Rapid Hook & Eye Co. v. De Ruyter , 1898 Mich. LEXIS 904 ( 1898 )

Hooker, J.

The record shows that the defendant became a stockholder in a corporation known as the Rapid Hook & Eye Company, by signing its original articles of association. Being sued for the amount due upon assessments on his stock, he has defended upon the grounds following, as shown by the testimony: Julius Berkey owned some patents upon hooks and eyes, and he proposed to organize a corporation to purchase said patents, and manufacture hooks and eyes under them. One Doty acted as promoter, and, by arrangement with Berkey (who holds a majority of the stock), induced the defendant and others to subscribe to the capital stock by persuasion and promises which are alleged to have- been untrue and fraudulent; and, among other things, it is claimed'that the defendant was promised that the company would take his stock if he became dissatisfied with it, though, in this connection, it may be said that proof of this allegation does not appear in the record, which purports to contain “the substance of all of the evidence given.” It is asserted, further, that the company ratified the action and undertakings of Doty, but we find nothing in the record justifying the statement, except the answer, “Yes, sir,” to the question asked Doty by the defendant’s counsel, “Were your acts afterwards ratified by the company in securing subscribers to stock? ” It is not claimed that the stockholders took any such action, and the witpess said that he never met the board of directors, and it is not too much to say that there is not a scintilla of evidence that the corporation ever assumed or ratified his representations or engagements. The trial judge stated his understanding of the defense as follows:

“The theory of the defense, as announced by counsel and made a part of this record, and as set forth in his notice, is that the plaintiff ought not to recover for the following reasons: First, because one Payson M. Doty, acting for and in behalf of Julius Berkey, made certain false and fraudulent representations to the defendant, which induced the defendant to subscribe for the stock in question; second, that the defendant relied upon those representations, believing them to be true; third, that he would not have subscribed for the stock had not those representations been made to him; fourth, that, if the defendant did not wish to retain the stock, it would be taken off his hands, and he relieved from responsibility; and, fifth, that the action of Mr. Doty and Mr. Berkey was ratified by the plaintiff.”

The court added:

“But the defendant relies entirely, as a defense to this action, upon the ground that the reputed false and fraudulent representations which would defeat this action were made by the promoter, Mr. Berkey, and his reputed agent, Mr. Doty, prior to the time of subscribing for the stock and signing the articles of association, and wefe subsequently ratified by the plaintiff. Upon these grounds the defendant rests his defense, and must stand or fall upon the law applicable to it.”

The case of St. Johns Manfg. Co. v. Munger, 106 Mich. 90 (29 L. R. A. 63, 58 Am. St. Rep. 468), is conclusive of the case. The crucial question was that of ratification, and, as there was no evidence tending to prove it, the jury should have been directed to render a verdict for the plaintiff.

The judgment is reversed, and a new trial ordered.

The other Justices concurred.