source: Caselaw Access Project

author: Moore, J. Hooker, J. Montgomery, J.

license: Public Domain

text:
    CHASE v. BOARD OF ELECTION COMMISSIONERS OF WAYNE COUNTY.
    1. Constitution — Amendment—Submission to Electors — 1Time-General Election.
    Section 1, article 20, of the Constitution, construed with reference to the history of the Constitution and the amendments thereto, implies that amendments proposed by the legislature must be submitted to the people at one of the general elections, either the autumn election held in the even years, or the spring election held in the odd years, whence the direction in Joint Resolution No. 34, Pub. Acts 1907, that the constitutional amendment proposed thereby be submitted at the spring election of 1908, is ineffective. Hooker and MoAlvay, JJ,, dissenting.
    2. Same.
    The constitutional direction being that such amendments be submitted at the “ next spring or autumn election,” a duty is imposed upon the legislature of submitting amendments proposed by it at one of the two elections mentioned occurring during the term of office of the legislature making the submission, whence the amendment proposed by Joint Resolution No. 34, Pub. Acts 1907, the spring election at which it might have been submitted having passed, must be submitted at the autumn election of 1908. Montgomery, Hooker, and MoAlvay, JJ., dissenting.
    Mandamus by Henry E. Chase, deputy attorney general, to compel the board of election commissioners of Wayne county to submit a proposed amendment to the Constitution to the people at the April election.
    Submitted March 5, 1908.
    (Calendar No. 22, 752.)

    Writ denied March 9, 1908.

      Henry JEJ. Chase, Deputy Attorney General, and Thomas Ambrose Lawler, Assistant Attorney General, for relator.
    P. J. M. Hally and Q-eorge B. Yerkes, for respondents.
   Moore, J.

The legislature of 1907 passed Joint Resolution No. 34, which proposed an amendment to section 10 of article 14 of the Constitution. It also provided that the amendment be submitted to the people at the election to be held upon the first Monday of April in the year 908, and for the giving of the necessary notices. The respondents have refused to give the notice provided for in the resolution. This is a mandamus proceeding to compel them to do so.

It is the contention of respondents that there is no spring election to be held in the city of Detroit, the city of Saginaw, and perhaps other portions of the State in April, and that the legislature is, not authorized to direct the submission of an amendment to the Constitution, originating in the legislature, at the annual elections held in the month of April in the even years, because said elections are not State-wide.

Section 1, article 20, of the Constitution, reads as follows:

“Any amendment or amendments to this Constitution may be proposed in the senate or house of representatives. If the same shall be agreed to by two-thirds of the members elected to each house, such amendment or amendments shall be entered on the journals respectively, with the yeas and nays taken thereon, and the same shall be submitted to the electors at the next spring or autumn election thereafter, as the legislature shall direct; and if a majority of electors qualified to vote for members of the legislature, voting thereon, shall ratify and approve such amendment or amendments, the same shall become part of the Constitution.”

It is clear that the elections at which these amendments are to be submitted, are elections at which all the constitutional qualified electors in the State can vote. The language indicates that the election referred to is one not to be created by the legislature, but one already existing. It is quite obvious, too, that the elections referred to are elections prescribed by the Constitution. This language, as will appear later, came into the Constitution in 1876.

Prior to 1876, section 1 provided that when an amendment had been properly agreed to by the legislature, “the same shall be submitted to the electors at the next general election thereafter.” A resolution proposing an amendment was properly passed by the legislature and filed in the office of the governor, March 30, 1875. It was not submitted at the April election thereafter, but was submitted at the November election thereafter and ratified by the electors. The question arose as to whether it ought not to have been submitted in April, the claim being that a general election was held in April. The provision of the section was construed in Westinghausen v. People, 44 Mich. 265, where Justice Campbell reviews at some length the various constitutional provisions and the convention debates hearing upon the question, and reached the conclusion that the words in the section “the same shall be submitted to the electors at the next general election thereafter ” referred to the fall election, and that the amendment was properly submitted.

In the opinion the following language is used:

“We have no means of knowing what were the reasons which led the several members of the constitutional convention to prefer a submission at the fall election. It may be presumed it was an idea, which facts have always warranted, that more votes are cast at that election than at other times.”

It has already appeared that section 1 was changed by the amendment of 1876 so that a proposed amendment might be submitted to the electors by the legislature “ at the next spring or autumn election thereafter.” We are at once confronted with the question, What is meant by the words “the next spring election thereafter?” The Constitution of the State mentions the general biennial fall election in section 34 of article 4; refers to the same election in section 3 of article 5; refers to the same election in section 1 of article 7. It refers to an annual election on the first Monday of April in each organized township in section 1, article 11; section 6 of article 13 reads:

“There shall be elected in the year eighteen hundred and sixty-three, at the time of the election of a justice of the Supreme Court, eight regents of the university; two of them shall hold office for two years; two for four years, two for six years and two for eight years. * * * At every regular election of a justice of the Supreme Court thereafter, there shall be elected two regents whose term of office shall be eight years.”

This was not a part of the Constitution of 1850 as originally adopted, but was an amendment that was added and ratified by the people at the election in 1862. By the terms of this section a provision of the statutes was incorporated intoothe Constitution, and which is section 2 of the act, to provide for the organization of the Supreme Court, section 178, 1 Comp. Laws.

“A general election shall be held in the several townships and wards of the State, on the first Monday of April, in the year one thousand eight hundred and fifty-seven, and on the first Monday of April in every second year thereafter, for the election of judges or justices of the Supreme Court.”

It will be observed the Constitution refers to two Statewide elections, one in the fall of the even year and the other in the spring of the odd year.

It will also be observed that the annual election held on the first Monday in April referred to in section 1, article 11, is not a State-wide election, but applies only to each organized township, and in some portions of the State no election is held in the month of April in the even years.

When section 6, article 13, was enacted, the constitutional law of the State therein referred to required the election of a justice of the Supreme Court at the annual April election occurring each odd year. Construing section 6 of article 13 in connection with that statute, it will be seen that the Constitution has at least recognized — if it has not made — the spring election occurring each odd-year State-wide in its character. We had, then, at the time the language of section 1, article 20, was inserted in the Constitution, a spring election and an autumn election State-wide in character. Each of these occurred once in two years, the spring election in the odd year and the autumn election in the even year. It would seem that these are the elections referred to in section 1 of article 20. Otherwise we are compelled to conclude that the people in authorizing the legislature to submit amendments at the next spring election intended also to give the legislature authority to create an election. The language used is not appropriate to convey that meaning. Surely no one would argue that it gave the legislature authority to create a new election in the autumn, and it is difficult to argue that the legislature has greater authority to submit in the spring than it has in the autumn. The suggestion is made that the word “next ” before “spring” indicates that the legislature may submit it at the succeeding April election, even though that election may not occur in the odd year. According to the same argument, it might be said that the legislature might submit it the succeeding autumn election though that election occur in the odd year. It is, however, conceded that it cannot do that. It is also conceded that the next autumn election means the election occurring in the autumn of the even year, and by the same reasoning the next spring election means the election occurring in the spring of the odd year.

Section 1, article 20, as it now reads, was construed in Seneca Mining Co. v. Secretary of State, 82 Mich. 573 (9 L. R. A. 770). An amendment was submitted to the electors at the April election in the year 1889, and the question was as to when it took effect. Justice Long, speaking for the court, among other things, said:

“Whatever interpretation may have been given this article by the legislature, or others acting under it, prior to the amendment of 1875, which was ratified by the electors, so that the vote of the electors upon amendments could be taken at the spring election, or in the autumn, it is very evident that it was the intention of the legislature of 1875, so to change the time when the amendments should take effect that legislation could at once be had under the change so made in the Constitution. If thé time of the taking effect of these amendments was still postponed until the commencement of the year following, then the submission of such amendments to the electors for their approval might as well have been at the general election as in the spring, and nothing would have been gained by a submission at an earlier period. It is quite apparent that the very purpose, and the only object, to be accomplished by this change in section 1, was to enable the legislature, during its sitting, to enact laws to meet the object sought to be accomplished by a change in the fundamental law,” etc.

Justice Long doubtless had in mind what we all know to be the fact, that State-wide elections are held in the odd years, and that the legislature convenes in January of the odd years and holds its sessions until long past April. It is also a matter of common knowledge that the legislature is not ordinarily in session in the even years, and is never in session in those years unless convened by the governor.

It is said the case of Peck v. Board of Sup’rs of Berrien Co., 102 Mich. 346, is decisive of the case in favor of the contention of the relator. There is language used in the opinion that tends to support the contention. The question involved did not, however, relate to the submission of an amendment to the Constitution, but was whether a county seat was properly removed, and the statute provided that the question of its removal should be submitted to the electors “at the time of holding the next township meeting.” The immediate question which was under discussion when the language was used was the power of the board of election commissioners of the county to prepare the ballots which were used. It appears by the opinion that section 9 of Act No. 190, Pub. Acts 1891, made it their duty to provide ballots for “all proposed constitutional amendments, or other questions to be submitted to the electors.” It is apparent that the language relied upon by the relator was not necessary to the decision of the case.

In People v. Burch, 84 Mich. 408, it was held that the legislature had a right to submit an amendment at the April election in the year 1890. In the course of the opinion it was said:

“ It is not necessary here to determine whether or not the spring election of 1890 was a general election; but a general election was held November 4, 1890, and any spring election at which justices of the Supreme Court and regents of the University are elected, is necessarily also a general election, and is now so regarded.”

In People v. Palmer, 91 Mich. 283, it is said:

“The rule was well settled in Westinghausen v. People, 44 Mich. 265, that the ‘general election’ specified in the Constitution meant the biennial November election. It is clear that the spring election is not a general election, except the election relating to the justices of the Supreme Court, regents of the University, and circuit judges.”

The case of Westinghausen v. People, supra, is authority for the statement that, prior to the amendment of 1876, section 1, article 20, did not authorize the submission of amendments except at the biennial November election.

The case of Seneca Mining Co. v. Secretary of State, supra, and the case of People v. Burch, supra, are authority for the proposition that since the amendment of 1876 it is competent for the legislature to submit amendments at the biennial April elections held in the odd years.

The case of People v. Burch, supra, is also authority for the proposition that the April election in the odd years is a general election.

The case of People v. Palmer is authority for the proposition that the spring election is not a general election, except the election relating to justices of the Supreme Court, and regents of the University, or circuit judges.

As the law now stands there is no spring election held in April of the even years, in the city of Detroit, in the city of Saginaw, and perhaps other municipalities in the State. No provision is made for the holding of an election in those localities in April of this year, unless it is by virtue of the joint resolution. It is a matter of common knowledge that there is not likely to be as large an attendance of electors at an election when no public officers are to be elected, as would attend an election where candidates for office are to be elected. The reasons for submitting an amendment to the Constitution at an election when there is likely to be a general attendance of the electors are just as pressing now as they ever were. We do not think it was contemplated that these amendments should be submitted except at a general election. It follows logically that an annual election held in the month of April in the even years, which election is not held in all the election precincts of the State, is not “the next spring election ” referred to in section 1 of article 20 of the Constitution.

We now come to the consideration of another question which is not raised by the record, but which is of such great practical importance that we ought to give it some attention, and that is whether, because the legislature has named an improper time for the submission of the amendment, its submission must fail altogether. The language of section 1 must be borne in mind, i. e., “and the same shall be submitted to the electors at the next spring or autumn election thereafter.” It is apparent that there is a duty imposed upon the legislature, and that is to submit the amendment at the time designated by section 1.

We have already shown that the spring election, held in the even years, which is not an election general throughout the State, is not the next spring election thereafter referred to in section 1, but the November election would be the next autumn election thereafter, and would be the first opportunity at which the amendment could be properly submitted. The language of Justice Long, in Seneca Mining Co. v. Secretary of State, supra, where he says: “ It is quite apparent that the very purpose, and the only object, to be accomplished by this change in section 1, was to enable the legislature, during its sitting, to enact laws to meet the object sought to be accomplished by a change in the fundamental law,” etc., is very germane in this connection.

It has already been stated that the legislature convenes in January of the odd years. The members of the legislature are elected for two years, upon the expiration of which their terms of office end. If an amendment is adopted at the biennial April election held in the odd years, which is the only general spring election, the legislature can at once pass the legislation made desirable by the amendment. If that election has passed so that the proposed amendment cannot be submitted, it then becomes the duty of the legislature to submit the amendment at the next autumn election thereafter. If the amendment is adopted it at once becomes part of the Constitution, and if the emergency is great, the same legislature which originated the amendment and submitted it for adoption, can be convened in extra session, and pass any legislation made necessary or desirable by the adoption of the amendment. Giving this construction to the section effectuates fully the purpose of the amendment as stated by Justice Long.

It is therefore the duty of the legislature to submit amendments proposed by it at one of the two general elections occurring during its term of office. The spring election of 190? having passed, the amendment must be submitted at the autumn election in 1908.

The application for the writ of mandamus is denied.

Grant, C. J., and Blair, Ostrander, and Carpenter, JJ., concurred with Moore, J.

Hooker, J.

For reasons stated in my opinion in the case of Carton v. Secretary of State, ante, 871, I think that the writ should be granted.

McAlvay, J., concurred with Hooker, J.

Montgomery, J.

Whatever view may be taken of the first question discussed in the opinion of Mr. Justice Moore, I cannot think this court can direct a submission of the amendment at a time not fixed by the legislature.


author: Grant, C. J.

text:
    CLARK v. E. C. CLARK MACHINE CO.

    1. Corporations — Stockholders — Sale op Stock —Rights op Creditors.
    On a bill by creditors of a corporation against retiring stockholders, evidence examined, and held, that the sale of defendants’ stock, consummated before complainants became creditors, was to the corporation and not to the officer to whom it was assigned, and was made in entire good faith without any intent to defraud creditors.
    2. Same — Stockholders—Estoppel.
    Stockholders participating in a purchase by the corporation of • ■ the>stock owned by another stockholder are estopped to deny the validity of the transaction.
    ■ 3. Same — Stockholder or Creditor — Evidence"
    On a bill by creditors of a corporation against the corporation and retiring stockholders, evidence examined, and held, that the transactions of one of the complainants with the corporation constituted him a stockholder and not a creditor, and that he had no, claim against the corporation for the money he had contributed to the capital.

      4. Same —Capital Stock — Assets —Trust Fund — Subsequent Creditors.
    The assessable stock and the assets of a corporation constitute a trust fund, not only for the benefit of existing, but also for future, creditors, and the assets cannot be used by the corporation in the purchase of its outstanding stock to the exclusion of subsequent creditors.
    5. Same — Stock—Purchase by Corporation — Mortgage — Validity.
    Where a corporation has given a mortgage upon all its assets to secure the purchase price of certain of its stock, a part of which it has resold, the mortgage is invalid as to subsequent creditors to the extent of the stock not resold.
    Appeal from Wayne; Donovan, J.
    Submitted January 18, 1907.
    (Docket No. 64.)
    Decided March 17, 1908.
    Bill by Minnie Clark and Chauncey R. Clark against the E. C. Clark Machine Company, Ernest C. Clark, William S. Wells, and Harvey J. Wells to set aside the sale of certain corporate stock, and to enjoin the foreclosure of a mortgage. Defendants Wells filed an answer in the nature of a cross-bill for the foreclosure of a mortgage, and the appointment of a receiver. Fairbanks, Morse & Company and others petitioned to intervene as creditors of defendant corporation. The Detroit Trust Company, as trustee in bankruptcy, was substituted for defendant corporation. From a decree for cross-complainants, defendant Detroit Trust Company and the interveners appeal.
    Modified and affirmed.

      William E. Fenwick (A. B. Hall, of counsel), for cross-complainants.

      Walker & Spalding, for intervening petitioners.

      Bowen, Douglas, Whiting & Murjin, for defendant trustee.
    Ernest C. Clark in February, 1904, owned and operated a machine shop in the city of Detroit. Defendant William S. Wells was then living in Pennsylvania. Through his son, the defendant Harvey J. Wells, he learned of the business being conducted by Clark. Desiring to invest some money and to secure work for his son, he came to Detroit, and Mr. Clark and William and Harvey Wells organized a corporation with a capital stock of $15,000, $10,000 of which was paid in. Mr. W. S. Wells put in $5,000 in cash; Mr. Clark put in his machinery and tools which were inventoried at $’¡',500. Mr. E. C. Clark had 50 shares, Mr. W. S. Wells 49, and Mr. H. J. Wells 1. Mr. E. C. Clark became manager of the company, and the three became directors. The business continued until May 27,1904. Some trouble had arisen between Clark and the Wellses, and negotiations were entered into to buy out the interest of the latter. An agreement was signed between Clark and defendant W. S. Wells by which Clark was to buy Mr. Wells’ stock for $5,000, payable at different times in the future, the payments to be secured by chattel mortgage upon the tools, machinery, and fixtures of the company. The agreement was abandoned.
    On May S’i'th, at the directors’ meeting, all being present and owning all the stock, a resolution was unanimously adopted that the corporation purchase the 50 shares of the stock of the corporation held by Messrs. W. S. and H. J. Wells for the sum of $5,000, said stock to be transferred from the said parties to E. C. Clark as treasurer of said corporation. Thereupon the following resolution was adopted:
    “Whereas, The Clark-Wells Machinery Company is indebted to W. S. Wells in the sum of five thousand dollars ($5,000),
    “Therefore, be it resolved, that the said Clark-Wells Machinery Company execute three promissory notes, one for one thousand dollars ($1,000), dated May 27, 1904, payable on or before one month after date; one for one thousand dollars ($1,000), dated May 27, 1904, payable on Or before two months after date; one for three thousand dollars ($3,000), dated May 27, 1904, payable on or before one year after date, each of said notes to bear interest at the rate of six per cent, per annum, and to be made payable at the Detroit Savings Bank; and, as collateral to secure the payment of said notes, the said company executes a chattel mortgage covering its tools, machinery and fixtures, and that E. C. Clark, as president of said company, and A. A. Bissell, as secretary of said company, are hereby authorized to execute the aforesaid notes and chattel mortgage of said corporation.”
    This was followed by another resolution providing:
    “The said stock purchased from Messrs. Wells be issued to E. C. Clark in consideration of his personally indorsing the notes of the corporation given to said W. S. Wells in payment of the aforesaid stock, and that the said E. C. Clark disposing of the said stock to himself, or others, that the proper officers issue the stock to the purchaser, or purchasers of the same.”
    On May 28th, at á meeting of the directors, Messrs. W. S. and H. J. Wells transferred the 50 shares to E. C. Clark as treasurer. The corporation, through its proper officers, executed to W. S. Wells three promissory notes aggregating $5,000, and executed a chattel mortgage to him to secure their payment. Wells then resigned as president and director of the corporation; his resignation was accepted. Mr. Clark transferred a share of stock to Mr. Bissell who was elected a director. Mr. H. J. Wells also resigned as vice president, secretary, and director. The resignation was accepted, and one William C. Manchester, to whom one share of stock had been transferred, was elected a director. Mr. Bissell was elected secretary.
    Subsequently Clark and his associates reorganized the company under the name of the E. C. Clark Machine Company. Payments amounting to about $1,900 were made to Mr. Wells upon the notes. On December 1,1904, the complainants, Minnie Clark and Chauncéy R. Clark, filed their bill of complaint against defendants E. C. Clark Machine Company, Ernest C. Clark, and William S. and Harvey J. Wells, alleging that they were creditors of said company and were so prior to May 27, 1904. They allege that the mortgage is void as to them, existing creditors. The Wellses answered and filed a cross-bill denying the indebtedness and setting up in full the transactions between the parties; prayed for a foreclosure and for the appointment of a receiver. The complainants made no answer to the cross-bill. Subsequently one John L. Murphy and other creditors filed a petition to intervene. The petition was granted. They appeared upon the hearing without further pleadings.
    The Detroit Trust Company was appointed receiver «December 12, 1904. On March 31, 1905, the company was adjudicated a bankrupt and the trust company appointed trustee on September 28, 1905, and'was duly substituted in this case for the E. C. Clark Machine Company.
    On September 2, 1904, Mr. Murphy became interested in the company and had an office in the office of the Clark plant. On October 1, 1904, he and Messrs. Bryant and Allen entered into a contract with Mr. Clark to buy 60 shares of the stock of the company which included the stock which had been formerly owned by Mr. Wells. This agreement recited that the property of the corporation was subject to the mortgage to Mr. Wells for $3,600, and that it was otherwise free of any incumbrance. The records of the company show that at a meeting of the directors, held October 1, 1904, Mr. JohnL. Murphy was elected a director in place of Mr. Manchester, resigned, and also treasurer of the company in place of E. C. Clark, resigned, and Robert C. Sheehan was elected director and secretary in place of A. A. Bissell, resigned. He after-wards acted as such. Mr. Murphy claims to have loaned the company $4,452. The defendant Wells claims that he purchased the stock of the company with this money. Mr. Henry W. Wells testified that Mr. Clark, the bookkeeper under Mr. Murphy, told him that Mr. Clark informed witness that he had sold out to Murphy and others. Immediately thereafter witness went to see Sheehan and Murphy, and Murphy told him that he (Murphy) had taken over that plant, and was operating it under a different arrangement, and Sheehan verified the statement. Mr. William Wells also testified that about the same time Murphy told him that the Clarks were not in the concern, and that it belonged to him. The case was heard in open court and decree entered in favor of the defendants Wells.

       Rehearing denied May 27, 1908.

   Grant, C. J.

(after stating the facts). We think that Mr. Wells sold his stock to the corporation and not to Mr. Clark individually. Mr. Wells had invested in the corporation $5,000, receiving therefor five thousand par value of the stock fully paid. He acted in entire good faith, and there is an entire absence of evidence showing any intent on the part of the stockholders to defraud creditors. The only evidence of any existing indebtedness at that time is the testimony of Harvey J. Wells, as follows:

“We might, have been owing a little money at that time; I could not give you exactly the amount. I could approximately, somewhere within $300.” .

No then existing creditors, if there were any, are now complaining. The claim of complainants Minnie and Chauncey R. Clark is eliminated from the case. The cross-bill denied the validity of their debt. They did not answer the cross-bill, and the order pro confesso admits the allegations to be true. They do not, therefore, now stand in this suit as creditors. The assets of the corporation were worth about $9,000. All the creditors now complaining are subsequent creditors, who gave credit with the mortgage on file in the proper office. The stockholders are not in position to complain, for they were all willing parties to the transaction and are therefore estopped to deny its validity. Solomon Solar Salt Co. v. Barber, 58 Kan. 419; Butterworth & Lowe v. Milling Co., 115 Mich. 1.

The transaction as to all parties then having any interest in the corporation or its assets was entirely valid. The interveners, subsequent creditors, while conceding that the record of the mortgage is constructive notice to them of its existence, insist that it was not notice to them that the assets of the company had been used to purchase some of the capital stock, and they insist that such use of the funds was void as to subsequent creditors. It is not correct to say that creditors have suffered a loss of the capital stock. The stock here involved was fully paid up. It was not liable to assessment. Its surrender to the company did no.t diminish the security of creditors. The use of the funds of the corporation to pay for the stock diminished its assets which would be as injurious to creditors as would be the purchase of the assessable stock of a stockholder. If the law prohibits one transaction it prohibits also the- other, as the same diminution of the assets of the corporation results in each case.

The first important question to determine is the relation in which Mr. Murphy stands to the corporation. He insists that he put $4,452 into the corporation as a creditor, while Mr. Wells insists that he put it in as purchaser of his stock. No stock was issued to Mr. Murphy, but that was not essential to constitute him a stockholder. He admits his intention to’ become a stockholder, but denies that that intention was consummated by actual purchase. He was elected a director on October 1st, and also treasurer. His friend Sheehan was also elected a director and secretary at the same time. Mr. Murphy from that time controlled the affairs of the corporation. His method of dealing with it appears from the fact that he immediately caused the note of the company to be given to his particular friend, Mr. Allen, for $1,800, when Allen had not delivered the goods for which the note was given. Mr. Murphy testified:

“After I got in as treasurer Allen got his' note for $1,800 at a crack.”

It appears that the property thus contracted for has not yet been delivered. Murphy continued in the control of the company until this litigation began and a receiver was appointed by the court. Mr. Wells’ stock which he sold to the corporation was assigned to Mr. Clark and the assignment authorized him to dispose of it to himself or others. Under the law Mr. Murphy could not be a director without being a stockholder. He knew this. He thus held himself out as a bona fide stockholder and a director. His mouth ought now to be closed from asserting that he is not. He testified that his advance on October 8th of $2,000 to Clark was “in view of my taking an interest in that business with others.” That language is susceptible of no other construction than that he paid that $2,000 for the purpose of making himself a stockholder. He was then a director and nearly the entire of his “advances,” as he calls them, were made while he was a director, and while he held himself out as a stockholder. He told Harvey and William Wells on September 2d that he (Murphy) had taken over their plant and was operating it under a different arrangement, and Mr. Sheehan said the same thing. Mr. Harvey Wells also testified that Mr. Clark told him in September that he had “sold out to Murphy and Sheehan and a couple of other Canucks.” We believe their statements. At that time Mr. Murphy was in charge of the office of the corporation and managing its affairs. The contract of October 1st included all the stock which had been issued; it did not include unissued stock. Mr. Murphy’s expressed intention to be a stockholder, his holding himself out as such, his becoming a director knowing that he could not be one unless he was a stockholder, his payment of $2,000 in view of an interest in the business, his control and management of the corporate affairs, his statements to the Wellses, the fact that Mr. Clark had nothing to do with the management of the corporation after Murphy’s advent into it, and that he was not called as a witness by him, point, in our judgment, to but one conclusion, and that is that Mr. Murphy was a stockholder. Money paid towards the purchase of stock cannot be converted into a loan to the detriment of other interested parties. Having found that he was a stockholder, the remaining question is, How much and whose stock did he buy? As above stated, the contract of purchase covered all the issued'stock. The intention of Murphy and his associates was to obtain substantially the entire stock of. the corporation. Simultaneously with this contract of purchase, and evidently in furtherance thereof, Murphy and Sheehan were elected directors and respectively treasurer and secretary, and Mr. Clark stepped out.

It is immaterial whether Mr. Murphy paid his money into the treasury of the company in furtherance of the contract of October 1st, or whether that was abandoned and he paid it for himself. While there is no express showing what particular stock Mr. Murphy paid his money to purchase, a court of equity will apply it in accordance with the principles of justice and equity. As above stated, Mr. Wells acted in good faith. There was no one in existence at that time to' be defrauded. Mr. Clark, to whom the stock was assigned for the company, was authorized to sell it. We will apply the payments to this stock, and will hold that this purchase was valid in so far as he paid for it, viz., to the extent of $4,452. Mr. Murphy paid this money to the corporation with full knowledge of the transaction between Mr. Wells and the corporation. He had the corporate books before him where the entire transaction was in good faith recorded.

We are compelled to hold that the assessable stock and the assets of a corporation constitute a trust fund,. not only for the benefit of existing, but also for future, creditors (American Steel & Wire Co. v. Eddy, 130 Mich. 266; Peninsular Savings Bank v. Stove Polish Co., 105 Mich. 535; Upton v. Tribilcock, 91 U. S. 45), and that the assets of a corporation cannot be used by it in the purchase of its outstanding stock to the exclusion of subsequent creditors.

It follows from our conclusion, that the mortgage is invalid to the extent of $548, which was included in the sale to the corporation and has not been resold. It is apparent under the record as it now stands that the assets will be more than sufficient to pay the debts. Should this prove to be the case Mr. Wells will be entitled to receive out of the surplus sufficient to pay him this amount. The decree will be modified in accordance with this opinion. Neither party will recover costs.

Blair, Ostrander, Hooker, Moore, Carpenter, and McAlvay, JJ., concurred. Montgomery, J., did not sit.


author: Ostrander, J. Carpenter, J.

text:
    COMMERCIAL MILLING CO. v. WESTERN UNION TELEGRAPH CO.
    Telegraph Companies — Negligence— Liability — Statute—Interstate Commerce.
    In this case, involving the validity and effect of Act No. 195, ■ Pnb. Acts 1893, prohibiting telegraph companies from limiting their liability for negligence in the transmission of messages, as applied to contracts to deliver messages beyond the limits of this State, a judgment for plaintiff for damages for negligence occurring beyond the limits of this State is affirmed by a divided court; Mr. Justice Ostrander, with whom concur Justices Blair, Moore, and MoAlvay, writing for affirmance on the ground that the contract to deliver the message was a Michigan contract, that the statute does not interfere with interstate commerce, and does not impair defendant’s right of contract; Mr. Justice Carpenter, with whom concur Chief Justice Grant, and Justices Montgomery and Hooker , writing for reversal on the ground that the statute, properly construed, has no application to a contract for service to be performed in part beyond the limits of the State, and that the statute as applied to the contract in question constitutes an interference with interstate commerce.
    Error to Wayne; Hosmer, J.
    Submitted February 20, 1907.
    (Docket No. 82.)
    Reargued October 8, 1908.
    (Docket No. 3.)
    Decided March 17, 1908.
    Assumpsit by the Commercial Milling Company against the Western Union Telegraph Company for failure to deliver a message. There was judgment for plaintiff, and defendant brings error.
    Affirmed by a divided court.

      Corliss, Leete & Joslyn (Paul B. Moody, of counsel), for appellant.

      Wilkinson & Younglove, for appellee.
   Ostrander, J.

In point of time, the statute considered here was passed after this court had, in the absence' of a statute, held that regulations similar to the one in question, limiting the liability of a telegraph company for mistakes and delays in transmitting messages and for failures to deliver them, were not unreasonable. The statute is entitled:

“An act to prescribe the duties of telegraph companies, incorporated either within or without this State, relative to the transmission of messages, and to provide for the recovery of damages for negligence in the performance of such duties.” Act No. 195, Pub. Acts 1893.

The duties of telegraph companies with respect to the transmission of messages arise not alone upon the terms of express contracts which they make, but, also, upon the nature of the business carried on and the interest of the public in the manner of conducting the business. They are not common carriers and they would not, at common law, be liable for mistakes or for delays or failures for which they were not, exercising proper care, responsible. It must be assumed that the legislature, taking into account this rule of law and the one established by this court, and already referred to, attempted to change, not the rule affecting liability for such miscarriages as proper care would have prevented, but the rule that for miscarriages for which they were responsible they might limit liability by contract or by conditions imposed upon senders of messages. If this statute is not considered to have this effect, it seems an entirely useless and ineffectual legislative effort. In reaching this conclusion, neither the reasoning employed nor the authority of the ruling made in McMillan v. Railroad Co., 16 Mich. 79, is questioned. Assuming the intent and the effect of the legislation to be what I have stated it to be, it follows that the word negligence, employed in the statute, does not mean a tort or wrong of defendant distinct from its express or implied contract obligations, but it means such a failure to perform its duty as at the common law would render it liable for the consequences. It must be held that the proper construction of the statute and its effect is to forbid a limitation of liability for the consequences of those miscarriages for which at common law such companies are liable, and to this extent to make void the stipulation contained in the contract, which reads:

It is agreed that the company shall not be liable for mistakes or delays in the transmission or delivery or for nondelivery of any unrepeated message beyond the amount received for sending the same. * * * ”

The declaration of the plaintiff is in assumpsit and counts upon the contract and avers breach thereof. The message was delivered by plaintiff at Detroit, Michigan, addressed to a corporation in Kansas City, Missouri. The evidence shows the message was transmitted by defendant to its Chicago office, and, fairly, that it was sent no further. It was not delivered at Kansas City. The reason for failure to deliver was, it may be inferred, failure to transmit beyond Chicago. No reason appears for failure to so transmit. Plaintiff, during the same day that the message in question was sent and was lost, sent to and received from the same party at Kansas City various messages by defendant’s service. The jury found, and were warranted in so doing, that the miscarriage was the consequence of defendant’s negligence.

I am of opinion that the legislature intended its action to be coextensive with its authority to act, and that the statute should be given the broadest possible application. The case presented, then, is this: The contract was made in this State, is single, involves in its performance service of defendant within and without this State, for a single charge. It may be assumed that the service which was performed within the State was perfect and that miscarriage occurred- beyond its boundaries. For the consequences of the miscarriage, a breach of common-law and of contract duty, the plaintiff, who sent the mes-' sage, has brought a suit upon the contract in .a court of this State. Defendant insists that its liability for the consequences of its miscarriage is to be determined by the stipulation, found in the contract. By the law of the State, the stipulation is of no force or effect. The court so declared. It is contended here that in so doing the court was in error. It will be well to have in mind the effect of the statute as it was applied by the trial court. Undoubtedly, it was the application of a local law to the contract. But the local law does not attempt to state, measure, or define, any duty of defendant, or to establish, define, or fix, the consequences of its miscarriage. The liability of defendant is established without reference to the statute. It is when it asks to be discharged therefrom, by giving effect to the stipulation, that the local law becomes, if at all, effective. These considerations answer those objections which are based upon the notion that the local law has been given extraterritorial effect, and they require, also, that this case and Western Union Tel. Co. v. Pendleton, 122 U. S. 347, shall be distinguished.

But, it is said, the contract is for interstate service, which fact furnishes a controlling reason why the local law may not be given effect. It seems clear that the application of the statute does not deny to defendant a right, privilege, or immunity created by Federal authority simply because it denies, where formerly the law of the State affirmed, as the law of the Federal courts does now affirm, the validity of the stipulation. Western Union Tel. Co. v. Carew, 15 Mich. 525; Primrose v. Telegraph Co., 154 U. S. 1. The rule referred to was arrived at, in both jurisdictions, by the statement and the application of common-law principles. In neither jurisdiction did the rule excuse the nonperformance of contracts or, except by agreement lawfully entered into, avoid the consequences of negligent performance thereof. The adoption of the rule by the Federal courts conferred upon the defendant no right, privilege, or immunity created by Federal authority. A reversal of the rule would take away no such right. If this court should be of opinion that the rule of the Carew Case should be denied and that sound public policy, in view of changed conditions, prohibited the defendant from limiting its liability for its negligence, by contract, condition, rule, or stipulation, the application of the announced rule to the present case would have required a denial of defendant’s contention. No different question is presented when the decision of the State court is reached by applying a statute of the State.

The statute as applied by the court below does not, in fact, regulate commerce among the several States, interfere with it in any way, tax or burden it, place obstacles in the way of entering into or performing contracts of commerce. If, as so given effect, the statute is invalid as an exercise of power belonging to the Congress, it is because the silence of Congress upon the subject is equivalent to an express enactment that the subject should be let alone. That Congress has not acted is plain, and the ruling of the court below was not in contravention of any Federal statute. It may be admitted that the, constitutional power of Congress over commerce among the States would sustain a. Federal law fixing the terms of contracts for interstate telegraphic service, including a rule of liability of the companies for negligence. In the absence of such legislation, the judgments of State courts refusing to give effect to similar stipulations in contracts for interstate transportation, have twice been affirmed by the Supreme Court of the United States, although such stipulations are, in cases coming under the jurisdiction of Federal courts, held to be valid. Pennsylvania R. Co. v. Hughes, 191 U. S, 477; Chicago, etc., R. Co. v. Solan, 169 U. S. 133. It is true that the actions in both of these cases were predicated of a tort, a wrong, and were brought in the States, respectively, in which the negligent injury occurred. But in each case the stipulation relied upon by the defendant company was, in terms, agreed to by the plaintiff, in a contract for interstate transportation. It was the agreed measure of plaintiff’s recovery. In one case the stipulation was prohibited by a statute of the State where the contract was made and sought to be enforced, in the other it was valid in the State where it was made and was held to be invalid, by judicial interpretation, in another State. These cases seem to laydown the rule that where a carrier, or connecting carriers, under a single contract for carriage, transports persons or goods through various States, such a stipulation as is here in question may be enforced, or its validity denied, in either of the States in which a specific act of negligence, and resulting damage, occurs, according to the law ‘of that State. If there had been Federal legislation fixing the stipulation as a part of the contract, the judgments in both of these cases must have been reversed.

What has been said disposes, adversely to appellant, of the contention that its right to freely make contracts has been invaded. I am not convinced that the court below was in error in determining the rights of the parties to this contract according to the law of the State. By that law the stipulation which defendant asks to have enforced is void. I am, therefore, for affirmance of the judgment.

Blair, Moore, and McAlvay, JJ., concurred with Ostrander, J.

Carpenter, J.

In the circuit court the plaintiff recovered a judgment of $960 as the damages resulting from defendant’s failure to deliver a telegram sent from Detroit, Michigan, to Kansas City, Missouri. Defendant promptly transmitted this telegram to its relay station in Chicago, and there it was received within a minute or two after it was filed in Detroit. What became of it afterwards we know nothing, except this: It was not delivered. This telegram was written upon a blank, upon the face of which appeared the following direction:

“ Send the following message, without repeating, subject to the terms and conditions printed on the back hereof, which are hereby agreed to.”

It was signed by plaintiff’s president and general manager. Among the conditions referred to upon the back of said blank was this:

“It is agreed * * * that the said company shall not be liable * * * for nondelivery of any unrepeated message beyond the amount received for sending the same.”

Was this agreement valid ? That is the material question to be determined in this case. The trial court held that it was not. He held it was prohibited by section 1 of Act No. 195 of the Public Acts of 1893. That section reads as follows:

“That it shall be the duty of all telegraph companies incorporated either within or without this State, doing business within this State, to receive dispatches from and for other telegraph companies’ lines, and from and for any individual, and on payment of their usual charges for individuals for transmitting dispatches, as established by the rules and regulations of such telegraph companies, to transmit the same with impartiality and good faith. Such telegraph companies shall be liable for any mistakes, errors or delays in the transmission or delivery, or for the nondelivery of any repeated or nonrepeated message, in damages to the amount which such person or persons may sustain by reason of mistakes, errors or delays in the transmission or delivery, due to negligence of such company, or for the nondelivery of any such dispatch, due to negligence of such telegraph company or its agents, to be recovered with costs of suit, by the person or persons sustaining such damage.”

Assuming, though not deciding, that the legislature of the State of Michigan, in enacting the law above set forth, intended, to the extent of its authority, to prohibit the making of such contracts as that in question, — and upon this assumption only can the plaintiff succeed, — the question arises whether the statute, construed in accordance with this intention, can have any application to the contract in question. That is a contract whereby the defendant agreed to transmit for the plaintiff a message from Detroit, Michigan, to Kansas City, Missouri. In performing this contract, defendant was engaged in interstate commerce. In the absence of a prohibitory statute, the parties had a right to embody in said contract the provision limiting liability under consideration. This is settled by our own decisions. Western Union Tel. Co. v. Carew, 15 Mich. 525; Birkett v. Telegraph Co., 103 Mich. 361 (33 L. R. A. 404); Jacob v. Telegraph Co., 135 Mich. 600. That is also the doctrine of the Supreme Court of the United States. Primrose v. Telegraph Co., 154 U. S. 1. The effect of the decision of the trial court, then, is to declare that the State of Michigan has deprived defendant of its right to make a contract which otherwise it might make for transmitting a message from one State to another.

Does this construction make the statute unconstitutional as an interference with the right of Congress to regulate commerce between States? In answer to this question we need do nothing more than quote from decisions of the Supreme Court of the United States, and those decisions are authoritative. Said that court, speaking through Mr. Justice Bradley, in Walling v. Michigan, 116 U. S. 455:

“We have so often hfeld that the power given to Congress to regulate commerce with foreign nations, among the several States and with the Indian tribes, is exclusive in all matters which require, or only admit of, general and uniform rules, and especially as regards any impediment or restriction upon such commerce, that we deem it necessary merely to refer to our previous decisions on the subject, the most important of which are collected in Brown v. Houston, 114 U. S. 622, 631, and need not be cited here. We have also repeatedly held that so long as Congress does not pass any law to regulate commerce among the several States, it thereby indicates its will that such commerce shall be free and untrammelled; and that any regulation of the subject by the States, except in matters of local concern only, is repugnant to such freedom. Welton v. Missouri, 91 U. S. 275, 282; County of Mobile v. Kimball, 102 U. S. 691, 697; Brown v. Houston, 114 U. S. 622, 631.”

In accordance with these principles was decided the case of Wabash, etc., R. Co. v. Illinois, 118 U. S. 557. To show what was there decided, I quote the headnotes of that opinion, the correctness of which I have verified:

“ A statute of Illinois enacts that, if any railroad company shall, within that State, charge or receive for transporting passengers or freight of the same class, the same or a greater sum for any distance than it does for a longer distance, it shall be liable to a penalty for unjust discrimination. The defendant in this case made such discrimination in regard to goods transported over the same road or roads from Peoria, in Illinois, and from Gilman, in Illinois, to New York; charging more for the same class of goods carried from Gilman than from Peoria, the former being eighty-six miles nearer to New York than the latter, this difference being in the length of the line within the State of Illinois. Held:

“ (1) This court follows the supreme court of Illinois in holding that the statute of Illinois must be construed to include a transportation of goods under one contract and by one voyage from the interior of the State of Illinois to New York.

“(2) This court holds, further, that such a transportation is ‘ commerce among the States,’ even as to that part of the voyage which lies within the State of Illinois, while it is not denied that there may be a transportation of goods which is begun and ended within its limits, and disconnected with any carriage outside of the State, which is not commerce among the States.

(3) The latter is subject to regulation by the State, and the statute of Illinois is valid as applied to it. But the former is national in its character, and its regulation is confided to Congress exclusively, by that clause of the Constitution which empowers it to regulate commerce among the States. * * *

“ (6) It follows that the statute of Illinois, as construed by the Supreme Court of the State, and as applied to the transaction under consideration, is forbidden by the Constitution of the United States, and the judgment of that court is reversed. ”

The subject of commerce in the foregoing cases was goods and not telegraph messages. But this is.a distinction of no consequence, for in the case of Telegraph Co. v. Texas, 105 U. S. 460, it was held “that a telegraph company occupies the same relation to commerce as a carrier of messages, that a railroad company does as a carrier of goods,”and that “both companies are instruments of commerce, and their business is commerce itself.”

Western Union Tel. Co. v. Pendleton, 122 U. S. 347, is an interesting case. In that case the telegraph company had undertaken to transmit a message from Shelbyville, Indiana, to Ottumwa, Iowa. It did not deliver this message at Ottumwa as required by a statute of the State of Indiana. Suit was brought in Indiana and the supreme court of that State held the statute applicable and the telegraph company liable for the penalty therein imposed. The Supreme Court of the United States held this statute unconstitutional. The opinion was delivered by Mr. Justice Field. After referring to the case of Pensacola Tel. Co. v. Western Union Tel. Co., 96 U. S. 1, and Telegraph Co. v. Texas, 105 U. S. 460, he said:

“In these cases the supreme authority of Congress over the subject of commerce by the telegraph with foreign countries or among the States is affirmed, whenever that body chooses to exert its power; and it is also held that the States can impose no impediments to the freedom of that commerce. In conformity with these views the attempted regulation by Indiana of the mode in which messages sent by telegraphic companies doing business within .her limits shall be delivered in other States cannot be upheld. It is an impediment to the freedom of that form of interstate commerce, which is as much beyond the power of Indiana to interpose, as the imposition of a tax by the State of Texas upon every message transmitted by a telegraph company within her limits to other States was beyond her power. Whatever authority the State may possess over the transmission and delivery of messages by telegraph companies within her limits, it does not extend to the delivery of messages in other States.

“ The object of vesting the power to regulate commerce in Congress was to secure, with reference to its subjects, uniform regulations, where such uniformity is practicable, against conflicting State legislation. Such conflicting legislation would inevitably follow with reference to telegraphic communications between citizens of different States, if each State was vested with power to control them beyond its own limits.”

It is scarcely necessary to state the conclusion to be drawn from these authorities and these quotations. The right which a telegraph company has to make contracts for the transmission of interstate messages cannot be taken from it by a State. If it is, commerce is not “free and untrammelled ” as according to the will of Congress it should be.

It is said that the statute deprives defendant of no right because it has no right to be negligent. This argument is plausible but is altogether specious and inapplicable. Defendant did have the right to enter into a contract limiting its liability in the event of negligence; that was a valuable right, and of that right the statute deprives it.

It is said that the contract was made in Michigan, and that its validity is to be determined by the laws of Michigan. This is true. But by what laws ? Manifestly, by the constitutional laws of Michigan, and not by the unconstitutional laws. The principle invoked is, then, of no service. It does not aid in determining the question at issue. Does the Constitution of the United States prevent the Michigan law applying to this case ? That is the-question, and that question has been determined by the decisions of the Supreme Court of the United States, and those decisions are controlling.

Our attention is called to various decisions which plaintiff insists are opposed to these views. Some of them are decisions by State courts. We do not discuss them, further than to say that if they hold the doctrine contended for by plaintiff they are opposed to the decisions of the Supreme Court of the, United States, and we must disregard them.

We do, however, think it proper to review two of the decisions of the Supreme Court of the United States upon which plaintiff places great reliance. These cases are Western Union Tel. Co. v. James, 162 U. S. 650, and Pennsylvania R. Co. v. Hughes, 191 U. S. 477. In Western Union Tel. Co. v. James the court gave effect to the statute of the State of Georgia which provided a penalty for the failure of the telegraph company to make prompt delivery within the State of Georgia of a telegram coming from another State. The distinction between that case and the case at bar is this, as shown by the following quotation from the opinion of the court:

“A provision for the delivery of telegraphic messages arriving at a station within the State * * * would have no such effect upon the conduct of the telegraph company with regard to the performance of its duties outside the State. * * * No attempt is here made to enforce the provision of the State statute beyond the limits of the State, and no other State could by legislative enactment affect in any degree the duty of the company in relation to the delivery of messages within the limits of the State of Georgia. * * * But the statute can be fully carried out and obeyed without in any manner affecting the conduct of the company with regard to the performance of its duties in other States.”

The case of Pennsylvania R. Co. v. Hughes, supra, is also easily distinguishable. There suit was brought in the courts of Pennsylvania for the recovery of damages to a horse shipped from a point in the State of New York to a point in the State of Pennsylvania. The horse was damaged in the State of Pennsylvania. The shipment was made under a bill of lading which limited the carrier’s liability. This limitation was valid áccording to the common law as construed by the courts of New York. It was invalid by the common law as construed by the courts of Pennsylvania. The supreme court of Pennsylvania adhered to its own construction of the law and held that within that State the limitation was invalid. In the Supreme Court of the United States the carrier contended that this decision was erroneous upon two grounds: First, because the validity of the contract was to be determined by the laws of the State of New York, where it was made, and not by the laws of Pennsylvania. This question the Supreme Court of the United State's refused to determine because it was not a Federal question. Second, it was contended that the judgment of the Supreme Court of Pennsylvania was erroneous because it was in conflict with the interstate commerce act passed by Congress. The court held that there was in this act, no “regulation of the matter in controversy,” and that therefore the question was ruled against the carrier by the case of Chicago, etc., R. Co. v. Solan, 169 U. S. 133, and the reasoning in that case was quoted and said to be “virtually decisive.” This disposition of the case requires us, then, to examine Chicago, etc., R. Co. v. Solan, and its reasoning.

There suit was brought in the courts of Iowa by a drover to recover damages for injuries sustained in that State in consequence of the negligence of a railroad company while transporting him and the cattle in his charge from Rock Valley, Iowa, to Chicago, Illinois. The shipper had signed a contract limiting the liability of the carrier for any injury to the person in charge of said stock to the amount of $500. The supreme court of Iowa held this contract void because it was prohibited by an Iowa statute. The Supreme Court of the United States affirmed this judgment, saying:

“A carrier exercising his calling within a particular State, although engaged in the business of interstate commerce, is answerable, according to the law of the State, for acts of nonfeasance, or of misfeasance committed within its limits. If he fails to deliver goods to the proper consignee at the right time and place, or if by negligence in transportation he inflicts injury upon the person of a passenger brought from another State, the right of action for the consequent damage is given by the local law. * * * The rules prescribed for the construction of railroads, and for their management and operation, designed to protect persons and property, otherwise endangered by their use, are strictly within the scope of the local law. They are not, in themselves, regulations of interstate commerce, although they control, in some degree, the conduct and the liability of those engaged in such commerce. So long as Congress has not legislated upon the particular subject, they are rather to be regarded as legislation in aid of such commerce, and as a rightful exercise of the police power of the State to regulate the relative rights and duties of all persons and corporations within its limits. * * * The statute now in question, so far as it concerns liability for injuries happening within the State of Iowa — which is the only matter presented for decision in this case — clearly comes within the same principles.”

The distinction between the Hughes and Solan Gases on the one hand, and the case at bar on the other, is clear. In the Hughes and Solan Gases the State statute was given a local application — an application within the territorial limits of the State enacting the statute. In the case at bar it is sought to give the statute of Michigan extraterritorial application. It is sought by that statute to restrict defendant’s right to carry messages between points in different States and to make it liable for an act done in another State. There is certainly nothing in the reasoning used in deciding the Hughes and Solan Cases to indicate that a State has authority to enact a statute which shall affect interstate commerce in another State. Indeed, that reasoning clearly points to the opposite conclusion. If it is true that in the absence of congressional legislation each State may regulate interstate commerce within its own borders, it follows that that commerce cannot be regulated by another State, and this is precisely what was decided in Western Union Tel. Co. v. Pendleton, 122 U. S. 347, heretofore referred to. It is interesting to compare that case and the case of Western Union Tel. Co. v. James, 162 U. S. 650, also heretofore referred to. In the Pendleton Case the right of the State of Indiana to enact a statute regulating the delivery of telegrams in the State of Iowa was denied. In the James Case the right of the State of Georgia to enact a statute regulating the delivery of telegrams within the State of Georgia was affirmed. It may then be said that. the Supreme Court of the United States has decided that in the absence of congressional legislation, each State may— within certain limits, at least — regulate interstate commerce within its borders, and that no State may regulate such commerce within the borders of another State, and the Hughes Case and the Solan Case are in harmony with this statement. The authority of the State of Michigan to enact the statute under consideration is not affirmed by the decision in the Hughes Case or in the Solan Case, or by any other decision of the United States Supreme Court, but it is denied by the decisions cited earlier in this opinion.

The Constitution of the United States, then, prevents the statute having any application in this case. It follows that if the legislature intended that it should apply to such a case, the United States Constitution forbids effect being given to such intention. There is, however, nothing to indicate such an intent. Nor is such intent to be presumed. It is rather to be presumed that the legislature intended to enact a law which would be wholly constitutional. The law should be construed in accordance with this presumed intent (Cooley on Constitutional Limitations [7th Ed.], p. 255), and as thus construed it applies to contracts to transmit messages between points within this State.

In the opinion of Justice Ostrander it is said:

“ If this court should be of opinion that the rule of the Carew Case should be denied and that sound public policy, in view of changed conditions, prohibited the defendant from limiting its liability for its negligence, by contract, condition, rule, or stipulation, the application of the announced rule to the present case would have required a denial of defendant’s contention. No different question is presented when the decision of the State court is reached by applying a statute of the State.”

To this I cannot agree. In determining that the common-law rule announced in the Carew Case shall be denied, and in determining that the statute applies to this case, the court is called upon to consider two radically different questions. In determining that the common-law rule announced in the Carew Case should be denied, the court is called upon to consider and answer in the affirmative this question: Does the common law prohibit the contract under consideration? In determining that the statute applies to this case, the court is called upon to consider and answer in the affirmative this question: Can a statute of a State deny to one engaged in interstate commerce the right which he theretofore possessed of making a contract limiting his liability ? It is true that we may avoid considering the second question by answering the first in the manner suggested, viz., by overruling the Carew Case, and it is also true that if we adopt that course our decision would be final. For it could not be reviewed by the Supreme Court of the United States under the existing law. Delmas v. Insurance Co., 14 Wall. (U. S.) 661; Pennsylvania R. Co. v. Hughes, supra. I do not understand, however, that any member of this court is willing to pursue that course. The doctrine of the Carew Case has for many years been regarded by the profession as a correct statement of the common law; it has been twice approved by subsequent decisions of this court, and the circumstance that since its > announcement it has received the approval of the Supreme Court of the United States adds much to its weight. It is true the legislature has seen fit in its wisdom to change this law. There is an implied suggestion in the reasoning of my Brother Ostrander that sound public policy growing out of “changed conditions” requires a denial of the rule as laid down in the Carew Case. I am aware of no other changed condition than the enactment of the statute — a statute enacted, it must be presumed, with the legislative purpose of changing the common law. Surely such a statute affords no reason for our declaring that the statute had any effect upon the principles of the common law. "We are bound to say that those principles were not affected by the statute. We are bound to determine this case, then, upon the assumption that, according to the principles of the common law, the defendant had a right to make the contract in question, and upon this assumption we must determine the question heretofore alluded to as the second question, viz.: Can the statute of a State deny to one engaged in interstate commerce the right, which under the principles of the common law he possessed, of making a contract limiting his liability ? We cannot determine this question in the affirmative by saying “we deny the right of one engaged in interstate commerce to make such a contract,” for we do not deny that right; on' the contrary, we affirm it. We must answer this question by a process of reasoning very different from that used in answering the first question, and we cannot answer it in the affirmative, as I have endeavored to show, without giving to the statute a construction repugnant to the Constitution of the United States. And that decision— and I state this not with the thought that it strengthens this opinion, but with the thought of illustrating the difference between these two questions — may be reviewed by the Supreme Court of the United States. See Delmas v. Insurance Co., supra.

We hold, therefore, not that the statute under consideration is unconstitutional, but that, as properly construed, it has no application to this case.

From this reasoning it results that the judgment under review is erroneous and should be reversed and a judgment entered in plaintiff’s favor for the small amount paid for transmitting the message, and defendant should be awarded costs of both courts. That course cannot, however, be taken. Four of the eight justices constituting this court reject th’e views stated in this opinion, and for reasons stated in the opinion of Justice Ostrander decide that plaintiff is entitled to recover its full damages. As their views agree with the judgment of the trial court, they are controlling, and consequently that judgment must be affirmed.

Grant, O. J., and Montgomery and Hooker, JJ.* concurred with Carpenter, J.


author: Blaib, J. Hooker, J.

text:
    JONES v. PENDLETON.
    1. Limitation of Actions — Commencement of Action — Pleading — Amendment.
    An amendment introducing a new cause of action barred by the statute of limitations will not be permitted.
    3. Executors and Administrators — Revival of Suits — Amendments.
    Under sections 10113, 10114, 3 Comp. Laws, the court has the same power of amendment in causes revived in the name of an administrator that it has in other cases.
    3. Pleading — Amendment—New Cause of Action.
    In an action by a broker to recover commissions on the sale of real estate, a declaration on the common counts in assumpsit, accompanied by a bill of particulars for commissions on a sale made by the plaintiff, is not so changed as to introduce >a new cause of action by an amendment counting on an agreement by defendant to pay plaintiff his commission in case another sold the land and a sale by another. Hooker, J., Grant, C. J., and Ostrander, J., dissenting.

      Error to Wayne; Brooke, J.
    Submitted April 10, 1907.
    (Docket No. 47.)
    Remanded for completion of the record June 3, 1907.
    Decided March 17, 1908.
    Assumpsit by Clarence R. Jones, administrator de bonis non of the estate of James A. Jones, deceased, against Edward W. Pendleton for commissions on the sale of real estate. There was judgment for defendant on a verdict directed by the court, and plaintiff brings error.
    Reversed.

      Lehman & Biggs, for appellant.

      William G. Stuart, for appellee.
   Blaib, J.

The record in this cause having been amended, pursuant to our opinion reported 148 Mich., page 544, we proceed to review the order of Judge Man-dell referred to therein. Under our previous decisions in this case, the cause of action stated in the proposed amended declaration is a different cause of action from that stated in the original declaration, and if at the time of Judge Mandell’s order the statute of limitations had run against the cause of action, he did not err in refusing to allow the amendment, and his order must be sustained. Gorman v. Newaygo Circuit Judge, 27 Mich. 138; Michigan Cent. R. Co. v. Kalamazoo Circuit Judge, 35 Mich. 227; Connecticut Fire-Ins. Co. v. Monroe Circuit Judge, 77 Mich. 231; Nugent v. Kent Circuit Judge, 93 Mich. 462; Wingert v. Wayne Circuit Judge, 101 Mich. 395; City of Detroit v. Wayne Circuit Judge, 125 Mich. 634.

It is clear, however, that at the time the order was made by Judge Mandell, the statute had not run against the cause of action, and counsel excepted to the legal sufficiency of that order just as effectively by the application for a writ of mandamus as though he had formally excepted upon the record. Jones v. Pendleton, supra. The question then arises, Was the ruling of Judge Man-dell erroneous ? The cases heretofore cited, holding that an amendment introducing a new cause of action which is barred by the statute of limitations will not be permitted, have no application, because, at the time the ruling in question was made, the cause of action was not so barred.

The cases of Loranger v. Davidson, 110 Mich. 605, and Frohlich v. Graulich, 113 Mich. 65, holding that on appeal from justice’s court to the circuit court, an amendment introducing a new cause of action cannot be permitted because the issue tried, in the justice’s court will thereby be changed, have no application, for this suit was originally commenced in the circuit court.

It is earnestly insisted that .plaintiff has authority only to prosecute this suit for the cause of action for which it was commenced (see section 10113, 3 Comp. Laws) and that, therefore, the cause of action described in the declaration cannot be changed by amendment. This section is to be read in connection with the following section (section 10114) which says, “ and it [the suit] shall be thenceforth conducted in the same manner as if it had been originally commenced by or against the same executor or administrator.” We think it would be anomalous and unjustifiable to hold that there is not the same power of amendment in such cases as in ordinary cases.

It is also said that one cannot, by amendment, introduce a new cause of action. The strongest authority in support of this proposition is Angell v. Pruyn, 126 Mich. 16. There it appears that plaintiff had two distinct causes of action. He' brought suit for one of these. It was held that he could not amend his declaration so as to count upon the other. That case is clearly distinguishable from this. Here the plaintiff has but one cause of action. He failed to properly describe it. The question here is, whether the court has power to permit plaintiff to amend his declaration so that he may recover on the precise cause of action for which he brought stiit, but which he failed to properly describe in his declaration. We think it is clear that he has that power. See Strang v. Branch Circuit Judge, 108 Mich. 232; Chapman v. Colby, 47 Mich. 47; Cleveland v. Rothschild, 138 Mich. 90; Smith v. Palmer, 6 Cush. (Mass.) 519.

The judgment is reversed and a new trial granted.

Montgomery, Moore, Carpenter, and McAlvay, JJ., concurred with Blair, J.

Hooker, J.

(dissenting). The plaintiff’s declaration was originally on the common counts in assumpsit, accompanied by a bill of particulars for commissions on a sale of real estate by the plaintiff for the defendant. Upon the first trial of the case the testimony showed that plaintiff did not sell the land, thereby earning a commission, but he was allowed to recover upon testimony that while he was ill the defendant informed him that others were trying to sell the property, but in view of the work the plaintiff had done he should have a commission in case they should sell it. We held that this was an error, for the reason that the declaration, as restricted by the bill of particulars, did not leave the case open for a recovery upon any but the first theory, the second being a new and different contract, thereby deciding the point upon which this case must turn. See Jones v. Pendleton, 134 Mich. 460. No suggestion is there made that an amendment might be permitted.

The action sued upon was a contract made at a particular time, whereby the plaintiff agreed to pay a certain commission for specified personal services. This contract is abandoned, and counsel now ask to be allowed to substitute another and different agreement made at another and later time. It is not, in my opinion, seeking to recover on the “precise cause of action,” but, on the contrary, an effort to recover upon a new and different cause of action. It is an attempt to recover upon a set of facts which we held did not prove the contract alleged, and was therefore a different cause of action. As well might plaintiff have asked to insert a count to recover a commission for selling a horse, when his original declaration counted on the sale of land. See Connecticut Fire-Ins. Co. v. Monroe Circuit Judge, 77 Mich. 231; Kleis v. Insurance Co., 117 Mich. 469; Angell v. Pruyn, 126 Mich. 19. As said in the last case cited, the evidence which would support the original claim would not support the later one, and we have already held that the evidence supporting the later did. not support the earlier, and the cause was reversed for that reason. See, also, 3 L. R. A. (N. S.) 290, note d. The case of Strang v. Branch Circuit Judge, 108 Mich. 232, was written by Mr. Justice Long, who also wrote Angell v. Pruyn, supra. It is distinctly based on the proposition that the amendment contemplated a special instead of the common count upon one and the same cause of action. The same may be said of Cleveland v. Rothschild, 138 Mich. 90. There was, in that case, but one transaction, one contract. It was not alleged accurately the first time, and an amendment was rightly permitted. That is not so in this case. Here there were two transactions and two contracts. Plaintiff sued on the first and failed, and now seeks to introduce the other by amendment, and this should not be permitted, under the well-settled rule.

The judgment should be affirmed.

Grant, C. J., and Ostrander, J., concurred with Hooker, J.


author: Moore, J.

text:
    CLUTE v. WHEATON.
    Deeds — Estates Created — Retention of Life Interest — Effect.
    Intestate, having conveyed a tract of land to defendant, her daughter, taking back a life lease, subsequently made a warranty deed of a part of the same land to defendant, taking* back a life lease conditioned for the payment by defendant to intestate’s two sons of a sum of money within two years after intestate’s death, in default of which the land conveyed was to become the property of the three in common. Held, that at the time the second deed was made intestate had no title to the land except her life estate, which she did not part with, and that the sons acquired no interest by virtue of the condition in the second lease.
    Appeal from Calhoun; North, J.
    Submitted June 19, 1907.
    (Docket No. 55.)
    Decided March 17, 1908.
    Bill by Charles M. Clute, administrator of the estate of Melvin L. Clute, deceased, against Mary E. Wheaton and Russell E. Clute to construe certain deeds and leases, a partition of real estate, and for an accounting. From a decree dismissing the bill, complainant appeals.
    Affirmed.

      W. A. Collins and A. McClatchey, for complainant.

      Winsor & Miller and James M. Powers, for defendants.
   Moore, J.

Alazan Clute died intestate, July 15, 1897. She was the mother of Mary E. Wheaton, Russell E. Clute, and Melvin L. Clute. At one time she owned the southwest fractional quarter of section 30, town 1 south, of range 5 west, Calhoun county, Michigan. Melvin L. Clute died November 19, 1900. May 28, 1903, the complainant was appointed administrator of his estate. On March 25, 1905, this suit was commenced. The bill of complaint asks for a construction of certain papers and that they be declared to constitute a trust, for partition of the real estate above described, and for an accounting. Russell E. Clute disclaimed any interest-in the litigation. The case was put at issue as to the other defendant and tried. The bill of complaint was dismissed. The case is brought here by appeal.

The record shows the following state of facts: On the 1st day of September, 1879, Alazan Clute deeded the east half of the southwest fractional quarter of said section to her son Russell E. Clute. This deed was not recorded, but was delivered to Russell E. Clute, and he took possession of the land and occupied it until the 14th day of August, 1884, when he sold it to Mary E; Wheaton for the sum of $4,000, and she went into possession. At the time Mary E. Wheaton bought the east 80 acres, the deed from Alazan Clute to Russell E. Clute had not been recorded, leaving, the record of title in Alazan Clute. That being the case, and, it is said, to save the expense of recording the deed from Alazan Clute to Russell E. Clute, the parties had the deed made directly from Alazan Clute to Mary E. Wheaton. Russell E. Clute undertook to cancel the. deed from his mother by writing across the face of it:

“This deed is hereby canceled, set aside, and held for naught and surrendered August 14, 1884.

“Russell E. Clute.”

He delivered the canceled deed to Mary E. Wheaton who produced and introduced it in evidence on the trial. May 13, 1905, Russell E. Clute also made to Mary E. Wheaton a quitclaim deed of the same property. On the 2d day of December, 1892, Alazan Clute deeded “all the west fractional half of the southwest quarter of section thirty” to Mary E. Wheaton. On the same date, and as a part of the same transaction, Mary E. Wheaton executed and delivered to Alazan Clute a deed of a life estate in the west fractional half of the southwest quarter-of section 30. It is shown by a preponderance of the proof that these instruments were delivered at the time of their execution.

On the 5th day of January, 1891, Mary E. Wheaton conveyed to Alazan Clute a life estate in and to “the east half of the southwest quarter of section 30.” On the 16th day of May, 1894, Alazan Clute executed and delivered to Mary E. Wheaton a deed of “69 acres of land off from the west side of the southwest fractional quarter of section number 30.” On the same day Mary E. Wheaton executed and delivered to Alazan Clute a life lease of “69 acres of land off from the west side of the southwest fractional quarter of section 30 * * * for and during the term of natural life of the said Alazan Clute, commencing on the 16th day of May, 1894, and ending at the death of said Alazan Clute.” The annual rental was $1. The life lease contained the following condition:

“And it is further agreed by the said party of the first part for the consideration of a deed this day made of the above-described lands to her from the said Alazan Clute, that she, the said first party, her executors or assigns will, within two years after the death of the said Alazan Clute without fraud or delay, pay to Melvin L. Clute, a son and heir of said first party, one thousand dollars and will also in the same time pay to Russell E. Clute, a son and heir of said first party, the sum of five hundred dollars and that in default of such payment to be made as aforesaid, the said above-described land and which this day has been deeded as aforesaid, shall revert to and become the property of the said Russell E. Clute, Melvin L. Clute and Mary E. Wheaton to be equally divided between them, share and share alike, and the above-named heirs of the said Alazan Clute, and no others, upon such default may re-enter the said lands and take possession of the same according to law, provided, however, that if the party of the second part shall well and truly perform and fulfill all and singular the covenants herein contained on her part to pay the moneys for rent, taxes, repairs, insurance, improvements or for any other purpose whatsoever, then this conveyance to be void.”

It was signed and acknowledged by Mary E. Wheaton.

On the 14th day of April, 1896, Alazan Clute executed and delivered to Mary E. Wheaton a warranty deed of “all of the southwest fractional quarter of section 30,” and it was stated therein: “This deed corrects an error and mistake.” Other papers were executed at this time which we think it unnecessary to refer to. The important claims of complainant are:

First. That the deed and life lease of the 16th of May, 1894, are to be construed together as one instrument, and that they created, first reserving to Alazan Clute a life lease, an executed trust in the property which they cover, which trust gave to the persons benefited vested estates, irrevocable from the time of their creation which was May 16, 1894.

Second. That under the trust, Mary E. Wheaton took an estate upon conditional limitation.

Third. That under the trust, Melvin L. Clute, Russell E. Clute and Mary E. Wheaton were given estates upon contingent remainder, upon the happening of which contingency, the three took equal estates in common, and the precedent estate of Mary E. Wheaton, upon conditional limitation, ceased to exist. * * *

Fifth. That Mary E. Wheaton should be compelled to account for the profits of the property since July 15, 1899.

Are these contentions well taken ? It has already appeared that Melvin L. Clute survived his mother nearly three and one-half years. The $1,000 was not paid to him, nor did he enter upon the land heretofore described, nor does it appear very clearly that he claimed the money or the land. It becomes material to inquire what the situation was when the deed and lease of May 16, 1894, were made. It already appears that Alazan Clute sold to her son Russell E. Clute the east half of the fractional quarter as long ago as in 1879, and never had any title thereto afterward. It is practically conceded by counsel that this description of land is eliminated from the case. It has also appeared that on December 2, 1892, Alazan Clute deeded to Mrs. Wheaton the west half of this fractional quarter, at which time she took back a life lease in the ordinary form. From that time on it does not appear that Alazan Clute had any title to the land in controversy except by virtue of her life lease. What, then, did she part with when she made the deed of May 16, 1894 ? Evidently nothing unless it was her life interest. She did not part with that because at the time she made the deed, and as part of the same transaction, she took back a life lease to herself. It must not be forgotten that Melvin L. Clute had no title to any of this property. It is not made to appear that he was in any way a party to the agreement, or that any consideration passed from him or from his mother to Mrs. Wheaton, or that the lease was ever delivered to him. Can it be said that as the result of what was done on May 16, 1894, Melvin L. Clute acquired a vested interest in this real estate ? We think this question must be answered ¿n the negative.

The decree is affirmed, with costs.

Blair, Montgomery, Ostrander, and Hooker, JJ., concurred.