author: Kuhn, J. Ostrandee, C. J.

text:
    COCHRAN v. STAMAN.
    1. Brokers — Frauds, Statute of — Commission on Sale of Land.
    In an action by a broker upon a written contract- to pay him all over $90 an acre received on the sale of a farm, as commission for making the sale, where the defense is that the writing was- insufficient under the statute of frauds (section 11981, subd. 5, 3 Comp. Laws 1915), the test is as to whether the promise to pay the commission was in writing, and not as to whether the written agreement or promise contains also all of the details necessary to be stated in an agreement to sell and convey real estate.
    2. Same— Commission — Evidence — Admissibility — Purchaser, Ready, Able, and Willing.
    Where the seller had agreed to accept $3,000 in cash and a mortgage at five per cent, for deferred payments, testimony that the broker produced a purchaser on the above terms, and, when his responsibility was questioned by the seller, the broker agreed to guarantee the sale, his responsibility being admitted, by taking the deed in his own name and executing the notes and mortgage, which he tendered, with $3,000, to the seller, held, admissible to show that the broker had earned his commission bjr furnishing a buyer ready, able, and willing to buy.
    3. Same — Pleading—Proofs—Variance.
    Nor was there a fatal variance between the declaration and the proofs, on the ground that the action was brought to recover a commission of $10 an acre on the sale of 237 acres of land, and the proofs showed that plaintiff proposed to himself buy the land at $90 an acre, since the plaintiff and the proposed purchaser both testified, in substance, that the purchaser agreed to take the land from plaintiff for $100 an acre.
    4. Same — Evidence—-Appeal and Error — PIarmless Error.
    Testimony of plaintiff, in corroboration of his claim, that defendants refused to go on with the sale because the land was worth more, that at the time of the trial the farm was worth $250 an acre, held, even if incompetent, not so prejudicial as to require reversal of the judgment.
    Fellows, Stone, and Kuhn, JJ., dissenting.
    See notes in 44 L. R. A. 601; 9 L. R. A. (N. S.) 933; L. R. A. 1915E, 976.

      Error to Wayne; Hally, J.
    Submitted April 24, 1918.
    (Docket No. 84.)
    Decided June 3, 1918.
    Assumpsit by Fred J. Cochran against Herman Staman and another for commissions on the sale of real estate. Judgment for plaintiff. Defendants bring error.
    Affirmed.

      Keena, Lightner, Oxtoby & Hanley, for appellants.

      Donnelly, Hally, Lyster & Munro, for appellee.
   Kuhn, J.

{dissenting). This is an action by a real estate broker to recover a commission claimed to be due him under the following agreement:

“Northville, Mich., July 13, 1915.
“F. J. Cochran :
“In consideration of the services performed and to be performed by you, I, the undersigned, hereby give to you for a term of three months the exclusive sale of the following described property: N. W. *4 of section 7 and the west °f the northeast *4 of section 7, T. 1 S. range 9 east, containing 237 acres more or less; and you are hereby authorized by me to accept a deposit to be applied on the purchase price and to bind the sale of the said above described property upon the following terms: $3,000 cash, or $............cash,balance at 5% interest..................... and in case of sale by you of said above described property I agree to pay you................dollars as a commission and all over and above the sum of ninety dollars per acre received therefor, which said, commission and excess over agreed price is to be retained by you out of the first money paid on said property. Upon receipt of payment according to this contract I agree to make a good and sufficient conveyance of said property by warranty deed.
“This agreement shall be in full force for the term above specified, also to continue until I give you 30 days written notice of withdrawal.
“I do here state that I am in peaceful possession of the above described property and that my title to same is good and is without incumbrance except..........
“Owner......Witness (Sgd.) Anna Staman (Seal)
“Address..... “ H. C. Staman (Seal)
“Phone.” ■

The circumstances attending the execution of this agreement were as follows: After some preliminary-talks between the plaintiff and the defendant Herman Staman relative to the possibility of effecting a sale of the latter’s farm, the plaintiff, on July 13, 1915, having first prepared a typewritten outline of the above agreement, went out to the farm and found Mr. Staman in the hay'field. After a little conversation with him, plaintiff went to the house to get the description of the property. Mrs. Staman showed him the deed of the farm, and he inserted the description in the proposed agreement and filled in the price, amount to be paid in cash, etc., and had’ Mrs. Staman sign it; then he took it back to Mr. Staman in the field, where the latter signed it. It is plaintiff’s claim that Mr. Staman read it over before signing, or rather that they compared the two copies of the agreement, plaintiff reading one aloud while Mr. Staman watched the other. Mr. Staman denied this, claiming he could not read English, and insisted that plaintiff had misrepresented to him the contents of the writing and that he signed it relying upon the misrepresentation. Plaintiff and defendant each retained a copy of the agreement.

After several months’ effort, plaintiff found a purchaser for the farm, a Mr. Elmer E. Gray, and reported this fact to Mr. Staman. Mr. Staman raised some question as to Mr. Gray’s financial responsibility, whereupon plaintiff offered to guarantee the sale. A few days later, according to plaintiff’s testimony, they discussed the terms of the mortgage to be taken for. the deferred payment, and it is plaintiff’s claim that Mr. Staman then agreed that a five-year mortgage-would be all right, though expressing a preference for a ten-year mortgage. Mr. Staman in his testimony does not refer to this specifically, but from his version of the transaction it is to be inferred that it is his claim that no such interview took place. Plaintiff further testified that he then told Mr. Staman that, in order to obviate the question of Mr. Gray’s financial responsibility and as to the amounts and times of payments, he (plaintiff) would guarantee5 the transaction by taking the deed in his own name and giving his own note and mortgage for the deferred payment, payable in five years, and. that he would re-sell to Mr. Gray upon such terms as Mr. Gray might see fit or be able to make. Mr. Gray was a witness and testified that he had offered to buy the farm at the price of $100 per acre, with a cash payment of $3,000, balance at 5%, secured by mortgage, and that the papers for the transaction between plaintiff and himself were prepared and left with his attorney. On the 9th of October, plaintiff made a tender of $’3,000 in cash, his note for $18,330 payable 5 years after date with interest at 5% per annum, and a committee form mortgage bearing even date with and collateral to said note, covering the said farm property, and requested Mr. Staman to execute and deliver a deed of said farm to plaintiff. Defendant refused to accept the tender or to execute the deed. The tender was made on the basis of the price of $90 per acre specified in the agreement. In this suit plaintiff claims the sum of $10 per acre as the commission specified in the agreement, and the jury returned a verdict in his favor of $2,537.85.

The defendants rely upon the following grounds for reversal.

1. That the agreement sued upon is void under the statute of frauds;

2. That there was a variance between the damages alleged and the damages proved;

3. That error was committed in permitting the plaintiff to give testimony relative to the increase in the value of the property up to the time of the trial.

In support of the first proposition counsel for appellants argue that the memorandum, to be sufficient under the statute of frauds, must be complete in itself, and leave nothing to rest in parol; that the writing in question does not show in all respects üpon what terms the defendants would be willing to sell, in that it does not state when and how he would require the balance of the purchase price to be paid; that these terms are left to future negotiations; and that it is just such uncertainties as this that the statute sought to avoid. After a careful consideration of the question, we think counsel are right in this contention. The provision of the statute here applicable (section 11981, 3 Comp. Laws 1915) is as follows:

“In the following cases specified in this section every agreement, contract and promise shall be void, unless such agreement, contract or promise, or some note or memorandum thereof be in writing and signed by the party to be charged therewith, or by some person by him thereunto lawfully authorized, that is to say: * * *
“5. Every agreement, promise or contract to pay any commission for or upon the sale of any interest in real estate.”

In cases arising under other subdivisions of this section (see Hall v. Soule, 11 Mich. 494; Ayres v. Gallup, 44 Mich. 13; Baumann v. Lumber Co., 94 Mich. 365; Palmer v. Rolling Mill Co., 32 Mich. 274; James v. Muir, 33 Mich. 223; McElroy v. Buck, 35 Mich. 434), as well as in cases arising under the section of the statute of frauds relating to contracts for the leasing or sale of lands (see Gault v. Stormont, 51 Mich. 638; Webster v. Brown, 67 Mich. 331; Messmore v. Cunningham, 78 Mich. 623; Ebert v. Cullen, 165 Mich. 75; Harris v. Brown, 172 Mich. 164; Hilberg v. Greer, 172 Mich. 505; Nichols v. Burcham, 177 Mich. 601), this court has consistently held that, in order to make a contract or agreement valid under the statute, the written memorandum thereof must be complete in itself and show all the terms of the contract, and that no resort may be had to parol evidence to add to the contents of the writing, and further, that in the case of contracts for the sale of land, the time of payment as well as the price is an essential element and must be specified. This rule has not been regarded by this court as confined to certain particular sections and subdivisions of the statute, to which .it has been applied for special reasons peculiar to each, but rather has been considered as .applicable to all under the same general underlying principle. Decisions under the various sections have been cited indiscriminately in support of the ruling under any one of the other subdivisions. It is true that subdivision 5, above quoted, is a recent amendment to the statute, having been added by Act No. 238 of the Public Acts of 1913, but in the recent case of Paul v. Graham, 193 Mich. 447, we had occasion to consider its status and effect, and there held that the rule in question applies equally to .this subdivision. In the course.of his opinion in that case, Mr. Justice Bird, speaking for this court, after calling attention to certain omitted terms or elements of the contract there in question, said:

“These are important elements, and if we are to overlook them and say that proof of the bare fact that some commission was to be paid is a compliance with the statute, and permit parol proof to make a completed contract, the effect which was obviously intended by the legislature is set at naught, and the controversies which the passage of the act was sought to avoid will still be with us. We think this subdivision 5 should be subject to the same construction that has been given the other subdivisions so far as it is applicable.”

It is the claim of counsel for appellee, however, that Paul v. Graham is not conclusive as to the point involved in the instant case. It is urged that the purpose of the legislature in adding this subdivision was to prevent claims for commissions by those who had never in fact been employed to make a sale, and that the essential thing required is to have the fact of the employment of the agent and the agreement to pay him a commission for his services expressly set forth in writing, but that it was not the intention, and that there is no purpose to be subserved, in requiring the details of the sale for which the commission is claimed to be set out in full in the commission agreement. Counsel insist that this view has been taken by the courts of other jurisdictions in construing similar statutes and cite, among other decisions, the case of Morton v. Gaffield, 51 Ind. App. 28, from which certain passages are quoted in their brief. In that case all the terms and elements of the agreement were set out in writing, but the description of the property to be sold was rather vague. The court held, however, that it sufficiently identified the land for the purposes of a suit for a commission. That the general trend of the decisions of the Indiana courts does not sustain the position taken by counsel will'appear by reference to a case in the preceding volume of the same reports, Olcott v. McClure, 50 Ind. App. 79, in which the court said:

“Said section governs the contract sued on, and the supreme court has said that the same must be strictly construed, in that there must be no doubt as to the existence of such written contract and no.dispute as to its contents or provisions. Citing Provident Trust Co. v. Darrough, 168 Ind. 29.”

And again:

“If the writing contains matter sufficient to enable the court to ascertain the subject matter and the terms and conditions of the obligation or contract to which the parties intended to bind themselves, it is sufficient.”

And further:

“Appellee in his brief says: ‘The primary question is whether the correspondence shows an agreement, upon which the minds of the parties met, as to description, terms, price, and commission, or whether the negotiations are inchoate and unperfected until something should intervene and be determined in order to give it full effect.’ See Everitt v. Bassler, 25 Ind. App. 303. We think the test here furnished a proper one.”

The decision of the Indiana supreme court in Provident Trust Co. v. Darrough, above cited, contains the following:

“In an action for commissions against the owner of real estate sold, a substantial compliance with the terms of the statute will be required,” citing Zimmerman v. Zehendner, 164 Ind. 466; Beahler v. Clark, 32 Ind. App. 222.

In Zimmerman v. Zehendner the contract provided for compensation to the agents “to the amount that has been and is now understood.” The court said:

“The compensation is to be the amount ‘understood,’ but by whom is not stated. In short, the contract, in so far as it relates to this action, is only partially in writing. The important feature — the amount of commission to be paid — is to be ascertained by parol testimony in regard to an understanding which may prove to be a misunderstanding, the exact thing which the statute was designed to prevent. A contract partly written and partly verbal is a parol contract, and contracts required by law to be in writing must be wholly written to be enforceable.”

The other case cited, Beahler v. Clark, held that where there was a contract for a commission invalid under the statute, there could be no recovery under a quantum meruit.

On the argument, our attention was also called to the case of Henderson v. Lemke, 60 Or. 363, as supporting appellee’s position. The situation in that case, however, was very different from the one now before us. The employment there was to “show” defendant’s property, and the agreement was that if any one to whom plaintiff had shown the property should purchase it, the defendant would pay a commission at a fixed rate. Under such an arrangement, of course, the selling price and terms of sale were immaterial, for the sale was to be made by the owner, not the agent, and unless a sale was made, there was no commission, and if a sale was made, the commission was on the selling price. There was nothing indefinite or open to dispute. The terms of the contract showed clearly when the commission was earned and how it was to be computed.

It seems to us clear that, in all the varying situations which may arise under these commission, contracts, the true test to determine whether or not the contract sufficiently complies with the statute, is this: Does the written contract or memorandum, by its terms, without the necessity of resorting to any supplemental oral agreement or understanding, furnish a definite basis for determining when the commission has been earned, and the amount thereof? If at a certain point in the transaction it can be shown by the very terms of the written contract that the thing to be done has been fully performed, and the reward to be paid therefor can be definitely ascertained, then the contract is valid. If some parol agreement or understanding as to a portion of the arrangement would have to be shown before such result could be reached, then the contract is void.

Applying this test to the case at bar, one element— the method of calculating the commission — is clearly set forth. But when is it earned? When the agent makes a sale of the farm therein described at a price over $90 per acre on the terms of $3,000 cash and the balance, with interest at 5%, to be payable — how and when? Here the contract fails to aid. Whether the balance is to be payable in one year or one hundred years, whether in a lump sum or in instalments, whether secured or unsecured, whether the interest is to be payable semi-annually, annually, or not till the principal becomes due, are important elements that do not appear. Plaintiff seeks to avoid this difficulty by showing a verbal understanding as to these omitted terms, and thereby places himself outside of the rule of validity above set forth. By his own showing the contract was partly written and partly oral, and such a contract is void. Searching the four corners of the writing, no test can be found to determine beyond dispute at what point in the transaction a commission can be said to have been earned. “The negotiations are inchoate and unperfected” until something “intervenes and is determined to give it full effect.”

Being, therefore, of the opinion that.the contention of appellants’ counsel, that the agreement sued upon is void under the statute of frauds, is sound, it becomes unnecessary to discuss the other grounds urged for reversal of the case.

The judgment should be reversed and no new trial granted, with costs to the appellants.

Fellows and Stone, JJ., concurred with Kuhn, J.

Ostrandee, C. J.

The writing relied upon, in my opinion, is a promise to pay a commission for or upon a sale of real estate. So far as the statute of frauds is concerned, no more is required. Suppose that the seller, in this case, and the proposing buyer, produced by plaintiff, had agreed upon terms of payment and completed a sale and conveyance of the premises for $100 an acre. In an action for the commission, could the seller defend upon the ground that the promise to pay the commission was not in writing? I think not. And this, I think, is the test to apply, and not the one whether the written agreement or promise contains ■also, — has incorporated therein, — all of the details necessary to be stated in an agreement to sell and convey real estate. In Paul v. Graham, 193 Mich. 447, it was decided that a particular writing did not satisfy the statute. But a written promise to pay a stated commission for the sale of described property, both of which elements, as the opinion points out, were lacking in the writing relied upon in that case, are present in the writing in this case. See, Toomy v. Dunphy, 86 Cal. 639.

“Every agreement, promise or contract to pay any commission for or upon the sale of any interest in real estate,”

is the language of the statute. There need be no resort to parol evidence in this case to add to what the words of the promise import, if only we confine our attention to what it is that must be in writing in order to satisfy the law. If the decisions of the courts of Indiana are not in harmony with this view, and my examination of them has not convinced me that they are, we should decline to follow them.

The trouble in this case does not arise upon the appointment of plaintiff as selling agent, or the promise to pay him a commission, but upon whether plaintiff has earned a commission. Plaintiff was permitted, rightfully I think, to testify that the defendants agreed to accept a mortgage for deferred payments, running five years. According to this testimony, the defendant Herman Staman questioned the financial responsibility of the purchaser produced by plaintiff; rather, he asked plaintiff if he knew he was responsible. But plaintiff says that he then offered to guarantee the sale personally or, if defendant thought that he was himself good, offered to buy it in his own name and execute the notes and mortgage evidencing deferred payments. Defendant assured plaintiff that he regarded him as all right. Plaintiff prepared a deed of the property running to himself as grantee, executed the notes and mortgage according to the theory that $90 an acre was the purchase price and tendered them and $8,000 to defendants and the tender was refused. The reason given for the refusal was that the farm was worth more. The jury found the facts to be as plaintiff claimed them to be.

It is said by appellants there is a fatal variance between declaration and proofs, which contention is rested upon the ground that the action is brought to recover a commission of $10 an acre on the sale of 237 acres of land, plaintiff having produced a purchaser able, ready and willing to buy, while the proof is that plaintiff proposed to himself buy the land at $90 an acre and does not show any contract or agreement with any one for the sale of the land at a higher price. It is further contended that if an agreement for a resale at a higher figure had been proven it would make no difference because plaintiff is not entitled to a commission in that ease, but, if damaged, his damages would be measured by the loss sustained by him in not being able to resell the land at a larger sum.

Counsel are mistaken in saying there is no evidence of a contract to sell the land at a larger sum. There is no written evidence, but plaintiff and the proposed purchaser both testify, in substance, that he, the purchaser, agreed to take the land from plaintiff for $100 an acre and that papers to that effect were drawn. Defendants do not upon the record dispute the fact that plaintiff produced a man able, ready and willing to buy the land for $100 an acre. If he did that, and defendants refused to proceed, plaintiff had earned the commission of $10 an acre. Such proof agrees with the declaration. If, to further satisfy the owner, plaintiff then proposed to himself purchase and secure deferred payments, but to turn the land over to his purchaser, it does not seem that he should be held to have lost what he had already earned, nor that proof of these facts established a variance. The case is essentially different from Jones v. Pendleton, 134 Mich. 460, and' other cases cited and relied upon by appellants. Here there is testimony which supports the allegations of the declaration. In corroboration of the testimony of plaintiff, to the effect that defendants refused to go on with the sale because the land was worth more, and in answer to the defense that defendants signed the contract relying upon false representations, plaintiff testified, over objection, that real estate values in the neighborhood had in fact increased and that at the time of the trial the farm was worth $250 an acre. It is said this testimony had no proper probative value for the purpose for which it was offered and was prejudicial because it tended to make the jury believe that by not carrying out the agreement defendants had profited largely. I am not satisfied that the testimony was incompetent for the purpose for which it was introduced. In any event, upon this record, and upon the merits, it appears that plaintiff earned his commission and, if this testimony ought to have been rejected, its admission was not so prejudicial to defendants that for its admission the judgment should be reversed.

Moore, Steere, and Brooke, JJ., concurred with Ostrander, C. J. Bird, J., did not sit.


source: Caselaw Access Project

author: Kuhn, J.

license: Public Domain

text:
    GARRISI v. KASS.
    1. Brokers — Commission—Ready, Willing, and Able — Evidence.
    In an action by a broker for commission on the sale of land on a written contract, “price $7,000, amount down, $1,000, $100 every six months and interest,” where plaintiff furnished a buyer who went to see defendant with $900 in cash, and who owned property worth $6,000 or $7,000, and was willing to enter into agreement to buy on defendant’s terms, plaintiff produced a buyer who was ready, willing, and able to buy.1
    2. Trial — Brokers—Commission—Instructions.
    The testimony being conclusive that the broker had produced a buyer who was ready, willing, and able to buy, the court below was not in error in instructing the jury that they might so find, from the testimony.
    Error to Wayne; Hosmer, J.
    Submitted April 3, 1918.
    (Docket No. 29.)
    Decided June 3, 1918.
    Assumpsit in justice’s court by John, Garrisi against Mary Kass for commissions on the sale of real estate. There was judgment for plaintiff, and defendant appealed to the circuit court. Judgment' for plaintiff. Defendant brings error.
    Affirmed.

      Albert E. Sherman, for appellant.

      Anthony Maiullo, for appellee.
    In July, 1916, the defendant, Mary Kass, signed the following paper:
    “Detroit, Michigan, July 18, 1916.
    “I hereby appoint John Garrisi the sole and exclusive agent for the sale, barter, or exchange, at the prices and terms of the property herein mentioned and described.
    “For and in consideration of its services and efforts in this manner I agree to pay John Garrisi a cash commission of 3 per cent, on selling price on said property.
    1See uote in 21 L. R. A. (N. S.) 935.

      “I further agree to furnish such abstract and deed and other papers as may be necessary to perf ect a sale.
    “Property listed, 773 Riopelle street, frame, 12 room, two stories, no bath, gas, electric, lot 30x115, sidewalk, street paved, cellar, price $7,000.00, amount down $1,000, $100.00 every six months and interest.
    “Owner, Mary Kass,
    “623 Canfield Ave. E.
    “Accepted by John Garrisi.
    “This contract can be changed or terminated by giving thirty days notice in writing.”
    Some time between the 20th and 23d of August of that year, the plaintiff told Mrs. Kass he had a purchaser for the property at the price and on the terms mentioned in the agreement, and offered to pay her $100 on account. She refused to accept the money, and, according to plaintiff’s testimony, said to him:
    “My boy isn’t in Detroit now; as soon as he comes, we will do the agreement.”
    A few days later he called again and again offered her $100 on account, which she refused to accept, saying:
    “I am getting tired; don’t bother me now, don’t bother me, don’t bother me.”
    On the 27th or 28th of August he tried to see her again, the prospective purchaser (who was his brother) being with him, but she was not at home, and her daughter who was there informed him that “they didn’t want to sell any more.” The defendant persisted in her refusal to sell, the plaintiff brought suit in the justice's court and recovered judgment for the amount of his commission under the agreement, $210. Upon appeal to the circuit court, the defendant was allowed to amend her plea so as to give notice of a defense of fraud in the procurement of the agreement, in that she was unable to read English well and signed the agreement upon the faith of the plaintiff’s representation that it provided that in case he failed to sell the property within 30 days from the date thereof, there would be no charge made to her, but that the agreement would terminate and be void. A further defense outlined in the amended plea was that plaintiff never found a purchaser who was ready, willing and able tc purchase and that there had been an entire failure of consideration. Upon the trial in the circuit court, the defendant testified, as alleged in her plea, that the plaintiff had represented to her that the agreement, by its terms, would terminate at the end of 30 days from its date, if plaintiff failed to find a purchaser within that time. It appears from the testimony of Mrs. Kass and her son that they were both present at the time that the agreement was signed, and that before Mrs. Kass signed it, she handed it to her son to read over and that he read it and knew what it contained. She testified,—
    “He just looked it over that time. I said it is only for thirty days. He says yes.”
    Plaintiff did not produce a purchaser within the 30 days. It does not appear that any notice of termination of the contract was given as provided by its terms. Mr. Vincent Garrisi, the prospective purchaser, testified that on the day he went with plaintiff to close the deal, he had with him $900 in cash, and that he owned property worth six or seven thousand dollars. Defendant contended that, inasmuch as the cash payment was to be $1,000, plaintiff had failed to produce a purchaser able to carry out the agreement. The court instructed the jury that plaintiff had made a sufficient showing of ability on the part of the prospective purchaser to carry out the terms of the agreement, and left to their determination the question of the procurement of her signature by fraud and misrepresentation. The jury found in favor of plaintiff, and judgment for $210 was entered.
   Kuhn, J.

(after stating the facts). Counsel for appellant bases his claim for reversal of the verdict of the jury on two grounds:

1st. That the plaintiff did not bring a purchaser ready, willing and able to buy, and,

2d. That the charge of the court was erroneous and prejudicial.

We are of the opinion that there is no merit in the first contention of the appellant. The party produced by the plaintiff, who was to purchase the property and was willing to enter into the agreement, had at the time $900 cash in his pocket and was the undisputed owner of property worth six to seven thousand dollars. We think that the learned trial judge was clearly correct in saying that under these circumstances the plaintiff had produced a purchaser who was ready, willing and able to buy the property on the terms specified by the principal, and that, having produced such a purchaser, the broker became entitled to the commission whether or not the sale was made. An examination of the record shows also that the defendant, at the time the purchaser was produced, made no claim that the purchaser was unable to buy the property, but placed her refusal on other grounds.

Fault is found with the language of the trial judge, where he said in charging the jury,—

“I think you may rightly find from the testimony the ability to carry out the purchase which he proposed to make,” etc.

Being of the opinion, as we have already stated, that the testimony is conclusive that the purchaser produced was ready, willing and able to buy, there was clearly no error in the trial judge instructing the jury in the way he did.

We affirm the judgment.

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


text:
    PEOPLE v. KENYON.
    1. Indictment and Information — Pleading—Illegal Practice of Medicine.
    An information under Act No. 368, Pub. Acts 1913, § 7, charging respondent with practicing medicine without a license, is not defective because exceptions contained in the following section were not set out, since, such exceptions not being in the enacting clause of the act, are matters of defense.
    2. Criminal Law — Instructions—Burden of Proof — Requests to Charge.
    An instruction that the defendant was presumed to be innocent of the charge brought against him, and that such presumption abides with him throughout the trial; that the arrest raised no presumption of guilt; that the burden of proof of establishing the guilt of accused was upon the people; and that to be justified in rendering a verdict of guilty the jury should be convinced beyond a reasonable doubt that every element of the offense charged had been proved, held, to fully protect the rights of defendant and the refusal to give a request in the language submitted was not error.
    3. Same — Witnesses — Cross-Examination — Evidence — Credibility — Impeachment.
    Where defendant testified, on direct examination, that he had never held himself out as a physician or surgeon, letters and a card holding him out as a physician, although dated long before the date of the offense charged, were admissible, on cross-examination, as bearing upon his credibility.
    4. Same — Evidence—Witnesses—Rebuttal.
    In view of such testimony by defendant, it was not error to admit the testimony of the person to whom such letters were written relating the circumstances that occurred at the time.
    5. Same — Evidence—Rebuttal.
    In a prosecution for practicing medicine without a license, where defendant’s counsel had intimated that a' claim might be made that defendant resided in another county, it was not error to show by the deputy eounty clerk that defendant was not registered in such county, even though such witness’ name was not indorsed on the information; ■such testimony being in effect rebuttal and being so treated by the court.
    Exceptions before judgment from Calhoun; North, J.
    Submitted April 12, 1918.
    (Docket No. 127.)
    Decided June 3, 1918.
    Levi Kenyon was convicted of practicing medicine in violation of Act No. '368, Pub. Acts 1913.
    Affirmed.

      Howard W. Cavanagk, for appellant.

      Adrian F. Cooper, Prosecuting Attorney, and James Cleary, Assistant Prosecuting Attorney, for the people.
   Kuhn, J.

The information in this case charges that the respondent,—

“heretofore, to wit: on the 1st day of July, A. D. 1915, and on divers other days between that day and the 8th day of December, 1916, at the city of Battle Creek in the county of Calhoun aforesaid, did then and there practice medicine and surgery and did advertise and hold himself out to the public as being able to heal, cure and alleviate human ailments and diseases, he the said Levi Kenyon not being then and there the lawful possessor of a certificate of registration or license issued under and pursuant to Act No. 237 of the Public Acts of 1899 as amended, and he the said Levi Kenyon not having then and there complied with the provisions of Act No. 368 of the Public Acts of 1913.”

At the outset of the’ trial respondent’s attorney made a motion to quash the information on the ground that it failed to allege that respondent was not within any of the exceptions to the operation of the act, and further that it was bad for duplicity in that it stated more than one offense. This motion was denied by the court, but the prosecutor was compelled to elect which of the two charges stated in the information he would proceed upon. At the conclusion of his case he elected the charge of practicing medicine without a license. The prosecution showed that Mr. Kenyon was not registered in Eaton, Calhoun or Barry counties as a physician, and also introduced the testimony of a number of witnesses to the effect that he had not merely furnished medicine, but had given treatments to a number of people in Battle Creek and elsewhere, the treatments consisting principally in rubbing on some sort or salve or oil, and occasionally giving a powder to take internally. Before giving a treatment he would “go into a trance,” as the witnesses expressed it, claiming to be under the guidance and control of an Indian spirit, who would talk to him and tell him whether or not he could cure the patient and also what to do to effect the cure. In a number of instances it was shown that he stated positively that he could cure the patients. These witnesses stated that they had gone to him for medicine or treatment because they had heard him spoken of highly by others whom he had treated; that they had seen no advertisement nor anything with the title “doctor” used in connection with his name, though they were in the habit of calling him Dr. Kenyon. During the cross-examination of Mr. Kenyon, he identified a number of letters written by his wife for him during the years 1913 and 1914 to a Miss Carrie Holmes, which were signed “Dr. Levi Kenyon,” the envelopes of which bore the return card, “Dr. Levi Kenyon, Bellevue, Mich.,” which letters were received in evidence, as was also a printed card which he identified, reading as follows:

“Clairvoyant Doctor. I diagnose Cases Anywhere in the United States free of Charge.
“Dr. Levi Kenyon,
“Bell Phone 50 3-4 “Bellevue, Michigan.
“R. F. D. No. 4.”

The respondent endeavored to show that during the period set forth in the information he did not practice medicine and did not hold himself out at all to cure or alleviate human ailments, but simply sold herbs, roots, and ointments prepared by himself, which might, if used, be of benefit to afflicted human beings. That during the period in question he did not advertise nor hold himself out to cure diseases, nor in any way violate the section of the act in question. The jury returned a verdict of guilty, and the case is before us on exceptions before sentence.

The questions raised by the assignments of error which are particularly argued in the brief of counsel and urged upon our attention, are thus stated:

1st. The permitting of information to stand without the exceptions of the statute being mentioned therein.

2d. The refusal of the court to charge as to the burden of proof.

3d. The admission of the letters and the card that were dated a long time prior to the time that was mentioned in the information.

4th. Allowing the witness Andrus to testify, his name not having been indorsed on the information, and no showing made as to why, and his. testimony being clearly a part of the main case.

1. The enacting clause of the act in question (2 Comp. Laws 1915, § 6724 et seq.), which makes the commission of the charge here preferred a misdemeanor, is section 7 of the act. The exceptions which respondent’s counsel urges should have been incorporated in the information charging the offense, are not contained in the enacting clause, but are found in a subsequent section, viz., section 8. The argument is made that sections 7 and 8 are so closely allied that it is only fair to respondent that the exceptions should have been enumerated in the information, so that the accused might have been fully informed as to the nature and cause of the accusation against him. The rule, however, in this State is well established that in declaring on a statute where there is an exception in the enacting clause, the pleader must negative the exception, but where there is no exception in the enacting clause, but an exemption in the proviso to the enacting clause or in a. subsequent section of the act, it is a matter of defense and must be shown by the defendant. In support of this rule, attention is called to the following cases: Myers v. Carr, 12 Mich. 63; People v. Phippin, 70 Mich. 6; People v. Pendleton, 79 Mich. 317; People v. Curtis, 95 Mich. 212; People v. Allen, 122 Mich. 123; People v. Shuler, 136 Mich. 161.

2. Fault is found because the trial judge did not give the following request to charge:

“I charge you that the burden of establishing these things, as above set forth, is upon the people, who are represented by the prosecuting attorney, and that during the whole trial that burden never shifts, but is always upon the prosecuting attorney. In other words, the defendant here is not called upon at any time during the trial to prove that he is innocent of this charge, for, as a matter of law, the defendant, Levi Kenyon, comes into this court and stands before you, gentlemen of the jury, as innocent of this charge and his being arrested and brought into court is not to be in any way used by you as an inference of guilt.”

The court did charge, with reference to the presumption of innocence, as follows:

“The defendant in this case is presumed to be innocent of the charge brought against him here, and that presumption of innocence abides with him throughout the entire trial of the case until he is proven beyond a reasonable doubt by the testimony given to be guilty of the charge brought against him. The mere fact that he is here on trial, that he has been arrested and brought into court by the ordinary criminal process should not be considered by you as in any way to raise the presumption that he is guilty. The burden of establishing the guilt of the accused is upon the people, and in order to justify you as jurors in rendering a verdict of guilty it must be proven beyond a reasonable doubt that this defendant has committed the offense charged here and at the time charged, and as I have said to you, it is necessary for you to decide in your deliberations whether or not that has been shown, beyond a reasonable doubt. And it has been said that a juror is satisfied beyond a reasonable-doubt as to a matter in controversy when after a full and fair consideration of all the testimony given in a case he can say that he has an abiding conviction to a moral certainty that the charge made has been established as having been committed by the accused. And in that connection you should bear in mind that it is essential that each element of the offense charged must be proven by that measure of proof beyond a reasonable doubt.”

We are of the opinion that the charge as given fully protected the rights of respondent and was a proper statement of the law with reference to the burden of proof. There was no error in the refusal of the court to give the request as preferred.

3. While the respondent was on the witness stand, on direct examination, he was interrogated by his counsel as follows:

“Q. Have you ever held yourself out as being a physician?
“A. No, sir.
“Q. Or a surgeon?
“A. No, sir, never in the world.”

The exhibits in question were introduced on the cross-examination of the respondent. Some question is raised whether or not proper objection was made to the introduction of them so that their admission can be relied upon as error in this court. It will be unnecessary to pass upon this question, as we are clearly of the opinion that it was not error to allow this cross-examination and the introduction of the letters as bearing upon the credibility of the respondent. See People v. Pyckett, 99 Mich. 613; Kingston v. Railway Co., 112 Mich. 40.

It is further contended that the testimony of the witness Carrie Holmes, to whom the letters in controversy were written, was admitted under a wrong theory and was prejudicial error. She was allowed to relate certain circumstances that occurred at the time these letters were written, and it is the claim of respondent that this testimony was introduced as a part of the direct case under the guise of rebuttal evidence. We have examined this testimony wjith some care, but in view of the statement made by respondent while on the stand in his direct examination, that he had never diagnosed a ease of any person coming to him and that he had never made a fixed charge for his remedies, we are of the opinion that no prejudicial error was committed by the court in allowing this testimony. ■ ,

4. The name of the witness Andrus was not indorsed upon the information. At the time this testimony was taken, the following occurred:

“Mr. Cavanagh: I object to this, this man’s, name is not on the information.
“Mr. Cleary: No, it is not on the information and I did not want to bring him in until the rebuttal. But you just told me you had no objections.
“Mr. Cavanagh: I do object. His name should be on the information even if it is in rebuttal.
“Mr. Cleary: I just want to show that the defendant is not registered.
“The Court: Of course if it is in rebuttal, it is not necessary to have his name indorsed, but I do not see at this time how that would be material.
“Mr. Cleary: It is in anticipation of the defense.
“Mr. Cavanagh: My only objection to it is that his name is not on the information.
“The Court: Well, a rebuttal witness is not supposed to be indorsed on the information, so you may take the testimony.
“Q. What is your name?
“A. Roy Andrus.
“Q. What is your business?
“A. Deputy county clerk of Barry county.
“The Court: We might state it this way, I suppose the only way in which this testimony could be relevant or material would be if the defendant should claim to be registered in Barry county.
“Mr. Cleary: That is it.
“The Court: Now, if you will state that he does not make any claim in this case during this period that is covered by the information to be registered in Barry county, you need not go into it.
“Mr. Gavanagh: Well, I think he states he lived in Barry county.
“The Court: The testimony may be taken.
“Q. As such deputy county clerk, have you the registers of physicians registered in .Barry county?
“A. I have.
“Q. Can you tell the jury whether or not Levi Kenyon is registered physician in Barry county?
“A. He is not.
“Mr. Gavanagh: There is no cross-examination and I move to strike the testimony out for the reason that it is not rebuttal and that his name is not on the information and that it is a part of the main case.
“The Court: I will reserve the ruling on the motion, and whether or not that it will be stricken out will be determined after the defense had concluded its case.”

It was not incumbent upon the peopie to prove that the respondent had not registered in Barry county, and this testimony was simply received out of order, in anticipation of the defense that respondent might claim that he lived in Barry county. It will be noted from the colloquy between the court and counsel above set forth that counsel for respondent intimated that the claim would probably be made that he did live in Barry county, and thereupon the court allowed the witness to testify. In view of the situation thus presented, the testimony was in effect rebuttal testimony and was treated as such by the court. We are not of the opinion that the respondent was prejudiced by the mere fact that the witness was called out of order, as it would clearly have been proper to call him in rebuttal, in view of the claim made by respondent as to his residence.

We are unable to find error in this record which would warrant a reversal of the case, and therefore affirm the conviction and direct the trial court to proceed to judgment.

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


text:
    COOPER v. SONK.
    Bills and Notes — Negotiable Instruments Law — Parol Evidence — Irregular Indorsers — Status.
    In an action on a promissory note indorsed by defendants on the back, it was .not competent to show that such note was the obligation of the corporate maker only and that the indorsements were not made in their individual capacity, since such testimony tended to vary or explain by parol the terms of a written instrument in violation of sections 65 and 66 of the negotiable instruments law (2 Comp. Laws 1915, §§ 6104, 6105).
    See note in 19 L. R. A. (N. S.) 136.
    Error to Wayne; Van Zile, J.
    Submitted April 10, 1918.
    (Docket No. 60.)
    Decided June 3, 1918.
    Assumpsit in justice’s court by Arnold B. Cooper, doing business as A. & W. Cooper, against Michael Sonk and others on a promissory note. There was judgment for plaintiff, and defendant appealed to the circuit court. Judgment for plaintiff on a directed verdict. Defendants bring error.
    Affirmed.

      John J. Zimmer, for appellants.

      Dingemm & Schueler, for appellee.
   Kuhn, J.

This action was brought in the justice’s court for the city of Detroit to recover from the defendants, as indorsers, the balance claimed to be due on a certain promissory note, of which the following is a copy:

“$600.00 Detroit, Michigan, February 1,1915.
“Six months after date we promise to pay to the order of A. and W. Cooper six hundred dollars at the Wayne County and Home Savings Bank, Detroit, Michigan, for value received, with interest at six per cent, per annum.
(Sgd.) “St. Michael’s Archangel Polish National Catholic Church.
“M. Sonk.
“Victor Gorniak.
“A. Citorski.”

On the back of the note appear the names of the said M. Sonk, Victor Gorniak and A. Citorski and also of the twelve other defendants. The note was not paid at maturity and was duly protested. Judgment for $500 was rendered in favor of plaintiff by the justice of the peace, and on appeal the circuit judge directed a verdict in plaintiff’s favor for the same amount.

The note was given in renewal of a prior note which had been accepted by the plaintiff in lieu of filing a lien against the church property for materials furnished in the erection of said church. Mr. Gage Cooper, plaintiff’s manager, testified that when the settlement by note was proposed, the representatives of the church agreed to have the note indorsed by some men of financial responsibility; that he looked up the proposed indorsers, found they were all right, and took the note with their indorsement. It is the claim of the defendants that the note was the note of the church corporation solely; that the names appearing on the face and back of the note were the names of the committee of the church and was signed by those persons as committeemen and not in their individual character, and that the plaintiff knew and understood this fact at the time the note was taken. Upon the trial the defendants attempted to introduce testimony to show these facts, but the court, upon objection by plaintiff’s counsel, refused to admit it, on the ground that the unqualified signatures on the note could not be explained or varied by parol evidence. Whether or not the court erred in refusing to admit this testimony is the question raised by the appellants’ assignments of error.

Section 65 of Act No. 265 of the Public Acts of 1905 (2 Comp. Laws, 1915, § 6104), known as the “negotiable instruments law,” provides:

“A person placing his signature upon an instrument, otherwise than as maker, drawer or acceptor is deemed to be an indorser, unless he clearly indicates by appropriate words his intention to be bound in some other capacity.”

Section 66 of the same act also provides as follows:

“Where a person, not otherwise a party to an instrument, places thereon his signature in blank before delivery, he is liable as indorser in accordance with the following rules:
“First. If the instrument is payable to the order of a third person, he is liablé to the payee and to all subsequent parties.
“Second. If the instrument is payable to the order of the maker or drawer, or is payable to bearer, he is liable to all parties subsequent to the maker or drawer.
“Third. If he signs for the accommodation of the payee he is liable to all parties subsequent to the payee.”

Mr. Bunker, in his work on Negotiable Instruments, in which he has annotated this act, in a foot-note to the last section above set forth, in reviewing the decisions applicable thereto, says:

“The statute seems to fix absolutely the status of the irregular indorser and thus excludes parol testimony to vary his liability. The only question of fact would seem to be, Did the person ‘not otherwise a party to the instrument’ place his signature thereon ‘before delivery!’ ”

From the instrument here in question it appears that the indorsements on the back of the note were unqualified, and in accordance with the decisions of this court we are of the opinion that parol evidence is not admissible to vary the terms of this negotiable instrument. As was recently said by Mr. Justice Steere in the case of Holland City State Bank v. Meeuwsen, 192 Mich. 326:

“tinder the undisputed facts in this case, defendants’ testimony along those lines, as the trial court ultimately held, was wholly incompetent, and but an attempt to reduce this written instrument from an absolute, unqualified undertaking according to its written terms to a conditional, defeasible agreement, by proof of a contemporaneous, oral contract. The court properly rejected such evidence. Sheffler v. Sherman, 167 Mich. 42 (132 N. W. 466), and cases there cited.”

The court ruled properly in rejecting the testimony in controversy.

The judgment is affirmed.

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


author: Kuhn, J. Ostrander, C. J.

text:
    DOWNS v. FOWLER.
    1. Master and Servant — Personal Injuries — Workmen’s Compensation Act — Evidence—Admissibility.
    In an action for personal injuries by a servant against a master who had not elected to come under the workmen's compensation act (2 Comp. Laws 1915, § 5423 et seq.), on the ground that defendant had failed to provide a reasonably safe place to work, testimony of plaintiff, over objection, that he was as responsible as any one for the condition of the place where the injury was had, was admissible only as bearing on the liability of the master and not as tending to show contributory negligence of plaintiff; the defenses of contributory negligence and assumption of risk being barred by the statute.
    2. Same — Insurance—Evidence.
    In such action, the fact that the master was protected by casualty insurance, and that the insurer was the real party in interest, was inadmissible; said fact having no bearing on the question of defendant’s negligence.
    3. Same — Wilful Negligence — Safe Place.
    The defense of wilful negligence being still available (section 5423, 2 Comp. Laws 1915), the court properly submitted to the jury the question as to whether plaintiff followed defendant’s instructions in keeping the place free from grout, and such action was not open to the objection that it amounted to saying that defendant would not be compelled to furnish a safe place in which to work.
    See notes in L. R. A. 1916A, 23; L. R. A. 1917D, 80.
    Error to Hillsdale; Chester, J.
    Submitted April 2, 1918.
    (Docket No. 17.)
    Decided June 3, 1918.
    Case by Floyd W. Downs against Travis A. Fowler for personal injuries. Judgment for defendant. Plaintiff brings error.
    Affirmed.

      Merton Fitzpatrick; for appellant.

      F. A. Lyon, for appellee.
   Kuhn, J.

The plaintiff, on September 17, 1913, was a laborer in the employ of the defendant, who was a building contractor and at the time was engaged in the erection of a large building for the Western Reserve Condensed Milk Company in the city of Hills-dale. On that particular day, among other operations, he was constructing a large cement coal bin in this building. The forms for the walls of this bin had been completed some days before, and on the day in question, as on several days preceding, the plaintiff and other laborers were employed in carrying the mixture of sand, cement, gravel and water known as “grout,” in wheelbarrows from the mixing machine up an incline to a platform at the top of the basement wall, from which it was poured into the forms. This incline was made by running two long timbers, 35 or 36 feet in length from the ground level to the top of a pile of ties built up in cob-pile fashion close to the basement wall, across which timbers heavy two-inch planks, about 11 feet in length, were nailed. The timbers were about five feet apart, so that the ends of the planks extended about three feet beyond them on either side. The elevation from the ground level at the foot of the incline to the top of the structure was, according to defendants testimonjr, about 5 feet, while according to plaintiff’s, it was nearer 7 feet. The mixing machine stood about 12 or 15 feet from the foot of this incline. There were 4 or 5 men wheeling the grout and two helpers. The latter would meet the wheelers as they came to the foot of the incline and hook an iron rod onto the front of the wheelbarrow and pull in front until the top of the grade was reached. There was another man at the top who helped dump the wheelbarrows into the forms. A wheelbarrow, when filled to capacity with grout, weighed about 150 pounds. Each man filled his own wheelbarrow and was not required to take on a greater load than he could handle properly without spilling. On an average they were filled about two-thirds full. Occasionally some of the grout would slop out of the wheelbarrows onto the runway, making it wet and slippery in places and leaving a sprinkling of small pebbles which were apt to roll‘under the feet of those operating the wheelbarrows. The plaintiff’s testimony is to the effect that on the day in question he was going up this incline with a loaded wheelbarrow, when the helper who was pulling in front slipped, and plaintiff just then stepped on a small stone which rolled under his foot, causing him to fall forward. He caught himself on the handles of the wheelbarrow before he struck the planking, but wrenched himself and felt a pain — a sort of stinging sensation, as he described it. He thought little of it, however, and continued wheeling grout until noon, and in the after-, noon was set to unloading a car of gravel stones. The pain continued to grow more severe and he noticed a lump forming. A fellow workman, upon examination, advised him to go home, as he probably had a rupture. He left work at about 2 o’clock and went to his physician the same afternoon, who informed him that he had a rupture in the left inguinal region and immediately fitted him with a truss. Since his injury, plaintiff has been unable to do heavy work, and his earning power has been reduced for that reason. It is conceded that the defendant had not complied with the requirements of the workmen’s compensation law (2 Comp. Laws 1915, § 5428 et seq.). Plaintiff brought this action, basing it on the ground of negligence On the part of the defendant in failing to provide him with a reasonably safe place to work. The jury returned a verdict in favor of the defendant.

Most of the assignments of error relate to rulings of the court with relation to testimony concerning the extent of the injury and the resulting damages. As the jury rendered a verdict of no cause of action, that is, that no negligence was shown on the part of the defendant, we need, in the consideration of this casé, concern ourselves only with such assignments as relate to the question of liability. All others are immaterial.

While plaintiff was on the stand, the court permitted answers by him, over objection, to the following questions:

“Q. Did you spill any? (meaning grout)
“A. Yes, sir.
“Q. Did you spill as much as anybody?
“A. Yes, sir.”

It is the claim of counsel for appellant that by these questions and answers it was sought to show that the plaintiff contributed to his injury, that is, that he was guilty of contributory negligence, and that, as the workmen’s compensation law expressly excludes, the defenses of contributory negligence arid assumption, of risk, it was error to admit this testimony. We are of the opinion, however, that the testimony was properly admitted as bearing upon the question of liability on the part of the defendant, it being the theory of the plaintiff that the place was made unsafe by the very fact that grout was allowed to spill and accumulate on the runway.

The trial court refused plaintiff’s counsel the right to show that in this, case the defendant was protected by insurance and that the real party in interest in defending this action was the insurance company. We think in this regard the ruling of the court was proper and that it would have been error to have permitted such a showing to be made. The question of whether or not the defendant carried insurance to protect him against liability of this kind, had no bearing upon the question of his negligence.

The court charged the jury with reference to wilful negligence, as follows:

“Upon the question of wilful negligence on the part of the plaintiff, you are instructed that if Mr. Fowler instructed this plaintiff to clean off this incline, removing therefrom the grout, pebbles and moisture, and plaintiff failéd to follow these instructions, and his failure rendered the place not reasonably safe, and because of his failure to follow such instructions plaintiff was injured, then plaintiff cannot recover.
“If Mr'. Fowler did not instruct the plaintiff to keep this runway free from pebbles and grouting and moisture, and you find it did become unsafe by reason of the slopping over of the grout, then plaintiff would not be guilty of wilful negligence. .
“In this connection, you are instructed in this case that it is no defense that plaintiff’s’injury, if you find that he received one on the inclined runway, was caused by his own negligence unless you further find that such negligence was wilful. You are also instructed in this case that it is no defense that plaintiff’s injury, if you find that he was injured, was caused by the negligence of a fellow servant or employee. Also you are instructed that the plaintiff did not assume the risks inherent in or incidental to the work in which he was engaged at the time of the claimed injury.”

Fault is found with the submission of this question to the jury and that it is tantamount to saying that the defendant would not be compelled to furnish a safe place in which to work. Wilful negligence is still a defense which can be urged by the defendant. Section 1, pt. 1, Act No. 10, Extra Session 1912 (3 Comp. Laws 1915, § 5423). ■ We cannot agree with the contention of plaintiff’s counsel in this regard and see no error in submitting this question to the jury in the language used by the trial court. See Freeman v. Railroad Co., 191 Mich. 529 (158 N. W. 204).

We have carefully read the entire charge of the court, and while some fault is found with the failure to give certain requests to charge, the crucial question of the negligence, namely, whether or not the defendant furnished the plaintiff a reasonably safe place to work, was concisely and clearly submitted to the jury.

We are unable to find any reversible error in the record, and therefore affirm the judgment.

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

Ostrander, C. J.

I find no negligence of defendant proven and concur therefore in the result.

Steere, J., concurred with Ostrander, C. J.


text:
    QUINN v. QUINN MANUFACTURING CO.
    1. Corporations — Officers and Agents — Authority of-Treasurer to Issue Notes — Acquiescence—Estoppel.
    In an action on a promissory note issued by the treasurer of the corporation maker, where it appeared that at the time of the giving of said note there were other notes outstanding all issued by said treasurer with the apparent knowledge and acquiescence of the board of directors, his authority may be fairly implied from such continued acts, and defendant was estopped from questioning it.
    2. Same.
    An officer of a corporation can deal with the corporation if his acts are open and fair and known to the directors and stockholders.
    3. Same — Dividends Declared at Stockholders’ Meeting — Validity.
    While it is the rule that directors alone have the authority to declare dividends out of the net earnings of a corporation, the fact that dividends were declared at a meeting called on the record a “stockholders’ meeting” were in effect the actions of the directors, where it appeared that all directors were present and fully exercised their judgment and discretion.
    4. Same — Dividends—Determination oe Earnings — Dude.
    In deciding whether a dividend was rightfully made, the transaction must he viewed from the standpoint of that time, and not in the light of subsequent events; notes or overdrafts by persons then considered abundantly good should not be counted as losses because they afterwards proved such.
    5. Same.
    Whether or not there were available net assets to warrant the directors of the corporation in declaring the same, held, a question for the jury, under proper instructions.
    Error to Wayne; Tappan, J., presiding.
    Submitted April 19, 1918.
    (Docket No. 38.)
    Decided June 3, 1918.
    Assumpsit by Margaret M. Quinn against the Quinn Manufacturing Company on a promissory note. Judgment for plaintiff. Defendant brings error.
    Affirmed.

      Geer, Williams & Martin, for appellant.

      Frank C. Cook and John P. O’Hara, for appellee.
   Kuhn, J.

The plaintiff’s action against the defendant is based upon a promissory note, dated December 31, 1913, for $7,000, signed “Quinn Manufacturing Co., S. A. Quinn, Treas.,” purporting to have been given to Mrs! K. E. Hughes, the mother of plaintiff, who indorsed it to the plaintiff. It was the claim of the plaintiff that she was the bona fide holder of the note; that her husband, S. A. Quinn, as treasurer of the defendant company, and acting for the company, executed the note in favor of Mrs. Hughes, who regularly indorsed it and transferred it to her, and that the entire transaction was completed in the usual and regular course of business of the company, and that therefore the company is in duty bound to pay the amount of the note with interest. It was the claim of the defendant that the consideration of the note in question was made up of $718.20, a balance of a former note given by the company to S. A. Quinn, also notes of the company for the following dividend checks from the company to S. A. Quinn: November 20, 1912, $1,877; April 1,1913, $1,026.20; August 4, 1913, $1,126.20; October 27, 1913, $1,126.20; December 31, 1913, $1,126.20, it appearing that when the company declared dividends — dividend checks being regularly issued to the stockholders — Mr. S. A. Quinn would then give his personal check to the company for the amount received by him as dividend and take the company’s note in like amount. It is the further contention of the defendant that these dividends were wrongfully declared; in that the actual net earnings of the company properly applicable to dividends in the respective years were insufficient to warrant the declaration of these dividends.

The plaintiff’s declaration is in assumpsit on the common counts with a copy of the note in suit attached. The defendant pleaded the general issue with notice of set-off on account of certain salary of Mr. Quinn paid to Mrs. Quinn after his death and with notice that the note in suit represents the dividends wrongfully declared and credited or paid to Quinn. An affidavit was also filed denying Quinn’s authority to execute the note. At the close of the plaintiff’s proofs, the defendant moved for a directed verdict on the ground that the consideration of the note was the alleged illegal dividends in question, and that the dividends were declared at stockholders.’ meetings instead of directors’ meetings. The motion being overruled, it was renewed at the close of the proofs and again overruled. The case was submitted to the jury under instructions, in substance, that if they found that the dividends were improperly declared, their verdict should be for the defendant, otherwise for the plaintiff, less the amount of the defendant’s set-off on account of Quinn’s salary. The jury found in favor of the plaintiff for $7,544.34, upon which verdict judgment was entered. The defendant then moved for entry of judgment in» its favor notwithstanding the verdict, which motion was denied. A motion for a new trial, being made, was also denied.

The case being brought here by writ of error, appellant’s counsel discuss the various assignments of error, under the following heads, as set forth in their brief:

“1. A verdict should have been directed in defendant’s favor, on the ground that Quinn had no authority to sign and execute the note in suit.
“2. A verdict should have been directed in defendant’s favor, on the ground that the dividends in question, which constituted the consideration of the note in suit, were declared at .stockholders’'meetings, not at directors’ meetings.
“3. A verdict should have been directed in defendant’s favor, on the ground that the note in suit represents dividends wrongfully declared, in that such dividends were not declared out of net surplus earnings of the defendant company, and hence formed no consideration for the note in suit.
“A. There was error in the admission and exclusion of evidence.
“5. Judgment should have been entered in defendant’s favor notwithstanding the verdict.
“6. Defendant’s motion for a new trial should have been granted.”

1. It is urged that because the by-laws of the company conferred no authority on Quinn as treasurer to execute negotiable instruments and because there was no resolution of the board of directors authorizing the giving of the note in suit, that therefore Quinn had no actual authority to sign and execute the note in suit and that a verdict should have been directed in favor of the defendant. It is undisputed Quinn was the only one who ever executed notes on behalf of the company and that there were outstanding promissory notes given by the Quinn Manufacturing Co., amounting to $48,000 at the time the note in suit was given to Mrs. Hughes. We think that the authority to execute this note may be fairly implied from the continued exercise of the power and from the holding out to the business world of the officer as being invested with such power. 2 Thompson on Corporations (2d Ed.), § 1564. The continued exercise by Quinn of the power to execute notes, with the apparent acquiescence of the board of directors, now estops the defendant, under the rule above stated, from questioning his. authority in this respect. But it is said that while this rule may be urged in a suit by a third person on a note for money borrowed or for merchandise purchased, no third person is involved in this suit, and that Mrs. Hughes, the payee of the note, and the plaintiff, the indorsee thereof, stand simply in the shoes of Quinn, as the transaction amounts to an attempt by Quinn to pay to himself the dividends in question, he acting for the defendant company in paying them and for himself in receiving payment. That his acting in this dual capacity rendered the note in suit void, as neither Mrs. Hughes nor the plaintiff occupied the status of a holder in good faith for value. An officer of a corporation can deal with the corporation if his acts are open and fair and known to the directors and stockholders. Barnes v. Spencer & Barnes Co., 162 Mich. 552, and cases there cited. If the dividends had been earned at the times they were declared, which question will be discussed later in this opinion, then it cannot be said that Quinn was not acting fairly in executing the note in suit. Upon the record as here made, we are not impressed that there is merit in the first contention of defendant’s counsel.

2. Nor are we of the opinion that a verdict should have been directed because the dividends in question were declared at stockholders’ meetings instead of directors’ meetings. Notice was given to both common and preferred stockholders of the meetings held on January 16, 1912, and January 21, 1913. Only common stockholders, however, participated in the proceedings of the meetings, which were attended by all the directors, excepting that at the meeting in January, 1913, director William Brinen was not present, although his stock was represented by proxy and he actually received the dividends which were declared. It is conceded by counsel for appellee that the general rule is that the directors of a corporation alone have the authority to declare dividends out of the net earnings of a corporation (Knight v. Alamo Manfg. Co., 190 Mich. 228), but it is urged that the learned circuit judge was right when he said that:

“The record shows the directors were all at a meeting and acted upon that question of the dividends. I shall hold that this is sufficient passing of a dividend by the board of directors.”

The court’s attention was not called at this time, nor at any other place in the record, to the claim that the alleged absence of William Brinen affected the validity of the action of the other directors. As the statement of the trial judge was allowed to stand unchallenged and he had no opportunity to pass on the question now urged by counsel, we will consider the question on this appeal as if the record fully justified his statement. We think it reasonable to hold, under these circumstances, that the actions of the stockholders’ meetings in January, 1912, and January, 1913, were in effect the actions of the directors, the judgment and discretion of the directors upon the question of dividends having been exercised by them at meetings attended by them, although called upon the record stockholders’ meetings. See Spencer v. Lowe, 198 Fed. 961; 8 Thompson on Corporations (2d Ed.), § 5285.

3. Appellee’s counsel say that they do not dispute the right of the preferred stockholders of the defendant corporation to raise the question that the note in suit represents dividends wrongfully declared, in that such dividends were not declared out of net surplus earnings of the defendant company; but insist that the record in this case presents a question of fact for the jury, which was properly left to them for determination by the trial court under a proper charge. It is contended by appellant’s counsel that while the defendant company apparently had surplus- net earnings at the close of business for the respective years in which the dividends were declared sufficient to warrant the declaration thereof, the actual condition of its affairs at the close of those years did not warrant these dividends, because in the loss and gain statements submitted as a basis for the dividends there were included worthless accounts receivable in large amounts, and there was a failure to include accounts payable which should have been included. After the death of Mr. Quinn in July, 1914, the books of the company were audited by the audit department of the Security Trust Company, Mr. C. E. Neff having charge of the audit. The affairs of the company were found in such condition that it was necessary to liquidate the company’s business, and the report disclosed $39,-271.82 (estimated) of bad accounts which were carried as live assets. Attempts were made to collect these accounts and some collections were made, so that the loss on account of bad accounts was actually approximately $35,000. The affairs of the company were finally wound up by Leo A. Migan, who acted as liquidation manager. Some argument is advanced in support of the claim that accounts receivable should not be taken into consideration by a corporation for the purpose of showing surplus net profits out of which to declare dividends. It is well established that book accounts concerning which there is no question may be included in the assets of a corporation in determining whether or not there has been a net profit. Spencer v. Lowe, supra. From the fact that Neff and Migan testified that they were unable, in winding up the affairs of the business, to collect these accounts, it does not necessarily follow that these accounts were worthless three and four years earlier. With reference to this, we think what the trial judge said in overruling the motion to enter judgment for the defendant non obstante veredicto is pertinent:

“Proofs show that the receiver has been unable to collect many accounts of persons who owed the company at the time these dividends were declared. It is universal experience that debtors who may be uncollectible from a legal standpoint, will continue to pay their running accounts to a going concern, but as soon as it ceases to operate these same debtors, whose accounts were properly deemed to be valuable assets, at once discontinue payment and the accounts thus become worthless.”

The rule is thus stated in Main v. Mills, 6 Bissell (U. S.), 98:

“In deciding whether a dividend was rightfully made, the transaction must be viewed from the standpoint of that time, and not in the light of subsequent events. Notes or overdrafts by persons then considered abundantly good, should not be counted as losses, because they afterwards proved such.”

There is considerable dispute concerning certain accounts payable which it is alleged did not appear in the statements of 1911 and 1912 and that certain goods appeared in the inventories of 1911 and 1912 which did not appear in the accounts payable for those years respectively. It is impossible, and would not profit, to attempt to discuss these various accounts in this opinion. It is sufficient to say that we have considered the contentions of counsel with reference thereto and are satisfied that the conflicting testimony concerning them fairly presented questions of fact for the jury. Whether or not the defendant company was in a financial condition — that is, whether or not there were available net assets — to warrant the directors in declaring dividends earned in 1911 and 1912, became on this record a question for the jury and was properly submitted to them by the trial judge in a clear and concise charge.

4. We have examined the various assignments of error with reference to the admission and exclusion of evidence and find no prejudicial error committed in the rulings with reference thereto.

5 and 6. Neither are we of the opinion that the court erred in. denying the motion to enter judgment for the defendant non obstante veredicto, and in denying the motion for a new trial.

The judgment is affirmed.

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


text:
    FIRST STATE BANK OF MILFORD v. WALLACE.
    Fraudulent Conveyances — Husband and Wife — Estates by Entireties.
    Where a husband and wife owning a farm by the entireties exchanged it for two houses and lots in a city, taking title by the entireties, and paying in cash a difference of $4,100, the husband at the same time disposing of his personalty, on a bill filed in aid of execution by creditors of the husband on indebtedness owing at the time the exchange was made, held, that to the extent of one-half the cash payment the transaction was in fraud of creditors, and the houses should be subject to their claim to that amount. Ostbandee, C. J., dissenting.
    Appeal from Washtenaw; Kinne, J.
    Submitted April 5, 1918.
    (Docket No. 46.)
    Decided June 3, 1918.
    Bill in aid of execution by the First State Bank of Milford against Alexander Wallace and another. From a decree for plaintiff, defendants appeal.
    Modified and affirmed.

      Cavanaugh & Burke, for plaintiff.

      James H. Pound, for defendants.
   Kuhn, J.

The defendant, Alexander Wallace, and one of his sisters were given by their father’s will a certain farm property of about 95 acres in Livingston county, charged, however, with the payment of certain debts, funeral expenses and the cost of erecting a monument on the cemetery lot. Mr. Wallace purchased his sister’s half interest for $2,500, which he borrowed from his brother, Henry M. Wallace, on the security of a mortgage on the property. In addition to this 95 acres Mr. Wallace owned some adjoining land, making altogether a farm of about 246 acres, of which, however, more than 70 acres was covered with water, being a part of Dunham (or Andrews) Lake. In the early part of 1909 Mr. Wallace, then 46 years of age and unmarried, made a proposal to a Miss Lena C. Rohn, of Brighton, then about 33, that if she would marry him and assist him in paying off the indebtedness on the farm, he would fix the property so that when he was through with it, it would be hers. . After consideration, she accepted his' offer and they were married. She had a little property of her own — a small amount of money, some poultry and a Jersey cow — and when she came to the farm, carried on a dairy and poultry business, and, according to Mr. Wallace’s statement, did more than half the work in paying off the indebtedness on the farm. Their efforts to that end were successful, and on December 28, 1910, he fulfilled his antenuptial promise by changing the title of the farm into an estate by the entirety. This was accomplished by conveying the farm property to Amelia Rohn (Mrs. Wallace’s mother) and on the same day taking back from her a deed of the same land, running to Alexander and Lena C. Wallace. Each deed mentioned and included the personal property on the farm, teams, harnesses, live stock, farm utensils, hay, grain, farm produce, household furniture, wagons, buggies, sleighs, cutter, robes, blanket, lumber, logs and wood. The mortgage of $2,500 was paid, and was discharged of record' on August 29, 1912. All of his indebtedness had been paid.

Oñ June 24, 1915, Mr. Wallace borrowed $225 from the plaintiff, the First State Bank of Milford, on his unsecured note. The money, according to Ms testimony, went to an automobile agent, with whom he was making a trade in automobiles. On July 15, 1915, he indorsed a note made by one, Seely' Orr, for $100, on which the plaintiff loaned- that amount without security. On July 30, 1915, Mr. Wallace borrowed $30 from the plaintiff bank on another unsecured note. At this time Mr. Wallace’s health was failing and he was becoming blind. It seemed advisable, therefore, to dispose of the farm property, and while Mr. and Mrs. Wallace were considering the matter, an advertisement in an Ann Arbor newspaper came to their attention, in which one George Gallup offered for sale some residence properties in Ann Arbor and stated that he would take certain bonds and stock in payment. With the thought in mind that a good house in Ann Arbor would furnish a source of income for Mrs. Wallace through renting rooms to students, they replied to this advertisement, and correspondence and negotiations followed. They sought the advice of Henry M. Wallace. He was acquainted with Mr. Gallup and conducted the negotiations on behalf of his brother, which finally resulted in the following transaction: Alexander Wallace and wife deeded the farm property to George Gallup, at a valuation of $7,900, and paid him $4,100 in cash, in return for which George Gallup and wife deeded to Alexander Wallace and Lena ¡C. Wallace, as husband and wife, two residence properties in Ann Arbor, one known as,No. 307 North State street, at a valuation of $5,000, and the other'No. 1513 South University avenue, at a valuation of $7,000. The growing crops on the farm were thrown in with it without any further consideration. In connection with this exchange, Mr. and Mrs. Wallace also turned over to Mr. Gallup the live stock, farm tools and implements, an automobile, a chattel mortgage and a number of notes, at a valuation of $3,500, in return for which Mr. Gallup transferred to Alexander Wallace 400 shares of the capital stock of the Consolidated Gas, Electric & Water Company, at the same valuation. It appears that the stock of this company was without any value, as the constituent companies went into the hands of receivers. The testimony indicates that the transaction was not viewed as one exchange with the consideration on each side estimated as a whole, but that the real estate properties on each side were set off against each other and the difference paid in cash, and that the stock was applied specifically to the purchase of the personal property. Mr. Alexander Wallace testified on cross-examination:

“Q. * * * You turned over all that property for this property in Ann Arbor, is that right?
“A, No, the personal property was turned in for that stock.
“Q. And the farm was turned in for the property here, in Ann Arbor?
“A. Yes.”

The $4,100 cash paid over in the transaction was borrowed by Mr. and Mrs. Wallace from Henry M. Wallace; $2,400 of this was paid by a five-year lease of No. 307 North State street, given by Alexander and Lena Wallace to Henry M. Wallace, payment of rent for the full term being credited in advance. The remaining $1,700 was to be secured by a mortgage on the same property, which, however, at the time of hearing had not been given, owing to this litigation.

The notes given to the plaintiff bank were not paid, and the bank brought suit against Alexander Wallace and took judgment by default for $372.46 damages and $27.60 costs, on which a writ of execution was issued and levied on the two pieces of real estate in Ann Arbor acquired by Alexander and Lena C. Wallace in the exchange, and the bank then filed a bill in aid of execution, alleging that the transaction was in fraud of creditors, and praying that the conveyance, in so far as it appertains to Lena C. Wallace, be set aside and declared void and any attempted joint tenancy be revoked and that plaintiff be authorized to proceed upon its writ of execution. After a full hearing the court below entered a decree granting the relief prayed for.

The above facts are practically undisputed, but there is a sharp conflict in the testimony in relation to certain facts sought to be established by the plaintiff in proof of fraud. The president of the plaintiff bank testified that in previous loans Mr. Wallace had always put up certain collateral — some notes that he held and sometimes gas bonds — and that he asked him for this collateral in connection with the $225 loan of June 24, 1915, but that Mr. Wallace then stated to him:

“Well now I cannot. I have disposed of those securities and I have taken this farm back in my own name, and I own this 270 acres in my own name absolutely, free and clear from incumbrance.”

And that it was on the faith of that representation that he loaned the money without security. Mr. Wallace in his testimony made a direct and positive denial that he had ever made such a statement. There was also some conflicting testimony as to the value of the farm property and as to sales'of other land in the vicinity bordering on the lake.

It is the contention of counsel for the plaintiff that by the transfer of the personal property and the transfer of the real estate a fraud was committed by the defendants, and that at the very moment that the transfer of the property was made to George Gallup, the tenancy by the entireties in the real estate in Livingston county was severed. That the purchase of the property in Ann Arbor with the proceeds of the farm and personal property created a new condition. While we are not prepared to approve this contention of counsel as made, we nevertheless are of the opinion that the result reached by the learned trial judge can be justified by authority.

In Newlove v. Callaghan, 86 Mich. 300, it is said:

“It does appear that, at the time of the purchase of this property, the defendant John Callaghan was indebted to complainant in the amount of this judgment, and that defendants jointly purchased this property, and jointly paid the sum of $1,850 therefor, and that, the deed was made to them jointly. In the absence of any showing to the contrary, the- defendant John Callaghan must be presumed to have paid one-half of the purchase price. * * *
“It would be a gross injustice to permit debtors to apply moneys which should be applied to the_ payment of their debts, to the creation of an estate which would be beyond the reach of their creditors. Had the entire estate been placed in the wife’s name, there could have been no question but that the same would be regarded as fraudulent under the statute, and it is no less a fraud upon creditors because the title has been taken in the name of the defendants jointly. In other words, estates in entirety cannot be created at the expense of creditors, and held in fraud of the latter’s right.”

And in the opinion on the rehearing of- the same case, it was said:

“According to the answer, the purpose of taking the title in the joint names of the defendants was that the survivor should take; but if any part of the consideration was paid by defendant John Callaghan, the effect was to place that part beyond the reach of process, and that operated as a fraud upon creditors. A denial of actual intent to defraud does not avoid the consequences of an act which is in effect a fraud.”

In the present case, if the Livingston farm property had been exchanged for the Ann Arbor real estate as an even exchange, without the payment of any difference by the defendants in cash, especially if it had been a technical “exchange,” there might be good ground for the argument that the estate by the entirety in the Ann Arbor property might properly be considered as a continuation of the estate by the entirety in the farm property, which had been lawfully acquired. In such a case there would have been no conversion into money, but one estate by the entirety would have been exchanged for another estate by the entirety. But, however that may be, under the reasoning of the decision above quoted from, Alexander Wallace, while he was indebted to the plaintiff, had no right to tie up an additional sum, represented by one-half of $4,100, in an estate by the entirety and make no provision whatever for the payment of the few hundred dollars that he owed the bank, especially in view of the fact that by a simultaneous transaction he had disposed of all his personal property and taken in lieu thereof some worthless stock, thereby further hindering the plaintiff in the collection of its claim. It may be argued that no part of the $4,100 cash payment was furnished-by Mr. Wallace, but that it was loaned by a third party, which reduced defendants’ actual equity in the property to just the value of the farm property, and that this debt was to be paid out of the income of the Ann Arbor property, which, under an extension of the doctrine of Dickey v. Converse, 117 Mich. 449, might be said to partake of the nature of the realty; hence that no separate personal property of Mr. Wallace would ever be invested in the land. But the fact remains that, by means of this deal, $4,100, of which Mr. Wallace presumptively would contribute one-half, will be invested in an estate by the entirety, out of the reach of Mr. Wallace’s creditors. Credit for $2,-400 has already been given on this indebtedness for a five-year lease of one of the Ann Arbor houses, which increases defendants’ equity by that amount. Dickey v. Converse applied only to crops grown on a farm held by entireties. Before increasing the amount of his investment in execution-proof property, it is defendant’s duty to pay his debts. In the absence of any showing that Mrs. Wallace personally has or will furnish the $4,100, we see no reason why the bank should not be allowed to realize by execution out of the property an amount clearly not in excess of the proportion of the surplus of $4,100 which Alexander Wallace may fairly be presumed to have contributed. No reason appears why, if the defendants are unable otherwise to pay this judgment and avoid a sale of the property, they cannot raise the amount by mortgage. It is not necessary to discuss the question whether the fraud was intentional. It is sufficient that the transaction was in effect a fraud on creditors.

Assuming, then, that the investment in the Ann Arbor properties represented by the valúe of the Livingston farm land still continues to retain the character of an estate by the entirety, nevertheless, as to the amount of money invested by the defendant Alexander Wallace in the Ann Arbor properties above the value of the Livingston farm we do not think, under the circumstances of this case, that he should have the right to create an estate by the entirety. At least to the extent of this amount the land should be subject to the claim of the plaintiff, and we are therefore of the opinion that a decree should be entered ordering a sale of such an interest in the Ann Arbor properties as represents one-half of the investment made therein in excess of the value of the Livingston farm property as established by the sale thereof.

A decree may be entered in accordance with this opinion, with costs to the plaintiff.

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

Ostrander, C. J.

I think it is obvious that the decree indicated by this opinion cannot be enforced in accordance with any known rules.