Court Opinion

ID: 9641687
Source: CourtListenerOpinion
Date Created: 2023-08-22 17:37:57.098873+00
Date Added: 2024-06-11T18:10:39.150424
License: Public Domain

*536Dissenting Opinion By
Mr. Justice Roberts:
At a moment in our jurisprudence when society expects the highest degree of integrity of those holding positions of public trust and confidence,1 it is shocking indeed to witness a licensed securities dealer abuse its position of trust. In my view, this Court unwisely chooses to approve the lawless conduct of Mayflower Securities. I dissent from the majority’s failure to condemn Mayflower’s resort to self-help.
The pertinent facts are undisputed. Mayflower, the sole underwriter of a new issue of 3i Company, received from appellant an indication of interest to purchase 100 shares. Shortly after February 26, 1968, the effective date of the distribution, a confirmation for the purchase of 100 shares and a prospectus was sent by ordinary mail to appellant. On March 1, 1968, Mayflower opened an account in appellant’s name and issued a stock certificate for 100 shares, registered in his name. Not hearing from appellant by March 7, and relying on the proscription of regulation T,2 appellee *537transferred the 100 shares to its nominee, Flow & Company. To do so appellee forged appellant’s name.
Having opened an account in appellant’s name and having registered securities in his name, appellee in order to transfer those securities could not resort to self-help, as it did. That appellant failed, according to appellee, to respond to a letter sent by ordinary mail did not justify appellee’s forgery of his name. No federal regulation, regardless of its significance, permits a licensed securities dealer in order to avoid the regulation’s impact to forge a customer’s endorsement on a stock certificate. Mayflower had before it other options, legal options, which it could have used to protect its rights. It chose not to act within the legal process, but to resort to self-help.
The forging of a customer’s endorsement, especially by a fiduciary, is to be condemned. Recent developments in the regulation of securities dealers and other market participants “all point to the conclusion that the broker-dealer community will be forced to live up to the professional image which it has tried to create.” Mundheim, Professional Responsibilities of Broker-Dealers : The Suitability Doctrine, 1965 Duke L.J. 445, 479. Appellee’s forgery not only contravened the professional image of a licensed securities dealer, but was a clear violation of its fiduciary duty and its responsibility to engage in fair and equitable trading practices.3
The majority concedes that between Mayflower and appellant there existed a fiduciary relationship. See Butcher v. Newburger, 318 Pa. 547, 179 A. 240 (1935). The fact of forgery is also plain. Yet the majority, although sitting in review of a court of equity, chooses *538to deny appellant relief and to vindicate the fiduciary’s conduct. In the past this Court has never been reluctant to grant relief to a party harmed by a forgery. E.g., Austen v. Marzolf, 294 Pa. 226, 143 A. 908 (1928);4 Walker v. Pennsylvania Co. for Insurances on Lives & Granting Annuities, 263 Pa. 480, 106 A. 795 (1919);5 Cornwell v. J. W. Sparks & Co., 248 Pa. 109, 93 A. 868 (1915).6
*539There can be little doubt that equity may decree the cancellation of a forged written instrument. Setlock v. Sutila, 444 Pa. 552, 554, 282 A.2d 380, 381 (1971); Fleming’s Estate, 265 Pa. 399, 109 A. 265 (1919);7 Flitcraft v. Commonwealth Title Insurance & Trust Co., 211 Pa. 114, 60 A. 577 (1905) (per curiam); Shisler v. Vandike, 92 Pa. 447 (1880); Tonkin v. Tonkin, 172 Pa. Superior Ct. 552, 561, 94 A.2d 192, 196 (1953); Heinrich Chemical Co. v. Ingram, 104 Pa. Superior Ct. 257, 260, 159 A. 77, 78 (1932) (“a forged contract amounts to nothing”). See generally D. Dobbs, Handbook on the Law of Remedies § 9.6, at 645 (1973). This being so, equity certainly has the power to undo the effect of a transfer of securities brought about by forgery.
Relying on the inherent power of an equity court to redress a wrong and not allow a party to profit by his own wrongdoing, I would reverse the decree of the Court of Common Pleas of Philadelphia.

 The words of Chief Justice Cardozo in Meinhard v. Salmon, 249 N.Y. 458, 464, 164 N.E. 545, 546 (1929), never tire of repetition. “Many forms of conduct permissible in a workaday world for those acting at arm’s length, are forbidden to those bound by fiduciary ties. A trustee is held to something stricter than the morals of the market place. Not honesty alone, but the punctilio of an honor the most sensitive, is then the standard of behavior. As to this there has developed a tradition that is unbending and inveterate. Uncompromising rigidity has been the attitude of courts of equity when petitioned to undermine the rule of undivided loyalty by the ‘disintegrating erosion’ of particular exceptions. . . . Only thus has the level of conduct for fiduciaries been kept at a level higher than that trodden by the crowd. It wiU not consciously be lowered by any judgment of this court.” See also Seaboard Indus., Inc. v. Monaco, 442 Pa. 256, 276 A.2d 305 (1971).

 12 C.F.R. § 220.4(e) (1973). Regulation T is one of the margin requirements issued by the Board of Governors of the Federal Reserve System under the authority of § 7 of the Securities Exchange Act of 1934, 15 U.S.C.A. § 78g (1971).

 Section 1 of Article III of the Rules of Fair Practice of the National Association of Securities Dealers provides: “A member, in the conduct of his business, shall observe high standards of commercial honor and just and equitable principles of trade.” OOH NASD Manual ¶ 2151.

 “Forgery is a heinous crime, which cannot be ratified.” 294 Pa. at 229, 143 A. at 909.

 In Walker v. Pennsylvania Co. for Ins. on Lives & Granting Annuities, 263 Pa. 480, 106 A. 795 (1919), the plaintiff was able to recover from the trustee who transferred her securities and from bona fide purchasers for value, who all relied on a signature, ostensibly plaintiff’s, but in fact forged by her attorney. Since the present case involves no third parties, and is a dispute between a party injured and the forger, there is stronger justification for decreeing specific performance in favor of appellant.
Moreover, in Walker, this Court considered the equitable position of the trustee who transferred plaintiff’s securities. However, this Court refused to deny plaintiff relief and to decide “in favor of a trustee who has negligently acted to her injury, when it had the power, and there was east upon it the duty, to protect both itself and her. When the forged power of attorney was presented to the trustee, it could have insisted that plaintiff be brought before it to acknowledge her signature, but it chose to rely upon Wagner’s standing as an attorney, or upon the guarantee of plaintiff’s signature by members of the stock exchange; and has only itself to blame for the situation in which it finds itself. It is not in position, being itself a wrongdoer, to invoke the doctrine of equitable estoppel as against plaintiff who has done no wrong, but simply trusted to her attorney not to wrong her, and to it, as her trustee, not to negligently deprive her of her property.” Id. at 484, 106 A. at 796.
If, as in Walker, a trustee, acting in good faith but negligently, could not prevail over a person whose name had been forged by another because the trustee had a duty to verify the signature on the securities, how then can a court condone the very act of forgery by a fiduciary?

 “Upon the merits [the finding of a forgery] should be and is controlling in determining the legal rights of the parties.” 248 Pa. at 114, 93 A. at 870.

 “Fraud, of which forgery is a glaring example, is one of the principal grounds of equity jurisdiction, and, as a general rule, equity may decree the cancellation of a written instrument found to be a forgery.” 265 Pa. at 407, 109 A. at 267-68.