Hosner v. Brown

• Decision Date: 24 May 1972
• Docket Number: No. 2,5773,7684,Docket Nos. 5518,2
• Parties: LeRoy HOSNER, Individually and as Shareholder, Plaintiff-Appellant, v. Albert F. BROWN, Individually, et al., Defendants-Appellees
• Court: Court of Appeal of Michigan — District of US

Page 295

199 N.W.2d 295

40 Mich.App. 515

LeRoy HOSNER, Individually and as Shareholder, Plaintiff-Appellant, v. Albert F. BROWN, Individually, et al., Defendants-Appellees.

Docket Nos. 5518, 5773, 7684.

Court of Appeals of Michigan, Division No. 2.

May 24, 1972.

Released for Publication July 27, 1972.

Leave to Appeal Denied Aug. 2, 1972.

Eliot Charlip, Lathrup Village, for appellant.

Kenneth B. McConnell, Bloomfield Hills, Gerald R. Gase and John N. O'Brien, Kenneth A. Roy, Royal Oak, for appellee.

Before QUINN, P.J., and DANHOF and TARGONSKI, ^* JJ.

TARGONSKI, Judge.

Plaintiff in his complaint and on appeal claims that this is a derivative action by him for the benefit of Northtown Transit Inc., Northtown Transit Mix & Supply Company, Inc., Western Aggregate Corporation and Michigan Concrete Pumping Inc. Appeal No. 5518 is brought by the plaintiff from the action of the trial court in setting aside garnishments before judgment which were issued on application of the plaintiff at the commencement of the proceeding with the filing of the complaint on March 26, 1968. Appeal No. 5773 is an appeal on leave granted from an order filed July 3, 1968, wherein the trial court denied plaintiff's motion for entry of a default judgment. Appeal No. 7684 is an appeal of right from the judgment of the trial court after a trial on the merits. In addition plaintiff in File No. 6021 made application for leave to appeal which was denied but without prejudice to the right of the plaintiff to include the question of the propriety of the circuit court order of June 26, 1968, setting aside the default of the defendants together with the matters in his Appeal No. 5773.

For the purposes of background information it is important to note that the plaintiff is not only a member of the Board of Directors but also a treasurer of Northtown Transit Mix, Inc., President and Director of Western Aggregate Corporation as well as a Director and Officer in another corporation owned by Northtown Transit Mix, Inc. This background becomes very important in the resolution of certain issues raised by the plaintiff on trial and on appeal.

We have very painstakingly plowed through almost 1500 pages of transcript, on trial and on motions, together with a stack of pleadings upwards of a foot high in an attempt to reconcile the variances between the statements of facts as made by the respective parties. Every single page of testimony was carefully digested along with the opinion and the judgment of the trial court and considered in light of the claims, allegations, charges, aspersions and other statements by the plaintiff in his pleadings, in his briefs and in the course of trial. Because of the complexities of the problem raised by the various assorted charges and allegations made by the plaintiff, a well organized file and trial would have been difficult enough to digest; a similar case in a state of organized confusion would be considerably more difficult, but the most polite label one can place on the pleadings and records in this cause is disorganized confusion which rendered the fog of obfuscation raised in the process to a point where it was almost impenetrable. Under the circumstances we deem it advisable to commend the trial judge for his patience and his infinite care in sifting through the wheat and the chaff to arrive at a studied and logical analysis and conclusion in this matter. In order to make certain that we minimize the amount of confusion in this record, it is our proposal to dispose of the preliminary issues first and then consider those issues raised by the plaintiff on appeal from the judgment after a trial on the merits.

I. Accordingly, we proceed to a consideration of the first issue raised on the appeal of the plaintiff relative to the question of dismissal of garnishment. From an analysis of the briefs of all parties and the transcript below we believe this question is best framed as:

'MAY PLAINTIFF, ACTING AS A DERIVATIVE SHAREHOLDER, GARNISH FUNDS OF THE CORPORATION, FOR WHICH HE PURPORTS TO ACT AND AGAINST WHICH HE CLAIMS NO DAMAGE, IN A SUIT AGAINST OFFICERS AND OTHERS, CLAIMING DAMAGES FOR FRAUD AND OTHER ALLEGED TORTIOUS WRONGS?'

Plaintiff claims that he has a count for damages for breach of contract, but an examination of his complaint fails to disclose any such allegation. In fact, there is no claim of any particular contract between himself or any one of the individual defendants, nor does he set forth the existence of any contract between himself and the corporate defendants other than his interest as a stockholder.

At the outset of the litigation, plaintiff in addition to filing his complaint, procured the issuance of writs of garnishment against the corporate accounts of Northtown Transit Mix on behalf of which he purported to be acting; he also filed a motion to restrain creditors from proceeding against the corporation, but said motion was never brought on for hearing although served upon the suppliers of the corporation; and he also attempted to procure an Ex parte appointment of a receiver and upon denial of that application made further attempt to have a receiver appointed during the pendency of the litigation on the basis of the allegations of fraud made in his complaint which were ultimately found to be untrue by the trial court.

The defendant corporations moved that the garnishments as filed be dismissed on the basis that: (1) there was no contract action in litigation, (2) no cause of action was shown against the corporation itself whose bank accounts had been garnisheed, and (3) the affidavit for garnishment before judgment was insufficient in several respects. Plaintiff apparently relies for support of his position upon GCR 1963, 738.14, 738.15 and 738.16. He further maintains that his complaint meets the requirements of § 4011 of the Revised Judicature Act of 1961, M.C.L.A. § 600.4011; M.S.A. § 27A.4011 which specifies that to sustain a garnishment prior to judgment a claim must be 'evidenced by contract'.

On this issue the respective positions of plaintiff and defendants raise the following questions which are discussed in turn for purposes of holding the length of this opinion to an irreducible minimum.

(A) DOES THE COMPLAINT OF THE PLAINTIFF MAKE A CLAIM UPON ANY ONE OF THESE DEFENDANTS 'EVIDENCED BY CONTRACT'?

For a determination of this issue we turn to the Revised Judicature Act, being 1961 P.A. No. 236, § 4011(1); M.C.L.A. § 600.4011(1); M.S.A. § 27A.4011(1), which states in part that:

'The circuit courts of the state shall have power by garnishment to apply to the satisfaction of a claim evidenced by contract.'

The statute then goes on to describe assets which can be garnisheed.

The previous statute M.C.L.A. § 628.1; M.S.A. § 27.1855 provided: 'In all personal actions arising upon contract * * *'. The language of the previous statute was similar to that presently contained in GCR 1963, 738.2(1). That language required, and now requires that the affidavits state that 'the principal defendant is indebted to the plaintiff in a stated amount upon a contract or judgment over and above all set-offs'. This position was affirmed by the Supreme Court in Talbert v. Solventol Chemical Products, Inc., 304 Mich. 557, 8 N.W.2d 637 (1943) to the end that in order to sustain a garnishment, the contract upon which an action is brought must contain a standard of reference by which damages can be ascertained.

'Proceedings in garnishment is special and statutory, affording a harsh remedy, and one pursuing it must bring himself within the statute and follow its mandates'. Carr v. National Discount Corp., 320 Mich. 192, 30 N.W.2d 832 (1948) and cases therein cited.

The Carr case, Supra, is interesting in that it is a suit to recover a certain sum of money allegedly obtained through a wrongful conspiracy by the defendants. The Court held that the declaration set forth facts which established a basis for a tort action rather than a contract action and that therefore, garnishment was not available to the plaintiff. Other than this, the cases cited indicate that strict compliance by the plaintiff is necessary to maintain his remedy.

The complaint in this cause is somewhat similar to that in the Carr case, Supra, in that plaintiff alleges that he has been wronged by one of the individual defendants in the action, not one of the defendants moving for dismissal of garnishment, however; and that the acts of the defendant, as alleged are tortious in nature as in the case cited.

On the basis of an examination of the plaintiff's complaint which reveals no allegation of a cause of action evidenced by contract and upon the authority cited and for the reasons stated this first question on the first issue must be answered in the negative.

(B) IS THE AFFIDAVIT UPON WHICH THE WRITS OF GARNISHMENT ARE BASED TRUTHFUL AND FACTUAL IN ITS ALLEGATION THAT SUCH CLAIM, 'EVIDENCED BY CONTRACT', IS MADE AGAINST THESE DEFENDANTS AND THAT THE PLAINTIFF IS APPREHENSIVE OF LOSS FOR THE REASON GIVEN THEREIN?

The provisions of GCR 1963, 738.2(1), 738.2(3) requiring an affidavit are prerequisites to the issuance of a writ of garnishment. It is self-evident that if such affidavit defaults, either by error or a product of perjury then the writ of garnishment which is based upon such affidavit must fail.

The complaint does not set forth the requisite facts and allegations to support the sworn statement of the plaintiff that the suit is brought upon an 'express and implied' contract. Further, an examination of plaintiff's alleged 'just apprehension of loss' indicates that he is fearful 'that the garnishee may pay said sums over to one or more of the defendants in breach of the contract'. Granting the most imaginative application and consideration to the allegations in the plaintiff's complaint and his sworn statement, we can filed no cause for him to be 'justly apprehensive of the loss of his claim' as required by GCR...