author: Montgomery, C. J. Hooker, J. Carpenter, J.

text:
    OLDS v. COMMISSIONER OF STATE LAND OFFICE.

    1. Joint. Resolutions — Nature of.
    A joint resolution is a form of legislation used chiefly for administrative purposes of a local or temporary character.
    2. Same — Constitution—Enactment of Laws.
    Section 19, art. 4, of the Constitution, providing that every bill and joint resolution shall be read three times in each house, and shall not become a law without the concurrence of a majority of all the members elected to each house, is a recognition of the former practice of giving a resolution the force of a law when its effect is to authorize a single act.
    3. Same.
    Joint Resolution No. 18, Pub. Acts 1887, authorizing the commissioner of the State land office to issue patents for certain State swamp lands to the executor of William M. Ferry or his assigns, was not unconstitutional on the ground that it attempted what only could be accomplished by a bill enacted into a law.
    4. Same — Allowing Private Claims by Legislature.
    A joint resolution providing for the payment of an admitted obligation .of the State by the appropriation of certain State swamp lands does not conflict with section 31, art. 4, of the Constitution, prohibiting the legislature from auditing and allowing private claims.
    5. Same — Selection of Swamp Lands — State’s Title — Patent.
    A resolution permitting a person to select a certain number of acres of any State swamp lan¡3s not otherwise appropriated does not limit him to lands subj ect to entry, but he may select from lands the title to which has vested in the State, though they have not been patented to the State by the United States.
    6. Swamp Lands — Great Lakes.
    Submerged land lying below the low-water mark of Lake St. Glair, and as such duly meandered by the federal surveyors, is not within the swamp-land act of 1850. Per Hooker, J.
    ON REHEARING.
    1. Highways — Contract for Construction — Payment in Lands —Statutes.
    Act No. 338, Laws 1865, authorized the construction of a highway, to be paid for in State swamp lands then subject to entry, and provided that the contract should be let in accordance with the provisions of Act No. 117, Laws 1859, which contained a provision that the contractor might elect to take his pay in money or in lands, then valued at §1.25 an acre. Held, that the.contract for the construction of the highway could not be let for a money consideration.
    2. Same — Constitutional Law — Extra Compensation.
    A person built a road under an act entitling him to receive in payment a certain number of acres of State swamp lands in Ottawa county, which the State then valued at $1.25 an acre. After the contract was let, the State changed the market price of its swamp lands to §8 an acre. When the road was completed, the State owned no swamp lands in Ottawa county. Held, that a resolution passed by the legislature, permitting the contractor’s assigns to select the lands from any swamp lands in the Lower Peninsula, did not conflict with the constitutional provision (section 21, art. 4) prohibiting the granting of extra compensation to a public contractor after the services have been performed.

      Mandamus by Schuyler S. Olds to compel William A. French, commissioner of the State land office, to permit the location of certain alleged swamp land. The Michigan Land & Lumber Company, Limited, intervened.
    Submitted June 22, 1901.
    (Calendar No. 17,558.)
    Writ granted July 10, 1901.
    Motion for rehearing granted October 15, 1901.
    Submitted on rehearing June 9, 1903.
    Former decision affirmed September 22, 1903.

      Walker & Spalding, for relator.

      Frank F. Robson, for intervener.

      Horace M. Oren, Attorney General (Avery Bros. & Walsh, of counsel), for respondent.

       The opinions filed on the original hearing in this case were withheld from publication pending the rehearing.

   Montgomery, C. J.

The relator asks a writ of mandamus to compel the commissioner of the State land office to permit the location of certain lands on the “St. Clair Flats,” so called, with certain scrip which he holds as assignee of the estate of William M. Ferry.

Act No. 338, Laws 1865, provided for the laying out and establishing of a State road from Ferrysburg, in Ottawa county, to the mouth of Black creek, in Muskegon county. Under the provisions of the act, the improvement was to be paid for by an appropriation of swamp lands, the provision being that for that portion of the work in Ottawa county the selection should be made from swamp lands in Ottawa county. William M. Ferry became the contractor. Before the road was completed, all the swamp lands in Ottawa county had been disposed of. In 1887 the legislature, by joint resolution, provided that the executor of William M. Ferry, or his assigns, “be and they are hereby authorized to selfeet the said amount of 799.10 acres from any State swamp land in the Lower Peninsula not otherwise appropriated, and that, upon filing the lists of lands so selected with the commissioner of the State land office, he cause patents to be issued therefor.” Pub. Acts 1887, Joint Res. No. 18.

The petition alleges that the lands in question are swamp lands, granted to the State of Michigan under the act of Congress of September 28, 1850, commonly known as the “Swamp-Land Act,” which the answer admits. It appears that the State has never received a patent for these lands from the federal government. In 1885 the State applied for a survey of the swamp and overflowed lands in the township where these lands are located, which was refused in 1886. In 1887 the State caused a survey to be made, and requested the United States authorities to issue patents for the lands, but this request was refused. The Michigan Land & Lumber Company, Limited, has intervened in this proceeding, it having made application to locate the same lands under other scrip.

The case is of great importance, it being stated that the lands involved are worth hundreds of thousands of dollars, and it being also stated that many of the lands are in occupation of settlers, who have made valuable improvements thereon, and that the application of relator is in their interest. It is apparent that, if either the relator or the intervener is entitled to have these lands patented, the State will part with a valuable property for but a fraction of its value. This consideration cannot control our decision in determining the rights of the parties, but will call for a careful consideration of the case.

It is contended that the resolution is invalid for various reasons, and that, if valid, it is not open to a construction which confers a right upon the representatives of Mr. Ferry to select the lands in question.

It is contended that the resolution attempted what only can be accomplished by a bill enacted into a law. Numerous cases are cited to sustain this contention. The case of Collier, etc., Lithographing Co. v. Henderson, 18 Colo. 259 (32 Pac. 417), involves a construction of the constitutional provision that “no law shall be passed except by bill.” Mullan v. State, 114 Cal. 578 (46 Pac. 670 34 L. R. A. 262), construed a constitutional provision couched in the same language. This is also true of the case of May v. Rice, 91 Ind. 546. The case of Burritt v. Commissioners of State Contracts, 120 Ill. 322 (11 N. E. 180), holds that, under a constitutional provision that “no money shall be drawn from the treasury except in pursuance of an appropriation made by law, * * * and no money shall be diverted from any appropriation made for any purpose, or taken from any fund whatever, either by joint or separate resolution,” it was incompetent for the legislature, by joint resolution, to provide for the expenditure of $10,000 for “Township Organization Laws,” to be paid out of an appropriation made by law for printing and binding. It will be seen that each of the above cases rests upon restrictive provisions not contained in our Constitution. The case of State v. Kinney, 56 Ohio St. 721 (47 N. E. 569), is distinguishable from the case under discussion. The constitution of the State of Ohio does- not recognize action by joint resolution, as ours does, as will be seen later on. State v. Rogers, 10 Nev. 250 (21 Am. Rep. 738), is not in point, as the question there involved is whether the omission of the enacting-clause in a statute is fatal. The decision is in line with People v. Dettenthaler, 118 Mich. 595 (77 N. W. 450). The case of Boyers v. Crane, 1 W. Va. 176, appears to be a case of first impression, and tends to sustain the contention of respondent’s counsel, but falls short in this: That the constitution of West Virginia contains no such provision as that found in section 19, art. 4, of our Constitution. We do not read the case of State v. Dahl, 6 N. Dak. 81 (68 N. W. 418), as supporting respondent’s contention; while Barry v. Viall, 12 R. I. 18, is, so far as it is authority, support for relator’s claim. A joint resolution is described to be “a form of legislation which is in frequent use in this country, chiefly for administrative purposes of a local or temporary character.” Cush. Law & Prac. Leg. Assem. § 2403.

The relator’s counsel have referred us to a large number of instances in which the legislature, prior to 1850, proceeded by joint resolution, in form corresponding to the one here involved, where the measure adopted was limited to a single occasion, and not designed to be a permanent law. Under joint resolutions, the State released its interest in certain real estate (No. 22, Laws 1842); authorized the payment of certain claims from the general fund (No. 23, Laws 1843); authorized the issue of certificates of purchase without full payment for lands (No. 21, Laws 1844); authorized the conveyance of lands (No. 17, Laws 1845); authorized the selection by a canal contractor of certain internal improvement lands, instead of those which could he located under warrants which he had received for his work. For this last provision, see No. 36, Laws 1849. In the light of this legislative practice, the Constitution of 1850 should be construed. Section 19, art. 4, provides:

“Every bill and joint resolution shall be read three times in each house before the final passage thereof. No bill or joint resolution shall become a law without the concurrence of a majority of all the members elected to each house.” ,

This provision is a clear recognition of the custom prevailing under the Constitution of 1835. The same practice of adopting resolutions which are given the force of law has prevailed under the present Constitution, where the effect of the resolution is to authorize a single act. The instances are numerous.

It is contended by respondent that the resolution is an attempt to audit and allow a private claim, within the meaning of section 31, art. 4, of the Constitution, and is invalid for this reason. We do not think the resolution open to this objection. The claim of relator was fully established. The resolution simply made provision for meeting an admitted obligation of the State.

It is further contended that to give the resolution the effect contended for by relator makes it invalid under section 21, art. 4, which prohibits the legislature from granting or authorizing extra compensation to any public officer, agent, or contractor after the service has been rendered or the contract entered into. The legislature of 1869 (by Act No¡ 97) caused the.swamp lands then remaining to be graduated in price. It is claimed the relator’s scrip could be thereafter used in the purchase of these lands only at the price of $1.25 per acre, and therefore the resolution of 1887, if construed as giving the right to select any lands in the Lower Peninsula in lieu of those in Ottawa county, gave enlarged compensation to the contractor. The force of this contention is lost if the premise is not well taken. If the contractor had the right to select any swamp lands in Ottawa county without regard to the gradation of price for sales to purchasers for cash, the only-effect of the resolution was to permit the selection of lands-in other counties instead of in Ottawa county. This would not be an enlargement of compensation, but the substitution of lands in other counties to make payment in kind in accordance with the contract already executed. At the date of the act in question there was no gradation as to price. All patented swamp lands were subject to entry, and subject to selection by the contractor. The language was, “the swamp lands now subject to entry.” The subsequent gradation of price could not affect this right.

The remaining question is, What construction should be placed on the joint resolution ? It is contended by the-respondent that the resolution is to be construed in connection with Act No. 338, Laws 1865, and that, although the language of the resolution is broad enough to include all swamp lands, it should be limited to lands of the class, named in Act No. 338, viz., lands subject to entry. A similar contention was made in State v. Sparrow, 89 Mich. 263 (50 N. W. 1088). It was there held that the-grant to the State of swamp lands by the act of Congress-was a grant in prcesenti; that a grant by the State of any swamp lands not otherwise appropriated included lands which had not been patented to the State by the United States, but which had been duly selected, so that the title had vested in the State, and the lands had been identified. The language of the resolution is not materially different, and we must hold that the question is ruled by State v. Sparrow. See, also, People, ex rel. County of Houghton, v. Commissioner of State Land Office, 23 Mich. 270.

This opinion is based upon the record as made. It is not intended to pass upon the question whether these lands-are a part of the bed of St. Clair Lake in a manner to conclude the parties.

The writ will issue as prayed.

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

Hooker, J.

(dissenting). The petition asks that the respondent be compelled to issue a patent for 757.44 acres of land situate on what is commonly known as “St. Clair Flats.” I understand that it is not claimed that the same is, in the main, other than submerged land, below low-water mark of the lake.

Lake St. Clair is' one of the Great Lakes, and as such was duly meandered and its boundaries defined by federal surveyors at an early day. Such being the case, none of the submerged land was within the swamp-land act of 1850, except swamps upon well-defined islands, if there be any. "We will take judicial notice that many square miles of the lake within such meander lines are covered with wild grass, wild rice, rushes, and other aquatic plants, which grow only in the water, and not upon land periodically dry. Such lands were not within the contemplation of the swamp-land act, and it would be a violation of the trust confided in the federal government by Virginia, in its cession of the lands, if they had been included in said act, even if the government had not lost its title by the admission of Michigan to the Union.

Well-defined islands, visible above water, may have swamps within their confines, as we held in People v. Warner, 116 Mich. 228 (74 N. W. 705); but the fact that they are surrounded by submerged lands, in which aquatic plants grow, does not impart to such islands the character of swamp lands, within the act, nor would the fact that said islands contain swamp lands affect the character of such surrounding lands as submerged lands. There is no case on record, so far as I am aware, where the federal government has sought to convey submerged lands in a lake within the meander lines, and it has been its general policy to refuse to do so. An apparent exception in the case of Niles v. Cedar Point Club, 175 U. S. 300 (20 Sup. Ct. 124), will be found not to be such, as that land was unsurveyed swamp and overflowed land lying between a former survey and the shoré of the lake.

The writ should be denied.

ON rehearing.

Carpenter, J.

This case was decided by this court July 10, 1901, and is reported supra (86 N. W. 956). A rehearing was ordered, and there are now in the controversy two distinct issues, viz.: (a) Is the land in controversy swamp land? This issue does not, however, relate to so much of the land as was involved in the suit of State v. Lake St. Clair Fishing & Shooting Club, 127 Mich. 580 (87 N. W. 117), that having been determined in that case to be swamp land. (6) Is relator’s scrip valid to take the land in question, if it is in fact swamp land ? This decision relates only to the second of these issues, and it concerns only relator and the intervening petitioner, the Michigan Land & Lumber Company, Limited; for, if the land is in fact swamp land, the scrip of the intervener will take it if that of relator will not. It leaves to be subsequently determined in this suit the first issue. All the questions involved in this case relate to the construction and validity of a joint resolution passed by the legislature in 1887 (see Pub. Acts 1887, No, 18), under which relator claims his rights. Intervener contends:

First. That the proper construction of said joint resolution does not give relator the right to take the land in question with his scrip.

Second. That said joint resolution is unconstitutional because it is prohibited by section 31 of article 4 of our State Constitution, which provides:

“The legislature shall not audit nor allow any private claim or account.”

Third. That said resolution is unconstitutional because it is prohibited by section 21 of article 4 of our State Constitution, which provides:

“The legislature shall not grant nor authorize extra compensa-fcion to any public officer, agent, or contractor after the service has been rendered or the contract entered into.”

We are entirely satisfied with our former opinion in so far as it relates to the first and second of the above-named •objections, and shall refrain from further discussion of them. We will, however, proceed to discuss the third of said objections. The facts, so far as material to the question under consideration, are these: Relator obtained his scrip from the estate of William M. Ferry, deceased. That scrip evidenced the State’s obligation to compensate said estate for the services of said Ferry in building a road in the counties of Ottawa and Muskegon. This road was completed in 1867. By the law under which the contract to build said road was let, as well as by the contract itself, said Ferry was to be compensated by the conveyance of State lands then subject to entry,- situated in the counties of Muskegon and Ottawa. Shortly after the completion of the contract, said Ferry received from the State a conveyance of all the land to which he was entitled in the ■county of Muskegon. There remained due him, however, 799.10. acres, which, by the terms of said law and contract, were to he selected from land subject to entry in said •county of Ottawa.

The law under which the contract to construct said road was made and the scrip earned is Act No. 338, Laws 1865. That law contained this provision:

Provided, that the State shall not be chargeable with ■any of the expense, * * * except as hereinafter provided. * * * For the purpose of aiding in the construction of said road, there is hereby appropriated 320 .acres per mile of the swamp lands now subject to entry.”

The law also provided that the contract should be let in accordance with the provisions of Act No. 117, Laws 1859. The act last named contained a provision that the ■contractor for the construction of roads might elect to take his pay in money, or in lands at the price of $1.25 an acre. The contract to build the road in question contained a recital that the contractor had elected to take his pay in land. The books in the department of the commissioner' of the State land office kept the account of the State with relator’s assignor in dollars, on the basis that each acre of land was worth $1.25. All the land subject to entry at tho time the contract was made and- performed was for sale at $1.25 'an acre.

Upon the completion of the contract, in 1867, there was not in Ottawa county, subject to entry, sufficient land, if there was any, to satisfy the State’s obligation to relator’s assignor. Therefore, the legislature, in 1887, passed the joint resolution in question (see Pub. Acts 1887, No. 18), giving relator’s assignor the right to take in satisfaction of his claim 799.10 acres of the State swamp lands from any in the Lower Peninsula not otherwise appropriated. As the legislature had in 1869 (see Act No. 97, Laws. 1869) passed the so-called “ Graduation Act,” by which lands thereafter offered for sale were placed on the market at the fate of $8 per acre, the effect of this resolution was to give 799.10 acres of land in 1887, which the State was holding at $8 an acre, in lieu of a claim for 799.10 acres of land, which the State in 1865 was holding at $1.25 an acre; in other words, the effect of the resolution gave land which the State in 1887 valued at $6,392.80 to satisfy a claim for land which in 1865 it valued at $998.88. Intervener contends that relator’s assignor had a claim against the State for the amount of $998.88, payable in land, and that by the joint resolution under consideration he is allowed $6,392.80, payable in land, and that said joint resolution attempts to grant the contractor extra compensation, and is therefore unconstitutional.

If the assumption underlying this argument is well founded, the argument is conclusive. It will be observed, however, that the strength of the argument depends, not on the fact that an acre of land of the 'market value of $8 is exchanged in 1887 for an obligation to convey an acre of land of the market value of $1.25 in 1865 (a subject which will be hereafter referred to), but upon the assumption that the claim of relator’s assignor was a money claim, payable in land. We are bound, however, to say that this assumption is not well founded. In our judgment, it is not true, as assumed, that the State, from 1867 to 1887, owed relator’s assignor $998.88, payable in land. The provision of the act of 1865-, that the contract should be let in accordance with the provisions of Act No. 117, Laws 1859, did not, as contended by intervener, empower the commissioner therein named to let the contract for a money consideration. The provision in the act of 1865, “ The State shall not be chargeable except as hereinafter provided,” limited the obligation of the State to the lands thereinafter appropriated, and therefore clearly forbade its commissioner obligating the State to pay money to the contractor. Nor can we give any effect whatever to the recital that the contractor elected to take his pay in land, contained in the contract for the construction of the work in question. That recital is inconsequential and nugatory. He was bound to take his pay in land by the express language of the statute. It seems scarcely necessary to state that the books in the office of the land commissioner, showing the amount due to relator’s assignor to be dollars instead of acres, had no effect upon the obligation of the State, which was fixed by an act of the legislature. It follows, therefore, that in 1887 the State had no right to compel relator’s assignor to accept money in satisfaction of this claim, and it was obligated to deliver to him 799.10 acres of land, situated in the county of Ottawa, and subject to entry in 1865.

Was it extra compensation to give in lieu of this obligation other land not otherwise appropriated? The State had disabled itself from carrying out its agreement. It was therefore under an obligation to compensate the loss •of relator’s assignor, to deliver to him lands equal in value to those promised him. Unless, therefore, we can say that the land which the contractor gets under the joint resolution is of greater value than that to which he was •entitled, we cannot say that he received extra compensation. It is true that the land promised was in 1865 subject to entry at $1.25 per acre, and that the land delivered, under the resolution of 1887, if it comes into the market at all, will, by virtue of the graduation' act of 1869, be placed thereon at $8 per acre.. Shall we say that because one gets land which the State in 1887 values at $8 per acre, in lieu of land which in 1865 it valued at $1.25 an acre, he is receiving extra compensation ? We do not know that the land promised had not a greater intrinsic value than $1.25 an acre. In 1887 it may have been apparent to the-legislature that the land promised equaled or exceeded in value that which could be taken under the joint resolution. We cannot, therefore, say that the intrinsic value of the land held by the State in 1865 at $1.25 an acre is not as. great as that of land held by the State in 1887 or in 1903-at $8 per acre. We cannot say that the intrinsic value of' the land which relator will get in satisfaction of his obligation exceeds that promised him. The most that may be said is that it is possible that it may exceed that. This possibility gives this court no authority to declare unconstitutional a resolution passed in due form by the legislative branch of the government. All doubts of this character must be so resolved as to sustain the law. Rumsey v. People, 19 N. Y., at pages 46-49; Lusher v. Scites, 4 W. Va., at page 14 et seq.

The result of this decision is to sustain our former opinion, which, like the present, was, as contended by intervener’s counsel, “based upon the view that the measure of compensation to be paid the contractor was acres of land.”' It follows that relator is entitled to a mandamus requiring-respondent to execute a deed of the land in controversy in the case of State v. Lake St. Clair Fishing & Shooting Club, 127 Mich. 580 (87 N. W. 117). Whether he is entitled to a deed of the remaining land in controversy depends upon the determination of the other issue involved in this suit, which, as heretofore stated, will be subsequently determined in this suit.

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


source: Caselaw Access Project

author: Hooker, C. J.

license: Public Domain

text:
    BANHAGEL v. SCHOOL BOARD OF DISTRICT NO. 1 OF BRONSON AND BETHEL TOWNSHIPS.
    1. Primary Schools — Mill Tax — Surplus—Appropriations.
    2 Comp. Laws, § 4665, subd. 12, providing that a school district, after having maintained a school at least eight months in a fiscal year, may appropriate any surplus moneys arising from the one-mill tax to certain other purposes, does not permit an appropriation to such purposes, in December, of any part of the mill tax of the then current year.
    2. Same — Findings op Court — Evidence.
    Evidence that at an annual school meeting the treasurer reported the amount of money on hand, and thereupon the meeting voted to raise by tax a definite sum for school purposes, does not warrant a finding that the district appropriated its surplus mill-tax money of the previous year to, and made it a part of, the mill tax of the current year.

      Certiorari to Branch; Yaple, J.
    Submitted June 23, 1903.
    (Calendar No. 19,970.)
    Decided September 22, 1903.

      Mandamus by Edward Banhagel to compel the school-board of district No. 1 of Bronson and Bethel townships to issue a certain warrant for money. From an order denying the writ, relator brings certiorari.

    Reversed.

      V. H. & H. H. Smith, for relator.

      Campbell & Johnson, for respondent.
   Hooker, C. J.

The relator applied to the circuit court for a writ of mandamus to compel the respondent, a school district board, to issue and pay to him its warrant for $1,200 for certain money raised by mill tax belonging to the school district. Issues were framed and submitted to the court without a jury, and we insert his findings of fact as at once showing the material issues, and his finding thereon:

“The parties in this cause being in court by their respective attorneys, ready for trial, and the issue joined therein having been brought on for trial before the court without a jury, and the said court, having heard the proofs and allegations of the parties and the arguments of counsel, after due deliberation thereon, finds:
“1. That the relator, Edward Banhagel, under a contract with the respondent, built and constructed a schoolhouse, and received therefor in payment the contract price; that relator lost money upon the contract and the building by reason of changed conditions which entailed to Banhagel a considerable loss, and that said relator had an equitable claim against respondent, or at least such a claim as would have been a proper basis for extra compensation by the said school district.
“ 2. That on the 19th day of December, A. D. 1901, a special meeting of said school district was held, and a majority vote was had thereat to pay to said Edward Banhagel, the relator, the sum of $1,200 from the one-mill tax belonging to said district.
“3. That, of the amount to be thus appropriated from the one-mill tax, the sum of $588.78 was in the hands of the treasurer of said school district, and was the surplus arising from the one-mill tax unused for the previous school year 1900 and 1901, but which had been turned over to the treasurer of said school district for the ensuing year, and had become a part of the one-mill tax fund for the year 1901; that $622.22 of said amount was the mill tax for the current school year 1901 and 1902, and had not at any time become a surplus fund, as provided by section 4665 of Miller’s Compiled Laws of the State of Michigan
“4. That the fund from which the relator seeks to reimburse himself for losses sustained as aforesaid, by reason of the vote of said school district, was not, at the time of said school meeting, a fund which the said school district had power to appropriate to any other purpose than that of maintaining a school in the said district, as provided by section 4665 of Miller’s Compiled Laws of the State of Michigan.
“5. That, if the relator has a claim against said school district capable of enforcement, such claim is not enforceable under the present action to compel the payment of the same from the fund aforesaid.
“Writ denied.
“ George L.'Yaple,
“ Circuit Judge.”

Upon application of the relator, the second finding was afterwards amended to read as follows:

“2. That on the 19th day of December, A. D. 1901, a special meeting of said school district was regularly held, and a majority vote was had thereat to pay said Edward Banhagel, the relator, in recognition and settlement of his said claim, the sum of $1,200 from the one-mill tax belonging to said district.”

The cause is before us on certiorari at the instance of relator. The proceedings under which this alleged appropriation was made were, first, a notice, which we assume to have been legally published, in which it was stated that the meeting was to be held “for the purpose of voting to appropriate $1,200 of the surplus money arising from the one-mill tax now in the treasury of said school district for the purpose of building and paying for building and constructing the schoolhouse of said school district. Dated December 13, A. D. 1901.” The following is a copy of the record of the proceedings of the special meeting:

‘.‘Beonson, Mich., Dec. 19th, 1901.
‘ ‘ Special Meeting.
“The special meeting of the legal voters of school district No. 1, Bronson and Bethel, met pursuant to published notice at the schoolhouse in Bronson, Dec. 19th, 1901. The meeting was called to order by Mr. Warner, the moderator. The call was also read by the moderator. The clerk read the itemized expense of building the schoolhouse. Motion was made to appoint Randall Powers and Harry Ruple for tellers. Motion carried. Motion was made to appoint A. L. Phillips and Alonzo Ruggles for clerk. Motion was made to appoint John Shurtz as challenger. Mr. Rudd came forward and administered the oath of office, and the moderator declared the election open. Time, 9:15 p. m. The ballot-box was kept open for two hours, and, on counting the ballot, the following result was announced: Whole number of votes cast, 109.
“ Eor the appropriation, Yes.....................57
“For the appropriation, No...............'_______52
109
“ The moderator declared the appropriation carried by five maj ority. Ad j ourned.
“Wells Knapp, Director ”

Passing any question that might arise over the sufficiency of a notice that failed to apprise the voters that this was an appropriation to cover an equitable claim, rather than a legal one, to pay which the district was bound by contract, we may say that this vote was no more than an' appi'opriation of $1,200 from the surplus of a particular fund for the purposes mentioned. It is noticeable that it was not an appropriation of $1,200 to pay to the relator for extra compensation. But, as no point is made upon that, we will assume that the district so understood and intended it. It then becomes necessary to inquire whether this fund might lawfully be thus appropriated. The finding shows that the district had on hand in September the sum of $588.78, which arose from the one-mill tax of the previous year, and which was a surplus remaining after its having had nine months school for that year. Subsequently there had been levied a mill tax for the then current year — i. 1901 and 1902 — of $686.22. None of this had been paid over to the district, and it is claimed that only a small portion of it had been collected by the township treasurers, on December 19, 1901, which was the date of the special school meeting. At all events, it had not been reported to the district, and was not in “thetreasury of said district,” as per the notice above set forth. 2 Comp. Laws, § 4665, subd. 12, confers upon the voters at a school-district meeting lawfully called the power—

“To appropriate any surplus moneys arising from the one-mill tax after having maintained a school in the district at least eight months in the school year, for the purpose of purchasing and enlarging school sites, or for building or repairing schoolhouses, or for purchasing books for library, globes, maps, and other school apparatus, or for any incidental expenses of the school.”

Under this provision it is clear that there was no surplus for the year 1901 and 1902 to appropriate, as the school had not been held eight months during that fiscal year. Neither was the fund in the district treasury, as shown above. This eliminates that portion of relator’s claim.

The finding shows that the surplus of $588.78 remaining over from the previous, year had been previously appropriated to and become part of the mill-tax fund for the year 1901 by action of the district at its annual meeting. We assume that this finding was based upon the testimony that, at the annual meeting held in September, it was reported as a part of the school fund on hand, and that it was considered in determining how much it would be necessary to raise by tax to support the school for the next year. This finding of fact rests upon evidence which does not warrant it. The only proof upon the subject shows that at the annual meeting the district treasurer reported the amount of money in the treasury belonging to the district. Thereupon the meeting passed a resolution to raise by tax upon the district a definite sum for-school purposes. We should not assume that there was an intention to appropriate the $588 surplus mill tax to such purpose in the absence of any action tending to show it. In the absence of definite action, we cannot assume that the voters intended to deprive the district of its control over this surplus as provided by 2 Comp. Laws, § 4665, subd. 12.

The order is reversed, and the record will be remanded, with directions to the circuit court to issue the writ as prayed for the sum of $588.78. The relator is entitled to costs of both courts.

The other Justices concurred.


author: Montgomery, J.

text:
    JONES v. PENDLETON.
    Pleading — Variance—Real-Estate Agents — Commissions.
    Under a declaration for money due plaintiff for commissions on effecting a sale of real estate, he cannot recover where the sale was made by another, although it was agreed that he should have his commissions if the sale was made by any one.
    Error to Wayne; Frazer, J.
    Submitted May 15, 1903.
    (Docket No. 91.)
    Decided September 30, 1903.

      Assumpsit by James A. Jones against Edward W. Pendleton for commissions on the sale of real estate. From a judgment for plaintiff, defendant brings error.
    Reversed.

      John D. Conely ( W. C. Stuart, of counsel), for appellant.

      Chamberlain & Guise (M. J. Lehman, of counsel), for appellee.
   Montgomery, J.

The plaintiff sued, in an action of assumpsit, to recover commissions upon a sale of real estate of defendant. The declaration was for money due for commissions payable to the plaintiff for services rendered in and about effecting a sale by the plaintiff, at the request of the defendant, of a certain piece of real estate, etc. The bill of particulars follows the declaration, and is for commissions on sale of real estate. The evidence adduced on the part of plaintiff tended to show that defendant placed the real estate in question in his hands for sale at a price of $35,000; that plaintiff thereupon entered into negotiations with various parties, and among others a Mr. Devlin; that Mr. Devlin was unable to raise the money to pay $35,000; that plaintiff endeavored to secure a loan of this amount on the property, but had failed to do so; that he had applied to various parties, but found no one willing to make a loan to that amount. At this stage the negotiations appear to have been arrested by the plaintiff’s illness. Another real-estate agent, Mr. Hannan, approached the plaintiff, and proposed that, if he would divide commissions, he could effect a loan, and enable Devlin to make the purchase. This plaintiff refused to do. His testimony tends to show that, while he was ill at his residence, the defendant called upon him, and told him that other parties were trying to effect a sale to Devlin, but that he need have no concern; that, if a trade was made with Devlin, the plaintiff should have his commissions, and to keep quiet, and not worry about it. This testimony was denied on the trial, but the case went to the jury, and the jury found in favor of the plaintiff. A sale was made to the representative of the Pridgeon estate, who on the same day sold to Devlin.

The circuit judge instructed the jury that if the contract was completed and the cash was procured, not through the intervention of Jones, but through the intervention of some other party, then the plaintiff had failed to make out his case, and could not recover. In stating the plaintiff’s claim in another part of the charge, the court said:

“He claims, also, that this sale — this transaction — was to be a transaction upon which he was to receive his commission, and that Mr. Pendleton recognized the fact that he had done a certain amount of labor in the pursuance of this agreement, and that he agreed to pay him for this arrangement, and that he agreed to pay him his commission, at all events, if a certain person was the purchaser. I believe that man’s name was Devlin,”

It would appear that the jury acted upon the plaintiff’s claim, rather than upon the instruction to the jury. So far as we discover, there was no evidence in the case which justified the submission to the jury of the question whether the plaintiff had in fact effected this sale. The declaration and bill of particulars did not leave the case open for a recovery upon any other theory, and therefore the case should not have been submitted to the jury. According to the plaintiff’s testimony, he had entered upon negotiations under a contract, and at a certain stage of his negotiations, he not yet having effected a sale, a new agreement was made, by which defendant undertook to pay his commissions in case any sale should thereafter be effected to Devlin. The testimony does not show a sale by plaintiff thereafter to Devlin, but a sale through the intervention of another agent, and this modified agreement should have been counted on if the plaintiff sought to recover upon that theory.

Judgment will be reversed, and a new trial ordered.

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


author: Carpenter, J. Hooker, C. J.

text:
    GREEN v. GRANT.
    1. Taxation — Mortgages—Covenant to Pax Tax on Mortgage.
    A covenant in a mortgage to pay all taxes levied upon the mortgaged property, ‘ ‘ or upon or on account of this mortgage or the indebtedness secured hereby,” is an agreement to pay the personal tax assessed against the mortgagee on account of the mortgage.
    2. Same — Interest.
    The payment by a mortgagor of the tax assessed upon the mortgage as a personal tax is not a payment to preserve the security, but is in the nature of interest upon the loan.
    3. Same — Usury—Intent oe Lender.
    An agreement by a mortgagor to pay the taxes assessed upon the mortgage as the personal property of the mortgagee is usurious where the lender knew that the aggregate of interest and taxes would exceed the maximum rate of interest allowed by statute, but is not usurious where he believed it would not exceed that rate. Hooker, C. J., dissenting.

      4. Same.
    Where, at the time of making the contract, the lender did not believe that the aggregate of interest and taxes upon the mortgage would exceed the maximum rate of interest allowed by statute, he may recover for all the taxes he has paid on the mortgage, and which the mortgagor agreed to pay, although the aggregate of interest and taxes does exceed such rate. Hooker, C. J., dissenting.
    Appeal from Bay; Shepard, J.
    Submitted January 13, 1903.
    (Docket No. 33.)
    Decided September 30, 1903.
    Bill by Mary E. Green and' Hezekiah M. Gillett, executors of the last will and testament of James A. Green, deceased, against Emeline M. Grant, to foreclose a mortgage. From a decree for complainants, defendant appeals.
    Affirmed.

      Simonson, Gillett & Clark, for complainants.

      John L. Stoddard, for defendant.
   Carpenter, J.

This is an appeal in chancery from a decree for the foreclosure of a mortgage. The mortgage was given by defendant to complainants under date of December 11, 1899, to secure a loan for $12,000. It contained a covenant by the mortgagor to pay all taxes and assessments levied upon the mortgaged property, ‘ ‘ or upon or on account of this mortgage or the indebtedness secured hereby, or upon the interest or estate in said lands created or represented by this mortgage or by said indebtedness, whether levied against the said mortgagor, her legal representatives or assigns, or otherwise.” Another paragraph gave the mortgagees the usual right to pay these taxes in default of their payment by the mortgagor, and to add the sums so paid to the mortgage debt.

The only question in dispute between the parties is as to whether these clauses imposed upon defendant, as mortgagor, the liability to pay the personal mortgage taxes assessed against complainants in 1900 and 1901. In order to narrow the controversy as far as possible, defendant, prior to the filing of the bill, paid all sums claimed to be due for principal and interest exclusive of taxes, and complainants released all of the mortgaged property excepting one lot. A bill was then filed upon the theory that the mortgagor was in default for failure to pay the amount represented by these taxes. Defendant filed a cross-bill, framed on the theory that the mortgage was paid in full, and that the complainants were liable for the statutory penalty for failure to discharge it. The circuit judge held that the amounts paid for taxes were properly chargeable against defendant as part of the sum secured by the mortgage, and entered the usual decree of foreclosure and sale, from which the defendant appeals.

The assessment, as it appeared on the roll, was, in 1900, “Personal, $12,000,” and, in 1901, “Personal, $13,000.” It was shown that in each instance the assessment to the extent of $12,000 was based on the mortgage in question. That this constituted an assessment “upon or on account of the mortgage or the debt secured thereby” is obvious. It is said by defendant that the assessment is against the person, because of his ownership of the mortgage; but, conceding this, the assessment is clearly “on account of” his ownership of the mortgage. See Attorney General v. Board of Supervisors of Sanilac Co., 71 Mich. 16 (38 N. W. 639).

Is the agreement to pay 5 per cent, interest and all taxes and assessments levied on account of the mortgage or the debt secured thereby — the aggregate of taxes and interest amounting to 7f per cent., or three-fourths of 1 per cent, in excess of the maximum legal rate — usurious? Complainants contend that the court should say as a matter of law that no agreement by the mortgagor to pay taxes on the mortgage indebtedness is usurious. Defendant contends that the court should say as a matter of law that all such agreements are usurious when the aggregate of the interest and taxes exceeds the maximum rate authorized by law. The effect of complainants’ contention is to make valid agreements to pay the maximum rate of interest allowed by law and the taxes in addition thereto. The effect of defendant’s contention is to make invalid all such agreements, even though at the time the agreement was made the parties to the contract supposed that the aggregate of interest and taxes would be less than the rate authorized by law. In our judgment, neither of these contentions is sound.

In support of their contention, complainants rely upon the decision of this court in the case of Common Council of Detroit v. Board of Assessors, 91 Mich. 78 (51 N. W. 787, 16 L. R. A. 59). It was there held that an agreement to pay the taxes imposed under the law of 1891 upon the mortgagee’s interest in the estate did not render the contract usurious. The ground upon which this decision was based is therein stated as follows:

“Such an agreement does not amount to a reservation of interest, but is in the nature of an agreement to preserve the estate which constitutes the security, and is no more unlawful than an agreement to keep the property insured with a similar purpose.”

In our judgment, that decision is inapplicable to the present case. When defendant pays a tax, as in this case, on account of complainants’ ownership of the mortgage indebtedness, he is not making a payment to preserve the security, but he is paying money for the complainants’ benefit, precisely as if paid directly to complainants.

Nor can we approve the decision of Dubose v. Parker, 13 Ala. 779, relied upon by complainants. In that case the borrower promised to pay the tax on the indebtedness in addition to the highest legal rate of interest allowed by the statute. The court decided that the agreement was not usurious, saying:

“ The law has deemed it wise and just to permit the lender to realize as profit 8 per cent, per annum for the loan of his funds. By the contract in question he receives no more. The payment of the tax upon the loan is not very dissimilar from the payment of expenses for conveyances, which are usually borne by the borrower.”

We are bound to disapprove this reasoning. When the lender received 8 per cent, and the payment of his own taxes, he did receive more than 8 per cent. The payment •of the taxes is quite different from the payment of expenses for conveyances. The payment of the tax relieves the lender from an obligation which clearly rests upon him,— an obligation which did not arise by reason of the loan; while the payment of expenses for conveyances is a mere reimbursement for an outlay occasioned by making the loan. By the statement, “The law has deemed it wise and just to permit the lender to realize as profit 8 per cent, per annum for the loan of his funds,” it is obviously intended to assert that the law permits the lender to receive from the borrower the maximum rate of interest authorized by law in addition to the taxes assessed on account of his ownership. We are bound to say that the law of Michigan cannot recéive this construction. The statute of this State (see Act No. 207, Pub. Acts 1899) makes it lawful for the parties to stipulate in writing for the payment of any rate of interest not exceeding 7 per cent, per annum, and provides (see 2 Comp. Laws, § 4857):

“If it shall appear that a greater rate of interest has been directly or indirectly reserved, taken, or received than is allowed by law, the defendant shall not be compelled to pay any interest thereon.”

We should disregard sound principles of statutory construction (see Bullock v. Taylor, 39 Mich. 137 [33 Am. Rep. 356]), if we decided that this statute did not forbid the lender of money exacting for its use all beneficial consideration which exceeded the maximum legal rate of interest.

Complainants also refer to the case of Banks v. McClellan, 24 Md. 62 (87 Am. Dec. 594), where it was said:

“We consider that the charges for taxes on the mortgage, with simple interest on each item from the time it was paid, are allowable, Mr. McClellan having agreed to pay them, and the law authorizing such payments without incurring usury.”

We cannot regard this case as an authority of value to •complainants’ position.

Opposed to the case of Dubose v. Parker, and in harmony with these views, is Meem v. Dulaney, 88 Va. 674 (14 S. E. 363). There it was decided that an agreement to pay 6 per cent, interest (the maximum rate under the statutes of Virginia) and the State taxes was usurious.

Nor can we assent to the contention of defendant that a ■contract is usurious because the aggregate of interest reserved and taxes paid exceeds the maximum allowed by the statute. In our judgment, such a contract is not usurious per se. Whether or not it is usurious depends upon the intention of the lender. If, at the time the contract was made, he knew that the aggregate of interest reserved ■and taxes to be paid would exceed the statutory rate, — as he would if the interest reserved was the maximum interest, — the contract is usurious. If, on the other hand, at that time he believed that the aggregate of interest and •taxes would not exceed the maximum rate allowed by statute, it would be as contrary to law as to good morals .to declare it usurious.

“ It is the essence of an usurious transaction that there shall be an unlawful and corrupt intent on the part of the lender to take illegal interest, and so yre must find before we can pronounce the transaction to be usurious.” Condit v. Baldwin, 21 N. Y., at page 221 (78 Am. Dec. 137).

Nourse v. Prime, 7 Johns. Ch., at page 77 (11 Am. Dec. 403); Bank of United States v. Waggener, 9 Pet., at page 399; Elliott v. Sugg, 115 N. C. 236 (20 S. E. 450); Varick’s Ex'r v. Crane, 4 N. J. Ch., at page 134; Tyler, Usury, p. 103.

The principle stated above is not confined in its application to cases where the interest has been paid partly in merchandise. It applies where the interest has been paid entirely in money, and that in excess of the statutory rate, where there was an intention to take no more than the legal rate. See Duncan v. Savings Inst'n, 10 Gill & J., at page 311; Duvall v. Bank, 7 Gill & J. 44.

Can we say that the mortgagee in this case intended by the transaction to take unlawful interest ? Did he intend that he would secure more than 7 per cent, interest upon his investment ? He knew that the interest promised him was 5 per cent. If he knew that the taxes assessed on account of the mortgage indebtedness would exceed 2 per cent., the transaction was usurious; otherwise it was not. Did he know that the aggregate of taxes would exceed 2 per cent. ? The record does not enable us to answer this-question. We know that in many localities in this State— and we think it may be said that in most localities — the-aggregate of taxes does not exceed 2 per cent. We cannot, therefore, say that the mortgagees, at the time this-contract was made, knew that the aggregate of taxes would exceed 2 per cent. We are bound, therefore, to say, under the authorities above cited, that there is no such proof of- an intent to take unlawful interest as justifies us in pronouncing the transaction to be usurious.

Does the conclusion that the transaction was not usurious justify us in requiring defendant to perform a contract which, in effect, compels her to pay interest in excess-of 7 per cent.? We think it does. If the contract was forbidden by law, all interest, and not merely that which exceeds 7 per cent., must be forfeited. If the contract was not forbidden by law, it is legal and enforceable according to its terms. While this particular question was not discussed in Duncan v. Savings Inst’n. or in Duvall v. Bank, supra, it is to be observed that in each, of these cases the borrower of money was compelled to pay interest in excess of the legal rate.

In our judgment, this case cannot, as urged by our Brother Hooker, be decided upon the presumption that the parties intended by their contract to include taxes only to an amount which, with the interest reserved, would equal 7 per cent. The express language the parties have deliberately used precludes the adoption of any such presumption. The mortgagor expressly agreed to “pay all taxes and assessments * * * levied * * * on account of this mortgage or the indebtedness secured hereby.” To construe this agreement as if it contained the provision, “not exceeding 2 per cent.,” is, in our judgment, to make a contract for the parties which they themselves did not make. The principle that “an agreement will not be adjudged to be illegal which is capable of a construction which will uphold and make it valid ” has, we think, no application, bepause the agreement in question is not capable of the construction contended for.

We agree with the complainants that defendant is not justified in making any claim of relief on the ground ■of mutual mistake.

The decree of the lower court will be affirmed.

Moore, Grant, and Montgomery, JJ., concurred with Carpenter, J.

Hooker, C. J.

(dissenting). The question raised by ■this record is whether an agreement by a mortgagor of land to pay 5 per cent, interest upon the amount secured by note and mortgage, and, in addition, “all taxes and assessments which shall be levied upon the said lands, or upon or on account of this mortgage or the indebtedness secured hereby, or upon the interest or estate in said lands •created or represented by this mortgage or by said indebtedness, whether levied against the said mortgagor, her legal representatives or assigns, or otherwise,”is usurious.

Inasmuch as the highest lawful rate of interest in this State was then 7 per cent., the contract was not usurious per se. If a promissory note or bond should stipulate that the payee’s or obligee’s taxes thereon should be paid by the maker or obligor in addition to the highest lawful rate of interest, there can be no question that the contract would be usurious. Counsel do not seem to question this, but insist that an agreement by a mortgagor to pay taxes does not fall within the rule, basing their contention upon some cases which they cite. The first of these is the case of Banks v. McClellan, 24 Md. 62 (87 Am. Dec. 594). All that was there said upon the subject was that:

“We consider that the charges for taxes on the mortgage, with simple interest on each item from the time it was paid, are allowable, Mr. McClellan having agreed to-pay them, and the law authorizing such payments without incurring usury.”

Whether there was or was not a statute authorizing it does not appear. Perhaps an inference that there was. such is proper; but, if not, there is nothing to show that such taxes were not taxes which were assessed against the-mortgagor upon his property, and which he should of' right pay. There is not an intimation that the mortgagee, profited by such payment, and, if not, there was not usury..

The next case is Dubose v. Parker, 13 Ala. 779, where an agreement by the maker of a note to pay the highest rate of interest allowed by law, and taxes assessed to the payee, was held not usurious. It is a case in point, supporting complainants’ claim, but based upon such fallacious reasons, and so at variance with principle, that we cannot follow it.

The other case is one of our own, — Common Council of Detroit v. Board of Assessors, 91 Mich. 78 (51 N. W. 787, 16 L. R. A. 59), — -where it was held that an; agreement to pay all taxes assessed against all interests in. the real property owned by the mortgagor, including the-interest granted to the mortgagee, was not usurious. Under our law a mortgagee takes only a lien by way of security, leaving the legal title in the mortgagor. It was-said that:

“ Such an agreement does not amount to a reservation, of interest, but is in the nature of an agreement to preserve the estate which constitutes the security, and is no more unlawful than an agreement to keep the property insured with a similar purpose.”

It is manifest that, if the debtor should pay his debt according to agreement, the creditor would get no benefit for the tax paid by him upon the land; nor would he if he-did not, because on foreclosure he could recover only his-debt and lawful interest through sale. His interest in the. land would then be gone, as would the money paid for taxes upon it. The case of Kidder v. Vandersloot, 114 Ill. 133 (28 N. E. 460), is in point on that proposition.

On the other hand, an agreement to pay 6 per cent, on a bond, and to save the obligee harmless from State taxes, was held to be usurious. Meem v. Dulaney, 88 Va. 674 (14 S. E. 363).

There are many instances where a contract is not per se usurious. That could be said in this case, for the contract does not indicate that the taxes will swell the interest to more than a 7 per cent. rate. Many cases hold that an agreement to pay premiums upon life insurance as a part consideration for a loan already drawing the highest rate of interest is usurious, but the better opinion is that it is not necessarily so per se, but may be shown to be. See Webb, Usury, § 326, and notes. In Boone, Mortg. § 81, it is said that an agreement to pay taxes on a mortgage is not necessarily usurious; citing Banks v. McClellan, 24 Md. 62 (87 Am. Dec. 594), which indicates the author’s understanding of that case. It goes without saying that it may not be usurious per se, for the aggregate of the interest reserved and the taxes promised to be paid or afterwards levied may not exceed lawful interest.

In the present case the contract plainly requires the maker of the note and mortgage to pay 5 per cent., and taxes which may be assessed thereon as a credit against the payee. If it could be said that it was a certainty that the taxes, etc., would not exceed 2 per cent., it could not be said to be a usurious contract. If it could be said from the contract that they would, it would be as clearly usurious ; but, as it could not be known what the taxes would be when the contract was made, it cannot be said to be usurious per se. The sequel has proved that the taxes were 2$ per cent., and it is now insisted that the complainants must suffer a forfeiture because they have not discharged the mortgage; and upon the same principle it might also be claimed that all unpaid interest should be forfeited.

Without expressing an opinion as to whether or not such would be the necessary result in any case, it need not be in this, for I think this contract is susceptible of a construction which will make it valid. It is a rule of construction that contracts shall be so interpreted as to make them valid, rather than illegal, where the language will permit. Thus, in Merrill v. Melchior, 30 Miss. 516, it is said, “Every presumption of law is in favor of the legality of a contract;” and in Crittenden v. French, 21 Ill. 598, that “the law will not so construe a contract as to make it illegal when it will bear a different construction making it legal.” In Ormes v. Dauchy, 82 N. Y. 443 (37 Am. Rep. 583), it was said, “ The law will not presume a contract illegal, or against public policy, and so void, when it is capable of a construction which will make it lawful and valid.” In Archibald v. Thomas, 3 Cow. 284, this rule was applied in a usury case, where it was said, “When a contract admits of two significations, that should be adopted which renders it operative, rather than that which renders it void;” and again, “ If a contract is susceptible of two constructions, one of which will bring it within and the other without the statute of usury, the latter construction should be adopted.” See, also, Standard Oil Co. v. Scofield, 16 Abb. N. Cas. 379. In Lorillard v. Clyde, 86 N. Y. 384, it was said, “An agreement will not be adjudged to be illegal when it is capable of a construction which will uphold and make it valid.” Powers v. Clarke, 127 N. Y. 417 (28 N. E. 402). The federal courts hold the same doctrine. In Hobbs v. McLean, 117 U. S. 567 (6 Sup. Ct. 870), it is said, ‘When a contract is fairly open to two constructions, the one lawful and the other unlawful, the former must be adopted;” citing 2 Whart. Ev. (2d Ed.) § 1250; 2 Best, Ev. (6th Eng. Ed., 1st Am. Ed.) §§ 346, 347; Shore v. Wilson, 9 Cl. & F. 355; Moss v. Bainbrigge, 18 Beav. 478; Mandal v. Mandal's Heirs, 28 La. Ann. 556. This case was approved and followed in U. S. v. Railroad Co., 118 U. S. 235 (6 Sup. Ct. 1038).

We have already said that this contract is not usurious •on its face, and we should not asssume that the parties intended it to be an illegal thing when we can legitimately infer the contrary; and, while the strict letter of the contract would cover taxes in excess of 2- per cent., it is not unreasonable to suppose that the parties designed to include taxes only to an amount which, with the interest, would not be usurious.

It is suggested that an unlawful intent — i. e., an intent to take more than the legal rate of interest- — is necessary to make the contract usurious. It may be conceded that there are cases where such a rule may apply, but if we say that in this case, and affirm the judgment, we not only relieve the mortgagee from a forfeiture of the lawful interest, but give him a judgment for the excess over 7 per cent., which the record shows that he recovered in the circuit court, and is claiming here. There is a class of cases where this question of intent is important; e. g., where one agrees to pay 5 per cent, and give the mortgagee a horse. There, if a jury can say that the value of the horse and the rate reserved so far exceed the legal rate as to show an intent to pay and take more than the legal interest, it is a usurious transaction, while, if they approximate the legal rate, the jury may be able to find that the parties treated the horse as of a value low enough to show an intention not to exceed the legal rate, and that there was no intent to evade the statute, in which case there would not only be no penalty imposed, but the contract might be enforced. This can hardly be true of a case where the entire payment consists of money. If the contract shows a reservation of, or the party receives, money to an amount exceeding the legal rate, such excess is usury, regardless of the intent, if it must be treated as interest; i. e., compensation for the use of money. The Maryland cases cited are cases where a small excess had been actually paid.

It follows that, as the decree includes all of the taxes, it is erroneous. As the briefs do not discuss the amount of usury upon this theory, the amount due can be determined upon the settlement of the decree, if counsel cannot agree upon it, at which time the question of costs can be settled.


author: Moore, J.

text:
    ANDERSON CARRIAGE CO. v. PUNGS.
    1. Pleading — Declaration—Requests to Charge.
    A declaration alleging that defendant represented to plaintiff that its business of manufacturing brake-beams would not cease because the American Brake-Beam Company, which had theretofore purchased all its product, discontinued its purchases, as he was procuring patents for improvements in brake-beams, which he would assign to plaintiff, and that plaintiff would make large profits in manufacturing them, greatly in excess of any profits theretofore realized from its contract with the American Brake-Beam Company, sufficiently stated the theory upon which plaintiff sought to recover to justify the refusal of a request that plaintiff was not entitled to recover on the theory that defendant promised to make good to plaintiff any loss it sustained by reason of the failure of the American Brake-Beam Company to renew its contract.
    2. Corporations — Contracts—Officers.
    Defendant brought about a consolidation of a corporation, in which he owned an interest, with another company, through representations that its business was very profitable; but, after the consolidation, the business ceased to be profitable, and the officers of the consolidated company were about to wind up its affairs. Defendant then promised to assign to the latter company patents which would make the business profitable, if the officers would retain their connection with the company and continue the business. Held, that the court could not say, as a legal conclusion, that it was a personal contract between individuals.
    3. Same — Measure of Damages — Instructions.
    In such case an instruction to the jury that, if they found for plaintiff, they should award such damages as would compensate it for the loss of the patents which defendant agreed to transfer to it, was not reversible error, where defendant did not request a more detailed instruction on the subject of damages.
    4. Evidence — Opinion of Court — Discrediting Witnesses.
    An opinion of the Supreme Court in another case between the same parties is not admissible for the purpose of discrediting the testimony of one of the parties.
    Error to Wayne; Rohnert, J.
    Submitted June 3, 1903.
    (Docket No. 23.)
    Decided September 30, 1903.

      Assumpsit by the Anderson Carriage Company against William A. Pungs for the breach of a contract to convey certain patents. From a judgment for plaintiff, defendant brings error.
    Reversed.

      Barbour, Bexford & Field, for appellant.

      Bussel & Campbell, for appellee.
   Moore, J.

This is a suit in assumpsit, brought by the Anderson Carriage Company, a Michigan corporation, against William A. Pungs. The plaintiff recovered a verdict for $17,970.24. The defendant has brought the case here by writ of error.

Prior to February 12, 1897, the Anderson Manufacturing Company was a corporation located in the city of Detroit. The Michigan Railway Supply Company was also a corporation located in the city of Detroit. On February 12, 1897, the two companies were consolidated, and all of their property and assets were conveyed to a new company, known as the Pungs-Anderson Manufacturing Company. On the 29th day of May, 1899, the name of the consolidated company was changed to the Anderson Carriage Company, the plaintiff herein.

It is the claim of the plaintiff that the negotiations which brought about the consolidation of these companies were conducted by Anderson and Locke, representing the Anderson Manufacturing Company, and Pungs, representing the Michigan Railway Supply Company; that in these negotiations Pungs represented that the earning capacity of his company, the Michigan Railway Supply Company, was equal to 10 per cent, of its capital stock, which he represented to be $400,000; that there were two departments to the plant of the Michigan Railway Supply Company, viz., the department in which nuts and washers were manufactured, and the department in which brake-beams were manufactured; that the brake-beam department constituted much the larger portion of its business, and yielded 70 per cent, or 75 per cent, of its annual earnings; that the brake-beam department was so related to the nut and washer department that it was impracticable to continue the running of the latter in case the company was compelled to close the former department, for the reason that the nuts and washers so manufactured were made from the iron scrap of the brake-beam department; that the brake-beams were made solely for the American Brake-Beam Company of Chicago, and this constituted the entire .business of the brake-beam department. In December, 1897, the American Brake-Beam Company canceled its contract with the Pungs-Anderson Manufacturing Company. It is claimed the Michigan Railway Supply Company was taken into the consolidation upon the representation that it could be relied upon to yield more than 50 per cent, of the earnings of the consolidated company, and its stockholders received in exchange for their holdings stock of the consolidated company to the amount of $100,000, while the stockholders of the Anderson Manufacturing Company received consolidated company’s stock to the amount of $70,000 only.

It is claimed that in January, 1898, Anderson and Locke, in their own behalf and as officers of the PungsAnderson Manufacturing Company, informed Pungs they intended forthwith to sever their connection, both individually and as officers of said company, and intended to place their holdings upon the market, and dispose of them as best they could; and, as officers of the company, they notified Pungs that the Pungs-Anderson Manufacturing Company was crippled to such an extent by the loss of the brake-beam business that, as such officers, they would immediately urge a disposition of the assets of said company in whatever way might seem practicable, and, as officers of said company, would do all in their power towards winding up the affairs of said Pungs-Anderson Manufacturing Company; that Pungs admitted the seriousness of the situation, and his responsibility for it, and endeavored to induce Anderson and Locke to refrain from taking the steps which they had determined upon, and said that the department.for manufacturing brake-beams would not have to be closed and cease operating because of the American Brake-Beam Company’s discontinuing doing any further business with them, and that, on the contrary, he (Pungs) was procuring and was about to procure letters patent upon improvements in brake-beams, which patents he represented to be of great value, and that the Pungs-Anderson Manufacturing Company, by using these patents, could continue to manufacture brake-beams, and make large profits out of its brake-beam department ; and Pungs promised to turn over and assign to the Pungs-Anderson Manufacturing Company these patents to make good the loss which it had suffered from the failure of the brake-beam business.

It is claimed Anderson and Locke promised and agreed to continue their connection with the company and to retain their holdings of stock in the same, and, as officers representing said company, promised and agreed with Pungs to withhold urging a disposition of the company’s assets, and, as said officers, promised and agreed to refrain from doing anything towards winding up the affairs of said company, or taking any steps towards changing the policy of the company in any manner whatsoever on account of the crisis which the company then was facing; that Pungs, in consideration of the promises of Anderson and Locke, promised and agreed to and with them, as officers of the corporation, to transfer and assign to the Pungs-Anderson Manufacturing Company, for its own use and benefit, such valuable patents for improvements upon brake-beams as would enable the company to carry on its brake-beam business at a large profit; that, in pursuance of this agreement, the company, with the knowledge of Pungs, and under his direction, and at his request, made expenditures of at least $400 in manufacturing patterns, in purchasing tools and raw materials, and employment of labor, etc., for the purpose of putting into practical working order the said patents for improvements in brake-beams; that Mr. Pungs obtained the patents in June, 1898, and April, 1899, and that, instead of turning them over to the plaintiff, as he agreed to do, he sold them to the American Brake-Beam Company of Chicago for$10,000. In the agreement by which the American Brake-Beam Company agreed to pay Pungs $10,000, Pungs not only turned over the patents to the Brake-Beam Company, but also promised and agreed not to engage in the brake-beam business in any way, shape, or form at any place within the United States of America, its territories, or the District of Columbia, and that he would not be connected with any company manufacturing or selling brake-beams in the United States, either as officer, employé, or shareholder (Chicago Railway Equipment Company alone excepted), at any time during the period covered by said letters_ patent.

It is claimed that, by reason of Pungs’ breach of his contract, the Anderson Carriage Company was compelled to abandon the manufacture of brake-beams, nuts, and washers, which constituted the entire business of what had been the Michigan Railway Supply Company prior to the consolidation. On the part of Pungs it was denied any such agreement was made.

It is claimed the court erred in refusing to • give the following request:

“ That the plaintiff is not entitled to recover in this cause on the theory that the defendant promised to make good to the plaintiff the loss, if any, which it sustained by reason of the fact that the American Brake-Beam Company did not enter into a new contract with the plaintiff after the expiration of the contract from January 1, 1897, to January 1, 1898, offered in evidence, and marked ‘ Exhibit G,’ since the declaration does not allege any agreement on that theory, and since damages for breach of such agreement, if such agreement was made, cannot be recovered under the common counts annexed to the special count in the declaration in this cause.”

The declaration contained the following:

“And thereupon the said Pungs represented to said Anderson and said Locke that the said department for manufacturing brake-beams would not be closed and cease operating because of said American Brake-Beam Company’s discontinuing doing any further business with it, but, on the contrary, that he, the said William A. Pungs, was procuring and. was about to procure letters patent upon certain improvements upon brake-beams, which said patents said Pungs represented to be of great value; and said Pungs further represented that the said PungsAnderson Manufacturing Company, by using said patents and manufacturing brake-beams by such use, would be able to make large profits out of the brake-beam department of said company; which said patents said Pungs promised to turn over and assign to said Pungs-Anderson Manufacturing Company, to be and remain its property.
“Said Pungs represented that be would turn over and assign to said Pungs-Anderson Manufacturing Company said patents to be issued, to be and remain its property, and that the ownership of said patents to be issuéd by the said Pungs-Anderson Manufacturing Company would place it (the said company) in such a position with regard to manufacturing brake-beams that it would be beyond competition, and that because of said Pungs transferring his rights to said company in said patents to be issued, and the company having the benefit thereof, said brake-beam department would thereafter yield large and increased earnings. And said Pungs represented that he considered it extremely fortunate from a business point of view for the said Pungs-Anderson Manufacturing Company that its relations towards said American Brake-Beam Company were so altered on the initiative of the said Brake-Beam Company that it (the said Pungs-Anderson Manufacturing Company) could enter upon the manufacture of brake-beams independently and in competition with the said American Brake-Beam Company, which theretofore it was not in a position to do; and further represented that the additional earnings thus accruing to the said PungsAnderson Manufacturing Company by the use of said patents to be issued would be far in excess of any profits theretofore realized from or on account of the business with said American Brake-Beam Company.”

• The bill of particulars also claimed for the value of the letters patent as particularly set forth in the declaration filed in this suit $60,000, and also, January 1, 1901, damages resulting from breach of contract, whereby said defendant agreed to transfer and assign valuable patents to plaintiff, by the use of which plaintiff could manufacture brake-beams at a large profit, $15,000.

We think the theory of plaintiff was sufficiently set out in the pleadings to justify the court in refusing the request.

It is claimed the plaintiff cannot maintain this action; that the contract, if any was made, was between Mr. Anderson and Mr. Locke on one side and Mr. Pungs on the other, and that the plaintiff is not a proper party to the litigation. The circuit judge charged the jury upon that feature of the case as follows:

“If you find that he did make this promise, you will consider the next question, — to whom did he make the promise ? If he made the promise to assign to the plaintiff company — If you find that he made a promise to assign to Anderson and Locke personally, you will find for the defendant, because, if he made the promise to Anderson and Locke personally, and not to the plaintiff company, there is no such contract here as will entitle the plaintiff company to bring the action. So, if you find that he promised, and that the promise was made to Anderson and Locke personally, in consideration of their personal promises, you must find for the defendant, ‘ No-cause of action.’ If, however, you find that these promises were made to the plaintiff company, and were made to Mr. Anderson and Mr. Locke as officers of the company, acting for the company and on behalf of the plaintiff company, then you will find for the plaintiff.”

A similar question was before the court in Anderson Carriage Co. v. Pungs, 127 Mich. 543 (86 N. W. 1040). The trial court charged the jury as follows:

. “ There is just one question in this case to be submitted to you, and that is whether or not Mr. Pungs, the defendant, is entitled to his salar}*- from the 5th of May to the 1st of June, 1899. You have heard the testimony of these various witnesses produced here. On the part of Mr. Pungs, it is plain that -his salary was to continue until he was released from his obligations on certain notes; that he subsequently waived this, and put in a resignation, to take effect on the 1st of June. Other witnesses produced by the plaintiff in this case testified that it was the arrangement that Mr. Pungs should vacate his position on the 5th of May, and that his salary should then cease. Now, that is peculiarly a question for you. What was the agreement? If it was the agreement between these parties that Mr. Pungs’ salary should cease when that stock was transferred, then Mr. Pungs is not entitled to that salary after the 5th of May. If, on the other hand, it was the agreement that his salary should continue until he was released from his obligations on this outstanding paper, then he is entitled to his salary from the 5th of May to the 1st of June.”

Mr. Justice Hooker, speaking for the court, said:

“This defendant claims that his office was not made vacant by the sale of his stock; that there is no evidence that, as part consideration for the purchase of his stock, he agreed to vacate the office; and that, if there was such contract, it was between him upon one side, and Anderson, Locke, and Newcomb upon the other, and that the plaintiff was not a party to it.
“The jury found that Pungs did agree to get out of the company and give up his office upon the sale of his stock, and we think the evidence indicates that it was the understanding of all that he should. We think, moreover, that he is in no position to deny plaintiff’s right to treat the office as vacant. It is apparent that the action of the members of the board of directors was not merely personal. The interests of the concern demanded a change, and its officers negotiated with Pungs to bring it about. We cannot say, as a legal conclusion, that this was a personal contract between the individuals.”

See, also, Monaghan v. Insurance Co., 53 Mich. 238 (18 N. W. 797).

It is claimed the court erred in his charge to the jury upon the question of damages. The charge relating to that subject was as follows:

“If you find for the plaintiff in this case, you will award the plaintiff such damages as, in your judgment, will compensate the plaintiff company for Mr. Pungs’ failure to carry out his part of the contract, if you find that he made the contract. * * *
“If you find for the plaintiff, you will award it, as I have said, such damages as, in your judgment, will compensate it for the loss of the patents which Mr. Pungs agreed to transfer to the company.”

The judge was not requested to charge the jury more in detail upon this subject. The only request made by defendant bearing upon the question of damages was that, if the jury found in favor of the plaintiff, it should be for only nominal damages, namely, six cents. As there was testimony tending to show that the patents were sold for a large amount, this request was properly refused. We do not think, in view of this record, the failure to charge more in detail upon the subject of damages was reversible error.

Upon the trial Mr. Anderson and Mr. Pungs were witnesses. Their testimony was contradictory to each other. They were both witnesses in the case referred to later. Upon the trial of this case the following occurred:

“Mr. Campbell: I now offer in evidence a decree of the Supreme Court of Michigan, filed July 19, 1901, in the case of Anderson Carriage Co. v. Pungs, 128 Mich. 49 (87 N. W. 105), in which it is judicially determined what the intentions of the parties are in relation to the conveyance of this land that has been referred to.
“Mr. Rexford: That is absolutely absurd, immaterial, and irrelevant. Mr. Pungs admitted that the court was against him in that case, and said that it was based upon the false testimony of Mr. Anderson. The object of it is to cast some reflection upon Mr. Pungs, by reason of the fact that the court held against him where his testimony was on one side and Mr. Anderson’s was on the other. I "think any such offer as that is improper, and I take an exception to it.
The Court: I think, in view .of the testimony, it would he material for the other side to show what property passed from the railway supply company to -the consolidated company. They have a right to show what the property was which passed to the consolidated company.
“Mr. JRexford: We have'conceded what the deed was, and to read the opinion of the Supreme Court cannot be material.
The Court: It is material in view of the testimony of Mr. Pungs characterizing the testimony of Mr. Anderson in the other case. I think I will permit such parts of this opinion to be read as 'will show whether the Supreme Court, in passing upon the matter, passed upon the question of the veracity as between Mr. Pungs and Mr. Anderson. Mr. Pungs’ testimony was that it was a question of veracity between himself and Mr. Anderson which decided the question. If there are any parts which bear upon that, I will permit it to be shown.”

An exception was- taken, and Mr. Campbell read to the jury from the opinion of the Supreme Court, as follows:

“Mr. Pungs was asked:
“ ‘ Q. You heard Mr. Newcomb’s testimony. Do you recollect any conversation with him with reference to buying an acre ?
'A. No, sir.
‘Q. "What conversation do you recollect that you had with him about buying an acre, or about the amount of land that was to be deeded ?
‘A. When I had the conversation, — the only conversation that I recollect, —the records show that is what land we needed. We bought just what we needed, and no more. We needed just that piece, and no more. We had a building 300 by 75 feet, and that is five times the size of the building that they had before that. It was ample for our use in every respect.’
“On his cross-examination defendant was asked:
‘Q. Isn’t it true, in the conversation that you had with New-comb and the others at the time interested in the company, that your talk was that you would sell them one acre?
“ ‘No, sir. If there had been we would never have said so many feet. * * *
“ 'Q. There was no such talk about an acre at all?
‘A. I do not think so. We might have said that it was about an acre, and gave them the dimensions.’
“He was then examined upon the statement in the deed that the property contained about one acre. He was. asked:
“ ‘ Q. What do you mean by the statement in the deed that the parcel hereby conveyed contained about one acre of land ?
‘A. I did not put it in. I asked Mr. Post [the attorney], and he said it was customary when it was anywhere near an acre.’
“ It appears to us that the facts of this case all tend to-show that the whole of lot 21 was intended to be conveyed by the deed of September 23d.”

It will be seen this opinion was read for the purpose of discrediting Mr. Pungs. This court passed upon the case made by the record which was presented to it in the case then before it. Whatever may have been its opinion as to the credit to be given to Mr. Pungs in that case, it was no more competent, as bearing upon the question of what credit should attach to Mr. Pungs’ testimony in this case, than would be the opinion of one of the jurors in that case. Counsel, with all their zeal and learning, have not called our attention to an authority justifying the admission of this opinion. We think they would have done so if one could have been found. We think this was harmful error, and for it the judgment of the court below is reversed, and a new trial ordered.

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