Comstock v. Horton

• Decision Date: 07 June 1926
• Docket Number: No. 122.,122.
• Citation: 209 N.W. 179,235 Mich. 282
• Parties: COMSTOCK et ux. v. HORTON et al.
• Court: Michigan Supreme Court

235 Mich. 282

209 N.W. 179

COMSTOCK et ux.

v.HORTON et al.

No. 122.

Supreme Court of Michigan.

June 7, 1926.

Appeal from Circuit Court, Otsego County, in Chancery; Guy E. Smith, Judge.

Proceeding by Almon B. C. Comstock against J. Lottie Horton and others for the appointment of a receiver of the Otsego County State Bank. Fred J. King was appointed receiver and filed a petition against Comstock and wife and others. Decree for receiver, and Comstock and wife appeal. Reversed and rendered.

For some time prior to November 4, 1914, Almon B. C. Comstock, Charles A. Quick, J. Lottie Quick, and J. Lee Morford were partners operating a private bank at Gaylord known as the Otsego County Bank, and one at Vanderbilt known as the Exchange Bank of Vanderbilt. On this day Mr. Morford sold and transferred his interest in both banks to the other partners. In the winter of 1915 the Otsego County State Bank was organized under the banking law and succeeded to and took over the business of the Otsego County Bank. The three partners continued to operate the Exchange Bank of Vanderbilt. December 6, 1922, Charles A. Quick died leaving a widow, defendant Celia A. Quick, and heirs, defendants Grant Quick, Virginia Quick, Lamont Quick, Lavern Quick, and Veva Clack. It fairly appears that he left no estate outside of what interest he had in the bank. J. Lottie Quick married a man named Horton, and is the other defendant; she moved to Flint, and for a number of years has had no active connection with the bank.

The record fairly discloses that for many years the Vanderbilt Bank did not have sufficient good assets to meet its liabilities, although Mr. Comstock was until recently a man of considerable means. He was well along in years and went to California, it is claimed, for his health. In the summer of 1924, the affairs of the bank were in a precarious condition. Mr. W. L. Townsend, an attorney of high standing, residing at Gaylord, had for many years been the attorney for Mr. Comstock. Mrs. Comstock was then in Gaylord; she gave Mr. Townsend $500 to be used for the benefit of the bank, but it was only a drop in the bucket. She and Mr. Townsend joined in a telegram to Mr. Comstock requesting authority to Mr. Townsend to institute proceedings on Comstock's behalf for the appointment of a receiver. The authority was promptly wired Mr. Townsend, and he filed a bill for Mr. Comstock, asking for the appointment of a receiver, the dissolution of the partnership, the winding up of its affairs, and for general relief. Fred J. King was appointed receiver, qualified as such, and took possession of the assets of the bank. Later Mrs. Comstock was made a party, and personally served with process.

Among the assets of the bank the receiver found several notes, long past due, signed individually by the copartners, Comstock, Quick, and Mrs. Quick, upon which they were jointly and severally liable. He also found other paper, long past due, upon which it is claimed they were liable by indorsement, and other items for which it is claimed they were also liable individually. He filed a petition to have their liability fixed on these various items, and also sought to have certain conveyances set aside. These conveyances were made under the following circumstances: Mr. Morford was indebted to the partnership in a considerable amount; in part payment of such indebtedness he deeded 320 acres to Mrs. Quick as trustee for the Otsego County Bank; she on behalf of the bank deeded the land to Comstock. It is not claimed there was bad faith up to this point, or that the bank was defrauded in any way by the transaction. After Comstock received title, he deeded the land to his daughter, who deeded it back to Comstock and wife as tenants by the entirety, thus placing it beyond the reach of an execution. It is this later transaction that is claimed to be in fraud of creditors. Other lands are mentioned, but this is the important and valuable piece involved. Mrs. Horton answered and claimed the benefit of the statute of limitations. Mr. and Mrs. Comstock made a motion to dismiss, and both claimed and now claim that the court had no jurisdiction to grant the relief asked or any of it either as matter of law or of fact. Mr. Comstock also invokes the statute of limitations in his defense. From a decree granting the relief prayed, Mr. and Mrs. Comstock appeal. Mr. Horton does not appeal. Counsel for the receiver thus states the questions before us:

‘The questions in the case seem to us to be as follows:

‘(1) Was the receiver authorized to proceed as he did in this case against Mr. Comstock to require him to pay his indebtedness upon these notes?

‘(2) Was Mr. Comstock liable upon the notes in question?

‘(3) Did the court have jurisdiction to make Mrs. Comstock a party to the proceedings?

‘(4) Was it proper to include in the receiver's petition the matter of the title to the land which the receiver alleged had been fraudulently put in the name of Mr. and Mrs. Comstock as tenants by the entirety?

‘(5) Was the court justified in holding that this transaction was fraudulent as to the bank, its creditors and depositors?'

Counsel for the Comstocks add a sixth question which they discuss under the head:

‘Appropriating land, the title of which was in Hattie Comstock, for the debts of Almon Comstock.'

Argued before the Entire Bench.

Kinnane & Leibrand, of Bay City, for appellants.

Stoddard & McMillan, of Bay City, for receiver.

FELLOWS, J. (after stating the facts as above).

1. There is no justification for any criticism of Mr. Townsend. He had been attorney for Mr. Comstock for many years. There was grave danger that the assets of the bank would be dissipated, grave danger that many suits would be started, grave danger that Mr. Comstock would be called upon to make up a large deficit unless prompt action was taken to conserve the assets. Mrs. Comstock was on the ground, presumably knew the situation, and joined in the request to her husband to wire Mr. Townsend authority to institute the proceedings. This he did. The original bill was filed by express directions of Mr. Comstock. By it he sought the dissolution of the partnership, the winding up of its affairs, and general relief. By it he submitted himself to the jurisdiction of the court, and asked to have the partnership affairs wound up. By it the court acquired jurisdiction, and it is difficult to perceive how he can now complain of appropriate action taken for that purpose. Wabash Railway Co. v. Marshall, 224 Mich. 593, 195 N. W. 134. In that case the plaintiff sought relief against the defendants in the state court. The defendants in defense, and by way of cross-bill sought certain relief from plaintiff. It was urged by plaintiff that such matter should be litigated in the federal court. But this court held that, having selected the state court as the forum, plaintiff, could not object to defendants' asserting their defense by way of cross-bill in such forum. So here Mr. Comstock appealed to a court of equity to adjust the partnership affairs, and he cannot complain if they are there adjusted.

If all the copartners were at this time jointly and severally liable as makers of the notes and also liable on the other items involved in the receiver's petition, we would have little difficulty in agreeing with appellant's counsel that this proceeding was unnecessary, as their liability could be eventually fixed when the amount of the deficiency is ascertained. But, as we shall presently show, we reach the conclusion that Mr. Comstock is liable on two of these notes. On the other hand, we reach the conclusion that Mrs. Horton is not now liable on any of them. The decree makes her liable on all the items, and, as she had not appealed, we cannot change decree in her favor, but, in determining the question of jurisdiction we may and should consider whether she is liable as matter of law. All of the items involved, were more than 8 years old. No payments on any of them had ever been made by her. Payments made by other makers did...