Lewis v. Weidenfeld

| Mich. | Oct 25, 1897

Grant, J.

(after stating the facts). 1. Defendant Weidenfeld appeared specially, and moved to remove the case to the United States court. The State court granted the order. The United States court, upon motion, remanded the case to the State court. It is now insisted that this order of the United States court was erroneous, and that the State court has no jurisdiction in the cause. This question is settled by the Supreme Court of the United States in Missouri Pacific R. Co. v. Fitzgerald, 160 U.S. 556" court="SCOTUS" date_filed="1896-01-13" href="https://app.midpage.ai/document/missouri-pacific-railway-co-v-fitzgerald-94345?utm_source=webapp" opinion_id="94345">160 U. S. 556. The court in that case say, “If the circuit court remands a cause, and the State court thereupon proceeds to final judgment, the action of the circuit court is not reviewable on writ of error to such judgment.”

2. Defendant Weidenfeld was a resident of the State of New York. Personal service could not, therefore, be had. Complainants made an affidavit setting forth the necessary facts, and an order of publication was made under the statute. The order required Weidenfeld and the New York Guaranty & Indemnity Company, also a nonresident, to “appear and answer the bill of complaint within four months from the date of this order.” After the case had been remanded, Weidenfeld appeared specially, and moved to set aside this order as insufficient and void. 3 How. Stat. § 6671, provides that, if the defendant is a resident of some other of the United States, the order shall require him “to appear and answer in not less than four months.” The order pro confesso was not entered until after the expiration of the four months. The point raised is that the order should fix a day for the appearance of the defendant, and that that day must be four months or more from the date of the order. The order gave the defendants the benefit of the entire four months, and the order pro confesso could not be entered, under its terms, until the expiration of the entire time. It could mislead no one. It furnished all the notice that it could by fixing a day certain. It is not indefinite. It is not necessary that the order should fix a specific day. It is in the usual form prescribed by the authorities. Jenn. Ch. Prac. 743, 744. The consequence of disturbing old and settled forms of practice is well stated in Pettiford v. Zoellner, 45 Mich. 358" court="Mich." date_filed="1881-01-26" href="https://app.midpage.ai/document/pettiford-v-zoellner-7930180?utm_source=webapp" opinion_id="7930180">45 Mich. 358.

3. Defendant Weidenfeld, after the above motion was overruled, appeared and answered, and it is now urged that he is not personally liable for any deficiency which may arise after the foreclosure sale. The contention of his counsel is that complainants, knew that he was acting as agent for others, and not for himself personally. The obvious reply to this is that he chose, by the express terms of his contract, to make himself personally liable. It is of no consequence that complainants knew that others were interested with him, or that he was acting with the intention of conveying the property to others. The law does not permit him to escape an express personal liability by showing that he was acting for others. The stockholders were parties to this agreement. If they did not consent to sell their stock under the terms of the agreement which was submitted to them, the contract failed and became inoperative. There is no evidence that the stockholders were informed that Weidenfeld was acting as agent, and not as principal. The injustice, therefore, of relieving him from personal liability, is apparent. This is a case where parol evidence is inadmissible to change the plain and express terms of a written contract. Mechem, Ag. § 443. Defendant Weidenfeld is therefore personally liable.

4. It is urged that the complainants have only a lien upon the property actually transferred by the Detroit Gaslight Company to Weidenfeld, and that it does not cover the additions which have since been made, and the new franchise which the defendant Detroit Gas Company obtained from the city. To uphold this contention would be to fly in the face of the explicit and express terms of the mortgage, viz., that it covered “ all improvements and additions, of every name and nature.” This covers the entire property, — as well that to be added as that conveyed. . It might as well be contended that when A. buys land, and gives back a mortgage for the purchase price, with .the express stipulation that it shall cover all improvements, a house erected thereon, and a part of the realty, is not covered by the mortgage. We may fairly conclude that a reasonable and prudent man foresaw what has happened, and provided against it. It was contemplated that the property of the three companies should be 'united into one. The defendant gas company asserts in its answer that such a consolidation was understood and intended. The property of the three companies was to be mingled, their pipes united, and their plants consolidated. The difficulty in separating the property after years of use -by the new company is apparent. Furthermore, the charter of the old company had but between six and seven years to run. Naturally, the new company would be seeking, and might at any time obtain, a new franchise. The new company did, in fact, without any notice to or consent of the old company, wipe out all the rights in the streets and the franchises which the old company had, by entering into a nev agreement with the city, and accepting a new ordinance for 30 years. The new company, therefore, has not the franchise which it purchased and mortgaged, to be reconveyed on the foreclosure sale. Further argument on this point is unnecessary. The mortgage covers all additions of every kind, and also the new franchise obtained by the defendant gas company in. place of the old franchise.

5. Were material representations of fact made by Croul, Lewis, and Lothrop, which were false, and upon which Weidenfeld relied in making the contract ? This question presents the only controversy of fact in the case. Briefly stated, the representations, as Claimed by the defendants, are that the Detroit Gaslight Company was operating under the contract of 1851, and that under it the rights of the company in the streets were perpetual. Owing to the importance of the case, on account of the large amount involved, we will refer to the testimony somewhat in detail. The negotiations which resulted in the sale were commenced in an informal way, in Detroit, in conversations between Messrs. Croul and Lewis and Mr. Frank P. Byrne. These conversations are unimportant. They resulted in an interview in New York city, at the office of Mr. Weidenfeld, between Messrs. Lewis and Croul and Messrs. Weidenfeld, John Byrne, and Frank S. Smith, on April 7, 1892. Mr. Weidenfeld testified:

“My recollection is that Mr. Croul based the negotiations on the contract of 1851. He said that the rights claimed to be granted by that agreement certainly endured until 1899. I don’t think he said anything as to the perpetual character of the franchise.”

On cross-examination he testified that he did not know when or where that statement was made, or whether it was in Detroit or New York. He also testified that his recollection was that the contract of 1851 was sent to him as the franchise of the company. If this was so, it was evidently after a copy of it was obtained from Mr. Lothrop, as hereinafter*referred to.

Mr. John Byrne testified:

“Mr. Lewis stated that they had valuable rights in the streets, and that they considered them perpetual. Either Weidenfeld or I asked, ‘Well, what" are those rights?’ Mr. Croul said, laughing, he believed he had the only copy of the contract of 1851, and considered it very valuable.”

It appears from his cross-examination that no copy of this contract was then produced by Lewis or Croul, and that witness did not see one till subsequently, when it was sent by Mr. Donnelly, of Detroit, to Mr. Smith, one of the attorneys for defendants, at New York, and was the copy he had obtained from Mr. Lothrop.

Mr. Smith testified that he had no conversation with Mr. Lewi's on the subject, but that Mr. Croul, after stating to him the price which they were entitled to charge, and in reply to the question for how long a time they would enjoy that right, said:

“They had it absolutely for seven years, which was the time within the unexpired duration of their right to be a corporation, and that, if the street-railway company succeeded in its litigation with the city, that right could be passed on to the new company, and was perpetual, because it was based upon a perpetual contract which had been given to the company about the year 1851.”

Mr. Frank P. Byrne testified to a conversation with Mr. Croul, in Detroit, early in the negotiations. His version of that conversation is as follows:

“I asked him as to the franchise of their company, and I remember his reply: It was all right; that they had practically — -What was the expression now? Well, unlimited rights in the streets. And then he told me, laughingly, that the city was really at the mercy, or in a hole, as he expressed it, on that subject, as it had no copy of the franchise or contract, whatever it might be, with their company; and he explained to me that the secretary of the gaslight company at or about the time the franchise was granted was a methodical sort of a fellow, and had copied the whole thing into the record book of the gaslight company, and that was the only copy in existence.”

This witness made the arrangement for the meeting in New York. He testified to a subsequent conversation in Detroit with Mr. Lewis, in which he stated to Mr. Lewis that they considered the price too high, to which Mr? Lewis replied:

“Your brother don’t give sufficient importance to the value of our rights or franchise from the city, which are perpetual. ”

The above is the substance of the representations upon which the defendants claim to have relied. Mr. Lothrop made no representations, except to state to Messrs. Donnelly and Wells, who were acting as attorneys for the proposed purchasers, that the contract of 1851 was the only contract which he knew anything about. This was in reply to an application from them to Mr. Lothrop for such information as he (Lothrop) could give with reference to the street rights, or the arrangement with the city.

These representations were absolutely and positively denied by Messrs. Croul and Lewis. They also testified that, at the time of these interviews, they did not know of the existence of the contract of 1851 or that of 1861. No claim is made that either Croul, Lewis, or Lothrop had any knowledge of the existence of the contract of 1861. That was not discovered by any one until after the institution of the suit by the city against the defendant gas. company. If any such representations were made, they were not communicated to the attorneys in Detroit acting for Weidenfeld and his associates, for on May 31, 1892, their attorneys, Brennan, Donnelly & Van De Mark, write to Attorney Smith, in New York, and inclose the copy of the contract of 1851 which they had obtained from Mr. Lothrop, and say:

“We think there are possibilities In this franchise not yet developed or understood by the present owners, as, notice, it nowhere limits the rights to use the streets, etc., to any particular period, and, in the absence of the same, the grant is perpetual, unless the limit is implied from the fact that the guaranty ceases to exist after 50 years." It is substantially the same question which we have in our street-railway litigation, in which we are going to win.”

Messrs. Croul and Lewis did not have a copy of this contract when they went to New'York city. They took with them only the charter of the company, and a statement showing the profits of the company for several years prior to that time.

Mr. Lothrop is dead, but left, in a letter of August 29, 1893, an emphatic denial of the charge. This letter was written in reply to one from Brennan, Donnelly & Van De Mark setting up these representations. Mr. Lothrop wrote:

“We know that no such representations were ever made.”

One Baxter, a gas engineer and superintendent of the Detroit Gas Company, testified to a conversation between Messrs. Croul and Lewis and Mr. John Byrne in regard’ to the purchase of this property during the latter part of May, 1892. He heard the conversation, and testified as follows:

“The conversation was in regard to the length of time the charter had to rim. Major Byrne stated that we had no charter, and Mr. Lewis said, ‘Oh, yes, we have.’ ‘Well,’ Major Byrne said, ‘you have only about seven years to run.’ Mr. Lewis then made the remark that it would not be much trouble in getting a new charter when the other would expire. There was nothing at all said in regard to the rights in the streets. They spoke about the price of the plant, and Mr. Byrne said they had an. option on a piece of property, and had a charter that would run 26 years, and could build a plant much cheaper than the $1,800,000 which was asked for the plant by Mr. Lewis.”

Several of the directors of the Detroit Gaslight Company testified that they had never heard of any claim made on behalf • of that company that it owned perpetual rights in the streets. After the contract'with Weidenfeld was made, Messrs. Croul and Lewis wrote letters to the stockholders, advising them to ratify it and sell their stock under its terms, because their charter had but a short time to run, and other parties had threatened to build another plant in competition with their company. This threat on the part of Weidenfeld and his associates is fully established. Messrs. Croul and Lewis did not become connected with the Detroit Gaslight Company until about 22 years after the date of the contract of 1851, and Mr. Lothrop not until 1885. There is nothing in this record to indicate that there was any occasion for them to examine the old records of the company or of the common council proceedings to ascertain what contracts had been made between the city and the company. We do not hesitate; under this record, therefore, to conclude that the representations claimed were not made, and that Lewis and Croul at that time had no knowledge of the contract of 1851.

6. We think it also fully established by the evidence that Weidenfeld and his associates did not rely upon the representations alleged to have been made by Croul and Lewis. Mr. John Byrne testified that, when Mr. Croul made his statement in regard to the rights of the company in the streets, Weidenfeld said:

‘ ‘ ‘Well, that is a question we don’t care to discuss here, because we always refer these things to our .lawyers. We will leave that question to the lawyers to determine,— about your rights.’ I said: ‘Very well. Now, gentlemen, what do you ask for this property ? ’ ”

They acted in accordance with the above statement, and referred the matter to their attorneys in Detroit. These attorneys applied to Mr. Lothrop “for such information as he had.” He replied by referring them to, and at their request giving them a copy of, the contract of 1851, with the guarded statement that that was all he knew anything about. It is conceded that Mr. Lothrop was an honest, upright, and careful man. He suppressed.no fact, and did not intend to. They had no right to assume that this contract was all there was, and Mr. Lothrop did not state or intimate that it was. They were notified by a perusal of that document that certain features of it existed for 10 years only, and that it .was entirely probable that other arrangements were then made. The records of the common council were in a building close by, and open to their inspection. So, also, the records'of the Detroit Gaslight Company were undoubtedly at their disposal for examination, had they seen fit to ask it. A brief examination of these would have discovered the contract of 1861 and other documents. If they chose to rely upon that contract, it was at their own risk. They had neither received any misinformation, nor had they been misled by any statement of Mr. Lothrop. ■ There was no suppression of any facts which Mr. Lothrop was bound to know and inform them of. If it were a fact that these parties relied upon representations of the extraordinary claim that this company had rights perpetual, and which would exist beyond the chartered life of the corporation, certainly common prudence would have warned them to examine the records at their command to determine whether those alleged rights had been affected by any other action between the city and the corporation.

In conclusion, we may add that the defendants are without equities. They purchased the property of the Detroit Gaslight Company at a figure at which it had been, and then was, exceedingly profitable. The stock of the Michigan Gas Company was exceedingly low. That company was threatened with a failure of the supply of natural gas, and desired and needed a plant for the manufacture of artificial gas to supply its customers and make it profitable. Mr. "Weidenfeld had purchased and procured the assignment to himself of all the stock of the Detroit Gaslight Company. Its directors had resigned, and, as they resigned, others, in the interests of Weidenfeld and his associates, were elected to take their places. They then organized the new company, the defendant gas company. The three old companies were then sold and transferred to the new company upon the basis of the following figures: The Detroit Gaslight Company, $1,450,-000; the Mutual Gas Company, $1,250,000; the Michigan Gas Company, $3,500,000, the latter company having cost but $1,800,000. They then capitalized this new company at $4,000,000 and issued bonds to the amount of $4,000,000 more, $2,000,000 of which were sold, and the other $2,000,000 held in reserve. Almost immediately suit was commenced by the city, attacking the legality of this organization. As above stated, neither the complainants, nor the stockholders whom they represented, nor the Detroit Gaslight Company, were notified or asked to defend that suit. The defendant company settled it with the city without the knowledge or advice of the complainants or those whom they represented. They obtained a new franchise for 30 years, and agreed upon the price of gas at a rate at which it is furnished by several other cities; and one of those who negotiated this franchise on the part of the defendant company stated that the franchise was worth a million dollars. Under these circumstances, their cause fails to meet the approval of a court of equity. For anything that appears upon the record, the new company-may be able to manufacture gas under the new ordinance with as much profit as was done under the old. The-proposition to now recoup as damages the difference between the value of the plant as a dead property, with no rights in the streets, and the price agreed to be paid, is wholly unjust and inequitable.

Other important and interesting questions are presented by this record, but, inasmuch as the above conclusion disposes of the case, we refrain from discussing them.

The decree is affirmed, with costs.

The other Justices concurred.