Link, Petter & Co. v. Pollie

• Decision Date: 03 January 1928
• Docket Number: No. 34.,34.
• Court: Michigan Supreme Court
• Parties: LINK, PETTER & CO. v. POLLIE.

241 Mich. 356

217 N.W. 60

LINK, PETTER & CO.

v.POLLIE.

No. 34.

Supreme Court of Michigan.

Jan. 3, 1928.

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

Action by Link, Petter & Co. against James Pollie. Judgment for plaintiff, and defendant brings error. Reversed, and new trial granted.

Argued before the Entire Bench. Laurence W. Smith, of Grand Rapids, for appellant.

Wicks, Fuller & Starr, of Grand Rapids, for appellee.

FLANNIGAN, J.

Plaintiff, a domestic corporation engaged as an investment banker, is licensed by the Michigan Securities Commission to deal in securities. Defendant, engaged as a merchant for over 20 years, was not a novice in the purchase and sale of speculative securities. He and the officers of plaintiff have been familiar from boyhood, and, prior to the transaction here involved, plaintiff acted as his broker in connection with some of his speculative ventures.

About the middle of December, 1925, J. H. Petter, an employee of plaintiff, called on defendant at his meat shop. After some talk relative to the stock market, defendant said ‘he would like to make some money on the market if something would come along.’ Petter replied, ‘if something came along that looked to our approval,’ they would call him up. No particular security was mentioned by either. Henry Petter, vice president of plaintiff, testified:

‘My brother, Jay Petter, had told me about his conversation with Mr. Pollie, and a few days later on December 18, I called Mr. Pollie up one night, and suggested the purchase to him of American States Securities rights, and he said, ‘Well, how much should I buy?’ and I said, ‘Won't you buy a couple of hundred?’ He said, ‘Why, don't I buy 500?’ I said, ‘All right, if that is what you want to buy we will buy it for you.’ So he authorized me to buy for his account 500 American States Securities rights.'

On corss-examination he testified in part:

‘I suggested the purchase of 200, and he said 500. * * * I told him that I wanted to help him make some money, and I thought he ought to buy 200, and he wanted to know why he should not buy 500.’

The day following the telephone conversation related by the vice president, plaintiff bought for, as it claims, or sold to, defendant, as he claims, 500 American State Security Corporation rights represented by warrants issued by that company. These so-called rights constituted an option in the holder to continue until January 7, 1926, to subscribe for 500 shares of the stock of the company at prices and on terms set forth in the warrant, which prices and terms are not of present interest. At the time of purchase neither the American States Security Corporation rights, warrants, or stocks had been accepted for filing by the Michigan Securities Commission, nor had any application for such acceptance been made.

The rights were purchased at $6.25. Before they were received by plaintiff, the market dropped sharply, and defendant refused to accept or pay for them. In making the purchase, plaintiff advanced $3,062.50, and, defendant persisting in his refusal to accept, it sold the rights on the open market, realizing $1,212.50. To recover the difference between the sum it advanced, plus a commission charge of $62.50, and the amount received on the sale, plaintiff brought this suit.

The trial judge found plaintiff solicited defendant to make the purchase; that plaintiff acted as defendant's agent in making the purchase; and that the transaction was ‘in no way influenced or regulated by the so-called Blue Sky Law.’ Judgment was entered in favor of plaintiff, and the case is here on writ of error sued out by defendant.

The pivotal question is whether on its own showing plaintiff may be held to have solicited defendant to make the purchase.

An option privilege to subscribe for stock of the American States Security Corporation, whether called a right, warrant, or otherwise, is a security within the meaning of Act No. 220, Public Acts of 1923, commonly called the ‘Blue Sky Law,’ and, the same not having been approved by the Michigan Securities Commission, solicitation in...