People v. Montague
Citation | 280 Mich. 610,274 N.W. 347 |
Decision Date | 29 June 1937 |
Docket Number | No. 146.,146. |
Parties | PEOPLE v. MONTAGUE et al. |
Court | Michigan Supreme Court |
OPINION TEXT STARTS HERE
Herbert Montague and another were convicted of unlawfully dealing in securities without first procuring a license in violation of the Blue Sky Law (Comp.Laws 1929, §§ 9789, 9790, Pub.Acts 1935, No. 37), and they appeal.
Affirmed.
Argued before the Entire Bench.
Leon W. Miller, of Petoskey, and John M. Dunham, of Grand Rapids, for appellants.
Raymond W. Starr, Atty. Gen., and Clyde N. Comstock, Pros. Atty., of Petoskey, for the People.
Defendants were convicted of a violation of sections 21 and 22 of the Blue Sky Law, being a part of Act No. 220 of the Public Acts of 1923, as amended by Pub.Acts 1935, No. 37 (2 Comp.Laws 1929, § 9769, et seq., and Comp.Laws Supp.1935). A trial by jury was expressly waived by each defendant.
Appellants were charged with unlawfully dealing in securities at the city of Petoskey, in the county of Emmet, without first procuring a license therefor as provided in the act, supra.
We quote the following statement of facts from the opinion of the trial judge:
‘The facts are not greatly in dispute. Having obtained from sources undisclosed by the testimony a partial list of the stockholders of the Petoskey Portland Cement Company and the Petoskey Transportation Company, defendants wrote three letters to some eighty of them located in Emmet and various other counties of the State. The exact form of the first latter does not appear though its date, April 7, 1936, and contents, at least in part, appear in Exhibit 5. The two followup letters bear date April 11 and April 17, 1936. The letters were written on the stationery of ‘Industries Trust and Finance Company, Book Building, Detroit.’ They were signed: ‘C. S. Forshee Industries Trust & Finance Co., C. S. Forshee, Trustee.’ the name C. S. Forshee being written in with pen and ink where it first appears, the balance of the signature being typewritten. * * *
‘The letter of April 11, Exhibit 5, says:
‘The letter of April 17, Exhibit 7, says:
‘The prospectus, Exhibit 1, bears the heading: ‘Aims and Purposes of the proposedIndustries Trust and Finance Corporation (To be incorporated under the laws of the State of Michigan).’
‘An appreciation of the paper can only be had by a reading of it. Briefly, after referring to the depression and resulting crippling of industries and their need for financial help, it states: * * *’
‘The prospectus then speaks of ‘Management,’ ‘Operation of the Proposed Industries Trust & Finance Corporation,’ ‘Organization and Financing of the Proposed Industries & Finance Corporation,’ ‘Location,’ and ‘Possible Earnings.’ Under the heading ‘Organization and Financing of the Proposed Industries Trust & Finance Corporation’ it states:
“The proposed corporation is to be incorporated under the laws of the State of Michigan with a capital of fifty thousand shares of common stock, fully paid and non-assessable, and without par value. There is to be no preferred stock or bonded indebtedness, and no liability attached to stockholders.
“The corporation is to be composed of a very limited number of pre-organization stockholders only. Not a single share of stock is to be sold after incorporation.
“A very unique plan of pre-organization financing has been devised, whereby from twenty to twenty-five recommended persons will be invited to participate in the organization of the company. No general solicitation of the public will be made, and all members taken into the company will be issued stock certificates as soon as incorporation is completed.
“No cash will be accepted for stock. * * *'
‘One of the sales or trades of Industries Trust and Finance Corporation stock for Petoskey Transportation Company stock, which was made in Charlevoix County, is shown by Pre-Organization Subscription Agreement, Exhibit 8, bearing date of April 29, 1936.’
This subscription agreement appointed defendant Forshee and two other subscribers were appointed by him to be trustees and attorneys in fact to do all things necessary and expedient to carry out the purposes of the proposed corporation, including the signing of the original articles of association. The agreement contained a ratification and approval of all acts that the trustees and attorneys in fact might do in the premises.
Decision turns on whether the record shows a ‘public offering’ of stock and whether it shows that subscriptions were ‘solicited by advertising.’
The statute (section 9773, supra), Act No. 37 of the Public Acts of 1935, reads:
‘(f) Subscriptions to capital stock made by incorporators in a proposed Michigan corporation, not exceeding twenty-five in number: Provided, That no public offering is made nor subscriptions to such proposed corporation solicited by advertising or commissions received for such subscriptions and that such subscribers actually sign the articles of association in person and not by agent.’
‘The purpose of the act is to prevent fraud, deception, and imposition on purchasers of securities,’ Wickstrand v. Nelson, 273 Mich. 393, 263 N.W. 404, 405, and it ‘should be liberally construed,’ Eichbauer v. Fidelity & Guaranty Co., 278 Mich. 674, 680, 270 N.W. 829, 831, and 2 Comp.Laws 1929, § 9771. As amended by Pub.Acts 1935, No. 37.
Appellants argue that since the act permits the obtaining of subscriptions in a proposed corporation not to exceed twenty-five in number, it must necessarily contemplate the right to devise some plan to obtain these subscriptions; that the offerings of the defendants having been made privately by letter,...
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