Dotson v. McLaughlin, 47561

• Decision Date: 25 January 1975
• Docket Number: No. 47561,47561
• Citation: 531 P.2d 1,216 Kan. 201
• Parties: Floyd DOTSON and Security State Bank, a corporation, Appellants and Cross-Appellees, v. Harold McLAUGHLIN and Norma Jean McLaughlin, his wife, d/b/a White Grill, Appellees and Cross-Appellants.
• Court: Kansas Supreme Court

Page 1

531 P.2d 1

216 Kan. 201

Floyd DOTSON and Security State Bank, a corporation Appellants and Cross-Appellees, v. Harold McLAUGHLIN and Norma Jean McLaughlin, his wife, d/b/a White Grill, Appellees and Cross-Appellants.

No. 47561.

Supreme Court of Kansas.

Jan. 25, 1975.

Syllabus by the Court

1. Meaning of invasion of privacy-The right of privacy is invaded when there is (a) unreasonable intrusion upon the seclusion of another; or (b) appropriation of the other's name or likeness; or (c) unreasonable publicity given to the other's private life; or (d) publicity which unreasonably places the other in a false light before the public. (Following Restatement, Second, Torts § 652A.)

2. Outrageous conduct causing severe emotional distress-One who by extreme and outrageous conduct intentionally or recklessly causes severe emotional distress to another is subject to liability for such emotional distress, and if bodily harm to the other results from it, for such bodily harm. (Following Restatement, Second, Torts § 46 (1).)

3. On the basis of the factual circumstances as fully set forth in the opinion it is held: (1) The evidence was insufficient as a matter of law to establish an invasion of the right of privacy and it was error for the trial court to submit the case to the jury on that theory; and (2) the evidence was insufficient as a matter of law to establish liability on the theory of debtor harassment.

Thomas G. Teichgraeber, Wheeler, Mitchelson & Rhodes, Pttsburg, argued the cause, and was on the brief for appellant and cross-appellee, Floyd Dotson.

Walter B. Patterson, Fort Scott, argued the cause, and was on the brief for appellees and cross-appellants.

PRAGER, Justice:

This appeal involves a claimed violation of the right of privacy. Various other claims and counterclaims of the parties have been determined either by settlement or by jury verdict. This is the final chapter of prolonged, complicated litigation that began in 1967. The original appellants in this case were the Security State Bank of Fort Scott, Kansas, and its president, Floyd Dotson. The appellees are Harold McLaughlin and his wife, Norma Jean McLaughlin. Most of the facts in this case are not in dispute and are essentially as follows: Prior to March 1966 the appellee, Harold McLaughlin, owned and operated four White Grill Restaurants at Nevada, Missouri, and at Chanute, Fort Scott and Pittsburg, Kansas. McLaughlin had secured a $60,000 loan from the Small Business Administration in 1963 for the construction of the Chanute restaurant. Subsequent tehreto he obtained a second SBA loan in the amount of $20,000. The Security State Bank had a ten percent interest in the first loan and a twenty percent interest in the second loan. The SBA loans were apparently subject to a first deed of trust held by a creditor of McLaughlin in the state of Missouri. In March of 1966 the employees of the Small Business Administration believed that its loans to McLaughlin were in danger and that the White Grill restaurants were in financial difficulties. The record is undisputed that the holder of the first deed of trust was threatening to foreclose its security. At that time McLaughlin owed approximately $13,000 to $14,000 on restaurant open accounts and it is undisputed that McLaughlin had written a number of insufficient fund checks in payment of business obligations. McLaughlin had written among others an insufficient fund check to the Internal Revenue Service in order to cover his taxes. It was necessary for McLaughlin to go around to each of his four restaurants to make that check good from cash on hand. He did not have sufficient money in any of his business bank accounts to pay the check. McLaughlin testified, however, that he did not think that at the time he was in any severe financial straits.

About April 1, 1966, at the request of the SBA, McLaughlin met with two SBA officals and Dotson at the bank. The SBA officials expressed their concern over McLaughlin's financial affairs and the status of the SBA loans. They discussed the management of the four White Grill restaurants. Dotson suggested that the financial control of the four restaurants should be taken over by himself acting for the bank. It was proposed that there be established four different accounts in the Security State Bank in which all receipts from the four restaurants would be deposited and from which all obligations of the four restaurants would be paid. Dotson also suggested that McLaughlin sell his Cadillac, which was heavily mortgaged, and personally manage the restaurant at Chanute. McLaughlin did not immediately consent to this arrangement. A few days later Dotson again called McLaughlin to the bank. According to Dotson at that time McLaughlin consented to having Dotson take over the running of the financial affairs of the restaurants and McLaughlin also agreed to sell his Cadillac. McLaughlin testified that he was advised by Dotson that if he did not agree to this arrangement, the SBA loans would be foreclosed and he would be out of business. McLaughlin testified he though that he did not have any alternative but to agree to this procedure since he presumed that the bank could foreclose its loan if he refused to go along. Dotson took over the handling of the financial affairs of the four restaurants on April 12, 1966, and continued to handle them until May 10, 1967, a period of 13 months. It should be noted that McLaughlin brough all of the books of his businesses to the bank and thereafter did deliver to Dotson all of the receipts from his restaurants and also all of the bills. Dotson got in touch with McLaughlin's creditors, advised them of the arrangement, and stated that current bills would be paid along with pro rata payments on older obligations. All in all, it was a very unsatisfactory arrangement to Harold McLaughlin and his wife, Norma Jean McLaughlin, whom Harold married during this period. During the period Dotson was in charge of the financial affairs of the four restaurants, the restaurant at Nevada was sold as was also McLaughlin's residential property in that city. The proceeds of these sales were placed in the bank accounts and used to pay McLaughlin's debts. Prior to relinquishing control of the three remaining businesses back to McLaughlin, Dotson obtained from Mr. and Mrs. McLaughlin their signatures on a release which stated that the bank and Dotson were fully released from liability arising from Dotson's handling of the restaurants' financial transactions.

The present litigation was provoked when an action was filed by Omaha Steaks International, Inc. against Harold Dotson and the Security State Bank to recover for food and restaurant supplies sold and delivered to the restaurants between December 27, 1965, and May 16, 1967. Both Dotson and the bank filed in addition to an answer a third-party petition against McLaughlin. The substance of the third-party petition against McLaughlin was that McLaughlin had purchased the goods from Omaha Steaks and that if there was anything due Omaha Steaks on that account, it was the obligation of McLaughlin and not of Dotson or of the bank. McLaughlin filed his answer to the third-party petition in which he pleaded that the bill for the merchandise claimed by plaintiff was the obligation of the bank and Dotson. In addition he filed a counterclaim in which he alleged that Dotson and the bank had forcibly and illegally taken possession of his four restaurants, that Dotson and the bank had mismanaged his financial affairs, and furthermore that they had caused McLaughlin to suffer mental anguish, pain and physical disability. McLaughlin sought to recover compensatory damages in the amount of $15,000 and punitive damages in the amount of $15,000. Furthermore he prayed for a complete and full accounting from Dotson and the bank in the handling of the finances of McLaughlin's restaurants. The case became even more complicated when the Security State Bank filed a reply to the counterclaim of the third-party defendant McLaughlin claiming the right to recover on a note executed to the bank by Harold A. and Norma Jean McLaughlin in May of 1967 when the handling of the financial affairs of the restaurants was turned back over to the McLaughlins.

Some time later Omaha Steaks International, Inc. dismissed its petition and dropped out of the litigation. The record does not show whether this claim was paid or how the dismissal came about. On March 25, 1968, a pretrial conference was held in the case. On September 18, 1968, an additional pretrial conference was had with reference to the various claims of the Security State Bank, Dotson and McLaughlin. The issues of fact were stated to be as follows:

(1) The manner in which Dotson and the bank took over the handling of the McLaughlin accounts.

(2) Whether or not there was an unlawful and illegal taking over of McLaughlin's business.

(3) Whether or not as a result of a proposed accounting McLaughlin is entitled to recover from Dotson and the bank.

(4) The extent of McLaughlin's damages, if any.

(5) Whether or not the McLaughlins had executed a valid release discharging Dotson and the bank from liability.

(6) Whether or not the note executed by the McLaughlins to the bank is an existing obligation because it was obtained by duress.

A number of difficult legal questions were also raised concerning the statute of frauds, the validity of the release, whether or not the bank was operating a business in violation of the banking statutes, and whether any acts by the bank and Dotson were malicious and wilful so as to permit recovery of punitive damages. It should be noted that there was no reference in the pretrial order as to any violation fo McLaughlin's right of privacy.

On May 25, 1970, the parties filed a document entitled 'Designation of Issus by Plaintiff and Third Party Defendants'. In this document it was claimed by McLaughlin that Dotson drew insufficient fund checks...