Court Opinion

ID: 8656779
Source: CourtListenerOpinion
Date Created: 2022-11-24 21:16:45.799698+00
Date Added: 2024-06-11T16:56:45.542271
License: Public Domain

THURMAN, J.
This is an action to recover the value of 10,000 shares of the capital stock of the defendant mining company which plaintiff alleges, defendants wrongfully converted to their own use.
The complaint, in substance, alleges that plaintiff is the owner of said shares of stock by purchase from one R. E. Campbell on the 1st day of May, 1917, and that plaintiff at all times thereafter was entitled to have said shares issued to him by the defendant company; that plaintiff on the said first day of May, 1917, and thereafter on the twelfth day of the same month, demanded of said defendant company that it issue to him said shares of stock, which said company refused and ever since has refused to do; that on the fifteenth day of May, 1917, the individual defendants, who constituted the board of directors of the defendant company, by resolution directed the president and secretary of said company not to issue said shares of stock to plaintiff; that the defendants were then in possession of said stock, and by the resolution aforesaid converted the same to their own use, to plaintiff’s damage in the sum of $3,000, the value of .the said stock.
Defendants, for want of information sufficient to form a belief, deny that plaintiff is the owner of the stock, or that he purchased the same from Campbell, or that plaintiff is entitled to its possession, or that defendants converted the same, or that the stock is of the value of $3,000, or that plaintiff sustained damages in said sum or at all.
Further answering, defendants, in substance, allege that in 1915 all of the stockholders of defendant company entered into an agreement with one George E. Hemphill, whereby they *576gave him the right to purchase 400,000 shares of the capital stock of said company, to be delivered to him from time to time at a certain specified price, and said contract was to continue in effect until the vehdors should terminate the same upon fifteen days’ previous notice in writing, which contract, it is alleged, is still in full force and effect; that at the time of said agreement one Fred Alkire was a stockholder in said company and was one of the parties to said contract; that at the time of making said contract said Alkire, said Hemphill, and others entered into an agreement that none of said stock should be sold, bargained, or otherwise disposed of before May 1,1917, or as long as said contract with Hemphill should remain in force, and until ninety days thereafter; that at the time of said agreement said Alkire was the owner of 10,000 shares of the stock of said company, and that said stock is the same stock that is now claimed by the plaintiff. It is then alleged, in substance, that after the making of said agreement Alkire transferred his stock to said E. E. Campbell; but defendants, upon information and belief, allege that the same was transferred by Alkire for the use and benefit of himself. It is then alleged that their reason for refusing to issue said stock to plaintiff was solely upon the ground that said Alkire was the owner thereof and had entered into the aforesaid agreement.
The trial court found for the plaintiff against the defendant company and entered judgment for damages. The action as to the other defendants was dismissed. Defendant company appeals, and assigns as error the order of the court, overruling its motion for a nonsuit, the admission of evidence over plaintiff’s objection, and insufficiency of the evidence to sustain the findings.
The evidence tends to show the following facts: That Fred Alkire was the original owner of the stock in question; that as evidence of ownership he held a certificate of the company therefor, certifying that he owned 10,000 shares oE stock subject to a pool agreement that the said stock was not to be issued until May 1, 1917; that in May, 1916, Alkire transferred the stock to E. E. Campbell by indorsement and *577delivery of tbe above certificate; that on May twenty-seventh of the same year Campbell sent the certificate to the secretary of the company for transfer, and in due time received one made to himself, in substantially the same form as the one received from Alkire. The exact form of the certificate is as follows:
“Lehi, Utah, Hay 27, 1916.
“This- is to certify that R. E. Campbell is the owner of ten thousand shares of the capital stock of the Earl-Eagle Mining Company, and that said stock, by pool agreement, is directed not to be issued, sold, transferred, bartered, or otherwise disposed of until May 1st, 1917.
“[Signed] Earl-Eagle Mining Company,
“By W. E. Evans, Secretary.’’
Campbell kept the certificate in his possession until about May 1, 1917, and then “turned it over” to the plaintiff, with the following indorsement thereon:
, “Earl-Eagle Mining Company,
“Lehi, Utah, May 1, 1917.
“Please issue my 10,000 shares of Earl-Eagle to the order of George Baglin.
“[Signed] R. E. Campbell.”
It also appears from the evidence that plaintiff is a mining stockbroker of Salt Lake City; that Campbell was absent from the state, and some time in the latter part of April, 1917, wrote the plaintiff informing him that he had a pool certificate for 10,000 shares of Earl-Eagle stock; that the pool expired May 1, 1917; that he desired to sell the stock, and inquired if plaintiff could sell it for him after May first. Plaintiff answered saying that he could. It further appears, from the testimony of both plaintiff and Campbell, that Campbell transferred the stock to plaintiff without consideration and without intending it as a gift. The only consideration moving Campbell to indorse the certificate and send it to plaintiff, as shown by the evidence, seems to be that Campbell desired to sell the stock and plaintiff assured him that he could sell it. It also appears from the evidence that plaintiff made formal demand upon the company that the stock be issued to him, and that the company refused to issue it until certain alleged conflicting claims were adjusted. Whether or *578not the refusal to issue the stock, in view of the excuse offered, amounted in law to a conversion we need not now determine.
Certain evidence admitted in proof of the market value of the stock was vigorously contested by the defendants, and its admission as evidence assigned as error. These questions, as far as may be necessary, will receive consideration before concluding these remarks. ,
At the close of the evidence for the plaintiff, defendants moved for a nonsuit on the following grounds: ■
“That there is no proof that the complaining party, the plaintiff, was the actual owner or owner at all of the stock that he attempts to sue for; or that he was entitled to any rights or privileges of an incorporator; or that there is no proof that the corporation was in any way, or the individuals in any wise, liable for refusal to issue the stock at the time that the' alleged conversion is complained of;
"That there is no evidence of a conversion in the record whatever made by the plaintiff, for the reason that there is no evidence whatever showing that the corporation or any of the defendants in any wise attempted to exercise any ownership or control as owners over the stock which the plaintiff alleges he made demand for; and there is no evidence that the corporation or these directors in any wise attempted to pass upon the ownership oi; the title to the stock; or that they ever denied that any particular person was the owner of the stock. There is no evidence of damages whatever in this case, under the rules of law, on which the court could find any damage accruing to the plaintiff in this action.”
The trial court overruled the motion. Appellant took exception, and relies upon the exception as grounds of reversal.
The points raised by the exception are (1) that the evidence fails to establish plaintiff’s ownership of the stock; (2) that there is no evidence of conversion, and (3) that there is no evidence of damage. If any one of these propositions is true, the court erred in denying the motion.
Appellant, under the first proposition, contends that plaintiff, in view of the evidence, was not the owner of the stock, and was therefore not the real party in interest.
Comp. Laws Utah 1917, section 6495, with certain exceptions which are immaterial here, provides that “every action must be prosecuted in the name of the real party in interest. ’ ’ *579Relying upon this provision of the Code, appellant insists that plaintiff was not entitled to prosecute the action. ¥e have heretofore alluded to the fact that the evidence showed the stock was transferred from Campbell to plaintiff without consideration; that he neither sold it to plaintiff nor gave it to him; that he delivered the certificate to plaintiff with the in-dorsement thereon authorizing defendant to issue the stock to the order of plaintiff; that Campbell’s purpose in so doing was to authorize plaintiff to sell the stock for Campbell’s benefit. No other conclusion can be drawn from the evidence, which is unimpeached and uneontradicted.
Plaintiff himself testified on cross-examination that his relation to the stock was that of broker. He referred to Campbell as his client, and also stated, in effect, that the damage sustained by the loss of an opportunity to sell the stock would be that of his client, and not his own, except his loss of a broker’s commission.
Testimony as to whether or not there was a consideration for the assignment was admitted over respondent’s objection. The position of respondent in respect to the question is that it is immaterial what the consideration was, or whether there was any consideration at all, inasmuch as the assignment conferred upon him the legal title to the stock.
This contention seems to be supported by the highest authority on code remedies. Pomeroy, Code Remedies, section 70, also remedies and Remedial Rights, section 132, state the proposition as follows :
“Analogous to the subject discussed in the proceeding paragraph is the question whether an assignee, to whom a thing in action has been transferred by an assignment which is absolute in its terms, so as to vest in him the entire legal title, but which, by means of a contemporaneous and collateral agreement, is, in fact, rendered conditional or partial, is the real party in interest. It is now settled by a great preponderance of authority, although there is some conflict, that if the assignment, whether written or verbal, of anything in action is absolute in its terms, so that by virtue thereof the entire apparent legal title vests in the assignee, any contemporaneous, collateral agreement by virtue of which he is to receive a part only of the proceeds, ‘and is to account to the assignor or other person for the residue, or even *580la to thus account for the whole proceeds, or by virtue of which the absolute transfer is made conditional upon the fact of recovery, or by which his title is in any other similar manner partial or conditional,’ does not render him any the less the real party in interest; he is entitled to sue in his own name, whatever collateral arrangements have been made between him and the assignor respecting the proceeds. The debtor is completely protected by the assignment, and cannot be exposed to a second action brought by any of the parties, either the assignor or other, to whom the assignee is bound to account.”
If this is a sound exposition of the law, the question is, does it apply to the facts in the instant case? Here the certificate relied on as evidence of Campbell’s title is absolute in form. The indorsement or assignment to plaintiff authorizes the issuance of the stock to the order of plaintiff. The assignment on ‘ its face is positive and unqualified. It is true there was a collateral agreement or understanding by which it was understood that plaintiff ivas to procure the issuance of the stock by the defendant company to himself or order, and dispose of it for the benefit of Campbell, less plaintiff’s commission as broker. ’We have stated this collateral understanding in the broadest terms possible under the evidence, so as to give appellant the benefit of every fact that might lend support to its contention.
There can be no question as to the assignability of the stock. There can be no question as to the assignment itself, as far as the instrument relied on is concerned. It is trae it does not purport to be given for a consideration, but that was a matter with which the defendants could have no possible concern. The defendants were completely protected as against any action upon the part of Campbell, and that was the only concern they could have so far as relates to the form of the, assignment. This brings the case clearly within the principles enunciated by Pomeroy in the language above quoted and the. cases cited in the note.
Assuming that the doctrine enunciated by Pomeroy is supported by the weight of judicial opinion, of which we have no doubt, we feel compelled to hold that the assignment 1, 2 in the case at bar conveyed the legal title to plaintiff, the collateral agreement or understanding of the *581parties to the contrary notwithstanding. Plaintiff, by the assignment became the real party in interest. He had a right to demand the issuance of the stock, and had the right to enforce the demand. He had every right that Campbell would have had if the assignment had not been made. As to his right to maintain the action, assuming that defendants refused to issue the stock without legal excuse, there can be no reasonable doubt. See specially Castner v. Sumner, 2 Minn. 44 (Gil. 32), cited in the above excerpt. In addition to the eases cited in the note the following are referred to, lending more or less support to the doctrine.: Minn. Thresher Manufacturing Co. v. Heipler, 49 Minn. 395, 52 N. W. 33; Young v. Hudson, 99 Mo. 102, 12 S. W. 632; Chew v. Brumagen, 13 Wall. 497, 20 L. Ed. 663; Cottle v. Cole, 20 Iowa, 481; McPherson v. Weston, 64 Cal. 275, 30 Pac. 842.
Respondent calls our attention to the following Utah eases: Wines v. R. R. Co., 9 Utah, 228, 33 Pac. 1042; Fritz v. Western Union T. Co., 25 Utah, 263, 71 Pac. 209; Anderson v. Yosmite M. Co., 9 Utah, 420, 35 Pac. 502; Culmer v. Clift, 14 Utah, 286, 47 Pac. 85; Mundt v. Comm. Bank, 35 Utah, 90, 99 Pac. 454, 136 Am. St. Rep. 1023; also two California cases, Tuller v. Arnold, 98 Cal. 522, 33 Pac. 445, and Dollar v. International Banking Corp., 13 Cal. App. 331, 109 Pac. 499.
In support of its contention that plaintiff is not the real party in interest, appellant cites and relies on the following: Bliss on Code Pleading (3d Ed.) section 45; 23 Am. E. Enc. Law, 932; 15 Enc. Pl. & Pr. 710; Williams v. Whitlock, 14 Mo. 559; Gruber v. Baker, 20 Nev. 453, 23 Pac. 858, 9 L. R. A. 302; Robbins v. Deverill, 20 Wis. 148; Chew v. Brumagen, 13 Wall. 504, 20 L. Ed. 663; Black’s Law Dictionary, 997; Skews v. Dunn, 3 Utah, 186, 2 Pac. 64; Tripler v. Mt. Pleasant C. & S. B., 21 Utah, 313, 61 Pac. 25.
Appellant quotes an excerpt from Bliss on Code Pleading, supra, as follows:
“Tlie real party in interest is tlie party who is to be benefited or injured by tbe judgment in the case. It will be observed that the statute provides the action must be prosecuted in the name *582of the real party in interest, and, of course, if the defense can show that the plaintiff or plaintiffs are not the real parties in interest,' the action- must fail.”
On referring to tbe volume cited, we find it is not a quotation from the text but from the note. The language is taken from the opinion of the court in Eaton v. Alger, 57 Barb. (N. Y.) 179. The language is very pointed, and certainly supports appellant’s contention; but inasmuch as the case was afterwards overruled by the New York Court of Appeals (Eaton v. Alger, 47 N. Y. 345), and a contrary doctrine announced, reference to the-case as authority for appellant was, to say the least, an unhappy selection. Ye have examined all of the authorities relied on by appellant on this particular question, and read them with more than ordinary care. We are nevertheless, of the opinion that it cannot be successfully urged that plaintiff in this case is not the real party in interest.
As to whether or not the conduct of the defendants in respect to the transaction constituted a conversion of the stock but little need be said. The refusal by a corporation tb issue stock to one entitled thereto may or may not constitute conversion. It all depends upon the character of the excuse the corporation has for not issuing the stock. In Coray v. Peery Irr. Co., 50 Utah, 70, 166 Pac. 672, a recent decision by this court in an action for refusing to issue a certificate of stock we held that the complaint of plaintiff, to which a demurrer had been sustained by the trial court, stated a good cause of action, and reversed the judgment on that ground. In Munclt v. Bank, supra, a case to compel the transfer of stock on presentation to the corporation of a duly indorsed certificate, this court sustained the action, and affirmed a judgment in favor of plaintiff.
The Mundt Case is of interest in another connection. The opinion defines the relative rights of the corporation and the owner of an indorsed certificate demanding transfer of the stock. It shows the duty and responsibility of a corporation in that regard, and also the duty and right of the corporation under certain circumstances to refuse to make the *583transfer. The law is there stated clearly and succinctly, 3, 4 and need not be repeated here. What is there said respecting the transfer of stock is equally applicable in a case where a demand is made for the issuance of the stock, as in the case at bar. The same principle governs. The law being as there stated, the only question to determine in this case is one of fact. Did the defendants in refusing to issue the stock act in good faith? Were there sufficient facts to justify their refusal? The trial court evidently arrived at the conclusion that there was some evidence of a conversion. We are not prepared to say that the conclusion arrived at was without foundation.
The third and last proposition relied on by appellant in its motion for a nonsuit presents a more serious question. Assuming there was a conversion of the stock, was there any substantial evidence of damage? Plaintiff himself was the only witness who testified on that subject prior to a motion for nonsuit. He testified that he was a broker; had been for several years on the Salt Lake Mining Exchange; that he had transacted business in other cities through other brokers; that the Earl-Eagle stock was listed on the Boston curb; that he followed the market both in Salt Lake and Boston during the month of May, 1917; that he knew what the market quotations were during that month in Salt Lake City; that he also knew what the quotations were on the Boston curb; that there were no sales during May on the Salt Lake exchange; that he attended the meeting of the stock exchange every day and heard brokers offer bids for the stock; that the market quotations as he knew them on the Salt Lake stock exchange were from 12 to 15 cents bid, and the stock offered at 30; that that condition continued for several months.
At this point several papers, marked plaintiff’s Exhibits C to H, inclusive, were identified by the witness. They purported to be daily statements of stock transactions on the Boston curb from May 1 to May 7, 1917. The exhibits were offered in evidence of market value. Defendants objected on the grounds that' they were incompetent, irrelevant, immaterial, and hearsay and had not been properly identified. Ob*584jection overruled. The exhibits were read in evidence, purporting to show sales of Earl-Eagle stock at prices ranging from 24 to 30'cents per share. Plaintiff testified that he received these records in the ordinary course of business. He also testified as to market quotations on the Salt Lake Exchange; that he was the present custodian of the records of the exchange, but was not the official custodian. The records of transactions concerning Earl-Eagle stock during the month of May, 1917, were admitted over the defendants’ objection that they were incompetent and immaterial. The records show that from one-quarter cent to one cent was bid, with an occasional offer to sell up to as high as thirty cents per share up to and including the eighteenth, day of the month; that after that from five to twenty-five cents was occasionally bid, with offers to sell at prices ranging from thirty to sixty cents per share, but no sales were made during the month. On cross-examination plaintiff testified he thought the quotations from the Boston curb were sent out by the Boston Curb Association. He had no positive knowledge as to who they were sent out by. He never received any from the Boston curb, but only from the brokers. Plaintiff was of the opinion that Earl-Eagle stock on May 15, 1917, was worth from twenty to thirty cents per share. He arrived at that conclusion from Boston quotations. His answer was based on his knowledge obtained from the sheets of the Boston curb. He knew nothing of the Earle-Eagle Company’s affairs or the merits of the property. The records from the Boston curb did not disclose who bought the stock. The witness admitted that for all he knew the seller and purchaser may have been the same person. He did not know whether or not such conduct was permitted on the Boston curb. Witness did not know what created the market there or whether or not it was a bona fide market. Sometimes a quarter of a cent was bid to make a quotation. He learned from the quotations, newspapers, and brokers that some sales had been made. Plaintiff testified he sold 5,000 shares of stock on the Boston curb at from, fifteen to eighteen cents per share, but was unable to deliver, because he did not have the stock in his possession. He did not know who purchased the stock. The sale did not go through.
*585Substantially all tbe testimony of plaintiff as to tbe market value of tbe stock was objected to by defendants as being hearsay and incompetent, especially as to tbe records of transactions on tbe Boston curb. The opinion expressed by plaintiff as to the market value was objected to because it appeared to have been based entirely on the Boston quotations, of which plaintiff had no knowledge, except as they appeared in the exhibits. It must be admitted that the evidence was in the highest degree unsatisfactory. On the face of it it appeared to be the baldest kind of hearsay. Without further evidence as to its reliability, it is impossible to 5 conceive upon what principle it should be permitted to determine the rights of litigants in a court of justice. The plaintiff did not know how the records were made up. He did not know whether or not the purported sales were bona fide. He did not even know that the buyer and seller were not the same person. In other words, the purported sales in Boston may have been the merest fiction for aught anything appears in the evidence of plaintiff.
In this connection an excerpt quoted by appellant from the Case of Vogt v. Cope, 66 Cal. 31, 4 Pac. 915, is strikingly in point:
“There was nothing to show, or tending to show, how or in what manner the ‘reports of sales’ were made up; where the information they contained was obtained; or whether the quotations of prices made were derived from actual sales, or otherwise. In the absence of some such proof, the ‘reports of sales’ offered by the plaintiff were incompetent, and the court below was right in its ruling.”
See, also, Whelan v. Lynch, 60 N. Y. 469, 19 Am. Rep. 202; Fairley v. Smith, 87 N. C. 367, 42 Am. Rep. 522; Norton v. Willis, 73 Me. 582; G., H. & S. A. Ry. Co. v Hillman (Tex. Civ. App.) 118 S. W. 158.
The evidence showed there were no sales whatever made on the Salt Lake Exchange. The fact that bids were made on different dates all'the way from a quarter of a cent to twenty-five cents per share, and offers to sell on other dates from twenty to sixty cents per share, and no bids and offerings to sell on the same day, affords no evidence of market value *586without further evidence of a bona fide market. Norton v. Willis, supra.
If we treat the motion for nonsuit as having been waived, and consider the evidence offered by the defendants, it can afford the plaintiff no consolation.. Mr. Geo. E. Hemphill, selling agent of the Earl-Eagle Mining Company, had a contract with the company to sell 400,000 shares. He lived in Boston two years before coming to Salt Lake City. He testified he was engaged in the business of stock broker and mining, was acquainted with the company’s mining property, and was president and manager of the company. When in Boston he was in touch with the Boston Exchange. The curb reports are authorized, but not guaranteed. They are made up by some authorized agent of sales during the day. The witness stated that he personally maintained the Boston market as to Earle-Eagle stock. He directed the buying and selling price. The stock on the market was treasury stock under his control. The personal stock was all pooled. The witness controlled the market in the way to create interest and publicity. It seems .to have been a case of playing both ends against the middle, a species of “flim-flamming” and “thimble-rigging,” to fleece the innocent public, especially the exceedingly numerous type of whom it is said one is “bom every minute.”
We search the record in vain for a line of competent substantial evidence that -throws any light whatever upon the question of actual market value. Notwithstanding these manipulations to stimulate a market and keep it alive, the bottom dropped entirely out of the market, as far as the Earl-Eagle stock was concerned, as. soon as the first assessment was levied. It is not our intention to discredit the stock or the property itself. It may have had more or less merit; but this court would be doing an injustice, both to the people of the commonwealth and to the stranger within our gates, if, when such a case is brought before us, we should refrain from expressing our views in unmistakable language.
We are of the opinion there was no competent evidence of *587damage to tbe plaintiff, and that the motion for a nonsuit should have been sustained.
The judgment is reversed, at respondent’s cost.
CORFMAN, C. J., and FRICK, WEBER, and GIDEON, JJ., concur.