Court Opinion

ID: 7938849
Source: CourtListenerOpinion
Date Created: 2022-09-08 23:12:34.507609+00
Date Added: 2024-06-11T16:33:38.519279
License: Public Domain

Long, C. J.
I am unable to agree with my Brother Hooker in this case. It now seems to be well established that the Michigan Trust Company had full knowledge of the claim of complainants under their contracts with *533the Lansing Lnniber Company, and recognized the fact that under these contracts the title.to the logs and lumber remained in the complainants. If we were able to find in the record any showing that the complainants or Mr. Fisher understood that this property , was to be included in the trust deed, and that the creditors were being deceived or misled as to its ownership, and that the complainants, so understanding, sat by, and permitted the deed to be executed and the creditors to be deceived, making no objection, and allowing the creditors to surrender substantial rights which they had and might have asserted had they not been so deceived and induced to surrender their former evidences of debt and accept the bonds secured by the deed, then the complainants might be held estopped; but such facts do not appear. The complainants were notified of the meeting of the creditors of the Lansing Lumber Company. Mr. Barnes, on May 19, 1893, wrote Mr. Fisher substantially that the proposition of the- creditors was to fund the indebtedness, and the contract to contain a provision that the trustee might borrow money to pay all indebtedness which constituted a lien upon the property, and added:
“As soon, therefore, as the papers can be prepared, and the consent of the creditors can be obtained, the trustee will at once take up and pay your claim, because you are one of the individuals, and your debt one,of the debts, that is to be paid by the trustee by borrowing money at once, if necessary, for the purpose of payment.”
A few days later Mr. Barnes wrote Mr. Fisher again saying:
‘ ‘ As soon as the mortgage is ready, I will send you a copy, so that you can see that your debt is to be paid first of all.”
On May 26th Mr. Barnes sent Fisher a copy of the mortgage, calling attention to the seventh clause, advising him that it amply' protected him as a preferred creditor. This mortgage or trust deed' contained -a • clause stating substantially that certain of the lands of the Lan*534sing Lumber Company were held by it under contract, and that a portion of the purchase money thereon remained unpaid, and empowering the trustee to advance or borrow money to pay off such indebtedness, in order that the title to the property might be fully vested in the trustee. The title to the lands of the complainants from which the logs and lumber were taken remained in the complainants until payments were fully made. A few days after the mortgage was executed, and on June 19th, Mr. Barnes again wrote, saying that it was expected that the indebtedness to special creditors, “ of which you are one,” would be taken up and paid; and, on July 3d following, again wrote that the notes which had been given complainants on this purchase had been reported to the trustee as secured property, and they had decided not to issue bonds for secured debts unless the parties preferred them; that the mortgage provided that “they will pay all claims covered by liens upon land before paying any other to other parties; ” and in the same letter said, “This gives you your full pay before any holders of bonds receive theirs.” On July 26th, Mr. Barnes again wrote:
“I will now refer your letter to the trustee. You will remember that you are one of two of the very first men to be paid out of the income of the lumber company.”
On July 24th Mr. Fisher had written Mr. Barnes a letter, which he had forwarded to Mr. Withey, the president of the Michigan Trust Company, the trustee named in the mortgage; and on July 28th Mr. Withey wrote Mr. Fisher, acknowledging the receipt of the letter, and saying:
‘ ‘As you are perfectly secure, as we understand it, we hope you will let the matter rest quietly as it is until such time as they [the lumber company] are able to shape themselves around to meet it; and we can assure you that your claim will not be out of our minds.”
On July 31, 1893, Mr. Fisher replied to Mr. Withey, advising him that the Lansing Lumber Company owed *535them (the complainants) “over $12,000, the same being secured by land contracts, and covers not only the standing timber, but the logs and lumber, * * * the title to which has never passed to them.” He also added:
“As I understand, * * * these claims of ours were preferred claims. * * * I must now insist that this matter be taken up, or we will be obliged to protect ourselves by due process of law, ■ against the lumber, logs,” etc.
On August 2d Mr. Withey replied, saying that he did not understand that the land contracts covered, not only the standing timber, but the logs and lumber now on hand, and added:
“So long as parties have'ample security, we do not think there would be any justification in taking so severe measures as you suggest, and we trust that you will treat the Lansing Lumber Company with such leniency as the times will seem to warrant.”
Mr. Fisher replied to this that he had been assured by the Lansing Lumber Company that, “as soon as this trust was formed,” their claim should be paid, and urging that it be attended to promptly. Two days later, Mr. Withey writes, excusing delay on the part of the Lansing Lumber Company, and says:
“Your security is perfectly good, and that is a good deal more than most creditors have in these days; so we shall expect that you will be patient, and not press payment of the matter at the present time.”
On September 28th Mr. Withey again wrote, saying:
“We hope, in a reasonable time, to pay you something on your claim.”
On December 2d he wrote again, saying that the Lansing Lumber Company was doing better, that it had been able to meet the interest on its bonds which matured November 1st, and then proposed to take care of such matters as the complainants’ just as speedily as possible.
We think it will be readily seen that the defendants *536are not in a position to interpose the defense of estoppel to complainants’ claim. Here the trustee had been fully advised of the claim of complainants -that they held the title, not only to the lands, but to all the logs and lumber taken from the land, until their claim should be fully paid and satisfied. The trustee, by the very terms of the trust deed, was fully authorized and empowered to advance or borrow money to pay complainants’ claim. In addition to this, when Mr. Fisher threatened to pursue a remedy open to him, and which would have secured his claim beyond question,—that is, by seizure of the logs and lumber,—the trustee, by its president, asks that the matter be delayed, promising, from time to time, that the claim would be paid. During all this time Mr. Withey treated the claim as secured under these contracts by reason of the title remaining in the complainants. It is certain that he must have known that the complainants’ claim was a secured claim, though he may not have seen Exhibit C—the last contract with the Lansing Lumber Company —until after the trust deed was made. He knew on July 31st that the claim amounted to over $12,000, and that it was secured by these land contracts, covering all the logs and lumber, the title to which remained in complainants. We cannot find upon this record that a fraud was practiced by the complainants upon the creditors of the Lansing Lumber Company, or that they sat by and permitted the other creditors to part with something of value. The complainants were well secured by the retention of title in themselves to all this property. They could, and undoubtedly would, have taken possession of it, but for the interposition of the trustee. So that, upon the first proposition, I am of the opinion that the defense sought to be made has no foundation.
But it is held by my Brother Hooker that the complainants are in no position to 'assert rights in the moneys arising from the loss of the property by the fire. There is great force in his- suggestion that, the trustee having an insurable interest in the property, such interest could *537be insured, and that the moneys arising from the loss could not be held by the complainants. The circumstances surrounding this case are, however, very peculiar, and the conduct of the Lansing Lumber Company and the trustee quite remarkable in many respects. Three contracts were made between these'parties. Under the first,—made November 21, 1887,—the Lansing Lumber Company could not cut or take any of the timber from the land without the written assent of the complainants. This was also true of the second contract, made December 5, 1888. On September 24, 1890, however, a new contract was made, containing this provision:
“Now, therefore, it is hereby agreed between the parties hereto that the entire title, ownership, and right of possession in and to all logs, timber, and lumber heretofore cut and removed from or remaining on said lands, and now under the control of or in the possession of said second party, shall be and remain in first parties, and the title and ownership of all logs, timber, and lumber hereafter cut or manufactured from said lands shall be and remain in first parties, until the full payment of all moneys due or to become due on either or both of said contracts, and the notes executed in connection therewith, or any notes executed in renewal of any such notes. It is further agreed that the second party shall mark plainly, as directed by first parties, all logs, timber, and lumber already cut or manufactured from said lands, and now in second party’s possession or control, and also, in like manner, shall mark all logs, timber, and lumber that shall hereafter be cut or manufactured from said lands, with the mark of first parties, which is TAT; marking irons for such mark being furnished to second party by first parties. It is further agreed that the logs and timber shall be manufactured into lumber, and piled at second party’s mill in Clare county, Michigan, in a good and workmanlike manner; and said first parties may insure same in their own names or otherwise, as they may deem advisable, and said second party shall pay the expense thereof; and, in case second party shall fail to pay for such insurance, and first parties' shall pay the same, second party shall pay to first parties such cost and expense of insurance, together with interest thereon,” etc.
*538Under these contracts most of the timber has been removed, so that the lands are comparatively worthless. Upon the execution of the last contract, the lumber was insured by the Lansing Lumber Company, in its name, for 165,000, and thereafter, at the request of complainants, the loss, if any, was made payable to them. These policies expired in June, 1891. On December 11, 1891, complainants wrote to have the policies forwarded to them. This was done, and it was found that the policies amounted to $37,250, and losses made payable to complainants. These policies expired in 1892. It appears that complainants never caused any policies to'be issued, apparently relying upon the Lansing Lumber Company to do so. No further policies were taken out by that company; but, upon the execution and delivery of the trust deed, the trustee caused the property to be insured in its name. The insurance stood in this way when the letters were written by the complainants to Mr. Withey in July, 1893. Mr. Withey knew then that the complainants held the title to all the lumber cut from the logs taken off the lands described in the contracts. The fire occurred on March 10, 1894. At that time, according to the testimony of Mr. Wheeler, the foreman at the mill of the Lansing Lumber Company, about one-half of the lumber on hand, and which was destroyed by the fire, was cut from logs taken from complainants’ lands, and the title of this lumber was in complainants. This lumber had been marked with the complainants’ mark after it had been piled. There was about 8,000,000 feet in the yard in all. The insurance on the mill was paid, amounting to six or seven thousand dollars; the rest of the insurance was paid for the loss of the lumber. It can hardly be contended that the insurance money received was not for the loss of complainants’ as well as the other lumber in the yard. It is true that the insurance did not run to the complainants, but to the Michigan Trust Company. But that company collected and appropriated the whole moneys arising from such insurance, *539and refuses to account to the complainants for it, asserting that it has gone into the general fund for the benefit of the general creditors of the Lansing Lumber Company. This claim is most unjust and inequitable, and should not be sustained, unless by the strict rules this court is powerless to do what right and justice demand. The prayer of the bill is that the complainants’ claim be paid out of the moneys obtained from this insurance, but there is also a general prayer for relief.
I shall now consider the position of the general creditors. It appears from the record that, at the meeting of those creditors when the trust deed was agreed upon, such creditors were informed that complainants’ claim was a preferred one, and should be paid, before any of the bondholders were paid. The committee appointed by the creditors was advised of this fact, and it is evident that the clause was inserted in the trust deed above referred to, which authorized the trustee to borrow money to pay such preferred or secured claims, in view of this fact; that it was well understood by the creditors that this was one of the claims necessary to be paid, so that the title to the property would pass to the trustee. At that time the complainants, upon the neglect or refusal of the Lansing Lumber Company or the trustee to pay such claim, could have taken possession of the property, and sold it in payment of their claim. To avoid this, and to place the title in the trustee, the clause in the deed was evidently inserted. How much Mr. Withey understood of this at the time it is now unnecessary to determine. He found that clause in the deed, and in July following was notified by complainants that they held this title. He wrote them on August 2, August 5, September 28, and again on December 2, 1893, recognizing the fact that such claim was one of those preferred, and asking them not to press payment, as their claim was perfectly good, that they had ample security ; • and thus put them off from commencing, any proceeding to collect from the property itself the amount of this claim, then amouning to over $12,000. *540All this time the trustee was holding the insurance policies covering the entire lumber, and after the fire collected for the loss, and then for the first time insisted that the complainants, not having the property insured in their name or for their own benefit, had no right to any portion of the money arising from the loss, and that the whole of it should be applied to the payment of the general creditors. Not only this, but it is claimed here that the trustee should not be decreed to pay the claims which not only the general creditors recognized as preferred, but one which the trustee also recognized as preferred, and which it could, under the trust deed, borrow the money to pay, and which would have been collected by the complainants had not the trustee begged for time, and which the complainants generously extended. The claim should be paid for the reasons:
1. That the general creditors authorized the trustee to make the payment.
2. That the trust deed authorized its payment.
3. That the trustee was advised of all the facts before the fire, and promised payment, and asked an extension of time in which to meet the demand, which extension was granted.
4. That the complainants, at the request of the trustee, withheld action in taking possession of the logs and lumber in reliance upon the promise of the trustee that they would be paid.
5. That the trustee had the power to pay conferred upon it by the trust deed. Having this power, it was a preliminary that it was to determine; and we think Mosher and Fisher had the right to rely upon its assurance that the trust funds in its hands would be devoted to that purpose.
6. That the trustee should be estopped from now claiming that the complainants are not entitled to be. first paid; for, whatever may be the actual intent of a party-to a transaction, if he so acts as to lead a reasonable person to believe that he understands and assents to its *541terms, and the other party, so believing, acts accordingly, the former is estopped from asserting that he did not so understand and assent. Peake v. Thomas, 39 Mich. 585; Vanneter v. Crossman, 42 Mich. 465. Here the complainants had it in their power to make their claim good. They did not do so in reliance upon the payment of their claim. The trustee ought not now to be permitted to assert title, collect the insurance, and then deny liability upon the demand.
But my Brother Hooker contends: (1) That the letters do not indicate any intent on the part of the trustee to pay the claim, but rather a willingness that the Lansing Lumber Company should pay from funds coming into its possession. (2) That there is no consideration shown for the promise. (3) That the trustee received from the insurance companies only what was equitably due the trustee. In these contentions I cannot agree. The trustee, under the trust deed, took every dollar’s worth of property, both real and personal, which the Lansing Lumber Company had or controlled. After describing certain real and personal property which was to pass under the trust deed, it is provided:
“ And also all other personal property of the said Lansing Lumber Company, of every nature and kind, including bills and accounts receivable, wheresoever the same may be situated, and all other personal property which may be hereafter acquired by the said Lansing Lumber Company during the lifetime of this security, including any revenue derived by the party of the first part from whatsoever source, and also all deeds, mortgages, contracts, assignments of contracts, and all muniments of title to real and personal estate; it being the intention to embrace in this security all the real and personal property of said party of the first part and the income from its business.”
The trust deed then provides that the trustee may pay the class of claims held by the complainants, and for this purpose he is expressly empowered—
“To borrow money to pay off the money remaining unpaid on said land contracts, * * * in order that the *542title to all said property may be fully vested in said trustee, free of all incumbrances, for the uses and purposes of this trust, and for the better security of the holders of bonds hereunder issued. And the said party of the second part is hereby authorized and empowered to pay off the money so advanced or borrowed, with interest thereon, to perfect the title to said lands, or release the same from existing liens, out of any money that may come into its hands as trustee, before applying any to the payment of bonds hereunder issued, and these presents shall inure as a security for the same.”
The trust deed further provides that—
“ All moneys received by said company during the continuance of said trust shall be deposited in some bank or banks to be selected by said trustee, the deposit to be to the credit of said trustee. For the purpose of providing for the disbursements, including the interest, taxes, insurance, and expenses of said company in the regular course of its business, said trustee shall turn over to said company such amounts as shall from time to time be necessary for that purpose, provided that the amount so in the hands of the company for current expenditures shall at no time exceed the sum of $10,000.”
In Michigan Trust Co. v. Lansing Lumber Co., 103 Mich. 392, this trust deed was held to be a mortgage; but that holding in no manner affects the question here.
Can it be possible that the. letters can have the construction placed upon them by my Brother Hooker? The Lansing Lumber Company did. not have a dollar with which to pay any debt. All the property went to the trustee, and even the income from the business was to go into the bank in the name of the trustee. Undoubtedly, the trustee intended that the moneys to pay the complainants should come from the funds realized from the Lansing Lumber Company; but the letters, in my opinion, meant no more than this. The circumstances surrounding the transaction and the situation of the parties were such that no other interpretation can plausibly be given. It was, therefore, the promise of the trustee to pay if the complainants would forbear prosecution of their claim. But was there any consideration for such *543promise? The general rule is that an agreement to forbear to prosecute a suit is a sufficient consideration for a promise. In Parsons v. Frost, 55 Mich. 230, the note in suit was within a few days of being barred by the statute of limitations, when the plaintiff, upon the understanding that one of the defendants should indorse the note, was induced to forbear suit until the other defendant, who was the maker, should return from Europe. It was held that this forbearance was a sufficient consideration for the indorsement, and the indorser and maker were held liable. The present case is much stronger. Here the proposition came from the trustee. He promised, if complainants would forbear bringing suit and taking the property into possession, that the Lansing Lumber Company would very soon have funds for the payment of the debt. The complainants rested upon this promise of payment, and did not bring suit. Can it be said that this was not a sufficient consideration ? I think not. Neither do I think that it was the promise that the Lansing Lumber Company would pay, when we take the situation of the parties into consideration.
From this view of the case it cannot matter whether the trustee received only what was equitably due it or not. The lumber burned was situated at the mill yard. There was about 8,000,000 feet of it. But the uncontradicted testimony shows that 4,000,000 feet of this lumber came off the lands of the complainants. When the fire occurred, the title to all that part of the lumber remained in the complainants. They had not taken possession of it because of the promise of the trustee that it would soon be paid for. They evidently relied upon this promise, and permitted the lumber to be treated as the property of the trustee. When the insurance moneys were paid, then for the first time they were told that they must look to the lands for the payment of the balance of their claim. These lands appear to be worthless. One-half of the insurance money came from the loss of the complainants’ lumber. . The trustee has it. It would be most inequit*544able to permit the trustee to now pay it over to other creditors- It had power to make the arrangement by which complainants forbore to commence suit. It should now keep the promise good. The other creditors would not suffer. The insurance money coming from the loss of complainants’ lumber was so much clear gain to them. If the lumber had not burned, the trustee could not have taken it without the payment of the claim. Equity and justice require that it should now pay.
The decree will be affirmed.
Montgomery and Moore, JJ., concurred with Long, C. J.