Smith v. Thompson

• Decision Date: 23 December 1892
• Citation: 94 Mich. 381,54 N.W. 168
• Court: Michigan Supreme Court
• Parties: SMITH v. THOMPSON et al.

54 N.W. 168

94 Mich. 381

SMITH v. THOMPSON et al.

Supreme Court of Michigan

December 23, 1892

Error to circuit court, Ingham county; Rollin H. Person, Judge.

Action by George T. Smith, for the use and benefit of Charles H Plummer, against William D. Thompson, Rufus H. Emerson, and Erastus Peck, for fraudulent representations inducing plaintiff to part with certain corporate stock, and for its conversion. A demurrer to the declaration was sustained, and plaintiff brings error. Reversed.

George W. Weadock and John Atkinson, for appellant.

Cahill & Ostrander, Montgomery & Lee, and Thomas A. Wilson, for appellees.

McGRATH C.J.

This is an appeal from a judgment sustaining a demurrer to a declaration in case. The declaration alleges, in substance that on the 27th of December 1889, Smith owned 8,000 shares in the George T. Smith Middlings Purifier Company of Jackson of the par value of $200,000, and which represented two thirds of the entire capital. The defendants owned a majority of the stock of the Knickerbocker Company. The two companies were engaged in making and selling machines known as "purifiers," "reels," and "scalpers," used in manufacturing flour, and were active competitors. The George T. Smith Company was doing a large business, and possessed assets to the value of $1,000,000. The shares owned by the plaintiff were worth $500,000. It was indebted to sundry persons, and was in need of $100,000 to meet immediate obligations. The defendants knowing the premises, and maliciously and fraudulently designing to obtain control and management of the George T Smith Company and ruin it by destroying its business, and maliciously and fraudulently intending to injure the plaintiff by destroying the value of his shares so as to destroy competition between the companies, maliciously and falsely represented to Smith that if he would assign 4,000 of his shares of stock to defendant Thompson, and consent to his voting upon them at all elections, general or special, and consent that defendants Emerson and Peck should, with the plaintiff, become the directors of the company, and Emerson become its financial manager and Peck its secretary, and should give Thompson an option to buy the 4,000 shares at any time within two years at par, to wit, at $100,000, then Thompson would advance to the company all moneys necessary to meet the immediate obligations, and to make its business prosperous and its credit higher than before, thus making the shares of stock still owned by Smith of greater value than all those owned by him at the time. Smith, relying upon these representations, surrendered a certificate for 4,800 shares of stock, partly in lieu of which a certificate for 4,000 shares was issued to Thompson and delivered to defendants. Defendants secretly entered into contracts with other shareholders for the voting power upon their shares, so that with these 4,000 shares they obtained the control and management of the company. They procured Francis D. Bennett and Frank M. Smith, who were then directors, to resign, and had Emerson and Peck elected in their stead. George T. Smith, who was then treasurer, relying upon the statements of defendants, and ignorant of their purpose, voted for Emerson and Peck. He resigned his office as treasurer, and Emerson was elected in his stead, and Peck became secretary. Defendants assumed management and control January 1, 1890, and at once refused to make the advances agreed upon or any advances, and refused to reassign the 4,000 shares, and on the 18th of January, 1890, caused a stockholders' meeting to vote for an assignment for the benefit of creditors to Emerson and Eldred. The plaintiff, Smith, was told that the defendants represented a sufficient number of shares to carry the resolution, whether he voted for or against it. He declined to vote, but defendants declared the resolution carried. Immediately afterwards a directors' meeting was held, and Emerson and Peck ordered an assignment executed to Emerson and Eldred. They requested the plaintiff to sign it as president. He having lost control of the company by his...