Wickstrand v. Nelson

• Decision Date: 12 November 1935
• Docket Number: No. 53.,53.
• Citation: 273 Mich. 393,263 N.W. 404
• Parties: WICKSTRAND et al. v. NELSON et al. KYSELKA v. SAME.
• Court: Michigan Supreme Court

273 Mich. 393

263 N.W. 404

WICKSTRAND et al.

v.NELSON et al.

KYSELKA

v.SAME.

No. 53.

Supreme Court of Michigan.

Nov. 12, 1935.

Two actions by David Wickstrand and another and Otto Kyselka against Helmer Nelson and the Michigan Fuel & Light Company. Judgment for the plaintiffs, and the defendant Michigan Fuel & Light Company appeals.

Judgment for plaintiffs David Wickstrand and another affirmed, and judgment for plaintiff Otto Kyselka reversed.

WIEST, J., POTTER, C. J., and BUTZEL, J., dissenting in part.

Appeal from Circuit Court, Grand Traverse County; Parm C. Gilbert, judge.

Argued before the Entire Bench.

Ross H. Lamb, of Benton Harbor (Dickinson, Smith, Farrell & Wham, of Chicago, Ill., of counsel), for appellant.

Matthews & Murchie, of Traverse City, for appellees.

FEAD, Justice.

The fact that Nelson was agent of Pierce & Co. did not prevent his being also agent of defendant light company in selling the stock. The company was actively and energetically promoting sale of the stock to its customers and the public, not only to aid its parent in obtaining money, but also to create a local good will interest in itself. Its advertisement urged purchase of ‘our stock’ and referred the public to itself, Pierce & Co., or ‘our employees' for information. It received checks in payment of stock, indorsed and cashed them, and remitted by its own check. While Nelson and the local manager, Eva, sought to minimize the company's participation in the campaign of sale, to ‘permitting’ meetings to be held at its office to instruct its employees how to sell stock and merely ‘suggesting’ that the employees sell stock for Pierce & Co., the fact is that the employees solicited sales in connection with their usual duties for the company during their ordinary working hours paid for by the company, and they took time from their company routine to complete sales. Giving actions their proper dominance over mere words, it is clear that the company not only held its employees out to the public to make or aid in sales, but actually authorized them to do so as part of the company business.

But, it is claimed, Eva had no authority to aid in the sales campaign on behalf of the company because he had not been so empowered by the board of directors. I think he had at least implied authority. He was local manager, doing acts for the benefit of his company, and his superior officers had ‘suggested’ that he assist the employees in the stock selling campaign. The advertisements extended over a period of a year and were paid for by the company. There is no evidence that the officers did not have actual knowledge of the activities of Eva and the employees. They were charged with knowledge of the long-extended campaign, particularly as their records showed the company paid for it; and they cannot claim ignorance of activities set in motion by their ‘suggestion’ to the local manager. Having taken the benefits, the company cannot escape the burden of its agent's acts.

The defense that the sale of stock is ultra vires the corporation and could not be authorized even by the board of directors is not tenable. In this action the corporation cannot raise the plea of ultra vires. Section 11, Act No. 327, Pub. Acts 1931; Wardowski v. Guardian Trust Co., 262 Mich. 422, 247 N. W. 908.

Defendant light company is liable for the fraud of its agent Nelson, and the judgment for plaintiffs Wickstrand is affirmed, with costs.

The case of plaintiff Kyselka is different. The charge of fraud made in his declaration was withdrawn. The ground of his recovery was that the sale to him was in violation of the Blue Sky Law, Comp. Laws 1929, § 9769 et seq.

Plaintiff rests upon the proposition that as defendants were not licensed as dealers or salesmen under the Blue Sky Law, and the act provides criminal penalties against unlicensed persons for making sales, the common law renders such transaction void and rescission open to the purchaser.

This principle was applied under the original law, which did not provide a civil remedy, to avoid sales of unaccepted securities. No case involving sale of accepted securities by unlicensed salesmen or dealers seems to have arisen.

The present act, Comp. Laws 1929, § 9788, provides that any sale or contract for sale of any security ‘not accepted for filing under this act or made contrary to any order of the commission’ shall be voidable at the election of the purchaser, who may rescind within two years from the date of the sale. Plaintiff claims this leaves the common-law right of rescission open as to sale by unlicensed persons. This would produce the anomalous situation of a purchaser of unaccepted securities from a licensed salesman being required to rescind within two years, while he would have six years in which to rescind if the sale were of accepted securities by an unlicensed salesman. The purpose of the act is to prevent fraud, deception, and imposition on purchasers of securities. Comp. Laws 1929, § 9771. The principal weapon against fraud is the requirement of acceptance of securities for registration by the state. No fraud can arise merely from the fact of whether a salesman has a license. The object of section 9788 was to provide a single definite civil remedy to be exercised under specific conditions. The Legislature cannot be held to have intended to accord a purchaser greater privilege to rescind for a subordinate and nonfraudulent act than he would have to set aside a sale for violation of the dominating provision against fraud. We think section 9788 was designed to provide an exclusive civil remedy. Barth v. Klicpera, 248 Mich. 460, 227 N. W. 757.

Judgment in favor of Kyselka against defendant light company is reversed, with costs, and without new trial.

NORTH, BUSHNELL, and EDWARD M. SHARPE, JJ., concurred with FEAD, J.

The late Justice NELSON SHARPE took no part in this decision.

WIEST, Justice (dissenting in part).

This opinion is in the Wickstrand Case but applies as well to the Kyselka Case.

This is an appeal by defendant Michigan Fuel & Light Company, a corporation, from a judgment against it for false representations made by defendant Helmer Nelson, one of its employees, inducing plaintiffs to purchase shares of stock in the American Commonwealth Power Corporation of Delaware. Mr. Nelson's liability is not here questioned.

The alleged false representation was, in substance, that: The American Commonwealth Power Corporation owned and operated the Michigan Fuel & Light Company and various other public utilities.

The following statement of the relation between the two corporations is taken from the brief for plaintiffs:

‘The association between the Michigan Fuel and Light Company and the American Commonwealth Power Corporation (of Delaware) in 1930 and 1931, was extremely remote, the facts being as follows:

‘All of the common stock of the Michigan Fuel & Light Company, except directors'...