Benton Harbor Federation of Women's Clubs v. Nelson

Sharpe, J. This case involves an appeal from the circuit court of Berrien county in an ejectment action. The material facts are not in dispute. Plaintiff was incorporated in February, 1917, by virtue of the authority contained in Act No. 171, Pub. Acts 1903 (see 2 Comp. Laws 1915, § 9054 et seq.). The term of existence of the corporation was 15 years. It was organized for the purpose of bringing “into relations of material helpfulness and cooperation, the various organizations of women of Benton Harbor and vicinity, and to secure united strength and action in promoting the vital interests of the day.” In November, 1923, James Stanley Morton and Carrie Heath Morton, his wife, executed an instrument in the form of a warranty deed running to plaintiff corporation as grantee, which was recorded November 30,1923. It purported to convey the Morton residence; and contained a clause reciting that the premises were to be permanently and exclusively devoted to “memorial, educative and other similar purposes.” The premises were to be known as the ‘ ‘ Josephine Morton Memorial Home. ’ ’ The grantee was to maintain the premises in repair, and insure the buildings. The instrument also contained the following-clause : “The grantors herein reserve the right to occupy, use and enjoy all of said premises and property during- the lives of said grantors, James Stanley Morton and Carrie Heath Morton, and the survivor thereof; *469 that is to say, that no part of this conveyance shall become effective until after the death of the grantors above named. Upon the death of the survivor of said grantors, this instrument shall become immediately effective.” When the above instrument was executed, the Mortons were possessed of considerable wealth, but their finances were gradually depleted until in 1936 they found themselves in severe financial straits. The defendants, Anna and Hilda Nelson, were sisters, who for years had cared for Mr. and Mrs. Morton. They had loaned Mr. Morton money to operate his business and to maintain his home. In 1936, Mr. and Mrs. Morton, being in failing health and realizing that their estate would be small, executed a quitclaim deed to Anna Nelson, grantee. This deed was executed September 10,1936, and purported to deed the Morton home to the said grantee. The deed reserved a life estate to the grantors and contained the following clause: “including any and all reversionary interest of said grantors.” Mr. Morton died October 1,1936, and Mrs. Morton died in December, 1937. The defendants continued to live in the Morton home. During the month of February, 1940, plaintiff corporation brought an ejectment action against defendants. The trial court held that the deed of November 26, 1923, was properely executed and intended to convey the property to plaintiff, but that the charter under which plaintiff corporation existed gave it no right to own and hold real estate. Plaintiff appeals. Of primary interest is the determination of the nature of the instrument executed by the Mortons in 1923. It is the claim of defendants that this instrument, being testamentary in substance, did not convey any present interest and was in effect a will and therefore subject to revocation. *470 In. Leonard v. Leonard, 145 Mich. 563, we stated the rule for making such determination: “Mr. Underhill states in his work on Wills (1st Ed.), §37: “ ‘The courts in determining whether an instrument disposing of real estate is a deed or a will are guided by the following considerations: If the instrument, whatever its form or the mode of its execution, passes a present interest which vests from the time of its execution, it will be a deed, though the possession and enjoyment of the estate granted in it do not accrue to the grantee until a future time. On the other hand, if the instrument, though it is in form a deed, does not convey any vested interest, right, or estate until the death of the person executing it, it will be regarded as testamentary and revokable. ’ “As to the admissibility of parol evidence he says the court— “ ‘May go outside of the writing to ascertain its character; not to supply an intention which cannot be found in it, but to ascertain with what intention the execution of the instrument was accompanied.’ 1 Underhill on Wills (1st Ed.), § 39.” In Moody v. Macomber, 159 Mich. 657 (134 Am. St. Rep. 755), we again stated the rule: “Gardner on Wills (1st Ed.), at page 24, states the rule as follows: “The essential difference between a deed and a will is that a deed must pass a present interest in the property, although the right to possession and, enjoyment may not accrue until some future time,' while an instrument, which passes no interest until after the maker’s death, is a will. * * * Regard must be had to the intention of the maker viewed in the light of the language of the instrument, and the circumstances surrounding the parties and attendant upon its execution’ — citing cases.” *471 Under the rule as above stated the intent of Mr. and Mrs. Morton in executing the instrument becomes of some importance. This intent may be gathered from the instrument itself, if unambiguous, or from the surrounding circumstances and the construction that the parties placed upon the instrument. In the case at bar, delivery of the 1923 instrument was not postponed, but was made promptly and the instrument was duly recorded. Subsequently, plaintiff raised the sum of $10,000 for the purpose of carrying out the conditions of the deed.Moreover, there was never any act upon the part of the grantors to indicate that present title had not been conveyed in 1923 until 1936, when the quitclaim deed was executed in favor of defendant Anna Nelson. The entire record sustains the claim that the parties to the 1923 conveyance considered that a present interest had been conveyed although its enjoyment was postponed until a future time. We, therefore, conclude that the instrument was a deed properly executed and delivered. The next logical step in the solution of the problem before us is the determination -of the right of plaintiff to maintain the action in the instant case. It appears that plaintiff corporation failed to file its annual reports or pay the necessary fees for the years 1935, 1936, 1937, and 1938 until December 4, 1939. Defendants urge that the failure to file the reports and pay the required fees, as provided by statute, voided the charter of plaintiff corporation to the extent that it is without power to maintain an action in ejectment. The trial court held that the failure of plaintiff corporation to file its reports and pay the fees was cured by filing and paying them in 1939, their acceptance by the State of Michigan, and the issuance of a certificate by the corporation and se *472 curities commission to the effect that plaintiff corporation was in good standing on January 1, 1940. It is an established fact that when the deed of November 26, 1923, was executed and delivered, plaintiff corporation was under no disability by reason of failure to file reports and pay the required fees; and that by the provisions of section 64 of the general corporation act of 1931 (Act No. 327, Pub. Acts 1931 [Comp. Laws Supp. 1940, § 10135-64, Stat. Ann. § 21.64]) the corporate existence of plaintiff was given perpetual life. While it is true that failure to file an annual report and pay the required fees suspends the corporate powers of a corporation for profit, yet such failure does not dissolve the corporation. See Bruun v. Cook, 280 Mich. 484; Mathews v. Life Insurance Co. of Detroit, 284 Mich. 352. Assuming that plaintiff’s charter was void on December 4, 1939, as contended by defendants, yet we think plaintiff had the right to institute the present action on February 17, 1940. In John J. Gamalski Hardware, Inc., v. Wayne County Sheriff, 298 Mich. 662 (136 A. L. R. 1155), plaintiff corporation brought a replevin action to recover possession of certain personal pro[oerty. Defendant sheriff who had seized the property moved to dismiss the action on the ground that the corporation had no standing in court because its corporate charter had been voided for failure to pay its annual franchise fees. In discussing this question, we said: “The sole question involved in this appeal is, Can a corporation whose charter has been forfeited for failure to file annual reports, and after the expiration of the three-year limit for winding up its affairs, maintain an action in a court of this *473 State to recover property belonging to it and unlawfully taken from it? * * * ‘ ‘ There is no question in the instant ease but that plaintiff’s default for failure to comply with the provisions of the general corporation act has rendered its charter void. However, we have held a corporation does not cease to exist upon its charter becoming absolutely void; that it still continues a body corporate and remains a legally existing corporation for certain purposes. One of said purposes being, as we have inferentially held, and now hold, is to hold and have possession of its property and to conserve samé, until due proceedings are had, either to cure the default which caused the loss of its charter, or to wind up its affairs in an orderly manner. There are many things it cannot do by reason of the prohibition of the statute; but to hold, protect and repossess its property is not one of the things it cannot do by reason of such prohibitory provisions. It would be doing a great injustice to the right to own and hold property for us to say that the courts of this State are closed to a defaulting corporation to continue the possession of its property and to conserve the same, by repossessing it by replevin from one who has unlawfully obtained and is unlawfully withholding possession thereof from its lawful owner. Bruun v. Cook, 280 Mich. 484; Mathews v. Life Insurance Co. of Detroit, supra; Blake v. American Trust Co., 293 Mich. 618; and Stott v. Stott Realty Co., 288 Mich. 35.” While the above case was a replevin action for the recovery of personal property and the instant case is an ejectment action for the possession of real estate, the principle involved in both actions is the same, the preservation of. the assets of a corporation whose charter was voided for failure to pay its franchise fees. It is next urged that plaintiff corporation has no capacity to own and hold real estate. Plaintiff *474 contends that it has snch right, but that in any event, defendants cannot question plaintiff’s capacity to own real estate. The purpose of the corporation as mentioned in its articles of incorporation makes no mention of owning real estate. We must assume that the right to bring the above action is dependent upon its right to own real estate. In an ejectment action, plaintiff must rely upon the 'strength of its own title; recovery will not be based upon the weakness of defendant’s title. The right of a corporation to own real estate- depends upon the statutes of the State by virtue of which the corporation is incorporated. If such power is not expressly stated in the articles of incorporation, it may be so possessed as a necessary incident of existence or implied in order to carry out the purposes for which the corporation was organized. The capacity of a corporation to acquire and hold real estate is stated in the general corporation act, Act No. 327, § 10, Pub. Acts 1931 (Comp. Laws Supp. 1940, § 10135-10, Stat. Ann. § 21.10): “Every corporation, unless otherwise provided, or inconsistent with the act under which a particular corporation is or shall have been formed, shall have power: * * * “d— to acquire, purchase, hold, and convey real and personal estate and to mortgage or lease any such real and personal estate with or without any of its franchises, corporate of otherwise; the power to hold real and personal estate shall include the power to take the same by gift, devise or bequest.” In our opinion, plaintiff corporation had the implied power to own such real estate as was necessary to carry on its corporate purposes. The ownership of such a “home” as is involved in this case would *475 not be inconsistent with the purposes of plaintiff corporation. Moreover, it is the rule in Michigan that no one but the State may challenge the powers of a corporation. In International Harvester Co. of America v. Eaton Circuit Judge, 163 Mich. 55, 67 (30 L. R. A. [N. S.] 580, Ann. Cas. 1912A, 1022), we said: “The rule that, where a corporation is incompetent by its charter to do an act, a private party cannot raise the question, but the sovereign alone can object, in a direct proceeding instituted for that purpose, applies here.” In 7 Fletcher, Cyc. on Corporations (Perm. Ed.), § 3448, p. 596, it is said: “The rule is often stated that no one but the State can attack the title of a corporation to real property, which rule, stated in other words, is merely that where a transfer of real property is wholly executed on both sides, neither a party to the contract, a stranger, nor any one else than the State can attack the transfer as ultra vires a stranger occupying the same position as a party to the transfer. ’ ’ In Illinois Steel Co. v. Warras, 141 Wis. 119 (123 N. W. 656), that court said: “Inability of a corporation, foreign or domestic, to acquire title to any property cannot be raised by a stranger claiming the property unless, perhaps, such inability results from express statutory prohibition. Such, merely ultra vires acts can be questioned only by persons directly interested in the corporation, or by the State, whose charter and franchises are exceeded or abused.” In the case at bar, defendants are not members of plaintiff corporation and may not challenge its right to own real estate. *476 The judgment of the trial court is reversed, and a judgment in ejectment will be entered in favor of plaintiff, with costs. Boyles, North, and Bushnell, JJ., concurred with Sharpe, J.