author: McGrath, 0. J. Montgomery, J.

text:
    Emanuel Schloss et al. v. Lyman Feltus.
    [See 96 Mich. 619.]

      Sale — Bona fide purchaser — Pre-existing debt.

    A naked, pre-existing debt is not such a consideration or payment for the transfer of a stock of goods as -will defeat replevin by the original vendors, who set up fraud in the purchase of the goods from them.
    Rehearing, upon application of the defendant, of case reported in 96 Mich. 619.
    Argued January 16, 1894.
    Former opinion affirmed January 8, 1895.
    The facts are stated in 96 Mich. 619.

      II. M. Oren (Julian G. Dickinson, of counsel), for appellants.

      McMahon & Terkes (M. G. Burch and Dwight Goss, of counsel), for defendant.
   McGrath, 0. J.

Upon rehearing, after the fullest consideration, we find no reason to change the former opinion. 96 Mich. 619. The principal question in the ease is whether a naked, pre-existing debt,is such a consideration or payment for the transfer of a stock of goods as will defeat replevin by the original vendor, who sets up fraud in the purchase from him.

The rule, as laid down in 16 Amer. & Eng. Enc. Law, 837, is that a pre-existing debt is not such a consideration as will sustain the plea of “ Iona fide purchaser for value,” except in the case of negotiable paper. The cases cited will be found to fully support the text. Other cases will be found collected in Tied. Sales, § 329; Hil. Sales, p. 332; and Benj. Sales (6th ed.), p. 448. Mr. Tiedman says:

“ Although there are a few cases which maintain that a pre-existing debt is a sufficient consideration, the better opinion is that it is not sufficient, because there is no parting with value in reliance upon the title to the goods thus acquired, and that an attaching or other creditor is not a bona fide purchaser.”

Some of the cases would seem to make a distinction between a receipt of property in payment of a pre-existing indebtedness, and a receipt in satisfaction or discharge of such debt, — that a satisfaction can only result from an agreement to that effect; but payment operates as a discharge or satisfaction of the debt, and in either case the failure of title revives the debt.

The case of Dickerson v. Tillinghast, 4 Paige, 215, was a bill to foreclose a mortgage given by Catharine Tilling-hast. Defendant Charles T. was the son of the mortgagor, who received a conveyance of the premises from his mother, subsequent to the mortgage,. the consideration for which was a debt due the son from his mother. Baze v. Arper, 6 Minn. 220, was a case of where the only consideration for a deed of land was a precedent debt. Root v. French, 13 Wend. 570, was a case of where a grocer had assigned his stock of goods to indemnify the assignee against liability as indorser for the assignor.

No distinction is made between a conveyance in payment of a debt and one given as security therefor. This Court has, in a number of cases, recognized the rule as applicable to conveyances as security for a pre-existing debt. Boxheimer v. Gunn, 24 Mich. 372; Kohl v. Lynn, 34 Id. 360; McGraw v. Solomon, 83 Id. 442; Edson v. Hudson, 83 Id. 450. But it is insisted that under our authorities this is the limit of the rule, and Bostwick v. Dodge (decided in 1844), 1 Doug. 413; Outhwite v. Porter (1865), 13 Mich. 533; and Hanold v. Kays (1887), 64 Id. 439, — are cited to support that contention.

In Bostwick v. Dodge, Bostwick gave his note to one Hooper, who indorsed it over to Dodge in payment of a debt due from Hooper to Dodge. The Court in that case say:

“ It has been long and uniformly held that the ex-tinguishment of a pre-existing debt was as valid and sufficient a consideration for the transfer of a negotiable instrument as the payment of money, or the delivery of any species of property whatever. That the rule is one of great convenience and necessity, even, to a commercial community, is too obvious to require illustration, and its adoption in no way contravenes the principles of natural justice.”

In Outhwite v. Porter, Porter held notes made by one Can tine. Outhwite bought out Can tine’s business, and Porter surrendered Cantine’s notes, taking from Outhwite the latter’s notes. Although Bostwick v. Dodge is cited, the Court held that Cantine had been released; that it was a case of novation by the substitution of one debtor for another, by the assent of the three parties.

In Hanold v. Kays, K. was indorser upon certain outstanding notes made by one 0. In consideration of K.’s agreement to take up and pay said notes, 0. conveyed certain land to K, The Court say that K. had paid the notes before notice, and that such payment formed a sufficient consideration for the deed. It had been repeatedly held by this Court that an . agreement to pay — a mere executory contract — was not a sufficient consideration, but that payment actually and in good faith made before notice entitled the' vendee to protection, and such is the universal rule. In that case, however, the Court use language unnecessary for the determination of that case, and regard Bostwick v. Dodge as authority for saying that one who takes a deed of land in absolute payment of a debt due him is a Iona Me holder for value. From an examination of the authorities, however, it will clearly appear that the rule laid down in Bostwick v. Dodge is an exception to the general rule, and the difficulty with the Hanold case is that it substitutes a recognized exception for the rule.

In Currie v. Misa, L. R. 10 Exch. 153, Lord Coleridge, in a dissenting opinion, — his contention being that the exception did not apply to a mere check in the hands of a holder for value, — says:

“It is too late to dispute that a pre-existing debt, due to the transferee of a bill, entitles him to all the rights of a holder for value. But it seems equally clear that this is an exception to general rules,- — an extraordinary-protection given to such a holder on grounds of commercial policy only, and in order to favor the unrestricted use, as currency, of negotiable,instruments.”

In Whistler v. Forster, 14 C. B. (N. S.) 248, it is saidr

“ The general rule of law is undoubted that no one-can transfer a better title than he himself possesses. To this there are some exceptions, one of which arises out of the rule of the law merchant as to negotiable instruments. These, being part of the currency, are subject to the same rule as money; and if such an instrument be transferred in good faith, for value, before it is overdue, it becomes available in the hands of the holder, notwithstanding fraud which would have rendered it unavailable in the hands of a previous holder.”

In Bay v. Coddington, 5 Johns. Ch. 54, the exception is recognized, but the court refused to apply the principle to that case as made. In Dickerson v. Tillinghast, supra, the case of Bay v. Coddington was referred to as sustaining the rule adopted; but, although Bay v. Coddington has been overruled, the rule of Dickerson v. Tillinghast remains the law of that state. The cases in support of the rule excepting commercial paper are collected in 2 Rand. Com. Paper, §§ 461-465, and the subject is referred to in 2 Amer. & Eng. Enc. Law, 392.

There are authorities which refuse to recognize either rule or exception, but the rule is supported by the great weight of authority. The serious conflict is as to the recognition of the exception in favor of commercial paper. Our own Court, in Bostwick v. Dodge, has determined that question; and the rule there laid down must be regarded as an exception to the general rule of law, and cannot be carried beyond the necessity that gave rise to it. The doctrine of that case has no application to the transfer of a non-negotiable instrument. In Whistler v. Forster, supra, the court refused to apply it, for the reason that the paper was not indorsed until after notice.

The term “ bona fide purchaser” is borrowed, from equity jurisprudence, and must be interpreted accordingly. Mr. Pomeroy, in his Equity Jurisprudence, says:

There must be actual payment before any notice, or what in law is tantamount to actual payment, — a transfer of property or things in action, or an absolute change of the purchaser’s legal position for the worse, or the assumption by him of some new, irrevocable, legal obligation.” Sections 747, 749-751.

It is well settled by our own Court that one must pay as well as purchase. Thomas v. Stone (1843), Walk. Ch. 117; Dixon v. Hill (1858), 5 Mich. 404; Warner v. Whittaker, 6 Id. 133; Blanchard v. Tyler, 12 Id. 339; Stone v. Welling, 14 Id. 514; Matson v. Melchor, 42 Id. 477.

In Blanchard v. Tyler, one Hearse claimed to be a Iona fide purchaser. He paid nothing to Tyler. Tyler was ■owing him about $7.50, which was to apply on the purchase, and he gave a non-negotiable note for $600, less $7.50. The note was' to be paid by turning out other notes, and this was not done until some time afterwards. The Court held that H‘. was not a Iona fide purchaser; that whatever he paid was after notice, and such payment was made in his own wrong.

In Stone v. Welling, Stone filed a bill to foreclose a mortgage given by Hart, making Welling (a subsequent purchaser) a party defendant. The consideration for the deed from Hart to Welling was an agreement by the latter to give up to the former certain judgments and notes held by Welling against Hart, and to release the latter from an existing indebtedness. Mr. Justice Cooley, for the Court, says:

But the question in this case is whether there was an actual payment of value for the land by Welling before notice of complainant’s mortgage; and, to make the agreement amount to such a payment, jt must at least have been one which Hart, at the time, could have enforced as a discharge against Welling & Root. The evidence shows that the agreement was wanting in the consideration agreed upon, since the land covered by the deed had previously been incumbered by the mortgage to complainant. There was no impediment, therefore, to Welling & Root proceeding in the collection of their demands against Hart & Williams, if the facts had all been made kno'wn to them.”

In Chadwick v. Broadwell (1873), 27 Mich. 6, the logs had been transferred to Chadwick in payment of the balance due on the stumpage contract between Chadwick and Lester; but the Court intimated that Chadwick had paid nothing, and that, should the purchase fail by reason of the fact that Mrs. Broadwell insisted upon her legal rights, the debt against Lester would remain.

In Battershall v. Stephens (1876), 34 Mich. 68, 74, Mr. Justice Grates refers approvingly to the rule that, in case the consideration is merely a past indebtedness, the purchaser is not entitled to be regarded as a Iona fide purchaser.

In Boxheimer v. Gunn, 24 Mich. 372, Chief Justice ■Ohristiancy uses this language:

“The defendant’s answer, as we have already seen, alleges the conveyance to Sutton to have been made to him merely as security for a precedent debt, and does not claim that any other consideration was paid or agreed to be paid; or that any time was to be given or had been given; or that the form of the debt was changed; or that he had relinquished any remedy in consideration of the •conveyance; or, finally, that his own position would not be equally as good to-day, if the conveyance should turn cut to be utterly valueless, as it was before the conveyance. He has not, therefore, by his answer, placed himself in •the position of a bona fide purchaser or incumbrancer for value, with equities superior to those of the complainant, though it should be admitted that he acted in good faith, and without notice;” citing Stone v. Welling, 14 Mich. 514.

It certainly could not have been contended, in view of the authorities referred to, that an unexecuted agreement to pay would constitute one a bona fide purchaser.

I do not desire to be understood as saying that an agreement to extend the time of payment may not be such a consideration as will support a mortgage given for a preexisting debt, nor that the release of security, or perhaps the surrender of evidences of indebtedness, may not be a sufficient present consideration to uphold a conveyance made in payment of a pre-existing debt. In the present case there was no change in the form of the debt.

It is urged that the vendor had other property out of which the purchaser might have made his debt. It is not necessary to pass upon that question. The transfer was made September 29, and on the 4th of October the vendee was notified of plaintiffs’ claim. There is no evidence of any change in the debtor’s circumstances respecting such other property, if he had any, between those dates. Under the rule laid down in Stone v. Welling, the creditor could then have avoided the discharge or release of the debt, to the extent of the failure of title. As to the rule that the purchaser is entitled to protection only to the extent of payments actually made at the time of the notice, see, also, Dickinson v. Wright, 56 Mich. 42, and Sheldon v. Holmes, 58 Id. 138.

We did not deem it necessary in the former opinion to discuss other questions raised by the record, and do not now.

The judgment must be -reversed, and a new trial ordered.

Long and Grant, JJ., concurred with McGrath, C. J.

Montgomery, J.

(dissenting). I am not able to concur either in the result reached by my brother, the Chief Justice, nor in his interpretation of the previous decisions, of this Court. It is well settled that one who is defrauded' by a purchaser of goods may rescind the sale and recover the goods, as against any but a Iona fide purchaser for value. Benj. Sales, § 428 et seq. It is equally well settled that the maker of a promissory note may set up a failure of consideration, as against any but a Iona fide purchaser for value. It seems to me illogical and confusing to apply in the one case a test in determining whether one is abona fide purchaser which does not obtain in the other. To do so is to surround the question with haze and uncertainty. For, while it may be said that the law merchant favors the transmission of commercial paper from hand to-hand, yet the extent to which the law offers inducement to this free use of commercial paper is definitely defined, and the law upon the subject is admittedly settled to go-to the extent only of protecting Iona fide purchasers, and; io precisely the same extent it is the settled doctrine that the law favors transmission of personal property. What, then, constitutes a bona fide purchaser? The payment of •a present consideration undoubtedly does. The surrender ■of security by a creditor would likewise constitute a sufficient consideration. The reason why an extension of time is a sufficient consideration to constitute the creditor a bona fide purchaser is that the creditor has, for a time, put it out of his power to proceed against the debtor. It •■seems to me that he has done this equally if he has discharged the original debt. Certainly, if the discharge of a pre-existing debt can be said to be parting with something of value, and a new consideration, when it is paid for a promissory note, it is inconceivable how it can, on the other hand, be said not to be of value, and a new consideration, when paid for a bale of cotton.

The cases in this Court involving the question of whether the purchaser of a promissory note'or other property is entitled to claim the rights of a bona fide purchaser have turned upon the question of what the purchaser parted with, and not upon the question of what the seller parted with. If, therefore, the purchaser did not change his position, or surrender any rights, as, for instance, if he accepted a promissory note as security merely for an antecedent debt, without any extension of time or release of other security, he does not become a bona fide purchaser. This is clearly because there did not pass from him. any sufficient consideration. But where there has been a discharge of an antecedent debt, as in Outhwite v. Porter, 13 Mich. 533, or an extension of time, as in DeMey v. Defer, 103 Mich. 239, and the other requisite conditions, the purchaser has been held a bona fide purchaser, for the reason that there did pass from such purchaser a sufficient consideration.

I do not agree with the broad statement of the Chief Justice that there is no distinction between a conveyance received in discharge of a debt, and one given as security merely, if it be meant by this a conveyance given as security, unaccompanied by any extension of time or surrender of other securities. See Williams v. Little, 11 N. H. 66; Bardsley v. Delp, 88 Penn. St. 420; Henriques v. Bank, 84 Mich. 168, 176; Burroughs v. Ploof, 73 Id. 607; 1 Smith, Lead. Cas. (8th ed.) 1215; 2 White & T. Lead. Cas. Eq. 33, 75, 83, 85, 86, 88.

The cases in our own Court do not sustain the contention that a discharge of a pre-existing debt may not be a good consideration to constitute one a bona fide purchaser. In Stone v. Welling, 14 Mich. 514, no such doctrine is announced. The facts in that case were that Welling received a deed, which, though executed after the-complainant's title accrued, was recorded first. The consideration of the deed to Welling is stated in the opinion to have been—

“An agreement by the firm of Welling & Root to give up to Hart, within 12 months from its date, judgments and notes against Hart and one Williams, both or either of them, to the amount of $450, including in that amount, their indebtedness to Welling & Root. There was also a conditional agreement to procure and give up to Hart. another note, of near a hundred dollars, held by oneHobert. Welling & Root at this time held a judgment against Hart & Williams, amounting to about $336, but whether there was any further indebtedness to them was not distinctly shown. Nothing appears to have been done towards performing this agreement with Hart after it was given."

So far from the case deciding that a discharge of an antecedent debt is not a sufficient consideration to constitute the creditor a bona fide purchaser, the opinion may be said to imply the contrary, for the Court take pains to point out that the facts do not make out that kind of a case. It is said:

"Nor do we think the agreement had the effect to discharge any indebtedness. It was executory in its character, covering, not only the claims of "Welling & Root, but also other claims to be procured by them, and upon which it cannot be claimed that the agreement itself would have any effect whatever. * * *

“But the question in this case is whether there was an actual payment of value for the land by Welling, before, notice of complainant’s mortgage; and, to make the agreement amount to such a payment, it must at least have been one which Hart, at the time, could have enforced as. a discharge against Welling & Root. The evidence shows, that the agreement was wanting in the consideration agreed, upon, since the land covered by the deed had previously heen incumbered by the mortgage to complainant.”

The case of Chadwick v. Broadwell, 27 Mich. 6, turned upon the question of whether the vendor stood in position to vest the purchaser with such possession as would constitute him a Iona fide purchaser. It was held that plaintiffs had given to Lester & Bundy such control over the logs as gave them the right to create a lien for sawing in favor of defendant; and, this being determined, the Court, proceeded to decide the question whether, by a purchase of the lumber in satisfaction of the claim of plaintiffs for the purchase price of the logs, plaintiffs had acquired priority over the defendant, as lien-holder. In determining this question, the Court say:

“We also think the circuit judge was right in holding that Mrs. Broadwell did not lose her lien by suffering the lumber to be placed on the Trowbridge dock. Under the agreement between Lester & Bundy and herself, the possession remained in her as much after it was transported to the dock as it did before. If she allowed sales and deliveries to be made to purchasers who were ignorant of her rights, the lien would thereby be waived to the extent of such sales, but not further.

“ But the plaintiffs claim that they were Iona fide purchasers, and, as such, were put in possession before they knew of any claim of lien. To this it may be replied that the whole transaction, as between them and Lester & Bundy, was by word of mouth only; no actual possession was taken by plaintiffs, and the attempt at a formal transfer of possession was ineffectual, because not made by the party in whom the possession vested. Mrs. Broadwell, in respect to the transaction, has been guilty of neither fraud, deception, nor negligence; the plaintiffs have paid nothing in consequence of it; and if their purchase fails, by reason of her insisting upon her legal rights, their debt against Lester & Bundy remains as before. And, in this view, We think it immaterial whether or not the plaintiffs, at the time they agreed to take the- lumber in satisfaction of their claim, had actual notice that Mrs. Broadwell insisted Upon a lien, as defendants claim it is proved by Chadwick^ testimony that they did. The nature of their own contract with Clewley was such as to permit him to have the logs manufactured, and consequently to create a lien thereon for the labor; and, if they dealt with his assignees afterwards in respect to the lumber, they were bound, at their peril, to ascertain either that the lien had been satisfied or waived, or, on the other hand, that the assignees had such possession of the lumber as to warrant the inference that no lien then existed.”

Neither was any such question as the sufficiency of a ■discharge of a past indebtedness as a consideration involved 'in Battershall v. Stephens, 34 Mich. 68. In that case the ■consideration paid was a present consideration. What was .said on this subject was therefore dictum, and what teas ■said was-:

“It has also been very often held in many courts of the highest character that, in case the consideration is merely a past indebtedness, the purchaser is not entitled to be regarded as a bona fide purchaser.”

The language was used in the course of an argument to show that want of good faith, in the sense in which it is used in connection with this rule, does not necessarily imply moral wrong. But it will be seen at a glance that this single sentence decides nothing, nor does it import that the Court necessarily approved the rule. Nor is it discoverable what rule is to be implied from the language, if any. "Was it intended to say that accepting security for past-due indebtedness, and giving time, does not constitute one a Iona fide purchaser, or, that in a case where the creditor has disarmed himself by the discharge of his -debt, he is not entitled to protection?

Boxheimer v. Gunn, 24 Mich. 372, is based upon Stone v. Welling, and contains nothing from which an inference can be drawn that the discharge of a pre-existing debt is not sufficient consideration. Kohl v. Lynn, 34 Mich. 360, and kindred cases, which establish the rule that before one may become a bona fide purchaser he must actually make payment, as well as contract to do so, and this before notice of prior rights or equities, clearly do not sustain the plaintiff’s contention here, or militate at all against the doctrine that the discharge of an antecedent debt is payment.

The New York cases are based upon Bay v. Coddington, 5 Johns. Ch. 54, 20 Johns. 637. In the case, as reported in 5 Johns. Ch., Chancellor Kent said:

The notes were not negotiated to them [the Codding-tons] in the usual course of business or trade, nor in payment of any antecedent and existing debt, nor for cash or property advanced, debt created, or responsibility incurred •on the strength and credit of the notes. They were received from E. and S., and after they had stopped payment, and had become insolvent, within the knowledge of J. and I. 0., and were seized upon by the Coddingtons as tabulo in naufragio, to secure themselves against contingent engagements previously made for E. and S., and on which they had not then become chargeable.”

In view of these facts, it is remarkable that in Dickerson v. Tillinghast, 4 Paige, 215, it was stated that it was held in Bay v. Coddington “ that the receiving of a negotiable note in payment of or security for a pre-existing debt, without any new consideration or other change of rights on the part of the persons receiving it, did not constitute them bona fide purchasers for a valuable consideration, although they supposed that the person from whom they received the note had a perfect right to dispose of it in that manner,” and that in Stalker v. M’Donald, 6 Hill, 93, it was again stated that the holding in Bay v. Coddington was that where he [the creditor] has received it [the note] for an antecedent debt, either as a nominal payment or as a security for payment, without giving up any security for such debt which he previously had, or paying any money, or giving any new consideration, he is not a holder of the note for a valuable consideration, so as to give him any equitable right to detain it from its lawful owner.” Whether it should be said that the rule now established in New York is due to misapprehension as to what was involved for decision in Bay v. Coddington, two facts should be considered, in determining the weight to be given to these adjudications, the first of which is that the court make no distinction, in determining as to the sufficiency of a consideration to constitute one a Iona fide purchaser, whether dealing with a purchaser of a note or of chattels. See Lawrence v. Clark, 36 N. Y. 128; Weaver v. Barden, 49 Id. 286; Dickerson v. Tillinghast, supra. But a more conclusive reason why the New York cases should not be decisive here is that this Court early refused to adopt the New York rule, and established the contrary doctrine. In Outhwite v. Porter, 13 Mich., at page 539, it was said:

“ The New York cases are cited to the effect that a person taking negotiable paper for a precedent debt is not a holder for value, and that such paper, in his hands, is subject to the equities existing between antecedent parties. But the rule established by these cases was directly repudiated in this State more than 20 years ago, in Bostwick v. Dodge, 1 Doug. 413, which established directly the contrary doctrine. This case has been uniformly recognized as law by this Court, and we are entirely satisfied with the correctness of the principle upon which it rests.”

See, also, Hanold v. Kays, 64 Mich. 439, 446, in which it was said by Mr. Jnstice Morse:

The doctrine that the extinguishment oí a pre-existing debt is not a valid and sufficient consideration for the transfer of a negotiable instrument was repudiated in Bostwick v. Dodge, 1 Doug. 413; and it has ever since prevailed in our State that such discharge of a precedent indebtedness is as good a consideration, in such a case, as the payment of money, or the delivery of any species of property whatever.”

See, also, Baker v. Pierson, 5 Mich. 459; Shufeldt v. Pease, 16 Wis. 689; Blanchard v. Stevens, 3 Cush. 162; Williams v. Little, 11 N. H. 66; Burroughs v. Ploof, supra; and Henriques v. Bank, supra.

On the former hearing, I concurred in the reversal of the judgment, without stating my reasons. The circuit judge charged the jury as follows:

They [plaintiffs] could not rescind this sale, or recover in this suit, unless they show, by a preponderance of evidence, three things: In the first place, they must show to your satisfaction, by a preponderance of evidence, that the sale of this bill of goods, made by the plaintiffs to Smith & Hassock, was induced or brought about, in part at least, by fraudulent representations; * * * or else you must be satisfied that at the time Mr. Smith purchased the goods there was no intent on his part, or on the part of the firm, to pay for them. You must also find, in addition to that fact, in order to entitle the plaintiffs to recover, that Mueller & Eaber, who first purchased the goods from Smith & Hassock, were not purchasers in good faith, for a valuable consideration, — Iona fide purchasers, without knowledge that there was any fraud in the sale and purchase of the goods in the first instance. You must also find that the defendant, Lyman Feltus, was not a purchaser in good faith, and that he had knowledge of the fact of the fraud, or that such facts and circumstances came to his knowledge as to raise the presumption that he knew it, or to put him on his guard. If the plaintiffs fail to show any one of these three things, they cannot recover, and your verdict should be for the defendant.”

I think, under the circumstances of this case, if the plaintiffs established the fraud on the part of the purchasers, the burden is with the defendant to show that he was a bona ficle purchaser, or that his immediate grantors, Mueller So Raber, were. Berry v. Whitney, 40 Mich. 65; Letson v. Reed, 45 Id. 27; Carrier v. Cameron, 31 Id. 379; Schaible v. Ardner, 98 Id. 70; Whitaker Iron Co. v. Preston Nat. Bank, 101 Id. 146. ,

For the error in this instruction, the judgment should be reversed, and a new trial ordered.

Hooker, J., concurred with Montgomery, J.

       See Mayer v. Heidelbach, 123 N. Y. 339, and cases there cited.


source: Caselaw Access Project

author: Hooker, J.

license: Public Domain

text:
    William K. Prudden v. Timothy Nester.

      Contract — Alteration—Construction.
    1. An alteration which does not change the effect of a written contract is immaterial, and will not preclude a recovery in a suit upon the contract; citing Miller v. Finley, 26 Mich. 249; Goodenow v. Curtis, 38 Id. 505; Gano v. Heath, 36 Id. 441; Leonard v. Phillips, 39 Id. 182; Bank v. Carson, 60 Id. 432; Weaver v. Bromley, 65 Id. 213.
    2. Contemporaneous with the assignment of a contract upon which the assignor claimed there was due to him $5,000, he executed to the assignee a writing to the effect that he anticipated that the debt would be at once paid on the happening of a specified event, and, in case of its non-payment, he could, and if called upon by the assignee would, show good cause for the payment of said debt, but that he did not guarantee that it would be paid. And it is held that the non-guaranty clause did not relieve the assignor from any obligation deducible from the writing, and that its removal was therefore an immaterial alteration.
    8. The agreement is not void for uncertainty, a fair construction thereof being that, if called upon, the assignor will show the debt to be a valid and subsisting legal obligation against the debtor.
    Error to Wayne. (Brevoort, J.)
    Argued October 4, 1894.
    Decided January 8, 1895.

      Assumpsit. Plaintiff brings error.
    Beversed.
    The facts are stated in the opinion.

      Edwin F. Oonely and Orla B. Taylor, for appellant.

      John Atlcinson and T. E. Tarsney, for defendant.
   Hooker, J.

Eay and Hester made a written agreement whereby the latter was given the right to cut certain timber on the lands of the former. On December 19, 1882, Nester assigned.his interest in this agreement to Turner, who promised to pay to Nester one-third of the profits, and out of Turner’s share of the profits he was to pay Nester the sum of $5,000. On August 11, 1883, Nester sold and assigned his interest in the Turner agreement to Prudden, the plaintiff, for the sum of $6,000, representing that the $5,000, which was to be paid by Turner, was a debt due him from Turner, and not dependent upon the profits derived from the contract mentioned. Turner denied this liability, and defeated Prudden in an action brought by the latter upon this claim. Thereupon Prudden brought an action against Nester, but was defeated, a verdict being directed for the defendant. Plaintiff appealed.

To understand the case it becomes necessary to refer to the agreement which Nester gave to the plaintiff. As set forth in the declaration, it reads as follows:

“Lansing, Mich., August 11, 1883.

“This memoranda witnesseth: That whereas, on the 19th day of December, 1882, Mr. James M. Turner, of Lansing, Mich., was justly indebted to me to the amount of $5,000, but as an accommodation to said Turner I agreed to wait until a sale , of a tract of pine timber, known as the f McGraw Tract.’ My interest in said tract and the indebtedness of said Turner to me are both men.tioned in a certain agreement from said Turner to me, dated December 19, 1882. The $5,000 due me from said Turner is mentioned in said agreement in the following terms:

“ And I [tlie said James M. Turner] am to further pay, out of my share of said profits, to Timothy Nester, the sum of $5,000.’

“The payment, however, of the said $5,000, was not dependent upon the amount of said Turner’s profits. I anticipate that the $5,000 will be-at once paid over to me, or my assigns, on sale of pine timber mentioned; but, should it not, I can and will, should I be called on to protect said payment, show good cause for its payment. I do not, however, guarantee its payment.

“Timothy Nester.”

The action was based upon the claim that although notified of the approaching trial between the plaintiff and Turner, and requested by the plaintiff to be present, and establish the $5,000 claim against Turner, defendant, Nester, neglected to appear, or in any other way aid plaintiff is establishing such demand.

Upon the trial, plaintiff produced a writing, signed by the defendant, which writing was in all respects like the one declared upon, except that it lacked the words, “ I do not, however, guarantee its payment.” The plaintiff testified that these words were a part of the paper produced, but that he had cut them from it before showing the writing to Turner, because he did not want him to know that Nester had refused to guarantee the debt. The paper showed the removal by cutting off a part of the ruled line preceding the signature of Nester. He further testified that the defendant had a duplicate of the agreement. The defendant testified that more than the words mentioned were cut from the contract, but said that he did not know what the rest was. He said: “ There was enough there to satisfy me and him at the time that there was no obligation on my part.” It was contended by counsel for the defendant that this was such an alteration as to render the contract void. It is well settled that, where the alteration is not such as to change the effect of the instrument, it is an immaterial alteration, and does not preclude recovery. Miller v. Finley, 26 Mich. 249; Gano v. Heath, 36 Id. 441; Leonard v. Phillips, 39 Id. 182; Goodenow v. Curtis, 33 Id. 505; Weaver v. Bromley, 65 Id. 213; First National Bank v. Carson, 60 Id. 432. The language, I do not, however, guarantee its payment,” which was the portion admitted to have been removed, did not relieve the defendant from any obligation deducible from the writing, as he nowhere undertakes to guarantee payment, but only to show good cause for its payment.” It was, therefore, an immaterial alteration.

The further claim is made that the writing is void for uncertainty. We think that a fair construction of the agreement is that, if called upon, the defendant would •show the $5,000 debt to be a valid and subsisting legal obligation against Mr. Turner.

The case should have gone to the jury.

The judgment will be reversed, and a new trial ordered.

Long, Grant, and Montgomery, JJ., concurred. McGrath, 0. J., did not sit.


author: McGrath, C. J.

text:
    John Gumberg and Cyrus Clapp v. Morris H. Treusch and Emanuel Treusch.

      Fraudulent conveyances — Garnishment—Evidence—Instructions to jury.

    1. When the issue to be tried involves a charge of fraud, evidence tending to establish the alleged fraud is freely admitted, and a wide range of inquiry into transactions between the parties is allowed.

      2. In a proceeding by judgment creditors under 3 How. Stat. § 8091, which makes a garnishee liable on account of and for the value of any of the property of the principal defendant in his possession, or which he has received and disposed of, and ■which is or was held by a conveyance or title void as to creditors of the principal defendant, it is error for the court, in his instruction to the jury, to predicate the right of recovery upon fraud perpetrated, not upon general creditors by the transfer of the property, but upon individual creditors, other than the plaintiffs, from whom the property had been purchased by the principal defendant.
    3. The principal defendant and the garnishees were engaged in the same kind of business. The principal defendant had been at one time an employé of the garnishees, and later a partner with them, and later still had purchased from them the stock owned by the firm, and another broken stock belonging to a branch store which the garnishees had operated for a time at a loss. The theory of the plaintiffs was that the principal defendant had transferred a large amount of goods to the garnishees in payment of an indebtedness which was not bona fide, and which goods were procured for that purpose pursuant to a fraudulent scheme entered into by the principal and garnishee defendants. And it is held competent for the plaintiffs to show whether orders for goods given by the garnishees were filled in the usual course of business or otherwise; and that, immediately after the sale of the stocks of goods by the garnishees to the principal defendant, he sent out a number of letters to different dealers, asking for quotations and samples, it appearing that the principal defendant was without capital, and, according to the claim of the garnishees, his indebtedness equaled, if it did not exceed, his assets.
    4. There was evidence from which the jury might infer that the transactions involving the purchase and transfer of the goods were collusive. And it is held that the same rule is applicable as in a case where a conspiracy is charged, and there is evidence tending to establish it; that everything said, done, or written by any one of the parties to the combination, in furtherance of the common purpose, is deemed the act of all; citing Hamilton v. Smith, 39 Mich. 332.
    5. It was not error to refuse to allow the plaintiffs to show that the garnishees had settled with certain other creditors of the principal defendant, and the record of a judgment in a case between the garnishees and other creditors of the principal defendant, in favor of the creditors, was properly rejected.

      6. The manager of a commercial agency testified in behalf of the plaintiffs to a statement made to him by the principal defendant as to his financial condition. After testifying on cross-examination that he had known the garnishees several years, he was asked if he had known of their having been engaged, during that time, in any dishonest transactions. And it is held that the court erred in permitting said latter inquiry to be made.
    7. In a case involving, as the main issue, the alleged transfer of goods in fraud of creditors, the court instructed the jury that the presumption of law is in favor of honesty and fair dealr ing; that this presumption must be overcome; that where it is sought to overcome it by circumstances, in the absence of direct or positive proof of fraudulent acts, the proof must be clear and convincing; that it is not sufficient to prove facts and circumstances, or a combination of facts and circumstances, that create doubt in the mind as to the honesty and fairness of the transaction, but the proof must be of the kind and amount as to create in the mind a hearty conviction that the charge is true; that fraud is never to be presumed nor lightly inferred, but the proof should be clear and convincing; that it is not necessary to establish it by proof beyond a reasonable doubt, but it must be proof that carries to the mind a conviction — a hearty conviction — that the charge is true. And it is held that under the rule laid down in Ferris v. MeQueen, 94 Mich. 367, the court was not justified in the use of the language given; that the words “ clear proof ” and “hearty conviction” are apt to mislead; that proof of facts and circumstances is sufficiently clear if it creates a belief that a fraud has been perpetrated, and a conviction so produced is sufficiently hearty to predicate a verdict upon.
    Error to Kent. (Grove, J.)
    Argued October 24, 1894.
    Decided January 8, 1895.
    Garnishment proceedings. Plaintiffs bring error.
    Reversed.
    The facts are stated in the opinion.

      Rood (& Ryan, for appellants.

      Fletcher & Wanty, for defendants.
   McGrath, C. J.

Plaintiffs obtained judgment against Jacob Lustig, and under 3 How. Stat. § 8091, garnished Morris H. Trensch and Emanuel Treusch, composing the firm of M. H. Treusch & Bro. Lustig is a brother-in-law of the defendants. Prior to January 2, 1888, defendants had been engaged in the cigar business on Monroe street, in the city of Grand Rapids. They had, prior to January 28, 1889, started the Hub cigar store, on the corner of Bridge and Canal streets, for a customer, and, evidently through the failure of such customer, had succeeded to that business. Lustig had been in their employ at a salary of 610 per week. On January 2, 1888, they started, “as a side issue to our business on Monroe street,” the Lustig Cigar Company store, the company consisting of the Treusches and Lustig; “giving Lustig a third interest in the net profits of said store, — he having no capital, just a working interest.” “ After three months’ experience, we found it [the Hub cigar store] unprofitable, and concluded to get rid of it.” The same witness says that on the 1st of January, 1889, the profits of the Lustig Company were 61,046. Lustig had overdrawn his account 8271.11. “ Lustig had a credit, when the Lustig Company was started, on our books, of $557.10. He had overdrawn the difference between this amount and $828.21. Against this debit, he had a right to one share of the profits. We had some money invested in the Lustig Company, and it hadn’t been a success.” On January 28, 1889, the Treusches sold to Lustig the Lustig Cigar Company business and the Hub cigar store. “We included in this sale the Lustig Cigar Company stock, the Hub stock, the book accounts and fixtures, and everything that belonged to the two businesses.” The transaction is entered on the books of Lustig ■and of M. H. Treusch & Bro. as follows:

Mr, J. Lustig, City.
'To purchase of stock Lustig Cigar Co.......... $1,673 35
To purchase of accounts Cigar Co. (good)......' 3,335 79
To purchase of accounts Cigar Co. (questionable)............ 1,425 34
To purchase of the Hub stock................. 1,826 10
To the purchase of the Hub outstanding accounts............... 754 44
To purchase of the Hub fixtures............... 325 00
As per attached inventory amount of debit to your account................................. 828 21
Total.................. $10,158 03
Diverse.
Amount of credit to your account............. $3,361 62
Amount of your earnings in the Lustig Cigar Co. .......................................... 1,064 86
Amount of credit for selling bad accounts, which were bought at 15 per cent, of face of inventory................ 1,211 49
Amount of check No. 1...................... 2,520 06
Amount of 30-day note................. 1,000 00
Amount of 60-day note________________________ 1,000 00
Total........................................ $10,158 03

The first item of credit upon this account, of $3,361.62, •“is composed of $2,804.52, which Mrs. Lustig transferred from her account to Lustig’s account at that time, and the credit of $557.10 on his personal account.” The second -item is the profits of the business for the year, which “we gave to Lustig.” The third item of credit is not explained, but it is, presumably, a mode of stating the discount on the accounts receivable, which had been transferred. On the day of the sale, Lustig is alleged to have given his note for $3,500 to Emanuel Treusch, and it was admitted, on the trial that the $2,520.06 check (the fourth item of ■credit) was a part of the $3,500 borrowed from E. Treusch. It therefore appears that Lustig was started out with the—

Lustig Co. store stock................$1,673 25
Hub store stock...................... 1,826 10
---$3,499 35
Accounts receivable................-..........- 4,293 98
Hub store fixtures.............................. 325 00
Total assets.......................-......... $8,118 33
His liabilities were:
Due Mrs. Lustig......................$2 804 52
Due E. Treusch...................... 3,500 00
Due M. H. Treusch & Bro............ 2,000 00
--$8,304 52

The testimony tended to show that a representative of R. G. Dun & Co. called on Lustig, March 4, 1889, who stated that his stock and fixtures inventoried $11,000; that he paid $9,000 cash, and gave two notes for $1,000 each. Upon that statement, he was given a rating of from $5,000 to $10,000. The testimony further tended to show that a representative of Bradstreet called in January, 1889, upon Emanuel Treusch, and interviewed him concerning the financial standing of Jacob Lustig; that-Emanuel Treusch informed him that Lustig had purchased the business at a total of $10,158.03, and had paid for it by credit account, $3,361.62; earnings, $1,064.86; discount, $1,211.49; cash, $2,520.06; and two notes of $1,000 each; that Lustig had in the neighborhood of $8,000 in his business. No reference was made to any indebtedness to Mrs Lustig or to Emanuel Treusch. On. this statement, Bradstreet gave Lustig a rating of from $5,000 to $10,000.

Lustig failed in July, 1891, having stock of the value of $10,000, and owing $8,400 in debts secured by chattel mortgage, and about $34,000 in unsecured debts. His. books showed that from March 1/ 1890, to August 1,. 1890, his purchases were $20,636.81, and his sales, during the same period, $34,985; that from March 1, 1891, until "the date of his failure, his purchases were $42,952.46, and his sales $29,37,6.97; that from April 1, 1891, to the time ■of the failure, there was a deficit on cigars alone, by brands, of 221,000 cigars, which, at cost prices, were worth ■over $6,000; that after March 1, 1891, Lustig had bought of 26 new houses; that he had drawn out of his business from January 28, 1889, to the time of the failure, $10,-901;, that on the 1st of March, 1891, the amount of Lustig’s indebtedness to the Treusches was $10,466; that from April 11, 1891, to June 21, 1891, Lustig had sold to the 'Treusches, in merchandise, $11,948, to apply upon this indebtedness, and on June 22, 1891, the Treusches paid Lustig, in cash, to balance accounts, $1,222.19. Lustig’s books show that on May 27, 1891, Lustig bought 10,000 Turn Yerein cigars. On June 12 he sold the Treusches 10.000 Turn Yerein. On May 28 Lustig bought 10,000 Oath cigars. On June 18 he sold the Treusches 10,000 ■Oath cigars. On April 23 Lustig bought 10,000 Snug Harbor cigars. On May 5 Lustig sold the Treusches 10.000 Snug Harbors. On May 27 Lustig bought 5,000 Oath cigars. On June 23 he sold the Treusches 5,000 Oath cigars. On May 27 Lustig bought 20,000 Americans. On June 12 he sold the Treusches 20,000 of the same brand. On April 17 Lustig bought 10,000 Rose Royals. On May 5 he sold the Treusches 10,000 of the same brand. Lustig lived opposite the residence of one of the Treusches, and there was testimony tending to show that the 'Treusches made frequent visits to Lustig's store; that goods ■were taken from Lustig’s store to the store of the defendants, in the original packages, and at the noon hour, when the bookkeeper and shipping clerk were absent, and Lustig only was present. The testimony as to the representations made t$ the commercial agencies, and as to the goods being delivered in original packages and at the noon hour, was contradicted; and defendants offered testimony tending to show that all goods sent from Lnstig’s store to defendants’ place of business were charged on Lnstig’s books and credited on defendants’ books. The parties, however, were related by marriage. Defendants were well advised of Lnstig’s financial condition. They knew that, at the start, 43 per cent, of his assets consisted of two-broken stocks of goods, and the remaining 57 per cent, consisted of book accounts receivable and store fixtures. They were constant visitors at his place of business. They were in the same line of business in the same city. They knew what the business had been at both the Hub store and the Lustig Company store. They claim to have-been his principal creditors at the start.

Under the facts stated, the plaintiffs should have been-allowed a wider range of inquiry in the examination and cross-examination of witnesses than was permitted. It is well settled that, when the issue involves a charge of fraud, evidence tending to establish such fraud' is freely admitted, and a wide range of inquiry into transactions between the parties is allowed. The transactions covered a period of two years and a half. Although the alleged indebtedness was but $10,000, goods of the value of several times that amount were purchased, and merchandise of the value of three or four times the amount of the indebtedness was traced to the defendants. Lnstig’s indebtedness at the start, if any existed, was $8,300, but at the finish it was $42,000, and Lustig had appropriated to himself nearly $11,000.

The trial court, after the discussion of other questions, charged the jury as follows:

“This leaves the case where, in my judgment, it should be left, to be determined upon the single question, whether or not, — or the two questions, perhaps, — whether or not, first, Lustig did obtain goods from divers persons during the three or four months before his failure (the time covered by the evidence) with a fraudulent intent at the time not to pay for them, and, if he did enter into that fraudulent purpose and scheme, were the Treusch Bros, implicated with him in it? Did they participate in it? Were they parties to that fraudulent scheme? If you find both of these questions in the affirmative, and that pursuant to such a fraudulent scheme on the part of Lustig, participated in by the Treusch Bros., for the purpose of enabling them to get goods in that way in payment of the debt which they held against Mr. Lustig, the plaintiffs then are entitled to recover in this, action the amount of the judgment which they have already recovered against the principal defendant; otherwise, they are not entitled to recover.”

The plaintiffs have a right to complain of this instruction, for the reason that it limited the issue. If the indebtedness to the Treusches was not Iona fide-, the conveyance of the goods to them was void as to creditors. If any goods were transferred to the defendants without, consideration, or for a consideration that was merely nominal, plaintiffs should recover. If the value of either the: Lustig stock or the Hub store stock, or the fixtures or the accounts, was inflated, in pursuance of a scheme to establish Lustig’s credit, and obtain goods, and turn them over to defendants, the indebtedness to which the goods are alleged to have been applied cannot be said to have been Iona fide, and plaintiffs are entitled to recover. If such fraudulent purpose entered into the transfer to Lustig, the indebtedness originating from it, or based upon it, cannot be said to have been Iona fide, and plaintiffs-are entitled to recover. The defendants transferred to Lustig two broken stock’s of goods and certain store fixtures, the remnants of business ventures that had not been attended with satisfactory results; and although defendants continued in the same business in the same city, and certain of the accounts, amounting to $754.44, were due to them, and were not in any way connected with the business of the Lustig Company, yet, of the assets, booked, charged, and transferred to Lustig at $10,000, and with which he — a brother-in-law, and without capital — started out to do business, over $5,500 was represented by accounts due the Lustig Company and the Hub store. The jury were entitled to take all the facts and all the dealings into consideration, in determining whether the original indebtedness was Iona fide. In determining whether the original indebtedness was bona fide, and whether the transfer toi defendants was made in payment of an indebtedness which was not bona fide, or made with intent to delay, hinder, and defraud creditors, the jury were entitled to consider, not only the origin of the indebtedness, the consideration for it, but the conduct of the parties, the means employed to establish Lustig’s credit, the representations made to the commercial agencies, the large purchases of goods without prospect of paying for them, the transfers of merchandise to defendants, and all the other facts and circumstances.

We cannot agree with the majority opinion in Treusch v. Ottenburg, 4 C. C. A. 629, 54 Fed. Rep. 867, but concur in the views expressed by Judge Taft in the dissenting opinion therein. The statute provides that—

■“ If any person garnisheed shall have in his possession any of the property aforesaid of the principal defendant, which he holds by a conveyance or title that is void as to creditors of the defendant, or if any person garnisheed shall have received and disposed of any of the property aforesaid of the principal defendant, which is held by a conveyance or title that is void as to creditors of the defendant, he may be adjudged liable as garnishee on account .of such property, and for the value thereof, although the principal defendant could not have maintained an action therefor against him.”

Judge Taft, in the Ottenburg case, says:

“The action by the defendants in error, therefore, was, as general creditors, to recover by garnishee process the value of the goods, which they had never owned, to the amount of their claim against Lustig. The only ground lor their action was that Lustig, being the owner of these goods and in failing circumstances, transferred them, in fraud of their rights as general creditors, to the Treusch Bros. The fraud which Lustig had been guilty of, in procuring the goods transferred to the Treusch Bros, from other creditors than the plaintiffs, gave the plaintiffs no right to complain. The plaintiffs’ right to recover goods or their value from Treusch was wholly dependent on Lustig’s title to them and ownership in them. It was not material, as an ultimate fact, in this controversy, that the Treusch Bros, conspired with Lustig to defraud the persons from whom the goods held by Treusch were purchased. The .persons thus defrauded could, of course, recover in trover the value of the goods from the Treusch Bros., as transferees with knowledge of the fraud in Lustig’s title; but the plaintiffs, from whom the goods were not purchased, had no such right. Their rights grew out of the fraud, if any, in the transfer by Lustig to the Treusch Bros, of goods which, so far as third persons were concerned, belonged to him, in fraud of general creditors. In order to show that the transfer of these goods from Lustig to Treusch was in fraud of general creditors, it might be relevant to introduce evidence of a general scheme of fraud in the purchase of the goods, in which the Treusches and Lustig were acting together, as tending to show a guilty relation between Lustig and Treusch, which would overcome a claim that Treusch was an honest creditor, honestly receiving pay for his debts. But the ultimate fact, which must have been established in order that the plaintiffs below could have the right to set aside the transfer from Lustig to Treusch, was fraud in that transfer, not as against the original owners of the goods, but as against the general creditors of Lustig, solely on the hypothesis that Lustig was the owner of the goods transferred. Any other view seems to me to confuse the right of a general creditor, which is that the debtor shall not hinder or delay the collection of his debt by fraudulently disposing of his assets available for its payment, and the right of the vendor, who has been defrauded into selling his goods, to set aside the sale and recover the .goods.”

The instruction given predicated the right of recovery upon fraud perpetrated, not upon a general creditor by the ■tranfer, but upon individual creditors, other than plaintiffs, from whom the goods had been purchased, and was therefore erroneous.

It was competent to show by Lustig’s employés just how and when orders for goods given by defendants were filled, — ■ whether as in the usual course of business or otherwise.

The evidence that, immediately after the sale to Lustig,. he sent out a number of letters to different dealers, asking for quotations and samples, should have been admitted. Such requests, made by a responsible party in the usual course, would not, standing alone, be indicative of a fraudulent purpose; but here Lustig was without capital, and, according to defendants’ claim, his indebtedness equaled, if it did not exceed, his assets. It was also proper to show what was done with the samples received.

The objection made to the introduction of Lustig’s testimony is without force. There was evidence from which the jury might infer that the transactions were collusive, and the same rule is applicable as in a case where a conspiracy is charged, and there is evidence tending to establish it. Everything said, done, or written by any one of the parties to the combination, in furtherance of the common purpose, is deemed the act of all. Hamilton v. Smith, 39 Mich. 222.

The court very properly refused to permit plaintiffs to show that defendants had settled with certain other creditors, and the record of the judgment in a case between defendants and other parties was properly rejected.

The court erred in permitting defendants’ counsel, upon cross-examination of the witness Ferguson, to ask if he had ever known of any dishonest transactions on the part of defendants.

The court further instructed the jury that—

“ The proof to establish fraud should be clear and convincing. If the circumstances • are equally as -consistent with honesty and fair dealing as with fraudulent and dishonest transactions, then it must be said that the fraud is not established. The presumption' of law is in favor of honesty and fair dealing, and that presumption must be overcome: and where it is sought to overcome it by circumstances, in the absence of direct or positive proof of fraudulent acts, the proof must be clear and- convincing. It is not sufficient to prove facts and circumstances, or a combination of facts and circumstances, that create doubt and suspicion in the mind as to the honesty and fairness of the transaction, but the proof must be of the kind and amount as to create in the mind a hearty conviction that the charge is true. Fraud is never to be presumed, neither is it to be lightly inferred, but the proof should be clear and convincing. It is not necessary to establish it by proof beyond a reasonable doubt, but it must be proof, as I have said, that carries to the mind a conviction — a hearty conviction — that the charge is true."

tinder the rule laid down in Ferris v. McQueen, 94 Mich. 367, the court was not justified in the use of the language given. The words “clear proof" and “hearty conviction" are apt to mislead. Proof of facts and circumstances is sufficiently clear if it creates a belief that a fraud has been perpetrated, and a conviction so produced is sufficiently hearty to predicate a verdict upon.

The judgment is reversed, and a new trial granted.

The other Justices concurred.

       Plaintiffs offered in evidence the examination of Lustig taken on supplementary proceedings in the principal case, and containing statements relating to his business, failure, and relation to the Treusches.


author: Grant, J.

text:
    The Fort Street Union Depot Company v. Absalom Backus, Jr., et al.
    [See 89 Mich. 209; 92 Id. 33.]

      Eminent domain — Union depot companies — Procedure—Rulings of circuit judge — Judgment—Costs—Practice in Supreme Court — Res judicata.

    1. Where, on the hearing in the Supreme Court of an appeal in condemnation proceedings, the award of damages, which alone is appealed from, is set aside, and the question of damages ordered submitted to a new jury, and the parties enter upon a new trial without a motion for a rehearing, they adopt the decision on said appeal as the law of the case, and the questions then decided are therefore res judicata.

    2. Under the rule laid down in Railway Co. v. Dunlap, 47 Mich. 456, the award of the jury in condemnation proceedings, instituted in the circuit court, cannot be disturbed on account of the attendance of the circuit judge to decide questions of law and administer oaths to witnesses, as provided by How. Stat. § 3466, unless some ruling or instruction of the circuit judge is clearly erroneous, and leads to the plain conclusion that the jury were thereby prejudiced against the party complaining.
    3. Pending an appeal by a union depot company from an award of damages in condemnation proceedings instituted in the circuit court, the respondents were paid the amount of the award. Upon a second trial a less sum was awarded, and judgment entered for the petitioner for the difference between the two awards. And it is held that How. Stat. § 3468, expressly provides for the entry of such a judgment, and the issuance of an execution thereon is authorized by How. Stat. § 7664.

      4. The costs of the second trial were properly awarded to the petitioner.
    5. Whether the second award is final under the statute — quaere.

      Certiorari to Wayne. (Gartner, J.)
    Argued November 23, 1894.
    Decided January 8, 1895.
    Respondents bring certiorari to review condemnation proceedings.
    Affirmed.
    The facts are stated in the opinion, and in 89 “Mich. 209, 92 Id. 33.

      Don M. Dickinson (John Atkinson, of counsel), for respondents, and petitioners in certiorari.

      F. A. Baker, for petitioner, and respondent in certiorari.

   Grant, J.

This case is now before us for the third time. It was commenced February 7, 1891. The first jury disagreed. The second jury found a verdict for the respondents of $96,143. This verdict was set aside by the circuit court in which the proceeding was tried. The respondents applied to this Court for the writ of mandamus to set aside this order. 89 Mich. 209. The case was after-wards brought to this Court by appeal, and is reported in 92 Mich. 33. After that decision the case was again tried before a jury, resulting in a verdict for Absalom Backus, Jr., for $15,000, and for A. Backus, Jr., & Sons for $48,000. For a full statement of the case, reference is had to the former decisions. The case is now brought before us on a writ of certiorari, and substantially the same questions are involved and argued as are stated in the opinion in 92 Mich. No motion was made for a rehearing of that decision. The case was remanded for a new trial, under the rulings then made. The respondents will not be heard upon the questions then decided, and we shall not argue them. By entering upon a new trial without a motion for a rehearing, both parties adopted that decision as the law of the case, and conducted the trial under it. All these questions are therefore res judicata, and not now open for review. That case was very ably and fully argued by counsel, and received the most careful consideration by the Court, of which four of the present mem, bers were then members. A re-examination shows no reason for doubting the soundness of the conclusions then reached.

We will now proceed to determin'd some questions which were not fully disposed of on the former hearing.

1. Complaint is made because the circuit judge presided at the trial, ruled upon questions of evidence, and charged the jury. No errors are assigned upon his rulings in either the admission or rejection of evidence. The precise complaint seems to be that he presided at all. The petition was presented to the circuit court for the county of Wayne, and all the subsequent proceedings were had in that court. The statute expressly provides that the circuit judge may attend the jury “ to decide questions of law and administer oaths to witnesses.” How. Stat. § 3466. Against this power there is no constitutional inhibition. The same course pursued upon this proceeding was also pursued in the case of Toledo, Ann Arbor & Grand Trunk Ry. Co. v. Dunlap, 47 Mich. 456, and the Court refused to set aside the award, even though the charge of the judge was ambiguous and open to criticism.” Hnder the' rule of that case, this award cannot be disturbed, unless some ruling or instruction of the judge is clearly erroneous, and leads to the plain conclusion that the jury were thereby prejudiced against the respondents. The fact that no errors are assigned upon his rulings upon the testimony removes that question from discussion. The judge, in both his rulings and his charge, was very careful not to encroach upon the functions of the jury. The charge was so clear, so appropriate to an important litigation (which had been conducted with great ability and vigor on both sides), and so carefully guarded the rights of both petitioner and respondents, that we here give it in full:

“ I invite your cool, calm, careful, and conscientious consideration to the matters about to be submitted to you. The case is one of more than ordinary interest. The importance to the petitioner and respondents, the interests involved, the eminence and ability of learned counsel engaged, the wisdom and legal learning shown, the more than ordinary interest exhibited, the far more than ordinary eloquence displayed, and to which you have been unwearied listeners, the great earnestness in the presentation and contest made, all imperiously demand that you seek well and faithfully to perform the further duty which now devolves upon you, and bring to bear in the matters about to be submitted to you a cool and unbiased judgment and a careful consideration of the facts as you may find them, supported by the evidence produced, with a firm resolve to do your duty — your whole duty — to all the parties, without fear or favor, and without regard for the opinions of others as to conclusions honestly reached. The matter has assumed that shape, to be, as I have said, one of more than ordinary interest. Its final determination rests largely, if not entirely, with you. Your responsibility must not be underestimated. The question before you is (as I will more fully explain hereafter), what compensation are the respondents entitled to, as the owners of certain property, by reason of the construction of the superstructure in and along River street? Opportunity has been given you to fully examine the situation and condition of respondents’ property, as well as the superstructure of the petitioner. Such view and such examinations as have been made by you, together with the evidence admitted during the hearing, as well as all the arguments made, based upon [and supported by the evidence admitted, constitute collectively the basis upon which your conclusions should rest. Your award should be the result of a careful, thoughtful, and conscientious consideration of all these matters, remembering that what you have before you upon which to base your award is the knowledge you obtained by viewing the premises, the evidence, and all the evidence, admitted in the case, and the arguments made, in so far as you find such arguments supported by the evidence as you may find it. The evidence and the particular weight to be given to the testimony of any witness, or whether such testimony should be disregarded, are matters upon which I cannot in any way enlighten you. This is a matter belonging solely to the jury, and no judge is or should be permitted to enter upon, explain, elaborate upon, or express, by intimation or otherwise, any opinion to a jury upon this peculiarly absolute province of the jury, in a controversy of this nature. I will, however, add that you should not suppose the existence of facts not supported by your view or ■observation of the premises, or the evidence admitted in the case, unless it be in instances where common experience and frequent observation show a fact fairly inferable, though not fully established by the view of the premises or by the testimony in the case. But the former must be established by evidence before you; you should infer or presume the second. What you may infer as-a fact must be a conclusion logically reached from facts established by evidence and resting in common experience. Thus far I have dealt in the broadest generalities, but I may say that, keeping these matters before you, your duty will be well done; failing, you are likely to be led into error which may terminate in rank injustice to either party.

“ The power of eminent domain, or, in other words, the power to take private property for public uses, is in the State. All property is subject to this power. It is a power recognized under the Constitution and law of the land. It is a power delegated by the people to and vested in the Legislature, subject to certain constitutional limitations, and can only be exercised by virtue of a legislative enactment given in express terms or by necessary implication. The power of the Legislature was, by the Constitution of 1850 of this State, limited and restricted in this: By article 18, § 2, it is provided that, ‘ when private property is taken for the use or benefit of the public, the necessity for using such property, and the just compensation to be made therefor, except when to be made by the State, shall be ascertained by a jury of 12 freeholders residing in the vicinity of such property,’ etc. Thus, you will observe that the questions of necessity and compensation are for the jury, and are not in any way subject to legislative interference; and, while the manner of procedure may be and is prescribed by statute, still any statute upon the subject which fails to observe and provide for every constitutional safeguard would be inoperative and void.

“ That the petitioner, under the statute under which it is incorporated, is vested with the exercise of this power of eminent domain, is not and cannot be questioned. Certain proceedings have heretofore been had in this matter, and I call attention to-them only for the purpose of stating to you that the question of the necessity for the taking — and which, as I have already stated, is one of the questions to be determined under the provision of the Constitution — is settled. That question — viz., necessity — has been determined, and with that you have nothing to do. That has passed out of the case, and is not before you. The question, and the only question, before you for your determination, is that of compensation, and of compensation only. Your duty, and your only duty, is to ascertain and determine what compensation or damages ought justly to be paid by the Fort ¿Street Depot Company to the respondents for the real estate, property, franchises, easements, and privileges described in the petition, viz,: (1) The amount to be allowed to Absalom Backus, Jr., as the owner of the fee of the land described; (2) the amount to be allowed to A.. Backus, Jr., & Sons, a corporation, as tenants in possession of such lands. Upon this question — viz., compensation or damages — what I have to say must necessarily be in a broad and the most general way. This is a question for you, and, from the very nature of a proceeding of this character, you are vested with large powers and great discretion. These powers and this discretion should not be exercised arbitrarily, nor without proper regard for substantial justice. You should bear in mind that, the greater the power, the more jealous is the law of its careful exercise, and the greater is the responsibility of the persons vested therewith. You should exercise a cool, careful, intelligent, and unbiased judgment. The compensation or damages must be neither inadequate nor excessive, and your award must not furnish a just inference of the existence of undue influence, partiality, bias, and prejudice, or unfaithfulness in the discharge of the duties imposed upon you. You must, however, remember that the respondents’ property is taken, or its enjoyment interfered with, under the so-called ‘ power of eminent domain,’ — a power somewhat and necessarily arbitrary in its character; and that, where this is done, the party whose property is taken, or whose enjoyment or use of the property is interfered with, is entitled to full compensation for the injury inflicted. While the allowance to be made should be liberal, still it must not be unreasonably exorbitant or grossly excessive. It should be a fair and liberal allowance and full and adequate compensation for the damages inflicted. You should not allow too little, nor should you allow too much. Your award should be based upon that which is real and what is substantial, and not upon what is either fictitious or speculative. You should look at the conditions of things as they exist. Under the Constitution and laws, the right to take another’s property for public uses — the power to exercise the right of eminent domain — is a part of the law of the land; but, when this power is exercised, it can only be done by giving the party whose property is taken, or whose use and enjoyment of such property is interfered with, full and adequate compensation, not excessive or exorbitant, but just compensation.

‘ ‘ I shall not call attention to any particular part of the testimony in the case. The responsibility of its application, and the weight to be given it, rests with you; always regarding that which is real and substantial, and disregarding that which is fictitious and speculative; treating conditions as they have been shown and as they are, without speculating as to what might possibly happen or occur; taking conditions as you find them, and the natural and probable consequences following such conditions.

“I do not want to leave this case without again impressing upon your minds your great responsibility. You want to and must do that which is just and right by the petitioner, that which is just and right by the respondents. You have before you such knowledge as you obtained by viewing the premises, the evidence admitted in the case, the arguments of counsel, and which, as I have said, you may consider in so far as supported by the evidence, and also the little that I have had to say to you. These matters are to be your guide absolutely and solely in the determination of the question involved. Let me impress upon you that, in a court of justice, friendship ceases. We know no friends; we know no enemies; we do no favors. Here we are actuated by reason only, in its most cool, calculating, deliberate, and unsympathetic spirit. ‘ Favor,’ ‘ offend,’ ‘ displease,’ are words which neither in thought nor spirit have meaning here. To do what is just and right is and should be our sole and absolute object. In ■the settling and determination of rights, in the administration of the law, acquaintances, associations, and friendships are not in any way factors. Purity and honest intention, the careful exercise of honest judgment, with a firm resolve to do exact justice, are the only virtues. These principles are predominant, and the •indomitable spirit to do right is the only incentive which actuates an honest mind and an honest man.

Gentlemen, the matter is now in your hands. Discharge your ■duty faithfully and honestly. I invoke in you the spirit so beautifully, though figuratively, exemplified in the Goddess of Justice, who, blindfolded, weighs in the scale every human action, and fearlessly determines the right, without passion, without prejudice, and regardless of and uninfluenced by wealth, position, or any thought and sentiment not just and pure.”

This charge correctly embodies the law upon the subject. There is nothing in it which could have any other tendency than to direct and aid the jury to a correct result. It in no particular invaded the province of the jury, and left to their consideration every legitimate element of damage. The arguments of the learned and able counsel on both sides, which extended over two days, are found in full in the record. The reading of them discloses the fact that the judge did not restrict their arguments in the least; that they were not interrupted except by •opposing counsel; and that every proper basis of damages was fully presented. Under these circumstances, we cannot concur in the statement of counsel that “the presiding judge made himself a controlling and constraining member of the constitutional tribunal, and thus rendered the proceedings void.” In these proceedings it is important that the jury should be confined to a consideration of those matters which have a legitimate bearing upon the questions confided to them for determination. It is of little consequence what agency under the statute has secured the result, — whether it be the judge, or commissioners, or counsel, or the jury themselves. When courts can say that the proceedings have been conducted fairly and honestly, they must confirm the award. It is proper here to note that no requests to charge were presented on behalf of the respondents.

2. The amount of the first award was paid to the respondents pending the appeal to this Court. Upon the •second trial the award was diminished, and judgment entered for the petitioner for the difference between the two ■awards. The statute provides for the payment of this sum by the respondents to the petitioner. We think judgment 'for this amount was properly entered. As already stated, this proceeding is in the circuit court, and the statute ■clearly contemplates the entry of judgment and the issue of execution to enforce the finding of the jury. The ■statute expressly provides for the entry of judgment. How. Stat. § 3468. A general statute also provides for issuing -execution upon any judgment rendered in any court of ■record. How. Stat. § 7664. The case of Derby v. Circuit Judge, 60 Mich. 1, does not apply to this case. The railroad company in that case had abandoned the proceedings •by refusing to pay the award, and consequently acquired no rights in the land. No execution could therefore issue ■either for the award or costs, both of which were held under the statute to be placed on the same footing.

3. The costs of the second, trial were allowed by the court to the petitioner. The validity of this allowance depends upon the construction to be given to the statute. That part of the statute relative to costs of the second trial reads as follows:

“If the amount of the compensation to be allowed is increased by the second report, the difference shall be a lien on the land appraised, and shall be paid by the company to the parties entitled to the same, or shall be deposited as the court shall direct, and in such case all costs of the appeal shall be paid by the company; but if the amount is diminished, the difference shall b'e refunded to the company by the party to whom the same may have been paid, and judgments therefor and for all costs of the appeal shall be rendered against the party so appealing.”

The costs of the first trial must be paid by the petitioner, and this it did. Had the award been increased, it would have been compelled to pay the costs of the second trial. We think the plain intent was to give costs to the successful party. Upon the appeal of the respondents and the increase of the award, would it be contended that they should pay the costs of securing a victory? If the literal language were followed, judgment for the difference, as well as for the costs, should be against the appealing party; but it is too clear to require argument that the judgment is to be against the respondents for the difference.

4. A motion was made to dismiss the writ of certiorari, on the ground that the second award is final under the statute, and that this provision cannot be evaded by invoking the use of this writ. The statute provides that “ the second report shall be final and conclusive upon all paz-ties interested.” We have chosen to dispose of the questions not adjudicated upon the former hearing on account of the importance of the case. It thus becomes unnecessary to decide the important question raised by the motion, and we pass no opinion upon it.

The award must be affirmed, with costs to the petitioner, the Fort Street Union Depot Company.

The other Justices concurred.