Barber v. Sheridan Trust & Savings Bank

• Decision Date: 10 May 1938
• Docket Number: 2028
• Parties: BARBER ET AL. v. SHERIDAN TRUST & SAVINGS BANK ET AL
• Court: Wyoming Supreme Court

78 P.2d 1101

53 Wyo. 65

BARBER ET AL. v. SHERIDAN TRUST & SAVINGS BANK ET AL

No. 2028

Supreme Court of Wyoming

May 10, 1938

APPEAL from the District Court, Sheridan County; HARRY P. ILSLEY Judge.

Action by Florence Wallace Barber and another against the Sheridan Trust & Savings Bank and others for an amount allegedly lost by the plaintiffs because of negligence of the defendants in selling stock, pledged as collateral security, for less than the par value of the stock, wherein J. T. Kessinger was substituted as a party defendant upon the death of defendant J. E. Lee. The substituted defendant was dismissed from the case during the course of the trial. From an adverse judgment, the defendants appeal.

Reversed with instructions.

For the appellants, there was a brief and oral argument by Louis J O'Marr of Sheridan, Wyoming.

No fraud is alleged or proven in this case. A pledgee in making sale of collateral must act in good faith and use a reasonable degree of skill and diligence to obtain what the collateral is worth, and conserve pledgor's rights, so far as is consistent with his own protection, but he is not required to exercise the same degree of care that a prudent man would exercise in the sale of his own property. 14 C. J 743; 49 C. J. 1005. The action was for damages for conversion. In a case of this kind, the measure of damages is the difference between the market value of the pledge and the amount of the debt secured thereby. 49 C. J. 1011; Hallack v. Gray, (Colo.) 34 P. 1000, 14 C. J. 738; Farm Investment Company v. Wyoming College, (Wyo.) 69 P. 561. Respondent failed to prove the actual value of the stock. 65 C. J. 149. Hetrick v. Smith, (Wash.) 122 P. 363; Morgan v. Johns, (Ore.) 165 P. 371; Maben v. Scott, (Colo.) 54 P. 860; Atlantic National v. Korrick, (Ariz.) 242 P. 1009; Hiscock v. Bank, 206 U.S. 28. It is doubtful whether the stock had anything but a liquidating value. Hatch Bros. v. Black, 25 Wyo. 109, 165 P. 518. The court erred in receiving evidence of other sales, over the opposition of defendants, thus giving the jury an impression of values not based on facts. The court erred in refusing defendant's requested instructions numbered 4, 5 and 6. At no place in the instructions given were the jury given a rule by which they could determine the value of the stock. A pledgee is under no obligation to take any chances on the market, or wait for a more favorable one than exists when he elects to sell. Hudgens v. Chamberlain, (Cal.) 120 P. 422; Williams v. Parker, (Cal.) 157 P. 550. The court erred in giving instruction numbered six. Wyoming Coal Mining Company v. Stanko, 22 Wyo. 110; Justice v. Brock. 21 Wyo. 281; 64 C. J. 168; Anderson v. Oregon R. Co., (Ore.) 77 P. 119; McKeon v. Lissner, (Cal.) 223 P. 965; 64 C. J. 742, 746. The court erred in giving instruction 5, in that there is nothing in it to guide the jury in determining the value of the stock. The court erred in denying defendant's motions for a directed verdict. The judgment should be vacated and the trial court ordered to enter judgment for defendants. Sec. 89-4803, R. S. 1931; Slane v. Curtis, 41 Wyo. 402; Snowball v. Maney, 39 Wyo. 84; 270 P. 167.

For the respondents there was a brief and oral argument by H. Glenn Kinsley and John G. Hutton of Sheridan.

This was an action for wrongful sale and conversion of the plaintiff's seventy shares of the capital stock in the Sheridan Artifical Ice Company, which was pledged to secure payment of a loan. The principles of law are simple. A trust relation exists between a pledgor and a pledgee of personal property. Hudgens v. Chamberlain, et al., (Cal.) 120 P. 422; Tracy v. Stock Assur. Bureau, (Cal. ) 23 P.2d 41; Dodge v. Scripps, (Wash.) 37 P.2d 896; Bank v. Richardson, 176 Mo. 270, 56 S.W. 1117; Bank v. Dunn, 24 F.2d 479; 49 C. J. Secs. 52 and 262. A pledgee is bound to exercise the utmost good faith. A literal compliance with the terms of the power of sale does not necessarily constitute good faith. A pledgee is liable to the pledgor, if by his acts, he has lulled the pledgor into a sense of false security. Schroeder v. Young, 161 U.S. 334; Winbigler v. Sherman, (Cal.) 165 P. 943; Moses v. Grainger, 53 L. R. A. 857. A pledgee may waive his right to sell without notice. 49 C. J. 996. The measure of damages is the difference between the par value of the stock on day of sale and the amount of indebtedness. 49 C. J. 961; Warner v. Powelson, 240 F. 628; 8 R. C. L. 488, and see note at 96 A. L. R. 74. Upon the question of interest, see City of Rawlins v. Murphy, 19 Wyo. 238. The authorities cited by appellant differ from the present case on the facts. The evidence was ample for the jury to determine the reasonable value of the stock. The authorities cited by appellant are cases where stock was sold for an established market price. Hatch Bros. v. Black, 25 Wyo. 109, involved the measure of damages for the loss of growing crops, and is not applicable to the present case. The sale of like property at the same time and under the same conditions is evidence of value and should be received. 1 Wigmore on Evidence, Sec. 463. The instructions given by the Court clearly stated the law with reference to this matter. Defendants did not renew their motion for a directed verdict at the close of all evidence. Boyle v. Mountford, (Wyo.) 270 P. 537. A verdict rendered on conflicting evidence will not be disturbed, even though the appellate court be of the opinion that the verdict is against the preponderance of the evidence. Western Union Tel. Co. v. Monseau, 1 Wyo. 17; O'Brien v. Chiniquy, 2 Wyo. 56; Chicago, B. & Q. R. Co. v. Morris, 16 Wyo. 208; Henderson v. Coleman, 19 Wyo. 183; Hanson v. Shelburne, 23 Wyo. 445; Worland v. Davis, 31 Wyo. 108; Montgomery v. Empey, 36 Wyo. 37; Chapman v. Ewing, 46 Wyo. 130; 111 A. L. R. 742 and note.

RINER, Justice. KIMBALL, Justice, and TIDBALL, District Judge, concur.

OPINION

RINER, Justice.

This proceeding, by direct appeal, asks the review of a record made in a cause tried in the district court of Sheridan County, wherein Florence Wallace Barber and W. H. Wallace were plaintiffs and two banking corporations, Sheridan Trust and Savings Bank and the Bank of Commerce, together with A. J. Ham, John J. Bentley and J. E. Lee were defendants. Lee having subsequently died, J. T. Kessinger was substituted in his stead as a party defendant. However, as it subsequently developed that he had nothing to do with the transactions involved in this litigation, the court, in the course of the trial, dismissed him from the case. The evidence of the parties was submitted to the court, with a jury in attendance, and resulted in a verdict for the plaintiff, upon which a judgment was in due course rendered against all the defendants who have united in this appeal.

The first four paragraphs of plaintiff's petition, in substance, alleged that Florence Wallace Barber resides in Utah and W. H. Wallace in Sheridan County, Wyoming; that the defendants Lee, Ham and Bentley composed a "shareholders committee" of the banking corporation Sheridan Trust and Savings Bank, which is alleged to be in the process of liquidation, its assets being in their hands, subject to certain security rights of the Bank of Commerce of Sheridan, Wyoming, in some or all of such assets; that said last mentioned bank has and claims some interest in the promissory note given by plaintiffs, as hereinafter described; that the plaintiffs at the times mentioned in said pleading were joint owners of a certificate for seventy shares of the capital stock of Sheridan Artificial Ice Company, a Wyoming corporation; that on December 19, 1932, plaintiffs executed and delivered to the defendant, Sheridan Trust and Savings Bank, their promissory note for $ 1600.00, depositing with said bank as collateral security therefor the aforesaid stock certificate, which was of the par value of $ 50.00 per share; and that said note and collateral security agreement provided that said certificate was pledged, a copy of the note and collateral agreement being attached to and made a part of the petition as Exhibit A.

This note was made payable to the Sheridan Trust and Savings Bank on August 26, 1933, bore interest at eight per centum per annum, from February 26, 1933, until due and ten per centum per annum thereafter. The collateral agreement attached thereto, signed by the plaintiffs, provided among other things that upon non-payment of the note at maturity or of the interest thereon when due the "said Bank, or its assigns, is hereby given full power and authority to sell, transfer and assign, free from any right of redemption, the whole, or any part, of said property, or substitutes therefor, or additions thereto, if any, either at public or private sale, without demand or notice or advertisement, which are hereby expressly waived, and said Bank, or its assigns, may purchase at such sale. And upon such sale the said Bank, or its assigns, shall deduct from the proceeds all fees, costs and expenses thereof, and apply the residue to the payment of this note, or of any liability or liabilities of the undersigned, at the option of the said Bank, or its assigns, and shall turn over the surplus, if any, to the undersigned; but in case of any deficiency the undersigned shall be jointly and severally liable therefor."

The remaining paragraphs of said petition charged, to summarize them briefly: Paragraph 5, that on or about October 9, 1935 the defendants wrongfully converted said shares of stock to their own use and sold same to F. S. Robinson of Sheridan, Wyoming, for $ 2,003.56, the amount then claimed by defendants to be due as principal and interest on said note; Paragraph 6, that on said date Robinson was negotiating for the purchase of all of the stock...