author: Moore, J. Hooker, C. J.

text:
    PINGREE v. STATE COURT OF MEDIATION AND ARBITRATION.

      1. Court of Mediation — Submission to Arbitration.
    A submission, to the court of mediation and arbitration, reciting that, “being unable to agree on the prices of the following work, we request an arbitration of the same,” followed by a list of certain kinds of work in the manufacture of shoes, is sufficiently broad to justify the court in saying the compensation should be by the piece, instead of by the day or week.
    2. Same — Extent of Authority.
    Where the proofs show that both the employer and workmen understand that the prices fixed by- the court shall take effect at a date prior to the date of submission, the court may fix the time, though the submission contains nothing on that subject.
    8. Same — Duration of Prices.
    Where the articles of submission fix the time during which the prices for work shall remain in force, the court need not name the time in its decision.
    4. Same — Time of Rendering Decision.
    Section 563, 1 Comp. Laws, requiring the court to render its decision within 10 days after the matter has been fully heard, is directory merely.

      Certiorari by Frank C. Pingree, John B. Howarth, and Hazen S. Pingree, copartners as Pingree & Smith, to review an award of the State court of mediation and arbitration.
    Submitted October 9, 1901.
    (Docket No. 19.)
    Affirmed April 8, 1902.

      Bowen, Douglas & Whiting, for relators.

      George F. Monaghan, for respondent.

      Rehearing denied June 11, 1902.

   Moore, J.

This case is brought here upon a writ of certiorari to review the proceedings of the State court of mediation and arbitration in a matter submitted to that court by the firm of Pingree & Smith and some of that firm’s employés. During the summer of 1899 serious differences arose as to the question of wages between the firm and its employés, which resulted in strikes and lockouts.' It was finally agreed to submit the differences to the respondent, and in the meantime the employés returned to their work. The submission was a written instrument, in words and figures as follows:

“Detroit, Dec. 16, 1899.
“ State Board oe Arbitration :
Gentlemen: Being unable to agree on prices of the following work, we hereby jointly request an arbitration of same by your honorable board, agreeing to abide by your decision. Prices to remain in force until May 1st, 1900.
“ 1st. For pulling over uppers and operating consolidated lasting machine on women’s, misses’, and children’s McKay sewed work.
“ 2nd. For pulling over uppers on women’s welt work, and operating the ideal lasting machine on same.
“ 3rd. For turning and second lasting women’s turned' work by new method now in use in our factory, styled ‘ string work.’
“ 4th. For trimming spring heels.
“5th. For automatic leveling.
“6th. For cleaning, ironing, and dressing.
“ 7th. For trimming bead-edge turns.
“ Frank C. Pingree,
‘ ‘ For Pingree and Smith. “Timothy O’Connor,
“Ernest A. Allen,
“ For Employés.
“In signing this agreement, we, the employés, do not relinquish any rights that we may have in any other matters not specified therein.”

March 9, 1900, the questions in dispute had been fully heard. March 31, 1900, the court rendered its decision, and served a copy on the counsel for the parties. It did not, however, file a copy with the clerk of the county of Wayne until April 19, 1900.

Pingree & Smith insist that, as a matter of law, the finding of the State court of mediation and arbitration was erroneous, because said court did not confine itself to the terms of said written submission. It is said by counsel:

“ In the case at bar the award departs from the submission, in that the arbitrators, in fixing prices for the work mentioned in the third, fourth, fifth, and sixth counts or paragraphs of said submission, treated that work as if it were piece-work, and fixed piece-work prices; thus, in effect, calling upon Pingree & Smith to change their method of doing the work embraced in those counts.”
“The decision of this court of mediation and arbitration makes a new contract between employers and employés, and substitutes it for the one existing at the time the submission was made.* Without any authority under the submission or elsewhere so to do, the court of arbitration said to the firm that the men who were engaged to work and who were working by the day or week must be considered or treated as if they had been engaged to work and were working by the piece. To permit the decision to stand would be to place a new and heavier burden upon the employers without their assent, and without any knowledge on their part that an attempt to do this was to be made.”

It is, of course, well settled that when arbitrators go beyond the submission, they exceed their jurisdiction, and the award may be set aside. The record discloses that, when this submission was made, some of the men claimed, under the system adopted by their employers, that, where they had formerly been able to earn $12 to $15 a week, they were able to earn less than $10 a week. It also shows that an attempt had been made to have the prices fixed by the piece, instead of having the work done by the day or week, and that upon the hearing, without objection, testimony was given upon both sides, not only by local experts, but by witnesses from a distance, in relation to the scale of wages by the piece as well as by the day. The terms of the submission were doubtless prepared in view of the actual situation and the claims of the respective parties, and, we think, aré sufficiently broad to justify the court in saying the compensation should be by the piece, instead of by the day or week.

In its decision the court fixed a time when the scale of prices should take effect. Counsel say of this:

“ The court of mediation and arbitration departed from the submission, also, when it decided that this decision, under the agreement of submission to this court, is ‘to take effect from the 26th day of July, A. D. 1899, and be paid from that date.’ An examination of the submission will show that the court is not asked or expected to fix the date from which the prices it may determine shall be paid. It might be said that the prices are to be paid from the date of the submission, December 16, 1899, — five months later than the date set by the court of mediation and arbitration. It seems to us that it might just as reasonably be said that these prices were to be paid from the date of the award. But, however this may be, there is nothing in the submission which authorizes the court of mediation and arbitration to fix a time antedating the submission itself. ”

It is difficult to justify this claim in view of what is disclosed by the record. It is shown that on the 26th of July, 1899, a machine was put. in the factory upon which the work was done which is mentioned in count 1 of the submission. Upon the trial Mr. Oakman was giving testimony in relation to the prices which should be paid to the employés, when the following occurred:

‘ ‘ Q. At the time this matter was submitted to arbitration for this board to decide on what prices should be paid, that price would then be paid and operate back to the time the work began ?
“A. Yes; but this shoe we are talking about now was not made this way, and consequently could not be put down until possibly a month or so after.
The Court: Is the witness referring to a past arbitration ?
Q. No, to the time this consolidated machine came over there, and Mr. Pingree said he would pay them a certain amount, and the amount due should be in abeyance. I ask the witness the date.
“Mr. Whiting: July 26, 1899.
“Mr. Pingree: I don’t think there is any question in regard to that, Mr. Oakman, and the men all fully understand that whatever price is set today is to go back to the time the machine was put in.”

Another witness was also testifying that he was being paid four cents a pair for lasting shoes, when counsel stated, “We do not claim we have paid anybody in full, because we expected some day it would be settled by this court.” In view of these statements made during the progress of the trial, we do not think the relators can be heard to say the court erred in fixing the date it did when its decision should take effect.

It is also said the court erred in failing to fix a limit to the time when the prices fixed by them should be in effect. As the articles of submission themselves fixed the limit, we cannot see what would be accomplished by naming the time in the decision.

It is said:

“ The State court of mediation and arbitration was act; ing under the terms of the act under which it was created, and it must therefore act, if it act at all, in the manner pointed out by the statute. Section 563, 1 Comp. Laws, says:
“ ‘After the matter has been fully heard, the said board, or a majority of its members, shall, within ten days, render a decision thereon in writing, signed by them or a majority of them, stating such details as will clearly show the nature of the decision and the points disposed of by them. The decision shall be in triplicate, one copy of which shall be filed by the clerk of the court in the clerk’s office of the county where the controversy arose, and one copy shall be served on each of the parties to the controversy.’
“The matter had been fully heard by and on March 9, 1900, but the decision was not rendered until March 31, 1900, and was not filed in the clerk’s office of Wayne county, where the controversy arose, until April 19, 1900. As there was no waiver of this requirement of the statute, it was obligatory upon the court to render its decision within the time limited, and its failure to do so rendered its award void.”

In the case of Renaud v. State Court of Mediation and Arbitration, 124 Mich. 648 (83 N. W. 620), the constitutionality of the statute creating this court was attacked; It was held the statute was constitutional; that it called into existence a court contemplated by article 6, § 23, of the Constitution. The respondent then being a court, the case of Rawson v. Parsons, 6 Mich. 405, is germane to the subject under discussion. Section 10260, 3 Comp. Laws, provides, among other things:

“ Upon the trial of a question of fact by the court without a jury, the decision of the court shall be given on or before the first day of the term succeeding that in which the cause was submitted.”

In Rawson v. Parsons, 6 Mich. 405, it was said:

“We are all of opinion that this provision, as relates to the time within which the decision shall be given and filed, is directory merely. It imposes a duty upon the judge; but, as the parties have no control over his action, it would be a harsh construction which should deprive them of the fruits of the litigation because the judge fails to decide by a particular day. ” ’

No case could exemplify such a hardship more than the one at bar. The testimony taken makes more than 500 pages of printed record. Several complicated scales of prices were introduced, and, if the testimony was to be intelligently considered and passed upon, some time would necessarily elapse. What little delay there was is not to be charged against the parties to the litigation, if to anybody ; and the law ought not to be given such a construction as is contended for by the relators.

The other questions raised by counsel have been considered, but we do not deem it necessary to discuss them.

The case is affirmed.

Montgomery, J., concurred with Moore, J.

Hooker, C. J.

This cause is before us upon certiorari. It involves an award made by the State court of mediation and arbitration in a cause between Frank C. Pingree et al., manufacturers, and some of their employés, whose names do not appear. The court referred to attempted to settle some differences between the employers and employés, and after a hearing they made an award fixing rates of compensation, etc. Pingree claims that the award is invalid for several reasons, among them the following, viz.: That the board attempted to adjudicate matters not submitted, and therein “exceeded their jurisdiction;” that it did not make its award within the period of 10 days, prescribed by statute; that it erred in receiving hearsay evidence upon the trial.

This proceeding arose under chapter 30 of the Compiled Laws, which is entitled:

“An áct to provide for the amicable adjustment of grievances and disputes that may arise between employers and employes, and to authorize the creation of a State court of mediation and arbitration.”

The act is a recent one, and is apparently designed to afford a means of adjusting matters relating to wages, hours of labor, and perhaps other matters entering into the relation of employer and employés. The act has been before us but once, and that was in this same cause. On that occasion the present relators attacked the law upon the ground that it was unconstitutional. The law was sustained under article 6, § 23, of the Constitution, as a court of conciliation, and it was held that such court has not the power to grant rehearings.

The term “court of conciliation,” as used in the Constitution, has not been judicially defined. If it should be held to mean a tribunal which might interest itself in controversies with a view to inducing the parties to compromise, or otherwise harmonize and adjust their differences, without power to bind the parties by its own opinions or conclusions, it would certainly be a court of conciliation; and such we understand to be the limit of the power of some such courts. Whether the term used in the Constitution can be properly held to apply to a court which has power to make a binding and enforceable judgment may be a doubtful question. That question is not here, because the law contains no provision indicating such an intention, unless we are to say that the provision for the making and filing an award is tantamount to authorizing it to render judgments. If that view should be taken, and we should hold that certiorari lies to review and correct such judgments, it is obvious that the court of conciliation would not differ materially from other courts in existence in this State under the other provisions of article 6 of the Constitution. See section 1, which names the courts in which the judicial power shall be vested. Courts of conciliation are not mentioned in section 1, and there is force in the claim that they do not fall within the definition usually applied to courts, and that they were intended to provide an entirely different method of settlement of disputes, viz., conciliation of the parties, and settlement of controversies, as contradistinguished from the establishment of legal rights by force of judicial'trials. If they are thus distinguishable, the decision to be made and filed under this law might have no judicial force, and there would be no occasion to review it. If this view is not taken, and it shall be said that a tribunal may be erected to act as arbitrators, and that it can be said to be within the constitutional term “courts of conciliation,” may we hold that it is within the power of the legislature to authorize such tribunal to go further than to make an award in the ordi-' nary acceptation of the term, which has a settled legal meaning, if in fact it may go so far? We may not discuss the former of these questions, for there has been no attempt to do more in this act than to erect a tribunal which should perform the functions of arbitrators by making an award. Its award is made, and, under the provisions of the act, must be filed with the clerk of the county. The question then arises whether, being a court of conciliation, its award may be enforced, and, if so, how.

As no one is here trying to enforce this award, we need not consider whether it is enforceable or not; but, assuming that it is, for the purpose of the case, we must conclude that it is to be enforced in one of two ways: (1) By action, or by way of defense in an action, or suit in equity to set aside the award in a proper case. 3 Enc. Pl. & Prac. 155. (2) Under our statute (3 Comp. Laws, chap. 302), if that is applicable. In either case the proceeding is to be taken in a court of original jurisdiction. See Morse, Arb. 574. An award at common law is usually enforced by' the appropriate action, or it may be' by suit to compel specific performance. Id. 610; 3 Enc. Pl. & Prac. 154. On the other hand, it may be used by way of defense; and, where proceedings have been taken under a statute which makes the award returnable into court, a motion may be made in that court to vacate it. Morse, Arb. 611, 613, 614. To hold that the intervention of this court may be invoked to supervise, control, and direct this court of mediation and arbitration, to review its proceedings, and reverse its awards because it has not followed the technical methods and rules applied in ordinary judicial proceedings, to deprive it of its summary influence or power — if “power” is an appropriate term to use — by dragging through the courts proceedings which the law attempts to have disposed of in 10 days, will be, in my opinion, to thwart the purpose of the act, and turn the court of conciliation or arbitration into the ordinary tribunal, with its attendant evils of technicality, delay, and expense to litigants.

We have purposely left many questions pertaining to this statute undecided, because they have not been djscussed by counsel, and it is unnecessary to pass upon them. The writ was improvidently issued, because it is not an appropriate or proper remedy in the premises. It should, therefore, be dismissed, with costs.

Long and Grant, JJ., did not sit.


source: Caselaw Access Project

author: Long, J. Hooker, C. J.

license: Public Domain

text:
    CITY OF GRAND RAPIDS v. LAKE SHORE & MICHIGAN SOUTHERN RAILWAY CO.
    1. Paving Tax — Retroactive Legislation. ,
    Taxes which are not a personal liability against the owner of the land at the time they are assessed and levied cannot be made so by a subsequent act of the legislature.
    2. Same — Unconstitutional Law.
    Act No. 443, Local Acts 1895, seeking to make certain railroads personally liable for a paving tax theretofore levied on their lands, is invalid.
    Error to superior court of Grand Rapids; Newnbam, J.
    Submitted October 9, 1901.
    (Docket Nos. 25, 26.)
    Decided April 8, 1902.

      Assumpsit by the city of Grand Rapids against the Lake Shore & Michigan Southern Railway Company to recover certain assessments for public improvements. From a judgment for plaintiff for part of its claim, both parties bring error.
    Reversed in favor of defendant.

      Lant K. Salsbury, for plaintiff.

      Fitz Gerald & Barry (Francis A. Stace, of counsel), for defendant.
   Long, J.

Plaintiff brought this action of assumpsit against the defendant railway company, claiming that it was personally liable for the payment of several special improvement assessments made at different times in the years 1892, 1893, and 1894. The declaration contains five counts, on five alleged separate, independent causes of action, arising out of five different special improvements. Plaintiff subsequently abandoned its claim under the fourth count. On the trial the court below took the case from the jury, and directed a verdict for the plaintiff on the first count for the sum of $1,277.90, — being the amount claimed for the assessment for the pavement of West Bridge street, with interest ‘from the date of the assessment, — but held the assessments for the improvements referred to in the remaining counts illegal and void. Both parties have appealed.

It appears that, at the time when the assessment for the improvement of West Bridge street was made, there was no- provision in the city charter that such assessment should be a personal demand against the owner or occupant of the property assessed; the only method provided for enforcing collection being a sale of the property assessed. The mayor’s warrant did not direct or authorize any proceedings by distress or suit or otherwise for the collection thereof. The assessment was made a lien on the land, and, if not paid voluntarily, the treasurer could do no more than to so certify in his return. This condition of the law was recognized by this court in the case of Lake Shore & Mich. Southern R. Co. v. City of Grand Rapids, 102 Mich. 374 (60 N. W. 767, 29 L. R. A. 195), in which case the city was enjoined from selling this same land for this same assessment. In this case, after reciting the provisions of the charter as to the sale of the land, the court said: “At the time of this assessment, no other means were provided by the charter for the collection of such assessments.” In 1893 section 10 of title 6 was amended by a provision that the mayor’s warrant should contain a clause “commanding and authorizing said treasurer, when he may deem it necessary so to do, to levy and collect the same by distress and sale of any personal property upon such premisés belonging to the premises chargeable to said assessment.” Act No. 418, Local Acts 1893. Of this provision this court remarked in the above case: “Just what this provision means is difficult of ascertainment.”

After the decision by this court of the above-mentioned ease, the city sought and obtained further legislation in relation to special assessments; and at the next session of the legislature, in 1895, the said section 10 was again' amended, so that no lien should attach to the roadbed,, right of way, or other premises of any duly incorporated railroad corporation which are necessarily used in operating its corporate franchises, and the city treasurer was authorized, ‘ ‘ when he may deem it necessary so to do, to levy and collect the same by distress and sale of any personal property belonging to the person, corporation, or company against whom such assessment or tax is made, and found within the corporate limits of the city of Grand Rapids, in like manner as general State, county, and municipal taxes are collected out of personal property within the corporate limits of said city.” Act No. 444, Local Acts 1895. . The city also procured the passage of the following act, which was approved on the same day as the amendment to section 10 as above indicated; such act being entitled:

“ An act to provide for the collection of certain assessments on premises belonging to the Chicago and. West Michigan Railway Company, the Detroit, Lansing and Northern Railroad Company, the Lake Shore and Michigan Southern Railway Company, the Grand Rapids and Indiana Railroad Company, the Michigan Central Railroad Company, and the Detroit, Grand Haven and Milwaukee Railway Company, for public improvements in the city of Grand Rapids.
“Section 1. The People of the State of Michigan enact, that the freight-houses, road-beds, rights of way, and other premises of the Chicago and West Michigan Railway Company, the Detroit, Lansing and Northern Railroad Company, the Lake Shore and Michigan Southern Railway Company, the Grand Rapids and Indiana Railroad Company, the Michigan Central Railroad Company, and the Detroit, Grand Haven and Milwaukee Railway Company, within the corporate limits of the said city of Grand Rapids, which are necessarily used in operating their respective franchises, are liable for all valid unpaid special assessments for public improvements heretofore made within said city of Grand Rapids, and legally assessed against the same, but that no lien shall attach thereto on account of such assessments, and that the payment of such assessments shall not be enforced and collected out of the same.
‘ ‘ Sec. 2. All such assessments which are valid, and all installments thereof, together with all interest and charges thereon, and all costs and charges for enforcing and collecting the same, are hereby declared legal demands against said respective railroad or railway corporations against whose premises said assessments were made, in favor of said city of Grand Rapids, and may be enforced by said city against said railroad or railway corporations in an action of assumpsit or other proper legal action, and collected out of any property of said respective railroad or railway corporations which is liable to levy and sale upon execution;
“Seo. 3. If, after the passage and taking effect of this act, any such assessment, or any installment thereof, is or shall thereafter become due and payable, and the same is not paid and discharged by the railroad or railway corporation against which the same is a legal demand, the said city of Grand Rapids is hereby authorized and empowered immediately to enforce and collect the same, together with all interest and chai’ges thereon, and all costs and charges for collecting the same, in any. manner provided for in this act.” . Act No. 443, Local Acts 1895.

- The plaintiff brings this action, claiming the right to recover under the above act of May 27, 1895, and on the trial in the court below was permitted, by the direction of the court, to recover under said act. The defendant claims that, if plaintiff can recover at all, it must be under that act; but it is contended that the act is unconstitutional, as being repugnant to the Constitution of the United States and of this State, because:

1. It attempts to create a personal liability to pay assessments previously made, where such liability did not exist when the assessments were made.
'2. It attempts to create a personal liability to pay special assessments for local public improvements.
3. It attempts to create a personal liability to pay an assessment without an opportunity to he heard thereon.
4. The act affects only certain specified railroad companies, and does not apply to all persons in like manner assessed.
5. It has more than one object, and its object is not expressed in its title.

It is further contended by counsel for defendant that, even if the act be valid, it does nbt apply to the assessment in this case, because such assessment is not shown to have been a valid assessment upon premises belonging to defendant; that the assessment itself was illegal and void, because not made in proportion to the benefits to the land; that the proofs of the assessment and of the lease to the defendant were inadmissible in evidence under the issue joined in the case; and that the plaintiff has no cause of action under the facts in the case.

If any action can be maintained, it must be under the statute above quoted. Assessments upon land cannot be made personal claims, in the absence of statutory provision. In the case of Lake Shore & Mich. Southern R. Co. v. City of Grand Rapids, 102 Mich. 374 (60 N. W. 767, 29 L. R. A. 195), this rule was recognized. It appeared in that case that the city charter, as it at that time existed, made no provision to enforce the collection of the tax except by a sale of the land. Under it the railroad was not made personally liable for the tax. In Mogg v. Hall, 83 Mich. 576 (47 N. W. 553), it was expressly held that a drain tax could not be collected as a personal tax against the owner; the only provision in the statute being that, if not collected, the land should be returned. The only question for consideration in the present case, therefore, is whether the act of May 27, 1895, which purports to give a right of action (Act No. 443), is valid. The act attempts to create a personal liability to pay assessments previously made, where no liability existed when the assessments were made. It declares that certain assessments theretofore made, and which prior to its passage had been mere charges upon the land, shall be legal demands against certain specified corporations; or, in the words of the act:

“All such assessments which are valid, and all installments thereof, together with all interest and charges thereon, and all costs and charges for enforcing and collecting the same, are hereby declared legal demands against said respective railroad or railway corporations ¡against whose premises said assessments were made, in favor of said city of Grand Rapids, and may be enforced by said city against said railroad or railway corporations in an action of assumpsit or other proper legal action, and collected out of any property of said respective railroad or railway corporations which is liable to levy and .sale upon execution.”

In Hart v. Henderson, 17 Mich. 218, it was said by Chief Justice Cooley:

“Nothing is a tax simply because of being called so; but any proceedings by which a man’s property is to be taken from him on a claim which has no other basis than the naked declaration of the legislature that it shall constitute a demand against him is unconstitutional- and void, ■as not being ‘according to the law of the land,’ but, on the ■other hand, wholly unwarranted by legal principles.”

The only basis for the action in the present case is the •declaration of the legislature that these assessments shall constitute a legal demand against said corporations. In the case of Mogg v. Hall, supra, it appeared that certain land of the plaintiff had been assessed in 1884 for the construction of a drain under the drain law then in force (Act No. 269, Pub. Acts 1881). That act, like the charter of Grand Rapids pi’ior to 1895, did not make such assessment •a personal charge on the owner, but declared it to constitute a lien on the land, and provided for a sale of the land in case of nonpayment. It was said by the court in that case:

i “Under this law the property of the then owner of the land could not have been seized and sold to satisfy the tax. If not paid, the only thing the collector could do was to return the lands. The tax was one levied upon the land, ■and not against the owner. This is further shown by the fact that, in the law of 1885, these taxes were expressly made a personal claim against the owner, and provision made for their collection as against him, the same as other taxes are collected. Act No. 227, Pub. Acts 1885. This is an indication that the legislature constiued the act of 1881 as deficient in this respect. It was also provided in the act of 1885 that all drain taxes ‘properly returned to the county treasurer,’ and remaining unpaid, ‘may be ordered charged back by the board of supervisors, and reassessed upon such lands, in the same manner that unpaid or rejected taxes may be charged back by the auditor general, and reassessed, under the general provisions of law.’ * * * When this tax was originally assessed, in 1884, under the law of 1881, as before said, it could not have been made a personal claim against the owner of the land. Ik was never levied against him, but against the land. The law of 1885 undertakes to make these taxes a persona] claim against the owner of the land. * * * This act could not have the retrospective action contemplated by the act. Taxes levied after the act went into effect may properly be made a personal claim, but the rejected taxes of 1884, reassessed under the act of 1885, cannot, in our opinion, be made a personal claim against the owner of the land.”

We think the above case is controlling of the present, and that no other of defendant’s contentions need be-considered.

The order of the court below holding the act valid, and entering judgment for the plaintiff, must be reversed. No' new trial will be ordered. It follows that the appeal of tbe city in reference to the other taxes cannot be sustained, and as to those the judgment must be affirmed.

Hooker, C. J., Moore and Montgomery, JJ., concurred with Long, J.

Hooker, C. J.

(concurring). This action is a second attempt through legal proceedings to collect an assessment made for local improvements upon the property of the defendant. The first failed for the reason that the legislature had failed to provide a method of enforcing payment by proceedings against the land assessed. In dismissing the bill in that case, we held that the local assessment was valid, and we were careful not to hold that the claim of the city for the assessment was not a valid and subsisting obligation, if not a lien upon the land. Subsequently the legislature attempted to make this a personal debt due from the defendant to the city, and incidentally provided ■that the land assessed should be discharged of any lien therefor. I concur with Mr. Justice Long in holdingthat this act cannot be given a retroactive effect, and therefore "that it has no application, in any of its provisions, to this ■cause. The judgment must therefore be reversed, and no new trial ordered; but it’ should be understood that the lien of the city for its taxes, if it ever had any, is unaffected by the legislation mentioned, or by these proceedings.

Moore and Montgomery, JJ., concurred with .Hooker, C. J.

Grant, J., did not sit.


author: Long, J.

text:
    REAUME v. WAYNE CIRCUIT JUDGE.
    1. Nonsuit — Order Vacating — Discretion or Court.
    Where the plaintiff, through the negligence of herself and counsel, is absent from the State at the time of trial, and a voluntary nonsuit is entered, it is within the discretion of the trial court to set aside the nonsuit upon payment of costs, though the statute of limitations would be a bar to a new suit for the same cause of action.
    -2. Same — Other Suits ror Same Cause or Action.
    The fact that the plaintiff has been defeated in other suits for the same claim, on the ground that she had mistaken her remedy, is no reason why the nonsuit should not be vacated, and she be allowed to avail herself of a proper remedy.

      Mandamus by Denis J. Reaume and others to compel William L. Carpenter, circuit judge of Wayne county, to vacate an order setting aside a nonsuit.
    Submitted October 29, 1901.
    (Calendar No. 18,884.)
    Writ denied April 8, 1902.

      John D. Conely, for relators.

      Fred A. Baker, for respondent.
   Long, J.

The opinion of Judge Carpenter so fully covers the facts upon which he set the nonsuit aside that we insert it here:

This is a motion to set aside a nonsuit. The jury was-impaneled late one day, and the case continued until the next morning. Plaintiff’s counsel did not attend court on the following morning, but he sent word that he could not get his witness, and would therefore submit to a nonsuit. Judgment of nonsuit was accordingly taken. Plaintiff’s-counsel now moves the court to set aside that nonsuit, upon affidavits which show that his client, who had formerly resided in Birmingham, Oakland county, in this State, removed about a year since to the city of Buffalo, N. Y. that she gave no information of this fact to her counsel;. that her counsel, at the time the jury was impaneled, thought there would be no difficulty in reaching his client and her witnesses, as he supposed her still to reside in Birmingham; that, after the jury was impaneled, he made-an effort to reach the plaintiff, but was unable to ascertain her whereabouts, and did not learn them until just before this motion was made. Several objections are made to this motion, to which I will now refer.
“1. It is urged that the court has no power to set aside-a nonsuit voluntarily submitted to, except when leave to make such a motion is reserved. I have examined the cases cited in support of this contention by defendants’ counsel. I do not think they are applicable to a case like the present. In this case plaintiff’s counsel submitted to a nonsuit, as the court was informed, because he could not procure the witnesses essential to prove his case. He-recognized that there was nothing else to do than to permit a judgment of nonsuit to be entered. He could not have made a showing warranting a continuance of the case or the withdrawal of a juror; and it would seem tome unjust to say that his rights were any less than they would have been had he opposed the entering of a nonsuit, or than as if he had. stated the facts to the court, and taken the judgment of the court as to what course should be pursued. As already stated, he simply signified his recognition of the fact that the one thing that the court must do was to enter a judgment of nonsuit.
“2. Some criticism lis made of the affidavits because-they do not state that the plaintiff has stated the facts of the case to her counsel, and been advised by him that she has a meritorious case, etc. What she has stated is that she has stated the facts ‘ of her ’ ease. It does not seem to me that this criticism is just. Neither does it appear by these affidavits that plaintiff herself is a material witness, and that the case could not have proceeded in her absence. I think I should assume from the character of the cause of action that the plaintiff is a material witness. In any event, if this point is insisted upon, I should permit additional affidavits to be filed showing the fact.
“3. It is insisted that there was such an absence of diligence on the part of the plaintiff and her counsel that the court should not grant this motion. . I think it is clear that either plaintiff or her counsel was lacking in diligence. Plaintiff, knowing as she did that this suit was pending, should have apprised her counsel of her whereabouts, and it is probably not too much to say that counsel should have known his client’s whereabouts before he commenced the trial of the cause. It would seem to me, however, that such negligence as this can be adequately punished by granting this motion on proper terms, and that it would be inadequate punishment, and punishment out of proportion altogether to the fault, to deprive plaintiff of her cause of action, for such might be the effect of the denial of this motion.
“4. It is urged that the fact that the plaintiff has already tried three suits against these defendants to enforce this same claim (upon all of which she has been defeated), and the fact, too, that upon the first trial of such claim, upon the chancery side of this court, the trial judge decided that there was no fraud, should move the court to deny this motion. I cannot agree with this contention. The first suit was a suit in chancery to set aside a contract which it is now claimed was fraudulent. The Supreme Court dismissed the bill, upon the ground that the complainant, the plaintiff here, had ratified the transaction. In both the second and third suits the plaintiff sought to recover in assumpsit upon the implied contract arising from the fraud. It was held that this action could not be maintained. In other words, under the advice of counsel, plaintiff has chosen the wrong remedy for her cause of action. The fact that the trial judge in the chancery court thought there was no evidence of fraud may or may not be a defense. It is by no means clear that that constitutes a defense. If it does, it would seem to me unjust to the plaintiff, by a denial of this motion, to prevent her obtaining the judgment of the Supreme Court upon this proposition. I do not think that the fact that plaintiff has mistaken her remedy should deprive her of the right of now availing herself of a proper remedy.
“5. It is urged that it would be unjust to the defendants to deprive them of the rights which have accrued to them by the granting of this nonsuit. It is said that, should this nonsuit stand, the statute of limitations has barred the plaintiff’s right of recovery, and to set aside this nonsuit is to deprive the defendants of that defense. This very argument moves me to vacate the nonsuit. It seems to me unjust, as I have indicated before in this opinion, that the negligence of plaintiff or her counsel should cost plaintiff her entire right of action. It is sufficient, it seems to me, that, when one has been negligent, he should pay for the damages thereby caused.
“An order will be made in this case setting aside the nonsuit, on condition that, the plaintiff pay the taxable disbursements incurred by defendants for the purpose of trying this case, and an attorney fee of $50, such payment to be made in 10 days after the taxation of those costs.”

Under these circumstances, we think the circuit court was not in error. The matter of setting aside the nonsuit was within the discretion of the court.

The order will be affirmed, with costs.

The other Justices concurred.


author: Montgomery, J.

text:
    COMMISSIONER OF RAILROADS v. GRAND RAPIDS & INDIANA RAILWAY CO.
    1. Corporations — Rights and Duties.
    Corporations cannot avail themselves of the provisions of the law giving them the right to do business, and disregard the onerous provisions of the law.
    2. Railroads — Rates of Pare.
    A railroad company organized in 1896 under the general law is bound by paragraph 9, section 9 (2 Comp. Laws, § 6234), fix
      ing the rate of fare at 2| cents per mile where the passenger trains earn more than §3,000 per mile, though such rate be unreasonable and inadequate.
    S. Same — Foreclosure—Reorganization.
    ' Purchasers at a foreclosure sale of a railroad, who organize a corporation under section 6224, <2 Comp. Laws, securing to them the same rights, powers, and privileges as the original company had, subject to all the provisions of said act and amendments thereto, are subject to the amendment of 1889 (2 Comp. Laws, § 6284, par. 9) reducing the rate of fare to 2-J-cents per mile, though the mortgage was given before said amendment was enacted.
    4. Same — Constitutional Law — Impairment op Property .Rights.
    The amendment of 1889, taking from the bondholders, in case of the foreclosure of a mortgage, the right to reorganize except upon condition of submission to the rates of fare fixed therein, is not unconstitutional as impairing, the obligations and property rights secured by a mortgage made prior to said amendment, as the purchasers would be able to manage the road without reorganization, and the amendment affects the remedy merely.

      Certiorari to Kent; Wolcott, J.
    Submitted December 10,1901.
    (Docket No. 219.)
    Decided April 8, 1902.

      Mandamus by Chase S. Osborn, commissioner of railroads, to compel the Grand Rapids & Indiana Railway Company to reduce its rate of fare. From an order granting the writ, respondent brings certiorari.

    Affirmed.

      Horace M. Oren, Attorney General (Roger Irving Wykes, of counsel), for relator.

      T. J. O’Brien and James H. Campbell, for respondent.
   Montgomery, J.

This is certiorari to review proceedings of the circuit court in which a mandamus was issued requiring respondent to reduce its fare. It appears that the respondent was organized as a corporation on the loth of July, 1896, under the railway law then in force, which, in paragraph 9 of section 9(2 Comp. Laws,, § 6234), fixes the rate of fare of railroad companies whose passenger trains earn more than $2,000 per mile at 2£ cents per mile. The respondent comes within this provision. The respondent company was organized, however, by purchasers of the property of the Grand Rapids & Indiana Railroad Company, on foreclosure of a mortgage given on the 1st day of August, 1884. At the time-this mortgage was given, the only limitation on the power to fix rates of fare was that it should not exceed three cents per mile. It is the respondent’s contention that under 2 Comp. Laws, § 6224, being section 2 of the-railway act, it succeeded to all the rights and privileges of the Grand Rapids & Indiana Railroad Company. The-answer states that the rate of fare of 2-J- cents per mile is unreasonable and inadequate, and, as this statement is admitted by demurrer to the answer, it is the respondent’s-contention that such a provision would be invalid as against the original railroad company, and that, as the-respondent has succeeded to the rights of the railroad company, it is equally invalid as to it.

The contention that a statute fixing unreasonable rates-would constitute an impairment of the property rights of the old company, is based upon numerous decisions of the federal supreme court and of this court. The subject was discussed in Smith v. Railway Co., 114 Mich. 460 (72 N. W. 328), and the rule was recognized in both opinions in that case that legislation, the effect of which is to deprive a corporation of its property, cannot be sustained under the power to alter, amend, or repeal. See, also, Attorney General v. Looker, 111 Mich. 498 (69 N. W. 929); City of Detroit v. Plank-Road Co., 43 Mich. 140 ( 5 N. W. 275). And that the fixing of unreasonable rates is an infringement of the property rights of an existing corporation, within the meaning of the fourteenth amendment, appears to have been determined by the federal supreme court in Chicago, etc., R. Co. v. Wellman, 143 U. S. 339 (12 Sup. Ct. 400); Reagan v Trust Co., 154 U. S. 362 (14 Sup. Ct. 1047); Covington, etc., Turnpike Road Co. v. Sandford, 164 U. S. 578 (17 Sup. Ct. 198); Chicago, etc., R. Co. v. Minnesota, 134 U. S. 418 (10 Sup. Ct. 702); and Lake Shore, etc., R. Co. v. Smith, 173 U. S. 684 (19 Sup. Ct. 565). The question in this case, however, is whether the defendant corporation stands in the same position in this respect as would the original company have occupied had there been no foreclosure. The briefs contain an elaborate discussion of the question as to how far, and in what respect, a charter, or a law authorizing an incorporation, is a contract. We do not find it necessary to discuss this question at length, for, in our view, it cannot admit of doubt that corporations formed under an existing law will not be heard to question the rates fixed by the statute. They cannot avail themselves of the provisions of the law which give them the right to do business, and disregard those provisions which are onerous. This was the view taken by this court in Jackson & Suburban Traction Co. v. Commissioner of Railroads, 128 Mich. 164 (87 N. W. 133), and has the support of authority in other jurisdictions. See 4 Thomp. Corp. § 5257, and cases cited. The case turns upon the question of whether the respondent is in position to insist that it occupies precisely the same'ground that the former corporation would but for the foreclosure.

2 Comp. Laws, § 6224, provides that:

“In case of the foreclosure and sale of any railroad, or part of any railroad, under any trust deed or mortgage, * * * it shall be competent and lawful for the parties who may become the purchasers, and such others as they may associate with themselves, to organize a corporation for the management of the same, and issue stock in the same in shares of one hundred dollars each, to represent the property in said railroad; and such corporation, token organized, shall have the same rights, powers, and privileges as are or may be secured to the original company whose property may have been sold under and by virtue of such mortgage or trust deed.”

The section then provides for a declaration or certificate of the purchasers at the sale, setting forth the description of the property, etc., the amount paid, and the stockholders to whom stock is to be issued, which shall be addressed to the secretary of State, and proceeds:

“And, being filed and recorded in his office, the said corporation shall become complete, with all the powers and rights secured to railroad companies under this act, to all the provisions of which, and amendments thereto, it shall be subject.”

When the mortgage in question was given, the section fixing the rates contained no limitation except that they should not exceed three cents per mile. It is contended that the legislature could not, by the amendment of 1889, enacted after the mortgage was made, withdraw from the bondholders the right to reorganize except on condition of submitting to the rates fixed by the statute. This question would seem to depend upon whether the legislation affected the bondholders’ remedy simply, or affected the right of property. It may be urged with some force that, if the legislature might prohibit any incorporation except on the terms of acceptance of unreasonable rates, the bondholders would be remediless, and that the right to reorganize is, in effect, a part of the mortgage contract, and that the rights and franchises of the debtor corporation vest in the purchaser on reorganization. If this view be adopted, and particularly if it be said that the purchaser 'could not, except through the instrumentality of a corporation, conduct the business of the corporation, it would be difficult to say that the amendment affects the remedy merely. Its effect would be, under such construction, to cut off the remedy, pro tanto at least; and, if the rates are so far unreasonable as to make the operation of the road a burden, the effect would be to cut off the remedy wholly, thus rendering the franchise valueless. This would be beyond the power of the legislature. Mundy v. Monroe, 1 Mich. 68; Cargill v. Power, Id. 369.

But is this the effect of the amendment ? May it not be said that the rights and property of this corporation vested in the purchaser upon the foreclosure sale, and that, independent of any express statutory authority to operate, the purchaser was authorized to maintain his property rights, and to operate this railroad in accordance with the franchise of the original company, and under precisely the same conditions? If this be so, the authority to incorporate was not essentially a part of the property right, but was a privilege granted by the State, which might be withdrawn. This latter view is enforced by the fact that, under the Constitution, the legislature possessed the power to alter, amend, or repeal this statute; and by the further fact that under section 2, as it has always existed, the right to reorganize by the purchaser at a foreclosure sale was limited by the provision that the corporation should be vested with the powers and rights secured to railroad companies under the act, to all the provisions of which, and the amendments thereto, it should be subject. More than this, the legislature possessed the power, under the Constitution, to repeal the statute. It could do this one day before the reorganization, or the next day after. While, by this means, it could not cut off the mortgage, or devest the mortgagee of his property rights, it could deprive him of the power of reorganization.

We think the legislation was not. unconstitutional, and the order of the circuit court is affirmed, with costs.

Hooker, C. J., Moore and Grant, JJ., concurred. Long, J., did not sit.


author: Hooker, C. J.

text:
    FERRIS v. SNOW.
    1. Contract Under Seal — Personal Liability of Stranger.
    A party not named in a contract under seal for the purchase of land, and which does not purport to be made in his behalf; is not liable for the purchase price, in the absence of some act of ratification.
    2. Same — When Cannot be Ratified.
    There can be no ratification of a contract by a stranger to it when neither party to the agreement intended or understood that it was being made for or in behalf of such third person.
    3. Same — Purchase Price.
    The fact that a stranger to a land contract intended to procure title to part of the premises through the vendee, and after-wards paid some interest on it, does not make him liable for the purchase price, if the vendee was not acting for him in making the contract.
    Cross-appeals from Wayne; Hosmer, J.
    Submitted December 12, 1901.
    (Docket No. 173.)
    Decided April 8, 1902.
    Bill by Loyde L. Ferris, individually and as administratrix of the estate of George W. Ferris, deceased, against Frank E. Snow, Fremont Woodruff, William A. Jackson, and Georgia-F. E. Ferris, Jeanette V. Ferris, and Thomas A. Ferris, infants, by Loyde L. Ferris, guardian ad litem, for the specific performance of a land contract. From the decree rendered, all parties except defendant Snow appeal.
    Reversed, and bill dismissed.

      George W. Radford, for complainant, and of counsel for infant defendants.

      DeForest Paine, for defendants Woodruff and Jackson.

      George C. Morse, for infant defendants.
   Hooker, C. J.

George W. Ferris and the complainant were husband and wife. On January 2, 1893, they joined in. a land contract under seal, whereby they agreed with Frank E. Snow, trustee, to sell to Mm, for the sum of $21,500, certain premises then owned by said George W. Ferris, said Snow, trustee, undertaking to pay therefor in the manner and at the times specified in the contract. Ferris subsequently died, and after payment of interest to her for some time, in which defendants Snow, Woodruff, and Jackson participated, each paying one-third, this bill was filed to foreclose the land contract, by the complainant, acting in the capacity of administratrix of her husband’s' «state. The complainant claims that the three defendants associated together and purchased said land through and in the name of Snow, and the main controversy in the case is whether this is so, thereby making them jointly and severally liable for an anticipated deficiency. That the defendants had equal interests in the premises is beyond dispute, and that they combined to procure them through Snow, in whose name, for reasons and purposes «f their own, not disclosed, they chose to have the contract made, is equally certain. This they had a right to do, ■and unless Ferris had a right to understand that the contract was made on their behalf, and unless he had a right to look to them for its performance, they assumed no obligation as to him, either legal or equitable, through the act of Snow. Upon the hearing in the circuit court, a decree was made that each of the defendants should be primarily liable for a third of the deficiency, and that Snow should be liable for all. All parties have appealed, except Snow, against whom the bill was taken as confessed.

Upon a former hearing (124 Mich. 559, 83 N. W. 374), on demurrer, it was held that the bill as there framed did not allege a cause for relief, because it showed that the contract was under seal, and defendants Woodruff and Jackson were not named in it, and it contained no allegation of facts constituting a ratification of the contract by them. The cause was remanded, with leave to amend, and the bill has been since amended by the insertion of allegations supposed to charge a ratification by them of Snow’s contract.

Aside from the question whether a contract under seal can be ratified by acts in pais or by one who is not mentioned in it, a ratification implies an undertaking by which it was attempted to bind the principal, to be ratified. The1 theory of ratification is that the principal adopts the action of his agent. No consent by C. to step into the place of A. , who has assumed to make a contract with' B. on his own behalf, would establish privity of contract between B. and C., unless based upon a new consideration. It is. different when A. assumes to contract with B. on behalf of C. In such case the contract is not changed in terms, but is vitalized by a ratification of the unauthorized act of the agent. Ratification cannot be in part, but must be of the-whole contract. Story, Ag. § 250. The writing in this case is, upon its face, plainly one between Ferris and Snow, and no one else, and one which Snow could not make for Jackson and Woodruff, for want of written authority. Moreover, the evidence is clear that Snow did not represent to Ferris that he was making this contract on behalf of any one but himself. The only evidence upon the subject tending to show the contrary is that Woodruff took an interest in the title to be obtained, and said, in substance, that, “We don’t want it with a defective title to the 20 acres,” and, when Snow was asked why the contract, “did not mention Mr. Jackson and Mr. Woodruff,” the witness says that Snow answered, “Because Mr. Ferris and Mr. Snow had been friends for a number of years, and Mr. Snow explained that it would be simpler to transact the business with one than with several.” It does not appear when or where this talk occurred. If it was after the contract was made, as the language would indicate, it was too late to affect it; if before, it evinced Snow’s indisposition to assert that he was making a contract on behalf of Jackson and Woodruff, although Fei’ris knew that the three were to own the land; and, manifestly, unless that is what the parties, Ferris and Snow, understood that he was attempting, there was no contract which these men could ratify.

Let it he conceded that Ferris knew of the intention of Snow, Woodruff, and Jackson to procure title to this land through Snow. He also knew that they did not choose to make a contract with him in their own names, hut did want one made between him and Snow. He consented to this. There was no fraud about it, and his own attorney drew the contract. Then, not only does the writing fail to show that the contract was intended to bind Jackson and Woodruff, but the testimony shows conclusively an intention that it should not, and an absence of any assumption by Snow to make a contract which should.

But it may be said that Jackson and Woodruff have admitted that they were bound by this contract, by the correspondence, and interviews and payments, since Ferris’ death. We think this is not so. They did recognize that they were jointly interested in the land, and after Ferris’ death each consented to pay one-third of the amount remaining due, — perhaps recognized an obligation to do so, moral or legal, or both. But we fail to find any testimony that indicates that either Jackson or Wood-ruff assented, or intended to assent, to the claim that he was personally bound to Ferris, by that contract, to pay the full purchase price of the land, or that it was intended to bind him in any way. Ferris did not suppose he was contracting with Woodruff and Jackson. He knew he was not. Hence there was no such contract for them to ratify. In 1 Am. & Eng. Enc. Law (2d Ed.), p. 1188, it is said:

“A ratification by a principal of the acts of an agent can only be effectual between the parties when the act was done by the agent on account of the principal, not on his own account, or on account of some third person. Where one buys in his oivn name, for himself, another cannot adopt the transaction.”

Many cases are cited in support of the text, among them Hurley v. Watson, 68 Mich. 581 (36 N. W. 726). It is a significant fact that in most, if not all, of the cases of ratification, the person contracting has had reason to believe that the agent was assuming to act for another. In Mechem, Ag. § 124, the learned author indicates that “the act to be ratified must have been done by one claiming to represent the person ratifying;” and again, in section 127, he says: “The act ratified must also have been done by the assumed agent as agent.” In Mitchell v. Fire Ass’n, 48 Minn. 284 (51 N. W. 608), it is said, “A ratification is only effectual when the act is done by a person professedly acting as the agent of the party sought to be charged,”- — citing Ewell’s Evans, Ag. p. 55; Story, Ag. § 251a. The latter authority states the rule thus:

‘! One other consideration is important to be borne in mind. It is that a ratification can only be effectual between the parties when the act is done by the agent avowedly for or on account of the principal. * * * This would seem to be an obvious deduction from the very nature of a ratification, which presupposes the act to be done for another,” etc.

See Wilson v. Tumman, 6 Man. & G. 236.

In Hamlin v. Sears, 82 N. Y. 331, it is said, “The doctrine properly applies only to cases where one has-assumed to act as agent for another.” Fry, Spec. Perf. § 510; Workman v. Wright, 33 Ohio St. 405 (31 Am. Rep. 546); Dempsey v. Chambers, 154 Mass. 330 (28 N. E. 279, 13 L. R. A. 219, 26 Am. St. Rep. 249).

•It follows that the decree must be reversed, and bill dismissed, with costs of both courts to defendants.

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


text:
    NATIONAL CITY BANK OF GRAND RAPIDS v. TORRENT.
    1. Security — Garnishment.
    A claim is secured, ■within the meaning of a contract providing that “whatever should remain uncollected or unsecured” at a certain time should be assigned, when a writ of garnishment is served, if the garnishee is liable.
    .'2, Negotiable Instruments — Executory Agreement to Transfer Title.
    An executory contract to assign a promissory note on the performance of certain conditions does not operate of itself to transfer title.
    3 Foreclosure — Suit for Deficiency.
    A debtor gave a trust deed to secure several creditors. It did not require the trustee to go further than realize upon the security, although it contained a promise to pay the claims in his hands. He sold the land in a chancery foreclosure proceeding, and reported a deficiency, which he took no steps to collect. Held, that a creditor who had not been paid in full could maintain an action at law for the balance due him.
    Error to Muskegon; Russell, J.
    Submitted December 13, 1901.
    (Docket No. 70.)
    Decided April 8, 1902.

      Assumpsit by the National City Bank of Grand Rapids against John Torrent and Herman O. Lange upon promissory notes. From a judgment for defendants on verdict directed by the court, plaintiff brings error.
    Reversed.

      ICnappen & Kleinhans, George Clapperton, and Robert E. Bunker, for appellant. '

      G. W. Sessions, John Vanderwerp, and Geer & Williams, for appellees.
   Hooker, C. J.

The plaintiff was one of several banks holding promissory notes made by John Torrent, and indorsed by H. O. Lange, upon November 3*, 1896. On the same day Torrent and wife gave a deed of lands to J. F. Baars, as trustee, for the purpose of securing all of these-notes, taking an agreement by Baars defining the trust. Subsequently other property was conveyed to the trustee for the same purpose. In 1897 the trustee commenced foreclosure in chancery, and a decree was taken, upon defendants’ default, on May 13, 1897, providing for a sale-on or after March 23, 1898. On March 21, 1898, upon petition filed by the trustee, the court found that the amount then due was $35,404.46, besides the sum of $24,590 of principal not then due, and ordered sale of the-property. The decree contained no personal liability clause, and no provision for collecting a possible deficiency.. The bill asked for no personal decree for a deficiency,, and no steps have been taken in the foreclosure case to-collect a deficiency. All of the property was sold to the trustee for $32,600, and this amount, less expenses, was indorsed upon the notes then due in their order. Of the plaintiff’s six notes two were paid in full, and the others are the subject of this controversy.

On November 19,1898, Baars made a contract with one-Erwin that all of the property sold under the foreclosure-proceedings should be put into the hands of Erwin for sale. It provided that, “whenever acceptable sales .of said property should amount to the sum of $50,000 within the period of two years, such of said property as should then remain unsold should be duly conveyed to Erwin or to his assigns, as and for their property, absolutely,” and “ that whatever should remain uncollected or unsecured of the debt and deficiency on said respective notes against John Torrent and Herman O. Lange at the expiration of said two years should also be duly assigned and transferred to Erwin or to his assigns absolutely.” On February 19, 1899, — being three months after said contract was made, — this action was brought upon the notes, and process in garnishment was served upon Patrick A. Ducey,' Ida M. Lange, and Caroline Torrent. On May 23, 1899, disclosures having been filed, demand for the examination of the garnishees, and for a trial of the statutory garnishee issues, was served upon each garnishee. About February 6, 1900, Erwin completed his contract with the trustee, and on March 31, 1900, he assigned his rights under it to Montgomery. The trustee thereupon deeded the real estate to Montgomery, who, on November 20, 1900, assigned the contract, and all his interests under it, except the real estate, to Ducey.

In this action upon the notes the defendants sought to make four defenses, which, as no question is raised upon •the pleadings, may be stated briefly:

1. That the deeds of trust were foreclosed by arrangement between the defendants and the trustee for the purpose of getting rid of certain levies on behalf of other ■creditors upon the property, under an agreement between them that after sale on foreclosure, and purchase by the trustee, the lands should be sold at private sale and the proceeds should be indorsed upon the notes; that the sale was made to Erwin for $50,000, and that said sum should he applied upon the notes.
2. That the trustee and the defendants agreed that the trust deeds should be foreclosed, the liens of other creditors thus cut off, and that the lands should be bid in by the trustee in full of all demands; that such sale and purchase was had, and the notes were thereby satisfied.

Subsequently a second plea was filed, and under this defendants claim:

3. That the title to the notes in suit is now in Ducey, under the assignment which was made after this action was begun.
4. That plaintiff’s only remedy for the collection of the ■deficiency remaining after the foreclosure sale is under the •chancery decree.

The court directed a verdict for the defendants upon the theory that the title to these notes was in Ducey, holding that the garnishment proceedings were not such security as would preserve the title to the notes in the plaintiff. The plaintiff has brought erroi\

The right of the plaintiff to a judgment is said to rest upon the garnishee proceedings, because they furnish the only ground for claiming that it has obtained any further security within two years, under the contract. It is contended that, if it can be said that such proceedings are not “security,” within the meaning of the contract,' or if they are void because of a want of jurisdiction in the main cause, or if they must fail because the record shows that the plaintiff is not entitled to recover in the main case upon the merits, in either of these contingencies the judgment must be affirmed. It is necessary to consider each of these questions, for the reason that, if any one of them warranted the direction of a verdict in favor of the defendants, the judgment .must be affirmed.

The contract with Erwin bound the plaintiff to assign and transfer, upon the performance of certain conditions within two years, so much of its claim as should then be uncollected or unsecured. This provision indicates that plaintiff proposed to proceed with its attempt to collect its-claim, and as to amounts collected the contract would not apply. The same was true of any amount not collected if it should be secured. It is insisted by the defendants’' counsel that the service of garnishee process cannot be-called security, within the contract, and we infer from the brief that their contention is that anything that falls short of giving plaintiff a lien for its claim upon specific property cannot be such security. Many authorities are cited to-sustain the position that garnishment proceedings, like-creditors’ bills, do not create such liens. The difficulty -is-with the premise which assumes that liens upon property are the only kind of security contemplated. We have no-doubt that the language used was meant to include any kind of substantial security from which the debt might be made,' such as levies by execution or attachment, which would be as binding as mortgages. Again, had these defendants seen fit to give security by way of indorsers, it would have been within the fair meaning of the contract, by which this plaintiff reserved the right to collect or secure its claim for two years. Mr. Erwin’s own testimony indicates this, and the garnishment proceedings-were begun within three months after the contract was made. Many authorities are cited in plaintiff’s brief sustaining this interpretation of the word ‘ ‘ security '' among these 1 Rap. & L. Law Dict. pp. 320, 352; 2 Rap. & L. Law Dict. p. 1164; First Nat. Bank of Stewart v. Hollinsworth, 78 Iowa, 575 (43 N. W. 536, 6 L. R. A. 92); Buckingham v. McLean, 13 How. 150; Oliver v. Sterling, 20 Ohio St. 391; Field v. Holland, 6 Cranch, 8; Levy v. Lovell, 14 Ch. Div. 234; In re Stanhope Silkstone Collieries Co., 11 Ch. Div. 160; Storm v. Waddell, 2 Sandf. Ch. 494, 506; Rood, Garnish. § 7.

It is contended that the denials of liability by the garnishees through their disclosures is conclusive, and that, in view of them, there is no substance to the claim that the plaintiff has security. That would perhaps be so if the disclosures were conclusive. They are not, under our statute. The plaintiff has the right to an examination and a trial, upon which it may establish the garnishees’ liability over their denial. By its process it has subjected them to liability, and made them accountable for any property, etc., within their control. In a sense it has security on such property or fund, for the garnishee is legally bound to retain and produce it, and, while he may have the physical power to dispose of it, he incurs a personal liability thereby.

This brings us to the further question of plaintiff’s right to sue. Leaving out of the question the chancery proceedings, may the plaintiff sue ? Defendants’ theory seems to be that Ducey is the owner of these notes, and we may add, if this be so, it might be claimed that there is no way of determining that plaintiff has security in the garnishee matter, and is therefore not entitled to judgment in the main suit until judgments have been rendered therein, and, as there can be no such judgment until plaintiff obtains a judgment in this suit, the plaintiff’s proceedings are at a “dead-lock.” The vice in this contention is that Ducey never owned these notes. They have always belonged to the plaintiff. If it has refused to perform its contract by assigning the claim to Ducey according to its promise, it does not follow that he is the owner. Plaintiff made an executory contract with Erwin. Both parties have done something towards performance. Erwin has sold enough of the property to produce $50,000. The plaintiff has conveyed the remainder to Erwin’s assignee. It has not assigned its claim, because it maintains that Erwin is not entitled to it under the contract. It has retained the title to the notes and to the decree, and seeks to enforce its alleged claim. Title to neither has passed to Ducey, whatever the sequel may show him to be lawfully entitled to under his contract. Both parties must have contemplated that plaintiff would retain title so long as it had an interest, and therefore that it would only pass by an assignment, as provided for in the executory contract. Ball v. Silver, 17 Ind. 539; Scott v. Metcalf, 13 Smedes & M. 563. The plaintiff is entitled to a judgment upon the notes if they have not been paid, unless by reason of the trust agreement or subsequent chancery proceedings it has been deprived of such right. Ducey has his remedy upon his contract. If it is not clear upon this record that the purchase at foreclosure sale was not in full of plaintiff’s claim, and that the trustee was not under obligation to apply the sum of $50,000 upon the claims in his hands, these matters were certainly disputed questions of fact, and apparently the learned circuit judge so considered them.

It remains to discuss the effect of the chancery proceedings as an obstacle to this suit. The circuit court has jurisdiction of this case prima facie. If, by reason of the pendency of another suit, this action should be abated, it is elementary that a dilatory plea should have been interposed at the outset. But it was not. The general issue was pleaded, with a notice. Subsequently a further notice was filed and served, in which the point is raised, and all questions are tried together. It is claimed that, at the most, the bringing ®f this action is an irregularity, and that it has been waived; but we find it unnecessary to decicle the question. The chancery proceeding was brought by the trustee to realize upon a security. There is nothing in the deed or declaration of trust that contemplated that he should go further than to realize upon the security in his hands, and apply it upon the debt. It is true that the agreement contains a promise by defendants to pay the amount of the claims in his hands, and this is followed by a power of sale; nothing more. It is possible that the statute should be so construed as to make it within the power of the trustee to proceed in chancery for a deficiency, but the trustee has not so construed this writing. He has made no claim for a deficiency. The decree determined the amount due, of necessity, but no attempt was made to declare or define the extent of any personal liability. We think that, under the circumstances, a court of chancery should not have refused leave to bring this suit had the privilege been asked, nor should the circuit court have stayed proceedings had a motion been made.

It is claimed that these notes were merged in the decree rendered in the foreclosure case, and that they cannot, therefore, be the foundation of a judgment in this case. The question is raised for the first time in this court. Had it been raised in the circuit court, the circuit judge would doubtless have permitted the addition of a proper count, if necessary. The decree was rendered in the case before the full amount of these notes was due, and, while it determined the amount of principal to become due on the aggregate of notes payable to several persons at some time or times not stated, it does not show how much was based upon the plaintiff’s notes. Whether, under such ■circumstances, it can be said that the notes are merged in the decree, we need not decide. The point is a technical ■one, and, not having been raised by counsel or considered by the court, we think it should be disregarded here. Plaintiff should be permitted to amend its declaration if it chooses to do so.

. The judgment is reversed, and a new trial ordered.

Moore, Grant, and Montgomery, JJ., concurred. Bong, J., did not sit.


text:
    AMERICAN STEEL & WIRE CO. v. EDDY.
    1. Corporations — Dividends—Impairment of Capital.
    Persons dealing with a corporation have a right to resort to its; capital stock for the payment of its debts, and the corporation cannot, to the injury of its creditors, impair its capital by the payment of dividends. 2 Comp. Laws, § 7057.
    2. Same — Preferred Stockholders — Personal Liability.
    2 Comp. Laws, § 7073, providing that preferred stockholders-shall not be liable for corporate debts, except labor debts, does not exempt them from the liability imposed by section 7057, making stockholders individually liable to the creditors-to the amount of capital withdrawn or refunded to them respectively, whether such withdrawal is by way of dividends or in reduction of the capital.
    Error to Bay; Shepard, J.'
    Submitted December 13,. 1901.
    (Docket No. 204.)
    Decided April 8, 1902.
    Petition by the American Steel & Wire Company, a judgment creditor of the Miller Hardware Company, under 3 Comp. Laws, § 8554 eb seq., against Selwyn Eddy, a preferred stockholder, to enforce the latter’s liability under section 7057, 2 Comp. Laws. From a judgment for defendant on verdict directed by the court, plaintiff brings error.
    Reversed.

      George E. & M. A. Nichols, for appellant.

      T. A. E. & J. C. Weadoclc (E. A. Cooley, of counsel),, for appellee.
   Hooker, C. J.

The plaintiff, a judgment creditor of' the Miller Hardware Company, brought this action against a preferred stockholder, under the provisions of section 7057 of the Compiled Laws of 1897, which reads-as follows:.

“If the capital stock of any such corporation shall'be withdrawn and refunded to the stockholders before the payment of all the debts of the corporation for which such stock would have been liable, the stockholders of such corporation shall be jointly and severally liable to any creditor of such corporation, in an action founded on this statute, to the amount of the sum refunded to him or them respectively.”

Its counsel professed to be able to show upon the trial, and offered testimony which he said would show, that the defendant received dividends from said company which impaired the capital stock; and that, while the books did not, upon their face, show this, it was because alleged assets consisted of worthless paper, the omission of which would show that the company had done business at a loss, and that such dividends were actually paid from the capital stock. The court directed a verdict for the defendant upon the ground that section 7073 provides that “in no event shall the holder of such preferred stock be individually or personally liable for the debts or other liabilities of said corporation, excepting debts for labor;” and the plaintiff has brought error.

Some of the dividends were paid before the Miller Hardware Company incurred the debt upon which plaintiff’s judgment is based; others were paid afterwards, the last being paid in April, 1897. Two months later the Miller Hardware Company made a common-law assignment, and it is said the assignee has paid 55 per cent, of its debts, which exhausted its assets.

When a corporation holds itself out to the world as .possessed of a given capital, those who deal with it have a right to the application of such capital to the payment of such debts as it may incur, and it has no authority to impair its capital by refunding to the stockholders a portion of its capital by way of dividend. This is not a new doctrine, as will appear from the following authorities cited by counsel: Williams v. Telegraph Co., 93 N. Y. 162; 5 Am. & Eng. Enc. Law (2d Ed.), 134-142; Flitcroft’s Case, 21 Ch. Div. 519; Main v. Mills, 6 Biss. 98 (Fed. Cas. No. 8,974); Park v. Locomotive Works, 40 N. J. Eq. 114 (3 Atl. 162); Hubbard v. Weare, 79 Iowa, 678 (44 N. W. 915); Richardson v. Buhl, 77 Mich. 632, 649 (43 N. W. 1102, 6 L. R. A. 457); 1 Mor. Priv. Corp. §§ 435, 440; People v. San Francisco Sav. Union, 72 Cal. 199 (13 Pac. 498); 1 Cook, Stockh. §§ 199, 290, 546, 548; Lockhart v. Van Alstyne, 31 Mich. 76 (18 Am. Rep. 156). It is claimed that this statute was not intended to have application to such cases, but merely to cases where the capital stock is reduced in amount by formal action of the stockholders, which may be lawfully done in conformity to section 7038. It is our opinion that section 7057 should not receive so narrow a construction. It does not, in express terms, refer to a reduction of the capital stock, but speaks of a “withdrawal” of capital stock, and “refunding” to the stockholders. If we hold this to refer to an amount constituting that portion of' the assets representing the capital stock, — and we cannot well imag-^ ine that it means anything less tangible, for nothing less could well be refunded; i. e., given back to the stockholder, — it could be as well done'by distribution by way of dividends, declared in the ordinary way, as by basing them upon formal action to reduce the capital stock. We see no reason to doubt that such dividends could he reached, if there were no statute, as being a fraudulent disposition of assets. This statute provides a new procedure, permitting one who has exhausted his remedy against the corporation (if not others) to sue the stockholder in an action at law. It is contended that this can- _ not have been contemplated, and that the collection should be made by an assignee for the benefit of all creditors. We have no doubt that a court of equity, under its general powers, might take custody of all assets for the purpose of distribution, and cut off the personal remedy of the creditor, under this statute, as in other cases; but we have not such a case. We are not advised that any court has ■ taken control of the assets of this corporation, or is in any way attempting their collection and distribution.

The preferred stockholder is not excepted by this statute, and he has no greater right to a dividend from the capital stock of an insolvent corporation than any other stockholder, until the debts are paid. See section 7073; Lockhart v. Van Alstyne, 31 Mich. 76 (18 Am. Rep. 156). The provision of section 7073, relied on by the learned circuit judge in his disposition of the cause, seems to us to have been misapplied. This case does not seek to impose a personal liability upon him, but merely to hold him for a trust fund, which has come to his hands through an unlawful disposition of it.

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

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


author: Grant, J.

text:
    DIXON v. LUDINGTON.
    Taxes — Landlord and Tenant — Fraudulent Homestead Certificate.
    A tenant who occupies under an agreement to pay all taxes, and who falsely and fraudulently procures to himself a homestead certificate under the tax homestead act, cannot, in defense to a bill of complaint by the landlord to have the homestead certificate canceled, maintain a demurrer on the ground that complainant has not formally complied with Act No. 107, Pub. Acts 1899, by commencing suit within six months after said act went into effect, and paying all taxes, interest, and legal charges due.
    Appeal from Alcona; Connine, J.
    Submitted December 13, 1901.
    (Docket No. 206.)
    Decided April 8, 1902.
    Bill by William B. Dixon against Kirk Ludington, Grace Ludington, Roscoe D. Dix, auditor general, and William A. French, commissioner of the State land office, to remove a cloud from title. From a- decree dismissing the bill on demurrer, complainant appeals.
    Reversed.
    It is alleged in the bill of complaint that about the year 1887 the complainant loaned some money to Kirk Ludington, who gave as security therefor a mortgage upon the land described in the bill, and executed by himself and Charles and defendant Grace, the wife of Kirk; that afterwards the defendants the Ludingtons, to avoid a foreclosure of the mortgage, and in payment of the debt secured thereby, deeded the land to the complainant; that afterwards the complainant leased the premises to Kirk Ludington; that the lease provided that Ludington should use the rent that he was to pay for the premises in payment of the taxes upon the land; that he failed so to pay the taxes; that they became delinquent for a number of years; that the defendants the Ludingtons have occupied the premises for the last 15 years; that the premises consist of a farm, with the usual clearings, fences, and buildings; that, while Ludington was in the occupancy of the premises, he fraudulently procured them to be examined, and returned certified as worthless and abandoned lands, within the meaning of the tax homestead act, for the purpose of defeating complainant’s title; that, after being certified, the land was conveyed by deed under the statute by the auditor general to the commissioner of the land office; that defendant Kirk Ludington afterwards made entry of the land as a tax homestead, and procured the usual statutory homestead certificate; that Charles has now no interest in the land; and that said land was assessed to said Ludington. The prayer of the bill is that the deed of the auditor general to the State, and the homestead certificate, be declared null and void, as clouds upon complainant’s title. There was also a prayer for general relief. The defendants appeared by the attorney general, and demurred to the bill for the following reasons: First, because the suit was not instituted within six months after the taking ■effect of Act No. 107 of the Public Acts of 1899; second, that the bill does not allege that the complainant has paid to the auditor general all the delinquent taxes, interest, charges, etc., that appear on record against the land, and has not purchased and paid for all the State tax bids and titles held by the State against the land, prior to the commencement of the cause, as provided in said Act No. 107. The court below sustained the demurrer.

      H. J. Kelley (De Vere Hall, of counsel), for complainant.

      Horace M. Oren, Attorney General (Charles W. McGill, of counsel), for defendants.
   Grant, J.

(after stating the facts). If the defendants the auditor general and the commissioner of the State land office had filed a demurrer to the bill because they were neither necessary nor proper parties, a different ■question would be presented from those now raised by the joint demurrer of all the defendants. No fraud is charged upon them. The charge in the bill is that the defendant Kirk Ludington falsely and fraudulently violated his contract with the complainant, neglected to pay the taxes, and falsely and fraudulently procured a homestead certificate. Upon the hearing the bill may be dismissed as to the auditor general and the commissioner of the State land office, and be sustained as to defendants Ludington. Kirk Ludington is not in position to take advantage of his •own wrong, and set up the requirement of the statute to pay or tender the taxes, or that suit was not commenced within the time prescribed by law. Under the allegations of the bill, he obtained his title fraudulently, and holds it in trust for the complainant. It is no defense to this fraud that complainant has not formally complied with the statute. He has offered all that equity requires, viz., to reimburse the State for the taxes, and for the fraud committed upon the State by defendant Kirk Ludington. So long as complainant has seen fit to make these officers of the State parties, and offers to reimburse the State, it is difficult to see why the State should object. It was Mr. Ludington’s duty to pay the taxes. Mr. Dixon relied upon him to do so. The question of who shall compensate the-State is not the real question here. The real question is, Did Kirk Ludington obtain this title by fraud as against the complainant? If so, the complainant is entitled to a decree against him.

Decree reversed, with costs, and case remanded for further proceedings.

Hooker, C. J., Moore and Montgomery, JJ., concurred. Long, J., did not sit.


author: Moore, J.

text:
    FOWLES v. JOSLYN.
    1. Limitations — Evidence of Payment.
    An indorsement of payment made by the owner of a note, not in the presence of the maker, is not sufficient evidence of payment to interrupt the running of the statute of limitations. 3 Comp. Laws, § 9744.
    2. Same — New Promise.
    A verbal statement by the maker of a note, that plaintiff ha® his notes, is neither evidence tending to show a payment has been made, nor a promise or acknowledgment of continuing liability that will prevent the running of the statute of limitations.
    Error to Calhoun; Winsor, J.
    Submitted January 7, 1902.
    (Docket No. 7. )
    Decided April 8, 1902.
    Louis Eowles presented a claim against the estate of Betsey C. Holmes, deceased, upon a promissory note. The claim was disallowed by the commissioners on a contest made by James L. Joslyn, administrator, and claimant appealed to the circuit court, where he obtained a judgment. Defendant brings error.
    Reversed.

      Joel C. Hopkins and Andrew W. Lockton, for appellant.

      L. E. Clawson and F. M. Wadleigh, for appellee.
   Moore, J.

The plaintiff obtained a judgment on a note for $950 dated October 28, 1891, due in one year, which it is admitted is outlawed unless it is taken out of the statute of limitations by a payment January 31, 1895, of $20. The case is brought here by writ of error. The only evidence of the payment is an indorsement on the back of the note made by Louis Fowles, not in the presence of the maker of the note, unless it can be said the testimony of Mrs. Storer, a sister, is evidence upon that point. Her testimony is that in October, 1898, her sister Miss Holmes, while on a visit to her in New York, had a conversation with her as follows:

“The conversation commenced by her urging me to leave my place and come up there and stay with her, but I didn’t think I could do so. My business was involved there some, and I says to her, ‘If I sell off everything I have got, I couldn’t retain to myself more than six or seven hundred dollars. I have went in debt for a building, and the payments are coming on,’ I says. ‘Well,’ she says, ‘ I would help you out, but Loua has my notes. ’ And at that point the conversation was interrupted by the hired man coming in, and it never was resumed at that point. We had other talks, but not in relation to that point, exactly. And I don’t think she mentioned anything about the notes at any other time. I don’t remember that she did, but she did then.”

It was explained Miss Holmes always called the claimant “ Loua.” It will be observed there is no suggestion in this testimony that Miss Holmes said she had made any payment on a note, and it is not evidence tending to show she had made a payment. Nor can it be said to be a promise to pay the notes. In Mainzinger v. Mohr, 41 Mich. 687 (3 N. W. 183), it is held:

“At the common law, a new promise to pay a debt barred by the statute might be inferred from, a mere recognition of the existence of a just demand; and, when this rule was so changed as to require an express promise in writing, it was wisely provided, ” etc.

And in Sperry v. Moore’s Estate, 42 Mich. 358 (4 N. W. 13), it is held:

“The statute is explicit that in such cases no acknowledgment or promise shall be evidence of a continuing contract whereby to take a case out of the provisions of the chapter, or to deprive any party of the benefit thereof, unless such acknowledgment or promise be made or contained by or in some writing, signed by the party to be charged thereby.”

Was the- fact of the indorsement evidence of a payment ? Section 9744, 3 Comp. Laws, reads:

“No indorsement or memorandum of any such payment, written or made upon any promissory note, bill of exchange, or other writing by or on behalf of the party to whom such payment shall be made or purport to be made, shall be deemed sufficient proof of the payment, so as to take the case out of the operation of the provisions of this chapter.”

In Michigan Ins. Co. v. Brown, 11 Mich. 265, it is said:

“Although payments are indorsed as made within 10 years, the statute expressly denies to such indorsements, unexplained, any weight,- as evidence of payment, for the purpose of charging the debtor by treating them as an acknowledgment, so as to take the case out of the operation of the law. 2 Comp. Laws 1857, § 5377. In the absence of other testimony, therefore, the statutory bar is complete, and no decree can be made against Brown for the balance which may remain unpaid.”

In Rogers v. Anderson, 40 Mich. 290, it is said:

“The statute is express and clear * * * that indorsements of payments, written by or on behalf of the party to whom payment is made, shall not be deemed sufficient proof of payment to take the base out of the statute. 2 Comp. Laws 1871, §§ 7164, 7165. Unexplained indorsements of payments could not be received as evidence, so as to take the case out of the operation of the statute. Michigan Ins. Co. v. Brown, 11 Mich. 273.”

See, also, Chandler v. Lawrence, 3 Mich. 261; Snyder v. Winsor, 44 Mich. 140 (6 N. W. 197); Lester v. Thompson, 91 Mich. 245 (51 N. W. 893); Ocobock v. Myers’ Estate, 127 Mich. 181 (86 N. W. 534).

The request of defendant to direct a verdict in his favor should have been granted.

Judgment is reversed, and new trial ordered.

Hooker, C. J., Grant and Montgomery, JJ., concurred. Long, J., did not sit.