Opinion ID: 1772875
Heading Depth: 1
Heading Rank: 1

Heading: liability of paine webber

Text: A conversion consists of an act in derogation of the plaintiff's possessory rights, and any wrongful exercise or assumption of authority over another's goods, depriving him of the possession, permanently or for an indefinite time, is a conversion. It is of no importance what subsequent application was made of the converted property, or that defendant derived no benefit from his act. Importsales, Inc. v. Lindeman, 231 La. 663, 92 So.2d 574 (1957). Without Paine Webber's signature guarantee, NEGEA would not have accepted the stock and Quealy would have remained the record owner. Paine Webber's signature guarantee was therefore a necessary step in the transfer of ownership and was a contributing cause of Quealy's loss. Internal regulations (Internal Control Memo # 50) circulated to Paine Webber employees required that signature guarantees be made only where the employee either knows the individual or takes steps to verify his identity, such as by making a comparison of the signature to a signature card or other similar records. As a member of the New York Stock Exchange, Paine Webber was bound by that association's Rule 405 (also known as the Know Your Customer rule) which obliged the brokerage firm to use due diligence in knowing with whom it does business. Godchaux and Bailey testified, however, that they merely relied on the notarized bill of sale as proof that the signature of Quealy was genuine. Bailey guaranteed that the signature was that of the person named on the face of the certificate, although Paine Webber personnel did not know Quealy nor have a record of his signature and the certificate was not signed in their presence. Moreover, although Ryan knew Morris Cali and had an account with Paine Webber, none of the personnel had previously known Castrone. Under these circumstances, it was not reasonable for Paine Webber to rely on the notarized bill of sale and take no further steps to verify the authenticity of Quealy's signature. In guaranteeing the signature of a person they did not know, who did not sign in their presence, and whose signature they did not compare to other existing records, Paine Webber employees acted in a manner inconsistent with Quealy's property rights. Paine Webber wrongfully assumed control over Quealy's stock and contributed to depriving him of its possession and was liable for conversion. La.Civ.Code art. 2315.