Crippen v. First National Bank , 273 Mich. 594 ( 1935 )

In January, 1929, plaintiffs purchased from defendant First National Bank of Ypsilanti certain bonds owned by it and claim they were induced to do so by the representations that the security behind the bonds was absolutely sound, that the bank bought the bonds for its own investment and would stand behind them and accept return thereof at any time and repay the money.

Interest was paid upon the bonds for a time and then, upon default, plaintiffs demanded that the bank take back the bonds and return their money. Upon refusal this suit was brought in June, 1932, to recover the money and, upon trial before the court without a jury, resulted in judgment for defendant, from which plaintiffs prosecute this appeal.

Plaintiffs seek recovery upon two counts; one for fraudulent representations inducing purchase of the bonds and the other a verbal promise to take the bonds back at any time and return the money. Among the bonds purchased were some of the Wolverine Mill Lumber Company first mortgage bonds and the claimed false representations related mainly thereto.

Defendant's bond clerk, at the time plaintiffs purchased those bonds, showed Mr. Crippen a "prospectus" sent out to dealers and upon which the bank had in the main acted in purchasing the bonds, but Mr. Crippen claims that defendant's bond clerk made affirmation of the statements therein and, to some extent, in addition thereto. The bond clerk made denial, and the pivotal issue in the case rested upon whether Mr. Crippen's testimony preponderated over that of the bond clerk.

The trial judge held that plaintiffs failed to make a case by a preponderance of the evidence.

The trial judge saw the witnesses; we have not had such a view but we have their testimony and a reading thereof brings us in agreement with the trial judge.

Plaintiffs purchased bonds of the Wolverine Company to the amount of $5,000. These bonds had been purchased by the bank at a slight discount and, immediately upon the sale to plaintiffs, the defendant again purchased the same amount of the bonds at a discount of four per cent. It is quite inconceivable that defendant unloaded valueless bonds upon plaintiffs and then immediately loaded up with a like quality and quantity.

Considering, as did the trial judge, the interest of Mr. Crippen in testifying to alleged representations and the lack of financial interest of the bond clerk who was no longer in defendant's employ at the time of the trial, we are unable to accord preponderance to the testimony of Mr. Crippen.

The bonds were purchased in the heyday of flotation of such obligations and when faith in such issues was necessarily, to a degree, in things hoped for. But the financial crash soon followed and things hoped for were not realized.

In their brief, counsel for defendant cite Awotin v. AtlasExchange National Bank of Chicago, 295 U.S. 209 (55 Sup. Ct. 674), a decision rendered since judgment was entered in the case at bar, and in which the court calls attention to a Federal statute,^* prohibiting national banks from selling with recourse "marketable obligations evidencing indebtedness of any person * * * or corporation, in the form of bonds, notes, and/or debentures, commonly known as investment securities," and holding that an agreement by a national bank to repurchase bonds cannot be enforced nor the money paid recovered.

No plea to such effect was interposed by defendant and, therefore, counsel for plaintiffs contend that such defense cannot be considered. Plaintiffs failed to establish their case by a preponderance of the evidence and there is no occasion to consider the mentioned prohibition.

The judgment is affirmed, with costs to defendant.

POTTER, C.J., and TOY, NORTH, FEAD, BUTZEL, BUSHNELL, and EDWARD M. SHARPE, JJ., concurred.

^* See 12 USCA, § 24. — REPORTER.