Court Opinion

ID: 3499222
Source: CourtListenerOpinion
Date Created: 2016-07-05 22:06:30.703271+00
Date Added: 2024-06-11T14:05:17.111194
License: Public Domain

Arda M. Johnson, individually, and as administratrix of the estate of William T. Johnson, deceased, sued defendant. There was verdict and judgment for plaintiff. A motion to set aside the verdict and enter judgment for defendant was denied. A motion for a new trial was denied. Defendant brings error, assigning 34 reasons for reversal, grouped under five heads as follows:
(1) The declaration is insufficient to sustain the verdict.
(2) There was no evidence of tender by plaintiff before suit of what was received under the contract. *Page 559 
(3) There was no evidence that decedent relied on the alleged misrepresentations.
(4) Deceased relied upon and acquiesced in the transaction after knowledge of the claimed fraud.
(5) Prejudicial argument by counsel for plaintiff.
The declaration has three counts, the first two of which charge defendant with having procured, through its agents, the money of plaintiff's intestate and plaintiff's assignor by false and fraudulent representations and pretenses. It is charged that defendant's agents represented they were selling stock in defendant, whereas they delivered memberships therein. The third count is the common counts in assumpsit.
Defendant challenges the sufficiency of the declaration for the reasons, — that it does not allege facts sufficient to sustain a cause of action; it does not count upon the statute, 3 Comp. Laws 1915, § 12350; and the counts for tort are improperly joined with the count in assumpsit.
The first two counts in the declaration allege that defendant's agents made false representations and pretenses to plaintiff's intestate and plaintiff's assignor, which representations and pretenses are set forth in the declaration; that plaintiff's intestate and plaintiff's assignor relied upon such false representations and pretenses; that defendant thereby procured their money which it would not have procured had they not relied upon such false representations and pretenses; and that plaintiff's intestate and assignor were injured thereby. We think either of these two counts in the declaration sufficient to sustain the verdict, and it is self-evident that the common counts in assumpsit are sufficient.
The claim that the declaration does not count upon section 12350, 3 Comp. Laws 1915, which provides that in cases where an action on the case for fraud or deceit may by law be brought, and in cases of the conversion of personal property into money, the plaintiff may *Page 560 
bring and maintain either an action of assumpsit or an action of trespass on the case, is without merit.
Defendant contends that the two tort counts in the declaration cannot be joined with the count in assumpsit; that plaintiff's intestate and assignor and plaintiff, upon the discovery of defendant's alleged fraud, had the choice of two inconsistent remedies, — to retain what had been received, affirm the contract and seek to recover damages for the fraud; or to rescind the sale, tender back to defendant what had been received, and seek to recover what plaintiff's intestate and assignor had parted with. Stowe v. Mather, 234 Mich. 385.
It seems to be a well-settled rule in this State that counts based upon rescission of a contract and upon breach of contract may be joined. Glover v. Radford, 120 Mich. 542; Goldman v.Great Lakes Foundry Co., 230 Mich. 524; Stowe v. Mather, supra.
We think the declaration in this case is sufficient.
It is a general rule where plaintiff seeks to rescind a contract upon the ground that it was induced by fraud, and recover back the money paid thereon, he must, as a condition precedent, tender back whatever of value he has received, and thus place the defendant in statu quo. The defendant's agents sold stock. It delivered so-called memberships. It obtained the money of plaintiff's intestate and assignor by false pretenses and representations as to what it was selling. Plaintiff's intestate and assignor and plaintiff had a right to rescind. The record shows that the secretary of State ordered defendant to default and cancel all memberships on which nothing had been paid before June 1, 1925. Defendant sent a release of liability to plaintiff's intestate and assignor in which they were asked to acknowledge that defendant was under no obligation to them. In view of the facts, of the position taken by the State and by defendant that these memberships were worthless, and should *Page 561 
be canceled and defendant released from liability, it was unnecessary for plaintiff's intestate and assignor or for plaintiff to tender back the receipts or certificates of membership before instituting suit. Stubly v. Beachboard,68 Mich. 401; Pangborn v. Ruemenapp, 74 Mich. 572; Joslin v.Noret, 224 Mich. 240.
The law does not encourage fraud. It does not deny relief because the fraud has been successful. One who has perpetrated a fraud cannot be heard to say that the person defrauded ought not to have relied upon his false pretenses. The proof is conclusive that false representations were made by defendant's agents. They thereby procured the money of plaintiff's intestate and assignor. The false pretenses and representations made are shown to have been a part of a general scheme of defendant's agents to obtain money by false pretenses and representations. That plaintiff's intestate and assignor parted with their money, and defendant's agents received it shows sufficient reliance upon the fraud. Eaton v. Winnie, 20 Mich. 156
(4 Am. Rep. 377); Sawyer v. Menominee Loan  BuildingAss'n, 103 Mich. 228; Smith v. McDonald, 139 Mich. 225. The testimony was sufficient to warrant the conclusion that plaintiff's intestate and plaintiff's assignor believed and relied upon the false representations made.
Defendant is a building and loan association organized and existing under the laws of the State of Michigan. It is purely a creation of law and exists only by authority of law. It possesses no power or authority except that which is expressly or impliedly conferred on it by law. 14 C. J. p. 51, § 3;Schuetzen Bund v. Agitations Verein, 44 Mich. 313 (38 Am. Rep. 270). A corporation which exercises or seeks to exercise corporate powers or privileges of a particular kind ought to be able to point to the law which authorizes the exercise of those powers and privileges. No act for *Page 562 
creating a corporation can be extended to cases not reasonably covered by its terms. The determination of the conditions and powers of corporate existence is peculiarly a matter of policy and requires legislative judgment. Stewart v. Father MatthewSociety, 41 Mich. 67.
Building and loan associations, from some real or imaginary benefit they are supposed to afford the poorer classes of society, are given exceptional advantages over other corporations and private persons. Phelps v. Savings  LoanAss'n, 121 Mich. 343. Experience has proved that such associations have not been free from the baleful influence of the desire for money getting. Stoddard v. Building  LoanAss'n, 138 Mich. 73.
Section 37, Act No. 255, Pub. Acts 1917 (Comp. Laws Supp. 1922, § 10023 [8]), was passed prohibiting them from directly or indirectly doing a banking business or advertising for or accepting deposits. Plaintiff's intestate and assignor were not depositors in defendant. It was forbidden to receive deposits. One-fifth of the money paid by them went to defendant; four-fifths of it went to defendant's agents. No interest on the money paid to defendant was to be received. Their supposed rights, according to defendant, were subject to cancellation and the money paid by them to confiscation. They did not become stock-holders in defendant. They could not vote for directors. They could not participate in the control of defendant. They could not share in dividends in case of winding up defendant. Memberships in defendant as sold were not securities. If plaintiff's intestate and assignor had bought stock in defendant they would have had to pay its full par value.
Defendant procured the money of plaintiff's intestate and assignor and purported to give them the right to deposit money with the defendant. There was then *Page 563 
nothing in the statute authorizing a building and loan association to sell memberships therein independent of the sale of its stock. These memberships were a subterfuge for procuring from the plaintiff's intestate and assignor money for defendant's agents and defendant. So common became the frauds perpetrated by the method pursued by defendant, that Act No. 207, Pub. Acts 1925, was passed which provides (§ 5):
"No membership fee in excess of three dollars, the actual amount of which to be determined by the secretary of State, may be charged for each one hundred dollars of capital stock subscribed nor shall stock or membership certificates be sold or transferred on commission nor at a premium either directly or indirectly. All moneys received from whatever sources, including membership fees, shall be paid into the treasury of the association and disbursed by the proper officers as provided by the by-laws."
Prior to the enactment of this statute, a building and loan association, under the law of this State, had no authority to sell memberships independent of its stock as a security therein, or to exact a fee therefor. By the enactment of Act No. 207, Pub. Acts 1925, the legality of membership fees within the limits of that statute was approved, but money taken by defendant for membership fees prior to the enactment of Act No. 207, Pub. Acts 1925, was improperly taken because such memberships were not legally authorized.
Plaintiff's intestate acted with reasonable promptness. There was testimony that he was sick. Defendant's correspondence was designed to lull him into security. Under such circumstances the law will not refuse relief because he was not diligent, but reposed too much confidence in defendant. Miller v. SavingsBank, 227 Mich. 316.
Defendant assigns error because of the argument of plaintiff's counsel. The argument of defendant's counsel is not reported. Many of the things stated *Page 564 
by plaintiff's counsel objected to by defendant were within the proof. The trial court charged the jury to disregard some improper remarks when they were made. In some cases the statements of counsel were stricken from the record. Some of them were in reply to defendant's argument. Many of the things stated by plaintiff's counsel might well have been unsaid. Upon the whole record we do not think plaintiff's improper argument sufficient to warrant a reversal of the case. Judgment should be affirmed, with costs.