2. A corporation made a general assignment for the benefit of its creditors. Its indebtedness to its principal creditor was evidenced by its notes, one of which was indorsed by its stockholders. After the assignment, suit was brought upon this note against the maker and indorsers, and the defendants appeared and under their plea of the general issue claimed to recoup damages growing out of the failure of the plaintiff to furnish to the corporation defendant goods to be sold on commission, as provided in a contract between said parties. The creditor (a corporation) also filed its entire claim for allowance under the assignment, and before a hearing discontinued the suit on the note, as to the corporation defendant, and proceeded to judgment against the indorsers. When the claim came on for hearing under the assignment, objection was made to proof of the note, and it was claimed that the amount of the judgment should be deducted from the amount of the claim as presented. And it is held that the controversy over the effect of such discontinuance and judgment could not affect the allowance of said claim, and can only be satisfied in the suit on the note. Error to Wayne. (Brevoort, J.) Argued November 13, 1889. Decided December 28, 1889. Claim against estate of insolvent. Assignee brings error. Reversed. The facts are stated in the opinion. Bowen, Douglas & Whiting and George W. Radford, for appellant, contended: 1. The signatures of the corporation and of the indorsers to the $12,000 note were all affixed at the same sitting, and before the delivery of the note to the payee, and all of the signers must be held to be joint makers, and the discontinuance as to the corporation and proceeding to judgment against the indorsers operated in law as a merger of the note, which cannot be considered in this proceeding, and plaintiff's claim should be reduced by the amount of said judgment; citing Candee v. Clark, 2 Mich. 255; Bonesteel v. Todd, 9 Id. 371; Winslow v. Herrick, Id. 380; Yawkey v. Richardson, Id. 529; Ballou v. Hill, 23 Id. 60; Evers v. Sager, 28 Id. 47; Anderson v. Robinson, 38 Id. 407; Munn v. Haynes, 46 Id. 140; Cross v. Eaton, 48 Id. 184; Post v. Shafer, 63 Id. 85. 2. The plaintiff had no right to discontinue as against James Jenks & Co. after the plea of set-off, and notice of recoupment; citing Act No. 123, Laws of 1885. 78 MICH.-20. Moore & Canfield and William H. Wells, for complainant, contended: 1. The doctrine of merger to which defendant appeals is applicable where one holding a joint demand prosecutes to judgment an action against less than all. The debt against all is merged in the judgment against a part. But where one institutes a proceeding on a joint debt, against all who are jointly indebted, and discontinues as to a part, the discontinuance operates as to the entire action; citing Anderson v. Robinson, 38 Mich. 407. 2. The question cannot be raised under the pleadings. The action is in form one at common law, and the plea is the general issue with notice of recoupment. The assignment was made November 19, 1887, and the proof of debt was filed in due course thereafter. The action at law was commenced November 3, 1888. If the pendency of the action at law was relied on it should have been pleaded in abatement. If there had been a former recovery, which in fact there was not, it should have been pleaded in bar; citing Briggs v. Milburn, 40 Mich. 512. LONG, J. On November 19, 1887, the defendant, a corporation under the laws of this State, and doing business in the city of Detroit, made a general assignment for the benefit of its creditors to Samuel T. Douglas. The indebtedness of the corporation at the time amounted to $32,288.30, and the claimant in this case is the principal creditor; its claim, as filed with the clerk of Wayne county, amounting on November 19, 1887, to the sum of $25,854.32. At the request of certain of the creditors, the assignee contests this claim. The case came on for trial in the Wayne circuit court before a jury, who, under the direction of the court, rendered a verdict in favor of the claimant of $28,591.08, being the amount claimed and interest. Appeal is taken by the assignee. The stockholders of James Jenks & Co., at the time of the assignment, were James Jenks, holding 598 shares; Frederic W. Swift, holding 600 shares; George A. Jenks, holding 198 shares; and Henry C. Hart, holding four shares. James Jenks & Co. had, as a corporation, been engaged in business in Detroit for a number of years, selling wood-working machinery and manufacturing brass goods, but for several years the company was mainly engaged in selling machinery of J. A. Fay & Co. On April 1, 1884, Frederic W. Swift became a stockholder in the company, and put into the business $15,000. At that time the company was indebted to J. A. Fay & Co. in the sum of $13,000 or $14,000, and the amount of the capital stock was nominally $40,000. Col. Swift was made its treasurer, and continued to hold that position in the company up to about March 1, 1886, when he resigned his position. At this time the indebtedness to J. A. Fay & Co. had increased, and then amounted to about $22,000. Some time just prior to October 19, 1886, Mr. Doane, president of J. A. Fay & Co., a corporation, and Mr. Lyon, its secretary, visited Detroit, and investigated the condition of affairs of James Jenks & Co.; and on October 19, 1886, the following agreement was entered into in writing between the two corporations: "This agreement made this 19th day of October, A. D. 1886, by and between J. A. Fay & Co., a corporation organized and doing business under the laws of the state of Ohio, at the city of Cincinnati, in said state, party of the first part, and James Jenks & Co., a corporation doing business under the laws of the State of Michigan, at Detroit, Michigan, party of the second part, witnesseth. "That whereas, the said corporation James Jenks & Co. is now indebted to J. A. Fay & Co. in the sum of $23,086.21, represented by the notes of said James Jenks & Co., as follows: Note dated July 10, 1886, due Nov. 13, 1886.....$ 1,686 48 3,344 51 3,238 68 2,816 54 Note dated Oct. 19, 1886, due on or before two years from dåte, interest 6 per cent., with privilege of making payments at any time, indorsed by James Jenks, George A. Jenks, and Frederic W. Swift....... Total...... 12,000 00 $23,086 21 "It is therefore hereby agreed by and between the parties hereto, that said J. A. Fay & Co. hereby appoint said James Jenks & Co. sole agent for the exclusive sale of said J. A. Fay & Co.'s machinery in the State of Michigan, and that said J. A. Fay & Co. shall supply, on consignment, machinery to said James Jenks & Co., as the latter may require the same for sale in its business, which said machinery shall be properly insured by said James Jenks & Co. for the benefit of said J. A. Fay & Co. Said James Jenks & Co. is to report on the tenth of each month the sales for the previous month, and give its notes, due in four months, bearing date with said report, for the amount of such monthly sales, without interest; and in case said James Jenks & Co. shall at any time desire a renewal of any of said notes, or of the four notes first mentioned herein, said James Jenks & Co. may renew the same for the period of four months, with six per cent. interest, by giving thereon the indorsements of said James Jenks, George A. Jenks, and Frederic W. Swift, who are the stockholders of said James Jenks & Co. A second renewal of any note shall only be allowed by special arrangement with said Fay & Co.; and it is further agreed that, in case of failure to pay any renewed note at maturity, said J. A. Fay & Co. shall have the option to declare all indebtedness of said James Jenks & Co. to it due and payable forthwith, including said note for $12,000.00, and also to declare said agency at an end. "In witness whereof the said parties hereto have affixed the official signatures the day and year first above written. "J. A. FAY & Co., "By W. H. DOANE, President. "JAMES JENKS & Co., "By JAMES JENKS, President." At the time of the execution of this contract the fol lowing note was executed: DETROIT, Oct. 19, 1886. "<$12,000.00. "On or before two years after date, James Jenks & Co., incorporated, promises to pay to J. A. Fay & Co. or order, twelve thousand dollars, at its office in Cincinnati, Ohio; said maker having the privilege of paying any sum at any time hereon, value received, with 6 per cent. interest per annum. "JAMES JENKS & Co., Incorporated. "By JAMES JENKS, President." Indorsed on back: "JAMES JENKS. "GEO. A. JENKS. "F. W. SWIFT. "Pay cashier Citizens' National Bank, Cincinnati, Ohio, or order. For collection. "J. A. FAY & Co. "Note duly protested Oct. 22, 1888." It appears that this $12,000 note, as well as the others, was given to secure the past indebtedness of James Jenks & Co., and Colonel Swift claims that he would not have indorsed this note except for the contract above set forth. Just before the assignment was made, on November 19, 1887, by James Jenks & Co., Doane and Lyon again. came to Detroit, looked over the affairs of the company, and demanded that Swift and James and George Jenks indorse the renewal notes. This Colonel Swift refused to do, when they were informed by Doane and Lyon that J. A. Fay & Co. would furnish no more machinery, and would take from their possession the commission goods then on hand. To this arrangement Colonel Swift protested. Immediately following this refusal to indorse these renewal notes the commission goods were removed, and within a few days the assignment was made. It is claimed that Doane and Lyon were fully advised of the assignment, and upon this claim there is but little, if any, dispute. |