Wohlrabe v. Pownell

Decision Date05 August 1981
Docket NumberNo. 50208.,50208.
Citation307 NW 2d 478
PartiesRobert G. WOHLRABE, et al., Respondents, v. Roger D. POWNELL, et al., Defendants, Greeley Street Clinic, P. A., et al., Appellants.
CourtMinnesota Supreme Court

Dorsey, Windhorst, Hannaford, Whitney & Halladay, William J. Keppel and Diane D. Malfeld, Minneapolis, for appellants.

Cox & Goudy and Charles A. Cox, Minneapolis, for respondents.

Heard before OTIS, PETERSON, and TODD, JJ., and considered and decided by the court en banc.

OPINION

TODD, Justice.

Roger D. Pownell, an accountant, had worked for Dr. Robert G. Wohlrabe both full time and part time from 1966 to 1975. Pownell also performed accounting services for the Greeley Street Clinic, P. A. and the Greeley Profit-Sharing Trust from 1972 to the fall of 1974. In the summer of 1974, Pownell apparently diverted $64,000 of the trust's funds which were to have been used to purchase a bank note. The note failed to appear during the trust's year-end audit, and Pownell came under pressure to produce the note. Instead of returning the note, Pownell borrowed funds from Dr. Wohlrabe, purchased a cashier's check in the amount of $77,875, and gave the check to the trust. The extra $13,875 apparently represented repayment of $6,000 diverted from the clinic's funds and interest payments on both diverted funds. The trial court found the loan from Wohlrabe was obtained by fraud, imposed a constructive trust on the loaned funds, and ordered the Greeley Trust and Clinic to pay the money back to Wohlrabe. We vacate in part and remand with instructions.

Pownell and Wohlrabe had a business relationship which had lasted several years. Pownell began performing accounting services for Dr. Wohlrabe in 1966 or 1967 as an employee of an accounting firm. In early 1969, Pownell went to work for Dr. Wohlrabe as an accountant and office manager and continued in that position until mid-1972. At that time, Pownell set up his own accounting firm but continued to perform accounting services for Dr. Wohlrabe, who held him in high regard. In the spring of 1974, Pownell told Dr. Wohlrabe he had an opportunity to buy a business which he could resell for a profit. Pownell asked Dr. Wohlrabe to guarantee his note in the amount of $57,000, and Dr. Wohlrabe agreed. Later that summer, Dr. Wohlrabe discovered that he had signed as maker of the note rather than as guarantor. When Dr. Wohlrabe confronted Pownell with this fact, Pownell convinced Dr. Wohlrabe that Dr. Wohlrabe had been mistaken as to their original agreement. Dr. Wohlrabe accepted this explanation.

In late 1972, Pownell's accounting firm began working for the Greeley Trust and Greeley Clinic. In 1973, Pownell asked Edward Lechner, an attorney who specializes in counseling profit-sharing trusts, to advise the Greeley Trust. In 1974, Pownell hired Terry Rawstern as an accountant for his firm, and by August of 1974, Rawstern was in charge of the accounting work done for the Greeley Clinic. At about this time, Pownell sold his accounting business for the clinic to Kenneth Johnson and Allen Anderson. Rawstern continued handling the clinic accounts for his new employers. Pownell had no contact with the accounting services rendered to the clinic or to the trust after October 1974.

Pownell apparently embezzled two checks. In the summer of 1974, the Greeley Trust had instructed Pownell to invest $64,000. Pownell reported that the funds had been invested in a note through the First National Bank of St. Paul. Apparently such an investment was never made, and the funds were diverted by Pownell to an unknown use. In September 1974, Pownell had caused a check for $6,000 to be drawn against the clinic's funds. Pownell was to have deposited the check in the clinic's account for income tax and social security obligations, but this check was also apparently diverted by Pownell.

In December 1974, Lechner, on his own initiative, began examination of the Greeley Profit-Sharing account so as to determine the amount of annual contributions to be made to the trust. In examining the records, he noted the listing of the $64,000 note as an asset, but he could not find the note itself. Lechner called Rawstern to inquire as to the physical location of the note. Rawstern told Lechner that he only handled the clinic's accounts and that Pownell should be contacted about the trust's note. When reached by phone, Pownell advised Lechner that he would send Lechner the note which he had obtained through the First National Bank of St. Paul. After about a week or 10 days, in late December or early January, Lechner again attempted to reach Pownell regarding the note. Again Pownell said that he would get the note to Lechner, but this time Pownell also began to speak of the note as a Thorp Credit note instead of as a First National Bank note. Lechner then urged one of the clinic's doctors and Rawstern to pressure Pownell to get the note to him as he wanted to finish his work before leaving on vacation in February.

Rawstern advised his accounting firm that Lechner was having difficulty getting the note. Rawstern also advised the firm that the clinic credit manager had been sent to the Stillwater bank on January 14, 1975, to check the trust's safety deposit box for the note and that the box had been empty. This situation worried Johnson and Anderson, the owners of the accounting firm. Johnson told Rawstern that Rawstern should tell the doctors about the missing note "because they were being screwed." There is no evidence, however, as to whether Rawstern ever communicated Johnson's opinion to the doctors at the clinic. Anderson was so anxious about the missing note that he went to see Pownell on the morning of January 24 to talk to him about it. Anderson was not satisfied with Pownell's answers to his questions and called Lechner that morning and advised Lechner to take immediate action.

Initially, Lechner had not been very surprised by Pownell's delay in sending the note because he knew that accountants were very busy closing their clients' books in December and January. A few days before January 24, however, Lechner began to suspect that Pownell may have embezzled the $64,000. With Pownell's actions specifically in mind, Lechner talked about embezzlement with a friend who had worked for the F.B.I. On January 23, Lechner called Pownell's house and left a message that it was urgent that Pownell call him. Lechner then received Anderson's call. When Pownell returned Lechner's call, Lechner told him that a lot of people were pressuring him to get the note and that now he was pressuring Pownell. Lechner told Pownell that he had talked to a friend who was formerly with the F.B.I. and that he wanted a copy of the note by noon on January 24 or he had no other alternative but to think that Pownell had embezzled the money. Lechner also told Pownell that he was going to advise the doctors of his opinion of embezzlement if the note was not produced. Pownell advised Lechner that he would go to the First National Bank in St. Paul and get the note out of his safety deposit box. That was the first time Lechner had heard anything about the note being in a safety deposit box.

Lechner was out of his office at noon on January 24, but he returned at about 2:30 p. m. On his desk he found a cashier's check in the amount of $77,875, drawn by the First National Bank of St. Paul, payable to the Greeley Street Clinic, P.A. Profit-Sharing Plan. The name of the remitter did not appear on the check. Lechner testified that when he found the check he was surprised and confused and he immediately called Rawstern. Lechner told Rawstern that he could not account for the amount of the check. Lechner asked Rawstern to review his records to determine whether $64,000 was the amount given by the clinic to the trust so that a bank note could be purchased. Rawstern reviewed the records and found that the $64,000 figure was correct. He also found, however, that a $6,000 clinic check supposedly drawn to pay tax and social security obligations had been deposited in a Minneapolis bank instead of in the Stillwater bank as was normal.

Lechner testified that it appeared to him and Rawstern that Pownell had diverted $64,000 of trust funds and $6,000 of clinic funds and that the balance of the check, $7,875, represented interest. Rawstern requested that Lechner immediately deliver the check to the clinic instead of mailing it. Despite objection, Lechner agreed to do so. When he arrived at the clinic, he met with Rawstern and one of the doctors whose identity he could not recall. Lechner instructed Rawstern to deposit all but $6,000 of the check in the trust account and to deposit the $6,000 in the clinic account. Lechner testified that Rawstern and the doctor were relieved to have their money and that his comment was that the "whole thing still stinks."

Dr. Wohlrabe testified that Pownell came into his office at about 1 p. m. on January 24. He described Pownell's condition as severely agitated, excited, and, in fact, Pownell was crying. Pownell told Dr. Wohlrabe that he had a really big problem, that he needed a large amount of money, and that he wanted Wohlrabe to help him. Pownell then explained that a representative of the Greeley Clinic, whose members were unknown to Dr. Wohlrabe, had contacted him about a $70,000 Thorpe note which he had purchased for the clinic. The representative told Pownell that if he did not show up with the note or cash within two hours, he would be reported to the county attorney. Pownell further told Dr. Wohlrabe that the note was in the safe at the clinic, but that the representative could not find it and would not let Pownell look for it. Pownell said that the doctor who usually handled these matters was on vacation and would not be back for two weeks.

Dr. Wohlrabe accepted this story without question because he did not have the slightest doubt as to Pownell's integrity despite the...

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