Grant, J.
(after stating the facts). 1. Is fraud charged in the bill and proven by the evidence against the defendant Pungs and the other directors of said company? The bill sets forth fully the main facts above stated. It charges that the scheme was illegal, a mere lottery, and that the representations made by the defendant officers in their advertisements and literature were false and fraudulent. It sets forth all the circumstances under which Mr. Pungs furnished the $50,000, to be deposited and advertised as a guaranty fund belonging to the company, and that the arrangement between Pungs and the company was concealed. The bare statement of this arrangement stamps it as fraudulent. The United States government investigated the scheme, declared it fraudulent, and prohibited the company the use of the mails. The banking department of this State made a like investigation, and reached the same conclusion. The character of the scheme will in the main appear from an examination of the contract, printed at the end of this opinion. The allegation of fraud is sufficient. The proofs fully sustain the charge. The defendant directors advertised this guaranty fund as the property of the company. It published the receipt of the bank that it was received and held by the bank “only for the payment of that amount of matured debentures issued by said the Michigan Debenture Company.” This was a grossly fraudulent representation, under the present claim of the defendants.
2. It is urged that the complainants are severally, and not jointly, interested, and therefore cannot maintain the bill as joint complainants. The bill is filed in behalf not only of the complainants, but of all the debenture holders. Complainants are jointly interested to prevent the dissipation of the funds in the treasury of the company, and in preventing Mr. Pungs from obtaining possession of the guaranty fund. Their interests are more closely connected than are taxpayers owning several distinct parcels of land, and who jointly file a bill to restrain the illegal appropriation of public funds or illegally contracting a debt. That [177]*177taxpayers may so join in a bill of complaint is well established. George v. Electric Light Co., 105 Mich. 1 (62 N. W. 985). The reason for these debenture holders joining is more cogent.
3. It is next urged that these complainants cannot maintain the bill because these debentures have not matured. Upon being denied the use of the mails, the Compaq' ceased to do any business in this State other than to attempt collections from its then holders of debentures. It is apparent that, the more these holders paid, the worse off they would be. The company was insolvent, its scheme found to be fraudulent and impossible of performance. Its principal manager and promoter was its treasurer, and claimed its indemnity fund. Under these circumstances, the only security the debenture holders had was to stop further expense, and to recover from the company the money in its treasury so far as it would go towards paying back the money they had invested.
4. It is next contended that, if the scheme under which the debentures were sold is illegal and a lottery, equity will not give complainants relief. If complainants purchased these debentures with knowledge of their illegal and fraudulent character, both law and equity would leave them without remedy. If, on the contrary, they acted in good faith, and were honestly deceived by the representations of the defendant through its officers, and the representations were such as would naturally tend to deceive, they are entitled to relief. The published literature of the company covers many pages of the record, and is so worded that it would naturally deceive the ignorant and the unwary, and as well intelligent persons unfamiliar with business methods. Mr. Pungs secured the names of three prominent citizens of Detroit as purchasers of these debentures, and so advertised them. In fact, they invested no money, but Mr. Pungs himself paid all their dues, and, under a resolution of the directors authorizing a compromise, he at once took advantage of the resolution, and received the money which under it would go to these [178]*178three holders. This is one of the methods very commonly resorted to to induce others to make investments in such corporations. The scheme appeared plausible upon its face, and the representations made in the company’s publications. No moral turpitude attaches to the complainants. The case falls within the following authorities: Calkins v. Bump, 120 Mich. 335 (79 N. W. 491); State v. Investment Co., 64 Ohio St. 283 (60 N. E. 220, 52 L. R. A. 530, 83 Am. St. Rep. 754).
5. Even if Mr. Pungs were entirely innocent in making his contract for the deposit of the $50,000, as between him and the debenture-holders, he must suffer the loss. Holcomb v. Noble, 69 Mich. 396 (37 N. W. 497); Peters v. Canfield, 74 Mich. 498 (42 N. W. 125); Condon v. Hughes, 92 Mich. 367 (52 N. W. 638); Stevens v. Ludlum, 46 Minn. 160 (48 N. W. 771, 13 L. R. A. 270, 24 Am. St. Rep. 210). Mr. Pungs knew that this fund was advertised as the property of the company. It was done for the purpose of inducing purchases. It had the desired effect. He is now estopped to claim title to any of this fund until the debenture holders have been made whole.
Decree affirmed.
The other Justices concurred.
Contract.
United States op America.
Certificate No.-.
The Michigan Debenture .Company, Incorporated, Authorized Capital Stock $250,000.00
DOES hereby agrp.e
to pay to - or order, upon maturity or redemption of any of the hereto attached five coupons, a sum equal to all the payments made thereon, together with the respective share of the net surplus earnings as shown oy schedule of redemption values.
The terms and conditions printed on the back hereof and in application herefor are a part of this contract as fully as if recited herein.
Signed,-sealed, and delivered at Detroit, Mich., this-day of ■ — ; is — • __
President.
Secretary.
[179]*179
Terms and Conditions.
Payments on this debenture shall be five dollars membership fee ■for the first month, and thereafter an installment of fifty cents per month on each unredeemed coupon until redemption or maturity. The membership fee must accompany the application, and the monthly installments are due without notice at the main office, or some duly authorized depository, on the first day of each month, beginning with the first month after the date of this certificate. Failure to pay on or before the fifteenth day of the month any installment due hereon shall render this contract null and void, and forfeit all payments made on same; but the same may be reinstated at any time within thirty days from lapse, by payment of overdue installment and a fine of ten cents on each unredeemed coupon ; but in no case shall the fine be less than twenty-five cents. No receipt for payment is valid unless it bears thó signature of the secretary or some person acting upon his written authority, and all remittances are made at the sender’s risk.
Apportionment of Receipts.
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Grant, J.
(after stating the facts). 1. Is fraud charged in the bill and proven by the evidence against the defendant Pungs and the other directors of said company? The bill sets forth fully the main facts above stated. It charges that the scheme was illegal, a mere lottery, and that the representations made by the defendant officers in their advertisements and literature were false and fraudulent. It sets forth all the circumstances under which Mr. Pungs furnished the $50,000, to be deposited and advertised as a guaranty fund belonging to the company, and that the arrangement between Pungs and the company was concealed. The bare statement of this arrangement stamps it as fraudulent. The United States government investigated the scheme, declared it fraudulent, and prohibited the company the use of the mails. The banking department of this State made a like investigation, and reached the same conclusion. The character of the scheme will in the main appear from an examination of the contract, printed at the end of this opinion. The allegation of fraud is sufficient. The proofs fully sustain the charge. The defendant directors advertised this guaranty fund as the property of the company. It published the receipt of the bank that it was received and held by the bank “only for the payment of that amount of matured debentures issued by said the Michigan Debenture Company.” This was a grossly fraudulent representation, under the present claim of the defendants.
2. It is urged that the complainants are severally, and not jointly, interested, and therefore cannot maintain the bill as joint complainants. The bill is filed in behalf not only of the complainants, but of all the debenture holders. Complainants are jointly interested to prevent the dissipation of the funds in the treasury of the company, and in preventing Mr. Pungs from obtaining possession of the guaranty fund. Their interests are more closely connected than are taxpayers owning several distinct parcels of land, and who jointly file a bill to restrain the illegal appropriation of public funds or illegally contracting a debt. That [177]*177taxpayers may so join in a bill of complaint is well established. George v. Electric Light Co., 105 Mich. 1 (62 N. W. 985). The reason for these debenture holders joining is more cogent.
3. It is next urged that these complainants cannot maintain the bill because these debentures have not matured. Upon being denied the use of the mails, the Compaq' ceased to do any business in this State other than to attempt collections from its then holders of debentures. It is apparent that, the more these holders paid, the worse off they would be. The company was insolvent, its scheme found to be fraudulent and impossible of performance. Its principal manager and promoter was its treasurer, and claimed its indemnity fund. Under these circumstances, the only security the debenture holders had was to stop further expense, and to recover from the company the money in its treasury so far as it would go towards paying back the money they had invested.
4. It is next contended that, if the scheme under which the debentures were sold is illegal and a lottery, equity will not give complainants relief. If complainants purchased these debentures with knowledge of their illegal and fraudulent character, both law and equity would leave them without remedy. If, on the contrary, they acted in good faith, and were honestly deceived by the representations of the defendant through its officers, and the representations were such as would naturally tend to deceive, they are entitled to relief. The published literature of the company covers many pages of the record, and is so worded that it would naturally deceive the ignorant and the unwary, and as well intelligent persons unfamiliar with business methods. Mr. Pungs secured the names of three prominent citizens of Detroit as purchasers of these debentures, and so advertised them. In fact, they invested no money, but Mr. Pungs himself paid all their dues, and, under a resolution of the directors authorizing a compromise, he at once took advantage of the resolution, and received the money which under it would go to these [178]*178three holders. This is one of the methods very commonly resorted to to induce others to make investments in such corporations. The scheme appeared plausible upon its face, and the representations made in the company’s publications. No moral turpitude attaches to the complainants. The case falls within the following authorities: Calkins v. Bump, 120 Mich. 335 (79 N. W. 491); State v. Investment Co., 64 Ohio St. 283 (60 N. E. 220, 52 L. R. A. 530, 83 Am. St. Rep. 754).
5. Even if Mr. Pungs were entirely innocent in making his contract for the deposit of the $50,000, as between him and the debenture-holders, he must suffer the loss. Holcomb v. Noble, 69 Mich. 396 (37 N. W. 497); Peters v. Canfield, 74 Mich. 498 (42 N. W. 125); Condon v. Hughes, 92 Mich. 367 (52 N. W. 638); Stevens v. Ludlum, 46 Minn. 160 (48 N. W. 771, 13 L. R. A. 270, 24 Am. St. Rep. 210). Mr. Pungs knew that this fund was advertised as the property of the company. It was done for the purpose of inducing purchases. It had the desired effect. He is now estopped to claim title to any of this fund until the debenture holders have been made whole.
Decree affirmed.
The other Justices concurred.
Contract.
United States op America.
Certificate No.-.
The Michigan Debenture .Company, Incorporated, Authorized Capital Stock $250,000.00
DOES hereby agrp.e
to pay to - or order, upon maturity or redemption of any of the hereto attached five coupons, a sum equal to all the payments made thereon, together with the respective share of the net surplus earnings as shown oy schedule of redemption values.
The terms and conditions printed on the back hereof and in application herefor are a part of this contract as fully as if recited herein.
Signed,-sealed, and delivered at Detroit, Mich., this-day of ■ — ; is — • __
President.
Secretary.
[179]*179
Terms and Conditions.
Payments on this debenture shall be five dollars membership fee ■for the first month, and thereafter an installment of fifty cents per month on each unredeemed coupon until redemption or maturity. The membership fee must accompany the application, and the monthly installments are due without notice at the main office, or some duly authorized depository, on the first day of each month, beginning with the first month after the date of this certificate. Failure to pay on or before the fifteenth day of the month any installment due hereon shall render this contract null and void, and forfeit all payments made on same; but the same may be reinstated at any time within thirty days from lapse, by payment of overdue installment and a fine of ten cents on each unredeemed coupon ; but in no case shall the fine be less than twenty-five cents. No receipt for payment is valid unless it bears thó signature of the secretary or some person acting upon his written authority, and all remittances are made at the sender’s risk.
Apportionment of Receipts. — All money paid to the company on account of debentures (or coupons) shall be divided into three separate funds, which shall be designated and used as follows:
Reserve Fund. This fund shall consist of twenty per cent, of all the monthly installments paid to the company by holders of its debentures, which, together with its-interest increment, shall be invested in such securities as the board of directors may deem advisable.
Expense Fund. This fund shall consist of the purchase price of all debentures (viz., five dollars on each debenture issued), together with fourteen per cent, of all subsequent installments received by the company on account of same; also of all fines, transfer fees, and other extraneous receipts.
Redemption Fund. This fund shall consist of sixty-six per cent, of all the money collected by the company on account of monthly installments on outstanding debentures. It shall be subdivided into two separate funds, designated, respectively, as a “Special Redemption Fund” and the “General Redemption Fund,” each of which shall be applied monthly as collected to the redemption of coupons as hereinafter specified.
Special Redemption. Each month sixteen per cent, of the total redemption fund for that month shall be used as a special redemption fund for that month, to be applied as follows: The lowest numbered coupon of the lowest numbered debenture shall be redeemed ; then the lowest numbered coupon of the next debenture in order, and so on through the list until said fund is disbursed.
General Redemption. Each month eighty-four per cent, of the total redemption fund for that month shall be used as a general redemption fund, to be applied as follows: The coupons to be redeemed each month with this fund are scattered throughout the entire list of coupons eligible for redemption, and cannot be designated in advance of the disbursement of the special redemption fund, nor until the calculation (hereinafter described) has been made for the purpose of determining the number of coupons that must be alternately passed over in the course of redemption. After the number which must intervene between the coupons to be redeemed has been determined as aforesaid, and the special redemption f.or that month has been concluded, a starting point for.the general redemption is given by first redeeming the lowest numbered [180]*180coupon attached to the debenture next following the last one from which a coupon was redeemed by the special redemption; and then, passing over as many consecutive coupons (of those eligible for redemption) as are equal to the “Redemption Numeral,” redeem another, and so on in like order until the fund is disbursed.
Redemption shall occur regularly on the 25th day of each month; but whenever the 25th shall fall on Sunday or other legal holiday', the redemption shall occur on the next legal day following.
The numeral apart which shall elect the couppns to be redeemed must be determined by dividing the total number of eligible coupons by the number the amount will pay on basis of the average value of such coupons.
The redemption numeral may be changed by order of the board of directors to any fractional part of the numeral obtained by the foregoing calculation.
Surrender Valué. — At any time after thirty-six months from date hereof, provided all payments of installments have been made as same became due and payable, the holder of this debenture may, if he so desires, surrender same to the company, and receive therefor a paid-up certificate for the total sum paid on account of this debenture to that date (less the amount received by the company on account of coupons previously redeemed), together with eight per cent, per annum for the average time; this accrued interest to be added to the principal of the paid-up certificate. All such paid-up certificates will be paid by the company in the order in which the applications for same are filed, and shall bear interest at eight per cent, per annum until paid. For this purpose' an amount not exceeding five per cent, of the general redemption fund for any one month may be used.
Agent’s Authority. — No person has power to alter, waive, or modify in any way the terms and conditions of this contract, and no promises or conditions other than those contained herein shall be binding upon the company.
Transfer. — This debenture is transferable only on the books of the company, for which a fee of twenty cents for each unredeemed coupon is charged; but in no case will the fee be less than fifty cents.
Eligibility and Maturity. — This certificate shall not be eligible for redemption until one monthly payment shall have been made hereon, and will be deemed fully matured at expiration of seventy-two months from date hereof. The money necessary to pay off said matured debentures shall be drawn from the redemption fund most immediately available, and, should that amount be insufficient for the purpose, then the balance shall be drawn from the reserve fund.