text:
    MEEUWSEN v. CLOUGH & WARREN CO.
    1. Pleading — Defenses—Contracts—Act of Public Enemies — New Trial.
    The defense that a contract was made subject to delay or failure caused by fires, strikes, riot, the act of God or the public enemies should be specially pleaded, and comes too late when urged for the first time upon motion for new trial.
    2. Principal and Agent — Self-Constituted Agent — Ratification —Scope of Agent’s Authority.
    Where a principal adopts the contract of a self-constituted agent, who has assumed to act for such principal without authority, he is bound to inquire and ascertain the extent the self-constituted agent assumed to act in his behalf, and the principal, when he becomes such by adopting his acts, is bound by all acts within the scope of the assumed authority.
    3. Same — Acts of Agent — Ratification—Contracts—Construction.
    Where defendant corporation adopted the act of Its secretary in contracting with plaintiff to pay him a commission on an order for goods for his services in assisting to procure the same, by accepting the benefit of such services and paying therefor as goods were shipped, and it clearly appears that by the contract it was intended to pay a commission upon the whole order, defendant is liable, in an action thereon, although, because of the war with Germany, it was unable to secure certain dyes and was compelled to cancel part of the order.
    4. Same — Contracts—Parties to Contract — -Wrong Name.
    Although defendant’s secretary contracted in the name of another corporation, where the affairs of the two corporations were closely interwoven, and defendant adopted the act of its secretary, the contract was binding upon it.
    Error to Lenawee; Hart (Burton L.), J.
    Submitted November 4, 1919.
    (Docket No. 97.)
    Decided December 22, 1919.
    Assumpsit by Peter Meeuwsen against the Clough & Warren Company and the Manophone Corporation for commissions on the sale of goods. Judgment for plaintiff. Defendant Manophone Corporation brings error.
    Affirmed.

      Franklin J. Russell and Baldwin & Alexander, for appellant.

      Charles L. Robertson and James H. Cornelius (L. W. Harrington, of counsel), for appellee.
   Kuhn, J.

The plaintiff, in March, 1917, was a manufacturers’ agent engaged in placing contracts between the assemblers of talking machines and the manufacturers of cabinets. Defendant Clough & Warren Company, prior to' December 20, 1916, was engaged in the manufacture and sale of pianos and organs at Adrian, Michigan. The defendant Manophone Corporation is a corporation, organized on December 20, 1916, at which time it took over the plant and business of the defendant Clough & Warren Company and since that time has been engaged in the manufacture and sale of talking machines and talking machine cabinets at the city of Adrian. The Clough & Warren Company has not been engaged in any business since it transferred its plant and business to the defendant Manophone Corporation, although it has not been formally dissolved. There were different stockholders, but Mr. Warren, who was treasurer of the Clough & Warren Company, became the vice president and treasurer of the Manophone Corporation, and Mr. Essex, who was secretary of the Clough & Warren Company, became secretary of the Manophone Corporation.

About March 1, 1917, the Manophone Corporation received a letter from the Playerphone Talking Machine Company of Chicago, stating that it was in the market for talking machine, cabinets, and on March 7, 1917, Mr. Essex went to Chicago for the purpose of calling on the Playerphone Company. On March 8th, the plaintiff and Mr. Essex met in Chicago and the latter gave the plaintiff a writing known in the record as Exhibit “A,” which reads as follows:

“Chicago, 3/18/17.
“For services rendered replacing contract with Playerphone Company, we agree to pay Mr. P. Meeuwsen 5% commission.
“Clough & Warren Co.,
“By L. W. Essex, Sec’y.”

On the following day, Mr. Essex and the plaintiff called upon the Playerphone Company, the visit resulting in an order being given to the Clough & Warren Company for cabinets of the value of $67,500. This order was subsequently transferred to the Manophone Corporation and due shipment made to the amount of $26,630.65. Cabinets of the value of $3,-448.92 were returned as defective and were credited to the Playerphone Company account, which left the net business done the sum of $23,181.73.

It is claimed that the Playerphone Company order was subsequently cancelled for the reason that German dyes were necessary to meet the specifications of the Playerphone Company and that these dyes were not obtainable, by reason of the war with Germany. It is claimed for the plaintiff that he is entitled to recover a commission of 5% on the full amount of the Playerphone order, whether any shipments were made or not. The defendant Clough & Warren Company claims that Exhibit “A" was not authorized by it and was not a valid and binding obligation upon it. The defendant Manophone Corporation claims that the writing in Exhibit “A” w'as never authorized by it and that it never knew of the writing and that it was not a valid contract binding upon it and that the only contract or agreement between the plaintiff and the defendant Manophone Corporation of which the latter has knowledge was to pay a commission of 5%' on shipments actually made to the Playerphone Company. The Manophone Corporation paid the commissions upon such shipments made and settled for by the Playerphone Company.

The case was tried before the court without a jury and the trial judge found that the writing known as Exhibit “A” w!as not a valid contract as to the defendant Clough & Warren Company and dismissed the case as to it. He further found that the writing was a valid contract between the plaintiff and the defendant Manophone Corporation and that the plaintiff was entitled to recover a commission of 5% on the full amount of the Playerphone order.

A motion for a new trial was made in which motion it was urged for the first time that the defendant should be excused or relieved from the obligation to pay the commission because of the provision in the contract which stipulated that the performance of the contract was to be subject to delay or failure caused by fires, strikes, riot, the act of God or the public enemies. Such a defense, if urged upon the trial, should have been specially pleaded under the notice of the special defense which was annexed to the plea of the general issue in order to comply with Circuit Court Rule No. 28. But, nevertheless, while such a defense may have been known to the defendant Manophone Corporation, it was not urged upon the trial and no notice of it given, and the first suggestion made with reference to it was upon the motion for new trial. We are of the opinion that, having been made at that time without any other notice having been given of it, it came too late and cannot now be urged.

The meritorious question involved in the controversy is whether or not the court erred in holding the writing (Exhibit “A”) to be a valid contract between the plaintiff and the defendant Manophone Corporation. The affairs of the two defendant corporations were so interwoven as might very readily and easily have led a person to believe that, so far as their business was concerned, they were one and the same company. There is no dispute that the Manophone Corporation was informed that Meeuwsen was to have a 5% commission. The question is, Upon what was he to receive the commission? The memorandum in writing, showing what the contract entered into by Meeuwsen and Essex wias, clearly indicates that it was intended to be upon the whole order. The Manophone Corporation accepted the benefit of Mr. Meeuwsen’s services, approved the contract which was made by him, and proceeded to send him commissions as the goods were shipped and paid for.

It is the claim of the defendant that it did not have full knowledge of the contract as made by Essex and that Essex had not been authorized to make the contract which the plaintiff relies upon. The trial court held that, as a matter of law, under the peculiar circumstances of this case, that having accepted the benefits of Mr. Meeuwsen’s services, if it did not have full knowledge of the contract, it was its legal duty to make the needed inquiry of Essex or of Meeuwsen to discover all of the terms of the commission contract. This conclusion in law, in our opinion, finds support in the decisions of this court.

In Busch v. Wilcox, 82 Mich. 336 (21 Am. St. Rep. 563), in commenting upon the law with reference to the binding effect of the acts of a self-constituted agent, the following is stated:

“The law, as we conceive it to.be, is. this: When a person deals with an authorized agent, he is bound to inquire and ascertain the extent and limit of his authority to bind the principal, and the principal is bound by all acts of the agent within the scope of his authority; and when the principal adopts the contract of a self-constituted agent, who has assumed to act for such principal without authority, he is bound to inquire and ascertain the extent the self-constituted agent assumed to act in his behalf, and the principal, when he becomes such by adopting his acts, is bound by all acts within the scope of the assumed authority; and in both cases the liability of the principal extends to the frauds or misrepresentations of the agent committed or made while acting within the scope of the real or assumed authority. We entertain no doubt upon the law that should govern the case.”

We think it necessarily follows, under the circumstances of this case, that the defendant Manophone Corporation, by adopting the acts of its self-constituted agent, sought to appropriate to itself all the benefits to be derived from the contract made by him with Meeuwsen as fully as if it had itself induced it in the first instance. This being true, it must also assume the liabilities which attach to it. See, also, Ripley v. Case, 86 Mich. 261; Sokup v. Letellier, 123 Mich. 640; Dodge v. Tullock, 110 Mich. 480.

The judgment should be, and is, hereby affirmed.

Bird, C. J., and Sharpe, Moore, Steere, Brooke, Fellows, and Stone, JJ., concurred.


source: Caselaw Access Project

author: Bird, C. J. Moore, J. Per Curiam.

license: Public Domain

text:
    GARBER v. TOWN.
    1. Corporations — Officers—Duties—Sake of Assets — Fiduciary Relations — Trusts—Accounting.
    Where the president of a corporation acted as' its salesman in the sale of its assets to another corporation and received, in addition to the purchase price which the stockholders agreed to accept, $75,000 in stock of the purchasing corporation, it being understood between himself and the purchaser that he was to keep $50,000 and turn $25,000 over to another who assisted in putting the deal through, equity will require that he account to the other stockholders for their proportionate share of the additional stock so received by him; it being apparent that it was in reality part of the purchase price.
    2. Same.
    Although said president did not personally benefit by the $25,000 so turned over to another, he had no right to make any such arrangement, and, the stock having passed through his hands, he will be required to account for the same. Moore, J., dissenting.
    3. Same — Transactions Between Officer and Directors — Sake by President to Corporation.
    Where the president of a corporation made an arrangement with his board of directors to sell to the corporation the premises occupied by it, taking in payment its stock worth $30,000, although a few months before he had offered to sell for $15,000, they will be required to account for the difference in value, in a suit in behalf of the stockholders; transactions between an officer of a corporation and his board of directors being subject to careful scrutiny, and, to be sustained, must have been made in the interest of the corporation.
    4. Same — Purchase of Stock — Accounting.
    The president of a corporation will be required to account to the stockholders for the extra value of shares of its stock issued to him and charged to his account at par, where they were at the time worth double the par value.

      Appeal from Eaton; Webster (Clyde I.), J., presiding.
    Submitted October 31, 1919.
    (Docket No. 106.)
    Decided December 22, 1919.
    Rehearing denied
    April 10, 1920.
    Bill by Rolandus A. .Garber and others against Frank P. Town and others for an accounting. From a decree for plaintiffs, defendants appeal.
    Modified, and affirmed.

      Elmer N. Peters, Frank A. Dean and Claude J. Marshall, for plaintiffs.

      William W. Potter, R. L. Sowers and Burritt Hamilton, for defendants.
   Bird, C. J.

This litigation grows out of the sale of the assets of the Duplex Power Car Company, of Charlotte, to the Duplex Truck Company, of Lansing, in November, 1916. A reference to the cases of Hill v. Town, 172 Mich. 508 (42 L. R. A. [N. S.] 799); Town v. Duplex Power Car Co., 172 Mich. 519; Toles v. Duplex Power Car Co., 202 Mich. 224, and Bollstrom v. Duplex Power Car Co., post, 15, will be found helpful in the consideration of this opinion.

On October 30, 1916, the following agreement, referred to as Exhibit A, was entered into between the defendant Town, who was at that time president of the car company, and certain residents of Lansing, referred to as the Lansing syndicate:

“This agreement, made this 30th day of October, 1916, between Frank P. Town of Charlotte, party of the first part, and Harry H. Lee, G. W. Hewitt, Harry P. Harper, Elgin Mifflin, W. H. Porter, E. S. Porter, J. Edward Roe, James H. Robinson and H. E. Bradner, all of Lansing, Michigan, parties of the second part, witnesseth as follows:
“Whereas, the parties of the second part propose and intend to organize a corporation for the manufacture and sale of motor power trucks, and it is their purpose and desire when said company is organized to purchase all the property, franchises, rights, privileges, assets and good will of the Duplex Power Car Company of Charlotte, Michigan, and all its patents or rights in patents by license or otherwise, and
“Whereas, the party of the first part is now a large stockholder and general manager of said Duplex Power Car Company, therefore it is mutually agreed as follows : '
“1. The corporation to be hereafter organized by second parties as aforesaid will accept a transfer of all the property, rights and assets as above mentioned of the Duplex Power Gar Company, and will pay therefor to said Duplex Power Car Company or its stockholders when a good and lawful transfer of said property, rights and assets aforesaid have been made to said new corporation, two shares of stock in said new organization for every one share of stock now outstanding in the said Duplex Power Car Company not exceeding 15,500 shares of the par value of $155,000 in the latter company, or cash equivalent to double the par value of said Duplex Power Car Company stock, at the option of said company or its stockholders. Said new corporation will assume and pay all the debts and obligations of whatever nature of said Duplex Power Car Company.
“It is agreed that this agreement shall not be binding upon any of the parties hereto until all of the parties named herein have signed the same.” >■/

In order to carry out the provisions of Exhibit A, Mr. Town caused a special meeting of the stockholders of the company to be held on November 30, 1916, at which more than three-fourths of the capital stock of the corporation was represented. The Lansing syndicate had at that time been organized into the Duplex Truck Company. At this meeting, a resolution was unanimously adopted authorizing the sale of all the property and assets of the car company to the truck company for $310,000; the purchaser to assume and pay all the outstanding indebtedness of the car company as per a schedule of same theretofore agreed on. On such sale the stockholders of the car company were to receive double the par value of their stock in cash or two shares in the truck company for each one of the car company transferred by them. The contract was afterwards fully performed by conveyance and transfers of the stock by the officers of the car company and the payment of cash and the issuance of shares of stock by the truck company. At the same time that Exhibit A was executed, a further agreement in writing was entered into between Town and the Lansing syndicate, which reads as follows:

“This agreement, made this 30th day of October, 1916, between Frank P. Town, of Charlotte, Michigan, party of the first part, and Harry M. Lee, G. W. Hewitt, Harry F. Harper, Elgin Mifflin, W. H. Porter, E. S. Porter, J. Edward Roe, James H. Robinson and H. E. Bradner, all of Lansing, Michigan, parties of the second part, witnesseth as follows:
“Whereas, the parties of the second part purpose and intend to organize a corporation for the manufacture and sale of motor power trucks, and it is their purpose and desire when said company is organized, to purchase all the property, franchises, rights, privileges, assets and good will of the Duplex Power Car Company of Charlotte, Michigan, and all its patents or rights in patents by license or otherwise, and
> “Whereas, the party of the first part agrees to acquire possession and control of not less than three-fourths of the outstanding stock of the said Duplex Power Car Company, and that when he so acquires the same, he shall deposit the same with some bank in Charlotte agreeable to second parties with proxies if so desired.
“First party also agrees that when he acquires such stock he shall use the same and its voting power either personally or by proper proxies to cause and procure a sale and transfer of all the property, franchises, patents, rights in patents as aforesaid, business, good will, rights and privileges of the said Duplex Power Car Company to a corporation to be hereafter organized by the parties of the second part. Said new organization to assume and pay all the debts and obligations of whatever nature of said Duplex Power Car Company.
“It is agreed by second parties that in consideration and on condition that the said Town.shall acquire said stock of said company as aforesaid, and shall use or cause to be used to procure or secure the sale and transfer of all of the property, rights and assets of the said Duplex Power Car Company as aforesaid to said corporation to be hereafter organized by second parties, the said second parties will pay to the said first party at the option of said first party $75,000 in cash or an equal amount of the par value of the stock of said new corporation to be organized by second parties. Said money to be paid or said stock delivered within ten days after said new corporation is organized and said transfer made to it by said Duplex Power Car Company.
“It is agreed that this agreement shall not be binding upon any of the parties hereto until all of the parties named herein have signed the same.”

On the same day, Mr. Town signed a writing, reading as follows:

“October 30th, 1916. On fulfillment of the conditions of a certain agreement entered into this day between me and Harry M. Lee, G. W. Hewitt, Harry F. Harper, Elgin Mifflin, W. H. Porter, J. Edward Roe, James H. Robinson and H. E. Bradner, of Lansing, Michigan, I hereby agree to deliver to James H. Robinson, of Lansing, Michigan, $25,000 worth of par value of the stock of the new company, which is to be organized, to take over the assets and business of the Duplex Power Car Company of Charlotte, Michigan.”

Town received the $75,000 in cash and stock from the truck company and assigned $25,000 worth of the stock to Robinson pursuant to this writing. The claims of the parties relative to Robinson’s connection with the matter will be hereafter stated.

It is admitted by Mr. Town that up to the time of the completion of the sale to the truck company none of the directors or stockholders of the car company had any knowledge of the existence of Exhibit B. On afterwards learning of same, the plaintiffs filed this bill of complaint, on behalf of themselves and all the other stockholders of the car company, praying, among other things, that the sum of $75,000 so received by Town be decreed to be the property of the car company and that it be distributed among the stockholders according to their respective shares at the time of such sale. We will dispose of this claim before taking up the other questions presented. The trial judge deducted the value of the stock assigned to Robinson, and granted the relief prayed for as to the balance of $50,000..

It is the claim of Town that the agreement under which he received the $75,000 in money or stock had nothing whatever to do with the sale of the property of the car company to the Lansing syndicate. The negotiations by which the deal was brought about were conducted between Town and Louis Rowley, of Lansing. It is Town’s claim that the agreement (Exhibit B) does not fairly state the consideration for which it was executed. He testified:

“At the time of these negotiations with Mr. Rowley up to the time this contract was made, not a word, not an intimation of any kind, was made about compensation to me. That question did not enter into the price which 1 put upon the plant in any way; the negotiations would have gone through just the same whether there had been one dollar paid outside or not; it had nothing to do with it. After that deal had been all completed Mr. Rowley said: T have a friend who is interested in this deal; he is the man who first interested the Detroit parties to come up here, but he is not interested in this; that is, he has not been identified, and I feel as this deal has grown out of that, that he is entitled to a little commission,’ and I said at once, ‘Mr. Rowley, if there is any commission paid any one out of this business you will have to get it from the other end, for I wouldn’t take one dollar from the stockholders to pay anybody a commission.’ ‘Well,’ he says, ‘Mr. Lee and I have talked this matter over and I can make arrangements so that it will come out of the other end,’ and I says, ‘Very well, that is none of my affairs; this is the deal and it is made in good faith with the stockholders and it will have to be made. I won’t have anything to do with anything further.’ ‘Now,’ he says, ‘you know these people are inexperienced in the manufacturing line; I will tell you what we propose to do. These men have simply been — Mr. Lee was a sales agent in the Reo and Mr. Hewitt was an auditor and bookkeeper, and they knew nothing about manufacturing trucks. It is going to be absolutely necessary for you to remain with the new company for a while.’ I said, 'Mr. Rowley, you know my condition at that time; I need a rest and I was going away.’ ‘Well,’ he said, ‘we must have your services. We are going to be liberal with you. Mr. Lee said we should be liberal with you, and,’ he said, ‘we are going for your services — you know there are suits to be taken care of and ho one can take care of them as. well as you, and to initiate these men into a new business — we are going to give you $50,000 for your services, and I want you to put this $25,000 for Mr. Robinson in with it and call it $75,000.’ So it was left that way. I suppose that was a verbal understanding and they could give me what they had a mind to if they wanted my services, but on the 30th they brought what is termed a private contract. That is the contract that has been introduced in relation to the $75,000.”

As to this matter Mr. Rowley testified:

“I called his attention to the fact that I wanted to have Mr. Robinson taken care of. I said I was getting my commission from the Lansing end of it, but I thought that Mr. Robinson, who had first called my attention to it and had participated in the Detroit negotiations, should be taken care of. I asked him to do it; he said, ‘How will I do it?’ ‘We will have to add that.’ I thought I saw some complications in the way and so I said, ‘No, we will arrange that differently.’ At this time I also said to him — and this was the first time that matter had ever been broached— that ‘In view of what you have done for the Duplex Company’ (he told me about the trials and struggles he had had in keeping the thing from going down, and in perfecting the truck and getting it in shape where he could do anything with it, at one time having put over $80,000 of his own money into it) T think as a simple matter of justice you ought to have something extra out of this. I think I can arrange that. I think the people over there more thoroughly appreciate the possibilities of this business than any* body else you can possibly deal with, and I think under the circumstances I can put that up to them so that they will recognize the value of your services here and what you have done and can do for the new company, and we.can make that sort of an arrangement and at the same time I can take care of Mr. Robinson in the same way.’ ”

Rowley further testified that he afterwards took the matter up with the Lansing people and they agreed to it and Exhibit B was prepared and executed the same day as Exhibit A.

Mr. Lee and Mr. Hewitt, two of the Lansing parties, who afterwards became president and secretary and treasurer of the truck company, both testified that Exhibits A and B were executed at the same time and were a part of the transaction which culminated in the purchase of the property. Mr. Lee further said that in order to put the deal across they had to include the $75,000 paid Mr. Town.

Under the facts as stated, we feel constrained to hold that the defendant Town must account to the other stockholders for their proportionate share of this $75,000. While he assumed to make the deal as an individual, he was at that time the president of the corporation and was dealing with corporate property. He occupied a fiduciary relation to the corporation and cannot be permitted to personally profit in any transaction in which its rights or interests were involved. It is apparent that the $75,000 received by him was a part of the purchase price which the truck company paid for this property. The claim that it was to include services to be thereafter rendered by him for the truck company cannot, in our opinion, be sustained. While it may be said to be somewhat supported by the testimony of Mr. Rowley, it is significant that neither Mr. Lee nor Mr. Hewitt was asked concerning it. This money was a part of the consideration paid by the truck company for the assets of the car company and as such it belonged to and became the property of the car company when paid to Mr. Town. The relationship of its officers, and the duties they owe to the corporation, is well expressed in Ten Eyck v. Railroad Co., 74 Mich. 226 (16 Am. St. Rep. 633, 3 L. R. A. 378):

“The entire management of corporate affairs is committed to their charge, upon the trust and confidence that they shall be cared for and managed within the limits of the powers conferred by law upon the corporation, and for the common benefit of the stockholders. They are required to act in the utmost good faith, and in accepting the office they impliedly undertake to give to the enterprise the benefit of their best care and judgment, and exercise the powers conferred solely in the interest of the corporation.”

Town, assumed to act as a salesman for the corporation in disposing of its assets to the truck company. While acting as such, he cannot secure to himself advantages not common to all the stockholders. In his dealings with the assets of the corporation, while acting as its president, equity will require him to account for all that he receives for the common benefit of all. It was his duty to make the most advantageous bargain possible. While that which he secured to them under Exhibit A may have been entirely satisfactory and considered a good bargain, yet if the rule of fiduciary responsibility were not strictly applied, even in such cases, the temptation for personal gain would in many cases undoubtedly lead to the sacrifice of the interests of the stockholders in order to secure a greater personal profit to the officer. He must not be permitted to assume a relation which will make his interest antagonistic to that of the other stockholders. By his acts in this transaction he received moneys paid on the purchase of the car company’s property as a personal profit to himself. These he must be held to have received as a trustee for the other stockholders and be liable to account to them for it. See 10 Cyc. p. 791, paragraphs 8 and 9, and cases cited; 2 Thompson on Corporations, § 1215 et seq.

The trial judge determined that “it would not be equitable or just to compel Mr. Town to turn over something that he did not receive,” and determined not to hold him chargeable with the $25,000 worth of stock he had turned over to Robinson. On first impression, this might seem but fair and just. We must, however, not overlook the principle involved. Town did receive this $25,000 in stock of the truck company as a part of the $75,000 paid under the contract, Exhibit B. As before stated, it was a part of the consideration paid by the truck company on its purchase of the assets of the car company. The stockholders of the car company were entitled to have the entire consideration paid for their property pass to them. This $25,000 came into Town’s hands while president of the company and as a part of such consideration. He had no right to make any arrangement or give any promise to pay any part of it to any person which would prevent its distribution in the usual way among his stockholders. If Robinson had performed services for the car company for which he was entitled to compensation, his claim therefor should have been presented to the board of directors and passed on in the usual way. If the services he rendered were in assisting Rowley to put through the deal for the Lansing syndicate, his claim should have been presented to them. There was clearly a misappropriation of this stock by Mr. Town and he must account to the stockholders for it.

For several years after the car company began its manufacturing business, the premises occupied by it were rented from two banks in Charlotte, each of which owned an undivided one-half interest therein. On November 11, 1911, the defendant Town purchased the interest of the Eaton County Savings Bank for $2,500, and on May 1, 1915, that of the First National Bank for $3,000. Some improvements had been made before this last purchase, and some were made by him thereafter. The car company paid $100 per month rental for the premises for several years. It is the claim of the defendant. Town that in the spring of 1916 he called the attention of the board of directors to the fact that the credit of the corporation was much impaired and that it would be improved should it own the premises which it was then occupying. He testified:

“Finally, the 2d of August, 1916, I suggested to them that they ought to acquire it in some form; that we didn’t have the money, but if they would pay a portion in cash I would carry the balance in stock; but we didn’t have the money to spare, at that time as I stated to them, but there had to be something done to get it in the name of the company so as to give us a commercial standing, and we were buying then in large quantities and we needed the credit, and they suggested to me if I would take it in stock they would purchase the factory, and I stated to them I thought I ought to have a portion of it in cash, and they proposed they take an option for three months, and during that meeting and conversation they stated to me that if I decided to take stock at any time I might consider it a sale, and if not, they would let it run until 90 days and then they would see what could be developed in paying a portion of it in cash. All the directors were present at that time. * * * At the meeting before the annual meeting, which was the 6th of August, or the 5th of August, I decided inasmuch as it was absolutely necessary to have the company have the credit that I would take the stock of the company for the factory * * * and at the annual meeting on the 6th of August — I guess it occurred on the 5th that year — the 6th fell due on Sunday I think — I made a report to the stockholders and it was talked over and they thought it was a grand good thing.”

He further testified that the stockholders expressed themselves as well satisfied with his proposal. The proceedings of this meeting are not inserted in the record, so we assume it contains no reference to the matter. In the minutes of the directors’ meeting held on August 2, 1916, three days earlier, we find the following:

“Moved by Mr. Brown and seconded by Mr. White, that the Duplex Power Car Company secure an option on factory and grounds and machinery belonging to factory now occupied by said Duplex Power Car Company for the term of three months at the price of $15,000.00.”

While both Town and Secretary Murray testified that the question of Town’s accepting stock for the real estate was discussed at meetings of the board and that he finally agreed to do so, the record is silent as to any such action until a meeting held on November 1, 1916. The minutes of that meeting read:

“Moved by Mr. Brown and supported by Mr. White, that the Duplex Power Car Company purchase the entire plant now occupied by said company, as per option given said company August 2d, 1916. Price to be fifteen thousand ($15,000) dollars, to be paid for in stock of said company at par value.”

It is elementary that any agreement made between Town and the board of directors relative to the real estate which rested in parol had no binding force or effect, and yet the property which but a few months before he had offered to convey for $15,000 was now purchased by them from him by authorizing a payment in stock then known to be worth $30,000.

The authorities before cited sustain the rule that all dealings between an officer of a corporation and his board of directors must be scrutinized carefully and to bind the stockholders must bear evidence of having been in the interests of the corporation. By this transaction, all of the stockholders lost their proportionate share of the $15,000 which Town received by reason of the stock being then of double par value. This action of the board cannot be sustained as a fair exercise of its powers. We are constrained to hold that not only the defendant Town, but the other defendants. who were then directors and present at the meeting held on November 1st and acted in the consummation of this transaction, must account for this $15,000 by causing the same to be returned to the treasury of the company.

An undivided one-half interest in this property had been bought by Town in 1911 before he became a director of the corporation. There is no evidence which controverts his testimony that in June, 1916, long before the deal with the Lansing syndicate was under consideration, it was fairly worth $15,000. The trial judge concluded that he should account for the value of the stock at the time it was transferred, which he found to be $22,250. We .find no sufficient evidence to support this finding, and conclude that he should account for that which the stockholders would have received had he been paid in cash and that is the sum of $15,000.

The bill of complaint alleges that certain other moneys received by the defendant Town should be charged to him, and prays for a general accounting. This was denied by the trial judge. We have read the record carefully and find there is one other item for which he should account. His agreement with the Lansing syndicate stated the total stock issue of the car company to be 15,500 shares. As a matter of fact, after the issue to him of the 1,500 shares in payment of the real estate, there still lacked 212% shares to make this number. These were issued to Town at their par value, and charged to his account with the company. As they were worth to him at the time of such issue double their par value, he should account to the company for such extra value, $2,125.

The proof as to other items lacks clearness and is not discussed by counsel in a way to throw much light upon them. They were carried as a credit to Town on the company’s books and were a part of the indebtedness which was assumed and paid by the truck company on the transfer. The trial judge, who heard the witnesses and gave these matters due consideration, concluded that.it was not in the interest of the stockholders to have the litigation prolonged by a further accounting. With this conclusion we agree.

Except as modified by this opinion, the decree will stand affirmed. A decree may be prepared granting relief to plaintiffs in conformity with this opinion. The plaintiffs will recover taxable costs against the defendants. All other expenses and attorney fees when determined by the trial court shall be paid out of the treasury of the car company before distribution.

Steere, Brooke, Fellows, Stone, and Kuhn, JJ., concurred with Bird, C. J.

Moore, J.

(dissenting). I agree with most of the conclusions of the Chief Justice in this case; but I think he is wrong in deciding that Mr. Town should account to the stockholders for the $25,000 turned over to Mr. Robinson. The inference from this record is irresistible that the persons who furnished this money did so with the distinct understanding that it was to go tó Mr. Robinson, and their understanding of the matter was given effect. Mr. Town should account for what has enured to his personal benefit while acting in a fiduciary capacity, but he ought not to be penalized because of his so acting. '

I think the trial judge is quite right in deciding that it would 'not be equitable or just to compel Mr. Town to turn over what he did not receive. In that respect his decree should be affirmed.

Sharpe, J., did not sit.

On Application for Rehearing.

Per Curiam.

The application recently filed in this cause for a rehearing has called our attention to an omission in the opinion filed. By inadvertence, a paragraph was omitted therefrom. The opinion will now be amended by adding the following:

The decree will provide that the bill of complaint will be treated as amended by making the Duplex Power Car Company a defendant herein. The amount found due by the several defendants will be paid by them to the treasurer of said company and will be disbursed by him to the stockholders entitled thereto at the time of the transfer of the assets of the car company to the truck company on the order of the judge of the circuit court for the county of Eaton, in chancery, subject, however, to the payment of expenses and attorney fees provided for in said decree and any indebtedness of said car company which said judge may find to be a first lien thereon. For the purpose of carrying out this direction, the record will be remanded.

Except as herein amended, the motion for a rehearing is denied.


author: Sharpe, J.

text:
    BOLLSTROM v. DUPLEX POWER CAR CO.
    1. Corporations — Stock and Stockholders — Fraud and Deceit.
    Plaintiff’s claim that he was induced to surrender to the corporation certain shares of its stock held by him by reason of the false and fraudulent representations of defendant stockholders, held, not sustained by the record.
    2. Same — Sale op Stock — Equitable Owner Entitled to Maintain Suit por Fraud in Sale.
    In equitable proceedings against the secretary of a corporation and certain of its stockholders to recover the difference in value of shares of stock between the amount paid by defendants and the true value, charging that defendant secretary misrepresented the true value, where it appears that plaintiff had always been treated on the books of th.e corporation as the owner of the stock, and the secretary had so reported a short time before, although plaintiff had been in the habit of transferring same from time to time to persons to whom he was indebted, held, that plaintiff was the equitable owner of the stock and entitled to maintain this suit although he was present when the sale of the stock was made and recognized another, to whom he had transferred it as security, as the owner.

      On liability of officer of corporation for fraudulent representation which induced another member to sell his stock, see note in 1 L. R. A. (N. S.) 258.

      3. Same — Sale of Stock — Estoppel—Fraud and Deceit.
    Although plaintiff would be estopped from disaffirming the sale of said stock, he is entitled to maintain this suit to recover for the fraud of defendant secretary in misrepresenting its value.
    4. Same — Fraud and Deceit — Evidence—Proof.
    Testimony reviewed, and held, to conclusively establish the fact that at the time of the sale of said stock defendant secretary knew of the completion of a deal whereby the assets of the corporation were to be taken over by another corporation and its stock was to be taken at double its par value in cash or stock of the new corporation.
    5. Same — Fraud and Deceit — Withholding Secret Information —False Representations.
    Representations by defendant to plaintiff, upon which the' latter relied, that he was getting a fair value for his stock, and that he was making a good bargain in selling it at par, although defendant possessed secret information at the time that it was worth double the par value, held, to conclusively show that defendant secured said stock by fraud and deception, and that plaintiff was damaged thereby.
    6. Same — Stock and Stockholders — Sale of Stock.
    Plaintiff, by this action having affirmed the sale of his stock, would not be entitled to share in the benefits derived by the stockholders at the time of the sale of its assets to another corporation under a decree of the court in another suit.
    Appeal from Eaton; Smith (Clement), J.
    Submitted November 5, 1919.
    (Docket No. 98.)
    Decided December 22, 1919.
    Bill by Maurice Bollstrom against the Duplex Power Car Company and others for an accounting. From a decree dismissing the bill, plaintiff appeals.
    Reversed, and decree entered.

      Elmer N. Peters (Frank A. Dean and Claude J. Marshall, of counsel), for plaintiff.

      Rosslyn L. Sowers, Colgrove & Potter and Burritt Hamilton, for defendants.
   Sharpe, J.

The Duplex Power Car Company was organized in 1909, and exercised its corporate powers until its assets were sold to the Duplex Truck Company on November 20, 1916. There has been much litigation relative to its affairs. The facts in this case will be better understood by a reference to the cases which have been considered by this court: Hill v. Town, 172 Mich. 508 (42 L. R. A. [N. S.] 799); Town v. Duplex Power Car Co., 172 Mich. 519; Toles v. Duplex Power Car Co., 202 Mich. 224; and Garber v. Town, ante, 1.

The plaintiff was one of the patentees of the device for a 4-wheel drive which distinguishes the truck that the company manufactured; 2,500 shares of stock were allotted to him for his interest in the patent. Previous to February 21, 1913, he had by transfer reduced his holding to 1,743 shares. A suit had been brought by some Chicago parties to whom stock had been sold and the plaintiff made a party thereto. This had been settled by the defendant Town, who was then a stockholder in the same corporation. At a stockholders’ meeting, held on April 21, 1913, at which plaintiff was present, the record shows the following:

“Mr. Town as attorney in fact for the stockholders reported that he had effected a settlement with the defendants whereby upon the payment by him of the sum of fourteen thousand ($14,000.00) dollars they had assigned to him for the benefit of the complainant stockholders 6,885 shares of stock, together with the mortgage held by Farlin H. Ball, as trustee, and all claims they might have against the company.
“Mr. Town reported that the expenses incurred in consequence of litigation, receivership and maintenance would approximate about ten thousand ($10,000.00) dollars, and that while there was sufficient.assets, if properly handled, to take care of this indebtedness, yet in his opinion the $10,000.00 expenses should be taken care of by the sale of stock to those who had pledged to pay their pro rata of this expense.
“Moved by R. A. Garber, supported by Brown, that complainant stockholders be asked to subscribe as much more stock as they now held, to liquidate these expenses, for which a double amount to that subscribed be issued them.
“Carried unanimously.
“Mr. M. Bollstrom stated that it would be impossible for him to pay for his quota of stock, and after some discussion he offered to shrink his- stock back to the complainant stockholders, to pay his pro rata of litigation and maintenance expenses.
“On motion duly made his proposition was unanimously accepted.”

Agreeably to such proceedings, plaintiff surrendered 582 shares of his stock to the corporation, and the other stockholders took additional stock as provided for in the minutes of such meeting. It is now the claim of the plaintiff that he was induced to make such surrender by the false and fraudulent representations of the defendant stockholders and that this transfer on his part should be set aside. We consider this claim at this time as it is entirely disconnected with the other questions presented. In disposing of it, the trial judge said*

“Without going into this claim with specific exactness, but passing on, it is only necessary to state that it is the judgment of the court.that the plaintiff has entirely failed to establish any fraud practiced upon him as to that settlement, or any wrong done to him in that matter. He was not asked to do more than he ought as matters then stood, and he did not do more than he ought., Relief under this claim as asked for by plaintiff cannot and should not be granted.”

We have carefully read the testimony on which plaintiff relies. The value of the stock at that time was problematical, and, as plaintiff attended many meetings thereafter, being for a part of the time a director, and in no way questioned the good faith of the transaction until he filed the bill of complaint in this cause on March 21, 1917, we are content with the conclusion reached by the trial judge relative thereto. Lewless v. Railway Co., 65 Mich. 292, 303.

The stock involved in the litigation referred to (6,-885 shares) was transferred to the defendant Town as trustee and for some time thereafter voted by him as such. At the meeting held on April 21st, a board of directors was elected which included the defendant Town, and at a directors’ meeting, held on the same day, he was elected president of the corporation. It appears from the allegations in the bill of complaint, supported by the proofs, that thereafter Mr. Town was not only the executive head of the corporation but practically in charge and control of all its affairs.

In the summer of 1916, it became apparent that additional capital was needed to make the business a success.^ In September and October*, an effort was made to' interest certain Detroit and New York parties.

In October, 1916, Town began negotiations with Louis Rowley, of Lansing, for the sale of the property of the corporation to certain parties living in that city. This deal was practically consummated on or about the 24th day of that month, though not reduced to writing until the 30th. On that day, Mr. Town entered into a written contract with Harry M. Lee and eight other Lansing citizens, who will hereafter be spoken of as the Lansing syndicate, for the transfer to such syndicate, when formally organized into a corporation, of “all the property, franchises, rights, privileges, assets and good will of the Duplex Power Car Company of Charlotte, Michigan, and all its patents or rights in patents by license or otherwise.”

Town represented that there were outstanding 15,-500 shares of stock in the car company, of a par value of $10 each, and the Lansing syndicate agreed to pay to the holders of such stock two shares of stock in the corporation to be formed by them for each share so held in the car company, or, at their option, $20 per share for such stock, being double the par value thereof, and to assume and pay all obligations and indebtedness of the car company. At the same time, the following agreement was entered into and signed by Mr. Town and all of the members of the Lansing syndicate :

“This agreement, made this. 30th day of October, 1916, between Frank P. Town of Charlotte, Michigan, party of the first part, and Harry M. Lee,.G. W. Hewitt, Harry F. Harper, Elgin Mifflin, W. H. Porter, E. S. Porter, J. Edward Roe, James H. Robinson and H„ E. Bradner, all of Lansing, Michigan, parties of the second part, witnesseth as follows:
“Whereas, the parties of the second part purpose and intend to organize a corporation for the manufacture and sale of motor power trucks, and it is their purpose and desire when said company is organized, to purchase all the property, franchises, rights, privileges, assets and good will of the Duplex Power Car Company of Charlotte, Michigan, and all its patents or rights in patents by license or otherwise; and
“Whereas, the party of the first part agrees to acquire possession and control of not less'than three-fourths of the outstanding stock of the said Duplex Power Car Company, and that when he so acquires the same, he shall deposit the same with some bank in Charlotte agreeable to second parties with proxies if so desired. First party also agrees that when he acquires such stock he shall use the same and its voting power either personally or by proper proxies to cause and procure a sale and transfer of all the property, franchises, patents, rights in patents, as aforesaid, business, good will, rights and privileges of the said Duplex Power Car Company to a corporation to be hereafter organized by the parties of the second part. Said new corporation to assume and pay all the debts and obligations of whatever nature of said Duplex Power Car Company.
“It is agreed by second parties that in consideration .and on condition that the said Town shall acquire said stock of said company aforesaid, and shall. use or cause the same to be used to procure or secure the sale and transfer of all of the property, rights and assets of the said Power Company as aforesaid, to said corporation to be hereafter organized by second parties, that said second parties will pay to the said first party at the option of said first party $75,000 in cash or an equal amount of the par value of the stock of said new corporation to be organized by second parties. Said money to be paid or said stock delivered within ten days after said new corporation is organized and said transfer made to it by said Duplex Power Car Company.
“It is agreed that this agreement shall not be binding upon any of the parties hereto until all of the parties named herein have signed the same.”

Both of these agreements were afterwards fully performed according to their terms. The $75,000 provided for in the latter was paid to Mr. Town.

The defendant Murray had been a director and secretary of the car company since February, 1915. On October 27, 1916, Dr. George Toles, of Charlotte, went to Murray for the purpose of purchasing some stock in the corporation. He gave him his check for $100 as down payment on 1,000 shares. Within half an hour thereafter, Murray informed Town by telephone and Town said to him that there was a deal on and no stock for sale. There was subsequently some personal talk between them that afternoon.

A certificate had been issued to plaintiif for his 1,161 shares on August 6, 1913. This he had assigned as security from time to time, but it had not been sent in for transfer until in October, 1915, when Mrs. E. E. Thompson, plaintiffs sister, so sent it to the defendant Murray. No such transfer was made. On September 11, 1916, she wrote Mr. Murray asking for the new certificate. The transfer was not made, and on October 21st she mailed to the corporation a written assignment of the stock to H. G. Wurst, a brother-in-law of plaintiff, and asked that the certificate be mailed to him. Plaintiff claims that he had theretofore on several occasions asked that his certificate be canceled and several smaller ones issued to him in its stead. ■ This was not done. The original certificate, with the assignment of Mrs. Thompson indorsed thereon, was in defendant Murray’s hands as secretary of the company on October 27,, 1916. Plaintiff had on several occasions stated, and had in fact testified in certain legal proceedings, that he was not the owner of this stock. Differences had existed between him and Town, and perhaps some of the other directors. Town had theretofore secured a personal judgment against plaintiff. .

On the morning of October 28, 1916, Murray went to Battle Creek to get in touch with plaintiff. His purpose was to secure an option on the 1,161 shares of stock. Not finding plaintiff on that day, he went there again on the 29th, and again on the 81st, at which time he met plaintiff. He inquired about Wurst, whom he knew to be the brother-in-law of plaintiff, and plaintiff brought them together at his home. After some negotiations, an attorney was employed by Murray and an assignment made by Wurst to Murray in which Wurst warranted that he was then the owner of the stock.' An option was prepared and signed by Wurst, giving Murray the right to purchase the 1,161 shares for $10 per share at any time within 15 days thereafter. Fifty dollars advance payment was made thereon. The plaintiff participated in the negotiations leading up to the assignment and option, and was present when they were signed. Wurst insisted on his being satisfied with the deal as finally made. The option and assignment were left in a bank at Battle Creek and were taken up by Murray within the 15 days. The certificate was canceled and a new certificate issued therefor to Murray on November 18, 1916. On the same day, this certificate was canceled and one issued to each of the defendant directors, except Town, for 50 shares, and one to each of two employees of the company for 25 shares each. These Murray testified were a gift on his part, no consideration having passed to him therefor. For the remaining shares, a new certificate was issued to Murray. All of these certificates were turned in to the truck company.

Plaintiff in this suit seeks to recover the difference between the amount paid under the option and the value of these shares as turned in to the truck company. He claims that he was then the equitable owner of the stock and that Murray secured it in fraud of his rights as a stockholder.

The defendants filed a joint answer. They deny the right of plaintiff to maintain this suit for the reason that he had parted with his title to the stock. They deny that Murray had any knowledge of the deal with the Lansing syndicate, or in any way deceived plaintiff or Wurst in the purchase he made, and allege this stock was purchased because plaintiff was a disturbing factor in the affairs of the corporation, and claim that the option and purchase thereunder were made in the usual way, without any intent to gain an advantage over either plaintiff or Wurst. They admit that defendant Town assisted Murray in securing the money to pay for this stock by indorsing his note, and also admit that Murray distributed the shares thus purchased by him as before stated.

Further facts will be stated in the discussion of the questions presented.

The trial court rendered a decree dismissing the bill, holding, as to this claim, that the deal by which Murray purchased the stock was a fair one and that as plaintiff had parted With his stock he was not a stockholder and had no standing in court in such a proceeding. From the decree rendered, plaintiff appeals.

There can be no question under the proofs but that plaintiff has always been the equitable owner of this stock. He made transfers to persons to whom he was indebted as security, and, at the time Murray procured the option on it, Wurst held it as security for an indebtedness of $250. The testimony of plaintiff as given on this trial and in a proceeding before Judge North at Battle Creek shows him to be an eccentric individual, very talkative, and not so careful in his statements as he might well have been. Notwithstanding the assignments of which the officers of the company had theretofore had notice, and of the fact that the certificate of stock assigned to E. E. Thompson was in the hands of the secretary at the time, the annual report, made as of August 31, 1916, and sworn to by the defendant Murray as secretary on October 30, 1916, listed this stock as belonging to plaintiff. The testimony (hereafter quoted) of both plaintiff and Wurst as to the statements made by Murray during the negotiation for the option clearly indicate that Murray then knew that the stock was the property of the plaintiff. We do not attach much importance to the expressions of warranty in Wurst’s assignment to Murray. Its purpose was evidently to secure a good and indefeasible title to the stock.

As before stated, plaintiff was unquestionably the equitable owner of the 1,161 shares, subject only to the lien of Wurst thereon for $250. He permitted Wurst to represent himself to be the owner thereof and to sell it to Murray. Were he now seeking to attack the validity of such transfer, he would clearly be estopped from doing so. He is, however, affirming the sale, not seeking to set it aside. His claim is that as he was then the owner of the stock, subject to Wurst’s lien thereon, Wurst acted as his agent in transferring it and he ratified such action. After the transfer was completed, he claims to have discovered that he had been defrauded by the action of Murray in securing the stock at one-half its value. He seeks to recover for this fraud, not by disaffirming the contract but in reliance on it. This, either he or Wurst clearly had a right to do. As is said in 20 Cyc. at page 86:

“An action of deceit to recover damages for fraud inducing the making of a contract is not based upon the contract but upon the tort. The action proceeds upon the theory of an affirmance of the contract alleged to have been fraudulently procured.”

While this right of action is included in equitable causes for which plaintiff seeks to recover in this suit, the prayer as. to this is that the defendants do pay to the plaintiff the difference between the amount paid by Murray and its value at the time of its purchase. Wurst received the amount due him out of the payment made by Murray on the option and had no further interest in the stock or in the transaction. Counsel for defendants say:

“No matter from what angle plaintiff’s conduct is viewed, he is clearly estopped from asserting title or ownership to the stock sold to Mr, Murray.”

The argument of counsel and authorities cited on this question are largely in support of the claim as stated. As has been observed, plaintiff is not claiming title to the stock. He affirms the sale and admits that title passed to Murray. But he insists that fraud was practiced by Murray on Wurst and himself in securing such title, and, as a result of such fraud, he, and not Wurst, has been damaged. ’ To such a claim, the doctrine of estoppel has no application. The gist of such a defense is thus stated:

“There can be no estoppel unless a party is misled to his prejudice by the one against whom it is set up, and does material acts relying upon conduct well calculated to mislead him.” Murray v. Rugg, 116 Mich. 519.
“It is the well-settled rule in regard to estoppels in pais that the conduct complained of must have induced another to act to his disadvantage, and that his situation in consequence thereof has changed.” Gooding v. Underwood, 89 Mich. 187.

We fail to see, nor do counsel point out, in what way Murray has been prejudiced by the failure of plaintiff to assert his ownership of the stock at the time the option was given by Wurst. That Bollstrom is the plaintiff in this suit in no way enhances the damages or affects any defense defendants might set up. We therefore conclude that plaintiff was entitled to bring this action.

Had Murray knowledge of the fact that Town had closed the deal with the Lansing syndicate at the time he secured the option from Wurst? Both he and Town testified that he had not. Plaintiff claims that the circumstances surrounding the transaction lead to the conclusion that he had. We have read the record with care. There is no positive proof to sustain plaintiff’s claim, but it is the duty of the court to weigh the testimony and draw a fair and reasonable inference from what was done and said in reference to it.

After Town secured the assignment of the stock from the Chicago parties to himself as trustee in 1913, he voted it at all meetings of the stockholders and thereby practically controlled the ¡election of the board of directors. While president, he exercised not only the duties of that office but of all the others as well. The money of the corporation was kept in his name in the bank. The negotiations with the New York and Detroit parties in September and October, 1916, were carried on by him alone, but Murray admits that he knew about it and saw the correspondence. The relations between Town and Murray were apparently very cordial and confidential, and, while Town might have believed it best to conceal from Murray his negotiations with Mr. Rowley, there was no reason for concealment after the deal was concluded between the Lansing syndicate and himself. He closed this deal with Rowley on October 27th, though it was not reduced to writing until the 30th. On the 27th, Murray telephoned to him about the Toles purchase and was told that there was a deal on and no stock for sale. Murray could not well have understood this to refer to the deals with the Detroit or New York parties, as he already knew about them. Soon after, he saw Town and talked with him. Both deny that anything was said about the deal with the Lansing syndicate, though it was in effect closed at that time. The next day Murray went to Battle Creek to secure plaintiff’s stock. Not having seen him, he went again on the 29th. He states as a reason for not going on the 30th that that was Sunday. The calendar shows he was mistaken in this, but it is significant that on that day, the 30th, the contract between Town and the Lansing syndicate was executed at Charlotte. On the next day Murray drove to Battle Creek in his car, reaching there about 8 o’clock in the morning. He admits that before leaving Charlotte he spoke to Town about helping him to get the money to buy the stock. While the deal for plaintiff’s stock was pending in Battle Creek, Murray called up Town and read a paper to him. They both claim that it was not the option but the assignment of the stock certificate. They both admit that Town told Murray about the Lansing deal on the next day, November 1st. The question naturally occurs, If Town felt at liberty to tell about it on November 1st why would he not have informed Murray about it on the 31st when he knew Murray was trying to buy plaintiff’s stock? On October 31, 1916, the day after the agreement with the Lansing syndicate was made, Town wrote to K. F. Ranger, who was a stockholder in the company, the following letter:

“There are some changes being contemplated in the Duplex and no doubt in taking in more capital, our interests will be somewhat influenced by the new additional capital and it is proposed that we make settlement most satisfactory to ourselves in the way of cash for our stock, or stock in the new organization which no doubt will be the result of the change.
“If you will inform me what you desire for your stock by return mail or if you desire to take stock in the new organization please so state, and you will greatly oblige. Please inform me at your earliest convenience as we can get a good price for our stock at this time no doubt and- by stating what you desire for yours, we can then govern ourselves accordingly.”

The money to pay for plaintiff’s stock was secured by a loan, for which Town indorsed Murray’s note to the bank. When Murray got the stock, he issued new certificates therefor, as before stated, and out of the proceeds he paid the judgment Town had theretofore secured against plaintiff.

Under the rule as to the weight to-be given to circumstantial evidence, can these facts, all of which are admitted by Murray or are established beyond question, be true and it be said that he had no such knowledge? We cannot believe that any jury would so conclude, nor can we do so. We feel constrained to hold that at the time Murray secured the option from Wurst he knew all about the contract which Town had entered into relative to the sale of the assets of the company to the Lansing syndicate.

Did Murray commit a fraud upon, plaintiff by not informing either him or Wurst about it? It is the claim of the defendants that though Murray was an officer of the corporation and stood in a fiduciary relation to it, he occupied no such relation to the individual stockholders and was under no obligation to advise the plaintiff as to any information he possessed relative to the value of the stock. Attention is called to the language of Justice Grant in Walsh v. Goulden, 130 Mich. 531, at page 539:

“Directors, of course, stand in a fiduciary relation to the corporation itself. They do not stand in that relation, however, when dealing with other stockholders for the purchase or sale of stock. In the purchase and sale of stock between stockholders there must be some actual misrepresentation in order to constitute fraud. Mere silence is not sufficient. The books of the corporation are open to all stockholders alike, and each may inform himself of the condition of the company.”

Counsel also cite 2 Thompson on Corporations (2d Ed.), § 1419; 8 Thompson on Corporations (2d Ed.), § 1419; 2 Machen on Corporations, § 1637; 1 Cook on Corporations (7th Ed.), § 320.

The reason for the rule thus stated is clearly summarized in the closing part of the quotation:

“The books of the corporation are open to all stockholders alike, and each may inform himself of the condition of the company.”

As applied to a going concern, whose records reveal the book value of the stock, and the good will and intangible assets of which are presumably as well known to one stockholder as another, there may be no hardship in so holding. But the proofs in this case present a different situation. The affairs of the corporation had not been prosperous for several years. Mr. Town testified that in 1913 one could not sell the stock “for ten cents on the dollar.” While the negotiations at Battle Creek were pending, Wurst testified:

“A. On the way down to the bank I says, ‘How is business over there?’ ‘Why,’ he says, ‘It is pretty good.’ He says, ‘It ain’t as good as it ought to be, or as good as it can be made.’ He says, ‘They don’t seem to just manage the thing right to make it go shccessfully.’
“Q. Did he make any statement as to whom he was purchasing this stock for?
“A. He says — that was at the time he wanted the twenty-day option, he says, T have got a chance now to get the money for Maurice. Maurice and me have been pretty good friends, I always like Maurice well. I have got a chance now to get this money for him. A relative of mine from Ohio wants to take this stock over.’
“Q. Did he say anything about the value of the stock, whether that price he was paying was a fair price — a good price?
“A. Yes, sir, that that was a good price. He says, ‘It ain’t every day that you can sell stock at par.’ ”

It is apparent that Bollstrom’s suspicions were aroused when Murray approached him to buy. this stock. His relations with Town had not been friendly, and he knew that Town was the dominating power in the board of directors. He testified as to his conversation when he first met Murray on the 81st:

“He was waiting in his car on the street near our home in the morning, the approximate time that I expected to go down town between seven and eight in the morning. He hailed me. I did not play up to him very strong. He says, ‘I am not going to hurt you, I am here to do you good. I am a friend of yours. I have always been a_friend of yours.’ He asked me about the stock and i did not give a direct answer. I asked him what he wanted and he said he knew where that stock could be disposed of, and I asked him who wanted it. He said that didn’t cut any figure who wanted it, if I wanted to sell it. I said something about liking to deal with a person direct and told him to let me know who wanted it, and I would look into it, and he said that could not be done because he had to make a deal that day or not at all, the deal would be all off. He just had that little time. I asked him how that was, or words to that effect. He said it was some out of town people that nobody knew any way, saying it did not matter if I wanted to dispose of it who it was, and I said I was going to know. He said it was a relative in Ohio. I knew he had relatives there and asked if they had the money. * * * I asked how much they wanted to pay for the stock and he asked how much I would take. I said I would have to look into it and the conversation along .that line went on. He suggested par and I expressed doubts because I did not get a clear explanation of what I wanted to find out. I expressed doubt whether I could get Mr. Wurst in that length of time. I was told it would be a very fine thing for me, again reiterating his friendship and I suggested they might put in writing what they would do and he said that could not be done because the deal had to be concluded that day or there would not be anything done. He said par might be paid, and I said I would see.”

These statements were denied by Murray, but on cross-examination he testified:

“A. I told them I thought I was paying enough for it.
_ “Q. In other words you told this man there at that time that you were paying them what you considered to be a good price for that stock?
“A. Yes, sir.
“Q. A fair price, and all it was worth?
“A. Yes, sir, I did so consider it.
“Q. You told them that was your opinion, didn’t you?
“A. Yes, sir.”

He further testified:

“Q. Did you tell them a syllable about it?
“A. Yes, there was something said about a deal; Mr. Bollstrom asked about the deal, asked what was doing, I didn’t know what to tell him. There wasn’t anything to tell him. * * *
“Q.’'He asked you a question and you didn’t answer it?
“A. Yes, I answered it, there was not anything particular doing that I knew of.”

And again:

“I don’t recollect Bollstrom asking me in whose interest I was there. I did not tell him I had some people, relatives in Ohio, that would like to get this stock. My recollection there was no reference made at all to any one in Ohio that would like to buy this stock. I might have said something, but cannot remember, but don’t think I said that.”

Mr. Murray at this time was a director and secretary of the company in which plaintiff was, in equity, a stockholder. As such officer, he had information, not accessible to the stockholders generally from the records, that plaintiff’s stock was worth double its par value. He did talk about it and assured plaintiff and Wurst that they were making a good bargain in selling, getting a fair value for their stock. While, under the authorities on which defendants’ counsel rely, he might have remained silent and declined to advise with them about the value of the stock or the fairness of the deal, the statements which he did make were an inducement to them to sell the stock to him were false in fact, and known by him to be so, and must be held to have been relied op by plaintiff. Any less stringent rule would place it in the power of an officer of a corporation to take advantage of a condition known only to him, and of which the records would afford no information, by which the value of the stock had been greatly enhanced, and, by an assurance to the stockholder that the price offered was a fair one, secure to himself the shares of that stockholder at a price grossly inadequate, in view of the information possessed by him. We think the facts in this case bring it squarely within the rule laid down in Strong v. Repide, 213 U. S. 419 (29 Sup. Ct. Rep. 521). In that case the president of a corporation purchased stock at much less than its par value as known to him and due to conditions unknown to the stockholders. The court said:

“If it were conceded, for the purpose of the argument, that the ordinary relations between directors and shareholders in a business corporation are not of such a fiduciary nature as to make it the duty of a director to disclose to a shareholder the general knowledge which he may possess regarding the value of the shares of the company before he purchases any from a shareholder, yet there are cases where, by reason of the special facts, such duty exists. The supreme courts of Kansas and of Georgia have held the relationship existed in the cases before those courts because of the special facts which took them out of the general rule, and that under those facts the director could not purchase from the shareholder his shares without informing him of the facts which affected their value.”

After a review of the facts, the court concluded:

“If under all these facts he purchased the stock from the plaintiff, the law would indeed be impotent if the sale could not be set aside or the defendant cast in damages for his fraud.”

Judge Peckham, who wrote the opinion, cites Stewart v. Harris, 69 Kan. 498 (77 Pac. 277, 66 L. R. A. 261, 2 Ann. Cas. 873); Oliver v. Oliver, 118 Ga. 362 (45 S. E. 232). These cases are very instructive on the general proposition here presented.

We cannot but conclude that Murray secured this stock by fraud and deception, and that plaintiff was damaged thereby. The amount of such damage was the difference between the sum Murray paid for the stock and its value at the time it was turned in to the Duplex Truck Company. The plaintiff is entitled to recover such amount from the defendant Murray.

The bill of complaint also contains in substance many of the allegations in the bill filed by Rolandus A. Garber and others against Frank P. Town and the other individual defendants herein, praying for an accounting against Town and the other defendants as therein set forth. By this action the plaintiff has affirmed the sale of the 1,161 shares of stock to Murray. He is therefore not entitled to share in the benefits derived by the stockholders at the time of the sale to the truck company under the decree in that case.

The decree of the trial court dismissing the bill of complaint will be reversed and one entered in this court in conformity with this opinion. The plaintiff will recover costs of both courts against the defendant Murray.

Bird, C. J., and Moore, Steere, Brooke, Fellows, Stone, and Kuhn, JJ., concurred.


author: Bird, C. J.

text:
    GUNDICK v. GUNDICK.
    1. Divorce — Alimony—Decree — Amendment — General Rule — Exception — Statute.
    Except as modified by 3 Comp. Laws 1915, § 11408, it is tbe rule in tbis State tbat a decree for permanent alimony containing no reservation of tbe power of modification cannot be altered after tbe expiration of tbe time witbin wbicb an appeal may be perfected.
    2. Same — Decree—Amendment—Justification.
    Where the court below, on motion oí the busband, after expiration of tbe time for perfecting an appeal, modified tbe decree for alimony by changing tbe wife’s undivided interest in tbe homestead to a money interest, wbicb action has no justification on the record under said statute, it was without authority and will be set aside by the appellate court.
    3. Same — Setting Aside Amended Decree — Showing—Abuse oe Discretion.
    Even if the court had authority to amend the decree, held, that, on the uncontroverteu showing made by the wife, on her motion to set it aside, the failure of the court to do so clearly amounted to an abuse of discretion.
    4. Same — Appeal and Error — Final Order.
    An order denying defendant’s motion to set aside an amended decree, being one finally disposing of the controversy, is appealable.
    5. Same — Description op Premises in Decree — Power op Court to Amend.
    The court below, having power to amend the decree by correcting the description of the premises therein, that part of the decree so amending said description will be affirmed.
    Appeal from Wayne; Brennan (Fred W.), J., presiding.
    Submitted October 14, 1919.
    (Docket No. 44.)
    Decided December 22, 1919.
    Bill by Albert Gundick against Martha Gundick for a divorce. Defendant filed a cross-bill asking for a divorce. From an order denying a motion to set aside an amended decree for defendant, she appeals.
    Reversed.

      William C. Gottman, for plaintiff.

      Samuel W. Shier, for defendant.
   Bird, C. J.

This is a divorce proceeding in which the defendant was granted a decree of divorce on her cross-bill. She was awarded the household furniture and an undivided one-half interest in a land contract, which had constituted their homestead, and of which she had possession. The purchase price of the premises was $2,800, upon which they had paid $1,100. The decree was filed April 18, 1919. On May 12th, upon motion of plaintiff’s solicitor, the decree was amended by the trial court. As amended, it divested defendant of her interest in the land contract and provided that upon payment to her of $555 plaintiff should be entitled to an assignment of her interest therein, and that if she refused t'o accept the money and make an assignment the money should be deposited with the clerk of the court, and the decree should operate as an assignment of her interest. ,The recitals in the amended decree show the reasons for amending the original decree:

“It duly appearing to the court that there are errors apparent upon the face of the decree heretofore entered, the same having been incorrectly drafted, and it further appearing that the property given to the said Albert Gundick and Martha Gundick jointly and left to be divided between them is both misdescribed in the decree and is liable to be lost because of a threatened forfeiture of the land contract by Albert Eastman, the titleholder thereof, and the attorney for the said Albert Gundick having a purchaser ready to pay sufficient to give them each $555 for their respective contract interests, therefore, etc.”

The description of the premises was also amended to show the particular block in which they were situate.

Several days after the amended decree was filed defendant learned of it and at once informed her solicitor that she was opposed to its terms and instructed him to protect her interests. Her solicitor making no move to this end, she employed another solicitor, and a motion was filed on June 17th to set aside the amended decree for various reasons, principally because it was inequitable and a fraud upon her rights. The showing in support of the motion included the affidavit of defendant, which shows:

(a) That she had no knowledge of the amended decree until several days after it was entered and filed, that she was not advised that any such step was contemplated, and that her solicitor neither advised her of the motion nor consulted her about it prior to its being heard. She further shows that her interest in the premises is worth in excess of $555, and that she expended several hundred dolíais thereon during the time the divorce proceedings were pending, and that she is desirous of acquiring the entire interest in said property. She further shows that after the original decree was granted her solicitor endeavored to purchase her interest in the property for $150. That she refused to sell for that price, and that he then offered her $250, and after the amended decree was made he urged her to accept the $555 and remove therefrom.

(b) It is shown by the affidavit of Mr. Eastman, the title owner of the premises, that he never threatened to forfeit the contract, but on the contrary had assured defendant he would assist, her in purchasing plaintiff’s interest therein, after the proceedings were ended.

(c) It is shown by the affidavit of her present solicitor that he had searched the files and records of court and that no motion or petition to amend the decree is in the files of said court, and neither is there any calendar entry of the filing of the motion to amend said decree.

This motion was heard on July 12th and denied, whereupon defendant appealed to this court. Later plaintiff’s counsel filed a motion to dismiss the appeal on the ground that the order was not an appealable one. Action on this motion was postponed until the decision of the case.

1. The rule with reference to the modification of decrees for alimony is stated as follows:

“A decree for permanent alimony is subject to modification because of fraud or mistake in the same manner and under the same circumstances as other decrees. The general rule would seem to be that where the divorce is absolute a decree for permanent alimony containing no reservation of the power of modification cannot be altered after the expiration of the time within which an appeal may be perfected.” 14 Cyc. p. 784.

And the reason of the rule is that the jurisdiction of the court over the subject-matter of -the suit and of the parties terminates with the entry of a final judgment except as to proceedings for its enforcement or for the correction of mistakes in the record. Walker v. Walker, 155 N. Y. 77 (49 N. E. 663).

In Perkins v. Perkins, 12 Mich. 456, an application was made to amend a.decree for alimony in a similar way. The trial court granted the amendment but this court set it aside, and, in doing so, said in part:

“The only ground stated in the petition for changing the decree is, that defendant did not know, at the time it was made, that complainant would, be entitled to dower in his real estate. If defendant was dissatisfied with the decree, he should have appealed; and not having done so the error, if there be one, cannot be corrected, after the time for appealing has expired, by petition under the statute.”

In Reynolds v. Reynolds, 115 Mich. 378, a like attempt was made to amend a decree for alimony by making it a lien upon the defendant’s property. This was held to be irregular.

The record in the present case does not show that any notice of appeal had been filed and no claim is made to that effect, and at the time the amended decree was filed it was too late to file such notice of appeal. 3 Comp. Laws 1915, § 13754. The only exception to this rule that we are aware of is the statute which provides that the circuit court, in chancery, may revise and alter decrees in divorce cases on petition of either of the parties. 3 Comp. Laws 1915, § 11408. The record gives no evidence that this action was taken in reliance upon this statute but even if it were there was no showing which would justify the action of the court under that statute. Perkins v. Perkins, supra; Reynolds v. Reynolds, supra. We must, therefore, conclude that the trial court exceeded its authority when it amended the decree in matters of substance by converting her interest in her home to a money interest.

But aside from the question of lack of authority we think defendant’s motion should have been granted. When it appeared, without contradiction, that the proceedings to amend the decree had been taken without defendant’s knowledge and consent, and that she had been thereby divested of her interest in her homestead upon a petition or motion which was in the air instead of in the files, when it appeared that the chancellor’s impression concerning the danger of the contract being forfeited was erroneous, and when it appeared that defendant’s solicitor had been recreant to his trust, the court should have promptly set aside the amended decree and given her an opportunity to secure other counsel and be heard upon the question of the value of the land and her ability to take care of the indebtedness. The failure to do so upon the part of the court was clearly an abuse of discretion.

The question is raised as to whether the order denying defendant’s request to set aside the decree is an appealable order. The order made by the trial court was one finally disposing of the controversy and was conclusive in dispossessing defendant of valuable rights. Under these circumstances we entertain no doubt as to defendant’s right to have the order reviewed by this court. Michigan Insurance Co. v. Whittemore, 12 Mich. 311; Tucker v. Stone, 92 Mich. 298. In the latter case a petition was filed in the trial court to correct the final decree. The prayer of the petition was denied. An appeal was taken, followed by a motion to dismiss on the ground that the order was not an appealable one. This court denied the motion to dismiss, saying:

“Complainant moves to dismiss the appeal on the ground, first, that it is not a final order. There is no doubt that this is a final order. See Webber v. Randall, 89 Mich. 531, and cases cited; Kingsbury v. Kingsbury, 20 Mich. 215. This order finally closed the case as against the defendant. It was held in Michigan Insurance Co. v. Whittemore, 12 Mich. 311, that an order refusing to set aside a decree for irregularity was a final order and appealable.”

Our conclusion is that the amended decree must be set aside except that portion thereof which corrects the description of the premises in the original decree. It was within the power of the court to make this correction and as to that part of the order the amended decree will be affirmed. The motion to dismiss will be denied and defendant will recover costs of the appeal in both courts, and also costs on the motion in both courts.

Sharpe, Moore, Steere, Brooke, Fellows, Stone, and Kuhn, JJ., concurred.


text:
    MALONEY v. WEBBER.
    Justices of the Peace — Jurisdiction—Trespass to Lands — Certifying Cause to Circuit Court.
    In an action in justice’s court for trespass on certain real estate owned in fee by tbe plaintiffs, where defendants pleaded the general issue and gave notice of justification under authority by plaintiffs to defendants’ employer to use the same, and on the trial admitted plaintiffs’ title, the justice had jurisdiction to try said cause; 3 Comp. Laws 1915, § 14237, providing that where plaintiff’s title shall not be admitted by defendant the justice shall certify the cause to the circuit court, etc., not being applicable.
    Case-made from Kent; Brown (William B.), J.
    Submitted October 15, 1919.
    (Docket No. 55.)
    Decided December 22, 1919.
    Rehearing denied January-28, 1920.
    Case in justice’s court by Anna Maloney and another against Arthur Webber and another for trespass upon land. There was judgment for defendants, and plaintiffs appealed to the circuit court by writ of certiorari. Judgment for defendants. Plaintiffs appeal.
    Affirmed.

      Ellis & Ellis, for appellants.

      Cornelius Hoffius and Fred P. Geib, for appellees.
   Bird, C. J.

Defendants appeared in justice’s court in response to a civil warrant to answer a charge of trespass on certain real estate owned in fee by the plaintiffs. Defendants pleaded the general issue and gave notice thereunder, as follows:

“Please take notice that under the general issue the defendants will justify the acts complained of on the ground that they were employees of the Kent county road commission, which commission was authorized by plaintiff to use the premises in question, and that defendants were using it in pursuance of and by virtue of such authority.”

Upon the trial defendants admitted that plaintiffs had title to the land described in the declaration. They showed, under objection of plaintiff’s counsel, that they were employees of the board of county road commissioners. They offered testimony tending to show that in December, 1916, the chairman of the board had secured from plaintiffs the right to use a portion of the land in question during the years 1917, 1918 and 1919, for a railway sidetrack, to aid in a nearby road construction, for a consideration of $100, and that the same had been used for such purpose without protest or hindrance during the season of 1917 and 1918, up to the time of their arrest.

Plaintiffs’ counsel objected strenuously to the admission of this testimony, claiming that it raised a question of title; that if defendants desired to contest plaintiffs’ title they should proceed under section 14287 of the Compiled Laws of 1915, but the objections were overruled by the justice and later judgment was rendered for the defendants. Plaintiffs then removed the proceedings to the circuit court by certiorari, where the same contentions were made and the same result was reached. The section of the statute referred to provides that:

“If it appear on the trial from the plaintiff’s own showing that the title to lands is in question, which title shall not be admitted by the defendant, the justice shall, without further proceeding, certify the cause and paper to the circuit court of the county where the same shall be tried.” * * * 3 Comp. Laws 1915, § 14237.

This section does not appear to be applicable as defendants conceded from the beginning, and now concede, that plaintiffs have the title to the premises. Under the express terms of the statute it is only when the defendants refuse to admit the title of the plaintiff that there is any necessity for certifying the case to the circuit court. In other words, it is only when the title is in dispute that this section is applicable. Ostrum v. Potter, 71 Mich. 44. In the case cited it was observed that:

“It was not the design of the legislature to confer upon justices’ courts jurisdiction to try titles to lands, and they have provided a way, in actions for trespass or other actions where the damages claimed fall within the jurisdiction of the court, where the title to land may be involved, for a trial to be had before the justice, namely, where the title claimed is admitted.”

Owing to the discussion between counsel and the court over the question whether title was in issue the precise contention of plaintiffs on the merits was somewhat obscured. But whether their claim was that defendants had no permission to go upon and use the land, or were using land not included in the permission granted, is not of much importance, as the justice had jurisdiction in either event, under defendants’ concession concerning the title. We think no further discussion of the case is necessary.

The judgment of the circuit court is affirmed.

Sharpe, Moore, Steere, Brooke, Fellows, Stone, and Kuhn, JJ., concurred.


text:
    PEOPLE v. LUPU.
    1. Criminal Law — Rape—Assault with Intent to Commit the Crime of Rape — Simple Assault.
    In a prosecution for statutory rape, the defendant may be convicted of rape, of assault with intent to commit the crime of rape, or of simple assault.
    2. Same — Trial—Instructions as to Lesser Offense.
    In such prosecution, where the trial judge instructed the jury that if they did not find defendant guilty of rape they might find him guilty of assault, and advised them as to what conduct would constitute an assault, but did not advise them that they could convict him of an assault with intent to commit the crime of rape nor as to what conduct would constitute that offense, a conviction thereof will be set aside, on error.
    3. Same — Lesser Offense — Distinction.
    Failure of the trial court to explain to the jury the distinction between simple assault and assault with intent to commit the crime of rape, held, prejudicial.
    Error to recorder’s court of Detroit; Jeffries, J.
    Submitted October 16, 1919.
    (Docket No. 111.)
    Decided December 22, 1919.
    Alexander Lupu was convicted of an assault with intent to commit rape, and sentenced to imprisonment for not less than one nor more than ten years in the Detroit house of correction.
    Reversed.

      William Look, for appellant.

      Alex. J. Groesbeck, Attorney General, Matthew H. Bishop, Prosecuting Attorney, and Herman H. Green-berg, Assistant Prosecuting Attorney, for the people.
   Bird, C. J.

Respondent was informed against in the recorder’s court of the city of Detroit for having committed the crime of statutory rape. After considering the proofs placed before them, the jury adjudged him guilty of an assault with intent to commit the crime of rape. Several errors are assigned by counsel in his behalf on the court proceedings, which led to his conviction. The important one and the one which must control the disposition of the case was the failure of the trial court to advise the jury what conduct would constitute an assault with intent to commit the crime of rape. The jury were charged that:

“If you do not find him guilty of rape beyond a reasonable doubt, gentlemen of the jury, as charged in the information, you may find him guilty of an assault, if you believe him guilty of that beyond a reasonable doubt.
“An assault is an offer or attempt, by violence, to do a corporal hurt to another, coupled with the present means or ability to carry it into effect.”

It was said in People v. Courier, 79 Mich. 366:

“Under an information charging carnal knowledge and abuse of a female child under the age of 14 years, the accused may be convicted of an assault with intent to commit that offense, or of simple assault.”

In commenting upon this case in People v. Abbott, 97 Mich. 484 (37 Am. St. Rep. 360), where a like question was raised, the court said:

“In this case it was a question for the jury, under the evidence in the case, to determine whether the respondent was guilty of rape, of assault with intent to commit that crime, or of simple assault; and the court should have directed them what constitutes the lesser offenses, and that they might convict on either of these lesser offenses” — citing Hall v. People, 47 Mich. 636.

See, also, People v. Durham,, 170 Mich. 598.

In the present case the trial court left it to the jury to determine whether the respondent was guilty of rape, and they were further instructed that if they did not find him guilty of that offense they might convict him of an assault, and they were advised what conduct would constitute an assault, but they were not advised that they could convict the respondent of an assault with intent to commit the crime of rape, nor was it explained to them what conduct would constitute that offense. It may be said, however, in this case that the court’s failure to instruct the jury that they might convict the respondent of an assault with intent to commit the crime of rape was not prejudicial, inasmuch as they convicted him of the lesser offense, but the difficulty is they did so without being instructed what elements would constitute that offense. The average jury would not be supposed to know without being instructed what elements would constitute the lesser offense. Had the distinction between a simple assault and an assault with intent to commit the crime of rape been explained to the jury, they might have reached a different conclusion than they did. For this reason the judgment of conviction must be set aside and a new trial ordered.

Sharpe, Moore, Steere, Brooke, Fellows, Stone, and Kuhn, JJ., concurred.