Getchell v. Dusenbuby

108 N.W. 723, 145 Mich. 197, 1906 Mich. LEXIS 740

• Court: Michigan Supreme Court
• Decided: July 23, 1906
• Docket: Docket No. 114
• Status: Published

Opinion

Grant, J.

(after stating the facts). Those representations which were made by Bahlke or by any other of the defendants, which were mere matters of opinion, are immaterial. Plaintiff testified to the statement of the defendants as above set forth, and gave some evidence tending to show that they were not true, and might have been inown by defendants to be untrue, and that he relied upon them in making his subscription.

There is no evidence that the directors and stockholders of the defendant did not act in entire good faith in deciding to increase the capital stock of the company and in employing Mr. Bahlke to sell it. His commission was reasonable. After the stockholders had voted the increase, it was the duty of the defendant directors to act "together and to promote the sale of the stock in all legitimate ways. That they did act together for that purpose is no evidence of a conspiracy. The record is not very satisfactory as to what occurred on October 10th at the meeting of the stockholders to determine whether there should be an increase of the capital stock. One Johnson, then a director, a witness for plaintiff, who voted for the increase, testified:

“ It is a fact that the directors laid the whole condition, of the company before the stockholders on the 10th of October.”

He also testified:

“I don’t remember of any statement of the condition of the company being read at the meeting of the stockholders.”

Even if the declaration were sufficiently broad to include the charge of fraud aside from conspiracy, the case as to the directors would clearly come within the statute of frauds (3 Comp. Laws, § 9518), providing that:

“No action shall be brought to charge any person, upon or by reason of any favorable representation or assurance, made concerning the character, conduct, credit,, ability, trade or dealings of any other person, unless such representation or assurance be made in writing, and signed by the party to be charged thereby, or by some person, thereunto by him lawfully authorized.”

The defendant directors were not acting in their own behalf. They were not selling their own stock. They made no profit by the transaction. They were not floating a spurious corporation. They were in good faith carrying out the direction of the stockholders of a bona fide corporation. They could not be held guilty of fraud upon the charge that they profited by the transaction, because they did not. The defendants were representing.the good faith and credit of another and not themselves, and therefore are within the statute. Bush v. Sprague, 51 Mich. 41; Hubbard v. Long, 105 Mich. 442, 449; Hess v. Culver, 77 Mich. 602 (6 L. R. A. 498).

It is unnecessary to enter into the history of this corporation subsequent to the increase of its capital stock, and the cause of its final failure. _ Plaintiff was made a director soon after he subscribed, and participated in all the subsequent transactions. As the circuit judge said, there was no evidence to show that the transactions, subsequent to the time of plaintiff’s subscription, in which he participated, were not the cause of the failure of the corporation.

Defendant Bahlke occupies a different position in the transaction than do the other defendants. He was the only one who was directly to profit by the transaction by receiving a commission. It is said in Hess v. Culver, supra:

“ That statute cannot apply to conspiracies or frauds where the representation is made to enable the party making it to profit by it.”

I think that under the authorities the statute does not cover the representation made by Bahlke. See Krause v. Cook, 144 Mich. 365.

It follows that the judgment must be reversed as to defendant Bahlke, and a new trial ordered, and affirmed as to the other defendants.

Blair, Montgomery, Ostrander, and Hooker, JJ., concurred.