Lacks v. R. Rowland & Co., Inc.

• Decision Date: 04 August 1986
• Docket Number: No. 50148,50148
• Citation: 718 S.W.2d 513
• Court: Missouri Court of Appeals
• Parties: 1 UCC Rep.Serv.2d 880 Cecilia LACKS, Plaintiff-Respondent, v. R. ROWLAND & CO., INC., Defendant-Appellant.

Page 513

718 S.W.2d 513

1 UCC Rep.Serv.2d 880

Cecilia LACKS, Plaintiff-Respondent, v. R. ROWLAND & CO., INC., Defendant-Appellant.

No. 50148.

Missouri Court of Appeals,

Eastern District,

Division Two.

Aug. 4, 1986.

Motion for Rehearing and/or Transfer

to Supreme Court Denied

Sept. 24, 1986.

Application to Transfer Denied

Nov. 18, 1986.

Martin P. Zucker, St. Louis, for defendant-appellant.

David M. Harris, St. Louis, for plaintiff-respondent.

REINHARD, Judge.

Defendant appeals from a judgment for plaintiff, entered in accordance with a jury verdict, awarding plaintiff $874.00 actual and $7,500 punitive damages on her conversion claim. We affirm.

The present dispute arose from a stock transaction involving plaintiff and defendant, a company which provides brokerage services. On May 7, 1981, plaintiff telephoned Tom Walter, a stock broker employed by defendant, and placed an open order to sell her 200 shares of Reece Corporation stock if the price of that stock reached 11 3/4 per share. On May 20, 1981, defendant was notified by its representative on the floor of the New York Stock Exchange that plaintiff's stock had been sold at the requested price. Defendant sent plaintiff confirmation of the sale and informed her that she should send the stock certificates to defendant by May 28, 1981, the settlement date. Plaintiff promptly mailed defendant her two certificates, each representing 100 shares, and defendant sent plaintiff a check for $2,285.51 on May 27, which constituted the proceeds from the sale less defendant's commission and taxes. Plaintiff received the check on May 28, and deposited it in her checking account by mailing it to her bank. On Thursday, May 28, defendant was notified by the New York Stock Exchange that there had been a mistake and that the price had never reached 11 3/4. Jerry Dolan, defendant's compliance officer and a vice president at the time of the transaction, testified that under New York Stock Exchange rules no trade occurred and the mistakenly reported "fill" could not be honored.

When Mr. Walter was informed of the error he attempted several times to contact plaintiff, without success. Prior to leaving on a business trip the next morning, Mr. Walter instructed his secretary to inform plaintiff that there had been a mistake at the stock exchange and no trade occurred. Plaintiff testified that she received a phone call from the secretary on May 29, and was told that there "was something wrong" with the transaction and that "it was going to be cancelled." When plaintiff asked to speak to Mr. Walter, the secretary explained that he was out of town, but would be back on Monday, June 1. Plaintiff left a message for him to call her. Plaintiff received written notice of the cancellation on June 2. On that same day she contacted Walter, who told her that the stock never reached 11 3/4 and that there had been a mistake. Walter gave plaintiff Mr. Dolan's phone number, and she called him as well. Mr. Dolan testified that he told her "there was a report of a fill from the New York Exchange, an inaccurate report, which was later classified as an error in transmission. Somebody, some person, wrote out a fill on a piece of paper and transmitted a fill to us in St. Louis." He further informed her that defendant was "prohibited by law [from honoring] that trade if the trade in fact did not occur ..." Both Dolan and Walter told plaintiff they could sell the stock for her if she so desired, but she replied that she "never wanted to deal with R. Rowland again; I was through with them."

On June 3, after discussing the matter with her sister and her brother-in-law, an attorney practicing in Chicago, she called Walter again and told him:

... that after the conversations yesterday that I wanted--that what I wanted to do was forget the whole thing. First I stated, that I wanted my stocks back and I will pay you back the money. Where are my stocks? And, he said you know where your stocks are, and I said, I don't know where the stocks are; I want you to tell me where the stocks are, and he said your stocks are downstairs in the office in the files at Rowland, and I said wonderful, we can end this if you'll mail them back to me and I should get them within three days and I will mail back the check. I told them, I don't want to talk to you again or deal with you again; it will be all over with.

She then called Dolan and told him "the same thing."

When she had not received her certificates by June 9 she sent a letter of complaint to the New York Stock Exchange. On June 18 she received notice from her bank that payment on the check she received from defendant had been denied on June 12. She called defendant's president on June 18 and received a phone call from Walter later that day. She testified that:

He told me that they were having some problems with it. He was having some problems with the stock certificates, that in fact, he didn't have my stock certificates, as he stated, in the office, and now he was going to have to get them from New York.... he said, that's why I hadn't gotten them back; they were having a problem getting new ones out of New York; it was taking longer than what he thought it would.

Dolan testified that defendant had attempted to comply with plaintiff's request that it return the two original certificates, which the transferring agent "refused to deliver," and that a replacement certificate had to be issued.

Later that week plaintiff was informed by Walter's secretary that the stock certificate had arrived, but that it would not be sent to her until she returned the check. Plaintiff then called Walter, who confirmed what his secretary had said. Plaintiff returned the check by registered mail and defendant received it on July 10. However, this apparently did not come to the attention of Walter or Dolan, both of whom testified that they were unaware that the check had been returned until much later. Dolan explained that SEC regulations require a central review point for mail coming into and out of brokerage offices; therefore, all incoming mail was opened by "an authorized person" in the mail room, and checks were routed directly to the cash department. Plaintiff enclosed only the check, without a letter of explanation, and it was apparently sent to the cashier.

When plaintiff did not receive her certificate she wrote a letter of complaint to the SEC on July 28, in which she explained that despite returning the check on July 9 she still did not have her certificate. The SEC wrote a letter to defendant, asking it to look into the matter and send a letter of explanation to plaintiff. Enclosed was a copy of the letter plaintiff had written to the SEC. Mr. Dolan responded on August 21 with a letter to plaintiff setting out the chronology of events and stating that "[w]e have asked you to exchange the check in return for 200 RCE."

Plaintiff then asked her brother-in-law, Mr. Wexler, to write a letter to defendant on her behalf. Defendant responded in a letter to Mr. Wexler dated January 6, 1982, that:

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It is our position that we must deny any liability for the following reasons:

1) The confirmation sent to Ms. Lacks was in error. A sale did not occur at 11 3/4 and, in fact, the high for the year at the time was 10 3/8.

2) All "D" series checks have automatic holds placed on their payment. R. Rowland rightly denied payment of check # D123924 payable to Ms. Lacks because no money was owed.

3) Ms. Lacks was, at all times, given full explanations of the situation and was always treated with complete courtesy and understanding.

4) Ms. Lacks has her stock in hand by this date. (Sent 12/31/81) Any delay caused could have been prevented by her prompt return of our check to her.

However, it was not until March 16, 1982, that plaintiff received a certificate representing 200 shares of Reece Corporation stock, which was made out in plaintiff's name and dated June 11, 1981.

Plaintiff presented evidence of the stock's value during the period of the alleged conversion. Plaintiff's exhibit # 21, which contained the closing value of Reece Corporation stock for each trading date from May 1, 1981, through January 31, 1984, was admitted into evidence without objection, and defendant stipulated to its accuracy.

Plaintiff testified that "[she] wanted the certificates back to do what [she] wanted with them," although she never attempted to sell the stock during the period of the alleged conversion. Walter testified that plaintiff could have sold the stock through another broker at any time, and explained the process: "... the actual transfer would be by telephone and a [transfer] paper, and the certificate would follow later." Walter further testified that most investors he dealt with "leave their securities in their accounts" at Rowland; "[v]ery few of them ever have them issued to themselves." It should also be pointed out that throughout this controversy defendant continued to send plaintiff monthly statements indicating that she had 200 shares of Reece stock in her account.

Defendant's principal point on appeal is that the trial court erred in denying its motion for directed verdict "for the reasons that (A) under RSMo 400.8-313(1)(c), no conversion of the 200 shares of Reece stock occurred because the plaintiff as a matter of law at all times owned, possessed, controlled, and had delivery of the ... stock, and (B) although the evidence showed that [defendant] held plaintiff's stock certificates, there was no evidence that [defendant] held the stock certificates with the intent to convert them to its own use and thus, as a matter of law, there was no conversion."

A directed verdict is a drastic action and should be granted only if reasonable and honest men could not differ on the disposition of a case. In passing upon a motion for a directed verdict, the reviewing court must give plaintiff the most favorable view of all the evidence and the benefit of all favorable...