Wilkes v. Allegan Fruit & Produce Co.

• Decision Date: 22 December 1925
• Docket Number: No. 37.,37.
• Citation: 233 Mich. 215,206 N.W. 483
• Court: Michigan Supreme Court
• Parties: WILKES et al. v. ALLEGAN FRUIT & PRODUCE CO. et al.

233 Mich. 215

206 N.W. 483

WILKES et al.

v.ALLEGAN FRUIT & PRODUCE CO. et al.

No. 37.

Supreme Court of Michigan.

Dec. 22, 1925.

Appeal from Circuit Court, Allegan County, in Chancery; Glenn E. Warner, Special Judge.

Suit by Charles R. Wilkes, administrator of the estate of Harry D. Pritchard, deceased, and others, against the Allegan Fruit & Produce Company and others. Decree for plaintiffs, and defendants appeal. Reversed and rendered.

Argued before McDONALD, C. J., and CLARK, BIRD, SHARPE, MOORE, STEERE, FELLOWS, and WIEST, JJ.I. C. Montague, of Allegan, for appellants.

Wilkes & Stone, of Allegan, for appellees.

WIEST, J.

In this state there is this statute:

‘When stock, bonds, or other personal property is pledged as collateral security for the payment of money or the performance of any obligation, and there has been a default in such payment or performance, such stock, bonds or other personal property may be sold to satisfy said debt or obligation at public sale, or at private sale where the contract of pledge authorizes a private sale; but before a sale, ten days' notice in writing thereof shall first be served on the pledgor or his legal representative, either personally or by mail addressed to said pledgor or his legal representative at his last place of residence.’ C. L. 1915, § 11917.

The following statement is taken from the opinion of the circuit judge:

‘Harry D. Pritchard borrowed $2,000 from Elmer Keel, July 2, 1922, gave his promissory note due one year after date, and to secure the payment thereof pledged 250 shares of the capital stock of the Allegan Fruit & Produce Company, indorsed in blank. In the note appears the following clause: ‘With authority to sell same at public or private sale or otherwise, at his option, on the nonperformance of this promise and without notice, * * * and I agree that said collateral shall also be held by said bank (Elmer Keel) as collateral security for any indebtedness now owing or that may hereafter be owing by me to said bank (Elmer Keel) until same is paid, with same power of sale as above stated and without notice.’ Subsequently Pritchard pledged to the First National Bank of Allegan, Mich., 83 1/3 shares of the capital stock of the Allegan Fruit & Produce Company, giving notes containing the same clause relative to sale without notice as appears in the note given to Keel. December 11, 1923, Harry D. Pritchard assigned to Herman Vaupell, one of the plaintiffs, his entire equity in the 333 1/3 shares of capital stock of the Allegan Fruit & Produce Company. Harry D. Pritchard died February 6, 1924. Charles R. Wilkes was appointed administrator of his estate April 2, 1924. April 11, 1924, the First National Bank of Allegan sold to Ward Granger the 83 1/3 shares of stock in said corporation which had been pledged as collateral, and on the same day Elmer Keel sold to Ward Granger the 250 shares of said stock which had been pledged to him.'

The question presented is whether this statute prevents waiver of notice of private sale, by express agreement in the pledge contract? The collateral was sold at private sale, without notice to the legal representative of the pledgor. The plaintiffs urge that the sale without notice was void. Defendants contend that, under the terms of the contract, notice was waived, and the sale was valid. The circuit judge held that, the provision of the statute requiring notice was mandatory and could not be waived by contract and, therefore, the sale was void. Defendants appealed. We are, in effect, asked to hold that the statute is bottomed on public policy and the intended protection cannot be contracted away.

It was aptly said in Steen v. Modern Woodman, 296 Ill. 104, 118, 129 N. E. 546, 552 (17 A. L. R. 406):

‘The courts must act with care in extending those rules which say that a given contract is void because against public policy, since, if there is one thing more than any other which public policy requires, it is that men of full age and competent understanding shall have the utmost liberty of contracting, and that their contracts, when entered into fairly and voluntarily, shall be held sacred and shall be enforced by the courts. Because a contract may waive constitutional or statutory rights or may change an established rule of law does not necessarily render it void on the ground that it is against public policy.’

The sale was made under express power granted by contract and not under authority of the statute. When the pledge of the collateral was made the stock was indorsed in blank and delivered to the pledgee. The common law conferred power to sell personal property, pledged as security to a debt, but exacted notice of right to redeem and also of the pledgee's intention to sell and of the time and place of sale. But such notice of sale was never necessary when the very instrument of pledge specifically authorized a private sale without notice. See McDowell v. Chicago Steel Works, 124 Ill. 491, 16 N. E. 854,7 Am. St. Rep. 381;Carson v. Iowa City Gaslight Co., 80 Iowa, 638, 645, 45 N. W. 1068.

In Ardmore State Bank v. Mason, 30 Okl. 568, 120 P. 1080,39 L. R. A. (N. S.) 292, the pledge read:

‘I do hereby give to the legal holder of this note full power and authority to sell said collateral security or any portion thereof at public or private sale at the option of the holder on the nonperformance of the above promise, and without advertising the same or otherwise giving me notice.’

It was contended by the pledgee that the notice required to be given by...