Jonklaas v. Silverman

• Court: Rhode Island Supreme Court
• Writing for the Court: DORIS; JOSLIN, Justice, with whom KELLEHER
• Citation: Jonklaas v. Silverman, 117 R.I. 691, 370 A.2d 1277 (R.I. 1977)
• Decision Date: 22 March 1977
• Docket Number: No. 75-55-A,75-55-A
• Parties: Anthony JONKLAAS et al. v. Norman L. SILVERMAN. ppeal.

Page 1277

370 A.2d 1277

117 R.I. 691

Anthony JONKLAAS et al. v. Norman L. SILVERMAN.

No. 75-55-Appeal.

Supreme Court of Rhode Island.

March 22, 1977.

[117 R.I. 702] Abedon, Stanzler, Biener, Skolnik & Lipsey, Milton Stanzler, Providence, for plaintiffs.

Winograd, Shine & Zacks, Richard I. Abrams, Providence, for defendant.

OPINION

DORIS, Justice.

This is a civil action wherein the plaintiff, a partnership of ten individuals known as Estabrook & Co., a stockbrokerage firm, seeks restitution of certain monies paid to the defendant as a result of an alleged mistake during stock transactions between the parties. The matter was heard by a Superior Court justice, sitting without a jury, who entered a judgment for the plaintiff in the amount of $11,705.51. In the defendant's counterclaim judgment was entered for the plaintiff. The defendant has seasonably appealed to this court.

In 1967, defendant maintained an account with plaintiff stockbrokerage firm (Estabrook) through whom he bought and sold stock. The defendant had standing in his name with Estabrook 1,000 shares of Saturn Industries stock which had been purchased in two lots, one of 300 shares, and one of 700 shares.

On April 6, 1967, on order of defendant, these 1,000 shares were transferred from plaintiff to Morris Cohon and Company, another brokerage firm in New York. The defendant admits that this transfer took place with his authorization and at his request. He further admits that Cohon sold or traded the 1,000 shares of Saturn Industries for other stock or cash, and therefore he received the full benefit of the 1,000 shares.

For some unexplained reason, plaintiff deleted only 300 shares from defendant's account and continued to carry 700 shares of Saturn Industries stock in its books in the name of defendant. The only explanation for the alleged error was to the effect that the number of transactions of the stockmarket in 1967 and 1968 was so tremendous that various stockbrokers including plaintiff could not keep up with the 'paper crunch.'

Estabrook mailed monthly statements to defendant from May 1967 through May 1968, showing that 700 shares of Saturn Industries stock were still being held by plaintiff in defendant's account. On May 31, 1968, plaintiff sent defendant his monthly statement which indicated that the 700 shares were sold on May 13, 1968, for $11,705.51, which amount was credited to defendant's account. While defendant testified that he did not recall this transaction, there was in the capital gains schedule of his 1967 and 1968 tax returns evidence that he was aware that he had twice benefitted from the sale of 700 shares of Saturn Industries stock. He admitted that the report of the 1968 capital gain was a duplication of the 1967 capital gain. The defendant further testified that his account with plaintiff continued to be active until 1970 or 1971.

John Mitchell, a witness for plaintiff, testified that he discovered the overpayment to defendant of $11,705.51 in 1972, and notified defendant of the overpayment by letter dated February 15, 1973, which also contained a demand for the return of the overpayment. Payment by defendant was not made to plaintiff who commenced action to recover the amount paid defendant by filing a complaint in Superior Court on July 28, 1973.

The plaintiff's claim for restitution was based on an alleged mutual mistake of a material fact which resulted in the unjust enrichment of defendant. The trial justice found that each of the parties acted under a mutual mistake of a material fact and that under the circumstances each had an equal obligation and opportunity to discover the mistake. On these findings the trial justice found for plaintiff and entered a judgment for plaintiff in the amount of $11,705.51. A judgment was entered for plaintiff on defendant's counterclaim.

On appeal before us, defendant first argues that the trial justice erred when he found that the action was not barred by the statute of limitations. The defendant contends that the statute of limitations began to run on April 6, 1967, the date that plaintiff credited the 700 shares of Saturn Industries stock to defendant's account and not on May 13, 1968, when plaintiff sold the stock and credited defendant's account with the proceeds of the sale of $11,705.51. The defendant states that since the complaint was not filed until July 28, 1973, the action is barred by the six- year statute of limitations. General Laws 1956 (1969 Reenactment) § 9-1-13.

In the execution of orders for the sale or purchase of securities, the ordinary relation of customers to broker is that of principal and agent. Mandeville v. Pooler, 60 R.I. 273, 198 A. 235 (1938); Leand v. Clark, Childs & Co., 53 R.I. 479, 167 A. 122 (1933).

2 Restatement (Second) Agency § 438, Comment c (1958) states that the agent's right of reimbursement arises when payment is made by the agent and not before, and that the statute of limitations runs in the principal's favor only from the time of payment by the agent. The period provided in a statute of limitations does not begin to run until a cause of action exists on which an action can legally be brought. Scullian v. Petrucci, 108 R.I. 406, 276 A.2d 277 (1971); Walsh v. Morgan, 60 R.I. 349, 198 A. 555 (1938).

Here, the claim is for restitution of an overpayment to defendant, and since payment was made by plaintiff to defendant on May 13, 1968, the date plaintiff completed the sale and credited defendant's account, the right of action accrued to plaintiff and the statute began to run on that date. Scullian v. Petrucci, Walsh v. Morgan, both supra. The complaint was filed within the six-year time limit allowed by the statute of limitations and the trial justice was correct in his determination that plaintiff's action was not barred by the statute of limitations.

The defendant in the alternative contends that the trial justice erred in rejecting the defense of laches. The defense of laches is peculiar to courts of equity and does not apply to actions at law. d'Hauteville v. Montgomery, 92 R.I. 453, 169 A.2d 916 (1961); 30A C.J.S. Equity § 113 (1965). Suits in equity that are brought within the period of limitation set by the statute are diligently brought and the defense of laches is not open. Knowles v. Knowles, 33 R.I. 491, 82 [117 R.I. 696] A. 257 (1912); see also Restatement Restitution § 148(2) (1937).

In a recent Massachusetts case the court stated that in an action to recover mistaken payments of money, the cause of action accrues on the receipt of payment without regard to when mistake is discovered whether the action is brought in equity or in law. Limitation statutes should apply equally to similar facts regardless of whether legal or equitable jurisdiction is involved. City of New Bedford v. Lloyd Investment Assocs., Inc., 363 Mass. 112, 292 N.E.2d 688 (1973).

Here, the action is a civil action under the Superior Court Rules of Civil Procedure and was determined by the trial justice to be a proceeding in law wherein the statute of limitations was applicable, ever though he recognized that certain equitable principles were being applied. In our opinion the doctrine of laches is not applicable and the trial justice was correct in his determination that the defense of laches did not apply to the facts of this case.

The defendant next argues that the relationship of a stockbroker to a client establishes a duty on the part of the stockbroker to discover his errors within a reasonable time or bear the financial loss for the delay. The defendant, relying on Leand v. Clark, Childs & Co., supra, asserts that a stockbroker is an agent for the person for whom he undertakes the purchase or sale of securities, and that it is that agent's duty to promptly communicate to his principal all facts affecting the principal's interest and that if the principal suffers a loss that the loss must be borne by the agent.

In Hornblower v. James, 155 A. 568 (R.I.1931), the court held that the stockbroker was not required to bear the entire loss caused by his mistake but that the client too must bear the loss in view of the client's inaction after knowledge of the mistake which caused a large part of the loss. In Hornblower the court found that there were certain facts which indicated that the client should have known or could have discovered the stockbroker's mistake.

Here defendant authorized the transfer of the 1,000 shares of Saturn stock to Morris Cohon and Company and admitted that they were sold or traded and that he received the full benefit of the 1,000 shares. There was evidence that defendant received monthly statements from April 1967 through May 1968 indicating that plaintiff was still holding 700 shares of Saturn Industries stock for his account. From defendant's 1967 and 1968 tax returns there was evidence that defendant had knowledge of the transaction. The trial justice found that there was a mutual mistake of a material fact and that even though defendant had knowledge of the error he did nothing about it. He further found that defendant suffered no loss but in fact received the benefit of the proceeds from the sale of the stock.

The rule is clear that findings of a trial justice sitting without a jury are entitled to great weight and will not be disturbed by this court unless clearly wrong. Shoor-Elias Glass Co. v. Raymond Constr. Co., 114 R.I. 714, 339 A.2d 250 (1975); Nugent ex rel. St. Dunstan's Day School v. St. Dunstan's College of Sacred Music, 113 R.I. 666, 324 A.2d 654 (1974); Palazzi v. State, 113 R.I. 218, 319 A.2d 658 (1974).

On appeal it is the appellant's burden to show that the trial justice is clearly wrong. Here, defendant has not sustained the burden and we affirm the findings of the trial justice.

Finally, defendant contends that the trial justice misconceived the law when he ruled as irrelevant defendant's attempt to introduce evidence that a change of circumstances had resulted from plaintiff's...