Lumber Village, Inc. v. Siegler, Docket No. 67887

• Decision Date: 19 October 1984
• Docket Number: Docket No. 67887
• Citation: 135 Mich.App. 685,355 N.W.2d 654
• Parties: LUMBER VILLAGE, INC., a Michigan corporation, Plaintiff-Appellant, v. Thomas S. SIEGLER and Priscilla J. Siegler, Defendants, Third-Party Plaintiffs. and L.M. BEAMAN CORPORATION, a Michigan corporation, and Larry M. Beaman and Dorothy E. Beaman, jointly and severally, Defendants, v. BYRON CENTER STATE BANK, a Michigan corporation, Third-Party Defendant-Appellee. and ATLAS FARM & INDUSTRIAL BUILDING COMPANY, INC., a Michigan corporation, Plaintiff, v. Thomas and Priscilla SIEGLER, Defendants. 135 Mich.App. 685, 355 N.W.2d 654
• Court: Court of Appeal of Michigan — District of US

Page 654

355 N.W.2d 654

LUMBER VILLAGE, INC., a Michigan corporation, Plaintiff-Appellant, v. Thomas S. SIEGLER and Priscilla J. Siegler, Defendants, Third-Party Plaintiffs. and L.M. BEAMAN CORPORATION, a Michigan corporation, and Larry

M. Beaman and Dorothy E. Beaman, jointly and severally, Defendants, v. BYRON CENTER STATE BANK, a Michigan corporation, Third-Party

Defendant-Appellee.

and

ATLAS FARM & INDUSTRIAL BUILDING COMPANY, INC., a Michigan

corporation, Plaintiff, v. Thomas and Priscilla SIEGLER, Defendants.

Docket No. 67887.

135 Mich.App. 685, 355 N.W.2d 654

Court of Appeals of Michigan.

Submitted May 3, 1984.

Decided June 28, 1984.

Released for Publication Oct. 19, 1984.

[135 MICHAPP 688] Carruthers & Halverson Associates by James G. Halverson, East Lansing, for plaintiff-appellant.

Freihofer, Oosterhouse & DeBoer, P.C. by Robert A. Buchanan and Clifford H. Bloom, Grand Rapids, for Byron Center State Bank.

Before BEASLEY, P.J., and ALLEN and BREIGHNER, ^* JJ.

ALLEN, Judge.

Plaintiff, Lumber Village, Inc., appeals as of right from a September 22, 1982, order of accelerated judgment in favor of third-party defendant, Byron Center State Bank, pursuant to GCR [135 MICHAPP 689] 1963, 116.1(5). Issue III raised on appeal is of first impression in Michigan.

In 1977, Thomas S. Siegler and his wife, Priscilla, undertook to have built for them a pole barn building for use in their horse stable operation business. For this purpose they employed Larry M. Beaman and L.M. Beaman Construction Corporation as the builder and secured financing for construction of the barn by a mortgage for $68,000 from the Byron Center State Bank. Plaintiff furnished building materials for the barn project, the bulk being delivered between September 27, 1977, and October 26, 1977, with smaller deliveries as late as January, 1978. Two money order checks totaling $30,250 were issued by the Byron Center State Bank to L.M. Beaman and Lumber Village, Inc. in September, 1977. The purpose of making the money orders payable to both parties was to avoid creation of a mechanics lien in favor of plaintiff.

The first check for $15,250 was dated September 22, 1977, and was picked up by Mr. Siegler, who gave the check to Beaman. Unbeknownst to either the bank or the Sieglers, and without the authorization of plaintiff, Beaman endorsed the name of plaintiff and deposited the check in his account at the Bank of Lansing on September 26, 1977. The second check, dated September 30, 1977, and in the amount of $15,000 was similarly endorsed by Beaman and deposited in his account on October 3 1977. The first check was paid by Byron Center State Bank on September 27, 1977, and the second check was paid by the bank on October 5, 1977.

Plaintiff did not receive payment from Beaman and, in April, 1978, recorded a mechanic's lien on the Siegler property. Mr. Siegler first became aware that the checks had not been properly [135 MICHAPP 690] negotiated when he was served with notice of the lien on April 12, 1978. Mr. Siegler immediately notified bank, and this appears to be the first time that the bank or Siegler became aware that the instruments had been paid over forged endorsements. In March, 1979, Lumber Village filed a contract action against Beaman and sought to foreclose the mechanic's lien on the Siegler property. After considerable difficulty, service was finally obtained on Beaman, and a default judgment against him was entered in May, 1980.

In February, 1981, an order was entered permitting the Sieglers to file a third-party complaint adding the Byron Center State Bank as an additional party-defendant. Though the bank and the Sieglers knew of the forgery and that Lumber Village was named as a payee on the money orders, this information had never been communicated to Lumber Village. The bank's failure to inform plaintiff of the forgery is the subject of the instant appeal. In March, 1981, the Sieglers filed a third-party complaint against the bank. This was the first time Lumber Village learned of the forgery. In April, 1981, the Sieglers filed bankruptcy, and the cause was removed to the United States Bankruptcy Court but was remanded July 28, 1981. In August, 1981, Lumber Village, Inc. moved for leave to file a third-party complaint against Byron Center State Bank, and, by stipulation and order, a third-party complaint against the bank was filed in December, 1981.

Third-party defendant bank pled the three-year statute of limitations for forged instruments, M.C.L. Sec. 600.5805; M.S.A. Sec. 27A.5805, as an affirmative defense and, on June 28, 1982, moved for accelerated judgment. In a written opinion dated September 22, 1982, the trial court made the following findings:

[135 MICHAPP 691] 1. For purposes of the motion, it was conceded that Lumber Village, Inc. did not become aware of the checks or the forgery until after the Sieglers filed their cross-complaint against the bank around April of 1981.

2. Based on Continental Casualty Co. v. Huron Valley National Bank, 85 Mich.App. 319, 271 N.W.2d 218 (1978), the three year statute of limitations applies to the alleged conversion and such statute began to run in September-October 1977, when the checks were paid on a forged endorsement and not in March 1981 when the plaintiff discovered the conversion or forgery.

3. Estoppel from asserting the defense of the running of the statute of limitations is unavailable in Michigan.

4. Estoppel and/or fraudulent concealment sufficient to toll the running of the statute of limitations requires active misconduct or affirmative acts or misrepresentations and mere silence is inadequate.

5. A separate or independent cause of action for silent fraud or fraudulent concealment requires detrimental reliance and, since Lumber Village, Inc. was unaware of the instruments, it could not have relied thereon to its detriment in any way.

The parties frame the issues differently both in content and number. As is our practice in such instances, we have rearranged and reworded the issues as follows:

I. WHETHER CONSTITUTIONAL DUE PROCESS REQUIRES THAT A STATUTORY PERIOD OF LIMITATIONS BEGIN TO RUN ON THE DATE A CAUSE OF ACTION IS DISCOVERED RATHER THAN THE DATE THE WRONG OCCURRED.

II. WHETHER DEFENDANT FRAUDULENTLY CONCEALED THE EXISTENCE OF A CAUSE OF ACTION SO AS TO PREVENT [135 MICHAPP 692] THE STATUTE OF LIMITATIONS FROM RUNNING

UNTIL TWO YEARS AFTER DISCOVERING THE ACTION.

III. WHETHER DEFENDANT SHOULD BE ESTOPPED FROM ASSERTING THE STATUTE OF LIMITATIONS AS A DEFENSE TO PLAINTIFF'S CAUSE OF ACTION.

IV. WHETHER PLAINTIFF SUFFICIENTLY STATED A CAUSE OF ACTION FOR SILENT FRAUD TO ALLOW THE CASE TO GO TO THE TRIER OF FACT ON THE MERITS.

I.

Initially, plaintiff presents the constitutional argument that due process requires that the statutory period of limitation starts running from the day of discovery by plaintiff of the cause of action, rather than from the date that the cause of action accrued. To hold otherwise, argues plaintiff, would result in the extinguishing of a payee's right to bring suit before the payee discovered that a cause of action existed. The trial court's opinion did not address the constitutional challenge, and nothing in the file suggests that the constitutional issue was raised at the trial level. The general rule of law is that constitutional challenges to a statute may not be raised for the first time on appeal. Brookdale Cemetery Ass'n v. Lewis, 342 Mich. 14, 18, 69 N.W.2d 176 (1955); Petterman v. Haverhill Farms, Inc., 125 Mich.App. 30, 33, 335 N.W.2d 710 (1983), Michigan Carousel, Inc. v. Cecil, 66 Mich.App. 248, 251, 238 N.W.2d 825 (1975).

Moreover, federal decisions find no violation of due process under the federal constitution even if the statute in question extinguishes a cause of action before it is discovered to exist. Adair v. Koppers Co., Inc., 541 F.Supp. 1120, 1128 (N.D.Ohio, 1982) (Ohio's ten year statute of limitations for [135 MICHAPP 693] actions against architects and engineers); Jewson v. Mayo Clinic, 691 F.2d 405, 411-412 (CA 8, 1982) (two-year limitation statute starts to run when treatment ceases rather than when injury is discovered); Mathis v. Eli Lilly & Co., 719 F.2d 134, 141 (CA 6, 1983); (Tennessee's ten-year limitation period for filing tort claim where injury was not discovered until 25 years after exposure); Duke Power Co. v. Environmental Study Group, Inc., 438 U.S. 59, 82-93, 98 S.Ct. 2620, 2635-2640, 57 L.Ed.2d 595 (1978). (Price-Anderson Act limiting liability of operator of nuclear plant arising from nuclear accident).

Citing Dyke v. Richard, 390 Mich. 739, 213 N.W.2d 185 (1973), plaintiff argues that, if not under the federal constitution, at least under the Michigan constitution, a statute of limitations is unreasonable and therefore constitutionally flawed where it extinguishes a cause of action before the injured party knew or could have known of the cause of action. ¹ However, this Court ruled in Szlinis v. Moulded Fiber Glass Cos., Inc., 80 Mich.App. 55, 66, 263 N.W.2d 282 (1977), that Dyke "restricted this approach to malpractice cases". More on point, for purposes of the instant case, is the Michigan Supreme Court's ruling seven years after Dyke in O'Brien v. Hazelet & Erdal, 410 Mich. 1, 299 N.W.2d 336 (1980). That case involved suits by various plaintiffs against state licensed architects or contractors for injuries arising out of defective or unsafe improvements to buildings. Citing Dyke, the injured parties claimed that the six-year period of limitation violated due process because it barred a cause of action before the injured parties [135 MICHAPP 694] could reasonably know that a defect existed. ² In a unanimous opinion, the six-year period of limitation was upheld. Since a review of relevant federal and state law discloses that neither the federal nor state constitution mandates that a "discovery" rule be utilized when applying a statutory period of limitation, we find Issue I...