Francis Martin, Inc. v. Lomas

J. H. Gillis, J. Plaintiff-appellant brought an action in the lower court against the appellees for the specific performance of a sales agreement. Under this alleged agreement, appellant was to sell an apartment building to appellees, Lomas and Dickieson, with the mortgage to be handled by appellee, Brighton State Bank (hereinafter referred to as "Bank”). Additionally, appellant pled a cause of action against appellee Bank for abuse of process and/or fraud in the issuance of a prior mortgage commitment and the securing of a writ of attachment in a separate action. Appellant also pled an equity action requesting that the foreclosure sale of the building in question, made pursuant to the Bank’s foreclosing on appellant’s mortgage, be nullified. This sale had occurred on March 30, 1973. Appellant’s original complaint in the instant *708 case was served on all parties on September 21, 1973. For the purpose of securing a restraining order tolling the running of the statutory redemption period in the foreclosure action, 1 appellant served its first amended complaint on September 28, 1973. On October 15, 1973, appellee Bank filed a motion for accelerated judgment, claiming that Francis Martin Enterprises, Inc. lacked the capacity to sue because there was no such corporation in Michigan. While the parties were awaiting the trial judge’s decision on the accelerated judgment motion, the Bank filed a motion for the appointment of a receiver. On January 30, 1974, the motion for a receivership was granted, the court ordering one instituted in ten days from that date. On June 17, 1974, the trial judge granted the Bank’s motion for accelerated judgment, and denied appellant’s motion to amend its complaint. On appeal, appellant contends that the trial judge abused his discretion in granting the accelerated judgment and in appointing the receiver. We deal first with the propriety of the accelerated judgment. The record reveals that Francis Martin, Inc. is a corporation duly registered with the State of Michigan. It is also clear that this corporation usually referred to itself as Francis Martin Enterprises, Inc. This corporation had transacted many deals with appellee Bank, always under the name of Francis Martin Enterprises, Inc. When the corporation sued the Bank, it did so under the name it normally used, Francis Martin Enterprises, Inc. After the corporation filed its first amended complaint, the Bank sought accelerated judgment, claiming that Francis Martin Enterprises, Inc. was *709 a nonexistent body in Michigan. Appellant acknowledged this to be true, and sought leave to amend its complaint so that it would read "Francis Martin, Inc.” The trial judge refused to allow the amendment because it would "allow a new party to be brought into the suit”. GCR 1963, 118.1 allows a party to amend its pleading once as of right so long as the amendment occurs within 15 days after the other party files responsive pleadings, or if responsive pleadings are not required, then within 15 days after the original pleading is served. After one amendment, the party may amend further only by leave of the court. Leave is to be freely granted "when justice so requires”. In Ben P Fyke & Sons v Gunter Co, 390 Mich 649; 213 NW2d 134 (1973), our Supreme Court stated that the purpose of GCR 1963, 118.1 is to facilitate the amendment of pleadings, except where prejudice to the opposing party would result. The court explained that such prejudice could appear in the form of surprise, undue delay, bad faith, or undue prejudice to the opposing party by virtue of the magnitude of the amendment. Absent such prejudice, leave should be freely granted. In the instant case, we fail to see how this requested amendment could have prejudiced the Bank. The lawsuit was still in its first stages, no responsive pleading had yet been filed by defendants. More importantly, the Bank cannot legitimately claim that the amendment would have surprised them in any manner. They had dealt with appellant before, they knew that appellant frequently referred to itself as Francis Martin Enterprises, Inc. The failure of the trial judge to grant the amendment did nothing more than exalt form over substance and deny appellant its day in *710 court. See St. Matthew’s Evangelical Lutheran Church v United States Fidelity and Guaranty Co, 222 Mich 256; 192 NW 784 (1923). For that reason we find the granting of the accelerated judgment to have been an abuse of discretion. Appellant also contends that the trial judge erred in setting up the receiver to run the apartment. It is first argued that since appellee Bank filed no cross-claim in this case, it cannot petition the court to set up a receiver. Appellant bases this claim on the rule of National Lumbermans Bank v Lake Shore Machinery Co, 260 Mich 440; 245 NW 494 (1932), which holds that a motion for appointment of a receiver may be made only as ancillary to other relief sought in the bill of complaint. Our reading of National Lumbermans Bank, supra, indicates only that a plaintiff may not bring an action solely to set up a receivership. Once an action on another claim has been commenced, either party may move to set up a receivership. National Lumbermans Bank, supra. It is also true, as appellant argues, that Michigan courts should be slow to order receiverships. Sanford v Newell, 204 Mich 91; 169 NW 941 (1918), National Lumbermans Bank, supra. A strong showing of harm is required. In this case, however, we believe that appellee has made such a showing. It is noteworthy that appellant commenced this suit one week before the statutory right to redeem would have expired. The trial judge ordered the six-month limit tolled only two days before it ended. Had he not done so, appellant would have irrevocably lost any right it had in the property. Furthermore, we note that appellant’s past performance in this matter was unimpressive. It had defaulted on a promissory note given to the Bank *711 some six months before suit was commenced. No payments on this note were ever made. Various mechanic’s liens were permitted to be attached to the building. Appellant also admits that it failed to pay any real estate taxes for the property and also failed to procure any insurance for the apartment. It conceded that it was receiving rent from tenants of the apartment but was not applying the rent towards the note, insurance or taxes. The trial judge allowed appellant ten days to meet its obligations, and set up the receiver only after it failed to do so. Because of appellant’s prior failure to meet its financial obligations, and because appellant would have lost all rights to the building had the judge not tolled the redemption statute, we hold that the judge did not abuse his discretion in ordering the receivership. Eeversed and remanded for trial. Costs to appellant. Footnotes [1] Under MCLA 600.3240; MSA 27A.3240, appellant was allowed six months to redeem its property after foreclosure sale.