McKay v. Van Kleeck

• Citation: 133 Mich. 27,94 N.W. 367
• Court: Michigan Supreme Court
• Decision Date: 21 April 1903
• Parties: McKAY v. VAN KLEECK.

94 N.W. 367

133 Mich. 27

McKAY v. VAN KLEECK.

Supreme Court of Michigan

April 21, 1903

Appeal from Circuit Court, Kent County, in Chancery; Willis B Perkins, Judge.

Action by John A. McKay against James Van Kleeck. From a judgment in favor of plaintiff, defendant appeals. Reversed.

George R. Fox, for appellant.

George W. Weadock (John A. McKay, of counsel), for appellee.

MOORE, J.

On the 26th of February, 1892, articles of association of the Home Security Association were filed in the office of the Secretary of State. Afterwards it engaged in business. On the 22d of October, 1894, a majority of the members of the Home Security Association adopted amended articles of association one of which was 'that the association shall be known in the law as the Home Security Life Association.' On the 20th of May, 1899, George Mellish filed a bill of complaint in which was recited the organization of the Home Security Company, and the names of the original incorporators, and that they or some of them managed and controlled the business until on or about January 1, 1899; that said association, in June, 1892, issued to complainant a membership certificate for the sum of $1,000, by which it agreed to pay him $1,000 at the expiration of six years; that he had paid all his assessments and demands, and that there was then due him $1,000; that it had issued many certificates of a like character; that said corporation had become and is insolvent and unable to pay its debts; that upwards of $75,000 was then due on certificates issued by it, which said corporation admitted it was liable to pay; that its assets are insufficient to pay its liabilities. The bill also stated the corporation received payments from holders of certificates after its executive board knew it was insolvent, and that it fraudulently continued to do so up to the time of the filing of the bill. The bill further charged that substantially all of the assets of the corporation had, by its officers, been paid to favored holders of certificates, and to those who had paid no consideration therefor, and especially to the Home Security Life Association, a corporation, with knowledge on the part of the officers of the first corporation that it would soon be compelled to suspend business and of its insolvency. The bill recites at length what complainant claims to be illegal and fraudulent action on the part of the defendants. The bill also recites a lack of knowledge as to the names of all the persons who should be made defendants, and claims the right, when ascertained, to add their names to the bill of complaint. It prays for an injunction, an accounting, and an appointment of a receiver. Upon the same day the following order was made: 'State of Michigan. In the Circuit Court for the County of Bay, in Chancery. George Mellish, Complainant, vs. The Home Security Association, Aaron T. Bliss, J. W. Richardson, Richard H Williams, John W. Foot, Charles Benjamin, John F. Barrows, W. E. Ormsby, O. Merton Belfry, C. W. Burnham, Frank Gwizdala, and Fred A. Nichols, Defendants. On reading and filing the bill of complaint in this cause, on motion of T. E. Webster, solicitor for the complainant, it is ordered that James Van Kleeck be, and is hereby appointed receiver of the moneys, property and effects of the above-named Home Security Association upon his executing, acknowledging and filing with the register of this court a bond in the usual form to the people of this state in the penal sum of seven thousand dollars, with sufficient security to be approved by the register of this court.' Mr. Van Kleeck duly qualified as receiver, and a quantity of notes and mortgages came into his possession as receiver. July 11, 1899, the court entered an order authorizing Mr. Van Kleeck to sell the assets in his hands at auction, which he did, after due notice, for the sum of $5,000. This sale was confirmed by the court August 21, 1899, and the money was paid to Mr. Van Kleeck. October 18, 1899, Mr. Van Kleeck was directed by the court to pay H. S. Stevens $32.50 and Stanley L. Otis $39 for personal labor in examining the books and records of the Home Security Association, and these amounts were paid. December 26, 1899, the receiver was directed to pay a claim of L. T. Durand for legal services rendered and money expended for said Home Security Association, amounting to $946.40, and this sum was paid by the receiver. In February, 1900, Marie M. Best filed a bill against the Home Security Life Association in the circuit court for the county of Kent in chancery, in which she asked for the appointment of a receiver, and John A. McKay was so appointed. Later the following order was entered: 'State of Michigan. In the Circuit Court for the County of Bay, in Chancery. George Mellish, Complainant, vs. The Home Security Association et al., Defendants. At a session of said court held at the courthouse in the city of Bay City, Michigan, on the 25th day of April, A. D. 1900. Present, Honorable Theodore F. Shepard, Circuit Judge. The above-entitled petition being brought on to be heard, and after hearing counsel for the respective parties hereto: It is ordered, adjudged and decreed, and the court doth hereby order, adjudge and decree, that the said John A. McKay, receiver for the Home Security Life Association, be and is hereby authorized to commence and prosecute such legal proceedings as may seem to him advisable to determine the respective rights and status of said James Van Kleeck under his appointment as receiver of the Home Security Association, and said John A. McKay under his appointment as receiver of the Home Security Life Association, and the title to and possession of the funds and property now in the hands of said James Van Kleeck. T. F. Shepard, Circuit Judge.' Instead of proceeding in the Bay circuit court in chancery to test the validity of Mr. Van Kleeck's appointment, and what rights he possessed thereunder. Mr. McKay, in May, 1900, filed a bill in the circuit court for Kent county in chancery reciting, in substance, his...