## Facts

- J. C. Trahan pledged 70,000 shares of Texas International Petroleum Corporation (TIPCO) stock to The First National Bank of Ruston to secure two personal loans.
- After Trahan repaid the loans in 1977, he demanded return of the pledged stock.
- The Bank refused to return all shares, asserting the TIPCO stock also secured a separate loan to Resource Exploration, Inc., which the Bank treated as effectively the same as Trahan.
- The purported extension of the pledge to the Resource Exploration loan rested on an uninitialed interlineation on the pledge agreement.
- After Resource Exploration defaulted, the Bank sold 15,000 shares of the TIPCO stock.
- Trahan sued in federal district court (diversity), alleging the Bank wrongfully converted the 15,000 shares.
- The district court found no valid pledge securing the Resource Exploration loan, held the Bank liable for conversion, and ordered the Bank to procure and deliver 15,000 shares of TIPCO stock to Trahan within 30 days.
- The parties disputed the proper measure of damages under Louisiana law, including whether relief should be limited to cash value at conversion or tied to subsequent market increases.

## Issues

1. Under Louisiana law, what is the proper measure of recovery for conversion of stock: return of equivalent shares, value at the time of conversion, or the highest value between conversion and judgment?

## Decision

- The Fifth Circuit affirmed the district court’s judgment.
- The court held the district court did not err by ordering the Bank to procure and deliver 15,000 TIPCO shares to Trahan as the remedy for conversion.
- The court rejected the Bank’s contention that damages had to be fixed solely at the stock’s value at the time of conversion.
- The court also rejected Trahan’s request for damages based on the highest market value reached between conversion and judgment.

## Legal Principles

- In Louisiana, the usual measure of damages for conversion is either return of the property converted or the value of the property at the time of conversion.
- Where the converted property is obtainable, ordering in-kind return (including procurement and delivery of equivalent shares) fits within the “return of the property” measure.
- Louisiana law, as applied here, does not require a “highest intermediate value” award for converted stock when return of equivalent shares is an adequate method of making the owner whole.

## Conclusion

The Fifth Circuit held that Louisiana conversion remedies permitted the district court to require the bank to restore the converted position by procuring and delivering equivalent shares of stock, and it declined to limit recovery to time-of-conversion value or to award peak-value damages.


Trahan v. First Nat’l Bank of Ruston, 690 F.2d 466 (5th Cir. 1982)