Mills v. Anderson

• Decision Date: 06 June 1927
• Docket Number: No. 60,Jan. Term.,60
• Citation: 214 N.W. 221,238 Mich. 643
• Parties: MILLS v. ANDERSON.
• Court: Michigan Supreme Court

238 Mich. 643

214 N.W. 221

MILLS

v.ANDERSON.

No. 60, Jan. Term.

Supreme Court of Michigan.

June 6, 1927.

Error to Circuit Court, Ingham County; Leland W. Carr, Judge.

Action by D. H. Mills, receiver of the Lansing Theatre Company, against George P. Anderson. Judgment for plaintiff, and defendant brings error. Affirmed.

Argued before the Entire Bench.Thomas, Shields & Silsbee, of Lansing (Clayton F. Jennings, of Lansing, of counsel), for appellant.

T. Rogers Lyon and Ernest C. Smith, both of Lansing, for appellee.

STEERE, J.

Plaintiff recovered in the circuit court of Ingham county a judgment on directed verdict against defendant for $500 and costs, being the amount of the latter's claimed stock subscription in the Lansing Theatre Company.

Plaintiff's declaration, filed May 23, 1925, names him as ‘receiver of the Lansing Theatre Company,’ without further description. He declared upon the common counts in assumpsit, with notice that under the money counts he would give in evidence a written contract by defendant for 40 shares of preferred and 20 shares of common stock in the Lansing Theatre Company, setting the same out at length in the notice.

Defendant pleaded the general issue with a lengthy notice of special defense, the substance of which is that the alleged contract of subscription is invalid for various reasons, amongst which are that it was obtained by the theater company's agent conditionally and by false representations.

At conclusion of plaintiff's testimony defendant asked for a directed verdict, which was denied, and after both parties rested each asked for a directed verdict. Defendant's request was denied and plaintiff's granted, the court directing a verdict in its favor for the amount of defendant's subscription. All questions raised during trial by defendant were properly saved for review.

Upon the trial it was shown that the Lansing Theatre Company was a Delaware corporation organized on January 27, 1920, ostensibly for the purpose of constructing and controlling a theater building in the city of Lansing, Mich. Its capital was fixed at 20,000 shares of preferred stock of the par value of $10, and 15,000 shares of common stock of no par value, which it proposed to sell to the public in units of 2 shares of preferred and 1 of common for $25 per unit. It never domesticated as a foreign corporation authorized to do business in this state, but shortly after its organization it claims to have complied with our statute relative to listing and selling corporate stock, and in compliance with that law to have made required reports to the state securities commission of its operations in that particular.

Plaintiff was appointed receiver of the Lansing Theatre Company on a petition signed and sworn to by its manager ad vice president, A. L. Brown, as a creditor and at the request of a committee consisting of 25 of its stockholders and its two remaining directors, the rest of its directors having resigned, while its nominal president had left the project and state for other fields of endeavor. The company was then in financial straits and apparently insolvent, several suits had been started against it by creditors while more were threatened, and it concededly could no longer continue the business for which it was organized. The petition prayed for a decree that it be dissolved, for an injunction, appointment of a receiver to collect and conserve its assets, liquidate its indebtedness so far as possible, etc. Various other matters are detailed in the sworn petition enlarging the subject and alleging grounds for exercise of equitable jurisdiction.

On the trial all files and records relating to the appointment of the receiver were offered and admitted in evidence without objection.

Defendant's contract of subscription upon which this action is planted, and of which special notice was given, is dated January 16, 1923. It is signed by him and by Brown as agent of the theater company. In material parts it is as follows:

‘I hereby subscribe for 40 shares of the preferred stock and 20 shares of the common stock of the Lansins Theatre Company to be sold in ratios, 2 shares of preferred and one share of common, $25, and agree to pay therefor the sum of $500, payable as follows: 10 per cent. of above amount when called by the company; 10 per cent. monthly thereafter until paid.

‘It is understood and agreed:

‘That this subscription shall not be binding until the construction work is started on the company's site on Capitol avenue and Allegan street.

‘When said construction work has started, I agree to pay the above amount as specified.

‘Upon acceptance, this subscription becomes an asset of the Lansing Theatre Company and is not subject to cancellation.

‘No statement of condition, not contained herein, nor alteration hereof, shall be binding or obligatory upon either party.’

Upon the trial plaintiff, Mills, testified that he was first appointed temporary receiver on February 4, 1925, and permanent receiver on March 14, 1925. He had taken possession of all assets, records, and files of the theater company, which were turned over to him by its attorney. Among them were a number of unpaid subscription contracts, including the one involved here, which defendant refused to pay, and in performance of his official duty the receiver brought this action to recover amount defendant had subscribed.

Defendant's counsel argue his assignments of error under the following heads:

‘(1) Defendant's Exhibit 1 should have been admitted in evidence.

‘(2) A verdict of no cause of action should have been directed for the defendant.

‘(3) It was error to direct a verdict for the plaintiff.’

At the time this case was tried neither Butterworth, president of the theater company, nor Brown, its vice president and manager, who swore to the petition for a receiver, were called as witnesses, and so far as shown were not available. Butterworth was in Florida. Brown's whereabouts is not disclosed. It appears that defendant knew Butterworth's location and after this suit was begun obtained from him a letter, directed to plaintiff as temporary receiver, dated Miami, Fla., March 14, 1925, reading as follows:

‘Regarding the subscription for stock in the Lansing Theatre Company, by George P. Anderson and James Hammell, this stock was subscribed for by them with the understanding that the loan from the Smith estate and the entire transaction was ready to go ahead. Under the existing conditions, I ask that they be released from paying their subscription to the Lansing Theatre stock.’

A subscript signed by Ethel C. Hills, notary public of the state of Florida, certifies that this letter was sworn to before her by Butterworth on March 14, 1925. It was marked Exhibit 1 and offered in evidence, but objection to its admission was sustained. Defendant claims this letter was competent as an adverse admission made by the company through its president. At the time that letter was written, the theater company and its assets were in the hands of a receiver acting under direction of the court. Before the receiver was appointed, Butterworth had abandoned the project in a foundering financial condition and left to engage in other enterprises in another state. He did not sign the letter as president of the company, and, if he had, there is no proof or presumption under the circumstances shown that he was authorized to make any conditions or concessions changing the terms of this written contract, which expressly provides that ‘No statement or condition, not contained herein, * * * shall be binding or obligatory upon either party.’ Butterworth is not shown to have taken any part in preparing this contract nor in soliciting defendant's subscription, or to have been present when it was signed by the latter. Defendant's testimony indicates that it was both prepared and signed in Butterworth's absence. We find no error in refusal of the court to admit the letter in evidence. It was an effort along the lines of which it is said in Upton, Assignee v. Tribilcock, 91 U. S. 45, 23 L. Ed. 203:

‘Equally unsound is the opinion, that the obligation of a subscriber to pay his subscription may be released or surrendered to him by the trustees of the company. This has been often attempted, but never successfully. The capital paid in, and promised to be paid in, is a fund which the trustees cannot squander or give away. They are bound to call in what is unpaid, and carefully to husband it when received.’

Appellant's second and third condensed assignments involve the negative and affirmative of directed verdicts and turn mainly on allied propositions.

Defendant's counsel strenuously contend that the circuit court of Ingham county had no power to assume jurisdiction over this matter for any purpose under the petition pursuant to which it appointed plaintiff receiver, as its expressed primary purpose and prayer was for dissolution of a Delaware corporation, and only the courts of that state have jurisdiction to dissolve it. Against this it is urged for plaintiff that the jurisdiction of the court to appoint a receiver is not open to attack in this collateral proceeding, and cite Detroit Trust Co. v. Lawrence, 235 Mich. 136, 209 N. W. 61, as conclusive, leaving ‘nothing for argument’ upon that question. What is said relative to collateral attack in the Lawrence Case is not to be questioned as applied to the situation there presented, which involved the validity of an order appointing a receiver for a domestic corporation as to which the inherent powers of the courts of chancery are generally recognized, including dissolution. It is text-book law that the courts of one state cannot dissolve a corporation created by another state. 3 Cook on Corporations (8th Ed.) 2304. In the petition under which plaintiff was appointed, the prayer for dissolution of this foreign corporation seems to have been ill advised. Its legal domicile was exclusively in the state of its creation. As...