Erpelding v. McKearnan

107 N.W. 107, 143 Mich. 409, 1906 Mich. LEXIS 663
CourtMichigan Supreme Court
DecidedMarch 27, 1906
DocketDocket No. 34
StatusPublished
Cited by1 cases

This text of 107 N.W. 107 (Erpelding v. McKearnan) is published on Counsel Stack Legal Research, covering Michigan Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Erpelding v. McKearnan, 107 N.W. 107, 143 Mich. 409, 1906 Mich. LEXIS 663 (Mich. 1906).

Opinions

Moore, J.

In April, 1900, a corporation was organized in Chicago with $20,000 capital, known as the “ Century Seating Company.” Its business was to be the manufacturing and selling of school furniture and school supplies. The plaintiff and his brother John E. Erpelding owned one-half the stock of said corporation. Mr. Mc-Kearnan, the defendant, was the man who suggested the organization of the corporation. uHe was a stockholder [410]*410therein, and its manager. A company known as the> “American School Furniture Company” was already doing business in Chicago. Soon trouble and litigation arose between the two corporations.

It is the claim of plaintiff that in the latter part of the year 1901 an agreement was made at Chicago through Mr. McKearnan, acting for the Century Seating Company, with the American School Furniture Company that the latter should become the purchaser of all the stock, business, and good will of the Century Seating Company, and that plaintiff and his associates were led to believe that the consideration therefor was the sum of $30,000. That said sale was made and said $30,000 was divided between the stockholders of the Century Seating Company, the plaintiff and his brother receiving thereof $15,000. It is the further claim of plaintiff that before he commenced this suit he learned for the first time that Mr. McKearnan. had a secret agreement with the officers of the American School Furniture Company that McKearnan should be paid $8,500 in addition to the $30,000 already mentioned, and that this was kept from the plaintiff and his brother and the other stockholders. Upon receipt of this information the plaintiff took an assignment from his brother o£ his interest, and it is to recover one-half of the $8,500 so paid to Mr. McKearnan that this suit is brought.

Mr. McKearnan interposes by way of defense the claim that the American School Furniture Company was a trust organized for the purpose of controlling the manufacture and sale of school furniture, and that its purpose in acquiring the Century Seating Company was to remove a competitor in its business, and that as part of the consideration for the purchase by the American School Furniture Company, it was agreed that there should be spread upon, the books of the Century Seating Company an agreement to hire Mr. McKearnan for five years at the sum of $3,000 a year, and that the Century Seating Company should continue to exist as a corporation, and should be held out to the public as a corporation still independent of the trust, [411]*411and as doing business on its own account, and that the plaintiff and his brother were parties to that agreement, and consented to its being made, were participants therein and in the fruits thereof. It is further claimed that said agreement was contrary to public policy, and was so tainted that the law will leave all the parties thereto where they left themselves.

The further defense is made that no part of the $8,500 which was paid to defendant was paid as part of the consideration for the stock, good will, and business of the Century Seating Company, but it is Mr. McKearnan’s claim that the American School Furniture Company recognized that he was practically the Century Seating Company, and desired to obtain his services and in consideration of his agreeing, in case the American School Furniture Company made the purchase as contemplated, that he would enter into its employ for the period of five years at the ostensible salary of $8,000 a year, that it would pay to him in addition thereto the sum of $8,500, and that the payment was made as agreed and for that purpose only.

The circuit judge upon the trial submitted to the jury one question only, and that was whether the $8,500 was paid to Mr. McKearnan as part of the purchase price of the stock, good will, and business of the Century Seating-Company, and charged the jury if it was, then the plaintiff was entitled to a judgment for one-half the amount thereof. On the other hand, he charged them if the payment was made to Mr, McKearnan as part of the compensation which he was to receive as an employé of the American School Furniture Company for the five years, which he agreed to work for them, the plaintiff could not recover. The jury found a verdict for the full amount of the claim of the plaintiff. The case is brought here by writ of error.

The questions involved in the case all center about the one question as to whether the transaction between the two corporations, if as claimed by the defendant, was so tainted with fraud because against public policy that the [412]*412law would leave the parties where it found them. If the defendant is right in this claim the case should be reversed. If wrong it should be affirmed.

We can present the issues involved in no better way than to quote from the briefs of counsel. Counsel for plaintiff say:

“ The stockholders and owners of the Century Seating Company sold their entire interest in such company and the entire plant, assets, business, and good will of the company. The consideration for the property was paid in cash by the purchaser. The vendors retained no part of, no interest in, and no control over, the property sold. After the sale, none of the vendors had any connection with the property except that the defendant and possibly the plaintiff were employed by the vendee and paid salaries which constituted the consideration for their services. Such a sale and transfer, even to an illegal trust or monopoly, is not unlawful. As well might it be said that the farmer is prohibited from selling his, wheat to the board of trade operator who is seeking to ‘ corner ’ the wheat market, or from selling his cattle to members of the beef trust. * * *
“ The alleged illegality of the contract in question cannot avail the defendant as a defense to this action for the reason that such contract was not between plaintiff and defendant, but was with third persons who have fully performed the same and paid over the moneys to defendant for the plaintiff and his assignor, and this suit is not brought to enforce such alleged illegal contract or any part thereof. That contract has been fully performed and executed by the parties thereto. The moneys sought to be recovered have been paid to the defendant by the representatives of the American School Furniture Company for the plaintiff’s use. The illegality (if any) of the original transaction at most ‘only appears incidentally in explaining whence the moneys were received.’ Neither the American School Furniture Company nor the public will be benefited or injured in any manner by the enforcement of the implied contract of the defendant to pay to the plaintiff the moneys received by the former for the latter’s use. To establish his case, it was not necessary for plaintiff to prove or rely upon the alleged illegal contract or any part thereof.” Citing Willson v. Owen, 30 Mich. 474, 475; Richardson v. Welch, 47 Mich. 309-312; Peo[413]*413ple v. Hawkins, 106 Mich. 479-484; McDonald v. Lund, 13 Wash. 412; Planters’ Bank v. Union Bank, 16 Wall. (U. S.) 483; Armstrong v. American Exchange Nat. Bank, 133 U. S. 433, and many others.

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Cite This Page — Counsel Stack

Bluebook (online)
107 N.W. 107, 143 Mich. 409, 1906 Mich. LEXIS 663, Counsel Stack Legal Research, https://law.counselstack.com/opinion/erpelding-v-mckearnan-mich-1906.