Blumenthal v. Maryland Casualty Co.

THE COURT.

On July 3, 1925, one Julia Powers commenced an action against plaintiff Blumenthal and others to recover certain shares of the capital stock of the Pacific Diesel Engine Company, a corporation. It was alleged that she had been fraudulently deprived of the stock and that the same had passed into the hands of Blumenthal as a purchaser. On July 3, 1925, a restraining order was issued, enjoining Blumenthal and the other defendants from selling, transferring, disposing of or otherwise dealing in the stock, and later upon the petition of the corporation—which was made a defendant in the action, but which disclaimed all interest in the stock—an order was made, permitting it to deposit the stock, evidenced by its certificate, with the clerk of the court to await the determination of the conflicting claims of defendant Blumenthal and the remaining defendants thereto. Upon the issuance of the restraining order a bond for $500, executed by the Maryland Casualty Company, the defendant in the present action, was filed. This undertaking was later superseded by another, executed by the same surety, in the sum of $1,000, which provided that the surety would pay to the parties enjoined such damages, not exceeding $1,000, as they might sustain by reason of the injunction if the court finally decided that plaintiff Powers was not entitled thereto.

In his answer to the complaint Blumenthal alleged in substance that certificates for the stock, duly indorsed in blank by Mrs. Powers, were purchased by him in due course

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of business for value and without notice of the alleged fraud. He further alleged , in a cross-complaint that he presented the certificates to the corporation for transfer, but that the latter at the request of the plaintiff did, wholly without right, retain possession thereof, and thereafter, as above stated, deposited the same with the clerk of the court; that as a result he had suffered damage in the sum of $1,049.96, the value of the shares, for which amount or the return thereof he prayed judgment against Mrs. Powers.

The court found the above allegations of Blumenthal’s answer to be true, but made no findings upon the allegations of his cross-complaint. Notwithstanding its findings the trial court entered judgment in favor of Mrs. Powers against Blumenthal, and the injunction was made permanent. From this judgment the latter appealed, and the Supreme Court in