recognizing that an interest in shares may be represented by a stock certificate
How later courts described this case
- recognizing that an interest in shares may be represented by a stock certificate
- recognizing an action for wrongful conversion of stock
- “It is elementary that the law of conversion is concerned with possession, not with title.”
- “the courts long since came to treat a willful and wrongful taking and disposal of stock certificates as a conversion of the property itself”
Written by the judges who cited it.
The opinion
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Lehman, J. (dissenting).
A certificate of stock belonging to the plaintiff’s testator was stolen. The certificate was not indorsed by the owner. The defendants came into possession of the certificate, bearing a forged indorsement. Though in good faith they gave a valuable consideration for the certificate they acquired no title to it. They wrongfully refused the owner’s demand for its return and thus deprived the owner of his property in the certificate. They converted the certificate but the question remains: What is the value of that property?
A certificate of stock is the tangible evidence of stock ownership. Business men deal in stock certificates because transfer of title to the stock certificate results in the transfer of the owner’s property in the stock as well as in the certificate. Then a distinction between a certificate of stock and the stock represented by it carries no practical consequences. In truth the stock certificate is not merely evidence of stock ownership but when properly indorsed it constitutes authority for the transfer of the stock, and thus enables the holder to acquire record title to the stock itself. Thus the conversion of a stock certificate, if transferable by delivery or indorsed by the owner, may result in depriving the owner of property in the stock as well as in the certificate. In such case the owner is entitled to recover the value of the stock. That was the situation in the cases cited in Judge Crouch’s opinion.
Here the situation is different. The certificate was not indorsed and the true owner gave notice to the corporation that the stock certificate was stolen. Concededly until the trial the owner of the certificate was still the record owner of the stock and entitled to all the benefit which flows from such ownership. No wrongful refusal to return the stock certificate could deprive him of that property. That could pass from him only by voluntary transfer. If the owner had lost the stock certificate or if it had been destroyed by fire, his damage
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would certainly not be the value of the stock, for he would still retain all his rights as a stockholder and his full property in the stock. So here, even after the defendants converted the certificate, the owner still claimed and enjoyed his property in the stock and took affirmative action to prevent that property from passing, actually or apparently, to another. The plaintiff is entitled to any damages suffered by the testator by reason of the fact that he was deprived of
possession
of the certificate, but since
possession
of the certificate without title does not carry with it any beneficial rights in the stock itself, he has never been deprived of property in the stock and its value may not be included in such damages.
The judgment of the Appellate Division should be affirmed.
Pound, Ch. J., Crane, Kellogg, O’Brien and Hubbs, JJ., concur with Crouch, J.; Lehman, J., dissents in opinion.
Judgment accordingly.