Detroit Trust Co. v. Hockett , 278 Mich. 124 ( 1936 )

This is an action commenced by the Detroit Trust Company, as receiver, to recover a statutory stockholders' assessment upon the ownership of 60 shares of the capital stock of the Guaranty Trust Company of Detroit, a Michigan corporation. On the 15th day of April, 1931, the defendant, Mabel R. Hockett, transferred 60 shares of stock of said corporation to Clara H. Cole. On July 1, 1931, this company was closed by action of the State banking commissioner who filed a bill of complaint in the circuit court of Wayne county resulting in the appointment of the Detroit Trust Company as receiver and on July 24, 1931, the company was found to be insolvent and the receivership was made permanent. On April 11, 1932, upon petition of the receiver an order was entered fixing the statutory stockholders' liability at $100 per share. The validity of this assessment was sustained by this court on appeal in Detroit Trust Co. v. Allinger, 271 Mich. 600.

Prior to 1930, the Guaranty Trust Company of Detroit had paid dividends of 15 per cent. of the par value of the stock. This stock was sold and traded on the Detroit stock exchange and during the year 1928 fluctuated between $280 and $340 per share. However, during the year 1930 it showed a rapid decline in market value and on December 22d of that year sold at $10 per share on the exchange; thereafter it was removed from trading on the exchange.

In September, 1930, a new president took charge of the trust company and shortly thereafter called the attention of the board of directors to the serious condition of the company. In February, 1931, the trust company attempted to borrow additional funds, but succeeded in getting only $50,000 of the $200,000 asked for. On March 23, 1931, the banks in the city of Detroit refused to make them additional loans. Following this failure the president and counsel for the trust company advised with the State banking commissioner, the result of which was a meeting of the stockholders of the trust company at which time the stockholders were informed that unless additional funds were raised the banking commissioner would be forced to take action to close the company. Thereupon a committee was appointed to contact the stockholders and solicit subscriptions, on which committee was Roland R. Hockett, son of Mabel R. Hockett. It also appears that Roland R. Hockett handled many of the business affairs of his mother, such as her interest in the Guaranty Trust Company, the Guaranty Investment Company, and the Guaranty State Bank. They had the same business and residence address. At the time of the transfer of the stock of Mabel R. Hockett, it was transferred through the personal account of Roland R. Hockett with the brokerage house of D.M. Woodruff Company. At the time of the trial of the cause, Mabel R. Hockett, Roland R. Hockett, and Clara H. Cole did not appear and testify owing to the failure of the officers to serve a subpoena upon any of said parties. The trial court after hearing the testimony rendered judgment against Clara H. Cole and dismissed the bill of complaint against Mabel R. Hockett.

It is plaintiff's position that:

1. By virtue of the statute, 3 Comp. Laws 1929, § 12005, any transfer of stock during the four months preceding the closing of a trust company subjects the transferor to liability for any stockholders' assessment thereafter levied. Defendant Hockett, concededly, transferred her stock during this four month period and she must therefore be held liable irrespective of any question of her intent in making the transfer;

2. In the event the statute is so construed as to require proof of a fraudulent transfer, defendant Hockett should be held liable because the transfer of her stock was fraudulent as to the creditors of the trust company.

The liability of stockholders of a trust company is fixed by that portion of 3 Comp. Laws 1929, § 12024, which provides:

"The stockholders of every trust company shall be individually liable, equally and ratably, and not one for another, for the benefit of the creditors of said trust company to the amount of their stock at the par value thereof, in addition to the said stock."

The statute dealing with the effect of a transfer of stock is 3 Comp. Laws 1929, § 12005, the relevant part of which provides:

"All sales, transfers, and assignments of any stock made or given with the intent and purpose on the part of such stockholder to hinder, delay, or defraud the creditors of such company or any of them shall be null and void as against the creditors of such company, except as to purchasers in good faith and for present fair consideration, if made within four months prior to the filing of a petition asking for the appointment of a receiver of such company."

We are unable to agree with plaintiff's contention that any transfer of stock during the four months preceding the closing of a trust company subjects the transferor to liability for any stockholders' assessment thereafter levied. The statute provides that if such transfer be made "with the intent and purpose on the part of such stockholder to hinder, delay, or defraud the creditors of such company or any of them," it "shall be null and void." In our opinion the language of the statute is unambiguous. In Village of Kingsford v. Cudlip,258 Mich. 144, we quoted with approval from Handy v. Township ofMeridian, 114 Mich. 454, 457:

" 'Courts are not to tamper with the clear and unequivocal meaning of words used in a statute. There can be no departure from the plain meaning of a statute on grounds of its unwisdom or of public policy.' "

In MacQueen v. City Commission of Port Huron, 194 Mich. 328, we said:

"It is a cardinal rule that the legislature must be held to intend the meaning which it has plainly expressed, and in such cases there is no room for construction, or attempted interpretations to vary such meaning."

It is next contended that defendant Hockett should be held liable because the transfer of her stock was fraudulent as to the creditors of the trust company. In such cases the burden of proof rests upon plaintiff and the proof necessary was well stated in Foster v. Row,120 Mich. 1 (77 Am. St. Rep. 565), where the court held that the burden is upon the receiver of an insolvent bank to show that a transfer of stock was made by the stockholder for the fraudulent purpose of avoiding liability as such stockholder.

It appears that at the time of the transfer of the stock, the company was at least in a condition bordering on insolvency, but to what extent this knowledge was conveyed or known to Mabel R. Hockett is the problem in the instant case. Neither Mrs. Hockett, her son, nor Mrs. Cole testified at the trial. The defendant knew that she had not received any dividend from her stock since March, 1930, but this fact standing alone is not sufficient to charge her with knowledge of the insolvency of the company; nor does the record disclose that she knew the value of the stock at the time of sale. It is also charged that Roland R. Hockett was the agent of Mabel R. Hockett. We think there is some testimony that an agency between these parties existed for certain purposes, but we are unable to find that Roland R. Hockett was the agent of his mother, Mabel R. Hockett, in the holding of her Guaranty Trust Company stock. Nor does the record disclose how much information Roland R. Hockett had as to the financial condition of the Guaranty Trust Company at the time of the transfer complained of here or how much of this knowledge, if any, he transmitted to defendant Mabel R. Hockett.

We think the trial court was correct in concluding that plaintiff failed to prove that the transfer of the stock was made for the purpose of defrauding creditors. The decree should be affirmed, with costs to defendant.