author: Steeke, J.

text:
    J. W. McCAUSEY & CO. v. GITTLEMAN.
    1. Mechanics’ Liens — Statutes—Construction.
    Lien statutes, being innovations upon tbe common law over the rights of property, are not to be extended in operation and effect beyond their plain provisions; the provisions by which lien attaches should be strictly construed,
    2. Mortgages — Mechanics’ Liens — Priority—Statutes.
    A mortgage in the hands of an innocent purchaser, executed by the owner of lands to a contractor, and recorded before a building permit was issued or excavation begun, was entitled to priority over mechanics’ liens on the building erected on the premises, under the provisions of section 14804, 3 Comp. Laws 1915; there being nothing in the note or mortgage to indicate that they were given for, or had any connection with, a building contract.
    3. Mechanics’ Liens — Enforcement in Chancery.
    The plainly expressed provisions of the lien law are none the less imperative because by the statute (section 14805, 3 Comp. Laws 1915) a chancery court is made the forum in which the attached liens may be enforced.
    4. Same — Contracts—Specific Payments — Affidavits—Statutes.
    Where a specific payment provided for in the contract was made by the owner of a building without securing from the contractor the affidavit for his protection from mechanics’ liens provided for in section 14799, 3 Comp. Laws 1915, the securing of an affidavit directed to á subsequent specific payment, for which it was procured and to which it by date related, would not extend the protection of the statute to the former payment.
    Cross-appeals from Wayne; McDonald, J., presiding.
    Submitted October 4, 1917.
    (Docket No. 31.)
    Decided March 28, 1918.
    Bill by J. W. McCausey & Company against Henry B. Gittleman, the Maryland Casualty Company, William E. Moss, the Webster & McCausey Lumber Company, Walter D. Gale, and Martin Brosteau to foreclose a mechanic’s lien. Defendants Lumber Company, Gale and Brosteau filed cross-bills claiming liens. Defendant Moss filed a cross-bill to foreclose a mortgage. From the decree rendered, plaintiff and defendants Lumber Company, Gale and Brosteau appeal.
    Modified and affirmed.

      Wilkinson, Routier & Hinkley, for plaintiff and defendants Lumber Company .and Gale.

      Cornelius & Ring, for defendant Brosteau.

      Goodenough & Long, for defendant Gittleman.

      Beaumont, Smith & Harris, for defendant Moss.

      Stevens T. Mason, for defendant Maryland Casualty Company.
   Steeke, J.

The bill of complaint in this suit was filed by plaintiff to foreclose and enforce a mechanic’s lien amounting to $398.45 for material furnished in the construction of a ten-family flat building upon certain described premises owned by defendant Gittleman in the city of Detroit.

Defendants and cross-complainants Webster & Mc-Causey Lumber Co., Walter D. Gale, and Martin Brosteau also assert and seek to enforce liens for material furnished and work performed on said building.

On June 23, 1914, defendant Gittleman entered into written agreement with a contracting corporation known as the Greenwich Company, of Detroit, for the construction of this building. Horace Hartwell, president of the construction company, represented it in negotiating for and securing the contract. The agreement provided that the building should be constructed by the Greenwich Company according to plans and specifications which were made a part of the contract, completed and ready for occupancy on or before October 20, 1914, at the specified price of $14,925, it being further stated in the contract that Gittleman should pay or cause to be paid to the company

“the said sum of-dollars in the following manner:
1st payt: On execution of the contract, mortgage ...................................... $7,500.00
2d payt: When the foundations are in....... 1,200.00
3d payt: When the building is framed, raised and the roof made waterproof.............. 1,000.00
4th payt: When the building is ready for plastering, cash ............................... 1,000.00
5th payt: When the building is plastered____ 1,000.00
6th payt: When the building Is completed____ 1,725.00”

As printed in the record this schedule of payments does not total the contract price by $1,500 and there is apparently some sentence or paragraph omitted, for near the end of the document we find for the first time reference made to an indicated payment by a land contract as follows:

“The land contract for $1,500 above mentioned (which in fact is not ‘above mentioned’) is a contract by the first party for the sale to S. Balter of lots 16 and 17 of the above-mentioned subdivision, said contract to be received at not exceeding $1,500.”

Gittleman testified of this:

“At the time I made fourth payment of $1,000 I transferred the contract and I received from the Greenwich Company receipts and sworn statement.”

On June 23, 1914, Gittleman executed a mortgage for $7,500 upon the premises where the building was to be erected in favor of the Greenwich Company. This mortgage was recorded by the Greenwich Company on July 7, 1914, the day before excavation for the basement began and five days before a building permit was issued. The contract and mortgage were contemporaneous, the latter being delivered to the contractor before any work was begun. To protect Gittleman and insure performance of the contract as entered into, the Greenwich Company on the same date gave him a contractor’s bond executed by it and the defendant Maryland Casualty Company in the sum of $15,000. It was given to indemnify Gittleman only, and not for the benefit of laborers, subcontractors, or materialmen. It provided, however, that he should “at all times observe and conform to the laws relating to liens of the State wherein said contract is to be performed.” The work progressed slowly and was not near completed within the contract time. The Greenwich Company became financially embarrassed and ceased work entirely on December. 18th, and on December 29, 1914, Gittleman served notice upon it of forfeiture of the contract. During the progress of the work he made payments to the company in fulfillment of his part of the agreement as follows:

First payment by note and mortgage as stated.. $7,500
Second payment on August 3d, cash............ 1,200
Third payment September 2d, cash............. 1,000
Fourth payment October 19th, cash $1,000 (and assignment of land contract $1,500), mating total of ...................................... 2,500
Fifth payment on November 13th, cash.......... 1,000
Total ........................................$13,200

The last two payments were made subsequent to the time the building should have been completed according to the terms of the contract. It was shown that after the contractors defaulted and abandoned the work Gittleman expended upon the building $1,725 and the bonding company $3,729.02, making the total cost of the completed building $18,854.02.

In the meantime defendant William E. Moss, who. testified his business was “investments and bonds,” purchased, on November 24, 1914, the $7,500 mortgage which had been given to the Greenwich Company, taking from it an assignment of the same which was recorded on the same date. He had, through an agent, examined the property, investigated the title and searched the public records to ascertain if there were any liens against it. He bought this investment in the line of his business, paying the Greenwich Company therefor partly in cash and partly in certain bonds of the Fulton Light & Power Company. Soon thereafter he sold and assigned the note and mortgage to the Northern Assurance Company, agreeing, however, to repurchase the same in event liens were subsequently filed against the property, the possibility of which was then suggested against the paper. On May 18, 1915, it was reassigned to him pursuant to such agreement.

The balances claimed due the respective lienors from the original contractor are apparently not questioned. Plaintiffs’ is for $398.45 on material furnished between November 28th and December 1, 1914; Webster & McCausey Lumber Company for $1,749.90 on material furnished between July 27th and December 10, 1914; Gale for $153 on electrical work done between October 6, 1914, and January 15, 1915, and Brosteau, for plastering done between October 21, 1914, and January 7, 1915, asserts a lien for unpaid balance due him amounting to $875.

Upon the hearing in circuit court it was found that the owner, Gittleman, had paid the full contract price of the building under circumstances which protected him against liens; that Moss as an innocent purchaser of the mortgage for a valuable consideration held it free from all liens subsequently filed. Plaintiffs’ bill and the lienor defendants’ cross-bills were accordingly dismissed.

The questions here raised upon argument and in the briefs of counsel are: The sufficiency of the sworn statements under which Gittleman made payments to the contractor, priority over liens of the mortgage given to the contractor as a payment on the contract before the construction began and whether in that connection Moss held a favored position as an innocent, bona fids purchaser.

When making payments on the contract Gittleman undertook to, and, it is claimed, did, comply with those provisions of the lien law which, if observed, protect the owner against liens, securing verified statements from the Greenwich Company, sworn to by Hartwell, its president, • as he made payments during the progress of the work. These were of like form and claimed infirmities as those furnished by the same company in its contract, out of which arose the case of Stevens v. Garland, 198 Mich. 24. As in that case, under the heading of “amount,” is written “nothing due” to the materialmen, subcontractors, and laborers listed. In view of what is there said and held as to this form of statement, the question is not open for discussion here. ,

None of these lienors took advantage of the provision for their protection against false statements of the principal contractor. In Smalley v. Brown-Stone Co., 114 Mich. 108, this court said:

“It is true that, for his own protection, the subcontractor, if he wishes to prevent a payment which will be valid as against him, must see to it that the sworn statement of the original contractor (if the owner exacts one) embodies his claim, or must himself serve the notice provided by section 1.”

Only as to one person do we find the monotony of equivalent marks under “nothing due” broken by figures showing substantial amounts set opposite the name of H. Solomon, a carpenter who, with the wisdom his name implies, appears to have taken the precaution to fortify himself against the contingency which subsequently materialized, as might any or all of these lienors had they seen fit to avail themselves of the protection which the statute offered.

It is further urged in behalf of the lien claimants that they are entitled to be equitably subrogated to sufficient of the mortgage fund, or proceeds, to pay their liens which should take priority over the mortgage given to the contractor in payment on a contract for performance of which they furnished labor and material. In support of this contention certain cases are cited involving merely an assignment of the principal contractor’s claim against the owner for a balance due him on his contract, which are of remote relevancy, and Bassett v. Menage, 52 Minn. 121, a case in which the doctrine contended for here was applied under the lien lav/ of that State where the mortgage in question yet remained the property of the original contractor, between whom and the lienors the relation of debtor and creditors existed.

The Minnesota lien law under which that case was decided contained no provision for precedence of a mortgage given and recorded prior to commencement of construction of the building in relation to which a subsequent lien is asserted, as does the Michigan statute. In Miller v. Stoddard, 50 Minn. 272, where it was held, under the facts of 'the ease, that, in the absence of any provision in the lien law a mortgage unrecorded at the time material was furnished for construction of the building, but recorded before lien was filed, took priority, the court commented on the deficiency, saying in part:

“The lien law is equally defective in not making any provision for such cases. Had the statute contained provisions, found in many of the lien laws of other States, to the effect that mechanic’s liens shall be preferred to any mortgage or other incumbrance of which the lienholder had no notice, and which was unrecorded at the time such lien attached, all difficulty would have been avoided. But our statute contains no such provision.”

This case was followed in Noerenberg v. Johnson, 51 Minn. 75; vide, also, Hill v. Aldrich, 48 Minn. 73.

Lien statutes are innovations upon the common law over the rights of property, not to be extended in operation and effect beyond their plain provisions. As to their provisions by which lien attaches strict construction is the recognized rule. In Rockel on Mechanics’ Liens, § 155, it is stated as the general rule that—

“All mortgage liens existing before the right to a mechanic’s lien comes into existence — having been perfected as the law requires — are prior to the mechanic’s lien and mortgages subsequent thereto yield priority to the lien of a mechanic.”

Along this line the Michigan mechanic’s lien law expressly provides (3 Comp. Laws 1915, § 14804, subd. 4) that liens for labor and material are “subject to any prior recorded title, claim, lien, incumbran'ce, or mortgage to or upon the land upon which such building * * * or improvement belongs or is put.”

The mortgage in question here was given and recorded before a permit was issued or excavation begun for the building in construction of which these lienors claim to have furnished labor and material. Nothing in the recorded mortgage or the note it was given to secure, which ran for three years, indicated that they were given for or had any connection with a building contract. When Moss bought and paid for this mortgage, and recorded his assignment of it from the mortgagee, the public records showed an otherwise clear title in the mortgagor free from liens or any other incumbrance. He was not in privity with the subsequent lienors or in any way connected with the contract under which they claim to have furnished labor and material. Of such a situation it was said in Stevens v. Garland, supra:

“At the time said mortgage was delivered no money was due. or to become due to any contractor or- materialman. * * * The mortgage was of record and every contractor and materialman dealing with the original contractor had constructive notice, of its terms.”

We do not conceive that the plainly expressed provisions of the lien law are less imperative because by the statute a chancery court is made the forum in which the attached liens may be enforced. While equity courts are said to be given special jurisdiction to deal with and correct that wherein the law is deficient because of its universality, they do not rise above or have power to change the law, either statute or common. The lien law is not deficient or uncertain as to these lienors’ rights. As it reads it afforded them all the protection they now appeal for on claimed equitable grounds had they timely availed themselves of its -provisions. This mortgage lien existed and was of record, perfected as the act specifies, before the building was begun or even any initiation of right to a mechanic’s lien came into existence, and it's priority is fixed by statute. While the trial court decreed its foreclosure in favor of Moss under the prayer therefor in his cross-bill, the only question as to it brought here by this appeal is that of priority over the liens claimed by appellants.

The only remaining question deemed to demand consideration is Gittleman’s failure to protect himself by a proper affidavit when making the third payment to the original contractor of $1,000 on September 2d. He introduced in evidence the receipted and dated bills of the Greenwich Company in substantiation of these payments and affidavits on the strength of which it is claimed they were paid. Ample objections were timely made and they were received subject to such objections. As to these papers the printed record is not altogether satisfactory, nor accurate in some respects. Resort to the original exhibits discloses no protecting affidavit of even approximately contemporaneous date with this third payment of September 2d. The affidavit claimed but not proven to have been furnished with it was sworn to by Hartwell on July 31st, prior to the second payment on August 3d (erroneously stated in the printed list of payments as the 8th) and, if of any significance, would relate to that payment, which was, however, accompanied by an affidavit of the same date (August 3d).

The statute upon which Gittleman relies requires that when any payment becomes due from the owner the original contractor shall furnish him a sworn statement. For his protection he may demand the same and refuse payment until it is furnished, the contractor being subject to a penalty of $100 and all resulting damages for failure to furnish it within five days after demand. Gittleman did not avail himself of these provisions and made this third payment of $1,000 without any sworn statement by the principal contractor of the same or even an approximate date. This was a distinct payment specified in the contract for protection of which special provision is made by statute, and is not protected, under the ruling in Stevens v. Garland, supra, by a later affidavit in the form furnished, directed to a subsequent specific payment for which it was procured and. to which it by date relates. Gittleman’s equitable interest in the property described is, under the mortgage held by Moss, subject to claimants’ liens to the amount of this unprotected payment of $1,000, and, as simultaneous mortgagees under the statute, they are entitled to foreclosure of their liens pro rata to that amount, subject to said paramount mortgage. The decree of the lower court, so modified, is otherwise affirmed.

The lienors herein will jointly recover costs in this court against defendant Gittleman as on one appeal, and defendant Moss will recover his costs in this court against said lienors.

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


source: Caselaw Access Project

author: Steere, J.

license: Public Domain

text:
    MACBETH-EVANS GLASS CO. v. GUMBINSKY.
    1. Corporations — Evidence—Statutes—Certificate of Officer— Liability of Directors — Filing Annual Report.
    Under section 12510, 3 Comp. Laws 1915, an official certificate by tbe secretary of State, dated March 3, 1915, certifying that he had made diligent search of his office and its records showed that the last report filed by a certain corporation gave its condition as of December 31, 1911, and was filed March 9, 1912. introduced in evidence in an action to collect a debt of the corporation from its directors, under section 9028, 2 Comp. Laws 1915, for failure to file a report for the year 1912, was presumptive evidence of the facts so certified.
    2. Same — Liability of Directors — Filing Annual Report — Statute — Construction.
    In such action, the fact that the report was not filed in no way prejudiced or misled plaintiff as to the condition of the corporation when extending credit to it, while not controlling, is regarded as of some significance when determining whether the plain language of the provision makes imposition of the provided penalty imperative.

      3. Same — Presumptions—Rebuttal.
    In. view of the highly penal nature of section 9028, 2 Comp. Laws 1915, imposing liability upon a director of a corporation wbo neglects or refuses to sign the annual report of tbe corporation, testimony that defendants made an effort to comply with the statute was admissible to rebut the presumption that such neglect or refusal was wilful.
    4. Same.
    Evidence held, sufficient to justify the finding of the jury that such presumption was overcome.
    Error to Kalamazoo; Weimer, J.
    Submitted October 22, 1917.
    (Docket No. 25.)
    Decided March 28, 1918.
    Rehearing denied June 20, 1918.
    Assumpsit by the Macbeth-Evans Glass Company against Oscar Gumbinsky and another, directors of the National Gas Light Company, for a debt of the corporation under 2 Comp. Laws 1915, § 9028. Judgment for defendants. Plaintiff brings error.
    Affirmed.

      Robert L. Campbell, for appellant.

      Harry C. Howard, for appellees.
   Steere, J.

In this action plaintiff seeks to collect from defendants Gumbinsky and Lewis a debt owing it by the National Gas Light Company, a bankrupt corporation of which defendants were directors, predicating its claim upon their statutory liability arising from failure of said gas light company to file with the secretary of State its annual report as required by Act No. 137 of the Public Acts of 1907 (2 Comp. Laws 1915, § 9028).

The statute required such corporation to annually make a report shewing its condition, on the 31st day of the preceding December, and file the same with the secretary of State within the month of January or February of each year; and provided that in default of the same being filed within ten days thereafter the corporate powers of the defaulting corporation should be suspended and “any director of such corporation so in default, who has neglected or refused to join in the making of such report, shall be liable for all the debts of such corporation contracted since the filing of the last report of such corporation.”

It was conceded at the trial that defendants were directors of the gas light company when the alleged default occurred, having been elected at its last preceding meeting of stockholders, in January, 1912, but were not reelected in January, 1913, because there was no stockholders’ meeting, and that the National Gas Light Company was adjudged a bankrupt, at what exact date is not disclosed but manifestly after March 10,1913, as the trustee in bankruptcy took possession about the last of July, 1913, and in October, 1913, declared a dividend to the creditors.

The gas light company had been a customer of plaintiff for some time and when it went into bankruptcy was owing it for goods bought in the usual course of trade during the latter months of 1912 and January, 1913, when the gas light company was. not in default in the matter of filing its reports. It is to recover the amount of such indebtedness, less dividends paid by the referee in bankruptcy, that this action is brought against defendants, on the statutory ground of liability that they as directors had “neglected or refused to join in making” the required annual report which should have been filed before March 11, 1913.

At the trial of. the case each side, against the objection of the other, introduced testimony directed to the question of whether defendants, or either of them, had in fact neglected or refused to join in making the required report as plaintiffs alleged, which was the only material issue of fact involved. Refusing requests by each side for a directed verdict, the trial court submitted this issue of fact to the jury under a charge which we think fully and fairly explained to them the nature of the case, the claims of the respective parties, the principles of law involved, pointed out the issue of fact for them to decide and their duties in that connection, with concluding directions to determine the fact as to each of the defendants, and render their verdict accordingly.

A verdict in favor of defendants was followed by motion for a new trial on behalf of plaintiff which was denied and judgment entered on the verdict. In passing upon the motion for a new trial the court stated and disposed of the controlling issue in debate as follows:

“Defendants’ contention is that they did not wilfully refuse or neglect to make or file the report but attempted in good faith to comply with the statute. This theory was submitted to the jury. It is plaintiff’s contention that the failure to file the report raised the conclusive presumption of wilful neglect within the meaning of the statute and that it was error to permit defendants to offer testimony tending to rebut it; in short, as stated by counsel for plaintiff in open court upon the hearing of this motion it is plaintiff’s claim that good faith of the defendants in endeavoring to make and file the report is not involved. * * * I hold the contrary view upon the authority of Gennert v. Ives, 102 Mich. 547, and Ford River Lumber Co. v. Perron, 148 Mich. 399. * * * In my opinion, there was ample testimony to justify the jury in finding defendants made an effort to comply with the statute.”

That an effort was made by defendants to comply with the statute is undisputed, but plaintiff contends the effort furnishes no defense, for the statute was not complied with nor any report for 1912 actually filed by the corporation, and the act provides that “neglect or refusal to file the report * . *• * shall be deemed wilful when such report * * * is not filed * * * within the time herein limited.”

The burden of proof was upon plaintiff, and to sustain its declared cause of action counsel introduced in evidence an official certificate by the secretary of State, dated March 3, 1915, certifying he had made diligent search of his office and its records showed that the last report filed by the National Gas Light Company gave its condition as of December 31, 1911, and was filed March 9, 1912. By statute this certificate was presumptive evidence of the facts so certified in the same manner and with like effect as if such officer had personally so testified in court upon the trial. Section 10170, 3 Comp. Laws (section 12510, 3 Comp. Laws 1915).

Of their efforts to comply with the statute, defendant Gumbinsky testified that he had a clear and independent recollection of signing these reports for 1912 for he was then particularly interested as an indorser for and creditor of the corporation, remembered signing his name twice, was accustomed to signing annual reports and knew there were two of them to be signed; that in February, 1913, Mr. Lewis who had presented the reports in previous years came to his office with the prepared reports for him to sign, they having been signed by several of the directors; that he examined them and as they appeared to be properly filled out he signed and returned them to Lewis; that he knew this was prior to March as he left for French Lick about the first of that month and his attention was not called to any correspondence, or difficulties, with the secretary of State in regard to these reports. Lewis, who was then president of the company, testified that they had proper blank forms: received from the secretary of State and during the month of February, 1913, he made out the regular annual report on them in duplicate, secured the signatures of a majority of the directors and sent the papers to the secretary of State’s office before March 1st, saying in part:

“After I had those reports signed and filled out, I gave them to Mrs. Leppen to mail. * * * She acted as our mailing clerk and stenographer. * * * The report was signed and delivered to the mailing clerk prior to the first day of March. * * * I know we filled out two blanks and those two were sent to the secretary of State. * * * I had charge of the mail. I must have either mailed it myself or sent it by messenger to the postoffice. * * * I think they were put in one of the office envelopes with the return card on the envelope. * * * The report was signed and delivered to the mailing clerk prior to the first day of March, 1913, * * '* I remember this particular year very well.”

Mrs. Leppen, the stenographer and mailing clerk, whose recollection as to dates and details was apparently somewhat confused in certain particulars, testified that she had charge of the mail and while she did not actually remember dropping this report in the mail said, “If they were given to me to mail I mailed them,” did remember their being made out, that she inclosed the fifty cents filing fee in a card-board at one time, that “they were returned twice because the word 'none’ was not in them,” and, with her recollection refreshed by a letter she had written, said that according to it she must have told Mr. Lewis she was sure they had been mailed.

Defendants’ testimony as to what was done by them tended to show not only an effort, but that the requirements of the statute had been fully complied with on their part. Upon the question of neglect or refusal it is clearly indicated they had no notice to the contrary or that the report was not accepted and filed, until after the time for filing had expired. Some correspondence between the secretary of State and the National Gas Light Company after that time, introduced by plaintiff against defendants’ objection, indicates that the report in relation to which defendants testify w;as received some time prior to April 5th, and inferentially before March 11th as no objection is raised that it was not within the required time, but in this correspondence it appears from a later letter of the secretary of State that the claimed defective report previously received at his office was returned on April 5th for correction in certain particulars which, after an attempt to. correct the claimed defects, was returned to the secretary of State and by him again returned to the corporation, on May 23d, because the copies then sent were not exact duplicates. What further effort was made, if any, does not appear and what was. done in that particular after March 11th would be of little materiality, as defendants’ liability, if any, for neglect or refusal to join in making the report would attach on that date.

Plaintiff’s basic assignment of error, which carries back through and dominates the various questions raised and saved by motion, objection and exception during the progress of the trial, is that:

“The court erred in denying plaintiff’s motion for a new trial on the grounds set forth in his written opinion denying the same,”

The controlling ground stated by the court is that the presumption of wilful neglect or.refusal arising from proof the report was not filed was open to rebuttal and not a conclusive presumption.

Primarily, the lengthy and particularized provisions of section 12 of the act, which incidentally creates the liability of directors relied upon in this action, is directed against corporations as such, its main object being to compel them in their individual capacity as artificial persons to make and file annual reports showing in detail their stockholders and officers, capitalization, the amount and nature of their stock, an inventory of their real and personal property with valuations, their assets, liabilities, etc., that the same as a public record may be available to those who do business with them and all others having occasion to inquire. Severe penalties are provided directly against a corporation for failure to comply with these requirements, involving suspension of its corporate powers. These reports are required to be authenticated by the signatures of a majority of the board of directors of the corporation. No penalty or liability arises against the minority which does not sign for a failure to do so but, contingently and to assure the signatures of a majority, auxiliary provision is made imposing liability upon a director who neglects or refuses to sign, both to the corporation for resulting damages and to creditors for debts of the corporation. This provision is manifestly highly penal in its nature, to be strictly construed and the penalty to be imposed only in those cases where the plain language of the provision requires it.

It is evident that the fact this report was not filed in no way prejudiced or misled plaintiff as to the condition of the corporation when extending credit to it for there was then no default, as the report of the preceding year was on file and the time had not yet arrived for filing that of 1912 when the indebtedness was created. While not controlling, this is regarded as of some significance when determining in.a case whether the plain language of the provision makes imposition of the provided penalty imperative. Continental, etc., Nat. Bank v. Emery, 178 Mich. 612; Westchester Appliance Co. v. Englehardt, 180 Mich. 602.

In the two cases cited and relied upon by the trial judge, although it was shown that no report had been filed the question of failure or neglect to join in making a report was withdrawn from the jury and verdict directed for defendant on the extenuating circumstances shown. In Gennert v. Ives, supra, defendant testified that he had no purpose in keeping the report back, left the business of the corporation to its president, did not know such a report was required and did not have in mind he was a director during the period when the report was due, and it was held that even such undisputed testimony was sufficient to overcome the presumption arising against him from failure to file. In Ford River Lumber Co. v. Perron, supra, it was stipuláted that a report for the year in question, with fee inclosed, had been mailed to the secretary of State who would testify, if produced as a witness, that so far as his records showed the same was never received or filed. In the instant case the verdict of the jury was taken as to each defendant upon testimony involving a defense analogous in substance.

We find no change in the law which renders the rule declared and applied in those cases inapplicable here, or any subsequent decisions involving the act which tend to modify them.

The judgment is affirmed.

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


text:
    NICHOLS v. WATERS.
    1. Judgment — Res Adjudicata.
    A judgment of the Federal court, that, at the time of the service of process in that case, plaintiff had no right of action because she had settled her claim, was not res adjudicata as to a claim of plaintiff’s attorneys for a contingent fee, of which defendants had notice.
    2. Master and Servant — Compromise and Settlement — Federal Employers’ Liability Act — Michigan Workmen’s Compensation Act.
    That the Federal employers’ liability act (35 U. S. Stat. 65) is paramount and exclusive in its jurisdiction as to the relations between interstate railway carriers and their injured employees, is no bar to the claimant and employer making a settlement by mutual agreement, after an accident to an interstate employee, upon the basis provided by the Michigan workmen’s compensation act, or upon any other basis agreeable to them.
    3. Trial — Evidence—Sufficiency—Issue — Breach of Contract —Contingent Fee.
    Evidence that plaintiffs first breached a contract providing for a contingent fee, by not caring for the funeral expenses of the deceased, held, insufficient to raise an issue of fact.
    4. Attorney and Client — Champerty—Contracts — Contingent Fee.
    In Michigan, contracts with attorneys for contingent fees . with a lien on the amount recovered, either by settlement or judgment, are valid, and, after proper notice, the opposing party is obligated to recognize the same at his peril.
    5. Same — Compromise and Settlement — Contracts—Public Policy — Invalidity.
    An agreement by a client with his attorney prohibiting the former from settling pending litigation without the attorney’s consent is void as against public policy.
    6. Same — Third Parties — Defenses.
    Third parties, sought to be held liable under such agreement for compensation in the matter to which the agreement relates, may avail themselves of its invalidity.

      7. Same — Contracts—Contingent Fee.
    Where plaintiffs’ contract with claimant, providing for a contingent fee, provided that they were to receive nothing unless claimant recovered more than the amount payable under the workmen’s compensation act, and she settled with the employer on the basis of the act, without plaintiffs’ consent, they were not entitled to recover, in an action against the employer, being precluded by the terms of their contract.
    8. Same — Contracts—Divisibility—Void Provision.
    If the void agreement not to settle without consent of the attorneys was a part of the consideration for the whole contract, or so modified its other provisions that they could not stand with the void provision stricken out, it was not divisible, and the whole contract was void. '
    Error to Kent; Perkins, J.
    Submitted October 12, 1918.
    (Docket No. 100.)
    Decided March 28, 1918.
    Assumpsit by George E. Nichols, Arthur F. Shaw and Edward P. Whitney, copartners as Nichols, Shaw & Whitney, against Dudley E. Waters and Paul H. King, receivers of the Pere Marquette Railroad Company, and others for attorneys’ fees. Judgment for defendants on a directed verdict. Plaintiffs bring error.
    Affirmed.

      George E. Nichols (A. F. Shaw and James K. Nichols, of counsel), for appellants.

      Parker, Shields & Brown (Charles E. Ward, of counsel), for appellees.
   Steere, J.

Plaintiffs constitute a law firm engaged in practice of their profession in the city of Grand Rapids. Defendants Waters and King were at the time of these proceedings receivers of the Pere Marquette Railroad Company. Defendant Kuiper was its claim attorney and Sandy his assistant.

On December 1, 1913, Thomas A. Holmes, a young, man 26 years of age and unmarried, sustained fatal injuries in a head-on collision on said railroad at a curve between Lowell and Elmdale in this State resulting from a mistake in running orders. He was employed as a brakeman, and then serving as one of the crew of an extra freight engaged in interstate commerce. December 29, 1913, his mother, Mrs. Margaret C. Holmes, was appointed and qualified as his administratrix, and on the same day she served, in her own name, a notice upon the railroad company of a claim for compensation under the Michigan workmen’s compensation act at the suggestion of defendant Sandy who furnished her with blanks. Some unsuccessful negotiations for settlement were thereafter had and on February 2, 1914, she entered into a contract with plaintiffs, signed by her as “administrator of the estate of Thomas Holmes, deceased,” by which she retained them on a contingent fee as her attorneys in the ¡matter of her claim arising against the railroad company out of her son’s death “with full authority to act in the matter, and conduct all negotiations of settlement, bring suit or take such action in the premises as they may deem best,” it being provided that in case of recovery by suit or settlement she would pay them and they would accept in full for their services one-half of the amount recovered, but if nothing was recovered they would charge her nothing for their services, with the following qualifications and provisions :

“That in case said second parties shall not recover more than first party would have received under the employers’ liability law, then and in such case said first party shall receive the amount which she would receive under said law.
“That said second parties agree to protect said Margaret Holmes from claims against said estate for burial expenses, etc., until this case shall be either settled or terminated.
“It is further agreed and understood between the parties hereto that neither party shall compromise or settle said claim without the consent of the other party hereto.
“It is agreed that said second parties shall have a lien upon any and all money received by reason of said claim for the amount of their services.”

On the same date plaintiffs notified the receivers and claim attorney of the railroad company, in writing, that they had been retained in the case and should bring suit unless it was desired to take the matter up with a view to a settlement, further saying:

“Please take notice that under our contract with Mrs. Holmes we have a lien against the amount she may be paid in settlement and that under our contract any settlement made without our consent is void.”

Receipt of this notice was acknowledged by defendants in writing. At this time defendants had offered Mrs. Holmes in settlement of her claim under the compensation act $6 a week for 300 weeks.

On February 19, 1914, plaintiffs commenced suit in behalf of Mrs. Holmes in the United States circuit court for the western district of Michigan under the Federal act to recover damages for the death of her' son, at the same time notifying the railroad’s claim attorney and receivers of the fact, stating that any settlement of the action without consent of plaintiffs would not be recognized; that they would not consent to any settlement under the employers’ compensation act of Michigan, and that they had a lien against any moneys which might be recovered. Subsequent negotiations for settlement between Mrs. Holmes and the claim attorney of the railroad, had without the knowledge or consent of plaintiffs as they claim, resulted in a written agreement of settlement, dated February 24, 1914. For this a prescribed form of the industrial accident board was used, by which the receivers agreed to pay her $9.80 per week during a period of 300 weeks, and, in addition thereto, pay the funeral expenses of her son, his average weekly wages being stated to have been $19.61. This agreement was signed by her as “widow, administratrix and guardian.”

On March 10, 1914, the summons issued when suit was commenced in the United States circuit court was served and defendants’ appearance was entered on March 25th, after declaration had been served. On May 6,1914, a motion was made by defendants before the Federal court to dismiss said suit on various grounds, supported by an affidavit of Mrs. Holmes that it was commenced without her authority and against her wishes and she had directed plaintiffs to discontinue it. An opposing affidavit, also sworn to by her, largely negativing the other was presented in opposition. The motion was, after argument, granted and said suit dismissed, the court finding and holding that, irrespective of any question of her desire to discontinue, she had no right of action at the time of service of process upon defendants, as she had then made application for compensation under the State law and before service of the summons, though after commencement of suit, had agreed upon a settlement with defendants, approved by the industrial accident board, received and retained the money paid her thereunder, which she had not offered to return, saying in conclusion:

“The Michigan statute above mentioned expressly and positively required the defendants, who had elected to operate under its provisions, to pay upon proper application the compensation therein provided, and just as positively deprived the plaintiff of any other remedy after making her application.”

While the latter conclusion is questioned, the court also squarely found that, at the time of the service of process in that case, plaintiff had voluntarily set-tied her claim by an executed contract and therefore had no right of action. The judgment of that court standing unreversed ends the issues there decided and precludes inquiry in another court as to whether, at the time of service of process in that case, she was bound, as between her and defendants, by her settlement with them; but we cannot follow defendants’ contention that it is res adjudicates, as to plaintiffs’ claim that she originally had a cause of action in which they were retained by a valid contract with her specifying their contingent compensation which defendants, with notice of their claim of lien, were bound to recognize. It is upon that theory this action is • brought to recover from defendants the fees which plaintiffs were or would be entitled to from her by virtue of their contract, and defendants by notice of the contract are holden for because they settled with her in disregard of its provisions.

Much is suggested and many complicated questions are debated in connection with the fact that the employee for whose death damages were claimed was at the time engaged in interstate commerce. Of this it may be noted that in view of the rulings and reasons therefor by appellate Federal courts to the effect that by the United States employers’ liability act congress covered the subject of liability of railroad companies to their employees while engaged in interstate commerce and granted a paramount power in express terms which occupied the field to the exclusion of State laws and superseded all legislation over the same subject by the States, the conclusion was reached by this court, in Carey v. Railway Co., 200 Mich. 12, wherein certain of those decisions are cited and reviewed by Justice Stone, that employees of an interstate carrier while employed.in interstate commerce-are not within the jurisdiction of our State workmen’s compensation act; and because only one remedy was recognized there could no estopping election of remedies follow an unsuccessful pursuit of an inapplicable one. It was held, however, in Waters v. Guile, 234 Fed. 532, as competent for the parties to make a settlement by mutual agreement, after an accident to an interstate employee, upon the basis provided by the Michigan compensation act, to which might be added, or on any other basis agreeable to them. Except as these parties may have independently contracted between themselves to adopt some provision of the Michigan act as the basis of computation or measure of their agreement, it is silent in this case and of no more binding force, legal effect or jurisdiction than the code of Hammurabi, which also deals with workmen’s compensation. The controlling questions here are the validity, in whole or in part, of the contract for contingent fees between plaintiffs and Mrs. Holmes, and whether by it under the facts shown anything is due plaintiffs from her.

The point is made by defendants that plaintiffs first breached this contract and released Mrs. Holmes from its obligations by not caring for the funeral expenses of her son as agreed in the contract, but we do not find competent testimony to even make that an issue of fact. She loosely complains of their neglect to attend to the matter, as she does of defendants’ attorneys and her invalid husband deceiving and coercing her into settling without litigation, of which she says she desired to have the suit, “If I had my own way,” but her husband and children at home, “no one else,” would not allow her to go on with it and “life became so I couldn’t stay at home any longer with them.” The contract provides that plaintiffs shall protect her “from claims against said estate for burial expenses, etc., until the case shall be either settled or terminated.” She testified they told her all she need do was to send the undertaker to them and a member of plaintiffs’ firm testified without contradiction that they never refused to pay the bill, nor did the undertaker call upon them, but did once ask about his bill over the telephone and was directed to file his claim in the probate court as was customary and when allowed by the probate court it would be paid.

This is one of the States where, in contravention of the common law, it has been provided by statute that contracts with attorneys for contingent fees with a lien on the amount recovered, either by settlement or judgment, are valid, and, after proper notice thereof, the opposing party is held obligated to recognize the same at his peril. Plaintiffs’ suit is based on that proposition, which is fully discussed, with citation of prior decisions, in Grand Rapids, etc., R. Co. v. Cheboygan Circuit Judge, 161 Mich. 181. Whether any effort was made in the Federal court to have the settlement of which plaintiffs complain set aside and they permitted to proceed with the original case in that court for the purpose of liquidating the amount of and recovering their fees there, we are not advised, although it is stated in plaintiffs’ brief that the court refused to pass upon the validity of their contract with Mrs. Holmes. Be that as it may, they began this action in the State court to recover from defendants the fees they would have been entitled to had the case proceeded in that court to a judgment in Mrs. Holmes’ favor, claiming the right to prove the amount of such fees by trying, in this action between themselves and defendants, the issue involved in that action between Mrs. Holmes and defendants, and have a jury in the State court decide upon the testimony it heard what a jury in the Federal court upon the testimony there produced would, or should, have decided she was entitled to recover against defendants for her son’s death had that case been tried. Other measures of damage are also proposed should this anomalous course ■ be deemed inappropriate.

It is conceded that whatever right of action plaintiffs might have against defendants arises out of their contract with Mrs. Holmes relative to fees and defendants’ failure to recognize the same after notice of its provisions. Against this defendants contend that the stipulation in the contract between plaintiffs, as attorneys, and Mrs. Holmes, as their client, prohibiting the latter from settling her case without consent of the former is void as against public policy, and being an inseparable part of the contract vitiates it in its entirety. On the part of plaintiffs it is urged that promise by Mrs. Holmes not to settle without their consent is valid and binding, but if a nullity, for the reason urged, it is in its nature a supplemental and severable portion of the agreement which does not contaminate the whole, which stands as a complete and enforceable contract after the obnoxious clause is rejected.

It is conceded that the decisions in other jurisdictions are somewhat at variance upon this question, which has not been directly passed upon in this State. While authority may be found indicating the contrary (Beagles v. Robertson, 135 Mo. App. 306), we think the overwhelming weight of authority is in support of the proposition that any agreement by a client with his attorney prohibiting the former from settling pending litigation without the attorney’s consent is void as against public policy. The following cases and others to which they lead fully discuss the rule and give convincing reasons in its support which it would be superfluous to repeat here: Fischer-Hansen v. Railroad Co., 173 N. Y. 492; Kansas City Elevated R. Co. v. Service, 77 Kan. 316; Greenleaf v. Railway Co., 30 N. D. 112; North Chicago St. R. Co. v. Ackley, 171 Ill. 100; Weller v. Railway Co., 68 N. J. Eq. 659; Davis v. Chase, 159 Ind. 242; Davis v. Webber, 66 Ark. 190; Burho v. Carmichiel, 117 Minn. 211; Howard v. Ward, 31 S. D. 114; Davy v. Insurance Co., 78 Ohio St. 256; Newport Rolling Mill Co. v. Hall, 147 Ky. 598; Jackson v. Stearns, 48 Or. 25.

That third parties, sought to be held liable under such an agreement for compensation of the client’s attorneys in the matter to which the agreement relates, may avail themselves of its invalidity appears to logically follow and is supported by authority. Davy v. Insurance Co., supra; Ingersoll v. Coal Co., 117 Tenn. 263; Pennsylvania Co. v. Lombardo, 49 Ohio St. 1.

The provision in restraint of compromise being void, and Mrs. Holmes having a legal right to settle her case with defendants, as she did, the question of whether the void clause in the contract vitiates it in its entirety, as to which the authorities are at variance, becomes unimportant under the facts and agreement as to contingent fees in this case, for her contract with plaintiffs provided that their compensation should be, “in case of recovery by settlement or otherwise, * * * one-half of the amount recovered,” and that if they did not recover more than she “would have received under the employers’ liability law” she should “receive the amount which she would receive under said law.”

It was shown without dispute that deceased lived with his parents and regularly turned over all his wages to his mother, except what the company kept out for meal tickets, that his father was in poor health, his parents were chiefly dependent on him for maintenance of their home, and his contributions for support of the family exceeded half his earnings, entitling her as legal representative of his dependents to ^one-half his average weekly wages, but not more than ten dollars, * * * for a period of three hundred weeks from the date of the injury,” according to provisions of the State compensation act. Her settlement with defendants was within that limit, aside from the funeral expenses, which plaintiffs had not paid but which one of them testified they had agreed to pay, “to keep her from worrying.”

The trial court found that under the undisputed evidence she received no more than the compensation act would have given her, that the. settlement she made with defendants upon that basis was one she had a right to make, was valid and binding between the contracting parties, whether the Federal act was exclusive or not, and directed a verdict for defendants, “because by the terms of the contract, the plaintiffs Were to receive nothing unless an amount over and above the amount payable under the employers’ liability act was recovered.” Against these conclusions plaintiffs say that at the time their contract with Mrs. Holmes was made she had been offered but $6 per week, that their contract for her minimum was in reference to that amount, but when she “violated the terms of her contract by making settlement, that portion of the agreement was no longer binding upon us because our rights entirely changed,” and therefore they are entitled to one-half the amount she received in settlement, or at least one-half of what she settled for in excess of the $6 per week.

Whatever may have been said about the six-dollar offer, the written agreement into which their negotiations merged, and under which it is attempted to hold defendants, makes no mention of offers by defendants, but fixes as a test the measure prescribed by the State law. Plaintiffs knew what that law provided and that she had filed her claim under it, and it is to be presumed they fairly advised her in regard to it. They claimed she was not estopped, by having elected her remedy, from an action for negligence in the Federal court, and, binding her by the contract not to settle without their consent, as they supposed, served notice of the fact upon defendants with warning that any settlement without their consent would be void, ^ut the agreement by Mrs. Holmes upon which they relied was void, and she did not violate any binding terms of her contract by making settlement. The matter of good faith with her attorneys and moral’ obligations in the transaction are not involved. It may be conceded that this record shows her acts and affidavits were governed largely by who saw her last, and it is evident plaintiffs depended for their protection upon her void written agreement which prohibited settlement without their consent, not upon her fidelity to them or moral responsibility. ■

The contention that her violation of the void clause in the contract entirely changed the rights of plaintiffs and the relations of the parties so that the otherwise valid provision as to a minimum amount she should recover before any fees were coming to them was no longer binding, only relegates them to the other born of the dilemma. If the void agreement not to settle without consent of the attorneys was a part of the consideration for the whole contract, or otherwise inseparably related to, modified or contaminated' its other provisions so that with that provision stricken out the remainder could not stand as it read, a distinct, valid and enforceable contract, then it was not a divisible contract, the illegality of the objectionable clause permeated and vitiated it in its entirety and rendered the whole contract void.

The judgment is affirmed.

Ostrander, C. J., and Bird, Brooke, Stone, and Kuhn, JJ., concurred. Fellows, J., concurred in the ■result. Moore, J., did not sit.


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    A. F. YOUNG & CO. v. GRAND RAPIDS & INDIANA RAILWAY CO.
    1. Carriers — Delay in Transportation — Evidence—Usual Time.
    In an action by a shipper against a railroad company for damages by frost to potatoes shipped in the winter time, as bearing upon the question of unreasonable time in moving cars to their destination, it was competent to show the actual time consumed as well as.the usual time required and taken for such transportation.
    2. Same-Negligence — Reasonable Diligence.
    It is the general rule that it is the duty of a common carrier to .safely transport goods, properly prepared for shipment and in good condition, accepted by it for that purpose, to their destination safely and with reasonable dispatch.
    3. Same — Unusual Conditions — Defenses — Burden of Proof — Evidence.
    If unusual conditions prevent the carrier from performing its duty, resulting in damage, the burden of proof is upon the carrier to show that its negligence did not cause, or contribute to, the loss or injury.
    4. Same — Negligence—Evidence—Statute.
    If unreasonable delay in shipping the goods was shown, their condition on arrival at destination might fairly raise the question, 'in the absence of any proof by defendant, whether the carrier exercised that degree of care required by section 8176, 2 Comp. Laws 1915.
    Error to Kent; Barton, J., presiding.
    Submitted October 15, 1917.
    (Docket No. 135.)
    Decided March 28, 1918.
    Assumpsit by A. F. Young & Company against the Grand Rapids & Indiana Railway Company for breach of a contract to transport certain potatoes. Judgment for defendant on a directed verdict. Plaintiff brings error.
    Reversed.

      Eastman & Eastman, for appellant.

      James H. Campbell (Elvert M. Davis, of counsel), for appellee.
   Steere, J.

On January 2 and 4, 1912, plaintiff loaded and shipped on defendant’s line two carloads of potatoes from Brutus, Emmet county, Michigan, to its agent Joshua A. Cave, at Charleston, S. C. Each car contained 220 sacks, weighing about 165 pounds each, of seed potatoes, known as “Irish Cobblers.” They were raised by farmers near Brutus at so much per bushel, from seed furnished by plaintiff, to be delivered to plaintiff’s agent in Brutus, from whence they were to be shipped by plaintiff for seed on its plantation in South Carolina.

Plaintiff introduced testimony tending to show that the sacks containing these potatoes were heavy burlap, weighing 2 1-2 to 3 pounds each, that the potatoes were carefully sorted and all defective, unclean or unsound ones rejected; that they were shipped in refrigerator cars which were well heated by stoves placed in them and a hot fire maintained for 48 hours until all moisture was dried out and the heat had thoroughly penetrated the double sides and floor of the refrigerator cars used, which had been lined with two coats of heavy paper on the bottom, sides, ends, ceiling, and inside of the doors, straw being placed on the bottom six inches thick and packed between the sacks and walls, the stoves being kept or replaced in the car after it was loaded and a good fire again started and maintained in them with closed doors for some time, when they were finally removed and the cars quickly closed, caulked, sealed and delivered in that condition to defendant for transportation; that this was carefully done by a man of long experience, according to approved methods of preparing and loading cars of potatoes for shipment at that season of the year, and refrigerator cars, which have double walls packed with insulated, paper and felt to keep out cold, so treated would hold the artificial heat from 48 to 72 hours.

An offer, or attempt, to prove the custom m regard to loading and shipping cars of potatoes from Michigan to points outside the State during the winter months was ruled out on defendant’s objection, the court saying, “That is not material. * * * The question is what they did.” Testimony of two witnesses experienced in handling and shipping potatoes to southern points, introduced against objection, showed that the usual time, under ordinary winter conditions, for moving such freight between Brutus, Michigan, and Charleston, S. C., is from six to seven days, but this testimony was all subsequently stricken out on defendant’s motion.

Plaintiff’s agent, Cave, was notified of the arrival of the cars at Charleston on the 17th of January, 1912. He paid the freight, amounting to $400.95 and at once went to the cars and inspected the potatoes sufficiently to ascertain some of them were frozen, some wet and some rotten, and he notified the railroad agent, refusing to accept the shipment until he had notified plaintiff and received instructions, when he was directed to dispose of them to the best advantage. He then had them unloaded, hauled to a warehouse, spread out upon the floor and sorted. He found them unfit for planting purposes and sold what were sale-able for table use at the best price obtainable in Charleston, the two carloads netting $1,204. A dealer in Charleston, who was familiar with the potato business and had handled them in large quantities, testi* fied that he examined these carloads after they were spread out and assisted in disposing of them, saying, “some were wet, evidently frozen, some were rotten. Out of the two carloads about 35 bags were absolutely worthless. The balance was then sold for table use at the best price obtainable. We made no charge for our services.” At that time Irish Cobbler potatoes suitable for seed purposes sold on the Charleston market for $5.06 per bag of 165 pounds or $4.60 per 150 pound sack, which was the price paid by plaintiff to replace these for planting. The testimony which plaintiff had introduced as to the usual time, under ordinary winter conditions, for moving potatoes by rail from Brutus to Charleston was stricken out on defendant’s motion after plaintiff had rested, followed by a motion for a directed verdict which the court indicated would be granted, when plaintiff moved for leave to introduce certain depositions in the case, taken by defendant, to show, among other things, various delays of those cars while en route, which was denied on defendant’s objection that plaintiff had rested. Defendant offered no evidence, and the court granted its request for a directed verdict in its favor ,on the ground that plaintiff had failed to make out a prima, facie case.

Conceding that the admission of the depositions after plaintiff had rested was discretionary with the court, striking out plaintiff’s evidence as to the usual time of carrying such freight to its destination was not. The testimony showed that both witnesses had years of practical experience in shipping potatoes south in the winter from Brutus and its vicinity to as far as Charleston, and beyond, and knew by experience the usual running time under ordinary winter conditions. The main objection interposed to this line of inquiry was that it did not include the condition of weather and other possible causes of delay existing when the cars were in transit and of which the witnesses admitted they did hot have knowledge. Of this it may be said there was no direct proof in the case of unfavorable transportation conditions or unusual weather for the time of year during the movement of those cars south, nor was such to be presumed. Its assumption by defendant in interrogation and argument was not évidence. If such was the case it was matter of defense. As bearing upon the question of unreasonable time in moving the cars to their destination, it was competent to show, not only the actual time consumed in the particular case, but the distance and usual time required and taken for such transportation. Loveland & Hinyan Co. v. Waters, 192 Mich. 680.

While the right to make contracts upon the subject, not in violation of law, and certain excusing exceptions are recognized when proved, the general rule obtains in this State, as elsewhere, that the duty of a common carrier is to safely transport goods, properly prepared for shipment and in good condition, entrusted to and accepted by it for that purpose, to their destination safely and with reasonable dispatch. If unusual conditions cause unavoidable delay, preventing the performance of that duty, with resulting damage, the burden of proof is not upon the shipper to negative the exception, but rightfully rests with the carrier, who is in possession of the goods and best knows the facts, to show that its negligence did not cause, or contribute to, the loss or injury.

Defendant cites and urges as conclusive here Michigan Cent. R. Co. v. Burrows, 33 Mich. 6, and Lardie v. Railroad, 192 Mich. 77, which, it is pointed out, “place freezing in the class of events termed the ‘act of God’ ” and say,

, “We believe it is the law in this State that freezing, not shown to be caused by the negligence of the carrier, is recognized as an exemption.”

In the present case it was shown that clean, sound, selected potatoes, in good condition for shipment, were properly loaded at Brutus with careful preparation for safe transportation at that season of the year, in refrigerator cars which had been properly prepared, heated, closed, and sealed, and promptly started South, where they would presumably soon encounter a milder climate and warmer weather. The actual time between their departure and notice of arrival at their destination was shown, but plaintiff was not permitted to show the customary and usual time taken for such transportation, nor, with it unexpectedly excluded, to introduce defendant’s depositions relating to the subject. It was shown, however, that those potatoes, delivered to the carrier at the point of shipment in good condition and properly loaded for transportation at that season of the year, arrived at their destination in bad condition, not only some of them frozen, but some wet and some rotten so that about 35 bags were utterly worthless. If unreasonable delay in dispatching the shipment was shown, the condition of the goods on arrival at their destination might fairly raise the question, in the absence of any proof by defendant, whether the carrier exercised that “degree of care in the transportation and safe-keeping of the goods intrusted to him which a reasonably careful man would exercise in regard to similar goods of his own,” which is the indicated statutory requirement. Section 8176, 2 Comp. Laws 1915.

While the goods being transported in the two cases cited were injured by freezing, and certain language found in the discussion may lend color to some of defendant’s contentions, the directly pertinent and controlling questions there decided under the facts proven do not directly apply to the facts shown or decide the questions raised in the instant case. The Burrows Case was decided before the law as to liability for negligence of a connecting carrier was changed by the interstate commerce law, and was reversed squarely on the ground that proof that the negligent delay charged, without which injury would not have occurred, was that of a subsequent carrier furnished a complete defense to an action seeking.to hold the first carrier responsible. In the Lardie Case, which was foreign to that question, certain language is quoted from the Burrows Case, indicating the carrier may not be liable for damage from freezing even if there was unreasonable delay, but the judgment on directed verdict for plaintiffs was set aside because it was shown that the shipper had plainly assumed the freezing risk, and requested a common box car in preference to waiting for a refrigerator car which had been ordered but could not then be gotten, had told the station agent not to put any stove in the box car when spoken to about it, and the bill of lading showed a “box car loaded with perishable freight at shipper’s request and shipper’s risk,” the controlling reason for the reversal being thus stated:

“They (plaintiffs) might have waited for a refrigerator car, but preferred to use a box car and excuse the carrier from liability for the danger to which the shipment would be subject under those conditions. They were not obliged to accept this car or none. Though the parties contemplated the possibility of a freezing, that fact did not make it the natural consequence of the breach of the contract, by unreasonable delay. Even if it had, the plaintiffs have expressly absolved the carrier from liability for the consequence of freezing.”

The points upon which those cases turned and were rightfully decided have but remote application and are not controlling in this case, where it is evident, from the course the trial took, with defendant standing upon objections and plaintiff precluded from introducing competent testimony, that the merits of the controversy were but partially developed.

For the errors pointed out the case is reversed and a new trial granted, with costs to plaintiff.

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


text:
    GROVES v. BOWMAN.
    1. Equity — Injunction—Highways and Streets — Mistake—Appeal — Adequate Remedy at Law.
    Equity has jurisdiction to restrain defendant highway commissioner from threatened trespass and injury to plaintiff’s freehold and to compensate him for damages already sustained, where defendant was attempting to locate, by mistake, a highway elsewhere than upon the true quarter line; and plaintiff’s remedy was not by appeal under section 4294, 1 Comp. Laws 1915, since he was not opposing the opening of the highway as petitioned for, nor attacking the statutory proceedings determining it a publip necessity.
    2. Boundaries — Location of Quarter Post — Evidence—Secondary Evidence.
    Although the recognized method of relocating a lost quarter post is to divide the section line equally, measured from corner to corner, such evidence is secondary in its nature and must yield to satisfactory, direct proof of the true location of the original corner.
    3. Same — Evidence—Sufficiency.
    Testimony by plaintiff and his witnesses that they had seen the original quarter post, positively locating it, held, sufficient to sustain a decree in his favor as to its true location.

      Appeal from Bay; Collins, J.
    Submitted October 24, 1917.
    (Docket No. 51.)
    Decided March 28, 1918.
    Bill by George Groves against William Bowman, highway commissioner of Gibson township, to restrain the laying out of a highway on plaintiff’s land. From a decree for plaintiff, defendant appeals.
    Affirmed.

      Kinnane & Black, for plaintiff.

      C. W. Hitchcock, for defendant.
   Steere, J.

Defendant Bowman, highway commissioner of Gibson township, in Bay county, moved by a petition of certain qualified freeholders, took steps in May, 1914, to open a new highway one-half mile in length between the southeast and southwest quarters of section 5 of said township as a continuation of an established road extending north from the village of Bentley along the north and south quarter-line of section 8 to its north line, which is also the south line of section 5. So extended, the road running north from Bentley would connect with an east and west highway on the quarter line through the middle of section 5.

The necessary right of way required a two-rod strip of land from the east side of the east half' of the southwest quarter of section 5, -owned by Walter D. Wilcox and William J. Banks, and two rods from the west side of the west half of the southeast quarter, owned by plaintiff, George Groves. Wilcox and Banks granted the strip on their side of the quarter line to the township without further compensation than the benefits they would receive from opening the proposed highway, and plaintiff Groves the two rods on his side by the following written agréement:

“For and in consideration of the sum of seventy-five and no dollars, to me in hand paid by W. M. Bowman, commissioner of highways of the township of Gibson, county of Bay,’ State of Michigan, do hereby convey and release to the township of Gibson aforesaid, all my right, title and interest in and to so much of the lands now owned by me as shall be necessary to lay out, open and construct a public highway along or across the following described premises, to-wit:
“West V2 of S. E. % Sec. 5. Said public highway to be laid out, opened, and constructed along or across said premises along the following route, to-wit: Commencing at government quarter post and running north through south % of section (5) five in parallel line with road running north through section 8 on quarter line, a strip of ground (2) rods wide and y% mile long.
“This conveyance is based upon the above described line of route, and shall be deemed to include the extreme width of said highway as shown in the survey thereof, to which survey reference is hereby made for a more particular measurement, and includes all claims for damages in any way arising from the laying out, opening, or constructing of said highway along or across said premises.
“Witness my hand and seal this 17th day of October, A. D. 1914.
“George Groves. (L. S.)”

This instrument was executed to supply the defects of a release given the preceding May and was in proper form for recording. It was placed on record in the office of the register of deeds of Bay county, on November 4, 1914.

While the preliminary statutory steps were being taken to lay out this highway, plaintiff did not oppose the project, and harmony prevailed until defendant had the line surveyed in November, after the release of right of way had been given. This survey located the commencing point or quarter post in the south line of section 5 about 95 feet east of the center line of the north end of the Bentley road which plaintiff claimed terminated at the quarter post. From there a post and wire fence extended north, which he claimed was on the quarter line in section 5, marking his western boundary, up to which he had occupied, used and asserted ownership of the inclosed land for many years, clearing all but a grove which he preserved for shade and ornament.

In December, 1914, defendant served notice upon plaintiff to remove his fence, and, following a disagreement as to the true line, plaintiff served notice upon defendant forbidding him from entering upon his inclosure for the purpose of cutting out or opening a road on the line as proposed. Not long thereafter defendant went with a crew of employees and started construction of the road along the line he had determined upon, entered upon plaintiff’s land, removed some of the fence and cut down a quantity of trees in the grove through which the full four rods right of way as projected ran, against the protest of plaintiff, who thereupon filed this bill of complaint to restrain further threatened trespass and injury to his freehold, and incidentally for damages already sustained. A temporary injunction was granted, defendant filed an answer, setting up also affirmative matter as by cross-bill to which plaintiff made answer. The suit was thereafter heard upon pleadings and proofs taken in open court, resulting in a decree sustaining plaintiff’s contentions and granting the relief asked.

Early in the hearing it was indicated there had been friction over this line between interested parties some years before and plaintiff’s counsel advanced the theory that the effort to open this new road on the line proposed was an attempt to use the township authorities “to settle a disputed line between neighbors,” which was disavowed by defendant’s counsel and the court intimated that in order to fairly settle the whole matter once for all the owners on the west of this quarter line and proposed road, who were necessarily interested, should in some way be brought in and made parties to the litigation. After the noon recess defendant’s counsel announced that, in view of the court’s suggestion, he was authorized by Banks and Wilcox, the owners on the west, who were present in court, to state that they were willing to be bound by any decree the court might render in establishing the line of the proposed highway, and for that purpose, or in that sense, they could be made parties, which both of them, who were witnesses in the case, ratified in open court.

The question of equity jurisdiction is raised by defendant, and it is urged that plaintiff has mistaken his forum, because he had an adequate remedy at law through appeal under the provisions of Act No. 283, Pub. Acts 1909, and amendments thereof (1 Cofirp. Laws 1915, § 4287 et seq.), pursuant to which the proceedings were taken to lay out and open the proposed highway. The infirmity in such contention is that plaintiff is not opposing the opening of the highway as petitioned for, nor attacking the statutory proceedings determining it a public necessity, nor raising any question as to award of damages, for right of way, which he released by an amicable agreement before the survey of which he complains was made.' His claimed grievance is that, whether by mistake or otherwise, the commissioner incorrectly located and proceeded to open the highway elsewhere than along the quarter line and outside of the right of way released, entirely upon plaintiff’s land, to accomplish which he invaded plaintiff’s premises, damaged his freehold and was endeavoring to appropriate certain of his land for use as a public highway under an unfounded claim of legal right at the time this bill was filed and relief asked. It is said in Harbor Springs Lumber Co. v. Emmet Circuit Judge, 160 Mich. 497:

“A bill in chancery that avers a trespass on complainant’s land, the tearing down of his fences and damage to crops, the threatened continuation of the same, and that prays for an injunction to restrain the wrong, states a proper case for equity jurisdiction.”

Vide, also, Burdick v. Lumber Co., 167 Mich. 673, and Loud v. Deacon, 189 Mich. 177.

In the latter case this court sustained the decision of the trial court, holding, in substance, that where the highway commissioner had located, by mistake, a' highway elsewhere than upon the true quarter line as contemplated and described in the petition therefor, complainants were entitled to enjoin laying out the highway so mistakenly located over their lands, there being no adequate remedy at law.

The controlling and triable issue in this case was .clearly one of fact as to the true location of the south quarter post marking the south end of the north and south quarter line of section 5, according to the government survey. Plaintiff made distinct provision in the release he gave that the proposed highway should commence at the “government quarter post,” which necessarily meant in the south line of section 5, as no other quarter post was in the vicinity of his land, and should run “north through south half of section five (5) in parallel line with the road running north through section 8 on quarter line,” lamely indicating the intent or understanding on his part that the new road would be a direct continuation north of the Bentley road, assumed to terminate at the quarter post. While the petition therefor does not appear in the record, he alleges in his bill of complaint, and it appears to be undisputed, that the statutory proceedings described and were taken- to lay out and open the proposed highway “along the north and south quarter line of said section five.” Bead in connection with the allegations in his bill, plaintiff’s release, which takes the government quarter post as the place of beginning, is to be construed as covering a strip of land two rods wide on the east side of the, south half of said quarter line, wherever that began and ran. The true quarter lines through a section, which were not run in the government survey, are straight lines between opposite government quarter posts marked and set in running the section lines. The location'of the quarter post in the north line of section 5 is not in dispute.

The quarter post set in the government survey and the marked witness trees indicating its exact locality had disappeared years before this new highway was projected as the result of clearing the land in that locality and the . opening of a highway along the east and west section line between sections 8 and 5. Its location as set and marked by the government surveyors was put in issue by the conflicting testimony of witnesses, consisting chiefly of an array of old inhabitants and land surveyors, called by the respective sides. None of the surveyors on either side had personal knowledge or could find any evidence of the original quarter post. Although disagreeing in certain particulars as to their conclusions and measurements, it was conceded that by the recognized method of relocating a lost or obscured quarter post (which was to divide the section line equally, measured from corner to corner), such relocation would approximate the locality claimed by defendant. That such evidence is secondary in its nature and must yield to satisfactory, direct proof of the true location of the original section and quarter section corners as established and marked by the government surveyors, even though less accurate, is too well settled to call for any extended citation of authority. The subject is reviewed at length and the question determined for this State in the early case of Britton v. Ferry, 14 Mich. 53.

Plaintiff was among the pioneers in the early development of that locality, and had lived in Gibson township 34 years. He testified that he had owned the land in question about 24 years and early saw the original quarter post at its southwest corner when its locality was yet undisturbed and the marked witness trees standing, which he described; that he was there when a surveyor named Pierce surveyed the line over 20 years before and replaced the original stake, and he first built a pole and log fence along his west line beginning at that quarter post, after which a fence was maintained on that line, where his west boundary post and wire fence stands.

After the timber had been cut out and a highway had been improved along the line between sections 5 and 8 a question arose as to the exact locality of this ■ quarter post. In 1895 a surveyor named Kelly was doing some work in that locality and in running this line he was unable to find this quarter post or any witness trees marking its location, and he relocated it by setting a stake half way between the two corners. Some 12 years before this case was heard, in 1915, a controversy arose between plaintiff and Wilcox over the location of the fence between them, and the latter had a survey made by Kelly who divided the section line-as before, locating the quarter post about 96 feet east of where Groves claimed it was. Trouble between Wilcox and plaintiff over their fence line became acute for a time, resulting in certain legal-entanglements, which later abated in connection with proceedings in which fence-viewers directed where and what portion of the fence each should build, and a new post and wire fence was built along the line of the old fence leaving their boundaries as before.

While upon the issue of true location the testimony» of witnesses for the respective parties is in distinct variance as to their conclusions and observations in many particulars, that of defendant’s witnesses is directed to relocating a quarter post which they did not find and never saw, while most of plaintiff’s witnesses testify positively to having seen it and the exact location where they found it at a time when natural conditions were undisturbed and both the stake and its witness trees were yet there. Aside from plaintiff, five of these witnesses who were pioneers in that locality testified to having helped or seen the surveyor Pierce run the line on which it was located 23 years before the time of the hearing; at which time the original quarter stake and its witness trees were found and seen by them. They describe the witness trees and the old surveyor’s marks upon them, the nature and location of the stake and attending circumstances in detail ; they claimed continued familiarity with the spot, testifying that plaintiff’s west line fence started from it and the Bentley road terminated at it. Without reviewing further the extended testimony upon that issue, we deem it sufficient to state that the record abundantly supports the conclusions, reached by the learned circuit judge who heard the case and saw the witnesses as they testified.

The award of damages for injury to the freehold is conservatively within the proofs, and we find no occasion to disturb the decree, which is-hereby affirmed, with costs, to plaintiff.

Ostrander, C. J., and Bird, Moore, Brooke, Fel- ■ lows, Stone, and Kuhn, JJ., concurred.


author: Bird, J.

text:
    UNDERWOOD v. TOWN.
    Vendor and Purchaser — Fraud — Boundaries — Evidence — Defenses.
    In an action for the balance due on a land contract, where the evidence of misrepresentation of the boundaries was insufficient to furnish a basis for the finding of the jury, the judgment of the court below for less than the amount, due will be set aside by the appellate court.
    Error to Clare; Dodds, J.
    Submitted October 16, 1917.
    (Docket No. 145.)
    Decided March 28, 1918.
    Assumpsit by J. Pratt Underwood, trustee, against Frank W. Town on a land contract. Judgment for plaintiff for less than amount claimed. Plaintiff brings error.
    Beversed.

      Norris, McPherson, Harrington & Waer, for appellant.

      John Quinn, for appellee.
   Bird, J.

Plaintiff sold on contract the south half of the north half of section 5 in township number '20 north, range 5 west, Clare county, to one Asa C. Gray. After making some payments thereon Gray sold and assigned his interest therein to defendant Town. Town defaulted in making the payments and plaintiff brought this suit to recover the balance due thereon. Under the general issue defendant gave notice, in substance, that he would attempt to recoup damages on the trial by reason of plaintiff’s misrepresentation of the northern boundaries of said land; that the misrepresentations were made by plaintiff to Gray, and that they consisted of statements as to where the north line of the tract was located. That had the misrepresented line been the true line the tract would have included valuable timber and farm land, and that the tract which was described in the contract was worth very much less than it would have been had the north line been located where plaintiff represented it to be. Plaintiff introduced the contract in evidence and made proof of the amount due thereon and rested. Several witnesses were sworn in behalf of defendant and it is claimed that their testimony made an issue of fact for the jury as to whether said representations were made and as to what they were.

Plaintiff, at the close of the testimony, requested the court to direct a verdict in his behalf in the sum of $713.63, insisting that there was no testimony that plaintiff had made any false representations with reference to the boundaries, and that there was no testimony that any one acting for plaintiff had made such representations. This motion was denied and the question was left to the jury and they rendered a verdict for $350. Plaintiff has removed the proceedings to this court and makes the same claim here that he made in the trial court.

The testimony discloses that the plaintiff resides in the city of Chicago, and that Gray, the grantee, had no acquaintance with him and that he made no representations to Gray at any time concerning the boundaries of the land. The claim is, however, that other persons who had authority to act for the plaintiff made the representations, but we have been unable in our investigation of the record to find any testimony authorizing any one to act or to make representations for plaintiff concerning the land. In plaintiff’s initial brief he challenges defendant to point out the testimony in the record which created an agency between the plaintiff and any person to act for him in the premises. Defendant, in response thereto, has this to say:

“As to the question of agency, proof of which plaintiff contends defendant failed to establish, we have to say: The witness Lowell Wright testified: T told Gray that these were the lines Atkins and I had run.’ Further, he testified (referring to Mr. Atkins), T didn’t know where he started; he told me he started from the section line south,’ and again: T didn’t show him the place on which to make the start in running his lines.’
“The witness John Cook testified:
“ T got it from Mr. Underwood himself through the mails about the lines. He told me the lines were blazed out there plainly, and that I couldn’t fail to find them if I would look, and I went over there and looked and I found them.’ ”

There is no testimony that either Lowell Wright or Atkins had any authority to run any lines or make any representations in relation to them and Atkins testifled that he ran no lines. The testimony of the witness Cook was not competent. He was permitted to testify, under objection, as to the contents of a letter received by him from plaintiff without laying any foundation to make parol proof of its contents admissible, but even if we are to accept the testimony as competent it is of no force because he testified that he did not communicate the statement to Mr. Gray. It will be unnecessary to discuss the testimony further, as we are satisfied that there is no testimony in the record which would furnish a basis for the conclusion of the jury.

The judgment must be set aside and the case remanded to the trial court for further proceedings consistent with this opinion. The plaintiff will recover his costs.

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