Jolley v. Puregro Co.

• Decision Date: 04 May 1972
• Docket Number: No. 10878,10878
• Citation: 496 P.2d 939,94 Idaho 702
• Parties: Tony JOLLEY, Plaintiff-Respondent, v. PUREGRO COMPANY, a foreign corporation, Defendant-Appellant.
• Court: Idaho Supreme Court

Page 939

496 P.2d 939

94 Idaho 702

Tony JOLLEY, Plaintiff-Respondent, v. PUREGRO COMPANY, a foreign corporation, Defendant-Appellant.

No. 10878.

Supreme Court of Idaho.

May 4, 1972.

M. Allyn Dingel, Jr., of Elam, Burke, Jeppesen, Evans & Boyd, Boise, for defendant-appellant.

Edward D. Ahrens, of Smith, McDonald & Ahrens, Nampa, for plaintiff-respondent.

BAKES, Justice.

This action and consequent appeal arose out of the conversion of a Lockwood Potato to Harvester and John Deere tractor axle extension owned by respondent Tony Jolley and converted by agents of appellant Puregro Company.

Respondent Jolley was a custom potato harvester, and used the Lockwood Harvester and the axle extension in conjunction with other equipment in his harvesting operation. At the end of the 1968 harvest season, respondent Jolley, not having a place to keep his equipment, stored the harvester and axle extension at Kenneth Johns' ranch, intending to use the equipment at the commencement of the 1969 harvest. Among the other farmers who also stored their equipment at the Johns place were the Smith brothers, whose equipment was mortgaged to appellant Puregro.

The conversion of respondent's equipment occurred during a formal foreclosure by appellant Puregro on the equipment belonging to the Smith brothers. Pursuant to court order for claim and delivery, and in the presence of Sheriffs Hileman and Barberis, Puregro's agents marshalled the mortgaged equipment of the Smith brothers at the Johns' place. Respondent Jolley's equipment was segregated from the Smith brothers' equipment. The record indicates and the district court found that Puregro's agents were explicitly advised by both sheriffs and Smith brothers not to take certain other equipment, including respondent's harvester and axle extension. In spite of the warnings and the segregation of respondent's equipment, Puregro's agents later took possession of respondent Jolley's equipment and transported it to Puregro's Mountain Home business location. ¹ Pursuant to its claim and delivery action against Smith brothers, Puregro advertised Jolley's equipment and conducted an auction, selling the Smith brothers' equipment in which it had a security interest, and also selling respondent's harvester and axle extension for $25.00.

In October, 1969, upon returning from a summer's farming in Nevada, respondent Jolley discovered that his equipment was missing. Soon thereafter respondent Jolley discovered that appellant Puregro had taken it and demanded the return of the equipment. Puregro advised Jolley that his machinery had been sold. Respondent then attempted to purchase a new harvester to do custom harvesting that fall; however, his attempt was unsuccessful due to his apparent inability to secure the necessary credit to finance the purchase.

Respondent instituted this action for conversion and, in his complaint, prayed for damages for (1) the value of the converted equipment, (2) for lost profits from a 1969 harvesting contract he was unable to perform, and (3) for exemplary damages for appellant's alleged wanton, wilful and malicious act of converting the equipment.

Since appellant admitted the conversion of the equipment, the dispute in the district court centered primarily around the proper damages award. At the conclusion of the trial, the district court awarded $150 for the value of the converted equipment, $8,750 for profits lost by respondent's inability to perform the 1969 contracted harvesting (less $200 earnings of respondent in mitigation of those damages), and exemplary damages in the amount of $5,000. From those awards appellant has appealed, advancing twenty-four assignments of error.

From these assignments of error, three issues appear which are fundamental to the disposition of this appeal. Two issues concern damages-first, whether the award of lost profits was too speculative to be sustained; second, whether the circumstances of the conversion justified the award of exemplary damages. The third issue is a procedural one-whether the district court erred in concluding that respondent Jolley's wholly owned corporation, the Sweetwater Cattle Company, was not a real party in interest and in determining that neither Sweetwater nor the Idaho State Bank was indispensable to the litigation. We will consider the procedural question first.

During the presentation of respondent Jolley's case in chief, evidence was adduced concerning the formation of the Sweetwater Cattle Company by respondent and his wife. The corporation ² had forfeited its charter in 1968 for failure to file its annual statement and pay its license fees. Prior to forfeiting its charter, however, the corporation apparently obtained financing from the Idaho State Bank, purporting to give a security interest in certain pieces of farm machinery, including the converted harvester. When evidence of this transaction emerged in the course of the trial, Jolley moved to join the Sweetwater Cattle Company as a party plaintiff. Puregro objected on the ground that it did 'not want additional parties brought in at this time, because it is the first time that we have been made aware of the situation with the corporation.' However, the record shows that Puregro was aware of the security filing by Sweetwater Cattle Company to the Idaho State Bank on the piece of equipment in question prior to the time that Puregro filed its amended answer before the trial. However, the trial court sustained Puregro's objection and denied Jolley's motion to join Sweetwater Cattle Company as a party plaintiff.

Subsequently, when the plaintiff Jolley rested, Puregro moved to dismiss the action on several grounds, one of which was failure to join the Sweetwater Cattle Company as an indispensable party. In denying Puregro's motion, the district court ruled that based upon the record before it, it was clear that Jolley, and not the Sweetwater Cattle Company, had owned the equipment and therefore Sweetwater Cattle Company was not an indispensable party. The court further ruled that Puregro had waived its objection of failure to join Sweetwater as an indispensable party because it had prior knowledge of the security agreement given to the Idaho State Bank. Denial of appellant Puregro's motion is raised as error.

The burden of proof in demonstrating the indispensability of a party rests on the moving party. Meyerding v. Villaume, 20 F.R.D. 151 (D.C.Minn.1957). There are several reasons why Puregro did not meet that burden. First, at the time of the trial the corporation, Sweetwater Cattle Company, had forfeited its charter and therefore the corporation could not be sued, nor could judgment be entered against it in its corporate name. Garrett v. Pilgrim Mines Co., 47 Idaho 595, 277 P. 567 (1929). It could not therefore properly have been a party. Secondly, Puregro's motion was based upon the record then before the court, i. e., plaintiff Jolley's case in chief. The ocurt ruled, and from the evidence it was clear, that the corporation, Sweetwater Cattle Company, had no interest in the equipment because it had never been transferred by Jolley to the corporation. Those findings will not be disturbed on appeal since there was substantial and competent evidence to support them. Summers v. Martin, 77 Idaho 469, 478, 295 P.2d 265 (1956); Robinson v. White, 90 Idaho 548, 414 P.2d 666 (1966); Bratton v. Slininger, 93 Idaho 248, 460 P.2d 383 (1969). In view of those findings, Sweetwater Cattle Company would not have been an indispensable party to the litigation. Also, because the corporation had no interest in the property as found by the district court, it could not create a security interest in it in favor of the bank under the Uniform Commercial Code. See I.C. 28-9-105. Therefore, the bank would not have been an indispensable party. ³

As a further ground for denying the motion to dismiss, the district court stated that because Puregro had knowledge of the possible interest of Sweetwater Cattle Company but did not raise the defense of indispensable party in its amended answer, Puregro had waived the defense. Failure to join an indispensable party is a defense which cannot be waived under I.R.C.P. Rule 12(h) because the rights of persons who are not parties to the litigation are involved and may be affected by any judgment entered. However, as stated in Benger Laboratories, Ltd. v. R. K. Laros Co., 24 F.R.D. 450, 452 (E.D.Pa.1959), aff'd 317 F.2d 455 (3rd Cir. 1963), cert. denied 375 U.S. 833, 84 S.Ct. 69, 11 L.Ed.2d 64 (1963):

'(R)ule 12(h) cannot be interpreted to mean that a party with the necessary information to make a motion for joinder of an indispensable party at his disposal can sit back and raise it at any point in the proceedings, when the only effect of the motion under the circumstances would be to protect himself and not the person alleged to be indispensable.'

This analysis is applicable to Puregro in the case at bar.

For the foregoing reasons, we think the trial court correctly denied the dismissal motions.

The next issue raised by the assignments of error relates to the award of $8,550.00 damages for loss of profits of a harvesting contract. Respondent attempted to recover lost profits from a harvesting contract which respondent, due to the conversion of his harvester, was unable to perform. Respondent testified that he expected to earn 'around $20,000 gross' from the harvesting contract, and that of this amount 'approximately half' or $10,000 would ultimately have been realized as net income. Respondent also testified that in the previous year 1968, performing two harvesting jobs, his net income was 'about ten or eleven thousand' dollars. Mr. Shaw, who had contracted with respondent for the harvesting of Shaw's potatoes in 1969, testified that he intended to pay respondent 25cents per cwt (hundredweight) for the entire harvesting operation, that his yield in 1969 was 70,000 sacks, and that he expected to expend about $17,000...