163 Mich. 132 | Mich. | 1910
Plaintiff filed his declaration June 5, 1908, against John H. Kellogg and Will K. Kellogg, defendants, alleging in the first two counts of the declaration that he was induced to purchase the shares of stock in a corporation by the fraud and deceit of both defendants, and, in the last two counts, that said fraud and deceit was practiced by the defendant Will K. Kellogg. The plea was the general issue. At the trial, at which the first two counts. of the declaration were withdrawn, the plaintiff recovered a verdict and judgment against the defendant Will K. Kellogg for $9,442.27. There was a motion for a new trial, which was denied. It is alleged in the declaration, and these are the essential allegations in both the third and -fourth counts thereof: that the defendant Will K. Kellogg, prior to October 22, 1906, being an owner of certain so-called proprietary food preparations known as Peptol, etc., etc., and anxious and desirous of disposing of said proprietary food preparations and formulas for making the same, had negotiations with one Charles D. Bolin to secure either the sale of said food preparations to said Bolin or to secure his co-operation in bringing about a sale: that said Bolin was entirely unacquainted with the nature and character of said food preparations and what had been accomplished previous thereto in reference to the sale of them, except as he was
“That said Will K. Kellogg, in order to bring about the sale of the right to manufacture said food products and the formulee for the manufacture of the same, as aforesaid, in which food products and the right to manufacture the same the said Will K. Kellogg had, to wit, a one-quarter interest, entered into a scheme to bring about such sale, and to that end and purpose misrepresented the facts and deceived the plaintiff herein in reference to said food products and their salability, and in reference to what had been previously done and accomplished in reference to the sale thereof. That the said Will K. Kellogg, in carrying out said scheme, represented and stated verbally to the said Charles D. Bolin, at the said city of Battle Creek and elsewhere, that the sales upon Peptol, one of said food preparations, as carried on at the said city of Battle Creek by the said John H. Kellogg or by said Sanitas Nut Food Company, Limited, or by said Will K. Kellogg, or by some or all of them, had earned a net profit of from 12 to 15 per cent, per year on $100,000. And in further representing to said plaintiff what, had previously been accomplished in reference to the sale of said Peptol, and
“Sept. 27, 1906.
“ Chas. D. Bolin,
“Louisville, Ky.
“Dear Friend: I have yours concerning Peptol. I do not ■want-to appear obstinate or stubborn, but after giving the matter considerable thought, I do not feel inclined to donate any of my §15, - 000 block of Peptol stock to Mr. Steele, and if the deal is to fall through for the reason that I will not comply with Mr. Steele’s demand, I think we will have to let it go. I have an option from the-Dr. for his Peptol business. If obliged to do so, I can pay the Dr. October seventh for his option, $20,000 worth of Corn Flake stock, two for one. I will do as much for Dr. Davis as either yourself or Mr. Clague, but I have the impression that Mr. Steele should be satisfied with what you have already offered him. If the deal is to be called off, kindly wire me promptly on receipt of this, at my expense. Papers are already being executed by the attorneys, but we can go ahead and organize it with Battle Creek people, without the assistance of a large amount of capital. The business which is already established is paying 12 to 15 per cent, on $100,000. If necessary to do so, I can handle the deal on my own account, without the assistance of any one; however, would like to have you in it, as I am confident it will be a money maker. With kind regards and best wishes, I am,
“Very truly yours,
“ W. K. Kellogg.”
“And in which letter above referred to the said defendant, Will K. Kellogg, among other things, reiterated the aforesaid statements and representations in reference to the sales upon Peptol and the earnings thereof, previous thereto, by the use of the following language:
“ ‘ The business which is already establishedr is paying 12 to 15 per cent, on $100,000.’
“And the said Will K. Kellogg in further carrying out the said scheme at said city of Battle Creek wrote to the said Charles D. Bolin a letter under date of October 1, 1906, which letter was in words and figures as follows, to wit:
*137 “ ‘October 1, 1906.
“ ‘Mr. Charles D. Bolin,
“ ‘ St. Louis, Mo.
“ ‘ Dear Mr. Bolin: I have just had a long distance message from Stanley Clague. He tells me that the Peptol matter is in the air and that if I do not submit to the assessment of a thousand dollars made on me for the béneñt of Mr. Steele by next Tuesday that the whole thing is off, so far as you are concerned. All that I have to say, Mr. Bolin, is that I shall be satisfied with your decision if it is to be that way. Peptol is already making good money. I have an option from J. H. K. which I can manage myself and the company is practically organized; and to meet the attorney this afternoon at three to finish and complete the papers, and we are all ready to go ahead and do business. I at the present time own one-quarter interest in Peptol. I can readily take up on Dr. Kellogg’s option by giving some of my Corn Flake stock as collateral to note and in case I do this and become the entire owner of all that pertains to Pan-Peptogen, Peptol and Maltol I am sure that my interest would be worth at least §50,000. Peptol is better than it has ever been before, we are getting good results and are getting good repeat orders. Last night about half-past eight, while at my home, I had a telephone call. The party gave his name as Calvert. He said he was a postal clerk at the office, and called me up about a special delivery letter he had just received from St. Louis, Mr. Dodd. I asked to have the letter sent up. Remembering the young man as one to whom I had given some Peptol to try, I asked him how he was getting along. Mr. Frank Calvert stated that he had gained sixteen pounds since he began using Peptol and that his wife had also gained. Calvert had always been one of the lean, long and lank kind, and never before in his life had he been able to make any gain; in fact, for some years he had been gradually losing. If Peptol will do this for Calvert and wife, it will do the same thing for hundreds of others. Unless I hear from you by telegram Tuesday night, I shall consider the deal is off, and so far as you and I are concerned, I am at perfect liberty to go ahead and operate Peptol as I see fit. I am sending this letter special delivery to insure its reaching you in time for the telegram. I shall not be in the least offended if you decide to throw the proposition down.
“ ‘ Yours very truly,
“ ‘ W. K. Kellogg.’
“And in which letter last above referred to the said Will K. Kellogg, among other things, reiterated the aforesaid statements and representations in reference to the sales upon Peptol and the earnings thereof, previous thereto, by the use of the following language: * Peptol is*138 already making good money’ (meaning thereby 12 to 15 per cent, on $100,000 during the year previous thereto). That the said representations and statements made verbally by the defendant herein as above stated, and as contained in the letters written by him to the said Bolin as aforesaid, were made in accordance with, and in carrying out, the scheme of the defendant as aforesaid, and were made for the purpose of having such representations and statements used by the said Bolin in soliciting stock Subscriptions for such proposed corporation; and the said Will K. Kellogg, at the time of making such representations and at the time of writing such letters and thereafter, well knew that such representations and statements so made by him as aforesaid were to be used by the said Bolin in soliciting stock subscriptions for such proposed corporation, and such representations were made by said Will K. Kellogg, he having knowledge in reference thereto superior to that of said Bolin and of this plaintiff, and superior to the knowledge of this plaintiff when he subscribed for the stock herein mentioned and paid the money herein referred to, said Will K. Kellogg, then and there, knowing such representations to be false and untrue, and said Will K. Kellogg made such representations for the purpose of deceiving and defrauding this plaintiff and any others who were to be solicited to buy the capital stock of said corporation as herein set forth.”
It is alleged that Bolin related and restated to plaintiff and others whom he solicited to purchase stock in the proposed corporation the statements made by the said Will K. Kellogg in reference to the earnings from said Peptol, stated that it was proposed to form a corporation with a capital stock of $100,000 to take over the manufacture of said food preparations as aforesaid, and exhibited to plaintiff and others the said letters which are above set out; that the plaintiff read the letters, and, having no other means of information, believed the statements therein and those given to him by the said Bolin in reference to the earnings from Peptol, and, relying solely thereon, subscribed for capital stock of the Peptol Company; that the said statements and representations of said Will K. Kellogg so made verbally and in and by the said letters were untrue and false, in that the earnings upon the manufact
Upon the trial the plaintiff gave the following testimony:
“Q. Now, I want you to tell the jury what led and induced you and what you relied upon in making this investment of $8,625.
“A. Nothing in the world except the statements of W. K. Kellogg in his letters. That was a thorough guaranty. I refer to the letter of September 27 and October 1, 1906.”
Pacts admittedly established by the testimony are: The Sanitas Nut Pood Company, Limited, of Battle Creek, Mich., manufactured a large number of food preparations and was practically owned by Dr. John H. Kellogg, who held all but two shares of its stock. The defendant Will K. Kellogg was its manager under an agreement, by the terms of which he received one-fourth of the net profits. One of the food preparations manufactured by this company was Corn Plakes, a business which was afterwards, and prior to the year 1905, taken over by a corporation called in the record the Corn Plake Company. Among other foods manufactured by this company were products known as Pan-Peptogen, Maltol, and Peptol; the latter product being put on the market under that name some time during the year 1905. Mr. Charles D. Bolin, of St. Louis, Mo., was to some extent acquainted with all the foods that were made by the Sanitas Company and was a stockholder in the Corn Plake Company. He and W. K. Kellogg had been acquainted for a number of years. These two gentlemen had some talk, and later some negotiations, concerning the organization of a separate company to manufacture and develop the sale of the
The jury was instructed, generally, that plaintiff, in order to recover, must establish:
“ (1) That the false representation was made by the defendant relative to a material fact; and in that connection I say to you that a representation as to the earning capacity of the Peptol proposition, viz., that it earned 12 to 15 per cent, on $100,000, would be a material representation.
“(2) He must show that the false statement was made knowingly or in reckless disregard of the truth by the defendant.
“(3) That it was made with intent to deceive the plaintiff, or a class of people to whom the plaintiff belonged, and to induce the purchase of stock in the Peptol Company.
“(4) That the plaintiff relied upon and has been deceived and defrauded by such misrepresentation, and not having knowledge of its falsity or such knowledge as would put a reasonably careful person upon his guard relative to that matter.”
They were further instructed that if these facts were established the measure of plaintiff’s damages would be — ■
“The difference between what the plaintiff’s investment in Peptol stock, viz., $8,625, actually was worth, and what the value would have been had these representations upon which the plaintiff claims to have relied been true; but, in determining what the value of this Peptol stock would have been had these representations been true, for the purpose of this suit you cannot find its value to exceed the amount paid by the plaintiff, viz., $8,625, because there is no proof in this case which would make the stock of greater value than this amount. With this limitation in mind, you should determine what the value of the stock purchased by Mr. Steele, which was of the par value of $11,630, was at the time he bought the stock in the Peptol Company; and the difference between this and what would have been the value of this stock had the representations been true as established by the evidence in this case (and this I have said cannot exceed $8,625, the amount paid'by the plaintiff), plus simple interest at the rate of 5 per cent, per annum on this difference from*142 the date of November 5, 1905, would be the measure of the plaintiff’s damages. I realize the fact, gentlemen, that this statement is somewhat involved. I am unable to make it plainer; but, pei’haps to repeat, it is true that if the plaintiff has any right to recover at all in this case you should determine on the one hand what his holdings would have been worth if the representations made by Mr. Kellogg upon which the plaintiff relied were true; in other words, you should determine what the $11,630 par value of this stock would have been worth if Mr. Kellogg’s representations had been true, but you cannot fix that value in excess of the amount the plaintiff paid for it, because there is no testimony in the case which will' justify such a finding. So the greatest amount which you can find to be the value of the stock he purchased, in the event that the representations had been true, would be $8,625'. But you may find it under the evidence to be less than that. If you do, you should subtract from the amount that the stock would have been actually worth had the representations been true (not to exceed $8,625), you should subtract from that what you find his stock was worth at the time he purchased it and the difference with 5 per cent, simple interest per annum would be the measure of his recovery.”
With this statement we proceed to notice some of the alleged errors. We have already disposed of many of the contentions of defendant in saying that upon each of the issues above referred to the testimony was conflicting. We are satisfied that none of them should have been decided by the court. As to others, we follow, substantially, the order in which they are presented in argument.
“We will show by Mr. Bolin that in this conversation with the Doctor which occurred in the month of July or August, 1906, the Doctor made a statement in reference to what Peptol had already been doing in the way of making money and earning money, and the Doctor stated to Mr. Bolin at that time, as I recollect, that Peptol was already earning something like $15,000 a year.”
Here an objection was interposed, the substance of it being that, as Dr. Kellogg was not a party (plaintiff hav
“ In that conversation Dr. Kellogg said many things in reference to what Peptol had been doing, and said to Mr. Bolin that Peptol was already earning in the neighborhood of $15,000 a year for the sale of Peptol as it had been previously carried on by the Sanitarium. Mr. Bolin made inquiry of Dr. Kellogg why he was so anxious to sell if it was earning so much money, and the Doctor said it was a preparation that was claimed to make thin people fat, and he wanted to get out of that kind of business because it was hurting his standing with the medical profession, and his influence and standing at the Sanitarium.”
Plaintiff was the first witness called, and he was asked:
“Q. Now, in the fore part of September, 1906, did Mr. Bolin repeat to you anything that W. K. Kellogg or Dr. Kellogg had stated about the Peptol. matter ?
“A. Yes, sir.”
An objection was interposed to the effect that any representation made by Dr. Kellogg was hearsay and immaterial, and the court sustained the objection. Later, on cross-examination of Bolin by defendant, he stated that Dr. Kellogg had intimated to him that Peptol was making good money and was doing well, and that he (Bolin) had informed plaintiff that the Doctor had told him it was earning $15,000 to $20,000 a year. No objection was interposed and no motion made to strike out the testimony. It was not competent, for the purpose of connecting Will K. Kellogg, to prove representations made by Dr. Kellogg. And there was, apparently, no excuse for referring to any such representations in the opening statement of counsel. But in view of the cross-examination of Bolin, which was conducted to sustain a theory of defense to the action, it would manifestly be improper to reverse the judgment because of the opening statement of counsel.
(1) They concerned the credit and financial standing of a business owned by Dr. Kellogg, or by the Sanitas Nut Food Company.
(2) They were not relied upon by plaintiff.
Motion to strike out the testimony was denied. In this connection may be considered the objection that statements made prior to September 27, 1906, by Bolin to plaintiff concerning the earnings of the business, were not admissible because it was not made to appear that Will K. Kellogg was responsible for such statements. A motion to strike out this last-mentioned testimony was denied upon the promise of counsel for plaintiff to prove that Will K: Kellogg was responsible for these statements, a promise which it is said was not redeemed. The record discloses that Mr. Bolin was a witness without whose testimony the plaintiff must have failed in the suit. It is his testimony which is relied upon to prove that the letter of September 27, 1906, was written to himself for' the express purpose of being shown and read to possible purchasers of stock to induce them to become purchasers; that it was a cunning device to attract any one by whom it should be read. Without his testimony the letter is, for the purposes of the plaintiff, an innocent document. While Bolin’s complicity in the scheme, if there was a scheme, does not relieve the defendant, it is nevertheless apparent that in permitting plaintiff to detail oral representations made to him by Bolin, and in permitting Bolin to detail oral representations made to him by Will K. Kellogg, opportunity was afforded to Bolin to exculpate himself, if he was not an innocent agent. It seems to us now, after the trial, that if the plaintiff had been required to rely upon the letter, which he says determined his action, upon the falsity of the representation therein contained and upon the testimony of Bolin to the effect that the letter wa3 written for the purpose of inducing purchases of
One of the letters excluded was written September 23, 1906, by Clague to Bolin, and was answered by Bolin under date September 29th. Confronted with the Clague letter and his reply thereto, Bolin was permitted to tell what he meant by language employed in his letter. It is said this was error. It will be remembered that when these letters were written no arrangement had been concluded with the Sanitas Nut Food Company, or with Dr. Kellogg. A proposition that Clague, Bolin, and defendant should each give to plaintiff $1,000 par value of stock proposed to be taken by them in the new company had been agreed to by Bolin and Clague but not by defendant. In his letter of September 23d Clague appears to charge the blame for nonconclusion of the principal arrangement to Bolin, who replied (September 29th):
‘ ‘ I cannot agree with you that I am holding up the Peptol proposition; the situation is just like it was when you left St. Louis. I told you when you were here that in order to get Mr. Steele in we would have to give him $8,000 worth of stock for $5,000. You and I agreed to give him $1,000 of our stock and leaving the other $1,000 for Mr. Kellogg to give. We then told Mr. Steele what we would do and he accepted our terms. That left the proposition up to Mr. Kellogg. Now he refuses to accept our terms and the Doctor has raised the price from*147 $18,000 to $20,000. I suppose if the matter drags a little longer they will raise it to $50,000. Allow me to say that I am not going to make any more concessions; if they want the deal closed on the terms already agreed upon between you and I and Doctor Kellogg’s last proposition to sell for $20,000 and take our note for $6,500 we will accept the proposition, if not, so far as I am concerned, you can count me down and out. I note further that you state that Peptol is a good proposition; if I did not think so, I would not of course, gone into it. But I cannot afford to give my time to selling the stock and promoting the company unless I am well compensated. I have written Mr. Kellogg a letter plainly stating that the proposition was up to him and unless he accepted it as proposed, that we would drop further negotiations. I appreciate the fact that you were willing to sacrifice part of your interest to close the deal and as you know I was willing to do the same thing. I think the Kelloggs are making a good thing out of the deal; they know about what they are doing or they would not sell. I have told Mr. Kellogg all along that I would not go into the deal unless Mr. Steele went into the proposition with me. We always make investments of all kinds together and I regard his judgment in these matters as first class and he would make one of the best directors we would have in the company. Unless Mr. Kellogg accepts this proposition by Tuesday and not later than Wednesday the whole deal will be a closed incident so far as I am concerned, as Mr. Steele has already notified me that he has other matters pending which he wants to close and that I must give him an immediate answer. * * *
“P. S. I really feel Mr. Kellogg and Dr. J. H. Kellogg should let this deal be consummated as agreed by you and I with Mr. Steele. We made a definite agreement with him and it is not in good faith for us to break our agreement with him. What shall I say to him ? I cannot afford to put myself in such a position again with him, he would lose faith in me and he would have a good reason for so doing.”
On September 29, 1906, Bolin also wrote to defendant, and in the letter he says:
“I have a letter from Mr. Clague this morning in which he intimates that I am holding up the deal. I am sorry that he looks on the matter in that light as I am do*148 ing nothing of the kind. It is up to Mr. W. K. Kellogg to accept the terms which Mr. Clague himself agreed to while in St. Louis.”
In a postscript the following is added:
“Mr. Clague and I felt sure you would do this and so agreed with Mr. Steele and immediately notified you, or at least Clague said he would. Your refusal to accede to our agreement puts us in an uncomfortable position with Mr. Steele. We definitely agreed to accept his proposition and I am at a loss to know what to say to him. I have made one or two trips to try and close this deal. After all our trouble with the Doctor it falls through for a pittance.”
His explanation of this postscript is that he meant by the words “and so agreed with Mr. Steele” that he had agreed in a tentative way and had in fact only a conditional understanding with plaintiff, who was demanding “ something more definite.” Whatever one may think of the explanation made by this witness, we know of no rule of evidence which refuses a witness the right to explain what he has written, or has stated orally, in correspondence with others. As to the excluded letter, written by Clague, nothing in it adds to or takes from the apparent force and effect of the correspondence which was received in evidence.
It is contended further that it was error to instruct the jury to' add interest to the difference in value as determined by them. Compensation is what the law means to award in such a case, and although it has been sometimes said that the jury may add interest — that it is discretionary — the general rule appears to be that where money is obtained by fraud and deceit its recovery, with interest, is compensation. 14 Am. & Eng. Enc. Law (2d Ed.), pp. 189, 190; Snow v. Nowlin, 43 Mich. 383, 387 (5 N. W. 443).
As we are unable to say that error was committed at the trial, the judgment is affirmed.