author: Kuhn, J.

text:
    AMERICAN INSURANCE CO. OF NEWARK v. MARTINEK.
    1. Appeal and Error — Findings of Fact — Review—Statutes.
    Under section 15, ehap. 18, of the judicature act (3 Comp. Laws 1915, § 12587), errors based upon exceptions that . findings of fact are against the weight of the evidence are reviewable by the Supreme Court.
    2. Insurance — Principal and Agent — Cancellation of Policy— Duty of Agent — Liability.
    When instructed so to do, it is the duty of an insurance agent to cancel a policy of insurance issued by him, and if he fails to cancel he is liable to his principal for the damage sustained by the principal, unless the agent can show some valid reason for his failure to follow his instructions.

    3. Same — Notice—Contributory Negligence.
    In an action by an insurance company against its agent for a loss occasioned by the neglect or refusal of the agent to cancel a policy after repeated instructions to do so, where letters in evidence from plaintiff to defendant showed that plaintiff assumed that the policy had been canceled and that the agent had merely neglected to return it to plaintiff as instructed to do, and the agent did not inform plaintiff to the contrary, a finding by the court below that plaintiff by its general officers knew that the policy was not canceled and that it should be held guilty of contributory negligence for not canceling direct, held, not warranted by the evidence.
    4. Same — Retention of Premium — Estoppel.
    Where it appeared from defendant’s testimony that he retained the entire premiums collected on plaintiff’s policies for 2% months, and that all he had to do was to pay the return premium out of plaintiff’s funds, give himself credit for that amount, charge it to the company, and deduct it from his next statement, and return’the policy in lieu of the cash, there is no merit in defendant’s claim that plaintiff retained the premium and was thereby estopped from maintaining the suit.
    Error to Menominee; Flannigan, J.
    Submitted June 7, 1918.
    (Docket No. 70.)
    Decided September 27, 1918.
    Rehearing denied January 31, 1919.
    Case by the American Insurance Company of Newark, N. J., against Jacob J. Martinek for failure to cancel a policy of insurance. Judgment for defendant. Plaintiff brings error.
    Reversed.

      Sawyer & Sawyer (Thomas Bates, of counsel), for appellant.

      Doyle & Barstow, for appellee.

      See notes in 22 L. R. A. (N. S.) 509; L. R. A. 1915A, 860.

   Kuhn, J.

In this action it is sought to recover damages occasioned to the plaintiff because of the failure of the defendant, as plaintiff’s agent, to obey its instructions and cancel a certain fire insurance policy written by the defendant in the plaintiff corporation. The case was tried before the judge without a jury, who at the close of the testimony filed written findings of fact and of his conclusions of law and entered judgment in favor of the defendant. The case is brought here by the plaintiff to review the conclusions of law of the learned trial judge and the findings of fact by him made.

In order that the case may be fairly understood, it is necessary to set forth certain facts. The plaintiff has been lawfully engaged in carrying on the business of fire insurance in this State, prior to, on, and ever since October 21, 1910, and the defendant conducted a general fire insurance agency at Menominee in this State, where he represents some 35 insurance companies, including, during the period of this controversy, the plaintiff in this case. The appointment of the defendant as agent contained the following:

“To receive proposals for insurance against loss and damage by fire, * * * to fix rates of premiums, and receive moneys for transmission to the company, and to countersign, issue and renew policies of insurance signed by the president and secretary of the company, subject to the rules and regulations of the company, and such instructions as may from time to time be given by its officers and managers.”

The appointment was not for any specified time, but the right was reserved in the company to revoke the appointment at any time.' Five years before the appointment of the defendant to the agency for the plaintiff, the defendant’s predecessor in said agency issued a policy of insurance in said company, insuring one Jule Duquaine against loss or damage by fire, covering a certain elevator building, the machinery and appliances therein, and other contents thereof, located at Carney in said county, in the sum of $3,400. This policy had been renewed from, year to year and was in force when said defendant received and accepted said agency for the plaintiff. The defendant thereafter annually renewed the said policy until April 17, 1916. On the 8th of April, 1916, the defendant filled out and delivered to said insured a policy of insurance insuring said property in like amount from April 17, 1916, to April 17, 1917, and on the same day reported the transaction to the plaintiff, which report was received by the plaintiff on April 10, 1916. On April 11th, arid again on April 27th and on May 9, 1916, the plaintiff wrote to the defendant, disapproving the policy unless revised to cover not exceeding $1,500 on the building and equipment, with stock item to equal or exceed that amount. The defendant did not reply to any of these letters, and on May 24, 1916, the plaintiff wrote the defendant:

“Assuming from the delay that the assured is not willing to increase the grain insurance and cut down the building item, we must ask for the return of the cariceled policy.”

On the 9th and 17th days of June, 1916, the plaintiff, by the use of a blank form mailed to defendant, had said, among other things, with reference to this policy:

“As the policy has doubtless been taken up, please return it to this office at once._ We wish to state that we never give an agent credit for the return premium on canceled policies until they are received at this office. * * *
“Trusting we will be favored with the above mentioned policy at once, we remain.”

On July 3, 1916, a duly authorized special agent of plaintiff wrote to the defendant requesting attention at once and the cancellation and return of the policy, and on July 7th, JOth, and 28th a form letter, containing in substance what we have quoted above from the other form letter, was mailed to, and duly thereafter received by, the defendant. The defendant in no way replied to any of plaintiff’s letters or notices regarding the policy, although he had written a great many policies in the plaintiff company and had canceled the policies when he had been requested so to do. The insured property was damaged by fire on July 31, 1916, entailing a loss as established by the proofs and adjustment, which the plaintiff was obliged to and did pay, on the 16th day of September, 1916, in the' sum of $2,801.88, besides the expense of adjustment, amounting to $49.72. It is for these two amounts that this action is brought, with interest thereon from the date of payment.

Counsel for plaintiff and appellant in their brief, with reference to the rule of law applicable, said as follows: .

“When instructed so to do, it is the duty of an insurance agent to cancel a policy of insurance issued by him, and if he fails to cancel, he is liable to his principal for the damage sustained by the principal, unless the agent can show some valid reason for his failure to follow his instructions.”

In reply, counsel for defendant say, referring to this statement of the law:

“So far as the above statement of law goes, it is unchallenged. There is no doubt that the above quotation is a correct statement of a rule of the law of agency. The difficulty with opposing counsel is that they stop short with this one rule of agency and disregard entirely other and equally binding, well-settled rules of this same law of agency. One need not look into a law book to know that unless a principal had some redress against his agent for disobedience of instructions, there would'be few relations of principal and agent established.”

But it is insisted that, notwithstanding the acknowledged negligence on the part of the defendant, no right of recovery should be had in this case, because it is urged that the doctrine of contributory negligence on the part of the plaintiff should be invoked, and that if this is done, under the findings of fact of the court, the defendant should not be held liable. In the findings of fact the following is found:

“The facts and circumstances of the case justify the inference which is drawn, that the plaintiff’s general officers knew the defendant had not rearranged the insurance or canceled the policy, and in ample time to have prevented a loss by cancellation direct.”

The seventh assignment of error is as follows:

“The court erred in finding, and in refusing to strike therefrom, as per plaintiff’s fifth proposed amendment, as follows: ‘But the question remains whether he (referring to defendant) could be held for the loss where it appears the plaintiff knew of his disobedience in ample time to have avoided loss by cancellation of policy itself,’ because the same, and the assumption of facts referred to is against the clear weight of the evidence.”

It, therefore, becomes necessary for us, by virtue of section 15, chap. 18, of the judicature act (3 Comp. Laws 1915, § 12587), to review this finding of fact. We cannot agree with the learned trial judge that, under the circumstances of this case, the plaintiff should be held guilty of contributory negligence or that the doctrine of avoidable consequences can be made to apply. The record showed that the defendant had, under the instructions of plaintiff, prior to this time canceled a great many policies, and he clearly understood it to be his duty, when instructed to do so by the plaintiff, and it seems to us that the plaintiff had the right to believe, and that the record justifies the conclusion that it did believe, that its instructions as to the cancellation of this policy were being obeyed, for in the notice sent by the plaintiff as late as the 28th of July, there appeared the following:

“We again call your attention to the fact that we have not as yet received policy No. 11178, issued to Jule Duquaine and ordered canceled —-- 1916, at your agency. As the policy has doubtless been taken up, please return it to this office at once.”

The defendant did not answer a single one of the letters that he received, but refused to obey the instructions of the plaintiff as to canceling the policy. The agent was located hundreds of miles from the principal, and the only method by which the plaintiff could ascertain whether the policy had been canceled was through its agent, who refused to advise it whether he had canceled it or not, but instead of doing so, he stubbornly refused and neglected to perform his duty under his appointment as the agent of the plaintiff. We are of the opinion that there is nothing in the record to warrant the inference that the plaintiff knew that the policy was not canceled, but in our opinion the conclusion is clearly warranted that they supposed that their positive instructions as to cancellation of the policy had been complied with and that the plaintiff had'been refusing to return .the canceled, policy. A somewhat similar case is found in 169 Pac. 213 (a Kansas case), St Paul Fire & Marine Ins. Co. v. Bigger, 102 Kan. 53. Another instructive case is London Assurance Corporation v. Russell, 1 Pa. Super. Ct. Rep. 320, where the court said:

“In the defendant’s testimony, the plaintiff company is relieved entirely of any charge of contributing to this loss, as the letters produced by the defendant clearly show that the company relied on their first notice through their representative, Mr. Calley. _ The primary obligations of an agent, whose authority is limited by instructions, is to adhere faithfully to those instructions in all cases to which they ought properly to apply. He is, in general, bound to obey the orders of his principal exactly, if they be imperative, and not discretionary; and, in order to make it the duty of a factor to obey the order, it is not necessary that it should be given in the form of a command. The expression of a wish by the consignor may fairly be presumed to be an order. * * * One who receives orders to cancel a policy delays their execution at his peril.”

It is also said by counsel for defendant that as the company retained the premium, that fact operated as an estoppel against the plaintiff. We do not think there is any merit in this contention, for the defendant testified:

“At the end of the month I make a current statement and send it to the company. In 45 days or 50 days thereafter, they draw on me through the bank. If I had canceled this Duquaine policy, I would have had to pay Mr. Duquaine back his unearned premium, then I would charge that to the company, and in my balances I get credit for it.”

It appeared that the defendant at all- times had in his possession the entire premiums collected on plaintiff’s policies for two and one-half months, and all he had to do was to pay the return premium out of plaintiff’s funds, give himself credit for that amount charge it to the company, and deduct it from his next statement, and return the policy in lieu of the cash. With him it was simply a matter of bookkeeping.

After a careful review of this record, we are satisfied that the trial judge erred in rendering a judgment for. the defendant, and a judgment upon these facts should have been entered for the plaintiff for the full amount claimed. The judgment is, therefore, reversed and a new trial granted, with costs to the appellant.

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


source: Caselaw Access Project

license: Public Domain

text:
    EVERHART v. CLUTE.
    1. Libel and Slander — Privilege—Malice.
    A slanderous statement is not privileged, although, made in response to a direct question by a third party, where there was proof of actual malice in that defendant circulated stories to the same effect as the slanderous statement both before and after the date of the alleged slander, and that he also made the same slanderous statements to persons who had no interest in the subject-matter.
    2. Same — Trial—Instructions—Damages.
    An instruction by the court below that the jury, in estimating the amount of plaintiff’s damages, might take into account any damage suffered by him by reason of the repetition or circulation of the slanderous words which was directly caused by defendant’s publication thereof in the first instance, although not supported by the record, was not prejudicial, where the verdict was not excessive.
    3. Same — Malice—New Trial — Excessive Verdict.
    Where it was plaintiff’s theory that, ever since litigation between them many years before, defendant had repeatedly circulated and published these slanderous statements about plaintiff, and had even pursued him and carried them into a new neighborhood to which he had removed, the court below was not in error in refusing a new trial on the ground that the verdict for $1,000 was escessive.
    4. Trial — Instructions—Issues Presented.

      Held, that the issue presented by the parties was fairly submitted to the jury with proper instructions.
    Error to Cass; Des Voignes, J..
    Submitted June 19, 1918.
    (Docket No. 72.)
    Decided September 27, 1918.
    Case by Charles E. Everhart against John Clute for slander. Judgment for plaintiff. Defendant brings error.
    Affirmed.

      Clarence M. Lyle and Gore & Harvey, for appellant.

      Elias P. Harmon and Asa K, Hayden, for appellee.
   Kuhn, J.

The following statement of facts is taken from the opinion of the learned trial judge denying the motion for a new trial:

“The case was based upon the alleged slanderous actionable words uttered by defendant of and concerning the plaintiff. The plaintiff for many years was a farmer, a resident of Newburg township, Cass county, but for the past year or two is one of the deputy State game wardens with residence at Three Rivers. The defendant has resided many years in Newburg township, following the occupation of farming. Both parties were for many years neighbors in that township.
“During the period they were neighbors, they became involved in litigation over the ownership of some turkeys. Both raised turkeys and defendant replevined some turkeys of plaintiff which he alleged were his. The case.went through the several courts and the final determination of the issue is reported in [Clute v. Everhart] 137 Michigan, at page 5. The litigation engendered bad feeling and seems to have continued notwithstanding the lapse of many years.
“It is the claim of plaintiff that during the time that has intervened defendant lost no opportunity to slander him among the neighbors and even to strangers; that later and after he had been appointed to the office he now holds, defendant on the streets at Colon, Michigan, and to people at Mt. Gilead and elsewhere said of and concerning the plaintiff, when asked the question: 'Did you (defendant meaning) ever hear of this man, Everett, stealing any turkeys?’ in reply defendant is claimed to have said, ‘Yes, God damn him, I am the man he stole the turkeys of, and I have the documents to prove it.’
“Defendant denied making the statement on the trial, but did testify on the trial that he told the persons making the inquiry the facts of the replevin case of the turkeys and then added, 'You can draw your own conclusions,’ or words to that effect.”

The trial resulted in a verdict for the plaintiff in the sum of $1,000, and the case is brought to this court by writ of error by the defendant.

It is the first contention of defendant’s counsel that the slander, under the circumstances alleged by the declaration and testified to by the plaintiff’s witnesses, must be held to be confidential and privileged, as the answer of the defendant was made in response to a direct question put to him by one Homer Eberhard. It is therefore said that the court erred in overruling the objection of defendant’s counsel made at the beginning of the trial to the reception of any testimony. Counsel for appellant do not say whether the answer should be held to be absolutely privileged or only qualifiedly privileged, but an answer to their contention, it seems to us, is clearly found in the contention of plaintiff, which was sustained by proof in the case, that there was actual malice on the part of the defendant, which is shown by proof that the defendant had previously, and also subsequently to the date when the alleged slanderous statement was made, circulated stories to the same effect as the slanderous statement. It also appears that the alleged false and slanderous statement was made to persons who had no interest in the subject-matter. See Flynn v. Boglarsky, 164 Mich. 513 (32 L. R. A. [N. S.] 740), in which opinion authorities in this State on this question are cited.

The court in his charge to the jury instructed them in part as follows:

“If you find that the plaintiff has suffered any damage not necessarily confined to the publication of the words charged by defendant himself, but that there was a repetition or circulation of the slanderous words which was directly caused by defendant’s publication •thereof in the first instance, if any, that may be taken into-account in estimating the amount of plaintiff’s .damage. And if you find from all the facts and circumstances. in the case that defendant uttered the words claimed by plaintiff, and that the same became current in the community, or among any number of persons in the community, then the damage which plaintiff may have suffered, if. any, by reason thereof, may be taken into account by you in arriving at the measure pf his damage, if any. And this element of the case would bear only upon the amount of damage to plaintiff’s reputation and feeling and humiliation in the community where he lived.”

It is not contended that this was an incorrect statement of the law, but that there was no basis whatever in the record to support it. We have been .unable to find, and our attention has not been challenged by counsel for appellee to any direct testimony of the repetition of the slanderous words caused by the defendant’s publication and circulation thereof in the first 'instance. We are, however, of the opinion that this statement in the charge cannot be said to have been prejudicial, in view of the fact that, in our opinion, the amount of the judgment cannot be said to be excessive. It was the theory of the plaintiff, as has been stated, that the defendant, since the trial of the first litigation, which found its way to this court, and which apparently precipitated all the trouble; has repeatedly circulated and published these slanderous statements about the plaintiff, and even after he left his old neighborhood, pursued him and carried them into the new home which he made for himself, where he had received the appointment as a deputy State game and fish warden. Leonard v. Pope,. 27 Mich. 145 (note). We cannot'say that a verdict of $1,000 for injury to the feelings of the plaintiff under such circumstances is one so clearly excessive that the trial judge should have granted a motion for a new trial on that ground.

It is also claimed that the charge of the court is argumentative, but a careful reading of it is satisfying that this criticism is without merit and that the issue presented by the parties in the trial was fairly submitted to the jury with instructions which properly safeguarded the rights of the defendant.

We find no prejudicial error, and therefore affirm the judgment.

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


text:
    LOUD LUMBER CO. v. STERLING CEDAR & LUMBER CO.
    Cancellation of Instruments — Contracts — Fraud — Timber Land — Rescission—Burden of Proof.
    On appeal from a decree of the court below rescinding a contract for the sale of a tract of timber land on the ground of fraud in misrepresenting the amount of timber thereon, evidence examined, and helé, that the parties were dealing with, each other, at arm's length, acting on their own independent investigations, and that plaintiff has failed to meet the burden of proof resting upon it as to the allegations of fraud and misrepresentation.
    Appeal from Mackinac; Shepherd, J.
    Submitted June 18, 1918.
    (Docket No. 32.)
    Decided September 27, 1918.
    Bill by the Loud Lumber Company against the Sterling Cedar & Lumber Company and others for the rescission of a contract on the ground of fraud and for an accounting. From a decree for plaintiff, defendants appeal.
    Reversed, and bill dismissed.

      Lucking, Helf man, Lucking & Hanlon (Victor D. Sprague, of counsel), for plaintiff.

      Willis Baldwin (Henry Hoffman and Angelí, Bod-man & Turner, of counsel), for defendants.
   Kuhn, J.

This is a bill for rescission of a contract for the purchase of certain timber lands, on the ground of fraudulent misrepresentations by the vendor as to the quantity of timber thereon. The vendor was the defendant Sterling Cedar & Lumber Company and the land in question was a tract of 3,560 acres in Mackinac and Chippewa counties which the company had purchased in 1906, after an examination by its cruiser, Mr. John C. Scott, whose report showed 19,380,000 feet of merchantable saw-log timber thereon. The purchase price, according to plaintiff’s claim, was $55,-820; according to defendants’, nearer $80,000. On this tract, at the village of Charles, the company owned and operated a savr mill and shingle and tie mill. In 1909, it requested the Security Trust Company of Detroit to act as trustee under a bond mortgage proposed to be placed on this property. The trust company employed Mr. George F. Beardsley, of Grand Rapids, to estimate the amount of timber on the land. He appears to have been an experienced "estimator whom the trust company was accustomed to depend upon in large transactions of this kind. Beardsley’s report showed 27,760,000 feet of merchantable timber and a later report of his added over 1,000,000 feet of balsam, bringing the total up to 29.340.000 feet. In 1910, Scott made a second cruise for the Sterling Company, at which time he reported 27.530.000 feet of timber. On May 1, 1911, the Sterling Company executed a serial bond mortgage to the Security Trust Company in the aggregate sum of $135,000, covering the entire tract and securing the payment of its bonds maturing in series annually from May 1, 1912, to May 1, 1920., These bonds were not sold to the public, but most of them were held as collateral by certain bank creditors of the Sterling Company. In August, 1912, the Sterling Company, being quite heavily in debt, inserted the following advertisement in the American Lumberman:

“For Sale — Saw Mill With Timber.
“An up-to-date going plant with 30M capacity circular mill; also shingle and tie mill, docks, store, dwellings, and camps, all going full force, with six thousand acres virgin hard and soft timber, cedar and pulpwood. Cut hardwood this winter, now cutting soft wood, especially located for water shipment in Michigan on Lake Huron. Entire cut can be contracted at good prices. Can arrange a bond issue; prefer retaining an interest, more timber in vicinity can be added; shingle timber for twenty years cut.”

This advertisement attracted the attention of Mr. H. Kimball Loud, who was connected with the lumber business of H. N. Loud & Sons at Au Sable and Os-coda, and to his letter of inquiry Mr. W. C. Sterling, Sr., replied:

“We are running full blast, have not cut a tree on my land for five years, preferring to buy from others and save my timber. Prefer to retain an interest With right party with experience.
“One hundred and sixty thousand will secure all but quick assets with many years good business and control of the Carp river timber. * * *
“The property can be bonded for $135,000.00;”

In the course of the negotiations which followed, it was represented by the defendants Sterling, according to plaintiff’s claim, that there was close to 30,000,000 feet of saw-log timber on the property. The written Beardsley statement of the amount of timber, etc., on the land was delivered to Mr. Loud, but not the original estimate made by Mr. Scott. It appears to have been the understanding and desire of both parties that Mr. Loud should have an independent cruise of the land made to check up the Beardsley estimate. Mr. Loud wrote several times for the detailed estimate by forties, but all that was. furnished him was Scott’s 1910 estimate on 9 forties, the Sterlings claiming that the other detailed reports had been lost or mislaid. Mr. Loud’s father was interested to some extent in the project, and in January, 1913, the Louds employed Mr. George Wilson, to cruise the land for them. While Wilson was up there the first time, Mr. Scott, the Sterlings’ estimator, who was acquainted with Wilson, came up to the tract and gave him what purported to be a summary by sections of his 1906 cruise, but which really contained the figures of his 1910 cruise, showing a total of 27,530,000 feet. This fact was unknown to the Louds until the trial of this case. In February of the same year Wilson went back to cruise the lands by forties, at which time he covered 33 out of the 89 forties and also went over some of the remainder roughly to get a general idea of it. He did not complete it at that time on account of the extreme cold weather. While he was up there, the Sterlings and the Louds and their attorneys were having conferences and negotiations in Detroit and Monroe, which resulted, on February 15, 1913, in the signing of a contract providing for the sale of the tract to H. Kimball Loud for $160,000, the Louds to organize a corporation, to issue their own mortgage bonds for $160,000 and to give the Sterlings $50,000 of preferred stock and $122,000 in bonds. The Sterlings were to buy the remaining $38,000 of bonds for $34,-000 cash to provide a working capital, the contract to be void if they failed to do so in 14 days. The Louds had the right to withdraw from the contract if the report of Wilson’s cruise was unfavorable or if they could not raise the necessary money. At this time the Louds did not have Wilson’s report, but had a telegram from him relating to' 26 forties, and soon after received his report on the 33 forties together with some general statements as to the remainder. On February 19th, however, Mr. H. K. Loud wrote W. C. Sterling, Sr., that they had been unable to secure the money for a working capital and withdrew from the contract unless the Sterlings themselves could bond the property for $160,000. The Sterlings immediately took up the matter, and a meeting was arranged in Detroit for February 27th, at which Mr. Sterling reported that he could sell the bonds if the Louds would guarantee .them, and offered to loan $17,000 for a working capital. The Louds wanted time to have the cruising completed,' but the Sterlings insisted that haste was necessary. On March 1, 1913, the contract now sought to be rescinded was made and executed by the parties. It bears date February 28, 1913. It provides for the purchase of the timber tract for $160,000 and of the camp equipment and store for $7,000, to be paid for in the following manner: The Loud Lumber Company was to be organized with $100,000 common and $50,000 preferred stock, to be fully paid for by the property purchased under the contract. The Loud Lumber Company was to assume $119,000 of the outstanding bonds of the Sterling Cedar & Lumber Company, which the Sterlings were to take and dispose of at 90c on the dollar; it was to turn over to the Sterling Company the $50,000 preferred stock, and to give its note for the balance of the $160,000, viz., $2,900, and for the further sum of $7,100 which the Sterling Company was to loan in cash for a working capital; also to give its note for $7,000 for the camp equipment. This arrangement was carried out, and the Sterling Company sold .the $119,000 of bonds for $112,000. In order to facilitate the sale of these bonds, a few days after the contract was made Mr. Sterling wrote Mr. H. K. Loud:

“Wish you would write me some sort of a letter for our bond men advising: ‘You bought the property on George F. Beardsley’s estimate after having two of your own cruisers go over the standing timber, verifying the estimates of Beardsley and those the Sterling Cedar & Lumber Co. had, and satisfying yourself that the timber was there.’ If you wish to elaborate a little, you can say, as your report sent us shows, that the cedar poles overrun about 16,700; pulpwood 750 cords, ties 100,000, posts 300,000, etc. Also comment on what cruisers say about chances of fire, conditions of roads in woods, Carp river for operating and driving, mills and docks, also value of land timber is on, and location of property as to freight rates and markets, etc.”

The Louds accordingly wrote the brokers, McLaughlin, Rice & Davis, substantially along the lines requested. The Loud Lumber Company was organized in March, 1913, and commenced operations on the property, among other things building a five-mile railroad to the southeast comer of the property. From time to time the Loud Lumber Company employed Wilson to cruise particular forties as an aid to plaintiff in its lumbering operations. It was not until March, 1915, that Wilson had sufficient information to make a complete report by forties, and his final report at that date indicated that there were but 15,-744,000 feet of timber on the tract at the time of the purchase. In the fall of 1915, plaintiff employed Thomas Burrell to cruise the lands, whose report showed 5,558,000 feet of saw-log timber then on the tract. According to plaintiff’s records, it had cut 5,-891.366 feet, which would seem to indicate that there were but 11,449,366 feet on the land when purchased by plaintiff. Prior to the hearing, plaintiff also employed William T. Tubbs and C. H. Fultz to examine the timber, who made detailed reports by forties, and their combined reports showed 4,254,000 feet of saw timber still on the land, which, if plaintiff’s cutting records are correct, would mean that there were only 10.145.366 feet of saw timber on the land at the time of plaintiff’s purchase. After Burrell’s report, plaintiff ceased to cut timber, and in October, 1915, filed the bill of complaint in this cause. After a full hearing, the learned trial judge made the following findings:

“Reflection has confirmed my opinion formed at the conclusion of the taking of the testimony and on the arguments, that the Louds, in making the purchase, relied largely and substantially upon the representation of the officers of the defendant company that there was more than twenty-nine million feet of merchantable timber standing upon the lands purchased, and that no timber had been cut by the Sterlings since their purchase and estimated by the witness Scott.
“I find as a matter of fact that there was on the land at the time of its purchase by the Louds less than one-half the timber represented; and that while it was owned by them the Sterlings had done some lumbering on the land.
“The; first of these misrepresentations, that is, as to the amount of standing timber, of itself constitutes such a fraud upon the plaintiff as confers upon it a right to relief in equity. The plaintiff is the child of the contract and may sue upon it. It is not barred by laches, delay or otherwise.”

The decree provided that the deed and contract be set aside; that $47,500 of preferred stock and $7,000 bonds held by the Sterlings, and also the $2,900 and $7,000 notes, be canceled; that the Louds be held harmless for the $2,500 of preferred stock sold and on $90,000 of bonds outstanding; that an accounting be had, in which plaintiff shall be allowed all payments made on the railroad, one-half its expenditures on the mill, and all payments for- permanent improvements; that the Loud account books be held'final in the accounting for timber; and that the defendants William C. Sterling, Sr., and William- C. Sterling, Jr., be held personally liable. It further dissolved some pending attachment suits and enjoined all actions at law.

Counsel for plaintiff,- in their brief, state their claims as follows:

“1. That a deliberate, wilful fraud was perpetrated upon the Louds and the plaintiff who succeeded to their rights, by the defendants, who falsely represented to them that the Mackinac tract contained over 29,000,000 feet of merchantable saw-log timber plus certain forest products, that the Beardsley cruise was correct and the timber and forest products therein set forth was on the lands, that Scott’s cruise of nine forties was all the defendants had left of his total cruise and was a fair average of the eighty-nine forties, that Beardsley’s cruise and Scott’s cruise roughly checked with each other, that the defendants had not cut timber or forest products on the lands since September, 1907, i. e., for five years prior to September, 1912, and not since the date of the Beardsley 1909 cruise. And that the concealment of the Scott 1906 cruise of 19,000,000 feet and of the Sterling cutting since that date to 1913 was wilfully fraudulent, even if based on legal advice of defendant’s attorney as claimed.
“2. That defendants fraudulently hurried the Louds and plaintiff into the transactipn on the fraudulent pretext that speed was necessary to secure a sale for the bonds and that the excuse therefor offered by defendants in their answer ‘that negotiations for the sale of the bonds had progressed so far that expedition was advisable to assure a probable bond sale,’ and the defense offered on the hearing that a delivery of the Scott 1906 cruise and checking thereof would have taken time and would have caused the Louds to ‘continue their investigation for a longer period of time’ is merely a fraudulent afterthought.
“3. That in cases of wilful and deliberate fraud, as distinguished from constructive fraud, laches is not a meritorious defense and will not be favorably regarded, and that equity will permit a rescission after some of the sold property has been 'consumed, allowing the fraudulent vendor consideration therefor and adjusting the equities between the parties.”

After a careful study of the transaction which forms the basis of this litigation, we are unable to agree with the conclusion reached by the learned trial judge, and are convinced that the plaintiff has failed to make out a case entitling it to the relief prayed for. The circumstances on which its counsel place their chief reliance, while they might, if properly linked with other facts, have considerable weight as evidence of fraudulent dealing, in the absence of such supporting evidence can be as easily accounted for on the theory that the defendants were acting in perfect good faith in the matter. Plaintiff has by no means met the burden of proof resting upon it to. establish fraud. We are impressed that the Louds were dealing at arm’s length in the transaction, were taking nothing for granted, but intended to satisfy themselves, and did satisfy themselves, by an independent investigation that the amount of timber represented by the, defendants was actually on the land. Indeed the record seems to indicate that the Sterlings were anxious to have them get a complete, independent estimate and were confident that it would verify the Beardsley report. Such an estimate would be an added advantage in putting through the bond deal, which was a necessary part of the transaction. We find no evidence that Wilson was hindered or misled in any way in making- his cruise or that he was not acting in good faith and for the interests of his employer. In the absence of such proof, we attach no significance to the fact that Scott was up on the tract at the time Wilson was cruising and went into the timber with him. The complaint made by the plaintiff that the Sterlings led the estimator into the best timbered portion of the tract and withheld from him the detailed reports covering the poorly timbered sections has little weight as evidence of fraud in view of the attitude of the Louds as disclosed by the very letters in which they asked for the detailed reports. On December 13, 1912, Mr. Loud wrote:

"If you have the detailed estimates, would you please let me use them? We could then plan to go where the timber is heaviest and not lose time on unimportant parts,”

And again:

"Can the detailed estimates be obtained from the Security Trust Company? * * * Without them considerable time would be wasted in going over descriptions on which there was not much timber to see.”

Clearly their purpose in asking for the information was not to find where the poor timber was — their letters evince knowledge that there were poorly-timbered descriptions — but to enable them to spend most of their efforts in inspecting the well-timbered portions. The Sterlings claim that their purpose in withholding the information was to force the Louds to make a complete cruise of the entire tract. We do not see how the Louds can claim to have been deceived in this respect.

Again, we are unable to see any merit in plaintiff’s contention that the Sterlings fraudulently hurried the closing of the deal before the Louds had completed their investigation. It appears that one contract had already been signed on February 15th, concerning which there is no claim of undue urging on the part of the Sterlings. By its terms it gave the Louds the chance to withdraw in case their cruiser’s report did not show the amount of timber expected — in itself an evidence of good faith on the Sterlings’ part — and the further opportunity to withdraw in case the Louds could not finance the deal. It was for the latter reason only that the Louds withdrew from that contract, and in announcing their failure they put it up to the Sterlings to see what they could do. Mr. H. K. Loud wrote:

“This is the last opening we know of as far as we are concerned for financing the enterprise, and apparently the only hope at present is in case you succeed in placing a bond issue of $160,000 upon the property. I sincerely hope that you may succeed in doing what we have been unable to do.”

The Sterlings then took hold of the matter and did succeed in making arrangements with a firm of brokers to sell the existing bond issue upon a guaranty thereof by the Louds, and their urgency that the deal be promptly closed was that the results of their efforts in this behalf might not be lost through delay. Moreover, the Louds appeared so well satisfied with the information they already had from Wilson that they did not think it necessary to send him back to complete the cruising of the tract, and according to their own testimony, the only purpose for which they subsequently employed him from time to time to cruise particular descriptions .was to aid them in their lumbering operations. The Louds explain their action in entering into the contract as they did, without a complete report on the timber, and their subsequent failure to have Wilson promptly finish his cruise, by the alleged fact that at the conference at which the final contract was agreed upon, Mr. Sterling, Sr., guaranteed the correctness of the Beardsley estimate. Mr. H. K. Loud testified:

“All the talk I had with Mr. Sterling where he said he would guarantee the estimates, was in the room in the Pontchartrain. He said he would guarantee them there. I asked him, ‘Will you guarantee those estimates?’ He said, ‘Yes.’”

Mr. H. N. Loud also stated that Mr. Sterling said he would guarantee the estimates, but the two Sterlings and Mr. Dixon, their attorney, denied that any such statement was made. No mention of any such guaranty is made in the written contract which was at once prepared. Both sides were represented by competent attorneys, the contract was drawn by the Loud’s attorney, not by the Sterlings’, it was carefully prepared, and there was every opportunity for the parties to safeguard all their rights. Indeed Mr. Sterling, Jr., testified that Mr. Helfman, while drawing the contract, asked particularly, “Is there anything about a guaranty to go into the contract?” and that both the Louds and Sterlings said, “No.” This is disputed, but, however that may be, it is undisputed in the testimony, and in fact is admitted by Mr. H. N. Loud, that Mr. Helfman did inquire whether the contract contained the complete understanding of the parties, and that it was approved by both sides. We think the omission of any guaranty in the written contract is almost conclusive proof that no guaranty was in fact made or relied upon.

Another claim of plaintiff does not seem to us to be established by the evidence, viz., that the Sterlings had cut upwards of 5,000,000 feet of timber from the •tract since the Beardsley estimate was made. The most that can be said to have been shown is that a few men were cutting on the tract for about two weeks, and the testimony leaves it uncertain whether this cutting was before or after the Beardsley estimate. According to the best recollection of the witness, this cutting was done on section 14, and if this is true, the record shows that Mr. H. K. Loud had personal knowledge of it prior to the making of the contract. In describing his trip into the woods in January, 1913, he said:

“When we got out into section 14, going through the hardwoods, we came to a place where there was some cut — I noticed that. I said, ‘Why here is some cut.’ He (Scott) said, ‘Yes, they cut — the Sterlings cut a little hardwood some years ago.’ ”

Complaint is also made that at the outset of the deal the Louds were furnished with Beardsley’s report as representing the amount of timber on the tract, but the Scott cruise made in 1906 was withheld from them. We do not think it has been proven, however, that the Beardsley report was incorrect. The attempted proof of fraud in connection with his estimates we think has utterly failed. The fact that he was interested in an adjoining tract appears to have been in no way connected with his obtaining the employment. It was a mere accidental circumstance. The Sterlings had nothing to do with his selection,' and it is difficult to see how they could have fraudulently manipulated his examination. Beardsley appears to have been a reliable man and his estimate to have been made in perfect good faith, and we are strongly impressed that it represented correctly the timber as he found it. We think the greater part of the discrepancy in the.results of the various cruises can be accounted for by the fluctuations in the condition of the lumber market. Mr. H. K. Loud testified:

“When we bought, the conditions were quite favor-' able in the lumber business, but the prices dropped all right enough, and the demand, in some cases, went down to nothing. We didn’t sell a tie in 1914. The ties stood on the dock — didn’t a one move. The demand was fierce. * * *
“Q. Isn’t it true, Mr. Loud, that when you purchased this in 1913 — or at the present time now, there would be money in getting out a class of material that didn’t pay you to get out in the summer of 1913 or 1914 or 1915?
“A. One could get out some material — low grade— when the prices are high, that you couldn’t afford to do when they are low.”

The estimates are of the merchantable saw-log timber on the tract. In a depressed condition of the market, a considerable quantity of timber would necessarily be classed as unmerchantable, because it could not be profitably cut and marketed, which would become merchantable upon a sufficient rise in the prices of lumber. Scott’s original estimate was made for use as a basis of purchase by the Sterlings and was doubtless made as low as'possible. Beardsley’s figures appear to represent a fair estimate of the merchantable timber in a normal condition of the market. Scott’s second estimate reached practically the same result. Wilson’s estimate at the time of the Loud purchase overran Beardsley’s in some respects. It is only in the amount of merchantable timber claimed to have been found on the descriptions covered by Wilson’s later cruises, made during the period of depression in the lumber business, that the great deficiency appears. Moreover, his detailed report in 1915 happened to include a few descriptions already covered by his first cruise in 1913, and it is a significant fact that the figures as to these descriptions have been reduced substantially in his later estimate from those first reported. Plaintiff says in this connection that some timber had been cut in the meantime on these ■descriptions, and that if this fact does not account for the entire discrepancy, it is proof that Wilson was tampered with in making his first estimate. But it might equally well be proof that his later estimate was made on a different basis than!the former because of a change in market conditions, which excluded much of the timber from the class of merchantable.

As has been stated, we are satisfied that the plaintiff has not met the burden of proof resting upon it as to the allegations of fraud and misrepresentation, and are therefore constrained to reverse the decree of the court below, and a decree may be entered dismissing the plaintiff’s bill of complaint, with costs to the appellant.

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


author: Fellows, J.

text:
    GRAND RAPIDS & INDIANA RAILWAY CO. v. COBBS & MITCHELL.
    1. Carriers — Railroad Companies — State Regulation — Contracts — Statutes.
    The enactment of Act No. 300, Pub. Acts 1909 (2 Comp. Laws 1915, § 8109 et seq.), regulating common carriers and prohibiting unjust discrimination among- shippers, rendered void a contract between a railway company and a lumber company whereby the railway company agreed to furnish cars for unlimited time free from demurrage charges, although said contract Was lawful at the time it was entered into.
    See note in 6 L. R. A. (N. S.) 834.

      2. Same — Constitutional Law — Police Power.
    Said act cannot be said to impair the obligation of a contract within the constitutional inhibition, since it was entered into with the knowledge that the State, in the exercise of its police power, could pass laws regulating common carriers within its borders, and the hands of the State in the exercise of this power may not be tied by private contract.
    3. Same — Demurrage—Contracts—Recoupment.
    In an action for demurrage charges subsequent to the passage of the act, the railway company was entitled to recover, since the contract was void; and defendant could not recoup its damages for the breach of an unenforceable contract.
    Error to Kent; Brown, J.
    Submitted June 6, 1918.
    (Docket No. 64.)
    Decided September 27, 1918.
    Assumpsit by the Grand Rapids & Indiana Railway Company against Cobbs & Mitchell, incorporated, for demurrage charges. Judgment for plaintiff. Defendant brings error.
    Affirmed.

      Norris, McPherson, Harrington & Waer, for appellant.

      James H. Campbell, for appellee.
   Fellows, J.

Plaintiff, hereafter called the railroad company, operates a line of road from the Straits of Mackinac to Grand Rapids, and from there to Ft. Wayne, Indiana, passing through Cadillac and Boyne Falls in the State of Michigan. Defendant, hereafter called the lumber company, operates its mill at Cadillac and has extensive holdings of timber lands near Boyne Falls.' Much of its timber lands had been acquired prior to the making of the contract hereafter referred to, and its holdings of timber lands in the vicinity of Boyne Falls have been considerably augmented since. Its investment in the business exceeds a million dollars.

The lumber company was transporting-its logs from forest to mill over the line of the railroad company under an arrangement not appearing in the record, until October 1, 1899. On that date the parties entered into a contract for future transportation and services, the railroad company being named as the first party and the lumber company as the second party. The contract very fully sets up their agreement and contains among its many provisions the following:

. “The second party agrees to furnish all the cars for the transportation of the logs as herein' provided, such cars to be those theretofore used for like service by the second party. They shall be kept in proper repair by the second party. • '
“The first party reserves the right to use, instead of the logging cars in question, such a number of its standard flat cars as it can spare for the service; to the extent that such flat cars may be used the logging cars will be displaced. ,
“The second party shall be responsible for the first party’s cars while off its line and in the second party’s possession. In case they shall be injured, damaged or destroyed, the second party will make good the loss.
“The cars to be provided by the first party are to be rent free, and are to be deemed, while in the service herein contemplated, to be in the possession of the second party as near as may be.”

On July 1, 1902, this contract was modified by the parties by a supplemental agreement containing only the following provision:

“Provision was made in the contract for the use of the standard flat cars of the first party, instead of the logging cars belonging to the second party. The second party now wishes the change to be made and the first party is willing that it should be done. The new service will begin at the date hereof.
“The rate for hauling the logs shall be one dollar per thousand feet and the cars shall be loaded with a minimum amount of four thousand feet each.
“The contract in question in all other respects shall continue as the arrangement between the parties in respect to the service in question.”

Since the execution of this supplemental agreement the railroad company has furnished its cars for the conduct of the business and the performance of the contract. Pursuant to the provisions of Act No. '300 of the Public Acts of 1909 (2 Comp. Laws 1915, § 8109 et seq.) the railroad company filed with the railroad commission and published its tariffs, including its rules, regulations and charges for demurrage. Two days’ free time for loading and unloading was given and $1 per day demurrage charge thereafter was* fixed. No objection to this tariff by an interested party was made, nor any proceedings taken by the commission upon its own initiative.

The present action is brought to recover demurrage charges, some accruing at Boyne Falls and some at Cadillac. It was tried by the court without a jury and resulted in a judgment for plaintiff. There was some testimony that the cars were bunched; that is, that more cars were delivered to the lumber company than it could use or than its contract required, but this testimony was of so general a character that we would not be justified in disregarding the finding of the court that the cars were delivered to the lumber company pursuant to the terms of the agreement. The case seems to have been tried in the court below and submitted to this court upon the assumption that the clause of the original contract, as amended by the supplemental agreement providing for the free use of the cars, was valid when made. The case having been tried and submitted on that theory, we shall for the purposes of the case accept such assumption without deciding that question, and dispose of the case upon the record as madé. The meritorious questions therefore presented to this court upon this record are:

„ (1) Does Act No. 300, Pub. Acts 1909, put an end to special contract rates for services performed by a railroad company, which special contract rates would result in unjust discrimination?
(2) If so; does it impair the obligation of contract within the constitutional inhibition?

That the portion of the contract making no limit upon the free time the lumber company might retain the plaintiff’s cars was valid and enforceable at the time it was executed and until the legislature. acted, is assumed by both parties. Nor can it be questioned that the contract would be unenforceable if now executed. Such a special contract giving to the lumber company free use of cars for unlimited time, when other shippers were required to pay $1 per day for all time over two days, would be unjustly discriminating in the highest degree. Therefore, the question for our solution is whether a provision of a contract valid when made, which would be invalid if now executed, comes within the purview of the act, and if so, whether the act itself squares with the Constitution.

It must be constantly borne in mind that we are dealing with a contract made with a public utility, a common carrier; that the movement was an intrastate movement; and that the State had the exclusive legislative prerogative over intrastate commerce, at least until congress should act, and that at this time congress had taken no steps looking towards Federal control of intrastate affairs.

We shall not attempt to cite the many acts passed by congress and the various States of the Union looking to the regulation of the railroads of the country. Suffice to say that congress acting within its sphere, regulating interstate carriers, and States acting within their sphere, regulating intrastate carriers, have passed many wholesome laws looking to the proper discharge by these public utilities of their duty to the public and their regulation by the public they serve. Running through this legislation may be found the steadfast purpose of the legislative depártment to eradicate, root and branch, unjust discrimination for special shippers and the requirement of like charge and like service tp all. This State, by a comprehensive act (‘Act No. 300, Pub. Acts 1909), kept pace with the other States of the Union. Prior to the bringing of this action various amendments to this act had been passed. See Act No. 139, Pub. Acts 1911; Act No. 173, Pub. Acts 1911; Act No. 370, Pub. Acts Í913; Act No. 389, Pub. Acts 1913.

By the provisions of the act in question, every common carrier was required, within 90 days, unless further time was granted by the commission, to file with the commission all schedules of rates (section 10i); such schedules are also to be kept open for public inspection and are required to contain, stated separately, “all terminal charges, storage charges, icing charges and all other charges which the commission may require, all privileges or facilities granted or allowed, and any rules or regulations” affecting the rates, and prohibits changes in such schedules of rates without giving ten days’ notice; prohibits the carrier from engaging in its business unless such schedules are filed and published, and also prohibits the carrier from collecting any greater, less, or different compensation than therein specified (section 10). The amendment to this section by Act No. 139, Pub. Acts 1911, is unimportant here. By section 17 it is provided:

“It shall be unlawful for any common carrier, subject to the provisions of this act, to make or give any undue or unreasonable preference or advantage to any particular person, company, firm, corporation or locality or any particular description of traffic in any respect whatsoever, or to subject any particular person, company, firm, corporation or locality or any particular description of traffic to any'undue or unreasonable disadvantage or prejudice in any respect whatsoever.”

Express authority is given the commission to fix demurrage charges (section 8). The act provides severe penalties for its violation. It was passed under the police power of the State, and in the exercise of the sovereign power of the State to regulate public utilities.

The property of the carriers is charged with a public interest, their business subject to governmental control within the limits of the Constitution. That the cars of a carrier must be loaded and unloaded promptly and kept moving if it discharges its functions, its duty to the public, is self-evident. Experience has taught that a charge against a shipper for the retention of a car after a reasonable time to load or unload, a demurrage charge, puts the car back in use for transportation more promptly than any other known method. Demurrage charges are, and for some time have been, imposed by all railroads. They are recognized as legitimate charges, and, properly levied and collected, serve a useful purpose. A carrier may not work discrimination through demurrage charges any more than it may work discrimination through a charge for line haul. The law contemplates the eradication of unjust discrimination in every form, and discrimination may be as unjust and unfair to other shippers, to the public generally, when provided for in an existing contract as though indulged in without prearrangement. The legislature did not, by section 11 of the act or by any other section or provision, exempt from the operation of the act special existing contracts which were not common to all shippers for a like kind of traffic, and we cannot without judicial legislation write such exemption into the law.

Does the law as so construed impair the obligation of contracts within the constitutional inhibition? When these parties entered into this contract they did so with the knowledge that the State, in the exercise of its police power, could pass laws regulating common carriers within its borders. Could these parties by private contract tie the hands of the State in the exercise of this power? Manifestly not. The language of Mr. Justice Cooley, when a member of the interstate commerce commission and writing for that commission in the case of Kentucky & Indiana Bridge Co. v. Railroad Co., 34 Am. & Eng. R. Cas. 630, is quite in point. He said:

“If the legislature had no power to alter its police laws when contracts would be affected, then the most important and valuable reforms might be precluded by the simple device of entering into contracts for the purpose. No doctrine to that effect would be even plausible, much less sound and tenable.”

Mr. Parsons, in his work on Contracts (vol. 2, p. 674), thus tersely states the rule:

“If one agrees to do a thing which it is lawful for him to do, and it becomes unlawful by an act of the legislature, the act avoids the promise.”

In the case of Atkinson v. Ritchie, 10 East, 530, Lord Ellenborough said:

“That no contract can properly be carried into effect, which was originally made contrary to the provisions of law, or which being made consistently with the rules of law at the time, has become illegal in virtue of some subsequent law are propositions which admit of no doubt.”

In the case of Addyston Pipe & Steel Co. v. United States, 175 U. S. 211 (20 Sup. Ct. 96), the court, in considering the power of congress to regulate commerce, and discussing the liberty of the citizen to make contracts, very clearly pointed out that if individuals or corporations could by enforceable contract regulate such commerce the power of congress would be materially limited. The court said, speaking through Mr. Justice Peckham:

“The power of congress over this'subject seems to us much more important and necessary than the liberty of the citizen to enter into contracts of the nature above mentioned, free from the control of congress, because the direct results of such contracts might be the regulation of commerce among the States, possibly quite as effectually as if a State had passed a statute of like tenor as the contract.
“The liberty of contract in such case would be nothing more than the liberty of doing that which would result in the regulation, to some extent, of a subject which from its general and great importance has been granted to congress as the proper representative of the nation at large. Regulation, to any substantial extent, of such a subject by any other power than that of congress, after congress has itself acted thereon, even though such regulation is effected by means of private contracts between individuals or corporations, is illegal, and we are unaware of any reason why it is not as objectionable when attempted by individuals as by the State itself.”

The case of Louisville, etc., R. Co. v. Mottley, 219 U. S. 467 (31 Sup. Ct. 265, 34 L. R. A. [N. S.] 671), is quite in point. In 1871 Mottley and wife were seriously injured in a collision-on the railroad of the plaintiff in error. An agreement was entered into between them and the company whereby their claim for damages was settled by an agreement of the company to issue to them free passes on its road during the remainder of their lives. This contract was performed by the railroad company until the enactment by congress of the so-called Hepburn bill, being the act of June 29, 1906 (34 U. S. Stat. 584), some of the provisions of which were engrafted into Act No. 300, Pub. Acts 1909. Mottley thereupon brought suit for the specific performance of the contract. The court fully considered the question and held that although the contract was lawful and enforceable when made the subsequent enactment of the act of June 29, 1906, made its'enforcement unlawful and denied the' relief sought. See, also, Fitzgerald & Co. v. Railroad Co., 63 Yt. 169 (22 Atl. 76, 13 L. R. A. 70); Grand Trunk Western R. Co. v. Railroad Commission, 221 U. S. 400 (31 Sup. Ct. 537); Home Telephone Co. v. City of Los Angeles, 211 U. S. 265 (29 Sup. Ct. 50). The recent case of Traverse City v. Railroad Commission, 202 Mich. 575, is upon principle quite analogous. In the Mottley Case it was said by the court:

“We forbear any further citation of authorities. They are numerous and are all one way. They support the view that, as the contract in question would have been illegal if made after the passage of the commerce act, it cannot now be enforced against the railroad company, even though valid when made. If that principle be not sound, .the result would be that individuals and corporations could, by contracts between themselves, in anticipation of legislation render of no avail the exercise by congress, to the full extent authorized by the Constitution, of its power to regulate commerce.”

Wffat we have said not only disposes of the question of the plaintiff’s right to recover but also defendant’s claim that even though plaintiff may recover, it (defendant) may recoup its damages for the breach of the contract in failing to provide the use of its cars free and without demurrage charges. Obviously defendant cannot recoup its damages for the breach of an unenforceable contract.

The judgment is affirmed.

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


author: Fellows, J. Ostrander, C. J.

text:
    LAVIN v. LYNCH.
    1. Vendor and Purchaser — Vendor’s Lien — Equity.
    The vendor of real estate who takes no security for the payment of the purchase price has an equitable lien for such purchase money upon the lands so sold.
    2. Same — Consideration.
    Such liens exist independently of any express agreement, and courts of equity enforce them, on the principle that a person, having gotten the estate of another, ought not in conscience, as between them, to be allowed- to keep it and not pay the consideration.
    3. Same — Equitable Title.
    The lien attaches notwithstanding the fact that the sale did not convey a title in fee, or a legal title, but only an equitable right or interest.
    4. Assignments — Mortgages—Notes.
    The assignment of a note which is secured by mortgage carries with it in equity an assignment of the mortgage, the security for its payment.
    5. Same — Vendor's Lien — Equitable Lien — Real Estate.
    An assignment of the liability for the purchase money of real estate carried with it, in equity, an assignment of the vendor’s lien which was security for its payment.
    6. Limitation oe Actions — Vendor’s Lien — Eneorcement — Equity.
    The vendor’s lien being in the nature of an equitable mortgage, and having priority over assignees in bankruptcy or a general assignee for the benefit of creditors, may be enforced as against the land, even though the statute of limitations has run against the personal liability of the vendee.

    Ostrander, C. J., dissenting.
    Appeal from Kent; McDonald, J.
    Submitted April 17, 1918.
    (Docket No. 113.)
    Decided September 27, 1918.

      Bill by Margaret Lavin against Jeremiah Lynch, an incompetent, and others to enforce an equitable lien and for an accounting. From an order dismissing the bill, plaintiff appeals.
    Reversed.

      E. A. Maher, for plaintiff.

      Joseph Renihan, for defendants.
    It appears by the bill in this case that at the time of his death, December 24, 1881, Patrick Lynch was the owner of certain real estate in Kent county. By his will it was devised to Jeremiah Lynch, subject to the payment of $400 to Mary Wheeler; $1,200 to Johanna Simonds, and $900 to plaintiff. These sums were not to draw interest for three years, but thereafter should draw interest at six per cent. This will was not admitted to probate until December 10, 1915, the interested parties having agreed that it would be unnecessary as they could settle among themselves. On April 20, 1910, the legatees above named executed to Jeremiah Lynch quitclaim deeds of the lands so devised by Patrick Lynch to Jeremiah, he agreeing to pay to them respectively the amount of their several bequests. Jeremiah Lynch has become mentally incompetent, and his daughter, Mary Ellen, has been appointed his guardian. None of such amounts so agreed to be paid by Jeremiah have been paid. Mary Wheeler and Johanna Simonds have assigned their claims and interests to plaintiff who filed this bill July 6, 1916. She seeks by this bill an accounting, a decree determining and enforcing by foreclosure a vendor’s lien upon the premises so deeded by quitclaim deeds, and also prays for general relief. Defendant Mary Ellen Lynch, as guardian for her father, moved to dismiss the bill on various grounds, among them the statute of limitations. The trial court dismissed the bill on this ground and plaintiff appeals.

      See note in 39 L. R. A. (N. S.) 1171.

   Fellows, J.

(after stating the facts). That the vendor of real estate who takes no security for the payment of the purchase price has an equitable lien for such purchase money upon the lands so sold has long been the established rule. Carroll v. Van Rensselaer, Har. Ch. 225; Michigan State Bank v. Hastings, 1 Doug. 225, 258; Appeal of Palmer, 1 Doug. 422; Hiscock v. Norton, 42 Mich. 320; Dunton v. Outhouse, 64 Mich. 419; Curtis v. Clarke, 113 Mich. 458; Kulling v. Kulling, 124 Mich. 56; Lyon v. Clark, 132 Mich. 521; Shaw v. Tabor, 146 Mich. 544; 39 Cyc. p. 1787. In the case of Michigan State Bank v. Hastings, supra, it was said by this court:

“Such liens exist independently of any express agreement, and courts of equity enforce them, on the principle that a person, having gotten the estate of another, ought not in conscience, as between them,_ to be allowed to keep it, and not pay the consideration money.”

And in Cyc., supra, it is said:

“A vendor’s implied lien, as distinguished from a lien expressly reserved, or from the security which the vendor has while he holds the legal title under an unexecuted contract to convey, is the equitable right, which by implication is accorded to one who has conveyed the title to land without reserving a lien thereupon, and has taken no security for the purchase-money other than the personal obligation of the purchaser, to subject the land in equity to the payment of the purchase-price, when the rights of others are not injured and it is equitable so to do. * * *
“The principle on which a vendor’s lien is generally regarded as resting is one of natural justice, that one who gets possession of the estate of another ought not in conscience be allowed to keep it without paying the consideration, although other grounds, such as the presumed intention of the parties, or the existence of a trust between them, have been assigned.”

This lien attaches notwithstanding the fact that the sale did not convey a title in fee, or a legal title, but only an equitable right or interest. Ortmann v. Plummer, 52 Mich. 76; Warren v. Fenn, 28 Barb. (N. Y.) 333; Bledsoe v. Games, 30 Mo. 448; Loomis v. Railroad Co., 17 Fed. 301; Curtis v. Buckley, 14 Kan. 449; Board v. Wilson, 34 W. Va. 609 (12 S. E. 778).

In the case of Ortmann v. Plummer, supra, Mr. Justice Campbell said:

“The right of a vendor to a lien does not seem to be confined to the sale of a legal title or title in fee. The leading case of Mackreth v. Symmons, 15 Ves. 329 (1 Leading Cases in Equity, 194, and notes) was one relating to what was treated as an equitable title. .The doctrine has been applied to copy-holds, and appears to be received as to all recognized title. See Adams’ Eq. (7th Ed.) p. 128, and notes; Winter v. Lord Anson, 3 Russ. 488. The lien on an equitable title may no doubt be more uncertain, by reason of the danger that bona fide purchasers from the legal holder may intervene and destroy it. But subject to that risk (which is not confined to equitable estates) it may be upheld. In the present case the legal title is still in the railway company, having knowledge of the equities, and defendants are not bona 'fide purchasers. We see no difficulty in the nature of the title:”

The case of Robinson v. Woodson, 33 Ark. 307, is not unlike the instant case upon principle. In that case the vendor executed a deed reserving a lien on the land for the purchase money. Afterwards he executed another deed containing "no reservation but acknowledging payment of the purchase price,, although it had not in fact been paid. It was held that he had a vendor’s lien which was enforceable in a court of equity.

When this plaintiff and her assignors, on the 20th day of April, 1910, executed to Jeremiah Lynch their respective quitclaim deeds of the premises, thereby conveying to him their respective interests therein under the will of Patrick Lynch, deceased, taking his unsecured promise to pay the purchase price therefor, they each held, by virtue of such transaction, a vendor’s lien for the payment of such purchase price. Was such lien assignable? While the courts are not in harmony on this question we think it must be answered in the affirmative. Curtis v. Clarke, supra; Dryden v. Frost, 8 L. J. Ch. (N. S.) 235; Buford v. McCormick, 57 Ala. 428; Felton v. Smith, 84 Ind. 485; State Bank of Iowa Falls v. Brown, 142 Iowa, 190 (119 N. W. 81); Dickason v. Fisher, 137 Mo. 342 (37 S. W. 1114); Armstrong v. Farr, 11 Ont. App. 186; Board v. Wilson, supra. The transfer of a note which is secured by mortgage carries with it in equity an assignment of the mortgage, the security for its payment. John Schweyer & Co. v. Mellon, 196 Mich. 590. So here we think an assignment of the liability for the purchase money carried with it, in equity, an assignment of the vendor’s lien which was security for. its payment.

Such vendor’s lien is in the nature of an equitable mortgage (Clark v. Stilson, 36 Mich. 482; Balow v. Insurance Co., 77 Mich. 540), and has priority over assignees in bankruptcy, or a general assignee for the benefit of creditors (Lyon v. Clark, supra). This being its character, it may be enforced as against the land even though the statute of limitations had run against the personal liability of the vendee. Stringer v. Gamble, 155 Mich. 295 (30 L. R. A. [N. S.] 815).

The very nature of the right precludes its enforcement at law. An equitable proceeding is necessary to establish and enforce it. The authorities, already cited and the nature of the right demonstrate this. We have considered all the grounds set up in defendant’s motion to dismiss. None of them are tenable. The bill sets forth a cause of action for equitable relief.

The decree of the court below must be reversed and the demurrer overruled. Defendant will have the usual time to answer. Plaintiff will recover costs of this court.

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

Ostrander, C. J.

(dissenting). The bill was filed July 6, 1916. It is charged therein:

“II. That at the time of his death the said Patrick Lynch was the owner in fee simple of certain, lands and premises situate and being in said county of Kent, known and described as follows, to wit: the southeast-quarter of the northwest quarter and the west half of the northeast quarter of section 31 in township 7 north, range 12 west, and of lot 24, in block 2 of Gunnison’s subdivision in the city of Grand Rapids, in said county.
“III. That the said Patrick Lynch, previous to the time of his death had executed an instrument which he intended as his last will and testament, which provided that all of his estate should go to his son, Jeremiah Lynch, the defendant in this case, subject to certain specific legacies and other directions. That among the specific legacies was one to Mary Wheeler for the sum of four hundred dollars, to Johanna Simonds for the sum of twelve hundred dollars, and to this plaintiff (then Margaret Lynch) for the sum of nine hundred dollars. That said amounts should be without interest for three years after the death of said Patrick Lynch and should draw interest at the rate of six per cent, per annum after that period of time.
“IV. That it was arranged and agreed by and between the heirs at law and next of kin of said Patrick Lynch, deceased, that it was unnecessary to have said will presented for probate; that they would arrange for a settlement of the estate of said Patrick Lynch, deceased, without probating said will, and it was further agreed by the said Jeremiah Lynch, that he would pay to the above named Mary Wheeler, Johanna Simonds and the said plaintiff herein, the several amounts which the said instrument provided that they should receive from the said estate for their interests in the lands and premises appertaining to said estate.
“V. That on the month of April, 1910, the said Jeremiah Lynch requested said Mary Wheeler, Johanna Simonds and this plaintiff to execute conveyance to him of said lands and premises, and agreed that if such conveyance were made he would pay to them respectively the several amounts of the legacies to them respectively provided for in the said will of Patrick Lynch, deceased. That on or about the 20th day of April, 1910, the said Mary Wheeler in pursuance of said request executed such a deed of conveyance to said Jeremiah Lynch, and on or about the' 20th day of April, 1910, this plaintiff and Johanna Simonds in pursuance of said request also executed a deed of conveyance of said premises to said Jeremiah Lynch, and said deeds were recorded in the office of the register of deeds of said county of Kent on the 11th day of July, 1910, in liber 386 of deeds on pages 442 and 443 respectively.
“VI. That each of said deeds expressed a consideration of one dollar and other good and valuable consideration, and that the other and good valuable consideration mentioned in said deeds were the promises of said Jeremiah Lynch to pay to this plaintiff and to said Mary Wheeler and Johanna Simonds the amounts provided for in the will of said Patrick Lynch, deceased, as aforesaid.
“VII. That the said Jeremiah Lynch has never paid to this plaintiff or to said Johanna Simonds or Mary Wheeler respectively the said sums of money or interest thereon or any part thereof, which it was provided in the will of said Patrick Lynch, deceased, that they should be paid by said Jeremiah Lynch.
“VIII. That the said Mary Wheeler and Johanna Simonds have each assigned, transferred and set over to this plaintiff all of their claims and demands against the said Jeremiah Lynch, and the above described premises and all of their claims and demands against the estate of Patrick Lynch, deceased, for and on account of the provisions so made for them in the will of said Patrick Lynch, deceased, and the said plaintiff is now possessed of the right to demand, receive and maintain suits for the purpose of recovering the sums and amounts which were made due and payable to this plaintiff by the terms of the said will of Patrick Lynch, deceased, and of the said promises and agreements of said Jeremiah Lynch together with all liens that the said Mary Wheeler and Johanna Simonds, as well as this plaintiff, had upon the aforesaid lands and premises.”

It is further charged that Jeremiah Lynch has become and is mentally incompetent and that Mary Ellen Lynch is guardian of his estáte, having been appointed March 8, 1916, that the will of Patrick Lynch was allowed December 10, 1915, and that Mary Ellen Lynch has.been appointed to administer his estate. Upon information and belief it is charged that Mary Ellen Lynch has contracted with the other defendants to sell to them the said premises and that the vendees are in possession of them. Relief prayed for is an account of the amounts which the plaintiff and the said Johanna and-Mary “became and were entitled to receive from said Jeremiah Lynch .under the will of said Patrick Lynch,” and that it be decreed that plaintiff has a lien upon the land—

“for the amounts which became due and owing to this plaintiff and to said Mary Wheeler and said Johanna Simonds respectively under and in pursuance of the terms of the will of said Patrick Lynch, deceased, and the agreement so made by Jeremiah Lynch to pay the same as aforesaid.”

In default of payment, 'a sale of the land is asked for “to satisfy such lien.” There is a prayer for general relief. On motion to dismiss, it was held that the cause of action is barred by the statute of limitations.

The will of Patrick Lynch is not set out in or with the bill, nor is the value of his estate or of what it consisted. Upon a motion to dismiss, we must deal with the facts set out in the bill. The bill charges that the testator bequeathed and devised all of his estate to his son Jeremiah, subject to certain specific legacies. This imports that there was personal property. It does not import that the legacies were made a charge upon the real estate. Quite the contrary. It was agreed that the will should not be probated, and Jeremiah promised plaintiff and her assignors, the legatees, to pay them the amounts of their legacies. Apparently, this promise was made 33 years before the bill was filed. Jeremiah did not pay as he agreed he would, but when, in April, 1910, the will not yet Laving been probated, he wanted to secure apparent title to the real estate in himself, to make a sale of it, and for this purpose desired conveyances from the other heirs at law of his father, he renewed his promise to pay them their specific legacies. The plaintiff and her assignors conveyed their then apparent, but not real, title to the land. The will has since been admitted to probate. Nothing further than this can be gathered from the bill of complaint.

Assúming all charges made in- the bill to be true, what present enforceable right of plaintiff is disclosed ? Obviously, it is a right resting upon either (1) the will and the specific legacies therein given to them, or (2) upon the promises of Jeremiah. If upon the will, this is not the forum for asserting it, the estate being open and the probate court engaged in its administration. If upon the promises of Jeremiah, neither of them was made within six years before this suit was begun and neither is actionable in a court of equity. Plaintiff and her assignors do not claim that they ever had title, legal or equitable, to the land or ever sold it. Clearly, they never, in fact, had legal or equitable title to it. They never sold it, and it is not asserted that any portion of the purchase price, upon a sale, remains unpaid. They conveyed the land, in form, upon the repeated promise of Jeremiah to pay them, not the purchase price, but the amount of the legacies fixed in the will.

If we indulge the notion that upon the death of the ancestor plaintiff and her assignors had an equitable lien upon the estate, including the real estate, to secure payment of their legacies, the promises or denials of Jeremiah could not affect it, enlarge or diminish it, unless in relying upon them plaintiff and her assignors released the lien. If they did not release it, what has kept it alive for 34 years?

The decree should be affirmed, with costs to appellees.


author: Ostrander, C. J.

text:
    SHARON v. FEE.
    1. Equity — Jurisdiction.
    Before the rule that, having jurisdiction of subject-matter and parties for one purpose, a court of equity may retain jurisdiction to settle all disputes relating to the same subject-matter between the parties, has application, some ground of equitable jurisdiction must, in any case, be • not only asserted, but established.
    2. Same — Mechanic’s Liens — Statutory Proceeding.
    A proceeding in chancery to foreclose a mechanic’s lien is not one of general equity jurisdiction, but is wholly statutory.
    3. Same — Jurisdiction—Personal Judgment.
    Because a court of equity is given jurisdiction, under the mechanics’ lien law (3 Comp. Laws 1915, § 14796 et seq.), to foreclose a mechanic’s lien, and may bring before it the claimants and owners and all contractors and materialmen interested, it does not follow that it may conclude every matter asserted by plaintiffs against them, find there is no lien, and yet give plaintiffs a judgment against some of the defendants upon an independent promise.

      4. Mechanics’ Liens — Equity — Jurisdiction — Personal JudoMENT.
    There is nothing in the Michigan mechanics’ lien law (3 Comp. Laws 1915, § 14796 et seq.) warranting the rendering of a personal decree in favor of the plaintiff against a contractor or subcontractor upon an .independent promise of such contractor or subcontractor to pay plaintiff’s claim.
    Appeal from Wayne; Sharpe, J., presiding.
    Submitted June 14, 1918.
    (Docket No. 60.)
    Decided September 27, 1918.
    Bill by Thomas Sharon and another against Ray M. Fee, Louis H. Spicer and Edwin C. Spicer, copartners as David Spicer’s Sons, and others, to enforce a mechanic’s lien. From a decree for plaintiffs against defendants Spicer, they appeal.
    Reversed, and bill dismissed.

      James A. Robison (Douglas, Eamxm & Barbour, of counsel), for plaintiffs.

      Frank W. Atkinson, for appellants.

      See notes in 14 L. R. A. (N. S.) 1036; 24 L. R. A. (N. S.) 321.

   Ostrander, C. J.

It was determined by the decree, .and could not have been otherwise determined, that the theory of the bill is not sustained by facts. Instead of dismissing the bill as to all defendants, it is dismissed as to some, including the owner of the building, and a decree — a judgment — is entered for plaintiffs against some of the defendants, upon a theory wholly different from and opposed to the theory of the bill. It is sought to sustain this personal judgment by an application of the rule that, having jurisdiction of subject-matter and parties for one purpose, a court of equity may retain jurisdiction to settle all disputes relating to the same subject-matter between the parties. Some ground of equitable jurisdiction must, in any case, be not only asserted, but established, before the rule relied upon has application.

This- cause is not one of general equity jurisdiction. The proceeding is wholly statutory. The bill was filed August 26, 1915. There was then in force a law, 3 Comp. Laws 1915, §§ 14805, 14809, which read:

“ (14805) Sec. 10. Proceedings to enforce such lien shall be by bill in chancery, under oath, and notice of lis pendens filed for record in the office of the register of deeds, shall have the effect to continue such lien pending such proceedings. And in such proceedings, the complainant shall make all persons having rights in said property affected or to be affected by such liens so filed in the office of the register of deeds, and all-persons holding like liens so filed, and those having filed notice of intention to claim a lien, parties to such action. And all persons holding like liens or having filed notice of intention to claim a lien, or any other persons having rights in said property, may make themselves parties thereto on motion to the court and notice to complainant, and may file their intervening or cross-bills or answers claiming the benefit of cross-bills and notices of lis pendens therein. And whenever the principal contractor or any subcontractor shall have given to the "owner, or other person or persons having rights in said property, any bond or surety or guaranty of any kind to protect such owner or other person or persons having rights in said property, against the liens provided for by this act, then the complainant or the owner or other person or persons having rights in said property, may make the surety or sureties in su,ch bond or guaranty, parties to such action by such original bill or by cross-bills or answers claiming the benefit of a cross-bill, and the court shall thereupon settle and determine the rights and liabilities of all the parties in the matter, and make such decree as may be required to determine and enforce the rights and liabilities of the various parties including such surety or sureties. Intervening or cross-bills shall be on oath, and all bills sworn to shall be evidence of the matters therein charged, unless denied by answer under oath. Amendments may be made to any bill or cross-bill at any time before final order, and if it shall appear that any party has had insufficient notice of any such proceedings, such further notice shall be given as the court shall think just.”
• “(14809) Sec. 14. Upon final decree the court may order a sale of the buildings or machinery separate, or the lands, buildings, machinery, structure, or improvements, together, by a circuit court commissioner or receiver, or may order the property into the hands of a receiver to be leased or rented from time to time under the direction of the court until the liens shall be discharged, or make such other order or disposition of the premises as justice may require. If upon the coming in and confirmation of the final report any portion of the liens shall still be unpaid, the court may enter personal decree for the same against the party who may be personally liable therefor, and execution shall issue for the same as upon other personal decrees rendered by the court.”

The bill is filed to foreclose a mechanic’s lien, the right to which, it is admitted by the bill, had been in form released. Ancillary relief asked for was the determination that the release was fraudulently secured by some of the defendants. It is found that what plaintiffs have is not a lien, nor any claim against the owner, but a cause of action upon an independent promise made by defendants Spicer. Because a court of equity is given jurisdiction to foreclose a mechanic’s lien and may bring before it the claimants and owners and all contractors and materialmen interested, it does not follow that it may conclude every matter asserted by plaintiffs against them, find there is no lien, and yet give plaintiffs a judgment against some of the defendants upon an independent promise.

Whatever may be the proper rule as affecting the right of a plaintiff claimant to a personal decree against the owner (see 18 R. C. L. p. 991; 22 Am. & Eng. Ann. Cas. 1912A, 124, and note, p. 129 et seq.), there is nothing in our statute warranting the rendering of a personal decree in favor of the plaintiff against a contractor or subcontractor upon an independent promise of such contractor or subcontractor to pay plaintiff’s claim. Nor has this court, although applying a liberal rule, held to the contrary. Koch v. Sumner, 145 Mich. 358, Scott v. Keeth, 152 Mich. 547, C. H. Little Co. v. L. P. Hazen Co., 185 Mich. 316, none of them goes so far, and in none will the reasoning employed sustain the decree in this case. Defendants Spicer are entitled to a trial by jury, of the issue of their liability to plaintiffs.

The bill ought to have been dismissed as to all defendants, and such a decree should be entered in this court.

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