Court Opinion

ID: 3803064
Source: CourtListenerOpinion
Date Created: 2016-07-06 07:44:45.287765+00
Date Added: 2024-06-11T14:13:21.715330
License: Public Domain

The majority opinion approves the finding of the trial court that plaintiff bought and paid for the certificate of stock in question; that it was validly issued at the time shown on the face thereof; that the owner thereof never received any dividends thereon, though semiannual dividends were declared and paid to the other holders of similar stock during the period of time involved; that the issuing company never paid dividends on the stock in question because it did not have a record thereof and no demand therefor was made; that the owner forgot he owned the stock and neglected to claim his dividends that would and did accrue thereon; that he should be excused for his failure to claim ownership of the stock and his certificate should be validated, but he should be allowed to take only the accrued dividends for a period of three years prior to the date he instituted his action. The denial of dividends except for a period of three years prior to the date he filed suit is based on the theory that he was guilty of laches in failing for a number of years to claim his dividends and that such failure worked a detriment to the present stockholders.
I am unable to see any distinction between the stock itself and the accrued dividends as far as the application of the principle of laches is concerned. I am also unable to agree that laches applies under the facts and circumstances of this case.
The defendant contends with the same earnest forcefulness and logic that lathes, estoppel, and the statute of limitations bar both claims of plaintiff, to wit, that the certificate is valid and that he is entitled to all accrued dividends. There never was any record, according to the defendant, that Swatek bought or owned the certificate of stock sued on or that it was validly issued; so the purchasers of stock in the company never could tell from the books of the company that this particular stock was outstanding and would therefore affect the amount of dividends to be allocated to them on their stock. The negligence of the company to keep its books properly, if the finding of the trial court and record herein and the majority opinion are to be accorded any consideration, is the reason for the existence of this situation. If the company had recorded the transaction with Swatek, all purchasers of stock would thereafter know of its existence and they, no doubt, would have received less dividends than they did actually receive; so it is obvious that up to the time of the established validity of the Swatek stock the stockholders of *Page 408 
the company had received benefits by way of increased dividends as the result of the neglect of both Swatek and the company. If Swatek now receives the amount of his accrued dividends, the stockholders will not suffer thereby, for they will only forego the receipt in the future of an amount equivalent to the excess already received on account of Swatek not being paid his dividends. They have already received Swatek's dividends. Everybody buys stock in corporations with knowledge of the fact that mistakes may have been made or may thereafter be made, or other contingencies may arise or might have arisen which might cast liability upon the company. Purchasers of stock in a company, such as the one herein, know that by negligence stock actually sold and the consideration therefor appropriated by the company may not have been entered upon the books of the company. Negligence of the obligee, as here, is often a benefit to those who eventually must pay the obligation. The proceeds of all purchases of stock are used by the company to increase its assets and enable it thereafter to pay greater dividends to all of its stockholders. The dividends that accrued to the Swatek stock would increase and enlarge the assets of the company and, no doubt, did increase its ability to pay dividends to its stockholders. The longer the day of payment of the Swatek dividends, without interest, is postponed — the greater the profit to those stockholders. So, anyway you look at it, even after Swatek has been repaid all accrued dividends, without interest, the stockholders of the company, past and present, have in effect had the benefit of the use of his money for a varying number of years; this is a distinct advantage and not a detriment to even the present owners, for they get the benefit of the increased assets now owned by the company as a result of the use of Swatek's money.
The trial court's judgment in this case, denying Swatek interest on his long past due dividends, casts a large and sufficient loss upon Swatek for his neglect in failing to demand his dividends. The company assets have been increased by the use of his dividends for all these years without charge and the present stockholders and those who have sold during the time from the date Swatek purchased down to the present time have had, or are now enjoying, the benefits of his neglect to demand his dividends. Equitable laches applies only in cases where there is inexcusable negligence or delay that causes actual detriment to innocent persons.
It is common knowledge that building and loan companies build up reserves to offset such valid claims as the one under consideration. Swatek helped to build such reserve and contributed to any undivided profits that the company may have on hand.
No doubt the judgment, to be rendered in accordance with the directions of the majority opinion, will be paid out of the reserve or undivided profits of the company. The present stockholders, regardless of when they purchased their stock, are enjoying the benefits that flowed directly and indirectly from all investments in the company's stock. This is particularly true of Swatek's stock, for he never drew any dividends and the assets of the company were increased by the use of his money without charge. How, then, could a court of equity cut off such a vast majority of a valid claim to satisfy such a theoretical claim of detriment, in order to punish one for negligence that has been judicially excused?
The statute of limitations and laches defeat the collection of just debts. Such defenses are justified only to prevent such claims or injury to innocent people. Such defenses should not be allowed except under compelling circumstances. If Swatek actually paid for this stock, and the majority say he did, and he honestly forgot it and for this reason failed to demand his dividends as they accrued, and the majority say he did, and the company used his money in the interest of the present and subsequent stockholders, and the record discloses this, then all received a definite benefit by his and the company's neglect, if *Page 409 
you refuse, as the trial court did, to allow Swatek interest on his dividends. Either Swatek is entitled to his stock and the accrued dividends or he is not entitled to anything — not even a judgment validating his stock certificate. The determination of the question of the validity of the stock, under all the circumstances, was a difficult one, no doubt, for the trial court, but it determined this issue unfavorably to the defendant and the majority opinion approves its judgment in this regard; we should not allow a hard factual situation to cause us to improperly apply the sound old principle of laches, but should apply it only to prevent definite injury to innocent persons.
By the judgment of the trial court and the majority opinion two facts are conclusively shown by the record in this case: (1) That the defendant company had no record of the Swatek transaction. (2) Swatek forgot that he owned the stock in question. However this may be, the lower court and this court having both validated the stock, the company has been Swatek's trustee since its issuance. There was no duty on his part to demand his dividends so long as the trust had not been by any fact or circumstance renounced. Granting that he knew the company was paying dividends on this character of stock, his failure to demand the dividends would have no legal effect except to cut off his right to interest thereon. This being true, the case of Holly Sugar Corp. v. Wilson, 101 Colo. 511,75 P.2d 149, is exactly in point except that the equities in the present case are more strongly in favor of Swatek than in favor of Wilson, the true stock owner, in the case, supra. In the case, supra, the corporation had already paid the accrued dividends to one who was not the true owner. Wilson, the true owner, had knowledge of his ownership and possession, but neglected for 20 years to claim the accrued dividends. In the case at bar Swatek had forgotten his ownership. In principle there is no distinction in the two cases. The Colorado court said:
"We do not think the statute of limitations may be interposed as to dividends declared on Wilson's stock and not paid. That the stock was preferred, and the certificates contained a provision to the effect that, before dividends can be declared and paid on common stock, dividends at a certain rate shall be paid on the preferred stock, is not sufficient, in the circumstances of the record, to warrant a different conclusion. Certificates evidencing the preferred stock, while definitely providing dividends as to rate, made no provision as to time when there should be declaration and payment. As already noted, not until October, 1934, was Wilson advised that dividends had been declared upon his stock, and his demand therefor was of December 15, 1934. 'The trusteeship of a corporation for its stockholders is that of an acknowledged and continuing trust. It can not be regarded of a different character. It arises out of the contractual relation whereby the corporation acquires and holds the stockholder's investment under express recognition of his right and for a specific purpose. It has all the nature of a direct trust, to which, it is generally held, statutes of limitation have no application until there is a clear and unequivocal disavowal of the trust, and notice of it brought to the cestui que trust. . . . There can be no substantial difference between the trusteeship of a corporation as it relates to the stock of a shareholder and its duty to him in respect to the profits or dividends upon his stock. He is under no obligation to draw or demand his dividends within any prescribed period. He may leave them with the corporation, if he chooses, and be under no default. The debt which a declared dividend creates on the part of the corporation to the stockholder is one payable only on demand, as is the obligation of a bank to its depositors. It is not subject to limitation until there has been a demand upon the corporation and a refusal to pay.' Yeaman v. Galveston City Co., 106 Tex. 389,167 S.W. 710, 723, Ann. Cas. 1917E, 191." *Page 410