West v. American Telephone & Telegraph Co.
| Citation | 54 Ohio App. 369,7 N.E.2d 805 |
| Parties | WEST et al. v. AMERICAN TELEPHONE & TELEGRAPH CO. |
| Decision Date | 09 November 1936 |
| Court | United States Court of Appeals (Ohio) |
Syllabus by the Court .
1. A wrongful transfer by a corporation of certificates of its stock, with knowledge of the rights therein of a third person will render such corporation liable as for conversion.
2. Where title to stock is vested in one for life, with remainder in another, and the corporation wrongfully transfers such stock to the life tenant absolutely, and thereafter transfers it to a bona fide purchaser from such life tenant, the remainderman is entitled to demand of the corporation the return of these certificates of stock or of other stock of equal par value, the same to be issued in such a manner as will protect the interests of all parties concerned.
3. In the event of refusal or inability to comply with such demand the remainderman may maintain an action against the corporation for damages for such refusal or failure. But until such demand is made, no cause of action exists against the corporation.
Tolles, Hogsett & Ginn, William B. Cockley, and P. J Mulligan, all of Cleveland, for appellant.
Garfield, Cross, Daoust, Baldwin & Vrooman and Maurice J. West, all of Cleveland, for appellees.
Charles P. West, Sr., died March 21, 1926, leaving as his next of kin the two plaintiffs-appellees, his sons, and leaving his widow, Grace C. West, who was incidentally, both the aunt and the stepmother of the plaintiffs. The widow and the two sons are all now living.
The decedent died testate, and items 2 and 3 of his will are in the following language:
‘ Item II. I give, devise and bequeath to my beloved wife Grace C. West in lieu of her dower and year's support, the use, income, rents and profits of all of my property of every kind and nature and wheresoever the same may be located, for and during her natural life, to use, enjoy and dispose of the same as she may deem best.
‘ I hereby give to my said wife authority with the consent and advice of my two sons hereinafter named, without the intervention of the Probate Court, to convert any or all of my real estate or securities into money and to invest and reinvest the same and any other moneys I may have at the time of my decease, in such manner as she and my said sons may determine.
The widow was named as executrix, without bond, qualified as such in the probate court of Cuyahoga county, paid all the debts of the estate and the costs of administration. Thereafter, on January 14, 1927, the executrix filed in the probate court of Cuyahoga county an application which listed among the assets of the estate shares of the capital stock of various corporations, included therein being 92 shares of the capital stock of the appellant, American Telephone & Telegraph Company. The application recited:
Attached to this application appeared the following, duly signed: ‘ We, the undersigned, Charles P. West, Jr., and Maurice J. West, hereby consent to the foregoing distribution in kind.’
The probate court entered an order which, after reciting the application and the consent heretofore referred to, concluded with: ‘ Wherefore said application is granted, and it is by the court ordered that said applicant, Grace C. West, be and she is hereby authorized and directed to distribute in kind and transfer unto herself as the widow of said Charles P. West, deceased, and the distributee entitled thereto, the aforesaid stocks as prayed for.’
On February 2, 1927, Grace C. West delivered at the transfer office of the appellant in New York City the certificates for the 92 shares duly indorsed by her as executrix, together with a certified copy of the will of the decedent, of her application with the consent of the appellees attached, and of the journal entry of the probate court, and, upon the production of these documents, the appellant caused to be issued a new certificate for said 92 shares to Grace C. West, individually, and without limitation.
Some time thereafter, presumably in 1929, Grace C. West sold these shares of stock represented by her certificate to an innocent purchaser for value, and on November 2, 1929, this purchaser presented the certificate, with the duly executed transfer by Grace C. West, at the transfer office of the appellant and obtained in lieu thereof a new certificate issued to such bona fide purchaser.
The record shows that the appellees had no notice until the spring of 1934 of the fact that the stock had been transferred to Grace C. West individually, or that she had sold and transferred the same to any other person. In June, 1934, they brought suit against the appellant for the value of the stock on the theory of conversion.
The amended answer filed by the company contained three defenses: First, that each of these transfers made by its was regularly and properly made, and that consequently there was no liability attached to it; second, that the plaintiffs were estopped by their conduct from raising this claim in this action; and, third, that their cause of action, if any, was barred by the statute of limitations of four years (Gen.Code, § 11224).
The cause came on for trial in the court of common pleas before a jury, and, during the progress of the trial, by consent of counsel the jury was discharged and the cause was submitted to the court. While the trial court in his opinion used expressions which might indicate an uncertainty as to the nature of plaintiffs' cause of action, he, nevertheless, apparently did treat the cause as one for damages for trover or wrongful conversion of property, and found on behalf of the plaintiffs and rendered judgment against the defendant in the sum of $29,526.47, being the amount which he found to be the value of the stock as of November 4, 1929, together with interest thereon at 6 per cent. from that date.
From that judgment an appeal was perfected to this court upon questions of law. For some reason counsel for appellant do not assign as error the failure of the trial court to sustain the motion of the defendant for judgment at the conclusion of the plaintiff's evidence, or at the conclusion of all the evidence, although the record shows that such motions were made. However, one assignment of error is that the court overruled the appellant's motion for a new trial, and a reference to that motion shows that one ground of it was that the judgment of the trial court was contrary to law, and it seems to us that counsel have thereby saved the question, and that this court can with propriety consider the proposition as to whether or not the defendant was entitled to judgment upon the pleadings and the evidence.
We find no difficulty in arriving at the conclusion that this corporation was at fault in making these transfers as they were made. It has before it a copy of the will of the testator with the other papers attached. These papers clearly show that Grace C. West had only a life estate in the property and that these appellees had an interest therein as remaindermen. The company was put upon its guard, and in issuing new certificates of stock did so at its peril, if it did not issue the same in accordance with the rights of the interested parties thereto. Having made this wrongful transfer to the widow in 1927, it was not protected or saved by her subsequent transfer of the stock to a bona fide holder in 1929. While, as stated by counsel for the appellees, the original transfer to the executrix, as an individual, was wrongful, the subsequent transfer to an innocent holder wrought the harm.
Furthermore, we cannot, and do not, find that the plaintiffs were estopped from asserting any claim against this corporation; they consented to nothing more than the distribution of the stock in kind.
The general proposition is correctly stated in 6 Thompson on Corporations (3d Ed.) 307, § 4435, wherein it is held that: ‘ A wrongful transfer with knowledge of the claims or rights of a third person will render a corporation liable as for conversion.’
An interesting case is that of Stewart et al., Trustees, v. Firemen's Ins. Co. of Baltimore, 53 Md. 564, where, in discussing a state of facts somewhat similar to the facts in the instant case, the court held: ‘ There was such negligence on the part of the appellee's officers (it being chargeable with knowledge), in allowing the transfers of the stock to be made, as rendered the appellee responsible to the appellants for the resulting loss.’
There is, therefore, in our judgment, no question as to the wrongful and harmful act of this corporation, and that, as a result thereof, the appellees have some basis of action against it. Taking the view which we do, however, there is no occasion for passing upon the defense of the statute of limitations or the question as to whether the trial court correctly figured the damages, and these two matters become altogether unimportant.
In this case, under the facts as shown, the appellees are remaindermen. They have not at any time had, or do they now have, the right of possession of the original certificates of stock, or of any certificates issued in...
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