Detroit Trust Co. v. Hartwick
Decision Date | 09 December 1936 |
Docket Number | No. 71.,71. |
Citation | 270 N.W. 249,278 Mich. 139 |
Parties | DETROIT TRUST CO. v. HARTWICK et al. |
Court | Michigan Supreme Court |
OPINION TEXT STARTS HERE
Suit by the Detroit Trust Company, receiver of the Guaranty Trust Company of Detroit, against James W. Hartwick and another, surviving trustees under the last will and testament of Edward E. Hartwick, deceased. From an adverse decree, plaintiff appears.
Reversed and decree entered.
Appeal from Circuit Court, Wayne County, in Chancery; James E. chenot, judge.
Argued before the Entire Bench, except POTTER, J.
A. W. Sempliner, of Detroit (Jason L. Honigman and Wm. M. Sempliner, both of Detroit, of counsel), for appellant.
Joseph J. Kennedy, of Detroit, for appellees.
Defendants, together with Guaranty Trust Company, were trustees under the last will and testament of Edward E. Hartwick, deceased, and as such were the owners of 100 shares of common stock of the trust company. This stock was sold on March 21, 1931, to Robah G. Hoover, who inserted the name of his wife, Mary A. Hoover, as transferee, and the shares were transferred to Mrs. Hoover on the books of the company the day of its sale.
The Guaranty Trust Company of Detroit was closed by the appointment of a receiver on July 1, 1931, and later an order was entered fixing the liability of its stockholders and authorizing the receiver to sue therefor. A statement of its condition at the close of business December 31, 1930, shows the book value of its stock to be about $200 a share. It was sold to Hoover within three months thereafter for 45 cents a share and the purchaser has since received his discharge in bankruptcy.
Mrs. Hartwick, the active trustee of the estate, testified that she instructed her son to sell the stock because of the advice of her lifetime friend, Louis E. Hart, a Chicago attorney. Mr. Hart was called as a witness by defendants; he testified he told Mrs. Hartwick that bank stocks were not a proper investment for a trust estate and that they should be sold immediately. Upon cross-examination, he said:
Mrs. Hartwick was called by plaintiff and subjected to a most searching cross-examination. The trial judge devoted much of his opinion to an analysis of her testimony. We quote a portion:
The remainder of the testimony largely consists of the necessary technical record proof regarding the financial condition of the trust company, the details surrounding the appointment of a receiver, the manner in which the investments of the Hartwick estate were handled, admissions of the uncollectibility of Hoover, and Mrs. Hoover's lack of knowledge of the transaction. To this may be added a claim of presumption of knowledge of insolvency on the part of the trust officer who handled the estate and the inference that such knowledge is imputed to the active trustee. All of this testimony was considered by the trial judge, who concluded that he was bound to accept the testimony of Mrs. Hartwick. He said: ‘* * * for that reason, if for no other, plaintiff in this case cannot prevail against this trust and these trustees.’
Plaintiff's appeal is submitted upon two questions:
Does the statute, section 12005, C.L.1929, provide that a transfer of trust company stock does not relieve the transferor of his liability for assessment, if made within four months prior to its closing?
Was the transfer of 100 shares of stock by defendant Hartwick estate made with the fraudulent intent of avoiding its liability as a stockholder?
Appellant supports its first question with a most interesting and persuasive argument for a different interpretation of the four months' rule than the one evidently applied by the trial court.
Appellee says the question of interpretation was not raised at the trial. The bill of complaint, however, states the proposition and appellant builds its case around the problem. We feel it is better to consider and decide this question.
Section 12024, supra, reads in part: ‘The stockholders of every trust company shall be individually liable, equally and ratably, and not one (1) for another, for the benefit of the creditors of said trust company to the amount of their stock at the par value thereof, in addition to the said stock.’ An assessment was levied in this receivership and sustained in Detroit Trust Co. v. Allinger, 271 Mich. 600, 261 N.W. 90. See, also, Gause v. Detroit Trust Co., 297 U.S. 695, 56 S.Ct. 572, 80 L.Ed. 986, where a writ of error issued in this cause was dismissed in the United States Supreme Court.
Section 12005, supra, reads in part: ‘All sales, transfers, and assignments of any stock made or given with the intent and purpose on the part of such stockholder to hinder, delay or defraud the creditors of such company or any of them shall be null and void as against the creditors of such company, except as to purchasers in good faith and for present fair consideration, if made within four (4) months prior to the filing of a petition asking for the appointment of a receiver of such company.’ The quoted portion of the foregoing section was first incorporated in the trust company act, as part of Act No. 67 of the Public Acts of 1929, and similar language appeared as an amendment to the banking act (Act No. 46, Pub.Acts of 1927). See 3 Comp.Laws 1929, § 11906.
The law prior to the 1927 amendment and the 1929 enactment is stated in Foster v. Row, 120 Mich. 1, 79 N.W. 696,77 Am.St.Rep. 565. It is suggested by the appellee in a companion case, Detroit Trust Co. v. Granger, 278 Mich. 152, 270 N.W. 239 (decided herewith), that Foster v. Row is controlling on this question.
Appellant in the instant case, in discussing the four months' rule, says:
Prior to 1927 there was nothing in either the banking or trust company acts that specifically said that a transfer of stock made with intent to avoid an assessment was invalid.
The question resolves itself into this: Did the Legislature by its enactment of 1929 intend to increase or diminish the liabilities of stockholders in trust corporations? No records of committee reports or legislative debates are available as aids in a search for the correct answer. The holdings of federal and other appellate courts are at best only persuasive because they deal with banking statutes containing varying provisions.
Appellant argues that the statute in its present form does not express the true intent of the Legislature and that its meaning may be made...
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