AMERICAN TELEPHONE & TELEGRAPH COMPANY
290 A2d 842 (Del.Chan.1972)
MARVEL, VICE CHANCELLOR. Plaintiff seeks the entry of a judgment against two corporations, namely American Telephone and Telegraph Company and General Electric Company, based on her claim for injuries sustained by her as a result of the alleged unauthorized registration of stock owned by her in each such company. Separate suits were filed against such issuers. However, the cases having been consolidated for trial purposes, this opinion will be filed in each case.
At the time of the acts complained of plaintiff was the registered holder of 500 shares of common stock of
American Telephone and Telegraph Company and 100 shares of common stock of General Electric. Later, the
shares of the latter company were split two for one.
In 1968, Gertrude L. Weller, a 94-year-old widow, was invited to live in the home of Mr. and Mrs. Kenneth
jumper. This change of residence came about because the plaintiff had known Mrs. jumper for many years and
was also acquainted with Mr. jumper, who had performed various helpful services for her in the past. Because of her lonely circumstances and advanced age she was more than delighted to accept the jumpers' proposal. As a token of her appreciation for their apparently unselfish gesture, Mrs. Weller, after moving in with them, made a gift of 100 shares of American Telephone and Telegraph stock to Mr. Jumper.
Thereafter, because of her age and poor health, plaintiff gradually surrendered more and more responsibility concerning the details of her business affairs to Mr. jumper. Thus, she acquiesced when he took upon himself to open her mail, being reassured by him on numerous occasions that he was sending her stock dividend checks and other income receipts to her bank. During this period Mrs. Weller evinced complete trust in the jumpers notwithstanding momentary worries over the fact that her mail was being opened by Mr. Jumper and that she was not actually being shown the income checks which she had received in the mail. However, she was easily convinced that there was nothing to worry about.
In February, 1970, after having moved to her nephew's to live, following disclosure to some extent of Mr. Jumper's actual nature, Mrs. Weller ascertained that for over a period of almost two years she had been systematically defrauded by Mr. Jumper. In other words she became aware for the first time of the fact that
Kenneth Jumper had used a form containing her signature for the purpose of opening a joint trading account with a stockbroker, namely the third party defendant Merrill Lynch, Pierce, Fermer & Smith, Inc., and that Mr. Jumper thereafter had apparently forged her name to the stock certificates here involved for the purpose of selling them on the market.
The trial evidence is to the effect that Mr. jumper had not only forged plaintiff's name to plaintiff's stock certificates but had also closed out her savings account and terminated her checking account by means of a forged signature. Needless to say, the income checks which Mr. Jumper had removed from Mrs. Weller's mail had also been diverted to his own use.
Plaintiff thereupon notified the defendants American Telephone and Telegraph Company and General Electric
Company on March 4, 1970 that the stock certificates representing her investments in such companies had been sold by means of forged signatures and requested the issuance to her of replacement certificates. The defendants having declined to issue such certificates as requested, this action ensued, the complaint naming as defendants the issuers of the certificates in question. Merrill Lynch was later joined as a third party defendant in its capacity as the broker which had guaranteed Mrs. Weller's signature.
Section 8-404(2) of the Uniform Commercial Code provides that where an issuer has registered a transfer of a security in the name of a person not entitled to it, such issuer on demand must deliver a like security to the true owner, provided, inter alia, the owner has acted pursuant to subsection (1) of the section which follows. 5,8-404(2)(b). Subsection (1) of the following section provides that the owner of such a security must notify the issuer of the wrongful taking complained of within a reasonable time after he has notice of a lost or wrongfully taken certificate, Section 8-405(1).
Defendants argue that in the case at bar plaintiff failed to notify the issuers within a "reasonable time", as such phrase is defined in the statute. It contends that plaintiff should have known some twenty-two Months before she notified the issuing corporations that Mr. Jumper had converted her stock certificates. Defendants go on to point out that had plaintiff made a casual examination of her bank book or bank statement, it would have been brought to her attention that dividend checks accruing on the shares here in issue were not being deposited to her credit.
In order to determine whether or not Mrs. Weller notified the issuer within a "reasonable time" after she had "noticed" that her shares had been transferred as a result of forgery it is necessary to determine the meaning of these two phrases as employed in the statute.
The definition section of Article 8 provides inter alia: "In addition Article 1 contains general definitions and principles of construction and interpretation applicable throughout this Article." Section 8-102(6). Article 1, provides that a person has "notice" of a fact when he has actual knowledge of it, has received notification, or ". . . from all the facts and circumstances known to him at the time in question he has reason to know that it exists." Section 1-201(25). Article 1 also provides: "What is a reasonable time for taking any action depends on the nature, purpose and circumstances of such action." Section 1-204(2).
In the case at bar we are concerned with the affairs of a 94-year-old woman, who while a guest in another's
home, was persuaded to allow one of her hosts, whom she trusted, to handle her affairs. I am accordingly
satisfied that Mrs. Weller, a lonely and trusting person of advanced years And of infirm mind and body, had every reasonable right to trust a family which took her in and which she had known intimately before she moved into its home. Furthermore, in light of her reliance on the perpetrator of the acts which deprived her of title to her securities and her own age and decrepitude, she having among other things broken a hip while at the jumpers, I do not think Mrs. Weller can be charged with unreasonable action in not checking her accounts from time to time. I therefore conclude in view of all of the surrounding circumstances that Mrs. Weller did not have the required statutory notice of Mr. Jumper's dishonesty until February 19 or 20, 1970, and that she thereafter
notified the issuers of her stolen securities within a reasonable time.
[judgment for plaintiff.]