Am. Sur. Co. v. McKiearnan

• Decision Date: 23 February 1943
• Docket Number: No. 109.,109.
• Citation: 304 Mich. 322,8 N.W.2d 82
• Parties: AMERICAN SURETY CO. v. McKIEARNAN.
• Court: Michigan Supreme Court

304 Mich. 322

8 N.W.2d 82

AMERICAN SURETY CO.

v.McKIEARNAN.

No. 109.

Supreme Court of Michigan.

Feb. 23, 1943.

Action on a note by American Surety Company against Charles R. McKiearnan. Judgment for plaintiff, and defendant appeals.

Affirmed.Appeal from Circuit Court, Wayne County; Joseph A. Moynihan, judge.

Before the Entire Bench.

Mason, Davidson & Mansfield, of Detroit (Walter A. Mansfield, of Detroit, of counsel), for plaintiff-appellee.

George A. Gray, of Detroit (Herbert E. Munro, of Detroit, of counsel), for defendant-appellant.

NORTH, Justice.

Defendant admits in the stipulation of facts that while acting as an agent of the American Express Company, either he, his agents or employees, issued money orders between November 6, 1934, and November 12, 1934, totaling $768.96 for which defendant did not account to the express company, although the amount of such indebtedness was subsequently reduced to $517.96. But it is not admitted in the stipulation that such indebtedness was an act of ‘wrongful abstraction’ rather than a mere debt. Plaintiff had executed a fidelity bond to the American Express Company on behalf of defendant and it paid this indebtedness to the express company. Thereafter defendant executed a promissory note dated December 13, 1935, for $617.96 payable to plaintiff, on which note defendant later made a payment of $100. July 17, 1936, defendant filed a voluntary petition to be adjudicated a bankrupt. Plaintiff herein appeared in the bankruptcy proceedings and contested defendant's right to secure a discharge of this particular item on the ground that defendant's note represented a sum that defendant had embezzled. Upon a hearing before the referee, he found: ‘It is admitted that the bankrupt embezzled certain funds (represented by the note) which were landed by the said surety company’; but the referee held: ‘That the objecting creditor in taking the note waived any tort that was committed by the bankrupt’; and recommended discharge of the bankrupt. The judge presiding in the bankruptcy court confirmed the referee's report; and on the same day (September 13, 1937) entered the order of final discharge. However, this final order of discharge contained the following: ‘Excepting such debts as are by law excepted from the operation of a discharge in bankruptcy.’

Plaintiff brought this suit January 26, 1940, charging that the indebtedness grew out of a wilful misappropriation of funds, that defendant had promised to repay the amount misappropriated but failed to do so. Defendant answered, denying any wrong-doing, and pleaded discharge in bankruptcy and the statute of limitations. The trial court, sitting without a jury, entered judgment for plaintiff. Defendant has appealed.

Two questions of fact are presented. (1) Did defendant's obligation arise from a wilful and malicious injury to the person or property of another so that a discharge in bankruptcy would not bar this claim of plaintiff under section 17, sub. a(2) of the Federal Bankruptcy Act, 11 U.S.C.A. § 35, sub. a(2)? And (2) Did plaintiff accept the note as payment for the balance of the indebtedness or only as evidence of the indebtedness?

Both the referee in bankruptcy and the circuit judge found that the money involved in this suit was embezzled by defendant. This finding is abundantly supported by the testimony. While the referee found that the note in suit was given in payment of defendant's indebtedness and thereby the tort was waived, to the contrary the circuit judge determined that the note was merely given as evidence of the indebtedness, fixing the amount thereof. The record sustains the conclusion reached by the trial judge. Plaintiff's agent testified he made the purpose of the note clear to defendant, i. e. that the note was taken only to show what the indebtedness was and that in taking the note, he could not waive and criminal action against defendant. On this controversial phase of the record, defendant's testimony was not at all clear or convincing; and in substance about all he could remember concerning the circumstances surrounding the execution of the note was that he signed it. Because of the above-noted circumstances, we are not in accord with defendant's contention that our decision in MacDonald v. Henry Hornblower & Weeks, 268 Mich. 626, 256 N.W. 572, is controlling in his favor. The facts and circumstances involved in the cited case clearly distinguish it from the instant case. We are in accord with the holding of the circuit judge that defendant's note was not taken in satisfaction of the debt, but instead merely constituted...