author: Blair, C. J.

text:
    SHOWEN v. J. L. OWENS CO.
    1. Corporations — Service oe Process on Foreign Corporations — Statutes—Actions—Attachment.
    The foreign corporations mentioned in 3 Comp. Laws, § 10443, on which service of process may be obtained by serving an officer or agent with a copy of the process, do not include such corporations as obtain the right to transact local business in the State of Michigan by appointing an agent for service of process, and securing a certificate of authority from the secretary of State, but include only foreign corporations engaged in interstate commerce in the State.

      3. Same — Actions—Foreign Corporations.
    The effect of the statutes regulating the right of foreign corporations to engage in business of a local nature is to make them domestic corporations, entitled to, and subject to, the same remedies as corporations organized in Michigan.
    3. Same — Estoppel—Process—Service.
    A foreign corporation engaged in local business in the State ■without complying with the statutes is estopped to interpose the unlawful character of its business as a ground of invalidity of the service of process upon its local agent.
    4. Attachment — Foreign Corporations — Process.
    Service of the writ of attachment upon defendant’s resident agent conferred jurisdiction in personam under 3 Comp. Laws, §§ 10474, 10555, et seq.

    5. Same — Affidavit — Damages Recoverable as Affecting Jurisdiction.
    Where damages alleged in a declaration in attachment for a breach of contract are susceptible of definite ascertainment by testimony, within a standard established by the contract, the remedy by attachment is allowed.
    6. Same — Assignment of Claim — Aotions—Parties.
    It is not a sufficient ground of objection to the jurisdiction in attachment that the plaintiff sues as assignee of a foreign ' corporation for the purpose of giving the courts of Michigan jurisdiction.
    Certiorari to Kent; Perkins, J.
    Submitted April 24, 1909.
    (Docket No. 83.)
    Decided October 4, 1909.
    Attachment proceedings by John L. Showen against the J. L. Owens Company. An order overruling a plea in abatement and denying a petition to dissolve the writ is reviewed by defendant on writ of certiorari.
    Affirmed.

      Sweet & Eastman, for appellant.

      Olapperton & Owen, for appellee.
   Blair, C. J.

On May 13 and December -26, 1904, the Arbuckle-Ryan Company, an Ohio corporation, and the J. L. Owens Company, a Minnesota corporation, executed written contracts at Toledo, Ohio, by the terms of which the Ohio corporation agreed to purchase Owens bean and pea threshing machines, to be delivered f. o. b. cars Minneapolis, the Owens Company “to guarantee the machines to be free from inherent and mechanical defects.” By the contract of May 13th the Ohio company is given the exclusive sale of the machines in certain counties in this State. By the agreement of December 26th the Ohio company was given the exclusive right of sale in the entire State of Michigan. On the 4th day of April, 1908, the plaintiff filed an affidavit for a writ of attachment in the circuit court for the county of Kent, stating:

“That the J. L. Owens Company, a foreign corporation, the defendant named in said writ, is justly indebted to deponent in the sum of $8,500, as near as may be, over and above all legal set-off, and that the same is now due and upon express contract.

“And this deponent further says that he has good reason to believe, and does believe, that the said defendant is a foreign corporation.”

A writ of attachment was issued against defendant, by virtue of which the sheriff returned that he seized certain machines of defendant:

“ I served on Benjamin F. Long, in the city of Grand Rapids, in said county, who was represented to me to be the agent of the defendant in said attachment named, the J. L. Owens Company, residing in the said city of Grand Rapids and doing business for said defendant company within the State of Michigan, a copy thereof, together with a copy of the inventory of said property, duly certified, as I am commanded, by delivering the same to the said Benjamin F. Long, in the said city of Grand Rapids.”

On the 18th day of April, 1908, the plaintiff, as assignee of the rights and interests of the Arbuckle-Ryan Company under its said contracts with defendant, filed his' declaration claiming damages for breach of warranty of said contracts. The first count alleges, as to the machines purchased under the agreement of May 13th,—

“That the said machines at the time of the making of said promise and undertaking of the said defendant, and at the time of the delivery of said machines, were not free from inherent and mechanical defects, but, on the contrary thereof, were inherently and mechanically defective, and were constructed from poor and rotten wood, and poor and defective castings and materials, and were unsuitable for the purposes for which they were intended.

“And the said plaintiff avers that the said the Ar-buckle-Ryan Company, confiding in the said promise and undertaking of the defendant as aforesaid, had, through its salesmen and agents, sold and delivered said machines to its customers in, to wit, the State of Michigan, and elsewhere, extending credit to its said customers for the purchase price of the machines so sold to them; that for the reasons aforesaid the said machines became and were of no use or value to the said Arbuckle-Ryan Company, or to its said customers, and were rejected by its customers, and settlement therefor refused by its said customers, and it, the said the Arbuckle-Ryan Company, was put to great charges and expenses of its moneys in and about the repairing of said machines, and the returning of said machines for repair, with the necessary and incidental costs of freight, cartage, and of new materials, and the expense of making the necessary repairs on said machines; that said the Arbuckle-Ryan Company had sold said machines to its said customers! at a large profit over and above the price at which it had purchased same from said defendant; that said the Arbuckle-Ryan Company, in order to induce its said customers to retain and keep said machines, and to dispose of said machines, was compelled to resell said machines after making said repairs at a reduced price, and thereby lost large gains and profits; that the loss and damage to the said the Arbuckle-Ryan Company, as aforesaid, in whole amounts to a large sum of money, to wit, the sum of $4,500.”

The second count alleges as to the machines purchased under the agreement of December 26th:

“The said defendant undertook, and then and there faithfully promised the said the Arbuckle-Ryan Company, to deliver to said the Arbuckle-Ryan Company said machines within a short, reasonable time thereafter, and faithfully promised the said the Arbuckle-Ryan Company that said machines and equipment so sold were and would be free from inherent and mechanical defects, and suitable for the purposes for which they were intended; * * * that the said machines at the time of the making of said promise and undertaking of said defendant, and at the time of the delivery of said machines, were not free from inherent and mechanical defects, but, on the contrary thereof, were inherently and mechanically defective, and were constructed from poor and rotten wood, and poor and defective castings and materials, and were unsuitable for the purposes for which they were intended. And the said plaintiff avers that, the said the Arbuckle-Ryan Company, confiding in the said promise and undertaking of the defendant as aforesaid, it, the said the Arbuckle-Ryan Company, had through its salesmen and agents sold and delivered said machines to its customers in, to wit, the State of Michigan and elsewhere, extending credit to its said customers, for the purchase price of the machines so sold to them; that for the reasons aforesaid the said machines became and were of no use or value to the said the Arbuckle-Ryan Company, or to its said customers, and were rejected by its said customers, and settlement therefor refused by its said customers,, and it the said the Arbuckle-Ryan Company was put to great charges and expenses of its moneys in and about the repairing of said machines, and the returning of said machines for repair, with the necessary and incidental costs of freight, cartage, and of new materials, and the expense of making the necessary repairs on said machines, and other expenses; that the said the Arbuckle-Ryan Company had sold said machines to its said customers at a large profit to it over and above the price at which it had purchased same from said defendant; that said the Arbuckle-Ryan Company in order to induce its said customers to retain and keep said machines, and to dispose of said machines, was compelled to resell said machines after making said repairs at a reduced price, and thereby lost large gains and profits; that, on account of the delay mid refusal of said defendant to ship said machines as it had promised, it, the said the Arbuckle-Ryan Company, lost divers sales and the gains and profits which it would' have made thereon; that the loss and damage to the said the Arbuckle-Ryan Company, as aforesaid, in whole amounts to a large sum of money, to wit, the sum of $4,500.”

The third count covers purchases under both agreements, and contains, among other allegations, the following:

“The said defendant undertook, and then and there faithfully promised the said the Arbuckle-Ryan Company, to furnish all the necessary new material to fix up and repair said defective and broken machines, and to send men to each place where said machines had been sold and were located to thoroughly repair said machines, so that they would be satisfactory to the customers to whom they had been sold by the said the Arbuckle-Ryan Company, and then and there faithfully promised the said the Arbuckle-Ryan Company to deliver to said the Arbuckle-Ryan Company said machines within a short, reasonable time thereafter, and faithfully promised the said plaintiff that said machines then and there ordered and purchased and their equipment were and would be free from inherent and mechanical defects, and suitable for the purposes for which they were intended; * * * that nevertheless the said defendant, contriving and fraudulently intending to injure the said the Arbuckle-Ryan Company did not perform its said promises and undertakings by it so made as aforesaid, and did not deliver said machines within a short, reasonable time as it had promised, and did not furnish all the necessary new materials to fix up and repair said defective machines, and did not send men to repair said beaners, or repair them to the satisfaction of said customers, but neglected and refused to keep its said promise in this regard, and thereby craftily and subtly deceived and defrauded the said the Arbuckle-Ryan Company, in this, to wit: That the said machines which were delivered after the time of the making of the said promises aforesaid, at said time and at the time of the delivery of said machines, were not free from inherent and mechanical defects, but, on the contrary thereof, were inherently and mechanically defective, and were constructed from poor and rotten wood, and poor and defective castings and materials, and w@re unsuitable for the purposes for which they were intended. And the said plaintiff avers that the said the Arbuckle-Ryan Company, confiding in the said promise and undertaking of the defendant as aforesaid, had through its salesmen and agents sold and delivered to its customers in, to wit, the, State of Michigan and elsewhere, extending credit to its said customers for the purchase price of said machines so sold to them; that, for the reasons aforesaid, the said machines became and were of no use or value to the said the Ar-buckle-Ryan Company, or to its said customers, and were rejected by its said customers, and settlement therefor refused by its said customers, and it, the said the ArbuckleRyan Company, was put to great charges and expenses of its moneys in and about the repairing of said machines, and the returning of said machines for repair, with the necessaries and incidental costs of freight, cartage and of new material, and the expense of making the necessary repairs on said machines and other expense; that the said the Arbuckle-Ryan Company had sold said machines to its said customers at a large profit to it over and above the price at which it had purchased same from the said defendant; that the said the Arbuckle-Ryan Company, in order to induce its said customers to retain and keep said machines, and to dispose of said machines, was compelled to resell said machines, after making said repairs, at a reduced price, and thereby lost large gains and profits; that, on account of the delay and refusal of said defendant to ship said machines as it had promised, the said the Arbuckle-Ryan Company lost divers sales, and the gains and profits which it would have made thereon, and, on account of the depreciated value and the worthlessness of said machines, said the Arbuckle-Ryan Company suffered the loss of large sums of money which it paid the said defendant in the purchase of said machines; that the loss and damage to the said the Arbuckle-Ryan Company, as aforesaid, in whole amounted to a large sum of money, to wit, the sum of $9,000.”

On the 26th day of May, 1908, defendant filed a plea in abatement, setting forth, in substance, that the cause of action set forth in plaintiff’s declaration did not accrue within the State of Michigan, but in the State of Minnesota or Ohio, and that, therefore, the circuit court for the county of Kent had no jurisdiction over said cause of action. On the 15th day of May, 1908, the defendant filed a petition in said circuit court asking for a dissolution of the writ of attachment, denying that there was any indebtedness whatever existing between the defendant and the said Arbuckle-Ryan Company or its assignee, the said John L. Showen, and that the sole and only rights of the said John L. Showen are such as he may have by reason of his assignment of the interest and title of the said Arbuckle-Ryan Company in the aforementioned contracts, and that the nature of the indebtedness, if any, due from the defendant to the said Arbuckle-Ryan Company or its assignee is wholly and entirely speculative, unliquidated, and indefinite in its character and amount, and is not capable of being made certain or definite, and is not such a claim of indebtedness as is contemplated by the statute in attachment proceedings,.

In answer to the plea in abatement, plaintiff filed his own affidavit, stating, among other things, as follows:

“Affiant further says that he is acquainted with Benjamin F. Long, the party referred to in the third paragraph of said plea, and has been acquainted with him for some years, and knows the business in which he has been engaged; that at the time said suit was commenced, and for some time theretofore, the said Benjamin F. Long resided with his family in the city of Grand Rapids, in said county, and was at that time and for some months at least before the commencement of said suit engaged as the agent or representative of the J. L. Owens Company of Minneapolis, Minn., in the sale of its bean threshers, and the handling of its business in the State of Michigan; that he knows from his association with and observation of the business done by said Long, affiant being engaged in a similar line of business as agent and representative, that the business of the said Long as agent and representative of the J. L. Owens Company as aforesaid in the State of Michigan was to make sales and take orders for bean threshers sold by the said J. L. Owens Company in the usual manner and upon the usual terms and custom in relation to such business, and that it was also a part of the business of the said Long as the agent and representative, as aforesaid, to negotiate and make contracts with local agents in towns in the State of Michigan on behalf of the said J. L. Owens Company for the sale of bean threshers in local territories, and in a general way to look after the business of said J. L. Owens Company as such agent and representative, in accordance with the general custom of such agents.”

The issue raised by the plea in abatement and the petition to dissolve the attachment were submitted to the court, and the court dismissed the petition and overruled the plea. On defendant’s application, a writ of certiorari was issued out of this court, and the record is before us for review. The return of the circuit judge in part is as follows:

“ I further show and return to said writ that at the time of the hearing and argument upon the plea to the jurisdiction in said cause, and upon the petition for the dissolution of the writ of attachment in said cause, it appeared from the pleadings and affidavits, all of which are attached hereto, and I found therefrom as a matter of fact that at the time of the commencement of said suit and the service of the writ of attachment therein the said defendant company had goods and property in said county and State for sale in the regular course of its business; that one Benjamin F. Long, upon whom the said writ was personally served, as shown by the return thereto, was a resident of the city of Grand Rapids, in said county, and was acting generally as the agent and representative of the said defendant company in the sale of its goods and the handling of its business in said county and State, and that at the time of the service of said writ the said defendant company was, and for a considerable period of time had been, through its said agent and otherwise, doing business generally with the citizens of said county and State in the sale of its products, and had merchandise and property, consisting of bean threshers manufactured by it, in said county and State, for the purpose of carrying on its said business therein.

“ I thereupon held that the court by the service of said writ acquired and had jurisdiction in said cause, as shown by the orders duly made and filed therein.”

Two principal questions are presented for our consideration by the briefs of counsel:

First. Did the court acquire jurisdiction over the defendant, a foreign corporation, the cause of action having accrued outside of the State ?

Second. Is the amount of the indebtedness or damages as stated in the declaration so uncertain, speculative, and conjectural as to exclude the remedy by attachment ?

First. Since there was no method for suing a corporation at common law outside of its home jurisdiction, it is argued that the right to maintain the present action must depend upon statutory authority. Defendant contends that such authority can be found only in section 10442, 3 Comp. Laws, which provides as follows :

‘ ‘ (10442) Section 1. The People of the State of Michigan enact, That suits may be commenced at law or in equity in the circuit court for any county of this State where the plaintiff resides or service of process may be had and suits at law, before justices of the peace in such county; and in cases where the plaintiff is .a nonresident in any county of the State, against any corporation not organized under the laws of this State in all cases where the cause of action accrues within the State of Michigan, by service of a summons, declaration or chancery subpoena within the State of Michigan, upon any officer or agent of the corporation, or upon the conductor of any railroad train, or upon the master of any vessel belonging to or in the service of the corporation against which the cause of action has accrued: Provided, That in all cases, except before justices of the peace, no judgment shall be rendered for sixty days after the commencement of suit, and the plaintiff shall, within thirty days after commencement of suit, send notice by registered letter to the corporation defendant at its home office.”

Counsel for plaintiff argue that section 10442, 3 Comp. Laws, should be construed as applying only to foreign corporations engaged in interstate commerce transactions within the State, and not to foreign corporations doing business in the State through resident agents and really domiciled in a business sense within the State. It is further contended that the provisions of section 10468, 3 Comp. Laws, áre applicable to foreign corporations actually doing business in this State as well as to domestic corporations. Defendant insists that this latter contention is disposed of by our previous decisions-. Grand Trunk R. Co. v. Wayne Circuit Judge, 106 Mich. 248 (64 N. W. 17), and cases cited therein. We do not regard these decisions, however, as necessarily disposing of the question under consideration. In People v. Hawkins, 106 Mich. 479 (64 N. W. 736), decided soon after the decision in Grand Trunk R. Co. v. Wayne Circuit Judge, supra, it was held that the section of the act relating to the incorporation of manufacturing and mercantile associations, which provided that foreign corporations organized for any of the purposes of the act, upon recording their articles of association and appointing a resident agent for service of process, might carry on business in this State and enjoy all the rights and privileges and be subject to all the restrictions and liabilities of corporations existing under said act, did not prohibit foreign corporations from doing business in this State until they had complied with such conditions or invalidate their contracts. As said by Justice Gray in Barrow Steamship Co. v. Kane, 170 U. S. 100 (18 Sup. Ct. 526):

“The constant tendency of judicial decisions in modern times has been in the direction of putting corporations upon the same footing as natural persons in regard to the jurisdiction of suits by or against them.”

See, also, Reeves v. Railway Co., 121 Ga. 561 (49 S. E. 674, 70 L. R. A. 513). We think this tendency is reflected in our statutes upon this subject enacted since the decision in 106 Mich. 248 (64 N. W. 17).

By Act No. 206, Pub. Acts 1901, the terms and conditions on which foreign corporations might be admitted to do business in Michigan were prescribed, and, among other things, they were required to appoint an agent in this State to accept service of process, and failure to comply with the provisions of the act subjected the offending corporation to heavy penalties. Upon compliance' with the provisions of the act, the corporation was authorized to carry on its business for the time set forth in its charter or articles of association, unless longer than contemplated by the laws of this State. This.act (section 1) was amended in 1903 (Act No. 34, Pub. Acts 1903) and at the regular and special sessions of 1907 (Act No. 310, Pub. Acts 1907; Act No. 3, Ex. Sess. 1907). By the amendatory act passed at the regular session of 1907, it was made unlawful for any foreign corporation to transact its business in this State—

“Until it shall have procured from the secretary of State of this State a certificate of authority for that purpose.”

Among other things necessary to the procurement of such certificate, it must file evidence of the appointment of an agent in this State to accept service of process on behalf of the corporation. The certificate of authority authorizes the corporation to carry on its business in this State for the period of its corporate existenco, but not to exceed 30 years.

“And the secretary of State shall in the certificate which he issues state under what act such corporation is to carry on business in this State and such corporation shall have all the powers, rights, and privileges, and be subject to all the restrictions, requirements, and duties granted to or imposed upon corporations organized under such act.”

By section 6 a failure to comply with the act invalidates all contracts. By section 7 it is made unlawful for any person to act as agent for an unauthorized company and any person violating this provision is made guilty of a misdemeanor. By section 5 of the amendatory act passed at the special session of 1907 failure to comply with the provisions of the act subjects the corporation to a penalty of not less than $100 nor more than $1,000 per month. Section 10 reads as follows:

“ Sec. 10. No such corporation having appointed an agent to accept service of process shall have power to revoke or annul such appointment until it shall have filled (filed) notice of appointment of some other person in this State as such agent. Service of process may also be made upon any officer or agent of such corporation in this State, or service may be made upon the secretary of State, who shall immediately notify the corporation thus served, by mailing notice thereof and a copy of such process to its address. There shall be paid to the secretary of State at the time of such service a fee of five dollars, which sum may be taxed as costs to the plaintiff in case he prevails in the proceeding.”

Section 13, Act No. 232, Pub. Acts 1903, being the act to revise and consolidate the laws providing for the incorporation of manufacturing and mercantile companies, etc., reads as follows:

“Sec. 13. Every corporation organized or existing under this act shall have power to have succession by its corporate name for the period limited in its charter, or by this act; to sue and be sued in any court of law or equity, with the same rights and obligations as a natural person ; to make and use a common seal and alter the same at pleasure; to ordain and establish by-laws for the government and regulations of its affairs, and to alter and repeal the same; to elect all necessary officers and to appoint and employ such agents as the business may require.”

The effect of the statutes regulating the transaction of local business in this State by foreign corporations is to make such corporations, as to such business, domestic corporations organized under the act specified in the certificate of the secretary of State entitled to and subject to the same remedies as such corporations in the courts of this State. We are of the opinion, therefore, that section 10442, 3 Comp. Laws, should be limited in its application to foreign corporations transacting interstate commerce business in this State. Barrow Steamship Oo. v. Kane, supra. The court found, and the evidence warranted the finding, that the defendant through its agent was transacting local business in the State, and the fact that such business upon the showing made was unlawful should not relieve the defendant, but it should bo held to assent to the same remedies which would have attached if it had done the business lawfully. It is estopped to set up in its defense the unlawfulness of its transactions. Ehrman v. Insurance Co., 1 Fed. 471; Hagerman v. Empire Slate Co., 97 Pa. 534; Sparks v. Accident Ass’n, 100 Iowa, 458 (69 N. W. 678); La Eayette Ins. Co. v. French, 18 How. (U. S.) 404. Under our attachment statutes, also, service of the writ upon defendant’s resident agent conferred jurisdiction in personam. 3 Comp. Laws, §§ 10474, 10555, 10556, 10559, 10560, 10571, 10576; St. Clair v. Cox, 106 U. S. 350 (1 Sup. Ct. 354);. Davidson v. Fox, 120 Mich. 386 (79 N. W. 1106).

Second. It was said in Roelofson v. Hatch, 3 Mich. 277:

. “ There may he cases of contracts not within this remedy, as for example a breach of promise to marry, where the damages rest so entirely in opinion that it would be a. solecism to say the amount of indebtedness could be sworn, to. But, again, there are many contracts where, although, the damages are not liquidated in the contract, yet by well-established rules of law they are capable of being ascertained definitely upon proof of the facts, and to hold that in all this class of cases the plaintiff is debarred of this remedy would be to defeat in a great measure the purposes sought to be secured by its enactment. The plaintiff is required to swear that the defendant is indebted to him upon contract, express or implied, and to state the amount of such indebtedness, as near as may be, over and above all set-offs. What is an indebtedness ? It is the owing of a sum of money upon a contract or agreement, and, in the common understanding of mankind, it is not less an indebtedness that such sum is uncertain. The result of a contrary doctrine would be to hold any liability which could only be the subject of a general indebitatus assumpsit, quantum meruit, or quantum valebant count in a declaration, such an indebtedness as could not be the subject of this remedy by attachment. Without fully deciding this point, which is not necessarily raised in this case, we see no reason why a demand arising ex contractu, the amount of which is susceptible of ascertainment by some standard referable to the contract itself, sufficiently certain to enable the plaintiff, by affidavit, to aver it ‘ as near as may be,’ or a jury to find it, may not be a foundation of a proceeding by attachment. See Fisher v. Consequa, 2 Wash. C. C. 382 (Fed. Cas. No. 4,816); Clark's Ex'rs v. Wilson, 3 Wash. C. C. 560 (Fed. Cas. No. 2,841).”

We are unable to find that this question has since been presented to this court. We hold, however, that the views of the court stated arguendo in the Boelofson Case correctly state the law, and justify the ruling of the circuit court. The amount of the damages in this case, while unliquidated, is susceptible of ascertainment by a standard referable to the contract. The standard established by the contract was that specified machines sold for a specified price should be free from inherent and mechanical defects. The declaration alleges that the machines were not free from, but possessed, such defects, that they were sold at a profit, but on account of the defects were returned, were repaired, and resold at a reduced price. While some of the damages claimed in the declaration were probably too indefinite and speculative to admit of the remedy by attachment, in the main, the damages claimed were susceptible- of definite ascertainment by testimony. Baumgardner v. Manufacturing Co., 50 Minn. 381 (52 N. W. 964); Lawton v. Kiel, 51 Barb. (N. Y.) 30; Weaver v. Puryear, 11 Ala. 941; New Haven Steam Saw-Mill Co. v. Fowler, 28 Conn. 103; Hyman v. Newell, 7 Colo. App. 78 (42 Pac. 1016).

We are also of the opinion that, under the showing made in this case, the plaintiff was entitled to maintain his suit as assignee. McBride v. Farmers’ Bank, 26 N. Y. 450; Hadden v. Dooley, 92 Fed. 274 (34 C. C. A. 338); Felt v. Evaporating Co., 52 Mich. 602 (18 N. W. 378); Henderson v. Railway Co., 131 Mich. 438 (91 N. W. 630).

The orders of the circuit court are affirmed, and the writ dismissed, with costs to plaintiff.

Montgomery, Ostrander, Hooker, and Brooke, JJ., concurred.


source: Caselaw Access Project

author: Montgomery, J.

license: Public Domain

text:
    MILLER v. PETER.

    1. Judgment — Mortgages — Res Adjudioata — Principal and Surety.
    On a bill to redeem from a deed, given without consideration to the grantor, to secure an indebtedness of a firm which had executed a mortgage on other property to secure the indebtedness, a decree foreclosing the debtors’ mortgage, in proceedings to which the surety was a party, is conclusive on the question of the right to a credit for taxes averred to be invalid, which had been paid by the mortgagee, and which were credited to the mortgagee by the foreclosure decree.
    3. Same — Defenses Concluded — Principal and Surety — Releasing Securities.
    Releases given' prior to the decree of foreclosure to one of the debtors, releasing lands on which he had given a mortgage to secure the same indebtedness could not be treated as payments for the benefit of the surety, on a suit to redeem, where the defense was necessarily involved in the foreclosure proceeding, and no fraud was alleged and no attempt made to set aside the decree during a lapse of many years.
    3. Mortgages —Deed as Security —Redemption —Evidence— Burden of Proof.
    Evidence that the deed given by the surety to the creditor was without additional consideration besides the original debt, that it was not received as payment of the indebtedness when delivered, and that no credit was subsequently given as payment, either by the parties or in the decree of foreclosure, sustains the burden of proof imposed on a complainant, who tries to redeem from a deed executed to take effect as a mortgage.
    4. Deeds — Real Property — Execution — Presumption as to Date of Delivery.
    A deed is presumed to have been delivered at the date of its acknowledgment.
    5. Equity — Laches—Bill to Redeem.
    Redemption from a deed given to secure a debt is not precluded by complainant’s laches, where it was executed in 1888 and suit'to redeem instituted in 1906, upon proof that in 1896 the husband of the grantor attempted, as her agent, to have the creditor treat the deed as a payment, and a satisfaction of the judgment was filed, without any authority from the grantor, although it is held that matters determined by the decree of foreclosure rendered in 1892 could not be reviewed collaterally after the death of some of the parties and the lapse of many years.
    6. Mortgages — Possession by Mortgagee — Compensation.
    The mortgagee is chargeable, on accounting, with the rental value of property of which he has had possession.
    Appeal from St. Clair; Law, J.
    Submitted April 29, 1909.
    (Docket No. 11.)
    Decided October 4, 1909.
    Bill by Anna P. Miller against Roxanna Peter, Alvin Peter, and William A. Young, administrators of the estate of William Peter, deceased, to have a deed absolute upon its face declared to be a mortgage, for permission to redeem therefrom, and for an accounting. Prom a decree dismissing the bill, complainant appeals.
    Reversed, and remanded.

      James Van Kleeck (George P. Cobb, of counsel), for •complainant.

      James E. Duffy, for defendants.

       Rehearing denied December 31, 1909.

   Montgomery, J.

On the 5th of June, 1888, Albert Miller and George Lewis, composing the firm of Miller & Lewis, being indebted to William Peter in the sum of $29,000, gave notes aggregating that amount and bearing interest at 8 per cent., secured by mortgage upon property in Bay and Arenac counties owned by Miller & Lewis. As a further security George Lewis and his wife executed a mortgage upon property owned by Lewis situated in the county of Bay, reciting a consideration of $10,000; the condition being that the mortgagors should pay, or cause to be paid, $29,000, according to the terms of the real estate mortgage executed by Miller & Lewis. On the same day Albert Miller and wife gave a like mortgage covering certain property owned by Albert Miller, and Jennie R. Miller, wife of Albert Miller, gave a mortgage on her individual property in the county of St. Clair, which, for a stated consideration of $10,000, covered the N. E. ^ of the S. W. i, the S. E. i of the N. W. i, the S. W. i of the N. E. i, and the N. E. i of the N. E. section 3, in township 2 N., range 16 E. The condition of this mortgage was that if the parties of the first part should pay, or cause to be paid, the sum of $29,000 according to the terms of the real estate mortgage executed by Miller & Lewis, the mortgage should be void, etc. Jennie R. Miller departed this life on the 15th of May, 1904, intestate. She left four children, who united in conveying the property covered by the last-named mortgage to the complainant in this case.

On the 19th of December, 1892, Jennie R. Miller executed an instrument which was in the form of a warranty deed running to William Peter for a recited consideration of $4,000, covering the property named in the mortgage given by her to Peter. The property conveyed was eleven-twelfths of the land described. Both the bill and answer, however, treat this as a conveyance of the entire property. The bill in this case is filed to have this deed of December 19, 1892, declared to be a mortgage and to redeem. The bill avers that payments have been made from time to time upon this $29,000 mortgage, and that releases had been made of property held by Lewis, who was primarily liable for the debt, under such circumstances as would release Jennie R. Miller, who had pledged her property as security simply, without any consideration. •

On the 4th of December, 1891, William Peter filed a bill to foreclose the $29,000 mortgage, making all the interested parties, including Jennie R. Miller, parties defendant. On the 22d of August, 1889, he had released to Lewis a part of the property covered by the mortgage given, by him. On the 3d of June, 1890, he made a further release of property covered by the Lewis mortgage. The evidence is not very clear as to the occasion for this, although there is testimony tending to show that the reason for this release was that the property, before it was mortgaged, had been sold on contract, and that it was released in order that the parties equitably entitled to the property might secure the same. The evidence is somewhat obscure, which is perhaps not surprising, in view of the lapse of time.

On the 13th of December, 1893, William Peter gave another part release from the mortgage made by George Lewis of certain property, and on December 17th of the same year Lewis conveyed, to Peter property which was also described in the mortgage given by him for a named consideration of $3,000. A mill, which was covered by the mortgage given by Miller & Lewis, was burned in July, 1893, and was covered by insurance to the amount of $17,500. Of this sum it is admitted that William Peter received $14,000. There is no evidence that the remaining $3,500 was received by him, but it is claimed that as between him and Mrs. Miller he is chargeable with it whether he received it or not, as he had the right to receive it.

Testimony was taken in the foreclosure case on the 35th of November, and again on the 30th of December, the complainant claiming in that proceeding credit to the sum of $6,315.11 for taxes paid for the years 1884 to 1887. The amount reported due by the commissioner was $31,469.33. This report was made on the 35th day of November, 1893. At about this date a company to take over the Miller & Lewis property described in the original mortgage was in contemplation. Jennie JR. Miller and Albert Miller were organizers of this company, and on the 13th of October, 1893, united with Mr. Lewis and his wife in the following consent:

“We will consent to you releasing all the real estate and other property situate in the sixth ward of Bay City, covered by the Miller & Lewis mortgage to you, which s in process of foreclosure, in consideration tJhat you credit as a payment on said mortgage tire sum of ten thousand dollars, such release being without prejudice to you as to other securities ” — and signed by the parties.

On the 30th of December the commissioner made a supplemental report, giving credit for $10,280 received upon a sale of the property covered in this consent, leaving a balance, including the tax item, of $11,189.33. On the same date a decree was rendered confirming the report of the commissioner, and stating that there was due to Peter $11,198.03, and decreeing a sale of the remaining property. No credit was given in this computation for the $4,000, the named consideration of the deed given by Jennie R. Miller. The circuit court commissioner proceeded to sell the property, and realized a net sum of $778.85, leaving a deficiency of $10,398.03. The matter rested here until the 6th day of May, 1896, when a satisfaction of this decree was entered of record, reciting that:

“ The complainant by himself and the defendants by said George Lewis having this day come together and agreed that payments have been made on the decree heretofore, to wit, on the 30th day of December, 1892, entered in said cause, which payments consist of a conveyance made by Jennie R. Miller of a certain farm in the county of St. Clair, Mich., and the conveyance by said George Lewis of certain property in the city of Bay City and Bay county, Mich., and the amount realized on the sale of real estate in the county of Arenac, and also certain property described in said mortgage, situate in said Bay City, by which the amount due on said decree has been reduced to a balance of $1,270.92, which amount-still remains unpaid on said decree after all payments and credits applied thereon between the parties, and said George Lewis having this day executed and delivered to said complainant his promissory note for said balance, * * * it is hereby agreed and stipulated that said decree is satisfied, and the register of said court is hereby authorized to enter satisfaction of record.” Signed by William Peter.

Upon a full hearing, the circuit judge denied the relief prayed, and the complainant appeals.

' The bill prays for an accounting of the rents and profits, and it appears to be conceded in this court that the personal representatives of Jennie E. Miller are necessary-parties to such a proceeding, but it is asked that, in case the court should find the complainant entitled to relief, •the case be remanded, with leave to bring in as complainants these personal representatives.

Many of the questions which are raised we think should be held concluded by the decree of foreclosure. The claim that the taxes paid by Mr. Peter should not be credited to him in the foreclosure proceedings is certainly precluded by the decree in that case if Jennie E. Miller was bound by that decree. We see no reason for holding that she was not so bound. The claim is not inequitable in any view. While there may have been defects in the proceedings to spread the taxes, the taxes were not discharged by such defects, and remained a lien upon the land, and the payment made was for the purpose of perfecting the -title and relieving the land of this burden, and as the property was sold to the South End Lumber & Salt Company, of which Mrs. Miller was one of the organizers, it would appear that the benefit of relieving this land from the lien of these taxes had accrued to the mortgagors. The attempt to evade this payment is, as the circuit judge held, an attempt to take advantage óf a technicality which does not commend itself to the court. The same thing may be said of the releases of the land of Mr. Lewis. These releases had been made prior to this adjudication, and had operated as payments, at least pro tanto, at the time the decree was made, if at all, and yet there is no claim of any fraud, and no attempt has been made to set aside that decree by a direct proceeding, nor has any attack been made upon it for many years.

Upon the principal question, however, of whether the deed in question was a mortgage or an absolute conveyance, the case is one presenting more difficulty. There is nothing in the record to indicate that Miller was paid any consideration for that deed. Excluding entirely the testimony of Albert Miller as incompetent under the statute, it still appears that on the 19th of December, 1892, this deed was executed and delivered without any new consideration. The bill alleges the execution and delivery at that time, and the answer admits it. It appears that on the 30th of December the last computations of the amount • due upon the mortgage of Miller & Lewis were made, and that at that time no credit was given for the payment of this $4,000 upon the mortgage, so that it conclusively appears that it was not then treated as a payment. It is true that the burden of proof rests upon the complainant to show that this deed, which was absolute in form, was given as a mortgage. But we think the circumstances show that she has met that burden of proof. Not only is there no claim that any consideration passed at this time, but the subsequent recitation by Mr. Peter over his own signature, indicating an attempt by an arrangement with Mr. Lewis to treat this conveyance as a payment, shows that it was executed upon no new consideration. The decree shows that it was not received as payment at the time it was delivered, so that any attempt to turn it into a payment must have depended upon subsequent negotiations with some one. It is suggested that the testimony of Mr. Young indicates that this arrangement was made at the time the deed was made. We think his testimony is altogether too vague upon this subject to be accepted as controlling.

It is also suggested that the delivery did not occur until after the decree, was entered, and that the answer should be amended so as to admit of the defendant taking this position. We think, however, that if we give the complainant the benefit of the presumption that a deed was delivered at the date of its acknowledgment (Johnson v. Moore, 28 Mich. 3), there is no tangible evidence which disputes this presumption, and that an amendment of the answer would be unavailing.

Reliance is had upon the complainant’s laches in bringing this suit. This question presents itself in two aspects: First, as to the laches in the attack made upon this decree; and, second, as to the laches in attempting to redeem the lands covered by the deed. The cases cited by defendants’ counsel are mostly cases in which an attempt is made to attack or set aside judicial proceedings. So far as this case partakes of that character, we think the position of defendants is unassailable. We do not think this decree should be open to . this collateral attack at this late date, after the parties to the transaction are some of them dead and others disabled from testifying. We think, therefore, that the decree should stand as it is, but as to the subsequent attempted settlement of 1896 it is obvious that this is not binding upon the complainant or the representatives of Jennie R. Miller. It would' appear, then, that this decree was discharged by Peter upon the assumption of authority in George Lewis to make application of the farm in question as a payment at the price of $4,000. There is no evidence of bad faith, nor is there, on the other hand, the slightest evidence that Mr. Lewis had this authority. We think, therefore, that this deed should be held as a security for the sum of $4,000, and complainants should be permitted to redeem upon the payment of that amount, with interest. The defendants should be charged with the rental value of the property, less expenditures made in the ordinary course of husbandry.

The case will be remanded in order to admit of bringing in the principal complainants, with directions to enter a decree in accordance with this opinion.

Ostrander, Hooker, Moore, and McAlvay, JJ., concurred.


author: Hooker, J.

text:
    BOARD OF SUPERVISORS OF ARENAC COUNTY v. BOARD OF SUPERVISORS OF IOSCO COUNTY.
    1. Health — Quarantine —Expenses —Liability of County — Allowance by Local Board of Health.
    The allowance of an account for care and supplies furnished to a person infected with smallpox and quarantined by the local board of health of a county in which he did not reside, is conclusive on the board of supervisors of the county in which the relief was afforded, and of the county in which he lived, upon the question of the character of the disease, the necessity and fitness of the articles and services furnished, and the inability of the patient to pay, under 2 Comp. Laws, § 4424, which provides that the expenses shall be paid by the patient or his relatives if able, otherwise by the county.

    2. Same — Action by Board of Supervisors.
    No legal liability was created by the allowance of the claim by the board of supervisors .of the county which incurred the expense.
    3. Same — Remedy Against Private Persons.
    Any right which the plaintiff may have obtained to reimbursement under 2 Comp. Laws, § 4424, became a vested right and was not affected by Act No. 7, Pub. Acts 1903, nor was the county required to pursue its remedy against private persons given by statute.
    4. Statutes — Construction—Retroactive Effect — Legislative Intent — Constitutional Law.
    Statutes will not be given a retroactive effect unless the legislative intent clearly appears and vested rights are unimpaired.
    Error to Iosco; Connine, J.
    Submitted June 9, 1909.
    (Docket No. 21.)
    Decided October 4, 1909.
    Assumpsit by the board of supervisors of Arenac county against the board of supervisors of Iosco county for expense incurred in the treatment of contagious diseases. A judgment for defendant is reviewed by plaintiff on writ of error.
    Reversed.

      W. C. Cook, for appellant.

      Jahraus & Bawden, for appellee.

       As to liability for expenses and damages caused by quarantine regulations, see note to Hurst v. Warner (Mich.), 26 L. R. A. 490.

   Hooker, J.

Gregory was a resident of Iosco county. He was taken ill with smallpox in Arenac county, at the village of Standish. He was placed in quarantine in temporary quarters provided for him, and a nurse and other supplies were furnished by order of the local board of health, amounting to $307.34. Among the items were stove $3, and tent $12, and these and some things listed as supplies, amounting in all to $56.79, are said to have been afterwards used for other patients who were not residents of Iosco county. The local board of health allowed all of the items, and the claims were audited by the board of supervisors, and paid by the treasurer of Arenac county. The bill so paid was presented to the board of supervisors of Iosco county on behalf of Arenac county, and was considered by said board at its regular session in January, 1904, and disallowed, whereupon this action was brought to enforce the claim. This expenditure was made in 1901, while 2 Comp. Laws, § 4424, was in force, though Act No. 7, Pub. Acts 1903, became operative before this action was commenced. The plaintiff has appealed.

Counsel seem to agree that the questions involved here are: •

(1) Was Iosco county conclusively bound by the action of the local board of health in auditing and allowing the bills ?

(2) Was it so bound by the action of the Arenac board of supervisors ?

(3) Was Arenac county bound to exhaust its remedies against other parties made liable to pay by the statute before suing defendant ?

(4) Was Arenac county barred from recovery under section 4424 by reason of the taking effect of Act No. 7, Pub. Acts 1903, before this action was begun ?

The defendant also asks that we decide:

(а) Whether appellant has a valid claim for articles afterwards used for Arenac county’s own residents.

(б) Can recovery be had for services of nurse employed against the protests of the patient who offers to furnish his own nurse and physician ?

Allowance by Local Board of Health. Under 2 Comp. Laws, § 4424, the allowance of an account by the local board of health was conclusive upon the board of supervisors of the county in which the relief was afforded, as to the character of the disease, the necessity and fitness of the articles and services furnished, the fact that they were furnished, and the inability of the patient to pay, and such board of supervisors had no alternative but to allow and pay the claim. Elliott v. Board of Sup’rs of Kalkaska Co., 58 Mich. 452 (25 N. W. 461, 55 Am. Rep. 706); Township of Cedar Creek v. Board of Sup’rs of Wexford Co., 135 Mich. 124 (97 N. W. 409); Pierce v. Board of Sup’rs of Gladwin Co., 136 Mich. 423 (99 N. W. 1132); Sturge v. Board of Sup’rs of Gladwin Co., 136 Mich. 425 (99 N. W. 1132); Thomas v. Board of Sup’rs of Ingham Co., 142 Mich. 319, 320 (105 N. W. 771).

We are of the opinion that this action of the local board of health is equally conclusive of these things upon Iosco county under the statute cited, and, while Arenac county was called upon to pay the certified claim in the first instance, it was only necessary upon the trial to make proof of such allowance and payment. There is a close analogy between such a' case as this and the expenses of State troops in suppressing a riot. See Auditor General v. Board of Sup’rs of Bay Co., 106 Mich. 679, 680 (64 N. W. 570), for a discussion of the principle involved. See, also, Board of Sup’rs of Arenac Co. v. Board of Sup’rs of Iosco Co., 144 Mich. 54 (107 N. W. 725).

Allowance by Arenac Board of Supervisors. A lengthy discussion of this question is unnecessary. The action of the Arenac supervisors added nothing in the way of creating a legal liability on the part of Iosco county. At most, such action was a prerequisite to enforcement.

Remedy against Private Persons. This question was settled by the case of Township of Cedar Creek v. Board of Sup’rs of Wexford Co., supra, which followed the enunciation of the same rule by Mr. Justice Moore in McKillop v. Board of Sup’rs of Cheboygan Co., 116 Mich. 614 (74 N. W. 1050). It is true that in those cases the question was raised by the board of the county in which the relief was furnished, but we think it equally applicable in this case. Arenac was not bound to exhaust the remedy given against private persons. Under the law, it merely performed its duty of paying this bill for the use and benefit of Iosco, if, in fact, the obligation rested on Iosco by reason of the residence of the patient, which is not disputed.

Act No. 7, Pub. Acts 1903. These rights vested under 2 Comp. Laws, § 4424, and were not lost by the amendment of 1903, which should be held to be limited to cases arising thereafter:

(1) Under the rule that statutes will not be considered retroactive unless the intent that they should have retroactive effect clearly appears. Price v. Hopkin, 13 Mich. 318; Smith v. Humphrey, 20 Mich. 398; Fuller v. City of Grand Rapids, 40 Mich. 395; Maxwell v. Bridge Co., 46 Mich. 278 (9 N. W. 410); Phillips v. Township of New Buffalo, 68 Mich. 217 (35 N. W. 918); In re Lambrecht, 137 Mich. 450 (100 N. W. 606); Davis v. Railroad Co., 147 Mich. 479 (111 N. W. 76).

(2) It cannot be construed as retroactive to the detriment of vested rights. Crane v. Reeder, 21 Mich. 24 (4 Am. Rep. 430); Van Fleet v. Van Fleet, 49 Mich. 610 (14 N. W. 566); Todd v. Boards of Election Com’rs, 104 Mich. 474 (62 N. W. 564, 64 N. W. 496, 29 L. R. A. 330); Cooley on Constitutional Limitations (7th Ed.), p. 528; Ludwig v. Stewart, 32 Mich. 27; Harrison v. Metz, 17 Mich. 377; McKisson v. Davenport, 83 Mich. 211 (47 N. W. 100, 10 L. R. A. 507); Atherton v. Vil lage of Bancroft, 114 Mich. 241 (72 N. W. 208); Angell v. West Bay City, 117 Mich. 688 (76 N. W. 128); Broffee v. City of Grand Rapids, 127 Mich. 92 (86 N. W. 401); Heineman v. Schloss, 83 Mich. 153 (47 N. W. 107); Stitt v. Casterline, 89 Mich. 239 (50 N. W. 847); Finn v. Haynes, 37 Mich. 63; Danville Stove & Manfg. Co. v. Kent Circuit Judge, 88 Mich. 244 (50 N. W. 140); Philip v. Heraty, 147 Mich. 473 (111 N. W. 93, 118 Am. St. Rep. 554); Little v. Bousfield & Co., 154 Mich. 369 (117 N. W. 903); Endlich on Interpretation of Statutes, § 271; Potter’s Dwarris on Statutes, p. 163; Boughner v. Bay City, 156 Mich. 193 (120 N. W. 597).

The judgment is reversed, and a new trial ordered.

Grant, Montgomery, Ostrander, and Moore, JJ., concurred. .


author: Grant, J.

text:
    TORREY v. TOLEDO PORTLAND CEMENT CO.
    1. Corporations — Promoters—Fiduciary Relation.
    Promoters of a corporation are fiduciaries as to stockholders and creditors.

    2. Same — Fraud—Concealment—Remedies.
    The strict good faith which is demanded of fiduciaries will render promoters liable to make good their false representations made to creditors or stockholders and to pay such damages as their concealment of material facts may have caused.
    3. Same — Stock and Stockholders — Unpaid Stock.
    Promoters who represented by prospectus to intending subscribers of stock that they had entered the corporation on the same footing, and that the money received from stock subscriptions should be used for corporate purposes, are liable to make good their false representations by paying in the amounts which were unpaid on stock issued to them without the payment of any money to the corporation, but upon other questionable consideration.
    Appeal from Washtenaw; Kinne, J.
    Submitted June 11, 1909.
    (Docket No. 92.)
    Decided October 4, 1909.
    Bill by Orlando L. Torrey and others against the Toledo Portland Cement Company, William Watts, Charles M. Cooley, Randall T. Van Valkenburg, and others for the appointment of a receiver of defendant corporation, for an accounting, and for general relief. Prom the decree rendered, complainants appeal.
    Reversed, and decree entered for complainants.

      A. F. & F. M. Freeman, for complainants.

      A. J. Sawyer & Son (Skunk & Thompson and C. F. Watts, of counsel), for defendant Watts.

      E. B. Norris, for defendants Cooley and Van Valkenburg.

       As to the duties and liabilities of promoters to the corporation and its members, see note to Yale Gas Stove Co. v. Wilcox (Conn.), 25 L. R. A. 90.

   Grant, J.

Defendant Watts demurred to the bill of complaint in this case. His demurrer wás overfilled. He appealed to this court. The action of the court below was sustained, and the case remanded for the framing of issue and hearing upon the merits. 150 Mich. 86 (113 N. W. 580). The hearing has been had and the bill dismissed as to defendants Watts and Cooley, and a decree rendered against defendant Van Valkenburg for $7,600. Complainants have appealed.

To the statement of the case in the former opinion should be added that the bill alleged that in the annual report of the corporation it was stated “the amount of capital stock actually paid in in property is $90,000;” that this was false and a part of the fraudulent scheme to deceive those who might and who did subsequently subscribe, otherwise the statement there made is a sufficient statement for this opinion. The allegations of the bill are in the main sustained by the proofs. The Michigan secretary and treasurer were only nominally such officers. An assistant secretary and assistant treasurer were elected in Toledo, and the entire duty of these offices were by resolution imposed upon them. There were indications of marl upon the lands described in the bill, and options from several owners of such lands were obtained by defendant Cooley through the advice of Van Valkenburg. The options were taken in the name of Cooley at a price of $1 each. These options covered 800 acres of land, and the price to be paid, if the lands were taken, was about $20,000. The right to take any portion thereof and to pay proportionately was secured by the options. These options were obtained for the purpose of forming a corporation to manufacture cement. They were subsequently assigned to three of the nine promoters and organizers. They (nine in number) met, organized the corporation with a capital stock of $500,000, issued as fully paid. Seven subscribed for 500 shares of stock each, and two for 750 shares each. The three paid nothing for the assignments by Cooley to them. The articles of association stated that $50,000 of the capital stock had been paid in at the date thereof, being *L0 per cent, of the capital stock. The entire nine elected themselves directors, with defendant Watts as president. The directors, or some of them, advanced money sufficient to pay the State fee for filing the articles of incorporation. This money was subsequently refunded to them out of moneys received from the sale of stock thereafter sold to other parties. The promoters retained for themselves as paid-up stock 9,000 shares, of the par value of $90,000. The three who had an assignment of the options from Cooley, together with an option from himself for some land of his own, were to receive $35,000 in addition to their stock, when the title to the lands should be obtained. The rest of the stock was to be returned into the treasury as treasury stock and sold at par. Each of the promoters selling any stock was to receive 10 per cent, thereof as a compensation for selling. Cooley claims that he was to receive his 500 shares for securing the options. The options were never assigned to the corporation, although there is evidence that they were present at one of the meetings of stockholders. The options were apparently ignored in finally obtaining the title to the lands purchased. In all 234J acres were purchased at an expense of $9,880, and not all of this was covered by the options. A committee, of which defendant Watts was chairman, reported that the committee had rejected certain options and bought certain other pieces; that Rochford, Butler, and Van Valkenburg, the assignees of Cooley, have never assigned or delivered to the company an option given them by Cooley; and that they found in the company’s archives certain options running not to the company, but nine of them to Charles M. Cooley, and one to Van Valkenburg, and all assigned to Rochford, Van Valkenburg and Butler. They further report that they had to go direct to the owners of these lands to purchase, as there was nothing to prevent the owners from denying any rights on the part of the company. Defendant Watts admits that he did not tell “ anybody about this $90,000 stock matter. I didn’t do it because I didn’t want to. I didn’t think it would make a favorable report.”

Mr. Wehrle, the agent for the Arbuckle-Ryan Company, who contracted to sell the cement company a large amount of machinery, testified that Dr. Watts told.him that—

“The $500,000 of stock was to be sold and was being sold, and at that time there was practically $200,000 of stock sold, and that the entire proceeds of the $500,000 of stock sold went into the plant, less a commission of 10 per cent. I asked him whether any promotion stock had been issued, and he said that not one dollar, nor would there be, — that the entire $500,000 would go into the plant.”

In the prospectus issued by these promoters they stated:

“We have purchased 800 acres of land near Manches-' ter, Washtenaw county, Mich. * * * The stock is all common. There is no preferred stock, as we consider one man’s dollar as good as any other man’s. Every dollar paid in for stock will be used to further the best interests of the company in buildings, equipments, operating expenses. * * * We have for sale a limited amount of stock, and each purchaser of stock will enter the company on the same footing as all other stockholders, as we have no preferred stock.”

As soon as it became known that $90,000 of the stock had been retained by the original promoters and organizers without the payment of a dollar therefor, that in addition $35,000 was to be paid for the purchase of the land, and that none of the capital stock had been paid in except upon the basis of the value of the options, it became impossible to obtain further subscriptions. The directors sought then to bond the company for a large amount of money, but it was impossible to float the bonds except for the small amount above stated.

We need not pursue further the transactions of these promoters and organizers, including the defendants, nor the efforts made to float the enterprise after it was launched. The judge found that—

“ The relation of the so-called promoters or original stockholders towards all of the parties interested must be regarded as fiduciary.”

He further held that—

“They may have been mistaken as to their legal rights and obligations; but I do not think they were dishonest or dishonorable in their plans and purposes. * * * If there was concealment or deception or fraud, such conduct would vitiate the whole transaction. The view which I have taken of this case does not render it necessary for me to pass decisively upon these questions.”

The court entered a decree holding that—

“The office of secretary and treasurer of the company and the duties and functions of each were usurped by alleged assistants secretary and treasurer; that its books, papers, accounts, credits, statements, assets, and funds were improperly and unlawfully kept away from the State of Michigan, and at Toledo, State of Ohio,” and that the abuse of the defendant’s corporate powers and such a violation of the law of its being operated as a forfeiture of its franchise, and appointed a receiver, and authorized the sale of the company’s property.

The decree contains other provisions not necessary to mention.

The decision of the circuit judge as to Watts and Cooley is based upon the theory that they did not sell any of their stock; that they had not profited by the transaction; that the organization was upon the advice of counsel; and that they made honest efforts after the enterprise was launched to make it a success. It is manifest that, if these defendants and their co-promoters and organizers had stated truthfully the facts in regard to the actual condition of this corporation at its inception, it would have been impossible to obtain subscriptions from men of sanity. They not only did not inform the public of the real situation, but misled those with whom they dealt by concealing the facts. As soon as the real facts became known, subscriptions ceased and the enterprise collapsed.

We agree with the circuit judge that these promoters and organizers stood in a fiduciary relation to all subsequent subscribers having no knowledge of the facts, and to creditors with whom they dealt. As such fiduciaries, they are held to the strictest honesty and open dealing. It is immaterial whether they gained or lost by the transaction. It is sufficient to establish liability if those with whom they dealt in this fiduciary capacity have suffered loss by their concealment of facts or misrepresentation. That the complainants have suffered loss is established beyond controversy. Why is Van Valkenburg liable? He obtained money by selling the stock issued to him. Watts and Cooley retained their stock. The same rule applies to all three, and as well to the promoters who are not parties to this suit. The good intentions of the defendants, their belief in the value of the property for which they had options, and in the ultimate success of the enterprise, their subsequent efforts, however strenuous, to obtain funds to make it a success, are wholly immaterial. Their liability is not measured by any or all of these things-. If the assertions of honest belief of those dealing in “wildcat” transactions and in the affairs of “high finance” were allowed as a defense to their conduct, few could be held liable. -These parties concealed, when they should have disclosed, the facts. They stated what was not true in their prospectus, issued for the purpose of obtaining subscribers to the stock. Watts not only concealed, but stated to the agent of the Arbuckle-Ryan Company what was not true. This was done for no other purpose than to induce the agent to make the contract. Such a transaction finds no approval in law or equity. Neither can defendant Watts sustain his nonliability on the ground .that the $5,000 of stock was issued to him as compensation for his agreement to act as president for one year. He received the same amount as did the others. Defendant Cooley could as well maintain the issue of $5,000 to him on the ground of his obtaining the options; and the others might find some other fancied consideration for the issue of the stock to them. These nine parties were promoters and organizers, and were bound in good faith to state to those with whom they dealt the entire condition of the affairs of the company so far as their own connection with it was con. cerned. They induced others to buy stock at its par value, while they paid nothing, but some of them at least have profited by the transaction. Defendant Watts was paid in cash $600 as salary for president the second year. He sold stock on which he received commissions amounting to about $1,200. Cooley received a considerable amount of money for the sale of his land to the corporation — land substantially valueless for farming or other purposes. These promoters and organizers now seek to retain what they received, and to cast the entire loss and debts of this corporation upon innocent stockholders who purchased upon the representations that all stockholders were on the same basis. If this transaction can be sustained, then, as is well said by the supreme court of Wisconsin :

“The well-settled doctrine that promoters cannot secretly obtain profits from the corporation they cause to be organized and launched into the business world without being responsible to it therefor can be easily evaded by their organizing the corporation, taking part of the stock ostensibly at the full par value thereof in cash, but really paying little or nothing therefor, and then inducing others to take the balance of the stock in ignorance of the facts, paying the full par value therefor into the corporate treasury.” Pietsch v. Milbrath, 123 Wis. 647 (101 N. W. 388, 102 N. W. 342, 68 L. R. A. 948, 107 Am. St. Rep. 1017).

See, also, Fred Macey Co. v. Macey, 143 Mich. 138 (106 N. W. 722, 5 L. R. A. [N. S.] 1036); Hinkley v. Pipe Line Co., 132 Iowa, 396 (107 N. W. 629, 119 Am. St. Rep. 564). These nine promoters and organizers attempted to acquire title to nearly one-fifth of the capital stock of this corporation without any real consideration, and without the payment of a single dollar in money. The law, justice, and equity require that they pay what other stockholders have been obliged to pay. The corporation is dead. The court has so decreed, and that its affairs be wound up.

The decree will be reversed and decree entered in accordance with this opinion, directing an accounting and a payment by the defendants of such amount as will place them upon the same basis as the other stockholders, and the case remanded for further proceedings. The complainants will recover the costs of both courts.

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


author: McAlvay, J. Ostrander, J.

text:
    PIERCE v. C. H. BIDWELL THRESHER CO.
    1. Negligence — Personal Injuries — Manufacturer’s Liability —Defective Construction — Words and Phrases.
    In an action for personal injuries resulting from the breaking in of the deck of a bean thresher, a charge that the plaintiff must show that the decking was so constructed as to be imminently dangerous to life and limb, was proper when read in connection with the rest of the charge which defined it as a danger which cannot be guarded against and must be instantly met.
    2. Same — Weight of Evidence.
    Refusal to grant a new trial was justified where the plaintiff’s testimony as to the manner in which the accident occurred was in conflict with defendant’s claim concerning the construction of the machine, and was not contradicted by any oral testimony.
    3. Same — Implied Knowledge of Defect.
    The question of the manufacturer’s knowledge of the defective construction, having been held on a former appeal to be for the jury, is concluded. Pierce v. Bidwell Thresher Co., 153 Mich. 323.
    4. Trial — Prejudicial Argument.
    Argument by plaintiff’s attorney that there were at least six witnesses who might have been summoned to testify concerning the manner in which the accident occurred, if defendant desired to put that question in issue, was not reversible error where there were several persons about at the time of the injury who were not sworn as witnesses.
    Error to Eaton; Smith, J.
    Submitted June 22, 1909.
    (Docket No. 66.)
    Decided October 4, 1909.
    Case by Loren D. Pierce against the O. H. Bidwell Thresher Company for personal injuries. A judgment for plaintiff is reviewed by defendant on writ of error.
    Affirmed.

      Thomas, Cummins & Nichols, for appellant.

      Frank A. Dean, Ernest Q-. Davids, and Huggett & McPeek, for appellee.
   McAlvay, J.

In an action for damages for personal injuries suffered by plaintiff by breaking through the deck of a bean threshing machine manufactured by defendant company, plaintiff recovered a judgment. The case was before this court for review after a former trial. It is reported (Pierce v. Bidwell Thresher Co.) 153 Mich. 323 (116 N. W. 1104). Comparing the record now under consideration with that before the court in the former case, we find that a restatement of the facts will not be necessary and refer to the statement in the opinion reported. It is claimed by appellant in its brief that—

“ There is in the present record a great deal of evidence bearing upon the vital questions involved in the case which was not in the former; and some of the questions here raised are raised with a view of the different aspect given the case by this evidence. There is also evidence which we claim shows that the accident could not have happened in the manner alleged.”

A motion for a new trial on the ground that the verdict was against the clear weight of the evidence was denied, and error is assigned upon such denial.

1. The first assignment of error relied upon by defendant is to the charge of the court with reference to the. meaning of “imminently dangerous,” contained in the following paragraph:

“I am going to say to you that in my mind imminent danger is such as must be instantly met, and cannot be guarded against by calling on others for assistance.”

The instructions to the jury connected with' the question of the imminently dangerous character of the structure, and the responsibility resting upon a manufacturer who places machinery so constructed upon the market, in connection with which the sentence objected to was given, can be understood only by considering all that was said upon the subject. In addition to the portion of the charge given on this subject and printed and approved in the former opinion, to which reference is had, the court said:

‘•And I further instruct you that, in order to recover, plaintiff must satisfy you by a preponderance of all the proof that the decking as constructed was imminently dangerous to life or limb to those operating the machine, and that the defendant, its officers, or agents knew that it was so imminently dangerous. And in that connection I say to you that, if you find this decking or structure as constructed was inherently imminently dangerous to life or limb, defendant’s knowledge of the same may be implied from the fact that it was the manufacturer of the machine, and had knowledge of the manner of its construction, and of the uses to which the machine was to be subjected. Now, gentlemen, there has been something said here that I would say to you about this term ‘ imminent danger.’ I am going to say this to you that, in my judgment, imminent danger is such danger as must be instantly met, and cannot be guarded against by calling on others for assistance. If you can get from that instruction and from that definition, ‘imminent danger,’that is what I understand it to be, is such danger as must be instantly met, and cannot be guarded against by calling on others for assistance. That is the kind of danger that parties must be subjected to, to be in imminent danger, under the claim of the plaintiff in this case.”

We need not state that the rule is settled that, to ascertain the true meaning of a charge given, the foregoing is the correct method. The meaning of the court in this charge cannot be mistaken, and could not have misled the jury. He used the ordinary definition of the words “imminent danger,” as approved in several cases, and added:

“ That is the kind of danger that parties must be subjected to, to be in imminent danger, under the claim of the plaintiff in this case.”

Which indicated that the danger might be impending, and did not mean an instant consummation. The Queen, of the Pacific, 25 Fed. 612.

2. In arguing its contention that the verdict was against the clear weight of the evidence, defendant assumes that the injury did not occur to plaintiff in the manner testified to by him, and it relies upon the evidence of the structure itself. There is no oral testimony in the case contradicting plaintiff’s statement. The structure of the decking and the distance of the revolving cylinder from it must then be found by the court to entirely remove plaintiff’s testimony from consideration. This would be an unusual disposition of a question of fact apparently disputed. We think that the record does not warrant a holding that plaintiff’s testimony should be ignored. It was a question of fact for the jury to find how plaintiff was injured. The second and third reasons advanced and argued at length as to whether the verdict was against the weight of the evidence were passed upon in the former opinion. The questions as to whether the structure, built as it was, to be used for the purposes known to the manufacturer, was one imminently dangerous to human life and limb, even in the absence of expert testimony to show such dangerous character, and whether the manufacturer had a full appreciation of the danger, were held to be questions of fact for the jury. The same charge was given to the jury on both trials upon these questions. We find nothing in the record before us which changes the situation. That decision controls this case in this respect. Nothing can be said to make what the court there decided more obvious. Our view that the verdict was not against the clear weight of the evidence is decisive of the error assigned to the refusal to grant a new trial.

3. The language of the charge covered by this assignment of error is admittedly in the exact language used on the former trial. It refers to the first paragraph quoted in this opinion relative to the statement that defendant’s knowledge might be implied. The question was decided in the former opinion.

4. Defendant argues that the argument of counsel for plaintiff was prejudicial to it in saying:

“ There were at least half a dozen eyewitnesses to the accident who might have been subpoenaed by the defense if they intended to raise any question about how the accident occurred.”

This was excepted to on the ground that the record did. not show how many eyewitnesses there were. Counsel, denied the statement, and said the jury would remember how many eyewitnesses there were; that, if he was wrong about it, the stenographer could take the statement, “But there was Brock and Carpenter on the stack.” It appears that Carpenter was sworn as an eyewitness; that Brock was with Carpenter on the stack and was not sworn, and there were five or six men about there at the time. The statement as to the number of eyewitnesses was an extravagant one, but from counsel’s statement, made immediately, it is apparent that it was no more than an extravagance. We do not consider this conduct sufficiently prejudicial to warrant a reversal of the case on that ground alone.

The judgment is affirmed.

Hooker, Moore, and Brooke, JJ., concurred with McAlvay, J.

Ostrander, J.

A stronger case is made for defendant upon the question of the defendant’s knowledge of the alleged defective condition of the deck than was made when the case was here before. Nevertheless I think the point was for the jury.