author: Stone, J.

text:
    W. H. HILL CO. v. GRAY & WORCESTER.
    1. Contracts — Restraint of Trade — Injunction.
    An injunction will not issue upon a bill of complaint of a drug manufacturer to prohibit a corporation engaged in the sale of drugs, from buying a medical preparation, made under a secret process, from dealers or jobbers who are under contract to sell the article at a fixed price to accredited agents of the manufacturer, and from retailing the preparation at a price lower than that fixed by a system of contracts between the manufacturer and the dealers throughout the country, since the contracts and system operate as an unreasonable restraint upon competition. Following Park & Sons Co. v. Hartman, 163 Fed. 34, 83 C. C. A. 58 (12 L. R. A. [N. S.] 135).
    3. Same — Trade-Marks and Trade-Names.
    The fact that an article of commerce not patented is sold under a trade name or in trade dress affords it no exemption from the common law or statutory rules against restraint of trade.
    Appeal from Wayne; Murphy, J.
    Submitted April 18, 1910.
    ( Docket No. 43.)
    Decided September 28, 1910.
    Bill by the W. H. Hill Company against Gray & Worcester to enjoin the sale of certain drugs in violation of a trade agreement. From a decree dismissing the bill, complainant appeals.
    Affirmed.

      Keena, LigMner & Oxtoby, for complainant.

      Chamberlain, May, Derby & Webster, for defendant.

       As to legality, under modern anti-trust acts, of agreements restricting the class of persons to whom commodities shall be sold, see note to Cleland v. Anderson (Neb.), 5 L. R. A. (N. S.) 136.

   Stone, J.

The complainant corporation for some years past has been engaged in the manufacture and sale of proprietary medicines, including specially Hill’s Cascara Bromide Quinine, a cold cure in tablet form. It is claimed that this preparation has acquired a reputation with the public as being an efficient remedy, and that the good will of complainant therein is a property right of great value. The tablets are, and since the year 1900 continuously have been, put up by complainant in a distinctive package and dress. These tablets are made under and in pursuance of a secret formula which is the sole property of complainant, and it has the exclusive right to the formula under which the tablets are made, and also to the name of the preparation, and to the peculiar or distinctive dress in which it has been marketed by complainant. It is also claimed that the demand for this article has been created with the consuming public by its merits, and by extensive advertising on the part of complainant. There are upon the market, available to the public, quantities of other preparations in tablet form, for similar purposes, and many druggists throughout the country put up and sell similar preparations on their own account. The price of complainant’s said preparation to the consumer is 25 cents for a small box, and complainant has at all times sold its preparation at fixed prices. The policy of the complainant has been to refuse to sell its preparation to any dealer upon more favorable terms than to others, to discourage the giving of secret rebates upon its goods by the jobber to the retail druggist, and to require the sale of its preparation at the equal price, aforesaid to the consuming public.

The bill states: That since the spring of 1905 said preparation has been sold only upon what is known as the direct contract plan; each carton or dozen boxes of said preparation is marked with a distinctive serial number, and each box contained in each carton is similarly identified, and in each carton there is placed a record card which, under said direct contract plan, is returned to complainant by the wholesale druggist, upon a sale of said preparation, showing to whom said preparation has been sold; that, as a part of said direct contract plan, complainant enters into a direct retail agency contract with any and all retail druggists who are desirous of selling its preparations ; that no discrimination is made by complainant, and that all druggists are given full opportunity of signing said contract, and of obtaining complainant’s preparation at fixed and uniform prices; that, under a contract with the wholesale druggist, said preparation can be sold and delivered only to druggists who have entered into a contract with complainant. Said retail agency contract contains the following provisions:

“In consideration whereof, said retail dealer hereby agrees not to sell or furnish at any price the said proprietary medicines to wholesale or retail dealers not accredited agents of the said company; nor to any other person, firm or corporation at less than the retail price fixed by the said W. H. Hill Company and printed upon each package.”

The retail price of Hill’s Cascara Bromide Quinine is fixed by said contract at 25 cents a box. The said wholesale agency contract contains the following clause:

“ In consideration whereof, said wholesale dealer hereby covenants and agrees not to furnish or sell any of the proprietary remedies manufactured by the said W. H. Hill Company to any persons, firms or corporations, to whom said W. H. Hill Company may, at any time, notify said wholesale dealer not to sell any of its medicines.”

The bill further states: That contracts had been signed by complainant with more than 1,500 retail druggists in the State of Michigan, and that the purpose of said method of selling complainant’s preparation was to prevent secret rebates in prices and discrimination on tbe part of wholesale druggists and others in favor of or against particular retail druggists, and to prevent cutting of prices and demoralization of trade, and the injury which would result therefrom to the reputation and good will of complainant’s business, and especially to its said preparation; that the said plan of sale of said preparation has been generally adopted, and, with few exceptions, said wholesale druggists and retail druggists have observed the terms of said contract, and especially that said preparation has been sold at the uniform price of 25 cents a box; that on or about March 1, 1906, the defendant executed with complainant one of said retail agency contracts, and in pursuance thereof defendant secured, in the usual course of business, through the wholesale dealer, such quantities of said preparation as it desired, and, as far as complainant was advised, defendant observed the terms of said contract until November, 1907, or thereabouts; that in the month of December, 1907, said defendant notified complainant that it desired to cancel said contract of March 1, 1906, and it was thereupon surrendered by defendant; that on or about January 10, 1908, defendant began advertising in the Detroit papers that it was selling Hill’s Cascara Bromide Quinine at 20 cents a box; that defendant did sell complainant’s preparation at this price, and in all such sales, before the filing of the bill of complaint, as far as appears, the serial number printed on the side of the small boxes was obliterated.

It is claimed that the defendant, after canceling its contract with complainant, knowing that it could not secure complainant’s goods from wholesale dealers who were advised of the cancellation of the contract, did not buy its goods in Detroit, but obtained them in Boston and in New York from wholesale jobbers, who undoubtedly sold to it under the impression that it was still under contract with complainant; that the defendant, well knowing the situation and desiring to cover up its fraud in thus securing the goods, obliterated the numbers as above stated. The complainant asked the court to enjoin defendant from selling its said preparation at a price less than 25 cents a box; also from securing for sale complainant’s preparation, by inducing a breach of contract on the part of the wholesale dealers, or others under contract relations with complainant; and also from mutilating the boxes containing said preparation.

In its answer the defendant denied that the purpose of the method of selling complainant’s preparation was as set forth in the bill, but avers that the purpose was to keep the selling price of the article — then an article of common use in the State — at a fixed and graduated figure in order to create a monopoly, and secure the profits of that monopoly; that the purpose and effect of said method of selling complainant’s preparation and the contracts incident to said method formed, among the wholesale and retail dealers entering into said contract, a combination, or trust to carry out a restriction in trade or commerce, and control the price of said commodity, and prevent free competition among and between said wholesale and retail dealers so combining, and free competition between such wholesale and retail dealers and other independent dealers, who may be desirous of competing; and that complainant’s method of selling its preparation had in fact resulted in practically a complete monopoly of the trade and commerce in said preparation, and that each of said contracts set forth in complainant’s bill was, and the combination of said contracts forming complainant’s so-called method was also, illegal and fraudulent as a restraint of trade and commerce both at common law, and under the laws of the State of Michigan, and especially in violation of the provisions of Act No. 255, Pub. Acts 1899, and are absolutely void, and not enforceable either in law or equity. The defendant denied all fraudulent conduct, combination, and collusion as alleged by complainant, and averred that, after the cancellation of said contract, it purchased said preparation in the regular and ordinary course of business in the open market. The complainant offered evidence tending to support its bill. Defendant offered no evidence.

The secretary of the complainant testified, among other things, that it had altogether about 25,000 contracts with retail dealers throughout the United States. That was only an estimate. On cross-examination he testified as follows:

“ The primary purpose of the contract plan evidenced by the exhibits is to fix the price of Hill’s Cascara Bromide Quinine at 25 cents to the consumer, and to fix the price to the wholesaler at the figure fixed in the wholesale contract. If the contract is' lived up to, there will be no competition in the sale of Hill’s Cascara Bromide Quinine, as far as the price is concerned.
“Q. What other competition could there be?
“A. Well, the competition of two jobbers in one town getting the business.
“Q, How could they get the business ? It is the same commodity that they are trying to sell ?
“A. Yes, sir.
“ Q. They are not allowed to cut the price ?
“2. Not at all.
“Q. Then, how would they get the business except by •cutting the price ?
“A. By personal solicitation.
“Q. For the same article ?
(tA. For the same article.
ieQ. At the same price ?
“A. Yes, sir.
Q. And that is the only competition that you can think of ?
“A. Yes, sir.
“Q. As I understand it, the real purpose of this contract system is to keep up the price of Hill’s Cascara Bromide Quinine to 25 cents to the consumer ?
“A. That is the main object.
“Q. Under any and all circumstances?
“A. Yes. We have about 1,800 of these contracts in the State of Michigan, at the present time, and at the time the bill of complaint was filed we had something over 1,800. This includes not only the druggists, but also, in the smaller communities, general stores, which handle a great many proprietary articles. There are about 1,700 druggists in the State of Michigan, and I would say of that number 1,500 are bound by the terms of our contract. That insures the company as far as the price goes a practical monopoly on the article.
“Q. And the W. H. Hill Company does as a result of these contracts have a monopoly in the State of Michigan?
“A. If you care to term it so, yes.
“Q. Well, what do you term it ? Can you tell us any other term to use in connection with it, rather than monopoly ?
“A. Why naturally, the Hill Company would have a monopoly of their own goods.
“Q. Well, then, that term applies to the situation ?
“A. Oh, yes. The contract which Gray & Worcester had with our company was canceled by mutual consent on the 4th of December, and from that time until the present Gray & Worcester had no contract relations with the company.”

Upon the hearing the learned circuit judge held that complainant’s contracts were void as being in restraint of trade, and a final decree was entered dismissing the bill of complaint. The complainant has appealed.

In a lengthy brief, and in an able oral argument, complainant’s counsel claim that its said contracts are valid and enforceable, and that they are not in restraint of trade at common law, and are not in violation of any statute. Our attention has been called to two recent cases decided by the United States circuit court of appeals for the sixth circuit. The opinions were written by Mr. Justice- Lurton, and were concurred in by the other members of the court. John D. Park & Sons Co. v. Hartman, 153 Fed. 24, 82 C. C. A. 158 (12 L. R. A. [N. S.] 135); Dr. Miles Medical Co. v. Park & Sons Co., 164 Fed. 803, 90 C. C. A. 579. In the first case Hartman was the manufacturer of the well-known proprietary medicine called “ Peruna.” This he put upon the market through a system of contracts intended to maintain prices. The system there adopted was so nearly like the one we are here considering that it need not be here described. In fact, complainant’s counsel admit that, if said opinions of Mr. Justico Lurton are right, they expect this court to follow them as decisive of the case. An examination of the cases above referred to, and of the cases there cited and reviewed, has been made. The opinion in the Hartman Case deals with every phase of this case. It cites many authorities and covers more than 20 pages, and its length prevents a full quotation. There the bill of complaint was demurred to. The doctrine of the case may be briefly stated as follows : The exemption from the common-law rule against monopoly and restraint of trade, and the provisions of the Federal anti-trust act of July 2, 1890, chap. 647, 26 Stat. 209 (U. S. Comp. Stat. 1901, p. 3200), which has been extended to contracts affecting the sale and resale, the use, or the price of articles made under a patent, or productions covered by a copyright, does not extend also to articles made under a secret process, or medicine compounded under a private formula. While the owner of the patent or copyright is protected in his exclusive right by the statute which gives him a monopoly, there is no statute which protects one who makes or vends an article which is made by a secret process or private formula, nor, so long as he keeps his process secret, can he bring himself within the principle of the statute which grants a temporary monopoly in consideration of the full publication of the invention or work. The owner of a secret process or formula is not protected by law in his secret, but he may protect himself by contract against its disclosure by one to whom it is communicated in confidence, or restrict its use by such person, and such contracts are not in restraint of trade because of the character of the property right in the secret which would be destroyed by its disclosure, and because it is not in itself an article of commerce, but such considerations do not apply to contracts for the sale of the manufactured product which do not involve a disclosure of the secret, and such contracts are within the rules against restraint of trade. The trading stamp and railroad ticket cases, such as Sperry & Hutchinson Co. v. Mechanics’ Clothing Co., 135 Fed. 833, and Nashville, etc., R. Co. v. McConnell, 82 Fed. 65, rest upon the peculiar character of the property rights involved. Neither concerns the buying and selling of articles of general commerce, and both relate to things in the nature of contracts personal in character, and not to things which can ever become the subject of general trade and traffic.

It does not follow, because a secret process or formula for a medicine will be protected against betrayal by employes, or those to whom it has been communicated in confidence, that a system of contracts for the control of all sales and subsales of the medicine when once made will be outside of the rules in restraint of trade simply because it is the product of such secret formula or process. The preparation when ready for the market and the formula are two separate and distinct things. Freedom of traffic in that is consistent with its value, and does not involve expense of the formula. None of the reasons which apply to patented articles, copyrighted productions, or to restricted disclosure of the secret formula itself, apply to the product of the formula. The cases directly in point opposed to this view are nisi prius decisions except one in the circuit court of appeals for the third circuit. The fact that an article of commerce is sold under a trade-name or in trade dress affords it no exemption from the common-law or statutory rules against restraint of trade.

Where the sole manufacturer of a medicine, made in accordance with a secret formula, but unpatented, sold the same only under a system of contracts between himself and wholesale dealers, to whom alone he sold at uniform prices by which they bound themselves to sell at a certain price, and only to retail dealers designated by him, and between him and such retail dealers, by which, in consideration of being so designated, they bound themselves to sell to consumers only and at a certain price, and such contracts had been entered into, as the manufacturer alleged, by a large majority of the wholesale and retail druggists in the United States, it was held that such system of contracts was prima facie illegal both at common law as in unreasonable restraint of trade, and under the Federal anti-trust act as aforesaid, where it affected interstate sales, its purpose and effect being to prevent competition between purchasers of the medicine, both wholesale and retail, and that, in the absence of allegation of facts showing it to be necessary for the protection of the manufacturer’s business, a court of equity would not aid in the enforcement of the contracts by granting an injunction to prevent a defendant, who was not a party thereto, from buying the medicine from purchasers who were, and reselling the same at any price it might see fit. A single contract, although it be • such as, taken alone, may not be within the rule at common law against contracts in restraint of trade, which is one of a great number of identical contracts made between the producer of an unpatented article of commerce and dealers therein, forming a “system” of contracts, which, taken as a whole, materially affects the public interests by stifling competition and trade in said article, is an unreasonable restraint, and within the rule at common law against contracts in restraint of trade, if, from an examination of the workings of the whole system, it appears that the restraint is actually, though not ostensibly, the main result and object of the system of contracts, and not merely ancillary or incidental to another and legitimate object.

In view of the evidence in this case showing the number and scope of the contracts, and the establishment of a “system,” the following excerpt from the opinion in the Hartman Case is pertinent:

“Assuming that these contracts operate only as a partial, and not a general, restraint, a question which we do not concede, and that they are properly to be considered as covenants ancillary to a principal contract, are the restraints thereby imposed necessary to protect the complainant in his retained business, or to protect him from an unjust use of the articles by the purchaser ? In the first place, we are to consider that we are not here dealing with a single contract. The complainant has made a multitude of them in identical terms, and the opposite parties comprehend, according to his bill, a large majority of the wholesale and retail druggists in the United States. The reasons which might uphold covenants restricting the liberty of a single buyer might prove quite inadequate when there are a multitude of identical agreements. The single covenant might in no way affect the public interest, when a large number might. So, also, the question as to whether the restraint was necessary to the retained business, and therefore ancillary to the principal purpose of the agreement, or whether the restraining covenants were not the principal, rather than the ancillary, matter, would largely depend upon the general sweep and result of a multiplication of identical contracts. The general purpose of each separate contract is the regulation of the prices and sales of the line of preparations made by complainant. A common purpose unites each covenantee to every other, and the ‘system’ is to be construed as ‘one piece,’ in which the complainant and every assenting dealer, whether wholesaler or retailer, is a party, and the agreement of each such covenantee to sell only at the prices dictated by the manufacturer constitutes one general scheme. The question here is therefore one of a totally different character from that which would arise if the question was the more simple one presented by a breach by a single covenantee. In Continental Wall Paper Co. v. Voight & Sons Co., 148 Fed. 939 [78 C. C. A. 567, 19 L. R. A. (N. S.) 143], where was involved a combination in restraint of trade, and where each wholesaler and retailer in the business had executed separate but identical contracts with the corporation representing the combined manufacturers, we held that each such separate covenantee was a party to the general scheme for enhancing prices. This was rested upon the holding that the several agreements constituted one whole. See, also, observations of Judge Taft in United States v. Addyston Pipe & Steel Co., 85 Fed. 275, 29 C. C. A. 141 (46 L. R. A. 122), and of Justice Peckham in Montague & Co. v. Lowry, 193 U. S. 38, 45, 46 (24 Sup. Ct. 307).
“ The plain effect of the ‘system of contracts,’ the purposed relation of each to every other being confessed by the very description of the method of carrying on business stated in the bill, is, first, to destroy all competition between jobbers or wholesale dealers in selling complainant’s preparations.- Complainant restrains himself by agreeing to sell at only one price and to only such persons as will sign one of his system of contracts. The contracting wholesalers or jobbers covenant that they will sell to no one who does not come with complainant’s license to buy, and that they will not sell below a minimum price dictated by complainant. Next, all competition between retailers is destroyed, for each such retailer can obtain his supply only by signing one of the uniform contracts prepared for retailers, whereby he covenants not to sell to any one who proposes to sell again unless the buyer is authorized in writing by the complainant, and not to sell at less than a standard price named in the agreement. Thus all room for competition between retailers who supply the public is made impossible. If these contracts leave any room at any point of the line for the usual play of competition between the dealers in the product marketed by complainant, it is not discoverable. Thus a combination between the manufacturer, the wholesalers, and the retailers to maintain prices and stifle competition has been brought about.”

Referring to the claim that defendant knew complainant’s plan, and that in selling to defendant each dealer thereby breached his contract, the following extract from said opinion is appropriate here:

“That Park & Sons Company knew complainant’s plan of business, and that in selling to them every such vendor thereby breached his agreement, is also charged, and for the purpose of the demurrer, admitted. What is the result ? Did the defendants by so purchasing, with knowledge of the restrictions imposed upon sales, thereby enter into contractual relations with complainant ? Manifestly not. Did they obtain the absolute title, notwithstanding their knowledge that the sale was in breach of restrictions imposed upon the seller ? Undoubtedly. The restrictions imposed by complainant upon sales and resales, if valid at all, are only so because they constitute personal contracts upon which an action will lie only against the contracting party. Garst v. Hall & Lyon Co., 179 Mass. 588 (61 N. E. 219, 55 L. R. A. 631). A prime objection to the enforceability to such a system of restraint upon sales and prices is that they offend ¿gainst the ordinary and usual freedom of traffic in chattels or articles which pass by mere delivery. The right of alienation is one of the essential incidents of a right of general property in moveables, and restraints upon alienation have been generally regarded as obnoxious to public policy, which is best subserved by great freedom of traffic in such things as pass from hand to hand. General restraint in the alienation of articles, things, chattels, except when a very special kind of property is involved, such as a slave, or an heirloom, have been generally held void. ‘ If a man,’says Lord Coke, in Coke on Littleton, § 360, ‘be possessed of a horse or any other chattel real or personal, and give his whole interest or property therein, upon condition that the donee or vendee shall not alien the same, the same is void, because his whole interest and property is out of him so as he hath no possibility of reverter; and it is against trade and traffic and bargaining and contracting between man and man.’ It is also a general rule of the common law that a contract restricting the use or controlling subsales cannot be annexed to a chattel, so as to follow the article and obligate the subpurchaser by operation of notice.”

The opinion in the Hartman Case was written in March, 190?. A writ of certiorari was issued by the Supreme Court of the United States to review the decision. But the writ was dismissed on December 21, 1908, upon motion of petitioner. After the decision of the Hartman Case, the drug company sought to evade that decision by means of a consignment contract so-called, and that case was before the same court in September, 1908. Dr. Miles Medical Co. v. John D. Park & Sons Co., supra. In this last case, after disposing of the consignment contract, Justice Lurton said:

“This case must, after all, turn upon whether there is such identity of character between the statutory monopoly of articles made under valid patent or copyright and articles made according to some private formula, as to exempt them from the principles which apply to contracts which tend to create' a monopoly, or restrain trade when the subject is an article not made under a patent or copyright or secret formula. * * * There are decisions by most respectable courts which hold that articles, such as proprietary medicines, are outside of all rules and statutes which forbid contracts in restraint of trade, because they are made under a secret formula. Some, if not most, of these decisions have been made in cases in which the Dr. Miles Medical Company has been a party. They are cited and commented upon by this court in the ease of John D. Park & Sons v. Hartman, supra. They go upon the conceded fact that a trade secret or formula is a monopoly until discovered by fair means, and will be protected against abuse by one who learns it under a contract limiting its use, or in the confidence of an employment. They do not observe any distinction between the necessary monopoly of the secret itself and the unnecessary monopoly of the articles made according to the secret process, and offered for sale and resale to the consuming public. Neither do those decisions recognize any distinction between the statutory monopoly accorded to articles protected by a patent or copyright and those made under such private formula. * * * In the case referred to,, we reached with unanimity the conclusion that no legal, economic, or moral reason existed for regarding contracts, in respect to the vast and ever-increasing commerce in. proprietary medicines as either outside of the mischief intended to be remedied by the Federal statute against monopolies, or the rules of the common law, or within the statutory protection afforded by the patent and copyright statutes. Any other conclusion would be to sanction a monopoly in that class of goods vastly more far-reaching than the monopoly extended upon high grounds of public policy to the inventor. The statutory monopoly has a limitation of a few years. To obtain it, the inventor must put on record his invention. At the end of the term, the public will be free to employ the discovery without the burden theretofore imposed as a compensation to the inventor. Not so with the monopoly asked for by those who control the enormous proprietary trade of this country. Their monopoly will go on forever, and, if there be merit in their formula, they may not only preserve it through all time, but continue to restrain prices and prevent competition in the sale of the product.
“ It is said that the proprietor of such a secret remedy need never communicate his formula. Concede this. To say that he need never compound his medicine, and that, if he does, he need not sell it unless he chooses, is undoubtedly true. But as much may be said about any article which the producer may choose to make or not to make, sell, or not sell, as he wills. So much pertains inherently to the natural freedom of man in respect to his own actions. But, if he elects to make and sell a product according to his formula, a public interest is affected if he be permitted to restrain freedom of trade in the article, when it has once passed under the dominion of a buyer. * * * The mere fact that one article or class of articles is made under an unknown and private formula, and another class is not, is an undeniable fact which may serve for some purposes to differentiate them. But that single fact does not afford an economic reason, and still less a legal reason, for saying that it operates to exempt such articles from rules against unlawful restraints of trade.
“We need not repeat the argument by which we reached the conclusion that the system of contracts which Hartman sought to enforce through the injunctive power of a court of equity was obnoxious, not only to the statute of congress against restraints and monopolies in respect of interstate trade, but inimical also to the reasonable restraints which at common law may be imposed as ancillary to a principal contract.”

In our opinion the arguments and reasoning of the able court that decided these cases meet and answer every position advanced by complainant’s counsel in this case. We are content with the reasoning, the citation, and review of. authorities, and the conclusion reached by that court, and we think that they are decisive, and controlling of every question here involved. We note in passing that there is no evidence in this record showing that the defendant purchased any goods from any person or firm that had been notified not to sell to it. Crittenden & Co., the Eastern Drug Company, and all other dealers in contract relation with complainant had a right to sell to defendant whose name was listed, unless notified not to do so, in any view of the case. But we place our decision upon the ground that complainant’s system of contracts deals with the manufactured product of its secret process, and not with the process itself, and that the system of contracts, being a restraint upon free competition, falls within the common-law prohibition of restraints of trade, and is void.

Having reached this conclusion, it is unnecessary to decide whether or not such contracts are illegal and void under the statute of this State.

The decree below will be affirmed, with costs.

Ostrander, Hooker, Moore, and Blair, JJ., concurred.


source: Caselaw Access Project

author: Blair, J.

license: Public Domain

text:
    COELING v. GREEN.
    1. Chattel Mortgages — Conditional Sales — Lien.
    Under a contract conveying an interest in a business without an express reservation of title, but providing that, on failure to pay the balance of the purchase price, title should revest in the seller, the purchaser obtains the title subject to a mortgage lien of the seller; and the transaction does not constitute a conditional sale.
    2. Same — Record—Aepidavit.
    Filing such contract without an affidavit of good faith, as provided for by Act No. 332, Pub. Acts 1907, renders the transaction void as to a subsequent purchaser in good faith.
    3. Same — Notice.
    In the absence of proof of actual notice of the existence of the contract, a purchaser of the business does not take it with notice.
    Error to Kent; McDonald, J.
    Submitted April 19, 1910.
    (Docket No. 85.)
    Decided September 28, 1910.
    Replevin by Tite Coeling against William Green and Edward N. Barnard. A judgment for defendants on a verdict directed by the court is reviewed by plaintiff on writ of error.
    Affirmed.

      Smedley, Hall & Freeland, for appellant.

      Mahar & Barnard, for appellees.
   Blair, J.

This is an action of replevin to recover possession of certain personal property purchased by defendant Barnard of defendant Green. The rights of the parties depend primarily upon the construction to be given to an agreement in writing between plaintiff and defendant Green, The agreement contained, among others, the following clauses:

“A Contract to Purchase.
“This option to purchase, made and entered this 3d day of January, A. D. 1908, between Tite Coeling, of the city of Grand Rapids, party of the first part, and William Green, of the same place, party of the second part, witnessed, as follows:
“Whereas, said parties are joint owners of a so-called vaudette show, known as the North Star, and located at No. 212 Plainfield avenue, in the city of Grand Rapids, Michigan, and they desire to sever their interests in said show in the following manner, viz.: Said first party, for and in consideration of the sum of one hundred dollars ($100) to him in hand this day paid by said second party, the receipt whereof is hereby confessed and acknowledged, and the promise on the part of the second party to pay to him the further sum of two hundred dollars ($200) at the time and in the manner hereinafter specified, and to carry out and fulfill all the other covenants of this agreement, hereby agrees to sell and give immediate possession of all his interest in said show of every nature and kind, including the following named property: * * *
“And said second party hereby promises and agrees to pay to said first party the two hundred dollars ($200) above mentioned eighteen (18) months from and after the date of this agreement, in full settlement for all his interest in said show and the above-described goods, and upon such payment of the two hundred dollars ($200) the title to said second party in said show and above described goods and chattels becomes under this agreement absolute and complete. And said first party has no further right or interest in or to them, or any part thereof.
“And it is hereby further agreed between the parties hereto that in-case said second party fails or refuses to pay to said first party the said two hundred dollars ($200) at or before the time above mentioned, or perform the other covenants of this agreement, such failure shall work a forfeiture of this agreement, and said first party’s right and title to a half interest in said show and the above-described goods and chattels shall be revived, and he shall become reinvested with the title to a one-half joint interest in said show, and goods and chattels, and he may keep and retain the one hundred dollars ($100) thus paid to him by said second party mentioned as stipulated damages for the use and benefit of said show and goods and chattels by said second party during the continuance of this agreement.”

The plaintiff contends that this agreement amounted to a conditional sale, reserving title in plaintiff until payment of the full purchase price. Defendant insists that the agreement was, in effect, a chattel mortgage, and that, if a conditional sale, plaintiff could not maintain replevin against his co-tenant. The circuit judge held with defendant Barnard as to both propositions, and directed a verdict in his favor. To reverse the judgment entered upon the directed Verdict, plaintiff prosecutes this writ of error.

It is apparent that legal terms were loosely used in the agreement; but, construing all of the provisions together, we think it fairly appears that it was the intention of plaintiff to part with his title to the property, and not to reserve title thereto. The provision that upon payment of the |200 “the title to said second party in said show and above-described goods and chattels becomes under this agreement absolute and complete ” is not necessarily inconsistent with this view, but may well mean that upon such payment such title is unaffected by any lien or right of the vendor. In fact, in view of the subsequent clause, this would seem to be the natural meaning. The subsequent clause clearly shows that the title was deemed to be in Green, but that upon his failure to perform his contract Cooling’s title should be revived, “and he shall become reinvested with the title,” etc. We are therefore of the opinion that the circuit judge did not err in his construction of the contract. Choate v. Stevens, 116 Mich. 28 (74 N. W. 289, 43 L. R. A. 277).

The contract was executed on the 3d day of January, 1908, and was filed with the city clerk January 18, 1908, but without the affidavit required by Act No. 332 of the Public Acts of 1907. The mortgage was, therefore, void as against subsequent purchasers in good faith. People, ex rel. Esper, v. Burns, 161 Mich. 169 (125 N. W. 740). It is claimed, however, that defendant Barnard was not a subsequent purchaser in good faith, because chargeable with notice of what was actually on the record. There is no claim or proof of actual notice, and since the agreement was not entitled to record, but its filing positively forbidden, it was no notice whatever to Mr. Barnard.

In view of what has been said, it becomes unnecessary to discuss the other questions argued in appellant’s brief.

The judgment is affirmed.

Osteandee, Hookee, Mooee, and Stone, JJ., concurred.


text:
    LUFKIN RULE CO v. SECRETARY OF STATE.
    Corporations — Stock and Stockholders — Sales—Restriction on Transfer.
    A proposed amendment to the articles of association of a corporation providing for the issuance of additional capital stock, to be known as option stock, to be issued to employés, subject to the right of the corporation to repurchase, it on specified terms, operates as an unlawful restraint upon the right of transfer, and is unauthorized by statute. Act No. 317, Pub. Acts 1905.
    Mandamus by the Lufkin Rule Company to compel Frederick C. Martindale, secretary of State, to record an amendment to relator’s articles of association.
    Submitted May 3, 1910.
    (Calendar No. 23,959.)
    Writ denied September 28, 1910.

      Humphrey, Grant & Baker, for relator.

      John JE. Bird, Attorney General (Arthur P. Hicks, of counsel), for respondent.
   Blair, J.

The Lufkin Rule Company is organized under Act No. 232, Public Acts of 1903, for the following purposes:

“ To manufacture and deal in measuring tapes, measuring rules and goods of like character; to carry on and conduct a general mercantile and manufacturing business; to manufacture and deal in any and all kinds of articles, tools, machinery, goods, wares and merchandise.”

In the month of February, 1910, it offered for record in the office of respondent the following amendment to its articles of association:

“Article 5a. Two hundred fifty thousand dollars (1250,000.00) of the increase of the capital stock is set. aside for sale only to employés of the corporation, and. said two hundred fifty thousand dollars ($250,000.00) of stock, or any part thereof, shall be subject to purchase by the corporation at any time within two years after the employé to whom the same is sold ceases from any cause to be an employé or officer of the company, upon the payment by the corporation to the owner thereof, as shown, by the books and records of the corporation, of the then true book value of the stock, together with the dividends due thereon, less any indebtedness of such owner to the corporation. Upon the payment or tender of payment of such purchase price to such owner, the title to such stock and all beneficial interest therein shall thereupon vest in the corporation, without any further act on its part or on the part of such owner, and the corporation shall then be entitled to have the certificates issued for such stock assigned and transferred to it, and such stock may be again resold and reissued by the corporation to its employés, subject, however, to the same rights of purchase as before. The corporation shall not have the right to make such purchase while it is insolvent, or if such purchase should render it insolvent, and shall only pay for such purchases out of its net profits. This stock shall be known as ‘option stock,’ and the price at which it is sold shall be taken as the consideration for the corporation’s retaining the option to purchase. Option stockholders shall have all the rights, privileges, powers, and benefits of other stockholders, including the right of alienation, subject only to such rights of purchase by the corporation. Certificates issued for option stock shall contain on their face a statement showing the option to purchase as aforesaid and the conditions thereof.”

Upon the advice of the attorney general, the repondent refused to record this amendment, and in his letter of refusal stated as his reasons for such refusal:

(a) Because it creates a new class of stock different in character from common and preferred stock provided in said Act No. 232.
(ib) Because it prevents and restrains the alienation and transfer of the stock.

The relator now asks for a peremptory mandamus to ■compel respondent to record the amendment so refused. It is the contention of respondent that the peremptory writ .should not issue, for the following reasons:

(1) Because the amendment will operate to restrain the '.transfer of stock.
(2) Because the amendment provides for the issuance <of a kind of stock not authorized by law.
(3) Because a corporation organized under Act No. 232 has no right to purchase its own shares.
(4) Because the amendment in effect authorizes a forfeiture of shares and expulsion of the stockholder.

'.Section 16 of the act in question provides:

“The stock of every such corporation shall be deemed personal property, and be transferred only on the books of such corporation, in such form and manner as their bylaws shall prescribe, and such corporation shall at all times have a lien upon all the stock or property of its members invested therein, for all debts due from them to such corporation.”

Section 24 and subsequent sections provide for the enforcement of the corporation’s lien by sale of the stock ‘ ‘ for cash at public auction to the highest bidder therefor. ” These provisions constitute the only restriction, if they may be so characterized, upon the transfer of the stock. Section 7 of chapter 55 of the Revised Statutes of 1846 provides for a transfer of shares of stock by indorsement and delivery of the certificates thereof; “but such transfer shall net be valid, except between the parties thereto, until the same shall have been so entered on the books of the corporation,” etc. This provision is retained in the amendment of 1905. Act No. 317, Pub. Acts 1905. As was said in Rough v. Breitung, 117 Mich. 48 (75 N. W. 147):

“ Such certificates, in the absence of some provision of law to the contrary, stand upon the same basis as commercial paper, and innocent purchasers and pledgees take title by assignment and delivery.”

Although section 16 above quoted, limits the mode o£ transferring the shares to entries on the corporate books, it was not intended thereby to change the essential character of the property, and doubtless a transfer by indorsement and delivery of the shares would, as between the parties, pass the equitable title thereto, which could be converted into the legal title by compelling the proper transfer on the books of the corporation. The provisions of the fourth subdivision of section % and of section 35 limit the corporation to the creation and issuance of “certificates for two kinds of stock, viz., general or common stock and preferred stock,” etc. We do not think it was intended by the provisions of the ninth subdivision of section 2 to authorize the corporation to create an essentially different class of stock than the classes specified, or to authorize any material change in the character of the property rights evidenced by the certificates. Our statutes having placed shares of stock in the category of personal property, and the certificates thereof approximating in character commercial paper, the same right of disposal of them must attach to their ownership as to the ownership of other classes of personal property, and such disposal is beyond the restrictive control of the corporation, except as granted such control by statute, or perhaps by the express contract of the owner. 10 Cyc. pp. 359, 577, £78, 579.

Does the amendment in question operate to restrain the .free disposition of the shares provided for therein ? We think it clearly does. The corporation itself is restricted to sales to its own employés and officers. If its employés do not take the stock, not a share of it can be sold, no matter how beneficial or necessary such sale may be to the welfare of the corporation. Restraint would be placed upon the shareholder’s right of transfer, since he could not pass a title, which could be converted into an absolute title, independent of the consent of the corporation. The manifest scheme of the amendment is to keep the shares perpetually under the control of the corporation, and to prevent any person obtaining an unqualified ownership thereof. Such scheme is incompatible with the right of disposal, which is an incident to the ownership of shares of stock, against public policy as embodied in our statutes, and the amendment was properly rejected by the secretary of State. We do not determine the questions, argued at considerable length, whether a corporation may purchase its own stock, nor whether it may contract with a purchaser of its shares for the right to repurchase such shares, since in the view we have taken such determination is unnecessary.

The writ is denied.

Ostrander, Hooker, Moore, and Stone, JJ., concurred.


author: McAlvay, J.

text:
    MAST v. PURCHASE.
    Trusts — Accounting—Mines and Minerals — Fiduciary Relations.
    Complainant subscribed the sum of $1,000 towards the purchase of a lease covering certain oil lands and a completed well, and this sum and all other subscriptions were placed in the hands of one of the defendants, a subscriber to the enterprise, under a trust agreement. The payments to the trustee amounted to $12,500, of which he expended only $3,500 in purchasing the lease, retaining the remainder of the funds in his hands and claiming to have expended the entire amount. He, in fact, owned a two-thirds interest in the lease, a circumstance which he concealed from the other promoters. On a bill filed to compel an accounting, held that the trustee must be charged with his own subscription to the fund and must account for the entire amount remaining in his hands above the purchase price of the lease.
    Cross-appeals from Washtenaw; Kinne, J.
    Submitted June 16, 1910.
    (Docket No. 73.)
    Decided September 28, 1910.
    Bill by Theodore E. Mast against George H. Purchase and others for an accounting. From the decree rendered, all parties appeal.
    Modified and affirmed.

      Robert E. Bunker, for complainant.

      Andrew J. Sawyer, M. J. Lehman, B. M. Thompson, and Thomas A. Bogle, for defendants.
   McAlvay, J.

The controversy in this case arose out of a certain transaction relative to the purchase of a lease of oil lands for the sum of $12,500, which transaction is evidenced by the following writing:

“ Oil Proposition. It is understood by the undersigned that Charles W. Miller of Detroit, Michigan, who is at present time engaged in drilling oil wells in East Tilbury township, Ontario, has acquired a lease upon one hundred and forty-six acres, more or less, in the township of East Tilbury, Kent county, Ontario, being parts of lots eight and nine, concession eleven, and that the said Charles W. Miller and his associates now offer to the undersigned their interests in this lease with one well drilled to the sand and properly cased, for the sum of twelve thousand five hundred dollars, and for the purpose of raising the said twelve thousand five hundred dollars, we, the undersigned, hereby agree to pay the amounts set opposite our respective names and to receive for that amount an interest in the entire lease and well, in the following proportion: Five hundred dollars buying one twenty-fifth of the entire proposition. We further agree to pay the amount of our respective subscriptions to George H. Purchase, who is hereby appointed trustee for the purpose of acquiring and paying for said lease and taking charge of the same until the completion of the first well, or until such time as the subscribers hereto shall make different arrangements. ”

This was signed by complainant and the defendants, each for the amounts set opposite his or her name.

Mr. Miller lived in Detroit, and, before this transaction, had business relations with defendant Purchase dealing in oil leases. According to the testimony of Purchase, Miller acquired this lease, known as the “ Denison lease,” in January, 1906, and Purchase acquired a two-thirds interest in it from Miller in April following, which he was to have for financing this lease; and at the time the foregoing “oil proposition” was prepared Purchase claims he was the owner of such interest. Mr. Miller does not agree with Purchase as to this transaction between them relative to the Denison lease, but counsel for complainant in their brief accept the version of Purchase of that transaction as correct. The “oil proposition ” was prepared by defendants Purchase and Glenn in Detroit late in August, 1906. Defendant Glenn testifies that he entered into the employ of Purchase selling shares in'the Denison lease venture at the time the subscription paper (oil proposition, supra) was prepared. Glenn was the active party in securing subscriptions to the full amount of $12,500, which was all paid in, and $10,000 of which Purchase admits came into his hands as trustee. The balance, as appears from his statement, Glenn used with his knowledge and consent for the claimed purpose of buying the influence of a man in order to succeed in getting the shares all sold. The record shows that there was no truth in such claim. Glenn testifies that Purchase and Miller fixed the price on the property at $12,500 with one well completed to the sand, and he started out at once to sell shares. The first thing Glenn did was to subscribe $500 to the “oil proposition,” and then Purchase signed for a like amount. Complainant was among the subscribers to the amount of $1,000. The account filed by Purchase on the hearing shows that Miller was paid for the lease but $1,500, and for the well put down by him $2,000.

Some months after paying in his money, complainant came into reliable information that only $3,500 was paid for the lease and the well, and that Purchase, the trustee, retained in his hands moneys belonging to the subscribers not accounted for. He thereupon filed this bill of complaint charging that he was deceived and defrauded by Purchase and Glenn and fraudulently induced by them to subscribe such money, and asking for an accounting and a receiver, making all the subscribers to the “oil proposition ” parties defendant. No company or corporation was ever formed or organized. Whatever was done relative to buying some machinery and putting down a second well was accomplished by all the parties acting together voluntarily. The details of what was done later need not be given because not material to the questions in dispute. Purchase and Glenn and also defendant Woodworth answered separately denying complainant’s charges. The majority of the other defendants answered admitting the allegations of the bill of complaint and asked for a receiver and an accounting. After issues joined, and before the hearing, Purchase and Glenn, the principal defendants, requested a jury to try the issues of fact in the case. Upon this application questions were settled and submitted to tb.e jury which sat and heard the testimony.

The following are the questions submitted to the jury, together with the answers given:

“(1) Q. Did the defendants Purchase and Glenn represent to Theodore E. Mast that the amount which was to be paid for the said Denison lease to C. W. Miller was $10,500?
“A. Yes.
“(2) Q. Did said defendants Purchase and Glenn represent to said complainant Theodore E. Mast that the land covered by said lease was valuable oil land ?
“A. Yes.
“(3) Q. Did the defendants Purchase and Glenn represent to said complainant that they had an option on the Denison lease ?
“A. Yes.
“(4). Q. Did the defendants Purchase and Glenn pay to the owners of said Denison lease the sum of $10,500 ?
“A. No.
“(5) Q. Did the defendants Purchase and Glenn or either of them represent to complainant before the closing of said contract for the purchase of said Denison lease that said lease was owned by Charles W. Miller and his associates ?
“A. No.
“(6) Q. Did the complainant at the time of closing the contract for the purchase of said lease rely upon the statement, if one was made by either Glenn or Purchase, that Miller was the sole owner of said lease ?
“A. Yes.
[Signed] “K. H. Wheeler, Foreman.
“Ann Arbor, March 27, 1908.”

The case was then submitted to the court, and a written opinion was filed, in which, among other things, the court stated and found as follows:

“This cause has now been heard upon pleadings and proofs and the service and protection of a jury have been invoked by the defendants Purchase and Glenn, and the findings of the jury are now a matter of record. It is manifest that these defendants must fail to extract any comfort from the report of the jury. The action of the jury is only advisory, and the cause returns to the court for final adjudication. The evidence in the case in my opinion fully establishes all of the material allegations of the bill of complaint. There might have been some plausibility in his action if the defendant Purchase had denied his trusteeship and refused an accounting, but his accounting is one of the most remarkable exhibitions of the execution of a trust that this court has ever examined. The defendant Purchase received these subscriptions upon the representation by him and his agent the defendant Glenn that this oil lease in the hands of Miller, the owner thereof, would cost the sum of $10,500. The evidence is incontrovertible that he only paid the said Miller for such lease the sum of $2,500, and that he thoroughly understood such to be the fact when he obtained these subscriptions upon the basis of an alleged cost of $10,500. It rests in doubt if even the $2,500 were wholly expended for this purpose. In the accounting of defendants Purchase and Glenn a very cowardly but wholly futile attempt was made by them to involve Prof. John E. Eood and Dr. Louis P. Hall. The evidence on this trial removes every possible suspicion or insinuation against either of these gentlemen and establishes beyond all controversy that they have acted in these matters with the utmost good faith, honor, and integrity.”

But little need be added relative to what this record discloses. The findings of the jury and of the trial judge are in all respects supported by the evidence. The refusal of Purchase to account to these people for the $12,-500 cash which was collected from them for him, as trustee, and which he and Glenn held, and the accounting which was filed by him, together with his entire testimony given during the trial, indicate the character of this witness.

The statement of the account filed by him, as taken from the opinion of the court, is as follows (the receipt of $12,500 having been admitted):

DISBURSEMENTS.
Special expense in Ann Arbor (being the amount paid by said Glenn to buy certain mining stock of one Ortman for the use and benefit of said
Glenn)....................................... $2,000 00
Paid to O. W. Miller (for his interest in the Denison lease).................................... 1,500 00
To G. W. Miller, contract for drilling well No. 1 at a profit of $500_____________________________ 2,000 00'
To E. G. Glenn for one-third interest in the lease, $1,500.00, and one block of stock valued at $500.00........................................ 2,000 00
To G. H. Purchase for one-third interest in lease at $1,500.00, and one block of stock valued at $500.00 ....................................... 2,000 00
Contract price (allowed by said Purchase to said Glenn) for filling the subscription list......... 3,000 00
$12,500 00

In this account is included his own and Glenn’s subscription charged as cash. In the final decree in the court below in the accounting, Purchase and Glenn were given credit for |1,000, the amount of their subscriptions, and. also for $1,000 claimed to have been paid Miller on the Hascall-Sloan and Denison leases. The testimony of these witnesses upon this proposition is unreconcilable. Miller says that the Denison lease was to be charged with but $?00. Purchase says the $1,000 was paid Miller as his share in the profits of the Hascall-Sloan lease, and nothing was paid for any interest in the Denison lease. He cannot find fault if this testimony of his is taken as true. It would seem to be corroborated by the fact that in his accounting he has already claimed credit for $1,500 paid Miller for his interest in the Denison lease. Both items should be charged in this accounting against them. The subscriptions, because they should be required to stand their share of losses; the other item, because it was never paid. This would make the amount to be accounted for $9,000, with interest from September 1, 1906.

The decree of the circuit court is affirmed, except as hereinabove indicated. A decree will be entered in this court accordingly, and the cause will be remanded to the circuit court for such further proceedings as may be proper. Complainant will recover costs of both courts against defendants Purchase and Glenn.

Ostrander, Hooker, Moore, and Brooke, JJ., concurred.


author: Bird, C. J.

text:
    GOODWIN v. UNION INSURANCE CO. OF PHILADELPHIA.
    1. Insurance — Weight of Evidence — Fraudulent Representations.
    In an action on a fire insurance policy, in which defendant claimed a change in the title to the insured property, and fraud of the insured, held that a verdict for the plaintiff wa3 supported by sufficient evidence.
    2. Same — Evidence—Hearsay—Proofs of Loss.
    While the proofs of loss are inadmissible, if unsupported by testimony of their correctness, to show the value of the property destroyed, it was not error to receive them as evidence of compliance with the policy, or as evidence of the value, after the plaintiff had used them to refresh his recollection and had testified to the correctness of the items.
    3. Same — Title—Conveyance of Property — Delivery.
    It appearing that plaintiff had conveyed the property to his wife previously to the fire, and had placed the bill of sale on record, a showing that he had done so without the knowledge of his wife, to conceal the property from his creditors, tended to rebut the presumption of delivery and raised an issue of fact for the jury.
    4. Same — Contracts—Construction.
    It was proper to charge the jury that certain riders attached to the insurance policy might be considered in determining whether or not the insured had informed the agent as to the true state of the title.

      5. Same — Foreign Corporations — Verdiot.
    The court will not assume, without proof, that the jury was prejudiced against the defendant because it was a foreign corporation.
    6. Trial — Argument—Conduct oe Counsel.
    Remarks of counsel in argument directed at defendant’s counsel personally, and of an uncourteous nature, cannot be held to have influenced the verdict.
    Error to Wayne; Rohnert, J.
    Submitted June 10, 1910.
    (Docket No. 38.)
    Decided September 28, 1910.
    Assumpsit by William P. Goodwin against the Union Insurance Company of Philadelphia on a policy of insurance. A judgment for plaintiff is reviewed by defendant on writ of error.
    Affirmed.

      Lehman, Biggs & Lehman, for appellant.

      Bernard B. Selling, for appellee.
   Bird, C. J.

This is an action upon a Michigan standard fire insurance policy to recover for a loss which the plaintiff suffered to his saloon and café in Mt. Clemens on the 31st day of December, 1906. The total amount of insurance carried by the plaintiff was $10,000, divided among several companies. The policy in suit was one for $1,500. The claimed loss was $5,936.19. The jury found that the loss was $5,388, and apportioned $808.30 of this sum to the policy in suit, and judgment was rendered for that amount against the defendant. A motion for a new trial was made and denied, and defendant assigns error thereon.

The grounds urged by defendant for a reversal of the case are:

(1) The verdict was against the weight of evidence and was contrary to the law and to the charge of the court.
(3) It was error to permit the proofs of loss to be used as evidence of value.
(3) That the court erred in refusing to direct a verdict for the defendant on the ground that the property was conveyed to his wife prior to the fire.
(4) Because the court did not construe the riders attached to the policy for the benefit of the jury.
(5) That the verdict was due to the natural prejudice of the jury against foreign corporations, and especially against a foreign insurance company.

First. On the part of the defense, it was insisted that the plaintiff was not the unconditional and sole owner of a large part of the insured property at the time the policy was issued, and that the property was afterwards incumbered by a chattel mortgage without the knowledge or consent of the defendant, and that, by reason thereof, all rights under the policy were forfeited. It was further charged that plaintiff was guilty of fraud in claiming damages to property which he never owned, and of making false and fraudulent statements in his proofs of loss. Plaintiff answered these charges by claiming that the state of plaintiff’s title was fully disclosed to the agent prior to the issuance of the policy, and that there was no chattel mortgage upon the property at the time of the fire. Plaintiff denied the allegations of fraud. There was a spirited contest over these issues at the trial, and much testimony was taken bearing on them. Nearly all of the issues presented questions of fact and were submitted to the jury.

The jury reduced plaintiff’s claim several hundred dollars, and doubtless rejected some of the items that were in dispute. It would be unprofitable for us to attempt to review all the testimony which made for or against these claims. It is sufficient to say that, after having examined the record with much care with reference to them, we are not persuaded that the verdict was against the weight of the evidence. We think there was testimony, which, if believed by the jury, would furnish a basis for the verdict which they returned. Neither are we persuaded that the verdict was contrary to the law or to the charge of the court.

Second. Complaint is made that the proofs of loss were used to prove the value of the property destroyed or damaged and were submitted to the jury for that purpose. If this use was made of the proofs of loss without any further evidence of the value and the correctness of them, it was error. Kennedy v. Insurance Co., 157 Mich. 411 (122 N. W. 134); Cascade, etc., Ins. Co. v. Publishing Co., 1 Wash. St. 452 (25 Pac. 331); Williams v. Insurance Co., 54 Cal. 442 (35 Am. Rep. 77). But we do not understand the record to show that this was done. At the outset of the trial, plaintiff’s counsel offered in evidence the proofs of loss, but the court declined to receive them, except for the purpose of showing a compliance with the stipulations of the policy. Subsequently plaintiff held them in his hand while testifying, and swore to the value of each article in the order in which it was inventoried in the proofs of loss. He testified that he had assisted in making the proofs of loss. Our understanding is that the witness used them for the purpose of refreshing his recollection. At the close of the trial, the proofs of loss were readmitted without objection, and the jury allowed to inspect them. We think there was no error in this. It would be difficult, indeed, for one who might sustain a loss to a stock of merchandise or to household goods to enumerate each item while on the witness stand without having recourse to a memorandum to refresh his recollection.

Third. This complaint relates to the refusal of the court to direct a verdict for the defendant on the ground that the property had been conveyed by plaintiff to his wife previous to the fire. Plaintiff testified that he had conveyed the property to his wife without her knowledge, and placed the bill of sale of record to keep the property out of reach of his creditors, and that the bill of sale was never delivered to her. The court submitted the question of delivery to the jury, and from their verdict it must be assumed that they found that there was no delivery of the paper. These facts bring the case within the ruling of Hogadone v. Insurance Co., 133 Mich. 339 (94 N. W. 1045). Defendant argues that the case is ruled by Kaufman v. State Savings Bank, 151 Mich. 66 (114 N. W. 863, 18 L. R. A. [N. S.] 630, 123 Am. St. Rep. 259), and Bangs v. Browne, 149 Mich. 478 (112 N. W. 1107). An examination of the latter cases will disclose that a presumption of delivery was raised by the acts and statements of the grantors and these presumptions were not rebutted, while in the Hogadone Case, and in the one before us, the presumption of delivery arising from the act of making the deed and placing it of record was rebutted by the positive testimony of 'the plaintiff that he never delivered it. This raised a question of fact which was proper to submit to the jury, and we think the trial court was in no error in so doing.

Fourth. There were two riders upon the policy, describing the property insured, and it was insisted by the defendant that the language used therein should be construed to mean that the plaintiff was the unconditional and sole owner of the property, while the plaintiff claimed that the language of the riders did not import unconditional and sole ownership, but bore out the testimony of the plaintiff that he informed the agent of the state of his title before the policy was issued. Upon this question the court first charged the jury as follows:

“ That it must clearly appear by the rider that that was the intent; otherwise it is not an exception to the terms of the stipulation of the policy with regard to an unconditional ownership. It must clearly appear in the rider that it was intended to make an exception.”

Subsequently, at the request of plaintiff’s counsel, the court charged the jury upon that question as follows:

“I withdraw from your consideration the constructions to be placed upon the language of the riders as far as my instructions to you permitted you to determine what those riders meant. However, you will consider them solely for the purpose of their bearing upon the testimony of Mr. Nunnely and Mr. Goodwin, touching the proposition as to whether or not Mr. Goodwin communicated to Mr. Nunnely at any time when he was getting the insurance that he owned the property otherwise- than unconditionally and solely. That is, you may consider the riders only for that purpose.”

We think the charge of the court as given latterly fairly covered that question. It was a question of veracity between the insured and the agent as to whether the insured had communicated to the agent the state of his title prior to the issuing of the policy. The language of the riders was submitted to the consideration of the jury to aid them in determining whether the insured or the agent had testified truthfully in regard to it. This submission very clearly placed before the jury the use they should make of the riders, and, if defendant’s counsel had desired anything further in connection with it, they should have so requested the court at that time.

jFifth. Defendant claims that the verdict was due to the natural prejudices of the jury against a foreign corporation, and especially against a foreign insurance company, and that the remarks of plaintiff’s counsel during the trial, and his argument to the jury, intensified these natural prejudices. We do not think that this court should assume without proof that the jury were prejudiced against the defendant because it was a corporation, or because it was a foreign insurance corporation. The objectionable remarks and argument of counsel complained of were mostly of a personal nature directed to defendant’s counsel, and were not in every instance pertinent or courteous, but it would be going too far to assume that they influenced the verdict which the jury returned.

The judgment of the trial court is affirmed.

MoAlvay, Bbooke, Blair, and Stone, JJ., concurred.


text:
    PEOPLE, ex rel. ATTORNEY GENERAL, v. GALBRAITH.
    1. Public Oeetoers — Qualifications—Nurses—Board of Registration.
    A member of the board of registration of nurses, under Act No. 319, Pub. Acts 1909, must have five years’ experience as a professional nurse, which qualification is not met by experience gained at intervals before her graduation as a trained nurse while engaged in teaching school.
    2. Same — Governor—Appointing Power.
    The statute having prescribed the qualifications necessary to authorize an appointment, the governor is limited to the ap' pointment of persons possessing them, and the appointment of an ineligible person is a nullity.
    Quo warranto proceedings by the people of the State of Michigan, on the relation of John E. Bird, attorney general, against Alfreda Maude Galbraith to try the right of respondent to the office of member of the board of registration of nurses.
    Submitted June 20, 1910.
    (Docket No. 101.)
    Judgment of ouster entered September 28, 1910.

      John E. Bird, Attorney General (Or one & Norris, of counsel), for relator.

      Homer H. Quay, for respondent.
   Blair, J.

Information in the nature of quo warranto to test the right of respondent to hold the office of member of the board of registration of nurses provided for by Act No. 819, Pub. Acts 1909. Section 1 of the act prescribes the following qualifications for appointees:

“ Such appointees shall be chosen from the actual residents of this State, and, except the registered physician, from nurses who have graduated from reputable training schools, giving at least a two years’ course of training, served in hospitals of good standing, and who have had five years’ experience in nursing.”

It is conceded that respondent was, at the time of her appointment, of proper age, an actual resident of this State, and a graduate of a reputable training school giving at least a two years’, course of training. Counsel disagree as to whether she possessed the other required qualifications. The facts are agreed upon and present the following statement as to respondent’s experience in nursing:

“That on the 26th day of July, in the year 1906, the respondent was admitted to and entered the said training school for nurses, and continued in said training school until the 29th day of January, in the year 1909. That after her graduation from said high school, and prior to her admission and entrance to said training school for nurses on the 26th day of July, 1906, teaching school had been the respondent’s principal occupation, and she had •never been in any training school for nurses nor employed in any hospital or asylum prior to July 26, 1906, but she had done considerable gratuitous nursing for regular •reputable physicians in Cheboygan, Michigan, at occasional intervals of her school work, such intervals extending over a period of three years prior to her entering (said Butterworth Training School. Said physicians considered her a practical nurse. The schools of Cheboygan, in which she was a teacher during said three years, were in session during the years aforesaid for a period of 40 weeks in each year. * * * That the principal occupation of the said respondent from and after the 29th day of ■January, in the year 1909, to the date of this stipulation, has been nursing. That the respondent was appointed a .member of the State board of registration of nurses on '.September 8, 1909, by the governor of the State of Michigan. That the respondent filed her oath of office and ■qualified as a member of the State board of registration ■of nurses September 14-, 1909.”

We are of the opinion that the five years’ experience ■specified in the act as one of the qualifications for appointment on the board means an experience gained as a professional nurse, and that the occasional services performed by respondent during intervals in her regular profession as a teacher are not to be considered as any part of the required term. It follows that respondent was not eligible to appointment, and is unlawfully holding her office, ■unless, as suggested by counsel for respondent, “ Under the statute the governor of the State of Michigan is made the sole judge as to the qualifications of the applicant.” We do not regard this suggestion as well founded. The statute having prescribed the qualifications necessary to authorize an appointment, the appointing power is limited to the appointment of such persons as actually possess those qualifications, and the appointment of an ineligible person is a nullity. 29 Oye. p. 1374, subd. 5, and cases cited in note 5.

A judgment of ouster is ordered.

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


text:
    ANN ARBOR RAILROAD CO. v. MICHIGAN RAILROAD COMMISSION.
    Railroads —Michigan Railroad Commission —Statutes—Constitutional Law — Interstate Commerce.
    Rules promulgated by the Michigan Railroad Commission, establishing and enforcing demurrage rates, must be limited to commerce within the State, since section 8 of Act No. 300, Pub. Acts 1909, limits the authority of the commission to the regulation of transportation within the State of Michigan.
    Appeal from Wayne; Donovan, J.
    Submitted June 20, 1910.
    (Docket No. 87.)
    Decided September 28, 1910.
    Bill by the Ann Arbor Railroad Company and others against the Michigan Railroad Commission to enjoin the enforcement of certain rules. From an order sustaining a demurrer to the bill, complainants appeal.
    Reversed.

      Orla B. Taylor and Charles F. Delbridge {Henry Russel, O. jW. Butterfield, B. 8. Warren, Harrison Geer, L. C. Stanley, Seward L. Merriam and James McNamara, of counsel), for complainants.

      John F. Bird, Attorney General, and Hal H. Smith {Beaumont, Smith & Harris, of counsel), for defendant.
   Blair, J.

On January 1, 1909, the railroads of the lower peninsula of Michigan, which are members of the Michigan Oar Demurrage Supervising Bureau, promulgated and placed in force a set of demurrage rules. These rules were filed by each railroad with the Interstate Commerce Commission. During the year 1909 the National Association of Railroad Commissioners, composed of the railroad commissioners of the several States, and the Interstate Commerce Commission, had under consideration a proposed set of demurrage rules intended to be effective throughout the United States. These rules were finally adopted by the Association of Railroad Commissioners by majority vote, and were indorsed on December 18, 1909, by the Interstate Commerce Commission. They have since been adopted and filed by the various railroads as effective in most of the States, and the railroad commissions of many of the States have also adopted them.

The complainant railroads in this case decided to adopt these rules as the demurrage rules upon their various lines of railroad in the State of Michigan, and announced to shippers that they would become effective May 1, 1910, and each railroad has filed the rules with the Interstate Commerce Commission. On February 3,1910, the Michigan Railroad Commission, which did not agree with the National Association of Railroad Commissioners and the Interstate Commerce Commission, but felt that rules more advantageous to the shippers of Michigan should be adopted, promulgated another set of demurrage rules, and ordered that the same become effective on March 1, 1910. These rules apply to the loading and unloading of cars coming from or going to points in other States as well as to those whose travel is within the State. They were promulgated in the form of an order in a proceeding before the Commission commenced June 13, 1908, by the Michigan Manufacturers’ Association against the railroads which are complainants in this case, and in which no decision was made until after the adoption of the rules by the National Association of Railroad Commissioners. On March 1,1910, complainants filed the bill of complaint in this cause, praying that the Michigan Railroad Commission be restrained from enforcing the last mentioned rules as to interstate commerce for the following reasons:

“ (a) By the express terms of the act, under which said defendant exists, its jurisdiction, power, and authority are limited to the transportation of property between points within the State of Michigan and to the receiving, switching, delivering, storing, and handling of such property, and to all charges connected therewith, including icing and mileage charges.
“ (5) The legislature of the State of Michigan has never conferred, nor attempted to confer, upon the defendant jurisdiction, power and authority to promulgate and enforce demurrage rules as to interstate commerce, and property and cars in such commerce.
“(c) The legislature of the State of Michigan has never adopted, nor attempted to adopt, demurrage rules or laws relative to interstate commerce and property and cars in such commerce, and is without power so to do.
(d) Interstate commerce begins as a matter of law when the loading of the property intended for interstate shipment into the car is commenced, and does not end until the actual removal of the property from the car at final destination, and is during said entire period within the jurisdiction of congress and the Interstate Commerce Commission, and entirely beyond the jurisdiction of the legislature of the State of Michigan.
“(e) The legislature of the State of Michigan was and is without authority to enact section 8 of said Act No. 300,- Pub. Acts 1909, which provides that the defendant Commission shall have power to fix a reasonable per diem demurrage to be paid for the detention of cars by shippers or consignees, and said provision of said act is unconstitutional and void.
“(f) If said act and paragraph 8 thereof aforesaid or either of them are intended to apply to interstate commerce as defined by the acts of congress aforesaid, said act and said paragraph are in violation of paragraph 3 of section 8 of article 1 of the Constitution of the United States.
“(g) The Interstate Commerce Commission of the United States, which exists under and by virtue of act of congress of February é, 1887, as amended, has complete, sole, and exclusive jurisdiction, power and authority over the subject of demurrage upon interstate commerce as defined in said act, and upon property and cars in such interstate commerce, and the defendant has no jurisdiction, power, or authority with reference thereto.
“(h) Any demurrage rules whatsoever adopted and promulgated by the defendant Commission which constitute a burden upon or a regulation of commerce with foreign nations and among the several States are void for the reason that said Commission has no jurisdiction, power, or authority to adopt or enforce the same.
“(i) The demurrage rules promulgated by the defenddant (Exhibit C), if enforced, will constitute a burden upon, and regulation of, interstate commerce.”

The Railroad Commission filed a demurrer to said bill of complaint, and the issue as to its power and authority is clearly framed. The reasons set forth in the demurrer are as follows:

“(a) There is no equity in the bill contained.
“(b) The service for which the complainants make the demurrage charge, so called, and to which the demurrage rules, so called, apply, is intrastate commerce, and not interstate commerce, and therefore within the sole jurisdiction of the Michigan Railroad Commission.
“(c) The service for which the demurrage charge is made and to which the demurrage rules apply arises, in the case of an interstate shipment, either before the car becomes an instrumentality of interstate commerce or after it has ceased to be such instrumentality, and is therefore an intrastate service, and its regulation is within the sole jurisdiction of the Michigan Railroad Commission.
“(d) Demurrage rules do not directly affect interstate commerce, since they relate to matters arising either before the interstate movement begins or after it ceases.
“(e) Demurrage rules, if they at all affect interstate commerce, do so only indirectly, and may, therefore, in the absence of express action by the congress of the United States, be prescribed by the State authority.
“(f) The congress of the United States neither through itself nor through the Interstate Commerce Commission has prescribed rules governing demurrage and demurrage charges. The recommendations of the Interstate Commerce Commission are only advisory.
“(g) The rules promulgated by the Michigan Railroad Commission are regulations conducive to the comfort and convenience of the citizens of the State, and therefore •within the power of the Michigan Railroad Commission to make.
“(h) The rules promulgated by the Michigan Railroad Commission do not burden interstate commerce, but, even if it can be said that they indirectly burden it, they relate to matters merely incidental to interstate commerce and within the power of the State to regulate, at least in the absence of action by congress.
“(i) The act creating the Michigan Railroad Commission, in express terms and by implication, empowers that commission to make and prescribe reasonable demurrage rules, and such act and such provisions are valid and constitutional, and not in conflict with the Constitution of the United States or any part thereof.
“(j) The rules prescribed by the Michigan Railroad Commission are reasonable rules. Their natural and reasonable effect will be to assist the movement of interstate commerce and not to burden or hamper it.”

The circuit court sustained the demurrer and complainants appeal to this court.

The power to promulgate demurrage rules and tho duty to do so is expressly conferred and enjoined upon the defendant by section 8 of Act No. 300 of the Public Acts of 1909, entitled:

“An act to define and regulate common carriers and the receiving, transportation and delivery of persons and property, prevent the imposition of unreasonable rates, prevent unjust discrimination, insure adequate service, create the Michigan Railroad Commission, define the powers and duties thereof and to prescribe penalties for violation hereof.”

Section 3 of the act defines and interprets the terms used in and the scope of the act. Subdivision “ d” of the section reads as follows:

“ The provisions of this act shall apply to the transportation of passengers and property between points within this State, and to the receiving, switching, delivering, storing and handling of such property, and to all charges connected therewith, including icing and mileage charges.”

It is apparent, therefore, that, by the terms of the act creating the defendant and defining its powers, its authority to promulgate demurrage rules is expressly limited to cases where the property has been or is to be transported “ between points within this State.” It becomes unnecessary, therefore, to consider the power of the legislature to grant the authority claimed for the defendant or the other interesting questions discussed in the briefs of counsel, since the limitations of the act creating it negative any authority on the part of defendant to establish and enforce demurrage rules where the transportation is interstate. It follows that defendant’s demurrage rules musí be limited in their application to intrastate transportation.

The order sustaining the demurrer is reversed, and a decree may be entered in favor of complainants in accordance with this opinion, but without costs.

Ostrander, Hooker, McAlvay, and Stone, JJ., concurred.