RODGERS v. RODGERS

MILLER, Justice:

The plaintiff, John T. Rodgers,1 appeals from an adverse judgment in the Circuit Court of Brooke County as to the ownership of 516 shares of stock in the Wellsburg National Bank. Plaintiff asserted that the stock belonged to the estate of his father, Hazlett M. Rodgers, Sr. The defendant below, Hazlett M. Rodgers, Jr., asserted that the stock was his separate property by virtue of various inter vivos gifts from his father. The trial court granted a directed verdict in favor of the defendant as to 336 shares of the stock on the ground that the plaintiff's claim to those shares was barred by the statute of limitations. A jury concluded that the remaining 180 shares belonged to the defendant as well. We conclude that the trial court erred in directing the verdict as to the 336 shares of stock and in giving certain instructions at the trial of the ownership of the remaining stock. Consequently, we reverse the judgment of the circuit court and remand for a new trial.

I.

The salient facts giving rise to this controversy are as follows. In the 1930's, Hazlett M. Rodgers, Sr., began purchasing stock of the Wellsburg National Bank in the names of his then minor children. Over time, he purchased 336 shares of bank stock in the name of the defendant and 180 shares in the name of Mary Rodgers, his daughter.2 Even though the stock was registered in the children's names, Mr. Rodgers, Sr., either retained possession of the certificates or turned over them to his wife for safe keeping. During his lifetime, Mr. Rodgers, Sr., received the dividends from the bank stock and reported them as income on the joint federal income tax return he filed with his wife. When Mr. Rodgers, Sr., died in 1971, Mrs. Rodgers retained possession of the stock certificates and continued to receive and report on her tax return the income from the stock until her death in 1982. Both Mr. Rodgers, Sr., and his wife died intestate.

The defendant has been a practicing attorney in Brooke County for some thirty-seven years and acted as legal counsel for his parents. He handled virtually all of his parents' business affairs and acted as the attorney for their estates. It was not until September, 1983, however, that an appraisal of his father's estate was filed. The defendant's brother, R. Wayne Rodgers, who had been recently appointed administrator of the estate, refused to approve the appraisal because it did not include the 516 shares of bank stock.

In January, 1985, this suit was commenced on behalf of the heirs. The complaint alleged that the defendant had converted the stock and other assets to his own use and sought to compel him to return them to his father's estate. The defendant asserted that his father had made an inter vivos gift to him of the stock and that it was, therefore, not properly includable in the estate.

Trial of the action commenced on November 30, 1988. At the close of the plaintiff's case-in-chief, the defense moved for a directed verdict, partly on the ground that the plaintiff's claims were barred by the statute of limitations. The trial court granted the motion with respect to the 336 shares of stock initially registered in the name of the defendant, but submitted to the jury the question of the ownership of the remaining 180 shares. On December 1, 1988, the jury returned a verdict in favor of the defendant. By order dated February 15, 1989, the circuit court denied the plaintiff's motion to set aside the verdicts. It is from this order that the plaintiff now appeals.

II.

The first contention on appeal is that the trial court erred in directing a verdict in favor of the defendant with regard to the 336 shares of bank stock originally registered in his name. We have recognized that a verdict should not be directed against a plaintiff in a civil case unless he has failed to demonstrate a prima facie right to recover. Blair v. Preece, ___ W.Va. ___, 346 S.E.2d 50 (1986). See Church v. Wesson, ___ W.Va. ___, 385 S.E.2d 393 (1989); Hinkle v. Martin, 163 W.Va. 482, 256 S.E.2d 768 (1979); Jenkins v. Chatterton, 143 W.Va. 250, 100 S.E.2d 808 (1957). In determining whether a prima facie case has been shown, it is incumbent on the trial court to weigh the evidence in the plaintiff's favor, as we stated in Syllabus Point 1 of Jividen v. Legg, 161 W.Va. 769, 245 S.E.2d 835 (1978):

"`"Upon a motion to direct a verdict for the defendant, every reasonable and legitimate inference fairly arising from the testimony, when considered in its entirety, must be indulged in favorably to plaintiff; and the court must assume as true those facts which the jury may properly find under the evidence. Syllabus, Nichols v. Raleigh-Wyoming Coal Co., 112 W.Va. 85 [163 S.E. 767 (1932)]"'. Point 1, Syllabus, Jenkins v. Chatterton, 143 W.Va. 250 [100 S.E.2d 808] (1957)."

Our duty on appeal was stated in Syllabus Point 1 of Lindsey v. Bluefield Produce & Provision Co., 91 W.Va. 118, 112 S.E. 310 (1922):

See Belcher v. Norfolk & W. Ry. Co., 140 W.Va. 848, 87 S.E.2d 616 (1955), overruled on other grounds, Bradley v. Appalachian Power Co., 163 W.Va. 332, 256 S.E.2d 879 (1979).

The trial court directed the verdict on the ground that the plaintiff's claim to the 336 shares was barred by the statute of limitations. The trial court found that the plaintiff was aware of the defendant's claim to ownership of the stock as early as 1978 and apparently concluded that because the plaintiff took no action to dispute that claim until 1987, the claim was time barred.3

A.

The action below bore substantial equitable overtones. As attorney for his father's estate, the defendant stood in the position of a fiduciary. As we explained in Syllabus Point 4 of Bank of Mill Creek v. Elk Horn Coal Corp., 133 W.Va. 639, 57 S.E.2d 736 (1950):

In such circumstances, the claim would appear to be an equitable one controlled by the doctrine of laches rather than by a statute of limitations. As we stated in Syllabus Point 3 of Felsenheld v. Bloch Bros. Tobacco Co., 119 W.Va. 167, 192 S.E. 545, 123 A.L.R. 334 (1937):

See also Laurie v. Thomas, ___ W.Va. ___, 294 S.E.2d 78 (1982); Patrick v. Stark, 62 W.Va. 602, 59 S.E. 606 (1907).

It is clear that delay itself in bringing the suit will not bar laches, as we stated in Syllabus Point 1 of Acker v. Martin, 136 W.Va. 503, 68 S.E.2d 721 (1951):

"`Mere delay will not bar relief in equity on the ground of laches. "Laches is a delay in the assertion of a known right which works to the disadvantage of another, or such delay as will warrant the presumption that the party has waived his right." Bank of Marlinton v. McLaughlin, 123 W.Va. 608 [17 S.E.2d 213 (1941) ], Pt. 2, syl.' Pt. 2 Syl., Hoglund v. Curtis, 134 W.Va. [735, 61 S.E.2d 642 (1950)]"

See Kuhn v. Shreeve, 141 W.Va. 170, 89 S.E.2d 685 (1955); Pownall v. Cearfoss, 129 W.Va. 487, 40 S.E.2d 886 (1946). What constitutes laches depends on the peculiar facts of each case. Hartley v. Ungvari, ___ W.Va. ___, 318 S.E.2d 634 (1984); White v. Manchin, ___ W.Va. ___, 318 S.E.2d 470 (1984); Hertzog v. Fox, 141 W.Va. 849, 93 S.E.2d 239 (1956).

Moreover, where a fiduciary relationship exists and claims are made as to property allegedly appropriated by the fiduciary, the defense of laches is not favored. We spoke to this in Syllabus Point 7 of Work v. Rogerson, 152 W.Va. 169, 160 S.E.2d 159 (1968):

See Bank of Mill Creek v. Elk Horn Coal Corp., supra.

We note that the rights of beneficiaries or heirs-at-law with regard to claims against a personal representative or other fiduciary who has settled an account are set out in W.Va.Code, 55-2-7 (1972).7 This statute provides that "a suit to hold such fiduciary or his sureties liable for any balance stated in such account to be in his hands shall be brought within ten years" after the account was confirmed. More importantly, it also states: "The right to recover money paid under fraud or mistake shall be deemed to accrue, both at law and in equity, at the time such fraud or mistake is discovered, or by the exercise of due diligence ought to have been discovered." We have applied a similar rule in equity cases where no statute was involved. See, e.g., Bank of Mill Creek v. Elk Horn Coal Corp., supra; Trowbridge v. Stone's Adm'r, 42 W.Va. 454, 26 S.E. 363 (1896). If ten years is an appropriate period in which to bring a suit to compel a distribution of funds from the final accounting by a fiduciary, a like period would not necessarily measure laches where the fiduciary has concealed funds that should have been included in the accounting under the foregoing statute.

An analogy may be drawn to Haudenschilt v. Haudenschilt, 129 W.Va. 92, 39 S.E.2d 328 (1946), where the plaintiff filed a claim against the estate of his former guardian, whom the plaintiff alleged had failed to account for and turn over funds from the estate of the plaintiff's father. The commissioner rejected the claim on the theory that a 1934 accounting, designated as a final accounting by the guardian, was res judicata. The plaintiff subsequently filed a suit in equity to reopen the proceedings by surcharge and falsify.8 The lower court held the suit was barred under W.Va.Code, 44-4-20 (1923), which made reports of fiduciaries binding and conclusive once they were confirmed by a commissioner.9 On appeal, this Court rejected this conclusion and held in Syllabus Point 1 of Haudenschilt that the statute did not take away the equity powers of a court:

Moreover, the Court went on to hold in Syllabus Point 2 of Haudenschilt that the failure to properly account constituted fraud:

In order to clarify this concept of constructive fraud, the Court explained:

We conclude that where an individual occupies a fiduciary relationship to an estate and claims ownership to estate assets that are not conveyed to such fiduciary by the will or by intestate succession, a beneficiary of such estate cannot be charged with knowledge of such claim until an appraisement of the estate's assets has been filed. It is at this point that the due diligence and the actual notice inquiry begins. To hold otherwise is to allow the fiduciary not only to delay the administration of the estate to assert laches, but also to claim that he gave unofficial notice of what was in the estate to the beneficiaries. Our cases have stated that a fiduciary of an estate owes a high degree of care to diligently administer an estate. See, e.g., Tabler v. Weller, ___ W.Va. ___, 342 S.E.2d 234 (1986); In Re Estate of Lapinsky v. Sparacino, 148 W.Va. 38, 132 S.E.2d 765 (1963).

B.

Taken in the light most favorable to the plaintiff, the evidence shows that he knew for many years that the 336 shares of stock at issue were registered in the name of his brother. He also admitted that there were some conversations within the family, possibly in 1978, with regard to the distribution of the bank stock.

It was undisputed, however, that Mr. Rodgers, Sr., retained possession of the stock certificates, collected the dividends for his own use, and declared the income on his tax returns throughout his lifetime. When Mr. Rodgers, Sr., died in 1971, his wife continued this practice until she died in 1982. These actions were not consistent with the defendant's claims of complete ownership prior to the filing of the appraisal. The prerequisites for inter vivos gifts are set out in Syllabus Points 2 through 6 of Tomkies v. Tomkies, 158 W.Va. 872, 215 S.E.2d 652 (1975):

We need not decide the inter vivos gift issue as to the 336 shares of stock. We need only hold that under the foregoing law, the trial court committed reversible error in holding this suit was time barred.

III.

The other phase of this case involves the 180 shares of bank stock registered in the name of Mary Rodgers. When Mary Rodgers died in 1970, the stock was not listed as an asset of her estate. Testimony revealed that Mr. Rodgers, Sr., received the dividends during his lifetime and kept possession of the shares. According to the defendant, Mary endorsed the stock over to her father, who gave it to the defendant sometime between 1966 and 1971. However, these shares were not registered in the defendant's name until three months after his father's death. Even then, the certificates were held and the dividends were collected by Mrs. Rodgers.

The court submitted the question of the ownership of the 180 shares to the jury, who returned a verdict in favor of the defendant. The plaintiff assigns several errors with regard to the jury instructions.

A.

The first instruction concerned delivery of a gift of personal property. Over objection, the trial court gave an unnumbered instruction which stated that a gift could be made "with the right of enjoyment in the donee postponed until the death of the giver, if the property is delivered to a third person with instructions to deliver it upon the giver's death."10 This language is contrary to our statement in Syllabus Point 6 of Tomkies, requiring proof that "the donor made delivery and relinquished all dominion and control over the thing delivered, and that the donee accepted the gift." (Emphasis added).

In Dickeschied v. Exchange Bank, 28 W.Va. 340 (1886), we implicitly recognized that delivery of a gift to an agent who accepts the gift on behalf of the donee could satisfy the requirements of a valid gift. However, we also held in Syllabus Points 8 and 9 of Dickeschied that if the third party is not the agent of the donee, a valid gift can be accomplished only if such third party delivers the gift to the donee during the donor's lifetime:

See also E.M. Meadows Funeral Home v. Hinton, 119 W.Va. 609, 195 S.E. 346 (1938). See generally Annot., 57 A.L.R.3d 1083 (1974). These principles are consistent with the first sentence of W.Va.Code, 36-1-5 (1923), which governs gifts of personal property and provides: "No gifts of any goods or chattels shall be valid unless made by writing, signed by the donor or his agent, or by will, or unless actual possession shall have come to and remained with the donee or some person holding for or under him."11

The unnumbered instruction given by the trial court failed to inform the jury that the third party to whom delivery was made had to be an agent for the donee rather than the donor. In this respect, the instruction was erroneous.

B.

Complaint is also lodged against Defendant's Instruction No. 7, which was offered in conjunction with the defendant's claim that his father gave him the 180 shares of bank stock. The instruction stated that the "mere fact that the parents received the income from the 180 shares... does not prove that a gift was not made."12 This is not an accurate statement of the law under the facts of this case.

As we have previously pointed out in Syllabus Point 6 of Tomkies, supra, where a parol gift is claimed, the donor must have "made delivery and relinquished all dominion and control over the thing delivered." Certainly, the parents' retention of the dividends from the stock in the name of Mary Rodgers at the time of the purported delivery would be inconsistent with an inter vivos gift of the stock to the defendant. This instruction is misleading because it initially informs the jury that the retention of the income by the parent does not itself negate the gift if the jury find the 180 shares were delivered by Mr. Rodgers, Sr., to the defendant. The central issue was whether a gift had been made. This issue could not be resolved merely by determining whether the shares had been delivered as the instruction suggested. The retention of the income by the parents after the delivery was made would be contrary to the definition of an inter vivos gift set forth in Tomkies. Under Tomkies, the retention of the income would be a factor against a bona fide inter vivos gift.

C.

The plaintiff also challenges Defendant's Instruction No. 3, which advised the jury that if they found a pattern or plan in Mr. Rodgers, Sr.'s acts of giving bank stock to the defendant, they could also presume that this pattern or plan continued throughout his life. The instruction also went on to state that the jury could consider the presumption of the pattern of action in determining whether Mr. Rodgers, Sr., made a gift of the 180 shares to the defendant.13 Although the instruction did not use the term, it is clear from the discussion at trial that the parties and the court understood it to embrace the concept of "habit" under Rule 406 of the West Virginia Rules of Evidence.

Rule 406 permits the introduction of "[e]vidence of the habit of a person ... whether corroborated or not and regardless of the presence of eyewitnesses ... to prove that the conduct of the person ... on a particular occasion was in conformity with the habit[.]"14 In several cases prior to the adoption of Rule 406, we discussed evidence of habit, but did not attempt to pronounce any general rule. See Hudson v. Norfolk & W. Ry. Co., 106 W.Va. 437, 146 S.E. 525 (1928), cert. denied, 279 U.S. 866, 49 S.Ct. 481, 73 L.Ed. 1004 (1929); Casdorph v. Hines, 89 W.Va. 448, 109 S.E. 774 (1921); Bank of Greenville v. S.T. Lowry & Co., 81 W.Va. 578, 94 S.E. 985 (1918); Hartman v. Evans, 38 W.Va. 669, 18 S.E. 810 (1893). Cf. Bowman v. Barnes, 168 W.Va. 111, 282 S.E.2d 613 (1981); Yeater v. Jennings Oil Co., 75 W.Va. 346, 84 S.E. 904 (1914).15 See generally F. Cleckley, Handbook on Evidence for West Virginia Lawyers § 6.4 (1986).

It is generally agreed that in order to be admissible under Rule 406, evidence of a person's habit must be shown to be a regularly repeated response to similar factual situations.16 The trustworthiness of habit evidence lies in its regularity, so that the act or response is shown to be almost semiautomatic.17 See Wilson v. Volkswagen of Am., Inc., 561 F.2d 494 (4th Cir.1977), cert. denied, 434 U.S. 1020, 98 S.Ct. 744, 54 L.Ed.2d 768 (1978); Whittemore v. Lockheed Aircraft Corp., 65 Cal.App.2d 737, 151 P.2d 670 (1944); Fissette v. Boston & Maine R.R., 98 N.H. 136, 96 A.2d 303 (1953); Halloran v. Virginia Chems., Inc., 41 N.Y.2d 386, 393 N.Y.S.2d 341, 361 N.E.2d 991 (1977); Glatt v. Feist, 156 N.W.2d 819, 28 A.L.R.3d 1278 (N.D.1968); Charmley v. Lewis, 302 Or. 324, 729 P.2d 567, 64 A.L.R.4th 549 (1986); Bown v. City of Tacoma, 175 Wn. 414, 27 P.2d 711 (1933); French v. Sorano, 74 Wis.2d 460, 247 N.W.2d 182 (1976). See generally Annot., 64 A.L.R.4th 567 (1988).

Courts are divided as to how many prior instances of identical behavior must be shown in order to demonstrate a habit. See Annot., 64 A.L.R.4th § 27 at 598-601. It is probably not possible to prescribe a precise number because much depends on the nature of the behavior in question.18 We decline, however, to follow the Wisconsin view that the rule does not require any minimum number. French v. Sorano, supra; Chomicki v. Wittekind, 128 Wis.2d 188, 381 N.W.2d 561 (App.1985).

Some courts have limited evidence of habit where there are no eyewitnesses to the event which is the subject of habit testimony. If there are eyewitnesses, then habit testimony is not available. E.g., Gardner v. Geraghty, 98 Ill.App.3d 10, 53 Ill.Dec. 517, 423 N.E.2d 1321 (1981); Missouri-Kansas-Texas R.R. Co. v. McFerrin, 156 Tex. 69, 291 S.W.2d 931 (1956). See Glatt v. Feist, supra. Our Rule 406 specifically permits habit testimony "whether corroborated or not and regardless of the presence of eyewitnesses."19

Finally, as other courts have held, before being admitted, habit evidence is subject to the balancing test contained in Rule 403 to determine whether the probative value of the evidence is substantially outweighed by "unfair prejudice, confusion of the issues, or misleading the jury, or by considerations of undue delay, waste of time, or needless presentment of cumulative evidence." E.g., Utility Control Corp. v. Prince William Constr. Co., Inc., 558 F.2d 716 (4th Cir.1977); Bloskas v. Murray, 646 P.2d 907, 42 A.L.R.4th 527 (Colo.1982). See also Farnsworth v. Steiner, 601 P.2d 266 (Alaska 1979); Breimon v. General Motors Co., 8 Wn.App. 747, 509 P.2d 398 (1973).

From the foregoing general discussion, we do not find that Defendant's Instruction No. 7 was proper. The effect of this instruction was to reduce the complex issue of the elements necessary to demonstrate a valid inter vivos gift to a simple question: Was stock in the Wellsburg National Bank periodically given to the defendant by his father? The jury was informed that if this question was answered in the affirmative, there was a presumption that this habit or pattern continued through the lifetime of Mr. Rodgers, Sr. Moreover, the instruction assumed the defendant's possession of the stock. It did not advise, as required by Tomkies, that there could be no retention of ownership indicia.

The instruction did not limit the jury to consideration of some specific act of Mr. Rodgers, Sr., such as his past practice of purchasing stock and putting it in the names of his children, as illustrative of what he did with Mary Rodgers's shares. Rather, it sought to bypass the critical issue of whether a valid inter vivos gift had been made by focusing on the fact that Mr. Rodgers, Sr., had "given" bank stock to his son in the past. That fact, if proven, could not satisfy the necessary elements of an inter vivos gift set out in Tomkies, supra. We find this instruction to be erroneous.

D.

Finally, the plaintiff objected to the trial court's amendment of Plaintiff's Instruction No. 25.20 This instruction was patterned after Syllabus Point 3 of Pine & Cypress Manufacturing Co. v. American Engineering & Construction Co., 97 W.Va. 471, 125 S.E. 375 (1924), in which we pointed out that a person who is charged with conversion of property need not be shown to have acted in bad faith or to have been negligent:

We recently reaffirmed this Syllabus Point in Miami Coal Co., Inc. v. Hudson, ___ W.Va. ___, ___, 332 S.E.2d 114, 121 (1985).

The trial court deleted from Plaintiff's Instruction No. 25 the phrase "irrespective of good or bad faith, care or negligence, knowledge or ignorance." In Wholesale Coal Co. v. Price Hill Colliery Co., 98 W.Va. 438, 128 S.E. 313 (1925), we made it clear that this phrase referred to the intentions, actions, or knowledge of the defendant. This is the general rule elsewhere. See 18 Am.Jur.2d Conversion § 3 (1985).

We believe the deleted phrase was an essential part of an instruction on the elements of conversion. The omission of this phrase was error because it suggested that the defendant had to be guilty of some bad faith or wrongful intent before the plaintiff could recover. Indeed, this erroneous impression of the law figured in the closing argument of defense counsel, who equated conversion with theft. This completely misperceives the nature of a civil action for conversion, which is essentially the exercise of dominion over the personal property of another by a person who has no legal right to do so. The term "no legal right" is equated to a wrongful exercise of dominion. Bad faith or evil motive is not required.

E.

In sum, then, each of the instructions complained of contained an incomplete or incorrect statement of the law applicable in this case. Instructions which are incomplete or incorrect are erroneous. E.g., McGlone v. Superior Trucking Co., Inc., ___ W.Va. ___, 363 S.E.2d 736 (1987); McAllister v. Weirton Hosp. Co., ___ W.Va. ___, 312 S.E.2d 738 (1983); Sydenstricker v. Vannoy, 151 W.Va. 177, 150 S.E.2d 905 (1966); Wilson v. Edwards, 138 W.Va. 613, 77 S.E.2d 164 (1953). In Syllabus Point 5 of Yates v. Mancari, 153 W.Va. 350, 168 S.E.2d 746 (1969), we stated:

"`An erroneous instruction is presumed to be prejudicial and warrants a new trial unless it appears that the complaining party was not prejudiced by such instruction.' Point 2, syllabus, Hollen v. Linger, 151 W.Va. 255 [151 S.E.2d 330 (1966)]." See Birch v. Kelly, ___ W.Va. ___, 355 S.E.2d 57 (1987); Kendall v. Allen, 148 W.Va. 666, 137 S.E.2d 250 (1964); Overton v. Fields, 145 W.Va. 797, 117 S.E.2d 598 (1960). In Syllabus Point 5 of Sydenstricker v. Vannoy, supra, we stated:

There is nothing in the record to indicate that the verdict below was not based, at least in part, on the erroneous instructions. Consequently, we must reverse and remand for a new trial on this issue as well. See Steinbrecher v. Jones, 151 W.Va. 462, 153 S.E.2d 295 (1967); Sydenstricker v. Vannoy, supra.

IV.

For the foregoing reasons, the judgment of the Circuit Court of Brooke County is reversed, and the case is remanded for a new trial.

Reversed and remanded.