Farm Prods. Co. of Mich. v. Jordan

• Citation: 201 N.W. 198,229 Mich. 235
• Decision Date: 10 December 1924
• Docket Number: No. 80.,80.
• Parties: FARM PRODUCTS CO. OF MICHIGAN v. JORDAN.
• Court: Michigan Supreme Court

229 Mich. 235

201 N.W. 198

FARM PRODUCTS CO. OF MICHIGAN

v.JORDAN.

No. 80.

Supreme Court of Michigan.

Dec. 10, 1924.

Error to Circuit Court, Kent County; Wm. B. Brown, Judge.

Action by the Farm Products Company of Michigan against Glenn H. Jordan. Judgment for defendant, and plaintiff brings error. Affirmed conditionally.

Argued before CLARK, C. J., and McDONALD, BIRD, SHARPE, MOORE, STEERE, FELLOWS, and WIEST, JJ.Dilley, Souter & Dilley, of Grand Rapids, for plaintiff in error.

Jewell, Raymond & Face, of Grand Rapids, for defendant in error.

FELLOWS, J.

Plaintiff is a corporation organized under the laws of the state of Michigan. It did not comply with the provisions of Act 46, Public Acts 1915 (section 11945 et seq., C. L. 1915), commonly known as the ‘Blue Sky Law.’ As the transaction here involved occurred prior to Act 404, Public Acts 1921, we shall refer to the sections of the original act. Shortly after its incorporation plaintiff sold 20 shares of its treasury stock to defendant at its par value of $100 a share. He paid $200 cash, for which he received 2 shares of stock and gave his note for $1,800, and 18 shares were issued to him, but were indorsed by him and held by the company as collateral to his note. It is apparent from the record that both parties desired that defendant should have some financial interest in the company, and should become employed by it. This suit is brought to recover on the note of $1,800. Defendant interposed the defense that the transaction was in violation of the provisions of the Blue Sky Law, a penal statute, and therefore void. The case was tried by the court without a jury, and written findings of fact and conclusions of law were filed. Following the holding in this court in Edward v. Ioor, 205 Mich. 617, 172 N. W. 620, 15 A. L. R. 256, it was held that the transaction was void, and judgment was entered for defendant for the amount of cash paid by him, less a small amount received by him as dividends.

We quote some of the applicable provisions of the act. In section 2 (section 11946, C. L. 1915) is found the following provision:

‘Every person, corporation, copartnership, company, or association (except those exempt under the provisions of this act) organized, or which shall hereafter be organized in this state, whether incorporated or unincorporated, which shall either himself, themselves or itself, or by or through others, sell or negotiate for the sale of any stocks, bonds or other securities issued by him, them or it within the state of Michigan, shall be known for the purposes of this act as a domestic investment company.’

Section 4 (section 11948, C. L. 1915) provides:

‘Before selling, offering for sale, taking subscriptions for, or negotiating for the sale in any manner whatever in this state, any stocks, bonds or other securities of its own issue, every investment company, domestic or foreign, shall file in the office of the commission a statement showing in full detail the plan upon which it proposes to transact business,’ etc.

And then follow details of information required, and the proceeding finally resulting in the approval or disapproval of the sale of the securities. Section 14 (section 11958, C. L. 1915) provides:

‘It should be unlawful for any investment company or dealer, or representative thereof, either directly or indirectly, to sell or cause to be sold, offer for sale, take subscriptions for, or negotiate for the sale in any manner whatever in this state, any stocks, bonds or other securities (except as expressly exempted herein), unless and until said commission has approved thereof and issued its certificate in accordance with the provisions of this act.’

Section 23 (section 11967, C. L. 1915) is the penal clause of the act.

It is here urged on behalf of plaintiff that we should construe the act as not applicable to the transaction here involved. It is urged that, although defendant was not a subscriber to the articles of association, the parties desired that he should be interested both financially and as an employé of the company, and that the sale to him of this stock and to two others similarly situated should be construed as not falling within the provisions of the act. But this argument overlooks the fact that before we are called upon to construe a statute we must find it to be ambiguous in terms. If it is ambiguous, we are called upon to construe it. If it is not ambiguous, we are only called upon to enforce it. The statute is clear and unambiguous in its terms. By the express and unambiguous terms of section 4 of the act, when plaintiff negotiated with and sold its treasury stock to defendant, it became a domestic investment company for the purposes of the act. When it sold this stock to defendant, it made an unlawful sale, one in violation of the provisions of section 14 of the act. In Edward v. Ioor, supra, this court said:

‘The sale, and it was a sale, as we have seen, of its stock to plaintiff and others was in violation of the act, and submitted all connected therewith as vendors to the penalties for its violation. The sale of stock without approval by a public board or commission was not...