Ross Industrial Chemical Co. v. Smith

5 Mich. App. 422 (1966) 146 N.W.2d 816

ROSS INDUSTRIAL CHEMICAL CO.
v.
SMITH.

Docket No. 1,357.

Michigan Court of Appeals.

Decided December 22, 1966.

Joslyn & Keydel, for plaintiff.

Smith, Ryan, Simmons & Jones, for defendants.

LESINSKI, C.J.

Defendants, escrow agents, appeal a summary judgment for plaintiff, alleged corporate creditor of Troyer, Inc. Said defendants are attorneys who were escrow agents for the benefit of creditors of Troyer, Inc., a Michigan corporation that was to be dissolved by a bulk transfer of its assets to Automotive Anodizing, Inc., another Michigan corporation. Defendant Smith represented Troyer, Inc., in the sale; defendant Campbell represented Automotive Anodizing, Inc.

Pursuant to Michigan statute,^[*] notice of the prospective sale was sent to creditors. The contents of this notice complied with the requirements of the uniform commercial code, PA 1962, No 174, § 6107, as amended by PA 1964, No 250 (CL 1948, § 440.6107 [Stat Ann 1965 Cum Supp § 19.6107]). Plaintiff's complaint related that on receipt thereof, plaintiff presented its claim to the buyer's agent, defendant Campbell; that Campbell assured the plaintiff that $8,111.32 was being held in escrow for its benefit and that plaintiff would be paid on or before April 10, 1965. Campbell's answer to plaintiff's complaint admitted this, and stated further that he (Campbell) was subsequently informed that plaintiff's claim was disputed by Troyer, Inc., and that this information was related to the plaintiff's attorney along with the advice that Campbell could not pass upon the justness of the claim, and would hold the money in escrow pending settlement of the disputed claim. Defendant Smith's answer to plaintiff's complaint pertinent to this point admitted holding the money, denied making a promise to pay, and said that plaintiff was informed of claims against it by Troyer, Inc.

Plaintiff's complaint continued with the allegation that the contemplated sale had been consummated on or about April 10, 1965, and that the defendants refused to pay the plaintiff's claim. Smith neither admitted nor denied this allegation. Campbell admitted the bulk transfer, but denied refusing to pay plaintiff. It was Campbell's contention that he was in the position of a stakeholder who holds the money pending settlement.

Plaintiff's final allegation was that the defendants held the money in trust for its benefit, and its prayer for relief sought recovery of the amount claimed. Defendant Smith denied both the holding of the money in trust for plaintiff and its right thereto, and sought dismissal. As noted above, Campbell considered himself in the position of a stakeholder.

Plaintiff moved for summary judgment. Defendant Smith contested the motion on the ground that he had made no promise of payment to plaintiff, and on the ground that there was a material issue of fact in dispute. The defense was of no avail, and Smith and Campbell here appeal a granting of plaintiff's motion. The court below based the summary judgment on defendants' failure to state a valid defense to the asserted claim and held that plaintiff was entitled to judgment as a matter of law. This was followed by an adjudication that defendants pay the amount claimed to plaintiff.

Because of the nature of the disposition of the case below and because of the diversity of role, if not interest, of the two defendants which required clarification, the contents of the respective pleadings have necessarily been set forth in some detail. They present this Court with the reoccurring question of determining whether a summary judgment was properly granted.

Although it was not denominated as such, plaintiff's motion was grounded and granted upon GCR 1963, 117.2(2), which reads: "the opposing party has failed to state a valid defense to the claim asserted against him." It is therefore necessary to ascertain if the defendants' answers summarized above contained sufficient matter to necessitate the reversal and trial urged by them, as the appellants here. Parenthetically, we note that this was not a motion for summary judgment under GCR 1963, 117.2(3), which states: "that except as to the amount of damages there is no genuine issue as to any material fact, and the moving party is therefore entitled to judgment as a matter of law." However, defendant Smith's motion in opposition to the motion for summary judgment, which contained an affidavit, did indicate a material fact, which we must assume to be the basis of the dispute referred to between Troyer, Inc. (the dissolved corporation) and its alleged creditor, plaintiff here, as to the validity or amount of the plaintiff's claim against Troyer, Inc. The answer filed by Campbell revealed the existence of a dispute thereto; the answer filed by Smith denied plaintiff's right to the money.

Therefore, the ultimate question becomes: Where a dispute exists as to a claim against a corporate principal (Troyer, Inc.), by its creditor (plaintiff), is the allegation of this dispute by one escrow agent (Campbell) and the denial of indebtedness by the other escrow agent (Smith) a sufficient defense to preclude a summary judgment based upon a lack of a valid defense?

The notice to creditors referred to previously contained the statement that "all debts of the seller as contained in a list of creditors provided by the seller to purchasers will be paid in full by Nicholas Smith and Donald F. Campbell, escrow agents, 450 First National Building, Detroit, Michigan, on or before April 10, 1965." The plaintiff finds in this sentence no support for defendants' statement in their appellate brief that the seller's debts "would be paid by the escrow agents to those creditors whose submitted claims were approved." (Emphasis supplied.)

According to the uniform commercial code, PA 1962, No 174, § 6104, as amended by PA 1964, No 250 (CL 1948, § 440.6104(2) [Stat Ann 1965 Cum Supp § 19.6104(2)]), the list of creditors "must contain * * * the names of all persons who are known to the transferor to assert claims against him even though such claims are disputed." It would seem too obvious to need further observation that the mere listing of a disputed claim, as required by statute, would create no obligation for its payment prior to resolution of the dispute. It would also seem to be apparent that a statement by the escrow agents that they would pay all of the seller's debts would not support an inference that the agents would pay disputed claims prior to their resolution. Plaintiff seems to find that some sort of a contractual obligation arose from the listing of the claim in the list of creditors; said theory is not supported by hornbook law or the law of contracts.

Although plaintiff does not see, and hence did not join, Troyer, Inc., as a party to this controversy, it is apparent that unless Troyer, Inc., or its successor in interest, or both, be joined, there can be no final determination of this cause. The unanswered question of the authority under which the escrow agents, or one of them, sought to bind the fund would remain unanswered. In addition, affirmation of the judgment below would force Troyer, Inc., to institute proceedings anew to resolve the alleged disputed claim. The end result would be an unnecessary cumulation, rather than a diminution, of litigation.

The pleadings sufficiently established a defense to preclude a summary judgment for failure to state a valid defense.

Pursuant to GCR 1963, 207, we direct the trial court to order the joinder of Troyer, Inc., or its successor in interest, or both, and reverse and remand for trial. Costs to appellants.

J.H. GILLIS and HOLBROOK, JJ., concurred.

NOTES

[*] Although defendants' brief on appeal refers to the bulk sales act, the effective date of Michigan's adoption of the uniform commercial code was January 1, 1964. Therefore, the sale here, in April of 1965, was governed by its provisions. For notice provision in bulk transfers, article 6, see the uniform commercial code, PA 1962, No 174, § 6105; § 6107, as amended by PA 1964, No 250 (CL 1948, §§ 440.6105, 440.6107 [Stat Ann 1964 Rev § 19.6105, Stat Ann 1965 Cum Supp § 19.6107]).