Thatcher v. Detroit Trust Co.

• Decision Date: 04 April 1939
• Docket Number: No. 104.,104.
• Citation: 288 Mich. 410,285 N.W. 2
• Parties: THATCHER v. DETROIT TRUST CO. et al.
• Court: Michigan Supreme Court

288 Mich. 410

285 N.W. 2

THATCHER

v.DETROIT TRUST CO. et al.

No. 104.

Supreme Court of Michigan.

April 4, 1939.

Suit by Julius E. Thatcher against the Detroit Trust Company, individually and as trustee, and another for damages for fraud and deceit, for breach of duty as trustee, for breach of implied warranty under the Negotiable Instruments Law, for breach of contract, and under the common counts. From an order of dismissal entered on the named defendant's motion, plaintiff appeals.

Affirmed.Appeal from Circuit Court, Wayne County; Harry B. Keidan, judge.

Argued before the Entire Bench, except BUTZEL, C. J.

Welsh, Bebout & Hill, of Detroit, for appellant.

Miller, Canfield, Paddock & Stone, of Detroit, for appellee.

BUSHNELL, Justice.

According to plaintiff's declaration, the owners of property having a frontage on Michigan Avenue, Shelby Street and Lafayette Avenue in the city of Detroit executed a lease in 1917 to a corporation known as the Michigan & Shelby Land Company. This corporation in turn executed a sublease at a higher rental to the Detroit Leasing Company, which, in turn, sublet the premises at a still higher rental to certain individuals who assigned this sublease to the Michigan Lafayette Building Company, a Michigan corporation, for a consideration of $160,000 and an undertaking by the assignee to carry out certain terms of the subleases.

The Michigan Lafayette Building Company, the declaration continues, erected upon the land a store and office building known as the Lafayette Building, at a cost of over two million dollars. On May 12, 1927, Michigan Lafayette Building Company, ‘by a unanimous vote of more than two-thirds of the outstanding capital stock of said company, and a majority vote of the directors,’ authorized the execution and delivery of a mortgage of its subleasehold interest in the property to secure a $1,800,000 issue of bonds, to the Detroit Trust Company as trustee. It is further alleged that the Detroit Trust Company drafted the resolutions authorizing the bond issue, the mortgage and the bonds; directed and secured proper execution and delivery thereof; accepted the trust in writing; prepared and presented the application for the approval of the Michigan Securities Commission; certified the bonds; took delivery of them for sale and delivery to the public; arranged for a sale to itself, First National Company of Detroit, and Harris, Small & Company as underwriters; received the money from the sale of the bonds and directed its application; and received and appropriated to itself a commission for such sale not as a fee for being trustee, but as profit to itself as underwriter.

Plaintiff claims that he purchased $5,000 of these bonds in 1927 through the First National Bank-Detroit, bond department, and that the latter was the agent of and/or co-worker with the Detroit Trust Company. The gravamen of his complaint is that the bonds were described as ‘6 per cent. first leasehold mortgage gold bonds,’ and that the Detroit Trust Company, named as defendant, was instrumental in publishing a prospectus wherein the bonds were described as ‘first mortgage leasehold 6 per cent. gold bonds.’ This, plaintiff claims, amounted to deceit and fraud since the mortgage was on a subleasehold rather than a first leasehold interest.

Plaintiff's declaration contains five counts, for fraud and deceit, for breach of duty as trustee, for breach of implied warranty under the negotiable instrument law, for breach of contract, and general allegations under the common counts. He states that his suit is in the nature of a class suit for the benefit of himself and others as are in like position as purchasers of the bonds, and who may intervene in the proceedings. In 1931, the mortgagor defaulted in its payments and later in the same year the mortgage was forfeited and Michigan Lafayette Building Company lost all rights in the property. Plaintiff's suit was not instituted until 1935, which was almost eight years after the bonds were issued and the prospectus published.

The trust company filed a motion to dismiss on the ground that the declaration showed that the alleged deceit, fraudulent representations and breaches of duty occurred in 1927, more than six years prior to the commencement of the action, and that consequently the suit was barred by the statute of limitations. Defendant claimed that plaintiff had full knowledge of all the relevant facts and circumstances not later than the year 1931. The parties agree that the only question before the court on appeal is whether the trial judge was correct in granting an order dismissing the suit because the alleged wrongs occurred more than six years prior to the institution of suit, the time prescribed by 3 Comp.Laws 1929, sec. 13976; Stat.Ann. sec. 27.605.

As the suit was dismissed on motion of the defendant, for the purposes of this discussion we shall consider that plaintiff could prove the charges made. We shall also assume in the face of persuasive considerations to the contrary, that the...