Kilbourne v. Kilbourne, 22037.

• Decision Date: 21 April 1930
• Docket Number: 22037.
• Citation: 156 Wash. 439,287 P. 41
• Parties: KILBOURNE v. KILBOURNE.
• Court: Washington Supreme Court

287 P. 41

156 Wash. 439

KILBOURNE v. KILBOURNE.

No. 22037.

Supreme Court of Washington, En Banc.

April 21, 1930

Appeal from Superior Court, King County; Charles P. Moriarty, Judge.

Action by M. Edna Kilbourne against Clio Kilbourne, as executrix under the last will and testament of Frank H. Kilbourne deceased. Judgment of dismissal, and plaintiff appeals.

Reversed and remanded.

FULLERTON and PARKER, JJ., dissenting in part.

Joseph H. Griffin and George F. Hannan, both of Seattle, for appellant.

Carkeek McDonald & Harris and Stanley J. Padden, all of Seattle, for respondent.

HOLCOMB J.

This is an action for damages for fraud and deceit stated in two counts.

On trial to the court and a jury, at the close of the evidence on behalf of appellant a challenge interposed by respondent to the sufficiency of the evidence on several grounds was sustained by the court on the ground that both causes of action were barred by the statute of limitations. A motion for a new trial was overruled, and a judgment of dismissal entered.

An outline of the nature of the case may be had from a brief summary of the pleadings.

During the month of September, 1928, Frank H. Kilbourne died testate at Seattle leaving an estate in King county Wash., and nominating his widow, Clio Kilbourne, his executrix.

The complaint of appellant alleges that she and the deceased were husband and wife until on September 30, 1904, when they were divorced; that at the time of the divorce they made an oral agreement to settle their property rights on the basis of each party receiving one-half of all the property. At that time the deceased owned a one-third interest in the capital stock of the Cascade Laundry, a corporation, and a one-third interest in the stock of the Model Laundry, and by the agreement of settlement appellant became the owner of a one-sixth interest in the stock of each laundry. The evidence developed, however, that the parties owned as community property only a one-third interest of fourteen-fifteenths of the stock of the Model Laundry. The complaint further alleged that, although appellant was the owner of such stock, nevertheless, she left it with the deceased as her trustee and agent for the purpose of collecting the dividends on all the stock and remitting them to her and generally representing her in the affairs of the companies. It was then alleged that appellant was inexperienced in business affairs and had great trust and confidence in the deceased in business matters; that the deceased acted as her trustee and agent from September, 1904, until April 22, 1910, during which period he collected in her behalf dividends of these laundries in the total sum of $53,700 and remitted to her dividends only in the sum of $21,200, and concealed from her the existence of any other dividends which the companies had paid; that appellant was damaged in the sum of $32,500, with interest at 6 per cent. from the respective dates of payments, interest amounting to $21,200, or a total of $53,700; that she did not discover the fraud that was perpetrated on her until about September, 1928.

The second count of the complaint, summarized, alleges that all the allegations contained in the first cause of action are adopted and made a part of the second cause of action; that on April 22, 1910, the deceased purchased from appellant all of her capital stock in both companies for the sum of $32,500; that the value of the stock at that time was not less than $75,000; that the deceased personally and through his duly authorized agent, C. A. Kilbourne, misrepresented the value of the stock to appellant in that they stated that $32,500 was all the stock was worth, and that it had been paying dividends of no more than approximately $300 per month; whereas, in truth and in fact, it had been paying dividends for many years of approximately $750 per month; that appellant believed, relied upon, and sold her stock upon those misrepresentations, and that she did not discover the deceit until September, 1928; that she at all times had great confidence in the deceased and in C. A. Kilbourne.

The answer denies the material allegations of both causes of action, and affirmatively alleges that each cause is barred by the statute of limitations and by laches.

The reply denies the affirmative matter in the answer.

Appellant herself, being disqualified under our statute to testify as to the transactions had with the deceased as to the matters in controversy, was not offered as a witness. Much of the testimony as to the representations and the transactions between appellant and the deceased was given by a daughter of the deceased and of appellant by the marriage of the deceased with appellant. Notwithstanding the self-interest of that witness, as asserted by respondent, she was a competent witness, and her credibility as such, and the truth of her testimony, was for the jury.

Aside from her testimony as to the representations made by the deceased to appellant, some important facts adduced at the trial, of which notice should be taken, are these:

Much of the evidence concerning the business profits and dividends of the two laundries was destroyed by a fire which it was claimed occurred in 1929 after this suit was instituted, so that some of the book evidence could not be produced. The account books of the Model Laundry for the period of 1904 to 1910 were destroyed many years ago. Dividend checks of the Model Laundry were likewise removed from their customary place of deposit at that time. In 1928, another laundry company purchased the Cascade Laundry, and at that time, under the direction of the officers of the purchasing company, the account books, except for the preceding six years, were destroyed. However, appellant was able to produce from other sources certain financial statements and statements of dividends which those companies had paid during that period. The trial balances for the Cascade Laundry for the years 1909 and 1910 were also produced.

Under the foregoing circumstances, notwithstanding the objection by respondent at the trial and her argument on appeal, proof of compliance with Rem. Comp. Stat. § 3823, prescribing that dividends shall be declared by the corporate trustees, was impossible; appellant had the right, under such circumstances, to prove by the next best evidence the profits and dividends of the laundry companies. According to the evidence of witnesses who were familiar with the business of those companies during those years, among them a brother of the deceased, the bookkeeper and another who made an examination of the affairs of the companies, it was shown that the Model Laundry paid dividends from and after August, 1906, with the exception of the months of September and October of that year. The Cascade Laundry Company had always paid dividends. The dividends paid to deceased and Charles A. Kilbourne, also deceased at the time of the trial (a man of the same surname and a business associate, but of no kin to the deceased), were put in an account of their own which was called 'Cascade Special.' Taken as a whole, the record fairly bears out a summary of the evidence produced at the trial as stated by appellant for the purpose of sustaining both causes of action and not assailed by respondent, except as to the legal effect of some of it and its legal sufficiency, to be, in substance, as follows:

(1) In 1904, at the time of the divorce, appellant and deceased entered into an oral agreement whereby they divided equally their stock interests in both laundry companies and whereby appellant and the deceased each agreed to contribute $75 per month towards the support of the three children of the parties until the children were married, and that the stock in the laundry companies should remain under the control of the deceased, who agreed to collect and remit the dividends to appellant.

(2) That from September, 1904, to April 22, 1910, Frank H. Kilbourne acted as agent for appellant in collecting dividends. That he remitted to her the sum of $17,843.99 in dividends; that he actually collected for her as dividends the sum of $37,763.31, and that he failed to pay over to her during that period the sum of $19,919.32.

(3) That between January and April, 1910, F. H. Kilbourne requested C. A. Kilbourne to act as his agent for the purpose of negotiating the purchase of the stock of these two laundries with appellant.

(4) That C. A. Kilbourne, acting as such agent, misrepresented the condition of the laundries in the following particulars:

(a) He stated to appellant that, since she had only been drawing dividends of $300 per month, it would be a better investment for her to get the money out of her stock and invest it in a certain hotel business that might earn $500 per month.

(b) He stated that the Model Laundry never had paid any dividends, and that it was doubtful whether or not it ever would pay any dividends. It is shown that it had paid large dividends ever since 1906--more than $83,000.

(c) The stated that $30,000 was all Mrs. Kilbourne's stock was worth, when, in truth, it was worth between $75,000 and $100,000.

(5) The failed to state that, in 1907, Frank H. Kilbourne and himself had purchased certain stock owned by C. P. Stone and had given a mortgage on the Cascade Laundry to secure the larger portion of the purchase price.

(6) According to the evidence, Frank H. Kilbourne personally misrepresented the facts as follows:

(a) He stated that $30,000 was all appellant's laundry stock was worth.

(b) He stated that the Model Laundry had never paid any dividends, and the probabilities were that it never would pay any dividends.

(c) He advised appellant to sell out the stock in order to purchase a hotel lease, and...