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Dbthmers, J.
This appeal of defendant Lender-ink involves the same accident as that in Ortega v. Veenstra (1969), 382 Mich 210. The defendants Veenstra were the driver and the owner, respectively, of the automobile which struck plaintiff’s minor boy. Plaintiff bas sought to attach liability to defendant Lenderink on the ground that he had parked his truck, in violation of the statute, within 20 feet of the crosswalk at an intersection, that the minor was concealed by the truck from the view of approaching defendant driver Yeenstra as he was about to cross the street, just before he stepped out from in front of the truck into and against the Veenstra car, and that such unlawful parking was, therefore, a proximate cause of the accident.
The cases against the Veenstras and Lenderink were tried together and resulted in a jury verdict of no cause for action as to all 3 defendants. On plaintiff’s appeal to the Court of Appeals it affirmed as to defendants Yeenstra but reversed and remanded for new trial against defendant Lenderink.- This appeal is here on leave granted to him. 381 Mich 755. The separate appeal of plaintiff in this Court against the Yeenstras is that considered in the opinion of Mr. Justice Kelly in the above cited case.
The Court of Appeals reversal was based on the theory that the trial court had committed reversible error in refusing plaintiff’s request to charge the jury that Lenderink was guilty of negligence as a matter of law in parking his truck where he did and to leave to the jury only the questions of proximate cause and contributory negligence.
At trial plaintiff originally filed written requests to charge, including the following, denominated “plaintiff’s proposed instruction No. 9”:
“It is the position of the plaintiffs in this action that defendant Lenderink was negligent in parking his truck so close to the north crosswalk of the Clancy-Fairbanks intersection as to obstruct the vision of drivers of automobiles who were approach ing the intersection from the north. One of the laws of Michigan controlling the nse of automobiles provides that,
“ No person shall park a vehicle * * # within 20 feet of a crosswalk.’
“This means that no one is permitted to park a car or a truck within 20 feet of the crosswalk at an intersection.
“If you should find that the delivery truck of the Clancy Food Market was parked by Mr. Lenderink within 20 feet of the north crosswalk of the Clancy-Fairbanks intersection at the time Robert Ortega was struck by the Veenstra car, then that would be a violation of the statute which I just read you, and defendant Lenderink would be guilty of negligence as a matter of law.”
This requested charge was given by the court. Before the court instructed the jury, however, plaintiff’s attorney informed the court that he was no longer satisfied with his request No. 9, which in effect leaves it to the jury to determine the place of parking and instructing only that if it should find it to be within 20 feet of the crosswalk the defendant Lenderink would be guilty of negligence as a matter of law. Counsel now requested, orally, that the court, instead, instruct the jury that Len-derink had parked his truck within those 20 feet and, therefore, was guilty of negligence as a matter of law. This the trial judge refused to do. The Court of Appeals says he should have done so.
Plaintiff seeks to establish his claimed .right to a directed finding of guilty of negligence against Lenderink on his own testimony, on cross-examination under the statute, which was, substantially, that he had never measured it, but that according to his best judgment the front of his truck, when parked, was between 17 and 18 feet north of the crosswalk. Plaintiff also points to the opening statement, made before proofs, by defendant Len-derink’s attorney about what the proofs would show, including the assertion that Lenderink’s best estimate of the distance between the crosswalk and the front of his parked truck was approximately 18 feet. In addition, plaintiff presented testimony of 3 other witnesses to the effect that the front of the truck had been in line with the fire plug, which other proofs showed to have been 16 inches north from the crosswalk in the direction of the parked truck.
A woman who lived in an apartment at the corner testified that she had been looking out of a window and saw the boy run out into the street and the ensuing accident. She also testified that she would say that the truck was parked 15 to 20 feet beyond the fire hydrant, which, defendant argues, with the hydrant being 16 inches north of the crosswalk, would amount to her testimony placing the front of the truck from 16 feet, 4 inches, to 21 feet, 4 inches, north of the crosswalk. Plaintiff points to inconsistencies in her testimony but nothing to show interest on her part in the outcome of the case.
Plaintiff has come, on appeal here, to the point of claiming that defendant Lenderink’s own testimony and the opening statements of his counsel about the distance constitute a judicial admission which is binding on him. In this connection he cites Connor v. Lahe Shore & M. S. R. Co. (1911), 168 Mich 29, Leadon v. Detroit Lumber Company (1954), 340 Mich 74, and Tozer v. Kerr (1955), 342 Mich 136. An examination of those cases shows that a statement made by a party or his counsel, in the course of trial, is considered a binding judicial admission if it is a distinct, formal, solemn admission made for the express purpose of, inter alia, dispens ing with, the formal proof of some fact at trial. In Toser, notably, this Court went so far as to say:
“We have here no formal admission of a fact, as in Connor, ‘made for the express purpose of alleviating the stringency of some rule of practice, or of dispensing with the formal proof of some fact at the trial,’ which, as stated in Connor, would ‘stand upon a different footing from that held by mere testimony.’ There was no judicial admission of fact requiring that we discard the usual rule applicable to defendant Moelke’s motion for judgment non obstante veredicto that the testimony must be viewed in the light most favorable to plaintiff. That rule is followed even when there are inconsistencies or contradictory statements in the téstimony of plaintiff or her witnesses. Yampolsky v. Smith (1948), 320 Mich 647; White v. Herpolsheimer Company (1950), 327 Mich 462 (26 ALR2d 667); Staunton v. City of Detroit (1951), 329 Mich 516; Knoellinger v. Hensler (1951), 331 Mich 197; Knoor v. Borr (1952), 334 Mich 30. Certainly the rule is not inapplicable merely because of her expression of opinions inconsistent with testimony of facts which support a verdict in her favor.”
In the instant case plaintiff was not prevented by the above admission of defendant and his counsel from presenting testimony of other witnesses as to the question of the distance involved and, in fact, did present that of 3 other witnesses. This is, then, no case, under the cited decisions or any others, for imposing the rule of a binding judicial admission against defendant Lenderink. To borrow from Toser, Lenderink is entitled to the benefit of testimony in support of a verdict in his favor despite his expression of an opinion inconsistent therewith. Furthermore, with the judicial admission question thus eliminated, we are left the situation of conflict ing evidence on the subject and, as said in Toser, and uniformly in onr decisions, in consideration of plaintiff’s motion for what amounts to a directed verdict on this matter, defendant Lenderink is entitled to have the testimony viewed in the light most favorable to him. So viewed, although plaintiff was entitled to the charge No. 9 which he first requested and which the court gave, he was not entitled to his afterthought, a direction to the jury to find a certain way as to a question of fact on Avhich there was conflicting testimony.
Reversed and remanded to circuit court for entry of judgment in accord with the verdict. Costs to defendant.
T. E. Brennan, C. J., and Kelly, Black, T. M. Kavanagh, Adams, and T. Gr. Kavanagh, JJ., concurred.
See OLS 1961, § 257.674 (Stat Ann 1968 Rev § 9.2374).— Reporter.
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Kelly, J.
A three-month Grand Rapids police department investigation and surveillance of persons suspected of operating a numbers lottery resulted in complaint and warrant accusing Walter Blakes, Emmett .Pruitt, LaVerne Holbrook, and Willis Brown with conspiring together to violate the gaming laws. At the preliminary examination, LaVerne Holbrook was discharged from custody upon motion by the prosecuting attorney.
Pruitt, Blakes, and Brown waived, a jury trial and were found guilty by then Superior Court Judge Vander Ploeg of conspiring together to violate the gaming and gambling law (CLS 1961, § 750.505 [Stat Ann 1954 Rev § 28.773]).
The Court of Appeals (People v. Blakes [1966], 4 Mich App 13) affirmed the Pruitt and Blakes convictions but reversed the judgment of conviction as to Willis Brown, stating (p 18):
“There is no testimony in the printed record or m the notebooks submitted in evidence that he had any knowledge of said conspiracy.”
In this appeal, appellants Pruitt and Blakes. present the following question:
“Were the proofs received in the conspiracy trial of the appellants below sufficient to sustain a verdict of guilt?”
At the request of the Grand Rapids police department, Cass county Deputy Sheriff Andrew Chavaus came to Grand Rapids to assist in acquiring evidence against the defendants. He testified that he placed number policy bets with Emmett Pruitt on December 18, 19, 20, and 21, 1963. .
On the same day that Ohavaus placed his last bet, namely, December 21,1963, all three defendants were arrested, but no gambling paraphernalia was found at the time of their arrests.
Immediately after arrest, defendant Blakes was brought by the police to the LaYerne Holbrook apartment, located on Grandville street, and while the officers were searching this apartment, defendant Blakes said, “The stuff that you fellows are looking for is over there in that room right down there off the hall.” In this room pointed out by Blakes, a number of numbers tickets and adding machine tapes were found and, also, the betting slips which Deputy Sheriff Ohavaus had purchased from defendant Pruitt.
Applying our decisions in People v. Heidt (1945), 312 Mich 629, and People v. Asta (1953), 337 Mich 590, we must conclude that Blakes’ statement at the Holbrook apartment, shortly after his arrest cannot be used to establish the corpus delicti of this alleged conspiracy.
We quote from defendants’ brief:
- “Appellants show that there was no evidence in the record before the Court of Appeals to suggest that the defendant Pruitt was ever seen in the company of the defendant Blakes. While the Court of Appeals stated in its opinion that':
“ ‘The defendants were observed communicating with one another and exchanging materials with one another in daily routine,’ [sic]
there is absolutely nothing in the transcript of proceedings io support this statement. Officer Patter-'soil: said that- from September 27, 1963 he saw the defendant Pruitt almost every day, but that he did not see the defendant Brown, or Blakes until ‘the latter part of November.’
“Further, in all the transcript Blakes was seen at 431 Grrandville on a number of occasions, but tvith the defendant Brown. Only once in all the evidence was Blakes ever seen transferring, receiving, or exchanging anything, and that was on December 20, 1963, the day before his arrest, when he was seen to receive an envelope from Brown, not Pruitt. It is true that Brown was receiving something from Pruitt, but whatever this was, it could not be thought to have been contraband, as the Court of Appeals held that Brown did nothing under the record to justify his being convicted or considered a part of any alleged conspiracy, and he was acquitted by the Court of Appeals.
“In reading the entire transcript there simply is not sufficient evidence contained therein to associate Pruitt and Blakes in a eomrnon enterprise. * * *
“E ?en though gambling materials, in some small quantity, were found located at the Grandville address, after the arrest of the defendant Blakes, the testimony contained in the transcript shows that this house was the property of one Felix [LaVerne?] Holbrook, who appeared in count 1 of the information as a co-conspirator, but who was discharged from custody upon the examination of the cause. * # *
“The only other testimony in the record went to the appellant Pruitt, and showed that on December 18, 19, 20 and 21st, of 1963, Andrew Chavaus paid Pruitt for a number, but Pruitt was not seen in contact with Blakes on any of these dates. No evidence shows Blakes to have been involved in any way in this set of circumstances. Cf. United States v. Saunders (CA 6,1964), 325 F2d 840, as being importantly similar.
“A criminal connection between Pruitt and Blakes cannot be based upon mere surmise, but must clearly appear from the proofs. As was said in Ingram v. United States (1959), 360 US 672 (79 S Ct 1314, 3 L Ed 2d 1503) at page 680:
“ ‘To establish the intent the evidence of knowledge must be clear not equivocal. * * * This because charges of conspiracy are not to be made out by piling inference upon inference, thus fashioning * * * a dragnet to trap all substantive crimes.’
“Finally, it must be remembered that the charge made below was one of conspiracy, and no dne, including Pruitt, could be in conspiracy by himself.
“It matters not that Pruitt accepted numbers bets from officer Chavaus. That might constitute a specific substantive offense; but it certainly does not permit the finding of conspiracy.”
Appellants cite People v. Sobczak (1955), 344 Mich 465 to stress the fact that ‘no inference of guilty participation can be drawn from mere association among persons, even those of shady reputation.”
Claiming the testimony supports an inference of a conspiracy in this case, plaintiff states:
“Appellee contends that the constant association of the appellants and their regular coming and going from the premises at 431 Grandville, S.W., where the gambling equipment and original slips were found, will support an inference of a conspiracy in this case. None of the defendants lived at this address, and the officers were directed by Blakes to gambling equipment and the duplicate slips found on the premises.
“The instant case is distinguishable from People v. Sobczak.”
In the Sobcsak Case, as in this appeal, the defendant was accused of “taking part in the numbers conspiracy” and the State, claiming there was sufficient testimony to sustain the conviction, stated (pp 468, 469) :
“ ‘Here there was a question of fact as to whether or not Sobczak was taking part in the numbers conspiracy by his frequent meetings in varied situations with heads of the syndicate, and his delivery and receipt of packages similar to those commonly carried by numbers operators.’
“And:
“ ‘Observations by the police indicated that Sob-czak, undisturbed, met with proved heads of the syndicate in both public and private places on many occasions, at times and places, and under circumstances which excluded purely social or legitimate business contacts. Immediately prior or subsequent to meeting Sobczak, the various conspirators visited confederates and called at addresses proved to be quarters of the syndicate. Sobczak’s conduct must be viewed in this environment.’ ”
In reversing the judgment of conviction and discharging defendant, we commented upon the above State’s claim of sufficiency as follows (p 469):
“What all of this testimony comes down to is that the defendant was keeping bad company. There is, at least, a breath of suspicion that he was involved somehow in this nefarious business. But it is no more than a suspicion. * * *
“It has long been established, of course, that conspiracy may be proved by circumstantial evidence, in fact that such is generally the case. People v. Beller (1940), 294 Mich 464; People v. Pitcher (1867), 15 Mich 397. But the circumstances must be such as to warrant a fair inference of the facts to be_ established. * * * What we fail to find in this record is any proof that any of the other parties to this conspiracy ever so much as spoke of it to defendant, or he of it to them, or to anyone else, or even that he knew of it.”
We cannot agree with plaintiff that the instant case is distinguishable from People v. Sobczak, and conclude that the proof of conspiracy offered in the Sobcmk Case was more adequate and convincing than that offered in the instant case.
Because of our finding that proofs offered in the instant ease were not sufficient to sustain a verdict of guilt, it is not necessary for us to pass judgment upon defendants’ claim that the court committed reversible error in admitting into evidence five memo-randa of the police officers’ daily observations, or the court’s failure to enter in the trial transcript the text of the memoranda of said observations.
Judgment of conviction reversed. Defendants discharged.
T. E. Brennan, C. J., and Dethmers, Black, T. M. Kavanagh, Adams, and T. Gf. Kavanagh, JJ., concurred. | [
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Kelly, J.
Plaintiff' appealed a jury verdict of no cause of action. The Court of Appeals affirmed as to defendants Veenstra and reversed the trial court and granted a new trial against defendant Lenderink.
This opinion is confined to plaintiff’s appeal to this Court from the affirmance of the verdict and judgment of no cause of action as to defendants Veenstra.
On August 28,1962, at about 11 a.m., as defendant Dona Veenstra was driving south on Clancy avenue, in the city of Grand Rapids, Robert Ortega (who was 7 years and 7 months old at the time of the accident) attempted to cross Clancy avenue from the west to the east side, at or near its intersection with Fairbanks street, in a primarily residential area.
Clancy is a through street, having the right-of-way over the intersecting street (Fairbanks) by virtue of a “yield right of way” sign located at the intersection.
The record sustains defendants’ claim that as the Veenstra automobile neared the intersection, Robert Ortega skipped or ran from a hidden position in front of the parked Lenderink truck into the path of the Veenstra automobile and was struck instantly after taking not more than three steps onto the street from his concealed position.
Plaintiff requests that the Court of Appeals’ decision be reversed and the case remanded for new trial because of the trial court’s failure to properly instruct the jury and the court’s ruling excluding a poi’tion of a deposition.
In regard to the claimed instructional errors, plaintiff claims he was entitled to: (1) an instruction that defendant had a duty to give audible warning with her horn as she approached the intersection; (2) an instruction distinguishing between the relative amount of care required of drivers and pedestrians; (3) and an instruction that any contributory negligence by Bobert Ortega must not only be a proximate cause of the car-pedestrian collision, but a “substantial factor” in bringing it about.
1. Duty to Blow Horn.
CLS 1961, § 257.706 (Stat Ann 1968 Bev § 9.2406) provides:
“The driver of a motor vehicle shall when reasonably necessary to insure safe operation give audible warning with his horn but shall not otherwise use such horn when upon a highway.”
No case has been cited, or called to our attention, requiring a driver to sound his horn upon approaching an intersection.
The record failed to disclose testimony sustaining-plaintiff’s contention that a reasonably prudent driver would deem it “reasonably necessary to insure safe operation [to] give audible warning with his horn.”
We agree with the following statement made by the Court of Appeals in disposing of appellant’s claim in this regard (p 195):
“Plaintiffs argue that the jury should have been instructed on defendant Veens tra’s duty under statute to sound her horn when reasonably necessary to insure the safe operation of her vehicle. The subject was adequately covered in the court’s instruction concerning the standard of ordinary care under the circumstances. This court is aware of no case under these particular facts which establishes a duty to sound one’s horn or which would require a specific jury instruction on a motorist’s duty to sound his horn in addition to the general instruction on ordinary care.”
2. Duty of Motorists and Pedestrians to Exercise Care.
Plaintiff contends that the trial court erred in refusing to instruct the jury that:
“ ‘The motorist has under his control an instrumentality capable of inflicting great bodily harm upon relatively slight impact, and at slight risk to himself. These are “circumstances” requiring the driver to exercise an extreme amount of care, for it is axiomatic that care must be exercised in direct proportion to one’s capacity to injure.’ ” (Empha sis ours.)
claiming that under our holding in Bartlett v. Melzo (1958), 351 Mich 177, 181, he was entitled to such an instruction.
It is plaintiff’s position that while the “standard” of care required of a pedestrian and driver may be equal, the “amount” of care is not equal.
Plaintiff raised this same question before the Court of Appeals, and, in disagreeing with plaintiff, the Court stated that the trial court properly instructed in regard to the care that both plaintiff and defendant should exercise, and that the Bartlett v. Melzo Case was “notjn point.”
The question presented in Bartlett v. Melzo was not one of proper jury instruction.
We agree with the Court of Appeals. In the Bartlett Case we were not dealing with facts as exist in the present case, where a pedestrian placed himself in peril by suddenly running out into the street, as is evidenced by the following from Bartlett (pp 180, 181):
“Is the center of the street a place of safety? Assuming it is such, is it negligent-for a pedestrian to leave this haven and make for the farther side of the street? The questions presented bring squarely before us a consideration of the relative rights and duties between a motorist, and a pedestrian caught in the middle when .a traffic signal changes. We are not dealing with the pedestrian who steps off the sidewalk under conditions that prove immediately to be perilous. That situation has its own unique problems.”
3. Contributory Negligence.
Plaintiff claims that the court failed to instruct that any negligence attributable to Robert Ortega must not only be “proximate cause” but, also, a “substantial factor,” and in support of such contention cites Mack v. Precast Industries, Inc. (1963), 69 Mich 439.
In the Mach Case, this Court, in reversing because of the use 16 times of the term “however slight,’^ did not hold that the negligence must be a “substantial factor,” but to the contrary stated (p 450):
“The decided weight of authority tends to view that contributory negligence is not susceptible of division into degrees or percentages, and that an instruction importing such division or inviting a comparison of the relative amount of negligence attributable to the parties to the action is erroneous.”
We agree with the Court of Appeals that (p 196):
“The trial court in its instructions repeatedly referred to contributory negligence and to the possibility of negligence on the part of plaintiff which might have contributed to his own injury. The instructions taken as a whole amply informed the jury on the proximate cause element of contributory negligence. * * # Michigan does not attempt subtle distinctions in the degree of contributory negligence; this is the true import of the Mack Case.”
We find that the jury was properly instructed and met the test that: “The judge’s charge should be a reasonably organized statement of the law in the judge’s own words.” Knickerbocker v. Samson (1961), 364 Mich 439, 449.
4. Deposition Exclusion.
In concluding that the trial court did not err in excluding a portion of the deposition of Patrolman Jack Billingsley, we first quote from plaintiff’s brief as follows:
“Witness Nancy Dahlke, called by defendants Veenstra, is the only person who purportedly observed the actions of Robert Ortega immediately prior to this collision. In the course of trial, Mrs. Dahlke testified that Bobby was crossing Clancy street from the northwest to the northeast corner and that he was running across the street at the time he was struck.
“When interviewed by Patrolman Jack Billingsley of the Grand Rapids police department immediately following the collision on August 28, 1962, Mrs. Dahlke stated that Bobby was crossing from the northeast to the northwest corner of the Clancy- Fairbanks intersection when lie was struck. * * * In cross-examination of witness Dahlke, she was asked whether she recalled having told Patrolman Billingsley that Bobby was crossing Clancy in an east-west direction at the time he was struck:
“ ‘Q. Do you recall talking with the police officer at the scene of this occurrence?
“ ‘A. Yes, I do.
“ ‘Q. Do you recall whether or not you told the police officer that Robert was going from the northeast corner to the northwest corner when he was struck ?
“ ‘A. I don’t remember that, I may have, but I don’t remember that.
“‘Q. You may have told .him that?
“ ‘A. It is possible I could have gotten my directions mixed up.’ ”
Plaintiff claims the court erred in refusing to allow the introduction of that portion of the Bil-lingsley deposition showing that Nancy Dahlke used the word “northeast” instead of the word “northwest”’
The fact as to how Robert Ortega attempted to cross Clancy avenue was not questioned by anyone, including plaintiff-appellant.
We have repeatedly held that a witness may not be impeached on an immaterial issue.
Affirmed. Costs to appellees.
T. E. Brennan, C. J., and Dethmers, Black, T. M. Kavanagh, Adams, and T. Gr. Kavanagh, JJ., concurred.
Ortega v. Lenderink (1968), 10 Mich App 190.
Leave to appeal granted, 381 Mich 755. | [
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] |
Williams, C.J.
This case presents important questions of first impression regarding the constitutionality and construction of the Nonprofit Health Care Corporation Reform Act, 1980 PA 350, MCL 550.1101 et seq.; MSA 24.660(101) et seq.
Prior to April 3, 1981, the effective date of the act, bcbsm brought a complaint for declaratory judgment challenging the constitutionality of the act and sought an injunction against the act’s enforcement in the Ingham Circuit Court. On April 2, 1981, the Ingham Circuit Court enjoined the enforcement of the act and further ordered the parties to comply with the existing enabling acts, 1939 PA 108 and 109, as amended. We initially granted leave to appeal from that order but, following bcbsm’s motion for reconsideration, we took the matter under advisement.
At the request of the Governor, pursuant to the certified-question rule, we ordered the Ingham Circuit Court to certify the controlling question or questions of public law, to provide a statement of the relevant facts and, if needed, conduct evidentiary hearings. Evidentiary hearings were subsequently conducted over a two-month period, from July 27 to September 24, 1982, generating 4,000 pages of transcript ánd 194 exhibits.
On November 1, 1982, the circuit court filed its certified questions of public law and findings of relevant facts, consisting of 562 findings. The parties agreed that the essence of the circuit court’s certification of controlling questions of public law is set forth in bcbsm’s "Questions Presented.” Those questions follow:
I. Does PA 350 unconstitutionally impair the existing contract between bcbsm and the State of Michigan?
II. Does PA 350 deprive bcbsm of liberty and property without due process of law by effectively converting a heretofore private corporation into a public, governmental corporation?
III. Does PA 350 constitute an unconstitutional delegation of legislative authority to bcbsm and other private persons?
IV. Do sections 203, 206(4), 211, 301(7), 302(1), 305(1), 509(4)(b), 510 and/or 516(2)(b) of PA 350 unconstitutionally impair private, vested contract rights between bcbsm and its members, participating providers and customers?
V. Do sections 104(3), 206(4), 211, 217, 401(7), 414a, 415, 502(l)(b) and/or 607(1) of PA 350 deprive bcbsm of liberty and property without due process of law by regulating bcbsm in an arbitrary and discriminatory manner which bears no real and substantial relationship to the objects of PA 350 or to the general health and welfare of the people of this state?
VI. Do sections 104(3), 206(4), 211, 414a, 515 and/or 607(1) of PA 350 deprivé bcbsm of the equal protections of the laws by regulating bcbsm in an arbitrary and discriminatory manner which bears no rational relationship to the objects of PA 350?
VIL Do sections 402(7), 404(5), 605 and/or 701(5) of PA 350 deprive bcbsm of liberty and property without due process of law by providing for administrative procedures lacking in fundamental due process guarantees?
VIII. Do sections 106(5), 205(4), 205(5), 310(1), 401(1), 503, 504(1), 509(1), 509(4)(b), 510(1), 511(1) and/or 513(1) of PA 350 deprive bcbsm of liberty and property without due process of law by imposing unconstitutionally vague and illusory duties on bcbsm and the Commissioner of Insurance?
IX. Does section 301(7) of PA 350 deprive bcbsm, its directors, officers and members of guaranteed rights of free speech?
We do not agree with bcbsm’s challenges to sections of 1980 PA 350 except in the following three particulars:
(1) Section 205(6) unconstitutionally delegates legislative power (Question 3);
(2) insofar as they pertain to administrative services only (aso) contracts, §§ 104(3), 211, 414a, 415, and 607(1) violate equal protection (Questions 4, 5, and 6);
(3) § 402(7) establishes an improper burden of proof (Question 7).
Other sections of the act we do not address because there is no actual controversy presented:
(1) whether §§ 509(4)(b), 510, and 516(2)(b) impair the private existing contracts between bcbsm and its participating providers (Question 4);
(2) whether §§ 217 and 502(l)(b) deprive bcbsm of due process of law (Question 5);
(3) whether §§ 402(7), 404(5), and 605 fail to provide for an impartial decisionmaker in violation of due process of law (Question 7);
(4) whether §§106(5), 205(4), 205(5), 310(1), 401(1), 503, 504(1), 509(1), 509(4)(b), 510(1), 511(1), and/or 513(1) impose unconstitutionally vague and illusory duties on bcbsm and the commissioner (Question 8);
(5) whether § 301(7) deprives bcbsm, its directors, officers, and members of free speech (Question 9).
We sustain the act’s constitutionality with regard to bcbsm’s other challenges.
By way of preface, the length of this opinion is principally attributable to the fact that the nine certified questions contain no less than thirty-two issues, because bcbsm challenged forty-six sections of 1980 PA 350. Furthermore, in responding to bcbsm’s multifarious style of attack, the opinion is necessarily somewhat redundant as a number of these sections challenged by bcbsm are attacked on several constitutional grounds, i.e., as an impairment of bcbsm’s public and private contractual rights, as a taking without due process of law, as violative of equal protection, as an unconstitutional delegation of legislative authority, as a denial of procedural due process, as unconstitutionally vague, and as a violation of the First Amendment.
I. Historical Background
Because any new piece of legislation is not created in a vacuum, it will be helpful to examine, from an historical perspective, the critical factors which led to this major legislative reform, 1980 PA 350, in the state’s health care delivery system.
Michigan’s first health care enabling legislation originated in the 1930s as an outgrowth of the Great Depression where pervasive poverty among the people caused them to forgo needed health care services which, in turn, resulted in financial uncertainty for hospitals and physicians. The main purpose of the enabling legislation was, through the mechanism of prepaid group health care plans, "to promote a wider distribution of medical care” to those people who otherwise did not have the financial resources to obtain health care services. The special legislation had a secondary purpose of protecting the public from fraud by placing the health care corporations charged with administering the plans under the regulatory authority of the Commissioner of Insurance. See Blue Cross & Blue Shield of Michigan v Ins Comm’r, 403 Mich 399, 419-425; 270 NW2d 845 (1978).
The two predecessor corporations of bcbsm were incorporated pursuant to this original enabling legislation, under separate but comparable statutes. A 1974 amendment to the enabling legislation allowed for the consolidation of these two corporations with the provision that the regulatory power of the Insurance Commissioner over the constituent corporations would remain the same with respect to the consolidated corporation. The consolidation occurred in 1975, resulting in the formation of bcbsm.
Bcbsm is a unique statutory creation, distinct from a private insurance company in that " 'it is not carried on as an insurance business for profit . . ., but rather it provides a method for promoting the public health and welfare in assisting . . . persons to budget’ health care costs.” Blue Cross & Blue Shield of Michigan, supra, p 418; see also Michigan Hospital Service [Blue Cross] v Sharpe, 339 Mich 357, 370; 63 NW2d 638 (1954). Under its enabling legislation, bcbsm is not "subject to the laws of this state with respect to insurance corporations, except as provided in [the] act . . . [nor] with respect to corporations generally.” §201(4). Rather, bcbsm is, by legislative declaration, a nonprofit "charitable and benevolent institution, and its funds and property shall be exempt from taxation by this state or any political subdivision of this state.” §§ 105(2), 201(5). In part by virtue of its favored status, in part by virtue of its health care delivery concept, and in part by virtue of the expertise and aggressiveness of its management, bcbsm has achieved a dominant position in the health care market, currently providing health care coverage to nearly sixty percent of the state’s population. It has participation contracts with all but four of the non-state-owned hospitals in the state and with approximately seventy percent of all the physicians. It also administers the federal Medicare program. Bcbsm has no shareholders and is managed by corporate officers and a board of directors. The board of directors has in the past been nominated from the corporate members and elected by the same body with the exception of two public appointees of the Insurance Commissioner. Historically, provider members on the board of directors have far outnumbered subscribers. Only in recent years has the number of consumer representatives on the board increased.
During the past twenty years, national and statewide expenditures on medical care increased at a rapid rate almost double the rate of inflation. In 1960, national health care expenditures were 5.2 percent of the gross national product. By 1978, the proportion had jumped to 9.1 percent, an overall increase of seventy-five percent. Michigan’s figures for health care expenditures over the same years paralleled those of the nation. While a combination of market forces is responsible for the spiraling costs, some of which are not within bcbsm’s control, bcbsm can nonetheless have a significant influence in determining market prices because of its virtual dominance over delivery of the state’s health care. To some degree bcbsm has, through its policies, implemented cost containment programs; yet despite these efforts, Michigan’s health care costs are among the highest in the country. The elderly, low income, and business sectors of this state have been especially burdened by the ever-increasing costs.
As health, care costs were mounting, bcbsm became the target of considerable controversy. The circuit court reported that much of the criticism voiced against bcbsm was centered on its secretive and closed system of board operation, its unresponsiveness to consumer interests and its ineffectiveness in containing the rapid escalation of health care costs.
In the midst of the concern with escalating health care costs, this Court issued its opinion in Blue Cross & Blue Shield of Michigan v Ins Comm’r, 403 Mich 399; 270 NW2d 845 (1978), which addressed the issue whether and to what extent the Insurance Commissioner had the power to control costs pursuant to his or her regulatory authority over bcbsm. In noting that the commissioner’s regulatory authority was not inherent but was derived solely from statute, this Court held that under 1939 PA 108 and 109 the commissioner possessed continuing statutory authority over bcbsm to approve or to disapprove "rates of payment by the corporation to hospitals that provide service to the corporation’s subscribers,” but not to physicians. Id., p 431. This Court observed that the statute empowering the commissioner to regulate such rates did not set forth standards to guide the commissioner in exercising that power. Id., p 428. This Court filled the gap by construing the enabling legislation broadly, finding that the Legislature intended the commissioner to regulate such rates only according to a "fair and reasonable” standard. Id., pp 428-429. This Court concluded that while the commissioner could consider wasteful expenditures in determining whether an increase in the rates of payment by bcbsm to hospitals was fair and reasonable, the commissioner did not have the authority under the forty-year-old enabling acts to require specific cost containment programs. Id., pp 413, 429. Thus, the commissioner’s hands were tied against effectively combating the rising costs of health care services.
The Legislature responded quickly, and within two years of the Blue Cross decision 1980 PA 350 was passed and signed into law on December 29, 1980. One of the groups instrumental in developing the legislation was bcbsm.
The legislative history of the act indicates that it is designed to meet and remedy the problems raised by Blue Cross, supra, in that it broadens the commissioner’s power to regulate bcbsm’s rates for both hospital and physician services and clarifies the standards to be followed by the commissioner in exercising this power. Moreover, the act is intended to increase subscriber and public representation on the board of directors and to reorganize the internal operations of bcbsm so as to ensure its accountability to the public it was created to serve. Further, the primary objective of the act is to check rising health care costs by implementing definite cost containment goals with respect to provider reimbursement arrangements and providing greater incentives for bcbsm to develop cost-efficient programs, all subject to the supervisory powers of the Insurance Commissioner. Overall, the act represents an effort of the Legislature aimed at curbing the rise in health care costs by a unique statutory scheme which combines both free-market and government regulatory methods of control.
II. Question 1
"I. Does pa 350 unconstitutionally impair the EXISTING CONTRACT BETWEEN BCBSM AND THE STATE of Michigan?”
Bcbsm claims that numerous sections of the act, when considered together, impair the public contract existing between the State of Michigan and bcbsm, as embodied in 1939 PA 108 and 109, its 1975 restated articles of incorporation, and its bylaws, in violation of US Const, art I, § 10 and Const 1963, art 1, § 10.
A. Bcbsm’s Reliance on Dartmouth College Is Misplaced
Bcbsm bases its claim of 1980 PA 350’s unconstitutionality in no small part on the premise that it is a private corporation and that any intrusion on its operations by the provisions of 1980 PA 350 impairs its contract with the state. The Attorney General, on the other hand, contends that bcbsm is a quasi-public corporation and, as such, has the responsibility to act in the public interest.
In support of its claim, bcbsm places great reliance on the well-known case of Trustees of Dartmouth College v Woodward, 17 US (4 Wheat) 518; 4 L Ed 629 (1819). The Dartmouth College case stands for the principle that the charter of a private corporation is a contract and any modification of a corporation charter by a state in the absence of a specific reservation of power violates the Contract Clause.
We find bcbsm’s reliance to be misplaced. Dart mouth College reflects an earlier era of Contract Clause analysis. Allied Structural Steel Co v Spannaus, 438 US 234, 241; 98 S Ct 2716; 57 L Ed 2d 727 (1978). Beginning with the landmark case of Home Building & Loan Ass’n v Blaisdell, 290 US 398; 54 S Ct 231; 78 L Ed 413 (1934), the modern United States Supreme Court has construed the Contract Clause as not prohibiting a state from exercising its police power to abrogate private or public contracts if reasonably related to remedying a social or economic need of the community. Under modern Contract Clause analysis, a balancing approach has been adopted by the courts, weighing the degree of the impairment of the contractual rights and obligations of the parties against the justification for the impairment as an act of the state’s police power to implement legislation for a legitimate public purpose. Michigan courts have followed this lead. See Van Slooten v Larsen, 410 Mich 21; 299 NW2d 704 (1980) (see in particular Justice Levin’s dissenting opinion); Metropolitan Funeral System Ass’n v Ins Comm’r, 331 Mich 185, 194 ff.; 49 NW2d 131 (1951), and federal cases cited therein.
This balancing test applies whether bcbsm is a private or quasi-public entity. Consequently, the question of bcbsm’s corporate nature is not paramount to our resolution of the Contract Clause challenge, but, rather, as will be set forth below, the critical issue is whether and to what extent bcbsm has been regulated in the past. The more heavily regulated the industry, the less severe the impairment, if any, effected by state regulation since further regulation in the area should have been expected.
B. The Constitutional Impairment of Contracts Standard Is Now a Balancing Approach
The new test for unconstitutional impairment of contracts is a balancing approach, weighing the extent of the impairment on the rights and obligations of the contracting parties against the state’s police power to regulate in the public interest. A recent example of this balancing approach is found in the United States Supreme Court case of Energy Reserves Group, Inc v Kansas Power & Light Co, 459 US 400; 103 S Ct 697; 74 L Ed 2d 569 (1983), involving a federal Contract Clause challenge to the 1979 Kansas Natural Gas Price Protection Act which imposed price controls on the intrastate gas market. In its opinion upholding the statute, the Court noted the significance of the fact that the natural gas industry was heavily regulated at both the state and federal levels. Id., p 413. We find particularly instructive the Court’s clarification of the standard to be used for adjudicating contract impairment claims:
The threshold inquiry is "whether the state law has, in fact, operated as a substantial impairment of a contractual relationship.” Allied Structural Steel Co, 438 US 244. See United States Trust Co [v New Jersey], 431 US [1,] 17 [97 S Ct 1505; 52 L Ed 2d 92 (1977)]. The severity of the impairment is said to increase the level of scrutiny to which the legislation will be subjected. Allied Structural Steel Co, 438 US 245. ... In determining the extent of the impairment, we are to consider whether the industry the complaining party has entered has been regulated in the past. Allied Structural Steel Co, 438 US 242, n 13, citing Veix v Sixth Ward Bldg & Loan Ass’n, 310 US 32, 38 [60 S Ct 792; 84 L Ed 1061] (1940). ("When he purchased into an enterprise already regulated in the particular to which he now objects, he purchased subject to further legislation upon the same topic”). The Court long ago observed: "One whose rights, such as they are, are subject to state restriction, cannot remove them from the power of the State by making a contract about them.” Hudson Water Co v McCarter, 209 US 349, 357 [28 S Ct 529; 52 L Ed 828] (1908).
If the state regulation constitutes a substantial impairment, the State, in justification, must have a significant and legitimate public purpose behind the regulation, United States Trust Co, 431 US 22, such as the remedying of a broad and general social or economic problem. Allied Structural Steel Co, 438 US 247, 249. Furthermore, since Blaisdell, the Court has indicated that the public purpose need not be addressed to an emergency or temporary situation. United States Trust Co, 431 US 22, n 19; Veix v Sixth Ward Bldg & Loan Ass’n, 310 US 39-40. . . .
Once a legitimate public purpose has been identified, the next inquiry is whether the adjustment of "the rights and responsibilities of contracting parties [is based] upon reasonable conditions and [is] of a character appropriate to the public purpose justifying [the legislation’s] adoption.” United States Trust Co, 431 US 22. [Id., pp 411-412.]
The federal balancing approach has been adopted by our Court for purposes of adjudicating state Contract Clause claims as well as federal Contract Clause claims. See Van Slooten v Larsen, supra; Metropolitan Funeral System Ass’n v Ins Comm’r, supra. Thus, in scrutinizing Contract Clause claims under the state and federal constitutions, the aforementioned cases establish the following standard:
1— The first inquiry is "whether the state law has, in fact, operated as a substantial impairment of a contractual relationship” (emphasis added). Allied Structural Steel Co v Spannaus, 438 US 244.
2— A critical factor to be considered in determining the extent of the impairment is "whether the industry the complaining party has entered has been regulated in the past.” Energy Reserves, supra.
3— If the impairment is minimal, then there is no unconstitutional impairment of contract and our inquiry may end at this step.
4— If, however, the impairment is severe, then there are two further inquiries, both of which must be affirmatively shown to justify the legislative impairment:
a) Is there a significant and legitimate public purpose behind the regulation, and
b) If there is a legitimate public purpose, are the means adopted to implement the legislation reasonably related to the public purpose?
C. Application of Standard to Challenged Statutory Schemata of the Act
As we apply the aforementioned balancing test to the legislation at hand, we begin by analyzing the individual sections of 1980 PA 350 which bcbsm challenges. Once we analyze the sections individually, we can then determine whether collectively they fundamentally alter bcbsm’s existing contract with the state.
The features of the act relevant here to bcbsm’s impairment of public contract challenge follow.
(1) §§ 202(l)(d.) and 401(1) — Corporate Duties
In its attack on 1980 PA 350, bcbsm alleges that §§ 202(l)(d) and 401(1) of the act thrust upon it "[pjublic welfare responsibilities ..., as corporate duties, without its consent: i.e., the duty to supply health care coverage to all residents of the State of Michigan and the duty to assure all subscribers access to quality health care services at a reasonable cost.” (Emphasis in original.) Bcbsm argues that 1980 PA 350, by imposing what are essentially governmental purposes on a private corporation, fundamentally alters its contract with the state, as embodied in 1939 PA 108 and 109 and its restated articles of incorporation.
We disagree.
Section 202(l)(d) states, in pertinent part, that a nonprofit health care corporation shall include among its corporate purposes:
(ii) To secure for all of the people of this state who apply for a certifícate, the opportunity for access to coverage for health care services at a fair and reasonable price.
(Hi) To assure for nongroup and group subscribers, reasonable access to, and reasonable cost and quality of, health care services. [Emphasis added.]
Section 401 provides, in relevant part:
(1) A health care corporation established, maintained, or operating in this state shall offer health care benefits to all residents of this state .... [Emphasis added.]
We point out that bcbsm bases its argument that 1980 PA 350 imposes governmental purposes on a private corporation on its misinterpretation of the statutory language. Specifically, bcbsm misconstrues the above provisions by stating that it forces upon bcbsm the duty to supply health care services to all people of this state. A careful reading of the provisions leads us to a far different construction. Contrary, to bcbsm’s contention, only those state residents "who apply for a certificate,” i.e., its own customers, need be given the opportunity for access to health care services at a fair and reasonable price. The goal of assuring reasonable access to, and reasonable cost and quality of, health care services is limited to "subscribers” of the corporation. Bcbsm is required only to offer, not to supply, health care benefits to all residents of this state. The act goes on to expressly provide that bcbsm is not prevented from denying coverage to an "individual [who] does not meet requirements for coverage contained in a certificate.” § 401(4)(c).
We fail to see how these provisions thrust upon bcbsm public welfare responsibilities. Rather, they place upon bcbsm nothing more than duties which bcbsm already owed to its own customers and to the public. Although under the former enabling acts, 1939 PA 108 and 109, bcbsm was not required to include legislated corporate purposes in its articles of incorporation, see 1939 PA 108, § 3, 1939 PA 109, § 4, it was subject to carry out the declared policy of 1939 PA 108, § 1, which was "to promote a wider distribution of medical care . . . in this state.”
We find that the provisions of 1980 PA 350 here in question are not so dissimilar to the expressed legislative policy of the former enabling acts as to constitute a substantial impairment of bcbsm’s existing contract with the state. Because we find that (1) the impairment, if any, is minimal, and (2) bcbsm has been regulated in the past, we need not further inquire as to whether the state has a legitimate purpose and has employed means both reasonable and of a character appropriate to that purpose. See Part 11(B).
(2) § 203 — Power to Amend Articles of Incorporation
Bcbsm further argues that § 203 operates to impair its contract with the state as embodied in Article VIII of its restated articles of incorporation, § 4 of 1939 PA 108 and § 5 of 1939 PA 109. Article VIII of the restated articles of incorporation, § 4 of 1939 PA 108, and § 5 of 1939 PA 109 empower the corporate membership of bcbsm to amend the restated articles of incorporation subject to the approval of the Attorney General and the Commissioner of Insurance. Section 203 of 1980 PA 350 places the power to amend and integrate the articles in the board of directors, subject to the approval of the Attorney General. Bcbsm contends that this shifting of authority from the corporate membership to the board of directors impairs its contract with the state.
We disagree.
In analyzing a Contract Clause claim, we must first ascertain whether the challenged legislative enactment works a substantial impairment of an existing contractual relationship. While we find that the provision in question transfers the power to amend bcbsm’s articles of incorporation from the members to the directors, we fail to see how this is a substantial impairment of bcbsm’s contract with the state where the industry has been subject to extensive state regulation in this area.
Under 1939 PA 108 and 109, the initial filing of bcbsm’s articles of incorporation and any alteration of said articles thereafter was always subject to the regulatory authority of the commissioner and the Attorney General. See 1939 PA 108, §§ 3 and 4; 1939 PA 109, §§ 4 and 5. In light of this past extensive state regulation over bcbsm’s articles, we deem the impairment, if any, under Act 350 to be unsubstantial.
Even had we found that § 203 is a substantial impairment of bcbsm’s contract with the state, we still would have upheld its constitutionality under 4(a) and 4(b) of the balancing test. See Part 11(B). To the extent § 203 impairs bcbsm’s contractual interests, that section rests upon and is prompted by significant and legitimate state interests.
In recent years bcbsm has been the subject of considerable controversy. The evidence indicates that bcbsm has been unresponsive to consumers’ interest. Additionally, critics have charged that bcbsm has not been vigorous in its cost containment efforts. The main reason alleged for these deficiencies is that bcbsm has been subject to undue and excessive provider and management influence. It is alleged that the providers and management have gained control of the corporate membership. Because the power to elect the corporate members and the directors is derived from the restated articles of incorporation and articles I and IV of the bylaws, which the corporate members have the sole authority to amend, the providers and management have been able to perpetuate their positions. Section 203 seeks to ensure the equitable control of bcbsm by all interested parties.
To accomplish this purpose, the Legislature eliminated the corporate membership’s sole power to amend the articles and has thereby reduced the possibility that any one group will dominate and control bcbsm. We believe that the means chosen to implement the legitimate public purpose are "reasonable . . . and ... of a character appropriate to [that] purpose . . . .” Thus, we reject bcbsm’s contention that by virtue of § 203 its contract with the state has been impaired within the meaning of the state or federal Contract Clause.
(3) §§205(5), (10), 607, and 608 — Power of the Commissioner Over Lines of Business and Risk Factors, Contingency Reserves, Issuance of New Certiñcates and Rates
Bcbsm next contends that §§ 205(5) and (10), 607, and 608 (which basically give the Commissioner of Insurance approval power over bcbsm’s lines of business, the risk factors assigned to those lines of business, contingency reserves, issuance of new certificates, rates, and rating methods) impair bcbsm’s contract with the state as embodied in 1939 PA 108 and 109, the restated articles of incorporation and the bylaws. Bcbsm asserts that under these new sections the Commissioner of Insurance is now vested with "dictatorial powers over virtually every meaningful aspect of bcbsm’s business.” Bcbsm, however, fails to cite any section or provision of its existing contract with the state that has purportedly been impaired by these new sections. Nor is it clear from a review of the relevant sources which provisions bcbsm is relying upon.
In this light, we disagree with bcbsm’s argument.
Again, the threshold question is whether the challenged provisions substantially impair bcbsm’s existing contract with the state. Under bcbsm’s existing contract with the state, the commissioner is given extensive approval power over contingency reserves, 1939 PA 108, § 11, 1939 PA 109, § 9, issuance of certificates, 1939 PA 108, § 5, 1939 PA 109, § 6, and rates, 1939 PA 109, § 3. See generally Blue Cross & Blue Shield of Michigan v. Ins Comm’r, supra. Moreover, supervisory power is also exercised over risk factors and lines of business. The authority exercised over bcbsm under the above provisions of 1980 PA 350 will be for all intents and purposes coextensive with that exercised under this existing system. Consequently, (1) we are unable to find a substantial impairment, and (2) we recognize that health care corporations have always been subject to extensive regulation. We deem this conclusion so manifest that we need not address the question whether the state has a legitimate purpose and has employed means both reasonable and of a character appropriate to that purpose. See Part 11(B). We reject bcbsm’s claim.
(4) §§ 301(l)-(5), (7) and 305(1) — Corporate Board and Membership Structure
Section 301(l)-(5) establishes the size of the board of directors and the composition thereof which includes four appointees of the Governor. Section 301(7) restricts the right of the corporate body, the incumbent board, the management, and members of each, to participate as such in the selection of the board, allowing participation only to the extent that the individual is a subscriber or to the extent that participation does not involve nomination, endorsement, approval, or confirmation of a candidate or director. Section 301(7) additionally provides that the method of selection of subscriber representatives on the board "shall maximize subscriber participation to the extent reasonably practicable.” Section 305(1) declares that the non-public corporate membership shall be selected in the same fashion as the non-public members of the board as set forth in § 301. That section also states that there shall be two nonpublic members for each non-public director. As to the public members, the four appointed directors are public members, and the Governor is authorized to appoint four additional public members, making a total of eight gubernatorially appointed public members.
As to all of the above sections, bcbsm argues that its contract with the state, consisting of 1939 PA 108 and 109, the restated articles of incorporation, and the bylaws, has been substantially impaired. Again, bcbsm makes a broad statement that "PA 350 deprives bcbsm of the right to select its own directors and corporate members and thereby deprives bcbsm of the fundamental right to select its own management . . . [and that] [t]hese changes substantially impair the object of bcbsm’s charter and deprive bcbsm ... of vested rights thereunder.” Again, however, bcbsm fails to cite to this Court the provisions of its contract with the state that have been purportedly impaired. Nonetheless, for purposes of the discussion that follows, we will assume that bcbsm is referring to: Article V of the restated articles of incorporation, which states that directors shall be chosen in accordance with the bylaws; Article IV of the restated articles of incorporation which states that the members shall be chosen in accordance with the bylaws; and the relevant articles and sections of the bylaws pertaining to the selection of the board of directors and corporate membership. See Articles I and IV of bcbsm’s bylaws.
In any event, we disagree with bcbsm’s contentions.
Although to a certain extent the provisions in question impair bcbsm’s right to select its own corporate management, we do not find this impairment to be substantial.
Under the existing contract with the state, the method of selection of bcbsm’s directors and members were specified in the bylaws, the establishment of which was in the corporate members’ exclusive domain, subject, however, to the approval of the commissioner and the Attorney General. Sections 301(6) and 305(1) of PA 350 state that the authority to establish the method of selection of the non-public directors and members shall be specified in the bylaws, which, in turn, has been placed in the control of the board of directors, subject as before to the Attorney General’s approval. See § 302.
While it is conceivable that under the new act the newly constituted board of directors could again vest the members with the power to select the non-public corporate members and directors, it is also conceivable that the members could be dispossessed of such power by the board of directors. What 1980 PA 350 has in effect done is divest the members of the sole authority they previously possessed to determine the method of selection of bcbsm’s corporate management by transferring the locus of control over the bylaws from the members to the directors. We do not perceive this change to be substantial especially given the fact that bcbsm’s bylaws have always been subject to extensive state regulation. The members took their position with knowledge of the regulatory powers of the state over the corporation’s bylaws.
Bcbsm further contends that 1980 PA 350’s legislatively mandated structure of the board of directors and corporate members has impaired bcbsm’s contractual right to "control its own corporate structure . . . and to thereby control its own corporate destiny.” We assume that by this bcbsm means that it does not have the right to control its destiny because to a significant extent it does not have the right to determine the composition and size of its board and corporate body. While we agree that bcbsm’s right to determine the size and composition of its board and corporate body has been limited, we do not think that such limitation substantially impairs any existing contractual right.
Section 301(1) states that the board shall have thirty:five directors. Article IV of bcbsm’s bylaws provides that the board shall consist of forty-seven members. We fail to see how this substantially impairs the state’s contract with bcbsm. Significantly, the health care industry is and always has been subject to heavy regulation. See Blue Cross & Blue Shield of Michigan v Ins Comm’r, supra. See also Energy Reserves Group, Inc v Kansas Power & Light Co, supra. Supervision of the industry has been extensive and intrusive. Moreover, the provision in question does not divest bcbsm of any previously possessed power, nor does it impede bcbsm’s ability to conduct its affairs. Nor, by the same token, has the basic structure of bcbsm or its board of directors been unreasonably altered. In this light, the mere reduction in the size of the board of directors can hardly be considered a substantial impairment.
A similar analysis is applicable to § 301(2), which authorizes the Governor to appoint four directors, and § 301(3)-(5), which requires that a certain number of directors be chosen from various enumerated groups. Again, it is significant that the health care industry has been heavily regulated. Additionally, § 301(2)-(5) is substantially the same as Article IV of bcbsm’s bylaws. See also 1939 PA 108, § 8; 1939 PA 109, § 2. That article specifies a board composition much the same as that required by § 301(2)-(5).
The only real differences are that under §301 the state is given four appointees as opposed to two under Article IV, and that § 301 mandates a slightly higher percentage of consumer representation on the board than is required under Article IV. We do not perceive either of these differences as crucial. Four appointees on a thirty-five member board as opposed to two on a forty-seven member board cannot substantially change bcbsm’s ability to operate. There are still thirty-one non-public board members, who can, needless to say, override any opposition from the four public members. Hence, we find it difficult to say that bcbsm’s corporate structure has been substantially altered or that the ability of the board to indepen dently manage bcbsm has to any significant degree been impaired.
With respect to the increase in consumer representation, we again perceive the difference as insignificant. On the old board twenty-seven of forty-seven directors represented consumers. On the board established under 1980 PA 350, consumers must occupy approximately twenty-six of the thirty-five positions. While consumer representation has been increased accordingly (in the boards under both laws, consumers are a majority), we are unable to see how this change would substantially impede bcbsm’s ability to manage its affairs. By the same token, we are unable to see how such an increase substantially impairs the corporate structure of bcbsm. Although the composition of the board has been changed, the basic operation thereof has not been substantially impeded.
Section 305(1) is no more intrusive than the sections previously discussed. That section merely requires that the corporate body be twice the size of the board, that the members be selected in the same manner as the directors, and that there be eight government appointees, four of whom must be the appointed directors.
Again, we must keep in mind the fact that this industry has been subject to broad and intrusive regulation. While the size of the corporate body was set at ninety-three under Article I of the bylaws, twice the size of the board established under those same bylaws, we do not perceive the reduction in corporate body size to seventy to be significant for the reasons discussed in connection with the board size. Finally, we note that the state’s authority to appoint eight members to the corporate body rather than the four it was empowered to appoint under Article I of the bylaws does not significantly affect the corporation’s power to govern itself and that, for the reasons discussed in connection with board appointees, we are unable to find any substantial impairment.
Even had we found that §§ 301(l)-(5), (7), and 305(1) substantially impaired bcbsm’s contract with the state, we still would have upheld their constitutionality under the latter part of the balancing test. See Part 11(B). To the extent that it can be argued that §§ 301(l)-(5), (7), and 305(1) impair bcbsm’s contractual interests, those sections rest upon and are prompted by significant and legitimate state interests. See Energy Reserves Group, Inc v Kansas Power & Light Co, supra.
As noted in the preceding section, in recent years bcbsm has been the subject of considerable controversy. There is evidence that bcbsm has been unresponsive to consumers’ interests. Moreover, critics have charged that bcbsm has not been vigorous in its cost containment efforts. The primary reason for these deficiencies is alleged to be that bcbsm has been subject to undue and excessive provider and management influence. Sections 301(l)-(5), (7), and 305(1) were designed to ensure a responsive and accountable corporate membership and board, and to prevent the undue influence of certain groups.
We find these interests both legitimate and significant. Bcbsm has an enormous effect on the lives of the people of this state and on the operation of the state’s business, by virtue of its dominant share of the health care market. Hence, its commitment, accountability, and responsiveness to the people it serves should be unwavering. In this light, we hold that the state has demonstrated both a legitimate and significant interest in securing a membership and board selection and composition that is more representative of the interests to be served.
Finally, we believe that the means chosen to implement these purposes were reasonable and of a character appropriate to the legitimate public purpose noted above. See Energy Reserves Group, Inc v Kansas Power & Light Co, supra; see also Van Slooten v Larsen, supra; Metropolitan Funeral System Ass’n v Ins Comm’r, supra. The Legislature has sought to reduce the ability of providers and management to dominate bcbsm and perpetuate their position by requiring broad-based representation and limiting incumbent members’ right to participate in elections. In addition, the Legislature has sought to set the framework for a more responsive bcbsm by increasing the representation of the individuals bcbsm was designed to serve, the consumers. In seeking these objectives, the Legislature has moved to provide all interested parties with an equitable opportunity to influence the selection process and subsequent managerial policies by providing for the participation of all component groups. While the predominance of management and provider groups in the corporation wás the source of the perceived problem, their participation has not been eliminated, but rather reduced and more closely regulated. Thus, the state has sought to control the root of the problem and, without excluding individuals with an interest in bcbsm’s operations, devise a system to ensure the representation of all interests bcbsm was designed to serve.
We thus determine that with respect to the above provisions there is not an unconstitutional impairment of the public contract as claimed by BCBSM,
(5) §§504(1), 505-513 — Power of the Commissioner Over Provider Reimbursement Contracts
Bcbsm finally asserts that §§ 504(1) and 505-513 of 1980 PA 350, pertaining to regulation of provider reimbursement contracts, unconstitutionally impair its contract with the state as embodied in 1939 PA 108 and 109 by giving the Commissioner of Insurance dictatorial power over bcbsm’s provider contracts and methods of provider reimbursement and by imposing vague and unachievable goals upon bcbsm.
With the passage of 1980 PA 350, the Legislature sought to remedy the crisis of spiraling health care costs by establishing the following goals:
Sec. 504. (1) A health care corporation shall, with respect to providers, contract with or enter into a reimbursement arrangement to assure subscribers reasonable access to, and reasonable cost and quality of, health care services, in accordance with the following goals:
(a) There will be an appropriate number of providers throughout this state to assure the availability of certificate-covered health care services to each subscriber.
(b) Providers will meet and abide by reasonable standards of health care quality.
(c) Providers will be subject to reimbursement arrangements that will assure a rate of change in the total corporation payment per member to each provider class that is not higher than the compound rate of inflation and real economic growth.
Pursuant to 1980 PA 350, a health care corporation, such as bcbsm, negotiates and enters into provider class plans which must at a minimum address the access, quality, and cost goals of § 504(1). The plan is allowed to operate free of government interference for the first two years (three years, forty-five days, if the provider is reimbursed on a prospective basis, i.e., hospitals), §§ 506, 509(1). If after this period of time the commissioner determines that the goals have been substantially met or that failure to satisfy any one of the goals is reasonably excused, bcbsm is permitted to negotiate new plans or continue existing plans for another two years without government involvement, §§ 509, 510. If, however, the commissioner determines the goals have not been satisfied, the commissioner’s power to review and correct any deficiencies in the plan is triggered, §§ 510-513. Bcbsm then has the right to appeal the commissioner’s ruling to an independent hearing officer, § 515. The act provides for greater input and participation by providers and subscribers from the negotiation to the review stages of the provider class plan, §§ 505, 507, 508, 511, and 515.
Under the former enabling acts, 1939 PA 108 and 109, the commissioner’s continuing regulatory authority over bcbsm was limited to approving or disapproving rates for hospital services, not for physician services, according to a "fair and reasonable” standard. See Blue Cross & Blue Shield of Michigan, supra, pp 431-432. By contrast, 1980 PA 350 expands the commissioner’s statutory authority to review rates of physician as well as hospital services and expressly delineates the factors and criteria to guide the commissioner in exercising this power. Additionally, the new act not only empowers the commissioner to approve or disapprove bcbsm’s provider class plans, but also to prepare a provider class plan which meets the § 504(1) goals where the corporation fails to overcome the plan’s deficiencies within a specified time. The commissioner’s proposed plan will then be placed in effect unless bcbsm invokes its right to appeal the commissioner’s ruling to an independent hearing officer. See § 513(2)(a). The statute further provides for judicial review of the hearing officer’s decision. See §§ 501(2), 502(7), and 518.
Although 1980 PA 350 broadens and clarifies the commissioner’s statutory powers from those possessed under 1939 PA 108 and 109 in the above respects, it limits the commissioner’s powers in other respects. For instance, the commissioner cannot exercise these regulatory powers for two years (three years, forty-five days, for hospitals), and, if bcbsm in that time sets up a satisfactory provider reimbursement system, the commissioner has no occasion to exercise these powers at all. This is far short of the bcbsm alleged dictatorial powers of the commissioner.
In light of the above and especially given the fact that bcbsm’s provider reimbursement arrangements at least as to hospital charges have always been subject to the commissioner’s continuing statutory authority, we find that 1980 PA 350’s broadening of the commissioner’s scope of authority over provider class plans does not substantially impair bcbsm’s contract with the state.
Even had we found a substantial impairment, we would nevertheless uphold these sections because they are prompted by a significant and legitimate public purpose and the means chosen are reasonably tailored to achieve the legitimate public purpose. See Part 11(B).
As previously indicated, the provider reimbursement sections of 1980 PA 350 were implemented for the primary purpose of ensuring all subscribers reasonable access to, and reasonable cost and quality of, health care services. The promotion of the health and general welfare of citizens is a matter of unquestionable state concern. See Const 1963, art 4, § 51; W A Foote Memorial Hospital, Inc v City of Jackson Hospital Authority, 390 Mich 193, 209-210; 211 NW2d 649 (1973), quoting from Ecorse v Peoples Community Hospital Authority, 336 Mich 490, 501; 58 NW2d 159 (1953); Birth Control Centers, Inc v Reizen, 508 F Supp 1366, 1386 (ED Mich, 1981). Hence, the purpose behind these provisions of 1980 PA 350 is both a significant and legitimate one.
Further, we believe that the means chosen to implement this public purpose are reasonable and of a character appropriate to that purpose. To support this conclusion, the circuit court found that an estimated $137 million would have been saved, a saving of approximately eight percent, if over the past four years the rate of health care costs had been capped at the rate of real economic growth multiplied by the rate of inflation as provided for in 1980 PA 350. Both parties acknowledge the fact that one of the principal causes of skyrocketing health care costs is over-utilization of services. Although bcbsm does not have control over some of the factors which drive up health care costs, it does have the ability, at least in part, to reduce utilization. It is widely recognized that the health care system does not, and has not, operated as a competitive market. The lack of a competitive market results in less incentive to reduce costs. What 1980 PA 350 attempts to do is provide greater incentives for bcbsm to use its dominant market position to engage in more effective cost containment programs.
As noted earlier, the regulatory structure of 1980 PA 350 is far short of a totally government-controlled system. Rather, it employs means which combine both free market and government intervention systems. Pursuant to 1980 PA 350, bcbsm is given the opportunity to formulate its own cost containment programs in accordance with the goals of the act. Only if bcbsm is unsuccessful in its efforts will the government step in. We find these means to be reasonable and necessary to accomplish the valid public purpose of the act.
For these reasons, we sustain 1980 PA 350’s provider reimbursement regulatory scheme against the challenge on impairment of contract grounds.
D. Conclusion as to Cumulative Effect of Challenged Sections
Thus, having concluded that the challenged sections of 1980 PA 350, when considered separately, do not unconstitutionally impair bcbsm’s existing contract, with the state, we further hold that the cumulative effect of these sections does not amount to a substantial impairment of the public contract here in question.
With respect to §§ 202(l)(d) and 401(2), bcbsm merely misinterpreted the statute; these sections add nothing to any cumulative effect. Sections 203, 301(2)-(5), (7) and 305 relate to the corporate structure and internal affairs of bcbsm. The net practical change effected by these sections is a change in degree, rather than a change in concept. Thus, there is no drastic change in regard to bcbsm’s contract with the state. Sections 205(5), 504(1), 505-513, 607, and 608 relate to the commissioner’s regulation of a health care corporation’s way of doing business. While 1980 PA 350 extends the area of regulation over 1939 PA 108 and 109, the cumulative effect does not take away the corporation’s initiation of its own business practices, but merely empowers the commissioner to regulate a somewhat broader area. The fact is that bcbsm has been subject to past government regulation since its inception. In consideration of these factors, we find that the cumulative effect of all the sections complained of does not create a degree of impairment sufficient to be considered substantial.
Even were we to find a substantial impairment, we would still uphold 1980 PA 350 because it was enacted for a legitimate and significant public purpose, namely "to promote an appropriate distribution of health care services for all residents of this state, . . . and to assure for nongroup and group subscribers, reasonable access to, and reasonable cost and quality of, health care services, in recognition that the health care financing system is an essential part of the general health, safety, and welfare of the people of this state,” § 102(1). Indeed, the Legislature is constitutionally mandated to adopt appropriate measures to safeguard the public health. See Const 1963, art 4, § 51.
Finally, as evidenced by our analyses with respect to the individual sections, the means adopted by the Legislature are reasonably related to the legitimate public purpose of the act. See Part 11(B).
We thus reject bcbsm’s claim that the challenged sections of 1980 PA 350, as a whole, fundamentally alter bcbsm’s existing contract with the state so as to violate the state or federal Contract Clause.
III. Question 2
"II. Does pa 350 deprive bcbsm of liberty and PROPERTY WITHOUT DUE PROCESS OF LAW BY EFFECTIVELY CONVERTING A HERETOFORE PRIVATE CORPORATION INTO A PUBLIC, GOVERNMENTAL CORPORATION?”
Bcbsm attacks 1980 PA 350 on the ground that certain mandatory provisions of the act, in effect, constitute a government takeover of bcbsm by transforming it from a "private” corporation into an agency of the state government in violation of due process of law. The crux of bcbsm’s takeover argument is that:
By PA 350, the Michigan Legislature has charged bcbsm [A] with the responsibility for formulating and managing a health care system for the state under the superintending control of the Commissioner of Insurance. [B] It has created a legislatively mandated board of directors, with some seats guaranteed to various legislatively determined constituencies and others to political appointees. [C] It has removed from bcbsm control over its composition, structure and corporate direction. [D] It has imposed on bcbsm the governmental responsibility of ensuring for all people in the state access to health care benefits at a fair and reasonable cost. [E] The Commissioner of Insurance is given peremptory power and authority over the managerial affairs of bcbsm, controlling: what lines of business it writes; what kinds of certificates it writes; all charges for those certificates; bcbsm’s contracts with its participating providers; and all methods of provider reimbursement. These provisions of 1980 PA 350, when considered en masse, amount to a governmental coup. [Emphasis in the original.]
We reject bcbsm’s argument on the ground that bcbsm’s construction of the act is overblown and unsubstantiated as compared with what the statute actually provides. By examining bcbsm’s allegations line by line against the exact statutory language of the act, the fallacy in bcbsm’s interpretation becomes clear.
[A]
After a thorough perusal of the numerous provisions of the act, we are unable to find any language, nor has bcbsm cited any, which delegates to bcbsm the responsibility for formulating and managing the state’s health care system. We therefore dismiss bcbsm’s first argument on the basis of our analysis under Part 11(C)(1).
[B]
We find bcbsm’s next allegation that 1980 PA 350’s legislatively mandated board of directors has removed from bcbsm control over its board structure and composition without due process of law to be equally unfounded. Bcbsm cites §§ 301(2) and 305(1), which permit the Governor to appoint members to bcbsm’s governing bodies as indicia of a governmental taking. Bcbsm argues that these provisions and the remaining sections of § 301 are onerous and interfere with managerial prerogatives. Hence, bcbsm concludes that there has been a taking without due process of law.
We disagree.
First we note that the mere fact that a regulation imposes a burden or expense upon the corporation, or subjects it to loss or inconvenience, does not make it a taking. See Chesapeake & O R Co v Public Service Comm of West Virginia, 242 US 603; 37 S Ct 234; 61 L Ed 520 (1917); Southern Wisconsin R Co v City of Madison, 240 US 457; 36 S Ct 400; 60 L Ed 739 (1916); Missouri Pacific R Co v City of Omaha, 235 US 121; 35 S Ct 82; 59 L Ed 157 (1914). We do not think that the action taken here constitutes a taking.
The state appointees constitute only a small voice on bcbsm’s governing bodies, and the remainder of the requirements in no sense interfere with managerial discretion. The fact that some members and directors are required to be selected from certain groups is not so onerous as to constitute a taking. To require a membership and board of directors that is more representative of all component groups interested in bcbsm’s operations does not amount to a government takeover of the corporation.
Moreover, for the very reasons discussed in Part 11(C)(4), we find that §§ 301(1X5), (7) and 305(1) are reasonably related to a legitimate legislative objective. See Shavers v Attorney General, 402 Mich 554, 612-613; 267 NW2d 72 (1978). We uphold the constitutionality of those sections as against bcbsm’s due process claim.
[C]
Bcbsm alleges that 1980 PA 350 has effectively removed from bcbsm control over its corporate direction. Specifically, bcbsm argues that by stripping its corporate members of the power and authority they formerly had to amend, adopt, or repeal the bylaws and placing this power in the board of directors, § 302(1) of 1980 PA 350 constitutes a taking of bcbsm’s property without due process of law.
We disagree.
Contrary to bcbsm’s contention, the act does not remove control from bcbsm over its corporate direction, but instead shifts it from bcbsm’s corporate members to its board of directors. While in some sense this can be deemed a loss of the members’ unqualified right to control the corporation, it is clear that losses incident to the lawful exercise of the police power are noncompensable. See Nowak, Rotunda & Young, Constitutional Law (2d ed), pp 483-485; Sax, Takings and the police power, 74 Yale L J 36 (1964). The United States Supreme Court has consistently upheld government regulation which may result in the loss of use or economic exploitation of property of a private owner without requiring compensation where such regulation was justified as promoting the health, safety, morals, or general welfare of the public. See Andrus v Allard, 444 US 51, 64-68; 100 S Ct 318; 62 L Ed 2d 210 (1979); Penn Central Transportation Co v New York City, 438 US 104, 123-129; 98 S Ct 2646; 57 L Ed 2d 631 (1978).
In Penn Central, supra, p 124, the Court identified several factors to determine when a regulatory measure rises to a "taking” in violation of the Fifth Amendment:
The economic impact of the regulation on the claimant and, particularly, the extent to which the regulation has interfered with distinct investment-backed expectations are, of course, relevant considerations. So, too, is the character of the governmental action. A "taking” may more readily be found when the interference with property can be characterized as a physical invasion by government, than when interference arises from some public program adjusting the benefits and burdens of economic life to promote the common good. [Citations omitted.]
Under the circumstances in the instant case, the regulation in question does not amount to a "taking.” The members of bcbsm, unlike stockholders of a corporation, have no "investment-backed expectations” in their unqualified right to control bcbsm. Bcbsm points to no discernible monetary or other equitable interest of the members in bcbsm, which give rise to an investment-backed expectation. While several hospitals and the Michigan Medical Society did advance money for working capital for the predecessors of bcbsm, this money was advanced in the form of a loan and it seems has in fact been repaid. Further, the regulation cannot be characterized as a "physical invasion by government” over bcbsm’s corporate direction. The purpose of this provision transferring control over bcbsm’s bylaws from the members to the directors is to promote the interests of all component groups bcbsm was designed to serve and to reduce the possibility of any one group gaining unassailable dominance over the corporation. We fail to see how this provision constitutes a governmental "taking” of bcbsm’s property.
[D]
Bcbsm’s fourth allegation that the act burdens it with the duty to ensure access to health care benefits at a fair and reasonable cost for all people of the state is another example of bcbsm’s misinterpretation of the applicable statutory language. A proper interpretation of the act indicates that the Legislature intended bcbsm to secure the opportunity for access to health care services at a fair and reasonable price "for all of the people of this state who apply for a certifícate,” § 202(l)(d)(ii). We are unable to discern how this provision imposes upon bcbsm an exclusively governmental function. See Part 11(C)(1).
[E]
We also reject bcbsm’s final allegation that 1980 PA 350 gives the Insurance Commissioner peremptory power over the managerial affairs of bcbsm with respect to what lines of business it writes, types of and rates for subscriber certificates, participating provider contracts, and methods of provider reimbursement. Again, bcbsm presents a distorted view of the actual statutory provisions. Under our interpretation of the act, bcbsm’s managerial power over its lines of business, subscriber certificates, and provider reimbursement contracts has not been preempted by the Insurance Commissioner. Bcbsm still has the power to establish its lines of business, § 205(4), to establish and set rates for subscriber certificates, § 607(1), to enter into provider class plans, § 502(1), and to formulate its methods of provider reimbursement in accordance with the "access,” "quality,” and "cost” goals of the act, § 504(1). The Insurance Commissioner’s authority under 1980 PA 350 with respect to the affairs of bcbsm is regulatory not peremptory.
We note that under 1939 PA 108 and 109, the commissioner exercised regulatory power over issuance of subscriber certificates, 1939 PA 108, § 5, 1939 PA 109, §6, rates of those certificates, 1939 PA 109, § 3, and hospital reimbursement arrangements, 1939 PA 109, § 3. See generally Blue Cross & Blue Shield of Michigan, supra. Moreover, regulatory power was also exercised over lines of business. While in certain respects the commissioner’s regulatory powers over bcbsm have been broadened and clarified under 1980 PA 350, they are for all intents and purposes coextensive with those the commissioner previously possessed under 1939 PA 108 and 109. Management of the corporation, however, continues to be entrusted to bcbsm’s board of directors, subject as always to the regulatory authority of the Insurance Commissioner. See § 301(1); see also Blue Cross & Blue Shield of Michigan, supra, p 429.
Thus, we find bcbsm’s claim that the challenged provisions of 1980 PA 350, in whole or in part, constitute a takeover of bcbsm by transforming it from a "private” corporation into a government entity without due process of law to be completely unsound.
IV. Question 3
"HI. Does pa 350 constitute an unconstitutional DELEGATION OF LEGISLATIVE AUTHORITY TO BCBSM AND OTHER PRIVATE PERSONS?”
Bcbsm further challenges 1980 PA 350 as an unconstitutional attempt by the Legislature to delegate legislative power to bcbsm and private individuals. Bcbsm claims that three areas in the statute permit such a delegation: the alleged directive to bcbsm to establish a statewide health care financing system, the creation of a panel of three actuaries to resolve risk factor disputes, and the appointment of independent hearing officers to settle rate challenges. We find only § 205(6), which establishes the actuary panel, to be constitutionally infirm.
A. Statewide Health Care Financing System
As a threshold matter, bcbsm asserts that the essential purpose of the statute is to thrust upon bcbsm the "legislative task of formulating a health care finance system for all persons in the State of Michigan.” Bcbsm argues that the policy formulation entailed in the establishment of a statewide health care financing program may not be delegated to a private corporation.
However, we may speedily dispose of this delegation challenge for the simple reason that the statute makes no attempt to establish a statewide health program, much less delegate the development and administration of the program to bcbsm. See Part 11(C)(1).
B. Actuary Panel — § 205(6)
Bcbsm next challenges § 205(6), which estab lishes a panel of three actuaries to resolve risk factor disputes. Bcbsm charges that § 205(6) is an unconstitutional delegation of legislative authority in that it lacks adequate standards to guide the panel’s action.
Challenges of unconstitutional delegation of legislative power are generally framed in terms of the adequacy of the standards fashioned by the Legislature to channel the agency’s or individual’s exercise of the delegated power. See, e.g., Osius v St Clair Shores, 344 Mich 693, 698; 75 NW2d 25 (1956). Although for many years this and other courts evaluated delegation challenges in terms of whether a legislative (policymaking) or administrative (factfinding) function was the subject of the delegation, this analysis was replaced by the "standards” test as it became apparent that the essential purpose of the delegation doctrine was to protect the public from misuses of the delegated power. The Court reasoned that if sufficient standards and safeguards directed and checked the exercise of delegated power, the Legislature could safely avail itself of the resources and expertise of agencies and individuals to assist the formulation and execution of legislative policy.
The criteria this Court has utilized in evaluating legislative standards are set forth in Dep’t of Natural Resources v Seaman, 396 Mich 299, 309; 240 NW2d 206 (1976): 1) the act must be read as a whole; 2) the act carries a presumption of constitutionality; and 3) the standards must be as reasonably precise as the subject matter requires or permits. The preciseness required of the standards will depend on the complexity of the subject. Argo Oil Corp v Atwood, 274 Mich 47, 53; 264 NW 285 (1935). Additionally, due process requirements must be satisfied for the statute to pass constitutional muster. State Highway Comm v Vander-kloot, 392 Mich 159, 174; 220 NW2d 416 (1974). Using these guidelines, the Court evaluates the statute’s safeguards to ensure against excessive delegation and misuse of delegated power.
Bcbsm complains that §205(6) contains "absolutely no standards” to guide the actuaries in their determination of risk factors. We generally agree.
(1) The Statute
"Risk factor” is defined in § 205(13)(c) as "the relative probability of loss associated with a given line of business, expressed as a percentage of incurred claims and incurred expenses for a calendar year.” Sections 205(4), (5), and (6) establish a three-part procedure to formulate risk factors.
First, the health care corporation must assign a risk factor for each line of the corporation’s business. Section 205(4) directs that the risk factor "shall be established in accordance with sound actuarial practices. . . .”
Second, the Insurance Commissioner must either "approve” or "disapprove” the factors proposed by the health care corporation, § 205(5). No guidelines are provided to direct the Insurance Commissioner’s response.
Third, if the risk factors are disapproved, a panel of three actuaries "shall determine a risk factor for each line of business,” § 205(6). No further directions are set forth to guide the panel.
The act provides no administrative or judicial review to challenge either the Insurance Commissioner’s or the actuary panel’s decision.
(2) Adequacy of the Standards
In order to properly evaluate bcbsm’s contention that the act provides "absolutely no standards to guide these ad hoc actuaries,” each of the interrelated procedures must be examined.
The only direction given to the health care corporations is that "sound actuarial practices” shall be used. Yet this apparently broad, general directive in fact invokes a body of guidelines.
Determination of risk factors is an integral part of actuarial science. Guidelines to standardize this statistical determination are published by the society of actuaries and the casualty actuarial society. Of course, determination of risk factors is not a mechanical calculation; there is no one correct risk factor because there is no one correct actuarially sound method of computation. See Beard, Pentikainen & Pesonen, Risk Theory (London: Methuen & Co Ltd., 1969); cf. Kosa v State Treasurer, 408 Mich 356, 372-373; 292 NW2d 452 (1980). Nonetheless, given the technical nature of actuarial science and the body of guidelines promulgated by the professional associations, the section provides a set of concrete standards to guide and constrain the health care corporations’ actions.
In contrast, the power delegated to the Insurance Commissioner is completely open-ended. The commissioner is starkly directed to "approve” or "disapprove” the proposed risk factors; the basis of the evaluation is not addressed. In fact, it is impossible to determine even the nature of the Insurance Commissioner’s inquiry — whether the com missioner is deciding (1) that the health care corporation’s proposed risk factors are actuarially sound, or (2) that, although the proposed factors are actuarially sound, a different set of actuarially sound risk factors are preferred by the commissioner.
This ambiguity is central to the dispute; the nature of the inquiry considerably alters the standards required to prevent an abuse of discretion. For instance, if the Insurance Commissioner merely reviews the proposed factors to ensure that they are in accordance with sound actuarial practices, it is unlikely that any further standard is required. If, however, the Insurance Commissioner may reject actuarially sound risk factors proposed by the health care corporation simply because of a preference for alternate risk factors, some criteria must be included to guide the Insurance Commissioner’s preference of one risk factor over another. Without additional standards, the Insurance Commissioner has de facto veto power over the health care corporation’s risk factors. This lack of clarity regarding the Insurance Commissioner’s function permits the Insurance Commissioner to define the authority of the commissioner. Finally, the ambiguous nature of the Insurance Commissioner’s inquiry affects the function of the actuary panel. If the commissioner’s power is confined to vetoing actuarially unsound risk factors, the directive to the panel to establish actuarially sound risk factors, without more, may sufficiently .tailor the panel’s inquiry to pass constitutional muster. On the other hand, it is equally plausible to read the panel’s function as an arbitration procedure: the panel must choose between the factors proposed by the corporation and the Insurance Commissioner, or reject both and choose a third risk factor. If this is the function delegated to the panel, the standards provided are wholly inadequate. The act is completely devoid of any indication why one factor should be preferred over another; no underlying policy has been articulated, nor has the Legislature detailed the criteria to be employed by the panel in making this determination. This complete lack of standards is constitutionally impermissible. Osius v St Clair Shores, supra.
Thus, the lack of standards defining and directing the Insurance Commissioner’s and the actuary panel’s authority renders this dispute resolution mechanism constitutionally defective.
C. Hearing Officers — §§ 514 and 613
Finally, bcbsm argues that the Legislature unconstitutionally delegated authority to the hearing officers who resolve part 5 rate disputes, § 514, and rate filing disputes, § 613, because they are "wholly unaccountable to anyone.” We disagree.
(1) §514
Very briefly, § 514 provides that all appeals under part 5 of the act (which deals with contracts between the health care corporation and health care facilities and professionals) shall be held before an independent hearing officer. The appeals may be brought to review various actions or determinations of the Insurance Commissioner.
The selection of the hearing officers is quite detailed. Section 514 directs the State Court Ad ministrator to compile a list of possible officers who meet certain qualifications: the hearing officer must be a retired circuit court judge, a Michigan resident not involved in the provision of health care services and not an employee or officer of a health care provider or health care corporation or an employee of the state. The hearing officers are randomly selected from the compiled list by the Insurance Commissioner; they serve per appeal.
Bcbsm articulates its challenge to the section:
Basic determinations with respect to provider class plans, which control bcbsm’s contracts and reimbursement arrangements with health care providers, are placed in the hands of hit and run "independent hearing officers” (§ 514) who are again wholly unaccountable to anyone, who are not members of any public body, and who are not removable by any public representative.
We must disagree with bcbsm’s claim. The hearing officers’ fidelity to the statutory role assigned them is monitored in several ways. First, § 514(4) requires the Insurance Commissioner to report to the appropriate legislative standing committees information on the hearing officers’ performance. The data include: the number of appeals heard; the nature of the controversy; the disposition of the appeal; the existence of a judicial appeal, and its result. One may safely assume that the legislative committee will review this information and alter the statute if the hearing officers dLo not act in conformity with the statute.
Second, the list of possible hearing officers is compiled by the State Court Administrator, a person appointed by and thus responsible to the Supreme Court, an elected body. One may assume that the State Court Administrator will thus carefully select the hearing officer candidates and attentively monitor their performance. Also, contrary to bcbsm’s contention, the individuals may be removed from the list of potential hearing officers at the discretion of the State Court Administrator.
Third, the hearing officers’ decisions are not immune from challenge. The statute specifically provides for judicial review of the hearing officers’ decisions, §§ 501(2), 502(7). Section 518 provides:
An appeal from a final determination of an independent hearing officer shall be conducted pursuant to chapter 6 of the administrative procedures act, except that the appeal shall be taken within 30 days after the final determination, upon leave granted, in the court of appeals.
Chapter 6 of the Administrative Procedures Act, MCL 24.301-24.306; MSA 3.560(201)-3.560(206), sets forth the procedures to be followed for direct review by the courts of an administrative decision. The court’s standard of review is carefully delineated:
(1) Except when a statute or the constitution provides for a different scope of review, the court shall hold unlawful and set aside a decision or order of an agency if substantial rights of the petitioner have been prejudiced because the decision or order is any of the following:
(a) In violation of the constitution or a statute.
(b) In excess of the statutory authority or jurisdiction of the agency.
(c) Made upon unlawful procedure resulting in material prejudice to a party.
(d) Not supported by competent, material and substantial evidence on the whole record.
(e) Arbitrary, capricious or clearly an abuse or unwarranted exercise of discretion.
(f) Affected by other substantial and material error of law. [MCL 24.306; MSA 3.506(206).]
This provision ensures that the reviewing court has broad enough authority to rectify a decision of a hearing officer which is repugnant to or in contravention of the statute.
This avenue of judicial review, in conjunction with the Legislature’s express intent to review the hearing officers’ performance and the State Court Administrator’s interest in recommending only qualified individuals, contradicts bcbsm’s assertion that the hearing officers are "wholly unaccountable”; the hearing officers’ decisions will be measured against the statutory requirements to ensure against abuse of the delegated authority.
(2) §613
Finally, bcbsm focuses on § 613 which provides for independent hearing officers to conduct hearings between the health care corporation and the requesting party on whether proposed rate filings meet the requirements of the act. Again, bcbsm alleges that the independent hearing officers are wholly unaccountable. We disagree.
Section 613(1) directs that the independent hearing officer shall be appointed by the Insurance Commissioner, an appointee of the Governor with the consent of the Senate. MCL 500.202; MSA 24.1202. The individual appointee must meet certain criteria:
In appointing an independent hearing officer, the commissioner shall select a person qualified to conduct hearings, who has experience or education in the area of health care corporation or insurance rate determination and finance, and who is not otherwise associated financially with a health care corporation or a health care provider. The person selected shall not be currently or actively employed by this state.
The independent hearing officer must conduct the hearing according to the Administrative Procedures Act, § 613(2). Within thirty days after receipt of the hearing officer’s proposed decision, the Insurance Commissioner shall render a decision which includes a statement of findings, § 613(4). The commissioner’s decision may be reviewed directly by the courts, §615. Thus, the hearing officers’ decisions are filtered through the politically and judicially accountable Insurance Commissioner. This procedure provides sufficient checks on the delegation of legislative power. The Legislature has included adequate safeguards to restrain the hearing officers from abusing or misusing the delegated power.
V. Question 4
"IV. Do sections 203, 206(4), 211, 301(7), 302(1), 305(1), 509(4)(b), 510 and/or 516(2)(b) op pa 350 UNCONSTITUTIONALLY IMPAIR PRIVATE, VESTED CONTRACT RIGHTS BETWEEN BCBSM AND ITS MEMBERS, PARTICIPATING PROVIDERS AND CUSTOMERS?”
Bcbsm also contends that certain sections of 1980 PA 350 unconstitutionally impair the private contract rights between bcbsm and its corporate members, its subscribers, and providers.
We note that the test stated in Part 11(B), for analyzing bcbsm’s impairment of public contract claim is equally applicable for adjudicating this impairment of private contract challenge. See United States Trust Co v New Jersey, 431 US 1, 25-26; 47 S Ct 1505; 52 L Ed 2d 92 (1977).
A. §§203, 302(1)
Bcbsm argues that § 203, which places the power to amend the restated articles of incorporation in the board of directors, impairs the corporate members’ contract with the state and corporation as embodied in 1939 PA 108 and 109 and the restated articles of incorporation. Under 1939 PA 108, § 4, 1939 PA 109, § 5 and Article VIII of the restated articles of incorporation, the corporate members are empowered to amend the restated articles of incorporation. Bcbsm contends that this shifting of authority from the corporate membership to the board of directors operates to impair the members’ contract with bcbsm and the state.
Bcbsm similarly argues that § 302(1), which places the power to adopt, repeal, and amend the bylaws in the board of directors, violates the members’ contract with the state and corporation as embodied in the restated articles of incorporation and the bylaws. Article VII of the restated articles empowers the board of directors to adopt, amend, and repeal the bylaws as provided therein. Article IX of the bylaws states that the board has such power except as to Articles I, II, IV, and IX of the bylaws which can only be amended or repealed by the corporate members. Consequently, bcbsm contends that as to those articles this shifting of authority from the corporate members to the board divests the former of their previously held authority and thereby impairs the corporate members’ contract with the state and the corporation.
In scrutinizing Contract Clause claims under the state and federal constitutions, our first inquiry is whether the enactment operates to substantially impair a contractual relationship. Second, in determining the severity of the impairment, a critical factor is whether the industry has been regulated in the past. Third, if the impairment is minimal, our inquiry ends. Fourth, if, however, we find a substantial impairment, we must ascertain, (a) whether there is a significant and legitimate public purpose behind the regulation and, (b) if so, whether the means adopted are reasonably related to the public purpose. See Energy Reserves Group, Inc v Kansas Power & Light Co, supra, pp 411-412. See also Part 11(B).
As to whether §§ 203 and 302(1) substantially impair the members’ contract with the state and the corporation, we are not convinced that they do. We acknowledge that the corporate members have been divested of the direct power they formerly held to alter the articles and bylaws, and that this is a considerable impairment. Nevertheless, we are unpersuaded that this impairment is substantial where the industry has been state regulated.
It is a fact that bcbsm is and always has been subject to regulation by the commissioner and Attorney General over its articles and bylaws. See 1939 PA 108, §§3-5; 1939 PA 109 §§ 4-6. This regulation has been extensive and intrusive. The members of bcbsm became members with the knowledge that bcbsm has been so regulated. We thus find it difficult to qualify the impairment here as substantial.
Even had we found that §§ 203 and 302(1) operated to substantially impair the corporate members’ contract with bcbsm and the state, we still would have upheld their constitutionality under 4(a) and (b) of our test. To whatever extent §§ 203 and 302(1) impair the corporate members’ contractual interests, the impairment created by those sections rests upon and is prompted by significant and legitimate state interests.
As previously noted in Part 11(C)(4), in recent years bcbsm has been the subject of considerable controversy. The evidence indicates that bcbsm has been unresponsive to consumers’ interests. In addition, critics have charged that bcbsm has not been vigorous in its cost containment efforts. The main reason alleged for these deficiencies is that bcbsm has been subject to undue and excessive provider and management influence. Allegedly, management and provider influence has been primarily fortified in the corporate membership.
The corporate membership under 1939 PA 108 and 109 elects not only the board of directors, but new corporate members as well. See bcbsm’s Restated Articles of Incorporation, Articles IV and V; bcbsm’s Bylaws, Articles I and IV. By thus gaining control of the corporate membership, the providers and management have allegedly been able to improperly perpetuate their positions and effectively control bcbsm in derogation of other interests. Since the power to elect the corporate body and board is derived from the restated articles of incorporation and Articles I and IV of the bylaws, which only the corporate members have the authority to alter, no one has been able to overcome the influence of the providers and management. Sections 203 and 302(1) indicate, first, a legislative determination that it is unwise to vest one body with such control over elections and the power to alter the bylaws and articles and, second, a legislative purpose to change that.
We find that the legislative purpose is both legitimate and significant. Sections 203 and 302(1) operate to reduce the possibility that any one group will dominate bcbsm in the future. Thus, they help to ensure the fair and equitable control of bcbsm by all interested parties. In this light, we hold that the state has demonstrated both a legitimate and significant purpose.
Finally, we believe that the means of implementation chosen were reasonable and of a character appropriate to the legitimate public purpose noted above. The Legislature has sought to reduce the ability of any one group to dominate and control bcbsm. Past experience is said to have shown that one group has been able to accomplish such domination because it was able to gain control of the corporate membership which possessed monopoly power over elections and the right to amend the bylaws and articles. The Legislature has eliminated the corporate membership’s sole power to amend the bylaws and articles and has thereby reduced the opportunity for any one group to control bcbsm. Even if one group were able to again obtain control over the corporate membership, they would be unable to control bcbsm since any authority they possessed could be held in check by the board of directors’ power to amend the bylaws and articles. However, we point out that the Legislature has not removed all of the corporate members’ previously held authority, but merely the right to amend the articles and bylaws. Thus, we think that the means chosen to implement the legitimate governmental purpose are reasonable and of a character appropriate to that purpose.
We thus determine that with respect to the above provisions there is not an unconstitutional impairment of contract as claimed by bcbsm.
B. §§301(7), 305(1)
Bcbsm asserts that the restated articles of incor poration and the bylaws endowed the corporate membership with the authority to select bcbsm’s corporate membership and board of directors. See bcbsm’s Restated Articles of Incorporation, Articles IV and V; bcbsm’s Bylaws, Articles I and IV. Bcbsm further asserts that the articles of incorporation and the bylaws confer those rights upon the corporate members as a contractual right which the state has substantially impaired through the enactment of §§ 301(7) and 305(1).
Section 301(7) restricts the right of the incumbent board of directors, corporate membership, management, and members of each, to participate as such in the board of directors’ selection, allowing participation only to the extent that the individual is a subscriber or to the extent that participation does not involve nomination, endorsement, approval, or confirmation of a candidate or director. Section 305(1) declares that the non-public corporate membership shall be selected in the same fashion as the non-public members of the board as set forth in § 301.
Section 301 establishes the size and composition of the board of directors and provides that the method of selection shall be specified in bcbsm’s bylaws. In addition to the foregoing, § 305(1) states that there shall be two non-public members for each non-public director. As to the public members, the four appointed directors under § 301(2) are also public members, and the Governor is authorized to appoint four additional public members, making a total of eight gubernatorially appointed public members.
Again, the first inquiry here is whether §§ 301(7) and 305(1) substantially impair the members’ contractual relationship with bcbsm and the state.
With respect to § 305(1), we recognize that it has in effect dispossessed the members of the sole authority they previously held to determine the method of selecting bcbsm’s corporate membership since under 1980 PA 350 the method of selection is to be specified in the bylaws which are now in the control of the directors. As noted in the preceding section, bcbsm’s bylaws have always been subject to extensive state regulation. The members acquired their positions with knowledge of this state regulation. In this light, we do not, therefore, find that this impairment of the members’ direct power to control the method of selection to be substantial.
Another aspect of § 305(1) which could in any sense be labeled an impairment of the corporate members’ right to select the corporate body is that portion which authorizes the appointment of eight public members, instead of four under the current system. The difference, however, between the number of appointments formerly authorized and the number now authorized is only four. The corporate body consists of seventy members. See 1980 PA 350, §§ 301(1) and 305(1). We again note that bcbsm has always been subject to broad and intrusive regulation. The members joined bcbsm with this knowledge. We therefore deem the impairment, if any, unsubstantial. In fact, we deem this conclusion so manifest that we need not address the question whether the state has a legitimate purpose and has employed means both reasonable and of a character appropriate to that purpose.
With respect to § 301(7), which limits participation of corporate members, board members, and management in the selection, we are again unpersuaded that a substantial impairment exists. Section 301(7) specifically exempts from its ambit of participation in the election the officer or em ployee of bcbsm who is authorized to serve as a member of the board of directors. See 1980 PA 350, § 301(4). In addition, the corporate members in their capacity as subscribers are permitted to participate in the election to the same extent as any other subscriber. As a matter of fact, corporate members are permitted to participate in the election in any capacity other than as one of the enumerated corporate officials. Finally, we note that even the proscription against participation by members only applies to the "nomination, endorsement, approval, or confirmation of a candidate or director.” See Part X. In view of these limitations, and the fact that the members joined bcbsm with the knowledge that bcbsm has always been subject to broad and intrusive regulation, we are not convinced of the existence of a substantial impairment.
Nevertheless, even if we were convinced that a substantial impairment existed, we would still have upheld the constitutionality of § 301(7) under 4(a) and (b) of our test.
As to 4(a), to the degree that it can be argued that § 301(7) substantially impairs the members’ contractual interests, that section rests upon and is prompted by significant and legitimate state interests. The corporate members of bcbsm are in a powerful position with regard to board elections. They are in a position to sway the election through the use of their corporate titles and the corporate facilities and resources. In an election, the mode of use typically takes the form of endorsement, nomination, approval, or confirmation. In this way corporate members may manipulate the election of a particular candidate, and in return acquire political debts from candidates who are aided by the members’ support. This tends to directly undermine the integrity of the election, and the responsibility of all those concerned for the successful functioning of that process. We think that the state’s interest in preventing this possibility mandates a finding that § 301(7) rests upon and is prompted by a significant and legitimate state interest. See Part X.
Lastly, we find that the means chosen to implement these purposes were reasonable and of a character appropriate to the legitimate public purpose noted above. The Legislature perceived the problem to be the potential for misuse of the corporate members’ position as corporate members in the election. This potential emanated from the position of corporate members as corporate members combined with their active participation in the election. The Legislature has curtailed the members’, as corporate members (instead of as subscribers), ability to actively campaign in those elections, which should reduce the possibility that corporate titles, facilities, and resources will be used to ensure the election of any particular candidate. In employing these reasonable means to achieve its legitimate purpose, however, the state has not unduly restricted the rights of the corporate members. As previously noted, the right of the corporate members to participate in the election has merely been curtailed, not eliminated. Hence, we hold that the means chosen to implement the legitimate governmental purposes are both reasonable and of a character appropriate to that purpose.
We reject bcbsm’s claim.
C .§206(4)
Bcbsm assails § 206(4), which prohibits health care corporations from transacting or marketing insurance in addition to delivering health care, on the ground that it substantially impairs its contractual relationships with those to whom bcbsm has issued insurance.
In the 1950s, bcbsm began to market insurance with its health care services. This was primarily accomplished by having an agent from an insurance company call on bcbsm’s customers with bcbsm’s agents to present a complete package. In the face of an increased demand, in the early 1960s bcbsm entered into an informal agreement with Phoenix Mutual Insurance Company whereby the latter’s agents would accompany bcbsm’s sales representatives to present individual proposals at the same time. By the late 1970s, the arrangement with Phoenix was proving insufficient to meet market demands.
The inability to satisfy market demands led to a series of events that eventually culminated in an arrangement between bcbsm and American Bankers Life Assurance Company (abl), whereby bcbsm’s sales representatives became licensed agents to sell abl insurance in conjunction with bcbsm coverage. Subsequently, in the spring of 1981, bcbsm’s subsidiary acquired a fifty percent interest in Associated Insurance Agency, an existing insurance agency. Associated licensed bcbsm’s sales representative to sell the insurance of abl or other companies in conjunction with bcbsm’s health care coverage. The underwriting company or abl pays standard agency commissions to Associated, which in turn pays agent commissions to bcbsm sales representatives. Apparently, it was felt that it would be more economical for abl to pay a standard commission to Associated rather than maintain a branch office in Michigan. All insurance premiums are paid directly to the insurance company and the company likewise directly underwrites and processes claims. Presently, bcbsm sales representatives who are licensed by the state to engage in the marketing of insurance are authorized to sell group life, accidental death and dismemberment, short- and long-term disability, dependent life, and travel accident insurance along with bcbsm health care coverage.
Bcbsm points out that it currently has 973 groups on a packaged arrangement, whereby bcbsm services the health care, and Associated services insurance. Bcbsm contends that § 206(4)’s prohibition against such arrangements will substantially impair its existing 973 packaging arrangements by extinguishing them. Bcbsm concludes that § 206(4) must be struck down as viola-tive of the Contract Clause.
We disagree.
The health care industry in Michigan has been heavily regulated from its inception. In fact, bcbsm has operated under 1939 PA 108 and 109, which extensively controlled bcbsm’s operations from its inception. Those acts specifically proscribe the execution of a contract, by or on behalf of a health care corporation, which provides "for the payment of cash or other material benefit by that corporation to the subscriber or his or her estate on account of death, illness, or injury, . . . [or is] in any way related to the payment of a beneñt by any other agency ,” 1939 PA 108, §2(1); 1939 PA 109, § 11 (emphasis added). See 1939 PA 108, § 3; 1939 PA 109, §§ 1, 4.
Clearly, the above provisions from 1939 PA 108 and 109 expressly prohibit bcbsm’s actions here. It is axiomatic that "[o]ne whose rights, such as they are, are subject to state restriction, cannot remove them from the power of the State by making a contract about them.” Energy Reserves Group, Inc v Kansas Power & Light Co, supra, p 411, quoting from Hudson Water Co v McCarter, 209 US 349, 357; 28 S Ct 529; 52 L Ed 828 (1908). Bcbsm never had the right to enter packaging contractual obligations, and thus there can be no impairment of contract as to these illegal contracts.
We express no opinion as to the availability or form of relief which may be sought by the 973 groups currently operating under such illegal packaged arrangements. However, we order the trial court on remand to require bcbsm to give each of these groups prompt and adequate notice that such arrangements were entered into without authority.
D. § 211
Bcbsm attacks § 211, which restricts bcbsm’s power to enter into administrative services only contracts (aso), on several grounds. In addition to bcbsm’s claim that this section substantially impairs bcbsm’s private contractual relationships with its aso customers, bcbsm claims that it violates due process and equal protection. Because we find this provision violates bcbsm’s right to equal protection of law, see Part VII(A), we need not address bcbsm’s impairment of private contract claim.
E. §§509(4)(b), 516(2)(b), 510
Bcbsm claims that §§ 509(4)(b), 516(2)(b), and 510 impair existing private contracts between bcbsm and its participating providers by vesting in the Insurance Commissioner the power to determine the share of provider reimbursement costs bcbsm must pay its providers. We quote from bcbsm’s reply brief, wherein it states that:
Bcbsm makes no esoteric claim of right to contract with providers free from appropriate governmental oversight. The fact is, however, that bcbsm has existing participating contracts with providers which cannot be willy-nilly impaired by either the Legislature or the Commissioner of Insurance. Settled authority establishes that vesting the power to annul these contracts in the commissioner impairs ¿he contractual rights of bcbsm visa-vis participating providers._
It is clear from this language that bcbsm is contesting the Insurance Commissioner’s power under §§ 509(4)(b), 516(2)(b), and 510 of 1980 PA 350 only in relation to existing provider contracts at the time the act goes into effect and not to any future contracts bcbsm may enter into after that date. The act, however, specifically provides that "a provider contract or a reimbursement arrangement that was in effect prior to the effective date of this act” is to continue in effect for a period of two years (three years and forty-five days if the provider is reimbursed on a prospective basis) before the commissioner may exercise authority under the challenged sections of the act. See § 509(l)(a).
Therefore, in order for bcbsm to prevail on its impairment of private contract claim as to the provisions in question, we would have to assume that bcbsm’s existing provider contracts will not expire nor be modified within the grace period. The possibility of this occurring is highly remote and too speculative. Because the circumstances of the contracting parties may change before the commissioner is authorized to invoke any powers under 1980 PA 350, there is at the present time no actual controversy as to bcbsm’s impairment of contract claim. We therefore decline to address this constitutional issue given its basis upon an entirely speculative and remote situation. GCR 1963, 797.1(a). See Shavers v Attorney General, supra, 402 Mich 589; Merkel v Long, 368 Mich 1, 13; 117 NW2d 130 (1962).
VI. Question 5
"V. Do sections 104(3), 206(4), 211, 217, 401(7), 414a, 415, 502(l)(b) and/or 607(1) of pa 350 deprive BCBSM OF LIBERTY AND PROPERTY WITHOUT DUE PROCESS OF LAW BY REGULATING BCBSM IN AN ARBITRARY AND DISCRIMINATORY MANNER WHICH BEARS NO REAL AND SUBSTANTIAL RELATIONSHIP TO THE OBJECTS OF PA 350 OR TO THE GENERAL HEALTH AND WELFARE OF THE PEOPLE OF THIS STATE?”
As with bcbsm’s impairment of contract challenge, the central issue underlying its due process challenge is whether the legislation represents a valid exercise of the state’s police power. It has been long recognized that the state, pursuant to its inherent police power, may enact regulations to promote the public health, safety, and welfare. Michigan Canners & Freezers Ass’n, Inc v Agricultural Marketing & Bargaining Board, 397 Mich 337, 343; 245 NW2d 1 (1976); Grocers Dairy Co v Dep’t of Agriculture Director, 377 Mich 71, 75-76; 138 NW2d 767 (1966). Such regulations passed pursuant to the police power carry with them a strong presumption of constitutionality. Shavers v Attorney General, supra, p 613; Michigan Canners, supra, pp 343-344; Grocers Dairy, supra, p 76.
To overcome this presumption, the party challenging the act has the burden to show that no reasonable state of facts can be ascertained which would justify the enactment or, concomitantly, that the legislation bears no reasonable relationship to a legitimate governmental interest. Shavers, supra, pp 613-618; Michigan Canners, supra, pp 343-344.
In Shavers, supra, pp 612-613, this Court articulated the appropriate standard to be used when faced with a due process challenge to Michigan’s no-fault act:
The test to determine whether legislation enacted pursuant to the police power comports with due process is whether the legislation bears a reasonable relation to a permissible legislative objective. See Michigan Canners v Agricultural Board, 397 Mich 337, 343-344; 245 NW2d 1 (1976).
A. §§104(3), 211, 414a, 415, and 607(1)
As mentioned, bcbsm attacks these sections of 1980 PA 350 which restrict bcbsm’s power to enter into aso contracts on three separate constitutional grounds: impairment of private contract, violations of due process, and violations of equal protection. Because we find that these sections violate bcbsm’s right to equal protection of law, see Part VII(A), we need not address bcbsm’s due process argument.
B .§206(4)
Bcbsm attacks § 206(4), which prohibits the packaging of health care services with lines of insurance, as violating due process of law.
We disagree.
In resolving this issue, we must determine whether § 206(4) bears a reasonable relation to a permissible legislative objective.
The life insurance market in Michigan has historically been very competitive, with the largest company today holding only about 9.56 percent of the market. One of the proffered objectives of § 206(4) is to protect the competitive nature of that market. It is feared that bcbsm’s enormous resources and power would be used to destroy the competitive nature of the life insurance market. Eventually bcbsm would monopolize that market much as it dominates the health care market.
The other proffered objective of § 206(4) is to prevent bcbsm from monopolizing the health care market. With its already dominant position, bcbsm could make its services even more attractive through packaging and thereby increase its share of that market.
We find these objectives or interests to be both legitimate and permissible. Free and fair competition is of unquestionable importance. See Arlan’s Department Stores, Inc v Attorney General, 374 Mich 70, 75; 130 NW2d 892 (1964).
We also find that § 206(4) is both rationally and reasonably related to the demonstrated interests. If bcbsm were permitted to enter the life insurance market, there is evidence indicating that bcbsm could potentially capture a position in that market equal to the share it controls in the health care market. This would obviously force out many other insurers or at least substantially reduce their share of the market and thereby reduce competition. Under bcbsm’s present arrangement with abl, bcbsm has already enabled abl to capture a significant share of the life insurance market. Abl ranks 24th out of 323 companies selling such insurance in Michigan. In Oregon, Indiana, Wisconsin, and Utah, where bcbsm has packaging arrangements with abl, in only a few short years abl has captured sizeable portions of the group life insurance market.
With respect to the health care market, it should be noted that life insurance companies are only able to compete with bcbsm by packaging health care coverage with other lines of coverage. If bcbsm were also permitted to package, this advantage held by the insurance companies would be effectively eliminated, and they would be unable to compete with bcbsm.
In accordance with the foregoing discussion, we reject bcbsm’s attack on § 206(4) as being violative of the Due Process Clause.
C .§401(7)
Bcbsm contends that by compelling it to now participate with state-owned psychiatric hospitals, §401(7) of the act violates due process in that it forces bcbsm’s subscribers to subsidize such institutions.
We disagree.
In the past, bcbsm’s refusal to participate with state-owned psychiatric hospitals was based on the ground that those hospitals were taxpayer supported, unlicensed institutions, not subject to need planning restraints and without adequate cost accounting methods, a peer review system, or a community governing board. Bcbsm further justified its policy of nonparticipation on the basis that more than adequate acute care beds were available at private psychiatric facilities to serve the needs of its subscribers and that participation would result in adding substantial costs to its operating expenses.
By enacting § 401(7), the Legislature sought to correct the past discriminatory policies of bcbsm with respect to state-run mental hospitals. Simply stated, § 401(7) requires a health care corporation to accept, as a participating facility, any facility operated by the state or a political subdivision of the state which otherwise meets certain specified criteria for participation. The criteria specified in the act approximate the very reasons stated above for bcbsm’s denial of participation status to state-owned mental hospitals.
We find that the legislative response is reasonably related to the purpose of rectifying the discriminatory practice of bcbsm, which we note was specifically prohibited by the section of the Insurance Code regulating commercial health insurers. Furthermore, this provision does nothing more than assure bcbsm’s subscribers the unrestricted choice of treatment in any hospital which otherwise would qualify for participation, a duty which bcbsm owed its subscribers under the former enabling acts. We therefore sustain this provision on due process grounds._
D. §217
Bcbsm contends that §217, which states that upon dissolution and after the payment of debts the remaining assets shall escheat to the state, constitutes a taking without due process of law. Without knowing if or when bcbsm’s assets will escheat to the state, the matter is too hypothetical or speculative to create an actual controversy. We do not consider this issue. See Shavers v Attorney General, supra, p 589; Merkel v Long, supra, p 13; Evans Products Co v State Board of Escheats, 307 Mich 506, 528-529; 12 NW2d 448 (1943).
E. § 502(l)(b)
Bcbsm finally argues that § 502(l)(b) which restricts "per case participation” by providers annually violates due process of law. There is no concrete proof on the record that this provision will definitely result in the reduction of per case participation claims by twelve and one-half to twenty-five percent, as alleged by bcbsm. The anticipated reaction of physicians to this provision and its effect on bcbsm and its subscribers is too speculative to determine now. Again, because bcbsm has failed to establish an actual controversy as to this issue, we do not address this constitutional challenge. See Shavers v Attorney General, supra, p 589; Merkel v Long, supra, p 13.
In sum, except for §§ 104(3), 211, 414a, 415, and 607(1) relating to asos, which we find violative of equal protection, and §§ 217 and 502(l)(b), which do not constitute an actual controversy, we do not find that any of these sections constitutes a due process violation.
VII. Question 6
"VI. Do sections 104(3), 206(4), 211, 414a, 515 and/or 607(1) of pa 350 deprive bcbsm of the EQUAL PROTECTION OF THE LAWS BY REGULATING BCBSM IN AN ARBITRARY AND DISCRIMINATORY MANNER WHICH BEARS NO RATIONAL RELATIONSHIP TO THE OBJECTS OF PA 350?”
Bcbsm argues that certain statutory classifications of 1980 PA 350 unreasonably and arbitrarily discriminate against bcbsm vis-á-vis its competitors in deprivation of equal protection.
In Shavers, supra, pp 612-613, we observed that the test to determine whether legislation enacted pursuant to the police power comports with equal protection is essentially the same as that for due process. Consequently,
"Under traditional equal protection analysis, a legislative classification must be sustained, if the classification itself is rationally related to a legitimate governmental interest.” [Quoting from United States Dep’t of Agriculture v Moreno, 413 US 528, 533; 93 S Ct 2821; 37 L Ed 2d 782 (1973).]
A. §§104(3), 211, 414a, 415, and 607(1)— Administrative Services Only Contracts
Bcbsm attacks §§ 104(3), 211, 414a, 415, and 607(1), which restrict bcbsm’s power to enter into asos, on the ground that these sections violate bcbsm’s right to equal protection. US Const, Am XIV; Const 1963, art 1, § 2.
The features of the act relevant here to bcbsm’s equal protection challenges are as follows:
1. "Certificate” is defined to include aso contracts, § 104(3)._
2. Health care corporations may not enter into or continue in aso arrangements with groups of less than five hundred subscribers, unless the arrangement was in existence in September of 1980, §211.
3. Health care corporations are required to provide substance abuse and prosthetic device coverage to "certificate” holders. Substance abuse coverage must be provided upon issuance or renewal of a certificate and prosthetic device coverage must be provided on all certificates within twelve months after the effective date of the act, §§ 414a, 415.
4. Health care corporations must submit a copy of any new or revised "certificate” along with proposed rates to the Commissioner of Insurance for approval, § 607(1).
Bcbsm attacks the above provisions only as they apply to aso contracts. It contends that these sections result in a "grossly discriminatory treatment of bcbsm vis-á-vis its competitors.” Furthermore, bcbsm argues that there is no logical or reasonable basis for this disparate treatment, because "aso business practices are virtually identical, whether conducted by bcbsm or commercial insurers.”
We agree.
In resolving bcbsm’s equal protection challenge, we must determine whether the classification itself is rationally related to a legitimate governmental interest.
Sections 104(3), 414a, and 415 combine to mandate that bcbsm include substance abuse and prosthetic device coverage in its aso contracts. There is no such requirement with respect to commercial insurers’ marketing of aso contracts. See MCL 500.5208, 500.5208a; MSA 24.15208, 24.15208(1). See also MCL 500.3425, 500.3609; MSA 24.13425, 24.13609. Sections 104(3) and 607(1) operate to require prior approval of the commissioner before bcbsm enters into an aso arrangement. Again, there is no such requirement for commercial insurers. See MCL 500.5208, 500.5208a; MSA 24.15208, 24.15208(1). Finally, §211 prohibits bcbsm from offering aso contracts to groups of under five hundred employees. Bcbsm’s competitors are permitted to offer aso contracts to groups of five hundred "employees and members.” See MCL 500.5208(2)(c); MSA 24.15208(2)(c). There are generally two and one-half members per employee. Hence, bcbsm’s competitors are allowed to enter into aso contracts with groups of considerably less than five hundred "employees.”
The Attorney General attempts to justify the discriminatory treatment of §§414a and 415 by pointing to need for substance abuse and prosthetic device coverage. We do not doubt the need for such coverage. However, we fail to understand why the need for such coverage is any greater with respect to bcbsm than it is with respect to bcbsm’s competitors. See Hartford Steam Boiler Inspection & Ins Co v Harrison, 301 US 459, 461-463; 57 S Ct 838; 81 L Ed 1223 (1937). The Attorney General offers us no explanation, and we are unable to conceive of one.
The Attorney General, however, goes on to argue that all of the sections are constitutionally sound because the Legislature may approach a problem in a piecemeal fashion. In support of this contention, the Attorney General cites Metropolitan Funeral System Ass’n v Ins Comm’r, 331 Mich 185, 194; 49 NW2d 131 (1951), where this Court stated:
"A State may properly direct its legislation against what it deems an existing evil without covering the whole field of possible abuses. . . . The statute must be presumed to be aimed at an evil where experience shows it to be most felt, and to be deemed by the legislature coextensive with the practical need; and is not to be overthrown merely because other instances may be suggested to which also it might have been applied.” [Quoting Kelly v Recorder’s Court Judge, 239 Mich 204, 215; 214 NW 316 (1927), quoting Whitney v California, 274 US 357, 369-370; 47 S Ct 641; 7 L Ed 1095 (1927).]
We still concur in the foregoing reasoning. Nonetheless, all evidence indicates that the evils associated with asos are the same regardless of who is marketing them. For example, it seems to be conceded that the risk factor varies with the size of the group. It seems that the smaller the group, the greater the possibility that there will be a larger variation in the claims that must be borne by that group. With groups of under five hundred, this fluctuation is most likely. Hence five hundred or more seems to be the optimum size. But if five hundred or more is the optimum size, it is so regardless of who is marketing the asos. This risk factor has no correlation with the discriminatory treatment of bcbsm here. The classification still must have an adequate or reasonable basis. Van Slooten v Larsen, supra, 410 Mich 55-56; Metropolitan Funeral System Ass’n v Ins Comm’r, supra, p 194, quoting Kelly v Recorder’s Court Judge, supra, p 215, quoting Whitney v California, supra, pp 369-370. The Attorney General has failed to present such a basis, and we are unable to think of one.
Moreover, we note that § 211’s requirement that bcbsm not offer aso contracts to groups of under five hundred employees is in fact contrary to the noted facts. Since there are generally two and one- half members per employee, bcbsm is only allowed to contract with groups of considerably larger than five hundred. If five hundred or more is the optimum number, then we see little reason why bcbsm should be permitted to enter aso arrangements only with groups much larger than five hundred.
Next, the Attorney General argues that bcbsm never had the right under the old acts, 1939 PA 108 and 109, to enter into aso arrangements. See 1939 PA 108, § 2(1); 1939 PA 109, § 1. Even assuming that this is true, however, this has no bearing upon bcbsm’s equal protection argument challenging the relevant sections of 1980 PA 350, which allow bcbsm to enter into aso contracts, but under restraints not imposed on bcbsm’s competitors. The state still must treat bcbsm and its competitors equally, unless the classification is rationally related to a legitimate governmental interest. As stated, this it has failed to do.
Finally, the Attorney General attempts to justify § 607(1), which gives the commissioner approval power over bcbsm’s aso contracts, by stating that the commissioner has always had such power. We are unable to locate any provision so empowering the commissioner. In any event, just because the commissioner was so empowered before does not make such power as authorized by § 607(1) any less violative of the Equal Protection Clause.
In sum, we hold that insofar as §§ 104(3), 211, 414a, 415, and 607(1) result in the arbitrary and discriminatory treatment of bcbsm’s aso arrangements, they are unconstitutional.
B. §206(4)
Bcbsm asserts that § 206(4) violates its right to equal protection by forbidding bcbsm to engage in packaging while bcbsm’s commercial competitors are not similarly restricted. Although § 206(4) denies bcbsm the right to package, it is not an unreasonable classification. Bcbsm is a health care corporation and not an insurance company. The state may create separate classifications for regulating various kinds of corporations where the regulation directly relates to the inherent differences between the corporations. See Metropolitan Funeral System Ass’n v Ins Comm’r, supra, pp 193-194 (wherein this Court held that the inherent differences between insurance companies and funeral benefit associations justified the statutory prohibitions on the former and not on the latter).
The restrictions on packaging, unlike those on asos, arise out of the inherent differences between insurance companies and health care corporations. The function of health care corporations is to market health care and not insurance. Packaging here involves the marketing of insurance, whereas asos involve the marketing of health care. Therefore, the differences between insurance companies and health care corporations justify the restrictions on packaging, but not on asos. We thus find that § 206(4) is neither arbitrary nor unreasonable and sustain it on equal protection grounds.
VIII. Question 7
"VII. Do sections 402(7), 404(5), 605 and/or 701(5) OF PA 350 DEPRIVE bcbsm of liberty and PROPERTY WITHOUT DUE PROCESS OF LAW BY PROVIDING FOR ADMINISTRATIVE PROCEDURES LACKING IN FUNDAMENTAL DUE PROCESS GUARANTEES?”
Bcbsm next challenges several sections of 1980 PA 350 on procedural due process grounds. Bcbsm alleges three areas of deficiency — failure to provide an impartial decisionmaker, improper burden of proof, and failure to provide notice and hearing— in several sections.
A. Failure to Provide an Impartial Decisionmaker —§§402(7), 404(5), and 605
Bcbsm asserts that two statutory provisions improperly grant the Insurance Commissioner the authority to review, in a judicial capacity, decisions previously made in a prosecutorial capacity, and that a third section allows the Insurance Commissioner to review judicial decisions by the commissioner. Bcbsm complains that these statutorily assigned dual roles of the Insurance Commissioner violate the corporation’s constitutional guarantee of a fair hearing before an impartial tribunal. Bcbsm challenges the dual functions as inherently defective situations only; no allegation of actual bias is directed at the Insurance Commissioner. We find that these issues present no actual controversy at this time.
Bcbsm alleges that §§ 402(7) and 605 improperly combine prosecutorial and adjudicative functions.
Section 402(6) authorizes the Insurance Commissioner to bring a complaint against the health care corporation upon probable cause that the corporation has violated the act. If an informal conference cannot resolve the dispute, a hearing is held pursuant to MCL 500.2030; MSA 24.12030 and in accordance with the Administrative Procedures Act. MCL 500.2030; MSA 24.12030, part of the uniform trade practices act, directs that "[t]he commissioner or his designate shall preside over the hearing, except that an independent hearing officer shall be designated by the commissioner if requested by the person who is the subject of the proceedings.” If after the hearing the commissioner determines that the health care corporation has violated the act, the commissioner may issue a cease and desist order (§ 402[7])._
Section 605(2) permits the Insurance Commissioner to order a summary suspension or limitation of the corporation’s certificate of authority. The section continues: "The corporation shall have the right to an administrative hearing within 5 days to show why the summary suspension or limitation should be terminated.”
We find nothing in these sections presenting an actual controversy. It is not at all apparent that the same individuals will ever assume both prose-cutorial and adjudicative roles.
The act provides that the Insurance Commissioner may delegate authority. Section 104(5) defines "commissioner” to include "an authorized designee of the commissioner, if written notice of the delegation of authority has been given as provided in section 601.” Thus, it is quite possible that the dual role situation hypothesized by bcbsm will never materialize. This Court declines to address such speculative questions.
Additionally, bcbsm attacks §404(5), complaining that this section improperly allows the Insurance Commissioner to review prior adjudication by the commissioner (as opposed to prosecutorial decisions), again in flagrant violation of the right to an impartial decisionmaker.
Section 404(4) directs the Insurance Commissioner to establish by rule a procedure for informal dispute resolution.
The commissioner shall by rule establish a procedure for determination under this section, which shall be reasonably calculated to resolve these matters informally and as rapidly as possible, while protecting the interests of both the person and the health care corporation. [Emphasis added.]
This statute thus delegates rulemaking author ity to the Insurance Commissioner. Such delegation withstands constitutional scrutiny if sufficient standards are incorporated to direct the agency’s action. Dep’t of Natural Resources v Seaman, 396 Mich 299, 309; 240 NW2d 206 (1976). Here, the Insurance Commissioner is directed to "[protect] the interests of both the person and the health care corporation.” Subsumed under the direction to protect the parties’ "interests” must be the duty to protect the parties’ fundamental due process guarantees which include an impartial decision-maker.
At the present time, because of the injunction, the Insurance Commissioner has not exercised her authority under this statute; she has promulgated no rules to establish an informal dispute resolution procedure. We have no reason to believe that when this power is exercised individual constitutional rights will not be respected. Therefore at the present time there is no actual controversy. See Sullivan v Board of Dentistry, 268 Mich 427, 429; 256 NW 471 (1934).
B. Burden of Proof — § 402(7)
Bcbsm next complains that §§ 402(6) and (7) establish too low a burden of proof upon which the Insurance Commissioner may issue an order regarding statutory violations. Section 402(6) provides that the Insurance Commissioner may bring a complaint against the corporation when the Insurance Commissioner has "probable cause to believe” that the health care corporation has violated the provisions of § 402. Section 402(7) provides that after notice of the complaint is given, a hearing will be held, then continues:
If, after the hearing, the commissioner determines that the health care corporation is violating, or has violated subsection (1), indicating a persistent tendency to engage in conduct prohibited by that subsection, or has probable cause to believe that the corporation is violating, or has violated subsection (2), the commissioner shall reduce his or her findings and decision to writing, and shall issue and cause to be served upon the corporation á copy of the findings and an order requiring the corporation to cease and desist from engaging in the prohibited activity. [Emphasis added.]
Bcbsm argues that the issuance of an order solely on the basis of a finding of probable cause is improper; We agree.
It is generally well established that issues of fact in civil cases are to be determined in accordance with the preponderance of the evidence with the burden of persuasion placed upon the party asserting the claim. McCormick, Evidence (2d ed), § 339, p 793; 30 Am Jur 2d, Evidence, § 1163, p 337; Stone v Earp, 331 Mich 606, 611; 50 NW2d 172 (1951); Martucci v Detroit Police Comm’r, 322 Mich 270, 274; 33 NW2d 789 (1948). In Aquilina v General Motors Corp, 403 Mich 206, 210; 267 NW2d 923 (1978), this Court stated that the same burden of persuasion applies to proceedings before an administrative agency. Accord Cooper, State Administrative Law, p 355.
Proof by a preponderance of the evidence requires that the factfinder believe that the evidence supporting the existence of the contested fact outweighs the evidence supporting its nonexistence. Martucci v Detroit Police Comm’r, supra, p 274.
Under § 402, the Insurance Bureau is authorized to bring a complaint charging bcbsm with a violation of § 402. The Insurance Commissioner must therefore prove its allegations at the subsequent hearing by a preponderance of the evidence. The statute, however, requires only a probable cause standard.
A probable cause determination does not involve the comparing and weighing of facts as required by the preponderance of evidence standard. A probable cause finding requires only facts which would induce a fair-minded person of average intelligence and judgment to believe that the statute was violated. People v Oliver, 417 Mich 366, 374; 338 NW2d 167 (1983). Thus we agree with bcbsm that the statute directs the application of an inappropriate standard in the § 402 administrative proceeding.
C. Failure to Provide Notice or Hearing — § 701(5)
Finally, bcbsm asserts that § 701(5) of the act completely ignores the due process guarantee of notice and an opportunity to be heard. Section 701 allows an existing health care corporation 120 days to amend its articles of incorporation and bylaws and to restructure its board of directors and thereby achieve compliance with the act. The corporation may continue to operate under its old structure during this 120-day grace period. However, if at the completion of the 120 days the. corporation has failed to comply with the act, § 701(5) provides:
If a health care corporation fails to comply with this section the commissioner may issue an order suspending the right and privilege of the corporation to sell or issue new certificates until this section has been fully complied with.
Bcbsm argues that because this section fails to provide for notice and hearing, due process is denied.
However, a statute must be read in its entirety, Metropolitan Council No 23, AFSCME v Oakland County Prosecutor, 409 Mich 299, 317; 294 NW2d 578 (1980), with a presumption of constitutionality. Johnson v Harnischfeger Corp, 414 Mich 102, 112; 323 NW2d 912 (1982); Workman v Detroit Automobile Inter-Ins Exchange, 404 Mich 477, 507-508; 274 NW2d 373 (1979).
Thus, while § 701(5) itself contains no reference to required procedural protections regarding the commissioner’s right to suspend certificates of authority, § 605(1) supplies the necessary procedures with reference to the specific instance involved in § 701. Section 605(1) reads:
Upon due notice and an opportunity for an evidentiary hearing pursuant to the administrative procedures act, the commissioner may suspend or limit the certificate of authority of a health care corporation if the commissioner determines that any of the following circumstances exist:
(c) The health care corporation refuses or fails to comply with this act or with a lawful order of the commissioner. [Emphasis added.]
Thus, when § 701(5) is read in conjunction with § 605(1), due process is fully satisfied.
IX. Question 8
"VIII. Do sections 106(5), 205(4), 205(5), 310(1), 401(1), 503, 504(1), 509(1), 509(4)(b), 510(1), 511(1) and/OR 513(1) OF PA 350 deprive bcbsm of liberty AND PROPERTY WITHOUT DUE PROCESS OF LAW BY IMPOSING UNCONSTITUTIONALLY VAGUE AND ILLUSORY DUTIES ON BCBSM AND THE COMMISSIONER OF Insurance?”
Bcbsm argues that various sections of the act include vague and illusory terms, and thus unconstitutionally deny bcbsm sufficient warning of its duties under the act. For instance, bcbsm challenges § 205(4) which directs:
A health care corporation, for purposes of this section, shall define at least 5 lines of business and shall assign a risk factor to each line of business.
Bcbsm correctly points out that "lines of business” is nowhere defined in the statute, and concludes: "The assignment of risk factors and ultimate determination of bcbsm’s contingency reserves would be greatly altered depending on the meaning attributed to the term 'lines of business.’ ” Bcbsm also specifically challenges the terms: "fiduciary [duty] toward the health care corporation and the subscribers,” § 310(1); "health care benefits,” § 401(1); "address the issue of uniform reporting,” § 503 and "reasonable access, cost and quality” in relation to health care services, §§ 106(5), 504(1), 509, 510, 511, 513.
It is a general principle of constitutional law that statutory language must be sufficiently clear and definite to provide fair warning of proscribed conduct. People v Dempster, 396 Mich 700, 715; 242 NW2d 381 (1976). However, as noted by this Court in People v Howell, 396 Mich 16, 21; 238 NW2d 148 (1976), statutes which do not involve First Amendment freedoms must be examined in light of the facts of the case at hand. The Howell Court cited United States v National Dairy Products Corp, 372 US 29, 32; 83 S Ct 594; 9 L Ed 2d 561 (1963), which further elucidates the problem associated with insubstantial vagueness challenges:
"The delicate power of pronouncing an Act of Congress unconstitutional is not to be exercised with reference to hypothetical cases .... [A] limiting construction could be given to the statute by the court responsible for its construction if an application of doubtful constitutionality were . . . presented. We might add that application of this rule frees the Court not only from unnecessary pronouncement on constitutional issues, but also from premature interpretations of statutes in areas where their constitutional application might be cloudy.” [Quoting United States v Raines, 362 US 17, 22; 80 S Ct 519; 4 L Ed 2d 24 (1960).]
The present statute has not yet brought bcbsm and the Insurance Commissioner into an actual adversarial relationship over the statutory terms. Bcbsm is not yet defending its definition against a conflicting position asserted by the Insurance Commissioner. Bcbsm hypothesizes areas of possible future confrontation, but on the present record we do not have an actual controversy to justify a constitutional analysis.
X. Question 9
"IX. Does section 301(7) of pa 350 deprive BCBSM, ITS DIRECTORS, OFFICERS AND MEMBERS OF GUARANTEED RIGHTS OF FREE SPEECH?”
Bcbsm attacks §301(7) of 1980 PA 350, MCL 550.1301(7); MSA 24.660(301)(7), under US Const, Am I, and Const 1963, art 1, § 5, which guarantee the right of free speech. Bcbsm argues that "[t]his section deprives bcbsm, its directors, officers and corporate members of guaranteed rights of free speech and clearly violates” art 1, § 5 of the Michigan Constitution and the First Amendment of the United States Constitution.
The act vests authority to amend the bylaws in the board of directors (§ 301[1]). It then sets forth the membership of the board, limits the number of provider directors to not more than twenty-five percent (§ 301[3]) and provides that the remaining members shall include representatives of subscriber groups in proportions which fairly represent the total subscriber population of the health care population (§ 301[5]).
Section 301(6) then provides that the method of selection of the directors shall be specified in the bylaws.
Section 301(7) provides that the method of selection of subscribers shall maximize subscriber participation, and that:
The method of selection [established by the bylaws] shall neither permit nor require nomination, endorsement, approval, or confirmation of a candidate or director by the corporate body, the board of directors, or the management of the health care corporation, or any member or members of any of these. This subsection shall not apply to the selection of an officer or employee as a director pursuant to subsection (4). This subsection shall not limit the rights of any director, member of the corporate body, or employee or officer of the health care corporation to participate in the selection process in his or her capacity as a subscriber, to the same extent as any other subscriber may participate.
There are two plausible constructions of subsection (7). The section could be read in conjunction with subsection (5) as precluding the bylaws from permitting or requiring the named groups from promoting or inhibiting the selection of subscriber members, or it could be read more broadly to limit these entities with respect to the selection of all members of the board (other than the public members, § 301[6], and the single officer/employee director authorized in § 3Q1[4]).
Since neither party has briefed this issue, we do not need to resolve which interpretation is correct. Neither view is a direct limitation on any individual, management, or corporate right of expression. Properly viewed, subsection (7) is a limitation on the method of selection to be ultimately adopted by the board of directors in the bylaws; that is, a directive that the selection process may not be impeded by a provision in the bylaws which either requires or permits the named entities to nominate, endorse, approve, or confirm "a candidate or director.” Since the bylaws relating to the selection process have not yet been amended, nor is there a suggestion as to how the board wishes to revise the bylaws, there is no actual case or controversy at this time.
If subsection (7) is subsequently interpreted by the Insurance Commissioner to impose a limitation on corporate expenditures or other expressions of influence which conflicts with the bylaws adopted by the board of directors, then a free exercise challenge would be presented. That, of course, is a wholly speculative matter, to be resolved when a case or controversy is presented. In short, we hold that subsection (7) is not a limitation of expression, but rather a limitation on the method of selection which the board through its bylaws may adopt. We therefore conclude that no cognizable constitutional challenge has here been advanced.
Conclusion
For the reasons more fully discussed in our analyses of the questions certified to this Court, we uphold the constitutionality of the challenged sections of 1980 PA 350 except as follows:
First, we agree that the act is unconstitutional in the following three particulars:
(1) the act’s provision for an actuary panel to resolve risk factor disputes is an unconstitutional delegation of legislative authority in that it lacks adequate standards, § 205(6) (Question 3);
(2) the statutory restrictions on aso contracts violate equal protection of the laws insofar as they result in arbitrary and discriminatory treatment of health care corporations vis-á-vis commercial insurers, §§ 104(3), 211, 414a, 415, and 607(1) (Questions 4, 5 and 6);
(3) the commissioner’s authority to issue a cease and desist order based on probable cause against a health care corporation for noncompliance with the act establishes an improper burden of proof, § 402(7) (Question 7).
Our ruling on these three areas of 1980 PA 350 does not affect the constitutionality of the remainder of the act. Where, as here, the unconstitutional provisions are easily severable, the remainder of the act need not be affected. People v McMurchy, 249 Mich 147, 157-159; 228 NW 723 (1930).
Second, we do not consider whether the act is unconstitutional in the following five particulars because there was no actual case or controversy established:
(1) whether §§ 509(4)(b), 516(2)(b), and 510 impair the private existing contracts between bcbsm and its participating providers (Question 4);
(2) whether §217 relating to bcbsm’s assets es-cheating to the state upon dissolution, and § 502(l)(b), relating to per case participation, deprive bcbsm of due process of law (Question 5);
(3) whether §§ 402(7), 404(5), and 605 fail to provide for an impartial decisionmaker in violation of due process of law (Question 7);
(4) whether §§106(5), 205(4), 205(5), 310(1), 401(1), 503, 504(1), 509(1), 509(4)(b), 510(1), 511(1), or 513(1) impose unconstitutionally vague and illusory duties on bcbsm and the commissioner (Question 8);
(5) whether § 301(7) deprives bcbsm, its directors, officers, and members of free speech (Question 9).
Accordingly, we remand this matter to the trial court with instructions to dissolve the injunction and to take such further action as is consistent with this opinion.
No costs, a public question being involved.
Brickley, Cavanagh, and Boyle, JJ., concurred with Williams, C.J.
Ryan, J., concurred in the result only.
Levin, J.
My principal disagreement with the majority concerns the validity of the provisions of 1980 PA 350 requiring Blue Cross and Blue Shield of Michigan to reincorporate under that act and to thereby transfer control of bcbsm from the members of that corporation, who theretofore elected the directors of bcbsm, to bcbsm subscribers and others who are empowered by that act to elect or appoint seventy-five percent of the directors. I would hold that those provisions effect a taking of "private property” within the meaning of the Constitutions of the United States and of this state and that the failure of the act to provide for the making or securing of just compensation therefor renders those provisions of the act invalid under the Michigan Constitution.
A
The governance issue is primary. If the provisions of Act 350 transforming the governance of bcbsm are valid, it is of less importance whether the other provisions challenged by bcbsm are valid. If the governance of bcbsm can be changed by legislative fiat, then those who would — now or in the future — challenge the validity of other provisions of the act or further amendatory legislation or regulations or orders promulgated by the Commissioner of Insurance or the opinions of the Attorney General regarding the meaning of the act may, by further amendatory legislative decree, find that their tenure is at an end. The rationale of the opinion of the Court means, in effect, that all the members of the bcbsm board serve under the Sword of Damocles at the pleasure of the Legislature and Governor.
B
Bcbsm asserts that implementation of Act 350 would constitute a government takeover of bcbsm, its business, and its property. I agree.
All agree that a purpose of Act 350 is to eliminate control of bcbsm, and hence of its business and properties, by the persons presently in control and to transfer control to others, persons appointed by the Governor and elected by providers and subscribers.
To be sure, there has been no change in legal title. Bcbsm, the corporation, remains the owner of all the assets that it formerly owned. Bare legal title without control, however, might well be meaningless. The law does not necessarily treat the holder of bare legal title as the owner. The person who has the power to possess, use, control, and acquire the property may be treated as the owner.
In the instant case, although the state does not take title to or possession of the assets of bcbsm, it would exercise control by means of a legislative enactment which designates who shall exercise control; bcbsm has in effect become a controlled subsidiary of the State of Michigan.
The state has, in effect, asserted the right to own a majority of the voting interest in bcbsm. The state has arrogated to itself the powers (i) to designate or confer on persons designated by it the power to elect a majority of the directors, (ii) to change the purposes of the corporation, and (iii) upon a dissolution (which its designees could bring about), to have the assets of bcbsm turned over to the state.
All who hold office and power pursuant to Act 350 do so at the sufferance of the Legislature and Governor. Control of bcbsm and of its business and properties is now subject to legislative directive. Having so arrogated to itself the power to control the use of the properties of bcbsm, the properties of bcbsm have ceased to be private property and have, by legislative fiat, become public property.
C
The majority rely on Penn Central Transportation Co v City of New York, 438 US 104; 98 S Ct 2646; 57 L Ed 2d 631 (1978). Suppose the New York Legislature had not passed the air-rights legislation considered in Penn Central, but rather a law stating that the use of the properties known as Grand Central Station shall henceforth be controlled by a committee appointed by the Governor of New York and elected by persons (voting by classes, if you will) who use the station, commuters, long-distance travelers, persons who work and shop there. There would be no change in title, the asset known as Grand Central Station would remain in the name of Penn Central. It would retain the right to receive whatever income was derived. But the use and operation of Grand Central Station would be subject to the directives of the committee appointed pursuant to the legislation. Surely, it could not then be said that Grand Central Station remained private property. The State of New York would surely have been held to have taken Grand Central Station.
So too here. The use and operation of the properties of bcbsm will henceforth be subject to the directives of a committee, called a board of directors, appointed pursuant to Act 350. Although title to the assets and properties of bcbsm remain in its corporate name, that committee, which serves at the sufferance of the Legislature and Governor, will henceforth run bcbsm. It can no more be said that the business and properties of bcbsm remain private property than it could be said that Grand Central Station would have remained private property. The assets and properties of bcbsm will have been taken over by the State of Michigan.
D
The challenged provisions of Act 350 cannot be justified on the basis that the state has taken over control of the bcbsm assets, properties, and business with a view to better serve the purposes for which bcbsm was organized or that bcbsm is organized as a not-for-profit corporation. Conceding that the assets, properties, and business of bcbsm might be subject to fiduciary obligations of some sort, those assets, properties, and business are nevertheless private property. Absent a judicial finding that directors or officers of bcbsm have misused the assets and properties of bcbsm, the state cannot lawfully put bcbsm into receivership.
In focusing on the purpose for which bcbsm was organized and that is a not-for-profit corporation, the Court confuses the purpose for which control or ownership must be exercised with the questions whether control and the assets, properties, and business subject to control are private property and whether the state can purport to separate legal title and control without effectuating a taking of the assets, properties, and business subject to that control. I would hold that it cannot. The assets, properties, and business of a corporation, profit or not-for-profit, are taken if the power to elect a majority of the directors is taken. The power to direct the use and disposition of assets and property and the business are at least a substantial strand, perhaps the core strand, of the property interests in those assets.
Whether the assets, properties, and business of bcbsm and control thereof belong to the members of the corporation or to the corporation or are superimposed with a fiduciary obligation requiring that they be used to further the corporate purpose or the public interest or even the interest of subscribers need not be decided. The central point is that those interests in property are private property, and neither the property interest in control nor the assets, property, or business subject to that control belongs to the state. When the state redistributes control, it has gone beyond mere regulation and has taken both control and the assets, properties, and business subject to control.
Nor is it material that the members would not have the right to use for themselves just compensation paid pursuant to the Takings Clause were it to be paid. Neither would the directors of the United Foundation nor the Kellogg nor Ford Foundations have the right to do so if property of those foundations were to be taken. Surely, the fact that no member or officer of a not-for-profit corporation would have the right personally to use just compensation paid for the taking of property or interest in property respecting the not-for-profit corporation does not justify a court holding that the failure to pay just compensation for the taking of the property of a not-for-profit corporation is harmless error.
In sum, the assets, properties, and business of bcbsm, including control, are private property protected by the Takings Clause. Bcbsm cannot be made a subsidiary of the State of Michigan without exercise of the power of eminent domain.
I
Bcbsm commenced this action seeking a declaratory judgment that Act 350 is unconstitutional. The circuit judge enjoined enforcement of the act and ordered the parties to comply with the original enabling acts under which bcbsm was incorporated, 1939 PA 108 and 109. The controversy is now before us on certified questions of public moment following an evidentiary hearing and the filing by the judge of findings of fact.
In parts III-XIII of this opinion, I consider challenges to provisions of the act including provisions imposing limitations concerning bcbsm provider contracts, marketing practices, and rates charged subscribers. In part III, I set forth my conclusions in summary form. I now turn to a consideration of the fundamental governance issue. _
II
Bcbsm, like most not-for-profit corporations, is organized as a membership corporation. The members generally control the enterprise through the power to elect directors and the powers, generally retained, to perpetuate control by electing new members, adopting and amending bylaws, and amending the articles of incorporation.
Act 350 requires bcbsm to reincorpórate under that act. The act retains the form of a membership corporation, but eliminates the substance by (i) eliminating the powers of members (or of directors elected by members) to elect directors and amend the articles and bylaws, and (ii) providing that seventy-five percent of the directors and members shall be elected or appointed by bcbsm subscribers and other persons who are not now members of BCBSM.
The act provides that the board of directors shall not exceed thirty-five persons. Four of the directors shall be appointed by the Governor. Not more than twenty-five percent may be providers (physicians and hospitals). One may be an officer of bcbsm. The remaining twenty-two directors shall be elected by subscribers. Six of the eight provider directors shall be "as broadly representative of provider classes as possible.” The "method of selection of each category of subscribers . . . shall maximize subscriber participation to the extent reasonably practicable.”
A purpose of this legislation, as set forth in the opinion of the Court, is to reduce or eliminate control of bcbsm by the providers who originally organized bcbsm and who have largely influenced and may still dominate and control bcbsm; and to transfer from the current members of bcbsm to subscribers and providers — elected in the manner provided in Act 350 and not in the manner provided by the articles of incorporation and bylaws of bcbsm — and the persons elected by them and to the four appointees of the Governor the power to control the business of bcbsm.
Because bcbsm — like other not-for-profit corporations — must be operated solely for the not-for-profit purpose for which it was organized, the current members of bcbsm, their successors — the directors they elect — not subscribers or the people —have the established property right to determine how that purpose shall be achieved.
A
The opinion of the Court indicates that the change in the governance of bcbsm is a governmental regulation enacted in the exercise of the “police power” to promote “health, safety, mor als, or general welfare of the public,” and that this "regulation” does not constitute a taking of private property because "[t]he members of bcbsm, unlike stockholders of a corporation, have no 'investment-backed expectations’ in their unqualified right to control bcbsm” and because there has been no " 'physical invasion by government’ over bcbsm’s corporate direction” or "governmental 'taking’ of bcbsm’s property.”
The opinion of the Court does not state why the majority have concluded that the members of bcbsm do not have "investment-backed expectations” other than that bcbsm is a membership, rather than a stock, corporation. Presumably the distinction drawn by the majority rests on something more substantial than whether the interests of the incorporators and the successor members are embodied in a piece of paper called a stock certificate. Because the majority fails to state the basis of the distinction, I am left to surmise that they have concluded either that the members of bcbsm do not have an "investment” in bcbsm or an "expectation” that the Legislature would not eliminate their power to elect directors of their choice, or both.
B
Since the Legislature has never sought to transfer the control of any corporation, including of a membership corporation, from the persons in control to others and, as far as I can determine, this is without precedent in this country, the members of bcbsm had a reasonable and substantial "expec tation” that the Legislature would not eliminate their power to elect the overwhelming majority of the directors.
C
Before turning to the question whether the members of bcbsm had either an "investment” in bcbsm or an "investment-backed expectation,” it should be noted that the United States Supreme Court has said "[tjhere is no set formula to determine where regulation ends and taking begins.” Goldblatt v Town of Hempstead, 369 US 590, 594; 82 S Ct 987; 8 L Ed 2d 130 (1962). Preceding the statement by the Court in Penn Central Transportation Co v City of New York, 438 US 104; 98 S Ct 2646; 57 L Ed 2d 631 (1978), that "the extent to which the regulation has interfered with distinct investment-backed expectations” is a "relevant consideration,” the Court acknowledged that, in deciding whether a regulation will be deemed to be a noncompensable adjustment of the "benefits and burdens of economic life to promote the common good” or a compensable taking, it had engaged in "essentially ad hoc, factual inquiries.” Penn Central, supra, p 124. In holding that a federal regulation requiring public access to a private marina adjoining navigable waters was a taking although the government could have refused to have allowed the dredging that made the marina navigable, the Court said it would not carry the "strict logic” of earlier decisions to their ultimate conclusion, and adverted to the observation of Justice Holmes "in a very different context” that "the life of the law has not been logic, it has been experience.” Kaiser Aetna v United States, 444 US 164, 177, 179; 100 S Ct 383; 62 L Ed 2d 332 (1979). And in Pennsylvania Coal Co v Mahon, 260 US 393, 416; 43 S Ct 158; 67 L Ed 322 (1922), the Court said that because Takings Clause questions are-"questions of degree” they "cannot be disposed of by general propositions.”
Most of the Court’s statements regarding the Takings Clause have been made, as in Pennsylvania Coal Co, Goldblatt, Penn Central, and Kaiser, in cases challenging land use regulations. The question ordinarily is whether a regulation barring a land owner from exploiting some undeveloped aspect of his property — unmined coal in Pennsylvania Coal Co, supra, dredging and pit excavating in Goldblatt, air rights over Grand Central Station in Penn Central, and the privacy of a marina in Kaiser — is a taking.
Act 350 does not seek to preclude the members of bcbsm from exploiting opportunities for changes in the bylaws or control of bcbsm not yet implemented — expectancies not yet exploited — but rather seeks to transfer control of bcbsm, as it has developed as a result of prior exploitations. If the New York Legislature had sought to transfer control of Grand Central Station itself, surely a different result would have been reached in Penn Central.
A closer analogy than air rights over Grand Central Station is the marina in Kaiser. Although, as the Court acknowledged, the government might have barred the dredging of the marina or might have conditioned its approval of the dredging on compliance with various measures appropriate to the promotion of navigation, the body of water resulting from the dredging was private property under Hawaii law and was linked to navigable water by a channel dredged with the consent of the government. The Court said that the " 'right to exclude,’ so universally held to be a fundamental element of the property right, falls within this category of interests that the government cannot take without compensation.” Kaiser, pp 179-180. So too here. The Legislature need not have exempted bcbsm from taxation, but, having done so, it cannot now belatedly exact a power to control bcbsm in exchange for the tax exemption.
D
Although most of the Takings Clause cases concern land use regulations, intangible personal property is property within the meaning of the Takings Clause. See Armstrong v United States, 364 US 40, 44; 80 S Ct 1563; 4 L Ed 2d 1554 (1960), holding that a materialman’s lien was protected property. Nor is it determinative whether there has been a physical occupation of the property (see Pennsylvania Coal Co where the proscription of coal mining involved no physical occupation) or whether the state itself has taken over the property or directly benefited from the regulation. See Loretto v Teleprompter Manhattan CATV Corp, 458 US 419; 102 S Ct 3164; 73 L Ed 2d 868 (1982), holding that a law requiring landlords to allow cable television facilities on property was a taking, and Kaiser, holding that a regulation allowing the public to enter a private marina was a taking. The' absence of a " 'physical invasion by government’ ” or of a "governmental 'taking’ ” in the sense of the state itself taking over bcbsm directly, is not determinative.
E
Bcbsm, it is complained, has excluded from its membership and board of directors representatives of subscribers other than the representatives of large corporate subscribers and large labor unions with the result that small and medium-sized subscribers and senior citizens are unrepresented or inadequately represented and the representatives of providers (hospitals and doctors) dominate bcbsm. In deciding whether the provisions of Act 350 that respond to that complaint by transferring the control of the business of bcbsm now shared by the representatives of providers and the large corporate subscribers and unions to representatives of the Governor and subscribers and providers not represented, is a regulation or a taking, we should bear in mind the admonition of the United States Supreme Court that "a State, by ipse dixit, may not transform private property into public property without compensation . . . .” Webb’s Fabulous Pharmacies, Inc v Beckwith, 449 US 155, 164; 101 S Ct 446; 66 L Ed 2d 358 (1980). We should also have in mind Justice Holmes’ observations in Pennsylvania Coal Co, supra, p 415, that "if regulation goes too far it will be recognized as a taking.” When the regulation reaches "a certain magnitude, in most if not in all cases there must be an exercise of eminent domain and compensation to sustain the act. So the question depends upon the particular facts.” Id., p 413. "We are in danger of forgetting that a strong public desire to improve the public condition is not enough to warrant achieving the desire by a shorter cut than the constitutional way of paying for the change. As we have already said, this is a question of degree — and therefore cannot be disposed of by general propositions. But we regard this as going beyond any of the cases decided by this Court.” Id., p 416.
F
This too goes "beyond any of the cases decided [by the United States Supreme Court]” or any other court except the Maryland Court of Appeals which struck down a statute purporting to transfer control of a corporation formed to act as trustee of an endowment funded for the benefit of a state university to the regents of that university. Board of Regents of the University of Maryland v Trustees of the Endowment Fund of the University of Maryland, 206 Md 559, 569-571; 112 A2d 678 (1955).
G
We may assume, without deciding, that the proposed transformation of the governance of bcbsm is for a public use. If it is not and there has been a taking, then Act 350 is invalid on that ground. We therefore need only decide whether the proposed transformation of the governance of bcbsm is a taking.
H
The property of nonprofit organizations and corporations is private property although the members, directors, and trustees of such organizations are obliged to use the property for the purpose for which the organization or corporation was organized and may not divert the property to their own personal benefit. The property of such an organization or corporation, no less so than the property of a profit corporation, is protected from an uncompensated taking for public use by the Takings Clause.
If the state, through the exercise of the power of eminent domain, purchases the property of a nonprofit corporation, the members and directors of the nonprofit corporation would, upon payment of just compensation for the going business value and other assets of the enterprise, be required to hold the proceeds as trustees to be used for the not-for-profit purpose for which the enterprise was organized.
I
Control of a corporation is a property interest and therefore may not be appropriated by the state and transferred from the persons in control to other persons without the payment of just compensation.
J
I turn to a consideration of whether the rule is different where a nonprofit organization or corporation is involved on the ground that the members do not have an investment in the enterprise.
The present members of bcbsm are in the main the successors in interest of the persons who created the original constituent corporations in 1940 following the enactment of the enabling acts.
One of the constituent corporations, Michigan Hospital Service, was organized with a cash contribution from three hospitals of $10,000, and the other, Michigan Medical Service, with a cash contribution of $16,000 from the Michigan State Medical Society. Without those cash investments and the volunteered labor of countless representatives of hospitals and the medical profession, bcbsm would not have grown as it has. That labor and money is an investment. Just as the person who endowed the corporation founded as a trustee of an endowment fund for the state university in University of Maryland, supra, had a constitutionally protected right and expectancy to choose the trustees and to provide for their succession, so too did the persons who created Blue Cross and Blue Shield, and by their cash contributions and labors made bcbsm constituent corporations and valuable enterprises, so much so that the state would take them over rather than itself create a health care agency of state government.
Ordinarily, neither the members nor directors or trustees of a not-for-profit corporation have a personal financial interest in the property, income, or business of the organization or enterprise. Most members, directors, and trustees serve without any expectation of immediate personal financial gain and with little or no financial commitment other than annual payment of dues or subscriptions to further the purposes of the organization or enterprise along with others who are neither members, directors, nor trustees.
There are countless such voluntary associations, organizations, and enterprises. The reasoning of the Court might permit the Legislature to transfer control of those associations, organizations, and enterprises from the persons who organized them, gave them life, and through their efforts sustained them, to whomever the Legislature chooses to confer that power.
The majority says that this can be done "to promote the interests of all component groups [bcbsm] was designed to serve and to reduce the possibility of any one group gaining unassailable dominance over the corporation.” This analysis would mean that the Legislature could change the governance of the United Foundation, a Michigan nonprofit corporation. The United Foundation, like bcbsm, subsists by reason of contributions made by hundreds of thousands, possibly millions, of persons. Some may think that it would be more equitable if the directors were chosen by small contributors voting as a class electing some of the directors, medium-sized contributors electing another class of directors, and large-sized contrib utors electing still another class of directors, all pursuant to rules and regulations established and administered by a governmental functionary. Some might even think that it would be more equitable if the agencies served by the United Foundation, equivalent in a sense to the providers in the instant case, could also participate in the governance. There seems to be nothing in the Court’s analysis of the Takings Clause which would preclude the Legislature from so transforming the governance of the United Foundation. Auto Club Insurance Association, formerly Detroit Automobile Inter-Insurance Exchange, is a voluntary association which has been dominated for many years by persons who are the successors of those who organized that enterprise. Auto Club, like bcbsm, has been subjected to regulation by the Commissioner of Insurance with regard to some of its underwriting practices. Under the Court’s analysis, the Legislature could by fiat transform the governance of Auto Club, allow the Governor to appoint members to its Board of Governors, and take over the process by which the Governors of the Auto Club are elected so that no one group may continue to exercise "unassailable dominance” of that association, and insureds are adequately represented and have adequate input into the rate structure, the underwriting of risks, and the payment of claims.
Further, (i) the "substantial group purchasers” (Chrysler Corporation [which filed a brief amicus curiae], Ford Motor Company, General Motors Corporation, Michigan Farm Bureau, Michigan Bell Telephone Company, and The Bendix Corporation), each of which corporations have one representative on the board of directors and one additional representative in the membership of bcbsm, and (ii) the unions (the uaw has three directors and three additional members, the afl-cio two directors and one additional member) and (iii) the other large purchasers of bcbsm coverage represented on the board of directors or in the membership (Michigan National Corporation, Ex Cell-0 Corporation, Burroughs Corporation, National Bank of Detroit, Dana Corporation, Crowley, Mil-ner & Company), may have investment-backed expectations resulting from expenditures of money and energy to develop prepaid health care contracts with bcbsm providing the coverage they desire and assurances of continuing good relationships with bcbsm resulting from participation in its membership and board of directors and the influence they may thereby exert.
A principal component of the going business value of bcbsm is its capacity to administer a system of financing and payment for health care services between subscribers and providers on a state-wide basis, at levels of quality established by subscribers and providers, to the extent they influence bcbsm decisions, in competition with whatever level of quality is or would be provided under commercially insured prepaid health care plans. That capacity and going business value is the result of an investment of money and labor and is property of value to the corporate and union users and the providers, whose representatives in the membership and on the board of directors of bcbsm do indeed dominate bcbsm.
I am not now questioning the power of the Legislature to decide upon the manner in which the governance of organizations such as bcbsm, United Foundation, and Auto Club, shall be determined. All three are supported and thrive only because of contributions and payments by hundreds of thousands or millions of persons who may not have an effective voice in the governance of those enterprises. The socialization or democratization — choose your idiom — of such organizations may be in the public interest. That is indeed a legislative not a constitutional question.
K
The opinion of the Court asserts that bcbsm has always been subject to intrusive governmental regulation. In actuality, it has been subject to limited regulation. In Blue Cross & Blue Shield of Michigan v Ins Comm’r, 403 Mich 399; 270 NW2d 845 (1978), this Court said, in effect, that the Commissioner of Insurance had only limited regulatory power. He had no power with regard to physician’s fees, and the only power that we recognized with regard to hospital charges was the power to eliminate charges that would result in waste.
Nor is it true that the original 1939 enabling acts conferred any significant power on the Attor ney General or the Commissioner of Insurance regarding the governance of the Blue Cross and Blue Shield constituent corporations. While the 1939 enabling acts required that the articles of association be submitted to the Attorney General for his examination, they also provided that if he found the articles "to be in compliance with this act, he shall so certify to the Commissioner of Insurance.” The Attorney General thus was not empowered to require provisions such as those contained in Act 350 regarding the distribution of the power of governance of Blue Cross or Blue Shield. Michigan Hospital Service was required to have representation from the public, hospitals, and the medical profession on its board of directors, and the Michigan Medical Service to have representatives of the public and the medical profession on its board. It appears that the Attorney General and the Insurance Commissioner were satisfied that those requirements were complied with by, and therefore mean no more than, a board of directors consisting of between twenty and thirty percent nonproviders for Michigan Hospital Service and less than fifteen percent for Michigan Medical Service.
There was no requirement that those public members be representatives of the subscribers or indeed that they be subscribers.
The 1974 amendments, concerning the merger of the constituent corporations, also provided for representation from the "public, the medical profession, and the participating hospitals . . . ,” The Commissioner of Insurance was given the power to disapprove the plan of merger or consolidation, but only upon designation of those provisions of the proposed plan or merger or consolidation that did not satisfy the requirements of the amendatory act. Provision was also made for judicial review of such disapproval by the Ingham Circuit Court, and the question was narrowed to whether the plan satisfied the requirements of the amendatory act. Clearly, the Commissioner of Insurance, just as the Attorney General, was denied discretion. There is still other language stating that the articles may be amended "with the approval of the Commissioner of Insurance” but it is stated that she may do so in any manner "not inconsistent with the provisions of this act.”
The Legislature thus circumscribed and limited the power of the commissioner and Attorney General to disapprove the provisions of the articles. The statements in the opinion of the Court to the effect that bcbsm has always been subject to intrusive governmental regulation ignore the limitations on the commissioner’s power spelled out in the enabling acts and recognized by this Court in Blue Cross. Indeed, the Court’s analysis or characterization of the history of regulation of bcbsm is inconsistent with the reason why we are here today. If the commissioner or the Attorney General had significant power there would have been no need to enact Act 350. It is because they did not have power that Act 350 was enacted. The Court seeks to justify radical legislation on the basis that there is no substantial change or enlargement of the degree of regulation although the Legislature would have had no occasion to enact Act 350 to bring about no substantial change. The majority cannot justifiably excuse or ignore the challenges of bcbsm on the basis that there is no substantial change.
In light of the foregoing history, it cannot properly be said that the organizers of the bcbsm constituent corporations and of bcbsm and the members thereof should have anticipated that the Legislature might seek to so transform the governance of bcbsm.
Ill
Bcbsm challenges the constitutionality of provisions of Act 350 on the grounds that they impair the obligation of contract, deprive bcbsm of property without due process of law and of the equal protection of the laws, and constitute an unconstitutional delegation of legislative authority.
I conclude that the provision(s) of Act 350 that
(1) Transfer from the present members of bcbsm to bcbsm subscribers and others the power to select the members and the directors of bcbsm, and from the members to the newly constituted board of directors the powers to amend the articles of incorporation and bylaws, and that expand the purposes of the corporation to include providing subscribers "reasonable access to, and reasonable cost and quality of, health care services” and achieving the statutory goals "relative to access, quality and cost of health care services,” that impose on directors a fiduciary obligation to bcbsm subscribers as well as to bcbsm and that provide, upon a dissolution of bcbsm, for the escheat to the state of its assets, are violative of the Due Process Clause;
(2) Provide for a panel of three actuaries to review risk factors disapproved by the Commissioner of Insurance, and provide for the appointment of retired circuit court judges to review disapprovals by the commissioner of provider class plans and other appeals arising under part 5 of the act are invalid because they constitute an unconstitutional delegation of legislative authority;
(3) Impose limitations on bcbsm with respect to administrative services only (aso) contracts different from those imposed on commercial prepaid health insurers are violative of the Equal Protection Clause, and the provisions that impose limitations on bcbsm with respect to packaging life insurance different from those imposed on commercial prepaid health insurers may be violative of the Equal Protection Clause;_
(4) Bars bcbsm from limiting or denying coverage or reimbursement on the ground that services were rendered while the subscriber was in a health care facility operated by the state is valid, but the provision requiring bcbsm to accord participation status to such a health care facility is violative of the equal protection component of the Due Process Clause;
(5) Empower the commissioner to issue a cease and desist order and exact a fine on a finding of probable cause and authorize the commissioner to suspend bcbsm’s certificate of authority summarily without a hearing are violative of the Due Process Clause;
(6) Requires bcbsm to offer to all residents of the state the opportunity to become a subscriber, although somewhat ambiguous, is not facially unconstitutional;
(7) Requires bcbsm to provide an informal procedure for subscriber complaints and requires bcbsm to submit new or revised subscriber certificates to the commissioner for approval is not unconstitutional;
(8) Requires bcbsm to reincorporate under Act 350 is unconstitutional because of the constitutional infirmities in the act.
The question whether the valid provisions of Act 350 are severable and enforceable has not been briefed and should be remanded to the circuit court for briefing and decision. We should retain jurisdiction.
IV
The corporate purposes of bcbsm, which was organized to provide a means of financing payment for health care benefits, are enlarged by the act to impose on bcbsm the corporate obligations
(i) to provide residents of this state and subscribers the opportunity for "reasonable access to, and reasonable cost and quality of, health care services,” and
(ii) to achieve the statutory goals of providing the state with a health care system that assures residents and subscribers such access to health care services with
(a) "an appropriate number of providers throughout this state,”
(b) providers that meet and abide by reasonable standards of health care quality, and
(c) a rate of change in reimbursement "to each provider class” that is not higher "than the compound rate of inflation and real economic growth.”
Bcbsm was organized to provide a means of financing payment for health care services, not to provide health care. Bcbsm is not a provider. It cannot, consistent with the Due Process Clause, be required either
(i) to devote its assets to a business which it does not freely enter, or
(ii) to develop and police a quality health care system with an adequate number of providers who both meet and abide by reasonable standards established by it or by the commissioner or, on appeal, by a retired circuit court judge, and who are willing to accept as compensation remuneration subject to a rate of change in reimbursement that does not exceed "the compound rate of inflation and real economic growth.”
Bcbsm, although the largest prepaid health carrier, does not have a monopoly of the prepaid health care market. It is in competition with the commercial prepaid health insurers.
The state might seek to develop and police a health care system that seeks to establish standards for providers and to control their compensation at levels of service determined by the state. Such legislation might be valid. The state would then have assumed the responsibility for providing and achieving the goals of assuring all residents of the state, or all who are willing and able to prepay for health care services, "reasonable access to, and reasonable cost and quality of, health care services,” "an appropriate number of providers throughout the state,” and that providers "meet and abide by reasonable standards of health care quality” and none are compensated at a rate of change in reimbursement higher "than the compound rate of inflation and real economic growth.”
All prepaid health carriers would, assuming the constitutionality of such legislation, then be prohibited from reimbursing providers at a higher rate and providers would be prohibited from accepting more than the state established level of reimbursement. It would then be the state’s responsibility to police the system.
The burden sought to be imposed on bcbsm would deny it due process of law and the equal protection of the laws. Bcbsm cannot be required to undertake alone to provide health care services to subscribers or residents of this state or to achieve a lower rate of reimbursement and the other goals of the legislation.
V
The act also provides that the directors of bcbsm have a fiduciary obligation to the subscribers of bcbsm as well as to bcbsm, and that, upon a dissolution of bcbsm, its assets shall escheat to the state.
As set forth in part 11(H), upon a dissolution of bcbsm, its properties would be required to be held and used by the members and directors as trustees for the not-for-profit purpose for which bcbsm was organized, and accordingly are not subject to confiscation by escheat.
The fiduciary obligation of bcbsm directors to bcbsm and the fiduciary obligation sought to be imposed by Act 350 on its directors for the benefit of bcbsm subscribers are in conflict. Requiring directors of bcbsm to serve two masters deprives bcbsm of the undivided loyalty of its directors in violation of the Due Process Clause.
Similarly, minutes of meetings of the directors of bcbsm are property which bcbsm may not be required to disclose except for limited purposes.
The foregoing conclusions make it unnecessary to reach bcbsm’s Contract Clause claims.
VI
I agree with the majority that the provisions of the act conferring on three actuaries the power to resolve risk factor disputes constitute an unlawful delegation of legislative power under the cir cumstance that no standard is stated to guide the commissioner in the exercise of the power confided to her with the result that the actuaries are also without guidance.
VII
The provisions of part 5 of the act concerning provider plans also constitute an unlawful delegation of legislative power to the commissioner and the hearing officers. The goals of an "appropriate number of providers,” "reasonable standards of health care quality” and compensation of providers at a rate of change in reimbursement "that is not higher than the compound rate of inflation and real economic growth” coupled with the re quirements that there be "responsible cost controls” that "balance quality, accessibility and costs” are undefined. There are no precedents or guides to limit the exercise of discretion. The ultimate decisional authority is vested in a retired circuit judge. The retired judge-hearing officer is empowered to decide that a provider class plan shall not be retained whereupon the commissioner may suspend or limit bcbsm’s certificate of author ity until bcbsm submits a provider class plan that "the hearing officer determines should be retained.”
The retired judge-hearing officers are not full-time governmental officials; here, in contrast with Detroit v Detroit Police Officers Ass’n, 408 Mich 410; 294 NW2d 68 (1980), there is no standard of comparable wages, hours, or conditions of employment and traditional practices to guide and limit the exercise of discretion. Here there is neither comparability nor tradition because the concept of authorizing one prepaid health carrier or a commissioner of insurance or a retired judge-hearing officer to formulate health care policy for the state to achieve such conflicting goals through the mechanism of controlling the rates of payments by one prepaid health carrier to providers without the involvement of any other prepaid health carrier or the providers is unprecedented.
The concept is further flawed in involving the State Court Administrator. I agree with the majority that the Legislature intended that the State Court Administrator would exercise some discretion in compiling the list of retired judges and would have the power to exclude from the list judges whose performance was regarded as unsatisfactory. This means that the State Court Administrator, a person appointed by and who serves at the pleasure of this Court, would be involved in the selection of hearing officers, thereby cloaking the decision reached by the hearing officer with the imprimatur of this Court’s authority and possibly embarrassing further review by the Court of Appeals or this Court. While retired judges may become hearing officers, this Court should not be involved, however indirectly, in the selection process.
Since the provisions concerning professional health care providers are subject to the invalid appeal procedure they too are unenforceable.
The foregoing conclusions make it unnecessary to reach bcbsm’s Contract Clause claims.
VIII
An aso contract is an arrangement whereby a prepaid health carrier provides an employer who desires to be self-insured with administrative services only for a fee; the prepaid health carrier agrees to treat employees of the self-insured employer as if they were subscribers and to pay their providers and thus assumes the risk that the self-insured employer may not be able to reimburse the prepaid health carrier for expenditures to providers for employees of the self-insured employer. The Insurance Code, accordingly, imposes limitations on such arrangements, but Act 350 imposes more onerous limitations on bcbsm than on commercial prepaid health carriers.
I agree with the majority that the aso limitations set forth in Act 350 deny bcbsm the equal protection of the laws._
IX
Act 350 bars bcbsm from marketing life insurance with bcbsm coverage. Such dual marketing is called packaging and is especially attractive to relatively small employers who thereby reduce the number of their insurance relationships and the time they expend in purchasing insurance coverages'.
Since 1979, bcbsm sales representatives have marketed packages of bcbsm coverage and life insurance underwritten by American Bankers Life Assurance Company of Florida. Bcbsm has no underwriting risk and thus there is no violation of the bcbsm enabling acts.
Bcbsm receives no compensation from abl. Bcbsm sales representatives, however, do receive sales commissions from abl for life insurance sold and bcbsm is able to sell bcbsm coverage that it would not otherwise be able to sell.
It appears that a purpose of this legislation is to protect independent life insurance salesmen from the competition of packaging by bcbsm of health and life insurance. It is not claimed that providing protection from competition to a favored group is itself a legitimate basis for exercise of the police power. It is rather claimed that it is necessary to bar competition to preserve competition; the predicate of that rationale is that bcbsm/abl packaging will ultimately reduce competition in the life insurance market and reduce the number of life insurers who offer prepaid health insurance. That predicate is of doubtful factual content.
The largest life insurers, and there are quite a number in that category, are financial giants, and bcbsm, by comparison, is a financial pigmy. Life insurers are likely to remain in the prepaid health insurance business as long as it is profitable. Be that as it may, there has been adequate experience in this and other states with packaging so that it should now be possible to determine whether there is sufficient substance to the proffered bar-competition-to-preserve-competition rationale to provide a rational basis for the classification. I would remand to the circuit court for further findings thereon.
X
The first sentence of § 401(7) of the act barring bcbsm from limiting or denying coverage to a subscriber limiting or denying reimbursement to a provider on the ground that the service was rendered while the subscriber was in a health care facility operated by the state or a political subdivi sion of this state parallels the provisions of § 2237 of the Insurance Code. This provision thus only imposes on bcbsm an obligation similar to that already imposed on commercial insurers and, therefore, is not violative of the Equal Protection Clause.
The second sentence, however, bars bcbsm from limiting or denying participation status to such a facility. This goes beyond what has been imposed on commercial insurers by requiring bcbsm’s subscribers to pay for a level of reimbursement to the state not required of commercially insured subscribers. The second sentence denies bcbsm and its subscribers equal protection of the laws.
XI
I agree with the majority for the reasons stated by them that the provisions of the act that empower the commissioner to issue a cease and desist order on a finding of probable cause denies bcbsm the equal protection of the laws. I also agree that the provision of the act that permits the commissioner to suspend summarily without a hearing bcbsm’s certification of authority deprives it of due process of law.
XII
I agree with the majority that the provisions of the act that require bcbsm to offer the opportunity to all residents of the state to become subscribers of bcbsm, although somewhat ambiguous, are not facially unconstitutional.
The provisions of the act requiring the commissioner to establish an informal procedure for subscriber complaints and requiring bcbsm to submit new or revised subscriber certificates to the commissioner for approval appear to parallel similar regulation of commercial insurers and are constitutional.
XIII
Because of the fundamental infirmities in Act 350, especially the provisions transferring control of bcbsm from its members to subscribers, providers, and appointees of the Governor, the provision of Act 350 requiring bcbsm to reincorporate under Act 350 is invalid.
The parties have not briefed the question whether the valid provisions of Act 350 are sever-able and may govern bcbsm although it remains incorporated under 1939 PA 108 and 109. The cause should be remanded to the circuit court for briefing, argument, and decision thereon. I would retain jurisdiction.
Justice Riley took no part in the decision of this case.
1939 PA 108 and 109, MCL 550.301 et seq.; MSA 24.591 et seq.; MCL 550.501 et seq.; MSA 24.621 et seq., were to be repealed effective April 3, 1981 by 1980 PA 350.
Ins Comm’r v Blue Cross & Blue Shield of Michigan and Blue Cross & Blue Shield of Michigan v Governor, 412 Mich 944 (1982).
The certified-question rule involved here is GCR 1963, 797.1. It provides, in pertinent part:
".1 From Michigan Courts.
"(a) Whenever the judge or judges of any court, or the officers of any tribunal, from which an appeal of right or otherwise may be taken to the Court of Appeals or to the Supreme Court, has pending before him or them any controlling question or questions of public law involved in a pending case or controversy, and such question or questions are of such public moment as to require early determination according to executive message of the Governor addressed to the Supreme Court, the Supreme Court in its discretion may authorize such judge or officers to certify such question or questions to the Supreme Court with a statement of the facts relevant thereto sufficient to make clear the application of such question or questions, and further proceedings relative to such case or controversy shall thereupon be stayed to such extent as the judge or officers shall by order direct, pending receipt of an answer from the Supreme Court.”
Bcbsm’s brief includes an additional Question:
"X. Does PA 350 violate article 4, section 29 of the Michigan Constitution of 1963 by creating a corporation by special act?”
We do not address Question X, although it is briefed by the parties, since this was not one of the questions certified to this Court by the circuit judge. In City of Gaylord v Gaylord City Clerk, 378 Mich 273, 287, n 1; 144 NW2d 460 (1966), we noted that "[wjhenever this unusual procedure is invoked, the parties should address themselves to the questions as certified.” GCR 1963, 797.1(a).
For an excellent review of the founding of Blue Cross plans in general and Michigan Blue Cross in particular, see Payton & Powsner, Regulation through the looking glass: Hospitals, Blue Cross, and certificate-of-need, 79 Mich L R 203, 214-232 (1980).
See n 1.
MCL 550.309a; MSA 24.599(1) and MCL 550.503b; MSA 24.623(2).
See Circuit Court’s Findings of Relevant Facts, No. 3(a).
See Circuit Court’s Findings of Relevant Facts, No. 3(a).
See Circuit Court’s Findings of Relevant Facts, No. 86.
MCL 550.308, 550.502; MSA 24.598, 24.622; see Circuit Court’s Findings of Relevant Facts, Nos. 73, 75, 95, 96.
See Blue Cross & Blue Shield of Michigan v Ins Comm’r, 403 Mich 399, 418; 270 NW2d 845 (1978).
See Circuit Court’s Findings of Relevant Facts, Nos. 10, 12, 259, citing defendant’s Exhibit 33, State Health Plan for Michigan 1979-1983.
See Circuit Court’s Findings of Relevant Facts, Nos. 3(a), 173, 216.
See Circuit Court’s Findings of Relevant Facts, Nos. 15,18, 245.
See Circuit Court’s Findings of Relevant Facts, Nos. 3(b), (c), (d), (f), 257.
See Circuit Court’s Findings of Relevant Facts, No. 3(e); defendant’s Exhibit 96, "SAS” Senate Analysis Section report on House Bill 4555 (Substitute S-l); see also Hollister & Drake, The Nonprofit Health Care Corporation Reform Act of 1980, 14 U Mich J L Ref 433 (1981); Law, Blue Cross: What Went Wrong? (New Haven: Yale University Press, 1974).
See Hollister & Drake, n 17, for a general discussion of the legislative history surrounding the enactment of 1980 PA 350.
See n 18.
The tension between increased government intervention on the one hand and free market forces on the other as means to achieve containment of health care costs has been the topic of current debate among health care analysts and commentators. See Havighurst, Deregulating the Health Care Industry (Ballinger Publishing Co: Cambridge, Mass, 1982); Yaggy & Anlyan, Eds., Financing Health Care: Competition versus Regulation (Ballinger Publishing Co: Cambridge, Mass, 1982); Lynk, Regulation & Competition: An Examination of "The Consumer Choice Health Plan,” 6 J Health, Politics, Policy & L 625 (1982); A special symposium: Market-oriented approaches to achieving health policy goals, 34 Van L R 849 (1981); Wing & Craige, Health care regulation: Dilemma of a partially developed public policy, 57 NC L R 1165 (1979); Symposium: Health Care: Parts I & II, 35 Law & Contemporary Problems 229, 667 (1970).
The charter of a corporation, whether conferred by special act or under the general incorporation laws, is a contract between the state and the corporation, the corporation and the stockholders, and the stockholders and the state. Bruun v Cook, 280 Mich 484, 491; 273 NW 774 (1937); Harsha v Detroit, 261 Mich 586, 590; 246 NW 849 (1933). We are concerned here with the contractual relation between the state and the corporation. The latter two contractual relations are the subject of our discussion in Part V addressing bcbsm’s impairment of private contracts claims.
Because this balancing approach directs our focus upon the permissible exercise of the state’s police power in resolving the impairment of contract claim to 1980 PA 350, we need not reach the question raised by bcbsm whether the state possessed the reserved power to so modify bcbsm’s 1975 corporate charter. See Conard, Ogders & Scanlon, Corporations and the Michigan Constitution (Constitutional Convention Preparatory Commission, State of Michigan, 1961), p 5, to the effect that "it is becoming increasingly clear that the state’s police power can accomplish everything that the reserved power clause can where the 'public interest’ is concerned.”
Bcbsm provides an inclusive list of those sections of 1980 PA 350 which are claimed to impair bcbsm’s contract with the state. We address ourselves only to those sections of 1980 PA 350 specifically listed in plaintiffs appendix and will not therefore consider bcbsm’s random reference to other sections of 1980 PA 350. For example, bcbsm, in a shotgun approach, mentions 1980 PA 350’s statutory restrictions on packaging, § 206(4), aso arrangements, § 211, per case participation, § 502(l)(b), and mandated subsidization of tax dollar supported and government owned mental health facilities, § 401(7), in connection with its impairment of public contract argument. Because none of these sections appear in plaintiffs appendix, we do not address them under this constitutional challenge.
Moreover, although bcbsm lists in its appendix § 304(1), which mandates that upon the request of a director, a subscriber shall receive a copy of the minutes of one or more meetings of the board, its committee, or the corporate body, as one of many sections which fundamentally alter bcbsm’s contract with the state and also constitute a taking without due process, we do not address this section because whether such a request will ever be made is pure conjecture at this time and, thus, there is no "actual controversy” as to this challenge. See n 50 for discussion of the "actual controversy” requirement.
See Circuit Court’s Findings of Relevant Facts Nos. 471-479; Testimony of Steven Henry, Tr Vol 18 pp 2949-2959; Defendant’s Exhibit 72; bcbsm’s Lines of Business.
We recognize that to some degree the relevant sections of 1980 PA 350 give the commissioner more power than under the former system. For example, under §205(5)(b) the commissioner is now empowered to define additional lines of business, and under § 205(10) the commissioner is empowered to formulate a plan to adjust the contingency reserve to the statutorily mandated level where the corporation is unable to formulate a satisfactory plan after two years. Nevertheless, in light of the commissioner’s extensive approval power under the existing system and the fact that bcbsm has always been subject to broad and intrusive regulation, there is no substantial impairment.
See n 17.
See Circuit Court’s Findings of Relevant Facts, Nos. 3(h), (i); Defendant’s Exhibit 96, "SAS” Senate Analysis Section report on House Bill 4555 (Substitute S-l).
See Circuit Court’s Findings of Relevant Facts, No. 3(a).
For a discussion of these sections in relation to bcbsm’s vagueness challenge see Part IX. .
Bcbsm asserts that it cannot even begin to assess the increased regulatory and administrative expenses it will incur in order to comply with these provisions mandating provider and subscriber input procedures. However, because bcbsm is unable to substantiate this assertion by any concrete proof on the record, we reject it as too speculative.
See Circuit Court’s Findings of Relevant Facts, No. 522.
In the past few years, bcbsm has voluntarily implemented programs which attempt to control the utilization of health care services. Among bcbsm’s cost containment programs is the replacement of the fee-for-service system, a method which in effect rewarded providers for increased utilization, with the prospective reimbursement system for hospitals’ services and the Michigan Variable Fee system for physicians’ services. However, the testimony and the exhibits presented are conflicting as to whether bcbsm has been successful in its efforts to control utilization. See Circuit Court’s Findings of Relevant Facts, Nos. 178,188,192, 196, 205, 206, 216-223.
See Circuit Court’s Findings of Relevant Facts, Nos. 175, 176; Testimony of Professor Paul J. Feldstein, Tr Vol 12, pp 2132-2135.
Bcbsm cites many of the same sections of 1980 PA 350 in relation to its takeover claim as it challenged under its impairment of public contract claim. Because of this, our discussion will inevitably involve a certain amount of overlap. However, to avoid redundancy, we will refer to our previous discussion of these sections where appropriate.
In addition, nearly all the same sections bcbsm lists under its takeover argument of Question 2 are also encompassed under its due process claim of Question 5, with a few exceptions. In fact, Questions 2 and 5 are merely parts of the same due process challenge to 1980 PA 350.
For the commissioner’s statutory authority with respect to a health care corporation’s lines of business, see § 205(5); rates of subscriber certificates, see § 607(3); provider class plans, see §§ 509-513.
See n 24.
See n 35.
As evidence of this delegation, bcbsm primarily relies on § 202(l)(d)(¿7) which directs a health care corporation to include in its articles of incorporation a provision assuring all subscribers "reasonable access to, and reasonable cost and quality of, health care services.”
Bcbsm also alludes to many of part 5 of the act’s provisions regarding contracts between bcbsm and health care facilities and professionals. However, these sections’ references to reasonable cost, quality, and access have no bearing on the creation vel non of a health care system to encompass the entire state. The articulated goals only apply to bcbsm’s relationship with its subscribers.
Bcbsm further alleges that § 205(6) delegates legislative policy-making power to unaccountable private persons. However, our analysis of the standard’s challenge obviates the need to address bcbsm’s accountability argument.
Section 205(5) provides:
"Within 30 days after receipt of the risk factors filed pursuant to subsection (4), the commissioner shall do 1 of the following:
"(a) Approve the factors and proceed under subsection (7).
"(b) Define 1 or more additional lines of business, transmit the definitions to the health care corporation, and request that the corporation establish risk factors for those additional lines. . . .
"(c) Disapprove the factors, and proceed under subsection (6).”
We note that the requirement of actuarially sound practices is not included in § 205(5). However, a reasonable reading of the act as a whole warrants the incorporation of the requirement. It is unrealistic to expect the Legislature to require actuarially sound risk factors of the health care corporation, but to omit this practical, and fiscally sound, requirement with regards to the Insurance Commissioner and the actuary panel.
Nor does the defendant offer any suggestion. In fact, defendant agreed at one hearing that the section was unconstitutional.
We note that bcbsm’s use of the phrase "and/or” in this certified question and the succeeding questions 6 through 8, Parts VII-IX, does not necessarily require us to address the cumulative effect of the particular sections challenged as to each question since bcbsm does not specifically argue this point in its brief. Rather, we take this phrase to mean that some or all of the challenged sections may be unconstitutional but we need not consider whether cumulatively they are constitutionally infirm. Only with respect to questions 1 and 2, Parts II and HI, does bcbsm make this cumulative effect argument in its brief.
We do not consider for purposes of determining whether there is a case or controversy the fact that the corporate members as such are not a party to this suit.
Bcbsm does not make this argument with respect to § 301(l)-(5).
"Packaging refers to an arrangement whereby a subscriber group purchases related lines of insurance, such as group life insurance, from a single representative.” See Circuit Court’s Findings of Relevant Facts, No. 301.
See Circuit Court’s Findings of Relevant Facts, Nos. 311-313.
See Circuit Court’s Findings of Relevant Facts, Nos. 313-338.
Section 509(4)(b) provides, in pertinent part:
"The commissioner shall give weight to each of the goals provided in section 504, shall not focus on 1 goal independently of the other goals of the corporation, and shall assure that no portion of the corporation’s fair share of reasonable costs to the provider are borne by other health care purchasers.”
Section 516(2)(b), the hospital costs counterpart of § 509(4)(b), provides:
"(b) No portion of the health care corporation’s fair share of hospitals’ reasonable financial requirements shall be borne by other health care purchasers. However, this subdivision shall not preclude reimbursement arrangements which include financial incentives and disincentives.”
Section 510 sets forth the commissioner’s review power, which by reference includes consideration of the above two provisions, and states, in relevant part:
"(1) After considering the information and factors described in section 509(4), the goals of a health care corporation as provided in section 504, and the objectives contained in the provider class plan, the commissioner shall determined [sic] 1 of the following:
"(a) That the provider class plan achieves the goals of the corporation as provided in section 504.
"(b) That although the provider class plan does not substantially achieve 1 or more of the goals of the corporation, a change in the provider class plan is not required because there has been competent, material, and substantial information obtained or submitted to support a determination that the failure to achieve 1 or more of the goals was reasonable due to factors listed in section 509(4).
"(c) That a provider class plan does not substantially achieve 1 or more of the goals of the corporation as provided in section 504.”
This case is before the Court as certified questions from a declaratory judgment action. The certified question rule, GCR 1963, 797.1, requires "a pending case or controversy.” The declaratory judgment rule, GCR 1963, 521.1, requires "a case of actual controversy.” The cases applying these standards treat the terms similarly. See Foote Memorial Hospital v Jackson Hospital Authority, 390 Mich 193, 228-233; 211 NW2d 649 (1973) (Levin, J., dissenting in part and concur ring in part) (certified question); Shavers v Attorney General, 402 Mich 554, 588-589; 267 NW2d 72 (1978) (declaratory judgment).
See Circuit Court’s Findings of Relevant Facts, Nos. 306-309, 322-323, 348-353.
See Circuit Court’s Findings of Relevant Facts, Nos. 309-310, 344-347.
See Circuit Court’s Findings of Relevant Facts, Nos. 306-309, 322-323, 348-353.
See Circuit Court’s Findings of Relevant Facts, Nos. 352-353.
See Circuit Court’s Findings of Relevant Facts, No. 310.
See Circuit Court’s Findings of Relevant Facts, Nos. 368-370, 378.
Section 401(7) provides in relevant part:
"To qualify for participation and reimbursement, a facility shall, at a minimum, meet all of the following requirements, which shall apply to all similar facilities:
"(a) Be accredited by the joint commission on accreditation of hospitals.
"(b) Meet the certification standards of the medicare program and the medicaid program.
"(c) Meet all statutory requirements for certificate of need.
"(d) Follow generally accepted accounting principles and practices.
"(e) Have a community advisory board.
"(f) Have a program of utilization and peer review to assure that patient care is appropriate and at an acute level.
"(g) Designate that portion of the facility which is to be used for acute care.”
Insurance Code, MCL 500.2237; MSA 24.12237 added by 1961 PA 133.
MCL 550.503; MSA 24.623; see also Blue Cross & Blue Shield of Michigan, supra, pp 454-455 (Levin, J., dissenting).
Administrative Services Only (aso) contracts "refer to an arrangement whereby a health care coverage customer elects to be self-insured and pays the actual cost of claims, plus an administrative fee, instead of a flat insurance premium.” See Circuit Court’s Findings of Relevant Facts, No. 261.
US Const, Am XIV; Const 1963, art 1, § 17.
In Sullivan v Board of Dentistry, supra, the Court dismissed plaintiff’s action seeking a declaration that the statute delegating to the Board of Dentistry the power to promulgate rules governing the practice of dentistry was unconstitutional. The Court held that the case presented no actual controversy, explaining:
"No rules or regulations have thus far been promulgated by the board, nor is it shown that any have been submitted to the attorney general to establish their legality. It is not to be presumed that the board will adopt any rules and regulations for the practice of dentistry that do not meet the test of constitutionality. It is not our duty to pass on moot questions or abstract propositions. As no unconstitutional rule has been pointed out, the presumption of the constitutionality of the act remains.”
Accord Evans Products Co v State Board of Escheats, 307 Mich 506, 529; 12 NW2d 448 (1943). Likewise, bcbsm’s challenge to § 404(4) poses the same type of hypothetical premature issue.
In contrast, bcbsm’s challenge that the actuary panel has been unconstitutionally delegated legislative power (see Part IV[B]) does not present a hypothetical issue. If the act had merely permitted the Insurance Commissioner to develop regulations to guide an inquiry, we would have presumed that the commissioner would act constitutionally and judged the issue premature.
However, the delegation challenge is more concrete. The Insurance Commissioner is given an open, unrestricted grant of authority to approve or disapprove the proposed risk factors. The Legislature must provide some standards or policy articulation, even if quite minimal, in order to constitutionally delegate power. No agency action can rectify this constitutional defect. Thus, the issue is not premature; an actual controversy is presented.
Bcbsm frames its argument in terms of a denial of due process. However, plaintiff fails to demonstrate the constitutional underpinnings of this claim: Therefore, rather than address this claim as one of constitutional dimension, we will consider it as a purely eviden-tiary question.
Although the Court is not presented with an actual § 402(6) determination based upon probable cause at this time, we nonetheless find this issue to be an actual controversy. The statute sets forth a burden of proof which is blatantly incorrect; no further development of facts is necessary to expose the problem; no action of the Insurance Commissioner could erase this incorrect burden of proof from the statute.
Bcbsm also briefly alludes to possible notice and hearing deficiencies with regard to § 605(2), which provides that upon a finding "that the public health, safety, or welfare requires emergency action” the Insurance Commissioner may order a summary suspension or limitation of a certificate of authority. The section also states: "The corporation shall have the right to an administrative hearing within 5 days to show why the summary suspension or limitation should be terminated.”
Bcbsm’s full discussion of its challenge to § 605(2) reads:
"If the commissioner finds that 'emergency action’ is required, he/ she can summarily suspend bcbsm’s certificáte of authority, without notice or hearing.” (Emphasis in original.)
The short answer to this claim is that due process does not require notice and hearing prior to deprivation of a property right in every case. Miller v Dep’t of Treasury, 385 Mich 296; 334; 188 NW2d 795 (1971); Rockwell v Crestwood School Dist Board of Education, 393 Mich 616, 633; 227 NW2d 736 (1975); 1 Davis, Administrative Law, § 7.08, pp 438-444. In Miller, this Court explained:
" ' "Discretion of any official may be abused. Yet it is not a requirement of due process that there be judicial inquiry before discretion can be exercised. It is sufficient, where only property rights are concerned, that there is at some stage an opportunity for a hearing and judicial determination. ...” (Emphasis added.)’” Quoting Ewing v Mytinger & Casselberry, Inc, 339 US 594, 599; 70 S Ct 870; 94 L Ed 1088 (1950).
Under §605(2) summary action is prompted by an emergency situation; the action is reviewed in an adversarial hearing within five days. While future application of this statute might expose latent deficiencies, in the present posture we find no due process violation.
Subsection (4), MCL 550.1301(4); MSA 24.660(301X4), authorizes not more than one officer or employee of the health care corporation to serve as a voting or nonvoting director.
As set forth in n 24 and the accompanying text, there is no need in the instant case to reach the question whether the taking is for a public use.
Fifth Amendment of the Constitution of the United States as applied to the states through the Fourteenth Amendment. See Webb’s Fabulous Pharmacies, Inc v Beckwith, 449 US 155, 160; 101 S Ct 446; 66 L Ed 2d 358 (1980).
Const 1963, art 10, § 2.
The remedy question, see San Diego Gas & Electric Co v City of San Diego, 450 US 621; 101 S Ct 1287; 67 L Ed 2d 551 (1981), need not be addressed because bcbsm is not seeking compensation for an inverse condemnation. The state has not offered to pay compensation, and the Michigan Constitution, in contrast with the Fifth Amendment of the Constitution of the United States, requires that before private property is taken for a public use just compensation therefor must be "first made or secured in a manner prescribed by law.”
A parent corporation does not directly own the assets of a subsidiary corporation; it nevertheless is in control through the ownership of a majority of the capital stock.
It has been suggested at conference that bcbsm does not have standing to raise the issue of the members’ loss of control, that they alone can raise this issue, and that the failure of any member to join in the complaint forecloses a decision predicated on member loss of control. It is now established that majority stockholders of a profit corporation hold the property interest in control for the benefit of the corporation and minority stockholders. Henn, Corporations (2d ed), § 188, pp 490 if. On the same principle, the property interest in control of a not-for-profit corporation belongs to the corporation and possibly all the members, those in the minority as well as those in the majority. Further, under the circumstances that this litigation has been pending for a number of years and the Legislature and the people need a decision on the fundamental takeover issue and the Attorney General does not contest the standing of bcbsm to raise the takeover issue, the Court should decide it on the merits. Otherwise that fundamental issue would remain undecided awaiting still further litigation.
MCL 550.301; MSA 24.591, MCL 550.501; MSA 24.621.
GCR 1963, 797.1.
MCL 450.117 et seq.; MSA 21.118 et seq.
MCL 550.302-550.303; MSA 24.592-24.593, MCL 550.501; MSA 24.621, MCL 550.504; MSA 24.624.
MCL 550.1701; MSA 24.660(701).
The validity of a self-perpetuity board of directors is not in issue and I express no opinion thereon.
"Sec. 301. (1) The property and lawful business of a health care corporation existing and authorized to do business under this act shall be held and managed by a board of directors to consist of not more than 35 members ....
"(2) Four voting members of the board shall be representatives of the public appointed by the Governor by and with the advice and consent of the senate.. . .
"(3) The board of directors shall consist of not more than 25% provider directors. In addition to physician and hospital provider directors, not less than 1 provider director shall be a registered professional nurse who shall be representative of licensees under part 172 of Act No. 368 of the Public Acts of 1978, as amended, being sections 333.17201 to 333.17242 of the Michigan Compiled Laws, and not less than 1 provider director shall be representative of the provider whose services, in the calendar year immediately preceding the effective date of this act in the case of an existing health care corporation, or, in the calendar year immediately following incorporation in the case of a newly-formed health care corporation, generated the largest number of benefit claims received by the corporation from its subscribers. Other provider directors shall be as broadly representative of provider classes as possible.
"(4) The bylaws of a health care corporation may authorize not more than 1 officer or employee of the corporation to serve as a voting or nonvoting director.
"(5) The remaining members of the board of directors shall include representatives of large subscriber groups, medium subscriber groups, small subscriber groups, and nongroup subscribers, in proportions which fairly represent the total subscriber population of the health care corporation. However, at least 3 directors shall represent non-group subscribers, at least 1 of whom shall be a retired individual 62 years of age or older, and at least 3 directors shall represent small subscriber groups. Large and medium subscriber groups shall be represented, to the greatest extent possible, by an equal number of labor and management representatives and shall be categorized as labor subscriber representatives or management subscriber representatives.
"(6) The method of selection of the directors, other than the directors who are representatives of the public, and additional provisions and requirements for further refinement or specification regarding the number of directors comprising each component shall be specified in the bylaws.. . .
"(7) The method of selection of each category of subscribers entitled to representation on the board under subsection (5) shall maximize subscriber participation to the extent reasonably practicable." MCL 550.1301(l)-(7); MSA 24.660(301)(1)-(7). (Emphasis supplied.)
Ante, pp 35, 47, 62.
See Hollister & Drake, The Nonproñt Health Care Corporation Reform Act of 1980, 14 U Mich J L Ref 433, 435-436 (1981).
The circuit judge found that there was no competent evidence that "the current board of directors of bcbsm is, or is not, provider dominated.”
The act further provides for the establishment of a membership of bcbsm composed of subscribers, providers, and appointees of the Governor selected in essentially the same manner and proportions as are directors:
"Sec. 305. (1) A health care corporation may establish a corporate body. The corporate body shall consist of individuals selected in the same manner as individuals are selected to serve as nonpublic members on the board of directors. The size of the corporate body shall be such that, for each nonpublic voting director on the board of directors of the corporation, there are 2 members of the corporate body. The 4 public members selected pursuant to section 301(2) shall be considered to be members of the corporate body as well as members of the board of directors. An additional 4 public members shall be appointed to the corporate body by the governor by and with the advice and consent of the senate . . . .” MCL 550.1305; MSA 24.660(305). (Emphasis supplied.)
Ante, p 46.
Ante, p 46.
Ante, p 47.
See Board of Regents of the University of Maryland v Trustees of the Endowment Fund of the University of Maryland, 206 Md 559, 569-571; 112 A2d 678 (1955), discussed in text accompanying n 23.
The bylaws of bcbsm, approved by the Commissioner of Insurance, permit a majority of the directors to amend the bylaws and thus to reduce the number of representatives on the board of directors of "substantial group purchasers” of bcbsm coverage and representatives of labor unions having "substantial membership representatives” enrolled in bcbsm.
See ns 14-15 and accompanying text. Neither Act 350 nor any other act of the Legislature provides for the payment of just compensation for the taking of property resulting from the enactment of Act 350.
Bcbsm was organized under restated articles of incorporation as the successor of Michigan Hospital Service and Michigan Medical Service. Both prior corporations were organized under the 1939 enabling legislation, see n 33. Blue Cross was incorporated with $10,000, one-third of which amount was contributed each by Harper, Grace, and Ford Hospitals. Blue Shield was organized with some $16,000 contributed by the Michigan State Medical Society, an organization of physicians. Not surprisingly, representatives of the hospitals dominated the board of Michigan Hospital Service, and physicians dominated the membership and board of Michigan Medical Service, and, not surprisingly, once having obtained those positions, they have sought to retain the control they had at the outset.
In 1974, the two corporations were merged into the present bcbsm, and restated articles were filed stating in pertinent part that the present members of the corporation shall be persons named in accordance with the provisions of the plan of consolidation. Successor members shall be chosen in accordance with the bylaws. The articles further provide that the board of directors may adopt, amend, or alter the bylaws.
The bylaws provided for the present classification of membership, twenty-eight representatives of substantial group purchasers of Blue Cross and Blue Shield coverage, ten representatives of labor unions which have substantial membership segments enrolled in bcbsm, twelve consumers who shall be subscribers "influential in community affairs,” four consumers named by the Commissioner of Insurance, fourteen doctors of medicine, four doctors of osteopathy, eighteen representatives of participating hospitals, two pharmacists, and the president of the corporation.
The board of directors consists of representatives of each class, but only half of the members of each class are directors. Thus, there are fourteen representatives on the board of directors of substantial group purchasers, five from labor unions which have substantial membership segments enrolled in bcbsm, six consumers influential in community affairs, two appointees of the Commissioner of Insurance, seven doctors of medicine, two doctors of osteopathy, nine representatives of hospitals, one pharmacist, and the president of the corporation ex officio.
Thus, of the forty-seven directors, nineteen are providers: the nine doctors, nine hospital representatives, and one pharmacist. Thus, if they vote together, they need only the votes of the president and four other persons to have a majority.
In In re Mt Sinai Hospital, 250 NY 103; 164 NE 871 (1928), the challenged legislation sought to preserve the control of the present directors of the hospital against possible interference by members who had no reasonable expectation of obtaining control and would only do so as a result of an unanticipated change in circumstances, a change in the method of financing public philanthropies.
See n 1 and Berman v Parker, 348 US 26; 75 S Ct 98; 99 L Ed 27 (1954).
In Board of Regents v Roth, 408 US 564, 577; 92 S Ct 2701; 33 L Ed 2d 548 (1972), the United States Supreme Court said: "Property interests, of course, are not created by the Constitution. Rather, they are created and their dimensions are defined by existing rules or understandings that stem from an independent source such as state law . . . .” See also Perry v Sindermann, 408 US 593, 601; 92 S Ct 2694; 33 L Ed 2d 570 (1972); Geriatrics, Inc v Harris, 640 F2d 262, 264 (CA 10, 1981); Baden v Koch, 638 F2d 486, 489 (CA 2, 1980).
It is established state law that corporate control is a property interest that belongs to the corporation. See Rowen v Le Mars Mutual Ins Co of Iowa, 282 NW2d 639, 650 (Iowa, 1979); Berle, The price of power: Sale of corporate control, 50 Cornell L Q 628, 635 (1965); Bayne, A philosophy of corporate control, 112 U Pa L R 22, 50 (1963); Henn & Alexander, Laws of Corporations (3d ed), § 241, pp 656-661.
Corporate control is not always synonymous with ownership. "[Economists] see [corporate control] as a crucial element in the functioning of society’s most important economic institution, the business firm. To them control means planning the firm’s long-term strategy; allocating its resources; selecting products, markets, and technology; and making other key decisions.” Werner, Book Review, 83 Colum L R 238, 239 (1983).
The stockholders of a stock corporation and the members of a membership corporation elect the directors or trustees of the corporation who, generally by majority vote, exercise that control.
The concept that property cannot be taken by the state except upon payment of just compensation is "inherent in the definition of due process.” Nowak, Rotunda & Young, Constitutional Law (2d ed), p 483, citing Chicago, B & Q R Co v Chicago, 166 US 226, 239; 17 S Ct 581; 41 L Ed 979 (1897), and Webb’s Fabulous Pharmacies, Inc v Beckwith, 449 US 155, 160; 101 S Ct 446; 66 L Ed 2d 358 (1980).
See also Const 1963, art 10, § 2.
See n 24.
Some members, directors, or trustees may have made voluntary financial contributions to the organization. Others may have become salaried employees. Others may prosper through legitimate financial dealings with the organization. And still others may wield financial power by providing others with employment or authorizing contracts with providers of goods and services.
Detroit Edison and Consumers Power in contrast with bcbsm are quasi-public corporations. See Wenham v Dep’t of Public Utilities, 333 Mass 15, 16; 127 NE2d 791 (1955). Both Detroit Edison and Consumers Power have been intrusively and vigorously regulated.
Although no one would question that their stockholders have distinct investment-backed expectations, it might not have an immediate or long-range adverse effect on the value of the common stocks of Consumers Power or Detroit Edison if the Governor were to be empowered to make his political appointees members of the board of directors and allow customers by classes, large, small, medium users, to elect still other directors. In this manner, "all component groups” that Consumers and Detroit Edison "were designed to serve” would be represented more equitably.
Again, I do not question the power of the Legislature to enact laws concerning the governance of private corporations whether they be profit or nonprofit corporations. It is a separate issue, however, whether such a law transforming the governance of a private profit or nonprofit association, corporation, or enterprise constitutes a taking of private property.
See Westland Convalescent Center v Blue Cross & Blue Shield of Michigan, 414 Mich 247, 280-282; 324 NW2d 851 (1982) (Levin, J., concurring).
MCL 550.304; MSA 24.594.
MCL 550.502; MSA 24.622.
MCL 550.308; MSA 24.598.
MCL 550.309a; MSA 24.599(1).
MCL 550.304; MSA 24.594.
The Michigan Hospital Service Corporation enabling act does not contain the "not inconsistent with the provisions of this act” language. MCL 550.305; MSA 24.595.
Const 1963, art 1, § 10.
Const 1963, art 1, § 17. See also US Const, Am XIV.
Const 1963, art 1, § 2.
Const 1963, art 4, § 1. See also US Const, Am XIV.
MCL 550.1305; MSA 24.660(305). See n 17 for text.
MCL 550.1301; MSA 24.660(301). See n 13 for text.
MCL 550.1202-550.1203; MSA 24.660(202)-24.660(203).
MCL 550.1302; MSA 24.660(302).
MCL 550.1202(d); MSA 24.660(202)(d). See n 65 for text.
MCL 550.1310; MSA 24.660(310). See n 66 for text.
MCL 550.1217; MSA 24.660(217). See n 67 for text.
MCL 550.1205(5), (6); MSA 24.660(205X5), (6). See n 71 for text.
MCL 550.1514; MSA 24.660(514). See n 78 for text.
MCL 550.1515; MSA 24.660(515). See also MCL 550.1501; MSA 24.660(501), MCL 550.1502(7); MSA 24.660(502X7), MCL 550.1508; MSA 24.660(508), MCL 550.1516; MSA 24.660(516), MCL 550.1518; MSA 24.660(518).
MCL 550.1211; MSA 24.660(211).
MCL 500.5208; MSA 24.15208, MCL 500.5208a; MSA 24.15208(1). See also MCL 500.3425; MSA 24.13425, MCL 500.3609a; MSA 24.13609(1).
MCL 550.1206(4); MSA 24.660(206X4).
No provision of the Insurance Code bars or limits a commercial prepaid health insurer from marketing both health and life insurance.
MCL 550.1401(7); MSA 24.660(401)(7). See n 89 for text.
See n 56.
Const 1963, art 1, § 17.16A Am Jur 2d, Constitutional Law, § 816, p 978. See also 16A Am Jur 2d, Constitutional Law, §§ 740-741, pp 782 ff.
MCL 550.1402(7), (8); MSA 24.660(402X7), (8).
MCL 550.1605(2); MSA 24.660(605)(2).
MCL 550.1401(1); MSA 24.660(401X1). See n 95 for text.
MCL 550.1404; MSA 24.660(404).
MCL 550.1607(1); MSA 24.660(607X1).
See n 12.
"(d) The purposes of the corporation, which shall be:
"(i) To provide health care benefits.
"(ii) To secure for all of the people of this state who apply for a certificate, the opportunity for access to coverage for health care services at a fair and reasonable price.
"(in) To assure for nongroup and group subscribers, reasonable access to, and reasonable cost and quality of, health care services.
"(iv) To achieve the goals of the corporation relative to access, quality, and cost of health care services, as prescribed in section 504. . . .” MCL 550.1202(d); MSA 24.660(202)(d). (Emphasis supplied.)
See n 72 for the text of § 504.
The original enabling acts provided that the articles of incorporation shall state "the purposes of corporations.” MCL 550.303; MSA 24.593, MCL 550.504; MSA 24.624.
The restated articles of incorporation of bcbsm state that its purpose is to "exercise all of the power” of a medical care corporation organized under 1939 PA 108 and of a hospital service corporation organized under 1939 PA 109.
"Sec. 310. (1) With respect to management of the affairs and property of the health care corporation, and in the selection, supervision, and control of committees of the board, employees of the health care corporation, and officers, each director and officer, and the composite board, shall exercise the duties of a fiduciary toward the health care corporation and the subscribers of the health care corporation as a whole, and shall discharge his or her duties with the degree of diligence, care, and skill which an ordinarily prudent person would exercise under the same or similar circumstances in a like position.” MCL 550.1310; MSA 24.660(310). (Emphasis supplied.)
"Sec. 217. Upon dissolution of a health care corporation, the assets remaining after the payment of all debts of the corporation shall escheat to the state.” MCL 550.1217; MSA 24.660(217). (Emphasis supplied.)
See n 67.
Although minutes are property, disclosure might be required to the Commissioner of Insurance or in a lawsuit where the subject covered by the minutes are relevant. Act 350 goes further, however, in making them generally available to subscribers and, thus, readily available to a competitor of bcbsm. MCL 550.1304; MSA 24.660(304).
Ante, p 96.
"(5) Within 30 days sifter receipt of the risk factors filed pursuant to subsection (4), the commissioner shall do 1 of the following:
"(a) Approve the factors and proceed under subsection (7).
"(b) Define 1 or more additional lines of business, transmit the definitions to the health care corporation, and request that the corporation establish risk factors for those additional lines. The corporation shall then have 60 days to submit a risk factor for each line of business defined by either the commissioner or the corporation, which shall be approved or disapproved by the commissioner under this subsection. A health care corporation may revise a previously filed risk factor under this subsection.
"(c) Disapprove the factors, and proceed under subsection (6).
"(6) If the risk factors are disapproved by the commissioner pursuant to subsection (5)(c), the commissioner shall immediately notify the health care corporation of the disapproval. Within 6 months following notification, a panel of 3 actuaries, 1 appointed by the commissioner, 1 by the corporation, and 1 appointed by the 2 previously appointed actuaries, shall determine a risk factor for each line of business. The agreement of any 2 actuaries on the panel shall be sufficient for the determination of the risk factors, and the panel shall transmit a copy of the risk factors to both the commissioner and the corporation.” MCL 550.1205; MSA 24.660(205).
"Sec. 504. (1) A health care corporation shall, with respect to providers, contract with or enter into a reimbursement arrangement to assure subscribers reasonable access to, and reasonable cost and quality of, health care services, in accordance with the following goals:
"(a) There will be an appropriate number of providers throughout this state to assure the availability of certificate-covered health care services to each subscriber.
"(b) Providers will meet and abide by reasonable standards of health care quality.
"(c) Providers will be subject to reimbursement arrangements that will assure a rate of change in the total corporation payment per member to each provider class that is not higher than the compound rate of inñation and real economic growth.
"(2) As used in this section:
"(a) 'Gross national product in constant dollars’ means that term as defined and annually published by the United States department of commerce, bureau of economic analysis.
"(b) 'Implicit price deflator for gross national product’ means that term as defined and annually published by the United States department of commerce, bureau of economic analysis.
"(c) 'Inflation’ or T means the arithmetic average of the percentage changes in the implicit price deflator for gross national product over the 2 calendar years immediately preceding the year in which the commissioner’s determination is being made.
"(d) 'Compound rate of inflation and real economic growth’ means the ratio of the quantity '100 plus inflation’, multiplied by the quantity '100 plus real economic growth’, to 100; minus 100; or as expressed in the following formula:
"(e) 'Rate of change in the total corporation payment per member to each provider class’ means the arithmetic average of the percentage changes in the corporation payment per member for that provider class over the 2 years immediately preceding the commissioner’s determination.
"(f) 'Real economic growth’ or 'reg’ means the arithmetic average of the percentage changes in the per capita gross national product in constant dollars over the 4 calendar years immediately preceding the year in which the commissioner’s determination is being made.
"(3) Nothing in this section shall preclude efforts by a health care corporation supplemental to the goals prescribed in subsection (1).” MCL 550.1504; MSA 24.660(504).
"Sec. 516. (1) All provider class plans retained by the commissioner under section 513 or approved by the hearing officer shall maintain the following standards for all providers:
"(a) Responsible cost controls shall exist that balance quality, accessibility, and cost.
"(b) The health care corporation shall promote programs and policies which encourage cost-effective behavior by providers in accordance with the provisions of this act, and in accordance with all of the following:
"(i) There shall be a reasonable basis for believing that the programs will be effective.
"(ii) The programs applicable to a provider class shall be reviewed to avoid duplication or inconsistency, to the extent practicable.” MCL 550.1516; MSA 24.660(516).
"(5) After receipt of a provider class plan transmitted by the health care corporation pursuant to subsection (4), the hearing officer shall determine 1 of the following:
"(a) That the provider class plan prepared by the corporation shall be retained as provided in section 506(4).
"(b) That the provider class plan prepared by the corporation should not be retained as provided in section 506(4), and the commissioner may suspend or limit the corporation’s certificate of authority until the corporation submits a provider class plan which the hearing officer determines should be retained as provided in section 506(4).” MCL 550.1515(5); MSA 24.660(515X5).
In this case, the Court held 1969 PA 312, concerning compulsory arbitration of labor disputes in police and fire departments, to be constitutional; I adhere to the views there expressed in dissent.
"Sec. 9. Where there is no agreement between the parties, or where there is an agreement but the parties have begun negotiations or discussions looking to a new agreement or amendment of the existing agreement, and wage rates or other conditions of employment under the proposed new or amended agreement are in dispute, the arbitration panel shall base its findings, opinions and order upon the following factors, as applicable.
"(d) Comparison of the wages, hours and conditions of employment of the employees involved in the arbitration proceeding with the wages, hours and conditions of employment of other employees performing similar services and with other employees generally:
"(i) In public employment in comparable communities.
"(ii) In private employment in comparable communities.
"(e) The average consumer prices for goods and services, commonly known as the cost of living.
"(h) Such other factors, not confined to the foregoing, which are normally or traditionally taken into consideration in the determination of wages, hours and conditions of employment through voluntary collective bargaining, mediation, fact-finding, arbitration or otherwise between the parties, in the public service or in private employment.” MCL 423.239; MSA 17.455(39).
Ante, p 56.
"Sec. 514. (1) All appeals under this part shall be held before an independent hearing officer. The state court administrator shall compile and maintain a list of individuals possessing all of the following qualifications:
"(a) Is a retired circuit court judge.
"(b) Is a resident of this state.
"(c) Is not engaged in the provision of health care services.
"(d) Is not an officer or employee of a health care provider, health care corporation, or an employee of this state. For purposes of this subdivision, an employee of an educational institution shall not be considered to be employed by this’state.
"(2) The hearing officer shall be selected at random by the commissioner from the list described in subsection (1), on a per appeal basis. If the individual selected is performing judicial duties, another individual shall be selected.” MCL 550.1514(1), (2); MSA 24.660(514X1), (2).
Const 1963, art 6, § 3; GCR 1963, 901.
MCL 550.1518; MSA 24.660(518).
Const 1963, art 6, § 4; GCR 1963, 851.
Const 1963, art 6, §§ 1, 4; art 3, § 2.
MCL 550.1502; MSA 24.660(502).
Paragraph (7) of § 502 provides that "[c]ontracts entered into under this section shall be subject to the provisions of sections 504 to 518.”
See n 53.
See n 52.
Ante, p 96.
See n 54.
Cf. Arlan’s Dep’t Stores, Inc v Attorney General, 374 Mich 70, 74-75; 130 NW2d 892 (1964) (opinion of Adams, J.).
"(7) A health care corporation shall not limit or deny coverage to a subscriber or limit or deny reimbursement to a provider on the ground that services were rendered while the subscriber was in a health care facility operated by this state or a political subdivision of this state. A health care corporation shall not limit or deny participation status to a health care facility on the ground that the health care facility is operated by this state or a political subdivision of this state, if the facility meets the standards set by the corporation for all other facilities of that type, government-operated or otherwise. To qualify for participation and reimbursement a facility shall, at a minimum, meet all of the following requirements, which shall apply to all similar facilities:
"(a) Be accredited by the joint commission on accreditation of hospitals.
"(b) Meet the certification standards of the medicare program and the medicaid program.
"(c) Meet all statutory requirements for certificate of need.
"(d) Follow generally accepted accounting principles and practices.
"(e) Have a community advisory board.
"(f) Have a program of utilization and peer review to assure that patient care is appropriate and at an acute level.
"(g) Designate that portion of the facility which is to be used for acute care.” MCL 550.1401(7); MSA 24.660(401X7).
MCL 500.2237; MSA 24.12237.
Ante, p 90.
See n 59.
See n 58.
Ante, pp 24-26.
"Sec. 401. (1) A health care corporation established, maintained, or operating in this state shall offer health care benefits to all residents of this state, and may offer other health care benefits as the corporation specifies with the approval of the commissioner.” MCL 550.1401(1); MSA 24.660(401X1).
See n 62.
See n 63.
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Long, J.
This action was brought to recover for injuries received on a defective sidewalk. Defendant pleaded the general issue to the declaration filed in the cause. The injury occurred on October 20, 1897, and the suit was commenced on December 6th thereafter. After the plaintiff was sworn in his own behalf on the trial, counsel for defendant objected to any evidence being given in the case, for the reason that the declaration did not set out that the claim made by plaintiff was ever presented to the village council prior to bringing suit. The record ds silent as to what disposition the court made of this motion; but the plaintiff was permitted to proceed with his proofs, from which it appeared that on October 20, 1897, while he was passing along the walk on Second street, in the village, he stepped with his right foot on the end of á plank in the walk, when the other end rose up, catching his left foot, and throwing him to the ground, severely injuring his left knee; that, the next morning after the injury, he sent for two members of the council, who were members of the sidewalk committee; that they came to see him, and examined his knee; and that, on November 10th following, a resolution was unanimously carried by the common council of the village, as follows:
“Moved by trustee Hurd that the president and clerk consult with Mr. William H. Clark in regard to injuries claimed by him to have been received in a fall upon a de fective sidewalk in the village of Davison, and obtain the consent to settle said claim, provided such claim is proven; such settlement to be made with the village of Davison by a board of arbitration, and entering into bonds for said settlement.”
It appeared, further, that the president and clerk of the village called on plaintiff thereafter, and an agreement to arbitrate was entered into, and signed by the parties; that a bond was also drawn up to be signed, and the arbitrators were agreed upon; that plaintiff failed to procure a surety on the bond; that the time was set for the arbitrators to meet, but that they failed to meet at the time fixed; that an agreement was then made to arbitrate without plaintiff’s giving a bond; that thereafter plaintiff refused to arbitrate, and notified the members of the council that he should take the matter into court. It also appeared that the plaintiff failed to file any verified statement of his demand with the council, as required by Act No. 3, Pub. Acts 1895. Thereupon the court directed the verdict in favor of defendant.
Plaintiff now contends:
1. That the action of the council in passing the resolution to settle the matter by arbitration, and the agreement entered into to arbitrate, amounted to a waiver of the right to have a verified statement of the demand from the plaintiff, or, at least, that it was a question for the determination of the jury whether the action taken amounted to a waiver of that right.
2. That the defendant, having pleaded the general issue, without setting forth any notice that it would insist on the trial that the notice was necessary, waived this defense. "
Section 7 of chapter 5 of the village act of 1895, above referred to, provides: .
“It shall be a sufficient defense in any court to any action or proceeding for the collection of any demand or claim against the village, for personal injuries or otherwise, that it has never been presented, certified to or verified as aforesaid, to the council for allowance.”
The preceding portion of the same section provides:
“ The council shall audit and allow all accounts chargeable against the village; but no account or claim or contract shall be received for audit or allowance unless it shall be accompanied with a certificate of an officer of the corporation, or an affidavit of the person rendering it, to the effect that he verily believes that the services therein charged have been actually performed or the property delivered for the village, that the sums charged therefor are reasonable and just, and that, to the best of his knowledge and belief, no set-off exists nor payment has been made on account thereof; except such as are indorsed or referred to in such account or claim; and every such account shall exhibit in detail all the items making up the amount claimed, and the true date of each.”
It will be noticed that this section of the statute is almost identical with section 20, chap. 8, Act No. 215, Pub. Acts 1895, which is cited and construed in Griswold v. City of Ludington, 116 Mich. 411. In that case it was held that—
“It is the evident intent of the legislature, by these sections of the charter, to compel all parties having claims against a city to make a statement of the claim under oath, or to obtain the certificate of an officer of the corporation certifying to the correctness of the claim; and, until this is done, no action can be commenced or maintained.”
The provisions of a similar charter were passed upon in the case of Springer v. City of Detroit, 102 Mich. 300. In that case the declaration did not contain any allegation that the claim had been presented to the common council, and the proofs disclosed the fact that none had ever been so presented. The plaintiff having recovered below, the judgment was reversed in this court, and a new trial awarded.
But counsel contend, as we have stated, that these provisions of the statute have been waived by the village authorities. It is claimed that the case falls within Canfield v. City of Jackson, 112 Mich. 120; that as good cause exists here for holding, that the provisions of the statute have been waived as in that case. But in the Canfield Case no claim was made under the statute by the defendant until after verdict and judgment, and then only on motion for new trial, which this court held to be too late. That case was not like the present; nor is it like the case of Germaine v. City of Muskegon, 105 Mich. 213, where the claim was not rejected for the reason it was not properly verified; nor Griswold v. City of Ludington, supra. Here the parties proposed to submit to arbitration. The village stood ready to try the case in that way, even without the plaintiff’s giving the bond which was first agreed to be given by him. Arbitrators were agreed upon, when the plaintiff refused to go on, and soon thereafter commenced this suit. It is difficult to understand how, under these facts, it can be claimed that the village council waived the provisions of this act. If the arbitration had taken place without the village authorities insisting upon the verified claim being filed, the case would have undoubtedly fallen within the rule of Canfield v. City of Jackson, supra; but the plaintiff himself put a stop to these proceedings, and commenced his suit within 47 days after the injuries were received, without filing a sworn statement. Under these circumstances, the court very properly held that there was no evidence to be submitted to the jury on the question of waiver.
The second point made — that is, that the plea contained no notice of statutory defense — has no force whatever. This fact can be shown under the plea of the general issue. This requirement of the statute is for the benefit of the village, and is a matter which may be used by it by way of defense. Wright v. Village of Portland, ante, 23.
The judgment below must be affirmed.
The other Justices concurred. | [
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Grant, O. J.
The petitioner, Joseph Hooker, presented his petition to the court below for a writ of assistance under a tax deed issued to him for delinquent taxes for the year 1892. The court denied the writ. The defendant Estella O. Murgittroyd is the owner of the original title. The validity of the proceedings under which petitioner obtained his deed is attacked for the following reasons:
1. The tax law of 1893 is unconstitutional, in that it permits landowners to be deprived of their property without due process of law.
2. The provision authorizing the issuance of the writ of assistance is void.
3. No demand for the payment of the taxes was made of the person liable to pay them.
4. The property was not assessed to the owner.
5. The collector did not seize and sell personal property to pay the tax.
6. No order pro confesso was ever entered.
7. No decree was made and entered of record in the proper book in the office of the register in chancery.
8. The decree does not contain a description of the property.
9. No certified copy of the decree was annexed to the tax record in the county treasurer’s office.
10. The decree was not enrolled.
11. The decree was not rendered 10 days before the day fixed for the sale.
The first and second objections are disposed of by Ball v. Ridge Copper Co., ante, 7. All the other objections, except the eleventh and ninth, are controlled by former decisions of this court. Muirhead v. Sands, 111 Mich. 487; Auditor General v. Sparrow, 116 Mich. 574; Mersereau v. Miller, 112 Mich. 103; Jenkinson v. Auditor General, 104 Mich. 37; Iron Star Co. v. Wehse, 117 Mich. 487; Hochgraef v. Hendrie, 66 Mich. 560. All - of these objections relate to questions over which the court in the tax proceeding had jurisdiction, and are foreclosed by that decree. The only way in which the defendant owner could have contested them was by appearing in that case, or, within the time provided, filing her petition to open the decree..
The statute clothes the court of chancery with general jurisdiction over these proceedings. It does not lose jurisdiction by the failure of any officer to perform the acts imposed upon him within the time fixed by the law, unless the taxpayer is deprived of some right, or unless the law, by negative language, prohibits the doing of the act at any other time. It should clearly appear that the act was mandatory; otherwise it will be held directory. If the taxpayer is not injured by the failure of the officer to act within the time prescribed, the failure does not render the decree and sale void. Justice Cooley states the rule as follows:
“The fixing of an exact time for the doing of an act is only directory, where it is not fixed for the purpose of giving the party a hearing, or for any other purpose important to him.” Cooley, Tax’n (2d Ed.), 289.
This rule is supported by Black, Interp. Laws, § 126; End. Interp. Stat. §§ 431, 436; 1 Blackw. Tax Titles, § 468; People v. Doe, 1 Mich. 451; Sibley v. Smith, 2 Mich. 486.
Where a statute required venires for grand jurors to be issued at least 40 days before the second Monday of September, a venire issued in less than 40 days was held valid, it being in season for service by the officer’ State v. Smith, 67 Me. 328.
A similar question was before the Supreme Court of the United States, involving the tax law of the Territory of Arizona, and it was held that the object of these provisions as to time was to secure prompt action, but that the court would not lose jurisdiction to enter a decree by failing to act within the time prescribed. The court in that case say:
‘ ‘ But, inasmuch as this proceeding is one in a court of general jurisdiction, it would require very precise and prohibitory language in the statute in order to withhold from that court the ordinary functions and powers of such a tribunal, among which is not only the right, but the duty, of giving such full consideration to all questions presented as its judgment determines is necessary. No such prohibitory language is found. The purposes and intention of the act are the collection of taxes, but only of such taxes as ought to be collected, and judicial determination is invoked to determine what taxes are justly due; and that the court takes time for the examination and consideration of this question does not oust it of jurisdiction.” Maish v. Territory of Arizona, 164 U. S. 599.
Moreover, this is one of the defects expressly cured by the statute that “no sale shall be held invalid on account of any irregularity, informality, omission, or want of any matter of form or substance in any proceeding that does not prejudice the property rights of the person whose property is taxed.” Act No. 206, Pub. Acts 1893, § 99.
i As to the ninth objection, if counsel for defendants intended to rely upon it, the should have introduced proofs to establish it. The objection is not argued by either counsel, and is not referred to in the brief of petitioner. It is made in the brief of defendants, without any reference to the record to support it. The record contains the petition of the auditor general, the decree, and report of sale. It shows that the deputy county treasurer was a witness, and that he produced the records from the office of the county treasurer, and that he read on his cross-examination from the decree, or a copy thereof, which must have been attached to the record. We find nothing to indicate that any such point was raised in the court below. It is a fair inference from the record that a copy of the decree was attached. If defendants claimed that it was void, they should have introduced it in evidence and made it a part of the record.
We are compelled to hold that the tax deed is valid, and that the petitioner was entitled to his writ of assistance.
The learned counsel for the defendants severely attacked the officers for their carelessness and neglect of • duty evidenced by the record in this case. It may be conceded that his criticism is deserved. This court has frequently spoken plainly upon this subject. But this does not excuse the taxpayer. This property had been Mr. Bond’s homestead for many years. The title was in his first wife, who died some years ago, leaving one heir, the defendant Estella C. Murgittroyd. The tax was not paid, and it does not appear that any of the parties interested made any attempt to pay it.
The order of the court below will be reversed, and the court directed to issue the writ of assistance. The costs of both courts are awarded petitioner.
The other Justices concurred. | [
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Grant, C. J.
Plaintiff brought suit in justice’s court, and recovered a verdict against both defendants. Both appealed. In the circuit court, plaintiff recovered verdict against defendant Charles, and the jury found defendant John not liable. The suit was for work and labor, claiming balance on settlement. In the circuit court, defendants pleaded a set-off.
The record contains none of the testimony, and the sole point raised is on the charge of the court. From this it appears that defendant Charles admitted his liability. The sole contention of defendant is that the suit was based apon a joint liability, and that the court erred in not instructing the jury that, if they found there was no joint liability, they must render a verdict for defendants. Cir. •Ct. Rule No. 27(c) was adopted to meet such cases as this which originated in the circuit courts. Bur gin v. Smith, 115 Mich. 239. It has no application to cases originating in justices courts. Anderson v. Robinson, 38 Mich: 407. The instruction should have been given.
Judgment reversed, and new trial ordered.
The other Justices concurred. | [
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Grant, C. J.
{after stating the facts). 1. In one portion of his charge the learned circuit judge instructed the jury that, if they should find the arrangement to be that defendant was to take the property, and dispose of it, or keep it, and account to plaintiff for the balance after paying what was due defendant, and the value of the property was not agreed upon, the jury might fix the value, deduct the amount due from plaintiff, and render judgment for the balance. Evidently the jury adopted this theory, for, if they found the contract as stated by the plaintiff, he was entitled to recover over $1,500. There was only one theory upon which the plaintiff could recover under his pleadings and proof, and that was a sale at the agreed price of $4,000. The above instruction was therefore erroneous.
2. Plaintiff was permitted on his case in chief to state the value of the land and of the items of personal property sold. This was not competent. If the defendant had introduced evidence tending to show that the value of the property was very much less than the price plaintiff claimed was agreed upon, for the purpose of showing the improbability of the contract, plaintiff would, of course, have been entitled to rebut it. But a plaintiff cannot support his contract by evidence of its reasonableness until the defendant has attacked it as unreasonable.
3. Plaintiff was permitted to testify to his purchase of this 80 acres, the amount of money he then had, and certain dealings between him and the defendant. These things had no bearing upon the question whether or not the contract plaintiff relied upon was made, and should have been excluded. Some of them might very naturally tend to prejudice the jury against the defendant.
4. It is claimed by the defendant that the deeds - and a hill of sale executed by plaintiff to defendant were in fact mortgages, and that plaintiff’s only remedy was in a court of equity to foreclose them. This claim is inconsistent with the defendant’s plea and notice. Both parties, by their pleadings, admitted a sale of the real and personal property, and defendant introduced a written release of all interest in the land, executed by plaintiff. The case was properly left to the jury upon this point.
Judgment reversed, and new trial ordered.
The other Justices concurred. | [
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Moore, J.
Complainants filed a bill to restrain the collection of certain taxes, and have appealed from a decree made against them by the trial court. The complainants are owners of a good many descriptions of land situated in various townships. For the purpose of having their lands properly assessed, they sent their agents, who were well acquainted with values, to attend the meeting of the board of review, whose duty it was to meet upon the fourth Monday of May at the office of the supervisor. They arrived at the office about 12 o’clock, and remained until about 3 o’clock. No member" of the board of review was present during that time, and the board were not assembled as a board that day. These men were informed that the supervisor was absent from home, and would not return for some days. They examined the assessment roll, and prepared a list of the lands assessed to the complainants, and set opposite each description what they regarded as its value for assessment purposes, which list they left at the office of the supervisor. Attached to the list was a written protest against any higher assessment than the values which they had put upon the lands. No one appeared at the office of the supervisor on behalf of complainants after this. It was claimed that it was necessary for the agents of the complainants to spend all of the remaining portion of the day, and the following day, with other boards of review. The record shows that the supervisor was called from home on the preceding week by the illness of his mother. He did not reach home until Monday night. He convened the board of review Tuesday morning, and it remained in session during all that day. It had the list prepared by plaintiffs’ agents before it, and passed upon the assessments. It was the opinion of the circuit judge that there was an opportunity for the complainants to appear before the board of review, and that the assessment was not void.
The complainants insist that the failure of the board of review to meet on the first day fixed by law voids the tax, and cite, in support of that proposition, Township of Caledonia v. Rose, 94 Mich. 216; Auditor General v. Chandler, 108 Mich. 569. There is language used in these opinions which justifies the claim of the solicitors, but the language was not necessary to the disposition of the cases. In the first case the owner of the land appeared at the place of the meeting, on Monday, to protest against his assessment, and was told by the supervisor the board had adjourned. He asked it to be reconvened. This was refused by the supervisor, and the board was not again in session. In Auditor General v. Chandler the landowner appeared at the house of the supervisor on Tuesday, and learned from the supervisor the board had adjourned without day. It will be seen that in both of these cases there was no opportunity for the owner of the land to have a hearing before the board of review, though he had been diligent in his effort to have a hearing. In this case there was an opportunity for a hearing upon one of the days fixed by law for the hearing. The legislature undertook to provide for such a contingency as occurred here. Section 28, Act No. 206, Pub. Acts 1893, provides for a board of review consisting of three members, a majority of whom shall constitute a quorum. Section 30 provides that the board of review shall meet at the office of the supervisor on the fourth Monday in May, at 9 o’clock in the forenoon, and continue in session during the day and the day following. Section 32 provides that if, from any cause, a quorum shall not be present at any meeting of the board of review, it shall be the duty of the supervisor, or, in his absence, any other member of the board, to notify any absent member to attend at once, and makes it the duty of the member so notified to attend without delay. It also provides that if, from any cause, the second meeting of the board shall not be held at the time fixed therefor, it shall meet the following Monday. Would it be claimed that, under these provisions of the statute, if the board, because of the sickness of some of its members, or illness in their families, or for any other cause, did not convene in the forenoon, it would void the tax even though it was in session in the afternoon? We think this is loo narrow a construction to put upon the law. The landowner has a right, up to the last moment fixed by law, to be heard in relation to bis assessment, and he cannot be deprived of that right; but where the board, though it may be late in convening, meets during the time fixed by law, and remains in session until the time fixed by law is ended, and has been in session long enough to permit all persons desiring to appear before it to be heard, and to pass intelligently upon the protests, it cannot be said the landowner has not had his day in court.
The decree is affirmed, with costs.
The other Justices concurred. | [
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Moore, J.
The plaintiff recovered a judgment for damages because of injuries received upon' a defective sidewalk. The defendant appeals the case here, and contends the statute of limitations had run against the claim. Some time ago plaintiff sued the city, and the case was heard in this court. It is the case of Springer v. City of Detroit, 102 Mich. 300. At that time no verified claim had been presented against the city before the suit was brought. There was a charter provision requiring such claim to be presented, and it was provided:
“It shall be a sufficient bar and answer to any action or proceeding in any court for the collection of any demand or claim against said city that it has never been presented to the common council for audit or allowance, or, if on contract, that it was presented without said affidavit, and rejected for that reason, or that the action or proceeding was brought before the common council had a reasonable time to investigate and pass upon it.” Charter of Detroit, chap. 5, § 17.
It was held the presentation of the claim to the council was a condition precedent to bringing a suit to recover. The decision was rendered in October, 1894.
The record shows the plaintiff presented her claim for the injury alleged in the declaration in this cause, to the common council of the defendant, for audit and allowance, in November, 1894, and from time to time testimony was duly presented as to such claim; and such claim was considered by the common council committee on claims and accounts from time to time, a final hearing being had on March 3, 1896, on which day the testimony was presented to such committee in full, and the matter was then submitted for their determination. On May 12, 1896, the committee reported to the common council a disallowance of the claim, which report was accepted and adopted. This suit was begun on the 18th day of June, 1896. The court charged the jury that the action was not barred by the statute of limitations.
The charter of the city of Detroit was amended by adding section 46, which reads as follows :
“No action shall be brought against said city, nor any of its boards, commissions, or officers, for any negligent injury, unless it be commenced within one year from the time the injury was received, nor unless notice shall be given in writing, within three months from the time of such injury, to the head of the law department, or to his chief assistant, of the time, place, and cause of such injury, and of the nature thereof. The provisions of this-section shall not be a bar to a suit for any injury for which there is now a lawful cause of action, but for every such injury suit shall be commenced within six months; from the time when this act shall take effect. ” Act No. 463, Local Acts 1895.
This amendment took effect September 1, 1895.
It is by virtue of this section it is urged the statute of limitations has cut off the right of action. It is said on the part of the city that, even though the claim is pending and undecided before the council, the plaintiff must bring her suit within six months after the amendment took effect, or lose her right of recovery. We have already quoted the charter provision which was construed in Springer v. City of Detroit, supra, where it was held no aotion or proceeding could be maintained until the verified statement had been presented to the council. The same provision gives the common council a reasonable time in which to investigate the claim and to pass upon it. It is evident there could be no lawful cause of action until these conditions had been complied with. Who shall say what constitutes a reasonable time? In a small town,, where there would be only an occasional case of this character, and the witnesses would be accessible, much less time might be a reasonable time than in a large town, where there were many claims to be investigated, and where the witnesses were scattered, or, as in this case, four years had elapsed after the alleged injury before the investigation was entered upon. There is nothing to indicate but the investigation was pursued in good faith, and that the delays were at the request of the city itself. It ’ does appear affirmatively that there was a full hearing of the claim before the committee after the six months had expired, and that some days thereafter the committee reported to the council a disallowance of said claim, which report was adopted by the council. The committee and the council, by their acts, have placed their interpretation: upon what in this case, with its surroundings and circumstances, was a reasonable time. The plaintiff acted upon their interpretation, and presented her witnesses before the committee. We do not think now, when the action of the city has carried the claim beyond six months after the amendment took effect, it can be said by the city a lawful cause of action existed until the council acted upon the investigation made. The plaintiff might have urged the council were delaying beyond a reasonable time; but the council cannot be heard to say that, though they were acting, they were not acting within a reasonable time, and therefore the action cannot be maintained.
In Westchester Fire Ins. Co. v. Dodge, 44 Mich. 420, it is said a claim under a fire-insurance policy does not mature until the company has decided whether it will exercise the right to rebuild, if such a right is reserved. In this case it is also held that, where the proofs of loss were furnished within a reasonable time before the end of the period fixed in the policy for bringing suit, the right to sue cannot be cut off by the company withholding its decision upon the proofs until that period has expired, even though the time allowed for examining the proofs would have consumed it.
In the case of Voorheis v. People’s Mutual Benefit Society, 91 Mich. 469, there was a provision in the policy that no suit should be sustainable in any court unless the suit was commenced within nine months after the death of the person. The suit was not brought until after the nine months had expired. The delay had been caused by negotiations looking to a settlement. In disposing of the case this language was used:
“ The time limited for the commencement of the action could not commence to run until after the cause of action accrued, and the action did not accrue until after the furnishing of the proofs of loss. But beyond this time it was extended by the negotiations for settlement, and overtures made by the defendant company looking to a settlement. The company could not delay the party entitled to bring suit, by promises of payment and overtures for settlement, beyond the period fixed for bringing the suit, and then set up in its defense that the action was not brought within the limit of time stated in the contract.”
We have, already seen there was no lawful cause of action, within the meaning of the statute, until a verified claim had been presented to the council, and a reasonable time given them to investigate, and decide what the city would do. Both parties treated the investigation as though made within a reasonable time, and, as the delay was caused by the investigation, the city cannot set it up as a defense in this action.
Judgment is affirmed.
The other Justices concurred. | [
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Long, J.
On March 10,1893, the parties hereto entered into a land contract, by which the defendant became the purchaser from plaintiff of 40 acres of land in Kent county for the price of #7,000. Defendant paid thereon at the date of the contract $4,950 in cash or its equivalent, and turned over to plaintiff at the same time $2,400 of the preferred stock of the Gypsum Plaster & Stucco Company, at a valuation of $2,000; giving at the same time a written agreement to pay the plaintiff $2,000 for the stock whenever it should be rendered worthless by the insolvency of the company. This left only $50 of the purchase price unpaid, which defendant afterwards paid, taking his deed for the land. In May, 1895, the stock of the Gypsum Plaster & Stucco Company became worthless by the insolvency of the company, and plaintiff made demand upon the defendant for the payment of the $2,000. This action was commenced to recover the $2,000 under the contract. The defendant pleaded that the contract was procured by misrepresentations by the plaintiff as to the character of the land, and that he (defendant) was thereby deceived and defrauded, and that he would recoup his damages on the trial. He gave evidence that the lands were sold to him as plaster lands, but that they were in fact worthless for plaster purposes, and good only for farming. He claims that he was not informed that the lands were worthless for plaster until about 18 months after his purchase; that he thereupon employed experienced men to drill into the land at various points, and discovered its character, and so informed plaintiff. No question arises in the case over the fact that the stock was worthless, or that the plaintiff had a right to recover the $2,000. Neither was there any question but that the land was worthless as plaster land. The only question related to the alleged misrepresentations of the plaintiff as to the character of the land. The jury returned a verdict in favor of defendant, and the plaintiff brings error.
1. It is claimed by counsel for plaintiff that there was no evidence given on the trial of any fraudulent state ments on the part of plaintiff which justified the court in submitting the case to the jury. The defendant testified on the trial as follows :
“ I asked him why he bought it, and why he wanted to sell it. He told me that at the time he bought it he was engaged in the manufacture of whiting; that business had run out, and he wanted to sell the land. I asked him about the plaster there, — the depth from the surface of the ground. I asked him how he knew about it. He said he had examined the land before he bought the last 20. I asked him what he found. He told me he found the same rock that they had at the Union Mills quarry. I asked him the depth. He said it was about 10 feet before they struck the rock. We talked about the matter considerably. I wanted to get what information he had about it. If I purchased it, I was purchasing it on his statement. I had never been on the land, or made an examination. I did not know whether it was plaster land or not, except as he told me. When he told me he had examined it, and found plaster there at the depth of 10 feet or thereabouts, I believed it. I relied upon his statements as true. I sought no other information than that given me by Mr. Morman in regard to the land, nor had I any other information ; and I purchased the land upon the representations made to me by Mr. Morman, and on nothing else. Morman told me he did not know what the combination might be on plaster; that they had practically gone out of the whiting business, and he did not need the land. He said they found the same rock they had in the Union Mills quarry. I was very familiar with the Union Mills quarry. The Union Mills quarry was from 8 to 12 feet below the surface. The top rock was about 8 feet below the surface. The lower strata or lime rock in the Union Mills quarry was from 12 to 13 feet thick. As to the extent of the Union Mills quarry, it was pretty even, except in places where there was no top rock. To the extent that they had quarried out, it was substantially even. The Union Mills quarry was situated about 60 rods from the land in question. The Union Mills Company land adjoins the Morman land, but it is not quarried up to the line.”
On cross-examination the defendant testified as follows:
“When I met Morman, on Pearl street, he told me to come to his office. I went to his office, and had a talk about the purchase of this property. He told me he was engaged in the manufacture of whiting when he bought this land. He did not tell me he bought it for the purpose of manufacturing whiting, but said he didn’t know but he might need it; there might be a combination in the plaster business, so that it would be best for them to own their own quarry. I asked him how he knew this plaster was there, and what there was. He said he examined it before he bought the second 30, — as I understood it, that he made an examination. I do not know whether he stated he made it personally or otherwise, but he examined the property before he bought the second 30, and he ascertained, either by personal examination or by having it examined, that there was plaster rock there. He had made an examination of the land to see what there was there, and he afterwards purchased it. He said he found the same rock that the Union Mills Plaster Company was working on, and that the depth— I was particular about the depth it was, and he said it was about 10 feet.
“ Q. And that was all he said upon his part, was it not, in respect to that matter ?
“A. Oh, we talked some about it; but what I was getting at was, what he knew there was in that land. If it was plaster land, I wanted to buy it. He said he found the same rock that the Union Mills was working on, and that it was at the depth of about 10 feet. Upon that statement I made the purchase.”
The court charged the jury, substantially, that under the undisputed evidence the plaintiff was entitled to recover the sum of $3,000, unless the defense of false representations set up by the defendant was established.by the evidence, and that the burden of proof was upon the defendant to establish it. Upon the question of false representations the court instructed the jury as follows:
“ If the jury are satisfied from all the evidence in the case that the plaintiff did make the representations substantially as claimed by the defendant, and as before stated, and are further satisfied from all the evidence that such representations were believed and relied on by the defendant, as claimed, and that such representations were in fact substantially untrue, as claimed by the defendant, as be fore stated, and that the defendant would not have made ~the purchase in question had the representations not been made, then the defendant is entitled in this action to recoup against the plaintiff the damages he suffered thereby; and this is true whether the representations were made by the plaintiff innocently or not, — the plaintiff being responsible for them in such case, although he believed them to be true. A representation made with a knowl- • e'dge that it is received in a sense that makes it deceptive is legally fraudulent. Designed partial statements which deceive, and concealment of facts such as to make those declared partial and misleading, are legally fraudulent. If, in this case, you find that the plaintiff represented to the defendant, during the negotiations for the sale of the land, that he had examined the land, and found it contained the same rock as the Union Mills Plaster Company land; and if you find that this statement was reasonably ■calculated to mean to the defendant, under all the circumstances shown by the evidence, that the land owned by the plaintiff, and which he was about to sell, contained plaster rock in the same degree and in the same way as the lands of the Union Mills Plaster Company, and that the defendant, under all the circumstances, had a right to understand the representation of the plaintiff in that way; and if you find that he purchased the land in reliance upon that representation, and in the belief, based on said representation, that the land contained plaster rock in the same ■degree and in the same way as the Union Mills Plaster Company land, ‘ and would not otherwise have purchased the same;’ and if you find that in fact this was not the ■case, and that the defendant was deceived through the representations made by the plaintiff, — then the defendant is entitled to recoup in this action the damages which he sustained on account thereof.”
It is true that this testimony was contradicted in great part by the plaintiff, but we are dealing simply with the ■question as to whether there was any testimony which warranted the court in submitting the question to the jury. We think the court was not in error in this. The land, or a large part of it, had no plaster upon it. If the testimony of the defendant be true, the plaintiff gave him to understand that he had made an examination of the land, ■or caused one to be made, and had found the same rock as in the Union Mills quarry; and this statement was', made in answer to an inquiry as to how the plaintiff knew about there being plaster there. It is a case where the plaintiff positively affirmed the facts concerning the quality and value of the land, and his assertion was something more than mere opinion. In the case of Jackson v. Armstrong, 50 Mich. 65, it was held that one who obtains land in a trade, and before doing so goes upon and looks at it, has nevertheless a right to show that he was misled by the representations of the other party, if they related to matters of which no one could adequately judge on a casual inspection, such as the capability of the land for drainage, and the reason why water was standing. In the present - case the value of the land consisted in the plaster rock. No one going upon the land and making a casual inspection could ascertain that fact, for the rock lies some feet beneath the surface. Defendant was assured by plaintiff that it contained the same rock as the-Union Mills quarry, which was a valuable property. This was a positive statement of a fact, and the defendant had a right to rely upon it, and was not bound to-verify it by an independent investigation. 2 Pom. Eq. Jur. § 895.
2. Counsel for plaintiff also claim that the defendant,, having paid the $50 due on the purchase price of the land, and taken the deed, with knowledge of the fraud, is now estopped from making the defense here set up, as the parties cannot be placed in statu quo. This contention cannot be sustained. The defendant by his plea set up the fraud in the transaction, and seeks to recoup his damages by reason of it. He had the right to elect his remedy. If he sought to rescind the contract, there would be some force in the contention made by plaintiff’s counsel. That is not what is attempted here by the defendant. He proposes to keep what he has received, and recover the damages he has sustained This he has the right to do; and the fact that he paid the balance of the purchase money, and received his deed, after the discovery of the fraud,. will not estop him from setting up the fraud in defense to the action. Warren v. Cole, 15 Mich. 265; Lenox v. Fuller, 39 Mich. 273.
3. It is also claimed that the court erred in permitting counsel for defendant to ask the plaintiff what he paid for the land. There was no error in this. The defense claimed false representations as to value, and in such cases a broad latitude is given. In Stone v. Covell, 29 Mich. 359, the action was for misrepresentation concerning a note and mortgage taken in exchange for chattels of the plaintiff. Plaintiff was allowed to show the value of the chattels. It was said:
“We think this was entirely proper. This was an •action for fraud in a bargain. In determining whether a fraud has been committed, it is always desirable to have the jury enabled to put themselves, as nearly as may be, in -the place of the parties, that they may fully appreciate the bearing of their conduct. The value of what is transferred on either side must bear more or less on the motives of both.”
See, also, Ganong v. Green, 71 Mich. 10.
4. Some contention is made that the court permitted the •defendant to show alleged frauds outside of those claimed by the pleadings. We have examined the testimony with •care, as well as the charge of the court, and are of the opinion that the court confined the defendant to the issues made by the pleadings. We think a discussion of this point is unnecessary. The theory of the plaintiff was submitted to the jury, and the court said to them:
“A question has come into this case. It relates to the fact as to whether the defendant relied solely upon the representations claimed to have been made by the plaintiff, and was induced thereby to purchase the land in question. Therefore, unless you find that Mr. Harrington did rely solely on the plaintiff’s representations, and •altered his condition solely in consequence of such representations, he would have no cause of complaint, and the plaintiff is entitled to recover.”
This part of the charge was certainly as favorable to fihe plaintiff as he could ask.
We find no error in the record, and the judgment must . be affirmed.
The other Justices concurred. | [
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] |
Moore, J.
The plaintiff is a Michigan corporation engaged in the manufacture of paper. Defendants are a copartnership engaged in the manufacture of bags at Baltimore, Md. This suit is brought for a balance claimed to be due it for the manufacture and delivery of paper made under the provisions of two contracts, one dated October 17, 1908, one dated July 6, 1909, and a supplemental contract of July 6, 1909.
There was delivered under these contracts paper of the approximate value of $120,000. Trouble arose between the parties and this litigation followed. Defendants pleaded the general issue, and gave notice of set-off and recoupment. The only item of these defenses involved in this review is a claim of damages for bréach of warranty amounting to $5,991.64, which defendants sought to recoup. From a verdict and judgment in favor of the plaintiff, the case is brought here by writ of error.
The appellants discuss their assignments of error under two heads, the first of which is that there was a mutual release of liability. This claim is based upon the following language contained in the contract of July 6, 1909:
“And it is further understood and agreed, by and between the parties hereto, that the contract under date of October seventeenth, nineteen hundred and eight, existing between the parties hereto, shall be henceforth and forever considered canceled and annulled, to all intents and purposes, as if the- same had never been entered into, the parties hereto releasing’ and discharging each other from all liability growing out of or arising therefrom.”
The first contract had this language in it:
“It is further agreed that party of the first part shall carry 100 tons of bag paper of the above-mentioned grades in the warehouse of party of the second part, and shall keep same insured, but will be at no further expense in regard to such stock. Specifications for the 100 tons to be furnished party of the first part by party of the second part thirty days before this contract is to take effect.”
When the second contract was made there was in storage in Baltimore 350 tons of paper, placed there for defendants. The supplemental contract was made the same day the second contract was made. It reads:
“July 6, 1909.
“It is hereby agreed between the Cheboygan Paper Company, of the first part, and the Paper Mills Company, of the second part, that the paper now in store in Baltimore, amounting to 350 tons more or less, shall be reported by them weekly as provided under contract dated October 17, 1908, so that the total amount of paper now in storage there shall have been reported used within ninety' days from the date hereof. If at the end of ninety days there' should remain any portion of the said 350 tons not reported by the Paper Mills Company, such portion shall be settled for by note from the Paper Mills Company to the Cheboygan Paper Company, which note, or any part thereof, shall be extended from time to time at the option of the Paper Mills Company, and shall be exclusive of the settlement by note of an amount equal to 100 tons which has been provided for in contract of this date
“Cheboygan Paper Co.,
“By H. A. Frambach, President.
“Paper Mills Co.,
“M. H. Eichberg.”
In view of the language contained in the supplemental contract, and the conduct of the parties following the making of the contracts of July 6, 1909, we think there is no merit in the claim of a mutual release.
The second group of assigned errors.grows out of the failure of the court to allow defendants to recover for a breach of an express warranty, in that the paper was overweight. We cannot present this claim better than to quote from the brief:
“The second contract contained the following express warranty: 'And the said party hereto of the first part, vendor, further agrees that all. the paper delivered under the terms and provisions of this contract shall be of the standard quality, which is considered by the customs of the trade as a good delivery, and acceptable in all respects to the said parties hereto of the second part, vendees, with the allowance of a variation of 3 per cent, in the tensile strength as shown by a Mullen tester, or in weight over the designated or ordered basis weight/ That the foregoing clause falls squarely within the definition of an express warranty is fully supported by the authorities: ‘A warranty in a sale of personal property is a statement or representation made by the seller, contemporaneously with and as a part of the contract of sale, though collateral to the express object of it, having reference to the' character of, or the title to, the goods or article sold, and by which the seller promises or undertakes that certain facts are, or shall be, as he represents them. The warranty is express when created by apt and explicit statements of the seller/ 30 Am. & Eng. Enc. Law, p. 129.
“Language strikingly similar to that employed in the second contract, and under parallel circumstances, was held to constitute a warranty in the case of American Glue Co. v. Rayburn, 150 Mich. 616 [114 N. W. 395]. The objection to overweight paper in the manufacture of bags is that it will produce fewer bags per pound than paper of lighter weight.”
It is claimed the last-named case rules the instant case.
As to the alleged breach of an express warranty, counsel for appellee say:
“First. There was no express warranty in either of the contracts sued on in this case; the provision in the second contract as to the qualities was not a warranty, but a description — a condition; that it con stituted a sale by description, which placed upon the buyers the duty to inspect, and accept or reject, the paper tendered thereunder.
“Second. That by the very terms of the second contract the purchasers, defendants, were obligated to seasonably accept or reject paper tendered by plaintiff thereunder; it being provided therein that the paper ‘shall be * * * acceptable in all respects to the said parties hereto of the second part, vendees.’
“Third. That on Fébruary 23, 1910, in writing, defendants acknowledged they had no' existing claim for alleged overweights of paper, and completed an agreement, in writing, signed by both parties to the so-called ‘second contract,’ that defendants should thereafter lay aside all paper received by them from plaintiff that was not up to standard in weight, quality, and finish, and that all paper thereafter shipped defendants was shipped under said agreement completed February 23, 1910, and that by its terms defendants were required to accept or reject all paper seasonably on its receipt, and therein and thereby any express warranty in the second contract, if any ever existed, was abrogated.
“Fourth. That, under the admissions of the defendants made in open court, defendants neither offered, nor can offer, any competent proof of damages in any event, so that the ruling complained of, being based upon this incompetent testimony, was not erroneous, and moreover, if erroneous, which we strongly deny, is harmless.”
The record shows there were occasional complaints made that the paper was running overweight, and was not making the requisite number of bags. The plaintiff claimed the weight was, as a rule, all right, and suggested that the paper was cut larger than necessary for the bags. The interpretation of the contracts made by the parties thereto is indicated by extracts from the correspondence as follows:
Mr. H. A. Frambach, president of plaintiff company, went to Baltimore, and while there dictated a letter to his son in which appeared the following:
“Oct. 22d, 1909.
“Mr. J. H. Frambach, Cheboygan Paper Co., “Cheboygan, Mich.
“Dear Harry:
“I herewith inclose note and letter just dictated in my presence by Mr. Hirsch. Please hand this to Mr. Jolly.
“I have also gone over some weights and will bring with me cards of the rolls and samples of the paper showing that some of it is running overweight, although the majority of the paper is running very accurate to weight. Now, Harry, see that no more of the paper runs overweight. While we have a margin of three per cent, that does not mean of course three per cent, over or three per cent, under, but it should average.
“I have handed Mr. Hirsch your last estimate of car loads shipped, which he will check up as soon as it arrives, and I hope that we have our weights down so that they will average up all right. Mr. Hirsch has notified me that if the paper runs over in future that he will charge back the overweight.”
“Feb. 21, ’10.
“Mr. M. L. Hirsch, Paper Mills Co.,-
“Baltimore, Md.
“Dear Sir:
“I have your esteemed favor of the 17th inst., which I find upon my desk this morning. Since I returned from New York I have been quite ill with a cold and have been in the house considerable of the time.. * * _ * Then there has been considerable fault found with our weights. Our records reveal exactly to us the condition of the weights and if you were here and saw our system you would quite agree with us that we know what we are talking about. While there was some of the paper that ran a trifle heavy, but nothing serious, there was considerable of the paper that ran a little under the specified weight which would even up the car load shipment, and give no cause for complaint. However, this was not so serious as you have never, made any specific claim against us, but have intimated lately that you would do so. Whenever our paper is not right, the only way to do is to lay it aside and have it returned. Then we will investigate at this end of the line as to whether you were justified in doing so or not.” * * *
“Very truly yours,
“H. A. Feambach.”
“Baltimore, Md., Feb. 23d, TO.
“Col. H. A. Feambach,
“Cheboygan, Mich.
“Dear Colonel:
“ * * * Regarding basis weights, writer showed you while you were here that the basis weights were over, and while we have never made any deductions on account of this error in basis weight, we feel we would have been fully justified and would have done so except for the strong friendship which exists between yourself and the writer.
“We shall follow your instructions hereafter as to laying such paper aside that is not up to the standard in weight, quality and finish, although we think you will change your position the first time this condition comes up. We have always tried to use your paper at a loss to ourselves, yet you are fully aware that the paper has not been up to the basis weight as ordered and consequently entailed a loss on us which we have always suffered. * * *
“Yours very truly,
“M. L. Hirsch.”
On March 14, 1910, a letter was written in which it was said:
“In the meantime, we want to call your attention to the fact that we cannot use the five or six cars which we have in the house and must be given immediate disposition of same, as we have no room to store it, unless there is a disposition on your part to allow us the privilege of using it and charge you back with such loss as we sustain. This is fair and we should think would be reasonable with you and be of little loss to each of us.”
Later the following telegram was sent:
“Baltimore, Md., March 16, 1910.
“Cheboygan Paper Co.,
“Cheboygan, Yiich.
“Reject shipment March first entire car wet torn not up to quality or weight. Suggest Colonel Frambach coming to Baltimore immediately.
“Paper Mills Co.”
Col. Frambach was unable to go to Baltimore, and his son went on, and a settlement was reached upon the basis of allowing defendants $1,101.60, to be paid in paper. This is the only time any paper was rejected. There'was much other correspondence which we have not quoted. Taken in its entirety it shows that, while there were occasional complaints by defendants, and statements made by plaintiff of a desire to fulfill the terms of the contract, and a willingness to have defendants reject any paper which did not meet their requirements, at no time was there a suggestion that defendants might accept and use the paper and then present a claim for damages upon the theory that the contract contained a warranty.
It must be remembered that at the time the second contract was made the paper was not in existence, but was to be manufactured and so it was provided in the contract:
“That all paper delivered under the terms and provisions of this contract shall be of the standard quality, which is considered by the customs of the trade as a good delivery, and acceptable in all respects to the said parties hereto of the second part, vendees, with the allowance of a variation of 3 per cent, in the tensile strength as shown by the Mullen tester or in weight over the designated or ordered basis weight.”
By the terms of the provision quoted it was a condition precedent that the paper tendered thereunder should be of standard quality, and should not vary more than 3 per cent, in tensile strength and weight over the ordered basis, and should be acceptable to the purchasers. Paper that was not of standard quality and that varied more than 3 per cent, in tensile strength or weight over the ordered basis did not comply with the terms of the contract of sale, and imposed no obligation on the vendees to receive and pay therefor.
A consideration of the language in the contract in connection with an examination of the case of American Glue Co. v. Rayburn, 150 Mich. 616 (114 N. W. 395), cited by counsel for appellants, will show that the case is easily distinguishable from the instant case.
It must be conceded that there is a lack of uniformity in the authorities. The rule has been stated as follows:
“When the subject-matter of a sale is not in existence, or not ascertained at the time of the contract, an undertaking that it shall, when existing or ascertained, possess certain qualities is not a mere warranty, but a condition the performance of which is precedent to any obligation upon the vendee under the contract, because the existence of those qualities, being part of the description of the things sold, becomes essential to its identity, and the vendee cannot be obliged to receive and pay for a thing different from that for which he contracted.” Pope v. Allis, 115 U. S. 363, 371 (6 Sup. Ct. 69); 2 Mechem on Sales, §§ 1208-1212.
Again:
“In. the sale of goods by description, there is a warranty that they shall answer the description, where it is given by way of indicating the character or quality of the article sold, and not for the purpose of identifying it merely, and when the buyer relies upon it as a warranty. It is not an implied warranty, but is construed, under such circumstances, as constituting an express undertaking that the article shall be as described. Such a warranty will not survive an acceptance after inspection.” 30 Am. & Eng. Enc. Law, p. 154, and cases cited.
The record shows that, after knowledge of conditions in the paper which defendants claimed amounted to defects, they accepted the paper and used it.
The principles of law involved have recently been the subject of discussion in this court in the cases of Columbus & Hocking Coal & Iron Co. v. See, 169 Mich. 661 (135 N. W. 920); Gill & Co. v. Gaslight Co., 172 Mich. 295 (137 N. W. 690). It is not necessary to restate what is said in the opinions in those cases. We think they are controlling of the instant case. Judgment is affirmed.
Brooke, C. J., and McAlvay, Kuhn, Stone, Ostrander, Bird, and Steere, JJ., concurred. | [
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Steere, J.
In this proceeding relator seeks by mandamus to compel respondent to set aside an order quashing an information filed in the circuit court of Ionia county charging one D. J. Healey with having from the 15th of August, 1913, to the 23d of March, 1914, wilfully and illegally engaged in the practice of medicine in the city of Belding in violation of the provisions of Act No. 237, Pub. Acts 1899, and acts amendatory thereto.
The record discloses a complaint, warrant, arrest, preliminary examination before a magistrate, and hold ing for trial in the circuit court according to the regular course of procedure in criminal prosecutions, followed by filing this information, arraignment in the circuit court, refusal to plead, the entry of a plea of not guilty by order of the court, and, when the case was brought on for trial, a motion to quash said information and discharge the accused because of the invalidity of the act under which it was filed, which motion was granted.
The record does not contain any testimony taken on the preliminary examination, and the only official information as to what the accused actually did, aside from practicing medicine without a license in violation of the provisions of said statute, stated in phraseology purporting to follow the statute with proper allegations negativing exceptions, is that:
“The said D. J. Healey then and there wilfully and illegally did advertise and hold out to the public himself as being able to treat, cure, and alleviate human ailments and diseases, and claiming to be capable of curing diseases and human ailments, and did then and there, for hire and reward, treat for diseases, prescribe for, and advise as to health and diagnosis, and give consultation and advice as to health and disease, divers persons, and did then and there attempt to treat, cure, and relieve human diseases, ailments, defects, and complaints of physical and mental origin, by attendance, advice, appliances, manipulations, divers persons, and did then and there treat and attempt to cure of ailments and disease one Albert Hammond and divers other persons then and there consulting him, contrary to the provisions of” said act and to the form of the statute in such case made and provided, etc.
It is stated, however, in the people’s brief that the prosecuting attorney admitted, at the time said motion to quash such information was presented and argued, that he did not claim, or propose any proof tending to show, that the accused made use of drugs, but would prove that he designated himself as a “chiropractor,”, and engaged in the practice of the system of that so-called school; that the proofs would show that he treated his patients in attempts to cure disease and relieve suffering by manipulation of the spine and muscles of the back.
The scope of the information being accepted as settled by this concession, the trial court, after argument, granted said motion, holding the act of 1899, as amended in 1913 (Act No. 368, Pub. Acts 1913), unconstitutional, for the reasons, briefly stated, that its title, relating only to the examination, regulation, licensing, and registration of physicians and surgeons and punishment for offenders against said act, did not include nor apply to persons assuming to treat diseases by mere manipulation, without surgery or the use of drugs and medicines; that the provisions of section 9 of said act, as amended, defining the practice of medicine, is both beyond the scope of said title and unconstitutional, in the further particular that it is “unreasonable, unjust, and deprived citizens of this State of their liberty, rights, and equality before the law;” that the provisions of section 7 regarding licensing persons who claimed to cure disease otherwise than by surgery, drugs, and medicines is not only beyond the purview of said title, but in its terms “confusing, conflicting, and contradictory, insomuch as to render the law incapable of construction or enforcement as to that paragraph.”
A motion to set aside the order quashing said information being denied, application was made to this court for mandamus.
The substance of the attack upon this information is that it rests upon amendments to the act of 1899, passed without changing the original title, which provide for licensing persons desiring to practice a system of treatment of human ailments without resort to drugs, medicine, or surgery, subjecting them to the punishment provided in said act for practicing medicine without a' license, and in the concluding paragraph essays to stamp them beyond question as medical practitioners by coining the following definition:
“In this act, unless otherwise provided, the term ‘practice of medicine’ shall mean the actual diagnosing, curing or relieving in any degree, or professing or attempting to diagnose, treat, cure or relieve any human disease, ailment, defect or complaint, whether of physical or mental origin, by attendance or by advice, or by prescribing or furnishing any drug, medicine, appliance, manipulation or method, or by any therapeutic agent whatsoever.”
This sweeping effort at definition, with all provisions “otherwise” taken into account, would render criminal numerous gratuitous and humane acts of relief and kindness to the suffering common amongst mankind in all ages and places. The police power of the State, though comprehensive, is scarce adequate to compass the’possibilities of such a definition, and it is difficult to discern in the title of the act any warning of a purpose to make such a definition a part of the law of this Commonwealth. That attribute of sovereignty known as “police power,” though difficult of definition, includes the power of legislation deemed essential for protection of the public peace, good order, morals, safety, and health. Preservation of the public health is universally recognized as a matter peculiarly within the police power, and to that end it is competent to control, under proper legislation, the activities of those who claim especial skill or knowledge in the healing art, and who seek for gain to engage as a business in the practice of their art upon the public, to regulate such practice, to prescribe qualifications necessary to be possessed by persons making such pretensions, and to grant them licenses before they may engage in the serious business of treating human ailments as a vocation. The power to license involves the power to prohibit and punish those attempting to practice the healing art without a license.
The title of the original act under consideration is:
“An act to provide for the examination, regulation, licensing and registration of physicians and surgeons, and for the punishment of offenders against this act, and.to repeal acts and parts of acts in conflict therewith.”
The amendment of 1913 refers to the original act by title and proposes to amend sections 3, 7, 8, and 9. Otherwise than as pointed out and as applied to “those persons who desire to practice (and do practice) a system of treatment of human ailments and disease without the use of drugs and medicines,” the amendments of 1913 are, in detail, of slight importance here.
The respondent, against whom this information is filed, does not claim to hold or to have .applied for a license under any provision of the act. He claims to be without the pale and purpose of the act as expressed in its title. His defense is that he is neither a physician nor surgeon, and does not practice medicine within any meaning of the title in question, and that, as applied to the things with which he is charged, such legislation is in any aspect unconstitutional and void, because it would operate to abridge his privileges and immunities as a citizen of the United States, to deprive him of his property — the right to earn — without due process of law, and thus denies him equal protection under the law.
The issue here is the validity of this information. It turns, in our opinion, upon the two questions of whether that with which the accused is charged can, in common acceptation and as generally construed by the courts, be regarded as engaging in the “practice of medicine,” and whether the title of the act is sufficiently broad to include the same. If so, the informa tion is good under the original act, irrespective of the amendments.
In Reetz v. Michigan, 188 U. S. 505, 23 Sup. Ct. 390, appealed from this court (People v. Reetz, 127 Mich. 87 [86 N. W. 396]), in an opinion written by Justice Brewer, it is said:
“The power of a State to make reasonable provisions for determining the qualifications of those engaging in the practice of medicine, and punishing those who attempt to engage therein in defiance of such statutory provisions, is not open to question. Dent v. West Virginia, 129 U. S. 114 (9 Sup. Ct. 231); Hawker v. New York, 170 U. S. 189 (18 Sup. Ct. 573), and cases cited in the opinion; State, ex rel. Burroughs, v. Webster, 150 Ind. 607 (50 N. E. 750, 41 L. R. A. 212), and cases cited.”
Does the title of this act cover and apply to the practice of medicine? It is not so stated in express language, and respondent contends that:
“The act is not one for the regulation of the practice of medicine, but is an act for the regulation of physicians and surgeons.”
The act is not only one to regulate, but to examine, register, and license, them. The police power to license, as indicated in said title, is the recognized power to authorize persons to engage in vocations which need special surveillance without which they would not be permitted. The object of this act would be no more clearly expressed if it proposed to provide for licensing physicians and surgeons to practice medicine and surgery. An act to license a class of persons designated by their trade, profession, or business is commonly understood to mean, and can only mean, to authorize and legally qualify them to pursue the vocation or business which the identifying names used necessarily point out. The subject-matter of this statute is fairly stated and indicated by its title to be physicians and surgeons in the pursuit of their calling — the practice of medicine and surgery— and it distinctly suggests the purpose of the act to be surveillance of such vocation, by examination, registration, license, and regulation. Auxiliary details and collateral provisions depending upon, and germane to, the principal purpose are by rule included, and need not be enumerated at length. The words “persons practicing medicine” are held to be synonymous with “physician” in Harrison v. State, 102 Ala. 170 (15 South. 563).
It needs no citation of authority to sustain the proposition that practicing medicine, surgery, and the healing art' generally or professing to heal the afflicted in any manner by any means as a vocation for hire are related subjects, ostensibly to the same end, naturally affecting one way or the other, and germane to the public health.
In recognition of such relation, although somewhat conversely to the question here, it was held in People v. Phippin, 70 Mich. 6 (37 N. W. 888), that under a law entitled “An act to promote the public health,” a statute prescribing conditions for practicing medicine and punishment of violators was sustained, though by a divided court, and respondent, who claimed to be a “magnetic healer,” and treated the sick for pay according to his so-called system, without complying with the statute, was held properly convicted of unlawfully engaging in the practice of medicine.
We are unable to discern any material difference in scope and meaning between this title and the titles of similar laws in other States passed “to regulate the practice of medicine” dealing with the various activities of those who, assuming special skill and knowledge in the treatment of disease, engage in such work for profit, and which, under such titles, provide for their examination as to qualifications, registration, and license to practice, with resulting punishment for those offending against such provision.
The original act of 1899 and the amendment of 1913 both make it a misdemeanor to practice medicine or surgery in this State without complying with the provisions of the act, the amendment including also advertising in any form or holding one’s self out “to the public as being able to treat, cure or alleviate human ailments or disease.” We conclude that regulation of the practice of medicine, as construed in People v. Phippin, supra, and the great weight of more recent authority in other courts, is a provision fairly related to and naturally suggested by the title in question.
That the practice of various systems of drugless healing which have been devised and exploited from time to time, the respective merits of which the courts cannot and do not.assume to decide, is to be regarded as practicing medicine, has been held in the following States and decisions, as well as many others therein cited, and every feature of the many questions raised so thoroughly analyzed and discussed that any attempt to go over them here in detail would be superfluous duplication: Bragg v. State, 134 Ala. 165 (32 South. 767, 58 L. R. A. 925) (osteopathy); Little v. State, 60 Neb. 749 (84 N. W. 248, 51 L. R. A. 717) (osteopathy); State v. Pollman, 51 Wash. 110 (98 Pac. 88) (osteopathic and magnetic); People v. Gordon, 194 Ill. 560 (62 N. E. 858, 88 Am. St. Rep. 165) (magnetic, healing in the nature of osteopathy); State v. Wilhite, 132 Iowa, 226 (109 N. W. 730, 11 Am. & Eng. Ann. Cas. 180) (neurology and ophthalmology); State v. Yegge, 19 S. D. 234 (103 N. W. 17, 69 L. R. A. 504, 9 Am. & Eng. Ann. Cas. 202) (ophthalmology, or fitting eyeglasses); State v. Adkins, 145 Iowa, 671 (124 N. W. 627) (vital science); State v. Marble, 72 Ohio St. 21 (73 N. E. 1063, 70 L. R. A. 835, 106 Am. St. Rep. 570, 2 Am. & Eng. Ann. Cas. 898) (Christian Science for pay); Witty v. State, 173 Ind. 404 (90 N. E. 627, 25 L. R. A. [N. S.] 1297) (suggestive therapeutics); O’Neil v. State, 115 Tenn. 427 (90 S. W. 627, 3 L. R. A. [N. S.] 762) (functional ray treatment); Parks v. State, 159 Ind. 211 (64 N. E. 862, 59 L. R. A. 190) (magnetic healer); Milling v. State (Tex. Cr. App.) (150 S. W. 434) (manipulation); State v. Johnson, 84 Kan. 411 (114 Pac. 390, 41 L. R. A. [N. S.] 539) (chiropractic); State v. Miller, 146 Iowa, 521 (124 N. W. 167) (chiropractic); State v. Smith, 233 Mo. 242 (135 S. W. 465, 33 L. R. A. [N. S.] 179) (chiropractic); People v. Allcutt, 117 App. Div. 546 (102 N. Y. Supp. 678) (mechano-neural therapy).
The substance of conclusions reached in this line of authority upon the scope of medical practice is comprehensively expressed in Commonwealth v. Jewelle, 199 Mass. 558 (85 N. E. 858), as follows:
“It would be too narrow a view of the practice of medicine to say that it could not be engaged in in any case or class of cases otherwise than by prescribing or dealing out a substance to be used as a remedy. The science of medicine, that is, the science which relates to the prevention, cure, or alleviation of disease, covers a broad field, and is not limited to that department of knowledge which relates to the administration of medicinal substances. It includes a knowledge, not only of the functions of the organs of the human body, but also of the diseases to which these organs are subject, and of the laws of health and the modes of living which tend to avert or overcome disease, as well as of the specific methods of treatment that are most effective in promoting cures. It is conceivable that one may practice medicine to some extent, in certain classes of cases, without dealing out or prescribing drugs or other substances to be used as medicines. It is conceivable that one may do it in other ways than those practiced as a part of their respective systems, by either ‘osteopathists, pharmacists, clairvoyants, or persons practicing hypnotism, magnetic healing,' mihd cure, massage cure science, or the cosmopathic method of healing.’ ”
We are not unmindful of the authorities to the contrary of the foregoing views, some of which can be distinguished by reason of special statutory provisions in their jurisdictions, and others which cannot, but an examination of the many decisions upon the subject which that fruitful source of litigation has demanded leads clearly to the conclusion that the great weight of authority and soundest reasoning sustains the views voiced in the cases cited. In the State of New York, Smith v. Lane, 24 Hun, 632, a leading case to the contrary, has been overruled by People v. Allcutt, supra. The comparatively early case of People v. Phippin, supra, plainly aligned this State with those “refusing to restrict the practice of medicine to the administration of drugs or the use of surgical instruments,” and, although then rendered less binding as a controlling precedent by a division of the court, it has not since been questioned, but on the contrary, both cited with approval by this court and strengthened as an authority by abundant and carefully reasoned decisions in other jurisdictions.
As to other constitutional questions raised, touching the inalienable rights of the accused as a citizen to equal protection under the law, etc., we are well satisfied that not only is the abundant authority elsewhere conclusive to the contrary of the contentions made, but the subject is fully and finally disposed of in People v. Reetz, 127 Mich. 87 (86 N. W. 396), referring in strong approving terms to the Phippin Case as follows:
“Notwithstanding the former decision of this court in People v. Phippin, 70 Mich. 6 (37 N. W. 888), counsel again attack the constitutionality of this legislation. That case settled the question against the contention of the respondent. See, also, People v. Moor- man, 86 Mich. 433 (49 N. W. 263). Counsel argue that such legislation is an interference with the inalienable- right of a citizen when ill to employ anybody he chooses as his physician. This contention is not supported by authority or reason. The practice of medicine affects the public health, and it is clearly within the police power of the State to provide that those dealing with disease shall be amply qualified to do so, so far as human experience and education may qualify them. * * * This legislation has been almost universally sustained by the courts of other States and the Supreme Court of the United States. Among the cases are the following, which we cite without further comment: State v. Dent, 25 W. Va. 1, affirmed in Dent v. West Virginia, 129 U. S. 114 (9 Sup. Ct. 231); State v. Webster, 150 Ind. 607, 50 N. E. 750 [41 L. R. A. 212], and authorities there cited.”
As before suggested, the validity of this information is not contingent upon the legality of provisions relative to licensing in the amended act. That it is within the police power of the State and the scope of the title to so provide, or not, in the discretion of the legislature, we are well satisfied. Neither can the court concern itself with whether “the system of treatment practiced by chiropractors is a separate, systematic, coordinated, and arranged branch * * * which has firmly established its worth,” or merely of the class of alleged methods of treatment without proved merit, often skillfully heralded with extravagant assurances and new-coined names as a thing inspired for the healing of the nations, to which the sick and afflicted searching a cure in their extremity are prone to harken with credulity. Those questions are for the legislative, and not for the judicial, branch of this government. The defendant is charged' with, and has claimed, the skill and right to practice as a profession for profit his system of healing. It may be all he claims for it, but it is a calling directed to the serious business of treating human ailments for the purpose of restoring the sick to health, and directly related to public health, to protect which is peculiarly within the police power of the State. We are not prepared to say that the exercise of that power by this legislation is unwise or unreasonable.
For these reasons, we conclude that the case should have been permitted to proceed to trial under the information filed, and the order quashing said information should be set aside.
Writ granted.
Brooke, C. J., and McAlvay, Kuhn, Stone, Ostrander, Bird, and Moore, JJ., concurred. | [
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Steere, J.
The proceedings in this case, brought here for review by certiorari, arose under Act No. 10, Pub. Acts 1912 (Extra Session); (2 How. Stat. [2d Ed.] §3939 et seq.), and involve the validity of an award, by the State Industrial Accident Board, of compensation to claimant for the death of her husband on February 13, 1913, against his employer, the Michigan Sugar Company, defendant.
It appears from the finding of the board, supported by competent evidence, that deceased was in the employ of said company as its chief engineer, supervising the installation of machinery in, and operation of, six of its plants located at Saginaw, Bay City, Alma, Croswell, Caro, and Sebewaing. He ■ resided at Saginaw, had a desk at the office of the company in that city, and did work there from time to time, but had no regular office hours, and was engaged much of his time visiting and looking after the different factories, as directed or as circumstances might require. He received an annual salary, with his traveling expenses paid when going on business of his employer. He sometimes started from the office and at other times from his home when making such trips, On February 4, 1913, he left Saginaw in the morning for Sebewaing, to visit the company’s plant at that place. A train arrived at Saginaw from Sebewaing at 5:40 p. m. About 6:40 he arrived home with an injury to his head, which was bleeding a little at the back, and which his wife cared for. He detailed to her, and subsequently to others, how it occurred. No one is shown to have seen the accident. He spent most of the following day at the office, and the day after attended a funeral in Bay City. During those two days he appeared unwell, complained of a severe headache, and in speaking of it told of the accident to which he attributed it. From that time he grew worse, suffered a partial paralysis, with other symptoms of brain pressure, and died on February 13th. Without details, the testimony of physicians showed that his death was caused by a hemorrhage resulting from a small fracture about one-half inch long extending from the vertex of the skull toward the right ear.
It is claimed and found by the board that upon arriving at the station in Saginaw, upon his return in the evening from Sebewaing, deceased found no street car in sight and started to walk along. Washington street in the direction of both his home and the company’s office; that after he had walked a number of blocks he saw a street car coming and started from the sidewalk, intending to take it; that the ground there was icy and covered with snow, and he slipped and fell, receiving the injury which eventually resulted fatally. Material parts of this finding are challenged as unsupported by any competent evidence; no witness being shown to have seen the accident. Much clearly incompetent and purely hearsay evidence produced by claimant was admitted in regard to it, some of which showed that deceased ran to catch the car and did not notice the ice until, in hurrying over it, he slipped and fell.
Conceding, however, as contended by claimant, that facts and circumstances properly proven, together with the report of accident made by the defendant company to the Industrial Accident Board, as required by statute, furnish sufficient evidential support for the findings, and accepting them as true, we are yet impelled, under the authorities, to the view that such findings fail to sustain the conclusion of law by the board that such accident was naturally or peculiarly incidental to and arose out of deceased’s employment.
To justify an award under this act, it must be shown that the employee received “a personal injury arising out of and in the course of his employment.” This provision is adopted in identical words from the English workmen’s compensation act, and presumably with the meaning previously given it there.
It is well settled that, to justify an award, the accident must have arisen “out of” as well as “in the course of” the employment, and the two are separate questions to be determined by different tests, for cases often arise where both requirements are not satisfied. An employee may suffer an accident while engaged at his work or in the course of his employment which in no sense is attributable to the nature of or risks involved in such employment, and therefore cannot be said to arise out of it. An accident arising out of an employment almost necessarily occurs in the course of it, but the converse does not follow. 1 Bradbury on Workmen’s Compensation, p. 398. “Out of” points to the cause or source of the accident, while “in the course of” relates to time, place, and circumstances. Fitzgerald v. Clarke & Son, 2 K. B. (1908) p. 796.
The same provision, in the same words, is found in the Massachusetts workmen’s compensation act. In McNicol’s Case, 215 Mass. 497 (102 N. E. 697), the controlling question was whether fatal injuries received by an employee through blows and kicks administered by a fellow workman, “in an intoxicated and frenzied passion,” arose out of the employment. It appearing that the assaulting fellow-servant, with whom deceased was required to work, was, when in liquor, known to be quarrelsome and dangerous, and unsafe to be permitted to work with his fellow-employees, the court held that “a natural result of the employment of a peaceable workman in company with a choleric drunkard might have been found to be an attack by the latter upon his companion;” but if the assaulter had not been an employee, though the injury would yet have been received in the course of the employment, it could not have been said to have arisen out of it. Mitchinson v. Day Bros., Workmen’s Compensation Reports (1913), p. 324. In that connection, recognizing as controlling authority, and differentiating, many cited English cases upon the subject, the court thus clearly and comprehensively states the rule:
“It is sufficient to say that an injury is received ‘in the course of’ the employment when it comes while the workman is doing the duty which he is employed to perform. It ‘arises out of’ the employment when there is apparent to the rational mind, upon consideration of all the circumstances, a causal connection between the conditions under which the work is required to be performed and the resulting injury. Under this test, if the injury can be seen to have followed as a natural incident of the work and to have been contemplated by a reasonable person familiar with the whole situation as a result of the exposure occasioned by the nature of the employment, then it arises ‘out of’ the employment. But it excludes an injury which cannot fairly be traced to the employment as a contributing proximate cause, and which comes from a hazard to which the workman would have been equally exposed, apart from the employment. The causative danger must be peculiar to the work and not common to the neighborhood. It must be incidental to the character of the business, and not independent of the relation of master and servant. It need not have been foreseen or expected, but after the event it must appear to have had its origin in a risk connected with the employment and to have flow-, ed from that source as a rational consequence.”
The question of whether deceased was in any sense within the ambit of his employment at the time and place of the accident is a serious one; but, conceding that the injury befell him while in the course of his employment, can it be fairly traced to his employment as a contributing, proximate cause, or did it come from a hazard to which he, in common with others, would have been equally exposed apart from the employment? No direct causal relation is claimed in the particular that the nature of the business of manufacturing sugar in itself exposes its employees to unusual risk or danger of accident of this nature. All that can be claimed is that the accident resulted from the understood extra hazard to which those who travel are exposed, and, while traveling in his employer’s business, he was protected against accidents attributable to that extra danger.
Deceased’s home and headquarters were in Sagi naw. He had a desk in the office of the company, where he did some work. One of the six factories he' supervised was in Saginaw. His traveling consisted of journeying to the other five factories from time to time as occasion required. On the day in question he had made such a journey to Sebewaing and returned to Saginaw in safety. At the time of the accident he was in his home city, walking along the street, exposed to no more or different hazards of travel than any other citizen, nor than he would have been had he spent the day at the company’s office or its Saginaw plant. How is the legal aspect of the case affected by his having gone to Sebewaing during that day, when it appears that his duties of the day were ended and he had returned safely to Saginaw? At the time of his. accident he was passing on foot along a familiar highway, upon which was ice and snow— a natural condition of that season of the year — involving an increased risk and added danger of falling, common to all and known to all. When he slipped upon the snow-covered ice and fell, he was not riding upon nor getting on or off any conveyance, public or private. No person or thing connected with transportation or travel touched or threatened him. While it is indicated by the record that he desired to take a street car and was walking or running towards one for that purpose, to assert that he was injured in attempting to take or board a car wquld be a misleading overstatement. He slipped and fell before reaching it, apparently such a distance away as not to attract the attention of those on the car, as no witnesses to the accident were produced. The board found that “he started from the sidewalk towards the car with the intention of boarding the same ;” and the employer’s report, which is the legal basis of such finding, shows that he fell “about one-third distance between sidewalk and car track.” The car was presumably somewhere on the track at the time, but just where is not disclosed.
Slipping upon snow-covered ice and falling while walking, or running, is not even what is known as peculiarly a “street risk;” neither is it a recognized extra hazard of travel or particularly incidental to the employment of those who are called upon to make journeys between towns on business missions.
These distinctions are recognized and the rule correctly stated in an opinion of the Michigan Industrial Accident Board, filed in Worden v. Commonwealth Power Co., 20 Det. Leg. News, No. 39 (December 27, 1913), as follows:
“It must also appear that the injury arose out of the employment and was a risk reasonably incident to such employment, as distinguished from risks to which the general public is exposed. To illustrate: * * * On the other hand, it might be fairly said that one of the most common risks to which the general public is exposed is that of slipping and falling upon ice. This risk is encountered by people generally irrespective of employment. * * * ”
The board also referred to the fact that claimant was upon his own premises, as of some force, but apparently denied an award upon the ground quoted, which is well supported by former decisions.
In the late case of Sheldon v. Needham, W. C. & Ins. Rep. of 1914, p. 274, a servant sent to mail a letter slipped in the street, upon a banana peel or some other slippery object, breaking her leg. Citing as controlling several cases involving the same principle, the court held that, although claimant was in performance of the exact thing ordered done, there could be no award because the accident was not due to any special or extra risk connected with and incidental to her employment, but was of such nature as to be equally liable to happen under like circumstances to any one in any employment, and whether employed or not. This unfortunate accident resulted from a risk common to all, and which arose from no special exposure to dangers of the road from travel and traffic upon it; it was not a hazard peculiarly incidental to or connected' with deceased’s' employment, and therefore is not shown to have a causal connection with it, or to have arisen out of it.
For the foregoing reasons, we are impelled to the conclusion that the order and award of the Industrial Accident Board in the premises cannot be sustained.
Reversed.
Brooke, C. J., and McAlvay, Kuhn, Stone, Ostrander, Bird, and Moore, JJ., concurred. | [
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Bird, J.
The health board of the city of Detroit employed one Robert E. Lee, after the civil service law of Detroit went into operation, without his having passed the civil service examination. It is the contention of the complainant commission that the employees of the health board are subject to the provisions of the act, and in consequence thereof that the employment of Lee was irregular. For the purpose of enjoining the controller from paying Lee his wages, they filed this bill. The position of the controller is that the employees of the health board are not subject to the provisions of the act; that the health board is a State agency, whose members are appointed by the governor; and that the health department is not a creature of the city charter, but exists by force of a special act of the legislature, which provides that the health officer may appoint and dismiss all employees of the health department.
If the question whether the health board of Detroit is a State agency is to decide the question, we must hold that it is a State agency, and therefore not affected by the provisions of the civil service act. The question whether the health board of the city of Detroit was a State agency was directly decided in Davock v. Moore, 105 Mich. 120 (63 N. W. 424, 28 L. R. A. 783), and afterwards approved in Davidson v. Hine, 151 Mich. 294 (115 N. W. 246, 15 L. R. A. (N. S.) 575, 123 Am. St. Rep. 267, 14 Am. & Eng. Ann. Cas. 352). In the latter case the distinction between a purely municipal agency, like the fire department, and a governmental one, like the health department, was clearly pointed out by Mr. Justice Carpenter.
But it is contended by complainant that, notwithstanding these holdings, subsequent changes in the Constitution have made the health department solely a municipal agency. The provisions relied upon to effect this change, are the following:
“Under such general laws, the electors of each city and village shall have power and authority to frame, adopt and amend its charter, * * * and through its regularly constituted authority, to pass all laws and ordinances relating to its municipal concerns, subject to the Constitution and general laws of this State.” Article 8, § 21.
“Any city or village may acquire, own, establish and maintain, either within or without its corporate limits, parks, boulevards, cemeteries, hospitals, almshouses and all works which involve the public health or safety.” Article 8, § 22.
It is argued that these two sections, construed together, have clearly transferred the health department of the city of Detroit from the domain of governmental agency to one of purely municipal concern. We are unable to agree with this conclusion. The words “all works which involve the public health,” found in section 22, obviously have reference to physi cal properties which may be convenient or necessary in caring for the public health.
Section 21 clearly enlarges the rights of cities and villages to control and manage their own local affairs, but this must be done as the section provides, “subject to the Constitution and general laws of the State." The State has not manifested any intention of surrendering its control over such matters by repealing the act which created the department, and in so far as the record shows no attempt has been made upon the part of the city to exercise that authority by passing any other or different provision in relation thereto.
For these reasons, we must hold that the constitutional provisions referred to have wrought no change in the relation of the health board to the city of Detroit.
The right conclusion having been reached in the trial court, its action will be affirmed, without costs to either party.
Brooke, C. J., and McAlvay, Kuhn, Stone, Ostrander, Moore, and Steere, JJ., concurred. | [
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Kuhn, J.
The plaintiff was employed as a brakeman on a switch engine of the defendant used in moving to desired places at the factory of the defendant cars of hemlock bark and also bark known as “hog feed.” There is testimony tending to prove that he was riding and standing upon the front end of a gondola car that was being moved at about 4 miles an hour, and when about 500 feet from a switch he signaled the engineer to slow down. The engineer slowed down to about 2 or 3 miles an hour. The plaintiff jumped off about 150 feet from the switch, on the right-hand (engineer’s) side of the track, and ran ahead. At a point about 40 feet from the switch he attempted to cross the track, to get to the switch, as he claims, and slipped on the snow or ice and fell between the rails, and a part of the first car passed over him and injured him. The negligence relied upon was the failure of the defendant to provide the engine with a good and sufficient brake; the claim being that the steam brake at the time of the accident, and for some time before, was not working. This claim is supported by the testimony of the plaintiff, who said that the engineer was the first to come to his aid, and that he said to him: “Otto, it’s too bad. I could have stopped the train if the brake had been in order” — and told him further that the brake had been out of order for a long time.
The case being submitted to a jury, it resulted in a verdict and judgment in plaintiff’s favor, and the cause is before us by writ of error. The assignments of error are as follows:
(1) The court erred in refusing to grant defendant’s motion for a nonsuit at the close of the plaintiff’s case.
(2) The court erred in refusing to direct the jury to find a verdict for the defendant, as requested by the defendant, at the close of the testimony in the case.
(3) The court erred in refusing to set the verdict of the jury aside and to give judgment for the defendant notwithstanding the verdict in accordance with the motion thereunto made by defendant, and in accordance with the stipulation entered into in open court, whereby there was reserved unto the court the right to order judgment for defendant notwithstanding the verdict, in case the jury should find a verdict for the plaintiff or in case the jury should disagree.
(4) The court erred in refusing to grant to defendant a new trial in this cause.
It is urged that no exception was taken to the ruling of the court upon the motion made at the close of plaintiff’s case, and that the second assignment of error is not specific enough. In order to understand fully what this record presents with reference to these objections, it is necessary to set forth what occurred on the trial. When the plaintiff rested, the following colloquy took place:
“Mr. Eastman: I move the court for a nonsuit, on the ground that the plaintiff has not established a cause of action, and has not shown negligence on the part of the defendant, and has shown himself guilty of contributory negligence which would defeat recovery.
“The Court: Do you wish to argue the motion?
“Mr. Eastman: Not at this time.
“The Court: I will overrule the motion, and, if you desire to call it up again at the conclusion of your case, you may do so.”
At the close of all the proofs, the following occurred :
“Mr. Eastman: May it please the court, we ask the court to direct a verdict for the defendant in this case. (Argument on defendant’s motion for directed verdict.)
“The Court: Defendant’s motion or request for a directed verdict is denied.” (Defendant excepts.) •
Counsel for defendant, who is from a foreign jurisdiction, when making the first motion, undoubtedly, in moving for a nonsuit, meant to request a directed verdict for the specific reasons given to the court. No argument was made upon the legal questions involved at that time, and, from what the court said, counsel was, in our opinion, justified in concluding that the ruling of the court was not final, and in waiting to take his exception until he should again bring it to the attention of the court at the close of all the proofs, in accordance with the court’s suggestion. At that time the questions were argued and a proper exception taken to the ruling then made.
It has been held that an assignment of error which simply alleged that the court erred in not directing a verdict for defendant is not specific enough. Jackson Bridge & Iron Co. v. Insurance Co., 122 Mich. 433 (81 N. W. 265); Canerdy v. Railway Co., 156 Mich. 211 (120 N. W. 582); Gold v. Railway, 169 Mich. 178 (134 N. W. 1118).
But the assignment here in question goes further in saying “as requested by the defendant at the close of the testimony in the case.” This, we think, should be held to refer to the reasons stated by counsel when the motion was first made at the close of plaintiff’s proofs. Such reference makes the assignment specific enough to afford information to the trial court concerning the points relied upon and to accord it fair treatment. This assignment, therefore, properly raises all the questions which are properly raised by exception and which we are asked to determine, viz., whether there was any evidence of defendant’s negligence shown, and whether it can be said that the plaintiff was guilty of contributory negligence, as a matter of law.
It is not contended that the declaration of the engineer to the plaintiff does not constitute a part of the res gestss, nor that it was not proper evidence in support of plaintiff’s claim of negligence, nor was it objected to. Although the testimony in support of plaintiff’s claim was meager, we are satisfied that both these questions were questions of fact for the jury, and submitted with proper instructions. See De Cair v. Railroad Co., 133 Mich. 578 (95 N. W. 726); Hewitt v. Lumber Co., 136 Mich. 110 (98 N. W. 992); Van Leuvan v. Railroad Co., 167 Mich. 355 (132 N. W. 1058); Gillespie v. Railway Co., 150 Mich. 303 (113 N. W. 1116).
Judgment is affirmed.
Brooke, C. J., and McAlvay, Stone, Ostrander, Bird, Moore, and Steere, JJ., concurred. | [
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Lesinski, C. J.
Appeal is taken by defendant, Hurley Hider, from a conviction for robbery armed in recorder’s court for the city of Detroit.
Defendant Hider was jointly tried by a jury with John Thomas for robbing at gun point Meyers’ Market located at 19231 Hershey avenue in the city of Detroit. During the course of the trial, three eyewitnesses identified defendant as one of two men who committed the holdup. Harold Meyers identified the defendant as one of two men who came into his store about 2:30 p.m. on September 24, 1964 and took, at gun point, approximately $265. Twyla Goins and Douglas Kramer, customers in the store during the course of the robbery, also identified the defendant.
Upon a finding of guilty as charged and a conviction thereon, defendant appeals and assigns as prejudicial certain statements and comments of the prosecutor made in the presence of the jury.
Defendant first contends that the following remarks of the prosecuting attorney in his final argument to the jury were prejudicial:
“Now counsel [defense] in his opening statement as to what they expected to prove have testified that they were going to show you that Hurley Hider and John Thomas couldn’t have been at that market and there hasn’t been one iota of testimony presented in this case.”
The prosecution replies that the summation was in response to the following opening statement by the defense counsel:
“Judge Koseinski, ladies and gentlemen, for the defendant, Hider, it is our position that he was not present when this holdup took place, didn’t take part in it, didn’t have anything to do with it, didn’t go into the store, didn’t have a gun, didn’t take any money, and has at all times denied that he was guilty of the offense.” (Emphasis supplied.)
The remarks of the assistant prosecuting attorney made in final argument against the opening statement of the defense were erroneous as to what was said by defense counsel. Additionally, the remarks tended to place an improper burden of proof upon the defense. Defense counsel, however, did not challenge the impropriety of what was suggested by the remarks but merely contested the accuracy of the prosecutor’s recollection of his opening statement. Based on this, the defense sought a mistrial which the court properly denied.
A review of the court’s instructions to the jury reveals that the court advised the jury that it must follow the law as the court gave it; that what the attorneys said in the matter as to the testimony was not binding on the jury; and that the defendant was presumed innocent and that he was not compelled to produce any testimony in his own behalf because he does not have to prove his innocence.
Reviewing the remarks of the prosecution in the light of the circumstances under which they were made, the basis of the defendant’s counsel’s objection at the time he voiced his objection, and the court’s instructions to the jury, we find no reversible error occasioned thereby.
It is further claimed that the above remarks constituted an indirect comment by the prosecutor that defendant had not taken the witness stand in his own behalf.
The proposition is settled in this state by statute that a prosecutor is not at liberty to comment di rectly or indirectly on the defendant’s failure to testify. CLS 1961, § 600.2159 (Stat Ann 1962 Eev § 27A.2159). See, also, People v. Parker (1943), 307 Mich 372; People v. Earl (1941), 299 Mich 579. The contention of the defendant that the prosecutor’s remarks constituted an indirect comment on the accused’s failure to testify is without merit.
Defendant has assigned as error various other statements of the prosecutor made in his final argument, to the jury. Defense did not direct the court’s attention to these remarks by timely objections. We will not consider them on appeal. People v. Hancock (1950), 326 Mich 471; People v. Omacht (1950), 326 Mich 505; People v. Zesk (1944), 309 Mich 129.
Defendant finally contends that the prosecutor, in the presence of the jury, committed prejudicial error in remarking “I believe that this document will speak for itself if he wants to offer it, fine” with reference to a certain “report on order” which was used by a witness to refresh his recollection during cross-examination by Mr. O’Connell.
The following is an excerpt from the record of the cross-examination by Mr. O’Connell of officer Philip Kolnoff:
“Q. Officer, did anyone tell you that either one of the holdup men had any bandages on his hands?
“A. I don’t recall.
“Q. Do you mean you don’t know if they did or not?
“A. No, sir.
“Q. Well, you would have written it in your report on order if they had told you, wouldn’t they?
“A. Yes, sir.
“Q. Well, would reading your report on order refresh your recollection in that connection?
“A. It might. It’s been a while.
“Q. Does that refresh your recollection, officer?
“A. Yes, it does.
“Q. Did either one of the men—
“Mr. Connor: {Interposing) Well, —
“Q. {By Mr. O’Connell) {Continuing) — tell you—
“Mr. Connor: {Interposing) I object to this, your Honor. This is all hearsay on the same grounds that Counsel made.
“Mr. O’Connell: Well, —
“Mr. Connor: {Interposing) I also might state that I believe that this document ivill speak for itself if he wants to offer it, fine.
“Mr. O’Connell: Something that nobody said is hearsay, your Honor. I don’t see how he can reason that.
“The Court: No, there has been a previous examination of the witnesses here as to what they told the police, the witnesses who testified here Friday. What applies to you doesn’t apply to Mr. O’Connell in this case. He has a right to cross examine the officer, test the story, the testimony of the previous witnesses who testified.
“Mr. Connor: All right, then your Honor, I submit that this document will speak for itself as to ivhat is in it or what is not in it, and if he wants to submit this document, I would have no objections.
“Mr. O’Connell: We aslc for a mistrial, your Honor.
“The Court: Denied.” (Emphasis supplied.)
The Court subsequently overruled Mr. Connor’s objection and permitted the witness to answer the question after refreshing his recollection.
Although these remarks by the prosecutor are objectionable and undesirable, they do not constitute reversible error. We do not believe that the remarks as disclosed by this record prejudiced the result of the defendant’s cause. See People v. Milhem (1957), 350 Mich 497; People v. Morehouse (1950), 328 Mich 689 (34 ALR2d 676); People v. Hoek (1912), 169 Mich 87.
Affirmed.
Burns and Levin, JJ., concurred.
CLS 1961, § 750.529 (Stat Ann 1968 Cum Supp § 28.797).
A police report summarizing the statements of res gestae witnesses. The report itself was clearly inadmissible as hearsay. | [
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] |
Quinn, P. J.
July 27, 1960, plaintiffs filed their complaint in chancery individually and as a class action under Court Eule No 16 (1945) to recover fees paid to defendant for building permits as required by an ordinance of defendant, which was held invalid in Merrelli v. City of St. Clair Shores (1959), 355 Mich 575. Defendants answered and plaintiffs replied. Thereafter, by stipulation, the cause was adjourned from time to time and ultimately until final decision of Beachlawn Building Corporation v. City of St. Clair Shores (1963), 370 Mich 128, and (1965), 376 Mich 261. November 17, 1965, defendant filed motion for summary judgment under GCR 1963, 117.2(1) as to the class action, and this motion was granted by order of April 3, 1967. Plaintiffs appeal.
The allegations of plaintiffs’ complaint are sufficient to constitute it a class action under Court Rule No 16, § 1(c) (1945), but the record does not contain proof of service of adequate notice on the members of the class, and no binding relief for or against members of the class can possibly be granted on the present record nor can a determination be made of the adequacy of the representation.
In granting summary judgment, the trial court relied on the inadequacy of notice and the court’s finding that it was not shown that the class was so numerous as to make it impractical to bring all the class before the court. We believe the trial court was in error on both grounds. The inadequacy of notice can be cured by an appropriate order under G-OR 1963, 208.4, and the response to such an order by members of the class will be dispositive of the issues of adequacy of representation and the practicality of bringing all members of the class before the court.
For the guidance of the trial court in making its order under GCR 1963, 208.4, it is suggested that the actions of the parties have precluded either from raising the statute of limitations; that in determining which party shall have the burden of serving the above order on the members of the class, consideration be given to the fact that the information from which adequate notice could have been had in the first instance was and remains available to plaintiffs, and that a court of equity having acquired jurisdiction, retains it for complete relief. Sternberg v. Baxter (1964), 373 Mich 8, especially the quotation from Brown v. Kalamazoo Circuit Judge (1889), 75 Mich 274, 280, found at the top of page 19 of Sternberg.
Reversed and remanded for entry of an appropriate order under GCR 1963, 208.4 and for such further proceedings as may he required.
T. G. Kavanagh and Corkin, JJ., concurred.
Presently GCR 1963, 208.
Presently GCR 1963, 208.1(3). | [
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Per Curiam.
Ruth Knoper sued William Sneed Burton for certain personal injuries and loss of wages incurred as a result of being struck by de fendant’s automobile. A jury returned a verdict of no cause of action and judgment was entered upon the verdict. Plaintiff appeals.
Plaintiff was crossing 36th Street in Wyoming, Michigan, at about 8:15 p.m. on December 22, 1961. She was accompanied by 2 coemployees of the Fisher Body plant; all 3 were returning to the plant after a break in the work. They had crossed the first 2 lanes of traffic and were standing in a row (the plaintiff in the middle) at or near the center line when all of them were struck by defendant’s car. The victims were standing in a marked pedestrian crosswalk and were observing the traffic coming from the opposite direction when the accident occurred.
Plaintiff’s injuries consisted of a number of superficial abrasions, and some damage to the lower back and left hip area, as well as an injury to her neck and the right side of her head; there was also some damage to the right eye. Extensive treatment was required, and it also appeared at trial that some future treatment would be necessary, plaintiff having been attended by several physicians. Since plaintiff elected to stand upon the physician-patient privilege, the treating doctors were barred from testifying in the case. She sought to support her claim instead upon the expert witness testimony of 2 non-treating doctors, neither of whom had even examined plaintiff. These witnesses were questioned by means of hypothetical; their testimony in response to such questions was excluded by the court, and therein lies the- first allegation of error.
Doctor Harold Schaubel, an orthopedic specialist, who neither treated nor examined the plaintiff, was called by plaintiff and asked a hypothetical question. On direct examination he was asked:
“Q. Doctor, do you have an opinion as to the probable relationship of this condition which you have described, to the trauma or injury that I described she received from the impact from the automobile?
“A. Yes.
“Q. What is your opinion?
“A. I believe, as I understand the problem, the injury was the cause of the distortion I see in the film, and this distortion is usually seen and accompanied with pain.”
He relied in part upon X-rays taken at the request of a treating physician, Doctor Andre. The trial judge properly ruled that the X-rays were necessary diagnostic tools to enable Doctor Andre to prescribe for plaintiff-patient and therefore within the privilege. The hypothetical question relied in part upon the X-rays taken at the request of the treating physician and was objectionable.
In addition, Doctor Schaubel had viewed X-rays which he had caused to be taken and his opinion in response to the hypothetical question was based in part upon such X-rays. Plaintiff’s counsel, after resting and before defense counsel had entered upon his proofs, asked to recall Doctor Schaubel and examine him on the basis of the unprivileged X-rays already received in evidence. The continuance was denied plaintiff’s counsel and the whole of Doctor Schaubel’s testimony was stricken.
A granting of the opportunity to recall Doctor Schaubel at most would have meant the continuance of the trial to the next day. As a result of the denial, plaintiff did not have the advantage of going to the jury with any of the testimony of Doctor Schaubel. His testimony insofar as it would have been based upon a proper hypothetical question and upon the X-rays he himself had caused to be taken, would have been admissible.
"We are guided by the general rule, as stated in People, for use and benefit of E. P. Brady & Co., v. Gilliland (1958), 354 Mich 247, p 253:
“A reopening of the proofs upon plaintiff’s motion is a matter within the sound discretion of the trial court, with which discretion we will not interfere, absent a showing of abuse thereof.”
On issues of reopening proofs, this Court’s attitude has generally been one of noninterference. See Cataldo v. Winshall (1966), 2 Mich App 442; Rucker v. Wyandotte Savings Bank (1967), 6 Mich App 195. However, this Court did find error in a trial court’s decision to reopen proofs where there was no motion to reopen. Benfield v. H. K. Porter Company, Inc. (1965), 1 Mich App 543.
Judicial review is not foreclosed, however, by the mere utterance of the word “discretion”. Our Supreme Court, in Bonner v. Ames (1959), 356 Mich 537, ruled that a trial judge was in error in denying a motion to reopen proofs made at the close of plaintiff’s case during arguments on defendant’s motion for a directed verdict. The Court commented, p 541:
“We recognize, of course, and have often held, that a motion to reopen proofs is a matter within the discretion of the court. But the discretion must be a sound judicial discretion. Here the case had not proceeded to such a point, nor had conditions so changed, that any undue advantage would be taken by plaintiff.”
Quite recently this Court also reversed a trial court’s denial of a motion to reopen proofs. Serijanian v. Associated Material & Supply Co. (1967), 7 Mich App 275. The basis of the ruling in that case is contained in the following excerpt from p 280:
“Defendants Zylstra or Associated would not have been prejudiced by reopening proofs * * *. There is no showing of undue hardship, surprise, or that they would be unable to meet the forthcoming testimony.”
The record reflects only one particular in which defendant would be prejudiced by reopening plaintiff’s proofs: the ease would have to be continued until later the same day, once again to accommodate Dr. Schaubel’s schedule. The doctor was not a new witness in the trial and his new testimony would be based on exhibits already received in evidence. By means of the testimony of this doctor, plaintiff sought to submit evidence of the causal relationship between the accident and the injuries, a necessary element in her case. Under these facts we find no surprise or undue hardship to defendant, were the reopening permitted. On the other hand, the dis-allowance of reopening, coupled with the striking of Dr. Schaubel’s earlier testimony, practically cut the heart out of plaintiff’s case. It was error to refuse plaintiff permission to reopen.
Dr. Robert A. Dye, an ophthalmologist called by plaintiff, was neither a treating nor an examining physician, but he too was examined through the statement of a hypothetical question. On direct examination Dr. Dye testified:
“Q. Doctor, do you have an opinion to a reasonable medical certainty of the probable cause of the condition which I have described to you?
“A. Yes.
“Q. Would you give us your opinion, Doctor?
“A. Well, the most likely thing to be aggravated by hydrocortisone would be herpetic keratitis.
“Q. Herpetic keratitis, would you, can you explain to us in terms with intelligence to the layman, what herpetic keratitis is?
“A. Herpetic keratitis can be defined as a virus disease involving the cornea or front of the eye, in such a way as to produce a lesion through which then produces other involvement of inflammation and symptoms.
* * *
“Q. All right Doctor, do you have an opinion with reasonable medical certainty of the probable cause of herpetic keratitis in this ease?
“A. Yes.
“Q. Would you give us your opinion?
“A. It would be my opinion that this was as a direct or indirect result of the trauma that she suffered.”
On cross-examination Dr. Dye testified:
“Q. Did he indicate to you that he wanted you to testify here without ever having examined this patient or this person?
“A. Yes.
“Q. He did, all right, now you have testified I take it to reasonable medical certainty, can you testify with reasonable medical certainty as to what the condition of Mrs. Knoper’s eyes have been in?
“A. No I can’t.
“Q. You would want to examine her first?
“A. Yes.
“Q. Then you could tell?
“A. Yes.”
At the close of plaintiff’s proofs, on a motion made by defense counsel, the whole of Dr. Dye’s testimony was stricken since he had not testified that the particular disease was caused by the trauma and since he could not diagnose the condition with any reasonable medical certainty without an examination of the plaintiff.
For the testimony of Dr. Dye to be admissible he need not have testified in terms of reasonable medical certainty. 11 Michigan Law & Practice, § 255, pp 473, 474, recites:
“Medical testimony may be accepted on tbe issue of the probable effect of injuries, their permanence, tbe possibility of complications, and tbe probability of tbe injured party’s recovering tbe ability to work * * * a physician may testify that tbe injury involved is attributable to, or could be caused by, tbe accident complained of, or that a described fall would be sufficient to cause a certain injury, and testimony that there was a very great possibility that an injury could have been caused by tbe accident alleged has been admitted, despite its lack of probative value. It is also competent for a doctor to testify that there ‘may have been’ a diseased condition secondary to a fracture.”
In Schreiner v. American Casualty Company (1965), 1 Mich App 43, 47, it was concluded that there was sufficient evidence both for the case to go to tbe jury and to support its verdict for plaintiff, when one of the experts “conceded that there was a possibility that tbe carotid sinus reflex could have been a cause of death.”
Another medical expert bad testified that tbe cause of death was a blow on the bead causing a concussion and subsequent unconsciousness. It was testified that with tbe neck crimped over to tbe side, tbe hyperactive carotid sinus reflex was activated and death followed.
Here, as there, it was for the jury to determine tbe issues where conflicting inferences could be drawn from tbe evidence.
New trial ordered. Costs to appellants.
Fitzgerald, P. J., and J. II. Gillis and Bowles, JJ., concurred.
CLS 1961, § 600.2157 (Stat Ann 1962 Rev § 27A.2157).
Compare Bilicki v. W. T. Grant Co. (1968), 10 Mich App 612, where the witness stated that he could not with reasonable degree of medical certainty form opinion as to malady suffered by plaintiffs, his testimony being held insufficient to make a submissible case. | [
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Champlin, J.
The respondents were informed against for murder, and were convicted of murder in the second degree. Marshall Gr. Barker was sentenced to imprisonment for life, and William K. Barker for the term of twenty-five years.
There are forty-nine assignments of error, which may be considered under three heads, namely : Those relating to
the selection of the jury; those relating to the introduction of expert testimony; and those relating to the alleged confessions of respondents.
1. The respondents claimed the right to challenge peremptorily sixty jurors, which was acceded to by the court. The qualification of the jurors challenged was tried and determined in open court by the circuit judge, who rejected some who were challenged for cause, and accepted others.
It is claimed by the counsel for respondents that the circuit judge erred in accepting certain jurors who were challenged for cause of bias, or of entertaining opinions relative to the guilt or innocence of the respondents which would require evidence to remove. The constitution of this State provides that, “ in every criminal prosecution, the accused shall have the right to a speedy and public trial by an impartial jury Article 6, § 28.
It was said in Holt v. People, 13 Mich. 228:
“To require that jurors shall come to the investigation of criminal charges with minds entirely unimpressed by what they may have heard in regard to them, or entirely with out information concerning them, would be, in many cases, to exclude every man from the panel who was fit to sit as a juror. With the present means of information, the facts or rumors concerning an atrocious crime are, in a very few hours, or days at farthest, spread before every man of reading and intelligence within the district from which jurors are to be drawn, and over the whole country, if the atrocity be especially great. And there are some crimes so great and striking that even the most ignorant will have information and impressions in regard to them; and the rule as stated, applied to such cases, would render the impaneling of a jury for their trial impossible, and make their very enormity a complete protection from punishment.
Without attempting or endeavoring to lay down rules for all cases, it is sufficient for us to say that the showing in the present case falls far short of establishing cause for challenge. The juror is shown to have formed a partial opinion, but not a positive opinion. This opinion was not based upon anything which he had himself witnessed, or from information derived from those who claimed to know the facts, but upon street rumors. Now, when a person says that lie has formed, from street rumors, a partial, but not a positive opinion, we think he is to be understood as speaking only of those impressions which every one receives insensibly when a charge of crime is made, but which, so far from amounting to settled conviction, do not in the least preclude an impartial examination of the facts, when afterwards presented in the form of legal testimony.”
This case was cited with approval in Stephens v. People, 38 Mich. 739. The opinion in this case was written by the same learned judge who wrote the opinion in Holt v. People, and in this case he said:
“ The question on this record is, whether that jury can be an impartial one whose members' are already so impressed with the guilt of the accused that evidence would be required to overcome such impressions. It seems to us that this question needs only to be stated: it calls for no discussion. This woman, instead of entering upon her trial supported by a •presumption of innocence, was, in the minds of the jury when they were impaneled, condemned already; and by their own statements under oath it is manifest that this condemnation would stand against her until removed by evidence. Under such circumstances it is idle to inquire of jurors whether or not they can return just and impartial verdicts ; the more clear and positive were their previous impressions of guilt, the more certain may they be that they can act impartially in condemning the guilty party. They go into the jury-box in a state of mind that is well calculated to give a color of guilt to all the evidence ; and if the accused escapes conviction, it will not be because the evidence has established guilt beyond a reasonable doubt, but because an accused party, condemned in advance, and called upon to exculpate himself before a prejudiced tribunal, has succeeded in doing so.”
The subject came under review again in Ulrich v. People, 39 Mich. 246, and the court said :
“That it appeared that one of tire jurors had formed and retained an opinion which evidence would be required to remove. It appeared, upon examination of this juror, that he had read a little about the case, — in all about twenty ■lines; that from this he had formed an opinion, not of a fixed character, but which would require evidence to remove ; and he believed that he would be able to render an impartial verdict according to the evidence submitted upon 'the trial. What the opinion was, whether favorable or unfavorable to the accused, did not appear. The showing as to the incompetency of this juror was insufficient. The opinion he had formed was not based upon anything he had himself witnessed, or from information derived from any one who claimed to know the facts, but from reading a few lines in a newspaper, which could not have given a very full account of the transaction, or made a very deep or lasting impression upon his mind, or one that would preclude him. from an impartial examination of the facts as presented during the trial.”
From what has been said by this Court in the cases cited, it appears that the opinion entertained by a juror which disqualifies him is an opinion of that fixed character which repels the presumption of innocence in a criminal case, and in whose mind the accused stands condemned already. It is not because it will require some evidence to remove impressions, or opinions formed from rumors, newspaper statements, or from whatever other sources these impressions may have been received, that a juror is disqualified. The sources of information are important ip determining the effect likely to have been produced upon the mind of the juror, and the influence likely to be exerted upon his judgment; but the human mind is so constituted that impressions made upon it which lead towards certain conclusions, whether reached or not, will always require other impressions to be made to eradicate the former ones, or to lead towards different conclusions; — in other words, will require some evidence to remove them. We all are conscious that notions entertained by us are not all of the same stable character, and range all the way from conviction, which is the ultimate'effect of ratiocination, to the passing comment or idle words thafleave no permanent impression.
The question, therefore, must be always one of degree and the trier is called upon to determine whether the opinion; entertained by the juror is of that fixed or permanent character which disqualifies him from coming to the case in a fair, candid, and impartial frame of mind, which is unaffected with prejudice or favor to either party.
Each of the jurors challenged stated, under oath, that from what they had read in the newspapers, and talk in the neighborhood, and rumors, they had formed opinions which would require evidence to remove, One said it would take good evidence — decided evidence. Two of them had formed their opinions from what they had read in the newspapers,, purporting to be a confession made by the respondents, and • that it would require evidence to change such opinions. It seems to me that the evidence shows that these jurors had such fixed opinions as disqualified them from sitting as-jurors. The learned circuit judge thought otherwise, and overruled the challenges to the favor. They were, in each instance, challenged by the respondents peremptorily, and rejected. The question now is, were the respondents prejudiced by the rulings of the court ? It appears from the record that after the jury were finally impaneled and sworn the respondents had twenty-two peremptory challenges remaining unused. It is not perceived how they were injured,, or in any manner prejudiced, by being compelled to challenge these jurors peremptorily. If the law was that the respondent could exercise the right of peremptorily challenging jurors without limit, until he was satisfied with the jury, and the court should overrule his challenges for cause, and he-should then reject the jurors peremptorily, no harm could possibly come to him by such erroneous ruling. Neither can it work harm where, in pursuing such course, his right of challenge is not exhausted before he secures a jury with whom he is satisfied to be tried. The point was directly ruled in Sullings v. Shakespeare, 46 Mich. 408.
During the progress of the cause, and before a full panel had been secured, a juror had been accepted as one of the panel, and the court adjourned at the close of one day until nine o’clock the next day. Upon assembling at the appointed time, this juror did not appear. After a delay of nearly an hour, and search, he was found in a room of the hotel, playing pool. The court fined the juryman $10 for contempt of court for not being present when the court opened, and excused him from the panel, and ordered him to step aside. His place was afterwards filled by another juror. The respondents excepted to that part of the judge’s order which excused the juror from serving.
The circuit judge is invested with a certain degree of discretion in the selection of jurors for a panel. Such discretion is to be exercised in seeing that proper and competent, men are selected; and so long as the case of the parties is not. prejudiced by the exercise of such discretion, they cannot-complain.
In the case of Atlas Min. Co. v. Johnston, 23 Mich. 36, neither party objected to the jury as finally obtained, yet the-court set aside two jurors without an}' challenge, because from their examination they did not seem to be entirely impartial;: and it was said that,
“It would be ground of error for the court to admit a juror who is challenged and ought to have been rejected. It is no-ground of error to be more cautious and strict in securing an impartial jury than the law actually required; and that for this purpose the court may very properly reject a juror on a ground which would not be strictly sufficient to sustain a challenge for cause, or, in other words, when the refusal to sustain the challenge would not constitute error.”
In the case of People v. Carrier, 46 Mich. 442, a juror was excused by the judge for the reason that he was to be a witness in the next case to be tried, and this Court said:
“ Before a juror has been sworn in the case, the judge may excuse him for any reason personal to the juror which seems to the judge sufficient.”
In Torrent v. Yager, 52 Mich. 506, the judge excluded a juror against objection, and without challenge, because of his unfitness in consequence of the excessive use of intoxicating liquor while acting as a juror. This was held not to be error, the Court saying:
“ It is the duty of the court to carefully guard and protect the rights of parties in the selection of jurymen, and see to it that no person who is incompetent is allowed to sit in the ■case.”
In the case under consideration, the juror had exhibited •such reckless disregard of his duty as a juror as to make it •quite evident that he was unfit to serve upon the panel, and the judge was guilty of no impropriety in excluding him •therefrom.
After the jury had been selected and sworn, and before •any further proceedings were had in the case, it was ascertained that one of the members of the panel was an alien. The court thereupon ordered him to stand aside, and be discharged from the panel, and that another juror be drawn in his stead; and that the respondents be allowed to challenge the remaining eleven, either for cause or peremptorily, if they desired to do so. The respondents excepted. Another juror was drawn and selected, and the jury were sworn, and ■the case proceeded. An alien is not qualified in any respect to sit upon a jury in this State. The jury when sworn consisted of only eleven jurors. The respondents were not in jeopardy until a jury of twelve men should be selected and sworn. The action of the circuit judge was correct, and supported both by reason and authority, many of which, are cited in the brief furnished us by the counsel for the People.
Error is also assigned upon what transpired during the selection of the jury, with reference to investigating the truth of a rumor that $1,000 had been put into the bank at Paw Paw, with which to bribe the jury. The matter was fully pi’obed, and turned out to be entirely, without foundation ; and, while I do not approve the wisdom or propriety of the time and manner of the investigation, I do not se¿ that the respondents could possibly be prejudiced in the minds of the jury by what transpired. It turned out to be a silly, idle rumor, without foundation, and without the semblance of testimony to support or give currency to it; and the result of the investigation was a complete vindication of the respondents from any charge of bribery, or attempted bribery, or corruption, of jurors. Morever, no exceptions were taken by the respondents, and for that reason the errors are not properly assigned upon this record.
2. Dr. Josiah Andrews was a practicing physician and surgeon. He was present at the post mortem examination -of the body which had been found in Max lake. He stated the examination which he made of the body, and described it as bloated considerably, and livid, purple, dark purple,— particularly the upper part of the body more than the lower part; made examination to ascertain cause of death, if he could do so, but did not make a very extended examination •of the body from the fact that it was very decomposed, very •offensive, and even dangerous, to work over; examined the lungs and heart in particular, found the lungs somewhat •collapsed, not very much filled out with air. Both cavities -of the heart were entirely empty of blood, — no blood in them, — nor in the first portion of the vessels, — the aorti and other large vessels. He described the appearance of other parts of the body, and the condition of the heart, and also the usual condition of the heart where death ensued from drowning. The prosecuting attorney asked the witness the following question:
'“ Doctor, from the entire examination that you made of the heart, lungs, eyes, mouth, neck, and general ■ appearance, together with the mutilation that you have testified to, did you come to any conclusion as to how' death occurred, — by drowning or by other means?”
This was objected to as incompetent. The court permitted the question to be asked, and the defendant excepted. It is insisted that the witness had not made an examination which was sufficient^ base an opinion upon. I think the witness had shown sufficient examination and knowledge to base an intelligent answer upon to the question. The witness answered:
“Yes; my opinion was that the man didn’t come to his death by drowning, — that he was dead before he was put into the water.”
Counsel for respondent then moved to strike this answer out. This motion was properly overruled by the court.
Dr. Hatheway was a practicing physician and surgeon of thirty-three years’ practice. He made an autopsy upon the body of a man found in Max lake, on August 1st. He examined the external appearance of the body, and laid off the scalp. He found no wound upon the body, except on the scrotum. A portion of that, particularly on the right side,, hung like a fringe, and the left side was not so defined as a fringe, but a cut over to the left, — a fringe of four or five pieces that hung, the skin from an inch to an inch and a quarter long. He made an incision with his knife to find the testicles; but there were none. The body was swollen— distended — very much. The face and neck were as black as an African’s. He also made another examination on the following Tuesday, being the one testified to by the witness Dr. Andrews. Witness .was then asked if, from the examination he made, he was able to come to any' conclusion or form any opinion as to whether death occurred from drowning. The respondents’ counsel objected on the ground of incompetency. The witness stated that it was not a scientific opinion, and the question was then excluded by the court.
On the examination of witness the following questions were asked by the prosecuting attorney, viz.:
“Q. Now, doctor, suppose there had been bruises, without breaking the skin upon the chest, previous to death, and death occurred from strangulation, — I will say by a person putting their knees upon the stomach or chest, — would that have a tendency to hurry decomposition ?
Q. Suppose that there had been bruises on the chest previous to death, and death had occurred from strangulation, what would you say as to whether decomposition would set in earlier than it would if there had been no bruises upon the chest ?
Q. How quick?
Q. Well, now, then, after the decomposition had set in to the extent it had on this body at the time you made the examination, and death occurred by strangulation, without a fracture of the cartilage of the larynx, what would you say then about finding evidence of violence ?
Q. Suppose that decomposition had set in as far as it had on this body at the time yon made the examination, and providing death had occurred by strangulation, without fracture of the cartilage of the larynx, what would you say then as to finding evidence of violence?
Q. Suppose a person was killed, strangled, and thrown into the water, would the body rise sooner or later than it would in case of drowning?
Q. Suppose that death occurred from strangulation, and the eyes and tongue protruded, and the body thrown into the water, would the eyes and tongue remain in the same condition, or would they protrude further? ”
Error is assigned upon the overruling of the objection of the respondents’ counsel to each of these questions. The record shows that question No. 1 was not allowed at all, and no ruling made upon it in that form. The objection to question numbered four was sustained. The fifth question was answered that “ We couldn’t tell; that is, presuming decomposition had gone to this extent.” To the sixth question, the witness answered : “ It would depend wholly upon the condition — it would depend wholly as to the length of time that had elapsed since death had taken place before it was thrown into the water.” Whether the ruling was right or wrong as to the questions numbered five and six, the respondents were not prejudiced by the admission of the answers thereto. They proved nothing. The other questions were proper under the circumstances disclosed in the record. The homicide was claimed to have been committed on the twenty-•eighth day of July, 1885, and the body of the murdered man was claimed to have been found in Max lake on the first day of August, 1885, in an advanced state of decomposition. A question was made as to the identity of the body, and this ■testimony was offered to explain its condition — the rapid rate ■of putrefaction ; and also to show that life was extinct before the body was thrown into the lake. The testimony is not all ■.returned ; but it appears that the prosecution claimed that the homicide was committed by means of strangulation, and that there was evidence which tended to prove that theory. ■It was in this view of the case that the court permitted the questions above mentioned to be put, and we are not able to-say that his rulings were erroneous.
Assignments of error' from the thirty-second to thirty-ninth, inclusive, refer to the admissibility of testimony relative to a substance supposed to be testicles, found upon a log about three hours after the body was found, which lay across the road leading through the woods from Bloomingdale to Max lake., There was no error in the rulings of the court with respect to the admission of this testimony. The surgeons who examined it testified positively that it was the-substance called “ testicles ; ” but they could not swear .that they were the testicles of a human being, and that they knew of no way of distinguishing the testicle of the human species-from that of other animals by its anatomical structure. In connection with the evidence of the mutilated condition of the body found in the lake, the testimony was admissible.
8. The fortieth, forty-first, forty-sixth, and forty-seventh-assignments of error relate to the testimony of Orange Cross. This witness was an inmate of the county jail in which respondents were confined after their arrest on the charge of murder, and was placed upon the witness stand by the people, and testified that he was somewhat acquainted with the-respondents ; that he became acquainted with them in jail,, and while there he had a conversation with Marshall G-. Barker, he should judge about the twenty-sixth of August. He was then asked to state what conversation he had with-him.
This question was objected to because there were certain alleged confessions obtained from the respondents by detectives, under the authority of the county ; and that any admissions or conversations following that detective work were-not admissible, unless shown by the party offering them that they were obtained fairly, and without any fraud or undue influence, and that the influence which had been brought to-bear upon the respondents by which the confessions were obtained had passed entirely out of their minds. The circuit judge then stated to counsel that there was no evidence-before the jury at that time that the respondents ever con fessed, or that any influences, improper or otherwise, were •brought to bear upon them ; and that respondents’ counsel had the right to examine and find out whether anything of the kind was done, when it would be for the court to determine whether it would be admissible or not. Counsel for respondents suggested that it was the duty of the court to see that confessions were made voluntarily, and without improper influence ; but the court replied :
“ I do not know, as a court, that any confessions were made at all. I have no evidence of it. There is no evidence before the court that any such confessions were made.”
The prosecutor announced that he proposed, by the question asked, to prove an admission of the respondents; but whether it was obtained from detective work he could not say at that time. Thereupon the court said to respondents’ counsel:
“You may examine the witness as fully as you desire before he answers any questions, to see what influence, if any, surrounded the respondents at the time this man talked with them.”
Exception was taken to this ruling.
Confessions voluntarily ¡nade, not induced by threats, or by a promise or hope of favor, are admissible in evidence in criminal cases. They are usually divided into three classes : (1) Confessions made in open court, under a plea of guilty, which are conclusive, and render any proof unnecessary ; (2) the next highest kind are those made before a magistrate; and (3) those made to any other person, which are the lowest grade, and require proof of corroborating circumstances to sustain them.
The presumption is that confessions have been freely made until the contrary appears: 1 Chit. Crim. Law, *571; Williams’ Case, 1 City Hall Rec. 119; Roscoe Crim. Ev. 43; Com. v. Culver, 126 Mass. 464.
The practice to be pursued in the introduction of confessions in evidence has not always been unifox’m. In Phillips on Evidence it is said :
“For the purpose of introducing a confession in evidence, it is unnecessary, in general, to do more than negative any promise or inducement held out by the person to whom the confession was made:" 1 Phil. Ev. *551.
Mr. Chitty, in his work on Criminal Law, at page *572, says:
“ The practice, however, at present, is for the prosecutor’s counsel, on his examination of his own evidence in chief, to inquire of the witnesses all the facts, so as to satisfy the jury that the confession was voluntarily made and duly taken.”
The question of the admissibility of the evidence is for the court, and not the jury, and is the subject of a preliminary inquiry: 1 Phil. Ev. *543 ; 1 Greenl. Ev. § 219.
Unless it appears from the testimony of the witness, or other evidence in the case, that the confession was not voluntary, or was made through the influence of fear or hope ; or unless the evidence offered is objected to upon the ground that the confessions were made in consequence of fear, or of favors held out to the prisoners, — no preliminary examination into the facts and circumstances is called for. If, however, the contrary does appear, or the objection is made, then the preliminary examination must be had. In this case, when the evidence was offered by the people it was objected to as being incompetentes having been made under influences which deprived it of the character of a free and voluntary confession. For all that appeared to the court at the time it was offered, it was prima facie competent. The respond, ents’ counsel contended that it was incompetent by reason of certain extrinsic facts. It was for the respondents to establish those facts, and for the circuit judge to ascertain 'before admitting the evidence. We think the correct rule is laid down by the supreme court of Massachusetts in the case of Com. v. Culver, 126 Mass. 464, where the point was directly passed upon, in which the court say:
“It appears by the bill of exceptions that when the confessions of the defendants were offered in evidence they objected to such confessions upon the ground ‘ that they were made in consequence of offers of favor made to the defendants by the ■officer who arrested the defendants and had them in custody.’ If this were true, and the defendants could establish the fact, the confessions were incompetent evidence. It was the duty of the presiding judge to determine that fact, upon hearing all competent evidence upon it which was tendered by either party. In the absence of all evidence, the presumption is that a confession is voluntary; and when the party confessing objects that confessions are not voluntary, he is called upon to show at least enough to rebut such presumption.”
As the case stood, the burden of rebutting this presumption was upon the respondents, and the court did not err in so holding.
The respondents then examined the- witness Cross, and also the prosecuting attorney and sheriff, whose testimony ■did not show that any confessions were obtained from respondents by means of threats, or by promises of favor, or by holding out to them the flattery of hope; but did show, conclusively, that artifice and deception were used to obtain a confession from respondents. This was accomplished through a detective agency of Chicago, by which a detective, by artifice and deception, personated, and led respondents to believe that he was a lawyer of celebrity from Chicago ; and in the confidence of that supposed relation obtained from them a statement of their connection with the crime.
Confidential communications made in reliance upon the supposed relation of attorney and client, whether the party assuming to act as such is an attorney or not, are excluded upon the plainest principles of justice. Indeed, the confessions thus obtained, when offered in evidence, were promptly excluded by the court. The confessions sought to be introduced were statements to or in the hearing of other parties having no connection whatever with the pretended lawyer, and upon other and different occasions. There was no testimony showing what statements the detective made to respondents to induce them to confide in him, or to make any confessions to him, other than that of his being an attorney from Chicago, at the time the circuit judge decided to admit the testimony of the witnesses relative to the alleged confessions.
We are of opinion that at the time the ruling was made by the circuit judge admitting the testimony of the witnesses Cross and De Puy, relative to the confessions made by respondents, such ruling was correct. Later in the case, communications written by one respondent to the other, and intercepted, or not delivered, were identified, and introduced in evidence; and from some of these it appeared that the detective who had assumed the role of the Chicago attorney had advised one of them to say that he committed the murder in self-defense, and the brother was called in afterwards to assist in secreting the body, and in that way he would clear them both, and especially the brother who aided and abetted after the act. Had these facts appeared prior to the introduction of the evidence relative to the confessions, it would have been incumbent upon the prosecution to prove that the confessions offered were not the result of the influences exerted by the detective: Roscoe Crim. Ev. 43; 2 Russ. Cr. 842; 1 Whart. Aimer. Crim. Law, § 694. And this might have been done by showing that the particulars of the crime, as stated to these witnesses, were different from those disclosed to the detective, and could not have been under the influence of his promises; for, instead of making one brother accessory after the fact, the story of the killing, as narrated by these witnesses, made both of respondents principals in the transaction. In cases, however, where a subsequent confession is made, and it is claimed that it is subject to the objection that the party making it is under the influence of an inducement held out or exercised to obtain a previous confession, which for that reason is not admissible in evidence, the question whether such subsequent confession was the result of the same influence which induced the one previously made, is one for the jury, under proper instructions from the court: Com. v. Cullen, 111 Mass. 435 ; Com. v. Smith, 119 Mass. 305 ; Com. v. Piper, 120 Mass. 185 ; State v. Potter, 18 Conn. 166; Sherrington's Case, 2 Lewin, 123 ; Rex v. Cooper, 5 Car. & P. 535; Com. v. Taylor, 5 Cush. 605.
In Com. v. Piper, the court says:
“ When a confession is offered in a criminal case, and the defendant objects that he was induced to make it by threats, or promises, it necessarily devolves upon the court to determine the preliminary question whether such inducements were shown; and the finding of the court upon this question cannot be revised upon a bill of exceptions, unless it involves some ruling in matter of law, or the whole evidence is reported with a view of submitting its sufficiency to the appellate court. If the presiding judge is satisfied that there were such inducements, the confession is to be rejected ; if he is not satisfied, the evidence is admitted. But if there is any conflict of testimony, or room for doubt, the court will submit this question to the jury, with instructions that if they are satisfied that there were such inducements they shall disregard and reject the confession.”
This seems to place the matter upon the proper foundation, and properly guards and protects the rights of the accused.
In this case, in an able charge which covered all the points in controversy in the case, and to which no exception was taken, the court instructed the jury upon the subject of the confessions as follows:
“ Testimony has been given before you in this case of certain alleged confessions and admissions claimed to have been made by respondents. It was the duty of the court to determine, in the first place, whether such alleged confessions were so far voluntary as to admit them in evidence for your consideration. The court did not, however, thereby determine them to be voluntary, and whether they were voluntary or not is a matter to be determined by you alone, without reference to their admission. If you find them to have been made voluntarily, you will consider them with all the other evidence in the case; but if you find that they were not voluntary, or if you find that they were made because of hopes held out to them, or because of fear, or because of inducements made to them to confess, you will reject them. Under such circumstances no reliance could be placed upon admissions of guilt, for the obvious reason that it could not be said that they were made because they were true, but because, whether true or false, the accused was led to believe it for his best interest to make them. And what I say upon this branch of the case I mean to apply also to the alleged written statements.
I further say to you that the confessions of a prisoner out of court are a doubtful species of evidence, and should be acted upon with great caution, and, unless they are supported by some other evidence tending to show that the prisoners committed the crime, they are rarely sufficient to warrant a conviction. The credit and weight to be given to confessions depend very much upon what the confessions are. If the crime itself as charged is proved by other testimony, and it is also proved that the defendants were so situated that they had an opportunity to commit the crime, and their confessions are consistent with such proof and corroborative of it, and the witness who swears to the confession is apparently truthful, honest, and intelligent, then confessions so made might be entitled to weight. And you are also instructed that in criminal prosecutidns the admissions of prisoners are received in evidence upon the same principle that admissions in civil suits are received ; that is, upon the presumption that a prisoner will not voluntarily make an untrue statement against his own interest.
I further charge you that where the verbal admissions of a person charged with crime are offered in evidence, the whole of the admissions must be taken together, as well that part which makes for him as that which may make against him, and if the part of the statement which is in favor of the respondent is not disproved, and is not apparently improbable or untrue, when considered with all the other evidence in the case, then such part of the statement is entitled to as much consideration from the jury as any other part of the statement. Alleged confessions and statements of these respondents were received simply and only as affecting the particular one alleged to have made them, and cannot be considered by you against the other.”
Although we conceive it to be the province of the court to determine, in a case free from doubt, whether the confession is voluntary or not before admitting or rejecting the same as evidence, yet, in this case, we think he properly submitted that question to the jury, and the respondents do not complain of this instruction. The assignments of error based upon the rulings of the court relating thereto are overruled.
Objection was made to the introduction of certain exhibits which were admitted in evidence. These exhibits were written notes which the witness testified were handed to him by one of the respondents to be delivered to the other, and, instead of delivering them, the witness handed them to the sheriff or to his wife. The witness identified the exhibits, and they were offered in evidence. The objection was that the handwriting was not proven. The court ruled that,
“Whether the handwriting be proved or not, is a question that is necessarily involved in -the question as to whether these papers should be admitted in evidence. The witness states that he received them from the parties, and that he handed them to Mrs. Todd. If he did so receive them, they are admissible in evidence ; and whether he received them and handed them to Mrs. Todd is a question of fact for the jury; therefore they will be received.”
There was no error in this ruling.
After the counsel for the People announced that the testimony for the prosecution was closed, the counsel for respondents then called one Matt W. Pinkerton, who, being sworn and examined on the part and in behalf of the respondents, testified that he resided in Chicago; that he had been in Paw Paw before; that he was there first on the nineteenth of August; that he had seen the respondents. And counsel for the respondents then asked the witness the following question;
ílQ. I want to ask you if you ever called the attention of Marshall Gr. Barker to section 9416 of the Statutes of Michigan ?
A. I did ; I think that was the section.
Q. (Showing book to witness.) Just look at it. Counsel for respondents then stated : ‘I offer this as explanatory of the notes.’
Q. That was prior to bringing the subject to the attention of William Barker, was it?
A. It was after, — after the first interview with him.”
Counsel for respondents then read the section of the statute in evidence. The counsel for the People then proceeded to cross-examine the witness, and asked him :
“Q. Did you have a conversation with Marshall Gr. Barker?
A. I did.
Q. In relation to Harvey Keith ?”
The respondents’ counsel then objected to any conversation as not cross-examination. It appearing that the conver sation was at the same time (by the further examination of the witness), the court overruled the objection, and permitted the witness to be cross-examined, and to testify to the conversation had at that time. Upon this ruling error is assigned.
It is laid down by Mr. Phillips that,
“ If a witness is sworn, and gives some evidence, — as, for instance, to prove an instrument, — -however formal the proof may be, he is to be considered a witness for . all purposes. Or if a witness is sworn, and would be competent to give evidence for the party calling him, the other party will be entitled, strictly, according to the general rule, to cross-examine him, although he has not been examined in chief: ”
2 Phil. Ev. *898; Morgan v. Brydges, 2 Starkie, 314; Wentworth v. Crawford, 11 Tex. 127; Beal v. Nichols, 2 Gray, 264.
In the last case cited the witness was called by the defendant for the sole purpose of proving the execution of two written contracts which the plaintiff refused to admit. The witness was then cross-examined generally, against defendant’s objection. Bigelow, J. said:
“We see no valid objection for changing the rule, as it lias long been established and practiced upon in this commonwealth, that a party calling a witness, even for formal proof of a written instrument, or of other preliminary matter, thereby makes him his witness; nor can he put ieading questions to him unless permitted to do so by the court in the exercise of a sound discretion. It follows that the adverse party has the right to cross-examine the witness upon all matters material to the issue.”
Our own .rulings upon the scope of cross-examination are familiar to the Bar, and have been quite as liberal as those of the Supreme Court of Massachusetts: People v. Hare, 57 Mich. 505 ; Thompson v. Richards, 14 Mich. 172; Chandler v. Allison, 10 Mich. 461; New York Iron Mine v. Negaunee Bank, 39 Mich. 658; Driscoll v. People, 47 Mich. 413; Jacobson v. Metzger, 35 Mich. 103 ; Lichtenberg v. Mair, 43 Mich. 387 ; Railroad Co. v. Van Steinburg, 17 Mich. 99 ; O'Donnell v. Segar, 25 Mich. 367; Wilson v. Wagar, 26 Mich. 452 ; Haynes v. Ledyard, 33 Mich. 319 ; Stearns v. Vincent, 50 Mich. 221; People v. Murray, 52 Mich. 288 ; Joslin v. Grand Rapids Ice Co., 53 Mich. 322; Dalman v. Koning, 54 Mich. 320.
There was no error in permitting the cross-examination of the witness.
The exceptions are overruled, and the judgment is affirmed.
Campbell, C. J., and Sherwood, J., concurred. | [
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Per Curiam.
In this action for declaratory relief and damages for breach of contract, plaintiff, Tenneco Inc., contends that environmental cleanup costs it incurred are covered under general liability and umbrella policies issued by defendant’s predecessor, Michigan Mutual Insurance Company (MMIC), to plaintiffs predecessor, the Monroe Auto Equipment Company (Monroe), for periods from July 1,1956, to July 1,1978. Defendant Amerisure Mutual Insurance Company appeals by leave granted the trial court’s denial of its various motions for summary disposition that were-based on the grounds that plaintiff failed to satisfy the policies’ notice provisions, that plaintiff forfeited any coverage by entering into settlements and also making “voluntary” payments that defendant had not approved, and that plaintiffs lawsuit was time-barred. Plaintiff filed a cross-motion for summary disposition, asserting that under the policies’ definition of “occurrence,” an “injury in fact” during the policy period triggered coverage and that the policy language required defendant to pay “all sums” that plaintiff became liable to pay as damages for injury or property damage. We reverse and remand for entry of a judgment for the defendant.
I. SUMMARY OF FACTS AND PROCEEDINGS
Monroe used solvents containing volatile organic compounds, trichloroethylene (TCE) and trichloroethane (TCA), to manufacture auto parts at facilities in Hartwell, Georgia, beginning in 1956; in Paragould, Arkansas, beginning in 1970; and in Cozad, Nebraska, beginning in 1961. Unaware of the danger posed to the environment, Monroe used the solvents through the mid-1980s, disposing of wastewater and sludge containing TCE and TCA at the sites of its manufacturing plants and at nearby landfills in Arkansas (Finch Road), and Nebraska (Sandhills). As a result, TCE and TCA contaminated the groundwater and Monroe incurred substantial environmental cleanup costs in the years since the contamination was discovered. Plaintiff filed this lawsuit in 2003 seeking a declaration that defendant, the corporate successor to MMIC, is liable for all environmental cleanup expenses plaintiff incurred over the years because defendant insured Monroe under general liability and umbrella policies from July 1, 1956, to July 1, 1978.
Defendant filed several motions for summary disposition, contending that the undisputed facts showed that plaintiff had failed to satisfy the policies’ notice provisions as a condition precedent to liability, and that plaintiff had forfeited any coverage by making “voluntary” payments and entering into settlements that defendant had not approved. Defendant also contends that this action is barred either by laches or the running of the six-year period of limitations applicable to contract actions. Plaintiff filed a cross-motion for summary disposition, asserting that under the policies’ definition of “occurrence,” coverage was “triggered” by an “injury in fact” during the policy period and that the policy language required defendant to pay “all sums” that plaintiff became liable to pay as damages for injury or property damage.
The policy conditions pertinent to this appeal involve (1) notice of occurrence, (2) notice of claim, (3) voluntary payment, and (4) action against the company. They provide:
4. Insured’s Duties in the Event of Occurrence, Claim or Suit
(a) In the event of an occurrence, written notice containing particulars sufficient to identify the insured and also reasonably obtainable information with respect to the time, place and circumstances thereof, and the names and addresses of the injured and of available witnesses, shall be given by or for the insured to the company or any of its authorized agents as soon as practicable.
(b) If a claim is made or suit is brought against the insured, the insured shall immediately forward to the company every demand, notice, summons or other process received by him or his representative.
(c) The insured shall cooperate with the company and, upon the company’s request, assist in making settlements, in the conduct of suits and in enforcing any right of contribution or indemnity against any person or organization who may be liable to the insured because of injury or damage with respect to which insurance is afforded under this policy; and the insured shall attend hearings and trials and assist in securing and giving evidence and obtaining attendance of witnesses. The insured shall not, except at his own cost, voluntarily make any payment, assume any obligation or incur any expense other than for first aid to others at the time of accident.
5. Action Against Company!.] No action shall lie against the company unless, as a condition precedent thereto, there shall have been full compliance with all of the terms of this policy, nor until the amount of the insured’s obligation to pay shall have been finally determined either by judgment against the insured after actual trial or by written agreement of the insured, the claimant and the company. [Emphasis in original.]
A. EVENTS AT COZAD, NEBRASKA
Monroe wrote a February 15, 1985, letter to MMIC stating:
This is to put you on notice of a potential claim at our plant in Cozad, Nebraska involving sudden and accidental discharge(s) to the environment. The effects of the discharge(s) were first noted in Spring and Summer 1984. Some or all of the discharges may have occurred prior to July 1, 1978.
Samuel Mostkoff, Monroe’s legal counsel, sent a “follow-up” letter in October 1985 informing MMIC that, as of July 31, 1985, Monroe’s cleanup costs at its Cozad plant were $454,323.00 and that Monroe was continuing to document additional expenses.
Defendant acknowledged receipt of Mostkoff’s letter in correspondence dated November 1, 1985, and informed Monroe that its February 1985 letter “appears to have been misplaced.” Defendant also, requested all available documentation regarding the costs incurred and reserved its rights regarding coverage and compliance with the terms and conditions of the policies.
Mostkoff responded with a November 7, 1985, letter stating that the documentation defendant sought was “quite voluminous.” He requested that either defendant’s claims examiner “indicate exactly the information you are looking for,” or that someone come to Monroe’s facility for a meeting. It does not appear that defendant acted on this request.
On November 15, 1985, plaintiff and the state of Nebraska agreed to investigate and remediate groundwater contamination at the Cozad plant.
In a letter dated April 17, 1986, plaintiff informed defendant:
This is to advise you that we have recently performed a review of sources of the groundwater contamination for the State of Nebraska. In connection with this review we have identified that some of the contamination is related to spills which occurred in connection with the delivery of these chemicals to our plant. We are reviewing our records and files, as well as the recollections of our employees, to determine the suppliers of these chemicals and/or the distributors/transporters of these chemicals to our Cozad, Nebraska plant.
Once this information is obtained, it will be forwarded to you for your use in filing claims against these potentially-liable parties for their role in the groundwater contamination.
We continue to accumulate documentation on our expenditures at Cozad in connection with the groundwater clean-up. Through December 1985 we had expended approximately $850,000 in activities related to the clean-up. These records are available for your review at Monroe headquarters.
Defendant asserts that plaintiff never documented any pre-1978 spills, nor did plaintiff demand a defense or seek indemnity. Apparently, there have never been any third-party claims or suits or potentially responsible party (PRP) letters sent to plaintiff regarding its Cozad plant.
On February 3,1993, plaintiff sent defendant a letter (the 1993 status letter) purporting to enclose “1993 semi-annual status reports” concerning “significant environmental claims” at all five sites (the three manufacturing plants and two landfills). The parties dispute whether the referenced “status” reports were ever actually sent to defendant; however, defendant asserts this 1993 status letter was the last communication it received from plaintiff before it filed this lawsuit in 2003.
B. EVENTS AT THE SANDHILLS LANDFILL, NEBRASKA
The Sandhills landfill is located approximately nine miles north of the city of Cozad. Plaintiff disposed of wastewater and sludge from its Cozad plant at Sandhills from August 1977 to December 1982. As part of its stipulation with the state of Nebraska on November 15, 1985, pertaining to the Cozad plant, plaintiff was precluded from disposing of sludge at the landfill. On August 28, 1987, the Nebraska Department of Justice notified plaintiff that the Sandhills landfill had been referred to it for enforcement action. Subsequently, on September 14, 1987, plaintiff entered into a consent decree with the state of Nebraska. Other than plaintiffs letters stating that it had incurred cleanup expenditures, plaintiff did not notify defendant of any demands or claims asserted against plaintiff, nor did plaintiff demand a defense or seek indemnity.
C. EVENTS AT HARTWELL, GEORGIA
On June 26,1986, Monroe sent MMIC a letter stating the following:
This is to put you on notice of a potential claim at our plant in Hartwell, Georgia involving sudden and accidental discharge (s) to the environment. The effects of the discharge(s) were first confirmed in January, 1986. Georgia was notified in March 1986. Some or all of the discharge(s) may have occurred prior to July 1, 1978.
Defendant informed plaintiff in a January 30, 1987, letter that, “[a]s of this date, we have not been notified that a claim in fact has been made.” Defendant also reserved its rights under the policy “ [i]f and when a claim is made.”
The next information plaintiff provided defendant regarding its Hartwell plant was the 1993 status letter. Defendant responded to the status letter by informing plaintiff that the information provided “cannot be matched to any prior claim files” and by requesting additional policy and claim information. The parties did not communicate further before the 2003 lawsuit.
Plaintiff contends that in the fall of 1986 the Georgia environmental protection agency of its Department of Natural Resources required plaintiff to submit reports on the results of test wells monitoring groundwater contamination. Plaintiff submitted a report to the Georgia Environmental Protection Division (GEPD) on January 30,1987. On June 29,1994, the GEPD notified plaintiff that its Hartwell property would be added to Georgia’s hazardous site inventory and instructed plaintiff to submit more environmental data.
On February 7, 1995, the GEPD notified plaintiff that it was a potentially responsible party (PRP) for contamination at the Hartwell plant site. Subsequently, on April 2, 1996, plaintiff entered into a consent order with the state of Georgia regarding remediation at the plant. In addition, between 1989 and 1995, plaintiff settled third-party claims and purchased property adjacent to the plant. Plaintiff did not notify defendant of its interaction with the GEPD or of the third-party settlements.
D. EVENTS AT PARAGOULD, ARKANSAS
On March 23, 1988, plaintiff sent defendant a letter that stated:
This is to put you on Notice of a potential claim at our plant in Paragould, Arkansas involving sudden and accidental discharge(s) to the environment. The effects of the discharge(s) were first noted in April, 1986. Some or all of the discharges may have occurred prior to July 1, 1978.
Defendant responded in a letter dated April 19,1988, citing the policies’ conditions and informing plaintiff that “because of your failure, promptly, to report the occurrence of April of 1986 to the Michigan Mutual Insurance Company, you are in violation of that duty of your policy” that required notice of an occurrence, claim, or suit. Defendant indicated that it would investigate the loss, but reserved all rights under the policy, including denying coverage.
Plaintiff responded to defendant’s reservation of rights in a letter dated June 2, 1988. Plaintiff informed defendant that it notified defendant as soon as it became aware that the policies might be involved. Plaintiff also insisted that defendant had not been prejudiced.
Plaintiff also wrote in a March 8, 1991, letter to defendant:
Please consider this letter a supplement to our letter of March 23,1988 in which we put you on notice of a potential liability claim concerning accidental discharge(s) into the environment at our Paragould, Arkansas manufacturing facility. A related site has been added to the Environmental Protection Agency’s Superfund list. This letter is our notice to you of the potential additional liability due to this action.[ ]
Defendant asserts that the 1993 status letter was the last communication from plaintiff to defendant regarding the Paragould plant before the 2003 lawsuit. Apparently, no third-party claims were filed against plaintiff relating to contamination at the Paragould plant.
E. EVENTS AT THE FINCH ROAD LANDFILL, ARKANSAS
The Finch Road landfill, also referred to as the Paragould pit or the Monroe Auto pit, is located seven miles from plaintiffs Paragould plant in Arkansas. Plaintiff dumped its waste sludge at this site from March 1973 to sometime in 1978. Groundwater contamination was discovered at the site in July 1987. On August 30, 1990, the site was added to a national priorities list as part of the Superfund process under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), 42 USC 9601 et seq. In a January 9, 1991, letter, the United States Environmental Protection Agency (EPA) notified plaintiff it was a PRP regarding the “Monroe Auto Pit Superfund Site.” Plaintiff contends that its March 8, 1991, letter gave defendant notice of this EPA action, but defendant asserts that plaintiffs brief on appeal is the first time plaintiff has contended that the Paragould pit was the “related site” referred to in that letter. On March 18, 1991, plaintiff received another letter from the EPA notifying plaintiff it had 60 days to agree to conduct a remedial investigation and feasibility study or the EPA would do so itself and sue plaintiff for the expense under CERCLA. On June 28, 1991, plaintiff entered into a consent order with the EPA requiring remedial investigation and response.
On November 18, 1996, the Arkansas equivalent of the EPA sent its own version of a PRP letter to plaintiff regarding the “Monroe Auto Superfund Site.” On February 5, 1998, plaintiff entered into a consent order with the Arkansas agency for remedial response.
In addition to agreeing to take remedial action with federal and state environmental agencies, plaintiff settled some third-party claims arising out of the contamination of properties adjacent to the Finch Road landfill.
Defendant asserts that plaintiff failed to provide it any notice of either governmental or private third-party demands regarding the landfill and, further, that plaintiff made no specific demand for coverage.
F. TRIAL COURT RULINGS
As noted above, defendant moved for summary disposition on the basis that plaintiff failed to satisfy the policies’ notice provisions, that plaintiff forfeited any coverage by entering into settlements that defendant had not approved and by making “voluntary” payments, and that plaintiffs lawsuit was time-barred either by the doctrine of laches, or by the running of the six-year period of limitations applicable to contract actions. Plaintiff filed a cross-motion for summary disposition, asserting that under the policies’ definition of “occurrence,” coverage had been “triggered” by an “injury in fact” during the policy period and that the policy language required defendant to pay “all sums” that plaintiff became liable to pay as damages for injury or property damage. The motions were argued on September 22, 2006.
The trial court issued several orders deciding the various motions. Pertinent to the present appeal, the trial court entered a single order denying defendant’s motion for summary disposition that was based on notice, laches, and voluntary payment. In its order, the trial court stated that laches did not apply because plaintiffs action was not an equitable action. Although the court noted that the applicable statute of limitations governed, the court did not further address the issue. With respect to the policies’ “voluntary payment” condition, the trial court suggested that the condition may not apply to payments required by a governmental agency and that the far-reaching powers of the government rendered plaintiffs response something other than voluntary. With respect to the “notice” condition, the trial court stated that plaintiff notified defendant of a potential claim when various governmental agencies advised plaintiff of the contamination. Further, the court noted that defendant stated that it would investigate, but both parties “dropped the ball” by failing to follow through. Because of defendant’s own failings, the trial court reasoned that defendant could not establish that it was prejudiced by plaintiffs failings.
With respect to plaintiffs motion, the trial court ruled that an “injury-in-fact” triggered coverage under the policies of insurance. With respect to allocation, the trial court adopted defendant’s argument that “the policies should be applied using the 'time-on-the-risk’ theory.”
Defendant moved for reconsideration. On reconsideration, the trial court recognized that laches could apply to a breach of contract case where there were “compelling equities” or when withholding relief would be “unfair and unjust.” But to apply laches, the court concluded, would require fact-finding and, therefore, the court denied reconsideration of. defendant’s motion regarding laches. The trial court also ruled that determining when the period of limitations began to run presented questions of fact inappropriate for summary disposition. Further, the court suggested that plaintiffs ongoing payments to remediate environmental damage “have the result of defining the claim as an active occurring event.” Also, the court cryptically noted that "[t]he statute of limitations could be found to toll after payments are completed.” The court further stated, “The statute of limitations could therefore toll when the government is satisfied that the claim or harm has been rectified.” Although to toll the statute is to stop the limitations period from running, the context of the court’s comments suggests it meant the opposite.
The trial court agreed with defendant that it did not fully address defendant’s arguments regarding plaintiffs “voluntary payments” in its first ruling, but it again denied relief after concluding that a question of fact existed regarding whether plaintiffs payments were truly “voluntary” when it paid pursuant to gov ernmental demands. The trial court also ruled that whether plaintiff provided sufficient notice presented the essence of a material factual question for the jury to resolve.
This Court granted defendant’s application for leave to appeal on July 17, 2007. Plaintiff filed a cross-appeal by right on August 6, 2007, pursuant to MCR 7.207(A)(1).
II. STANDARD OF REVIEW
The parties’ motions for summary disposition implicate MCR 2.116(0(10) (no genuine issue' of material fact), and MCR 2.116(C)(7) (immunity granted by law). This Court reviews de novo the trial court’s grant or denial of summary disposition. Maiden v Rozwood, 461 Mich 109, 118; 597 NW2d 817 (1999). When considering a motion under subrule C (10), the court must view the proffered evidence in the light most favorable to the party opposing the motion. Maiden, supra at 120. A trial court properly grants the motion when the proffered evidence fails to establish any genuine issue of material fact and the moving party is entitled to judgment as a matter of law. West v Gen Motors Corp, 469 Mich 177, 183; 665 NW2d 468 (2003). “A genuine issue of material fact exists when the record, giving the benefit of reasonable doubt to the opposing party, leaves open an issue upon which reasonable minds might differ.” Id.
When addressing a motion under subrule C (7), the trial court must accept as true the allegations of the complaint unless contradicted by the parties’ documentary submissions. Patterson v Kleiman, 447 Mich 429, 434 n 6; 526 NW2d 879 (1994). If the material facts are not disputed, this Court reviews de novo as a question of law whether a claim is barred by the statute of limitations. Trentadue v Buckler Automatic Lawn Sprinkler Co, 479 Mich 378, 386; 738 NW2d 664 (2007).
This case also requires the interpretation of an insurance contract. The interpretation of clear contractual language is an issue of law, which is reviewed de novo on appeal. Klapp v United Ins Group Agency, Inc, 468 Mich 459, 463; 663 NW2d 447 (2003). Like any other contract, an insurance policy is an agreement between the parties. Heath v State Farm Mut Automobile Ins Co, 255 Mich App 217, 218; 659 NW2d 698 (2003). The primary goal in the interpretation of an insurance policy is to honor the intent of the parties. Klapp, supra at 473. If an ambiguity in the contract cannot be resolved, it should be strictly construed against the drafter. Id. at 471-474; Wilkie v Auto-Owners Ins Co, 469 Mich 41, 61; 664 NW2d 776 (2003). Further, determining the scope of coverage under an insurance policy is a separate question from whether liability is negated by an exclusion. Heniser v Frankenmuth Mut Ins Co, 449 Mich 155, 172; 534 NW2d 502 (1995). While exclusions are strictly construed in favor of the insured, this Court will read the insurance contract as a whole to effectuate the intent of the parties and enforce clear and specific exclusions. Hayley v Allstate Ins Co, 262 Mich App 571, 575; 686 NW2d 273 (2004) .
With respect to defendant’s claim of laches, this Court reviews a trial court’s equitable decisions de novo, but the findings of fact supporting an equitable decision are reviewed for clear error. Yankee Springs Twp v Fox, 264 Mich App 604, 611; 692 NW2d 728 (2004). A decision is clearly erroneous if, although there is evidence to support it, this Court is left with a definite and firm conviction that a mistake was made. Wayne Co v Wayne Co Retirement Comm, 267 Mich App 230, 252; 704 NW2d 117 (2005).
III. ANALYSIS
A. NOTICE
We conclude that plaintiffs “potential claim” letters were arguably sufficient to satisfy the policies’ notice of occurrence condition, at least for the purposes of summary disposition. See Wendel v Swanberg, 384 Mich 468, 478 n 8; 185 NW2d 348 (1971) (the reasonableness of the notice given is usually a question for the trier of fact). Further, in light of defendant’s failure to investigate, and because, as we hereinafter conclude, defendant’s liability is precluded by other conditions or exclusions, defendant cannot establish prejudice from defective notice of an “occurrence.”
On the other hand, the unrebutted evidence establishes that plaintiff failed to comply with the policies’ condition requiring immediate notice of every claim, suit, demand, notice, or summons. This condition is independent of the condition requiring notice of an “occurrence.” See Koski v Allstate Ins Co, 456 Mich 439, 445; 572 NW2d 636 (1998). Because defendant forever lost the opportunity to contest plaintiffs liability, engage in settlement negotiations, or seek a judicial determination of its liability to plaintiff under the policies, defendant has established the prejudice necessary to terminate its liability to plaintiff. Id. at 447-448; Wood v Duckworth, 156 Mich App 160, 163-164; 401 NW2d 258 (1986).
We conclude that both parties’ tangential arguments lack merit. Plaintiff bases an argument on estoppel. However, the reasoning of Meirthew v Last, 376 Mich 33; 135 NW2d 353 (1965), simply does not apply to these facts because plaintiff never asked for, and defendant never undertook, plaintiffs defense; consequently, a duty of complete disclosure did not arise. A party may be estopped to assert a fact when (1) the party by representation, admissions, or silence intentionally or negligently induces another party to believe certain facts, (2) the other party justifiably relies and acts on this belief, and (3) the other party will be prejudiced if the first party is permitted to deny the existence of those alleged facts. Van v Zahorik, 460 Mich 320, 335; 597 NW2d 15 (1999). Silence or inaction alone is insufficient to invoke estoppel absent a legal or equitable duty to disclose. West American Ins Co v Meridian Mut Ins Co, 230 Mich App 305, 310; 583 NW2d 548 (1998). In Meirthew, the duty of full disclosure arose because the same counsel represented both the insurer and the insured in the defense of litigation against the insured, but the insurer failed to disclose the specific policy conditions it would rely on to deny coverage in the event of an adverse verdict. Meirthew, supra at 36-38. Here, defendant responded to plaintiffs notices of “potential claim” by informing plaintiff that it was reserving its rights to deny coverage on the basis of all the terms and conditions of the policies. Plaintiff does not allege, nor can it establish, that justifiable reliance caused it prejudice. See Allstate Ins Co v Keillor (After Remand), 450 Mich 412, 416 n 2; 537 NW2d 589 (1995) (holding that the insurer was not estopped from asserting a policy defense not contained in its reservation of rights letter where the delay was not unreasonable and the insured was not prejudiced). Further, it is plaintiffs failure to notify defendant of claims, suits, and demands against it by third parties and governmental agencies, an independent policy condition, that prejudiced defendant under the facts of this case.
Likewise, we reject defendant’s reliance on Rowland v Washtenaw Co Rd Comm, 477 Mich 197; 731 NW2d 41 (2007). The Supreme Court in that case held that the 120-day period of MCL 691.1404(1) within which to give notice to invoke the exception to governmental immunity with respect to a defective highway should be enforced as written, and the Court also overruled prior decisions holding that the failure to comply with the statute’s terms would not bar recovery absent a showing of prejudice. Defendant asserts that the same reasoning applies by analogy to the insurance policy notice conditions, i.e., that the policy language does not require that defendant show that plaintiffs failings in providing notice caused defendant prejudice. This argument is based on an inapt analogy and would require this Court to ignore longstanding Michigan Supreme Court precedent. The requirement of MCL 691.1404(1) to give notice within 120 days after an injury caused by a defective highway is far different from a provision in an insurance policy requiring notice of an “occurrence,” an event neither expected nor intended, as soon as practicable. But regardless of the merits of defendant’s argument, this Court is bound by the rule of stare decisis to follow the decisions of our Supreme Court. Griswold Properties, LLC v Lexington Ins Co, 276 Mich App 551, 563; 741 NW2d 549 (2007). Our Supreme Court has held “that an insurer who seeks to cut off responsibility on the ground that its insured did not comply with a contract provision requiring notice immediately or within a reasonable time must establish actual prejudice to its position.” Koski, supra at 444.
“Provisions in liability insurance contracts requiring the insured to give the insurer immediate or prompt notice of accident or suit are common, if not universal. The purpose of such provisions is to allow the insurer to make a timely investigation of the accident in order to evaluate claims and to defend against fraudulent, invalid, or excessive claims.” Wendel, supra at 477. The Court further noted that mere delay in complying with a notice condition would not forfeit coverage “because such provisions are construed to require notice within a reasonable time.” Id. at 478, citing Kennedy v Dashner, 319 Mich 491; 30 NW2d 46 (1947), and Exo v Detroit Automobile Inter-Ins Exch, 259 Mich 578; 244 NW 241 (1932). Pertinent to this case, the Wendel Court stated that “[prejudice to the insurer is a material element in determining whether notice is reasonably given and the burden is on the insurer to demonstrate such prejudice.” Wendel, supra at 478 (citations omitted). These principles apply equally to “notice of accident and notice of suit although their application will differ in varying factual contexts.” Id. at 478-479, citing Weller v Cummins, 330 Mich 286, 293; 47 NW2d 612 (1951). The Koski Court, also citing Weller, confirmed this last principle. Koski, supra at 445. But giving notice of an “occurrence” will not relieve an insured of its obligation to provide notice of subsequent claims, suits, demands, or other process. See Aetna Cas & Surety Co v Dow Chem Co, 10 F Supp 2d 800, 811 (ED Mich, 1998).
An insurer suffers prejudice when the insured’s delay in providing notice materially impairs the insurer’s ability to contest its liability to the insured or the liability of the insured to a third party. West Bay Exploration Co v AIG Specialty Agencies of Texas, Inc, 915 F2d 1030, 1036-1037 (CA 6, 1990). Although the question of prejudice is generally a question of fact, Wendel, supra at 478 n 8, it is one of law for the court when only one conclusion can be drawn from the undisputed facts. See Wehner v Foster, 331 Mich 113, 120-122; 49 NW2d 87 (1951). Further, “Michigan law does not require an insurer to prove that but for the delay it would have avoided liability.” West Bay, supra at 1037 (emphasis in original).
In determining whether an insurer’s position has actually been prejudiced by the insured’s untimely notice, courts consider whether the delay has materially impaired the insurer’s ability: (1) to investigate liability and damage issues so as to protect its interests; (2) to evaluate, negotiate, defend, or settle a claim or suit; (3) to pursue claims against third parties; (4) to contest the liability of the insured to a third party; and (4) to contest its liability to its insured. [Aetna Cas, supra at 813.]
Giving plaintiff the benefit of the doubt, we conclude that it is possible that its “potential claim” letters gave defendant notice of an “occurrence” at plaintiffs Cozad, Hartwell, and Paragould plants. Further, giving plaintiff the benefit of the doubt, a reasonable fact-finder might determine plaintiffs March 8,1991, letter referring to a “related site” portending “additional liability” with respect to plaintiffs Paragould plant might have given notice of an “occurrence” with regard to the Finch Road landfill. But there is nothing from which to infer that plaintiff gave defendant notice of an occurrence at the Sandhills landfill. Plaintiff appears to argue that notice of an occurrence at its plants also included notice of an occurrence at the nearby landfills. But the notices regarding Paragould and Cozad mention only plaintiffs “plant,” not a landfill, and, because the plants and the landfills are miles apart, the notices failed to identify the “place” of the “occurrence.”
But even if plaintiff complied with the policies’ condition requiring notice of an “occurrence,” reasonable fact-finders could only conclude that plaintiff failed to give notice of subsequent claims, suits, or demands. In this regard, both our Supreme Court and this Court have held that governmental agency demands for environmental remedial action are “suits” within the meaning of this standard liability insurance policy condition. In Michigan Millers Mut Ins Co v Bronson Plating Co, 445 Mich 558, 573; 519 NW2d 864 (1994), overruled in part Wilkie, supra at 63, our Supreme Court, in the context of an EPA demand for environmental remediation under CERCLA, held “that the legal proceeding initiated by the receipt of [a PRP letter] is the functional equivalent of a suit brought in a court of law.” Similarly, this Court in South Macomb Disposal Auth v American Ins Co (On Remand), 225 Mich App 635, 668; 572 NW2d 686 (1997), held that state agency demands for environmental remediation under state environmental laws “constituted a ‘suit’ for purposes of triggering the insurers’ duty to defend.” Plaintiff contends that its 1980s and early 1990s correspondence placed defendant on notice that it faced governmental demands for environmental cleanup. While plaintiff, in some of this correspondence, stated that it had incurred environmental cleanup expenses at its Cozad plant and, in other correspondence, suggested that state or federal agencies may have been involved in determining that groundwater contamination had occurred, no correspondence from plaintiff stated that it had received a PRP letter or other governmental demand for remedial action, or that it had received a private third-party claim, suit, or demand. Further, it appears undisputed that after providing defendant with the initial notices, plaintiff settled several third-party claims and entered into several stipulations and consent orders with various governmental agencies for remedial action, all without providing defendant any specific notice of its actions.
We conclude that plaintiff prejudiced defendant by not complying with the condition requiring it to give notice of any suits or demands even if plaintiff notified defendant of an “occurrence.” Although an “occurrence” triggers coverage under the policies, the policies, read as a whole, plainly provide that defendant’s liability under the policies is limited to plaintiffs legal obligation to pay being determined after an actual trial or by “agreement of the insured, the claimant, and the [insurance] company.” Further, the policies prohibit the insured from voluntarily paying its believed legal obligation without the consent of the insurance company. In sum, the insurance policies cover liability to third parties. See Gelman Sciences, Inc v Fidelity & Cas Co, 456 Mich 305, 312; 572 NW2d 617 (1998), overruled in part on other grounds Wilkie, supra at 63. It is a third-party suit that triggers the insurer’s duty to defend the insured and, ultimately, to indemnify the insured for sums the insured is legally obligated to pay. See Michigan Millers, supra at 573-575, and American Bumper & Mfg Co v Hartford Fire Ins Co, 452 Mich 440, 450-451; 550 NW2d 475 (1996) (general liability policy contained two separate, but related, duties of the insurer: the duty to indemnify the insured for sums the insured is legally obligated to pay for covered bodily injury or property damage and the duty to defend any suit against the insured seeking damages because of an occurrence).
Without regard to whether evidence has been lost or might be available from other sources, the lack of notice of claims, suits, or demands has forever cost defendant the opportunity to contest plaintiffs liability, engage in settlement negotiations, or seek a judicial determination of its liability to plaintiff under the policies. Thus, defendant has established the prejudice necessary to preclude any liability it may have had to plaintiff. Specifically, the lack of notice has materially impaired its ability to contest its liability to plaintiff and plaintiffs liability to the government for cleanup or for third-party claims. West Bay, supra at 1036-1037. This is so even if, had defendant been notified of suits or claims, the outcome might not have been different. Id. at 1037. Our conclusion that defendant has satisfied its burden of showing that it was prejudiced as a matter of law is supported by the reasoning employed in Koski, supra; Wood, supra-, and Wehner, supra.
The Wehner Court credited the unrebutted testimony of the insurer’s assistant claims manager as establishing a prima facie case of prejudice from late notice of an occurrence. Wehner, supra at 122. The claims manager testified that had the insurer been promptly notified, it could have determined the question of liability, obtained competitive cost estimates regarding damages, attempted to settle the claim if there were liability, and established a reserve for future payments if damage appeared extensive. Id. 118-119. Defendant here lost the opportunity for a prompt determination of its liability to the insured, lost the opportunity to negotiate settlements with governmental agencies and third parties, and lost the opportunity to build reserves for future payments if liability existed and damage appeared extensive.
The insured in Wood waited 18 months before notifying the insurance company of a lawsuit against him. The Court observed that
the insured neglected to notify the insurance company of the lawsuit until liability was virtually assured by the damaging admissions of the insured prior to notice, in direct contravention of the insurance agreement, the forfeiture clause of the policy, which provides that no action shall lie against the company unless, as a condition precedent, the insured has fully complied with all the terms of the policy, should take effect. [Wood, supra at 163-164.]
So, too, in the present case, plaintiff never notified defendant of suits, claims, or demands. It waited until after it had settled claims and entered into stipulations and consent decrees, all in contravention of policy conditions prohibiting settlements without defendant’s consent.
In Koski, our Supreme Court held that the insurer had been prejudiced by late notice of suit even though the insurer had received prompt notice of the occurrence, which the Court referred to as “the notice-of-claim requirement.” Koski, supra at 444. But the insured did not notify the insurer that a lawsuit had been filed until three months after entry of a default judgment. Id. This deprived the insurer of “any opportunity to engage in discovery, cross-examine witnesses at trial, or present its own evidence relative to liability and damages.” Id. at 445. Although the insurer had been notified of the underlying accident, the Court found it unreasonable to impose on the insurer “ ‘sentry duty’ ” to determine if the insured were sued. Id. at 446, quoting Weaver v Hartford Accident & Indemnity Co, 570 SW2d 367, 369 (Tex, 1978). Moreover, the Koski Court held that the insured was not released from complying with the notice-of-suit condition precedent to the insurer’s liability by the fact that the insurer had denied coverage after notice of the accident. Koski, supra at 441, 445. On the other hand, the Court emphasized, “an insurer who knows of legal proceedings instituted against its insured, but nevertheless chooses to rest on its claim of noncoverage, faces a heavy burden in demonstrating prejudice from its insured’s failure to comply with a notice provision.” Id. at 446 n 7. Because notice of suit was not given until three months after entry of a default judgment, which was unlikely to be set aside, the Court determined that the insurer was clearly prejudiced. Id. at 446.
In sum, we conclude that even if plaintiff gave adequate notice of an occurrence, it subsequently failed to provide notice of governmental environmental cleanup demands — the functional equivalent of a lawsuit — and of third-party claims and demands. Plaintiffs failure to give notice of suit deprived defendant of the opportunity to promptly contest its liability to the insured, participate in settlement negotiations, or contest plaintiffs liability. Prejudice to defendant is clear because plaintiff waited years after its liability had been cemented by its own settlements, stipulations, and consent decrees before seeking reimbursement from defendant. The trial court erred by not granting defendant summary disposition on this basis.
B. LACHES AND THE STATUTE OF LIMITATIONS
We conclude that although plaintiff styled this lawsuit as an action for a declaratory judgment, it is essentially a breach of contract claim that is governed by the six-year period of limitations. MCL 600.5807(8). Plaintiffs claim is for money damages based on defendant’s alleged breach of its duties to defend and indemnify plaintiff as a result of the environmental claims asserted against it. In that regard, all events giving rise to plaintiffs claims, except one, occurred more than six years before plaintiff filed its complaint. Consequently, plaintiffs claims are generally barred by the statute of limitations. To the extent that plaintiffs claim regarding the February 5, 1998, Finch Road landfill consent order survives the statute of limitations inquiry, recovery against defendant is precluded by plaintiffs failure to give notice to defendant of the related November 18, 1996, PRP letter, as discussed in part III (A) of this opinion, or for breach of the “voluntary payments” and “no action” conditions, discussed hereafter in part III (C) of this opinion.
In Taxpayers Allied For Constitutional Taxation v Wayne Co, 450 Mich 119; 537 NW2d 596 (1995), our Supreme Court addressed the time limitations within which to bring claims for retrospective relief (a tax refund) and for prospective relief (injunctive and de claratory relief) for an alleged unconstitutional tax. The Court observed that it had to “analyze the time of accrual separately for each type of relief sought.” Id. at 123. Regarding the refund, the claim accrued when the “wrong” occurred, MCL 600.5827, which was when the tax was assessed and became due. Taxpayers, supra at 123-124. The Court held that the pertinent one-year period of limitations, MCL 600.308a(3), applied to the refund claim. Taxpayers, supra at 122-126. But the plaintiffs claim for prospective relief from an alleged unconstitutional tax did not neatly fit a statute of limitations defense and to hold otherwise “would truncate the constitutional right.” Id. at 127.
With respect to declaratory relief, the Court in Taxpayers, supra at 128, quoted with approval Luckenbach Steamship Co v United States, 312 F2d 545, 548 (CA 2, 1963):
“Limitations statutes do not apply to declaratory judgments as such. Declaratory relief is a mere procedural device by which various types of substantive claims may be vindicated. There are no statutes which provide that declaratory relief will he harred after a certain period of time. Limitations periods are applicable not to the form of the relief but to the claim on which the relief is based.” [Emphasis added.]
The Court further stated that claims for declaratory relief must necessarily be based on an underlying substantive claim to satisfy the requirement that an “ ‘actual controversy’ ” exist. Taxpayers, supra at 128. “Once a court determines which statute of limitations applies, however, the time at which the claim accrues for purposes of applying that statute depends on the type of relief sought.” Id. at 128 n 10. “Declaratory relief may not be used to avoid the statute of limitations for substantive relief.” Id. at 129. Consequently, a careful reading of Taxpayers leads to the conclusion that when the statute of limitations would bar granting relief on the underlying substantive claim, it also bars the same claim when stated as one seeking declaratory relief. Holding otherwise is equivalent to rendering an advisory opinion on a moot issue, one for which the relief requested cannot be granted. See Michigan Nat’l Bank v St Paul Fire & Marine Ins Co, 223 Mich App 19, 21; 566 NW2d 7 (1997).
MCL 600.5815 buttresses this analysis of Taxpayers. “The prescribed period of limitations shall apply equally to all actions whether equitable or legal relief is sought. The equitable doctrine of laches shall also apply in actions where equitable relief is sought.” MCL 600.5815. This Court has held that MCL 600.5815 does not preclude the application of laches to legal actions but “evidences only a legislative intent to subject equity actions to the same statute of limitations available for law actions, thereby modifying the prior judicial practice of applying a statute of limitations by analogy in an equity action.” Eberhard v Harper-Grace Hospitals, 179 Mich App 24, 36; 445 NW2d 469 (1989). See also Attorney General v Harkins, 257 Mich App 564, 568-572; 669 NW2d 296 (2003), which invoked MCL 600.5815 to apply the six-year limitations period of MCL 600.5813 to an action for injunctive relief.
There is, however, a relationship between laches and the statute of limitations. Lothian v Detroit, 414 Mich 160, 165; 324 NW2d 9 (1982). The doctrine of laches will not ordinarily apply if a statute of limitations will bar a claim because laches is viewed as the equitable counterpart to the statute of limitations. Eberhard, supra at 35, citing Lothian, supra. If laches applies, a claim may be barred even though the period of limitations has not run. The application of laches can shorten, but never lengthen, the analogous period of limitations. Citizens Ins Co of America v Buck, 216 Mich App 217, 228; 548 NW2d 680 (1996). For laches to apply, inexcusable delay in bringing suit must have resulted in prejudice. Id.; Wayne Co v Wayne Co Retirement Comm, 267 Mich App 230, 252; 704 NW2d 117 (2005). With respect to the statute of limitations, delay alone for the prescribed period is a conclusive bar to suit. Lothian, supra at 165-166. Thus, laches may bar a legal claim even if the statutory period of limitations has not yet expired. Eberhard, supra at 35-36; Citizens, supra.
The true nature of a plaintiffs claim must be examined to determine the applicable statute of limitations. Adams v Adams (On Reconsideration), 276 Mich App 704, 710; 742 NW2d 399 (2007). “[T]he gravamen of an action is determined by reading the complaint as a whole, and by looking beyond mere procedural labels to determine the exact nature of the claim.” Id. at 710-711. Here, plaintiff asserts in ¶ 36 of its first amended complaint that defendant was obligated under the insurance polices “to defend and indemnify” plaintiff with respect to the environmental claims it faced. In ¶ 37, plaintiff asserts that defendant “has denied coverage, reserved the right to refuse coverage, or otherwise failed or refused to comply with its contractual duties and obligations” regarding the environmental claims brought against plaintiff. “These breaches,” plaintiff alleges in ¶ 38, have deprived plaintiff of the benefits of insurance coverage. Plaintiff, in its prayer for relief, requests “actual compensatory and consequential damages” for defendant’s “breaches of its insurance contracts.” Consequently, the gravamen of plaintiffs complaint is breach of contract. Specifically, plaintiff alleges that defendant breached its contractual duties (1) to defend plaintiff from the environmental claims asserted against it and (2) to indemnify plaintiff for the sums it became legally obligated to pay as a result of environmental damage. Plaintiff seeks legal relief, i.e., money damages. Accordingly, the six-year period of limitations applicable to breach of contract actions applies. Taxpayers, supra at 128-129; Lothian, supra at 171-175.
In Michigan, a breach of contract claim accrues “at the time the wrong upon which the claim is based was done regardless of the time when damage results.” MCL 600.5827. To determine the “wrong upon which the claim is based,” the parties’ contract must be exámined. Scherer v Hellstrom, 270 Mich App 458, 463; 716 NW2d 307 (2006). Here, plaintiff alleges two wrongs. First, that defendant breached its duty to defend plaintiff from the environmental claims and, second, that defendant breached its duty to indemnify plaintiff for expenses it became legally obligated to pay for response activities. In general, “a cause of action for breach of contract accrues when the breach occurs, i.e., when the promisor fails to perform under the contract.” Blazer Foods, Inc v Restaurant Properties, Inc, 259 Mich App 241, 245-246; 673 NW2d 805 (2003). With respect to an insurer’s promise to defend its insured from suits, a breach occurs when the insurer refuses to defend an action brought against its insured. Schimmer v Wolverine Ins Co, 54 Mich App 291, 297; 220 NW2d 772 (1974). With respect to a promise to indemnify, the period of limitations runs from “when the indemnitee sustained the loss,” Ins Co of North America v Southeastern Electric Co, Inc, 405 Mich 554, 557; 275 NW2d 255 (1979), or “when the promisor fails to perform under the contract.” Cordova Chem Co v Dep’t of Natural Resources, 212 Mich App 144, 153; 536 NW2d 860 (1995).
As we have already noted, all events giving rise to defendant’s alleged duties of performance with respect to defending plaintiff against environmental “suits” or indemnifying plaintiff for property damage claims plaintiff became legally obligated to pay, except in one instance, occurred more than six years before this lawsuit was filed in June 2003. With respect to environmental claims, defendant’s obligation to defend plaintiff would have arisen upon plaintiffs receipt of the complaint in a lawsuit seeking money for property damage or upon receipt of a governmental agency PRP letter. See Michigan Millers, supra at 573-575, and South Macomb Disposal Auth, supra at 668. Plaintiff became legally obligated for cleanup costs giving rise to plaintiffs claim for indemnity when it entered various third-party private settlements and stipulations or consent orders with various governmental agencies. Plaintiff entered one consent order within the six-year period immediately preceding the filing of this lawsuit. Specifically, plaintiff entered a consent order on February 5, 1998, with the Arkansas Department of Pollution Control and Ecology for remedial response at the Finch Road landfill. But to the extent that plaintiffs claim is based on this consent order, recovery against defendant is precluded by the policies’ notice condition precedent as discussed in part III (A) of this opinion, or breach of the “voluntary payments” and “no action” conditions precedent, hereafter discussed in part III (C) of this opinion.
Plaintiff asserts two arguments regarding the statute of limitations that, though logical and having some caselaw support, we reject under the facts and circumstances of this case. First, plaintiff argues that the period of limitations did not begin to run until defendant formally denied coverage, which occurred after this lawsuit was filed. Plaintiff relies on Schimmer, supra at 297, which states that a cause of action for breach of the duty to defend accrues “when [the in surer] refused to defend the actions brought against [the] plaintiff.” Although this statement is dictum, it does appear to be the general rule. Plaintiff also relies on Jacobs v Detroit Automobile Inter-Ins Exch, 107 Mich App 424; 309 NW2d 627 (1981), but that case is factually distinguishable in that it was based on policy language “that a demand for arbitration of a claim for uninsured motorist benefits was a condition precedent to plaintiffs right to suit.” Id. at 431.
Plaintiffs argument that the period of limitations did not begin to run until defendant formally denied coverage fails. First, plaintiffs complaint alleges that the breach of contract had already occurred at some point before the filing of the complaint. Paragraph 37 of the complaint alleges that defendant “denied coverage, reserved the right to refuse coverage, or otherwise failed or refused to comply with its contractual duties and obligations ... .” Further, plaintiff began incurring the expenses for which it now seeks indemnification in 1985 and notified defendant that it had incurred some of those expenses in letters dated October 3, 1985, and April 17, 1986. The first letter specifically advised that plaintiff would be making a claim against defendant for the cleanup expenses it was incurring. Defendant’s November 1, 1985, response to the October 3, 1985, letter at most promised to investigate coverage while reserving its rights under the policy. It does not appear that defendant responded to the second letter, which was referenced: “Claim Concerning Cozad Groundwater Contamination.” The last correspondence between the parties before the instant lawsuit was filed occurred in February 1993. Plaintiff forwarded to defendant a letter enclosing “status reports” regarding its “significant environmental claims” concerning all five sites at issue. Defendant responded on February 24, 1993, that it could not match the material presented in plaintiffs letter to any prior claim and requested further information. Thus, by 1993, although plaintiff had asserted claims for indemnity regarding all five sites, defendant gave no indication that it would honor the claims. We conclude that the period of limitations began to run notwithstanding the lack of a formal denial by defendant. Indeed, at the very latest, the period of limitations began to run on a claim for indemnity when plaintiff became legally obligated for cleanup costs after it entered into settlements with private third parties and stipulations or consent orders with various governmental agencies.
With respect to plaintiffs claim for breach of defendant’s duty to defend “suits” brought against plaintiff, defendant never refused to do so because it was never informed of any suits and because plaintiff never requested a defense. The policies themselves set forth that defendant has both a duty and the right to defend any suit for covered damages brought against plaintiff. Further, the policies require plaintiff to immediately notify defendant of such suits, which plaintiff did not do. For the reasons discussed in part III (A) of this opinion, defendant suffered prejudice from plaintiffs breach of the notice-of-suit condition. For the same reasons, plaintiffs inexcusable delay in bringing suit regarding the asserted duty to defend has prejudiced defendant. Further, plaintiffs breach of the notice condition combined with an inexcusable delay of longer than the statutory limitations period in filing suit created the “exceptional circumstances” or “compelling equities” for laches to bar this claim. Eberhard, supra at 35-36.
Finally, we reject plaintiffs argument that the policies’ “no action” condition precedent has not yet been fulfilled and, therefore, the period of limitations could not run. Not only must the policies be read as a whole but also so must the “no action” clause. A paragraph of a contract “must be read as a whole and together with the remaining provisions of the [contract], and not by disassociating one part thereof from the remainder.” Fox v Detroit Trust Co, 285 Mich 669, 676; 281 NW 399 (1938). We do not read the “no action” condition as a temporal requirement for suit, i.e., a contractual statute of limitations. The “no action” condition provides:
No action shall lie against the company unless, as a condition precedent thereto, there shall have been full compliance with all of the terms of this policy, nor until the amount of the insured’s obligation to pay shall have been finally determined either by judgment against the insured after actual trial or by written agreement of the insured, the claimant and the company. [Emphasis in original.]
Although the first four words of this paragraph might possibly be read as referring to when a suit could be filed, the clause when read as a whole is a condition precedent to the insurer’s liability, not a time frame within which the insured may file suit. See Wood, supra at 163-164, and Coil Anodizers, Inc v Wolverine Ins Co, 120 Mich App 118, 121-123; 327 NW2d 416 (1982).
In sum, plaintiffs claims are time-barred either by the statute of limitations or by laches.
C. VOLUNTARY PAYMENTS AND SETTLEMENTS
Independent of the lack of notice and the untimely filing of plaintiffs complaint, we agree with defendant that plaintiff voluntarily and without defendant’s approval entered into various consent decrees and incurred extensive costs to remediate environmental contamination at the five sites. Because plaintiff voluntarily entered into various consent decrees and settlements without defendant’s consent, the “volun tary payments” and the “no action” clauses in the policies at issue preclude defendant’s liability under the policies. Coil Anodizers, supra at 123; Wood, supra at 163-164; see also Augat, Inc v Liberty Mut Ins Co, 410 Mass 117, 122-123; 571 NE2d 357 (1991) (consent order that the insured entered into with the government for environment cleanup was “voluntary” and the insurer was not required to demonstrate prejudice before being allowed to disclaim liability under the “voluntary payments” clause).
Plaintiff argues that it did not violate the “voluntary payments” and the “no action” clauses because (1) its responses to governmental cleanup demands were not “voluntary”; (2) defendant waived its right to complain regarding plaintiffs actions by not promptly participating in a response, and (3) defendant has failed to demonstrate that it was prejudiced by plaintiffs actions. We disagree.
Plaintiffs responses to governmental cleanup demands were “voluntary” because plaintiff had other choices. In Michigan Millers, supra at 572-574, our Supreme Court discussed factors that differentiated a common civil liability demand from the PRP letter the EPA sent to Michigan Millers’ insured. The Court held, “Taking into account the various components of this PRP letter and its ramifications, we find that the legal proceeding initiated by the receipt of that notice is the functional equivalent of a suit brought in a court of law.” Id. at 573. The Court noted that the administrative record created after the PRP letter would be critical, that CERCLA essentially imposed strict liability, that the PRP letter carried immediate and severe implications, including that the EPA could take whatever action it deemed necessary, subject only to later review for an abuse of discretion. Id. at 573-574. The Court opined:
The EPA’s powers may also be viewed as coercing the “voluntary” participation of PRPs. The entire CERCLA scheme revolves around “encouraging” PRPs to engage in voluntary cleanups. Only in so doing may a PRP have a voice in developing the record that will be used against it and in determining the amount of its liability through selection of investigatory and remedial methods and procedures. The significance of these incentives is underscored by the fact that EPA-conducted CERCLA actions have historically been considerably and, some would suggest, needlessly more expensive than those actions conducted by PRP groups. [Id. at 574-575.]
Plaintiff relies on the passage above to argue that its responses to governmental cleanup demands were not voluntary. Clearly, coerced action cannot be voluntary. Read in context of the Court’s opinion, however, the quoted comment does not mean voluntary cooperation with the government after receiving a PRP letter is involuntary. Rather, in context, the quoted comment must mean that when faced with the harsh reality of potentially worse alternatives under the CERCLA, cooperation with the government is the wisest choice.
Defendant cites Augat, supra at 122-123, which holds that the insured voluntarily consented to an order with the government for environmental cleanup. In Augat, the insured’s manufacturing plant discharged contaminated wastewater into a municipal sewer system. The Massachusetts Department of Environmental Quality Engineering (DEQE) drafted a complaint against Augat seeking damages, injunctive relief, and civil penalties under Massachusetts’s law. The complaint was simultaneously filed with a consent order signed by Augat and the commonwealth and a proposed judgment, which judgment was entered four days later. The judgment imposed civil penalties and required that Augat decontaminate the site at its own expense. Id. at 118-119. Although Augat wrote to Liberty Mutual a week after the entry of the consent order advising that “ ‘[a] situation has arisen ... which may give rise to a claim’ ” under the comprehensive general liability policy covering the plant, Augat did not advise Liberty Mutual of the consent order until almost 2V2 years later. Id. at 119. Subsequently, Augat submitted a claim for several million dollars for past and future remediation expenses, which Liberty Mutual denied. Id. Augat sued Liberty Mutual for breach of contract and other claims. Id. Liberty Mutual moved for summary disposition on the basis of the policy’s “voluntary payment” clause, which is identical to that at issue in the present case and provides, in part, “ ‘The insured shall not, except at his own cost, voluntarily make any payment, assume any obligation or incur any expense other than for first aid to others at the time of the accident.’ ” Id. at 119 n 3.
Augat argued in opposition that “it did not violate the voluntary payment provision because its consent to judgment was not ‘voluntary,’ but was coerced by the threat of a more costly verdict.” Id. at 120. The court addressed this argument as follows:
The question then becomes whether, by entering into a consent judgment, Augat “voluntarily” assumed the obligation to fund the cleanup, thus releasing Liberty Mutual from the duty to indemnify under the voluntary payment provision of the policy. We conclude that the assumption of the obligation was “voluntary” for present purposes. Here, as Augat urges, we give a seemingly unambiguous term of the insurance policy its common, ordinary meaning. Webster’s defines “voluntary” variously as “by an act of choice,” “not constrained, impelled, or influenced by another,” “acting or done of one’s own free will,” and adds that the word “implies freedom from any compulsion that could constrain one’s choice.” Webster’s Third New International Dictionary 2564 (1961). Augat suggests that, under this definition, its settlement with the DEQE was not “voluntary” because the company did not want to assume the considerable expense of cleaning up the site of the spill. Instead, according to Augat, the company was presented with a “Hobson’s choice”: it could accept the settlement DEQE offered or risk paying treble damages following a suit. We conclude that the decision was “voluntary,” however, because Augat had an alternative — it had the right to demand that Liberty Mutual defend the claim and assume the obligation to pay for the cleanup. Nevertheless, Augat failed to exercise this right. Thus, while Augat’s decision obviously was not “voluntary” in the sense of “spontaneous” or entirely free from outside influence, it was “voluntary” in the sense of “by an act of choice.” Therefore, we conclude that the voluntary payment clause, if applied literally, would remove the cleanup costs from the scope of coverage under the policy. [Augat, supra at 121-122 (citations omitted; emphasis in original).]
The United States District Court for the Eastern District of Michigan in Aetna Casualty, supra at 813, applying Michigan law in a similar pollution case addressing insurance coverage, addressed the question whether Dow Chemical’s responses to governmental demands were “voluntary” within the meaning of the same general liability policy condition. The district court, using reasoning similar to that in Augat, also concluded that Dow Chemical had made “voluntary payments.” Dow had argued that it had a legal obligation that left it with no choice but to respond as it did. Id. at 831. The court rejected this argument, opining “that the insured has other options under circumstances such as those presented here; i.e., the option to demand that its insurers participate in the matter for which it seeks coverage or the option to at least notify its insurers in advance of taking actions for which it later seeks indemnification.” Id. at 832.
Although neither Augat nor Aetna Casualty is binding precedent, the reasoning they employ regarding the meaning of the “voluntary payment” clause is persuasive. Both courts applied principles of construction Michigan courts would employ when interpreting identical language in a general liability policy in a strikingly similar factual setting. Michigan courts also “examine the language in the contract, giving it its ordinary and plain meaning,” Wilkie, supra at 47, and may resort to a dictionary such as Webster’s to establish the meaning of a term, Citizens Ins Co v Pro-Seal Service Group, Inc, 477 Mich 75, 84; 730 NW2d 682 (2007). Further, Michigan courts will enforce clear and unambiguous exclusions in insurance policies unless contrary to Michigan law or policy. See Linebaugh v Farm Bureau Mut Ins Co, 224 Mich App 494, 503-505; 569 NW2d 648 (1997), and Lee v Auto-Owners Ins Co (On Second Remand), 218 Mich App 672, 676; 554 NW2d 610 (1996).
In the present case, as in Augat, plaintiff failed to notify defendant of both third-party claims and governmental environmental cleanup demands that under Michigan law were the equivalent of a lawsuit that would trigger an insurer’s duty to defend the insured. Consequently, plaintiff had choices regarding how to respond to the receipt of governmental PRP letters, including demanding that defendant provide a defense. Augat, supra at 121-122. The insurer’s duty to defend its insured under a general liability policy is broader than the duty to indemnify. American Bumper & Mfg Co v Hartford Fire Ins Co, 452 Mich 440, 450; 550 NW2d 475 (1996). “If the allegations of a third party against the policyholder even arguably come within the policy coverage, the insurer must provide a defense.” Id. at 450-451. Consequently, plaintiff voluntarily made payments, assumed obligations, and incurred expenses within the meaning of the “voluntary payments” clause in the policies. Unless the clause is contrary to public policy, or defendant waived its application, plaintiffs breach of this condition precedent relieved defendant of liability. Coil Anodizers, supra at 121-123; Lee, supra at 676.
The closely related “no action” condition precedent is also pertinent. It is not disputed that plaintiffs obligation to remediate the pollution or pay settlements was not determined “by judgment against the insured after actual trial” or by a written agreement to which defendant was a party. Consequently, unless this condition precedent is contrary to public policy or defendant waived its application, plaintiffs breach has relieved defendant of liability.
Plaintiff argues that neither the “voluntary payment” nor the “no action” clause shields defendant from liability because defendant has not established that it was prejudiced. Although there is longstanding precedent requiring a showing of actual prejudice to void insurance coverage on the basis of the insured’s failure to comply with contractual provisions requiring notice immediately or within a reasonable time, Koski, supra at 444, no such judicial requirement has been grafted onto the “voluntary payment” and “no action” clauses at issue here. To do so now would be contrary to settled principles of contract interpretation. While exclusionary clauses in insurance contracts are strictly construed in favor of the insured, clear and specific exclusions must be enforced as written. Brown v Farm Bureau Gen Ins Co, 273 Mich App 658, 661; 730 NW2d 518 (2007).
This Court has determined the “voluntary payment” and “no action” clauses here at issue to be clear and unambiguous and has enforced them as written without a showing of prejudice. In Coil Anodizers, the plaintiff allegedly produced defective anodized aluminum sheets that yellowed on exposure to sunlight. Coil’s customer (Prime) notified Coil that it would look to Coil to reimburse any expenses it might incur to its own customer (Avion). Coil notified Wolverine, its liability insurer, but Wolverine denied coverage and refused to defend Coil. Although no lawsuit was ever filed, Coil settled the claim. Coil Anodizers, supra at 120. Wolverine’s policy, like the ones in this case, provided that the insurer would pay all sums that the insured shall become legally obligated to pay for covered damages and contained the identical “voluntary payment” and “no action” clauses. Id. at 120-121. This Court found the clauses to be unambiguous conditions of Wolverine’s liability, opining:
The language of the contract’s “no action” clause clearly contemplates that the insured’s liability to the claimant shall first be fixed by formal judgment or be formally acquiesced in by defendant as a condition precedent to recovery. Neither a judgment nor formal consent... was obtained here. Accordingly, plaintiffs settlement... effectively excused defendant from liability. [Id. at 123.]
At least one subsequent panel of this Court has read Coil Anodizers as holding that an insurer need not show prejudice to enforce “voluntary payment” and “no action” clauses. Further, in Giffels v Home Ins Co, 19 Mich App 146; 172 NW2d 540 (1969), on which the Coil Court relied in part, a showing of actual prejudice was not required before the insured’s voluntary settlement relieved the insurer of liability. In Giffels, the insurance policy conditioned payment upon a prior determination that the insured be found legally liable and also reserved to the insurer the right to adjust the claim and to conduct and control the defense of the insured. Id. at 152. The Court held that under the terms of the policy and an express cautionary instruction by the insurer, the insured was not entitled to settle the claim without the consent of the insurer. Id. The Court further held that the plaintiff by his unauthorized settlement with the claimant, “improperly denied [the insurer] the right to effect an adjustment of the claim or to conduct a defense,” thereby releasing the defendants from liability. Id. at 153. The Giffels Court found no need for the insurer to show actual prejudice.
Similarly, the Augat court rejected the insured’s argument that the insurer be required to show actual prejudice from the insured’s breach of the “voluntary payments” clause to relieve the insurer of liability. The court explained that “the purpose of the policy provision in question is to give the insurer an opportunity to protect its interests.” Augat, supra at 123. The court stated:
After Augat agreed to a settlement, entered into a consent judgment, assumed the obligation to pay the entire cost of the cleanup, and in fact paid a portion of that cost, it was too late for the insurer to act to protect its interests. There was nothing left for the insurer to do but issue a check. We conclude, therefore, that no showing of prejudice is required in this case .... {Id.}
The Augat court’s reasoning applies to the present case. See also Wood, supra at 163-164.
Plaintiff cites several federal court decisions to the contrary, including Aetna Cas, supra at 833-834, in which the court predicted that the Michigan Supreme Court would apply a prejudice requirement to the “voluntary payment” and “no action” conditions similar to that with respect to “notice” of occurrence or suit conditions. In general, these federal decisions are either factually distinguishable or are simply not persuasive given this Court’s decision in Coil Anodizers. Further, this Court explicitly rejected a prejudice requirement with respect to an analogous requirement in an uninsured motorist insurance provision that an insured not settle a claim against a third-party tortfeasor without the consent of the insurer. See Lee, supra at 676 (clear and specific exclusions contained in policy language must be given effect without incorporating a condition of prejudice), and Linebaugh, supra at 506-507 (concluding that the plaintiffs “conduct clearly violated the exclusion providing that coverage did not apply to any claim settled without the insurer’s consent [and] neither ‘lack of prejudice’ nor ‘lack of reasonableness’ ” was a sufficient ground for ignoring clear policy language). Consequently, we conclude that the clear and unambiguous “voluntary payment” and the “no action” conditions must be enforced as written without requiring the insurer to prove actual prejudice to its rights.
Finally, plaintiff argues that defendant waived the application of both the “voluntary payment” and the “no action” conditions. We reject this argument for the same reason this Court rejected a similar one in Coil Anodizers. The Court held that Wolverine did not waive the “no action” clause by refusing to defend Coil Anodizers because “an insured must show that the insurer both denied liability and refused to defend an action brought against the insured.” Coil Anodizers, supra at 124 (emphasis in original). No waiver occurred because no lawsuit was ever filed. Id. Similarly, here, defendant was not notified of any third-party suits or governmental PRP demands, nor did plaintiff request that defendant defend it from any such claims or suits. Consequently, defendant could not have waived either the “voluntary payment” or the “no action” conditions. Moreover, “ ‘[a] waiver is a voluntary relinquishment of a known right.’ ” McDonald v Farm Bureau Ins Co, 480 Mich 191, 204; 747 NW2d 811 (2008), quoting Dahrooge v Rochester German Ins Co, 177 Mich 442, 452-452; 143 NW 608 (1913). No waiver occurred here.
D. CONCLUSION
Because of our resolution of the issues discussed in parts III (A), (B), and (C), it is unnecessary for this Court to address the issues raised in plaintiffs cross-appeal. Plaintiffs cross-appeal is moot in light of our resolution of defendant’s issues. An issue is moot if an event has occurred that renders it impossible for the court to grant relief. Michigan Nat’l Bank, supra at 21.
We conclude that the undisputed facts established that plaintiff failed to provide defendant any notice of governmental environmental cleanup demands (PRP letters), the functional equivalent of a lawsuit, or of any private third-party claims or demands. Plaintiffs failure to give notice of suit deprived defendant of the opportunity to promptly contest its liability to the insured, participate in settlement negotiations, or contest plaintiffs liability. Prejudice to defendant is clear because plaintiff waited years after its liability had been cemented by its own settlements, stipulations, and consent decrees before seeking insurance payments. The trial court erred by not granting defendant summary disposition on this issue.
Independently, we find that plaintiffs lawsuit is time-barred by the statute of limitations, or under the equitable doctrine of laches.
Again, independently of the first two reasons, plaintiff “voluntarily” entered third-party settlements, stipulations, and consent decrees with governmental agencies to take remedial action regarding environmental damages. The clear and unambiguous “voluntary payment” and the “no action” conditions precedent preclude defendant’s liability with no requirement that defendant prove actual prejudice to its rights. Consequently, the trial court erred by not granting defendant summary disposition on this basis also.
We reverse and remand for entry of judgment for defendant. We do not retain jurisdiction.
The policies define “occurrence” as “an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured.”
See Gelman Sciences, Inc v Fidelity & Cas Co, 456 Mich 305, 319-320, 329; 572 NW2d 617 (1998), overruled in part Wilkie v Auto-Owners Ins Co, 469 Mich 41, 63 (2003). In this similar case, applying similar policy language, the Court held that an “actual injury must occur during the time the policy is in effect in order to be indemnifiable, i.e., the policies dictate an injury-in-fact approach.” Gelman, supra at 320.
Both parties assert that the pertinent provisions of the various policies are substantially the same; they are paragraphs 8, 9, 10, and 11 in some policies.
On appeal, plaintiff argues the “related site” mentioned in the letter is the Finch Road landfill.
See 26 USC 9507.
Dupuis v Utica Mut Ins Co, unpublished opinion per curiam of the Court of Appeals, issued April 25, 2006 (Docket No. 250766). | [
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Murphy, P.J.
Plaintiffs appeal as of right the trial court’s order granting summary disposition in favor of defendants pursuant to MCR 2.116(C)(7) on the basis of res judicata grounded on earlier bankruptcy proceedings conducted under title 11 of the United States Code, the Bankruptcy Code, and more specifically chapter 7, 11 USC 701 et seq. (liquidation). Defendants cross-appeal, arguing alternative grounds, which were raised but not decided below, in support of the trial court’s ruling to summarily dismiss plaintiffs’ action. We affirm in part, reverse in part, and remand for further proceedings consistent with this opinion.
I. OVERVIEW
In an earlier lawsuit filed by plaintiff RDM Holdings, Ltd. (RDM), against Continental Lighting, L.L.C. (Con-Lighting), formerly known as Continental-Chivas, L.L.C. (Con-Chivas), neither of which is a party here, RDM obtained an order granting partial summary disposition in its favor, but Con-Lighting then filed for chapter 7 bankruptcy protection, staying further proceedings. That lawsuit, which we shall refer to as the RDM I litigation, concerned commercial property located on Merrill Road in Sterling Heights that was leased to Con-Lighting and used to manufacture automobile parts for General Motors Corporation (GM) and DaimlerChrysler Corporation. RDM alleged breach of the lease with respect to Con-Lighting’s obligations to pay holdover rent, insurance, and damages for building repairs and cleanup.
Following the bankruptcy stay that halted the RDM I litigation, RDM and Chestnut Properties, L.L.C. (Chestnut), filed the instant suit against defendants Continental Plastics Co. (Con-Plastics) and Continental Coatings, L.L.C. (Con-Coatings), alleging successor liability, violation of the Uniform Fraudulent Transfer Act (UFTA), MCL 566.31 et seq., and a claim seeking to pierce the corporate veil. We shall refer to the present lawsuit as the RDM II litigation. In RDM II, the theories of recovery reflected efforts to hold defendants liable for Con-Lighting’s alleged breaches of the Merrill Road lease, which were also the subject matter of the RDM I lawsuit. Plaintiffs further alleged in RDM II that Con-Lighting breached leases, under which Chestnut was the landlord, with respect to two additional business properties rented to Con-Lighting.
The trial court granted summary disposition in favor of defendants under MCR 2.116(C)(7) on the basis of res judicata, ruling that the allegations raised in the RDM II complaint could have been addressed in the bankruptcy proceedings had plaintiffs pursued the matter. Plaintiffs appeal that determination, arguing that the elements of res judicata had not been satisfied, and they appeal the trial court’s denial of their motion for partial summary disposition on the UFTA claim. Defendants argue that the trial court properly applied the doctrine of res judicata arising out of the bankruptcy proceedings and that plaintiffs were not entitled to summary disposition on the UFTA claim. Moreover, defendants cross-appeal, contending that, even if the trial court erred in applying res judicata in the context of the court’s reliance on the earlier bankruptcy proceedings, res judicata grounded on the RDM I lawsuit would apply. Further, defendants maintain that they were entitled to summary disposition under MCR 2.116(C) (10) with regard to the successor liability, UFTA, and corporate veil claims.
II. REVIEW OF THE CHAPTER 7 BANKRUPTCY PROCEEDINGS
On August 19, 2005, 11 days after the order granting partial summary disposition was entered in RDM I, Con-Lighting filed a voluntary petition for bankruptcy under chapter 7 in the United States Bankruptcy Court for the Eastern District of Michigan, Southern Division. The petition referred to past names used by Con-Lighting, i.e., Chivas Products, Ltd., and Con-Chivas, it was signed by Kenneth Lamb as president of Con-Lighting, and the petition estimated that there existed between 50 to 99 creditors. A summary of bankruptcy schedules, and the schedules themselves, indicated that Con-Lighting had zero assets, while its liabilities amounted to approximately $2.4 million. A statement of financial affairs provided that Con-Lighting had annual gross income from sales in the amounts of $15.7 million in 2002, $12.7 million in 2003, and $9.5 million in 2004. Additionally, the statement of financial affairs indicated that $940,233 in property and assets had been surrendered to Comerica Bank. In an October 19, 2005, § 341 hearing, with bankruptcy trustee Mark Shapiro presiding, Lamb testified that there was a mistake in the petition and that the Con-Lighting property and assets had actually been surrendered to Con-Plastics. Lamb was unaware of any appraisals being done in regard to the Con-Lighting property before its surrender.
The bankruptcy petition stated that Gregory Eaton held a 51 percent interest in Con-Lighting and that the remaining 49 percent interest was held entirely by Con-Plastics. The petition provided that Con-Plastics currently had possession of Con-Lighting’s books of account and records, along with records of a Con-Lighting inventory. Bankruptcy schedule F (creditors holding unsecured nonpriority claims) listed, among many other creditors, plaintiff Chestnut, with a claim amount of $1,600, and RDM, with the claim amount expressed as “unknown.” Also listed as creditors holding unsecured nonpriority claims were Con-Coatings, owed $1.5 million, and Con-Plastics, owed $303,286.
Bankruptcy trustee Shapiro testified in his deposition that his job in conducting a chapter 7 bankruptcy was to ascertain whether any assets were available for distribution and to liquidate available assets for the benefit of the creditors. He stated that the Con-Lighting bankruptcy was a zero asset estate, which ultimately led to the filing of a “no distribution report” and the closing of the bankruptcy estate. Shapiro testified that claims of successor liability, piercing the corporate veil, alter ego, and fraudulent conveyances were all claims that could be brought or raised by a trustee in the context of a bankruptcy proceeding, usually taking the form of an adversarial proceeding. He asserted that he had done so in the past in other cases. According to Shapiro, he could have pursued those claims against Con-Plastics and Con-Coatings in the bankruptcy court on his own initiative or if requested and justified; plaintiffs, however, never made such a request. Had those claims been successfully pursued in the bankruptcy proceedings, Shapiro could have taken monies recovered from Con-Plastics and Con-Coatings and distributed the funds to creditors, including plaintiffs. He indicated that he has a fiduciary duty to all creditors to look into the validity of such claims. All creditors would have received notice of the bankruptcy. Shapiro was not aware of any laws that obligated or mandated a creditor in bankruptcy proceedings to come forward with claims such as those alleged in RDM II.
We recognize that, while providing some helpful insight, Shapiro’s testimony concerning the authority of a trustee and the bankruptcy court relative to successor liability, corporate veil, and fraudulent conveyance claims and issues does not control. Such matters are governed by the Bankruptcy Code and relevant caselaw construing the code.
III. STANDARD OF REVIEW
This Court reviews de novo a trial court’s decision on a motion for summary disposition. Kreiner v Fischer, 471 Mich 109, 129; 683 NW2d 611 (2004). The issue whether the doctrine of res judicata bars a subsequent lawsuit constitutes a question of law that this Court likewise reviews de novo on appeal. Stoudemire v Stoudemire, 248 Mich App 325, 332; 639 NW2d 274 (2001).
IV SUMMARY DISPOSITION TESTS
We shall first address the issue of res judicata and whether application of the doctrine could be grounded on the bankruptcy proceedings under the circumstances presented. Under MCR 2.116(C)(7) (claim barred by prior judgment, i.e., res judicata), this Court must consider not only the pleadings, but also any affidavits, depositions, admissions, or other documentary evidence filed or submitted by the parties. Horace v City of Pontiac, 456 Mich 744, 749; 575 NW2d 762 (1998). The contents of the complaint must be accepted as true unless contradicted by the documentary evidence. Patterson v Kleiman, 447 Mich 429, 432; 526 NW2d 879 (1994). This Court must consider the documentary evidence in a light most favorable to the nonmoving party. Herman v Detroit, 261 Mich App 141, 143-144; 680 NW2d 71 (2004). If there is no factual dispute, whether a plaintiffs claim is barred under a principle set forth in MCR 2.116(C)(7) is a question of law for the court to decide. Huron Tool & Engineering Co v Precision Consulting Services, Inc, 209 Mich App 365, 377; 532 NW2d 541 (1995). If a factual dispute exists, however, summary disposition is not appropriate. Id.
Because we conclude that the trial court erred in part in applying res judicata, we shall also consider defendants’ arguments under MCR 2.116(C)(10). MCR 2.116(C)(10) provides for summary disposition where there is no genuine issue regarding any material fact and the moving party is entitled to judgment or partial judgment as a matter of law. A trial court may grant a motion for summary disposition under MCR 2.116(0(10) if the pleadings, affidavits, and other documentary evidence, when viewed in a light most favorable to the nonmovant, show that there is no genuine issue with respect to any material fact. Quinto v Cross & Peters Co, 451 Mich 358, 362; 547 NW2d 314 (1996), citing MCR 2.116(G)(5). “A genuine issue of material fact exists when the record, giving the benefit of reasonable doubt to the opposing party, leaves open an issue upon which reasonable minds might differ.” West v Gen Motors Corp, 469 Mich 177, 183; 665 NW2d 468 (2003). A court may only consider substantively admissible evidence actually proffered relative to a motion for summary disposition under MCR 2.116(0(10). Maiden v Rozwood, 461 Mich 109, 121; 597 NW2d 817 (1999).
V ANALYSIS : RES JUDICATA AND BANKRUPTCY PROCEEDINGS
A. GOVERNING PRINCIPLES
Our starting point is to determine the applicable res judicata test. Chronologically, we are confronted with a situation in which a federal proceeding was initiated before the complaint in RDM II was filed and the bankruptcy case was closed before the hearing on the motion for summary disposition. In Beyer v Verizon North, Inc, 270 Mich App 424, 428-429; 715 NW2d 328 (2006), this Court stated:
This Court must apply federal law in determining whether the doctrine of res judicata requires dismissal of this case because the consent judgment in the prior suit was entered by a federal court. Pierson Sand & Gravel, Inc v Keeler Brass Co, 460 Mich 372, 380-381; 596 NW2d 153 (1999). Under federal law, res judicata precludes a subsequent lawsuit if the following elements are present: (1) a final decision on the merits by a court of competent jurisdiction; (2) a subsequent action between the same parties or their “privies”; (3) an issue in the subsequent action which was litigated or which should have been litigated in the prior action; and (4) an identity of the causes of action. Becherer v Merrill Lynch, Pierce, Fenner & Smith, Inc, 193 F3d 415, 422 (CA 6, 1999), quoting Bittinger v Tecumseh Products Co, 123 F3d 877, 880 (CA 6, 1997) (emphasis omitted in Becherer). [Some quotation marks omitted.][ ]
In Pierson Sand, supra at 380-381, our Supreme Court, quoting 18 Moore, Federal Practice, § 131.21(3)(d), p 131-50, stated:
“If a plaintiff has litigated a claim in federal court, the federal judgment precludes relitigation of the same claim in state court based on issues that were or could have been raised in the federal action, including any theories of liability based on state law. The state courts must apply federal claim-preclusion law in determining the preclusive effect of a prior federal judgment.”
Accordingly, federal law guides our res judicata analysis, and we will look to any relevant opinions issued by the United States Court of Appeals for the Sixth Circuit, absent pertinent United States Supreme Court precedent, on matters concerning creditors’ rights and the extent of the authority exercisable by the bankruptcy court and the trustee in the context of this case. See In re Livingston, 379 BR 711, 725 (WD Mich, 2007) (“It is... understood that district courts and bankruptcy courts within this circuit are bound by published Sixth Circuit decisions.”); In re Dow Corning Corp, 244 BR 634, 651 (ED Mich, 1999) (subsequent history omitted) (Michigan bankruptcy court is bound by Sixth Circuit ruling on an issue). Opinions issued by the United States District Court for the Eastern District of Michigan, as well as those issued by the United States Bankruptcy Court for the Eastern District of Michigan, would also be relevant on issues concerning exercisable authority and creditors’ rights. And of course, the Bankruptcy Code is the bedrock of any review.
While Michigan bankruptcy courts are bound by reported Sixth Circuit rulings construing the Bankruptcy Code, thereby making it appropriate for us to examine the rights, duties, and authority of those involved in bankruptcy proceedings under Sixth Circuit precedent, this consideration naturally extends only to the res judicata question whether the issues in RDM II could or should have been litigated in the bankruptcy court. For example, if the United States Court of Appeals for the Fifth Circuit differed from the Sixth Circuit on an issue regarding whether the Bankruptcy Code granted a chapter 7 trustee authority to initiate an adversarial proceeding on an alter ego theory, it would make little sense for us to follow Fifth Circuit precedent in determining whether trustee Shapiro could or should have pursued an alter ego theory in a bankruptcy court located within the Sixth Circuit’s jurisdiction. But, and again appreciating that we must apply federal law, this does not mean that we are required to apply federal law as interpreted by the Sixth Circuit on other res judicata issues, such as whether the bankruptcy court issued a final decision on the merits, whether the same parties or privies are involved, whether there is an identity of the causes of action, or whether other res judicata principles are implicated. These issues are, for the most part, inextricably linked to interpretation of the United States Bankruptcy Code. Under Abela v Gen Motors Corp, 469 Mich 603, 606; 677 NW2d 325 (2004), our Supreme Court ruled that state courts are bound by decisions issued by the United States Supreme Court that construe federal law. But “there is no similar obligation with respect to decisions of the lower federal courts.” Id. If there are conflicting decisions rendered by lower federal courts, we are free to choose the view that seems most appropriate to us. Id. And even if no such conflict exists, we are not bound “to follow the decisions of even a single lower federal court.” Id. at 607. Lower federal court rulings may be persuasive, but they are not binding on a state court. Id. Furthermore, in Pierson Sand, the federal court action, which predated the state court action, originated in the United States District Court for the Western District of Michigan, eventually winding up before the Sixth Circuit for decision. Pierson Sand, supra at 375-377. The Pierson Sand Court, in conducting its res judicata analysis, relied not only on Sixth Circuit precedent, but also cited Second, Third, Fifth, and Ninth circuit opinions. Id. at 384, 386.
We also make the observation that both the Michigan Supreme Court and the United States Supreme Court have held that application of the doctrine of res judicata can be grounded on earlier bankruptcy proceedings. In Gursten v Kenney, 375 Mich 330, 335; 134 NW2d 764 (1965), our Supreme Court stated that res judicata applies to every issue that belonged within the subject matter of the bankruptcy action, including those that the parties, exercising reasonable diligence, could have brought forward at the time. The Court concluded:
While plaintiff may have had an election of remedies for the alleged tortious conduct of the defendants, he elected to pursue the matter before the referee in bankruptcy. Having made that choice, he was under obligation to pursue it or abide by an adverse result because of his failure to do so. [Id.]
In DePolo v Greig, 338 Mich 703; 62 NW2d 441 (1954), our Supreme Court applied res judicata to bar a circuit court action in which the plaintiffs sued the president of a corporation for selling them unvalidated stock, where the plaintiffs already had the full opportunity to present the same issues in the corporation’s bankruptcy proceedings. The Court stated, “Defendant as president and principal stockholder of the corporation was a stranger to the bankruptcy proceedings in only the strictest sense of the term[, and] [p]laintiffs had full opportunity to present the same issues now presented against the defendant.” Id. at 711-712.
In Katchen v Landy, 382 US 323, 334; 86 S Ct 467; 15 L Ed 2d 391 (1966), the United States Supreme Court expressed the following:
[O]nce a bankruptcy court has dealt with the preference issue nothing remains for adjudication in a plenary suit. The normal rules of res judicata and collateral estoppel apply to the decisions of bankruptcy courts. More specifically, a creditor who offers a proof of claim and demands its allowance is bound by what is judicially determined, and if his claim is rejected, its validity may not be relitigated in another proceeding on the claim. [Citations omitted.]
Accordingly, as a general principle, res judicata can be invoked in a lawsuit on the basis of an earlier bankruptcy proceeding. And with respect to chapter 7 in particular, the United States Court of Appeals for the Second Circuit in EDP Med Computer Sys, Inc v United States, 480 F3d 621, 624-625 (CA 2, 2007), observed:
Res judicata “is a rule of fundamental repose important for both the litigants and for society.” It “relieve[s] parties of the cost and vexation of multiple lawsuits, conserved] judicial resources, and, by preventing inconsistent decisions, encourage[s] reliance on adjudication.” These virtues have no less value in the bankruptcy context; this is particularly true in a Chapter 7 liquidation where it is desirable that matters be resolved as expeditiously and economically as possible.... “[I]t is more imperative than ever that the doctrine of res judicata be applied with unceasing vigilance” to Chapter 7 proceedings!.] [Citations omitted; first three alterations in original.]
B. ELEMENT 1: FINAL DECISION ON THE MERITS BY A COURT OF COMPETENT JURISDICTION
We now examine the first element of federal res judicata, which requires a final decision on the merits by a court of competent jurisdiction. Plaintiffs argue that the bankruptcy court did not render a judgment on the merits for purposes of res judicata. We disagree. In a chapter 7 bankruptcy, the trustee marshals the assets of the debtor, liquidates the estate, and distributes the proceeds, if any, to the creditors. 11 USC 721 et seq. (subchapter II of chapter 7— collection, liquidation, and distribution of the estate); In re Conference of African Union First Colored Methodist Protestant Church, 184 BR 207, 218 (D Del, 1995). The Federal Rules of Bankruptcy Procedure (FRBP) address the closing of a chapter 7 liquidation case, providing:
If in a chapter 7 ... case the trustee has filed a final report and final account and has certified that the estate has been fully administered, and if within 30 days no objection has been filed by the United States trustee or a party in interest, there shall he a presumption that the estate has been fully administered. [FRBP 5009.]
Here, there is no dispute that trustee Shapiro filed the necessary documents, that he certified that the estate was fully administered, and that there were no objections. “After an estate is fully administered and the court has discharged the trustee, the court shall close the case.” 11 USC 350(a). The Con-Lighting chapter 7 case was closed by order of the bankruptcy court.
With respect to determining the finality of a bankruptcy order, each matter that arises between the fifing of a bankruptcy petition and the issuance of a closing order is treated as a separate proceeding, and a final order can be any order that concludes a discrete judicial unit in the larger case. In re Moody, 817 F2d 365, 367-368 (CA 5, 1987). A bankruptcy order that entirely resolves all the issues pertaining to a claim will satisfy the res judicata requirement of a final judgment. In re Iannochino, 242 F3d 36, 43-44 (CA 1, 2001). For purposes of res judicata grounded on bankruptcy proceedings, “[c]losing orders are, of course, final judgments on the merits.” In re Coastal Plains, Inc, 338 BR 703, 713 n 5 (ND Tex, 2006). Here, the case was closed after the trustee earlier issued a “no distribution report” on determination that the bankruptcy estate had zero assets. There were no further matters to resolve. Thus, we conclude that there was a final decision on the merits by a court of competent jurisdiction, thereby satisfying the first element of res judicata.
We acknowledge that when a chapter 7 proceeding concludes with regard to a corporate entity, there is no discharge of debts. 11 USC 727(a)(1) (“The court shall grant the debtor a discharge, unless ... the debtor is not an individual[.]”); In re Strada Design Assoc, Inc, 326 BR 229, 240 (SD NY, 2005) (debtor corporations not entitled to discharge or a fresh start). However, this does not negate the fact that the bankruptcy court closed the case, nor does it run contrary to our conclusion that there was a final decision on the merits. Con-Lighting’s debts were not and could not be discharged and there remained potential liability on the debts by Con-Plastics and Con-Coatings, but any claims against these defendants were still subject to principles of res judicata.
C. ELEMENT 2: A SUBSEQUENT ACTION BETWEEN THE SAME PARTIES OR THEIR PRIVIES
Next, we examine whether the RDM II lawsuit was between the same parties or their privies as those involved in the bankruptcy proceedings. Plaintiffs contend that the parties in RDM II were not parties to Con-Lighting’s bankruptcy case. We disagree.
There is no dispute that RDM and Chestnut, as well as Con-Plastics and Con-Coatings, were all listed as creditors in the bankruptcy proceedings. Creditors in bankruptcy proceedings must be considered parties for purposes of res judicata. Sanders Confectionary Products, Inc v Heller Financial, Inc, 973 F2d 474, 480-481 (CA 6, 1992); Federated Mgt Co v Latham & Watkins, 138 Ohio App 3d 815, 823; 742 NE2d 684 (2000). “It is undisputed that a creditor of the debtor qualifies as a party for res judicata purposes.” In re G-P Plastics, Inc, 320 BR 861, 865 (ED Mich, 2005); see also In re Farmland Industries, Inc, 376 BR 718, 727 (WD Mo, 2007), remanded on other grounds, 378 BR 829 (CA 8, 2007). The rights and obligations of debtors, creditors, shareholders, and other parties in interest are adjudicated in bankruptcy proceedings for purposes of res judicata. In re Xpedior Inc, 354 BR 210, 224 (ND Ill, 2006). Among other rights, creditors are entitled to notice of various bankruptcy proceedings, FRBP 2002, they can participate in the meeting of creditors, 11 USC 341; FRBP 2003, and they can file proofs of claim, 11 USC 501(a). A creditor is a party in interest under the Bankruptcy Code. In re Thompson, 965 F2d 1136, 1147 (CA 1, 1992). Accordingly, we conclude that the “same parties” requirement of res judicata was satisfied in the case at bar.
D. ELEMENT 3: EDM II ISSUES COULD OR SHOULD HAVE BEEN LITIGATED IN BANKRUPTCY COURT
Next, we examine the third element of res judicata, which is whether the claims in RDM II could or should have been litigated in the bankruptcy proceedings. We find that this issue poses the most difficult part of our analysis and requires careful contemplation of each particular claim.
We begin by emphasizing that under federal res judicata law, “[a] final judgment on the merits of an action precludes the parties or their privies from relitigating issues that were or could have been raised in that action.” Federated Dep’t Stores, Inc v Moitie, 452 US 394, 398; 101 S Ct 2424; 69 L Ed 2d 103 (1981) (emphasis added). If a party had a full and fair opportunity to litigate a claim in the bankruptcy court but chose not to do so, res judicata bars litigating that claim thereafter in a state court. Ins Co of State of Pennsylvania v HSBC Bank USA, 10 NY3d 32, 40; 852 NYS2d 812; 882 NE2d 381 (2008). The important aspect to remember is not whether a particular claim is compulsory; rather, it is whether the claim should have been considered during the bankruptcy proceedings. Winget v JP Morgan Chase Bank, NA, 537 F3d 565, 580 (CA 6, 2008).
With respect to plaintiffs’ cause of action for a fraudulent conveyance, the claim arose out of the collateral surrender agreement discussed in footnote 4 of this opinion. Count II of the RDM II complaint alleged a violation of the UFTA, asserting that the lease breaches arose before the transfer of assets and obligations, that the transfer was made with the intent to hinder, delay, or defraud plaintiffs and other creditors, that Con-Lighting did not receive reasonably equivalent value in exchange for the transfer, and that at the time of the transfer Con-Lighting was left with an unreasonably small amount of assets despite the fact that it continued to engage in business with plaintiffs under the leases. The UFTA count further alleged that at the time of the transfer, Con-Lighting should have been aware that it would incur debts beyond its ability to pay, that Con-Lighting was insolvent at the time of the transfer, or became insolvent because of the transfer, that defendants had reasonable cause to believe that Con-Lighting was or became insolvent, and that defendants were “insiders” as defined under the UFTA. Plaintiffs contended that they were entitled “to an attachment against the transferred assets or other property” of defendants to the extent of Con-Lighting’s obligations to plaintiffs.
28 USC 157(b)(1) provides that “[bjankruptcy judges may hear and determine all cases under title 11 and all core proceedings arising under title 11, or arising in a case under title 11, ... and may enter appropriate orders and judgments[.]” Core proceedings under the Bankruptcy Code include “proceedings to determine, avoid, or recover fraudulent conveyances[.]” 28 USC 157(b)(2)(H). Therefore, a claim under the UFTA would constitute a core proceeding in bankruptcy, allowing the bankruptcy court to render a ruling on a fraudulent conveyance claim. In re Bliss Technologies, Inc, 307 BR 598, 604-605 (ED Mich, 2004). A final decision by a bankruptcy court in a core proceeding can be res judicata. Sanders Confectionary, supra at 482.
In general, a trustee represents the estate of the debtor, 11 USC 323(a), and he or she has the capacity to sue others or to be sued, 11 USC 323(b). Under 11 USC 544(b)(1), a “trustee may avoid any transfer of an interest of the debtor in property or any obligation incurred by the debtor that is voidable under applicable law by a creditor holding an unsecured claim ....” This section has been coined a strong-arm provision that allows a trustee to step into the shoes of a creditor in an effort to nullify transfers that are voidable pursuant to state fraudulent conveyance acts for the purpose of benefiting all the debtor’s creditors. In re Fordu, 201 F3d 693, 698 n 3 (CA 6, 1999); Nat’l Labor Relations Bd v Martin Arsham Sewing Co, 873 F2d 884, 887 (CA 6, 1989), mod on reh on other grounds, 882 F2d 216 (CA 6, 1989); In re Forbes, 372 BR 321, 330 (CA 6, 2007); In re Harlin, 321 BR 836, 838 n 2 (ED Mich, 2005); Bliss Technologies, supra at 604. Additionally, 11 USC 548(a)(1) provides a trustee with a mechanism to avoid fraudulent transfers of a debtor’s interest without reliance on particular state law, where the statute itself sets forth criteria for determining whether a transfer is fraudulent and can be avoided. See Donell v Kowell, 533 F3d 762, 776 n 7 (CA 9, 2008) (11 USC 548 is viewed as the federal fraudulent transfer provision, whereas 11 USC 544[b] authorizes fraudulent transfer actions by the trustee under, in part, applicable state law). 11 USC 550 addresses the liability of a transferee when a transfer of property has been avoided. Accordingly, a trustee has the authority to pursue fraudulent conveyance actions.
Under chapter 7, in relation to the statutory duties of a trustee, the trustee is required to “collect and reduce to money the property of the estate for which such trustee serves, and close such estate as expeditiously as is compatible with the best interests of parties in interest^]” 11 USC 704(a)(1). A chapter 7 trustee must also “investigate the financial affairs of the debtor[.]” 11 USC 704(a)(4). As reflected in the testimony of trustee Shapiro, he would have had a duty to pursue a claim in an adversarial proceeding, FRBP 7001 et seq., seeking to avoid the transfer of Con-Lighting’s property had he considered the transfer to actually have been fraudulent. This is because of his duty and obligation to “collect.. . the property of the estate” for which he served. Plaintiffs, however, never brought their con cerns to Shapiro’s attention, although the record suggests that Shapiro, or his office, had information that might have called for further inquiry, i.e., the discrepancies between the surrender agreement and the bankruptcy documents filed by Con-Lighting’s president. Shapiro himself conceded this point in his testimony. If a fraudulent transfer action had been successfully pursued, it would have enlarged the debtor’s estate for the benefit of all creditors.
The question becomes whether the authority and duty of the trustee to bring a fraudulent transfer action, when justified, permit us to conclude that there was a full and fair opportunity to litigate the matter and that it should have been litigated, where it would be somewhat speculative whether trustee Shapiro would have actually brought an action even if plaintiffs vigilantly pursued the matter with Shapiro. Our concerns, however, are alleviated by the Sixth Circuit’s ruling in In re Automated Business Sys, Inc, 642 F2d 200 (CA 6, 1981). In that case, a creditor brought an action in bankruptcy court seeking to require another creditor to return money that had been transferred to it by the debtor, which transfer was allegedly made in an effort to defraud other creditors. The case arose out of a chapter 7 liquidation. An initial question that the Sixth Circuit had to answer was whether the creditor plaintiff could bring the action for a fraudulent transfer, rather than the bankruptcy trustee. The Sixth Circuit found that the creditor had standing to pursue the claim, reasoning:
Generally if a trustee in bankruptcy defaults in the performance of any duty, such as seeking to set aside a fraudulent transfer, “the court may upon application direct him in his duty or, if he be recalcitrant, remove him for disobedience, or permit a creditor to act in his name.” [Id. at 201 (citation omitted).]
The Sixth Circuit court agreed with the bankruptcy court that a creditor who believes that a lawsuit should be commenced has the right to petition the bankruptcy court in an effort to compel the trustee to take action, or to seek permission to prosecute the lawsuit. Id.
In a case involving an alleged fraudulent transfer, In re Gibson Group, Inc, 66 F3d 1436, 1446 (CA 6, 1995), the Sixth Circuit applied a rule comparable to that utilized in Automated Business, but did so in the context of a chapter 11 case. The court, referring to Automated Business, stated that “[w]e established in that case that a creditor could initiate an avoidance action with the permission of the court, after making a demand upon the trustee and if the trustee defaulted in his duty.” Gibson Group, supra at 1443.
On the strength of Automated Business and Gibson Group, we find no merit in plaintiffs’ argument here that they could not force the trustee to act and that, therefore, it could not be said that their fraudulent conveyance claim could have been litigated in the bankruptcy court. Had plaintiffs pursued the matter with trustee Shapiro, and had Shapiro refused to file a fraudulent transfer action, plaintiffs would have had redress with the bankruptcy court, possibly leading to plaintiffs filing their own claim or Shapiro being ordered to pursue the claim. While it is true that the bankruptcy court, in such a scenario, could conceivably have rejected plaintiffs’ efforts, an appeal would have been possible and the bankruptcy court’s decision-making process on the matter would necessarily have contemplated the validity and soundness of a fraudulent transfer claim. In other words, plaintiffs would have had their day in court to some degree. With the avenues available to plaintiffs in the bankruptcy proceedings to have their fraudulent transfer issues ad dressed, their decision to do nothing implicates some of the underlying purposes of res judicata, which include conservation of judicial resources and prevention of inconsistent decisions. Indeed, if plaintiffs were allowed to pursue the UFTA claim in state court, and were they successful in obtaining the requested relief attaching the transferred assets, MCL 566.37(1) (b) (attachment relief for UFTA violation), an underlying premise upon which the relief was awarded would be that the property should have remained in the hands of Con-Lighting. This conclusion would run contrary to the trustee’s accounting in bankruptcy showing that Con-Lighting had zero assets to disburse and it would offend the rights of other creditors.
We conclude that the third element of res judicata was satisfied in regard to the fraudulent conveyance claim.
With respect to the claim seeking to pierce the corporate veil, plaintiffs asserted that Con-Plastics was a 49 percent owner of Con-Lighting, that Con-Lighting was a mere instrumentality of Con-Plastics, that the corporate entity known as Con-Lighting was used to commit a fraud or wrong against plaintiffs, and that plaintiffs suffered an unjust loss as a result of the fraud or wrong. We initially note that the complaint, as well as the documentary evidence, lends no support for a conclusion that Con-Coatings, which held no interest in Con-Lighting, and holds no interest in Con-Plastics, is liable to plaintiffs under a corporate veil theory. Thus, Con-Coatings is entitled to summary disposition on this claim under both MCR 2.116(C)(8) and (10). The claim pertains solely to Con-Plastics.
As stated above, 11 USC 704(a)(1) provides that the trustee is required to “collect and reduce to money the property of the estate for which such trustee serves [.]” “Property of the estate” is composed of, in part, “all legal or equitable interests of the debtor in property as of the commencement of the case.” 11 USC 541(a)(1). This definition applies to property “wherever located and by whomever held[.]” 11 USC 541(a). “It is clear that causes of action belonging to the debtor prior to bankruptcy constitute estate property, and that [11 USC 704(a)(1)] grants the bankruptcy trustee the authority to pursue such causes of action.” In re RCS Engineered Products Co, Inc, 102 F3d 223, 225 (CA 6, 1996) (emphasis added). The question whether a particular cause of action is available to a debtor, thereby constituting property of the estate under 11 USC 704(a)(1) and 11 USC 541(a)(1), is determined by applicable state law. RCS Engineered, supra at 225, citing Butner v United States, 440 US 48; 99 S Ct 914; 59 L Ed 2d 136 (1979).
In Kalb, Voorhis & Co v American Financial Corp, 8 F3d 130, 132 (CA 2, 1993), the federal court stated:
The initial inquiry herein is whether a claim alleging that the debtor or bankrupt is the alter ego of its controlling stockholder constitutes “property” of the bankruptcy estate or debtor-in-possession within the scope of [11 USC 541(a)]. Property of the estate does not belong to any individual creditor. If under governing state law the debtor could have asserted an alter ego claim to pierce its own corporate veil, that claim constitutes property of the bankrupt estate and can only be asserted by the trustee or the debtor-in-possession. As this Court stated:
*
“... If a claim is a general one, with no particularized injury arising from it, and if that claim could be brought by any creditor of the debtor, the trustee is the proper person to assert the claim, and the creditors are bound by the outcome of the trustee’s action.” [Citation omitted.]
If an alter ego claim is indeed the property of a bankruptcy estate, the trustee has full authority over the claim, and before a creditor may pursue such a claim, there must be a judicial determination that the trustee has abandoned the claim. Steyr-Daimler-Puch of America Corp v Pappas, 852 F2d 132, 136 (CA 4, 1988). Without an abandonment determination, a creditor cannot pursue an alter ego claim. Id. Alter ego theories cannot be pursued by anyone other than a chapter 7 trustee in the absence of abandonment or the grant of derivative standing. In re Charles Edwards Enterprises, Inc, 344 BR 788, 790 (ND W Va, 2006).
We now turn to the issue whether, under Michigan law, the debtor Con-Lighting, and thus the trustee, could have asserted a claim to pierce Con-Lighting’s own corporate veil in the chapter 7 bankruptcy proceedings. We conclude that RCS Engineered commands us to conclude that the answer is no, given a lack of subsequent authority to the contrary. In RCS Engineered, the court addressed an alter ego claim and a bankruptcy trustee’s standing to assert the claim against a parent corporation under the “property of the estate” provisions in 11 USC 704 and 11 USC 541. The court ruled, “A review of Michigan alter ego cases and basic principles of the law of corporations leads us to conclude ... that under Michigan law a subsidiary does not have standing to sue its shareholders or its parent company under an alter ego theory.” RCS Engineered, supra at 226. Rather, “courts apply the alter ego theory and disregard a company’s separate corporate identity for the benefit of third parties, e.g., creditors of the corporation, who would suffer an unjust loss or injury unless the shareholders or the parent corporation were held liable for the subsidiary’s debts.” Id. The court held:
Since a subsidiary may not bring an alter ego claim against its parent company under Michigan law, the claim does not become the property of the estate under [11 USC 541(a)(1)] of the Bankruptcy Code when the subsidiary files a petition for bankruptcy. Accordingly, the subsidiary’s bankruptcy trustee may not bring an alter ego claim under [11 USC 704(1)] of the Code. Thus, we conclude that the bankruptcy court erred in holding that... [the] bankruptcy trustee ha[d] standing under these sections to assert an alter ego claim ....” [Id. at 227.]
We agree with defendants’ assertion that Con-Lighting was not technically a subsidiary, which has been defined as a company with more than half of its stock owned by another company, because Con-Plastics held only a 49 percent interest. See Liggett Group, Inc v Ace Prop & Cas Ins Co, 798 A2d 1024, 1035 (Del, 2002). However, although RCS Engineered spoke at times in terms of subsidiaries, it also used very broad language at other times, stating that “[t]he general rule is that the corporate veil is pierced only for the benefit of third parties, and never for the benefit of the corporation or its stockholders,” and that “[t]here is simply nothing in the cases to suggest that Michigan courts would allow an alter ego claim to be brought in other than third-party situations.” RCS Engineered, supra at 226-227. Moreover, the United States District Court for the Eastern District of Michigan has relied on RCS Engi neered in disallowing a trustee to pursue an alter ego claim, stating that alter ego claims not involving third-party situations are not recognized in Michigan. Nieto v Unitron, LP, 2006 US Dist LEXIS 54443, unreported opinion of the United States District Court for the Eastern District of Michigan, Southern Division, issued August 7, 2006 (Docket No. 06-11966). Furthermore, in Rymal v Baergen, 262 Mich App 274, 293; 686 NW2d 241 (2004), this Court stated that “ ‘[t]he traditional basis for piercing the corporate veil has been to protect a corporation’s creditors[.]’ ” (Citation omitted; emphasis added.) Accordingly, trustee Shapiro, despite his testimony to the contrary, could not pursue an alter ego theory piercing Con-Lighting’s corporate veil because such a claim was not “property of the estate” under Michigan law. Further, because Shapiro did not have the authority to proceed on a theory to pierce Con-Lighting’s corporate veil, thereby making the issue of claim abandonment moot, plaintiffs themselves could not have pursued the claim on a derivative basis; nor does there exist an independent basis under the Bankruptcy Code for them to file such a claim against Con-Plastics. Therefore, for purposes of res judicata, it cannot be concluded that plaintiffs could or should have litigated the corporate veil claim in the bankruptcy proceedings. The trial court erred in dismissing this claim or theory on the basis of res judicata arising out of the bankruptcy proceedings. We will later discuss defendants’ arguments that the corporate veil claim should be summarily dismissed under MCR 2.116(C)(10) and res judicata grounded on the RDM I litigation.
With respect to the successor liability claim, plaintiffs asserted that defendants expressly or implicitly assumed the obligations of Con-Lighting, that the transfer of assets and certain obligations in advance of bankruptcy was fraudulent and undertaken in bad faith to avoid liability to plaintiffs and other Con-Lighting creditors, that Con-Lighting did not receive reasonably equivalent value in return for the asset transfer, and that defendants were engaged in a mere continuation or reincarnation of Con-Lighting’s business. Therefore, according to plaintiffs, defendants were liable to plaintiffs for the full amount of Con-Lighting’s debts owed to plaintiffs. We initially note that the documentary evidence lends no support for a conclusion that Con-Plastics was Con-Lighting’s corporate successor or that it carried on the business operations of Con-Lighting after Con-Lighting ceased operations. Rather, the evidence pointed only to Con-Coatings continuing the business operations previously undertaken by Con-Lighting, although Con-Plastics served as a conduit to some degree. Con-Plastics’ role as an alleged successor is tied solely to plaintiffs’ allegations concerning the fraudulent transfer of assets; however, we find that this aspect of the successor liability claim was subsumed under the UFTA claim, which was properly dismissed on the basis of res judicata. Thus, Con-Plastics is entitled to summary disposition on this claim under MCR 2.116(C)(10). For the same reasons, we will not permit plaintiffs to pursue any fraudulent transfer allegations against Con-Coatings under the guise of a successor liability claim. Further, there is no evidence that Con-Coatings expressly or implicitly assumed Con-Lighting’s lease obligations. Thus, continuity of enter prise or operations relative to Con-Coatings is the only basis that could potentially serve to support the successor liability claim. We now proceed with the res judicata analysis of the successor liability claim, as whittled down by us.
We are not aware of any relevant Sixth Circuit precedent on whether a successor liability claim by a predecessor company against a successor company is considered property of the bankruptcy estate, so that a trustee could have pursued a claim in the bankruptcy proceedings. The analytical framework for addressing the successor liability claim is the same as used earlier in this opinion with respect to the corporate veil claim, in that 11 USC 704(a)(1) and 11 USC 541(a)(1) serve as the foundation of the analysis. However, we find it unnecessary to perform a review of Michigan law to determine if a predecessor company, if not yet defunct or dissolved, can sue a successor company. We cannot conclude with any level of confidence, for reasons discussed later in this opinion, that plaintiffs could have pursued a successor liability claim in the United States Bankruptcy Court for the Eastern District of Michigan, Southern Division.
Initially, we reject defendants’ contention that the successor liability claim, as well as the other claims, all constituted core proceedings that could only be addressed in the bankruptcy court. While the UFTA claim qualified as a core proceeding, as indicated already in this opinion, the corporate veil and successor liability claims did not. In Sanders Confectionary, supra at 483, the Sixth Circuit stated:
The bankruptcy judge rules on whether a particular proceeding is a core proceeding. 28 U.S.C. § 157(b)(3). The court looks at both the form and the substance of the proceeding in making its determination.... A core proceeding either invokes a substantive right created by federal bankruptcy law or one which could not exist outside of the bankruptcy .... In non-core proceedings that are “related to” the bankruptcy case, the bankruptcy judge may hear the matter and “submit proposed findings of fact and conclusions of law to the district court,” but without the parties consent the bankruptcy court may not make a final decision on the matter. 28 U.S.C. § 157(c).
Successor liability and alter ego claims are not core proceedings because they are not claims against the assets of the estate and they do not deal with the relationship between a debtor and its creditors, but instead target the assets of a nondebtor. In re G-I Holdings, Inc, 295 BR 211, 217 (D NJ, 2003). “Case law dealing with bankruptcy litigation of successor liability and veil piercing issues confirms that this action is not a core proceeding.” Id.; see also Phar-Mor, Inc v Coopers & Lybrand, 22 F3d 1228, 1239 (CA 3, 1994); In re Julien Co, 120 BR 930, 937 (WD Tenn, 1990) (“veil piercing or alter ego theory could not be a core proceeding”); but cf. Central Vermont Pub Service Corp v Herbert, 341 F3d 186, 192 (CA 2, 2003). A successor liability claim can exist outside bankruptcy, it is not created by the Bankruptcy Code, and it does not require resort to concepts peculiar to bankruptcy for resolution; therefore, it is not a core proceeding. G-I Holdings, supra at 217. At best, plaintiffs’ successor liability and corporate veil claims were related to the bankruptcy case. Accordingly, defendants’ arguments that the successor liability and corporate veil claims entailed core proceedings and that they had to be litigated in the bankruptcy court lack merit. Furthermore, pursuant to 28 USC 1334(b), which governs jurisdiction in bankruptcy cases, bankruptcy courts have full and exclusive jurisdiction over the bankruptcy case itself, but they lack sole and exclusive jurisdiction over civil proceedings, including core proceedings. In re Lenke, 249 BR 1, 6 n 4 (D Ariz, 2000). “The bankruptcy court has original but not exclusive jurisdiction over fraudulent transfer claims.” In re Int’l Admin Services, Inc, 211 BR 88, 95 n 4 (MD Fla, 1997).
The caselaw is split with respect to whether res judicata attaches to a non-core proceeding. Some of the cases rejecting the application of res judicata to non-core proceedings are Barnett v Stern, 909 F2d 973, 979 (CA 7, 1990) (district court claim by creditor only barred by res judicata if the claim would have been a core proceeding in bankruptcy), Howell Hydrocarbons, Inc v Adams, 897 F2d 183, 190 (CA 5, 1990), and SMI/USA, Inc v Profile Technologies, Inc, 38 SW3d 205, 211 (Tex App, 2001) (disposition of non-core proceedings in bankruptcy “is not res judicata as to subsequent state court proceedings regarding the same claims”). The Sixth Circuit, however, allows imposition of res judicata in regard to non-core proceedings. Sanders Confectionary, supra at 483 (even though bankruptcy court may not be able to issue a final decision, federal district court has the authority to do so). In Cabrera v First Nat’l Bank of Wheaton, 324 Ill App 3d 85, 97; 753 NE2d 1138 (2001), the Illinois Appellate Court, with supporting citations, observed that “[s]everal federal circuits reject the distinction between core and noncore claims for the purpose of res judicata,” generally because the bankruptcy judge and the district court can together provide full and fair litigation of a non-core claim. The Cabrera court also noted that a legal commentator has charged that the courts rejecting application of res judicata to non-core proceedings demonstrate confusion between jurisdiction and power. Id. “It thus appears that the position of the Fifth and Seventh Circuits has been widely rejected, with the opposite view holding prominence in the federal courts.” Id.
We decline to become embroiled in this debate for a very practical reason, which is the unreported opinion of Nieto by the United States District Court for the Eastern District of Michigan, Southern Division, issued in 2006, the same year that the bankruptcy case here was closed. In Nieto, Unitron, Inc., filed for chapter 7 bankruptcy, claiming that it had $12,000 in assets and in excess of $300,000 in liabilities. At the same time the bankruptcy petition was filed, Unitron, LI] unilaterally terminated vested benefits of former employees of a Unitron plant in Troy. The employees and their union filed suit in the district court against Unitron, LI] alleging that it was a “disguised continuance and the alter ego” of Unitron, Inc., where they had “substantially identical management, business, purpose, operation, equipment, customers, supervision and ownership.” Nieto, supra at *5-6. The court addressed the issue whether the plaintiffs had standing to pursue their claims in district court or whether the claims had to be pursued by the trustee in the bankruptcy proceedings involving Unitron, Inc. The court noted that the parties agreed that the “ ‘property of the estate’ ” did not belong to any individual creditor. Id. at *13 (citation omitted). The court, relying on RCS Engineered, held that the claims were not property of the estate under 11 USC 541(a)(1), that the trustee thus did not have standing to pursue the claims, and that therefore the automatic stay provision of the Bankruptcy Code did not operate as a bar to the plaintiffs’ lawsuit in district court. Id. at *21-22.
Kegardless of the fact that Nieto was unreported, and without commenting on the correctness of the ruling, it certainly provides some insight into how a bankruptcy court in that same federal district and division may have handled an attempt to pursue a successor liability claim by trustee Shapiro. We cannot in good faith rule that a successor liability claim should and could have been pursued and fully litigated in the bankruptcy court when the district court in that jurisdiction has rejected a nearly identical claim.
E. ELEMENT 4: IDENTITY OF THE CAUSES OF ACTION
Finally, we examine the fourth element of res judicata, which requires an identity of the causes of action. Given the rulings we made earlier, only the fraudulent conveyance claim remains relevant. We first conclude that plaintiffs have failed to address this element. Moreover, this element is satisfied if the claims arose out of the same transaction or same series of transactions, or if the claims arose out of the same core operative facts. Winget, supra at 580. “In determining whether the causes of action are the same, a court must compare the substance of the actions, not their form.” I A Durbin, Inc v Jefferson Nat’l Bank, 793 F2d 1541, 1549 (CA 11, 1986). Here, of course, no claims were raised in the bankruptcy court. It would be incorrect, however, to conclude that because the particular claims were not raised in the bankruptcy proceedings, no identity of claims exists. Sanders Confectionary, supra at 483-484. Instead, “[i]dentity of causes of action means an ‘identity of the facts creating the right of action and of the evidence necessary to sustain each action.’ ” Id. at 484, quoting Westwood Chem Co v Kulick, 656 F2d 1224, 1227 (CA 6, 1981). Had plaintiffs raised the fraudulent conveyance claim in the bankruptcy proceedings, as they should have done, the claim would have arisen out of the same transaction and core operative facts giving rise to the claim contained in RDM II; the substance of the actions would be identical. Accordingly, the fourth element of res judicata was satisfied. Therefore, defendants were entitled to summary disposition with respect to the fraudulent conveyance claim on the basis of res judicata grounded on the bankruptcy proceedings.
VI. RES JUDICATA GROUNDED ON RDM I
Defendants present a cursory argument that plaintiffs’ claims are barred by res judicata grounded on the RDM I lawsuit. In Dart v Dart, 460 Mich 573, 586; 597 NW2d 82 (1999), our Supreme Court stated:
Res judicata bars a subsequent action between the same parties when the evidence or essential facts are identical. A second action is barred when (1) the first action was decided on the merits, (2) the matter contested in the second action was or could have been resolved in the first, and (3) both actions involve the same parties or their privies. [Citations omitted.]
Here, although an order granting partial summary disposition in favor of RDM was entered, the case was left open and hanging in limbo by the filing of Con-Lighting’s bankruptcy petition and the entry of a stay. Moreover, the evidence or essential facts in RDM I dealt only with the alleged lease breaches in connection with the Merrill Road property, and while those breaches formed part of the RDM II litigation, the evidence and essential facts related to the successor liability and corporate veil claims were not identical to those in RDM I and they developed later in time and required exposure through the discovery process. Further, Chestnut was not a party to the RDM I lawsuit, nor were defendants before the bankruptcy stay or before the RDM II suit was filed. Additionally, defendants’ assertion that they were “putative privies” is not a claim that they were actual privies for purposes of res judicata and is instead, effectively, a contention that they were not privies.
Defendants’ argument is more in the nature of a claim that they should have been joined as parties in RDM I and that plaintiffs, upon joinder, should have litigated the successor liability, fraudulent conveyance, and corporate veil claims. Such an argument is not one of res judicata, but necessary joinder under MCR 2.205, which we find was not implicated under the circumstances presented.
VIL MCR 2.116(0(10): PIERCING OF THE CORPORATE VEIL AND SUCCESSOR LIABILITY
We conclude that issues of fact abound in regard to the corporate veil and successor liability claims. We first address plaintiffs’ claim seeking to pierce the corporate veil. “The law treats a corporation as an entirely separate entity from its shareholders, even where one individual owns all the corporation’s stock.” Rymal, supra at 293. However, as explained in Rymal, id. at 293-294, the protection afforded by the corporate veil can be pierced under certain circumstances:
“The traditional basis for piercing the corporate veil has been to protect a corporation’s creditors where there is a unity of interest of the stockholders and the corporation and where the stockholders have used the corporate structure in an attempt to avoid legal obligations.” ...
For the corporate veil to be pierced, the corporate entity must be a mere instrumentality of another individual or entity. Further, the corporate entity must have been used to commit a wrong or fraud. Additionally, and finally, there must have been an unjust injury or loss to the plaintiff. There is no single rule delineating when a corporate entity should be disregarded, and the facts are to be assessed in light of a corporation’s economic justification to determine if the corporate form has been abused. [Citations omitted.]
Here, there was documentary evidence that Con-Plastics, a 49 percent owner of Con-Lighting, and its president, Anthony Catenacci, fully controlled every aspect of the operations at Con-Lighting, including the decision to cease operations and file for bankruptcy to the detriment of numerous creditors. Gregory Eaton testified that, despite an operating agreement indicating that he had provided $204,000 for his 51 percent interest in Con-Lighting, he never paid any money for his interest. Rather, the funds were “loaned” to him by either Con-Plastics or Catenacci; however, there was no loan agreement, Eaton never paid any money toward the loan, and no one ever asked Eaton to repay the loan. Eaton testified that he had no knowledge of the Comerica assignment or the surrender agreement. He did not make the decision to cease Con-Lighting’s operations or to file for bankruptcy, nor did he authorize anyone to make those decisions on his behalf. Further, Eaton did not have any involvement in shifting property or operations from Con-Lighting to Con-Coatings. Catenacci testified that he made the decision to shutter operations. The evidence suggested that Eaton was a mere figurehead placed in the position solely to allow Con-Lighting to claim minority-ownership status.
Additionally, documentary evidence was presented showing that Con-Plastics had loaned millions of dollars to Con-Lighting and its predecessors over the years to keep the business operating and afloat, despite the fact that the enterprise continued to lose money. There was evidence that Con-Lighting did not honor various lease obligations, although the decision to cease operations had already been made and a plan conceived to convert operations to Con-Coatings. There was evidence that Con-Lighting equipment started to be moved out in September or October 2004 and found its way to Con-Coatings, which had hired several Con-Lighting employees in mid-October, even though evidence also showed that Con-Lighting benefited by remaining on the Merrill Road property past the lease expiration date, implicating the holdover provision and payment obligation. This could be viewed as wrongfully taking advantage of the corporate entity, whose life was coming to an end with bankruptcy on the horizon, to the detriment of plaintiffs.
In sum, there was sufficient documentary evidence to create an issue of fact regarding whether Con-Lighting was a mere instrumentality of Con-Plastics, whether the corporate entity of Con-Lighting was used to commit a wrong or fraud, and whether there was an unjust injury or loss to plaintiffs. Con-Plastics was not entitled to summary disposition under MCR 2.116(C)(10) with respect to the corporate veil claim.
With respect to the successor liability claim against Con-Coatings, our Supreme Court explained the theory in Foster v Cone-Blanchard Machine Co, 460 Mich 696, 702-704; 597 NW2d 506 (1999):
The traditional rule of successor liability examines the nature of the transaction between predecessor and successor corporations. If the acquisition is accomplished by merger, with shares of stock serving as consideration, the successor generally assumes all its predecessor’s liabilities. However, where the purchase is accomplished by an exchange of cash for assets, the successor is not liable for its predecessor’s liabilities unless one of five narrow exceptions applies. The five exceptions are as follows:
“(1) where there is an express or implied assumption of liability; (2) where the transaction amounts to a consolidation or merger; (3) where the transaction was fraudulent; (4) where some of the elements of a purchase in good faith were lacking, or where the transfer was without consideration and the creditors of the transferor were not provided for; or (5) where the transferee corporation was a mere continuation or reincarnation of the old corporation.”
[P]olicy concerns shaped this Court’s expansion of the traditional rule in Turner [v Bituminous Cas Co, 397 Mich 406; 244 NW2d 873 (1976)]. After examining the relevant policy concerns, this Court in Turner concluded that a continuity of enterprise between a successor and its predecessor may force a successor to “accept the liability with the benefits” of such continuity. Turner held that a prima facie case of continuity of enterprise exists where the plaintiff establishes the following facts: (1) there is continuation of the seller corporation, so that there is a continuity of management, personnel, physical location, assets, and general business operations of the predecessor corporation; (2) the predecessor corporation ceases its ordinary business operations, liquidates, and dissolves as soon as legally and practically possible; and (3) the purchasing corporation assumes those liabilities and obligations of the seller ordinarily necessary for the uninterrupted continuation of normal business operations of the selling corporation. Turner identified as an additional principle relevant to determining successor liability, whether the purchasing corporation holds itself out to the world as the effective continuation of the seller corporation. [Citations and some quotation marks omitted.]
As indicated earlier in this opinion, the continuing enterprise theory (mere continuation or reincarnation of the old corporation) is the only theory that can be pursued by plaintiffs at trial. Much of the evidence discussed above in relation to the corporate veil claim is equally relevant to the successor liability claim. There was documentary evidence reflecting a continuity of management, personnel, assets, and general business operations. There was also evidence that Con-Lighting ceased operations around the time of the changeover to Con-Coatings, or the plan to so proceed, and sought liquidation in chapter 7 bankruptcy proceedings soon thereafter. Eaton testified that Con-Lighting customers, chiefly GM and DaimlerChrysler, communicated concerns about obligations being satisfied and that Kenneth Lamb and John Lowe worked on alleviating those concerns. There was evidence that GM and DaimlerChrysler began sourcing or procuring parts from Con-Coatings that had previously been provided by Con-Lighting. There was evidence that Con-Lighting’s suppliers started supplying Con-Coatings and that Con-Coatings’s books showed a dramatic increase in gross receipts in 2005, at least partly attributable to business generated by GM and DaimlerChrysler purchasing parts from Con-Coatings. A reasonable juror could surmise from the evidence that Con-Coatings was holding itself out to the world as the effective continuation of Con-Lighting. In sum, a genuine issue of material fact exists whether Con-Coatings can be held liable under a successor liability theory.
VIII. CONCLUSION
The trial court did not err in dismissing the UFTA claim on the basis of res judicata with respect to both defendants. The trial court, however, did err in dismissing the corporate veil and successor liability claims on the basis of res judicata grounded on the bankruptcy proceedings. Neither defendant is entitled to summary disposition on the basis of res judicata grounded on the RDM I lawsuit. Defendant Con-Coatings is entitled to summary disposition under MCR 2.116(C)(8) and (10) in regard to the corporate veil claim. Defendant Con-Plastics is entitled to summary disposition under MCR 2.116(C)(10) in regard to the successor liability claim. Finally, there are genuine issues of material fact with respect to the successor liability claim against Con-Coatings and in regard to the corporate veil claim against Con-Plastics.
Accordingly, we affirm in part, reverse in part, and remand for further proceedings consistent with this opinion.
It was unnecessary for defendants to file a cross-appeal to present alternative arguments in support of the trial court’s ruling. See In re Herbach Estate, 230 Mich App 276, 284; 583 NW2d 541 (1998) (“Although a cross appeal is necessary to obtain a decision more favorable than that rendered by the lower tribunal, a cross appeal is not necessary to urge an alternative ground for affirmance, even if the alternative ground was considered and rejected by the lower court.”).
The order granting partial summary disposition in RDM I provided that Con-Lighting was “a holdover tenant and obligated under the lease agreement for a term of an additional year.”
We note that at the time of the bankruptcy filing, Lamb was a manager for Con-Coatings and had been in that position since October 18, 2004.
In actuality, Con-Lighting property and assets had been surrendered to Con-Plastics pursuant to an agreement executed on February 15, 2005, and that surrender agreement indicated that the value of the property and assets was $1.3 million. Before February 15, 2005, Con-Lighting had been obligated to repay certain Comerica Bank loans, which had been issued over the years and secured by Con-Lighting property, and there was a total outstanding balance of approximately $4.6 million. By agreement also dated February 15, 2005, Comerica assigned to Con-Plastics all of the bank’s rights under the promissory notes and security instruments that had been executed by Con-Lighting. In exchange, Con-Plastics executed a note in favor of Comerica in the amount of $4.6 million, representing the debt that had been owed by Con-Lighting to the bank. Con-Plastics thereby became itself indebted to Comerica, taking Con-Lighting out of the picture. There was documentary evidence indicating that Con-Lighting property had made its way to Con-Coatings months before the surrender agreement was executed, that some of Con-Lighting’s employees began working for Con-Coatings in October 2004, and that Con-Lighting’s operations ceased in October 2004, with operations and production shifting to Con-Coatings.
This is a reference to 11 USC 341, which concerns the meeting of creditors.
We note that the United States Supreme Court has stated that, pursuant to the doctrine of res judicata, a final judgment on the merits precludes the parties or their privies from relitigating matters that were or could have been raised in the first action. San Remo Hotel, LP v City & Co of San Francisco, California, 545 US 323, 336 n 16; 125 S Ct 2491; 162 L Ed 2d 315 (2005).
The bankruptcy judge in Livingston, supra at 726, further stated that “the policies of both the Supreme Court and the Sixth Circuit require that I accept their interpretations of the Bankruptcy Code regardless of whether my own interpretation may be different.”
Abela concerned the proper interpretation of the Magnuson-Moss Warranty—Federal Trade Commission Improvement Act, 15 USC 2301 et seq. Abela, supra at 605-606.
Any suggestion by plaintiffs that there was no final decision on the merits because the bankruptcy court never determined whether there were fraudulent conveyances or other wrongful acts lacks logic. The bankruptcy court never entertained these issues because they were never brought to its attention, and such a suggestion would effectively eliminate res judicata being applied in the context of an argument that a claim could have been presented but was not.
Plaintiffs place great reliance on Hatchett v United States, 330 F3d 875 (CA 6, 2003), for the proposition that there was no final decision on the merits. Hatchett concerned an action by the plaintiffs, husband and wife, against the government for a wrongful levy on entireties property, where it was only the plaintiff husband who owed more than $8 million in taxes. The central theme of the government’s defense and argument was that levies may attach to entireties property. A secondary argument was that the husband fraudulently conveyed the property to himself and his wife while insolvent; the argument was referred to as the fraudulent conveyance defense. The conveyance issue was the subject of previous and finalized bankruptcy proceedings. The lower court refused to allow presentation of the fraudulent conveyance defense because, in part, the bankruptcy trustee alone had standing to pursue a claim for a fraudulent conveyance and res judicata barred further litigation on the matter after the trustee abandoned the fraudulent conveyance claim and officially settled the bankruptcy. Id. at 878-879, 885. The Hatchett court reversed, holding that the trustee abandoned the fraudulent conveyance claim, that the government was entitled to pursue the claim or defense after the bankruptcy proceedings concluded, and that res judicata was not applicable because there was no final judgment on the merits regarding a fraudulent conveyance, given that the trustee had abandoned the claim. Id. at 886. We decline to give any weight to Hatchett. First, it involved a procedural posture (defense in a civil suit against the government) radically different from the proceedings here or in any of the other cases we have reviewed and cited. Second, the court relied, in part, on cases involving the rights of the Internal Revenue Service and the government to take action. Id. Also, there was a formal abandonment of the fraudulent conveyance claim by the trustee, which did not take place in the instant action. Further, the res judicata analysis was woefully cursory. To the extent that Hatchett has any relevance here and runs contrary to our ruling, we are not bound by it and reject its application, favoring instead the authorities cited earlier in this opinion.
We note that Con-Plastics held the status of a party in the bankruptcy proceedings not only on the basis of its position as a creditor, but also because it was a creditor-shareholder. Browning v Levy, 283 F3d 761, 777 (CA 6, 2002).
MCR 2.116(C)(8) provides for summary disposition when the plaintiff “failed to state a claim on which relief can be granted.”
Generally speaking, courts that allow a trustee or debtor to bring an alter ego claim do so under 11 USC 541. In re Icarus Holding, LLC, 391 F3d 1315, 1319 (CA 11, 2004) (citing precedent from the Second, Fifth, and Seventh circuits). Following the lead of many other courts, the Eleventh Circuit has held that in order for a trustee to bring an alter ego claim, the claim should be (1) a general claim that is common to all the debtor’s creditors and (2) allowable under state law. Id. at 1319-1320.
While Nieto is an unreported opinion, it has value because the bankruptcy court at issue here is also from the Eastern District, Southern Division. Therefore, Nieto sheds light on the issue whether trustee Shapiro could have pursued the corporate veil claim. Bankruptcy court appeals go to the federal district court for review. 28 USC 158(a); In re DSC, Ltd, 486 F3d 940, 943 (CA 6, 2007). And the district court reviews de novo questions of law that had been presented to the bankruptcy court. In re Gardner, 360 F3d 551, 557 (CA 6, 2004).
While we have not fully surveyed Michigan caselaw on the matter, we are not aware of anything that would preclude such a lawsuit, although it is typically third parties, e.g., creditors and victims of defective products or negligence, that pursue such suits. See, e.g., Craig v Oakwood Hosp, 471 Mich 67; 684 NW2d 296 (2004); Foster v Cone-Blanchard Machine Co, 460 Mich 696; 597 NW2d 506 (1999); Turner v Bituminous Cas Co, 397 Mich 406; 244 NW2d 873 (1976). And there certainly are bankruptcy courts that have entertained successor liability lawsuits. See, e.g., In re Sunsport, Inc, 260 BR 88 (ED Va, 2000).
We note that the mere fact that the UFTA claim was a core proceeding does not mean that the non-core successor liability claim becomes a core proceeding. In re Exide Technologies, 544 F3d 196, 206 (CA 3, 2008).
Through an unusual procedure, the trial judge in RDM II, who also presided over RDM I, permitted defendants to intervene in RDM I during the pendency of RDM II. The purpose was to give defendants the opportunity to seeks reconsideration of the order granting partial summary disposition in RDM I. The trial court denied reconsideration. To the extent that this occurrence made them “parties” to the RDM I lawsuit, no further litigation or rulings took place in RDM I, and we are not prepared to hold that res judicata was implicated merely by this quirky procedural step. Furthermore, when they became “parties” to RDM I, they were already parties to the RDM II lawsuit.
The record contains several documents generated by GM referencing contracts and stating under the heading “line item notes”:
Purchase order is being issued per request from John Lowe, Continental Lighting, dated 8/19/04 to transfer business from ... Continental Lighting to Continental Coatings.
We do wish to emphasize that, in light of our ruling that the UFTA claim should have been litigated in the bankruptcy proceedings and is thus barred, plaintiffs are not permitted to claim a fraudulent conveyance arising out of the surrender agreement as evidence in support of piercing the corporate veil. This applies equally to the successor liability claim.
Con-Lighting president Kenneth Lamb became a manufacturing manager for Con-Coatings, John Lowe, a plant manager for Con-Lighting, became a manager for Con-Coatings, and other former Con-Lighting personnel became employed by Con-Coatings. Much of Con-Lighting’s equipment flowed to Con-Coatings.
John Lowe testified that he met several times with GM and Daimler-Chrysler personnel about Con-Lighting shutting down production. Kenneth Lamb and others were also present at these meetings, which took place between August and October 2004. Lowe indicated that there was a general goal or plan that Con-Lighting’s equipment and operations would eventually move or be resourced to Con-Coatings. Lowe conceded that, at some point, some of Con-Lighting’s equipment and business did indeed end up at Con-Coatings. Equipment started to be moved in either September or October 2004. Lowe indicated that Con-Lighting had about 50 to 70 purchase orders in 2004 and was manufacturing 30 different parts at the time. According to Lowe, GM and DaimlerChrysler “approved the resource of all of the business that Continental Lighting had over to Continental Coatings.” Lowe stated that GM had not previously done business with Con-Coatings and that he had to obtain a DUNS (identification) number for Con-Coatings. Lowe testified that on customer approval, contracts were issued to Con-Coatings.
Of course, plaintiffs must also prove the underlying allegations regarding the lease breaches. | [
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Beckering, P.J.
In this premises liability action, defendant appeals by leave granted the trial court’s order denying its motion for summary disposition, limited to the issue whether black ice without the presence of snow is an open and obvious danger. We affirm. This appeal has been decided without oral argument pursuant to MCR 7.214(E).
I. PERTINENT PACTS
Flaintiff injured her back when she slipped and fell while an invitee at defendant gas station. Flaintiff alleges that on December 31,2004, she and her husband traveled from Linden, Michigan, to Manistee, Michigan, in order to visit a casino and attend a theatrical performance. The weather was sunny during their drive north that morning. It did not snow that day, nor at any time during the prior week. When plaintiff and her husband headed to the show in the evening, the weather in Manistee was cloudy.
After the show, at some time between midnight and one o’clock in the morning, plaintiff and her husband stopped at the defendant gas station to refill their gas tank in preparation for the return trip. Plaintiff needed to use the restroom, and fell while alighting from her truck. Holding onto the door of the vehicle, plaintiff had placed her right foot on the running board, swung out, and stepped onto the pavement with her left foot. She had immediately lost her footing on black ice and slid underneath the truck. The parking lot was paved with black asphalt, and plaintiff was not able to observe ice or snow. It was, however, starting to rain at the time of her fall. Plaintiff told the gas station attendant she had fallen and advised him to salt the parking lot to make it less slippery.
Plaintiff filed suit, and defendant filed two motions for summary disposition in the trial court; one filed before answering the complaint and the other filed upon the completion of discovery. At the first motion, the trial court questioned defendant’s attempt to further extend the open and obvious danger doctrine to black ice — something that, by its nature and without other indicators, is not open and obvious. Addressing the principle behind the open and obvious danger doctrine, the court commented, “[I]t seems to me that what sets so-called black ice apart in its capacity to be treacherous is that it’s not visible. It’s a fairly invisible kind of ice. And so people get tripped up on it, as it were.”
Defendant argued that black ice should be considered open and obvious by the mere fact that any prudent Michigan resident knows that in winter months in Michigan, there is ice and snow on the ground. The trial court agreed with the general principle that obvious weather conditions should fall within the open and obvious danger doctrine, but took issue with the idea that the doctrine should apply to conditions that are, in fact, invisible, stating: “Well, sure. I agree. Except what if you look and you can’t see it? Does that mean you don’t dare walk? You don’t dare get out of a car? You just got to stand there? Or should we all carry ski poles with spikes in them? Crampons on our boots? What do we do? What do we do if we look and can’t see it? That’s my question.” The judge denied the motion and ordered that discovery be taken to ascertain whether, under the circumstances of the case, the condition was open and obvious.
After the completion of discovery, defendant renewed its motion for summary disposition. The trial court denied the motion, holding that given the circumstances, there was a question of fact regarding whether an average person of ordinary intelligence would have been able to discover the danger and risk upon casual inspection. Defendant appeals by leave granted.
II. STANDARD OF REVIEW
This Court reviews de novo a trial court’s decision on a motion for summary disposition. Dressel v Ameribank, 468 Mich 557, 561; 664 NW2d 151 (2003). Issues of law are also reviewed de novo. Mahaffey v Attorney General, 222 Mich App 325, 334; 564 NW2d 104 (1997). Summaiy disposition is proper under MCR 2.116(C)(10) if the documentary evidence submitted by the parties, viewed in the light most favorable to the nonmoving party, shows that there is no genuine issue regarding any material fact and the moving party is entitled to judgment as a matter of law. Veenstra v Washtenaw Country Club, 466 Mich 155, 164; 645 NW2d 643 (2002).
III. DUTY OF CARE AND THE OPEN AND OBVIOUS DANGER DOCTRINE
It is well settled in Michigan that a premises possessor owes a duty “to undertake reasonable efforts to make its premises reasonably safe for its invitees.” Lugo v Ameritech Corp, Inc, 464 Mich 512, 526; 629 NW2d 384 (2001). As such, a premises possessor “owes a duty to an invitee to exercise reasonable care to protect the invitee from an unreasonable risk of harm caused by a dangerous condition on the land.” Id. at 516, citing Bertrand v Alan Ford, Inc, 449 Mich 606, 609; 537 NW2d 185 (1995).
A premises possessor is generally not required to protect an invitee from open and obvious dangers. The logic behind the open and obvious danger doctrine is that “an obvious danger is no danger to a reasonably careful person.” Novotney v Burger King Corp (On Remand), 198 Mich App 470, 474; 499 NW2d 379 (1993). Accordingly, when the potentially dangerous condition “is wholly revealed by casual observation, the duty to warn serves no purpose.” Id. If this purpose is frustrated by the application of the doctrine to a particular set of facts because the condition is for all practical purposes invisible and indiscernible, then the application of the open and obvious danger doctrine would not be appropriate.
“[I]f special aspects of a condition make even an open and obvious risk unreasonably dangerous, the premises possessor has a duty to undertake reasonable precautions to protect invitees from that risk.” Lugo, supra at 517. The special aspects that cause even open and obvious conditions to be actionable are those that make the conditions “effectively unavoidable,” or those that “impose an unreasonably high risk of severe harm.” Id. at 518.
The standard for determining if a condition is open and obvious is whether “an average user with ordinary intelligence [would] have been able to discover the danger and the risk presented upon casual inspection.” Novotney, supra at 475. The test is objective, and the inquiry is whether a reasonable person in the plaintiffs position would have foreseen the danger, not whether the particular plaintiff knew or should have known that the condition was hazardous. Corey v Davenport College of Business (On Remand), 251 Mich App 1, 5; 649 NW2d 392 (2002).
When applying the open and obvious danger doctrine to conditions involving the natural accumulation of ice and snow, our courts have progressively imputed knowledge regarding the existence of a condition as should reasonably be gleaned from all of the senses as well as one’s common knowledge of weather hazards that occur in Michigan during the winter months. In Joyce v Rubin, 249 Mich App 231, 239-240; 642 NW2d 360 (2002), this Court determined that the danger posed by a visibly snowy and icy sidewalk, on which plaintiff slipped twice before falling and recognized as being unsafe, was open and obvious. In Corey, supra at 2, 5-6, this Court held that a reasonable person would recognize the danger posed by visibly snowy and icy steps outside a college dormitory and that the condition therefore was open and obvious.
In Kenny v Kaatz Funeral Home, Inc, 264 Mich App 99, 101-102, 119 (Griffin, J., dissenting); 689 NW2d 737 (2004) (Kenny I), rev’d 472 Mich 929 (2005) (Kenny II), a 78-year old lifelong Michigan resident slipped and fell in a parking lot in December. She did so after witnessing three companions get out of a vehicle in the parking lot and hold onto the hood of the car to keep their balance. Id. In his dissent, Judge Griffin opined that under those circumstances, “all reasonable Michigan winter residents would conclude that the snow-covered parking lot was slippery.” Id. at 120. Judge Griffin adopted the reasons articulated by the trial court, which noted that a lifelong Michigan resident should be aware that ice frequently forms beneath the snow during snowy December nights. Id. at 119. Our Supreme Court subsequently adopted Judge GRIFFIN’s dissenting opinion. Kenny II, supra.
In Ververis v Hartfield Lanes (On Remand), 271 Mich App 61, 65; 718 NW2d 382 (2006), this Court was faced with determining whether the Supreme Court in Kenny II was adopting one of two possible rules:
First, a snow-covered surface might always, by its very nature, present an open and obvious danger because it is likely to be slippery as a result of underlying ice or for some other reason. Alternatively, a snow-covered surface would not present an open and obvious danger unless there is some other reason, in the facts of a particular case, that would lead a plaintiff to reasonably conclude that it is slippery.
In Ververis, “there was no independent factor, beyond the snowy surface itself, that would reasonably have alerted [the plaintiff] to the fact that it was slippery.” Id. at 66. In determining which rule applies, this Court considered the fact that the Supreme Court summarily reversed three other cases that had relied on Kenny I in determining that snow-covered ice did not constitute an open and obvious danger; Schultz v Henry Ford Health Sys, 474 Mich 948 (2005), Morgan v Laroy, 474 Mich 917 (2005) (Morgan II), and D’Agostini v Clinton Grove Condominium Ass’n, 474 Mich 876 (2005). “The Supreme Court reinstated the trial court decisions that the defendants were entitled to summary disposition on the open and obvious danger question even though there were no factors in those cases, other than the snow-covered surfaces themselves, that would have forewarned the plaintiffs regarding their slipperiness.” Ververis, supra at 66-67. Thus, on the basis of those rulings, this Court held “as a matter of law that, by its very nature, a snow-covered surface presents an open and obvious danger because of the high probability that it may be slippery.” Id. at 67.
The open and obvious danger doctrine was also applied to black ice in a snow-covered parking lot in Royce v Chatwell Club Apartments, 276 Mich App 389, 394; 740 NW2d 547 (2007), a case in which the plaintiff stepped off a sidewalk into a parking lot, slipped on snow-covered black ice, and slid underneath her car. The plaintiff had observed that the pavement was snow-covered, but did not otherwise realize that the surface was slippery. Id. at 390, 394.
With regard to ice-covered surfaces without the presence of snow, the Supreme Court has held that the danger posed by visible frost and ice is open and obvious. Perkoviq v Delcor Homes—Lake Shore Pointe, Ltd, 466 Mich 11, 14; 643 NW2d 212 (2002). In Perkoviq, the plaintiff, a painter, fell from the roof of a partially constructed house after he had told the defendant that the roof was icy. Id. at 12, 14.
Thus, absent special circumstances, Michigan courts have generally held that the hazards presented by snow, snow-covered ice, and observable ice are open and obvious and do not impose a duty on the premises possessor to warn of or remove the hazard. There is no published opinion, however, that addresses whether black ice, without the presence of snow, is considered an open and obvious danger in and of itself.
IV ANALYSIS
Defendant argues that the “vast weight of published and unpublished cases from this Court and our Su preme Court strongly suggest that the reasonable Michigan resident should know of the potential hazardous weather conditions in parking lots in the winter, regardless of the presence of snow or not.” Thus, defendant contends, the mere presence of black ice in Michigan at any time during the winter should be deemed open and obvious as a matter of law.
Plaintiff contends that under the circumstances of this case, she had no warning of icy conditions on defendant’s premises and that, the condition therefore was not open and obvious. Further, plaintiff contends that special circumstances existed because the condition posed an unreasonable risk and was unavoidable.
To determine whether black ice is open and obvious, one must consider the logic behind the open and obvious danger doctrine, which, as stated earlier, is that “an obvious danger is no danger to a reasonably careful person.” Novotney, supra at 474. We are asked to determine whether “an average user with ordinary intelligence” would be able to discover black ice “upon casual inspection,” absent the presence of snow. Id. at 475.
Perhaps the best way to ascertain whether black ice is open and obvious is to examine the characteristics of black ice. Webster’s New World College Dictionary (4th ed), p 151, describes black ice as “a thin, nearly invisible layer of ice on a paved road.” Merriam-Webster’s Collegiate Dictionary (11th ed), p 129, defines black ice as “a nearly transparent film of ice on a dark surface (as a paved road or a body of water) that is difficult to see.” The American Heritage Dictionary of the English Language (4th ed), p 191, defines black ice as “[a] thin, nearly invisible coating of ice that forms on paved surfaces.” The New Oxford American Dictionary (2nd ed), p 172, describes it as “a transparent coating of ice, found esp. on a road or other paved surface.” The American Century Dictionary (2005), p 60, defines it as a “thin layer of invisible ice on a road, etc.”
The overriding principle behind the many definitions of black ice is that it is either invisible or nearly invisible, transparent, or nearly transparent. Such definition is inherently inconsistent with the open and obvious danger doctrine. Consequently, we decline to extend the doctrine to black ice without evidence that the black ice in question would have been visible on casual inspection before the fall or without other indicia of a potentially hazardous condition.
With regard to whether other evidence of an open and obvious danger existed in this case, there was no snow on the ground, and it had not snowed in a week. Before alighting from her truck, plaintiff did not observe anyone else slip or hold onto an object to maintain his or her balance. She did not see the ice before she fell, and could not readily see it afterwards. Although it was starting to rain at the time of plaintiffs fall, the danger and risk presented by a wet surface is not the same as that presented by an icy surface. Contrary to defendant’s assertion that the mere fact of it being wintertime in northern Michigan should be enough to render any weather-related situation open and obvious, reasonable Michigan winter residents know that each day can bring dramatically different weather conditions, ranging from blizzard conditions, to wet slush, to a dry, clear, and sunny day. As such, the circumstances and specific weather conditions present at the time of plaintiffs fall are relevant. We are not persuaded that the recent onset of rain wholly revealed the condition and its danger as a matter of law such that a warning would have served no purpose. See Novotney, supra at 474.
We agree with the trial court that there remains a question of fact regarding whether an average person of ordinary intelligence would have been able to discover the danger and risk upon casual inspection, and affirm the denial of summary disposition in this matter. Given our ruling, we need not address plaintiffs alternative argument that special circumstances existed.
Affirmed.
Both motions were brought under MCR 2.116(0(10).
The rationale behind imposing a duty upon the premises possessor for hidden or latent defects is that the burden “should rest upon the one who is in control or possession of the premises and, thus, is best able to prevent the injury.” Riddle v McLouth Steel Products Corp, 440 Mich 85, 91; 485 NW2d 676 (1992).
If special circumstances exist, “the premises possessor has a duty to take reasonable measures to protect invitees from that risk.” Royce, supra at 392, citing Lugo, supra at 517.
Unpublished opinions have varied in their analysis of this issue, and they are not binding precedent of this Court. MCR 7.215(C)(1). | [
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Hoekstra, P.J.
This case involves the enforceability of the in terrorem (no-contest) clause in the Mary E. Griffin Revocable Grantor Trust agreement. Respondent appeals as of right the probate court’s order declaring the clause unenforceable and denying her motion for summary disposition under MCR 2.116(C)(9) and (10). Although MCL 700.2518 does not apply to trusts, we conclude that it reflects this state’s public policy that a no-contest clause in a trust agreement is unenforceable if there is probable cause for challenging the trust. We further conclude that petitioner, Otto Nacovsky, had probable cause to challenge the trust because the trust, on its face, violated the rule against perpetuities. Therefore, the in terrorem clause was unenforceable, and we affirm the probate court’s order denying respondent’s motion for summary disposition.
i
Respondent, Priscilla Hall, is the daughter of petitioner. They are both beneficiaries under a trust created by Mary E. Griffin, who is petitioner’s mother and respondent’s grandmother. The trust was established in 2001, and the trust agreement was amended several times thereafter, including in January 2003 and May 2003. The January 2003 amendment added the following clause to the trust agreement:
Terror [sic] Clause. If any beneficiary under this Agreement or any heir of Settlor, or any person acting, with or without court approval, on behalf of a beneficiary or heir, shall challenge or contest the admission of Settlor’s will to probate, or challenge or contest any provision of Settlor’s will or of this Agreement, the beneficiary or heir shall receive no portion of Settlor’s estate, nor any benefits under this Agreement. However, it will not be a “challenge or contest” if Trustee or a beneficiary seeks court interpretation of ambiguous or uncertain provisions in this Agreement.
After Griffin died in January 2005, petitioner filed a petition contesting the trust. Petitioner alleged that the trust violated the rule against perpetuities because the trust agreement, as last amended on May 1, 2003, provided that the principal was to be held in trust for the benefit of petitioner and Griffin’s dogs, but failed to include a provision for the distribution of the trust corpus after the death of petitioner and the dogs. Petitioner also alleged that Griffin’s last two amendments in January 2003 and May 2003 resulted from respondent’s undue influence over Griffin. Respondent filed a petition to enforce the in terrorem clause. She claimed that, because petitioner had challenged the validity of the trust, if petitioner failed to substantiate his claim of undue influence, petitioner was not entitled to receive anything under the trust.
Following an evidentiary hearing, the probate court determined that the perpetuities problem was the result of a drafting error, and it reformed the trust agreement to remedy the omission of the residuary clause. The court also determined that there was no undue influence. Petitioner thereafter filed a motion alleging defenses to the in terrorem clause. Respondent in turn moved for summary disposition pursuant to MCR 2.116(C)(9) and (10), arguing that the in terrorem clause was both enforceable and applicable because petitioner had challenged the trust. The probate court determined that because MCL 700.2518 applied to wills but not trusts, the Legislature intended that no-contest clauses in trust agreements be unenforceable. Accordingly, the probate court held that the in terrorem clause in the Mary E. Griffin Revocable Grantor Trust agreement was unenforceable as a matter of law, and it denied respondent’s motion for summary disposition.
II
On appeal, respondent does not contest the probate court’s conclusion that MCL 700.2518 only applies to wills. Rather, she contests the probate court’s conclusion that because the Legislature did not include a provision regarding no-contest clauses in trust agreements in the Estates and Protected Individuals Code, MCL 700.1101 et seq., a no-contest clause in a trust agreement is unenforceable. Respondent argues that the enforceability of a no-contest clause in a trust agreement must be gleaned from the common law relating to no-contest clauses in wills. We disagree.
A
This Court reviews de novo a lower court’s decision on a motion for summary disposition. Trost v Buckstop Lure Co, Inc, 249 Mich App 580, 583; 644 NW2d 54 (2002). Below, respondent argued that summary disposition was proper under MCR 2.116(C)(9) because the defense petitioner asserted to her petition to enforce the in terrorem clause — that he had probable cause for challenging the trust — was not a defense to the enforcement of a no-contest clause in a trust agreement. A motion under MCR 2.116(C)(9) tests the sufficiency of a defendant’s pleadings and is properly granted when the party has failed to state a valid defense to a claim. A defense is invalid for purposes of MCR 2.116(C)(9) when the party’s pleadings are so clearly untenable as a matter of law that no factual development could possibly deny the opposing party’s right to recovery. Payne v Farm Bureau Ins, 263 Mich App 521, 525; 688 NW2d 327 (2004).
B
Whether the in terrorem clause in the Mary E. Griffin Revocable Grantor Trust agreement is enforceable requires us to ascertain our state’s public policy regarding the enforceability of no-contest clauses in trust agreements. If no-contest clauses in trust agreements are against public policy, then the in terrorem clause at issue here is unenforceable. 2 Restatement Trusts, 3d, § 29(c), pp 53-54 (stating that a trust provision is invalid if it is contrary to public policy).
This state’s public policy is reflected in its statutes, “and when they have not directly spoken, then in the decisions of the courts and the constant practice of the government officials.” Maids Int’l, Inc v Saunders, Inc, 224 Mich App 508, 511; 569 NW2d 857 (1997) (quotation marks and citation omitted). There is no statute regarding the enforceability of no-contest clauses in trust agreements, nor is there any caselaw on the issue. There are, however, caselaw and a statute, MCL 700.2518, addressing the enforceability of no-contest clauses in wills.
In Schiffer v Brenton, 247 Mich 512, 520; 226 NW 253 (1929), the Supreme Court held that no-contest clauses in wills were valid and enforceable, irrespective of whether the will contest was in good or bad faith. The Court reasoned:
Such provisions serve a wise purpose; they discourage a child from precipitating expensive litigation against the estate, and encourage and reward other children in their effort to sustain their parent’s disposition of his property if such contest is precipitated; they discourage family strife, they discourage litigation, and the law abhors litigation. [Id. at 519.]
In Saier v Saier, 366 Mich 515, 520; 115 NW2d 279 (1962), and Farr v Whitefield, 322 Mich 275, 280-281; 33 NW2d 791 (1948), the Court reiterated the rule that no-contest clauses in wills are generally enforceable.
However, in 1998, the Legislature enacted MCL 700.2518, which provides:
A provision in a will purporting to penalize an interested person for contesting the will or instituting other proceedings relating to the estate is unenforceable if probable cause exists for instituting proceedings.
This statute reflects the Legislature’s decision to partially abrogate the rule announced in Schiffer. Accordingly, MCL 700.2518 indicates this state’s current public policy regarding the enforceability of no-contest clauses in wills. See Hoerstman Gen Contracting, Inc v Hahn, 474 Mich 66, 74; 711 NW2d 340 (2006) (“ Tn general, where comprehensive legislation prescribes in detail a course of conduct to pursue and the parties and things affected, and designates specific limitations and exceptions, the Legislature will be found to have intended that the statute supersede and replace the common law dealing with the subject matter.’ ”) (citation omitted). Thus, pursuant to MCL 700.2518, a no-contest clause in a will is unenforceable if probable cause exists for instituting proceedings.
The question becomes whether the public policy regarding the validity of no-contest clauses in wills, as established by MCL 700.2518, controls the enforceability of no-contest clauses in trust agreements. Legal authorities agree that the same test should apply to no-contest clauses in wills and trust agreements. As observed in Bogert, Trusts & Trustees (rev 2d ed, 2008 Cum Supp), § 181, p 103 “Although \in terrorem] clauses appear most frequently in wills, there appears to be no reason to apply a different test in determining the validity of such a clause in a living trust instrument . . . .” Similarly, 2 Restatement Property, 3d, Wills and Other Donative Transfers, § 8.5, comment i p 200, provides:
With the increase in the use of revocable inter vivos trusts as will substitutes, no-contest clauses and clauses restraining challenges of particular provisions in those trusts serve the same purpose as do such clauses in wills, and the same test applies to determine the validity of those clauses in the two comparable situations.
Cf. In re Reisman Estate, 266 Mich App 522, 527; 702 NW2d 658 (2005) (law governing wills typically applies to trusts).
On the basis of these authorities, we conclude that while MCL 700.2518 does not apply to trusts, it reflects this state’s public policy that no-contest clauses in trust agreements are unenforceable if there is probable cause for challenging the trust. Conversely, if there is no probable cause to challenge the trust, it is not contrary to public policy to enforce the no-contest clause. Thus, the probate court properly denied respondent’s motion for summary disposition under MCR 2.116(C)(9). As a defense to respondent’s petition to enforce the in terrorem clause, petitioner alleged that he had probable cause to challenge the trust. Because a no-contest clause in a trust agreement is unenforceable if there is probable cause for challenging the trust, petitioner stated a valid defense.
c
Respondent further argues, however, that she was entitled to summary disposition under MCR 2.116(0(10) because there was no genuine issue of material fact that petitioner lacked probable cause for challenging the trust. We disagree.
A motion under MCR 2.116(0(10) tests the factual support for a claim. Lewis v LeGrow, 258 Mich App 175, 192; 670 NW2d 675 (2003). In reviewing a motion under MCR 2.116(0(10), this Court “must consider the available pleadings, affidavits, depositions, and other documentary evidence in a light most favorable to the nonmoving party and determine whether the moving party was entitled to judgment as a matter of law.” Unisys Corp v Ins Comm’r, 236 Mich App 686, 689; 601 NW2d 155 (1999).
The Restatement provides the following definition of probable cause: “Probable cause exists when, at the time of instituting the proceeding, there was evidence that would lead a reasonable person, properly informed and advised, to conclude that there was a substantial likelihood that the challenge would be successful.” 2 Restatement Property, 3d, Wills and Other Donative Transfers, § 8.5, comment c, p 195. In this case, petitioner sought to terminate the trust on two grounds: (1) it was invalid pursuant to MCL 554.72 because of the perpetuities problem and (2) it was invalid because of undue influence by respondent.
A trust is invalid if it violates the rule against perpetuities. 2 Restatement Trusts, 3d, § 29(b), pp 53-54. The rule against perpetuities is codified in MCL 554.72, which, at the time relevant to this case, provided:
(1) A nonvested property interest is invalid unless 1 or more of the following are applicable to the interest:
(a) When the interest is created, it is certain to vest or terminate no later than 21 years after the death of an individual then alive.
(b) The interest either vests or terminates within 90 years after its creation.
The last trust amendment failed to include a provision for the distribution of the trust corpus after the death of petitioner and Griffin’s dogs. Accordingly, the trust, on its face, violated the rule against perpetuities because it was not certain to vest or terminate within 21 years after Griffin’s death or within 90 years after the creation of the trust. Because the trust, on its face, violated the rule against perpetuities, there was evidence from which a reasonable person could conclude that there was a substantial likelihood that a challenge to the trust as violating the rule against perpetuities would be successful. Accordingly, petitioner had probable cause to challenge the trust. Respondent was not entitled to summary disposition under MCR 2.116(0(10).
D
In conclusion, the probate court properly denied respondent’s motion for summary disposition under MCR 2.116(C)(9) and (10). A no-contest clause in a trust agreement is unenforceable if probable cause exists to challenge the trust, and petitioner had probable cause for challenging the trust as violating the rule against perpetuities. Therefore, the in terrorem clause in the Mary E. Griffin Revocable Grantor Trust agreement is unenforceable. Because the probate court reached the right result, albeit for the wrong reason, we affirm the probate court’s order denying respondent’s motion for. summary disposition. See Gleason v Dep’t of Transportation, 256 Mich App 1, 3; 662 NW2d 822 (2003).
Affirmed.
CAVANAGH, J., concurred.
Our conclusion that MCL 700.2518 reflects the public policy of this state with regard to no-contest clauses in trust agreements is consistent, in part, with respondent’s argument. Respondent urged us to apply the common law relating to no-contest clauses in wills to the in terrorem clause in the present case. Thus, respondent appears to concede that there is no policy reason to treat no-contest clauses in trust agreements differently from no-contest clauses in wills. We just disagree with respondent’s contention that the common law, rather than MCL 700.2518, reflects the state’s public policy regarding no-contest clauses in trust agreements.
Although the probate court ultimately determined that the perpetuities problem was the result of a drafting error and there was no evidence of undue influence, the enforceability of the in terrorem clause depends on whether petitioner had probable cause to challenge the trust on these bases. Thus, the probate court’s ultimate decision on petitioner’s claims is not dispositive of whether petitioner had probable cause to bring a challenge in the first instance.
The statute was amended by 2008 PA 149, effective May 28, 2008.
Because we conclude that petitioner had probable cause to challenge the trust on the basis that it violated the rule against perpetuities, we need not decide whether petitioner had probable cause to challenge the trust on the basis of undue influence by respondent. | [
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Per Curiam.
The Attorney General appeals as of right the December 21, 2006, order of the Public Service Commission (PSC) authorizing Michigan Consolidated Gas Company (MichCon) to add uncollectible expense true-up mechanism (UETM) surcharges to the rates it charged customers for natural gas. We affirm.
The PSC adopted the UETM in an April 28, 2005, order in this case granting rate relief to MichCon. The basic framework of that mechanism is as follows. The PSC estimates an amount of “uncollectible expense” to include in setting MichCon’s rates for a calendar year. After that calendar year has ended, the actual uncollectible expense for the year is determined and compared with the projection. If the actual uncollectible expense exceeds the estimate, UETM surcharges will be imposed on ratepayers to attempt to collect 90 percent of the difference between the actual and the estimated uncollectible expense. Conversely, if the actual expense is less than estimated, credits will be applied to attempt to return 90 percent of the difference. However, for the initial period in 2005 underlying this case, only the actual and the estimated uncollectible expenses from May to December were considered. The actual uncollectible expense for that period exceeded the estimated expense included in MichCon’s rates. As a result, the PSC approved MichCon’s request for surcharges to its rates for 2007 in the December 21, 2006, order being appealed.
The Attorney General argues that the UETM is unlawful because it is not within the scope of the PSC’s statutory authority and constitutes an impermissible retroactive ratemaking mechanism. We disagree.
Under MCL 462.25, rates prescribed by the PSC are presumed to be lawful and reasonable. In re Application of Detroit Edison Co, 276 Mich App 216, 224; 740 NW2d 685 (2007). A party aggrieved by a PSC order has the burden of proving by clear and satisfactory evidence that the order is unlawful or unreasonable. Id. To establish the unlawfulness of a PSC order, the appellant must show that the PSC failed to follow a mandatory statute or abused its discretion in exercising its judgment. Id. An order is unreasonable if it is unsupported by the evidence. Id. Further, the PSC “has broad ratemaking authority” and “is not bound by any single ratemaking formula, and may make pragmatic adjustments when warranted by the circumstances of the particular matter before it.” Id. at 243. A rate-design decision should not be disturbed absent a showing that it is “arbitrary, capricious, or an abuse of discretion.” Id.
This Court’s opinion in In re Application of Consumers Energy Co, 279 Mich App 180; 756 NW2d 253 (2008), approved for publication on May 27, 2008, after the filing of all the briefs on appeal in this case, requires the rejection of the Attorney General’s position that the UETM was outside the PSC’s statutory authority and violated the rule against retroactive ratemaking. In that case the Attorney General contended, paralleling its contention regarding the UETM, that an “equalization mechanism” for pension and other post-employment benefits was improper as outside the PSC’s authority and as constituting improper retroactive ratemaking. Id. at 182, 194. In its relevant aspects, the UETM at issue in this case parallels the equalization mechanism at issue in Consumers Energy Co. Specifically, both mechanisms involve the inclusion of an initial projection of the relevant expense (uncollectible expense in this case and pension and other post-employment expenses in Consumers Energy Co) in regulated rates with the actual such expense later being compared with that initial amount and a difference between the two rates being deferred for future recovery. See id. at 194.
This Court rejected the challenge to the equalization mechanism in Consumers Energy Co, stating:
The Attorney General asserts that approval of this equalization mechanism constituted prohibited retroactive ratemaking. The PSC concluded that pursuant to its general ratemaking powers it was authorized to adopt a ratemaking formula that included this equalization mechanism, which was designed to ensure, to the extent possible, that rates would match expenses. We note that the rate is presumed, prima facie, to be lawful and reasonable. In re Detroit Edison Application, supra at 224. The Attorney General has failed to overcome this presumption. In Attorney General v Pub Service Comm, 262 Mich App 649, 656; 686 NW2d 804 (2004), this Court held that deferred expenses were an expense of the year to which they were deferred, and were therefore prospective. Specifically, this Court noted, “ ‘when capitalized expenditures are amortized, the amortization becomes a current expense even though it reflects expenditures that were capitalized in the past.’ ” Id., quoting Ass’n of Businesses Advocating Tariff Equity v Pub Service Comm, 208 Mich 248, 261; 527 NW2d 533 (1994). There is no sound basis for distinguishing the equalization mechanism approved by the PSC in this case from deferred expenses affirmed in prior caselaw. Accordingly, the deferral of pension and other post-employment benefit expenses to a subsequent year did not constitute retroactive ratemaking. [Consumers Energy Co, supra at 194.]
Applying this template to the present case, as with the equalization mechanism in Consumers Energy Co, the PSC acted within its general ratemaking powers in adopting the UETM to ensure that the portion of rates attributable to uncollectible expense would substantially match actual uncollectible expense. Further, the UETM, designed to defer 90 percent of the difference between the initially projected and the actual uncollectible expenses for a given period to a future year, does not involve retroactive ratemaking because the deferred expense is deemed an expense of the year to which it is deferred and, thus, is recovered on a prospective basis. Particularly, under the rationale of Consumers Energy Co, the 2005 uncollectible expense de ferred to 2007 under the order being appealed is a 2007 expense collected on a prospective, not retroactive, basis in 2007.
In light of our resolution of the merits of the substantive issue presented by the Attorney General, we need not consider whether the PSC erred by considering the Attorney General’s arguments barred as untimely.
Affirmed.
Uncollectible expense essentially refers to the amount of unpaid utility bills remaining after MichCon has exhausted its collection efforts with regard to ratepayers unable or unwilling to fully pay those bills.
The rationale for using 90 percent of the difference is to give MichCon an incentive to maximize its collection efforts to reduce its uncollectible expense. | [
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Kelly, J.
Respondent mother appeals as of right the trial court order terminating her parental rights to her minor child pursuant to MCL 712A.19b(3)(d) (parent’s noncompliance with a limited guardianship placement plan resulted in a disruption of the parent-child relationship) and (j) (reasonable likelihood that the child will be harmed if returned to parent). We affirm.
I. BASIC FACTS AND PROCEEDINGS
In March 2002, respondent filed a petition with the probate court requesting the appointment of Carolyn H. Roach as the limited guardian for the minor child pursuant to MCL 700.5205, because respondent lacked housing. Roach was the mother of respondent’s boyfriend and acted as a surrogate grandmother to the minor child. The probate court granted the petition, and for the five years between the time the petition was granted and the time of the dispositional hearing, the minor child lived with Roach. The probate court ordered respondent to comply with a limited guardianship placement plan, which required respondent to visit the minor child seven times a week and participate in positive outings, have daily telephone contact with the child, provide transportation to school, attend all school conferences and nonemergency doctor and dentist appointments, pay for babysitting, and contribute $200 a month for room, board, and expenses and $100 a month for food.
In June 2004, respondent petitioned the probate court to terminate the guardianship of the minor child, but the petition was dismissed after respondent and Roach agreed to a consent order for visitation. This order provided for visitation every Saturday from 10:00 a.m. to 2:00 p.m. at Roach’s home.
In June 2005, Roach suspended respondent’s parenting time because she found that respondent’s behavior was disruptive. Respondent then petitioned the probate court to terminate the guardianship. The court adopted a transition plan on August 8, 2005, requiring that respondent obtain a recommendation for a psychiatrist and receive a full psychiatric evaluation, including a comprehensive recommendation for treatment and medication. The plan provided that respondent should comply with any medication and treatment recommendations and authorize the release of her medical and counseling records to the court, Laura Henderson (the minor child’s therapist), Karen Russell (who, before acting as petitioner in this matter, had been the minor child’s guardian ad litem), and respondent’s attorney. The plan required respondent to participate in parenting classes and maintain adequate housing and a legitimate source of income. The plan also provided that Henderson should facilitate parenting time, following the receipt of respondent’s psychiatric evaluation. The court ordered that the matter would be reviewed in six months.
Respondent failed to provide a report confirming that she had received a full psychiatric evaluation. On February 15, 2006, the probate court denied respondent’s motion to terminate the guardianship, finding that respondent had failed to substantially comply with the transition plan. The probate court suspended respondent’s parenting time and directed the guardian ad litem to take appropriate action in the juvenile court on behalf of the minor child.
The guardian ad litem, now petitioner in this matter, filed the initial petition with the trial court in this matter on June 6, 2006, claiming that respondent had failed to comply with the court-structured transition plan, which resulted in a disruption in the parent-child relationship. Petitioner alleged that respondent had significant mental health issues, including bipolar disorder. Petitioner requested that the court take jurisdiction of the minor child. In an amended petition filed on August 21, 2006, petitioner requested the termination of respondent’s parental rights pursuant to MCL 712A.19b(3)(d), (e), (g), and (j), at the initial disposition phase. The court adjourned the matter on five occasions before the case came before the court in June 2007, approximately a year after petitioner filed the initial petition.
The trial court then asserted jurisdiction over the child on the basis of the prior order of the probate court finding that respondent had failed to comply with the transition plan, MCL 712A.2(b)(3). The court proceeded to the dispositional hearing. When the hearing began, respondent had not had visitation with the child for over two years.
Elaine Ball-Tyler, a guardianship investigator with the probate court, testified that she first had contact wdth respondent because the maternal grandparents had been appointed as limited guardians of respondent’s two older children. During an investigation regarding the guardianship of the older children in August 2001, Ball-Tyler visited respondent’s home and reported that it had a very unpleasant odor, and clothing, debris, papers, and materials from various projects were strewn about the house. Ball-Tyler first met the minor child who is the subject of this action in April 2002, when she conducted a guardianship investigation pursuant to a referral based on respondent’s petition for guardianship in the instant case. The child, then almost five years old, was fearful, unaccustomed to sleeping alone, and frequently wet the bed. Ball-Tyler recalled that the child had poor communicative language skills, did not know how to hold a crayon, and did not know the alphabet, numbers, or colors. Ball-Tyler described the child as disheveled and indicated that she had not received most of her immunizations, had a drifting eye, and she required dental care.
Ball-Tyler asserted that respondent had not complied with the limited guardianship placement plan in that she had failed to visit the minor child seven times a week, attend medical appointments, pay for babysitting, contribute $200 a month for room and board, or contribute $100 a month for food. Respondent admitted that she had not provided any money for room, board, or food, claiming that she could not afford it.
Henderson, the child’s therapist, opined that there was no bond between respondent and the minor child and that there had been a dramatic disruption in the parent-child relationship. There was a “huge gap of time” when respondent did not have any consistent contact with the child, and the child did not recall any positive memories of respondent. Henderson believed that, if the child were returned to respondent, she would most likely “show some significant regressive behavior fairly quickly.” Henderson did not believe that, given respondent’s history, the child would be psychologically safe if returned to respondent. During the two years Henderson had conducted therapy with the minor child, she saw a significant reduction in the child’s anxiety and depression. Henderson asserted that the child was thriving in her environment, which was evidenced by her success in school and relationships with her friends. Ball-Tyler reported that the child was happy, secure, confident, and succeeding in school and involved in a variety of activities. Henderson believed that the child needed closure, consistency, and stability, and she asserted that termination was in the child’s best interests.
Respondent’s therapist, Sandra Fringer, testified that, during the preceding year, respondent had been working on stress management techniques and had made improvement. Fringer stated that respondent’s psychiatrist had reported that her condition was stable. However, Fringer testified that she understood that respondent had a psychiatric hospitalization seven months before the dispositional hearing began. Fringer was unable to offer an opinion with respect to respondent’s ability to parent or maintain her own household. Respondent similarly claimed that she had been stable for a year before the dispositional hearing. In addition, respondent’s friend, Sherry Pinch, testified that she believed that respondent could be a good parent to the minor child.
The minor child informed Henderson that, before she began living with Roach, respondent’s older children had permitted her to jump out of a window onto a trampoline while respondent was at work and that they had once locked her out of the house. With respect to the trampoline incident, respondent admitted that she had left the minor child under the supervision of her older children, then ages 8 and 12, and she blamed them for the lapse in judgment. Respondent did not believe that her older children had locked the minor child out of the home.
Respondent admitted that, during the time the minor child had been living with Roach, she had been involved in two different relationships that exhibited poor judgment. In both of these relationships, she moved in with a man whom she had known for a short time and lived with him for one to two months. Both of these relationships involved incidents of domestic violence for which the police were summoned.
Respondent testified that she was unable to obtain the required psychiatric evaluation because the psychiatrists to whom she had been referred would not accept her insurance. However, she admitted that she received a psychiatric evaluation in December 2005 and that the doctor recommended lithium. Respondent asserted that she was unable to take lithium because it caused seizures and that the doctor was unwilling to prescribe any other medications. Respondent did not know why she had not presented this evaluation to the court, but she explained that she had been having trouble or mental problems at the time and could not manege to obtain the records, even though she had an attorney.
The trial court terminated respondent’s parental rights to the minor child pursuant to MCL 712A.19b(3)(d) (parent’s noncompliance with a limited guardianship placement plan resulted in a disruption of the parent-child relationship) and (j) (reasonable likelihood that the child will be harmed if returned to parent). This appeal follows.
II. ADJOURNMENTS
Respondent argues that the trial court erred by failing to conduct a timely adjudication pursuant to MCR 3.972(A). We agree that the trial court erred, but we conclude that this error did not affect the outcome of the proceedings and therefore does not warrant reversal.
A. STANDARDS OF REVIEW
Generally, this Court reviews a ruling on a motion for a continuance for an abuse of discretion. In re Jackson, 199 Mich App 22, 28; 501 NW2d 182 (1993). However, because respondent failed to raise this issue before the trial court, it has not been properly preserved for appellate review. In re NEGP, 245 Mich App 126, 134; 626 NW2d 921 (2001). Our review is therefore limited to plain error affecting substantial rights. People v Carines, 460 Mich 750, 763, 774; 597 NW2d 130 (1999). Generally, an error affects substantial rights if it caused prejudice, i.e., it affected the outcome of the proceedings. Id. at 763. When plain error has occurred, “Reversal is warranted only when the plain, forfeited error resulted in the conviction of an actually innocent defendant or when an error seriously affect[ed] the fairness, integrity or public reputation of judicial proceedings independent of the defendant’s innocence.” In re Osborne (On Remand, After Remand), 237 Mich App 597, 606; 603 NW2d 824 (1999) (quotation marks and citations omitted; alteration in original), citing Carines, supra at 763-764.
This issue also involves the interpretation of a court rule, which is a question of law that we review de novo. In re AMAC, 269 Mich App 533, 536; 711 NW2d 426 (2006); In re BAD, 264 Mich App 66, 72; 690 NW2d 287 (2004). We likewise review de novo the construction of the term “good cause.” In re FG, 264 Mich App 413, 417; 691 NW2d 465 (2004).
B. ANALYSIS
MCR 3.972(A) provides the following time requirements for conducting a trial after a petition has been filed:
If the child is not in placement, the trial must be held within 6 months after the filing of the petition unless adjourned for good cause under MCR 3.923(G). If the child is in placement, the trial must commence as soon as possible, but not later than 63 days after the child is removed from the home unless the trial is postponed:
(1) on stipulation of the parties for good cause;
(2) because process cannot be completed; or
(3) because the court finds that the testimony of a presently unavailable witness is needed.
When trial is postponed pursuant to subrule (2) or (3), the court shall release the child to the parent, guardian, or legal custodian unless the court finds that releasing the child to the custody of the parent, guardian, or legal custodian will likely result in physical harm or serious emotional damage to the child.
If the child has been removed from the home, a review hearing must be held within 182 days of the date of the child’s removal from the home, even if the trial has not been completed before the expiration of that 182-day period. [Emphasis added.]
Here, the 63-day requirement is inapplicable. The minor child was not “in placement” as she had been living with a limited guardian and was not in “foster care, a shelter home, a hospital, or a private treatment agency.” MCR 3.903(C)(8). Rather, MCR 3.972(A) requires that the trial should have been conducted within six months of the date the petition was filed “unless adjourned for good cause under MCR 3.923(G).” Pursuant to MCR 3.923(G), “[a]djournments of trials or hearings in child protective proceedings should be granted only (1) for good cause, (2) after taking into consideration the best interests of the child, and (3) for as short a period of time as necessary.”
“Good cause” is not defined by court rule. Therefore, we consult a dictionary and caselaw to assist us in ascertaining its meaning. In re FG, supra at 418; Richards v McNamee, 240 Mich App 444, 451; 613 NW2d 366 (2000). Black’s Law Dictionary (8th ed) defines good cause as “[a] legally sufficient reason.” See Richards, supra at 451-453 (discussing the dictionary definition of “good cause” in applying MCR 2.102[D]). In the context of MCR 3.615(B)(3), this Court has defined good cause as “[a] legally sufficient reason” and “a substantial reason amounting in law to a legal excuse for failing to perform an act required by law.” In re FG, supra at 419 (quotation marks and citation omitted). We adopt the same definition here, and hold that in order for a trial court to find good cause for an adjournment, “a legally sufficient or substantial reason” must first be shown. See id.
Petitioner filed the initial petition on June 6, 2006, and the trial court scheduled a pretrial hearing for June 21, 2006. On June 21, 2006, the court adjourned the hearing, and it was rescheduled for July 26, 2006. This hearing was also adjourned, and it was rescheduled for August 29, 2006. The lower court record does not contain any indication regarding the reasons for these two adjournments, and no legally sufficient or substantial reasons supporting these adjournments are apparent from the record. Moreover, there are no indications that the best interests of the child were considered. The trial court erred in repeatedly adjourning these proceedings. However, we conclude that this error does not require reversal in this case.
When the parties appeared for the August 29, 2006, hearing, respondent formally requested a hearing before a judge rather than a referee pursuant to MCR 3.912(B). The pretrial hearing was adjourned and rescheduled before a judge for September 19, 2006. No determination regarding good cause was made with respect to this adjournment. However, “[i]t is settled that error requiring reversal may only be predicated on the trial court’s actions and not upon alleged error to which the aggrieved party contributed by plan or negligence.” Lewis v LeGrow, 258 Mich App 175, 210; 670 NW2d 675 (2003). Given that this adjournment may be attributed to respondent, any error in this adjournment does not require reversal.
The court convened on September 19, 2006, and respondent requested a jury trial. The trial court scheduled a jury trial for January 4, 2007. Respondent’s request for a jury trial likely constitutes a legally sufficient or substantial reason for this adjournment, but there are no indications that the best interests of the child were taken into consideration or that the 372-month period of adjournment was as short as necessary. See MCR 3.923(G)(2) and (3). However, given that this adjournment may also be attributed to respondent, any error that occurred does not require reversal. See Lewis, supra at 210.
At a December 18, 2006, motion hearing, respondent’s counsel informed the court that respondent was hospitalized. In answer to the court’s questions, the minor child’s guardian ad litem asserted that the child was safe, in stable placement, and would not experience any potential prejudice or harm if the matter were adjourned. Respondent’s doctor, who was contacted after the hearing, informed respondent’s attorney that she was not expected to be able to participate in the proceedings scheduled for January 2007. The trial court entered an order adjourning the January 4,2007, trial, ruling that good cause had been shown by respondent’s hospitalization. The court rescheduled the jury trial for March 27, 2007. Given respondent’s hospitalization and the expectation that she would be unable to participate in the proceedings, there was a legally sufficient or substantial reason for this adjournment. The trial court also took the best interests of the child into consideration, and there is no indication that the 272- month adjournment was longer than necessary. We therefore conclude that this adjournment was proper pursuant to MCR 3.972(A).
On March 12, 2007, respondent filed a stipulated waiver of jury trial, requesting a bench trial on March 27, 2007. The trial court scheduled a bench trial for March 27, 2007, and the parties appeared on that date. The guardian ad litem requested that the court transfer the case back to the referee for trial, and respondent waived her right to a trial before a judge and consented to transfer the case to the referee. The trial before the referee was scheduled to begin on June 26, 2007, and it commenced as scheduled. Given that respondent contributed to the delay by consenting to transfer the case back to the referee, any error in this adjournment does not require reversal. See Lewis, supra at 210.
The petition was filed on June 6, 2006, and the trial was not conducted until June 26, 2007, more than six months beyond the time limit provided in MCR 3.972(A). The high number of adjournments in this case was inappropriate. However, respondent has not claimed prejudice. She merely notes that memories and circumstances may change over time, and she does not assert any violation of due process guarantees.
With respect to the failure to comply with the requirement that a termination hearing on a supplemental petition be conducted within 42 days after the supplemental petition is filed, this Court has noted that the court rule and applicable statute provided no sanctions for the violation. In re Jackson, supra at 28-29; In re Kirkwood, 187 Mich App 542, 545-546; 468 NW2d 280 (1991). The Kirkwood Court declined to include a sanction in those provisions and held that “[s]uch a procedural defect, standing alone, will not cause us to dismiss the case or set aside the termination order.” Kirkwood, supra at 546. MCR 3.902(A) provides that MCR 2.613 governs limitations on the correction of errors in proceedings involving juveniles. In re TC, 251 Mich App 368, 371; 650 NW2d 698 (2002). MCR 2.613(A) provides:
An error in the admission or the exclusion of evidence, an error in a ruling or order, or an error or defect in anything done or omitted by the court or by the parties is not ground for granting a new trial, for setting aside a verdict, or for vacating, modifying, or otherwise disturbing a judgment or order, unless refusal to take this action appears to the court inconsistent with substantial justice.
MCR 3.972(A) does not provide a sanction for a violation of the six-month time limit, and, given the circumstances of this case, respondent could have actually benefited from the additional time because she could continue to work on establishing stability and resolving any barriers to reunification. See In re Gazella, 264 Mich App 668, 674; 692 NW2d 708 (2005); In re Jackson, supra at 29. Therefore, respondent was not prejudiced by the repeated and erroneous adjournments, and substantial justice does not require reversal.
III. ADMISSIBILITY OF EVIDENCE
Respondent contends that the trial court improperly admitted hearsay evidence at the initial dispositional hearing, which resulted in the termination of her parental rights. We agree that hearsay was improperly admitted, but we conclude that there was sufficient clear and convincing, legally admissible evidence to support the trial court’s decision to terminate respondent’s parental rights.
A. STANDARDS OF REVIEW
We review for an abuse of discretion a trial court’s decision regarding the admission of evidence. In re Archer, 277 Mich App 71, 77; 744 NW2d 1 (2007). An abuse of discretion occurs when the trial court chooses an outcome that falls “outside the range of principled outcomes.” Barnett v Hidalgo, 478 Mich 151, 158; 732 NW2d 472 (2007). When an evidentiary question involves a question of law, such as the interpretation of a statute or court rule, our review is de novo. In re Archer, supra at 77; In re BAD, supra at 72.
The statutory grounds for termination of parental rights must be proven by clear and convincing evidence. MCR 3.977(E)(3). “If the court finds that there are grounds for termination of parental rights, the court shall order termination of parental rights . .. unless the court finds that termination of parental rights to the child is clearly not in the child’s best interests.” MCL 712A.19b(5). We review for clear error a trial court’s decision to terminate parental rights and, if appropriate, its decision regarding whether termination is contrary to the child’s best interests. MCR 3.977(J); In re JK, 468 Mich 202, 209; 661 NW2d 216 (2003). A decision is clearly erroneous if, “although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been made.” In re JK, supra at 209-210.
B. PROTECTIVE PROCEEDINGS
Child protective proceedings consist of two distinct phases: the trial, also known as the adjudicative phase, and the dispositional phase. In re AMAC, supra at 536. During the adjudicative phase, which occurs first, the trial court determines whether it may exercise jurisdiction over the minor child pursuant to MCL 712A.2(b). In re AMAC, supra at 536. If the court conducts a trial, “the rules of evidence for a civil proceeding and the standard of proof by a preponderance of evidence apply . .. notwithstanding that the petition contains a request to terminate parental rights.” MCR 3.972(C)(1); In re AMAC, supra at 536. If the court acquires jurisdiction over the child, the dispositional phase follows, at which the trial court determines “what action, if any, will be taken on behalf of the child.” In re AMAC, supra at 536-537; see also MCR 3.973(A). The dispositional phase must be conducted immediately after the adjudicative hearing or after proper notice has been given. In re AMAC, supra at 538. Unlike the adjudicative phase, the Michigan Rules of Evidence do not generally apply at an initial dispositional hearing. MCR 3.973(E)(1); In re AMAC, supra at 537.
The trial court may order termination at an initial dispositional hearing under certain circumstances. MCL 712A.19b(4); In re CR, 250 Mich App 185, 201; 646 NW2d 506 (2002). MCR 3.977(E) provides the procedural requirements for terminating parental rights at an initial dispositional hearing as follows:
The court shall order termination of the parental rights of a respondent at the initial dispositional hearing held pursuant to MCR 3.973, and shall order that additional efforts for reunification of the child with the respondent shall not be made, if
(1) the original, or amended, petition contains a request for termination;
(2) at the trial or plea proceedings, the trier of fact finds by a preponderance of the evidence that one or more of the grounds for assumption of jurisdiction over the child under MCL 712A.2(b) have been established;
(3) at the initial disposition hearing, the court finds on the basis of clear and convincing legally admissible evidence that had been introduced at the trial or plea proceedings, or that is introduced at the dispositional hearing, that one or more facts alleged in the petition:
(a) are true, and
(b) establish grounds for termination of parental rights under MCL 712A.19h(3)(a), (b), (d), (e), (f), (g), (h), (i), (j), (k), (i), (m), or (n);
unless the court finds by clear and convincing evidence, in accordan.ce with the rules of evidence as provided in suhrule (G)(2), that termination of parental rights is not in the best interests of the child. [Emphasis added.]
Petitioner sought termination of respondent’s parental rights in the amended petition, and the trial court assumed jurisdiction over the child on the basis of the prior order of the probate court that stated that respondent had failed to comply with the limited guardianship plan, MCL 712A.2(b)(3). Therefore, clear and convincing, legally admissible evidence was required to establish the grounds for termination.
We reject petitioner’s argument that In re Gilliam, 241 Mich App 133; 613 NW2d 748 (2000), and In re Snyder, 223 Mich App 85; 566 NW2d 18 (1997), dictate that the Michigan Rules of Evidence do not apply. Both cases involved former MCR 5.974(E), which governed the termination of parental rights based on changed circumstances. See Gilliam, supra at 136-138; Snyder, supra at 89-90. Given that petitioner did not seek termination on the basis of changed circumstances, MCR 3.977(F) does not apply, and petitioner’s reliance on Snyder and Gilliam is misplaced. Rather, petitioner sought termination of respondent’s parental rights at the initial disposition in the amended petition, and MCR 3.977(E) provides that clear and convincing, legally admissible evidence was required.
C. HEARSAY
Respondent claims that there were repeated instances of hearsay pertaining to statements Roach made about respondent, statements the minor child made to Henderson, and statements contained in police reports. Respondent also indicates that Ball-Tyler improperly testified about statements made by the maternal grandparents. Hearsay is “a statement, other than one made by the declarant while testifying at the trial or hearing, offered in evidence to prove the truth of the matter asserted.” MRE 801(c). Hearsay is inadmissible unless the rules of evidence provide otherwise. MRE 802.
Henderson testified that the minor child told her that she was afraid of respondent because respondent yelled, threw things at her boyfriend, and engaged in incidents of domestic violence with him. Ball-Tyler testified that the minor child told her that she did not want , to have telephone calls or visitation with respondent, that the visits were not good, that respondent made her feel afraid, that she cried the night before a visit was scheduled to occur, and that she did not think respondent would ever get well. Ball-Tyler also related that the child said that respondent used “bad words,” asked her to keep secrets, and threatened not to let the minor child see Roach or Roach’s family if she were returned to respondent. Although these statements constitute hearsay, they are admissible as exceptions because they pertain to the minor child’s then-existing mental or emotional condition. Statements that the declarant is afraid may be admissible pursuant to MRE 803(3) to prove the declarant’s state of mind. People v Bauder, 269 Mich App 174, 188-189; 712 NW2d 506 (2005); People v Ortiz, 249 Mich App 297, 307-310; 642 NW2d 417 (2002). These statements were relevant pursuant to MRE 401 because they tended to show that the parent-child relationship had been disrupted under MCL 712A.19b(3)(d), which was at issue.
Ball-Tyler also testified that she had reviewed multiple police reports regarding domestic violence involving respondent; two reports involved respondent committing acts of domestic violence, and one involved her being the alleged victim of such violence. Ball-Tyler conducted an investigation in response to the June 2005 petition to terminate the guardianship, and although respondent had reported that she was living with the maternal grandparents, Ball-Tyler was unable to schedule a home visit by contacting their residence. Ball-Tyler’s testimony demonstrated that respondent was not living with her parents; rather, it indicated that respondent was living at other locations at various times. Ball-Tyler’s testimony was offered to demonstrate that respondent had not been consistently living with the maternal grandparents, and not for the truth of the matter asserted, i.e., that respondent was living with various boyfriends, was violent, or was involved in abusive relationships. Therefore, this testimony does not constitute hearsay pursuant to MRE 801(c). See Int’l Union, United Automobile, Aerospace & Agricultural Implement Workers of America v Dorsey (On Remand), 273 Mich App 26, 35-36; 730 NW2d 17 (2006). These reports themselves were not admitted into evidence. Although Ball-Tyler may have offered more testimony than necessary to establish respondent’s residence, respondent admitted that, during the time the minor child was living with Roach, respondent had been involved in two relationships in which incidents of domestic violence occurred and the police were summoned. Respondent testified regarding other domestic violence incidents as well, further elaborating on Ball-Tyler’s testimony.
Ball-Tyler asserted that the maternal grandparents had told her that they did not believe respondent could manage her own residence or was capable of being on her own and that they were concerned about the stability and consistency of her behavior over time. Because these statements were offered to prove the truth of the matter asserted, i.e., that respondent was not able to manage her own residence or live on her own and that her behavior was not stable or consistent over time, they constitute hearsay. MRE 801(c). Ball-Tyler also asserted that Henderson told her that the visits with respondent were causing stress and anxiety for the minor child and were counterproductive. Ball-Tyler stated that Roach reported being frustrated with respondent because of the problems during the visits with the minor child and respondent’s inappropriate actions. Henderson testified that the child expressed that she was afraid that respondent would take her away from Roach, whom she regarded as her grandmother. These statements constitute hearsay because they were offered for the truth of the matter asserted, i.e., that respondent’s visits with the child were not productive. MRE 801(c).
Ball-Tyler testified that Roach told her that respondent rarely arrived at 10:00 a.m. for the scheduled visits with the minor child and that the child was attempting to avoid telephone calls with respondent. To the extent that these statements were offered to prove the truth of the matter asserted, i.e., that respondent was not timely for her visits, they constitute hearsay. MRE 801(c). However, respondent acknowledged that she had not arrived on time for her weekly visitation with the minor child and admitted that she did not believe it was important to be on time.
Ball-Tyler stated that the maternal grandparents had informed her that respondent’s two older children had “great parental responsibility” for the minor child. Henderson testified that the child had similarly told her that respondent’s older children were frequent caregivers and that the child had identified three incidents involving the older children: they permitted her to jump out of a window onto a trampoline, they locked her out of the house, and they permitted her to eat dog food. These statements constitute hearsay because they were offered for the truth of the matter asserted, i.e., that respondent left the minor child in the care of her older children. MRE 801(c). However, with respect to the trampoline incident, respondent admitted that she had left the minor child in the care and supervision of her older children while she was at work. Respondent also asserted that she did not believe that her older children had locked the minor child out of the home.
Although the trial court abused its discretion by allowing the admission of extensive hearsay statements, detailed above, to prove the statutory bases for termination of respondent’s parental rights, MCR 3.977(E)(3), reversal is not necessarily required. To the extent that respondent testified regarding the substance of hearsay statements that were improperly admitted, she must demonstrate that substantial justice requires us to reverse the order terminating her parental rights. MCR 2.613(A); MCR 3.902(A); In re TC, supra at 371. If petitioner provided clear and convincing, legally admissible evidence that respondent substantially failed, without good cause, to comply with the limited guardianship placement plan and that this noncompliance resulted in a disruption of the parent-child relationship, MCL 712A.19b(3)(d), or that there was a reasonable likelihood that the child would be harmed if returned to respondent, MCL 712A.19b(3)(j), reversal is not warranted. See In re CR, supra at 206-208.
D. MCL 712A.19b(3)(d)
The trial court terminated respondent’s parental rights pursuant to MCL 712A.19b(3)(d), which provides:
The child’s parent has placed the child in a limited guardianship under section 5205 of the estates and protected individuals code, 1998 PA 386, MCL 700.5205, and has substantially failed, without good cause, to comply with a limited guardianship placement plan described in section 5205 of the estates and protected individuals code, 1998 PA 386, MCL 700.5205, regarding the child to the extent that the noncompliance has resulted in a disruption of the parent-child relationship. [Emphasis added.]
Again, the term “good cause” is not defined in the statute. As discussed earlier, this Court defines “good cause” as “a legally sufficient or substantial reason,” and we adopt the same definition here. Termination is therefore appropriate pursuant to MCL 712A.19b(3)(d) if a respondent fails to substantially comply with a limited guardianship plan without a “legally sufficient or substantial reason,” and this noncompliance results in a disruption of the parent-child relationship.
The probate court expressly found “that there has been no substantial compliance by the natural mother with the Transition Plan ....” Henderson testified at the dispositional hearing that she never received respondent’s psychiatric evaluation, which supports the probate court’s finding that respondent failed to comply with the transition plan. However, respondent asserted that she had difficulty obtaining a psychiatric evaluation because she could not find a psychiatrist who accepted her insurance. Although much of the evidence disproving this claim was improperly admitted hearsay, respondent’s own testimony was sufficient to demonstrate that her noncompliance with the transition plan was without good cause. Respondent admitted that she had received a psychiatric evaluation in December 2005, but she explained that, because of her mental problems at the time, she could not manage to obtain the records, even though she was represented by counsel. Because respondent’s asserted cause for noncompliance with the transition plan, i.e., her mental illness, is the very condition that impairs her ability to care for the child, it cannot constitute a legally sufficient or substantial reason. The absence of good cause was established by clear and convincing, legally admissible evidence.
Respondent’s failure to comply with the transition plan resulted in a further disruption of the parent-child relationship, which was already severely disrupted by that time. Roach suspended respondent’s parenting time in June 2005, and the probate court suspended respondent’s parenting time in February 2006 because respondent had failed to comply with the transition plan. Henderson did not facilitate visitation because she never received a psychiatric evaluation, and visits were never reinstated. Visitation was ultimately suspended when petitioner sought termination of respondent’s parental rights in August 2006. See MCL 712A.19b(4). Thus, the eight-month gap in visits from the time of respondent’s psychiatric evaluation in December 2005 until the filing of the termination petition in August 2006 is wholly attributable to respondent’s failure to comply with the transition plan. This clearly constitutes a disruption in the parent-child relationship, and termination on this ground was proven by clear and convincing, legally admissible evidence.
E. MCL 712A.19b(3)(j)
Given our conclusion that the grounds for termination pursuant to MCL 712A.19b(3)(d) were established by clear and convincing evidence, it is not necessary to address the second ground for termination pursuant to MCL 712A.19b(3)(j). In re Trejo Minors, 462 Mich 341, 360; 612 NW2d 407 (2000). We nonetheless provide analysis as follows.
The trial court also terminated respondent’s parental rights pursuant to MCL 712A.19b(3)(j) because it found that there was a reasonable likelihood that, given respondent’s conduct or capacity, the child would be harmed if returned to respondent’s home. Respondent suffers from bipolar disorder, and she testified that, from 1994 until July 2006, she was not stable. Respondent admitted that she made poor decisions during the time the minor child lived with Roach, including living with two abusive men whom she knew for very short periods before beginning to live together. Respondent continued to exhibit poor judgment at the dispositional hearing, for example, by testifying that she felt it had been appropriate to leave the minor child in the care of her older children, who were then 8 and 12 years old, while respondent was at work. Respondent attributed the trampoline incident to poor judgment on the part of her older children, but not herself for leaving them in charge of the minor child. Respondent also indicated that she did not believe that her older children had locked the minor child out of the house. Respondent acknowledged that she might have disappeared between November 2003 until May 2004 and failed to remember it. She testified that she had been physically and mentally unable to visit the minor child for the entire four-hour visitation periods that were allowed during part of the limited guardianship. She answered affirmatively when asked whether a seven-year-old was supposed to realize that her mother just could not come to visit.
Fringer could not provide an opinion with respect to respondent’s ability to maintain a household on her own or on her ability to parent. She indicated that, after six additional months of therapy, respondent could “possibly” care for herself without therapy and could improve enough to potentially parent. Fringer also testified that respondent had a psychiatric hospitalization in December 2006, contradicting respondent’s own testimony that she was hospitalized at Oakland General Hospital for a heart attack and later transferred to the Detroit Behavioral Institute for three or four days for observation of her heart. Respondent herself testified that she had been stable since July 2006. Any rational evaluation of the evidence must take into account respondent’s lengthy history of instability as relevant to her current capacity to provide proper care for the child. Respondent’s lengthy period of instability, compared to the recent period of stability reported by herself and Fringer, in combination with her own testimony indicating a continuing lack of judgment, insight, and empathy for the child, provided sufficient evidence to support termination pursuant to MCL 712A.19b(3)(j). Thus, despite the extensive hearsay erroneously received by the trial court, we conclude that the trial court’s decision to terminate was supported by clear and convincing, legally admissible evidence. MCR 3.977(E)(3).
Affirmed.
The lower court record indicates that once Russell became the petitioner, a different guardian ad litem was appointed.
It appears that the trial court regarded the transition plan as a modified limited guardianship plan, and respondent does not challenge this consideration on appeal.
MCR 3.615 governs proceedings pursuant to the Parental Rights Restoration Act (PRRA), MCL 722.901 et seq. MCR 3.615(B)(3) prohibits the release of the contents of the court file maintained under the PRRA absent “good cause shown and only for a purpose specified in the order of the court.”
In In re Jackson, supra at 28-29, and In re Kirkwood, 187 Mich App 542, 545-546; 468 NW2d 280 (1991), the Court applied former MCR 5.974(F)(1)(a). The rules governing juvenile proceedings have since been amended and renumbered, effective May 1, 2003. MCR subchapter 5.900 was moved to new MCR subchapter 3.900, and MCR 3.977 corresponds to former MCR 5.974. In re JK, 468 Mich 202, 209 n 17; 661 NW2d 216 (2003).
Former MCR 5.974(E) corresponds to current MCR 3.977(F). See In re JK, supra at 209 n 17.
For example, Ball-Tyler testified that a previous therapist of respondent informed her that she had advised respondent of several psychiatrists who would accept her insurance and perform a psychiatric evaluation. Respondent does not challenge the admission of this testimony. | [
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Murray, P.J.
Defendant, Wesco Distribution, Inc., appeals as of right the trial court’s order of judgment for plaintiff, DaimlerChrysler Corporation (Chrysler). Wesco’s arguments on appeal pertain to the trial court’s order granting summary disposition for Chrysler with respect to liability. Although Wesco posits several arguments for reversal, we find one dispositive. That is, Wesco could not be held liable to indemnify Chrysler under this contract for an injury that occurred before the contract was formed. On this basis, we reverse and remand.
I. FACTS AND PROCEEDINGS
Wesco, a distributor, has a business relationship with Eaton Electrical Engineering Services and Systems Division, which provides service and support to users of Eaton Electrical products and supports factories with warranties and other equipment needs. Eaton uses distributors like Wesco as intermediaries when performing electrical work for customers like Chrysler. In general, Eaton prepares a quotation for the work to be performed and submits it to Wesco. Wesco then applies a markup and supplies the quotation to the customer. If Wesco and Eaton are awarded the job, Wesco then receives a purchase order from the customer and sends it to Eaton, which performs the work.
On July 23, 2002, Jay Karnik and Jack Hemmert of Chrysler called Mark Stephens, a field services engineer for Eaton, and asked him to come to Chrysler’s plant in Newark, Delaware, to look at some damaged electrical equipment contained in a capacitor bank and prepare a quotation for the work that would be required to repair it. When Stephens arrived at the plant, two or three High Voltage Maintenance Corporation (HVMC) employees were working on electrical equipment near the damaged capacitator bank. After Stephens finished gathering the information necessary to formulate a quotation for the repairs, Hemmert asked Stephens if he could borrow a phase rotation meter. Stephens retrieved the meter from his van and handed it to Hemmert. Stephens eventually sought to retrieve his meter. The Chrysler employees were about to use the meter, but one of them handed the meter to Stephens instead because it was “[his] device.” One of the HVMC employees, who were standing next to Stephens, touched two of the leads to the transformer. Stephens then touched the third lead to the transformer, and pushed the button. The equipment then exploded.
According to Dale Schmidt, a district manager for Eaton, Eaton was not able to use the information Stephens collected on that day because his notes were lost or destroyed during the accident. Schmidt and Jimi Jones, an Eaton employee responsible for direct sales, ultimately returned to the Delaware facility and “started from scratch,” recollecting the information, and reformulating the quotation. In determining the extent of the damage, they “probably” also used some photographs that Stephens had taken of the equipment on July 23, 2002. The work of Schmidt and Jones resulted in an August 2, 2002, quotation from Eaton to Wesco, which Wesco used to formulate the quotation that it submitted to Chrysler, also on August 2, 2002. Wesco’s quotation describes the work to be performed as “LABOR AND MATERIAL TO COMPLETE SERVICE WORK AND A 5KV METAL ENCLOSED CAPACITATOR BANK” and quotes the prices as $17,461, or $21,649 with optional overtime hours.
On August 8, 2002, Chrysler issued a purchase order to Wesco, which describes the work to be performed as follows: “PROVIDE ALL LABOR, MATERIAL AND SUPERVISION TO SERVICE, TROUBLE SHOOT AND REPAIR (1) 5KY METAL ENCLOSED CAPACI-TATOR BANK.” It also refers to Wesco’s August 2, 2002, quotation, and lists the same $17,461 price. The purchase order includes an indemnification clause, which provides, in part: “Seller... shall protect, defend, hold harmless, and indemnify DaimlerChrysler from and against any and all loss ... arising out of or related to the performance of any work in connection with this contract.” On September 26, 2002, Wesco issued Chrysler an invoice, in the amount of $17,461, for the repair of the capacitator bank, which Chrysler paid without objection on October 30, 2002.
In 2003, Stephens filed a personal injury action against Chrysler and HVMC in a Pennsylvania state court. Chrysler sought indemnification from Wesco and HVMC. They apparently refused, and Chrysler filed this action. As part of a settlement agreement between Stephens, HVMC, and Chrysler, Chrysler agreed to dismiss its claims against HVMC, and the trial court entered an order to that effect. Wesco filed a motion for summary disposition pursuant to MCR 2.116(C)(8) and (0(10). The trial court, pursuant to MCR 2.116(I)(2), instead granted summary disposition for Chrysler with respect to liability, and thereafter entered judgment for Chrysler, awarding it $941,894.81, which included the $750,000 settlement that Chrysler paid to Stephens, attorney fees, litigation expenses, and prejudgment interest on those amounts.
II. ANALYSIS
We review a trial court’s decision on a motion for summary disposition de novo. Rose v Nat’l Auction Group, 466 Mich 453, 461; 646 NW2d 455 (2002). Although Wesco brought its motion for summary disposition under both MCR 2.116(C)(8) and (C)(10), the trial court decided the motion under MCR 2.116(C)(10) because it considered documentary evidence submitted by the parties. When reviewing a decision on a motion for summary disposition pursuant to MCR 2.116(C)(10), we consider “the affidavits, pleadings, depositions, admissions, and other documentary evidence submitted by the parties in the light most favorable to the party opposing the motion.” Rose, supra at 461. Summary disposition is appropriate “if there is no genuine issue regarding any material fact and the moving party is entitled to judgment as a matter of law.” In addition, under MCR 2.116(1)(2), summary disposition in favor of the opposing party is properly granted if the Court determines that that party, rather than the moving party, is entitled to judgment. MCR 2.116(I)(2); Sharper Image Corp v Dep’t of Treasury, 216 Mich App 698, 701; 550 NW2d 596 (1996). We also review de novo, as questions of law, issues concerning the interpretation of a contract. DaimlerChrysler Corp v G-Tech Professional Staffing, Inc, 260 Mich App 183, 184-185; 678 NW2d 647 (2003).
Before addressing the indemnity issue, we first dispatch with Wesco’s argument that the August 8, 2002, purchase order was not the final contract. Wesco bases much of its argument on an analysis of the parties’ exchange of documents under the Uniform Commercial Code-Sales (UCC), MCL 440.2101 et seq. However, the UCC does not apply in this case because the primary purpose of the contract was the provision of services, rather than goods, and the UCC applies to transactions in goods. MCL 440.2102; Neibarger v Universal Cooperatives, Inc, 439 Mich 512, 536-537; 486 NW2d 612 (1992); Farm Bureau Mut Ins Co v Combustion Research Corp, 255 Mich App 715, 723; 662 NW2d 439 (2003). Here, Wesco’s quotation of August 2, 2002, and Chrysler’s August 8, 2002, purchase order make it clear that a service — repair of the capacitator bank — was the primary purpose of the parties’ contract, and the provision of necessary materials was incidental to the repairs. Therefore, this contract dispute is governed by the common law, rather than the UCC.
Applying the common law, the trial court correctly held that the August 8, 2002, purchase order constituted a counteroffer, which Wesco accepted by its performance. “Before a contract can be completed, there must be an offer and acceptance. Unless an acceptance is unambiguous and in strict conformance with the offer, no contract is formed.” Kloian v Domino’s Pizza, LLC, 273 Mich App 449, 452; 733 NW2d 766 (2006) (quotation marks and citation omitted.) “Further, a contract requires mutual assent or a meeting of the minds on all the essential terms.” Id. at 453. Wesco’s August 2, 2002, quotation provided:
This quotation constitutes an offer to sell which offer expressly limits acceptance to the terms of this offer on the back of this quotation. This offer shall be firm for a period of fifteen (15) days from the date of this offer. Subject to Buyer’s credit worthiness, the return of this form with a Purchase Order number or any other reasonable manner of acceptance will be sufficient to form an agreement on the terms and conditions on the back of or attached to this quotation.
“An offer is defined as the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it.” Kloian, supra at 453 (quotation marks and citation omitted). Wesco’s quotation constituted an offer because it expressed Wesco’s willingness to enter into an agreement and invited Chrysler’s assent.
Chrysler responded with a purchase order that mirrors the key terms of Wesco’s offer: listing the services to be performed, as well as the price, and referring to Wesco’s quotation. However, the purchase order also states, “SELLER AGREES TO SELL AND DELIVER THE GOODS OR SERVICES IN ACCORDANCE WITH THE TERMS AND CONDITIONS CONTAINED IN THE ORDER.” Clause # 054 of the purchase order, which requires Wesco to indemnify Chrysler, conflicts with a provision in Wesco’s terms and conditions requiring Chrysler to indemnify Wesco. Because an acceptance must be in strict compliance with the offer in order for an agreement to be formed, no contract was formed at this point. Kloian, supra at 452-453. Rather, Chrysler’s purchase order constituted a rejection of Wesco’s offer, and instead was a counteroffer. Harper Bldg Co v Kaplan, 332 Mich 651, 655; 52 NW2d 536 (1952); see also 2 Williston, Contracts (4th ed), § 6.11, pp 110-117 (“[B]ecause the offeror is entitled to receive what it is it has bargained for, if any provision is added to which the offeror did not assent, the consequence is not merely that the addition is not binding and that no contract is formed, but that the offer is rejected, and that the offeree’s power of acceptance is thereafter terminated.”).
Wesco accepted this counteroffer by performing the contract work. See Sanchez v Eagle Alloy, Inc, 254 Mich App 651, 666; 658 NW2d 510 (2003) (“A meeting of the minds can be found from performance and acquiescence in that performance.”); Williston, § 6.25, pp 331-341, 350-357 (noting that the drafters of the Restatement Second take the position that, absent a contrary indication in the offer, the offeree will be entitled to accept either by promising to perform or by rendering performance). Therefore, Chrysler’s August 8, 2002, purchase order constitutes the agreement between the parties. Wesco’s subsequent issuance of an invoice containing different terms and conditions, despite its inclusion of a conditional assent clause, had no effect on the parties’ preexisting agreement.
Although the trial court correctly held that the August 8, 2002, purchase order constituted the contract, we believe it erred by ruling that the terms of the indemnity clause of that contract applied to an act and injury occurring before August 8, 2002.
“This Court construes indemnity contracts in the same manner it construes contracts generally.” Badiee v Brighton Area Schools, 265 Mich App 343, 351; 695 NW2d 521 (2005). “An unambiguous contract must be enforced according to its terms.” Id. (quotation marks and citation omitted). “If indemnity contracts are ambiguous, the trier of fact must determine the intent of the parties.” Id. “While it is true that indemnity contracts are construed strictly against the party who drafts them and against the indemnitee,” id. at 352 (quotation marks and citation omitted), that principle only applies if the contract is ambiguous. G-Tech Professional Staffing, Inc, supra at 187. Whether a contract is ambiguous is a question of law for the court to decide. Coates v Bastian Bros, Inc, 276 Mich App 498, 503; 741 NW2d 539 (2007).
In arguing that the indemnification provision cannot be applied retroactively, Wesco correctly notes the general rule that a contract “cannot be construed to operate retrospectively,” In re Slack Estate, 202 Mich App 627, 629; 509 NW2d 861 (1993), unless, of course, the parties expressly provide so in their agreement. See Hyatt v The Grover & Baker Sewing Machine Co, 41 Mich 225, 227; 1 NW 1037 (1879) (holding that surety contract would only apply prospectively unless the contract specified differently); Brockway v Petted, 79 Mich 620, 626; 45 NW 61 (1890) (surety contract only applies to future events unless otherwise provided in contract); Watson Wyatt Corp v SBC Holdings, Inc, 438 F Supp 2d 746, 750-751 (ED Mich, 2006) (applying Michigan law), rev’d in part on other grounds 513 F3d 646 (CA 6, 2008). These decisions are entirely consistent with the principle that it is the contract language freely agreed to by the parties that controls. Rory v Continental Ins Co, 473 Mich 457, 468; 703 NW2d 23 (2005). Thus, we again turn to the indemnity language chosen by the parties.
The indemnification provision in Chrysler’s purchase order provides, “Seller. .. shall protect, defend, hold harmless, and indemnify DaimlerChrysler from and against any and all loss ... arising out of or related to the performance of any work in connection with this contract.” This plain and unambiguous language makes clear that indemnification applies only to any loss that is related to work performed in connection with the August 8, 2002, contract. That contract required labor and material to be supplied for repair of the capacitor bank, and all of that work was started and completed after August 8, 2002. Obviously, the Stephens injury occurred well before the contract was formed (indeed, even before an offer was even made), and was not related to the work performed on the capacitor bank. Consequently, Stephens’s injury was not covered by the indemnity clause.
DaimlerChrysler relies on G-Tech Professional Staffing, Inc, supra, as well as several unpublished, nonprecedental decisions, in support of its argument that the indemnity clause covered Stephens’s precontract injury. But all G-Tech recognized is that the words “related” and “connecting” within an indemnity provision required an expansive reading of what was “related” or “connected” to the work performed under the contract. See G-Tech Professional Staffing Inc, supra at 186-187. That conclusion, however, does not assist us in resolving the issue presented here. It is one thing to decide whether an injury occurring during the term of the contract falls within the contract’s coverage language, but it is quite another to decide whether a party has agreed to indemnify another for an injury that occurred before the indemnity provision was agreed upon. Hence, unlike in G-Tech, where the Court was addressing whether a postcontract injury was related to the work performed under the contract, we must look to whether the parties provided language that shows an intent to require indemnification for precontract activity. As we have explained, there is no such language, and Stephen’s precontract injury is not covered by the indemnity provision.
Reversed and remanded for entry of a judgment in favor of Wesco. We do not retain jurisdiction.
Wesco’s reliance on Power Press Sales Co v MSI Battle Creek Stamping, 238 Mich App 173; 604 NW2d 772 (1999), is misplaced, as that case addressed issues under the UCC, which is inapplicable to this case.
Although neither relevant nor necessary to our decision under Michigan law, we note in passing that the rule in Michigan is consistent with that in several other states. See, e.g., Pena v Chateau Woodmere Corp, 304 AD2d 442, 443-444; 759 NYS 2d 451 (2003) (indemnity provision does not apply to injury that occurred before effective date of contract unless explicitly stated); Service Merchandise Co v Hunter Fan Co, 274 Ga App 290, 296-297; 617 SE2d 235 (2005) (same conclusion under Georgia law), and Servco Pacific Inc v Dods, 193 F Supp 2d 1183, 1193 (D Hawaii, 2002) (Hawaiian law).
See MCR 7.215(C)(1).
We also point out that the injury caused in G-Tech occurred after formation of the contract. See id. at 187. | [
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Potter, J.
Defendant, a young negro boy- 18 years of age, a native of Georgia, resident in De troit, with no previous criminal record and of good family, was arrested and informed against charged with robbery armed, under Act No. 374, Pub. Acts 1927 (3 Comp. Laws 1929, §§16722, 16723). On arraignment he pleaded guilty to the information filed against him. Subsequently, on the trial of other defendants with him at the time of the alleged robbery, they were acquitted, and it appeared defendant was probably not guilty. When brought before the trial judge for sentence, he appeared by counsel and sought to withdraw his plea of guilty and enter a plea of not guilty. The court refused his application to change his plea, and sentenced him to the State reformatory at Ionia for not less than two and one-half nor more than 15 years. Defendant brings error.
The law favors trial on the merits. People v. Merhige, 212 Mich. 601. The right of trial by jury is constitutional. To permit a change of plea after sentence involves setting aside the judgment of the court, and is not favored (People v. Goldman, 245 Mich. 578), but it was the duty of the trial judge, if there was doubt of the truth of defendant’s plea of guilty, to vacate the same, direct the entry of the plea of not guilty, and order a trial of the issue thus formed. 3 Comp. Laws 1929, § 17328. We have such doubt. “We have no question that at any time before sentence the plea of guilty may be changed by the court to one of not guilty.” People v. Utter, 209 Mich. 214. Judgment reversed, and new trial ordered.
Butzel, C. J., and Wiest, Clark, McDonald, Sharpe, North, and Fead, JJ., concurred. | [
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Potter, J.
Assumpsit on a promissory note dated February 6, 1926, due October 1, 1927, made by defendant Horton to William Addison & Son or order, for $1,000 with interest at 6 per cent, per annum. On the back of this note was printed:
“For value received, I hereby guarantee the payment of the within note, and waive protest, demand and notice of nonpayment thereof.”
Beneath this printed matter was written:
“Pay to Fred Main of Albion, Mich.
“William Addison & Son,
“Dr. F. W. Main.”
From a judgment for plaintiff against all defendants, William Addison & Son bring error. The question is whether appellants are liable under the facts. Mooers v. Stalker, 194 Iowa, 1354 (191 N. W. 175), holds the negotiable instruments law was obviously intended to change the previous rulé that a waiver written or printed on the back of a note at the time of its execution had the same force and effect as though embodied in the instrument. Presentment for payment is necessary to hold an indorser, 2 Comp. Laws 1929, § 9319; unless waived, 2 Comp. Laws 1929, § 9331. No notice of dishonor was given to appellants. The question is whether appellants waived presentment and notice of dishonor.
In Mooers v. Stalker, supra, it is said:
“An indorser who waives notice waives for himself alone, and a subsequent indorser does not, by the mere fact of indorsement, accept or become bound by a waiver of a previous indorser. Under the statute, he is not now required to cancel or reject such waiver or to add to his indorsement words repudiating the waiver of a prior indorser.”
In this case there were no indorsers prior to appellants. The printed waiver quoted above was on the back of the note. It was not erased. The writing was added thereto and signed.
“Where language constituting a waiver is printed on the back of a note or placed thereon by an indorser, it has been held that those who merely append their naked signature beneath such waiver must be assumed to have adopted the same and will be bound thereby, although such waiver is not apparently connected with his indorsement.” 8 C. J. p. 702.
In Farmers Bank of Kentucky v. Ewing, 78 Ky. 264 (39 Am. Rep. 231), it is said:
“It must be presumed that the parties knew of the memorandum when the contract of indorsement was executed; and when on the paper at the time of the indorsement it cannot be disregarded because of the ignorance of the appellee as to its legal effect.”
At the time appellants signed the indorsement on the back of the note in question, there was no previous indorsement. They did not strike out the printed waiver on the back of the note, but added thereto the written language above indicated before signing.
Under the circumstances, this language must be construed together with the printed waiver, and, so construed, indicates appellants waived notice of presentment and dishonor. Judgment affirmed, with costs.
Butzel, C. J., and Wiest, Clark, McDonald, Sharpe, North, and Fead, JJ., concurred. | [
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Sharpe, J.
Defendant here seeks review of an order made by the trial court on the accounting had, pursuant to the order of this court entered on June 2, 1930 (250 Mich. 561).
By reason of the claim here made by the defendant, it seems necessary to review the proceedings in this case at some length. In doing so, we have had resort to the records and briefs filed on the former hearings.
The bill of complaint was filed on July 29, 1926, by the plaintiff as administrator of the estate of Enoch W. Marsh, deceased. It was alleged therein that the deceased, in November, 1915, had estab lished a printing business on Field avenue, in Detroit, and that he carried it on as owner thereof until his death on October 15, 1922, under the name of the Michigan Brief and Record Company; that on his death the defendant, his widow, took possession thereof under a claim of ownership; that she had converted the net income thereof to her. own use, and should account to the plaintiff therefor. The relief sought was an accounting and an order that defendant turn over said business to the plaintiff.
Annexed thereto were copies of five chattel mortgages, given by the deceased to the Mergenthaler Linotype Company, with dates and amounts as follows: November 26, 1915, $2,180; August 12, 1916, $2,741; May 26, 1920, $3,000; July 12, 1921, $2,500, and April 17, 1922, $2,200, on linotype machines, presumably to secure the purchase price thereof. In the last three of these, the mortgagor was said to be “Enoch W. Marsh, doing business as the Michigan Brief & Record Company. ’ ’
The defendant answered, denying the material allegations in the bill. She admitted that the chattel mortgages were executed by her husband, but averred that they were so signed “at the direction and under the authority of this defendant.” In a cross-bill she alleged that the business was established by her, and that she was the owner thereof, and prayed for a decree so determining.
After a hearing on proofs taken in open court, a decree was entered on December 24,1927, containing the following provision:
“That the printing business known as the Michiigan Brief and Record Company, and United States Law Printery, located at 4429 Field avenue (old No. 1009), Detroit, Michigan, and all furnishings, machinery and equipment thereof, and all records thereof, of every kind whatsoever, including books of account, bank books, bank check books, canceled checks, invoices, receipts, and other instruments, or papers or writings in anywise pertaining to said business, and all merchandise, supplies and stock thereof, and all good will existing, developed and connected with said printing* business, together with all notes and accounts receivable, is the property of the estate of Enoch W. Marsh, deceased.”
In it the plaintiff was appointed a receiver of the company and the defendant ordered to deliver to it all of its property and effects. It also provided for an accounting of the business conducted by the defendant after the death of her husband, and that defendant do pay to the receiver such sum as should be found due from her conduct of such business.
The defendant made an ineffectual effort to appeal from this decree. Marsh v. Wayne Circuit Judge, 243 Mich. 530. When the report of the receiver was presented and allowed by the trial court, she sought, on appeal therefrom, to incorporate into the record the testimony and exhibits taken on the trial, but such right was denied to her. Marsh v. Wayne Circuit Judge, 246 Mich. 511.
In the taking* of the accounting now before us, the defendant testified:.
“Prom the date of the starting of the business, that is from the period of November 5, 1915, to and including the 15th day of October, 1922,1 have made advances to the business.”
On objection thereto, the court said:
“That of course was in the original record and that was determined. At the present time it is not the question involved, as has already been determined by the court. ” * '
Under the statute so permitting, she submitted proof that during the period above stated she had contributed to the business the sum of $7,609.03. In ruling upon it, the trial court said:
“If Mrs. Marsh made any advances prior to October 15, 1922, they are charges against the estate of Enoch W. Marsh, and should be pursued as a claim against the estate.”
Under the ruling of the court, the plaintiff was not required to rebut the claim thus made on her part, .and counsel’s statement that there was no controversy over the fact that she made such advances is without force or effect.
Counsel seem unable to appreciate the duty imposed on the court by the decree in taking the accounting. The receiver appointed in the decree was ordered to report to the court a true and complete accounting of said printing business, its property and effects, and of the net profits earned since the date of the death of Enoch W. Marsh, October 15, 1922,. The argument of counsel is founded upon their claim that—
“Appellant established the business of the Michigan Brief and Record Company and Enoch W. Marsh made no contribution whatsoever.”
This claim was litigated on the hearing first had, and the decree then made forecloses her from raising it in this proceeding. On this record we cannot but hold that the trial court was right in declining to consider her claim for advances-made to the business prior to the death of her husband.
'Stress is laid'upon the fact that the “bank account” was not specifically referred to in the decree determining that the business belonged to the estate of the deceased. We do not again quote this provision, but it seems clear that under it any moneys in the bank to the credit of the' Michigan Brief and Record Company would pass to the receiver. We do not find that the amount of the bank account is stated in the report, nor do counsel refer to it in their brief. The claim relative to it is thus stated:
“We contend that appellant was the owner in her own right of the bank account and all sums deposited therein, that the same were her sole and separate property and estate and not that of any other; that the record warrants no other finding, than that this was the sole and separate estate of Ella B. Marsh and she is not required to account to plaintiff, the decedent’s estate, his children or the receiver.”
If considered by the court, we think it was properly disallowed.
The trial court found that the business “was profitably run and managed” by the defendant; that her personal withdrawals from the business amounted to $62,035.31; that she should be charged with interest on overdrafts by her exceeding the sums allowed her for salary and rent, amounting to $5,468.45 — in all, $67,503.76. These charges do not seem to be attacked.
He credited her with salary for 62½ months at $500 per month, $31,250; with rental of her building in which the business was conducted at $125 per month for the same time, $7,812.50, and for personal, advancements made by her to the business during that time, $1,037.01 — in all the sum of $40,099.51. The only criticism of these allowances is as to the rent, which it is urged should have- been fixed at $200 per month. The evidence sustains the allowance as made. The difference between these amounts, $27,404.25, he found to be due from her to the estate, and ordered it to be paid by her to the plaintiff.
It appeared that the defendant had paid out of the business certain sums to persons claiming to be the children of the deceased, amounting to $4,502. The court declined to give her credit for these payments, saying they were a matter' of adjustment in the probate court. In this we think he was right, as also in disallowing an item of $541, made up of gifts to the grandchildren of the deceased.
The claim of the injustice to the defendant in requiring her to pay to the estate of her deceased husband moneys which in fact and in right belong to her has impelled us to give this case very thoughtful consideration. We. can only say that, upon the record before us, the order made by the trial court was fully justified, and it is affirmed, with costs to. appellee.
Butzel, C. J., and Wiest, Clark, McDonald, Potter, North, and Fead, JJ., concurred. | [
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] |
Potter, J.
Plaintiff, receiver of Quality Home Builders Company, a corporation, sued defendants for discovery, to recover money claimed to have been lost through the fraud and negligence of the directors of the corporation and for other relief. Defendants 'Willings and Spathelf moved to dismiss the bill of complaint. From an order denying defendants’ motion to dismiss they appeal. Plaintiff was appointed by the circuit court of Oakland county. As such receiver he is the arm of the Gourt. He derives his authority as such receiver from the statutes and rules of court, the order appointing him, and specific orders which may from time to time be made by the court of his appointment. Defendants object that it does not appear plaintiff was authorized to bring suit and he has no right to bring it unless authorized so to do. High on Receivers (4th Ed.), p. 245. Plaintiff filed this bill in 1930. At that time Circuit Court Rule No. 61 was in force. It provides:
“Every receiver of the property and effects of the debtor, appointed in a suit upon a creditor’s bill, shall, unless restricted by the special order of the court, have general power and authority to sue for and collect all the debts, demands and rents belonging to such debtor, and to compromise and settle such as are unsafe and of a doubtful character.”
The rule gives him many other powers and provides it shall be his duty without unreasonable delay to convert all the personal estate and effects into money. Former Circuit Court Rule No. 61 is identical with Michigan Court Rule No. 53.
“His right to sue is limited to the right of the person or corporation over whose property he is appointed, if no receiver had been appointed except in those instances where, as a representative of the creditors, he may avoid illegal and fraudulent acts of the party whom he succeeds which the party might be estopped from doing. * * * His suit is legal and equitable, according to the subject matter, and his rights when in court are precisely those of any other person.” 2 Tardy’s Smith on Receivers, pp. 1999, 2002.
No other reason assigned for dismissing the bill of .complaint merits discussion, and the order of the trial court is affirmed, with costs.
Butzel, C. J., and Wiest, Clark, McDonald, Sharpe, North, and Fead, JJ., concurred. | [
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Wiest, J.
This is a bill by vendees to rescind a land contract, alleged to have been induced by false representations, and have a vendee’s lien for payments made. Rescission was denied, but an award of damages decreed and credited upon the contract.
Defendant Northwestern Investment Company, assignee of the vendor, prosecutes this appeal. The land contract, was executed January 16, 1928, with plaintiffs, vendees, and the Trinity Building Company, vendor, and the same day assigned by the vendor to defendant Northwestern Investment Company.
The house was built upon swamp ground, the building was improperly constructed, has settled, the interior walls have cracked, doors and windows do not fit, the roof leaks and many other defects exist, all contrary to representations made by the builder, defendant Trinity Building Company. There was sharp controversy over the question of a swamp at the point where the house stands, but considering the mute evidence furnished by the house and the articulate evidence by frogs in.the back yard, we are satisfied, that the witnesses who said there was formerly a swamp at that point are correct. But it is said that no such claim was set up in the bill. The bill alleged representations made, and averred falsity thereof, and sufficiently connected many of the defects with the mentioned cause. The house was new, and when the frost left the ground in the spring the building soon disclosed defects. Plaintiffs complained, relied on promises to repair, and made payments of installments for many months.
The circuit judge held the right to rescind lost, but the right to have justice remained, and awarded a sum sufficient to remedy the wrong done.
At the hearing it was claimed, and in this court it is urged, that :
“This land contract should not have been admitted in evidence and when at the close of the hearing the tax had not been paid the court should have granted defendant’s motion to dismiss the bill.”
The record does not show payment of the tax, but in the brief of counsel for plaintiffs it is said that the tax was paid by the Northwestern Investment Company in September, 1929, when that company brought suit on the contract in the common pleas court, and set forth the certificate of the county treasurer. This, not being in the record, cannot be considered beyond leading us to say that, hearing the case de novo, we will withhold decree until it is made a part of the record by stipulation of counsel or filing of such certificate in this court.
In its answer to the bill defendant stated:
“This defendant further shows that plaintiffs * * * were served with summons in case No. 6228 in the common pleas court as the return of the officer will show, in which case they appeared by attorney, and pleaded thereto. And that on October 28, 1929, a valid judgment in the sum of $460.60 was rendered in favor of the Northwestern Investment Company against the plaintiffs and a motion for new trial was made, argued and denied, reference to which is prayed, which judgment is in full force and effect and has never been appealed and which is res adjudicaba to all the claims which the plaintiffs attempt to raise in this suit. ’ ’
The bill herein was filed October 16, 1929, and before the judgment was rendered in the common pleas court. The original record returned to this court shows that upon filing the bill an order was made for defendants to show cause, if any, why an injunction should not issue restraining prosecution of the action in the common pleas court, together with a restraining order in the meantime. October 26, 1929, the restraint was modified and the Northwestern Investment Company permitted to proceed with its action in the common pleas court, but required any money collected to be deposited with the clerk of the circuit court to await further order of the court. January 22, 1930, the order modifying the restraint was vacated and the cause “referred back to Hon. Theodore J. Richter, circuit judge.” February 14, 1930, the restraining order was dissolved for failure to file a bond.' March 10,1930, the order dissolving the restraining order was set aside and an injunction authorized and issued restraining defendants “from taking any summary action either before the circuit court commissioner or in any other manner, for the purpose of collecting on said contracts during the pendency of this suit, and from proceeding any further with the action now instituted in the common pleas court for the city of Detroit.” This case was heard in June, 1930.
Upon this record we cannot hold that the judgment in the court of the common pleas is res adjudicata of issues herein.
The answer of the Northwestern Investment Company, in the nature of a cross-bill, alleged default by plaintiffs and prayed foreclosure. The answer to plaintiffs’ bill called for no counter pleading by plaintiffs, but the cross-bill demanded an answer' and it was no answer to merely-deny that defendant was entitled to the relief prayed in the cross-bill. But this is of little moment, for plaintiffs admitted nonpayment, alleged excuse, and asked for relief. Plaintiffs asked for rescission or other relief agreeable to equity and good conscience.
We said in Witte v. Hobolth, 224 Mich. 286:
“A bill in equity praying rescission proceeds on the theory that there has been no rescission, not on the theory that rescission has already been accomplished. ’ ’
The bill gave the court of equity jurisdiction. The court evidently thought that right to have rescission was lost by laches and payments. Plaintiffs not having appealed we may not hold otherwise. Upon the subject of laches see Culver v. Avery, 161 Mich. 322; Witte v. Hobolth, supra; Plate v. Detroit Fidelity & Surety Co., 229 Mich. 482.
In Jefferson Park Land Co. v. Wayne Circuit Judge, 234 Mich. 341, we said:
‘ ‘ This seems to be a case in which equity and exact justice may or may not require rescission, and in capable of determination until the proofs are in. Even under a bill to rescind, if equity demands affirmance and damages instead, it may be so decreed. ’ ’
In the case at bar the court, upon refusing rescission, was not required to remit plaintiffs to an action at law.
We think the decree just, and it is affirmed, with costs to plaintiffs.
Butzel, C. J., and Clark, McDonald, Potter, Sharpe, North, and Fead, JJ., concurred. | [
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Sharpe, J.
The cases were tried together by the court without a jury, and, by stipulation, but one bill of exceptions was settled to be used as the basis for review in this court of the judgments entered in favor of the plaintiff in the circuit court. The action in the first case is on a promissory note, a renewal of one theretofore given by the defendants in that case to Joseph A. Martin, deceased. We quote from the findings of fact filed by the trial court:
“The two defendants were members of a syndicate which was purchasing certain land on land contract. The vendee upon the contract was the Guardian Trust Company of Detroit, which held the vendee’s interest for the benefit of the members of the syndicate. Each of the defendants had undertaken in writing to subscribe and pay a certain sum of money to the trustee. Subsequently an assessment to meet payments on the land contract was levied against the members, and the defendants herein were obligated under the terms of the syndicate or trust agreement, to which they were parties, to pay their prorated share of the assessment. The prior note for $400, of which the note in suit was a renewal, represented the unpaid portion of defendants’ share of this assessment.”
He further found that Martin had paid the assessment for which the first note was given; that he, or his agent, was not guilty of any fraud or misrepresentation in procuring its execution, or in inducing the defendants to become members of the syndicate.
The fraud of which defendants complain is thus stated:
“ (a) By deceiving the members of the syndicate in the purchase price of the land, that is, buying it at $800 per acre and turning it over to the syndicate at $1,400 per acre.”
The answer to this claim is that no representation was made by Martin to either of the defendants as to the purchase price of the land or the price at which he was turning it over to the syndicate. In this respect it differs from Crowley v. McCullough, ante, 362.
“(c) By stating that great profits would inure to defendants by the investment made by them through him, and due to his professed expert knowledge of the real estate business, upon which they relied.”
Defendants were doubtless induced to invest by the' expectation of large profits. What was said to them amounted to no more than expressions of confidence that the venture would prove a wonderful success, and does not support this defense of fraud. Kulesza v. Wyhowski, 213 Mich. 189; J. B. Colt Co. v. Cousino, 226 Mich. 518.
“(d) By inducing them to invest in said enterprise and then appropriating to his own use and benefit, funds belonging to the syndicate.”
The evidence does not support this claim. It clearly appears that the proceeds of the note first given were paid by Martin to the trustee for the syndicate.
The other questions presented have received consideration, but do not merit discussion. We do not consider the question of the sale made to defendants being in violation of 2 Comp. Laws 1929, § 9769 et seq. (the blue sky law), as it does not appear that the syndicate had not complied therewith.
The judgments are affirmed. .
Butzel, C. J., and Wiest, Clark, McDonald, Potter, North, and Fead, JJ., concurred. | [
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North, J.
The facts and circumstances giving rise to this litigation appear in Sharrar v. Wayne Savings Ass’n, 246 Mich. 225. Since our former decision the case has been retried in the circuit. At the conclusion of the proofs each party moved for a directed verdict. The jury was discharged, and upon findings by the court plaintiff had judgment. Defendant reviews by writ of error.
One of defendant’s grounds urged in support of its motion that verdict be directed against plaintiff was that “she is not the real party in interest and cannot maintain this action in her own name on behalf of all these parties. * * * Therefore, the only interest she has in the case is the interest of her own claim amounting to some $126 with interest.”
Plaintiff brought this suit to recover membership fees paid to defendant by herself and 42 others who prior to the suit had assigned to plaintiff their respective claims in the following manner:
“For a valuable consideration to me paid, I, the undersigned, do hereby sell, assign, transfer and set over to Ruby L. Sharrar, all my right, title and interest in and to a certain claim in amount indicated below, which I hold against the Wayne Savings Association, a corporation, and do hereby authorize said assignee to institute suit in his name for the collection thereof.”
On the second trial plaintiff voluntarily abandoned a number of the claims. The circuit judge disallowed 11; but rendered judgment in plaintiff’s favor for the balance of the claims, totaling $3,170.69. It is defendant’s contention that, except as to plaintiff’s individual claim, her recovery was in violation of 3 Comp. Laws 1929, § 14010, which with certain exceptions not here important provides that “every action shall be prosecuted in the name of the real party in interest.” On this phase of the case plaintiff testified:
“Q. That is the understanding, is it, that if anything is recovered in this suit that the expense will be deducted pro rata and the balance distributed among the members?
“A. Yes.
“Q. Then the only interest you have in this is to bring the suit and recover what that membership fee was ?
“A. Yes, sir.”
Thus we have presented the question as to whether plaintiff as an assignee can successfully maintain this suit as “the real party in interest.” We think this is not an open question in this State. We are committed to the proposition that where an' assignment is such that satisfaction of the judgment obtained by the assignee will discharge the defendant from his obligation to the assignor, for the purpose of the suit the assignee is the real party in interest and may maintain an action in his own name. Under the record in this case it cannot be' questioned that recovery against defendant by Mrs. Sharrar will constitute satisfaction of the respective claims of her assignors. In a recent decision we" said:
“The rule stated in Barak v. Detroit Apartments Corp., 232 Mich. 59, 61, is that the statute (3 Comp. Laws 1929, § 14010) authorizes a person to sue as the real party in interest if he can legally discharge the debtor and the satisfaction of judgment rendered will operate as such discharge, notwithstanding that the amount recovered may be for the benefit of another.” Johnson v. National Fire Ins. Co., 254 Mich. 126.
Defendant’s motion for a directed verdict on the ground that the misrepresentations relied upon by plaintiff and her assignors “were mere sales talks or statements by the agents to encourage subscriptions,” was not well founded. This phase of the litigation was discussed by Justice Fead .in our former opinion and a proper rule was there laid down. It was followed by the circuit judge in the second trial. He passed upon the testimony, allowed some of the claims and disallowed others. We find no reason in this record for disturbing the circuit judge’s decision.
Defendant also sought a directed verdict on the ground of laches and ratification. Plaintiff’s course of conduct was largely governed by the final determination of the secretary of State to abide by his decision that defendant could not establish branches outside of Wayne county. This information was finally and definitely ascertained by Mr. Sharrar, who seems to have been acting in behalf of plaintiff and her assignors, on or about May 26, 1926. Suit was started January 15,1927. In the meantime these claims were assigned to plaintiff and demand made upon defendant for repayment of the membership fees involved. On this phase of the record, as well as others having to do with defendant’s motion for a directed verdict, the testimony must be construed most favorably to plaintiff. The circuit judge correctly refused to direct a verdict either on the ground of laches or ratification. In this connection we have also considered appellant’s claim as to laches or ratification being a defense in consequence of which the circuit judge should have disallowed either plaintiff’s individual claim or the claim of any of her assignors. We find no reason for reversing his holding in this regard as to any of the individual claims for which recovery was had.
Appellant claims error in the exclusion of certain testimony offered for the purpose of showing that the misrepresentations on which plaintiff relied for recovery were made by defendant’s agents (if made at all) without authority so to do or knowledge thereof on the part of the directors of the defendant company. There was no error in this' ruling. Defendant ratified the doings of its agents by accepting the fruits of their activities; and regardless of its actual knowledge or active participation in the frauds perpetrated defendant is responsible therefor. Chaffee v. Raymond, 241 Mich. 392; Upell v. Bergman, 246 Mich. 82.
Appellant’s brief reviews to some extent the record of each of the separate claims on which the circuit judge rendered judgment for plaintiff, and urges that such judgment was against the great weight of evidence. In this connection it is urged that the defendant did maintain a branch office at Alma in accordance with its agreement. On substantially the same record as we now have before us, we held otherwise in our former decision, and no reason now appears for reversing that determination. As noted above, some of the claims assigned to plaintiff were abandoned, some were disallowed by the trial judge, and recovery was ‘had on 20 of the claims. We have reviewed the record carefully as to each of the claims on which recovery was had, and in each instance find testimony which sustains the judgment rendered.
There are numerous other assignments of ebror in the record relative - to the admissibility of evidence. We deem it unnecessary to review them in detail. Most of the objections are not well founded. The others are largely based upon the objection that the testimony was hearsay. These objections were made while the case was on trial before the jury. If the case had'finally been submitted to the jury some of these objections might have been of more serious consequence. However, the suit was finally submitted for determination by the circuit judge without a jury; and under the circumstances we are well satisfied that no prejudicial error resulted from any of the rulings on evidence of which complaint is made. We find nothing in this record which would justify a retrial. The judgment is affirmed, with costs to appellee.
Butzel, C. J., and Wiest, Clark, McDonald, Potter, Sharpe, and Fead, JJ., concurred. | [
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McDonald, J.
This bill was filed for rescission of a contract to purchase a lease and restaurant business. The lease contained a clause prohibiting assignment without the lessor’s consent in writing. The bill was drawn on the theory of a failure of con sideration because the defendant did not secure such consent. A decree was entered in favor of plaintiff. The defendant has appealed.
The sale was consummated on May 5th, 1930. The consideration was $5,985, payable $1,000 in cash and a note for $1,500 on the execution of the contract, $1,000 in four months thereafter, and the balance in equal installments in six, nine, and twelve months.
This controversy has arisen out of the following provision of the contract:
“For the purpose of effectuating the sale hereinbefore mentioned, the said party of the first part shall and will execute and deliver to the said party of the second part an assignment of said lease and possession of the personal property described herein, provided, however, that actual delivery of the said lease and the assignment thereof to the party of the second part shall be withheld by the party of the first part and the title thereto and title to the aforesaid personal property and the right to possession thereof shall be and remain in said party of the first part until said sum of $5,985 and interest shall be paid in full.”
At the making of this contract, both parties were represented by their attorneys. The papers necessary to its consummation, except the lessor’s consent to the assignment of the lease, were executed and delivered to the plaintiff. The American State Bank was lessor. Mr. Wheeler, attorney for the plaintiff, suggested that he would look after the matter of securing the bank’s consent. The unsigned paper prepared for that purpose was delivered to him. The plaintiff took immediate possession of the premises and business. Mr. Wheeler presented the written consent to Mr. DeYonkers, assistant cashier of the bank, who said the bank had no objections to a transfer of the lease to the plaintiff, but wanted the writing to include a clause preserving the liability of the original lessee. For some reason not appearing in the record, Mr. Wheeler thought that such a consent would not fully protect the plaintiff and declined to insert the condition requested by the bank. However, he continued to negotiate for a more satisfactory consent until he went away on his summer vacation. From that time until commencement of suit no further attempt was made by any one to secure a written consent to a transfer of the lease. In the meantime, plaintiff was conducting the business. He paid rent to the bank for June and July and otherwise carried out his obligations under the contract. Early in September he was two months in arrears on the rent. He called on the bank and promised to pay if given time. But he did not pay. On September 16, 1930, without notice to the defendant or demand that he secure the lessor’s written consent to .a transfer of the lease, he filed this bill for rescission of the contract. The defendant claims that until summons in the suit was served on him he was unaware that the plaintiff’s attorney had failed to secure the lessor’s consent in writing to the transfer, and that when he learned of it he immediately went to the bank and secured its signature. The question is whether there were legal grounds for rescission.
At the time of the sale the lease had an unexpired term of four years and was valuable. No valid assignment could be made without the written consent of the lessor. It was a condition of the sale that such consent should be procured by the defendant. But he was relieved, at least temporarily, of this duty by Mr. Wheeler who voluntarily and with plaintiff’s consent took over the matter of securing the necessary writing from the lessor. Mr. DeYonkers, acting for the bank, offered him a written consent containing a reservation of liability against the original lessee. He refused to accept it, but continued negotiations with him, endeavoring, as he says, to “work out” an assignment that would be satisfactory to the plaintiff. These negotiations failed, but he did not turn the matter back to the defendant. In replying to a question on cross-examination by defendant’s counsel, he said:
“To my knowledge neither Mr. Petroff or you were ever asked subsequently to assume charge of obtaining that consent in my stead or instead of any body else, had there.”
The defendant did not contract to secure any particular form of consent. That which the bank offered contained no unreasonable conditions, and was in form and substance a sufficient compliance with the contract. The facts are that the defendant pever refused to procure from the bank a proper consent in writing and the bank never refused to give it. The plaintiff was offered a proper written consent and that he did not accept it was no fault of the defendant. No fraud is claimed. The plaintiff had bought and sold restaurants and was not inexperienced in business. Having taken over the matter of securing the lessor’s written consent to a transfer of the lease, and having failed to secure one in satisfactory form, fairness required that he give the defendant an opportunity to secure it for him before beginning his suit for rescission. Further, it is a significant fact that he continued in possession with no apparent thought of rescission until he saw the business failing and became in arrears for rent. The evidence shows no legal grounds for rescission. The circuit judge should have dismissed the bill.
A decree will be entered in this court in accordance. with this opinion. Defendant will have costs.
Butzel, C. J., and Wiest, Clark, Potter, Sharpe, North, and Fead, JJ., concurred. | [
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Fead, J.
Plaintiff sued defendant on a promissory note given by the latter to Ada T. Lewis on March 1, 1928, for $824.28 with interest at seven per cent, per annum, due 30 days after date. Before maturity and for a valuable consideration plaintiff purchased this note. Under his plea of general issue defendant gave notice of two defenses: (1) That no consideration passed from the payee of said note to defendant; and (2) that defendant had set-offs and counterclaims against said note of which, plaintiff had notice at the time he purchased the instrument. The circuit judge, who heard the case without a jury, rendered judgment for plaintiff, and defendant has appealed.
Appellant’s brief presents the following questions :
“(1)' Was the plaintiff in this cause a bona fide purchaser without notice?
“(2) Is a purchaser of a note from the vendor under a land contract who knew that the consideration for the note was an executory oral agreement of the vendor to convey the title to property covered by the land contract assigned to the purchaser, as part of the transaction and to be by him conveyed to the vendee upon payment, a bona fide purchaser?”
As bearing upon the first question the following facts are pertinent. Mrs. Lewis was the owner in fee of a parcel of real estate which had been sold upon a land contract in which she held the interest of vendor. Twelve hundred dollars remained unpaid on this contract. Mrs. Lewis entered into an oral agreement with defendant to deed to him this parcel of land subject to the contract sale and to assign to him her vendor’s interest in the land contract upon his paying the $800 note in suit. Before this note matured plaintiff purchased it of Mrs. Lewis at a discount of $50. At the time of plaintiff’s purchase Mrs. Lewis’ attorney informed plaintiff that payment of the Foster note was secured by a deed and land contract. Plaintiff did not see these instruments until a day or so later, at which time they were delivered to him together with a conveyance to him of the property and an assignment of the vendor’s interest in the land contract. Obviously this was done both for the purpose of giving plaintiff security for the payment of the Foster note and to enable him to convey the real estate and assign the vendor’s interest in the land contract to Mr. Foster upon the payment of his note in accordance with the original agreement with Mrs. Lewis. It is appellant’s claim that because the oral agreement between himself and Mrs. Lewis involved thé transfer of an interest in land it was void and therefore his note was without consideration ; and also that because the circumstances above outlined in connection with the giving of the note were called to plaintiff’s attention at the time he purchased the instrument it lost its quality of negotiability and it therefore became subject to the same set-offs and counterclaims that it would have been in the hands of the original payee. The record discloses that at the time plaintiff purchased this note and prior thereto appellant held counterclaims against Mrs. Lewis in substantial amounts. Testimony taken before the circuit judge sustains his finding on this phase of the case, which in part is as follows:
“I therefore find that it has been established by a preponderance of the evidence in said case that the plaintiff, John Conroy, took, said note on March 21, 1929, in good faith and for value, and that at the time he took in same, the note was complete and regular on its face; that he had no notice of any infirmities in said note, or defects in the title of Ada T. Lewis; that by reason thereof, plaintiff is a holder in due course of said note free from the defenses which defendant has sought to raise in this case, and is entitled to recover thereon. ’ ’
Question number two, above quoted from appellant’s brief, is based upon the hypothesis that plaintiff, at the time he purchased this note, “knew that the consideration for the note was an executory oral agreement of the vendor to convey the title to property covered by the land contract. ’ ’ The testimony in the case disproves this assumption, and the circuit judge properly so found. The judgment of the lower court is affirmed, with costs to appellee.
Butzel, C. J., and Wiest, Clark, McDonald, Potter, Sharpe, and North, JJ., concurred. | [
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Fead, J.
This is a bill to set aside, for plaintiffs’s claimed mental incompetency, a trade of his 80-acre farm in Wayne county and a five-year lease on another 40 acres with option to purchase at $10,000, for defendants’ property in Ypsilanti.
Plaintiff is 61 years old. He likes to live in a wagon instead of a house. For about nine years he worked in Ypsilanti, housecleaning, and used defendants’ property for headquarters for his wagon. Periodically for several years he made offers to defendant Youngs to purchase part of the city property or trade 40 acres of his 'farm for it. At times plaintiff enlisted the aid of one Griffin, a friend of his, who had a second-hand store on the premises, to help him in securing a trade. Their efforts were unsuccessful. The store was renting at $600 per year, the rest of the property was vacant. The value was not satisfactorily shown, but apparently runs from $12,000 to $20,000. It is under mortgage of $1,200. Youngs said he had refused an offer of a trade at $35,000. Plaintiff thought it was worth 40 acres of his land.
During plaintiff’s sojourn in Ypsilanti, George Hake, his brother, and next friend in this suit, managed the farm, securing tenants and collecting the rent of $400 per year. About three years prior to the trade, plaintiff moved to the farm and since has managed it himself and continued to live in his wagon. He also at times, through Griffin, has tried to make a trade with Youngs.
On February 4, 1929, plaintiff gave one McKinney a 30-day option to purchase the farm at $500 per acre. Several 'witnesses testified it was worth that price. In March, plaintiff told Griffin to offer defendant 60 acres of the farm on a trade. Griffin communicated with Youngs, they visited the farm on March 5th, and, after negotiations, the trade was agreed upon as above stated. Plaintiff told Youngs of the option to McKinney expiring the next day. Youngs talked with McKinney and said he (Youngs) would honor the option if sale was made.
Youngs, Griffin, and plaintiff went to an attorney at Ypsilanti, who drafted deeds for them according to their instructions. Youngs could not find his old deeds and obtained the descriptions of the property, which were by metes and bounds, from tax receipts. Plaintiff’s deed to defendants and the lease were executed and left with the attorney to be delivered when he should check up the descriptions of defendants ’ land from the records. He later checked them, and, on March 7th, defendants executed their deed to plaintiff and received from the attorney and recorded plaintiff’s deed to them.
March 6th, McKinney claimed to have a purchaser for the farm. He went to the attorney’s office and there saw plaintiff’s conveyances to defendants. Nevertheless (and he does not explain why) he took a contract of purchase of the farm from plaintiff to himself and another. No money was paid down nor the name of the real purchaser disclosed. He suggested to plaintiff that his trade to defendants be rescinded. Plaintiff went to Ypsilanti on March 7th, found that his deed to defendants had been delivered and Youngs had gone to Detroit to get it recorded. When Youngs returned from Detroit he refused to trade back.
Plaintiff and McKinney talked with Gfeorge Hake, told him of the trade, and plaintiff asked him to begin suit to set aside the deeds. March 20th, proceedings were commenced in probate court to declare plaintiff mentally incompetent, and an order to that effect was entered later.
The testimony of plaintiff’s mental condition was both medical and lay. Pour doctors examined him after the trade. Two testified each way. Several reputable lay witnesses gave opinion that plaintiff was mentally competent. McKinney thought he was when he executed the option. Several witnesses thought plaintiff was incompetent. Some testified that plaintiff had the reputation of being incom petent. Most of their testimony would have been inadmissible under objection because they did not give facts upon which they based their conclusions. Plaintiff had had a credit of about $1,000 at a bank and his brothers had asked the banker not to permit him to withdraw money without their consent. However, they took no action before the trade to have him declared mentally incompetent. George Hake said plaintiff sometimes bought trinkets, such as cheap watches and jewelry. Some of the witnesses said he talked childishly. Aside from those assertions and plaintiff’s inclination to live in a wagon, the record is practically devoid of facts indicating departure from the normal.
Plaintiff was sworn as a witness. The record of his testimony shows that his answers were as direct and intelligent as those of any other witness subjected to a long examination. The circuit judge was impressed with his competency from personal observation, and the record fully sustains his finding that plaintiff had not met the burden of proof of mental incompetency.
Plaintiff further claimed Youngs represented that the trade was purely tentative and he had ten days in which to accept or reject it. Plaintiff had been engaged in other real estate transactions involving deeds and abstracts and the testimony is convincing that the instruments as drafted by the attorney were those desired by the parties, and they knew their effect.
The testimony is persuasive that plaintiff was extremely desirous of obtaining the Youngs property, that he had little faith in McKinney making a sale of the farm, and that he made the exchange freely and knowingly.
Prom the testimony, there appears to be considerable discrepancy in the values of the properties ex changed. Had defendant urged or induced plaintiff to make the exchange, the difference in values would he more important. Mere inadequacy of consideration, unless it be so gross as to shock the conscience of the court, is not ground for rescission. Albright v. Stockhill, 208 Mich. 468. Values were not discussed by the parties nor representations made. As plaintiff for years had been attempting to make the trade, was fully acquainted with the property, and was mentally competent to judge its worth to him, the difference in values does not justify relief to him.
Plaintiff made motion for rehearing on the ground of newly-discovered evidence. The motion was not sufficient under well-settled rules. Some of the new evidence claimed was merely cumulative. As to the balance, there was lack of showing of diligence in obtaining the witnesses or the affidavits failed to state specifically the anticipated testimony so its value could be appraised.
In one respect, however, the motion needs attention. It is alleged by plaintiff’s counsel that, on checking the records and the plat of the Ypsilanti property, which defendants had agreed to convey in the- trade, they found that part of it had been omitted from defendants’ deed to plaintiff and another part was not owned by defendants. There is no denial of this claim in the record.
The cause will be remanded to the circuit court, with directions to take proofs on such claimed deficiencies of defendants’ deed to plaintiff, and to report the same to this court with the opinion of the chancellor thereon.
Butzel, C. J., and Wiest, Clark, McDonald, Potter, Sharpe, and North, JJ., concurred. | [
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] |
McDonald, J.
This action was brought for the conversion of two bonds of $1,000 each which the plaintiff claims belong to the estate of John B. Shered, deceased. The defendant claims that the bonds were delivered to it by Mr. Shered during his lifetime with directions that they be delivered to his great grandchildren, Marvel Shered and Marvin Shered, at' his death; that it delivered them according to instructions; and that they belong by gift to Marvin and Ma-rvel. At the close of the proofs, both parties requested a directed verdict. The verdict was directed and judgment entered in favor of the defendant. The plaintiff has brought error.
The undisputed testimony shows that the defendant bank purchased for John B. Shered two $1,000 bonds of the G-emmer Manufacturing Company and at his request retained them for safekeeping. About six months prior to his death, Mr. Shered expressed a desire to give the bonds to his great grandchildren, Marvin and Marvel, sons of Paul Shered. For that purpose he went to the bank and talked to Mr. Parks, its cashier. To effectuate the gifts, Mr. Parks prepared the following paper:
“Paw Paw, Michigan, May 10, 1928.
“First National Bank.
“Received of John B. Shered............value $2,000.
“We hereby acknowledge receipt of the following documents or valuables, which we undertake to hold for your account and at your risk, to be delivered on the return of this receipt. We agree to give the said documents or valuables the same care we do our own property, but beyond this, we assume no responsibility.
“First National Bank,
(Signed) “E. F. Parks, Cashier.
“Articles.
“Two Gemmer Manfg. Company bonds, 5½ per cent, due 1-1-1933, Nos. 712 and 713, to be, at his death, delivered to Marvel and Marvin Shered.
“Not negotiable. ’’
After this transaction the bank paid to Mr. Shered interest on the bonds and at his death delivered them to Paul Shered, the guardian of Marvin and Marvel.
It is essential to the validity of these gifts that Mr. Shered should have voluntarily delivered the bonds to the bank for the donees with the intention of relinquishing control and passing title to them. Shepard v. Shepard, 164 Mich. 183, and cases cited on page 199.
It is undisputed that Mr. Shered went to the bank for the purpose of making these gifts. It is not claimed that he acted under compulsion or duress. His act was voluntary. He attached no conditions to the gifts except that possession of the bonds by the donees should be postponed until his death. It was his intention, clearly expressed in the writing prepared by the cashier at his dictation, that the bank should hold the bonds until his death and then deliver them to Marvin and Marvel:
“Two Gemmer Manfg. Company bonds, 5½ per cent, due 1-1-1933, Nos. 712 and 713, to be, at his death, delivered to Marvel and Marvin Shered.”
These facts show an intention to make the gift, accompanied by a delivery to the bank for that purpose and an acceptance by the. bank of the trust. Nothing further was necessary on the part of the donor to complete the gift. But the plaintiff contends that the receipt given by the bank in accepting the trust for the donees shows an intention on the part of the donor to retain control of the bonds, and invalidates the gift. We do not think so. The receipt was on a printed form used by the bank when securities or valuables were left with it for safekeeping. It contains language not directly applicable to a transaction of this, kind, but nothing to indicate that Mr. Shered reserved any control over the bonds; and in fact no control was attempted.
It is not necessary to discuss other contentions of the parties. The intention of the donor to make these gifts to his great grandchildren is clear and unmistakable. The delivery was sufficient to support the gifts. The bonds were not registered and were transferable by delivery. Delivery to the bank passed a present title to the donees, and the fact that possession was postponed until the donor’s •death did not make the transaction testamentary in character. The circuit judge was correct in holding the gifts valid.
The judgment is affirmed, with costs to the defendant.
Butzel, C. J., and Wiest, Clark, Potter, Sharpe, North, and Fead, JJ., concurred. | [
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McDonald, J.
This action was brought to recover damages for personal injuries received by the plaintiff while attempting to get on a truck driven by one James Lewis, and belonging to the defendant, his employer.
The plaintiff’s testimony shows that as the truck was being driven along Harper avenue in the city of Detroit, he signaled the driver for a ride. The truck was stopped and the plaintiff was invited to get on. As he was attempting to do so, it suddenly moved forward and threw him to the pavement. He was seriously injured. The driver had been instructed by the defendant not to allow any person to ride on the truck. For this reason the trial court held that the defendant was not liable for the plaintiff’s injuries, and directed a verdict in his favor. The plaintiff has brought error.
It is well settled that a master is not liable for the negligent acts of his servant unless at the time the servant is acting within the scope of his employment or within his actual authority. In inviting the plaintiff to ride, the driver of the truck was not acting within the scope of his employment. His act was not only unauthorized but was contrary to the express instructions of his employer. In Stornelli v. Railway Co., 193 Mich. 674, the plaintiff was injured while riding on one of the defendant’s trains at the invitation of the engineer. The court said:
“If any such invitation was given, such invitation was outside the scope of the engineer’s authority. Keating v. Railroad Co., 97 Mich. 154 (37 Am. St. Rep. 328); Schulwitz v. Lumber Co., 126 Mich. 559; Mahler v. Stott, 129 Mich. 614.”
In Schulwitz v. Lumber Co., supra, quoting the syllabus, it was said:
“A master is not liable for the negligence of his servant in permitting a boy, contrary to the master’s orders, to ride upon a wagon provided for the servant’s use in hauling lumber, such act not being within the scope of the servant’s employment.”
See, also, Rolfe, Admx., v. Hewitt, 227 N. Y. 486 (125 N. E. 804, 14 A. L. R. 125), and annotation page 145, 14 A. L. R.
In the instant case it is not claimed that the driver was guilty of - wanton or wilful misconduct. It is true, as urged by the plaintiff, that, having invited him to ride, it was the driver’s duty to exercise ordinary care for his safety; but, as the invitation was not within the scope of his employment, the defendant was not liable for his neglect of duty.
The court correctly directed the verdict. The judgment is affirmed, with costs to the defendant.
Butzel, C. J., and Wiest, Clark, Potter, Sharpe, North, and Fead, JJ., concurred. | [
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North, J.
Appellants filed a bill of complaint in the circuit court of Wayne county, in chancery, wherein they sought to have the appellees restrained from making any claim to certain property by reason of a mortgage given thereon by appellants to the Mortgage Security Corporation of America, or by reason of the sheriff’s sale incident to the foreclosure of such mortgage. The plaintiffs in the bill of complaint also seek cancellation of the mortgage and of the sheriff’s deed given on foreclosure. Briefly the reasons set up in the bill of complaint in consequence of which the plaintiffs asserted the right to the relief prayed are that the Mortgage Security Corporation of America is a foreign corporation which was not and is not licensed under the statute to do business in Michigan (2 Comp. Laws 1929, § 10118 et seq.); that the mortgage was usurious ; and that the foreclosure proceeding and sale were void because notwithstanding plaintiffs were living on the property involved, they were given no notice of the foreclosure proceeding. The defendants appeared and as a part of their answer moved to dismiss plaintiffs ’ bill of complaint on the ground that it contained no offer to do equity by way of offering repayment of money actually received incident to the loan and interest at' the legal rate accrued thereon. Upon hearing this motion the plaintiffs elected to stand upon their bill of complaint as filed and declined to amend by embodying an allegation offering to do equity. The circuit judge granted defendants’, motion to dismiss. The plaintiffs’ appeal is now before us.
Plaintiffs .are seeking equitable relief. It is needless to cite authorities to the effect that one who seeks equity must do equity. Plaintiffs admit their indebtedness to the Mortgage Security Corporation of America to the amount of several thousand dollars advanced them as a mortgage loan, and that the mortgage (in the form of a trust deed) which they seek to have canceled was given as security. As noted, such cancellation is sought on the ground that the mortgagee was doing business in Michigan illegally and that the terms of the mortgage loan are usurious. Under the holdings in this State, plaintiffs cannot be granted relief which is so plainly inequitable and unconscionable. The mere fact that a foreign corporation has carried on business in this State without being duly licensed so to do does not under all circumstances bar it from obtaining legal redress in the courts of this State. Rex Beach Pictures Co. v. Garson Productions, 209 Mich. 692; Hallet & Davis Piano Co. v. Droste, 213 Mich. 381; Mojonnier Bros. Co. v. Detroit Milling Co., 233 Mich. 312; Lu-Mi-Nus Signs Co. v. Begent Theatre Co., 250 Mich. 535. We know of no authority which relaxes the rule that a plaintiff in equity must do equity simply because the defendant is a foreign corporation carrying on business without a license in the jurisdiction.
“Where it is sought to cancel a contract on the ground of the noncompliance of a foreign corporation with the laws entitling it to do business, the usual rule applies that he who seeks the cancellation of an instrument must restore what is received under it, and it has been held that in a ease where a person has secured a loan from a noncomplying foreign corporation and has failed to pay the same as provided for by his contract, even though the corporation has failed to qualify as provided by law in order to entitle it to do business in the State, the borrower will not be heard in a court of equity to admit the contract and the indebtedness, and at the same time prosecute his action to cancel the mortgage given to secure the indebtedness, simply because the corporation failed to comply with the statute in qualifying to do business.” 12 R. C. L. p. 89.
“We can not assent to the proposition that a person can obtain another’s money, upon the faith and assurance of a mortgage security, and, the next moment after securing and appropriating it, go into a court of conscience, and ask that court to cancel the security as a cloud on his title, still retaining the money, and making ho offer to repay the money he has received, with lawful interest.” George v. New England Mortgage Security Co. 109 Ala. 548 (20 South. 331).
See, also, Ross v. New England Mortgage Security Co., 101 Ala. 362 (13 South. 564); Hanchey v. Southern Home Bldg. & Loan Ass’n, 140 Ala. 245 (37 South. 272). To the same effect see Tarr v. Western Loan & Savings Co., 15 Idaho, 741 (99 Pac. 1049, 21 L. R. A. [N. S.] 707 [note]); Ray v. Home & Foreign Investment & Agency Co., 98 Ga. 122 (26 S. E. 56).
Plaintiffs’ claim for relief on the ground of usury contravenes numerous holdings of this court.
“Usury statutes, being penal in character, must be strictly construed, and unless the statute takes away equitable rights it follows that they remain. He who asks equity must do equity.” Vandervelde v. Wilson, 176 Mich. 185.
See, also, McTavish v. Green, 220 Mich. 606; Stiglitz v. Weinstein, 227 Mich. 691.
Appellants’ contention that they were not in default when foreclosure was instituted is not sustained by the record. The remaining ground upon which appellants assert they are entitled to relief is that, notwithstanding they were living on the property subjected to the foreclosure, “no notice of the' said foreclosure proceeding’ was given or attempted to be given plaintiffs, or either of them.” The answer to this contention is that the foreclosure was by advertisement under the statute which requires only publication and posting of notice on the premises. 3 Comp. Laws 1929, § 14427. Plaintiffs were not entitled to actual notice, but only the constructive notice specified in the statute. There is no showing of failure in the foreclosure proceeding to comply with the statutory requirements. See Grand River Avenue, Christian Church v. Berkshire Life Ins. Co., ante, 480.
We find nothing in this record which relieves plaintiffs from offering to do equity as a condition of being granted equitable relief. The decree of the circuit judge dismissing the bill of complaint is affirmed, with costs to the appellees.
Butzel, C. J., and Wiest, Clark, McDonald, Potter, Sharpe, and Fead, JJ., concurred. | [
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57
] |
McDonald, J.
In behalf of herself and minor children, the plaintiff presented a claim for compensation against Lee & Cady for injuries resulting in the death of her husband, Tony .Sinkiewicz, while in its employ. To review an order awarding compensation, the defendants have brought certiorari.
Briefly stated, the facts show that on January 11, 1930, Tony Sinkiewicz was working for Lee & Cady as a laborer. His duties required him to pick up sacks and cases of sugar from the floor and place them on a truck. The sacks weighed 100 pounds and the cases 60. He was working alone when he received his injuries. His foreman found him lying on his hands and knees on a pile of sugar suffering great pain in the region of his abdomen. He said he had hurt himself lifting a bag of sugar. He was removed to the hospital and operated on. The doctor testified that he found a ruptured bowel about one-half inch long with considerable fecal matter through the peritoneal cavity. It was his opinion that the condition he found could be caused by trauma. There was no evidence of other causes.
The defendants admit that decedent was injured while in the employ of Lee & Cady and that his injuries resulted in his death, but they deny that the injury was accidental within the meaning of the workmen’s compensation act (2 Comp. Laws 1929, § 8407 et seq.).
In its opinion upon which the award was based, the commission pointed out no direct evidence as to how the decedent received his injury. Its conclusion that it was due to an accident is by inference from circumstances shown in the following statement, which we quote from the opinion:
“We have presented a case of a young man who had worked steadily for his employer for a period ■of 16 years and never complained of any disability; and on this particular morning was found lying on a bag of sugar on the premises of the employer, and it was necessary to remove him to his home. He was operated on the next day for peritonitis and died a few days later. This peritonitis could be brought on according to the undisputed testimony by trauma.”
Do these circumstances justify the inference that his condition was due to an accident? We think not. But it is not necessary to indulge in inferences as to what caused the injury.. There is direct evidence of it. He told his foreman that he had hurt himself lifting a bag of sugar. If he injured himself in that way, and there is no evidence direct or circumstantial to the contrary, he did not suffer an accidental injury within the meaning of the compensation law. He was injured while doing the work he was employed to do and doing it in the usual manner. To justify compensation for accidental injury, there must have been “some unusual, fortuitous or unexpected happening which caused the injury and which was in essence accidental in character.” Kutschmar v. Briggs Manfg. Co., 197 Mich. 146 (L. R. A. 1918 B, 1133); Stombaugh v. Peerless Wire Fence Co., 198 Mich. 445.
In this case there is a total lack of evidence tending to show accident. The commission was not justified in awarding compensation. The award is vacated.
Butzel, C. J., and Wiest, Clark, Potter, Sharpe, North, and Fead, JJ., concurred. | [
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Butzel, C. J.
Friderike Her, testatrix, was first married to Conrad Rieboldt and bore unto him three children; Elizabeth, who is now known as Alvina O’Neall, and is the plaintiff herein, Frederick, who died, leaving three children, and Dorothy, who is known as Dorothy Her, which name she assumed. Plaintiff was born in 1875. Her parents were divorced the year following her birth, and she was taken to the home of Carl Bartell and wife, who named her Alvina Bartell, although they never adopted her. She remained with them until she reached the age of 17, when she married a Mr. Bishop, and subsequently moved to Chicago.
In 1878 testatrix remarried and became the wife of Adam Her of Grand Rapids. In 1888 or thereabouts, plaintiff visited the Her home over the Christmas period, but after several weeks, plaintiff’s mother, the testatrix, told her that there were too many in the family, that some one would have to go to work, and plaintiff thereupon returned to the Bartell home where she remained until her marriage. Bishop died in 1916, and in 1924 plaintiff married William O’Neall, of Chicago, where she now resides.
Plaintiff’s mother, after her marriage to Adam Her, became the mother of five more children, four of whom are now living. They are Charles F. Her, Mamie Anderson, Minnie Woolson, and Clara Mackey, who, together with plaintiff’s sister, Dorothy, are the defendants in the present case. Dorothy Rieboldt always remained with her mother, became a member of the Her household, and was known as Dorothy Her and treated by Adam Her the same as his own children.
At the time of plaintiff’s birth and for many years thereafter, .the Rieboldt and the Her families were poor and it was economic pressure that prompted plaintiff’s mother to give up her child in the first instance and let her go to strangers. The Her family worked hard; Dorothy helped her father in the meat business; the mother took in washings; and it was through frugality and hard work that Adam and Friderike Her together accumulated an estate of $30,000 or thereabouts. The testimony shows that after plaintiff was first placed with others, her mother occasionally saw her in Grand Rapids, but after she married Bishop and moved to Chicago, all association ceased. For 33 years prior to the execution of the will in question in this case, plaintiff and testatrix had not met. They did not correspond with one another, nor did they even exchange an occasional card. They both acted as if they were permanently and absolutely estranged from one another. They did meet subsequent to the execution of the will, but it was not changed.
On or about the 8th day of May, 1929, Adam and Friderike Her called upon an attorney in Grand Rapids and instructed him to draw wills that were almost identical. Adam Her executed his will on the 8th day of May, 1929, and testatrix signed hers the following day. In neither will are either plaintiff or the children of Frederick Rieboldt specifically mentioned. Their names are omitted. Each will provides that the property be trusted to Charles F. Her for the support of the surviving spouse, upon whose death the property is to go to the children, who are, however, specifically named in another clause. The pertinent provisions in the will of Adam Her are as follows:
“ (c) Upon my death if my wife does not survive me, after satisfying the provisions hereinbefore set forth, I direct my trustee to divide the'balance of this trust fund into as many portions of equal value as I have children, whose names I have hereinafter mentioned and to dispose of the same as hereinafter provided.
“(d) I have the following children. Dorothy Her, Charles F. Her, Mamie Anderson, Minnie Woolson and Clara Mackey.
“It is my will and I wish that Dorothy Her shall be considered in every respect as my child, and no questions shall be raised in the distribution of the share bequeath to her by reason of any illegality of adoption, or any other question affecting her parentage, and shall be treated as though she was a child of the blood, in the distribution as herein provided for.
“(e) When my trustee shall have converted by sale or otherwise all of the estate into money, which it is my will and I direct shall be done with all convenient speed, but not at the sacrifice of any value by reason of haste in such conversion, that when said estate shall be so converted by my said trustee, the said trustee is hereby directed to pay each child in sub-paragraph “d” named, an equal proportion thereof, that is to say, the said trust estate shall be divided into five parts, and I give, devise and bequeath to Dorothy Her, and to her heirs and assigns forever one-fifth (1/5) part of the entire of said trust estate.
“To Charles F. Her and to his heirs and assigns forever one-fifth (1/5) part of the entire of said trust estate.
“To Mamie Anderson and to her heirs and assigns forever one-fifth (1/5) part of the entire of said trust estate.
“To Minnie Woolson and to her heirs and assigns forever one-fifth (1/5) part of the entire of said trust estate.
“To Clara Mackey and to her heirs and assigns forever one-fifth (1/5) part of the entire of said trust estate.”
Testatrix’s will is similar to Adam’s in all respects, except that the word “husband” is substituted for “wife” and the short clause, providing that Dorothy Her is to be considered in every respect as a child, is omitted.
Adam predeceased Friderike, and upon her death and the filing of her will for probate, plaintiff filed a petition in the probate court for Kent county asking that she be given the same share of the estate of testatrix as if the latter had died intestate. She based her application upon 3 Comp. Laws 1929, § 15550, which provides that a child shall be entitled to such a share if it appears that such an omission from the will was not intentional but made by mistake or accident. Upon appeal to the circuit court from the order denying the petition by the probate court, the trial judge refused to hold that the omission of plaintiff’s name from her mother’s will was unintentional and to direct a verdict. He submitted the question to the jury, who found against plaintiff’s contentions.
Plaintiff has appealed to this court, the sole question raised being whether the lower court erred in not holding that'“the omission was by mistake or accident and was not intentional.” Our attention is called to clause “c” wherein the testatrix states that her estate is to be divided into as many portions of equal value as she has children, whose names are thereinafter mentioned. The will then proceeds to name the children, but omits that of plaintiff. It must be noted, however, that a subsequent clause of the will provides that a share of one-fifth each shall go respectively to each of those five children who are specifically named.
Plaintiff relies on the case of Bachinski v. Bachinski’s Estate, 152 Mich. 693 (125 Am. St. Rep. 427), where, however, under an entirely different state of facts, it was also held that the fact of a mistake may be proved by extrinsic evidence. The court said:
“A rule that the question must be determined ‘from the four corners of the instrument’ would render the statute of little value. In reason and common sense resort must be had to extrinsic evidence. The intent cannot often appear from the will itself. See note to Thomas v. Black, 8 Am. Prob. Rep. 340 (113 Mo. 66 [20 S. W. 657]), where numerous authorities are cited; Coulam v. Doull, 133 U. S. 216 (10 Sup. Ct. 253).”
In Re Stebbins’ Estate, 94 Mich. 304 (34 Am. St. Rep. 345), where a granddaughter sought to share in her grandfather’s estate by virtue of the same statute, the court said:
“There was testimony in the case in reference to the circumstances attending the making of the will; the relationship and condition of the parties; the affection existing between them; the extent and frequency of their visits and correspondence; the'age of the testator; his mental and physical condition, as evidenced not only by the will itself, and by the peculiarity of some of its provisions, but also by his feeble condition about the time the will was made, and his death shortly afterwards. This class of testimony was all competent for the jury to con sider, and from it they had a right to determine the questions submitted to them by the court. The relation of the testator to the objects of his bounty, and to this granddaughter, as well as his intelligence, his mental and physical condition, and the circumstances connected with the making of the will, are all proper matters for consideration by the jury. Buckley v. Gerard, 123 Mass. 8; Converse v. Wales, 4 Allen (86 Mass.), 512; Ramsdill v. Wentworth, 101 Mass. 125; Peters v. Siders, 126 Mass. 135 (30 Am., Rep. 671); Prentis v. Bates, 93 Mich. 234 (17 L. R. A. 494), and cases cited. And the omission to provide may be shown to be unintentional either by the terms of the will or by extrinsic parol evidence. Wilson v. Fosket, 6 Metc. (47 Mass.) 400 (39 Am. Dec. 736).”
The same question arose in Carpenter v. Snow, 117 Mich. 489 (41 L. R. A. 820, 72 Am. St. Rep. 576), where the court said:
“Extraneous testimony was taken, which, if competent, shows that Mr. Snow intended to give all his property to his wife to the exclusion of his children, having confidence in her management of the property, and her sharing it with the children. While this testimony may be competent to show that the omission to provide for Clara was not unintentional, we do not think it competent to show that the testator did not intend to provide for his unborn children.
“The provisions of the statute applying to the facts disclosed by this record are as follows:
“2 How. Stat. § 5809 (see 3 Comp. Laws 1929, § 15549), provides:
“ ‘When any child shall be born after the making of his father’s will, and no provision shall be made therein for him, such child shall have the same share in the estate of the testator as if he had died intestate, and the share of such child shall be as signed to him as provided by law in case of intestate estates, unless it shall be apparent from the will that it was the intention of the testator that no provision should be made for such child.’
“Section 5810 (re-enacted in 3 Comp. Laws 1929, § 15550) provides:
“ ‘When any testator shall omit to provide in his will for any of his children, or for the issue of any deceased child, and it shall appear that such omission was not intentional, but was made by mistake .or accident, such child, or the issue of such child, shall have the same share in the estate of the testator as if he had died intestate, to be assigned as provided in the preceding section.’
“It will be noticed the language in the two sections with reference to showing the intention of the testator 'is not at all alike. In the last-named section it is not required that the omission to provide must be shown by the will itself to be intentional. This section has been construed by this court in Re Stebbins’ Estate, 94 Mich. 304 (34 Am. St. Rep. 345), where it is held the question as to whether omission to provide for a child in the will was intentional or otherwise is a question of fact which may be submitted to a jury. ’ ’
The trial judge was correct in submitting the question of whether the omission was intentional or not to the jury, and permitting them to consider not only the will itself but also extrinsic evidence. Thé verdict of the jury holds that the omission was intentional. It is fully supported by the evidence. The judgment in favor of defendants is affirmed, with costs.
Wiest, Clark, McDonald, Potter, Sharpe, North, and Fead, JJ., concurred. | [
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Butzel, C. J.
Sophia Bacho, plaintiff, upon the death of her husband, became the owner of farm land that rapidly grew to be very valuable for subdivision purposes on account of its vicinity to Detroit. The property was syndicated and sold. She remained a member of the syndicate and from time to time realized large sums from it. With part of the proceeds, she purchased a tract of land not far from Detroit and having a frontage of 250 feet on Telegraph Boad at the corner of Eureka Boad, both paved superhighways. Three houses and a garage were erected upon the property. One house was occupied by plaintiff, the other two by her two married daughters. A son-in-law conducted the garage. Plaintiff’s contentment and happiness over her material prosperity were short lived, for not only did her wealth wane, but she was overcome by far greater misfortune. Both her son Howard and son-in-law were arrested, charged with serious crimes. Howard was convicted of robbery and sentenced to a long term of imprisonment. Howard, while in jail awaiting trial, made the acquaintance of defendant, Paul L. Beach, a fellow prisoner. Plaintiff also met Beach a number of times while visiting Howard in jail. Beach was charged with having given a worthless check in order to purchase an automobile which he drove out of the State. He was finally apprehended in El Paso, Texas, brought back to Detroit, and lodged in jail. He remained there three or four weeks before plaintiff met him. He and Howard had become friends and he seems to have made a very good impression upon plaintiff, for on March 23, 1926, shortly after meeting him, she paid the sum of $200 in order to secure a bail bond by virtue of which defendant was released from custody. Subsequently, he paid the worthless check and the charge against him was dismissed. Upon his release, he seemed at once to have ingratiated himself into plaintiff’s favor, for, as she stated, she soon depended upon him to assist her in her business affairs and to take Howard’s place in the management of her property.
Plaintiff is a woman of 59 years, with a very meagre education. She scarcely can read typewritten documents. She soon relied entirely upon defendant’s business advice and direction, and on June 2, 1927, gave him a written power of attorney. It authorized him to look after all of her real estate and her equity in the syndicate, collect all moneys to become due her, deposit them in the bank, invest the moneys so collected, pay her taxes, bring and defend suits and act for her in such matters as might require her personal attention. The following month, on July 5, 1927, defendant, on the plea that he wanted to go on surety bonds, persuaded plaintiff to execute unto him a warranty deed to the Telegraph and Eureka Road property. Plaintiff claims that defendant told her he would deed it back any time she so requested. She produced corroborative testimony to this effect. No moneys were passed by defendant to plaintiff, nor was any document executed by him showing that he held the property in trust or that he would return it on demand. De fendant claims that at the time of the execution of the deed plaintiff was indebted to him in the sum of $8,000, for which he held her note; that shortly thereafter he gave her the sums of $7,100 and $3,400, both evidenced by checks signed by him. On the checks there is appropriate writing tending to show that they were given in relation to the property, and the last check indicates that it was given as the balance due on the purchase price. The two checks and note aggregate $18,500, which may be somewhat near the value of the property.
Plaintiff claims that she neither owed defendant any money whatsoever, received none from him, except several smaller sums that he had collected for her, does not remember giving a note or receiving the checks, and if she did, she simply indorsed them the same as all other documents he presented to her, and returned them to defendant; that she signed her name whenever and wherever directed by him, and that he secured the deed to the property by fraud. She filed a bill to secure a reconveyance of the property. Defendant, after securing the deed, insured the house in which plaintiff lived in his own name and recovered $4,000 insurance when the house burned down. The record is not clear as to the collection of the insurance. Possibly this is owing to the fact that it seems to have been admitted by both parties. No objection was made to the finding of the trial judge nor does defendant’s attorney raise it, in the statement of the questions involved, at the beginning of his brief.
The trial judge, after listening to voluminous testimony and seeing the witnesses, entered a decree ordering a reconveyance of the property and the payment of the $4,000 insurance to plaintiff. Defendant has appealed.
The case almost exclusively involves questions of fact. We are much impressed with the opinion of the trial court and were it not for its length, we would adopt it as our own. We only mention a few of the pertinent facts.
Defendant acknowledged his previous arrests for speeding, drinking, fighting, and a subsequent arrest for giving a worthless check, and again still later, for disposing of a diamond ring to which he had no title. He had posed as an unmarried man and presented the ring to a young woman. Upon securing its return, he claims that in a fit of anger he threw the ring into the street. He also testified that he had been engaged in transporting liquor. Notwithstanding the fact that he first met plaintiff when he was in jail on account of passing a worthless check, he claims that at that time he was worth thousands of dollars represented by deposits in banks, liberty bonds in a safety deposit vault, and moneys in a safe. He, however, did not produce any. bank books showing such credits or any physical proofs of ownership of a safety deposit box nor did he give any other facts that at all impress us with his claim that he had any moneys whatever. When asked why he did not pay the worthless check and thus endeavor to secure his release, he stated that he was not guilty of the crime charged; that it was agreed at the time the check was given it was to be held and not used until later; and that he preferred to remain in jail so as to increase the damages in a false imprisonment suit he proposed bringing later on. He does not show that any such suit was ever begun.
When plaintiff first met defendant, she had $14,242 on deposit in the banks. A short time later, after defendant had become her confidential agent, she had a balance of $7 left. Although plaintiff testified she had deposited all her moneys in the banks, her bank books produced show no such sums as defendant swears he paid her. She admits going to the bank with defendant and signing her name to some papers as requested by him. Defendant also claims that plaintiff borrowed $6,500 from his mother. Were this true, plaintiff in a very few months would have spent nearly $40,000, consisting of the balances in her banks, $6,500 claimed by defendant' to have been borrowed by plaintiff from his mother, and the $18,500 that defendant claims to have paid her as hereinbefore stated. There is nothing to show such expenditures. Defendant makes the claim that plaintiff does not come into court with clean hands, and that $4,000 of the amount involved or some other sums was used by the plaintiff to bribe witnesses against her son to leave the State. A receipt of such alleged witnesses was produced, but it is so indefinite in character as to be almost meaningless. In it two parties acknowledge the receipt of some moneys from plaintiff. Her signature is also attached to the receipt. In answer to her denial that she paid witnesses any sums whatsoever, defendant testified that he and plaintiff together paid the witnesses. Even were this true it would not excuse defendant’s fraudulent conduct in obtaining’ plaintiff’s property. It would appear as if some money of an indefinite amount had been paid by plaintiff, but whether she was being blackmailed or what actually happened we can not determine from the testimony.
Defendant does show that he deposited sums of $7,100 and $3,600 in his bank, but the bank statements also show that the sums of $7,100 and $3,400 were withdrawn the very same days these deposits were made, so that the bank balance remained almost the same at the end of each of these days as they were the previous days. His bank deposit slips were not produced, nor was there any corroborative testimony produced by defendant showing that plaintiff received the moneys on the checks. Counsel for each party had previous dealings with the other party, and frequently questions were asked that had nothing to do with the issues involved. They seemed to be more in the nature of testimony given by the attorneys than answers to questions. The trial judge stated that he permitted a wide latitude in an equity suit so that he might study the character of the witnesses while the testimony was being given and also to obtain such further light as might be possible.
Defendant also claimed that plaintiff deeded the property to him because she wanted to put the property beyond the reach of her creditors on account of a suit against her arising out of an automobile accident. Plaintiff flatly denies that there is any truth in this claim. She further showed that she was protected by automobile insurance. Other minor questions were raised which we do not believe it is necessary to discuss.
The sole question of law raised is whether, in view of the fact that plaintiff admitted that she deeded the property to defendant with only an alleged verbal agreement on his part to reconvey upon request, she is precluded from demanding such reconveyance on account of the 'statute of frauds (3 Comp. Laws 1929, § 13411). It is true that in the absence of fraud, accident, or mistake, parol testimony is inadmissible to establish a trust in real estate. Elson v. Elson, 245 Mich. 205. However, when it is shown that title has been obtained through fraud, misrep resentation, concealment, nndne influence, duress, taking advantage of one’s weakness, or necessities, or any other similar circumstances which render it unconscionable for the holder of the legal title to retain and enjoy the property, and there are no intervening rights of bona fide purchasers, equity will impress a constructive trust on the property and turn it over to the one to whom it rightfully belongs. Morris v. Vyse, 154 Mich. 253 (129 Am. St. Nep. 472); Biddle v. Biddle, 202 Mich. 160, 167, and cases therein cited. This rule has been frequently applied in cases of agents who take advantage of their fiduciary relationship and thus secure the property of their principal. Moore v. Mandlebaum, 8 Mich. 433; Beedle v. Crane, 91 Mich. 429; Salliotte v. Dollarhite, 211 Mich. 269, 272.
The decree in favor of plaintiff is affirmed, with costs.
Wiest, Clark, McDonald, Potter, Sharpe, North, and Fead, JJ., concurred. | [
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] |
North, J.
Plaintiff company, a corporation, brought this suit to recover damages incident to defendants ’ alleged failure or refusal to perform a real estate option. Plaintiff had a verdict for $1,100; but judgment non obstante veredicto was entered for defendants. Plaintiff has appealed. The judgment non'obstante was entered on the ground that plaintiff’s tender was insufficient. This presents the sole question for review.
Plaintiff’s 30-day option to purchase defendants’ land for $12,000, $6,000 cash and balance in deferred payments, expired June 7,1929. According to plaintiff’s version of the facts, which we must accept in view of the jury’s verdict, the defendants in the afternoon of the last day of the option were informed by plaintiff’s officers that they wished to close the transaction.. Defendants were then attending a social gathering, and they promised they would be at their home at seven o’clock that evening and complete the deal. Messrs. O’Toole and Nedeau with two other gentlemen went to defendants’ home at the time specified, remained there over two hours and then left. They assert they were then ready, willing, and able to complete the transaction on the terms of the option. Defendants were not at their home as they had agreed. The record does not dis close a subsequent refusal by defendants to.perform, excepting by tbeir pleadings in this suit which was instituted shortly thereafter. Defendants’ refusal to convey seems to have been prompted by dissatisfaction with plaintiff arising out of another transaction. *
At the trial it developed that when Mr. O’Toole and Mr. Nedeau went to close the option instead of having in their possession the full amount of the cash payment ($6,000) in legal tender, they had $1,500 in currency and the balance in certificates of deposit of a local bank indorsed in blank. No claim is made that these indorsed certificates of deposit were not the equivalent of cash and acceptable as such, but the technical defense is urged that when plaintiff’s officers went to close the transaction they were not ready and able to make a legal tender. As against this contention plaintiff urges that since the defendants were first in default in repudiating their option by failing to appear at the agreed time and place to conclude the transaction, they cannot stand on a technical objection which plaintiff might have overcome had defendants met with plaintiff’s officers as agreed and actually insisted upon a legal tender.
It is too plain for argument that the circumstance which primarily defeated a technically legal tender was defendants’ failure to keep their agreement to meet Messrs. O’Toole and Nedeau. "Whether or not such failure was a deliberate plan by which defendants sought to avoid the option, they now seek to be released from it because by staying away they prevented plaintiff’s officers from making a tender which would have been good in the absence of a specific objection by defendants that the proffered payment was not in legal tender. t We think the tender plaintiff was prepared to make should be considered the same as it would have been if made to defendants in person and without objection by them on the ground that it was not a legal tender. In the absence of such objection the tender would have been good. Murphy v. Frank P. Miller Corp., 229 Mich. 162; Browning v. Crouse, 40 Mich. 339; 36 Cyc. p. 702, and cases cited. At the trial defendants did not claim they would have refused the tender because of the form in which plaintiff’s officers were prepared to make it. Defendants’ failure to be present as agreed estops them from now claiming if present they would have objected to the tender as being legally insufficient. To hold otherwise would allow defendants to take advantage of their own wrong. Courts should not and have not looked with favor upon the claims of those who seek to evade their obligations in the form of such options by avoiding the optionees until the time of performance has expired. The party holding the option is not thereby deprived of his rights. Cheney v. Libby, 134 U. S. 68 (10 Sup. Ct. 498); Schaeffer v. Coldren, 237 Pa. 77 (85 Atl. 98, Ann. Cas. 1914 B, 175); Borden v. Borden, 5 Mass. 67 (4 Am. Dec. 32); Foternick v. Watson, 184 Mass. 187 (68 N. E. 215); Noyes v. Clark, 7 Paige, Ch. (N. Y.) 179 (32 Am. Dec. 620).
“Acts insufficient in themselves to make a complete tender may operate as proofs of readiness to perform, so as to protect the rights of a party under a contract, where a proper tender is made impossible by reason of circumstances not due to the fault of the debtor. * * * And if the tender is prevented through the contrivance of the persons to whom it should be made, it will be excused or be considered equivalent to a tender.” 26 R. C. L. pp. 623, 624, citing cases.
In the Schaeffer Case, supra, the syllabus in part reads as follows:
“Acts insufficient in themselves to make a complete tender may operate as proof of readiness to perform so as to protect the rights of a party under the contract, where a proper tender is made impossible by reason of circumstances not due to the fault of the tenderer.
“A certificate of deposit or certified check is a sufficient tender, if no objection be made on the ground that it is not lawful money.”
The trial judge entered judgment for defendants non obstante veredicto because he was of the opinion that the certificates of deposit with which plaintiff’s officers proposed to pay defendants did not constitute legal tender. Technically his holding was correct; but under the circumstances disclosed in the instant case, defendants not having declined to perform for that reason, they will not now be permitted to urge it as a justification for their nonperformance. The case is remanded to the circuit court with direction to set aside the judgment non obstante, and that judgment for plaintiff in the sum of $1,100 with taxable costs be entered as of April 26, 1930. Appellant will have costs in both courts.
Butzel, C. J., and Wiest, Clark, McDonald, Potter, Sharpe, and Fead, JJ., concurred. | [
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] |
Clark, J.
Plaintiffs as dependents of a deceased employee, their son Harold James Pringle, bring certiorari to review an award in their favor against defendant employer and its insurer.
Thomas v. Morton Salt Co., 253 Mich. 613, negatives right to recover damages for injuries resulting in the death of Harold James Pringle in an action at law by representative of the deceased employee against defendant employer and sustains right to award of compensation.' The award is affirmed.
Butzel, C. J., and Wiest, McDonald, Potter; North, and Fead, JJ., concurred. Sharpe, J., did not sit. | [
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Butzel, C. J.
Sam Rosko, agent of plaintiff, New York Life Insurance Company, interviewed defendant Antonnina Abromietes in regard to taking out an insurance policy on the life of her sister, Tillie Witer, a school girl of 14 years of age who was living with, and being supported by, defendant. The latter postponed taking out the policy for a month because she did not have the money with which to pay the first premium. On June 7, 1927, Rosko called on defendant and the application was duly signed by assured. Defendant claims that at the same time the first premium was paid in cash. Plaintiff admits the receipt of the premium and does not deny that it was paid when the application was made. On June 11, 1927, the assured was examined by a medical examiner of plaintiff, who found her to be in good health. She was attending school. Several days later, however, on June 14 and 15, 1927, she consulted a physician, who found that she had symptoms of miliary bilateral tuberculosis. On June 20 or 21, 1927, a policy for $1,000, dated June 15, 1927, was delivered to defendant. A few days later, assured was sent to a sanitarium. On June 29, 1927, she was removed in a state of coma to a hospital in Detroit where the following day she died from tuberculosis complicated with meningitis and pneumonia.
The record does not show that assured had any disease or knowledge thereof either on the date she was examined by the plaintiff’s physician or when the insurance was first solicited or when the application was signed and the premium paid. The policy contained the following provisions:
“9. It is mutually agreed as follows: 1. That the insurance hereby applied for shall not take effect unless and until the policy is delivered to and received by the applicant and the first premium thereon paid in full during his lifetime, and then only if the applicant has not consulted or been treated by any physician since his medical examination; PROVIDED, HOWEVER, THAT IP THE APPLICANT, AT THE TIME OP MAKING THIS APPLICATION, PAYS THE AGENT IN CASH THE PULL AMOUNT OP THE PIRST PREMIUM POR THE INSURANCE APPLIED POR IN QUESTIONS 2 AND 3 AND SO DECLARES IN THIS APPLICATION AND RECEIVES PROM THE AGENT A RECEIPT THEREPOR ON THE RECEIPT PORM WHICH IS ATTACHED HERETO, AND IP THE COMPANY, APTER MEDICAL EXAMINATION AND INVESTIGATION, SHALL BE SATISPIED THAT THE APPLICANT WAS, AT THE TIME OP MAKING THIS APPLICATION, INSURABLE AND ENTITLED UNDER THE COMPANY'S RULES AND STANDARDS TO THE INSURANCE, ON THE PLAN AND POR THE AMOUNT APPLIED POR IN QUESTIONS 2 AND 3, AT THE COMPANY'S PUBLISHED PREMIUM RATE CORRESPONDING TO THE APPLICANT'S AGE, THEN SAID INSURANCE SHALL TAKE EPPECT AND BE IN PORCE UNDER AND SUBJECT TO THE PROVISIONS OP THE POLICY APPLIED POR PROM AND APTER THE TIME THIS APPLICATION IS MADE, WHETHER THE POLICY BE DELIVERED TO AND RECEIVED BY THE APPLICANT OR NOT. ’ ’
The provision in capital letters is particularly referred to.
The trial judge found from the testimony that the premium was paid at the time the application was made. It is evident that no receipt on the form attached to the application was given defendant nor did the assured indorse on the printed form in the application the fact that she had paid the first premium. The parts of the application containing such forms were removed by the Detroit office of the plaintiff, because they had never been executed, and an appropriate indorsement explaining the removal was stamped on the application. There is no question but that the assured consulted a physician after the application was signed. This was prior to the date of the policy. Plaintiff tendered to defendant a return of the premium paid by her, and upon her refusal to accept it, filed a bill to annul the policy because the assured consulted a physician after the date of the application but prior to the date and delivery of the policy. Defendant claims that under, the quoted clause of the application, which is attached to and made a part of the policy, the insurance became effective from the date of the application ; that the payment of the first premium in cash made the policy effective from such date, notwithstanding that no receipt on the form attached to the application was produced nor any indorsement by assured on the application shown. In her cross-bill defendant asks a decree ordering* that plaintiff pay her the amount of the policy. Plaintiff’s counsel concede that if it is not entitled to a decree voiding the policy, then it is obligated to pay defendant the amount of the policy. No question was raised as to the jurisdiction of the court. The trial judge found in plaintiff’s favor and rendered a decree annulling the policy. Defendant appeals.
Were it not for the proviso in the part of the policy hereinbefore quoted, plaintiff would be relieved from liability under the policy, because of the fact that the assured consulted a physician after the application, but prior to the issuance of the policy. The leading case is that of Stipcich v. Metropolitan Life Ins. Co., 277 U. S. 311 (48 Sup. Ct. 512), in which the court said:
“It was shown on the trial by uncontradieted evidence that after his application Stipcich consulted two physicians and that they told him that an operation for the removal of the ulcer was necessary. * * * Here both by the terms of the application and familiar rules governing the formation of contracts no contract came into existence until the de livery of the policy, and at that time the insured had learned of conditions gravely affecting his health, unknown at the time of making* his application.
“Insurance policies are traditionally contracts uberrimae fidei and a failure by the insured to disclose conditions affecting the risk, of which he is aware, makes the contract voidable at the insurer’s option. Carter v. Boehm, 3 Burrows, 1905 (97 Eng. Rep. Repr. 1162); Livingston v. Maryland Insurance Co., 6 Cranch (U. S.), 274; McLanahan v. Universal Insurance Co., 1 Pet. (U. S.) 170; Phœnix Life Insurance Co. v. Raddin, 120 U. S. 183, 189 (7 Sup. Ct. 500); Hardman v. Firemen’s Insurance Co., 20 Fed. 594.”
The record does not disclose the reason for the proviso. Undoubtedly making a policy effective from the date of the application is of very great advantage to the assured. Such a policy should be more attractive to the assured and salable by the insurer. We can also see the advantage of having the first premium paid promptly and the right of an insurance company to positive proof of payment of the premium at the time of the application. However, we are not ruling on a case where it is denied that the first premium was paid at the time of the application or where the failure to produce the receipt or the indorsement or the lack of them might be of very great importance in determining whether the first premium was paid or not.
In the present case, the assured and defendant were dealing with plaintiff’s agent. The record indicates that the parties were foreigners and that neither the assured nor her sister were experienced in business. It seems more than probable that both the receipt and the indorsement on the application would have been executed had their importance or necessity been made known to assured or defendant by plaintiff’s agent. In securing the application, he was acting for plaintiff. Although he had no right to alter the terms of the contract, his neglect or omission to give the receipt and see to it that the indorsement be made on the application should not be attributable to defendant. See Hoyle v. Grange Life Assurance Ass’n, 214 Mich. 603, 607. At least, plaintiff should not profit by such neglect or omission in view of the fact that it shows no resulting loss or damage and admits the payment of the first premium at the time the application was signed.
Under the circumstances of the present case, defendant is entitled to recover the amount of the policy and interest. The decree of the lower court is reversed, and the case remanded for the entry of a proper decree, in accordance with this opinion. Defendant will recover costs.
Wiest, Clark, McDonald, Potter, Sharpe, North, and Fead, JJ., concurred. | [
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Sharpe, J.
A corporation known as “Clare E. Mosher, Inc.,” had been engaged in the wholesale jewelry business in Detroit for several years prior to 1924. The greater part of the stock was owned by Clarence E. Mosher. In December of that year, Mosher succeeded in interesting the defendant Israel S. Bird in the business, and the negotiations resulted in an agreement executed on December 11, 1924, under the terms of which Bird entered into the employ of the corporation at a salary stated therein, and agreed to, and did, purchase 30 shares of its capital stock, for which he paid the sum of $3,000. It further provided that the corporation would, within a specified time, if requested, repurchase the. stock at the price he had paid therefor, “or replace him by securing another party to take investment.”
Early in the spring of 1925, Mosher informed Bird that the corporation was not doing sufficient business to justify its retaining him in its employ at the salary agreed upon, and Bird consented to retire. After some delay, an agreement was entered into on May 12th, under which Mosher and his wife conveyed to Bird and his wife two parcels of real estate in Grand Rapids, by separate deeds, for a consideration of $4,100, represented by $1,000 then paid by Bird to Mosher and the value of the stock ($3,100) then assigned to Mosher by Bird, The defendants agreed to hold these deeds in escrow until June 25th, at which time, unless they were paid the said sum of $4,100, they should become absolute, and in the event of such payment they would reconvey the property to Mosher. The deeds were immediately recorded. No tender of the $4,100 was at any time thereafter made. The defendants after-wards, and before, the commencement of this suit, sold said property, receiving approximately $3,700 therefor. • .
On June 23, 1925, the corporation executed a trust mortgage to a trustee of all of its property. Its assets were then listed at about $13,000, and its liabilities at about $28,000.
On June 25, 1925, Mosher filed a voluntary petition in bankruptcy, and on September 9, 1925, Mrs. Mosher did likewise, and both were adjudicated bankrupts. No estate from either of them passed into the hands of the trustees. The claim of the plaintiff, arising upon a promissory note executed by Mr. and Mrs. Mosher, amounting to about $3,000, was filed in each bankruptcy proceeding.
In July, 1925, the Moshers removed to.Washington, D. C., where they have since resided. It seems to be conceded that they own no property in this-State or elsewhere.
On.May 3, 1927, this suit was begun. Its purpose is stated by counsel for the plaintiff as follows:
“The bill herein was filed to void said transfers to Bird as fraudulent and void as against plaintiff bank, a creditor of the Moshers, and to impress a trust upon the property in Bird’s hands.”
The proofs were submitted in open court. The trial court filed an opinion, in which he denied á motion made by defendants to dismiss for want of jurisdiction, but held that the deeds were valid, and entered a decree dismissing the bill of complaint, from which plaintiff has appealed.
Plaintiff attacks the conveyances because they were “partially voluntary and were fraudulent,” and insists that they were “void as matter of law by reason of the secret reservation” contained in the agreement executed at the time they were given.
At the time Bird purchased the stock, the corporation undertook, if requested to do so within a specified time, to repurchase it or “replace him by securing another party to take investment.” When such request was duly made, the corporation had not the funds on hand to retire this stock. Mosher was then making an effort to sell a larger amount of stock, and had confidence that he would succeed in doing so. He testified: “I am positive that if I could have gotten this money everything would have been all right at the time. ’ ’ He was the large stockholder in the company. His income therefrom was his only means of subsistence. He did not want the credit of the company affected by proceedings on the part of Bird to enforce the contract, and so he and his wife concluded to purchase the stock from Bird. They were personally under no legal obligation to do so, but they felt that their interest in the corporation warranted their doing so. It satisfactorily, appears that when the deeds and agreement were executed, Bird indorsed his certificate of stock and delivered it to Mosher. It does not appear that at that time Bird knew that the Moshers were indebted to plaintiff or that the corporation was insolvent.
We cannot but conclude, as did the trial court, that Bird acted in good faith in his acceptance of the deed; that a sufficient consideration passed to the Moshers therefor, and that there was no intent on the part of either Bird or the Moshers to delay, hinder, or defraud the creditors of the latter.
No stress is laid upon the fact that the defendants recorded the deeds soon after delivery. That it was expected they would do so is apparent froin the requirement that upon payment they would reconvey to the Moshers.
It is insisted that the right secured to the Moshers in the contract to have the property reconveyed to them on the payment of the $4,100 at any time until June 25,1925, had the effect of hindering and delaying the creditors of the Moshers, and that the deeds executed pursuant thereto were for that reason fraudulent and void.
Counsel rely on our. decision in Anderson v. Chapman, 215 Mich. 80, in which the effect of a secret agreement between the parties to a conveyance was involved. The deed in that case reserved to the grantor the use and possession of the property for 15 months. In a separate writing, he was given the right to repurchase within that time at the same consideration for which the premises were sold. It was urged that this secret reservation voided the conveyance. The court said:
“Under our view the question will not be very important in this case, but the question is here and should be answered,”—
and, after a consideration of the authorities, further said:
“These papers, construed together, show, beyond question, a secret reservation to the grantor and one which the law says is illegal and one which obviously hindered and delayed the collection of these notes in question,”
This was at once followed by the further statement:
“This conclusion, however, is not as important to us as it has been to counsel, by reason of the view we take of the facts. The burden of proof was on plaintiff to show his bona fides.”
After a consideration of the evidence, it was said that he had not done so and the conveyance was held to be subject to the defendant’s rights under an execution which had been levied by him upon the property.
The quotation from 12 R. C. L. which appears in the opinion, and which we need not here repeat, was applicable to the facts there presented. In the preceding paragraph it was said:
“No effort of a debtor to hinder or delay his creditors is more severely condemned by law than an attempt to place his property where he can enjoy it, but require his creditors to await his pleasure for the payment of their claims out of it. A man cannot be the beneficial owner of property and still have it exempt from his debts. * * * It is also held in some instances that the effect is the same though the transferee be innocent of any wrong intent, and acted from the best of motives. But other cases hold that the presumption of an evil intent in a grantee who accepts a conveyance of property in which a benefit is reserved cannot be indulged in the absence of some further fact than the reservation itself. Under these decisions to impute or show bad faith in the grantee, whether by construction merely or as a fact, it must appear, in addition to the trust created or benefit reserved on the face of the instrument, that the grantee was charged with inquiry into the purposes of the grant by a knowledge of the grantor’s insolvency, or, at least, of the fact that he was indebted. Nothing short of this will suffice to impute to the grantee even that kind of bad intent which rests on legal presumptions. ” 12 R. C. L. pp. 544, 545.
And following the quotation in the Anderson Case above referred to, it is said:
“So a man cannot tie up his property under trust in such manner that he may be enabled to enjoy the income thereof and set his creditors at defiance.” 12 R. C. L. p. 546.
The conveyances in question were delivered to Bird when executed by Mr. and Mrs. Mosher. At the same time Bird assigned his stock certificate to Mr. Mosher and paid him the sum of $1,000. By such delivery the title passed to the defendants. The use of the word “escrow” in the agreement in no way affected defendants’ rights under the deeds. The effect of delivery of a deed to a grantee to be held by him in escrow was considered at length in Dyer v. Skadan, 128 Mich. 348 (92 Am. St. Rep. 461), and in Wipfler v. Wipfler, 153 Mich. 18 (16 L. R. A. [N. S.] 941). In the Dyer Case, the following was quoted with approval from Darling v. Butter, 45 Fed. 332 (10 L. R. A. 469):
“The rule is ancient and familiar that a deed cannot be delivered in escrow to the grantee. When there is a valid delivery of a deed by the grantor to the grantee, it is impossible to annex a condition to such delivery; and the delivery vests the title in the grantee, although it may be contrary to the intention of the parties.”
See, also, Hawthorne v. Dunn, 210 Mich. 176, 187.
In the agreement made at the time of delivery the Birds agreed to reconvey within a stated time on receiving payment of the amount paid by them for the property. If this undertaking be treated as a land contract,- rights under it could be had only by a tender of the amount to be paid and demand for a reconveyance. If the deed and agreement be treated as an equitable security given Bird for the payment of the $4,100 due him, it does not help the plaintiff’s case upon this record. The trial court was inclined to so consider it, and to hold the defendants liable to pay for any excess in the value of the property conveyed over and above the $4,100. In the opinion filed he said:
“As matters stand, defendants, if liable at all, might be required to respond for whatever the property, or the Mosher interest in it, was actually worth, over and above their own claim, if the property was in fact worth more. If plaintiff, within ten days after filing of this opinion, requests the same in writing, I will hear further proofs as to the question of value; otherwise the finding will be that the Moshers’ interest in the property conveyed was worth not more than $4,000.”
No such request was made. While Mosher testified that the property was worth $7,000, it seems clear to us, as it did to the trial court, -that defendants paid for it all that it was fairly worth, and more than they got for it on a sale made soon after they acquired title.
We do not think the rule applied in the Anderson Case applicable to the facts here presented. In that case possession of the farm was reserved to the grantor for a period of 15 months, and the value of the property was much greater than the sum paid the grantor for the conveyance. It clearly appears that there was no intent on the part of either Bird or Mr. and Mrs. Mosher to defraud the plaintiff. The property conveyed having no value in excess of that paid by Bird for it, the plaintiff has shown no interest therein entitling it to a decree.
In view of the conclusion reached, we do not consider the question as to whether plaintiff should have obtained a judgment against Mr. and Mrs. Mosher before filing its bill of complaint herein.
The decree dismissing the bill is affirmed, with costs to appellees.
Butzel, C. J., and Wiest, Clark, McDonald, Potter, North, and Fead, JJ., concurred. | [
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] |
McDonald, J.
This is a suit to recover for loss under an indemnity automobile policy issued by the defendant to Richard Frederick insuring property described as a 1926 Ford truck, motor No. 12264548. The applicable portions of the policy are as follows:
To indemnify the assured against loss for liability imposed by law upon him for damages on account of bodily injuries or death suffered by any person other than an employee; to defend any suit brought against him to enforce a claim, “whether groundless or not,” for damages on account of bodily injuries or death to any person other than an em ployee; the association shall have the right to settle any cláim or suit; the policy shall be void if the assured shall voluntarily assume any liability or interfere in any negotiations or legal proceedings conducted by the association or shall settle any claim or incur any other expense without the written consent of the association; if claim for damage is made to the assured he shall give notice to the association with full particulars; if any suit is brought against him he shall immediately forward to the association every summons or other process as soon as the same shall be served; no action shall be brought against the association under the policy except for loss and until final judgment has been rendered after a trial in a suit against the assured and within 90 days from the date of judgment.
On January 6, 1928, while the policy was in full force and effect, the Ford truck became involved in an accident in which two women, Nellie E. Silk and Harriet L. Silk, were seriously injured. On June 2, 1928, each began suit against the assured. Notice of the accident and suits was promptly given to the insurer. It denied liability and refused to defend on the alleged ground that the truck involved in the accident was not- the truck covered by the policy. About three weeks thereafter, the assured retained an attorney and assumed the defense. After appearance was entered and plea filed, the insurer offered to defend the suits on certain conditions not acceptable to the assured. The suits were not defended by the insurer. Eventually they were settled by the assured. His pleas were withdrawn and a judgment by default entered in each case for $5,000, which was the liability limit of the policy. The assured borrowed $10.000 from Clarence E. Elliott to satisfy the judgments and to him they were assigned. This suit was brought under the policy to recover the loss. At the close of the plaintiff’s case and on motion of defendant, Richard Frederick was dismissed as a party; The case was tried before the court without a jury. Findings of fact and conclusions of law were filed, on which judgment was entered in favor of the defendant on the theory that the insured breached the policy and relieved the defendant of liability when it settled the'suits without its permission.
The plaintiff has appealed.
The principal question involved is whether the defendant breached the policy by refusing to defend and thereby released the insured from his agreement not to settle without its consent the suits brought against him by Nellie Silk and Harriet Silk.
It was the duty of the insurer to defend these suits brought against its assured. It refused to do so under the erroneous impression that its policy did not cover the particular truck involved in the accident. It is now settled that it was the same truck. Its refusal to defend was a breach of the policy. It was not excused because the insured refused to sign an agreement to waive any objections to its defenses in an action under the policy. "When these suits were commenced against the insured, one of two courses was open to the insurer. It could repudiate liability and refuse to defend, taking.its chances on a showing that the truck involved in the accident was not the truck insured, or it could defend, with notice to the insured that it reserved the right to later question the identity of the truck. At first it repudiated liability and refused to defend. Later, after the insured had assumed the defense, it offered to defend if he would sign an agreement, the applicable sections of which read as follows:
“1. In consideration of the mutual promises hereinafter contained, the said second party agrees to and does hereby release the said association from any and all liability which may have been or might have been incurred on account of or by reason of the terms of said policy of indemnity. * * *
“3. The said second party does hereby agree that no act of said association in defending said two suits above mentioned for and on behalf of said second party, and/or no act of said association in providing counsel to appear for and on behalf and to defend the said second party, shall be construed, looked upon, or considered as in any way, manner or form a waiver or prejudicial to the rights, claims and/or defenses of said association, it being expressly understood and agreed by and between the parties hereto that none of the acts above mentioned on the part of the association shall be prejudicial to or shall be considered or construed to waive any and/or all defenses which the association may have against the party of the second part hereto, or any other person whatsoever.”
This contract if signed by the insured would have constituted an absolute release of all liability in an action against the defendant under the policy. The insured refused to sign it. The defendant’s attorney testified he offered to eliminate section one. That he offered to do so is denied; but that makes no difference. The insured was not required to sign a contract in order to induce the insurer to defend the suits. The policy provided for that. The duty of the insurer in such circumstances is well stated by the court in Mason-Henry Press v. Ætna Life Insurance Co., 211 N. Y. 489 (105 N. E. 826), as follows:
“Under such circumstances, I think that the insurer as a matter of safety to itself and of fairness to the insured was bound to undertake the defense of the action for the benefit of both and of each. * * * Of course, there was no method by which it could compel the insured to make an explicit agreement of the kind above suggested covering this subject. All it could or was bound to do was to fairly and reasonably assert its rights under the policy in such a manner as would be notice to the insured that it did not intend to waive those rights by proceeding with the defense of the action.”
In the instant case, the insurer should have defended. The policy unqualifiedly required it to do so. If it believed the truck involved in the accident was not the truck insured, it could easily have protected itself by a simple notification to the insured that, in defending, it did not waive its right to later deny liability on that ground. It wrongfully refused to defend, thereby breaching the policy and releasing the insured from its agreement not to settle the suits without its consent.
“Where the insurer has agreed to settle or defend an action brought to recover of the insured for an accident covered by the policy, and has wrongfully refused to so settle or defend the action, and the insured defends the same and in good faith makes a settlement thereof, he may recover the amount paid on such settlement, unless it is shown that there was in fact no liability, or that the amount paid was excessive. The settlement is presumptive evidence that there was a liability, and as to the amount thereof.” Butler Bros. v. American Fidelity Co., 120 Minn. 157 (139 N. W. 355, 44 L. R. A. [N. S.] 609); 14 R. C. L. p. 1322; 36 C. J. p. 1116.
This decision is supported by the great weight of authority and is in harmony with reason and justice.
In this action, questions as to the reasonableness of the settlement, the good faith of the insured and his liability in the suits brought against him for damages were open to the defendant. They were not challenged by any evidence.
“Such settlement, in the absence of .proof to the contrary, is presumptive evidence of a liability and the amount thereof.” 36 C. J. p. 1116, § 108.
The loss defined in the policy is a loss actually sustained by the payment of money. It is claimed by the defendant that, as the insured did not pay any money to satisfy the judgment, but merely gave his note, he did not sustain a loss within the meaning of the policy.
“It is now well established by precedent that an insurer, having thus violated its contract to defend a suit against the insured, may not be allowed to defeat a recovery on the policy by objecting to the manner in which the judgment was paid.” Ford Hospital v. Fidelity & Casualty Co. of New York, 106 Neb. 311 (183 N. W. 656); 36 C. J. pp. 1099, 1100.
If possible, the construction of the language used in the policy should be such as to make it of some value to the insured. There is no sense or justice in holding that unless his loss is in actual currency he cannot ask his insurer to reimburse him. We think the satisfaction of the judgments in this case by promissory note was a sufficient compliance with the requirements of the policy.
The defendant should pay this loss without further attempts at technical evasions of liability. The record discloses no reasonable excuse for refusal to discharge its obligations under the policy.
The judgment is reversed, and the. case remanded to the circuit court for entry of judgment in favor of the plaintiff, with costs.
Butzel, C. J., and Wiest, Clark, Potter, Sharpe, North, and Fead, JJ., concurred. | [
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Sharpe, J.
The defendant Northwestern Investment Company here seeks review by appeal from an order of the trial court denying its motion for summary judgment on its claim made by way of counterclaim and recoupment in a notice attached to the plea of the general issue. No application for leave to appeal was made to this court, and no such leave has been granted. The appeal must therefore be dismissed. As this question is not raised by counsel for appellees, no costs will be allowed.
We may say, however, after an examination of the record, that, were decision to rest on the merits of the appeal, the same result would be reached.
Butzel, C. J., and Wiest, Clark, McDonald, Potter, North, and Fead, JJ., concurred. | [
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Wiest, J.
This is foreclosure of a land contract for payments in default, there being no acceleration provision.
Defendant Edward J. Meyer Southfield Woods Corporation is’assignee of the vendee, and admits default in payments, but, notwithstanding, claims right to have lots released under terms of the contract. The contract described a single parcel of land and contained an agreement that the vendors would join in a plat subdividing the parcel into lots. The tract was subdivided into lots, and plaintiffs joined in executing the plat. The land contract also provided:
“It is further agreed that the parties of the first part will release any lot or lots of any subdivision to be made of said premises or any part thereof, from the liens, terms or provisions of this contract on the payment, to apply on principal on the basis of ten ($10) dollars per-front foot, such payments not to be considered a part of the regular yearly payments mentioned in this contract, but as additional payments on principal.”
Some lots were sold by the vendee and released by the vendors, and some were sold, and because of default in payments under the land contract, releases were refused.
After the bill was filed, plaintiffs joined purchasers of lots as defendants and later dismissed them from the case. The decree found $59,386.82, due for payments in default, interest, and taxes, granted 30 days’ time for payment, mentioned the fact, of the subdivision of the tract into lots, release of some lots, provided for release of other lots upon payment for the same by the purchasers thereof, within 30 days, and directed sale of the premises, not so released, as an entirety, subject to $40,665, unpaid, but not then due on the contract. The Edward J. Meyer Southfield Woods Corporation appealed. Purchasers of lots, made defendants and then dismissed, have not appealed.’
Defendant claims the right to have lots released, regardless of default in contract payments. . This is contrary to the express terms of the contract, and to our holding in Pine Shores Realty Co. v. Parker, 253 Mich. 300.
The decree gave lot purchasers an opportunity to save their interests; they have not appealed, and their dismissal, as defendants, worked no harm to defendant corporation. The decree excepted from sale lots released. Other lots, under contract of sale by defendant, were properly withheld from release by reason of defendant’s default; therefore, title had not passed and the rule requiring sale in inverse order of alienation was not applicable. Plaintiffs were not required, before or during foreclosure, to adjust the equities between the defendant corporation and its land contract vendees, nor, by release of lots, had they cut off their right to foreclosure on all the lots not released. Lots not released before sale were ordered sold “in their entirety,” and were sold, by designated lot numbers, to plaintiffs subject to the balance to become due on the land contract.
Defendant contends that the lots could only be sold separately, citing Jerome v. Coffin, 243 Mich. 324 (a mortgage foreclosure), where this court applied the statutory provision (3 Comp. Laws 1929, § 14431), regulating sales under mortgage foreclosure. Proceedings to foreclose land contracts are not regulated by statutory provisions with respect to foreclosure of mortgages. Jones v. Bowling, 117 Mich. 288; Drysdale v. P. J. Christy Land Co., 248 Mich. 184; Craig v. Black, 249 Mich. 485.
The interest decreed to be sold, and sold, was the equitable title of the vendee, and this was sold to satisfy the amount past due. We repeat, that purchasers from the vendee of lots not released by the vendor were accorded opportunity to pay and obtain releases, and no such purchaser has appealed.
This record discloses no reason for disturbing the decree in the circuit court, and it is affirmed, with costs to plaintiffs.
Butzel, C. J., and Clark, McDonald, Potter, Sharpe, North, and Fead, JJ., concurred. | [
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] |
Potter, J.
Henry Sachs of Wyandotte made his last will and testament, January 24, 1929, and died February 22, 1929. His will, on being offered for probate, was objected to by appellant on the grounds of nonexecution, mental incompetency, and undue influence; and, on appellant’s application, certified to the circuit court, where, upon trial, a verdict was directed for proponents. Contestant brings error. The testimony of the scrivener who drew the will, an attorney of 34 years ’ practice, of the subscribing witnesses who were old friends of the testator, and of doctors Albert P. 'Walker, Presley L. Pound, and William H. Honor, all of whom had treated him, is that testator was mentally competent. No one acquainted with him testified to anything indicating either mental incompetency or undue influence. Testator signed the will with proper formalities. The testator was in a hospital in 1928. The hospital records were offered in evidence and properly rejected. Metropolitan Life Ins. Co. v. Dabudka, 232 Mich. 36; 22 C. J. p. 902. Their authenticity was not questioned, but their correctness was not proven. One William O. Lawrence, a medical expert, in response to a hypothetical question based upon no facts tending to show testator’s mental incompetency, and who, so far as the record shows, had never known, seen or heard of testator in his lifetime, testified testator was mentally incompetent to make a will. This was not evidence. The direction of a verdict for proponents was correct. Judgment affirmed, with costs.
Butzel, C. J., and Wiest, Clark, McDonald, Sharpe, North, and Fead, JJ., concurred. | [
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] |
Wiest, J.
The morning of May 21, 1929, between the hours of eight and nine o’clock, llene Door, four years and three months of age, was. coasting in a little cart on the sidewalk along the north side of Johnson street in the city of Grand Rapids. She was going west, slightly down grade, and suddenly turned into a paved driveway leading from the sidewalk to the curb, a distance of five feet, also down grade, and her cart went upon the pavement, ran into the side of a truck going west upon the proper side of the street, and she was killed. This suit was brought against the owner and driver of the truck to recover damages under the death act. At the close of proofs, the circuit judge directed a verdict in favor of defendants. The child was too young to be guilty of contributory negligence, and, upon review, we pass upon the question of whether there was negligence on the part of the driver of the truck.
Witnesses to the accident fully described the happening. The truck was driven at a speed of about 15 miles per hour on the proper side of the street, ten feet from the curb, and, when it was ten feet from the drive, the cart suddenly turned from the sidewalk, down the drive to the street pavement, the truck driver swerved his truck away from the approaching cart and applied the brakes, but the cart had such momentum that it carried the child to collision with the side of the truck, just forward of the rear wheel. The driver of the truck saw the girl coasting on the sidewalk but had no reason to anticipate that she would turn down the drive and into the street. As soon as she turned into the drive and it was apparent that the speed of the cart would carry her into the street he swerved his truck away from her approach and applied the brakes. It would have been useless to sound a warning signal when the girl turned into the drive, and while she was coasting on the sidewalk no signal was called for.
Cases involving instances of children in the roadway have no application. The driver was guilty of no violation of law.
In Hyde v. Hubinger, 87 Conn. 704 (87 Atl. 790), a child, a few months over four years of age, was struck by an automobile while in a public street. What the court there said applies to this case:
“No evidence was offered from which the jury could reasonably have found negligent conduct on the defendant’s part. There was an entire absence of testimony that he was traveling at an excessive speed, that he did not have his car under suitable control, or that he failed to exercise due care in any respect or at any time. There was no testimony to indicate that the plaintiff had left the sidewalk, where he was just before the accident, until the moment before he was hit, or that there was anything in the situation which called for special precaution on the defendant’s part to avoid the accident which was not taken. On the contrary, the evidence indicates strongly that the plaintiff did not leave the walk, or come into a position of danger, or of apparent danger, until the defendant’s car was so^ close to him that no reasonable efforts on its driver’s part could have avoided running* him down. ’ ’
The evidence in the case at bar negatives negligence on the part of the truck driver.
The judgment is affirmed, with costs to defendants.
Butzel, C. J., and Clark, McDonald, Potter, Sharpe, North, and Fead, JJ., concurred. | [
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Sharpe, J.
Section 1 of Rule No. 78 of the Michigan Court Rules, adopted by this court to take effect January 1, 1931, reads as follows:
“Whenever the judge of any court, or the officers of any tribunal, from which an appeal lies to the Supreme Court, shall be in doubt as to any controlling question or questions of law involved in a pending case or controversy, such judge or officers may certify such question or questions to the Supreme Court with a statement of the facts relevant thereto sufficient to make clear the application of such question or questions, and further proceedings relative to such case or controversy shall thereupon be stayed to such extent as the judge or officers shall by order direct pending the receipt of an answer from the Supreme Court.”
Pursuant thereto, the trial court has certified to this court the following statement of facts, and requests an answer to the question appended thereto:
“1. This is an action by writ of habeas corpus brought by the above-named plaintiff, Frederick Yolk, a citizen of the State of Ohio, against the above-named defendant, Hazel Yolk, now domiciled in the State of Michigan, for the purpose of obtaining custody and control of Gilbert Clyde Yolk, aged two years, the minor child of the parties hereto.
“2. Both plaintiff and defendant resided in the city of Toledo, Ohio, sometime prior to September 10, 1930. Plaintiff herein commenced divorce pro ceedings against defendant in the court of common pleas for Lucas county, Ohio, praying for a divorce. Defendant herein entered an appearance in that cause and a final decree was duly entered therein on April 7, 1930, granting plaintiff herein an absolute divorce from defendant and giving custody of said minor child to the mother, Hazel Yolk, defendant herein, and ordering plaintiff herein to pay. certain alimony for the support of the child.
“3. The State of Ohio has a statutory court known as the juvenile court, which in Lucas county is presided over by one of the judges of the common pleas court. Under the statute organizing the juvenile court, it has exclusive jurisdiction over minors in the following cases:
‘ ‘ a. In divorce cases, where the decree of divorce refers the custody and care of the minor children to the juvenile court (there was no reference to the juvenile court in the decree of divorce granted the parents).
“b.' Children under eighteen years of age, when they were:
‘ ‘ 1. Delinquent.
‘ ‘ 2. Dependent.
“3. Neglected;
“Upon determination of the juvenile court that the child was delinquent, dependent, or neglected, the jurisdiction of tfie court was as follows:
“ ‘Section 1643. When Jurisdiction Terminates. —When a child under the age of eighteen years comes into the custody of the court, under'the provisions of this chapter, such child shall continue for all necessary purposes of discipline and protection, a ward of the court, until he or she shall attain the age of twenty-one years. The power of the court over such child shall continue until the child attains such age.’
‘ ‘ Other pertinent sections of the juvenile court act of Lucas county are as follows;
“ ‘Section 1645 * * * For the purpose of this chapter, the words “dependent child” shall mean any child under eighteen years of age, who is dependent upon the public for support; or who is destitute, homeless or abandoned; or who has not proper parental care and guardianship * * * or whose condition or environment is such as to warrant the State, in the interest of the child, in assuming its guardianship. ’
“ ‘Section 1648 * * * Upon filing of the complaint, a citation shall issue, requiring such minor to appear and the parents or guardian or other person, if any, having custody or control of the child or with whom it may be, to appear with the minor, at a time and place to be stated in the citation. * * * A parent, step parent, guardian,' or other person not cited may be subpoenaed to appear and testify at the hearing.’
“ ‘ Section. 1653 * * * When a minor * * * is found to be dependent or neglected, the judge may make an order committing such child to the care of # * # some reputable citizen of good standing.’
“ ‘Section 1663 * * * When a complaint is made or filed against a minor, the probation officer shall inquire into and make investigation into the facts and circumstances surrounding the alleged delinquency, neglect, or dependency. * * * He shall be present in court to represent the child when the case is heard. * * * ’
“ ‘Section 1683. Chapter to be liberally construed —This chapter shall be liberally construed to the end that proper guardianship may be provided for the child, in order that it may be educated and cared for, as far as practicable in such manner as best subserves its moral and physical welfare, and that, as far as practicable in proper cases, the parents, parent or guardian of such child may be compelled to perform their moral and legal duty in the interest of the child.’
“4 On the 28th day of February, 1930, Hazel Volk, defendant herein, the mother of the minor child, Gilbert Clyde Volk, filed a petition in the juvenile court of Lucas county, Ohio, stating that ‘Gilbert Clyde Volk has not proper parental care, in that his parents are separated and fail to properly care for him.’ This application was filed in the juvenile court on the 28th day of February, 1930, citation was issued, served on the father, who is plaintiff herein, and on the mother, defendant herein. The records of the juvenile court of Lucas county show the following proceedings and orders made after the filing of the application.
“March 3, 1930, citation issued and duly served and on March 5, 1930, the record shows the following entry:
“ ‘Defendant in court, hearing had. Defendant dismissed and given right of visitation during daytime every other day starting March 10, 1930.’
“On May 9,1930, another citation was issued and duly served and on May 14, 1930, said record shows the following entry:
“ ‘Defendant in court, hearing had. Father allowed to have child as ordered next Sunday and every other Sunday.’
“On July 2, 1930, a third citation was issued and duly served and on July 16,1930, said record shows the following entry:
“ ‘Allowance by United States to be paid through the Toledo Humane Society, Trustee. Visitation, only to be had 3 to 6 p.- m. Sunday. ’
“On September 5, 1930, a fourth citation was issued and duly served and on September 10, 1930, the record shows the following entry:
“ ‘Defendant in court, hearing had. Father to have child every week Thursday, 1 p. m. to Friday, 6 p. m. Mother to give child to father. Father to return child to mother. Starting September 11, 1930.’
“On the night of September 10, 1930, defendant herein with her said minor child moved to Detroit, Michigan, where she and said child have since resided continuously with her parents. Since her arrival in Michigan she has not been without its confines.
“The record of the Lucas county, Ohio, juvenile court also shows that on September 15, 1930, another citation was issued for hearing September 17, 1930, served on plaintiff herein but not on defendant herein, and under date of September 17, 1930, the following entry appears:
“ ‘Defendant in court, hearing had. Gilbert Clyde Volk probated to temporary care and custody of father, Frederick Volk, to be kept with paternal grandparents. ’
“On October 10,1930, another citation was issued by said juvenile court, served on the plaintiff herein but not on defendant herein for hearing on'October 15, 1930, and under date of October 15, 1930, appears the following entry:
“ ‘Defendant in court, hearing had. Judge ordered sole and legal custody awarded to father. See J. E. 12/8205/403.’
.“The defendant, Hazel Volk, admits that in all proceedings had in said juvenile court up to and including September 10, 1930, she appeared in person in the juvenile court after service of due process, and it is conceded that no citations were served on defendant, Hazel Volk, for either of the hearings held on September 17th or October 15, 1930; and that she was not present in court at either of said last'two hearings.
“Neither the decree of divorce nor any of the orders made in the juvenile court of Ohio, expressly prohibited the mother from removing the child out of the jurisdiction of the Ohio courts, but on the 10th day of September, 1930, without the permission <?r knowledge of the juvenile court, or the knowledge or consent of the father, Frederick Yolk, defendant, Hazel Yolk, moved to the State of Michigan, taking the infant child with her.
“Certified Question.
“Are the orders of the juvenile court for Lucas county, Ohio, modifying its previous orders for the temporary care and custody of the minor child, Gilbert Clyde Yolk, made without service of process on defendant, Hazel Yolk, and made after she had left the State of Ohio, with the child, and she had acquired a domicile in the State of Michigan, valid and binding, so that such orders cannot be collaterally attacked in the proceedings instituted in the circuit court for the county of Wayne, State of Michigan?”
The decree of divorce in this case was granted by the court of common pleas for Lucas county, in the State of Ohio, at a time when both parties were residents of that county. Its jurisdiction in such cases is similar to that of our circuit courts, and “full faith and credit” must be given to the decree under article 4, § 1, of the Constitution of the United States. The custody of the minor child was given to his mother. It does not appear that this decree has been in any way modified or changed by the court granting it.
It does appear, however, that the mother filed a petition in the juvenile court of Lucas county, stating that the minor child “has not proper parental care, in that his parents are separated and fail to properly care for him.” The jurisdiction of that court as it appears from the statute above quoted was dependent upon a finding that the child was either dependent or neglected.
At the time the petition for the writ of habeas corpus was filed, the mother had acquired a domi oile in the State of Michigan. The domicile of an infant until emancipation is that of his father. But, under the decree of divorce, the mother was given his unrestricted custody. His domicile thereafter became that of his mother, and, when she removed to this State and became domiciled here, the domicile of the child was in Michigan.
“When a divorce has been granted to the wife, however, and unrestricted custody of the minor child of the marriage given her in the. decree, her own domicile, and not the father’s, establishes that of the child.” 9 R. C. L. p. 549.
See, also, Fox v. Hicks, 81 Minn. 197 (83 N. W. 538, 50 L. R. A. 663), note 49 L. R. A. (N. S.) 864 et seq.
When the minor became domiciled here, he became a ward of this State (Kane v. Kane, 241 Mich. 96), and no longer subject to, or under the control of, the courts in Ohio. The orders thereafter made by the juvenile court of that State in no way affected his status, and do not severally constitute judgments which must be given full faith and credit under the provision in the Federal Constitution.
The reason for the application of this rule is well stated in 15 R. C. L. p. 940:
“Nor is a decree of a court of one State awarding the custody of a child binding upon the courts of another State under the full faith and credit clause of the Federal Constitution after the child had become domiciled in the latter State. Such a decree as to a child has no extraterritorial effect beyond the boundaries of the State where it is rendered, and the courts of the second State will not remand the child to the jurisdiction of another State, especially where it is against the true interests of the child. The reason for this rule is found in the fact that children are the wards of the court and the right of the State rises superior to that of the parents. Therefore, when a child changes his domicile and becomes a citizen of a second State, he is - no longer subject to the control of the courts of the first State.”
See, also, In re Hugh Alderman, 157 N. C. 507 (73 S. E. 126, 39 L. R. A. [N. S.] 988), and the note appended to the latter.
It follows that the question submitted must be answered in the .negative.
Butzel, C. J., and Wiest, Clark, McDonald, Potter, North, and Fead, JJ., concurred. | [
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Sharpe, J.
Prior to March 10, 1922, the plaintiff was engaged in the business of manufacturing machinery for the printing and allied trades at the city of Kalamazoo under the firm name of J. A. Richards Company. On that day he sold a one-third interest in the business, including special tools, patterns, patents, and good will, to the defendant for the sum of $4,000. The business was continued under the same firm name. On July 27, 1927, the partnership was dissolved by written agreement. Por a consideration of $4,500 the defendant sold his one-third interest therein, including “the good will of said business, and all other assets; of said copartnership,” to the plaintiff. He was employed by the plaintiff thereafter until about the middle of January, 1929.
Before the partnership agreement was entered into, the plaintiff had applied for a United States patent on certain improvements pertaining to a circular saw structure which he was then manufacturing, and which the partnership continued to manufacture. Soon after leaving plaintiff’s employ, the defendant engaged in business at Comstock, in Kalamazoo county. He began the manufacture of a machine which plaintiff claims to be an infringement of his patent. Alleging that the defendant had taken certain drawings and tracings appertaining to this machine, plaintiff filed a bill praying for an injunction to restrain their use, and obtained a decree therefor on May 11, 1929.
On July 24, 1929, he filed the bill of complaint herein. In it he set forth the dissolution agreement, and alleged that the defendant is advertising for sale a saw trimmer manufactured by him in violation of the terms of such agreement. In his prayer for relief he asked that defendant—
“be compelled to specific performance of the dissolution contract and also enjoined from advertising the saw trimmer referred to in the advertisement and also benders and cutters,”—
and from selling the same, and that he be awarded such damages as he had sustained by reason thereof.
The answer contained a denial of the material allegations in the bill. While the cause was pending, plaintiff’s application for a patent, above referred to, was granted, and the bill was amended to so state.
After hearing the proofs submitted, the trial court in an opinion filed by him said:
“In my opinion the only question involved herein is that of infringement. No other question is presented to which infringement is merely incidental, or the determination of which brings this cause within the jurisdiction of this court,”—
and entered a decree dismissing the bill, from which plaintiff has appealed.
Plaintiff’s claim is thus stated by his counsel:
“The theory of the bill in the instant case is that the plaintiff and the defendant together owned all of the assets of the partnership, and that the' defendant in the dissolution agreement conveyed to the plaintiff the same assets which he had acquired and which included the good will and the patents; that he was bound by the dissolution agreement not to injure the plaintiff by selling plaintiff’s customers .machines within the terms of the patent which he had sold; that by the decree in the earlier case he had no lawful right to make use of plaintiff’s drawings.”
He relies on the holding in Becher v. Contoure Laboratories, 279 U. S. 388 (49 Sup. Ct. 356), to support his right to the relief prayed for. In that case it appeared that Becher, while in the employ of one Oppenheimer, who had invented a machine, learned all of the facts relative thereto, aiid, while still in such employ, without the knowledge of Oppenheimer, and in violation of his agreement—
“to keep secret and confidential the information thus obtained and not to use it for the benefit of himself or of any other than Oppenheimer,”—
applied for and obtained a patent on such machine. In an action brought in the State court to compel Becher to deliver to Oppenheimer an assignment of the letters patent and to enjoin him from manufacturing the machine, and from transferring any rights under the patent issued to him, Oppenheimer was granted the relief prayed for. ' At about the time.the judgment was entered, Becher brought suit in the Federal court of the State, setting up his patent, alleging infringement and praying for an injunction. The jurisdiction of the State court which rendered the judgment was assailed, it being in sisted that the jurisdiction of the Federal courts is exclusive in suits arising under the patent laws. In affirming the judgment of the lower court denying plaintiff relief, it was said:
“It is plain that that suit had for its cause of action the breach of a contract or wrongful disregard of confidential relations, both matters independent of the patent law, and that the subject-matter of Oppenheimer’s claim was an undisclosed invention which did not need a patent to protect it from disclosure by breach of trust. (Citing several cases.) Oppenheimer’s right was independent of and prior to any arising out of the patent law, and it seems a strange suggestion that the assertion of that right can be removed from the cognizance of the tribunals established to protect it by its opponent going into the patent office for a later title.”
The facts here presented differ widely from those there considered. In the written agreement dissolving the partnership, the defendant sold to plaintiff, as before stated, his one-third interest therein, including “the good will of said business, and all other assets of said copartnership.” It contained no provision that defendant should not engage in a competitive business. He had no right to remove any of the drawings from plaintiff’s place of business, and his use of them was enjoined by the decree first rendered. If he has violated its terms, he may be punished therefor. But neither the agreement nor the decree in any way prohibited the defendant from manufacturing a machine for use in the printing business which did not infringe upon the design for which plaintiff had then applied for a patent. After the dissolution, defendant was employed by plaintiff as a superintendent in his shop for about 18 months. That he might, after he left this employment,, use the knowledge he there acquired in order to build a machine which would compete with plaintiff’s in the market seems clear, unless the machine- so built by him infringed upon the design for which plaintiff was then seeking and afterwards obtained a patent. No trade secret was involved except as pertained to the design filed, in the patent office. Plaintiff’s invention was protected by his application, made before the partnership agreement was entered into. Any knowledge acquired by the defendant during the partnership, or while in plaintiff’s employ after the dissolution, which pertained to the design sought to be patented, could not be used by him. But knowledge acquired relative to the manufacture of machines which .did not so infringe might certainly be used by him, without incurring any liability to the defendant either under the dissolution agreement or otherwise.
This court has held that—
“One who is givén employment by a manufacturer whose processes of manufacture, methods, and machinery are kept secret from the public, upon the agreement, express or implied, that he will not use the information imparted to him in the course of his employment, for his own benefit or communicate it to strangers, will be enjoined from breaking his agreement.” O. & W. Thum Co. v. Tloczynski, 114 Mich. 149 (syllabus) (38 L. R. A. 200, 68 Am. St. Rep. 469).
See, also, Glucol Manfg. Co. v. Schulist, 239 Mich. 70.
But the only secret in the manufacture of plaintiff’s machine at the time the partnership agreement was entered into, or during the after employment of the defendant, was in the design, of which plaintiff had theretofore applied for a patent,
The question then resolves itself, as stated by the trial court, into whether the machine now manufactured by the defendant is an infringement of the patent granted to plaintiff. The plaintiff pointed out the respects in which it does infringe, and the defendant was equally positive that it does not. A patent attorney produced by defendant was examined at length as to the points of similarity in the two machines. Apparently in answer to a question put by the court, he said:
“Now, what I desire to show, your honor, is, that although there are admittedly resemblances between the Kline machine and the Richards machine, the resemblances are only of a general nature, and that the specific mechanism of the two machines is quite different, and the difference between the specific mechanism of the Kline machine and the Richards machine is fully as great as the difference between the specified mechanism of the Richards machine and the prior art.”
If defendant’s machine does not infringe the patent granted plaintiff, he should not be enjoined from manufacturing it, and whether it does or does not must be determined in a suit brought therefor in the proper court to decide such cases. •
The decree is affirmed, with costs to defendant. '
Butzel, C. J., and Wiest, Clark, McDonald, Potter, North, and Fead, JJ., concurred. | [
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] |
Fead, J.
Defendant owed M. Fiol, of New York, $210.75. Defendant’s brother Meyer sued Fiol in justice’s court in Detroit and garnisheed defendant. Five days later, defendant was served with notice that Fiol’s claim against him had been assigned to plaintiff, who resides in New York. Two days later he filed disclosure admitting the indebtedness and gave notice that plaintiff claimed the fund. Meyer took judgment against Fiol, and, thereafter, without judgment in garnishment against defendant, the latter paid Meyer’s attorney the amount. The assignment had been executed some months before. This suit is by the assignee on the original debt.
Defendant pleaded the garnishment in bar. To save himself from double liability he was required to give notice of the assignment, although received by him after service of garnishee summons. Tabor v. VanVranhen, 39 Mich. 793; Metz Manfg. Co. v. Holbeck, 247 Mich. 241. For several reasons, de fendant’s payment to Meyer’s attorney did not constitute a defense to action by the assignee. Stone v. Dowling, 119 Mich. 476; Button v. Trader, 75 Mich. 295; Union Bank v. Hanish, 97 Mich. 404; 3 Comp. Laws 1929, § 16209.
Defendant claims the assignment was invalid because not in conformity with the laws of New York governing general assignments for the benefit of creditors. Fiol compromised with' certain of his creditors and assigned his book accounts in trust for their benefit. He retained some property and had other creditors. A “specific assignment for the benefit of one or a limited number of creditors” is valid. Royer Wheel Co. v. Fielding, 101 N. Y. 504 (5 N. E. 431); Dodge v. McKechnie, 156 N. Y. 514 (51 N. E. 268); Warner v. Littlefield, 89 Mich. 329.
Moreover, the assignment may be attacked only as a fraud upon creditors and at suit of creditors. Knower v. Central National Bank, 124 N. Y. 552 (27 N. E. 247, 21 Am. St. Rep. 700); Butler v. Wendell, 57 Mich. 62 (58 Am. Rep. 329).
The other assignments of error discussed in defendant’s brief are without merit and need no elaboration. Those not discussed are not considered.
Judgment affirmed, with costs.
Butzel, C. J., and Wiest, Clark, McDonald, Potter, Sharpe, and North, JJ., concurred. | [
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] |
Sharpe, J.
On March 25, 1929, wnile George E. Kelley, manager of the wholesale grocery firm of Lee & Cady, a corporation, was driving an automobile, owned by it, north on the paved highway from Lansing towards St. Johns, the car collided with that of the defendant at a point about five miles north of Lansing, and was badly wrecked. The plaintiff,- with which the corporation had its car insured, after investigation, settled for the damage done to it and took from the corporation a “Subrogation Receipt,” acknowledging payment of $865 and assigning its right to damages arising out of the collision. This action is brought for the recovery thereof. At the conclusion of plaintiff’s proofs, the trial court directed a verdict for the defendant. Plaintiff seeks review of the judgment entered thereon by writ of error.
The verdict having been directed, “the testimony and its legitimate inferences most favorable to plaintiff must be accepted.” Olchefsky v. Brick Co., 240 Mich. 536, 539.
Earl C. Gignac, who was driving south about 200 feet behind defendant’s car, was a witness to the accident. He testified that defendant’s car was traveling about 40 miles an hour; that just before the collision a car from the east came on the paved highway at an intersection “directly in front of the man in front of me;” that the pavement was wet; that defendant apparently applied his brakes, and his car veered to the left and turned partly around on the east side of the pavement on which Mr. Kelley was driving, and that Kelley’s car crashed into it and forced it off the west side of the traveled portion of the highway. Mr. Kelley testified:
“I was'driving in a northerly direction. I saw two or three cars coming towards me, and when I saw those' cars coming towards me one of them deviated from its regular course. The cars were all on the right-hand side of the road when I first saw them coming, or on the west side of the road. The second car turned out of its course and went directly east. When this car came over towards the east or on the east side of the road I just threw on my brakes and shut my eyes. I was less than ten feet from this car when it turned over onto my side of the road. My car is almost a total wreck. Mr. Foth was driving this other car. After the accident I inquired as to whether he or his wife was hurt, and just talked about the accident in regard to I had no chance of missing him, and he agreed. He said something about a car ahead of him started to stop and he threw on his brakes to miss hitting that car and skidded across the road.”
Carl J. '"Weale, the Lansing manager of Lee & Cady, testified that he came to the scene ■ of the accident about an hour after it occurred;'that the. defendant was still there, and in answer to a question put to him by the witness,
“He said that his car skidded in front of the car going north which was Mr. Kelley’s, and that Mr. Kelley had no opportunity to stop.”
While it may be said that under the cross-examination of (xignac and Kelley inferences may be drawn which tend to relieve the defendant from the charge of negligence, and to show negligence on the part of Kelley, these may not be considered in view of the fact that a verdict was directed.
It must be assumed that the defendant saw the' car on the side road as it approached the intersection. If it was running at a rate of speed and in a way which indicated that the driver did not intend to stop, but planned on entering the paved highway in front of defendant’s car, then the jury might have found that the defendant’s failure to reduce the speed of his ear at a time when the application of the brakes would not have resulted in causing it to skid, as it did, directly in front of that driven by Kelley, was negligence on his part and the proximate cause of the collision. Whether Kelley was negligent in not sooner checking the speed of the car he was driving, or turning so as to avoid the collision, was doubtless also a question for their consideration. But, on the record now before us, it must be said that there was error in the direction of a verdict for the' reason that no negligence on the part of the defendant was established and that Kelley was guilty of contributory negligence.
The trial court was also of the opinion that under the terms of the “subrogation receipt” .the entire claim of Lee & Cady was not assigned to plaintiff, and that, as a plaintiff may not split a cause of action, recovery could not be had thereon. This instrument, after reciting the payment of $865, in settlement of all claims >and demands for loss and damage to the car insured, stated that Lee & Cady—
“hereby assigns and transfers to the said company each and all claims and demands against any other party, person, persons, property or corporation arising from or connected with such loss and damage (and the said company is hereby subrogated in the place of and to the claims and demands of the undersigned, against said party, person, persons, property or corporation in the premises) to the extent of the amount above named and the said company is hereby authorized and empowered to sue, compromise or settle in their name or otherwise to the extent of the sum of money paid as aforesaid.”
While called a “subrogation receipt,” this instrument by its terms was an assignment by Lee & Cady'to the plaintiff of its claim for the damages sustained by it by the injury to its car to the amount stated. In Heck v. Henne, 238 Mich. 198, 201, wherein it appeared that a similar assignment had been made, this court said:
“By assignment before suit, the insurance company was the real party in interest seeking recovery for damage to the automobile.”
In McPeake v. Railway Co., 242 Mich. 676, where both the owner and the insurance company were joined as plaintiffs, it was said (678):
“The assignment to the insurance company stated that it was to the extent of the payment made by the company to McPeake. There was an improper joinder of parties plaintiff. The cause of action could not be split. The suit should have been dismissed as to plaintiff McPeake when it appeared that he had- assigned his right of action (Heck v. Henne, 238 Mich. 198), and, as such fact was stated in the declaration, defendant was entitled to such an order at once, upon request. The request was made early in the- trial and .denied, and McPeake gave his direct testimony as a plaintiff, but, at the close thereof, he was dropped. His improper joinder was not fatal. 3 Comp. Laws 1915, § 12364 (3 Comp. Laws 1929, § 14021).”
This action was brought in the name of the insurance company under the assignment made to it, and its right tó recover is sustained by these decisions. It may, however, be well said that there was no splitting of the cause of action as it conclusively appears from the evidence that Lee & Cady make no claim for any other damage than that assigned to the plaintiff.
Attention may properly be called to Act No. 271, Pub. Acts 1929 (3 Comp. Laws 1929, § 14010), amending section 12353, 3 Comp. Laws 1915, relating to “parties to actions,” which provides:
“That where an assignment of a part of a cause of action in tort has been made by an insured to an insurer, both assignor and assignee may join in an action on such claim, and a joint judgment shall be rendered for all the damages to which either or both may be entitled. ’ ’
It follows that the trial court was in error in directing a verdict for the defendant. The judgment entered thereon is reversed, with costs to plaintiff, and a new trial ordered.
Butzel, C. J., and Wiest, Clark, McDonald, Potter, North, and Fead, JJ., concurred. | [
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Potter, J.
The Ford Motor Company, a corporation, engaged in manufacturing in Fordson, in 1925 desired a grade separation at Eagle avenue — to construct an underpass 121 feet wide under the yard of the Pennsylvania, Ohio & Detroit Railroad, the tracks of the Pere Marquette Railroad, and the land of the city of Detroit, department of street railways — to enable its employees and others to reach its plant more easily, quickly, and safely. It entered into contracts in writing with the Pere Marquette Railroad Company, the Pennsylvania, Ohio & Detroit Railroad Company, the Pennsylvania Railroad Company operating the Pennsylvania, Ohio & Detroit Railroad, and with the city of Detroit, department of street railways, for the acquisition of the right to make this grade separation; and subsequently entered into a contract in writing with John M. Blair, doing business as the Blair Construction Company, to build this underpass and grade separation. Blair entered upon the work, making many contracts for material, but before the job was completed, disputes arose between Blair and the Ford Motor Company, and the Ford Motor Company rescinded the contract and took over the work. A large number of claims for liens were filed by subcontractors and materialmen, including plaintiff; about 60 suits were commenced against Blair in the circuit court for Wayne county, in which the Ford Motor Company was garnisheed; several eases were commenced in justice’s court against Blair in which the Ford Motor Company was named as garnishee defendant, and other litigation ensued. A bill was filed by plaintiff to declare and enforce its lien; various other lien claimants named in the bill as defendants filed answers and cross-bills to establish, declare, and enforce claims of lien filed by themselves. The Ford Motor Company filed motions to dismiss these bills and cross-bills upon the ground the property upon which a lien was claimed was not lienable and answered the bill of complaint and the several cross-bills filed. An arbitration agreement between Blair and the Ford Motor Company was entered into, a hearing had, and an award filed by the arbitrators awarding Blair $437,294.77. This case was brought on for hearing, referred to William C. Marldey, a circuit court commissioner, who, September 23, 1930, filed findings herein to which exceptions were taken, and subsequently heard before the circuit court and a final decree entered sustaining the liens. The Ford Motor Company appeals.
The bill of complaint describes three parcels of land, parcel number one, being owned by the Ford Motor Company, a corporation; parcel number two, being owned by the Pennsylvania, Ohio & Detroit Railroad Company; and parcel number three owned by the city of Detroit, department of street railways (described in the bill of complaint as the Detroit United Railroad, a Michigan corporation). The lands, and the interests of the Ford Motor Company therein, occupied by the right of way and structures incident to the Eagle avenue grade separation, are described in different ways by claimants. Though there is'no uniformity in description, they all attempt to describe, in different ways, the ■ interest of the Ford Motor Company in the right of way and the grade separation incident thereto. The bill of complaint alleges, “the owners of said property being desirous of making a separation of grades of the railroad crossings through said property, did enter into a contract with John M. Blair, doing business as Blair Construction Company, for the separa tion of said grades and the erecting of viaducts and crossings thereunder.” No contract, such as alleged in the bill of complaint, was entered into by the owners of the lands upon which this grade separation was made. The grade separation affects the lands of the Pere Marquette Railroad Company, the Pennsylvania, Ohio & Detroit Railroad Company, the city of Detroit, department of street railways, and the operating rights of the Pennsylvania Railroad Company. None of these parties entered into contract with Blair for the construction of this grade separation. They assumed no responsibility for damages resulting from its building, maintenance, and operation. On the other hand, the railroad companies above named, owners of the lands .crossed by the grade separation, granted to the Ford Motor Company the right to construct the same at its own expense; the Ford Motor Company agreeing to keep, save, and bear harmless the owners of the lands from any loss or damage resulting from the building, maintenance, and operation of such grade separation.
The mechanics’ lien law (3 Comp. Laws 1929, § 13101 et seq.) is framed upon the theory that those who perform work or furnish material which enters into and enhances the value of improvements on real estate are entitled to a preferred claim against and a lien upon the specific property presumably bettered by the performance of such labor and the furnishing of such materials; the security of attaching creditors and mortgagees being so enhanced in value thereby that they are not prejudiced.
The statute, 3 Comp. Laws 1929, § 13101, under which a lien' is claimed, provides:
“Every person who shall, in pursuance of any contract, express or implied, written or unwritten, existing between himself as contractor, and the owner, part owner or lessee of any interest in real estate, build, alter, improve, repair, erect, ornament or put in, or who shall furnish any labor or materials in or for building, altering, improving, repairing, erecting, ornamenting or putting’ in any house, building, machinery, wharf or structure, or who shall excavate, or build in whole, or in part, any foundation, cellar or basement for any such house, building, structure or wharf, or shall build or repair any sidewalks or wells or shall furnish any materials therefor, and every person who shall be subcontractor, laborer, or materialman, perform any labor or furnish materials to such original or principal contractor, or any subcontractor, in carrying forward or completing any such contract, shall have a lien therefor upon such house, building’, machinery, wharf, walk or walks, wells, foundation, cellar or basement, and other structures, and its appurtenances, and also upon the entire interest of such owner, part owner or lessee in and to the lot or piece of land, not exceeding one-quarter section of land, or if in any incorporated city or village, not exceeding the lot or lots upon or around or in front of which such improvement is made, to the extent of the right, title and interest of such owner, part owner or lessee at the time work was commenced or materials were begun to be furnished by the contractor under the original contract, or by the subcontractor who furnishes or is furnished with any labor or material in the performance or execution of such subcontract and also the extent of any subsequent acquired interest of any such owner, part owner' or lessee.”
This statute came before the court of appeals of the sixth circuit, Judges Taft, Lurton, and Severens, in Pennsylvania Steel Co. v. J. E. Potts Salt & Lumber Co., 11 C. C. A. 11 (63 Fed. 11). The court placed its decision upon the construction of the statute. It said:
“In most of the statutes of the several States, the subject of the lien is localized within restricted limits; in others, it is of an extended character; and in some; railroads are expressly mentioned. We are not disposed to question the proposition that such statutes, though they are in contravention of the common law, should be fairly and liberally construed; but we cannot extend them beyond the bounds of the purpose of the legislature, as gathered from the words employed. Upon general principles of construction, we do not think that the words ‘other structure,’ following, as they do, in the Michigan statute, such limited and localizing words as ‘house, building, machinery, wharf,’ can reasonably be held to include a railroad. This conclusion appears to us to be strongly fortified by the restriction of the lien in the latter part of the section to ‘the lot or piece of land not exceeding one quarter section of land, or if in a village not exceeding the lot or lots ’ on which the improvement is made. Giving all these considerations their just weight, it seems clear to us that the complainant has no lien, and therefore that his suit must fail.
“It is suggested by counsel for complainant that the statute gives an independent lien upon the ‘structure,’ and a further one upon the land upon which it is built. We do not find it necessary to decide this point, or whether, if it is well taken, the statement of lien which was filed would support the claim of a lien upon the material composing the structure; for we are of the opinion that the structure for which the complainant furnished the material is not such a one as the statute contemplates, and it is only for material furnished for such a purpose that a lien is afforded;”
In Detroit Trust Co. v. Railway, 159 Mich. 442, suit was brought to foreclose a mortgage. Defendants Praether Engineering Company, J. H. Kusell, trustee, and the Harrisburg Foundry & Machine Works, filed answers in the nature of cross-bills to enforce mechanics’ liens. The question arose as to the construction of the statute. It is said:
'“The validity of the claimed mechanics’ liens, apart from questions of procedure, depends upon the construction of our statute providing for such liens. See 3 Comp. Laws [1897], §10710, as amended (Act No. 17, Pub. Acts 1903). This statute came under the consideration of the United States circuit court of appeals, sixth circuit, on appeal from the decree of the circuit court for the eastern district of Michigan, in the case of Pennsylvania Steel Co. v. Lumber Co., 11 C. C. A. 11 (63 Fed. 11). The eminent judges who constituted the court, after much consideration and examination of authorities, reached the conclusion that the statute was not intended to give a lien for the materials used in the construction of a railroad. We are satisfied that the court correctly interpreted our statute, so far as concerns materials furnished to become an integral and permanent part of the railway system, and that the property upon which the mechanics’ liens are claimed in the instant case is as much outside of the statute as the rails in the case referred to. Phœnix Iron-Works Co. v. Trust Co., 28 C. C. A. 76 (83 Fed. 757), and cases cited; Detroit United Ry. v. State Tax Com’rs, 136 Mich. 96.”
(a) Laboring and material men doing work for or furnishing material to railroad companies, such as those above named, are protected under Act No. 100, Pub. Acts 1871 (2 Comp. Laws 1929, §§ 11394 to 11396 inclusive), and not under the mechanics’ lien law.
(b) Those who furnish labor and material to street railways are protected by Act No. 110, Pub. Acts 1899 (2 Comp. Laws 1929, § 11397), and not under the mechanics’lien law.
(c) The enforcement of claims against municipal corporations,-townships, cities, and villages is governed by 3 Comp. Laws 1929, § 14690.
It is claimed, so far as the property of the Pere Marquette Railroad Company, the Pennsylvania, Ohio & Detroit Railroad Company, and the city of Detroit, department of street railways, are involved, the Ford Motor Company had no title. Its rights are said to amount only to a license.
“A license is a permission to do some act or series of acts on the land of the licensor without having any permanent interest in it. 3 Kent’s Commentaries, p. 452; Cook v. Stearns, 11 Mass. 533, 538; Woodbury v. Parshley, 7 N. H. 237 (26 Am. Dec. 739); Prince v. Case, 10 Conn. 375 (27 Am. Dec. 675); Wolfe v. Frost, 4 Sandf. Ch. (N. Y.) 72, 91. It is founded on personal confidence, and therefore not assignable. 3 Kent’s Commentaries, p. 452; Brown on Stat. of Frauds (3d Ed.), § 22. It may be given in writing or by parol; it may be with or without consideration; but in either case it is subject to revocation, though constituting a protection to the party acting under it until the revocation takes place. Where nothing beyond a mere license is contemplated, and no interest in the land is proposed to be created, the statute of frauds has no application, and the observance of no formality is important. But there may also be a license where the understanding of the parties has in view a privilege of a less precarious nature. Where something beyond a mere temporary use of the land is promised; where the promise apparently is not founded on personal confidence, but has reference to the ownership and occupancy of other lands, and is made to facilitate the use of those lands in'a particular manner and for an indefinite period, and where the right to revoke at any time would be inconsistent with the evident purpose of the permission; wherever, in short, the purpose has been to give an interest in the land, there.may be a license but there will also be something more than a license, if the proper formalities for the conveyance of the proposed interest have been observed. "What that interest shall be called in the law may depend upon the character of the possession, occupancy or use, the promisee is to have, the time it is to continue, and perhaps upon the mode in which the compensation, if any, is to be made therefor. It may be an easement or it may be a leasehold interest; or if the proper grant or demise has not been executed for the creation of either of these, the permission to make use of the land may still constitute a protection to the party relying upon it, until withdrawn.” Morrill v. Mackman, 24 Mich. 279 (9 Am. Rep. 124).
If the Ford Motor Company is a bare licensee, the property of the railroad companies and the city of Detroit, department of street railways, would not for that reason be lienable. Griffith v. Happersberger, 86 Cal. 605 (25 Pac. 137, 487); Boise Payette Lbr. Co. v. Bickel, 42 Idaho, 245 (245 Pac. 92, 45 A. L. R. 575); W. H. Athinson Co. v. John Shields Construction Co., 76 N. J. Law, 751 (72 Atl. 81).
What interest in real estate must the Ford Motor Company have to sustain a lien by plaintiff and the other lien claimants herein? Such interest has been defined as,
“Any interest in land which could be sold under execution.” McGreary v. Osborne, 9 Cal. 119.
“Any interest which the party could pass by mortgage.” Montandon & Co. v. Deas, 14 Ala. 33 (48 Am, Dec. 84).
“Any interests in land which is legally subject to mortgage.” Tyler v. Birmingham Realty Co., 207 Ala. 210 (92 South. 264).
In short, any interest which the owner, part owner, or lessee may have, “provided such interest is such that it can be assigned, transferred, mortgaged or sold under execution.” 40 C. J. p. 62.
The right of the Ford Motor Company to construct this grade separation amounted to more thaja a license. It was in the nature of an easement.
“An easement is a right which one proprietor has to 'some profit, benefit or lawful use, out of, or over, the estate of another proprietor. * * * It does not displace the general possession by the owner of the land, but the person entitled to the easement has a qualified possession only, so far as may be needful for its enjoyment.” Morrill v. Mackman, supra.
• “An easement is a liberty, privilege, or advantage without profit, which the owner of one parcel of land may have in the lands of another; or to state it from the opposite point of view, it is a service which one estate owes to another, or a right or privilege in one man’s estate for the advantage or convenience of the owner of another estate.” 19 C. J. p. 862.
Its right is to occupy and use as a private way the tunnel or underpass constituting the Eagle avenue grade separation as a means for travel and transportation by those coming to or going from its plant. Such right was granted by the railroad companies and the city of Detroit to the Ford Motor Company for the benefit of particular land and for a specific purpose. Its use is limited to such land; Wood v. Woodley, 160 N. C. 17 (75 S. E. 719, 41 L. R. A. [N. S.] 1107), and to the purposes of the grant. Gale on Easements (10th Ed.), pp. 330, 347.
A thing is appurtenant to something else when it stands in the relation of an incident to a principal and is necessarily connected with the use and enjoyment of the latter. Humphreys v. McKissock, 140 U. S. 304, 313 (11 Sup. Ct. 779).
This grade separation or underpass constitutes an incident to and a part of the right of way granted to the Ford Motor Company under the tracks and across the lands of the railroad companies and the city of Detroit. Its construction and maintenance was one of the conditions of the grant of such right of way which would be valueless except in connection with its use by employees of the Ford Motor Company and others having occasion to go to and from its plants. This right of way or easement is appurtenant to the property of the Ford Motor Company, which was bound to construct, improve, and maintain it, but nevertheless it constitutes an incorporeal right attached- to and belonging with the real property of the Ford Motor Company. It is annexed thereto, and though it might pass as an incident to it, it is a species of servitude incapable of existence separate and apart from the particular land to which it is annexed. 2 Bouvier’s Institutes, note 1600; 3 Kent’s Commentaries (14th Ed.), p. 419; Lamb v. Railroad Co., 150 Mich. 340; Cadwalader v. Bailey, 17 R. I. 495 (23 Atl. 20, 14 L. R. A. 300); 19 C. J. p. 865. Such right of way and the incidents thereto may not be conveyed by the Ford Motor Company separate from the land to which it is appurtenant, but may only be conveyed by it in connection with such land. It cannot exist separate from it and cannot be converted into an easement in gross. Wood v. Woodley, supra: Jones on Ease ments, § 28. Being an appurtenant easement, it is incapable of existence separate and apart from the particular land to which it is annexed. Cadwalader v. Bailey, supra; Reise v. Enos, 76 Wis. 634 (45 N. W. 414, 8 L. R. A. 617); Houston v. Zahm, 44 Ore. 610 (76 Pac. 641, 65 L. R. A. 799); Wooldridge v. Smith, 243 Mo. 190 (147 S. W. 1019, 40 L. R. A. [N. S.] 752); Jarvis v. Seele Milling Co., 173 Ill. 192 (50 N. E. 1044, 64 Am. St. Rep. 107); Wood v. Woodley, supra; Mahler v. Brumder, 92 Wis. 477 (66 N. W. 502, 31 L. R. A. 695); Jones on Easements, § 28; 3 Kent’s Commentaries (14th Ed.), p. 419; 9 R. C. L. pp. 737, 802; 19 C. J. p. 865.
Neither the land of the railroad companies, the city of Detroit, nor the easement granted by them to the Ford Motor Company, is subject to a lien. There are no contractual relations between the railroad companies and the city of Detroit and the principal contractor, or between them and the lien claimants. The grade separation itself was constructed as an incident to and for the security and protection of an easement appurtenant to the property of the Ford Motor Company which cannot be sold, mortgaged, assigned, transferred, or conveyed separate and distinct from the dominant estate to which it is attached. Upon sale or conveyance it would cease to exist.
The claims of the lien claimants must follow the contract. The real estate upon which the lien is here claimed belongs to distinct owners. These several owners did not enter into any contract which may be made the basis of a lien. The only contract entered into is that of the Ford Motor Company: The Ford Motor Company is primarily a private corporation engaged in the manufacturing business. Its entire property is subject to levy and sale under execution. It entered into no contract with plaintiff or with the other lien claimants. Their contracts were primarily entered into with Blair. Such lien claimants as materialmen seek advantage of the mechanics’ lien law, claiming a lien upon the Eagle avenue grade separation. It is this property upon which the lien claimants seek to fasten liens and sell to satisfy their claims from the proceeds of sale.
The Eagle avenue grade separation, although constructed by the Ford Motor Company, is devoted to a quasi-public use. Its purpose is to facilitate the speed and safety of the city street cars of the city of Detroit and of persons going to and from the Ford Motor Company’s plants. Its uses are quasi-public in character. To use this grade separation it must be kept intact. The safety of operation of the several railroads, intrastate and interstate carriers, must be safeguarded. To tear apart this grade separation and divide its constituent parts among the contesting lien claimants would destroy and defeat the purposes of its creation, render it unable to perform its intended functions, and increase the danger of travel of those who use it, and subject them to greater hazards of life and limb. Yet, if the lien claimants have liens to establish and enforce, they must be permitted to do so.
Under our statute, liens attach not only to the buildings erected but to the interest of the party erecting them, the owner, part-owner, or lessee, in the real estate. If the person contracting for the erection of the building has no legal title to the land, the lien attaches to the structure erected. The court may order the sale of the land and buildings together, or the buildings separately, if severable from the land. Carland v. United Engineering Co., 209 Mich. 244.
It is a general rule that buildings erected on the lands of another under leave or license so to do, in furtherance of the purposes of the permissive use and occupation, remain personal property and may be removed by the lessee or licensee at any time during his occupancy, or, if such occupancy or right of occupancy terminate on a contingency, within a reasonable time thereafter. Kerr v. Kingsbury, 39 Mich. 150 (33 Am. Rep. 362); Osborn v. Potter, 101 Mich. 300; VanNess v. Pacard, 2 Peters (U. S.), 137; Martin v. Roe, 7 El. & Bl. 237 (119 Eng. Rep. Repr. 1235); Northern Central R. Co. v. Canton Co., 30 Md. 347; Antoni v. Belknap, 102 Mass. 193; 2 Taylor, Landlord and Tenant (9th Ed.), § 552. It is in recognition of this principle that, under our statute, buildings may be sold separately from the land in case a lien is established thereon.
A part of the Eagle avenue grade separation was built by the Ford Motor Company upon its own land. Is this land and this part of the grade separation subject to the lien claimed?
There was a single contract entered into with the Ford Motor Company for the construction of the grade separation, which must be considered as one piece of work, and if liens exist in favor of the lien claimants, they must be against the entire structure.
In Detroit International Bridge Co. v. American Seed Co., 249 Mich. 289, it is said:
“The bridge and its approaches form one structure. As such, it constitutes a union of highways of Michigan and of Ontario and converts them into one uninterrupted public road.”
The Eagle avenue grade separation must be regarded as one structure. It constitutes a union of Mulkey avenue and Miller road. It was constructed primarily for the use of the Ford Motor Company and its employees, but the use to which it is put is substantially the same as if it had been constructed by public authority.
In Orear v. Dierks Lumber Co., 188 Mo. App. 729 (176 S. W. 467), an action in equity was brought to restrain defendant from removing the west 40 feet of a three-story brick business building 120 feet in length in Kansas City. The question was whether or not this building was severable. It is said:
“While the law is that where a building is erected on land not owned by the builder and a judgment is obtained and execution had enforcing a mechanic’s lien against the building, it may be removed from the ground within a reasonable time. Ambrose Manfg. Co. v. Gapen, 22 Mo. App. 397; Deatherage v. Sheidley, 50 Mo. App. 490. But this, as intimated in those cases, cannot be done when it would destroy an entire structure of which it has been made a part. O’Brien v. Pettis & Leithe, 42 Iowa, 293, wherein it is said, ‘The defendants’ right depends upon the fact as to whether the building upon which these materials were furnished and work done is so far an independent structure as to be capable of being removed without materially injuring or destroying that which would remain, or whether it is so united with that which was before upon the lot, as to constitute substantially the one building or structure.’ ”
A mechanic’s lien cannot be enforced against a part of an entire building. Leidel v. Bloeser, 77 Mo. App. 172; Wright v. Cowie, 5 Wash. 341 (31 Pac. 878); O’Brien v. Pettis & Leithe, 42 Iowa, 293.
Liens in the abstract are nonexisting. A lien that is unenforceable is a nullity. The right to enforce a lien by sale of the property to which it attaches is its essential characteristic. “The lien abstractly is nothing, its consequences and results are everything.” Vulcanite Paving Co., v. Philadelphia Rapid Transit Co., 220 Pa. 603 (69 Atl. 1117, 17 L. R. A. [N. S.] 884).
See, also, Vulcanite Portland Cement Co. v. Allison, 220 Pa. 382 (69 Atl. 855).
There are limitations on the right to a lien.
(a) The mechanics’ lien law does not by its terms extend to claims against the property of railroad companies, street railway companies, or municipalities.
(b) A lien may attach only to interests in real estate capable of alienation as separate and distinct entities.
(c) The right of way granted to the Ford Motor Company by the several railroad companies and by the city of Detroit was a grant upon conditions of an easement.
(d) These conditions of the grant were complied with, the grade separation constructed, and the easement is now appurtenant to the land of the Ford Motor Company.
(e) This easement is not lienable because not capable of mortgage, sale, or alienation separate and distinct from the land to which it is appurtenant. Attached, it is a valuable appurtenance; detached, it ceases to exist.
(f) The grade separation is one structure, incapable of division without destroying it and thwart-' ing the purposes of its creation and existence.
(g) As such structural unit this grade separation may not be disintegrated, and its constituent ele ments separately sold, because not severable from the easement. .
It follows that none of the property herein involved is lienable. Decree-reversed, and the bill and cross-bills dismissed, with costs.
Clark, McDonald, Sharpe, North, and Fead, JJ:, concurred with Potter, J. Wiest, J., concurred in the result. Butzel, C. J., did not sit. | [
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] |
Wiest, J.
The bill herein was filed to foreclose a land contract. Defendant, by answer, set up that the grantor did not have a marketable title because of an easement for a drain granted the county of Oakland in 1876, and, by cross-bill, asked rescission for that reason and because of an alleged slight shortage of land and the refusal of plaintiff to release lots. There was also the claim by defendant that the lots were described as “in Beech Hill Park subdivision,” and there is no such subdivision. In fact the lots are in “Beech Hill subdivision,” and the circuit judge considered the word “park” surplusage, “because the quarter sections, township and county were named and there would be no difficulty in locating the premises.” With this holding we agree.
The circuit judge also held:
‘ ‘ The claim as to the discrepancy in measurements is rather indefinite and uncertain; the surveyor didn’t find any alignments from which he made his measurements, but took fence lines and there was no testimony as to how long the fences had been recognized as lines between the properties.”
The alleged shortage was about seven and onelialf inches on the west side of certain lots in the subdivision.
The contract contained the following release clause:
“Any residence lot in said subdivision to be released upon the additional payment of one and one half times the pro rata proportion that the lots bear to the balance due upon said lots and two times the pro rata proportion for lots on Maple Road when said deeds are called for.”
Defendant admits default in payments as well as taxes, but asks for release of lots because of payments made under the contract. Such payments were not “additional” payments commanding release of lots. The decree, dismissing the cross-bill and denying relief to defendant, is affirmed.
The circuit judge stated:
‘ ‘ The plaintiff is attempting to foreclose her land contracts and should be in a position to tender defendant a deed carrying marketable title in accordance with the contracts signed by the parties. It is admitted that she is unable to do that at this time.
“No claim was ever made by the defendant of any discrepancies in description or any fault found in .the title until after suit to foreclose the contracts was started. However, that does not relieve plaintiff from the necessity of being in a position to deliver deeds showing marketable title and before she can attain a position to foreclose the contracts she must be in such a position.”
' For that reason plaintiff’s bill was dismissed without prejudice.
The easement was granted by deed, executed July 14, 1876, and released and conveyed to the county of Oakland “the right of way and the necessary lands for the construction of the said watercourse, ditch or drain and for no other purpose whatever across and over the lands of the which they have control.” This easement touched but a slight part of the subdivision. No ditch or drain was ever constructed under the easement and the proposed drainage was provided elsewhere. For 54 years this easement has been dormant and renounced by the county in the establishment of the drainage elsewhere. Such an easement as this can be extinguished by abandonment of purpose or by renunciation showing that other means employed serve the purpose.
It is settled law that:
“A grant of an easement for particular purposes having been made, the right thereto terminates as-soon as the purposes for which granted cease to exist or are abandoned or are impossible.” Chicago & N. W. Ry. Co. v. Sioux City Stockyards Co., 176 Iowa, 659 (158 N. W. 769).
The grant was of an easement for drainage purposes only, and when the contemplated purpose was abandoned by establishment of the drain elsewhere the right of way ceased and the easement was hut a cloud. Upon this subject see California & N. R. Co. v. Mecartney, 101 Cal. 616 (38 Pac. 448); Bangs v. Potter, 135 Mass. 215; Batchelder v. State Capital Bank, 66 N. H. 386 (22 Atl. 592).
While such is the rule, it does not save plaintiff’s' case, but does prevent rescission by defendant. This suit is to foreclose and not to remove a cloud on the title. The county of Oakland is not a party to this suit, and is entitled to a day in court. The mere record of the outstanding easement is sufficient to command assurance to defendant against the contingencies of a law suit. Platt v. Newman, 71 Mich. 112. The easement is undoubtedly moribund, and, under the evidence, constitutes no justification for’rescission by defendant, but does require plaintiff, before exacting performance by defendant, to be in a position to tender a marketable title. The plaintiff can remove the cloud, now of record, and file a new bill to foreclose.
The decree in the circuit is affirmed. Both parties having appealed, without avail, neither can have ■ costs.
Butzel, C. J., and Clark, McDonald, Potter, Sharpe, North, and Fead, JJ., concurred. | [
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North, J.
Defendants have appealed from a decree granting plaintiffs relief prayed in a controversy arising out of the following facts and circumstances : On and prior to November 29, 1921, plaintiffs were the holders of a vendee interest in farm property located in Macomb county. On that date and in consideration of a loan, plaintiffs gave their promissory note to defendants for $2,900 payable one year from date. On March 31, 1922, plaintiffs gave defendants another note for $490, payable in eight months. Payment was secured by the assignment to defendants of plaintiffs’ vendee interest in the farm property. Neither of these obligations was paid. On December 12, 1922, in an effort to adjust their matters, the parties met in an attorney’s office in Mt. Clemens. This litigation arises out of their disagreement as to the nature of the transaction then and there consummated. It is defendants’ claim that plaintiffs desired to dispose of their interest in the farm property and to pay their indebtedness to defendants; that an agreement was reached whereby plaintiffs made another assignment of their vendee interest in the farm property to defendants and also gave defendants a bill of sale of the personal property on the farm in consideration of defendants canceling plaintiffs ’ indebtedness and for the further consideration of $1,000, $200 of which was paid by defendants to plaintiffs in cash and payment of the remaining $800 was secured by a chattel mortgage on the farm stock and equipment. Defendants assert that consummation of this transaction in this manner vested them with the absolute ownership of the vendees’ interest in the land contract and of the personal property subject to plaintiffs’ chattel mortgage.
On the other hand plaintiffs assert the arrangement above outlined, in connection with which possession of the property was delivered to defendants, was consummated only as a means to further secure payment of plaintiffs’ indebtedness to defendants, and it was understood between the parties at the time that upon payment of plaintiffs’ indebtedness their property would be restored to themi Plaintiffs assert that they were unskilled in business matters, that they were without funds, and were induced to make this arrangement because of defendants’ threat to institute an attachment proceeding and to take plaintiffs’ property from them. As noted above, the trial court accepted plaintiffs’ construe tion and construed the transaction of December 12, 1922, as resulting in an “equitable” mortgage covering plaintiffs’ property and securing payment of their indebtedness to defendants, and decreed the amount of such indebtedness to be $10,309.89. This included payments made on the contract by defendants, taxes, etc. Payment was ordered and in case of nonpayment right of sale on foreclosure was decreed to defendants.
A thorough consideration of the record has forced us to accept defendants’ contention. There- is a sharp conflict in the testimony on this phase of the case, but with the exception of some rather limited testimony of admissions against interest claimed to have been made by the defendants, the testimony of the plaintiff Roslowski, which is conflicting in itself, stands practically uncorroborated. In support of the contrary claim of the defendants, the following facts appearing from the record may be noted:
(a) The assignment of plaintiffs’ vendee interest, hereinafter quoted, is an unconditional assignment.
(b) The bill of sale of the personal property on the farm from plaintiffs to defendants is also absolute and unconditional.
(c) To secure the payment of the balance of $800 due to plaintiffs from defendants incident to this transaction, the latter took a note for one year bearing six per cent, interest from defendants, payment being secured by a chattel mortgage covering personal property on the farm.
(d) Immediately after this $800 note fell due, plaintiffs instituted proceedings to foreclose the chattel mortgage.
(e) Immediately after the transaction of December 12, 1922, plaintiffs delivered possession of the farm and the personal property to defendants who have continued in such possession. Some of plaintiffs’ personal property was not wholly paid for when turned over to defendants, but the latter seem to have taken the property subject to the indebtedness and subsequently paid the same. .
(f) Defendants have made all payments on the land contract since the assignment and also all taxes on the property. Prior to the transaction of December 12th, defendants had been given an assignment of plaintiffs’ vendee interest in the land contract to secure payment of previous loans from defendants to plaintiffs. This unquestionably was a conditional assignment. It was destroyed by the attorney at the time of the transaction of December 12th. This attorney represented both parties, and it is difficult to understand why he would destroy the former assignment of plaintiffs’ vendee interest and prepare a second one unless the second assignment was of a different character and for a different purpose.
(g) It is also difficult to understand why the attorney, if the transaction was of the character asserted by the plaintiffs, made no mention of that fact 'in any of the instruments executed by the parties, nor did he prepare and have executed for plaintiffs’ protection an instrument signed by defendants setting forth plaintiffs’ right (if such there was) to reconveyance or reassignment of the property upon payment of certain sums or certain items to defendants.
(h) Defendants have not only kept up payments on the contract and also taxes; but in the meantime (and apparently with plaintiffs’ knowledge) have made permanent improvements upon the property among which was the bringing under cultivation of about 30 acres of farm land which theretofore was unproductive.
(i) At the time of this transaction plaintiffs had first attempted to secure for their interest the payment of $2,000 by defendants. There was consider able negotiation between the parties, plaintiffs reducing the offer to $1,500, $1,300, then $1,200 and finally to $1,000, which was accepted by defendants. This $1,000, together with the indebtedness against the property, seems to have been a fair consideration therefor. But local improvements together with a general rise in property values resulted in a rapid increase in the value of this property during the years 1923 and 1924.' Plaintiffs ’ bill was not filed until May 27, 1925, notwithstanding they had been aware that defendants claimed to be the absolute owners of this property since some time in 1923.
We forego noting other like aspects of the record. The testimony of Mr. and Mrs. Sztaba that the property was unconditionally sold to- them is not only corroborated by that of their son Anthony, but also by that of Frank Mackowiecki and Frank G-odyana, who were disinterested witnesses. The attorney who represented all the parties in the transaction of December 12, 1922, testified that he had no recollection of the details beyond those in the papers prepared at the time. From the agreement of December 12, 1922, executed by both plaintiffs and de.fendants, we quote the following:
“And the said second parties desiring to pay up the indebtedness evidenced by the notes above mentioned, have this day assigned all of their right, title and interest in and to the property above described and to the land contract above stated, together with the advantages to be derived therefrom. And the said second parties have this day given to the said first parties a bill of sale of all stock, tools, farm implements, and produce, all crops planted and growing, all the goods and chattels now on the farm premises in said township of Sterling, Macomb county, Michigan, for the sum of $1,000, payable as follows: $200 on this date, receipt of which is hereby acknowledged and the balance, of $800 payable one year from date with interest at 6 per cent, per annum, according to the terms of a certain promissory note bearing even date herewith and secured by a chattel mortgage on all of the stock hereby bargained and sold to the said first parties by the bill of sale as above stated. ’ ’
There can be no particular advantage in reducing transactions to written agreements if on slight pretext and with uncertain showing the terms of such written instruments are to be wholly disregarded by the parties and set aside by courts. For the reasons above indicated, we find that plaintiffs are not entitled to the.relief prayed. A decree may be taken dismissing the bill of complaint, with costs of both courts.
Butzel, C. J., and Wiest, Clark, McDonald, Potter, Sharpe, and Fead, JJ., concurred. | [
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Sharpe, J.
These cases were tried together and have been so submitted in this court. At the conclusion of plaintiffs’ proofs, the defendant receiver moved for a directed verdict, and, on the trial court announcing that he felt compelled to grant such motion, the plaintiffs asked, and were permitted, to withdraw a juror, and the cases were continued as to the defendant Yeip. Plaintiffs review the judgments entered on the directed verdicts by appeal.
There is little dispute about the facts, but they must be considered in the light most favorable to plaintiffs. About 9 o’clock at night on September 4, 1926, the plaintiffs were riding in an automobile towards the east on Grand River avenue a few miles west of Farmington. The night was dark and rainy, and there were no lights on the highway except those on the cars passing thereon. William Yoght and his wife were riding in a car about 25 feet in the rear of plaintiffs’ car, and a “Blue Goose” bus of the Peoples Motor Coach Company or Detroit United Railway had been following the Yoght car for a considerable distance. These cars were traveling at a speed of about 25 miles per hour. The paving was about 18 or 20 feet in width, and the shoulders quite narrow. The bus turned to the left and drove up alongside of the Yoght car. At this time a car approached from the east, driven by the defendant Yeip, and traveling at about 27 miles per hour. Yeip testified:
“When I was just about three car lengths in front of the Braendle car all at once the Blue Goose bus sort of came down the left-hand side and I slammed on the brakes and my car made a complete circle. My car swung around to the right, completely around. That threw me right over on the left-hand side of the road in the path of Dr. Braendle’s car. I was approximately three car lengths distance from Dr. Braendle’s car when my car began to swerve. There wasn’t any room there for Dr. Braendle’s car to avoid my car as it swung around. He didn’t have a chance.
“My car got hit on the right-hand side at the door by the left-hand front corner of Dr. Braendle’s car. There was a fellow riding with me.
“When the two cars came together I saw Dr. Braendle come half through the windshield and Mrs. Braendle went out head first on the pavement right in between the two cars, that is my car and their car. Both cars stopped. I saw the Yoght car turn out to the right and go to the ditch.
“When everything had come to a stop I noticed the passenger bus had come practically to a stop right abreast of the Braendle’s. The front of the bus was parallel or even with the front of the Braendle car but it wasn’t completely stopped there, though.”
As a result of the collision, the plaintiffs were injured, and these actions were brought to recover the damages incident thereto.
The question presented on the motion to direct a verdict was whether, under the circumstances, it was negligence on the part of the driver of the bus to turn to the left and attempt to pass the Yoght car, and, if so, whether such negligence was the proximate cause of thé collision and the injuries to the plaintiffs resulting therefrom.
Had the driver of the bus been watchful, as it was his duty to be, in view of the darkness and the condition of the pavement at the time, due to the rain which was falling, he would necessarily have seen the approach of the car driven by Yeip when he turned out to pass the Voght car. By doing so he occupied that part of the pavement which Yeip would necessarily travel on in passing the three cars. He could not have planned on taking a position behind the Braendle car as the distance between it and the Voght car was only about 25 feet. These facts being considered, the jury might well have found that the driver was guilty of negligence in turning his bus to the left at the time he did. .
In our opinion they might also have found that his negligence in this respect was the proximate cause of the collision. Tozer v. Railroad Co., 195 Mich. 662, 666; Jaworski v. Detroit Edison Co., 210 Mich. 317, 320; Butrick v. Snyder, 236 Mich. 300, 308.
When Yeip saw the bus approaching on the same side of the road on which he was traveling, and when he was but a short distance from the Braendle car, he testified that he applied his brakes, and, due to the slippery condition of the pavement, his car skidded and turned around and in the path of the Braendle car. The driver of the bus could but have expected that Yeip would make an effort to stop his car to avoid a collision with the bus, and the jury might have found that by the exercise of reasonable foresight he should have known that, if Yeip did so, his car was likely to skid and collide with the Braendle car.
The action of the trial court was doubtless based on the testimony of Gordon George Braendle, who stated that Yeip, when about two car lengths from the car he was driving, suddenly swerved to the left and came in collision with his car. But, as before stated, the testimony must he viewed in the light most favorable to plaintiffs, and, when so considered, presented issues of fact as to the negligence of the driver of the bus and as to such negligence being the proximate cause of the injuries plaintiffs received.
The judgments are reversed, with costs to plaintiffs, and new trials granted.
Butzel, C. J., and Wiest, Clark, McDonald, Potter, North, and Fead, JJ., concurred. | [
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Fead, J.
This is a bill by plaintiff, as vendee, for rescission of a land contract, and cross-bill by defendants for its reformation.
The contract described the premises as:
“Lots Nos. 235, 222, 228, 243, 234, Pennsylvania Park Subdivision of part of the N. W. ¼ of section 6, T. 4 S., R. 11 E., village of Riverview, Monguagon township, Wayne county, Mich.”
The description is correct except that the recorded name of the subdivision is “Clarence W. Carkeek’s Pennsylvania Park Subdivision.” There was no question of the identity of the property. With the name of the subdivision corrected, the contract would describe the property defendants intended to sell and plaintiff intended to buy. The mistake was a mutual clerical error. The court properly reformed the contract to correct the description.
After the contract was made, defendants deeded one of the lots to a third person. The conditions were not shown. When plaintiff discovered it he made no further payments, but did not attempt rescission. Defendants brought suit in justice’s court for recovery of installments due, had reacquired title, offered there to hand the deed to plaintiff, and had title when this suit was commenced. Plaintiff made no case for rescission.
Defendants had decree for reformation and also for a sum due on the contract, although the cross-bill did not pray for a money judgment. The contract showed the payments made and there is no claim that the amount decreed is not correct. The cross-bill will be considered as amended to support the decree, and it is affirmed, with costs.
Butzel, C. J., and Wiest, Clark, McDonald, Potter, Sharpe, and North, JJ., concurred. | [
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] |
McDonald, J.
This suit was brought to recover damages for injuries received in an automobile collision which occurred on the highway, US-16, near Webberville, Michigan. The plaintiff was a minor at the time of the accident. He was a student at the College of the City of Detroit and a member of a debating team which was in charge of Preston H. Scott, professor of dramatics and public speaking. On March 14, 1928, Professor Scott took the team in his automobile to Lansing, where they were engaged to debate with a team of the Michigan State College. On the way back to Detroit,' Professor Scott was driving. The plaintiff sat in the front seat beside him. The defendant’s truck was coming toward them from the east. The plaintiff claims that, as the vehicles neared each other, the truck suddenly swerved to the left directly in the path of the car in which he was riding. A collision followed, in which the plaintiff was seriously and permanently injured.
It is the defendant’s claim that, as the automobile in which the plaintiff was riding approached, it was weaving back and forth over the center line of the road, and, just as it neared the truck, suddenly made a sharp turn to the left over to the north side and into the path of the truck.
These issues were submitted to the jury in a proper charge and the plaintiff received a verdict of $35,000. A motion for a new trial was refused. Judgment was entered on the verdict and the defendant has brought error.
The case has been tried twice. In the first trial, the plaintiff recovered a verdict of $5,000. On motion, the court set the verdict aside on the ground that it was grossly inadequate'. This is the second trial.
The defendant claims error:
1. In setting aside the verdict of $5,000 in the first trial.
2. In admitting testimony showing that the defendant was insured.
3. In denying defendant’s motion for a new trial on the ground that the verdict was excessive.
1. Did the court err in setting aside the verdict in the first trial?
On entering the order in the first trial, the defendant applied to the Supreme Court for a writ of maiidamus to compel the circuit judge to set it aside. An order to show cause was denied. In reviewing the subsequent verdict and judgment, the defendant has assigned error on the order of the circuit judge in the previous trial. If in the circumstances it may be 'assumed the question is properly in this case for review, we must hold it to be entirely without merit. The granting of a new trial rests in the judicial discretion of the trial court. If in view of the evidence it appears that the verdict is inadequate, he may set it aside on his own motion or on motion of a party.
“The trial court has discretionary power in a personal injury case to set aside the verdict rendered, and order a new trial, of its own motion, if it deems the award insufficient.” Fort Wayne & Belle Isle R. Co. v. Wayne Circuit Judge, 110 Mich. 173 (syllabus).
In the instant case, considering the very serious injuries which the plaintiff sustained, the verdict of $5,000 was insufficient. The trial court rightly exercised his discretion in setting it aside and granting a new trial.
2. Was it error to admit testimony tending to show that defendant carried insurance?
This testimony was not admitted. It just came in without suggestion of counsel and without opportunity by the court to reject it. Ernest A. Sinclair was sworn and examined in behalf of the defendant. He had not been a witness on the previous trial, and, on cross-examination, plaintiff’s counsel sought to find out why. The witness said they wanted him to come before, but he was working and could not come.
“Q. Who wanted you to come down before?
“A.- I can’t recall the lawyer’s name.
“Q. Mr. Mason or Mr. Frost or Mr. Davison or Mr. Alexander?
“A. Some of the insurance lawyers. * * *
“Mr. Mason: If the court please, what has this developed about insurance lawyers?
“Mr. Nelson: He did it; I didn’t know what it was.”
The question asked by counsel was proper cross-examination. It did not suggest insurance, and counsel was not to blame that the witness answered in that way. Experience in the trial of these cases shows that the question of insurance very frequently gets before the jury in spite of court and counsel. While always it should be excluded, the present day decisions are against holding it to be reversible error unless it is deliberately injected into the case and improperly used by counsel. In Morris v. Montgomery, 229 Mich. 509, this court said:
“The time has come when probably a majority of persons on every jury own automobiles and the policy of carrying insurance is so common that it is not surprising if jurors sense the fact. The rule of exclusion, perhaps, ought to continue, even though every day affairs have moved beyond its original reason, but it ought not to be employed to set aside judgments except in cases of flagrant violation.”
And in Sutzer v. Allen, 236 Mich. 1, it was said:
“It has now become common knowledge that people owning automobiles have them insured, and because that fact in a particular case reaches the ears of the jury during the trial, it is no longer reversible error unless an improper use is made of it by counse] for the evident purpose of inflaming the passions of the jury and thereby increasing the size of the verdict.”
Nothing of that kind happened in the instant case. The matter of insurance was not again referred to during the trial except when the court charged the jury that they must disregard it entirely. This court will assume that they followed his instructions. Its presence in the case does not constitute reversible error.
3. Did the court err in refusing a motion for a new trial on the ground that the verdict was excessive?
This assignment is not here for review. No reasons were filed by the court for overruling the motion. None were requested. Time and again we have held that, to save this point for review, reasons must be filed. In Groat v. Railway, 153 Mich. 165, 169, we said:
“A motion for a new trial was made, which included as one of the reasons why the verdict should be set aside, that it was excessive. No request was made of the trial court to file reasons for overruling the motion, and none were given. This court has repeatedly held that it cannot in such case consider error assigned upon such refusal. ’ ’
See Moerman v. Clark-Rutka-Weaver Co., 145 Mich. 540; Campbell v. Haughton Elevator & Machine Co., 233 Mich. 157.
No other questions merit discussion. The judgment is affirmed, with costs to the plaintiff.
Butzel, C. J., and Potter, Sharpe, North, and Fead, JJ., concurred with McDonald, J. | [
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Sharpe, J.
On April 7, 1925, Dennis J. Crowley, one of the plaintiffs, secured an option from the owners to purchase a tract of land in the township of Northville, in Wayne county, consisting of 88 acres, at the price of $800 per acre. At his request, the plaintiffs Earl R. Frost and Karl L. Ernst and the defendant, McCullough, joined with him in the organization of a syndicate, to be called the Clark Farm Syndicate, for the purpose of purchasing said land and selling the same. A written agreement °so providing was prepared and signed by the parties on August 31, 1925. Crowley was designated the manager thereof, and the others agreed to pay to him such portion of the sums set opposite their respective signatures as he should call for from time to time. Opposite the name of Crowley appears the sum of $16,971.43; of Frost, $28,285.71; of Ernst, $5,657.15, and of McCullough, $28,285.71, in all the sum of $79,200.
On August 31, 1925, contracts of purchase and sale were entered into between the owners of the land and Crowley individually, the purchase price being stated therein to be $70,400, or $800 per acre. These contracts were duly executed and acknowledged.
The defendant paid all sums requested by Crowley until February 28,1929, when a payment of $1,974.33 was said to be due. Another payment of $1,827.14 was demanded on August 31, 1929. The defendant declined to make these payments, and this action was brought for their recovery. The members of the syndicate, except the defendant, are made the plaintiffs, although the declaration alleges that Ernst had sold his interest therein to John H. Friedman, who is also a plaintiff.
The defense rested upon the claim of the defendant that Crowley fraudulently represented to the defendant that the price to be paid for the land was $900 an acre, whereas in fact it was purchased by him for $800 per acre.
Trial was had before the court without a jury. The trial judge filed an opinion, in which he dis: cussed at length the evidence, and found that the defendant had sustained the burden of proof upon his claim above stated, and entered a judgment of no cause of action on plaintiffs’ claim and a judgment in favor of the defendant for the amount paid by him to Crowley pursuant to the syndicate agreement.
Plaintiffs’ counsel in their brief say that the “issues involved” are:
“1. Was any fraud proven which would release the defendant from his liability under the syndicate agreement?
“2. Had the defendant rescinded the syndicate agreement so as to be entitled to a judgment for the money which he had put into the syndicate?
“3. Was the defendant’s right to rescind, if it ever existed, barred by his delay in asserting it?
“4. Did the court err in denying plaintiffs’ motion for a new trial?”
1. It will serve no useful purpose to set forth at length the evidence which supports the finding in this respect. The following facts, admitted or established by a preponderance of the evidence, may be noted:
(1) Crowley was here purchasing under land contract property of the value of $70,400, and, while the contracts were properly acknowledged, he did not place them upon record.
(2) Defendant sent his check to Crowley for $5,000 on July 13, 1925, to apply on the down payment on these contracts, and in the letter accompanying it he stated: “The purchase price being seventy-nine thousand two hundred ($79,200) dollars exactly.” This letter was written more than a month before the syndicate agreement was formally executed.
(3) Crowley testified that he personally mailed a letter to the defendant acknowledging receipt of this check and stating therein that he had purchased this land at $800 per acre and was turning it in to the syndicate at $900 per acre. He further testified that this letter had been prepared for him by an attorney, and that he had sent a similar one to the other members of the syndicate, but, although the defendant denied receiving it, neither the attorney nor any of the other members of the syndicate, all of whom are plaintiffs herein, was called to corroborate his testimony in this respect.
(4) Crowley prepared and sent to defendant several statements, each of which was headed: ‘ ‘ Statement of Clark Farm Syndicate,” followed by the words, ‘ ‘ Clark Farm, 88 acres at $900 per acre * * * $79,200,” and in which the payments made by the members of the syndicate were listed and the balance due was stated, followed by the amount re-' quired to be paid by defendant as his share of the payment then due.
(5) The second paragraph of the syndicate agreement provided:
“The object of the syndicate is to negotiate for and purchase the following described premises:”—
At the time it was entered into, Crowley had an option to purchase this land at $800 per acre. No negotiation was needed to secure it. If it was then understood that he had such option, and that he was to turn the land into the syndicate at $900 per acre, it could have been easily so stated, but, as it was written, the defendant had the right to assume that the syndicate was to pay the purchase price at which Crowley, after negotiation with the owners, was able to secure it.
There are other circumstances which tend to support the claim of the defendant that Crowley deceived him in representing that the price to be paid to the owners was $900 per acre, and justify the finding of the court that on the discovery of such fraud the defendant was not required to further perform the obligation he had assumed in the syndicate agreement.
2. Under this heading counsel urge that, before the defendant could recover the moneys he had paid to Crowley, he must have made a “tender back of that which has been received.” They rely upon the holding in Victor v. D. E. Meyer Co., 243 Mich. 673, in which it was said:
“Obviously, the plaintiffs cannot recover on the theory of rescission and surrender of the property purchased, because they have not restored to the vendor the thing purchased, nor have they kept good a tender of restoration. This is essential to rescission and recovery in an action at law.”
The contract of purchase was entered into by Crowley as an individual, and not as a trustee for the members of the syndicate. The only rights acquired by the defendant were under the syndicate ag'reement, and these could have been enforced only by a bill in equity. His refusal to make further payment, and his claim under the notice attached to his plea that he would seek recovery of the amounts paid by him clearly amounted to a repudiation of these rights. He had no copy of the syndicate agreement to surrender, nor anything in his possession to which the plaintiffs y/ure entitled, nor anything of value relating to the transaction to deliver to them. The rule stated in Duncombe v. Tromble, 219 Mich. 8, 11, is more clearly applicable:
“Whether plaintiffs so notified defendant (of a rescission), or not, under the circumstances here disclosed, does not defeat the action. The bringing of the suit within a few days after the payment of the money operated as notice to defendant of the refusal of the plaintiffs to go ahead with the deal under the new terms imposed and as a demand for the return of the money paid. The bringing of suit by plaintiffs to recover the consideration money paid was sufficient evidence of rescission on the part of plaintiffs.”
3. Crowley and the defendant had long been friends. While the defendant admits that he had heard talk about the club to which they both belonged that Crowley had made the purchase from the owners at $800 per acre, he was loath to believe it and made payments thereafter. He finally consulted an attorney, and became satisfied that he had been defrauded only after his attorney had made investigation which seemed to establish the fact. That he relied upon the integrity of Crowley rather than the talk lie heard about the club cannot be said to sustain the claim of laches.
4. The defendant testified that, after he had heard the talk in the club above referred to, he met Crowley in a restaurant, and that he then assured him that he was paying $900 an acre for the land. The motion for a new trial was based on affidavits of persons who claimed to be then present and who would, if called as witnesses, dispute the testimony of the defendant in that respect. In arriving at the conclusion we have reached, we have not considered this testimony, and we agree with the trial court that if these witnesses so testified on a new trial it would not warrant a change in the decision arrived at.
In view of the affirmance of the judgment, we do not find it necessary to pass upon the defendant’s motion to compel the trial court to set aside an order made by him extending the time to settle the bill of exceptions, decision on which had been reserved to this time.
The judgment is affirmed.
Butzel, C. J., and Wiest, Clark, McDonald, Potter, North, and Fead, JJ., concurred. | [
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Fead, J.
November 14,1928; F. M. Cray, Jr., Inc., contracted to drill an oil well for plaintiff, 1,700 or more feet deep, for $7,500 to $8,500, operations to begin within 10 days, and to be prosecuted diligently. Defendant executed a bond to plaintiff, conditioned on the Cray company performing the contract. The well was not completed, and plaintiff had judgment on the bond in the amount it had advanced the Cray company. The trial was before .the court without a jury. Defendant contends the findings were against the great weight of evidence and did not support the judgment, that plaintiff had breached the contract and thus released defendant from the bond.
In the course of the transaction, the Cray com-. panv was represented by Cray, Weinstein, Watkins and Milaeger, and the plaintiff by Klomparens and others.
From the beginning, performance of the contract varied from its precise terms. The down payment of $2,000 was seven days late. Two thousand dollars more was paid in December. Ordinarily the well could have been completed in about 30 days, but drilling was not commenced until January 2, 1929. The Cray company excused the delay in drilling by weather conditions and the difficulty of obtaining suitable machinery. Plaintiff claimed it was largely due to lack of supervision, and it became fearful the work would not be completed.
On January 7th, $1,750 became due. Cray said he wrote Klomparens, but the latter denied lmowledge that the sum was due until a few days later, when Watkins called on him. Drilling stopped January 11th. Defendant claimed it was because of nonpayment of the $1,750. Plaintiff’s witnesses said it was because of a break-down of machinery.
Later, Watkins called on plaintiff two or three times. What happened was in sharp dispute. Watkins said he merely demanded the money due. Plaintiff claimed Watkins urged abandonment of the well and offered to return some of the advances if the work were discontinued. On January 18th, Watkins put the matter in the hands of an attorney and again saw plaintiff’s officers. They said he insisted upon abandonment of the work, and that they offered to pay the sum due upon assurance that the well would-be completed. Gray was consulted by telephone. Plaintiff paid Watkins $1,000. Gray testified the payment was received upon the agreement that the well should be abandoned. Watkins said it was agreed that .the well should be abandoned but if the other $750 was paid on the following Monday, January 21st, he would recommence drilling. Plaintiff’s witnesses testified that the $1,000 was paid on the contract with the definite agreement that the drilling would be continued.
Later, whether on January 21st or 25th is in dispute but the court found the earlier date, plaintiff gave Gray’s attorney a certified check for $750, payable to the order of the Gray company. The attorney testified he telephoned th§ Gray office and Milaeger told him the work would continue, and the check was given him by plaintiff upon that assurance. Milaeger said the attorney talked with him on January 25th and he instructed him that he, the attorney, had no authority to accept the check or represent the Gray company.
The well, at a depth of 540 feet, was wholly abandoned and the outfit removed by the Gray company January 21st. Some time later, plaintiff told the attorney the work had been discontinued, and he returned the check to it. On January 24th, Gray company telegraphed to plaintiff that the well had been shut down for nonpayment of the $1,750, that on January 18th the agreement had been to abandon the well and new arrangements would have to be made if plaintiff desired to proceed. Shortly thereafter a receiver was appointed for the Gray company. Later plaintiff tried to induce the receiver to resume drilling.
Pew, if any, construction contracts are executed in precise conformity with their terms, and it is the rule that where the bond for performance is executed by a paid surety, the latter is not released from liability by departure in execution of the contract unless the variation is material and operates to the injury of the surety. People v. Bowen, 187 Mich. 257; People v. Fidelity & Deposit Co., 238 Mich. 326; Realty Construction Co. v. Kennedy, 234 Mich. 490.
Defendant contends plaintiff breached the contract in failing to pay the sum of $1,750 when due, that if prompt payment had been made the well would have been drilled and defendant saved from liability, and the lack of prompt payment caused the discontinuance of the work.
The assumption is untenable that prompt payment of the $1,750 would have resulted in completion of the contract, in view of the fact that prompt payment would have followed, and did follow, verbal assurances by the Gray company that the contract would be performed. If plaintiff’s testimony be accepted that the contractor’s delay in commencing drilling was unjustified and caused it to fear the well would not be completed although it had already paid Gray company $4,000, that the drilling ceased on January 11th because of a break-down of machinery, and that the Gray company at once there after sought to discontinue the work and terminate the contract, the demand for verbal assurances that it would be performed was not unreasonable. In making such demand plaintiff asked no more than the contract called for, and its insistence upon the further and diligent prosecution of the work' was for the benefit, not the injury, of defendant.
If, upon nonpayment, the Gray company had declared the contract at an end, the situation would be different. But the time of payment was waived by subsequent negotiations and agreement and the well was not abandoned for failure of prompt payment. Defendant claimed it was discontinued by agreement, and plaintiff said it was because the Gray company had breached the contract. Both claims were supported by testimony.
Plaintiff finally paid the whole amount due. The authority of the attorney to .receive the final payment was a question of fact. If it was paid on assurances that the work would continue, as claimed by plaintiff, it performed the contract and the Gray company breached it. The act of the attorney in later returning the check to plaintiff was for the benefit of the defendant, as it decreased its liability.
There was ample testimony to sustain the findings of the court or the converse on all the controlling issues of the case. The question was one of credibility of witnesses. The court held that plaintiff had substantially performed the contract and the Gray company had breached it. It cannot be said that the findings. were against the great weight of evidence.
Judgment affirmed, with costs.
Butzel, C. J., and Wiest, Clark, McDonald, Potter, Sharpe, and North, JJ., concurred. | [
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Per Curiam.
This case is a companion of Smith v. Detroit Trust Co., ante, 659, and is ruled thereby. Affirmed accordingly, with costs to plaintiff.
Butzel, C. J., did not sit. | [
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Fead, J.
Plaintiff is a Michigan corporation, organized in September, 1925. In 1926, the directors were defendants, E. C. Vandewalker, now dead, P. T. Slattery, and C. H. Bliss. Defendant Wilson was director, secretary, and manager of the company.
August 14, 1926, Wilson, acting for himself, the other defendants, Slattery, and Vandewalker, secured an oil and gas lease from Herman Oehring and wife, took it in the name of John Hopkins, now dead, and, on August 18th, at a regular meeting of the board of directors at which only defendants, Slattery, and Vandewalker were present,, sold it to the corporation for 3,600 shares of stock, worth $1 per share.
November 1, 1926, Wilson, acting as before, obtained an oil and gas lease from Ed Engel, also running to Hopkins, and, at a regular meeting of the board of directors, at which only defendants and Slattery were present, sold it to the corporation for $7,200.
The leases cost defendants $1 each, besides some expense in procuring them. The corporation has not rescinded the purchases. It has drilled on the premises and both leases have producing wells. There is no claim of actual money loss to plaintiff.
This action is to recover from defendants the value of the stock and money paid for the leases, on the theory that they constituted secret profits of directors in corporate transactions. The court directed a verdict for plaintiff for such amount.
Counsel do not disagree upon the general rules governing the duties of fidelity, fairness, and frankness owing to a corporation by directors, their liability for secret profits, and their right, under proper circumstances, to sell to the corporation. However, the mere recognition of these general rules is not sufficient. There is need to be specific. The difference between damages recoverable for improper sale and as secret profits is not always clear, and it appears to us that the testimony here demanded a sharper discrimination between the private rights and official obligations of directors than seems to have been suggested by counsel to the trial court.
There was testimony that Wilson was an officer in two other oil companies and a real estate dealer handling leases, and was so known to plaintiff; that it was distinctly understood, when he was made manager, that he was not expected to acquire leases for plaintiff; that in 1926 plaintiff was not in the market seeking- leases as it already had more lands than it had funds to drill; that the Oehring and Engel leases were taken by Wilson in the course of independent and personal dealings, in harmony with his agreement with plaintiff; that he and the other defendants and associates had been engaged together for some time in independent dealing in such leases'; that they did not obtain the leases with the intention of selling them to plaintiff; that after the leases had been procured, subsequent events convinced defendants and their associates that they were valuable to plaintiff and funds could be raised on them for immediate drilling; and defendants made the sale in good faith and for the advantage of plaintiff.
This testimony presented an issue of fact which called for application of the rule on sale of property. When directors sell their own property to a corporation, through their own action or influence as officers, or without disclosing their interest, and the corporation does not repudiate the purchase and rescind, the directors are liable not upon the theory of secret profits (Highland Park Investment Co. v. List, 27 Cal. App. 761 [151 Pac. 162]), but for fraud or excessive price, and the measure of damages is the difference between the price paid by the corporation and the fair value of the property. Garber v. Town, 208 Mich. 1, 12; Danville, H. & W. R. Co. v. Kase, 17 Phila. 332, same case, 39 Atl. (Pa.) 301; Dean v. Shingle, 198 Cal. 652 (246 Pac. 1049, 46 A. L. R. 1156); Parker v. Nickerson, 137 Mass. 487; 14A C. J. p. 116.
There was also testimony that Wilson claimed to the lessors that he was representing the corporation in negotiating’ the leases, the corporation was to be the real lessee, and the intervention of Hopkins was merely a customary way of taking oil leases to a corporation. Wilson denied this. There were further facts and circumstances from which it reasonably could be inferred that defendants procured the leases for the purpose and with the intention of selling them to plaintiff.
Directors owe the corporation good faith and honest service. Good faith includes not only personal upright mental attitude and clear conscience, but also intention to observe legal duties. Honest service includes elimination of private gain in corporate transactions conducted by directors and not approved by other authorized disinterested officers, with full knowledge of the facts. If directors undertake to acquire property for the corporation, they act in a trust capacity in acquiring it. Express direction by the corporation to them to purchase is not a requisite of liability in this respect. Nor does the fact that they have a right to deal personally in leases modify their duties as directors when their transactions touch the corporation itself. Their obligations and liabilities arise out of their trust duties in dealing fairly with the corporation. If they purchase personally, with the intention to sell to the corporation, or while purporting to act as corporation officers, the whole benefit of the purchase inures to the corporation and the rule of secret profits applies. In such case, the rule of damages is that directors would be liable for the price paid by the corporation less the cost of the lease to them. Badger Oil & Gas Co. v. Preston, 49 Okla. 270 (152 Pac. 383); Douglass-Whisler Brick Co. v. Simpson, 233 Pa. 515 (82 Atl. 759); Parks v. Hughes, 145 La. 222 (82 South. 202); Redhead v. Parkway Driving Club, 148 N. Y. 471 (42 N. E. 1047); Loewer v. Lonoke Rice Milling Co., 111 Ark. 62, 74 (161 S. W. 1042); Spaulding v. North Milwaukee Town Site Co., 106 Wis. 481, 493 (81 N. W. 1064); Parker v. Nickerson, supra. Of interest generally are: Southwestern Portland Cement Co. v. Latta & Harper (Tex. Civ. App.), 193 S. W. 1115, 1131; Ruethel Mining Co. v. Thorpe, 9 Ont. W. R. 942; Drennen v. Southern States Fire Ins. Co., 164 C. C. A. 616 (252 Fed. 776); Great Luxembourg R. Co. v. Magnay, 25 Beav. 586 (53 Eng. Rep. Repr. 761); New York Trust Co. v. American Beatty Co., 244 N. Y. 209 (155 N. E. 102); United Zinc Companies v. Harwood, 216 Mass. 474 (103 N. E. 1037, Ann. Cas. 1915 B, 948); Citizens Development Co. v. Kypawva Oil Co., 191 Ky. 183 (229 S. W. 88); Bennett v. Havelock Elec. Light & Power Co., 21 Ont. L. R. 120; Earle v. Burland, 27 Ont. App. 540, affirmed 13 Can. R. App. Cas. 418; Stanley v. Luse, 36 Ore. 25 (58 Pac. 75); 4 Fletcher Encyc. Corporations, § 2318; 14A C. J. p. 115.
We think the testimony presented issues of fact for the jury.
At the trial, complaint was made of the declaration, but, while not quite specific in. view of the above distinctions, it states a cause of action, and, in the absence of motion for greater particularity, is sufficient. Resolutions authorizing commencement of this suit were admitted in evidence. Defendants claim there was no denial of the authority of the corporation to sue. If that be so, the resolutions were immaterial.
Judgment is reversed, and new trial ordered, with costs.
Butzel, C. J., and Wiest, Clark, McDonald, Potter, Sharpe, and North, JJ., concurred. | [
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North, J.
In his suit for libel plaintiff had verdict and judgment. Defendant reviews by writ of error. In the fall of 1925, plaintiff, a man of Polish ancestry, was a candidate for election to the common council of Detroit. He was a lawyer by profession, but devoted Ms energies largely to the real estate business. Many of his friends and constituents were of Polish nationality. Louis P. Wojcik, a banker and president of the defendant publishing company, was also a candidate for election to the common council. The defendant company publishes a newspaper in the Polish language, the Polish Daily News. This Polish paper supported Wojcik, but a rival Polish newspaper — the Daily Record — supported plaintiff. While the political campaign was pending, and on October 26, 1925, defendant published in its newspaper an article antagonistic to plaintiff and by him alleged to have been libelous. Among other charges contained in the article were the following :
“He (Joseph. J. Poleski) conspired with the Klan, against his own conscience, against the interests of the Polish public in Detroit. * * * He went merely to get votes,- merely to cheat the Polish public. * * * Mr. Poleski betrayed, belied and deceived the citizens of Polish descent in Detroit, * * * (and) conspired against the interests of the Polish public in Detroit. * * * The eyes of the Poles in Detroit now will open, * * * when they see that this alleged Polish progressive * * * sold himself, cheated the Polish public, bargained for himself with the votes of Polish citizens. * * * Mr. Poleski does not belong to any parish, * * * he ridicules the priests’and the faith, * * * he laughs at those ideals that are sacred to the parishioners. * * * But since Mr. Poleski lies that he belongs to St. Thomas parish, or to the St. Stanislaus parish — although he does not belong to any of them — but only to gain for himself the parish votes, it is our duty to unmask such a person. * * * However, the Polish people will open its eyes today and convince itself that it has to do with an ordinary political swindler, with an ordinary liar, who pulls the wool over the eyes of the people, that he belongs to a parish, that he wars with the Klansmen, yet (in the) meantime he goes hand in hand with the Klansmen, and does not belong to any parish. How does such a candidate present himself? Let the Polish public know now with whom it has to do! ”
Plaintiff alleges he was thus maliciously libeled by defendant, and that in consequence thereof he has “been and is greatly injured in his good fame and credit and brought into public scandal, infamy and disgrace;” and has been “deprived of great gains and profits in his said profession and occupation as a real estate broker, * * * and also thereby suffered great mental pain, anguish and mortification. ’ ’ Plaintiff contends this alleged libelous publication was prompted by malice and bad faith, that defendant sought by thus maligning plaintiff to advance the rival candidacy of the president of the defendant company. On the other hand, defendant asserts it acted in good faith in discharging its public.duty in attempting to give publicity to the qualifications or fitness of- plaintiff as a candidate for public office, that such publication was qualifiedly privileged, and, since defendant acted without malice in the reasonable belief that its publication was true, it is not liable.
The verdict was for $5,000 property damages and $10,000 for injury to feelings. Appellant asserts that the court erred in permitting plaintiff to testify concerning his loss of profits from the sale of real estate which he owned individually. Plaintiff was connected with a copartnership and a corporation engaged in real estate business; but in the trial of this case the court excluded all testirdony tending to establish loss or damage except such as was incident to plaintiff’s individual property or business affairs. As indicative of such loss, plaintiff was allowed to testify over defendant’s objection as to the volume of his business for six months next preceding this publication and the volume of his business for a like period next following the publication. His testimony indicates that individually he dealt extensively in real estate transactions, and he testified that by reason of diminution of business the six months following the publication he lost $15,000. On cross-examination he testified that all of this property was sold within the following year. Defendant asserts this practically nullifies his claim of loss; but plaintiff testified in that connection “I could have sold them and then some, had I been able to.” Defendant also stresses the fact that plaintiff’s income tax report for 1925 contradicts his present claim concerning the amount of profits he derived from his real estate activities. These and other matters of like character were proper items of proof on direct and cross-examination, but they do not render incompetent plaintiff’s own testimony as to his loss of profits.
Appellant also asserts error on the part of the court in allowing plaintiff to testify to a conversation with one Lipinsky whom plaintiff approached relative' to the sale of property, and thereupon Lipinsky stated that he did not like the position plaintiff took politically, saying “You were associated with the Ku Klux Klan. I won’t have anything to do with you.” Appellant contends that this testimony tended to establish special damages and that such special damages were not alleged. We do not so understand. This testimony tended to establish plaintiff’s general claim of damage by showing a particular instance. Had plaintiff sought to show the loss of a particular sale to Lipinsky and a specific profit, appellant’s objection would be well taken.
Appellant also urges that the court erred in permitting witness Joseph Karasiewicz and other witnesses to answer over defendant’s objection questions concerning what other people had said to them relative to the alleged libelous article. While such testimony may be said to be of a hearsay character, nonetheless in actions of this kind it is competent to show the extent and effect of the publication of the alleged libelous article. Such testimony was competent as tending to sustain plaintiff’s allegation of general damage to his reputation, character, and business. Cyrowski v. Polish-American Publishing Co., 196 Mich. 648.
Joseph Karasiewicz had previously been the editor-in-chief of defendant’s paper and likewise of another Detroit Polish daily. He was living in or near Detroit at the time the article here in suit was published. As a witness for plaintiff he testified that through his activity he had come to know “thousands of Polish people,” and, concerning their attitude towards the Ku Klux Klan, he testified:
“The feeling among the rank and file of the Polish citizens, especially, was very bitter against the Ku Klux Klan, because they were under the impression that the Ku Klux Klan wánts to drive them away from this country, deny them the right of having parochial schools, and trying to force them to support 100 per cent. Americanism, which is used by the Ku Klux Klan as the cloak of their intolerance.”
Appellant claims this testimony was highly incompetent “because it calls for a conclusion on the part of the witness, as to what the feeling of the rank and file of the Polish citizenry was.” Appellant.asserts this witness was no more qualified or capable of giving tóstimony of this character than the jurors. Appellant’s position in this regard is not well founded. There was ample testimony of special knowledge possessed by this witness. It was both competent and material for plaintiff to show the conditions under which the libeious article was published; especially if, as is here claimed, such conditions had a bearing upon the extent of the injury sustained by plaintiff in consequence thereof. Line v. Spies, 139 Mich. 484; Bolton v. Walker, 197 Mich. 699 (Ann. Cas. 1918 E, 1007).
Appellant complains of the trial court’s failure to define in his charge to the jury the terms exemplary and punitive damages, and also of the court’s failure to charge that if the defendant in publishing this article acted in good faith it could not be found guilty of malice, and in that event the verdict should be one of no cause of action. In the course of his charge the trial court did intimate to the jury that exemplary or punitive damages had to do with “injury to feelings.” Defendant made no request for a further definition or explanation of these terms, and its claim of error in that particular is without merit. Halloran’s National Detective Agency v. Weiden, 238 Mich. 242. Defendant’s request to charge that in case defendant acted in good faith it could not be found guilty of malice and the verdict would therefore be in favor of the defendant, is not sound as a proposition of law. Lack of malice would foreclose plaintiff’s right to recover punitive or exemplary damages, but he would still be entitled to damages actually sustained, if any, incident to his business. Clair v. Battle Creek Journal Co., 168 Mich. 467. The case was fairly and plainly submitted to the jury on defendant’s claim that in pub lishing this article it was protected by a qualified privilege. The court charged the jury:
“If it appears that criticism is just and proper and was made in good faith, without malice and for the public good, for the purpose, as supposed by the person at the time, to prevent an incompetent and unfit person from receiving a majority of the votes of the electors, the article is prima facie privileged, and the law requires the party who complains to show that it was published with bad motives and not for good ends and purposes. . * * *
“Where, as in this case, the publication is qualifiedly privileged, it is not actionable unless made in bad faith or with actual malice or without reasonable cause to believe it to be true. * * * If you should find for the plaintiff, damages for libel upon a candidate for public office are reduced to a minimum if the libel resulted from an honest mistake made or an honest effort to enlighten the public as to his character; and if you find from the facts in this case that the defendant published the alleged libel through an honest mistake made, or an honest effort to enlighten the public as to the character of the plaintiff when he was a candidate for councilman for the city of Detroit, then your damages which the plaintiff is entitled to recover are reduced to a minimum.”
We think this and other similar statements in the charge of the court fully protected defendant’s rights. Complaint is made that the damages awarded are excessive. In cases where there is decided conflict in testimony and wide latitude in the issues submitted to the jury, courts should not substitute their judgment as to the measure of damages for that of the jury. If plaintiff’s contention in this case is true, a most unjustified and vicious attack was made upon him and prompted by the malicious motive of giving defendant’s president an advantage over plaintiff in a political contest. Plaintiff immediately demanded retraction, and this demand reached defendant October 28th. Notwithstanding defendant was publishing a daily paper it made no retraction until its afternoon edition on the day before the election, which was held November 3d. The retraction was tardily made, but the court charged the jury that it should be considered in mitigation of damages. Defendant was permitted to show all the circumstances under which the article was published. Its attempt at justification was not at all convincing. The amount awarded as damages to property or business was well within the range of plaintiff’s testimony. Under the facts disclosed by this record we would not be justified in setting aside the jury’s verdict as to either actual or exemplary damages. In a libel case, we have said:
‘ The court, on appeal, will not set aside a verdict on the ground that it was excessive unless satisfied that the result was reached as a consequence of gross error, passion, bias, or corruption.” Clair v. Battle Creek Journal Co., supra (syllabus).
We have given, consideration to the other assignments of error and find them without merit. They are not prejudicial or such as to justify reversal. The case was carefully tried and submitted to the jury under a full and impartial charge. The judgment rendered is affirmed, with costs to appellee.
Butzel, C. J., and Wiest, Clark, McDonald, Potter, Sharpe, and Fead, JJ., concurred. | [
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Butzel, C. J.
Plaintiff Transcontinental Insurance Company, upon payment of a loss, took an assignment of the claim, and brought suit to recover the damages arising out of a collision of the car of its assured with a truck owned by John Berens, and driven by his son Harry Berens, defendants herein. The jury rendered a verdict against both defendants, and John Berens appeals from the judgment rendered thereon. He claims that he is not liable under that part of 1 Comp. Laws 1929, § 4648, which provides:
“The owner of a motor vehicle shall be liable for any injury occasioned by the negligent operation of such motor vehicle * * * (when it) is being-driven with his or her express or implied consent or knowledge. It shall be presumed that such motor vehicle is being driven with the knowledge and consent of the owner if it is driven at the time of said injury by his * * * son * * * or other immediate member of the family.”
He insists that there was positive testimony showing that the car was riot driven with his express or implied knowledge or consent, that thus the statutory presumption had been overcome, and that the trial judge erred in not directing a verdict as requested in his favor.
The son testified that up to the time of his marriage, about eight months prior to the collision, he had resided at his father’s home and driven his father’s car; that he had not done so since he had married and established his own home some distance away; that he “was stuck” four or five miles from his father’s home, and went there and took the truck. The father’s testimony is brief and is herewith set forth in full:
“I am the father of Harry and the owner of the truck involved in this suit.
“Q. Did you ever give Harry Berens any permission or consent to Ms taking that truck?
“A. I did not.
“Q. Did you ever give Harry Berens any permission or consent to use your truck?
“A. I did not.
“Q. Were you home when he came and got it? '
“A. I wasn’t around the house.
“Q. Did you see him take it?
“A. No.
“Q. Did you know he had it at that time ?
“A. Not at that time.
“Q. You learned that later?
“A. I learned that later, yes, sir.”
Cross-examination by Mr. Jarrett N. Clark:
“I have owned an automobile, I think the first one in 1923.
“Q. And from that time on, you have let Harry drive your automobile?
“A. The first car I did.
“Q. Did you ever tell Harry that he couldn’t drive your automobile?
“A. Which automobile ?
“Q. Any?
“A. Sometimes I did.
“Q. When did you do that ?
“A. I don’t remember.
“Q. That was only once in a while or a special occasion?
“A. I don’t know. •
“Q. Well, isn’t it a matter of fact, Mr. Berens, and didn’t you tell your brother, Fred Berens, the •township clerk of Blendon township of Ottawa county, that Harry came to you and asked for this truck and you told him he could take it, but be careful and not have any accidents ?
“A. I don’t know that any such thing happened.
“Q. Did you ever have a talk with your brother about that?
“A. I don’t know.
“Q. Would you say you didn’t?
“A. I don’t remember.
“Q. Isn’t it a fact, Mr. Berens, that Harry did ask you for that truck, and you let him take it to go and get the truck that was stuck over somewheres else?
“A. No.
“Q. You knew he had it, didn’t you?
“A. Afterwards.
“Q. Before he took it, didn’t you know it?
“A. No.
“Q. Did you send word to him and tell him to bring the truck back?
“A. I telephoned him.
“Q. Where did you telephone him?
“A. Prom my home.
“Q. Whereto?
“A. Byron Center. I think he’ lived there at that time.
“Q. Why did you call up over the telephone then to Byron Center?
“A. I had to use it.
“Q. Oh, you had to use the truck?
“A. Yes, sir.
“Q. That is the only reason that you wanted it, to use the truck, and you were hauling gravel into the township, weren’t you?
“A. I had to the next day.
“Q. The next day, and you wanted him to bring the truck back the next day, or in time so you could use it the next day, is that correct? That is the only reason why you wanted it back, so you could use it in drawing gravel'for the township the next day? Say yes or no, please.
“A. Yes.”
Re-direct examination by Mr. Leo W. Hoffman:
“Q. How did you learn that your son had the truck?
“A. Prom my wife.
“Q. She told you?
“A. She told me.”
In order to overcome the statutory presumption, the evidence must be of a direct, positive, and credible character. The rule is stated by Mr. Justice North in Wehling v. Linder, 248 Mich. 241, 243:
“One who is driving a motor vehicle incident to the owner’s business is presumed to be duly authorized to so drive the vehicle; but it is the established law in this State that such a presumption prevails in favor of the litigant relying thereon only so long as that phase of the case is not covered by testimony to the contrary. Gillett v. Michigan United Traction Co., 205 Mich. 410; Union Trust Co. v. Car Co., 219 Mich. 557; Depue v. Schwarz, 222 Mich. 308; and Noonan v. Volek, 246 Mich. 377. If the testimony opposed to the presumption is clear, positive, and uncontradicted, it becomes the duty of the trial judge to direct a verdict if the issue is a controlling one in the case. Union Trust Co. v. Car Co., supra.”
A review of the quoted testimony shows that it is not clear, positive, and uncontradicted, so as to overcome the presumption, and it became the duty of the trial judge to submit the question to the jury. This he did in a proper charge, and the jury rendered a verdict against both defendants.
The judgment is affirmed, with costs to plaintiff.
Wiest, Clark, McDonald, Potter, Sharpe, North, and Fead, J J., concurred. | [
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Wiest, J.
This is an appeal from a decree of the circuit court for the county of Kent, in chancery, vacating an adjudication of adoption of a minor child in the probate court of that county 34 years ago.
Plaintiff herein is 42 years of age, and was nearly seven years of age at the time of adoption. He waited 20 years, after reaching full legal age, before filing the bill and had been fully aware of his adoption for 29 years, the record of which was in the county where he resided. Before plaintiff was born his mother filed a bill against his father for divorce on the ground of extreme cruelty. An answer to the bill was filed by his father. Before the hearing of the divorce case plaintiff was born, and the bill was amended to allege his birth and pray for his custody. At the hearing his father was found guilty of extreme cruelty and the parties were, by decree, divorced on July 20,1889. The decree also adjudged Edwin Slattery, father of plaintiff herein, an unsuitable person to have the child, then three months and 27 days of age, and awarded his. mother his care, custody, and education until 14 years , of age. The decree did not award alimony or support money for the child. At the time of the decree plaintiff’s father resided out of the State, and so resided until his death, and never contributed anything toward the support of his former wife and his child. He ignored their existence, remarried in another State, and died intestate in the State of Connecticut in January, 1930, leaving there a widow and a considerable estate; hence.this suit for revocation of the adoption.'
September 23, 1891, the mother of plaintiff married George H. Cress, and January 22, 1896, she and Mr. Cress acknowledged and filed in the probate court an instrument for the adoption of plaintiff by Mr. Cress. That instrument stated:-
“That whereas the said party of the first part is the mother of a minor child, tó-wit: Oscar Clarence Slattery born March 23d, A. D. 1889, whereby the custody and possession of said child belongs to and remains with said first party hereto, * * * and whereas the said Louisa Cress party of the first part, and mother of said child as aforesaid, has and does by these presents give her full and free consent to such adoption of said child by said party of the second part.”
Plaintiff, then nearly seven years of age, gave consent in writing to the adoption. The same date the order of adoption was made and entered in the probate court, from which order we quote the following :
“That said Louisa Cress is the mother of said infant. That * * * whereby the said Louisa Cress is become sole custodian of said infant, possessing due authority to execute said instrument, * * * And it further appearing to the court that the said George Henry Cress is a suitable and proper person to have the custody, care and rearing of said child, and that said instrument is executed in good faith and in due form, according to the statute in such case made and provided.
“Therefore, it is ordered, adjudged and decreed,” etc.
It will be noted that in the adoption instrument no fact, excusing consent of the father, such as abandonment of the child by him, was asserted, but only a conclusion, and in the probate court order no facts were stated “whereby” the mother had become the sole custodian of the child and vested with authority to execute the instrument. The mentioned points are relied upon as grounds for vacating the adoption.
The omission in the instrument of adoption is the more serious question, for, the order of adoption being in a judicial proceeding, the finding implies proof of facts therein adjudged. Adoption of children is purely statutory in this State, having no common-law background. If the statutory provisions regulating adoption of children are not complied with, adoption fails. Albring v. Ward, 137 Mich. 352. Consent lies at the foundation of statutes of adoption, and if they require it to be given, the jurisdiction of the subject-matter cannot be acquired without it; where certain facts obviate the necessity of consent, the existence of these facts must be shown. Must the fact, obviating consent, be stated at length in the instrument of adoption as well as in the judicial finding? The modern tendency of the courts is away from the harsh doctrine that nothing will be presumed in favor of jurisdiction and that all must appear of record, else the adoption is void.
“The better rule would seem to be that the adoption will be upheld as against a collateral attack unless the want of jurisdiction is affirmatively shown.” 1 C. J. p. 1394.
The law applicable to this case is so well stated in Wilson v. Otis, 71 N. H. 483 (53 Atl. 439, 93 Am. St. Rep. 564), that we quote liberally therefrom:
“But it is insisted that the judge of probate had no jurisdiction to decide the question presented, or to render a judgment thereon, because it does not affirmatively appear in the record that the mother of the boy consented in writing to the adoption, as required by the statute. * * * This fact, however, is not necessarily essential to the exercise of jurisdiction by the probate court. If the parent has abandoned the child for three years, his consent to adoption proceedings is rendered unnecessary by the statute. * * * It is for the court, after having acquired jurisdiction by the filing of an appropriate petition, to decide in the first instance whether the parent has consented to a decree of adoption; if not, whether there is any valid excuse for his non-action, as death, insanity, or other disability ; or whether he has so far abandoned his parental duties for three years as to render his consent unnecessary. These, with other preliminary questions that might be suggested, must be determined upon evidence and a hearing by the judge, after he has acquired jurisdiction of the general subject-matter of the petition. The filing of the petition and the appearance of proper parties gave him, under the statute * * * power to act judicially. * * * The court was not asked to do what it had no judicial power to do under any circumstances. It became its duty to act upon the subject-matter presented, and to receive evidence upon all material questions suggested, among .others upon the question of abandonment as an excuse for the failure of the mother to consent to a decree of adoption. * * * If its decision was erroneous upon this question, the error did not render the proceedings absolutely void * * * so that they might be disregarded in a collateral suit. The error, if there was one, was correctable by appellate procedure, and does not prove a want of jurisdiction in the probate court. * * *
“Nor does the absence in the petition of an allegation of abandonment, or of the mother’s consent, affect the question of general jurisdiction. It is not necessary that the petition should contain a full statement of all facts essential to a decree. It might seriously fail in this respect, or be demurrable, and still state a ease calling for and requiring the exercise of the judicial power of the court. The test has been said to be, not whether it states a perfect case, but whether the court has the power to grant the relief sought in a proper case. Van Fleet, Collateral Attack, § 61. If upon a petition for adoption which omits these allegations the court finds the fact of abandonment, as well as other necessary-facts, its decree of adoption is valid. The judgment or decree necessarily implies a finding of all material facts not inconsistent with the record, one of which may be the fact of abandonment.”
We may assume, for the purpose of considering the point, that the sole reason obviating consent by the father was his alleged abandonment of the child. Such abandonment, of course, must have existed! at the date of the adoption. The statute, in force' at that time, did not require that the evidence showing abandonment, or even the fact of abandonment, be set out in the adoption instrument, or that the particular reason, excusing consent of the other parent, be given. The present statute (3 Comp. Laws 1929, § 15952) requires an allegation “in the instrument of adoption that the other parent has abandoned such child for the period of one year last preceding the date of filing the instrument of adoption.” The instrument of adoption gave the probate court jurisdiction in the premises.
But it is contended that, in the eye of the law, there was no abandonment of the child by the father because custody, care, and maintenance of the child was with the mother, citing People v. Dunston, 173 Mich. 368 (42 L. R. A. [N. S.] 1065). That was a criminal case under a penal statute. If we apply the rule of that case to this case we only find that the judge of probate was in error in holding otherwise.
■ The statute did not provide for notice to the father. The initial step, giving the probate court jurisdiction of the subject-matter, was properly taken by the mother. In the exercise of jurisdiction, so conferred, the probate court had to determine whether the necessary parties in interest were before the court. Consent by the father was not necessary if he had abandoned the child. The fact of abandonment must have been found, for it was adjudged that the mother was the sole custodian of the child and possessed due authority to execute the instrument of adoption. If it be held that the father was entitled to notice, then he alone could complain of want of notice, and, for 34 years after the adoption and to the time of his death, he made no such complaint. The father never questioned the validity of the adoption, and, by lapse of time, he was barred from seeking revocation thereof, had he so desired, and plaintiff is equally barred.
Plaintiff was a necessary party to the proceeding in the probate court; for his welfare was the very substance thereof. The probate court had jurisdiction of the subject-matter and to make adjudication, and the adjudication made, however erroneous in point of fact or law, cannot, after the lapse of 34 years, be now questioned by plaintiff.
The decree in the circuit court is reversed, and the bill dismissed, with costs against plaintiff.
Butzel, C. J., and Clark, McDonald, Potter, Sharpe, North, and Fead, JJ., concurred. | [
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Potter, J.
Plaintiff filed a bill of complaint against defendant for an injunction to restrain him from engaging or continuing in the business of local freight handling in the city of Monroe, and for other relief. Prom a decree for defendant, plaintiff appeals. Defendant was the owner of a motor truck engaged in the local freight-handling business in Monroe. He sold plaintiff his truck, business, and good will, and made and delivered to him a list of his local customers, below the list of which he wrote over his oym signature, “I have sold my business to Kenneth Colton and my good will.” Plaintiff testifies, and it is' not disputed, the defendant told him he would not re-engage in the local freight-handling business. This was one of the inducements which led him to purchase.
In pursuance of the sale of the truck and business, defendant told various customers he had gone out of business, and plaintiff notified the rest. Defendant engaged for a short time in long-distance freight handling by motor truck, then returned to Monroe and engaged in local freight-handling business in competition with plaintiff, soliciting customers whose names were on the list delivered by him to plaintiff when he sold the truck, business, and good will.
' The written statement delivered by defendant to plaintiff indicates a sale of the business and good will. It was prepared by defendant and delivered by him to plaintiff and will be most strongly construed against defendant. Waites v. Miller, 244 Mich. 267; Saxon v. Howey, 247 Mich. 508; Patterson v. Miller, 249 Mich. 89.
Defendant sold the good will of the business— those intangible advantages or incidents which are impersonal and attached to the thing conveyed (Williams v. Farrand, 88 Mich. 473 [14 L. R. A. 161]); the favor which the management of the business had won from the public and the probability the old customers would continue their patronage in the future (Chittenden v. Witbeck, 50 Mich. 401). Good will is based upon the prospective profits to result from voluntarily continued patronage of the public. It indicates that value which inheres in the fixed and favorable consideration of customers arising from an established and well-conducted business. Mills v. Rich, 249 Mich. 489.
The consideration paid for the truck, the business, and good will was sufficient. No further consideration was necessary to support the sale and transfer of good will. Weickgenant v. Eccles, 173 Mich. 695; Weiss v. Stein, 187 Mich. 369. Though it is sometimes said contracts in restraint of trade are void as against public policy (Hubbard v. Miller, 27 Mich. 15 [15 Am. Rep. 153]), public policy requires when a man has created a business which he wants to sell he should have the right to sell it in the most advantageous way and to preclude himself from reengaging in business directly competitive with that sold. Hubbard v. Miller, supra; Leather Cloth Co. v. Lorsont, L. R. 9 Eq. 345, 353; Up River Ice Co. v. Denier, 114 Mich. 296 (68 Am. St. Rep. 480). The contract pleaded and proven was valid and enforceable. Doty v. Martin, 32 Mich., 462; Beal v. Chase, 31 Mich. 490. The rule is that contracts of this nature will be enforced in equity where the restraint is only partial and is limited to a particular place (Hubbard v. Miller, supra; Up River Ice Co. v. Denler, supra; 2 High on Injunctions [4th Ed.], § 1167); and the defendant enjoined from a violation of the contract (Timmerman v. Dever, 52 Mich. 34 [50 Am. Rep. 240]; Reber v. Pearson, 155 Mich. 593; C. H. Barrett Co. v. Ainsworth, 156 Mich. 351).
Defendant will not be permitted to derogate from his own assignment. He is not at liberty to destroy what he transferred or depreciate what he sold. There was an implied covenant on the sale of the good will of the business by defendant that he would not solicit the custom which was paid for and parted with. It was a fraud to sell that which he did not mean the purchaser to have; to pocket the paid price and attempt to recapture the thing sold; or to solicit or attempt to decoy it away from plaintiff, or call it back to himself before plaintiff had time to attract it to himself and make it his own. Defendant cannot impair the value of what he sold or sell the business and its good will, take the price paid, and keep or retake the thing sold. These principles are elementary and have been repeatedly stated by the English and American courts. Labouchere v. Dawson, L. R. 13 Eq. 322; Trego v. Hunt, L. R. 21 App. Cas. 7; Suburban Ice Manfg. & Gold Storage Co. v. Mulvihill, 21 Ohio App. 438 (153 N. E. 204); Grow v. Seligman, 47 Mich. 607 (41 Am. Rep. 737).
Defendant’s conduct violates the contract, deprives plaintiff of the good will which he bought and paid for, and should be enjoined. Thompson v. Andrus, 73 Mich. 551. The decree of the trial court .is reversed, with costs, and decree will be entered for plaintiff.
Butzel, C. J., and Wiest, Clark, McDonald, Sharpe, North, and Fead, JJ., concurred. | [
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] |
Clark, J.
Plaintiff as lessor and defendant as lessee, on November 15, 1924, made and executed in writing a lease of lands in Grand Rapids for a term of five years from and after the date, $150 per month for first two and one-half years and $200 per month for remainder of the term.
On May 1, 1928, the tenant quit the premises and refused to pay rent. This suit is to recover the monthly installments of May, June, July, and August, 1928, $800 with interest.
The cause was tried to a jury who returned a verdict of no cause of action. Defendant had judgment. Plaintiff brings error.
The lease contained a condition that the landlord, at any time after two and one-half years of the term had elapsed, might cancel the lease and recover possession upon six months’ notice in writing to the tenant. In the fall of 1927, the tenant desired to quit the property and to surrender the lease and to acquire other more commodious quarters. Defendant, by its officers and agents, discussed the matter with plaintiff. He was willing, if another tenant might be provided. Western Michigan Motor Club of the city offered to take the property under a lease. A lease was prepared, signed by the motor club, and presented to plaintiff, who declined to sign, for reasons not here material. During these negotiations with the motor club and when it appeared that it was to take lease, plaintiff discussed the matter with agents of defendant and the substance and effect of this discussion, as it appears the jury rightly found, was an oral understanding that defendant might surrender the lease as of May 1,1928. Plaintiff requested defendant to write a letter respecting the matter. This is the letter:
“November 7, 1927.
“Dr. Louis Barth,
“E. Pulton Street,
“Grand Rapids, Michigan.
“Dear Sir:
“In accordance with your request that we submit a written proposition to vacate your property on Guild avenue occupied by the Women’s City Club under lease from you, we hereby offer to surrender up the lease and vacate the premises on or before May 1, 1928, whereupon on such surrender our lease shall terminate and be void.
“Please indicate your acceptance of this offer, and oblige,
“Very truly yours,
(Signed by defendant). ’ ’
Learning that plaintiff had not concluded lease with the motor club and that he intended to hold it on its lease, defendant, on December 6,1927, wrote to plaintiff calling attention to the verbal agreement and protesting his change of attitude and insisting the agreement be carried out. On December 9,1927, defendant replied in part:
“I have received your letters of November 7th and December 6th and am surprised at them. I have at no time agreed to release your club from the lease I hold with it unless I can get a tenant satisfactory in character and willing to pay the rents that your club is bound to pay under its lease.”
The decisive question is that there was no surrender in writing as required by the statute of frauds, 3 Comp. Laws 1915, § 11975 (3 Comp. Laws, 1929, § 13411):
“No estate or interest in lands, other than leases for a term not exceeding one year, nor any trust or power over or concerning lands, or in any manner relating thereto, shall hereafter be created, granted, assigned, surrendered or declared, unless by act or operation of law, or by a deed or conveyance in writing, subscribed by the party creating, granting, assigning, surrendering or declaring the same, or by some person thereunto by him lawfully authorized by writing.”
And therefore the trial judge ought to have directed a verdict for plaintiff.
Defendant contends that because of the condition of the lease permitting the lessor to cancel upon six months’ notice, performance within a year was possible and therefore the statute does not apply, citing Caplis v. Monroe, 228 Mich. 586. The tenancy was for five years upon condition. Shaw v. Hoffman, 25 Mich. 162. Under 3 Comp. Laws 1915, § 11977 (3 Comp. Laws 1929, § 13413), leases for a long'er period than one year are void unless in writing. In re Reh’s Estate, 196 Mich. 210. As the lease here for five years had to be in writing to be valid, a surrender of it when the unexpired term is more than a year as. here, must also be in writing, must be of equal dignity. Pontiac Nursery Co. v. Miller, 236 Mich. 511; Range v. Davison, 242 Mich. 73; note, 4 A. L. R. 666; 27 C. J. p. 214.
The surrender urged is of the tenant’s estate. Where is the “deed or conveyance in writing” thereof? We find none. Defendant’s letter of November 7th is a mere offer and the letter of December 6th not a surrender but a mere protest of plaintiff’s change of attitude. No particular form of words is required to constitute a surrender, but clearly there must be more than a mere offer. See 2 Underhill on Landlord and Tenant, p. 1196. It is unnecessary to consider how an acceptance of the offer - might have been made and a surrender effectuated, as the record shows no acceptance, rather a repudiation. See Wardell v. Williams, 62 Mich. 50; 2 Tiffany, Landlord and Tenant, § 189; 25 R. C. L. p. 675.
It is argued that plaintiff’s letter of December 9th, above quoted from, is an admission of the existence of the oral agreement and sufficient to take the case out of the statute.
Plaintiff was not to surrender his reversionary estate. He could not by his writing surrender to himself the tenant’s estate. The tenant might surrender the estate for years. It is the tenant’s estate, which surrender, to be valid, must be in writing as.the statute requires. 2 Tiffany, Landlord and Tenant, § 187.
Estoppel, perhaps an important question, was pleaded, but not urged in the trial court, and therefore receives no attention here.
Verdict should have been directed for plaintiff. Reversed. New trial granted. Costs to abide the result.
Butzel, C. J., and Wiest, McDonald, Potter, Sharpe, North, and Fead, JJ., concurred. | [
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Potter, J.
Plaintiffs brought ejectment in the circuit court for Monroe county to recover an undivided interest in the lands and premises in Monroe county described in the declaration. From a judgment for defendants, plaintiffs bring error. Frank X. Soleau died in Monroe county, March 6, 1911, leaving the lands in dispute as his sole property, according to the inventory of the estate in the probate court; several children and two infant grandchildren, plaintiffs herein. His widow, Jo-, sephine Soleau, was regularly appointed administratrix of his estate by the probate court of Monroe county, gave a bond as such, and entered into the discharge of her trust. Appraisers appointed by the probate court appraised the real estate in question, May 2, 1911, at $2,500, subject to a mortgage of $600. Various claims were presented against the estate and allowed by commissioners on claims appointed by the probate court in the sum of $2,307.14. By order of the probate court, September 9, 1911, the administratrix was ordered to pay the debts of the estate within 60 days. During the probate proceedings Josephine Soleau, the widow, filed a petition for a widow’s allowance, and was awarded $200 in personal property, to be selected by her, and $5 a week for the support of herself and children for a period of one year. Later the administratrix filed a petition in the probate court for leave to sell the real estate belonging to the estate to pay the debts of deceased. Notice of hearing on such petition was duly published, a bond on the sale of real estate filed, and December 8, 1911, she was granted a license by the probate court to sell the real estate. She sold the real estate in question for $3,500, paid the claims allowed against the estate, the mortgage and interest thereon, charged the estate for her support, attorney’s fees and fees as administratrix, in all, $3,500. Her final account was allowed by the probate court and she discharged, and her bond canceled September 27, 1912. Plaintiffs claim, and it is admitted, the real estate in question was sold by the administratrix at private sale to Bose Soleau, her daughter, who, on the same day, conveyed it to the defendant Josephine Soleau. It is claimed by plaintiffs the sale by her of the real estate is void. The trial court held the sale valid. No inadequacy of consideration was shown. Defendant Josephine Soleau, as administratrix, realized from the sale of the real estate in question a sum substantially in excess of the appraised value thereof, and used the proceeds of sale to pay and discharge indebtedness of the estate. No fraud or breach of trust is claimed. The case is ruled by Taylor v. Brown, 55 Mich. 482, and Ketchum v. Ketchum, 177 Mich. 100. Judgment affirmed, with costs.
Butzel, C. J., and Wiest, Clark, McDonald, Sharpe, North, and Fead, JJ., concurred. | [
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T. E. Brennan, C. J.
The Case.
For the purpose of this opinion, the case can be stated very simply. Defendant was convicted upon a trial in which counsel for one of the State’s witnesses was allowed to sit ahead of the rail and address the court, making objections to questions put to his client by the defendant’s lawyer.
A more detailed statement of the facts is contained in the opinion of the Court of Appeals.
The Issue.
Is participation in a trial by counsel for a witness a denial of due process to an objecting party?
The Opinion.
A witness who is not a party to an action may refuse to answer questions on the ground that his answer may tend to incriminate him. But his right to refuse to answer does not constitute a right to participate in the trial itself.
A witness who is not a party has no right to examine or cross-examine other witnesses in the case. He is not permitted to make any argument to the jury, nor even to address the court, except with permission. He may not object to the materiality, relevance, or admissibility of evidence offered by the parties.
Similarly, a witness who is not a party may not object to the materiality, relevance, or admissibility of any question asked by counsel for the parties, nor may a witness move to strike anything from the record of the cause.
A lawyer for a witness cannot do what the witness himself cannot do.
A witness to a lawsuit has a perfect right to hire his own lawyer, and have him attend the trial as a spectator. He has a right to the advice of his coun-sellor before taking the stand or during any recess. In a proper case, the court in its discretion might grant a recess for that very purpose.
But if an attorney does not represent one of the parties to the litigation, there is no basis for him to participate as an advocate before the bar.
If he objects, and his objection is sustained erroneously, against whom is the error committed? Against whom is the appeal to be taken? If his objection be overruled erroneously, can the error be saved to the witness? Surely witnesses have no right of appeal.
A decision to object or not object is often a matter of trial strategy. On whose doorstep is that strategy to be laid?
The notion of permitting witnesses’ attorneys to participate in civil trials or in criminal trials generally is so inconsistent with onr adversary system as to constitute a denial of due process of law, to an objecting party.
But it is argued that this is a narrower case, a criminal prosecution in which the witness is a participant in the offense charged, himself under indictment for the same offense, and entitled to the assistance of counsel at every critical stage of the proceeding against him. It is argued that the trial of a participant is a critical stage of the legal proceedings flowing from the witness’ arrest, and therefore Federal constitutional decisions require that the witness have the assistance of counsel.
The argument is spurious. The issue is not whether the witness is entitled to counsel; the issue is whether the witness’ counsel is entitled to participate in somebody else’s trial.
The fact that a man has a right to the assistance of counsel does not endow his counsel with any special powers of assistance. Counsel has the right to advise his client to speak or not to speak; to answer questions or not to answer questions; but he cannot prevent the prosecutor from obtaining a subpoena for the client to testify in another case.
If the client chooses to testify in the other defendant’s case, then his constitutional right to the assistance of counsel consists only in being afforded the advice of counsel with respect to his testimony. That advice must be given only at such times and in such manner as does not deprive the actual defendant in those proceedings of his right to a fair, impartial, and adversary trial.
The Court of Appeals is reversed and the cause remanded for a new trial.
Dethmers, Kelly, T. M. Kavanagh, Adams, and T. G-. Kavanagh, JJ., concurred.
Black, J., did not sit.
People v. Henderson (1968), 10 Mich App 333.
See US Const, Am 5; Midi Const 1963, art 1, § 17.—Reporter.
The instant ease provides an excellent example.
“Q. Mr. Armstrong, a day or so before this occurrence occurred were you not picked up by the police for carrying a concealed weapon?
“A. Yes, sir.
"Q. What weapon was that?
“A. A ’22-caliber blank pistol.
“Mr. Cummings: I wifi object to this line, of questioning, Your Honor. This witness was not picked up. He was stopped by the police department, but he was not picked up and he was not carrying a concealed weapon.
“Mr. Beauchamp: I believe the witness has testified to the opposite.
“Mr. Cummings: Were you brought to the police station, Wayne?
“A. Yes, sir.
“Mr. Cummings: At the -time you were stopped?
“A. Yes.
“Mr. Cummings: Were you booked, fingerprinted?
“A. No, sir.
“Mr. Beauchamp: Your Honor, I am going to object to any cross-examination or recross by tlie prosecutor at this time.
“Mr. Black: I am going to make an objection on behalf of my client, Your Honor. The normal ground, as I understand, for impeaching a witness on credibility is conviction of a criminal offense and I would like to see a conviction if Mr. Beauchamp has it here or if he is just fishing around—
“Mr. Beauchamp: Your Honor, I think I have a right to go into the background of this person, which has been gone into extensively by the qn'oseeutor, with respect to the credibility of this witness.
“The Court: I think Mr. Black has stated the rule correctly. As far as criminal affairs is concerned a person is innocent until proven guilty and convictions are the way of showing anything of that nature.”
Note that the prosecutor, Mr. Cummings, did not state the rule of evidence as did Mr. Black, the witness’ attorney. The prosecutor preferred rather to use the occasion to correct the testimony of the witness, even embarking upon some untimely redirect examination. The prosecutor undoubtedly ran this risk knowingly, expecting to be cut off in consequence of the defense counsel’s anticipated objection. | [
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T. M. Kavanagh, J.
On April 2, 1963, defendant, while driving a truck leased by a private company hauling its own products, was stopped by a motor carrier inspector employed by the Michigan public service commission. The inspector asked to examine defendant’s driver’s logbook (driving record). When defendant refused, he was told he was under arrest for failure to display his “driver’s logbook to a peace officer upon demand.”
In reply to defendant’s question of “Who’s going to arrest me,” the inspector replied “I will.” Defendant placed his truck in gear and drove away. The inspector gave chase and overtook defendant’s vehicle and, with his red light oscillating and siren sounding, waved to defendant to “move over.” Defendant disobeyed. The inspector then drove in front of the truck and slowed to a near stop. Defendant drove around him.
On April 6, 1963, at 2 a.m., the defendant was arrested in his home by an officer from the Plymouth police department who was accompanied by two inspectors employed by the public service commission, and transported to the Oakland county jail. Defendant was arraigned, waived examination, and was bound over to circuit court on a charge of resisting and opposing an inspector of motor carriers for hire — hereafter referred to as “motor carrier inspector” — in attempting to arrest him on April 2, 1963, “for failure to display daily logbook” as required by PA 1937, No 314, commonly known as the motor carrier safety act — hereafter referred to as the “safety act.”
Defendant filed a motion to quash the summons and complaint for the reasons that the motor carrier inspector was not a “peace officer” within the meaning of the criminal statute — PA 1931, No 328, §479 (CL 1948, § 750.479 [Stat Ann 1954 Rev § 28.747]); and that even if the inspector were a peace officer he had no right to arrest defendant under the circumstances because defendant had not committed a misdemeanor in the presence of the inspector. The motion to quash was denied by the trial court.
■ Defendant sought a directed verdict at the close of the people’s testimony, for the reason that the motor carrier inspector was without authority to arrest persons not licensed by the public service commission and the testimony did not support the charge shown in the warrant and complaint. The trial court denied the motion. The jury returned a verdict of guilty. The Court of Appeals affirmed. 11 Mich App 213. Defendant is here on leave granted. 381 Mich 768.
The questions raised by defendant are:
(1) Whether motor carrier inspectors, employed by the public service commission, are peace officers as the term “peace officer” is used in PA 1937, No 314, §2 (CL 1948, § 480.2)?
(2) If motor carrier inspectors employed hy the public service commission were police officers, could they lawfully stop and detain by force the driver of a motor vehicle truck for the sole purpose of demanding the driver’s daily logbook, even though they had no reason whatever to believe a crime had been committed?
(3) If motor carrier inspectors employed by the public service commission were police officers, could they lawfully compel a driver of a motor vehicle truck to involuntarily surrender his daily logbook (driving record) for the purpose of possibly furnishing information on which the driver could be charged with a crime?
(4) Whether the driving away of a motor vehicle and the disobedience of an inspector’s signal to stop constitutes “resisting and opposing” in violation of the penal code — PA 1931, No 328, § 479?
(5) Did the complaint and warrant allege and did the evidence show that defendant violated the statute pursuant to which the arrest was attempted?
(6) Did the Court of Appeals err in holding that the case had been moot since October 28, 1965, because the conditions of probation had been completed and defendant discharged from probation on that date? (This latter issue appears only in a concurring opinion and is not dispositionally relevant.)
The crucial question is whether a public service commission inspector was a peace officer empowered pursuant to article 5, § 13 of the motor carrier act (CL 1948, §479.13 [Stat Ann § 22.578]) to enforce all the general laws of this State, including the safety act.
It is argued by the people that it was the intent of the legislature to place the responsibility for the enforcement of the safety act on the public service commission. More specifically, section la of the act read:
“The purpose of this act is to safeguard the persons and property of those upon and along the highways within this state, arising from the operation thereon, by persons physically unfitted or physically impaired from exhaustion or other causes, of motor trucks, tractors and trailers, and from the operation thereon of motor trucks, tractors and trailers without reasonably proper safety devices and appliances; and the Michigan public service commission is hereby authorized and empowered to malee such rules and regulations as are reasonably necessary to the accomplishment of this purpose.” (Emphasis added.) CL 1948, § 480.1a (Stat Ann 1960Rev § 9.1665[la]).
This argument fails to distinguish between the regulatory power which is clearly vested in the public service commission and the power to enforce the act. As to the latter power, section 2 of the act unequivocally entrusted the power to demand the display of the logbook only to a peace officer:
“Said daily log or record shall be displayed by the operator or driver of the vehicle upon which the same is maintained, at any time upon demand of any peace officer of the state or any division thereof. The failure to maintain said daily log or record upon each such motor truck or tractor, and to make the entries hereinbefore named, or to display the same or furnish copies thereof to the Michigan public service commission or to the department of labor and industry, as hereinbefore provided, shall be deemed to be a violation of this act by the owner or user of the vehicle in question.” (Emphasis added.) CL 1948, § 480.2 (Stat Ann 1960 Rev § 9.1665[2]).
The legislative designation of a “peace officer” in section 2 of the safety act is plain and unambiguous and no interpretation or construction of this particular section is necessary. Acme Messenger Service Co. v. Unemployment Compensation Commission (1943), 306 Mich 704; In re Chamberlain’s Estate (1941), 298 Mich 278; Geraldine v. Miller (1948), 322 Mich 85; Knapp v. Palmer (1949), 324 Mich 694; Van Antwerp v. State (1952), 334 Mich 593; Mercy Hospital v. Crippled Children Commission (1954), 340 Mich 404; Barthowiah y. Wayne County (1954), 341 Mich 333; Big Bear Markets of Michigan, Inc., v. Liquor Control Commission (1956), 345 Mich 569. The Court can only give full effect to the plain meaning of the term as used in the statute and cannot read into the law a requirement that the lawmaking body has seen fit to omit. In re Hurd-Marvin Drain (1951), 331 Mich 504; Staiger v. Liquor Control Commission (1953), 336 Mich 630.
Recognizing the plain meaning and the exclusive use of the term “peace officer” in section 2, we must consider whether an inspector employed by the public service commission was • empowered under article 5, § 13 of the motor carrier act to act as a “peace officer” as that term has been generally defined.
Although the term “peace officer” has not been statutorily defined, it has been judicially construed. In People v. Bissonette (1950), 327 Mich 349, this Court stated (pp 356, 357):
“Peace officers have general authority to operate in a broader field. Their powers have not been specifically defined by the statute law of this State.
“ ‘Peace Officers. This term is variously defined by statute in the different States; but generally it includes sheriffs and their deputies, constables, marshals, members of the police force of cities, and other officers whose duty is to enforce and preserve the public peace.
“ ‘Public Peace. The peace or tranquility of the community in general; the good order and repose of the people composing a State or municipality.’ Black’s Law Dictionary (3d ed), p 1341.
“ ‘Peace Officer. Law. A civil officer whose duty it is to preserve the public peace, as a sheriff or constable.’ Webster’s New International Dictionary (2d ed), p 1798.”
It is the people’s position that by virtue of appointment pursuant to the motor carrier act, inspectors automatically become peace officers of this State.
The motor carrier act, article 5, § 13, provides:
“The commission may use any and all available legal and equitable remedies of a civil nature to enforce the provisions of this act or any lawful order, rule or regulation made in pursuance thereof. The commission is empowered to employ and appoint from time to time such experts, assistants, inspectors and other help as may be deemed necessary with the aid of the enforcing agencies of this state, to enable it at all times properly to administer and enforce this act. The inspectors so appointed by the commission shall have all the powers conferred upon peace officers by the general laws of this state. A record shall be kept by the commission showing the daily activities, violations found, and arrests made as to each inspector. No employee of the commission shall ask or receive any fee from any person for the taking of acknowledgments or any other service. It shall be the duty of the law enforcement department or agency of every division, branch or commission of the state government, and of every county and municipality within the state, to see that the provisions of this act, and the orders, rules and regulations of the commission thereunder are enforced; and every peace officer shall arrest, on sight or upon warrant, any person found violating or having violated, any provision of this act, or any order, rule or regulation of the commission; and it shall be the duty of the attorney general of the state and of the prosecuting attorneys of the counties of the state to prosecute all violations of this act, or any order, rule or regulation of the commission thereunder.” (Emphasis added.)
The declared legislative purpose and policy in enacting the motor carrier act was “to confer upon the [public service] commission the power and authority and to make it its duty to supervise and regulate the transportation of persons and property by motor vehicle for hire upon and over the public highways of this state.” (Emphasis added.) See CL 1948, § 475.2 (Stat Ann 1969 Cum Supp § 22.532). A fair reading of the entire act discloses a legislative intent to restrict the scope and operation of the motor carrier act only to those motor vehicles which are “for hire.” See People v. Hertz Driveurself Stations, Inc. (1953), 338 Mich 139.
The title of the motor carrier act has for its basic purpose the supervision, regulation and control of motor vehicles “for hire,” and repeatedly employs the restrictive terminology of “for hire” throughout the title. Consonant with this declared policy and manifest intent, as expressed both in the title and body of the act, the title additionally provides “for the enforcement of this act and [prescribes] penalties for its violation.” This, of course, was an undisputably valid and proper exercise of the legislative power.
The legislature, however, went further than the purpose and title of the act when it attempted to create a new classification of peace officers by the following language of article 5, § 13 of the motor carrier act:
“The inspectors so appointed by the commission shall have all the powers conferred upon peace officers by the general laws of this state.”
This provision, although admittedly within the legislative power, is constitutionally infirm because it is an object in addition to the singular object of the act and it is not expressed in the title of the act. Const 1908, art 5, § 21, mandates that “No law shall embrace more than one object.”
The main purpose of Const 1908, art 5, § 21, was to prevent the legislature from passing laws not fully understood and to avoid bringing into one bill subjects diverse in their nature and having no necessary connection. It was intended that the legislature, in passing law, should be fairly notified of its design and that the legislature and public might understand from the title that only provisions germane to the expressed object would be enacted. MacLean v. State Board of Control for Vocational Education (1940), 294 Mich 45, and cases cited therein.
The provision under consideration creates the type of evil which the Constitution specifically intended to avoid. Certainly, the creation of a new classification of “peace officers,” as manifested by the clear and unambiguous language, is neither necessary nor consonant with the declared legislative purpose and policy of the motor carrier act. It is patently diverse in nature from the entire title and body of the act and it bears no necessary or rational connection to the supervision, regulation, and control of motor vehicles for hire. ■ Nowhere in the title of the act is it even intimated' that there exists, somewhere in the act, the legislative object to create a new classification of “peace officers” as that term has been construed by the Court. Yet, as the in stant case bears witness, the operation of this statute as it presently exists could reach any private conduct falling subject to the power of a peace, officer. "We do not question the legislature’s ability under the police power to enact such a law, but we reject as constitutionally impermissible the method employed in article 5, § 13 of the motor carrier act. See People v. Wohlford (1924), 226 Mich 166; Arnold v. Ogle Construction Company (1952), 333 Mich 652; People v. Hertz Driveurself Stations, Inc., supra; Knott v. City of Flint (1961), 363 Mich 483; Hall v. Calhoun County Board of Supervisors (1964), 373 Mich 642; Continental Motors Corporation v. Township of Muskegon (1965), 376 Mich 170, and cases cited therein; City of Gaylord v. Gaylord City Clerk (1966), 378 Mich 273.
We hold the provision of article 5, § 13 of the motor carrier act which reads: “The inspectors so appointed by the commission shall have all the powers conferred upon peace' officers by the general laws of this state,” to be unconstitutional for the reason above stated.
We further hold that a public service commission inspector is not, and never was, a “peace officer” as that term has been generally defined. Briggs v. Campbell, Wyant & Cannon Foundry Company (1967), 379 Mich 160. It follows that the inspector had no authority, outside the ambit of the motor carrier act, to stop a private vehicle, or to demand display of a logbook, or to arrest the driver of a private vehicle.
The judgments of the trial court and the Court of Appeals are reversed.
T. E. Brennan, C. J., and Dethmers, J., concurred with T. M. Kavanagh, J.
CL 1948, §§ 480.1-480.5 (Stat Ann 1960 Eev §§ 9.1665[1'J-9.1665[5]), repealed and superseded by PA 1963, No 181, as amended (MCLA §§ 480.11-480.19, Stat Ann 1968 Eev §§ 9.1666[1]-9.1660, [9])-
PA 1933, No 254, as amended (Cl) 1948 and CLS 1961, §§ 475.1-479.20 [Stat Ann and Stat Ann 1969 Cum Supp §§ 22.531-22.585]).
Amended by PA 1956, No 164, and PA 1957, No 173.
For current provision, see Const 1963, art 4, § 24. | [
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Levin, J.
The question is whether the Department of State Police may refuse to disclose to the United Plant Guard Workers of America reports, sought by upgwa pursuant to the Michigan Freedom of Information Act, containing the names and addresses of guards employed by certain security guard agencies, on the ground that it would constitute, within the meaning of the foia, a "clearly unwarranted” invasion of the guards’ privacy.
The circuit court ordered disclosure of the reports and taxed a nominal attorney fee. The Court of Appeals affirmed. The department now seeks reversal of the order requiring disclosure, and upgwa seeks additional attorney fees. We conclude that the department is required to disclose the reports to upgwa and that upgwa is entitled to additional attorney fees._
I
In Kestenbaum v Michigan State University, 414 Mich 510; 327 NW2d 783 (1982), an evenly divided Court affirmed a Court of Appeals decision denying an foia request for the names and addresses of students. Both opinions in Kestenbaum employed the balancing test articulated, in dictum, by the United States Supreme Court in Dep’t of the Air Force v Rose, 425 US 352, 372-373; 96 S Ct 1592; 48 L Ed 2d 11 (1976), which stated that the "public interest” in disclosure is to be weighed against the "individual’s right of privacy.” Kestenbaum is not, however, binding under the doctrine of stare decisis because this Court was there evenly divided, and did not constitute an adoption of a balancing test.
In Tobin v Civil Service Comm, 416 Mich 661; 331 NW2d 184 (1982), a "reverse foia” case in which a third person attempted to prevent disclosure, the parties agreed that the information requested was within the privacy exemption.
This Court thus has not decided whether, in determining if an invasion of privacy is "clearly unwarranted,” a court should measure only the nature and extent of the asserted invasion of privacy or should balance the benefits of disclosure against the intrusion on privacy.
Our conclusion that providing the information requested in the instant case would not constitute a clearly unwarranted invasion of privacy under either approach makes it unnecessary to decide whether a court should balance the interest in disclosure against the individual right to privacy or consider only the nature and extent of the potential invasion of privacy.
II
The Attorney General contends that disclosure is required only where it would serve the foia’s "core” purpose of revealing the inner workings of the government. This argument is based on the following declaration of public policy at the outset of the foia:
It is the public policy of this state that all persons are entitled to full and complete information regarding the affairs of government and the official acts of those who represent them as public officials and public employees, consistent with this act. The people shall be informed so that they may fully participate in the democratic process.[ ]
While the federal Freedom of Information Act does not contain such a declaration of policy, the inclusion of the policy section does not mean that the Legislature intended for use of the foia to be limited to its core purpose.
The foia does not require that all requests further the core purpose, or even that all requests affecting the rights of third persons further the core purpose. The act presumes records are dis-closeable and provides that a person has a right to public records "except as otherwise expressly provided by [the exceptions section].” The exceptions section does not expressly permit withholding merely because a request would not further the core purpose. To the contrary, except as narrowly restricted in the exception sections themselves, the foia permits persons to obtain information per- taming to trade secrets, the location of archeological sites, product testing data and academic transcripts. This information would be much more useful and likely to be used in purely private pursuits than in scrutinizing governmental activity, and disclosure of such information — especially information concerning trade secrets and academic transcripts — could implicate the rights of third persons.
The Legislature decided on a broad policy of disclosure not limited to special circumstances. By declining to confine use of the foia to its core purpose, the Legislature seems to have decided that society would be better off if the government shares valuable information. As has been said, one aim of a freedom of information act is "to facilitate the exploitation of positive externalities created by the government’s acquisition of valuable information.”
Restricting the use of the foia to its core purpose would also put a premium on the ingenuity with which a requester can characterize his interest as furthering the core purpose of the act. Virtually any information held by the government could, conceivably, be used to scrutinize a governmental activity. Here, for instance, upgwa could have requested the information not only to recruit members, but also to determine whether the State Police record of security guards is sufficiently accurate and up-to-date to ensure that dangerous or otherwise unfit persons are not allowed to become, or remain, security guards capable of carrying weapons and detaining citizens. When so characterized, the request furthers the core purpose.
Thus while the policy statement underscores the core purpose, it cannot properly be read as words of limitation, requiring that all information requests further the core purpose.
Ill
In Part III, we discuss the "public interest” in disclosure, an issue that needs to be considered only in connection with a balancing test. In Part IV, we focus only on the nature and extent of the invasion of privacy. As previously indicated, whether a balancing test is employed, or whether only the privacy interest is considered, we reach the same result.
A
Assuming a balancing test is to be applied, it must still be determined whether a court should consider only the classic public interest, or whether a court should also consider the benefits that disclosure would bestow on the requester and other directly interested parties. Although the foia — which does not expressly mandate a balancing test — does not clearly answer this question, the act does provide that copying costs, which generally are imposed, may be waived if a particular request "can be considered as primarily benefiting the general public.” The foia apparently contemplates requests that would not benefit the general public. This, plus the factors considered above in Part II, suggests that the benefits accruing to the requester and other directly interested parties should be considered.
In addition, if courts consider only the classic public interest, the balancing test would account for the cost imposed on one directly affected party (an addressee’s loss of privacy), but would ignore the benefits that might be obtained by that directly interested party (an addressee might welcome an upgwa solicitation) and the benefits sought by the other directly interested party (the requester). This would not only tilt the balance against disclosure — an inappropriate result considering the statutory policy in favor of disclosure and the provision that only a "clearly unwarranted” privacy invasion justifies withholding information — but it also would elevate the "interests” of a largely disinterested public above those of directly interested requesters and addressees who might desire contact. We should not assume irrefutably that the difficult-to-quantify benefits accruing to a large number of persons — dubbed the classic public interest — are more significant than more readily quantifiable benefits accruing to directly interested parties.
The benefits to both directly interested groups and the general public should be considered. There are, therefore, four interests to be considered — the interests of the requester, the general public, the "benefited addressees” (addressees whose benefit from the contact exceeds their privacy loss), and the "harmed addressees” (addres sees whose privacy loss exceeds their benefit from contact).
B
The requester, upgwa, has a strong proprietary interest since the information would be useful and is difficult otherwise to obtain. Indeed, as the Court of Appeals noted, "this is presumably one reason why [upgwa] is willing to bear the risk and expense of litigating the issues now before this Court.”
The classic "public interest” is very limited in this case. The union did not assert that the request would further the foia’s core purpose. The general public purpose claimed is the encouragement of collective bargaining, but this is not compelling. Collective bargaining is governed by its own body of law. If the information requested were neces sary to actuate the public benefits of collective bargaining, one would expect that labor law would provide a means for its acquisition. Upgwa’s claimed public benefit has not been deemed, as a matter of labor law, sufficiently important to require employers to divulge the requested information; the claimed public benefit should not loom larger for the foia.
Although labor law does not provide a means for the acquisition of the requested information, it does not follow that the information cannot be obtained pursuant to the foia. In Excelsior Underwear, Inc, 156 NLRB 1236; 61 LRRM 1217 (1966), the National Labor Relations Board recognized that a union might attempt to secure names and addresses by means other than the acquisition of an 'Excelsior list” of employees eligible to vote in a representation election. Excelsior merely validated one means of acquiring names and addresses —it did not make that means exclusive or bar other means.
In Washington Post Co v Dep’t of Health & Human Services, 223 US App DC 139, 145; 690 F2d 252 (1982), the United States Court of Appeals for the District of Columbia Circuit, in concluding that "information that is privileged against discovery can nonetheless be obtained under foia,” reasoned that "the issues in discovery proceedings and the issues in the context of an foia action are quite different” and that therefore an "independent inquiry” was required to evaluate the privacy issues.
In the instant case, issues not involved in Excelsior are significant. Because Excelsior involved a private employer, and not the government, the board was not called upon to consider the effect of a freedom of information act. The board might have promulgated a different rule if Congress had enacted a "private” equivalent to the Freedom of Information Act requiring private parties to disclose information.
Also, an Excelsior list is available only after the direction or approval of an election, and is designed, at least in part, to reduce the number of post-election challenges by enabling the union to learn the employer’s position on voter eligibility before the election. In the instant case, the list requested does not purport to be a list of eligible voters, but is rather a list of security guards who may or may not be eligible to vote in a union election. Because the employer is not taking a position on voter eligibility, the list requested has less legal significance than an Excelsior list.
Finally, because the list requested is in the possession of the state, the employer has no bur den of preparation, as it would if an Excelsior list were requested.
Certain addressees who would like to unionize might be unaware of upgwa, and would be pleasantly surprised by the receipt of an upgwa solicitation. Although no evidence has been presented on this aspect of the matter, the number of "benefited addressees” should not be underestimated. Solicitors like upgwa would not go to the trouble and expense of an foia request and a mailing unless they expected to profit from the endeavor. They can profit only if addressees respond favorably, and addressees are not likely to respond favorably unless they believe they would be benefited. Therefore, upgwa, which knows more about its affairs than we do, must believe that a good number of addressees will believe they would benefit from the contact.
IV
Solicitation could result in an invasion of an addressee’s privacy interest. The "short, though regular, journey from the mail box to the trash can,” is not a major burden, but some addressees might suffer a greater loss. Although one would expect upgwa to treat potential members well in order to induce cooperation, some addressees might fear harassment by the union, and, even if use restrictions were employed effectively, some addressees might still fear that their addresses could become "public” and such addressees could therefore suffer a loss of peace of mind. A few addressees might even find the mere thought of unionization repulsive and offensive, akin to pornography.
There is little evidence concerning the actual effects upgwa’s solicitations might have on addressee privacy. The state’s promise of confidentiality and the express exemption barring the disclo sure of the addresses of police officers arguably suggest that the information is "information of a personal nature” the disclosure of which "would constitute a clearly unwarranted invasion of an individual’s privacy.” Nevertheless, because privacy is so subjective a concept — virtually anything can be embarrassing in the appropriate circumstance — we regard as significant the absence of evidence establishing or even tending to show that the requested information is personal in nature. We are not willing to "deem” these addresses personal in nature as a matter of law.
While we realize that foia is often used as a shortcut to obtain information, and that the compilation of empirical data might therefore defeat a requester’s objective, and that, in cases in which the requested information is truly embarrassing, the state might find it difficult to secure witnesses who would openly testify about, and thereby reveal their relation to, the embarrassing information, we nonetheless conclude that the state has failed to meet its burden of demonstrating that the requested information is so personal and private that the address lists should not be disclosed.
V
Upgwa claims it is entitled to recover reasonable, actual attorney fees, costs, and disbursements, and is not limited to an attorney fee taxed as costs pursuant to § 2441(l)(b) of the Revised Judicature Act. We agree.
The foia provides concerning attorney fees:
(4) If a person asserting the right to inspect or to receive a copy of a public record or a portion thereof preveáis in an action commenced pursuant to this section, the court shall award reasonable attorneys’ fees, costs, and disbursements. If the person prevails in part, the court may in its discretion award reasonable attorneys’ fees, costs, and disbursements or an appropriate portion thereof. The award shall be assessed against the public body liable for damages under subsection (5).[ ]
The act clearly provides that reasonable fees and other expenses must be awarded to a requester who prevails completely. Arguably, upgwa did not prevail completely since its use of the disclosed information has been restricted. While upgwa’s victory may not be total, it is still a very substantial one, and upgwa has obtained everything it initially sought. Accordingly, upgwa may recover reasonable attorney fees, costs, and disbursements that have been incurred or will be incurred on remand.
We remand to the circuit court for a determination of the amount, and reasonableness, of upgwa’s claimed attorney fees, costs, and disbursements.
Boyle, J., concurred with Levin, J.
Ryan, J.
In my judgment, the provisions of § 13 of the Michigan Freedom of Information Act do not justify the refusal to disclose the information requested by plaintiff in this case because revelation of the requested information would not consti tute a "clearly unwarranted invasion of . . . privacy” of the security guards involved. I write separately to say so because I am unable to subscribe to some of what my brother Levin has written.
My views concerning the general purpose of the state foia, the intent of its drafters, the meaning of the principal operative language of the public policy section, and the privacy exemption provisions are all set forth in my opinion in Kestenbaum v Michigan State University, 414 Mich 510; 327 NW2d 783 (1982). There is no need to reiterate them here.
It suffices to say that the only reasonably debatable point upon which the resolution of this litigation ought to turn is whether disclosure by the state police of the names and home addresses of the security guards in this case, and the identity of their employers, if an invasion of privacy at all, is one "clearly unwarranted” within the meaning of § 13 of the act.
My colleagues seem to be divided over the question whether courts should engage in a balancing of interests as a means of determining whether, in a given case, particularly this one, the public benefit to be derived from disclosure of requested information so outweighs the privacy interest involved as to warrant the conclusion that the privacy invasion was not clearly unwarranted.
It seems plain to me that deciding whether an asserted invasion of privacy is warranted, unwarranted, or clearly unwarranted involves identification and application of a standard, a criterion, to provide an answer to the question, "Compared to what?” That is the "balancing” I referred to in Kestenbaum that has been forced upon the judiciary by a purposefully imprecise legislation for resolution of those cases in which a plain and serious invasion of privacy will result from disclosure of the requested information. Since the foia says nothing about conditioning the disclosure of requested information upon the purpose for which the requester wants it, or the manner in which he promises to use it, the assumption ought to be made that the information might be used for any purpose, even criminal misuse; but surely such a possibility cannot be a basis for nondisclosure under a statute whose policy is one of disclosure. As was indicated in both opinions in Kestenbaum, supra, whether the disclosure of requested information is a "clearly unwarranted invasion of privacy” does not depend upon the possible worthwhile use to which the information may be put or the damage that can conceivably be done by its misuse. The inquiry is whether disclosure itself would amount to a clearly unwarranted invasion of privacy. In a close and difficult case, that will require, as an analytical aid to determining whether the invasion of privacy that may attend its disclosure is clearly unwarranted, a judicial determination (a balancing) whether there is a significant public purpose likely to be served by disclosure of the information. It is not every case, however, in which an appropriately self-restrained judiciary needs to make value choices in the name of "balancing.” In some cases, the information sought is simply not "[information of a personal nature” — a condition precedent to application of the "invasion of . . . privacy” exemption of § 13(l)(a) of the act. In my judgment, that was the situation in the case of the names and addresses of the 44,000 Michigan State University students in Kestenbaum. In such cases, no balancing of inter ests is required. But even if reasonable minds might differ concerning the question whether names and addresses of security guards and the identity of their employers is "information of a personal nature,” in construing the application of the state foia there is a presumption in favor of disclosure. The foia is an expression of a legislative policy of disclosure. If revelation of the information is merely an invasion of privacy, disclosure is required. If revelation is arguably an unwarranted invasion of privacy, disclosure is still required. It is only when the privacy invasion is clearly unwarranted that the exception provision of § 13 is an obstacle to revelation. The day may come when this Court will be presented with a claimed invasion of privacy of that dimension, but this is not it.
I confess to great difficulty in identifying any basis for the conclusion, in this day and age, that one’s name, address, and the identity of his employer is "information of a personal nature,” within the meaning of the exemption from disclosure provisions of § 13 of the foia or that public disclosure of such information is, per se, a clearly unwarranted invasion of privacy, whether considered in the abstract or as compared to an assert-edly countervailing public purpose. See Kesten-baum, opinion of Ryan, J., n 18.
I concur in part V of my brother Levin’s opinion concerning attorney fees.
Boyle, J., concurred with Ryan, J.
Riley, J.
I
I believe that the release by the Department of State Police of lists containing the names and home addresses of persons employed by private security guard agencies to a union for collective bargaining purposes constitutes a clearly unwarranted invasion of the employees’ privacy and therefore such lists are exempt from disclosure pursuant to § 13(l)(a) of the Freedom of Information Act, 1976 PA 442, as amended, MCL 15.231 et seq.; MSA 4.1801(1) et seq.
The foia provides for public access to public records kept by governmental bodies provided that the requested information does not fall within any enumerated exemption set forth in the act.
The legislative intent of the foia is articulated in MCL 15.231(2); MSA 4.1801(1X2):
(2) It is the public policy of this state that all persons are entitled to full and complete information regarding the affairs of government and the official acts of those who represent them as public officials and public employees, consistent with this act. The people shall be informed so that they may fully participate in the democratic process. [Emphasis added.]
Thus the foia provides public access to valuable information regarding the affairs of government, and at the same time, it subjects the activities of government to public scrutiny.
"Public body” and "public record” are defined in §§ 2(b) and 2(c) of the act. MCL 15.232(b), 15.232(c); MSA 4.1801(2)(b), 4.1801(2)(c). The parties here agree that the defendant department is a "public body.” The parties also agree that the requested information is contained in a "public record.”
The parties hereto agree that the thrust of the foia is a policy of disclosure and, therefore, the public body bears the burden of justifying refusal of a disclosure request. The parties agree, also, that the issue before this Court today is solely whether the department properly exempted the requested records from disclosure pursuant to § 13(l)(a) of the act which provides:
A public body may exempt from disclosure as a public record under this act:
(a) Information of a personal nature where the public disclosure of the information would constitute a clearly unwarranted invasion of an individual’s privacy. [MCL 15.243(l)(a); MSA 4.1801(13)(l)(a).]
In analyzing requests for release of records which are claimed to fall within the privacy exemptions of the state and federal acts, many courts have followed the approach articulated by the United States Supreme Court in Dep’t of the Air Force v Rose, 425 US 352; 96 S Ct 1592; 48 L Ed 2d 11 (1976), i.e., that the public interest must be weighed against the invasion of privacy. In Dep’t of the Air Force, supra, 372, the Court explained:
Congress sought to construct an exemption that would require a balancing of the individual’s right of privacy against the preservation of the basic purpose of the Freedom of Information Act "to open agency action to the light of public scrutiny.”
As Justice Levin recognizes, it has not been clear, however, exactly what is the public interest that is to be balanced against the invasion of privacy. I conclude that the extent to which disclosure would effectuate the purpose of the foia, as expressed in § 1(2), is a factor properly considered in evaluating the public interest in disclosure. This is not to say that disclosure must benefit the public as a whole, but it does require that release of the information be, in the language of the policy section, "consistent with this act.”
It is significant to note that there is an important difference between the Michigan foia and the federal act, 5 USC 552. The federal act, unlike our act, contains no statement of public policy. In addition, a survey of the federal cases indicates that their decisions have gone far beyond the initial standard first enunciated by the United States Supreme Court in Dep’t of the Air Force v Rose, supra.
I agree with Justice Levin that "[t]he foia does not require that all requests further the core purpose” as expressed in the policy section because that would, in effect, be creating a separate exemption not intended by the Legislature. However, I believe this section cannot be ignored. The foia’s policy section must be used in defining the public interest side when determining whether a request for information gives rise to a clearly unwarranted invasion of privacy. The more the release of the information would further the core purpose of the act, the more the scale will tip in favor of disclosure.
It is for these reasons that I decline to follow the federal lead, or that of Justices Levin and Ryan today, and adopt a broad conception of any unrelated public purpose as opposed to a purpose consistent with the Michigan Legislature’s declaration of intent in § 1(2) of the Michigan foia.
II
In evaluating the privacy interests involved in the case at bar, it is instructive to note that the Private Security Guard Act of 1968, MCL 338.1051 et seq.; MSA 18.185(1) et seq., prescribes, in part, certain powers and duties of the department with regard to private security guards and private security guard agencies. The purpose of the act is to license and regulate the security guard industry in order to protect the general public from any unauthorized and unethical procedures by individuals engaged in private security guard operations. The act also provides the department with the authority to promulgate rules and regulations. One such rule requires security guard agencies to file quarterly reports containing the names and addresses of personnel with the department:
A complete employee personnel list shall be filed with the department by each licensee on a quarterly basis. This list shall be kept conñdential except for oficial use. [1979 AC, R 28.4003. Emphasis added.]
These quarterly reports (which include names and home addresses of each licensee’s employees) are used by the department to verify that the individuals who are employed with private security guard agencies are in compliance with the employment qualifications specified in the act. The department licenses only the agencies, not their individual employees. However, the act does require that individual employees meet certain minimum qualifications and requires that the employer submit a set of fingerprints of each employee to the department so that it may determine whether the qualifications have been met. MCL 338.1067, 338.1068; MSA 18.185(17), 18.185(18).
Ill
Turning next to the public interest asserted, the quarterly reports in the instant case were requested by the upgwa for the purpose of furthering union activity. The request with regard to one agency was to disseminate information concerning organization of a union. The purpose with regard to the other two agencies was to facilitate the enactment of collective bargaining agreements. As Justice Levin notes, the general public purpose asserted — the encouragement of collective bargaining — is not compelling. Further, in assessing the extent to which disclosure would further the core purpose of the act as expressed in § 1(2), no claim is made that release of the requested information would either serve to increase public awareness and understanding of the actions and operations of public agencies, officials, or employees, or that it would facilitate participation in the democratic process.
IV
I conclude that in balancing the privacy interest at stake with the public interest in disclosure (which includes the "core purpose” factor), it is clear that the privacy interest does outweigh the public interest, thus mandating denial of disclosure of the requested records. While release of names and home addresses in some instances may not be a clearly unwarranted invasion of privacy, I am persuaded that it is in this case. Here the requested information is from an involuntary submitter under a requirement that also provides that the information be kept confidential. Moreover, this request intrudes upon and may adversely affect the confidentiality needs usually associated with private security personnel.
I also believe that whether or not the records in question are otherwise obtainable does not affect the disclosability issue. Nothing in the act suggests that records that are available elsewhere are to be treated any differently than records not available elsewhere. Further, as noted by the Court of Appeals in Mullin v Detroit Police Dep't, 133 Mich App 46, 54; 348 NW2d 708 (1984), the " 'available elsewhere’ inquiry [has been] used both to support and to deny disclosure . . . .” Hence, I am persuaded that this factor is irrelevant to the determination of disclosability.
Finally, I conclude that it is a distortion of the language of the foia and the legislative intent declared therein to argue that the controlling factor, in weighing whether an invasion of privacy is warranted, is the particular public purpose claimed by those requesting the information contained in the public records. To be sure, my colleagues cite several cases to support the conclusion they have reached today, but in almost every instance they rely on federal cases which speak to the federal act which contains no express statement of public policy. I decline, however, to read the policy section out of the Michigan act. I consider this act in its entirety as it was written. Thus, I am persuaded that we are not bound by the balancing of interests test espoused by either Justices Levin or Ryan (i.e., the public purposes of those seeking disclosure versus the extent of the invasion of privacy). I agree with former Chief Justice Fitzgerald’s opinion in Kestenbaum v Michigan State University, 414 Mich 510; 327 NW2d 783 (1982), holding that the particular purpose for which the information is requested is not the controlling focus of analysis when scrutinizing the public benefits of disclosure. The determination should also include whether the release is consistent with the legislative intent as expressed in the policy section of the act. I am persuaded that an approach which takes into account the extent to which disclosure would further the public purpose of the act is the most workable approach and, further, is most consistent with the intent of the act. I believe that the department properly exempted the requested records from disclosure. Thus, I would reverse.
Williams, C.J., concurred with Riley, J.
MCL 15.231 et seq.; MSA 4.1801(1) et seq.
The privacy exemption provides:
"(1) A public body may exempt from disclosure as a public record under this act:
"(a) Information of a personal nature where the public disclosure of the information would constitute a clearly unwarranted invasion of an individual’s privacy.” MCL 15.243(l)(a); MSA 4.1801(13)(l)(a).
Upgwa asserted that the request was in the public interest because it would "facilitate the dissemination to . . . employees of information concerning the union,” and facilitate enforcement of existing collective bargaining agreements.
Int’l Union, United Plant Guard Workers of America v Dep’t of State Police, 118 Mich App 292; 324 NW2d 611 (1982).
Because the United States Supreme Court in Dep’t of the Air Force v Rose, 425 US 352; 96 S Ct 1592; 48 L Ed 2d 11 (1976), ordered that the requested information be disclosed, the privacy exemption was not operative. In United States Dep’t of State v Washington Post Co, 456 US 595; 102 S Ct 1957; 72 L Ed 2d 358 (1982), the Court held only that records need not be similar to personnel or medical records to qualify for the privacy exemption.
In Breckon v Franklin Fuel Co, 383 Mich 251, 278-279; 174 NW2d 836 (1970), this Court, considering the effect of opinions signed by four of eight justices, quoted approvingly from 20 Am Jur 2d, Courts, § 195, pp 530-531:
"A decision by an equally divided court does not establish a precedent required to be followed under the stare decisis doctrine.”
Accord Hertz v Woodman, 218 US 205, 213-214; 30 S Ct 621; 54 L Ed 1001 (1909); Meredith v Bd of Public Instruction, 112 F2d 914, 916 (CA 5, 1940).
Tobin, supra, p 671.
The issue is not a simple one. Although the language of the privacy exemption in the federal Freedom of Information Act, like its Michigan counterpart, does not mandate balancing, some authority for balancing can be found in the Senate report:
"The phrase 'clearly unwarranted invasion of personal privacy’ enunciates a policy that will involve a balancing of interests between the protection of an individual’s private affairs from unnecessary public scrutiny, and the preservation of the public’s right to governmental information.” (Emphasis added.)
In contrast, the House report seems to imply that Congress itself struck the balance with the phrase "clearly unwarranted”:
"The limitation of a 'clearly unwarranted invasion of personal privacy’ provides a proper balance between the protection of an individual’s right of privacy and the preservation of the public’s right to Government information by excluding those kinds of files the disclosure of which might harm the individual.” (Emphasis added.)
(Both reports are reproduced in Hoglund & Kahan, Comment: Invasion of privacy and the Freedom of Information Act: Getman v NLRB, 40 Geo Wash L R 527, 530, ns 19, 20 [1972]).
Some courts and commentators have said that the Senate report provides more useful insight into Congressional intent. In Getman v NLRB, 146 US App DC 209, 212, n 8; 450 F2d 670 (1971), the United States Court of Appeals for the District of Columbia Circuit said:
"[T]he Senate report is to be preferred over the House report as a reliable indication of legislative intent because the House report was not published until after the Senate had already passed its bill.”
Accord Benson v GSA, 289 F Supp 590, 595 (WD Wash, 1968), and Consumers Union, Inc v Veterans Administration, 301 F Supp 796, 801 (SD NY, 1969).
Professor Davis said that "the House committee yielded to pressures to restrict the disclosure requirements, but instead of changing the bill, it wrote the restrictions into the committee report.” Davis, Administrative Law (3d ed), p 69. The House report, in this context, seems to support more liberal disclosure than the Senate report.
With respect to the Michigan foia, it is worth noting that the act, for five different exceptions to disclosure, expressly mandates balancing to determine the applicability of the exceptions. See MCL 15.243(lXc), (1), (n), (o), and (t); MSA 4.1801(13XD(c), CD, (n), (o), and (t).
MCL 15.231; MSA 4.1801(1).
MCL 15.233(1); MSA 4.1801(3)(1). (Emphasis added.)
The foia provides for exemption from disclosure only (see MCL 15.243[1]; MSA 4.1801[13][1]) for:
"(g) Trade secrets or commercial or financial information voluntarily provided to an agency for use in developing governmental policy if:
(i) The information is submitted upon a promise of confidentiality by the public body.
(ii) The promise of confidentiality is authorized by the chief administrative officer of the public body or by an elected official at the time the promise is made.
(iii) A description of the information is recorded by the public body within a reasonable time after it has been submitted, maintained in a central place within the public body, and made available to a person upon request. This subdivision shall not apply to information submitted as required by law or as a condition of receiving a governmental contract, license, or other beneñt.” (Emphasis added.)
The foia provides for exemption from disclosure only (see MCL 15.243[1]; MSA 4.1801[13][1]) for:
"(p) Information which would reveal the exact location of archeological sites. The secretary of state may promulgate rules pursuant to Act No. 306 of the Public Acts of 1969, as amended, being sections 24.201 to 24.315 of the Michigan Compiled Laws, to provide for the disclosure of the location of archeological sites for purposes relating to the preservation or scientific examination of sites.”
The foia provides for exemption from disclosure only (see MCL 15.243[1]; MSA 4.1801[13][1]) for:
"(q) Testing data developed by a public body in determining whether bidders’ products meet the specifications for purchase of those products by the public body, if disclosure of the data would reveal that only 1 bidder has met the speciñcations. This subdivision shall not apply after 1 year has elapsed from the time the public body completes the testing.”
The foia provides for exemption from disclosure only (see MCL 15.243[1]; MSA 4.1801[13][1]) for:
"(r) Academic transcripts of an institution of higher education established under sections 5, 6 or 7 of article 8 of the state constitution of 1963, where the record pertains to a student who is delinquent in the payment of financial obligations to the institution.”
See ns 16 and 21 and accompanying text.
Kestenbaum, supra, p 542, n 10, quoting Kronman, The privacy exemption to the Freedom of Information Act, 9 J Legal Studies 727, 744 (1980).
See n 21. Although the note discusses problems with the "public interest,” similar problems exist in determining the core purpose.
A request which would benefit the general public might not further the core purpose of the foia, and vice versa. For instance, a request by a tax attorney for Internal Revenue Service revenue rulings for use in his private practice would further the core purpose (it would reveal how government officers make governmental decisions), but would probably not benefit the general public. Conversely, a request by a philanthropist for the names of students receiving financial aid, so that the philanthropist could set up a broad-based scholarship fund, would appear to benefit the general public (students would receive aid and taxpayers would be less burdened), but would not seem to further the core purpose of the foia.
See n 7.
MCL 15.234(1); MSA 4.1801(4)(1).
MCL 15.243(l)(a); MSA 4.1801(13)(l)(a). (Emphasis added.)
In Washington Post Co v Dep’t of Health & Human Services, 223 US App DC 139, 148; 690 F2d 252, 261 (1982), the United States Court of Appeals for the District of Columbia Circuit said that the privacy exemption
"requirement that disclosure be 'clearly unwarranted’ instructs us to 'tilt the balance [of disclosure interests against privacy interests] in favor of disclosure . . .’ the [privacy exemption’s] presumption in favor of disclosure is as strong as can be found anywhere in the Act.”
Accord Rose, supra, p 378, n 16; Kestenbaum, supra, p 554 (opinion of Ryan, J.); Mullin v Detroit Police Dep’t, 133 Mich App 46, 50; 348 NW2d 708 (1984); UPGWA, n 3 supra, p 295; Penokie v Michigan Technological University, 93 Mich App 650, 663; 287 NW2d 304 (1979); Ditlow v Shultz, 170 US App DC 352, 355; 517 F2d 166 (1975); Getman, n 7 supra, p 213; Rural Housing Alliance v United States Dep’t of Agriculture, 162 US App DC 122; 498 F2d 73 (1974); Disabled Officer’s Ass’n v Rumsfeld, 428 F Supp 454 (D DC, 1977).
Because the "public interest” is a vague, difficult-to-quantify concept, courts have had trouble using it in this context. One commentator has noted that "[a]s a result [of the public interest requirement] there is a premium on the ingenuity with which a requester’s lawyer can characterize a client’s interest as public.” Adler, Litigation Under the Federal Freedom of Information Act and Privacy Act (10th ed), p 111. Compare, for example, American Federation of Government Employees v Dep't of Health & Human Services, 712 F2d 931 (CA 4, 1983) (union’s request for addresses of employees denied because benefits "inure primarily to the union”) and Van Bourg, Allen, Weinberg & Roger v NLRB, 728 F2d 1270 (CA 9, 1984) (union’s request for addresses of employees granted because the union "raised the possibility that the representation [election] was conducted unlawfully”). See also Heights Community Congress v Veterans Administration, 732 F2d 526, 530 (CA 6, 1984) (desegregation group requested addresses of va loan recipients to investigate racial bias and steering, but request denied because this "legitimate public interest” was outweighed by "the basic right in this nation simply to be left alone”); Ferri v Bell, 645 F2d 1213, 1218 (CA 3, 1981) (prisoner’s request for arrest record of prosecution witness, sought in order to help overturn his conviction, granted because the "public at large has an important stake in ensuring that criminal justice is fairly administered”).
In a pluralistic society, there cannot be a public interest — there only can be a diverse hodgepodge of values and interests, the sum of which might be called the "public interest.” The "public interest” is often a shorthand method of accounting for difficult-to-quantify benefits that accrue to a large number of persons. Upgwa is part of "the public”; its interests, even if "private,” are part of a broader public interest. Similarly, benefits to addressees also further a broadly viewed public interest.
It is unclear whether harm to nonaddressees and the public interest should be considered in balancing interests. The state, if required to divulge information in contravention of a promise of confidentiality, might find it more difficult to obtain cooperation in the future, and increased compliance costs would harm the public. (See generally Washington Post Co, n 20 supra, pp 146, 168.) Also, the submission by the Michigan Association of Private Detectives and Security Guard Agencies, Inc., of an amicus brief opposing disclosure suggests that security guard agencies might prefer that the addresses of their employees not be disclosed. We are of the opinion that the Legislature, by providing for broad disclosure limited by few exceptions, determined that only specified interests (i.e., the privacy interests of addressees) should weigh against disclosure.
Except as exemptions to disclosure provide (see generally MCL 15.243; MSA 4.1801[13]), the foia makes the agency’s interests subservient to the other interests.
Without use restrictions, addressees for whom the privacy cost is greater than the benefit from contact if there are no use restrictions, but for whom benefit from contact is greater than privacy cost if use restrictions are used, are "harmed addressees.” With use restrictions, such addressees are "benefited addressees.”
The availability of alternative sources of information has been considered by some courts. See Kestenbaum, supra, pp 530-533; Mullin, n 20 supra, p 53; UPGWA, n 3 supra, p 295; Penokie, n 20 supra, p 659; Getman, n 7 supra, pp 215-216; Ditlow, n 20 supra, p 358; Disabled Officer’s, n 20 supra, p 458; Van Bourg, n 21 supra, p 1273; Rural Housing Alliance, n 20 supra, p 127; Minnis v Dep’t of Agriculture, 737 F2d 784, 786 (CA 9, 1984).
Here, upgwa could attempt to obtain an "Excelsior list” of employees who are eligible to vote in a union election, but only after the approval or direction of an election, and this would require a showing by upgwa that thirty percent of the employees were interested in the union. See Excelsior Underwear, Inc, 156 NLRB 1236; 61 LRRM 1217 (1966). The nlrb has acquiesced to the disclosure of "Excelsior lists” which contain up to a thirteen percent error factor in the addresses of eligible voters. See Days Inn of America, Inc, 216 NLRB 384; 88 LRRM 1224 (1975). Upgwa could also negotiate with the employers for a list of employee addresses, but this would presumably require some concession by the union. Finally, while upgwa might use other means of communicating with potential members, methods such as distributing leaflets might be ineffective at organizing dispersed workers.
UPGWA, n 3 supra, p 297. See also Kronman, n 15 supra, p 744.
Under certain circumstances, a union may require an employer to disclose the names and addresses of certain employees. See the discussion of Excelsior, n 26 supra.
Michigan law appears to be in accord with Excelsior. See Helper v Dep’t of Labor, 64 Mich App 78; 235 NW2d 161 (1975).
In contrast, in United States v Weber Aircraft Corp, 465 US 792; 104 S Ct 1488; 79 L Ed 2d 814, 824 (1984), the United States Supreme Court refused to grant an foia request because disclosure would have “circumvented” the "weighty policies underlying discovery privileges.” (Emphasis supplied.)
In Weber the Supreme Court was construing foia exemption 5 which allows withholding of:
"inter-agency or intra-agency memorandums or letters which would not be available by law to a party other than an agency in litigation with the agency.” 5 USC 552(b)(5). (Emphasis added.)
Because exemption 5 requires consideration of availability in litigation, a court, in determining whether information must be disclosed pursuant to the foia, must first decide whether the information would be discoverable.
The separate privacy exemption, however, stands on its own, and does not incorporate another body of law.
See Excelsior, supra. See also Morris, The Developing Labor Law (2d ed), p 382.
See Gray Drug Stores, Inc, 197 NLRB 924; 80 LRRM 1449 (1972).
In Disabled Officer’s, n 20 supra, p 458, a United States district court considered that disclosure might benefit certain addressees.
Upgwa could, for instance, have attempted to show that guards had communicated with the union regarding representation. In some cases, benefit to the addressees can probably be assumed. In Ditlow, n 20 supra, for instance, an attorney wished to communicate with travelers who might recover damages in a class action. See also UPGWA, n 3 supra, p 296.
Kestenbaum, supra, p 555 (opinion of Ryan, J.), quoting Lamont v Comm’r of Motor Vehicles, 269 F Supp 880, 883 (SD NY, 1967). See also Kronman, n 15 supra, p 745.
See Kromnan, n 15 supra, p 747.
Id., p 745.
In Kestenbaum, supra, pp 544, 551, Justice Ryan suggested that a court first inquire whether requested information was "of a personal nature” and, if so, then determine whether the disclosure of the information "would constitute a 'clearly unwarranted invasion of an individual’s privacy.’ ”
It has been said that "[o]ther things being equal, release of information provided under a pledge of confidentiality involves a greater invasion of privacy than release of information provided without such a pledge.” Washington Post Co, supra, 223 US App DC 150. Accord Ditlow, n 20 supra, p 358. See also Rural Housing, n 20 supra, p 127, n 21; Robles v EPA, 484 F2d 843, 846 (CA 4, 1973). The reasons for this belief are not compelling, and apply with little force in this case.
While the foia exempts from disclosure “[rjecords or information specifically described and exempted from disclosure by statute” (emphasis added), MCL 15.243(l)(d); MSA 4.1801(13)(l)(d), there is no corresponding provision concerning information described in administrative regulations or promises. A regulation, qua regulation, therefore, does not defeat disclosure. See Legal Aid Society of Alameda County v Schultz, 349 F Supp 771, 776 (ND Cal, 1972) ("administrative promises of confidentiality cannot extend the command of the Freedom of Information Act that only matters 'specifically exempted ... by statute’ are [exempted from disclosure]”).
The significance, if any, of a pledge of confidentiality is attributable to the expectation of privacy the pledge may generate (see Washington Post Co, supra, 223 US App DC 150) or to the belief that such a pledge would not have been made unless the information submitted was truly personal.
Assuming that a pledge of confidentiality can create an expectation of privacy if properly communicated, there is no evidence that the guards in this case were aware of the pledge. The Court should not assume such awareness especially since the employers, not the guards, submitted the information to the State Police. See MCL 338.1068(1); MSA 18.185(18X1).
More importantly, while a pledge of confidentiality might induce an expectation that information will not be released, a pledge does not enhance or change the "quality” of the information and make it "[i]nformation of a personal nature" within the meaning of the privacy exemption. To illustrate, suppose a regulation required every citizen to submit to the state the third letter of the citizen’s last name. A pledge of confidentiality would create an expectation of "privacy” (i.e., lack of disclosure), and breach of the pledge might be a "clearly unwarranted” breach of trust, but few would assert that a breach constituted an invasion of privacy. A pledge of confidentiality does not affect whether the underlying information is "information of a personal nature.”
While, arguably, a pledge of confidentiality might give rise to the inference that the underlying information is personal in nature, there is no need to rely on an inference. This Court can directly examine the content of the information and make a judgment whether it is personal. The State Police may have honestly believed that the information was "personal” and thus in need of confidentiality, but the State Police possess no special ability to determine whether information is personal (in the generic sense), and the State Police certainly have no expertise in determining whether information is "of a personal nature” within the meaning of the foia.
Although there has been no allegation in the instant case that the pledge of confidentiality was given to subvert the foia, an agency might make such a pledge to accomplish that objective. See, e.g., Washington Post Co, supra, 223 US App DC 150 ("to allow the government to make documents exempt by the simple means of promising confidentiality would subvert foia’s disclosure mandate”); Ackerly v Ley, 137 US App DC 133, 136-137, n 3; 420 F2d 1336 (1969) ("it wül obviously not be enough for the agency to assert simply that it received the file under a pledge of confidentiality to the one who supplied it. Undertakings of that nature can not, in and of themselves, override the Act”). Accord Robles, supra, p 846; Providence Journal Co v FBI, 460 F Supp 778, 786 (DC RI, 1978); Legal Aid Society, supra, p 776. See, also, Davis, Administrative Law (Supp 1970), § 3A.22, p 164.
Because a confidentiality pledge is of limited value in determining whether information is "[¡Information of a personal nature” disclosure of which "would constitute a clearly unwarranted invasion of an individual’s privacy,” and because there is a potential for abuse, a pledge of confidentiality should be given little, if any, weight.
The foia, MCL 15.243(l)(t); MSA 4.1801(13)(l)(t), permits an agency to withhold "[ujnless the public interest in disclosure outweighs the public interest in nondisclosure in the particular instance, public records of a police or sheriffs agency or department, the release of which would do any of the following: . . . (iii) Disclose the personal address or telephone number of law enforcement officers or agents or any special skills that they may have.”
The Attorney General argues that because security guards are quasi-law enforcement officers subject to some of the same risks as police officers, the addresses of guards should be accorded the same, somewhat qualified, exemption from disclosure.
Under the foia, however, withholding of information is permitted only when "expressly provided by [the exceptions section]” MCL 15.233(1); MSA 4.1801(3)(1) (emphasis added). The exceptions section does not "expressly” permit withholding the addresses of security guards.
The fact that the addresses of law enforcement officers need not be disclosed does not mean that the addresses comprise "[information of a personal nature” the disclosure of which "would constitute a clearly unwarranted invasion of an individual’s privacy.” If addresses were personal, there would have been no reason to include a separate section exempting from disclosure officers’ addresses. The exemption for the addresses of law enforcement officers was added not because an address is information of a personal nature, but because the exemption is thought to promote effective police work or to he necessary for the protection of law enforcement officers and their families. The Legislature did not feel that such an address exemption was necessary for security guards.
See Kestenbaum, supra, pp 544, 554; Ditlow, n 20 supra, p 356, n 12; Kronman, n 15 supra, p 752.
A showing that disclosure would constitute the tort of "public disclosure of private facts” would seem to evidence that requested information is personal and private. The Texas Court of Appeals employed this standard in Hubert v Harte-Hanks Texas Newspapers, Inc, 6520 SW2d 546 (Tex App, 1983). (The federal courts have, with regard to the privacy interests of "public figures,” analogized the issues involved in the federal Freedom of Information Act to those involved in freedom of speech libel cases. See, e.g., Fund for Constitutional Government v National Archives & Records Service, 211 US App DC 267; 656 F2d 856, 864-865 [1981], and Common Cause v National Archives & Records Service, 202 US App DC 179, 184-185; 628 F2d 179 [1980].)
The federal Freedom of Information Act characterizes as especially private "medical and personnel” files, 5 USC 552(b)(6), and, although the federal courts no longer require an agency to show that records are similar to personnel or medical records in order to qualify for the privacy exemption (see United States Dep’t of State v Washington Post Co, 456 US 595, 600; 102 S Ct 1957; 72 L Ed 2d 358 [1982]), such a demonstration would still militate in favor of withholding information.
Surveys of interested persons’ attitudes about confidentiality have also been considered as evidence of the personal nature of information. See Simpson v Vance, 208 US App DC 270, 274; 648 F2d 10 (1980); Washington Post Co, supra, 223 US App DC 149. But see the dissent in Washington Post Co, supra, 223 US App DC 164-165. Similarly, in Kestenbaum, supra, p 546, Justice Ryan, apparently believing that the amount of effort expended to keep information confidential relates to whether information is personal and private, felt it was important that very few students had "opted out” of being listed in the student directory. Here, the Post Office's list of persons who have elected to be removed from mailing lists pursuant to 39 USC 3008 might have been compared, in camera if necessary, to the persons on the lists requested by upgwa. Also, the state could have attempted to demonstrate that similar unionization attempts involved invasions of privacy. See Getman, n 7 supra, p 214.
Because the privacy interest invaded is minimal, regardless of whether use is restricted, and because upgwa has not objected to the use restrictions added by the Court of Appeals, we need not decide whether use restrictions are valid.
MCL 600.2441(l)(b); MSA 27A.2441(l)(b).
MCL 15.240(4); MSA 4.1801(10)(4).
We note, in passing, that under the federal Freedom of Information Act, the award of costs is discretionary. See 5 USC 552(a)(4)(E).
See, however, n 43.
MCL 15.231(2); MSA 4.1801(1)(2).
MCL 15.243(l)(a); MSA 4.1801(13)(l)(a).
MCL 15.243; MSA 4.1801(13).
For purposes of this opinion, I accept, without agreeing, that the information sought herein is contained in a "public record.”
I recognize that Justice Levin does not expressly endorse a balancing approach.
MCL 338.1056(l)(a), (e), (fj, (k), 338.1067(2); MSA 18.185(6)(l)(a), (e), (f), (k), 18.185(17)(2). | [
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] |
Per Curiam.
The issue in these cases is whether an actual intent to kill is an element of the crime of assault with intent to commit murder. MCL 750.83; MSA 28.278. The prosecution concedes that it is, and we therefore address the question whether to reduce these assault convictions.
I
On October 22, 1977, defendant Guy D. Taylor shot a man named Billy Fuller. The shooting occurred during a confrontation that appears to have been the result of some earlier gang-related animosity. At a bench trial in December of 1977, the defendant was found guilty, as charged, of assault with intent to murder, possession of a firearm during the commission of a felony, and possession of a pistol with the intent to use it unlawfully. MCL 750.83, 750.227b, 750.226; MSA 28.278, 28.424(2), 28.423. In finding the defendant guilty, the trial court made the following findings:
The Court having heard the testimony of these various witnesses, I think the testimony is without any contradiction whatsoever, that Mr. Taylor did fire his weapon, this .38 derringer which was introduced into evidence, at Mr. Fuller, striking him in the face with the bullet. This certainly constitutes an assault, no question about that. The next question which this Court would have to make a finding of fact on, is whether this assault was with intent to commit murder. That is probably the most difficult part of the elements that the Court has to consider — an assault is very simple, there is no question about that. The question of intent is one that can be inferred by the acts of the individual himself and as I stated yesterday, the inferences that may be wrought from that is discussed in [People v Johnson, 54 Mich App 303, 304; 220 NW2d 705 (1974)], where it says, "The intentional discharge of a firearm at someone within range is an assault. The usual result and purpose of such an assault is death. The unjustified and unexcused intention to kill when committing an assault constitutes the crime charged.”
Well, if I recall the testimony correctly of at least two of the witnesses, the words might not have been exactly the same, the general context that Mr. Taylor pointed the gun at Mr. Fuller and said, "I’ll show you that this gun isn’t shit,” which would indicate certainly an intent to shoot him. There is no question about that as set forth in a great many Michigan cases, one of them [People v Becker, 300 Mich 562; 2 NW2d 503; 139 ALR 1171 (1942)], which the court said the intent to kill may be evidenced by the nature and the location of the bullet wound in the body of the victim. In this case Mr. Fuller had a bullet wound in his cheek, and of course, if that bullet wound had been three to four inches higher, and a couple of inches to the left, he would have shot him through the forehead. If that would have been the case I think that Mr. Fuller would have been . . . dead rather than in this court testifying in this case and as indicated in other Michigan cases, one of those being [Wilson v People, 24 Mich 410 (1872)], because assault must be under circumstances where death ensued, the crime would have been murder. There is no question that Mr. Fuller, had Mr. Fuller died, Mr. Taylor would have been charged with murder and in all probability at the trial would have been found guilty of murder based upon the testimony we have heard today, and I think this indicates enough of the elements of the crime that we have an assault with intent to commit murder and there is no — the same being done with malice. I see no mitigating circumstances, in fact, the fact they were arguing is one thing, but he was in an automobile. He had the opportunity to leave. He wasn’t protecting himself, or anything else, he just stuck his arm out the window and fired it at Mr. Taylor [sic], obviously with the intent of hitting him with it. I would say that with intent to murder Mr. Taylor [sic], not to do great bodily harm. A definition of malice as indicated, in the jury charges is malice means the defendant intended to kill or the conscious — to create a very high degree of misconduct and knowledge of the probable consequences of his act, he did so under circumstances which do not justify, excuse or mitigate the crime and that is exactly what I find here. He created a very high risk death [sic] and knowledge of the crime and the consequences of his act, and there are no circumstances which justify, to [sic] excuse, or mitigate the crime.
Based upon those findings, I find Mr. Taylor guilty of Count 1, the charge, assault with intent to commit murder and there is no question as to Count No. 2 that he had the weapon in his hands, he committed a felony while in the possession of a firearm and based upon the testimony, it is uncon-tradicted in this case, therefore I find him guilty of Count 2, possession of a firearm in the commission of a felony. And Count 3, the carrying of a firearm with unlawful intent. There is no question about that. The elements in this crime are that he was armed with a pistol, and second, at the time he was so armed the defendant intended to use this weapon, and third, he intended to use the weapon unlawfully against the person of another. And the testimony in this matter clearly indicates that all three of those elements are present.
The Court will find him, also, guilty of Count 3 in this matter.
The defendant was sentenced to a term of from fifteen to twenty-five years in prison for assault with intent to murder, two years in prison for felony-firearm, and from two to five years in prison for possession of a pistol with the intent to use it unlawfully.
The Court of Appeals affirmed. The defendant then filed a letter request for review pursuant to Administrative Order No. 1977-4, 400 Mich lxvii (1977). This Court directed that counsel be appointed for the defendant. After he filed a delayed application for leave to appeal, we granted leave to appeal. People v Guy Taylor, 419 Mich 879 (1984).
II
On May 19, 1978, Andre Witcher was shot, receiving injuries that have since confined him to a wheelchair. Defendant Marvin Johnson was part of a group of people involved in the melee in which Witcher was shot. Johnson was charged with assault with intent to murder. MCL 750.83; MSA 28.278. The defendant was tried before a jury in June of 1979, and was found guilty as charged. The jury was given the following instructions con cerning the intent needed to commit the crime of assault with intent to murder:
The defendant is charged with the crime of assault with intent to murder. Any person who shall assault another with intent to commit the crime of murder is guilty of this crime.
The defendant pleads not guilty to this charge. To establish this charge the prosecution must prove each of the following elements beyond a reasonable doubt:
First, that the defendant, Marvin Johnson, assaulted Andre Witcher, the complainant in this case. An assault, ladies and gentlemen of the jury, is an attempt or threat, with force and violence, to do some immediate bodily harm to another by one who has the present means of doing such harm.
Second, that at the time of committing such an assault the defendant intended to murder the complainant.
Murder, ladies and gentlemen of the jury, is the killing of one person by another with malice. Malice is a term with special meaning in the law. Malice means that the defendant intended to kill or that he consciously created a very high degree of risk of death with knowledge of the probable consequences of his act and that he did so under circumstances which did not justify, excuse or mitigate the crime.
Those are the elements, ladies and gentlemen, that the People must show to prove the crime of assault with intent to commit murder.
Ladies and gentlemen of the jury, the first two charges that I’ve charged you on; that is, assault with intent to commit murder and assault with intent to commit great bodily harm or do great bodily harm less than murder, are what we call specific intent crimes, and I will now define for you, under the law, what is specific intent.
Beginning: When a certain intent is a necessary element in a crime, the crime cannot have been committed when the intent did not exist.
Intent is a decision of the mind to knowingly do an act with a conscious, fully formed objective of accomplishing a certain specific result.
There can be no crime of assault with intent to commit murder, or assault with intent to do great bodily harm less than murder, under our law where, in the case of assault with intent to murder, there is no intent to murder, and the burden rests upon the prosecution to show beyond a reasonable doubt that the defendant at the time of doing the alleged act had that wrongful intent.
The intent with which a person does an act is known by the way in which he expresses it to others or indicates it by his conduct. The intent with which a person does an act can sometimes be determined from the manner in which it is done, the method used an [sic] all other facts and circumstances, but only if that intent is established by the evidence.
If you find that the defendant, for any reason whatsoever, did not consciously and knowingly act with the intent to murder, the crime cannot have been committed and you must find the defendant not guilty of the crime of assault with intent to murder.
On the other hand if you find — not on the other hand, but also charging you. If you find that the defendant, for any reason whatsoever, did not consciously and knowingly act with the intent to do great bodily harm less than murder to the complainant, the crime cannot have been committed and you must find the defendant not guilty of the crime of assault with intent to do great bodily harm less than murder.
Again, ladies and gentlemen, you must consider specific intent as you consider the first two charges that I have charged you with reference to assault with intent to murder and assault with intent to do great bodily harm less than the crime of murder.
If from all of the evidence you have a reasonable doubt as to whether or not the defendant knowingly and consciously acted with the intent to murder or to do great bodily harm less than murder, then you must find the defendant not guilty of the crime of assault with intent to com mit murder or assault with intent to do great bodily harm less than murder.
The defendant was sentenced to a term of from twenty to forty years in prison.
The Court of Appeals affirmed. People v Johnson, 116 Mich App 452; 323 NW2d 439 (1982). We then granted leave to appeal. People v Johnson, 419 Mich 879 (1984).
Ill
On January 1, 1982, defendant Ronald G. Taylor fired a large number of shots at the home of a Romulus family named Webb. A daughter was killed, and the mother and two other children were wounded. The father and a fourth child were present at the time of the attack, but were not wounded. The defendant was charged with first-degree murder, five counts of assault with intent to murder, and one count of possession of a firearm during the commission of the murder and assaults. MCL 750.316, 750.83, 750.227b; MSA 28.548, 28.278, 28.424(2).
A bench trial took place in July of 1982. At the conclusion of trial, the defendant was found guilty of second-degree murder and was otherwise convicted as charged. MCL 750.317; MSA 28.549. The trial court explained:
The Court: The Court would first like to acknowledge its gratitude to the attorneys for their patience which has been excellent and thorough and in the best interests or in the best traditions of the Prosecution and Defense bar. You have both represented your respective interests in this trial extremely well._
Based upon all the evidence in the case, the Court makes the finding, the following findings of fact and conclusions of law beyond a reasonable doubt.
The events upon which this, the criminal charges in this case are based occurred during the evening of January 1, 1982, in Wayne County, Michigan.
Throughout the evening of January 1, 1982, although Defendant had consumed an unknown amount of alcoholic beverages, had been struck and kicked in a melee with Robert Webb, Earl Bryant, and Garnet Bryant and was angry, nevertheless Defendant was possessed of the requisite mental ability to form the state of mind and specific intents to which the Court will have reference in these findings of facts and conclusions of law.
After being involved in the melee at the Webb home with the Bryant brothers and Mr. Webb, the Defendant left the home, obtained a rifle or rifles along with ammunition and returned to the vicinity of the Webb home.
While in the Webb home previous to his leaving it, the Defendant had become aware that the home, and specifically the living room, was occupied by Mr. and Mrs. Webb and the Webb children, Monica, Erica, Robin Gail, and Robert, Jr., and that when he returned to the home, the Defendant was similarly aware of its occupants.
Upon his returning to the vicinity of the Webb home and locating himself approximately 70 yards from the front of the home, the Defendant fired a fusilade [sic] of .30 caliber rifle shots at the front of the Webb home at least seven of which shots entered the home.
When he fired the fusilade of shots into the front of the Webb home, the Defendant knew he was creating an extremely high degree of risk of death or serious bodily harm to the occupants of the home and he had the specific intent to create such a risk.
The Defendant fired the fusilade of shots into the front of the Webb home with malice, in that he intentionally, knowingly, willfully, and wantonly committed acts, the natural tendency of which was to cause death or serious bodily harm with knowing and intentional disregard of the consequences of such acts.
During the fusilade of shots fired by Defendant into the front of the Webb home, Monica Webb was killed by one of the shots after being struck in the head by it, and Erica Webb and Robert Webb were wounded by the shots.
Subsequent to firing the fusilade of shots into the front of the Webb home, the Defendant positioned himself with a view of the rear of the Webb home on the street in the rear of the Webb home, Delano Street, and fired a fusilade of .30-30 caliber shots at the rear of the home, at least two of which entered the home. At this time the home was unoccupied.
In firing the fusilade of shots at the rear of the Webb home, the Defendant evidenced the same intent and state of mind as the Court finds he was possessed of when he fired the fusilade of .30 caliber shots in the front of the home.
Based upon the foregoing findings and conclusions which the Court has made beyond a reasonable doubt, the Court makes the following findings of guilt: Count I, guilty of Murder in the Second Degree; Count II, guilty of Assault With Intent to Murder; Count III, guilty of Assault With Intent to Murder; Count IV, guilty of Assault With Intent to Murder; Count V, guilty of Assault With Intent to Murder; Count VI, guilty of Assault With Intent to Murder; and Count VII, guilty of the Possession of a Firearm in the Commission of a Felony.
The specific intent in the findings of intent is the intent as expressed in the findings of fact and conclusions of law, the intent, that is, to create an extremely high degree of risk of death or serious bodily harm to the occupants.
Do you have any questions, gentlemen?
Mr. Kenny [Assistant Prosecuting Attorney]: Your Honor, just a couple of questions with regard to the factfinding. You did mention that you found as a matter of fact and a matter of law that the, as a matter of fact that Erica Webb and Robert Webb, Jr., were, in fact, wounded. I believe the testimony in the trial from Mrs. Eva Webb was also to the effect that she was wounded.
The Court: I’m sorry, yes, that is correct.
Mr. Kenny: I assume the Court would incorporate that in its findings.
The Court: It was an oversight on my part. That is correct.
Mr. Kenny: And, with regards to Complainants Gail Webb and Robert Webb that they were, Gail Webb was inside the home at the time the first fusilade of shots were [sic] fired and that Mr. Robert Webb, Sr., was on the front walk, on the front.
The Court: All — the entire Webb family, that is to say Mrs. Webb, Eva Webb, the four Webb children were inside the home and Mr. Webb, Robert Webb, Sr., was on the sidewalk immediately outside the home when this first shot was fired and thereupon dove for cover between parked cars on the driveway adjacent to the Webb home and I make those findings beyond a reasonable doubt.
The defendant was sentenced to a term of from twenty to forty years in prison for murder, five terms of from fifteen to forty years in prison for assault, and two years in prison for felony-firearm.
The Court of Appeals affirmed. People v Ronald Taylor, 133 Mich App 762; 350 NW2d 318 (1984). The same day, the Court of Appeals certified a conflict with People v Davis, 126 Mich App 66; 337 NW2d 315 (1983), a case discussing adequacy of findings at a bench trial. This Court granted leave to appeal. People v Ronald Taylor, 419 Mich 879 (1984).
IV
We explained in People v Aaron, 409 Mich 672, 722; 299 NW2d 304 (1980), that there are several intents which can support a murder conviction. There can be an intent to kill, an intent to inflict great bodily harm, or a wanton and wilful disregard of the likelihood that the natural tendency of the actor’s behavior is to cause death or great bodily harm.
However, the issue before us concerns assault with intent to murder. The prosecution correctly concedes in all three of these cases that, in order to find a defendant guilty of this crime, it is necessary to find that there was an actual intent to kill. Maher v People, 10 Mich 212, 217-218 (1862), Roberts v People, 19 Mich 401, 415-416 (1870).
This case, so far as regards the intention to kill, is not identical with that of murder. To find the defendant guilty of the whole charge, it is true, the jury must find the intent to kill under circumstances which would have made the killing murder — and it is not denied that had death ensued in the present case, it would have been murder. But the converse of the proposition does not necessarily follow; that, because the killing would have been murder, therefore there must have been an intention to kill. Murder may be and often is committed without any specific or actual intention to kill. See instances stated in 1 Bish Cr Law, §§412 and 667. And no such specific intent is therefore necessary to be found. This difference was recognized in Maher v People, above cited.
By saying, however, that the specific intent to murder, or (which under the circumstances of the case, would be the same thing), the intent to kill must be proved, we do not intend to say it must be proved by direct, positive, or independent evidence; but as very properly remarked by my brother Campbell in People v Scott, 6 Mich [287 (1859)], the jury "may draw the inference, as they draw all other inferences, from any facts in evidence which to their minds fairly prove its existence.” And in considering the question they may, and should take into consideration the nature of the defendant’s acts constituting the assault; the temper or disposition of mind with which they were apparently performed, whether the instrument and means used were naturally adapted to produce death, his conduct and declarations prior to, at the time, and after the assault, and all other circumstances calculated to throw light upon the intention with which the assault was made.
As we explained in this passage from Roberts, one may, of course, draw reasonable inferences to assist in making the finding of an actual intention to kill.
V
Guy Taylor and Ronald Taylor were convicted following bench trials. In neither case did the trial court find that the defendant intended to kill. Likewise, the jury that convicted Johnson was not instructed that it needed to find an intent to kill. In Guy Taylor and Ronald Taylor, the prosecution argues that the trial judge did, in effect, find an actual intent to kill. Likewise, the prosecution argues in Johnson that the jury instructions were such that a guilty verdict was necessarily grounded on a finding of an actual intent to kill. We disagree, since we can locate in neither the findings nor the instructions the requisite language concerning an intent to kill. In none of these cases can the error be said to be harmless, since each arose under circumstances equally suggestive of a lesser intent.
In Johnson and Ronald Taylor, we remand the case to the trial court for entry of a judgment of guilty of assault with intent to do great bodily harm less than murder, and for resentencing. MCL 750.84; MSA 28.279. If, however, the prosecuting attorney is persuaded that the ends of justice would be better served, on notification of the trial court before resentencing, the trial court shall vacate the judgment of conviction and grant a new trial on the charge that the defendant committed the crime of assault with intent to murder.
Because the findings in Guy Taylor are unclear as to exactly what was intended by the defendant, we remand that case to the trial court for clarification of its findings of fact. Within twenty-one days of the date this opinion is filed, the Recorder’s Court of the City of Detroit shall file with the clerk of this Court supplemental findings of fact stating whether Guy Taylor had an actual intent to kill, and the basis for that finding. If the trial court finds that Guy Taylor was without an actual intent to kill, it shall find what intent he did possess, and shall state the basis for that finding.
As to defendants’ remaining issues, we are no longer persuaded that those questions should be reviewed by this Court. We retain jurisdiction in Guy Taylor. We do not retain jurisdiction in Johnson or Ronald Taylor.
Williams, C.J., and Levin, Ryan, Brickley, Cavanagh, and Boyle, JJ., concurred.
Riley, J., concurred in Ronald Taylor only, and took no part in the decision of Guy Taylor or Johnson.
"The defendant was convicted in a bench trial of assault with intent to murder, MCL 750.83; MSA 28.278, possession of a firearm in the commission of a felony, MCL 750.227b; MSA 28.424(2), and carrying a firearm with unlawful intent, MCL 750.226; MSA 28.423. Defendant was sentenced to 15 to 25 years imprisonment on the first count, 2 to 5 years imprisonment on the second count, and 2 years imprisonment on the third count; defendant appeals as of right.
"A review of the record and briefs and the issues raised therein discloses no prejudicial error. See, Wayne County Prosecutor v Recorder’s Court Judge, [406 Mich 374; 280 NW2d 793 (1979)], People v Eisenberg, 72 Mich App 106, 113-115; 249 NW2d 313 (1976), and People v Johnson, 54 Mich App 303; 220 NW2d 705 (1974).
"Affirmed.” Unpublished memorandum opinion of the Court of Appeals, decided November 1,1979 (Docket No. 78-650).
Cf. Administrative Order No. 1983-4, 417 Mich cxxii (1983); MCR ' 7.303.
We had earlier held the case in abeyance, pending our decision in People v Dykhouse, 418 Mich 488; 345 NW2d 150 (1984). People v Taylor, 414 Mich 877 (1982).
He was also charged with possession of a firearm during the commission of the assault, but that charge was later dismissed. MCL 750.227b; MSA 28.424(2).
Supplemental instructions, given at the jury’s request, were similar:
"You ask about the intent. Let me once again tell you that, under the law, two of the crimes that I have charged you on, assault with intent to commit murder, assault with intent to do great bodily harm less than murder, are specific intent crimes. Meaning that they have to be specific intent crimes. Meaning that they have to be specifically intended, the results, in order to find that the defendant is guilty.
"In felonious assault, which I also defined for you, it is what we call a general intent crime. It is not any specific intent. But in the other two there has to be specific intent.
"I will, once again, read to you the charge relative to specific intent. Beginning:
"When a certain intent is a necessary element in a crime, the crime cannot have been committed when the intent did not exist.
"Intent is a decision of the mind to knowingly do an act with a conscious, fully formed objective of accomplishing a certain specific result.
"Therefore, there can be no crime of assault with intent to commit murder or — nor can there be any crime of assault with intent to do great bodily harm less than murder, under our law where there is no intent, in the case of assault with intent to do great bodily harm less than murder, where there is no intent to do great bodily harm, and the burden rests upon the prosecution to show beyond a reasonable doubt that the defendant at the time of doing the alleged act had that wrongful intent.
"The wrongful intent; that is, the intent to murder or — the intent to do great bodily harm; that is the wrongful intent we’re speaking of.
"The intent with which a person does an act is known by the way in which he expresses it to others or indicates it by his conduct. The intent with which a person does an act can sometimes be determined from the manner in which it is done, the method used and all other facts and circumstances, but only if that intent is established by the evidence.
"Therefore, if you find that the defendant, for any reason whatsoever, did not consciously and knowingly act with the intent, first, to murder, then the crime cannot have been committed and you must find the defendant not guilty of the crime of assault with intent to murder.
"Now, if from all of the evidence you have a reasonable doubt as to whether or not the defendant knowingly and consciously acted with the intent, first, to murder, then you must find the defendant not guilty of the crime of assault with intent to commit murder.”
This case too had heen held in abeyance for Dykhouse. People v Johnson, unreported order entered March 21, 1983.
Administrative Order No. 1984-2, 418 Mich Ixxxii (1984). | [
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Riley, J.
Introduction
This case involves three separate appeals resulting from a lawsuit brought by plaintiffs Nicholas and Nancy Bosak for personal injuries suffered by the former at a construction site accident. (Hereinafter, use of plaintiff in the singular will refer to Nicholas Bosak.)
The general contractor on the construction project was Forsythe Development Company (For-sythe). Concrete Components, Incorporated (cci), plaintiffs employer, was a subcontractor on the project, having been hired to supply and install precast concrete slabs. Cci had rented from The Hurley Corporation (Hurley) a crane and operator to assist in the installation of the slabs. When the crane arrived at the site, it was not completely assembled. Plaintiff was injured on December 19, 1974, while the crane was being assembled, as the crane operator "boomed down,” causing plaintiffs left hand to be pulled into a sheave through which a cable, on which his hand was resting, ran. Four fingers of plaintiffs left hand were severed.
Several issues are raised in this appeal, only six of which we need address:
Forsythe v Bosak
(1) Did the Court of Appeals err in reversing the trial court’s grant of the general contractor’s motion for directed verdict on the inherently dangerous activity theory?
Forsythe v Concrete Components, Inc.
(2) Assuming that the inherently dangerous theory of the general contractor’s liability should have been submitted to the jury, should the general contractor’s claim for common-law indemnity against plaintiffs employer have been allowed?
Bosak v Hurley & Forsythe
(3) Is the jury’s damage award so clearly and grossly inadequate as to shock the judicial conscience and warrant additur?
(4) Did the evidence support instructing the jury on plaintiffs comparative negligence?
(5) Was the jury’s finding that plaintiff was thirty percent negligent against the great weight of the evidence?
(6) Did the trial court erroneously refuse to instruct the jury to consider inflation in calculating its award of future damages?
Hurley v Concrete Components, Inc.
(7) Did the Court of Appeals err so as to require reversal in finding that the crane involved in plaintiffs accident was "nonoperational” and that, as a consequence, the indemnity agreement between the lessor and the lessee of the crane was unenforceable?
We reverse the decision of the Court of Appeals in two respects. First, we hold that the crane assembly operation was not an inherently dangerous activity (issue 1). That determination renders consideration of Forsythe’s claim of indemnity against cci (issue 2) unnecessary. Second, we remand this matter to the trial court to determine whether the crane was operational (issue 7). With respect to plaintiffs claims of error (issues 3 through 6), we affirm the decision of the Court of Appeals.
Procedural History
Plaintiff and his wife filed suit against Forsythe, Hurley, and Robert Hutchinson, the crane operator. Forsythe’s liability was premised upon the dual theories that, as general contractor, it was actively negligent in directing that the crane be assembled under unsafe conditions and that it was responsible for the results of an inherently dangerous activity, i.e., the crane assembly. Hurley’s liability was premised upon the respondeat superior theory that the negligence of its employee caused the accident. Forsythe and Hurley, in turn, filed third-party claims for indemnity against cci.
Hurley’s indemnity claim was based on its lease agreement with cci, which provided, in part, that it would be indemnified for injuries resulting from the "operation of the crane.”
Prior to trial, the trial court granted summary judgment dismissing Hurley’s claim against cci for indemnification for any claims for personal injury arising out of work performed by Hurley for cci. Cci’s motion for summary judgment on Forsythe’s claim for common-law indemnification was granted at trial.
At the close of the evidence, Forsythe moved for a directed verdict as to its liability. The trial court granted the motion insofar as it applied to the inherently dangerous activity theory, but denied it with respect to the theory of direct negligence on Forsythe’s part.
The jury returned a verdict finding that Hurley was negligent, that its negligence was a proximate cause of the accident, that Forsythe was not negligent, that plaintiff suffered $100,000 in damages, that he was thirty percent comparatively negli gent, and that plaintiff Nancy Bosak was entitled to damages in the amount of $10,000. Judgments were entered for Nicholas Bosak in the amount of $70,000 and for Nancy Bosak in the amount of $7,000.
Plaintiffs filed a post-trial motion for judgment notwithstanding the verdict or, in the alternative, for a new trial or an order of additur. Plaintiffs argued, in part, that their theory of inherently dangerous activity on the part of Forsythe should have been submitted to the jury, that the damage award was inadequate, that the jury should not have been instructed on comparative negligence, and that its finding of plaintiff’s negligence was against the great weight of the evidence. The motion was denied in all respects.
Plaintiffs appealed to the Court of Appeals, raising these same questions and also claiming error in the trial court’s refusal to instruct on inflation. Forsythe and Hurley filed claims of appeal from the order granting cci’s motions for summary judgment.
The appeals were consolidated by the Court of Appeals. Initially, the Court affirmed the trial court’s judgments in all respects, not reaching, however, Forsythe’s claim of error.
Plaintiffs filed an application for rehearing, seeking reconsideration of the inherently dangerous activity question. On August 19, 1983, the Court of Appeals vacated its earlier decision and remanded the case for a new trial on plaintiffs’ inherently dangerous activity theory. Further, the Court of Appeals affirmed the grant of cci’s motion for summary judgment on Forsythe’s claim for common-law indemnification.
Subsequently, Forsythe, Hurley, and plaintiffs applied to this Court for leave to appeal.
The facts will be detailed with the appropriate issues.
Issue I
Did the Court of Appeals err in reversing the trial court’s grant of the general contractor’s motion for directed verdict on the inherently dangerous activity theory?
A. Facts:
Testimony established that the crane arrived at the worksite on the morning of December 19, 1974. Before it could be used, multiple sections of tubular steel had to be added to its base, and various cables had to be strung through the appropriate sheaves and attached to the ball.
The arrangements for assembly were the subject of dispute at trial and go to the heart of the lawsuit. Zolar Marus, cci’s field superintendent, recalled that Forsythe’s on-site superintendent, Leonard Thompson, ordered the assembly to be done after regular working hours so that the assembly would not interfere with other work being done and the crane would be ready for the next day’s work. Thompson, who at trial had no recollection of the conversation, testified that he would not have ordered the crane to be assembled after working hours and would not have objected to daytime assembly.
The crew which assisted crane operator Hutchinson consisted of three cci employees: a "pusher” or foreman, Patrick Miller, and two ironworker apprentices, plaintiff and Keith Porter. Erection of the boom commenced sometime after 4:00 p.m. Testimony showed that the weather was cold and wet and the site was muddy and slushy. There was evidence that there may have been some street lighting from the expressway near the site, that there could have been some lighting coming from the adjacent buildings, and that a security guard had parked his vehicle in such a manner that the lights shone along the boom. The record further reveals that neither the crane operator nor the crew, except for Porter, were concerned about the lighting conditions.
The erection of the boom progressed during increasingly diminishing light until it was completed. The crew then began hauling out the cables. The ironworkers got on the boom to carry the lines out toward the end. In order to steady themselves, they held onto the gantry line.
The operation of the boom was solely under Hutchinson’s control. He testified that he would not operate the boom unless and until he had received a signal from the pusher (Miller).
Plaintiff believed that they were stringing a second cable when the accident occurred. He was the first one out on the boom, carrying the cable over his right shoulder and holding onto the gantry line with his left hand. Hutchinson testified that at the time of the accident Miller was standing outside the cab, approximately two or three feet from him, giving the signals. Miller did not believe that he was that close to Hutchinson. What occurred at that moment was the subject of controversy at trial. It was not disputed, however, that Hutchinson activated the gantry line which moved and pulled plaintiff’s left hand into the sheave. Hutchinson testified that although Miller had been signaling by hand until just before the accident, Miller verbally signaled for Hutchinson to boom down. Miller contended that he did not give any verbal signal and that no hand signals were made at this point. Neither Porter nor plaintiff heard Miller signal.
B. Disposition in the Trial Court and the Court of Appeals
The trial court and the Court of Appeals have analyzed this issue in various ways. The trial court granted Forsythe’s motion for directed verdict with regard to plaintiff’s inherently dangerous activity theory. This ruling was based on the trial court’s findings that (1) Forsythe had not contracted with cci to erect the crane at night, and (2) cci’s decision, subsequent to the contract, to erect the crane without adequate lighting amounted to collateral negligence as defined in 2 Restatement Torts, 2d, § 426, p 413.
Initially, the Court of Appeals affirmed the grant of directed verdict, although on a different basis:
Even assuming the assembly of a crane could be found to be an inherently dangerous activity, the proofs submitted by plaintiffs show that the injuries sustained by Nicholas Bosak were not due to the inherently hazardous nature of the work, but rather to the collateral negligence of the crane operator. See Garczynski v Darin & Armstrong Co, 420 F2d 941, 942 (CA 6, 1970).
The negligence involved here is solely the negligence of the crane operator in "booming down” when he had apparently received no order to do so. On a properly operated crane, this risk is not inherent or normal to the work, and defendant Forsythe certainly had no reason to contemplate the Hurley employee’s negligence when the contract with cci was made. [Emphasis added.]
However, on rehearing, the Court of Appeals concluded that the case should have been submitted to the jury:
After again reviewing the record we believe that the evidence raised a question of fact, for the jury, as to whether plaintiffs injuries were due solely to the collateral negligence of the crane operator or whether the accident could be attributable to both the crane operator’s negligence and the actions of the general contractor. Forsythe allegedly directed the work to be done after normal working hours, on a mid-winter evening in muddy, snowy, winter-weather conditions by workers who had already worked a full day on the construction site. Whether these conditions contributed to the accident is a determination which should be left to the trier of fact; the foreseeable circumstances and consequences of night-time crane-assembly in mid-December were sufficient to present to the jury the inherently dangerous activity theory of liability.
C. Analysis
The inherently dangerous activity doctrine is an exception to the general rule that an employer of an independent contractor is not liable for the contractor’s negligence or the negligence of his employees. 2 Restatement Torts, 2d, § 409, p 370; 41 Am Jur 2d, Independent Contractors, § 41, p 805.
Michigan has recognized the exception for activities which reasonably can be foreseen as dangerous to third parties, and has, on occasion, allowed the doctrine to be applied to employees of the contractor performing the dangerous work. McDonough v General Motors Corp, 388 Mich 430; 201 NW2d 609 (1972); Vannoy v City of Warren, 15 Mich App 158; 166 NW2d 486 (1968), lv den 382 Mich 768 (1969).
The doctrine was first recognized in Michigan in Inglis v Millersburg Driving Ass’n, 169 Mich 311; 136 NW 443 (1912). In that case, the plaintiff’s land and timber were damaged when fire, which had been set by a contractor employed by the defendant to clear the defendant’s land, spread to plaintiff’s adjoining land. In reversing a directed verdict for the defendant which was based on its contention that it could not be held liable for the contractor’s actions, this Court noted that the defendant had been notified of the danger of setting fires. Taking judicial notice of the fact that the season had been unusually dry, the Court held that an employer of an independent contractor cannot avoid liability for
work necessarily involving danger to others, unless great care is used, to make such provision against negligence as may be commensurate with the obvious danger. [Inglis, supra, 321.]
Further, the Court concluded that
[t]here was a condition of great danger caused by an unprecedented drought, apparent to every one, cautions and warnings had been given, yet no precautions were required or enforced, in fact, defendants acted in permitting these fires to be set with utter disregard of consequences, which, under the conditions, naturally resulted from such conduct. [Inglis, supra, 322.]
The rule as stated in Inglis has been followed in subsequent cases. McDonough, supra; Utley v Taylor & Gaskin, Inc, 305 Mich 561; 9 NW2d 842 (1943); Grinnell v Carbide & Carbon Chemicals Corp, 282 Mich 509; 276 NW 535 (1937); Watkins v Gabriel Steel Co, 260 Mich 692; 245 NW 801 (1932); Wight v H G Christman Co, 244 Mich 208; 221 NW 314 (1928); Brown v Unit Products Corp, 105 Mich App 141; 306 NW2d 425 (1981), rev’d añer remand on other grounds 123 Mich App 157; 333 NW2d 204 (1983); Huntley v Motor Wheel Corp, 31 Mich App 385; 188 NW2d 5 (1971), lv den 387 Mich 761 (1972); Vannoy, supra. The Vannoy Court described the doctrine as "closely akin to, but not exactly the same as, strict liability.” Van-noy, supra, 163.
The Restatement of Torts, 2d, defines inherently dangerous activity in two sections, § 416 and § 427, which, according to Comment a to § 416, overlap. Section 416 refers to "peculiar risk”:
One who employs an independent contractor to do work which the employer should recognize as likely to create during its progress a peculiar risk of physical harm to others unless special precautions are taken, is subject to liability for physical harm caused to them by failure of the contractor to exercise reasonable care to take such precautions, even though the employer has provided for such precautions in the contract or otherwise. [2 Restatement Torts, 2d, § 416, p 395.]
Section 427 refers to "special danger”:
One who employs an independent contractor to do work involving a special danger to others which the employer knows or has reason to know to be inherent in or normal to the work, or which he contemplates or has reason to contemplate when making the contract, is subject to liability for physical harm caused to such others by the contractor’s failure to take reasonable precautions against such danger. [2 Restatement Torts, 2d, § 427, p 415.]
The above definitions were cited by the McDon-ough Court and were relied on by the Court of Appeals in Bradford v General Motors Corp, 123 Mich App 641; 333 NW2d 109 (1983), lv den 417 Mich 1100.16 (1983).
In McDonough, supra, the plaintiffs decedent was an ironworker employee of a contractor (Paragon) engaged by the defendant (General Motors) to erect the structural steel framework for an additional floor which was to be built above the existing plant. Paragon had installed steel trusses as a part of the structure. The plaintiff’s decedent was standing on one of the trusses when the accident occurred. A derrick, owned by Paragon, which was to be used to lift steel beams, had just been erected. As the crew, of which the plaintiff’s decedent was a member, was tying the boom of the derrick to a permanent truss in order to secure it for the night, the boom fell on the decedent as a result of either careless operation of the derrick or faulty installation of the boom cable.
The McDonough case produced four opinions, none of which had more than one co-signer. A majority of the justices did, however, seem to agree on the construction of the inherently dangerous activity doctrine, which construction was based on the Inglis rule.
The per curiam opinion concluded that the evidence supported submitting the question to the jury under the Inglis rule, as "the job called for by this contract had to be performed with 'great care’ lest employees — not only of Paragon but of Chevrolet workmen below — be or become endangered by such performance.” McDonough, supra, 440.
Having examined these various definitions of what constitutes an inherently dangerous activity, it is apparent that an employer is liable for harm resulting from work "necessarily involving danger to others, unless great care is used” to prevent injury, Inglis, supra, 331, or where the work involves a "peculiar risk” or "special danger” which calls for "special” or "reasonable” precautions. 2 Restatement Torts, 2d, §§ 416, 427. It must be emphasized, however, that the risk or danger must be "recognizable in advance,” i.e., at the time the contract is made, for the doctrine to be invoked. Thus, liability should not be imposed where a new risk is created in the performance of the work which was not reasonably contemplated at the time of the contract. This concept is the key to the resolution of the instant case. Our examination of the evidence and inferences that may be drawn therefrom, even when viewed most favorably to plaintiffs, persuades us that reasonable minds would conclude that the activity at issue was not inherently dangerous.
We note that the parties disagree as to what is the activity which is submitted to be inherently dangerous. Plaintiffs argue that the activity was nighttime, midwinter crane assembly. At oral argument, they claimed that while assembling a crane in the daytime might be a commonplace, innocuous activity, Forsythe’s directing that the assembly be done at night resulted in the activity taking on a peculiar risk for which special precautions were necessary. Forsythe responds that the activity was crane assembly and that the weather and lighting conditions had nothing to do with the accident.
Comments b and c to § 427 of the Restatement set forth above, might be read as supporting plaintiffs’ argument:
b ... It is sufficient that work of any kind involves a risk, recognizable in advance, of physical harm to others . . . that the employer has special reason to contemplate such a risk under the particular circumstances under which the work is to be done.
c . . . The rule applies equally to work which, although not highly dangerous, involves a risk recognizable in advance that danger inherent in the work itself, or in the . . . prescribed way of doing it, may cause harm to others.
In this case, however, there is no evidence that "the particular circumstances under which the work [was] done” or the "prescribed way of doing” the work created "a risk, recognizable in advance, of physical harm to others.” § 427, supra. (Emphasis added.) Further, there appears to be no record evidence that Forsythe, the general contractor, was aware at the time of entering into the contract with cci of the need to erect the crane on site or that it was anticipated that the erection was to be done at night. Rather, the evidence suggests to the contrary, that it was a fairly routine job as construction jobs go and that the dangerous activity was doing such a job with inadequate lighting, not the erection of the crane per se.
The doctrinal thread that runs through Michigan case law, which we reaffirm today, is the definition enumerated in T?annoy, supra, that the inherently dangerous doctrine is something akin to a theory of strict liability. Given this definition, we decline to drift toward a standard that would permit collateral negligence to elevate normal activity into inherently dangerous activity. On this record, we cannot say that the construction of a crane at a construction site presents a peculiar risk (2 Restatement Torts, 2d, § 416) or special danger (2 Restatement Torts, 2d, § 427) or, as is argued, an inherently dangerous activity.
Therefore, we reverse the judgment of the Court of Appeals on rehearing granting plaintiffs a new trial, and we affirm the trial court’s denial of plaintiffs’ motion for a new trial. Our treatment of this issue renders moot the second issue raised herein.
Issue III
Is the jury's damage award so clearly and grossly inadequate as to shock the judicial conscience and warrant additur?
Plaintiff contends that the trial court erred in denying his motion for additur or in the alternative a new trial when his lost past wages alone exceeded the jury verdict._
GCR 1963, 527.1(4) provided that a new trial may be granted where the verdict "is clearly or grossly inadequate . . .
GCR 1963, 527.6, which governs remittitur and additur, provided:
When a finding is made that the only error in the trial is the inadequacy or excessiveness of the verdict, the court may deny a motion for new trial on condition that within 10 days the non-moving party consents in writing to the entry of judgment of an amount found by the judge to be the lowest or highest amount respectively which the evidence will support.
The decision to grant a new trial is a matter within the trial court’s discretion and this Court will not interfere unless the abuse of that discretion is palpable. Moore v Spangler, 401 Mich 360, 372; 258 NW2d 34 (1977). Great deference is given to the decision of the trier of fact who has heard and observed the testimony. In Precopio v Detroit, 415 Mich 457, 465; 330 NW2d 802 (1982), this Court noted:
In reviewing damage awards in cases tried to juries, this Court has asked whether the award shocks the judicial conscience, appears unsupported by the proofs, or seems to be the product of improper methods, passion, caprice, or prejudice; if the amount awarded falls reasonably within the range of evidence and within the limits of what reasonable minds would deem just compensation for the injury sustained, the verdict has not been disturbed.
We, then, must determine whether the jury verdict of $100,000 was either shocking to the judicial conscience, or beyond the proofs, or secured by improper methods, prejudice, caprice, or passion. See Precopio, supra, pp 465-466, n 11, and cases cited therein.
Plaintiff correctly states the rule that where a jury verdict ignores the uncontroverted out-of-pocket expenses of the plaintiff, such verdict is inadequate and must be reversed. Zielinski v Harris, 289 Mich 381; 286 NW 654 (1939); Walker v Britton, 193 Mich 174; 159 NW 150 (1916); Cooper v Christensen, 29 Mich App 181; 185 NW2d 97 (1970); Hugener v Michlap, 2 Mich App 157; 139 NW2d 132 (1966).
The instant case differs, however, from those just cited in that here the amount of plaintiff’s out-of-pocket expenses was controverted.
Plaintiff relies on the following evidence in support of his claim that he is unable to return to ironwork. At the time of the accident, plaintiff was within two months of completing his ironworking apprenticeship. He testified that after his accident he tried to complete the apprenticeship program but failed because, with only one hand, he could not pass the welding course.
At the time of the accident, plaintiff was working full-time, averaging forty hours per week, and earning $10.0358 per hour. Plaintiff presented testimony concerning the wages he would have earned had he completed his apprenticeship and worked forty hours per week, fifty-two weeks per year, for the years 1975 through June, 1981.
Plaintiff testified that his actual earnings for the period between the accident and trial were approximately $35,000. Comparing his actual earnings and projected ironworking earnings, plaintiff claims he sustained out-of-pocket losses of approximately $180,000.
That claim, however, is predicated on the assumption that plaintiff could not have returned to ironwork. The testimony on this question was disputed. While plaintiff did testify that he could not do the welding required to complete his apprenticeship, he also testified that he did not return to ironwork because he believed he might endanger the safety of himself and others, and also because his wife would be worried about his safety.
Further, the governing hoard for the ironwork-ers’ union permitted plaintiff to continue the apprenticeship, apparently aware of the nature and extent of his injury, giving rise to the possible inference that he could return to ironwork.
There was no testimony from anyone other than plaintiff about his inability to complete his apprenticeship. Moreover, George Falls, the former vice president of cci, testified that he wrote a letter to plaintiff in January, 1976, stating his understanding that plaintiff was ready to resume work and should contact Falls to make arrangements for his return to work. To Falls’ knowledge, plaintiff never responded. Falls testified that he would hire plaintiff as an ironworker on the basis of the availability of work.
Thus, the conflicting testimony as to whether plaintiff could have returned to ironwork put in dispute the amount of plaintiffs out-of-pocket expenses. As Forsythe and Hurley argue, the jury could have believed that plaintiff could have returned to work in January, 1976, but that he voluntarily chose not to return. Lost ironworker wages for the period December 19, 1974 through January 1, 1976, would have been $26,908, using a fifty-two week work year.
A similar situation was presented in Moyer v Shampo, 357 Mich 391; 98 NW2d 631 (1959). In that case, the plaintiff had testified that his injuries had prevented him from returning to work for an extended period of time. The defendant maintained that the plaintiff was able to resume his work after six weeks. This Court affirmed the denial of the plaintiffs motion for new trial which, like the instant case, was based on the claim that the verdict was inadequate:
The jury might have found that plaintiff’s earning capacity was impaired only during the 6 weeks following the accident. Such a conclusion would not have been contrary to the great weight of the evidence: plaintiff did indeed return to work at the end of that period. The jury thus might have found a loss of 6 weeks’ earnings at the testified rate of $98.40 per week, awarding such sum, together with $500 or $600 to compensate for pain and suffering. Such amount would be within the reasonable discretion of the jury. See Sebring v Mawby, 251 Mich 628 [232 NW 194 (1930)].
We do not wish to suggest that the testimony necessitates such findings or that we are assured of the probability that they were made. Judicial review does not involve such conjecture. We must be satisfied merely that a basis for the verdict of the jury may be found in a sound evaluation of the evidence. And we are so satisfied. [Moyer, supra, 393-394.]
See, also, Moore, supra, 375-379.
Next, plaintiff argues that the trial court erred in denying his motion for a new trial or additur because "the jury’s award does not include any amount for loss of future earnings, pain and suffering, mental anguish, loss of social pleasure and enjoyment, embarrassment, etc.” He relies on Cooper, supra, Mosley v Dati, 363 Mich 690; 110 NW2d 637 (1961), Fordon v Bender, 363 Mich 124; 108 NW2d 896 (1961), and Weller v Mancha, 353 Mich 189; 91 NW2d 352 (1958), where the jury awards which ignored pain and suffering were found inadequate.
In the instant case, it is not disputed that plaintiff proved that he experienced pain and suffering. He suffered the traumatic amputation of four fingers of his left hand. Reattachment of the severed fingers was not possible, and a skin graft was performed. He underwent unsuccessful surgery to widen the grasp of the hand. Plaintiff took pain medication for three months, and testified that he still experienced occasional pain. However, his doctor testified that plaintiff had tolerated his injury as well as any patient he had treated and that on the last visit had no complaints of serious pain. Plaintiff further testified that he was embarrassed over the appearance of his hand, that it was tender and sensitive to cold, that he was somewhat limited in his activities, but still participated as best he could in hobbies and athletics.
Nevertheless, contrary to the facts in the instant matter, in all of the cases relied upon by plaintiff, the verdicts were less than, or equal to, the amounts of uncontroverted out-of-pocket expenses, indicating that the juries failed to consider pain and suffering. Thus, we find this case distinguishable. On this record, it simply cannot be said that the jury awarded the full verdict of $100,000 as compensation for lost wages to the exclusion of the other types of damages claimed.
The plaintiff in Moore, supra, 380, made a similar argument, which this Court rejected:
Plaintiff bases her contention that the jury "could not have considered” her alleged pain and suffering in reaching its verdict on two erroneous assumptions: (1) that her out-of-pocket expenses were uncontroverted; (2) that "since the jury did not even consider all the uncontroverted out-of-pocket expenses, it could not have considered the plaintiff’s pain and suffering . . . .” Since we have found plaintiff’s first assumption unsupported by the evidence and her second assumption to be too speculative and conjectural to warrant consideration, the conclusion is inescapable that plaintiff’s argument that the jury ignored her alleged pain and suffering is conjectural at best.
Further, we note that there is no absolute standard by which to measure awards for personal injury and that such awards, particularly those for pain and suffering, rest within the sound judgment of the trier of fact. Precopio, supra, 464-465.
Therefore, we conclude that the Court of Appeals properly affirmed the trial court’s denial.of plaintiffs motion for additur or a new trial.
Issue IV
Did the evidence support instructing the jury on plaintiff’s comparative negligence?
Issue V
Was the jury’s ñnding that plaintiff was thirty percent negligent against the great weight of the evidence?
Plaintiffs next assertions of error concern the question of his comparative negligence. He first argues that the trial court erred in instructing the jury on his comparative negligence because the evidence did not support such an instruction, and, second, that the jury’s finding that he was thirty percent comparatively negligent was against the great weight of the evidence.
We consider Issue V first.
The grant or denial of a motion for new trial on the ground that the verdict is against the great weight of the evidence rests within the sound discretion of the trial court, and the exercise of that discretion will not be disturbed on appeal unless a clear abuse is shown. Termaat v Bohn Aluminum & Brass Co, 362 Mich 598; 107 NW2d 783 (1961); Murchie v Standard Oil Co, 355 Mich 550; 94 NW2d 799 (1959); Murphy v Sobel, 66 Mich App 122; 238 NW2d 547 (1975).
Judicial discretion has been variously defined. Compare Langnes v Green, 282 US 531, 541; 51 S Ct 243; 75 L Ed 520 (1931), with Spalding v Spald-ing, 355 Mich 382; 94 NW2d 810 (1959).
In his concurring opinion in People v Talley, 410 Mich 378, 399; 301 NW2d 809 (1981), Justice Levin wrote:
Thus when a question of abuse of discretion is properly framed, it is incumbent upon a reviewing court to engage in an in-depth analysis of the record on appeal. This Court has, in spite of references to Spalding, [supra], continued to give full-fledged review to discretionary decisions by carefully weighing the various rights and considerations involved in each type of discretionary decisions.
Our analysis of the record in this case leads us to conclude that no abuse of discretion occurred.
On the night of the accident, plaintiff and his co worker, Keith Porter, were erecting the crane’s boom under the supervision of their foreman, Patrick Miller. Just prior to the accident, plaintiff and Porter were carrying a cable over their right shoulders while walking along the boom. To support themselves, plaintiff and Porter held onto a gantry line which had already been strung. While plaintiff grasped the line near a sheave, the line was released and his left hand was pulled into the sheave, causing his injury. Porter testified that he felt the gantry line move just before plaintiff screamed. The crucial question was whether plaintiff violated his duty to use ordinary care for his own safety and was negligent in placing his hand on the gantry line.
The crane operator (Hutchinson), who was not an ironworker but had worked with cranes and ironworkers for many years, testified that it was not appropriate for ironworkers to place their hands on gantry lines for support. According to him, it was the accepted practice for ironworkers to support themselves by holding onto the back boom stoop or "hog rods.”
The Court of Appeals placed great reliance on Hutchinson’s testimony in affirming the trial court. Plaintiff presents two arguments as to why this was erroneous.
Plaintiff argues:
First of all, the crane assembly job performed by Plaintiff and the rest of the three-man ironworker crew was quite obviously an ironworker job and any expertise would reasonably be expected to lie within that trade. Plaintiff’s own foreman, an extremely experienced ironworker, was totally supportive of Plaintiff’s conduct or job performance at the time of the accident. Moreover, all of the ironworker testimony (Miller, Porter, and Plaintiff Bosak) indicated the correctness of the procedure employed by Plaintiff in rigging the crane.
A close reading of the testimony, however, belies this argument. It is true that Porter testified that he too was holding onto the gantry line at the time of the accident. Further, Marus testified that there was nothing unusual about ironworkers holding onto gantry lines for support, and plaintiff himself testified to having done so in the past and having seen others do the same. Also, Miller, the foreman, testified:
Q. [Attorney for plaintiffs]: Mr. Miller, as a journeyman of 35 years of experience, did you know of anything wrong with having Nick Bosak hold that cable on one shoulder and use that gantry line for support?
A. [Mr. Miller]: I’d do the same thing.
However, Mr. Miller also testified:
Q. [Attorney for defendant Hurley]: Is it custom-ery [sic], is that what you are telling us?
A. [Mr. Miller]: Yeah, yeah.
Q. Is that the way you were trained?
A. Yeah.
Q. To hold on to that boom line?
A. Yeah.
Q. When you get near the floating harness, what do you then hold on to?
A. Well, you don’t have to hold on to nothing but if there is something there, I don’t know why, we just automatically grab a hold of it.
Q. Would you make an attempt not to hold a cable right next to a sheave?
A. Well, yeah.
Q. Why is that?
A. Well, because you know if you get into one of those sheaves, it’s tragedy. [Emphasis added.]
Thus, the testimony suggests that although holding onto a gantry line might be proper in some circumstances, holding onto a line close to a sheave might be improper. Contributory negligence depends upon the circumstances, Jaworski v Great Scott Supermarkets, Inc, 403 Mich 689; 272 NW2d 518 (1978); 57 Am Jur 2d, Negligence, § 295, p 692. We are not persuaded that the record conclusively established "the correctness of the procedure employed by Plaintiff.”
Plaintiff next argues that Hutchinson’s testimony was "inherently unreliable and incapable of being believed” because of testimony that Hutchinson admitted "fault” immediately following the accident. We note that at trial Hutchinson denied that he was at fault, explaining that he "probably would have said anything” to comfort plaintiff at the time. In any event, determination of credibility is within the province of the factfinder; an appellate court will not grant a new trial simply because the court may have drawn different inferences from the evidence, resolved conflicting testimony in a different way, reached a different conclusion on credibility, or even preferred a different decisio-n as between permissible alternatives. Thoms v Diamond, 131 Mich App 108; 346 NW2d 69 (1983), lv den 419 Mich 904 (1984).
Plaintiff further argues that because he, as an apprentice, was merely following the orders of his foreman in stringing the cable, he was incapable of being found personally negligent. There is no evidence that Miller "ordered” plaintiff to hold onto the gantry line for support; in fact, it is likely that Miller would not have done so in light of his testimony that doing so could be a "tragedy.” Even assuming that Miller actually ordered plaintiff, either verbally or by example, to grasp the gantry line near the sheave, plaintiff is chargeable with the duty to guard his own safety. Plaintiff, well through his three years of apprenticeship, had participated in erecting crane booms before, and Miller testified that plaintiff seemed to know what he was doing.
Plaintiff also argues that his grasping a gantry line near a sheave only became dangerous because Hutchinson negligently "boomed down” the crane while men were standing on it and that he cannot be held liable for failing to foresee and protect himself against the negligence of another. Testimony indicated however, that "booming down” with men standing on the boom was a common practice. Thus, the jury could have found that the possibility of the boom moving was foreseeable.
Finally, it is clear that it was proper to instruct the jury on the issue of plaintiff’s comparative negligence. The presence of the above-noted evidence on the question distinguishes this case from those relied upon by plaintiff where error was found because the trial court submitted to the jury an instruction on an issue not sustained by the evidence.
Issue VI
Did the trial court erroneously refuse to instruct the jury to consider inflation in calculating its award of future damages?
Plaintiffs requested that the trial court instruct the jury that it should consider the effect of inflation when calculating plaintiffs’ future damages. Plaintiffs claimed that such an instruction would balance SJI 34:03 (reduction of future damages to present value, now SJI2d 53.03). They asked the court to take judicial notice of the rise in the Consumer Price Index in formulating an inflation instruction.
The trial court refused to give an inflation instruction:
With regard to the other arguments, this Court will not give any instruction with regard to inflation. I don’t think that is an appropriate instruction and there are too many variables that can come into play and certainly this Court is not satisfied there is sufficient data to justify comments about inflation coming from the lips of the Court which some people think carry more weight than coming from the attorneys. So, the Court will not give an instruction on inflation.
The Court of Appeals affirmed the decision of the trial court:
Under the circumstances of this case, we decline to find the trial court’s refusal to instruct the jury that it must consider inflation to be improper. Plaintiffs introduced no testimony regarding the present or future rate of inflation. While the existence of inflation may have become "a fact of present-day life,” Tiffany [v The Christman Co, 93 Mich App 267, 280; 287 NW2d 199 (1979)], the existence and rate of inflation in the future is simply not a matter of which a trial court may take judicial notice and attempt to properly and fairly instruct the jury thereon.
Recently, courts of many jurisdictions have expressed the view that expected inflation in the value of money is properly considered by the trier of fact in calculating damages for future losses. See Anno: Effect of anticipated inñation on damages for future losses — Modern cases, 21 ALR4th 21. Disagreement exists, however, concerning the proper method of determining an award for lost earnings in an inflationary economy.
Michigan cases have agreed that inflation may be considered, but none has considered the precise question involved here — whether the trial court, when requested, must instruct the jury that it should consider inflation in calculating damages where there has been no testimony of the present or projected future rate of inflation.
The first Michigan case was Normand v Thomas Theatre Corp, 349 Mich 50; 84 NW2d 451 (1957), which referred to inflation in the context of the defendant’s claim that the verdict was excessive. The jury had awarded $10,000, of which $804.50 was represented by expenses, to the plaintiff who had sustained a leg injury which left a 3-1/2 inch-long scar below her knee and sustained a partial loss of supination of the right hand and forearm resulting from a fracture of the radius at the elbow. In upholding the award of damages, this Court wrote:
It is said that this is too much, shockingly so. We find it appropriate in the way of answer to say that the jury was entitled to take into account the reduced value of today’s dollar in making its criticized assessment, and that what might in the past have been excessive is not on the same facts necessarily exorbitant today. Judged in such light, we cannot say that this verdict is excessive.
On the very day of this writing (July 15, 1957), the Detroit Free Press observed editorially something this Court may and should judicially notice: "and the pace of inflation has been stepped up from a crawl to a trot.” In 1950 the editorial writers of American Law Reports prepared an exhaustive brief entitled "Changes in cost of living or in purchasing power of money as affecting damages for personal injuries or death” (12 ALR2d 611). (They might well prepare another, bringing 1950 into comparative array with the Free Press’ characterization of 1957.) In such annotation it is shown that the courts of this country are generally agreed that judicial review of verdicts in personal injury cases should take into account the fact that a change has taken place in the purchasing power of money, and in the cost of living, which of right may be reflected in damage awards; further, that such economic developments are so much a matter of common knowledge that judges and juries are entitled to consider them although not expressly proven in evidence (Compare Palmer v Security Trust Co, 242 Mich 163 [218 NW2d 677 (1928)] [60 ALR 1392] with Graham v United Trucking Service, Inc, 327 Mich 694, 706 [42 NW2d 848 (1950)]). [Normand, supra, 61, 62.]
Plaintiffs urge:
The Normand decision is noteworthy in that it sets forth two important propositions. First, it affirmatively states that a jury can consider the effect inflation has on reducing the purchasing power of money; and second, it expressly concludes that inflation is of such common knowledge that judicial notice may be taken of it.
We believe plaintiffs read Normand too broadly. As the Court of Appeals wrote in Freeman v Lanning Corp, 61 Mich App 527, 531; 233 NW2d 68 (1975):
Normand and cases like it stand only for the principle that courts need not be bound by the size of past awards in determining whether a current award is excessive. Rather they may take note of rising prices due to past inflation in order to justify large verdicts against a charge of excessiveness. See Williams v United States, 435 F2d 804, 807 (CA 1, 1970).
In Freeman, the trial court had not reduced the damages to their present value. The plaintiff in Freeman argued that the failure to reduce the present value was rendered harmless by inflation, claiming that, according to Normand, the trial court was entitled to take judicial notice of the effect of inflation and that the court took account of such effects. The court rejected the argument and remanded the case for a recomputation of damages. Similarly, in McKee v Dep’t of Transportation, 132 Mich App 714, 727-729; 349 NW2d 798 (1984), the Court remanded for reduction of the damage award to present value. In McKee, the trial court’s opinion had stated that "any normal reduction to present value is offset by inflation.” Id., p 729.
Plaintiffs seize on the remark in McKee that
[n]o finding was made as to the current inflation rate to illustrate that this was indeed the case.
Plaintiffs go on to argue:
The clear inference to be drawn from McKee is that, if the Court had made such a finding, rather than simply making blanket statements and assumptions, the Court of Appeals would have upheld the trial judge’s consideration of inflation.
We do not believe that this conclusion is mandated. McKee differs from Tiffany in that the Tiffany jury, unlike McKee, was instructed to reduce damages to present value. Tiffany, 287. Therefore, even if there had been a finding as to the current inflation rate in McKee, as there was in Tiffany, the error for failure to reduce to present value still would have existed.
Further, we note that in this case no testimony was presented as to current or future rates of inflation. Relying on Feldman v Allegheny Airlines, Inc, 382 F Supp 1271, 1293-1294 (D Conn, 1974), and Pierce v New York Central R Co, 304 F Supp 44, 45 (WD Mich, 1969), for the proposition that courts can take judicial notice of statistics compiled by the Bureau of Labor Statistics of the United States Department of Labor, plaintiffs submit that they "offer[ed] the monthly labor reviews from the Department of Labor, from the year 1967 forward, to the judge for his review.” In Feldman and Pierce, however, unlike this case, there was expert testimony on the subject, in addition to the judicially noticed data.
The only Michigan case to affirm a jury instruction on inflation is Kovacs v Chesapeake & Ohio R Co, 134 Mich App 514; 351 NW2d 581 (1984), lv gtd 422 Mich 974 (1985).
There, without analysis, the Court of Appeals affirmed the following instruction, finding that it "was not contrary to any law of damages in Michigan”:
"You jurors may, in considering the reduction of the verdict rendered in this matter to its present worth, further consider the effect of inflation on the reduction to present worth and the amount of damages which you find the plaintiffs have suffered.
"It is for you to determine from the evidence whether in determining damages, the damage should be reduced to the value of today’s dollar due to the changes taking place in the purchasing power of money and the cost of living as well as inflationary forces.” [Id., pp 534-535.]
Plaintiffs have not provided us with the requested instruction. The transcript of the argument on the instruction, however, indicates that plaintiffs sought to include a specific rate (thirteen percent) of inflation. Thus, the instruction differs from the Kovacs instruction, which was of a general nature.
We do not read Kovacs as mandating the type of instruction requested in this case. In light of the lack of testimony on the subject, we believe the trial judge properly declined to give the instruction. Moreover, we note that the trial judge permitted, and plaintiffs’ counsel made, extensive argument on the fact and effect of inflation. And, the jury was free to apply its common knowledge of and experience with inflation in fashioning the award.
Issue VII
Did the Court of Appeals err so as to require reversal in ñnding that the crane involved in plaintiffs accident was "non-operational” and that, as a consequence, the indemnity agreement between the lessor and the lessee of the crane was unenforceable?
Hurley filed a third-party complaint against cci for indemnity based in part on the lease agreement for cci’s rental of the crane from Hurley. That agreement provided inter alia that "[l]essee assumes all responsibility for loss, damage and expense resulting from the operation of the above equipment either personal injury or property damage . . . .”_
Prior to trial, cci moved for summary judgment on Hurley’s claim for contractual indemnity. In its brief in support of the motion, cci relied on Darin & Armstrong v Ben Agree Co, 88 Mich App 128; 276 NW2d 869 (1979), lv den 406 Mich 1007 (1979), and stated that "[i]t would be against public policy to coerce Concrete Components [cci] to indemnify Hurley for damages caused by Hurley’s own neglect.” In dicta, the Court of Appeals stated in Darin & Armstrong, p 136:
Even if the contractual provision could be read, in light of surrounding circumstances, as indemnifying Darin & Armstrong against its own negligence, the provision would be void as against public policy. MCL 691.991; MSA 26.1146(1); Ford v Clark Equipment Co, 87 Mich App 270; 274 NW2d 33 (1978). Nor could the provision be utilized to indemnify Darin & Armstrong for its concurrent negligence; this would be akin to contribution, which is forbidden by Michigan courts where workers’ compensation is involved. Husted [v Consumers Power Co, 376 Mich 41; 135 NW2d 370 (1965)]; Minster [Machine Co v Diamond Stamping Co, 72 Mich App 58; 248 NW2d 676 (1976)]; Jordan v Solventol Chemical Products, Inc, 74 Mich App 113; 253 NW2d 676 (1977).
The trial court acknowledged that "this Darin case definitely seems to be at odds with other Court of Appeals cases,” but nevertheless relied on Darin & Armstrong in granting the motion. Subsequently, the judge denied Hurley’s motion for rehearing, writing:
The basis for the Court’s decision granting cci summary judgment against Hurley and Hutchinson’s third party complaint was that there was no allegation of negligence against cci in either the Complaint or the Third Party Complaint and that, even if there was, there could be no indemnification where Hurley and Hutchinson were themselves negligent and cci’s position would be that of a joint tortfeasor. The Court held that a showing of joint negligence would not authorize indemnity since it would be tantamount to an action for contribution against the employer which is forbidden under Michigan law. Darin & Armstrong v Ben Agree Co, 88 Mich App 128 [276 NW2d 869] (1979); Husted v Consumers Power Co, 376 Mich 41 [135 NW2d 370] (1965).
At trial, Hurley moved to amend its pleadings to add allegations of active negligence against cci. Hurley reasoned that if it could be proven that cci was concurrently negligent, cci would be liable on the indemnity agreement for Hurley’s concurrent, rather than sole, negligence. The trial judge denied the motion to amend.
Hurley appealed these rulings to the Court of Appeals, where the Court reasoned that the contract expressed the parties’ intent to indemnify Hurley for its concurrent, but not sole, negligence. Relying on its decisions in Giguere v Detroit Edison Co, 114 Mich App 452; 319 NW2d 334 (1982), lv den 414 Mich 961 (1982), and Paquin v Harnischfeger Corp, 113 Mich App 43; 317 NW2d 279 (1982), the Court'of Appeals ruled that Hurley was not precluded from asserting a claim for contractual indemnity due to the exclusive remedy provision of the Worker’s Disability Compensation Act (wdca). MCL 418.131; MSA 17.237(131).
However, the Court of Appeals continued:
We find persuasive, however, cci’s argument that in this case, the crane was not yet operational and that plaintiffs injuries, resulting from assembly of the crane, were not covered by the indemni fication contract. Under the contract, cci assumed responsibility for the operation of the equipment, not for its assembly. Accordingly, the trial court did not err in dismissing Hurley’s claim against cci.
Hurley’s challenge to this decision is two-fold: first, citing the well-known rule that appellate courts will not review issues or theories which are raised for the first time on appeal, Hurley claims that the Court of Appeals erred in considering cci’s claim that the indemnity agreement was not in effect at the time of Bosak’s accident because the crane was not operational. In this regard, Hurley claims that while cci’s motion in the trial court involved only legal questions, the question whether or not the crane was "operational” is factual, and the facts necessary for this determination were not fully developed.
Second, Hurley argues that the limited evidence presented at trial shows that the crane was operational.
In response, cci admits that the trial court did not discuss the issue, but asserts that the theory was pled, citing a paragraph from its affirmative defenses filed with its answer to the third-party complaint:
3. That, the alleged contract to which Third-Party Plaintiff refers to as a basis for contractual indemnity was not in effect at the time of the loss in question.
Also, cci continues, appellate courts may interpret the language of indemnity agreements, and all of the facts necessary for the interpretation called for here are present. Hence, they urge affirmance of the Court of Appeals finding that the crane was not operational.
In the Court of Appeals, the issue was whether the contract of indemnification was unenforceable as a matter of public policy on the ground that Hurley could not receive indemnification from cci because cci, as plaintiff’s employer, was protected from liability by the exclusive remedy provision of the wdca.
The Court of Appeals answered this question in the negative, thus reversing the trial court’s basis for granting summary judgment. However, the Court of Appeals went on to affirm the trial court’s grant of summary judgment premised on cci’s argument that the crane was not operable at the time of the injury. With this determination, we do not agree.
In this Court, inasmuch as the Court of Appeals findings are not the. subject of a cross-appeal by cci, the sole issue for us to consider is the Court of Appeals decision regarding the operability of the crane.
In reviewing the Court of Appeals decision, we make our own independent examination of the pleadings filed and arguments made by the parties. Our examination of the record indicates that in the Court of Appeals cci argued for the first time that the crane was not actually operating at the time of the accident, although it had originally asserted that fact as an affirmative defense in its answer to the third-party complaint. Despite cci’s eleventh-hour resurrection of an affirmative defense, we decline Hurley’s invitation to find that the issue was waived on appeal. However, we are not persuaded that the Court of Appeals could properly pass on the mixed question of law and fact, inasmuch as the trial court had not consid ered the question whether the crane was in operation at the time of the accident so that the indemnity agreement was enforceable. Moreover, it is evident from the parties’ briefs that the facts necessary to the determination of the issue are disputed. Therefore, we remand the case to the trial court for consideration of the issue.
Affirmed in part, reversed in part, and remanded to the trial court for consideration of whether the crane was in operation at the time of the accident.
Costs to Forsythe; costs to cci and Hurley to await final outcome; no costs to plaintiffs Bosak.
Ryan, Brickley, Cavanagh, and Boyle, JJ., concurred with Riley, J.
Hutchinson was dismissed with prejudice just prior to trial.
Bosak v Hutchinson, unpublished opinion per curiam, released February 28, 1983 (Docket Nos. 57795, 60565, 60567).
Bosak v Hutchinson (On Rehearing), unpublished opinion per curiam, released August 19, 1983 (Docket No. 60567).
Grinnell v Carbide & Carbon Chemicals Corp, 282 Mich 509; 276 NW 535 (1937); Watkins v Gabriel Steel Co, 260 Mich 692; 245 NW 801 (1932); Wight v H G Christman Co, 244 Mich 208; 221 NW 314 (1928); Olah v Katz, 234 Mich 112; 207 NW 892 (1926); Inglis v Millersburg Driving Ass’n, 169 Mich 311; 136 NW 443 (1912).
Section 426 of the Restatement Torts, 2d, sets forth this principle:
"Except as stated in §§ 428 and 429, an employer of an independent contractor, unless he is himself negligent, is not liable for physical harm caused by any negligence of the contractor if
"(a) the contractor’s negligence consists solely in the improper manner in which he does the work, and
"(b) it creates a risk of such harm which is not inherent in or normal to the work, and
"(c) the employer had no reason to contemplate the contractor’s negligence when the contract was made.” 2 Restatement Torts, 2d, § 426, p 413.
See, also, 2 Restatement Torts, 2d, §427, comment d, p 417. The Inglis Court suggested that this exception is viable:
"It [liability based on the inherently dangerous activity theory] is not applied to those cases where the injuries occur which are collateral to the employment, like the dropping of material by the servant of a contractor upon a person passing by . . . .” Inglis, supra, 321.
We recognize that the per curiam opinion in McDonough, supra, "expressly reserved” the question of the application of this exception.
The question whether liability for inherently dangerous activity is vicarious (passive) or active negligence for purposes of determining common-law indemnification claims has split the Court of Appeals. Compare, e.g., Nanasi v General Motors Corp, 56 Mich App 652; 224 NW2d 914 (1974), with Duhame v Kaiser Engineering of Michigan, Inc, 102 Mich App 68; 300 NW2d 737 (1980), lv den 411 Mich 955 (1981). In likening the inherently dangerous activity doctrine to strict liability, we do not suggest that liability based on the inherently dangerous activity theory involves only passive or vicarious negligence, so that the employer is automatically entitled to common-law indemnification from the contractor. We specifically do not decide whether liability for inherently dangerous activity involves active or passive negligence for purposes of determining common-law indemnification claims.
New MCR 2.611(A)(1)(d) is substantially the same as former court rule GCR 1963, 527.1(4).
New MCR 2.611(E)(1) is substantially the same as former court rule GCR 1963, 527.6.
The secretary-bookkeeper of the ironworkers union testified to the following pay scales mandated by ironworker contracts:
Gross Hourly Wages
$10.0358
12.5517
14.4977
15.0120
Period
As of December 1974
January 1975 — May 1976
June 1976 — May 1977
June 1977 — November 1977
15.5402
16.7804
18.1229
20.0258
December 1977 — May 1978
June 1978 — May 1979
June 1979 — May 1980
June 1980 — May 1981
There was also testimony that ironworkers averaged forty-week work years.
See, e.g., Jaworski v Great Scott Supermarkets, Inc, 403 Mich 689; 272 NW2d 518 (1978).
See Tiffany, supra; Kovacs v Chesapeake & Ohio R Co, 134 Mich App 514; 351 NW2d 581 (1984), lv gtd 422 Mich 974 (1985).
See Tiffany v The Christman Co, 93 Mich App 267, 280; 287 NW2d 199 (1979). [Emphasis added.]
In Tiffany, the Court of Appeals affirmed the trial court’s admission of expert testimony on future lost wages which projected an annual 3Vi percent wage increase as a reflection of inflation.
See Bach v Penn Central Transportation Co, 502 F2d 1117 (CA 6, 1976).
Cci also sought summary judgment on Hurley’s and Forsythe’s claims for common-law indemnity. Neither of these is at issue here.
No argument on this theory was made in cci’s motion for summary judgment, its brief in support thereof, or in its counsel’s argument in support of the motion. | [
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Grant, C. J.
(after stating the facts). 1. Plain» tiffs’ counsel contend that the submission to arbitration was not under the policy, but outside of it, and that it must stand on the general ground of a common-law arbitration. In support of this, they cite Connecticut Fire Ins. Co. v. Hamilton, 8 C. C. A. 114, 59 Fed. 258, which is cited with approval in Hamilton v. Phoenix Ins. Co., 9 C. C. A. 536, 61 Fed. 385, and Harrison v. German-American Fire Ins. Co., 67 Fed. 585. The appraisal demanded in that case was not such as the policy called for. All the companies in that case made a joint demand, but the terms of the policies were different, and each of necessity, therefore, mixed its controversy with the others. On page 118, 8 C. C. A., and page 262, 59 Fed., Judge Severens states wherein these policies differed, and shows that each had a separate and distinct controversy from the others. In this case the policies are all alike-, except in the names of ‘the companies, and are those prescribed by the laws of this State. All the companies could therefore join in this arbitration to determine the value of the loss without mixing separate controversies. In other words, the appraisal was just such as each policy provided, and was binding upon plaintiffs and each company only so far as the policy and the submission under it provided. Neither was -bound by the appraisal. It was only prima facie correct, and either party attacking it assumed the onus probandi. If, therefore, the circuit court relied upon the submission as a waiver of all the other provisions of the policy, he was in error. The policy expressly provides that “this company shall not be held to have waived any provision or condition of this policy, or any forfeiture thereof, by any requirement, act, or proceeding on its part relating to the appraisal,” etc. It was therefore incumbent on plaintiffs to make proofs of loss, notwithstanding the submission for an appraisal.
2. It is urged that plaintiffs failed to show that they had furnished proofs of loss. By this is meant valid proofs of loss. Proofs were furnished in good faith, and under the belief that they complied with the contract of insurance. A copy was produced by plaintiffs upon the trial, and they-were examined in regard to it. An extract from it was read in evidence, which showed the goods totally destroyed, and their value, $65.9.29. It also showed the cash value of the goods on hand at the time of the fire to be $15,-939.66, and amount of loss thereon to be $10,909.95. These proofs, called “Exhibit I” in.the record, were offered in evidence. They were objected to as “incompetent, irrelevant, and immaterial.” After some discussion, the attorney for plaintiffs stated that he withdrew them for. the present. It does not appear that they were after-wards offered in evidence, and they do not appear in the record. The objections made to them in the letter of March 7th by Mr. Dodd are technical. We fail to find in this letter any statement of a material defect. Some of the objections are frivolous. Mr. Dodd and his principal fully understood that plaintiffs sent these as their proofs of loss. It was unnecessary to write a formal address to the defendant, or to state accurately the addresses of the other companies. The frivolity of some of the objections appears in his statement:
' “ There is nothing to show whether the fire was at 116 West Exchange street, or at 927 west side of North Washington street, or at the southwest corner of Washington and-Exchange streets.”
Defendant’s agents knew the location, and to permit any such objection to defeat a valid claim would be a reproach to the law. The provision of the policy in regard to these proofs is as follows:
“If fire occur, the insured shall give immediate notice of any loss thereby in writing to this company, protect the property from further damage, forthwith separate the damaged and undamaged personal property, put it in the best possible order, make a complete inventory of the same, stating the quantity and cost of each article and the amount claimed thereon, and within 60 days after the fire, unless such time is extended in writing by this company, shall render a statement to this company, signed and sworn to by said insured, stating the knowl edge and belief of the insured as to the time and origin of the fire; the interest of the insured and of all others in the property; the cash value of each item thereof, and the amount of loss thereon; all incumbrances thereon; all other insurance, whether valid or not,' covering any of said property, and a copy of all the descriptions and schedules in all policies; any changes in the title, use, occupation, location, possession, or exposures of said property since the issuing of this policy; by whom and for what purpose any building herein described, and the several parts thereof, were occupied at the time of the fire; ánd shall furnish, if required, verified plans and specifications of any building, fixtures, or machinery destroyed or damaged; and shall also, if required, furnish a certificate of the magistrate or notary public (not interested in the claim as a creditor or otherwise, nor related to the insured) living nearest the place of fire, stating that he has examined the circumstances, and believes the insured has honestly sustained loss to the amount that such magistrate or notary public shall certify.”
The only objections entitled to any consideration are:
(1) That the policy requires a statement in the proofs of loss of “any changes in the title, use, occupation, location, possession, or exposures of the property since issuing the policy.” It is manifest from this record that the title, use, location, and situation of the property were the same at the time of the fire that they were at the issuance of the policy, 44 days before; and it is a fair inference from the letter of March 7th that this was stated in the proofs of loss.
(2) That the proofs failed to show that the plaintiffs were the sole owners of the stock at the time of the fire. This is based upon the technical objection that the proofs were dated February 7th, and that the language is in the present tense. The fair inference is that both plaintiffs and defendant understood this to refer to the time of the fire.
We think there is enough upon this record to show that correct proofs of loss were furnished.
3. The policy provides for an examination of the insured under oath. Such an examination was demanded, and had February 25th to 27th. Upon that examination,, plaintiffs, under the advice of their attorney, Mr. Miner, refused to produce their books showing the amount of sales since February 5th, and, under the like advice, refused to answer any questions concerning their business or sales since that -date. They had bought other goods, mingled them with their old stock, and sold them. This conduct was in plain violation of the contract, and, if the result depended upon this, it would become a serious question whether it would not defeat recovery. This conduct, however, was clearly waived by subsequent proceedings. Negotiations were subsequently renewed. Plaintiffs, by appointment, went to Detroit, and, at the request of defendant, made a statement of their business, submitted it to the defendant, and offered to be questioned under oath. These things involved an expenditure of time and money, and, under our decisions, operated as a waiver of this and other defenses which are claimed. Burnham, v. Interstate Casualty Co., 117 Mich. 155, and authorities there cited. For the same reason, if there were any defects in the proofs of loss, they were waived. The court may have given a wrong reason, but its conclusion was correct. The result will not, therefore, be disturbed.
Other objections are raised, but, as they come within the above determination, we refrain from discussing them!
Judgment affirmed.
The other Justices concurred. | [
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Moore, J.
The respondents are keepers of an hotel in Dorr, Allegan county, and are also engaged in the sale of intoxicating liquors. Their bar is upon one side of a barroom, which room is also used as the office of the hotel. This office has windows upon .two sides, through which persons from the street could command a view of the bar. The respondents were convicted of- having, between 9 o’clock at night and 7 o’clock in the morning, not removed the curtains, screens, partitions, and other things that obstructed the view, from the street, of the bar or place where the liquors were sold and. kept for sale. After a trial they were found guilty, and bring the case here by appeal.
The only question involved in the case is whether, where a bar is kept in a barroom which is also used as an hotel office, the curtains or screens to the windows of such a room must be raised or removed so as not to obstruct the view of the bar, or place where the liquor is sold, from the street. Section 31, Act No. 313, Pub. 'Acts 1887 (8 How. Stat. § 2283/4), reads as follows:
“During the time when, by the provisions of this act, places where liquor is sold or kept for sale must be closed, all curtains, screens, partitions, and other things that obstruct the view, from the sidewalk, street, alley, or road in front of or at the side or end of said building, of the. bar or place in said room where said liquors are sold or kept for sale, shall be removed. Any person who shall violate any of the provisions of this section shall, upon conviction thereof, be punished as provided in section seven of this act.”
The language of the statute is plain, simple, and unambiguous. It does not make exception in favor of a barroom which is also used as an hotel office. The purpose . to be accomplished by the statute is discussed in People v. Kennedy, 105 Mich. 75.
The conviction is affirmed.
The other Justices concurred. | [
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] |
Moore, J.
The husband of the plaintiff was insured in the defendant company. The plaintiff was the beneficiary named in the policy of insurance. After the death of the husband, the company declined to pay the insurance. The plaintiff brought suit, and obtained a judgment after a trial by jury. The case is brought here by appeal.
In 1895, the husband of the plaintiff was insured in the Michigan Masonic Mutual Benefit Association. In September, 1896, this company retired from business, and defendant company took over the insurance of Mr. Ferris, and issued to him a policy containing, among other conditions, the following:
“In consideration of the payments and the representations, agreements, and warrants made by the insured herein named in his original application made to the Masonic Life Association of Grand Rapids, Michigan, and upon which application said association issued its policy No. 6,468, which application, and the articles of association and by-laws of this company, are hereby made a part-of this policy, and in further consideration of the acceptance of this policy, with the stipulations and conditions herein contained, by said insured, during his lifetime and while in good health, * * * this company does hereby issue this policy.”
In the original application, signed by Mr. Ferris, were the following questions and answers:
“Question No. 8. Has any proposal or application to insure your life ever been made to any company or agent upon which a policy has not been issued? If sos state full particulars.
' “Answer. No.
“ Question No. 9. Has any physician given an unfavorable opinion upon your life with reference to life insurance ? If so, state particulars.
“Answer. No.”
Mr. Ferris died February 17, 1897. In the application it was stated the questions WQre truthfully answered, and that they “are considered as an essential part of the application, and as forming, with it, the basis of a proposed contract of insurance.” It is claimed by way of defense that these questions were untruthfully answered, and by the answers such fraud was practiced upon the company as to avoid the policy.
The testimony on the part of the defendant showed that, in the summer of 1894, Mr. Sirrine, master workman of Eureka Lodge, A. O. U. W., took the written application of Mr. Ferris to become a member of that lodge, and delivered it to the recorder, who retained it for about three months, waiting for the medical examination to be presented; but, as it did not come, the application was destroyed. It also appears from the record that in August Mr. Ferris was examined by the medical examiner of the lodge five times. The medical examiner testified that he found traces of Bright’s disease, and so informed Mr. Ferris. He said he usually informed the grand medical examiner of the result of his examinations, but did not in this case, because of the request of Mr. Ferris, who said, if the officer made the report, he could not get other insurance. The record also shows that in November, 1895, Mr. Ferris was urged by a member of Detroit Lodge, A. O. U. W., to become a member of that lodge, and told the member he was not eligible, because he had been examined by the medical examiner, who told him he Had Bright’s disease. The only testimony that tended in any way to lessen the force of this testimony was' the answers made by Mr. Ferris to the questions in the application itself, and some statements made by the medical examiner as to the result of his examination, which it is said were not consistent with his testimony; and the further fact that the records of the lodge did not show Mr. Ferris ever applied for membership. This testimony did not tend to show the medical examiner did not make the examination as testified by him. It was also shown that no record was made of an application unless accompanied by the report of 'a medical examiner. The circuit judge was requested to direct a verdict in favor of defendant. He thought there was some evidence for the jury, and submitted the case to them.
It is a right which insurance companies have to be truthfully informed whether an applicant for insurance has before then applied for insurance, and been rejected, and to know whether a medical examiner has declined to give a favorable opinion upon his application for insurance, so that the persons whose duty it is to act upon the application upon the part of the company may act intelligently. Brown v. Insurance Co., 65 Mich. 306 (8 Am. St. Rep. 894); Finch v. Modern Woodmen of America, 113 Mich. 646. There is no testimony in the case which tends to discredit the testimony on the part of the defendant that Mr. Ferris did apply to the Ancient Order of United Workmen for insurance, and that their medical examiner advised him he was not a proper subject for insurance. The judge should have directed a verdict in favor of defendant. Lange v. Perley, 47 Mich. 355; Corbett v. Spencer, 63 Mich. 731; Township of Medina v. Perkins, 48 Mich. 67; Dondero v. Frumveller, 61 Mich. 440; Hunt v. Order of Chosen Friends, 64 Mich. 671 (8 Am. St. Rep. 855 ); Gillette v. Knowles, 97 Mich. 77.
Judgment reversed, and new trial ordered.
Grant, C. J., Montgomery and Long, JJ., concurred. Hooker, J., did not sit. | [
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Hooker, J.
The plaintiff’s action was brought to recover damages from the defendant for its failure to promptly transmit and deliver a telegram, whereby the plaintiff is said to have suffered a loss. The record contains testimony tending to show that the plaintiff, a merchant, residing at Corunna, called the office of the defendant.at that place by telephone. Mr. Young, defendant’s agent, responded, whereupon the plaintiff asked him to take a message, which he did. The message was as follows, viz.:
“Corunna, Mich., Jan. 25, 1898.
“ To G. W. Wylie Company,
“145 Yan Burén Street,
‘ ‘ Chicago, 111.
“Buy three May. , John E. Carland.”
It was intended to be understood to mean, “ Buy 3,000 bushels of May wheat.”
After waiting 24 hours without response to his message, the plaintiff called the defendant’s office by telephone, and was answered by Mr. Reed, Young’s assistant, who, in response to his inquiry, assured him that the message was sent. Twenty-four hours later the plaintiff called upon Young, who said he would trace the message, and he reported later that the message was never received at the Chicago office, and a duplicate of the message was sent on January 28th. The testimony tended to prove further that the price of wheat advanced meantime, and plaintiff’s agent was obliged to pay a higher price than would have been necessary had the first message been sent promptly. A verdict was rendered in favor of the plaintiff, and the defendant has brought the case to this court by writ of error.
The action was commenced before a justice of the peace. The docket shows that:
“Plaintiff declared orally on all matters provable under the common counts in assumpsit, and especially on a contract with said defendant, and files a written memorandum of said contract, and claims damages $300 or under.
“ Written Memoranda of Plaintiff’s Declaration Herein.
‘ ‘ Plaintiff says that heretofore, to wit, on the 25th day of January, A. D. 1898, said defendant was, and still is, a telegraph company and corporation engaged in the telegraph business, and a common carrier of telegraph messages. And on, to wit, the 25th day of January, 1898, said defendant undertook, for a valuable consideration, to wit, 40 cents, to convey and deliver for said plaintiff a telegraph message to G. W. Wylie & Co., No. 145 Van Buren street, Chicago, Ill., which message was as follows: Corunna, Mich., Jan. 25th, 1898. To G. W. Wylie & Co., 145 Van Burén Street, Chicago, Ill.: Buy three May. J. E. Carland,’ — which message instructed G. W. Wylie to purchase for said plaintiff 3,000 bushels of wheat, to be delivered to said plaintiff on May first. _ And said defendant, by its contract with said plaintiff, owed said plaintiff a duty to deliver- said telegram promptly, and without unnecessary delay. But, notwithstanding such contract and duty, said defendant wholly failed to deliver said telegram in any manner, and wholly failed and neglected so to do, and, on account of such failure and neglect of said defendant, said plaintiff was deprived of and lost large gain and profits on said wheat which the said George W. Wylie would have purchased for this plaintiff, and said plaintiff was deprived of the opportunity of purchasing said wheat on said 25th day of January, 1898, and on account of which said plaintiff has been damaged in the sum of $300, for the recovery of which this suit is brought.
“J. E. Garland.”
Several assignments of error relate to the declaration, it being claimed that it does not state a cause of action; that there is a misjoinder of counts; that the ad damnum clause, being $300, was fatal to the jurisdiction of the justice ; and that, if none of these points are valid, the court should have compelled an election of counts.
It is manifest from the record that the plaintiff did not recover upon the common counts, and that, there being nothing in the case that tended to support them, they were practically abandoned, and an election would have been an empty form.
The special count appears to have been intended as a count in assumpsit for the breach of a contract, and not a count in case for a negligent injury in the nature of a tort. See Tiff. Justice’s Guide (How. 5th Ed.), 183. It follows that, being a count in assumpsit, it was properly joined with the common counts, as “all causes of actions enforceable in assumpsit may be joined.” 1 Enc. PI. & Prac. 169.
But it is contended that there can be no recovery in assumpsit in such cases, and that the action must be case for a breach of duty, and not assumpsit for breach of contract. Counsel says that the “gist of these actions is negligence,” quoting the language of Mr. Justice Grant in Birkett v. Telegraph Co., 103 Mich. 367 (33 L. R. A. 404, 50 Am. St. Rep. 374). We think counsel has misinterpreted this language, and that there is nothing in that case which compels one having contract relations with a telegraph company to forego an action of assumpsit upon breach of the contract, and resort to an action ex delicto. It was true that negligence was the gist of that action, be_ cause the conditions which were made a part of the contract made it essential to recovery. In this case the plaintiff’s claim is that the usual conditions are not a part of the contract.
‘ ‘ Where the sender can show that, through the negligence of the company in transmitting or delivering a message, he has suffered a legal injury, there can be no question as to his right to sue for damages; and this whether the right of action be regarded as resting in contract, or in tort for the breach of public duty.” 25 Am. & Eng. Enc. Law, 824; Gray, Telegraphs, § 64; Playford v. Telegraph Co., L. R. 4 Q. B. 706, 10 Best & S. 759.
Again:
“ The action is properly one ex contractu, and based on the contract of sending.” 25 Am. & Eng. Enc. Law, 830.
In the case of Western Union Telegraph Co. v. Carew, 15 Mich. 525, cited by counsel, the action was assumpsit, and, though the case was reversed, the court seems to have recognized the propriety of the form of action by ordering a new trial. There may be cases where an action upon contract would not be appropriate, as-where the plaintiff was not a party to the contract. In actions brought by the person to whom the message is addressed, some of the courts so hold. This is so in England, where the rule is strictly enforced; but in this country there is a want of harmony upon the subject. See 25 Am. & Eng. Enc. Law, 824.
This also disposes of the jurisdictional question, as the statute (2 ITow. Stat. § 6814) confers concurrent jurisdiction upon justices of the peace in all civil actions upon contract where the debt or damages do not exceed $300. The declaration was entitled to the liberal treatment which the courts accord to pleadings in justice’s court, and sufficiently set forth the alleged contract, and its breach, to apprise the defendant of the plaintiff’s claim. This also disposes of the objection made to the introduction of the depositions.
' A number of questions relate to the alleged contract. It is contended that the contract to send the message was subject to the conditions which the defendant usually imposes upon its patrons; that Young was, by the plaintiff, made his agent to write the telegram upon the blank containing the conditions; and that receiving a message upon any other terms than such conditions would be outside of the scope of Young’s authority. Young, being the person in charge of the defendant’s business, and authorized to receive telegrams, was acting within the general scope of his authority in so doing, and the plaintiff was not bound, at his peril, to ascertain the secret instructions that the defendant had given in relation thereto. In Maryland some recognition has been given to the defendant’s conten tion by cases which hold that the sender of a message must be supposed to be informed in regard to the rules and regulations of the telegraph company; but the weight of authority is to the contrary. See Thomp. Elect. §§ 211, 212, for a discussion of this subject; also, 25 Am. & Eng. Enc. Law, 804; Beasley v. Telegraph Co., 39 Fed. 181. But, while this is true, if the plaintiff had knowledge of the rules and regulations under which the defendant did business, he would be bound by them so far as they were valid and binding upon others, and it was a question for a jury to determine whether he had such knowledge or not, if a question in the case.
Should it be said that Young, in receiving, by telephone and writing such message, was the agent of the plaintiff ? We are cited to several cases holding that the operator is such agent, under somewhat similar circumstances. Thus, in the case of Western Union Telegraph Co. v. Edsall, 63 Tex. 677, where, at the request of the sender of the message, it was written by the operator upon a blank of the company, which the sender signed, it was held that the operator was, as to that message and its preparation, the agent of the sender. The court said: “Evidently the operator, in the preparation of the message, was acting for the appellee, and not the company. True, he was the agent of the company to receive and forward messages, but not to write messages for others.” This case was followed in the case of Western Union Telegraph Co. v. Foster, 64 Tex. 220 (53 Am. Rep. 754). In that case the sender wrote the message, and, upon its being read over by the clerk, he (the sender) detected a mistake in it, and the clerk undertook to correct it by an interlineation, which he made in a wrong place. The court held that he was not acting within the scope of his authority, and was the agent of the sender. In a still later case the Texas court of civil appeals has sustained this doctrine. See Gulf, etc., R. Co. v. Geer, 5 Tex. Civ. App. 349. The original message, written upon a piece of brown paper, was rejected by the operator as unintelligible, and by him handed back to the person sent by the plaintiff to deliver the same. Plaintiff’s messenger stated to the operator that he was hot and nervous, and asked the operator to ’write down the message. He wrote it on a telegraphic blank, as dictated, and sent it. It was held that the operator, in the preparation of the message, was acting for the sender, and not the company, and that the plaintiff could not, therefore, complain of his act in writing the message upon the form commonly used for the purpose, and that the conditions upon the blank were binding upon the sender.
It seems to us that in the cases cited the Texas court went too far if it took judicial notice that the scope of the agent’s authority did not permit him to write messages for those desiring to send them, who, from infirmity, were incapacitated from writing the same, or were, from ignorance, unable to do so. The law does not forbid such authority, nor does it make it the duty of the sender to write the message. If the rules of the company forbade it, there is nothing in the case to show that the fact was brought home to the knowledge of the patron, and the rule would have no greater force than any other of which he was ignorant. We cannot conclude, in the absence of proof, that the telegraph companies expect their operators to turn away patrons who cannot write, or that they keep telephones in the office, but do not permit their use in their business by their patrons who send and receive messages. And we are of the opinion that such use should not be altogether at the peril of the patron, or that he should suffer for mistakes made at either end of the line, merely because such are the instructions to the operator, or made the subject of a rule of which the patron has no knowledge. It would seem more reasonable to hold such acts to be within the general scope of his authority, or, at least, hold it to be a question for a jury. There is sufficient justification for the decision in the Edsall Case without invoking such a rule, for the sender signed the message upon the blank, thus making it his own, under the current weight of authority that so holds, although the conditions be not read. 25 Am. & Eng. Enc. Law, 805, and cases cited in note 1. So, in the case of Gulf, etc., R. Co. v. Geer, supra, the message was written upon the blank by request. The Foster Case, supra, more nearly sustains defendant’s contention. We are cited to no authorities in support of the Texas cases. We are of the opinion, therefore, that the- court committed no error in holding that Mr. Young acted as agent for the defendant, under the proofs contained in the record, and might properly have instructed the jury that he was not shown to have acted as agent for the plaintiff.
It is urged that the court erred in permitting the plaintiff to testify to the meaning of the words used in the dispatch, viz., “Buy three May.” Counsel cites some authorities supporting the doctrine that such evidence is not admissible where the statute of frauds has application; but no such' question is raised here. There was no contract with the Wylie Company; merely a request to purchase something. If the language had a secret meaning, it was proper to show the fact. Ciphers play an important part in business affairs, and we see no reason why they are not as proper subjects for translation as foreign languages.
The defendant asserts further that there was no competent evidence that the telegram was not delivered. Young stated such fact to the plaintiff before sending the duplicate message, and we think this was an act within the scope of his authority, and a part of this transaction. .As it is not in any way contradicted, it is unnecessary to inquire whether the testimony of the Chicago witnesses upon the same subject was admissible or not.
We are of the opinion that the court did not err in leaving the question of the price of wheat at Chicago to the jury. The plaintiff testified that he knew what it was, and his cross-examination did not show that he had no knowledge upon the subject.
It is contended further that this telegram was sent in furtherance of a gambling contract, which would have been void under the statute, and that damages for a failure to deliver it cannot be recovered. 3 How. Stat. § 9354/, prohibits the purchase and sale of grain, etc., on margins for future or optional delivery, without any intention of receiving or paying for the property so bought or sold. If this claim were conclusively proved, so that we could find the fact as alleged, we should have no doubt that the plaintiff’s action must fail; but this is a disputed fact. The plaintiff testified that such an arrangement was not contemplated, and that he expected to pay for and receive the grain. We have no occasion to express our opinion of the matter. There was evidence for the jury, and the responsibility of justly determining this fact was theirs. Every contract for a future delivery of grain is not a gambling contract. It is only when the parties mutually understand it to be such, and no actual sale or purchase or contemplated delivery is involved, and where the one is tp pay and the other receive the amount of fluctuations in the market, that this statute applies. It is the pretended, and not the actual, buying and selling of grain, etc., that is prohibited. An extended discussion of this subject will be found in 8 Am. & Eng. Enc. Law, 1005 et seq. The subject is also fully discussed by Mr. Justice Marston in Gregory v. Wendell, 39 Mich. 338 (33 Am. Rep. 390), and later, upon another review of the same case, by Mr. Justice Cooley. See 40 Mich. 435.
The judgment is affirmed.
The other Justices concurred. | [
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Montgomery, J.
The hearing below was on an appeal from an allowance of a claim in' favor of the appellees by commissioners on claims. On the trial the circuit judge directed a verdict in favor of claimants. The Home Savings Bank, a creditor of the estate, defended against the claim in the .circuit court, and has brought error to review the proceedings on the trial.
As the circuit judge directed a verdict, the question presented is whether the testimony was conclusive to sustain the claim presented, or- whether, on the other hand, an inference of nonliability could be drawn from the whole testimony. The facts were not much in dispute. A history of the claim is, in brief, as follows: Catherine H. Jones, the grandmother of claimants, died testate, Octobor 18, 1865, bequeathing to J. Huff Jones and Augustus P. Thompson a considerable estate in trust for these claimants, to possess, control, and manage until the younger of the two claimants should attain the age of 21 years; and empowered the trustees to lease, sell, or mortgage any portion of the estate, and to invest the trust property in first-class securities, and to divide the property equally when the younger child should attain the age of 21 years. J. Huff Jones became the active trustee in the management of the estate. Henry K. Jones became of age October 30, 1883, and Matilda C. Jones on August 2, 1886. On August 11, 1886, the trustees deeded to Henry K. and Matilda O. Jones, jointly, all of the real estate held in trust, the active trustee, however, retaining control of the personal estate until March 10, 1888, when the personal property for which he accounted was turned over in equal parts, and a receipt in full given by each of the claimants, purporting to discharge the trustees from liability as trustees. J. Huff Jones died testate, but insolvent, December 16, 1892, Shortly after the death of J. Huff Jones, Henry K. Jones for the first time made an examination of the books of J. Huff Jones kept in connection with the books of another trust estate in the hands . of J. Huff Jones, and found substantial inaccuracies in the accounts. This directed his attention to the accounts kept by deceased of the transactions relating to the property of these claimants, and on examination he found inaccuracies in the account. Further investigation by the claimant and experts resulted in the presentation of the present claim.
After the presentation of this claim, an expert accountant, Mr. John H. Clegg, was employed to examine the books of deceased, and the result of his examination was a finding that there was on the 10th of March, 1888, a balance due the claimants of $25,258.07 over and above the amount accounted for. A stipulation was entered into between the parties, reading as follows:
“It is hereby stipulated and agreed by and between the parties hereto that the examination of the books and accounts of said suit, made by John H. Clegg, at the trial of this cause on appeal, may be treated as though such examination had been made by a referee, under the direction of the court, for the purpose of ascertaining the amount due from J. Huff Jones to claimants, according to the books and papers of J. Huff Jones in the condition they were in at the time of his death, and the amount so found due may be considered the same as if found by a referee; provided, that this stipulation shall not be con strued as in any way to prevent the raising of an issue of fact or law based upon any alterations, omissions, or errors which may be found in the original entries and accounts of said J. Huff Jones, deceased, as to any part or all of said account, or of any question concerning the same; or likewise to prevent the raising of an issue of fact or law based upon dealings between claimants and said deceased concerning said claim, or any part thereof.
[Signed] “Sidney T. Miller,
“Att’y for Claimants.
[Signed] “George W. Radeord,
“Att’y for Appellant.”
In our view, this stipulation left very_ little to litigate. As regards the amount of the liability, if any existed, if the contestant had been able to show that 'this amount was incorrect because of omissions and errors or alterations, it was open to it to do so; but we do not think the testimony offered, when analyzed, impeaches the finding of Mr. Clegg. No special errors in the account are pointed out in the brief of appellant’s counsel, while the testimony of witnesses for claimants shows very clearly that the changes were made in the books either by J. Huff Jones or his bookkeeper, and in his lifetime.
It is contended by appellant’s counsel—
“That it was a question of fact for the jury to determine whether the investigations of Clegg were of sufficient weight and accuracy to show fraud, mistake, or misrepresentation on the part of J. Huff Jones, and thus overthrow the settlement of March 10, 1888, between claimants and J. Huff Jones, by which the former acknowledged payment in full, and released J. Huff Jones from all liability.”
We do not agree with this contention. All the testimony in the case was to the effect that neither of the claimants had ever examined into the transactions of deceased as their trustee. There was no pretense that they had personal knowledge of the transactions. It cannot be gainsaid that the receipts on their face show that the trustee had assumed to account for all the avails of their property; and yet at the very date, as appears from the finding of Mr. Clegg (whose finding is of the force of that of a referee), there was in the hands of this trustee, unaccounted for, more than $25,000. We are all ■satisfied that the .testimony on behalf of claimants not only overcame the evidence afforded by the receipts, but that it left no room for any inference inconsistent with liability.
The point is made that the claimants were barred by the statute of limitations before Mr. Jones’ death. As essential to this contention, the counsel for. appellant argues that, by the terms of the trust, the same terminated when Matilda C. Jones reached the age of 21 years. But the mere fact that money due the cestui que trust is allowed by him to remain in the hands of the trustee does not change the nature of the debt, and, until an accounting was had or demanded, the statute of limitations did not run. 2 Perry, Trusts, § 863 (p. 513, 4th Ed.), and cases cited; Frank v. Morley’s Estate, 106 Mich. 635.
Judgment affirmed.
The other Justices concurred. | [
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] |
Moore, J.
In October, 1895, Charles E. Kelsey executed a mortgage upon a quantity of lumber, to the Union Trust Company, as trustee, to secure a debt due the plaintiff of $13,000, and one to Charles L. ’Kelsey of upwards of $2,000, and stated the lumber was clear of all liens, “except possible legal liens for saw bills,” etc. The lumber was then piled upon the docks belonging to the owners of the mills where the lumber was cut. This mortgage was properly filed. In December following, a writ of attachment against Charles E. Kelsey was placed in the hands of defendant, who was sheriff of the county, and, by virtue of his writ, he levied upon the lumber in question. Afterwards a judgment was obtained in this attachment suit. In April, 1896, the mortgagee attempted to-foreclose the mortgage, and sold the property by mortgage sale, subject to the liens for saw bills, to the plaintiff in this case, for about $9,000. It is the claim of plaintiff that he afterwards paid the saw-bill liens, amounting to upwards of $4,000. After the sale, he caused a demand to be made upon the sheriff for the lumber, and, upon his refusal to give it up, commenced this action in replevin.
It was the claim of defendant upon the trial that the mortgage was void as to the creditors of Charles E. Kelsey, and that the foreclosure proceedings were so defective that plaintiff did not obtain title. The plaintiff asked the judge to direct a verdict in his favor. He declined to do so, but directed a verdict in favor of defendant for two reasons:
“1. That there is no sufficient evidence that the notices of sale provided by said mortgage and by law were given prior to the making of the sale.
‘ ‘ 2. That at the time of said sale the property pretended to be sold was not in the possession of the person making said sale, but was held adversely to him by the- defendant in this suit, as sheriff, under a writ of attachment, and that the plaintiff in this case is not entitled to recover.”
He also instructed them as follows:
“Your verdict must be in favor of the defendant for the amount of the defendant’s lien, the defendant having waived a return of the property; and the amount of the lien is the judgment and the costs and the interest, amounting to $10,078.57. You will render a verdict in favor of the defendant for that amount.”
Exceptions were taken, by plaintiff to this action of the judge, and error is assigned.
There was sufficient testimony of the posting of the notices of sale so the question should have been submitted to the jury; but, as the notice itself is not in the record, we are not able to say the court erred in instructing the jury there had been no compliance with the provisions of the mortgage in relation to the notices of sale.
It is claimed by plaintiff that, even if the sale was defective, he succeeded to the rights of the mortgagee, and had a lien upon the lumber to the amount due upon the mortgage; that he also had a lien upon the lumber for the saw bills; that these liens were prior to the lien of the sheriff, and, as they amounted to the value of the lumber, defendant was entitled to only nominal damages. The record does not disclose when, or the circumstances under which, the saw bills were paid; so we are unable to decide whether the lien for saw bills was discharged or not.. The record shows a dispute as to the validity of the chattel mortgage. This raised a question of fact; and, as it was not submitted to -the jury, we cannot say whether the mortgage was void as to creditors or not. If it was a valid mortgage, it was not extinguished by an irregular sale, but the purchaser would succeed to the rights of the mortgagee. Jones, Chat. Mortg. § 811; Gilbert v. Cooley, Walk. Ch. 494; Lillibridge v. Tregent, 30 Mich. 105; Hoffman v. Harrington, 33 Mich. 392; Lyle v. Palmer, 42 Mich. 314; Morse v. Byam, 55 Mich. 594; Rose v. Page, 82 Mich. 105.
Defendant urges that, as plaintiff claimed in the court helow to be the owner of the property, he cannot now claim to be a lienor. The plaintiff duly excepted to the action of the circuit judge in directing a verdict for the amount of the judgment and costs which were obtained in the attachment case. If the plaintiff was not entitled to the possession of the property, defendant was entitled to its return. If it was returned to him, no one would claim that it would be discharged of the valid liens which existed at the time the replevin suit was commenced, or that their priority would be affected. Is it possible such a result can he worked out by simply waiving a return of the property ? The right to waive a return of the property, and to have its value assessed, is given in 2 How. Stat. § 8347. This section expressly provides that the right shall be subject to -the provisions of section 8342; and this section provides -that, where either of the parties has a lien or part ownership in the property, that fact shall be determined, and such judgment shall be entered as shall be just between the parties. If it is true, as claimed by plaintiff, that this chattel mortgage and the saw bills were liens upon the property at the time the levy was made, and that he -had succeeded to the rights of the mortgagee and the lienors, it would not be just to render such judgment as was directed in this case.
We do not deem it necessary to discuss the-other questions, for they are not likely to arise in a new trial.
Judgment is reversed, and new trial ordered.
The other Justices concurred. | [
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The certified questions presented to this Court by the United States District Court for the Eastern District of Michigan are considered and the Court declines to answer the certified questions. Williams, C.J., and Levin, J., would answer the certified questions. | [
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The certification by the Court of Appeals pursuant to Administrative Order 1984-2 that its decision in this case is in conflict with its decision in Caplan v Detroit Automobile Inter-Ins Exchange, 102 Mich App 354; 301 NW2d 471 (1980), is considered. In light of the fact that no application for leave to appeal has been filed, the Court declines to take any further action. Court of Appeals No. 78713. | [
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Moore, J.
This is a proceeding to foreclose two mortgages. A decree was rendered in the court below in favor of complainant, from which decree some of the defendants appeal.
Prior to 1878, Arthur B. Long, of the State of Pennsylvania, and his son, George H. Long, had been engaged in the business of lumbering. In April, 1878, a partnership agreement was made, which, omitting the formal part, reads as follows:
“As this agreement has reference now to the late firm of A. B. Long & Son, who has formerly been doing business as the firm of A. B. Long & Son, and is now carrying on and doing business of lumbering in the name of A. B. Long & Son at this date, and for some time has been doing and carrying on the business in this name, and «hat all lands and lumber, logs and other property, have been made to George H. Long and A. B. Long, for which property in logs, lands, and lumber, and sundry personal property has been made, by deed and otherwise, unto the late firm of A. B. Long & Son, A. B. Long and George H. Long, who in their own right and by deed own the property so sold and deeds held for the same as follows: That A. B. Long owns in said property and lands the undivided two-thirds of all lands and other property now held and owned by the firm of A. B. Long & Son, and that George H. Long now holds and owns the undivided one-third interest in all the above lands and other property; and now, for the purpose of continuing and carrying on the business of lumbering, we this day agree to continue the business in all its various branches and places as they shall from time to time think most proper and best for them to do, and the length of time shall be determined by the parties themselves, and to their best interest; and it is further agreed by and between the parties that A. B. Long shall not draw or take from the firm more than $500 monthly, and that George H. Long shall not draw or take from the firm more than $250 monthly, and that A. B. Long is to have two-thirds interest and profits made by carrying on the said lumbering business, and bear the two-thirds losses, and George H. Long to have the one-third interest and profits made by carrying on the lumbering business, and bear the one-third losses.”
Arthur B. Long died in 1884, leaving a will, which was duly probated in Pennsylvania,' and afterwards in this State. The property was given by 'the will, one-fifth of it to each of four children, and one-fifth to one child and his children, after providing the sum of $3,000 annually to his wife. The sum of $10,000 was to be held by George H. Long as trustee, and the income from it was to be paid annually to William J. Long as long as he lived. By a codicil, George H. Long and David W. Woods were made executors. The will contained these provisions:
“All of my estate, both real and personal, that is being and lying in the county of Clearfield and State of Pennsylvania, and now leased unto Robert Hasse Powell, the same bearing date the 11th day of June, 1872, and June the third, 1871, and that my executors or .their executors or administrators shall continue the said lease with the said Robert Hasse Powell for the full term of ten (10) years after my decease, and the royalties that accrue from said coal or lease shall by my executors be paid to the above legatees, as prescribed in section second, at the end of each year after my decease.
“ The lease made on the ninth day of July, 1881, by and between George H. Long and A. B. Long, for certain pine timber being and lying in Mecosta county and State of Michigan, and that my executors or their executors or administrators, and with the sawmill at Grand Rapids, with the adjoining lands to said mill for sidings and ground for sticking and drying lumber, shall continue and remain as they now are, for such use and purpose, until all the pine timber on the above-named lands shall be manufactured at said mill, and sold, and the moneys thereof made shall from such lumber shall by my executors or their executors or administrators shall at the end of each year divide among the above legatees, as specified in the above in section second, after my decease. Any other lands being or lying in the State of Michigan, not mentioned above, shall be sold by my executors as soon as convenient after my decease.
“I do by these presents give unto my executors, or a majority of them, or their executors or administrators, or a majority of them, full power and authority to grant, alien, bargain, sell, and convey by deed, and assign, all the said lands mentioned in this my last will, and any other lands or personal property I may have at the time of my decease, unto person or persons and theirs forever, in fee simple, by all and every such lawful ways and means in the law as to my said executors or their executors or administrators, or a majority of them, his or their counsel learned in the law, shall seem fit or necessary to be done.”
Mr. Woods and Mr. Long qualified as executors; Mr. Woods having charge of affairs in Pennsylvania, and Mr. Long in this State. The business of lumbering was continued after the death of A. B. Long as it had been before, and the proceeds of the Michigan business were taken to Pennsylvania by Mr. Long, annually reported to the probate court, and distributed; the amount so taken by Mr. Long, and distributed, amounting to upwards of $500,000. Mr. Long also filed annual accounts in the Kent county probate court. The coal lands in Pennsylvania ceased to be productive in 1892 or thereabouts. The lumber was all manufactured in 1891 or 1892, and the mill in Grand Rapids was soon after that dismantled.
It is the claim of the executor that he had distributed the funds which came into his hands, amounting to upwards of a half a million of dollars, so that January 1,1892, he had in his hands as executor but $134. In February of that year, he received upon a judgment a little over $600, which, he says, he had agreed to forward to the Pennsylvania executor, to help him pay the taxes on the coal lands. It is his claim that in October he was notified of an assessment against the Grand Rapids property of $2,400 for street improvements, and that there would be other taxes due, and that he had no money as executor with which to pay them. In January, 1895, he petitioned the probate court for leave to mortgage the real estate, to enable him to pay the debts against the estate. The petition contained, among other things, the following statements :
“That the amount of personal estate of the said Arthur B. Long that has come into, the hands of your petitioner is the sum of $386,385, of which only one or two hundred dollars remains undisposed, of; that the debts outstanding against the estate of the deceased, as far as can be ascertained, amount to the sum of $2,000 or thereabouts; that the charges of administering the estate of the deceased, including future probable charges, amount to the sum of $800; that the expense of administration of the estate of the deceased will amount to the sum of $800.
“That the following is a description of all the real estate of which the testator died seised in the county of Kent, in the State of Michigan, namely: [ Then follows a description of the lands and of their values.] That there is not sufficient personal estate in the hands of the executor, your petitioner, to pay the debts outstanding against the estate of the deceased, and the expense of administration; that it is necessary to borrow money by way of mortgage on the whole of the real estate of said testator above described, for the purpose of paying the debts against the estate of the deceased and the expense of administration ; that the names and residences of all persons interested in said estate are as follows: * * * that it will be necessary, for the purpose of paying the aforesaid debts, expenses, and charges, to borrow the sum of $3,600 by way of mortgage upon such real estate.
“Your petitioner therefore prays that he may be authorized, empowered, and licensed to borrow said sum of money by way of mortgage upon such real estate, or some part thereof, as the court shall deem best, for the purpose of paying such debts, charges, and expenses, according to the provisions of the statute in such case made and provided.”
Due notice was given of the hearing, and the court made an order authorizing the executor to borrow $2,666.66 for one year, at 6 per cent., and to give a mortgage upon the undivided two-thirds interest of the testator in the lands described in the petition. The executor gave, upon the requirement of the court, a bond in the sum of $4,000, and took the oath required by statute. He arranged with the complainant, who is his wife, to borrow the money of her. He reported fully the arrangement to the probate court, and his action was approved and confirmed. No appeal was taken from any of these orders. On the same day the $2,660.66 mortgage was given, Mr. Long, as an individual, and as surviving partner of A. B. Long & Son, and as executor, and his wife, Kate E. Long, gave a mortgage on the undivided one-third interest which George H. Long owned in the same property, for $1,333.34, to Mr. Sheller, who is the brother of Mrs. Long; and the same day that mortgage was assigned to Mrs. Long, who-paid over to Mr. George H. Long the sum of $4,000. It is to foreclose these mortgages that this suit is brought.
It is the claim of defendants there was no need of giving these mortgages, and that in the giving of them it was the purpose of the executor to acquire title to the property for much less than it is worth, and to deprive the other heirs of their interest in it. The defendants seek to attack in this proceeding the validity of the order made by the judge of probate, and have introduced the proceedings in the probate court, including the annual accounts which were filed prior to the making of the order. They also urge that Mrs. Long is not a good-faith holder of the mortgage. It is the contention of the complainant that she advanced the money upon the mortgages in the utmost good faith. She urges that the petition conferred upon the probate court jurisdiction authorizing the making of the mortgage, and its validity cannot be attacked in this proceeding.
The petition in this case complies with the provisions of the statute quite as fully as did the petition in the case of Griffin v. Johnson, 37 Mich. 87, in which case Justice Campbell used this language:
“The allegations in this petition set up a sufficient state of facts, if true, to authorize the granting of a license. This being so, the truth or falsity of those allegations cannot be inquired into collaterally. The court having jurisdiction, parties claiming under a mortgage made in pursuance óf a license are not required to investigate the truth of those facts, but have a right to assume the court acted correctly. This doctrine has been settled by a long series of decisions of this court,” — citing many cases.
This doctrine has since then been followed in a large number of cases. Norman v. Olney, 64 Mich. 553; Egan v. Grece, 79 Mich. 629; Pfirrman v. Wattles, 86 Mich. 254.
It is said, notwithstanding the general rule that an order of this kind by the probate judge cannot be attacked collaterally, this order can be, for the reason it was made without the court having any jurisdiction to make it. It is the claim of counsel that the probate court was without authority to make the order, for the reason that the debt accrued after the death of Mr. Arthur B. Long, and such an order could not be made for a debt arising after his death;“citing a number of cases, but relying especially upon the case of Farrar v. Dean, 24 Mo. 16. The Missouri statute differs from ours. It reads: “Where there are not sufficient personal estate and effects charged with the payment of the debts of any testator or intestate, it shall be the duty of the executor or administrator to apply,” etc., and provides an order may be made for a sale of so much real estate as shall be necessary for the payment of the debts of the deceased. 1 Rev. Laws 1825, p. 106, § 40. Our statute provides the probate court may authorize the giving of a mortgage for the “purpose of paying the debts against the estate of any deceased person.” 3 How. Stat. § 6105. This statute was construed in Be Lambie’s Estate, 94 Mich. 489, where it was held a mortgage' against land owned by the deceased, but not made by him, was such a debt as authorized the order, the court saying:
“There is no question here but that this estate, consisting only of this one parcel of land which has been pledged to pay this specific sum, is legally liable to pay this charge upon it; and it can make no difference that deceased was not personally liable, but took this property subject to the pledge. * * * In the present case the language of the ■statute is ‘debts against the estate.’ Is not this mortgage debt one against the estate, — against the property of the estate? Is not the estate — the property of the estate-charged with its payment ? Is it not legally liable for its payment? The word ‘debts,’ in the statute, should be given its ordinary signification, rather than a technical construction, which would be contrary to the practical construction which has been given it up to the present time.”
A large proportion of the amount authorized to be raised was for assessments and taxes against the lands of the testator. Is not the estate — the property of the estate— chargeable with the payment of these taxes? And, if they were not paid, would not the land be sold ? It was the duty of somebody to pay the tax. But it is said so much time has elapsed since the death of Mr. Long that this real estate ought not to have been under the control of the executor, but should have been partitioned. It is sufficient to say the statute gives the executor possession of the real estate until the estate is settled, or until delivered over by the order of the probate court to the heirs. & How. Stat. § 5875. The estate had not been closed; the executor had not filed his final account; none of the heirs had asked for partition; and, until some of these things were done, it was not only proper, but it was the duty of the executor, to pay the taxes, and prevent the property from being sold for taxes.
It is claimed there are included, in the amount for which the mortgage was given, items.for needless and unauthorized litigation. The executor gave a bond at the time the mortgage was given. He will have to give an account to the probate court of his expenditure of the money received on account of the mortgage. We have already seen that debts were in existence, giving the court jurisdiction to act. The probate court, rather than here, is the proper forum to decide in the first instance whether the money has been properly expended.
It is urged the executor had upwards of $30,000 in his hands that he had improperly retained in the way of compensation, and that this order ought not to have been made. We have already said that the petition was sufficient to confer jurisdiction upon the court, and that his order cannot be attacked in this collateral proceeding. The executor has not filed his final account. If he has received moneys for which he has not properly accounted, the probate court or the court in chancery is entirely competent to deal with that question in a proceeding in which it is directly involved.
There are other questions raised by counsel, but, in view of the effect of the order made by the probate judge, we do not think they can be raised in this proceeding, and it will not be profitable to discuss them further.
It is urged in defendants’ brief that the decree authorizes the sale of the entire property, instead of authorizing the sale of a two-thirds interest therein on one mortgage, and a one-third interest therein on the other. The language of the decree is somewhat ambiguous, and it may be modified in that respect so that there can be no question about its meaning. When so modified, it will be affirmed, with costs to appellees.
The other Justices concurred. | [
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Montgomery, J.
This is a bill filed for specific performance of a contract. The complainant is a young man, and unmarried. The defendant is a man about 70 years of age, and also unmarried, and the uncle of complainant. In March, 1897, the complainant was the owner of 120 acres of land in the township of Campbell, Ionia county, which was mortgaged for about $3,000; the amount being represented in three mortgages, two of which were held by a Mrs. Powers, and the third, in the sum of $900, running to defendant. The complainant also owed unsecured debts amounting to about $500. The evidence shows that in March the complainant received an offer of $40 per acre for the lands in question from one William Whitney; the purchase price to be paid in 20 acres of land, at a valuation of $1,200, and the balance in cash. There is no dispute in the record of the fact that complainant received this offer. The complainant’s claim is that he informed defendant of this offer, and defendant proposed to him that he (complainant) deed to defendant, and that he (defendant) would give back a “life-lease deed,” so called, providing that each might occupy the land during the lives of both, and that at the death of either it should go to the survivor. Defendant further proposed to advance $3,500 upon the land, wherewith to. pay the mortgages and enable complainant to meet his outstanding indebtedness. This proposition complainant claims he accepted, and made a deed to defendant; that the execution of the so-called “life-lease deed,” and the payment of the balance coming to complainant over and above the mortgages, were postponed from the time the deed was made, in April, until some time in the month of June, when defendant refused to fulfill his part of the agreement, and ordered the complainant to leave the premises.
The question involved is wholly a question of fact. The complainant’s testimony shows that, after the agreement was entered into between the parties, they continued to live together upon the premises from April until June. The complainant continued to expend money in trimming the orchard and repairing the fences, and also continued to spend labor for the betterment of the place. This testimony would tend to show that, if complainant’s theory of the case was maintained by the proof, he had entered into a performance of the contract in such manner as would entitle him to relief by way of specific performance, under section 6183, 2 How. Stat. Upon the question of fact, the learned circuit judge found the case stated in the bill to be made out by the proofs. A careful reading of the testimony convinces us that this conclusion was fully justified. The parties are at direct variance in their testi mony upon the main question, and in such cases we look for support to the one or the other in the surrounding circumstances. We find complainant’s version of the transaction supported by the subsequent conduct; and, furthermore, what is of great significance is that, if defendant’s theory be accepted, which is that the complainant deeded the land to him without reserving any consideration other than the payment of the mortgages upon the property, it would appear that the complainant voluntarily sacrificed the difference between the price offered by Mr. Whitney, viz., $4,800, and this, sum. This seems incredible, especially in view of the fact that defendant seems to have been a man of considerable means, and complainant a poor man. It is true, the defendant introduced testimony tending to show the value of this land to be much less than the offer of Mr. Whitney, and while it is probable, upon the whole testimony, that the land would not have sold for $4,800 in cash, yet we are fully satisfied that its value was from $3,600 to $4,000, while to the complainant, in view of the offer which he had from Whitney, it was worth much more.
The decree of the circuit court granted the relief prayed, and that decree will be affirmed, with costs.
Hooker, Moore, and Long, JJ., concurred. Grant, C. J., did not sit. | [
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] |
Per Curiam,
The writ of certiorari is denied. The voters of the district, at a meeting properly called and held, voted not to permit relators the use of the schoolhouse for the purpose of holding meetings. Their action was regular, and authorized by the law. | [
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Cavanagh, J.
This appeal presents three questions for our consideration:
1) May foster parents invoke the defense of parental immunity in negligence suits brought by or on behalf of a foster child placed in their care?
2) If so, does negligent supervision of a child fall within the purview of the parental immunity doctrine?
3) If so, is the reasonableness of the alleged parental conduct a question of law or fact?
We hold that foster parents cannot invoke the defense of parental immunity and therefore may be held liable for their negligent conduct which proximately causes injury to their foster child. In light of this holding, we need not address the remaining two questions.
I
Defendants Alfred and Carol Pryor were properly licensed by the Department of Social Services as foster family home parents. Justin Mayberry was placed in their home in October, 1977, after the Bay County Probate Court temporarily removed him from the custody of his natural mother, plaintiff Kay Mayberry. At the time of the initial placement, Justin was twenty-two months old and deaf. Justin was briefly returned to Ms. Mayberry’s custody twice, but was removed to the Pryors’ home after appropriate hearings.
On November 18, 1979, Justin, then about four years old, was allegedly attacked by a German shepherd dog while sitting alone on the front porch of the Pryors’ home. Because of his deafness and inability to communicate, Justin was unable to cry out for help. As a result of the attack, he suffered serious injuries and permanent brain damage. Justin apparently has been placed in a state residential facility because of his physical and mental disabilities.
Ms. Mayberry filed a complaint in June, 1980, against the Pryors for negligent supervision, and against defendants Ralph and Susan Day, the owners of the dog. The Pryors moved for summary judgment on the ground that their foster parent status entitled them to invoke the defense of parental immunity. In March, 1982, the Saginaw Circuit Court granted the Pryors’ motion pursuant to GCR 1963, 117.2(3). The Court of Appeals affirmed. 134 Mich App 826; 352 NW2d 322 (1984), and certified, pursuant to Administrative Order No. 1984-2, that its decision was in conflict with Grodin v Grodin, 102 Mich App 396; 301 NW2d 869 (1980), lv den 412 Mich 867 (1981). We granted plaintiffs application for leave to appeal. We directed the parties to brief whether Plumley v Klein, 388 Mich 1; 199 NW2d 169 (1972), was properly applied to the instant case and whether foster parents may invoke parental immunity. 419 Mich 901 (1984).
II
In Plumley, this Court joined a growing number of jurisdictions which have abolished the common-law rule that children cannot bring a tort cause of action against their parents. We retained the defense of parental immunity in only two limited situations:
A child may maintain a lawsuit against his parent for injuries suffered as a result of the alleged ordinary negligence of the parent. Like our sister states, however, we note two exceptions to this new rule of law: (1) where the alleged negligent act involves an exercise of reasonable parental authority over the child; arid (2) where the alleged negligent act involves an exercise of reasonable parental discretion with respect to the provision of food, clothing, housing, medical and dental services, and other care. [388 Mich 8.]
Although Plumley addressed only the tort liabil ity of a natural parent, the circuit court and Court of Appeals concluded here that persons acting in loco parentis to a child could also invoke the defense of parental immunity. Citing Hush v Devilbiss, 77 Mich App 639; 259 NW2d 170 (1977), the circuit court reasoned that licensed foster care homes provide children, whose natural parents are unwilling or unable to provide proper care and supervision, with a healthy and supervised environment. Since by definition foster parents replace the function of natural parents, the circuit court concluded that the Pryors stood in loco parentis to Justin. The Court of Appeals similarly held, as a matter of law, that persons who provide temporary foster care to a child pursuant to a probate court order stand in loco parentis to the foster child. 134 Mich App 830.
Both lower courts then held that an action for negligent parental supervision is barred because it involves the exercise of parental authority over a child, which falls within the first Plumley exception. Id., pp 830-831. Finally, they concluded that the reasonableness of the exercise of parental authority is a question of law which can be disposed of by motion for summary judgment. The Court of Appeals at first distinguished, then rejected, the seemingly contrary holding in Grodin. Id., pp 832-833.
III
The tort liability of a foster parent is an issue of first impression in this state. Similar cases from other jurisdictions are conflicting. The vast majority of cases which have discussed the tort liability of persons standing in loco parentis to a child generally involved the child’s stepparents, adoptive parents, grandparents, or other persons re lated by consanguinity, marriáge, or adoption. In addition, the child was generally visiting with or being cared for by these persons with the natural parents’ consent when the injury occurred. See cases discussed in 6 ALR4th 1066, § 4, pp 1087-1093; 41 ALR3d 904, § 11, pp 960-963.
The situation is markedly different when a foster care arrangement is involved. Foster parents and foster children are not related by consanguinity, marriage, or adoption. See MCL 722.111(f); MSA 25.358(ll)(f). They are brought together lay means of a preexisting contractual arrangement between the dss and the foster parents in which the latter are compensated for expenses incurred in caring for the child. See MCL 400.115a-c, 712A.25; MSA 16.490(25a)-(25c), 27.3178(598.25). The foster parents and home must conform to specific statutory and regulatory guidelines and the dss is required to monitor them. See MCL 722.111 et seq.; MSA 25.358(11) et seq.; 1979 AC, R 400.191 et seq.
In addition, placement of the child in a foster family home generally is not voluntary. It often occurs after the child has been physically removed from the custody of the natural parent or other caretaker by order of the probate court after an adversary hearing due to neglect, mistreatment, or abandonment. See MCL 712A. 1 et seq.; MSA 27.3178(598.1) et seq. Even a "voluntary” relinquishment of a child for foster care placement may be induced by threats of court proceedings or the product of uninformed consent. Smith v Organization of Foster Families, 431 US 816, 834; 97 S Ct 2094; 53 L Ed 2d 14 (1977).
Finally, the goal of foster care is not to create a new "family” unit or encourage permanent emotional ties between the child and foster parents. Foster care is designed to provide a stable, nurturing, noninstitutionalized environment for the child while the natural parent or caretaker attempts to remedy the problems which precipitated the child’s removal or, if parental rights have been terminated, until suitable adoptive parents are found. Smith, 431 US 861-862 (Stewart, J., concurring). See also MCL 400.18c(2), 712A.19; MSA 16.418(3X2), 27.3178(598.19).
There are few cases from other jurisdictions involving suits by foster children against foster parents. We are aware of only two cases in which a foster parent has been determined to stand in loco parentis to a foster child. In Miller v Pelzer, 159 Minn 375; 199 NW 97 (1924), the. child was placed with the foster parents shortly after her birth and lived with them for twenty-five years. When she discovered that she was not their natural child, she filed suit alleging fraud and deceit and sought compensation for farm work she had performed. In dismissing the child’s suit, the Minnesota Supreme Court initially noted that the family relation which had existed "for all practical purposes was just as sacred as if plaintiff had been the natural daughter.” Id., p 377. The true holding of the case, however, was that the foster parents were under no legal duty to inform the child of her true parentage and therefore plaintiff had failed to state a cause of action. Although Miller was cited with approval in London Guarantee & Accident Co v Smith, 242 Minn 211, 217, n 13; 64 NW2d 781 (1954), the liability of a stepfather was involved in the latter case.
In Goller v White, 20 Wis 2d 402; 122 NW2d 193 (1963), the Wisconsin Supreme Court accepted the trial court’s conclusion that the foster father stood in loco parentis to the foster child. It then proceeded to abolish the defense of parental immu nity, except in two limited situations. Since the child’s complaint sufficiently alleged negligent parental supervision, a cause of action which did not fall within either exception, the Goller Court concluded that the foster father could be held liable. Id., pp 409-413. The concurring opinion would have allowed the suit on the ground that parental immunity should not be extended to foster parents. Id., p 413.
Several courts have permitted foster children to sue their foster parents without discussing the issue of parental immunity. Some cases are distinguishable because the foster parents allegedly engaged in intentional misconduct. See, e.g., Blanca v Nassau County, 103 AD2d 524; 480 NYS2d 747 (1984); Vonner v Dep’t of Public Welfare, 273 So 2d 252 (La, 1973); Hanson v Rowe, 18 Ariz App 131; 500 P2d 916 (1972). Actions alleging intentional torts were one of the first exceptions carved out from the parental immunity doctrine. Other courts, while expressing sympathy for the plight of foster parents, have nevertheless permitted suits alleging negligent supervision. Headrick v Parker, unpublished opinion of the Tennessee Court of Appeals, decided August 31, 1984 (Docket No. CA 954) (available on lexis); New Jersey Property-Liability Ins Guaranty Ass’n v State, 184 NJ Super 348, 354-355; 446 A2d 189 (1982), rev’d on other grounds 195 NJ Super 4; 477 A2d 826 (1984). See also Kern v Steele County, 322 NW2d 187 (Minn, 1982); cf. Pickett v Washington County, 31 Or App 1263; 572 P2d 1070 (1977).
The only jurisdiction which has thoroughly addressed the problem and concluded that foster parents are not entitled to parental immunity is New York. We find the reasoning of Andrews v Otsego County, 112 Misc 2d 37; 446 NYS2d 169, 172-174 (1982), to be particularly enlightening:
"Foster parents, in the generally accepted meaning of that term, are contract service providers. The very existence of the status of foster parent arises out of a knowingly assumed contractual relationship between the State and the foster parents.” Matter of Mavis M, 110 Misc 2d 297, 308; 441 NYS2d 950 [1981]. Although a foster parent may develop significant emotional ties with a foster child, the duties owed to the child are grounded in a "knowingly assumed contractual relation with the State.” Smith v Organization of Foster Families, 431 US 816, 845; 97 S Ct 2094, 2110; 53 L Ed 2d 14 [1977]. . . . [F]oster care placement is a temporary arrangement designed as an alternative to institutionalized care, and the County agency continues to be the legal custodian of the child. People ex rel Ninesling v Nassau County Dep’t of Social Services, 46 NY2d 382; 413 NYS2d 626; 386 NE2d 235 [1978], The natural parent continues to be responsible for the child’s support during placement. Rockland County Dep’t of Social Services v Brust, 102 Misc 2d 411; 423 NYS2d 435 [1979]. The foster parent does not assume "all the obligations incident to the paren tal relationship” (Rutkowski v Wasko, [286 AD 327, 331; 143 NYS2d 1 (1955)]), but only those responsibilities assigned by the agency as required by law. Smith v Organization of Foster Families, supra, 431 US at pp 826-828; 97 S Ct at 2100-2101. See [52A, NY] Social Services Law, § 378 [McKinney’s]; 18 NYCRR [New York Codes, Rules and Regulations] § 444.6. Indeed, the "temporary parent substitute must keep his proper distance at all costs to himself.” Spence-Chapin Adoption Service v Polk, 29 NY2d 196, 205; 324 NYS2d 937; 274 NE2d 431 [1971],
The second theory of liability also applies here. The [foster parents] knowingly and voluntarily assumed a contractual duty to provide supervisory care for which they received compensation. Having undertaken the duty, they may and should be held responsible for any failure to use reasonable care. Zalak v Carroll, [15 NY2d 753; 257 NYS2d 177; 205 NE2d 313 (1965)].
Third, the [foster parents’] duty to provide care was created by contract, not "because of the family relationship.” Holodook v Spencer, [36 NY2d 35, 44; 364 NYS2d 859; 324 NE2d 338 (1974)]. At the time of placement, there was no familial bond between this infant plaintiff and the [foster parents]. His natural mother continued to be the legal guardian and the County his legal custodian. Smith v Organization of Foster Families, supra, 431 US at page 827; 97 S Ct at 2100. Although foster parents owe similar responsibilities to the foster child concerning discipline, food, clothing, housing, education and supervision as are owed to their own biological children, the nature of the required care and supervision is distinct. Foster parents must strive to provide a stable environment and at the same time, encourage, rather than discourage, the relationship of the foster child and natural parent and ease the return of the child to the natural parent. See State ex rel Wallace v Lhotan, 51 AD2d 252, 259; 380 NYS2d 250 [1976]. This unique responsibility clearly dif fers from the supervisory functions of a natural parent. Moreover, the foster parent-child relationship is designed to be temporary, and the foster parent is obliged to surrender the child upon expiration of the term and perhaps sooner upon the institution of removal proceedings. See, in this respect, Fox v Mission of the Immaculate Virgin, [202 Misc 478; 119 NYS2d 14 (1952), aff'd 280 AD 993; 117 NYS2d 477 (1952)].
Counsel for the [foster parents] also urges that a number of foster parents assume their responsibility with a view towards adoption and that there may be increasing difficulties in finding suitable foster parents in the future. The Court can appreciate these concerns. However, it must be noted that general legislative policy prefers the ultimate return of the child to the natural parent. Soc. Serv. Law, § 384-b(l); Smith v Organization of Foster Families, supra, 431 US at pp 846-847; 97 S Ct at 2110-2111. See also, Note, The Fundamental Right to Family Integrity and Its Role in New York Foster Care Adjudication, 44 Brooklyn LR 63, 84-96 [1977]. Although foster parents and children may develop emotional ties, the natural parent retains a paramount right to raise the child. . . . Thus, the Court finds that the concerns expressed by counsel do not tip the public policy scale in favor of an immunity from suit (or, more accurately, nonrecognition of a cause of action).
The Court additionally observes that the County is obliged to contact and observe the foster home and determine whether the foster child is receiving adequate supervision. 18 NYCRR § 428.3(e)(2). Seemingly, negligent or inadequate supervision would serve as a basis for termination of foster care services. It would be incongruous to permit negligent supervision to serve as a basis for termination of foster care service and allow the relationship of foster parent-child existing at the time of the event to preclude a cause of action for negligent supervision.
Accord Miller v Davis, 49 Misc 2d 764; 268 NYS2d 490 (1966).
These considerations are equally applicable to this state’s system of providing foster care. As previously noted, foster parents and children are brought together solely through a contractual arrangement between the dss and the foster parents. Foster parents are compensated by the state. The natural parents or other caretakers are required to reimburse the state or county for the cost of foster care if and to the extent they are financially capable. MCL 712A.18(2); MSA 27.3178(598.18X2). Placement of a child in a foster home is generally designed to be temporary and is monitored by the DSS.
We are not persuaded that the traditional rationales for the parental immunity doctrine — preservation of the family unit and domestic tranquillity, protection of family resources, and a reluctance to interfere with parenting decisions — require or justify extending the defense to foster parents. Licensing and monitoring procedures already exist, which to some degree limit the foster parents’ parenting decisions. As the Andrews court noted, it would be incongruous to suspend a foster parent’s license because of negligent supervision, but not allow the foster child to sue for injuries incurred because of that negligence.
We recognize that the vast majority of foster parents execute their duties conscientiously and provide quality care to their foster children. Foster parents provide a greatly needed and appreciated service to children who would otherwise have to be institutionalized. The question presented today involves a balancing of equally compelling interests —the foster child’s interest in receiving proper care and being compensated for his injuries versus the foster parents’ interest in providing foster care without fear of litigation. The clear judicial trend is to abolish or limit the availability of the parental immunity defense to both parents and other caretakers alike. We are similarly persuaded that the interests of the child outweigh those of the foster parents and that the parental immunity doctrine should not be further extended. We note, however, that parental immunity from tort liability can be statutorily extended to foster parents if the Legislature so desires.
IV
The decision of the Court of Appeals is reversed. The case is remanded to the Saginaw Circuit Court for further proceedings consistent with this opinion.
Williams, C.J., and Levin, Ryan, Brickley, Boyle, and Riley, JJ., concurred with Cavanagh, J.
One other sibling was temporarily placed with the Pryors, but was successfully returned to Ms. Mayberry’s custody. Two other siblings remained in Ms. Mayberry’s custody throughout the probate court proceedings.
Shortly before summary judgment was granted, Ms. Mayberry voluntarily released her parental rights to Justin because of her inability to care for his special needs. Apparently a guardian ad litem has replaced her as conservator of the child’s estate.
The suit against the Days is apparently still pending.
In Hush, the Court of Appeals reasoned that the rationales for parental immunity — preservation of domestic tranquillity and family unity, protection of family resources, and avoidance of judicial intervention in parenting decisions — were equally applicable where a person voluntarily assumes parental responsibility and attempts to create a homelike environment for a child. Since Plumley did not specifically limit immunity to natural parents, the Court concluded that persons who intend to assume parental status can stand in loco parentis to a child and therefore can invoke the defense of parental immunity. 77 Mich App 644-647.
Since we need not reach this issue, we express no opinion as to the validity of the Hush Court’s reasoning. We note, however, that the tort liability of the child’s grandmother was at issue there, rather than the liability of a foster parent. Moreover, the child had been voluntarily placed in the grandparents’ care by the natural parents because of the mother’s prolonged illness.
The Court of Appeals has consistently held that an action alleging negligent parental supervision falls within the first Plumley exception. Wright v Wright, 134 Mich App 800, 806-807; 351 NW2d 868 (1984); McCallister v Sun Valley Pools, Inc, 100 Mich App 131, 137-139; 298 NW2d 687 (1980), lv den 411 Mich 905 (1981); Hush, 77 Mich App 643-644; Paige v Bing Construction Co, 61 Mich App 480, 485; 233 NW2d 46 (1975), lv den 395 Mich 751 (1975). Some other state courts have similarly barred suits for negligent parental supervision. See, e.g., Holodook v Spencer, 36 NY2d 35; 364 NYS2d 859; 324 NE2d 338 (1974); Cherry v Cherry, 295 Minn 93; 203 NW2d 352 (1972); cf. Horn v Horn, 630 SW2d 70 (Ky, 1982); Cole v Sears, Roebuck & Co, 47 Wis 2d 629; 177 NW2d 866 (1970).
In Grodin, a child filed suit against his mother for negligently taking tetracycline during pregnancy, which caused the child’s teeth to discolor. The Grodin Court concluded that although the cause of action fell within the second Plumley exception, summary judgment for the mother was improper since a fact question existed as to the reasonableness of her conduct. Grodin, 102 Mich App 401.
The Court of Appeals in the instant case first attempted to distinguish Grodin because it involved the second Plumley exception. However, since both exceptions include the word "reasonable,” it concluded that Grodin was improperly decided. Proper application of the Plumley exceptions supposedly required a determination as to the scope of reasonable parental authority or discretion, rather than the reasonableness of the individual parent’s conduct.
A similar conclusion was reached in Wright, 134 Mich App 808-809. In his concurring opinion in that case, Judge Mahek, who was on the panel which decided Grodin, attempted to reconcile the cases. He explained that if there is no reasonable dispute as to whether the alleged tortious activity falls within one of the Plumley exceptions, summary judgment is proper. In Grodin, however, there was a dispute as to whether the mother’s actions fell within the second exception. Thus, summary judgment was improper. Wright, pp 809-810.
Since we need not decide this issue here, we express no opinion as to which interpretation, if either, is proper.
The two Goller exceptions were adopted nearly verbatim in Plumley. However, Wisconsin courts have consistently held that parental supervision does not fall within either exception.
In most of the following cases, the state or county agency charged with supervising the foster care program was also named as a defendant. Generally, the key issue in these cases was whether the governmental agency could be held directly or vicariously liable for the foster child’s injuries, whether the foster parents could invoke the defense of sovereign or governmental immunity, or whether the governmental agency was statutorily or contractually required to indemnify the foster parents. None of these issues are presented here.
In Vonner, the foster father was held liable on a breach of contract theory for failing to provide proper board and care, rather than for any actual participation in the beating of the foster child inflicted by the foster mother.
See Prosser, Torts (4th ed), § 122, pp 866-867; Hollister, Parent-child immunity: A doctrine in search of justiñcation, 50 Fordham L R 489, 498 (1982); Note, The child’s right to "life, liberty, and the pursuit of happiness": Suits by children against parents for abuse, neglect and abandonment, 34 Rutgers LR 154, 164-165 (1981), and cases discussed therein.
Placement of a foster child can be made with a view to an adoption by the family with whom the child is placed. See MCL 400.115c; MSA 16.490(25c). There is evidence that the Pryors at one time intended to adopt Justin. Regardless of this intent, at the time Justin resided with the Pryors, Ms. Mayberry’s parental rights had not been terminated or released.
We noté that the dss may reimburse foster parents for legal costs incurred in successfully defending suits alleging injury or damage which occurred while the foster parent was acting within the scope of authority as a foster parent. MCL 722.161; MSA 25.358(61). | [
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4
] |
Long, J.
Relator is the mayor of the city of Grand Haven. Respondent is the clerk of that city. It appears that at a regular meeting of the common council of that city held on June 2, 1898, a resolution was adopted by a majority vote of that body to transfer the sum of over $7,000 of the contingent funds in the city treasurer’s hands, and divide and apportion said moneys to several different funds. The relator, as mayor, on June 3d filed a notice with the clerk that it was his intention to veto the resolution. On Saturday, June 4th, he prepared his veto, went to the office of the city clerk about 25 minutes after 4 o’clock in the afternoon, and found the office locked and the clerk absent. He found the clerk at his residence about 7 o’clock in the evening of that day, and left the veto message with him for filing on that day; and relator claims that he was given to understand the clerk would so file it. The clerk in fact did not place the filing thereon until the following Monday, which was June 6th. The relator presented a petition to the circuit court for Ottawa county for a mandamus to compel the clerk to file said veto message as of June 4th. In that petition he sets out-the facts above set forth, and alleges that —
‘ ‘Afterwards, at a meeting of said city council held on June 9, 1898, the said veto was ignored and considered by said city council as null and void, because it was not filed within the statutory period (which statutory period was three days, and expired June 5th); and the said council gives it out and says that the said veto is null and void and -of no effect, and that said Alderman Kiel’s report and resolution are valid, and that said council will consider the same valid, and shall consider said veto invalid.”
On return to an order to show cause, counsel for respondent, without filing an answer, moved that the peti tion be quashed, on the grounds:
(1) That it did not show upon its face that the veto had been lodged in the office of the city clerk within the period prescribed by the charter.
(2) That it did not show any resolution subject to the mayor’s veto.
This motion was granted by the court below. The case comes to this court by writ of certiorari.
The report of the committee'which the resolution adopted recommended the transference from the contingent fund of $7,084.88, and placed it in several funds, such as electric light fund, fire department fund, general street fund, water fund, police fund, poor fund, bonded debt fund, etc. It was the resolution adopting this report that the majmr attempted to veto, in which veto he claimed that it was illegal to divide the contingent fund, and distribute it to these several funds. Whether it was legal or not we do not attempt to decide. The city of Grand Haven is of the fourth class, under Act No. 215, Pub. Acts 1895. By the act, the mayor is made the president of the council, but he has no vote therein except in case of a tie, when he has the casting vote. Section 3, chap. 9, of the act, provides:
“No ordinance or resolution passed by the council shall have any force or effect if, on the day of its passage, or on the next day thereafter, the mayor, or other officer or person legally discharging the duties of mayor, shall lodge in the office of the clerk a notice in writing suspending the immediate operation of such ordinance or resolution. If the mayor, or other officer or person legally exercising the office of mayor, shall, within three days after the passage of any such ordinance or resolution, lodge in the office of the city clerk his reasons in writing why the same should not go into effect, the same shall not go into effect, nor have any legal operation, unless it shall, at a subsequent meeting of the council, be passed by a two-thirds vote of all the aldermen elect, exclusive of the mayor, or other officer or person legally exercising the duties of the office of mayor, and, if so repassed, shall go into effect according to the terms thereof. If such reasons shall not be lodged with the clerk as above provided, such ordinance or resolution shall have the same operation and effect as if no notice suspending the same had been lodged with the city clerk; and no ordinance or resolution of the cquncil shall go into operation until after the expiration of twenty-four hours after its passage, unless the said mayor, or acting mayor, shall approve the same in writing. ”
1. We think the veto message was lodged in the office of the city clerk within the time prescribed by the statute, within its meaning. The mayor gave the notice required by the act, which suspended the immediate operation of the resolution, and this was followed up by the veto message within the time required. It is true that he did not find the clerk in his office in the afternoon; but at 7 o’clock that evening he placed it in his hands, and it became the, duty of the clerk to at once place the filing thereon. The statute cannot have the restricted meaning sought to be placed upon it. The lodging of the message in the office of the city clerk was accomplished when it was placed in the hands of the city clerk for filing in his office within the time prescribed.
2. The claim that it was not a resolution which, under the statute, the mayor had the power to veto, has no force. The statute provides that no ordinance or resolution passed by the council shall have any force or effect if the notice is given, and such ordinance or resolution shall not go into effect when the veto message is interposed within the time prescribed, unless the same is passed over the veto by a two-thirds vote of all the aldermen elect.
The order made by the court below will be vacated, and the writ of mandamus issued as prayed, with costs of this motion. -
The other Justices concurred. | [
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Moore, J.
This case comes here upon special findings of the court. The bill of exceptions does not purport to contain all the testimony taken upon the trial. The plaintiff is a builder and contractor. In August, 1893, he entered into a written contract with defendants, to erect for them a large factory building. Soon thereafter he entered upon its construction. It was completed, and the defendants took possession of it, in November, 1893, and were in possession when this suit was tried. A controversy arose as to how much was due from defendants to plaintiff. They were unable to agree upon the amount. Plaintiff sued defendants, and recovered a judgment against them, from which judgment defendants appeal.
Those portions of the contract important in this discussion read as follows:
“The said party of the first part further agrees that all work performed under this contract shall be done in strict accordance with the plans and accompanying specifications prepared for the erection of the said buildings by E. A. Ellsworth, architect; and any questions that may arise between the said parties to this contract as to the true intent and meaning of the said plans and specifications shall be referred to the architect (or, in his absence, to Louis R. Lavalle, representing the said architect as superintendent of construction), whose decision shall be final and binding upon both parties to this agreement. The entire work, when finished and completed, shall be subject to the final examination of the said architect, and all shall be made to meet his acceptance truly to the requirements of the specifications before this contract will be acknowledged and accepted as complete by the said parties of the second part. * * * And it is further agreed by the said party of the first part that all work shall be finished and delivered up to the said parties of the second part free from all mechanics’ liens or other claims upon the same. And the said parties of the second part, in consideration of the complete fulfillment of all the conditions hereinbefore set forth, covenant and agree, for themselves, their heirs, executors, or administrators, with the said party of the first part, to well and truly pay to the said party of the first part a sum of money equal to eight and twenty-five one-hundredths ($8.25) dollars, lawful money of the United States of America, for each and every thousand of brick, and part thereof in like proportion, measured in the walls, at the rate of twenty-two and one-half (22-|-) brick per cubic foot of-wall; the said price being based on the cost of said brick, delivered on the site of the said proposed buildings, at the rate of five and fifty-five one hundredths ($5.55) dollars per thousand (actual count).”
The first dispute between the parties grows out of the measurement of the work. It is the claim of the plaintiff that the measurements should be controlled by the custom in Michigan, which he claims is to measure the outside of the wall, not deducting anything for the openings made by doors and windows; he contending the custom is a reasonable one, as the construction of the wall without openings takes less time and costs less than one with many windows and doors. It is the claim of defendants that they were ignorant of any such custom, and that the space occasioned by the doors and windows should be deducted from the measurements. The circuit judge found that the contract did not provide for any particular method of measurement, and did not leave the method of measurement to the architect or superintendent, and that the language of the contract was ambiguous as to the method of measurement. He also found that, at the time when the contract was made, there was existing in this State, and many of the other States, a custom, which was uniform, general, of long standing, and reasonable, in measuring brick walls, of counting the openings as part of the solid wall, and that plaintiff, in making his contract, relied upon this custom. In the disposition of the case by the circuit judge, he treated the openings as part of the wall. Was he justified in doing so? An inspection of the contract shows no method was pointed out of making the measurements. It also fails to show, in case of a disagreement between the parties as to the method, that the architect or superintendent shall determine. The matters so referred to them are “any questions that may arise between the said parties to this contract as to the true intent and meaning of the said plans and specifications.” This language is not broad enough to convey the authority to decide the disputed question of method of measurement. The contract, then, not providing for the method of measurement, how shall it be decided, except by the custom of the place where the contract is made and performed ?
In Lowe v. Lehman, 15 Ohio St. 179, there was a written contract for the construction of a brick wall, where payments were to be made for the brick furnished and laid in the wall, at $6.25 a thousand. The contract was silent as to the method of measurement. Parol proof was given as to the custom which controlled such measurements. This was said to be error, first, because it contradicted a written instrument by parol, and, second, because the custom was unreasonable. In affirming the judgment of the court below, this language is used:
“We are unable to see anything unreasonable in the custom. The workman was to furnish the brick and materials, and lay them up, by the thousand. The contract contains no specification of the dimensions, shape, angles, openings, or arches of the wall, or of the size of the brick. It does not require a mason to know that the value of the work and materials depends much upon these and such like conditions, if they are to be paid for by the numerical thousand. Again, the brick are to be ‘furnished ’ as well as to be laid up. Where and how will you count them numerically? Will you count them at the kiln, on the ground, or in the wall ? And who will lose the breakage in transportation and in handling, and the waste of filling them into the wall? Some fair measurement of the wall would seem to be a more reasonable method. And we cannot say that this method was not a fair one. It slightly increased the estimated number of bricks in the wall, it is true, by making small additions for extra work, and extra waste of brick, at the angles and openings; and the rule of measurement adopted fixes upon an arbitrary and uniform dimension for the average size of the brick, which may vary slightly, but cannot vary much, from their true average size. All this seems to us reasonable.
: “Neither do we think that proof of this custom is objectionable on the ground that it contradicts the contract. Authorities to support this view are numerous and almost uniform, and the rule is of every-day application. It is applied to shingles, to printers’ ems, to lumber, etc. It is applied to measures and weights of numerous commodities. A ton of one article often contains over, and sometimes under, 2,000 pounds, and not unfrequently more pounds in one place than in another. In 2 Pars. Cont. the author says that custom ‘ may give to words of number an entirely different sense from that which they usually bear.’ He cites numerous cases to that effect. Among them are Smith v. Wilson, 3 Barn. & Adol. 728, where ‘1,000 rabbits’ was held to mean 1,200 rabbits, by the custom; and Hinton v. Locke, 5 Hill, 437, where ‘12 shillings per day ’ was made to mean 12 shillings per 10 hours, or 1£ days for every day on which 12-)- hours’ work was 'done. But it is useless to multiply authorities. The reason and necessity of the rule lies at the foundation of all language. It is as true now as it was in the time of Horace that custom is at once the arbiter and standard of language, — -‘ Hsus, quern pene et jus et norma loquendi.’ It belongs to the imperfection of language that while much the larger part of its words become, by usage, fixed and universal in their meaning, yet some of them must always be left subject to the changes and variations necessarily occasioned by local usages and the customs of trades.
“We are of opinion, therefore, that proof of this custom was properly admitted by the court. We hold that it was not necessary to set it out in the petition; that it was a reasonable custom; and that it does not contradict or vary the written contract in any objectionable sense.”
In Patterson v. Crowther, 70 Md. 124, the same doctrine is held. See, also, Walls v. Bailey, 49 N. Y. 464 (10 Am. Rep. 407); Breen v. Moran, 51 Minn. 525; Miller v. Botto, 79 Ill. 535. The following cases, though not directly in point, bear upon the question: Merick v. McNally, 26 Mich. 374; McDonnell v. Ford, 87 Mich. 198.
Before bringing this suit, plaintiff had not made out and given to the owners a statement under oath of the number and names of the subcontractors, laborers, and material men. It is claimed that, under the provisions of section 4 of Act No. 179, Pub. Acts 1891, this action cannot be maintained because said statement was not furnished. The trial judge found that no statement of this kind was ever requested, and that, when this suit was commenced, all laborers and contractors had been paid in full, and that all the labor done and materials furnished had been paid for; and it did not appear that any laborer or material man had ever served any notice of any claim under the mechanic’s lien law. He further found the work done by plaintiff was completed and accepted by the defendants, and was free from all mechanics’ liens or other claims at such time. This suit was not commenced until more than two years after the building was accepted by defendants. The time in which any person could assert a lien as subcontractor, laborer, or material man had long elapsed. Section 22 of the act provides:
‘' Except as herein otherwise expressly provided, nothing in this act contained shall be construed to prevent any creditor in any such contract from maintaining an action thereon at common law in like manner as if he had no lien for the security of his debt.”
The plaintiff in this case is not attempting to assert a lien under the mechanic’s lien law. It appears conclusively the situation is such that none of the laborers, subcontractors, or material men are in a condition to assert a lien, or to subject defendants to litigation on that account. In the case of Barnard v. McLeod, 114 Mich. 73, Justice Hookee used this language:
“We do not intend to be understood as saying that the service of such sworn statement is necessarily jurisdictional, and that neglect to serve is fatal in all cases, or that it cannot be waived. Possibly it should not be allowed to stand in the way of recovery where the absence of other liens and the opportunity to effect them are conceded or obvious. This provision is a shield, and, while it should be given full effect for that purpose, its mission may be held to end with the possibility of such use, should such case arise.”
The case suggested by Justice Hooker is now here. The use here made of the provision of the statute is not that of a shield on the part of the owner against possible hens, but it is an attempt to use the statute to prevent the rendition of a judgment which, according to the findings of the court, ought to be rendered.
Other questions are raised and discussed by counsel, but the finding of facts conclusively disposes of them, and their discussion would be unprofitable.
Judgment is affirmed.
The other Justices concurred. | [
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] |
Moore, J.
This is an application for a rehearing, with leave to appear and answer the petition of the auditor general in a tax proceeding. The petition claims the proceedings were void:
First. Because the owner was a nonresident of the State, who had sold the land upon a contract, to a purchaser who was to pay the taxes; that the purchaser was also a nonresident, who sent the money to pay the taxes to his brother, who was a resident, but who failed to pay the taxes.
Second. Because the owner had no notice of the tax proceedings until after the deed had been issued by the State to the defendants.
Third. Because included in the tax was a drain tax, which tax it is alleged is “illegal and void for the reason that the officers of the law failed to take the necessary proceedings to establish said drain and to perform their duty in the manner and at the time required. Said drain tax, as well as other taxes, are therefore illegal and void, and the decree ,as well, for the following reasons:
“1. That there is no release of any right of way for said drain by the owners of the land along which said drain was constructed, and no release by your petitioner.
“ 2. That no application was ever made to the probate court, as required by law, for the appointment of commissioners to determine the necessity for such drain, and for taking of private property for the use and benefit of the public, and for the just compensation to be made therefor.
“3. That there has been no notice or citation from the probate court to the owner or occupant of said lands to show that they were to be affected, or her rights were to be in any way involved.
“4. That said drain taxes are void for the reason that there was more than twice as much attempted to be assessed and collected against said land as was authorized or necessary; there being about $1,074.45 levied for drain purposes for said year, when there was only about $440.54 required to be expended or authorized by law if the proceedings had been legal.
“5. That there is’no order of the board of supervisors of the county of Muskegon directing said drain taxes to be spread upon the tax roll of the year 1893, as required by law.
“6. That the papers and records necessary to show the history and proceedings in this cause, which are required to be made by the county drain commissioner, were never deposited or filed in the county clerk’s office for over 10 months after the tax was spread upon the tax roll. Consequently said drain taxes are unauthorized, and illegally spread upon the roll, and are therefore void.
“7. That said lands were assessed in one parcel by the supervisor of the township in which they are located, but at the sale were sold in separate parcels; that, at some time between the time of assessment and the sale for taxes, said land was separated in different parcels, and the tax apportioned, by some person not authorized by law, without regard to the different values of the separate parcels, — the same amount of general taxes being levied on the north 40 acres of said land as the south 40 acres, whereas the south 40 acres was worth twice as much as the north 40.
“8. Because the board of supervisors of said county .of Muskegon, in 1893, borrowed and raised by taxes more than $1,000 for constructing and repairing public buildings, highways, and bridges within said county, without such action having first been authorized by a majority of the electors of such county voting thereon, contrary to the Constitution of the State of Michigan.
“9. Because the board of supervisors of said county did, not, at their October session in 1893, nor at any other session in that year, examine the assessment rolls of the several townships and cities in said county, and ascertain whether the relative valuation of the real property in the respective townships and cities had been equally and uniformly estimated.
“10. Because the board of supervisors of said county did not, at any session in 1893, equalize the assessment rolls of the several townships and cities in said county by adding to or deducting from the valuation of the taxable property in any of the townships or cities such an amount as, in their judgment, would produce relatively an equal and uniform valuation of the real property in the county, and enter the amount added to or deducted from the valuation in any township or city upon their records.
“11. Because said board of supervisors did not, at any session in 1893, cause to be entered upon their records the aggregate valuation of taxable real and personal property of each township and city in said county as determined by them.
“12. Because the board of supervisors of said county did not, at their annual October session in 1893, ascertain and determine the amount of money to be raised for county purposes, and because said board did not apportion the amount so determined, nor any amount, either for county or State taxes, among the several townships in the county, as provided by law.
“13. Because the decree and other proceedings in this case were not enrolled prior to sale, or prior to the filing of the report of the treasurer, and have not yet been enrolled.
“14. No certified copy of decree was attached to tax record and delivered to the county treasurer before sale, as required by section 67, Act No. 206, Pub. Acts 1893.
“15. Because the county treasurer did not make sale of this property in the manner provided by law, said land being first offered to the person who would take the entire description for the amount charged against it.”
Upon the hearing, the court declined to hear proofs, except in relation to reasons 14 and 15 of subdivision 3. The petitioner declined to offer any proofs under the ruling of the court. The petition was dismissed, and the petitioner brings the case here by appeal.
All of the questions raised by the petitioner, except the two in which the court said she might offer proof, have been decided against the petitioner in the recent cases of Muirhead v. Sands, 111 Mich. 487; Auditor General v. Hutchinson, 113 Mich. 245; Hilton v. Dumphey, Id. 241; Auditor General v. Sparrow, 116 Mich. 574; and Hughes v. Jordan, ante, 27.
The appellant has handed us a supplemental brief since the case of Hughes v. Jordan was handed down, in which attention is called to the fact that, when defendants obtained their deed, they did not pay all taxes then a lien upon the property. This claim was not made in the petition filed before the circuit judge, though it does appear in an affidavit attached thereto. If it had been made in the petition, and established by proof, the claim would have been well taken. As it is now made for the first time, we do not feel at liberty to consider it upon this record; but, upon the payment of costs, leave will be granted to petitioner to have the case remanded, with leave to file an amended petition and a rehearing .in the court below; otherwise the decree dismissing the petition is affirmed, with costs.
The other Justices concurred. | [
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Moore, J.
This is an appeal from an order overruling a demurrer to a bill in chancery.
The bill alleges, in substance, that complainant is the owner of a judgment rendered before a court of record in the State of New York in December, 1877, for upwards of $500, at the suit of one Watkins, against George W. Barker, and that said judgment is still in full force and effect, and of the present value of $1,200; that in August, 1897, it was assigned for a valuable consideration by Watkins to complainant. The bill further states that the defendant is executrix of the last will and testament of Ezekiel Jewett, deceased; that by the terms of the will said George W. Barker is entitled to a legacy of $500, and may be entitled to a larger sum, and, unless restrained by the order of the court, the executrix will pay over to Barker said sum of money. It is further stated that Barker is a resident of Arkansas, and has no property in the State of Michigan subject to garnishment or other process, and is and has been insolvent ever since the rendition of said judgment; that complainant will suffer irreparable injury unless the executrix is restrained from paying the legacy. The bill prays a receiver may be appointed to take charge of said legacy, and to pay the same to the satisfaction of the claim of complainant. It also contains a general prayer for relief. The bill is signed, “William P. Belden, Complainant. Walbridge & Belden, Solicitors for -Complainant.”
The reasons stated in the demurrer, so far as it is necessary to repeat them here, are as follows:
“1. Because it appears by the said bill of complaint that the said complainant is an attorney at law and solicitor in chancery and a counselor, and that he purchased the judgment referred to in said bill of complaint on the 28th day of August, 1897, with the intent and for the purpose of bringing suit thereon; and that this suit, based on said judgment, was begun by him in this court on the 31st day of August, 1897, — all of which is contrary to the provisions of the statutes of the State of Michigan, and especially contrary to the provisions of section 7185 of volume 2 of Howell’s Annotated Statutes, being the statutes of the State of Michigan. * * *
“4. Because, if the said complainant and the sa’d Ira W. Watkins, or either or both of them, ever had or obtained in any court of the State of New York a judgment against said, defendant George W. Barker to the amount, including damages and costs, of $506.97, or in any other amount, — which this defendant doth in no sort admit, — the said judgment was obtained more than 19 years before the same was assigned to said complainant, and more than 19 years before the said bill of complaint was exhibited in this honorable court; and the said defendant does not now reside, and has never resided, in the State of Michigan, and has in no way recognized said judgment, or paid anything thereon, within said 19 years; and, if the said judgment ever had any binding force or effect, it is now wholly outlawed, illegal, and void, and cannot be made the basis of an action in any court in the State of Michigan.”
As to the first of these reasons: It does not appear in the bill that complainant is an attorney at law and solicitor in chancery, but it is urged complainant is a solicitor of this court, and the court will take judicial notice of its own officers, including attorneys, and their signatures and official acts; citing Norvell v. McHenry, 1 Mich. 233; Johnson v. Delbridge, 35 Mich. 439. These authorities do not sustain the doctrine as broadly stated by counsel. There is nothing to show that the William P. Belden who is the complainant is the same William P. Belden who is an officer of this court. Nor is there anything to show that the purpose for which the judgment was assigned to him is the one prohibited by the statute.
As to the second reason stated: If it was necessary to state in the bill sufficient facts to prevent the statute of limitations from running against this claim, the statements contained in the demurrer supply that defect by showing the defendant does not now, and never has, resided in the State of Michigan. While the complainant is not bound by the statement of facts contained in the demurrer, the defendant cannot complain if the court assumes they are true. It is said by counsel the statute does not apply to a right of action which accrued without the State between parties who were at the time nonresidents, but applies only to actions that accrue within the State. The courts of New Jersey and Texas sustain the doctrine as contended. Our statute is like that of Masachusetts and New York. The statutes of those States have been construed as applying to causes of action which accrued without the State between nonresidents. White v. Bailey, 3 Mass. 270; Wilson v. Appleton, 17 Mass. 180; Bulger v. Roche, 11 Pick. 36 (22 Am. Dec. 359); Carpenter v. Wells, 21 Barb. 593; Bower v. Hathaway, 43 Barb. 214; Miller v. Brenham, 68 N. Y. 83. We think the last-named cases should be followed here.
A bill of complaint similar to this was sustained iEarle v. Kent Circuit Judge, 92 Mich. 285.
The order is affirmed, with costs against defendant, as executrix, to be paid out of the fund belonging to Barker.
Montgomery, Hooker, and Long, JJ., concurred. Grant, O. J., did not sit. | [
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] |
Long, J.
This action was brought to recover damages for injuries sustained by plaintiff, occasioned, it is claimed, by the negligence of the defendant. The case was tried before a jury, and at the close of the testimony the court directed the verdict in favor of defendant. In this we think the court was in error. It appears that the plaintiff was employed by one Thomas Cosgrove, the chief engineer of the defendant, in charge of its car ferryboat the “Ann Arbor No. 2,” in September, 1896. Plaintiff was paid at first the sum of $20 per month. His work at that time was passing coal. In January following he was given the work of oiling the machinery, and his pay increased to $30 per month. He was under the direction of Mr. Cosgrove, by whom he was hired, and who directed his work and movements. He continued in this work until March 14, 1897. On that day another'of defendant’s boats, called the “J. C. Ford,” was laid up at what was called “Woodward’s Hock,” in the same harbor where the •Ann Arbor lay. The Ford was out of commission. Mr. Cosgrove called the plaintiff to go with him to the Ford, and assist in putting her in condition to go into commission. A man from “Ann Arbor No. 1” was also called by Mr. Cosgrove to go with them. Arriving at the Ford, the parties went down into the fire-hole by a ladder, and there attempted to go through into the engine-room. Finding they could not get through that way, Mr. Cos-grove told plaintiff to take the keys which he handed him, and “go up on deck, and get into the engine-room in some other way.” Plaintiff testified, in reference to his going towards the engine-room, as follows:
“When I went up there, I could not see any way to get down, only to go forward. I did not know any other way. There was a way of going down forward through a companion-way right down next to the boiler-house there. That stairway led down to the lower deck. There were two decks. The Ford is a freight boat, with a double deck. When I got down between the decks it was dark. I knew pretty near where the engine-room was. I did not know exactly. I had never been through the boat before. I had never before that time been through any steamboat that was laid up and out of commission. I had never worked upon a steamboat at any time, except passing coal and greasing on the No. 2. When I landed between decks, I proceeded towards the engine-room. Mr. Cosgrove said, ‘Go into the engine-room stairway,’ and we would get some lights and set up the engine. I went down through there, and went just as carefully as I could walk, — slow; and I thought I was all right, and was going over to the left-hand side, and I walked right into this big hatchway. I could not see. There was no chance for me to see that hatchway at that time. The batchway was wholly uncovered, and no coaming around it; just as level as the floor. ■ I fell ]2 to 16 feet. I broke my leg twice in two, and got a cut over the eye, and one band was injured so I could not use it.”
Cosgrove and others soon came to him and took him away.
Plaintiff further testified that he did not know anything about the various hatchways prior to receiving the injury, or the hatchways of any other steamer than the Ann Arbor No. 2. It appeared from other testimony in the case offered by plaintiff that the car ferry Ann Arbor No. 2 and other ferries have gratings over the hatchways. The hatchway on the Ford, through which the plaintiff fell, was about three feet aft of the boiler-house, and was uncovered. The superintendent of the defendant’s water line, Capt. William Robertson, testified that, while the Ford was laid up, the hatches were ordered off to give ventilation to keep the boat dry. Plaintiff testified that he did not know of the custom to keep the hatchways on boats open when out of commission. Plaintiff further testified that he was not told by Mr. Cosgrove or any other person that the hatchways of the Ford were open, and knew nothing' about it; that he never saw any open hatchways that were not covered by a grating, unless they were receiving or discharging freight through them. Mr. Cosgrove was not called as a witness.
It is averred in the declaration that it was the duty of the defendant, under the circumstances, to inform the plaintiff that these hatchways were open. The court below, in directing the verdict, stated to the jury that—
“The leaving the hatchways open was not an act of negligence, and, for the plaintiff to recover, it would seem to me to be necessary for the plaintiff to show that the person directing him * * * to go through this boat, where these open hatchways existed, — that the person who directed him to go there, — had a superior knowledge to himself as to the condition of the boat; which has not been done in this case.”
Capt. Robertson testified that Mr. Cosgrove had charge of this work. He was chief engineer of the defendant, had hired the plaintiff and directed all his movements, and from this record it appears he stood in place of the master. He called the plaintiff from the work in which he was regularly employed, and sent him into a place of danger, without any caution that he might expect an open hatchway. From his position there, it must be presumed that Mr. Cosgrove knew it was the custom of the defendant to leave the hatchways open while the freight boat was out of commission. The plaintiff did not know this. He had been but a short time employed on a boat, and was wholly unacquainted with freight boats, or the custom of leaving the hatchways open on such boats. He was employed as an oiler of engines on the Ann Arbor. He was taken away from his accustomed work, and, if his testimony be true, put into a dangerous place, without warning or caution, by one who stood in place of master. It is true that the rule is well settled that the servant assumes all the risks usually incident to his employment, but this rule cannot be invoked in the present case. His usual work, for which he was employed, was that of oiler; and that on another and different kind of boat. He was taken from that work, and put to do work of another kind. Plaintiff had the right to assume that he would not be put in a position of danger, in going upon the boat to aid in fitting her out. Harrison v. Railroad Co., 79 Mich. 409 (19 Am. St. Rep. 180); Engel v. Smith, 82 Mich. 1 (21 Am. St. Rep. 549).
The court below was in error in taking the case from the jury. The question of the defendant’s negligence, as well as the negligence of the plaintiff, should, under the circumstances here, have been submitted to the jury. Judgment is reversed, and a new trial ordered.
The other Justices concurred. | [
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Per Curiam.
Upon filing the bill in chancery in this case, the court issued a preliminary injunction. Answers were filed, and a motion made to dissolve the injunction. Three of the circuit judges heard the motion, and refused to grant it. We see no occasion for interfering with the discretion of the court in this matter. We think the court did right in retaining the injunction until the hearing upon pleadings and proofs. The order to show cause will be denied. | [
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Montgomery, J.
The plaintiffs brought an action to recover the amount of an installment of interest due them by the terms of a written contract for the sale of lands. The defense interposed was a surrender of the contract. The circuit judge directed a verdict for the plaintiffs for the accrued interest, and defendants bring error.
One of the defendants testified to the surrender as follows:
“ That he saw Mr. Patterson prior to giving up the contract, and that Patterson said that he must have either the money or the contract; that upon this occasion Casper Salter was hot present; that, some days after, he took the contract to the plaintiffs’ store, where he found Mr. Patterson, and told him the contract was there, and, if he was satisfied to take it and let the interest go, he would be satisfied, and that Mr. Patterson said it would be all right, after which he gave Mr. Patterson the contract, and asked for a receipt; that Mr. Patterson did not say anything about consulting his partner; that, after getting the receipt, Mr. Patterson then said he would speak to his partner, and he thought it would be all right; and that, having parted with his contract, he did not know what to do; that, not long after, he received a letter from the plaintiffs asking for interest; that neither of the plaintiffs ever offered him back the contract, and that he did- not go back to get the contract.”
The testimony of the plaintiff Patterson differs from that of the defendant, in that he disputes any agreement to surrender, but he corroborates the statement that he (Patterson) said-he would have to refer the matter to the plaintiff Grunow. He also testifies that he did not in fact have authority to release defendants.
It is evident from defendant’s testimony that, before the parties separated, the defendant was informed that the assent of Mr. Grunow was essential to defendants’ release, and that he made no dissent from this statement, and left the contract with Patterson upon that understanding. The circuit judge was right in so holding.
The court was also correct in holding that the interest of the defendants as contract purchasers was such an interest in land as could not be surrendered by parol. 2 How. Stat. § 6179; McEwan v. Ortman, 34 Mich. 325; opinion of Campbell, J., in Whiting v. Butler, 29 Mich. 144.
The other questions presented relate to rulings in no way affecting the main issue.
The judgment will be affirmed.
The other Justices concurred. | [
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] |
Hooker, J.
The question in this case is whether the plaintiff was guilty of contributory negligence. The proof conclusively shows that he walked upon a track of a street railway, and was almost instantly struck by the car. The most favorable view of the evidence is that he started to cross the street, and, at a distance of 12 feet or thereabouts from the track, looked to see if a car was coming, and saw none, but did see a covered grocery wagon and horse between him and the approaching car. He did not look again, but walked directly to and upon the track. The grocery wagon was not upon the track, and, when the car passed it, the wagon must have been sufficiently far from the track to permit the car to pass. Hence, when the plaintiff was within two or three feet of the track, he must have had an unobstructed view of the track, and the approaching car must then have been visible to him had he looked towards it. In the case of McGee v. Railway Co., 102 Mich. 107 (26 L. R. A. 300, 47 Am. St. Rep. 507), it was held that it was not sufficient for a man to look when 15 feet from the track, but that it was his duty to look again before stepping upon the track. This was the rule laid down as to steam roads in the case of Houghton v. Railway Co., 99 Mich. 308. If, as contended, the plaintiff’s view was obstructed by the wagon, that was a reason for greater caution. We are unable to distinguish this case from the McGee Case, and are of the opinion that it should be, and it is therefore, affirmed.
Grant, C. J., and Long, J., concurred with Hooker, J. | [
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Per Curiam.
This case is ruled by the decision in the case of Mardian v. Wayne Circuit Judge, ante, 353. | [
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Montgomery, J.
The petitioner, Warren Pierpont, purchased certain lands at the annual tax sale held at the treasurer’s office of Shiawassee county on the 7th day of December, 1896. The lands were sold for the delinquent taxes of 1894 under a decree the regularity of which is not questioned. A certificate of purchase was issued to the petitioner in the usual form. The lands not having - been redeemed, the certificate of purchase was surrendered to the auditor general, and a deed was issued by the auditor general to the petitioner, which deed was dated February 14, 1898. After demand for possession of the premises in question, the petition in the present proceeding was filed asking for a writ of assistance. The defendant showed that he had tendered to the petitioner the full amount paid by him, together with the additional charges provided by Act No. 229 of the Public Acts of 1897. The circuit court granted the writ, and defendant appeals.
The two questions presented are whether Act No. 229, Pub. Acts 1897, was intended to affect the title or remedy of the petitioner and those occupying a like position, and, second, if this was the intention, whether the provision extending the time for redemption, and modifying conditions under which redemption may take place, impairs the obligation of contracts, and is, for that reason, unconstitutional. Both questions are discussed in the briefs of counsel. The provisions of the statute in question material to this inquiry are as follows:
“ Sec. 140. No writ of assistance or other process for the possession of any land the title to which has been obtained under and in pursuance of any tax sale hereafter made, or of any sale of State tax lands or State bids hereafter made, except where such title shall be obtained under the provisions of section 131 of this act, shall be issued, until six months after there shall have been filed with the county clerk of the county where the land is situated a return by the sheriff of said county, showing that he has made personal service, or until substituted service, as hereinafter provided, has been made, upon the grantee or grantees under the last recorded deed to said land, and upon the mortgagee or mortgagees named in the last recorded mortgage, or any assignee thereof of record, of a notice,” etc.
It is the contention of the appellant that this statute should be so construed as to include all titles so acquired after the act takes effect, and that the title is not acquired until the conveyance is actually made by the auditor general. It is said that the words “sale hereafter made” mean the same thing as “title hereafter acquired.” We do not find ourselves able to agree with the learned counsel for the appellant. It appears by this section that the writ of assistance, authorized by other provisions of the tax law, is by the legislature denied in three cases: (1) In cases where the title to the land has been obtained under and in pursuance of a tax sale hereafter made; (2) in cases where the title is obtained by purchase of State tax lands; (3) in cases where the title is obtained by purchase of State tax bids, — in either of the two latter cases the purchase being made after the act takes effect. It was obviously not the intention of the legislature to deny the remedy to those who had made previous purchase of land at a tax sale, but who had not acquired their title or conveyance from the auditor general. To place this, construction upon the statute, we would be required to insert the word “heretofore” in place of or in addition to the word “hereafter.” It cannot be said that in this statute the words “any tax sale hereafter made’’refer to the conveyance by the auditor general to the purchaser. These words in the tax law are used to denote the sale made on petition of the auditor general, and at which the certificate of purchase is given to the purchaser. Act No. 206, Pub. Acts 1893, §§ 70-72, 74. Section 70 provides for the sale; section 71 provides for the giving of the certificate at such sale; and section 74 provides that any person owning any of the lands, or any interest therein, may, at any time within one year from and after “such sale,” redeem any parcel of such lands, etc. But the language of the act of 1897 is not ambiguous. It refers to a title which has been obtained in pursuance of a tax sale. The very language imports a distinction between a tax sale and an acquisition of title. Had the intent been otherwise, an apt term would have been, ‘ ‘ a title obtained by one through a tax sale.” But the language employed imports that a tax sale must have preceded the acquisition’ of title.
Being satisfied that the construction of the statute contended for by defendant cannot be adopted, it becomes unnecessary to consider whether the legislature has the power to enact such a provision as would relieve the owner of the property by materially extending the period of redemption.
The order appealed from will be affirmed.
The other Justices'concurred. | [
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Grant, C. J.
{after stating the facts). The theory of the complainant’s bill is that the territory formerly covered by the. waters of this lake should be divided among .the shore owners in proportion to the amount of shore frontage owned by each; that such ownership extends to the center of the lake, to be equitably established by the court; and that such territory should be partitioned by convergent lines drawn from the outside limits of each frontage to a convergent point called the ‘ ‘ equitable center.” To the bill is attached a map purporting to contain such equitable division.
The equitable center is placed a short distance east of the center line of the section, and about 12.84 chains north of the south line. To this center lines are run from the several points where the meander line crossed the south line of the section. A piece of land in the shape of an obtuse-angled triangle is thus carved out of the bed of the lake upon the southwest quarter of section 10, and contains 14.92 acres. A similar piece is carved out of the southeast quarter, of section 10, and contains 10Í84 acres. These pieces are claimed by the complainant, while the triangular piece between them, containing 4.05 acres, is apportioned to the L. S. I. Co. by virtue of its ownership of lot 6. . The southeast arm of the lake, south of the section line, contained 12.50 acres. The part between lots 4 and 5 and the south line of the section contained 5.57 acres. This apportionment, if adopted, would give the complainant the entire southeast arm of the lake, and from two-thirds to three-quarters of the west arm.
The only reference made in the bill to the agreement above given, or to the action of the parties thereunder, is as follows:
“And your orator further alleges that within the last four or five years, by mutual consent, your orator and the said defendants shared in the expense of pumping out and draining the said inland lake, your orator paying three-fifteenths of said expense, the defendant the Lake Superior Iron Company four-fifteenths, and the defendant the Cleveland Iron-Mining Company the balance, so that now said lake has been drained of water, except what is easily disposed of by moderate pumping.”
The claim of the C. I. M. Co. is thus stated:
“1. The patent under which the defendant the Cleveland Iron-Mining Company claims title gave it title to the whole east half of section 40 to the south line thereof, and complainant is barred from objecting to this claim, because it has treated a body of water covering a portion of that territory as of no value, and joined in the draining of the water, as if the land was merely swampy ground, value-able only when reclaimed and made dry land.
“2. Because it has title by adverse possession for more than 15 years.
“3. Because the south se'ction line of section 10 was fixed as a boundary by agreement between the parties; that agreement being recognized and evidenced by tbe pumping contract and its written adjuncts, and was followed by continuous acts of recognition thereof, and expenditures based thereon, by both parties.
“4. Because the pumping contract is an estoppel by deed against the complainant from now asserting title.
“5. Because the complainant is estopped by matter in pais from asserting title to the land.
“6. Because the complainant is estopped by its laches.
”7. Because, as a tenant of a portion of the premises in dispute, complainant is estopped to deny defendant’s title.”
The claim of the L. S. I. Co. is thus stated:
“1. That there has been a practical division of the lake bed between the parties; that contracts, explorations, and mining operations have been carried on on the strength of such division for many 'years, in which large sums of money have been expended, without any certainty at the time of such expenditures that returns would be realized by the defendants therefrom; and that, by such division and long course of construction between the parties, the complainant is estopped to claim any portion of the lake bed lying north of the section line.
“2. That the pumping contract, executed by the several parties under their corporate seals, and expressly providing that it shall be binding upon the successors and assigns of the several parties, making it a contract running with the land, amounts to a division of the -lake bed by deed duly executed by the several parties.
“3. That the pumping contract is so entirely based upon the division of the lake bed above mentioned, and said division forms so essential a part of the contract, that, if such division be set aside or disregarded, the contract itself must fall; that in such case not only is the agreement to continue the drainage of the lake at an end, but either party has a right to demand that the drainage of the lake must stop, and the water allowed to rise to its original level, — a result which, after all that has been done under the pumping contract, and in reliance upon it, would work great injustice to the defendants.
“4. That if the original division of the lake be disregarded, and a new division must be made, such division must be made by the middle line or thread of the lake, in accordance with the common-law rule for division of the bed of fresh-water streams.”
The situation is anomalous, and the books present no similar case. In March, 1892, the parties entered into an agreement to extinguish the lake by pumping out the water, leaving the territory dry ground. They agreed upon an apportionment of expense substantially according to the territory within the lines of the government survey. The lake no longer exists. Nearly five years after, this suit is planted upon the theory that the lake exists, and that the court must make an equitable division from a common equitable center. All the parties, however, seem to have discussed the question as of a lake actually in existence.
The difficulty in apportioning the territory according to the theory of complainant is apparent from its irregular form. It seems conceded by the learned counsel for the complainant that the division according to the diagram made a part of its bill cannot be sustained, because they concede that it may be more equitable to divide the two arms of the lake according to the river rule, viz., the medium filum aguce. It must also be conceded that the C. I. M. Co., under this rule, would be entitled to some of the territory lying under the southeast arm of the lake south of the section line. In this territory the complainant, in 1891, discovered valuable ore, which it has mined through its shafts, levels, and drifts. Complainant has no means of ascertaining how much ore was taken from this territory, part of which, under its theory, belongs to the C. I. M. Co. Part of the territory has caved in, and the rest is filled with waste rock.
The distance from the south section corner, between sections 10 and 11, to the meander line, is 125 feet. The meander line then runs from the south section line, in a northwesterly direction, 225 feet, and thence to the northeast. Complainant’s proposed line of division upon the northeast almost entirely cuts off this frontage of the C. I. M. Co. Another complication results from the fact that the C. I. M. Co. is the owner of a small piece of land in the southwest corner of the southeast quarter of section 10, which is 100 feet in length on the section line.
No fixed rule ever has been or ever can be laid down for the division of the territory covered by these inland lakes, with their irregular shores. Each case must depend upon its own peculiar circumstances and facts, and as reasonable a division arrived at as possible.
The manner in which the equitable center was established in this case appears from the testimony of one of complainant’s own witnesses, Mr. Bradt, an engineer:
“ Q. How did you locate your center point in the lake ? What guided you ?
" A. I refer you to Mr. Clark, our attorney.
“ Q. What did he tell you to do to find that center point ?
“A. He didn’t tell me to find it; he found it himself.
“ Q. How did he find it ?
“A. You will have to ask him.
“ Q. What did he tell you about that point? What information did he give you ?
“A. He simply asked me to compute courses and distances that would converge at a point that he selected and designated.
“ Q. Did he tell you the angle to make?
“A. No, sir.
“ Q. Now, I wish you would give us just what Mr. Clark gave to you as a basis from which you did that work.
“A. Mr. Clark located upon the map a point that might be considered the equitable center, and I was, from that point, to compute courses and distances from the section line which would converge or meet at that point.”
This same witness also admits that the apportionment on his diagram deprives the C. I. M. Co. of any frontage on the southwest shore of lot 7.
The above statement is sufficient to show the difficulty in making an equitable apportionment, and while nothing was said during the negotiations leading up to the agreement, or in the agreement itself, in regard to the difficulty, it may have had much to do in the minds of the officers and agents of the respective parties in fixing the terms of that agreement. That contract was a deliberate settlement of the boundary line between the lands of the three companies, and was so understood. It was of the utmost importance to these parties that the boundary line be settled beyond any possible doubt. Complainant had discovered a mine on its territory south of the line, and extending under an arm of the lake. At that time it was the only one which it was known would be benefited by the removal of the water. No ore of sufficient value to mine had been found under the lake north of the line. After the removal of the water would come extensive and very expensive explorations, to determine whether there existed under the bed of the lake ore worth mining. The contract, if valid, established the line beyond dispute.
The first obstacle for the complainant to remove, before resorting to an equitable apportionment, is this contract, recognized as valid and acted upon for nearly five years by all the parties. It attempts to do this by asserting that in making that contract it relied upon the case of Clute v. Fisher, 65 Mich. 48, as establishing the rule that the territory should be divided by the government lines, and that it rested upon that case as the established law until the decision of Grand Rapids Ice & Coal Co. v. South Grand Rapids Ice & Coal Co., 102 Mich. 227 (25 L. R. A. 815, 47 Am. St. Rep. 516), claiming that the latter overruled the former, and that in making that contract there was a mutual mistake which entitles it to the relief prayed. The former case was decided in February, 1887, and the latter in September, 1894. This claim depends upon the testimony of Mr. Kidder, the superintendent of complainant. He testified that, upon learning of the decision in Clute v. Fisher, he obtained the opinion of Mr. Clark, its attorney, to the effect that the decision established the rule that the government lines controlled; that he thereupon removed some of the buildings which complainant had erected on land made by it north of the’ section line on the southwest quarter; that he learned of the decision in Grand Rapids Ice & Coal Co. v. South Grand Rapids Ice & Coal Co. in the last of December, 1895; that he then applied to Mr. Clark for his opinion, which he received February 8, 1896. Still complainant waited nearly nine months before asserting title contrary to that defined by the contract. Upon this subject Mr. Kidder further testified:
“I accepted Mr. Clark’s opinion as final on the subject, so far as to govern my actions. I understood it to be only a matter of opinion. I understood it to be his opinion, but that the decision was definite by the Supreme Court.
“Q. So long as the matter remained in an opinion, it was a matter of doubt, wasn’t it ?
“A. .Yes.
“Q. You were also aware of the fact that the courts sometimes change their opinions, were you not ?
“A. I have very frequently thought that, with reference to this very thing, the Supreme Court might change sometime.
“Q. And rather than investigate any further, or raise any question about it, you concluded to accept the opinion as rendered by Mr. Clark. Is that it?
“A. Yes; that is so.”
In Clute v. Fisher the lake contained 32.68 acres. Plaintiff owned about three-fourths of the frontage. Defendant owned no land fronting upon it, but claimed that the title was in the State. The question of the division of the lake was not involved. The place where the ice was cut was conceded to be in territory owned by the plaintiff, unless his title was limited tó the meander line. A diagram of that lake is found in 102 Mich. 231, and the issue clearly stated in the opinion of Chief Justice McGrath. Ah examination of the briefs shows that the question of a division among the riparian owners was not mentioned. That part of the opinion was therefore mere dicta, and was an erroneous statement of the law, as was subsequently held in the case between the ice companies. The mere dicta in the opinions of courts are not controlling. It may, however, be conceded that the statement of the learned justice who wrote the opinion, which was concurred in by the entire court, might fairly be considered as enunciating the law in this State applicable to inland lakes of such size, while it also recognized the correct rule in larger lakes. The Supreme Court of the United States so accepted it, as is evident by their reference to it in Hardin v. Jordan, 140 U. S. 398.
We will first discuss and dispose of the question raised upon the theory that complainant relied upon the decision of Clute v. Fisher as an authoritative enunciation of the law in its negotiations and contract with the defendants, and that all the parties so understood it. The following, then, is the situation: We find that the parties, in reliance upon that case, entered into a deliberate contract establishing their boundary lines and determining the amount of territory belonging to each. Complainant made the contract with knowledge that it gained territory south of the line, known to be valuable, while it surrendered territory north of the line, not then known to possess any value. All parties are chargeable with knowledge that each was to incur risks of its own, make its own expenditures upon its own land according to the agreement, and, by reason of its expenditures and improvements, would be placed in such a position that it could not be restored to its former status quo. The anticipated result came. The explorations, expenditures, and improvements were made, each company making them at its own risk. It is impossible to restore the status quo or to render exact justice between the parties, because the data are not in existence. It is doubtful if a result approximately correct could be reached upon an accounting. It would be impossible to determine its correctness, within many thousands of dollars. The result of complainant’s contention would be that, whenever any case had been overruled, every transaction or agreement based upon that decision may be set aside by the courts, if not barred by the statute of limitations. The agreements and settlements of parties, made with full knowledge of the facts and in reliance upon the law, ought to be as binding as the judgment of the court in a particular case. If ten other similar suits had been pending when Clute v. Fisher was decided, and judgments had been rendered in reliance upon that decision, the courts could not now set them aside. The law is not so unstable as to permit such results. Judgments rendered and contracts made upon the faith of the law as enunciated in the decision of a court, in the absence of fraud or misrepresentation, * must stand. When that decision is overruled, the overruling decision controls only-subsequent transactions. Such is the rule recognized by the decisions and text-writers.
“The general rule certainly is (as has been very clearly stated by the Supreme Court of the United States) that a mistake of the law is not a ground for reforming a deed founded on such a‘ mistake; and, whatever exceptions there may be to this rule, they are not only few in number, hut they will be found to have something peculiar in their character, and to involve other elements of decision.” 1 Story, Eq. Jur. § 116.
“Upon a close survey, rhany, although not all, of the cases in the latter predicament will be found to have turned, not upon the consideration of a mere mistake of law, stripped of all other circumstances, but upon an admixture of other ingredients, going to establish misrepresentation, imposition, undue confidence, undue influence, mental imbecility, or that sort of surprise which equity uniformly regards as a just foundation for relief.” Id. § 120. See, also, Id. § 128.
Kent, the learned chancellor, said:
“A subsequent decision of a higher court, in a different case, giving a different exposition of a point of law from the one declared and known when a settlement between parties takes place, cannot have a retrospective effect and overturn such settlement. The courts do not undertake to relieve parties from their acts and deeds fairly done on a full knowledge of facts, though under a mistake of the law. Every man is to be charged, at his peril, with a knowledge of the law.. There is no other principle which is safe and practicable in the common intercourse of mankind. And-to permit a subsequent judicial decision in any one given case, on a point of law, to open or' annul everything that has been done in other cases of the like kind, for years before, under a different understanding of the law, would lead to the most mischievous consequences. Fortunately for the peace - and happiness of society, there is no such pernicious precedent to be found. This case, therefore, is to be decided according to the existing state of things when the settlement in question took place.’’ Lyon v. Richmond, 2 Johns. Ch. 51.
An examination of the cases cited by complainant’s counsel will show that there were other considerations in them besides a naked mistake of law. To analyze them would make this opinion unnecessarily long. A brief reference to two will suffice. In Whelen’s Appeal, 70 Pa. St. 410, there existed a failure to furnish evidence for which the applicant called and to which she was entitled. The court refers to the well-settled principle, and says:
“This doctrine, though founded on principle and supported by authority, will not be allowed to bar the way to relief, where the party seeking to avoid the consequences of his own deed shows that he has acted upon a want of proper knowledge, which he was not able to obtain, though vigilant and diligent in his search for it, or where information to which he was entitled, and which was necessary to the formation of a correct judgment as to the performance of a proposed act by which, his rights are to be affected, has been withheld from or refused to him. * * * It is clearly settled that where, with a mistake in law, there is found mixed up other ingredients, showing misrepresentations, stating that which is not true, or concealing that which ought to have been made known; where imposition, undue influence, mental incapacity, or surprise are established,- — -relief will be afforded to one who has thus been imposed upon and induced to do that which it is contrary to equity to maintain.”
In Blakeman v. Blakeman, 39 Conn. 320, petitioner purchased of defendant land, including a right of way through a lane, and paid a greater price than would have been paid for the land alone. There had been an appurtenant right of way, which had ceased by operation of law. The d efendant represented that the way still existed, and would pass by the deed. The court says: “Both parties were mistaken in relation to the fact of the existence of the way, — a mutual mistake.”
This case is stripped of all other circumstances. It contains no element of misrepresentation, imposition, suppression, undue influence, undue confidence, imbecility, or surprise. Neither -said or did anything to mislead the others. Each acted with deliberation and with complete knowledge of all the facts. The sole basis of complainant’s claim is that the decision of this court, upon the faith of which the contract was made, was subsequently overruled. We recognized the rule in Ingles v. Bryant, 117 Mich. 113. We declined to reopen a chancery case, where a decree had been entered in this State by mutual consent, upon the faith of a decision of the supreme court of Ohio. Subsequently this court held directly to the contrary. It was decided that the consent decree, acquiesced in for three years, was conclusive upon the parties. Why should not a voluntary settlement out of court be as conclusive as the like settlement made in court? We are therefore of the opinion that this case does not come within any exception to the rule that a mistake of law does not furnish any ground for relief.
Do the contract settling the boundary line, and acquiescence therein, and the acts done thereunder, estop complainant to now assert a different line ? The rule is settled by the decisions of this court that, where disputed boundary lines have been established by express agreement, or under such circumstances that an agreement will be implied, and parties have for any considerable time recognized them, they will be upheld, though title by adverse possession could not be maintained. Joyce v. Williams, 26 Mich. 332; Smith v. Hamilton, 20 Mich. 433 (4 Am. Rep. 398); Jones v. Pashby, 67 Mich. 459 (11 Am. St. Rep. 589).
According to the testimony on the part of the complainant, there was a dispute as to the boundary line. Mr. Kidder testified that the superintendent of the C. I. M. Co. asked him for a deed of the land lying north of the section line, and that he for his company declined to give it, making the same claim that he now asserts. If his testimony be true, and for this purpose the company must ’Stand by its own testimony, there was a dispute, and it was settled by the agreement. Complainant recognized it for nearly five years, and saw all these expenditures made by the defendants without protest.
Complainant, however, invokes the doctrine that title to land cannot rest on estoppel on account of the statute of frauds, and that a vote of three-fifths of the entire stock of the company is essential, under the statute, to convey title. The obvious reply to the first proposition is that it is also established that the statute of frauds does not apply to boundary lines, and that the doctrine of estoppel will be applied to the voluntary adjustment of disputed boundaries. Hayes v. Livingston, 34 Mich. 384. Under the theory of complainant, corporations could not settle boundary lines without a meeting of the stockholders called to pass upon the alienation of its lands, and the doctrine of estoppel could never be applied to a boundary line between corporations or between a corporation and an individual.
So, too, in reply to the second proposition, it may be said that the statute does not apply to the voluntary adjustment of these lines, but to alienation by deed of conveyance. Complainant was not alienating, dividing, or selling any of its real estate, within the language of the statute. 1 How. Stat. § 4052. “Alienation” means, in law, a transfer of title by conveyance. Webst. Diet.; Cent. Diet. The C. I. M. Co. claimed title by virtue of the original patent. Complainant owned no specific piece of land north of the section line, even under its own theory, which could be measured by metes and bounds. How much, if any, it owned could only be determined by agreement or the decree of a court of equity. If it surrendered land north of the line, it gained other on the south. There was no such alienation of lands as required the vote of the stockholders.
The contract was the act of the three parties to it. It was introduced by the complainant as a valid contract. It was executed with all the formalities of a deed. It had the seal of the corporation. Complainant, as well as the defendants, paid out large sums of money under it. All are now estopped to deny its due execution and validity.
Another singular result of complainant’s contention is this: The annulment of the pumping contract, and the substitution by the court of another in its stead. Courts may annul contracts for fraud or mistake, but they cannot make and substitute others. Complainant did not offer by its bill to have the court fix its proportion of the cost of pumping out the water and mud from the lake, nor define its position upon the contract. Upon the hearing, and after proofs were in, it asked to have the court virtually set the contract aside, and make another one for the parties. The contract was a continuing one, and provided for the continuance of the drainage. Can a court of equity make an agreement for the parties requiring them to keep the water of this lake pumped out, and fix the amount each shall pay, upon a basis which neither contemplated or assented to? Would the parties originally have entered into a contract such as the complainant now asks to be made? In the summer of 1893 the parties disagreed as to the continued liability under that clause of the contract relating to the drainage, and a claim was made against the complainant. Its superintendent replied to this claim by stating that it was under no circumstances interested in pumping out the mud, and that, had such a contingency been stated in the contract, it would not have become a party to it. If complainant would not then tolerate a change in the contract contrary to its understanding, upon what reason can it now ask the court to make one for its benefit, contrary to the express terms of the one the parties made? The court must either affirm the contract in toto or wholly set it aside. The foundation of the contract was the settlement of the boundary lines, and the division of the territory and apportionment of expense in accordance therewith. The court cannot set it aside as to the boundary lines, and reform or remake it upon an equitable division of the territory. ' If set aside, the contract is at an end, and the lake must be left to fill up, if either refuses to enter into a new contract. The L. S. I. Co. has discovered no valuable ore. It was willing to assume risks in the hope of finding ore. Though it has found none, it does not seek to avoid its agreement. To that agreement alone it can be held.
Complainant is entirely without equity. It doubted the correctness of the rule of Clute v. Fisher, and thought that a different rule might some time prevail. It was then its duty to take steps to test the question, before permitting defendants to enter into a contract and explorations involving over $100,000. It should, at least, have informed the defendants of its claim, and given them the opportunity to make a contract with that in view. This claim would not have been heard of unless the C. I. M. Co. had developed a valuable mine. The fact that the venture proved successful after large expenditure creates no equity for this complainant. The skill, energy, and money of that company developed a valuable property. It ought, in justice, to reap the benefit, and the complainant ought to be estopped to participate in the benefit, unless an unbending rule of law prevents. Twin-Lick Oil Co. v. Marbury, 91 U. S. 592; Clegg v. Edmondson, 8 De Gex, M. & G. 787. It would not have offered to bear its share of the loss if unsuccessful, nor could it have been compelled to.
Furthermore, it was guilty of laches in keeping silence when it ought to have spoken. Every one is presumed to know the law. Therefore it must be presumed to have known of the law enunciated in Grand Rapids Ice & Coal Co. v. South Grand Rapids Ice & Coal Co., supra. It had an able attorney, who keeps well versed in the decisions of the courts of this State. Yet it waited 2£ years before asserting its claim, and still 9 months after obtaining the opinion of its attorney that Clute v. Fisher was no longer the law. It waited until circumstances and conditions have so changed that it is impossible to restore the status quo.
Decree affirmed, with costs.
The other Justices concurred. | [
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