Meyer v. Walker Land Reclamation, Inc.

• Decision Date: 04 February 1981
• Docket Number: Docket No. 48657
• Parties: Charles MEYER, Plaintiff-Appellant, v. WALKER LAND RECLAMATION, INC., Defendant-Appellee. 103 Mich.App. 526, 302 N.W.2d 906
• Court: Court of Appeal of Michigan — District of US

Page 906

302 N.W.2d 906

Charles MEYER, Plaintiff-Appellant, v. WALKER LAND RECLAMATION, INC., Defendant-Appellee.

Docket No. 48657.

103 Mich.App. 526, 302 N.W.2d 906

Court of Appeals of Michigan.

Feb. 4, 1981.

Released for Publication March 23, 1981.

[103 MICHAPP 528] William G. Boyer, Sterling Heights, for plaintiff-appellant.

William J. McGrail, Jr., Utica, for defendant-appellee.

Before BRONSON, P. J., and J. H. GILLIS and CYNAR, JJ.

J. H. GILLIS, Judge.

Plaintiff appeals the lower court's entry of orders dismissing his complaint and entering default judgment on defendant's counterclaim.

Between 1956 and 1969, plaintiff owned almost 99% of the stock in defendant corporation. In 1969, he sold off enough of the corporate stock to leave him with a 30% interest. A part of this transaction involved a loan of $6,667 to the corporation.

On July 16, 1974, plaintiff filed suit seeking return of $4,726.26 still owing on the loan. In its answer, defendant admitted that this amount was indeed outstanding, but defendant denied that it was indebted to plaintiff for any sum of money. The basis for this denial was set forth in the counterclaim; to-wit, that plaintiff had, while employed as manager of defendant after 1969, "intentionally converted and kept for his own use various and numerous monies belonging to the corporation as receipts and/or income".

Plaintiff was deposed on August 20, 1975, upon notice from defendant. In his deposition testimony, plaintiff stated the defendant's income was derived [103 MICHAPP 529] mainly from money paid by corporations and individuals who wished to dump solid waste at defendant's landfill. After the 1969 stock transaction, plaintiff managed the landfill, accepting cash and checks in payment for the privilege of dumping solid waste. Of the money he received, a portion was deposited in the corporate bank account. The remainder, mostly cash, was "used for corporate expenditures".

An integral part of processing the money through the corporate structure entailed turning in copies of receipts given to customers. However, plaintiff did not forward copies of all receipts. Rather, he testified that he did not forward receipts from the cash transactions which "were used for corporate expenditures". When defense counsel asked what the corporate expenditures were, plaintiff refused to answer on the ground that it might incriminate him.

Resuming the dialogue between the plaintiff and defense counsel, plaintiff testified that Mitchell Foster orally gave him the authority to divert the money during a conversation in the fall of 1969. On the basis of the privilege against self-incrimination, however, plaintiff refused to divulge the contents of that conversation. The privilege was also invoked as to (1) why he converted checks payable to the corporation into cash via a checking account in the assumed name of a business he set up; (2) why another employee who collected cash receipts at the landfill turned the money over to plaintiff; (3) where the diverted money went; and (4) the names of the companies to whom plaintiff might have paid the cash. Plaintiff did clearly state, however, that he did not use the cash for personal purposes, and that he only converted $4,815 between 1969 and 1973.

Subsequent to the August 20, 1975, deposition, [103 MICHAPP 530] defendant moved for an order to compel answers or enter default. On November 10, 1975, the motion was denied, but, on rehearing, the trial court granted the motion on the basis that (1) no possible answer could have incriminated plaintiff, given that he stated that the money was used for corporate expenditures: "If in fact the monies were used properly, which is Meyer's testimony, how could answers then incriminate?"; and (2) plaintiff's testimony as to "corporate receipts and disbursements precludes (him) from now refusing to answer inquiries that naturally flow from the prior answers". By order dated July 13, 1976, plaintiff was ordered to answer the questions previously put to him as to which he had pled the privilege, and any questions prompted by those answers.

At the subsequent deposition, on August 9, 1976, the first substantive question asked of plaintiff was what the corporate expenditures were. Plaintiff's attorney immediately objected on the basis that the question and answer would be irrelevant. Further, he stated that all of the questions on which plaintiff previously pled the privilege against self-incrimination would also be irrelevant. Plaintiff confirmed the refusal to answer on the sole basis of irrelevancy, not the privilege against self-incrimination.

On December 8, 1976, pursuant to defendant's motion, an order was entered dismissing plaintiff's complaint with prejudice and placing plaintiff in default on defendant's counterclaim.

On November 13, 1979, default judgment was entered. Damages were determined on the basis of evidence presented solely by defendant at a hearing at which the court denied plaintiff or his attorney any right of participation. Defendant was awarded $30,391 damages plus $10,700.06 interest and $253.60 taxable costs, for a total of $41,344.66.

[103 MICHAPP 531] On appeal, plaintiff asserts three claims of error. The first argues that the trial court erred in ordering plaintiff to answer the questions on which he pled the privilege against self-incrimination. A second assertion of error is that the trial court improperly dismissed plaintiff's complaint and entered a default on defendant's counterclaim. Finally, plaintiff claims that the trial court erred in denying plaintiff the right to participate at the hearing to establish defendant's damages.

I

In considering whether plaintiff properly invoked the privilege against self-incrimination at the deposition, we must first determine whether the answers to the questions might have tended to incriminate plaintiff. In re Vickers, 371 Mich. 114, 117, 123 N.W.2d 253 (1963).

The trial court in this case determined that no answer plaintiff might give could incriminate him. This determination was incorrect.

Plaintiff testified at the first deposition that he used the diverted cash for corporate expenditures, not for personal purposes. However, he never claimed that such expenditures were legal. Bearing in mind that plaintiff managed a sanitary landfill, we find that the cash could have been used to pay off government officials in an effort to avoid full compliance with state law. See, M.C.L. § 325.298; M.S.A. § 14.435(8) which provided that a violation of M.C.L. § 325.291 et seq.; M.S.A. § 14.435(1) et seq. (the act regarding landfills), is a misdemeanor. ¹

[103 MICHAPP 532] Our conclusion that plaintiff could have incriminated himself by answering the questions to which he objected is further supported by a statement made by his attorney at the November 22, 1976, hearing on defendant's motion for dismissal and default:

"(Plaintiff) indicated that they were for corporate purposes when they asked who the payments were made to (,) and I remind you this is a landfill operation wherein there, as we suggested on previous occasions, (have) been some illegal payments made (,) and he refused to testify."

The next question we must consider is whether plaintiff waived the right to invoke the privilege against self-incrimination because he freely testified that he had diverted money from the corporation. The trial court found that this testimony obligated plaintiff to answer "inquiries that naturally flow from the prior answers".

The question of waiver turns first upon whether the witness is voluntary or involuntary. Where a witness voluntarily testifies, he may not claim the privilege on matters put into issue by his own testimony. Brown v. United States, 356 U.S. 148, 78 S.Ct. 622, 2 L.Ed.2d 589 (1958); Foster v. People, 18 Mich. 266, 276 (1869). However, when the witness testifies involuntarily, he "has no occasion to invoke the privilege against self-incrimination until testimony sought to be elicited will in fact tend to incriminate". Brown, supra, 356 U.S. at 155, 78 S.Ct. at 626. The point at which the privilege may be invoked by an involuntary witness is identified by determining whether the evidence up to that point amounted to an admission of guilt or furnished clear proof of crime. Arndstein v. McCarthy, 254 U.S. 71, 72, 41 S.Ct. 26, 65 L.Ed. 138 (1920); McCarthy v. Arndstein, [103 MICHAPP 533] 262 U.S. 355, 358, 43 S.Ct. 562, 67 L.Ed. 1023 (1923). Further, even if prior evidence is incriminating, we must still determine whether the next questions asked the involuntary witness "presented a reasonable danger of further crimination in light of all the circumstances, including any previous disclosures". Rogers v. United States, 340 U.S. 367, 374, 71 S.Ct. 438, 95 L.Ed. 344, 19 A.L.R.2d 378 (1951), reh. den. 341 U.S. 912, 71 S.Ct. 619, 95 L.Ed. 1348 (1951).

The question whether a party is a voluntary or involuntary witness at a deposition has not been decided in Michigan. In Phelps Dodge Corp. v. Superior Court of Cochise County, 7 Ariz.App. 277, 438 P.2d 424 (1968), however, the Arizona Court of Appeals considered the issue and ruled as follows:

"We do not believe Lederman can be classified as a 'voluntary witness.' His deposition indicates it was taken 'pursuant to notice.' A litigant in a civil action is subject to having his deposition taken in accordance with Rule 26, Rules of Civil Procedure, and he is subject to sanctions if he fails to appear at the designated time for this purpose. Rule 37(d), R.Civ.P., 16 A.R.S.; and see American Title & Trust Co. v. Hughes, 4 Ariz.App. 341, 420 P.2d 584 (1966); O'Donnell v. Breuninger, 9 F.R.D. 245, 247 (1949)." 7 Ariz.App. at 283, 438 P.2d 424.

A similar conclusion may be made here. GCR 1963, 305.1 states that:

"Service on a party, or his attorney, of notice of the taking of the deposition of a party * * * is sufficient to require the appearance of the deponent and a subpoena need not be...