text:
    CARPENTER v. LENNANE.
    1. Partnership — Subcontractors—Nature.
    An agreement between plaintiff and defendants, subletting to plaintiff a part of a contract that defendants had to construct subways for a railroad company, plaintiff to build cement sidewalks at 8-J- cents a square foot, and to share in the profits of certain portions of the work, was not a partnership agreement.
    9. Same. ,

    The elements of partnership are community of interest in some business, for the conduot of which the parties are mutually principals of and agents for each other, with general powers within the scope of the business. Beeeher v. Bush, 45 Mich. 188 (7 N. W. 785, 40 Am. Rep. 465).
    3. Evidence — Materiality.
    In an action for the price of work done under the agreement, error was not shown in the exclusion of testimony concerning the terms oí a prior contract between the parties, to which reference was made by witnesses, but which was not material to the question in dispute, i. e., the share of profits claimed by plaintiff.
    4. Same — Contracts.
    Where it was claimed by plaintiff, under his contract to construct cement walk, that he was to have, in addition to a stipulated compensation for the cement walk, 60 per cent, of defendants’ profit arising out of the grading which was turned over to him, defendants claiming that they were to have 40 per cent, of profit made by plaintiff, who was to retain only 60 per cent, of his profit, defendants should have been permitted to show that the cost of grading to be done by them under the arrangement, added to the cost of cinders to be furnished by defendants, exceeded any difference between plaintiff’s price and the contract price to be paid them, so that they could make no profit.
    5. Same — Burden of’Proof — Requests.
    Requests that impose on a plaintiff the burden of satisfying the jury beyond a reasonable doubt, are properly denied.
    6. Same — Trial—Charge.
    Since plaintiff claimed a percentage of profits made on the grading and filling, the burden rested on him to show what the cost of that portion of the work was, in order to recover his claimed share of the profits, and, if he failed to sustain the burden, could not recover any part of such profits.
    7. Same.
    And it was error to charge the jury that the parties did not differ as to the estimates and amount of work done, there being disputed testimony as to certain figures and computations.
    Error to Wayne; Murfin, J.
    Submitted March 8, 1911.
    ( Docket No. 185.)
    Decided September 29, 1911.
    Assumpsit by James Carpenter against William E. Lennane and John Lennane, copartners as Lennane Brothers, for work, labor, and materials. Judgment for plaintiff. Defendants bring error.
    Reversed.

      Gray & Gray (H. H. Emmons, of counsel), for appellants.

      Washington I. Robinson, for appellee.
   McAlvay, J.

Defendants have removed this case to this court, asking the reversal of a judgment obtained against them on account of claimed errors committed during the trial before a jury in the circuit court.

Such facts as may be necessary for an understanding of the case as are set forth in appellants’ brief, and not disputed by appellee, are adopted by the court and briefly stated as follows:

The defendants are copartners and conduct a general contracting business. In 1908 they entered into a contract with the Michigan Central Railroad to construct the subways on eight streets in the city of Detroit, Mich.; these subways being necessary to complete the grade separation then in progress in Detroit. Defendants’ contract with the Michigan Central Railroad, briefly stated, required them to excavate the earth, construct the retaining walls, lay the necessary sewers, grade the streets, grade the sidewalks, pave the streets, and construct the cement sidewalks. In the preceding year, defendants had had a similar contract with the Michigan Central Railroad for the construction of a subway on Junction avenue. In the performance of the Junction avenue work, defendants sublet a part of the sidewalk construction to the plaintiff.

In June, 1908, defendant William E. Lennane and the plaintiff had an interview, which resulted in an agreement, the exact terms of which are a matter of dispute, respecting a portion of the construction work of the sidewalks on the eight streets where defendants were constructing subways. No other person was present at the interview. They both agree that the Junction avenue walk was mentioned in their interview, and that both parties wanted a different agreement than the one covering the Junction avenue work. Lennane says that defendants were to “ grade ” the work and furnish the cinders, and that Carpenter was then to take charge of the work and finish it; defendants were to advance all of the money needed, and guaranteed the price of most of the necessary materials, all of which Carpenter admits is true, but claims that the “grading” was, later in their interview, turned over to him to do. They both agree that 8£ cents was named as the price to govern on the work in question.

The dispute or difference between them is that: Lennane says the cost of the work performed under Carpenter’s supervision was to be figured on a basis of 8i cents per square foot, and the profit arising from its performance was to be divided, 60 per cent, to Carpenter, and 40 per cent, to Lennane. Carpenter says he was to receive Si cents for the work, making no division or accounting to Lennane in connection with the same, and in addition they agreed to let Carpenter do the grading, and the profit arising on the “ grading ” was to be divided, 60 per cent, to Carpenter, and 40 per cent, to Lennane.

The specifications for the sidewalk, in a general way, require a foundation of cinders, on top of which is placed the concrete mixture of sand and cement. Before laying the cinders, the earth must be dug out, so that the sidewalk, when finished, comes to a proper grade. The “grading” therefore designated in the record was the preparation of the earth, by digging it to a proper depth and leveling it off, so that it was ready to receive the cinders. The excavating of the entire job, both for the street and the sidewalk, was done in the first instance, and in so far as possible, with steam shovels, and the finishing portion only was done by hand. Mr. Lennane’s explanation of the reason why he retained the grading of the walks, and would not include that in the work in which Carpenter was to participate, was because, in his general digging, he virtually covered all of the digging needed for the walks, and it was therefore simpler and better for him to do it all, looking to Carpenter to take the work when it was ready to receive the cinders. Defendants at no time during the trial admitted that the computations of plaintiff, even upon his own theory, were correct. It was agreed that plaintiff had constructed 101,357 square feet of sidewalk, and defendants admitted that a balance of $1,739.48 was due plaintiff. The trial resulted in a verdict for plaintiff in the sum of $3,781.09, being the entire amount claimed by him, with interest.

It is contended upon the part of appellants that error was committed by the court in refusing to instruct a verdict in their behalf, on the ground that the contract between the parties was a partnership contract, to be adjudicated only in a court of chancery, and that at least as to the percentage part (if a divisible contract) the court should have so instructed. In our view of the case, it will be of no importance to determine whether this was an entire contract or divisible. We do not agree that it was a partnership agreement. There is no indication that such was the intention of the parties, nor does the contract in question, as claimed by either party, contain the elements of a partnership, “which are, at the very least, community of interest in some business, for the conduct of which the parties are mutually principals of and agents for each other, with general powers within the scope of the business.” Beecher v. Bush, 45 Mich. 188 (7 N. W. 785, 40 Am. Rep. 465). It is apparent in this case that the parties considered the agreement between them relative to percentage as one measuring the compensation for services to be rendered by plaintiff. Stockman v. Michell, 109 Mich. 348 (67 N. W. 336); Morrow v. Murphy, 120 Mich. 204 (79 N. W. 193, 80 N. W. 255). There is no evidence in the case tending to show that any losses incurred were to be shared by the parties. The only inference to be drawn from the evidence is that losses were not in any manner to be considered. No error was committed by the court in refusing the request of the defendants to instruct a verdict for them, or in refusing to grant a new trial upon the ground that this was a partnership agreement.

Defendants also contend that the court erred in excluding from the case testimony relative to the Junction avenue contract between these parties, in 1907, relative to other work of the same character, on the ground that it was referred to and considered by both parties at the time this contract was entered into, and some testimony in regard to it got into the case. In view of the fact that both parties agree that 8£ cents per square foot was the basis upon which the construction of the sidewalk was to be computed, and also agree upon the prices at which defendants offered to furnish materials, we do not see the materiality of this evidence relative to terms of the Junction avenue contract. So far as the record shows, nothing definite appears to be claimed for it, except as bearing upon the price. The dispute upon this branch of the case is whether plaintiff, for the construction of the 101,357 square feet of walk, was to receive the full price at 8£ cents per foot, or whether, with that price as a basis, after deducting the entire cost of construction, he was to receive 60 per cent, of the difference between such cost and the full amount computed at such price. Upon that dispute the testimony excluded was not shown to be material. The action of the court in excluding it was not erroneous.

Defendants assign errors on the exclusion of evidence of several witnesses offered by them to show the actual cost to the contractor of the final digging and grading, as it is called, the cost of cinders delivered, and to show that such cost of the work reserved by defendants is 3 cents per square foot, not including anything for the maintenance of the work for five years under the guaranty required. The record shows that the defendants’ contract with the railroad company for the sidewalk work was 11 cents per square foot. At the time plaintiff gave his testimony, he believed that the price was lO^cents. Itisdefendants’ claim that their agreement with plaintiff gave him an interest in the profit to be made on the basis of an 8^-cent price of a part of the work, retaining for themselves the balance, or 2$ cents, and their part of the profits to cover the cost of the digging or grading, the furnishing of cinders, and protecting their five-year guaranty on the work. It is plaintiff’s claim that the defendants only retained 40 per cent, of the profit in the digging or grading, figured on a 2j-cent basis, to cover the cost of the cinders and the five-year guaranty. Both of these parties were familiar with this class of work, and knew the cost of the same.

Defendants contend that this evidence was material and important in assisting the jury in arriving at a determination of what this contract really was. It is not claimed that it would be positive evidence of the terms of the agreement, but, there being a direct contradiction between the parties, and there being no other witnesses, the dispute must be settled by facts tending to show the reasonableness of the claims made, and that the cost price of the work is an essential element bearing upon the probability of an agreement being made for one price, rather than for the other. The argument is persuasive, and, we think, sound. The jury should have the benefit of the cost price of this part of the work, in order to pass intelligently and understanding^ upon the testimony. The testimony offered should have been admitted upon the ground it was offered. The court was in error in excluding it, and a new trial should have been granted, as requested, on that ground.

Errors are also assigned upon the refusal of the court to give certain requests to charge which relate to the proof of plaintiff as to the cost of that part of the work done by him, for which he claims he was to receive 60 per cent, of all profits above such cost. Some of these requests need not be discussed, because they contain the proposition that the plaintiff must satisfy the jury beyond a reasonable doubt as to certain claims he made.

The following request, which relates to the grading and digging plaintiff claimed was included in his contract under a 60 per cent, division of profits above cost, which the court also refused to give, reads:

“ It appears from the plaintiff’s testimony that a certain amount of the grading and digging necessary to prepare the work for the cinders was done by him, and that a considably larger portion was done by the defendants. This amount was reduced to dollars and cents by the plaintiff, but the details of the same were not given. On the other hand, it appears from the testimony of the defendants that the plaintiff did perform a small part of the work of grading and digging, and rendered a statement of the same, the items of which appear in detail in their testimony ; that almost all of the grading and digging was done by the defendants, but no estimate has been given of the value of the same. If you find that the contract between the parties was of the nature claimed by the plaintiff, then you must ascertain the cost price of the digging and grading, and the burden of proof rests upon plaintiff to furnish you with sufficient information, so that you can ascertain the same. If he has failed to do this, then he has failed to prove his case in this respect, and your verdict to this extent must be for the defendants.”

The substance of this request was not embodied in the charge of the court. In the instant case, the finding of the actual cost of this part of the work done by plaintiff by the jury was necessary, for the reason that in no other •way could it be determined what plaintiff should be allowed for it, if the jury found the contract to be as plaintiff claimed. Defendants were entitled to have the attention of the jury directed to the subject-matter of this request, which was a proper one, and should have been given. The* propriety of this is made more apparent in connection with certain portions of the charge of the court upon which error has been assigned, and which will be next considered.

The portions of the charge upon which error is assigned are as follows:

“ Under the theory of the plaintiff, he claims he is entitled to recover $3,551.68. Under the theory of the defendant, it is claimed that the plaintiff’s recovery is limited to $1,739.48. Now, gentlemen, one of those two amounts, substantially, will have to be your verdict. There may be, owing to different methods of figuring, some slight changes in these amounts, or according as you should find on some of these disputed questions, such as the disputed pay roll, and some of the bills for materials, involving some few odd dollars, but the difference is slight, indeed, and substantially those amounts represent the conflicting claims of the parties. And it is for you to determine what was the amount between the parties. If the contract was as outlined by the plaintiff, your verdict will be accordingly. If it was as claimed by the defendant, your verdict will be accordingly.”

And also:

“As I stated to you this morning, during the course of my charge, that under the claim of the plaintiff he was entitled to recover approximately $3,551.68, if you find the contract as he claims it. And that if you find the contract as the defendant claims it the plaintiff is entitled to recover $1,739.48. In making up the figures that the plaintiff has submitted to you, it is not controverted in this case but that those figures include his figures based upon 8£ cents per square foot, plus 60 per cent, of the alleged profit in the grading portion of the job, plus such cinders as he furnished.”

The court was mistaken in his statement in these portions of the charge that there was no substantial difference between the parties upon the amounts for which a verdict should be rendered, whichever of the versions of the contract was accepted. He overlooked the fact that the record shows defendants early in the case disputed the figures and computations of the plaintiff, as does also the cross-examination of plaintiff, which, by the testimony of plaintiff as to how he arrived at the cost of digging and grading, fairly raised a question to be considered by the jury whether any substantial proof of such cost had been made. The charge objected to as given was erroneous for the reasons stated.

The judgment of the circuit court is reversed, and a» new trial ordered.

Ostrander, O. J., and Brooke, Blair, and Stone, JJ., concurred.


source: Caselaw Access Project

author: McAlvay, J.

license: Public Domain

text:
    UTICA FIRE ALARM TELEGRAPH CO. v. WAGGONER WATCHMAN CLOCK CO.
    1. Corporations — Stock Subscriptions —Liability op Stockholders.
    Where stock was issued to incorporators of a company for property and assets, including a patent, bills receivable, and furniture, valued in good faith at $15,000, the widow of one of the original incorporators who received his stock on distribution of the estate of the deceased stockholder, was not liable to contribute towards the payment of corporate debts.
    3. Same.
    Stockholders, who obtained unissued stock of the corporation at twenty-five per cent, of its par value, knowing that it was not a going concern, and needed funds to enable it to do business, were rightly decreed to pay the difference for the benefit of creditors of the insolvent company.

      3. Same — Going Concern — Words and Phrases.
    An agreement with another conoern, permitting the latter to manufacture and sell the products which the corporation purposed to produce, did not constitute it a going concern.
    4. Same — Contracts.
    Under a contract of subscription stipulating that stock issued to defendants should be “fully paid and nonassessable when twenty-five per cent, has been paid” the stockholders who were in default in contributing the agreed amount were also liable to pay the remainder required to bring their subscription to the par of the stock.
    5. Same — Officers—Salary.
    A claim filed by one of the stockholders for salary for services performed in the office of the corporation was properly disallowed on the hearing, in the absence of any formal action of the corporation allowing him a salary, and any entry on its books crediting him with the same, his testimony that one of the directors arranged to pay him the salary being contradicted by the director.
    6. Same — Creditors—Subrogation.
    Nor did the court err in disallowing the claim of such stockholder to share in the fund created by the payment of the stock in full, upon a corporate note which he had. indorsed and paid to the bank, to whose rights he asked to be subrogated, since he had knowledge of the terms of issuance by the corporation of the stock; but the decree rightly allowed his claim as that of an ordinary creditor that was not misled by the issuance of stock below par.
    7. Same — Stock and Stockholders — Set-off.
    It is contrary to public policy to permit a stockholder to off-set against his liability for such unpaid stock an indebtedness due from the corporation to him.
    8. Same — Decree—Creditors’ Suit.
    The court rightly decreed that the stockholders should pay the creditors of the corporation which owed less than the amount payable on the stock held by them, in the proportion of their several holdings.
    9. Same.
    Services rendered to a corporation in payment for stock must be reasonably commensurate with the par of the stock, or creditors may attack the transaction.

      10. Same.
    A director and president of the corporation, who transferred his stock to an irresponsible purchaser, knowing the financial difficulties of the corporation, which was insolvent at the time of transfer and whose transfer book did not show the sale, was correotly held to have acted in bad faith, and required by the decree to pay the balance due on his stock.
    11. Same — Notice.
    That the purchaser took the stock in his name as agent, paying only one per cent of the par in cash, the remainder in quarterly installments, and that he told the seller he could not pay the price in full, justified the court in finding that the seller knew of the purchaser’s insolvency.
    Appeal from Kent; Lamb, J., presiding.
    Submitted February 27, 1911.
    (Docket No. 114.)
    Decided September 29, 1911.
    Creditor’s bill by the Utica Fire Alarm Telegraph Company against the Waggoner Watchman Clock Company, Edward M. Deane, and Christian Bertsch, to enforce stockholders’ liability. By cross-bill Annie Y. Sears, Albert E. Waggoner, and W. B. Waggoner were brought in as parties. From a decree dismissing said cross-bill and awarding relief to complainant, the defendants appeal.
    Affirmed.

      George O. Brown, for complainant.

      Oleland, Heald & Montgomery, for defendant Deane.

      Bmedley, Hall & Gillard (William E. Grove, of counsel), for defendant Bertsch.
   McAlvay, J.

A judgment creditor’s bill was filed by complainant, on behalf of itself and other creditors, against defendant company and three stockholders, Edward M. Deane, Christian Bertsch, and Eugene A. Hamilton, for the purpose of winding up the affairs of defendant corporation, and to enforce the unpaid stock subscriptions of certain stockholders. The bill asked for a receiver and an injunction. The bill was taken as confessed against defendant corporation. The individual defendants filed separate answers. The answers of defendants Deane and Bertsch were in the nature of cross-bills, asking that other stockholders be made parties, and for affirmative relief against them. Of these parties but one, Annie V. Sears, the widow of one of the original incorporators, answered the cross-bills.

Defendant corporation was organized December 23, 1899, under Act No. 232, Pub. Acts 1885, with an authorized capital of $50,000, of which $15,000 appears to have been subscribed by the incorporators, Austin K. Wheeler, Albert E. Waggoner, and William B. Waggoner; each taking 500 shares. This stock was paid for by turning in the good will and assets of a partnership of the same name, composed of Mr. Wheeler and A. E. Waggoner. The assets consisted of some accounts receivable and stock on, hand, all of the value of about $800, and a patent for the clock which the corporation was organized to manufacture. Mr. Wheeler died January 15, 1900. Later his stock was assigned as part of his estate to his widow, the cross-bill defendant, Annie Y. Sears. Before the incorporation, the partnership had done some business in manufacturing and selling about 15 clocks. The three incorporators were equal partners. The record of the meetings of the company shows that between the date of incorporation and Mr. Wheeler’s death nothing had been done, except to elect directors and officers, and making an agreement with a party to get subscriptions to stock. At the first annual meeting, held December 22, 1900, the following was recorded :

“ The business of the company being in a state of suspense, owing to the inability of Judge C. W. Perkins to dispose of the stock as per agreement, and that no other arrangements had yet been made to carry on the business of the company. An effort is being made to secure subscriptions to the stock or part of it, and until this is accomplished there can be no business conducted. * * * There being no business before the meeting, it was duly adjourned.”

On March 15th following, an arrangement was made with the Michigan Yapor Stove Company to manufacture clocks for 50 per cent, of the profit; the remaining 50 per cent, to be paid A. E. Waggoner as a salary for selling. This was done because “ it was impossible for the company to do business, owing to lack of clocks.”

At this meeting it was agreed to offer defendant E. M. Deane stock to the amount of $3,000 “in consideration of his disposing of the stock and putting the company on a safe financial footing.” The record of the annual meeting of December 22, 1901, shows only that the agreement with the Yapor Stove Company was being carried out, and the following:

“There can be no business done by the clock company itself until such time as enough stock is sold to enable the company to be placed on a proper financial basis.”

On the same day a written memorandum of a meeting shows that it was agreed to issue to defendant Deane 300 shares of stock, to be held in trust, conditioned that if he was unable to dispose of stock as agreed the certificate was to be canceled.

On January 21,1902, at a meeting of the stockholders—

“The following proposition was submitted by Mr. E. M. Deane: He and his associates agree to take $10,000 of the stock at 25 cents on the dollar, full paid and non-assessable. He further agrees that if more money is needed to carry on the business than the $2,500 realized from the sale of the $10,000 of stock he will sell enough more stock as may be considered necessary by the board of directors, at not less than 50 cents.”

The record of the meeting shows that the proposition was accepted, and that it was agreed to issue $3,000 in stock to him, when the $10,000 in stock was issued to him and his associates. On March 3,1902, the said stock was issued as follows: $5,000 to defendant Deane; $5,000 to defendant Bertsch, being 500 shares each of the original unissued stock of the company; and to defendant Deane there was also issued 300 shares of the same original stock, the consideration for which was selling $10,000 of stock, at 35 cents on the dollar, and such other stock as might be necessary to put the business on safe financial footing. Both these defendants knew the kind of stock they were getting, and that the money they were to pay in constituted the capital upon which the company would commence business. Deane paid $300 when his $5,000 stock issued, and $700 later. He has never paid the balance of $350. Bertsch also paid $300 when his stock issued, and later small payments amounting to $600. He has never paid the balance of $350. The defendant company, with the $600 cash paid in by Bertsch and Deane, began business operations in March, 1903. Bertsch was immediately elected a director and president. Deane was also elected director and treasurer, and was manager of the company for a year or more, and had charge of the books to May 1, 1904. These two defendants managed the financial affairs of the concern. It will not be necessary to state in detail all that occurred in this business. Frequent statements of the condition of the business were gotten out, from which it appears that it never was successful. Defendants Bertsch and Deane were active in its interests.

Bertsch sold his 500 shares of stock to defendant Hamilton, in January, 1905, in consideration of $50 in cash, a note of $1,000 payable in quarterly installments of $100 each, and taking up two company notes at the bank, amounting to $1,100, indorsed by Bertsch, which Hamilton paid with his wife’s money. The notes were taken up for her, and she now holds them against the company. The stock was issued to E. A. Hamilton, agent, so that his creditors could not reach it. Hamilton already had 50 shares of the stock issued to him at the time of the issue of stock to Bertsch and Deane, and apparently in good faith for a sufficient consideration. When he purchased the Bertsch stock, he understood that he would be secretary and treasurer of the company. He was insolvent at the time. None of the other stockholders knew of this transfer of stock at the time, and it was never entered upon the record book of the corporation.

Defendant Deane has filed a claim for unpaid salary at $50 per month, for a year or more, and a claim of $1,081.60 for money paid by him on a note of the company.

Service of process was never had upon the two Wag-goners, who lived beyond the jurisdiction and were insolvent. Therefore, on motion, the cross-bills were dismissed as to them.

A hearing was had upon the issues joined upon the bill and cross-bills. The court made an extended finding upon the facts, and granted a decree in favor of complainant and against the corporation and defendants Bertsch and Deane. The bill of complaint was dismissed as against Hamilton without costs. The cross-bills of Bertsch and Deane, as against defendant Annie V. Sears, were dismissed, with costs in her favor. The defendant corporation was dissolved. Defendant Deane was held liable to pay $250, with interest, being the balance unpaid on his agreement to purchase $5,000 of the stock at 25 cents. Defendant Bertsch was also held liable to pay $350 and interest on his purchase of stock. Defendant Deane was further held liable to pay $6,000, with interest, being the balance unpaid on his $5,000 of stock purchased at 25 cents, and $3,000 of stock given for selling stock, less $750 allowed. The transfer of his stock by Bertsch to Hamilton was held to have been in bad faith, with intent on his part to escape liability, when the company was known by him to have been in a failing condition and Hamilton an insolvent, and he was decreed to pay $3,750, the balance unpaid on his $5,000 of stock. The claim of Deane for salary was disallowed, and his claim of $1,031.60, for money paid for defendant company, was allowed, to be paid out of the general assets, and not allowed to participate in the trust fund. The battery patent and the magneto patent were decreed to be the property of the corporation and part of its general assets. Other provisions of the decree, which refer to a distribution of assets and the proportions to be paid by Bertsch and Deane, and matters of costs, need not be stated.

Defendants Deane and Bertsch have appealed, and claim that in all respects, as far as liability on their part was decreed, the court was in error, except as to the matter of the balance due on their purchases of 500 shares of stock each, at 25 cents on the dollar, which one actually and the other inferentially insists they should be decreed to pay.

We will first consider the question of the liability of Mrs. Sears. One of the appealing defendants urges that she, having acquired this stock through the distribution of her husband’s estate, is liable to the same extent his estate would have been liable, and that he never paid anything upon the 500 shares of stock he took upon the organization of the corporation. The record is clear and undisputed that the corporation was organized by the members of the old copartnership of the same name, who turned in all of its assets, and each took therefor 500 shares of stock in the corporation. It is true that the records and books of the company do not show the transfer and acceptance; but it is clear that these assets, consisting of a few hundred dollars, some bills receivable, some furniture and fixtures, and the patent under which they intended to manufacture the clock, were all the assets the corporation received. The value fixed upon these assets was $15,000, and upon that valuation the stock was issued. The patent was assigned to the corporation later. The finding of the court that this stock was issued in good faith for a sufficient consideration was warranted by the evidence, and the conclusion dismissing the cross-bill against Mrs. Sears necessarily followed.

The contentions of defendants rest to a certain extent upon the claim that this corporation was a going concern at the time they purchased its stock. In our opinion, the evidence contained in this record does not sustain such contention. In law this corporation was an entity; but its stockholders at the first regular annual meeting solemnly declared and recorded that it was not doing business, and could not do business, until stock was sold and money realized from such sales. Defendants Deane and Bertsch both knew that the money paid in by them on the purchase of stock was for the purpose of starting business. The company, on December 33, 1899, when organized, had about #300 and some small amount of material. It afterwards manufactured 15 clocks. Wheeler died within 30 days. The agent selected for that purpose sold no stock. Owing to this fact, at the end of the year 1900, “the business was in a state of suspense,” and the stockholders declared, relative to selling stock, “until this is accomplished, there can be no business conducted.” Written in red ink, upon the sworn annual report by the directors of the condition of the company for the year 1900, made February 37, 1901, was the following:

“Since the death of A. K. Wheeler, January 15, 1900, the business of this company has been practically at a standstill.”

March 15, 1901, the stockholders met, and because “ the financial arrangements not having been concluded, whereby the company could carry on its business, it was unanimously agreed to accept the proposition of the Vapor Stove Company,” stated above, and at this meeting it was voted to offer defendant Deane #3,000 in stock “in consideration of his disposing of the stock and putting the company on a safe financial footing.” At the annual meeting following (December 33, 1901), it appears that the same conditions continued. On the next day, at a meeting of the stockholders, it was unanimously voted to issue 300 shares of stock to Deane, in trust, upon the understanding “ that in case he was not able to dispose of the stock of the company as per the minute of March 15th, supra, the stock is to be canceled and returned to the treasury.” On January 31, 1903, Deane submitted his proposition to a stockholders’ meeting, as follows:

“He and his associates agree to take ($10,000) ten thousand dollars of stock at (25c.) twenty-five cents on the dollar, full paid and nonassessable. He further agrees that if more money is needed to carry on the business than the $2,500 realized from the sale of the $10,000 stock he will sell enough more stock as may be considered necessary by the board of directors, at not less than (50c.) fifty cents.”

This original stock, never before issued, was issued to Deane and his associate, Bertsch, March 3, 1902, and at the same time $3,000 in stock was issued to Deane under his agreement. Some of this money was paid at once by these defendants; each paying $300. As already appears, it has never been fully paid.

The arrangement with the Vapor Stove Company was not carrying on a business by the corporation. It was a permission granted to the stove company to manufacture and sell these clocks. The record is undisputed that the corporation was not, during this time, continuing to prosecute its business with the prospect and expectation of still doing so. Nor was it being carried on as a whole and with some particular object in view. Nor was it continuing to transact its ordinary business necessary to fix its status as a “going concern,” as judicially defined by the courts. Vol. 4, Words and Phrases, p. 3103, citing Corey v. Wadsworth, 99 Ala. 68 (11 South. 350, 23 L. R. A. 618, 42 Am. St. Rep. 29); Oliver v. Lansing, 59 Neb. 219 (80 N. W. 829); White, Potter & Paige Manfg. Co. v. Importing Co. (C. C.), 30 Fed. 864, 865.

In addition to other evidence, the testimony of both these defendants shows a knowledge of conditions when they purchased their stock. Deane testified that the proposition contained in the minutes of March 15, 1901, as set forth, was made by him; that he had investigated the finances of the company before he undertook to sell stock, and knew it was in a pretty bad way. He said he knew the clock company was not doing anything. He also testified:

“Q. Mr. Bertsch knew — you told him what the condition of the company was when he came in ?
“A. I did.
“Q. That they were wanting capital to start their business ?
“A. Yes, sir. * * *
"Q. You understood you were getting a part of their unissued capitalization didn’t you ?
“A. Yes, sir.
“Q. Did you give Mr. Bertsch to understand the same thing ?
“A. Yes, sir; Mr. Bertsch and I came in at exactly the same time. It was all one transaction, and he understood as much of the conditions at that time as I did.”

Defendant Bertsch testified that he purchased through Deane’s efforts, who said he expected to raise money enough so “we could get the company going.” He testified further:

“Q. When you came into the company, you knew the company was not doing business, didn’t you ?
“A. I did.
“Q. And you knew that the money that you and Mr. Deane were paying in was for the purpose of financing the company, so that it could go ahead and do business ?
“A. That was the understanding.
Q. You knew that the company had no other property at that time besides these patents, didn’t you ?
“A. Well, I didn’t suppose they had.”

It would appear that this testimony of these defendants was conclusive upon them as to their knowledge of the conditions at the time they purchased their stock, and also as to what use the cash paid in by them was to be put. The contention of these defendants is that this was a going concern, which required additional capital, and that the stock was purchased by them in good faith for its actual value, and the creditors cannot call upon them for the difference between the sum paid and par value of the stock. We think that it already sufficiently appears that the facts in the case do not support such contention.

In Rickerson Roller-Mill Co. v. Machine Co., 75 Fed. 554, 23 C. C. A. 302, the question here presented was considered by the court. The facts upon this proposition were similar to those in the instant case, and the contention the same. The case is from the western district of Michigan. Judge Lurton, speaking for the court, said:

“Neither is this the case of a going corporation, whose capital stock had become impaired or diminished by losses or misfortunes. It is true that in some sense this corporation had been doing business in a small way for a month or more before this new stock was issued; but there is no evidence that its capital stock had been impaired by losses. Upon the contrary, the Messrs. Fox were admitted as shareholders in consequence of the necessity for increasing the capital stock of the company, and enabling it to begin the business for which it had been organized. Their purchase of these shares was in accordance with the original scheme of the promoters, and they were bought as an investment in a manufacturing corporation which had not yet acquired a plant, or begun the business for which it had been organized. The arrangement by which they were to buy these shares from the corporation, and pay but 50 per cent, of the par value of the stock, was subject to the contingency that they would be liable, in the event of the insolvency of the corporation, to creditors who should become such in ignorance of the arrangement, and who had a right to suppose that this increased stock had been paid in full, or was subject to call. The stock taken by Rickerson and his original associates stands upon a very different footing. That was issued in payment for the. Rickerson patents, upon a value estimated by the parties to be fair and reasonable. When full-paid stock is issued by a corporation having power to receive property in payment for stock subscriptions, there must be actual fraud in the transaction to authorize creditors of the corporation to call upon the subscriber for the difference between the actual value and that at which it was received.”

In this opinion the learned judge distinguishes the cases relied upon by defendants in the case at bar. The case is a well-considered one, and an exhaustive footnote digests the authorities upon the subject of “ Stockholders’ Liability to Creditors of Corporations in Equity, and the ‘ Trust Fund’ Doctrine.”

In the case under consideration, there is another and sufficient reason why they cannot claim exemption from liability upon the unpaid balance of stock purchased. The contract of purchase of this stock was explicit that the “same shall be fully paid and nonassessable when twenty-five per cent, has been paid.” This has never been performed by these defendants. It is undisputed that each is in default and neglected to pay on demand. Both were properly held liable to pay the difference in full between the amount paid and par upon the stock so purchased. So far the defenses of defendants Deane and Bertsch have been identical and considered together. Separate consideration must be given to the further objections of each to the decree appealed from.

Defendant Deane has filed a claim for salary for services performed in the office and about the business, by virtue of an understanding with Mr. Waggoner, one of the directors. This is denied by Mr. Waggoner, and the records and books show no credit for salary to him. Claimant admits that there was no formal action of the corporation allowing him a salary. No claim was ever made for a salary prior to filing his answer in this case. The court denied the allowance of the claim. The evidence upon the subject does not warrant us in holding that under the circumstances there is a presumption that it was intended by the parties that such services would be paid for. In fact, the record negatives such a presumption. This charge was evidently an afterthought, and was properly dissallowed. Notley v. First State Bank, 154 Mich. 676 (118 N. W. 486).

Defendant Deane also claims that the court should have allowed his claim of $1,031.60 for money paid to bank on note of the company indorsed by him to participate in the distribution of the so-called trust fund, and that he should be subrogated to the rights of the bank. Under the circumstances, may he who became a creditor, after full knowledge of the terms of sale of this stock, participate in the fund created by requiring the stock to be paid in full ? An ordinary creditor with such knowledge would have no such right, for the reason that the want of such knowledge is the basis of the right on the part of a creditor to require full payment for such stock. 1 Cook on Corporations (6th Ed.), § 199, This principle was involved in Rickerson Roller-Mill Co. v. Machine Co., supra. The defendant, a stock purchaser, who was a party to the transaction of purchase for less than par, on becoming a . creditor, can claim no greater equities than an ordinary creditor. Nor can he be subrogated to the rights of the bank by reason of his knowledge of conditions. The court properly excluded this claim of defendant Deane from participation in this fund.

It is the contention of defendant Deane that he is entitled to set off this claim against the amount due on his subscription of stock. It appears to be well settled that to allow such set-off is inequitable, and against public policy. 1 Cook on Corporations, § 193; Scovill v. Thayer, 105 U. S. 143.

Of the amounts the defendants Bertsch and Deane were held liable to pay, the court below directed the receiver to collect from them only an amount sufficient to pay the debts of defendant company remaining unpaid in a proportion of eight-thirteenths from Deane and five-thirteenths from Bertsch. The correctness of this apportionment does not appear to be disputed. The amount of claims proved against the company was fixed at only $3,383.20, while the liability of these defendants, as found by the court, is almost three times that amount. They were the only defendant stockholders contributing, and stood upon the same footing, each with full knowledge of financial conditions, and that the other’s contract with the company to buy stock at 25 per cent, of its par value was like his own. Defendant Deane would therefore have no equitable right to participate in this fund so created to satisfy his claim, thereby compelling defendant Bertsch to pay five-thirteenths of it.

Defendant Deane urges that the portion of the decree which determines that he is liable to pay on the $3,000 worth of stock which he received for services in selling stock to the amount of the difference between what his services were found to be reasonably worth and par, being $2,250, should be reversed. He claims that this stock was issued to him in payment for his services performed in good faith in selling $10,000 par value of stock, under an agreement that he was to receive $3,000 par. value of stock, and that under the authorities he cannot be held for any unpaid balance on it. In othor words, that it was fully paid and nonassessable as issued. This court has recognized the rule contended for, with the modification usually embraced in it, as follows:

“ It is conceded that services rendered to a corporation in good faith constitute a good consideration for the purchase of stock. * * * Such services, however, must be reasonably commensurate with the par value of the stock subscribed; otherwise such purchase is void as to the public and creditors.” Peninsular Sav. Bank v. Stove Polish Co., 105 Mich. 535 (63 N. W. 514).

The court below found that such services were reasonably worth $750. We cannot say that this was unsupported by evidence. Defendant Deane made this purchase with the full knowledge he had in purchasing $5,000 worth of the same stock on the same day. In our opinion, the value of the services performed by him as found by the court were not “ reasonably commensurate with the par value of the stock.” We find no sufficient reason why he should not pay the balance on this stock the same as we have held he should on the other stock purchased by him at the same time.

Defendant Bertsch urges as a reason for reversal of the decree against him that the court was in error in holding that the transfer of his stock, on January 3, 1905, to defendant Hamilton was not made in good faith in the regular course of business, but was made with a view of escaping liability, knowing that the company was insolvent, and knowing that Hamilton was insolvent, and contends that from the record the contrary of each of such findings was true. Unless his contention in respect to this matter of a good faith transfer of this stock to Hamilton is sustained, from the determination we have already made upon his other contentions, the decree against him must he affirmed.

We have already found that when he purchased this stock he did so with full knowledge that the corporation was not a going concern, and that it could not do business without money from the sale of stock, and that the money paid in by Deane and Bertsch was to be devoted to that purpose, and we have held that under the facts he was liable to pay the unpaid balance on such stock. The record shows that at once after he became a stockholder he was elected a director and president, which offices he held up to the time of the transfer to Hamilton. It also shows that all the financial business of the company was done by Deane and Bertsch; that defendant Bertsch attended the stockholders’ meetings, and saw the annual reports and knew their contents; that he had indorsed the company’s note at the bank, which the company was unable to pay; that he refused to indorse further, and Deane indorsed, and was required to pay the note, which amount is a claim of Deane’s in this suit; that he never paid the full amount of the purchase price of his stock, which balance was carried as an asset, and refused to pay when asked; that the company was reported by Dun & Co. as having no available assets, and he told their manager at the time of sale to Hamilton that the business was not successful, and did not give a statement of assets and liabilities, and said that no other stock could be sold; that a heavy creditor had gone to him, complaining about the claim and asking for payment of the debt. An examination of the annual statements upon which counsel comments as showing a successful business, taken in connection with the other evidence, shows that, they are unreliable, and do not warrant such a conclusion. The record shows that the business was never successful. It was scraping along without capital and without credit, and was insolvent at the time of the transfer to Hamilton. Defendant Bertsch, as president and one of the financial managers of the company, was presumed to have, and the record shows did have, complete knowledge of its failing condition. This is confirmed by the fact that about 90 days after the sale to Hamilton the corporation sent a letter to its creditors, asking for a compromise at 25 per cent., and stating:

“Our tangible assets are practically accounts, face value, $1,800; our debts amount to about $5,500, and creditors can scarcely realize anything, except by an amicable compromise.”

This condition the record shows had not changed from the time when Bertsch sold out. Under these circumstances, he sold to Hamilton, agent. The latter admits he was insolvent and purchased as agent to avoid creditors. His status of insolvency is fixed by his own testimony.

Knowledge of Bertsch as to his insolvency also appears. He sold to him as “agent,” which to a business man of his experience meant financial irresponsibility. He desired Hamilton to pay for the stock in full, who told him he could not do it. He sold for a cash payment of only $50, and a note for $1,000, payable $100 every three months, secured by the stock. Hamilton”|was to assume and pay the unpaid balance of $250 on his original purchase, and also pay two notes he had indorsed for the company at the bank, aggregating the sum of $1,100. Hamilton paid $50 cash and the $1,100 at the bank. He never made further payments. Hamilton testifies that these notes were paid with his wife’s money, and were taken and held by her as a claim against the company. Bertsch testifies that he was present at the bank, having gone there with Hamilton to see that the notes were taken up. From the record the court was justified in finding that Bertsch knew of the insolvency of Hamilton. It is apparent that Hamilton was unable to respond, if called upon to pay the balance unpaid on the stock for which Bertsch was liable, and that this was known to Bertsch at the time of the transfer. McDonald v. Dewey, 202 U. S. 510 (26 Sup. Ct. 731). This knowledge is material as bearing upon the question of fraudulent intent of defendant Bertsch.

In the above case, Mr. Justice Brown, speaking for the court, after discussing and digesting Federal cases bearing upon the question, said:

“We think it a proper deduction from the prior cases, and such we hold to be the law, that the gist of the liability is the fraud implied in selling, with notice of the insolvency of the bank, and with intent to evade the double liability imposed upon the stockholder by the national banking act. In short, the question of liability is largely determinable by the presence or absence of an intent to evade liability. The fact that the sale was made to an insolvent buyer is doubtless additional evidence of the original fraudulent intent, but would not be in itself sufficient to constitute fraud without notice of the insolvency of the bank. The stockholder is not deprived of his right to sell his stock by the fact that the sale is made to an insolvent person, unless it be made with knowledge of the insolvency of the bank. McDonald v. Dewey, supra, at page 526.

Upon this proposition the court was unanimous, although there was a dissenting opinion upon another question. While this was a Federal case, relative to double liability of a stockholder under the national banking act, it is in point in principle upon the question of fraudulent transfer.

The record shows that this transfer was made to Hamilton without telling him of the insolvent condition of the company; that defendant Deane was not informed of the sale; that defendant Bertsch signed the new certificate of stock issued to Hamilton, and made no transfer of the stock upon the books of the corporation kept for that purpose as required by law. The finding of the circuit court that this transfer to Hamilton by defendant Bertsch was for the purpose of evading liability is fully sustained by the record, and the portion of the decree imposing upon him a liability for the unpaid balance upon his stock was warranted by the record.

The decree of the circuit court is affirmed, with costs in favor of complainant.

Ostrander, O. J., and Brooke, Blair, and Stone, JJ., concurred.


author: Ostrander, C. J.

text:
    FOOTE v. GREILICK.
    1. Corporations — Meeting of Stockholders — Notice—Proof— Evidence.
    Though corporate records do not show due service of notice of an annual meeting of stockholders, the fact is presumed, and parol evidence of proper service is competent in support of the presumption.
    2. Same — Preferred Stock — Majority Required — Statutes.
    Seven hundred twenty-one shares is a sufficient majority of the capital stock to authorize the issuance of preferred stock of a corporation organized with an authorized capital of $10,000, of which 919 shares were issued and 120 shares of the issued stock subsequently repurchased by the corporation; as only 799 shares remained outstanding, and after deducting the 120 shares that were voted, 601 shares remained voting for the preferred stock, being a three-fourths majority. Act No. 232, Pub. Acts 1903.
    3. Same.
    Section 2 of said act does not require a subscription of fifty per cent, of an intended increase in the capital stock of a corporation as increased, in order to warrant the adoption of the increase, but merely requires the subscription of half the increase in order to entitle the proceedings to record in the office of the secretary of State.

      4 Same.
    The question whether defendant and other stock subscribers intended to make an unqualified or a preliminary subscription, to become binding when acted upon by the action of the corporation, was for the jury.
    5. Same — Amendment of Articles — Preferred Stock — Validity.
    Proceedings to amend the articles of incorporation by providing for §14000 common, and $6,000 preferred stock, were not invalid on the ground that the issuance of an excessive amount of preferred stock was authorized, under the limitation of the statute providing that preferred stock shall not exceed two-thirds of the paid in capital (§ 35, Act No. 232, Pub Acts 1903); it appearing that the corporation never issued any such preferred stock, and no more than §3,000 was subscribed and that its total issued capital stock was $9,190, exclusive of subscriptions to the increased portion.
    6. Same.
    The court erred in finding as a matter of law that defendant was liable upon his subscription to preferred stock on the alleged ground that he was a director and holder of stock that was represented at the stockholders’ meeting at which proceedings were taken to issue the preferred stock, and was presumed to know of the certificate of increase filed with the secretary of State, where it was claimed in defense to the action that the defendant’s subscription was conditional upon the entire amount of preferred stock being subscribed for and less than that amount was taken.
    7. Same — Conditional Subscription — Estoppel.
    It was a question for the jury whether the subscription was qualified as indicated by certain conditions contained in the resolution adopted at the meeting of stockholders, fixing a limit of 10 days for subscriptions, and defendant was estopped from setting up the qualification only in the event that it should be found that he knew of or acquiesced in the certificate showing such increase of stock, filed with the secretary of State, and it should be also found that claims accrued against the corporation after such filing in reliance on the facts shown by the said certificate.
    8. Same — Bankruptcy—Trustee—Action.
    The trustee in bankruptcy could sue for and collect valid subscriptions to stock of the bankrupt corporation.

      Error to Grand Traverse; Mayne, J.
    Submitted April 7, 1911.
    (Docket No. 45.)
    Decided September 29, 1911.
    Assumpsit by William O. Eoote, as trustee in bankruptcy of the estate of the Traverse City Motor Boat Company, against Clarence L. Greilick on a stock subscription. A judgment for plaintiff on a verdict directed by the court is reviewed by defendant on writ of error.
    Reversed.

      Smurthwaite & Alway, for appellant.

      John W. Patchin, for appellee.
   Ostrander, C. J.

The plaintiff, a trustee in bankruptcy of the estate of the Traverse City Motor Boat Company, a corporation, and an adjudicated bankrupt, brought this action against one of its stockholders, who was also a director, upon an alleged subscription for stock. He defended in the circuit court upon the ground that said subscription was not a legal obligation against him, and has appealed from a directed verdict. There is little dispute about the facts.

This corporation was organized in 1905 with an authorized capital of $10,000. Only 919 shares of this stock were issued, and of these 120, issued to one Stanton, were not paid for in full by him. These shares were purchased from him by the company; new certificates being issued to a trustee. The company having become embarrassed for want of funds, its officers and directors determined that an increase of the capital stock to $20,000, of which $6,000 should be preferred stock and $14,000 common stock, would enable the company to pay its debts and furnish a small working capital. They therefore arranged to submit the question of such increase to the stockholders at their next annual meeting, to be held on January 10, 1908, and this was done by the adoption of a resolution at a meeting of the board held on January 3,1908. Defendant participated in such action. The first meeting of the "board at which the subject was discussed was held on December 13, 1907, and a committee was appointed to formulate a proposition for increasing the capital stock. The report of this committee was made to the board at a meeting held on January 3d, and action was then taken, and at the annual meeting held on January 10th the resolution was submitted to and carried by the stockholders; 721 shares being voted in favor of the increase. The subscription sued upon is as follows:

“ It is hereby mutually understood by and between us, the undersigned, parties hereto, and the board of directors of the Traverse City Motor Boat Company, that we will take the number of shares of preferred stock in the Traverse City Motor Boat Company, incorporated with a capital stock of $20,000, divided into 1400 shares of common stock and 600 shares of preferred stock of ten dollars each, organized under the laws of the State of Michigan, as hereinafter set opposite our respective names.
“And we each one, severally, and for himself, or herself promise and agree to pay for each share the sum of ten dollars, in such manner and at such time or times and upon such terms and conditions as the stockholders or board of directors may prescribe.
“Dated at Traverse City, this-day of January, 1908.”

As this paper is not dated, we have had some difficulty in ascertaining when it was signed, but we understand plaintiff’s claim to be that the directors were informed that it was necessary that the subscriptions to stock amount to $10,000, as a condition to the proposed increase, and that their first five subscriptions were made unconditionally, either prior to the action of the stockholders or before filing a certificate of such action with the secretary of State, which certificate bears date on January 23, 1908, and is as follows:

“Certificate of Increase of Capital Stock and Providing for Preferred Stock of the Traverse City Motor Boat Company. We, the undersigned, being the president, the secretary and a majority of the directors of the Traverse City Motor Boat Company, a corporation existing under the provisions of Act No. 232 of the Public Acts of 1903, do hereby certify, as required by sections 2 and 35 of said act:
“ That at a meeting of the stockholders of said corporation expressly called for the purpose of increasing its capital stock and providing for preferred stock, and held at the office of said company on the 10th day of January, A. D. 1908, it was resolved, by a vote of three-fourths of the capital stock of said corporation, that the capital stock be increased from ten thousand dollars to twenty thousand dollars, and that the articles of association be so amended as to provide for the preferred stock, and that the articles relating to capital stock be and the same are amended so as to read as follows, viz.:
“The capital stock of the corporation hereby organized, is the sum of twenty thousand dollars, of which fourteen thousand dollars shall be common stock, and six thousand dollars shall be preferred stock. The preferred stock shall be subject to redemption at par on the 1st day of January, A. D. 1911, and the holder shall be entitled to a dividend of 7 per cent, per annum, payable Jan. 1st in each year, which shall be cumulative and payable before any dividend shall be set apart or paid on the common stock. The preferred stockholders shall be entitled to vote for directors.
“ The number of shares into which the capital stock is divided is two thousand of the par value of ten dollars each.
“We do further certify that the total amount of common stock, including such increase, subscribed, is nine thousand one hundred ninety dollars. The total amount of preferred stock subscribed is fifteen hundred dollars.
“ The total amount of common stock, including such increase actually paid in, is the sum of nine thousand one hundred ninety dollars, of which no dollars of the increase has been paid in cash, and no dollars has been paid in other property.
“The amount of preferred stock actually paid in is the sum of no dollars.
“ It was further resolved by the same vote that the value of, and the price at which such increase of the capital shall be subscribed and paid for by the stockholders be fixed at ten dollars per share, and the time and manner of subscription and payment for such increased stock shall he as follows:
“Subscriptions therefor shall be made within ten days from date; payment shall be made in cash within ten days after subscribing therefor and the directors of said corporation are authorized to sell, at not less than the price so fixed, any part of such increase not subscribed by the stockholders, after they have had a reasonable opportunity to make subscription of their proportionate shares thereof, and the directors may make provision for calling in and canceling the old and issuing new certificates of stock.
“ In witness whereof we hereunto sign our names this 22nd day of January, A. D. 1908.
“George Tarbuck,
“Leon F. Titus,
“ Geo. H. Cross,
** T)iT,Af'fnrsi
'“W. W. Smith, President.
“H. D. Alley, Secretary.”

There seems to be no doubt that defendant signed this paper prior to January 10th, and that it was present at the meeting of the board held that day, and we cannot satisfy ourselves that it was not signed by this defendant and present at the board meeting held January 8d.

Counsel for defendant say:

(1) The action of the stockholders was illegal (a) for want of notice of the meeting; (6) for insufficient attendance.
(2) This subscription is at most a unilateral contract; the corporation never having signed nor accepted it.
(3) The subscription never was completed, and it was signed with the understanding that it was to be of no effect if $6,000 was not raised.
(4) It was never acted upon, but was abandoned because of the failure to obtain subscribers for the amount of $6,000.

Notice of Annual Meeting. The record of the meeting held does not show that notice was given, but there is evidence (not contradicted) that notices were mailed in compliance with the law. This was competent and therefore sufficient proof of the fact, which is ordinarily presumed without proof. 1 Cook on Stock & Stockholders, § 600; Id., §§ 137, 138, and note; 2 Cook on Stock & Stockholders, § 714, and notes. Furthermore, the defendant was present by his authorized representative, holding his proxy, and he cannot complain that notice was not given to others. 2 Cook on Stock & Stockholders, § 730; 1 Cook on Stock & Stockholders, § 599; Stutz v. Handley (C. C.), 41 Fed. 531; s. c., 139 U. S. 417 (11 Sup. Ct. 530); Schenectady, etc., Plank Road Co. v. Thatcher, 11 N. Y. 102.

Insufficient Attendance. The attempt to increase the capital stock was made by virtue of Act No. 232, Pub. Acts 1903. Under section 35, a vote of three-fourths of the stock is essential to an amendment providing for the issue of preferred stock. Under the original articles the .issue of 1,000 shares was authorized. Only 919 shares were issued, and it is claimed that of these 120 had been repurchased by the company, and therefore were not outstanding at the time action was taken to amend the articles. There were 721 shares represented at the meeting, which were voted in favor of the increase, and these included the 120 shares, which, if deducted, would reduce the number of shares represented and so voted to 601, being less than three-fourths of the authorized stock. The plaintiff contends that the shares were issued and outstanding in the name of a trustee, and were entitled to be represented, whoever was the real cestui que trust. We are of the opinion that the stock outstanding at the time of the meeting, and not the amount of capital authorized, i. e., fixed by the original articles, is the amount upon which the computation should be based. We have said that the record shows that 721 shares were represented and voted at the meeting in favor of the amendment. This was more than three-fourths of the stock that had been issued. If, however, the 120 shares should be treated as treasury stock not issued, these shares should be subtracted from the 919 shares, leaving 799 shares outstanding, of which 600 shares would have been three-fourths; and, if 120 be subtracted from the 721 votes cast, there were still 601 votes left, which were enough to carry the measure. This leaves the case to turn on some of the other questions raised.

It is contended that it was necessary to have 50 per cent, of the full $20,000 subscribed before a valid increase of capital to that amount could be made, and that, to effect that, these subscriptions were made, i. e., the defendant’s and some others. If that is true, the transaction was in the nature of a preliminary subscription, which became binding when acted upon by the stockholders, directors, and officers in adopting the amendment and filing the statutory certificate with the secretary of State. We are of the opinion, however, that the nature of this subscription, the time when, and the circumstances under which, it was made, raised a question for the jury to determine whether it was so made and intended and acted upon. Section 2 does not require the subscription of 50 per cent, of the total capital as increased before the adoption of the proposition, but it does require that the certificate show such subscription, to make it eligible to record by the secretary of State. The certificate shows such subscription, but that is not of itself necessarily conclusive of the matter. If the proofs show it to have been a bona fide and unqualified subscription for the purpose named, which purpose was accordingly carried out, defendant would be liable.

The learned circuit judge was of the opinion that the proceedings to amend were void, upon the ground that the provision for issuing $6,000 preferred stock was for an excessive amount, being more than two-thirds of the capital stock (common) that had been paid in. In this we think him in error. Section 35 does not preclude such action, though it does prohibit the issue of preferred stock to an amount greater than two-thirds of the capital paid in. The company never issued any such stock, and there was at no time more than $3,000 subscribed, even if the conditional subscriptions be included.

He directed a verdict for the plaintiff, however, upon the ground that the defendant was a director and holder of stock, that such stock was represented and voted by proxy at the stockholders’ meeting, that a committee had been appointed at that or another meeting to solicit stock, and that it acted and procured signatures, including those in question, including his own, five in number, aggregating $1,500 of preferred stock. It is clear that the defendant knew of the action of the board and the stockholders’ meeting. He states that he was at the meeting of January 3d, and his stock was voted by his authority. Either before or afterwards, he became the first signer on the subscription for preferred stock to the amount of $500. But it is the claim of the defendant that the subscription was made as a tentative one, and that in the event of a failure to obtain purchasers for $6,000 of preferred stock the attempt to increase the capital stock should be abandoned.

We have seen that a subscription for additional stock was unnecessary to the action of the stockholders’ meeting. The action of the stockholders contemplated a later subscription within 10 days and payment within 10 days, as it shows, and it is not impossible, as defendant claims, that the subscription was understood by all to be subject, to that kind of an arrangement. If it was a qualified subscription, and defendant knew the contents of or acquiesced in the making and filing of the certificate, he would be estopped to deny his liability to those whose claims accrued after the filing thereof in reliance upon the increase of capital stock through such subscription. But we find no reason for saying that, because the subscription was made and the certificate was filed, the stockholders were therefore denied the right, as between themselves and the corporation, to insist upon the terms of the arrangement and the failure to carry the arrangement into effect, —to insist that their liability was wholly contingent. These are questions which should have been submitted to the jury.

We have no doubt of the right of the trustee in bankruptcy to sue for and collect any valid subscription, and we do not understand that an increase of capital must necessarily be all subscribed to bind subscribers. That depends upon their contracts. We think this discussion has covered the important questions in the case.

The judgment will be reversed, and a new trial directed.

Bird, Moore, McAlyay, and Brooke, JJ., concurred.


author: Brooke, J.

text:
    HUMPHREY v. MICHIGAN UNITED RAILWAYS CO.
    1. Carriers — Expulsion oe Passenger — Tioket—Validity.
    While a carrier of passengers is not liable for the expulsion or attempted or threatened ejection of a passenger having a ticket void upon its face, the conductor of an interurban electric railway was not excused for a threat to eject a woman who carried a commutation ticket issued June 8th, to be good for 80 days, but by mistake marked void after June 9,1909, on the cover and on each coupon, but having the date of expiration correctly punched on the inside of the cover as July 9th, and bearing date June 8, 1909.
    2. Same — Threats—Insulting Language — Damages—Assault.
    A breach of the carrier’s duty to protect passengers from insulting, abusive, or opprobrious language affords a ground of action.
    3. Same.
    Whether the conduct of defendant’s conductor was such as to render the defendant liable was a question of fact which was properly submitted to the jury by a charge containing the instruction that if the jury found, by a fair preponderance of the evidence in the cause, that the conductor in the performance of his duty made use of impudent and insulting language to plaintiff, she was entitled to recover, but if they should not find that the conductor used such language and insulted and abused plaintiff, the verdict should be for defendant.
    4. Damages — Excessive Verdict — New Trial.
    For a mere unexecuted threat on the part of defendant’s cortductor, accompanied by abusive conduct but not by violence, to eject a female passenger from its car, a judgment of $500 is excessive and is reduced, on error, to $100.
    Error to Kalamazoo; Knappen, J.
    Submitted April 17, 1911.
    (Docket No. 53.)
    Decided September 29, 1911.
    Case by Mary Humphrey against the Michigan United Railways Company for an assault and resulting injuries. Judgment for plaintiff. Defendant brings error.
    Affirmed on condition that plaintiff remit a part of the verdict.

      Sanford W. Ladd (Warren, Cady & Ladd, of counsel), for appellant.

      D. 0. French, for appellee.
    On June 8, 1909, plaintiff purchased from defendant a commutation book containing 52 coupon tickets, each good for transportation over defendant’s road between Comstock and Kalamazoo. It was the intention of the plaintiff to buy, and of the defendant to sell, a book of tickets good for passage within 30 days from the day of issue. Through the error of the issuing agent, the book was indorsed upon its outside cover “void after June 9th, 1909,” and each coupon was stamped upon its back “ June 9th, 1909.” On the inside of the front cover, the days of the month, the months and the years are printed around the margin in such position as to conveniently permit the punching out of the date of expiration. This date was correctly punched out as of July 9, 1909. The ticket reads that it is issued to plaintiff—
    “ On conditions named in contract attached and made part hereof. This ticket will not be accepted for passage after date expiration as punched out of the margin, which shall in no case be more than thirty days from date of sale, and is worthless if more than one date is punched out or if any alterations are made hereon.
    “contract.
    “ (6) It is good only if used on or before expiration of date punched in margin of cover and written below and no stop-over checks will be given and it will be taken up by the conductor if presented after expiration of date.
    * * *
    “ (8) This ticket is void after June 9th, 1909.
    “ I have purchased and agreed to use this ticket subject to above conditions.
    [Signed] “Mary Humphrey, Purchaser.”
    Plaintiff presented this book for passage on June 28th. This was within the date of expiration punched in the cover, but 20 days after expiration as indicated by the written date upon the outside of the cover and in the contract signed by the plaintiff. The conductor refused to accept the ticket, took it up, demanded the fare, and said, if it was not paid, he would put plaintiff off the car. Plaintiff claimed that the book did not expire until July 9th, that it was good for passage, and that she had no money. The conductor thereupon went to the forward end of the car, and in a short time returned to plaintiff’s seat, where he punched and threw down a cash ticket, with the remark:
    “ I will show you I am a gentleman. I will pay your fare.”
    Plaintiff was not ejected from the car, but rode to her destination upon the ticket. Plaintiff brought her action against defendant, claiming in her declaration that the conduct of defendant’s agent—
    “ Caused her great suffering, mortification, and humiliation, and then and there and thereby injured her good name and standing among her friends and relations and the people on said car, and amongst all her neighbors and friends with whom she had always stood in good repute, and whose confidence and respect she had always enjoyed.”
    Plaintiff recovered a judgment for $500, and defendant has removed the case to this court for review.
   Brooke, J.

(after stating the facts). The position of the defendant is that this case is ruled by Frederick v. Railroad Co., 37 Mich. 342 (26 Am. Rep. 531), where this court said:

“As between conductor and passenger, the latter’s ticket is conclusive evidence of the extent of his right to travel, and he must produce it when called on as the evidence of his right to the seat he claims.”

We have no disposition to depart from or modify the law as here announced, but we are of the opinion that the facts in the instant case do not warrant the conclusions reached by defendant. It is urged that the ticket presented upon its face demonstrated that it had expired, and was therefore, as between the conductor and passenger, worthless for passage upon the day of its presentation. This seems to us an untenable contention. Here was a commutation book bearing the date of issue “June 8th, 1909.” The date of expiration was properly punched as July 9, 1909, and, while the latter date was improperly and mistakenly printed and written in two other places upon the book as of June 9, 1909, we think it clear that the most casual examination upon the part of the conductor would have convinced him that the date punched, and not that written or stamped, was the proper date and should have controlled.

Defendant next urges that:

“ No physical injury being either alleged or proven, no damages can be recovered for claimed humiliation and mental suffering.”

We have held that:

“Fright, unaccompanied by any immediate physical injury, cannot be made the basis of a recovery of damages.” Nelson v. Crawford, 122 Mich. 466 (81 N. W. 335, 80 Am. St. Rep. 577), and cases there cited.

As between a common carrier and its passengers, it is the duty of the carrier to protect the passenger from insulting, abusive, or opprobrious language on the part of its servants and agents, and to see to it that such servants and agents treat him respectfully. A breach of this duty affords a ground for action. Baldwin on Personal Injuries (2d Ed.), § 301; Knoxville Traction Co. v. Lane, 103 Tenn. 376 (53 S. W. 557, 46 L. R. A. 549); Lafitte v. Railroad Co., 43 La. 34 (8 South. 701, 12 L. R. A. 339). The two cases last above cited and the authorities therein discussed seem to be particularly relied upon by plaintiff. In the first case the defendant’s servant was drunk, and addressed the passenger in language slanderous in and of itself. The court there said:

“The plaintiff should be protected against hearing obscenity, witnessing immodest conduct, or submitting to wanton approach.”

In the second case the servant of the carrier groundlessly charged the passenger with the crime of passing counterfeit money. While there is and should be no doubt as to the principle upon which the liability of the carrier rests in such cases, it is clear that not every dispute arising between the servant of a carrier and a passenger, unaccompanied by abusive or insulting language, will give the passenger a right of action. Good faith and respectful treatment are imperative. Insults and wanton abuse are intolerable and are actionable. Whether the conduct and language of defendant’s agent in the case at bar was such as to render the defendant liable was a question of fact for the jury, under proper instructions.

Error is assigned upon every paragraph of the charge. We have examined it, however, and we think that the crucial question was properly submitted. The court charged:

“ I instruct you, gentlemen of the jury, if you find by a fair preponderance of the evidence in the case that the conductor in charge of the car on the morning in question, and while in the performance of his duties as conductor, made use of impudent and insulting language to the plaintiff, then the plaintiff is entitled to recover. * * * If you do not find that the conductor used such language and insulted and abused the plaintiff, you will find a verdict of no cause of action.”

The unwarranted threat of the conductor to eject the passenger, though unaccompanied by actual expulsion or molestation, as well as his remark when paying plaintiff’s fare, were such acts as would afford a basis for plaintiff’s recovery if the jury so determined.

A motion for a new trial was made, one of the grounds for which was the claim that the verdict was grossly excessive. This motion was overruled. We here agree with the contention of the defendant. Whether it resulted from passion or prejudice on the part of the jury or not, it is clearly excessive.

The judgment will be set aside and a new trial ordered, unless the plaintiff remits from the amount thereof the sum of $400, in which event it will stand affirmed.

Moore, Mo Alva y, Blair, and Stone, JJ., concurred.


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    SMITH v. TOLMAN. ROBSON v. TOLMAN. CARL v. TOLMAN.
    Fraudulent Conveyances — Husband and Wire — Debtor and Creditor — Bill in Aid oe Execution.
    As to judgment oreditors of the husband, a conveyance of his real property to his wife to repay advances made to him by the wife from twenty-five to thirty years previously, under his agreement to return the sums on demand, was not fraudulent.

    Appeal from Clinton; Searl, J.
    Submitted April 17, 1911.
    (Docket No. 71.)
    Decided September 29, 1911.
    Bills in aid of execution by Stephen S. Smith against Myron Tolman and Rose Tolman, by Ray Robson against the same, and by Roscoe J. Carl and Raymond J. Read, executors of the estate of John Read, deceased, against the same. The three suits were heard together. From a decree dismissing complainants’ bills, complainants appeal.
    Affirmed.

      William M. Smith, for appellants.

      Charles F. Hammond, for appellees.

       Burden of proof of husband’s debt to wife on acoount of property received from her, see note in 56 L. R. A. 817.

   Brooke, J.

In the month of September, 1908, the complainants in each of the foregoing causes recovered separate judgments in varying amounts against defendant Myron Tolman. Executions were issued in each case and levies were made upon the W. £ of the E. £ of the N. E. £ of section 33, town 5 N., range 1 W., in Clinton county, Mich. Separate hills of complaint were filed in aid of execution, in each of which the court was asked to cancel a warranty deed covering the above described premises made by defendant Myron Tolman to his wife and co-defendant, Rose M. Tolman, for an expressed consideration of $1,500 and bearing date November 3, 1906. The three causes were consolidated and tried as one.

It was averred in the bills of complaint that the deed in question was a voluntary conveyance, without consideration, made by the husband to the wife for the sole purpose of preventing the creditors of Myron Tolman from collecting their debts. The defendants claimed that the conveyance was made in good faith and for a valuable consideration. It was their contention that between the years 1875 and 1881, inclusive, the wife had loaned to the husband at different times sums of money aggregating $1,200, and that the deed of the 40 acres in question was made in satisfaction of said loans which the husband had agreed to repay. We think the record fairly establishes the fact that the wife did hand to the husband sums of money amounting to $1,200, of which $500 was advanced in 1879, and $600 in 1881. The defendant Myron Tolman had purchased, in 1870, 80 acres of land across the road from the 40 acres here in question for $3,000, taking the title in his own name. Upon this 80 acres there was a mortgage for $560, and as further part of the purchase price Tolman gave a second mortgage for $500. This second mortgage he refused to pay, and foreclosure proceedings were necessary. In the meantime he had deeded the 80 acres, without consideration, to his brother-in-law, Adam C. Fuller.

In 1877 Fuller redeeded this property to Tolman and wife jointly. Tolman’s liability under the second mortgage was established by a decision of this court. See Richardson v. Tolman, 44 Mich. 379 (6 N. W. 840). In October, 1887, Tolman purchased the 40 acres here in question, taking title in his individual name, and so retaining it until the making of the conveyance to his wife in 1906. Both of the defendants testify that, at the time the money was given by Mrs. Tolman to her husband, there was a promise on his part to repay the same at some uncertain future time, and that the deed here in question was made in redemption of that promise.

Complainants advance the argument that the conveyance of the 80 acres to Tolman and his wife in 1877 should be considered as a sufficient, and probably the real, consideration to her for the money she advanced. The difficulty with this proposition is that, at the time the joint deed was made, Mrs. Tolman had advanced but $100 to her husband; $500 was advanced by her two years after that event, and $600 three years thereafter. Under these circumstances, we think it can scarcely be said that the joint deed was made in consideration of the advances.

There is no doubt that for many years Tolman represented himself as being the owner of the entire 120 acres of land, and that he was able to incur a very considerable indebtedness among his neighbors, who apparently relied upon the truth of his representations. The record, however, does not indicate that Mrs. Tolman was a party to these false statements. The circumstances surrounding the dealings between this husband and wife strongly indicate that the money of the wife was handed by her to her husband freely, and by him used with her consent as her contribution to their common property without any intention of creating an indebtedness. These circumstances, however, are flatly contradicted by the testimony of the defendants, which received credence at the hands of the learned circuit judge who saw the witnesses and heard them testify.

After a careful consideration of the entire record, we have concluded, though with hesitation, that the case falls within prior decisions of this court. Hedstrom v. Kingsbury, 40 Mich. 636; Brigham v. Fawcett, 42 Mich. 542 (4 N. W. 272); Dull v. Merrill, 69 Mich. 49 (36 N. W. 677); Strauss v. Parshall, 91 Mich. 475 (51 N. W. 1117); Hicks v. McLachlan 94 Mich. 278 (53 N. W. 1107); Belding Sav. Bank v. Moore, 118 Mich. 150 (76 N. W. 368); Cole v. Cole, 126 Mich. 569 (85 N. W. 1098).

The judgment is affirmed.

Moore, McAlvay, Blair, and Stone, JJ., concurred..


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    PEOPLE v. HANCOCK.
    I. Intoxicating Liquors — Local-Option Law — Furnishing to Guest.
    Furnishing intoxicating liquor to a caller, who came to get milk at respondent’s farm, was not, as a matter of law, a violation of the local-option law, although testimony of the prosecution, contradicted by respondent’s evidence, tended to show that before leaving the home of respondent the caller laid twenty cents on the table at which the parties had been drinking; and the court erred in charging the jury, as a matter of law, that the caller was not ai guest. 3 Comp. Laws, § 5413 et seq., Act No. 183, Pub. Acts 1899, Act No. 107, Pub. Acts 1909.
    3. Same — Evidence.
    Evidence of prior similar acts alleged to have been committed by respondent was admissible to show bad faith and his intent in furnishing the liquor.

    Exceptions before sentence from Allegan; Padgham, J.
    Submitted April 30,1911.
    (Docket No. 125.)
    Decided September 29, 1911.
    Frank Hancock was convicted of violating the local-option law.
    Reversed.

      Charles Thew, for appellant.

      Clare E. Hoffman, for the people.

       Evidence of other crimes in criminal case, see note in 63 L. R. A. 193.

   Brooke, J.

Respondent stands convicted of a violation of the local-option law, and has removed his case to this court for review upon exceptions before sentence.

The record shows that respondent is a farmer, and had been living for upwards of a year upon a farm near Saugatuck, in the county of Allegan. On September 24, 1910, one Schultz, a neighbor, called, in company with his little girl, to get a couple of turkeys which respondent’s wife had promised them. Schultz and respondent walked over the farm and visited for a time. Returning, respondent invited Schultz into the house. They seated themselves at a table in the kitchen, and respondent produced a quart bottle partly filled with whisky, and some glasses, and invited Schultz to drink. While the two men were sitting there, one Palzer, who resided at Saugatuck, entered the kitchen and was invited to drink, and did drink. Palzer testified that he went there upon an errand, and, further, that—

“ I was in the habit, when I was short of milk, to go there and have them save some for me in the evening, and I am sure I went there that day for that purpose. I am farming and peddling milk and during the summer I went there and got milk when I was short. I think I went there to order milk that day.”

The three men sat in the kitchen visiting for some time, and took two or three drinks each. The information charged respondent with unlawfully furnishing liquor to Palzer only.

Both Palzer and Schultz were sworn as witnesses for the people. Schultz testified that no demand was made for payment nor was payment made for the whisky; but Palzer testified that when he left he laid 20 cents on the table to pay for his drinks. Respondent admitted the furnishing of the liquor as charged, but claimed that he did so as an act of hospitality to a guest in his own home, and that he neither demanded nor received any money therefor from Palzer.

The court practically directed a verdict of guilty, hy charging the jury, as a matter of law, that upon the occasion in question Palzer was not respondent’s guest. It is clear that respondent would be guilty if he had demanded or received pay for the liquor furnished. It is apparent, however, that the jury did not convict him upon that theory; for, after deliberating for a time they returned to the courtroom, when a juror asked this question of the court:

“Would you give us the definition of the word ‘guest’ again ? ”

To which the court replied:

“ I told you, gentlemen, this man was not a guest when I instructed you. You need not spend any time on that. He was not a guest at that place.”

The definition to which the juror referred was taken by the court from the Standard dictionary, and is as follows:

“A person received and entertained at the house of another; a visitor, as, a welcome guest. The term is applied with little respect to the duration of the call or visit, and whether the person be present by invitation or not. The members of an evening party, persons invited to dinner, or relatives or friends making a long sojourn are alike guests.”

Webster defines the word as:

“A visitor; a person received and entertained in one’s house or at one’s table; a visitor entertained without pay.”

Adopting these definitions of the word “ guest,” we do not think it can be said as a matter of law that upon the occasion in question Palzer was not the guest of respondent. Counsel for the people insists that there is a legal distinction between a “guest’’and a “visitor.” None such seems to have been made by the lexicographers, and in making use of the word “ guest ” in our decisions heretofore we had no intention of giving to the same any restrictive meaning.

The first and fourth requests to charge, preferred by respondent, were as follows:

“First. It is the claim of respondent in this case that on September 24th last, which is the date that they are charged with the sale of liquor to one Palzer, that they were in their own home, in the kitchen; that one Schultz was there, visiting with Prank Hancock, and after they had sat there several minutes, Prank Hancock, who was the owner and had in his possession a bottle partially filled with whisky, gave to Schultz a drink, and took one himself, out of his bottle, pouring the same out into glasses, and at about that time one Palzer came in and sat down, during which time respondent, Prank Hancock, gave him also a drink, and the three of them drank together; that-he gave this liquor to them as his guests, as an act of hospitality, and had no intention to violate the law, demanding no money for the same, and no money was left on the premises for the payment of said liquor by Palzer. Now, I charge you that, if you find the facts in this case to be substantially as claimed by said respondent, that your verdict should be not guilty.
Fourth. I charge you that, if you find from the evidence that on the day alleged in the information that said Palzer was invited into his home and the liquor given to him as an act of hospitality, that he gave him one or two drinks of whisky in their home, nor took nor demanded no pay therefor, that your verdict would be not guilty.”

These requests were proper, and should have been given. In our view of this law, it was not the intention of the legislature to interfere with the privacy of the home, in which we have held the host has a right to dispense hospitality to his guests or visitors reasonably, decently, and in good faith. People v. Peterson, 156 Mich. 235 (120 N. W. 570); People v. Myers, 161 Mich. 40 (125 N. W. 701); People v. Bedell, 162 Mich. 230 (127 N. W. 33); People v. Slater, 164 Mich. 156 ( 129 N. W. 22).

Error is assigned upon the admission of testimony as to prior similar acts alleged to have been committed by respondent. As, under our decisions, the question of good faith may become one of fact in doubtful cases, we think such evidence admissible as bearing upon the intent with which the liquor was furnished upon the day charged in the information.

The conviction is set aside, and a new trial ordered.

Moore, McAlvay, Blair, and Stone, JJ., concurred.


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    FORD v. STATE BOARD OF EDUCATION.
    1. Mechanics’ Liens — Public Buildings and Improvements — Bonds — Statutes.
    Subcontractors and materialmen who furnish labor or materials for a public building, under a contract of the principal contractor with the State board of education, have no lien on the structure. 3 Comp. Laws, §§ 10710, 10743 et seq.

    3, Bankruptcy — Trustee — Creditors Under Public Building Contract.
    Subcontractors and materialmen to whom money is due from a contractor by reason of materials or labor employed in making improvements upon a public building, and who filed their claims in bankruptcy against the estate of the contractor therein being administered, cannot prevent the payment to the trustee in bankruptcy of a balance due under the construction contract that the trustee in part performed; where the claimants, although served with notice, filed no objections in mandamus proceedings brought by the trustee against the State board of education to recover a balance due under the contract, and where they were secured by the statutory bond obtained by the board.
    3. Same.
    Title to the fund vested in the trustee in bankruptcy.

      Mandamus by Albert N. Ford, trustee in bankruptcy of tbe estate of Charles R. Wells, to compel the State board of education of Michigan to pay to said trustee the balance due under a contract with said bankrupt.
    Submitted April 11, 1911.
    (Calendar No. 24,267.)
    Writ granted September 29, 1911.

      Henry B. Graves, for relator.

      Franz C. Kuhn, Attorney General, and Thomas A. Lawler, Assistant Attorney General, for respondents.
   McAlvay, J.

In this matter there is no dispute as to the facts. Relator is the trustee in bankruptcy for Charles R. Wells, and has filed his petition, as such, asking for a writ of mandamus requiring respondents to pay to him the sum of $1,741.40, being the balance due the said bankrupt upon a certain plumbing and heating contract in writing, performed by said bankrupt for the board of education of Michigan. Defendant William J. McKone is treasurer of said board. It appears that the balance claimed was not paid because of claims for large amounts filed with said board by creditors, cláiming as subcontractors and laborers, for materials furnished and work and labor done in the performance of said contract, and that respondents have been and are willing to pay the said balance to the persons who may be found entitled thereto, that by reason of a statutory indemnifying bond furnished by the contractor to pay all indebtedness on account of labor and materials furnished respondents could not do anything to jeopardize the security so held, and can only pay over such balance in a proper proceeding instituted for that purpose. It further appears that these claimants who have notified respondents not to pay over the funds so held have all filed their claims in said cause in bankruptcy as general, and not as secured, creditors, and have been duly notified of these mandamus proceedings, and none of them have appeared or filed any briefs herein. The bankruptcy of the contractor was declared, and relator appointed as trustee before tbe contract was completed, and he proceeded to complete, and did complete, the work.

These creditors have no lien upon this public building. Knapp v. Swaney, 56 Mich. 345 (23 N. W. 162, 56 Am. Rep. 397). Nor is a lien created by the statute requiring the bond held by respondents.

These claimants are creditors of the bankrupt. They ignore these proceedings which their objections have made necessary. We presume they are relying upon whatever rights they have which will be determined by the Federal court in bankruptcy. The relator under the bankrupt act has legal title to this fund. Section 70, U. S. Bankruptcy Act (30 U. S. Stat. 565, 3 U. S. Comp. Stat. 3451, 1 Fed. Stat. Ann. 697).

Claimants do not appear to have any rights to be determined by this court. The court in bankruptcy has jurisdiction to adjudicate these claims already submitted for its consideration.

The writ of mandamus will issue as prayed.

Ostrander, C. J., and Brooke, Blair, and Stone, JJ., concurred.