Hayward v. Rogers

         There was no fraud even if plaintiff, as the agent, pledgee, or trustee of defendant, had sold the stock of the latter without his consent, if he was at all times ready, able, and willing to turn over on demand an equal quantity of similar stock. The Court below held that the relations of pledgor and pledgee existed between these parties, and upon that opinion was compelled to declare the law as laid down by this Court in Atkins v. Gamble , 42 Cal. 86.

         That decision goes to the merits of this case, and is the law of this case upon the assumed proposition that Hayward, this plaintiff, was the pledgee of the stock in controversy, and the charge of the Court to the jury upon the law of the case, was practically an extract from that decision. So thatpractically the errors assigned by the defendant to the Court below are errors of this Court, and a favorable consideration thereof would result in overruling that case. The case at bar is much stronger than Atkins v. Gamble .

         It was conceded in that case that the plaintiff was the owner of the stock and had himself deposited it with the defendant, who thereupon became the pledgee thereof. And the Court held that although the owner of personal property which has been wrongfully converted is ordinarily entitled to recover his specific property, or its value, and can not be compelled to accept other property of the same kind and equal value in lieu of that which was converted, yet shares of stock in a corporation stand upon a different footing, and if all the shares are of equal value, there can be no reason for preferring one share to another.

         Indeed, as the Court remarked, the stockholders in a corporation are the joint owners of the franchise and property of the corporation. Each holder is entitled to an undivided share in the assets and business of the corporation. All stand upon the same footing. This same view was entertained by the Supreme Court in two other cases, viz.: Hawley v. Brumagim , 33 Cal. 394; Hardenbergh v. Bacon, id. 365. Chancellor Kent in the case of Nourse v. Prime, 7 Johns. Ch. 87, was of the same opinion as this Court in Atkins v. Gamble .

         The plaintiff in this case was the owner of certain shares of U.S. Bank stock, which he deposited with defendant as collateral for the payment of his note; and if the note was not paid the stock was to be sold, the note paid out of the proceeds, and the balance turned over to the plaintiff. The stock was sold afterwards at a depreciated price, and the sale did not realize enough to pay the debt; so the pledgee brought suit to recover the deficiency.

         The pledgor, however, filed his bill in equity to enjoin the action at law, on the ground that the pledgees were large operators in stocks, and had mingled his stock with their own and other stocks which they held in trust, in such a manner that they could not be distinguished, and that it was the duty of the defendants to have set apart the pledgor's shares in such a manner that they could be identified; and not having done so, they were liable for the highest price at which the stock could have been sold.

         Theopinion of the Court was adverse to the plaintiff in the equity suit, on the ground that under the contract all that plaintiff could demand was a return of 430 shares of the bank stock; that if he desired to have any specific 430 shares he should have so provided in the contract. The learned Chancellor approves the opinion of Lord Chancellor Parker in Le Croy v. Eastman, 10 Mod. 499, in a similar case, to the effect that the defendant was accountable only for the stock and dividends, and not for the price at which the stock was held. (See also Horton v. Morgan, 6 Duer, 56; Gilpin v. Howell, 5 Penn. St. 42; Allen v. Dykers, 3 Hill, 593.)

         JUDGES: Sharpstein, J. Morrison, C. J., and McKee and McKinstry, JJ., concurred. Ross, J., concurring.

         OPINION

          SHARPSTEIN, Judge

         In Bank. The principal contention on behalf of Rogers is, that Hayward held a certain number of shares of mining stock as security for money advanced by him to Rogers, and that Hayward, without the knowledge of Rogers, sold said shares of stock, and that afterwards, and while Rogers was uninformed and ignorant of said sale, Hayward procured a power from Rogers to sell said stock, and then sold of the stock of the same mining company the same number of shares that he, Hayward, had held prior to said first sale as security for his said advances to Rogers, and that Hayward accounted to Rogers for the sum realized on the sale of the stock last sold only, which was much less than the sum realized on the sale of the stock first sold, which Rogers contends was the stock which Hayward held as security for his said advances.

         On the other side, it is claimed that Hayward constantly held the identical stock certificates which he took as such security from the time when he received them up to the time when he admits that he sold them, or that if he did not, during all of such time, have said identical stock certificates in his possession, that he did, during all of such time, have other stock certificates of the same mining company for the same number of shares, which, during all of such time, he was able, ready, and willing to deliver to Rogers, upon his paying the sum for which said certificates were held as security.

         It is to the admission and rejection of evidence, and to the giving and refusing of instructions upon this issue, that most of the exceptions are directed.

         The transaction out of which this litigation arose, as narrated by Rogers in his testimony, was as follows:

         " I went to Mr. Hayward, and found him alone in his front office. I said to Mr. Hayward that I had two hundred and ten shares of Savage coming in on Monday; that is, it was due Monday--we speak of it as coming in, and I was afraid I would not be able to take care of it, and would sell the stock. * * * I told him that I thought that perhaps, rather than to see that amount of stock thrown on the market, he might assist me in taking care of it. He asked me at what prices the stock was coming in. I told him; and he said: 'Send it to me.' That is, the two hundred and seventy shares. * * * Then, upon his saying, 'Send it to me,' he says: 'By the way, what has become of that two hundred shares Burling was carrying for you?' I says: 'Burling is still carrying it.' He says: 'Order that up and send it to me.' I told him I would do so. That was the end of the conversation. There may have been something said about interest--probably was.

         " Q.--Was anything said as to Mr. Hayward's power or authority to sell it? A.--Not a word.

         " Q.--What was done in consequence of that arrangement, if anything? A.--The stock was delivered to Mr. Hayward and he paid the money that was spoken of, about $ 186,000, that he advanced to these different parties for this stock."

         In considering the exceptions upon which the appellant relies, we shall assume, as indeed we must, that this is the correct version of that transaction. And in view of that, and the further fact that it is not charged in the cross-complaint of Rogers that he was induced to do what he did by reason of any representations of Hayward as to the condition of the mine, or the then present or prospective value of the stock, or in regard to the quantity of it which Woods & Freeborn, or any other person or persons, were selling, we do not think that the Court erred in sustaining the objections of respondent to the introduction of evidence of what Hayward said to Rogers in regard to those subjects.

         Nor do we think that the Court erred in allowing the witness Peart to be asked how much stock Hayward carried for Rogers from April 22, 1872, to November, 1872. According to the testimony of a majority of the witnesses, Peart was better qualified to answer that question than any other witness, including Hayward himself. When this question was asked, appellant's counsel said: " I understand that question to be an offer to contradict their own witness, to contradict Mr. Hayward's books and Mr. Peart himself. I object to it as incompetent." Appellant's counsel seem to have assumed that the answer of the witness would contradict all the evidence to which the objection referred. But we are unable to see how the Court could have anticipated the answer of the witness, and if it could not, there was no error in overruling the objection. After the witness had answered the question, no motion was made to strike the answer out, and the Court, therefore, had no opportunity, after being sufficiently advised, to decide whether or not the witness had contradicted the evidence referred to. And according to our understanding of the evidence, there is no such contradiction.

         The evidence as to the number of shares of stock that Hayward was carrying for persons other than Rogers, and as to the contents of the letter which Rogers wrote to Hayward, may not have been relevant to any issue in the case, but as we can not conceive how the appellant could possibly be prejudiced by it, the error, if error there was in overruling the objections to it, must be disregarded.

         Upon the main issue in the case the Court charge the jury as follows: " If you find that Hayward had sold the 690 shares before the execution of the power; that you remember was July 13th; and had been ready, able, and willing to transfer to Rogers an equivalent number of similar shares in the same company by a proper and valid certificate, then and in that case it was not material that these facts should be imparted to Rogers at the time he executed the power of attorney, and the power was a valid and binding one. It was not material to tell him that, for the reason that that was a thing that Hayward had a right to do anyway, and the law says, that he was selling his own stock, and not Rogers' stock, provided he was all the time able, ready, and willing to respond to Rogers, in case he should come and demand his stock. And if you find that Hayward had sold the identical 690 shares, and that he was not at the time of such sales able, willing, and ready to deliver to Rogers a similar number of shares, then, and in that case, the suppression of those facts operated as a fraud upon Rogers, and destroyed the force and effect of the power of attorney, there being nothing for the power to operate upon." This, in our opinion, was a correct and sufficiently clear exposition of the law applicable to that issue, and it obviated the necessity of the Court's giving any other or further instructions upon it. Therefore the refusal of the Court to give the instructions asked on the points covered by the instruction given, is not a sufficient ground for reversing the judgment.

         The charge of the Court as to what would constitute a bar to Rogers' right of action against Hayward, appears to us to be substantially correct. Another portion of the charge to which exception was taken, reads as follows: " When facts are testified to by witnesses who are not impeached, and there is no inherent improbability in the statement, the jury are bound to take that evidence as proving the particular fact; and the jury have no right capriciously to disregard evidence where it is not controverted and the character of the witnesses is good, and the story is probable."

         There ought to be no necessity for giving such an instruction to a jury. A juror who required to be so instructed would be utterly unfit for the position. But as a matter of law we think the instruction was correct, and, so far as we can see, it was as favorable to one side as it was to the other.

         We do not think that the judgment should be reversed; but it must be modified. The jury found for the plaintiff in the sum of $ 295,345.38 and the judgment was entered for the sum of $ 305,050.95.

         It is therefore ordered that this cause be remanded to the Court below with directions to so modify the judgment as to make it correspond with the verdict of the jury; and, when so modified, it is hereby affirmed.

         CONCUR

          ROSS

         Ross, J., concurring:

         The plaintiff was justified in acting in accordance with the views expressed by this Court in the case of Atkins v. Gamble , 42 Cal. 86. It matters not whether those views accord with our own notion as to what the law ought to be. That case was the law when the transactions in question occurred, and has remained so ever since. Whatever certificates of stock the plaintiff sold, of those received by him on account of the defendant, were replaced by him with like certificates prior to the execution of the power of attorney from defendant to plaintiff. At the time the power of attorney was drawn the defendant was present with the plaintiff's agent, the certificates of stock were produced, and from them the attorney obtained the number of the certificates and the number of shares, and drew a power of attorney, which the defendant executed, authorizing the plaintiff to sell them; and this he did.