Atherton v. Michigan Guaranty Corp. , 237 Mich. 133 ( 1926 )

The facts are not in serious dispute. But defendants' counsel insist that the application of certain legal rules contended for by them requires a reversal of the decree. They first insist that they are entitled to apply the rule of equitable estoppel which became ingrafted in the law before the adoption of the uniform stock transfer act (3 Comp. Laws 1915, § 11920et seq.) that where the owner of a stock certificate indorsed it in blank and intrusted it to another he was estopped from asserting title as against a purchaser who in good faith had bought it in reliance on the indorsement. But here the certificates were not indorsed, by the owner. The diligence of counsel has brought to our attention no case where the doctrine of estoppel was applied to a case of actual forgery which had not been subsequently ratified either expressly or by necessary implication and we do not think the doctrine should apply to such a case. There was no ratification by plaintiff and no act of his which tended in that direction. The indorsement was a forgery, did not pass title, and plaintiff is not estopped on this record from so asserting.

It is further insisted by appellant's counsel that plaintiff is estopped by his laches. It is claimed that Phipps, Beeson Company became insolvent and went into the hands of a receiver and that Hurd went out of business, and it is insisted that plaintiff's delay in bringing this action prevented appellant from realizing upon the guaranty by these brokers of the genuineness of the signature on the certificates. Some further facts should be here stated. Plaintiff did not learn for several weeks that his stock had been sold by McDonald. Some six weeks after he let McDonald take the certificates he became suspicious and wired the corporation not to honor any assignment of his stock until further notice and received a wire that it had already been transferred and canceled. His attorney then wrote the corporation but the letter was not as full as might be desired. Some time after this, plaintiff is not certain the exact time which elapsed but it could not exceed two months, he went to appellant's office and informed the officers of the forgery. He did not bring this suit until considerable time thereafter. If under these circumstances it could be claimed there was such laches as to operate as an estoppel, a question not necessary to decide, it is not here available to appellant. To constitute estoppel there must be prejudice to the party pleading it. It is true that Phipps, Beeson Company went into the hands of a receiver, but this was before appellant received the stock. It is true that Hurd went out of business, but he only went out of the brokerage business. He answered plaintiff's bill, was present and represented by counsel at the hearing. He was called as a witness by defendants but was not inquired of as to his financial ability. However, appellant's treasurer testified:

"I think the C. M. Hurd Company referred to is at this time financially responsible. From what I know of them financially they are substantial now as they were in 1922, August and September of that year."

Although appellant was told of the forgery not to exceed two months after plaintiff learned of it, it did not then nor so far as this record discloses has it since made any effort to secure reimbursement from either brokerage firm, nor does it attempt to show that it could not then or now recover all it lost through the forgery of McDonald. It has not shown that it was in any way prejudiced. There is no estoppel by laches.

Appellant also insists a money decree was not justified. With this contention we agree. Had plaintiff desired only to recover the value of the stock at the time of its conversion, he should have brought an action at law for conversion. By his original bill he sought the restoration of his certificates or the issuance to him of new ones in their place and an accounting for dividends. Upon this record he is entitled to such relief; it is relief a court of equity may grant. He sought equitable relief and he must be content with equitable relief. The decree must be modified by requiring appellant to issue plaintiff 37 shares of its capital stock and account to him for the dividends.

As so modified, it will be affirmed. Appellant will have costs of this court.

BIRD, C.J., and SHARPE, STEERE, WIEST, CLARK, and McDONALD, JJ., concurred. SNOW, J., did not sit.