Joy v. Pagel , 287 Mich. 453 ( 1939 )

Plaintiff William M. Joy, as assignee of Universal Securities Trust, brought suit against defendants. The cause was tried before the court and without a jury. Plaintiff was given judgment in the sum of $14,704.93. Defendants appeal.

The facts in this cause are very much in dispute, but there is competent evidence to sustain the following facts. In December, 1934, and January, 1935, Universal Securities Trust advanced $12,650 under four agreements. The following is a copy of one of them:

"American Tire Guard Company "5919 Commonwealth Avenue, "Detroit, Michigan, U.S. A.

"December 11, 1934.

"UNIVERSAL SECURITIES TRUST, "3164 Penobscot Building, "Detroit, Michigan.

"Attention: Mr. William M. Joy.

"Gentlemen:

"We herewith deliver to you 7,000 shares American Tire Guard Stock certificate No. 74 validated for sale in Michigan by the Michigan securities commission, for the sum of $5,950.

"We the undersigned hereby agree to repurchase said shares from you on or before Friday, December 28th for the sum of $7,000 cash; you in turn agreeing to deliver same to us upon receipt of said $7,000.

"Very truly yours,

"BENJ. S. PAGEL, President.

"OLIN FINNEY, Vice-President Secretary.

"F. LANGDON HUBBARD, Treasurer."

These advancements were made at the solicitation of defendant Finney who at that time was vice-president and secretary of the American Tire Guard Company. The company was organized to market a patented tire guard, but was not as yet in production. At the time of the transaction, the company had no surplus and later became insolvent. The agreements were not performed and it appears that owing to the financial condition of the tire company at the time the agreements were made and at the time that suit was begun, the tire company could not legally enter into or perform such an agreement. The trial court found as a fact that, at the time the agreements were entered into, the stock represented by the certificates mentioned in the agreements was owned by the corporation and not by the individuals who signed the agreements; that at the time of the mentioned transactions, the corporation (American Tire Guard Company) was involved in experiments looking towards the bettering of its own products and was endeavoring to raise money for the purpose of erecting a plant to carry on its activities; that prior to the instant transactions, there were at least two other transactions of a similar nature with the First Income Trading Corporation, a company with which plaintiff was associated; and that witnesses Grow and Wicks, officers of the First Income Trading Corporation, testified for plaintiff and witness Grow stated that he informed Mr. Finney that his company would do business on the basis of personal liability. The record shows that Mr. Joy testified that the advancements were made on condition that defendants assume personal liability.

The trial court held as a matter of law that the liability was an individual liability and not a corporate liability; and that the two transactions, namely, the original advancement and the agreement to repurchase constitute a single transaction and there being partial performance, the statute of frauds does not apply.

In appealing defendants contend that the liability is that of the corporation; that if they are liable, such liability is secondary to that of the corporation and since the corporation could not under the facts be legally obligated to repurchase its own stock, there could be no secondary liability on their part; and that the instruments are unenforceable under the statute of frauds because the Universal Securities Trust, as seller, did not execute the memoranda nor was there any part performance.

We have examined the record and conclude that there is evidence from which the trial judge could find that it was the intent of the parties to bind the defendants individually, but it is contended by defendants that if the repurchase contracts are interpreted as the personal obligations of defendants, then they are unenforceable under the statute of frauds (2 Comp. Laws 1929, § 9443 [Stat. Ann. § 19.244]) because they are neither signed by Universal Securities Trust as seller on resale nor has any part performance been had by the payment of any consideration or their receipt of any portion of the bargained stock.

The rule is that unless a contract to purchase goods (valued over $100) is in writing and signed by both parties, it is not mutual and binding, and is void under the statute of frauds,Willebrandt v. Sisters of Mercy, 185 Mich. 366; and that shares of stock are "goods" within the meaning of the statute of frauds. Sprague v. Hosie, 155 Mich. 30 (19 L.R.A. [N. S.] 874, 130 Am. St. Rep. 558).

The claim is made that neither Mr. Joy nor his assignor Universal Securities Trust signed the agreements to sell the stock back to defendants. Assuming this to be true, the question resolves itself into whether the parts of the agreements are separate and distinct from each other. Plaintiffs contend that the two parts constitute a single transaction and the original delivery from the first seller to the first buyer operates as a partial performance and takes the contract out of the statute of frauds.

In 27 C. J. p. 237, § 253, it is said:

"A contract by which one sells his own goods, payment and delivery being made, and agrees to repurchase them, upon the demand of the buyer, is an entire contract, and the promise to repurchase is taken out of the statute by such payment and delivery; but it is otherwise when an agreement for repurchase is made by a person other than the owner of the goods."

In Calvert v. Mason City Loan Investment Co., 219 Iowa, 963 (259 N.W. 452), it is said:

"The general rule is that if the seller was selling his own property or his own stock, then the agreement does not come within the statute of frauds. Because the contract was one entire contract, — a part of which contract was the obligation of the seller, stated as a condition of said purchase and sale by the purchaser that at any time purchaser should return the bonds, the seller would pay the money received by him for them, — this obligation of the seller was a part of the original contract. The contract for the purchase and sale constitutes one contract, which was partly performed by purchaser paying the money for the bonds and the seller handing over the bonds. * * *

"In other words, the statute of frauds does not apply when the seller sells his own property. In this case, if the bonds belonged to the Mason City Loan Investment Company, then the statute would not apply, but if the bonds did not belong to the Mason City Loan Investment Company and they simply acted as agent, according to the cases cited, the statute of frauds would apply.

"Where the property is purchased from an agent, the contract of purchase is between the purchaser and the agent's principal, and the contract of repurchase is a contract between the purchaser and the agent, in which case you have two contracts, and the better weight of authority holds that the contract to repurchase comes within the statute of frauds. SeeKorrer v. Madden, 152 Wis. 646 (140 N.W. 325); Becker v. Kreul,173 Wis. 273 (181 N.W. 211); Seaman v. Sweat, 22 Ga. App. 92 (95 S.E. 378); Morse v. Douglass, 112 A.D. 798 (99 N.Y. Supp. 392)."

In Becker v. Kreul, 173 Wis. 273 (181 N.W. 211), the court said:

"This is an action to recover damages for breach of contract arising by reason of the refusal of the defendant to repurchase the stock in accordance with the agreement made December 24, 1917. * * * This was a sale of stock owned by Cochems to the plaintiff, Becker, a part of the inducement being that the defendant (Kreul) agreed that he would, as found by the jury, take the stock and return the money if the plaintiff became dissatisfied within a year. These facts bring this case squarely within Korrer v. Madden, 152 Wis. 646 (140 N.W. 325). Here, as there, the defendant did not sell his own stock, no part of the purchase price was received by him, the stock was delivered to the plaintiff by Cochems, and payment was made to the company. We need not repeat here the discussion found inKorrer v. Madden, and we must hold that the contract in this case was within the statute of frauds. It was not in writing and therefore void. Wisconsin Statutes 1919, § 2307."

Plaintiff contends that Beverly v. Richards, 255 Mich. 508, is controlling in the instant case. In that case defendant was an individual and actually received the money paid to the corporation-seller as the corporation used the money to pay off a debt owing between the corporation and the defendant. The stock sold by the corporation was stock which defendant held in pledge to secure his personal loan to the corporation.

The facts in the above case may be distinguished from the controlling facts in the case at bar. In the instant case, the stock was the property of the corporation and was sold to plaintiff; the consideration was received by the selling corporation; and the agreements to repurchase were made by defendants. Consequently, two different transactions were involved and the agreements, not being signed by plaintiff's assignor, were therefore void.

The judgment of the trial court should be reversed without a new trial. Defendants should recover costs.

BUSHNELL, and CHANDLER, JJ., concurred with SHARPE, J. BUTZEL, C.J., did not sit.