Cluett v. Rosenthal

• Decision Date: 18 May 1894
• Citation: 58 N.W. 1009,100 Mich. 193
• Court: Michigan Supreme Court
• Parties: CLUETT et al. v. ROSENTHAL.

58 N.W. 1009

100 Mich. 193

CLUETT et al. v. ROSENTHAL.

Supreme Court of Michigan

May 18, 1894

Error to circuit court, Muskegon county; Albert Dickerman, Judge.

Garnishment by George B. Cluett and others against Gates L. Rosenthal in an action against Sol and Sam Rosenthal. Judgment for plaintiff. Garnishee brings error. Reversed.

Bunker & Carpenter, for appellant.

Brown &amp Lovelace, for appellees.

MONTGOMERY J.

On the 25th day of June, 1892, the defendants Sol and Sam Rosenthal executed to the defendant Gates L. Rosenthal a trust mortgage to secure $15,800 of alleged indebtedness of the mortgagors which consisted of $1,850 to the Union National Bank, $9,000 to Gates L. Rosenthal, $2,950 to Rosen Bros., and $2,000 to Ben Kersberg, of Kansas City. The mortgage covered the entire stock of Rosenthal Bros., together with books of credit evidence of debt, rights of action, and bills and accounts receivable. The defendant took possession under the mortgage very shortly after its execution. This suit in garnishment was instituted for the purpose of attacking the validity of the mortgage. It is claimed-First, that it amounted to a general assignment with preferences; and, second, that it was actually fraudulent as against the creditors of Rosenthal Bros. We do not find support for the first contention. The only provision of the chattel mortgage which is unusual is that authorizing the mortgagee to sell at private sale or in the usual course of trade. This does not vest any actual title in the mortgagee, and is not inconsistent with the right of the mortgagor or his creditors, who may acquire liens, to redeem at any time. The provision confers no power upon the mortgagee to reinvest the proceeds of the sales, or apply them to any other purpose than the satisfaction of the secured claims. The case is not at all analogous to Kendall v. Bishop, 76 Mich. 634, 43 N.W. 645. In that case the mortgagee was empowered to reinvest the trust funds, and add to the stock. The court below was of opinion that the mortgage was not void upon its face, and submitted the question of fraud to the jury. The trial resulted in a verdict for the plaintiff. The questions presented by the appellant's counsel relate to proceedings at the trial. We do not think the court erred in proceeding to a trial of the case. The defendant waived his right to have the case tried at the term at which judgment was rendered against the principal defendants ^[1] by noticing the case for a subsequent term, and in that term consented that the case be continued. Having waived the statutory right, the case must thereafter proceed as other issues of fact, subject to notice by either party.

Error is assigned upon a ruling of the circuit judge admitting proofs of the contents of the books of Rosenthal Bros. Two grounds are urged against the admissibility of the testimony offered: First, that the original books themselves were mere hearsay, in a suit against Gates L. Rosenthal; and, second that the secondary evidence admitted was improperly obtained, and therefore it should have been excluded. As to the admissibility of the books themselves, we think the court was not in error. The testimony tended to show that defendant had previously been connected with Rosenthal Bros., and severed his connection with them in 1890; that between the 1st day of January, 1892, and the 1st day of June, Rosenthal Bros. had purchased very largely, their purchases amounting to $18,000. That defendant had, after severing his connection with the firm, kept some track of the business; that when he took the mortgage in June, 1892, as trustee, he went through the form of taking possession, but continued the Rosenthal Brothers in actual charge of the business; that the stock was subsequently sold by the mortgagee, and bid in by him in form, but that Rosenthal Bros. still continued in actual possession; that in taking the mortgage he assumed to act as trustee for certain named creditors, who it does not appear were present; and the jury might well have found that he would, as a reasonably prudent man, before assuming to act as trustee, inform himself as to the state of these creditors' claims by reference to the books of Rosenthal Bros., especially in view of his previous knowledge of their business. The books in fact tended to show no such indebtedness as that claimed to exist in favor of Rosen Bros. and Kersberg was ever created. This testimony was certainly competent as showing a fraudulent intent on the part of Rosenthal Bros. Koch v. Lyon, 82 Mich. 513, 46 N.W. 779. And we think, in view of the fact that the defendant undertook to act as trustee for other alleged creditors, it is a fair inference that he would inform himself by reference to the books as to the state of their claim, and the books were some evidence of mala fides on his part. See Loos v. Wilkinson, 110 N.Y. 212, 18 N.E. 99. See, also, Ganther v. Jenks & Co., 76 Mich. 510, 43 N.W. 600. The information of the witness who gave evidence of the contents of the books was obtained while the goods were in possession of the sheriff under an unauthorized attachment; and in Rosenthal v. Muskegon Circuit Judge (Mich.) 57 N.W. 112, we held that the attorney should be required to deliver up any memorandum which he had made, relating to the contents of the books, thus righting a wrong committed by a misuse of the process of the court, as far as practicable. But the attorney who obtained the information was not acting in the present case at the time the attachment in question was sued out, or the information obtained. The question, therefore, is whether one who is in no way responsible for the tort by which information is obtained by a witness may introduce evidence of the facts ascertained, even though a trespass or wrong was committed by the witness in obtaining the information. We...