text:
      In re FOX’S ESTATE.

    1. Taxation — Inheritance Tax — Nature—Statutes—Validity.
    An inheritance or succession tax is not a tax upon property, but upon the right or privilege of receiving property by inheritance, and constitutional provisions requiring equality and uniformity of property taxation do not apply to statutes by which inheritance taxes are imposed.
    3. Constitutional Law — Equal Protection of Laws —Constitutional Provisions — Construction.
    The principle that “all men are equal before the law, and that life, liberty, and property are secure to all alike,” upon which all State Constitutions are founded, is no broader in its scope and effect than the similar provisions of the Fourteenth Amendment, and no law which can be sustained under the provisions of the Federal Constitution can be said, in those respects, to violate our Constitution.
    8. Taxation — Inheritance Tax — Statutes —Validity—Class Legislation.
    Sections 1 and 3 of the inheritance tax law of 1908 (Act No. 195), which exempt from taxation transfers of personal property to lineal heirs where the value of the property so transferred is less than $3,000, and which tax the entire transfer of such property to such heirs without any exemption where its value is $3,000 or more, are not unconstitutional, as making an unjust discrimination, but are founded on a legal and proper classification, the members of each class being treated alike.
    A Same — Statutes — Construction — Adoption from Sister State.
    In determining the question whether, in ascertaining and fixing the amount of the inheritance tax, the debts of the testator secured by mortgages upon his real estate should be deducted from the personal property, the decisions of the New York courts are controlling.
    5. Same — Computation of Tax — Mortgages on Realty — Deduction.
    In computing the amount of an inheritance tax, the value of a mortgage upon the real estate must be deducted from the value of the real estate, and not from, the personal estate, notwithstanding the mortgage debt is presented as a claim against the estate and paid from the personalty.
    Case made from Kent; Sessions, J., presiding.
    Submitted April 13, 1908,
    (Docket No. 59.)
    Decided September 10, 1908.
    John F. Wilkinson, deputy auditor general, appealed to the circuit court from an order of the probate court determining the amount of inheritance tax due the State from the estate of E. Crofton Fox, deceased. There was judgment overruling the order of the probate court, and the estate appeals.
    Affirmed.

      Kleinhans & Knappen, for appellant.

      John E. Bird, Attorney General, and Thomas Ambrose Lawler, Assistant Attorney General, for appellee.

       Rehearing pending.

   McAlvay, J.

“ It is hereby stipulated that the issues in this cause are set forth in the'pleadings filed herein, and that the following facts, based upon the record and files which are made a part hereof, shall be taken as true, and that neither party hereto shall be required to prove any of the said matters otherwise than by this stipulation, namely:
“E. Crofton Fox, a resident of the city of Grand Rapids, State of Michigan, died on March 1, 1904. By his last will and testament, which was duly admitted to probate, he devised and bequeathed to Elizabeth B. Nichols, his sister-in-law, the sum of ten thousand dollars ($10,000); to Butterworth Hospital, a charitable corporation, two thousand dollars ($2,000); and the balance of his estate to his brother, Charles Fox, a considerable portion p£ which latter bequest being left in trust for the benefit of the said Charles Fox, instead of being given to him absolutely. His property was inventoried after his death as follows:
“Real estate_________________________________$196,280 00
Personal estate_____________________________ 121,170 65
After the inventory personal property was found and added to the estate to the amount of___________ 1,489 18
“The court allowed the following expenses and claims, viz.:
“ Funeral expenses...........-................ $220 05
Administration expenses..-___________________ 1;249 68
Claims________________________- -........... 80,757 56
“ Among the claims allowed was a note for fifty thousand dollars ($50,000) made by the said deceased to the Michigan Trust Company of Grand Rapids, Mich., dated May 81, 1895, with interest at 5 per cent., and secured by a mortgage on certain of the real estate of said deceased in the city of Grand Rapids, which said real estate passed into the trust created by the will for the benefit of the said brother, Charles Fox. The Michigan Trust Company filed a claim for this note, and it was allowed .by the probate court at the sum of $50,568.75.
“ The probate court on July 11, 1905, determined the inheritance tax upon the net value of the personal estate, which he found to be $40,432.49, after deducting all of the claims and expenses above mentioned, as follows:
“Charles Fox (brother), real estate............$196,380 00
No tax.
Charles Fox (brother), personal estate.....- 28,432 39
Deduction__________________________________ 5,000 00
$23,432 39
Tax at 1 per cent. ......................... 234 32 Elizabeth B. Nichols (sister-in-law)
Personal estate............................ 10,000 00
Tax at 5 per cent.......................... 500 00
Butterworth Hospital, personal estate........ 2,000 00
Exempt corporation — no tax.”

Said cause came on to be tried in the circuit court for the county of Kent, before the Honorable Clarence W. Sessions, circuit judge, presiding, and was tried by the court upon the stipulation as to facts without a jury. Later the court filed its conclusions of law in writing, upon which a judgment was entered against the estate. The estate filed exceptions to the conclusions of law of the court, and upon these exceptions errors were duly assigned. A reversal of the judgment is asked on the ground of such errors claimed to have been committed by the court.

The probate court held that sections 1 and 2 of Act No. 195, Pub. Acts 1903, were unconstitutional and void, for the reason “that they deny to persons the equal protection of the laws, and provide unjust discrimination instead of a uniform rule of taxation, contrary to the provisions of the Constitution of the United States and the State of Michigan.” He therefore made his determination of the amount of the inheritance tax due to the State from the estate under the law of 1899, to which the act of 1903 above referred to was an amendment. The probate court also held that the value of the real-estate mortgage should be deducted from the clear market value of the personal property, instead of deducting the same from the value of the real estate. Upon both propositions the circuit court reversed the order and decree of the probate court. For the convenience of the profession we quote from the statute of 1903 the amended sections 1 and 2, the validity of which is challenged upon constitutional grounds:

“ Section 1. That after the passage of this act a tax shall be and is hereby imposed upon the transfer of any property, real or personal, of the value of one hundred dollars or over, or of any interest therein or income therefrom, in trust or otherwise, to persons or corporations not exempt by law from taxation on real or personal property, in the following cases:
“First. When the transfer is by will or by the intestate laws of this State from any person dying seised or possessed of the property while a resident of this State;
“Second. When the transfer is by will or intestate law of property within the State, and the decedent was a nonresident of the State at the time of his death;
“Third. When the transfer is of property made by a resident or by nonresident, when such nonresident’s property is within this State, by deed, grant, bargain, sale or gift made in contemplation of the death of the grantor, vendor or donor or intended to take effect, in possession or enjoyment at or after such death. Such tax shall also be imposed when any such person or corporation becomes beneficially entitled in possession or expectancy to any property or the income thereof by any such transfer, whether made before or after the passage of this act. Such tax shall be at the rate of five per cent, upon the clear market value of such property, except as otherwise prescribed in the next section.
“Sec. 2. When the property or any beneficial interest therein passes by any such transfer to or for the use of one or more of the following named persons: Father, mother, husband, wife, child, brother, sister, wife or widow of a son, or the husband of a daughter, or to or for the use of any child or children adopted as such in conformity with the laws of this State of the decedent, grantor, donor, or vendor, or to or for the use of any persons to whom any such decedent, grantor, donor, or vendor, for not less than ten years prior to such transfer stood in the mutually acknowledged relation of a parent, or to or for the use of any lineal descendant of such decedent, grantor, donor, or vendor, such transfer of property shall not be taxable under this act, unless it is personal property of the clear market value of two thousand dollars or over, in which case the entire transfer shall be taxed under this act at the rate of one per cent, upon the clear market value thereof. The exemptions of sections one and two of this act shall apply and be granted to each beneficiary’s interest therein, and not to the entire estate of a decedent.”

The learned trial judge, in his conclusions of law filed in the case, has fully discussed both questions involved, and it appearing to this court that his conclusions of law are correct and supported by the clear weight of the authorities, and that he has distinguished this case from the cases cited and relied upon by the appellant, we adopt such conclusions as the opinion of this court:

“The facts in this case have been agreed upon and are set forth in a written stipulation which has been filed, and need not be herein again stated. There are two questions of law to be determined:
“First. Are the provisions of sections 1 and 2 of the inheritance tax law (Act No. 195, Pub. Acts 1903) unconstitutional? and,
“Second. In computing and fixing the amount of the inheritance tax, shall the value of a mortgage upon real estate be deducted from the value of such real estate, or shall the amount of the debt secured by such mortgage be deducted from the value of the personal estate ?
“1. It is now settled beyond controversy that an inheritance or succession tax is not a tax upon property, but is a tax upon the right or privilege of receiving property by inheritance, and that constitutional provisions requiring equality and uniformity of property taxation do not apply to statutes under and by which inheritance taxes are imposed. Therefore, in the determination of the question under consideration, the provisions of our State Constitution requiring a uniform rate of taxation of property can be disregarded. Counsel for appellee have not pointed out any specific provision of our State Constitution, and I apprehend none can be found, which requires either uniformity or equity in tfie taxation of the privilege of receiving property by inheritance. But every Constitution in the Union is founded upon the principle ‘ that all men are equal before the law, and that life, liberty, and property are secured to all alike.’ Such principle, however, is no broader in its scope and effect than the provisions of the Fourteenth Amendment of the United States Constitution, and no law which can be sustained under such provisions of the Federal Constitution can be held, in those respects, to violate either the letter or the spirit of our State Constitution.
“ Counsel for appellee contend that the provision of the act of 1903 which exempts from taxation transfers of personal property to lineal heirs where the value of the property so transferred is less than $2,000, and which taxes the entire transfer of such property to such heirs without any exemption where its value is $2,000 or more, is not a proper and legal classification, but, on the contrary, is an unjust discrimination.
“Counsel for appellant contends that the classification made by this provision of the statute is a proper and legal one, and that the law operates uniformly upon all within the same class, and thus fulfills the requirements of both the Federal and State Constitutions.
“ This statute creates two main classes; the first being composed of lineal heirs and near relatives of the testator or intestate, and the second of distant relatives and strangers. The former is again divided into two subclasses dependent upon the amount of the estate received. Classifications based upon relationship and also upon the amount transferred have been sustained in the Federal courts and in our own and many other State courts. If the constituents of each class or subclass are affected alike by the statute, the rule of equality prescribed by constitutional provisions and defined by the courts in construing those provisions is satisfied. Tested by this rule, it is evident that the statute under consideration meets the constitutional requirements. The members of each class are treated alike; that is to say, all lineal heirs who inherit less than $2,000 are exempt, and all lineal heirs who inherit personal property of the value of $2,000 or over are taxed 1 per cent, of such value for the privilege of receiving such inheritance. The person who inherits less than $2,000 is not in the same class with the person who inherits $2,000 or over. Hence the rule requiring uniformity among members of the same class is not violated. There is equality within the classes, and that is all that is required. The fairness and justice of such a provision are matters for legislative, and not judicial, consideration.
“Moreover, there is no difference in principle between the statute under consideration and a statute imposing a progressive rate of taxation. In other words, there is no difference in principle between a statute which permits a person to receive an inheritance of less than $2,000 without taxation and requires him to pay a tax upon the transfer if the inheritance amounts to or exceeds $2,000, and a statute which imposes a tax at one rate upon the transfer of property of the value of less than $2,000 and a tax at' another and larger rate upon the entire transfer of property of the value of $2,000 or more. The same inequality exists in the one case as in the other, and, if there is unjust discrimination in the one case, there is also in the other. The difference is one of degree, and not of principle. But classification based upon a progressive rate of taxation of inheritance has been sustained by many courts, including the Supreme Court of this State. '
“The Illinois statute provides for a progressive rate of taxation on legacies to strangers to the blood of the testator as follows: On all legacies of $10,000 and less, 3 per cent.; on all legacies of over $10,000, and not exceeding $20,000, 4 per cent.; on all legacies of over $20,000, and not exceeding $50,000, 5 per cent.; and on all legacies over $50,000, 6 per cent. The validity of that statute has been sustained by both the supreme court of the State of Illinois and the Supreme Court of the United States. The decision of the latter court has received the express approval of the Supreme Court of this State. In Magoun v. Savings Bank, 170 U. S. 283, 300, the Supreme Court of the United States said:
“ ‘ It is said that the tax is not in proportion to the amount, but varies with the amounts arbitrarily fixed, and hence that an inheritance of $10,000 or less pays 3 per cent, and that one over $10,000 pays, not 3 per cent, on $10,000, and an increased percentage on the excess over $10,000, but an increased percentage on the $10,000 as well as on the excess; and it is said, as we have seen, that in consequence one who is given a legacy of $10,001, by the deduction of the tax receives $99.04 less than one who is given a legacy of $10,000. But neither case can be said to be contrary to the rule of equality of the Fourteenth Amendment. That rule does not require, as we have seen, exact equality of taxation. It only requires that the law imposing it shall operate on all alike, under the same circumstances. The tax is not on money. It is on the right to inherit, and hence a condition of inheritance, and it may be graded according to the value of that inheritance. The condition is not arbitrary because it is determined by that value. It is not unequal in operation because it does not levy the same percentage on every dollar— does not fail to treat “ all alike under like circumstances and conditions both in the privilege conferred and the liabilities imposed.’”
“See, also, Knowlton v. Moore, 178 U. S. 41; Campbell v. California, 200 U. S. 87; Union Trust Co. v. Wayne Probate Judge, 125 Mich. 487; Stellwagen v. Wayne Probate Judge, 130 Mich. 166; Kochersperger v. Drake, 167 Ill. 122 (41 L. R. A. 446); Appeal of Nettleton, 76 Conn. 235; In re Magnes' Estate, 32 Colo. 527; State v. Alston, 94 Tenn. 674 (28 L. R. A. 178).
“Counsel for appellee cite and rely upon the following authorities as sustaining their contention: Black v. State, 113 Wis. 205; State v. Ferris, 53 Ohio St. 314 (30 L. R. A. 218); Drew v. Tifft, 79 Minn. 187 (47 L. R. A. 525); State, ex rel. Frye, v. Bazille, 87 Minn. 503.
“ Because of the peculiar provisions of their respective constitutions, the courts of Minnesota, New Hampshire, Ohio, and Wisconsin are not in entire harmony in their decisions with the Federal and other State courts, including our own. As was said by the supreme court of Minnesota in the Drew Case:
“ ‘Minnesota is, so far as we are advised, the only State whose constitution in express terms limits the power of the legislature in the laying of an inheritance tax.’
“And, again:
‘“We therefore hold that by virtue of section 1, art. 9, of our State constitution, as it now stands, the requirement of equality in taxation applies to inheritance taxes exactly as it does to taxes on property, except as expressly provided in the last proviso thereto. In reaching this conclusion we have not overlooked the fact that it is contrary to the great weight of authority in other States. But our constitution in this particular is unique, and its mandate is so clearly expressed as to leave no doubt as to its meaning; hence the decisions of the courts of other States are not in point.’
“ In the recent case of State, ex rel. Foot, v. Bazille, 97 Minn. 11 (6 L. R. A. [N. S.] 732), the same court has explained and somewhat modified its former holdings. The same may be said of the Wisconsin and Ohio courts in their recent utterances: Nunnemacher v. State, 129 Wis. 190 (9 L. R. A. [N. S.] 121); State v. Guilbert, 70 Ohio St. 229.
“But, aside from differences in constitutional provisions upon which the decisions of the several courts are founded and by which they are controlled, the authorities upon which counsel for the estate rely do not sustain their contention. The precise question here involved was not determined in any of the cases cited. In each of these cases the power of the legislature to classify the beneficiaries of estates of decedents, both according to relationship and according to the value of the property received, is upheld. The right to create exemptions is conceded, and the power to provide for a progressive rate of taxation of inheritances is sustained. The courts agree that the constitutional rule of equality and uniformity is complied with if all members of the same class are treated alike. The differences among courts arise only in the application of that rule. In the Black Case the supreme court .of Wisconsin held that the inheritance tax law of that State was unconstitutional, ‘ for the reason that it provided for unlawful discrimination, in that a beneficiary receiving a legacy or inheritance from an estate under $10,000 paid no tax, while a beneficiazy standing in exactly the same relation to the decedent receiving a legacy or inheritance of the same amount from an estate exceeding $10,000 was obliged to pay a tax.’ This discrimination which the court there held to be unlawful arose from the fact that the exemption of $10,000 allowed by that statute applied to the whole estate, and not to the share of each beneficiary. The same line of reasoning, if it had been adopted, would have compelled our Supreme Court to find that the Michigan inheritance tax law of 1899 was unconstitutional, :and would have compelled the Supreme Court of the United States to declare invalid the inheritance tax laws of Illinois and New York, as well as the Federal revenue act of like character. However, no such objection can be urged against the statute now under consideration. The Michigan law of 1903 provides in express terms that the exemptions shall apply and be granted to each beneficiary’s interest in the estate, and not to the entire estate. All persons standing in the same degree of relationship to the decedent and receiving the same amount are treated alike. There is thus no ground for claiming that this law provides for any discrimination between members of the same class of beneficiaries even under the holdings of the Wisconsin and Ohio courts.
“2. In determining the question of whether or not, in ascertaining and fixing the amount of the tax, the debts of the testator secured by mortgages upon his real estate should be deducted from the personal property, the decisions of the New York courts are controlling, unless such decisions are made inapplicable by reason of the existence of other statutes of that State. The language of the supreme court of New York in Re Sutton’s Estate, 3 App. Div. (N. Y.) 208, 212, is peculiarly applicable'to the case at bar:
‘“It is of no importance to the executor or beneficiaries, except for the purpose of determining the tax, from which fund the mortgages shall be paid; and they cannot be permitted to be paid from the personal estate for the sole purpose of increasing the exemption of real estate, and decreasing the amount of the tax to be paid. The testator has transferred his whole estate as a single fund, for the use and benefit of his children. In holding that, for the purpose of determining the tax, the real estate owned by the testator at the time of his death must be treated as such, we could not extend that exemption beyond the value of the testator’s interest therein. It was such interest only that was transferred, and which will be held for the use of the beneficiaries, and such only that can be held to be exempt.’
“It is urged, however, that the holdings of the New York courts cannot be of binding effect here because they are based upon a statute of that State which requires the heir or devisee of real estate incumbered by mortgage to pay such mortgage out of his own property without resorting to the executor or administrator of his ancestor, unless there be an express direction in the will of such testator that such mortgage shall be otherwise paid. But the courts of that State have determined the question adversely to this contention, both independently of the statute and in cases where the will of the testator expressly directed the payment of the mortgage debt out of his personal estate. In Re Livingston, 1 App. Div. (N. Y.) 568, the court said:
“ ‘ Whether treated under the common-law rule, or under the statute, the practical question is: Shall the heir or devisee satisfy the mortgage, or shall that burden be borne by others interested in the personalty ? No such question can arise when the real and personal property are in the same hands. If the legatee chooses to apply his personalty to the satisfaction of the mortgage, he benefits his real estate pro tanto. He neither gains nor loses by its application or nonapplication. The payment of the mortgage would amount substantially to an investment of the personalty in the real estate. * * * The tax was imposed by the statute upon the “transfer” of the property. (Laws 1893, chap. 399, § 3.) That transfer was effected by the death of the testator, and the tax became due and payable immediately. The subsequent act of the executor had no greater effect to reduce the taxable personalty than would the taking of the money by the beneficiary out of one pocket and putting it into the other.’
“ In Re Offerman's Estate, 25 App. Div. (N. Y.) 94, the testator specifically directed his executor to pay out of his personal estate any and all mortgages upon his real estate, yet, in fixing the amount of the transfer tax upon personal property, the court refused to permit the deduction of the debts secured by mortgages upon real estate.
“In re Pullman's Estate, 46 App. Div. (N. Y.) 574, and In re Burden's Estate, 95 N. Y. Supp. 972, are instructive cases, and from them the rule may be deduced that, where debts of the decedent are secured by mortgage or pledge of nontaxable property, such debts cannot be offset against personal property taxable under the inheritance or transfer tax law.
“ It follows that the probate judge was in error in determining that sections 1 and 2 of Act No. 195 of the Public Acts of 1903 are unconstitutional, and that the transfer of $5,000 of the personal property in said estate is exempt from any inheritance tax, and also in determining the clear market value of taxable transfers in said estate by deducting the real estate mortgage valued at $50,568.75 from the value of the personal property instead of from the value of the real property in said estate. The order of the probate judge will be reversed, and judgment entered imposing a transfer tax of 1 per cent, upon such amounts of $5,000 and $50,568.75 in addition to the amounts of such tax as fixed and determined by the probate judge. The order and judgment of this court will be certified to the probate court in the manner provided by the statute.”

The order and judgment of the circuit court is affirmed.

Grant, C. J., and Blair, Montgomery, and Carpenter, JJ., concurred.


source: Caselaw Access Project

author: McAlvay, J.

license: Public Domain

text:
    MASTENBROOK v. UNITED STATES ACCIDENT ASS’N.
    1. Appeal and Error —Review—Findings of Fact— Conclusiveness.
    A finding of fact, where a case is tried by the court without a jury, is treated as a special verdict, and is conclusive if there is evidence to sustain it.
    2. Accident Insurance — Action on Policy — Limitations — Waiver.
    In an action on an accident insurance policy, evidence examined, and held, to support the finding of facts and conclusion of law that a clause in the policy limiting action thereon to six months from the date of the injury had been waived by defendant.

      Error to Kent; Perkins, J.
    Submitted April 16, 1908.
    (Docket No. 106.)
    Decided September 10, 1908.
    Assumpsit by Jacob Mastenbrook against the United States Accident Association on a policy of insurance. There was judgment for plaintiff, and defendant brings error.
    Affirmed.

      Heald & Montgomery, for appellant.

      Charles A. Watt, for appellee.
   McAlvay, J.

Plaintiff sued defendant, a Michigan corporation, in justice’s court in the city of Grand Rapids, upon a certain policy of insurance issued to him, and recovered a judgment of $142 damages, together with costs of suit. Defendant appealed to the circuit court for Kent county, where the case wás tried before the court without a jury. The court made and filed his findings of fact and conclusions of law, and in accordance therewith a judgment was entered against defendant. Amendments were proposed to these findings and conclusions of the court by defendant, which were refused. Exceptions were then taken to the refusal of the court, as well as to the facts and conclusions objected to. Upon these exceptions errors are duly assigned, and a reversal is asked of this court by defendant.

The following are the findings of fact and conclusions of law referred to:

"The parties in this cause being in court by their respective attorneys ready for trial, and the issue joined therein having been brought on for trial before the court without a jury, and the said court, having heard the proofs and allegations of the parties and the arguments of counsel, after mature deliberation thereon finds the following facts, viz.:
"(1) That said defendant company did, on the 8th day of March, 1904, issue to said plaintiff a certain health and accident policy, being numbered 14,593, therein insuring said plaintiff as a hotel keeper proprietor in ‘ Class B,’ subject to the limitations and conditions named on the back of said policy, which were made a part of said contract, against the loss of time by reason of accidental injuries, sickness, or death while said policy should remain in force, and agreeing to pay said plaintiff, in case of accident, in accordance with the provisions of said policy.
“(2) That said policy on its face contained the following clauses: First. ‘At the rate of one hundred dollars per month against loss of time for any period of temporary total disability, not exceeding twelve consecutive months, resulting from bodily injuries effected through external and accidental means, which shall independently of all other causes immediately, wholly and continuously disable him from transacting any kind of labor or business;’ and, second, ‘ or for partial loss of time by reason of a material but not, total disability, or a disability not resulting immediately after the accident, indemnity shall be paid at the rate of one-fifth of the monthly accident indemnity as above mentioned, for continuous disability not to exceed twelve months. Indemnity will be paid for partial disability succeeding total disability, but the combined period of both shall not exceed twelve months.’
‘ ‘ (3) That said policy on the back thereof contained the following limitation or condition:
“ ‘Section 8. Immediate written notice must be’given to the secretary of the association at Detroit, Michigan, of any accidental injury or illness for which claim may be made under the contract, with full particulars of the accident or illness; and failure to give such written notice within ten days from date of accident or beginning of illness shall invalidate all claims under this contract. And no proceedings at law or in equity shall be brought to recover any sum unless the same is commenced within six months from the date of the alleged accidental injury, illness or death.’
“ (4) That on the first day of July, 1905, and while said policy was in full force and effect, the said plaintiff sustained an accidental injury, whereby the second joint of the second finger on his left hand was broken and crushed, and that, in consequence thereof, the said plaintiff was obliged to and did call in a physician, by whom the same was necessarily treated on the following days: July 3d, 7th, 10th, 15th, 19th, 25th, August 6th, 18th, and 30th, September 9th and 20th, October 14th and 26th, November 3d and 7th, December 1st and 29th, of the year 1905, and on January 15tb, February 16th, and March 16th, of the year 1906. That besides the foregoing treatments, subsequent treatments were had at various times, the dates of which are not given, but all of said treatments were had at the office of the physician, and none of them at the residence of the plaintiff. That plaintiff suffered great pain from said injury, extending over a period of more than 12 months, though in a gradually lessening degree, but that he never fully recovered from the injury, as the finger is still deformed, stiff, and weak and occasionally painful.
“ (5) That plaintiff was engaged in the business of running a hotel in the small village of Grandville, in connection with which were a bar and livery stable, and that he himself took an active part in the work of the various departments, engaging only such help as was necessary, with his own labor, to do the work entailed. That his duties consisted in receiving guests, attending the bar, and waiting on customers, handling baggage, frequently the ordinary barn work, and taking care of the horses of customers, opening the hotel, etc., the early mornings, buying stock for the bar, and taking cash and paying bills. That from the first day of July, 1905, to August 12, 1906, the plaintiff was wholly unable to do any manual labor, but was not confined to his bed. That he was able to be around and partially superintend the running of the hotel, and to receive guests, handle cash, pay bills, and give such attention to his business for short periods of time as did not require any muscular exertion. That from August 12, 1905, to March 16, 1906, the plaintiff was partially disabled by reason of said accident, as the said finger continued weak, painful, and stiff and deformed, and interfered with the performance of his duties as such hotel keeper.
“(6) That said plaintiff, by reason of the aforesaid accidental injury, sustained a material, but not total, disability from July 1, 1905, to March 16, 1906.
“ (7) That immediately after receiving this injury, the plaintiff gave written notice to defendant company of the same, in which he complied with all the requirements of the defendant in that regard. That no other or final proofs of loss are required by the terms of the policy. That no steps were taken by the defendant to adjust or reject the claim for indemnity, and that in September, 1905, the plaintiff and the general agent, located at Grand Rapids, Mich., were in Detroit, and called on the general manager of defendant about this claim, and were informed by the general manager, one A. C. McGraw, that the claim would be adjusted when the final proofs were filed. That plaintiff afterwards consulted the defendant’s general agent at Grand Rapids, one Miles B. Campbell, as to when he should file his final proof of claim, and was fold by said Campbell to wait until he knew how long the injury would last, or, in the language Campbell used, ‘until he got well.’ That in March, 1906, the plaintiff, although not then recovered from his injury, determined to file a final proof of claim, and called on the general agent, Campbell, for the blank. That on March 12,1906, Campbell wrote to defendant’s head office in Detroit, asking for an accident blank for final proof of claim for plaintiff, and on March 13, 1906, the defendant wrote Campbell as follows : ‘We herewith inclose you the final accident blanks for J. Mastenbrook as per your request ’ — and at the same time inclosing this blank, which plaintiff caused to be filled out and properly executed at some expense to himself, and forwarded same to defendant. That the same was received by defendant on March 19, 1906, and was filed, and a letter written as follows:
“ ‘Detroit, Michigan, April 13, 1906.
“ ‘Mr. J. Mastenbrook,
“ ‘ Grandville, Mich.
‘Dear Sir: Your communication of the 26th hit. received inclosing your final blank for disability, dating July 1, 1905, and we have referred same to the claim department, who will give it their usual prompt investigation and return. Trusting this arrangement is entirely satisfactory, we beg to remain,
“ ‘Very truly yours,
“ ‘The United States Accident Ass’n,
“ ‘By O. E. Hangstereer, Treas.’
“That said final proof was executed on March 16,1907, and contained the following provision:
“ ‘ I understand and agree that the neglect of said association to pay said claim within sixty days from the date hereof shall, at the expiration of said sixty days, be construed by me as a refusal on part of said association to pay this claim, and in the event of the refusal, by notice or neglect of said association to pay said claim, I agree that no suit or proceedings at law shall be commenced or maintained for said injury unless the same shall be commenced within thirty days from the date of said refusal.’
“(8) That said so-called final proof showed that the plaintiff was injured July 1, 1905, and claimed for a total disability from that date to August 18, and from that date to March 16th, the date of the final proofs, for a partial disability. No objection was made by the defendant that the proof was too late, or on any other ground. From time to time plaintiff inquired of the general agent, Campbell, about the status of his claim, and was always informed by Campbell that the claim would be adjusted and paid. The defendant’s local attorney, Mr. Smedley, made different attempts to get a settlement with plaintiff, and in fact negotiations were pending for a settlement between the parties up to August 16, 1906, during which time the contention between the parties was whether the plaintiff was entitled to indemnity for total or partial disability. At no time was the plaintiff notified that the defendant rejected the claim or denied liability. That suit was brought August 88, 1906.
“As conclusions of law from the foregoing facts the, court finds:
“First. That said policy was a valid policy on and after July 1, 1905.
“Second. That said plaintiff sustained a material accidental injury on July 1, 1905, from which cause he suffered a partial loss of time by reason of such material, but not total, disability from July 1, 1905, for a period of 8-£- months.
“ Third. That the defendant has by its acts waived any right to claim that this suit was not brought within six months from the date of the accident or 90 days from date of filing final proofs of loss.
“Fourth. That defendant is liable to the plaintiff in the sum of $80 per month for such period, with interest at 5 per cent, from March 16, 1906, to date. '
Fifth. That plaintiff is entitled to a judgment for the sum of $180.95, with costs of suit to be taxed, including an attorney fee of $85.
“Willis B. Perkins, Circuit Judge.”

Defendant, waiving all other exceptions, relies upon the following:

(1) The action was barred by the terms of the policy, and there was no waiver.

(2) The action was barred by the terms of the final proof, and there was no waiver.

(3) The judgment should have been, no cause of action.

(4) Errors committed by the court in receiving evidence.

The first proposition rests upon the following clause contained in the policy:

“And no proceedings at law or in equity shall be brought to recover any sum unless the same is commenced within six months from the date of tbe alleged accidental injury, illness or death.”

The second proposition rests upon the following clause, in the blank for final proofs furnished by defendant:

“ I understand and agree that the neglect of said association to pay said claim within sixty days from the date hereof shall, at the expiration of said sixty days, be construed by me as a refusal on part of said association to pay this claim, and in the event of the refusal by notice or neglect of said association to pay said claim, I agree that no suit or proceedings at law shall be commenced or maintained for said injury unless the same shall be commenced within thirty days from the date of said refusal.”

Both of these propositions will be disposed of adversely, if, from the evidence in the case, the trial court was correct in holding that defendant had waived the limitation of six months provided in the policy. The law is well established that a finding of fact, where a case is tried by the court without a jury, is to be treated as a special verdict, and is conclusive if there is evidence to sustain it. The findings in this case bearing upon the questions now under discussion are the ?th and 8th, contained in the findings of the court, supra. An examination of the record shows that there was evidence in the case tending to support such findings. The conclusion of law upon such findings that the limitation of six months provided in the policy had been waived by defendant is the logical and correct conclusion-to be drawn from the facts found. It is not necessary to pass upon the effect of the limitation clause in the proofs of loss, ánd we refuse to consider it. The evidence allowed in the case, over the objections and exceptions of defendant, numbered 1, 2, and 3, was material to the issue, and all related to the question of waiver. There was no error in admitting it.

The judgment of the circuit court is affirmed.

Grant, C. J., and Blair, Hooker, and Carpenter, JJ., concurred.


author: Carpenter, J. Montgomery, J.

text:
    ALDRICH v. SCRIBNER.
    1. Fraud — Misrepresentations—Scienter—Necessity.
    In this State, in order to constitute fraud, it is not necessary that the person making the statement should either know that it is untrue or be recklessly and consciously ignorant whether it be true or untrue, but it is sufficient if the representation be false in fact, and the person making it is a party to the contract and profits by the other’s loss. Montgomery, Blair, and Ostrander, JJ., dissenting.
    2. Same — Liability—Extent of Profit.
    The liability of a vendor, who deceives a purchaser by erroneous statements of fact made in good faith, to make good to such purchaser the loss accruing to him by reason of the property being worth less than it would have been worth had the statements been true, is not affected by the consideration that the purchaser may have paid less than the property would have been worth, and that therefore the purchaser may have lost more than the vendor gained by the transaction. Montgomery, Blair, and Ostrander, JJ., dissenting.
    Error to Wayne; Donovan, J.
    Submitted April 17, 1908.
    (Docket No. 128.)
    Decided September 10, 1908.
    Case by Frank Aldrich and Sarah E. Aldrich against Enoch W. Scribner for fraud and deceit. There was judgment for defendant on a verdict directed by the court,, and plaintiffs bring error.
    Reversed.

      Palmer & Palmer, for appellants.

      Clark, Jones & Bryant, for appellee.
   Carpenter, J.

For a statement of this case see 146 Mich. 609. The case has been retried, and a verdict directed in defendant’s favor. ' The false representations relied upon as a basis of recovery were made to plaintiff by Barnard & McCloud, real estate brokers. I think there is evidence in the case that Barnard & McCloud were acting as defendant’s agents at the time these representations were made. Moreover, plaintiff Frank Aldrich testified that the defendant, “Scribner, asserted that those representations Barnard had made to me were true.” The testimony also shows that defendant, Scribner, had never seen the land in question, and that this circumstance was known to plaintiffs, and there is also evidence that the representations were relied upon by the plaintiffs, and were untrue in fact. The question arises, assuming de-, fendant, Scribner, to have acted in good faith, Is he liable on the ground of fraud ? I can discover no legal difference favorable to defendant between this case and that of Busch v. Wilcox, 82 Mich. 315. There defendant, Wilcox, was held responsible in an action of fraud for misrepresentation respecting the timber upon a certain piece of land. The misrepresentation was made by defendant’s agent, Hall, who had never seen the land, and the following charge to the jury was approved:

“ If you find that Mr. Hall, acting as agent for Wilcox, knew that Busch did not know the quantity of the timber upon the land in question, * * * and expected that' Mr. Busch would, in entering upon the agreement, rely upon such information as he (Hall) might give him, and you further find that Hall did, in good faith, make material representations as to quality and quantity of timber to be lumbered, and at the same time he made such rep-reservations stated that he made them upon Mr. Van Riper’s estimates, which he believed to be correct, and that Mr. Busch, relying upon such representations, did enter into the agreement of September 33d, and you further find that there was not upon the land the timber, either in quantity or quality, as represented, the plaintiff would be entitled to recover.”

Holcomb v. Noble, 69 Mich. 396, is also in point. There defendant and plaintiff exchanged lands. In making this exchange plaintiff relied on certain representations of fact respecting the pine on the land transferred to him by defendant. These representations were based — and this was understood by plaintiff — upon the reports of a land looker, and defendant told plaintiff “that all he knew about the land was what he learned from the land looker.” Defendant believed these representations to be true. They were in fact false, and plaintiff sustained damages by his reliance thereon. An action of fraud was brought, and it was held that plaintiff could recover. There were two opinions in the case, one written by Justice Campbell and concurred in by Justice Champlin, one written by Justice Morse and concurred in by Chief Justice Sherwood. In the opinion of Justice Campbell it is said:

“It is admitted that in equity an actual design to mislead is not necessary if a party is actually misled by another in a bargain. There was abundant evidence in this case to authorize the jury to find that defendant, whether honestly or dishonestly, expected plaintiff to act on his representations of the reliableness of the reports which he produced, and that plaintiff did rely on them. There is no reason for a difference in action, in such cases, between courts of law and courts of equity. Where an equitable cause of grievance exists, it in no way differs from a legal one, unless a different remedy is needed. A court of law cannot cancel a contract, and for such a purpose the equitable remedy must be sought. But where the relief desired is compensation for the wrong, the equitable remedy is much less appropriate, and an action in equity for mere damages will generally be denied, but denied only because the legal remedy is better. If there could be no legal remedy, there can be no doubt that equity would act. If the fraud is such that it creates a right of action anywhere, an action must lie on the case where a money judgment is needed.”

I now quote from the opinion of Justice Morse, concurred in by Chief Justice Sherwood :

“ I was strongly impressed, upon the argument of this case, with the theory of the defendant, supported by abundant authority outside of our own State, that unless the jury found that the representations, relied upon by the plaintiff as false, were made by the defendant, Noble, knowing them to be false, or he made the statements as facts within his own knowledge, when he was ignorant of the truth or falsity of them, he could not be held liable in this action; that if he told plaintiff that he had never seen the lands, but that he had had the same examined by a competent land looker, who said that there were 5,000,000 feet of pine on the land, and made no representations as of his own knowledge, the plaintiff could not recover. A subsequent careful examination of the case, and the authorities cited by defendant’s counsel, has but confirmed me in the correctness and justness of his claim. I am satisfied that the law ought not to make a different contract for the seller than he sees fit to make for himself, and hold him, in eftect, for warranties that he never made. But an equally careful examination of the cases adjudicated in this State satisfies me that the doctrine is settled here, by a long line of cases, that if there was in fact a misrepresentation, though made innocently, and its deceptive influence was effective, the consequences to the plaintiff being as serious as though it had proceeded from a vicious purpose, he would have a right of action for the damages caused thereby either at law or in equity Baughman v. Gould, 45 Mich. 483; Converse v. Blumrich, 14 Mich. 109; Steinbach v. Hill, 25 Mich. 78; Webster v. Bailey, 31 Mich. 36; Starkweather v. Benjamin, 32 Mich. 305; Beebe v. Knapp, 28 Mich. 53.”
I think these decisions are indistinguishable from the case at bar, and require us to say that the trial court erred in directing a verdict for the defendant. The Busch Case and the Holcomb Case cannot be distinguished from the case under consideration by saying that in them “the principal adopted the agent’s estimate as his own,” for in this case, as heretofore stated, defendant asserted to plaintiff “that those representations Barnard had made were true.” It might therefore be said in this case, then, the principal adopted the agent’s estimate as his own.
Our attention is called to Krause v. Cook, 144 Mich. 365. There defendant, acting for one Parker, sold mining stock to the plaintiff. Certain false representations were made, and an action to recover damages for fraud was brought. It was held that the trial court should have given the following instruction:
“ If a person received information from others, and believes it, repeats it, explaining that he has no personal knowledge, he is not guilty of fraud. Therefore, if you find that the defendant received information from others, and repeated that information to plaintiff, and explained to plaintiff the sources of his information, he is not guilty of any fraud, if he acted honestly and in good faith.”

At first blush it would seem that this principle is opposed to the decisions of Holcomb v. Noble and Busch v. Wilcox, supra. And it must be admitted, I think, that if this principle had been applied in those cases, a different conclusion would there have been reached. If there were no difference in the facts, 'it might be said that Krause v. Cook, supra, is opposed to "the principle announced in the Busch and Holcomb Cases. But there is a difference in the cases, and, in my judgment, such a difference as to require a different rule of law. In the Holcomb and Busch Cases the defendant himself obtained what plaintiff lost by means of the false representations. In the Krause Case the defendant was an agent, who at most received only 10 per cent, of the damages caused by the false representations. This difference, in my judgment, places the Krause Case outside the rule of the Holcomb and Busch Cases. That rule is peculiarly a Michigan rule. Elsewhere, in order to create liability for deceit, it must be shown that—

“ The person making the statement, or the person responsible for it, either knows it to be untrue, or is culpably ignorant (that is, recklessly and consciously ignorant) whether it be true or not.” Webb’s Pollock on Torts, p. 355.

In Michigan we have held (see cases cited in the opinion of Justice Morse in the Holcomb Case, supra) that, in order to constitute a fraud, it is not necessary that the person making the statement should either know that it is untrue or be recklessly and consciously ignorant whether it be true or not. It is sufficient if it be false in fact. It must be said, however, that in the cases in which this principle has been applied, the defendant obtained what the false representations caused the plaintiff to lose. Applied in such cases, the principle is a just and salutary one. This may be illustrated by the Holcomb Case — which is a typical case. There, because plaintiff, Holcomb, credited a certain false statement of fact, he paid defendant, Noble, more for land purchased than otherwise he would have paid. The false statement of fact was an agency whereby the property of the plaintiff was transferred to defendant. The law would be justly subject to reproach if it afforded no redress in such a case. In Michigan the law does give redress in such a case, and that redress may be obtained in an action for fraud. It may seem somewhat unjust to characterize such conduct as fraudulent, but the court was apparently placed in the dilemma of either so characterizing it or of altogether denying compensation, and it chose the least objectionable of these two alternatives. This principle, which is alto, gether just in its application to cases where the loss of the plaintiff has inured to the profit of the defendant, would be most unjust if applied to cases where the defendant has obtained no such profit. This may be illustrated by taking a concrete case, and I take a case even plainer in its facts than the Krause Case. Let us suppose that, with commendable motives and in the best of faith, one friend communicates to another with all amplitude of detail certain information he has received respecting a mine, which it is known that neither of them has ever visited. The object of this communication is to induce the one to whom it is made to purchase stock, but not from the one making the communication, but from a third person having no relation to him. The stock is purchased accordingly, without any profit resulting to the friend making the communication; the information proves to be false and the stock worthless. Did the friend who communicated the information which proved to be false commit a fraud ? He did no moral wrong. Indeed, from a moral point of view, his conduct was commendable^ and, unless compelled to do so, the court should not announce a rule of law which penalizes commendable conduct. Are we compelled to declare that there exists a rule of law which makes such conduct fraudulent ? Manifestly not, unless we are bound to declare that the doctrine of the Holcomb and Busch Cases applies. Must we so declare ? As already pointed out, the case differs materially from the Holcomb and Busch Cases, and this difference is such that the doctrine of those cases has no just application. That doctrine was designed to accomplish justice; as applied in the Holcomb and Busch Cases and in similar cases it does accomplish justice. TAs applied to cases where the loss of the plaintiff has not inured to the profit of the defendant, it accomplishes an injustice, and it therefore has no application to such cases^ It is true that the Krause Case differs from the supposed illustrative case stated in this opinion in this: That the defendant Cook did profit to the extent of 10 per cent, of the loss sustained by plaintiff. If there were any rule of law by which we could hold a wrongdoer responsible for 10 per cent, of the damages, and relieve him of responsibility for 90 per cent, of the damages, it might have been just to have applied the principle of the Holcomb and Busch Cases to the Krause Case. But there is no such rule, and therefore we held, and were bound to hold, that the principle was inapplicable. The Krause Case was not, therefore, within the rule of the Holcomb and Busch Cases, and is not inconsistent with that rule. It must then be said that the decision of the Krause Case casts no doubt on the Holcomb and Busch Cases. The rule applied in those cases is the law for all similar cases. The case at bar is similar, and is governed by that rule. Accordingly, it must be held that the trial court erred in refusing to submit the case to the jury.

Justice Montgomery understands me to maintain that the principle of the Holcomb and Busch Cases can be applied only where the consideration passing to the defendant was the equivalent to the damages which the law gives for such a wrong.” If in my opinion there is any language which conveys that impression, I take this opportunity to say that in using it I failed to clearly express my views. Under these circumstances, it seems necessary for me to attempt to restate those views. Nearly every suit to recover damages for fraud arises from a contract. The plaintiff sues to recover damages because he has been fraudulently induced to make that contract. The defendant may be, and generally is, the other party to that contract. - Sometimes, however, the defendant is a third person, either the agent of the other party, or perhaps some one having no legal relation whatever to either party. For the purpose of determining whether the principle of the Holcomb and Busch Cases is applicable, I draw a distinction between the suits brought against a party to the contract and the suits brought against those who are not parties to the contract. If it is brought against a party to the contract, that principle is applicable, /if it is not brought against a party to the contract, that principle is not applicable^ When one is fraudulently induced to enter into a contract, it is quite correct, in a general sense, to say that his loss inures to the profit of the other party to the contract. In a legal sense, the other party to the contract is the beneficiary of the fraud, and, speaking generally, his profits equal the losses of the defrauded party. I concede, however, that, under the well-settled rule that the measure of damages is the difference between the actual value of the property and its value as represented, cases will arise where the losses of the defrauded party will exceed the profits of the other party to the contract. Such a case will arise whenever the defrauded party has paid less for property than it would be worth if the false representations had been true. I have no hesitation in saying that such cases are within the principle of the Holcomb and Busch Cases. The party to the contract is in such a case the legal beneficiary of the fraud. The defrauded party paid him what he himself regarded and accepted as the equivalent of the value of the property as it was represented to be. In such case, I think, it would be quite correct to say that the defendant, in consideration of what he did receive, understood that he should make good any loss caused plaintiff by relying upon the false representation. I think there is no injustice in holding him responsible for that loss.

Justice Montgomery, as I understand his opinion, does not deny that in applying the principle of the Holcomb and Busch Cases a distinction may be drawn between those cases where suit is brought against a party to the contract and those where it is brought against an innocent person having no relation to the contract whatever. He does, however, deny that a distinction may be drawn between cases where suit is brought against the party to the contract and suit is brought against the agent. I content myself with saying that the agent is in no legal sense a party to the contract, and that the distinction between him and the innocent party is not of kind, but of degree. But, after all, the important question for this court to decide in this case is not whether I have pointed out a sound distinction between the Krause Case and the principle of the Holcomb and Busch Cases. The important question is this: Shall this court declare that the principle of the Holcomb and Busch Cases is no longer the law of this State ? We cannot affirm the judgment in this case, as I have already pointed out, without so declaring. By so declaring we overrule the Holcomb and Busch Cases. We do more than that, we repudiate the principle of those decisions. That principle is this: /That if a representation is false in fact, and actually deceives the one to whom it is made, it is actionable fraud, even though made in the best of faith, and even though the one who made it had every reason to believe it to be true. That principle is peculiar to our jurisprudence. It has existed for many years, as shown by the long line of cases cited in the opinion of Justice Morse heretofore referred to. By rejecting that principle we overrule those cases. As I have heretofore pointed out, the principle applied in a certain class of cases affords redress for wrongs which otherwise could not be redressed. Whether that principle should or should not — and I have urged that it should — be limited to such eases, it certainly should continue to be applied to them. To affirm this judgment is to hold that it cannot be applied to them. To affirm it is to hold, that' by a false representation, innocently made, one may profit by another’s loss and entirely escape responsibility. I cannot consent to repudiate that principle. I vote, therefore, for the reversal of the judgment.

Grant, C. J., and Hooker, Moore, and McAlvay, JJ., concurred with Carpenter, J.

Montgomery, J.

(dissenting). Plaintiffs brought this action on the case against the defendant to recover damages claimed to have been sustained by reason of false and fraudulent representations made by the defendant to the plaintiffs-^relating to a farm in Lapeer county, which representations are alleged to have induced a trade by plaintiffs of an equity in a house and lot in Detroit for the farm. It is claimed that the particular representations were made by a firm of real estate agents, who, it is alleged, represented the defendant. This is a matter of dispute. The representations were made on an unsigned slip of paper, and described the property as follows:

“Forty acres; 6-room frame house; small barn with wagon shed, also shed attached to barn; room enough for five horses; 175 fruit trees in good, bearing condition; fences fair; rents at $100.”

It is claimed that these representations were not true in fact, and that there were less than 100 fruit trees on the property, which, it would seem, was the principal ground of complaint made by the plaintiffs. The case has been once before the court. On the former trial a recovery. was had by the plaintiffs, and the judgment was reversed upon error, in an instruction given by the trial judge. On the second trial, a verdict was directed for the defendant. It is claimed by the plaintiffs that the testimony on the present trial is not materially different from that given upon the first trial. It is enough to say, if such was the case, that the question of whether there was a case for the jury was not determined upon the former hearing, and is now for our consideration.

The plaintiffs were entitled to go to the jury upon the question of fact if the representations which were made by the defendant were made as statements of fact within the knowledge of the defendant. The plaintiff’s testimony as to the representations made by Barnard & McCloud, the real estate agents, is as follows:

“Barnard told about this property, and finally he pulled out some papers from a pigeonhole in his desk, and made a memorandum from them as to how many trees there were and the condition of the barn; * * * that everything he had stated to me was true. It was the same statement that had been made to Mr. Scribner, that they had made inquiry from Ferguson, besides getting the statement from the gentleman he had bought from, and that the banker had stated it was true; that the property was all right.”

There was other property also traded, called the “ Avon property,” and plaintiff testified that when defendant and himself were going out to see this Avon property, they discussed the trade, and he •proceeds:

“ I told him I really ought to see the Lapeer property before I traded, but I figured that if the representations that Barnard had made — that it is 40 acres of land, that there is a six-room house, and if there is 175 bearing apple trees — that certainly the property should pay 6 per cent, on $1,600. Scribner replied that he figured it just that way when he made the trade.”

He further testified that he knew they had just traded for the property. He knew that they had telephoned a Mr. Ferguson of Almont, who held a mortgage on the property. He also testified that he himself conferred with a Mr. Hanna, who had once owned the property, in the absence of defendant, with a view of getting all the information he could. He also testified that defendant, Scribner, had told him that the representation in the memorandum made by Barnard was faulty in one respect —that the farm was not rented for $100 — but that Ferguson had told him it was rented for $60, and plaintiff testified that, after receiving the memorandum that Barnard gave him, he had a talk with Scribner, and found that he had never seen the farm, and that he had had these same representations from Ferguson. The testimony on behalf of the defendant shows that the information imparted to plaintiff was precisely that which had been given him by Ferguson, and there is nothing in the case to indicate that there was any intent to mislead the plaintiff.

The case presents the question of whether, in- the absence of a warranty, one who sells property stating that he has no personal knowledge of its condition, but who gives the source of his information upon the subject, and imparts the information as it was imparted to him, is liable, in' an action on the case for deceit, if the information turns out to be incorrect. Plaintiff relies chiefly upon Holcomb v. Noble, 69 Mich. 396, and Busch v. Wilcox, 82 Mich. 336. In each of these cases the representation consisted of an estimate of timber made by an agent of the seller, and it is possible that the rulings may be sustained upon the ground that the principal adopted the agent’s estimate as his own. If so, the cases can be distinguished from the case under consideration. However this may be, the latest enunciation of this court was made in Krause v. Cook, 144 Mich. 365. In that case the question was distinctly presented. Cook was charged with fraud in the selling of stock. He made certain representations as to the character of the property, and these representations proved to be false. It was held that the court should have given the following instruction:

“If a person received information from others, and believes it, repeats it, explaining that he has no personal knowledge, he is not guilty of fraud. Therefore, if you find that the defendant received information from others and repeated that information to plaintiff, and explained to plaintiff the sources of his information, he is not guilty of any fraud, if he acted honestly and in good faith.”

I am not able to distinguish that case from the present. It is suggested that in the Krause Case the defendant was an agent who at most only received 10 per cent, of the damages caused by the false representations. This attempt to distinguish appears to be based upon the assumption that the recovery in an action for fraud is in some sense based upon what the defendant received. There is no such rule of law that I am acquainted with. The present case well illustrates the difficulty of applying such a rule. There is very little doubt upon the record in this cáse that the farm, even in the condition, in which it proved to be, was adequate compensation for the equity in the Detroit property which the defendant received. But this, if there was actionable fraud, would not affect the plaintiff’s right to recover the difference between the farm as represented and what it actually proved to be. True, if upon the ground of mutual mistake it was sought to rescind a contract because facts, which both parties assumed upon information derived from the same source to be true, proved to be false, a very different question . would be presented. But in an action for fraud the recovery is not based upon what the defendant receives. It is based upon the fact that the plaintiff has been induced to enter into a contract, and through false representations of the defendant has found himself in possession of something different from what he expected.' The illustration of information afforded by one friend to another as to the value of mining or other property, accompanied by a statement of the source of information, is not an apt illustration of anything analogous to the facts in Krause v. Cook. In such case there is no contract between the parties. But in Krause v. Cook there was a contract. The defendant was a party to that contract in the sense that he not only made the sale of the stock as agent, but received a consideration passing to him; and, as pointed out in the opinion of Mr. Justice Hooker, the rule in Holcomb v. Noble, so far as “it is a sound rule, was in Angell v. Loomis, 97 Mich. 5, applied to an action against an agent.

It is suggested that the rule of liability for a representation such as that involved in this case accomplishes justice where the contract is made by the defendant, and the whole consideration passes to him. This is certainly a shadowy distinction, existing only in degree at best, and if an attempt were made to make such a distinction, it would involve in every case an investigation as to whether the consideration passing to the defendant was the equivalent of the damages which the law gives for such a wrong. This is neither an action to rescind nor is it an action to recover the consideration paid. It is an action for a tort, and that tort is committed as well by one who receives only a portion of the consideration as by one who receives it all. If such a distinction were attempted, one partner could not be made liable in an action of tort for a representation, which afterwards proved to be false, made under the circumstances of this case, whereas one who received the whole consideration might. / ,

I find it impossible to distinguish the case of Krause v. Cook. See, also, Hunt v. Blanton, 89 Ind. 38, cited in defendant’s brief; also 20 Cyc. p. 17.

It is also alleged that the court erred in excluding testimony to contradict evidence given by the witness for the defendant on the former trial of the case, who had since died. A complete answer to this objection is that the defendant offered to waive the objections he had previously made to the testimony and permit plaintiff to put in the proof, but he declined to do so.

We think no error was committed in withdrawing the case from the jury, and judgment should be affirmed.

Blair, and Ostrander, JJ., concurred with Montgomery, J.


text:
    TOWNSHIP OF SUMMIT v. CITY OF JACKSON.
    Municipal Corporations — Jackson Charter— Health — Quarantine — Hospitals—Contaguous Diseases — Townships—Local Sele-Governhent.
    The provisions of the charter of Jackson (Act No. 399, Local Acts 1905, tit. 9, § '4), authorizing the common council to establish a hospital for contagious diseases beyond the limits of the city, do not, in view of the general health laws (sections 4436, 4437, 4459, and 4471, 2 Comp. Laws), and the constitutional right of local self-government, authorize the city to bring patients infected with dangerous communicable diseases within a township, where it has a hospital, without first obtaining consent therefor from the proper officers of the township.
    Appeal from Jackson; Parkinson, J.
    Submitted May 7, 1908.
    (Docket No. 115.)
    Decided September 10, 1908.
    Bill by the township of Summit against the city of Jackson to enjoin the use of a hospital for the treatment of infectious diseases. From a decree dismissing the bill, complainant appeals.
    Reversed, and decree entered for complainant.

      T. E. Barkworth, for complainant.

      John F. Henigan and Forrest C. Badgley, for defendant.
   McAlvay, J.

The charter of the city of Jackson, as revised by Act No. 399, Local Acts 1905, tit. 9, § 4, on the subject of public health, provides as follows:

“The council may purchase the necessary lands and erect thereon, or otherwise provide, one or more hospitals, either within or without the city limits, and provide for the appointment of the necessary officers, attendants or employes, and for the care and management thereof; and for the care and treatment therein of such sick and diseased persons as to the council or board of health of the city shall seem proper, and, by direction of the council or board of health, persons having any malignant, infectious or contagious disease may be removed to such hospital, and there detained and treated, when the public safety may so require, and the council may provide such restraints and punishments as may be necessary to prevent any such person from departing from such hospital until duly discharged.”

Acting under this provision, the city council purchased certain lands without the limits of said city, and within the limits and jurisdiction of complainant township, and has used buildings already erected thereon for the treatment of patients brought from within the limits of said city into said township, affected with smallpox, “without the consent of the board of health of Said township, and without the license, authority, or consent of said township or any of its officers authorized thereto.” The bill of complaint in this case was filed against defendant, praying that it be permanently enjoined from the further use of said premises as a hospital for the treatment of contagious and infectious diseases, and for general relief. A temporary injunction was also asked for. Defendant answered the bill, admitting all the essential and material charges therein contained, and justifying its action under and by virtue of the charter provision above quoted. A replication was filed, and a hearing had upon pleadings and proofs. A decree was granted and entered, dismissing the bill of complaint, with costs to the defendant. The question in the case involves the construction of the charter provision quoted. Complainant has appealed, and urges that the circuit court was mistaken in the construction put upon this statute, and asks this court to reverse the decree. Its position is stated in the brief of counsel as follows:

“The only question in the case is whether the naked power given to the city of Jackson in its charter shall be deemed subordinate or superior to the general provisions of the law regulating the public health.”

The question is an important one. The same provision is contained in the general law relative to the incorporation of cities of the fourth class, and also in the charters of other cities.

Complainant contends that the act should be construed as requiring the city to obtain the consent, license, and permission of the proper township authorities, before it can maintain a smallpox or other hospital for the treatment of infectious and contagious diseases, or bring patients infected with such diseases within the limits of the township; that the charter gives but the naked right to acquire such property, and is a local enactment, and should be construed as not repealing the general health laws; and that defendant’s construction would invade the general and well-recognized doctrine of local self-government uniformly applied in this State.

Defendant urges that by this charter provision the legislature has conferred upon the city a governmental function for the purposes of the preservation of the public health, and that from the provision quoted, and other provisions in the same act, a fair construction would be that the legislative intent was that the right to own a hospital site without the limits of the municipality carried with it the right to use it for the purposes indicated, without reference to the consent or objection of the municipality in which the same might be located. The other charter provisions referred to are: Authority given to the council to enact all ordinances necessary to preserve the public health, to prevent the spread of contagious or other diseases, and to remove, care for, and quarantine persons infected with the same, either within or beyond the city limits; to exercise all the power of a health board, as conferred by general laws of the State, so far as the same are applicable and consistent with this act; to own or lease property, within or without the city, for cemeteries or parks; to go without the city limits for the purpose of removing obstructions from and clearing the channel of Grand river. Defendant also contends that this power granted is not new legislation, having been embodied in the city charter since 1875.

It is admitted by defendant that this authority or power ' granted the municipality to acquire property outside its corporate limits is the exception and not the rule, and that the reason is that in so doing it is acting as a governmental agency, and to hold that the legislative intent in authorizing such acquisition of property was limited to the bare right to purchase or otherwise acquire would leave a municipality shorn of any means to enter upon and enjoy the property for the purposes indicated.

The general laws pertaining to the public health provide, among other things (section 4436, 2 Comp. Laws), that a township may provide quarantine ground within or without its limits, provided, if without its limits, the assent of the township within whose limits it may be established shall first be obtained. Section 4437 provides that any two or more townships may at joint expense establish a quarantine ground for joint use, either within or without their limits, provided that, if such place shall be without their limits, they shall first obtain the assent of the township within whose limits the same may be. By section 4471, no person affected with any communicable disease dangerous to the public health, or corpse, or article infected shall come or be brought into any city, village, or township of this State without the special permit of the board of health or health officer, and then only under the supervision of the health officer. The general public health laws further provide (section 4459):

“The provisions of this chapter, and the amendments thereto, shall, as far as applicable, apply to all cities and villages in this State * * * excepting in cases where charters of such cities and villages contain provisions inconsistent herewith.”

Is it not possible that these several provisions of the general health laws of this State and the provision of this charter under consideration, and like provisions in other charters, may be construed together as a whole, making a complete and consistent system of regulations in the interest of the public health ? It is clear to us that this may be done. It is evident that the legislative intent is, and has been, to preserve to each municipality its constitutional right of local self-government, which this court has ever been careful to preserve, as will appear from its expressions upon this question in the following cases: People, ex rel. Board of Park Com'rs, v. Detroit Common Council, 28 Mich. 241; People v. Hurlbut, 24 Mich. 44; Robertson v. Baxter, 57 Mich. 130; Attorney General v. Detroit Common Council, 58 Mich. 213; Board of Metropolitan Police v. Board of Auditors, 68 Mich. 576; Mason v. Railway Co., 104 Mich. 631.

By the general health laws townships have been authorized to acquire sites for hospitals in other townships, but the right has always been subject to the consent of the township where the hospital is to be located. Cities by their charters, and fourth class cities under the general law, have been given the naked right to acquire extraterritorial sites for contagious disease hospitals, for the reason that, without such legislation, such municipalities had no authority to do so. Nothing is said in any of these acts relative to the consent of the invaded township. Which construction will comport with the well-established doctrine of local self-government of each municipality within its limits^-the construction that a departure from the fixed policy of this State in that regard was intended, though not expressed, or that the authority to acquire hospital sites without their limits was an authority granted to cities and villages for the purpose of giving them a recognized benefit already enjoyed by townships generally, leaving such municipalities, as to the exercise and enjoyment of such benefits, subject to the provisions of section 4459, above quoted, to be governed by the general health laws in force upon the subject ? Such latter construction is a reasonable one, and requires no repeal by implication. It gives full force and effect to the charter and the general laws. People v. Bussell, 59 Mich. 109. It will preserve to each municipality the provision for the prohibition of the entrance of person, corpse, or thing infected, or suspected of infection, with any dangerous communicable disease, within any municipality, without the consent and supervision of its health officials, which has been the greatest safeguard of the public health.

Our attention is called to a Canadian case, which indicates that the doctrine of local self-government obtains with our neighbors, and the case may be considered as authority supporting complainant’s contention discussed earlier in this opinion. It appears that the provisons of law in force in Canada relative to the public health are similar to the provisions of sections 4436, 4437, and 4471, above cited. A bill was filed to obtain an injunction against the town of Brockville from maintaining a hospital within the limits of the township of Elizabethtown without the consent of the latter. The injunction was granted. The Chancellor said:

“Can it be supposed that this hospital situate in the township, is to be subject to the local board of health for the town ? That would evade and destroy the whole system of municipal government in so far as public health is concerned. The law does not contemplate such an invasion of municipal rights, unless it be by the permission of the municipality invaded, or by agreement to establish a common hospital, under section 12 of 45 Vic. chap. 29.” Township of Elizabethtown v. Township of Brockville, 10 Ont. 372.

There is no express indication in our legislation relative to the public health that municipal boundaries are disregarded and other or different districts established. The cities and townships within their respective limits are, in the execution of the laws relative to the public health, exercising a governmental function or agency. There is no authority of law given to one to invade the territory of any other, and there is grave doubt whether legislation which expressly granted such authority could be upheld. It is not necessary to determine that question in this case.

We do not agree with the circuit court in his construction of this charter provision, and hold that defendant cannot bring patients infected with dangerous communicable diseases within the township, without first obtaining consent therefor from its proper officers, according to law.

The decree of the circuit court is reversed, and a decree will be entered granting complainant the relief prayed in its bill of complaint, with costs of both courts.

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


text:
      In re BENDER’S ESTATE.

    APPEAL OF BLAIN.
    1. Executors and Administrators — Probate Court — Jurisdiction — Allowances to Attorneys.
    The probate court has no jurisdiction to order an executor to pay attorneys for services rendered in behalf of the estate he is administering.
    2. Appeal and Error — Review—Matters Considered — Orders Not Appealed erom.
    An order of the probate court, directing the executor of an estate to pay attorneys for services rendered in behalf of the estate, having been entered without jurisdiction, the propriety of the payment was open to review on appeal from an order allowing the executor’s account, though the order directing the payment was not appealed from.
    3. Executors and Administrators — Accounting — Expenses of Litigation.
    An executor should be allowed his entire expenses and disbursements in preparing for the trial of suits against life insurance companies issuing policies on the life of the testator, the amounts being reasonable, notwithstanding the major portion of the amount involved will, on recovery, belong to the heirs and legatees.
    Error to Wayne; Rohnert, J.
    Submitted May 6, 1908.
    (Docket No. 93.)
    Decided September 10, 1908.
    Alexander W. Blain filed his first annual account as executor of the last will and testament of August Bender, deceased. The account was allowed in the probate court, and certain heirs and legatees appealed to the circuit court. There was judgment disallowing certain items of the account on a verdict directed by the court, and the executor brings error.
    Modified and affirmed.

      William, Look, for appellant.

      Herbert O. Munro (Arthur E. Schreiter, of counsel), for appellees.

       Rehearing pending.

   McAlvay, J.

Appellant, executor of the last will and testament of August Bender, deceased, filed his first account in the probate court for Wayne county. This account after a hearing was allowed. From this allowance certain heirs, devisees, and legatees appealed in due form to the circuit court for Wayne county, where the case was later heard before a jury, which, under the charge of the court, returned a directed verdict, disallowing three certain items in the said account. A judgment thereon was entered in the usual form, with costs to appellants, and ordering the record remitted to the probate court for further proceedings. The executor has brought the case to this court for review, assigning errors upon such action of the court, and asks this court to reverse and set aside the said judgment, and enter a judgment affirming the judgment of the probate court.

It will not be necessary to go into this accounting in detail, nor to state more facts contained in this voluminous record than will be sufficient to an understanding of the items of account in dispute. The three items directed to be disallowed by the circuit court are as follows:

(1) The item of $1,000 for services in the suit and collection of $10,000 on the Sun Life Assurance Company policy.

(2) The item of $433.33, deducted from the charge of $650, paid for depositions and obtaining evidence for defending suits.

(3) The item of $333.33, deducted from the charge of $500, to apply on costs of appeal.

The estate of August Bender consisted principally of insurance policies in old line companies, and beneficial certificates in mutual benefit companies. At the time of his death he held a policy of $10,000 in the Sun Life Assurance Company of Canada. Negotiations to settle this claim not succeeding, a suit was brought against the company, which was later settled and discontinued upon payment of the entire amount of the claim. For services rendered in this litigation the amount of the first item was charged by the attorneys. The total amount of his life insurance, including this policy, was $49,000. Of this, $31,000 was paid. Of the balance of $18,000 uncollected, the estate was entitled to $6,000, and the heirs to $12,000. This was the amount involved in the litigation, out of. which the second and third items above referred to arose. For certain services claimed to have been performed as attorney for said estate, William Look filed a petition, asking the probate court to authorize and direct the executor to pay petitioner and his counsel the sum of $2,500, upon which a payment of $500 had been made. The prayer of this petition was granted by an order of the court on May 23, 1904, and the executor ordered to pay $2,000. This amount was included in the executor’s account, appealed from in this case, and the charge of $1,000 for services in collecting the amount of the Sun Life policy. Appellant’s attorney, Mr. Look, claims that as the order of May 23, 1904, was not appealed from, it was not before the court for consideration. The case of Lothrop v. Duffield, 134 Mich. 485, is authority for holding in this case that the probate court had no jurisdiction to make that order. The circuit court, therefore, was not precluded from considering the whole matter of the services of attorneys included in the order appealed from. In such consideration the court determined, as a question of . fact, that $2,500 was a sufficient sum for all services rendered in that case. We are not inclined to disturb such determination. Appellant does not complain that this question was not submitted to the jury. He conceded thát it was one to be determined by the judge, and he asks this court to reverse it only upon the assumption that the judge determined it erroneously. It must not be inferred, however, that we decide that this question should not have been submitted to the jury.

Items 2 and 3 may be considered together. Several of the companies which had sold life insurance to Mr. Bender flatly refused to pay, on the ground that there was no Eability by reason of suicide. A test case was made and tried in the Wayne circuit court. A jury called in the case agreed with the contention of the company. The learned trial judge concurred in the opinion, and rendered a decree accordingly. The case was appealed to this court, and affirmed. Fidelity Mutual Life Ins. Co. v. Blain, 144 Mich. 218. The policy in question was one belonging to the estate. Eighteen thousand dollars of insurance was involved, of which $6,000 belonged to the estate. The court below held that the estate should pay but one-third of these items in question, and that the heirs and legatees should, according to their interests, pay two-thirds. No question is here as to the amounts of these items being excessive. This was litigation which was of importance to the estate. It was the duty of the executor to prosecute or defend diligently, and to pay the ordinary and necessary fees and charges. The fact that the result would affect the heirs and legatees is not controlling. The question is the necessity and reasonableness of the expenditure. The amounts of these two items were improperly disallowed by the circuit court. As a matter of law, we can say these charges should both have been allowed.

The judgment of the circuit court is modified, and the allowance for disbursements will be fixed at the sum of $4,611.14, and the balance due the estate fixed at $5,465.83. The cause will be remanded to the circuit court, and a judgment entered accordingly, and then be remitted to the probate court for further proceedings according to law. Costs will be allowed appellees in the circuit court and the executor in this court.

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


author: Ostrander, J.

text:
    HARRISON GRANITE CO. v. PENNSYLVANIA RAILROAD CO.
    Carriers — Railroads —Special Service — Interference with Shipper’s Rights — Liability of Carrier.
    In an action against a carrier for damages arising from a wrongful interference with, plaintiff’s contract rights, evidence examined, and held, sufficient to support a recovery by plaintiff on the theory that, with knowledge of the circumstances, defendant interfered with plaintiff’s shipment of a monument over its lines by refusing its regular service, which would have been adequate to deliver the monument by the date stipulated in plaintiff’s contract with the purchaser, and transported it by special service at a much greater expense,' which had to be paid out of the fund which had been raised for the purchase of the monument, and hence, ultimately, by plaintiff.
    Error to Lenawee; Chester, J.
    Submitted May 4, 1908.
    (Docket No. 86.)
    Decided September 10, 1908.
    Case by the Harrison Granite Company against the Pennsylvania Railroad Company for wrongful interference with plaintiff’s contract rights. There was judgment for plaintiff, and defendant brings error.
    Affirmed,

      D. B. Morgan, for appellant.
    Smith, Baldwin & Alexander, for appellee.
   Ostrander, J.

A reference to the statement of facts and to the opinion of this court (145 Mich. 713) will discover the issue, which has been a second time tried. It was said in the opinion:

“The jury might have found, from the evidence, that the defendant, with knowledge of all the facts, refused its regular service to the plaintiff, thus preventing plaintiff ■from performing, as it would otherwise have done, its contract with said chapter; that the special service, rendered over the protest of plaintiff, was unnecessary, and resulted, and was bound to result, in diverting to the defendant $700 which otherwise would have been paid to plaintiff, and which has, in consequence, been wholly lost to plaintiff.”

It is the claim of defendant, appellant, that upon the second trial it is established that the defendant received no money from the chapter, but did receive its pay for the special service from an individual who provided the special service as a gratuity to the ladies of the chapter without expectation of being repaid by them; that neither the defendant nor the person who paid for the special service knew or had reason to believe that the plaintiff would be charged finally with the cost of the special service. There is testimony supporting these conclusions, and it was not introduced upon the first trial. It is not conclusive. The tendency of the testimony upon the second trial is as stated in the report of the case already referred to. There was also introduced, upon the part of plaintiff, testimony tending to prove that the chapter declined to contract for the monument until after they had the fund to pay for it on hand; that they procured the money, $1,500, in part at least, by entertainments given by various associations of the ladies of the chapter, deposited it in bank, and referred the agent of plaintiff to an officer of the bank of deposit for confirmation of the fact; that the chapter had no capital or property or financial responsibility otherwise. By the terms of the contract entered into, this sum, $1,500, was to be paid to plaintiff in consideration of performance of the contract on its part. The person who arranged for and who paid the defendant for the special service was the husband of the president of the chapter. Upon learning that special service was to be given the car containing the monument, plaintiff’s president protested, told the agent of defendant that the cost would in all probability come out of the fund, and asked to have the arrangement canceled. He told defendant’s agent that plaintiff would hold defendant responsible for any damages suffered if it gave the special service, and the representative of the firm of attorneys to whom plaintiff’s president was referred, and who demanded the deposit of a certified check as a condition of canceling the arrangement for special service, said that the $700 would be taken out of the money accumulated to pay plaintiff. It was taken out, and Mr. Blythe, who in the first instance paid defendant, was reimbursed. It may be said that upon the second trial plaintiff’s case was more complete than it was upon the earlier trial. It must be said that the issue was for a jury, and that the criticisms made of the charge of the court are, except from the point of view of defendant which has been stated, without merit.

The judgment is affirmed.

Hooker, Moore, Carpenter and McAlvay, JJ., concurred.