Prochnow v. Anderson , 244 Mich. 525 ( 1928 )

Margaret M. Hoover-Anderson had a judgment against Howard G. Engard. She caused an execution to be issued out of the circuit court for Washtenaw county, Michigan. The sheriff made a levy on 20 shares of common stock of the Ann Arbor Buick Service Company, which it was claimed belonged to Engard. The plaintiff in this case, who is president of the Ann Arbor Buick Sales Company, and its largest stockholder, filed a bill to restrain the sale by the sheriff of all but two shares of the stock on the ground that only two shares belonged to Engard, and that he, the plaintiff, owned the balance, which stood in his name on the books of the company. The theory of the bill, as amended, is that the plaintiff is entitled to relief in equity because the Ann Arbor Buick Service Company is a close corporation; that none of its stock is for sale; and that the 18 shares upon which the sheriff levied has a special value to the plaintiff. The defendants filed a motion to dismiss the bill, the principal ground being that the plaintiff had an adequate remedy at law. The motion was denied, and the plaintiff was permitted to amend his bill. It was further claimed in defense to the action that the sale by which the plaintiff acquired ownership of all but two shares of Engard's stock was made with intent to hinder, delay, and defraud other creditors of Engard and was therefore void. On the hearing, the court found for the plaintiff and entered a decree restraining the sale by the sheriff of 18 of the 20 shares levied on. The defendants Anderson and Robison have appealed.

It is first urged that the bill should have been dismissed on defendants' motion, for the reason that the plaintiff had an adequate remedy at law. Equity will not entertain jurisdiction to restrain the sale on execution of personal property unless it has some special value to the owner or, if taken from him, cannot readily be replaced or compensated for by damages.City Bank Trust Co. v. Hurd, 179 Mich. 454; Asiulewicz v.Pietrazewski, 220 Mich. 690.

The property levied on was not a commercial article with a market value. It was shares of stock in a close corporation. None of it was for sale. If dispossessed of the stock, he could not replace it. It has a special value to him because on it depended his control of the business in which he had a large amount of money invested. In view of these facts, his remedy at law was not adequate, and equity has jurisdiction to restrain the sale of stock under levy.

One other question requires discussion. Was the sale of this stock to the plaintiff by Engard a good-faith transaction, or was it made to hinder, delay, and defraud creditors? This company was organized August 1, 1923. All of the stock was held by the plaintiff, Walter A. Prochnow, the defendant Howard Engard, and one Lew Selaska. Engard gave his note for $8,700 in payment of 87 shares of stock. Mr. Engard had no money, and was unable to pay anything on the interest or principal of the note. In August, 1926, some difficulty arose in regard to the business, which convinced the plaintiff that it was necessary for him to secure control. Accordingly, he purchased all of the stock held by Engard except two shares. Engard's note was canceled, his stock surrendered, and new certificates were issued, two to Engard and 85 shares to the plaintiff. So, at the time of the levy only two shares of stock stood in the name of Engard on the books of the company. This sale of stock to the plaintiff was made a short time before Mrs. Anderson obtained her judgment against Engard and about three months before the execution was issued. We are unable to find any evidence in the record which would justify us in holding that the sale was made with intent to defraud the creditors of Mr. Engard. It appears to have been in entire good faith and for a valuable consideration. In restraining the sale for all of the stock levied on except the two shares which stood in the name of the defendant Engard on the books of the company, the trial court correctly disposed of the issue.

The decree is affirmed.

FEAD, C.J., and NORTH, FELLOWS, WIEST, CLARK, POTTER, and SHARPE, JJ., concurred.