Lamb v. Abendroth, 19.

• Decision Date: 21 June 1934
• Docket Number: No. 19.,19.
• Parties: LAMB et al. v. ABENDROTH et al.
• Court: Michigan Supreme Court

268 Mich. 73

255 N.W. 447

LAMB et al.

v.ABENDROTH et al.

No. 19.

Supreme Court of Michigan.

June 21, 1934.

Appeal from Circuit Court, Wayne County, in Chancery; Clyde I. Webster, Judge.

Suit by Scott E. Lamb and Charles A. Smith, receivers for the Metropolitan Trust Company, against Florence Abendroth and others. From a decree for plaintiffs, Hugh G. Allerton and other defendants appeal.

Affirmed.

Argued before the Entire Bench, except BUTZEL, J.

Robert M. Brownson, of Detroit (Kenneth Murray and Paul Marco, both of Detroit, of counsel), for appellant Brownson.

Hugh G. Allerton, of Highland Park, in pro. per.

Berry & Stevens, of Detroit, for appellant Campbell.

Butzel, Levin & Winston, of Detroit, for appellant Plumb.

Harry M. Stone and Ernest C. Stieler, both of Detroit, for appellants Holmes and others.

Emmons, Oren & Sleeper, of Detroit (David A. Howell, of Detroit, of counsel), for appellees.

NELSON SHARPE, Chief Justice.

The bill of complaint herein was filed by the receivers of the Metropolitan Trust Company to enforce the liability fixed by statute (Comp. Laws 1929, § 12024) of its stockholders under an order of the court therefor. The claims filed with the receivers amount to the sum of $1,262,198.24, of which $1,000,507.80 are in the nature of certificates of deposit. It appears that the appraised value of the assets of the company amounts to $968,246.39. It is the claim of the appellants that the trust company had no power or authority under the statute or its charter to issue these certificates, and that no liability on the part of the stockholders attached by reason thereof, and that, as the assets as appraised are of greater value than the indebtedness with these certificates eliminated, no necessity existed for the enforcement of such liability.

The Metropolitan Trust Company of Highland Park was incorporated on April 22, 1925, under Act No. 108, Pub. Acts 1889, and the amendments thereto (Comp. Laws 1929, § 11997, et seq.). Its articles were later amended by changing its name to Metropolitan Trust Company and its place of business from Highland Park to the city of Detroit. Its capital stock was increased to $500,000, divided into 25,000 shares of $20 each. The applicable sections of the statute read as follows:

‘Sec. 12016. It shall be lawful for any such corporation * * * to execute and issue in the transaction of its business all necessary receipts, certificates, papers and contracts, which shall be signed by such person or persons as may be designated by the by-laws of such corporation * * *.’

‘Sec. 12018. Any corporation organized or existing under this act shall have power in and by its corporate name to take, receive and hold, and repay, reconvey and dispose of any effects and property, both real and personal, which may be granted, committed, transferred or conveyed to it, with its consent, upon any terms, or upon any trust or trusts whatsoever at any time or times, by any person or persons. * * * Such corporation shall have power to loan money upon real estate and collateral security, and execute and issue its notes and debentures, payable at a future date, and to pledge its mortgages on real estate and other securities as security therefor. But nothing herein contained shall be construed as giving the right to issue bills to circulate as money or buy or sell bank exchange or do a general banking business * * *.’

‘Sec. 12024. 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 * * *.’

In 1912, the then commissioner of banking wrote the Attorney General of the state with regard to the power of trust companies to issue certificates of deposit in return for moneys received by them. In answer thereto, the Attorney General replied in a lengthy opinion in which he discussed the question and reviewed the authorities bearing thereon, and concluded that such power was conferred by the statute.

In the opinion filed by the trial court he found: ‘The trust companies that were in existence at that time, and all trust companies that have been formed since, have followed that opinion. This is the first time that it has been questioned. This particular trust company was not in existence at the time that opinion was given, so when it was formed and it started to sell its stock and put it upon the market, the trust companies were doing business in accordance with this opinion, and so it must be held that when these defendants purchased this stock in this particular company they did it with the knowledge that that was the way trust companies were doing business in Michigan and that they were doing business in Michigan that way under high authority.’

He expressed doubt as to whether, under the statute and its articles of incorporation, the trust company was authorized and empowered to issue such certificates, but found that the stockholders were estopped to deny liability, and entered a decree against them severally for the amount of their stock, from which a...