Aldine Mfg. Co. v. Phillips

• Decision Date: 20 September 1898
• Citation: 118 Mich. 162,76 N.W. 371
• Court: Michigan Supreme Court
• Parties: ALDINE MFG. CO. v. PHILLIPS.

76 N.W. 371

118 Mich. 162

ALDINE MFG. CO. v. PHILLIPS.

Supreme Court of Michigan

September 20, 1898

Appeal from circuit court, Kent county, in chancery; William E Grove, Judge.

Bill by the Aldine Manufacturing Company against James T. Phillips. From a decree dismissing the bill on demurrer, plaintiff appeals. Affirmed.

Butterfield & Keeney, for appellant.

More &amp Wilson, for appellee.

HOOKER J.

The defendant being a stockholder in the Aldine Manufacturing Company, that company filed the bill in this cause, claiming an indebtedness due to it from the defendant upon open account for $1,000 and upward, and praying an accounting and a decree of foreclosure of its lien upon his stock in default of payment. The lien is claimed to exist by virtue of section 4161b5, 3 How. Ann. St., which provides that the corporation shall at all times have a lien upon all the stock or property of its members invested therein, for all debts due from them to such corporation. The bill was demurred to on two grounds (1) That there was no jurisdiction in equity to enforce the lien; (2) that the remedy provided by 3 How.

Ann. St. �� 4161c3-4161c7, inclusive, is exclusive. The demurrer was sustained, and the bill dismissed. The complainant has appealed.

Upon the part of the defendant it is claimed that equity has no jurisdiction to enforce a sale of the property to satisfy the statutory lien in a proceeding brought solely for that purpose; and, second, that, even if the court might do so when it had acquired jurisdiction for some other purpose within its jurisdiction, no such situation exists here. The theory upon which the bill seems to have been filed is that the lien of the complainant was akin to that of a mortgage or pledge of the stock, and carried with it a right to enforce payment of the debt secured by it, through foreclosure, in a court of chancery, as well as by the notice and sale provided for by the statute to which allusion has been made. This lien is not one which is created by direct agreement of the parties, such as a pledge or a mortgage, but arises by operation of law out of certain business relations, viz. that of corporation and stockholder. It is not in its nature an equitable lien, like the lien of a vendor of land sold upon contract for the purchase price. In such cases, under our practice, courts of equity have power to enforce the lien, upon bill practically for specific performance, to which the enforcement of the decree for the purchase price, by sale of the premises, is an incident. See Fitzhugh v. Maxwell, 34 Mich. 140, and Boehm v. Wood, Turn. & R. 332. It is, on the contrary, a legal security, closely analogous to a common-law lien, which last is said not to be enforceable in equity. Indeed, in cases of common-law liens, which always involved possession of the chattel, actual or constructive (2 Kent. [12th Ed.] 639), the creditor had no right to sell the chattel for the purpose of obtaining compensation. The lien was defined to be "the right of detention, in persons who have bestowed labor upon an article, or done some act in reference to it, and who have the right of detention till reimbursed for their expenditure and labor." Oakes v. Moore, 24 Me. 219. As said by Chancellor Kent: "A lien is in many cases like a distress at common law, and gives the party detaining the chattel the right to hold it as a pledge or security for the debt, but not to sell it. It was said by Popham, C.J., in the Hostler Case, Yel. 66, than an innkeeper might have a horse of his guest appraised and sold after he had eaten as much as he was worth. But this was a mere extrajudicial dictum, and it was contrary to law, as it has been previously *** and subsequently adjudged." 2 Kent, Comm. (12th Ed.) 642, and cases cited. See, also, Jones, Liens, � 335, where the author, in discussing a carrier's lien, says that it, "like all other common-law liens founded upon possession, gives him [the holder] no right to sell the property, but only a right to retain it until his charges are paid." Again, in section 1033 the learned author says that "a common-law lien *** is merely the right of a person in possession of the property of another to detain it until certain demands *** are satisfied."

In Doane v. Russell, 3 Gray, 382, a wagon maker sold a wagon, pursuant to notice to the owner, for the purpose of satisfying his lien, and the court held that he had no right to do so. In Briggs v. Railroad Co., 6 Allen, 246, a railroad company sold flour to pay their charges for its transportation, and it was held that they had "only a right to detain it until they were paid, and not to sell it to obtain remuneration to which they were entitled." In Pothonier v. Dawson, Holt, N. P. 383, Chief Justice Gibbs said: "Undoubtedly, as a general proposition, a right of lien gives no right to sell the goods." This was obiter, but nevertheless, from the eminence of the author it is entitled to great weight. The doctrine was stated in Jones v. Pearle, 1 Strange, 557. Again, in Lickbarrow v. Mason, 6 East, 21, note, the rule was stated by Mr. Justice Buller as follows: "But he who has a lien only on goods has no right so to do [i. e. sell and dispose of them]; he can only retain them till the original price be paid." See, also, Walter v. Smith, 5 Barn. & Ald. 439, where it is said that "a pledge as a security for a debt *** is a lien, with a power of sale superadded." Chief Justice Shaw also cites Cortelyou v. Lansing, 2 Caines, Cas. 200; 1 Chit. Gen. Prac. 492; Cross, Lien, 47; Woolrych, Com. & Merc. Law, 237. In Briggs v. Railway Co., supra, Merrick, J., said: "And the rule, which is now well established, that a party having a lien only, without a power of sale superadded by special agreement, cannot lawfully sell the chattel for his reimbursement, is as applicable to carriers as to all others having the like claim upon property in their possession." While the doctrine of these cases-i. e. that the creditor cannot sell the property-is indisputable, there was no impediment to the recovery of judgment and sale of the property, as well as any other property of the debtor on execution. Tete v. Bank, 4 Brewst. 308; Railroad Co. v. Dudley, 14 N.Y. 336.

Does it follow that a common-law lien cannot be foreclosed in equity because it does not confer upon the creditor the right to sell the property? It is evident that, in cases of common-law lien for a liquidated claim, a judgment and execution are as expeditious and effective as a proceeding in equity would be likely to be, and an application of the familiar doctrine that equity will not intervene when there is an adequate remedy at law would seem proper. It is a significant fact that we are not cited to any well-settled line of authorities that support the practice of foreclosing common-law liens in equity. At the same time, Chancellor Kent, in discussing the subject, says: "I presume that satisfaction of a lien may be enforced by a bill in chancery." 2 Kent, Comm. (12th Ed.) 643. He supports the statement by no authorities, however. And in Tete v. Bank, supra, there is a dictum that in proper cases the creditor may invoke the aid of a court of equity to work out a sale. The lien with which we have to do is not a common-law lien, but is statutory. It has the attributes of a common-law lien, however, although the manual possession of the certificates of stock is not with the complainant. Inasmuch as a transfer of the stock must be upon the books, it may be urged that the corporation has constructive possession. But it is not of much importance whether it has possession or not. Statutory liens often exist, although the creditor has not possession of the property; and we know of no authority that treats the matter of possession as depriving statutory liens of the legal attributes of common-law liens to which they are analogous. Jones, Liens, � 104, says that "a statutory lien without possession may, by force of the statute, have the same operation and efficacy that a common-law lien has with possession." See Id. � 112; Beal v. White, 94 U.S. 382.

In the case of Lumber Co. v. McDonald, 57 Mich. 292, 24 N.W. 87, Cooley, C.J., said that "log labor liens which are statutory could give no jurisdiction to a court of equity. If valid, they were legal claims." In Thames Iron-Works Co. v. Patent Derrick Co., 1 Johns. & H. 93 97, the jurisdiction of equity to enforce by sale a builder's lien upon a vessel was denied; and in answer to the claim of exigency alleged to arise from the expense of retaining the chattel, and the consequent necessity to make the security effectual by annexing to the passive lien the active right of sale, Mr. Vice Chancellor Wood said that "if, in a matter of this magnitude, the court should for the first time in 1860 establish such a new right as between persons dealing with chattels, it would injure rather than promote commercial interests." See Canal Co. v. Gordon, 6 Wall. 561, where the federal supreme court held that the jurisdiction to enforce a statutory lien "rested on the statute, and could extend no further." In 23 Am. & Eng. Enc. Law, 697, it is said: "The lien is most frequently enforced by the refusal of the corporation to register transfers from an indebted member;" citing many cases. It adds that other methods of enforcement are foreclosure and sale and attachment. Few authorities are cited, and these will...