Hackley v. Mack

• Decision Date: 15 April 1886
• Citation: 27 N.W. 871,60 Mich. 591
• Court: Michigan Supreme Court
• Parties: HACKLEY v. MACK.

27 N.W. 871

60 Mich. 591

HACKLEY v. MACK.

Supreme Court of Michigan

April 15, 1886

Appeal from Clare.

Smith, Nims, Hoyt & Erwin, for appellants.

Moses Taggart, (Edward Bacon, of counsel,) for defendant.

SHERWOOD, J.

In 1876 the Lake George & Muskegon River Railroad Company was organized under the general railroad laws of this state, with a capital stock of $60,000. The road to be constructed by said organization was about seven and one-half miles long and mainly for logging purposes. The first board of directors were E.H. Hazelton, W.S. Gerrish, J. Terra Watson, Leslie F Gerrish, and William Stafford, and their offices were at Muskegon. The road was constructed in 1877, and began to be used in hauling logs that year. In the month of February 1878, an attempt was made to increase the capital stock of the company to $100,000, "and thereafter the transactions of the company seem to be all based on the amended articles and increase of one hundred thousand dollars capital stock, and the reports to the auditor general of the state show a like increase. The articles of association were also amended, showing an increase of length of road to twenty-one miles or thereabouts. On April 12, 1881, the company, by its board of directors recognized its indebtedness to W.S. Gerrish 'for money furnished the corporation to pay its current expenses, the purchase of rolling stock and material for construction,' and by resolution authorized and instructed the president and secretary of the company to execute and deliver to Winfield S. Gerrish a mortgage on its road-bed, iron, spikes, ties rolling stock, consisting of engines, cars, machinery, machine-shops, and all personal effects now owned and controlled by said corporation, to the amount of fifty thousand dollars, payable at the office of said company, in Muskegon, in one and one-half years from date, bearing interest at seven per cent. per annum. On the nineteenth of April, 1881, the president and secretary of said company, pursuant to the resolution stated, executed the company's mortgage and bond to W.S. Gerrish to secure him in the sum of fifty thousand dollars. On the tenth of May the mortgage was duly acknowledged, and on the thirty-first of May, 1881, the same was recorded in the register's office of Clare county. On the twenty-seventh of May, 1881, Winfield S. Gerrish, for the consideration of fifty thousand dollars, sold and assigned said mortgage and bond to John L. Woods, of Cleveland, Ohio. The assignment was recorded in the register's office of Clare county. On the twenty-eighth of November, 1881, the railroad company, by its board of directors, recognized the fact of the company's indebtedness to John L. Woods, of Cleveland, Ohio, in the sum of fifty thousand dollars, and recite in their records: 'Whereas, it appears to us probable that the company will be unable to discharge said indebtedness at maturity, and whereas, said John L. Woods has offered to cancel said debt on the execution and delivery to him of a conveyance of all the property, real and personal, of the company, resolved, that the president be, and he is hereby, authorized to execute and deliver to said John L. Woods a conveyance of the road, rolling stock, and other property of this company, (except its bills receivable and bills payable,) on the surrender and discharge of the indebtedness aforesaid.' "

On the same day, Woods discharged the mortgage assigned to him by W.S. Gerrish, and surrendered the bond secured thereby to the company, and received a deed of the property, and took possession thereof. He continued in possession and control thereof until he sold the same to the complainants on the second day of January, 1882, for the sum of $45,000. The complainants' deed was recorded in the month of March, 1882, in the county of Clare. The complainants continued in the quiet and peaceable possession of the property until about that date, when the sheriff of Clare county, claiming to be acting under a warrant from the auditor general of the state, dated May 5th, levied upon the property of complainants above mentioned for the hereinafter mentioned taxes, interest, and penalties stated in the warrant, with his fees, and interest at 10 per cent., and to satisfy the same. The levy was made on the fifth day of June, 1882, and complainants had been in possession of the property under their deed at that time since the early part of March previous. The sheriff, who is the defendant, says in his return that the property levied upon was "the property of the Lake George & Muskegon River Railroad Company," and that he advertised the same for sale, to satisfy the demand of his warrant, on the seventeenth of June, 1882, and at the time of his levy he filed notice thereof as lis pendens with the register of deeds of Clare county. The warrant recites an indebtedness to the state of Michigan from the Lake George & Muskegon River Railroad Company for specific taxes for the year 1879, payable July 1, 1880, $2,424.46; for the year 1880, due and payable July 1, 1881, $1,856.10; and with interest on both of said sums, making due a total of $4,684.99 the thirteenth day of April, 1882, at the date of the demand claimed to have been made by the auditor general. The warrant further recites that a demand according to law was made on the thirteenth of April, 1882, for the payment of said specific taxes and the penalty of 2 per cent. per month. The sale under the sheriff's levy was adjourned from time to time until enjoined. On or about the second of August, 1882, the bill in this cause was filed, and subpoena served, with an injunction to restrain the sheriff from further executing his warrant.

In addition to the foregoing, the complainants further claim that the said levy is illegal, unjust, and oppressive, and that, at the time of purchasing the property in question, they had no notice of any lien or claim of lien for taxes, and claimed to be bona fide purchasers for full value paid, to-wit, $45,000, and were in the actual and peaceable possession of the property as a copartnership at the time of the levy on the fifth of June, 1882; and they further show that they are not a railroad corporation; had no interest at any time, and have not now, in the Lake George & Muskegon River Railroad Company.

The prayer of complainants' bill is that the proceedings under the defendant's warrant to sell the property levied upon and advertised to be sold may be perpetually restrained, and that the levy may be released and discharged, and for general relief.

The defendant answered the bill, and filed the same on the fifth of January, 1884, and the cause was placed at issue by the complainants' general replication, filed January 21 1884. The defendant admits the levy by him as sheriff of Clare county upon the complainants' property as stated in the bill, under and by virtue of the warrant from the auditor general to obtain the taxes and other moneys claimed in the warrant, and that he advertised the complainants' property for sale as stated, and avers his lawful right so to do; and, further answering, says that upon information and belief he alleges the truth to be that the Lake George & Muskegon River Railroad Company "owned, had, and possessed, and used in operating said railroad," and as appurtenant to it, all the property described in the warrant, "and that this status of ownership, use, and possession continued, as to all the fixed and stationary property, throughout the years 1879, 1880, 1881, and in 1882, and up to the commencement of this suit, or so much of the time aforesaid; that all the said property became and was subject to liens in favor of the state of Michigan for all the moneys mentioned and claimed in the warrant;" and further avers that "the said corporation did continue to have such an interest in and relation to said property, and every part thereof, at and through such times;" that the liens of the state of Michigan, as aforesaid, did "attach to said property," and were valid and subsisting liens, at the date of said warrant, to secure to the state of Michigan the moneys therein mentioned; that such liens took precedence over all other claims, demands, or titles, either to or against said company's property held by complainants, and that all steps necessary were legally taken by the state, and its officers and agents, to perfect its claim to the taxes levied under the warrant upon the corporation property; and that if said corporation ever transferred any or "all of the property aforesaid to said complainants, or to any person or persons under whom they claim, such transfer was either without consideration, or for grossly inadequate consideration, or was on some secret trust for said corporation or some of its officers,...