Rutan v. Straehly, 45.

• Decision Date: 22 June 1939
• Docket Number: No. 45.,45.
• Citation: 289 Mich. 341,286 N.W. 639
• Parties: RUTAN v. STRAEHLY.
• Court: Michigan Supreme Court

289 Mich. 341

286 N.W. 639

RUTAN

v.STRAEHLY.

No. 45.

Supreme Court of Michigan.

June 22, 1939.

Action for fraud and deceit by Alletta B. Rutan against James A. Straehly. From a judgment for the plaintiff, defendant appeals.

Affirmed.Appeal from Circuit Court, Branch County; Blaine W. Hatch, judge.

Argued before the Entire Bench.

J. Paul Wait, of Sturgis, for appellant.

Raymond H. Dresser, of Sturgis, for appellee.

CHANDLER, Justice.

In 1918, following the death of her husband, plaintiff turned over the sum of $3,000 to the defendant for the purpose of having the latter invest the same for her. Defendant used the funds to purchase bonds, and for a 10 year period he turned over to plaintiff, annually, an income of $180 each year. There was no agreement in regard to defendant's compensation but there is evidence that he retained one per cent of the income of some of plaintiff's investments which were earning seven per cent. Plaintiff had knowledge of and assented to this practice.

Defendant claims that just prior to 1929 he was holding for plaintiff a $2,000 bond in the Detroit Gas Company and that the remaining $1,000 was invested in real estate bonds.

The parties resided in different localities, but sometime prior to August, 1929, defendant saw plaintiff and recommended that the latter purchase an insurance annuity. However, this suggestion was not acted upon. Thereafter, on August 3, 1929, defendant made a settlement with plaintiff whereby she accepted from him his six promissory notes for $500 each, bearing six per cent interest, each note being dated August 1, 1929 and due consecutively over a period of six years, commencing August 1, 1930. Thereupon, the plaintiff signed a settlement receipt.

When defendant delivered his notes to plaintiff, he had her original $2,000 Detroit Gas Company bond and $1,000 in cash, uninvested, both of which items he retained. At the trial, defendant stated that his notes were given to serve as interim protection in lieu of certain notes of J. D. Lake which he was to deliver subsequently to plaintiff.

Plaintiff testified, however, that the Lake notes were not mentioned in 1929 and that she never heard of them until June, 1933.

Two of defendant's notes which plaintiff held were renewed, the new notes being dated August 1, 1930, and August 1, 1931, respectively. In August 1930, defendant sent plaintiff $180 to be credited as interest on the six notes, $30 to each note. No further interest was paid after September, 1931.

In April, 1933, defendant went to see plaintiff at Elkhart, Indiana, informed her that he was going into the peppermint oil business, and requested that she give him back his notes so that they would not be reflected on his financial statement at the bank where he desired to obtain a loan. He stated that the loan would enable him to go ahead with the peppermint business and that he would then see that she received her interest. Plaintiff consented to turn over the notes, providing defendant gave her a paper to show that he had her money, and he agreed to do so. On June 1, 1933, he prepared and signed a paper (referred to as a proxy) stating that he had in his possession notes signed by F. D. Lake in the amount of $3,000, which notes, although made payable to him, were the property of plaintiff. Plaintiff testified that this was the first time she had heard of the Lake notes.

The so-called Lake notes originate in 1927 when F. D. Lake, president of F. D. Lake, Inc., a Michigan corporation, handling builders and contractors supplies, gave his notes to defendant in purchase of $4,000 par value of F. D. Lake, Inc., stock which defendant had previously purchased for $3,000 while in the employ of said company in 1926. Lake paid $25 per week on said notes for a time, and they were renewed from time to time. In 1931, the company went into bankruptcy, and Lake was unable to continue payments. The last renewal notes were taken in August 1932 and January 1933. Defendant made efforts to collect them after they became due, but without success. He retained them, however, and had some of them pledged at various banks to secure his personal indebtedness.

After June, 1933, plaintiff tried to obtain the Lake notes from defendant, and after they were received by her, he offered to help collect them and urged her not to attempt forced collection thereof. In November, 1937, plaintiff caused an investigation to be made and learned that her money had not been invested in said notes, but that they had arisen out of the aforementioned stock transaction between the defendant and Mr. Lake. Investigation also revealed that the notes were uncollectible.

On March 9, 1938, plaintiff, by summons, started this suit at law against defendant for fraud and deceit, filing her declaration April 6, 1938. The declaration contained a special count in trespass on the case, alleging breach of duty by defendant to safely invest and re-deliver plaintiff's funds and alleging false, fraudulent, negligent and improper use of her funds for defendant's own purposes. The declaration also contained the common counts.

The case came on for trial on July 6, 1938, and before trial, during a colloquy between the court and opposing counsel in an effort to settle the issues involved, defendant's counsel moved to strike plaintiff's pleadings on the ground that he reply set up a cause of action different than that alleged in the declaration. Counsel for plaintiff moved to amend the declaration to include the new matter, claiming that the same was not known to him when the declaration was prepared. Leave to amend was granted and the trial proceeded before the court without a jury.

The court entered a finding in favor of plaintiff and assessed damages against defendant in the amount of $3,000, plus interest from April, 1933. Defendant moved for a new trial which was denied, and this appeal followed.

Numerous grounds for appeal and assignments of error are claimed by defendant. Our discussion, however, will be confined to questions raised in the briefs of counsel.

Did the plaintiff elect to affirm and not rescind?

The defendant claims that the original declaration was for recission and not affirmance, as shown by the fact that plaintiffs asks for the return of $3,000; and that the attempt at recission failed for lack of tendering the notes. Plaintiff says no recission is claimed, but that she is seeking damages for the alleged fraud. The trial court held plaintiff had a right to affirm the transaction and sue for fraud and deceit, and apparently considered the case on that basis.

Even if it be conceded that plaintiff's original declaration was on the theory of rescission, it was amended before trial so as to stand as a suit for damages for fraud and deceit. Defendant does not assign as error the trial court's action in allowing the amendment.

Defendant...