Court Opinion

ID: 9482776
Source: CourtListenerOpinion
Date Created: 2023-08-05 08:59:57.656622+00
Date Added: 2024-06-11T17:49:11.694845
License: Public Domain

SHADUR, District Judge,
concurring.
Both the holding and the analysis of the ultimate issues contained in the court’s opinion are literally and figuratively right on the money. Indeed, the opinion unsnarls many of the needless complexities that have been presented by the litigants, instead focusing on and resolving the core issues posed in this case rather than exploring several of the byways invited by the parties’ advocacy.
Only a few words should be said about what the opinion accurately characterizes as “an interesting detour.” Because the issue that is posed by the opinion’s dictum on that score — the potential or lack of potential for any corporate liability for conversion of the corporation’s own stock by an improper redemption — may recur in the future, it seems appropriate to reflect a different perspective on that subject. Hence this brief concurrence.
Conversion essentially depends not on benefit to the converter but on detriment to the owner. To be sure, when a thief (for example) converts an owner’s property, he or she does so to make it his or her own— indeed, there is a special label of “conversion to his own use” that has been established by UCC § 7-204(2), adding an ingredient to the common law tort of conversion for limited purposes. But the exercise of dominion over the rightful owner’s property — the essence of conversion — frequently causes harm to the owner without any corresponding benefit to the converter. That kind of situation is often encountered in the bailment relationship — see the treatment of “conversion” and “conversion to one’s own use” in my opinions in W.A. Taylor & Co. v. Griswold & Bateman Warehouse Co., 719 F.Supp. 697, 705-06 (N.D.Ill.1989) (applying Illinois law and the UCC); Refrigeration Sales Co. v. Mitchell-Jackson, Inc., 575 F.Supp. 971, 976-77 (N.D.Ill.1983) (same), aff'd, 770 F.2d 98 (7th *48Cir.1985); Inland Metals Refining Co. v. Ceres Marine Terminals, Inc., 557 F.Supp. 344, 347-49 (N.D.Ill.1983) (applying Indiana law and the UCC).
Just so, the fact that the redemption of stock involves a zero-sum game as to the redeeming corporation does not at all foreclose the conclusion that a wrongful redemption by that corporation may be a conversion. When the spotlight of legal analysis is turned instead on the impact upon the rightful owner (that is, the assumed rightful owner for'purposes of this discussion), there has indeed been the exercise of dominion by the corporation over the owner’s property (comprising the bundle of rights to dividends and the proceeds of redemption or liquidation as well as the intangible right of voting the stock) — and that exercise of dominion has imposed the type of harm on the owner that the law finds compensable.
Hence there is no conceptual roadblock to a corporation’s being mulcted in damages for the conversion of its own stock via redemption to the detriment of the rightful owner. Recognition of such a claim by the Eighth Circuit in Shidler v. All American Life & Financial Corp., 775 F.2d 917, 925-26 (8th Cir.1985), citing and quoting as it did 4 William Fletcher, Fletcher Cyclopedia of the Law of Private Corporations § 1969, at 697 (Charles Keating rev.1985), seems entirely sound.
What dooms Dr. Kerrigan’s claim against American Orthodontics here is not, then, the wrongful-exercise-of-dominion component of the conversion claim, but rather the fact that the plaintiff in a conversion action must be the rightful owner of the asset. If the issue were one of Kerrigan’s rights as against Dr. Hoffman, Kerrigan would have had no problem in adding a claim in conversion to the other grounds of Hoffman’s liability: As between them, Kerrigan owned the 50 shares and Hoffman was his nominee.
As to American Orthodontics, however, Kerrigan’s mere letter notification of his claim of ownership without a demand for transfer into his own name is not enough. As the court’s opinion accurately states, UCC § 8-207(1) tells us that Kerrigan was not the owner of the shares as between himself and American Orthodontics, and that is fatal to his conversion claim. Accordingly I join the court’s determination that Kerrigan cannot gain access to American Orthodontics’ treasury, the only remaining deep (or if not deep, at least solvent) pocket that is potentially available to recoup the loss caused by Hoffman’s faithlessness to his duties as nominee.