Smith v. Austin

• Decision Date: 18 November 1862
• Citation: 11 Mich. 34
• Court: Michigan Supreme Court
• Parties: Simon Smith v. Calvin P. Austin and others

11 Mich. 34

Simon Smith v. Calvin P. Austin and others

Supreme Court of Michigan

November 18, 1862

Argued October 22, 1862 [Syllabus Material] [Syllabus Material] [Syllabus Material]

Appeal in Chancery from Sanilac Circuit.

This case was once before in the Supreme Court, and is reported in 9 Mich. 465. After the decision then given the bill was amended so as to show:

That on November 10, 1853, Rollin C. Smith and Alfred A. Dwight held the legal title to nine thousand acres of land in Huron county, known as the Port Austin property, the equitable title to which was in the firms of Smith, Dwight & Co doing business in Michigan, and William F. Smith & Co., doing business in Ohio, both of which firms were composed of the persons named and William F. Smith, complainant's son, who had saw mills thereon.

That on the day mentioned, said R. C. Smith, Dwight and William A. Howard, loaned from Calvin P. Austin $ 30,000 for said partnership, to secure which a mortgage was given on said lands.

That on January 3, 1855, R. C. Smith and Dwight conveyed said lands to Howard, who, on the fifth day of March following, gave a mortgage for $ 15,000 thereon to Almet Reed, and he, in December, 1855, assigned the same to Roswell Reed.

That Howard conveyed the lands to Albert L. Catlin in March, 1855, and Catlin conveyed them to William Warner in October, 1856.

That prior to said conveyance to Howard, the said firms had become insolvent, and the said conveyances to Howard, Catlin and Warner, though absolute in form, were really given for the purpose of securing the payment of debts of said firms.

That William F. Smith, who had had charge of the business of the Ohio firm, being particularly anxious to pay its indebtedness, amounting to about $ 100,000, induced complainant to co-operate with him in the attempt to manage said property and pay off the incumbrances and indebtedness, for the consideration of what should remain thereafter; said William F. Smith to act as complainant's agent.

That accordingly, at the request and by the procurement and for the benefit of complainant, Warner and his wife, on October 14, 1856, executed a trust deed of said land to Thomas B. Rose. This deed, which recited a consideration of one dollar paid by complainant, conveyed the lands to Rose as trustee "for whoever are or may hereafter become the lawful holder or holders of a certain contract and certain promissory notes hereinafter mentioned," but upon the following trusts and considerations:

1. That complainant should be put in possession of said property, and the same should be operated, used and managed, and the proceeds disposed of in his name by W. F. Smith, as his agent.

2. Complainant and his agent should apply such proceeds, first, to the performance and satisfaction of a contract between himself and Warner and Catlin of even date, for goods, feed, supplies, teams and other personal lumber property; second, to the payment and satisfaction of the incumbrances to the extent necessary to prevent the title of the property, or any of it, from passing by virtue of foreclosure; third to the payment of twelve notes made by said W. F. Smith in favor of certain parties in Ohio, amounting to $ 29,465; fourth, to the payment of a note made by said W. F. Smith to Catlin for $ 4,000; fifth, to the payment of an acceptance of Smith, Dwight & Co., of $ 3,000, and two drafts drawn in favor of parties in Ohio, by W. F. Smith & Co., for $ 4,000; sixth, to the payment of nine notes made by W. F. Smith, to parties in Ohio, amounting to $ 35,000; seventh, to the payment of three other notes amounting to $ 5,162.

3. So long as complainant and his said agent should perform the contract with Warner and Catlin, and make the said payments, and perform all other conditions and requirements of the trust deed, they were to retain the property, and operate, use and manage the same, with the right of disposing of the products for the purpose aforesaid.

4. If they should fail in fulfilling the obligations of the Warner & Catlin contract, or of the notes, or of the trust deed, the trustee might take possession of the property, and operate the same, and apply the net avails in the manner above pointed out, and if the same should not be sufficient to pay all, after satisfying said contract and inducing the holders of the incumbrances not to foreclose, then to pay the successive classes in their order, and when all were paid the title to the property was to pass to complainant.

5. If complainant and his agent should fail to perform the conditions of the Warner & Catlin contract, or to manage the property and dispose of the products with sound business discretion, or fail for three months to pay any of said notes as the same should come due, it should be the duty of the trustee, on the written application of the holder of said contract, or of six-tenths the amount of said notes then outstanding, to take possession of said property and operate the same, and dispose of the products in manner aforesaid; and on like application to make sale of said property and pay over the proceeds in like manner, and the balance, if any, to complainant.

After the Warner & Catlin contract was satisfied, complainant might, with the approval of the trustee, sell the lands, and apply the proceeds, first to the incumbrances, and next to the satisfaction of said debts; and the trustee was to execute the proper conveyances. And on the full performance of all the conditions of the trust deed, the title to the property, or to what should remain, was to vest in complainant.

There were other provisions in the trust deed not necessary to be mentioned here.

The bill then sets forth that complainant took possession of said lands, and invested about $ 20,000 in supplies, etc., to carry on the business; that he continued to manage the property up to the close of 1857, and paid off about $ 20,000 of the debts provided for by the trust deed; that that year proved one of commercial disaster, and Roswell Reed, becoming convinced that complainant could not pay his mortgage and meet the requirements of said trust, filed his bill in Chancery against complainant Rose and others, to foreclose the same; that complainant also became convinced he could not pay the Ohio indebtedness and also the mortgages, and being desirous to save at least what he had been induced to put into said property, being about $ 30,000, made agreements with the holders of said mortgages pending said foreclosure proceedings, for an extension thereof so far as...