McNaughton v. Rockford State Bank

• Citation: 246 N.W. 84,261 Mich. 265
• Decision Date: 03 January 1933
• Docket Number: No. 79.,79.
• Parties: McNAUGHTON v. ROCKFORD STATE BANK.
• Court: Supreme Court of Michigan

261 Mich. 265

246 N.W. 84

McNAUGHTON

v.ROCKFORD STATE BANK.

No. 79.

Supreme Court of Michigan.

Jan. 3, 1933.

Appeal from Circuit Court, Kent County; Willis B. Perkins, Judge.

Suit by Frances McNaughton against the Rockford State Bank. From a judgment in favor of plaintiff, defendant appeals.

Reversed, without new trial.

Argued before the Entire Bench.Smith, Searl & Strawhecker, of Grand Rapids, for appellant.

Dunham, Taylor & Allaben and Linsey, Shivel & Phelps, all of Grand Rapids (Cornelius Wiarda, of Grand Rapids, of counsel), for appellee.

FEAD, J.

Plaintiff brought suit for conversion of moneys, adding the common counts, and had verdict of a jury and judgment. Defendant pleaded the statute of limitation, and its motions for directed verdict and new trial were denied. The principal question is whether the statute of limitation (Comp. Laws 1929, § 13976) was tolled by fraudulent concealment of the cause of action from the knowledge of plaintiff by defendant. Comp. Laws 1929, § 13983.

In 1919, plaintiff began to finance her second husband, Clare McNaughton, with money and credit, in the garage business. His first transaction with defendant was the opening of a personal checking account, with plaintiff's check to him for $500.

On March 10, 1920, McNaughton borrowed $600 from defendant. When the note became due in July, plaintiff signed the renewal with him, and both executed renewals in January, March, June, and August of 1921.

In April, 1920, plaintiff and her husband, on joint note, borrowed $700 from defendant, renewed it in October for six months, and it was marked ‘paid’ and surrendered on January 8, 1921.

Defendant held as collateral 150 shares of Brown Seed Company stock and some United Truck & Equipment Company stock, which it claims was security for loans generally. Plaintiff denied knowledge of the latter stock, and claimed the Brown Seed Company stock was collateral only to the $600 note. She stated she turned it over to her husband ‘to use as he saw fit.’ The certificate was deposited in the bank by McNaughton when the note was given. It ran to plaintiff, and was indorsed by her in pencil in blank.

January 8, 1921, McNaughton sold the Brown Seed Company stock for $1,335, deposited the proceeds to his personal account, paid the $700 note by check, and later checked out the balance in due course. The certificate was delivered by defendant on payment of the price.

McNaughton had other notes, some of which plaintiff executed with him, but the record is not complete as to them. However, it appears that there was a note of $600, executed by both, renewed at intervals until July, 1920, when $200 was paid on it and the balance renewed quarterly to August, 1921, and is still unpaid; that, upon the $600 note, which was last renewed in August, 1921, and to which plaintiff claims the Brown Seed Company stock was collateral, $450 was credited from sale of the truck company stock, and the balance is still unpaid; and that in March, 1921, the parties gave a note for $140, afterwards paid.

McNaughton became bankrupt in December, 1921. Later plaintiff obtained a divorce from him, with property settlement, in which he agreed to pay her $5,000. She claims she advanced him over $14,000. She does not know what bank items were taken into consideration in reaching the settlement. This suit was commenced December 16, 1930, to recover the sale price of the Brown Seed Company stock less the $600 note.

Plaintiff's claim of fraudulent concealment of the cause of action, tolling the statute of limitation, is that, in July or August, 1920, defendant's cashier approached her to sign the stock certificate in ink and told her the note had not been paid; she told him the stock was worth more than the note, and he replied that it would hardly bring enough to pay the note and interest; on her further insisting upon the value of the stock, he agreed to give her any excess on the sale and promised to notify her if there was an excess; she relied upon his promise because her first husband was a banker, was honest, and she thought all bankers could be trusted; she made no inquiries to ascertain the facts and did not discover there had been an excess until October, 1930. The occasion of discovery was not shown, but it appears both she and McNaughton were making inquiries at the time. Defendant wholly denied the claimed conversation, but, under the verdict of the jury, plaintiff's testimony and version must be accepted.

In applying the statute here invoked, regard must be had for the distinction between actions based on fraud or breach of trust (Tompkins v. Hollister, 60 Mich. 470, 27 N. W. 651;Stebbins v. Patterson, 108 Mich. 537, 66 N. W. 484;Allen v. Conklin, 112 Mich. 74, 70 N. W. 339), and those where such misconduct does not...