Wing v. Commercial & Savings Bank
| Decision Date | 22 January 1895 |
| Citation | 103 Mich. 565,61 N.W. 1009 |
| Parties | WING v. COMMERCIAL & SAV. BANK ET AL. |
| Court | Michigan Supreme Court |
Appeal from circuit court, Mason county, in chancery; James B McMahon, Judge.
Bill by Charles G. Wing against the Commercial & Savings Bank and others for a decree declaring defendants to be trustees of certain moneys, and to restrain defendant bank from further prosecuting the action on a note. Decree for complainant, and defendants appeal. Affirmed.
Fitch & Reardon (Dovel & Smith, of counsel), for appellant bank.
M. B Danaher, for appellant Cartier.
Charles G. Wing (H. H. Wheeler, of counsel), for appellee.
In the early part of April, 1892, Charles T. Sawyer and Don F Cargill obtained from one Charles Mears, of Chicago, an option for the purchase of about 2,000 acres of land lying immediately north of the city limits of Ludington, Mich. for the sum of $15,000. They then held a conference at the office of the defendant bank with the defendant Fuller, who was the cashier of the said bank, and the complainant, Charles G Wing, at which it was agreed that the four parties named should organize themselves into a body corporate, purchase said lands, and engage in a scheme for developing the city of Ludington, popularly known as "booming." They were to grant bonuses to manufacturing establishments, to induce them to locate their plants in Ludington, expecting, as it is fair to assume, that the resulting appreciation in real estate values would eventually, if not at once, bring them a fair return, at least, for their investment and enterprise. It was agreed by Fuller that the defendant bank would furnish all money necessary to buy the said lands, upon the notes of the individual corporators. A corporation was accordingly formed, with the four individuals aforesaid as its stockholders. The corporation was known as the "Development Company of Ludington," and each of the four corporators held an equal share of its capital stock. The complainant herein was chosen its president, and said Fuller its secretary and treasurer. The defendant bank, through the manipulations of Fuller, furnished the funds to purchase the lands aforesaid, taking three notes, each dated April 11, 1892, due in four months from date, and each of the sum of $5,000, making up the $15,000, the purchase price of the Mears land. One of these notes was signed by Wing, the complainant, as maker, and indorsed by the other three parties; a second was signed by Sawyer, as maker, and indorsed by the others; and the third was signed by Cargill, as maker, and indorsed by the other three corporators of the development company. The first above mentioned is the one more particularly in issue in this case. It reads as follows: $5,000. Ludington, April 11th, 1892. Four months after date, I promise to pay to the Commercial and Savings Bank, or order, five thousand dollars, at the Commercial and Savings Bank, Ludington, Mich., for value received, with interest at 8 per cent. per annum until paid. [Signed] C. G. Wing. [Indorsed] H. S. Fuller. D. F. Cargill. Chas. T. Sawyer." The deed of the land from Charles Mears was taken directly to the defendant bank. Within a short time afterwards, the development company purchased 80 acres of land in the same locality, known as the "Danaher & Melendy Addition," for the sum of $2,000, and still another 40 acres, known as the "McDole 40," for $600. The defendant bank also furnished the money for these purchases upon the notes of the company, indorsed by the individuals aforesaid. The development company proceeded, largely under the direction of Fuller, to carry on the booming business. Great expenses were incurred. One hundred and sixty acres of the land was platted into city lots, and a great public sale of these lots was advertised in July, 1892. Excursions from Chicago and other points were advertised; a barbecue provided. At the sale about $10,000 worth of the lots were disposed of. The reckless expenditures of money by the management, however, consumed a large part, if not all, of the proceeds of the sale. Fuller had been the guiding spirit in these schemes, and his conduct of affairs gave rise to dissensions among the stockholders of the development company. Some conferences were held, and the complainant, after investigating the affairs of the company, insisted that it was in a perilous situation, and that an assignment must forthwith be made by the company for the benefit of its creditors. To this course Fuller strenuously objected, on the ground that such a course would be highly injurious to the defendant bank, as the latter held so much of the paper of the company that its standing and credit would be impaired if the facts became known and the company should assign. Fuller asked the complainant to sell his interest to him (Fuller) in the company; and this the complainant agreed to do, provided he could be released from all liability on his obligations to the bank on behalf of the company. Fuller readily promised the complainant to indemnify him against his liabilities to the bank on the development company's paper; but the complainant refused to accept Fuller's undertaking, and said he would deal only on condition that he could deal with the bank itself; that, if the bank would release him, he would step out of the development company, and Fuller might manage its destinies as he pleased. Fuller then undertook to give the release of the bank, and, in pursuance of that understanding, executed and delivered to the complainant a release in the following words: Immediately below this, and on the same sheet of paper, was the following: The notes matured on August 14, 1892; and about that time complainant asked Fuller for the notes, and was assured by him that they were paid, and would be delivered up. He said that some of the notes had been deposited as collateral, and had not been gotten in yet, but would be in a few days, and would be canceled and delivered up. In the meantime the stock of Sawyer and Cargill had been purchased by Fuller, who was now the sole proprietor of the assets of the development company, and its sole stockholder, except the 600 shares held by the bank. Sawyer and Cargill were to be released also, and about the same time they made inquiry for the notes. Mr. Sawyer especially inquired several times, and was answered over and over again, almost impatiently, that the notes had been paid, and would be delivered up in a few days. It was not claimed that Sawyer and Cargill had bargained for their release from the bank, but Fuller had acquired their stock, and was to release them himself.
It is not claimed that any of the other directors or officers of the defendant bank had any actual knowledge of these transactions, or took any part in them. Fuller and his relatives and personal friends, all of them nonresidents of Ludington, owned a majority of the stock of the defendant bank; and Fuller, as he often boasted, was the sole manager, and could do anything he pleased in relation to the management of the bank. He openly asserted this on different occasions, and his course of conduct lent all possible color to the claim. He advanced the money of the bank to build a clubhouse in the city of Ludington. He took stock in manufacturing companies, and did other extraordinary things for the cashier of a bank to do, without any protest on the part of the resident directors of the bank. The directorate was made up of men totally unacquainted with banking, men engrossed in other affairs, and who had neither time nor inclination to look after the affairs of the bank. They voluntarily left all matters to the discretion of Fuller; seldom held meetings of the directors; and it is uncertain, under the evidence, whether a meeting was held between the 1st of April and the 15th of August of the year 1892. Mr. McMaster, the vice president, says he thinks there must have been a meeting between those dates, but is not sure of it. Mr. Rath, another director, has no recollection on the subject, and says he seldom attended the meetings when they were held. It appears from all the testimony that the boast of Fuller that he controlled the bank was not an empty or idle one by any means. It does not appear that the outside stockholders took their stock on the express condition that Fuller should have absolute control, or that there was any express agreement to that effect. It does not appear whether the directors had actually voted to confer unusual powers upon Fuller, but it does appear that he claimed and exercised them without let or hindrance on all occasions. He was by sufferance, if by no other authority, something more than a cashier; he was the manager of the bank.
At the time these negotiations were going on, it was talked in Ludington that there was a necessity for the organization of a new development company to carry forward the work begun by the old company, but which it had proved inadequate to carry out. To this end a meeting was...
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