National Bank of Rochester v. Meadowbrook Heights, Inc.

• Decision Date: 23 January 1978
• Docket Number: Docket No. 31522
• Citation: 265 N.W.2d 43,80 Mich.App. 777
• Parties: NATIONAL BANK OF ROCHESTER, a National Banking Association, Plaintiff-Appellee, v. MEADOWBROOK HEIGHTS, INC., a Michigan Corporation, Defendant, and Charles M. Wilkinson and Helen Z. Wilkinson, his wife, jointly and severally, Defendants-Appellants. 80 Mich.App. 777, 265 N.W.2d 43
• Court: Court of Appeal of Michigan — District of US

Page 43

265 N.W.2d 43

NATIONAL BANK OF ROCHESTER, a National Banking Association Plaintiff-Appellee, v. MEADOWBROOK HEIGHTS, INC., a Michigan Corporation Defendant and Charles M. Wilkinson and Helen Z. Wilkinson, his wife jointly and severally, Defendants-Appellants.

Docket No. 31522.

80 Mich.App. 777, 265 N.W.2d 43

Court of Appeals of Michigan.

Jan. 23, 1978.

Released for Publication April 26, 1978.

[80 MICHAPP 778] Powers & Conlin by Thomas M. Powers, Portage, for defendants-appellants.

Bebout, Potere, Cox, Hughes & Cadieux by Mark W. Lyon and Robert F. Potere, Rochester, for plaintiff-appellee.

Richard C. Walsh, Kalamazoo, for Meadowbrook.

Before R. B. BURNS, P. J., and ALLEN and MAHER, JJ.

R. B. BURNS, Presiding Judge.

This is an action to collect on two promissory notes. The trial court denied defendants'[80 MICHAPP 779] motions for change of venue, and granted plaintiff's motion for summary judgments against the maker of the notes, Meadowbrook Heights, Inc., against the guarantors of the notes, Mr. and Mrs. Wilkinson, jointly, and against Mr. Wilkinson, severally. Mrs. Wilkinson interposed a defense of coverture as to her several liability, but, following a trial on the merits, the trial court granted plaintiff's renewed motion for summary judgment against Mrs. Wilkinson, severally. Mr. and Mrs. Wilkinson appeal and we affirm as to venue and reverse as to Mrs. Wilkinson's several liability.

Meadowbrook Heights, Inc., is a close corporation owned and operated solely by Mr. Wilkinson, and was engaged in an attempt to build an apartment complex in Oakland County. To this end Meadowbrook obtained a $30,000 loan from plaintiff, in exchange for which it gave a promissory note signed by its president, Mr. Wilkinson. When the note came due, Mr. Wilkinson sought an extension plus an additional loan of $20,000. Plaintiff determined that neither Meadowbrook nor Mr. Wilkinson individually qualified for an extension or additional credit. Plaintiff, aware that Mrs. Wilkinson had assets separate from those of her husband, and acting upon Mr. Wilkinson's representation that his wife's sole and separate estate would benefit from the extension and additional loan, informed Mr. Wilkinson that it would allow the extension and the additional loan if Mrs. Wilkinson guaranteed both. Plaintiff prepared for the signatures of Mr. and Mrs. Wilkinson the following "letter of consideration":

"We wish to take this opportunity to advise you that we are both very concerned about the success of Meadowbrook Heights, Inc., as we have invested heavily in [80 MICHAPP 780] this corporation the same will have a noted effect on our joint and several estates.

"We therefore are requesting that every consideration be given in the extention (sic ) of credit and loans. To assure a proper line of credit and financial resources to the corporation in protection of our individual holdings we will be most happy to personally guarantee all required notes. We do so in consideration of your making the necessary funds available to Meadowbrook Heights, Inc."

In his testimony, Mr. Wilkinson denied telling plaintiff that his wife's sole and separate estate would benefit from the loan. Instead, plaintiff informed him that he and his wife had to sign the letter and guarantees or he would not get the loans. He did not understand the legal significance of the letter. Mrs. Wilkinson testified that, except for their house, she had always kept her property separate from that of her husband and had never commingled their separate assets. She did not expect to derive any benefit from the loans to the corporation. At the time her husband brought the "letter of consideration" to her, she was ill, and did not read it, although she did sign it. She routinely signed documents presented by her husband without reading them.

At the close of proofs, Mrs. Wilkinson moved to dismiss, and plaintiff renewed its motion for summary judgment. In an opinion delivered from the bench, the trial court ruled that Mr. and Mrs. Wilkinson's assertions that they did not understand the significance of the letter which they were signing were not credible. Although plaintiff was "slipshod" in not pinning down Mrs. Wilkinson as to how the loans would benefit her separate estate, it did rely upon the letter to its detriment, so that it would be inequitable to permit Mrs. Wilkinson to deny that her sole and separate [80 MICHAPP 781] estate would be benefited. The court therefore granted summary judgment against Mrs. Wilkinson, severally.

In reaching its decision, the trial court resolved several factual disputes. Its decision, incorrectly labeled summary judgment, GCR 1963, 117.2(3), was actually a decision on the merits following trial. We therefore review to determine whether the trial court's findings of fact are clearly erroneous, giving regard to the special opportunity of the trial court to judge the credibility of the witnesses who appeared before it. GCR 1963, 517.1. The record indicates that both Mr. and Mrs. Wilkinson are experienced business persons, and had made a practice of keeping Mrs. Wilkinson's assets separate from those of Mr. Wilkinson. From this, coupled with his determination that Mr. and Mrs. Wilkinson were not credible, the trial court reasonably concluded that they were aware of the significance of the "letter of consideration". There was testimony that plaintiff relied upon the letter in extending credit, even though it knew that the proceeds of the loan would go to the corporation, and that Mrs. Wilkinson was not a shareholder of the corporation. We find no clear error in the trial court's findings of fact. We therefore disregard defendants' contention on appeal that Mrs. Wilkinson was the innocent victim of overreaching by her husband and plaintiff, and assume for purposes of analysis that all parties were aware of the law of coverture, and that the suretyship was the result of reasoned consideration of each party's best interest.

The primary issue on appeal is whether equitable estoppel precludes Mrs. Wilkinson from asserting as a defense to her liability as a surety the disability of coverture.

[80 MICHAPP 782] The Married Women's Act of 1855 was passed to protect married women from the improvidence or predations of their husbands and from the husbands' creditors. Artman v. Ferguson, 73 Mich. 146, 150, 40 N.W. 907, 909 (1888); Tong v. Marvin, 15 Mich. 60, 71 (1866); Note, The Impact of Michigan's Common-Law Disabilities of Coverture on Married Women's Access to Credit, 74 Mich.L.Rev. 76 (1975). The Act M.C.L.A. § 557.1 et seq.; M.S.A. § 26.161 et seq., provides that married women may acquire, hold, and devise property separate from their husbands' influence and not subject to their husbands' debts, with "like effect as if * * * (they) were unmarried", M.C.L.A. § 557.1; M.S.A. § 26.161, and may be held liable on any contract made in relation to their sole property, M.C.L.A. § 557.4; M.S.A. § 26.163. The Act did not confer upon married women a general power to contract. West v. Laraway,28 Mich. 464, 465 (1874). In order to hold a married woman liable on a contract, a plaintiff must prove that the contract directly concerned the married woman's separate estate. ¹ See, e. g., Koengeter v. Holzbaugh,332 Mich. 280, 283, 50 N.W.2d 778, 779 (1952); Judd v. Judd, 187 Mich. 612, 615, 154 N.W. 31, 32 (1915); Kenton Insurance Co. of Kentucky v. McClellan, 43 Mich. 564, 565, 6 N.W. 88 (1880). In Koengeter v. Holzbaugh,supra, a married woman was held not severally liable on a note she made with her husband where the makers told the holders of the note that the loan was to provide working capital for a corporation of which the wife was the sole stockholder. The Court held that the contract was for the benefit of the corporation and, absent fraud [80 MICHAPP 783] or misuse of the corporate device, the contract was not for the benefit of the woman's separate estate. In Monroe State Savings Bank v. Orloff, 232 Mich. 486, 490, 205 N.W. 596, 597 (1925), the Court stated that a married woman "may not bind her separate estate by any obligation in the nature of suretyship, or by a promise to pay the debt of another". Accord, West v. Laraway, supra. Such a contract does not concern her separate estate.

In the instant case it was undisputed that Mrs. Wilkinson signed as a surety, and that the loan went to a corporation owned by her husband, for the purpose of attempting to build an apartment complex. Mrs. Wilkinson lacked capacity to make this contract, and the contract is therefore void. Judd v. Judd, supra.

A married woman may be precluded from asserting her disability through operation of equitable...