Earle v. Humphrey

• Decision Date: 17 October 1899
• Citation: 80 N.W. 370,121 Mich. 518
• Court: Michigan Supreme Court
• Parties: EARLE v. HUMPHREY et al.

80 N.W. 370

121 Mich. 518

EARLE v. HUMPHREY et al.

Supreme Court of Michigan

October 17, 1899

Appeal from circuit court, Ionia county, in chancery; Frank D. M Davis, Judge.

Bill by J. Milton Earle against Henry and Martha A. Humphrey and others. A demurrer to the bill was overruled, and defendants appeal. Demurrer sustained.

Russell C. Ostrander, for appellants.

George E. & M. A. Nichols, for appellee.

MOORE J.

The following statement is taken from the brief of the solicitor for complainant: The bill of complaint in this cause was filed in the Ionia county circuit court, in chancery, in August, 1897. The bill alleges: That complainant prior to the 26th day of January, 1895, was a resident of Belding, Mich and was the owner of certain property, described in the bill as 'Parcel 1,' which was incumbered for $2,500, and was also the owner of parcel 2 described in the bill of complaint. That his wife, Mary C. Earle, was the owner of certain other property described in the bill, known as 'Parcel 3,' and about that time complainant became interested in the Lansing Pants & Overall Company, and moved to the city of Lansing. That Henry Humphrey was the owner of 78 shares of stock in the Ingham County Savings Bank. That his wife, Martha A. Humphrey, was the owner of a certain house and lot in the city of Lansing. That the title of the bank stock stood in Henry Humphrey, and the title of the land in his wife. That Humphrey approached complainant, and made a proposition for an exchange of the house and lot owned by his wife and the bank stock owned by himself for the property of complainant and his wife; also, an insurance business that complainant owned at Belding, Mich., valued at $2,500. That Humphrey represented to complainant that the bank stock was worth from $100 to $125 per share; that the bank had a paid-up capital of $100,000, and a surplus of $50,000. That Humphrey referred complainant to John A. May then cashier of said bank, to vouch for the truth of the statement. That May substantially reiterated the statement in regard to the value of the stock as made by Humphrey. That complainant was entirely ignorant of the value of the stock and so informed Humphrey and May. That Humphrey had been cashier of the bank prior to its reorganization, and knew all about the value of the stock; also, that May knew all about its value. That Humphrey was owing the bank on his promissory note $4,000. The proposition made by Humphrey to complainant for the deal was, in substance, as follows: That Humphrey would transfer his bank stock to complainant; that his wife Martha A. Humphrey, would transfer to complainant or his wife the real estate in Lansing, making a total consideration of $17,250; that complainant was to transfer parcel 1 of his property in Belding at a consideration of $7,000, and parcel 2 at a consideration of $3,500, and parcel 3 at a consideration of $3,000; also, complainant was to turn over his insurance business to Humphrey, and assume the payment of the $4,000 note owing by Humphrey to the bank. That complainant, believing the statements as to the value of the bank stock, accepted the proposition. That, in pursuance of the arrangement, parcels 1 and 2 in Belding were transferred to Humphrey by complainant and his wife. That Mary C. Earle, wife of complainant, transferred parcel 3 to Humphrey and his wife. That Martha A. Humphrey conveyed the Lansing real estate to Mary C. Earle of the same date. That Humphrey caused a new issue of stock to be issued to complainant in lieu of the stock held by him in the bank, and complainant gave his own note for $4,000 to the bank, to substitute that of Humphrey, and transferred the insurance business to him. That complainant also assigned $4,000 of the Lansing Pants & Overall Company stock to the bank as collateral to his note of $4,000. The bill alleges that while this transaction was going on the bank well knew of the representations made by Humphrey and May as to its value; that the bank suspended business August 13, 1896, and John A. May was appointed receiver; that the stock at the time the representations were made was wholly and entirely worthless; that Humphrey and May knew that to be a fact, and that they were made with the purpose of defrauding complainant; that May on July 22, 1897, filed a petition in the circuit court for the county of Ingham, setting forth that there were not sufficient assets to pay the debts of the bank, and asking the court for authority to collect 65 per cent. of the stockholders on their stock subscriptions; that, although complainant was elected director after purchasing the stock, he never had anything to do with the bank, and knew nothing about its affairs or the value of the stock, excepting as he was informed by the other directors and officers; that, even after the appointment of the receiver, complainant, still relying on the information of the directors and other officers, was led to believe that the paper held by the bank would be paid by the makers thereof, and all of the debts of the bank would be paid, and the stock would be worth at least 50 cents on the dollar; and, relying upon such representations, complainant took no steps to investigate the real condition of the bank, or to repudiate his purchase of the stock, and was thereby lulled into security until after the appointment of the receiver on the 22d day of July, 1897, and as a matter of fact complainant filed his bill on the 7th of August, in about two weeks after his discovery of the fraud. The bill further alleges that complainant's wife, Mary C. Earle, died in 1897, but before her death she had conveyed the real estate in Lansing, which had been deeded to her by Martha A. Humphrey, to Helen M. Earle; that on the 3d day of August, 1897, after complainant discovered the worthlessness of the stock, he immediately repudiated the whole transaction, and tendered to Martha A. Humphrey a deed of the Lansing property from Helen M. Earle, and also tendered to Henry Humphrey all of the stock certificates that complainant had received from Henry Humphrey in the Ingham County Savings Bank, and demanded of Humphrey and his wife the deeds of parcels 1, 2, and 3 of the Belding property, and also demanded that Humphrey obtain the note given by complainant to the bank, and deliver it to him, and also a bond to indemnify complainant from all loss by reason of the receivership of said bank, and also that Humphrey transfer the insurance business at Belding, or turn over the proceeds, to him, all of which was refused by...