United States District Court, W.D. Texas, Austin Division
PITMAN UNITED STATES DISTRICT JUDGE
the Court are cross-motions for summary judgment filed by
Plaintiff John Stephen Thorne, (Dkts. 81, 84, 85),
Defendants Union Pacific Corporation and Union Pacific
Railroad Company, (Dkt. 86). Having reviewed the filings, the
relevant law, and the factual record, the Court hereby issues
the following Order.
John Stephen Thorne (“Plaintiff”) seeks a
declaratory judgment establishing the number, class, and
present dollar value of shares of stock he allegedly owns in
Union Pacific Corporation (“UPC”) or Union
Pacific Railroad Company (“UPRR”) (collectively,
“Defendants”). (Am. Compl., Dkt. 12, at 13).
Plaintiff also seeks a declaration of the Court regarding the
cumulative dollar amounts of the dividends and interest
earned on his shares, if any. (Id.).
argument is predicated on his ownership of a stock
certificate (the “Certificate”) issued by the
Southern Pacific Railroad Company (“SPRC”) in
1859. (Id. ¶ 17). The Certificate, which bears
the number 1656, issued to Mary Key 300 shares of $100 each.
(Id. ¶¶ 17-18; Dkt. 12-1). SPRC
subsequently underwent several sales, takeovers, and
reorganizations. (Am. Compl., Dkt. 12, ¶¶ 19-31;
Stip. Facts, Dkt. 56, ¶¶ 19-49, 70-75). Plaintiff
maintains that the 300 shares of SPRC stock at issue in this
case survived each of those events. (Am. Compl., Dkt. 12,
alleges that, at some time between 1874 and 1893, Ms. Key or
her son “gifted, sold, or otherwise properly
conveyed” the Certificate to Lansing Stephen
(“L.S.”) Thorne, who was hired by Texas &
Pacific Railway Company
(“T&PRC”) as a brakeman and eventually became
vice president and general manager of the company.
(Id. ¶¶ 40-41). Plaintiff alleges that the
Certificate was thereafter gifted through generations of the
Thorne family, culminating in a 2005 gift to Plaintiff (the
great-great grandson of L.S. Thorne). (Id.
¶¶ 42-46). He further alleges that the shares have
“evolved and grown into a valuable portion of
equity” in UPRR or its holding company
judgment is appropriate under the Federal Rules of Civil
Procedure only “if the movant shows there is no genuine
dispute as to any material fact and that the movant is
entitled to judgment as a matter of law.” Fed.R.Civ.P.
56(a). A dispute is genuine if the evidence is such that a
reasonable jury could return a verdict for the nonmoving
party. Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 254 (1986).
party moving for summary judgment bears the initial burden of
“informing the district court of the basis for its
motion, and identifying those portions of [the record] which
it believes demonstrate the absence of a genuine issue of
material fact.” Celotex Corp. v. Catrett, 477
U.S. 317, 323 (1986). If the moving party bears the burden of
persuasion at trial, it must also “support its motion
with credible evidence . . . that would entitle it to a
directed verdict if not controverted at trial.”
Id. at 331.
the movant carries its initial burden, the burden shifts to
the nonmoving party to establish the existence of a genuine
issue for trial. Matsushita Elec. Indus. Co., Ltd. v.
Zenith Radio Corp., 475 U.S. 574, 585-87 (1986);
Wise v. E.I. Dupont de Nemours & Co., 58 F.3d
193, 195 (5th Cir. 1995). The non-movant must respond to the
motion by presenting evidence indicating there is a genuine
issue for trial. Miss. River Basin Alliance v.
Westphal, 230 F.3d 170, 174 (5th Cir. 2000). The parties
may satisfy their respective burdens by tendering
depositions, affidavits, and other competent evidence.
Topalian v. Ehrman, 954 F.2d 1125, 1131 (5th Cir.
1992). The Court views the summary judgment evidence in the
light most favorable to the non-movant. Rosado v.
Deters, 5 F.3d 119, 123 (5th Cir. 1993). “After
the non-movant has been given the opportunity to raise a
genuine factual issue, if no reasonable juror could find for
the non-movant, summary judgment will be granted.”
Westphal, 230 F.3d at 174.
cross-motions for summary judgment, the court examines each
party's motion independently, viewing the evidence and
inferences in the light most favorable to the nonmoving
party. White Buffalo Ventures, LLC v. Univ. of Tex. at
Austin, 420 F.3d 366, 370 (5th Cir. 2005).
“Cross-motions for summary judgment will not, in
themselves, warrant the Court in granting summary judgment
unless one of the parties is entitled to judgment as a matter
of law . . . .” Joplin v. Bias, 631 F.2d 1235,
1237 (5th Cir. 1980). Each party may move for summary
judgment using different legal theories that rely on
different sets of material facts. Bricklayers, Masons
& Plasterers Int'l Union of Am. v. Stuart Plastering
Co., 512 F.2d 1017, 1023 (5th Cir. 1975). Nonetheless,
cross-motions for summary judgment may be probative of the
absence of a factual dispute when they reveal a basic
agreement concerning what legal theories and material facts
are dispositive. See id.
PLAINTIFF'S PARTIAL MOTIONS FOR SUMMARY JUDGMENT
filed three partial motions for summary judgment: one
regarding Defendant's affirmative defenses, (Dkt. 81);
one regarding the effect of an 1868 document pertaining to an
event referred to herein as the “Hall Sale, ”
(Dkt. 84); and one regarding the import of text found on the
back of the Certificate, (Dkt. 85).
first partial motion for summary judgment seeks to limit
Defendants' affirmative defenses to his claims. (First
Partial Mot. Summ. J., Dkt. 81). Specifically, Plaintiff asks
the Court to restrict Defendants' arguments against the
validity of Plaintiff's stock to a single argument
regarding an 1868 sale of SPRC assets to a group of creditors
led by R. B. Hall (the “Hall Sale”).
(Id. at 1-2; Am. Compl., Dkt. 12, ¶¶
26-27). Plaintiff argues that he is entitled to this relief
because Defendants' “sole stated reason for
rejecting Plaintiff's tender of [the Certificate] and
request for transfer of Defendant[s'] stock certificates
in Plaintiff's name has been their position that [the
Hall Sale] destroyed the initial shareholder's equity
interest.” (Id. at 2). In so arguing,
Plaintiff avers that Defendants' refusal to recognize the
Certificate “constitutes an ongoing conversion”
outside the scope of any permissible qualified refusal.
intermediate Texas courts have found that the refusal to
recognize rights in corporate stock or issue new stock
certificates based on such rights constitutes conversion.
See, e.g., First Nat'l Bank v. South
Beaumont Land & Imp. Co., 60 Tex.Civ.App. 315, 128
S.W. 436, 437-39 (Tex. Civ. App. 1910, writ ref'd)
(holding that a company's failure to recognize a stock
certificate constituted conversion). A defense to conversion
exists, however, when the person in possession of the
demanded property engages in a “qualified
refusal”-that is, when they refuse to surrender the
property for a reasonable length of time while there is a
reasonable doubt about the claimant's right to
possession. Stein v. Mauricio, 580 S.W.2d 82, 83
(Tex. Civ. App.-San Antonio 1979, no writ). To successfully
rely on qualified refusal, the person in possession of the
demanded property must disclose all reasons for the refusal
to the alleged owner of the property. Id. (citing 18
Am. Jur. 2d Conversion § 44 (1965); 89 C.J.S. Trover
& Conversion § 59 (1955)) (“For a person in
possession to rely on a qualified refusal, it is essential
that the qualification be disclosed to the owner. The refusal
must be stated distinctly, and all reasons for the refusal
that are not mentioned at the time of refusal are waived and
cannot be later raised.”).
Plaintiff alleges that Defendants “asserted only the
1868 Hall Sale as the basis for their qualified refusal,
” thereby waiving “all other purported reasons
for such refusal.” (First Partial Mot. Summ. J., Dkt.
81, at 7). Defendants make three arguments in response:
first, that the affirmative defense of qualified refusal
applies only to a claim for conversion, a claim Plaintiff has
not brought; second, that qualified refusal is inapplicable
here because Defendants contend they do not possess any of
Plaintiff's property; and third, that there is a material
fact dispute with respect to whether the Defendants' sole
basis for rejecting Plaintiff's tender of the Certificate
was that the Hall Sale destroyed the initial
shareholder's equity interest. (Resp. First Partial Mot.
Summ. J., Dkt. 91, at 1).
summary judgment is appropriate only when “the movant
shows there is no genuine dispute as to any material fact and
that the movant is entitled to judgment as a matter of law,
” Fed.R.Civ.P. 56(a), the Court will consider
Defendants' third argument first. Defendants maintain
that a dispute exists with respect to whether their sole
basis for rejecting Plaintiff's tender of the Certificate
and request for the equivalent amount in current stock is
that the Hall Sale destroyed the initial shareholder's
equity interest in the Certificate. Plaintiff's only
evidence is (1) an August 3, 2011 email from UPC in-house
counsel Timothy Dunning to Plaintiff's former attorney,
Ronald Bair, (Dunning-Bair Email, Dkt. 81-1, at
a portion of Plaintiff's own deposition testimony
regarding that communication, (Thorne Dep., Dkt. 81-2, at
and “similar responses [by Defendants] to other
inquiries over the past 150 years, ” (Dkt. 81-3).
(First Partial Mot. Summ. J., Dkt. 81, at 2, 5). However, in
the very email cited by Plaintiff, Mr. Dunning references not
just the Hall Sale but also (1) other sales in 1860 and 1861,
and (2) the 1872 acquisition of SPRC by TPRC. (Dunning-Bair
Email, Dkt. 81-1, at 2). Additionally, an email between
Plaintiff and Mr. Bair regarding a telephone conversation the
latter had with Mr. Dunning notes that Mr. Dunning mentioned
not only the Hall Sale but also a stock ledger from 1871 and
the 1872 acquisition of SPRC by TPRC. (Bair-Plaintiff Email,
Dkt. 86-40, at 2-3). These facts indicate, at the very least,
that Defendants may have provided other bases for their
refusal. Therefore, with respect to this issue, Plaintiff has
failed to show that there is no genuine dispute as to any
material fact. As a result, he is not entitled to judgment as
a matter of law. Plaintiff's first partial motion for
summary judgment, (Dkt. 81), is DENIED.
reasons stated below, see infra Parts IV-V, the
Court concludes that Plaintiff's second and third partial
motions for summary judgment, (Dkts. 84, 85), are moot. The
Court therefore proceeds to an analysis of Defendants'
DEFENDANTS' MOTION FOR SUMMARY JUDGMENT
argue they are entitled to summary judgment on
Plaintiff's claims because (1) Plaintiff cannot prove he
is the true and rightful owner of the stock interest the
Certificate once represented; (2) Plaintiff's claims are
barred by the applicable statute of limitations; (3)
Plaintiff's claims are barred by laches; (4) the stock in
question was extinguished at least 147 years ago, if not
before, by various corporate transactions, and (5) Plaintiff
has no evidence to establish the declaratory judgments
requested. (Defs.' Mot. Summ. J., Dkt. 86, at 1-7). Given
the historical nature of Plaintiff's claims, the Court
deems it prudent to begin its analysis with Defendant's
second and third arguments: the statute of limitations and
Statute of Limitations
parties in this matter dispute whether the statute of
limitations has run. Both agree that the statute of
limitations for a stockholder to assert his rights to recover
stock and back dividends is generally four years, with claims
accruing once a demand is made by the alleged stockholder and
the corporation refuses the demand. Cavitt v.
Amsler, 242 S.W. 246, 248 (Tex. Civ. App. Austin 1922,
writ dism'd w.o.j.); Yeaman v. Galveston, 167
S.W. 710, 722-23 (Tex. 1914); (Defs.' Mot. Summ. J., Dkt.
86, at 20; Pl.'s Resp., Dkt. 94, at 12). But Defendants
assert the Court should interpret that rule in light of other
courts' more recent adoption of an “inquiry
notice” standard. (Defs.' Mot. Summ. J., Dkt. 86,
at 20). Courts using “inquiry notice” evaluate
whether a demand by an alleged stockholder is barred by the
applicable statute of limitations by considering when the
alleged stockholder knew or should have known that her rights
were being denied. See, e.g., Whitney v. Guys,
Inc., 826 F.3d 1074 (8th Cir. 2016); Egner v.
Talbot's, Inc., 214 P.3d 272 (Alaska ...