Stott v. Stott Realty Co.

• Decision Date: 11 October 1943
• Docket Number: No. 30.,30.
• Citation: 11 N.W.2d 215,306 Mich. 492
• Parties: STOTT v. STOTT REALTY CO.
• Court: Michigan Supreme Court

306 Mich. 492

11 N.W.2d 215

STOTT

v.STOTT REALTY CO.

No. 30.

Supreme Court of Michigan.

Oct. 11, 1943.

Assumpsit by Arthur Stott against Stott Realty Company to recover installments of dividends collected by defendant on securities pledged to it by plaintiff as collateral for loans. From a judgment of no cause of action entered on defendant's motion for directed verdict, plaintiff appeals.

Affirmed.Appeal from Circuit Court, Wayne County; James E. Chenot, judge.

Before the Entire Bench.

Shapero & Shapero, of Detroit (Harold M. Shapero, of Detroit, of counsel), for appellant.

Lewis & Watkins and David I. Hubar, all of Detroit (Milton M. Maddin, of Detroit, of counsel), for appellee.

BUSHNELL, Justice.

This is an appeal by plaintiff, Arthur Stott, from a judgment of no cause of action, entered on defendant Stott Realty Company's motion for a directed verdict. Plaintiff's action is in assumpsit to recover from dividends collected by defendant company on securities that were pledged to it by plaintiff as collateral for loans. The determination of the matters in dispute depends upon the interpretation of the several loan agreements.

Upon the death of plaintiff's father, David Stott, practically all of the stock of the defendant corporation passed to his testamentary trustees. The beneficiaries named in the will were plaintiff, Arthur Stott, and all his brothers and sisters. This testamentary trust was dissolved in 1925. Prior to this time, Arthur Stott, being in need of funds in addition to those he ordinarily would receive as dividends from defendant company, secured a loan from defendant and pledged as security therefor all of his stock in the defendant corporation and other stocks and bonds.

Later being in default as to this loan, and desiring an additional loan of $50,000, he entered into a written agreement with defendant company on October 2, 1924, in which he acknowledged, (1) an existing indebtedness of $23,922.80, under an agreement dated August 17, 1923, covering the purchase of 1,700 shares of the capital stock of defendant company; (2) a default of $400; (3) an additional indebtedness of $43,690.79, by reason of an assignment by Bertha A. Stott to defendant company of her claim against Arthur Stott; and (4) a further indebtedness of $11,302.50, because of other moneys advanced to him to enable him to pay certain debts. This agreement further provided that defendant company would advance an additional $50,000 to the plaintiff, and extend the time of payment of his past indebtedness, and that the loans should be repaid in the following manner: ‘The Stott Realty shall collect and receive all cash dividends, proceeds, income and revenues of every kind whatsoever from each and all of the securities herein pledged, under the terms of this agreement, and apply the same first to the payment of interest which shall grow due underany and all indebtedness owing to the said Stott Realty Company from the said Arthur F. Stott, and the balance if any remaining, upon the principal of said debts or either of them, as in its judgment it may see fit. All stock dividends realized from said pledged securities shall be held by the Stott Realty Company by way of pledge as additional collateral security for the repayment of all sums due from said Arthur F. Stott hereunder.’

The agreement contained the usual provisions for sale of the pledged securities upon default.

This additional $50,000 was advanced by defendant. Shortly thereafter Stott was married and he became in need of further funds. After some negotiations between the parties, another written agreement was made, dated October 14, 1926. This agreement referred to the 1924 agreement and subsequent advances of $11,612.15. Stott confirmed and acknowledged his then indebtedness as of June 30, 1926, in the total amount of $122,174.94. The agreement recited Stott's desire to divert a portion of the income and revenue from the pledged securities in an amount ‘available to him only and cancellable at his option.’ After a formal ratification and confirmation of the existing indebtedness and the agreements of October 2, 1924, and October 14, 1926, the parties agreed among other things as follows: That there would be released to Stott on his written request, out of dividends, the sum of $400 monthly, and this monthly payment was to be raised to $500 or $600 a month, if the amount of dividends derived from the pledged securities should increase to $21,000 or $27,000 a year. A proviso was included in the agreement, reading as follows: ‘4. Notwithstanding the provisions contained above and subject to the provisions contained in paragraph five (5) hereof, it is agreed between the parties hereto that the right to require such advances is personal to said second party (Arthur Stott) and cancellable at his option, and may not be assigned by said second party, nor may the same be seized, attached, or taken by any creditor or receiver appointed to administer the assets of said second party. Immediately upon any right hereunder being assigned, incumbered, attached, seized, or if the same shall in any manner pass out of the full and absolute control of the second party, then and in that event the obligation of the first party (Stott Realty Company) to continue such advances shall cease and terminate.’

The language of the paragraph 5 referred to reads: ‘5. It is further agreed that upon the death of the second party and notwithstanding the laws of descent and distribution which may be applicable nor any provision in any will made by the second party, the said monthly withdrawals shall be payable to Emily Stott, wife of said Arthur F. Stott, second party, until the termination of said agreement of October 2nd, 1924, and supplemental agreements.’

The...