Livingston v. Krown Chemical Mfg., Inc.
| Decision Date | 27 May 1975 |
| Docket Number | No. 2,J,2 |
| Citation | 394 Mich. 144,229 N.W.2d 793 |
| Parties | Jack K. LIVINGSTON et al., Plaintiffs-Appellees, v. KROWN CHEMICAL MANUFACTURING, INC., a Michigan Corporation, severally, Defendant-Appellant, and Leonard Marsano, Defendant-Appellee, and Leonard Marsano and Lillian R. Marsano, jointly and severally, Defendants-Appellees. an. Term. 394 Mich. 144, 229 N.W.2d 793 |
| Court | Michigan Supreme Court |
Craig, Farber & Stein, P.C. by Gene A. Farber, Detroit, for Krown chemical.
John H. Norton, Berkley, for defendants-appellees.
Before the Entire Bench.
Marsano, Inc. was engaged in the manufacture and sale of a product known as 'Beauty Mate Comb.' Leonard Marsano and his wife, Lillian Marsano, owned about 52 1/2% Of the capital stock and plaintiffs Jack K. Livingston, et al., owned about 47 1/2%.
The stockholders, majority and minority, decided to sell their shares and placed an advertisement in the Wall Street Journal. Defendant Krnown Chemical Manufacturing, Inc. negotiated with stockholders and a contract was signed on December 22, 1967.
For their shares, the Marsanos received $31,000 and 2,000 shares of Krown capital stock. The Krown shares were placed in escrow subject to certain conditions. Krown agreed to pay the plaintiff minority stockholders, 120 days after January 3, 1968, $46,000 for their shares which were escrowed.
Krown failed to pay the $46,000 and the minority stockholders commenced this action against Krown and the Marsanos.
The trial court, finding that there were misrepresentations by the sellers, denied the minority stockholders specific performance but, nevertheless, awarded them $46,000 as damages. 1 It rejected Krown's counterclaim for rescission, confirmed the Marsanos' right to retain the $31,000 and the 2,000 shares of Krown stock, rejected the Marsano counterclaims against Krown and required Leonard Marsano to assign to Known the patent for the Beauty Mate Comb. The Court of Appeals affirmed. 50 Mich.App. 153, 212 N.W.2d 775 (1973).
We affirm, but remand for further proceedings.
Krown, relying on Farrell v. Hannan Real Estate Exchange, 251 Mich. 669, 672--673, 232 N.W. 209 (1930), contends that damages cannot be awarded when specific performance has been denied because of the plaintiff's fraudulent conduct. In Farrell, this court adopted the trial court's opinion refusing to award money damages on denial of specific performance:
Krown would distinguish the two cases relied on by the Court of Appeals, Herpolsheimer v. A. B. Herpolsheimer Realty Co., 344 Mich. 657, 75 N.W.2d 333 (1956), and Michigan Sugar Co. v. Falkenhagen, 243 Mich. 698, 220 N.W. 760 (1928), where this Court said that money damages can be awarded in lieu of equitable relief. Herpolsheimer was not an action for specific performance; the plaintiff sought equitable superintendence of a claimed constructive trust, an accounting and ancillary relief. The plaintiff in Michigan Sugar, in contrast with the minority stockholders in this case, was not denied equitable relief because of inequitable or fraudulent conduct on its part.
Professor Corbin wrote, '(i)ndependently of codes of procedure and other statutes, it became generally established in the United States that a bill for specific performance would be retained for the assessment of damages, in lieu of the remedy asked, if the bill stated a case that was proper for equity jurisdiction and the only reason for refusal of the decree asked was because performance had become impossible or for some reason inequitable. . . .' However, '(i)f the plaintiff's case is not one that is normally the subject of equity jurisdiction, one in which his own conduct has made an equitable remedy unavailable . . . the plaintiff's bill will seldom be retained for assessment of his damages unless the case falls within the provisions of statutes like those referred to below.' 5A Corbin on Contracts, § 1161, pp. 197, 199--200.
Michigan Sugar appears to be a case where specific performance 'had become impossible or for some reason inequitable.' Defendant had oversold and delivered the commodity, creating rights in a third party.
Corbin cites Farrell as a case in which plaintiff's conduct made an equitable remedy unavailable.
But Corbin further explained that as a result of modern codes of procedure in most jurisdictions:
5A Corbin on Contracts, § 1161, pp. 201--203. (Emphasis supplied.)
The Michigan constitutions of 1850 and 1908 provided, 'The legislature shall, as far as practicable, abolish distinctions between law and equity proceedings.' 2 The 1963 Constitution provides, 3 The Judicature Act of 1915 and the Revised Judicature Act of 1961, adopted before the effective date of the 1963 Constitution, authorized the Supreme Court by general rules to abolish, as far as practicable, distinctions between law and equity. 4
Despite the 1850 and 1908 constitutional directives to the Legislature, the objective was not achieved. The Judicature Act of 1915 provided that 'legal and equitable causes of action shall not be joined.' 5
The long-sought reform was achieved in the General Court Rules of 1963. GCR 1963, 12 provides 'There shall be 1 form of action to be known as a 'Civil Action." The accompanying committee comment states, 6
GCR 1963, 203.1 provides, 'A complaint shall state as a claim every claim either legal or equitable' which the pleader has against any party arising out of the transaction or occurrence that is the subject-matter of the action and does not require the presence of third parties of whom the court cannot acquire jurisdiction. GCR 1963, 111.2, 111.9(2) provide that a pleader may state as many separate claims or defenses as he has 'whether based upon legal or equitable grounds or upon both.'
The minority stockholders, thus, could properly join claims seeking legal and equitable relief. However, they did not. Their complaint against Krown asserted that 'compensation in damages would be inadequate and incalculable.' The relief sought 'as to Count One' was specific performance and such other and further relief 'as shall be agreeable to equity and good conscience.'
However, the Revised Judicature Act permits amendment after judgment has been entered 'in affirmance of the judgment.' 7 The deficiencies in plaintiffs' pleadings do not preclude an award of damages as an alternative to specific relief.
No reason appears for concluding that Krown's trial defense against the assessment of damages was prejudiced by plaintiffs' failure to amend before judgment.
We are remanding for further proceedings for other reasons. On remand amendment may be allowed and Krown may be afforded an opportunity to introduce any additional evidence opposing the plaintiffs' damage claim.
Krown's principal assertion is that it had a right to rescind because of misrepresentations by Leonard Marsano, who acted for himself, Lillian Marsano and the plaintiff minority stockholders. The asserted basis for rescission became known to Krown three months after it acquired Marsano, Inc. and by the end of April or early May, 1968 it had decided not to pay further money. This was well before a meeting in July, 1968, arranged between the minority stockholders' and Krown's representatives after Krown had indicated by letter of June 6 that it did not intend to pay for the Marsano, Inc. stock. The only evidence of a tender of the minority stockholders' stock is the following testimony by a Krown representative concerning the July meeting:
'Q. Did you on this particular case, offer the return of your stock to Mr. Livingston and to the other minority stockholders through their attorneys Messrs. May?
'A. I said they could have their stock. I had no way of paying for it.
'Q. And did anybody respond to this statement?
'A. Well, I don't know if they responded, but we went into it a little further discussion of was I interested in even getting rid of my fifty-one per cent.
'Q. And then what if anything took place?
'A. They said they'd let me know as to whether they would take their stock back or not.
'Q. And did they ever let you know whether they were going to take their stock back?
(Emphasis supplied.)
Krown took no other step to rescind until after the September 17, 1968 commencement of this action by the...
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