McKeighan v. Citizens Commercial & Sav. Bank of Flint

• Decision Date: 08 September 1942
• Docket Number: No. 13.,13.
• Parties: McKEIGHAN et al. v. CITIZENS COMMERCIAL & SAVINGS BANK OF FLINT et al.
• Court: Michigan Supreme Court

302 Mich. 666

5 N.W.2d 524

McKEIGHAN et al.

v.CITIZENS COMMERCIAL & SAVINGS BANK OF FLINT et al.

No. 13.

Supreme Court of Michigan.

Sept. 8, 1942.

Suit by John J. McKeighan and another against Citizens Commercial & Savings Bank of Flint and others, to declare a deed executed by plaintiff to named defendant a mortgage and for other relief. From an adverse decree, defendants Hallie Short and Freda Short appeal.

Affirmed.Appeal from Circuit Court, Genesee County; Philip Elliott, judge.

Before the Entire Bench, except WIEST, J.

Joseph & Joseph, of Flint, for defendants Hallie Short and Freda short.

Walter C. Jones & Maurine L. Jones, of Flint, for plaintiffs and appellees.

SHARPE, Justice.

This is a suit to declare a deed executed by John J. McKeighan and wife to the Citizens Commercial and Savings Bank of Flint a mortgage and to set aside a deed of the same property from the bank to Elizabeth Stockton.

Prior to 1926, William McKeighan had purchased 40 acres of land in the city of Flint for $20,000 and had given a mortgage to the vendor for part of the purchase price. In 1926, the mortgage was being foreclosed and at that time the balance due upon the mortgage was approximately $10,000. On April 6, 1936, John J. McKeighan, brother of William McKeighan, and Thomas Stockton borrowed money to pay off the mortgage from the Citizens Commercial and Savings Bank of Flint and executed a note to the bank. A deed to the property was given to John J. McKeighan and wife, who then deeded it to the bank as security for the loan.

After the deed was given to the bank, payments were made to it on the note which was reduced to the sum of $4,600. Thomas Stockton died and on August 7, 1937, Mrs. Stockton paid the bank the balance due on the note out of the proceeds of an insurance policy which had been pledged to the bank to secure the loan. In October 1938, the bank quit-claimed the property to Mrs. Stockton and also assigned the note to her. On November 2, 1939, Mrs. Stockton executed a quit claim deed of the property to defendants Hallie and Freda Short in consideration of the sum of $500. The property was sold for unpaid taxes in May, 1938, and bid in by the State. The State's title became absolute on November 3, 1939, and the property was included in the lists of land to be offered for sale by the State Land Office Board on February 13, 1940.

Plaintiffs John J. McKeighan, Alice McKeighan, his wife, and William McKeighan filed a bill of complaint in the circuit court of Genesee County to restrain the State Land Office Board from issuing a certificate of purchase to any one other than the plaintiffs; they asked that the deed given to the bank be declared a mortgage; that the deed from the bank to Mrs. Stockton be set aside; and that plaintiffs be declared the proper parties to purchase at the so-called scavenger sale to be held February 13, 1940.

Defendants Short filed an answer and cross-bill in which they asked to be decreed the owners of the property subject to all unpaid taxes; or that an accounting be had and the mortgage foreclosed for the balance that might be found due on the same.

The cause came on for trial and the court decreed that John J. McKeighan is the owner of the premises; that he holds the lands as trustee for William McKeighan; that William McKeighan is the proper party to bid or meet the highest bid at the scavenger sale; that upon payment of $500 by plaintiff to defendants Short, they shall execute a deed of the premises to plaintiff John J. McKeighan.

Defendants Hallie and Freda Short are the only appealing parties. They claim that they are bona fide purchasers of the property; that at least, they hold a mortgagees' interest in the property; and that plaintiffs do not come into equity with clean hands.

On the question of appellants being bona fide purchasers, the trial court made the following finding of facts:

‘On November 2, 1939, Hallie Short paid to Mrs. Stockton $500 and received from her a quit claim deed. His purpose in making this purchase was to come within the term ‘owner’ above described, and thus be the one who could meet the highest bid within the 30 days after the public sale, as above provided. At the time he made the purchase he heard from those who were living on the property that the McKeighans still owned it, or had an interest in it. He knew that John McKeighan had platted the property and recorded the plat after the warranty deed from John J. McKeighan and wife to the Citizens Commercial & Savings Bank was executed. He knew enough to put him on his guard that the warranty deed of John J. McKeighan and wife to the Citizens Commercial & Savings Bank was for security only, or in other words was in reality a mortgage, though in form a warranty deed. He testified, ‘I was buying what the record showed, irrespective of what I had learned.’ And he testified that he believed he had a ‘Nuisance’ value.

‘There was some...