author: Stone, J.

text:
    ANDREWS v. OSIUS.
    1. Fraud — Corporations — Misrepresentation op Assets — Liability of Officer.
    A statement of the assets and liabilities of a corporation made to a prospective purchaser of stock of the corporation not authorized by the corporation, signed by defendant, held, to be the signature of defendant personally, and -not that of the corporation,, although he added the words “secretary and treasurer” after his name.
    2. Same — Statutes—Frauds, Statute of.
    Where the stock of the corporation, which was largely a' family affair, was practically owned by defendant and his wife, and was controlled by defendant, section 11983, 3 Comp. Laws 1915, providing that no action shall be brought to charge any person by reason of favorable representation concerning the character, credit, etc., of any other person unless such representation be in writing, and signed by the party to be charged thereby, is not applicable.

      3. Same — Liability of Officer.
    If, however, it were to he held that said statute did apply, the statements in writing signed by the defendant were a sufficient compliance with its terms, and were personally binding upon defendant.
    4. Same — Evidence—Pleading—Issues.
    In an action for fraud and deceit in misrepresenting the assets, liabilities, and business of a corporation to a prospective purchaser of stock of the corporation, where the declaration averred that defendant represented to plaintiff that said company was taking out of the nets on an average 800 pounds of fish per day, but there was no evidence of such representation by defendant, it was error for the court below to admit evidence that the average catch was not over 300 pounds per day, and to submit such auestion to the jury.
    Error to St. Clair; Tappan, J.
    Submitted June 18, 1918.
    (Docket No. 52.)
    Decided September 27, 1918.
    Rehearing denied January 21, 1919.
    Case by Bert Andrews against Charles R. Osius for fraud and deceit. Judgment for plaintiff. Defendant brings error.
    Reversed.

      Jumes A. Muir (Lincoln Avery, of counsel), for appellant.

      Burt D. Cady (Walsh & Walsh, of counsel), for appellee.
   Stone, J.

This action is based upon alleged fraud and deceit of defendant. The action was begun by writ of capias ad respondendum. It is the claim of the plaintiff that early in 1914 he was negotiating with the defendant for the purchase of an interest in a fishing plant at Port Huron, owned by the Consolidated Fisheries, a corporation; that plaintiff lived at Bay City, and had no knowledge of the value of the plant or the amount of business that said corporation was doing; that he had a considerable correspondence with defendant, in which plaintiff asked and called for a correct and true statement of the property of the corporation, and the true cash value of the items of its property; also the true statement of the debts of the company, including mortgages, and all of its resources, and stated that he did not want to invest money in the business unless such true statement was first furnished him.

The plaintiff also claims that while he' was familiar with the business of buying and selling fish, and with the operation of small net fishing for perch and pickerel, he had had no experience in deep water fishing for lake trout and white fish, and that he so informed the defendant. The plaintiff further claims that after he had made said several written requests of the defendant, the latter did on January 28, 1914, give to the plaintiff a detailed type-written statement showing items of property, and their value, and also a statement of the debts of the corporation, and that at the bottom of each of these typewritten statements the defendant wrote, with pen and ink, that the statements were true, signing his name thereto, adding the words “Sec’y and Treas. Consolidated Fisheries, Inc.”; that upon receipt of these statements so signed, the plaintiff paid to the defendant the sum of $2,000 and received $2,000 par value of the stock of said corporation; that at the same time and as part of the same transaction and in consideration thereof, the plaintiff became the general manager of the corporation under a written contract with the corporation to that effect; and that he took charge of its business in March, 1914, and continued such management until about September, 1914.

It is the further claim of the plaintiff that from time to time while he was acting as manager, he discovered that the statement of the defendant as to the value of the property was untrue; that the defendant had grossly misrepresented the value of a large part of the property; that he had concealed from plaintiff the existence of a chattel mortgage upon which there was unpaid upwards of $500 on one of the company’s boats; that he had grossly misrepresented the amount of debts of the company; and that he had misrepresented the amount of business which the company had been doing before the plaintiff purchased his stock. Because of these claimed misrepresentations of fact and relying on the same, the plaintiff claims that he was induced to pay $2,000 for stock in a company that soon after became bankrupt, and to enter into said contract, and that because of fraud and deceit on the part of the defendant, as aforesaid, he was entitled to a judgment for the loss of his money, he claiming to have tendered back his stock, and to have made a demand for the money, before bringing this suit. There was testimony tending to prove said claims.

On the part of the defendant it was claimed at the trial, that he, his wife, and one Dr. Ellis had purchased and incorporated the business known as the Consolidated Fisheries; that he had no practical knowledge of the working of the business, but was himself a dentist; that the company needed a man experienced in the business to act as a general manager, and advertised for one; that the plaintiff answered the advertisement and came from Bay City to Port Huron on several occasions before he purchased the stock in question, and examined the property and plant; that he gave plaintiff full information concerning the business, and that plaintiff had full opportunity to examine the boats, seines and all of the physical property of the plant. ■ He claims that he gave the plaintiff a fair "estimated” value of the boats, seines and all the property of the company, and also a full and true statement of the debts and obligations of the company, including the chattel mortgage on the boat, held by the St. Clair County Savings Bank, which he claimed was included in the statement of the total amount of debts owed by the company. It was also defendant’s claim that all of the $2,000 that plaintiff paid for his stock was used for purchasing seines and supplies for the company, and that plaintiff knew this fact; that in addition to this, both the defendant and his wife made further advances of cash, all of which were used for the benefit of the company, with plaintiff’s knowledge;. that the direct cause of the failure of the company was, in part, a poor season’s business, due to natural causes, but largely to the mismanagement of the plaintiff himself, which latter was a controlling cause, which resulted in the company becoming bankrupt, causing the loss of all the money which defendant and his wife invested in the property.

The statement of the' values made by defendant to plaintiff, and known as exhibit 7, was as follows: Heading:

“Consolidated Fisheries, Inc., Producers of Lake Huron Fish, Port Huron, Mich. Board of Directors: Chas. R. Ellis, President; M. W. Warrick, Vice President; C. R. Osius, Secretary-Treasurer. 221 Huron Ave. Telephone 87.
“ ‘Estimates of our assets, January 28th, 1914.
2 tugs ...................................... $5,000.00
Steamer Brooks ............................ 3,000.00
No. 1 gas tug................................ 2,000.00
(making a total of $5,000.00.)
2 buildings ................................. 500.00
21,000 corks ................................ 315.00
5,400 lb. lead ............................... 270.00
140 nets .................................... 560.00
120 nets .................................... 200.00
1 lifter ..................................... 350.00
1 lifter ..................................... 100.00
1' lifter ..................................... 250.00
1 gas engine .................••.............. 50.00
3 platform scales ............................ 45.00
150 skipping boxes .......................... $50.00
50 tug boxes ................................ 50.00
25 twine boxes .............................. 35.00
6 reels .... 60.00
1 ice crusher ............................... 15.00
1 gas tank .................................. 7.00
500 lbs. salt fish ............................ 25.00
1 oil corker ................................. 12.00
1 tanning vat ............................... 10.00
Misc. suck as tools, cables, anchor ropes, buoy-ropes, furniture, printed matter............ 100.00
$8,004.00’ ”
(Then in writing as follows):
“This is a true statement, January 28, 1914.
“C. R. Osius, Sec’y and Treas.
“Consolidated Fisheries, Inc.”

Another statement relating to the indebtedness of the company, and known as exhibit 8, it was claimed, and testified to by plaintiff, bore the same heading and was signed exactly the same as exhibit 7. It contained names and amounts opposite, nine in number, amounting to $338.38, the last item being “cash in bank $174.26. Bills we are owing” (here follows 25 names and amounts opposite). “Total $1,464.37.”

The plaintiff testified that after the receipt of exhibits 7 and 8, he entered into a written agreement with the Consolidated Fisheries; and that, acting upon the representations so made to him by the defendant as to the assets of the corporation, and its liabilities, he invested his money in this company. There was testimony tending to show the value of some of the property to be much less than' was represented, and the indebtedness much larger, including a chattel mortgage on one of the boats. By the terms of the agreement between the plaintiff and the corporation it was provided that:

“Said Andrews shall be allowed a separate bank ’account of two thousand dollars ($2,000) for carrying on the necessary business of said corporation and shall have authority to sign checks for the same. Should said account be at any time over two thousand dollars ($2,000) said Andrews agrees to turn over all money above said two thousand dollars ($2,000) to the treasurer of said corporation at his request.”

This agreement was signed by the plaintiff and Consolidated Fisheries, Inc., by C. R. Osius, secretary and treasurer. It contained the following:

“The undersigned signatures are stockholders of the Consolidated Fisheries, Inc., and the above agreement is approved by them as signed below:
“ ‘Shares of Stock. Par value $10.00 each.
Stockholders’ names. Common. Preferred.
M. W. Osius.............. Shares 400
Chas. R. Ellis............. Shares 75
James A. Muir............ Shares 25
C. R. Osius................ Shares 136’”

It appeared that M. W. Osius and M. W. Warrick were one and the same person, to wit, the wife of defendant. It appeared in evidence that' the $2,000 paid by the plaintiff was placed in a bank account to the credit of the plaintiff as manager, but he immediately gave a check to the defendant for $1,000 to be used by the latter for the purchase of supplies, and the paying of indebtedness of the company. It appeared in evidence that the defendant had used some part of said fund to pay on indebtedness where he was personally liable. Upon that subject the defendant testified as follows:

“Stub of 3-16, 1914, to the bank for $34.25 was $25 on a note and $9.25 interest. That was the note secured by chattel mortgage. That was indorsed by me, I think. I believe I indorsed the note collateral to the bill of sale of the tug to the bank. On March 16th after Mr. Andrews went in, the company paid $25 on principal, and $9.25 interest on that note. That check was drawn on a fund wherein the $1,000 I received from Mr. Andrews was deposited.”

The declaration averred that the defendant represented to the plaintiff that the said company was enjoying a large and lucrative business, and that it was taking out of the nets on an average of 800 pounds of fish per day. This last item as to the 800 pounds average catch was not testified to by the plaintiff, nor was there any evidence of such a representation by the defendant. The plaintiff’s counsel, however, asserted that there was such evidence, and in the course of the testimony of the plaintiff’s witness, Max Moore, after he had testified to the values of the buildings, boats, etc., the following occurred:

“Q. There has been some proof in this case of representations made by Dr. Osius that the company was having an average catch of fish amounting to 800 pounds a day. Do you know anything about the catch of that company during the year 1913; we will say?
“Defendant’s Counsel: I object to that; in the first place there is no charge anywhere, except just now out of the mouth of Mr. Walsh that this defendant ever made a statement in writing, or otherwise, that the average _ catch during the year, or during any particular time was 800 and some odd pounds a day.
“Objection overruled.
“A. Yes.
“Q. Tell the jury how you happen to know anything about it.
“A. Well, they weren’t very friendly with the other fishermen—
_ “Defendant’s Counsel: There is some more prejudicial stuff of that character, and I move to strike that out as prejudicial.
“The Court: It may'stand.
“A. They wouldn’t tell us fishermen what they were catching and it was up to us in our own business to know what they were catching, and the quantities that they were getting of a certain catch. I was fishing the same time, and if I wasn’t doing as good as they were, I would move to where I would do better, and if I was doing better than they were I would keep my mouth shut, and keep away from the gang.
“Defendants Counsel: I move to strike that out as hearsay.
“The Court: It stands simply as an explanatory basis of his knowledge how he happens to know.
“A. I went up there on the track back of my residence and watched them unload their fish and I could see when they threw off boxes. I could guess within a very short amount of what was in that box, not as to the kind, but as to the weight, and I knew from the position of their tug during the time they were lifting, what they were fishing for.
“Q. Give the jury your estimate of their average catch per day, during the entire season of 1913 ?
“Defendants Counsel: I object to that for the reason that this witness is not shown to be competent to testify to that during the period he is now asked.
“The Court: He may answer.
“A. I wouldn’t place their catch to exceed 300 pounds of fish on an average for every day. There were a few days in the spring when their catches ran possibly 800 or 900 pounds, and there were a few days in the summer time, when their catch ran about three fish. That is true of everybody’s fishing.
“Defendants Counsel: I ask to have that' stricken out as incompetent.”
“The Court: It may stand.
“A. I include all kinds of fish. Perch would be half the value of white fish, and trout would be about two-thirds the value of white fish.” . •

The witness then proceeded to testify as to the value of the different kinds of fish. Similar testimony was received under objection from the witness Selkirk. In its charge to the jury the court then stated as one of the claims of the plaintiff, that the defendant “had misrepresented the amount of the daily average catch of the fish.” The court also charged the jury, among other things, as follows:

_ “You are further instructed that whether the plaintiff exercised ordinary care and prudence in protecting himself from fraud, by ascertaining the character and value of the property in question by means of the inspections he made, is a question of fact for you to determine. To determine this fact you will take all of the evidence concerning this phase of the case into consideration. If it be your conclusion from the proofs that the defects and lack of value of which he complains, were ascertainable as I have explained it, and his loss is due to his own carelessness, then he cannot recover damages upon this phase of the case. If, however, the inspection he made and the information he had, or his lack of experience in regard to the character and value of property would not be a warning to a man of ordinary prudence that Dr. Osius’ statements as to value of property were untrue, then plaintiff had a right to rely upon those statements as being true, and if false, he may recover damages sustained. You are instructed that the principle of law just explained does not apply as to misrepresentations, if any, made by Dr. Osius as to the amount of fish caught, the existence of the chattel mortgage, or the amount of debts of the corporation. These were facts wholly within the knowledge of Dr. Osius, and it was his duty to include in his statement the existence of all obligations of the company. Plaintiff was not bound to ascertain facts concerning these matters. Plaintiff had a right to rely upon such statements, and if you find they were in fact false, and plaintiff relied upon them as being true, then defendant may be held responsible for resulting damage.”

It will be noted that one of the boats listed (the steamer Brooks) was valued at $3,000. The defendant himself testified that it was purchased by his wife for $1,500, although the agreement for the purchase was in the name of the company and was for $1,500. The bill of sale, however, was to Mrs. Osius and stated the amount to be $2,500. On January 28, 1914, she transferred the boat to the company “for one dollar and other valuable consideration.”

In the record the facts concerning the corporation are somewhat confusing. The original articles do not appear in the record in full. It is claimed that they bore date November 10, 1911. The defendant testified:

“We attended to the work of organizing the company in 1912. I don’t think we had an attorney. The articles of association have been produced here. They seem to be dated November 10, 1911, and filed January 27, 1912. The stockholders’ names are put in here. M. W. Osius is my wife. Geo. L. Moore, that is Max Moore’s brother. He got us into it. Charles R. Ellis, he works in my office, and C. R. Osius, myself. We had a first meeting and elected directors. And the directors elected the officers. We never kept any minutes.
“Q. The articles of association show the capital stock $3,000, and the amount subscribed $1,500, how was that $1,500 subscribed?
“A. I don’t remember that. There never was anything but cash put in for stock. Mr. Moore did not put in any; I loaned him the money personally, and I never got it back. He never got the stock. I kept the stock for security. Mr. Ellis put in $500 in cash, I think. Later on he got his stock. Those were the only people that put any cash in, myself, my wife and Mr. Ellis. I think my wife and I put in $500 that time. The two of us. And I put in another $500 for Mr. Moore.”

When asked as to the amount of money his wife had advanced the company, on January 28, 1914, he answered:

“Altogether, from the beginning that must have been three or four thousand dollars, something like that. When you say advanced, she kept buying stock in the concern. I figured out at the time, on January 28, 1914, how much she had advanced to the company. I issued her stock for all she had advanced. I charged her $10 a share for the stock, full price. I handled Mrs. Osius’ business matters. This is her money that went into this. Her stock has always' remained in my safe. * * * She has about 400 and some shares. * * *
“Q. When you took the bill of sale in the name of Mrs. Osius for $2,500, was it your understanding that Mrs. Osius was to be repaid $2,500?
“A. She was to take it out in stock; she didn’t get any money for it. She took it out in stock of the corporation. We didn’t issue her any stock in the beginning; we knew we had it, but we didn’t make any division of it. Then when outsiders came in — this was a family affair as we claimed before, our family owned it and friends of ours, and we did not issue any particular stock at that time, but when an outsider came in, we issued all our stock, and Mrs. Osius got $1,500 worth of stock in the concern at par value. Then she conveyed this tug'over to the company. That was about January 28, 1914, the very day that Bert Andrews put his money in here.”

The plaintiff claimed that under the terms of the agreement he was entitled to one-half of the profits secured on the sale of fish purchased from outsiders, together with two cents a pound on the company’s catch, less cost of labor of running the fish house and the cost of the ice used in connection with this branch of the business. He claimed that his portion of these profits was $896, which sum he retained. After the plaintiff severed his connection with the corporation, it was declared a bankrupt, and suit was brought by the trustee in bankruptcy to recover this $896 which the plaintiff had retained. That suit is now in this court. It also appeared that the plaintiff retained $408 of the money of the company, but it appeared that he turned over that sum to the trustee in bankruptcy of said corporation, after this suit was begun. There was evidence tending to show that plaintiff had sold one-half of his stock for $1,500. He testified, however, that he never received any pay for it, and afterwards, and before suit, took it back.

The case was submitted to the jury, and they were finally instructed that if they found that the plaintiff, in the manner claimed, lost any portion of the $2,000 that he paid for his stock, they should fix the amount, and the court added: “Interest will be added from

January 28, 1914. This may be done here in open court when you return your verdict.” The jury later returned into court with a verdict for the plaintiff in the sum of $1,000, “to which verdict, the court, then and there, added interest of $116 and directed the entry of said verdict in the sum of $1,116.”

A motion having been made- for a directed verdict for the defendant at the close of the evidence, and the court having reserved its decision, under the statute, the same was considered on a motion for a judgment for the defendant, notwithstanding the verdict, for many reasons, some of which were the following:

“Section 9518 of the Compiled Laws of 1897 (3 Comp. Laws 1915, § 11983), provides that:
“ ‘No action shall be brought to charge any person, upon or by reason of any favorable representation or assurance, made concerning the character, conduct, credit, ability, trade or dealings of any other person, unless such representation or assurance be made in writing, and signed by the party to be charged thereby, or by -some person thereunto by him lawfully authorized.’
“No writing of the character required by said statute was offered or received in evidence on the trial of said cause, which is an action for false representations, claimed to have been made by defendant to plaintiff concerning the character, credit, ability, trade or dealings of the Consolidated Fisheries, and to have been relied upon by the plaintiff to his damage.
“Said defendant never individually gave to plaintiff any signed statement regarding the matters mentioned in the preceding paragraph. * * *
“The statement introduced on said trial by plaintiff was not signed by defendant, and does not purport to cover and include all of the assets, or all of the liabilities of said Consolidated Fisheries. * * *
“Defendant did not reap any reward out of the result of the sale of shares of stock of, in, to and by said Consolidated Fisheries to plaintiff.”

This motion was denied, and in denying the same the learned'circuit judge said:

“At the close of proofs, and upon motion of defendant for a direction of verdict for defendant on the ground that the statute of frauds applicable in case of corporations, requires that the individual to be charged with the debt, or promise of another, shall sign such undertaking personally. The contention is, that the written statement as to the property in question, and its value, and which is the basis of fraudulent representations charged, is the statement of the corporation, and not of defendant Osius. At that time the court was impressed with this contention, basing this upon the assumption that the organization, the Fisheries company named in the declaration, must be presumed to be a borm. fide corporation, and the written statement in question signed by defendant Osius in the name of the corporation should be held to be the signature of the corporation solely. Upon more deliberate consideration of the evidence and the circumstances concerning the organization, I am convinced that it would be improper for the court to set aside the jury’s verdict. The entire question as to the character and value of the property in question, and as to the representations of fact concerning the same, made by Osius to Andrews, and all other questions of fact were fully submitted to the jury. They settled these disputed facts in favor of plaintiff. Their verdict should not be disturbed unless it clearly appears there is no legal basis for its support. Upon consideration of the entire record, it is my conclusion that there was no corporation action of the company authorizing Osius to sign the written statement in question, and that in view of his entire course in the matter, the signature to the representations complained of becomes the personal act of the defendant, and not of a corporation.”

The learned circuit judge then expressed serious doubts as to the legality of the corporation. Judgment was thereupon entered for the plaintiff. The defendant has brought the case here for review, and there is a large number of assignments of error. By his assignments of error it is obvious that appellant relies mainly upon the statute of frauds above quoted.

It is first contended that the statements were signed by the corporation and not by the defendant personally. We do not agree with this contention. The fact that he added to his signature the words “Sec’y and Treas. Consolidated Fisheries, Inc.” does not make it the signature of the corporation as contended. We think that by the undisputed testimony, the signature was intended to be, and was, that of the defendant.

We are of the opinion that the statute of frauds relied upon is not applicable to the instant case. It appeared that the corporation was practically owned by defendant and his wife, and was controlled by defendant. He handled Mrs. Osius’ business matters. He had the full management and control of the business and it was a family affair, prior to plaintiff’s taking the stock. In the light of this record it may be said that defendant so manipulated the business as to get $2,000 of the plaintiff’s money into the corporation, in fact to reimburse himself and wife, and especially to reimburse himself for moneys he had paid out, and with which to pay debts for which he was personally liable, and to put new life into the business.

The following language in Hess v. Culver, 77 Mich, at page 602 (6 L. R. A. 498), is applicable here:

“The legal provision concerning the necessity of representations in writing to sustain an action upon favorable assurances concerning the character, conduct, ability, trade or dealings of another person, was intended to reach cases where the plaintiff has dealt with and given credit to the person favorably mentioned, and done so on the faith of the assurances. That statute cannot apply to conspiracies or frauds, where the representation is made to enable the party making it to profit by it.”

See, also, McDonald v. Smith, 139 Mich. 211; Diel v. Kellogg, 163 Mich. 162, 171; Hubbard v. Oliver, 173 Mich. 337; Massey v. Luce, 158 Mich. 128.

In Massey v. Luce, supra, many of the facts were similar to those in the instant case. Before the time plaintiff put in his money, Mrs. Osius and defendant had advanced moneys, the exact amount of which does not appear. At the time of the transaction, when plaintiff came in, the capital stock was increased, the defendant and wife took new stock for their advances, thereby directly benefiting themselves. This was done as a part of the scheme to get- the plaintiff’s money into the concern, and to get the contract with him.

If, however, it were to be held that the statute of frauds did apply, the statements in writing signed by the defendant were a sufficient compliance with the terms of the statute, and were personally binding upon the defendant.

We are constrained, however, to reverse the judgment below for the reason that the question as to the 800 pounds average catch of fish per day was submitted to the jury. There was not a scintilla of evidence on the part of the plaintiff that any such representation had ever been made by defendant, either orally, or in writing. Plaintiff’s counsel, however, asserting there was such testimony, was permitted, over the objection of defendant’s counsel, to offer and put in testimony that the average catch for 1913 had not exceeded 300 pounds per day, and also the value of fish. The court, in its charge, advised the jury that this was one of the claims of the plaintiff, for them to consider, and further advised them that a misrepresentation “as to the amount of fish caught” was an inducement upon which plaintiff had a right to rely, without investigation. In our opinion it was prejudicial error to receive testimony on the subject, and to submit the question to the jury. The subject should not have been gone into, or submitted to the jury at all. It is, on this record, impossible to say what amount of damages, if any, was awarded-to the plaintiff upon that subject. The claimed difference of 500 pounds per day was an item large enough to account for the entire verdict.

As the case must go back for a new trial, it should be said that a careful consideration of the record does not disclose any other prejudicial error. Upon the subject of misrepresentations as to value, attention is called to the cases cited, and what was said in the recent case of Face v. Hall, 177 Mich. 495, 499.

For the error pointed out the judgment of the circuit court is reversed, and a new trial granted, with costs to the appellant.

Ostrander, C. J., and Bird, Moore, Steere, Brooke, Fellows, and Kuhn, JJ., concurred.


source: Caselaw Access Project

license: Public Domain

text:
    KRUCZKOWSKI v. POLONIA PUBLISHING CO.
    1. Master And Servant — Workmen’s Compensation Act — Minors —Hazardous Employment.
    Under the provisions of section 11, Act No. 285, Pub. Acts 1909, as amended (2 Comp. Laws 1915, § 5332), prohibiting the employment of any male under the age of 18 years in any hazardous employment, where a boy has not attained the age at which he may lawfully be employed in the occupation or work in which he is injured, he cannot be regarded as an employee, within the provisions of the workmen’s compensation act. '
    2. Same — “Employee.”
    A valid contract of employment in the work in which the minor was injured is essential in order that such person may be an “employee” under the workmen’s compensation act.
    See notes in L. R. A. 1916A, 23; L. R. A. 1917D, 80.

      3. Statutes — Minors—Child Labor Laws — Master and Servant.
    The object of statutes regulating the employment of minors is threefold: To prevent persons of immature judgment from engaging in hazardous occupations; to prevent employment and overwork of children during the period of their mental and physical development; and to prevent, as far as the law is able to prevent it, a competition between weak and underpaid labor and mature men.
    4. Master and Servant — Minors — Hazardous Employment — Personal Injuries — Assumption oe Risk — Fellow Servant.

      Held, that children who are unlawfully set at work in hazardous employments and are injured therein, without fault or negligence on their part, should have the benefit of a common-law action against the wrongdoer, where the defenses of assumption of risk and negligence of a fellow servant are not available to a defendant.
    5. Same — Negligence—Assumption of Risk — Illegal Contract— Statutory Duty.
    Since assumption of risk is the result of a contract of employment, and the employer cannot legally contract to violate a statute, the servant does not assume the risk due to the omission of a statutory duty on the part of the employer.
    Error to Wayne; Davis, J., presiding.
    Submitted June 4, 1918.
    (Docket No. 11.)
    Decided September 27, 1918.
    Case by Joseph Kruczkowski, an infant, by his next friend, against the Polonia Publishing Company for personal injuries. Judgment for plaintiff. Defendant brings error.
    Affirmed.

      Clark, Emmons, Bryant & Klein, for appellant.

      Dohany & Dohany, for appellee.
   Stone, J.

The sole meritorious question raised and discussed by counsel in this case is whether the plaintiff had a right to bring this action to recover damages for a personal injury, or whether he should have proceeded under the workmen’s compensation act (2 Comp. Laws 1915, § 5423 et seq.).

It appeared that at the time of his injury, the plaintiff was 15 years, 8 months, and 5 days old. The injury occurred on February 4, 1915. The plaintiff went to work for the defendant in the month of December, 1914, as an errand or messenger boy, and so continued until the day of the accident, when his work was changed to operating a Gordon press. He had never worked anywhere before he was employed by the defendant. At the time of soliciting employment by the defendant, plaintiff took with him and produced his “working papers” and left them with the defendant. These papers authorized his employment in nonhazardous employment, but said plaintiff was not allowed to be employed in any hazardous employment.

It further appeared that the defendant was a private corporation engaged in the conducting of a printing establishment, and had accepted the provisions of Act No. 10 of the Public Acts of 1912, Extra Session, and had complied with all the provisions thereof, and that said acceptance had been approved by the industrial accident board of this State, and that due notice thereof had been posted in a conspicuous place in the plant or place of work of the defendant, and that the plaintiff had entered the employ of the defendant subsequent to said acceptance, and subsequent to the approval of said acceptance by said board, and subsequent to the said posting of notices thereof; and that at the time of the entering into said contract of hire, as errand or messenger boy, the plaintiff did not notify defendant in writing that he elected not to be subject to the provisions of said act. It was therefore claimed by the defendant that the court had no jurisdiction to hear, try and determine the matters and' things in the declaration alleged. There was a plea to the jurisdiction of the court, in the nature of a plea in abatement, and the same matters of defense were also claimed in a notice under the general issue. The plaintiff alleged and testified that he was set at work by the defendant to run a Gordon press, a hazardous employment, without proper instruction, and that while thus at work his right hand was so mangled and injured in the machinery that he suffered the loss of a number of fingers, and a part of the hand, thus rendering the same useless; all without any negligence on his part.

By section 11 of Act No. 285 of the Public Acts of 1909, as amended by Act No. 220, Pub. Acts 1911 (2 Comp. Laws 1915, § 5332), it is provided that no male under the age of 18 years shall be employed in any hazardous employment.

Upon the trial at the close of the plaintiff’s case, and again at the close of all of the evidence, the defendant moved the court for a directed verdict upon the ground that, there being evidence of the defendant’s compliance with the compensation act, the court had no jurisdiction. These motions were overruled and defendant duly excepted. The questions of defendant’s negligence, and whether the employment was a hazardous ° employment, and whether the plaintiff was guilty of contributory negligence were duly submitted to the jury in a proper charge. At the defendant’s request the following special question was also submitted to the jury:

“Was the employment of the plaintiff at the Gordon press, under all the evidence in this case, a hazardous employment within the meaning of section 11 of Act No. 220 of the Public Acts of 1911?”

This question was by the jury answered in the affirmative, and a general verdict for the plaintiff in the sum of $2,500 damages was returned. Thereupon, and within the time allowed, the defendant filed a motion for judgment notwithstanding the verdict, raising the same question. This motion was denied, and a judgment for the plaintiff in accordance with the verdict was duly entered. The same question was raised in a motion for a new trial, which being denied the defendant duly excepted, and the case is here upon writ of error. ■

By its assignments of error the same question is presented. Upon the questions of fact involved there was evidence to sustain the verdict, and there is no claim that the verdict was contrary to the weight of the evidence. Appellant calls attention to the following provisions of the compensation act. Section 4 of part 1 (2 Comp. Laws 1915, § 5426) provides that:

“Any employer who has elected with the approval of the industrial accident board hereinafter created, to pay compensation as hereinafter provided, shall not be subject to the provisions of section one; nor shall such employer be subject to any other liability whatsoever, save as herein provided for the death of, or personal injury to any employee, for which death or injury compensation is recoverable under this act, except as to employees who have elected in the manner hereinafter provided not to become subject to the provisions of this act.”

The position taken by.counsel for plaintiff, and held by the trial court was, that plaintiff was not within the operation of the compensation act because he was employed at a hazardous employment, which is prohibited by the statute upon that subject. This raises the question whether a minor legally employed at nonhazardous work, but prohibited by another section of the statute from being employed about dangerous machinery, or at hazardous employment, comes within the operation of the workmen’s compensation act. So far as we know there are no adjudicated cases in this State upon this proposition.

Subdivision 2 of section 7 of part 1 of the act (2 Comp. Laws 1915, § 5429) defines employees as follows:

“Every person in the service of another under any contract of hire, express or implied, oral or written, including aliens, and also including minors who are legally permitted to work under the laws of the State who, for the purposes of this act, shall be considered the same, and have the same power to contract as adult employees, but not including any person whose employment is but casual or is not in the usual course of the trade, business,, profession or occupation of his employer.”

If the plaintiff comes within the purview of this section of the act, obviously he cannot recover in this action. What interpretation should be given the words, “and also including minors who are legally permitted to work under the laws of the State?”

In Hetzel v. Wasson Piston Ring Co., 89 N. J. Law, 202 (98 Atl. 308), a minor was employed contrary to law, and in holding that the workmen’s compensation act did not apply, but that defendant was liable under the common law, the court used the following language:

“It can hardly be doubted that the legislature, in providing for the engrafting, of these statutory provisions on contracts of hiring, had in mind contracts which were valid in law, or, at least, contracts the making of which was not prohibited by express legislative enactment; for it would be entirely unreasonable to attribute to the legislature the intention of adding terms to a contract of hiring which it had already prohibited the parties from making.”

Is it not a fair interpretation of the statute to say that the words “minors who are legally permitted to work under the laws of the State,” refer to, and mean, the work being performed when the accident occurs, and do not refer to an illegal employment? Section 11, Act No. 220, Pub. Acts 1911, which was on the statute books at the time the workmen’s compensation act was passed, clearly prohibits the employment of a minor 15 years of age in any hazardous employment. Section 10 of the same act permits the employment of minors under 16 years of age at a nonhazardous employment, if the minor has a permit granted by the proper authorities. The employment permit in evidence contains the following:

“Said child is, therefore, hereby granted permission to be employed in accordance with said law.”

It is apparent that when his employment was changed from nonhazardous to hazardous work, his employment was contrary to law, and in violation of the permission granted in the employment permit. The law seems to be that where a child has not attained the age at which he may lawfully be employed in the occupation or work in which he is injured, he cannot be regarded as an employee, within the provisions of a compensation act. Hetzel v. Wasson Piston Ring Co., supra; Hillestad v. Industrial Ins. Commission, 80 Wash. 426 (40 Ann. Cas. 1916B, 789, 141 Pac. 913); Stetz v. Mayer Boot & Shoe Co., 163 Wis. 151 (156 N. W. 971). But in Foth.v. Maeomber & Whyte Rope Co., 161 Wis. 549 (154 N. W. 369), it was held that the rule did not apply to a minor who was at the time of entering the employer’s service, legally authorized to engage in the occupation for which he contracted to work, but was not permitted by law to do the particular work in which he was injured. In our opinion the better rule is that to permit a minor employee to be regarded as within the meaning and provisions of the compensation act, there must be a valid contractual relation, and a contract to be employed in the work in which he was injured; that a contract which is illegal, or in violation of a statute, will not suffice. A valid contract of employment in the work in which the minor was injured,is essential in order that such person may be an “employee” under the act. The statutes regulating the employment of minors, are humane statutes, and their violation is made a misdemeanor. Their object, in part, is the protection of the child. It has been said that the object of such laws is threefold: To prevent persons of immature judgment from engaging in hazardous occupations to their peril; to prevent employment and overwork of children during the period of their mental and physical development, and to prevent, so far as the law is able to prevent it, a competition between weak and underpaid labor and mature men, who owe to society the obligations and duties of citizenship.

We should not lose sight of what is best for the child. The law not only discourages, but prohibits the employment of children in hazardous employments. It is casting no disparagement upon the workmen’s compensation law to hold that its provisions were not intended to apply to children who are unlawfully set at work in hazardous employments; and that when they are injured in such employments, without fault or • negligence on their part, that they should have the benefit of a common-law action against the wrongdoer, where the defenses of assumption of risk and negligence of a fellow servant are not available to a defendant. Such a holding will, in our opinion, have a tendency to discourage such illegal employment, and be a benefit to the minor.

The following decisions of this court are to the effect that the neglect or violation of a statutory duty by an employer is itself actionable negligence; and that as the assumption of risk is the result of a contract of employment, and the employer cannot legally contract to violate a statute, the servant does not assume the risk due to the omission of a statutory duty on the part of the employer. Sipes v. Michigan Starch Co., 187 Mich. 258; Sterling v. Union Carbide Co., 142 Mich. 284; Murphy v. Grand Rapids Veneer Works, 142 Mich. 677; Swiek v. Ætna Portland Cement Co., 147 Mich. 454.

Upon the subject of the defense of the fault of a fellow servant, and the concurring negligence of .the master, see Syneszewski v. Schmidt, 153 Mich. 438; Kleinfelt v. J. H. Somers Coal Co., 156 Mich. 473.

We find no reversible error in the record, and the judgment of the circuit court is affirmed.

Ostrander, C. J., and Bird, Moore, Steere, Brooke, Fellows, and Kuhn, JJ., concurred. „


text:
    MOORE v. ANDREWS.
    1. Contracts — Construction by Parties — Question eoe Jury.
    Where a contract between a corporation and its manager as to compensation for his services was obscure and ambiguous, and it was defendant’s claim, supported by evidence, that for several months the ■ contract had been construed by both parties according to his contention, he was entitled to have such question submitted to the jury.
    2. Same — Requests to Charge — Instructions.
    It was error for the court below to refuse defendant’s re- . quested instruction that, if the jury should find that in the method of keeping the books and rendering monthly statements to the corporation, the parties adopted a method of construing the contract, the jury should adopt the same method of construing the contract in arriving at a verdict.
    3. Same — Trustee in Bankruptcy.
    Where the trustee in bankruptcy of a corporation, in a suit against the corporation’s former manager, is relying upon a contract which the corporation had a right to make, he is bound by the terms of the contract.
    4. Trover — Conversion—Money.
    An action of trover will lie against the former manager of a bankrupt corporation, at the instance of the trustee in bankruptcy, for money belonging to the corporation which he unlawfully retains, after it has been demanded.
    Error to St. Clair; Law, J.
    Submitted June 18, 1918.
    (Docket No. 53.)
    Decided September 27, 1918.
    Rehearing denied January 21, 1919.
    Case by Alex. Moore, trustee in bankruptcy of the Consolidated Fisheries, Incorporated, against Bert Andrews for the conversion of certain money of said corporation. Judgment for plaintiff on a directed verdict. Defendant brings error.
    Reversed.

      Burt D. Cady (Walsh & Walsh, of counsel), for appellant.

      James A. Muir, for appellee.
   Stone, J.

This is an action on the case, with a count in trover, for the alleged unlawful conversion of the money of the Consolidated Fisheries, a corporation. The plea was the general issue. Before plea there was a demand by the defendant for the particulars of the plaintiff’s demand. The bill of particulars filed was for the wrongful conversion of the following sums of money at the times mentioned, viz.:

June 30, 1914 ................................ $689.72
July 31, ” 121.75
August 25, ” 50.92

Upon the trial this bill was amended by adding $34 thereto. On the 28th day of January, 1914, the said corporation, through its authorized officers, entered into a written contract with the defendant which was as follows:

“This agreement made and entered into this 28th day of January, 1914, by and between Bert Andrews of Bay City, Michigan, hereinafter called Andrews, and the Consolidated Fisheries, a Michigan corporation, of Port Huron, Michigan, hereinafter called corporation.
“Witnesseth: That whereas said corporation is desirous of securing a general manager for its business and said Andrews represents himself as capable and experienced in all matters pertaining to the practical management of a commercial fishing establishment and the purchasing and selling of fish, and fish products; now upon those representations it is agreed as follows:
“Said corporation employs said Andrews as general manager, and said Andrews binds and engages himself for such work and agrees not to enter into any other employment, or to become interested in anything of a competitive nature for a period of five years from February 28th, 1914, which day will be the beginning of the term of services.
“Said Andrews agrees to devote all of his time and energy for said five years to further the interest of said corporation and agrees to faithfully account to the proper officers of said corporation, for any and all money and property entrusted to his care or handled by him.
“Said Andrews agrees to make full and true statements to the corporation directors, the first part of each month of the amount of fish, or other business handled during the previous month, and of the price paid and received therefor, and of the labor and services and expenses in detail, in connection with said business, and to keep at the office in the fish house of said corporation proper books of accounts in that respect, which books shall show in detail the affairs of said business as managed by said Andrews, and shall at all reasonable times be accessible to any officer or stockholder of said corporation.
“Said Andrews shall be allowed a separate bank account of two thousand ($2,000.00) dollars for carrying on the necessary business of said corporation and shall have authority to sign checks for same. Should said account be at any time over two thousand' ($2,000.00) dollars, said Andrews agrees to turn over all money above said two thousand ($2,000.00) dollars to the treasurer of said corporation at his. request.
“Said Andrews shall have for said period- of five (5) years the full management of said corporation’s business; buying and selling and producing of fish or anything else may be handled in such business, and the full control of its physical properties for said purpose, but he shall consult and counsel with the' secretary or treasurer of said corporation so as to be informed of the financial condition of said corporation and of its ability to make .purchases of any kind above said two thousand ($2,000.00) dollars, so that such officers may know of the plans and contemplated purchases and expenditures by said Andrews and acquiesce therein or disapprove thereof.
“Instead of salary, said corporation agrees to pay and said Andrews agrees to accept for said five (5) years’ services, one-half of the net profits of said corporation during that term, except profits growing out of said corporation’s own catch of fish hereinafter referred to. . It is agreed, however, by said Andrews and said corporation that said Andrews’ commission shall not exceed twenty-five thousand ($25,000.00) dollars, for the five (5) years’, services, or, in other words, if said one-half of the net profits due said Andrews should amount to more than the twenty-five .thousand ($25,000.00) dollars, during said five (5) years’ services, then all in excess of this amount shall revert to and belong to said corporation.
“It is also agreed that while the management of the plant and equipment of business shall be in charge of said Andrews, the catch of fish shall be sold and disposed of in the same manner as purchases by said Andrews as manager and the moneys resulting shall be the property of the corporation, less the sum of two cents per pound, which two cents is that upon which a part of the commission of said Andrews is to be figured. It being further understood the expenses for running said fish house including ice shall be paid out of said two cents and the profits on the purchases and sales of other business outside of said corporation’s own catch of fish and the said corporation will pay all other expenses.
“As a part of this contract; said Andrews agrees to purchase at par and pay for in cash to said corporation, on or before February 28, 1914, two thousand ($2,000.00) dollars of the capital stock of said corporation and it is agreed that at the end of said five (5) years, that if this contract be not renewed, that said corporation will repurchase all of said Andrews’ stock at par, and said Andrews agrees to sell the same.
“Said corporation agrees that if there are any dividends, they will declare same semi-annually, in June and December.
“And each party hereto agrees to faithfully perform all the promises and undertakings in his or their behalf hereinbefore set up.
“In witness whereof, the said parties hereto have hereunto set their hands and affixed their seals in duplicate the day and year first above written. “Bert Andrews,
“Consolidated Fisheries, Inc., •
“By C. R. Osius, Secretary and Treasurer.
“Signed, sealed and delivered in the presence of James A. Muir.
“The undersigned signatures are stockholders of the Consolidated Fisheries, Inc., and the above agreement is approved by them as signed below.
Shares of Stock
Par Value
$10.00 each
Stockholders’ names, P. O. Address Common
M. N. Osius, Port Hurop..................... 400
Chas. R. Eixis, Port Huron.................. 75
James A. Mum, Port Huron.................. 25
C. R. Osius, Port Huron..................... 136”

Early in March, 1914, the defendant went into the management of the business and continued until the fall of that year, when the corporation went out of business, and was later adjudicated a bankrupt in the Federal court. Later, the plaintiff herein was ap.pointed trustee in bankruptcy, and this suit was brought claiming that the defendant unlawfully converted the said moneys of the corporation while he was such general manager, under circumstances which entitled the plaintiff to maintain this action.

The case turns upon the construction that is to be given to the contract above set forth. It was the claim of the plaintiff, which claim was adopted by the trial court, that it was* contemplated by the parties when they made the contract that the sole compensation or commission of the defendant was to be one-half of the net profits of the concern, including both its function as a dealer in fish, and its function as a producer or catcher of fish.

In directing a verdict for the plaintiff for the full amount of his claim, as stated above, the court, after reading the paragraphs relating to defendant’s compensation, said:

“Now, gentlemen, the language of these two paragraphs of the contract, clearly divide the business of the corporation into two parts, first that of buying fish from other people from third parties, and selling them again. That is the function of dealing in fish. That is one part of the business of this corporation as it is to be managed by Andrews. Another part is fishing, catching fish, producing fish, as the contract says, and selling them.
“Now it appears to the court that the language in the 7th paragraph, that Mr. Andrews shall receive one-half of the net profits of said corporation during the term, is a controlling part of the contract. That is, it is contemplated by the parties, or it was contemplated by the parties, at the time, as appears from the language, that that should be the measure of his compensation. Now, in reference to the fish caught,. it gives him two cents a pound upon the fish caught by the corporation, and it says, ‘which two cents is that upon which a part of the commission of said Andrews is to be figured.’ In other words, I think it is plainly contemplated, or was contemplated by the parties when they made this contract, that the sole profits, or sole commission of Andrews was to be one-half of the net profits of the concern, including both its function as a dealer in fish, and its function as a producer, or catcher of fish. * * *
“Now, gentlemen, so far as the testimony shows in this case, the department of the corporation which caught fish, lost very heavily. That is, the contract, parts of which the court has read you, does not seem to contemplate there shall be any losses; it was evidently in the minds of the parties at the time they made the contract, that all would be clear sailing, and there would be profits all the time, and no losses. Now, there have been very heavy losses in the department that had to do with catching of fish, or producing of fish. As to whether there have been profits in the department devoted to the buying and selling of fish, is very much a disputed question here. Mr. Andrews rendered monthly statements, and has taken and retained the amount of $896.40, which he claims to be one-half of the net profits made by that part of the business that had to do with the buying and selling of fish. I have no doubt whatever but what Andrews is entirely sincere in-this claim; I think he really believes that his system of keeping the books and retaining this money, is exactly in compliance with the terms of the contract, and the contract is somewhat obscure, it is a very difficult contract to construe, but the construction belongs to the court. * * *
“Taking this contract as a whole, under the testimony which has been given quite thoroughly here in court, I cannot see how there are any net profits in the business, one-half of which is to be given to Mr. Andrews. I cannot conceive of any reasonable theory of the construction of this contract, taking into consideration the language of the contract itself, and the circumstances surrounding the making of the contract; I cannot conceive any construction of the contract that would give Mr. Andrews any profits, hence, this $896.40 which he has does not belong to him, but belongs to the creditors of the corporation, who are here represented by the plaintiff.”

It appeared in evidence upon the trial that negotiations between the defendant, on the one part, and Dr. Osius, the secretary and treasurer of the corporation, and Mr. Muir, the attorney of the corporation, on the other part, had been pending for more than a-month before the contract was finally signed on January 28, 1914.

At that time Dr. Osius and his wife were the owners of a majority of the stock, and Mr. Muir was the duly authorized attorney of the corporation. The defendant had submitted a draft of contract which did not suit Mr. Muir. On December 26, 1913, Mr. Muir wrote the defendant a letter and apparently either suggested a new draft, or referring to a prior draft of contract, which had been prepared by him. In that letter, among other things, he said:

“They want you to come here as manager, and if you want to come and invest $2,000 in the capital stock, come, and the corporation * * * will see that you are supplied with proper funds for the purchase of fish. It will give you one-half of the net profits of all fish bought from outsiders, and one-half of the net results of two cents per pound on its own catch, with the understanding that you are to have one-half of the net profits, during the five years, up to $25,000.”

The draft of contract submitted by Mr. Muir contained the following:

“For compensation,-the corporation agrees to pay, and said Andrews agrees to accept for said five years’ services, one-half the net profits of said corporation during that term, except that growing out of the catch of said corporation, hereinafter referred to, but not to exceed $25,000 during said term, it being understood that one-half said net profits for any year might be less than $5,000 but, if the total net profits during the term hereof, equal the sum of $50,000 said Andrews is to receive one-half thereof, but no more on account of such services. It is also agreed that, while the management of the plant and equipment of business, exclusive of-said boats, shall be in the charge of said Andrews, the catch, or product of the catch shall be sold and disposed of, in the same manner as purchases by said Andrews, as manager, and the moneys resulting shall be the property of the corporation, less the sum of two cents per pound, which two cents is that upon which a part of the compensation of said Andrews is to be figured. It being further understood that all expenses of said business, exclusive of running the boats, shall be paid out of said two cents, and the profits on the purchase and sale of other fish outside of the said catch and products of said corporation, and that the corporation will pay to man, fuel, repair, equip for navigation, and run said boats.”

This letter and draft of contract were offered in evidence by the defendant “as showing the negotiations leading up to the contract that was really executed.” The offer was objected to as immaterial and irrelevant, and the objection was at first sustained. After some discussion the court said, referring to the letter:

“Inasmuch as this is purely a question of construction for the court, in order to allow a record to be made, I will admit this, but I do not think there is any use of reading it to the jury.”

And the draft of contract was “received in the same way.” The defendant testified:

“I wrote back to him shortly after I received this letter from Mr. Muir. I don’t think I received any reply from Mr. Muir to my letter. I had a talk with him the same day the contract was signed, only before it was signed and once before that. And as a result of that conference, the agreement which has been entered into, and offered in evidence, was entered into. I remember a clause in the last paragraph on the second page which says that the ‘corporation will pay all other expenses.’ * * *
“Q. Did you have such a conversation with him after you entered into the contract?
“A. On the same day.
“The Court: Was that after the contract was signed?
“A. Both before and after.
“The Court: Whatever talk you had about that clause after the contract was signed, on the same day, you may tell.
“A. I wasn’t to pay any of the rents, that there was understood, no rents out of that part of it. Just as the contract reads; we talked that over, I wasn’t to pay any rent for the fish house part. My salary, instead of salary, was to be commission. They paid the rents and I done the work there.
“Q. Was there any discussion as to what should be included in the expenses of the fish house account?
“A. Just the running part of the fish house, the men that I hired and he hired. That was talked before and after the contract. The same day, too.
“Q. What was the discussion as to what you should charge against the fish house, in the way of expenses ?
“Objected to as not competent, and that the parties to whom he was talking had no authority to change or alter the contract.
“The Court: To whom were you talking?
“A. Dr. Osius.
“The Court: Go ahead.
“A. I was to pay for the men I had helping to pack up fish. If I didn’t have any men, there was no men to pay, and what ice I used I was to pay for.”

The defendant also testified that after taking possession, he opened a set of books, the same that had been offered in evidence.

“I entered these books in a double entry system with two accounts, the fish house account, and the corporation account. These books were kept according to that account all the way through, I did not act as manager of the company as the contract provided. I was the manager of the buying and selling of the fish, and supposed to be manager of the other part; but I wasn’t. Dr. Osius was the manager of the other part. Dr. Osius ran the part of the business known as the corporation end of it. I ran the fish house end of the business, the buying and selling. I have upon the books of the corporation an account known as the fish house account. I entered upon that account the several items that should be credited to it, and charged against it the several items that should be charged against it. That account shows a profit, a net profit of somewhere near $1,800. * * * I kept track of all the amounts and reported them to Mr. Muir. I have reported to the corporation all moneys that should be credited to that account, every cent of it, and also all moneys that should be charged against it, and after doing this it showed a net profit of somewhere around $1,800. That is what is known as the fish house account, and that is the part of the business I looked after. The part that Dr. Osius looked after showed a loss. * * * Dr. Osius looked at the books a good many times. I showed him the books. He did not make any comment about the books, except he said they were kept fine. He never objected to anything about the statement he had. He never made any objection to any charges I made on the different accounts. He never made any objections to the items that I put in the different charge accounts. I did furnish a monthly statement of the business transferred there. These eight slips represent the monthly statements. They are fish house statements. I made them out at the dates indicated, and after making them out kept one, and gave one to the doctor. Dr. Osius never objected to those accounts.”

The accounts were received in evidence. The defendant then testified at great length to the correctness of these accounts, the result of which showed a net profit, as he testified, of $1,792.81, saying: “I credited the corporation with $896.41 and myself with $896.40, making a total of $1,792.81,” being the amount sued for. He further testified that Dr. Osius knew how he was keeping the books, that the doctor got the statements, saw the books and knew what money defendant was drawing, and no objection was made, or question raised. It is undisputed that the only officers or persons representing the corporation, with whom the defendant ever dealt, were Mr. Muir, its attorney, and Dr. Osius, the secretary and treasurer. Mr. Muir was sworn and denied some of the statements of the defendant, but Dr; Osius was not sworn as a witness at all, on the trial.

Upon the trial it was the claim of the defendant that under the contract, he was to receive in lieu of salary two cents per pound from the sale of the fish caught by the company, and that he was to have one-half of the profits on all fish purchased from outsiders, and that the only expense to be deducted from these sums was the expense for the labor of running the fish house, and cost of the ice used; that the books kept by defendant, .and with which Dr. Osius and Mr. Muir were familiar, showed that, as soon as he started the work, he opened a fish house account in which he entered only the fish house expenses and the purchases and sales of fish; that these books were inspected by Dr. Osius and Mr. Muir frequently, and no protest or objection was made as to this division of the money until after the corporation suspended business; and that the course pursued by defendant was consistent with the letter of Mr. Muir, which related to a form of contract substantially like the one finally signed.

It is urged by defendant that the contract when construed in connection with the nature of the business should be held to be as claimed by him, and that it is unreasonable to hold that by the contract it was intended that the defendant should be compelled to work five years before he could claim any compensation for his labor; and then make such compensation dependent upon whether there had been a net profit in the entire business.

Finally it is urged by defendant that if he is not right in the foregoing contention, then oral evidence was admissible to explain portions of the contract which are ambiguous; and that if the contract was construed by the action or conduct of the parties and by defendant making entries showing that he was being given credit for profits in accordance with his contention, and the officers of the company knew that he was doing this, and made no protest, then this construction would be binding upon the company.

The defendant, after requesting the court to direct a verdict in his behalf, submitted the following requests to charge, in case the requests to direct a verdict were refused.

“3. The contract entered-into in this case contains certain provisions as to what Mr. Andrews was to obtain in lieu of salary. These provisions are not clear, and certain doubt remains after reading the contract, as to its proper interpretation. Evidence has been introduced tending to show that Mr. Andrews’ .method of keeping the corporation’s books required to be kept by the contract, and that monthly statements of the business were rendered to Dr. Osius, and that the method of keeping the books and rendering monthly statements was based upon an interpretation of the contract in accordance with the claim of the defendant herein. If you find such evidence to be true, and that the parties to the contract adopted a construction and interpretation thereof, by their actions, then I instruct you that such interpretation should be also adopted by you fin rendering your verdict.
“U., If you find that Mr. Andrews’ method of keeping the books, required to be kept under the contract, was known to the corporation, and assented to by it, and that he rendered monthly statements to the corporation, as he has testified, which were accepted without question by the corporation, and if you further find that the method of keeping such books, and rendering such statements showed that the parties themselves had adopted a method of construing this contract, as to how his commissions should be figured, then I instruct you that you should adopt the same method of construing the contract, in arriving at your verdict.”

Judgment having been entered on the verdict, the defendant has brought the case here, and by proper assignments of error the same questions are raised, as in the requests to charge. Defendant invokes the following rule, and cites some of the following authorities :

“Where the parties to a contract have given it a practical construction by their conduct, as by acts in partial performance, Ssuch construction is entitled to great, if not controlling, weight in determining its proper interpretation.” 13 Corpus Juris, p. 546; Switzer v. Manufacturing Co., 59 Mich. 488; Farnsworth v. Fraser, 137 Mich. 296; Axe v. Tolbert, 179 Mich. 556; Ardis v. Railway Co., 200 Mich. 400; Brown v. A. F. Bartlett & Co., 201 Mich. 268.

We are of the opinion that there is much force in this claim of the defendant. The contract, in its terms referred to, is obscure and ambiguous. The practical construction of such provisions by the parties was material, and involved a question of fact which should have been submitted to the jury.

We think that the court erred in directing a verdict for the plaintiff, and in refusing to submit the case to the jury, and in refusing to give defendant’s third and fourth requests to charge.

But it is urged by the plaintiff, and appears to have been held by the trial court, that the rule above stated cannot apply here, because the action is brought by the trustee, in bankruptcy. Upon this record the trustee is suing in right of the bankrupt, relying upon the contract of the corporation. The question is, What was that contract? We think that the corporation had the right to make the contract as claimed by the defendant. See authorities cited in Courtney v. Youngs, 202 Mich. 384.

It is also urged by the defendant that the court erred in entering a judgment in trover. If it shall, however, turn out that the money taken by the defendant was the money of the corporation at all times, as claimed by the plaintiff, the same having been demanded, we are of the opinion that trover would lie for its conversion. Hogue v. Wells, 180 Mich. 19; Reed v. McCready, 170 Mich. 532; Pierce v. Underwood, 103 Mich. 62; Bearss v. Preston, 66 Mich. 11.

Mistake, or ignorance, or even belief that the money belonged to a defendant “does not constitute a defense in trover.” . Tidey v. Kent Circuit Judge, 179 Mich. 580, 586.

For the error pointed out the judgment of the court below is reversed and a new trial granted, with costs to the appellant.

Ostrander, C. J., and Bird, Moore, Steere, Brooke, Fellows, and Kuhn, JJ., concurred.


author: Stone, J. Ostrander, C. J.

text:
    BRADFORD & CO. v. BAXTER.
    1. Attachment — Fraudulent Conveyances — Identity of Property — Description—Amendments.
    On a bill in aid of execution to set aside a deed of certain lots as in fraud of creditors, an objection that the property sought to be attached was not properly described is without merit, where it appears, that the description was the same as in the conveyances to defendants, that there is no question as to the identity of the property, and the plaintiff was, on an ex parte hearing of motion to amend, granted an order permitting the sheriff who served the writ of attachment to amend his return as to the description of the property levied upon.
    2. Same — Amendments—Ex Parte.
    Amendments are permissible in attachment proceedings on ex parte application.
    3. Same — Undivided Interest — Title to Property.
    A bill in aid of execution will lie as to the undivided two-thirds interest in the attached property standing in the name of defendant, but not as to tbe undivided one-tblrd in tbe name of a third party.
    4. Same — Fraudulent Conveyances — Husband and Wife.
    Evidence that at tbe time of defendant’s marriage tbe wife bad considerable property in ber own right, that she loaned money to tbe husband in consideration of which tbe attached property was deeded to ber, held, sufficient to sustain tbe decree of tbe court below dismissing tbe bill.
    Appeal from Kent; Lamb, J., presiding.
    Submitted June 14, 1918.
    (Docket No. 20.)
    Decided September 27, 1918.
    Bill in aid of execution by Bradford & Company against Frank C. Baxter and another to set aside a deed. From a decree dismissing the bill, plaintiff appeals.
    Affirmed.

      Cady & Andrews, for plaintiff.

      Frank J. Powers, for defendants.
   Stone, J.

The bill of complaint herein was filed in aid of execution, to set aside a deed executed by defendant Frank C. Baxter to his wife, Sadie S. Baxter, bearing date January 17, 1914. It appears from the record that growing out of a contract entered into between the plaintiff and defendant Frank C. Baxter, dated March 21, 1913, the latter became and was indebted to the plaintiff, and that on May 31, 1916, in the circuit court for the county of Kent, the plaintiff recovered a judgment against the said defendant Frank C. Baxter, in a suit in attachment, in the sum of $5,816.72 damages and costs taxed at $63.80.

At the time of the commencement of the attachment suit on December 22, 1915, the defendants were both nonresidents of this State, and the writ was served by attaching the following real estate in the city of Grand Rapids, county of Kent, viz., lot 19 and the south 15 feet in width of lot 20, in block 6 of Wenham’s addition to said city, and there was no personal service of the writ, but the required notice of attachment was given and proof filed therein, and there was no appearance in said attachment suit by the defendant therein, and judgment was taken by default.

After the entry of judgment, the issuing of execution thereon, and the levying thereof on the real estate attached, as shown by the certificate of levy under attachment, the plaintiff was, on an ex parte hearing of motion to amend, granted an order permitting the sheriff who served the writ of attachment to amend his return as to the description of property upon which the attachment was levied to read as follows:

“Lot 19 and the south 15 feet in width of lot 20, in block 6 of Wenham’s subdivision of blocks 3 and 6, city of Grand Rapids, Kent county, Michigan.”

At the time of the attachment aforesaid the title of record to the property described in the certificate of levy under attachment was in defendant Sadie S. Baxter, and had been continuously since January 17, 191á, and she had become possessed of said title on that date by virtue of the said deed of that date executed by said defendant Frank C. Baxter. Levy of execution on the property in question was made on July 29, 1916, and the bill herein in aid thereof, was filed September 12, 1916.

It appeared that the defendants were married to each other in June, 1911, and that prior to said .marriage the defendant Sadie S. Baxter had been an actress, had received a good salary, and had accumulated a considerable sum of money, and it was undisputed that at the time of said marriage she was worth upwards of $10,000.

The plaintiff was a manufacturer of pennants and novelties at St. Joseph, Michigan, and the defendant Frank C. Baxter was a dealer in advertising novelties, and the contract between the parties related to the sale of a large quantity of pennants. The learned circuit judge, who heard the case at the circuit, filed a written opinion, which is returned with the record, and from it we quote as follows:

“At the time the indebtedness from Frank C. Baxter to Bradford & Company, in the spring of 1913, accrued, and for some months prior thereto, defendant Sadie S. Baxter was a good-faith creditor of defendant Frank C. Baxter, and she so continued to be, and was such on the 17th day of January, 1914; and on the 17th day of January, 1914, the amount which the said Frank C. Baxter was indebted to said Sadie S. Baxter was reasonably commensurate with the value of the real estate in question herein; that while I am satisfied from the testimony that Frank C. Baxter intended to, and did what he could to delay and thwart the collection of any claim that the plaintiff may have against him, yet I am not satisfied from the proofs that defendant Sadie S. Baxter had any knowledge of just what Frank C. Baxter was doing, or what his intentions were in that regard. Sadie S. Baxter, being a creditor of Frank C. Baxter, at the time of the transfer, he was acting within his legal right in giving her the preference, without regard to his motive and without regard to the result. Sadie S. Baxter, being a creditor in an amount reasonably commensurate with the value of the real estate transferred, to avoid the conveyance the burden is on the plaintiff upon the whole case to establish, as a fact, that both grantor and grantee are guilty of the fraud complained of. In my judgment the burden has not been sustained.”

In a supplemental opinion, referring to the sentence, “the burden is on the plaintiff, upon the whole case to establish,” etc., the circuit judge said :

“What the court meant by the use of said expression is no more than this: That in the judgment of the court, the defendants had met the prima, facie case of the plaintiff as to any connection of Sadie S. Baxter with the alleged fraud, by the greater weight of the proofs, and that then the burden shifted to the plaintiff, and it had not sustained that burden, upon the case taken as a whole.”

Some of the' salient facts in the case should be stated. The paternal grandmother of Frank C. Baxter originally owned 19 lots on Burton avenue in Grand Rapids, and also the property in question located on Division street, and known as the Wenham’s addition property. Under the grandmother’s will the father of Frank C. Baxter had a life estate in this property. He died in 1909, and the said property came to Frank C. Baxter and his two brothers, Don and Solon, each having an undivided one-third interest therein. In July, 1911, Don had a third interest in the property in question, and also a third interest in the 19 lots. Frank C. had an equal interest in the same property. Solon, the other brother, had a third interest in the property in question, but no interest in the 19 lots, he having sold the same to his mother. Prior to 1911, Don had lived in the East and had been in the employ of Frank C. In 1910, Don became afflicted with tuberculosis and later came to Grand Rapids.

The defendants soon after their marriage, and in July, 1911, came to Grand Rapids where they found Don in bad physical and pecuniary condition. It was the claim of the defendants, and they testified, that desiring to aid Don, it was so arranged that defendant Sadie S. advanced $2,300 with which to purchase Don’s interest in the property, it being understood that the interest should be conveyed to Sadie S. Instead of taking the deed in her name, Frank C. took the deed in his own name, but he claimed that he held it for Sadie S. They further testified that in August, 1912, defendant Sadie S. loaned to Frank C. Baxter $3,000 for which he was to deed to her his interest in the property. On July 9, 1913, defendant Frank C. Baxter filed a bill against Solon for partition of the property in question. The bill was prepared and signed by his solicitor. It was therein stated that he owned at that time a two-thirds interest in the property, “that no person or persons other than your orator and the said Solon W. Baxter, Jr., have any interest or title to said lands or any part thereof, in possession, remainder, reversion or otherwise.” Later, the date not appearing, Sadie S. Baxter was.made a party complainant to the bill for partition, and she became the purchaser at a circuit court commissioner’s sale, of Solon’s interest, paying $1,500, an allowance being made of $446 on account of rent while the premises had been in the occupancy of Solon. This deed ran directly to her from the commissioner, and the sale appears to have been made on May 29, 1915.

Defendant Sadie S. was the owner of a valuable home in the city of Brooklyn, N. Y., when she married Frank C., upon which there was a considerable mortgage. It was the claim of both defendants that it was agreed between them that Frank C. should pay rent to Sadie S. for the use of her home at the rate of $65 a month, but that no rent had ever been paid. On January 12, 1914, the defendant Frank C. Baxter confessed two judgments in favor of defendant Sadie S. Baxter in the supreme court of New York, New York county, one in the sum of $2,200 said to be for money loaned in 1911 and 1913, and the other for the sum of $2,015 for rent of said home of Sadie S. Baxter. In her testimony the defendant Sadie S. Baxter appeared to have little knowledge or information relative to said judgments; but claimed that the matter had been attended to by her New York attorney, who advised such course. Five days after the entry of such judgments the deed of January 17, 1914, was executed by defendant Frank C. Baxter to her of the property in question, and the 19 lots. She claimed that while the judgments had not been discharged or satisfied of record, they really were satisfied and paid by said conveyance. She made no claim to the 19 lots, and testified that she had no knowledge relating to said lots and did not know that they were included in her deed. Those lots were afterwards sold by defendant Frank C. and the proceeds used in the payment of a debt to his mother, and also in payment of alimony due the trustee of his former wife. The 19 lots are not here in question. A decree having been entered dismissing the bill of complaint with costs to the defendants, the plaintiff has appealed. Some objections to the jurisdiction of the court in the attachment case should be referred to. It is urged by defendant that the judgment was of no validity because the property sought to be attached was not properly described; and that the court had no power to grant the amendment which was ordered. It is of course elementary, that in such a case only the property attached can be levied upon and sold. (Section 13053, 3 Comp., Laws 1915.)

It should be stated that in the deed from Frank C. to Sadie S. as well as in the report of the commissioner, and in the-deed from the circuit court commissioner to Sadie S. Baxter, the property was described in the same language as in the attachment levy. The primary object of a description is to identify the property. There seems to have been no question of the identity of the property. By the defendants in their answer and testimony the property is ref erred, to in different ways: as the Wenham avenue property, as 412-414 Division avenue property, all said to be the same property that was in Wenham’s addition. It is stated by plaintiff’s counsel that there is but one lot 19 and but one lot 20 in Wenham’s addition. The most that can be said from this record is that the contrary does not appear. Our statute of amendments is very broad. (Sections 12478-12481, 3 Comp. Laws 1915.) It has been held that the statute of amendments applies to attachment proceedings. Barber v. Smith, 41 Mich. 138, 145. Amendments have been allowed in attachment proceedings on ex parte application. Kidd v. Dougherty, 59 Mich. 240. We think that the objection is without merit.

It is also urged that as the property attached did not stand in the name of Frank C. Baxter the judgment is a nullity. It will be noted that as to the undivided two-thirds of the property in question the title had been in Frank C. Baxter. As to the» undivided one-third the title had never been in his name, but went direct from Solon, by the circuit court commissioner to Sadie S. Baxter. Our statute provides that:

“All the real estate of any debtor * * * including lands fraudulently conveyed with intent to defeat, delay, or defraud his creditors * * * may be levied upon and sold on execution,” etc. (Sec. 12897, 3 Comp. Laws 1915.)

As to the undivided two-thirds interest the point is not well taken. As to the undivided one-third, a bill in aid of execution would not lie. Archer v. Laidlaw, 129 Mich. 198; Hackett v. Kenning, 170 Mich. 583. See, also, Bliss v. Tyler, 159 Mich. 502, where the title to the lands attached had never been held by Tyler.

Upon the merits of the case the plaintiff’s counsel strenuously insist that there was a conspiracy on the part of both defendants to defeat the claim of the plaintiff. There is much criticism of the testimony of the defendants as to the claimed bank deposits of Sadie S. Baxter and of the methods of proving them, in the use of memoranda, etc. We think, however, that there was competent evidence that Sadie S. was possessed of money and that it was deposited in banks, as claimed. One may testify that he is the owner of personal property without producing the bill of sale. Plaintiff urges that it was improbable that Sadie S. Baxter had money in bank, while she was paying interest on a mortgage on her home. It is further urged that if any money was paid by Sadie S. to Frank C. it was a gift. It is true that in some instances Sadie S. used the expression that she “gave” Frank C. the money. Yet in the same connection she testified what was to be done by Frank C. and how the loans were to be paid. It is very evident that she was not a business woman, and was ignorant as to business methods. We are aware of the rule that in such cases the testimony of husband and wife should receive careful scrutiny. It is true that no charge was entered upon any book, either as to the loans or the rent. What was said in Ullman v. Thomas, 126 Mich. 61, at page 66, is appropriate here:

“True it is that the business was not conducted with the same care and business prudence that would be expected between business men or strangers; but it is not more unusual than is frequently found where the relation between the parties is that of husband'and wife, and where the wife trusts the husband, so far as her business affairs are concerned; and, so far as she is concerned, it must be held that the transaction was an honest one, by which she intended to secure the payment and satisfaction of her debt, and did not intend to hinder, delay, or defraud the creditors of her husband.”

The testimony was taken in open court, and the trial court had an opportunity to see the witnesses, and to judge of their appearance and fairness. That court has passed upon this testimony, accepting the theory and claim of the defendants, and we cannot upon this record say that the court below erred in believing that the defendant Sadie S. Baxter was a good-faith creditor of Frank C. Baxter. The language of Justice Brooke in Smith v. Tolman, 166 Mich. 651, 653, is in point here.

After a careful consideration of the entire record, we have concluded, though with some hesitation, that the conclusion reached by the court below was correct. Its decree will be affirmed, with costs to the defendants.

Bird, Moore, Steere, Brooke, Fellows, and Kuhn, JJ., concurred with Stone, J.

Ostrander, C. J.

In my opinion, Bliss v. Tyler, 159 Mich. 502, denies the validity of the judgment in attachment, for which additional reason I concur in affirming the decree.