Blair, C. J.
This case was before the court on demurrer to the bill of complaint and the demurrer overruled at a previous term. Hamilton v. Hulled Bean Co., 143 Mich. 377. The allegations of the bill of complaint and the nature of the case are sufficiently stated in the opinion filed therein. Both defendants have answered, proofs have been taken in open court, a decree entered dismissing the bill of complaint without any indication of the grounds therefor, and complainants appeal to this court.
Defendant Fuller resides in Kalamazoo, and the American Hulled Bean Company, Limited, was located at Battle Creek. On March 13, 1901, two patents were issued by the United States to Fuller covering a process for hulling beans and preparing the products for food. He sold these patents to D. L. Merrill, Abram C. Wisner, Neal S. Phelps, and Martin V. Barker for $100,000 in cash and notes. Afterwards Fuller bought back a one-fifth interest in these patents for himself and brother for $30,000, and became associated with the others. On June 19,1901, these parties organized a partnership association known as the American Hulled Bean Company, Limited. By the amended articles filed August 38, 1901, the capital stock of the company was fixed at $5,000,000, of which $3,000,000 was paid in by the incorporators by the assignment of [611]*611these patents. The remaining $2,000,000 of the stock was kept in the treasury, and it was agreed and provided that $500,000 of this treasury stock should b.e made preferred stock, and that the balance of $1,500,000, together with the $3,000,000 of stock issued for the patents, should all be deemed common stock. On the 28th day of August, 1901, the following agreement was executed by the parties:
“Agreement made this 28th day of August, 1901, by and between David L. Merrill, Neal S. Phelps, Abram C. "VV isner, and Martin V. Barker, all of Battle Creek, Michigan, parties of the first part, and Charles D. Fuller and Frank D. Fuller, parties of the second part.
“ For a good and valuable consideration to the parties of the first part in hand paid, the receipt whereof is hereby acknowledged and confessed, and the said first parties being each and every of them members of the board of managers of the American Hulled Bean Company, Limited, of Battle Creek, Michigan, they do hereby agree to and with the said second parties that they, as members of the board of managers of said American Hulled Bean Company, Limited, will vote as such managers that the said Charles D. Fuller shall have out of the treasury stock of said company the exclusive right to sell and dispose of one hundred and fifty thousand dollars, par value, of preferred stock, each share of preferred stock to be accompanied by one share of common stock, at not less than fifty cents for one dollar of preferred accompanied by one dollar of common stock; all over and above said sum shall belong to the said Fuller, and the balance shall be by him paid into the treasury of said company, but it is understood that he shall be under no obligation to sell said stock; the exclusive right is given to him to sell and dispose of such amount if he chooses to exercise it for five months from date only. Second party agrees to commence the sale of said stock within ten days, and devote all of his available time to the sale thereof.
“ The said first parties do further agree that as such managers they will also vote that in consideration of the assistance that has been rendered by the said Charles D. Fuller, that the said Frank D. Fuller shall be employed the first year as the manager of said company, and that his salary shall be five thousand dollars.
“ In witness whereof the parties hereto have hereunto [612]*612set their hands and seals the day and year first above written.
[Signed] “David L. Merrill. [Seal/ “Abram C. Wisner. [Seal/
“Neal S. Phelps. [Seal/
“ Martin Y. Barker. [Seal/
“ Charles D. Fuller. [Seal/ “Frank D. Fuller.” [Seal/
On October 22, 1901, but under date of September 4th, the following action was taken and entered in the record as part of the record of a meeting of the board of managers :
“It was moved and seconded that one hundred and fifty thousand dollars ($150,000) of the preferred stock and one hundred and fifty thousand dollars ($150,000) of the common stock of this company be sold to Charles D. Fuller, and issued to him or such persons as he may direct for the sum of seventy-five thousand dollars ($75,000) in cash ánd the assignment by said Charles D. Fuller to this company of all rights in the Canadian patents now pending, or which may be applied for hereafter on bean-hulling machinery, the process of hulling beans and everything else pertaining thereto, which he may invent or which may be secured by said Charles D. Fuller. Carried unanimously.”
The record of the company of October 30, 1901, is, in part, as follows:
“Present, the full board. The following letter from Charles D. Fuller was read:
“‘To the American Hulled Bean Co., Limited.
“ ‘ Gentlemen: 1 have sold eight hundred and fifty (850) shares of preferred stock of your company, amounting to eighty-five thous- and dollars ($85,000), being part of the preferred stock of one hundred and fifty thousand dollars ($150,000) that was voted to me by resolution of your board of managers September 4th, 1901. The sale of this stock has bepn made at par to the following persons, each of whom h¿s/pur/hased the number of sharea of preferred stock set opposite” his name. * * * You will apply seventy-five thousand dollars ($75,000) of the proceeds of this sale on the cash payment which I was required to make by the terms of said resolution, and the balance you will return to me.
“ ‘Yours truly,
“ ‘Charles D. Fuller.’
[613]*613‘ ‘ On motion of Mr. Phelps, supported by Mr. Barker, it was unanimously resolved that the foregoing proposition be accepted and that the chairman and secretary be directed to execute a written acceptance thereof, which was accordingly done, and the following is a copy thereof:
“ ‘ The American Hulled Bean Company, Limited, hereby accepts the foregoing proposition, and agrees with said Charles D. Fuller and the above-named subscribers to said stock severally that it will upon the full payment of the par value of the said stock at the time and manner stated in the foregoing communication, <Ésue, and deliver to said several purchasers, his representatives or assigns, the number of shares of preferred stock subscribed and paid for by him at par.
“ ‘We further agree to credit the moneys paid for said stock up 'to the amount of the seventy-five thousand dollars (§75,000) on the amount which the said Charles D. Fuller is to pay us in pursuance of the resolution aforesaid, and to pay to him all moneys paid to us on account of this transaction in excess of that sum.
“ ‘By order of the board of managers.
“ ‘American Hulled Bean Company, Limited,
“ ‘By David L. Merrill, Chairman.
“ ‘F. D. Fuller, Secretary.’”
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Blair, C. J.
This case was before the court on demurrer to the bill of complaint and the demurrer overruled at a previous term. Hamilton v. Hulled Bean Co., 143 Mich. 377. The allegations of the bill of complaint and the nature of the case are sufficiently stated in the opinion filed therein. Both defendants have answered, proofs have been taken in open court, a decree entered dismissing the bill of complaint without any indication of the grounds therefor, and complainants appeal to this court.
Defendant Fuller resides in Kalamazoo, and the American Hulled Bean Company, Limited, was located at Battle Creek. On March 13, 1901, two patents were issued by the United States to Fuller covering a process for hulling beans and preparing the products for food. He sold these patents to D. L. Merrill, Abram C. Wisner, Neal S. Phelps, and Martin V. Barker for $100,000 in cash and notes. Afterwards Fuller bought back a one-fifth interest in these patents for himself and brother for $30,000, and became associated with the others. On June 19,1901, these parties organized a partnership association known as the American Hulled Bean Company, Limited. By the amended articles filed August 38, 1901, the capital stock of the company was fixed at $5,000,000, of which $3,000,000 was paid in by the incorporators by the assignment of [611]*611these patents. The remaining $2,000,000 of the stock was kept in the treasury, and it was agreed and provided that $500,000 of this treasury stock should b.e made preferred stock, and that the balance of $1,500,000, together with the $3,000,000 of stock issued for the patents, should all be deemed common stock. On the 28th day of August, 1901, the following agreement was executed by the parties:
“Agreement made this 28th day of August, 1901, by and between David L. Merrill, Neal S. Phelps, Abram C. "VV isner, and Martin V. Barker, all of Battle Creek, Michigan, parties of the first part, and Charles D. Fuller and Frank D. Fuller, parties of the second part.
“ For a good and valuable consideration to the parties of the first part in hand paid, the receipt whereof is hereby acknowledged and confessed, and the said first parties being each and every of them members of the board of managers of the American Hulled Bean Company, Limited, of Battle Creek, Michigan, they do hereby agree to and with the said second parties that they, as members of the board of managers of said American Hulled Bean Company, Limited, will vote as such managers that the said Charles D. Fuller shall have out of the treasury stock of said company the exclusive right to sell and dispose of one hundred and fifty thousand dollars, par value, of preferred stock, each share of preferred stock to be accompanied by one share of common stock, at not less than fifty cents for one dollar of preferred accompanied by one dollar of common stock; all over and above said sum shall belong to the said Fuller, and the balance shall be by him paid into the treasury of said company, but it is understood that he shall be under no obligation to sell said stock; the exclusive right is given to him to sell and dispose of such amount if he chooses to exercise it for five months from date only. Second party agrees to commence the sale of said stock within ten days, and devote all of his available time to the sale thereof.
“ The said first parties do further agree that as such managers they will also vote that in consideration of the assistance that has been rendered by the said Charles D. Fuller, that the said Frank D. Fuller shall be employed the first year as the manager of said company, and that his salary shall be five thousand dollars.
“ In witness whereof the parties hereto have hereunto [612]*612set their hands and seals the day and year first above written.
[Signed] “David L. Merrill. [Seal/ “Abram C. Wisner. [Seal/
“Neal S. Phelps. [Seal/
“ Martin Y. Barker. [Seal/
“ Charles D. Fuller. [Seal/ “Frank D. Fuller.” [Seal/
On October 22, 1901, but under date of September 4th, the following action was taken and entered in the record as part of the record of a meeting of the board of managers :
“It was moved and seconded that one hundred and fifty thousand dollars ($150,000) of the preferred stock and one hundred and fifty thousand dollars ($150,000) of the common stock of this company be sold to Charles D. Fuller, and issued to him or such persons as he may direct for the sum of seventy-five thousand dollars ($75,000) in cash ánd the assignment by said Charles D. Fuller to this company of all rights in the Canadian patents now pending, or which may be applied for hereafter on bean-hulling machinery, the process of hulling beans and everything else pertaining thereto, which he may invent or which may be secured by said Charles D. Fuller. Carried unanimously.”
The record of the company of October 30, 1901, is, in part, as follows:
“Present, the full board. The following letter from Charles D. Fuller was read:
“‘To the American Hulled Bean Co., Limited.
“ ‘ Gentlemen: 1 have sold eight hundred and fifty (850) shares of preferred stock of your company, amounting to eighty-five thous- and dollars ($85,000), being part of the preferred stock of one hundred and fifty thousand dollars ($150,000) that was voted to me by resolution of your board of managers September 4th, 1901. The sale of this stock has bepn made at par to the following persons, each of whom h¿s/pur/hased the number of sharea of preferred stock set opposite” his name. * * * You will apply seventy-five thousand dollars ($75,000) of the proceeds of this sale on the cash payment which I was required to make by the terms of said resolution, and the balance you will return to me.
“ ‘Yours truly,
“ ‘Charles D. Fuller.’
[613]*613‘ ‘ On motion of Mr. Phelps, supported by Mr. Barker, it was unanimously resolved that the foregoing proposition be accepted and that the chairman and secretary be directed to execute a written acceptance thereof, which was accordingly done, and the following is a copy thereof:
“ ‘ The American Hulled Bean Company, Limited, hereby accepts the foregoing proposition, and agrees with said Charles D. Fuller and the above-named subscribers to said stock severally that it will upon the full payment of the par value of the said stock at the time and manner stated in the foregoing communication, <Ésue, and deliver to said several purchasers, his representatives or assigns, the number of shares of preferred stock subscribed and paid for by him at par.
“ ‘We further agree to credit the moneys paid for said stock up 'to the amount of the seventy-five thousand dollars (§75,000) on the amount which the said Charles D. Fuller is to pay us in pursuance of the resolution aforesaid, and to pay to him all moneys paid to us on account of this transaction in excess of that sum.
“ ‘By order of the board of managers.
“ ‘American Hulled Bean Company, Limited,
“ ‘By David L. Merrill, Chairman.
“ ‘F. D. Fuller, Secretary.’”
The defendant the American Hulled Bean Cpmpany admitted in its answer the allegation of the second paragraph of complainant’s bill of complaint “ substantially as therein set forth.” The second paragraph of the bill contained, among others, the following allegations:
“ And, as a further inducement to him for the purchase thereof, agreed to aid him in disposing of said stock at a profit to himself, and, in furtherance of said agreement, it was then and there agreed and understood by and between said defendants that said Fuller would forthwith undertake the work of interesting the general public in the sale of said stock, and that he might solicit subscriptions for preferred stock in said company, offering two shares of common stock as a bonus with each share of preferred stock in said company in the name of said company, and for and in its behalf, and that he might further represent that the preferred stock was being sold only for cash and at one hundred cents on the dollar, and that said company had authorized one hundred thousand dollars ($100,000) of said preferred stock to be placed on the market, and it was further agreed between said defendants [614]*614that the subscription lists used in obtaining said subscriptions might state and set forth that the stock to be issued to and received by the subscribers thereto, should be treasury stock, and that there was in the treasury of said company five hundred thousand dollars ($500,000) of the preferred stock and one million five hundred thousand dollars ($1,500,000) of the common stock of said company, but that, when subscriptions were obtained by said Fuller, they should, in fact; be filled by the said company by issuing to said subscribers stock from the block sold to said Fuller as aforesaid without notifying or informing such subscribers of the substitution; and, in furtherance of said fraudulent scheme, it was further agreed by the said defendants that the said Hulled Bean Company should collect and receive from subscribers to its capital stock so obtained by said Fuller the full amount of their stock subscriptions at par, and then, without informing said subscribers of the disposition made of their money, should apply all amounts so received, first, in satisfying and canceling said purchase price of seventy-five thousand dollars ($75,000), to be paid by said Fuller to the defendant company, as hereinbefore set forth, and thereafter all amounts in excess of said sum, and the unsold portion, if any, of said block of stock, was to be turned over to said defendant Fuller in pursuance of the terms of the resolution hereinafter set forth. * * * No part of said stock was issued or transferred to defendant Fuller by said defendant, American Hulled Bean Company, Limited, at the time of the adoption of said resolution, nor did he pay any part of said purchase price, aud your orators allege that said scheme to sell and dispose of the stock thus set apart for said Fuller under the pretense that the same was treasury stock was conceived and carried out by both of said defendants with the design and intent to cheat, deceive, and defraud all subscribers whom said Fuller might secure by means thereof.”
The defendant Fuller in his answer denied the said second paragraph and all material allegations of fraud.
The company having notified defendant Fuller that it did not wish to receive over $75,000 of the subscriptions, he made such arrangements that only $77,000 was paid, of which $2,000 was paid to him by the company, as he alleges, for his services. Defendant Fuller testified, that, before calling upon complainants,—
[615]*615“ I first went and I consulted with a friend of mine up there, and he advised that I go and see the officers of the Michigan Trust Company, and, if possible, get them interested, and have them look into the proposition so as to be able to vouch for the facts that I was there to present.”
Then he went to Mr. Withey and Mr. Hardy, the pres, ident and secretary of the Michigan Trust Company.
“I gave Mr. Hardy a bonus of common stock. I don’t know that I could properly state the amount that was for Mr. Hardy alone. I think I can state how much common stock went to him and perhaps Mr. Withey, and I don’t know who else. I think $35,000 of the common stock went to them. * * * I think that the matter of the commission was discussed with them in view of the fact that they had to do a good deal of investigating and so on, and Mr. Hardy, as I remember it, took the position that he did not want any cash out of the matter, but that he thought with the amount of stock that was outstanding that he was entitled to something in the way of a stock commission, and, in pursuance of that request, I agreed to give the $35,000 of common stock. If I remember right, Mr. Hardy took about two weeks to make these different trips, and investigate and look up the patents, and so on and so forth. My impression is that they spoke of the matter of a commission at first, before he made the trips, and I think that I said that I would give' them $15,000, and I think that the matter was left open then until after these investigations went on, and they consumed considerable more time than I guess Mr. Hardy figured on, and at this time he drew the subscription list on September 23d, he raised the point that that was not sufficient, and so it was arranged that I was to give him this amount that I did, which I remember to be $35,000 of the stock. My memory is that that final agreement was reached just as we were drawing the subscription list to take around to the Grand Rapids people. * * * I don’t remember positively, but I think I gave Claude Hamilton a small bonus. He was assistant secretary, or some similar capacity, of the Michigan Trust Company at that time. I think there was a further arrangement with Claude Hamilton by which I agreed to buy his stock back at 50 cents on the dollar for the preferred stock at any time in case he should want to sell it. Afterwards his stock was taken back. I made an arrangement as I remember it with two [616]*616gentlemen in Battle Creek, and that contract with Claude Hamilton was carried out.”
Fuller also arranged with Hyde and Thornton, attorneys at Grand Rapids, to assist in placing the stock.
“The commission I paid Hyde and Thornton was 11,500 and some common stock. I think it was $6,500 of common stock. The subscription was filled out of the stock that I supposed I had coming to me from these Canadian patents, and the common stock was from my own personal stock because the other common stock was all used up. * * * The only subscription of the Grand Rapids subscribers that was paid to me direct was from Hyde and Thornton, and they knew they were getting my personal stock because I told them distinctly, and they had these bonuses or commissions coming to them, so that they were very glad to accept of the arrangement. They paid $3,500 for $5,000 of stock. \
“Q. How much in money did you have after paying the expenses of the sale out of this $3,500 ?
“A. I estimated that barely $2,000.”
Defendant Fuller instructed Hyde and Thornton as follows:
“As your subscriptions are going to be paid into the Michigan Trust Company, you had better send your amount directly to me, as, of course, it will not do to let them find out anything as they would have to if they received the subscriptions.”
Having made these arrangements for satisfactory investigations and introductions, defendant Fuller called upon complainants, and, according to their testimony, which we accept as substantially correct, represented .to them, in substance, that he and his associates had organized the defendant bean company, and had conveyed to it their entire invention, including the patents for the United States and Canada, so that they were in a position to take out patents wherever it was deemed advisable to do so; that the company had been organized with a capital stock of $5,000,000, of which $3,000,000 had been given for the invention and patents, and that the remaining [617]*617$2,000,000 was in the treasury and had been divided into $500,000 of preferred stock and $1,500,000 of common stock; that the stock he was selling was treasury stock, and that all the proceeds of their subscriptions would go into the treasury and build up the company’s business; that he had no personal interest in selling the stock, but was in Grand Rapids merely at the request of the hulled bean company; that he was not offering the stock generally, but placing it with his business friends and acquaintances ; that he did not know that he should even get his expenses paid in connection with it; that he did not tell either of the complainants about his arrangement with the hulled bean company under the option of August 28th, nor did he tell them about the resolution of September 4th under which $75,000 of the preferred stock which was supposed to be in the treasury was to be turned over to him for the Canadian patents. On the contrary, he said the company owned the invention as well as the patents, and that all of the preferred stock was treasury stock. The subscription agreement signed by complainants contained the following:
“The American Hulled Bean Company, Limited, of Battle Creek, Michigan, has been organized with a capital stock of $5,000,000 (50,000 shares at $100 each), $4,500,-000 of which is common stock and $500,000 of which is seven per cent, preferred stock; $500,000 preferred stock and $1,500,000 of the common stock is treasury stock.”
We are of the opinion that the allegations of the bill were sustained by the proofs’,'and that complainants were entitled to a decree, unless, as contended by counsel for defendant Fuller, the proofs demonstrate that complainants were not injured by the misrepresentations. This contention rests upon the undisputed fact that the $75,000 in cash to be paid by Fuller to the company was actually paid to itj. out of the subscriptions and upon the further alleged f&ct that on and shortly prior to June 12, 1902, and long prior to this suit, he had assigned to the company [618]*618all of his then holdings of stock. On the date last mentioned the following receipt was given:
“Received of Charles D. Fuller an order for all of his holdings in the capital stock of the American Hulled Bean Company, Limited, which is hereby declared to be a full settlement of all our demands against him of every name, nature and description.
[Signed] “Martin V. Barker.
“D. L. Merrill.
“A. C. WlSNER.
“Neal S. Phelps.”
Defendant Fuller testified:
“ Q. Referring now to this block of preferred stock that was set aside to you in this resolution, and that you have spoken of as being surrendered prior to the receipt in June, was any of it ever issued to you ?
“Á. Of the $75,000? Yes, sir; there was. I drew $11,500 par value of it.
“ Witness (continuing): That is all I ever drew. The rest was unissued. Part of that $11,500 I used to pay commissions and bonuses with in order to get the option financed up there in addition to the $53,000 of my own common stock, aside from my own common stock that I surrendered as mentioned in the trustee agreement. * * * I had given up over $53,000 of that that I had
paid cash or its equivalent for. What I had left, both preferred and common, I considered just as much my property as anything I owned in the world, and I considered that the Canadian patents were the property of the company, and that I had given them an equivalent.
“Q. Now, after the company became insolvent, you say you transferred all of your holdings in it back to them, did you not ?
“A. Well, as a matter of fact, I never had any of that $75,000 of preferred stock.
“ Witness (continuing): That is, it had not been issued to me, except I was forced to draw some of it to pay commissions and bonuses. Five thousand dollars more of it I frittered away for the first premium on a life insurance policy. I don’t remember who I did pay that to, but it was in the New York Mutual Life, as I remember it, at Grand Rapids, and Mr. Branch bought the stock later of an agent, according to my best knowledge, which I believe [619]*619is correct. At a subsequent date, when the company was hard up, I transferred back to it $63,500. That stock stood to my credit, and I either transferred it back or to a trustee. I think it may be that instead of transferring it directly to the company that I transferred it to a trustee for the company, so that it was put where they could have the benefit of it when they wanted it. I have never drawn it or tried to sell it; simply let it lie there in the treasury. I did not take this Exhibit I, which is a release from the managers, at that time. As I remember it, that was for the common stock. I don’t remember that I took any receipts for the preferred stock. I don’t remember that the American Hulled Bean Company had any demands against me at the time that receipt, Exhibit I, was signed. I just took the release as I remember it as a matter of precaution in case anything should ever arise.”
It is apparent from his own testimony that defendant Fuller did not restore to the company all of the preferred stock allotted to him for his Canadian patents, but used $11,500 thereof for his own purposes, and derived a direct personal benefit therefrom, and to that extent injured the complainants, to whom he had represented that the Canadian patents, along with the United States patents, had been paid for by the transfer of the $3,000,000 of common stock.
The decree is reversed, and a decree may be entered for complainants, as prayed for, with costs of both courts.
Ostrander, Hooker, McAlvay, and Brooke, JJ., concurred with Blair, C. J.