## Facts

- Robert H. Heimbach and John B. Fawcett agreed in writing (1980) to co-purchase 8,000 shares of restricted Medical Graphics Corporation stock, each paying half and holding equal interests; sales required mutual agreement and equal division of proceeds.
- The stock certificate was issued solely in Heimbach’s name to be held for both parties’ benefit.
- After restrictions ended and the stock increased in value, Heimbach sold shares without Fawcett’s consent, did not disclose the sales, and retained the proceeds, including a 1,500-share sale (March 1983) and a 1,000-share sale (April 1983).
- Later in 1983, during discussions about a jointly agreed sale, Fawcett authorized Heimbach to sell 1,000 shares for Heimbach’s own benefit; the courts treated this as ratifying the April 1983 1,000-share sale, but Heimbach still did not disclose the March 1983 sale.
- Heimbach also placed shares in a margin account in his name; additional shares attributable to Fawcett were liquidated to meet margin calls.
- Fawcett discovered the undisclosed sales and other unauthorized transactions in 1994, after the stock price had declined.
- Fawcett sued in 1996 for, among other claims, conversion of securities and violations of the Minnesota Securities Act; after a bench trial, the district court found three conversions, awarded damages using stock value at the time of each conversion, and awarded attorney’s fees under the Act.

## Issues

1. Whether damages for conversion of stock should be measured by fair market value at the time of each conversion or at discovery (or a reasonable time after discovery).
2. Whether attorney’s fees were recoverable under the Minnesota Securities Act based on these facts.

## Decision

- The court affirmed the damages award measuring conversion damages by the fair market value of the shares at the time and place of each conversion.
- The court rejected valuation based on discovery or a reasonable time after discovery, particularly where non-disclosure by the converter contributed to delayed discovery.
- The court reversed the award of attorney’s fees, holding the facts did not satisfy the statutory predicates for fee-shifting under the Minnesota Securities Act.

## Legal Principles

- The measure of damages for conversion is the fair market value of the property at the time and place of conversion; this rule applies to securities.
- A converter’s unauthorized disposition of a co-owner’s securities injures the owner when the ownership interest is wrongfully appropriated, not when the owner later learns of it.
- Attorney’s fees under Minn. Stat. ch. 80A are available only when the plaintiff proves a claim within the Act’s specific remedial provisions; common-law conversion between co-owners does not, by itself, establish a fee-eligible securities-law violation.

## Conclusion

The court held that conversion damages for stock are fixed at each conversion’s market value when the taking occurred, and it vacated the statutory attorney’s fee award because the misconduct, though actionable as conversion, did not fall within the Minnesota Securities Act provisions authorizing fee recovery.


Fawcett v. Heimbach, 591 N.W.2d 516 (Minn. Ct. App. 1999)