author: Person, J.

text:
    WHITE v. HUBER DRUG CO.
    1. Landlord and Tenant — Lease — Assignment — Conditions— Covenant Against Subletting.
    Covenants not to assign or underlet the leased premises-•without the assent of the lessor are commonly used and are recognized as valid and reasonable. The purpose of such a stipulation is to reserve to the landlord the privilege of determining who shall occupy the premises, and, where the right is clearly reserved to the lessor, he may insist upon it if he wishes to, without regard to the. qualifications of the proposed assignee.

      2. Same — Construction—Transfer.
    While it has been stated that covenants against assignment or underletting are not favorably regarded by the courts and are liberally construed in favor of the lessee, this means no more than that the scope of the wofd assignment will not be enlarged by the courts, and that the covenant will not be considered as violated by any technical transfer that is not fairly and substantially an assignment, as where a tenant without license from his landlord takes a third party into partnership and lets such party into joint possession with him.
    3. Same — Evidence—Corporations—Successor.
    And where the original tenant, a corporation, becoming insolvent, transferred all its assets to a new company in which the principal stockholder was the largest stockholder and chief creditor of the insolvent, holding all but three shares of the new company, which continued the business of the original corporation under a new name, assuming all the debts of the old corporation, the new company was not so identical with its predecessor as to be treated as the same corporation or successor thereto so as to entitle it to occupy premises that had been rented under a lease prohibiting subletting or assigning the leasehold interest.

      4. Same — Option—Waiver.
    The lessor does not waive his rights under a lease which contains a prohibition against subletting or assigning the interests of the lessee by executing an option with the corporation hiring the premises granting thereto and to “its successors and assigns” a right of renewal of the lease at their option. The successors and assigns must be taken to refer only to such persons as the landlord would consent to or to whom the interest passed by operation of law.
    Error to Kent; Cross, J., presiding.
    Submitted April 20, 1915.
    (Docket No. 104.)
    Decided March 30, 1916.
    Summary proceedings by Sophie A. White and another against the Huber Drug Company, a corporation, for the recovery of possession of certain real estate. Erom a judgment of the commissioner, complainants appealed to the circuit court. Judgment for defendant on a verdict directed by the court. Complainants bring error.
    Reversed.

      Chas. E. Ward, for complainants.

      Kleinhans, Knappen & Uhl, for defendant.
   Person, J.

These are proceedings brought before a circuit court commissioner to obtain possession of certain real estate in the city of Grand Rapids known as the Addis Block. In 1906, Maria Addis, then owner of the property, made a lease thereof in writing to the Walter K. Schmidt Company, a corporation, for a term of five years from the 1st day of February, 1911. The lease contained a covenant that the lessee should not assign nor transfer the same, nor sublet the premises, or any part thereof, without the written assent of the lessor; and it was further 'provided that upon default in any of the covenants of the lease the lessor might re-enter and'repossess herself of the premises. Upon the death of Maria Addis, which occurred before the transfer of the lease as hereinafter mentioned, the-complainants, as tenants in common, succeeded to the ownership of the property. The Walter K. Schmidt Company remained in possession until in December, 1913, when it transferred all of its property, including its rights undei^the lease, to the defendant corporation. It is claimed by the complainants, as the grounds for these proceedings, that such transfer was in violation of the condition against assignment, and that all rights under the lease were thereby forfeited. On the other hand, the defendant insists that such transfer did not amount, in substance, to an assignment of the lease, because, it says, the defendant company was but a reorganization of, and is identical with, the Walter K. Schmidt Company, and took a transfer of the lease as successor to that company. It also insists that Mrs. Panting, one of the complainants, by signing a certain option hereinafter mentioned, had consented that the Walter K. Schmidt Company might assign the lease. The defendant prevailed before the circuit court commissioner, and also before the circuit court. In directing a verdict the circuit judge held that there was no proof of Mrs. Panting’s consent to the transfer; but as to the transfer itself, he held that it was not such an assignment as the lease prohibited inasmuch as the defendant company was substantially identical with the company it succeeded.

The case is brought here by complainants; and the questions before this court are: First, whether the transfer of its rights under the lease by the Walter K. Schmidt Company to defendant was, in substance and in fact, an assignment of the lease; and, second, whether Mrs. Panting, by signing the option, consented to an assignment of the lease. These questions will be considered in their order.

First. “A covenant not to assign or underlet the leased premises without the assent of the lessor is frequently inserted in a lease, and is regarded ás a fair and reasonable covenant.” Wertheimer v. Circuit Judge, 83 Mich. 56, 61 (47 N. W. 47).

See, also, Marvin v. Hartz, 130 Mich. 26 (89 N. W. 557).

The purpose of such a stipulation is to reserve to the lessor the right to say who shall occupy the premises; and where the right is clearly reserved to the lessor, he may insist upon it, if he wishes to, without regard to the qualifications of the proposed assignee; that is, it is not for the court to determine whether the proposed assignee would, or would not, make as good and acceptable p, tenant as the lessee himself.

It has been said, however, that covenants against assignment or underletting are not favorably regarded by the courts and are liberally construed in favor of the lessees. But this means only that the scope of the term “assignment” will not be enlarged by the courts, and that the covenant will not be considered as violated by any technical transfer that is not fairly and substantially an assignment; as where a tenant without license from his landlord takes a third party into partnership and lets such party into joint possession with him. Roosevelt v. Hopkins, 33 N. Y. 81. For this: reason, while the defendant, the Huber Drug Company, claims to have succeeded to all the rights of the Walter K. Schmidt Company under the lease, it yet insists that there has been no actual and substantial assignment, because, it says, the defendant company is practically identical with the Walter K. Schmidt Company. The facts relied upon by the defendant to show the supposed identity are as follows :

The Walter K. Schmidt Company, which for convenience will be referred to as the old company, in December, 1913, had become insolvent. It then had capital stock issued and outstanding to the par value of $30,090, which was held by 24 stockholders. Its president, Henry Huber, Sr., was the largest holder of its stock, but his holdings fell far short of a majority. Mr. Huber had loaned considerable money to the company and had also guaranteed much of its other indebtedness, so that, directly and indirectly, he was its heaviest creditor. Under these circumstances it was decided by Mr. Huber and his friends that he ought to secure absolute control of the company, and of its assets, so as to save himself, as far as possible, from loss. Two ways of doing this seem to have occurred to Mr. Huber and his legal advisers, one of which was to get the other stockholders to assign their stock in the existing company to him, while the other was to organize a new company, of which he should hold practically all of the stock, and then to obtain a transfer by the old company of its assets to the new company. The latter course was finally adopted, for the reason, apparently, that all of the other stockholders could not be prevailed upon to assign their stock to him without compensation, or, perhaps, could not be prevailed upon to assign it at all. So another company was organized by Mr. Huber under the name of the Huber Drug Company, the defendant herein, which will be spoken of as the new company. This new company was capitalized at $1,000, of which $500 were paid in, and 50 shares of stock were issued, of which 47 shares were issued to Mr. Huber, and one share each to three other gentlemen, making four stockholders in all. These four stockholders of the new company included the officers of the old company, so that the same men who had been officers of the old company became the officers of the new company. The purposes of the incorporation also, as stated in the articles of association of the new company, were the same as those stated in the articles of association of the old company. Thereupon the directors of the old company, in accordance with a vote of the majority of its stockholders, executed a bill of sale by which it transferred to the new company all of the goods, chattels, moneys, debts, notes, good will, things in action, contracts, agreements and all other assets whatsoever and wheresoever of the old company, together with the right, on the part of the new company, to use the name of the old company; and in consideration thereof the new company assumed all of the old company’s debts and liabilities. After making this transfer to the new company the old company, under the provisions of section 12 of Act No. 232, Pub. Acts 1903 (2 Comp. Laws 1915, § 9028), filed with the secretary of State a notice that it had been dissolved by sale of all its property and franchises; and the new company proceeded to amend its articles of association so as to change its name to that of the old company; that is, to change its name from Huber Drug Company to Walter K. Schmidt Company. But when the new company attempted to file a certificate of such amendment with the secretary of State, it was found that another corporation in the city of Grand Rapids had already adopted the name of the old company, and the certificate of amendment was refused and rejected. It seems, nevertheless, that thereafter the new company assumed to use the name of the old company in the transaction of its business. Immediately, also, upon the transfer of its assets by the old company to the new, the latter took possession of the premises in question and control of the business of the old company. For some months thereafter the new company paid rent under the lease to the agent of complainants, who were nonresidents of the State, but in making such payments the new company signed the name of the old company to its checks. Neither complainants nor their agent, when receiving this rent, knew of the transfer by the old company to the new, nor did they know that any change had taken place in the control of the premises. Upon learning of the transfer-complainants refused to receive further rent from the new company, declared the lease terminated by the violation of the condition against assignment, and began these proceedings to obtain possession of the property.

These facts, in our judgment, instead of showing an identity between the new company and the old one, show the reverse. It is true that the reorganization of a corporation is sometimes authorized by statute, and the statute may provide that the new corporation shall succeed to all the rights and assets of the old corporation. First Commercial Bank v. Talbert, 103 Mich. 625 (61 N. W. 888, 50 Am. St. Rep. 385), and Hicks v. Steel, 142 Mich. 292 (105 N. W. 767, 4 L. R. A. [N. S.] 279), are cases of this kind. In each of these cases a national bank had reorganized as a State bank under an express provision of law authorizing it to do so. And they were held to have succeeded, by force of the statute, to the rights and assets of the national banks thus reorganized. Frequently, also, statutes authorizing the consolidation of corporations provide that the •consolidating company shall succeed to the property and rights of the constituent companies. In all of these cases the succession is by force of the statute. But in the case at bar there was no statute authorizing the reorganization of the old company into the new, nor was there any statute by which the new company was empowered to succeed to the rights and assets of the old company.

And there are instances where, without the aid of the statute, a corporation has reorganized under such circumstances that the new company has been held to succeed to the assets of the old company as a matter of right. Reynolds v. Meyers, 51 Vt. 444, was a case of this kind. There the entire body of stockholders of a Massachusetts corporation reincorporated under the laws of Vermont, and the new corporation was held to have succeeded to a nonassignable contract of the old company.

In New York Bank-Note Co. v. Engraving & Printing Co., 28 App. Div. 411 (50 N. Y. Supp. 1093), Judge O’Brien said:

“The stock of the new company was distributed ratably among the stockholders of the old. Technically the new company was a distinct legal entity from the old, but to all intents and purposes it was the same concern. * * * The new company had the same assets as the old, the same business, and, so far as appears, the same charter rights. * * In the absence of special circumstances, there should, we think, be no hesitation in holding that the reorganization of a corporation does not prevent the new company from succeeding to all the rights and liabilities arising under contracts of the old.”

In that case the stockholders of a New Jersey corporation had reorganized as a body under the laws of West Virginia. In both of these cases the reorganization amounted simply to a change in charters. The same men who had been incorporated under the laws of one State reincorporated under the laws of another State; and in the sense in which stockholders are said to be the equitable owners of the corporate property, there had been no change in the equitable ownership. The case at bar is altogether different. Here the object was not to reincorporate substantially the same stockholders, but to get rid of most of the stockholders of the old company.

The fact that one company purchases the assets and assumes the liability of another company does not make the two companies identical. Nor does the further fact that the purchasing company continues the business purchased at the old location make them identical. Any four'men not interested in the old company might have organized a corporation for the purpose of purchasing the assets and assuming the liabilities of the Walter K. Schmidt Company; yet it would hardly be suggested that such organization thereby became •identical with the Walter K. Schmidt Company. The fact that the new company was organized by 4 out of the 24 stockholders of the old company can make no difference in principle. The very purpose of organizing the new company in this case was to get rid of the old company and its stockholders. When the new company took over the assets of the old company it did so purely as a purchaser and not otherwise; and there at once ensued a radical change, not only as to the legal title to the assets, but also as to the equitable title of the stockholders. And the transfer of the lease by the bill of sale was therefore an assignment in the strictest sense.

The condition against assignment in a lease to a partnership was held to have been violated where the members, of the partnership, upon its dissolution, assigned the lease to a corporation which they and others had formed for the purpose of taking over the partnership business and assuming its liabilities. Emery v. Hill, 67 N. H. 330 (39 Atl. 266). And

“if one firm is dissolved and another one formed, and the lease is assigned to the new partnership by the original one, this has been held a breach of a condition -against assignment.” Jones on Landlord & Tenant, | 469.

Second. As to the claim, made by the defendant, that Mrs. Panting, by signing a certain option, had waived her right to insist upon the condition in the lease against assignment. Before the organization of the new company, that is, in January, 1913, an agreement in writing had been submitted to the complainants by which the old company, “its successors and assigns,” were to have the right to a renewal of the lease at their -option. This agreement had been signed by Mrs. Panting, but not by Mrs. White. And it is the theory of the defendant that, by signing this option, which contained the words “successors and assigns,” Mrs. Panting had thereby impliedly consented to an assignment of the lease by the old company.

We do not think that this is so. To operate as a waiver by implication the terms of the option must have been inconsistent with the condition in the lease, and they were not, in fact, inconsistent. The lease did not prohibit an assignment absolutely and at all events, but only when made without the written assent of the lessor. Furthermore, it is usually held that such a ■condition does not prohibit an assignment by operation of law, unless expressly so stated. Jones on Landlord & Tenant, § 466.- And it must necessarily be held that -the words “successors and assigns” in the option referred only to such successors and assigns as the complainant should consent to, or as should become such by operation of law. The same question was before the supreme court of California in German-American Savings Bank v. Gollmer, 155 Cal. 683 (102 Pac. 932, 24 L. R. A. [N. S.] 1066), where the court said:

“As we have seen, the lease contained a covenant against assignment without the consent of the lessor, with a provision for re-entry in the event of a breach thereof. These provisions were in no way rescinded or affected by the provisions of the supplemental agreements. The provision in the latter agreements that ‘this agreement shall inure to and * * * bind the heirs, executors, administrators, successors and assigns of the several parties’ were not effectual to make any change in this regard. Consent of the lessor was still essential to any assignment which would be binding upon the lessor, and there could not be any ‘assign’ of the lessee in whose favor the provision would operate, except one who had become such by consent of or waiver of the lessor.”

We think the circuit judge was in error in holding that the transfer of the lease by the old company was not in violation of the condition against assignment,’ and the judgment must be reversed.

Judgment is reversed, and a new trial granted.

Stone, C. J., and Kuhn, Ostrander, Bird, Moore, Steere, and Brooke, JJ., concurred.

This case having been submitted on briefs, without oral argument, was reassigned after the death of Justice McAlvay.


source: Caselaw Access Project

license: Public Domain

text:
    KNIGHT v. ALAMO MANUFACTURING CO.
    1. Corporations — Dividends—Stock and Stockholders — Profits.
    Only the directors of a corporation have power to declare a dividend of its earnings and to determine its amount; so that the holder of cumulative preferred stock is not entitled to bring an action on his certificate for dividends that the board of directors have not duly declared.
    2. Same — -Dividends—Actions.
    The word dividends, used in a certificate of stock, does not mean simply profits, but does refer to such portion of the profits as the directors have, by proper resolution, ordered distributed among the stockholders.
    3. Same — Equity—Distribution of Profits.
    While the stockholders may be entitled to a dividend, if profits have been earned and a dividend refused, in a proceeding in equity, preferred stock is subject, in so far as the payment of a stock dividend is concerned, to substantially the same rules as the common stock unless they are rendered inapplicable by express provisions.
    4. Same — Assumpsit.
    An action at law does not lie for dividends earned but not declared by the board of directors.
    5. Same — Custom.
    And on the facts appearing in evidence, held, also, that no profits had been earned by defendant corporation, and any previous practice of declaring or paying dividends on preferred stock unauthorized by the board of directors would not change the settled and general rule.
    6. Same — Resale.
    Where the corporation issued with some of the preferred stock an agreement described as a guaranty to resell the stock if the purchaser within a limited time should so elect, and dividends were paid regularly by the officers, even though other stock received none, plaintiff whose stock was not guaranteed did not obtain any rights by reason thereof.

      Error to Hillsdale; Chester, J.
    Submitted June 16, 1915.
    (Docket No. 56.)
    Decided March 30, 1916.
    Assumpsit in justice’s, court by J. W. Knight against the Alamo Manufacturing Company for the recovery of_stock dividends. From a judgment for plaintiff, defendant appealed to the circuit court. Judgment for defendant on a verdict directed by the court. Plaintiff brings error.
    Affirmed.

      C. A. Shepard and B. E. Sheldon, for appellant.

      F. A. Lyon, for appellee.
   Person, J.

This action was brought in. a justice’s court, and the nature of plaintiff’s claim is fairly explained by his declaration, which reads as follows:

“Plaintiff declares verbally in assumpsit on the following clause in certificate No. 189 of preferred stock of the Alamo Manufacturing Company, of Hillsdale, Mich., to wit: ‘This stock is entitled to a cumulative dividend of 7 per cent, per annum, payable semiannually, on the 1st day of September, and the 1st day of March of each year.’ Plaintiff says the dividend for September, 1913, and for March, 1914, have neither been paid, and the amount due plaintiff at the commencement of this, suit was $72.60, for which plaintiff asks judgment.”

From a judgment rendered by the justice in favor of plaintiff, an appeal was taken to the circuit court, where a verdict was directed for the defendant. The case is brought here by writ of error.

It will be observed that plaintiff’s pleading does not aver that any dividend was declared by the defendant company for either September, 1913, or March, 1914, and no such dividends were, in fact, declared. This, together with the claim that there were no profits from which either dividend could have been declared, constitutes the defense in the case.

Plaintiff admits that dividends upon his stock are payable only from such profits as the company may make; and he also admits that, as a general rule, an action at law will not lie for a dividend until it has been duly declared by the directors of the company. But, notwithstanding these admissions,'he insists that' the terms of his certificate, which was authorized by a resolution of the board of directors, constitute an absolute promise to pay dividends in March and September of each year, if there are profits from which they can be paid, and that therefore the existence of such profits is a legitimate question to be determined by a jury.

In this the plaintiff is entirely wrong. His is an ordinary certificate of preferred stock, and contains no unusual provisions. It does entitle him to dividends in March and September of each year, if on those dates there are profits in the possession of the company which the directors, in the exercise of a fair discretion, believe can properly be distributed as dividends. And, being cumulative, these dividends, if there are no profits at the time which can properly be used to pay them, stand over until there are such profits. But to let a jury determine whether there are or are not profits, and, if there are any, to let it determine whether those profits may properly be distributed among the stockholders, would be equivalent to letting a jury declare the dividend. This, of course, is not the law; and, if each stockholder might call in a jury at his pleasure to determine whether a dividend should be declared, corporations would be short-lived affairs and of but little value.

“It is a well-recognized principle of law that the directors of a corporation and they alone, have the power to declare a dividend of the earnings of a corporation, and to determine its amount.” Hunter v. Roberts, Throp & Co., 83 Mich. 63 (47 N. W. 131).
“The property of the corporation belongs in law to the corporation, and not to the stockholders. This is just as true of the profits earned by a corporation as it is of its other assets: The stockholders of a corporation may have the equitable right to insist that the profits from the corporate business shall be divided among them, but they have no legal right to a share therein, nor is there any indebtedness to them on the part of the corporation, so as to entitle them to maintain an action against it, until a dividend has been made or declared.” 2 Clark & Marshall on Private Corporations, § 517 (6).

The word “dividend,” in plaintiffs certificate of stock, does not mean simply profits, but it does mean such profits, or such portion of the profits, as the directors, by proper resolution, have ordered distributed among the stockholders. As was said in City of Allegheny v. Railroad Co., 179 Pa. 414 (36 Atl. 161):

A dividend “differs from profits in being taken by competent authority out of the joint property of the partnership or company, and transferred to the separate property of the individual partners or stockholders.”

The thing that plaintiff’s certificate of stock says he is entitled to is the declaration of a dividend in March and in September of each year, if on those dates, there are profits in the hands of the company that, ought justly to be divided among the stockholders. And, if directors wrongfully refuse to declare- a dividend when one ought to be declared, the stockholder may have his remedy in equity; but he cannot maintain an action at law until it has be.en declared.'

“Except as to this right of priority over common stock, preferred stock is subject, in so far as the payment of a dividend is concerned, to substantially the same rules as common stock, unless they are rendered inapplicable by express provision.” 2 Clark & Marshall on Private Corporations, § 417 (e).

The circuit judge was. right in holding that this action cannot be maintained, and, being right in his conclusion, the judgment would not be reversed even had he failed to assign' a right reason for it.

In directing a verdict for the defendant company the circuit judge did not expressly.put.it upon the ground that the dividends had not been declared by the board of directors, although he says he had that reason in mind. What he did say in his instructions to the jury was that, in his judgment, it had not been shown that there were any profits from which a dividend could have been declared. And in this, too, we think he was right. The books of the company were not produced for the purpose of determining whether there were profits or not. The secretary testified that the company had not made any profits from which either of these dividends could have been declared. And the only evidence offered by the plaintiff to show the existence of profits were certain statements made to the plaintiff and others by the secretary at various times before the action was begun, to the effect that the company had “gilt-edge paper” for $35,000 or $36,000, but that the banks would not advance money on it at that time. It was also shown that the secretary had held out hopes to the preferred stockholders that they would get their dividends in '30, or 60, or 90 days. This came far short of proving profits. The company might have had that amount of good securities, and much more, without having made any profits. To determine whether or not a company has made profits sometimes requires a very nice balancing of assets with indebtedness and expenses. Nothing of that kind was attempted in this case.

It appears from the record that previous to September, 1913, the secretary of the company had been in the practice of paying dividends upon the preferred stock without any formal resolution or declaration by the board of directors authorizing him to do so. These payments had been reported each year to the stockholders at their annual meeting, and no objection to the practice had been expressed. The plaintiff seems to claim some kind of support for this action from that method of paying the dividends. But we cannot see how he is to get any benefit from it. The payments were unauthorized, but, where stockholders have thus actually distributed profits by unanimous consent, they may be estopped from asserting any claim to recover them back. Barnes v. Spencer & Barnes Co., 162 Mich. 509 (127 N. W. 752, 139 Am. St. Rep. 587). An irregular practice of this kind cannot be held to abrogate the well-settled and essential rule of law that dividends must be determined upon and declared by the board of directors before a stockholder can maintain an action at law for their recovery.

It also appears that a comparatively small portion of the preferred stock, the exact amount not being shown, had been sold by the company under what the secretary called a guaranty. The certificates issued for the preferred stock thus sold were like all of the other certificates of preferred stock, and the so-called guaranties were contained in papers separate and distinct from the certificates. These guaranties consisted of promises, in substance, to resell the stock for the purchaser within a certain limited time if he should so desire. Some of these promises were signed by the company, and others by various parties connected with the company. The secretary testified that these stocks so sold under a promise to effect a resale had always been considered by the company as of the nature of loans, and that in consequence thereof dividends were paid upon these stocks in September, 1913, and in March, 1914, when they were not paid upon the other preferred stock. It is urged by the plaintiff that such payment of dividends upon the so-called guaranteed stock ought to be treated as a declaration of dividends upon the preferred stock generally. It is true that dividends must be pro rata and equal upon all stock of the same class. And it is also true that these promises of resale did not at all affect the character of the stock promised to be resold. It was still simply preferred stock and of the same class as the other preferred stock. But in this case there was no resolution, by the board of directors directing the payment of these dividends upon the so-called guaranteed stock, and, so far as the record shows, the dividends were paid without authority. An unauthorized payment of dividends to a few preferred stockholders cannot be held equivalent to the declaration of a dividend in favor of all preferred stockholders.

The judgment is affirmed.

Stone, C. J., and Kuhn, Ostrander, Bird, Moore, Steere, and Brooke, JJ., concurred.

This case, having been submitted on briefs without oral argument, was reassigned after the death of Justice McAlvay.


author: Person, J. Bird, J.

text:
    BISCHOFF v. AMERICAN CAR & FOUNDRY CO.
    Master and Servant — Workmen's Compensation Law — Injury Arising out oe and in Course op Employment.
    Claimant was a molder in the factory of defendant and had charge of a floor, so-called, operating an electric crane in furtherance of his work. He was a foreigner and did not understand English clearly. His superior servant had directed him to report anything wrong about the crane to a machinist, and not to go on the crane. While the machinist was attempting to repair the machinery of the crane, that had gotten out of order, claimant went up the ladder to point out the source of difficulty, but was injured by the starting of the crane as he attempted to descend. Held, that the injury was not received out of or in the course of his employment, and the question whether or not his injury was caused by intentional and wilful misconduct was not material; that the work he had been employed .to do might not be enlarged so as to permit recovery by any direction given by his superior or by the fact that he may have thought the act would benefit his employer. Kuhn, Bird, and Moore, JJ., dissenting.
    Certiorari to the Industrial Accident Board.
    Submitted January 12, 1915.
    (Docket No. 69.)
    Decided March 30, 1916.
    George BisehofE presented his claim against the American Car & Foundry Company, a New Jersey corporation, for compensation for injury to claimant’s right hand. From an order awarding compensation respondent brings certiorari.
    Reversed.

      Angelí, Bodman & Turner, for appellant.

      Barbour, Field & Martin, for appellee.
   Person, J.

On the 16th day of September, 1913, the claimant was, and for more than a year had been, employed by the American Car & Foundry Company as a molder. In the forenoon of that day his right hand was caught in the gear wheels of an electric crane and so crushed as to require the amputation of the larger portion of it. The committee of arbitration appointed under Act No. 10, Extra Session 1912 (2 Comp. Laws 1915, § 5423 et seq.), having found the claimant entitled to compensation, and the amount of such compensation having been increased on appeal to the Industrial Accident Board, the employer brings the case here for review, insisting that the injury received by the employee did not arise “out of and in the course of his employment,” that it was the result of his. own “intentional and wilful misconduct,” and that the compensation allowed is excessive.

As this act provides compensation only for such injuries as are received in the course of the employment, and then only when they grow out of the employment, and as injuries received outside the employment are not within the provisions of the act at all, it must follow that the “intentional and wilful misconduct” which operates to debar the employee from the compensation which he might otherwise receive refers to such misconduct within the scope of his employment. If the injury to the employe was not received “in the course of his employment,” it is immaterial whether it was caused by his “intentional and wilful misconduct” or not.

The first question therefore to be determined is whether the injury received by claimant arose out of and in the course of his employment. And in this connection the findings of fact made by the Industrial Accident Board and returned to this court, being well supported by the evidence, are controlling so far as they go. Such findings are as follows:

“(1) On the 16th day of September, 1913, George Bischoff, claimant and appellee, was employed as a car wheel molder at the Detroit plant of the American Car & Foundry Company, a New Jersey corporation, engaged in the manufacture of cars, car wheels, etc. He was at that time 29 years of age, and had been in the employ of the appellant 3% years, 2 of which he had spent working as helper to a molder, and iy% of which he spent working as a molder.
“(2) The foundry in which appellee worked at the time, of the accident was divided into 14 ‘floors’ about 9 feet apart. Each ‘floor’ consisted of a row of molds, 25 molds in length, located on one level or general ground floor of the foundry. A molder was in charge of each one of these ‘floors.’ At a distance of about 15 feet above each ‘floor’ was located a crane, the motive power of which was electricity; 240 volts being required to operate it. Appellee was in charge of a ‘floor’ over which was located crane No. 8, three photographs of which were introduced in evidence as appellant’s Exhibits A, B, C. From the floor appellee, as part of his work, operated the crane forward and backward and up and down as might be necessary in doing his work. The crane could be reached only by climbing a brace located near it or by a ladder which must be especially placed for the purpose.
“ (3) There is nothing in the occupation of a molder which would require him to go upon the crane for the purpose of repairing it should it be out of order; a machinist and electrician being employed by appellant to make the necessary repairs. Appellee understood that hé was employed as a molder, and in no other-capacity; that all his duties relative to such employment were ordinarily to be performed on the floor; that he must use the crane to do his work; that, if the crane was out of order and he could not use it or operate it, he should report it to the machinist or electrician, and, if they could not be found, he should sit down or go home.
“(4) Instructions had been given by the superintendent to the foreman to allow no one but the men designated for such work to go upon the crane, and these instructions had been given to the molders by the foreman, but appellee could not speak nor fairly understand either English or the language of his foreman. Appellee had, in fact, gone up to fix or oil the crane several times before the date of his injury.
“(5) A short time before the injury, appellee discovered that the crane was out of order and reported to the machinist, who was also a foreman, that the crane was not working well, because the brake was too loose. Appellee is a German, and the machinist is a Croatian; appellee could not talk with the machinist very well, because they did not speak the same language; yet he could indicate in broken English that ‘the brake is too loose,’ and by showing the machinist say enough in English to inform him what the trouble with the crane was.
“(6) While the machinist was up on the crane looking for the trouble, appellee, not being able to make him fully understand in English, went up the ladder and got off where the machinist was to point out to him where the trouble was.
“ (7) After being on the crane five minutes appellee started to go down the ladder. In some way the machinist or appellee set the machinery in motion, and appellee’s hand was caught in certain gear wheels, and all that part including the four fingers was amputated from a point on the metacarpal bone of the little finger about an inch and three-quarters below the wrist joint diagonally across the hand to a point two and a half inches below the wrist joint, leaving the thumb entirely uninjured.
“(8) It was mutually conceded by the parties that, if appellee is entitled to anything, he is entitled to the maximum compensation of $10 a week.”

If a workman is injured while voluntarily doing something quite outside the scope of the work he is employed to do, it cannot well be said that such injury “arises out of and in the course of his employment.” This is illustrated by the old case of the boy who was engaged to hand balls of clay in molds to a molder, and was told not to touch the machinery; but, having nothing to do for the moment, he did attempt to clean the machinery, and was injured. It was necessarily held that the injury did not “arise out of and in the course of his employment.” Lowe v. Pearson, 1 W. C. C. 5. It was also held that the injury did not arise out of and in the course of the employment where a girl left her work to start an engine when the person whose particular duty it was to do so happened for the moment to be absent. Losh v. Evans & Co., 5 W. C. C. 17.

In other words, the work which one is employed to do, when construed in a reasonably broad and comprehensive way, does limit and mark out “his employment,” within the meaning of the statute. Of course, the scope of such particular employment may be enlarged for the time being by the directions of some superior who has authority; and in the case of an actual emergency it may be held that any reasonable attempt to preserve the employer’s property is' within the general lines of an employee’s duty. But ordinarily the scope of a workman’s employment is defined by the things he is employed to do, and the things reasonably and fairly incident thereto.

Notice must be taken that a factory of today usually Includes within the field of its operations many fairly distinct lines of work, from that of the roustabout engaged in the ordinary labor that almost any one may perform, to that of the expert mechanic, which can be done safely by those only with skill and experience. The difference between these various kinds of work was always recognized by the common law, and it was held to be negligence for the master to require of the servant, without warning and instructing him, the performance of work outside of and more dangerous than that which the latter had contracted to perform. Such classification of work exists in the very nature of things, and as much under the statute as at common law. Its recognition is required by any proper organization of a factory, not only for efficiency, but as well for the purpose of guarding against accident and injury. And if a workman, when there is no emergency, should, of his own volition, see fit to intermeddle with something entirely outside the work for which he is employed, he ought not to be allowed compensation upon the mere plea that he thought his act would be for the benefit of his employer. That plea may be of value under some circumstances, but it cannot authorize an employee to voluntarily take upon himself the performance of work for which he was not employed.

In the case at bar the crane, in connection with which the accident occurred, was located on beams some 15 feet above the floor where the claimant was required to work. It could be reached only by use of a ladder to be obtained and placed for that purpose, or by climbing upon a brace which was not intended for such use. Its location was as separate and distinct from the floor where the claimant worked as if it had been in another room or in another building. The crane was operated by electricity, and 240 volts were required for that purpose. It was dangerous to get upon it, or to inter-meddle with it, as is stated repeatedly in the testimony and is shown by the accident itself. And this the claimant must have known as well as anybody. Two experts were employed by the company for the particular purpose of repairing the cranes if they should get out of order.

It is expressly found by the Industrial Accident Board, and we are bound by the finding, that the claimant understood he was employed as a molder, and in no other capacity, and that there was nothing in the occupation of a molder which would require him-to go upon the crane for the purpose of repairing it should it be out of order. A more definite and explicit finding as to what was within the scope of his duties and what was without such scope could not well be made. The Industrial Accident Board also finds that instructions had been given by the superintendent to the foreman to allow no one but the men designated for such work to go upon the crane, and that these instructions had been given to the molders by the foreman. The superintendent testifies that one reason for these instructions was the safety of the molders. It is true the board also finds that the claimant could not speak nor fairly understand either English or the language of the foreman, but it makes no express finding as to whether the claimant did or did not actually and in fact understand these instructions. Whether the claimant really understood them or not, he certainly did understand from the foreman that he was to report to the machínist or to the electrician any defect in the operation of the crane, and, if they could not be found, that he should sit down or go home. This is found by the board from his own testimony.

On the day of the injury the crane used by claimant in his work did not operate properly, and he reported it to the machinist. It does not appear from the claimant’s testimony that he had any difficulty in making the machinist understand the trouble with the crane. He says that he told the machinist that it was not good and that the brake was too loose. Thereupon the machinist got a ladder and climbed upon the crane to repair it. After the machinist had got upon the crane the claimant followed him up the ladder, and also up on the crane. No communication whatever between the two had been attempted after the machinist had started up the ladder and while the claimant, was on the floor. In other words, the claimant did not climb up to and upon the crane because of any failure to make the machinist understand anything he was trying to tell him at the time. What the claimant did after getting upon the crane was to point out to the machinist .what claimant thought ought to be done in making the repairs. He did not apparently go up for the purpose of reporting the condition of the crane, but to suggest to the machinist what the latter ought to do to remedy the difficulty. The claimant appears to have fully understood the danger of being on the crane, because he says that as soon as he found the switch had not been opened he at once started ato go down. In doing this he placed one hand upon the large wheel, when in some way the machinery was started, and his hand was crushed.

The very thing that the claimant attempted to do was the very thing that the Industrial Accident Board has expressly found to have been outside the limits of his employment. The finding of the board is:

“There is nothing in the occupation of a molder which would require him to go upon the crane for the purpose of repairing it should it be out of order; a machinist and an electrician being employed by appellant to make the necessary repairs. Appellee understood that he was employed as a molder, and in no other capacity.”

The very thing he did do was to climb upon the crane, not for the purpose of reporting that it was out of order, but to direct the machinist in the performance of his duty. And he did this, well knowing the danger to which he was subjecting himself. In the face of the express findings of the board, which, as we have said, are warranted by the evidence, it does not help claimant any that on several previous occasions also he had gone outside the limits of his employment by climbing upon the crane.

The orders allowing compensation must be reversed and set aside.

Stone, C. J., and Ostrander, Steere, and Brooke,. JJ., concurred with PERSON, J.

Bird, J.

(dissenting). The sixth finding of fact of the Industrial Accident Board was:

“While the machinist was upon the crane looking for the trouble, appellee, not being able to make him fully understand in English, went up the ladder and got off where the machinist was to point out to bim where the trouble was.”

This finding of fact seems to me to be justified by the record. Claimant did not go up on the crane to repair the defect in violation of the rules. He went there merely to point out the defect which he was unable to describe in words to the machinist. To do so was to hasten the repair of the machine, which ordinarily would be to the advantage of both claimant and master. I am of the opinion that claimant’s conduct should not be characterized as “intentional and wilful misconduct.” Neither am I of the opinion that we should hold that claimant, in going up on the crane under such circumstances, was acting outside of the scope of his employment. The cases cited by Mr. Justice Person on this question were instances where the servant left his particular work and meddled with machinery with which he had nothing to do. The machine in the present case was operated by claimant. When it was out of repair his work stopped. He knew where the defect was; the machinist did not, for the moment. In an attempt to point out the defect claimant was injured. His effort was made in furtherance of the master’s business, and it should not deprive him of the award.

The finding of the Industrial Accident Board should be affirmed.

Kuhn and Moore, JJ„, concurred with Bird, J.


text:
    FRASER v. FLEMING.
    1. Principal and Surety — Subrogation—Construction—Bonds— Building Contracts.
    A surety on the bond of a contractor who defaulted In tbe performance of tbe agreement to build bouses and transfer free from incumbrance with tbe land on which they were built to tbe obligees in the bond was entitled, upon performing its obligation, to equal rights with tbe purchaser and to tbe same standing in a court of equity on tbe question of foreclosure; tbe surety did not become affected with any wrong done by tbe contractor whom it guaranteed.

      2. Mortgages — Prior Rights — Notice—Possession. Possession of the premises by a contract purchaser is con-
    ■ structive notice of his rights as to a subsequent mortgagee and, therefore, where the buyers of a lot and house which was constructed thereon for them, paid up the purchase price and started to more on the property, leaving some furniture upon the premises at the time the contractor, vendor, arranged for a loan secured by a mortgage on the property, and where they actually began living there the night before the money was advanced on the mortgage, the mortgagee was not in the position of a subsequent good faith lienor, but was charged with constructive notice of the rights of the parties in occupancy. Nor was possession retained by the contractor because it was shown that a painter whom he had employed was engaged in painting the house at the time the owners moved in, and later when the money was advanced on the mortgage.
    3. Subrogation — Equity—Mortgagee’s Rights.
    Since subrogation is a creature of equity it must be enforced with a due regard for the rights, legal or equitable, of others. It cannot be invoked so as to work injustice or defeat a legal right or overthrow a superior or perhaps an equal equity or displace an intervening right or title.
    4. Same — Priority.
    The mortgagee having advanced money to the contractor aforesaid, who used it to pay up the balance due upon a prior purchase and to adjust certain materialmen’s claims, was not entitled to priority over the grantee of the premises who was in possession at the time the loan was made and the mortgage lien took effect; the contractor agreeing to give to the buyer a clear and unincumbered title.
    Appeal from Muskegon; Sullivan, J.
    Submitted October 12, 1915.
    (Docket No. 58.)
    Decided March 30, 1916.
    Bill by Frederick L. Fraser against R. Andrew Fleming, trustee for Helen H. Littell, to set aside a mortgage. From a decree for defendant, complainant appeals.
    Reversed.

      Miller, Smith, Canfield, Paddock & Perry, for complainant. «•

      Cross, Vanderwerp, Foote & Ross, for defendant.
   Person, J.

This case involves a question of priority between the complainant, as assignee of a contract purchaser of lot 6, block 97, in the city of Muskegon Heights, and defendant, as mortgagee of the same lot. The facts which give rise to the controversy are, in substance, as follows: On the 30th day of June, 1913, Samuel W. Carpenter and his wife, Esther M. Carpenter, entered into a contract for the purchase of the lot from one Orrin Trimble. Trimble himself at that time held only a contract for the lot from Will M. Dodge, who owned the legal title. The contract between the Carpenters and Trimble provided for the transfer of the Carpenters’ farm to Trimble, at an agreed valuation of $9,000, in consideration whereof Trimble was to build a house upon lot 6, and one upon each of three other lots, and convey each lot to the Carpenters free and clear of incumbrance as soon as the house thereon should be completed. The first house was to be finished within 60 days from the date of the contract, and they were all to be completed within 120 days. The farm of the Carpenters, however, was not to await the completion of the houses, but was to be conveyed to Trimble whenever he should furnish them a satisfactory bond for the performance of his part of the contract. Such bond was, in fact, furnished by Trimble soon after the making of the contract with the American Surety Company, of New York, as surety thereon; and he received a conveyance of the Carpenters’ farm.

Trimble was slow in the performance of his part of the contract. The first of the houses undertaken by him, it seems, was the house on the lot in question. Instead, of completing it within the 60 days promised, it dragged along for more than a month after that. The Carpenters, who had parted with their farm to Trimble, grew impatient, and some correspondence ensued. They were finally informed by Trimble that they could come to the city, and that the house would be ready for them on the 30th day of September. They brought their goods to the house on the 1st or 2d day of October, but it was not completed so that they could move in. They thereupon put their stove and some furniture upon the porches, and stayed with the Trimbles. The workmen, except the painters, finished during the forenoon of the 4th, which was Saturday. The Carpenters insist that they moved into the house on the afternoon of the 4th, and from that time continued to live there. This is disputed by Mrs. Trimble and the mechanic who had worked on the house, and by the latter’s wife. But, however that fact may be, it is conceded by all that the Carpenters were living in the house on the night of October 7th, and resided in it from that time on.

While the Carpenters were getting into the house, as has been described, Trimble, without their knowledge, was negotiating with defendant for a loan, to be secured by a mortgage on the property. The terms of the loan were agreed to on Saturday, the 4th, and the mortgage was drawn on that day, but it was not acknowledged until the 7th, and none of the money loaned upon it by defendant was paid over until the forenoon of the 8th. The delay was occasioned by the necessity of obtaining a deed from Dodge to Trimble in performance of their contract. This deed was obtained and recorded on the 7th, upon defendant’s oral promise to Dodge that he would pay him the balance of the purchase price, $138.51, due from Trimble, out of the money to be loaned. The payment to Dodge was not made, however, until the 8th. On the same day defendant paid to one Moore $377.53 for material used by Trimble in building the house. These two payments, amounting to $516.04, together with the mortgage tax, .the fee for recording the mortgage, the fee for recording the Dodge deed, and the brokerage fee of $27.50, divided by defendant between himself and his agent, made up the sum of $550, which, by the terms of the mortgage, was to be paid to defendant in three years, with interest at 7 per cent., payable semiannually.

It is evident that defendant himself had no actual knowledge when he paid the money that the Carpenters were in, or had any right to, the house. His agent, who visited the premises'on the 3d, in contemplation of the loan, admits seeing the stove, and perhaps other property of the Carpenters, on the porch, but says that it did not occur to him that they might belong to some one other than Trimble, and he made no inquiries. The agent also says that he was around the house after that, but saw nothing to cause a suspicion that some third party might have an interest in the place. Certainly the Carpenters knew nothing about the making of the loan or the giving of the mortgage. Mr. Carpenter testifies that he was importuning Trimble for a deed, and that Trimble promised to give him one; but Trimble, instead of doing so,- upon some night during the proceedings quietly disappeared from the vicinity. Later the security company, as required by the bond, settled with thd Carpenters for Trimble’s default, and, as a part of such settlement, took from the Carpenters a conveyance of their interest in and rights to the lot in question, the conveyance being made to complainant, who is resident vice president of the company. Afterwards, but before the suit was begun, complainant also secured a cqnveyance from the Trimbles, in whom the record title yet remained.

Claiming to have succeeded to all of the .rights of tlie Carpenters, complainant, by his bill of complaint, asks that the mortgage be set aside as a cloud upon his title; while the defendant, by cross-bill, prays for its foreclosure. The circuit court, being of the opinion that the possession by the Carpenters was not such as amounted to constructive notice of their rights, dismissed the original bill, and granted the foreclosure sought by the cross-bill. Complainant appeals to this court.

In determining the rights of the parties upon these facts, notice should be first taken of a suggestion in behalf of defendant that complainant, as representing the surety upon Trimble’s bond, has not the same standing before the court that the Carpenters would have had. The implication is that the surety, in guaranteeing Trimble’s performance of the contract, is in some way tainted by Trimble’s wrong. Counsel have not given any reason for such a view of the matter, and we have not been able to discover any. The surety’s obligation was wholly for the benefit of the Carpenters, and not at all for the benefit of defendant; and, having fulfilled the obligations, there is no apparent reason why it may not succeed to their rights.

The Carpenters held a contract for the lot which antedated defendant’s mortgage by a considerable period of time, and they had fully paid the purchase price, but the contract had not been recorded, and defendant had no actual notice of its existence. The question therefore is whether their possession of the lot was of such a character as to amount to constructive notice when defendant parted with the money loaned on the mortgage.

“The rule uniformly settled in this State is that payment must be made before notice in order to secure the title to the land purchased.” Palmer v. Williams, 24 Mich. 328.

See, also, 39 Cyc. p. 1763.

And—

“possession of land by a contract purchaser is constructive notice of his rights.” Corey v. Smalley, 106 Mich. 257 (64 N. W. 13, 58 Am. St. Rep. 474).

Defendant testified that the money loaned was paid to Trimble’s creditors on the morning of the 8th, after the deed from Dodge had been recorded, and the deed was recorded at 10:45 a. m., as shown by the register’s certificate. It is practically undisputed that the Carpenters had supper in the house on the evening of the 6th, and that their goods were in the house by the evening of the 7th, when they began living there regularly and continually. We cannot agree with the circuit judge that this possession was insufficient to operate as constructive notice. What more notorious and open possession could they have taken? Their goods were in the house, they were eating and sleeping there, and any one calling at the house would have found them there on the day the money was paid, and on the night before. They were there under and by virtue of their contract rights, and by the consent of Trimble, who had turned the house over to them. The presence of a painter employed by Trimble to paint the outside of the house did not amount to a retention of possession by him. The possession by the Carpenters was in the best of faith, and not for the purpose of defrauding defendant; and, although it had not existed for any great length of time before the payment of the money, it had existed for a sufficient period to operate as constructive notice. Allen v. Cadwell, 55 Mich. 8 (20 N. W. 692); Miner v. Wilson, 107 Mich. 57 (64 N. W. 874); Oconto Co. v. Lundquist, 119 Mich. 264 (77 N. W. 950); Boyer v. Chandler, 160 Ill. 394 (43 N. E. 803, 32 L. R. A. 113); Phelan v. Brady, 119 N. Y. 587 (23 N. E. 1109, 8 L. R. A. 211). Constructive notice by possession is equal to constructive notice by record. 39 Cyc. p. 1745. The mortgage was therefore void in equity as against the rights of the Carpenters, and is equally void as against complainant, who has succeeded to those rights.

It is further argued, however, for defendant, that he is entitled to certain rights of subrogation, if it is found that the possession by the Carpenters was sufficient to operate as constructive notice of their interest in the premises. The money loaned by him to Trimble was used, to the extent of $138.51, in payment of the balance due- from Trimble to Dodge, the holder of the legal title. And $377.53 of the money was applied in cancellation of Moore’s claim for material -used in building the house. These, it is urged, were prior liens upon the property, which the Carpenters would have had to pay to protect their rights, and that they will not be injured in any way if defendant is subrogated to these claims thus paid out of his money.

But there seem to be insuperable objections to the application of the principles of subrogation to the facts of this case. It has been said:

“Since subrogation is a creature of equity, it must be enforced with a due regard to the rights, legal or equitable, of others. It cannot be invoked so as to work injustice, or defeat a legal right, or overthrow a superior or perhaps even an equal equity, or displace an intervening right or title.” 99 Am. St. Rep. 480, note.

The defendant cannot be subro'gated to the claims mentioned without imposing upon the Carpenters, or their grantee, obligations they were and are under no legal duty to assume. By their contract the Carpenters were to have the lot free and clear of incumbrance, and they had paid the purchase money in full. It was no more their duty to pay Mr. Dodge or Mr. Moore than it was the duty of defendant; and it is no more their duty to bear the loss now than it is his. Nor is it as much their duty; for the Carpenters were in possession when defendant paid the money, and he had notice of their' right to hold the premises free and clear of the liens-he was paying. He made the payments at Trimble’s request, not at theirs; and they were not consulted as to their willingness that the form of the obligations should be changed to a mortgage for three years upon théir lands. Nor can it be assumed that Trimble might not have performed his duty to the Carpenters in some way if the loan had not been made. Their rights in the situation became vested when Dodge transferred the legal title to Trimble, and cannot now be changed by subrogation. The case comes within the principles of Kitchell v. Mudgett, 37 Mich. 81, and Gerber v. Upton, 123 Mich. 605 (82 N. W. 363).

The view taken makes it unnecessary to consider the question of usury raised by complainant, or the fact that there were no covenants of warranty in defendant’s mortgage. And no other or further points were argued.

The decree will be reversed, and one entered granting the prayer of the original bill and dismissing the cross-bill. Complainant will recover costs of both courts.

Stone, C. J., and Kuhn, Ostrander, Bird, Moore, Steere, and Brooke, JJ., concurred.


text:
    RIMMELE v. HUEBNER.
    1. Trial — Joinder—Discontinuance—Motions.
    At the trial of an action for breach of a contract of warranty, the trial court did not err in declining to require plaintiff to elect whether or not he would proceed jointly against both defendants, who were made parties to the cause, or would discontinue as to one of them, as the right of plaintiff to the benefit of Circuit Court Rule 27 was inconsistent with such compulsory election, plaintiff being authorized under the rule in taking the verdict of the jury against all or one of the defendants as the proofs may justify.
    2. Same — Judsment—Parties.
    And where one of the defendants, a corporation, did not plead but appeared specially to move that the service be quashed, and by stipulation the motion was withdrawn, so that the case was not at issue as to- the defendant referred to, which had not been defaulted, and the case could not proceed to a joint judgment, the other defendant was not entitled to have his motion granted to ascertain whether plaintiff would proceed against one defendant: he must be charged with knowledge that a judgment could be had against him alone.
    3. Same — Joinder—Discontinuance.
    If the proofs warrant only a joint judgment, and the case is not in a situation to enter judgment against one of the joint debtors, the court cannot properly enter any judgment.
    4. Same — Variance—Amendment.
    Paragraph (c) of Circuit Court Rule 27 authorizes the jury, in a suit against joint defendants, to render a verdict against those who. are found to be liable without any requirement as to amending the declaration: either the variance is disregarded or amendment assumed to be made; and hence, upon plaintiff discontinuing against one defendant at the close of plaintiff’s case, and proceeding to judgment against the other, the court did not err in not requiring a formal amendment of the declaration.

      5. Same — Practice.
    If an amendment is ordered and is of such nature that the record supplies all the data for the change, it may be considered as made, though no verbal corrections are made in the pleadings.
    6. Sales — Rescission—Return—Warranty.
    Plaintiff, who claimed that he returned a defective motor car to defendant, from whom he bought it, and received defendant’s promise to supply a new one, not performed (as alleged), was not entitled to a direction in his favor and against the contention of defendant, who denied the return of the car or promise to supply another, but he-should have been allowed to go to the jury upon the issue of fact; and held, that there was a question of fact as to the agency of defendant’s son to enter into the settlement agreement.

    Error to Saginaw; Kendrick, J.
    Submitted October 14, 1915.
    (Docket No. 92.)
    Decided March 30, 1918.
    Rehearing denied April 21, 1916.
    Assumpsit by Leo J. Rimmele against John Huebner and another for the recovery of money paid for an automobile. Judgment for plaintiff against defendant Huebner, who brings error.
    Reversed.

      R. L. Crane, for appellant.

      Snow & Snow, for appellee.

      ‘As to right of purchaser to reject goods for breach of warranty, see note to 27 L. R. A. (N. S.) 914.

   Person, J.

The defendant John Huebner resides in Saginaw, and is- engaged, among other things, in the sale of automobiles. In the early part of the year 1913 he sold to plaintiff a car manufactured by the Thos. B. Jeffrey Company, a corporation of Kenosha, Wis. The price of the car was $1,900, which the plaintiff paid. After using the car for a time the plaintiff says that he found it was not in accordance with the warranty under which it was sold, and he claims that he thereupon delivered it back to the defendant, who received and accepted it and promised to furnish him a new car. A new car not having been furnished, nor the purchase price of the first one returned, the plaintiff brings this action. The action was begun by summons, and was brought originally against both the defendant John Huebner and the Thos. B. Jeffrey Company; and the declaration was filed against both, charging a joint liability. The defendant John Huebner appeared generally to the action, and filed a plea with notice of his defense; but the Thos. B. Jeffrey Company appeared specially, and moved that the service upon it be quashed because made by a deputy sheriff when the plaintiff himself was sheriff of the county. No further proceedings were had upon this motion until the case came on for trial, when it was withdrawn by stipulation. The motion having been withdrawn, counsel for defendant Huebner requested that he be informed whether the plaintiff intended to proceed against both defendants jointly or against defendant Huebner alone. Plaintiff’s counsel refused to furnish the information required, and the court declined to require him to do so. The refusal of the court to direct that the information be furnished is assigned by defendant Huebner as error. The trial proceeded, and at the close of plaintiff’s proofs his counsel asked permission to discontinue as to the Thos. B. Jeffrey Company, and the discontinuance was permitted by the court, although objected to by counsel for defendant Huebner. The permission to discontinue is also assigned as error. After the discontinuance the testimony in behalf of defendant Huebner was heard, and upon the submission of the case to the jury a verdict was rendered in favor of the plaintiff for $1,900, and some interest. Defendant Huebner brings the case to this court by writ of error.

In considering these alleged errors it must be remarked that a very broad construction has been given, and properly given, to Circuit Court Rule 27. By that rule a plaintiff may proceed against several defendants and obtain a joint judgment against all, or a' judgment against one or more of them, in accordance with the facts as the jury may find them to be. Root & McBride Co. v. Salt Ass’n, 140 Mich. 441 (103 N. W. 844). And it would not be consistent with this right which the plaintiff has to secure such verdict as the facts may warrant that he should be required to elect, at the beginning of the trial, or during its progress, whether he will ask for a joint judgment or a several judgment. It therefore seems that the defendant was not entitled to demand the information he asked for, and the refusal on the part of the court was not error. But attention must be called to the fact that the situation was somewhat anomalous. The Thos. B. Jeffrey Company had withdrawn its motion to set aside the service of the summons, but had not pleaded to the action, nor had its default been entered. As to that company the case was not at issue. With matters in that situation the plaintiff could not have proceeded to a joint judgment. If under the proofs a judgment must be joint, and the case is not in a situation to go to judgment against one of the joint debtors, the court cannot properly render any judgment. Penfold v. Slyfield, 110 Mich. 343 (68 N. W. 226). Defendant Huebner did not object to proceeding with the case, but only sought to be informed whether the plaintiff would ask for a judgment against both defendants or only against himself. And under the circumstances of the case he must be held to have known that a several judgment against himself alone was the only one possible. Good practice would have required plaintiff to discontinue at that time against the Thos. B. Jeffrey Company. He did discontinue against that company at a later period; and, as the proofs tended to show a liability on the part of defendant Huebner alone, it is not apparent that the latter was injured by the course adopted.

Upon the discontinuance as to the Thos.'B. Jeffrey Company the case proceeded without any formal amendment to the declaration, and judgment was entered against defendant Huebner alone. His counsel claims that this was a fatal variance, and that the case could not have legally proceeded to such judgment without an actual amendment to the declaration charging a several liability in the place of the joint liability. Section, (b) of Circuit Court Rule 27 seems to contemplate such amendment. But by paragraph (c) of the same rule the jury, where an action is brought against several defendants, may render a verdict against those liable without a discontinuance as to the other defendant or defendants, and in such case no actual amendment seems to be required. Either the variance is disregarded or the amendment is assumed to,have been made. Root & McBride Co. v. Salt. Ass’n, 140 Mich. 441 (103 N. W. 844). In discontinuing against one defendant, in the course of the trial, and proceeding against the other, the plaintiff did no more, in effect, than the jury would have been authorized to do in rendering their verdict; and it would seem that the amendment might be assumed as well in the one case as in the other. While it is a general rule that an amendment to be effective should be actually made (Ballou v. Hill, 23 Mich. 60; Harris v. Thomas, 140 Mich. 462 [103 N. W. 863); Carroll v. Manufacturing Co., 181 Mich. 280 [148 N. W. 390]), yet there are exceptions to this rule.

“We have no doubt that where an amendment is ordered or permitted, and is of such a nature that the record furnishes upon its face all the data for applying it, it may be considered as made, though no verbal changes are made in the pleadings, which are then to be read as if they had been actually amended.” Ballou v. Hill, supra.

And where during the course of the trial a discontinuance is had against one or more of the defendants, and no change is required in the declaration further than to adjust it to such discontinuance, we think the exception applies, and that it should be read as if the amendment had actually been made.

But, in submitting the case to the jury, the court evidently did make a mistake in assuming certain facts to have been conclusively established, when, instead thereof, these facts were the subject of sharp dispute. After averring the purchase by the plaintiff of the automobile from the defendant, and that such automobile did not conform to the warranty under which it was sold, the declaration proceeds as follows:

“Whereupon then and there the said plaintiff delivered said car over to the said defendants and demanded the money he had paid them therefor as the purchase price agreed upon. That said defendants, their said agents and representatives, then and there accepted back said automobile, and there and then conceded to and agreed with the plaintiff that said automobile was not as they had represented it to be, but, on the contrary, was defective and improperly constructed, and they then and there agreed to receive back said defective automobile as aforesaid, and then and there took possession of the same as their property. That in consideration of the amount of money paid them by the plaintiff for said automobile as aforesaid the said defendants, their agents and representatives, then and there agreed and promised to deliver to plaintiff a new automobile of similar design and make.”

It will be observed from the reading of the declaration that the action was brought upon the theory that the sale had been rescinded by mutual consent, and that the automobile had been returned to the defendant and accepted by him as his own property, thus leaving in his hands the purchase price which it was his duty to restore to the plaintiff, and that in consideration of such purchase price so in the defendant’s possession he had promised to furnish the plaintiff a new car. And to this special count in the declaration were attached the common counts in assumpsit.

The very consideration for defendant’s promise, as thus alleged in the declaration, was dependent upon the mutual rescission, and the acceptance back of the car by the defendant. Plaintiff’s testimony tended to prove such rescission and acceptance of the car. The mere breach of the warranty would not have authorized a rescission by the plaintiff alone. Williams Transportation Line v. Transportation Co., 129 Mich. 209 (88 N. W. 473, 56 L. R. A. 939). But the rescission was stoutly denied by the defendant, who insisted throughout that the car had never been returned to him, and that he had never received or accepted it. It was his contention that the plaintiff had remained in possession and control of the car throughout; and he denied ever having agreed to receive the car back or to furnish a new one. Whether the car had been returned to the defendant and received and accepted by him as his own property became, therefore, a material and controverted issue which should have been left to the determination of the jury. But, instead of so leaving it to the jury, the court treated the return and acceptance of the car as an established fact, and in that behalf instructed the jury as follows:

“Therefore, gentlemen of the jury, I think the question for your decision is fully before you. You understand that the issue to be decided by you as a final issue is whether after Mr. Rimmele took this car to run it as he did he made complaints about its being out of order, and then had the contract or the discussion with the defendant, and the defendant agreed to furnish him a new car. That is the question — whether he did or not. If you find that he did, in manner and form as claimed by the plaintiff, then he is liable here for the amount of money that that car was worth.
“It clearly appears in this case that the car was returned before this suit was brought, and it was fully turned over to the defendant. Defendant claims there was no intention of getting a new car, because the party who brought it back tendered it to Mr. Rimmele, and it had been refused by him; that the car returned was the same car that was taken away. Therefore, if you find that there has been an agreement made, as I have explained to you, and as has been claimed by the plaintiff, your verdict will be for the sum of $1,900, with interest since the commencement of this suit, or such sum, if'you find from the evidence that any other car was mentioned than a ‘Cross Country Rambler/ why, then it is for you to so find.”

Some of .the negotiations relied upon by plaintiff to establish his case were had with a. son of the defendant, and it is insisted by the latter’s counsel that there was no such proof of the son’s agency as made his promises and actions, if established, binding upon defendant. We think, however, that there was testimony tending to establish the son’s agency, and that this feature of the case was properly left to the jury.

It is also claimed by defendant that the court instructed the jury to so answer certain special questions submitted by him that the answers would agree with their general verdict. But we think the record is not clear as to the court’s instructions in this respect, and the point will not be considered.

For the error pointed out, the judgment is reversed, and a new trial ordered.

Stone, C. J., and Kuhn, Ostrander, Bird, Moore, Steere, and Brooke, JJ., concurred.


author: PERSON, J.

text:
    COLWELL v. ALPENA POWER CO.
    1. Evidence — Expert and Opinion Testimony — Timbee — Estimate.
    Though a witness who estimated the amount of timber destroyed did not claim to be of wide experience as an estimator, and the proof of his competency was weak, the court properly permitted him to testify as an expert.
    2. Damages — Judgment.
    Plaintiff brought an action for flooding lands by damming back the waters of a lake. In a previous suit he recovered for the injury done to these lands as meadow or grass ' lands, claiming that they were productive of blue joint grass until defendant flooded them. In the second action plaintiff sought to recover for the same loss, treating the lands as productive, and gave proof of the value of crops which could have been grown upon the soil during the subsequent period. Held, that the proper measure of damages was the rental value of the land, since the recovery in the first action included damages for destroying the growing grass, and there was no evidence to show that the meadow had grown up and been a second time destroyed.

    3. Same — Speculative Damages.
    And where the owner had never devoted the meadow lands to any agricultural use, and had never cut grass on the ground, permitting his neighbors to take what they wanted without payment, damages based on prospective profits were too speculative or indefinite.
    4. Same — Power Companies — Dams.
    And the rental value was not that of meadow land, but the value of land in the condition it was shown to have been in when the former judgment was obtained.
    Error to Alcona; Connine, J.
    Submitted October 15, 1915.
    (Docket No. 121.)
    Decided March 30, 1916.

      Case by George W. Colwell against the Alpena Power Company, a limited partnership, for flooding plaintiff’s lands. Judgment for plaintiff. Defendant brings error.
    Reversed.

      Henry, Henry & Henry, for appellant.

      Joseph H. Cobb and O. H. Smith, for appellee.

      As to measure of damages for overflow of lands, see note to 59 L. R. A. 896.

   PERSON, J.

Plaintiff is the owner of the south half of the south half of section 3, lot 2, of section 2, and the north half of the northwest quarter of section 11, all in township 27 north, of range 7 east. These, with other lands owned by plaintiff, lie adjacent to Hubbard Lake, in the county of Alcona. At the outlet of the lake is a dam formerly owned by the Alpena City Water Company, and transferred to defendant in September, 1906. This dam was originally used in getting logs out of the lake, but since it passed to the ownership of defendant, it has been employed for the purpose of holding back the water, for use, during dry portions of the year, in the operation of the company’s industries at Alpena. It seems that the height of the dam was increased as early as 1903 or 1904, thereby raising the water in the lake above its. normal level. It is claimed by plaintiff that the wrongful flooding of his lands has been practically continuous since the dam was raised. This action is brought to recover damages for the overflow during the years 1910, 1911, 1912, 1913. An earlier action was brought by him against the same defendant to recover damages for the overflow during the period from 1903 to 1909, inclusive.

The damages claimed in this case are alleged to have grown out of the destruction of tamarack timber on that portion of section 11 above described, and of a meadow partly on the south half of the south half of section 3, and partly on lot 2 of section 2, together with. the grass growing thereon. The land on section 11 was not included in the earlier case, and the right of plaintiff to recover the value of such tamarack thereon as has been killed by the water does not seem to be seriously contested. It is objected, however, that one Derosia was permitted to estimate, as an expert, the amount of timber destroyed, without having shown himself qualified to so testify. It must be admitted that the witness did not claim very much experience as an estimator of timber, but he did testify to some experience, and we are not prepared to say that the court was wrong in receiving his testimony.

The principal question in the case is in regard to the damage done the meadow lands and grass. As has been said, these lands were included in the first action, which was begun in February, 1910, and which claimed damages for the destruction of the same meadow, and of the grass thereon. But that action made claim for injuries inflicted during the period from 1903 to 1909, inclusive. Plaintiff obtained a judgment against defendant in that action, and the case was brought to this court. The opinion upon the appeal will be found in Colwell v. Power Co., Ltd., 178 Mich. 183 (144 N. W. 516). The first count in the declaration in that case, after describing the lands on sections 2 and 3, contained the following averments:

“By means of said dam and the operation and manipulation thereof, said defendant therein and thereby so operated the same as to prevent the waters from said Hubbard Lake from uninterruptedly flowing into said south branch of Thunder Bay river, and by means of said dam and the operation thereof, raised and maintained the waters in said Hubbard Lake during the years 1905, 1906, 1907, 1908, and 1909, to wit, six feet above its natural height and the waters when so raised and maintained by said dam overflowed the lands of said plaintiff and soaked into said lands, and said waters washed away the banks of plaintiff’s lands and have destroyed, to wit, ten acres of land by means of washing down the banks and shores of said lake, have overflowed and destroyed the meadow lands and grass and hay growing thereon; have killed and destroyed the elm, ash, cedar, and other woods growing thereon and therein, and thereby have greatly damaged said plaintiff, and said plaintiff,.by means thereof without any fault on his part,' has suffered great damages to his lands, timber, and meadows during each of said years 1905, 1906, 1907, 1908, and 1909.”

The second count charged practically the same injury, except that the period during which it occurred is alleged to have been from the year 1903 to the year 1909, inclusive; and it is further averred in the second count that the lands had been grown up to wild grass and bogs during all of that time. The proofs in that case tended to support the declaration. It was shown that the meadow or marsh covered about 50 acres of land; and that, while it had formerly produced what is called blue joint, a grass of considerable value, it had, since about 1904 or 1905, been continually flooded with water and grown up to cat-tails, water lilies, and bogs.

The present action was commenced early in 1914, and, as has also been said, claims damages to the same meadow lands, and to grass growing thereon during the period from 1910 to 1913, inclusive. The declaration in the present case, after alleging ownership in the plaintiff of the south half of the south half of section 3, and of lot 2 of section 2, charges that the defendant :

“By means of said dam and the operation thereof, as aforesaid, raised and maintained the waters in said Hubbard Lake during the years 1910, 1911, 1912, and 1913, to wit, six feet above its natural height and the waters when so raised and maintained by said dam overflowed the lands of said plaintiff and soaked into said lands, and said waters have destroyed, to wit, the meadow lands and the grass and hay growing thereon; have killed and destroyed the cedar, ash, elm, tamarack .and other woods growing thereon and therein, and thereby have greatly damaged said plaintiff, and said plaintiff by means thereof, without any fault upon his part, has suffered great damage to his lands, timber, and meadow during all of said years 1910, 1911, 1912, and 1918, to wit, $5,000.”.

It will be observed that the same meadow is claimed to have been destroyed during the later period, that was claimed to have been destroyed during the earlier one; and that the loss of grass and hay growing thereon is averred after the proofs in the other case had shown the land to be grown up to bogs, cat-tails, and water lilies. This anomalous situation led the defendant to give notice, under his plea of the general issue in this case, of the former recovery, and now causes him to insist that the plaintiff is again attempting to recover damages for the same injuries to the meadow lands for which he recovered damages in the previous case. The trial court overruled defendant’s objections, in this behalf, and received such testimony as the plaintiff offered. These rulings are assigned as error..

Counsel for defendant is clearly wrong in this contention. In the former case the recovery was for injuries sustained during the period from 1903 to 1909, inclusive. The recovery sought in the present action is carefully limited by the declaration to such injuries as were inflicted during the period from 1910 to. 1913, inclusive. The dates mentioned are materially descriptive of the injuries for which compensation is sought. And, however improbable it may seem that a meadow once destroyed, and thereafter continually flooded, could be destroyed again, and that a crop of grass could have come from lands continually covered with water and grown up to bogs, cat-tails, and water lilies, yet it was a mere matter of proof. If the plaintiff could have shown in the present case that the meadow had been a second time destroyed, and that grass growing thereon during the period named in the declaration had been lost through the wrongful overflow,- he had a perfect right to do so, regardless of the former recovery. But he was unable to make such proofs. The. testimony in the present case tends to show that the meadow was destroyed, once for all, so far as it has been destroyed, back in 1904 or 1905, and that no grass has grown upon the land since that time. In other words, the -plaintiff has failed to show, in regard to this so-called meadow land, the injuries specifically alleged in his present declaration.

The damages which plaintiff really desired to recover in the present action were not damages for the destruction of the meadow, nor for the loss of any grass growing thereon, but they were damages for being deprived of the use of the land during the period mentioned in the declaration. His theory, however, as to the measure of such damages was erroneous. He did not attempt to prove the growth of any grass since the beginning of the former action; his proofs, on the contrary, tended to show that none had grown; but he did try to establish his loss in being deprived of the land, by showing the probable value of each crop of grass, had any grown, during the years 1910, 1911, 1912, 1913. This method was too speculative and uncertain. The plaintiff had never devoted this land to any particular use. He had never cut any grass thereon himself, but had permitted his neighbors to take it as they wished, without compensation. The proper measure of his damages, under the circumstances, would be the rental value of the land. 3 Sedgwick on Damages (9th Ed.), § 942; 4 Sutherland on Damages (3d Ed.), § 1049; 13 Cyc. p. 153; 8 R. C. L. p. 483; Hoffman v. Railroad Co., 114 Mich. 316 (72 N. W. 167); City of Chicago v. Huenerbein, 85 Ill. 594 (28 Am. Rep. 626); Kankakee, etc., R. Co. v. Horan, 17 Ill. App. 650.

But in determining this rental value, the land should not be treated as having been an existing blue joint meadow at the beginning of the period mentioned in the present declaration, if, as a matter of fact, the blue joint and its seeding had been entirely destroyed previous to that time. It must be remembered that this is the second action for a wrong that is alleged-to have been continuous. All damages that had been suffered during the period covered by the first action belonged to that action, whether they were temporary or permanent. If the meadow, as a blue joint meadow, was wholly destroyed during that period, the damages for such destruction could have been recovered in that action. The rule in Phelps v. City of Detroit, 120 Mich. 447 (79 N. W. 640), simply means, that as to a wrong which may be discontinued at any time, future injuries that have 'not yet occurred, shall not be anticipated. In successive actions brought for a continuing wrong, each action takes the situation as it finds it, and permits the recovery of damages for such further injuries, if any, as have occurred during the period covered by it.

It is urged by plaintiff that the measure of damages which he attempted to apply in this case was sanctioned by the opinion of this court in the earlier case; but an examination of the record and briefs in that case shows that the point was not in fact raised nor considered by this court.

The judgment is reversed, and a new trial ordered.

Stone, C. J., and Kuhn, Ostrander, Bird, Moore, Steere, and Brooke, JJ., concurred.