas law.

 The Court agrees with the plaintiff that the defendant did not properly raise most of the objections it is now making to the Court's jury instructions. Nevertheless, it also is convinced that those instructions properly state the applicable law.

 The plaintiff has set forth in her briefs a detailed statement of much of the evidence which supports the verdicts of the jury. Except with respect to the size of the verdicts, which will be discussed below, the Court agrees that the evidence fully supports the findings implicit in the jury's verdicts.

 EXCESSIVENESS OF COMPENSATORY AND PUNITIVE DAMAGE AWARDS.

 The defendant vigorously challenges the jury's verdicts for both compensatory and punitive damages. The cases which the Court has examined for guidance with respect to these issues include the following: Century "21" Shows v. Owens, 400 F.2d 603 (8th Cir. 1968); Krall v. Crouch Bros., 473 F.2d 717 (8th Cir. 1973); Malandris v. Merrill Lynch, 703 F.2d 1152, (10th Cir. 1981); Morrill v. Becton, Dickinson & Co., 747 F.2d 1217 (8th Cir. 1984); and the Arkansas law and cases cited by the parties in their briefs.

 Awards for punitive or exemplary damages are subject to revision by the Court to the same extent as awards of compensatory damages. See e.g., Holmes v. Hollingsworth, 234 Ark. 347, 352 S.W.2d 96 (1961).

 There is an Arkansas statute dealing with the subject of excess. See Section 27-1903, Ark. Stat. Ann. which reads as follows:

 
27-1903. Excessiveness of damages - Remittitur - When verdict set aside.
 
The verdict of any jury rendered in any action for the recovery of damages where the measure thereof is indeterminate or uncertain, shall not be held to be excessive, or be set aside as excessive except for some erroneous instruction, or upon evidence, aside from the amount of the damages assessed, that it was rendered under the influence of passion or prejudice. Provided, that the circuit judge presiding at the trial may on motion for a new trial filed by the losing party, if he deems the verdict excessive, indicate the amount of such excess, and thereupon, if the losing party shall offer to file and enter of record a release of all errors that may have accrued at the trial if ...

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