Rath v. Armour & Co.

• Decision Date: 01 July 1965
• Docket Number: No. 8129,8129
• Citation: 136 N.W.2d 142
• Parties: Bennie RATH, Cleon Streigel, Ray Benson, Russell Folmer and Clarence Johnson, Members of the Capitol Milk Patrons Committee, for themselves individually and for all others similarly situated, Plaintiffs and Respondents and Appellants on Cross-Appeal, v. ARMOUR AND COMPANY, a foreign corporation, Defendant and Appellant and Respondent on Cross-Appeal.
• Court: North Dakota Supreme Court

Page 142

136 N.W.2d 142

Bennie RATH, Cleon Streigel, Ray Benson, Russell Folmer and

Clarence Johnson, Members of the Capitol Milk Patrons

Committee, for themselves individually and for all others

similarly situated, Plaintiffs and Respondents and Appellants on Cross-Appeal, v. ARMOUR AND COMPANY, a foreign corporation, Defendant and Appellant and Respondent on Cross-Appeal.

No. 8129.

Supreme Court of North Dakota.

July 1, 1965.

Syllabus by the Court

1. The effect of Section 31-11-06, N.D.C.C., is to enact into substantive law the equitable principle of estoppel and render it cognizable in both law and equity.

2. A showing of prejudice is necessary in order to establish estoppel.

3. There are three types of class actions provided for by Rule 23, N.D.R.Civ.P., which are generally designated as 'true,' 'hybrid' and 'spurious.'

4. In all three types of class actions it must initially appear that the class is so numerous as to make it impractical for the plaintiff or plaintiffs to bring all of the members before the court, and the party or parties appearing for the class must be members of the class claimed to be represented.

5. A spurious class action under Rule 23(a)(3), N.D.R.C.P., may be maintained where the right sought to be enforced on behalf of members of a class is several as to each member, but there are involved common questions of law and fact affecting these several rights for which common relief may be granted, though in the form of judgment for separate and varied amounts.

6. Where a spurious class suit is brought on behalf of members who have claims for varying amounts of damages the judgment rendered extends only to plaintiffs becoming parties before judgment.

7. Where, on an appeal from a judgment and from an order denying a motion for judgment notwithstanding the verdict, or, in the alternative, for a new trial, the evidence is insufficient to sustain the verdict, but it appears that the defects in proof may be remedied upon a new trial, the supreme Court is not required to order judgment notwithstanding the verdict but may order a new trial.

8. Upon an issue of the award of punitive damages the burden of proof is on the plaintiff and such damages may be awarded only when fraud, malice or oppression exist.

Cox, Pearce, Engebretson, Murray & Atkinson, Bismarck, for defendant and appellant and respondent on cross-appeal.

Breidenbach & Milhollan, Bismarck, for plaintiffs and respondents and appellants on cross-appeal.

JAMES MORRIS, Commissioner.

The plaintiff alleges that:

'They are the duly elected and acting members of the Capitol Milk Patrons Committee, elected by the patrons themselves to take charge of and operate on a temporary basis the business known as Capitol Milk Products Company of Bismarck, North Dakota, and that they bring this action on their own individual behalf and on behalf of all other patrons similarly situated.'

The defendant is a Delaware corporation, with principal offices in Chicago, Illinois, and a branch in Saint Paul, Minnesota, and is authorized to do business in the State of North Dakota. The nature of the business insofar as it pertains to this case is the manufacture of butter and other milk products.

The plaintiffs allege that on September 26, 1962, they sold and shipped to the defendant 210 sixty-four pound boxes of bulk butter which has an approximate fair market value of $7,400.00 and that

'The Plaintiffs have made repeated demands upon the Defendant for payment of the above referred to butter, but the Defendant has wrongfully and while being guilty of oppression, fraud and malice, refused to pay the Plaintiffs for their property and has converted the property or its proceeds to its own use and as a proximate result thereof the Plaintiffs have been damaged in the sum of Seven Thousand Four Hundred dollars ($7,400) actual and special damages.'

The plaintiffs prayed for judgment for both compensatory and punitive damages in the total amount of $9,900.00

'* * * and further that the Court order the aforesaid amount distributed to the entire class of Capitol Milk Patrons as their interest may appear.'

The jury rendered a verdict for $7,531.95 actual damages upon which the judgment was entered. It also returned a verdict for $250.00 punitive damages with respect to which the trial court ordered judgment for the defendant notwithstanding the verdict.

The defendant moved for a directed verdict when the plaintiff rested, an renewed its motion at the end of the trial, when both parties rested. The defendant made a timely motion for judgment notwithstanding the verdict or, in the alternative, for a new trial. The motion was denied with respect to actual damages, and granted with respect to punitive damages. The defendant appeals from the judgment and from the order denying the motion for judgment notwithstanding the verdict. The plaintiffs appeal from the trial court's order insofar as it grants the motion for judgment notwithstanding the verdict with respect to punitive damages.

In 1961, and for some years prior thereto, the defendant had operated in Bismarck, North Dakota, a plant at which were manufactured or processed butter and powdered milk. In November, 1961, the defendant sold its plant to Donald Wadzinski for $90,000.00. The purchaser paid $30,000.00 and gave a mortgage on the plant for $60,000.00. Wadzinski operated the plant until about the middle of September, 1962, under the name of Capitol Milk Products Company. The purchaser made monthly payments to the defendant amounting to about $1,000.00 or $1,160.00 per month. The payments appeared to have been made about the fifteenth of each month. The last payment by Wadzinski was in August, 1962.

During Wadzinski's operation of the plant he bought milk or cream from three hundred or more patrons living within a radius of about fifty miles of Bismarck. In September, 1962, he owed these patrons about $50,000.00, which he was unable to pay. These patron-creditors held a meeting with Wadzinski on the evening of September 17, 1962. At this meeting the patrons elected a 'Capitol Milk Patons Committee,' who are named in this action as plaintiffs. Some two hundred fufty patrons were present. The chairman of this committee testified:

'Mr. Wadzinski stood up and said he couldn't pay the farmers, that he would do everything in his power to see if the farmers couldn't get their money back in any way possible, and that he would turn over this business at Capitol Milk so they may run it and operate it and see if there was any way they could possibly take that business over.'

Wadzinski confirmed this testimony and it appears that he immediately relinquished control of the operation of the plant to the committee, who operated it from September 17 through the 26. During that period the operation was conducted by Ben Haines, a manager hired by the committee. The expenses of operation were paid by the committee.

The record contains no minutes of the meeting, and all of the negotiations with Wadzinski appear to have been oral. The committee maintained its own bank account, it paid nothing to Wadzinski, and he rendered no services to the committee during the period involved in this transaction. The plaintiff Rath did the hauling of the milk from the farms to the plant, and testified that the milk that he hauled belonged to the farmers and that he had no financial interest whatever in the outcome of this action.

During Wadzinski's operation of the plant, butter was sold and shipped to the defendant at Saint Paul, Minnesota, under the name Capitol Milk Products Company. During the period of operation by the committee, milk furnished by the patrons was processed into butter. The defendant received no notice of the change in the control or method of plant operation. On September 26, 1962, the butter shipment, from whence springs this controversy, originated at the plant, was turned over to Hart Motor Express under a straight bill of lading consigned to Armour Creameries, Saint Paul, Minnesota, the bill of lading being signed, 'Capitol Milk Products, shipper, per A. J. Brown.' It was accompanied by an invoice, at the top of which was stamped, 'Capitol Milk Products Co., 922 Front Street, Bismarck, North Dakota,' and recited that there was sold to Armour Creameries at Saint Paul, '210 64 # Boxes Bulk Butter.'

At the time the shipment was received the defendant did not know that there had been any change in the management or operation of the Capitol Milk Products Company. It withheld payment for the butter thus shipped for application on the past due payment that Wadzinski owed the defendant on his note and mortgage. The defendant first learned of the existence of the Capitol Milk Patrons Committee by receipt, on October 5, 1962, of a letter from Mr. Haines, as Acting Manager for the committee, in which he outlined his understanding of the operation in which he was engaged. He said:

'It was the concensus of opinion that as an operating business Capitol Milk might have some value whereas it would have little or no value when shut down. By a unanimous vote the patrons agreed to continue sending him their milk, selling it to themselves and processing it themselves, using the facilities of the Capitol Milk Products Co., managed by the Patrons Committee.'

He also outlined the selection of the committee and further said:

'I believe it is fair to state that the patrons would never have continued shipping their milk to Capitol Milk Products and did not intend nor did they in fact sell their milk production to Donald Wadzinski after the 17th of September. The butter which you hold was manufactured solely out of milk shipped after the 17th. It was and is the properly of the patrons themselves and owned by them and not by Donald Wadzinski. Accordingly the money which you hold is not payable to Donald Wadzinski nor may it be offset against any debt owed by Wadzinski to you. That money is the property of the patrons...