116 Mich. 519 | Mich. | 1898
-On April 3, 1893, tbe Michigan Handle Company, a corporation organized under the laws of this
It is conceded that every debt secured by this mortgage was bona fide, and most of the creditors secured accepted under it at once. The bank is situated at Mancelona, Antrim county. The plaintiff resides at South Board-man, in the same county. The Michigan Handle Company is also situated at South Boardman.
The plaintiff testified that, some two or three days before the mortgage was given, he talked with Mr. Knickerbocker, president of the bank, about taking security for the indebtedness of the Michigan Handle Company to himself, as he and Mr. Peck were indorsers upon all the paper of the company to the bank, as well as indorsers upon other paper of the company to other parties; that on April 1st, and after this talk, he received a letter from Mr. Knickerbocker, advising the taking of the security. The'letter is as follows:
*521 “ J. H. Murray, Esq.,
“Dear Sir: As per your'request when I left you last night, will say I have given your business very careful thought; and, knowing something of the outside feeling about the financial condition of the Handle Company, my advice would be for you and Mr. Peck to file your claim. The suggestion he made to buy it out is the best one, but still you can’t do that without giving notice, and holding a meeting of the shareholders, and the consent by ballot of two-thirds of them. So you see, if you wait to do that, it will require time, and allow others to undermine you. If you thought best, and wire me, I will come down on the 4 p. m.' train, and bring Mr. Bailey, also the State laws, so you can see for yourself the condition of affairs.
“ If I understand it correctly, which I think I do, by you and Mr. Peck taking that into your own charge now, and cutting up that timber, you can get nearly enough out of what is there, and sell the team and equipments, to save yourselves clear, and then, if you don’t want any more of it, turn it back to him, and let him go on with the business. I think, if this scheme was carefully considered, you would all agree with me, and by so doing save yourself and us; otherwise you will both lose heavily, and you can’t avoid it. I wish you would send me a statement of the indebtedness of the firm, and the amount you have indorsed with him at other places than here, and the amount of judgments he has confessed, and claims upon which suit has been begun. It seems there has been an inclination to keep these things from us, and we feel that we are entjtled to know the facts just as they are, without any hesitancy on the part of any one. I feel that, as you said last night, we are secured by your indorsements. Still, if we know your interests are secure, ours is just that much more secure. I trust you will wake up to a realization of the .condition, and not subject yourself to such robbery any longer. Trusting to hear from you by return mail the full facts, I am,
“Yours truly,
“H. Knickerbocker.”
The plaintiff testified further that this letter referred to the making of a mortgage, and that the property to be taken into the possession of himself and Mr. Peck, and run by them, was the property of the Michigan Handle Company; that Knickerbocker said that they ought to be
“ Peck & Murray,
“ Gentlemen: I have been unable to get our committee together, owing to some being absent, but I will say that those I have seen think that we ought to have 10 per cent, on the whole amount. But, through my urgent request to help you people out, they have decided to make 8 per cent, rates on $2,500, and 10 per cent, on sums above that amount.
“ Trusting this will meet your approval, I am,
“ Very truly yours,
“H. Knickerbocker.
“P. S. Please let me know what your decisions are.”
Plaintiff further testified that this letter was received after he had taken possession of the property as trustee, and had reference to himself and Peck taking hold of the business and running it; that they operated the property about a week, when the attachment was served on May 18, 1893; that in the meantime a meeting of the creditors had been called, at which meeting the Antrim County State Savings Bank was represented by its attorney; that the purpose of taking hold of the business with Mr. Peck was to pay the claims of the creditors.
On the part of the defendant, it was contended, and testimony was introduced to show the fact, that, a few days before this mortgage was given, Mr. Knickerbocker went to South Boardman, and there had a talk with Mr. Edmiston and Mr. Murray about securing the bank for the indebtedness due it from the Michigan Handle Company ; that at this time Mr. Knickerbocker knew nothing of the indebtedness of the Handle Company, except that to the bank, and $400 or $500 outside of that; that at this time an arrangement was made with the Handle Company, through Mr. Edmiston, that a mortgage should be given to the bank to secure it and the indorsérs of the notes; that, when the arrangement was to be carried out, Mr. Knickerbocker was to be notified, and bring his own attorney down there to draw the papers; that this arrangement was not carried out, but he learned a day or two later that the mortgage to Murray as trustee had been executed; that he never accepted the terms of this mortgage. His explanation of the letter of April 1st is that while he was in South Boardman, a few days before, he had his suspicions aroused; that while there he heard that the company had been sued and had confessed judgment, and he wanted to know what it meant; and that the letter was not written to have any indebtedness included in the mortgage, except that of the bank. Mr. Knickerbocker further testified that, at the time the letter of April 15th was written, he did not know that Murray and Peck had executed mortgages upon their stocks, or that they were insolvent; that, a day or two before that letter was written, Murray and Peck came to him, and wanted to run the plant, and put in,. $200 on it, in improvements, if their indebtedness could be reduced that amount;, that it was in response to that request that the letter
It does not appear that Mr. Knickerbocker, by any affirmative act, accepted the terms of the mortgage. All that can be said of the testimony is that, when he found that the mortgage had been given, he sent the attorney of the bank to look it up, and, on ascertaining the true state of facts, reported them to the bank, and the bank refused to accept the terms of the mortgage, and made no claim under it.
After the plaintiff’s case was closed, the defendant sought to show that the execution of the mortgage was never authorized by a majority of the directors or stockholders of the corporation, and that it was made with the fraudulent purpose of putting the property into the hands of Mr. Murray, who was insolvent at the time. The court refused to receive this testimony. The court charged the jury that, if they found that there was a meeting of the directors of the corporation held for the purpose of authorizing the trust mortgage, yet if the legal directors were not all there, and had not all been notified of such meeting, and reasonable time given in which to let the absent ones reach the meeting, then any action taken at the meeting was invalid ; that, if they found that the mortgage was executed
The court was also in error in submitting to the jury the question of the acceptance of the terms of the mortgage by the bank. It appears conclusively that whatever was done by Mr. Knickerbocker or the bank in reference to that mortgage was in entire ignorance of the insolvency of Murray and Peck, and in ignorance of the fact that the mortgage was never authorized by the board of directors. With those facts ascertained, the hank would not be estopped from making claim under its attachment. The first letter from Mr. Knickerbocker to plaintiff was written before the mortgage was made. When the letter of April 15th was written, Mr. Knickerbocker knew nothing of the insolvency of Murray, though it appears that, 11 days prior to that, Murray and Peck both had conveyed all their property for the benefit of their individual creditors, and Murray had assigned his interest in this very trust mortgage. Neither did Knickerbocker know at this time that the mortgage was not authorized by the board of directors. There can be no estoppel unless a party is misled to his prejudice by the one against whom it is
The judgment below must be reversed, and a new trial ordered.