Martin v. W. W. Lanahan & Co.

Stockbridge, J., delivered the opinion of the Court. On the 6th day of September, 1917, Charles H. Martin sued the firm of W. W. Lanahan & Co: in the Court of Common Pleas of Baltimore City, and on the same day W. W. Lanahan & Co. brought suit against Charles H. Martin in the Superior Court of Baltimore City. In the first case the alleged cause, of action was a conversion by the defendants of fifty shares of the capital stock of the Chalmers Motor Company and the plaintiff claimed to be entitled to recover damages for such alleged conversion. In the second case the suit was upon the common counts for a balance found to be due to the plaintiffs of several thou ⁵²⁷ sand dollars as the result of certain transactions between the parties.

The two cases were tried together by agreement, -inasmuch as the main and controlling difference between the parties grew out of one and the same transaction. At the trial of the suit in trover the Court directed a verdict in favor of the defendants, and when this result was reached it necessarily followed that in the suit in assumpsit the verdict should he in favor of the plaintiffs. There was no difference between the parties as to the amount due, provided Martin was not entitled to recover damages in the action in trover. Judgment was accordingly entered in the action in assumpsit in favor of the plaintiffs for $3,956.02.

From these two judg ments Marlin has taken these appeals. The cases were argued together in this Court. During the progress of the trial in the suit in trover twelve exceptions were reserved on behalf of Martin, and by agreement of counsel the same exceptions are to he regarded as having been, taken in each of the cases. The first and controlling question in these cases is, whether there had been a conversion by Lanahan & Co. as averred in the declaration in the suit brought in the Court of Common Pleas.

To answer this it is first requisite to understand clearly what cooistitntés conversion, and then to ascertain whether the facts as testified to make out a case of convert siou or not. Numerous- authorities have been cited by the appellant, a» to what constitutes conversion, hut in none of them is it any more clearly stated than in the case of Dietus v. Fuss, 8 Md. 148 , and re-affirmed in Hammond v. DuBois, 131 Md., at p,. 151, in both of which it is said: “The action of trover can not he maintained without a conversion. - It may he either direct or constructive, and, therefore, may he proved directly or by inference. "When the plaintiff fails in proving an actnal conversion, it will he necessary for hiip. to give evidence of a demand and refusal having, been made at a time when the defendant had the power to give up- the goods. A demand and refusal are only evidence of a prior conversion ⁵²⁸ which may be explained and rebutted by evidence to' the contrary.” In the case of Manning v. Brown, 47 Md. 506 , Judge Alvey, commenting' upon the evidence in that case, makes this further addition to the definition of conversion.

He says: “There is no evidence whatever of any intention on the part of the defendants to take to themselves the property in the goods, or in any manner to deprive the plaintiff of them. To entitle him to recover on the count in trover, such proof would have been required.” The same rule is clearly stated by Judge Bukke in the recent case of the Merchants Bank v. Williams, 110 Md. 334 , when he said: “Conversion in the sense of the law of trover consists either in the appropriation of the property of another, or in its destruction, or in exercising dominion over it in defiance of the owner’s rights, or in withholding the possession from him under an adverse claim of title, and all who aid, command, assist or participate in the commission of such unlawful acts are liable.” In view of these clearly enunciated principles of what constitutes conversion, as a basis for an action of trover, it is now in order to examine the salient facts of this case, and ascertain how far they go to come within the application of these principles. On the 13th of October, 1916, Martin requested the firm of Lanahan & Co. to receive fifty shares’ of Chalmers Motor Company common stock, pay to Near & Co. $6,500, the purchase price for the same, to charge that amount to his account and to carry the stock for him. On the same day Martin was advised that the appellee had paid Near & Co.’s draft for the amount named, charged the same to his account, and that they would carry the stock for him.

The stock which Martin had bought at 130, sold down to a half point below par by the 17th of October. About ten days later Martin testifies that in talking with Mr. Ensor, an employee of the appellees, he was told that ⁵²⁹ their firm had had an inquiry from Homblower and Weeks, of New York, inquiring whether he wished to sell his stock. By that time the price of the stock had rallied somewhat, and was in the vicinity of $120, but Martin told Mr. Ensor that he was disposed to hold on a little longer. According to the witness’ calculations, the stock which he had bought, then had a book value of about 140, and early in Hovember the appellant saw an article in the Wall Street Journal, to the effect that a new company was to be formed, which would take over the stock of the Chalmers Motor Company, and give four shares of the new for one share of the old.

Martin also speaks of a circular which he saw, according to which the book value of the new stock was $29, or for the four shares $116, which he would receive for what cost him $130 per share. Again Mr. Martin had a talk with Mr. Ensor, in which he asked if the latter could get him “200 shares of the stock for the 50 old I had and deliver it. He told me that fit would be all right.’ I think the market started at 35, but I am not sure; but I told him to sell the 200 shares and he did sell. He told me he had gotten an order and he told me he had gotten $33.50 a share for it.” The note reporting the sale, which Martin received from Lanahan & Co., under date of Hovember 9th, showed a sale as of that date of 200 shares of the Chalmers Motor Corporation, the name given to the new company.

Upon the receipt of this Mr. Martin did not attempt to disavow the sale shown to have been made, but did find some fault with the fact that only four shares of the new were issued for one of the old, and he accordingly on that day wrote a letter to Mr. Chalmers, the president of the old company, in which the sole burden of his complaint was to the effect that the holders of the stock of the old company ought to receive more than four shares for one. A few days after this Mr. Martin got his counsel to write to Mr. Chalmers about an exchange at 5 to 1, rather than ⁵³⁰ 4z to 1. TTp to this time it does not clearly appear that either Lanahan or Martin had any knowledge of anything to put them upon inquiry, that there was anything in connection with the proposed exchange, except the cancellation of the certificates of the old corporation, and the issuing of certificates of stock in the new. Thus far in the transaction both parties were apparently unaware that in the case of stock of the one corporation exchanged for that of the other, it was to be on a basis of “if, as and when issued”.

Or if either party did have knowledge of this fact no attention apparently was given to the language as affecting the deal, either by Martin or Lanahan & Go. Tbe words “if, as and when issued,” have a peculiar significance in this ease, for tbe reason tbat a certain amount of tbe stock of tbe new company was not issued by way of exchange for old stock, but was to be disposed of to an underwriting syndicate, which was to place the same upon the market at 35, and as is: common in stock transactions of this sort, the exchanged stock was not to be issued until tbe lapse of a certain amount of time, to enable tbe members of tbe underwriting syndicate to 'unload the stock taken by them. This-syndicate stock, which was paid for in cash, immediately received certificates of the stock, while that which was to be-issued by way of exchange would not be issued until tbe time had elapsed which bad been agreed upon between tbe underwriting syndicate and tbe new corporation. Comparatively little of tbe stock of tbe new company was so issued, only about 2,000 shares out of an authorized issue of