Case Name: Michael O'Dwyer, Appellant, v. Frederick A. Verdon, Respondent
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1906-09-28
Citations: 115 A.D. 37
Docket Number: 
Parties: Michael O’Dwyer, Appellant, v. Frederick A. Verdon, Respondent.
Judges: 
Reporter: Appellate Division Reports
Volume: 115
Pages: 37–40

Head Matter:
Michael O’Dwyer, Appellant, v. Frederick A. Verdon, Respondent.
Second Department,
September 28, 1906.
Judgment — when prior judgment that certain stock is void binding upon assignee of stockholder •— conversion — when stockholder obtaining certificate in excess of stock held by him not liable for conversion of stock previously issued.
A judgment in a prior action declaring that an alleged stockholder had no title to or interest in certain stock, and a prior surrender of said stock for cancellation made upon the consideration of the discontinuance of a second action brought by the corporation against the alleged stockholder extinguish any right of action for conversion of said stock, and such alleged stockholder by ' assigning his rights does not vest the assignee with any right of action. The former judgment and settlement are admissible against the assignee.
The president of a corporation, of which all the stock was issued, held 159 shares. He surrendered ten shares thereof to the corporation which reissued the same and sold them to the plaintiff’s assignor. Thereafter the president obtained a new certificate from the corporation representing 159 shares, although he had previous^ parted with ten shares. In an action against the president for converting said ten shares ,
Held, that he was not liable as for a conversion, for the ten shares reissued, if valid at all, entitled the holder to full standing as a stockholder irrespective of the subsequent overissue of stock.
Appeal by the-plaintiff, Michael O’Dwyer, from a judgment of the Supreme Court in favor of the defendant, entered in the office of the clerk of the county of Kings on the 23d day of November, 1905, upon the verdict of a jury rendered by direction of the court after a trial at the Kings County Trial Term, and also from an order entered in said clerk’s office on the 1st day of November, 1905, denying the plaintiff’s motion for a new trial made upon the minutes.
Burton W. Gibson, for the appellant.
Mark Ash, for the respondent.

Opinion:
Woodward, J.:
At the close of all the evidence both parties moved for the direction of a verdict, so that if there were any disputed questions of fact they must he deemed to have been determined by the court by consent of the parties in favor of the defendant, no request having been made to submit any questions to the jury. The facts, so far as it is necessary to consider them in disposing of this case," appear to be that the defendant is the president of the Frederick A., Verdón Company, a joint stock corporation organized under the laws of Hew Jersey, with a capital stock of $26,000. It appears that on the llth day of March, 1900, all of the stock of the corporation had been issued ; that on that day the defendant surrendered to the corporation ten shares of stock standing in his name, and the corporation, which is- not a party to this action, issued and delivered to one Andrew Wood a certificate for ten shares of the common stock of said corporation, which certificate was subsequently assigned to one Stephen Callaghan, plaintiff's assignor. On or about the 1st day of January, 1903, Stephen Callaghan brought an action in the Supreme Court, which was subsequently removed to the United States Circuit Court for the eastern district of How York, in which he set up title to the ten shares of stock, alleged a refusal of the corporation to make the necessary transfer upon its books, and demanded damages in the sum of $6,000. The corporation interposed an answer and alleged that the shares of stock were never in fact delivered to Wood, but that he had fraudulently gained possession of the same and never acquired title thereto. While this common-law action was pending, the Verdón Company instituted an action in equity, ancillary to such action, but before this latter action came to trial" the common-law action- was tried, resulting in a verdict in favor of the corporation, whereupon Callaghan entered into negotiations for the discontinuance of the action "in equity, brought to secure the cancellation of the certificate for the ten shares of common stock, agreeing to surrender the stock for cancellation in consideration of such discontinuance, without costs. The equity action was discontinued and Callaghan surrendered his certificate for cancellation, and then assigned to this plaintiff his alleged cause of action for the conversion of these same ten shares of stock by the defendant. The alleged conversion consists, according to the plaintiff's brief,, in the fact that the defendant originally owned 184 shares of stock, evidenced by certificate Ho. 1, and after a series of transfers, " on May 1, 1903, with a balance of one hundred forty-nine shares to the credit of his certificate and account he caused to be issued to himself a new certificate for one hundred fifty-nine shares in lieu of the old one and in total disregard of the ten shares previously transferred by him to Wood, plaintiff's predecessor in title, which transfer had never been entered or recorded in the books of the company,' lie wrongfully exercised active dominion over the ten shares, claimed title to them and deprived plaintiff's assignor of the substantial benefit and use of the shares."
A court of competent jurisdiction has held that Wood never gained any title to these shares of stock; that he never conveyed any title to Callaghan, and Callaghan has accepted the results of that litigation and has been relieved of the payment of costs in an action ancillary to his own action by surrendering the certificates for cancellation, but the plaintiff urges that these certificates were not the stock — that they were mere evidences of the stock — and that the cause of action for the alleged conversion survived such surrender and cancellation, and that it was error for the court to submit the evidence of the judgment in the common-law action, and the evidence of the subsequent adjustment between Callaghan and the Verdón Company. Obviously there is nothing tenable in 'such a proposition; the defendant had a clear right to show that the plaintiff had no title or interest in the stock; that plaintiff's assignor, for a valuable consideration, and in acknowledgment of the fraudulent possession of the same, had surrendered the certificate for cancellation, and there was no better evidence of these facts than the records of the court where the case had been tried and disposed of without questioning on the part of plaintiff's assignor. The cause of action here attempted to be asserted is entirely fanciful, and has no foundation in law or in justice.
But if Andrew Wood, the original possessor of this stock, had been the lawful owner of the same, it is difficult to understand how the defendant could be guilty of a conversion. The defendant concededly surrendered ten shares of his stock to the corporation, and the corporation issued a certificate of stock for ten shares to Wood on the 17th day of March, 1900, and that certificate was never out of the possession of Wood or his assignees during the time that the defendant is alleged to have had the transactions resulting in an overissue of the stock of the corporation. That certificate, while not in law the stock itself, is the evidence of the stock, and entitles the lawful owner to have his.stock entered of record in the books of the corporation and to all of the privileges of the corporation, and the transfer of the stock to any other person would be a fraud on the part of the corporation (New York & N. H. R. R. Co. v. Schuyler, 34 N. Y. 30, 84), which is not a party to this action. How the defendant, personally, could be guilty of conversion under the facts as they appear, and as they must be deemed to have been found, we are unable to understand.;.
The judgment and order appealed from should be affirmed, with costs.
Jerks, Hooker and Miller, JJ., concurred.
Judgment and order affirmed, with costs.