Bush v. Wadsworth

60 Mich. 255 | Mich. | 1886

Morse, J.

These two cases were argued and submitted together, and involve nearly the same state of facts.

The first bill is filed to foreclose a mortgage executed by the defendant Wadsworth to one Hiram Lewis; and the •other to foreclose a mortgage given by Wadsworth to one Isaac Wan Kersen.

In the summer of 1876, Wadsworth bought the land which is covered by these mortgages, — part of it of Lewis and a portion of Wan Kersen. He executed purchase-price mortgages upon the two parcels, — one to Lewis upon the land bought of him, for $2,074, and one to Wan Kersen upon the other piece, for $3,000.

He then sold both parcels to the Eagle Portland Cement Company, subject to these mortgages, the land becoming a part of the company’s plant. This company was composed of the complainant, who resided in Kalamazoo, where the plant was located, and other parties, most of whom resided in Chicago, Illinois.

The corporation was organized and existed under the laws of the state of Illinois.

On the twenty-fifth day of January, 1878, this corporation, being indebted to various parties, elected the complainant its president, and voted to mortgage its plant in the sum of $25,000. It voted to issue, and did issue, bonds of $500 each for the above amount, and executed its mortgage upon its real estate and property to one George L. Otis, as trustee for the holders of said bonds, and to secure them ; the mortgage being in form an Illinois trust deed.

The corporation at this date was owing Bush & Patterson, the complainants in the second bill, who were copartners in business, the sum of $3,359.40 ; also some floating debts in Kalamazoo; about $12,000 in Chicago; and the amount of these Lewis and Wan Kersen mortgages, less payments of $690; and one year’s interest upon the one to Lewis; and $1,000 and $300 interest upon the one to Wan Kersen,— making in all a total indebtedness of about $21,000.

Some of the stockholders were indorsers upon the Chicago indebtedness, and it was agreed that Bush and the others should take a certain amount of these bonds towards the company’s indebtedness to them, or to indemnify them for their liability as indorsers. The complainant Bush took $2,500 of the bonds, and some of the others also took some, and paid the amount of the same on the Chicago indebtedness. The indebtedness at the latter place was nearly paid in this manner.

The business of the company not prospering as expected,, it is claimed by the complainant Bush that by an agreement between himself and the other directors, and at their request, he was authorized to run the works, with the understanding that he should do the best he could with the business, and if any profit was made, divide the same among the stockholders, who were also to share in the expenses, and the losses, if any.- This claim is supported by the proofs. Thereupon, commencing about February, 1878, the complainant Bush, or Bush & Patterson, it is immaterial which, carried on the business of the company until the foreclosure of the-Otis trust deed and sale of the property thereunder as here-, inafter stated.

The complainant Bush further claims that when the payments of installments of principal and interest, during this-time, became due on these two mortgages, in order to protect the interests of the trustee, Otis, and himself as holder of a-portion of these bonds, he was obliged to pay, and did pay, upon the Lewis mortgage the sum of $1,671.90, and upon theYan Kersen mortgage the sum of $1,200, whereby he became subrogated to all the rights of said mortgagees, as far as these amounts are concerned.

It is admitted that he paid these amounts, but not out of his own or Bush & Patterson’s money, as he claims. The Improved Eagle Portland Cement Company, which defends, acquired the property subsequently, and asserts that these payments were made with moneys belonging to the Eagle Portland Cement Company, and were paid by Bush as the-president of that corporation.

March 1, 1882, at a foreclosure sale of the premises under the Otis trust deed, the land covered by the Lewis and Yan Kersen mortgages was bid in by one John M. Boundtree, who conveyed to the Improved Eagle Portland Cement Company, the corporation defendant in these suits.. This defendant also holds a deed from the old corporation, the Eagle Portland Cement Company.

In the Otis foreclosure proceedings, the old corporation, Jeremiah P. Woodbury, Allen Potter, and Frederick Bush were made defendants. Woodbury was made a party on the ground that he owned the Van Kersen mortgage, Potter because he was supposed to hold the Lewis mortgage, and Bush for the reason, as therein stated, that he claimed to have-paid out moneys on these prior mortgages for and in behalf of the trustee, Otis. And the decree in that case expressly states and finds that the lands to be sold thereunder are subject to incumbrances which are prior to the trust deed, as follows : To said defendant Woodbury, as holder of Van Kersen mortgage, $1,451.36; to holder of Lewis mortgage, $873.12;- and to Frederick Bush, for moneys advanced upon said prior' mortgages, $3,621.90 ; in all, $5,946.38.

The defendant corporation acquired its title with full knowledge of this decree, and by sale under it.

January 10, 1883, the complainant Bush acquired, by a duly-executed assignment, the note and mortgage given by defendant Wadsworth to Lewis; and on the same day and year the Van Kersen note and mortgage were duly assigned to the complainants, Bush & Patterson. Bush & Patterson also transferred their interest in the Lewis mortgage to Bush.

The defendant corporation in its answers claims, as before stated, that the amounts paid by Bush, or Bush & Patterson, upon these mortgages, before assignment, were paid out of the moneys of the Eagle Portland Cement Company, and as the agent or agents of said company; that the defendant corporation is the assignee of all the property, assets, and choses in action of said Eagle Portland Cement Company, either legal or equitable; and that said complainant Bush had large sums of money in his hands belonging to said old corporation, and it was his duty to apply said funds in payment of these mortgages, and that he had no right to take assignments in his name, or in the name of Bush & Patterson; and that as between complainants and the corporation defendant, as assignee of the old corporation, the mortgages are in fact fully paid and satisfied, and ought to be discharged; that said bonds, secured by the Otis trust deed, were issued to pay the indebtedness of the Eagle Portland Cement Company, including these mortgages; that Bush took and disposed of twenty-two of these bonds, amounting to $11,000, for which he never paid said company, nor accounted to it for the price of the same; nor has he ever accounted for them to the defendant corporation, its successor.

This defendant claims the benefit of a cross-bill by its answers, and prays for an accounting, claiming an indebtedness, over and above the mortgages, from Bush to the corporation.

The decrees below dismissed the bills of complainant without prejudice to the right of either or any of' the parties to file a bill for an accounting in relation to the-matters involved, in said suit.

We are satisfied from the proofs that the complainants are entitled to a decree in each cause for the amount due on the note and mortgage in each case. There is no showing that the complainant Bush was ever obligated by his connection-with the old corporation to pay these mortgages. Under all-the evidence in the case, charging him with the twenty-two-, bonds at $11,000, the old corporation was still in his debt at-the time he took the assignments of these mortgages. Most,, if not all, of the stockholders of the present company were members of the old corporation, and have profited by the foreclosure of the Otis trust deed — at least in the amount of these two mortgages, if not more. The plant was sold expressly subject, by the decree under which the sale wai made, to these mortgages, and also the amount that Bush had paid upon them before the decree was taken. It is natural to suppose that the bidder, Roundtree, who was in fact the agent of the new corporation, obtained the property at public sale with reference to these incumbrances, and at so much less a figure than he would had it been clear and unincumbered.

The evidence goes to show that the non-resident stockholders put the whole burden of this failing business upon-The shoulders of Bush; that some of them refused or neglected to take the share of the bonds they agreed to when they were voted ; that the bonds could not be sold in the market at fifty cents on the dollar; that Bush & Patterson made their own note for $5,000 to keep the concern in funds; that Bush was finally urged by the others to take the remaining bonds and do what he could with them ; that he took them upon his ■own hands, and credited them to the company, in his expense account with it, at their face value; yet it does not appear that there was ever a time when the corporation was not indebted to him, or his firm, even charging him with the full par value of the bonds. He finally sold the bonds at twenty-five cents on the dollar, admitted to be their market value at the time of such sale, to one of the stockholders of the old corporation, who was also a member of the new corporation.

The complainant Bush insists that he never agreed to take these bonds at their face value; nor is there any testimony showing that he so agreed, save the fact of his charging them against himself in his debit and credit account against the old company.’

It seems from the evidence before us that Bush has lost more in this transaction than the other stockholders, and has an equitable claim for a large amount against the old company.

The testimony is very meager and uncertain as to the real state of the accounts between him and the Eagle Portland Cement Company ; but from what does appear from Exhibit Q, introduced by the defendant, and the evidence of Bush, no one else seeming to know anything about it, it is apparent that Bush, instead of using the funds of the company to make the payments upon these mortgages, for which he claims the right of subrogation, was obliged to and did pay the same with his own money, or the money of Bush & Patterson, and for the want of any funds in his possession or within his reach belonging to said company.

If the stockholders of the corporation defendant, who were stockholders and directors of the old company, know anything about the affairs of such old company, or as to the state of its accounts with the complainant, they have certainly failed by the record to acquaint us with their knowledge. The only intelligible testimony we have is that of the complainant and the Exhibit Q, which is a copy of complainant’s-account. His evidence is corroborated by what facts and circumstances appear outside of his own statements. He had the confidence of the Chicago directors, as they admit, and the burden of the whole business was put upon him, and the-whole proofs show that he honestly and faithfully endeavored to fulfill the trust. He used his own credit to buoy up the business, and was a great loser thereby. He has the right to be compensated for the expenditures made to protect the company as well as himself. It was necessary that he should make the payments upon these mortgages, not only to save the property of the company, but his own interest as a bondholder and stockholder. We are satisfied that, in effect, he made these payments out of his own moneys. The fact that he charged these items of payment against the company in hope that the business might pay enough to reimburse him, does not change his equities.

Although it is not here necessary to decide that the clause in the Otis decree recognizing the complainant’s lien upon the mortgaged premises for these payments, is binding upon the defendant corporation as an adjudication of his claim to subrogation, yet, when this corporation became the owner of the property by a purchase under said decree, and by a: sale of the premises expressly subject to this claim, it certainly can urge no equitable defense against his right to a decree for the amount of these payments against the premises, save that the payments were made with the funds of the company, or that Bush was indebted to the company, and therefore in duty bound to pay them for the company. And in these defenses it has signally failed in its proofs.

The decrees of the circuit court for the county of Kalamazoo, in chancery, are reversed, and new decrees will be entered here in each case, in accordance with this opinion and the prayers of the bills of complaint; the complainants to recover costs of both courts.

The other Justices concurred.