Monroe State Sav. Bank v. Orloff

• Decision Date: 27 October 1925
• Docket Number: No. 128.,128.
• Citation: 205 N.W. 596,232 Mich. 486
• Parties: MONROE STATE SAV. BANK v. ORLOFF.
• Court: Michigan Supreme Court

232 Mich. 486

205 N.W. 596

MONROE STATE SAV. BANK

v.ORLOFF.

No. 128.

Supreme Court of Michigan.

Oct. 27, 1925.

Error to Circuit Court, Wayne County; Ray Hart, Judge.

Suit by the Monroe State Savings Bank against Julia Stott Orloff. Judgment for plaintiff, and defendant brings error. Affirmed.

Argued before McDONALD, C. J., and CLARK, BIRD, SHARPE, MOORE, STEERE, FELLOWS, and WIEST, JJ.

Bird, Moore, and Wiest, JJ., dissenting.

Robert M. Brownson, of Detroit, for appellant.

Edgar G. Gordon, of Monroe, for appellee.

SHARPE, J.

On June 11, 1920, plaintiff began suit by attachment in the Monroe circuit court to enforce collection of a note held by it, then past due, executed by the Detroit Transportation Truck Company, payment of which had been guaranteed by L. B. Orloff, the husband of defendant. The sheriff, acting under the writ, seized a considerable amount of the property of the transportation company and took possession of its plant. The defendant was a stockholder in the company. At one time she had been a director. She was the owner of a very considerable amount of property. Her husband was also interested financially in the company.

At the suggestion of defendant, a conference was held in the office of Thomas Payne, her personal attorney, on December 9, 1920, for the purpose of attempting to adjust plaintiff's claim against the transportation company, and thus secure the release of the attachment. Mr. and Mrs. Orloff, Mr. Payne, and representatives of the plaintiff were present. It resulted in an arrangement by which the defendant executed and caused to be delivered to the plaintiff her personal note, due in 60 days, for the amount due the plaintiff from the transportation company. The transportation company note was afterwards sent to her, but stamped ‘Paid.’ The attachment was released. The note signed by defendant was renewed by her on February 7, March 9, and May 8, 1921; the interest due at the time of each renewal having been paid by her. Later in 1921 the transportation company went into bankruptcy. On December 28th the defendant filed a claim against the bankrupt for the amount of her outstanding note held by plaintiff and interest thereon. In the proof attached thereto, verified by her, she stated that the bankrupt was ‘justly and truly indebted’ to her in the amount of the note referred to in the claim filed ‘for money advanced by claimant for the bankrupt’; that there were no set-offs or counterclaims, and ‘that said account became due and payable on the 8th day of August, A. D. 1921.’ (This was the date on which the last renewal note became due.) The allowance of this claim was resisted by the trustee in bankruptcy for the reasons, among others, that defendant ‘is not a creditor of said bankrupt,’ and ‘because said bankrupt is not indebted to said claimant in any amount.’ On November 13, 1922, the referee in bankruptcy made an order which, after reciting that claims had been filed by the Leonard B. Orloff Company in the sum of $25,281.04, and Leonard B. Orloff personally in the sum of $916.63, and Julia Stott Orloff (the defendant) in the sum of $2,166.02, and that objections had been filed to the allowance thereof, and that these parties had agreed to a reduction of the total amount of such claims to the sum of $7,500, allowed the three claims, without any separation as to amounts, in the said sum of $7,500. On December 1, 1923, the trustee in bankruptcy issued a check, payable to the order of ‘Leonard B. Orloff and Julia S. Orloff,’ in the sum of $423.53. This was indorsed by the payees, and paid by the bank on which it was drawn on December 13th.

On January 9, 1922, after defendant's claim in bankruptcy was filed, but before its allowance, plaintiff began this action against defendant to recover on the renewal note executed by her on May 8, 1921. Defendant gave notice that she would prove in defense that the note was executed by her without consideration, and that, at the time she executed it, she was a married woman, and her promise to pay it in no way related to her separate estate.

The testimony as to what occurred at the conference in Mr. Payne's office was very conflicting. Some of the witnesses testified that the representatives of the plaintiff then present insisted that defendant must either pay the transportation note or purchase it from the bank, and that she did so purchase it, and her individual note was accepted by the bank as a consideration for its transfer of the transportation note to her. Other witnesses denied that there was any talk of purchase, and testified that the bank agreed to release the attachment, if defendant would give her individual note for the amount due by the company, and that she executed it upon that understanding. At the conclusion of the proofs, defendant's counsel moved for a directed verdict ‘on the ground that the note sued upon is void by reason of the fact it was executed by a married woman and has no reference to nor does it deal with such married woman's separate individual estate.’ The trial court denied the motion. The jury found for the plaintiff. Defendant here reviews the judgment entered on the verdict by writ of error.

1. The power of a married woman to bind her separate estate by contract is well settled in this state. Under the statute (3 Comp. Laws 1915, § 11485) her individual property ‘may be contracted, sold, transferred, mortgaged, conveyed, devised or bequeathed by her, in the same manner and with the like effect as if she were unmarried.’

Her promissory note, given for property purchased by her, is valid. Gillam v. Boynton, 36 Mich. 236. Her promise to pay, as evidenced by such a note, must be based on a property consideration, and relate to property already possessed by her, or to be acquired by the contract. Johnson v. Sutherland, 39 Mich. 579;Russel v. Savings Bank, 39 Mich. 671, 33 Am. Rep. 444. She may not bind her separate estate by any obligation in the nature of suretyship, or by a promise to pay the debt of another. Caldwell v. Jones, 115 Mich. 129, 73 N. W. 129;Fitzgerald v. Garson Productions, 221 Mich. 88, 190 N. W. 695;Jarzembinski v. Plodowski, 225 Mich. 104, 195 N. W. 681;Kirby v. Orloff, 226 Mich. 413, 197 N. W. 371.

That defendant might have lawfully purchased from plaintiff the note held by it against the transportation company cannot be questioned. She has the power under the statute to loan her money on notes. She may therefore purchase a note held by another, and the law will not constitute itself a guardian for her to see to it that such an investment is prudently made. The trial court, after stating the claims of the parties as to what was said at the conference in Mr. Payne's office, said to the jury:

‘Now get the distinction of the claims in this case. The plaintiff claims that the defendant purchased the note. The defendant denies it, and that is the issue that is for your decision.’

Defendant's counsel, after quoting a considerable part of the testimony of the witnesses present at the conference in Mr. Payne's office, insists that--

‘If we look through the form and consider the substance of this transaction, the conclusion is irresistible that the defendant assumed and agreed to pay the debt of the Detroit Transportation Truck Company, a corporation. It was not a contract made by this married woman in relation to her separate estate or for the benefit of her separate estate.’

Eugene C. Betz, one of plaintiff's directors, testified that defendant said ‘the only way she could protect her interests was to make an arrangement whereby she might assume this obligation’; that Mr. Gutman, plaintiff's assistant cashier, ‘immediately brought objection, or suggested that such a plan would not be feasible. The bank couldn't entertain it, for the reason that a woman's note, under those conditions, wouldn't be valid. Mr. Payne then said that Mr. Gutman was quite right in his understanding, but Mrs. Orloff could purchase the note,’ and that defendant said ‘under those conditions she would purchase that note.’ Mr. Gutman testified to the same effect. Plaintiff's representatives were unwilling to close the deal until they had submitted defendant's proposition to their board of directors. The board approved the settlement, and the note was afterwards given.

It seems a little incredible that the officials of the bank, if advised that defendant could not legally bind herself to pay the debt of the transportation company, would surrender its right to enforce collection in the attachment proceeding without securing an obligation on the part of defendant which would be enforceable. That could be accomplished only by her purchase of the note of the company.

The defendant was a competent business woman. If the testimony of these witnesses be true, she fully understood that she could not bind her separate estate by a promise to pay the debt of the transportation company; that the only settlement that could be made which would result in the release of the attachment, by means of which payment of plaintiff's claim was fully secured, was for her to purchase the note, nonpayment of which had caused its issue. Had she paid the cash and the note been turned over to her, the legality of the transaction could not be questioned. Betz also testified that defendant said that, when the note became due, ‘she would have the cash and take it up.’

A consideration of the entire record satisfies us that there was ample proof to justify the submission of defendant's liability to the jury.

2. The rule is well established in this state that when it is sought to hold a female on an obligation signed by her, and it appears that she is a married woman, the burden is on the plaintiff to show that a consideration passed to her; in other words, that her promise to pay had reference to her separate property. Judd v. Judd, 187 Mich. 612, 154 N. W. 31, in which the earlier cases are reviewed and discussed.

Defendant insists that,...