Opinion
Rehearing Denied Aug. 27, 1930
Hearing Granted by Supreme Court Sept. 25, 1930.
Appeal from Superior Court, City and County of San Francisco; Maurice T. Dooling, Judge.
Action by Rose Green against William Cavalier and others, copartners, doing business under the firm name and style of Wm. Cavalier & Company. Judgment for plaintiff, and defendants appeal.
Affirmed.
COUNSEL
Pierre A. Fontaine, of Oakland, and Redman, Alexander & Bacon, of San Francisco, for appellants.
Louis Ferrari and J.J. Posner, both of San Francisco, for respondent.
OPINION
NOURSE, P.J.
Plaintiff sued for damages for the conversion of stock. The cause was tried by the court sitting without a jury and resulted in findings and judgment for the plaintiff for $15,263.40. The defendants appeal on a bill of exceptions.
The complaint was framed in three causes of action, the first covering stock owned by plaintiff, the second and third covering stock owned by her assignors. On deciding the cause the learned trial judge wrote an opinion, which we adopt as the opinion of this court:
"Action for conversion of shares of stock. The stock represented a stock dividend, certificates for which were prepared by the corporation in the names of plaintiff and her assignors. The certificates were never delivered to plaintiff and her assignors, but were wrongfully delivered by an employee of the corporation to her ex-husband. The ex-husband and another man forged the signatures of the persons named in the certificates to assignments thereon and delivered them to defendants, who innocently sold them to third persons and procured the corporation to cancel the forged certificates and issue new certificates to the purchasers.
"Defendants claim that plaintiff and her assignors never became the owners of the stock represented by the certificates because the certificates were never delivered to them. The certificates are not stock, but mere evidence of its ownership and ordinarily delivery of the certificate is immaterial. But defendants claim that because this stock was not subscribed for, but represented a stock dividend, plaintiff and her assignors did not become owners of the stock in the absence of delivery of the certificates to them. The relation of stockholder in a corporation arises by agreement between the stockholder and the corporation, and defendants’ argument comes to this, that the plaintiff and her assignors not having received and accepted the certificates from the corporation did not assent to become stockholders and hence did not ‘own’ the stock represented by the certificates. On this very nice question no authorities have been cited by either counsel to aid the court, and I have found none precisely in point. I am compelled, therefore, to reason from analogy.
"The corporation having entered the names of plaintiff and her assignors on its books as owners of the stock represented by these certificates, and having prepared the certificates for delivery, did all that was necessary to constitute them stockholders if they assented thereto. Plaintiff and her assignors, upon learning of the facts, did not repudiate the act of the corporation in this regard, but have done everything in their power to confirm it.
"In the case of deeds delivered to third persons without the grantee’s knowledge the courts have frequently indulged a presumption of acceptance by the grantee (18 Cor.Jur. Deeds § 494, p. 416; Neely v. Buster, 50 Cal.App. 695, 701, 195 P. 736; Smith v. Lombard, 201 Cal. 518, 526, 258 P. 55), and a similar rule has been adopted in the case of gifts of personal property (28 Cor.Jur. Gifts § 37, p. 644, and cases cited in notes 89 and 90; Burbank v. Stevens, 104 Conn. 17, 131 A. 742; Dickson v. Chamberland, 22 Alberta L.R. 270; Grant Tr. & S. Co. v. Tucker, 49 Ind.App. 345, 96 N.E. 487, 490). In Western P. R. Co. v. Godfrey, 166 Cal. 346, 136 P. 284, Ann.Cas.1915B, 825, the court held that a legatee who does not renounce a legacy of stock, and to whom it is distributed, becomes liable on the stockholder’s liability from the date of the testator’s death.
"While these cases are not controlling on the question here presented, they are persuasive. It seems to me that the same rule should be applied to the case of a stockholder who is entitled to a stock dividend. The corporation having done all that is necessary on its part to make him a holder of the new stock— the delivery of the certificate under well settled principles not being necessary for that purpose— his acceptance may reasonably be presumed, where, on learning of the facts, he does not repudiate the transaction, but, on the contrary, does all in his power to confirm it.
"Defendants further rely on a line of decisions, of which Pardee v. Nelson, 59 Utah, 497, 205 P. 332, 21 A.L.R. 385, is typical, that the mere retention of an unendorsed stock certificate does not amount to a conversion of the stock. The reasoning of these cases is that without endorsement the certificate cannot be transferred on the books of the company and hence the owner still retains his ownership of the stock unimpaired. But here the stock has been transferred on the books of the corporation upon the forged endorsements. That such a transfer amounts to a conversion is settled in this state. Tafft v. Presidio R.R. Co., 84 Cal. 131, 24 P. 436, 11 L.R.A. 125, 18 Am.St.Rep. 166, where the transfer was made at the request of an unauthorized agent without any endorsement, and Quay v. Presidio R.R. Co., 82 Cal. 1, 22 P. 925, where the endorsement was ineffective because made in excess of an agent’s authority.
"Defendants having procured the transfer on the books of the corporation, even though innocently and in good faith, are none the less liable. Swim v. Wilson, 90 Cal. 126, 27 P. 33, 13 L.R.A. 605, 25 Am.St.Rep. 110."
On this appeal the appellants agree that there is no question as to the amount of the judgment if there was a conversion, but they insist that they could not be held for conversion of certificates of the character involved, and they also urge that we should not follow the rule of Swim v. Wilson, 90 Cal. 126, 27 P. 33, 13 L.R.A. 605, 25 Am.St.Rep. 110. We are satisfied that the trial court has correctly applied the rule to certificates of this character and that the rule of the Swim Case has become so well established that we should not depart from it. In this connection we should add that this rule was approved in the recent case of Powers v. Pacific Diesel Engine Co., 206 Cal. 334, 339, 274 P. 512, where, however, recovery was denied because the negligence of the owner of the stock was the proximate cause of the loss. Here negligence of the respondent was not made an issue, hence the authority of the Swim Case controls.
Judgment affirmed.
I concur: STURTEVANT, J.