text:
    SANBORN v. LOUD.

    1. Deeds — Construction—Interest Created — Patent to Executors.
    A patent to “ J. and N., executors of the estate of S., and to their heirs and assigns forever,” habendum to “ J. and N., executors aforesaid, and to their heirs and assigns * * * forever,” conveys the title to the executors individually, and not to the estate, the words “executors,” etc., being merely descriptio person».

      2. Same — Construction—Extrinsic Evidence.
    Where a patent was issued to J. and N., “executors of the estate of S.,” the court cannot, in an action of ejectment, look outside the instrument for evidence that it was the intention of the grantees to secure the title for the estate and thereby declare the estate to be the grantee, since such practice would permit a secret and undisclosed intent of the grantees to change the legal effect of a deed.
    S. Parties — Necessary Parties — Trustees—Executors.
    Land conveyed to J. and N., “executors of the estate of S.,” cannot be declared to be held by them as trustees of the estate in a suit to which they are not parties.
    4. Trusts — Establishment—Equity Jurisdiction.
    A claim that the title to land is held in trust is one that should be made in a court of equity.
    5. Ejectment — Appeal —Affirmance—Failure to Show Title.
    Errors occurring at the trial of an action of ejectment terminating in verdict and judgment for defendant will not be considered where plaintiff did not, as a matter of law, have the legal title to the land in controversy.
    Error to Alcona; Connine, J.
    Submitted January 18, 1907.
    (Docket No. 58.)
    Decided October 4, 1907.
    Rehearing denied December 10, 1907.
    Ejectment by Frederick D. Sanborn, executor of, and trustee under, the last will and testament of James W. Sanborn, deceased, against Henry N. Loud, George A. Loud, and Edward F. Loud, copartners as H. M. Loud’s Sons Company, and William Carroll. There was judgment for defendants, and plaintiff brings error.
    Affirmed.

      Cyrus A. Hovey (H. L. Stevens, of counsel), for appellant.

      Charles B. Henry, for appellees.

       The opinion filed on the original hearing in this ease was withheld from publication pending the rehearing.

   Carpenter, J.

This is an action of ejectment. It was commenced by the plaintiff as executor and trustee to recover the possession of three descriptions of land. It was tried in the circuit court before a jury and resulted in a verdict and judgment in favor of defendants. Plaintiff seeks a reversal of that judgment upon various grounds. In my opinion, none of these grounds need be considered, because, as I shall endeavor to show, it is our duty to say, as a matter of law, that plaintiff did not have the legal title to the land in controversy, and defendants were, therefore, entitled to verdict and judgment.

Plaintiff claims to have acquired title by certain patents issued by the State of Michigan in the year 1871. Those patents recited the issuance of certain Agricultural College land certificates and their assignment “to John P. Sanborn, of St. Clair county, and Newell Avery, of Wayne county, executors of the estate of James W. San-born,” and then proceeded:

“Now, therefore, I, Henry P. Baldwin, governor of said State, in consideration of the premises, and by virtue of the power and authority vested in me, * * * do issue this patent in the name and by the authority of the people of the State of Michigan, hereby granting and confirming unto the said John P. Sanborn and Newell Avery, executors aforesaid, and to their heirs and assigns forever, the following piece or parcel of land situate in the State aforesaid, to wit: [the description is omitted]. To have and to hold the above described and granted premises unto the said John P. Sanborn and Newell Avery, executors aforesaid, and to their heirs and assigns, to their sole and only proper use, benefit and behoof, forever.”

Plaintiff claims that the title thus conveyed vested in the estate of James W. Sanborn, deceased, and, therefore, that he as the present executor of said estate — he having succeeded said John P. Sanborn and Newell Avery, the executors named in the will — is entitled to recover in this suit. It is clear that he has no right to recover unless the title conveyed by said patents did vest in said estate. Did the title so conveyed vest in the estate of James W. Sanborn, of which the above named Sanborn and Avery were executors ? or Did it vest in Sanborn and Avery as individuals ? If we construe this instrument by looking at the language contained within its four corners, we must say that the title was conveyed to Sanborn and Avery individually, and that the words “executors of the estate of James W. Sanborn ” are merely descriptio personae. The contention that it should be construed as a grant to the estate of which they were executors, requires us to cast out of the instrument the words, “their heirs and assigns forever ” and to substitute in their stead, “ their successors and assigns,” or some equivalent expression. This we are prohibited from doing by all sound rules of construction. The words “ their heirs and assigns forever ” were not mere idle words. Prior to 1881 (see section 9016, 3 Comp. Laws), it was necessary to use the word “ heirs ” or some other word or words of similar import in order to create an estate of inheritance. 13 Cyc. p. 642. This reasoning is supported by numerous authorities. Pfeiffer v. Rheinfrank, 2 App. Div. (N. Y.) 574; Kanenbley v. Volkenberg, 70 App. Div. (N. Y.) 97; Innerarity v. Kennedy, 2 Stewart (Ala.), 156; Jackson v. Roberts, 95 Ky. 410; Richardson v. McLemore, 60 Miss. 315; Towar v. Hale, 46 Barb. (N. Y.) 361; Hannen v. Ewalt, 18 Pa. 9. But it is contended that we may look outside of the instrument and by so looking find evidence which convinces us that it was the intention of the above-named grantees, Sanborn and Avery, to secure this title for the estate and thereby declare the estate to be the grantee. I deny our right to seek and use such evidence in construing the deed. By so doing, we permit a secret and undisclosed intent of the grantees to change the legal effect of a deed. Under that practice, deeds would no longer be construed by the court in accordance with their language. They would be construed by juries in disregard of their language.

The case of Brown v. Combs, 29 N. J. Law, 36, is an anomalous one. There it was held that a deed much like the patents under consideration conveyed the legal title to the grantee who was therein designated “trustee,” but that it might be shown in an action of ejectment in a court of law by evidence outside the deed that the grantee had taken the property in trust and that the court would presume that the trustee had, as he should do, conveyed the property to his executive trust. There are insuperable objections to our applying the doctrine of that caseto the case at bar. Neither John P. Sanborn nor Newell Avery are parties to this suit, and they clearly should be parties to any suit in which a court undertakes to declare that property standing in their names as individuals is held as trustees. To disregard this rule would subject defendants to a double liability for their alleged wrongful possession of the land in controversy. The claim that the title was held in trust is one which should be made in a court of equity. Under our practice, that is the proper tribunal in which to determine that question and it has authority to grant appropriate relief.

We conclude that plaintiff had no legal title to the land in controversy, and that defendants were entitled to recover.

The judgment should be affirmed.

Me Alva y, C. J., and Grant, Hooker, and Moore, JJ., concurred.


source: Caselaw Access Project

author: Blair, J.

license: Public Domain

text:
    ORR v. KENNY.
    1. Statute of Frauds — Sale of Goods — Sufficiency of Memorandum — Mutuality.
    A writing signed by defendant, which states that he has sold certain goods to plaintiff for delivery on a day stated, and acknowl-^ edges the receipt of a part payment, is not void for want of mutuality, nor otherwise objectionable because not signed by plaintiff nor dated, nor does it lack’consideration.

      H. Sales — Breach by Seller — Damages—Burden of Proof.
    In an action by a buyer against a seller of goods for failure to deliver, the burden is upon defendant to show that plaintiff could have supplied himself with the goods at a less price than he actually did pay.
    3. Damages — Rule—Direction of Verdict — Error.
    Where no complaint is made by defendant regarding a rule of damages announced in the instructions, the application of which shows that the damages exceed the amount of the verdict and judgment, he can predicate no error upon the amount of damages for which the verdict was directed.
    Error to Sanilac; Beach, J.
    Submitted October 22, 1907.
    (Docket No. 108.)
    Decided December 10, 1907.
    Assumpsit by Clare Orr against David J. Kenny for breach of a contract for the sale of certain lumber. There was judgment for plaintiff on a verdict directed by the court, and defendant brings error.
    Affirmed.

      F. 8. Viets, for appellant.

      W. H. Burgess, for appellee.
   Blair, J.

This action was originally brought in justice’s court to recover damages alleged to have been sustained by reason of the failure of defendant to deliver certain pieces of timber under an alleged contract, which reads as follows:

“ I hereby bargain and sell to Clare Orr, at $13.75 per thousand, delivered at Sandusky, Michigan, the following: 124 pieces 2£ by 10, 10 feet long; 384 pieces 2 by 8, 18 feet long; 172 pieces 2 by 12, 18 feet long. The above joists to be tamarack except the 2 by 12 x 18 feet, which can be furnished in maple if it cannot be furnished in tamarack.' All joists to be of good sound timber suitable for joist. Received on the above $5.00. Delivery by April 15th.
“David J. Kenny.”

Defendant pleaded the general issue, with notice “that the only contract, if any, entered into by and between the said plaintiff and this defendant was void under the statute of frauds and for want of mutuality.” The judgment having passed against defendant in justice’s court, he appealed the case to the circuit court, where, upon conclusion of the testimony, verdict was directed for the plaintiff for damages to the amount of $200. Judgment was entered upon this verdict, and defendant has removed the record to this court for review upon writ of error. When the alleged contract was offered in evidence, defendant’s counsel made the following objection:

“ That is objected to as it does not contain the necessary requisites of a contract. It is not dated. There is no consideration for it; it is signed by only one of the parties, and there is no mutuality about it. It does not bind the plaintiff in this case to accept the goods. It is void for want of mutuality.”

The objection was overruled and exception taken by defendant. The ruling of the court, admitting this contract and treating it as valid in directing a verdict for plaintiff, is made the subject of the principal assignments of error in the case, and almost the entire brief of defendant’s counsel is devoted to sustaining his contention that the contract was invalid for the reasons given. The ruling of the court was not erroneous but was in accord with previous holdings of this court. Miller v. Smith, 140 Mich. 524.

The only other assignment of error which seems to be argued in defendant’s brief is the eighth, which is as follows :

“Thecourt erred in directing a verdict for the plaintiff for |200, there being no evidence of any such amount of damages.”

All that is said with reference to this assignment in the brief is the following:

“We contend that, under the rules of practice as laid down by this court, our exceptions are well taken and the honorable trial judge erred in taking the case from the jury and directing a verdict of $200 when there was no evidence from any source of that amount of damages.”

Plaintiff’s testimony was to the effect that, although he made diligent efforts to procure the timbers at Sandusky in accordance with the specifications of the contract, he was unable to do so there or elsewhere, but was obliged to fill the contract with hemlock, the cheapest timber which, he could procure to take the place of the timber specified. The best price at which he could purchase the hemlock, was $25 per thousand. His testimony also tended to> show that tamarack was better for the purpose for which he required the timber than hemlock, and that he did purchase the hemlock at $25 a thousand to take the place of the timber which defendant had agreed to deliver. The burden of proof was upon the defendant to show, if he could, that plaintiff could have procured timber at less price than he actually did pay, but the evidence produced by him fell far short of such proof, and, in fact, was in harmony with plaintiff’s proofs. No complaint is or was made of the rule of damages stated by the court as “the difference between the contract price and the price he had to pay for timber as a substitute.” Accepting this as the proper measure of damages, the testimony showed that "the damages exceeded $200.

Judgment affirmed.

Grant, Montgomery, Ostrander, and Hooker, jj.s concurred.


author: Grant, J.

text:
    CHICAGO, KALAMAZOO & SAGINAW RAILWAY CO. v. LANE.

    1. Specific Performance — Contract to Convey — Defíniteness.
    A contract to convey land for a railroad right of way is not too uncertain and indefinite to be specifically performed where complainant has taken possession with the express assent of defendants and constructed its road thereon and the consideration to be paid can be ascertained by a computation of the acreage used and the amount per acre paid therefor by defendant, including interest and taxes.
    2. Evidence — Contracts—Parol Evidence — Time Limit.
    Where, prior to the execution of a contract for a deed of right of way for a railroad, two different drafts were prepared containing a limit within which the railroad must be constructed, whioh were rejected by complainant, after which defendants prepared, and the parties executed, one with the time limit omitted, defendants cannot by parol testimony insert a time limit.
    3. Vendor and Purchaser — Contract — Railroad Right of Way — Crossings.
    Where a contract to convey land for a railroad right of way provides that the purchaser shall have three crossings over a proposed road to be built by the vendors, but contains no provision that the vendors shall have similar rights over the purchaser’s road, the vendor cannot insist on the insertion of such a provision in the deed.
    4. Evidence — Parol Evidence — Written Contracts.
    Where a contract complete in itself is entered into with full knowledge of the circumstances by men of large business experience after negotiations extending over a consider, able time, it cannot be converted by parol evidence into a temporary memorandum containing nothing binding upon the parties.
    5. Specific Performance — Contract to Convey — Right of Way — Abandonment—Evidence—Sufficiency.
    On a bill for specific performance of a contract to convey land for a railroad right of way, evidence examined, and held, not to support a decree denying relief on the ground that complainant had abandoned the route.
    6. Same — Forfeiture—Estoppel to Assert.
    Where a parol contract to convey land for a railroad right of way was not to become binding until complainant had built its road along another right of way for which it had a contract with defendants, and defendants prevented the building of the other road, they could not take advantage of the failure to build in a suit for specific performance of the parol contract.
    7. Same — Equity.
    Specific performance, though a matter of grace rather than of right, will not be denied where complainant, a railroad company, would be compelled either to abandon its road or take proceedings for condemnation, with its consequent risks, and specific performance will give each party what was contracted for without injustice to either.
    Appeal from Kalamazoo; North, J., presiding.
    Submitted June 13, 1907.
    (Docket No. 10.)
    Decided October 4, 1907.
    Bill by the Chicago, Kalamazoo & Saginaw Railway Company against M. Henry Lane and Frank B. Lay for the specific performance of a land contract. From a decree dismissing the bill, complainant appeals.
    Reversed, and decree entered for complainant.

      Harry C. Howard (N. H. Stewart, of counsel), for complainant.

      Dallas Boudeman and Alfred J. Mills, for defendants.
    Qomplainant owned and operated a railroad from Woodbury on the north to Kalamazoo upon the south. It desired an extension to the south so as to connect with some trunk line running east and west which would increase its facilities for travel and freight. The defendants owned several parcels of land and intended to con- . struct a belt line passing, around the business portion of the city of Kalamazoo on the north, east, and south, and forming a connection with other railroads passing through the city of Kalamazoo. It would also pass most of the manufacturing plants in the city. A route had been surveyed from a point near the terminal of complainant’s railroad to what was known as the Bryant Paper .Mill, and also other land known as the Reed Farm, lying a short distance east of said mill.
    Defendants desired a railroad to be thus constructed for the purpose of enhancing the value of their land lying along the river. One Hays, a real estate agent, entered into negotiations with the complainant and the defendants for the extension of complainant’s road along the line of the proposed belt line road. The Southside Improvement Company was organized and the defendants conveyed to that corporation a portion of the lands owned by them for the sum of $33,853.22. The Improvement Company was capitalized at $80,000. Hays entered into negotiations with Mr. Dewing who acted for the railroad company and persuaded the officers and the stockholders of the company to take $8,000 of the capital stock of the Improvement Company. The result of the negotiations was that the officers of the railroad took $8,000 of the stock, and the following contract was made between Mr. William S. Dewing and the defendants:,
    “ This contract, made this twenty-second day of June, A. D. 1899, by and between M. Henry Lane and Frank B. Lay, both of the city and county of Kalamazoo, and State of Michigan, parties of the first part, and William S. Dewing of the same residence aforesaid, party of the second part.

      “Witnesseth: That the said parties of the first part, in consideration of the sum of one dollar and other valuable considerations herein recited, to them in hand paid by said party of the second part, do hereby agree that they shall and will at any time before January 1st, 1901, following from the date hereof, at the written request of the said party of the second part, execute and deliver to him, or to any person or persons as he the said party of the second part shall direct in writing, a good and sufficient warranty deed of the following described land, situated in the county of Kalamazoo, State of Michigan, to wit:
    “Two rods of land lying northeast and south of proposed right of way of Belt Line Railroad as per survey commencing at the west side of Oxbow nearest present terminal of C. K. & S. R. R. and continuing to and along said Belt Line right of way to east side of Portage street. Also two rods of land lying on the north side of main Belt Line of railroad commencing at junction of crossing and running thence east along main Belt Line two rods wide to the east boundary of land owned by said first parties. Privilege to cross said Belt Line Railroad not to exceed three times. The curves as laid out on map shall be reduced to curves not sharper than three degrees. It being understood this deed conveys only such portion of lands for-said right of way as belongs to said first parties. Also the right to cross the main line of Belt Line as extended east, and any branch of said Belt Line as per map showing survey of said Belt Line and branches, for the sum of $1,000 more or less, payable as follows: On delivery of warranty deed free and clear of any and all encumbrances on or before January 1st! 1901. It is hereby understood the value of right of way or purchase price to be paid is based and to be computed upon cost of land per acre to said first parties with interest at seven per cent, from date of purchase and pro rata of taxes paid.
    “And the said parties of the first part do hereby further agree that they shall and will not, before January 1st, 1901, sell, convey, mortgage or otherwise encumber the said land, or any part thereof, or do any act or deed to diminish or encumber the title to said land. It is hereby fully understood and agreed between parties hereto that this option is given and accepted upon basis that said first parties may be able to secure release of mortgaged premises upon payment of a reasonable sum not less than purchase price paid.
    “ It is agreed by and between the parties hereto, that if the said party of the second part at the expiration of the aforesaid limited time shall have declined or omitted to make application for the purchase of said land at the price aforesaid, then this instrument shall be void, and the above sum of one dollar so paid as aforesaid shall be forfeited by the said party of the second part, and the said parties of the first part shall have the right to retain the same, as and for liquidated damages, and the said party of the second part shall relinquish to said parties of the first part all claim to said land, either in law or in equity, and also all claim to the said sum of one 'dollar so paid as aforesaid, and no claim of the said party of the second part under this contract shall then be effectual.
    “ In witness whereof, the said parties have hereunto set their hands and seals the day and year first above written.
    “M. Henry Lane. (Seal)
    “ In presence of “ Frank B. Lay. (Seal)
    “ Chas. B. Hays. “ William S. Dewing. (Seal)
    “ J. H. Dewing.”
    W. S. Dewing, J. H. Dewing, and Edward Woodbury were the officers of the railroad company and owned most of the stock. The defendants did not own all of the land over which complainant’s right of way was to extend. Being unable to agree with the owner of one piece over which it was desired to extend their road, they agreed to deviate their line, and made the following contract with the defendants for the purchase of a right of way which would give them a continuous line:
    “Articles of agreement, made this 28th day of August in the year of our Lord one thousand nine hundred between the Chicago & Kalamazoo Terminal Railway Co. and M. H. Lane and Frank B. Lay, of the City of Kalamazoo, Michigan, parties of the first part, and William S. Dewing, of the same residence, party of the second part, in the manner following: The said parties of the first part, in consideration of the sum of one thousand dollars, to be to them duly paid, hereby agree to sell unto the said party of the second part, all that certain piece or parcel of land lying and being situated in the city of Kalamazoo, county of Kalamazoo, and State of Michigan, and more particularly known and described as follows :
    “ Commencing at a point on the south line of Lake street in the city of Kalamazoo, where the easterly line of the right of way of the Chicago & Kalamazoo Terminal Railway Co. crosses said south line of Lake street, thence southerly along the easterly line of said right of way to the right of way of the Grand Rapids & Indiana Railroad Company, thence northwesterly to a point on the south line of Washington avenue where the westerly line of the east two rods of the right of way first mentioned crosses Washington avenue, thence northerly along the westerly line of said east two rods to the south line of Lake street, thence east two rods on the south line of Lake street to the place of beginning, together with the right and privilege to slope one rod of land next west at the above-described strip, at such places where cuts may be made for the purpose of grading and laying tracks on the right of way agreed to be sold by this contract.
    “ Said first parties also agree to sell to said second party a joint interest in the reservation made by the grantors in a certain deed recorded in libér 101 of deeds in the office of- the register of deeds of Kalamazoo county, at page 828, for the said sum of one thousand dollars, which the said party of the second part hereby agrees to pay the parties of the first part, as follows: Within thirty days of the date hereof.
    “ Said second party is to have the right at once to prepare said land for a railroad track.
    “It is mutually agreed between the said parties that the said party of the second part, shall have possession of said premises forthwith, and he shall keep the same in as good condition as they are at the date hereof, until the said sum shall be paid as aforesaid; and if said party of the second part shall fail to perform this contract, or any part of the same, said part., of the first part shall, immediately after such failure, have a right to declare the same void, and retain whatever may have been paid on such contract, and all improvements that may have been made on said premises, and may consider and treat the part.. of the second part as. _ tenant holding over without permission, and may take immediate possession of the premises, and remove the part., of the second part therefrom.
    “ And 'it is agreed that the stipulations aforesaid are to apply to and bind the heirs, executors, administrators and assigns of the respective parties.”
    After the first contract was executed Mr. William S. Dewing gave the defendants a letter reading as follows:

      “Gentlemen: I hereby agree that the option dated June 22, 1899, for right of way adjoining our Belt Line, shall not be sold to other parties, and if deed is executed under the same and delivered to me, I further agree that I will build, or cause to be built, a railroad upon this right of way, or in case of failure to do it, I will deed back to the Messrs. Lane and Lay, upon receipt of purchase price of right of way. And I further agree that I will build or cause to be built the three crossings mentioned in the said contract, but not build any interlockers thereto, and should other crossings be required, the railroad crossing the first railroad shall bear the expense of the same.”
    It was thoroughly understood by all parties that the contracts with Mr. Dewing were in fact made with the complainant, and that Mr. Dewing was acting for the complainant. The evident purpose of this communication was to remove any question as to the right of Mr. Dewing to assign the contract tó any other company.
    The first contract was deposited in escrow with Mr. Hays, to be delivered to Mr. Dewing when he had subscribed or caused to be subscribed $8,000 of the stock of the Southside Improvement Company. Mr. Dewing and his friends subscribed and paid for this stock, and the contract was delivered to him by Mr. Hays. Mr. Dewing soon after assigned the contract to the complainant and it entered upon the construction of its roadbed and track. No question ever arose as to its location. Defendants assented to it, were present while the work was going on, and made no protest or objection. The roadbed was constructed to the tracks of the G. R. & I. R. R., towards the Bryant mill. A spur was also constructed extending to the east crossing the Kalamazoo river to Kalamazoo Paper Mill No. 3. The complainant also purchased land which would have been unnecessary if the line had not been extended to the Bryant mill. It paid $1,500 to the G. R. & I. R. R. Co. for crossing under its track and paid one-half the expense for raising the track of the G. R. & I. R. R., while the Traction Company paid the other half. The expenses incurred in these improvements and purchases was approximately $71,000. All this was done without any protest from the defendants, or any hint upon their part that it was not done in strict accordance with the contract. From this statement should perhaps be excepted the construction of the extension to Paper Mill No. 2. This extension was not included in the original contract. It is claimed by complainant that there was a parol agreement for this extension upon the same terms as those in the first contract.
    The defendants executed and submitted a deed to the complainant for its approval, for this extension. It was satisfactory to complainant and was returned with request to insert the amount of the consideration when the complainant would pay the amount. Complainant made .a verbal request to defendants for the deeds. In reply thereto Mr. Dewing received from the defendants the following letter, dated August 25, 1900:

      “Dear Sir: In accordance with your verbal request we will prepare the deeds for the railroad right of way mentioned in writing of June 22, 1899, and the subsequent writing from you; we wish to state, however, that in order to get to our land and utilize it, it will be necessary for us to reserve the right to make and use three or more railroad crossings over the right of way that goes to you or the Chicago, Kalamazoo & Saginaw railway. We will therefore have the deeds prepared accordingly.”
    To this Mr. Dewing replied refusing to make any change in the contract, and demanded that a deed be executed in accordance therewith. No controversy had up to this time arisen between the parties. On November 1, 1900, the defendants wrote Mr. Dewing the following letter:

      “Dear Sir: In relation to the disagreement between us as to deeds prepared for right of way for the extension of the C. K. & S. Railroad, we do not feel that we ought fo or that we can give up what you ask. On the whole we think it best to withdraw all options heretofore tendered by us to you for the right of way for the C. K. & S. Railroad, and leave the matter for future arrangement. This we accordingly do. We believe, however, that there need be no trouble in coming to satisfactory terms.”

      On August 37th, prior to. the date of this letter, Mr. Dewing had written to the defendants notifying them that he was ready to accept the terms of the contract and to receive the deed. Defendants knew that complainant had paid half of the expense for raising the tracks of the Gr. R. & I. so as to let the complainant’s tracks go under it, and testified that complainant “could have had no other purpose to go under than to go to the Bryant Mill.”
    On October 33, 1900, defendants wrote complainant calling its attention to the fact that they had not yet received payment for the right of way. On the same day Mr. Dewing replied that he was ready to pay for a deed of the right of way when the defendants would make the deed in compliance with the contract.
    The officers of the complainant had been considering for some years an extension to the south. One of the routes considered was to Marcellus, to connect with the Grand Trunk Railway, which would be a continuation of the line past the Bryant Mill. Other extensions had also been talked of, but the extension to' Pavilion to connect with the Grand Trunk Railway there had not been thought of when the contracts were made. This extension was finally decided upon but not until the latter part of 1900; or the early part of 1901. It was constructed in the summer of 1901. It had not been determined upon until after the defendants refused to carry out their contract by the letter of November 1, 1900. The extension to Pavilion did not cross the G. R. & I., but went in a southeasterly direction from a point near the proposed crossing of the line to the Bryant Mill.
    We need not make any further reference to the facts in this statement.
    Proofs were taken in open court, and the circuit court entered a decree dismissing the complainant’s bill on the ground that it had abandoned that part of the route covered in “Exhibit A” extending across the G. R. &T. to the Bryant Mill.

       Pending a motion for a rehearing, this cause was discontinued by stipulation February 6, 1908.

   Grant, J.

{after stating the facts). The contention of the learned counsel for the defendants, that the contract is too uncertain and indefinite to be specifically-performed, is wholly without merit. The defendants who were the originators of the proposed Belt Line had made a survey and a track had been laid a few years before upon a small portion of it. A blueprint of the survey was given by the defendants to Mr. Dewing and was produced in evidence. The original had been destroyed by afire in which the factory of Lane & Lay had been destroyed. No one testified that there was any doubt as to the location of this strip of land described in the contract. A complete answer, however, to this claim is that the complainant took possession of it with the express assent of the defendants and constructed their road thereon. If there was any indefiniteness in the description it has been made definite by the action of the parties. March-Brownback Stove Co. v. Evans, 9 Pa. Sup. Ct. 597; Purinton v. Railroad Co., 46 Ill. 297; Work v. Welsh, 160 Ill. 468; 26 Am. & Eng. Enc. Law (2d Ed.), p. 86. There is no word of testimony to indicate either that the parties did not understand the location of the land or that there was any disagreement as to its location when complainant took possession. An exact and definite method had been agreed upon to determine the price to he paid, and the defendants themselves testified thgt they had prepared deeds for the conveyance of the land occupied. A computation of the acreage of the strip to be conveyed could easily be made and the price per acre could easily be ascertained by ascertaining the price of the original cost per acre, with interest and taxes added, and multiply that by the number of acres conveyed. Defendants admit that the consideration could thus be easily figured.

It is next urged that the contract was only a temporary memorandum containing nothing binding upon the parties, but that the terms were left to rest in parol. This contention is also without merit. It was a contract for the sale of lands and for a deed to be executed according to its terms. There is no claim of fraud on the part of the complainant. Mr. Dewing, representing complainant, was not the moving party in the negotiations which led up to the contract. Mr. Hays appears to have been the originator and promoter of the proposition. He first proposed it to Mr. Dewing and to the defendants. The defendants prepared a contract containing a short time limit for the construction of the road to the Bryant Mill. Mr. Dewing declined to accept the contract containing this provision and it was destroyed. A second one was drawn but it did not meet the approval of the parties, and was destroyed. The defendants then submitted a new contract with the time limit omitted, and this was accepted, and the contract left in escrow with Mr. Hays on the conditions above mentioned. Defendants now seek by parol testimony to again insert a time limit into the contract.

When the defendants assented to the refusal of Mr. Dewing to execute a contract with the time limit in and executed another with the time limit out, it eliminated entirely any question of specified time limit, and left it to be construed according to the rule of the common law. Mr. Dewing and his assignee would undoubtedly be required to construct the road within a reasonable time. The contract is complete in itself and contains all that is essential for its complete performance. After the complainant had more than half completed its roadbed according to the contract, defendants sought to read into it by parol another provision not found in the written contract. It provided that the complainant should have three crossings over the proposed belt line location. It contained no provisions by which the defendants should have the right to make crossings of their own over complainant’s road. The crossing of one railroad by another or by private parties is a matter of great importance. Should the defendants desire to construct a belt line which should require crossings over the complainant’s road, the law provides a way by which such right can be obtained. If they had desired to obtain it by contract they should have spoken when they made the contract, and have insisted upon the insertion of such a provision in it. A party making a contract to sell land to another without any reservation of a right of way might as well insist that he should have a right of way over the land when he is caljed upon to make a deed. I know of no better illustration than this case affords of the wisdom of the rule holding that all prior negotiations and talks are merged in the written contract which parties make. It is not claimed that there was any previous agreement for such crossings. All parol testimony relating to conversations as to the time limit or other provisions was incompetent, and cannot be considered.

This was no hasty contract. All the parties to it were men of business, experience, and intelligence. The negotiations extended over a considerable time. The third contract was drawn before one was found acceptable to both parties. All parties understood the situation, and also understood what the contract contained, and its purport. To hold that this contract can be virtually laid aside by parol would be a virtual annulment of the rule that written contracts must control. Adair v. Adair, 5 Mich. 204; Cohen v. Jacoboice, 101 Mich. 409; Helper v. Manufacturing Co., 138 Mich. 593.

A contract complete in itself cannot be converted into an idle and meaningless memorandum by parol evidence.

We cannot concur in the conclusion reached by the learned circuit judge, that the complainant had abandoned the construction of its road to the Bryant Mill, and in his refusal to grant specific performance for that reason. This finding rests mainly upon the testimony of the defendants and Mr. Hays. They testified that in conversations. with Mr. James H. Dewing he informed’ them that he did not intend to construct the road from the G. R. & I. to the Bryant Mill. None of these conversations are claimed to have occurred until the roadbed was completed to the G. R. & I. and to Mill No. 2, and the defendants had refused to give Mr. Dewing deeds for the land according to the terms of the contract. Mr. Dewing says that he told them that the company would proceed no further with the road until they had given the deed in accordance with the terms of the contract (and this complainant i^as clearly justified in doing), but denied positively ever telling them that the construction to the Bryant Mill was permanently abandoned. All the officers of the company testified positively that there never had been any talk or action on the part of the company looking towards such abandonment.

It is conceded by the defendants in their testimony and by counsel in their briefs that Mr. Dewing for the complainant entered into this contract in good faith; that the complainant constructed its road in good faith in accordance with it, but they claim that it was subsequently determined not to construct the road to the Bryant Mill after it had decided upon a connection with the Grand Trunk at Pavilion.

At the time defendants wrote their letter demanding further concessions and conditions, refusing to give deeds unless these were complied with, and also the letter attempting to rescind the contract, they had no knowledge that there was any intention to construct the road to Pavilion. They did not refuse to perform the contract on account of this extension, but for other reasons as above stated. In fact at that time it had not been determined to extend to Pavilion. The extension to Pavilion was no concern of the defendants. There was no agreement to construct the road by the Bryant Mill to Marcellus, several miles longer than to Pavilion. The object of' the defendants in securing the construction of the road to the Bryant Mill was to open their land, known as the Reed Farm, for the location of manufactories and other buildings which manufacturers always require. The extension to Marcellus was of no benefit to them. The extension to Pavilion with the branch extending to the Bryant Mill was as beneficial to them as would have been. the extension of the Bryant Mill branch to Marcellus. The benefits to the defendants would have been as great in the one case as the other. The defendants having first broken the contract, the complainant and its officers were justified in refusing to go further with their road until the defendants tendered them the deeds. Complainant had tendered the money and has kept the tender good by a deposit in the bank for them. Neither law nor equity. will, under these circumstances, permit the defendants to compel a forfeiture of the contract and the abandonment of the improvements which the complainant had made at large expense. Upon what principle, either of law or justice, could the defendants refuse to execute the deed and oust the complainant, who was guilty of no violation, from the possession of its property ? The complainant Lad spent several thousand dollars in buying land not needed except for the extension to the Bryant Mill; in purchasing the right from the G. R. & I. to cross under its tracks, and the expense of raising them, and in the construction of its road to the G. R. & I., an extension not required except to reach the Bryant Mill; the officers of the complainant and the defendants were neighbors in ‘ the city of Kalamazoo; they took great pains to put their intentions in writing, first by contracts and then by correspondence, and in all this correspondence not even a hint is found of any intention to abandon the construction to the Bryant Mill. Defendants made no such claim as a cause for rescinding the contract. These acts are wholly inconsistent with the idea of abandonment and speak the truth more certainly than the uncertain memory of interested witnesses.

We think it clear upon the record that the road would have been constructed in a short time had it not been for the unjustifiable acts of the defendants.

Was there a verbal contract for the right of way for the extension from the main line to Mill No. 2, and was it executed in accordance with such agreement ? The officers of the complainant testified that such a contract was made, and that it was for the same consideration as that expressed in the first contract,-viz., the price of the acreage based upon the cost of the land to the defendants, with interest and taxes added. The defendants admit that that was the agreement, with the condition that it was not to become binding until the road was completed to the Bryant Mill. In September, 1900, they prepared a deed of this strip of land which complainant had used and upon which it had erected its road to the paper mill, and submitted it to Mr. Dewing. It was made, on the basis of the consideration above named, and the deed was complete except that it did not contain the amount of the consideration. No reference is made in it to any such consideration as the defendants now claim. It was satisfactory to the complainant, and was returned by Mr. Dewing to the defendants for the insertion of the amount of the consideration. We are satisfied that such an agreement was made and that it was fully performed by the complainant. If, however, the agreement were as the defendants claim, they waived that condition when they refused to perform the first contract, and thus prevented the construction to the Bryant Mill, and will not now be heard in a court of equity to take, advantage of their own wrong to the detriment of the complainant.

Counsel for both parties cite authorities to the rule that the specific performance of a contract is not a matter of right in a court of equity, but rests in the sound discretion of the court or chancellor.. It is unnecessary to cite authorities in support of this rule. This discretion is to be guided largely by the equities and justice of the case. If specific performance is denied the complainant may lose the large amount of money it has in good faith invested in the construction of its road, not only over the defendants’ land, but also to Pavilion and the purchase of land therefor. It will either be compelled to abandon its road or take proceedings for condemnation, and run the risk of a finding by a jury that there was and is no necessity for the construction of the road. If, however, the necessity should be found by a jury, it may be compelled to pay large damages on account of increased valuó of land since its road was built. This would undoubtedly be the case, unless the court should hold that the damages should be limited to the value of the land at the time the road was built. Specific performance will give to each party just what they contracted for and do no wrong or injustice to either. Under these circumstances, sper eific performance should be decreed.

Decree reversed, and decree entered in this court for the complainant, directing the defendants to execute the deeds in accordance with the contracts, and requiring the complainant to construct its road to the Bryant Mill within six months from the date of said decree, with costs.

McAlvay, C. J., and Carpenter, Hooker, and Moore, JJ., concurred.


author: Moore, J. Ostrander, J. Carpenter, J.

text:
    WOOD v. SLOMAN.
    1. Corporations — Limited Partnership Associations — Organization-Contributions to Capital Stock — Property — Valuation — Fraud.
    Where the organizers of a limited partnership association, organized under chapter 160, 2 Comp. Laws, issued practically its entire capital stock in payment for a secret formula, one-half of the stock being immediately transferred to a trustee to be sold at a nominal price for the benefit of the association “in order to supply cash capital for the company and to enable it to carry on its operations,” and the stock issued to others than the incorporators was issued upon original subscriptions made directly to the association, the prices paid being from 20 to 50 per cent, of the par value, the contribution of the organizer transferring the formula cannot be said to have been taken at a valuation approved by the members subscribing, within the meaning of section 6079, 2 Comp. Laws, nor can the stock in the hands of such purchasers be considered fully paid and nonassessable and the stockholders exempt from liability to creditors of the association under section 6080, 2 Comp. Laws. Carpenter and Grant, JJ., dissenting.
    2. Same — Unpaid Subscriptions — Enforcement by Trustee in Bankruptcy.
    The trustee in bankruptcy of a limited partnership association can maintain a bill against stockholders to enforce payment of the difference between the sums paid to the association for stock and the par value of the stock, where the difference in value is an asset of the association.
    Appeal from Wayne; Mandell, J.
    Submitted January 22, 1907.
    (Docket No. 74.)
    Decided December 10, 1907.
    Bill by Ira L. Wood, trustee in bankruptcy of the Manna. Cereal Company, Limited, against Morris H. Sloman, Theodore L. Backus, D. Fred Charlton, and others, to enforce a statutory liability for unpaid subscriptions, for an accounting, and for general relief. From an order overruling demurrers to the bill, defendants appeal.
    Affirmed.

      Albert B. Hall (Fred A. Baker, of counsel), for complainant.

      Sloman & Sloman, for defendants Sloman et al.

      Edward A. Barnes, for defendant Backus et al.

      A. B. Eldredge and A. E. Miller, for defendants Charlton et al.
   Moore, J.

This is an appeal from orders overruling defendants’ demurrers to complainant’s bill of complaint. The questions involve a construction of sections 6079, 6080, 2 Comp. Laws, the last named of which provide that under certain contingencies members of a partnership association may be liable to its creditors to the extent of the portions of their subscriptions in the capital of the association not then paid. We insert-sufficient of the bill of complaint for an understanding of the issues involved:

“State oe Michigan, — In the Circuit Court for the County of Wayne, in Chancery.
“ Your orator, Ira L. Wood, as trustee in bankruptcy for the Manna Cereal Co., files this bill against Morris H. Sloman” and upwards of 130 others whose names are given, and in the amended bill of complaint it is averred “being all of the persons owning stock of the Manna Cereal Company at the time of the filing of this bill,” and respectfully shows unto the court:
“1. That the Manna Cereal Company is a partnership association, limited, organized under the laws of Michigan, being chapter 160, 2 Comp. Laws 1897.
‘ ‘ 2. That it was organized on the 24th day of April,' A. D. 1902, by Morris H. Sloman, G. L. Winckler and James H. Bayne, all of the city of Detroit, and State of Michigan, and the following statement was filed in the office of register of deeds of Wayne county on the said 24th day of April, 1902:
“ ‘ The undersigned, desiring to form a partnership association for the purpose of conducting within the United States and Territories, the business of manufacturing an improved cereal breakfast food, with the principal office and place of business established and maintained at the city of Detroit, in the State of Michigan, by subscribing and contributing capital stock thereto, which capital stock shall alone be liable for the debts of such association, in accordance with and pursuant to Act No. 191 of the Public Acts of Michigan of 1877, as amended by Act No. 216 of the Public Acts of 1881, and Act No. 21 of the Public Acts of 1885, being chapter 160 of the Compiled Laws of Michigan of 1897, do hereby sign and acknowledge the following statement:
“ ‘ First. The total amount of capital stock of said association is five hundred thousand dollars ($500,000), and all of which is paid in, in full, at the time of the execution of this statement, and consists:
“‘1st. The formula for the manufacture of said improved cereal breakfast food, which is held as a trade secret, and its value is understood and agreed to as four hundred and ninety-nine thousand, nine hundred and ninety-eight dollars ($499,998), and
“ ‘ 2nd. Cash, two dollars ($2).
“‘Making a total of five hundred thousand dollars ($500,000).
“ ‘ Second. The full names of the persons composing said association and the amount of capital subscribed for by each, is as follows:
“‘Morris H. Sloman, who contributes as part of said capital stock, property consisting of
said formula at the agreed value of________ $499,998 00
George L. Winckler, cash, one dollar.....1 00
James H. Bayne, cash, one dollar........... 1 00
Total--...............................- $500,000 00
‘ ‘ ‘ Third. The character of the business to be conducted is, the manufacture and sale of an improved cereal breakfast food, and the location at which the same is to be carried on is, the city of Detroit, county of Wayne, State of Michigan.’ * * *
“8. That upon the organization of the said association a meeting of the members of the said association was held on the 1st day of May, 1902, at which meeting certain bylaws were adopted, among which by-laws, No. 3'readsas follows:
“ ‘ No certificate of shares in this association shall issue except to persons who have previously paid in full therefor.’
“The capital stock of the association was divided into 500,000 shares of the par value of one dollar ($1) each.
“ By by-law No. 8 it was provided as follows:
“ ‘Of the total shares of this association, 499,998 shares shall issue to Morris H. Sloman, in full for the formula of manufacture contributed by him to the capital stock of the association, and one share each to George L. Winckler and James H. Bayne respectively, they having paid in full therefor the par value thereof, and certificates for such shares shall issue accordingly.’
“4. That immediately after the adoption of the said by-laws, said Morris H. Sloman announced that he had disposed of certain shares allotted to him, and a stockholders’ meeting was held, in which meeting the transferees of the said Morris H. Sloman’s shares participated, new officers were -elected, and a board of five managers was chosen.
“5. At this meeting the said Morris H. Sloman agreed to transfer for the benefit of the association, 249,998 shares of the stock held by him, which said shares were subsequently transferred by a deed in trust to F. C. Harvey for the benefit of the association; said shares to be sold for cash, for the use of the association, at a price not less than 20 cents per share, the remainder of the shares owned by Morris H. Sloman not to be sold or offered for sale until after the 249,998 shares were sold or responsibly subscribed for.”

Said trust deed is then set out in full. Among other things it provides said Harvey is “to have and to hold the same in trust, however, upon the following uses and trusts, and not otherwise, to wit:

“First. To sell the said shares or any portion thereof, to purchasers for cash or its legal equivalent, at the best price obtainable therefor, but in no case shall any of said shares be sold for less than 20 cents per share.
Second. To pay, or cause, to be paid, into the treasury of said Manna Cereal Company, Limited, at once upon the receipt thereof, the entire proceeds of all such sales of stock, such proceeds to be held, used and disposed of by the said Manna Cereal Company, Limited, for its own sole and exclusive use, benefit and behoof.
‘c Third. To cause to be issued under the rules and bylaws of said company and its board of managers, regular and proper certificates of stock in said Manna Cereal Company, Limited, to the purchaser of said shares or any proportion or part thereof.
“And be it further known, that in consideration of the premises, and in order that the advantageous sale of said shares or any part thereof may not be obstructed or interfered with by any act of mine, I, the said Morris H. Sloman, do hereby promise, covenant, agree and undertake, that I shall not sell, or otherwise allow or permit the remaining portion of shares of said company, amounting to 250,000 shares of which I. am the owner, to be sold or offered for sale until after the full number of 249,998 shares herein and hereby transferred, shall have been first sold or responsibly subscribed for.
“ In witness whereof, I have hereunto signed my name and affixed my seal, at the city of Detroit, county of Wayne.”

The hill states the trust was accepted by Mr. Harvey. Continuing it avers:

“6. In pursuance of this plan of organization, certificate No. 1 was drawn in favor of the said Morris H. Sloman for 499,998 shares, but this certificate was never issued, and still remains undetached in the stock book of the association, and bears upon its back the indorsement and assignment to F. C. Harvey, trustee, of 249,998 shares, T. C. Sherwood 50,000 shares, Morris H. Sloman 18 certificates aggregating 200,000 shares. Certificate No. 2 was issued to Gr. H. Winckler for one share. Certificate No. 3 was issued to James H. Bayne for one share. Certificate No. 4 was drawn in favor of F. C. Harvey, trustee, for 249,998 shares, but was never issued or detached from the stock book of the association.
“7. All stock subsequently issued to subscribers was issued as original stock, signed by the officers of the association, the stub only indicating that a transfer had been made from certificate No. 4, which as a matter of fact had never been issued or detached from the stock book.
“8. Different forms of blanks were used in subscribing for stock in said association, but all subscriptions were made directly to the Manna Cereal Co., Limited, and all stock issued upon such subscriptions were issued as original stock of the association.
“9. The board of managers of the said association agreed at various times to sell the stock of the association at different prices; some of the stock was sold for 20 cents on the dollar, some at 50 cents on the dollar; some of the contracts of subscriptions purported that the stock when issued should be considered as fully paid and nonassessable, while other contracts simply provided for a straight subscription at a price below the par value of the stock.
10. Your orator shows unto the court that the above-named respondents all subscribed for stock in the said association, and agreed to pay different prices; but that none of the said respondents paid the par value of the said stock.
“11. Your orator shows that the said Morris H. Sloman sold a large number of shares of the stock of the said association assigned to him as aforesaid at a price below the par value of the said stock, but the exact price received by the said Sloman for said stock is unknown to your orator.
“12. That on the eighth day of February, 1904, the said association was declared a bankrupt by the United States district court for the eastern district of Michigan; that your orator was appointed trustee in bankruptcy, and proceeded to collect the assets of the said bankrupt association, and apportion said assets among its creditors.
“ 13. Your orator shows that the said assets amounted to $4,480, and the debts proven before the commissioner in bankruptcy amounted to $23,883; that two dividends were declared of 5 per cent, and 5.6 per cent, each, and that the same have been paid to the said creditors.
“ 14. Your orator shows that there remains unpaid to the said creditors the sum of $21,304; that all of the assets of the said bankrupt association have been exhausted, except the unpaid subscriptions to the capital stock of said association.
“15. Your orator further shows unto the court that an attempt was made to organize an association with a capital stock of $500,000, with a cash capital of $2, and to raise money for the carrying on of the business of the association by transferring original stock to a trustee for the benefit of the association, and selling the same as treasury stock.
“16. Your orator charges the fact to be, that the scheme was conceived in fraud; that the stock was held by all the subscribers as original stock; that said stock was subscribed for as original stock, and was so issued by the said association.
“17. And your orator charges, the legal effect of such a scheme was to make the subscribers of such stock and their transferees liable for the debts of the said association, to the amount of the par value of the stock subscribed for.
“18. Your orator shows unto the court that the formula described in the said articles of association had very little, if any, value and that it was given a value of $499,998 in said articles in bad faith and fraudulently in an attempt to evade and defeat liability upon subscriptions to the capital stock of said association for the full amount of the par value thereof; that the certificate No. 1 in the name of Morris H. Sloman for 499,998 shares of the capital stock of said association was never issued to him and was not intended to be issued; that said Morris H. Sloman on the making out of said certificate, immediately assigned 249,998 shares to Fred C. Harvey as trustee for the association, and the same became and was original stock in said association, and subscribers to the capital stock of said association were given certificates from the stock so held by said Fred C. Harvey as trustee, as stock issued by the association, and each and every said subscriber became and from thenceforth has been and still is liable to the association for the full amount of his respective subscription at the par value of said stock. That the 250,000 shares of stock remaining in the name of Morris H. Sloman was put in his name and remained in his name without any consideration whatever and the same never became a valid subscription to said capital stock, except so far as subscriptions to the capital stock of said association were obtained, and certificates were issued to subscribers by transfers of stock from the 250,000 shares so placed and held in the name of Morris H. Sloman.”

The bill then prays for an assessment and has a prayer for general relief.

The various defendants are represented by upwards of 30 solicitors who have filed demurrers in behalf of their clients, assigning different reasons for the demurrers. All of these reasons are embraced in the demurrer filed in behalf of defendant Theodore L. Backus, et al. The reasons assigned, which will sufficiently present the questions involved, are as follows:

“2. Because it affirmatively appears from said bill of complaint that the Manna Cereal Company, Limited, is a partnership association and that its entire capital stock was fully paid at the time of the organization thereof in such manner as to bind the said partnership association itself, and therefore no person could be entitled to compel the payment of additional money from the subscribers or stockholders thereof as for unpaid stock subscriptions, except such as have been fraudulently deceived or misled in fact and to their injury, and it does not appear that the complainant, or all, or any of the persons in whose behalf said bill is filed, have been wrongfully misled or deceived by or through the action of the original incorporators and subscribers to said capital stock or these defendants in such manner as to give him or them any rights in the premises against said original subscribers or these defendants, which the partnership association itself did not possess. * * *
Í. Because it affirmatively appears from the said bill of complaint that public notice of exactly what property constituted the entire capital stock of said partnership association was given in the manner provided by law,' by which notice all of the parties in whose behalf this bill is filed are bound, which notice explicitly set forth without evasion or anything calculated to mislead, exactly what property was taken in said capital stock and the valuation at which the said property was taken by said partnership association.
“5. Because the said bill of complaint does not contain any allegations connecting these defendants or any or either of them with any fraud in the manner in which the capital stock of said partnership association was issued as full paid or charging them with any knowledge or notice of the actual consideration therefor, other than that which it appears from the said bill of complaint was had by the parties in whose behalf this bill is filed.
“6. Because assuming that the allegations of said bill of complaint established a liability on the part of these defendants as for unpaid stock subscriptions, it does not appear from the said bill of complaint that all responsible persons similarly liable and within the reach of process of this court at the time said bill of complaint was filed have been made parties to said cause.
“7. Because by reason of the facts affirmatively appearing upon the bill of complaint in this cause particularly referred to.in the foregoing ground of demurrer numbered two, such claims for additional contribution as might exist could not be assets in the hands of a trustee in bankruptcy for general distribution (because they could exist only in favor of such creditors as have been deceived and defrauded) and cannot be enforced by him.
£t 8. Because it affirmatively appears from the said bill of complaint that the stock alleged to have been subscribed for and purchased by said defendants was-at the time of such alleged subscription and purchase ‘ treasury ’ stock, the same having been previously issued as full paid stock and returned to the treasury, and as such said partnership association was lawfully entitled to dispose of the same as full paid stock for its fair value regardless of its par value, and it does not appear from the said bill of complaint that such ‘treasury’ stock was sold to said defendants for less than its fair value at the time of such sale.”

It is urged that the bill sets forth nothing giving rise to a contract liability on the part of the defendants. It is also said the allegations of the bill do not set forth a case of liability upon any equitable principles. It is contended that as the subscriptions were made and the property conveyed as provided in the articles of association there can be no liability. It is also said that where the valuation was agreed upon by the incorporators and no deception was practiced upon them, creditors in general have no better rights than the corporation itself would have. It is urged, we quote from the brief:

“But the principles upon which liability is established in the case of the issuance of the capital stock of a corporation for property taken at an excessive valuation are entirely inapplicable to this case, because of the fundamental differences in the provisions which the statutes and the common law have developed for the protection of creditors and others dealing with corporations and the provisions to accomplish the same purpose in the statutes under which this concern was organized.”

In support of this contention the solicitor cites McBryan v. Elevator Co., 130 Mich., at page 121; they then quote section 6079, 2 Comp. Laws, and say:

“To any one familiar with the principles upon which liability is established against corporation subscribers the noticeable features of this statute are the provisions in express terms authorizing the organizers under it to contribute ' property at any valuation agreed upon by all of them, and the requirement that in such case a schedule be filed showing exactly what it is that is taken at. such a valuation. The plain intent of this statute is that the protection of parties dealing with the association shall not as in the case of corporations be in any representations as to how much in value has been contributed by the organizers, but in the information the certificate must furnish as to what the contribution actually consists of. In the case of corporations where the creditor is given no knowledge of the actual property the correctness of the valuation is all important. But under this act, as intending creditors are to be given the means of making their own valuations, the valuations of the organizers become unimportant excepting as furnishing a measure between themselves of their respective shares. The important thing for others is the description.
“The provision for recording is clearly intended to give notice to everybody concerned of the matter recorded. Where parties have acted under this statute and have fully complied with the provisions intended for the protection of others by truthfully reciting exactly what the property is which constitutes the capital, to hold that they, or purchasers from them of the capital stock so obtained, shall nevertheless be liable upon proof that their valuation is excessive, would nullify the plain provision of the statute authorizing them to put their own valuation on it provided they give the requisite information.”

In support of this argument the cases of Dieterle v. Enamel Co., 143 Mich. 416, Staver & Abbott Manfg. Co. v. Blake, 111 Mich. 282 (38 L. R. A. 798), and certain cases from Pennsylvania are cited. We do not reach the same conclusions from reading these cases as does counsel. In the Staver & Abbott Case, supra, the court declined to follow to the fullest extent the Pennsylvania cases. It is well however to look at those cases for they throw light upon two features of this case, first, Was the description of the property sufficient ? and second, Must the incorporators act in good faith in putting a value upon the property ?

In Maloney v. Bruce, 94 Pa. 249, the articles of association fix the amount of capital at $15,000 “and recites that the whole amount of the capital had been paid in by the assets and property of Martin Maloney, one of the members, at a valuation approved by all the members. ” Then follows what purports to be a list of the property contributed in lieu of cash, the first item being a “contract with the Pennsylvania Gaslight Company at a valuation of $2,500,” with no information what the contract was, after which comes merchandise under a general description, together with “furniture, fixtures and all goods, tools and chattels now on the premises, 209 Lackawanna avenue, Scranton city, valuation $12,500.”

In disposing of the case the court said:

“ This is not the kind of schedule contemplated by the act of 1876. The description is too general to enable any one to form a correct estimate of the extent of the property, and a lumping valuation renders it equally difficult to judge of values. The property contributed was intended as the equiyalent of a cash capital, and the plain object of the provision in the act of 1876 requiring a schedule was to enable creditors to ascertain precisely of what the property consisted and to judge of its value. If parties seek to have all the advantages of a partnership and yet limit their liability as to creditors, they must comply strictly with the act. Where property has not been contributed, scheduled and valued as the act of 1876 directs, there is no payment of the capital.”

In Vanhorn v. Corcoran, 127 Pa. 255 (4 L. R. A. 886), decided in 1889, one of the items of the schedule was as follows: “Paid in merchandise, lumber, book accounts and bills receivable transferred to this association, $21,609.18.” As a matter of fact it appeared that the amount $21,609.18 represented the difference between the estimated assets and the estimated liabilities of a firm which merged into the association. The court in disposing of the case said:

“It will be noticed that the act gives a wide latitude as to the kind of property that may be contributed as capital. At the same time, it is very evident that it contemplates a real actual capital, in cash, or in property available for the business of the company and the payment of its debts. It was never intended that the property contributed as capital should be moonshine, wild lands, or water lots. If the business be merchandising, a stock of goods and the store house in which they are contained would be legitimate; if the business be mining, a mine with its machinery and improvements would be appropriate ; and if manufacturing, the factory building, with its machinery and the stock, manufactured and unmanufactured, would be in the direct line of its business, and therefore a proper and available contribution to capital. The point of these remarks will appear later. * * *
“ The description in this case is even more vague than in Maloney v. Bruce. It consists of ‘ merchandise, lumber, book accounts, and bills receivable.’ A creditor looking at this description could not form any estimate of its quantity, character, or value. For all practical purposes it might as well have been omitted. If the property had been properly scheduled, an estimate of its value might have been made approximating the truth. As an illustration, if the general and indefinite word ‘lumber’ had been followed by the words ‘consisting of 100,000 feet of No. 1 yellow pine flooring,’ almost any business man could have formed a fair idea of its value, or he could have ascertained it from any one engaged in the lumber business. * * *
“ Their allegation in the certificate that they had contributed $21,609.18 in property was inaccurate, and came dangerously near being a false statement, though I do not think it was so intended. Had the certificate set forth that their contribution consisted of their interest in a firm subject to the payment of its debts, it would have conformed to the truth, but it would not have been a compliance with the act of 1876. That act contemplates such contributions as shall be available to aid the business and pay the creditors of the limited partnership.”

Apply the language of these two cases to the case at bar and do we find a sufficient description of property so that an inquiring creditor could form an intelligent estimate of the value of the property contributed ? Suppose, distrusting his own judgment, he calls in an expert manufacturer of breakfast foods, and asks him to put a value upon property described as w a formula for the manufacture of said improved cereal breakfast food, which is held as a trade secret,”is he'likely to get a,definite and intelligent answer? We cannqt imagine a description of property more indefinite than this.

Another Pennsylvania case is illustrative. It is the case of Rehfuss v. Moore, 134 Pa. 462 (7 L. R. A. 663). The defendants had formed a limited partnership association under the name of the Automatic Overseaming Button Hole Machine Company, Limited. Three thousand and thirty dollars was contributed in cash. Certain patent rights for button-hole machines, which were described in detail, were put in at a valuation of $496,970. It appeared that the creditors, when they became such, had actual knowledge of all the facts relating to the patents and bearing upon their value. It is held that patent rights are such property as may be contributed to the capital of a limited partnership association. After mentioning some of the earlier cases the opinion proceeds:

“But where, as here, the statement is in due form, and contains all the essential requirements of the statute, but the valuation is alleged to be unconscionable, and inserted in the statement without any proper consideration of the inherent or intrinsic worth of the property contributed, the question is one of good faith. All property contributed under the act of 1876 is to go into the capital ‘at the valuation to be approved by all the members subscribing to the capital,’ and the subscribers would not be justified, perhaps, in fixing a grossly fictitious and fraudulent valuation to mislead and defraud creditors. But if their estimate is made honestly and in good faith, it must be accepted, although mistaken, and even grossly excessive. Their motives must be considered as of the time when the valuation was made; it will not do to condemn their estimate of the property because it afterwards proved worthless, and the enterprise resulted in a disastrous failure. In this case there is no evidence of fraud. The members of the association seem to have believed these patents to have been of extremely great value. One-fifth interest in the original invention cost $10,000; the remaining four-fifths were held by Mintzer and Banks, and the entire patent was thus contributed to the association.”

Then after giving a history of the patents the court proceeds :

“There is practically nothing to support a «charge of fraud. The testimony clearly shows that this enterprise was undertaken in good faith, and that the members had the utmost confidence in its final success. They paid in the cash capital, and contributed as much more in aid of the enterprise. The whole trouble was, that, although the invention was valuable in mechanical conception, and was a pioneer invention in its line, yet others, who were active in the same direction, relieved its imperfections, and reaped the reward. The plaintiffs were not deceived. They knew the nature and character of the several contributions made to the association, for these contributions were certified upon the record according to the fact, and they had, besides, actual, personal, and intimate knowledge of the resources of the company. We are of opinion that this was a good-faith transaction, and the judgment should be affirmed.”

We think the language fairly construed means that cases may arise where the good faith of the incorporators in placing a value upon the property contributed is an important factor.

Counsel call attention to another case. We quote from the brief:

“ Then came the important case of Cock v. Bailey, 146 Pa. 328, the final one in the series in which the law in Pennsylvania was developed and established, and which is especially important for us. In this case the articles of association showed that the company was organized with a capital stock of $500,000, subscribed as follows: ‘James M. Bailey, $100,000,’etc., etc.; that ‘each of the subscriptions was to be paid by the transfer of an undivided interest in the property described in the schedule attached.’ These schedules described the property in great detail, but gave no separate valuations and set out stipulations that the conveyances were subject to certain liens and that a sufficient amount of the capital stock was to be retained by the association at the par value of the same to cover these liens. Liability was claimed because of the lumping valuations, but the court held that they had substantially complied with the requirements of the law, and should not be held personally liable. Paxson, Chief Justice, after referring to the requirements of the statute, says:
“ ‘ The object of this, as was said in Maloney v. Bruce, 94 Pa. 249, is to enable creditors to ascertain precisely of what the property consisted, and to judge of its value. The main point is the description. That should be sufficiently accurate to identify it. The valuation is a minor matter. The company can put it in at its own value, so that it be agreed upon. There is nothing in the act to restrict the amount of the valuation. If it is excessive, the creditor can decline to give the company credit; while, if the description is accurate, he can only he misled by his want of prudence. But, if the description be so defective or inaccurate that the creditor may be misled, he has no means of forming an accurate judgment.’”

There are one or two sentences quoted which perhaps justify the conclusion of counsel; we think however from a careful examination of the case that the court did not understand it was laying down a new rule of law. The property contributed was real estate. It was described by metes and bounds. The court did not intimate that it intended to overrule or modify its previous decisions. On the contrary it cited with approval Hill, Keiser & Co. v. Stetler, 127 Pa. 145. See, also, the case of First Nat. Bank of Danville v. Creveling, 177 Pa. 270. Our own statute has been before the court several times. In Rouse, Hazard & Co. v. Wayne Circuit Judge, 104 Mich. 234, it was held the provisions of the act were constitutional, and that an execution may issue against any of the members of the association to the extent of the unpaid portions of their subscriptions respectively.

In Rouse, Hazard & Co. v. Cycle Co., 111 Mich. 251, (38 L. R. A. 794), it was held that these associations are governed by the law of corporations rather than by the law of limited partnerships. It was also held that the good faith of a transaction whereby the stockholders of a limited partnership association which had become insolvent gave their promissory notes for the unpaid portions of their subscriptions to the capital stock, which notes were immediately turned over to- the principal creditor, who advanced money to pay certain outstanding indebtedness, and arranged to continue the business, is a question for the jury.

In Dieterle v. Enamel Co., 143 Mich. 416, reference was made to the case of Young v. Iron Co., 65 Mich. 111, and a quotation made therefrom. The court then said:

“ In the case at bar, however, there was nothing to indicate to creditors of the defendant company that no pash was paid in, and that the assets consisted wholly of an interest in an insolvent company, and in a secret formula which none of the shareholders except Rice had ever seen, and which he knew to fee a fraud. However much the original shareholders may have acted in good faith as to the creditors, what was done was as to them a fraud. The case is within Moore v. Elevator Co., 122 Mich. 48; McBryan v. Elevator Co., 130 Mich. 111. Thesolvent original incorporators should be required to pay their subscriptions in full if necessary to satisfy the complainant creditor.”

If the facts are as stated in the bill of complaint, we think the creditors are entitled to relief against the original subscribers to the extent of their unpaid portions of stock respectively. Rouse, Hazard & Co. v. Cycle Co., 111 Mich. 251 (38 L. R. A. 794), and 1 Cook on Corporations (5th Ed.), § 108, and cases cited in note, are authority for the maintenance of the suit by the receiver.

The decree is affirmed, and defendants are given 30 days in which to answer:

Ostrander, J.

I agree that the bill should be answered. If the facts set out in the bill reasonably supported the inference that the contribution of Morris H. Sloman to the capital stock was taken at a valuation approved by the members subscribing, I should be inclined to agree that mere excessive valuation of the contribution was not unlawful and is not to be regarded as fraudulent with respect to interests represented by complainant. But I think no such inference is warranted and that the facts set out in the bill and admitted by the demurrers to be true justify but one conclusion, which is that the sole purpose of fixing a value for the formula was to enable the promoters to sell, at a nominal price, stock represented to be full paid. It will not do to say that the entire capital stock of such an association can be made fully paid and nonassessable by the mere observance of a form — by force of a declaration of the three original associates — the plan in fact being to sell the stock, for the association, for cash, for a fraction of its par value, ‘ ‘ in order to supply cash capital for the said company and to enable it to carry on its operations.” It is charged in the bill that stock issued to others than the incorporators was issued upon original subscriptions made directly to the association, the prices paid for stock ranging from 20 to 50 cents per share.

The point that the trustee in bankruptcy may not, in this proceeding, enforce payment of the difference between the sums paid to the association for stock and the par value of the stock, is ruled against appellants by Rouse, Hazard & Co. v. Wayne Circuit Judge, 104 Mich. 234; Same v. Cycle Co., 111 Mich. 251 (38 L. R. A. 794), if this difference in value is, as it is charged as being, an asset of the association.

McAlvay, C. J., and Blair, Montgomery, Hooker, and Moore, JJ., concurred with Ostrander, J.

Carpenter, J.

The facts in this case are stated in the opinion of Justice Moore. The issue requires us to construe the following part of section 6079, 2 Comp. Laws (relating to the organization of partnership associations):

“Contributions to the capital stock may be made in real or personal estate, at a valuation to be approved by all the members subscribing to the capital of such association ; but where property has been contributed as part of the capital, a schedule containing the names of the parties so contributing, with a description and valuation of the property so contributed, shall be inserted in such statement; and any amendment of said statement shall be made only in like manner; which said statement and amendments shall be recorded in the office of the register of .deeds,” (now the secretary of State and county clerk).

Does the foregoing section give the members therein mentioned the right to place any valuation they choose upon the property contributed by them to the capital of such association ? I maintain that it does. I understand complainant concedes that the members may place upon such property an excessive valuation, but he insists that they cannot place upon it a valuation which they know to be excessive. In other words, he insists that in fixing' that valuation they must act in good faith. The State of Pennsylvania has a similar law, and this law was construed in Rehfuss v. Moore, 134 Pa. 463 (7 L. R. A. 663). There it was held that the members might place upon the property an “unconscionable” valuation, “inserted without any proper consideration of the inherent or intrinsic value of the property contributed..” It is true that the court said: ‘ ‘ The subscribers would not be justified, perhaps, in fixing a grossly fictitious and fraudulent valuation,” but this was merely dictum, for in that case the subscribers had acted in good faith in valuing the property. In a later case, Cock v. Bailey, 146 Pa. 338, the court said:

“The main point is the description. That should be sufficiently accurate to identify it. The valuation is a minor matter. The company can put it in at its own value, so that it be agreed upon. There is nothing in the act to restrict the amount of the valuation. If it is excessive, the creditor can decline to give the company credit; while, if the description is accurate, he can only be misled by his own want of prudence.”

The above language, in my judgment, is a correct statement of the law; and it is not at variance with any prior adjudicated case in the State of Pennsylvania.

Maloney v. Bruce, 94 Pa. 349, and Vanhorn v. Corcoran, 137 Pa. 255 (4 L. R. A. 386), referred to by my Brother Mooke, are not in point. Each of these relate to a question entirely different from that under discussion, viz., the question of the proper description of fhe property contributed. The statute, in my judgment, gives the members of a partnership association the right to finally determine the valuation of the property contributed as capital stock. It neither says nor indicates that the members must put upon that property a fair valuation or even what they regard as a fair .valuation. They may place upon it any valuation they choose. No valuation approved by them is excessive, because they have a right to determine that valuation. Creditors have no right to say that any such valuation deceived them, for it does not purport to be the true valuation. Property contributed “at a valuation approved by all the members” is lawfully contributed.

I think, too, that this is the construction upon which ' the legal profession and business men advised by them have acted in forming partnership associations.

Proceeding upon the assumption that property might “be contributed at a valuation approved by all the members,” it will, I think, be found that they have often — and with no intention of defrauding creditors — placed upon such property a valuation in excess of what they believed to be its true value. An adjudication that fraud shall be or may be inferred from such action will, in my judgment, lead to disastrous consequences and do great injustice. The circumstance that such members did not intend to defraud creditors when they excessively valued the property contributed will be — if not entirely immaterial— practically unimportant; for their intention to defraud creditors will be inferred, if, as complainant contends, the law prohibits them from placing upon the property a valuation known by them to be excessive.

Justice Ostrander, while conceding — as I understand his opinion — the general proposition that the valuation “approved by all the members” is not open to review, maintains that it is otherwise in a case like that under consideration where “the sole purpose of fixing a value for the formula was to enable the promoters to sell at a nominal price stock represented to be fully paid.” I am unable to assent to this qualification. It suggests an exception which is not found in the statute. I think it is opposed to a proper construction of the statute. That, in my judgment, as already indicated, gives the members of the association “the right to place any valuation they choose upon the property contributed by them to the capital of such association.”

I do not discover any charge in complainant’s bill that the secret formula (the property contributed) was not sufficiently described in the articles of association. If that point is made, I do not think it well taken. I do not see how the description could have been any more particular and definite without disclosing the secret of the formula. To disclose this would have destroyed its value.

The contention that the formula is not sufficiently described is then in effect a contention that a secret formula can constitute no part of the capital of the association. For if it could, its members clearly had a right to contribute such formula as a part of said capital. The association was lawfully organized for “ the manufacture and sale of an improved cereal breakfast food.” What reason is there for saying that it could not own a secret formula for manufacturing said food ? I can see none. I submit that there is none. I think the order overruling the demurrer should be reversed, and the demurrer sustained.

Grant, J., concurred with Carpenter, J.