United States Fid. & Guar. Co. v. Newburger

• Decision Date: 21 November 1933
• Citation: United States Fidelity & Guaranty Co. v. Newburger, 263 N.Y. 16 (N.Y. 1933)
• Court: New York Court of Appeals Court of Appeals
• Parties: UNITED STATES FIDELITY & GUARANTY CO. v. NEWBURGER et al.

263 N.Y. 16

188 N.E. 141

UNITED STATES FIDELITY & GUARANTY CO.

v.NEWBURGER et al.

Court of Appeals of New York.

Nov. 21, 1933.

Action by the United States Fidelity & Guaranty Company against Alfred H. Newburger and others, copartners doing business under the firm name and style of Newburger, Henderson & Loeb, wherein Ray Gleason and Louisa Kohl were impleaded as defendants.From a judgment of the Appellate Division(237 App. Div. 818, 260 N. Y. S. 1015), unanimously affirming a judgment of the Trial Term, rendered after a trial before the court without a jury, the plaintiff and the defendants other than the impleaded defendants cross-appeal.

Judgment modified in accordance with opinion.

LEHMAN and KELLOGG, JJ., dissenting.Appeal from Supreme Court, Appellate Division, First department.

William J. McArthur, of New York City, for plaintiff-appellant.

Donald A. Gray, Oscar R. Houston, and G. Arthur Blanchet, all of New York City, for defendants-appellants and respondents.

Edward A. Coleman, of Astoria, L. I., for defendant-respondentLouisa Kohl.

HUBBS, Judge.

On February 7, 1929, the brokerage firm of Moore & Schley was the owner of record of a certificate representing one hundred shares of the capital stock of the Electric Power & Light Corporation, a Maine corporation.The certificate was issued in its name, and was numbered 42510.It indorsed the certificate in blank, and sent it by a messenger for delivery to a customer.The certificate was stolen from the messenger.

The appellant, United States Fidelity & Guaranty Company, had issued to Moore & Schley a bankers' blanket bond, indemnifying that company against loss by theft, and upon demand it paid to that company $5,843.75, the conceded market value of the stolen certificate.Moore & Schley then applied to the Guarantee Trust Company, the transfer agent, for the issuance of a duplicate certificate, which was issued upon the delivery of an indemnity bond to the transfer agent, executed by Moore & Schley as principal and the United States Fidelity & Guaranty Company as surety.The duplicate was issued to the firm of Moore & Schley and indorsed by it to the United States Fidelity & Guaranty Company, which surrendered it to the transfer agent and had issued to it in its name a new certificate, No. 50599.

About two months later the stolen certificate came into the possession of the defendant brokerage firm of Newburger, Henderson & Loeb (hereafter referred to as Newburger).It received the stolen certificate from the defendant Gleason, who had received it from the defendant Kohl, who claimed to have taken it as collateral security for a loan.At the time when Newburger received the stolen certificate, it had been altered and forged by erasing the name Moore & Schley from the face thereof and inserting the name ‘Otto Schmidt,’ and indorsing on the back the name Otto Schmidt just above the genuine signature of Moore & Schley.Newburger presented the stolen certificate thus forged and altered to the Guarantee Trust Company, the transfer agent, for transfer.Although the books of the company showed that no certificate had been issued in the name of Otto Schmidt and that certificate No. 42510 still stood in the name of Moore & Schley, the transfer agent canceled the stolen certificate and issued a new one in the name of Newburger.That caused an overissue of the stock of the electric company.When that was discovered by the transfer agent, it demanded from the plaintiff the surrender of the certificate for one hundred shares which had been issued to it, and the plaintiff surrendered to the transfer agent that certificate.The plaintiff then demanded of Newburger the stolen certificate or its proceeds.The demand was refused, and this action was brought in conversion.At that time plaintiff, which had paid to Moore & Schley $5,843.75 under its agreement to indemnify against damage by reason of theft, was out the money paid and the stock which it had received from Moore & Schley because of such payment, and Newburger was in possession of a certificate for one hundred shares which had been issued by the transfer agent upon the surrender of the stolen certificate.

The trial court found in favor of the plaintiff upon the issue of conversion, but decided that the stolen certificate was without value when received by Newburger, as the new certificate, at that time in the possession of plaintiff, evidenced the real ownership of the stock.Judgment was entered in favor of the plaintiff for 6 cents damage and in favor of Newburger for a like amount against Gleason and Kohl, who had been impleaded.Plaintiff and defendant Newburger each appealed to the Appellate Division, where the judgment was unanimously affirmed.

Plaintiff contends that it is entitled to receive from Newburger the sum of $5,843.75 which concededly it has lost by reason of the payment of the market value of the stolen certificate to Moore & Schley.When plaintiff, by reason of its indemnity agreement with the firm of Moore & Schley, paid it the market value of the stolen certificate, its entire interest passed to plaintiff, and, because of that interest, plaintiff ultimately came into possession of the certificate which it was compelled to surrender after the stolen certificate was surrendered by Newburger to the transfer agent, and the fact that it was a stolen certificate was discovered by the transfer agent.

The only certificate in existence when the plaintiff made a demand on Newburger was the certificate which had been issued by the transfer agent to Newburger in place of the stolen certificate.

Newburger, by accepting the stolen certificate of stock, did not obtain title to it as against the true owner, Moore & Schley.The owner had a right to recover possession of the certificate from whoever came into possession of it.The right which it possessed passed to the plaintiff.

In the eyes of the law, the certificate of stock which Newburger received from the transfer agent for the surrender of the stolen certificate stood in place of the stolen certificate, and Newburger had no more right to retain it as against the true owner than he would have had to retain the stolen certificate if it had still remained in its possession.

When Newburger, upon the demand of the plaintiff, refused to surrender the possession of the certificate of stock which had been issued to it in place of the stolen certificate, such refusal constituted a conversion of the stock itself, and made Newburger liable for the damages resulting from such conversion.Those damages consisted of the market value of the certificate of stock.Pierpoint v. Hoyt, 260 N. Y. 26, 182 N. E. 235, 83 A. L. R. 1195.

Not only was Newburger liable in conversion after demand, but it was also liable for conversion of the stolen certificate...