Court Opinion

ID: 3494083
Source: CourtListenerOpinion
Date Created: 2016-07-05 22:02:09.013512+00
Date Added: 2024-06-11T14:05:10.743593
License: Public Domain

During the year 1937, plaintiff offered for sale through Brown, Anthony  Company, Incorporated, a brokerage corporation, an issue of capital stock. Brown, Anthony 
Company, by approval of an application filed by it on or about October 19, 1936, had been licensed to deal in securities and had furnished the bond required by the provisions of 2 Comp. Laws 1929, § 9790, as amended by Act No. 229, Pub. Acts 1931, and Act No. 37, Pub. Acts 1935 (Stat. Ann. § 19.762), the defendant Maryland Casualty Company being the surety thereon.
During 1937 and prior to June 30th of said year, the expiration date of the license of Brown, Anthony  Company, said company through its agent, Loren J. Kuehnle, solicited subscriptions for shares of the proposed issue of stock being offered by plaintiff. The subscriptions, in writing, were forwarded to the Detroit office of the brokerage company, and in due time each subscriber received a confirmation of sale, together with a letter acknowledging receipt of the subscription.
The license of Brown, Anthony  Company expired on June 30, 1937, and was not renewed. After said date, the salesman, Mr. Kuehnle, collected the amount of the subscriptions from the various subscribers, payment in each instance being made by a check which was cashed by the brokerage company. However, the certificates of stock were never delivered to the subscribers, nor did plaintiff receive the sums paid by the subscribers therefor from the broker. Thereafter, plaintiff reimbursed each of said subscribers for the sums so paid by them, and received an assignment of any claims they might have against Brown, Anthony  Company and its surety.
Thereupon, this suit was instituted to recover said sums against the insolvent principal and its surety. *Page 361 
The trial court entered judgment against both defendants and the surety has appealed, claiming that its liability as surety on the bond terminated on June 30, 1937, the expiration date of the license of the principal.
It appears to be conceded that Brown, Anthony  Company failed to comply with the provisions of the statute under which it was licensed, and the only question before us is whether or not the liability of the surety on the bond terminated with the expiration of the license.
The statute contains no provision relative to the length of time the bond shall remain in force and the bond itself in terms does not limit liability to the license period.
However, the bond is required in express terms for the protection of the public against the acts of the licensee in violation of the provisions of the statute under which the license is granted. In Timmerman v. Hartford Accident Indemnity Co., 243 Mich. 338, an action was brought to recover on a dealer's bond which had been issued by the defendant surety company in connection with a proposed application for a dealer's license for defendant Bultman. No application for a license was made by Bultman after the bond was issued; the bond was never filed; nor was a license ever granted. Under this state of facts, the plaintiffs sought to recover from the surety on the bond. In denying recovery, it was pointed out that the bond was executed by the surety in furtherance of a statutory purpose, that is, the protection of the public from the unlawful acts of those to whom a license had been issued in accordance with the provisions of the statute, and that the license, the subject matter of the bond, never existed. The foundation of the decision denying liability rests upon the fact that no license existed. *Page 362 
If there is no liability under the bond for acts occurring prior to the granting of the license because of the nonexistence of such license, by what reason can it be said that there is liability for acts occurring after the license has expired? The bond becomes effective upon its acceptance and the issuance of a license by the securities commission; it is for the protection of the public during the life of the license from the prohibited acts of a licensed dealer; and liability terminates thereunder with the expiration of the license.
The unlawful acts of the agent of Brown, Anthony  Company consisted in the misappropriation of funds at various times subsequent to the expiration of the license, and it follows that no recovery therefor can be had against the surety on the bond.
Counsel for appellee contend that the issue involved in the instant case is identical with that involved in City of Detroit
v. Blue Ribbon Auto Drivers' Ass'n, 254 Mich. 263
(74 A.L.R. 1306). The trial judge was of the opinion, and so stated, that the question raised by this appeal was the same as that before the court in the Blue Ribbon Case, and based his conclusion of liability thereon.
The writer of this opinion has diligently endeavored either to harmonize his views with those expressed in City of Detroit
v. Blue Ribbon Auto Drivers' Ass'n, supra, or to distinguish that case from the instant one, but his efforts have been futile.
I believe that the foregoing opinion is sustained byTimmerman v. Hartford Accident  Indemnity Co., supra; UnitedStates v. Smith, 8 Wall. (75 U.S.) 587; Spiegler v. City ofChicago, 216 Ill. 114 (74 N.E. 718); Rumford v. Boston GroceryCo., 111 Me. 116 (88 A. 394); Lyman v. Cheever, 168 N.Y. 43
(60 N.E. 1047); Commonwealth v. Foch Cereal Co., 302 Pa. 373
(153 A. 695); Adams v. *Page 363 State, 105 Tex. 374 (150 S.W. 591); and that the holding in theBlue Ribbon Case, supra, is decidedly in the minority.
The judgment should be reversed as to the defendant surety company, with costs.