Machined Parts Corp. v. Schneider

• Decision Date: 06 July 1939
• Docket Number: No. 8.,8.
• Citation: 286 N.W. 831,289 Mich. 567
• Parties: MACHINED PARTS CORPORATION v. SCHNEIDER.
• Court: Michigan Supreme Court

289 Mich. 567

286 N.W. 831

MACHINED PARTS CORPORATION

v.SCHNEIDER.

No. 8.

Supreme Court of Michigan.

July 6, 1939.

Suit in equity by the Machined Parts Corporation against Max Schneider to recover possession of a stock certificate, free from any claims of defendant, for transfer and cancellation on plaintiff's books. Decree for plaintiff, and defendant appeals.

Affirmed.

Appeal from Circuit Court, Wayne County, in Chancery; Max E. Neal, judge.

Argued before the Entire Bench.

Leon Dreifuss, of Detroit, for appellant.

Miller, Baldwin & Boos, of Detroit, for appellee.

SHARPE, Justice.

Plaintiff corporation was organized in 1920. Its business was the buying and selling of discontinued automobile parts. Defendant was in an allied business somewhat similar to that of plaintiff corporation; and defendant and plaintiff corporationhad many business transactions over a period of years. In 1929, defendant purchased 1,000 shares of stock in the plaintiff corporation for the sum of $12,000 and a short time later sold 50 of these shares of stock to people connected with the corporation. When defendant purchased the stock it was understood that he did not intend to take an active part in the management of the corporation although he became treasurer and a director.

In 1929, the principal business of the corporation was the buying and selling of discontinued parts from automobile factories, but shortly thereafter the motor car manufacturers changed their systems and accessories were no longer available for purchase in large quantities, the result of which was that plaintiff corporation had a falling off in business. In June, 1930, defendant became financially embarrassed and borrowed $1,500 from plaintiff and pledged as security for said debt 150 shares of the stock purchased from plaintiff corporation. Said note and security was later assigned by plaintiff to Richard D. Warden, an officer and stockholder of plaintiff corporation. Defendant repaid approximately $700 of this indebtedness, but not paying the balance fast enough, suit was commenced against him and settled in accordance with the following agreement:

‘Whereas, Max Schneider was the owner of 950 shares of stock in the Machined Parts Corporation, thereafter pledging 150 shares of the stock so purchased as security for the payment of obligation incurred to the Machined Parts Corporation in the amount to-wit, $1,500.00, of which to-wit, $1,000.00 remains unpaid, and further,

‘Whereas, said Machined Parts Corporation heretofore assigned said claim of, to-wit, $1,000.00, and the security pledged by Max Schneider to Richard D. Warden, and

‘Whereas, the said Richard D. Warden has instituted suit against the said Max Schneider for the recovery of said claim so assigned to him, and

‘Whereas, it is the mutual desire of all of the parties hereto to adjust any and all damages between them,

‘Therefore, it is agreed by the said Max Schneider that the said Richard D. Warden and/or Machined Parts Corporation shall retain and have title of said shares of stock, to-wit, 150 shares heretofore pledged to said corporation, this stock, together with Max Schneider's interest in the 800 shares of stock hereinafter described, to be in full satisfaction of the unpaid balance now owing Richard D. Warden, assignee of Machined Parts Corporation, or the Machined Parts Corporation, and said Max Schneider does hereby transfer to said corporation, and/or Richard D. Warden, all right, title and interest in the said 150 shares of stock, and does hereby irrevocably constitute and appoint Richard D. Warden, and/or any officer of the Machined Parts Corporation, his attorney, to transfer the said stock on the books of the within named corporation, with full power of substitution, and the said Max Schneider does also sell and assign all of his right, title and interest in the balance of his stock, to-wit, 800 shares of the Machined Parts Corporation stock, to the said Richard D. Warden and/or the Machined Parts Corporation, said assignment being subject to an indebtedness to Charles Marienthal in the sum of $5,000.00 and interest thereon at 6 per cent from the 15th day of August, 1931, which the said Richard D. Warden and/or the Machined Parts Corporation does not assume or agree to pay, except at their election to redeem said stock, and the said Max Schneider hereby irrevocably constitutes and appoints Richard D. Warden and/or any officer to the Machined Parts Corporation, his attorney to transfer such interest as the said Max Schneider has in said 800 shares of stock, on the books of the said Machined Parts Corporation, with full power of substitution in the premises.

‘The said Richard D. Warden and the Machined Parts Corporation do hereby acknowledge full satisfaction, release and payment in full of all indebtedness he or it may have against the said Max Schneider for the loan made of $1,500.00 or thereabouts, upon which and for which said suit is now pending in the Circuit Court for Wayne County, for its recovery, and also any and all other indebtedness and claims which he or it may have up to this date, against the said Max Schneider, and the said Max Schneider does hereby acknowledge full satisfaction, release of all and any indebtedness which the said Richard D. Warden and/or the Machined Parts Corporation may owe to him, and also releases the said Richard D. Warden and the said Machined Parts Corporation from any and all claims of any name and nature which he may have against the said RichardD. Warden and/or the Machined Parts Corporation.

‘That the said Richard D. Warden and said Max Schneider hereby agree that the suit heretofore started by Richard D. Warden against the said Max Schneider, in the Circuit Court for Wayne County, same being No. 181842, be dismissed without costs.

‘Machined Parts Corporation,

‘By C. E. Larson,

‘Richard D. Warden,

‘Max Schneider.

‘Dated at Detroit, Michigan, March 18, 1935.’

In August, 1931, defendant being indebted to one Charles Marienthal assigned certificate No. 17 for 800 shares of common stock of plaintiff corporation, the material portion of the written assignment reads as follows:

‘To Whom It May Concern:

‘Be it known that on this 15th day of August, 1931, I have, for one dollar and other good and valuable consideration, disposed of my stock holdings in the following concerns to Mr. Charles Marienthal:

‘Description of Stock

‘Item I-Certificate No. 17 for 800 shares common stock, Machined Parts Corporation, par value $10.00 a share.’

The consideration of this assignment was $5,000 which was repaid in December, 1936, and the stock returned to defendant, who thereupon notified plaintiff corporation that he was the owner of the 800 shares of stock. As soon as plaintiff corporation learned that Marienthal had released the stock certificate to defendant, on December 29, 1936, a demand was made upon defendant for the delivery and surrender of the certificate for the 800 shares of stock. Defendant refused to surrender the stock certificate and plaintiff filed a bill of complaint in the circuit court of Wayne county praying for a decree that defendant had no title or claim for the 800 shares of the capital stock of plaintiff corporation. The cause came on for trial and the trial court held that plaintiff is entitled to the possession of the stock certificate, free and clear from any claims of defendant, for proper transfer and cancellation upon the books of the corporation.

Defendant appeals and contends that the proper interpretation of the agreement bearing date of March 18, 1935, is that the...