McCoy v. Northwestern Casualty & Surety Co.

WILLIS, J.,

pro

tem.

The action herein is for conversion of certain corporate stock, the cause having been submitted to the trial court on the pleadings and a written stipulation of facts. No findings, therefore, being required, the stipulations being deemed in law to constitute the findings, the court’s conclusion and order for judgment in favor of plaintiff, respondent herein, was entered on the minutes, and a judgment was entered thereon from which this appeal is taken, the record being brought here by a bill of exceptions. No brief has been filed by respondent.

On respondent’s application, appellant Northwestern Casualty and Surety Company (hereinafter called “company”) furnished a stay bond in the sum of $10,582.70, in a case appealed by respondent from a judgment for money entered in the Superior Court of Los Angeles County. As collateral security to protect the company from liability for loss or damages on account of such bond respondent delivered to the company 200 shares of common stock of Acme Fire Insurance Company of the then value of $10,000 and of which he was the owner. This transaction was conducted by respondent and one Channing Follette, since deceased, who was the duly appointed attorney-in-fact of the company. By the written collateral pledge agreement, dated September 25, 1928, the company was given the right to retain said stock until its liability on the bond had ceased or terminated, with power to sell, assign and deliver the stock without notice at broker’s board, public or private sale, and to appropriate the proceeds to protect itself against . any loss on account of said bond. Shortly thereafter the Acme Fire Insurance Company agreed upon a merger with Pacific American Fire Insurance Company, and, with the approval of the corporation commissioner of California, the stock of the former company was to be delivered into an escrow, wherein each two shares of its stock were to be exchanged for $39 cash and one share of stock issued by the latter company, if and when more than seventy-five per cent of the issued stock of the former company had been delivered

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into such escrow. Such contingency having arisen, the exchange was made; Follette, being in possession of respondent’s stock as agent of the company, on December 11, 1928, delivered the same into such escrow, but did so in the guise of attorney-in-fact of Seaboard Surety Corporation, another bonding company of which he was likewise attorney-in-fact. On December 28, 1928, the escrow agent delivered to Follette, as agent of Seaboard Surety Corporation, a check for $3,900, payable to the latter company and a certificate for 100 shares of stock of Pacific American Fire Insurance Company issued in the name of Seaboard Surety Corporation. Follette cashed the check and appropriated the money to his private uses. The stock was later delivered into the possession of Seaboard Surety Corporation. This escrow transaction was accomplished without the knowledge of respondent or of the officers of Seaboard Surety Corporation, or of appellants herein, none of whom had actual. knowledge thereof prior to July 5, 1931. The value of the 200 shares of Acme Fire Insurance Company stock on December 11, 1928, was $47 per share, or $9,400.