Nature of the Case
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Facts
In the summer of 1980, P had the opportunity to purchase shares of common stock in Medical Graphics Corporation (MGC). The stock was 'legend stock,' and it could not be sold, traded or pledged for a period of two years. The minimum block of shares that could be purchased was 8,000. P didn't have the money to purchase the minimum increment and asked D to join him in the purchase of the stock. P and D agreed they would contribute equally to the purchase of 8,000 shares at $1.90 per share. Their agreement was memorialized in a document entitled 'Letter of Understanding,' dated August 21, 1980. They would hold equal and undivided interests in the shares and the shares which could be sold only by agreement of both parties with the proceeds divided equally. On March 4, 1983, D sold 1,500 shares of the MGC stock at a price of $11.75 per share and received $17,623.50. D did not request P's permission to sell the shares. He also failed to disclose the sale to P and did not divide the proceeds. On April 23, 1983, D sold 1,000 shares of stock at a price of $11.00 per share. The sale was again made in secret, and the proceeds of the sale were not divided. In 1983, P wanted to sell some shares, and as part of that agreement he ratified the 1,000-share sale of D, but D did not disclose the first sale he had made of 1,500 shares. On September 15, 1983, D again sold shares without telling P and without sharing the proceeds of the sale. D sold 500 shares of the stock at $12.00 per share, receiving a total of $5,839.88. Sometime prior to January 1985, D deposited the remaining 4,000 shares of the stock he and P had purchased in a margin account in his own name. He also pledged the shares of stock as security and, through the margin account, borrowed funds against those shares. D did not advise P of these actions. D borrowed money five times against the stock. The first four borrowings had been used to purchase stock that remained in the margin account, the last resulted in a check payable to D or his order. This money was not divided with P. In October 1986, D borrowed $7,001.75, which he used to purchase MGC stock. This stock remained in the margin account. By January 1987, the value of the stock reached $14.50 per share. In February 1987, D increased the debt against the stock by more than $25,000. The indebtedness of the margin account exceeded the value of the shares, and the shares of stock were sold as part of a margin call. D was required to pay in $16,000 to balance the account. During the entire sequence of events, D never advised P that he had deposited the shares in a margin account or that the shares had been sold. D did not disclose that the original shares had been sold or lost; instead, he made statements to lead P to believe the stock was still held pursuant to their agreement and that holding the stock was a wise investment. Eventually, the truth was revealed, and D purchased 3,000 shares of the stock at the then-current market price of $6.75 per share and gave P a certificate for 3,000 shares of MGC stock on May 13, 1994. P sued D for conversion, fraud, breach of contract, and breach of fiduciary duty. The court found D converted P's shares on three occasions. It concluded the damages for each instance of conversion would be the value of the stock at the time of the conversion. The court also awarded attorney fees. D appealed.
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