McBryan v. Universal Elevator Co.
| Decision Date | 26 March 1902 |
| Citation | 130 Mich. 111,89 N.W. 683 |
| Court | Michigan Supreme Court |
| Parties | McBRYAN v. UNIVERSAL ELEVATOR CO. et al. |
Appeal from circuit court, Wayne county, in chancery; Bryon S Waite, Judge.
Suit by William H. McBryan, receiver, against the Universal Elevator Company and others. Bill dismissed, and complainant appeals. Affirmed.
A corporation, known as the "C. C. Wormer Machinery Company of Detroit,' sold and delivered to the Universal Elevator Company, in April, 1896, machinery, at an agreed price of $9,697.68. No cash was paid down, and two notes were given covering the entire purchase price. The contract of sale expressly provided that the title to the property should remain in the Wormer Company until the full sum had been paid; that the rental value thereof was $750 per month; that said company might at any time enter upon the premises of the defendant company and take possession of the property, and that any money already paid should be considered as having been paid for the use of said property. The machinery was placed in the building erected by the defendant company, and remained there until March, 1897, when the Wormer Company took possession of it and sold the most of it. Whether it had been used does not appear. The elevator company was a failure, and in August, 1896, Mr. Livingstone took possession of the building and its contents, under a deed made to him by the elevator company. The Wormer Company sued the elevator company, declaring on the common counts, and for the use and occupation of machinery, etc. A plea of the general issue was interposed. Whether any further steps were taken to defend the suit, the record does not show. The judgment, as appears by the testimony of the agent of the Wormer Company, Mr O'Hara, taken at the trial, was for the difference between the value of the machinery when taken back and the amount of the notes, with interest and insurance premiums added, paid by the Wormer Company. Judgment was rendered for $4,997.69. Execution was issued and returned nulla bona. The Wormer Company then filed a judgment creditors' bill, and obtained a receiver, Mr. McBryan, the complainant in this case. Complainant thereupon filed this bill against the elevator company and the other defendants, who are stockholders, alleging that the stock was not fully paid, and praying an assessment against the stockholders to pay this and other debts of the company. The original stockholders were: Moore, 2,500 shares; Brotherton, 675 shares; Stanton 1,000 shares; James N. Schoonmaker, 750 shares; Frank E Schoonmaker, trustee, 700 shares; Frank E. Schoonmaker, 700 shares. The other defendants subsequently became stockholders. The defense made as to all of the defendant stockholders are: (1) That this action was prematurely brought, because all the corporate debts have not been ascertained, and no leave obtained from the court to institute this suit against the stockholders; (2) that the assets conveyed to the corporation at the time of its organization were worth the sum of $63,000, the amount of the capital stock shown by the articles of association to have been actually paid in; (3) that the judgment is void, under Perkins v. Grobben, 116 Mich. 178, 74 N.W. 469, 39 L. R. A. 815, 72 Am. St. Rep. 512, because the Wormer Company took their property in accordance with the contract of sale, and cannot now sue for the purchase price, and that the judgment against the company is not conclusive in a suit against the stockholders. Proofs were taken in open court, and the bill dismissed. The history of the organization of the defendant company and the relation of all defendants thereto, except Bierce, John and Charles Duffie, and Leavitt, are given in Moore v. Elevator Co., 122 Mich. 48, 80 N.W. 1015, and it is unnecessary to repeat them here.
Moore & Moore, for appellant.
Dickinson, Warren & Warren, for defendant Stanton.
Leo M. Butzel, for defendant Bierce.
Isaac N. Payne, for defendant Brotherton.
S. S. Babcock (W. F. Atkinson, of counsel), for defendant Moore.
GRANT J. (after stating the facts).
1. This suit was properly launched. No application to the court for leave to bring suit is required. Chancery Rule 31; Comp. Laws, �� 10,841, 10,842. A judgment creditor is entitled to maintain a bill to seek assets to satisfy his judgment and execution. Turnbull v. Lumber Co., 55 Mich. 387, 392, 21 N.W. 375; Young v. Iron Co., 65 Mich. 111, 127, 31 N.W. 814. Other creditors can come in under such a proceeding if they so desire, and the court may make an order for serving notice upon them. A judgment creditor is under no legal or moral obligation to bring in other creditors. He may proceed to secure his own rights independent of them. The bill in this case is substantially the same as that in Young v. Iron Co.,--the only difference being that in that case the receiver in his petition stated that he instituted the suit for himself and other creditors who should choose to come in, while this bill contains no such allegations. The bill, however, is broad enough to include other creditors who may choose to come in, for one of the prayers is that the debts of the defendant company may be ascertained and decreed.
2. Was the C. C. Wormer Machinery Company entitled to the judgment it took? The title to the machinery did not pass, but was expressly reserved in the vendor. The vendor retook it under his contract, and, as stated by counsel for complainant, who was the attorney for the Wormer Company, 'sold the property for its then value, 'the then selling price, which was all that we could get for it,' applied the amount on the notes, and brought suit against the elevator company for the balance.' The record is conclusive that the judgment was taken for the difference between the contract price and the estimated value when retaken. In Perkins v. Grobben, 116 Mich. 172, 74 N.W. 469, 39 L. R. A. 815, 72 Am. St. Rep. 512, the contract provided that the title should not pass until full payment, and that all payments made on the notes which were given for the purchase price should be deemed 'to be payments for the use, wear, and tear of the property up to the retaking thereof.' There is no substantial difference between the above provision of that contract and the one in this providing that the monthly rental value of the property was $750, if such provision be conclusive as an implied contract to pay that amount as rental if the vendor should retake the property. In that case money had been paid, while in this case none had been paid. But that difference cannot change the rule of law. The notes were given in consideration of the property contracted to be sold. When the property was retaken under the contract, there was no longer any consideration for the notes. The only remedy open to the vendor in such case is to sue for the rental value, or bring a suit for damages for nonperformance of the contract. He cannot bring suit to recover the purchase price, or any part thereof. A defense upon this ground would, therefore, have been fatal to the plaintiff's right of action, based upon the theory upon which the judgment was rendered. The judgment is, of course, valid as against the defendant elevator company, and is not open to a collateral attack by it. The judgment could only be set aside by that company upon a direct proceeding for that purpose.
It is also urged that the judgment should be sustained because judgment for a larger amount might have been rendered for the rental of the property, and therefore the stockholders are not prejudiced. Counsel for the defendants challenge the right to recover the rental during the time claimed by the complainant. Upon this question, as well as upon the construction of the contract, the defendant company was entitled to be heard in the suit at law. A judgment rendered upon any illegal basis cannot be sustained because one might have been rendered upon a legal basis.
It is claimed that the Wormer Company retook this property by agreement. Whether Mr. Moore, the president of the company, had any authority to make such an arrangement, we need not consider. All Mr. Moore said to the agent of the Wormer Company was to advise him that he had better take back his property, and dispose of it. This did not make a new contract. It was advice simply to the company to take advantage of the contract it had made.
Is judgment conclusive against a stockholder? While it is the general rule that judgments against corporations are conclusive upon the stockholders, an exception is equally well established in cases where the judgments are rendered through fraud or collusion, or without jurisdiction. 3 Thomp Corp. �� 3392, 3400; 2 Mor. Priv. Corp. � 865; 1 Cook, Corp. � 209; Bohn v. Brown, 33 Mich. 258, 263. In Bohn v. Brown this court said, 'If the proceedings against the corporation should appear to be tainted by fraud or collusion between the claimant and the corporation, the judgment would not be good as inducement, or as an adjudication to fix the liability of the stockholder through it, or to fix the amount, and the suit against the stockholder would fail inevitably.' This exception is approved in the following cases: Irons v. Bank (C. C.) 36 F. 843; Schrader v. Bank, 133 U.S. 67, 10 S.Ct. 238, 33 L.Ed. 564; Slee v. Bloom, 20 Johns. 669; Warrington v. Ball, 33 C. C. A. 609, 90 F. 465; Saylor v. Banking Co. (Or.) 62 P. 652; Ward v. Joslin, 44 C. C. A. 456, 105 F. 224. In Schrader v. Bank judgment was rendered against the bank on a contract of guaranty. In a suit against the stockholders to enforce their liability as such, it was held that they could go behind the record of the judgment and show that the guaranty of the bank had been released by the release of the principal debtor before...
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