Kennison Sales & Engineering Co., In re, 37

• Citation: 110 N.W.2d 579,363 Mich. 612
• Decision Date: 21 September 1961
• Docket Number: No. 37,37
• Parties: In the Matter of the Voluntary Dissolution of KENNISON SALES & ENGINEERING COMPANY, Incorporated, a Michigan Corporation. BROWNING v. NATIONAL BANK OF DETROIT.
• Court: Supreme Court of Michigan

Page 579

110 N.W.2d 579

363 Mich. 612

In the Matter of the Voluntary Dissolution of KENNISON SALES & ENGINEERING COMPANY, Incorporated, a Michigan Corporation BROWNING v. NATIONAL BANK OF DETROIT.

No. 37.

Supreme Court of Michigan.

Sept. 21, 1961.

Ernest C. Wunsch, Robert B. Aikens, Detroit, for National Bank of Detroit, as Admr. with Will Annexed of Estate of Everett B. Kennison, Deceased.

A. Albert Sugar, Detroit, for receiver, appellee.

Before the Entire Bench, except BLACK, J.

KAVANAGH, Justice.

In March, 1956, Everett B. Kennison and his wife Pauline were murdered while on a vacation trip in Mexico. Mr. Kennison, at the time of his death, was president of the Kennison Sales and Engineering Company, Incorporated. He owned 1 per cent of the stock of the corporation and his wife Pauline owned 98 per cent, the remaining 1 per cent being owned by Dennis H. Robinson, a neighbor of the Kennisons. The firm was incorporated on October 4, 1954, and had been previously operated as a sole proprietorship by Mr. Kennison. The firm's original registered office was on Cass avenue in Detroit, while part of the corporate files and other books and records were maintained at the Kennison home on Evergreen avenue in Detroit. Some of the business was also done at that location.

Shortly after the Kennisons' burial, Mr. Dennis H. Robinson, a director of the corporation, Mr. Tilden Gallagher, attorney for the corporation, Mr. Charles J. Dormal, brother-in-law of Mrs. Kennison, and Adrian Kennison, brother of Mr. Kennison, went to the home on Evergreen avenue to examine the effects of Mr. and Mrs. Kennison. They found personal records of the Kennisons and records and files relating to the Kennison Sales and Engineering Company, Incorporated. In addition they found 4 sealed, white, unmarked envelopes. The first envelope contained $10,000 in cash; the second envelope $8,200 in cash; the third envelope $195 in Canadian funds; and the fourth envelope $8,000 in cash. This cash, except the Canadian funds, amounting to $26,200 is the subject matter of this suit. In addition there were found cashier's checks amounting to $20,554.88 payable to Kennison Sales and Engineering Company, Incorporated; a lady's purse containing cash in the amount of $1,449.65; and a cashier's check for $780 payable to Pauline Kennison.

An inventory was made by the parties followed by a discussion of what to do with the funds. They decided to turn them over to Brinks for safekeeping. The parties later turned the $26,200 over to the National Bank of Detroit.

On May 28, 1956, the Wayne county probate court appointed the National Bank of Detroit administrator with will annexed of the estate of Everett B. Kennison. On March 29, 1956, Charles J. Dormal was appointed administrator of the estate of Pauline Kennison.

Mr. George E. Bowles was appointed attorney for the estate of Everett B. Kennison. Mr. Tilden Gallagher was retained as attorney for the administrator of the estate of Pauline Kennison.

Mr. Dormal, Mr. Bowles and a Mr. Arthur A. Ude were elected directors of the Kennison Sales and Engineering Company, Incorporated. These directors appointed the National Bank of Detroit as agent for the corporation and turned over all the corporate books and records to it. From 1956 up to February 16, 1959, meetings of the board of directors of the corporation were held frequently at the National Bank of Detroit.

At the direction of one of the directors, the National Bank of Detroit paid claims against the estate of Everett B. Kennison totaling $2,932.95. These payments were made with the knowledge and consent of the directors of the corporation.

The funds in question were not included in the inventory of the estate of Everett B. Kennison filed with the probate court. The only explanation given for this in the record is that the estate of Pauline Kennison, through its attorney, had indicated it intended to file a claim to part of this fund and the bank did not want it included in the inventory until the claim was resolved.

On February 20, 1959, a petition for the dissolution of Kennison Sales and Engineering Company, Incorporated, was filed. William B. Browning was appointed receiver.

On March 14, 1960, the receiver filed his petition for an order to show cause why the National Bank of Detroit should not be ordered to turn over the funds in question to him. Hearings were had and the trial judge concluded from lengthy testimony that 'the bank's position has been one of at best, a dual capacity--administrator for the estate of Everett Kennison, and the agent for the corporation.' The court made clear he was not determining title to the cash, but only the right to possession. He directed that the cash be turned over to the receiver forthwith and that the receiver hold the sums intact. He provided for the increase of the receiver's bond commensurate with the amount of money in his hands.

The National Bank of Detroit, through its attorney, offered a proposed order which directed that the National Bank of Detroit as fiduciary of the estate of Everett B. Kennison should forthwith deliver and pay over to the National Bank of Detroit the $26,200 plus any and all income earned therefrom during the period which the bank was in possession of such sum as fiduciary of the estate of Everett B. Kennison, setting up certain terms upon which the bank was to hold the funds.

The circuit judge refused to sign such an order and entered one directing the National Bank of Detroit as stakeholder and agent to turn over the sum of $26,200 to the receiver forthwith.

The bank, as administrator with will annexed of the estate of Everett B. Kennison, has appealed, claiming the circuit court was in error in entering an order in a summary proceeding transferring possession of the cash fund held under a claim of title by the administrator to the receiver; that the order appealed from was unconstitutional; and that the administrator would be irreparably injured by the order transferring the fund to the receiver.

Appellant's argument is based on the well-established rule that a receiver may not invoke the aid of a court in a summary proceeding to take possession of property held by a stranger to the proceeding. With this general rule appellee does not disagree. Appellee contends, and we think correctly so, that the general rule that a person claiming adversely cannot be ordered to surrender possession of property to a receiver in a summary proceeding does not apply where such adverse claimant is a party to the receivership proceeding or is an agent of or in privity with such party.

The trial court found the National Bank of Detroit was at best acting in a dual capacity--that of administrator of the estate of Everett B. Kennison and agent for the corporation.

This Court in the case of Stowe v. Wolverine Metal Specialties Co., 242 Mich. 624, pages 628-630, 219 N.W. 714, page 716, speaking through Justice Fellows, recognized the general rule but said:

'But corporations may only act through their officers and agents, and while the rule above referred to has generally been recognized, it has likewise been generally recognized that it is not applicable to the officers and agents of corporations. In High on Receivers (4th ed.), § 312a, it is said:

"When a receiver is appointed over a corporation, with the usual powers of receivers, and specially empowered by the order or the court to receive all the effects and choses in action of the corporation, such order involves a correlative duty upon the part of the corporate officers to deliver the assets to the receiver, even though such delivery is not specifically directed by the court. A failure, therefore, by the officers of the corporation to deliver its assets to the receiver, and their sale by such officers, constitute a contempt of court and will be punished as such.'

'And in section 144 of the same work it is said:

"The receiver, being the officer or agent of the court, is entitled to its assistance in obtaining possession of property which is the subject-matter of his receivership, and may have an order of court to procure possession of such property, not only against defendant in the action, but in a proper case against his agents and employees, although not parties to the record, requiring them to deliver up the specific property.'

'In (1) Tardy's Smith on Receivers (2d ed.) [p. 872], § 345, it is said:

"A failure of the officers of a corporation over which a receiver has been appointed to deliver its assets to such receiver, even though the delivery is not specifically ordered by the court, constitutes a contempt of court.'

'In Tolleson v. [People's] Savings Bank, 85 Ga. 171, 11 S.E. 599, it was said:

"When a court acquires jurisdiction over a corporation as a party, it obtains jurisdiction over the official conduct of the corporate officers so far as that conduct may be involved in the remedy against the corporation which the court is called upon to enforce.'

'And the commitment of the officer for contempt was affirmed. In the case of In re Cohen and Jones, supra , where this question was before the court, it was said:

"Courts of equity unquestionably have the power to appoint receivers and to order them to take possession of the property in controversy, whether in the immediate possession of defendant or his agent, and in proper cases they can also order the defendant's agents or employees, although not parties to the record, to deliver the specific property to the receiver.'

'See, also, Brandt v. Allen, 76 Iowa 50, 40 N.W. 82, 1 L.R.A. 653; State ex rel. Cameron v. District Court, 48

Nev. 198, 228 P. 617; Blaise v. Security Brewing Co., 124 La. 979, 50 So. 861; Thornton v. Washington Savings Bank, 76 Va. 432; Young v. Rollins, 90 N.C. 125; Wheeler v. Matthews, 70 Fla. 317, 70 So. 416; Edrington v. Pridham, 65 Tex. 612. And this court has...