Case ID: mich_303/html/0086-01.html
Source: Caselaw Access Project
Author: {"author": "Butzel, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

CARSON v. MILCROW MOTOR SALES.
    1. Sales — Insolvency op Purchaser — Intent.
    Eaet that one knows at the time of a purchase on credit that he is insolvent and fails to disclose such faet to the seller does not of itself render the purchase void as there must also be an intent on Ms part not to pay for the goods purchased.
    2. Same — Rescission—Money Decree — Eraud—Evidence—Appeal.
    In suit against corporate dealer and two individual defendants for rescission of transaction whereby plaintiff turned in his car immediately to dealer toward a new ear to be delivered in the future, where no decree whatever was entered against bankrupt corporation and testimony fails to support money decree against appellant on ground of fraud and plaintiff did not cross-appeal nor complain of failure to enter a decree of rescission, a decree for such relief will not be entered in Supreme Court and the decree against appellant is reversed.
    That insolvency of contracting party is merely evidence of intention not to perform, see 2 Restatement, Contracts, § 473, comment e.
    Appeal from Wayne; Murphy (George B.), J.
    Submitted June 4, 1942.
    (Docket No. 74, Calendar No. 42,027.)
    Decided October 5, 1942.
    Rehearing denied November 25, 1942.
    Bill by Harry A. Carson against Milcrow Motor Sales, formerly George Holzbaugh, Inc., a Michigan corporation, and George Holzbaugh and Earl Holzbaugh to set aside a contract, for a money decree and other relief. Decree for plaintiff against defendants Holzbaugh. Defendant Earl Holzbaugh appeals.
    Reversed as to appellant.
    
      Harry A. Carson, in pro per.
    
    
      Corliss, Leete & Moody, for defendant Earl Holzbaugh.
   Butzel, J.

On September 21, 1939, plaintiff, while a college student, was the owner of a 1935 Ford convertible sedan wbicb be wished to sell or trade. He became acquainted with one of tbe Ford Motor Company’s agents, wbo looked after tbe business of tbe company with its dealers. Tbe agent recommended defendant George Holzbaugb, Inc., a retail dealer, for tbe purpose of trading in plaintiff’s car. Plaintiff previously bad tried to sell tbe car. All be could get for it was $110 but Holzbaugb, Inc., agreed to allow him $215 on a trade for a new car to be delivered in 1941, tbe old car to be turned in immediately. It also agreed to lend him an old car for use during tbe summer months of 1940. A written contract entered into on September .21, 1939, was signed by defendant Earl Holzbaugb, wbo stated that be would sign a contract embodying tbe oral agreement previously made by his brother George, absent on the date mentioned, tbe terms of tbe agreement being told to Earl by plaintiff.

There is no doubt that George Holzbaugb, Inc., at tbe time was insolvent and bad been in that condition for a number of years. It owed $100,000 to tbe Holzbaugb brothers, also over $20,000 to a company of wbicb Earl Holzbaugb’s fatber-in-law was president. It also owed $70,000 to a Mrs. Germer wbo was vice-president of the corporation. This was secured by a chattel mortgage wbicb bad been running for almost seven years. It also owed tbe State of Michigan tbe sum of $42,550 wbicb it bad arranged to pay in monthly instalments of $250. In spite of tbe business being poor during tbe previous two years, tbe company bad sold about 3,000 new cars and 6,000 used cars in 1938. Tbe sales in 1938 amounted to about $3,000,000. During its peak year tbe company did a business of $5,000,000. It was just beginning" to fill an order from tbe city of Detroit for 500 buses, on wbicb order tbe profit would be approximately $150,000. It also had other prospective business. On October 21, 1939, Mrs. G-ermer gave notice that she was about to foreclose her chattel mortgage. There is no claim by plaintiff that defendant Earl Holzbaugh made any representations whatsoever to him. George Holzbaugh, Inc., about October 11, 1941, changed its name to Milcrow Motor Sales, and shortly thereafter, on October 29, 1941, it was adjudicated a bankrupt in involuntary proceedings. In the latter part of May, 1940, plaintiff after some difficulty located Earl Holzbaugh who was then working for another Ford agency. He obtained no satisfaction from him. The following summer, plaintiff saw him again. He also saw George Holzbaugh who told him that the company was out of business and there was nothing he could do about it. Plaintiff thereupon rescinded his contract by letters to G-eorge Holzbaugh and Earl Holzbaugh. He began the instant suit against them and the corporation. He asks rescission of the contract, or, if the automobile cannot be returned, money damages. Plaintiff alleges in his bill of complaint that he had made a diligent but futile search for defendant Milcrow Motor Sales and its assets; that the corporation was insolvent at the time he made the contract with it; that the individual defendants knew of the condition of the corporation and had no intention whatsoever of carrying out the terms of the contract; that plaintiff had no adequate remedy at law. He asked that the contract be rescinded and set aside; that the defendants return to plaintiff title and possession of the automobile delivered to the corporation for sale two years before the beginning of suit; also that it pay damages, and, in case of defendants’ inability to return the automobile, that they pay damages in a still larger amount. The lower court in its decree did not rescind the sale but entered a decree for money damages only against George and Earl Holzbaugh in the sum of $215. George Holzbaugh has not appealed.

There is no testimony whatsoever that Earl Holzbaugh made any false representations to plaintiff or that at the time he signed his brother’s name to the contract that either he or the company did not intend to pay for the automobile. While he was secretary and treasurer of the company and knew its financial condition, the record indicates that he had no reason to believe that the mortgage, which had been running for almost seven years to the vice-president of the company, was to be foreclosed. There also was good reason to believe that the payment of the large debts due himself and family would not be pressed and the other debts would be taken care óf and that with the business in sight and the assets on' hand the company would continue its business. The fact that one knows at the time of a purchase that he is insolvent and fails to disclose that fact to the seller does not of itself render the purchase void. There also must be an intent on his part not to pay for the goods purchased. Zucker v. Karpeles, 88 Mich. 413, 434; Illinois Leather Co. v. Flynn, 108 Mich. 91; John Heidsik Co. v. Rechter, 291 Mich. 708.

The testimony does not support a decree against Earl Holzbaugh. The judge did not enter any decree whatever against the Milcrow Motor Sales,' and did not enter a decree of rescission, but only a money decree, against George and Earl Holzbaugh. A decree of rescission against the Milcrow Motor Sales would have been an idle gesture, as it had gone through bankruptcy. Inasmuch as plaintiff filed no cross-appeal and does not complain of the failure of the court to enter a decree of rescission, a decree of rescission will not be entered in this' court.

For the reasons hereinbefore stated, the decree of the circuit court against Earl Holzbaugh, the sole appellant, must be reversed. The others not having appealed, it will stand as to them.

Decree will be entered in this court in accordance with this opinion, with costs to defendant Earl Holzbaugh.

Chandler, C. J., and Boyles, North, Starr, Bushnell, and Sharpe, JJ., concurred. Wiest, J., did not sit.