c was enacted to eliminate this kind of litigation it set forth obligations and put obligations on those parties that were best able to bear those obligations and what the judge did below by implying that or applying a standard of notice that does not exist in the u c c was to go outside of the u c c and shift that burden to mr m the clear obligations of the transfer agents of franklin resources and a franklin resource itself so briefly this story starts in one nine hundred seventy one at the time the franklin resources becomes a public company it injures into an agreement with the bank of new york in which three parties mr mulva hills company that did the i p o franklin resources and the bank of new york all agreed to maintain the records of every single share transfer and to maintain copies of every single cancelled share this is not uncommon this is the way the system is and transfer agents exist to maintain these mounds of data but so do the public companies themselves indeed in the bylaws of franklin resources the corporate secretary is required to maintain precisely those records  mili the third the plaintiff here the next he hears about the stock is twenty twelve when the chairman and chief executive officer of franklin who had personally sold the shares in their original shares in question to mr mealy jr calls and elevates an issue is to did you ever get the shares a reference to some events that took place according to mr johnson in one nine hundred eighty six mr neely jr died when my client was three my client never knew anything about it never received any mail although there were there are references to mail during some time period to start did he have that conversation before he got the letter from the i r s i know he did not on it it's three pages or see how many pages i think that's about three pages and it says well what i've highlighted here on the first page you will al hundred thousand sixty six dollars please compare your records with the payer information shown on page three of this notice and then you go to page three of the notice and it has the franklin resources of the bank of new york stock information here issued form ten ninety nine dividends and looks like it's forty one thousand dollars worth of stock if i'm reading that's correct correct all of that all of that is correct so he got this right he got it and i think the record is clear that he saw the the big print on the front saying that he owed the money he was nineteen or twenty at the time but he was twenty one know what it and it's in the statute is notice that the certificate has been lost destroyed or wrongfully taken all this is nothing with it other than to take it to an accountant who wasn't his mr mobile hills accountant no less he had two too many conversations with him the guy said pay him the i r s and although there's a dispute in recollections at this point in time the accountant said you don't want to tangle with the i r s if you have the money so the first of defense is that he did get notice should have waited i'm sorry and the firm of defense is that he did get notice correct right but he didn't like not notice and so then we look at the definition of notice you know under this delaware statute and it says a person has notice of a fact if the person has actual knowledge of it has received a notice or notification of it or number three which i think is what we're all looking at is from all the facts and circumstances known to the person at the time in question has reason to know that it exists you're saying it is what here well it's the fact the notice of the fact which then they refer to it as if it is what's found in and eight four or five a money thousand shares of frankly i don't think it i don't think i don't remember the notice telling you how many shares or any of that information the size of  well i don't have those certificates and then what well the last resort right that is reaction something like that you know never heard of these shares before of the i r s yeah i thought i thought i'm sorry i thought that's what it said but page three is the is the reference to franklin on page one is the reference to how much he owes the mail went to or first portion of the first page i will just say that he's relatively unsophisticated and got actually called and gone right now he then immediately said to his mother what should we do about this and she said let's call mulvihill who i think they referred to generally as uncle gene at the time because he had been a very close business colleague of amelia jr and her statement was he knows about these things and and and he he went to see him showed him the notice he said i'll take care of this i want you to talk to my accountant eliot goldberg and got the notice to mr goldberg and they had two two minute conversations after the talk franklin shares whether the conversation or not he knew he was paying taxes on the forty thousand dollars the dividend he'd never seen the fox i got to pay it and he paid he forgot about the whole thing franklin wasn't the only company as to which there were c is self contained with regard to what it does and doesn't contain this particular section eight four hundred five that we're talking about has no statute of limitations associated with it so article one two zero two says that a person has notice of a fact if the person has as it was read earlier the as actual notice of it has received a notice cation of it or from all the facts and circumstances known to the person at the time in question has reason to know that it exists that's a classic formulation of that that what you just judge were gay just read people yes and that's a classic letter be sufficient under that standard as well because it appears the letter for mr mi l that franklin stock was registered in his name someone was receiving significant debt and dividend payments on the stock stock is somewhere lost or are gone all i mean i'm just trying to figure out why why would that fit under even constructive note because the notice is notice fact and the fact that are relevant are not that you own the stock or that there have been dividends credited to you the facts that are relevant here are whether or not the certificate has been lost destroyed or wrongfully taken there's a case cited in in the paper somewhere called gallagher which was a california case many years ago pre code i believe and they were talking about the  supreme court california was talking about the issue of how long a time period could be applied back pre code thinking maybe latches was was the issue and they say their court said that a woman who knew that her stock certificates had been destroyed in a fire and didn't come to the comp the didn't ask the company about it for twenty eight years had not been unreasonable  waiting to do this and the reason for that and the difference here between the question that you're positing is that what he didn't know was that it was wrongfully that the shares were wrongfully taken the whole claim is that the shares are wrongfully taken in there is a their seems like all you had to know if they were gone or the he didn't have i mean i'm trying to figure out where is it johnson that mr johnson was concerned because he didn't know what happened to the stock and he was concerned that that that he'd never gotten a call thanking him for this and in fact we didn't know it none of us knew that the stock had in other words there were nine documents that were acquired these these shares were to denominate is being in trust and the sales required the trust agreement that required all sorts of things we don't know if there was a sale on his behalf all we know is that these shares disappeared from the vaults and all we know is that mr mulvihill sold some shares in franklin resources we don't know what the source was that  and we don't know what he did with them and he didn't and the shares don't add up there are over fifty thousand shares difference which today would be somewhere on the order i'm going to say of a and i think your questions focused on the salient issue of the salient time period but this is it's a difficult case i have to say because you know we're looking at this clause in this particular state delaware statute that you know delaware hasn't given us a lot of guidance on in this context but it has come in and on it in various other contexts some of it that supports your position some of that doesn't and so i'm just trying to figure out you know what which which way and which application do we go with what the magistrate judge did who did a pretty meticulous job of going through different  it seems like that case might be distinguishable because it you know here i mean i think it was equitable remedy that they were talking about in the in the in and not at the statutory language so please help me try to resolve this and you're absolutely right there is not a lot in the law in delaware when other states applying what is proper notice however i think we all can agree on it is in the statute and whether it's actual notice or reason to no notice this constructive notice principal mr mealy had that notice so for we go right into that if you could respond as you respond to that question to mr little statement that he had to have noticed that was wrongfully taken so talk to me about that simply incorrect and that in the statute is eight four zero six that is one avenue in which a shareholder can provide notice but a for a six says the it is if a security certificate has been lost apparently destroyed or wrongfully taken and the owner fails to notify the issuer of that fact so that fact is that the certificate has been lost destroyed or take wrongfully taken yes that is one possible avenue for a shareholder to give notice to an issue or but that's not the only one and that's i think clear in the statute in this case mr mili had notice that his either lost yes absolutely and or it could have been or maybe you know maybe with full well either way he did not have them and i think that's what judge beeler was going on his whole theory of this case your honor remember is i never knew i had franklin stock until today two thousand and twelve we found this i r s notice through discovery and we presented it to him and he said i only read he didn't read the first half of the page he read the first two lines with his testimony and freaked out and called an accountant while quincy dentally the next page or page three talks about franklin shares but the reason to no standard is an object objective excuse me reasonable person standard so whether or not he read the entire document is not the question it's what a reasonable person would decide to talk about constructive not right and i think all  prong of notice that's constructive notice is it let's look at that says from all the facts and circumstances known to the person at the time in question has reason to know that it exists  cite for example that the weller case which is the one delaware case the i bomb yes case which is the california case pretty much every court that has looked at that prong has applied a constructive notice standard otherwise why would you have a difference between an actual notice but the person knew and the reason to no notice it has to be a constructive notice standard otherwise it would make the actual notice standard repetitive reminded think well as the ninety four year old woman it is and why is that different so our position is well or is it's probably the most opposite case to the situation you have here you have a ninety year old woman who is mentally and physically infirm that's taken in by a couple who she knows and trusts who take care of or while they're under the care she breaks her hip they start opening her mail and they discovered these dividends which they deposited into their account but the delaware court in that case rightfully said she did not have a reasonable basis for discovering by looking at her account statements for example that funds were missing  that was the basis for the decision and well are can trust that to for example the hovey case where someone knew they had shares but in a quarterly statement that they received some of those shares were missing that was a suspicious circumstance by which the court said that's a trigger that's that's the type of situation you typically have here this case isn't anywhere like heller we have a twenty one year old adult running his own business in college and he admits that he received the i r s notice and iris notice that says on its face that page three franklin shares your honor asked about forty one thousand and i think the response was that was forty one thousand dollars worth of excuse me forty one thousand shares it's actually forty one thousand in dividends which equate to one hundred forty thousand shares his income that year was twenty something thousand you know the i mean his reported his reported income that's right so even even on that basis it's twice one hundred forty percent of his income the dividends he said well there are other dividends in there well look at the notice there was one other company g e had seventy five dollars in dividends the other one franklin forty one thousand two hundred fifty dollars in dividends no reasonable person taking a look at this notice receiving it in the mail freaking out would then say you know what i'm just going to pay it i'm not going to read it i'm just going to pay it implausible is his story is that i didn't read it as an implausible as his story is that his accountant told him to just pay it judge bill or assumed all that to be true for purposes of summary judgment she held that iris notice under a reasonable person standard still put a person on notice that they own franklin shares and sense that the area is i never owned it if you're being told you do own it and you've never seen it before if that's a loss di apply constructive notice i thought she did the research in kareena and she did she did both she she did in two steps so she first said that there was constructive notice as to what a reasonable person but then she took the next step and said because this was so suspicious an inquiry would have led to additional facts so all the additional facts such as the fact that his best for his uncle gene had all these franklin shares suddenly in his account which he liquidated the seaboard applications that have mr merely signature during the same period which he says are forged all these additional records were then kind of open play i mean aren't there are two different kinds of notice are reasonable and a constructive notice are you saying that's one in the same because then i'm not well let me ask you have you answer that question and it's a good question i would say constructive notice is a spectrum and the reasonable increase at the end of the spectrum but the constructive notice is simply an artificial so your charge with notice based upon what a reasonable person would have based upon the same information inquiry notices what you have leads you to go one step further and ask so in this case asking franklin giving them a call and saying as your honor had asked i don't own the shares what are the shares why am i being reported to having these dividends that's inquiry notice under either standard under just a straight constructive notice where they don't take that extra step and make that phone call from the facts and circumstances just from that iris notice or from making that extra step notice is stablished in this notice argument this argument was not raised below its raise for the first time here it's completely inconsistent with the text of the statute the statute language says quote and the issuer registers a transfer of the security before receiving notification so the language itself the plain meaning of that language is that section eight for zero six applies for the issuer has registered a transfer before receiving notification there is no additional requirement or limitation such as the owner receiving notice before the transfer takes place now certainly it would be nice if notification was received by the issuer before the transfer was registered that would give them the ability to stop it but that's not a requirement or a limitation on this defense and as we cited the weller case the hovey case the burke case all those cases involved situations where the notification was given to the shareholder of the loss after the transfer had taken place and they still all applied this statute so that the court's interpretation have never and no court has ever adopted the position is advocating here and from a practical point of view as we pointed out it would lead to an absurd result in the situation where a shareholder like mr mili after learning of a loss but after a transfer occurs let's say that he learned of it a day or a week or a month after could just sit on their rights for as long as they wanted to and still have a cause of action and prevent an issue or from invoking that defense that is that's contrary to the purpose of a four of six which is supposed to give an issue or the ability to either stop the transfer or if a transfer is already taken place to investigate it so they can remedy the situation by either defending themselves  going after the person who got the money here because he waited twenty plus years mr mobile died is the state was closed his brokerage account when in which he was trying these franklin shares was closed all this type of information that would be available to franklin to defend this type of case is gone and that's also a basis for the latch as argument which we briefed in our paper yeah could we be sure that dollar would apply latches to this provision in order to these eight you know four or five claims and it seems like there are factual disputes here as to the reasons or for the delay in bringing the suit in the district didn't really address the latches i mean not sure if you want to talk about any of that i appreciate that your honor so i think on the issue of the unreasonable delay for purposes of latches that there is no dispute the inquiry notice does apply for latches so if one assumes as judge dealer reasoned in her opinion that he had picked up the phone call and figured out the shares are gone and been able to trace it like we are able to do in discovery back in  he didn't bring the case until two thousand and twelve twenty years so that twenty years is an unreasonable delay and i don't think there can be any dispute about that we know for example in the in the two cases that were  cited by the plaintiff the craft case and the weller case the craft case was a perfect situation in which a court because of the death of a key witness one key witness that was enough for prejudice and taking too long the key case in delaware on latches is church of religious science that's another case on summary judgment in which a plaintiff and waited a couple years too long in the meantime the plaintiff had exploited a technology that he had developed and started a new business the key witness said passed away in the court found on summary judgment grounds that that was as a matter of law unreasonable we think the same situation we think this is a prototypical situation for application of watches thank you very much had actually left something for him he was he had spent his entire life with his family not talking about his father not knowing anything but his father and he went to confront mohill about it and confront  new jersey after the argument on the front porch mr johnson then worked with mr millie and with counsel and with investigators to try to get to the bottom of it and it wasn't until two thousand and fourteen that anybody learned that the shares which had not been had been returned because they had not been deliverable that the shares had left the vaults of the bank of new york the transfer agent and that's the exact word in the letter  and that first of all they were kept in the vaults and secondly in october of one nine hundred ninety one mr hanrahan who was the liaison between the bank of new york worked for the bank of new york and franklin left a telephone that is in the record saying what happened to the shares to mr burns and then corporate counsel and corporate secretary who do want to just address one thing if i can and that is that the the issue that you focus on with regard to is an inquiry notice part of constructive notice obviously the big issue there is increased notice requires you to do something you have to affirmatively go out and search or investigate and there is a situation under the notice provision of the u c c article one dash two zero two and i commend it to you to your review but it's subsection f and it it imposes a duty on organizations specifically not on individuals and organizations to conduct some due diligence if they get an inquiry about you contend that the judge erred in granting summary judgment reference was made to the extensive record in my right that the alternative would have been a bench trial yes time we were in in court she said i think i want to get those people in here for a trial even if it's a mini trial so that i can assess what what what they did so your claim is that if she had an opportunity to listen to their live testimony and resolve credibility issues favorable to them she would have come to a different bottom line conclusion right she says that she did does doesn't address credibility and it but she has to because the denials of the of actual live witnesses are so extensive and so all consuming throughout the entire time period she would have had to have at least seen them thank you thank you thank you very much thank you both for here or argument presentations today that in the case of anthony neely third versus franklin resourcing perforated and charles beach onsen is submitted thank you