author: Bashara, P. J. M. J. Kelly, J.

text:
    PEOPLE v SPALLA
    Docket No. 31488.
    Submitted March 13, 1978, at Lansing.
    Decided June 5, 1978.
    Frederick T. Spalla was charged in an information with murder and convicted in Oakland Circuit Court, Robert L. Templin, J., of first-degree murder. At trial the prosecutor called the wife of the deceased who denied making any statements to a friend to the effect that she would share the life insurance proceeds with whoever would kill the deceased. The prosecutor then called the friend to impeach the deceased’s wife by testifying to the statements. Defendant appeals raising several issues. Held:

    1. Defects in a complaint and warrant are waived by a defendant entering a plea at arraignment without raising objections thereto.
    2. An information charging murder without specifying the degree is sufficient to sustain a conviction of first-degree murder, even where the defendant at preliminary examination requests specification of the charge and his request is denied.
    3. The elements of first-degree murder, including corpus delicti, deliberation and premeditation may be proven by circumstantial evidence.
    4. It is improper for a prosecutor to impeach the credibility of a witness whom he calls but is not obligated to call where the testimony given by the witness is anticipated.
    5. In reviewing inadmissible evidence introduced at trial the reviewing court must decide whether the evidence was of such a nature that the "human limitations” of the jury could reasonably be anticipated to preclude them from adhering to the trial court’s limiting instructions concerning it.
    Affirmed.
    References for Points in Headnotes

       5 Am Jur 2d, Arrest § 117.

       40 Am Jur 2d, Homicide §§ 205, 209, 212.

       40 Am Jur 2d, Homicide §§ 433, 439.

       81 Am Jur 2d, Witnesses § 619.

       5 Am Jur 2d, Appeal and Error § 890.

       5 Am Jur 2d, Appeal and Error §§ 778, 779, 798, 803, 807.

      M. J. Kelly, J., dissented. He would hold that introduction of statements of the wife of the deceased to a friend to the effect that she would share the life insurance proceeds with whoever killed her husband, for the purpose of impeaching the credibility of the wife, was collateral to the issue of defendant’s guilt or innocence and highly prejudicial. He would reverse.
    Opinion of the Court
    1. Criminal Law—Complaints—Warrants—Waiver.
    Defects in a complaint and arrest warrant are waived where a defendant enters a plea at arraignment on the information without making objections thereto.
    2. Homicide—Murder—First-Degree Murder—Second-Degree Murder—Informations—Purpose of Information—Sufficiency of Information.
    The purpose of an information is to advise the accused of the offense with which he is charged; an information charging a defendant with murder, without specifying the degree or circumstances, is sufficient to advise him to prepare to defend himself against both first- and second-degree murder, even where the defendant requests a particularization as to degree.
    3. Criminal Law—First-Degree Murder—Proof of Elements—Circumstantial Evidence.
    The elements of first-degree murder, including corpus delicti, deliberation and premeditation, may be properly proven by circumstantial evidence.
    4. Witnesses—Criminal Law—Prosecution Witnesses—Impeachment.
    It is improper for the prosecutor to impeach the credibility of a witness whom he is not obligated to call, where the testimony of the witness is anticipated.
    5. Appeal and Error—Evidence—Human Limitations of Jury.
    The issue on review of inadmissible evidence admitted at trial is whether the evidence is of such a nature that the "human limitations” of the jury could reasonably be anticipated to preclude them from adhering to a limiting instruction of the trial court.
    Dissent by M. J. Kelly, J.
    6. Appeal and Error—Evidence—Murder—Motive—Impeachment Evidence.

      Admission in a murder trial of testimony otherwise inadmissible

      which provides the only evidence of motive and which would require heroic effort for the jury to follow the trial court’s limiting instruction cautioning that the testimony was only to function as impeachment testimony and not as substantive evidence is error requiring reversal and cannot be held to be harmless error.

      Frank J. Kelley, Attorney General, Robert A. Derengoski, Solicitor General, L. Brooks Patterson, Prosecuting Attorney, Robert C. Williams, Chief Appellate Counsel, and Thomas S. Richards, Assistant Prosecuting Attorney, for the people.

      Wesley J. Roberts (Robert Pagano, of counsel), for defendant on appeal.
    Before: Bashara, P. J., and M. J. Kelly and Allen, JJ.
   Bashara, P. J.

Defendant appeals from a jury verdict convicting him of first-degree murder. The information alleged an open charge of murder, but cited the first-degree murder statute.

It is claimed by defendant that there was insufficient evidence presented to support the issuance of a complaint and warrant for his arrest. When arraigned on the information, defendant entered a plea without raising this objection. Consequently, if there was any defect in the complaint and warrant, it was thereby waived. People v Licavoli, 256 Mich 229, 231; 239 NW 292 (1931), People v Dowd, 44 Mich 488; 7 NW 71 (1880), People v Bohm, 49 Mich App 244, 250; 212 NW2d 61 (1973), lv den, 397 Mich 877 (1976).

A pre-trial motion to quash the information was made by defendant on the basis that insufficient evidence was presented at the preliminary examination on the element of premeditation and deliberation to permit a trial on the charge of first-degree murder. Defendant contends that denial of that motion was erroneous. In conjunction with this claim, defendant further argues that it was error for the magistrate to submit defendant for trial on a charge of murder without specifying the degree.

As to the latter contention, it is important to recognize that the purpose of an information is to advise the accused of the offense with which he is charged. People v Rios, 386 Mich 172, 175; 191 NW2d 297 (1971), People v Gould, 237 Mich 156, 164; 211 NW 346 (1926). In People v Treichel, 229 Mich 303; 200 NW 950 (1924), the Court held that an information charging the defendant with murder, but not specifying the degree or circumstances, was a sufficient basis for finding him guilty of either first- or second-degree murder. Id. at 307-308. Accordingly, the information in the instant case was sufficient to advise the defendant that he must prepare to defend himself against both first- and second-degree murder.

This conclusion also finds support from the case of Sneed v People, 38 Mich 248 (1878), where it was held that an indictment charging the defendant with "murder” was sufficient to encompass first-degree murder. Id. at 251-252. We, therefore, conclude that the magistrate was not required to specify the degree of murder charged, even though a request for such particularization was made by the defendant. When the charge encompasses first-degree murder the ultimate finding as to degree is for the jury. See MCL 750.318; MSA 28.550; cf. People v Carter, 395 Mich 434, 438; 236 NW2d 500 (1975).

We also find that the evidence presented at the preliminary examination as to premeditation and deliberation was sufficient to warrant a denial of defendant’s motion to quash the information. Although the evidence presented by the prosecution was entirely circumstantial, that alone would not preclude the jury from finding the element of premeditation and deliberation. People v Hoffmeister, 394 Mich 155, 158-159; 229 NW2d 305 (1975). The defendant’s state of mind may be inferred from his conduct within the context of the circumstances shown by the evidence. Id.

In the instant case, testimony was presented which, if believed by the jury, would establish that the defendant and decedent left the decedent’s residence together in a bronze compact automobile, borrowed by defendant from his friend. Defendant stated, in the presence of one witness, that he and the decedent were going to an area near Lake Orion. Approximately 20 to 30 minutes thereafter, another witness, while on his property in a secluded area near Lake Orion, heard three gun shots. He then observed a bronze compact automobile drive out from a nearby field and speed away from the area. When the witness went over to the area from which he observed it drive away, he found the decedent’s body.

Crime laboratory investigators obtained tire tread impressions and measurements from the area where decedent’s body was found. Those impressions and measurements matched the tread style and wheel base of the car defendant borrowed from his friend.

Additional circumstantial evidence was presented as to the distances allegedly traveled by defendant, the time required to traverse those distances, and the sequence of events before and after the occasion of decedent’s death. It is our conclusion that this array of evidence was sufficient to allow a trier of fact to infer that the defendant planned the excursion to a secluded area with the intent to kill the decedent. Therefore, the court’s denial of defendant’s motion to quash the information was proper. Proof of the corpus delicti and defendant’s guilt may rest upon circumstantial evidence. People v Barron, 381 Mich 421, 426; 163 NW2d 219 (1968), People v Hawksley, 82 Mich 71, 73; 45 NW 1123 (1890).

At trial the prosecutor, in his opening statement, indicated that he would show the motive for the murder was to collect the proceeds of the insurance on decedent’s life. As part of the motive evidence, the prosecutor called the decedent’s wife as a witness. He attempted to elicit testimony showing her close relationship with defendant. The prosecutor then asked whether she had previously stated to a named friend that she would share the life insurance proceeds from decedent’s death with whomever she could find to kill him. She denied making any statement of that nature.

One of the following prosecution witnesses was the friend of the decedent’s wife named in the latter inquiry. She testified, over the defendant’s objection, that approximately 9 to 12 months prior to his death, decedent’s wife had made the claimed statement. The trial court instructed the jury that they were to consider such testimony only for the purpose of assessing the credibility of decedent’s wife. Defendant maintains that in permitting the prosecutor to impeach the credibility of his own witness, the trial court committed reversible error.

Our state’s jurisprudence continues to adhere to the archaic common law prohibition against a party’s impeachment of his own witness’s credibility. People v White, 401 Mich 482, 508; 257 NW2d 912 (1977). Notwithstanding the resounding criticism of the rule and its abrogation in numerous jurisdictions, it has been codified, along with its exceptions, in our recently adopted rules of evidence. The exceptions are not applicable to the instant case. Consequently, it was error for the trial court to allow the prosecution to impeach the credibility of its witness.

However, our inquiry cannot cease with that conclusion. We must assess whether that error resulted in undue prejudice to defendant’s right to a fair trial, or whether it was harmless beyond a reasonable doubt. People v Robinson, 386 Mich 551, 562-563; 194 NW2d 709 (1972), People v Smith, 363 Mich 157, 164; 108 NW2d 751 (1961).

In People v White, supra, the impeachment evidence was found to be so prejudicial that the jury could not be relied upon to follow the admonition of the trial court’s instruction limiting its use to credibility assessment. Id. at 510. The evidence consisted of testimony by a cofelon, given in a previous trial, that he and defendant committed the offense with which the defendant was charged. The Court referred to the supporting case of Bruton v United States, 391 US 123; 88 S Ct 1620; 20 L Ed 2d 476 (1968), which involved utilization of a codefendant’s confession in a joint trial, admitting that he and the petitioner had committed the charged offense.

The Bruton decision was premised upon a perceived violation of the defendant’s Sixth Amendment right of confrontation. However, the United States Supreme Court also made the following observation:

" 'Unless we proceed on the basis that the jury will follow the court’s instructions where those instructions are clear and the circumstances are such that the jury can reasonably be expected to follow them, the jury system makes little sense.’ We agree that there are many circumstances in which this reliance is justified. Not every admission of inadmissible hearsay or other evidence can be considered to be reversible error unavoidable through limiting instructions; instances occur in almost every trial where inadmissible evidence creeps in, usually inadvertently. 'A defendant is entitled to a fair trial, but not a perfect one.’
"It is not unreasonable to conclude that in many such cases the jury can and will follow the trial judge’s instructions to disregard such information. Nevertheless, as was recognized in Jackson v Denno, supra [378 US 368; 84 S Ct 1774; 12 L Ed 2d 908 (1964)], there are some contexts in which the risk that the jury will not, or cannot, follow instructions is so great, and the consequences of failure so vital to the defendant, that the practical and human limitations of the jury system cannot be ignored.” Id. at 135 (citations omitted).

Accordingly, our inquiry is, essentially, whether the inadmissible evidence in the case under review is of a nature that the "human limitations” of the jury could reasonably be anticipated to preclude them from adhering to the limiting instruction of the trial court. That instruction enjoined them not to consider the testimony as substantive evidence, but only that the decedent’s wife made a prior inconsistent statement. We conclude that introduction of the impeachment testimony, though error, was not reversible error.

The impeachment testimony pertained only to the motive of decedent’s wife for hastening her husband’s demise. Yet the prosecutor was unable to present evidence even remotely suggesting that the decedent’s wife enlisted the defendant’s service in achieving that objective. Further, the trial court’s instruction that the testimony was not to be considered for the truth of what was said, in conjunction with the defense counsel’s skillful cross-examination eliciting the witness’s disbelief in the statement, significantly militates against any adverse effect upon the jury.

The foregoing factors, considered with the otherwise commendably and adroitly presented case by the prosecutor, leads us to conclude that any error was harmless beyond a reasonable doubt.

Defendant’s contentions with respect to the jury’s verdict are unavailing, being resolved by People v Rabin, 317 Mich 654, 668; 27 NW2d 126 (1947), cert den, 332 US 759; 68 S Ct 60; 92 L Ed 345 (1947). Similarly, the remaining claims of error are without merit.

Affirmed.

Allen, J., concurred.

M. J. Kelly, J.

(dissenting). I cannot agree with the majority that the error committed by the trial court in allowing the prosecutor to impeach the credibility of his own witness by a rebuttal witness was harmless beyond a reasonable doubt.

The purported statement by the wife of the victim to a friend that she would share the life insurance proceeds from the victim’s death with whomever she could find to kill him was collateral to the issue of defendant’s guilt and extremely prejudicial to the defendant. The prosecutor called the wife as a witness, but she denied making the statement. Subsequently, the prosecutor called the friend of the wife, and over the defendant’s objection, she testified that approximately 9 to 12 months prior to the victim’s death, his wife had made the claimed statement to her. The trial court erred in allowing this testimony. The prosecutor cannot call a witness to impeach another witness on a collateral matter. If there was a plan there was absolutely no evidence connecting defendant with the wife’s plan. People v Culver, 280 Mich 223, 226; 273 NW 455 (1937). See People v Lowe, 71 Mich App 340; 248 NW2d 263 (1976), People v Drew, 67 Mich App 295; 240 NW2d 776, lv den, 397 Mich 807 (1976). Cf. People v Sherman Hall, 77 Mich App 456; 258 NW2d 517 (1977).

For the following reasons I find that the error requires reversal:

The jury was cautioned that the testimony relating to the statement was only to function as impeachment testimony regarding the credibility of the wife, and not as substantive evidence. The statement, nevertheless, birthed a motive for the killing. It would require heroic effort for the jury to follow the trial court’s limiting instructions about impeachment rather than truthfulness of the testimony. I am not convinced no error occurred.

The record indicates that the prosecution was unable to present any evidence suggesting that the wife employed defendant to carry out her plan. This was not necessary, it would be implicit. I would hold that the prejudicial aspect of the collateral statement was not clearly ignored by the jury, and the defendant was very likely prejudiced. The motive was provided by the statement, and defendant was the only one charged with the crime. See People v Ellerhorst, 12 Mich App 661, 670-671; 163 NW2d 465 (1968), also McCormick, Evidence (2d ed), § 36, pp 70-72.

I would reverse for a new trial.

       MCL 750.316; MSA 28.548.

        Id.

       The Court’s decision in Sneed was predicated upon the provisions of 2 CL § 7916, which is now MCL 767.71; MSA 28.1011, and states:
      "In all indictments for murder and manslaughter it shall not be necessary to set forth the manner in which nor the means by which the death of the deceased was caused; but it shall be sufficient in any indictment for murder to charge that the defendant did murder the deceased; and it shall be sufficient in manslaughter to charge that the defendant did kill the deceased.”
      This provision is made applicable to informations by MCL 767.2; MSA 28.942.

        See, e.g., Chambers v Mississippi, 410 US 284; 93 S Ct 1038; 35 L Ed 2d 297 (1973), United States v Norman, 518 F2d 1176 (CA 4 1975), United States v Freeman, 302 F2d 347 (CA 2 1962), Johnson v Baltimore & O R Co, 208 F2d 633 (CA 3 1953), 1 Morgan, Basic Problems of Evidence, pp 69-71 (1954), 3A Wigmore, Evidence (Chadbourn Rev, 1970), §§ 896-899, pp 658-666. In Chambers the United States Supreme Court observed:
      "Although the historical origins of the 'voucher’ rule are uncertain, it appears to be a remnant of primitive English trial practice in which 'oath-takers’ or 'compurgators’ were called to stand behind a particular party’s position in any controversy. Their assertions were strictly partisan and, quite unlike witnesses in criminal trials today, their role bore little relation to the impartial ascertainment of the facts.”
      "Whatever validity the 'voucher’ rule may have once enjoyed, and apart from whatever usefulness it retains today in the civil trial process, it bears little present relationship to the realities of the criminal process.” Id. at 296 (footnotes omitted).
      Professor Wigmore has referred to the rule as a "primitive notion, resting on no reason whatever, but upon mere tradition, and irrationally forbidding any attempt to question the utterances of one’s own witness * * * ”, Wigmore, supra, § 898.

        See, e.g., FR Evid 607, Ill Rev Stat (1967), ch 110, § 60, GL, c 233, § 23 (Mass), § 20-2-4 NM Stat Annot 1953 (2d Repl Vol 4), McKinney’s Cons Laws of NY, Book 7B, 4514, CPLR Cal Evid Code, § 785.

       MRE 607 provides:
      "The credibility of a witness may be attacked by
      (1) an opposing party; or
      (2) the calling party if
      (A) the calling party is the prosecutor and he is obliged to call the witness,

        (B) in a civil case, the witness is an opposite party or employee or agent of an opposite party, or
      (C) the witness’s testimony was contrary to that which the calling party had anticipated and was actually injurious to the calling party’s case.”


source: Caselaw Access Project

author: Bronson, J. M. J. Kelly, J.

license: Public Domain

text:
    MILLER v MILLER
    Docket No. 77-659.
    Submitted October 5, 1977, at Grand Rapids.
    Decided June 5, 1978.
    Plaintiff Julia M. Miller filed a complaint against George W. Miller seeking a judgment of divorce. The Kalamazoo Circuit Court, Raymond W. Fox, J., entered a judgment granting the divorce and dividing the property of the parties. Defendant appeals and presents the issue of whether a party’s interest in a pension plan, funded entirely by his employer, is distributable pursuant to a divorce and property settlement. Held:

    An employee’s interest in a pension funded by his employer is distributable pursuant to a judgment of divorce to the extent that the interest is marital property with a reasonably ascertainable present value. Interests which are contingent upon the happening of an event which may or may not occur are not distributable. The party seeking to include the interest in the marital estate bears the burden of proving the reasonably ascertainable value.
    Remanded.
    M. J. Kelly, J., dissents and would hold that there is no reason to remand since it appears from the agreed statement of facts that the husband should be given credit for half of the amount contributed by plaintiff wife into her pension fund because the contribution came from marital funds; furthermore, the controversy is de minimis and the problems of noncontributory versus contributory pension plans, whether vested or nonvested, should await the existence of a controversy highlighting genuine competing considerations.
    Opinion of the Court
    1. Divorce—Distribution of Assets—Retirement Pensions—Marital Property—Present Value.
    An employee’s interest in a pension funded by his employer is distributable pursuant to a judgment of divorce only to the extent that the interest is marital property with a reasonably ascertainable present value; if the employee’s interest is contingent or a mere expectancy it may not be distributed pursuant to a divorce judgment.

      References for Points in Headnotes

       24 Am Jur 2d, Divorce and Separation §§ 623, 679, 723.
    60 Am Jur 2d, Pensions and Retirement Funds §§ 59, 80.
    Pension of husband as resource which court may consider in determining amount of alimony. 22 ALR2d 1421.

      2. Divorce—Appeal and Error—Distribution of Assets—Retirement Pensions—Present Value.
    A trial court erred in a divorce action in allocating the interests in pension funds of both a husband and his wife in the property settlement based upon total contributions to the funds where such calculations did not take into account the reasonably ascertainable present value of the interests in the funds.
    3. Divorce—Distribution op Assets—Retirement Pensions—Burden op Proof—Value.
    A party in a divorce action who seeks to include an interest in a pension fund for allocation in the property settlement bears the burden of proving the reasonably ascertainable value of the interest in the fund in order for that interest to be considered an asset subject to allocation.
    Dissent by M. J. Kelly, J.
    4. Appeal and Error—Divorce—-Remand—Distribution op Assets —Interest in Pension Funds—Marital Property—Value— Agreed Facts.

      There is no need for the Court of Appeals to remand to the trial court for a ñnding of the reasonably ascertainable value of the parties’ interests in pension funds and for an allocation of such marital property between the parties where the case was submitted on an agreed statement of facts from which such determination can be made without remand.

      Birkhold, Newland & Hills, for plaintiff.

      Edward J. Ryan, for defendant.
    Before: M. F. Cavanagh, P. J., and Bronson and M. J. Kelly, JJ.
   Bronson, J.

This is an appeal from a judgment in a divorce action in which the property of the parties was divided by the trial court. The sole issue on appeal is one of first impression in Michigan—whether a party’s interest in a pension plan which is funded entirely by his employer is distributable pursuant to a divorce and property settlement.

The leading Michigan case on the distribution of a party’s interest in a pension pursuant to a divorce is Hutchins v Hutchins, 71 Mich App 361; 248 NW2d 272 (1976). In Hutchins, the Court held that a husband’s accumulated contributions to a pension plan funded by deductions from his salary was to be considered an asset by a trial court dividing property in a divorce action. The Court’s rationale was that the accumulated contributions constituted marital property because they were deducted from the husband’s salary and were not forfeitable: MSA 25.81 et seq. Therefore, it must be included as an asset in the distribution of property.” Hutchins, supra, at 370-371.

"Returning to the Michigan public safety department pension, accident and disability fund leads us, as do other jurisdictions with similar statutes, to the conclusion that it also treats the accumulated deductions in the husband’s account in a manner which makes them marital property. Here, the plaintiff-husband’s interest was created in most part from his salary, and we agree with the defendant-wife that these deductions would have been available to the parties during their marriage to be invested, in stocks, bonds, savings account, annuity and/or other investments. The plaintiff-husband’s right in the fund is fully vested and cannot be subjected to divestment or forfeiture, except as herein noted for breach of the public trust. We also hold that it is property that came to the plaintiff by reason of the marriage and therefore should be included in the total assets of the parties. As in New Jersey, our divorce laws make no reference to vesting. See MCLA 552.1 et seq.;

Accord, In re Marriage of Pope, 544 P2d 639 (Colo App, 1975), Pellegrino v Pellegrino, 134 NJ Super 512; 342 A2d 226 (1975), Tucker v Tucker, 121 NJ Super 539; 298 A2d 91 (1972), Schafer v Schafer, 3 Wis 2d 166; 87 NW2d 803 (1958).

We believe the same result should obtain where the pension is funded directly by the employer. I.e., an employee’s interest in a pension funded by his employer is distributable pursuant to a divorce only to the extent that the interest is marital property with a reasonably ascertainable present value. If the employee’s interest is contingent or a mere expectancy it may not be distributed pursuant to a divorce judgment. See, generally, Polate v Polate, 331 Mich 652; 50 NW2d 190 (1951). Cases from other jurisdictions are in accord with this rule.

In Tucker v Tucker, supra, the New Jersey court held that a husband’s interest in a pension and profit-sharing plan was not distributable pursuant to a divorce judgment because the plan was funded entirely by the employer, the employee had no right of withdrawal and the right to payment in the future was not certain. The court quoted Williamson v Williamson, 203 Cal App 2d 8, 11; 21 Cal Rptr 164 (1962), with approval: party is certain to receive some payment or recovery of funds. To the extent that payment is, at the time of the divorce, subject to conditions which may or may not occur, the pension is an expectancy, not subject to division as community property.’ ” 121 NJ Super at 549.

" 'Pensions become community property, subject to division in a divorce, when and to the extent that the

The same reasoning was applied in White v White, 136 NJ Super 552; 347 A2d 360 (1975), in which the court held that an employee’s interest in a pension plan funded entirely by the employer, with no right of withdrawal and which required full compliance with eligibility requirements as a precondition to payment, was not "property” subject to equitable distribution before the conditions had been met. See, also, In re Marriage of Ellis, 36 Colo App 234; 538 P2d 1347 (1975).

In the case at bar, the trial court’s distribution of the pensions of both the husband and wife was based on total contributions to the pension funds. This was improper. Pension interests are distributable only to the extent of their reasonably ascertainable present value. See Hutchins v Hutchins, supra, at 372.

In evaluating the interests at issue in the case at bar, a recent New Jersey case stated the problem as follows:

"On one side is property which, although not without value, constitutes an expectation of receipt of benefits or is subject to a contingency. Tucker v. Tucker, supra; Williamson v. Williamson, 203 Cal.App.2d 8, 21 Cal.Rptr. 161 (D.Ct.App. 1962); White v. White, supra. On the other side of that line is property which, although not cash in hand, is not subject to a contingency, has a reasonably discernible value, and awaits but the decision of the owner to take actual possession. Pellegrino v. Pellegrino, supra; See v. See, 64 Cal.2d 778, 51 Cal Rptr. 888, 415 P.2d 776 (Sup.Ct. 1966); Angott v. Angott, 462 S.W.2d 73 (Tex.Civ.App. 1970).”

The court held that only the second type of property was distributable. Blitt v Blitt, 139 NJ Super 213, 216-217; 353 A2d 144, 146 (1976).

We therefore must remand this case to the trial court. The court should: (1) find whether the pension interests have a reasonably ascertainable value or whether the interests are expectancies or subject to contingencies, (2) determine that value, if any, and (3) applying equitable principles, allocate the distributable marital property between the parties. To aid the trial court on remand, we reiterate that pension interests are distributable only if they are marital property with a reasonably ascertainable value. Interests which are contingent upon the happening of an event which may or may not occur are not distributable. The party seeking to include the interest in the marital estate bears the burden of proving a reasonably ascertainable value; if the burden is not met, the interest should, not be considered an asset subject to distribution.

Remanded for proceedings consistent with this opinion. Costs to appellant.

M. F. Cavanagh, P. J., concurred.

M. J. Kelly, J.

(dissenting). There is no need for a remand in the present case. This case was submitted on an agreed statement of facts by stipulation which included the following:

"The parties further agree that the Plaintiff’s pension fund has a present value of $1,393.00, and that the Plaintiff contributed $1,393.00 to said fund.
"The parties further agree that the value of the Defendant’s pension fund is $3,857.56, and that the source of this sum was from the employer * * *.”

The mistake that the trial judge made was in failing to give the husband credit for half of the amount paid by the plaintiff wife into the pension fund because her contribution obviously had to come from marital funds. The trial court decided that the assets should be divided on a 50/50 basis. The husband should be given credit for an additional $696.50, and the balance of the trial judge’s decision should be affirmed. The controversy, although important to the parties, is de minimis and the problems of noncontributory versus contributory pension plans, whether vested or nonvested, should await the existence of a controversy which highlights the opposing interests for our determination as to what is and is not marital property viewed in the light of genuine competing considerations.

       The Court’s reference to "vesting” is puzzling in light of its finding that the husband’s interest in the fund was "fully vested”. To the extent this language could be read as indicating that it is irrelevant to a determination of distributability that an interest in a pension fund is "vested” or not, we disapprove. In determining whether an interest is distributable, the court should consider whether the pension is vested or not, not the source of the funding.

        See MCL 552.19; MSA 25.99. The trial court found that the pension interests were marital property. We do not disagree with that finding.

       The actual distribution of the property is left to the trial court’s discretion. See MCL 552.19; MSA 25.99.

       The court held that the defendant’s interest in a 50% vested employer-funded profit-sharing plan had a distributable value of $24,500 (one-half of the fund), as distribution of that amount could occur on retirement, disability, death, or termination of employment.


author: D. F. Walsh, J. D. C. Riley, P. J.

text:
    LEE v CITY OF UTICA
    Docket No. 77-915.
    Submitted November 8, 1977, at Detroit.
    Decided June 5, 1978.
    Plaintiffs, Tung Gan Lee and Myong Suk Lee, were stopped while driving by defendant Sergeant Robert L. Poynter, a sergeant in the Utica Police Department. Plaintiffs filed suit in Macomb Circuit Court against Sgt. Poynter and the City of Utica alleging tha Sgt. Poynter assaulted them without justification, uttered racial epithets and engaged in other acts of brutality and harassment against plaintiffs, and seeking damages from defendants for false arrest, false imprisonment, malicious prosecution, violation of plaintiffs’ civil rights and for "the tort of insult and outrage”. The trial court, Hunter D. Stair, J., granted accelerated judgment on behalf of the City of Utica on the grounds of governmental immunity. Plaintiffs appeal. Held:

    A police officer engaged in making a traffic arrest is engaged "in the exercise or discharge of a governmental function”, for which the governmental body has been granted immunity from tort liability by statute.
    Affirmed.
    D. C. Riley, J., dissented. She would hold that the statute granting governmental bodies immunity from tort liability in the exercise of governmental functions does not extend to intentional torts of the police officer making an arrest.
    Opinion op the Court
    1. Torts—Statutes—Governmental Immunity—Municipal Corporations—Governmental Function—Arrest as Governmental Function.
    A policeman making an arrest is engaged in an activity "in the exercise or discharge of a governmental function” under a statute granting a government agency immunity from tort liability for such activity (MCL 691.1407; MSA 3.996[107]).

      References for Points in Headnotes

       56 Am Jur 2d, Municipal Corporations, Counties, and other Political Subdivisions § 285.
    63 Am Jur 2d, Public Officers and Employees §§ 288 et seq., 304.
    72 Am Jur 2d, States, Territories, and Dependencies § 99 et seq.

    Nature and status of rule as to municipal immunity from liability for torts. 60 ALR2d 1198.

       57 Am Jur 2d, Municipal, School, and State Tort Liability § 298 et seq.

    63 Am Jur 2d, Public Officers and Employees § 289 et seq.

      Dissent by D. C. Riley, P. J.
    2. Torts—Statutes—Municipal Corporations—Intentional Torts —Governmental Immunity—Governmental Function—Arrest as Governmental Function.

      A statute providing governmental immunity to a municipality exercising or discharging a governmental function does not extend immunity for intentional torts committed by a police officer in making an arrest (MCL 691.1407; MSA 3.996[107]]).

      LaBarge, Zatkoff & Dinning, P. C. (by Robert G. Lyons), for plaintiffs.

      Joselyn, Rowe, Jamieson & Grinnan, P. C. (by Gary W. Carravas), for defendant.
    Before: D. C. Riley, P. J., and D. F. Walsh and A. C. Miller, JJ.

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

   D. F. Walsh, J.

The relevant facts of this case are ably reported in our colleague’s dissenting opinion and are adopted here. We find no error, however, in the trial court’s entry of accelerated judgment, GCR 1963, 116.1, dismissing plaintiffs’ suit against the City of Utica on the grounds of governmental immunity.

The act of a policeman in making an arrest is an activity "in the exercise or discharge of a governmental function”. MCL 691.1407; MSA 3.996(107). The suggestion that it might not be was expressly rejected by the majority in Thomas v Department of State Highways, 398 Mich 1, 13-14; 247 NW2d 530 (1976):

"Under the guise of 'judicial refinement’, the Kavanagh/Fitzgerald opinion has sought to impose rather novel standards for governmental immunity. For example, the opinion suggests that if a police commission plans a particular type of war on crime, that is a governmental function, but if a police officer under that plan performs the traditional police function of arresting a criminal, that is not a governmental function. This certainly does not in any way correspond to the meaning the Legislature intended.” (Emphasis added, footnote omitted.)

Moreover we find the case before us to be distinguishable from Kriger v South Oakland County Mutual Aid Pact, 399 Mich 835; 250 NW2d 67 (1977), relied upon in the dissenting opinion. In Kriger the police officer assailants were not involved in the governmental function of making an arrest but were engaged in an unprovoked assault.

The judgment of the trial court is affirmed. No costs, a public question.

A. C. Miller, J., concurred.

D. C. Riley, P. J.

(dissenting). I respectfully dissent.

In this matter, plaintiffs appeal an adverse accelerated judgment, GCR 1963, 116.1, which dismissed their suit against defendant City of Utica on grounds of governmental immunity. MCL 691.1407; MSA 3.996(107).

The complaint alleges that on February 22, 1976, defendant Poynter, a sergeant in the Utica Police Department, while wearing his uniform, driving a marked police car and acting under color of authority, stopped a 1975 Vega driven by plaintiff Tung Gan Lee. According to the complaint, defendant Poynter then assaulted plaintiffs without justification, uttered racial epithets and engaged in other acts of brutality and harrassment against plaintiffs. In successive counts, the complaint also alleges false arrest; false imprisonment; malicious prosecution; violations of plaintiffs’ civil rights under 42 USC 1983 and US Const, Am XIV; and "the tort of insult and outrage”.

In Thomas v Department of State Highways, 398 Mich 1; 247 NW2d 530 (1976), the Supreme Court held:

"The key to determining the applicability of the immunity defense is in ascertaining whether or not the particular case is one 'wherein the * * * agency is engaged in the exercise or discharge of a governmental function’.
" 'Governmental function’ is a term of art which has been used by the courts of this state to describe those activities of government which due to their public nature should not give rise to liability at common law. Through many years of application, the label of governmental function has been attached to a number of governmental activities.
"[T]he Legislature, in choosing the precise terminology of 'governmental function’ to describe the limits of governmental immunity, intended that activities described as governmental functions at common law at the time of enactment of the new legislation would enjoy statutory immunity from tort liability.
"Under the present statutory scheme the judiciary, looking to past precedents (which in many cases are less than clear), must decide on a case-by-case basis which activities may be classified as governmental functions and thus entitled to immunity.” Id. at 9, 10, 13. (Emphasis in original.)

Until recently, Tzatzken v Detroit, 226 Mich 603, 607-608; 198 NW 214 (1924), epitomized the common law rule in Michigan:

"While the courts have encountered difficulties in determining in particular instances whether or not certain officials, employees and agents of municipalities are in the discharge of governmental functions and therefore carry with them the immunity from liability by the municipality for their torts, as to policemen the courts have found little difficulty in putting them in the category of public officers (Blynn v City of Pontiac, 185 Mich. 35 [151 NW 681 (1915)]), and the discharge of their duties the discharge of governmental functions. They do not act for the municipality in its proprietary character but act for the State in its sovereign capacity. Although they may be personally liable for their unlawful acts, the municipality of which they are officers is not. The municipality in so far as it performs governmental functions acts in a sovereign capacity and carries with it, in the absence of statute to the contrary, the immunity of the sovereign.”

See also, Hirych v State Fair Commission, 376 Mich 384; 136 NW2d 910 (1965), and McPherson v Fitzpatrick, 63 Mich App 461; 234 NW2d 566 (1975).

The continuing validity of the Tzatzken line of decisions has been called into question, however, by a fresh, but terse, decision of the Supreme Court. See Kriger v South Oakland County Mutual Aid Pact, 399 Mich 835; 250 NW2d 67 (1977).

In Kriger, the facts (as reported by the Court of Appeals) were these:

"On August 25, 1970, a disturbance took, place at Memorial Park in Royal Oak, Michigan. Police were ordered to the scene to restore order. Plaintiff, a 17-year-old amateur photographer, had been observing the altercation from a vantage point across the street. Suddenly and without provocation, three police officers assaulted and beat him, causing severe and lasting injuries. The assailants were not attempting to arrest plaintiff. The incident was recorded by newspaper photographers and TV cameramen and later published and broadcast. The officers involved could not be identified.
"Plaintiff sued the South Oakland County Mutual Aid Pact, the 18 member cities of the Pact, and 3 unidentified police officers. His complaint sounded in tort for assault and battery, libel and slander, and the negligence of the Mutual Aid Pact and the 18 defendant cities in training police officers. Plaintiff sought compensatory damages and injunctive relief.” 49 Mich App 7, 9; 211 NW2d 228 (1973).

The City of Berkley then requested and obtained a summary judgment, GCR 1963, 117.2(1), dismissing it as a defendant on the basis of governmental immunity. The Court of Appeals, addressing various constitutional objections to the immunity statute, affirmed.

In lieu of granting leave to appeal, the Supreme Court in an order peremptorily reversed the summary judgment, observing:

"The complaint states a claim for which relief may be granted because it pleads facts which, if proved, demonstrate that the activity complained of is not activity 'in the exercise or discharge of a governmental function’ under MCLA 691.1407; MSA 3.996(107), and, therefore, 'does not fall within the ambit of immunity established by the Legislature in 1970 PA 155.’ McCann v Michigan, 398 Mich 65, 77 [247 NW2d 521] (1976).” 399 Mich at 835.

While I can fathom distinctions between the facts in Kriger and those in the case at bar, none compels or counsels a different result. If the governmental immunity statute affords no protection to a municipality for the intentional torts of police officers committed while quelling a disturbance, Kriger, supra, then the statute can offer no greater succor to the instant municipality for Sergeant Poynter’s allegedly intentional torts stemming from a traffic stop.

Accordingly, I would reverse the judgment below and remand the matter for trial.

       In the Court of Appeals opinion in Kriger v South Oakland County Mutual Aid Pact, 49 Mich App 7, 9; 211 NW2d 228 (1973) the facts were stated to be as follows:
      "On August 25, 1970, a disturbance took place at Memorial Park in Royal Oak, Michigan. Police were ordered to the scene to restore order. Plaintiff, a 17-year-old amateur photographer, had been observing the altercation from a vantage point across the street. Suddenly and without provocation, three police officers assaulted and beat him, causing severe and lasting injuries. The assailants were not attempting to arrest plaintiff. The incident was recorded by newspaper photographers and TV cameramen and later published and broadcast. The officers involved could not be identified.” (Emphasis added.)

       Defendant Poynter is not a party to this appeal.

       I would offer an observation on the Supreme Court’s frequently recurring practice of issuing peremptory orders in lieu of granting leave.
      Given the ever-increasing number of litigants filing applications for leave, it is understandable that the Court might be inclined to act with dispatch in a case it believes has been wrongly decided and thus, by issuing a peremptory order, to avoid the problem of justice delayed being justice denied. But to act with speed can only be countenanced in situations where the Supreme Court nonetheless satisfies its duty of concise statement, Const 1963, art VI, § 6, and its "general obligation to explain and reconcile the law for bench, bar and populace”. People v Clemons, 74 Mich App 448, 461 n 1; 253 NW2d 795 (1977) (D. C. Riley, J., concurring). Otherwise, justice unexplained is surely justice denied. See, e.g., Pierce v Riley, 81 Mich App 39; 264 NW2d 110 (1977).

        Kriger v South Oakland County Mutual Aid Pact, 399 Mich 835; 250 NW2d 67 (1977), rather than being an aberrant decision, stands as a clear departure from prior law. See Mattox v City of Detroit, 399 Mich 832; 250 NW2d 70 (1977), and Oglesby v Walker, 399 Mich 832; 250 NW2d 69 (1977), where the Supreme Court, in lieu of granting leave to appeal, reversed unpublished decisions of the Court of Appeals which had affirmed summary judgments dismissing the City of Detroit on grounds of governmental immunity. In Mattox, plaintiff claimed that a municipal police officer had intentionally and maliciously shot him without provocation. Likewise, in Oglesby, plaintiff, by her next friend, alleged that a city officer had arrested her and, prior to taking her to the police station, took her to an apartment where he forced her to engage in sodomy and fellatio.


author: N. J. Kaufman, J.

text:
    WILLIAMS v AMERICAN TITLE INSURANCE COMPANY
    Docket No. 77-1210.
    Submitted January 5, 1978, at Detroit.
    Decided June 5, 1978.
    Walter E. Williams and Violet V. Williams purchased certain real property from Julia Polgar and Zigmond Polgar on August 1, 1959. The Polgars provided an abstract of title certified to July 15, 1959, by Abstract Title and Guaranty Company. The abstract was originally issued on February 4, 1926, by the Macomb County Abstract Company and was extended by that company periodically through 1952. American Title Insurance Company is the successor in interest to Macomb County Abstract Company. The abstract in question failed to include a deed dated May 1, 1926, which was recorded on May 24, 1926, and conveyed the southerly 60 feet of the property in question to the Macomb County Board of Road Commissioners. The Williamses operated a fast-food restaurant on the subject property in their own names, and later under the corporate name of Whiteway, Inc. The county road commission commenced building a sidewalk through the parking lot on the property in 1969 or 1970. The sidewalk was to extend straight through the restaurant and Whiteway, Inc., was ordered to vacate the building on August 21, 1970. The restaurant equipment was moved out and placed in storage and the building dismantled by the Williamses. Mr. Williams did not rebuild the restaurant, but obtained a class C liquor license and built a bar and restaurant on the property. The new business opened 2-1/2 years after the dismantling of the first building. The equipment was eventually sold after being in storage for about 5 years. The Williamses and Whiteway, Inc., commenced an action against the Polgars and the American Title Insurance Company for damages arising out of defect in title which was not revealed by the abstract of title. Accelerated judgment for the defendants was granted. The Court of Appeals reversed and remanded for further proceedings, 43 Mich App 95 (1973), and the Supreme Court affirmed the Court of Appeals, 391 Mich 6 (1974). After remand to the trial court, defendants Polgar were dismissed from the.action and judgment was entered for plaintiffs Williams in the amount of $54,531.50 and for plaintiff Whiteway in the amount of $1,950.60, Macomb Circuit Court, Howard R. Carroll, J. The plaintiffs appeal and defendant American Title cross appeals. Held:

      References for Points in Headnotes

       4 Am Jur 2d, Appeal and Error § 76.
    Formal requirements of judgment or orders as regards appealability. 73 ALR2d 250.

       22 Am Jur 2d, Damages §§ 30-32.
    57 Am Jur 2d, Negligence §§ 37, 440.

       19 Am Jur 2d, Corporations §§ 15-17, 19, 33.

       57 Am Jur 2d, Negligence § 438 et seq.

       22 Am Jur 2d, Damages § 46 et seq.

      1. The plaintiffs were not entitled to damages for the loss realized on the equipment, fixtures and improvements because the plaintiffs’ total failure to try to find a use for or market for the equipment constituted a breach of the duty to mitigate damages.
    2. The lower court correctly ruled that Whiteway, Inc., was only a month-to-month tenant of the individual plaintiffs because of the lack of any lease arrangement between Whiteway and the Williamses, and therefore, Whiteway was entitled to only one month’s lost profits.
    3. The plaintiff was not precluded from recovering damages from the defendant. The trial court in determining damages correctly based its figure on the difference between the value of the property at the time the road commission began construction on the plaintiffs property and the value of the property as it remained after the road commission’s rights had been proven and enforced, plus the cost of removing the structure existing at that time.
    Affirmed.
    1. Appeal and Error—Findings of Fact—Trial Judge—Court Rules.
    An appellate court will set aside the findings of fact of a trial judge sitting without a jury when such findings are clearly erroneous (GCR 1963, 517.1).
    2. Damages—Minimizing Damages—Contracts—Torts—Reasonable Effort.
    The injured party, in both contract and tort actions, must make every reasonable effort to minimize damages suffered; it is the burden of the defendant, however, to show that the plaintiff has not used every reasonable effort within his or her power to minimize damages.

      3. Corporations—Piercing the Corporate Veil—Fraud—Statutes.
    Ordinarily a corporate veil will not be pierced absent fraud, sham or other improper use of the corporate form; in ascertaining whether the separate corporate entity should be disregarded, each case is sui generis and must be decided in accordance with its own underlying facts.
    4. Property—Real Property—Negligence—Abstracts—Attorney and Client—Road Widening—Misrepresentation—Constitutional Law.
    A plaintiffs failure to follow up on his attorney’s advice to check about possible road widening before agreeing to buy a certain parcel of land does not preclude the plaintiffs recovery for negligence against a title insurance company for a defect in an abstract prepared by the title insurance company which failed to include a deed which had been recorded years earlier and conveyed 60 feet of the property in question to the county road commission where the attorney’s advice pertained to future condemnation proceedings and the plaintiff had no need to be concerned about such proceedings because of the constitutional guarantee against the taking of property for public use without just compensation; reliance on the Michigan Constitution will not preclude recovery for negligent misrepresentation (Const 1963, art 10, § 2).
    5. Damages—Property—Real Property—False Representations— Negligence.
    Persons who acquire property about which negligent false representations as to value, quality or condition have been made are entitled to damages equal to the difference between the actual value of the property at the time of the contract and the value it would have had if the representations had been true.

      Perica, Breithart, Gallagher, Viviano, Graham, Nitz & Carmody, P. C., for plaintiffs.

      Rowe, Talon & Jones, P. C., for defendant.
    Before: Bashara, P. J., and J. H. Gillis and N. J. Kaufman, JJ.
   N. J. Kaufman, J.

The facts pertinent to this appeal are compiled from the record and briefs as well as the decision of Williams v Polgar, 43 Mich App 95; 204 NW2d 57 (1972), and the appeal of that case to the Michigan Supreme Court, 391 Mich 6, 10; 215 NW2d 149 (1974), from which we note that:

"Plaintiffs Williams purchased certain property situated in the City of Warren, Macomb County, from defendant Polgar on a land contract dated August 1, 1959. At the time of purchase, as provided in the land contract, defendants furnished to plaintiffs an abstract of title certified to July 15, 1959 by Abstract and Title Guaranty Company. This abstract was originally issued on February 4, 1926 by the Macomb County Abstract Company and was extended by said company in 1936, 1937, 1943, 1944, 1945, 1946, 1948, 1951 and 1952. Defendant American Title Insurance Company is the successor in interest to Macomb County Abstract Company.
"The abstract of title failed to include a deed dated May 1, 1926 which was recorded on May 24, 1926 in Liber 242 of Deeds at page 174 of Macomb County records. This deed conveyed the southerly 60 feet of the property in question to the Macomb County Board of Road Commissioners.
"After execution of the land contract on August 1, 1959, plaintiffs learned, allegedly for the first time, of the existence of this omitted deed. As the result thereof, plaintiffs claim they were required to completely remove a building and that certain other damages were incurred.”

Plaintiffs Williams sought damages in the amount of $150,000 to compensate them for a building which was torn down and $50,000 in lost rentals. Plaintiff Whiteway, Inc., sought damages in the amount of $100,000 for the loss of fixtures, equipment and improvements, and $100,000 in lost profits.

A nonjury trial was held which resulted in a judgment for plaintiffs Williams in the amount of $54,531.50, and for plaintiff Whiteway, Inc., in the amount of $1,950.60. On April 18, 1977, plaintiffs appealed of right. Defendant cross-appealed on April 29, 1977.

At trial, Walter Williams testified that he and his wife had leased a restaurant at the corner of Ten Mile and Mound Road in Macomb County from Ms. Polgar prior to 1959. In August of 1959, they entered into a land contract with Ms. Polgar. Prior to signing of the land contract, Ms. Polgar acquired an abstract of title for the property. She gave it to Mr. Williams, who took it to his attorney George Parris. Mr. Williams asked Mr. Parris for his opinion as to the sufficiency of the abstract. At the end of July, Mr. Parris wrote to Mr. Williams advising him that his examination of the abstract of title indicated that title to the property was vested in Mr. and Mrs. Polgar, that there were no mortgages on the property, that the taxes had been paid through 1958, and that no restrictions appeared in a plat recorded April 16, 1937. Attached to the letter, and referred to in the letter, was a form advising Mr. Williams to check "additional matters outside of the records which should be considered by every purchaser or mortgagee”. The purchaser was advised, for example, to inquire at the proper offices to determine if "any proceedings are contemplated or in progress as to road street widening”. Mr. Williams made no inquiry as to possible road widening at that time. It was not until 1969 or 1970, when the city started building a sidewalk through the parking lot on the property, that Mr. Williams first inquired about road widening.

The Williamses operated a 24 hour fast-food restaurant on the property. The city’s sidewalk was to go through the parking lot on the Ten Mile side of the property and run straight through the building.

Mr. and Mrs. Williams used to operate the restaurant in their individual capacities. In the late 1960’s, they decided, for business and tax reasons, to incorporate the business as Whiteway, Inc. Mr. and Mrs. Williams were the sole shareholders and directors. Whiteway became the tenant of Mr. and Mrs. Williams and paid rent to them. Whiteway owned and operated the restaurant as well as other restaurants. The Williams continued to own the property. There was no written lease with the corporation.

After 1959, as owners, Mr. and Mrs. Williams made several improvements in the building. They installed a new bathroom, new windows, new arches, new floors, new equipment. They remodeled the outside of the building. The corporation itself also made improvements, including installing new fixtures—counters, stools, grills, refrigerators, and electrical equipment.

When it was apparent that plaintiffs did not agree with the road commission’s project, the road commission began proceedings for possession which resulted in the State of Michigan ordering plaintiffs to vacate the building on August 21, 1970. Corporate plaintiff Whiteway, Inc., stopped business on August 19, 1970, and moved its equipment out. The plaintiffs Williams dismantled the building.

Mr. Williams decided against rebuilding the hamburger restaurant. After the building had been torn down, Mr. Williams’ application for a Class C liquor license was approved. He built a bar and restaurant on the property. The new business opened on April 17, 1973, 2-1/2 years after the original building had been torn down. The bar is doing a profitable business.

After the fixtures and equipment had been removed from the hamburger restaurant, they were put in storage by Mr. and Mrs. Williams. Some were stored in a Detroit warehouse. Another part was stored in a building owned by Mr. Williams which was located on Nine Mile Road. A garage across from Mr. Williams’ home was also used. The equipment included cooking equipment, refrigerating equipment, counters, stools and signs, etc. The property belonged to Whiteway, Inc. No attempt was made to sell the property or to use it in one of the other six restaurants owned by Mr. and Mrs. Williams. Mr. Williams testified that the property was not needed in the other restaurants which were already in operation. The property was stored until three or four months before the trial began, at which time it was sold to A. J. Marshall Co. for $400. Marshall Co. had originally sold the property to plaintiff. The property sold to Marshall Co. included cigarette and juke machines owned by the individual plaintiffs. Mr. Williams testified about the profits which they shared with the corporation.

On cross-examination, Mr. Williams stated that he had heard, prior to the execution of the land contract, of proposals to widen Mound Road. He had not, however, heard of any proposals with regard to widening Ten Mile Road.

Alvin Barbret, A. J. Marshall Co. sales manager, testified that his company was in the bar and restaurant business. He testified that his company had held the equipment for plaintiffs for a long time and that the accrued storage charges had become enormous. Plaintiffs, according to Mr. Barbret, finally decided to sell the property to the company. Since the equipment had been built for a particular building, and since the health codes had changed since the time it was built, the equipment was worth very little at the time of sale to A. J. Marshall Co. as it was not saleable in most of Michigan. He testified, however, that the fact that the property had been stored for so long had an effect on the price paid for it by A. J. Marshall Co. in 1976.

Qualified as an expert, Ross Strevel testified as to the value of the restaurant, prior to, and subsequent to the ascertainment and enforcement of the legal rights of the road commission.

The trial court found that defendant could reasonably have foreseen that both plaintiffs Williams and plaintiff Whiteway, Inc., would rely on the accuracy of the abstract furnished to Ms. Polgar by defendant. Plaintiffs were therefore entitled to recover against defendant. Because of the lack of a written lease between Whiteway and plaintiffs Williams, the trial court concluded that Whiteway was at most a tenant from month to month. The award of damages went as follows: as to plaintiffs Williams, $53,500 for property and building and removal, $344 for one month’s lost profits on a cigarette and juke machine, and $687.50 for lost rent for one month; plaintiff Whiteway, Inc.: $1,606.60 for one month’s profit lost and $344 for one month’s profit lost on cigarette and juke machines. Plaintiffs were also awarded interest, taxable costs and taxable appeal expenses including proper attorney fees. The court expressly stated that it had not considered the 34 month lapse between the time the original building was torn down and the new business was opened. The court explained that it did not award damages to plaintiff Whiteway for loss of equipment because Mr. Williams testified that he had made no attempt to sell the equipment on behalf of the corporation.

On appeal, plaintiff Whiteway, Inc., claims that the trial court erred in awarding no damages for loss of equipment, fixtures, and improvements, allegedly totaling $100,000. In discussing this claim, the trial court noted that the equipment "was not disposed of and no attempt was made to dispose of it”. It was placed in storage from 1970 until 1976.

We do not believe the trial court’s findings to be clearly erroneous. As noted by the Supreme Court in Tuttle v Dep’t of State Highways, 397 Mich 44, 46; 243 NW2d 244 (1976):

"Under GCR 1963, 517.1, an appellate court will set aside the findings of fact of a trial court sitting without a jury when such findings are clearly erroneous.”

In both contract and tort actions, the injured party must make every reasonable effort to minimize damages suffered. It is the burden of the defendant, however, to show that the plaintiff has not used every reasonable effort within his or her power to minimize damages. Froling v Bischoff, 73 Mich App 496, 499; 252 NW2d 832 (1977).

Mr. Williams’ total failure to even make an effort to find a use for or market for the equipment constituted a breach of the duty to mitigate damages.

The second claim of error raises a rather unique question of law. Appellant Whiteway, Inc., claims that the trial court clearly erred in finding that corporate plaintiff was only a month-to-month tenant of the individual plaintiffs and in therefore awarding only one month’s lost profit, despite the fact that the individual plaintiffs are the sole shareholders and directors of the corporation.

The parties frame this issue in terms of piercing the corporate veil for the benefit of plaintiffs Williams, the sole shareholders and directors of Whiteway, Inc. It was undisputed that Whiteway operated plaintiffs’ restaurant and leased the building from them.

As noted by appellant, ordinarily a corporate veil will not be pierced absent fraud, sham or other improper use of the corporate form. Gottlieb v Arrow Door Co, 364 Mich 450, 452; 110 NW2d 767 (1961), Paul v University Motor Sales Co, 283 Mich 587, 602; 278 NW 714 (1938). The notion of separate corporate identity is, however, merely a fiction:

" 'The doctrine, however, that a corporation is a legal entity existing separate and apart from the persons composing it is a mere fiction, introduced for purposes of convenience and to subserve the ends of justice. This fiction cannot be urged to an extent and purpose not within its reason and policy, and it has been held that in an appropriate case, and in furtherance of the ends of justice, a corporation and the individual or individuals owning all its stock and assets will be treated as identical.’ 7 R. C. L. p 27.” Montgomery v Central National Bank & Trust Co of Battle Creek, 267 Mich 142, 147-148; 255 NW 274 (1934). (Emphasis added.)

Thus, complete identity of interest between the sole shareholders and the corporation may lead courts to treat them as one for certain purposes. See: Pettaway v McConaghy, 367 Mich 651; 116 NW2d 789 (1962), L A Walden & Co v Consolidated Underwriters, 316 Mich 341; 25 NW2d 248 (1946).

While Brown Brothers Equipment Co v State Highway Comm, 51 Mich App 448; 215 NW2d 591 (1974), does allow the corporate veil to be pierced by other than a creditor of a corporation, it goes on to say:

"In ascertaining whether the separate corporate entity should be disregarded each case is sui generis and must be decided in accordance with its own underlying facts. In the case at bar, defendant continuously treated both corporations as one and entered the settlement contract for the purpose of keeping Brown Brothers’ manufacturing business in operation. Defendant was also aware that the continuation of that enterprise was the motivation for plaintiff agreeing to the state taking possession of its land. To now accept defendant’s contention of 'separate corporate entity’ would work an injustice on plaintiff and deny it the benefit of its contract. Defendant has shown no surprise, disadvantage, or objection at trial in plaintiffs use of Brown Brothers, Inc., books for evidence of loss for breach of contract. Equitable principles require this Court to disregard the legal fiction of separate corporate entity and approve the trial court’s action.” 51 Mich App at 452-453.

In the case at bar we do not believe that the plaintiffs should be allowed to raise the question of piercing the corporate veil. They are the ones that set it up; they had the advantage of the corporation status for many years. Cf. Clement, Bane & Co v Michigan Clothing Co, 110 Mich 458; 68 NW 224 (1896). However, now that the shoe is on the other foot, plaintiffs want to set that status aside. We conclude that the trial court’s ruling was proper, in the interest of justice.

At the beginning of trial, cross-appellant moved for summary judgment, GCR 1963, 117.2(1), for failure of plaintiffs to allege facts as to the basis of cross-appellant’s duty toward plaintiff Whiteway, Inc. Plaintiffs responded that defendant had been on notice as to Whiteway’s claim. No specific statement had been sought. Amendment of the complaint was possible. The trial court responded that it would allow no amendment of the complaint. It referred to GCR 1963, 111, and noted that, although Whiteway’s claim had not been apparent at the beginning of the suit, the claim was clear now. In response to the court’s inquiry, defendant admitted that it had learned the substance of Whiteway’s claim in the deposition of Mr. Williams. The trial court took the motion for summary judgment under advisement. The trial court never expressly addressed the motion again.

In light of the notice function of Michigan plead-\ ing rules, and especially since cross-appellant never denied that it had notice as to the basis of Whiteway, Inc.’s, claim, we find no error in the failure of plaintiffs’ complaint to allege any facts as to the status of Whiteway, Inc.

Cross-appellant further claims that plaintiffs should have known of the abstracter’s negligent misrepresentation at the time they entered into a land contract for the sale of the property. American Title argues that at the time plaintiffs bought the property from Ms. Polgar, their attorney told them to check about possible road widening. Plaintiffs admitted that they made no attempt to follow up. Therefore, American Title contends that plaintiffs’ negligent reliance on the abstract precludes recovery. We cannot agree.

The form that plaintiffs received from their attorney refers to future condemnation proceedings. It is entirely possible that plaintiffs may have decided not to pursue the matter in view of the constitutional guarantee of compensation:

"Private property shall not be taken for public use without just compensation therefor being first made or secured in a manner prescribed by law. Compensation shall be determined in proceedings in a court of record.” Const 1963, art 10, § 2.

Reliance on the Michigan Constitution will not preclude recovery for negligent misrepresentation.

Finally, cross-appellant argues that, in a case of negligent misrepresentation of an abstract company as to chain of title for failure to discover a deed conveying part of the property, damages should be based on the value of the property at the time of the conveyance—in this case, the value of the property at the date of the conveyance from Ms. Polgar to plaintiffs. Cross-appellant notes that when owners of property breach covenants of title, the breach occurs at the time of the conveyance and damages are awarded based on the value of the property at that date.

The general rule in cases based on negligence is that persons who acquire property about which false representations as to value, quality or condition have been made are entitled to damages equal to the difference between the actual value of the property at the time of the contract and the value it would have had if the representations had been true. D’Alessandro v Vander Hooning, 365 Mich 66; 112 NW2d 114 (1961), Paquin v Van Houtum, 343 Mich 111, 123; 72 NW2d 169 (1955).

Here, Ross Strevel testified that, before the road commission complication arose, the plaintiffs’ property was worth $161,500. Plaintiffs’ property as it remained after the road commission’s rights had been proven and enforced was worth $111,000. To the $50,500 difference was added the $3,000 cost of removing plaintiffs’ restaurant. The trial court adopted Mr. Strevel’s opinion that $53,500 was just compensation.

In Williams v Polgar, supra, this Court adopted the "date of discovery” statute of limitations rule for negligent misrepresentation.

The finding of fact by the trial court was not clearly erroneous, GCR 1963, 517.1.

Affirmed. No costs, neither side having prevailed in full.

        "OPINION OF THE COURT

      "For a complete statement of the pertinent facts in this case, with one exception, this Court refers to the opinions appearing in Williams v. Polgar, 43 Mich App 95 and in Williams v. Polgar, 391 Mich 6. The exception is that at trial on the issue of liability and damages stipulation was executed by all parties dismissing Polgar from this litigation. Since that trial this Court has been favored with excellent Briefs by both parties and this Court is satisfied that both plaintiffs Williams and Whiteway, Inc. fall within the category referred to in the Supreme Court opinion and as such are permitted to recover from the sole remaining defendant, American Title Insurance Company.
      "Plaintiffs Walter E. Williams and Violet V. Williams are the sole owners of Whiteway, Inc. The business operation prior to the taking of the property by the County Road Commission was operated by Whiteway, Inc. The testimony revealed that there was no written lease between Williams and Whiteway. Whiteway, therefore, was at most a tenant from month to month and is so treated in the findings of this Court.
      "This Court finds for plaintiffs and awards damages as follows:

        WILLIAMS

      Property and Building and removal $53,500.00
      Cigarette and juke machine (1 month) 344.00
      Rent (1 month) 687.50
      $54,531.50

        WHITEWAY, INC.

      Profit loss (1 month) $ 1,606.60
      Cigarette and juke machine (1 month) 344.00
      $ 1,950.60
      In addition thereto plaintiffs are entitled to interest, taxable costs and taxable appeal expenses including proper attorney fee.
      "Although this Court is aware that there was a lapse of 34 months between the eviction of plaintiffs from the property and the opening of the new business which now includes a Class C license, this Court did not consider that lapse of time. Another problem which has caused some confusion involves the equipment and the loss thereof by plaintiff Whiteway. However, the testimony is that it had a depreciated value of $21,000.00. It was not disposed of and no attempt was made to dispose of it. It was placed in storage and this Court cannot in good conscience award damages therefor in view of the testimony of Mr. Williams who stated that he had made no attempt to sell the equipment on behalf of the Corporation.
      "Judgment may enter. Judgment may be presented consistent herewith.
      /s/_
      Howard R. Carroll
      Circuit Judge
      "Dated: March 3, 1977.”

      "July 31,1959
      "Mr. and Mrs. Walter E. Williams
      2016 Goulson
      Warren, Michigan
      "Dear Sir and Madam:
      "I herewith submit to you may [sic] opinion of the Abstract of Title to the land located in the City of Warren, Macomb County, Michigan, described as follows:
      Lot 40, except the Northerly 60 feet and also except the Westerly 45 feet thereof, of Supervisor’s Plat of Heath Acres, being a part of the Southeast quarter (1/4) of Section 20, Town 1 North, Range 12 East, Warren, Township, Macomb County, Michigan, Liber 18 of Plats, page 11, Macomb County Records,
      based upon an examination of the Abstract of Title of the Abstract and Title Guaranty Co., No 45832, certified to July 15, 1959, at 8:00 A.M.
      "I. TITLE: Subject to the matter herein contained, title is vested in Zigmond Polgar and Julia Polgar, his wife;
      "II. MORTGAGES: None.
      "III. TAXES: Paid through year 1958,1959 not examined.
      "IV. RESTRICTIONS: None appear in the plat recorded April 16, 1937.
      "Please note attached sheet.
      Very truly yours,
      PARRIS & FERRIS
      /s/
      By: GEORGE N. PARRIS
      "GNP/sl
      Attached Sheet.”

        "The foregoing entire opinion is based upon the abstract as submitted. Your attention is called to additional matters outside of the records which should be considered by every purchaser or mortgagee.
      "POSSESSORY RIGHTS: Your [sic] should make inquiry upon the premises and if you find them occupied by any person other than the owner named, learn the rights of the occupancy claimed, as you are charged with notice of the rights of an occupant, and the rights of the person under whom an occupant claims.
      “ENCROACHMENTS: You should examine the premises and adjoining lands and satisfy yourself that the buildings, fenses [sic] and their projections, if any, are located on the proper lot and within correct lines. Encroaching buildings or fences which are allowed to stand for the period prescribed in the statute of limitations can be maintained as a matter of right.
      "MECHANICS’ LIENS: If the building upon the premises is being repaired or repairs have been made within sixty days, the premises are liable to mechanics’ liens. You should protect yourself by inquiry and inspection for this class of claims. Such liens would take priority over subsequent purchasers or mortgagees. You should demand sworn statements and waivers of liens.
      "ROAD, PAVEMENTS, DRAINS AND SPECIAL ASSESSMENTS: Roads, pavements, sidewalks, drains and other public improvements are frequently installed by the state, county, township or village and assessed upon the adjoining property. Such assessments are liens upon the property but are not shown in the tax history of the abstract. Such assessments usually are payable in stallments [sic], although the entire assessment is a lien upon the property at the time of assessment. You should make inquiries at the proper offices to ascertain if there are any special assessments and satisfy yourself that they have been paid.
      "BUILDING LINES, ZONING LAWS, ROAD WIDENING AND CONDEMNATION PROCEEDINGS: You should also make inquiry at the proper offices to ascertain whether there is any law or regulation restricting or regulating the height, style or type of building or setback lines on such property, or if any proceedings are contemplated or in progress as to road street widening or opening on any of said property for any public use.
      "Water bills; You should make investigation to determine whether all of the water bills due against the premises are paid, because delinquent water bills constitute a lien against the premises regardless of the ownership of same.
      "DRAIN ASSESSMENT: You should make investigation to determine whether all of the drain assessments against the property have been paid or whether or not there are any drain assessments against the property. Some of these assessments are in litigation at the present time and are subject to reinstatement, and you may be required to pay the same at a later date.
      "YOUR ATTENTION is called to the fact that if you have actual notice of any deeds, instruments, conveyances or restrictions upon the property, you take the premises subject to that notice regardless of whether the particular instrument is on record.”

       Had plaintiff Williams been suing for relocation costs, this Court’s opinion in Brown Brothers Equipment Co v State Highway Comm, 51 Mich App 448; 215 NW2d 591 (1974), would have been directly on point. But there was no concrete reference to relocation costs in the complaint. See Ford v Howard, 59 Mich App 548; 229 NW2d 841 (1975).


author: V. J. Brennan, J.

text:
    RZEPKA v FARM ESTATES, INC.
    Docket No. 77-1314.
    Submitted March 15, 1978, at Detroit.
    Decided June 5, 1978.
    Plaintiffs Mitchell and Rita Rzepka, Lyle and Betty Locke and Marvin Hacker filed suit in Macomb Circuit Court against Farm Estates, Inc., R & C Investments, Inc., Louetta Ott, Donald Casterline and Robert Refior alleging violations of Michigan securities law, fraudulent misrepresentation and conspiracy in the sale of stock in defendant Farm Estates, Inc. The trial court, Raymond R. Cashen, J., found that defendant Ott had committed a common-law fraud on plaintiff Mitchell Rzepka in failing to disclose the corporation’s true financial condition and in failing to inform Rzepka of the existence of litigation against the company when she sold Rzepka the stock; that commissions had been collected for the sale of the stock, preventing the corporation from claiming a statutory exemption from the registration requirement; that, as a result of the registration requirement and the fact that the stock was not registered, defendants Ott, Refior and Casterline were liable to plaintiffs Rzepka for $20,000 and to plaintiffs Locke for $10,000. Judgment was entered with the amount of liability against these defendants slightly altered and awarding plaintiffs Locke and Rzepka costs and attorney fees. Amended findings of fact holding defendant Farm Estates, Inc., liable on the judgment in favor of plaintiffs Rzepka and Locke and for attorney fees were filed and judgment was entered. Defendants appeal. Plaintiffs Rzepka cross-appeal with respect to the extent of their recovery. Held:

    1. From the evidence presented at trial the court reasonably concluded: that Farm Estates, Inc.’s, stock had never been registered; that commissions were authorized by the Board of Directors for the sale of the stock; that the directors had not met their burden of proving they had no knowledge of the failure of registration; and that as officers and directors of Farm Estates, Inc., they were liable to the purchasers.

      References for Points in Headnotes

       18 Am Jur 2d, Corporations § 408 et seq.

    69 Am Jur 2d, Securities Regulation—State §§ 69-78.

       69 Am Jur 2d, Securities Regulation—State § 105.

       19 Am Jur 2d, Corporations §§ 1326-1331.
    69 Am Jur 2d, Securities Regulation—State §§ 102, 105.

      2. The statute exempting officers and directors of a corporation from liability to purchasers of the company’s unregistered stock when the officers and directors had no knowledge of the existence of the facts by reason of which the liability exists does not exempt officers and directors for ignorance of the blue sky laws.
    3. A seller’s failure to disclose the poor financial status of a corporation to a prospective buyer of stock is adequate to support a claim for common-law fraud.
    Affirmed.
    1. Corporations—Statutes—Securities—Registration of Securities—Exemption from Registration.
    The statute on registration of securities which exempts certain ‘ corporate stock does not apply to stock for which sales commissions were paid and later returned; statutory exemptions are to be given a limited, rather than expansive, construction (MCL 451.802; MSA 19.776[402]).
    2. Corporations—Statutes—Securities—Registration of Securities—Officers and Directors—Liability of Officers and Directors—Exemptions.
    A statute holding corporate directors and officers liable to purchasers of stock which is unregistered but exempting those officers and directors who sustain the burden of proving lack of knowledge of the facts by reason of which the liability is alleged to exist does not apply to officers and directors who only prove ignorance of the blue sky laws; ignorance of the law is no excuse (MCL 451.810[b]; MSA 19.776[410] [b]).
    3. Fraud—Sale of Corporate Stock—Failure to Disclose as Representations.
    Failure of a corporate director, who had a duty of disclosure, to disclose the bleak financial condition of the corporation and existence of pending litigation against it to a purchaser of the director’s stock is tantamount to a representation that the corporation is solvent and is sufficient to support an action by the purchaser for common-law fraud.

      William A. Gentz, for plaintiffs.

      Freud, Markus, Slavin, Toohey & Galgan, for defendants.
    Before: R. M. Maher, P. J., and V. J. Brennan and N. J. Kaufman, JJ.
   V. J. Brennan, J.

Plaintiffs brought this action on August 4, 1974, alleging violation of various Michigan security laws, fraudulent misrepresentation, and conspiracy in the sale of stock in Farm Estates, Inc. They sought the return of their investments in this corporation. The case was tried in Macomb County Circuit Court on May 4, 6 and 7, June 29-30, and July 1, 2, 7, 14 and 15, 1976.

In an opinion dated February 14, 1977, Judge Raymond R. Cashen ruled that defendant Ott had committed a common law fraud against plaintiff Mitchell Rzepka in failing to disclose to him the corporation’s shaky financial situation and the existence of litigation against it when she sold him $5,000 worth of stock on October 26, 1973. The court also found that commissions had been collected for the sale of stock, which prevented the corporation from claiming a statutory exemption to the registration requirement. MCL 451.802; MSA 19.776(402).

Consequently, the court held defendants Ott, Refior and Casterline liable to plaintiffs Rzepka for $20,000 and plaintiffs Locke for $10,000. A judgment of no cause of action was entered in favor of Farm Estates, Inc. and R and C Investments, Inc. A similar judgment was entered against plaintiff Hacker.

On March 22, 1977, a judgment was entered, altering the amount of liability slightly and also awarding plaintiffs Locke and plaintiffs Rzepka $6,354.76 for costs and attorney fees. On April 11, 1977, amended findings of fact and conclusions of law were entered, holding that Farm Estates, Inc., was also liable for the $10,000 judgment in favor of Locke, the $20,000 judgment in favor of plaintiffs Rzepka and the award of attorney fees. The individual defendants now appeal as a matter of right. GCR 1963, 806.1. Plaintiffs Rzepka have filed a cross-appeal regarding the extent of their recovery.

Defendants, and plaintiffs on cross-appeal, collectively raise three allegations of error in the trial court’s decision. We will deal with only one claim at any length.

Defendants contend the record at trial indicates no proof of their culpable knowledge, even though liability was grounded upon their own act of approving the receipt of commissions for the sale of unregistered stock in violation of MCL 451.701; MSA 19.776(301) and MCL 451.802(b)(9); MSA 19.776(402)(b)(9).

Judge Cashen found defendants’ corporation, Ott, Casterline and Refior jointly and severally liable to plaintiffs Rzepka and Locke for the purchase price of the securities which were not registered as required by MCL 451.701; MSA 19.776(301.). We agree with the court.

On the basis of the evidence presented, we find Judge Cashen was not in error when he inferred that Farm Estates stock was never registered. Moreover, we find uncontroverted the fact that commissions were authorized by the Board of Directors on March 29, 1971, for the sale of corporate stock and that such commissions were reversed on the corporate books effective April 30, 1973. The reversal occurred only after defendant Ott had met with a representative from the Department of Commerce. We also find that Mrs. Ott received a number of commissions pursuant to this authorization including $4,000 on August 6, 1970, paid to Business Management Consultants, one of Ott’s alter-ego corporations, for the sale of stock to Rzepka. Further, Refior testified that he knew of these commissions, and the record is uncontroverted that these commissions were noted in the minutes of the meeting of the Board of Directors on March 29, 1971. At that time, the Board of Directors consisted of Ott, Refior and Casterline.

We also find proper the trial court’s conclusion that the corporate stock did not qualify for the exemption under MCL 451.802; MSA 19.776(402), since commissions were paid on the sale of this stock. Further, nothing in the statute leads us to conclude that returning the commissions would have the effect of retroactively placing the stock within the exemption for the period in which such commissions were collected. Statutory exceptions are to be given a limited, rather than expansive construction. Lee v J H Lee & Son, 72 Mich App 257, 260; 249 NW2d 380 (1976), Northville Coach Line, Inc v Detroit, 379 Mich 317, 329; 150 NW2d 772 (1967) (plurality opinion). Moreover, the narrow view we take here is consistent with the statutory purpose of protecting the public. People v Dempster, 396 Mich 700, 707-708; 242 NW2d 381 (1976).

We also find reasonable Judge Cashen’s conclusion that Ott received commissions on all sales made during the period in which such commissions were authorized, including: the sale on October 14, 1972, of $20,000 worth of stock to Rzepka and the sale on November 1, 1972, of $10,000 worth of stock to Locke. This conclusion is supported by Ott’s admissions as to the receipt of commissions throughout the period and the existence of a commission check of $4,580 for the sale of stock to several persons whose names could not be recalled at trial. Evidence also appears that Ott received a commission in connection with the August 5, 1970, sale of stock to Rzepka, although commissions were not authorized at that time.

Consequently, we find that the sales of stock to Rzepka on August 5, 1970, and October 14, 1972, and the sale of stock to Locke on November 1, 1972 were in violation of MCL 451.701; MSA 19.776(301) and that plaintiffs Rzepka and Locke maintain a valid cause of action against defendants under MCL 451.810(a)(1); MSA 19.776(410)(a)(1).

Having established defendant’s liability as seller under MCL 451.810(a)(1); MSA 19.776(410)(a)(1), we further affirm the court’s finding of liability as to the individual defendants predicated upon MCL 451.810(b); MSA 19.776(410)(b).

The trial court concluded that "no proof’ was advanced to bring the knowledge exception of this section into play. Although this characterization may be extreme, we do hold that the individual defendants have failed to meet their burden of proof under the statute. We find clear the fact that Ott, Casterline and Refior all knew about the commissions which were authorized by them in their positions as members of the Board of Directors. Testimony also appears supporting the proposition that Ott and Casterline knew the stock had not been registered. Although no evidence exists that Refior knew of the stock’s unregistered status, likewise no evidence appears that he "could not have known” of this fact. Since the individual defendants have clearly failed to establish their lack of knowledge, actual or constructive, we find them liable under MCL 451.810(b); MSA 19.776(410)(b) in their positions of directors and officers of the corporation. Their ignorance of blue sky laws is irrelevant for purposes of this statute, as the exception only speaks of the lack of knowledge of "the existence of the facts by reason of which the liability is alleged to exist”. Clearly, under the statute, ignorance of the law is no excuse. See Cola v Terzano, 129 NJ Super 47; 322 A2d 195 (1974). See, also, Anno: What Amounts to Participation by Corporate Officer or Agent in Illegal Issuance of Security in Order to Impose Liability upon Him Under State Security Regulations, 44 ALR3d 588.

We therefore sustain the trial court in granting Rzepka judgment for $20,000 plus interest and Locke judgment for $10,000 plus interest. We find that plaintiffs were entitled to the return of their purchase price. Clearly, they filed suit within two years of the purchase and did not refuse any prior offers or reimbursement. As to the remaining claims, we address them only briefly.

Defendants claim the trial court erred in finding either common-law or statutory fraud based on Ott’s sale of stock to plaintiff Locke without disclosing to him the existence of pending litigation or the corporation’s poor financial condition.

The trial court found that Ott committed common-law fraud in selling $5,000 worth of her stock to Locke on October 26, 1973. The record supports the court’s finding of fraud. See Hi-Way Motor Co v International Harvester Co, 398 Mich 330, 336; 247 NW2d 813 (1976). Specifically, Ott’s failure to disclose the bleak financial position of the corporation constitutes adequate support for the action. An affirmative misrepresentation of one’s financial condition has been held adequate in such cases. First State Savings Bank v Dake, 250 Mich 525; 231 NW 135 (1930).

Consequently, assuming Ott had a duty of disclosure as seller, that duty should encompass disclosure of the corporation’s poor financial status. Failure to disclose these facts under the circumstances of this case is tantamount to a representation that the corporation was solvent. Such representation was clearly false; and Ott, as director, officer and creditor of the corporation, obviously knew the representation was false. Such a misrepresentation is clearly material as bearing upon a fact crucial to Locke’s decision to buy. Papin v Demski, 17 Mich App 151, 155; 169 NW2d 351 (1969), aff'd 383 Mich 561; 177 NW2d 166 (1970). We find reliance here where the facts not disclosed are of the sort that would have induced plaintiff not to have acted had he known of them. The corporation’s dire financial condition clearly qualifies under such a test. The trial court reached the correct decision. We find no error.

Plaintiff Rzepka on cross-appeal contends the trial court improperly denied him recovery of the purchase price of the stock he bought in August, 1970, despite the fact that (1) no fiduciary relationship existed between Rzepka and Ott, (2) an action based upon MCL 451.810(a)(2); MSA 19.776(410)(a)(2) was barred by a statute of limitations and (3) plaintiffs have not proven the existence of material misrepresentation or the nondisclosure of facts which would have affected plaintiff’s decision to purchase the stock.

The trial court found that plaintiff’s action for statutory fraud was barred by the statute of limitations and that plaintiff’s theory based upon common-law fraud and breach of fiduciary duty were without merit. We agree.

This action was filed on August 4, 1974. The alleged fraud occurred four years previously. MCL 451.810; MSA 19.776(410) provides in part:

"(e) No person may sue under this section more than 2 years after the contract of sale. No person may sue under this section (1) if the buyer received a written offer, before suit and at a time when he owned the security or commodity contract, to refund the consideration paid together with interest at 6% per year from the date of payment, less the amount of any income received on the security, and he failed to accept the offer within 30 days of its receipt, or (2) if the buyer received such an offer before suit and at a time when he did not own the security or commodity contract, unless he rejected the offer in writing within 30 days of its receipt.”

Consequently, plaintiff’s action is barred since the case was commenced more than two years from the date of the sale. We find no merit to plaintiff’s claim and sustain the trial court.

Having reviewed each of the claims of defendants and plaintiffs, we affirm the decision of the trial court.

Affirmed. Neither side to be assessed costs.

       This statutory provision reads as follows:
      "It is unlawful for any person to offer or sell any security in this state unless (1) it is registered under this act or (2) the security or transaction is exempted under section 402.”
      The exemptions appear in MCL 451.802; MSA 19.776(402). This provision reads as follows:
      "(a) The following securities are exempted from sections 301 and 403:
      "(9) Any transaction pursuant to an offer directed by the offeror to not more than 15 persons, other than those designated in paragraph (8), in this state during any period of 12 consecutive months, whether or not the offeror or any of the offerees is then present in this state, if:
      "(A) The seller reasonably believes that all the buyers in this state, other than those designated in paragraph (8), are purchasing for investment; and
      "(B) No commission or other remuneration is paid or given directly or indirectly for soliciting any prospective buyer in this state, other than those designated in paragraph (8); but the administrator may by rule or order, as to any security or transaction or any type of security or transaction, withdraw or further condition this exemption, or increase or decrease the number of offerees permitted, or waive the conditions in clauses (A) and (B) with or without the substitution of a limitation on remuneration.”

       This statutory provision states in pertinent part:
      "(a) Any person who:
      "(1) Offers or sells a security or commodity contract in violation of section 201(a), 301, or 405(b), or of any rule or order under section 403 which requires the affirmative approval of sales literature before it is used, or of. any condition imposed under section 304(d), 305(f), 305(g), or 412(g)

        "Is liable to the person buying the security or commodity contract from him, who may sue either at law or in equity to recover the consideration paid for the security or commodity contract, together with interest at 6% per year from the date of payment, costs and reasonable attorneys’ fees, less the amount of any income received on the security or commodity contract, upon the tender of the security or commodity contract, or for damages if he no longer owns the security or commodity contract. Damages are the amount that would be recoverable upon a tender less the value of the security or commodity contract when the buyer disposed of it and interest at 6% per year from the date of disposition.” MCL 451.810(a)(1); MSA 19.776(410)(a)(l).

       This statutory provision states in relevant part:
      "(b) Every person who directly or indirectly controls a seller liable under subsection (a), every partner, officer, or director of such a seller, every person occupying a similar status or performing similar functions, every employee of such a seller who materially aids in the sale, and every broker-dealer or agent who materially aids in the sale are also liable jointly and severally with and to the same extent as the seller, unless the nonseller who is so liable sustains the burden of proof that he did not know, and in exercise of reasonable care could not have known, of the existence of the facts by reason of which the liability is alleged to exist. There is contribution as in cases of contract among the several persons so liable.” MCL 451.810(b); MSA 19.776(410)(b).

       We perceive no grounds to exempt defendants concerning the sales to Rzepka and Locke on October 14 and November 1, 1972, under the limitations provision of MCL 451.810(b); MSA 19.776(410)(b). The present action was brought on August 4, 1974. Nor do we find evidence of a written offer to refund the purchase price and interest which would bar suit under MCL 451.810(e); MSA 19.776(410)(e).