Court Opinion

ID: 1843
Source: CourtListenerOpinion
Date Created: 2010-04-16 00:41:21+00
Date Added: 2024-06-11T13:27:55.124312
License: Public Domain

NOT FOR PUBLICATION

                    UNITED STATES COURT OF APPEALS                            FILED
                           FOR THE NINTH CIRCUIT                              APR 14 2010

                                                                          MOLLY C. DWYER, CLERK
                                                                            U.S. COURT OF APPEALS

BANK OF STOCKTON,                                No. 09-15909

             Plaintiff - Appellant,              D.C. No. 2:08-cv-02257-JAM-GGH

  v.
                                                 MEMORANDUM *
VERIZON COMMUNICATIONS, INC.,

             Defendant - Appellee.

                   Appeal from the United States District Court
                       for the Eastern District of California
                    John A. Mendez, District Judge, Presiding

                       Argued and Submitted March 9, 2010
                            San Francisco, California

Before: B. FLETCHER and CLIFTON, Circuit Judges, and WALKER, ** Chief
District Judge.

       The Bank of Stockton appeals the district court’s grant of summary

judgment in favor of Verizon Communications, Inc. in this suit for damages from

the alleged wrongful escheatment of the Bank’s Verizon stock under California’s

        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
       **
             The Honorable Vaughn R. Walker, Chief United States District Judge
for the Northern District of California, sitting by designation.
Unclaimed Property Law, Cal. Civ. Proc. Code §§ 1300, et seq. We affirm.1 The

Bank received the proceeds of the State Controller’s sale of its Verizon shares

pursuant to California Civil Procedure Code section 1540 and failed to show

damages beyond the amount tendered to it.

      The Bank’s proposed calculation of damages at the “highest market value”

of the stock following its alleged conversion relies on cases applying an obsolete

version of California Civil Code section 3336. See Potts v. Paxton, 153 P. 957

(Cal. 1915). That statute was amended in 1931 to replace the “highest market

value” measure of damages with a provision allowing a court to award “an amount

sufficient to indemnify the party injured for the loss which is the natural,

reasonable and proximate result of the wrongful act complained of and which a

proper degree of prudence on his part would not have averted.” Cal. Civ. Code §

3336; see Wong v. Paine, Webber, Jackson & Curtis, 24 Cal. Rptr. 821, 823 (Ct.

App. 1962) (“The amendment deprived the complaining party of the unqualified

right to choose, as the basis for his damages, the highest value of the property

between the date of the conversion and the trial. That was the very purpose of the

amendment.”).

      1
       We grant the Bank’s request for judicial notice of publicly reported Verizon
stock prices, and we deny Verizon’s motion to strike portions of the Bank’s reply
brief.
                                           2
      Under California law, “[a] plaintiff has a duty to mitigate damages and

cannot recover losses it could have avoided through reasonable efforts.” Thrifty-

Tel, Inc. v. Bezenek, 54 Cal. Rptr. 2d 468, 474 (Ct. App. 1996). The Bank failed to

mitigate any loss it did incur by repurchasing its escheated stock with the proceeds

of the Controller’s sale or by taking other steps in mitigation after Verizon declined

to reverse the unauthorized stock transfer. Thanks to the fortuitous timing of the

Controller’s sale and tender of the proceeds to the Bank, it had ample opportunity

to repurchase its original shares and more than compensate for any “time and

money properly expended in pursuit of the property.” Cal. Civ. Code § 3336. The

Bank failed to demonstrate any “loss which [was] the natural, reasonable and

proximate result of the wrongful act complained of,” Cal. Civ. Code § 3336, in an

amount that exceeded the Controller’s tender of the proceeds from the sale of the

shares.

      The Bank’s assertion that it incurred federal tax liability from the

involuntary sale of its stock was not substantiated by any evidence in the record,

nor did the Bank offer a plausible rebuttal to the observation that it could have

avoided realizing any taxable gain by simply repurchasing the shares. See 26

U.S.C. § 1033.

                                          3
       In light of the windfall the Bank could have reaped as a result of the decline

in the share price after the State sold the stock, the district court properly rejected

the Bank’s claim for interest on that sum. See Cal. Civ. Code § 3336; Tyrone Pac.

Int’l, Inc. v. MV Eurychili, 658 F.2d 664, 666 (9th Cir. 1981) (noting that courts

may decline to award the “value . . . at the time of conversion with interest” to

avoid manifest injustice to the defendant (quoting Myers v. Stephens, 43 Cal. Rptr.

420, 430 (Ct. App. 1965))).

      AFFIRMED.

                                            4