text:
    REED & CHENEY CO. v. RICHARDS-WILSON CO.
    1. Contracts — Construction—Intent—Extrinsic Evidence.
    The intent of the parties to a contract in writing is to be gathered from the instrument itself without extrinsic evidence.
    2. Same — Condition Precedent — Sales.
    A condition in a written contract that plaintiff is to accept and pay for fuel-saving devices if said devices save 25 per cent, of the average amount of fuel consumed during the last three winters is a condition precedent; the title to the devices in the meantime remaining in defendants.
    3. Same — Breach of Condition Precedent — Failure of Contract —Guaranty.
    Where defendants’ contract to sell fuel-saving devices to - plaintiff failed for breach of a condition precedent, plaintiff could not recover in an action on' a guaranty to save fuel over a period of years, contained therein, since the guaranty was as dependent on the sale as were the other terms of the contract, and when the contract failed the ’ guaranty failed.
    Error to Kent; Perkins, J.
    Submitted June 10, 1919.
    (Docket No. 81.)
    Decided July 17, 1919.
    Assumpsit by Re^L & Cheney Company against Richards-Wilson Company and others for breach of a contract of guaranty. Judgment for defendants on a directed verdict. Plaintiff brings error.
    Affirmed.

      Hall & GillarcL, for appellant.

      Eastmm & Eastman, for appellees.
    On August 30, 1915,'the parties to this litigation entered into the following agreement:
    “This agreement, made in duplicate this 30th day of August, 1915, by and between the Richards-Wilson Company of Grand Rapids, Michigan, and hereinafter called the seller, and the Reed & Cheney Company, a Michigan corporation, of Grand Rapids, hereinafter called the user;

      On the question of sale of article on trial and approval, see notes in 50 L. R. A. (N. S.) 808; L. R. A. 1918B, 873.

      “Witnesseth: 1. That the seller hereby agrees to install four Blaske Fuel Saving Devices of sufficient size for the four horizontal boilers of the user, located at their greenhouse No. 2, Madison ave., Grand Rapids, Michigan, who agrees to operate the same as near as possible according to the printed instructions of the Heat Saver Co., of Chicago, Illinois, copy of which are attached to this contract. The seller guarantees that the deyice will save the user during the season of 1915-16, and during a period of nine years thereafter a minimum of 25% of the fuel used in former seasons. It being understood that the average amount of fuel used during the seasons of 1912-13, 1913, 1914, 1914-15, is to be used as a basis for the comparison.
    “2. The user hereby agrees and promises to pay to the order of the seller at its office, Grand Rapids, Michigan, the sum of $1,350.00 (thirteen hundred and fifty dollars) for the device on the first day of June, 1916, providing that same shows a decrease during the season of 1915-16 of not less than 25% compared with the average amount of fuel used during the seasons of 1912-1913, 1913-1914, 1914-1915. It is further understood that the user buys equal grade to 114-inch lump Red Jacket coal same grade as formerly bought from the Norfolk-Chesapeake Coal Company during the seasons enumerated above, and the average of these seasons, according to the books of the user recording amount of coal burned in plant 2 of their greenhouses on Madison ave. Accordingly they have this day stated that their average annual fuel consumption during the seasons heretofore mentioned in dollars and cents amounted to approximately $3,-150.00 (thirty-one hundred and fifty dollars), it beifig understood that the price per ton of coal was $3.60 (three dollars and sixty cents) or approximately 875 (eight hundred and seventy-five) tons. These figures are to be used as a basis of comparison between the user and the seller in ascertaining the amount of fuel saved during 4he seasons of 1915-1916 and nine more succeeding years.

      “3. In. the event that at any time during the ten years’ guarantee the device fails to maintain a saving of at least 25% in the consumption of fuel, the seller agrees to reimburse the user any difference between 25% less than the average of the seasons 1912-1913, 1913-1914, 1914-1915 and the amount of fuel actually used in any season, providing that should the number of square feet of greenhouses supplied by the boilers during the life of this contract be increased' after October first, 1915, the proportionate amount of fuel necessary to supply this additional number of square feet of greenhouse shall be considered in making this comparison.
    “In witness whereof, the said parties hereto have signed this agreement.
    “Richards-Wilson Company,
    “E. B. Plumb, Agent.
    “Reed & Cheney Co., by C. L. Reed.
    “I, the undersigned, hereby guarantee the fulfillment of the above contract by Richards-Wilson Company.
    “Glendon A. Richards.”
    The devices were installed and were used during the season of 1915-16 without any saving of fuel. After the season was over plaintiff mailed defendant company a check for $350.10 with an accompanying letter and statement in which it claimed that the difference in the cost of coal actually used and what would have been used had the devices saved 25% was $999.90, and stated this remittance was in payment of the purchase price of the devices. The check was returned and it appears that negotiations for a settlement were of no avail. The devices were used the following season without any saving of coal and this action was brought to recover 25% of the value of the coal used the two seasons, amounting to $3,-205.69. Upon the trial defendant admitted that the devices did not work, established its offer to remove them without damage to plaintiff’s property or to leave them in without payment therefor. There was no proof of any actual damage to plaintiff. At the close of the proof the trial judge directed a verdict for'the defendant on the ground that the transaction was a conditional sale or a conditional contract, that the guaranty of saving was collateral to and dependent on the sale, and that the provision in the agreement with reference to damages was in the nature of a penalty and not enforceable.
   Fellows, J.

(after stating the facts). We do not find it necessary to consider the last reason advanced by the trial judge or the assignments of error which do not go to the main question, the right of the plaintiff to recover. Undoubtedly plaintiff’s counsel is correct in his statement that the trial judge in using the term “conditional sale” did not refer to conditional sales of the kind considered by this court in Young v. Phillips, 203 Mich. 566; but we doubt that he had in mind the provisions of the uniform sales act (Rule 3, § 11850, 3 Comp. Laws 1915) or had reference thereto. It is more likely that he had reference to conditional contracts referred to by Story in his work on contracts (1 Story on Contracts [5th Ed.], §§ 39, 40), where he said:

“Contracts are also divided into conditional and absolute. An absolute contract requires no explanations.It is simply an agreement to do or not to do something, at all events. A conditional contract is an executory contract, the performance of which depends upon a condition. It is not simply an executory contract, since the latter may be an absolute agreement to do, or not to do, something; but it is a contract whose very existence and performance depend on a contingency and condition.
“A condition may be either precedent or subsequent. A condition precedent is a condition which must happen before either party becomes bound by the contract. Thus, if a person agrees to purchase the cargo of a certain ship at sea, provided the cargo prove to be of a particular quality, or provided the ship arrives before a stated time, or at a particular port, each proviso is a condition precedent to the performance of such a contract, and unless the cargo prove to be of the stipulated, quality, or the ship arrive within the agreed time, or at the specific port, no contract can possibly arise.”

Plaintiffs counsel is correct in his contention, and the trial court so held, that the intent of the parties is to be gathered from the instrument itself without extrinsic evidence. Examining this agreement we find that it is not a present sale of the devices. It is an agreement to give the devices a trial. If the conditions are fulfilled, if they do the work, the agreement becomes a binding contract for the purchase and sale of the devices. If the condition did not happen, if the devices did not do the work, the contract did not bind. The condition therefore is a condition precedent. Under the contract the title to the devices remained in the defendant. Pierce v. Cooley, 56 Mich. 552. It is an agreement for a sale of the devices upon condition, upon contingencies. Plaintiff was in no way obligated to buy unless the ’devices worked a saving of 25% of the fuel; the contract depended upon this as its condition. There was no sale unless this condition was fulfilled; it was a condition precedent to the sale, to the taking effect of the terms of the agreement. That the condition failed is admitted. No obligation, therefore, rested on the plaintiff by the terms of the contract and so far as it was concerned the agreement was at an end, the condition had not been fulfilled, the contingency upon which liability on its part depended had not happened. The plaintiff agreed to purchase on the happening of the condition. Likewise, the defendant company agreed to sell on'the happening of the condition, and the guaranty was as dependent on the sale, on the happening of the condition, as were the other terms of the contract. The defendant’s guaranty that there would be a saving on coal for a period of 10 years from the time the devices were installed was not a guaranty separate and apart from the contract, independent from it and without reference to the sale, but was as much dependent upon the condition, upon the sale, as was the plaintiff’s agreement to purchase. When the contract failed as to the plaintiff for breach of condition precedent, it failed as to the defendant for a breach of condition precedent.

These views being -in accord with those entertained by the trial judge, it follows that the judgment must be affirmed.

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


source: Caselaw Access Project

author: Fellows, J.

license: Public Domain

text:
    VILLAGE OF PORTLAND v. CITIZENS TELEPHONE CO.
    1. Negiigence — Active Negugence — Passive Negugence.
    A distinction between active negligence and passive negligence exists, although it is not important that such terms be expressly used; frequently the terms positive tort and negative tort are used to denote the distinction.
    2. Same — Contribution—Joint Torteeasoes.
    Where the wrongful act of one results in liability being imposed on another, such other person may have indemnity from the person actually guilty of the wrong, except that as between actual joint tortfeasors the law will not enforce contribution or indemnity.
    On right of municipality to recover indemnity or contribution from one for whose tort it has been held liable, see notes in 40 L. R. A. (N. S.) 1165; L. R. A. 1916F, 86.

      3. Same — Joint Tortfeasors — Contract for Indeotity-^Vaiidity.
    Where a village and a telephone company were joint tortfeasors, both being guilty of active negligence in causing the death of a boy and serious injury to his mother by contact with a highly charged electric wire, for which judgments were recovered against them, the village is not entitled to contribution or indemnity from said company, although the ordinance permitting the use of the streets for its poles and wires provided that it should save the village harmless from any cost or damage to any person or property by reason of such construction.
    Error to Ionia; Davis, J.
    Submitted June 4, 1919.
    (Docket No. 38.)
    Decided July 17, 1919.
    Assumpsit by the village of Portland against the Citizens Telephone Company for the amount of a judgment. Judgment for defendant on a directed verdict. Plaintiff brings error.
    Affirmed.

      Nichols & Nichols (A. R. Locke, of counsel), for appellant.

      Hawley & Eldred (Travis, Merrick & Warner, of counsel), for appellee.
    The plaintiff village of Portland has since 1896 maintained and operated an electric lighting plant. In 1902 the defendant Citizens Telephone Company obtained from and accepted an ordinance of the village permitting the use of its. streets and alleys for the purpose of erecting poles and stringing wires. Included in the ordinance were the following provisions:
    ‘‘During the construction of said telephone plant, which is to be erected in,' along, or over highways, avenues, streets, and alleys in the said village, and especially during the placing of poles in the streets thereof, or the putting of conduit therein, the said Citizens Telephone Company shall not unnecessarily impede public travel therein, and shall leave all highways, avenues, streets, and alleys and public places upon which they may enter for the purpose herein authorized, in as good condition as they were at the time of said entry and shall properly guard all work during the progress thereof, and shall put up and maintain red lights and barriers around excavations, and during the construction and maintenance of said plant, shall save the said village of Portland harmless from any cost, or damage to any person or property that may occur by reason of such construction. * * *
    “All wires entering any building or buildings shall be so1 trained and arranged as to cause the least possible obstruction, and in accordance with the best approved method as to safety from fire and other injury to person or property, and all poles shall be erected and wires strung therein in such a manner as not to interfere^ with the village fire alarm telegraph wires or unnecessarily interfere with any other existing poles or wires.”
    There is an alley in said village between Kearney and Grant streets extending north from Brush street. On and prior to April 21, 1909, both parties maintained their wires in this alley, plaintiff’s being first in time of occupancy. The telephone wires crossed over the electric light wires and sagged to such an extent that it fairly appears that the wires on oecasion came in contact and the insulation on the electric light wires became defective. On the last mentioned date a high wind prevailed in the village of Portland; 'the electric lighting wire of the village, carrying a voltage of 2,000, came in contact with the telephone wire, causing the electric light wire to sever, and one of the ends thus highly charged dropped into Brush street. This live wire in some manner (there was no witness to the accident) came in contact with a young boy about 10 years old, named John Sykes, Jr., who was a pedestrian on Brush street, causing his death. His mother learning of the accident hurried to his assistance, and in attempting to extricate him, herself received a serious shock and other injuries. An action was brought in the Ionia circuit court by the\ administrator of the estate of John Sykes, Jr., against the village and telephone company jointly under the death act and a judgment for $1,200 against both defendants was rendered. This judgment was affirmed by this court. Sykes v. Village of Portland, 177 Mich. 290. An action was brought by Mrs. Sykes against both defendants in the same court and a judgment in her favor for $6,000 was rendered. This judgment was reversed by this court for the erroneous admission of evidence, but it was held that plaintiff had made a case for the jury. Sykes v. Village of Portland, 193 Mich. 86. A reference to these two cases will disclose more in detail the facts and the plat found in the report of the first case will be of assistance in understanding the situation. The husband of Mrs. Sykes also brought an action against both defendants for the loss of his wife’s services.
    The telephone company paid the judgment rendered in the case brought by the administrator of the estate of John Sykes, Jr. After the reversal by this court of the case brought by Mrs. Sykes, all of the parties came to an agreement for the settlement of the then pending litigation. This agreement contemplated the discontinuance of the suit brought by Mr. Sykes, a judgment in favor of Mrs. Sykes for $9,000 without costs, a payment of this judgment in equal shares by the village and the telephone company without prejudice to their rights between themselves for contribution or indemnity which was to be determined by future litigation between them. Mr. Sykes’ suit was discontinued, a judgment in favor of Mrs. Sykes against both the telephone company and the village was rendered for $9,000; each of them paid $4,500 in\ satisfaction of the judgment, and this suit was brought \ by the village to recover the sum so paid together with y its expenses incurred by the litigation aggregating 1 about $3,500. At the close of the proofs the trial judge directed a verdict for the defendant, his reason being:
    “It has been held, I think by the verdict of the jury and judgment of this court, and of the Supreme Court in the first case I have cited, and by the judgment of the court in the second case, that these parties were each of them guilty of negligence, active negligence.
    “I shall hold in this case, and so instruct you, that the negligence complained of was concurred in by both parties; they became, in law, what is called joint tortfeasors, joint wrongdoers; that a contract between such parties where they concur and join in a wrong, as is done in this case and as has been judicially determined to produce an injury to a third person is not enforceable. Therefore, the plaintiff cannot recover upon this contract.
    “The whole subject of this matter has been adjudicated, as I have stated, and passed upon and there ought not' to be any contribution between these parties nor right to recover over, as both parties are shown to be joint wrongdoers.”
   Fellows, J.

(after stating the facts). That a distinction exists between active negligence and passive negligence must be recognized. Such distinction has been recognized by this court as we shall presently see. It is not important that such terms be expressly used; frequently the. terms positive tort and negative tort are used to denote the distinction. It must also be recognized as a general rule that where the wrongful act of one results in liability being imposed on another such other person may have indemnity from the person actually guilty of the wrong. And it must also be recognized that this rule is subject to the exception or to another general rule that as between* actual joint tortfeasors, parties in pari delicto, thej law will not enforce contribution or indemnity. The important questions presented upon this record are, What are the rights of these parties as between themselves under these rules? Into which class does the negligence of the plaintiff as alleged and provemfall?

Illustrative of the class of cases where the right to recover over has been sustained will be found Anderson v. Grant, 114 Mich. 161; City of Detroit v. Grant, 135 Mich. 626; Grant v. Maslen, 151 Mich. 466 (16 L. R. A. [N. S.] 910); Township of Hart v. Noret, 191 Mich. 427, 203 Mich. 376. The first three of .these cases involve the same transaction. One Archibald Grant entered into a contract with the city of Detroit to do certain paving. He was to put up colored lights to warn people of excavations in the street and was to save the city harmless. He sublet the contract to one Anderson, who had entire charge of and did the work. Anderson did not put up the colored lights and one Dooley fell into the excavation and was injured. He filed a claim against the city and subsequently brought suit and recovered a judgment. In the first of these cases Anderson brought suit against Grant for a balance due him of $421.65. Dooley’s claim was still pending and unsettled. It was held that Anderson could not recover. In the second of these cases the city sued to recover over from Grant the amount of the judgment recovered against it by Dooley. Its right to recover over was sustained. In the third case the representatives of the Grant estate prosecuted to recover over from the representatives of the Anderson estate the amount Grant had been required to pay the city of Detroit on the Dooley judgment and the right to recover over was sustained. The city of Detroit and Grant were guilty of no active negligence. They had absolutely no active part in doing the paving. No act of theirs caused the injury to Dooley. They were not joint tortfeasors with Anderson, nor with each other. The city of Detroit was liable under its statutory duty to maintain the streets and not because of any active negligence on its part. Grant was guilty of no active negligence but responded over pursuant to the terms of his contract. He was permitted to recover over against the only person guilty of active negligence. In Township of Hart v. Noret, supra, a recovery over was permitted under the following facts: Noret without authority removed the railings on a bridge over a millrace in order to move several buildings; later he replaced the old railings or built new ones in so defective a manner as that one McRae was injured. McRae sued the township and the mill owners and recovered a judgment which was affirmed by this court. McRae v. Township of Hart, 179 Mich. 325. The township having paid the judgment brought suit to recover over from Noret, the party guilty of the active negligence. The township, not. haying itself been guilty of any active negligence but having been held liable under the statute, it was held that recovery could be had.

On the other hand, Detroit, etc., R. Co. v. Boomer, 194 Mich. 52, will be found to be illustrative of that class of cases where recovery over is refused even though indemnity is expressly agreed upon. That case arose upon the following state of facts: The railroad company had built a private side track into the yard of Boomer, a dealer in sand, lime and like products. Boomer had agreed to keep the track free from obstruction and to indemnify the railroad company. Rain had caused sand to wash upon the track to the depth of several inches which had not been removed by Boomer. The railroad company backed cars down on the side track; in passing the sand pile the rear tracks of an empty car left the rails, causing injury to one Glappa, who brought suit and recovered judgment against the railroad company, which was affirmed by this court. Glappa v. Railroad Co., 179 Mich. 76. Thereupon the railroad company brought suit to recover over against Boomer under the provisions of the contract. We there held that the negligence of the railroad company was active negligence, that the parties were joint tortfeasors and that there could be no recovery over.

A case very much in point is City of Tacoma v.. Bonnell, 65 Wash. 505 (118 Pac. 642, 86 L. R. A. [N. S.] 582). In that case one Ohrstrom had been killed by coming in contact with a secondary wire which had become overcharged by coming in contact with a primary wire. His widow and minor children sued and recovered from the city; the city brought the action to recover over from Bonnell. It was alleged that Bonnell had negligently permitted some plank to fall on the wires. But the declaration in the Ohrstrom case had charged the city with negligence in not installing proper ground wires to protect the secondary wires from becoming overcharged,, and had failed to detect the dangerous overcharge after notice thereof. It was insisted there, as it is here, that such negligence on the part of the city was passive only, that the parties were not in pari delicto, and that recovery could be had. The court, after remarking that, “It seems clear that, but for the concurring negligence of the city and the defendant, no injury would have accrued,” considers a number of the authorities and concludes:

“The answer in this case shows that the city was guilty of negligence in maintaining its primary and secondary wires in, a dangerous condition, when they might readily have made them safe so that injury would not result if the wires should come in contact. If the city had not been negligent in this respect, the accident could not have occurred, even though the defendant in this action was negligent in causing the wires to come in contact. The concurring negligence of both parties, therefore, caused the injury. Under the authorities above cited, the parties were in pari delicto, and neither may recover against the other.”

The case of Atlanta, etc., R. Co. v. Telegraph Co., 107 Fed. 874, is also quite similar to the instant case. One Owings, an employee of the telephone company, received a shock from a “call wire” of the telephone company, causing his death. It was claimed that such “call wire” came in contact with a “feed wire” of the railway company, which was highly charged with electricity. Owings’ widow brought suit against the railway company, alleging that company was negligent in permitting its feed wire, which crossed the call wire, to rest upon it. She recovered a judgment against the railway company and this suit was brought against the telephone company for indemnity. The right to recover was denied. Judge Newman, in denying liability, said:

“While it is true, as has been remarked, that, if the allegations in this declaration were taken alone, the declaration would not be subject to demurrer, yet, when taken in connection with the fact that recovery was had against the Consolidated Company for such character of negligence as made it liable to the public, an entirely different case is presented. The fact that Mrs. Owings could recover against the Consolidated Company for the death of her husband under the circumstances, that company being under no special obligation or peculiar duty to Owings, to my mind necessarily adjudicates and determines the question of such negligence on the part of the Consolidated Company as would prevent a recovery against the Telephone and Telegraph Company. The very most that can be said, taking this entire case together — the declaration in the former suit and in this, suit — is that they were joint wrongdoers, and that by their mutual fault these wires came in contact and this dangerous current was diverted.”

Another case quite similar to the instant case is Cumberland, etc., Telegraph Co. v. Mayfield Water & Light Co., 166 Ky. 429 (179 S. W. 388). We quote the syllabus:

“Through the negligence of an electric company in allowing the insulation to wear off of one of its wires, and that of a telephone company in stringing its wires too low, a connection between the light wire and the telephone wire was formed, resulting in the death of a telephone lineman, whose administratrix recovered from the light company: Held, that the negligence of both was concurrent, and the light company could not enforce contribution against the telephone company.”

Where the negligence was a failure to inspect, it was held by the Supreme Court of the United States in Union Stock Yards. Co. v. Railroad Co., 196 U. S. 217 (25 Sup. Ct. 226), that both parties were wrongdoers and there could be no recovery over. We quote the syllabus:

“A railroad company delivered a car with imperfect brakes to a terminal company; both companies failed to discover the defect which could have been done by proper inspection; an employee of the terminal company, who was injured as a direct result of the defective brake, sued the terminal company alone and recovered. In an. action brought by the terminal company against the railroad company for the amount paid under the judgment: Held, that:
“As both _ companies, were wrongdoers, and were guilty of a like neglect of duty in failing to properly inspect the car before putting it in use, the fact that such duty was first required of the railroad company did not bring the case within the exceptional rule which permits one wrongdoer, who has been mulcted in damages, to recover indemnity or contribution from another, on the ground that the latter was primarily responsible.”

See, also, Doles v. Railway Co., 160 N. C. 318 (75 S. E. 722, 42 L. R. A. [N. S.] 67); Consolidated Kansas City Smelting & Refining Co. v. Binkley, 45 Tex. Civ. App. 100 (99 S. W. 181); Sparrow v. Bromage, 83 Conn. 27 (74 Atl. 1070, 27 L. R. A. [N. S.] 209); Central of Georgia Ry. Co. v. Macon Ry. & Light Co., 9 Ga. App. 628 (71 S. E. 1076); Sutton v. Town of Dundas, 17 Ont. L. R. 556.

An examination of the record and briefs in the case of Sykes v. Village of Portland, 177 Mich. 290, discloses that at that time the village insisted that the actual, effective and proximate cause of the accident was the negligence of the telephone company alone and that therefore the village was not liable, and it was there insisted as it is here that its plant was first installed, and no question seems to have been there made, at least no question is here raised, that it was not safely and properly installed. This court there declined to follow such contention. Speaking through Mr. Justice Kuhn, it was sáid:

“Whether these defendants acted as an ordinarily prudent man would have acted under the circumstances was properly submitted to the jury. It must be said that this accident was the result of concurring causes, the removal of any of which would have prevented the accident. * * *
“When a dangerous condition became apparent, it was the duty of the village officers in charge of the plant, if possible, to remove the danger, and, if the situation was caused by the telephone company, it was the duty of the village officers and employees to request them to remove it. In this regard it seems to us they occupy no different position than the officers and employees of a private corporation would occupy under similar circumstances.”

Without basing our decision on the ground that this decision is res adjudícala between the parties to this case, we are impressed that the declarations in the Sykes Cases and the proofs make out a case of concurrent negligence of the village and the telephone company and that the negligence of each was active. It is true that the village wires were first strung; that they were properly put up and that they would not have come in contact with the telephone wires had not the telephone wires been later improperly installed. It is true that the proofs show that the telephone wires were so put up that they sagged and came in contact with the village wires; but it is also true that by such contact the insulation on the village wires was worn off; and it is also equally true that the village knew or should have known the exact situation an inspection would have disclosed. The defective condition was as well known to the village as to the telephone company. With these two wires in such close proximity that they would come in contact when the wind was blowing, the village during a high wind sent a deadly current of 2,000 volts over its improperly insulated wire, resulting in the death of young Sykes and the injuries to his mother. This was an active act of negligence, a positive tort. There was nothing passive or negative about it. The defective condition and the crossing of the wires alone were not dangerous to the Sykes boy, the sending of the deadly current over the village wires when such condition existed was. It was said by Mr. Justice Brooke, speaking for the court in Glappa v. Railroad Co., supra:

“It is next urged that a verdict should have been directed for defendant upon the ground that the evidence does not show negligence on the part of the defendant railway. It is said that, if there was sand upon the track which caused the derailment and consequent injury to plaintiff, it was not put there by defendant railway, nor was it the duty of the railway. to remove it. It is true that, if there was sand upon the track which caused the derailment, it was placed there either directly or indirectly by Boomer, and it is equally true that it was Boomer’s duty to have caused it to be removed. It does not, however, therefore necessarily follow that the defendant railway was free from negligence. The mere presence of the sand upon the track was no menace to the plaintiff. If the cars had not been moved, the plaintiff would not have been injured. It was the alleged negligent movement of the cars over the accumulated sand which caused the injury.”

We are clearly of the opinion that this cáse falls within the class of cases and is controlled by Detroit, etc., R. Co. v. Boomer, supra, and kindred cases. The parties to this case were joint tortfeasors, both were guilty of active negligence which concurred in producing the death of the Sykes boy; neither is entitled as against the other to contribution or indemnity; they are in pari delicto and the law cannot afford relief to either.

The judgment is affirmed.

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


text:
    PEOPLE v. RICE.
    1. Criminal Law —Information — Evidence Before Examining Magistrate — Admissibility.
    An information will not be quashed because of the admission of incompetent evidence by the examining magistrate, where there is sufficient competent evidence to establish the commission of the offense by the defendant.
    2. Same.
    Evidence held, sufficient to justify the examining magistrate in holding defendant for trial; it not being necessary to establish his guilt beyond a reasonable doubt.
    3. Same — False Pretenses — Information—Sufficiency.
    In a prosecution for obtaining money by false pretenses, where the information alleged that the false representations, by means of which a check was obtained, were made to the Excelsior "Wrapper Company, the party defrauded, it was not defective for failure to allege that the person sending the check was an agent of the company.
    For authorities passing on the question of evidence of other crimes in criminal cases, see notes in 62 L. R. A. 193, 222, 240, 323; 43 L. R. A. (N. S.) 667.
    On reliance on false pretenses as an element of the offense, see note in 6 L. R. A. (N. S.) 365.
    For improper evidence as grounds for quashing an indictment, see note in 47 L. R. A. (N. S.) 1207.

      4. Same — False Pretenses — Intent Necessary Element.
    Intent to defraud is a necessary element of the offense of obtaining money by false pretenses.
    5. Same — Evidence—Other Similar Offenses — Intent.
    While, in a prosecution for felony, it is the general rule that evidence tending to establish the guilt of defendant of another distinct and independent crime, is not admissible, yet an exception to the general rule is made where the question of intent is of vital importance, in which case such evidence is admissible to prove intent.
    6. Same — Evidence of Subsequent Similar Offenses — Intent.
    Evidence as to similar transactions between the same parties occurring both before and after the obtaining of the check on false pretenses charged in the information, held, admissible for the purpose of proving intent to cheat and defraud, since the probabilities of an honest mistake diminish as the number of similar transactions, indicating a scheme or system, increases.
    7. Same — Trial—Instructions.

      Held, that the trial judge, by appropriate instructions, carefully guarded its use and limited the purpose for which said evidence was received.
    8. Same — Evidence—Sufficiency—Directed Verdict.
    There being an abundance of testimony to take the case to the jury, the court below properly refused to direct a verdict for defendant.
    Error to superior court of Grand Rapids; Dunham, J.
    Submitted June 12, 1919.
    (Docket No. 99.)
    Decided July 17, 1919.
    Fred C. Rice was convicted, of obtaining money by false pretenses, and sentenced to imprisonment for not less than 4 nor more than 15 years in the State prison at Jackson.
    Affirmed.

      Lillie, Lillie & Lillie and O. Y. Rossiter, for appellant.

      Cornelius Hoffius, Prosecuting Attorney (Fred P. Geib, of counsel), for the people.
   Fellows, J.

The Excelsior Wrapper Company, hereafter called “the company,” is a Michigan corporation located at Grand Rapids, and is engaged in manufacturing excelsior, excelsior wrapping pads, etc. In the year 1913 it entered into business relations with Fred C. Rice, the defendant, who resided at Traverse City. Stated briefly, the arrangements were that the company agreed to purchase of Rice poplar and basswood bolts at an agreed price; the company was to advance to Rice $5 pet cord on the bolts when and as he advised it he hacl purchased the same, or, as stated by some of the testimony, as he had the same reported to him. The bolts were quite largely, if not entirely, green when purchased and were not to be shipped to the company until they were seasoned. This took from a year to a year and a half. When seasoned and shipped the company gave Rice his proper credit. The business done was considerable, and in the spring of 1917 the company had advanced over $18,000 to Rice beyond the amount of bolts received at its plant. It fairly appears that the winter preceding had been a difficult one to get bolts out of the woods and to the railroad, and a shortage of shipping facilities seemed imminent. The company was anxious to get stock to keep its plant running and requested a report of the amount of bolts on hand. In answer to this request the defendant on March 4th wrote the following letter:

“3/4/17.
“Excelsior Wrapper Co.,
“Grand Rapids, Mich.
“Gentlemen: As per your phone request of yesterday, I beg to report the following stock of bolts at various stations. In round figures 2,400 cords of dry and partly dry stock.' About 1,000 cds. of cut green stock and some 1,200 cds. cutting jobs not yet completed, on which no funds other than 50 cents stump-age has been advanced.
“Yours truly,
“F. C. Rice.”

On May 18th defendant wrote the company a letter which contained the following:

“Have reported 55 cords peeled bolts on which an advance of $275 is requested.”

A check for the amount of the bolts reported, $275, was sent by the company to Mr. Rice. Comparatively few bolts were shipped by the defendant to the company during the spring and summer of 1917, and in September the company sent a man to check up the bolts on hand at the various stations from which defendant shipped. At some of the stations a few bolts were found, at others none, and defendant admitted that he had misapplied the funds, that he had made a mistake and was sorry for it and that he knew they could put him in jail for it, There was. testimony in the case that during this month a conference was had in Grand Rapids at which defendant admitted his shortage. We quote- from the testimony of the witness William E. Tallmadge:

“I asked him, I said: ‘Do you mean tó say that you have been sending in statements here and requesting us to send you money in payment of bolts that you have been collecting the last few months, and those reports are false, that you have been getting your money to buy bolts?’ He said, ‘Yes.’ He said, T have been lying about it right along.’ I said, ‘Then you have not been buying any bolts lately?’ He said, ‘No.’ Then I asked him what he was using that money for. ‘Well,’ he said, T have been using it for other things.’ I said, ‘You are in the automobile business.’ He said, ‘Yes.’ I said, ‘How have you been getting along with that?’ ‘Well, at first, I hoped to make enough out of that business so as to square up with the Excelsior Wrapper Company.’ I asked him, I said, ‘Mr. Rice, do you realize the position that you have placed Mr. Meves in. Do you realize that through your treatment of him and the Excelsior Wrapper Company .that he is liable to lose his position and ruin his future.’ He said, ‘Yes, and that is what makes me feel so badly, because E. A. has been so square with me right along and this thing has worried me for a good many months.’ I said to him, ‘Then, when did you begin using the-company’s money for other things.’ ‘Well, soon after you commenced sending me checks.’ I said, ‘That long, early in 1913, you began using the company’s money for other things than buying bolts?’ He said, ‘Yes, I have done that right along from that time up to the time we quit sending him checks, I have been pursuing that policy.’ He said, ‘That is exactly it, and I am glad and willing to take any punishment I deserve, go to Jackson and pound stone or anything else.’ ”

■ The defendant was arrested charged with obtaining the check for $275 by false pretenses; upon preliminary examination he was held to trial in the superior court of Grand Rapids, where an information was filed setting up quite fully the dealings of the parties, charged the making of the representations in the letter of March 4th and that they were false, the making of the representations contained in the letter of May 18th that he had reported 55 cords of peeled bolts and its falsity and the obtaining of the check for $275 by means of such false representations. A motion was made to quash the information which was refused and a trial resulted in defendant’s conviction.

The principal grounds upon which defendant sought an order quashing the information and here urged as basis of assignments of error upon the refusal to grant such order are that the examining magistrate received improper testimony and that the testimony produced before him did not establish the commission of the offense and probable cause. The objected testimony consisted of portions of the examination of the defendant before the referee in bankruptcy- in proceedings in which he was adjudged a bankrupt. It is not claimed by the prosecution that such testimony was admissible and it was not offered upon the trial. An information will not be quashed because of the admission of incompetent evidence where there is sufficient competent evidence to establish the commission of the offense by the defendant. People v. Lauder, 82 Mich. 109 People v. Lay, 193 Mich. 17 (L. R. A. 1917B, 608). It is not necessary to establish the guilt of the defendant beyond a reasonable doubt before the examining magistrate. While in the instant case the evidence before the magistrate of the defendant’s confession was not as full as that given upon the trial we think there was sufficient of it taken in connection with the testimony of the transaction and the dealings of the parties to justify the examining magistrate in holding defendant for.trial and that the motion to. quash on this ground was properly refused.

We do not think the information defective within the holdings of this court in the case of People v. Behee, 90 Mich. 356. In that case the information alleged the obtaining of $5, the property of the Detroit Stove Works, by means of certain representations to Mr. Barbour. There was' no allegation that he was the agent of the company or had any control over’ the money of the company or what relation he bore to the company. Without such allegations or some allegation connecting him with the company and its funds it was held that the information was not sufficient. In the instant case the representations were alleged to have been made to the company, not to a third person. The information was not defective in this regard.

We have examined the numerous assignments of error upon the admission of testimony and discover no reversible error. Except the question we shall now consider, they do not require consideration.. The prosecution was permitted to introduce proof of similar transactions occurring both before and after the obtaining of the check for $275 for the purpose of showing intent, and the court instructed the jury that such testimony might be considered by them for that purpose.- By objections to receiving such testimony, motion to strike it out and assignments of error on the charge, defendant raises the question of the admissibility of such evidence, particular stress being laid upon the evidence of subsequent transactions, such subsequent transactions having occurred shortly after the obtaining of the $275 check, and in which defendant made similar representations and received checks thereon. This is the important question in the case and we approach it with no inclination to differ from the claim of defendant’s counsel that the precise question here involved has not been adjudicated by this court. Our attention has not been challenged in-the brief of either counsel to a decision of this court exactly in point. We must have in mind the character of the charge and the question as presented upon the record in the consideration of this question. The defendant stands charged in the information with making certain false and fraudulent representations with intent to cheat and defraud the company. The intent to defraud is a necessary element of the offense. Although the representations were false, if they were made honestly through mistake or otherwise without such intent there could not be a conviction. It was the claim and theory of the prosecution that they were made with such intent, that they were a t of a system or scheme to defraud the company.

The general rule is well established and is recognized in this jurisdiction that upon trial for felony the prosecution will not be permitted to give evidence tending to establish the guilt of defendant of another distinct and independent crime. /But this rule has its exceptions; and it is not contended and cannot be contended that this court has not recognized that exceptions to this rule must obtain; and where this offense is involved, with the question of intent of vital importance, this court has held that evidence of similar transactions before the one charged are admissible to prove intent. People v. Henssler, 48 Mich. 49; People v. Wakely, 62 Mich. 297; People v. Summers, 115 Mich. 537. Does this exception also permit the introduction of evidence of subsequent similar acts, occurring shortly after the one charged and a part of the same system or scheme for the like purpose of proving intent? We think that upon reason and authority this question must be answered in the affirmative. The underlying reason for the exception lies in the fact that a man may be honestly mistaken, have no fraudulent intent if the transaction stands alone, is single; but that the probabilities of an honest mistake diminish as the number of similar transactions indicating a scheme or system increases. Thus a man may honestly offer a counterfeit bill* and the one transaction standing alone has little force in proving guilty knowledge, in proving intent to defraud. But if he successively offers 5 or 25 counterfeit bills, as such offers increase in number the probabilities of an honest mistake diminish, and the probabilities of guilty knowledge, of intent to cheat, increase. As was said by Lord Coleridge in Reg. v. Francis, 12 Cox Cr. Cas. 612:

“It seems -clear upon principle that, when the fact of the prisoner having done the thing charged is proved, and the only remaining question is whether, at the time he did it, he had guilty knowledge of the quality of his act, or acted under a mistake, evidence of the class received must be admissible. It tends to show that he had been pursuing a course of similar acts, and thereby it raises a presumption that he was not acting under a mistake. It is not conclusive; for a man may be many times under a similar mistake or may be many times the dupe of another. But it is less likely he should be so oftener than once, and every circumstance which shows that he was not under a mistake on any one of these occasions strengthens the presumption that he was not on the last.”

The reason for the exception being as stated we perceive no ground of distinction between similar transactions occurring shortly before and those occurring shortly after the offense charged where they are part of a system or scheme to cheat and defraud. It is stated by Mr. Greenleaf in his work on Evidence (3 Greenleaf on Evidence [16th Ed.], § 15):

“In the proof of’ intention, it is not always necessary that the evidence should apply directly to the particular act, with the commission of which the party is charged; for the unlawful intent in the particular case may well be inferred from a similar intent, proved to have existed in other transactions done before or after that time.”

Mr. Wigmore thus summarized the rule (1 Wigmore on Evidence, § 320, page 408):

“Subsequent representations are equally admissible with prior ones; because, on the principle of intent it is the repetition of them that is significant, and a subsequent instance reduces the probability of innocence equally as well as a prior one.”

And in 1 Wharton on Criminal Evidence (10th Ed.), § 39, with citations of sustaining authorities, is found the following:

“When the object is to show system, subsequent as well as prior collateral offenses can be put in evidence, and from such system identity or intent can often be shown. The question is one of induction, and the larger the number of consistent facts, the more complete the induction is. The time of the collateral facts is immaterial, provided they are close enough together to indicate that they are a part of the system. In order to prove purpose and design, evidence of system is relevant; and in order to prove system, collateral and isolated offenses are admissible from which system may be inferred. Or, where crimes are so mutually connected or interdependent that the proof of one is not coherent without evidence of the other. But to be admissible as relevant under system, the collateral, extraneous, or independent offense must be one that forms a link in the chain of circumstances and is directly connected with the charge on trial.”

In considering the subject of false pretenses it is said in 19 Cyc. at page 443:

“Evidence of similar false representations made by defendant to the same person for the purpose of obtaining property, or to others shortly before or after the representations for which defendant is on trial, is in most jurisdictions held admissible to prove either defendant’s knowledge of their falsity or a guilty intent or both, and this is so even though the transactions differ in detail, if similar in general outline.”

In 4 Elliott on Evidence, § 2976, it is said:

“Evidence of similar offenses, involving the making of other false representations within reasonable limits as to time and circumstances, whether before or after the time in question and whether to the same person or to others, is admissible against the defendant to show that he was aware of the falsity of the statements made _ by him in the instance in question, and that, knowing them to be false, he made them with the intent to deceive.”

In the case of State v. Marshall, 77 Vt. 262 (59 Atl. 916), defendant was informed against for fraudulently obtaining a bank check by falsely personating another. The court speaking through Mr. Justice Start said:

“Where the issue is the fraud or innocence of one in doing an act having the effect to mislead another, it is relevant to show other similar acts of the same person having the same effect to mislead, at or about the same time, or connected with the same subject-matter; and when several crimes form a part of one entire transaction and have some connection with each other, as a part of the same plan or induced by the same motive, they may be shown to reduce the probability, of innocence; and for this purpose, subsequent representations, are equally admissible with prior ones, for it is the repetition of them that is significant, and a subsequent instance reduces the probability of innocence equally as well as a prior one, and the criminality of prior or subsequent acts or representations does not affect their admissibility, if they are otherwise relevant.”

The case of Commonwealth v. Lubinsky, 182 Mass. 142 (64 N. E. 966), was a false pretense case. It was said in the opinion:

“As bearing upon the intent with which the defendant obtained the goods from Walkowich, it was competent for the government to show, if it could, that the goods were obtained by the defendant pursuant to a general or common plan or scheme of fraud on his part. And for the purpose of showing such a plan or scheme it was competent for the government to introduce testimony tending to show that at or about the same time he fraudulently obtained goods from other parties by the same or similar pretenses which he appropriated to his own use and for which he did not pay. The different transactions must be connected with the one in question as parts of a general or common scheme or plan to defraud in order to. justify their admission as evidence. But when so connected the evidence of fraud which they furnish is competent as bearing upon the intent with which the goods were obtained in any one of the transactions embraced1 in the general plan or scheme. Commonwealth v. Drew, 153 Mass. 588 (27 N. E. 593) ; Commonwealth v. Robinson, 146 Mass. 571 (16 N. E. 452) ; Commonwealth v. Tuckerman, 10 Gray (Mass.), 173, 197; Jordan v. Osgood, 109 Mass. 457. The fact that the evidence might also be admissible to prove the commission of other crimes did not render it incompetent for the purpose for which it was admitted.”

The exception is more broadly stated by Justice Story in Bottomley v. United States, 1 Story, 135, than is necessary for us to adopt. He says:

“In most cases of conspiracy and fraud, the question of intent, or purpose, or design in the act done, whether innocent or illegal, whether honest or fraudulent, rarely admits of direct and positive proof; but it is to be deduced from various circumstances of more or less stringency, and often occurring,' not merely between the same parties, but between the party charged with the conspiracy or fraud and third persons. And in all cases, where the guilt of the party depends upon the intent, purpose, or design, with which the act is done, or upon his guilty knowledge thereof, I understand it to be a general rule, that collateral facts may be examined into, in which he bore a part, for the purpose of establishing such guilty intent, design, purpose, or knowledge.”

In State v. Wilson, 72 Minn. 522 (75 N. W. 715), it was said:

“The general rule is that, when offered simply for the purpose of proving a defendant’s commission of the offense charged, evidence of his commission of other independent crimes is inadmissible. But there are exceptions, or rather apparent exceptions, to this rule. One of these is where the crime in question is one of a system of similar crimes in the commission of which the defendant is habitually engaged. This exception is particularly applicable to cases where the defendant is engaged in the commission of a system of successive frauds of the same kind; as, for example, a system of successive forgeries or of successive cheats or swindles of the same general nature. It is therefore competent to show that the defendant had been engaged in practicing like or similar cheats, as tending to prove a criminal intent.”

In the case of State v. Brady, 100 Iowa, 191 (69 N. W. 290), a case cited and quoted from by this court in People v. Hoffmann, 142 Mich. 531, the defendant was overseer of the poor at Ottumwa. He was indicted for cheating by false pretenses. The offense alleged in the indictment occurred on or about July 11, 1893. It grew out of the filing of a claim for three dollars pretended by the defendant to be for transportation furnished a woman and three little children. Upon the trial the prosecution was permitted to introduce all the claims presented by' the defendant during the year of 1893, upwards of 500 in number and aggregating upwards of $1,400. In the Hoffmann Case we quoted from the Iowa case the following:

“It seems to us that the evidence was also admissible for the purpose of proving a systematic scheme or plan on the part of the defendant to cheat and defraud the county, thus negativing the idea that the presentation of the claim in question was accidental, or through oversight, or mistake. * * * The jury may well have found, from the evidence complained of, that the filing of the claim, and the receipt of the warrant charged in the indictment, was a part of a plan or scheme adopted by the defendant to cheat and rob the county. For this purpose, as well as for the purpose of establishing the defendant’s knowledge of the falsity of the claim, the evidence was admissible.”

In the Hoffmann Case the charge was obtaining money from the State by false pretenses. The amount obtained, $56.34, was procured by the defendant, then coroner of the county of Wayne, by means of a bill for alleged services of himself as coroner and for other alleged expenses growing out of the violent death of one Mrs. Josephine Summers, who was represented by him to be a stranger although a resident of the city of Detroit. This was the specific offense charged in the information. Upon the trial some 40 bills or vouchers of the defendant upon similar blanks used in the Summers case and upon which defendant procured various sums from the State were received in evidence; there was also received evidence tending to show the falsity of the representations contained in these various bills or vouchers; the circumstances were similar to those in the Summers case and tended to show a system to defraud. This court there fully considered the admissibility of such proof and affirmed the conviction. An examination of the record in that case discloses that the dates of the various bills do not appear, and it is not established by the record whether they were before or after the Summers case.

In the case of People v. Seaman, 107 Mich. 348, the charge was manslaughter by abortion. Evidence of other criminal operations was received. In considering the cases dealing with the admissibility of this class of testimony it was said:

“Some of these authorities would seem to be border cases, but they illustrate the tendency of the courts to allow the introduction of this class of testimony to repel the inference that the cause was an accidental one, in cases where such an inference might otherwise obtain. Upon principle and authority, it is clear that where a felonious intent is an essential ingredient of the crime charged, and the act done is claimed to have been innocently or accidentally done, or by mistake, or when the result is claimed to have followed an act lawfully done for a legitimate purpose, or where there is room for such an inference, it is proper to characterize the act by proof of other like acts producing the same result, as tending to show guilty knowledge, and the intent or purpose with which the particular act was done, and to rebut the presumption that might otherwise obtain.”

See, also, State v. Merry, 20 N. D. 337 (127 N. W. 83); State v. Walton, 114 N. C. 783 (18 S. E. 945) ; Kramer v. Commonwealth, 87 Pa. St. 299; Penn. Mut. Life Ins. Co. v. Trust Co., 19 C. C. A. 286 (72 Fed.. 413); Wood v. United States, 16 Pet. (U. S.) 342; State v. Rosenberg, 162 Mo. 358 (62 S. W. 435, 982) ; Carnell v. State, 85 Md. 1 (36 Atl. 117); Queen v. Hamilton, 1 Cox Cr. Cas. 244; Reg. v. Dossett, 2 C. & K. 306; People v. Ascher, 126 Mich. 637; citation and consideration of numerous other authorities will be found in People v. Hoffmann, supra, People v. Sea man, supra, and in Trogdon v. Commonwealth, 31 Grab. (Va.) 862.

We conclude that the testimony of similar transactions subsequent to the date of the act alleged in the information was properly received. These transactions were shortly after that date, were of like character, between the same parties and were a part of the same system or scheme to defraud. When testimony of this character is received the trial judge should carefully guard its use by appropriate instructions, and limit the purpose for which it is; received. This was done in the instant case.

The court properly overruled defendant’s motion for a directed verdict. There was an abundance' of testimony to take the case to the jury. Defendant’s confession, the evidence of the man who went to the various stations from which defendant shipped bolts, and where bolts would, have been found if defendant had purchased the bolts he claimed he had; the testimony of numerous parties from whom defendant purchased bolts that they had not sold him any bolts at approximately the time in question, the dealings, and transactions of the parties all tended to establish the claim of the prosecution. The case of People v. Perry, 197 Mich. 47, is quite in point. It was there said:

“It has been held that proof of the falsity of the representation need not necessarily be direct; it is sufficient if the evidence establish facts tending legitimately to show its'falsity. It is said that as defendant is usually in a position to know the truth or falsity of the representation, slight evidence of its falsity is sufficient for his conviction, in the absence of countervailing evidence of its truth.”

We have examined the charge of the court and the defendant’s requests to charge. The charge of the court was a fair one and fully protected the rights of the defendant; such of defendant’s requests as he was entitled to were given in substance in the general charge. We have been able to find no reversible error upon this record. The defendant has been given a fair trial.

His conviction is affirmed.

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


text:
      In re JOSEPH.
    1. Process — Service—Attachment oe Notice oe Rule to Plead to Declaration.
    Attachment to the declaration of the notice of the rule to plead instead of writing it upon the back of the document was not such a defect as vitiated the service and the proceedings.
    2. Habeas Corpus — Validity op Judgment — Writ op Error.
    Where, in an action for the conversion of goods, the court acquired jurisdiction of both the subject-matter and the parties, and a writ of capias ad satisfaciendum was issued out of said court following a judgment against defendant by default, said judgment is not open to collateral attack in habeas corpus proceedings brought in the same court; a writ of error being the appropriate remedy.
    Certiorari to Crawford; Sharpe, J.
    Submitted June 3. 1919.
    (Docket No. 13.)
    Decided July 17, 1919.

      Habeas corpus proceedings by Henry Joseph to obtain his release from custody under a writ of capias ad satisfaciendum by the American Express Company. From an order discharging defendant from custody, plaintiff brings certiorari.
    Reversed, and writ dismissed.

      George L. Alexander and Campbell, BulMey & Led-yard (Wilson W. Mills, of counsel), for appellant.

      Sprague & Shepherd, for appellee.
    The K. & W. Rubber Company of Ashland, Ohio, shipped to Henry Joseph at Grayling, automobile tires of the value of $1,835.68. The shipment was by express, C. O. D. When the tires reached Grayling, the express company being without storage room and the shipment not being paid for by the consignee, an arrangement was made by the company with Mr. Joseph to store the tires and safely keep them until he should pay for them. This he failed to do but converted them to his own use. An action was commenced by the express company in the circuit court for the county of Crawford by declaration. To the copy of the declaration served on the defendant was attached a notice of the rule to plead. In due course of time defendant’s default was entered and judgment followed. The judgment contains the following:
    “And, it having been shown by the testimony given upon the trial of this cause that said Henry Joseph did unlawfully and fraudulently convert the goods and chattels described in plaintiff’s declaration, to his own use, as alleged in the declaration filed herein and that this cause might have been commenced by capias ad respondendum and that said defendant might have been held to bail thereon, it is ordered that execution against the body of said defendant may issue herein.”
    On October 15,1918, a writ of capias ad satisfaciendum was issued out of said court upon such judgment, placed in the hands of the sheriff and executed. On December 14th this writ of habeas corpus directed to such sheriff was sued out by Mr. Joseph. Upon the hearing he was discharged. This is certiorari to review the order and judgment in such habeas corpus proceedings.
   Fellows, J.

(after stating the facts). We are met at the threshold of this case with the question of whether the circuit court for the county of Crawford may, in this habeas corpus proceeding, inquire into the validity and enforceability of the judgment rendered in that court in the case of the American Express Company against Henry Joseph. The court had jurisdiction over the subject-matter of that case. We are not impressed that the attachment to the declaration of the notice of the rule to plead instead of writing it upon the back of the document was such a defect as vitiated the service and the proceedings. Bouvier’s Law Dictionary, p. 1546; Crosby v. Roub, 16 Wis. 645. The court acquired jurisdiction of the parties. The court having jurisdiction of both the subject-matter and the parties, we conclude that under the authorities its judgment is not open to collateral attack in habeas corpus proceedings brought in the same court. As stated by Chief Justice Ostrander, speaking for the court in Re Satt, 164 Mich. 472:

“The judgment of the court is not a nullity, and' such mistakes, if any, as were made by the court ought to be asserted in a court of errors.”

It was stated by this court in Re Coffeen, 38 Mich. 311:

“Upon habeas corpus, if it should turn out there is no valid sentence, we could not render any judgment which would operate directly upon the judgment below. We shall not pass, therefore, upon its validity until we have it before us on writ of error, when every consideration can be examined properly, and complete justice done so far as the law will enable us to do it.”

And in Hamilton’s Case, 51 Mich. 174, this court said:

“An appellate court may no doubt make use of the writ as one means of exercising its supervisory, power, but it is not to be employed as a writ of error by tribunals not possessing the appellate authority.”

See, also, In re Eaton, 27 Mich. 1; In re Underwood, 80 Mich. 502; In re Johnson, 104 Mich. 343; In re Bushey, 105 Mich. 64; In re Lewis, 124 Mich. 199; In re Butler, 138 Mich. 453; In re Vitali, 153 Mich. 514.

12 R. C. L. p. 1192, with numerous sustaining authorities found in the foot note, thus states the rule:

“The writ of habeas corpus is not designed to interrupt the orderly administration of the laws by a competent court acting within the limits of its jurisdiction, but is available only for the purpose of relieving from illegal restraint, any persons restrained of their liberty by virtue of the final judgment of any competent tribunal or by virtue of any execution issued thereon are excluded, generally speaking, from the benefits of the writ, as such persons are not illegally restrained, but are deprived of their liberty by due process of law. Proceedings on habeas corpus to obtain release from custody under final judgment being in the nature of a collateral attack, the writ deals only with such radical defects as render the proceeding or judgment absolutely void, and cannot have the effect of an appeal, writ of error, or certiorari, for the purpose of reviewing mere error ‘‘and irregularities in the proceedings leading to the final judgment or sentence of a court of competent jurisdiction by virtue of which the prisoner is committed, nor are mere defects in the judgment or sentence itself, or irregularities after it is pronounced, reviewable in this manner. If the court has jurisdiction of the person and the subject-matter, and could render a judgment upon a showing of any sufficient state of facts, any judgment which it may render, however erroneous, irregular or unsupported by evidence, will be sustained as against an attack by habeas corpus. This rule applies to inferior courts, and the judgment of an inferior court, such as a police court, mayors, magistrates, or justices, having jurisdiction conferred by law to try and dispose of a criminal case, is as conclusive and rests upon the same basis, when the jurisdiction has attached, as the adjudication of any other common-law court. This rule that mere errors or irregularities are not ground for habeas corpus has been held to apply though no appeal or writ of error will lie to the judgment.”

Section 13460, 3 Comp. Laws 1915, provides:

“The following persons shall not be entitled to prosecute such writ: * * *
“3. Persons convicted, or in execution, upon legal process, civil or criminal.”

The writ of habeas corpus may not be used as a substitute for a writ of error or to perform its functions. In the instant case the question of whether the declaration in the case of the American Express Company against Henry Joseph stated sufficient facts to authorize a judgment for a body execution was a question reviewable by writ of error; by appropriate proceedings bringing to the attention of the court in that case the bankruptcy proceedings of Joseph that court could determine the question of whether such proceedings operated to discharge the defendant from the debt represented by the judgment, and this court upon writ of error would review such determination. Bryant v. Kinyon, 127 Mich. 152 (53 L. R. A. 801); Field v. Howry, 132 Mich. 687; Prentis v. Richardson’s Estate, 118 Mich. 259; and so as to the other questions raised in this proceeding, a writ of error furnishes the appropriate remedy. We are constrained to hold, without passing on the questions raised as to the validity or enforceability of the judgment in the case of the American Express Company against Henry Joseph, that such questions may not be disposed of in this habeas corpus proceeding.

The case will therefore be reversed and the writ dismissed.

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


author: Stone, J.

text:
    AMERICAN FORGING & SOCKET CO. v. WILEY.
    1. Corporations — Promoters—Fiduciary Relations — Acquisition of Stock — Equity—Jurisdiction—Restitution.
    Where defendant, a stockholder and promoter of plaintiff corporation, stood in a fiduciary relation to said corporation and its other stockholders, and received stock to be used for the benefit of plaintiff, for which he refuses to account, a court of equity has jurisdiction to compel restitution. ,
    2. Equity- — Remedy.
    In equity, that kind of relief will be granted which is best adapted to the situation at the time it is applied for.
    3. Corporations — Fiduciary Relations — Defenses.
    Where defendant received stock of plaintiff corporation to be used for its benefit, he is in no position to deny the legality of the organization of plaintiff, or the validity of the contract whereby he received said stock.
    4. Same — Parties.
    Since whatever would be an injury to the shareholders would be an injury to their collective or corporate interests?, the company is the proper plaintiff to enforce such rights.
    5. Same — Modification of Decree.
    Where defendant received 100 shares, and the evidence supports the conclusion that his services exceeded the value of 20 shares, the decree of the court below requiring him to surrender for cancellation 80 shares will be modified to 60 shares and affirmed.
    Appeal from Oakland; Smith, J.
    Submitted April 16, 1919.
    (Docket No. 56.)
    Decided July 17, 1919.
    Bill by the American Forging .& Socket Company against Harry'W. Wiley and others for the cancellation of certain shares of stock. From a decree for plaintiff, defendants appeal.
    Modified, and affirmed.

      Perry & Lynch and Arthur P. Picks, for plaintiff.

      Alex. Moore, for defendant Wiley.
    Authorities discussing the subject of liability of promoters of corporation for secret profits, are collated in a note in 18 L. R. A. (N. S.) 1110.
   Stone, J.

The bill of complaint in this case was filed against Harry W. Wiley, Emma McCourt, George W. Dickinson and Charles E. Duffy for the purpose of canceling 100 shares of stock in the plaintiff company, originally issued on the order and direction of said defendant Wiley to himself and to his sister, Emma McCourt, 20 shares of which were subsequently issued to George W. Dickinson, and 10 shares to defendant Charles E. Duffy. The bill alleged that defendant Wiley claimed, prior to the execution of the articles of incorporation, that he was the owner of certain patents which were then under consideration at the patent office at Washington, which were valuable and useful for the manufacture of articles which said corporation desired to manufacture and sell; that he was acquainted with various people of financial ability whom he could induce, and would induce, to take stock in the proposed corporation, and thereby furnish said corporation with a means to proceed with its business of manufacturing, and that he proposed, in the event of said corporation being formed, to finance said business and secure valuable financial assistance therefor.

It alleged that the original incorporators of said corporation were defendant Wiley, Warren W. Stoler, Edward Stoler, Edgar A. Rathbun and Evan P. Heaton; that said incorporators, at the suggestion of defendant Wiley, employed an attorney to ‘draw up articles of incorporation; that none of the said individuals were trained in the law, or had knowledge of the provisions of the statutes of Michigan relative to incorporation, and relied entirely upon the advice of said attorney in the drawing of said articles; that the said attorney advised the said incorporators that under the laws of the State of Michigan it would be necessary to have all of the capital stock subscribed for, and all issued; that said incorporators — at least said incorporators excepting the defendant Wiley— did not expect that it would be necessary that all the stock should be issued;' that they were desirous of having stock in the treasury to sell for the purpose of securing money to finance said corporation; but that after they had been informed by said attorney that it was necessary that all the stock should be subscribed for and issued, it was then and there agreed by all the incorporators that each of said incorporators would cancel- or turn into the treasury, one-half of all the stock issued to them respectively; that the other half of the capital stock so issued to each individual was to be, by said individuals, sold and the proceeds thereof used for the benefit of said corporation as capital; that the said defendant Wiley, under said agreement, agreed to cancel one-half of the said 200 shares of stock so issued to him, and to proceed diligently to sell the same and interest capitalists in the said venture, and induce them to purchase stock therein to enable the corporation to secure capital to carry on its work; that out of the 100 shares so retained by said defendant Wiley he should retain a sufficient amount of stock to repay him for the value of the said patents, for the work he would do in promoting the interests of said corporation and securing the investment of capital therein, and the balance of said stock should be accounted for to said corporation at its par value.

The bill alleged that, subsequently, at a meeting duly held by all of the stockholders, each of the said stockholders, excepting the said defendant Wiley, voluntarily canceled one-half of the stock so isshed to each of them, turning the same back into the treasury to be used as treasury stock for the purpose of securing capital for said corporation,* and that said defendant Wiley objected and refused at first to turn any portion of his said stock in, as he had agreed, but finally he did turn into the treasury of said company 100 shares of the stock so issued to him; that at the time the 200 shares were originally issued to said defendant Wiley he requested that 160 shares thereof be issued in the name of his sister, Emma McCourt; and that said 200 shares of stock were issued in three blocks, one of 120 shares in the name of Emma McCourt, as aforesaid, and one of 40 shares also in her name, and one of 40 shares in the name of said defendant Wiley; that when the said defendant Wiley consented to return 100 shares of said stock he produced the certificate of 120 shares issued to his said sister, and also had in his possession the 40 shares issued in her name, both of which certificates were indorsed by the said Emma McCourt; that the said certificate of 120 shares of stock in the name of Emma McCourt was surrendered to the plaintiff corporation and a certificate for 20 shares, at the request of said defendant Wiley, was issued in the name of defendant Dickinson. The bill further alleged that, as matter of fact, the said defendant Wiley was not the owner of, nor did he have any claim of title whatever to the patents heretofore referred to and described in the articles of incorporation, and that he has not, at any time since, become possessed of title thereto; that the said defendant Wiley, after the said incorporation, did not succeed in selling any stock to any person; did not interest any capital in the business of said corporation, and did nothing whatsoever to in any manner or in any degree assist said corporation in any of its affairs, and that he has not performed any of the things agreed by him to be done, and has not sold any of the 100 shares of stock obtained by him out of the said original subscription, but now claims to own the same. The bill alleged that the stock issued to said defendant Dickinson was issued to him without his knowledge, and that he is not a bona fide holder thereof. It is further alleged that said defendant Wiley, having absolutely failed, refused and neglected to carry out the terms of the trust under which said shares of stock were issued to him, the plaintiff caused notice to be published in a newspaper published in the city of Detroit, that the shares of stock so held by said defendant Wiley were held by him without consideration, and that no money or property whatsoever had been paid at any time therefor, and that the said company would not recognize any transfer thereof; that subsequent to said notice defendant Duffy presented to the plaintiff, through its secretary, the certificate of stock for 40 shares originally issued to the said defendant Wiley, upon which certificate was an indorsement of transfer to said defendant Duffy of 10 shares thereof.

The bill charges that the defendant Duffy had knowledge of the facts connected with the issuing of said stock, and of the terms and conditions under which said defendant Wiley held said stock, and the fact that this plaintiff claimed and insisted that said Wiley had no legal title thereto, and that said defendant was so informed at the time he presented said stock and asked that two certificates be issued in lieu of said 40 shares of stock, one in the name of said Duffy for 10 shares, and one in the name of said defendant Wiley for 30 shares, which request this plaintiff refused, and did not consent to the transfer, and did not issue any stock in lieu thereof; and the plaintiff claims that said Duffy paid no value for said shares of stock and was not a bona fide holder thereof.

The bill further alleged that defendant Wiley is not entitled to any of the shares of said stock; that he has not fulfilled the terms and conditions under which the same were delivered to him, nor discharged the trust imposed in him at the time, and that he is not legally entitled to hold and control any of said stock, and that said defendants McCourt, Dickinson and Duffy are not bona fide holders for value, nor holders without notice, and are not, nor is any of them, entitled to insist upon the ownership of said stock as against the plaintiff; that this plaintiff is apprehensive that the said defendant Wiley will sell and dispose of the said stock to parties who may be purchasers for value, and the rights of this plaintiff thereby jeopardized and injured, and that by reason of the premises the said defendant Wiley should not be permitted to sell and transfer any of the said shares of stock.

The bill further alleged that defendant Wiley is a man of no financial responsibility, and that a judgment against him for the value of the stock would be of little or no value, and that since the incorporation of said company certain of the stockholders of said company have been successful in selling stock, and interesting capital in its venture, and that the plaintiff at the present time is in a fairly prosperous condition, and engaged in the manufacture and selling of sockets and forgings of different kinds, and as a consequence the stock of said company is worth many thousands of dollars; that said stock in question, as matter of law and right, belongs to this plaintiff; that said defendant Wiley should be helcUto account to said plaintiff for said stock, he being given credit for any and all moneys he has expended, and for any and all work that he did for the benefit of such corporation, and the balance of the stock returned by him to the plaintiff.

The articles of incorporation were executed on the 28th day of May, 1915. They appear to be in due form. The purpose or purposes of the corporation are therein described as follows:

“To manufacture and sell, both at wholesale and retail, forgings, sockets, and automobile parts of all kinds, and to purchase, own and operate a factory for the manufacture of forgings, sockets, and automobile parts of all kinds.”

The principal place of business is stated to be the city of Pontiac, Oakland county, Michigan. The capital stock was the sum of $100,000; the number of shares 1,000 of the par value of $100 each. All of this stock was in form subscribed, and the names of the stockholders and the number of shares of stock subscribed for by each were as follows:

Harry W. Wiley ...........................200 shares
Warren W. Stoler ...'.......................200 ”
Edward Stoler .............................200 ”
Edgar A. Rathbun .........................200 ”
Evan P. Heaton............................200 ”

—all of which it was alleged was actually paid in, of which amount $5,000 was said to have been paid in cash, and $95,000 in property described as follows:

One patent, serial No. 29,402, issued to Warren W. Stoler by the United States, May 20, 1915, on a bow socket locking machine, and duly assigned to this plaintiff, which patent was of the value of $50,-000; also one patent, serial No. 634,106, issued to Edward Stoler by the United States, July 2, 1914, on an automobile top socket, and duly assigned to the plaintiff, the value of which was stated as $45,000.

The affidavit required by the statute was signed and sworn to by Warren W. Stoler, Edgar A. Rathbun and Edward Stoler.

The defendant Wiley answered denying generally the allegations of the bill of complaint, and especially that he ever agreed to account to the plaintiff in any way for the 100 shares of stock here involved, claiming to own the same, with the exception of 20 shares conveyed to the defendant Dickinson. Defendant Emma McCourt. disclaimed all interest in the stock, and defendant Duffy admitted on the record that his stock must stand or fall with the stock standing in the. name of defendant Wiley.

It appears undisputed from the evidence that the Edward Stoler patent was never issued and never received by the company. The $5,000 said to be paid in cash was not paid in as stated in the articles, but, at the most, about one-half thereof was expended by two incorporators, Heaton and Rathbun, in building the machine covered by the Warren W. Stoler patent.

The court below found that the certificates for 80 shares of stock remaining in the name of defendant Wiley were issued and delivered without any adequate consideration therefor, and that the material allegations in the bill of complaint in relation to said certificates were true, and that defendant Wiley had not paid for said certificates of stock. It ordered and directed that the said defendant deliver up to the plaintiff the said certificates, and that they be decreed in his hands to be null and void; and that in case he refused to deliver up said certificates, the decree should operate as a cancellation thereof. It dismissed the bill of complaint as to defendant George W. Dickinson. It restrained all the defendants from assigning, selling, transferring, disposing of, or incumbering in any way the certificates for the said 80 shares of stock, and awarded costs against defendant Wiley; and decreed that as to defendant Charles E. Duffy, his rights should abide the decree in relation to the stock standing in the name of defendant Wiley.

While all the defendants appear to have claimed an appeal, the defendant Wiley, only, has filed a brief in this court. It is the claim of the appellant Wiley that the plaintiff has no standing in a court of equity, for the purpose of obtaining the relief prayed for in the bill of complaint; that the rights of the public or creditors are not involved, and that the original stockholders dealt wholly with themselves as sellers and buyers, and a corporation, and that no other person had any interest in this initial transaction, and that there was no effort or opportunity to defraud any one, and cites in support of this contention: Blum v. Whitney, 185 N. Y. 232 (77 N. E. 1159) ; 3 Cook on Corporations (7th Ed.), p. 2042; Old Dominion Copper Co. v. Lewisohn, 210 U. S. 206 (28 Sup. Ct. 634); Great Western Mining Co. v. Harris, 198 U. S. 561 (25 Sup. Ct. 770).

It is the claim of the plaintiff that a court of equity has jurisdiction to. grant the relief prayed for in the bill of complaint, and it cites in support of that position: Old Dommion Copper Co. v. Bigelow, 203 Mass. 159 (40 L. R. A. [N. S.] 314, 89 N. E. 193); Fred Macey Co. v. Macey, 143 Mich. 138 (5 L. R. A. [N. S.] 1036); Cuba Colony Co. v. Kirby, 149 Mich. 453, and other Michigan cases.

It is also the claim of plaintiff that Old Dominion Copper Co. v. Lewisohn, supra, was not followed in the Massachusetts case, which latter case is in accord with our decisions. It should be said that the Massachusetts case was affirmed by the Supreme Court of the United States, in Bigelow v. Old Dominion Copper Co., 225 U. S. 111 (32 Sup. Ct. 641), the question involved being whether the Massachusetts court gave to the Lewisohn Case (being a New York judgment which was pleaded in bar in the Massachusetts suit) the full faith and credit which was required by the Constitution of the United States and the statutes thereunder. Of course, the Massachusetts court was not bound to follow the United States Supreme Court upon the main questions decided in the Lewisohn Case. This court has adopted the doctrine of. the Massachusetts case.

There is no question that the defendant Wiley, as a promoter, stood in a fiduciary relation to the plaintiff and to those who subscribed for its. stock. As such he was bound to act in good faith and to deal with them in perfect candor. The principle on which courts of equity proceed in these cases is a very familiar one. The promoter of the company, like its. directors, is deemed to sustain towards the members of the company, and toward the corporation, the relation of trustee toward his cestui que trust. This being so, he will not be permitted to speculate out of that relation, or to derive any secret advantage from it. 7 R. C. L., “Corporations,” § 51 et seq.

The evidence shows that subsequent to the organization of the plaintiff, certain of its stock, which had been surrendered in pursuance of the alleged agreement, had been sold to stockholders who had no knowledge of the agreement or arrangement alleged in the bill of complaint.

From the evidence contained in .this record, we are of opinion that the plaintiff has sustained the burden of proof by showing the arrangement between the defendant Wiley and the other incorporators, substantially as alleged in the bill of complaint. On the familiar principle that where property or money has been received by, or is found in the possession of, a fiduciary in violation of a fiduciary duty, a court of equity has jurisdiction to compel restitution, a suit in equity may be maintained by a corporation against a promoter to recover the same; and in equity, that kind of relief will be granted which is best adapted to the situation at the time it is applied for. Old Dominion Copper Co. v. Bigelow, supra; Yeiser v. U. S. Board & Paper Co., 46 C. C. A. 567 (107 Fed. 340, 52 L R. A. 724).

We have no doubt of the right of this plaintiff to maintain this action. We are satisfied that the defendant Wiley, sustaining a trust relation to the plaintiff, has in his possession certain shares of the capital stock of the plaintiff, placed in his possession for the purpose of benefiting the plaintiff; that he has never paid for such stock, and that he now denies the trust relation and asserts ownership of the stock and refuses to account to the plaintiff therefor. He, himself, admits that he did not have ownership of the patents, and fails to show wherein he is entitled to the possession of the stock. Manifestly, the plaintiff corporation is. interested in the amount of its assets and capital stock, and may maintain an action against any person who has possession, wrongfully, of such assets. The defendant is in no position to deny the legality of the organization of the plaintiff company, and °we think the agreement, as set up in the bill of complaint, with defendant Wiley, to account to the plaintiff for the stock received by him was valid, not opposed to public policy, and, in any event, that under the circumstances here disclosed, said defendant is in no position to claim that said agreement was invalid. Whatever would be an injury to the shareholders would be an injury to their collective or corporate interests, and the company is the proper plaintiff to enforce such rights. A shareholder would be required to first request the plaintiff to bring such a suit, before he could have any standing in a court of equity. We are, therefore, of the opinion that the bill states a good cause of action in favor of the corporation, and that its right to sue under such circumstances is settled upon principle and authority. Pittsburg Mining Co. v. Spooner, 74 Wis. 307 (42 N. W. 259). Many authorities are cited in this case to the effect that such an agreement, as is alleged in the bill of complaint, constitutes an implied trust in the defendant, for the benefit of the corporation, and that an action by the corporation will lie, in the case of the breach of such trust.

The court below having found in favor of defendant Dickinson, and the plaintiff not having appealed, his rights are not before us.

The bill of complaint alleged that the defendant Wiley might retain a sufficient amount of stock to repay him for the value of the patents, and for the work which he would do in promoting the interests of the corporation, and in securing investments of capital therein. We are satisfied, from the testimony of defendant Wiley, himself, that he had no substantial interests in the patents, or either of them; but, desiring to do justice to all the parties in the case, we are not satisfied that the work which he did in promoting the organization and interests of the corporation was of no value. He seems to have spent considerable time in the interest of the organization of the corporation, and for two or three months thereafter, jointly with the other officers, when he “washed his hands” of the matter. He has had the benefit of the 20 shares of stock standing in the name of defendant Dickinson; but we are constrained to hold that, under the evidence, the value of his services for the corporation has exceeded that amount. We think the decree of the circuit court should be affirmed as to 60 shares of the capital stock of the corporation instead of 80 shares, as provided in such decree, and that the defendant should surrender for cancellation 60 shares of said stock instead of 80 shares, and as thus modified the decree will be affirmed, without costs in this court to either party.

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