text:
    ATTORNEY GENERAL v. MICHIGAN STATE TELEPHONE CO.
    Telegraphs and Telephones — Rates—Federal Control.
    Where the President of the United States, acting under the authority given him by joint resolution of Congress (40 U. S. Stat. 904, chap. 154), took possession and control of the telegraph and telephone systems of the United States as a war measure, and such control and operation were exercised through the postmaster general, the latter had the power to prescribe local rates for telephones in the city of Detroit without reference to the laws of the State of Michigan relating thereto; the questions involved being Federal and controlled by the decisions of the Supreme Court of the United States.
    Appeal from Ingham; Wiest, J.
    Submitted April 16,1919.
    (Docket No. 50.)
    Decided June 13, 1919.
    Bill by Alex. J. Groesbeck, attorney general, against the Michigan State Telephone Company and another to restrain a proposed increase in rates. From a decree for plaintiff, defendants appeal.
    Reversed, and bill dismissed.

      Alex. J. Groesbeck, Attorney General, Leland W. Carr and Thomas G. Baillie, Assistants Attorney General (David H. Crowley, of counsel), for plaintiff.

      Stevenson, Carpenter, Butzel & Backus, Charles M. Bracelen and Thomas G. Long (Leo M. Butzel and Eugene S. Wilson, of counsel), for defendants.
   MOORE, J.

This is an action brought by the attorney general for the purpose of securing an injunction to restrain a proposed increase in telephone rates, the bill of complaint being founded upon the proposition that such increase has not been obtained by the method prescribed by the laws of the State in that an application had not been filed with, or approval obtained from, the Michigan railroad commission as prescribed by section 10 of Act No. 206 of the Public Acts for the year 1913 (2 Comp. Laws 1915, § 6698).

The answer set forth the various steps by which the telephone lines of the United States, including those of the defendant telephone company, came into the control of the postmaster general, and asserted that the increase in rates was due to an order made by the postmaster general. The answer denied the authority of the court to grant the relief prayed for in the bill of complaint for the reason that the postmaster general had not been made a party defendant to the said bill and that the action was in effect a suit against the United States government and without its consent.

Upon the issues thus made the matter came on for hearing and the court issued its injunction restraining the defendants from putting into effect the proposed schedule of rates. This is an appeal from that decree.

We quote from the brief of the attorney general:

“Two questions only are presented for consideration :
“First: Has the postmaster, general, by virtue of the joint resolution of congress, the authority 'and power to prescribe local rates applicable only to the city of Detroit without reference to the laws of the State of Michigan relating thereto ?
“Second: Has the circuit court for the county of Ingham, in chancery, jurisdiction to entertain proceedings and grant injunctive relief?”

Litigation of like character to that involved here has arisen in a number of States. In Oklahoma and Massachusetts injunctive relief' was refused. In Mississippi and North Dakota and perhaps other States it was granted. Because of the great importance of the questions, involved the Supreme Court of the United States granted an early hearing and rendered a decision therein very promptly. On the second day of this month the court handed down a decision in the case of Dakota Central Telephone Co. v. State of South Dakota, 39 Sup. Ct. Rep. 507, in which the 'first question presented by the brief of the attorney general in the instant case is answered in the affirmative. We quote from the opinion handed down in that case:

“On the 16th of July, 1918, congress adopted a joint resolution (40 U. S. Stat. 904, chap. 154), providing:
“ ‘That the President during the continuance of the present war is authorized and empowered, whenever he shall deem it necessary for the national security or defense, to supervise or to take possession and assume control of any telegraph, telephone, marine cable, or radio system or systems, or any part thereof, and to operate the same in such manner as may be needful or desirable for the duration of the war, which supervision, possession, control or operation shall not extend beyond the date of the proclamation by the President of the exchange of ratifications of the treaty of peace: Provided, That just compensation shall be made for such supervision, possession, control, or operation, to be determined by the President; * * * Provided, further, That nothing in this act shall be construed to amend, repeal, impair or affect existing laws or powers of the States in relation to taxation or the lawful police regular tions of the several States, except wherein such laws, powers, or regulations may affect the transmission of government communications, or the issue of stocks and bonds by such system or systems.’
“Six days thereafter, on the 22d of July, the President exerted the power thus given. Its exercise was manifested by a proclamation which, after reciting the resolution .of congress, declared:
“ ‘It is deemed necessary for the national security and defense to supervise and take possession and assume control of all telegraph and telephone systems and to operate the same in such manner as may be needful or desirable:
“ ‘Now, therefore, I, Woodrow Wilson, President of the United States, under and by virtue of the powers vested in me by the foregoing resolution, and by virtue of all other powers thereto me enabling, do hereby take possession and assume control and supervision of each and every telegraph and telephone system and every part thereof, within the jurisdiction of the United States including all equipment thereof and appurtenances thereto whatsoever and all materials and supplies. It is hereby directed that the supervision, possession, control and operation of such telegraph and telephone systems hereby by me undertaken shall be exercised by and through the postmaster general.’ [40 U. S. Stat. 163.]
“The proclamation gave to the postmaster general plenary power to exert his authority to the extent he might deem desirable through the existing owners, managers, directors or officers of the telegraph or telephone, lines, and it was provided that their services might continue as permitted by general or special orders of the postmaster general.
“It was declared that—
" ‘from and after twelve o’clock midnight on the 31st day of July, 1918, all telegraph and telephone systems included in this order and proclamation shall conclusively be deemed within the possession and control and under the supervision of said postmaster general without further act or notice.’
“Under this authority the postmaster general assumed possession and control of the telephone lines and operated the same. On the 31st day of October, 1918, the President through the postmaster general in the exercise of the duty imposed upon him by the resolution of congress to make compensation, concluded a contract with the telephone companies of the most comprehensive character covering the whole field while the possession, control and operation by the United States continued. By its terms stipulated amounts were to be paid as consideration for the possession, control, and operation by the United States and the earnings resulting from such operations became the property of the United States. Although concluded in October, 1918, by stipulation the contract related back to the time when the President took over the property.
“Following this, by authority of the President the postmaster general fixed a general schedule of rates and it was the order to put this schedule in effect which gave rise to the suit, the trial, and the resulting judgment which we have now under consideration.
“That under its war power congress possessed the right to confer upon the President the authority which it gave him we think needs nothing here but statement, as we have disposed of that subject in the North Dakota Railroad Case, 39 Sup. Ct. Rep. 502. And the completeness of the war power under which the authority was exerted and by which completeness its exercise is to be tested suffices, we think, to dispose of the many other contentions urged as to the want of. power in congress to confer upon the President the authority which it gave him.
“The proposition that the President in exercising the power exceeded the authority given him is based upon two considerations: First, because there was nothing in the conditions at the time the power was exercised which justified the calling into play of the authority; indeed, the contention goes further and assails the motives which it is asserted induced the exercise of the power. But as the contention at best concerns not a want of power, but a mere excess or abuse of discretion in exerting a power given, it is clear that it involves considerations which are beyond the reach of judicial power. This must be since, as this court has often pointed out, the judicial may not invade the legislative or executive departments so as to correct alleged mistakes or wrongs arising from asserted abuse of discretion.
“The second contention, although it apparently rests upon the assertion that there was an absence of power in the President to exert the authority to the extent to which he did exert it, when it is correctly understood amounts only to an asserted limitation on the power granted based upon the plain misconception of the terms of the resolution of congress by which the power was given. In other words it assumed that by the resolution only a limited power as to the telephone lines was conferred upon the President, and hence that the assumption by him of complete possession and control was beyond the authority possessed. But although it may be conceded that there is some ground for contending, in view of the elements of authority enumerated in the resolution of congress, that there was power given to take less than the whole if the President deemed it best to do so, we are of opinion that authority was conferred as to all the enumerated elements and that there. was hence a right in the President to take complete possession and control to enable the full operation of the lines embraced in the authority. The contemporaneous official steps taken to give effect to the resolution, the proclamation of the President, the action of the postmaster general under the authority of the President, the contracts made with the telephone companies in pursuance of authority to fix their compensation, all establish the accuracy of this view, since they all make it clear that it was assumed that power to take full control was conferred and that it was exerted so as to embrace the entire business and the right to the entire revenues to arise from the act of the United States in carrying it out. Indeed congress in subsequently dealing with the situation this produced would seem to have entertained the same conception as to the scope of the power conveyed by the resolution and dealt with it from that point of view. (Act of October 30, 1918, 40 U. S. Stat. 1017, chap. 197.)”

The opinion concluded by reversing the decree granting an injunction. It follows that the second question stated in the brief of the attorney general must be answered in the negative.

The questions involved are Federal questions and this court deems it to be its duty to accept the decrees of the Supreme Court of the United States in relation to Federal questions as final.

It follows that the decree of the court below must be reversed and the bill of complaint dismissed, but without costs to either party.

6ird, C. J., and Steere, Brooke, Fellows, Stone, and Kuhn, JJ., concurred. Ostrander, J,, did not sit.


source: Caselaw Access Project

author: Moore, j.

license: Public Domain

text:
    ATTORNEY GENERAL v. MICHIGAN STATE TELEPHONE CO.
    This case is controlled by Attorney General v. Michigan State Telephone Co., ante, 372.
    Appeal from Ingham; Wiest, J.
    Submitted April 16, 1919.
    (Docket No. 51.)
    Decided June 13, 1919.
    Bill by Alex. J. Groesbeck, attorney general, against the Michigan State Telephone Company and another to restrain a proposed increase in rates. From a decree for plaintiff, defendants appeal.
    Reversed, and bill dismissed.

      Alex. J. Groesbeck, Attorney General, Leland W. Carr and Thomas G. BaillAe, Assistants Attorney General (Hal. H. Smith, of counsel), for plaintiff.

      Stevenson, Carpenter, Butzel & Backus, Charles M. Bracelen and Thomas G. Long (Leo M. Butzel and Eugene S. Wilson, of counsel), for defendants.
   Moore, j.

This is an appeal from a decree enjoining defendants from putting into effect telephone rates prescribed by the postmaster general. The same questions are involved as those presented in a case in which an opinion was handed down at this term, entitled Attorney General v. Michigan State Telephone Co., ante, 372. The opinion in that case is controlling.

The decree of the court below is reversed and the bill of complaint is dismissed, but without costs to either party.

Bird, C. J., and Steere, Brooke, Fellows, Stone, and Kuhn, JJ., concurred. Ostrander, J., did not sit.


author: Moore, J.

text:
    ATTORNEY GENERAL v. MICHIGAN INDEPENDENT TELEPHONE & TRAFFIC ASSOCIATION.
    This case is controlled by Attorney General v. Michigan State Telephone Co., ante, 372.
    Appeal from Ingham; Wiest, J.
    Submitted April 16, 1919.
    (Docket No. 52.)
    Decided June 13, 1919.
    Bill by Alex. J. Groesbeck, attorney general, against the Michigan Independent Telephone & Traffic Association and another to restrain a proposed increase in rates. From a decree for plaintiff, defendants appeal.
    Reversed, and bill dismissed.

      Alex. J. Groesbeck, Attorney General, Leland W. Carr and Thomas G. Baillie, Assistants Attorney General, for plaintiff.

      Charles M. Bracelen, and William A. Bahlke, for defendants.
   Moore, J.

Alexander J. Groesbeck, attorney general, in behalf of the State of Michigan, filed his petition in the circuit court for the county of Ingham, to enjoin the Michigan Independent Telephone & Traffic Association of Grand Rapids, and Charles E. Tarte, alleged to be its general manager, from charging telephone rates as fixed by the postmaster general. From a decree granting the injunction the case is brought here by appeal.

The opinion recently handed down by this court in Attorney General v. Michigan State Telephone Co., ante, 372, is controlling here. It is not necessary to repeat what was there said.

The decree of the court below is reversed and the bill of complaint is dismissed, but without costs to either party.

Bird, C. J., and Steere, Brooke, Fellows, Stone, and Kuhn, JJ., concurred. Ostrander, J., did not sit.


author: Stone, J.

text:
    FREEMAN v. MITCHELL.
    1. Corporations — Mortgages—Validity—Directors—Fraud.
    Where money represented, by demand notes was lent to a corporation in good faith, the lender or his personal representatives had a right to demand and take security from the corporation for its repayment, even if the directors had some ulterior or sinister purpose in borrowing the money and in giving the mortgage.
    2. Same — Evidence of Indebtedness — Secretary—Implied Powers —Recital in Mortgage.
    Where the mortgage given to secure the demand notes recited that it was authorized by the directors, and the minutes also recite and admit the debt secured, any implied power of the secretary of the corporation to execute the notes in question was immaterial.
    3. Same — Mortgages—Assignments.
    A mortgage given by the directors of a corporation to secure demand notes given from time to time for money borrowed, helé, not an assignment within the meaning of the articles of association providing that no assignment of the property of the company for the benefit of creditors should be made by the directors unless authorized by a majority vote of all the stock issued.
    4. Same — Mortgages—Validity—Notes Indorsed by Directors.
    Said mortgage was not invalid simply because it secured the payment of notes indorsed by the directors.

      5. Same — Foreclosure—Price Bid.
    The contention that the price hid at the foreclosure sale was inadequate, helé, not supported by the evidence.
    6. Wills — Bequest—Construction oe Will.
    A bequest of $400,000, to be satisfied by the assignment of evidence of indebtedness from a corporation to testator, held, not a bequest of all amounts owing to testator by said coficern, but limited to the amount specified.
    7. Corporations — Mortgages—Foreclosure— Stockholder’s Suit to Set Aside.
    In a stockholder’s suit to set aside the foreclosure of a mortgage given by the directors of a corporation on the ground that the mortgage indebtedness was in whole or in part fictitious, his right to relief depends upon some proof that the debt was not created at all or was created for some evil purpose shared by the mortgagee and the directors.
    Appeal from Hillsdale; Hart (Burton L.), J., presiding.
    Submitted April 15, 1919.
    (Docket No. 38).
    Decided May 29, 1919.
    Rehearing denied July 18, 1919.
    Bill by Amariah F. Freeman against Charles T. Mitchell and others, executors of the estate of William W. Mitchell, deceased, the Alamo Manufacturing Company and others to set aside the foreclosure of a mortgage against the defendant corporation. From a decree dismissing the bill, plaintiff appeals.
    Affirmed.

      F. M. Freeman (Frank E. Jones and A. F. Freeman, of counsel), for plaintiff.

      F. A. Lyon (Gaffney, Miltner & Millington, of counsel), for defendants.
   Stone, J.

From an order dissolving a temporary injunction and denying a motion to dismiss the bill, cross-appeals were taken in this case, and the order below affirmed. Freeman v. Mitchell, 198 Mich. 207. The cause has been heard upon the merits and from a decree dismissing the bill the plaintiff appeals. In his brief he says that he adopts,—

“in the most part, the concise and admirable ‘Findings of Facts,’ of the trial judge * * * except, in the few instances here noted, where we think the fact is really slightly different in the proofs or shaded somewhat differently than stated in such ‘Findings/ or, in a few instances, stating omitted facts not appearing in the findings, which materially bear upon the issues here in suit.”

The findings of fact referred to, filed July 23, 1918, are the following:

“This is an action commenced by the plaintiff to have certain mortgage foreclosure proceedings set aside, and the mortgage, which was the basis for the same, held for naught..
“The bill, in substance, alleges that the claimed, mortgage indebtedness was, in whole or in part, fictitious; that the property, covered by the mortgage, was bid off at an insignificant figure; that the whole transaction was based upon fraud, and was the result, of conspiracy.
“The court finds the following facts to be established on the hearing:
“1. That on April 25, 1901, the Alamo Manufacturing Company, of Hillsdale, Michigan, was incorporated with the capital stock of $25,000, divided into 2,500 shares each of the par value of $10; that $24,500 of the capital stock was paid for and the term of the corporation was to be for a period of 30 years; the articles of incorporation also contained the following: ‘Article 6% — No assignment of the property of this company for the benefit of creditors, shall be made by the board of directors, unless the same shall first have been authorized by a majority vote of all the stock issued.’
“2. That in 1902, the capital stock was increased from $25,000 to $75,000. In February, 1903, the capital stock was increased from $75,000 to $150,000. In August, 1903, .the capital stock was again increased from $150,000 to $200,000, divided into $50,000 preferred stock and $150,000 common stock. In January, 1904, the capital stock was increased from $200,-000 to $500,000, of which $350,000 was common stock and $150,000 was preferred stock. In 1907, the capital stock was again increased from $500,000 to $600,-000, of which $350,000 was common stock and $250,-000 was preferred stock. All of the preferred stock, or at least outside of the very commencement, was to pay 7 per cent, on the investment, with interest to be paid semi-annually. That no changes were made in the amount of the capital stock since its increase to $600,000.
“3. That all of the money realized from the sale of such common and preferred stock as was sold was used in the conduct of the business by the company, there being no evidence that any of it was diverted to outside channels.
“4. Plaintiff, in 1908, became the owner of $3,000 common stock and $1,000 preferred stock, having acquired the same from Franklin Bushman at a cost of $2,800, or thereabouts. At time of, or just previous to his purchase, which was after all increases of capital stock had been made by the company, plaintiff learned the preferred stock was paying dividends, but the common stock was not. Plaintiff received 7 per cent, dividends on his preferred stock until September, 1913, when the company failed to pay any dividends on its preferred stock, and it has never paid any thereon since that time.
. “5. The company started to manufacture gas engines, that being the purpose of its incorporation. It seemed to be in its experimental stage and kept using in the business and for the payment of dividends, the money derived from the business and the sale of stock, and what it could borrow, until 1909 or 1910. At these later dates, it had exhausted its credit with local banks and local men and was greatly in debt, and Mr. Wade, of the company, went to Cadillac, Michigan, to see one W. W. Mitchell, an old resident of Hillsdale and a brother-in-law of Dr. W. H. Sawyer, who is director and stockholder of the company.
“6. W. W. Mitchell, from or about 1909 or 1910, began to loan the company money and various sums from time to time, until at the time of his death, which was November 8, 1915, the Alamo Manufacturing Company owed him, on demand notes, for money loaned, the sum of $797,500; on book accounts, $89,719.78; and money loaned through his agent, designated as the Hillsdale Investment Company, $64,-955. The mortgage notes were all signed by the Alamo Manufacturing Company, and indorsed by the directors of the company, among the indorsers being Dr. W. H. Sawyer, and Frank A. Lyon, the attorney hereinafter referred to. Since the death of W. W. Mitchell and up to this time, the executors of his estate have loaned the company other money, and paid all of its known creditors, advancing therefor the sum of $207,19.8.85, making the sum total paid out by W. W. Mitchell and his estate for the use of this company, the sum of $1,109,373.63. There is no evidence that this money was not received and used by the company, and it would appear to me, if Mitchell had not come to the rescue, dividends would not have been paid on the preferred stock as long as they were, and all of the stock would have been worthless long before it was.
“7. W. W. Mitchell was not a director of the company and never bought any stock in the company, but after he began to loan to the company, one $10 share of stock was sent to him as a Christmas present.
“8. Annual reports were filed with the secretary of State, that from 1906 to 1915, those produced on the hearing were not all correct; the first few of these reports show an indebtedness to Dr. Sawyer and his wife, who were also directors of the company, but the later ones did not, and none of them showed the Mitchell indebtedness; Mitchell, or his estate, had nothing to do with these reports, nor does the evidence establish that he, or his estate, had any knowledge of them, or their contents.
“9. An effort was made, from time to time, by W. W. Mitchell to collect, or at least reduce his indebtedness; this was unsuccessful up to, at least, the time of his death. On October 14, 1913, the company authorized a $400,000 Bond issue, executed by a trust mortgage, its object being to take care of the Mitchell indebtedness, or at least a portion of it, and the trust mortgage was at. once put on record, but after consultation with the then attorney general, the Honorable Grant Fellows, who by virtue of the law, was also a member of the Securities Commission, the company was informed the attorney general would not consent to this issue, and the bonds were not delivered.
“10. After the death of W. W. .Mitchell, and on January 10, 1916, a mortgage in usual form was executed and delivered by the Alamo Manufacturing Company in the sum of $250,000, and for the purpose of securing $250,000 worth of these demand notes. This mortgage covered all of the real and personal property of said company. The mortgage provided that if default was made in the payment of the $250,-000 and interest for a period of ten days, all due thereon should at once be due and payable. The board of directors held a meeting at the home of Frank A. Lyon, on January 10, 1916, Mr. Lyon being an attorney and having been ill, which resulted in the meeting being held at his home. The company had twelve directors, but some two or more had resigned, and this meeting was attended by eight directors of the company, and among those present being Dr. W. H. Sawyer and Frank A. Lyon, the attorney. The directors who were present all voted for and signed the resolution which authorized the mortgage. The mortgage had already been prepared by Attorney Lyon and was executed at the close of the meeting. At the time the_ mortgage was given, Attorney Frank A. Lyon, acting for the Mitchell estate, was holding 19,787 shares of stock as trustee for all the stockholders. This came about when the capital stock was increased, and this increase was voted to the stockholders as a declared dividend; and became trustee-stock held by Mr. Lyon, as trustee, to be under the control of the board of directors for the benefit of the company. Attorney Lyon was also a director 'of the company at the time of the execution of the mortgage, and was also an indorser on some, if not all, of said notes, and he acted for the Alamo Manufacturing Company at the time, in the preparation of the mortgage, and Mr. Lyon had acted for it as an attorney, on previous occasions, but he had no regular retainer fee from the company, and only acted as its attorney when called upon to do so. At this same meeting the $400,-Ó00 bond issue was taken up and the bonds ordered destroyed and the trust mortgage to be released of record, which was afterwards done; the mortgage in question was acknowledged before Frank A. Lyon, as notary public, was witnessed by F. A. Lyon and George E. Tubbs,' both being stockholders and indorsers on said notes. This mortgage was put on record January 11, 1916, by William Prideaux, another stockholder and director of said company, and also an indorser on said notes, and now in the employ of the Alamo Engine Company, which is a successor to the former company. After the mortgage was recorded, Mr. Prideaux delivered the mortgage to the executors of the Mitchell estate. As far as Mr. Lyon recollects, this mortgage was handed to him or delivered to him for foreclosure by either Dr. Sawyer or Mr. Prideaux.
“11. March 1, 1916, proceedings were commenced in the Hillsdale circuit court, in chancery, to foreclose said mortgage, the proceedings being instituted by the executors and executrix of the Mitchell estate, with Frank A. Lyon, as their attorney. In May, 1916, a decree was made in said matter finding the amount due and if not paid, ordering the premises sold. This was a default decree, the defendant, the Alamo Manufacturing Company, not appearing, service of summons having been made on William Prideaux, manager and president of the Alamo Manufacturing Company at that time. On October 23. 1916, the property covered by the mortgage was sold under said decree and was bid in by the executors and executrix of the W. W. Mitchell estate in the sum of $289,000, that being the amount for principal, interest, and expenses due to that date. No bidders bid on it, except Mr. Lyon, who was acting for the Mitchell estate. The Mitchell estate would háve bid $300,000 but no more for the property. No defects are pointed out in the evidence in the regularity of the proceedings or sale. Redemption period extended to April 23, 1917. No redemption took place. After this sale, the board of directors, and I think it was on November 25, 1916, passed a resolution leasing the property or at least authorizing the Mitchell estate to operate the plant during redemption period for $500 a month. This rental money was to be credited on other indebtedness owing to the Mitchell estate by the Alamo Manufacturing Company. No evidence was offered to show the bid of $289,000 was not the fair value of the property sold. But I will now (August 2, 1918) amend this finding and additionally state that the report of the company to the secretary of State for 1915, shows:
Real estate used in its business was valued at ...................................... $63,141.28
Goods, chattels, merchandise, material and other tangible property .................. 191,620.12
Cash on hand, including deposit in banks.. 212.10
Patent rights, copyrights, trademarks and formulas ................................ 51,116.85
Good wiU ................ 114,208.13
Value of credits owing to the corporation... 98,322.64
And a total of .......................... $517,621.12
“12. After this, another lease was made by the directors of the Alamo Manufacturing Company leasing to Charles T. Mitchell certain real estate of the said, company, which had been covered by the said mortgage. The purpose of this lease was to allow the Mitchell estate to erect some hew additions on the land which they had bid in at the sale, and to provide that if the Alamo Manufacturing Company redeemed, from the mortgage sale, the Mitchell estate could have the benefit of these buildings for twenty years from the date of redemption by the payment of an annual rental of $1,000. This lease was to be operative if the premises were redeemed, and void if the premises: were not redeemed. If the premises were redeemed,, the rent was to be applied on paying the other indebtedness belonging to the Mitchell estate. After the execution of the lease mentioned in this paragraph of the findings, certain expensive buildings have been Built and improvements placed on the premises by either the Mitchell estate, or the Alamo Engine Company, or by both.
“13. Certain preferred stock was redeemed during the life of the company to the amount of about $8,000. This stock was redeemed by virtue of an agreement given with it at the time it was sold giving the buyer the option to have his money back within certain periods from the time he bought it, and this redemption money was paid out in accordance with said agreements.
“14. On May 10, 1917, a resolution was passed by the board of directors, which resolution was to dissolve the Alamo Manufacturing Company; this meeting was held in the office of attorney Lyon. No further proceedings were taken toward the dissolution except the sending of the notice of dissolution to the secretary of State and receiving a registry receipt from him.
“15. Wm. W. Mitchell left a will, dated September 24, 1910, and paragraph six of said will being, in substance, as follows:
* " ‘Paragraph Sixth. Bequest to Walter H. Sawyer and Harriet Belle Sawyer, his wife, both of Hillsdale, Michigan, jointly, or to the survivor of the twain if one, and one o*nly, of the twain shall survive me, the sum of $400,000 the same to be made and paid from my estate, or the income therefrom, and at such time or times as my executors may deem for the best interest of my estate, and as shall be equitable considering my directions herein in relation to other bequests and provisions relative thereto, as herein severally provided. But in the payment of this bequest, I will and direct that if at the time of my death I shall own, hold, or be obligated upon any evidence of indebtedness owing by the said Walter H. Sawyer or the said Harriet Belle Sawyer, or by any co-partnership, company, corporation, or concern, in which the said Walter H. Sawyer and the said Harriet Belle Sawyer, or either of them, is interested as co-partner, owner, stockholder, proprietor, or part proprietor, then any and all such evidence of indebtedness shall, as soon as may be after my death, be by my executors properly assigned and turned over to the said Walter H. Sawyer and Harriet Belle Sawyer, or to the then survivor of the twain, if such survivor shall survive me, and the face value of such evidence of indebtedness with any accumulated interest thereon, be applied upon treated as payment, to the extent of such face value, and interest, of the bequest in this paragraph sixth provided for.’
“16. I further find that Dr. W. H. Sawyer and wife both survived W. W. Mitchell, and that Dr. W. H. Sawyer was made one of the executors of said will> and that $400,000 of said Alamo Manufacturing Company notes have been set aside and listed for Doctor and Mrs. Sawyer by the executors and the executrix to pay the said legacy which is mentioned in said will, but have not yet been turned over to them.
“17. The affairs of the Alamo Manufacturing Company have been continued by the Mitchell estate and the Alamo Engine Company, respectively, since the sale, with the same working force and in the same office as before.
“18. The Alamo Engine Company was organized July 10, 1917, for a period of thirty years with a capitalization of $350,000, of which $300,000 is common stock and $50,000 is preferred stock. The stock has all been subscribed for, and the $300,000 of the common stock was paid for by turning in the property of the Alamo Manufacturing Company, and of' the $50,000 preferred stock, $35,000 was paid in cash. The stockholders of the new company are Charles T. Mitchell, who has 1,000 shares of common stock and five hundred shares of preferred stock of the par value per share of $100; Ella Y. Mitchell has 1,000 shares of the common stock, and Marie Mitchell Berris has 1,000 shares of the common stock.
“19. Plaintiff never attended a stockholders’ meeting, or a board of directors’ meeting, since he acquired the stock. He made an investigation before he bought his stock, and thought the company was a good concern, and from time to time after lie owned his stock he examined the annual reports on file at the county clerk’s office when he happened to be in Hillsdale, which was once or twice a year. He knew of the cessation of his dividends on his preferred stock at the time they ceased.”

’ Findings of law were also filed, reading:

“1. One of the first questions that presents itself is whether or not this mortgage was, in fact, a mortgage or, in fact, an assignment. The plaintiff contends that the instrument given here was, in effect, an assignment and prohibited by the articles of association, without it was authorized by the stockholders. I find that the instrument given was not an assignment but that it was a mortgage. It has all the terms of a mortgage, and it provided for a payment within ten days and had all of the rights reserved to the mortgagors that are usually contained in mortgages. If it had been an assignment it would have passed the property over at once, without any power of statutory sale or without any right to redemption and the other incidents that follow mortgages. I think, under the Michigan decisions and the facts in this case, that this instrument was a mortgage, and I think this is controlled by the case of Cluett v. Rosenthal, 100 Mich. 193.
“2. The evidence in this case fails to convince me that the indebtedness covered by the mortgage was fictitious. In fact, all of the evidence shows that the Mitchell estate now has over one million dollars in this Alamo Manufacturing Company by way of loans and' paying all of its outstanding indebtedness, and as far as I can determine, have advanced the money in good faith and to try and enable the company to make a success. There is no proof that this was a gift because notes were taken for the loans. There is no proof that the company did not have the money unless it would be considering the annual reports as proof and as to those the Mitchell estate would not be bound as there is no proof that either Mr. Mitchell in his lifetime, or his estate, had any knowledge of these reports, or their contents. The Alamo Manufacturing Company having had the benefit of the loans, it would seem unfair now to say that the claims of the Mitchell estate are fictitious.
“3. As to the property being sold at an insignificant figure, there is no evidence that the property did not bring all it was worth unless it might be said that the Mitchells would, if forced to, have paid $300,-000 for it. On such a sale as this, in size, a variation of $10,000 would not show that the property brought an insignificant figure, and even if the sale was now set aside and the property would now bring $300,000, and there is no evidence that it would bring more than that, the interest on the $289,000 from then until now would more than make up this difference.
“4. I do not find the evidence establishes conspiracy or fraud. _ If the Mitchell estate had been working and scheming to get this property, instead of making the mortgage for $250,000, they would have made it for a much larger amount, in fact, so large an amount that there would have been no possibility of any one buying it at the sale, but it would seem to me the Mitchell estate desired its money more than anything else for they only made the mortgage for what they thought it would bring, and the evidence shows that they would have been willing to have taken $300,000 and let the property go and lost their other indebtedness. So, under these facts. I cannot find a conspiracy. Neither am I able to.find fraud. It is true the facts on their face and unexplained might look suspicious. However, when the facts are explained, they sound reasonable and logical, at least, to me. There was a company heavily in debt, and being crowded by its creditors, it might hope, in ten days, to be able to stave off the matter, or it would know that before the premises were sold by foreclosure proceedings it would take some time, and it might hope that in that time, things would turn for the better, or that the property would bring a better figure at the sale. Under all these circumstances, I cannot say that the directors did not act in good faith. Under the rule, fraud is not to be lightly inferred but must be proven like other facts, it does not seem to me that plaintiff has complied with this rule. All of the increases in stock were made before those loans took place. It is true that some of the reports to the secretary of State were not correct, but no creditor has been injured, as every one has been paid in full, except the notes held by Dr. Sawyer and his wife, and they are not complaining in this suit. As to the stockholders, their money was already in, and the reports did not cause them to make their investment, and there has been no showing that the reports injured them. In fact, I think that Dr. Sawyer and Mr. Lyon, and some of the others, made every effort to make the company a success and try and make it pay out. Dr. Sawyer advanced his own money on several heavy loans. I think they did all they could until forced to meet the obligations. If the board of directors acted in good faith, I understand their action binds the company. I cannot find they did not act in good faith. If the company had made a success, no stockholder would have complained, because it did not, it is to be regretted, but it is a chance that all stockholders take when they go into an enterprise.
“5. If the sale should be set aside and a receiver was appointed to take charge of the matters and the property resold, and if it should bring $11,000 more than it did, it would seem to me these assets would fail to meet the $750,000 of the Mitchell indebtedness outside of the mortgage indebtedness, and if the assets have to be used first to pay the debts, the assets would be exhausted and the stockholders no better off than they are now. In fact, I think the stockholders gained because they received dividends on their preferred stock from 1909 or 1910, to the latter part of 1913, which would not have happened, in my judgment, but for these loans. I think under all the evidence the company would have been the subject of bankruptcy long before, but for W. W. Mitchell. It is true that some other directors might have done better, but if those in charge did the best they could and used their best judgment, I do not think they are to be blamed.
“6. Quite a little is said in plaintiff’s brief about the Supreme Court refusing to dismiss the bill on a motion and plaintiff contends that makes the law of this case. I agree with him that the Supreme Court has spoken and when they have spoken, it is the law of this case, but I read the opinion of the Supreme Court different than is claimed for by the plaintiff. The Supreme Court sáys the bill is good providing you establish the allegations in the bill, and among the allegations in the bill were that the indebtedness in the mortgage was without consideration, that the mortgage was fictitious, and that it was obtained by fraud. _ These were, as I view it, to be determined by the trial court under the evidence, and if the trial court found the evidence sustained the allegations of the bill, the bill would lie. I do not think the evidence sustained the allegations in the bill.
“7. The plaintiff carried the. burden of proof to establish his allegations, and' I do not think the plaintiff has done this.
“8. I think the bill of complaint should be dismissed but I think it should be without costs because, as I said before, the facts unexplained might lead one to think that there was fraud, and I think for that reason, the plaintiff should not pay the costs.”

Later, a petition for a rehearing and to permit an amendment of the bill was filed, and further findings were made and filed September 9, 1918, which are:

“A motion having been made for leave to file an amended bill of complaint and to have the case reopened, and having been granted, and the proofs having been taken and concluded on the amended bill of complaint and pleadings, the court finds that the will of the late Mr. Mitchell did not transfer all of the notes in question to Dr. W. H. Sawyer and wife.
“The court therefore finds that there was a consideration for the mortgage in this case, and his former findings in the case with this supplemental finding constitutes the court’s entire findings in the case.
“The court, therefore, concludes that it should not change its former opinion, and that therefore the bill of complaint may be dismissed but without costs.”

We are not impressed, and evidently counsel for plaintiff is not, that if the slight amendments to the findings suggested by him were made the issue would be in any manner changed or any different rules of decision be made applicable. What plaintiff really challenges are the legal conclusions which the court bases upon the facts found.

Although a rather complete statement of the nature of the suit, the charges made in the bill, and the relief prayed for will be found in the opinion of the court above referred to, it will be of value, at least will be convenient and tend to an understanding of this opinion to set out, briefly, and in a general way, some matters included in and some supplementing the findings made by the learned trial judge.

Organized in 1901, with a capital stock of $25,000, the Alamo Manufacturing Company had increased its capital and capital stock until, in 1907, the capital stock was $600,000 — $350,000 common and $250,000 preferred. Its place of business was Hillsdale, Michigan. It was in 1908 that plaintiff became owner of $3,000 of common arid $1,000 of preferred stock, paying for it about $2,800. The common stock was not paying dividends, the preferred paid- 7 per cent, and plaintiff received his dividends until September, 1913, when a dividend on the preferred stock was passed, and none has ever since been paid. The only annual* report of the corporation to the secretary of State appearing in the printed record purports to show the condition of the company December 31, 1915. It is therein recited that the subscribed stock is, common, $343,084; preferred, $161,570; all paid in in cash. The values of property recited therein are—

Real estate used in its business.......... $62,141.28
Goods, chattels, merchandise, material and other tangible property ................. 191,620.12
Credits owing to the corporation.......... 98,822.64
Cash on hand ............................. 212.10
Besides this, patent rights, copyrights, trademarks and formulas are valued at...... 51,116.85
Good will at .............................. 114,208.13

All liabilities are given as $212,569.57, none of which is secured by mortgage.

On the 10th day of January, 1916, the corporation gave a mortgage to the estate of W. W. Mitchell for $250,000, covering, in its terms, all of its real and personal property. It contains, by recital, a list of promissory notes theretofore given by the corporation to Mr. Mitchell, aggregating $250,000, each note bearing 6 per cent, interest, all payable on demand. The earliest note is one for $20,000, dated February 25, 1911, five others were dated in 1912, five in 1913, four in 1914, four in 1915. It is a condition of the mortgage that the said sum and interest be paid as demanded by the party of the second part, and if not paid within ten days the whole sum is made to be due and payable immediately. The mortgage is signed by the corporation by its president and secretary, with the corporate seal, and it was recorded January 11, 1916, in the office of the register of deeds for Hills-dale county. A tax of $1,250 was paid. Mr. W. W. Mitchell had died November 8, 1915, and it is recited in the mortgage that the representatives of his estate demanded payment of the money or security by way of a first mortgage on the property, real and personal, of the corporation. If the records of the corporation, the notes produced in evidence, and the testimony offered upon the subject, are to be believed, the recital in the mortgage of demands owing to Mr. Mitchell did not include all outstanding notes.

It was the claim of the defendants made at the hearing that notes then outstanding amounted to $797,000, there being $547,500 of notes not included in the mortgage, all of which represented advances made by Mr. Mitchell or his estate to the corporation. It was a further contention that the additional sum of $207,198.85 was paid by the estate of Mr. Mitchell to general creditors of the Alamo Manufacturing Company. The notes, payment of which was secured by the mortgage, were indorsed by directors of the Alamo Manufacturing Company.

In March, 1916, proceedings were instituted in the circuit court for the county of Hillsdale, in chancery, to foreclose the mortgage by representatives of the Mitchell estate. A decree, pro confesso,' was taken in May, 1916. The property was sold, under the decree, October 23, 1916, to the representatives of the estate for $289,000, the amount of principal, interest and expenses of foreclosure due at that date. The redemption period extended to April 23, 1917. There was no redemption. In May, 1917, 'the directors, by resolution, dissolved the corporation. No other proceedings to this end were taken, but notice of'the dissolution was sent to the secretary of State.

Without using the imagination, it may be assumed that stockholders of this corporation who had no knowledge of this very large indebtedness to Mr. Mitchell, no part of which had ever been mentioned in the annual and verified reports of the corporation, who had never been consulted or advised with about the conduct of the business, were amazed at and felt outraged by the conduct of the board of directors, which had apparently stripped the corporation of property and made the shares of its stock worthless. Plaintiff has sought in this suit a remedy. He charges in. his bill:

“41/2. That at the time said mortgage was given as aforesaid, as plaintiff is informed which he believes to be true, William Prideaux was president and treasurer of said defendant company, W. H. Sawyer was its vice-president, and T. M. Sawyer (son of said W. H. Sawyer), was its secretary,, and that its board of directors at that time consisted of Aaron.Worthing, F. M. Stewart, C. E. Singer, Frank A. Lyon, M. D. O’Meara, William Prideaux and W. H. Sawyer; and that said Frank A. Lyon was and had been for a long time prior thereto, its attorney and adviser and generally recognized as such attorney and adviser.
“5. That at or before the time that the said mortgage was given as aforesaid, as this plaintiff has been informed which he believes to be true, no stockholders’ meeting of defendant company had been called for the purpose of authorizing the giving of that mortgage nor had any notice been given to the stockholders generally of a meeting called for such a purpose, at least plaintiff positively avers none was given to him; and when such mortgage was given as aforesaid, as plaintiff is also informed and which he believes to be true, none of the general stockholders knew anything about the giving of such mortgage nor that there was any occasion or necessity therefor, at least this plaintiff had no such knowledge nor did he know anything •about such mortgage until the month of August, 1916, as hereafter stated, nor did the general stockholders of defendant company, to this day, know of such mortgage as plaintiff verily believes. And, in this connection, plaintiff avers and charges, as he is advised which he also believes to be true, that in the giving of the mortgage by the president and secretary of defendant company, acting under the authority of its board of directors, and without the permit and authority of a regular convened meeting of its stockholders and the requisite number voting therefor was wholly without sanction of law, was unlawful and utterly void- and illegal and was a fraud upon the stockholders and this plaintiff.
“6. That on or about the 1st day of March, 1916, within the short space of 50 days from the time that that mortgage was given to said executors and executrix, they filed their bill of complaint in this court seeking to foreclose such mortgage and claiming at that time that there was $269,808.37 for-principal and interest due upon that mortgage and adopting the legal general or usual form and procedure incident to such a proceeding, as will appear by the files and records, of this court in such respect, reference being had thereto and made to form a part hereof for certainty. And', that such proceedings must have been conceived and; inspired as this plaintiff avers and charges, on information and belief for a considerable time before ¡said bill for foreclosure was filed and as this plaintiff also charges on information and belief same was at the very time the mortgage was given, and was therefore a species of fraud and conspiracy to cheat and defraud the general stockholders and this plaintiff and cut them and him off from further connection or relation to the properties of this defendant company and was likewise highly reprehensible and improper to be done. That said Frank A. Lyon appeared in that foreclosure proceedings, as the attorney of record for the plaintiff mortgagees in such foreclosure proceedings and that service of the writ of subpoena issued in that cause was had upon said William Prideaux, as treasurer of the defendant company and that he nor any one in behalf of the defendant company made no appearance whatever to such foreclosure proceedings nor entered any defense or protest thereto, but, rather, suffered default thereon and full sanction thereof, and whereupon the regular or usual pro confesso order of default was entered, all of which will also appear by the records and files of this court in that cause to which reference is also made to form a part hereof. * * *
“And, in this connection, plaintiff avers and charges, upon information and belief which he believes to be true, that there is no such amount as stated properly as mortgage indebtedness nor as proper decree obligation against defendant company and that such mortgage is fraudulent and was ‘conceived in sin and brought forth in iniquity’ to cheat and defraud the stockholders of defendant company and gain titles away from defendant company and its stockholders and to the person or persons whom they might select or name to become the bidder or bidders at a foreclosure sale proceeding under such mortgage, well knowing that the small individual stockholder would not and would, in fact, be unable to protect himself against such a foreclosure proceeding, and thereby gain the title and ownership at an insignificant figure in comparison to the value of the property covered by the mortgage and it ought not to stand, for that reason and for the other reasons heretofore averred, as a binding obligation and instrument against defendant company to deplete and impair the value of the. stockholders’ certificates of stock in that company.”

He charges, upon information and belief, that the mortgaged property was worth about $700,000. He prays for a decree setting aside the mortgage—

“(c) That the said decree of foreclosure be vacated; or, at least, plaintiff be permitted to make answer to the foreclosure bill of complaint, and, if necessary, that this bill of complaint may be regarded as a bill of revivor or review or in the nature thereof, or of such equity proceeding as this court shall decree just and equitable to preserve the rights of plaintiff.
“(d) That the sale made under said foreclosure proceedings upon said October 23, 1916, be set aside, vacated and altogether held for naught”;

—that the circuit court commissioner’s deed be canceled, and for other, including general, relief.

We held in Freeman v. Mitchell, supra, that the bill ought to be retained, answered and proofs taken, overruling the motion to dismiss. We are called upon now to determine whether the proofs sustain the charges made in the bill.

It must- be kept in mind that plaintiff’s position, from and on account of which he seeks a remedy, is the position of owner of the stock of the Alamo Manufacturing Company, the management of which company was annually committed by the stockholders to a board of directors. He has made the representatives of the Mitchell estate defendants, joining with them, as defendants, the Alamo Manufacturing Company and William Prideaux, Aaron Worthing, C. E. Singer, Frank A. Lyon, M. D. O’Meara, Frank M. Stewart and Walter H. Sawyer, who were directors of the Alamo Manufacturing Company when the mortgage was given.

The apparent position of the representatives of the Mitchell estate is an honest one. If it is admitted, or assumed, that Mr. Mitchell, having no sinister purpose, lent the money represented by the notes described in the mortgage to the Alamo Manufacturing Company, his right and that of his personal representatives to demand and take security from the Alamo Manufacturing Company for its repayment is clear. This is so even if the defendant directors had some ulterior or sinister purpose in borrowing the money and in giving the mortgage. And if no legal wrong was committed in giving and taking the security, or in enforcing it, there is nothing with which plaintiff may charge the representatives of the Mitchell estate which contributed to his loss. If the representatives of the Mitchell estate are discharged, all defendants must be discharged in this action, because there is no foundation in the pleadings for any judgment for plaintiff against the defendant directors. No theory has been advanced according to which plaintiff can cdmpel those defendants to restore the assets of the company or to recompense plaintiff.

If we understand the positions taken by plaintiff, they may be stated as follows: First, Mr. Mitchell did not lend the Alamo Manufacturing Company the money evidenced by the notes described in the mortgage; second, the notes do not appear to be given by authority, having been executed by the secretary of the corporation; third, the mortgage was in effect, in law and fact, an assignment for the benefit of a creditor, forbidden by article No. 6% of the articles of association of the corporation in the words,—

“No assignment of the property of this company for the benefit of creditors, shall be made by the board of directors, unless the same shall first have been authorized by a majority vote of all the stock issued”;

—fourth, the mortgage secured notes indorsed by directors of the corporation; fifth, the property was sold for an inadequate sum; sixth, all of the notes and evidences of indebtedness to Mitchell were by his will bequeathed to and became the property of Walter H. Sawyer and his wife Harriet, and were therefore not the property of the Mitchell estate.

Let us examine these points in their order.

First. We expected, naturally, that plaintiff would point out the evidence sustaining this position. He has not done so. The evidence, documentary and oral, supports the finding of the trial court. It supports, also, the finding that the money was, in some way or other, used in the business of the corporation.

Second. Defendants need not rely upon any implied power of the secretary of the corporation to execute the notes. They are listed in- — described in — the mortgage, and the mortgage was authorized by the directors, whose minutes, also, recite and admit the debt secured.

Third. The mortgage was not an assignment within the meaning of the. articles of association. Evidently, the articles distinguish an assignment from a mortgage. The notes secured were demand notes. They were outstanding and had been given from time to time. The instrument executed to secure payment of the notes necessarily secured payment of them according to their terms unless otherwise provided. It is in form a mortgage. The evidence that an assignment, an immediate passing of title, was intended is not persuasive.

Fourth. The mortgage was not invalid simply because it secured the payment of notes indorsed by the directors. Webster v. Ypsilanti Canning Co., 149 Mich. 489. No creditor of the corporation is complaining.

Fifth. The evidence does not sustain the contention that the property was sold for an inadequate price. The purchasers would have given $300,000 if there had been other bids requiring so much to be given. There were no bidders other than the mortgagees. It is true that the reports of the corporation represent the value of all the assets to be considerably more than the sum bid at the sale. It is also true that the values put upon patents and good will are to be distinguished from the values of tangible property. The good will of a bankrupt concern cannot be accepted at the valuation put on it by optimistic or dishonest officials of the concern. In December, 1915, the value of tangible assets, including credits, was fixed in the annual report at $252,296.14.

Sixth. We construe the sixth paragraph of the will of Mr. Mitchell as bequeathing to Mr. Sawyer and his wife, or the survivor, $400,000, and no more. This bequest might be satisfied by delivering to the legatees $400,000 of the paper of the Alamo Manufacturing Company owned by Mr. Mitchell. It did not become a bequest for $500,000 or $700,000 because at the time of his death Mr. Mitchell held so much of the paper of the company. ' The court found, upon undisputed evidence, that the representatives of the estate have selected demands due Mr. Mitchell from the defendant corporation to the amount of $400,000, to be used in discharge of the legacy.

We have not overlooked any of the circumstances pointed out by plaintiff as creating suspicion and perhaps affording apparent foundation for the charges of dishonesty made against defendants. We may agree with him that open and fair dealing required that the directors of this corporation should make and issue to stockholders a true statement of the affairs of the corporation, giving them — the stockholders — opportunity to determine whether to continue the borrowing of large sums of money or to dissolve the corporation, saving whatever sum it was possible to save. We may agree that the continued financing of the business by Mr. Mitchell is not to be explained by any ordinary rules of sound finance. The situation remains, and, as has been already said, in the last analysis plaintiff’s right to relief depends upon some proof that the debt was not created at all or was created for some evil purpose shared by Mr. Mitchell and' the directors. This proof is not supplied by showing mere business carelessness of the lender of the money or blind optimism or desperation of the directors. And it may be that Mr. Mitchell, having carelessly lent a large sum of money likely to be lost, was himself imbued with the idea that perhaps further advances would enable the corporation to succeed. We are impressed that for the most part the findings of the circuit court are sustained by the evidence, and the conclusions drawn inevitable.

The decree appealed from concludes with these words—

“That the plaintiff having proceeded in good faith in this cause, and the situation here complained of having been created by the defendants, shall recover costs to the amount of thirty-five dollars.”

We affirm the decree; but in the face of this record are impressed that defendants should recover from plaintiff one taxable solicitor’s fee and the cost of printing the brief.

Bird, C. J., and Moore, Steere, Brooke, and Kuhn, JJ., concurred. Ostrander, J., did not sit. Fellows, J., took no part in the decision.


author: Ostrander, J. Brooke, J. Fellows, J.

text:
    ATTORNEY GENERAL v. BOLTON.
    1. Justices of the Peace — Constitutional Law — Cities—Time of Electing Justices — Delegation of Power to Change.
    Under section 21, art. 8, of the Constitution, the legislature has authority by general law to delegate to cities the power to determine the time and manner of nominating and electing justices of the peace. Per Osteandee, Moobe, Steeee, Brooke, Stone, and Kuhn, JJ.
    2. Same — Detroit Charter.
    Under 1 Comp. Laws 1915, § 3331, as amended by Act No. 275, Pub. Acts 1917, the city of Detroit had authority to determine, by its charter, the time and manner of nominating and electing justices of the peace, they being local officers and their selection a matter purely of local concern. Per Osteandee, Moore, Steere, Brooke, Stone, and Kuhn, JJ.
    3. Same — Appointment to Pill Vacancy — “General Election.”
    Section 27, Act No. 475, Local Acts 1903, authorizing the . common council of the city of Detroit to fill a vacancy in the office of justice of the peace “until the next general election,” does not limit said term to the general election held in November of the even years, but, the office in question being a judicial one, the spring election at which justices of the Supreme Court, regents of the university, and other State officers are elected, is a “general election” for the election of judicial officers. Ostrander and Moore, JJ., dissenting.
    4. Same.
    Where defendant in quo warranto proceedings was, on January 7, 1919, appointed to the office of justice of the peace in the city of Detroit to fill a vacancy until the next general election, his term of office was terminated by the election of his successor at the general spring election held on April 7, 1919.
    Quo warranto by Alex. J. .Groesbeck, attorney general, against Edwin C. Bolton to try the title to the office of justice of the peace in the city of Detroit.
    Submitted June 13, 1919.
    (Docket No. 105.)
    Judgment of ouster entered July 17, 1919.

      Alex. J. Groesbeck, Attorney General, Leland W. Carr and Thomas G. Baillie, Assistants Attorney General, for plaintiff.

      Allan P. Cox, for defendant.

      Clarence E. Wilcox, Corporation Counsel, and Vincent M. Brennan, Assistant Corporation Counsel, for the city of Detroit.

      Arthur W. Kilpatrick and Arthur P. Hicks, for com testant Arthur E. Gordon.
   Ostrander, J.

By Act No. 475, Local Acts of 1903, entitled:

“An act to establish and provide justices’ courts in the city of Detroit, and to repeal act number four hundred and twenty-six of the Local Acts of ninetéen hundred and one, approved May thirteenth, nineteen hundred and one,”

—it is provided that there shall be four justices of the peace in and for the city of Detroit, who shall be elected at the regular charter election of said city or at any general election held therein, in the same man-her, possess the same jurisdiction, powers, duties and liabilities, as justices of the peace for townships, excepting as otherwise provided by law. ■ It is provided in section 2 of this act that at the general election held in November, 1904, and every two years thereafter, there shall be elected two justices of the peace, whose terms of office shall commence on the fourth day of July next succeeding their election, and who shall hold their office for a term of four years. In section 27 of the act it is provided that in case of a vacancy in the office it shall be the duty of the common council of the city of Detroit to fill such vacancy by appointment of' some suitable person, who shall upon duly qualifying therefor fill such vacancy until the next general election, when a justice of the peace shall be elected to fill the unexpired term of said officer.

By Act No. 76, Public Acts of 1917, entitled,—

“An act to authorize township boards of townships and legislative bodies of cities to fill vacancies in the office of justice of the peace,”

—it is provided that the township board of a township or the legislative body of a city may fill such vacancy—

“and such appointee shall hold office by virtue of such appointment only until the next succeeding township or city election.”

This act was approved April 17, 1917, and ordered to take immediate effect.

In the information filed in this cause, the attorney general represents that a vacancy occurred in the office of a justice of the peace of the city of Detroit by resignation of the incumbent and that respondent was on January 7, 1919, appointed by the common council to fill the vacancy, that he duly qualified on January 8, 1919, and entered upon the performance of the duties of said office; that by virtue of the said appointment respondent was empowered to perform the duties of said office until April 7, 1919, on which date , his right to the office expired. It is alleged that since the last mentioned date respondent has unlawfully intruded into and usurped the said office. It is further represented in the information that the city of Detroit has a new charter in and by which it is provided (title 5, chap. 1, § 4) that at the biennial spring election in 1919, there shall be elected four justices of the peace, who shall hold their office for four years from and after the fourth day of July, 1919, at the biennial spring election in 1921 two justices of the peace shall be elected for four years from and after July 4, 1921, and thereafter there shall be elected alternately at each biennial spring election four justices of the peace and two justices of the peace who shall hold office for four years from and after the fourth day of July succeeding their election; that it is further provided in said charter that the offices of justices of the peace shall continue as heretofore created and established except that there shall be six justices of the peace as herein provided. ,

It is further represented that the charter of the city of Detroit provides for holding nonpartisan primary elections for nominating candidates to city offices and that on March 5, .1919, such a primary election was-held in the city of Detroit, at which election it was sought to nominate a candidate for justice of the peace to fill the vacancy which by appointment respondent was filling, in which primary election respondent was a candidate and received so many votes, that he became entitled to have his name appear upon the ballot as a candidate for said office'; that his name duly appeared upon the ballot used in the election held April 7, 1919, at which election he was defeated for the said office, the certificate of election being issued to another, who duly qualified; that respondent refused to abide by the result of the said election and to recognize the election of another to the office, and that in consequence the business of the court and the interests and rights of the people are hindered, embarrassed and improperly protected.

Respondent admits the appointment to the office as set out in the information. He represents that the election held in Detroit in April, 1919, was not a general election and was not a city election in that by the charter of the city the next city election will be held on the first Tuesday after the first Monday in November in the year 1921.

“Respondent further represents that an election to fill a vacancy in, or the unexpired term of, the office of justice of the peace in and for the city of Detroit and the county of Wayne, is not provided for in any way whatsoever in the charter of the city of Detroit, but on the contrary, that the charter of the city of Detroit is absolutely silent upon this subject.”

Admitting that the charter of Detroit provides for a method of holding nonpartisan elections and nonpartisan primary elections, as set forth in the information, respondent contends that the office of justice of the peace in and for the city of Detroit and county of Wayne is not a municipal or city office. He says that on February 11, 1919, he presented to the city clerk of the city a partisan petition praying that his name be placed on the primary ballot of the coming primaries as a candidate on the republican ticket for the office of justice of the peace to fill the said unexpired term, and says that his said petition was refused as well as his personal petition in that behalf and his tender of the required legal fee, the said clerk declaring that there would be no partisan ticket, but that the primary would be nonpartisan. He contends that the primary election which was had was illegal and void. He admits that at the election held April 7, 1919, he received votes and another person more votes for the said office, and that the certificate of election was issued as set out in the information, but contends that the election was void. Specifically, respondent says that the said primary election was void because contrary to the provisions of Act No. 281, Public Acts of 1909, and acts amendatory thereof, that the election held April 7, 1919, was void because contrary to the provisions of Act No. 203 of the Public Acts of 1917, contrary to section 1, article 6, of the State Constitution, and paragraph 19 of section 64 of the Compiled Laws of 1915, and that both the primary and the election were void because contrary to section 15, article 7, and section 21, article 8, of the Constitution.

To the answer the attorney general replied, saying:

“I. That respondent was on the 7th day of January, A. D. 1919, appointed to the office of justice of the peace in and for the city of Detroit by the common council of said city to fill a vacancy in said office; and that said appointment was made under and pursuant to the provisions of Act No. 475 of the Local Acts of 1903.
“II. That said common council was not authorized and empowered to make, an appointment to fill said vacancy, extending beyond the next ensuing general election held in the city of Detroit, namely, the 7th day of April, 1919; that relator was not appointed to hold beyond said date; and that in fact and in law his tenure of office terminated with the holding of said election at which his successor was by law required to be chosen.
“HI. That the provisions of section 28 of Act No. 279 of the Public Acts of 1909, the same being section 3331 of the Compiled Laws of 1915, as last amended by Act No. 275 of the Public Acts 1917, insofar as the same authorizes cities proceeding under said act to provide for the time and manner of the nomination and election of justices of the peace, is a valid and constitutional enactment; and that the provisions of the charter of the city of Detroit, adopted pursuant thereto, which are in said information more fully described, are likewise valid.
“IV. That the nomination of candidates for the office of justice of the peace to fill the vacancy, and the subsequent election held and conducted on the 7th day of April, 1919, as in said information set forth, were and are valid and legal in every respect; and that in consequence the said Arthur E. Gordon was duly elected to the office of justice of the peace to fill said vacancy.
“V. That upon the election and qualification of the said Arthur E. Gordon, as in the information alleged, it became and was the duty of the respondent to immediately surrender said office and to deliver the records and effects thereunto pertaining to the said Gordon.
“VI. That in becoming and being a candidate for the nomination and election to fill said vacancy, as in the information set forth, the respondent recognized the validity of the provisions of the charter of the city of Detroit, in accordance with which the nomination and election were conducted, and consented to the form and procedure observed, which said form and procedure was in all respects as required by said charter.
“VII. That the said charter provisions, and the said provision of Act No. 279 of the Public Acts of 1909, as amended, above referred to, are not invalid, either in whole or in part for the reasons set forth in respondent’s plea or for any other reasons whatsoever.
“Wherefore, the relator says that the said plea of the respondent is not sufficient in fact or in law and prays the judgment of this court that the said respondent may be ousted from the said office of justice of the peace in and for the city of Detroit.”

No suggestion was made that issues be framed or that it was desired that testimony be taken. The cause therefore came on for hearing upon the pleadings.

If the act under which respondent was appointed is alone to be considered, it is at once apparent that we must go, to find the period for which respondent was appointed, to section 27 of Act No. 475 of the Local Acts of 1903. Having been appointed pursuant to this law, respondent’s right to the office expired, in terms of the law, at the next general election. The term general election means, as here used, the géneral election held in November in the even years. It cannot be doubted that the reference to a general election in section 27 is to the general election also mentioned in section 2 of the act.

But it is asserted by the attorney general that respondent’s right to the office terminated at the time when by election the vacancy could be filled and that this time is fixed by the revised charter of the city as the biennial spring election in 1919. In other words, we a-re to consider the question as though section 27 of Act No. 475 of the Local Acts of 1903 was amended by the revised charter of the city of Detroit so as to fix the period of the appointment as expiring at the date fixed in the charter for the election of justices of the peace. We are agreed that respondent’s tenure of office was limited by the day of the election at which the vacancy in the office was required to be filled, and, being so agreed, address ourselves to the principal question debated, which is whether the city had power to provide in its charter for an election of justices of the peace at a different time than the one named in the local act.

Justices of the peace are constitutional officers in whom, by the Constitution, is vested a part of the judicial power of the State. After providing that not to exceed four justices shall be elected in each organized township of the State, the Constitution (art. 7, § 15) says, “The legislature may provide by law for justices in cities.” The Constitution further provides, article 8, § 20, that the legislature shall provide by a general law for the incorporation of cities and, section 21, under such general law the electors of each city shall .have power and authority to frame, adopt and amend its charter and to amend an existing charter of the '-city heretofore granted and passed by the legislature for the government of the city and through its reg-. ularly constituted authority to pass all laws and ordinances relating to its municipal concerns, subject to the Constitution and general laws of the State; The legislature has provided by a general law for the incorporation of cities, and in that general law has made especial reference to justices of the peace. The section, 1 Comp. Laws 1915, § 3331, as amended by Act No. 275, Pub. Acts 1917, is here set out:

“In all cities now organized, which may hereafter amend or revise their charters under the provisions of this act, all of the provisions of the present law, whether general or special, applying to any such city relating to the qualifications, term of office, powers, jurisdiction, duties and compensation of justices of the peace and constables therein, and the conduct of all proceedings, suits and prosecutions before such justices of the peace and appeals therefrom, and all laws creating municipal courts and the proceedings thereof in any such city, shall remain in full force and effect, except as to the time and manner of nomination and elections of judges, justices and court officers : Provided, That any city may in its charter provide for and limit to one or more the number of justices of the peace and may provide that the civil jurisdiction of such justice or justices shall be increased to five hundred dollars with such exceptions and restrictions as are provided by law; and may also in its charter, or by ordinance, provide that any justice of' the peace shall be paid a salary, in lieu of fees, the amount of said salary to be fixed by said charter or ordinance, in which case all fees chargeable by such justice of the peace shall be collected by him and shall be forthwith paid into the city treasury: Provided, further, That any justice of the peace or municipal judge provided for by municipal charter in accordance with the provisions hereof shall have the same jurisdiction as is or may be conferred by law on justices of the peace in townships in both civil and criminal matters.”

In view of the purpose and language of the Constitution, we regard the words employed, in this section of the general law as meaning that cities may determine the time and manner of nominating and electing justices of the peace. If such authority may be delegated by the legislature to cities, wé regard this as a sufficient delegation of authority. .

Assuming that justices of the peace are an integral part of the judicial system of the State, they are nevertheless local officers and their selection is matter purely of local concern. No one excepting those directly charged with their nomination and election have any possible interest in the subject of when or how their selection shall be brought about. We find sanction for the delegation to the city o"f the power to fix the time of their selection in the provisions of section 21, article 8, of the Constitution.

It follows that judgment of ouster must be entered.

Moore, J., concurred with Ostrander, J.

Brooke, J.

I concur with Justice Ostrander upon the main question involved, but agree with Justice Fellows that the spring election of 1919 was a general election.

Steere, Stone, and Kuhn, JJ., concurred with Brooke, J.

Fellows, J.

I am not persuaded that the term “general election” found in section 27 of Act No. 475, Local Acts 1908, has reference solely to the general election mentioned in section 2 of the act. Section 2 by its express language provides for the election of justices of the peace:

“At the general election held in November, in the year nineteen hundred and four, and every two years hereafter.”
Section 27 authorizes the common council to fill a vacancy in the office of the justice of the peace, “until the next general election,” and does not limit the term “general election” to the general election held in November of the even years as does section 2. The office in question is a judicial one, and I am impressed that the election held April 7, 1919, at which Justices of the Supreme Court, regents of the university and other State officers were elected was a “general election” for the election of judicial officers. People v. Burch, 84 Mich. 408, 417. Respondent’s appointive term, in my judgment, expired on this date. For this reason

I concur in the judgment of ouster.

Bird, C. J., concurred with Fellows, J.


author: Bird, C. J.

text:
    WOLFE v. CITY ELECTION COMMISSION OF DETROIT.
    This case is controlled by Attorney General v. Bolton, ante, 403.
    Certiorari to Wayne; Codd, Chester, and Williams (Benjamin), JJ., presiding.
    Submitted October 8, 1918.
    (Calendar No. 28,514.)
    Decided July 17, 1919.
    Mandamus by Louis H. Wolfe and another to compel the city election commission of the city of Detroit to place their names upon a primary ballot. From an order denying the writ, plaintiffs bring certiorari.
    Affirmed.

      Donnelly, Hally, Lyster & Munro, for appellants.

      Allan H. Frazer, Corporation Counsel, and Vincent M. Brennan, Assistant Corporation Counsel, for appellee.

      J. O. Murfin and A. W. Sempliner, for intervener De Gaw.
   Bird, C. J.

(dissenting). Plaintiffs, desiring to become candidates for the office of justices of the peace in the city of Detroit at the August (1918) primaries, filed their petition with the city clerk and paid the statutory fees. The defendant election commission refused to consider them, assigning as a reason there-; for that no justices- of the peace were to be elected at the November election. Thereupon plaintiffs sought to compel defendant to comply with their request by mandamus. The writ was refused by the circuit court for Wayne county, and plaintiffs have removed the proceedings to this court by writ of certiorari for review.

On June 25, 1918, the city of Detroit adopted a new charter, in which it was provided that:

“At the biennial spring election in 1919, there shall be elected' four justices of the peace who shall hold office for four years from and after the 4th day of' July, 1919, and until their successors are elected and qualified. At the biennial spring election in 1921, two justices of the peace shall be elected for four years to hold office from and after the 4th day of July, 1921, and thereafter there shall be elected alternately at each biennial spring election four justices of the peace and two justices of the peace who shall hold office for four years from and after the 4th day of July succeeding their election.” Detroit Charter, tit. 5, chap. 1, § 4.

Prior to the adoption of the new charter, the time at which justices of the peace were elected was governed by section 2 of Act No. 475 of the Local Acts of 1903. This act provides that:

“At the general election held in November in the year 1904 and every two years thereafter, there shall be elected two justices of the peace, whose terms of office shall commence on the 4th day of July next succeeding their election, and who shall hold their office for a term of four years.”

The question presented is, Which one of these sections controls? Defendant’s counsel call attention to’ the constitutional provision which gives the legislature the right “To provide by law for justices in cities” (art. 7, § 15), and argue that the legislature being vested with this power, has by section 28 of the so-called home rule act delegated it to cities. Section 28 provides that:

“In all cities now organized, which may hereafter amend or revise their charters under the provisions of this act, all of the provisions of the present law, whether general or special, applying to any such city relating to the qualifications, term of office, powers, jurisdiction, duties and compensation of justices of the peace and constables therein, and the conduct of all proceedings, suits and prosecutions before such justices of the peace and appeals therefrom, and' all laws creating municipal courts and the proceedings thereof in any such city, shall remain in full force and effect, except as to the time and manner of nomination and elections of judges, justices and court officers: Provided, That any city may in its charter provide for and limit to one or more the number of justices of the peace and may provide that the civil jurisdiction of such justice or justices shall be increased to five hundred dollars with such exceptions and restrictions as are provided by law; and may also in its charter, or by ordinance, provide that any justice of the peace shall be paid a salary in lieu of fees, the amount of said salary to be fixed by said charter or ordinance, in which case all fees chargeable by such justice of the peace shall be collected by him and shall be forthwith paid into the city treasury.” Act No. 279 of the Public Acts of 1909, as amended by Act No. 82 of the Public Acts of 1915 (1 Comp. Laws 1915, § 3381).

It is asserted that this delegation of power is justified by the constitutional provision authorizing the passage of the home rule act, which reads:

“Under such general laws, electors of each city and village shall have power and authority to frame, adopt and amend its charter, * * * and, through its regularly constituted authority, to pass all laws and ordinances relating to its municipal concerns, subject to the Constitution and general laws of this State.” Art. 8, § 21.

The plaintiffs, of course, concede that the Constitution confers upon the legislature the power to provide for justices of the peace in cities, but denies the right of the legislature to delegate the power to cities.

If the question presented involved nothing more than a mere determination of the date when justices of the peace in the city of Detroit should be elected, it would not be very important which way it was decided. The question, however, is one of power, and whether the State legislature or the local legislature of Detroit is to exercise it.

The Constitution has clothed the legislature with certain powers with reference to the judiciary of the State. Among them is the power to provide for justices in cities (art. 7, § 15). The language of this constitutional provision contains no express permission to the legislature to delegate this power, or any part of it, to cities, nor can such authority be inferred therefrom as an incident to any express power given to the legislature. Unless some authority can be found in the Constitution, either express or implied, authorizing the legislature to delegate the power, it was not within its right in attempting to confer this authority upon cities in the home rule act. Cooley’s Constitutional Limitations (7th Ed.), p. 163. It was there said in part that:

“One of the settled maxims in constitutional law is that- the power conferred upon the legislature to make laws cannot be delegated by that department to any other body or authority. Where the sovereign power of the State has located the authority, there it must remain; and by the constitutional agency alone the laws must be made until the Constitution itself is changed. The power to whose judgment, wisdom and patriotism this high prerogative has been entrusted cannot relieve itself of the responsibility by choosing other agencies upon which the power shall be devolved.”

See, also, Bolt v. Riordan, 73 Mich. 508.

Justices of the peace are constitutional officers and are a part of the judicial system of the State. The fixing of their jurisdiction within constitutional limits; the determination of the number of justices which shall be elected in cities; the time when they shall be nominated and elected; and the date upon which their term shall begin, are matters of State and not local concern, and, therefore, should be determined by the legislature. While the home rule provision of the Constitution, heretofore quoted, confers upon cities the right to “pass laws and ordinances relating to its municipal concerns” it does not authorize them to pass laws or ordinances relating to matters of State concern. To hold in accordance with the contention of defendant, we would be obliged to say that the local legislature of a city could prescribe the time and manner of the nomination and election of a constitutional officer, who is part of the judiciary of the State. This we cannot do.

Defendant’s counsel cite the case of Burton v. City of Detroit, 190 Mich. 195, in support of defendant’s contention. That case involved the right, of the common council to add to the salary of the recorder, and not the power to fix his salary.

We are of the opinion that that part of section 28 of Act No. 82 of the Public Acts of 1915, which attempts to delegate this authority to cities is unconstitutional and, therefore, of no force.

The order of the trial court should be reversed, but it will be unnecessary to issue the writ as the exigency has passed. No costs will be allowed either party.

Fellows, J., concurred with Bird, C. J.

Brooke, J. We are. of opinion that this case is controlled by the case of Attorney General v. Bolton, ante, 408. Affirmed.

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