Olitkowski v. St. Casimir's Saving & Loan Ass'n

• Decision Date: 01 July 1942
• Docket Number: No. 61.,61.
• Citation: 4 N.W.2d 664,302 Mich. 303
• Court: Michigan Supreme Court
• Parties: OLITKOWSKI v. ST. CASIMIR'S SAVING & LOAN ASS'N et al.

302 Mich. 303

4 N.W.2d 664

OLITKOWSKI

v.ST. CASIMIR'S SAVING & LOAN ASS'N et al.

No. 61.

Supreme Court of Michigan.

July 1, 1942.

Suit to recover money by Sophia Olitkowski, administratrix of the estate of John Olitkowski, deceased, against St. Casimir's Saving & Loan Association and Frank J. Kolodziejski who filed a cross-bill. From the decree, defendants appeal.

Judgment reversed and bill of complaint dismissed as to defendant St. Casimir's Saving & Loan Association and judgment affirmed as to Frank J. Kolodziejski.

BOYLES, J., dissenting in part.Appeal from Circuit Court, Wayne County, in Chancery; Guy A. Miller, judge.

Before the Entire Bench.

John Stipeck and David E. Roberts, both of Detroit (Dale D. Libkuman, of Detroit, of counsel), for appellee.

Louis Andrzejewski, of Detroit (John Bossenberger, of Detroit, of counsel), for appellant St. Casimir's Saving & Loan Ass'n.

Charles A. Bryan, of Detroit, for appellant Frank J. Kolodziejski.

BOYLES, Justice.

Plaintiff, as administratrix of the estate of her father, seeks to recover a sum of money admittedly received by the defendant St. Casimir's Saving and Loan Association, either as a ‘deposit,’ or an ‘investment’ in membership certificates. Defendant Frank J. Kolodziejski was employed by the administratrix as attorney for the estate, and also, at the time this money was turned over to the saving and loan association, was attorney for and a director of the association.

Plaintiff's father, John Olitkowski, died intestate in 1929, leaving $2,196.64 on deposit in a Detroit bank, and about $1,500 in promissory notes receivable. The bank deposit could not be withdrawn without probating his estate and plaintiff employed defendant Frank J. Kolodziejski, a petition was filed in probate court, and plaintiff was appointed and qualified as administratrix. Defendant Kolodziejski instructed or advised plaintiff to withdraw the bank deposit and deposit it with the defendant association. This was done, through Kolodziejski, defendant association opened an account on its books under the name ‘Olitkowski Estate’ and issued a passbook to plaintiff, containing the constitution and bylaws of the association. No certificates of membership were ever issued to plaintiff. Subsequent to the original ‘deposit,’ Kolodziejski, acting as attorney for the estate, collected further sums for the estate, all of which were credited to plaintiff on the passbook, together with several interest items. The passbook shows several items of sums withdrawn, and a balance of $2,295.30 due plaintiff on January 1, 1932. Plaintiff has received nothing since that date. The circuit judge gave plaintiff a decree against the defendants for that amount, together with interest at five per cent per annum from that date. Defendants prosecute separate appeals.

The association admits its liability to the estate in some amount, but contends that the estate has no greater right than other shareholders. The association has been in process of voluntary liquidation since 1932 and apparently its assets are not sufficient to pay shareholders in full. As against the association's claim, plaintiff insists that Kolodziejski and the association received the money illegally as a deposit, knowing that the administratrix could not legally deposit the estate's money or legally ‘invest’ it in the association's membership certificates, and that a constructive trust results in favor of the estate.

Plaintiff never had any direct contact with anyone representing the association except Kolodziejski. His office was in the rear of the offices occupied by the association through which one would have to pass in order to reach his private office. Plaintiff's ‘deposits' and withdrawals were all made through Kolodziejski. He never directed plaintiff to any other agent, officer or representative of the association, but handled all the transactions himself. He advised her to make the deposit in the first instance, as her attorney, and continued to act as such throughout the transactions.

In his brief and on the record, Kolodziejski invariably refers to the fund as a ‘deposit’ in the association. Obviously, Kolodziejski, a well-informed attorney, must have known that the association could not accept a ‘deposit’ of money. On the other hand, Kolodziejski must be charged with knowledge that the administratrix could not ‘invest’ estate moneys in membership certificates, at least without express approval by the probate court (and none was obtained).

The estate was ready for distribution to the heirs in 1931, having been converted into money and all debts paid. Plaintiff contacted Kolodziejski to obtain the money for distribution and was told she would have to wait-that the association was obtaining a loan. In March, 1932, plaintiff filed her final account in probate court, showing a balance on hand $2,326.18. The record does not show whether the probate court entered any order allowing the account, although the circuit judge stated in his opinion it was allowed. Kolodziejski suggested she accept four passbooks of the association dividing the balance between the four heirs. This, the plaintiff declined to do. Thereafter, plaintiff continued to try to get the money to close the estate. Kolodziejski proposed that plaintiff accept as security assignments of mortgages he had with the association. Finally, when plaintiff was cited by the probate court to close the estate, she employed other counsel and started two different suits against Kolodziejski for summary judgment against him as attorney, which were dismissed on the ground that the matter should not be disposed of as a summary proceeding.

We assume that the defendant association was organized under Act No. 50, Pub.Acts 1887, as amended, 3 Comp.Laws 1929, § 12134 et seq. (Comp.Laws Supp.1940, § 12134 et seq., Stat.Ann. § 23.541 et seq.). This statute expressly prohibits the association from accepting ‘deposits', directly or indirectly, and forbids engaging in the business of banking in any way. 3 Comp.Laws 1929, § 12170 (Stat.Ann. § 23.580).

Kolodziejski acted for the saving and loan association in its contact with plaintiff throughout this entire transaction. The saving and loan association is bound by his knowledge that it had no right to receive deposits, and that the administratrix had no right to invest estate money in its membership certificates. The record amply justifies the conclusion that the association must be held bound by the acts of Kolodziejski. Katz v. Kowalsky, 296 Mich. 164, 295 N.W. 600, 134 A.L.R. 179.

Constructive fraud, a term applied to a great variety of transactions which equity regards as wrongful and to which it attaches the same or similar effects as those that follow actual fraud, has been evolved to designate what is essentially nothing more than the receipt and retention of unmerited benefits. Constructive trusts arise by operation of law to prevent injustice; fraud, active or constructive, is their essential element, and they will arise whenever it becomes necessary to prevent a failure of justice. Equity will construct a trust where a person gains something he should not be permitted to hold in equity and good conscience through actual fraud, abuse of confidence, or questionable means. A constructive trust arises not from agreement but from operation of equities in order to satisfy demands of justice. A court of equity, in decreeing a constructive trust, is bound by no unyielding formula as the equity of the transaction must shape the measure of relief. A constructive trust is imposed not because of the intention of the parties but because the person holding the title to the property would profit by a wrong or would be unjustly enriched if he were permitted to keep the property. Constructive trusts are such as are raised by equity in respect of property which has been acquired by fraud, or where, though acquired without fraud, it is against equity that it should be retained by him who holds it. Union Guardian Trust Co. v. Emery, 292 Mich. 394, 290 N.W. 841.

Throughout the entire transaction, plaintiff was led to understand by Kolodziejski that he was in effect the association and the matter was entirely intrusted to him by plaintiff, who was not versed in such matters. An attorney of much experience must be presumed to understand and be familiar with well-established principles of law. 2 Mechem on Agency, 2d Ed., § 2195. When an attorney undertakes the management of business committed to his charge, he thereby impliedly represents that he possesses such knowledge. 2 Mechem on Agency, 2d Ed., § 2193; 1 Thornton on Attorneys at Law, § 314. Where an agent is invested with authority or discretion, it is against public policy for him to represent the other party in the transaction without full disclosure to both of his dual agency. Trost v. J. E. St. Clair Co., 250 Mich. 342, 230 N.W. 147. An attorney owes an undivided allegiance to his client and he cannot act both for his client and one whose interest is adverse or conflicting with that of his client in the same general matter unless the client consents after he has been given full knowledge of all the facts and circumstances. 5 Am.Jur., p. 296. We must hold Kolodziejski liable to the estate for any loss resulting from his conduct.

The association insists that plaintiff's claim is barred by the statute of limitations, or by equitable estoppel. Passing the question whether this defense is properly raised by the pleadings, or on this appeal, mere lapse of time, without showing prejudice, will not constitute laches.

Plaintiff administratrix has been diligent in her efforts to obtain the return of the money for the estate. In 1931, Kolodziejski told her she would have to wait for the money-that the association was obtaining a loan of $20,000; in 1932, when she signed the annual account to probate court, he tried to induce her to accept four passbooks in order to close the estate, and she refused;...