Beverly v. Richards

• Decision Date: 05 October 1931
• Docket Number: No. 103.,103.
• Citation: 255 Mich. 508,238 N.W. 270
• Parties: BEVERLY v. RICHARDS.
• Court: Michigan Supreme Court

255 Mich. 508

238 N.W. 270

BEVERLY

v.RICHARDS.

No. 103.

Supreme Court of Michigan.

Oct. 5, 1931.

Appeal from Circuit Court, Kent County; Wm. B. Brown, Judge.

Action by Harriet Beverly against Glendon A. Richards. Judgment for plaintiff, and defendant appeals.

Reversed and remanded with directions.

Argued before the Entire Bench. Joseph R. Gillard, of Grand Rapids (George S. Baldwin, of Munising, of counsel), for appellant.

McAllister & McAllister, of Grand Rapids, for appellee.

WIEST, J.

In July, 1923, plaintiff had $3,300, which she wanted to safely invest and so informed her friend, defendant herein. Defendant was president of the Richards Storage Company, had loaned the company $10,000 for building purposes, and received a certificate for shares of preferred stock to that amount, which he held as security. Plaintiff claims that defendant induced her to invest in shares of preferred stock of that company by representing that it was perfectly safe, came ahead of everything, the buildings more than covered it, would pay 7 per cent. dividends, which she could have quarterly, and, if the company did not so pay the dividends he would pay the same, and she could have her money back any time she wanted it. Plaintiff purchased shares of stock from the company, but selected by the company out of shares held by defendant on account of the mentioned loan, and defendant received from the company the $3,300, paid by plaintiff. For nearly three years thereafter plaintiff received the promised dividends from the company.

In December, 1925, the Richards Storage Corporation was organized. That company was a merger or consolidation of the Richards Storage Company, in which plaintiff held stock, and four other storage companies, in which she held no stock. The consolidation was authorized without dissent by the stockholders of the Richards Storage Company, after full notice of the purpose intended, and plaintiff was content therewith, surrendered her stock in the Richards Storage Company for an equal number of shares in the Richards Storage Corporation, but claims that she so acted upon the representation of defendant that it was the same company with only a change in name. It is inconceivable that she was so misled, for she must have been aware by notice of the purpose that four other companies were to be consolidated with the Richards Storage Company.

Plaintiff received two dividends on her holdings in the Richards Storage Corporation. Thereafter that company paid no dividends and for some time defendant paid her the equivalent of dividends out of his own funds but, February 7, 1930, sent her the following letter:

‘Enclosed please find my check for $57.75, being the balance of the amount the Richards Storage Corp., owes you on your 1929 dividend, but paid by me individually.

‘Since receiving your letter of the 5th instant, and giving the same very careful consideration, I have decided to withdraw any verbal promise I have made you regarding my future actions concerning dividends.’

Thereupon plaintiff tendered defendant her certificates of stock in the Richards Storage Corporation and, asserting rescission thus accomplished, and averring false and fraudulent representations and also a promise to refund her money, brought this suit and had verdict and judgment for $3,300. Defendant prosecutes review.

The circuit judge instructed the jury that, if there were misrepresentations made and afterwards learned by plaintiff to be false and she rescinded the contract and acted with reasonable promptness, she could recover the $3,300 paid for the stock. This was error.

Plaintiff received dividends from the Richards Storage Company and from the Richards Storage Corporation to the amount of several hundred dollars and, while it was not necessary to tender to defendant such dividends before suit, the same should have been considered in reduction of plaintiff's damages. Stowe v. Mather, 247 Mich. 329, 225 N. W. 504; Marten v. Paul O. Burns Wine Co., 99 Cal. 355, 33 P. 1107. See, also, Loomis v. Pease, 234 Mass. 101, 125 N. E. 177;Marr v. Tumulty, 228 App. Div. 559, 240 N. Y. S. 328.

The court also instructed the jury: ‘There is another theory in this case that I have already explained. She says that he told her that she was taking no chances, that she would get 7 per cent interest on her money, and then if she wanted her money back any time, he would pay it back. Then she is entitled to recover if you find she has established her claims by a preponderance of the evidence. If you find she has not established her claims in this regard, then, of course, she is not entitled to recover. You may take this case, ladies and gentlemen of the jury, and decide whether the plaintiff is entitled to recover on either one or both theories. She may recover on either one of these theories by a preponderance of the evidence, or she may recover on both theories by a preponderance of the evidence.’ This was error.

The right to recover upon the promise of defendant to purchase was one entirely apart from fraud inducing purchase of the stock, and...