Holland Furnace Co. v. Allen, 8418.
Decision Date | 08 April 1941 |
Docket Number | No. 8418.,8418. |
Citation | 118 F.2d 969 |
Parties | HOLLAND FURNACE CO. v. ALLEN. |
Court | U.S. Court of Appeals — Sixth Circuit |
E. D. Alexander, of Grand Rapids, Mich. (Alexander, McCaslin & Cholette, of Grand Rapids, Mich., on the brief), for appellant.
George S. Norcross, of Grand Rapids, Mich. (Warner, Norcross & Judd, of Grand Rapids, Mich., on the brief), for appellee.
Before HICKS, SIMONS, and ALLEN, Circuit Judges.
Suit for conversion of 300 shares of common stock of appellant, Holland Furnace Company. The court hearing the case without a jury awarded damages in the sum of $8,524.48 and interest.
Appellee, Allen, was continuously employed in the sales department of the Company from November, 1926, to December, 1937, with the exception of a lay-off from January, 1933, to April, 1935.
In February, 1931, appellee purchased through the Company (it having advanced the money), 200 shares of its common stock at $31 per share, transferring to it as collateral 100 shares which he owned. His obligation to the Company, including brokerage charges, was $6,230. Up to August 1, 1933, he was credited with $1,350 but no further payments were made.
About September 27, 1935, the Company sold the 300 shares without notice to appellee, receiving $18 a share on 200 shares and $18 1/8 a share for the remainder. It applied the proceeds on appellee's account and cancelled the deficit.
The court held that the sale, being without notice, violated Sections 9561-9563 of the Compiled Laws of Michigan, 1929. We quote Sec. 9561:
Appellee's purchase was made following the issuance by appellant over the signature of Landwehr, its sales manager, of Sales Department Bulletin No. 12, dated February 19, 1931. The bulletin was addressed to "Holland Furnace Company Employees" and outlined three plans for the purchase of stock. Deferred payment Plan No. 2 under which appellee applied for the 200 shares is as follows:
We quote two other paragraphs from Bulletin No. 12 as follows:
Pertinent portions of appellee's application for stock made in response to the bulletin follows:
Appellee's agreement with appellant must be found in the two documents from which we have just quoted. Appellant was a manufacturer and not a stock broker. It was to purchase stock for appellee from money advanced by it upon which appellee would pay interest out of dividends earned by the stock. The stock purchase, plus 100 additional shares, was put up as collateral to protect appellant. Appellee agreed to repay the money advanced in about three and a half years.
Obviously, no sale of the purchased stock on behalf of appellee was contemplated. Bulletin No. 12 recommended the stock "as a good buy for an investment" and we think that the transaction was considered an investment by the parties. If a sale were made it would be to protect appellant's advance, and not because of any contract, express or implied, to sell for the purchaser. The fact that appellant took title to the stock and retained the right to sell upon default did not affect the further fact that the stock was in the words of the statute "pledged as collateral security for the payment of money."
There is nothing in the contract providing the procedure in case of sale or indicating that there might be a private sale or that the debtor waived the statutory requirements for a sale. Wilkes v. Allegan Fruit & Produce Co., 233 Mich. 215, 206 N.W. 483. The contract was a Michigan contract, to be performed there, and is governed by Michigan law. Hence, by selling the stock without the statutory notice to appellee, appellant exercised an unauthorized dominion over it and a conversion resulted. Bennett v. Holland Furnace Co., 2 Cir., 116 F.2d 218. The statute, after all, is substantially an embodiment of the common law. Williston on Contracts, Rev.Ed., Vol. 4, sec. 1043, p. 2915; Edwards on Bailments, p. 248, et seq.
Appellant contends that appellee became acquainted with all the material facts in connection with the sale and failed to repudiate it for over two years and thereby ratified it as a matter of law. The court held that appellee did not ratify the conversion either expressly or by implication.
The law is that any purported ratification must have been made with knowledge of the material facts. Restatement of the Law of Agency, sec. 91; First Natl. Bank v. Alton Mercantile Co., et al., 8 Cir., 18 F.2d 213; Corrigan v. Bobbs-Merrill Co., 228 N.Y. 58, 126 N.E. 260, 10 A.L.R. 662; Myers v. Shipley, 140 Md. 380, 116 A. 645, 20 A.L.R. 1460.
Tahaney, Secretary and Assistant Treasurer of appellant, testified that appellant was carrying a half million dollars in defaulted stock-employee accounts such as appellee's, and Cheff, the General Manager, testified that when appellant's stock began to rise, the officers adopted the policy of selling out each account...
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... ... Allegan Fruit & Produce Co., 233 Mich. 215 [206 N.W. 483]; Holland Furnace Co. v. Allen (C.A. 6), 118 F.2d 969 ... [361 Mich. 320] 'There ... ...