Barber v. Kolowich

• Decision Date: 10 November 1937
• Docket Number: No. 98.,98.
• Citation: 275 N.W. 797,282 Mich. 143
• Parties: BARBER v. KOLOWICH et al.
• Court: Michigan Supreme Court

282 Mich. 143

275 N.W. 797

BARBER

v.KOLOWICH et al.

No. 98.

Supreme Court of Michigan.

Nov. 10, 1937.

Action by Everett W. Barber, receiver of the State Bank of America, against George J. Kolowich and others. From a judgment for plaintiffs, named defendant appeals.

Reversed and remanded. Appeal from Circuit Court, Wayne County; Fred S. Lamb, judge.

Argued before the Entire Bench.

Savery, McKenzie & Hamilton, of Detroit, for appellant George J. kolowich.

Neill E. Graham and and Cook, Smith, Jacobs & Beake, all of Detroit, for appellee.

FEAD, Chief Justice.

The declaration is in trespass on the case. On trial before the court plaintiff had judgment against defendants George Kolowich and Henry Fedeson, and the case was dismissed as to the other defendants. Kolowich appeals.

In 1926, Kolowich was very extensively engaged in developing subdivisions, building homes, and selling lots, as well as in other activities. He arranged with Fedeson, a building contractor, to erect 20 houses in the Irene Kolowich subdivision in the city of Detroit. Fedeson was to construct the houses on a percentage basis, the precise terms of which are in dispute but are of little consequence. After a time, and before the houses were completed, Kolowich and Fedeson had some dissension, and Kolowich finished the construction himself. After beginning the erection of the houses with other funds, Kolowich desired to borrow money on real estate mortgages to finish the work.

Kolowich owned 400 shares of stock in the State Bank of America, and was a member of the board of directors. His father, Adolph Kolowich, onwed 100 shares, and was vice president and appraiser of the bank. The cashier was Adolph E. Lark.

Kolowich obtained loans from the Bank of Detroit in the sum of $3,500 per lot on five lots. The appraisers for the Bank of Detroit valued the lots and buildings at $7,000 per lot description. Kolowich desired to obtain loans of $4,000 per lot from the State Bank of America, and he discussed the matter with the loan committee of the bank. Adolph Kolowich appraised each lot, with improvements, at slightly in excess of $8,000, thereby qualifying the loans for the savings department of the bank.

Kolowich testified that he did not wish to appear as borrowed and mortgagor, because he did not want his name connected with the subdivision at the time on account of its effect on other properties he was selling. It was handled as follows: Kolowich and his wife were vendees in a land contract covering the 15 lots; warranty deeds were executed by Hecker and wife, vendors in the land contract, and Kolowich and wife, vendees, to Henry and Eleanore Fedeson, in groups of 5 lots on May 10, June 5, and June 29, 1926, respectively; Fedeson made written applications to the State Bank of America for the mortgage loans; they were approved by the loan committee; thereupon Fedeson and wife executed real estate mortgages to the bank in the sum of $4,000 per lot in three transactions, each covering 5 lots and occurring, respectively, on May 10, June 9, and July 14.

The board of directors approved loans at its meeting on July 8, but the record is not plain as to the mortgages covered by such action. Fedeson and wife had no interest in the premises, except in connection with the construction on a percentage basis. They executed back to Kolowich and wife a quitclaim deed of the 15 lots on June 2, 1926. Kolowich did not record the deed until November 21, 1927.

The proceeds of the loans were paid by the bank to Kolowich. Kolowich established a Henry Fedeson building account in the bank, and deposited money therein, some or mostly from other sources than the loans. The money was withdrawn by Fedeson to pay the cost of construction of the houses.

The attorney for the bank approved the abstract title as being in Fedeson. The president of the bank and members of the loan committee knew that Kolowich was interested in the loans, but, apparently, they were not informed of the precise method in which conveyances had been made. The president testified that the loans had greater strength because of Kolowich's interest, but they had been made strictly upon the basis of value of the security; the premises being deemed ample to fully safeguard the bank. Kolowich said he discussed the transaction with other directors of the bank. There was no testimony that any officer or director was ignorant of Kolowich's interest in the transaction.

Plaintiff's principal...