62 F.3d 1418 (6th Cir. 1995), 94-1230, Payne v. Wood
| Citation | 62 F.3d 1418 |
| Docket Number | 94-1230. |
| Date | 02 August 1995 |
| Parties | Priscilla M. PAYNE, on her own behalf and as attorney in fact for Christine A. Payne and Jennifer S. Payne, and as guardian and conservator for minors Gregory J. Payne, Johnathan M. Payne, and Johanne M. Payne; Christine A. Payne, Jennifer S. Payne, Gregory J. Payne, Johnathan M. Payne, and Johanne M. Payne, Plaintiffs-Appellees, v. Richard M. WOOD |
| Court | U.S. Court of Appeals — Sixth Circuit |
Page 1418
Editorial Note:
This opinion appears in the Federal reporter in a table titled "Table of Decisions Without Reported Opinions". (See FI CTA6 Rule 28 and FI CTA6 IOP 206 regarding use of unpublished opinions)
On Appeal from the United States District Court for the Eastern District of Michigan, No. 90-70210; Julian Abele Cook, Jr., Chief Judge.
E.D.Mich.
AFFIRMED IN PART, VACATED IN PART, REMANDED.
Before: BOGGS and BATCHELDER, Circuit Judges; and ALDRICH, District Judge. [*]
PER CURIAM.
Douglas Stalley, as personal representative of the Estate of Richard Wood, appeals a judgment against the estate for $3,760,909.49, representing damages of $2,860,395.41 and prejudgment interest of $900,541.08 awarded for the period from January 26, 1990 through the date of entry of judgment, June 9, 1993. He also appeals the district court's denial of his post-trial motions. We affirm the liability elements of the judgment, but find that damages were erroneously calculated. We reverse and remand this aspect of the verdict for further disposition in accordance with this opinion.
I
Priscilla Payne is a wealthy heiress. Richard Wood was her attorney and financial adviser. Payne first met Wood in 1980. She retained Wood to be her attorney in her 1980 divorce and afterwards retained him to handle her estate planning matters.
Wood asked Payne to allow him to manage her investments. According to Payne, he orally promised her that he would invest in blue chip stocks, that she could get her money anytime, and that she would earn returns of at least 20 percent a year. Payne testified that in March 1982 she sold for about $2 million shares of Tenneco stock that she had inherited. She testified that after capital gains taxes, her proceeds were about $1.2 million, which she immediately gave to Wood to invest. She also gave Wood funds on behalf of her children that they received as beneficiaries of a trust. Payne stated that the funds forwarded on behalf of her children totalled $619,006 over the years Wood handled these investments. The record contains monthly statements for her account and for the accounts of her children from 1982 through October 1989. The record also contains statements from 1980-81 for Payne's account, indicating that she used Wood for investments before the sale of Tenneco stock in 1982. In addition, these statements indicate some growth in her holdings with Wood during 1982, but not to the extent of $1.2 million.
Payne testified that she first asked Wood verbally to return her investments, about six weeks before she sent him a letter repeating the request, dated October 1988. Wood did not return any money or stock. Payne retained an attorney, John MacNeal, who again requested that Wood return Payne's investments, or cash, in a letter dated April 7, 1989. Payne became concerned about her family's investments with Wood when an acquaintance sent her clippings from the Ann Arbor News that indicated other Wood investors could not get their assets from Wood. Another attorney, George Bearup, wrote a similar letter on Payne's behalf to Wood on December 21, 1989.
Payne filed her complaint against Wood on January 26, 1990, on her own behalf, as the attorney-in-fact for Christine Payne and Jennifer Payne, and as the guardian and conservator for Gregory Payne, Johnathan M. Payne and Johanne Payne, who are minors. Payne stated a federal claim under the federal Investment Advisers Act and supplemental Michigan law claims for breach of contract, professional malpractice, fiduciary duty, conversion, and unjust enrichment. After Richard Wood committed suicide in May 1990, Payne amended her complaint to name Douglas Stalley, personal representative for Wood's estate.
At trial, Payne testified that her family's accounts with Wood contained $1,523,429.82, as reflected on her last statement from Wood, dated October 18, 1989. Over Stalley's objection, Payne then testified that if that sum were increased by a 20 percent compounded annual rate of return from October to the day of trial, March 24, 1993, it would total $2,860,395.41.
Briggs Stahl, an accountant, testified that it was his opinion, after reviewing all available documents, that Payne transferred a total of $1,408,301.58 to Wood's Capital Investments Group, and that the total amount either returned to the Paynes or invested in stocks they still own was $1,033,990, leaving a unaccounted-for difference of $374,311.58. Stahl testified that he could not find any stock, cash or assets that belonged to Payne or were in her name.
Stahl also testified that Wood was operating a "form of" a pyramid scheme, because it appeared from the available financial records that Wood received money from new investors, then used some of it to pay off old investors and for personal expenses. Stahl testified that after examining Wood's records using first-in, first-out accounting methods, he determined that Wood had used some of Payne's funds to pay other investors, and some went to Wood's law firm.
The jury returned a verdict for Payne. On the special verdict forms, the jury indicated that it found that Wood: (1) violated the Investment Advisers Act, 15 U.S.C. §§ 80b-6(1) and (2); 1 (2) breached an investor/adviser contract with Payne; (3) converted Payne's property, 2 but that Payne was not entitled to treble damages; 3 (4) committed malpractice; (5) breached his fiduciary duty, and; (6) obtained unjust enrichment.
The jury awarded Payne $2,860,395.41 as damages. 4 The jury calculated this amount as damages for Woods's violation of the Investor Advisers Act, breach of contract, malpractice, breach of fiduciary duty and unjust enrichment. This number duplicated exactly the damages calculation presented by Payne in her testimony and in her closing argument. In addition, the court awarded Payne prejudgment interest from January 26, 1990 to June 9, 1993, in the amount of $900,514.08, for a total judgment of $3,760,909.49.
Stalley filed a motion for judgment as a matter of law and/or for a new trial on July 9, 1993. He argued that the evidence was insufficient to support the jury's verdict, that the court erred in several evidentiary decisions, and erred by refusing to give his proposed instruction on prejudgment interest and usury. Stalley also argued that the damages were contrary to the jury instructions and excessive. The district court denied Stalley's motion, holding that the record was sufficient to support the verdict. The court also found that the jury included a 20 percent return in its verdict as damages, not as interest. The court rejected Stalley's arguments that its award of prejudgment interest, in addition to the jury's inclusion of a 20 percent return to the date of judgment as damages, was "double-counting."
Stalley argued that under Michigan law the proper method to value a breach of contract for failure to purchase or deliver stock was to determine the highest value of the stock within a reasonable time after the breach, and not by giving Payne her money back plus a 20 percent annual return compounded indefinitely. Stalley noted that Payne failed to produce evidence to substantiate such damages. The court rejected this argument as well, determining that, based on the evidence produced at trial:
Wood maintained possession of the Plaintiff's stocks, which bore a value of $1,540,187.50, as late as October 1989 ... in conjunction with an annual rate of return for the years during which Wood acted as an investment advisor, [this evidence] could have led the jury to conclude that the Plaintiffs suffered damages which approximated nearly three million dollars.
Order at 19.
On appeal, Stalley once again argues that Payne presented insufficient evidence for a jury to find that Wood breached a contract with Payne. He also claims that the court committed reversible error by admitting Payne's testimony regarding Wood's contracts with other investors. He argues that the court also erred by submitting Jury Instructions 53, on unjust enrichment, and 71, on the calculation of damages for a violation of the Investment Advisers Act, and by rejecting Wood's prejudgment interest "instruction." He also argues that the damages award was excessive, and that the court erroneously awarded prejudgment interest in addition to the damages award, in which the jury had included a 20 percent "return."
II
First, we consider whether the evidence at trial was sufficient to find a contract between Payne and Wood. The contract law aspects of Payne's claim require the court to apply Michigan law. The standard of review of a jury verdict of a claim arising under Michigan law is that if reasonable people could differ as to the meaning of the evidence when the facts are viewed in a light most favorable to the prevailing party, the evidence is sufficient to support the verdict. Wiskotoni v. Michigan Nat'l Bank-West, 716 F.2d 378, 383 (6th Cir.1983) (citing Birou v. Thompson-Brown Co., 241 N.W.2d 265, 269 (Mich.App.1976)).
Our review of the record indicates that Payne testified that Wood did not say that she would receive a particular return each year, but that the return would be at least 20 percent. Furthermore, evidence produced at trial indicated that he promised her more than just this. Payne also testified that Wood promised to make her a multimillionaire,...
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