author: T. M. Burns, J. R. M. Maher, J.

text:
    SMITH v SUTHERLAND
    Docket No. 78-1386.
    Submitted March 7, 1979, at Detroit.
    Decided October 15, 1979.
    Leave to appeal applied for.
    Joelyn M. Smith brought an action against Peggy S. Sutherland, the operator of an automobile, and her father John J. Sutherland, the owner of the automobile, jointly and severally for recovery of noneconomic losses suffered by the plaintiff in an automobile accident. Defendants admitted liability and the question of whether the injuries sustained resulted in a serious impairment of body function was submitted to a jury. The jury returned a verdict of no cause of action, Oakland Circuit Court, John N. O’Brien, J. Plaintiff appeals alleging: (1) the court’s jury instruction "the term serious impairment has been interpreted as meaning an impairment of a body function of more than ordinary severity” was erroneous and requires reversal, (2) the nonoperator-owner’s liability was not affected by the enactment of the no-fault act and therefore the liability of the nonoperator-owner is controlled by the civil liability act, which would allow recovery on a mere showing of negligence based on the same accident if the suit were against the owner, therefore, the court erred in instructing that the same standard of liability applied to both defendants, and (3) defendants never introduced evidence that they were insured, therefore, it was error to require a showing that Peggy’s negligence caused injuries resulting in a serious impairment of a body function as provided for in the no-fault automobile insurance statute. Held:

    1. The no-fault automobile statute provides that tort liability for noneconomic loss shall attach if the injured person has suffered serious impairment of body function. The statute requires only that the impairment be of the kind that is ordinarily serious and it need not be more than what is an ordinarily serious (or severe) injury. A jury instruction which states that "the term serious impairment has been interpreted as meaning an impairment of a body function of more than ordinary severity” conflicts with the statutory standard, adds to plaintiffs burden and is sufficiently misleading to require a new trial because "more than ordinary severity” does not mean the same as the word "serious”, as used in the statute.

      References for Points in Headnotes
    [1-7] New Topic Service Am Jur 2d, No-Fault Insurance §§ 14-15.
    Validity and construction of "no-fault” automobile insurance plans. 42 ALR3d 229.

      2. The court did not err in instructing the jury that the same standard of liability applied to both defendants. The civil liability act has no application in the face of a controlling statute and the no-fault act controls and sets the standard under which liability is imposed. This standard of liability is the same for both drivers and owners of motor vehicles.
    3. Whether a no-fault defendant is insured is a relevant inquiry which should be addressed to the court and not the jury. In the case of a retrial the defendant should be given an opportunity to provide proof on this issue. If the person is insured, he comes under no-fault coverage and there is no problem. If the person has failed to obtain security for payment of benefits under personal protection benefits, he is not entitled to the protection of the no-fault act and traditional tort theory and procedure applies.
    Reversed and remanded.
    R. M. Maher, J„ concurred in part and dissented in part. He agrees with the majority that the instruction on serious impairment of body function was improper and requires reversal and that the same standard of liability applies to the defendant owner as applies to the defendant driver. However, he does not agree that the serious impairment/permanent disfigurement threshold does not apply to suits against uninjured motorists. He would hold that the threshold requirement for retained liability applies to actions against both insured and uninsured motorists.
    Opinion of the Court
    1. Insurance — No-Fault Insurance — Instructions to Jury — Serious Impairment of Body Function.
    An instruction to the jury, in an action for recovery of noneconomic losses under the no-fault automobile insurance act, explaining the phrase "serious impairment of a body function” which stated that "the term serious impairment has been interpreted as meaning an impairment of a body function of more than ordinary severity” is erroneous and misleading.
    2. Insurance — No-Fault Insurance — Instructions to Jury — Tort Liability — Statutes.
    There are no standard jury instructions for cases arising under the no-fault automobile insurance act and there are no statutory definitions for the thresholds for retained tort liability under the act; each factual situation is to be considered on a case by case basis (MCL 500.3135; MSA 24.13135).
    3. Insurance — No-Fault Insurance — Instructions to Jury — Serious Impairment of Body Function — Statutes.
    Jury instructions explaining the phrase “serious impairment of a body function”, in cases involving retained tort liability under the no-fault automobile insurance act, are not reversibly erroneous where the instructions given do not detract from the statutory standard or allow recovery in more limited situations than the statute itself (MCL 500.3135; MSA 24.13135).
    4. Insurance — No-Fault Insurance — Tort Liability — Drivers — Owners — Statutes.
    The standard for retained tort liability under the provisions of the no-fault automobile insurance act is the same for drivers as for nonoperator owners (MCL 500.3135; MSA 24.13135).
    5. Insurance — No-Fault Insurance — Tort Liability — Question of Insurance — Trial — Statutes.
    The no-fault automobile insurance act abolishes tort liability only as to those defendants who are insured pursuant to the no-fault act; therefore, whether a defendant is insured is a relevant inquiry; however, such inquiry must be addressed to the court rather than the jury because of a statutory ban on injecting the issue of insurance into a trial (MCL 500.3135; MSA 24.13135).
    Partial Concurrence, Partial Dissent by R. M. Maher, J.
    6. Insurance — No-Fault Insurance — Noneconomic Loss — Tort Liability — Statutes.

      Tort liability for noneconomic loss resulting from minor injuries is absolutely prohibited under the no-fault automobile insurance act; the statutory provision prohibiting such liability makes no distinction between the insured and uninsured status of the tortfeasor (MCL 500.3135; MSA 24.13135).

    7. Insurance — No-Fault Insurance — Tort Liability — Insured Motorist — Uninsured Motorist — Statutes,

      The no-fault automobile insurance act abolishes all tort liability for insured motorists, with the exception of loss resulting from intentional torts, noneconomic loss from serious injuries, and expenses, work loss and survivor’s loss beneSts in excess of the statutory limitations; uninsured motorists remain liable for all economic losses and for noneconomic loss except as limited by

      the threshold provision of the act (MCL 500.3135; MSA 24.13135).

      Rosenbaum, Bloom, Kaufman, Appel & Moses, for plaintiff.

      Condit & McGarry, P.C., for defendant.
    Before: N. J. Kaufman, P.J., and T. M. Burns and R. M. Maher, JJ.
   T. M. Burns, J.

Plaintiff brought this suit to recover for injuries sustained in an automobile accident on March 21, 1976. Defendants admitted liability and the question of whether the injuries sustained resulted in a "serious impairment of body function”, MCL 500.3135; MSA 24.13135, was submitted to a jury. A judgment of no cause of action was entered on the verdict returned and plaintiff appeals by right. We reverse.

The trial court instructed that plaintiff must demonstrate that her injuries resulted in a serious impairment of a body function before she could recover damages. But, in explaining the phrase the court indicated, "the term serious impairment has been interpreted as meaning an impairment of a body function of more than ordinary severity”. This instruction is erroneous and sufficiently misleading to require a new trial.

There are no standard instructions for no-fault cases and no statutory definitions for the thresholds of retained liability in § 3135. The courts have been commanded to consider each factual situation on a case by case basis. See, Advisory Opinion re Constitutionality of 1972 PA 294, 389 Mich 441; 208 NW2d 469 (1973). In reviewing a trial court’s instructions, no reversible error has been found where the instructions given do not detract from the statutory standard or allow recovery in more limited situations than the statute itself. Stevens v Hogue, 85 Mich App 185; 270 NW2d 735 (1978).

The instruction above conflicts with the statutory standard. In the context in which it was used in this case, "more than ordinary severity” is not the same as "serious”. The statute requires only that the impairment be of a kind that is ordinarily serious, it need not be more than what is an ordinarily serious (or severe) injury. No one could doubt that injuries which rendered an individual a quadraplegic are injuries which result in a serious impairment of a body function. Under the trial court’s instruction, the quadraplegic plaintiff would be unable to recover for his injury unless he could establish that his condition was more severe than the ordinary serious type of injury which results in quadraplegia.

The court’s instruction increased the plaintiff’s burden and requires a new trial. We would refer the court to McKendrick v Petrucci, 71 Mich App 200; 247 NW2d 349 (1976), Cassidy v McGovern, 86 Mich App 321; 272 NW2d 644 (1978), and Stevens v Hogue, supra, for guidance in framing the instruction on a retrial.

Plaintiff raises a number of other issues, but only two require discussion. Plaintiff sued both the driver of the car which struck her and the owner of that car. Plaintiff argues that the nonoperatorowner’s liability was not affected by the enactment of the no-fault act. Under plaintiff’s theory, the liability of the nonoperator-owner is controlled by the civil liability act, MCL 257.401 et seq.; MSA 9.2101 et seq. Under this view, an injured individual would not need to show an injury resulting in death, serious impairment of a body function or permanent serious disfigurement to recover against a negligent driver of a motor vehicle, but a mere showing of negligence, based on the same incident, if suit were against the owner.

We cannot agree. MCL 500.3135; MSA 24.13135 provides, in relevant part:

"(1) A person remains subject to tort liability for noneconomic loss caused by his ownership, maintenance or use of a motor vehicle only if the injured person has suffered death, serious impairment of body function or permanent serious disfigurement.
"(2) Notwithstanding any other provision of law, tort liability arising from the ownership, maintenance or use within this state of a motor vehicle with respect to which the security required by subsections (3) and (4) of section 3101 was in effect is abolished except as to:
"(b) Damages for noneconomic loss as provided and limited in subsection (1).
"(c) Damages for allowable expenses, work loss and survivor’s loss as defined in sections 3107 to 3110 in excess of the daily, monthly and 3 year limitations contained in those sections.” (Emphasis added.)

From the language of the statute we can only conclude that the standard of liability is the same for drivers and owners. The civil liability act still provides a basis for imposing liability, where none would exist in the absence of the statute, Wieczo rek v Merskin, 308 Mich 145, 148; 13 NW2d 239 (1944), but the standard under which liability is imposed is furnished by § 3135 of the no-fault act. There was no error in instructing that the same standard of liability applied to both defendants.

Plaintiff argues that since defendants never introduced evidence that they were insured it was error to require a showing that defendant driver’s negligence caused injuries resulting in a serious impairment of a body function. As recently pointed out in Stevens v Hogue, supra, whether defendants were insured is a relevant inquiry. But, it is addressed to the court, not the jury. Defendants should have the opportunity to provide proof on this issue before the retrial ordered herein.

Since there is no indication on the present record that defendant owner’s car was insured, it is necessary to discuss the standard of liability as if the car were uninsured. There has been much confusion in regard to whether a different standard applies depending on the insured or uninsured status of the defendant. Several panels of this Court, by focusing on the language of § 3135(1) and the absence of any mention of insurance in that subsection, have concluded that a defendant’s lack of insurance is irrelevant — a plaintiff still must meet one of the thresholds before liability is imposed. See, e.g., McKendrick v Petrucci, supra, Cassidy v McGovern, supra and Schigur v West Bend Mutual Ins Co, 80 Mich App 640; 264 NW2d 83 (1978), lv gtd 402 Mich 950q (1978).

Without making a specific holding on the point, the Supreme Court seems to have read the statute as contemplating the opposite result. Shavers v Attorney General, 402 Mich 554, 624; 267 NW2d 72 (1978).

The confusion appears to stem from the organization of the statute, as set out above. The McKendrick panel and cases which have followed it treat subsection (1) as the operative subsection. However, it appears that subsection (2) actually controls this question. Subsection (2) abolishes tort liability only if the defendant is insured. One of the exceptions to this abolition of tort liability, set out in subsection (2)(c), is that provided and limited in subsection (1). Unless a defendant has brought himself within § 3135(2) by purchasing insurance, § 3135(1) would not apply. This is how the statute was construed by the Supreme Court in Shavers.

We hold, therefore, that an individual who has failed to obtain "security” as required by MCL 500.3101; MSA 24.13101 is not entitled to the protection of § 3135 and as to that individual, traditional tort liability is retained. If, in this case, the defendant owner’s car is found to have been uninsured, plaintiff need not meet the thresholds of § 3135(1) and would attempt to recover under traditional tort theory and procedure. See, Birkinsha, Insurance Law, 1975 Annual Survey of Michigan Law, 22 Wayne L Rev, 535, 539 (1976).

Plaintiff has raised a number of other issues. All have been considered. The evidentiary issues are without merit. The other issues need not be discussed in light of the holdings above.

Reversed and remanded. Costs to appellant.

N. J. Kaufman, P.J., concurred.

R. M. Maher, J.

(concurring in part, dissenting in part). I agree that reversal is required and concur in the majority opinion as to the first two issues. I cannot agree, however, that the serious impairment/permanent disfigurement threshold does not apply to suits against uninsured motorists.

The language of the statute is clear. MCL 500.3135(1); MSA 24.13135(1), abolishes tort liability for noneconomic loss (e.g. pain and suffering, emotional distress) resulting from minor injuries. Recovery of noneconomic loss from minor injuries is absolutely prohibited. The focus is on the seriousness of the injury; no mention is made of the insured or uninsured status of the tortfeasor. It is subsection (2) of § 3135 which deals with the exemption from liability of insured — as opposed to uninsured — motorists. As to insured motorists, all tort liability, including liability for both noneconomic loss and economic loss (e.g. lost wages, medical expenses), is abolished, with the exception of loss resulting from intentional torts, noneconomic loss from serious injuries, and expenses, work loss and survivor’s loss in excess of the statutory limitations. Uninsured motorists remain liable for all economic losses and for noneconomic loss except as limited by the threshold provision in subsection (1).

For example, if a claimant is injured through the negligence of an uninsured motorist, suffering neither serious impairment of body function nor permanent serious disfigurement, he may not bring an action for noneconomic loss such as pain and suffering. If he has suffered loss of wages and incurred medical costs, however, he is entitled to maintain an action against the uninsured motorist to recover those losses. If, on the other hand, this same claimant has been injured to the same extent by an insured motorist, he is not entitled to maintain an action either for noneconomic loss or for his lost wages and medical expenses (assuming that his losses do not exceed the statutory limits), but must obtain PIP benefits from his insurer (or from another insurer if the statute so provides).

It should be noted that a person injured by an uninsured motorist will in most cases be entitled to first-party benefits (reimbursing him for economic loss) either from his own insurer or from the assigned claims fund. The injured person’s right of action against the uninsured motorist will therefore be exercised by an insurance company entitled to subrogation by reason of having compensated the injured person for his economic loss.

To hold, as the majority does, that a person injured by an uninsured motorist may sue for noneconomic loss for injuries which do not meet the threshold of § 3135(1) is to give the victim of an uninsured motorist a right to recover benefits which the person injured by an insured motorist does not have. Both classes of injured persons are entitled to recover for economic loss from the insurer of the injured person, the driver or the vehicle owner. Where no one involved in the accident is insured, the injured person is entitled to benefits from the assigned claims fund. In addition, both classes of injured persons are entitled to sue for noneconomic loss if their injuries meet the threshold requirements of § 3135(1). Under no circumstances may the victim of an insured motorist recover noneconomic loss unless his injury meets the threshold. The same should be true of the victims of uninsured motorists.

Although it is true that the Supreme Court in Shavers v Attorney General, 402 Mich 554; 267 NW2d 72 (1978), in ruling on a due process and equal protection challenge to the no-fault statute, apparently assumed that traditional tort liability continues as to uninsured motorists, the Court did not clearly hold that its interpretation of § 3135 applied the threshold requirement only to insured tortfeasors. Until the Supreme Court expressly rules on the question, I will adhere to the view expressed in Schigur v West Bend Mutual Ins Co, 80 Mich App 640; 264 NW2d 83 (1978), and McKendrick v Petrucci, 71 Mich App 200; 247 NW2d 349 (1976).

I would hold that the threshold requirement applies to actions against both insured and uninsured motorists.

       Below, plaintiff objected to the instruction as given and the refusal of the trial court to give a different instruction which she had requested. It is unnecessary to decide whether it was error to refuse to give plaintiffs requested instruction in exactly the terms proposed. We would note, however, that the court should have instructed that a serious impairment of a body function need not be permanent.

       This statute provides in part: "The owner of a motor vehicle shall be liable for any injury occasioned by the negligent operation of such motor vehicle whether such negligence consists of a violation of the provisions of the statutes of the state or in the failure to observe such ordinary care in such operation as the rules of the common law requires.”

       Assuming, of course, that recovery is not barred by MCL 500.3113; MSA 24.13113.

       The Supreme Court in a footnote in Shavers, cited in text supra, assumed that the Legislature intended to retain traditional tort liability for uninsured motorists as an incentive to purchase insurance. In view of the penalties imposed elsewhere in the statute, MCL 500.3113; MSA 24.13113, the slight additional threat of a claim for noneconomic benefits for minor injuries seems unlikely to provide a substantial incentive to purchase insurance.

       Leave to appeal has been granted in Schigur, 402 Mich Mich 950q (1978).


source: Caselaw Access Project

author: Danhof, C.J. V. J. Brennan, J.

license: Public Domain

text:
    PEOPLE v LYONS
    Docket No. 78-2253.
    Submitted June 7, 1979, at Lansing.
    Decided October 15, 1979.
    Defendant, Charles M. Lyons, was charged with embezzlement, fraudulent practices under the Uniform Securities Act and failure to obtain a license as a securities broker-dealer or agent. Defendant, a veteran insurance salesman, began a company specializing in the sale of deposit term life insurance by demonstrating to potential customers how they could profitably take the cash surrender value of their whole life policies, purchase deposit term insurance at a lower rate and use the balance for investments or other purposes. The charges arose out of a transaction with Mr. and Mrs. Reed. Burnett Marus, a salesman for defendant’s firm, first met with the Reeds and recommended that they surrender their whole life policies, buy deposit term insurance and invest the difference. Defendant and Marus both met with the Reeds later, at which time defendant told them about investment possibilities in oil and gas partnerships, limited real estate partnerships, apartment buildings and the Channing Mutual Fund, an open-end investment firm in which persons could buy shares. Upon defendant’s oral promise to put their money into an investment vehicle like the Channing Fund or an interest-bearing account at 7%, Mrs. Reed gave defendant a check made out to his company for $10,000. She later tendered an additional $5,000. About two months later Mr. Reed phoned Marus and intimated he wanted his $15,000 back. Defendant phoned Mrs. Reed and informed her that the money had been deposited in National Premium Budget Investments and promised its return within 30 days. The checks had actually been deposited in the company’s business account and the funds used to pay agent’s commissions, provide defendant with personal cash and company finances and discharge defendant’s child-support obligations. Defendant contended that he never offered to sell securities to the Reeds, that he had promised to invest the funds at 7% and that the Reeds had made a short-term loan to his company. He explained that he lied to Mrs. Reed about the location of the money because Marus and another agent burst into his office while he was with clients, demanding that he speak to Mrs. Reed. He said he was shocked at the intrusion and made up the story so he could return to his clients. Defendant was convicted of the fraudulent practices charge and acquitted of the other two charges in the Washtenaw Circuit Court, Ross W. Campbell, J. Defendant appeals. Held:

      References for Points in Headnotes
    [1] 73 Am Jur 2d, Statutes § 293 et seq.

    [2, 4] 69 Am Jur 2d, Securities Regulation — State §§ 12, 102.
    [3] 31 Am Jur 2d, Expert and Opinion Evidence §§ 2, 69.

      Statutes imposing criminal penalties are to be strictly construed and a defendant cannot be convicted under the language of a statute unless his acts are clearly and unequivocally encompassed by its terms. Criminal statutes should be construed in light of the evil addressed so as to effectuate the end purpose of the legislation. The purposes of the Uniform Securities Act are to protect the public against fraud and deception in the issuance, sale, exchange or disposition of securities by requiring the registration of certain securities and transactions and to prevent stockholders and promoters from perpetrating frauds on unsuspecting investors in hazardous undertakings and to protect credulous and incompetent persons from their own inclinations to speculate in hazardous enterprises. The fraud charged had no relation to the securities discussed by defendant with the Reeds. The obtaining of money under a false promise to invest the money in securities does not bring the fraud within the purview of the Uniform Securities Act.
    Reversed and the charge dismissed.
    V. J. Brennan, J., dissented. He would hold that the obtaining of money under a false promise to invest it in securities does fall within the purview of the Uniform Securities Act. He would affirm.
    Opinion op the Court
    1. Criminal Law — Statutes — Statutory Construction — Securities.
    Statutes imposing criminal penalties are to be strictly construed and a defendant cannot be convicted under the language of a statute unless his acts are clearly and unequivocally encompassed by its terms; thus, one who obtains money upon the false promise to invest the money in a security is not guilty of fraudulent practices under the Uniform Securities Act because the fraud is not "in connection with the offer, sale or purchase of any security” (MCL 451.501[3]; MSA 19.776[101][3]).

      2. Criminal Law — Statutes — Statutory Construction — Statutory Purpose.
    Criminal statutes should be construed in light of the evil addressed so as to effectuate the end purpose of the legislation; the fraud of obtaining money by falsely promising to invest it in securities is not a fraud contemplated under the purposes of the Uniform Securities Act which are to protect the public against fraud in the issuance, sale, exchange or disposition of securities by requiring the registration of certain securities and transactions and to prevent stockholders and promoters from perpetrating frauds on unsuspecting investors in hazardous undertakings.
    3. Witnesses — Expert Witnesses — Question of Law.
    It is the general rule that courts will not permit even expert witnesses to testify on a question of domestic law because it is the exclusive responsibility of the trial judge to find and interpret the applicable law.
    Dissent by V. J. Brennan, J.
    4. Criminal Law — Statutes — Securities Fraud.

      The obtaining of money upon the false promise to invest it in a security falls within the fraudulent acts prohibited by the Uniform Securities Act (MCL 451.501; MSA 19.776[101]).

      Frank J. Kelley, Attorney General, Robert A. Derengoski, Solicitor General, William F. Delhey, Prosecuting Attorney, and James S. Sexsmith, Assistant Prosecuting Attorney, for the people.

      Donald F. Welday, Jr., for defendant.
    Before: Danhof, C.J., and V. J. Brennan and H. R. Carroll, JJ.

       Former circuit judge, sitting on the Court of Appeals by assignment pursuant to Const 1963, art 6, § 23 as amended in 1968.

   Danhof, C.J.

Defendant was charged with embezzlement, MCL 750.174; MSA 28.371, fraudulent practices under the Uniform Securities Act (hereinafter the Act), MCL 451.501(3); MSA 19.776(101X3), and failure to obtain a license as a securities broker-dealer or agent under the Act, MCL 451.601(a); MSA 19.776(201)(a). After a jury trial, he was convicted on the second count of fraudulent practices under the Act and acquitted of the other two charges. Defendant appeals as of right.

The facts, briefly summarized, are as follows. In 1972, defendant, a veteran insurance salesman, started his own company, Ann Arbor International Investment Planning (AAIIP), specializing in selling deposit term life insurance. Using a sales technique perfected by defendant and an associate, an AAIIP sales agent would analyze a prospective client’s existing whole life policies. He or she would then demonstrate that the client could more profitably take the cash surrender value of the existing policies, purchase deposit term insurance at a lower cost and use the remaining money for investments or other purposes of the client’s choice. The agents were, however, warned during their training not to discuss particular investment possibilities with clients unless they were licensed to sell securities.

The prosecution’s case was based on a course of events involving defendant, Burnett Marus, an AAIIP insurance agent and Loyd and Lucy Reed, AAIIP clients. Marus testified that he first met with the Reeds on October 22, 1973. In keeping with the company’s sales technique, he recommended that they surrender their current whole life policies, purchase deposit term insurance and invest the remainder of the cash surrender value. On November 21, 1973, defendant accompanied Marus to the Reed home and explained the advantages of deposit term insurance. The Reeds accordingly surrendered their existing policies, received a check for approximately $10,000 and bought deposit term insurance.

Marus further testified that, on January 12, 1974, he and defendant again met with the Reeds. Defendant told the Reeds about investment possibilities in oil and gas partnerships, limited real estate partnerships, apartment buildings and the Channing mutual fund. According to Marus, the Reeds expressed a preference for an investment like the Channing mutual fund. Upon defendant’s oral promise to put their money "into an investment vehicle like the Channing fund” or an interest bearing account at 7% interest per annum, Mrs. Reed gave defendant a check for $10,000 made out to AAIIP. In February, 1974, the Reeds received a second check from their whole life policies. Mrs. Reed wrote another personal check for $5,000 to AAIIP.

Marus stated that AAIIP began disintegrating in March, 1974. Many of the agents, including Marus, resigned. In late April, 1974, Mr. Reed called Marus and intimated that he wanted his $15,000 returned to him. Defendant phoned Mrs. Reed on April 30, 1974, told her that he had deposited the money in National Premium Budget Investments in Lincoln Park, Michigan, and promised to return the money within 30 days. When Mrs. Reed tried to find this company, she discovered it did not exist.

The Reeds corroborated Marus’s testimony. They both indicated their belief that defendant had promised to invest $15,000 for them in an interest bearing account and to return their money on demand. At the time of trial in March of 1978, defendant had repaid only $1,500 of their money.

The prosecution also introduced defendant’s personal secretary as a witness to testify that the Reeds’ checks had been deposited in the corporate checking account of AAIIP. Checks written on this account thereafter paid AAIIP’s agents’ commissions, provided defendant with personal cash and company finances, and discharged defendant’s child support obligations to his ex-wife.

Defendant’s defense was that he had never offered to sell securities to the Reeds, although securities had been discussed, and that he had promised to invest their $15,000 in AAIIP at 7% interest per annum. In other words, he asserted that the Reeds had made a short-term loan to his company. Defendant insisted that he still planned to return the Reeds’ money with interest, but that his business and personal fortunes had declined precipitously since March, 1974. He also explained that he had lied to Mrs. Reed about the location of the money because Marus and another agent had burst into his office while he was with clients, demanding that he speak to Mrs. Reed. He was shocked by the intrusion and made up a story so that he could return to his clients.

Two former clients of AAIIP also testified for defendant that they had engaged in transactions with the company similar to that of the Reeds. On defendant’s suggestion, both witnesses had loaned money to AAIIP and both had eventually been repaid nearly all of the amounts loaned with interest.

Based on this set of facts, the second count of the information against defendant read as follows:

"[Defendant] did wilfully in connection with the offer, sale or purchase of securities, directly or indirectly engage in acts, practices or a course of business which Operated as a fraud or deceit on Complainant’s, to-wit: (1) Defendant, acting on behalf of and as an officer of Ann Arbor International Investment Planning, Inc. did receive $15,000 from Lucy and Loyd Reed in separate payments of $10,000 on 1/12/74 and $5,000 on 2/7/74. Said amount was paid to International Investment Planning, Inc., Defendant having represented to the Complainant’s that the money was to be held by the firm in an interest bearing account and to pay at least 7% until a suitable investment was found for them. (2) That Defendant did thereafter comingle said monies in his business checking account. (3) That he advised Complainant’s that their money was deposited in a certain place, when in truth of fact it was not. (4) That upon demand he has refused to return Complainants’ monies contrary to his agreement, and contrary to Sec. 451.501(3), C.L. 1948, as amended; MSA 19.766(101)”.

The provision of the Act under which defendant was charged, MCL 451.501(3), makes it unlawful for any person

"* * * in Connection with the offer, sale or purchase of any security or commodity contract, directly or indirectly:
"(3) To engage in any act, practice or course of business which operates or would operate as a fraud or deceit upon any person.”

Defendant’s argument on appeal is that the evidence does not support any finding of a security being offered, sold or purchased. He insists that he did not ask the Reeds to invest risk capital in a particular organization, but rather to loan money to AAIIP at a 7% interest rate. Loans are specifically excluded from the definition of a sale under the Act. MCL 451.801(j)(6)(A); MSA 19.776(401)(j)(6)(A). See also People v Breckenridge, 81 Mich App 6; 263 NW2d 922 (1978).

We are not convinced by defendant’s characterization of the evidence. The prosecution witnesses’ testimony clearly tends to show that the Reeds did not intend to have their money commingled with AAIIP’s finances, although the nebulous nature of defendant’s purported promise to "invest” their money in "an interest bearing account” makes it difficult to determine what sort of transaction the parties anticipated, and whether it concerned a security or not. But even assuming an offer, sale or purchasé of a security was somehow involved in defendant’s dealings with the Reeds, we agree with defendant’s general premise that the situation in this case does not fall within the purview of the behavior criminally sanctioned under MCL 451.501(3).

Stripped to its essentials, the gravamen of the offense charged against defendant was that he converted the Reeds’ checks to his own use contrary to his promise, then lied to them about the location of their money and, finally, refused to return it on demand. Defendant’s allegedly fraudulent and deceitful acts were thus not "in connection with the offer, sale or purchase of any security” within the meaning of the Act, MCL 451.501(3). Defendant’s act actually constituted a criminal conversion of money entrusted to him for another use.

One may argue that defendant’s promise to "invest” the Reeds’ money was linked to his future fraudulent course of action because defendant’s promise occasioned his acquisition of their money. But defendant could just as well have vowed to buy the Reeds the Eiffel Tower or donate their money to charity; the promise, no matter what the content, was merely the vehicle by which he acquired their funds.

Statutes imposing criminal penalties are strictly construed. The defendant cannot be convicted under the language of the statute unless his acts are clearly and unequivocally encompassed by its terms. People v Kirstein, 6 Mich App 107, 113-114; 148 NW2d 539 (1967), Bremer v Equitable Construction & Mortgage Corp, 26 Mich App 204; 182 NW2d 69 (1970). The relationship between defendant’s alleged fraudulent acts and the offer, sale or purchase of any security is too attenuated to establish the connection required by the language of MCL 451.501.

It is also well settled that criminal statutes should be construed in light of the evil addressed so as to effectuate the end purpose of the legislation. People v Dempster, 396 Mich 700, 707-708; 242 NW2d 381 (1976), People v Johnnie W Jones, 12 Mich App 293; 162 NW2d 847 (1968), People v Loney, 12 Mich App 288; 162 NW2d 832 (1968). The purpose of the Act is to "protect the public against fraud and deception in the issuance, sale, exchange, or disposition of securities within the State of Michigan by requiring the registration of certain securities and transactions”. Dempster, supra, 704, quoting Schmidt & Cavitch, Michigan Corporation Law (1974), p 1071. The Act also seeks "to prevent stockholders and promoters from perpetrating frauds and impositions on unsuspecting investors in hazardous undertakings and to protect credulous and incompetent persons from their own inclinations to speculate in hazardous enterprises”. Breckenridge, supra, 14-15. The regulatory purpose is, in short, to require full and honest disclosure of the facts underlying securities transactions so that buyers and sellers can properly appraise the value of securities based on accurate information.

The fraud charged by the prosecution had no relation to the securities which defendant discussed with the Reeds. There was no allegation that defendant mischaracterized market risks involved or misled the Reeds about the nature of a security. He simply failed to invest their money in any securities at all. The regulatory scheme of the Act was not meant to address this type of misappropriation of funds. Defendant’s conviction for fraudulent practices under the Act must therefore be reversed and the charge dismissed.

Although not necessary to our decision, we briefly address one other important issue. At trial, the prosecution introduced Donald Gunn as an expert witness on securities law. Gunn stated that he had worked for 13 years as a corporation auditor-investigator enforcing securities law through the Michigan Corporations and Securities Bureau. According to the guidelines established by the Michigan Supreme Court, Gunn was qualified as an expert. O’Dowd v Linehan, 385 Mich 491, 509-510; 189 NW2d 333 (1971), Johnson v Detroit, 79 Mich App 295; 261 NW2d 295 (1977). His testimony also met the requirement of aiding the jury to understand the complexities of the case against defendant. O’Dowd, supra. Cf., Dudek v Popp, 373 Mich 300, 305-306; 129 NW2d 393 (1964). See also MRE 702.

But the court erred in allowing Gunn to testify, over defendant’s objection, concerning the legal definition of a security under the Act. The general rule is that courts will not permit even expert witness testimony on a question of domestic law because it is the exclusive responsibility of the trial judge to find and interpret the applicable law. McCormick, Evidence (2d ed), §§ 12, 335, pp 28-29, 776-777; 7 Wigmore, Evidence (Chadbourn Rev), § 1952, pp 103-104. See also Marx & Co, Inc v Diners’ Club, Inc, 550 F2d 505 (CA 2, 1977), Huff v United States, 273 F2d 56, 61 (CA 5, 1959), State v Ballard, 394 SW2d 336, 340 (Mo, 1965).

The wisdom of this rule is demonstrated in the instant case. Gunn’s testimony included a legal conclusion that an interest bearing account constituted an evidence of indebtedness within the meaning of the Act, MCL 451.801(1); MSA 19.776(401X1). The jury asked to have the tape of Gunn’s remarks replayed during its deliberations, while also requesting the trial judge to clarify the meaning of an evidence of indebtedness under MCL 451.801(1). The judge assented to the first request, but stated privately to the prosecutor and defense counsel:

"I should point out that my opinion here differs from that of Mr. Gunn. I have allowed Mr. Gunn to give testimony as an expert. The jury is at liberty to give that testimony such weight as they feel it deserves. Nonetheless, I can not delegate my role as trial judge to Mr. Gunn or any other expert where a question of law is involved, and had the Legislature wished to have the more liberal interpretation both Mr. Gunn and the Prosecutor would place upon the term evidence of indebtedness, the remedy is simple: they can spell it out in the statute. But until and unless they have, I have to break this in favor of the Defense and take the conservative stance on the definition that I have.” (Emphasis supplied.)

He then instructed the jury that "under the Michigan Uniform Securities Act evidence of an oral promise to pay back money, absent the issuance of a written instrument evidencing such promise to repay, is not evidence of indebtedness”. The jury thus heard two varying, if not inherently contradictory, legal interpretations of a statutory term involved in the case.

Allowing witnesses to testify as to questions of law invites jury confusion and the possibility that the jury will accept as law the witness’s conclusion rather than the trial judge’s instructions. We would reverse on the basis of Gunn’s erroneously admitted testimony.

Reversed and the charge against defendant dismissed.

H. R. Carroll, J., concurred.

V. J. Brennan, J.

(dissenting). The majority’s disposition of the issue of fraudulent practices committed by defendant is based upon their characterization of defendant’s actions as a criminal conversion of money entrusted to him for another use. However, the defendant’s fraudulent acts connected with the offer to sell a security are sufficient to bring this case within the purview of the Uniform Security Act.

Section 101 of the Act provides:

"Sec. 101. It is unlawful for any person, in connection with the offer, sale or purchase of any security, directly or indirectly:
"(1) To employ any device, scheme or artifice to defraud.
"(2) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading.
"(3) To engage in any act, practice or course of business which operates or would operate as a fraud or deceit upon any person.” MCL 451.501; MSA 19.776(101). (Emphasis added.)

The Act defines security as follows:

"(1) 'Security’ means any note; stock; treasury stock; bond; debenture; evidence of indebtedness; certificate of interest or participation in any profit-sharing agreement; collateral-trust certificate; preorganization certificate or subscription; transferable share; investment contract; voting-trust certificate; certificate of deposit for a security; certificate of interest or participation in an oil, gas or mining title or lease or in payments out of production under such a title or lease; or, in general, any interest or instrument commonly known as a 'security’, or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing. 'Security’ does not include any insurance or endowment policy or annuity contract under which an insurance company promises to pay money either in a lump sum or periodically for life or some other specified period.” MCL 451.801(1); MSA 19.776(401X1).

Sale and offer to sell are defined in pertinent part as follows:

"(j) (1) 'sale’ or 'sell’ includes every contract of sale of, contract to sell, or disposition of, a security or interest in a security for value.
"(2) 'Offer’ or 'offer to sell’ includes every attempt or offer to dispose of, or solicitation of an offer to buy, a security or interest in a security for value.” MCL 451.801(¡); MSA 19.776(401)(j). (Emphasis added.)

On January 12, 1974, defendant met with the Reeds and told them about oil and gas partnerships, limited real estate partnerships, apartment buildings, and the Channing mutual fund. After discussing the merits of several investment possibilities, the Reeds selected a program "like the Channing program”. Mrs. Reed then gave the defendant a check for $10,000 made out to AAIIP. The defendant told the Reeds that this money would go into "an investment vehicle like the Channing Fund”. Later another $5,000 was turned over to defendant.

Clearly the defendant was offerng a participation in a mutual fund which falls within the definition of securities set forth above. The fact that defendant never invested the money in a mutual fund but used the Reed’s monies to pay not only his business creditors but his alimony and support payments indicates he never intended to invest the Reed’s money. There was ample evi-. dence which proved defendant’s fraudulent intent. I would hold that the Act encompasses this type of activity and would affirm on this issue.

       As explained by Burnett Marus, a prosecution witness, deposit term life insurance provides a death benefit for a specific number of years. The insured pays an initial deposit of 1% of the face amount of the policy plus an annual premium. If the insured holds the policy until the maturity of the term, the deposit is returned with 10% interest.
      Whole life insurance also provides a death benefit for a specific term, but has a savings program connected to it. The average whole life policy pays a 2.5% annual dividend or interest.

       Neither Marus nor defendant had a license to sell securities.

       Marus stated that the Channing Mutual Fund was an open-ended investment firm in which persons could purchase shares. The purchaser would not only receive interest or dividend income, but the principal investment would increase in value as the fund prospered.

       The definition of a security under the Uniform Securities Act is as follows:
      "(1) 'Security’ means any note; stock; treasury stock; bond; debenture; evidence of indebtedness; certificate of interest or participation in any profit-sharing agreement; collateral-trust certificate; preorganization certificate or subscription; transferable share; investment contract; voting-trust certificate; certificate of deposit for a security; certificate of interest or participation in an oil, gas or mining title or lease or in payments out of production under such a title or lease; or, in general, any interest or instrument commonly known as a 'security’, or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing. 'Security’ does not include any insurance or endowment policy or annuity contract under which an insurance company promises to pay money either in a lump sum or periodically for life or some other specified period.” MCL 451.801(1); MSA 19.776(401X1).

       Defendant made the same argument at trial in support of his motion for directed verdict on the second count of the information. The trial court denied the motion, ruling that there was sufficient evidence of a connection between the fraudulent acts alleged and the offer, sale or purchase of a security.

       We are aware of the tendency of courts to liberally construe the language of the Uniform Securities Act. See, e.g., People v Dempster, 396 Mich 700, 704-711; 242 NW2d 381 (1976). See also generally, 79 CJS Supp, Securities Regulation, § 200, pp 481-483,. concerning the wide scope of fraudulent practices punished under the Uniform Securities Act. Flexible interpretation of the Act is necessary if its goal is not to be frustrated by the use of novel or atypical schemes. But this liberality of construction should not include stretching the language of the act to encompass evils not addressed within the statutory purpose.

       Gunn testified in part as follows:
      "Q (BY MR. COOPER [the prosecutor]): Mr. Gunn, are you familiar with the term interest bearing account?
      "A Yes.
      "Q What is an interest bearing account?
      "MR. WELDAY [defense counsel]: 1 would object to that again, Your Honor.
      "THE COURT: I don’t find that in the statute.
      "MR. WELDAY: Pardon?
      "THE COURT: I don’t find that word in the statute.
      "MR. WELDAY: I don’t believe it is in the statute either, Your Honor, and there has been no evidence that this man is qualified to define that term as it may be known in law. He may have an opinion and he may understand what it is, but that I am sure we all do. His opinion must be that of an expert, if it is to be given, and I don’t think he has been qualified to tell us what an interest bearing account may be. Perhaps a banker might be, but Mr. Gunn—
      "THE COURT: Why doesn’t the Prosecutor examine and see if he doesn’t know what that account might be? Does he have expertise in that area?
      "Q (BY MR. COOPER): Have you come across that term before, sir?
      "A Yes.
      "Q Are you familiar with it?
      "A Yes.
      "Q Have you had occasion to deal with that term on prior occasions?
      "A Yes.
      "Q In what capacity?
      "A Well, we have certain entities that you can put money on deposit with and receive an income or interest on your investment or your depsoit, so to speak- This is a form of security.
      "Q It is a form of security?
      "A Yes.
      "Q How does an interest bearing account qualify, if you will, as a, quote, security under the Uniform Securities Act?

      "A Well, I think it could qualify in one of two ways. It could be— there is evidence of indebtedness there. You have money on deposit. It is due you. It is a form of evidence of indebtedness. You might say it is another class of a proñt sharing agreement. You are putting your money into an entity, you ar.e hoping that money — that company or entity makes money to pay you interest that you have on deposit with the company. ” (Emphasis supplied.)


author: Beasley, J. R. M. Ransom, J.

text:
    HEARD v STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY
    Docket No. 78-2691.
    Submitted June 15, 1979, at Detroit.
    Decided October 15, 1979.
    Leave to appeal applied for.
    William H. Heard was injured when he was struck by an automobile driven by State Farm Mutual Automobile Insurance Company’s insured while Heard was pumping gasoline into the tank of his uninsured automobile which was parked in a self-serve gas station. There was no contact between Heard’s uninsured automobile and the insured automobile. Heard sought personal protection benefits under the no-fault motor vehicle insurance policy issued by State Farm, claiming that his uninsured automobile was not connected with the accident. State Farm refused to make payments and Heard brought suit. State Farm moved for summary judgment on the basis that plaintiff was excluded from personal protection benefits under the no-fault insurance act because his uninsured automobile was involved in the accident. The Oakland Circuit Court, Steven N. Andrews, J., granted defendant’s motion for summary judgment. Plaintiff appeals. Held:

    1. Plaintiffs injuries, being the direct result of physical contact with equipment permanently mounted on his parked automobile, are injuries arising out of the ownership, maintenance or use of his automobile within the meaning of the no-fault insurance act.
    2. Plaintiff was not a pedestrian within the meaning of the no-fault act, notwithstanding the fact that he was outside the confines of his automobile.
    3. Plaintiffs automobile was involved in the accident within the meaning of the no-fault motor vehicle insurance act, notwithstanding that there was no contact between plaintiffs automobile and the automobile of the defendant’s insured.

      References for Points in Headnotes
    [1, 2] New Topic Service Am Jur 2d, No-Fault Insurance §§ 18, 19.
    What constitutes a "motor vehicle” covered under no fault insurance. 60 ALR3d 651.
    [3] New Topic Service Am Jur 2d, No-Fault Insurance §§ 17-19.
    [4] New Topic Service Am Jur 2d, No-Fault Insurance §§ 20, 23.
    [5] New Topic Service Am Jur 2d, No-Fault Insurance § 20.
    [6] 73 Am Jur 2d, Statutes § 278,
    [7] [No Reference]

      4. The exclusion under the no-fault insurance act of personal protection benefits for persons whose uninsured automobile is involved in an accident is not penal in nature.
    5. Personal protection benefits under the no-fault insurance act are not available to plaintiff, since his uninsured automobile was involved in the accident within the meaning of the no-fault act.
    Affirmed.
    R. M. Ransom, J., dissented. He would hold that the term "involved”, as used in the no-fault motor vehicle act, should not be liberally construed so as to deny benefits. Plaintiffs automobile was not "involved” within the meaning of the act; and, accordingly, plaintiff was entitled to personal protection benefits. He would reverse.
    Opinion of the Court
    1. Insurance — Automobiles — No-Fault Insurance — Personal Protection Benefits — Parked Automobile — Statutes.
    Bodily injuries suffered by an individual who is struck by another automobile while in the process of pumping gasoline into the gas tank of his parked automobile, being a direct result of physical contact with equipment permanently mounted on his automobile, are injuries arising out of the ownership, maintenance or use of the parked automobile within the meaning of the provisions of the Michigan no-fault motor vehicle insurance act (MCL 500.3106[b]; MSA 24.13106[b]).
    2. Insurance — Automobiles — No-Fault Insurance — Personal Protection Benefits — Parked Automobile — Pedestrian — Statutes.
    An individual injured as a result of being struck by another automobile while that individual is in the process of pumping gasoline into the gas tank of his automobile is not a pedestrian within the meaning of the Michigan no-fault motor vehicle insurance act, notwithstanding the fact that the individual was outside the confines of his automobile when the accident occurred (MCL 500.3101 et seq.; MSA 24.13101 et seq.).

    3. Insurance — Automobiles — No-Fault Insurance — Personal Protection Benefits — Parked Automobile — "Involved” — ■ Statutes.
    An automobile into which gasoline is being pumped is "involved” in an accident within the meaning of the Michigan no-fault motor vehicle insurance act where personal injuries to the owner of said automobile occur as a result of said owner being struck by another automobile while pumping the gasoline, notwithstanding the fact that there was no physical contact between the two automobiles (MCL 500.3113[b]; MSA 24.13113[b]).
    4. Insurance — Automobiles — No-Fault Insurance — Personal Protection Benefits — Exclusions — Punitive Nature — Statutes.
    The portion of the Michigan no-fault motor vehicle insurance act which excludes personal injury benefits under certain circumstances is not punitive in nature, the penal aspect of the no-fault statutory scheme being covered elsewhere in the act (MCL 500.3102, 500.3113[b]; MSA 24.13102, 24.13113[b]).
    5. Insurance — Automobiles — No-Fault Insurance — Personal Protection Benefits — Excluded Coverage — Statutes.
    Personal protection benefits under the Michigan no-fault motor vehicle insurance act are not available to an individual who is struck by an insured automobile while that individual is putting gasoline into the gas tank of his uninsured automobile, since such individual is subject to the "involved” uninsured vehicle exclusion of the act (MCL 500.3113[b]; MSA 24.13113[b]).
    Dissent by R. M. Ransom, J.
    6. Insurance — Automobiles — No-Fault Insurance — Remedial Nature — Liberal Construction — Statutes.

      The Michigan no-fault motor vehicle insurance act, being remedial in nature, is to be liberally construed, however, such liberal construction should not be applied to the determination of the scope and intent of provisions of the act excluding beneñts (MCL 500.3101 et seq.; MSA 24.13101 et seq.).

    7. Insurance — Automobiles — No-Fault Insurance — Personal Protection Benefits — Parked Automobile — "Involved” — Statutes.

      An uninsured parked automobile which is in the process of having its gas tank ñlled when the owner of said automobile is struck and injured by another automobile, no contact being made between the other automobile and the uninsured automobile, is not "involved" in the accident within the personal protection beneñt exclusion provision of the Michigan no-fault

      motor vehicle insurance act (MCL 500.3113[b]; MSA 24.13U3[b]).

      . Marston, Sachs, Nunn, Kates, Kadushin & O’Hare, P.C. (by David K Barnes), for plaintiff.

      Eggenberger, Eggenberger, McKinney & Weber, for defendant.
    Before: J. H. Gillis, P.J., and Beasley and R. M. Ransom, JJ.

       Circuit judge, sitting on the Court of Appeals by assignment.

   Beasley, J.

Plaintiff drove his uninsured car to a self-serve gas station. As plaintiff pumped gasoline into his car, a car driven by defendant’s insured struck plaintiff. The two vehicles never collided. Plaintiff requested no-fault benefits from defendant, claiming that his car was not connected with the accident. There was no claim of "serious impairment of body function” under MCL 500.3135; MSA 24.13135. Upon defendant’s refusal to make payments, plaintiff filed suit. Defendant brought a motion for summary judgment pursuant to GCR 1963, 117.2(1). From the grant of summary judgment to defendant, plaintiff appeals as of right.

This case presents another issue of first impression under this state’s no-fault insurance law. The question before the court concerns the word "involved” as used in MCL 500.3113(b); MSA 24.13113(b). The trial court held that plaintiff was not entitled to no-fault benefits, as his injuries arose out of an accident in which his uninsured automobile was "involved”. Plaintiff contends that his car was "parked”, that there was no physical contact between the vehicles and, therefore, the trial court’s definition of the term "involved” was erroneous.

Exceptions to payment of personal protection insurance benefits are set forth in MCL 500.3113(b); MSA 24.13113(b) as follows:

"A person is not entitled to be paid personal protection insurance benefits for accidental bodily injury if at the time of the accident any of the following circumstances existed:
"(b) The person was the owner or registrant of a motor vehicle involved in the accident with respect to which the security required by subsections (3) and (4) of section 3101 was not in effect.” (Emphasis added.)

It is plaintiff’s contention that at the time of the accident he was a pedestrian who merely happened to be standing near his parked automobile. However, under MCL 500.3106; MSA 24.13106, plaintiff’s injury appears to be within the statute’s contemplation:

"Accidental bodily injury does not arise out of the ownership, operation, maintenance or use of a parked vehicle as a motor vehicle unless any of the following occur:
"(a) The vehicle was parked in such a way as to cause unreasonable risk of the bodily injury which occurred.
"(b) The injury was a direct result of physical contact with equipment permanently mounted on the vehicle, while the equipment was being operated or used or property being lifted onto or lowered from the vehicle in the loading or unloading process.
"(c) The injury was sustained by a person while occupying, entering into or alighting from the vehicle.” (Emphasis added.)

Under the facts of this case, where plaintiff was in the process of pumping gasoline into the gas tank of his automobile, we find that the accident arose out of the ownership, maintenance or use of the car because it fell within the language of subsection (b) emphasized and set forth above.

Further, we do not find that plaintiff was a pedestrian within the meaning of the statute, even though he was outside the confines of his automobile when the accident occurred.

In Collins v Motorists Mutual Ins Co, the Court held that a person who was injured while leaning over the trunk of a parked car, in which he had been a passenger, but which was now disabled, was an "occupant” of an automobile within the meaning of an insurance policy. It was not necessary that the insured party be inside of the vehicle when the accident occurred.

Nickerson v Citizens Mutual Ins Co is a case in which the plaintiff was injured when he stood in front of the car from which he had recently alighted.. The court found that a definition of the word "occupying”, "which does not hold 'physical contact’ mandatory, appears to us to be by far the more reasonable and persuasive approach.”

Although we find no Michigan case which concerns itself with whether a motor vehicle is "involved” in an accident, several courts outside of this jurisdiction have had an opportunity to examine the term. In one of those cases, Stout v Sutton, the court dealt with the term in the context of a non-resident motorist statute. To bring the statute into operation, the motor vehicle of a nonresident must be "involved” in an accident or collision or damages which occurs within the state. In Stout, the plaintiff was injured by a log, a part of the cargo, which fell off the truck as it was being unloaded. Defendant argued that since plaintiff was not struck by any part of the truck itself, the motor vehicle was not involved. Defendant also claimed that the injury could just as easily have occurred by a rolling log after it was unloaded from the truck.

The court, in determining that the motor vehicle was "involved” in the accident even though the accident occurred during unloading, indicated that if the vehicle were not "involved”, the accident would not have happened. The court found little difference between an accident which arose in connection with the unloading process and an accident which arises because some integral part of the motor vehicle is defective or negligently handled.

Lykens v American Cast Iron Pipe Co also determined the meaning of "involved” in the context of a non-resident motorist act and found:

"[1] The word 'involved’ under the Pennsylvania statute has not been interpreted to mean something connected with the accident as a natural or logical effect of the accident, but that involvement means just that and not causation. Wilson v Armstrong, 242 F. Supp. 612 [ED Pa, 1965]. Under the Pennsylvania Nonresident Motorist Act the word 'involved’ includes not only the movement of a motor vehicle but any use that is made of said unit, which includes loading and unloading.”

The common definition of "involve” does not seem to support plaintiff’s position:

"involve * * * 1. to include as a necessary circumstance, condition, or consequence; imply; entail: * * * 2. to affect, as something within the scope of operation. 3. to include, contain, or comprehend withn itself or its scope. 4. to bring into an intricate or complicated form or condition. * * * 6. to cause to be troublesomely associated or concerned, as in something embarrassing or unfavorable: * * * 7. to combine inextricably * * * 10. to preoccupy or absorb fully * * *. 11. to envelop or enfold, as if with a wrapping. 12. to swallow up, engulf, or overwhelm.” The Random House Dictionary of the English Language (unabridged ed, 1971).

The words "to combine inextricably” from the dictionary definition, would fit the instant situation. In putting gasoline into one’s automobile and being injured during this procedure, the car one was servicing, because of the close proximity and association with the insured’s vehicle, would be "involved” within the meaning of the statute.

We find that the Legislature did not intend such a restrictive definition of the word "involved” as plaintiff would have us hold. Whether there was physical contact between the two vehicles or not is not necessarily crucial to the interpretation of that term.

Plaintiff’s argument that MCL 500.3113(b); MSA 24.13113(b) is punitive in nature is also without merit. The penalty aspect of the no-fault statutory scheme is covered by MCL 500.3102; MSA 24.13102. By contrast, MCL 500.3113(b); MSA 24.13113(b) is merely an exclusionary section. Had plaintiff carried the required insurance coverage, he would be the recipient of the benefits he now attempts to claim from the substitute source. The intent of § 3113(b) is to prevent benefits from going to someone who has not paid a premium for the same.

Thus, our finding that plaintiffs uninsured motor vehicle was "involved” in the accident with defendant’s insured’s vehicle precludes the payment of personal protection insurance benefits under the statute.

Affirmed.

J. H. Gillis, P.J., concurred.

R. M. Ransom, J.

(dissenting). The majority concludes plaintiffs injury comes within the contemplation of MCL 500.3106(b); MSA 24.13106(b), i.e. arising out of the "ownership, operation, maintenance or use” of a motor vehicle. The majority further concludes plaintiff was not a pedestrian. Therefore, plaintiffs vehicle was "involved” within the meaning of MCL 500.3113(b); MSA 24.13113(b). "Had plaintiff carried the required insurance coverage, he would be the recipient of the benefits he now attempts to claim from the substitute source.”

I do not agree with this reasoning.

Whether plaintiffs injury arose out of "the ownership, operation, maintenance or use” of a motor vehicle, which would entitle him to receive benefits had he carried the requisite insurance coverage, should not necessarily control in determining whether plaintiffs vehicle was "involved” in the accident.

The so-called "no-fault automobile insurance act” is remedial in nature. Insofar as the Act is remedial in nature, it is to be liberally construed.

Collins v Motorists Mutual Ins Co, and Nickerson v Citizens Mutual Ins Co, relied upon by the majority, exemplify liberal construction of a remedial act.

I do not agree that such liberal construction should be followed in determining the issue of exclusion from benefits.

Plaintiffs vehicle was parked. MCL 500.3106; MSA 24.13106 provides in pertinent part:

"Accidental bodily injury does not arise out of the ownership, operation, maintenance or use of a parked vehicle as a motor vehicle unless ** * *
"(b) The injury was a direct result of physical contact With equipment permanently mounted on the vehicle, while the equipment was being operated or used of property being lifted onto or lowered frtím the vehicle in the loading or unloading process.”

My Brothers rely on sub-section (b) of the aforesaid statute in concluding that plaintiff incurred an accidental bodily injury arising out of the ownership, operation or maintenance or use of his parked automobile.

Not so. Plaintiffs injury was the "direct result” of being struck by another motor vehicle, not the "direct result of physical contact with equipment permanently mounted on the vehicle”.

Plaintiffs motor vehicle was not "involved” in this accident within the contemplation of MCL 500.3113(b); MSA 24.13113(b).

I would reverse.

       36 Mich App 424; 194 NW2d 148 (1971).

       393 Mich 324; 224 NW2d 896 (1975).

         Id., 331.

       434 SW2d 316 (Ky App, 1968).

       The non-resident motorist statute reads as follows:
      "KRS 188.020. Any nonresident operator or owner of any motor vehicle who accepts the privilege extended by the laws of this state to nonresidents to operate motor vehicles or have them operated within state shall, by such acceptance and by the operation of such motor vehicle within this state, make the secretary of state the agent of himself or his personal representative for the service of process in any civil action instituted in the courts of this state against the operator or owner, or the personal representative of the operator or owner, arising out of or by reason of any accident or collision or damage occurring within this state in which the motor vehicle is involved." (Emphasis added.)

       295 F Supp 895, 896 (WD Pa, 1969).

        Shavers v Attorney General, 402 Mich 554; 267 NW2d 72 (1978).

        Dillon v Secretary of State, 61 Mich App 588; 233 NW2d 96 (1975).

       36 Mich App 424; 194 NW2d 198 (1971).

         393 Mich 324; 224 NW2d 896 (1975).


author: Danhof, C.J. V. J. Brennan, J.,

text:
    LICHNOVSKY v ZIEBART INTERNATIONAL CORPORATION
    Docket No. 78-2796.
    Submitted June 7, 1979, at Lansing.
    Decided October 15, 1979.
    Leave to appeal applied for.
    Anthony S. Lichnovsky entered into a "license agreement” with Auto Body Rustproofing Company granting him the exclusive right to establish and operate "Auto Body Rustproofing” stations using the Ziebart compounds, equipment and name within Genesee County. The contract stated in part, "[t]his license agreement shall be in full force and effect indefinitely, unless terminated by an earlier date in accordance with the provisions of Paragraph 11”. Paragraph 11 outlined the procedure for termination for default. As part of the agreement Lichnovsky agreed "to strictly adhere to the methods, practices and system established and in effect by Licensor for the management and operation of [the business]”. Ziebart Rustproofing Co., Auto Body Rustproofing’s successor in interest, in 1973, informed Lichnovsky that their agreement allowed termination by either party upon reasonable notice and offered Lichnovsky a new ten-year contract, but Lichnovsky refused. Later, Ziebart published policies and instruction manuals delineating the rustproofing procedures it deemed necessary for various vehicle models. The policies required the attaining of certain grades on examination by company inspectors in order to maintain a dealer’s “good standing”. Lichnovsky failed to make the required grades and a dispute over failure to meet required standards, failure to keep current instruction manuals and failure to treat certain portions of the vehicles culminated in a letter from Ziebart to Lichnovsky announcing its intention to terminate the agreement and gave Lichnovsky 30 days to either sell or remove all Ziebart identification from his premises. Lichnovsky filed suit in the Genesee Circuit Court against Ziebart International Corporation and Ziebart Rustproofing Company seeking an injunction. Defendants counterclaimed, admitting the agreement and asserting that defendants had improved the Ziebart process, that plaintiff failed to adopt the new procedures, that his noncompliance injured the Ziebart trademark and that they had a right and a duty to ensure standardization. They sought a declaration of termination, an injunction prohibiting plaintiff from using the trademark and damages. The court, Ollie B. Bivins, J., ruled that the agreement controlled the rights of the parties and that the requirements plaintiff was charged with ignoring did not contribute to effective rustproofing and enjoined defendants from interfering with plaintiff’s business. Defendants appeal. Held:

      References for Points in Headnotes
    [1] 17 Am Jur 2d, Contracts §§ 275, 276.
    [2-4] 17 Am Jur 2d, Contracts § 486.
    Termination by principal of distributorship contract containing no express provision for termination. 19 ALR3d 196.

      1. A contract provision that the agreement "shall be in full force and effect indefinitely, unless terminated at an earlier date in accordance with [other provisions]” does not compel an interpretation that the parties intended perpetual duration and, in fact, contributes nothing to the task of determining the duration intended by the parties.
    2. The "Missouri Rule” that a principal’s otherwise unfettered right to terminate at will an agreement specifying no duration period is limited by the agent’s right to enforce the agreement for such time as will afford him a reasonable opportunity to recoup the expenses he incurred in preparing to perform his obligations applies to license or franchise agreements providing for territorially exclusive distribution where the distributor must purchase the product that is the subject of the agreement, promote the sale of the product and make agreements intended to bind the manufacturer; in such agreements the distributor becomes the business agent of the manufacturer-principal and the limitation on the principal’s power to terminate applies only when the agent has actually and forseeably expended capital or given up an otherwise profitable business in his preparations and allows recoupment only of those expenditures directed to this end.
    Remanded for further proceedings.
    V. J. Brennan, J., concurred in the reasoning of the majority but would grant plaintiff an opportunity to rectify the problems precipitating defendant’s decision to terminate and the option to sell the franchise to a third person under the condition that defendant’s current operating procedures be met.
    Opinion of the Court
    1. Contracts — Construction of Contracts — Ambiguity.
    Any ambiguity in a contract should be construed against the party who drafted it.

      2. Contracts — Duration — Indefinite Duration.
    A contract provision that the agreement "shall be in full force and effect indefinitely, unless terminated at an earlier date in accordance with [other provisions]” does not compel an interpretation that the parties intended perpetual duration and, in fact, contributes nothing to the task of determining the duration intended by the parties.
    3. Contracts — Exclusive Distribution Contracts — Termination — Missouri Rule — Principal and Agent.
    The "Missouri Rule” that a principal’s otherwise unfettered right to terminate at will an agreement specifying no duration period is limited by the agent’s right to enforce the agreement for such time as will afford him a reasonable opportunity to recoup the expenses he incurred in preparing to perform his obligations applies to license or franchise agreements providing for territorially exclusive distribution where the distributor must purchase the product that is the subject of the agreement, promote the sale of the product and make agreements intended to bind the manufacturer; in such agreements the distributor becomes the business agent of the manufacturer-principal and the limitation on the principal’s power to terminate applies only when the agent has actually and forseeably expended capital or given up an otherwise profitable business in his preparations and allows recoupment only of those expenditures directed to this end.
    Concurrence by V. J. Brennan, J.
    4. Contracts — Principal and Agent — Termination — Missouri Rule.

      An agent in an agency relationship subject to the "Missouri Rule” who is having his relationship terminated by the principal for failure to meet the principal’s current operating procedures should be afforded an opportunity to rectify the problems or sell the business to a third party under the condition that the principal’s current operating procedures be met.

      William J. Priehs, for plaintiff.

      Goodenough, Smith & May (by Richard H. May and Robert A. Vieweg) (Burton, Parker & Schrámm, of counsel), for defendants.

      Before: Danhof, C.J., and V. J. Brennan and H. R. Carroll, JJ.

       Former circuit judge, sitting on the Court of Appeals by assignment pursuant to Const 1963, art 6, § 23 as amended in 1968.

   Danhof, C.J.

In 1963 the plaintiff was approached by representatives of Auto Body Rustproofing, Inc., who offered him a franchise to sell and apply the then recently developed "Ziebart process” for rustproofing automobiles. Negotiations between the parties produced a "license agreement”, composed by the defendant and signed by the parties on June 13, 1963.

The agreement granted the plaintiff the exclusive right to operate an "Auto Body Rustproofing” station in Genesee County, including the right to use "Ziebart Compounds” and the tools and processes developed by the defendant for their application. The plaintiff was entitled by the agreement to purchase all the Ziebart compounds his business required at the price prevailing at the time of order. For a charge of $6,000 the plaintiff was to "purchase” a quantity of consumable supplies, including Ziebart compound and various specialized application tools and other equipment; title to the tools and equipment was to remain with the defendant. Worn or damaged tools and equipment were to be replaced by the plaintiff at the "price” prevailing at the time of "purchase”.

The defendant agreed to provide a 12-day training session for two persons at its Detroit facility, travel and accommodation expenses to be paid by the plaintiff.

Among the other terms of the agreement were the following:

"7. It is understood and agreed that a material part of the consideration passing to the Licensor hereunder is the promise and agreement of Licensee to strictly adhere to the methods, practices and system established and in effect by Licensor for the management and operation of AUTO BODY RUSTPROOFING stations in order to retain and protect for the mutual benefit of Licensor and Licensee and the good will and public acceptance of AUTO BODY RUSTPROOFING, and in pursuance thereof Licensee specifically promises and agrees as follows:
"(a) To use only the "Ziebart Compounds” and "Ziebart Solvents” in the operation of their business.
"(b) To charge a minimum of $35.00 per vehicle for each AUTO BODY RUSTPROOFING process.
"(c) To use only the mobile equipment, nozzles and method of operation furnished by Licensor in performing an AUTO BODY RUSTPROOFING treatment to a vehicle, and not to use such said equipment or any part thereof in connection with the performing of any other process and the use of any other solvents and compounds other than that furnished and sold by Licensor to Licensee.
"(g) To operate said business only under the name of AUTO BODY RUSTPROOFING, and to exhibit only such advertising signs as shall be approved by Licensor.
"(h) To pay any and all obligations incurred by him in said business when the same become due and payable.
"(i) To follow strictly the AUTO BODY RUSTPROOFING process; to maintain the standard established by Licensor; not to cheapen said process.
"8. Licensee shall pay for his own building, plumbing, electrical equipment and lighting, carpenter work and material, of every kind that may be necessary to establish and place in operation the AUTO BODY RUSTPROOFING Store or Station which may be established hereunder, and Licensor shall not be obligated nor liable for any sum or sums incurred by Licensee for such labor or materials.
"10 This License Agreement shall be in full force and effect indefinitely, unless terminated at an earlier date in accordance with the provisions of Paragraph 11.
"11. Should Licensee fail to perform any of the terms, conditions or provisions of this License Agreement, and shall remain in default for a period of 30 days after the receipt of a notice by Licensor by registered letter setting forth the reasons and grounds for default, Licensor shall thereafter have the right to terminate this Agreement forthwith by registered letter to Licensee; to repossess with or without legal process any and all equipment delivered to Licensee by Licensor under the terms of this Agreement; to retain all money paid for the use of said equipment; to terminate all of the rights and privileges herewith granted, and to enter into any License Agreement or contract granting to any other person the right to operate an AUTO BODY RUSTPROOFING business in the territory described in this Agreement; to remove with or without legal process any and all signs bearing or displaying the trade mark or trade name "AUTO BODY RUSTPROOFING”; to take possession of any and all supplies which bear the AUTO BODY RUSTPROOFING trade mark or trade name, upon reimbursement of the cost of said supplies only to Licensee; and to resort to any other legal process for the enforcement of this Agreement. If legal action by Licensor is necessary to enforce the performance of this Agreement by Licensee, Licensee agrees to pay Licensor such sum as the Court may fix as reasonable attorney’s fees.
"14. Licensee agrees that if for any reason whatsoever, the license is terminated, Licensee will not solicit or engage directly or indirectly in a business similar to that of AUTO BODY RUSTPROOFING for a period of Two (2) years in the United States or Canada, except as is hereinafter provided.”

The relations between the parties were apparently satisfactory for several years. In 1973 the defendant informed the plaintiff that the 1963 agreement permitted termination upon reasonable notice by either party and offered the plaintiff a new ten-year contract, which the plaintiff refused. Sometime thereafter the defendant published policies and instruction manuals delineating the rustproofing procedures it deemed necessary for various models of motor vehicles. The policies variously required "grades” of 85 or 90 percent on vehicle inspections by company officials as a condition of a dealer’s "good standing”. The plaintiff’s work consistently failed to meet these requirements, the company inspectors complaining of his cluttered shop, his failure to keep current instruction manuals and his failure to treat certain portions of automobile bodies with the Ziebart compound. The dispute culminated in a letter to the plaintiff from the defendant, dated April 6, 1976, in which the defendant reiterated its complaints, announced its intent to terminate the "license agreement” and gave the plaintiff 30 days to either sell his "license” or remove all Ziebart identification from his building.

The plaintiff commenced this action in circuit court before the 30-day period elapsed, alleging that the defendant had "long coveted your Plaintiff’s exclusive rights in Genesee County” and had "embarked upon a program of harassment and intimidation designed to force your Plaintiff from his business”. The plaintiff claimed that the standards of performance demanded by the defendant were not. contained in the 1963 agreement and could therefore not support the threatened termination. The complaint sought an injunction against the defendant’s "wrongfully interfering” with the plaintiff’s business or obstructing his right to purchase supplies and use the Ziebart trademark.

The defendant answered with denials, but, curiously, did not claim that the performance standards in question arose from the 1963 agreement, stating merely that they were "necessary to protect the public, as well as the good name and reputation of the defendant”. A counterclaim admitted that the 1963 agreement permitted the plaintiff to use the Ziebart mark but asserted that defendant had developed and improved the Ziebart process, that the plaintiff had failed to adopt the new procedures, that his noncompliance injured the value of the Ziebart mark and that the defendant had a right and a duty (apparently to other retail dealers) to ensure the standardization of the process. The defendant sought a declaration that the parties’ contract was at an end, an order prohibiting the plaintiff from using the trademark and damages.

At trial, the central issue was the utility of the defendant’s new standards in increasing or ensuring the quality of automobile rustproofing. The plaintiff stated that in his many years in the automobile body repair business he had never seen rust in the areas he had refused to treat, an observation which was confirmed by other individuals engaged in that business. It also appeared that the plaintiff consumed in his business more of the compound purchased from the defendant than called for by company standards. There was testimony from the plaintiff that in 1963 the defendant’s training for dealers was "general” and not nearly as exacting as the procedures set forth in the new instruction manuals. The plaintiff stated that he had refused the defendant’s 1973 offer of a ten-year contract because the new offer substantially restricted his right to move his business within Genesee County or to sell it to a new licensee and additionally subjected him to compulsory promotional assessments by the defendant.

While concluding that the 1963 agreement controlled the rights of the parties, the trial judge also found that the requirements the plaintiff was charged with ignoring did not contribute to effective rustproofing. An order issued, restraining the defendant from terminating the agreement and from "harassing or obstructing or interfering in any way with the conduct of the [plaintiff’s] business”. This appeal followed.

The defendant’s primary claim on appeal is that the trial court erred in its determination that the plaintiff did not breach his agreement with the defendant to maintain certain quality standards in marketing the Ziebart process. The standards of performance required of the plaintiff must necessarily be determined by reference to the parties’ 1963 agreement. However, that instrument does not specify the details of the procedure the plaintiff agreed to follow, stating merely that the plaintiff must "strictly adhere to the methods, practices and system established and in effect by Licensor for the management and operation of AUTO BODY RUSTPROOFING stations” and "follow strictly the AUTO BODY RUSTPROOFING process; to maintain the standard established by Licensor; not to cheapen said process”. These phrases do not tell us whether the performance of the plaintiff is to be measured by the "methods, practices and system” in effect in 1963, when the plaintiff was solicited to enter the contract, or by standards the defendant would later develop in the expansion and standardization of its system of franchised outlets. Neither view is unreasonable, for, while we are accustomed to viewing contracts as inflexible constitutions of the business world, we also note that the defendant’s process was new in 1963 and could be expected to be refined as experience revealed opportunities for improvement.

The possibility of changing economic and technical conditions was contemplated by the defendant when it drafted the agreement. The defendant retained rights to change the chemical makeup of its compound, to charge the current market price for compounds and tools delivered to the plaintiff in the future and to regulate the content of the plaintiff’s advertising. This conscious effort to provide for technical changes and business supervision must be contrasted with the defendant’s failure to explicitly retain similar powers with respect to the application of the compound by the plaintiff, and yields no inference that the defendant ever intended to have the power it attempted to exercise in this relationship. Such a significant power should not easily be discovered in a contract not explicitly providing for it.

If the contested contractual terms are viewed in isolation, they are at best ambiguous and call for the construction most favorable to the plaintiff, who was not responsible for the drafting of the instrument. See Ladd v Teichman, 359 Mich 587; 103 NW2d 338 (1960). The trial judge was correct in limiting the defendant’s right to enforce performance standards to those standards contemplated by the agreement. While the matter was apparently decided below on the grounds that the defendant’s post-1963 requirements were not shown to be reasonably related to effective rustproofing, we affirm the decision upon our observation that the defendant never attempted to prove what body coverage and shop upkeep standards were ordinarily observed by the defendant and its dealers in 1963. It may be assumed that this proof was in the possession of the defendant. Without it, no breach of the contract in this regard can be shown.

A determination that the plaintiff has not breached the performance standards of the 1963 agreement does not end our examination of this troubled relationship. The defendant argues on appeal that the contract, being for an "indefinite” duration, was terminable at will. The plaintiff, seeking relief on the grounds that the parties’ obligations were to endure as long as he was not in breach of the agreement, necessarily claimed that its "indefinite” duration term created perpetual rights in both parties. The trial court never directly considered the question, but, in passing upon the defendant’s claim to a right to terminate the agreement due to the plaintiff’s breach, impliedly adopted the plaintiff’s position. For the reasons set forth below, we are unable to agree that either party’s view is correct.

The plaintiff’s claim to a perpetual right to operate his franchise and to demand performance of the defendant asks this Court to find in the sparse language of this agreement an undertaking very seldom encountered in the commercial world —a promise of two business entities to remain bound to each other as long as both (including their heirs, executors, administrators, successors or assigns) remain in existence and meet the requirements of the contract. Such obligations are so inaptly fitted to the always changing commercial world that courts find them only when the language of an agreement allows no other reasonable construction.

"It is not often that a promise will properly be interpreted as calling for perpetual performance. Only in such negative promises as to forbear suit or not to carry on a business or occupation is so broad an interpretation likely to be permissible. More commonly the true interpretation will mean some period short of infinity; and partly in order to carry out the supposed actual intention of the parties and partly, doubtless, in order to prevent an offer or agreement from being ineffectual because too indefinite, courts will, where the contract contemplates a single act or exchange of acts, unless the circumstances show a contrary intention, interpret a promise which does not in terms state the time of performance as intending performance in a reasonable time.” (Footnotes omitted.) 1 Williston on Contracts (3d ed), § 38, p 113.

See also Adkisson v Ozment, 55 Ill App 3d 108; 12 Ill Dec 790; 370 NE2d 594 (1977), Paisley v Lucas, 346 Mo 827; 143 SW2d 262 (1940), Holt v St Louis Union Trust Co, 52 F2d 1068 (CA 4, 1931).

There is nothing in the terms of this agreement that indicates a perpetual duration was not intended by the parties; however, the term "indefinitely” hardly compels such a construction, for it means merely, "having no exact limits”. In the absence of a more forceful indication of intent a construction favoring a perpetual relationship is not warranted. We conclude that the term contributes nothing to our task of determining the duration intended by the parties.

The defendant contends that an agreement for an unspecified or indefinite term may be cancelled at the will of either party. This is generally true of contracts establishing agency or employment relationships. O’Connor v Hayes Body Corp, 258 Mich 280; 242 NW 233 (1932). Yet, it is clear that more than an employment was contemplated by the parties to this agreement.

The "license” or franchise agreement at issue in this case is remarkably similar to contracts which create territorially exclusive distributorships. Such agreements bear many of the characteristics of contracts for continuing sales in that the distributor must often purchase the product that is the subject of the agreement; yet, they often require the distributor to promote the sale of the product and make agreements intended to bind the manufacturer, and in this respect make the distributor the business agent of the manufacturer "principal”. See Hunt Foods, Inc v Phillips, 248 F2d 23 (CA 9, 1957).

Several courts, viewing distributorships in light of their agency characteristics, have applied the so-called "Missouri Rule” and held that in agreements for an unspecified duration the principal’s otherwise unfettered right to terminate the arrangement at will is limited by the agent’s right to enforce the agreement for such a time as will afford him a reasonable opportunity to recoup the expenses he has incurred in preparing to perform his obligations. See, e.g., Jack’s Cookie Co v Brooks, 227 F2d 935 (CA 4, 1955), Beebe v Columbia Axle Co, 233 Mo App 212; 117 SW2d 624 (1938). See also, 9 Williston on Contracts (3d ed), § 1017A, p 152, Gelhorn, Limitation on Contract Termination Rights — Franchise Cancellations, 1967 Duke LJ 465, 482, Anno: Termination by Principal of Distributorship Contract Containing No Express Provision for Termination, 19 ALR3d 196. This limitation on the principal’s power applies only when the agent has actually and foreseeably expended capital or given up an otherwise profitable business in his preparations, and allows recoupment only of those expenditures directed to this end; it does not include ordinary operating expenses and does not guarantee the franchisee a profit.

"Where the duration of a distributor contract is indefinite and distributor has expended substantial sums in establishing and promoting the distributorship and such expenditures were within the contemplation of the parties, the contract may be terminated after the lapse of a reasonable time. What a reasonable time is depends upon the circumstances in the particular case. Among the circumstances to be considered in determining reasonable time are: The amount of preliminary and promotional expenditures, the length of time the distributorship has been in operation before notice of termination, what the prospects for future profits are, and whether it has proven profitable during actual operation. It is not a question of whether distributor has recouped his expenditures, but whether he has had a fair opportunity.” The General Tire & Rubber Co v Distributors, Inc, 253 NC 459, 472; 117 SE2d 479 (1960).

While the disputes most frequently presented to the courts have involved sudden terminations shortly after the distributor or franchisee has made his investment, see Gelhorn, supra, there appears in principle no reason why continuing investments not part of the agent’s operating costs or directed solely at improving his own business and fairly foreseeable to the principal should not come within this rule. This was recognized in the allowance of a claim for recoupment of unamortized capital expenditures not part of the distributor’s start-up investment in Ag-Chem Equipment Co, Inc v Hahn, Inc, 480 F2d 482 (CA 8, 1973). The rule simply prevents a manufacturer or franchisor from exercising a power to terminate an agreement at will in such a fashion as to unfairly deprive the distributor or franchisee of assets foreseeably committed to their joint project.

The record shows that the plaintiff was required to make substantial expenditures in readying himself to perform his contract with the defendant. However, it is impossible to determine from this record the amount of the expenditures that the plaintiff has made or whether, despite the long period which has elapsed since the performance started, the plaintiff’s "reasonable time” has passed. Despite the failure of the parties to pursue this matter in the court below, proper resolution of this dispute requires that an evidentiary hearing in the trial court address this matter. The trial court will determine what time was or will be required to protect the plaintiff’s right to recoupment. If that time has passed, the choice to terminate the agreement lies with the defendant. If the plaintiff has not yet enjoyed a reasonable period of performance in which to recoup his expenditures, the trial court will order the defendant to afford the plaintiff such a proper period, specifying the duties of the defendant to the plaintiff in an order conforming with GCR 1963, 718.9(2).

The cause is remanded to the trial court for proceedings not inconsistent with this opinion. No costs, neither party having prevailed in full.

H. R. Carroll, J., concurred.

V. J. Brennan, J.,

(concurring). I concur in Judge Danhof’s opinion. While I agree that the "Missouri rule” should be employed in determining the extent of defendant’s right to terminate, I would give to plaintiff the opportunity to rectify those problems which precipitated defendant’s decision to terminate the contract, which would in effect allow plaintiff to maintain the business under the new policies of defendant. In addition, plaintiff should be given the option to sell the franchise to a third party under the condition that defendant’s current operating procedures be met.

       The defendants in this action are successors of Auto Body Rustproofing, Inc. In this opinion, "defendant” will designate the named defendants or their predecessors, unless otherwise indicated.

       We are unable to discern any meaningful expression of intent from the fact that the duration of the undertaking was explicitly stated to be indefinite rather than being omitted altogether.

       These included the purchase of specialized tools and the training of the plaintiff and one of his employees at the defendant’s Detroit facility. It is not clear whether the plaintiff gave up his auto body repair business prior to starting performance, nor is it clear that such a sacrifice, if made, was required or reasonably anticipated by the defendant. A free choice to abandon a less lucrative business for an increasingly attractive one does not support a right of recoupment.