Ablah v. Eyman

• Decision Date: 09 October 1961
• Docket Number: No. 42309,42309
• Citation: 188 Kan. 665,365 P.2d 181
• Parties: , 90 A.L.R.2d 766 Frank J. ABLAH et al., Appellees, v. Ray H. EYMAN, Appellant.
• Court: Kansas Supreme Court

Page 181

365 P.2d 181

188 Kan. 665, 90 A.L.R.2d 766

Frank J. ABLAH et al., Appellees, v. Ray H. EYMAN, Appellant.

No. 42309.

Supreme Court of Kansas.

Oct. 9, 1961.

Syllabus by the Court

The record in an action in replevin where plaintiffs secured possession of the personal property in question, the working papers of defendant who was a public accountant, by giving an undertaking in replevin in the sum of $24,915.50, and where defendant was financially unable to give a redelivery bond as provided in G.S.1949, 60-1007, but filed a third amended cross petition with his third amended answer, seeking a return of the property and full indemnity for the value of the use of his property resulting from its wrongful seizure, detention and use, as more fully set forth in the opinion, examined, and it is held: (1) The district court erred in sustaining the first paragraph of the motion to strike and the allegations stricken are restored to the first cause of action, and (2) the district court did not err in sustaining the second paragraph of the motion to strike, striking out the three items of damage in the amounts of $40,000, $25,000, and $6,450, respectively, and corresponding allegations, nor in sustaining paragraph 4b which struck out items of compensatory damage alleged in the second cause of action and conceded by defendant to be for attorney fees only.

Clyde Wendelken, Wichita, argued the cause, and Henry E. Martz and Charles B. Hughes, Wichita, were with him on the briefs for appellant.

Kenneth H. Hiebsch, Wichita, argued the cause, and Milton Zacharias, Richard A. Render, Albert L. Kamas, Donald E. Lambdin and David G. Arst, Wichita, were with him on the briefs, for appellees.

FATZER, Justice.

This case involves the working papers of a public accountant. The action was in replevin to recover certain books and records alleged to be owned by appellees, plaintiffs below, to which appellant, defendant below, filed his third amended cross petition with his third amended answer. The amended cross petition contained four causes of action: The first sought to recover actual damages for 'the value of the use' of the property alleged to have been sustained by appellant, based upon 'the usable value and money savings to the plaintiffs' by their wrongfully obtaining possession of the books and records, and presents the principal question involved; the second pertained to nominal damages, and damages 'for expenses and time expended in pursuit of possession of the said property'; the third was for the balance due on account for professional services, and the fourth was for punitive damages in the amount of $55,000. The appeal is from an order sustaining appellees' motion to strike the allegations of actual damages in the first cause of action, and for damages for pursuing the property as alleged in the second cause of action.

The parties will be referred to as they appeared in the court below.

The action was commenced on Saturday morning, September 19, 1959, at 8:23 a. m. Plaintiffs filed their petition, affidavit in replevin, and undertaking in replevin, and an order for delivery of property was issued by the clerk of the district court. All papers necessary to file the action were prepared and executed by plaintiffs three days before--on Wednesday, September 16, 1959, except the undertaking in replevin which was prepared and executed the following day, Thursday, September 17. The petition alleged plaintiffs were the owners and entitled to immediate possession of the personal property in the possession of defendant, as follows:

'All books, records, journals, ledgers, correspondence, documents, checks, statements, receipts, memorandum, detailed recordings of deposits to and withdrawals from all bank accounts, analyses of bank accounts, summaries, reports, adjusting journal entries, identifying source documents and all other instruments and records of every kind and nature for and pertaining to the years 1948 through 1956 which in any way involve or pertain to these plaintiffs, or transactions affecting them, or any of them, including business partnerships and accounts known as Ablah Hotel Supply Company, Ablah Manufacturing Company, Ablah Meadows, Ablah Building Account and the corporation Ablah Hotel Supply Company, Inc., now in the possession of the defendant, Ray H. Eyman, which personal property includes but is not limited to the following: (describing records pertaining to bank accounts of six of the plaintiffs in two banks in Wichita).'

The affidavit for replevin alleged the personal property had an aggregate or actual value of $12,457.75, and was wrongfully detained by defendant. In accordance with G.S.1949, 60-1007, plaintiff's undertaking in replevin was in the sum of $24,915.50.

Service of summons was obtained upon defendant on Saturday morning, September 19, 1959, at approximately 11:00 o'clock. The records in question were secured by the sheriff at the same time. Defendant was temporarily impecunious and unable over the week end of September 19-20, to post a redelivery bond in the amount of $24,915.50 within twenty-four hours (G.S.1949, 60-1007), and was unable to secure a return of the records to his possession. On Monday morning, September 21, 1959, the district court issued its order to the sheriff of Sedgwick County directing him to hold all books and papers obtained from defendant in replevin and then in his hands until the further order of the court. Plaintiffs perfected an appeal from that order, and on April 6, 1960, it was heard on the merits. On May 14, 1960, the order was held to be void and was set aside. Ablah v. Eyman, 186 Kan. 626, 352 P.2d 10. Following reversal, the records were delivered to plaintiffs.

Courts may judicially notice earlier proceedings in the same case (In re Estate of Rothrock, 173 Kan. 717, 723, 252 P.2d 598; Schauf v. Peter Kiewit & Sons Co., 187 Kan. 180, 183, 354 P.2d 687), and, as a background to defendant's allegations for actual damages pleaded in the first cause of action, reference is made to two affidavits filed in this court on October 22, and October 30, 1959, by plaintiffs and their presently employed public accountants during the pendency of Ablah v. Eyman, supra. Those affidavits are summarized and quoted as follows: It was essential that plaintiffs have immediate possession of the aforesaid records, books, information, data, and so forth, in time to prevent 'an adverse tax determination against these appellants in an amount in excess of $25,000'; further, that on July 23, 1959, plaintiffs received notices of proposed income tax deficiencies in an aggregate amount of $79,673.23 plus estimated interest of $27,885.55; that such notices required the filing of formal protests with the Bureau of Internal Revenue within 30 days; that plaintiffs secured a 60-day extension in which to file said protests, and on October 22, 1959, thirteen separate protests were filed on their behalf; that it was absolutely necessary plaintiffs have the books and records which were the subject of the action prior to a hearing before the Appellate Division of the Bureau of Internal Revenue, which was expected in the very near future; that if plaintiffs were 'denied such records a wholly unjustified adjudication of tax liability would be made against them and for which the records contained data constituting a legitimate defense,' and, 'that because of the volume and complexity of the records and the limited time prior to the hearing, it would be impossible to reconstruct the records and data which are the subject of this action.'

In his third amended answer defendant specifically denied possession of any of the personal property itemized in the petition and affidavit for replevin, 'except certain papers, work sheet analyses, schedules, statements, reports, records, correspondence and memoranda prepared or made by the Defendant or received in connection' with his employment by plaintiffs, which were particularly described and identified in Exhibit A attached to his amended answer. (Exhibit A is attached to the opinion as an appendix, and for brevity, items described therein are hereafter referred to as 'working papers' or 'work sheets'). Defendant further specifically denied that plaintiffs or anyone acting in their behalf had requested or made demand for delivery of the personal property itemized in the petition and in the possession of the defendant and alleged there was no refusal or failure by him to deliver the same; that the aggregate and actual value of the personalty itemized in the affidavit of replevin was $12,457.75; that said personalty had an actual or aggregate value, or a market value, or a salable value, and that he wrongfully detained any papers or records of plaintiffs or that they had any ownership of, or immediate or superior right of possession to, any personal property in his possession.

Further answering, defendant alleged that at all times material, he was a duly practicing public accountant; that he was employed by plaintiff Frank J. Ablah in November, 1955, to make an audit or audits necessary to determine taxable income in connection with an investigation of the Internal Revenue Service for the years 1949-1954 for himself and other named plaintiffs; that he was paid in excess of $12,000 for his services and there was a balance due of $459.50 plus interest; that upon completion of the audit he rendered a final report in writing to plaintiffs with a copy to the Internal Revenue Service reflecting proposed adjustments of taxable income previously reported by plaintiffs in federal income tax returns for the years 1949-1954; that plaintiffs knew he did not have possession of the other personal property itemized in the affidavit of replevin (the original books and records covering several business years prepared and built by defendant) since he delivered the same to them prior to their filing the action; that the working papers prepared or made by...