Flint & Pere Marquette Railway Company v. Dewey

• Decision Date: 16 October 1866
• Court: Michigan Supreme Court
• Parties: Flint & Pere Marquette Railway Company v. George M. Dewey

14 Mich. 477

Flint & Pere Marquette Railway Company v. George M. Dewey

Supreme Court of Michigan

October 16, 1866

Heard October 3, 1866 [Syllabus Material] [Syllabus Material]

Appeal from Genesee circuit, in chancery.

The facts are stated in the opinion.

Decree of the court affirmed, with costs.

Wm. L Webber, for complainant:

1. The defendant claims a right to hold these seven bonds as his own property, basing his claim on the assignment of a three-eighth interest in the contract for building the road which assignment was made by Paul, the contractor, for the consideration that Dewey, as president, and Hazelton, as secretary of the company, should, and did, give Paul the contract for building the road, at $ 30,000 per mile.

The defendant was president of the company from its organization, in 1857, to July, 1860. He, with Hazelton and Drake, were appointed a committee by the board of directors, to let the contract for building the road. He, as president of the company, had the general charge, superintendence, and management of the business of the company. It was, therefore, his duty, while acting in that capacity, to act so as best to promote the interests of the company. In letting the contract for the building of the road, his duty required him to protect the interests of the stockholders, by getting the work done as low as possible. But, instead of this, he and Hazelton seem to have acted on the principle that the higher the price they could get any one to take it at, the better for themselves. They became in fact the contractors. They let themselves the contract.

Neither a court of equity nor of law can for a moment admit the existence of such a pernicious doctrine: 2 Mich. 192; 2 Id. 330; 11 Id. 222; 1 Lead. Cas. in Eq., Fox v. Macreth, 92, and notes.

The defendant assumes no responsibility under the contract; he is to be a mere recipient of profit.

His own testimony shows that he received these bonds, or the ones for which they were exchanged, on his own order as president, and with other bonds for use of the company.

2. The defendant cannot retain these bonds for any debt he may claim against the company, because, 1st, he does not base his claim on that ground; 2d, the proof shows that he is in debt to the company on assessments.

Holding these bonds as he does, in fact for the company, but denying the right of the company, and fraudulently claiming them as his own property, it is proper that he should be charged in a court of equity as a trustee, and compelled to deliver them over to the proper officer for the benefit of the party for whose use he received them.

Wm. Newton, for defendant:

1. The bill cannot be sustained, as it is not necessary to prevent irreparable mischief, and the remedy at law is complete: Har. Mich., 1; 12 Mich. 45.

A recovery in damages would be an adequate remedy and if so there is no ground for the relief sought: 2 Story, Eq. Jur., §§ 703, 708.

2. The number of bonds shown to be in the actual possession of defendant is six. Three had been delivered to Baldwin, or other parties, one to Robert P. Toms, one to Farwell.

The decree is erroneous and not warranted by the testimony.

a. In fixing the rights of complainant to bonds in the hands of Toms, as he is not made a party, and defendant is sued jointly with him in another cause where he had a right to be heard.

b. The six bonds were delivered to and held by defendant individually in lieu of others of former issue surrendered and outstanding, due from the company to contractors.

3. If the bill can be sustained at all, it cannot without the addition of parties interested; Farwell and Toms, the former as party contractor to whom first bonds were issued, and the latter holding one of the bonds in controversy.

All persons materially interested in the subject matter should be made parties: 7 Cranch 69, note; 1 Pet. 299; 13 Id. 359; 24 Me. 20; 11 Vt. 290; 3 Id. 160; 7 Con. 342; 11 Id. 112; 4 Cow. 717.

4. Complainant claims that the defense is valid for the reason that the contract of Dewey and Hazelton with Paul and others, set up in answer, is fraudulent. This we deny.

a. That question is not in issue.

A general replication is filed. The alleged fraudulent contract is not set up or avoided, or any relief asked against it in the bill; it is not stated in the bill, nor relief asked on that ground: 13 Mich. 367; 2 Id. 389, 560.

b. The rule of law that an agent can not act for himself and principal as laid down--11 Mich. 222--does not apply in this case. But see dissenting opinion of Campbell J., and cases there cited, p. 230.

c. The testimony shows the contracts were let on regular estimates made by the engineer of the railway company, and no harm can ensue by Dewey and Hazelton having an interest in the contract. They did not make the terms of the contract.

d. The bonds in controversy were issued solely to take the place of others which had already passed into other hands, and were outstanding against the company. Besides, the parties in interest holding stock in the road seem all, or nearly all, to have participated in the contract; and the defendant especially to have negotiated the means to build the road.

There was no fraud in the contract, and the bill should be dismissed.

e. The report of Myron H. Clark does not show that the bonds were delivered to Dewey as president, but to him individually.

Christiancy J. Cooley, J. concurred. The chief justice was absent. Campbell, J. concurred.

OPINION

Christiancy J.:

The bill was filed to procure the surrender and delivery by the defendant to complainant of eleven bonds of one thousand dollars each, executed by complainant with coupons attached, which bonds are a part of a much larger sum executed and intended to be used in the construction and equipment of complainant's road.

The bonds were secured by a deed of trust executed by the company to Myron H. Clark, Shepherd Knapp, and James M. Edmunds. They were countersigned by the trustees, signed by the defendant (then, and for some time after, president of the company), and attested by Edmund H. Hazelton, secretary, under the corporate seal, and were transferable by mere delivery from one holder to another.

The bill alleges that these eleven bonds were, by said Myron H. Clark, one of said trustees, delivered to the defendant, then president of the company; that they were, and still are the property of, and have not been disposed of by said company; that, while these bonds were thus in the hands of the defendant, as president, on the sixth day of July, 1860, Eber B. Ward was elected president of the company, and became entitled to the possession of these bonds; that defendant has been duly requested by said Ward as president, and by the board of directors of the company, to deliver over said bonds to said Ward, as president; but that defendant, after having on different occasions promised to do so, finally refused and still refuses thus to deliver them; that he intends to convert them to his own use, and, unless restrained by the order of the court, he will wrongfully and fraudulently deliver over or dispose of the bonds to some other person or persons, to place them beyond the reach of complainant, so as to compel complainant to pay the full amount thereof. The bill also alleges the insolvency of the defendant, and that he is indebted to the company to the amount of thirty thousand dollars for unpaid assessments on his stock in the company.

The defendant answers under oath, admitting the execution of the bonds as stated in the bill, and substantially (for it becomes unnecessary to notice all the special matters set forth in the answer) admits that seven of said bonds were delivered to him by said Clark, trustee, while he, defendant, was president, and that he still has six of them in his hands and under his control. But he denies that they were delivered to him as president of the company, or received by him in that capacity, but in his individual and unofficial capacity. And he claims the right to hold them as his own property under and by virtue of an interest in a contract made by the company with one Francis W. Paul, to which Paul, Farwell & Company afterwards became parties, for the construction and equipment of a part of complainant's road.

This contract, dated October 23, 1857, with various amendments thereto; a preliminary agreement between the same parties, dated Sept. 8, 1857, and the assignment (or rather several assignments) by Paul to the defendant and E. H. Hazelton, of three-eighths of his interest in the contract, are referred to and attached to the answer. From these and the evidence in the case it appears that the defendant (then president), Edmund H. Hazelton, secretary, and Morgan L. Drake, another director of the company, were appointed a committee to let a contract for building and equipping the road; and afterwards, on the eighth day of September, 1857, they, in the name and on behalf of the company, entered into a preliminary written agreement for that purpose with one Francis Wilson Paul, in which, among other things, it was provided that, if said Paul should desire it, said company should within sixty days let to him by contract the construction and equipment of the road on the terms and conditions therein stated, as the basis of the contract. This preliminary agreement is signed by Paul individually, and by Dewey (the defendant), Hazelton and Drake officially, as "directors and committee."

On the same day said Paul, by a written instrument, assigns to said George M. Dewey (the defendant), and said Hazelton "three-eighths of said (preliminary) agreement and four-tenths of a contract to be hereafter entered into," "said Dewey and Hazelton to be at...