text:
    LEHNEN v. RYAN.
    1. Chattel Mortgages — Sales—Foreclosure—Insecurity Clause.
    Under a conditional contract of sale, in the nature of a chattel mortgage, whereby the vendor transferred’ to complainants a business and its assets upon an agreement to pay monthly installments, and providing that 90 per cent, of the net profits should be turned over to the vendor in. addition to the specified installments but which contained no clause authorizing the vendor to declare the entire amount of the purchase price due and payable in case of default, the vendor was not authorized to take possession of the property under the usual insecurity clause where there was no evidence that a default had occurred in paying over profits of the business to the vendor or that any such profits had been made, and where, also, upon taking possession of the business the vendor secured about $350 in cash from complainants, which more than sufficed to pay any amounts due under the stipulations of the agreement.

    2. Same.

      Held, that the evidence did not establish defendant’s contention that he was not secure.
    3. Same — Injunction—Restraining Unlawful Sale.
    The vendee, on filing a bill of complaint setting up a threatened sale of the business by the vendor, was entitled to an injunction restraining the premature foreclosure by public sale of the entire property.
    4. Same — Adequate Remedy at Law — -Equity.
    Where complainants’ business was" a going one that had been purchased by them under an agreement authorizing them to conduct the business, which consisted in part of valuable good will, and defendant’s action in taking possession for the purpose of selling, injured or destroyed it, and where he had no right to do so under the provisions of the contract, the court of equity obtained jurisdiction of the question in issue for the purpose of restraining the threatened illegal action and was authorized to proceed to an accounting and a complete disposition of the controversy; the remedy at law could not be considered adequate in such sense as to oust equity of jurisdiction.
    5. Injunction — Bond.
    No bond to secure defendant against loss by the injunction proceeding under section 502, 1 Comp. Laws (4 How. Stat. [2d Ed] §12020), was required as a condition to the issuance of the restraining order since the statute relates to a suit or action at law pending, not to the seizure of property by the defendant under a chattel mortgage clause in a contract of sale.
    Appeal from superior court of Grand Rapids; Stuart, J.
    Submitted January 11, 1915.
    (Docket No. 58.)
    Decided March 18, 1915.
    Bill for injunction by Matthias Lehnen and others against Otis H. Ryan to restrain a foreclosure and sale of personal property and assets of complainants. From a decree in favor of complainants, defendant appeals.
    Affirmed.

      Carroll, Kirwin & Hollway, for defendant.

      Joseph Renihan, for complainants.

       Upon the rights and liabilities of vendor and purchaser by conditional sale on default of payment, see note in 32 L. R. A. 455.

   Stone, J.

The bill of complaint in this cause was filed to obtain an injunction and for an accounting. The defendant had for many years prior to July 8, 1911, been engaged in the business of teaming and general excavating work in the city of Grand Rapids on a large scale, owning and employing in such work from 50 to 60 horses and a large number of wagons and other necessary equipment. This business had latterly been conducted under the name of the Reliable Transfer Company, a corporation, whose capital stock was owned by defendant. Having met with an accident resulting in the loss of his eyesight, he entered into negotiations with the complainants, Matthias Lehnen, the father, and the other three complainants, his sons, for the sale of said property and business. The negotiations resulted in the following agreement, viz.:

“This agreement, made the 8th day of July, 1911, between Otis H. Ryan, of the city of Grand Rapids, county of Kent, and State of Michigan, party of the first part, and Matthias Lehnen, Peter Lehnen, Jacob Lehnen and Joseph Lehnen, all of the same place, parties of the second part, witnesseth:
“(1) That said party of the first part, for and in consideration of the sum of twenty-two thousand, five hundred and seventy-seven and fifty one-hundredths dollars ($22,577.50), lawful money of the United States, to be paid as hereinafter mentioned, has contracted and agreed to sell to the said parties of the second part, and the said parties of the second part have agreed to purchase, the barn building located at 53 Ellsworth avenue, in the city of Grand Rapids, also the hotel, furniture and fixtures as contained in an inventory attached hereto, marked Exhibit B, and all the capital stock- of the Reliable Transfer Company, a corporation of Michigan, which said capital stock is owned by said party of the first part, an inventory of its property being hereto annexed and marked Exhibit A.
“(2) The said parties of the second part may forthwith take possession of said property and they do hereby agree to pay the said purchase price as follows: Two hundred and eight dollars and thirty-three cents ($208.33) on the fifteenth day of August, 1911, with interest on said principal sum at the rate of six per cent, per annum, and a like sum of two hundred and eight dollars and thirty-three cents on the fifteenth day of each and every month thereafter with like interest on so much of said purchase price as remains unpaid each month at six per cent, per annum until the whole of said purchase price is fully paid. It is also agreed that at the end of each month, so long as said purchase price or any part thereof shall remain unpaid, an examination of the books and a trial balance of the business done by said parties of the second part, shall be taken by the bookkeeper, hereinafter mentioned, and after deducting from the gross receipts all wages, repairs, cost of replacing or recovering any of said property and all other expenses incident to said business of said parties of the second part, they shall, in addition to the above monthly payments, pay to said party of the first part, upon such purchase price, ninety per cent, of the net profits of the business each and every month whenever any of said month’s said net profits shall exceed the sum of two hundred and eight dollars and thirty-three cents, provided, however, that said parties of the second part shall pay at least twenty-five hundred dollars of said purchase price each and every year until the same is fully paid. And it is further provided, that only one hundred dollars and interest shall be paid in the months of January, February, March and April, at the option of said second parties, and the said parties of the second part, for themselves, their heirs, executors and administrators covenant and agree to pay said party of the first part, his representatives or assigns, the said several sums of money as they severally become due with interest thereon as above provided, without any deductions, taxes or assessments whatever. And they further agree to and with said party of the first part to pay and discharge within the time prescribed by law, all taxes and assessments either regular or special which may be levied by the United States, State of Michigan, county of Kent, or the city of Grand Rapids, or by any lawful authority, on said property during the time the said purchase price remains unpaid. And said parties of the second part further covenant and agree to and with the said party of the first part to keep said building and property insured for not less than ten thousand dollars ($10,000), with insurer or insurers to be approved by said party of the first part. Loss if any to be paid to said party of the first part as his interest may appear and the policy or policies of insurance shall remain in the possession of the said party of the first part. And the said parties of the second part further covenant and agree to and with said party of the first part to keep the said stock and property, or a stock equal in amount and value to the said stock and property, at all times until the full amount of said purchase price and interest thereon has been fully paid. Or if any of the stock or property is sold its selling price is to be paid to the said party of the first part and to be applied on the amount of this contract, or at the option of said party of the first part, other stock or equipment equal in value is to be purchased, and which will be subject to the terms of this contract, but none of said stock or property shall be sold by said parties of the second part, so long as said purchase price remains unpaid, without the written consent of said parties of the first part.
“(8) Said parties of the second part covenant and agree to retain and hire William Ervine as bookkeeper at the sum of twenty dollars ($20.00) per month, whose duty it is to strike a trial balance each month on the books of said parties of the second part and to keep the book of said parties of the second part in balance and to give to the said party of the first part a copy of such trial balance so struck as aforesaid. Said Ervine shall be discharged for cause only, and in the event of such discharge, said party of the first part shall have the right to choose his successor. And it is further covenanted and agreed between the parties to these presents that if default be made in the payment of taxes and assessments, or any other duties as shall by lawful authority be imposed upon the said property above described, the said party of the first part, his heirs, executors, administrators and assigns may pay and discharge such duties, taxes and assessments and the moneys thus paid are to be a lien on the said property added to the amount secured by this contract and be payable forthwith with interest thereon at the rate of 6 per cent, per annum. It is further agreed by the parties to these presents that if the said parties of the second part fail to get the building and property insured, as aforesaid, against loss and damage by fire and in the amount and manner provided by the said party of the first part, his heirs, administrators, executors or assigns, that then the said party of the first part may effect such insurance and pay the premium or premiums for effecting the same and said premium or premiums so paid shall be a lien upon the said property added to the account secured by this contract and be payable forthwith with interest at the rate of 6 per cent, per annum.
“ (4) And it is further agreed by the parties to this contract that until the said parties of the second part have paid one-half (%) of the face value of this contract, or eleven thousand and two hundred and eighty-eight dollars and seventy-five cents ($11,288.75), with interest, each of the said parties of the second part shall not draw in excess of twelve dollars ($12.00) a week as salary, provided and upon condition, however, that each of the parties of the second part is to put in full time working for the interests and in behalf of the business transferred and sold by these presents, and in the event of their not working as aforesaid, a proportionate amount based upon the period of such idleness is to be deducted from the amount that the one so laying off is to receive except when such item is occasioned or caused by sickness.
“(5) It is hereby understood and agreed that so long as said purchase price and interest thereon remains unpaid, title of said property shall be and remain in the said party of the first part, and if default is made in said payments due hereunder, or in any of them at the time and in the manner the same are made payable, the said party of the first part is hereby authorized to sell at public auction, after the like notice as is required by law for constable sales, the goods, chattels and personal property hereinbefore mentioned or so much thereof as may be necessary-to satisfy the said debt, interest and reasonable expenses and to retain the same out of the proceeds of such sale, the overplus or residue, if any, to belong to and to be returned to the said parties of the second part, and. the said party of the first part, his heirs, executors, administrators and-assigns is hereby authorized at any time, when he shall be himself unsecured or if the said parties of the second part shall sell, assign or dispose of, or attempt to sell, assign, or dispose of the whole or any part of the said goods, chattels and personal property, hereinbefore mentioned, or remove or attempt to remove the whole or any part thereof from said premises without the consent in writing of the party of the first part, then and from thenceforth it shall and may be lawful for the said party of the first part, his executors, administrators or assigns, or his or their authorized agents, to enter upon the said premises of the said parties of the second part, or any place or places where the said goods, chattels and personal property or any part thereof may be, and take possession thereof and the same retain in some convenient place at the risk and expense of said parties of the second part until the said sum of money shall become due as aforesaid and then dispose of the same in the manner above provided.
“In witness whereof, the parties thereto have hereunto set their hands and seals the day and year as above written.”

This agreement was duly signed and acknowledged by the parties.

The bill of complaint states that, to secure the faithful performance of said contract, complainant Matthias Lehnen and wife, on the said 8th day of July, 1911, made and executed to the defendant a certain real estate mortgage in the sum of $2,000, covering certain property in the city of Grand Rapids; and that the other complainants, on the same day, made and executed to said defendant a certain chattel mortgage in the sum of $2,120, covering eight horses and certain larries, wagons, and other property in their possession; that on said day the complainants took possession of said property and business specified in said contract and assumed the active management and operation thereof, and continued the operation and management thereof, until the close of the 6th day of November, 1911; that during that time they performed each and every act, deed, and thing in said contract covenanted to be performed by them; that on November 7, 1911, the said defendant, with the aid of a deputy sheriff, entered upon said premises and took possession of the property and business specified in said contract, together with the cash on hand, book accounts, bills receivable, and other papers and things relating and pertaining to said property and business; and that ever since said last-named date the defendant had been continuously in active charge and control of said property and business; that he had assumed and exercised the active, exclusive control and management of said property and business specified in said contract; that from the 7th day of November, 1911, down to the time of filing the bill of complaint, which was November 15, 1911, said defendant had written, notified, and commanded the various debtors of complainants not to pay their accounts to complainants, but had commanded the said debtors to pay the said accounts to the defendant; that in the meantime said defendant had collected large sums of money due and payable to complainants, which said defendant had neglected and refused to turn over to complainants or account for; that said defendant asserted and pretended that he had taken charge of the property and business mentioned in said contract for the reason that he was unsecure in the several payments as they became due and payable according to the terms of said contract, whereas complainants claim the contrary to be true, they alleging that the defendant was amply secured in the payment of the several payments mentioned in said contract as they became due and payable according to the terms thereof; that said property and business was purchased at the true and actual value of said property, as indicated by said inventory accompanying the contract; that said defendant since taking possession of the property and business, as aforesaid, had published notices to the effect that on November 15, 1911 (the day of the filing of said bill of complaint), he would sell, or cause to be sold, all of the property, goods, chattels, and effects listed, specified, and mentioned in the said inventory attached to said contract of sale; that complainants had repeatedly, but in vain, requested the defendant to turn over to them the management, operation, and control of said property and business, together with the books of account, accounts payable and receivable, and all moneys and other things in any wise pertaining to the management of said business under said contract, and render a true and perfect account of all moneys and properties taken by the said defendant from their possession as aforesaid, together with moneys collected by the defendant; that they had kept during all the time they had possession of said property a true and correct account of all business transacted ; that the bookkeeper employed in said business had rendered a true and correct statement of the business carried on and the condition thereof, and said defendant had full access to the books of account from time to time, as provided in said contract, and had at all times been in possession of knowledge of the conduct, nature, and extent of the business so transacted, and the condition and management thereof; that at the time said defendant took possession of said property and business complainants had outstanding bills due them amounting to upwards of $2,000 upon the books of said company, which said defendant had taken possession of; that he had collected a large portion thereof and converted the same to his own use; that said defendant had in an arbitrary manner taken possession of other property than that specified in said contract belonging to complainants, and on demand refused to turn the same over to them; that he still held the said real estate mortgage and the collateral chattel mortgage above referred to.

The bill prays for an injunction restraining the defendant from selling and disposing of said property, and also prays for a decree holding that the said defendant was unlawfully in possession of said property and business, and that he render and come to a true and perfect accounting as to all moneys received and collected by him belonging to complainants, and to give them free access to the books and to the other papers relating and pertaining to said property and business, and there was a prayer for preliminary injunction.

The answer of defendant admits the making of said agreement and the collateral mortgages above referred to. The answer also states that defendant had learned that the title to the real estate covered by said mortgage given by Matthias Lehnen and wife was incumbered for taxes, and had been sold and deeded to the city of Grand Rapids for certain delinquent taxes; that the property covered by the said collateral chattel mortgage was not worth to exceed $750; and that the same was also incumbered by a previous lien. Especially the said answer denied that, during the time complainants had possession and control of said property and business, they did and performed every act, deed, and thing in said contract and mortgage covenanted and agreed by them to be done and performed, and that they had made default as follows:

(а) With reference to said collateral mortgages as above referred to.

(б) That said complainants failed and refused to maintain insurance on said property mentioned in the contract and mortgage, or to pay the insurance companies the premiums due upon the policies of insurance. That said insurance companies threatened to, and were about to, cancel said policies, and for his own protection defendant was obliged to, and did, pay said insurance companies premiums to the amount of $125 in order to keep said policies in force.

(c) That said complainants had failed and refused to keep the stock and property described in said contract and mortgage, or a stock in equal amount and value to said stock and property, but, on the contrary, allowed said wagons, harness, and other property to be and remain out of repair, and had mistreated and overworked said horses and did not provide them with proper food, to such extent that four of them had died, and the remainder of them became so poor and run down and unfit for work that the humane agent of said county had ordered that 13 of said horses should not be worked until such time as they were in proper condition. That said complainants did not replace the four horses that died with other horses of equal value, but did bring two old horses of less value than any of said horses that died. That, when defendant attempted to take possession, complainants removed said two horses and now have the same in their possession, and that by reason of complainants’ ill treatment and want of care of said stock and property the same had depreciated in value to the amount of $6,500 and upwards, and that the said property in its then present condition would not sell for, and was not worth in excess of, $16,000.

(d) That complainants did not make the payments due on said contract and mortgage as they had covenanted and agreed to do, but were in default. That complainants had made payments on such contract and mortgage as follows: July 1, 1911, $50; August 18, 1911, $350.03; September 28, 1911, $319.03; October 1, 1911, $252 — making a total of $971.06. That they did not make the payments due defendant under the terms of said contract, but fraudulently and deceitfully attempted to deprive him of the same by keeping a portion of the earnings of said business off their books, collecting the same and appropriating them to their sole use, and by improperly keeping their books so that the same did not represent the amount of business which was being conducted, all for the purpose of depriving defendant of a portion of the earnings due him under said contract. And that without cause they had discharged the bookkeeper mentioned in said contract, and had employed another who would not inform defendant of the condition of the affairs of said business.

(e) That complainants failed and neglected to put in their full time in working for the interests of, and in behalf of, said business; but, on the contrary, certain of said complainants spent a large portion of the time while they were in possession of said property in idleness, and in drinking and carousing in saloons and other places.

The answer admits that defendant took possession of the property as alleged, but avers that he did not take possession of all the cash on hand, or accounts, bills receivable, and other papers and things, but only such portions thereof as were found in the office, and claims that certain cash, accounts, and papers belonging to said business had not come into defendant’s possession, but had been concealed by complainants; that complainants had made default in said contract which justified defendant in taking possession of said property, business, and accounts. The answer states that defendant took possession of said property and business for the reasons that defendant was unsecured in the several payments as they became due and payable according to the terms of the contract. He admits the publication of notice of sale as alleged, and claims that he had a legal right to sell. The answer claims the benefit of a demurrer upon the following grounds:

(а) That complainants have not stated such a case in their bill as is cognizable in a court of equity.

(б) There is no equity on the face of said bill, in that complainants have not offered to pay the purchase price of said property in the possession of defendant, or to secure the payment of the same.

(c) That complainants have a complete and adequate remedy at law.

A preliminary injunction had been issued upon the filing of the bill restraining the sale of the property. Upon the coming in of the answer a motion was made to dissolve. It was ordered dissolved upon defendant giving a bond in the penal sum of $3,000, conditioned that said defendant should promptly comply with, pay, and discharge any decree that might be rendered against him. Such bond was given, and the property was again advertised for sale; was sold and bidden in by defendant for the sum of $15,000. No part of the proceeds of the sale was offered or tendered to the complainants, but they had been notified by defendant that upon payment of $15,000 the property would be restored to them.

The case, being at issue, was heard upon evidence taken in open court. The court found, among other things, in and by its decree, that the whole contract did not fall due at the time defendant seized possession of the said goods and chattels; that the sale made by defendant through seizure was premature and unlawful, and without right under the terms of the agreement; that the money on hand, taken by defendant at the time of the seizure, belonged to complainants ; that the bills receivable seized, and the accounts collected, were the property of complainants; that nothing had ever become due on the chattel mortgage or real estate mortgage given by-complainants to defendant as additional security; and that the several debts contracted by complainants in conducting the business had not been paid. The decree ordered the defendant to account for the money which he took at the time of the seizure, and also for the amount of money collected on the bills receivable for work done by complainants, and that, out of this money, debts owing at the time of the seizure by complainants and incurred while doing the business be paid by defendant out of the moneys so seized and collected and, if not sufficient to pay in full, that the same be prorated. The court found that the defendant, at the time of the seizure, took in cash, or its equivalent, $345.41, and that the defendant had collected since the seizure the sum of $493.30. It also found the value of the property taken by defendant, and not restored to complainants, covered by the chattel mortgages as additional security, to be a certain sum therein specified, and provided for certain offsets, and determined the amount that should be paid by defendant to complainants. The defendant has appealed.

A large amount of testimony was taken in the case, as appears by the lengthy record. The testimony on some points in issue was very conflicting.

The instrument above set forth was a contract, in the nature of a chattel mortgage. It was prepared, according to the evidence, by the attorneys for the defendant, and there is no claim that the defendant did not fully understand its terms. A perusal of the Instrument will disclose some peculiarities. It provides, in addition to the monthly payments, that at the end of each month, so long as the purchase price or any part thereof remained unpaid, a trial balance of the business done by said complainants should be taken by the bookkeeper of complainants mentioned in the contract,—

“and after deducting from the gross receipts all wages, repairs, cost of replacing or recovering any of said property, and other expenses incident to the business of said parties of the second part, they shall, in addition to the above monthly payments, pay to said party of the first part, upon such purchase price, 90 per cent, of the net profits of the business each and every month, whenever any of said month’s said net profits shall exceed the sum of $208.33; provided, however, that said parties of the second part shall pay at least $2,500 of said purchase price each and every year until the same is fully paid.”

It was provided, also, as follows:

“And the said parties of the second part further covenant and agree to and with said party of the first part to keep said stock and property, or a stock equal in amount and value to the said stock and property, at all times until the full amount of said purchase price and interest thereon has been fully paid.”

The last clause of said instrument is also significant. An examination of this clause of the contract shows ■that there is no provision authorizing the defendant ■to declare the whole sum secured by the contract due, in case of default in payment of any installment or interest. In case of default he was authorized to sell such property, or so much thereof as might be necessary to satisfy the said debt, interest, and expenses, and to retain the same out of the proceeds of such sale; the overplus or residue, if any, to belong to and be returned to the complainants. In case defendant was unsecure, or in case of attempt to sell, etc., any part of the property by complainants, defendant might take possession of the property, “and the same retain in some convenient place at the risk and expense of said parties of the second part until the said sum of money shall become due as aforesaid and then dispose of the same in the manner above provided.”

From defendant’s answer it appears that there had been paid upon the contract at least the sum of $971.06. At the time of the seizure defendant found and took in cash, or its equivalent, substantially $350. This sum applied upon the contract would have more than paid any installment then due, and the interest on the contract. This being so, the right of the defendant to proceed to advertise the property for sale and to sell it is not apparent.

We find no clause in the contract authorizing the defendant to take possession of the bills receivable of the complainants. There was a good deal of evidence, pro and con, upon the hearing as to whether the defendant was really unsecured. The trial court evidently found that, as matter of fact, he was not unsecured.

There was also a sharp conflict in the evidence as to whether or not the property had deteriorated in value while in the possession of the complainants and whether they had properly cared for the same. The trial court also evidently found in favor of the complainants upon this question. Whether this finding was correct or not is not controlling here, for in any event the defendant had no right to proceed to sell the entire property, and hold the proceeds thereof.

Referring to the premiums due on insurance, we are satisfied that defendant did not pay these amounts until after he had seized the property. The policies had not been canceled.

Considerable testimony was taken upon the subject of the keeping of the books, and it is quite evident that they were not perfectly kept, but we have looked in vain for any evidence to show that the gross receipts were such that there was any net profit of the business that would entitle the defendant to the 90 per cent, thereof referred to in the contract. It does appear that the complainants contracted for, and were owing a large sum of money for, feed and supplies purchased for the care of the horses and stock while they were in charge of the same. The proofs are left in such condition that we cannot determine what amount, if any, might rightfully have been claimed by the defendant under this clause of the contract. The defendant himself testified that at the time he seized the property he made no claim that complainants were in default as to the’ 90 per cent, clause of the contract.

The business was a going one, and it had been purchased by the complainants under a contract in which they agreed to pay a large sum therefor, and the evidence shows that the good will of the business was a large item in the contemplation of the parties in making the contract. This business of the complainants, so far as they are concerned, was not only interrupted, but was destroyed, by the seizure and sale of the property by the defendant. If defendant had no right to seize and proceed to sell the property at the time he did, and if the threatened sale was premature, these facts, we think, gave the right to complainants to file an injunction bill. The court, having obtained jurisdiction, had the right to proceed to an accounting between the parties, and to make the orders with reference to the injunction. It made such orders, by first enjoining the sale, then permitting it to proceed upon the giving of a bond’ by defendant. See Hall v. Nester, 122 Mich. 141 (80 N. W. 982), where similar action was had.

Whether complainants were entitled in the case to recover damages for the breaking up of their business is not necessary for us to consider, because the trial court awarded no sum in that regard, and the complainants have not appealed.

Counsel for defendant, in their brief, claim that the injunction proceedings were void because the bond provided for, by section 502, 1 Comp. Laws (4 How. Stat. [2d Ed.] §12020), was not furnished. We do not agree with counsel upon this point. The statute contemplates the filing of a bond in case a suit or personal action at law is pending. We do not understand that the seizing of this property by virtue of the contract, in the nature of a chattel mortgage, was such a suit at law as to make the bond necessary.

It is next claimed by defendant’s counsel that, under the demurrer clause of the answer, the court should have dismissed the case on the ground that there was an adequate remedy at law. We think the court had jurisdiction for the reasons already stated.

Counsel for defendant also urge that defendant at least should have been given credit for certain sums of money found to be due complainants on the Century Fuel Company account, and other like accounts. We cannot agree with this contention. The defendant would not be entitled to those sums, or to any sum, unless the record showed, which it did not, that the net profits had been such as to give him the percentage provided for in the contract. We think that the equities of the case are with the complainants.

The sum awarded to the complainants by the court below, under the circumstances of the case, is a small one, and one of which we think the defendant cannot here justly complain; and, as we have said, the complainants are in no position to claim a larger sum.

A careful examination of the record has led us to the conclusion that the decree of the court below should be affirmed, with costs to the complainants. It is so ordered.

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


source: Caselaw Access Project

author: Stone, J.

license: Public Domain

text:
    NORRIS v. DETROIT UNITED RAILWAY.
    1. Street Railroads — Negligence — Personal Injuries — Pavements — Excavation in Street — Lights—Crossings.
    On the trial of a personal injury action brought against a defendant street railroad company for injuries sustained by falling into an excavation made in the street which plaintiff claimed was not lighted, defendant’s contention being that it had furnished sufficient lights which had been extinguished by a heavy wind and rain storm immediately before the accident, the question whether or not the storm was such that it might reasonably be expected during the month of June, when the injury occurred, was a proper question for the jury upon conflicting testimony; the court was not required to withdraw from the jury the question of fact upon the theory of the defendant that the storm was, as matter of law, extraordinary.

    2. Same — Instructions—Trial.
    It was the duty of the court, however, to instruct the jury that if they should find the storm was an unusual one such as defendant would not be required to anticipate in' the exercise of ordinary care, that it was for the jury to determine whether defendant had had a reasonable time in which to restore the lights before the occurrence of plaintiff’s injury, and if such reasonable time had not elapsed, then plaintiff could not recover.
    3. Evidence — Expert Testimony — Hearsay—Pain and Suffering.
    Testimony of defendant’s physician, on cross-examination, who examined her ankle, that in making the examination plaintiff flinched, was hearsay testimony and should have been excluded from the evidence.
    Error to Wayne; Hosmer, J.
    Submitted January 18, 1915.
    (Docket No. 123.)
    Decided March 18, 1915.

      Casé by Myrtle I. Norris against the Detroit United Railway for personal injuries. Judgment for plaintiff. Defendant brings error.
    Reversed.

      Corliss, Leete & Joslyn and William G. Fitzpatrick, for appellant.

      William M. Mertz (William MacPherson, of counsel) , for appellee.

       Upon the liability of a street railway for injuries caused by defects in track or street, see notes in 52 L. R. A. 448 and 15 L. R. A. (N. S.) 840.

   Stone, J.

The plaintiff, an unmarried woman about 24 years of age, brought this action to recover damages resulting from her falling into an excavation made by the defendant in the course of the construction of its tracks in the city of Detroit. In June, 1911, the defendant was building a track on Grandy avenue north from Gratiot avenue, in said city. One block north of Mack avenue, Grandy crosses St. Joseph street at about right angles; the latter street running east and west. Grandy avenue at this time was a paved street; St. Joseph was not. There is a depression in Grandy avenue between Alexandrine avenue on the north and Mack avenue on the south, with the lowest point at St. Joseph street, which is 5.2 feet lower than Alexandrine and 1.3 feet lower than Mack avenue. An excavation 7 feet wide and about 22 inches deep, measured from the top of the pavement, had been dug in the center of Grandy extending north and south from St. Joseph street for some distance beyond, in both directions. Temporary crossings at street intersections were required by the city. There was no dispute that such a crossing had been provided at St. Joseph street for vehicular traffic. It was made of ties and planks laid lengthwise in the trench for its entire width and depth. Whether there had also been a foot passenger crossing provided on the south side of St. Joseph street in the line of the sidewalk prior to the accident in question is disputed in the evidence. Between 9:30 and 10 o’clock on the night of June '4, 1911, the plaintiff, accompanied by her mother and sister, was returning to her home going east on St. Joseph street. They lived a little over a block east of Grandy avenue, and their way lay across the latter avenue. When they reached Grandy avenue, the plaintiff, the foremost of her party, stepped or fell into the excavation at a point in the line of the sidewalk on the south side of St. Joseph street. She and her companions testified that there was no light on the crossing. A somewhat severe electrical storm, accompanied by what was claimed to be an unusually high wind and a heavy rainfall, raged in Detroit from at least 8 until nearly 10 o’clock of the night in question.

The railway company had provided sufficient lanterns to light every street intersection, in the line of the excavation, with eight lights. It had also put two men to the task of lighting the lights and seeing, by patroling the district, that they were kept lighted. It was the claim of the defendant, and it gave evidence to support that claim, that these men had placed lighted lanterns at the intersection in question prior to the storm. There was evidence that the storm was of sufficient violence to put out the lights.

The declaration charged the negligence to be that there were no lights at this place at the time of plaintiff’s injury, and it was claimed upon the trial that the defendant was negligent in failing to provide a sufficient force of men on the job to keep the lights burning during and after the storm, and that the men provided were negligent in not seeing that any lights put out by the storm were relighted before the injury. Owing to the topography at the scene of the accident, large quantities of water accumulated in the trench at this point. When the plaintiff went into the excavation, she was completely immersed up to her chin. In falling, she claimed to have seriously sprained and injured her ankles, and at the time of the trial it was claimed that her left ankle was weak and impaired, and more or less permanently injured.

The pleadings were silent upon the subject, but the evidence disclosed that some time previously the plaintiff had been suffering from a species of goiter, called “Graves” disease, and it was claimed that her condition in this respect was aggravated principally from the shock.

The evidence offered on the part of the plaintiff was of a very positive nature that there was an entire lack of lights at the time and place of the accident.

On the part of the defendant there was evidence tending to show that the lights were burning before the storm. This testimony was given by one Kolb, who testified that he and one Dooley, who was dead at the time of the trial, had the territory lying from Forest avenue at tlie north to Gratiot avenue on the south of St. Joseph street. He testified on direct examination as follows:.

“Q. How many lights, do you remember, did you have at St. Joseph street, at Grandy — just tell us how many lights?
“A. Oh, we had all the time four, and four on the road; that makes eight altogether.
“Q. On the crossing?
“A. Yes, sir. * * *
“Q. Before this heavy wind came up, were all the lights lit on St. Joseph street?
“A. Yes; all over.
“Q. Now, do you know whether the wind blew those lights out or not?
“A. Oh, yes, tipped the lights over — the rain and the wind blew out the lights, and the city lights was gone out the same way for a while, too.
“Q. Now, after the lights on St. Joseph street were blown out by the wind, did you and Dooley come along and relight them again?
“A. Yes.
“Q. And do you know whether they were blown out again?
“A. Not after that
“Q. Not after the storm?
“A. No, then the wind lay off.”

He testified to a heavy rain and storm, and that he went under cover over on Mack avenue.

“Q. When it stopped raining, did you go back on the job?
“A. Right away, when the lights was put all in shape.”

He further testified that they had plenty of lights, whicn consisted of lanterns properly trimmed and in condition.

We'infer from this testimony that the relighting testified to by this witness, in all probability, occurred after the injury of the plaintiff. The testimony of this witness was somewhat weakened by his cross-examination, which was lengthy, and from which we quote a small portion only. The witness testified that he and Dooley divided the work of lighting lanterns between them:

“Q. Some nights he would take the upper end and some nights you would take the lower end?
“A. Yes, sir.
“Q. To light these lights?
“A. Yes, sir.
“Q. Which end did you usually take — the lower end or the upper end?
“A. I was on the back end.
“Q. On the north end?
“A. On the north side.
“Q. Which end did you take on Sunday night — the -north end?
“A. I don’t know.
“Q. He lit the lights on one end, and you lit the lights on the other?
“A. We lit them all on the box.
“Q. I say, he would light them on one end of the route and you would light them on the other?
“A. Yes, sir.
“Q. Where did the north end of the route end — at what street did you divide your division?
“A. On Forest avenue.
“Q. So one of you would work up from Gratiot to Forest, and the other would work up from Forest to the other end?
“A. Yes, we had so many streets.
“Q. But you don’t know on the night of June 4th, on Sunday night, which end one of you had, the upper and which had the lower end?
“A. No, I cannot tell anything about that.
“Q. You cannot tell anything about that?
“A. No, I cannot go on to count that. ■
“Q. If you had the upper end, you stayed all night at the upper end?
“A.-Yes, and we walked up and down.
“Q. And if he had the lower end he would stay all night at the lower end?
“A. Yes, sir.
“Q. You would walk up and down your division?
“A. Yes, sir.
“Q. And he would walk up and down his division, but you could not tell which division you were in that night?
“A. No.”

There was evidence tending to show the velocity of the wind and the amount of rainfall. The inspector of the United States weather bureau testified, from the official records, that at 8:52 p. m. the velocity of the wind on the Majestic building was (a north wind) 59 miles, and at .9:06 (northwest) 38 miles, and at 10:23 (north) 28 miles an hour; that the wind movement was general throughout the city; that the rainfall was general over the city; and that the entire rain that fell during the entire day of 24 hours was .62 inch. This same witness testified that it rained continuously from 8:43 to 10:02 p. m., accompanied by thunder. There was evidence also tending to show that the wind was blowing at 10 o’clock.

The trial took place a year and nine months after the injury, and the plaintiff and her witnesses, including her physician, testified that she still suffered from her injuries, and that her left ankle was impaired and weakened. After plaintiff’s physician had testified in chief, defendant requested-an examination by its physician, Dr. Sanderson, with a view of qualifying him as a witness. Such examination was made in the presence of Dr. Jaeger, the plaintiff’s physician. After such examination Dr. Jaeger was recalled by defendant for cross-examination, and testified he witnessed the examination made by Dr. Sanderson. Upon redirect examination of Dr. Jaeger the following occurred:

“Q. Do you know whether or not, during the examination yesterday, there was any manifestation of pain on the part of the patient? (Objected to as incompetent and self-serving.)
“Mr. Mertz: The examination took place after the adjournment of this case yesterday.
“The Court: I think he may testify to any objective symptoms. Note an exception.
“A. Yes, sir.
“Mr. Fitzpatrick: I move to strike out the answer as incompetent. The question was whether there was any exclamation of pain.
“The Court: Manifested. I think he may testify to any objective symptoms that he saw.
“Mr. Fitzpatrick: I want the record to disclose the fact that the examination was being made by a physician of the defendant, to testify as a witness in this case — made for such purpose to the knowledge of the plaintiff herself. I therefore, under those circumstances, assert that anything in the way of manifestations or of exclamations are incompetent and improper.
“The Court: I think, with reference to that, he may testify to any manifestations — to any objective symptoms shown at such examination of the plaintiff.
“Q. What objective symptoms as to the manifestation of pain were there, if any?
“A. What do you mean — by visual signs, what I saw?
“Q. Exactly.
“A. I did not see any visual sign of pain excepting an exclamation from the plaintiff when the doctor—
“Mr. Fitzpatrick: That is objected to. That is the thing I say is improper — exclamations of pain.
“The Court: I think exclamations of pain may be given if it was a pure exclamation.
“Mr. Fitzpatrick: If there is any element of doubt in your Honor’s mind, I would be willing to submit, authorities. Exclamations made under those circumstances are highly improper, I believe, under the authorities.
“The Court: Very well; put it in at your peril.
“Mr. Fitzpatrick: Also on the strength of the doctor’s last answer that there were no visible signs —no objective symptoms — I move to strike out the answer as incompetent. The answer just before that which was ‘yes,’ as to whether manifestations of pain were made.
“Mr. Mertz: I am willing to have that word ‘yes’ stricken out.
“The Court: Strike it out.
“Mr. Mertz: I understand exclamations of pain are objective symptoms — something you can hear— if it was manifest to this doctor, as a medical man, as a pure manifestation of pain.
“Mr. Fitzpatrick: Counsel is laboring under an entire misapprehension of the rule with reference to objective symptoms. Exclamations of pain have never, to my knowledge, before been categoried as objective symptoms.
“Mr. Mertz: Well, that is true, strictly speaking. I want to know whether there were any exclamations of pain which were apparent to you to be pure exclamations of pain?
“A. When Dr. Sanderson manipulated the limb she said it pained her. I saw when Dr. Sanderson manipulated the limb she said it pained her.
“Mr. Mertz: That may be stricken out.
“Mr. Fitzpatrick: I except to the statement, and I object to the attempt to cure the error. It has been put in. Note an exception.
“The Court: Note an exception.”

Later Dr. Sanderson was called as a witness on behalf of defendant, and in the course of his cross-examination the following occurred:

“Q. Did she manifest any tenderness in the examination you made?. (Objected to as incompetent.)
“The Court: I think you may ask if she flinched— did she flinch under it?
“A. She said it pained her.
“Mr. Fitzpatrick: Object to that and ask that it be stricken out.
“The Court: That may be stricken out.
“Q. Did she scream?
“A. No, sir.
“Q. She did not flinch?
_ “A. She drew her foot away. She remarked at the time it pained her, and drew her foot away.
“Mr. Fitzpatrick: I move to strike that out.
“The Court: That may be stricken out.
“Q. Did she flinch?
“Mr. Fitzpatrick: I move to strike out the answer as incompetent and self-serving — that she flinched. I move that it be stricken out — she drew away her foot —as self-serving and incompetent.
“The Court: Let it stand. Note an exception.
“Q. To your eye — an experienced eye of a medical man — while you made that examination, were there any signs of pain? You would not say there were not, would you? • •
“A. In an examination?
“Q. Yes.
“A. On deep pressure, I probably elicited pain, but I would expect that.
“Q. You would expect that?
“A. Yes, sir.
“Q. Now, is it possible for a person, situated as this young lady was situated, to fall into an excavation, ■filled with cold water, on a dark night, and receive a severe nervous shock such as she did receive?
“A. Certainly it is possible for anybody.
“Q. Whether they are well or sick with goiter?
“A. Certainly. •
“Q. Is it possible to get a permanent nervous injury from the fall?
“A. The possibilities are unlimited; certainly it is possible. You can do all kinds of damage with a fall. I would attribute the aggravation of her condition after the accident to the injury.
“Q. To the accident?
“A. Yes, sir.
“Q. There is nothing else in God’s world to attribute it to, is there?
“A. No, sir.
“Mr. Fitzpatrick: Doctor, you said there was some pain on deep pressure, such as you might expect in any case. Why do you say that?
“A. On deep pressure on the left ankle over the tendon that runs down; that is, just back of the little toe, it was severe pressure that elicited pain.”

At the close of all the evidence in the case, the defendant moved for a direction of a verdict in its favor, on the ground that there was no evidence of any of the several acts of negligence charged in the amended declaration. The motion was denied, to which defendant excepted. Whereupon the defendant requested the court to charge the jury to the same effect, which was refused. In the course of its charge to the jury the trial court used the following language:

“ (If the intersection was not sufficiently lighted by the proper lights and usual lights that are placed at such places, and if you find that the plaintiff was in the exercise of ordinary care — such reasonable care as a party under like circumstances should exercise-then, of course, the plaintiff would be entitled to a verdict at your hands.)
“Mr. Fitzpatrick: Now I direct your honor’s attention right there to the statement that the crossing was in the line of the sidewalk. I understood the case was to be submitted—
“The Court: I am going to say there is no doubt about that fact; there is no question about that. Of course, gentlemen of the jury, I do not mean to say that it was essential to lay planks precisely over the excavation — precisely at that point — (but, of course, if planks were not laid over at the intersection of the southerly sidewalk with Grandy avenue, it should have been so lighted at that point as to indicate to them that there was danger in passing over what would be a continuation of the sidewalk. Of that, of course, there can be no question.)
“(You are also instructed that if this excavation at this place was left open and unguarded on the evening in question without signal lights or other warnings of approach thereto, so that the plaintiff or any other person in coming upon it would not be warned of its existence, then this crossing is not in a condition reasonably safe and fit for travel, and the plaintiff or other pedestrians could not be expected — could not necessarily be expected to be on the lookout for such a situation — that is to say, if they had no knowledge of that, of the existence of it, and there was nothing there to indicate, gentlemen of the jury, that there was this excavation, they certainly could not be expected to anticipate that the excavation was there, and I charge you, therefore, if you find from the evidence in this case that such a situation existed at this particular place, and the plaintiff herself, while in the exercise of ordinary care and free from negligence on her part, while passing over at this intersection, fell into the excavation, then it would be your duty to return a verdict for the plaintiff for such damages as will compensate her.) * * *
“Now, on the part of the defendant, I think I may say, as I said before, that it is not essential, that I know of, that a crossing should have been built in the line of the southerly sidewalk. (I think it ought to have been sufficient if a sufficient walk was built in the center of the street, as has, been testified^ to, but still in that connection you may bear in mind the testimony of the city inspector that such a walk had been provided at that place, and I say again to you, gentlemen of the jury, that if such walk were not built there would be, of course, more necessity for the putting of lights to indicate the excavation and the maintenance of such light while put there.) * * *
“(If the jury should believe the walk was removed or disturbed by trespassers or others over whom they have no control at any time after Saturday night or before the accident happened, then I charge you that this would not be, under the evidence in this case, negligence for which the defendant would be liable to the plaintiff. That is undoubtedly so, gentlemen of the jury, but the necessity to guard the excavation which exists, of course,- would remain, because there would be necessity for watchmen, and the necessity to guard if the sidewalk or crosswalk had been taken up.)
“I am asked to charge you that the defendant is not legally chargeable with the results of the storm which is shown to have been of unusual severity, nor was it in duty bound to anticipate the effects of the elements upon its crosswalk; and if you find it had constructed the same with reasonable care, if you believe the storm or the rain which fell with it caused the walks to become unsafe, submerged, or to float away, then the defendant cannot be said to be negligent or liable for injuries which resulted approximately from such condition. I think that is so, gentlemen of the jury (but, as I said before, if the storm was of such severity at that time as to render the force of watchmen upon the job insufficient to light the light and sufficient time had intervened for the city railway to have put on — the defendant in this case to put on a larger force of men — I think, gentlemen of the jury, under such circumstances, it may have been requisite for them to have placed the light in such a position, if it was not there before, as to have given a warning of the existence of the excavation, but not otherwise).
“Under tne evidence in this case, I think you must find defendant had upon the work, at the time of the accident, a reasonably sufficient number of lanterns, properly supplied and properly equipped to provide all necessary warning and signals; and if you believe from this evidence that eight of those lanterns were placed at or near the crossing in question, and were lighted and so placed, gentlemen of the jury, as to afford a warning of the excavation, and if the same were blown out by the wind that prevailed, or put out by the rain at that time, then. I charge you that the defendant would not be responsible for the action of the elements, and the fact, if you find it so, that the lights were not going when the plaintiff attempted to cross, would not be negligence for which the defendant would be liable to the plaintiff. I think that is so (except, gentlemen of the jury, as I said before, if sufficient time intervened for the agents of the defendant to have lighted these lights, and they failed to do so, then under the existing circumstances, of course, gentlemen of the jury, it would be the same as if the lights had not existed).”

The jury returned a verdict for the plaintiff in the sum of $1,000, and judgment was entered accordingly.

The defendant has brought the case to this court by writ of error. The errors assigned upon the charge appear in parentheses in that portion of the charge above quoted. Error is assigned also upon the rulings of the court in receiving the evidence, above quoted, of Drs. Jaeger and Sanderson. The errors raised are discussed by the appellant under the following heads:

(1) That there was no proof of negligence, and the court should have directed a verdict for the defendant.

(2) That the court erred in submitting to the jury the question of whether the intersection was lighted by proper lights, independent of the question of whether the lights had been put out by the storm, or were seasonably relighted after the storm subsided.

(3) That the court erred in submitting to the jury the question whether the railway furnished a sufficient number of watchmen to properly guard the intersection, and whether sufficient time elapsed after the subsidence of the storm, and before the accident, to permit the lights to be relighted that had been extinguished thereby.

(4) There was error in the admission of the testimony of the two physicians as to complaints of pain by plaintiff, and her flinching, at the time when she was examined by defendant’s physician, in order to qualify him as a witness ill the case.

The last assignment of error is as follows:

“The charge of the court on the question of whether there were lights on the crossing, and the duty of the defendant to have such lights there, and lighted at the time of the accident, and the duty of the defendant to have watchmen at the scene of the accident, if the lights were not lighted, or had been put out by the storm, considered as a whole, was erroneous, inconsistent, and confusing, and well calculated to mislead the jury.”

1. The first three propositions of appellant are discussed together, and the defendant contends that the evidence is undisputed that a sufficient quantity of lights had been provided by the defendant to properly light the excavation, and, in fact, the court so charged the jury; that, if the lights were not burning at St. Joseph street at the time of the accident, they had been put out by the wind and rain; that the evidence is uncontradicted that the storm was of unusual severity, and of such a character as to prevent the possibility of keeping the lanterns lighted during its progress. The defendant further contends that the evidence in substance agrees that the accident occurred about 10 o’clock in the evening; that the evidence clearly shows that the wind and rain put out the lights that had been set to guard this very crossing, and that defendant could not keep the lights lighted, nor relight them, if they were out, while the storm raged; that there was a wind velocity at that time of 28 miles an hour; and that the real question is: How soon after the storm ceased was it practicable to set about repairing the damage it had done, and how soon after that did the defendant’s agents act?

We are not able to agree with defendant’s counsel that the court should have instructed the jury, as a matter of law, or undisputed testimony, that the storm was an unusual and extraordinary one. We think that a question of fact was presented by the testimony. Neither do we agree with the contention that a verdict should have been directed. We are of opinion, however, that the jury should have been instructed more explicitly than they were upon the subject. We think the rule applicable here is stated by Elliott on Roads and Streets (Bd Ed.), at section 1163, as follows:

“The duty of a public corporation does not demand of it that high degree of care which would be necessary to keep its roads and streets absolutely safe for passage at all times and hours, and therefore it is not ordinarily liable for injuries produced by defects caused by sudden and violent storms and extraordinary floods. In many cases an action may be successfully defended upon the ground that the injury resulted from an extraordinary flood, and in no case is a corporation liable for a defect, or an obstruction, in a highway produced by sudden, violent, and unforeseen storm, until it has had a reasonable time in which to remove the obstruction or remedy the defect.”

See cases cited by the author.

If the jury should find, as matter of fact, that the storm was an unusual and extraordinary one, and one which the defendant could not, in the exercise of ordinary care, reasonably expect, we think the question then should have been clearly put to the jury whether the defendant had had a reasonable time in which to restore the lights before the accident happened; and they should have been instructed that if it had not had a reasonable time in which to restore the lights, in case the storm was of such a nature, then there would be no liability. Whether it was such .a storm as it might reasonably expect and provide for at that season of the year was also a question for the jury. The idea is embraced in the charge of the court in Beattie v. City of Detroit, 137 Mich. 319, at page 324 (100 N. W. 574, at page 576), where the charge of the trial court was approved by this court:

“Did they do all that prudence and foresight would demand of them? In other words, if the rain and storms that might be expected, if you believe that they might be expected at that time of the year, would put that street out of repair and render it dangerous, then, gentlemen of the jury, in my opinion, negligence would be chargeable against the city; but if you find that a storm of unusual severity, or a storm that might not be expected under ordinary circumstances and conditions at that time of the year, came up, then it is something human foresight cannot see or prevent, and that would be an extraordinary visitation of the elements, and the city * * * would not be, in such a case, chargeable with negligence.”

And the rule of reasonable time in which to remedy the defect would apply.

We have quoted extensively from the charge of the court, and most of it cannot be justly criticised, but we fear the jury failed to understand from the charge that a reasonable time in which to restore the lights, in any event, should be given to the defendant, before there would be liability in case the storm was an unusual and extraordinary one which put out the lights. This question of reasonable time in which to make repairs in cases of severe storms has been before this court in numerous cases, including cases against railroads for destruction of stock, where fences have been destroyed by violent storms. Robinson v. Railway Co., 32 Mich. 322; Stephenson v. Railway Co., 34 Mich. 323. The question of reasonable diligence is involved in all that line of cases. That the crossing was a place that required lighting, in the first instance, is not denied.

2. We are constrained to hold that the court erred in admitting the evidence of the physicians, above quoted. We have examined the testimony with great care; and while there is some confusion, in the colloquy between court and counsel, which leaves it somewhat in doubt as to what was intended by the rulings, yet we think it does sufficiently appear that the court permitted, and the jury understood that the court permitted, the evidence as to the flinching of the plaintiff to stand in the case. In the testimony of Dr. Sander-son the following appears:

“Q. Did she flinch?
“Mr. Fitzpatrick: I move to strike out the answer as incompetent and self-serving, that she flinched. I move it be stricken out — that she drew away her foot —as self-serving and incompetent.
“The Court: Let it stand. Note an exception.”

This question had substantially been answered in the affirmative, and we gather from the ruling that it was permitted to stand. This subject has been so often ruled upon by this court that about all that is necessary to do is to refer to the following authorities : Grand Rapids, etc., R. Co. v. Huntley, 38 Mich. 537 (31 Am. Rep. 321); Comstock v. Georgetown Township, 137 Mich. 541 (100 N. W. 788); O’Dea v. Railroad Co., 142 Mich. 265 (105 N. W. 746); Marshall v. Railroad Co., 171 Mich. 180 (137 N. W. 89).

As this court said in Comstock v. Georgetown Township, above cited:

“It hardly needs an argument to show that flinching is an expression, if not an exclamation. Like an exclamation, it may be involuntary or it may be voluntary; and in either case it is in the nature of, or has the effect of, a declaration, and, when taken to indicate suffering, becomes hearsay, if proven by another, and therefore subject to the principle discussed.”

Under the circumstances in which the manifestations testified to occurred, we think it was reversible error to receive the testimony.

For the errors pointed out, the judgment of the court below is reversed, and a new trial granted.

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


author: Bird, J. Ostrander, J.

text:
    STATE NATIONAL BANK OF ALBUQUERQUE v. WERNICKE.
    1. Guaranty — Principal and Surety — Acceptance — Bond — Notice.
    There was a sufficient notice of acceptance by plaintiff bank of defendant’s bond, guaranteeing the obligations of a third party, in order to render the bond valid as between the bank and defendant guarantor, who was shown by the testimony to have written suggesting to the principal debtor that such bond be executed, where the bank forwarded to the defendant a bond in the form of a guaranty containing the terms suggested by him.

    2. Same — Evidence — Parol Evidence Rule — Contracts — Ambiguity.
    Under a simple contract of guaranty that the principal debtor would punctually pay any and all indebtedness to the plaintiff bank up to a stated amount, it was reversible error to permit the defendant to testify that his understanding when he signed the guaranty was that the obligation should extend to future indebtedness only.
    3. Same — Consideration—Suretyship—Banks and Banking.
    Although the evidence established the fact that the plaintiff bank made advances to the principal debtor a number of days before the defendant executed the guaranty, which was forwarded to him pursuant to his suggestion, the plaintiff was entitled to recover notwithstanding that no additional consideration passed after the guaranty was received by it.

      4. Same — Fraud—Concealment.
    No such fraud as would vitiate an agreement was disclosed hy evidence that the plaintiff did not state to the guarantor that the principal debtor was indebted to it at the time of the execution of the instrument: unless the concealment was such as to amount to fraud the surety would not he released and failure to advise the guarantor was not fraudulent.
    5. Same — Subjects Included — Construction of Contract.
    Where plaintiff bank held notes of one of the officers of the debtor corporation to the extent of over five hundred dollars and the corporation indorsed such obligation, although there was no consideration for doing so, the notes which had been executed prior to its organization were not obligations secured hy the guaranty; also, the guarantor was under no legal obligation to pay the amount of $350 which was advanced to the company after he withdrew the guaranty.
    ■Kuhn, Stone, and Ostrander, JJ., dissenting.
    Error to Kent; Brown, J.
    Submitted October 7, 1913.
    (Docket No. 3.)
    Decided April 6, 1915.
    Assumpsit by the State National Bank of Albuquerque against Otto H. L. Wernicke upon a contract of guaranty.. Judgment for defendant. Plaintiff brings error.
    Reversed.

      Carroll, Kirwin & Hollway, for appellant.

      Wilson & Wilson, for appellee.

      Upon the néeessity of notice of acceptance to bind guarantor, see notes in 16 L. R. A. (N. S.) 353; 33 L. R. A. (N. S.) 960, and 48 L. R. A. (N. S.) 198.
      On the question as to when a guaranty is a continuing one, see note in 39 L. R. A. (N. S.) 724.

   Bird, J.

This suit was commenced by the plaintiff to enforce payment on a contract of guaranty executed by the defendant in February, 1907. Judgment passed for the defendant in the trial court, and plaintiff assigns error thereon.

It appears that defendant, who resides in Grand Rapids, had in 1907 a small interest in a merchandise corporation, doing business in Albuquerque, N. M. He also appears to have had a friendly interest in F. J. Houston, who ran the business prior to September, 1906, at which time the F. J. Houston Company was organized and took over the business. By reason of a lack of sufficient capital, che F. J. Houston Company was financially embarrassed in December, 1906, and was unable to take care of an overdraft owing to plaintiff, upon which it was being pressed for payment. While matters were in this situation, F. J. Houston, the manager of the company, appealed to defendant to relieve the situation, by purchasing more stock of the company. Defendant in reply indicated his inability to take more stock, but suggested relief in another way, which is shown by the following letter:

“F. J. Houston Company,
“Albuquerque, New Mexico.
“Gentlemen:
“Your communication of the 21st inst. (12th) and the one from my brother Fred have been received and noted. My commitments in other directions for the present are such that I could not increase my investment in your enterprise at the present time, no matter how anxious I might be to do so.
“You state that you owe for merchandise and other incidentals about $2,000. Of this amount there is due the Macey Company about $275.00, and I figure that you would also have some open accounts on your books not subject to discount, probably $500.00. From this it appears that you are short of capital or credit to the extent of about $1,500. I will arrange a credit for you with the Macey Company of $500.00, upon which you are expected to pay 6 per cent, interest from the time the accounts become due in the ordinary course of business, and it may be that the company will require you to give notes in settlement of balance, but the notes will not be discounted nor presented through any bank, so that you will not have any trouble regarding the same.
“In addition to this, if you can arrange it with the bank with which you are doing business to give you a line of credit of $1,200 or $1,500, and if they are willing to accept my guarantee in shape of bond or the usual form of guarantee, so that I will not have to be bothered with the signing of the notes each time, I am willing to let you use the credit of my name to that extent, but let hie suggest that in case you can make such arrangement with your bank that you avoid checking your balance down to less than 20 per cent, of the amount borrowed. It is a poor practice and makes your account look hard up to the bank.
“Hoping this will enable you to get along until you can place some more stock, or until business gets into' better shape, I remain,
“Sincerely yours,
“O. H. L. Wernicke.”

This letter was taken to plaintiff by Mr. Houston, whereupon a written guaranty was prepared by the bank and forwarded to defendant. It was executed on February 20, 1907, and returned to plaintiff. The guaranty was in the following form:

.“For and in consideration of the sum of one dollar, to me in hand paid by the State National Bank of Albuquerque, New Mexico, the receipt whereof is hereby confessed and acknowledged, and the further consideration that the said the State National Bank of Albuquerque, New Mexico, upon my request extend credit to the F. J. Houston Company in an amount not exceeding fifteen hundred ($1,500.00) dollars, I hereby guarantee that the said F. J. Houston Company shall punctually pay any and all indebtedness of the said F. J. Houston Company to the said bank to the extent and up to the said amount, the sum of fifteen hundred ($1,500.00) dollars, and I hereby promise and agree to and with the said the State National Bank of Albuquerque, New Mexico, that the F. J. Houston Company will well and truly pay any and all aforesaid notes and obligations of the said F. J. Houston Company at the several times and in the manner mentioned and to be mentioned in any and all notes of the said F. J. Houston Company, not exceeding fifteen hundred ($1,500.00) dollars.
“And I hereby expressly waive and dispense with any demand upon the said F. J. Houston Company, and any notice of any nonperformance on the part of the said F. J. Houston Company.
“And I hereby waive the necessity of requiring any notice of nonpayment or nonperformance or proof of notice or demand being made whereby to charge me ■ therefor.
“In witness whereof, I have hereunto set my hand and seal this 20th day of February, 1907.
[Signed] “O. H. L. Wernicke, [Seal.]
“Grand Rapids, Mich.”

After the receipt of defendant’s letter offering to execute the guaranty, but before it was executed and returned, plaintiff discounted a note for F. J. Houston Company in the sum of $1,575. This amount was made up by an overdraft of $1,085.69, and the balance, $415.31, was passed to the credit of the company. This note was renewed several times, and then payment of $575 was made thereon, thereby reducing it to $1,000. Subsequently, and on November 9, 1908, the balance on two notes given by Houston previous to the organization of the company, and afterwards renewed with the company as indorser, was added to the $1,000, and a new note discounted for $1,520. This note was renewed from time to time, but was never paid. On March 16, 1908, defendant advised plaintiff that he would not be responsible for any increase in the indebtedness then existing, and that he desired the amount then owing reduced as rapidly as possible, so that he might be relieved of all liability. After this, and on March 4, 1909, a new loan of $350 was made to the company by the plaintiff. The company went into the hands of a receiver in September, 1909, owing plaintiff a sum in excess of the amount named in the guaranty. The .matter was tried before the court, and a finding of facts was made, and the conclusions of law thereon were:

(1) Mr. Wernicke’s letter of January 17, 1907, to the Houston Company, did not constitute a guaranty upon which the bank could extend credit to the Houston Company.

(2) Mr. Wernicke’s guaranty of February 20, 1907, did not apply to any existing indebtedness of the Houston Company, but applied only to such loans as the bank might thereafter make to the company, relying on the guaranty. The bank made no loans to the company after receiving the guaranty, and before Mr. Wernicke withdrew it on March 16, 1908. Therefore there is no liability on the guaranty.

The trial court permitted defendant to testify that his understanding was at the time the guaranty was signed that it would apply only to future indebtedness. This was allowed over plaintiff’s objection, on the ground that the guaranty was ambiguous in this respect. This was error. The undertaking of defendant was a simple contract of guaranty, providing for a cash credit of $1,500 at the plaintiff bank, and the language creating that obligation was involved in no such verbal haze as would justify invoking that exception to the general rule excluding parol testimony.

The case of the Detroit Free Press v. Pattengill, 155 Mich. 272 (118 N. W. 927), is relied upon to demonstrate that the trial court was in error in refusing to hold that defendant’s contract of suretyship never became operative against him by reason of the failure of the plaintiff to advise him that it was accepted. In the case cited the obligee in the bond sent to one Kimmel a blank bond, with the suggestion that, if he would secure a responsible surety, it would furnish him newspapers. The surety was secured and the bond returned, and nothing was ever said by the Detroit Free Press Company as to whether it accepted the bond. In the instant case the suggestion of surety-ship was made by the defendant himself. When the suggestion was communicated to the plaintiff, it prepared the bond and returned it to the defendant .for his signature. The drawing up of the bond and returning it to the defendant for his signature after being advised that he was willing to become surety were acts which amounted to a notice of its acceptanee. And therein lies the difference between the instant case and the case cited.

It is urged that, inasmuch as the $1,575 note was discounted by plaintiff on the 11th day of February, nine days before the guaranty was executed, there was no consideration passing to the debtor which would support the guaranty. While there was an adjustment of the financial matters of plaintiff and the Houston Company before the guaranty was signed, it is obvious that they were adjusted and additional credit extended to the company on the strength of defendant’s letter, in which he promised to execute a guaranty to the amount of $1,500. It is doubtless true, as argued by counsel, that the letter itself did not amount to a guaranty; it was simply a promise to execute a guaranty. And it is quite likely that the bank took some chances in adjusting their matters in the way they did before they were advised that the guaranty had been executed; but that was a contingency which never happened. The guaranty was subsequently executed as promised, and the mere fact that it would have been difficult to enforce payment if the guaranty had not been executed" affords no reason why the additional credit extended to the company in reliance upon defendant’s letter should not serve as a consideration to support his guaranty. If any further consideration were needed, it can be found in the fact that plaintiff was threatening the Houston Company with legal proceedings if it did not make payment of its overdraft.

But it is argued that the plaintiff concealed the fact from defendant that the company was indebted to the bank, and therefore it was such a concealment of a material part of the transaction as would make it inequitable to enforce the contract. Unless the concealment amounted to a fraud, the surety would not thereby be released. If the defendant had inquired as to the fact, and the truth had been evaded, or otherwise concealed, it would then have amounted to a fraud; but, if no inquiry were made, the failure of plaintiff to disclose to the guarantor the indebtedness of the Houston Company to the bank would not amount to a fraud. 1 Brandt on Suretyship (3d Ed.), § 473; Hamilton v. Watson, 12 Clark & Finnellys (Eng.), 108.

The defendant did not undertake by his contract to guarantee the payment of any existing note or overdraft owing by Houston & Co. to the bank. What he proposed to do in his letter, and what he afterwards did do, was to guarantee a cash credit at the bank for Houston & Co. After he did so he was liable to the extent of his guaranty, whatever the form of the evidence of indebtedness might be. After the money was loaned to Houston & Co. in reliance upon the defendant’s letter and guaranty, it was at its disposal, and if that company saw fit to use some or all of the $1,500 in paying existing indebtedness to the bank, of what importance is it, and how was the defendant prejudiced by such application? The defendant knew before he signed the guaranty that the Houston Company was experiencing some rough weather, and needed assistance, and he figured out himself in his letter that the company would need a credit of $1,200 or $1,500, and he consented to become surety in that amount to assist the company in making payment of its pressing demands, and it appears to me to be of no moment that the bank happened to be the owner of one of those demands. Our conclusion is that the defendant is liable on his contract. Hamilton v. Watson, supra.

The question then resolves itself into one of how much of the indebtedness to the bank is covered by defendant’s guaranty. The testimony shows that $520 of the note for $1,520 which was owing to the plaintiff when the company failed was made up of the balance due on two notes owing to plaintiff by Houston before the company was formed. It is true that upon some of the renewals of these notes, the company appeared as indorser, but the trial court found that there was no consideration shown for such indorsements. If the $520 was made up of the individual indebtedness of Houston, neither Houston nor the bank had any right to merge it with the amount owing by Houston & Co., and thereby compel the guarantor to pay Houston’s individual debts. The $520 is, therefore, not covered by defendant’s guaranty. It further appears that a credit of $850 was extended to the company after the defendant withdrew his guaranty. It is clear that this sum should not be included within the guaranty.

For the reasons indicated, the judgment is reversed, and a new trial ordered.

Brooke, C. J., and McAlvay, Moore, and Steere, JJ., concurred with Bird, J.

Ostrander, J.

(dissenting). Plaintiff relies upon an agreement of defendant — a contract — and, theoretically, upon something done by plaintiff in reliance upon it. Treating the making out and forwarding of the form of guaranty as a notification to defendant that the plaintiff had received and would accept the offer contained in defendant’s letter to his friend, how can it be said that before that time there was a contract — an agreement of any sort? Clearly, there was none. Now, it is undisputed that after the contract was entered into plaintiff did nothing in reliance upon it.

The lower court was right, and its judgment should be affirmed.

Kuhn and Stone, JJ., concurred with Ostrander, J.


author: Bird, J.

text:
    MERCER v. STEPHENS.
    1. Taxation — Redemption—Quitclaim Deed — Right oe Geantee —Tax Title.
    A daughter, as heir of one who held regular title of real property, was entitled to redeem from the tax purchase, where the records of the probate court showed that she had been adjudged to be the sole heir of such owner: complainant, who purchased from the daughter by quitclaim deed, acquired the interest she had and prima facie was entitled to maintain a bill to redeem.
    2. Same — Notice to Redeem — Service — Geantee in Regular Chain oe Title.
    Where there was a break in the regular chain of title because of the omission to record a deed which was placed upon record after the commencement of suit to redeem, there was a sufficient showing to justify the service of notice to redeem upon the last grantee in such regular chain of title after the alleged break.
    3. Same — Names—Idem Sonans.
    Where the notice was served upon John Chingkuom, who was the last grantee in the regular chain of title, but the name which appeared in the notice was spelled “Chinkwam,” and the person so named was unable to read or write, and his name was pronounced as if spelled “Chinkwam,” he was sufficiently identified for the purpose of serving notice to redeem.
    4. Same — Estates oe Decedents — Redemption.
    Although the person to whom notice to redeem was directed had died, where the sheriff returned that after diligent search he was unable to obtain service upon or to learn the address of the decedent, or his heirs, or personal representatives, etc., the return of the sheriff must be accepted as final, and sufficiently authorized the publication of the notice as required by statute.
    Appeal from Mason; Withey, J.
    Submitted February 11, 1914.
    (Docket No. 177.)
    Decided April 6, 1915.

      Bill by Vic N. Mercer against Thomas S. Stephens to redeem from a purchase ■ of lands for delinquent taxes. From a decree for complainant, defendant appeals.
    Reversed; bill dismissed.

      Frank L. Fowler and Howard L. L. Campbell, for complainant.

      A. A. Reiser, for defendant.
   Bird, J.

The relief which complainant seeks by his bill is permission to redeem the west % of the southwest % of section 24, town 20 north, range 16 west, Mason county, from certain tax sales for the years 1896, 1897, 1899, and 1900. The auditor general sold and deeded this 80-acre tract, which was vacant and unoccupied, to defendant on June 30, 1906, for the taxes for the foregoing years, and at the time of the sale defendant paid the taxes thereon for the years 1903, 1904, and 1905. On November 19, 1906, defendant gave the regular six months’ notice to redeem, which was directed to one John Chinkwam, and service was had by means of publication under the provisions of the statute. Proof of service by publication was duly filed in the office of the register of deeds for Mason county on January 17, 1907. Soon after this defendant went into possession, and was still in possession when this suit was filed in November, 1912. The questions which the record raises, and which are discussed in the briefs of counsel, are:

(1) Has complainant such an interest in these premises as entitles him to redeem?

(2) Was the six months’ notice to redeem sufficient?

(3) If the notice'to redeem was sufficient, was the tender adequate?

1. Defendant questions the right of complainant to maintain this suit on the ground of a lack of interest in the premises. It is conceded by both counsel that John Chinkwam was the last owner of the premises in the regular chain of title, and complainant relies on a quitclaim deed from Lucy Chinkwam, who was adjudged by the probate court of Mason county to be a daughter and sole heir of John Chinkwam. This showing raised at least a prima fade right in complainant to maintain a bill to redeem the premises.

2. Complainant contends that his right to redeem was not cut off by the six months’ notice to redeem, because it was not served upon the grantee in the last recorded deed in the regular chain of title. The defendant insists that it was so served. It is agreed by counsel that the government title came down to and vested in Robert N. Risden, and his deed was duly recorded. The heirs of Risden conveyed to Pelton, and Pelton to others, who in turn conveyed to Chinkwam. These deeds were all of record, save the deed from the Risden heirs to Pelton. It is conceded by complainant that, if the deeds from the Risden heirs to Pelton had been of record, John Chinkwam would have been the grantee in the last recorded deed in the regular chain of title, but he insists that, by reason of the break in the record chain, the Risden heirs, and not the heirs of John Chinkwam, should have been served with the- notice.

It is not disputed that the regular chain of title stopped with John Chinkwam; nor is it disputed that his deed and all other deeds in the regular chain of title except the Risden deeds were of record. The Risden deeds, which would have made the record complete, were then in existence, but were not recorded until after the notice was served. We must conclude, under this state of facts, that John Chinkwam was the grantee in the last recorded deed in the regular chain of title. The title was complete, but the record lacked the Risden deeds, which were subsequently, and before this suit was begun, placed of record. We think this was a substantial compliance with the provisions of the statute.

It is further argued that the service of the notice was invalid, for the reason that it was directed to John Chinkwam in the published notice, whereas, in fact his name was spelled “John Ching-kuom,” and so appears in the deed conveying these premises to him. Two witnesses were sworn who testified that they knew him personally for many years, and that he lived on this land at one time; that he could neither read nor write, and that his name was pronounced as though it were spelled C-h-i-n-k-w-a-m, and that they always spelled it in that way, and, further, that he was known by that name. This testimony appears to be nowhere denied, and, taken in connection with the following direction in the order of publication, we think it was sufficient to identify him as the former owner and occupant of the premises:

“To John Chinkwam, grantee in the last recorded deed in the regular chain of title to said land.”

A final contention is that this notice should have been directed to the heirs, executors, or administrators or trustee, because John Chinkwam was dead. The return of the sheriff is as follows:

“State of Michigan,
“County of Mason — ss.:
“I do hereby certify and return that, after diligent search and inquiry, I am unable to ascertain the whereabouts or post office address of John Chinkwam, his heirs, executors, or administrators, the grantee named in the last recorded deed in the regular chain of title to said land, and to whom said notice is directed and addressed.
“Dated December 5th, 1906.
[Signed] “Chas. Tufts,
“Sheriff of Mason County.”

It does not appear that the sheriff knew that Chinkwam was dead; therefore his certificate must be accepted as final on the extent of his knowledge, and of the result of his inquiry. The certificate was sufficient to authorize the publication. It will be unnecessary to discuss the remaining question.

The decree will be reversed, and the bill of complaint dismissed, with costs of both courts to defendant.

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