Jones v. Hicks, 97

• Decision Date: 04 January 1960
• Docket Number: No. 97,97
• Citation: 358 Mich. 474,100 N.W.2d 243
• Parties: Donald A. JONES, Trustee of the Estate of Albert Charles Lavoy, bankrupt, Plaintiff and Appellant, v. Floyd HICKS and Michigan Surety Company, Defendants and Appellees.
• Court: Michigan Supreme Court

Page 243

100 N.W.2d 243

358 Mich. 474

Donald A. JONES, Trustee of the Estate of Albert Charles Lavoy, bankrupt, Plaintiff and Appellant, v. Floyd HICKS and Michigan Surety Company, Defendants and Appellees.

No. 97.

Supreme Court of Michigan.

Jan. 4, 1960.

Donald A. Jones, in pro. per.

Paul C. Younger, Lansing, for appellee Floyd Hicks.

Clayton F. Jennings, Lansing, for appellee Michigan Surety Co.

Before the Entire Bench.

CARR, Justice.

Plaintiff brought this action as trustee of the estate of Albert Charles LaVoy, bankrupt, to recover damages for alleged fraud. The declaration filed averred that in October, 1956, defendant Hicks was a deputy sheriff of Ingham county. The other defendant was the surety on his statutory bond. A creditor of LaVoy obtained judgment against him in the municipal court of the city of Lansing and writ of execution was placed in the hands of defendant Hicks for levy against the goods and chattels of the judgment debtro. Levy was made on a Ford pickup truck which was duly advertised for sale on October 29, 1956.

The declaration further alleged that the said vehicle was at the time of the sale of the value of approximately $1,100, and that it was sold to a bidder who was acting as the undisclosed agent of defendant Hicks, to whom the truck was transferred on or about December 17, 1956, for the sum of $375, the amount of the bid price at the sale. Paragraph X of the declaration read as follows:

'That this plaintiff elects to affirm the voidable sale to defendant Hicks and to seek damages flowing from the fraud practiced on Albert Charles LaVoy under the provision of Sec. 148 of Chapter XXIII of Act 314 of 1915, as amended (M.S.A. 27.1647) which provides that quintuple damages may be sought from an officer by anyone injured by the fraud of said officer associated with an execution sale conducted by him.'

It was further averred in plaintiff's pleading that the conduct of the execution sale in the manner stated was a fraud on the rights of LaVoy and a breach of the condition of the bond given by defendant Hicks.

Defendants filed their answers to the declaration, denying plaintiff's claim of fraud and denying liability for damages. It was affirmatively asserted by defendants that the sale was properly conducted, that a bid from a third party for the sum of $350 was made, and that the said sum of $375 was the highest offer received. Defendant surety company further claimed that under pertinent provisions of the bankruptcy code plaintiff's declaration did not state a cause of action against said defendant.

The trial of the case before a jury began on March 30, 1959. Counsel then representing plaintiff made an opening statement to the jury as to the nature of the cause of action and the facts that plaintiff would establish and prove. At the conclusion of such statement defendants moved to dismiss, claiming that sufficient facts were not set forth in the opening statement to establish, if proved, the right to recover damages, and that the cause of action set forth in the declaration being based on fraud, plaintiff, as trustee, was not entitled to prosecute it. The trial judge in passing on the motion did not discuss the opening statement of counsel, but concluded that the objection raised to the bringing of the action by the trustee was well-founded. Defendants' motions were in consequence granted, and the following order was entered:

'This cause having come on to be heard and after the jury was sworn and the opening statement made by the counsel for the plaintiff, the defendants, by their counsel, moved for an order of dismissal for the reason that the declaration and the opening statement did not state a cause of action and that the cause of action sounded in fraud and under the bankruptcy act a cause of action based on fraud could not be transferred or assigned to the trustee or sued upon by the trustee in bankruptcy.

'After listening to argument of counsel and the Court being fully advised in the premises, upon the mortion of Paul C. Younger and Clayton F. Jennings, attorneys for the defendants.

'It is ordered, that the above cause shall be and is hereby dismissed with prejudice as to the plaintiff in the above cause.'

From such order plaintiff has appealed.

Was the trial court in error in holding that LaVoy's cause of action for damages based on fraud, if such there was, did not pass by assignment to the trustee in bankruptcy? Such question must be determined with reference to the law of this State relating to the matter. In Cochran Timber Co. v. Fisher, 190 Mich. 478, 157 N.W. 282, 283, 4 A.L.R. 9, it was declared that:

'The general rule is well established and has been often recognized by this court in varying language that a right of action for fraud is personal and not assignable.'

In support of the statement quoted several prior decisions of like import were cited, including Lewis v. Rice, 61 Mich. 97, 27 N.W. 867; Stebbins v. Dean, 82 Mich. 385, 46 N.W. 778; Smith v. Thompson, 94 Mich. 381, 54 N.W. 168. If, as claimed, the execution sale was fraudulently conducted by defendant Hicks, the judgment debtor, LaVoy, might have questioned it by appropriate action. It does not appear that he had done so. The question as to his present right to bring such an action is not before us. At the time the bankruptcy proceeding was instituted no action was pending to recover the pickup truck, or to recover damages for alleged fraud. The title acquired at the sale by the party whose bid was accepted, and subsequently by defendant Hicks, was not void but voidable, assuming the existence of the fraud claimed. Cochran Timber Co. v. Fisher, supra; Vanderlinde v. Bankers' Trust Co., 270 Mich. 599, 604, 259 N.W. 337.

It is suggested that if LaVoy had the right to elect whether to pursue the property or seek damages such right passed to the plaintiff trustee by operation of law. In stating in his declaration that he elected to affirm the voidable sale to Hicks and to seek damages under the statute (C.L.1948, § 623.148 [Stat.Ann. § 27.1647]), plaintiff recognized the voidable title of defendant Hicks and proceeded on the assumption that he was entitled to elect as to the remedy to be pursued. However, if LaVoy had affirmed the sale it is apparent that the right to sue for damages would not have passed to plaintiff. The practical situation is that if the right of election devolved on the trustee in bankruptcy, entitling him to sue for damages, such right passed to him by assignment. Any such claim is clearly at variance with the long recognized rule in this State that an action for damages for fraud may not be prosecuted by an assignee thereof.

Attention has been called to the language found in certain prior decisions, among which is Sweet v. Converse, 88 Mich. 1, 49 N.W. 899, 901. There the plaintiff filed a judgment creditor's bill to reach assets in the hands of an alleged fraudulent holder. The assets sought to be reached were tangible personal property claimed to have been transferred in such manner as to operate as a fraud upon certain creditors. In discussing the situation it was said:

'All of the cases cited concede that the rule contended for, that a right of action for fraud is not assignable, has no application to an assignment of something which is in itself tangible; capable of delivery; involving a right of property. In such case, the right to whatever remedy the assignor has follows the assignment. Here valid judgments were assigned to complainant. They would have survived to the personal representatives of the assignors. Complainant does not set up a right acquired by assignment from the Newaygo Manufacturing Company. It has nothing to assign but a naked right to bring suit. Complainant may avail himself of any remedy open to his assignors; nor does the fact that he, before these judgments were assigned to him, proved up, in the foreclosure proceeding, a claim then hled by him, which was declared to be secured by said mortgage, affect this right.'

The language quoted must be construed in the light of the controversy then before the Court. The case was not an action for damages for fraud but, rather, one to reach tangible property. The plaintiff had acquired judgments that he was entitled to enforce by reaching such assets, if possible. It must be borne in mind that in the case now before us the plaintiff is not seeking to recover the possession of the pickup truck. He has undertaken to waive his right to pursue the property and is, in fact, seeking to recover on the basis of a nonassignable cause of action.

In Howd v. Breckenridge, 97 Mich. 65, 56 N.W. 221, the action was brought to reach property claimed to have been conveyed in fraud of creditors. The Court, as in Sweet v. Converse, supra, recognized the general rule that a right of action for fraud is not assignable, and also pointed out that such rule would not prevent showing fraud incidentally as the basis for enforcing an assignable claim to tangible assets. Had an action been brought by LaVoy, or by the plaintiff trustee, to recover possession of the truck, the alleged fraud at the execution sale might, of course, have been shown, but the fact remains that such form of action was not adopted.

Consistent with the foregoing decisions is Reeder Bros. Shoe Co. v. Prylinski, 102 Mich. 468, 60 N.W. 969. That was an action in replevin to recover a stock of merchandise. The claim was raised by defendant that plaintiff could not maintain the action because it, as assignee, could not sue for fraud and deceit. In answering such objection it was pointed out by the Court that such was not the form of action involved, that the object sought to be attained was the recovery of property, and that the transaction did not involve 'an assignment of a right of action for the fraud, but the right of the assignor to recover the specific property.' These decisions and others of like import may not be regarded as...