text:
    SPRAGUE v. MOORE.
    1. Estates op Decedents — Advancements—Loans — Presumption.
    In the absence of any declaration to the contrary, it will be presumed that money paid to a son, for which he gives to the ancestor a promissory note, is a loan, and not an advancement.
    2. Same — Declarations in Wills and Deeds op Trust.
    Moneys paid to an heir, for which promissory notes are given to the ancestor, may be shown to be an advancement by subsequent declarations of the ancestor in deeds of trust or wills.

      3. Same — Deed of Trust — Accommodation Paper.
    Moneys paid to an heir, and for which promissory notes were taken, as well as money paid to take up accommodation paper upon which the ancestor was an indorser, are not shown to be advancements by a deed of trust of all the ancestor’s property, stipulating that, at her death, the property should be distributed equally among her heirs, and that the estate, for the purpose of distribution, should consist, not only of the property that came into the trustee’s hands, but also of all advances made to each of her children, all debts due from them to her or to her trustee, and all payments made by her or her trustee for the benefit of each of them, and also directing the trustee to pay all accommodation paper theretofore made and which the heir ought to pay, and charge the same, with interest, to his share of the estate.
    4. Same — Interest on Advancements.
    Por the purpose of equalizing shares on the distribution of an estate, interest should be computed on advancements from the death of the ancestor, but not before, unless there is some provision in the acknowledgment or declaration of the advacement requiring it.
    5. Same — Construction of Trust Deed.
    A woman, having made advancements to some of her children, made a trust deed of all her property, providing that the trustee might advance to each of her children $1,000 per year, and that any sum withheld from a minor grandchild should be equalized at the termination of the trust, if not before, and that at her death the estate should be distributed equally among her heirs. She expressed a desire that all should “share equally and ratably in all past, present, and future benefits.” The deed contained no specific provision as to interest. Held, that all beneficiaries should share equally from the time the deed was made; that advances made after that time should bear interest, and that those made before should not.
    6. Descent and Distribution of Estates — Administrator.
    Where one of eight children, who receive vested interests in their mother’s property by virtue of a trust deed, dies before her mother, leaving no debts or issue, her interest in the property goes equally to her brothers and sisters, under 3 Comp. Laws, §§ 9064, 9333, and no administrator is necessary for the distribution of her estate.
    7. Unnecessary Administration — Costs.
    Where a person asks for the appointment of an administrator of an estate when such appointment is wholly unnecessary, he will be left to pay his own costs and disbursements in such proceedings.
    8. Trustee — Purchase oe Interest oe Beneficiary.
    A beneficiary may assign hjs interest in the trust estate to the trustee to secure the trust estate and also the personal interest of the trustee; but the latter’s interest will be second to that of the trust estate.
    Appeal from Wayne; Brooke, J.
    Submitted January 8, 1902.
    (Docket No. 22.)
    Decided March 18, 1902.
    Bill by Thomas S. Sprague against Irene Sprague Moore, as trustee, Irene Sprague Moore, as general guardian of the estate and effects of Gracie Deats, a minor, Irene Sprague Moore, Rollin C. .Sprague, George H. Sprague, Mary A. Stofflet, Ida L. Taylor, Gracie Deats, Thomas S. Sprague, as administrator of the estate of Amelia L. Sprague, deceased, and Thomas S. Sprague, as administrator of the estate of Adeline L. Sprague, deceased, for an accounting. From the decree rendered, defendants Irene Sprague Moore, as trustee, as guardian, and individually, Gracie Deats, and Thomas S. Sprague, as administrator of the estate of Amelia L. Sprague, deceased, appeal.
    Modified.

      George W. Radford, for complainant.

      William J. Gray, for defendant Rollin C. Sprague.

      Moore & Moore, for other defendants.
   Hooker, C. J.

In the year 1876 Mrs. Adeline L. Sprague was possessed of a large fortune. She had then eight children, all of whom are now living, except Amelia, who died intestate and unmarried in 1892, and Hattie, who died in 1889, prior to the execution of the trust deed in question, leaving one child, Gracie Deats, who is represented by Irene Sprague Moore, her guardian. Mrs. Sprague began to make advances of money to her children in 1876, and these advances continued in various amounts to the several children until she executed a trust deed to Irene Sprague Moore in 1889. There was considerable inequality in the advancements prior to July 1, 1879. After that date, and until the trust deed was made, each of six children (Irene and Amelia not being included) received substantially $600 a year. Mrs. Moore received nothing, and Amelia received only her maintenance, said to be worth about $200 per year. A uniform practice was not followed for the whole period by Mrs. Sprague in taking acknowledgment for payments.' No vouchers are shown to have been taken for some of them. Upon other occasions receipts as for advancements were taken, and this was the uniform custom after June, 1880. Before and after that date notes were taken, varying in form, and payable at different periods.

On April 22, 1889, Adeline L. Sprague made the trust deed mentioned of all her property to her daughter Irene Sprague Moore, as trustee, for the benefit of her seven living children and one grandchild, viz., Amelia L. Sprague, Irene Sprague Moore, Rollin C. Sprague, George H. Sprague, Mary A. Stofflet, Ida L. Taylor, Thomas S. Sprague, and Gracie Deats, the daughter of Hattie Sprague, deceased. A separate instrument gives the terms of the trust. It provides that Mrs. Moore shall:

1. Manage the property.
2. Pay (a) the expenses of the trust; (b) the mother’s debts on which she is liable as principal; (c) “also all indebtedness which she is or may become liable to pay, whether as surety, indorser, or maker of any promissory notes or other obligations now existing, made or incurred for the accommodation or benefit of others, and which such othérs should, or of right ought to, pay.”
3. Out of the income (a) support the mother; (5) pay funeral expenses, etc.; (c) out of the remaining income “the trustee, in her discretion, may pay to each of the beneficiaries and to all of full age, alike, annually, a sum not exceeding one thousand dollars per year; and any sum withheld from the minor beneficiary, Gracie Deats, shall be equalized at, if not before, the termination of the trust.”
4. It names the beneficiaries, and provides that: “It is my desire, and the purpose of this trust, that they shall share equally and ratably in all past, present, and future benefits received from me and my estate, including said trust estate. I therefore direct that, as soon as practicable after my death, said trustee shall proceed to the distribution of the trust estate among all of said persons as if she was executor and this was my last will.”
5. It provides that: (a) “ Obligations heretofore entered into for the benefit of any of said beneficiaries, and hereafter paid by said trustee,, shall bear interest at six per cent, per annum, and be charged to such beneficiary’s share.” (b) “ Should any of said beneficiaries die before me, his or her share shall be paid to his or her estate for distribution according to the laws of Michigan.”
6. A subsequent statement of advances was made, showing the date and amount each child, had received, and this statement contained the following clause: “And for the purpose of enabling the trust to be fulfilled without uncertainty or conflict of right,' I hereby now relinquish and assign to said trustee, for the purposes of said trust as expressed in said trust instrument, all rights reserved by me under said paragraph seven, said paragraph having now been fulfilled by this declaration.”

The record shows the date and amount of each item of money received by the different children, and the character of the note or receipt given at the time. After the creation of the trust, Amelia continued to receive her maintenance until 1892. Thomas was paid nothing, but was credited upon his indebtedness the same amount as was paid to others, who received substantially the- same sum yearly, excepting Gracie Deats, — to whom a large sum was given in 1896 to equalize her share with others, — and Irene, who has been paid nothing.

Amelia L. Sprague died January 13, 1892. Adeline L. Sprague died May 1, 1899, after which this bill was filed by Thomas S. Sprague for an accounting. One phase of the cause has been before this court, and will be found in 125 Mich. 357 (84 N. W. 293). Subsequently proofs were taken in the circuit court, and a decree was made, from which several of the parties have appealed, viz., Gracie Deats, Irene Sprague Moore, in her own right, and also as trustee and guardian, and Thomas S. Sprague, as administrator of Amelia.

Thomas S. Sprague has not appealed except in the capacity of administrator, and makes but one. objection to the decree, and that is that it should have directed the payment of the share of Amelia to her administrator for administration and distribution under the probate laws. The decree provides that:

“It is further ordered, adjudged, and decreed that said beneficiary Amelia L. Sprague became vested of her interest in said estate upon the execution and delivery of said trust deed; that she died prior to the death of Adeline L. Sprague, to wit, on January 13, 1892, and her interest immediately became vested in the other seven beneficiaries named in said trust instrument, subject to the claims of the creditors of said Amelia L. Sprague, said vested interest to be paid at the period of distribution. But it appearing to this court from the evidence that Amelia L. Sprague left no debts, it is therefore ordered, adjudged, and decreed that each of said beneficiaries shall receive one-seventh of Amelia’s share of said trust estate, which shall be ascertained separate and distinct from the shares to which the other beneficiaries are entitled in said trust estate; and it appearing from the evidence that Thomas S. Sprague has made a good and valid assignment of his interest in said Amelia’s estate to George W. Radford, the one-seventh of said Amelia’s estate to which said Thomas S. Sprague would be entitled, because of such assignment, shall be paid to him, said assignee, free and clear of any lien thereon.”

To show clearly the controverted questions, a further statement of facts is necessary. In 1877 — some years before 'the trust deed was made — Mrs. Sprague had made a will, by which she bequeathed her property to her children equally; and this will was superseded by the trust deed, as this court held in its former decision already referred to. At the time this trust was declared, it was accompanied by a summary of her dealings with her children, under a title called “ Supplemental,” reading as follows:

“supplemental.
. “ This is the statement of the ‘advances, payments, charges, and debts’ made by me to my children and held against them, intended, included, and' referred to in clauses five and seven of trust instrument made by me to Irene Sprague Moore, dated April 22nd, 1889. The advances and charges against my daughter Hattie A. Deats shall be charged against the share which her daughter, Gracie Deats, is to receive under said trust; it being intended that. Gracie Deats shall receive the same share and interest in the trust estate as her mother would have received had she been living at the time of the creation of the trust and named as an equal beneficiary thereunder, subject to charges for advances, etc., made to her. And for the purpose of enabling the trust to be fulfilled without uncertainty or conflict of right, I hereby now relinquish and assign to said trustee, for the purposes of said trust as expressed in said trust instrument, all rights reserved by me under said paragraph seven, said paragraph having now been fulfilled by this declaration.
“Adeline L. Sprague.”
The following tables show the situation at that time.
First Period, to July 1, 1879.
No Voucher. Notes. Total.
Rollin .....................§2,150 00 §4,150 00 §6,300 00
Thomas -_____ 2,150 00 1,800 00 3,950 00
George.............-.....- 2,250 00 2,250 00
Mary _____ 2,130 75 700.00 2,830 75
Ida ........... 2,050 00 2,000 00 4,050 00
Hattie .................... 50 00 50 00
§19,430 75
Second Period, July 1, 1879, to April, 1889.
Receipts. Notes. Total.
Rollin.................... §5,350 00 §1,800 00 §7,150 00
Thomas ..... 6,000 00 2,350 00 8,350 00
George ......... 8,019 44 400 00 8,419 44
Mary.................... 5,350 00 500 00 5,850 00
Ida ........ 5,350 00 700 00 6,050 00
Hattie ......... 5,350 00 1,200 00 6,550 00
§42,369 44

It is noticeable from these tables that, at the time the trust deed was made, no two children had received the same amount, while Irene had received nothing, and Amelia little more than her support. In addition to this, Thomas S. Sprague had obtained his mother’s indorsement on accommodation paper amounting to $19,600. It is claimed that this made the total amount received by him over $46,000, estimated by counsel for Mrs. Moore to be ■$10,000 or $11,000 more than his share of the estate.

At the outset it is important to determine whether all, and, if not all, then which, of the transactions between the intestate and her children were intended, when they occurred, to be treated as advancements. The record shows that previous to July 1, 1879, five of the children had received about $2,000 each, and Hattie $50, for which no vouchers were given. Amelia and Irene had received nothing. It appears to be conceded that these were advancements, and, if it were not conceded, we should have no doubt of it under the proofs and the provisions of the trust deed. During the same period about $9,000 was paid to several of the sons and daughters, for which notes were given; and these drew interest, either by their express terms or after maturity, unless they are to be treated ■as advancements. There is no presumption that money paid to a son, for which he gives to the ancestor a promissory note, is an advancement. On the contrary, the law presumes it to be a loan. The following cases cited in 1 Am. & Eng. Enc. Law (2d Ed.), 778, fully sustain the text in the statement that “the giving of any of the ordinary evidences of indebtedness is prima facie proof that the transaction wás a loan, and not an advancement, ” viz.: Harley v. Harley, 57 Md. 340; Speer v. Speer, 14 N. J. Eq. 240; Appeal of Harris, 2 Grant, Cas. 304; In re Jones’ Estate, 29 Pittsb. Leg. J. 89; Appeal of Morr, 80 Pa. St. 427; Ex parte Middleton, 42 S. C. 178 (20 S. E. 34). Cases involving promissory notes are the following: Grey’s Heirs v. Grey’s Adm’rs, 22 Ala. 233; Robinson v. Moseley, 93 Ala. 70 (9 South. 372); Denman v. McMahin, 37 Ind. 241; Seagrist’s Appeal, 10 Pa. St. 424. See, also, Vaden v. Hance, 1 Head, 300; In re Strock’s Estate, 158 Pa. St. 355 (27 Atl. 1003); Johnson v. Ghost, 11 Neb. 414. (8 N. W. 391); Ruiz v. Campbell, 6 Tex. Civ. App. 714 (26 S. W. 295); House v. Woodard, 5 Coldw. 196; Dawson v. Macknet, 42 N. J. Eq. 633 (8 Atl. 312). The rule was applied in the case of an outlawed note in Batton v. Allen, 5 N. J. Eq. 99 (43 Am. Dec. 630). Counsel cite several cases, some of which treat notes as advancements, but they are mostly cases where a subsequent will has shown a clear intention on the part of the testator to have them so treated. Grey's Heirs v. Grey's Adm'rs, 22 Ala. 233; Brook v. Latimer, 44 Kan. 431 (24 Pac. 946, 11 L. R. A. 805, 21 Am. St. Rep. 292); Peabody v. Peabody, 59 Ind. 556; Harris v. Harris, 69 Ind. 181; Roberson v. Nail, 85 Tenn. 124 (2 S. W. 19); Krebs v. Krebs' Ex'r, 35 Ala. 293; Hall v. Davis, 3 Pick. 450; Grim's Appeal, 105 Pa. St. 375; Patterson's Appeal, 128 Pa. St. 269 (18 Atl. 430). Our investigation of this question leads us to believe that the courts are substantially unanimous in their adherence to this rule.

After July 1, 1879, the intestate adopted the practice of taking receipts for moneys paid her children when she did not take notes. We understand that no one disputes that the items covered by the receipts were advances, and those covered by notes are governed by the same rule as other notes already discussed. This practice continued until 1889, when the trust deed was made. During the period last mentioned, Adeline L. Sprague also aided one of her sons in obtaining money by joining him in making or indorsing notes, which were hypothecated by him for money, and these notes were subsequently found to aggregate a much greater sum than was at first supposed by Mrs. Sprague’s agent and Irene Moore. Attention has already been called to the provisions of the trust deed. While, as we have said, the notes create the presumption of loans, rather than advances, it was competent for the intestate to give them the character of the latter by her trust deed, if she chose to do so, as appears to have been done by wills in several of the cases cited. See Krebs v. Krebs' Ex'r, 35 Ala. 293; Hall v. Davis, 3 Pick. 450; Sherwood v. Smith, 23 Conn. 516; Wallace v. Owen, 71 Ga. 544; Needles’ Ex’r v. Needles, 7 Ohio St. 432 (70 Am. Dec. 85); Kirby’s Appeal, 109 Pa. St. 41; Darne’s Ex’r v. Lloyd, 82 Va. 859 (5 S. E. 87, 3 Am. St. Rep. 123). To have that effect, such an intention must appeal* in the trust deed, which, like other instruments, must be construed in the light of the circumstances under which it was made.

We cannot avoid inferring that Mrs. Sprague may have been, and probably was, disturbed by the reflection that advancements and loans exceeding $60,000 had been made to some of her children prior to April, 1889, while others had received nothing, and that, in addition to that, a further sum had been pledged through indorsement for the benefit of one of them. The point-blank refusal of Mr. Gray, then acting as her solicitor, to advise her to yield further to the importunities of one of their number, who at that time stated the amount of such outstanding paper for his benefit at $8,300, while in fact the amount of such paper exceeded $19,000, is significant, as is the further fact that it was apparently short-time paper. At this juncture Mrs. Sprague deeded substantially all of her property to her daughter Mrs. Moore, in trust.

The third charge upon the property was the maintenance of the grantor, and to this not less than $3,000 a year was to be applied, to which should be added expenses of last illness and burial. It was expected that the income would defray these expenses, and, if any income remained, the trustee might, if she thought advisable, pay yearly to each child of full age, during the life of her mother, a sum not exceeding $1,000; the same to be paid to all alike. Any sum thus paid was to be “equalized” to the minor-grandchild, Gracie Deats, at some time before the termination of the trust. The trustee was to invest the estate, and upon the death of the mother it was to be distributed.

The directions as to distribution are clear and specific. The writing first states what shall be considered part of the trust estate for that purpose, and it is made to include not-alone what came to the hands of the trustee, but — First, all advances theretofore made to each and all of her children ; second, all debts due or to become due from them to her, or to her trustee; third, all payments made by her or her trustee; fourth, advances made to Hattie Deats (the mother of Gracie), which were to be charged against Gracie in the distribution; fifth, all payments made thereafter on the account or for the benefit of each and all of them. Thus it appears that the purpose of the mother1 was that all debts due to her should be recognized as such, and that all advances should be brought into hotchpot at the time of the distribution of the estate, for the purpose of ascertaining the amount to be divided.

We have seen that a large amount of accommodation paper was outstanding, made for the benefit of one of the beneficiaries, and that this was to be paid by the trustee. It is also noticeable that it is called “accommodation paper,” and the writing contains the implication that others-ought of right to pay it. In this connection we should read another provision of this document, which is included with the other directions relating to what should be considered the estate for the purpose of distribution, viz.:

“Obligations heretofore entered into for the benefit of any of said beneficiaries, and hereafter paid by said trustee, shall bear interest at six per cent, per annum, and be charged to such beneficiary’s share.”

These various provisions are convincing against the contention of complainant’s counsel that it was the intention that not only the sums represented by notes should be treated as advancements, in the technical sense of the term, but that the amounts paid to take up accommodation paper should also be so treated. Again, we have said that the writing indicates an intention that all advances should be brought into hotchpot, not with a view to the repayment of any sum really intended as an advancement, which it was beyond the power of the mother to compel, but for the purpose of an equal distribution of the residue of her estate. It is improbable that she intended to require an additional advancement of |8,000 as represented, and $19,000 as it really was, to one who had already received a disproportionate share. Furthermore, the beneficiary recognized this by securing and renewing his paper from time to time, when asked to do so by the trustee’s agent. The claim that he did this in ignorance of the terms of the trust is not sustained. The provision that 6 per cent, should be added, and the amount charged to the beneficiary’s share, should be taken in the connection in which it occurs. This was for the purpose of ascertaining the estate to be divided, and has reference only to money applied upon debts of the character mentioned, and not repaid to the estate, or otherwise settled with the trustee; and such settlements should not be reopened. Nor does it exclude the right of the trustee to collect or charge interest on paper given to the grantor.

The next question that is presented relates to the equalization of shares. It involves principally the question of interest, and, first, whether interest should be computed on advances made by the mother, and, second, on advances made by the trustee. The payments for which notes were given, and the amount paid on indorsed paper, etc., are not to be treated as advancements, but loans. Interest should, therefore, be computed upon them according to their terms, or at the.lawful rate. No specific provision is found requiring interest to be paid on advancements made by either the mother or trustee. If it is chargeable, in contravention of the general rule, which we recognize,' — i. e., that interest is not to be computed upon, advancements, — it must be in obedience to provisions of the writing which imply it.

The first of the provisions relied on relates to payments by the trustee, already quoted, which implies an intention that all shall receive a like sum, and that, if anything should be withheld from Grade Deats, it should be equalized. The other provision is the one expressing the mother’s purpose to be that all “shall share equally and ratably in all past, present, and future benefits.” These provisions raise a perplexing question. On the one hand, the writing is specific in its enumeration of what shall go to make up the estate for the purpose of estimating shares. Nothing is said about interest upon advances previously made by the grantor, or which should thereafter be made by the trustee, or upon debts due or to become due, or upon payments made by her or the trustee, except as the latter may be included in the provision already quoted, relating to obligations theretofore entered into, etc.; yet we cannot suppose that she intended to stop interest running on loans, and, on the other hand, there is perhaps an implication that no interest was to be computed on past or future advances arising from her omission to provide for interest. It is also noticeable that she does not provide for advancements being paid to Grade, but requires advancements made to those of full age to be equalized later as to her, instead of providing that she shall receive a similar sum. This is susceptible of either construction, viz., that she should subsequently receive a similar amount, with or without interest.

We understand it to be a general rule that interest is to be computed upon advancements after the death of the ancestor for the purpose of equalizing shares on distribution. See 1 Am. & Eng. Ene. Law, p. 785, and cases there cited. We think the intention expressed by this instrument is that, from the time this trust deed was made, all beneficiaries should share equally, and that the shares between them should be equalized from that time as to advances thereafter to be made, and as to the sums necessary to equal advancements theretofore made. In other words, she sought to divide the estate as of that date; and while we doubt an intention that interest should be computed back of that date on .technical advances, she designed that it should be thereafter. In short, for the purposes of distribution we are disposed to treat the estate as though it had come into the hands of an executor at that date. See 1 Am. & Eng. Enc. Law, p. 785, note 5. This would allow interest to Mrs. Moore, and possibly others, on deferred payments of the annuity, and it would increase the estate by the amount of the interest upon advances for the purpose of equalizing shares.

We are asked to confirm the distribution so far as it has been made. We have no hesitation in saying that it is within the terms of the trust for the trustee to proceed in the ordinary way to put the property received by her in a shape to distribute, and we are not disposed to question the disposition so far as made. We think, however, that no harm can result from leaving the matter of confirmation until full compliance with the decree which shall be made, if it shall then be made to appear that it has been complied with.

The foregoing discussion will serve to point out the way to determine the shares after the personal property of the trust estate is converted into money, and we see no objection to a partition of real property, either by division of the property or by sale and division of the proceeds under the direction of the circuit court; but some other subjects must be discussed in this connection. Amelia L. Sprague died in 1892, seven years before her mother. At the time she died she had a vested interest in this property under the trust deed, which expressly provides..that, in case of the death of a beneficiary, the distributive share shall be paid to his or her estate for distribution according to law. Upon her death her seven brothers and sisters, including Graeie Deats, and her mother, became vested with interests in her estate, under sections 9061 and 6322 of the Compiled Laws; and in 1899, upon the death of the mother, the seven children took vested interests in her share. It appears that neither the mother nor Amelia left any debts, and therefore that Amelia’s interest, whatever it was, is now .vested in her six brothers and sisters and Graeie Deats. There is no occasion for distribution to the respective administrators, or for their intervention, except for the purpose of paying the costs of administration proceedings, which, inasmuch as it is unnecessary that any estate shall pass through their hands for any other purpose, should be limited to a reasonable allowance for such sums and services as they may have disbursed and performed, if any, in relation thereto.

While counsel have seen fit to come to this court upon the question of the necessity for the appointment of an administrator of the estate of Adeline L. Sprague, which, out of abundant caution, we held necessary, as it was insisted upon, a trial of the merits has disclosed that it was wholly unnecessary, and we think the party asking such appointment should be left to pay his own costs and disbursements in such proceedings; and the same should be done by the ones who asked administration upon the estate of Amelia.

The interests of two of the beneficiaries have been assigned. The first assignment by Thomas S. Sprague was. to the trustee for the protection of the estate. It was valid, but perhaps unnecessary for this purpose. It also purported to secure her personally for all claims that she held against him. Among them was a note of $1,675, originally for borrowed money. Had a second assignment been made, running directly to her, there would have been sufficient consideration to support it, and we think she should not be required to lose her security because an attempt was made to secure her in both capacities. That this was the intention is clear, and it is a reasonable construction to give this paper that effect. Of course, her interest is second to that of the trust estate, and this assignment does not cover any interest subsequently inherited from the estate of Amelia. There were other assignments, by two of the sons, of their interests in the trust estate and Amelia’s estate. No complaint is made of the decree regarding these, and we have no occasion to discuss them.

We are not disposed to disturb the decree of the circuit court as to compensation. The amount paid to the trustee’s husband seems to us adequate for all services growing out of the transaction.

Amelia died vested of a one-eighth interest, and her estate should be credited with the same amount as any other beneficiary. This was not subject to any lien on behalf of the trust estate for advances to or debts due from other beneficiaries.

We have been subjected to considerable inconvenience through a failure of the index to name or describe the respective exhibits, which should be in some way identified. We have attempted to cover all points essential to an accounting, and the cause will be remanded for further proceedings. A decree in conformity to the foregoing may be taken. Irene Moore, trustee, will recover costs against Rollin C. Sprague and Thomas S. Sprague personally, and not as against the estate of Amelia.

Moore, Grant, and Montgomery, JJ., concurred. Long, J., did not sit.
      Section 6322, in the 12th line above, should read 9322.


source: Caselaw Access Project

author: Hooker, C. J.

license: Public Domain

text:
    BROWN v. CITY OF OWOSSO.
    1. Pleading — Amendments—Continuance.
    Where, in an action against a city for personal injuries, the declaration avers that the plaintiff fell over a loose plank upon a sidewalk, the court may, without granting a continuance, allow an amendment that the plank was a part of the walk.
    3. Sidewalks — Notice oe Defects.
    Where, in an action against a city for an injury caused by a loose plank, it is shown that the walk was recently repaired, and no proof is offered of any loose planks between that time and the time of the injury, evidence is admissible to show that the walk was old, the stringers rotten, and in places would not hold nails, and that the repairs did not include new stringers, as tending to show that the city had notice of the defect.
    3. Same — Evidence—Condition oe Walk After Accident.
    Evidence is admissible to show that, upon taking up the walk soon after the accident, the stringers were badly decayed, as . it tends to show the actual condition.
    4. Same — Knowledge of Defect — Condition of Walk in Other Places.
    Where a strip of wooden w&lh is put down at one time, of uniform material, it may be presumed to decay with some degree of uniformity; and, if the particular plank which caused an accident is unknown, it is competent to show the condition of the walk in other places, as evidence justifying the inference of knowledge on the part of the city authorities.
    5. Defective Sidewalks — Opinions of Witnesses.
    A city is not injured by a ruling of the court which excludes the opinion of its witness as to the safety of a walk, and admits it so far as it tends to show the actual condition of the walk.
    Error to Shiawassee; Smith, J.
    Submitted January 8, 1902.
    (Docket No. 13.)
    Decided March 18, 1902.
    Case by Minnie Brown against the city of Owosso for personal injuries. From a judgment for plaintiff, defendant brings error.
    Affirmed.

      Watson & Chapman, for appellant.

      Selden 8. Miner and Norton & Dooling, for appellee.
   Hooker, C. J.

The plaintiff recovered a judgment against the defendant for injuries received by falling upon its sidewalk. She claims to have been tripped by a loose board, one end of which flew up when her husband stepped upon the other end. It is claimed that the declaration, as originally filed, alleged that she fell over a loose-plank upon the walk, and the point was made that this was not a sufficient allegation that it was a part of the walk to sustain a verdict. The court permitted an amendment and refused a continuance. Error is assigned upon this. We are satisfied that the declaration needed no amendment, and it was not error for the court to permit an amendment to save a possible question.

The testimony was not clear as to the exact point where the accident occurred, and there was proof admitted tending to show that there were several planks loose at the time, and that when the walk was taken up, a little later, a number of the stringers were rotten, and would not hold nails. There was also testimony tending to show that the walk was old, and had been recently repaired. It is claimed by defendant’s counsel that the walk was repaired on the 23d of May, and that there was no proof offered to show that there were defects after May 23d until the day of the accident, i. e., May 29th. The testimony shows, and it is uncontradicted, that the walk was repaired on May 23d; and there is no clear testimony that there were any loose boards after that until this accident happened, or, at any rate, until the Sunday morning previous to the evening when it occurred. Unless there is something in the testimony to indicate that this repairing was not properly done, the city could not be said to have notice that the defect existed. The plaintiff offered testimony tending to show that the walk was old, and that the stringers were rotten, and in places would not hold nails, and that the repairs made did not include new stringers, and claimed that the city, with notice of these conditions, failed to put the' walk in a condition that could be called safe. We are of the opinion that it was proper to leave this question to the jury. If the walk was so notoriously old and rotten that the city should have known that nails would not hold, it was incumbent upon it to make repairs sufficiently substantial in character to justify them in believing that it was reasonably safe. It was proper to receive evidence that upon taking up the walk, soon after the accident, the stringers were badly decayed, as it tended to show the actual condition. Whether the actual condition as thus shown tended to prove notice or not, is another question. Standing alone, it might not; but, taken in connection with an attempt to repair, it might, for one driving nails into rotten wood might ascertain that it was rotten, and one supplying new boards, or even replacing old ones, would have an opportunity to see the stringers, and learn something of their condition and the general character of the walk.

It is urged that the testimony should' have been limited to the particular defect, and that it was not competent to prove the condition of the walk in other places.' This is true, unless there is a fair presumption, arising from the condition elsewhere, that the particular defect existed. When a strip of wooden walk is put down at one time, of uniform material, it is not unreasonable to suppose that it will wear out and go to decay with some degree of uniformity. Hence those facts may be shown, and the general condition of such a piece of walk may become important evidence. In this case the exact board which caused the accident was unknown. If it appeared that the walk was old and several boards were loose, it tended to show a necessity for repair, which, if sufficiently long continued, might be accepted by the jury as evidence justifying the inference of knowledge on the part of the authorities.

Error is assigned upon some rulings whereby witnesses for the defendant were asked to express an opinion as to the condition of the walk. The court attempted to exclude their opinions as to the safety of the walk, as trenching upon the province of the jury, and apparently designed to admit the testimony so far as it tended to show the true condition of the walk. We think the defendant was not injured by these rulings. The testimony of the witnesses admitted fairly covered the ground.

We think it unnecessary to discuss other questions, further than to say we find no error in the charge.

The judgment is affirmed.

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


author: Grant, J. Moore, J.

text:
    McBRYAN v. UNIVERSAL ELEVATOR CO.

    1. Equity Practice— Creditor’s Bill by Receiver.
    A bill praying an assessment against stockholders, filed by a receiver of the corporation on behalf of a judgment creditor, is not prematurely brought, though all the corporate debts have not been ascertained, and no leave has been obtained from, the court to institute suit against the stockholders.
    2. - Sale — Retention of Title — Retaking Property — Suit for Purchase Price.
    A contract for the sale of machinery to a corporation provided that title should remain in the vendor until notes given for the purchase price were fully paid; that the vendor might retake the property at any time for default in payment, in -which case payments made should be considered as paid for use; and that the rental value should be a certain amount per month. No payments were made on the notes, and the ven dor, after retaking the machinery and selling it, recovered a judgment against the corporation for the difference between the amount of the notes and the proceeds of the sale. Held, (1) that, after retaking the machinery, the consideration for the notes failed; (2) that the judgment for part of the purchase price was erroneous, and could not be sustained, even on the ground that a larger one for rental might have been obtained.
    3. Same — Judgment—Collateral Attack.
    Such judgment is not conclusive against a stockholder of the corporation in a suit by its receiver to collect unpaid subscriptions to the capital stock for the purpose of paying the judgment.

      4. Corporations — Capital Stock — When Paid Up.
    When incorporators pass no judgment upon the value of assets turned in as capital stock instead of money, such capital stock will be considered as paid only to the amount of the'value of the assets as ascertained by the court. Per Grant, J.
    ■5. Same — Liability of Incorporators — Transfer of Stock.
    Original incorporators who recklessly make false statements as to the amount of capital stock actually paid in cannot escape liability to persons who become creditors after they have transferred their stock. Per Grant, J.
    Appeal from Wayne; Waite, J.
    Submitted October 24, 1901.
    (Docket No. 76.)
    Decided March 26, 1902.
    Bill by William H. McBryan, receiver of the Universal Elevator Company, against the Universal Elevator Company, Charles W. Moore, Marvin M. Stanton, Wilbur Brotherton, Frank E. Schoonmaker, trustee, Frank E. Schoonmaker, James N. Schoonmaker, William R. Johnston, William H. Hültgren, William B. Bierce, John H. Duffie, Charles T. Duffie, and Alvah H. Leavitt, to enforce an alleged liability for unpaid subscriptions to the capital stock of defendant corporation. From a decree dismissing the bill, complainant appeals.
    Affirmed.
    A corporation, known as the “C. C. Wormer Machinery Company of Detroit,” sold and delivered to the Universal Elevator Company, in April, 1896, machinery, atan agreed price of $9,697.68. No cash was paid down, and two notes were given covering the entire purchase price. The contract of sale expressly provided that the title to the property should remain in the Wormer Company until the full sum had been paid; that the rental value thereof was $750 per month; that said company might at any time enter upon the premises of the defendant company and take possession of the property, and that any money already paid should be considered as having been paid for the use of said property. The machinery was placed in the building erected by the defendant company, and remained there until March, 1897, when the Wormer Company took possession of it and sold the most of it. Whether it had been,used does not appear. The Elevator Company was a failure, and in August, 1896, Mr. Livingstone took possession of the building and its contents, under a deed made to him by the Elevator Company. The Wormer -Company sued the Elevator Company, declaring on the-common counts, and for the use and occupation of machinery, etc. A plea of the general issue was interposed. Whether any further steps were taken to defend the suit the record does not show. The judgment, as appears by the testimony of the agent of the Wormer Company, Mr. O’Hara, taken at the trial, was for the difference between the value of the machinery when taken back and the amount of the notes, with interest and insurance premiums added, paid by the Wormer Company. Judgment was rendered for $4,997.69. Execution was issued and returned nulla bona. The Wormer Company then filed a judgment creditor’s bill, and obtained a receiver, Mr. McBryan, the complainant in this case. Complainant thereupon filed this bill against the Elevator Company and the other defendants, who are stockholders, alleging that the stock was not fully paid, and praying an assessment against the stockholders to pay this and other debts of the company.
    The original stockholders were: Moore, 2,500 shares; Brotherton, 675 shares; Stanton, 1,000 shares; James N. Schoonmaker, 750 shares; Prank E. Schoonmaker, trustee, 700 shares; Frank E. Schoonmaker, 700 shares. The other defendants subsequently became stockholders. The defenses made as to all of the defendant stockholders are:
    1. That this action was prematurely brought, because all the corporate debts have not been ascertained, and no leave obtained from the court to institute this suit against the stockholders.
    2. That the assets conveyed to the corporation at the time of its organization were worth the sum of $63,250, the amount of the capital stock shown by the articles of association to have been actually paid in.
    3. That the judgment is void, under Perkins v. Grobben, 116 Mich. 178 (74 N. W. 469, 39 L. R. A. 815, 72 Am. St. Rep. 512), because the Wormer Company took its property in accordance with the contract of sale, and cannot now sue for the purchase price, and that the judgment against the company is not conclusive in a suit against the stockholders.
    Proofs were taken in open court, and the bill dismissed.

      The history of the organization of the defendant company, and the relation of all defendants thereto, except Bierce, John and Charles Duffie, and Leavitt, are given in Moore v. Universal Elevator Co., 122 Mich. 48 (80 N. W. 1015), and it is unnecessary to repeat them here.

      Moore & Moore, for complainant.

      S. 8. Babcock ( W. E. Atkinson, of counsel), for defendant Moore.

      Dickinson, Warren & Warren, for defendant Stanton.

      Isaac N. Payne, for defendant Brotherton.

      Leo M. .Butzel, for defendant Bierce.,

       Rehearing denied June 11, 1902.

   Grant, J.

( after stating the facts). This suit was properly launched. No application to the court for leave to bring suit is required. Chancery Rule No. 31; 3 Comp. Laws, §§ 10841, 10842. A judgment creditor is entitled to maintain a bill to seek assets to satisfy his judgment and execution. Turnbull v. Lumber Co., 55 Mich. 387, 392 (21 N. W. 375); Young v. Iron Co., 65 Mich. 111, 127 (31 N. W. 814). Other creditors can come in under such a proceeding if they so desire, and the court may make an order for serving notice upon them. A judgment creditor is under no legal or moral obligation to bring in other creditors. He may proceed to secure his own rights independent of them. The bill in this case is substantially the same as that in Young v. Iron Co.; the only difference being that in that case the receiver in his petition stated that he instituted the suit for himself and other creditors who should choose to come in, while this bill contains no such allegations. The bill, however, is broad enough to include other creditors who may choose to come in, for one of the prayers is that the debts of the defendant company may be ascertained and decreed.

Was the C. C. Wormer Machinery Company entitled to the judgment it took? The title to the machinery did not pass, but was expressly reserved in the vendor. The vendor retook it under its contract, and, as stated by counsel for complainant, who was the attorney for the Wormer Company, “sold the property for its then value, ‘the then selling price, which was all that we could get for it,’ applied the amount on the notes, and brought suit against the Elevator Company for the balance. ” The record is conclusive that the judgment was taken for the difference between the contract price and the estimated value when retaken.

In Perkins v. Grobben, 116 Mich. 172 (74 N. W. 469, 39 L. R. A. 815, 72 Am. St. Rep. 512), the contract provided that the title should not pass until full payment, and that all payments made on the notes which were given for the purchase price should be deemed “to be payments for the use, wear, and tear of the property up to the retaking thereof.” There is no substantial difference between the above provision of that contract and the one in this providing that the monthly rental value of the property was $750, if such provision be conclusive as ■an implied contract to pay that amount as rental if the vendor should retake the property. In that case money had been paid, while in this case none had been paid. But that difference cannot change the rule of law. The notes were given in consideration of the property contracted to be sold. When the property was retaken under the contract, there was no longer any consideration for the notes. The only remedy open to the vendor in such case is to sue for the rental value, or bring a suit for damages for nonperformance of the contract. He cannot bring suit to recover the purchase price, or any part thereof. A defense upon this ground would, therefore, have been fatal to the plaintiff’s right of action, based upon the theory upon which the judgment was rendered. The judgment is, of course, valid as against the defendant Elevator Company, and is not open to a collateral attack by it. The judgment could only be set aside by that company upon a direct proceeding for that purpose.

It is also urged that the judgment should be sustained because judgment for a larger amount might have been rendered for the rental of the property, and therefore the stockholders are not prejudiced. Counsel for the defendants, challenge the right to recover the rental during the time claimed by the complainant. Upon this question, as well as upon the construction of the contract, the defendant company was entitled to be heard in the suit at law. A judgmentrendered upon an illegal basis cannot be sustained because one might have been rendered upon a legal basis.

It is claimed that the Wormer Company retook this property by agreement. Whether Mr. Moore, the president of the company, had any authority to make such an arrangement, we need not consider. All Mr. Moore said to the agent of the Wormer Company was to advise him that he had better take back his property, and dispose of it. This did not make a new contract. It was advice simply to the company to take advantage of the contract it had made.

Is the judgment conclusive against a' stockholder ? While it is the general rule that judgments against corporations are conclusive upon the stockholders, an exception is equally well established in cases where judgments are rendered through fraud or collusion, or without jurisdiction. 3 Thomp. Corp. §§ 3392, 3400; 2 Mor. Priv. Corp. § 865; 1 Cook, Corp. § 209; Bohn v. Brown, 33 Mich. 257, 263. In Bohn v. Brown this court said:

“ If the proceedings against the corporation should appear to be tainted by fraud or collusion between the-claimant and the corporation, the judgment would not be good as inducement, or as an adjudication to fix the liability of the stockholder through it, or to fix the amount, and the suit against the stockholder would fail inevitably.”

This exception is approved in the following cases: Irons v. Bank, 36 Fed. 843; Schrader v. Bank, 133 U. S. 67 (10 Sup. Ct. 238); Slee v. Bloom, 20 Johns. 669; Warrington v. Ball, 33 C. C. A. 609, 90 Fed. 464; Saylor v. Banking Co., 38 Or. 204 (62 Pac. 652); Ward v. Joslin, 44 C. C. A. 456, 105 Fed. 224.

In Schrader v. Bank judgment was rendered against the bank on a contract of guaranty. In a suit against the stockholders to enforce their liability as such, it was held that they could go behind the record of the judgment, and show that the guaranty of the bank had been released by the release of the principal debtor before judgment was taken against the bank. In Slee v. Bloom, it was said that a judgment “is not of itself, as res judicata, binding on the stockholders, if it was procured by fraud, or is founded in error.” In Warrington v. Ball the defense set up was that the judgment was obtained by collusion between the plaintiff and the representatives of the bank, and that the certificate of deposit on which the judgment was based was issued for money furnished to the cashier personally. The judgment was held not to be conclusive upon the stockholders. The opinion says:

‘ ‘ To bind one by a judgment to which he is not a party, as provided for by the statute, is barely tolerable. To bind him by such a judgment obtained by fraudulent collusion would be intolerable.”

In Saylor v. Banking Co. the judgment against the corporation was based upon a promissory note executed by the president and secretary of the corporation to the president, and plaintiff sought to enforce payment of the .judgment by assessments against the stockholders for unpaid subscriptions. It was held that they could attack the validity of the judgment upon the ground that the execution of the note had not been authorized by the directors. See, also, Mandeville v. Reynolds, 68 N. Y. 528, and Conway v. Duncan, 28 Ohio St. 102, in which judgments were held not conclusive.

We think the principle approved in these decisions is sound, and that when a stockholder can show, even aliunde the record, that the judgment is wholly void, he may do so as a defense to his liability as a stockholder.

We might rest here without determining the important questions raised as to the value of the assets which comprised the value of the capital stock issued as fully paid, and as to the liability of the original and subsequent stockholders, but the record and briefs are mainly devoted to these questions. There are other creditors of the defendant corporation who are entitled to come in, prove their claims, and enforce the liability of the stockholders, if there is any. The parties have been subjected to large and expensive litigation, which ought to be brought to an end. We should, therefore, dispose of these questions.

The duty of the corporators in putting in property as paid-up capital stock is fully stated in Moore v. Universal Elevator Co., and needs no further discussion by us. The original incorporators exercised no judgment whatever upon the value of the assets transferred to the corporation by Schoonmaker Bros. & Co. as worth $63,250, and for which stock was issued to that amount as fully paid. No one asked, and no one volunteered an opinion, as to their value. Moore, Stanton, and Brotherton, the only original incorporators of any financial responsibility, testified that they did not ask or consider the value of the assets. They considered themselves as mere dummies to sign the articles of incorporation, make the solemn assertion and certification that stock of the value of $63,250-had been actually paid in, and that they each had subscribed for a certain number of shares. They believed that they could immediately transfer their stock to the Schoonmaker Bros, without incurring any liability whatever. They testified that an attorney, who was present, so advised them. This attorney was not produced as a witness. Frank E. Schoonma'ker was not a witness. James N. Schoonmaker testified that he did not know the value of these patent devices. This case, therefore, affords no room for the application of the rule of Young v. Iron Co., 65 Mich. 111 (31 N. W. 814), that “corporators are not responsible for an honest error of judgment, or a mistake, in placing a valuation upon property appropriated or used as capital,” and as approved in Graves v. Brooks, 117 Mich. 424 (75 N. W. 932). In cases where the incorporators passed no judgment upon the value of the assets turned in as capital stock instead of money, the only course left open to courts, when called upon to determine whether the stock has been fully paid, is to ascertain the actual value of the property which was turned in as capital stock, and hold that the stock is only paid to the extent of the value of the property so found. This brings us to ■ the question of the value of these assets.

We found in Moore v. Universal Elevator Co. that the property conveyed was not worth the amount stated in the articles.of association, and that as to the Schoonmakers and Hultgren it was a fraud in fact, and that as to the other parties it was a fraud in law, if not in fact. The assets put in to form a corporation with $63,350 of capital stock fully paid in are as follows: Elevator patents, $37,000; business of the Otto Gas-Engine Company, $10,000; factory and property, $15,500; business incidental with mechanical engineering, $10,750.

Schoonmaker Bros. & Co. were agents for the Otto Gas-Engine Company. That agency was revocable at any time. Schoonmaker Bros. & Co. could not transfer it to the Elevator Company without the assent of the Gas-Engine Company. There is no evidence of any such arrangement with that company, or any agreement .that the Gas-Engine Company would accept the Elevator Company as its agent. It may be inferred from the. record that the Gas-Engine Company raised no objection to the' Elevator Company’s acting as its agent during the time the latter carried on business. It appears from the depositions of the officers of the Otto Gas-Engine Company that the commissions paid- Schoonmaker Bros. & Co. were as follows: 1893-4, $337.90; 1895, $1,043.34; 1896, $1,399.91; 1897, $1,160.73. Out of this, however, were to come Schoonmaker Bros. & Co.’s expenses, and it is not shown how much these were. At the same time Schoonmaker Bros. & Co. were selling elevators for Morse, Williams & Co., of Philadelphia, and had the exclusive agency for the Variety Machine Company, a manufacturer of hand elevators. Is a revocable commission agency, yielding from $300 to $1,400 a year, worth $10,000 as part of the capital stock of a corporation organized for another and entirely different purpose ? If this contention were sustained, it would result that three or more agents, having no tangible property, might form a manufacturing corporation of $20,000 to $100,000, fully paid up, by simply putting in their revocable agencies as salesmen. This is not the tangible property which the statute requires to constitute a part of the paid-up capital stock of a corporation. It was an intangible asset, of no value whatever to the creditors of the Elevator Company.

“Business incidental with mechanical engineering, $10,-750.” No tangible property whatever, except perhaps $150 worth of tools used by Schoonmaker Bros. & Co., was included in this asset, and I find no evidence that these tools became the property of the corporation. Schoonmaker Bros. & Co. employed from three to five men in connection with their business as agents for the three companies, viz., the Gas-Engine Company, the Variety Machine Company, and Morse, Williams & Co., for -whom they sold elevators.. Naturally, Morse, Williams & Co. would not employ the Elevator Company to act as their agent when it was engaged in a rival business. James N. Schoonmaker testified that this item “was for our business as experts; our ability to carry on the business ; our skill. It didn’t represent any tangible property. There was no contract made by which we-were to work for the company.” Mr. Schoonmaker was unable to tell whether there was any profit in the agency, and, when asked upon what he based or computed the agency to be worth $10,000, replied, “As to the possibility there was in the business we were doing.” What is the cash value of a possibility, and that a possibility which Schoonmaker Bros. & Co. had not contracted to continue for the benefit of the corporation?

Within four months after the making and filing of these articles of association, the directors of the Elevator Company made and filed a statement of their assets and liabilities, in which these two items disappeared as a part of the capital stock. In that statement the only assets are: Cash paid in, $17,000, and five United States patents, $46,250. Not only was this done, but the stock issued for the item of “Business incidental with mechanical engineering” was surrendered and canceled. To hold that this action on the part of the incorporators was in compliance with the statute, which, 'under the decision in Young v. Iron Co., at least requires that the incorporators pass an honest judgment on the value of the assets put in as capital stock, would defeat the purpose of the statute, and render it utterly valueless. If the statute required the articles of association to state the property put in as capital stock, it .might be held that creditors should deal with the corporation at their own risk. But until the legislature sees fit to enact such a provision, incorporators must be required to act in good faith in placing values upon property put in as a part of paid-up capital stock, and the right of those dealing with the corporation to rely upon these solemn statements must be preserved.

There was no factory in existence at the time the company was organized, but it had bonus subscriptions, amounting to something like $8,000, and a bonus subscription of an acre and a half of ground on which to place the factory. There was no other property at that time, except those bonuses.

The one-third interest in the patents, which was turned in at $27,000, consisted of a one-third interest in five devices used in making elevators. There were other devices used by other companies designed to accomplish the same purposes. Mr. Hultgren, the patentee, and Mr. Ellithorpe, who was interested with him, estimated these devices as worth much more than the interest conveyed by Mr. Hultgren to the Elevator Company through the Schoonmakers. An attorney, an expert in patents and their value, testified that these devices were of little value. As against these ■opinions, what are the facts ? Mr.' Hultgren sold one shop right to a company in Springfield for $200. This gave that company the right to manufacture only in Springfield, but the right to sell anywhere in the world. He also received, for a similar right, about $200 or $300 from an elevator companyin Chicago, in 1891-92. He has received no royalty since, because that company ceased to use the device. He was employed by the Michigan Elevator Company at a salary of $2,000, requiring him to devote his whole^time to the business. This salary included the right to use his devices. He worked for an elevator company in Toledo at $1,800 a year, which included his services and the use of one of his devices. Mr. Hultgren refused to sign the articles of association, “ because I couldn’t see where any money would be forthcoming by which it would place us in a position to manufacture; ” and that, although the assets, in his judgment, were worth $63,000, yet they would not give the company any credit. If,these patent devices are of the value placed upon them by Hultgren and Ellithorpe, the receiver ought to be able to sell a one-third interest in them for something; but none of the parties to this litigation have seemed to regard them as of sufficient value' to justify an attempted sale, and no one has offered to buy such valuable property. These facts are much more convincing than the opinion of interested parties. I reach the same conclusion that was reached in Moore v. Universal Elevator Co., that these devices were practically worthless.

It is urged on behalf of Moore, Stanton, and Brother-ton that they had transferred their stock before the debt of the Wormer Company was contracted, and that therefore they are not liable. No question of the bona fide transfer of stock is involved. The question is, Can original incorporators make a false statement as to the amount of capital stock actually paid in, and escape liability for such false representations, immediately after executing the articles of association, by transferring their stock to other parties ? The wrong was done by the original incorporators in making a false statement as to the amount of stock actually paid in. The public, and creditors dealing with the corporation, had the right to rely upon this statement as true. Subsequent purchasers of stock were also entitled to rely upon it as true. It would be unjust to visit the sins of the original incorporators upon subsequent stockholders who purchased in good faith. It would be a disgrace to the law if creditors, dealing with the corporation in reliance upon these statements, which they examine in the public offices, where they are on file, had no remedy. Justice and good morals require that they who make such false statements, whether they make them intentionally or, as in this case, recklessly, should respond in damages therefor. The law does not permit them to evade this liability by a transfer of their stock.

I think the decree should be modified in accordance with this opinion, and the case remanded, with directions to the receiver to sell the interest in the patent devices, if a purchaser can be found, and to apply the proceeds thereof in payment of the judgment in favor of the Wormer Company, and to proceed under the order and direction of the court below to assess the original incorporators to pay other debts, should any be proven; but my brethren think the decree should be sustained, with costs, and it is so ordered.

Moore, J.

I do not think the disposition of the case requires the discussion under head 3 of the opinion, and express no opinion in relation to the question there discussed. I concur in the disposition of the case made by Justice Grant.

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


author: Moore, J.

text:
    W. K. HENDERSON LUMBER CO. v. STILWELL & CO.
    1. Sale — Recoupment—Severable Contract.
    A contract for the purchase of 12 cars of lumber, to be shipped in car' lots at different times, each car to be settled for when received, is severable, and the purchaser, who is sued for the price of four car loads, which he has received and refused to pay for, cannot recoup damages because the entire 12 cars "were not shipped.
    2. Same — Loss of Profits.
    A defendant who has received goods, inspected and kept them, knowing they did not comply with the contract for their pur- . chase, cannot, in an.action for the puBehase price, recoup damages for loss of prpfits in his business.
    Error to Wayne; Frazer, J.
    Submitted October 25, 1901.
    (Docket No. 90.)
    Decided March 26, 1902.

      Assumpsit by the W. K. Henderson Lumber Company, Limited, against Stilwell & Company, for goods sold and delivered. From a judgment for plaintiff, defendant brings error.
    Affirmed.

      Trevor & Trevor, for appellant.

      George E. Eckert, for appellee.
   Moore, J.

The plaintiff is a Louisiana corporation engaged in the manufacture of Southern yellow pine lumber. The defendant is a Michigan corporation engaged in buying and selling lumber in the city of Detroit. In 1897 a firm known as T. R. Brent & Son turned over an order from Stilwell & Co. to plaintiff in this case. This order was expressed in the following correspondence:

“Shreveport, La., Oct. 12, 1897.
“To Stilwell & Co.,
“Detroit, Mich.
Gentlemen: T; R. Brent & Son, of Kansas City, have sent ns an order for 12 cars of rough clear stock. * * * I have concluded to take the order at the prices he quoted, provided you can take the cars as I can get them out during the next 60 or 90 days. I will try to get the cars off as you suggest, but we have to ship rough clear finishing lumber from small mills that have no planers, and cannot control the mills as to how they ship, as it is impossible for them to get out just a certain size, but they have to cut whatever their logs will run. * * * We have entered the order as shown on the inclosed tissue copy, and also with the understanding that you are to give us 60 days’ acceptance for the lumber as soon as the car is received and checked out, or discount the bill 2 per cent. If anything is wrong with the way we have agreed to enter these orders, please notify us immediately, as we do not want to ship it unless we have a satisfactory understanding in regard to it,” etc.
To this defendant replied as follows:
“Oct. 16, 1897.
“ To the W. K. Henderson Lumber Co.,
“Shreveport, La.
' ‘ Gentlemen: Your favor of the 12th inst. at hand and noted. We accept the conditions you name in regard to the shipments during the next 60 or 90 days, and also as to shipping mixed widths and thickness in the same car, with this condition, viz. -v * * * ”

Ten or eleven cars were shipped under this contract. The defendant received the lumber when it came, but made complaints about the lumber not answering the requirements of the contract. It is also claimed by plaintiff that defendant did not make the payments as it agreed. It is claimed by plaintiff that full settlements were made for all the lumber shipped, except the four car loads which are the subject of this controversy. In the court below the plaintiff recovered a judgment. The case is brought here by writ of error. There are upwards of 40 assignments of error, but not many of them call for discussion.

Certain depositions offered by plaintiff were received in evidence. It is claimed this was error because they did not sufficiently identify the lumber as being the lumber in controversy here. An inspection of the depositions shows they clearly identify the cars in which the lumber was shipped. We think their admission was not error.

It is the claim of defendant it is entitled to recoup for damages because the entire 12 cars were not shipped. The judge charged the jury as follows:

‘ ‘ There is no dispute, as I understand it, upon the part of the defendant, that this lumber was received, — these four car loads. There was a controversy concerning the lumber that had been shipped before, the testimony showing that there were 12 car loads ordered; and it is claimed upon the part of the defendant in this suit that they have a right to go into this whole contract; that it is what they term a ‘ continuing contract;’ and that they are entitled to show damages that they may have received on account of the first number of car loads not having come up to the requirements of the order. But as this suit is brought only to recover the value of these four cars, and it is claimed by the plaintiff that the pay for the other cars previously shipped had been settled, and that, in my opinion, not entering into the controversy here, I have ruled- — -and I think I am correct in that ruling — that nothing is to be considered by you in regard to the car loads that had been shipped previous to the four.
“ It is also claimed by defendant that he has a right to recoup damages on account of not having received the 12 car loads that he ordered; that previous to the shipment of the balance which would amount to the 12, whatever that number may have been, a controversy arose between these parties in regard to the payment of these four cars; and I charge you that it was not required of the plaintiff to have filled the balance of the order unless the matters concerning-the four cars had been adjusted between them. That is, the plaintiff had a right to receive his pay for the four cars, or have that matter in controversy settled, before he would be required to ship the balance of the order of 12 cars; so that, in my opinion, nothing is before you for consideration in this case except the question as to the four cars of lumber that have been testified to by witnesses in this controversy now before you for detérmination.”

As before stated, the record shows that settlements were made for the cars shipped prior to the four in controversy. It is apparent that, while 12 cars were ordered, it was expected by the parties they would be shipped in car lots, and at different times; settlement to be made for each car when received. The contract was severable. The case is within Williams v. Robb, 104 Mich. 242 (62 N. W. 352).

It is claimed the court erred in relation to the measure of damages. The defendant had an opportunity to inspect the lumber. According to its version, knowing it did not comply with the contract, it received it and kept it. It seeks not only to recover damages because the lumber did not meet the requirements of the contract, but also for the loss of profits. The charge of the court upon this branch of the case was more favorable to the defendant than it was entitled to have given. See Talbot Paving Co. v. Gorman, 103 Mich. 403 (61 N. W. 655, 27 L. R. A. 96); Williams v. Robb, supra.

Judgment is affirmed.

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


text:
    CAMPBELL v. KEYS.
    1. Attaohment-t-Priority — Unrecorded Mortgage.
    An attachment levy is a lien only upon the interest in the land owned by the debtor at the time of the attachment, and is not entitled to priority over an unrecorded mortgage.
    2. Same — Amendment of Statute.
    Act No. 227, Pub. Acts91889 (3 Comp. Laws, § 9224), amending the statute relating to levies of execution on real estate, does not change the provisions of the statute (3 Comp. Laws, § 10564) relating to attachment levies, so as to give a lien upon the title as it stood of record when the attachment levy was made.
    3. Same — Lien—Execution.
    Where a levy by attachment is followed by an execution levy, the latter does not relate back so as to give a lien upon the title as it stood of record when the attachment levy was made.
    Appeal from Clinton; Stone, J.
    Submitted November 13, 1901.
    (Docket No. 101.)
    Decided March 26, 1902.
    Bill by Oliver B. Campbell and Thomas P. Steadman against Horace N. Keys, Antha D. Keys, and George Bane to foreclose a mortgage. From a decree dismissing the bill as to defendant Bane, complainants appeal.
    Reversed.

      I~I. E. Walbridge and High & Everett, for complainants.

      Almond G. Shepard and Edwin H. Lyon, for defendant Bane.
   Moore, J.

The bill of complaint was filed to foreclose a mortgage given by the defendants Horace N. Keys and Antha D. Keys to Campbell, Keys & Steadman, to secure the payment of a note dated January 2, 1894, for $2,645. The mortgage is dated February 19, 1897, and is for the sum of $1,000. This mortgage was recorded in the office of the register of deeds May 3, 1897. A default was entered against the defendants Horace N. Keys and Antha D. Keys for want of appearance and answer. The defendant George Bane appeared and defended on the ground that he had caused a levy of attachment to be made upon the premises covered by the mortgage on the 28th day of April, 1897. The trial court found a decree against Horace N. Keys and Antha D. Keys for the sum of $1,000. The decree also provides that the bill of complaint be dismissed as to George Bane, with costs. The complainants have brought the case to this court, claiming the trial court erred in dismissing the bill of complaint as to George Bane.

Complainants claim to have established upon the trial of the case, by a fair preponderance of evidence, that the defendant Bane had actual knowledge of the existence of the mortgage at the time he commenced his attachment proceedings, and levied upon the property covered by the mortgage. The defendant Bane claims that he did not have knowledge. The testimony is very conflicting, and is very evenly divided. The proofs were taken in open court. The judge had the advantage of seeing the witnesses. He was of the opinion the complainants had failed to show, by a preponderance of the evidence, knowledge of the existence of the mortgage on the part of Mr. Bane before he commenced his attachment. The evidence does not convince us he was wrong in his conclusion.

We now come to the question whether, in the absence of knowledge by Mr. Bane of the existence of the mortgage, his attachment levy has priority over the unrecorded mortgage. It is the claim of complainants that by his levy Mr. Bane acquired only such interest in the property as his debtor, Mr. Keys, then had, and, as Mr. Keys had then executed the mortgage, it has priority over the levy, The solicitors for defendant Bane say this court held otherwise in Campbell v. Bane, 119 Mich. 40 (77 N. W. 322), in that part of the opinion reading, “ In the present case, Bane’s lien is subsequent in date, and his right of priority must be determined by the fact of actual notice of the existence of the mortgage.” A reference to that case shows that the questions involved were whether the mortgage could be foreclosed before there had been a final adjustment of the partnership accounts between the complainants and Keys; and, second, whether Bane is a proper party. Both questions were answered in the affirmative; the court holding that, as Bane was a subsequent purchaser or lien holder, he had a right to redeem, and was also entitled to have the amount due on the mortgage determined. The court was not called upon to decide which lien had priority, and did not intend to so decide; and, if the language quoted is susceptible of the interpretation given it by counsel, it was dictum, and not controlling.

It is also said that, since the amendment of 1889 to the statute in relation to the levy of executions, ‘ ‘ The lien thus obtained shall, from the filing of such notice, be valid against all prior grantees and [mortgagees] mortgages of whose claims the party interested shall not have actual nor constructive notice.” 3 Comp. Laws, § 9224. Section 10564, 3 Comp. Laws, provides:

“ Real estate attached shall be bound, and the attachment shall be a lien thereon, from the time when a certified copy of the attachment, with a description of the real estate attached, shall be deposited in the office of the register of deeds in the county where the real estate attached is situated.”

And it is urged that, when the levy by attachment is followed by the execution levy, the latter relates back so as to give a lien upon the title as it stood of record when the attachment levy was made. The circuit judge accepted this view. In doing so, it is said, he is supported by Jerome v. Bank, 22 Colo. 37 (43 Pac. 215); Woodward v. Sartwell, 129 Mass. 210; and Bigelow v. Topliff, 25 Vt. 273 (60 Am. Dec. 264).

An examination of these cases discloses that Jerome v. Bank arose in Colorado, where the statute provides that not until a deed or conveyance is filed for record shall it take effect “as to subsequent bona fide purchasers and incumbrancers by mortgage, judgment, or otherwise, not having notice thereof.” 1 Mills’ Stat. § 446.

In Massachusetts the reason of the opinion in Woodward v. Sartwell seems to have been that:

“An attaching creditor stands in the position of a purchaser for value, and, as a deed duly recorded takes precedence of a prior deed unrecorded, so an attachment, when duly made, has the effect of a prior purchase, and takes precedence of a prior unrecorded deed. Marshall v. Fisk, 6 Mass. 24 (4 Am. Dec. 76); McMechan v. Griffing, 9 Pick. 537; Roberts v. Bourne, 23 Me. 165 (39 Am. Dec. 614).”

As we shall see later, this is not the rule in Michigan. The courts of Vermont have followed the same rule as in Massachusetts.

In 1 Shinn, Attachm. § 10, it is said:

“ Attachment is a factor of that system of law which charges the property of a debtor with the payment of his •debts. Its purpose is to give to the creditor, from the very •commencement of his suit, a lien on the estate of his debtor. It is an anterior process, the purpose of which is to make the jurisdiction of the court in ulterior proceedings more effectual, and to afford the plaintiff security for the satisfaction of the judgment which he may obtain. It is an effort to create a lien upon the debtor’s property. The attachment levy from its date operates as such a lien. That is to say, it charges the property levied upon with the payment of the judgment to ■ be rendered, in priority of any subsequent alienations the»defendant may make, or of any subsequent incumbrances he may create.”

While the law in relation to the levy of executions was amended in 1889, the law in relation to the levy of attachments has remained unchanged since 1875. In Columbia Bank v. Jacobs, 10 Mich. 349 (81 Am. Dec. 792), it was held that an attachment levy upon real estate only gives the ■creditor a lien on the debtor’s attachable interest in the lands, and in no way interferes with the previously acquired rights of third persons. In French v. De Bow, 38 Mich. 708, the court cited the case of Columbia Bank v. Jacobs, and held that, the levy of an execution did not .give to the creditor any rights analogous to those of a bona fide purchaser, and that, until the creditor becomes .a purchaser at the execution sale, the creditor stands in the rights of his debtor, and the levy may be defeated by equities which the debtor is unable to resist. See, also, Michigan Paneling Machine Co. v. Parsell, 38 Mich. 475.

In Smith v. Williams, 44 Mich. 240 (6 N. W. 662), the court discussed the effect of the recording laws, and, among other things, said:

“ But the recording laws could not help the defendants. Those laws point out specifically the danger to which the party failing to record his title is exposed, and the courts cannot extend or add to it. Columbia Bank v. Jacobs, 10 Mich. 349 (81 Am. Dec. 792); Millar v. Babcock, 29 Mich. 528. The danger is indicated by section 4231 of the Compiled Laws [of 1871]:
“ ‘ Every conveyance of real estate within this State, hereafter made, which shall not be recorded as provided in this chapter, shall be void as against any subsequent purchaser in good faith, and for a valuable consideration, of the same real estate, or any portion thereof, whose conveyance shall be first duly recorded.’
“ By ‘subsequent purchaser,’ in this section, is meant a subsequent purchaser from the same grantor. * * * The mere institution of suit cannot make one a bona fide purchaser.”

In Atwood v. Bearss, 45 Mich. 469 (8 N. W. 55), it is held that it is not until the execution creditor has become a purchaser that he obtains anything more than a lien upon the land; but, when he becomes a purchaser, he then becomes entitled to the benefits of the recording act.

The statute in relation to the levy of attachments, as it now reads, was construed in Avery v. Stephens, 48 Mich. 246 (12 N. W. 211), where, among other things, it was said:

“ The statute provides that the writ of attachment shall command the sheriff to attach so much of the lands, etc., of the defendant, not exempt from execution, wheresoever the same may be found within the county; and the sheriff is directed to execute the writ by seizing the lands. Sections'6401, 6402 [2 Comp. Laws 1871]. The'statute further declares that real estate shall be bound, and the attachment shall be a lien thereon, from the time when it was attached, on complying with certain provisions, which was done in this case. Section 6406. Where due diligence has been observed by the creditor in the prosecution of his claim, this lien continues until a reasonable time has elapsed for the issuing of an execution and levy thereunder, and there can be no doubt but that the execution levy relates back to the time of the attachment, and holds the interest which the debtor then had.”

In a case decided in 1886 (Manwaring v. Jenison, 61 Mich. 117, 27 N. W. 899), it is said:

‘ ‘ The purchaser under the execution sale does not stand in the relation of a bona fide purchaser of the land without notice of the rights of the plaintiff. He only took by his levy the same title his judgment debtors had. It gave him a lien upon all the right, title, and interest of Haven, Blake & Co., but upon no better title.”

See, also, Corey v. Smalley, 106 Mich. 257 (64 N. W. 13, 58 Am. St. Rep. 474).

As between the mortgagor and the mortgagee, it is clear the mortgagor has diminished his interest in the real estate to the amount of the mortgage; and by the decisions of this court a bona fide mortgagee, prior to the amendment of 1889, would be protected against any levy by attachment or execution, even though his mortgage was not •of record.

In the following cases it is held that an unrecorded deed or mortgage will have priority over the lien of an attachment, although the attaching creditor did not, at the time of the attachment levy, have any notice of the unrecorded deed or mortgage: Holden v. Garrett, 23 Kan. 98; Northwestern Forwarding Co. v. Mahaffey, Slutz & Co., 36 Kan. 152 (12 Pac. 705); Wilcoxson v. Miller, 49 Cal. 193; Davis v. Owenby, 14 Mo. 170 (55 Am. Dec. 105); Hope v. Blair, 105 Mo. 85 (16 S. W. 595, 24 Am. St. Rep. 366); Norton v. Williams, 9 Iowa, 528; Bell v. Evans, 10 Iowa, 353; Vaughn v. Schmalsle, 10 Mont. 186 (25 Pac. 102, 10 L. R. A. 411); Runyan v. McClellan, 24 Ind. 165; Wright v. Jones, 105 Ind. 17 (4 N. E. 281); Greenleaf v. Edes, 2 Minn. 264; Schroeder v. Gurney, 73 N. Y. 430; Harral v. Gray, 10 Neb. 186 (4 N. W. 1040). In Hackett v. Callender, 32 Vt. 97, it is held that if an attaching creditor has notice after his attachment, but .before execution levy, that the land does not belong to the execution debtor, though the record title is in the debtor, the equitable interest of the real owner will be protected against the levy. This case would seem to discredit the earlier case of Bigelow v. Topliff, cited earlier-in this opinion. See Chapman v. Coats, 26 Iowa, 288.

The act in which section 9224, in relation to execution levies, is found, is entitled “An act relative to levies of executions on real estate.” The amendment of 1889 does not refer to attachment levies, and does not purport to change its provisions. If, as was said in Smith v. Williams, supra, the courts cannot extend or add to the recording laws, we do not see- how the attaching creditor obtained any greater interest in the property levied upon than was then owned by the attachment debtor. As this-mortgage was put upon record after the attachment, and before the execution levy, we think Mr. Bane was a proper-party to the foreclosure proceeding, and that his levy was-subject to the mortgage debt. The decree will be reversed, as to him, with costs, and affirmed as to the other defendants.

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

      See Luton v. Sharp, 94 Mich. 203 (53 N. W. 1054), for a case •arising subsequent to the amendment.


text:
    STODDARD v. COURTRIGHT.
    1. Collateral Security — Application oe Payments.
    A statement in a letter by one wh,o has received collateral security, that he received it “as a general or blanket- security,” does not justify the claim that the proceeds of the-security should be divided and applied pro rata to several notes, where the letter also states that the proceeds were to-be applied wherever there should be a deficiency upon any of the notes, and that two of the notes were uncollectible, and he should therefore apply the proceeds upon those notes.
    2. Appeal — Questions Not Raised Below.
    Objections not made on the trial will not be considered in the. Supreme Court.

      Error to Bay; Shepard, J.
    Submitted November 15, 1901.
    (Docket No. 133.)
    Decided March 26, 1902.

      Assumpsit by John L. Stoddard against Morris L. Courtright upon a promissory note. From a judgment for plaintiff, defendant brings error.
    Affirmed.

      McDonell & Duffy, for appellant.

      John L. Stoddard, in pro. per.

   Moore, J.

For some time prior to 1887, Edward C. Hargrave and his father, Edward J. Hargrave, owned mill property at Bay City, and were engaged in the business of manufacturing lumber and salt. The business was carried on in the name of E. J. Hargrave & Son. The father died in 1887. It is the claim of defendant that, after the death of Edward J. Hargrave, Elizabeth W. Hargrave, the widow of E. J. Hargrave, and Edward C. Hargrave, continued the business together under the old firm name of E. J. Hargrave & Son, until the firm failed in January, 1896. In the fall of 1895 Mrs,» Hargrave went to England; and it is the claim of the plaintiff that the business was the business of Edward C. Hargrave alone, carried on in the name of E. J. Hargrave & Son. Mr. Edward C. Hargrave, in 1891, organized the E. C. ■ Hargrave & Co., a corporation, at Hinkley, N. Y., which carried on the business of manufacturing lumber and sulphate fiber at that place. In this corporation Mr. Edward C. Hargrave was a large stockholder, owning $350,000 out of the $400,000 capital stock, all of which was paid up.

The several loans involved in this case were made by plaintiff, Stoddard, as follows: Early in 1893, viz., upon February 10, 1893, Edward C. Hargrave borrowed from the plaintiff, Stoddard, the sum of $3,000, giving his personal note, and transferring as collateral security a real-estate mortgage and accompanying, notes amounting to $3,000, running from Francis Gr. Fitch to Edward C. Hargrave, and also a lease, running for a period of five years, for the use of all of the railroads and booms connected with, said property. Fitch subsequently paid one of these notes, which was applied on the note, reducing this loan from $3,000 to $2,500. Upon September 1, 1893, another loan of $1,000 was made. The note representing this loan was indorsed by Mr. Courtright. It is claimed by plaintiff both of these loans were made to E. C. Hargrave. It is the claim of defendant they were made to E. J. Hargrave & Son.

Upon October-2, 1893, plaintiff, Stoddard, made another loan of $5,481.63, and upon January 5, 1894, another of $1,000. Mr. Stoddard testifies that the two amounts were brought together in some way, and, together with some additional items, made up the sum of $7,000, for which he took two notes, of $5,000 and $2,000, respectively, of Paiton & Co., the originals being taken up, the last renewals being dated October 31,1895, and are for $5,000 and $2,000, respectively, made by Patton & Co., of Albany, N. Y., to the Trenton Falls Lumber Company, and indorsed by E. C. Hargrave' & Co., the New York corporation, and by Edward C. Hargrave personally.

Upon May 8, 1895, Mr. Stoddard took the note of E. J. Hargrave & Son, dated May 8, 1895, for $1,000, due in four months. This note was secured by a certificate of stock in the E. C. Hargrave & Co. corporation.

Patton & Co. failed in the latter part of 1895, carrying down with it the Trenton Falls Lumber Company and the E. C. Hargrave & Co. corporation in New York, and by reason of these failures E. J. Hargrave & Son, of Bay City, came into financial difficulties. These various loans had been renewed from time to time. Whatever may be said as to whym these moneys were loaned or for whom they were borrowed, in January, 1896, Mr. Stoddard held notes as follows: Notes of E. J. Hargrave & Son: One note secured by the Fitch real-estate mortgage, $2,500; one note indorsed by Morris L. Courtright, $1,000; one note secured by certificate of stock in the E. C. Plargrave & Co. corporation, $1,000. Notes of Patton & Co.: One note, $5,000; one note, $2,000. The last two notes were made to the Trenton Palls Lumber Company and indorsed by them. They also bore the indorsement of E. C. Hargrave & Co. and Edward C. Hargrave personally.

In January, 1896, Mr. Stoddard first learned of the financial difficulties of the above concerns, and claims that a few days after January 1, 1896, he saw Mr. Hargrave at Mr. Stoddard’s office in Bay City, and that Mr. Hargrave told Mr. Stoddard of the claim against Pitch, which he (Hargrave) agreed to turn over to Mr. Stoddard, but that nothing was done about it then. Within a day or two prior to January 17, 1896, Mr. Stoddard went to the office of M. L. Courtright, who was the attorney for E. J. Hargrave & Son, and, after a talk with the latter, it was decided that Mr. Courtright, acting for E. J. Hargrave & Son, would turn over to Mr. Stoddard an assignment of the Pitch claim before mentioned, together with an assignment of a certain chattel mortgage on file December 6, 1893, made by Pitch et al. to E. C. Hargrave. An assignment was made, reading as follows:

. “ Por value received, we hereby sell, assign, and transfer to John L. Stoddard our claim and accounts against the Pitch Salt Company, together with a certain chattel mortgage given by the ,said company to us, bearing date December 5, 1893, and now on file in the office of the recorder of Bay. City, Michigan.
“ Dated this 18th day of January, 1896.
“E. J. Hargrave & Son,
“ By M. L. Courtright.”

It is claimed Mr. E. C. Hargrave afterwards ratified this assignment. The chattel mortgage was afterwards discharged, and a new one made by the Pitch Salt Company direct to Mr. Stoddard.

May 27, 1896, the following paper was given:

“Bay City, Mich., May 27, 1896.
“ One day after date, without grace, for value received, I promise to pay to the order of J. L. Stoddard ten thousand seven hundred eighty dollars and eighty cents ($10,780.80), with interest from date at eight per cent, per annum, payable quarterly until paid.
“This note is collateral to the following, viz.: One note for two thousand dollars ($2,000), dated October 31, 1895, and made by Patton & Co., and indorsed by the Trenton Falls Lumber Company, E. C. Hargrave & Co., and Edward C. Hargrave; a note for five thousand dollars ($5,-000), of same date as above, and made and indorsed the-same as last above note; a note for one thousand dollars-($1,000), made by E. J. Hargrave & Son, dated September 11,1895; a note for two thousand five hundred dollars ($2,500), made by E. J. Hargrave & Son, dated September 16, 1895, — all of which notes are now held by said Stoddard. E. C. Hargrave.”

It will be observed the note of $1,000 indorsed by Mr. Courtright is not mentioned in this paper, and it is claimed by plaintiff that the proceeds of the securities which he held were to be applied on any or all of the notes described in the .agreement, as in his judgment it would be to his advantage to apply them, and that none of them were to be applied on the note indorsed by Courtright. It is the claim of Mr. Hargrave that he did not notice the Court-right note was not included in the paper he signed. This-claim of plaintiff as to the application of the proceeds of the securities is denied by defendant and by Mr. Edward C. Hargrave, who wrote plaintiff October 5, 1898, as follows:

“ This firm owes you for three notes, one for $2,500 and two for $1,000 each, besides interest upon the same. One of the $1,000 notes is indorsed by M. L. Courtright. You hold for security for the above a real-estate mortgage for $2,400 and an assignment of an account due us from E. S. Fitch. We understand you are about to receive some money on the Fitch account. Any money you may receive on the Fitch account apply as follows: Apply all that you may receive on the note indorsed by Mr. Court-right until it is paid. After the Courtright indorsement ■ — that is, the note indorsed by him — is paid, apply all the money you may receive on the other $1,000 note until it is paid, and the balance you may apply on the $2,§00 note.”

As early as in November, 1899, there was realized from the property covered by the real-estate and chattel mortgages more than the amount of the notes of E. J. Hargrave &c Son, which amounts were indorsed on the $10,780.80 note. After considerable correspondence, this suit was brought to recover on the $1,000 note indorsed by defendant.

It was the claim of the plaintiff upon the trial of the case that Edward C. Hargrave was in reality E. J. Hargrave & Son; that the indebtedness was his personal indebtedness; that the Fitch real-estate mortgage was his; that the Fitch account and chattel mortgage were his, and that, therefore, the moneys realized from those securities were his; that, while no agreement was had between himself and Mr. Hargrave, at the time the securities were turned out to him, as to the application of the proceeds, such an agreement was had upon May 27, 1896, when Mr. Hargrave made the note for $10,780.80, representing all of the paper which plaintiff held except the $1,000 note of E. J. Hargrave & Son upon which Mr, Courtright was an indorser, and consented that the entire amount realized from the Fitch assets should be credited upon this note. It was the further claim of plaintiff that Mr. Courtright consented to this arrangement, and thereby waived the benefit of the security which had been given for the E. J. Hargrave & Son paper upon which Mr. Courtright was an indorser, and therefore plaintiff was entitled to recover from the defendant the amount of the E. J. Hargrave & Son note which he had indorsed.

The defendant, on the other hand, denied any such arrangement, or any knowledge thereof, and claimed that the indebtedness was the indebtedness of E. J. Hargrave & Son; that the assets were the assets of E. J. Hargrave & Son, and that he was entitled to have the assets of E. J. Hargrave & Son applied to the debts of E. J. Hargrave & Son until that indebtedness was wiped out; that the uncontradicted testimony showed that the assets were more than enough to pay the indebtedness, and that, therefore, the note of E. J. Hargrave & Son for $1,000, upon which, he was an indorser, was paid; that he never knew of or consented to any arrangement whereby he should waive the benefit of the security which had been turned out to plaintiff to secure the indebtedness of E. J. Hargrave & Son; that no such arrangement existed in fact; and it was contended in his behalf that plaintiff, by his dealings and actions, was estopped from claiming that any such arrangement existed.

The jury brought in a verdict in favor of the plaintiff and against the defendant for $905.50. The case is brought here by writ of error.

The law applicable to the case is not at all complicated. The trouble arises out of the proper disposition of the questions of fact. The record is very long. The testimony was conflicting. The charge was very full. Those portions of it which may perhaps be justly criticised are where the judge expressed his opinion that the business of E. J. Hargrave & Son was not the business of Mr. Edward C. Hargrave alone, but that there was associated with him either his mother or brother. But, if this was error, it was in favor of defendant. It is said that after the jury had been out for a time, and were recalled, what then occurred misled the jury. We do not get that impression from a careful reading of the record.

In one of the letters from Mr. Stoddard to Mr. Hargrave the following language is used:

“ I have been looking over my papers since writing the letter of yesterday, however, and, while the statement that I made in the letter yesterday as to the Fitch matter being received as security to the notes of $5,000 and $2,000, respectively, is not literally true, it is true in effect. I find that the exact understanding was that the Fitch matter was transferred to and received by me as a general or blanket security, and the proceeds to be by me applied wherever there should be a deficiency upon any of the several notes aggregating $11,500 that I held, with the right on my part to apply payments, if I chose to do so, to cover items of interest or discount due me. It is absolutely certain that the parties to the $5,000 note and $2,000 note mentioned are uncollectible, and therefore I shall, as I said, apply the net amount that I may receive from the Fitch matter upon those notes.”

It is said that, in any event, “under the blanket security theory,” the proceeds should have been divided, part of it being applied to the Courtright note. The contents of the letter, taken as a whole, do not justify that claim. No such theory was advanced upon the trial. See John Hutchison Manfg. Co. v. Pinch, 107 Mich. 13 (64 N. W. 729, 66 N. W. 340); Little v. Williams, 107 Mich. 652 (65 N. W. 568); Wolf v. Holton, 110 Mich. 166 (67 N. W. 1082). The testimony was contradictory. The charge presented the conflicting theories of the parties in such a way that the defendant, at least, is not in a position to complain. The jury found the version of the transaction claimed by the plaintiff to be true.

Judgment is affirmed.

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