Devine v. Rayette-Faberge, Inc., 3-67 Civ. 261.

• Citation: 285 F. Supp. 1006
• Decision Date: 24 June 1968
• Docket Number: No. 3-67 Civ. 261.,3-67 Civ. 261.
• Parties: Raymond T. DEVINE, Plaintiff v. RAYETTE-FABERGE, INC., a Minnesota corporation, and Northwestern National Bank of St. Paul, a national banking corporation, Defendants and Third-Party Plaintiffs, v. HARRIS, UPHAM & CO., Incorporated, a Delaware corporation, and Reynolds & Co., a partnership, Third-Party Defendants.
• Court: United States District Courts. 8th Circuit. United States District Court of Minnesota

285 F. Supp. 1006

Raymond T. DEVINE, Plaintiff v. RAYETTE-FABERGE, INC., a Minnesota corporation, and Northwestern National Bank of St. Paul, a national banking corporation, Defendants and Third-Party Plaintiffs, v. HARRIS, UPHAM & CO., Incorporated, a Delaware corporation, and Reynolds & Co., a partnership, Third-Party Defendants.

No. 3-67 Civ. 261.

United States District Court D. Minnesota, Third Division.

June 24, 1968.

Feinberg, Mirviss, Meyers, Schumacher & Malmon, Minneapolis, Minn., for plaintiff Raymond T. Devine.

Levitt, Palmer, Bowen & Bearmon, Minneapolis, Minn., for defendant and third-party plaintiff Rayette-Faberge.

Oppenheimer, Hodgson, Brown, Wolff & Leach, St. Paul, Minn., for defendant and third-party plaintiff Northwestern Nat. Bank of St. Paul.

Faegre & Benson, Minneapolis, Minn., for third-party defendant Harris, Upham & Co.

Vennum, Newhall, Ackman & Goetz, Minneapolis, Minn., for third-party defendant Reynolds & Co.

NEVILLE, District Judge.

Involved here is the question of the proper statute of limitations to be applied to an alleged conversion and subsequent reregistration and reissue by a transfer agent of shares of corporate stock with particular reference to the Minnesota "borrowing" statute of limitations.

Plaintiff is, and at all times material was, a resident and citizen of California. He instituted the above lawsuit in this court against defendants Rayette-Faberge Inc. ("Rayette") and the Northwestern National Bank of St. Paul, Minnesota ("Northwestern Bank"), on September 18, 1967. Rayette is a Minnesota corporation with its principal place of business in New York. Northwestern Bank, situate in Minnesota, was at times material hereto one of the transfer agents and registrars for Rayette capital stock.

Defendants filed third-party complaints naming Harris, Upham & Co., Inc. ("Upham") and Reynolds & Company ("Reynolds") as third-party defendants. Upham is a Delaware corporation engaged in a national securities brokerage business with offices in Minnesota, Illinois and elsewhere. Reynolds is a partnership engaged in the same business and maintains similar offices in Minnesota, Illinois and other locations.

Irving Trust Company of New York is not a party in this action. It is involved here, however, as one of the transfer agents and registrars for Rayette stock from June 6, 1960 until June 14, 1963.

One Lipkin, also not a party to this action, is a resident of Chicago, Illinois. He engaged in some business transactions with plaintiff. The dispute at bar involving Rayette common stock grows out of a transaction occurring between February 26, 1959, and October 25, 1961. A brief synopsis of the undisputed facts on this motion for summary judgment against the plaintiff is necessary. The following facts appear undisputed from the pleadings, affidavits and briefs of counsel on file.

On February 26, 1959, an account styled "Lipkin and Devine" was opened in Reynolds' Chicago office. At Lipkin's urging, plaintiff furnished one-half of the funds necessary for the original purchase of Rayette common stock by the account, and personally loaned Lipkin some $8,000 for a part of Lipkin's proportionate share or interest in the account purchase. Though originally only 1,000 Rayette shares were acquired, by October 1959 the Lipkin and Devine account with Reynolds swelled through stock dividends and stock splits to an aggregate of some 6,000 shares.

The precise disposition of all 6,000 shares is not clear but it does appear that all were delivered out of or removed from the Reynolds' account by October 23, 1959. A certain 1,200 shares were taken out of the so called street name and transferred to and registered in the name of Lipkin and Devine. A partner in the Reynolds' Chicago office authorized the guarantee of the Lipkin and Devine signatures, endorsing three stock certificates representing the 1,200 shares.

The three certificates (Nos. 4090, 4753 and 5374), were pledged on August 17, 1961, to the Peoples National Bank of Chicago as collateral for a loan made in the name of Devine and Lipkin. Subsequently, and on or about October 11, 1961, an account was opened in the Chicago office of Upham in the name of Lipkin and Devine. On approximately the same day, Upham received a letter from the Peoples National Bank, dated October 11, 1961, enclosing the stock certificates described above in the name of Lipkin and Devine endorsed and with signature guaranteed by Reynolds. The letter requested Upham to sell the same and on the settlement dates to forward the proceeds for the sale of the 1,200 shares to the Peoples Bank. Another letter to the same effect, purportedly signed by Lipkin and Devine, was transmitted to Upham. On the same day the 1,200 shares were sold and the funds remitted to the Peoples Bank. Upham also guaranteed the signatures on the stock certificates. All of these transactions took place in Illinois and there are no allegations by any party that to this point any other State was involved.

On or about October 25, 1961, Irving Trust Company through its New York office, acted as transfer agent and registrar for Rayette in cancelling the three stock certificates (4090, 4753, 5374) representing the 1,200 shares and issuing new certificates therefor in the name of Upham. This entire transfer took place in New York. Northwestern Bank, then also a transfer agent and registrar did not effect this transfer or registration, and only after the fact did it receive written notice from Irving Trust Co. of the transfer and re-registration.

Plaintiff claims he had no knowledge relating to the removal and sale of the 1,200 shares; that his endorsements to the certificates and the letter sent to Upham were forged; that he was a 50% owner in the 1,200 shares and that he never received any of the proceeds. He sues Rayette and Northwestern Bank for the alleged wrongful conversion, and seeks either damages or the issuance of replacing shares. The court finds that plaintiff is barred as a matter of law either by the statute of limitations of the State of New York, or, alternatively, the statute of limitations of the State of Illinois. Thus the defendants' motions for summary judgment must be granted.

In this diversity action the court is bound by the laws of the State of Minnesota including its principles of conflict of law. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941).

Under Minn.Stat. § 541.05 (Supp. 1967) an action sounding in conversion must be brought within six years of the accrual of the cause of action. Thus, if the Minnesota statute of limitations were applicable, plaintiff would not be barred, for admittedly six years has not lapsed since the alleged conversion took place. Conversely, however, if one of the statutes of limitations of New York or Illinois is applicable plaintiff then is barred since under 83 Ill.Ann.Stat. § 16 (Smith-Hurd 1966)¹ the period for bringing suit is five years, while 7B N. Y. C.P.L.R. § 214 (McKinney 1963)² provides a three year limitations period. Defendants and third-party defendants earnestly contend that under Minn.Stat. § 541.14 (1965)³, Minnesota's so-called "Borrowing Statute,"⁴ the statutes of limitations either of New York or Illinois govern.

Section 541.14 Minn.Stat. provides in full as follows:

"When a cause of action has arisen outside of this state and, by the laws of the place where it arose, an action thereon is there barred by lapse of time, no such action shall be maintained in this state unless the plaintiff be a citizen of this state who has owned the cause of action ever since it accrued."

If, as the movants contend, the statutory elements of § 541.14 are fulfilled, then plaintiff's action is barred in Minnesota. Pattridge v. Palmer, 201 Minn. 387, 277 N.W. 18 (1937); Klemme v. Long, 184 Minn. 97, 237 N.W. 882 (1931); Burkhardt v. Northern States Power Co., 180 Minn. 560, 231 N.W. 239 (1930); Moe v. Shaffer, 150 Minn. 114, 184 N.W. 785, 18 A.L.R. 1194 (1921); Kamper v. Hunter Land Co., 146 Minn. 337, 178 N. W. 747 (1920); Drake v. Bigelow, 93 Minn. 112, 100 N.W. 664 (1904); Luce v. Clarke, 49 Minn. 356, 51 N.W. 1162 (1892). Section 541.14 thus removes what might otherwise be a complex conflict of laws question⁵ from the case, since only the Minnesota cases interpreting that section need be consulted. The narrow question is whether the statute applies in the context of the facts heretofore set out.

The borrowing statute prescribes three prerequisite conditions before barring a cause of action in this forum: (1) a cause of action arising outside of the state; (2) a statutory bar where the cause of action arose; and (3) a plaintiff who is not a Minnesota citizen. Plaintiff concedes that condition number (3) is satisfied. Thus, inquiry is limited to the first two criteria. Plaintiff contends that a genuine issue of fact exists and that summary judgment therefore is improper. However plaintiff points to no fact militating against the defendants' position which is well-established by affidavit. It is clear that plaintiff cannot merely stand on the allegations of his complaint, regardless of how well pled, in resisting a motion for summary judgment. First Nat'l Bank of Arizona v. Cities Service Co., 391 U.S. 253, 88 S.Ct. 1575, 20 L.Ed.2d 569; Lundeen v. Cordner, 356 F.2d 169 (8th Cir. 1966).

Under the Minnesota case authority cited supra, the conclusion that the plaintiff's cause of action arose outside Minnesota is compelled.⁶ As a general rule, a wrongful transfer and reissuance of stock certificates by the corporation creates a cause of action in conversion against the transferring corporation. See Mathews v. First Citizens Bank, 374 S.W.2d 794 (Tex.Civ.App. 1963); Fleckenstein v. Franklin Nat'l Bank, 32 Misc.2d 1032, 226 N.Y.S.2d 51 (Sup.Ct.1962); Casper v. Kalt-Zimmers Mfg. Co., 159 Wis. 517, 149 N.W. 754, 150 N.W. 1101 (1914); 12 Fletcher, Cyclopedia Corporations § 5551, at 683 (Rev....