Detwiler v. Glavin
| Citation | 377 Mich. 1,138 N.W.2d 336 |
| Decision Date | 07 December 1965 |
| Docket Number | Nos. 25-27,s. 25-27 |
| Parties | John W. DETWILER, Plaintiff and Appellant, v. Clem GLAVIN, d/b/a Glavin Oil Company, Defendant and Appellee. William Robert BRYANT, Plaintiff and Appellant, v. Clem GLAVIN, d/b/a Glavin Oil Company, Defendant and Appellee. LeRoy H. PECAR and Ann M. Pecar, Plaintiffs and Appellants v. Clem GLAVIN, d/b/a Glavin Oil Company, Defendant and Appellee. |
| Court | Supreme Court of Michigan |
Orville F. Sherwood, Detroit, for plaintiffs and appellants.
Cozadd, Shangle & Smith, Detroit, for defendant and appellee.
Before the Entire Bench.
Presented by this appeal are 2 questions. First, whether the disposition of a prior suit brought by plaintiffs, LeRoy H. Eecar and Ann M. Pecar, against defendant renders the issues raised by this suit res adjudicata. The second is the construction of a statute commonly called the Blue Sky Law. 1
The controversy grows out of the purchase, assignment and reassignment of oil and gas leases. In May 1955, Elmer and Elizabeth Flaugher executed an instrument entitled 'OIL AND GAS LEASE' which provided that for consideration they:
'Grant, demise, lease and let unto the said lessees [Central Michigan Oil Co.] for the sole and only purpose of mining and operating for oil and gas * * * all that certain tract of land * * * described as follows, to wit: [here follows the legal description of the leased land].'
On April 26, 1955, Ralph and Sarah Howell leased, by identical instrument, the north 1/2 of the southeast 1/4 of the adjoining section in which the Flaugher land was located to the same lessee. All were for an initial 5-year period and continuing so long as oil and gas were produced. Each lease contained the following provision:
'In consideration of the premises the lessee covenants and agrees:
'1st. To deliver to the credit of lessor, free of cost, into tank reservoirs or into the pipe line to which lessee may connect wells on said land, the equal one-eight (1/8) part of all oil produced and saved from the leased premises '2nd. To pay lessor one-eighth (1/8) of the gross proceeds each year, payable quarterly, for the gas from each well where gas only is found, while the same is being used off the premises, and if used in the manufacture of gasoline a royalty of one-eighth (1/8), payable monthly at the prevailing market rate for gas. Where such gas is not sold or used for a period of one year, lessee shall pay or tender as royalty an amount equal to the yearly delay rental as provided by the provisions of this lease, payable annually at the end of each year during which such gas is not sold or used, and while such royalty is so paid or tendered this lease shall be held as a producing property under the above paragraph setting forth the primary term hereof. Lessor is to have gas free of cost from any such well for all stoves and all inside lights in the principal dwelling on said land during the same time, by making lessor's own connections with the well at lessor's own risk and expense.
These leases were all 'bought' i. e., assigned to defendant Glavin subject to the retained interest of the original lessors.
Thereafter Glavin sold part of his rights in the Flaugher lease to the Pecars for $12,000, and a one-half interest each of part of his interest in the Howell lease to the Detwilers and the Bryants for $6,000 each. None of the foregoing is disputed. However, it is the inducements to purchase alleged to have been made by defendant to all plaintiffs that gives rise to the suits which were brought. The plaintiffs claim that defendant falsely, fraudulently and knowingly represented that Michigan Consolidated Gas Company was willing and able to pay plaintiffs twice their purchase price for the leases. This was represented to be so because certain geological conditions were said to have existed which would in fact mandate purchase by Michigan Consolidated. Since the actions were dismissed on motion, and no testimony was taken, it does not appear why defendant was so altruistically disposed toward the purchasing plaintiffs. In any event, Michigan Consolidated didn't purchase nor evidence any interest in purchasing the 'indispensable' leases and plaintiffs brought suit. The Pecars began one action in June of 1960. The other plaintiffs, together with the Pecars, began actions December 26, 1963. The disposition of the first Pecar suit and its effect upon the present appeal will be discussed later herein. The actions begun in 1963 were brought one day prior to the running of the general 6-year statute of limitations. Plaintiffs had theretofore rescinded the contracts of purchase by formally executed reassignments and had demanded return of the purchase price. The complaints alleged fraudulent misrepresentation of material fact, reliance thereon and consequent damage. The responsive pleadings were affidavit -supported motions for accelerated judgment. The affidavits raised the ban of the 2-year statute of limitations contained in the Blue Sky Law, 2 and in the case of the Pecars the plea of res adjudicata, as earlier mentioned. The theory of the defendants as to the limitation of action defense is that the instruments vesting in plaintiffs, their interests in the leases were 'units or shares in an oil, gas or mining lease' or an 'investment contract.'
We set forth the relevant statutory provisions: 3 'The term 'security' or 'securities' shall include any note, stock, treasury stock, bond, debenture, evidence of indebtedness, preorganization certificate or preorganization subscription, transferable certificate of interest or participation, certificate of interest in a profit-sharing agreement, certificate of interest, units and/or shares in an oil, gas or mining lease, oil or gas well, collateral trust certificate, any transferable share, investment contract, or beneficial interest in or title to property or profits, or any other instrument commonly known as security, or warrant or right to subscribe to or purchase any of the foregoing.
* * *
* * *
(Emphasis supplied.)
The learned trial judge agreed with defendant and in a terse opinion held:
'The question before the court is whether the two-year statute of limitations established by Stat Ann § 19.760 controls. Admittedly, if the statute does control, the two-year period has expired and the suit is barred.
'The declaration on the case was filed more than three-and-a-half years after the purchase of the oil or gas interest, but plaintiffs contend the statute does not apply, claiming that the lease of the plaintiffs is not a security as defined by the statute.
Plaintiffs contrariwise argue that the leases were interests in land and cite venerable precedent in support thereof. Further authority is furnished from other States that the interests of the plaintiff were not 'securities' within the meaning of similar statutes. We do not find the 2 theories mutually exclusive. Irrespective of whether the instruments were, as urged by defendants, 'units or shares' in a gas and oil lease or an 'investment contract' requiring filing with the Commission is not controlling. The statute was not enacted for defendant's benefit. It was enacted 'to prevent deception in the purchase of securities.' See Eichbauer v. United States Fidelity & Guaranty Co., 278 Mich. 674, 680, 270 N.W. 829. Its purpose was not to deprive plaintiffs of an existing cause of action, but to create a statutory remedy for those to whom sales were made in violation of the act. As this Court mentioned in Eichbauer, at p. 683, 270 N.W. at p. 832:
'The statutory right of rescission is conferred irrespective of whether the sale could be avoided under principles of common-law fraud.'
The Court there clearly recognized that the common-law action for fraud was not abolished by the statute. The remedies are different in essence. The statutory remedy has naught to do with fraudulent representations, reliance, or even consequent damage. It merely gives the purchaser the option of making his purchase voidable when the statute is not observed. The common-law remedy survives the statute and retains the necessity of proof of the elements of that cause of action. As to plaintiffs Bryant and Detwiler we hold the trial court erroneously concluded that the statutory remedy was exclusive and thus mandated bringing the actions thereunder. This precise point was strongly urged by plaintiffs' counsel in argument on the motion.
As to plaintiffs Pecars further discussion must be had. In 1960, they started an action by summons and subsequent declaration alleging virtually the same cause of action they set...
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Foster v. Foster
... ... been wrong or rested on a subsequently overruled legal ... principle."); Detwiler v Glavin , 377 Mich. 1, ... 14; 138 N.W.2d 336 (1965) (holding that the doctrine of res ... judicata applies to "a valid but erroneous ... ...
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...Mich. 393, 263 N.W. 404 (1935), and Barth v. Klicpera, 248 Mich. 460, 227 N.W. 757 (1929), which were superseded by Detwiler v. Glavin, 377 Mich. 1, 138 N.W.2d 336 (1965). Those two earlier cases were decided under Michigan's former securities statute which did not contain a provision expre......
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Charney v. Thomas
...period of limitations. However, since the date of the District Court's dismissal, the Supreme Court of Michigan in Detwiler v. Glavin, 377 Mich. 1, 138 N.W.2d 336 (1965) has held that a defrauded purchaser has his choice of remedies. He may proceed with his action for rescission under secti......
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Kittilson v. Ford
...statutory remedy and the common law remedy, there is no reason why the two causes of action cannot co-exist. See Detwiler v. Glavin, 377 Mich. 1, 138 N.W.2d 336, 339 (1965). Indeed, it would be incongruent with the protective purpose and remedial nature of the Securities Act to hold that th......