Summary
denying purchaser recovery even though seller admittedly failed to comply with the Act because purchaser did not attempt to rescind the transaction until sued
Summary of this case from Investors Equity Group v. Universal SymetricsOpinion
Docket No. 1,959.
Decided April 25, 1967.
Appeal from Common Pleas Court of Detroit; Vokes (David C.), J. Submitted Division 1 February 7, 1967, at Detroit. (Docket No. 1,959.) Decided April 25, 1967.
Declaration by H.E. Walton, doing business as Walton Oil Company, against R.W. Semmler for moneys allegedly due plaintiff under a written contract for the assignment of an interest in certain oil and gas leases in return for the assumption of proportional development and operating costs. Summary judgment for defendant. Plaintiff appeals. Reversed.
Wilson Templin, Basso Basso ( Louis G. Basso, Jr., of counsel), for plaintiff.
Arthur J. Hass, for defendant.
Plaintiff sued defendant in common pleas court of Detroit to collect amounts allegedly due from defendant to plaintiff under a written contract admittedly subject to the provisions of the blue sky law, CL 1948, § 451.101 et seq., as amended (Stat Ann 1964 Rev § 19.741 et seq.). Defendant pleaded the contract was void under the provisions of the blue sky law and his motion for judgment of no cause for action was granted at the close of plaintiff's case. Plaintiff appeals.
Although these statutes were repealed by PA 1964, No 265, they are applicable to this case. See section 417(b) of Act No 265 (CL 1948, § 451.817[b] [Stat Ann 1965 Cum Supp § 19.776(417) (b)]).
By written contract of June 4, 1959, plaintiff agreed to assign to defendant an undivided 1/32 of the leasehold working interest in a certain oil and gas lease and acknowledged receipt of $1,250 as defendant's proportionate share of the operating and drilling expense to date of contract. Defendant agreed to pay promptly his proportionate share of the cost of equipping the well for production and the operating expense thereof; defendant was to own his share of equipment. The other provisions of the contract are not pertinent to decision.
A well was completed in March, 1960, and plaintiff assigned defendant his interest therein. Plaintiff billed defendant $869.73 for completion costs and defendant paid $750 on this billing, but he has never paid the balance of $119.73 or his share of operating costs through August of 1965 in the amount of $614.45. By this suit, plaintiff sought recovery of $734.18 plus interest of $68.81.
The pertinent provision of the statute is CL 1948, § 451.120 (Stat Ann 1964 Rev § 19.760), which reads, so far as applicable here, as follows:
"Every sale or contract for sale of any security, not accepted for filing or otherwise exempt under this act or made contrary to any order of the commission, or made contrary to any provision of this act, shall be voidable at the election of the purchaser, and the person making such sale or contract for sale * * * shall be * * * liable to such purchaser, upon tender to the seller or in court of the securities sold or of the contract made, for the full amount paid by such purchaser, together with all taxable court costs, in any action brought under this section: Provided, That no action shall be brought for the recovery of the purchase price after 2 years from the date of such sale or contract for sale."
It is conceded the contract here involved comes within the foregoing provisions, and the question is what is the effect of those provisions on the situation presented here, namely: the purchaser makes no election to void the contract until sued thereon, and then only to avoid liability on the contract.
By the terms of the statute, this contract is voidable at the election of the purchaser; it is not void. Barth v. Klicpera (1929), 248 Mich. 460. The object of the blue sky law as stated in its title is "to prevent fraud, deception and imposition in issuance, trade, purchase, exchange, sale or disposition of stocks, bonds and other securities sold, traded, purchased, exchanged or offered for sale, trade, purchase or exchange within the State of Michigan." The courts have reiterated that this is its object. Barth, supra; Stone v. Indemnity Insurance Company of North America (1934), 267 Mich. 580. As stated in Barth, supra, at page 462:
"Sales made in violation of the statute are voidable at the election of the purchaser, and, if voided and tender back is made, the amount paid for the stock may be recovered. The statute penalizes violations of its provisions, and awards a specific civil remedy for recovering the money paid * * *. At the election of the purchaser the statute makes it the duty of the seller to repay what he has received and grants an action for the recovery of the money or other considerations had and received. It is optional with the purchaser to retain the stock, or tender it back and be entitled to recover what has been paid."
We do not believe the application of section 451.120, supra, contended for by defendant and as made by the trial judge is within the object of the statute. Since it can have but one object, which shall be expressed in its title (Const 1908, art 5, § 21), we hold the statute does not afford defendant the defense here asserted.
Reversed and remanded to the trial court for entry of judgment for plaintiff, who may recover his costs in this Court also.
LESINSKI, C.J., and BURNS, J., concurred.