Wendland v. Citizens Commercial & Sav. Bank

• Decision Date: 05 September 1979
• Docket Number: Docket No. 78-2365
• Citation: 284 N.W.2d 776,92 Mich.App. 250
• Parties: Florence P. WENDLAND, Plaintiff-Appellant, v. CITIZENS COMMERCIAL & SAVINGS BANK, a Michigan Banking Corporation, Defendant-Appellee.
• Court: Court of Appeal of Michigan — District of US

Page 776

284 N.W.2d 776

92 Mich.App. 250

Florence P. WENDLAND, Plaintiff-Appellant, v. CITIZENS COMMERCIAL & SAVINGS BANK, a Michigan Banking Corporation, Defendant-Appellee.

Docket No. 78-2365.

Court of Appeals of Michigan.

Sept. 5, 1979.

Released for Publication Nov. 9, 1979.

Cumings & Johnston by David K. Johnston, Flint, for plaintiff-appellant.

Winegarden, Booth, Ricker, Shedd & Haley by Myron Winegarden, Flint, for defendant-appellee.

Before DANHOF, C. J., and V. J. BRENNAN and CARROLL, ^* JJ.

DANHOF, Chief Judge.

This case presents a significant issue concerning the extent to which contractual disabilities of coverture stemming from our common-law legal heritage continue to restrict women under the married women's property act, M.C.L. § 557.1; M.S.A. § 26.161, and the cases interpreting that act.

Plaintiff is the widow of Frederick Wendland, who was proprietor and sole stockholder of a now defunct chain of stores in Flint, Michigan, incorporated as Wendlands' Apparel, Inc. Plaintiff was the nominal vice-president of the corporation, but performed no corporate duties and allowed her husband to handle all of the couple's financial affairs until his death on June 23, 1976.

Over the years, the Wendlands had borrowed in excess of $300,000 from defendant bank on jointly executed, personal unsecured notes. Defendant customarily deposited the proceeds of these loans directly into the account of Wendlands' Apparel, Inc. During the early 1970's, the business began consistently losing money and defendant eventually requested security for the Wendlands' debt. One of defendant's officers informed Mr. Wendland that unless he turned over possession of certain securities comprising the bulk of the Wendlands' net worth, defendant would call in the loans. These securities were actually plaintiff's sole and separate property.

Mr. Wendland personally delivered the securities to defendant in two blocks, one in 1974 and one in 1975, each stock certificate being accompanied by a stock assignment executed in blank by plaintiff. Although this procedure was sufficient to absolutely transfer the securities to defendant, M.C.L. § 440.8309; M.S.A. § 19.8309, the parties do not dispute that the transfer was intended as a pledge of plaintiff's stock to secure the Wendlands' joint debt. ¹

In 1977, plaintiff instituted this action seeking cancellation and rescission of her stock assignments to defendant on the theories that her separate property could not be used as collateral for the jointly executed notes and that the circumstances surrounding plaintiff's execution of the stock assignments and promissory notes constituted a fraud upon her. After plaintiff and two of defendant's employees had been deposed, the trial court granted defendant's motion for summary judgment pursuant to GCR 1963, 117.2(1). Plaintiff appeals as of right.

The pivotal legal issue is whether, under the married women's property act, M.C.L. § 557.1, a married woman may pledge her solely owned stock as security for a promissory note signed jointly by her and her husband, or whether the common-law disabilities of coverture still apply to render such a pledge of her separate property void Ab initio and unenforceable. ² If the latter proposition is true, plaintiff is entitled to the return of her stocks. If not, defendant has the right to satisfy any debt remaining on the Wendlands' jointly-executed promissory notes out of plaintiff's pledged securities, pending our secondary inquiry into whether a fraud was perpetrated on plaintiff by defendant or her husband.

The roots of the instant controversy are mired in the common-law doctrine, formerly accepted in Michigan, that marriage resulted in unity of person as between husband and wife, the husband alone controlling all of his and his wife's actions and property. By virtue of her married state, the wife "lost entirely all the legal incidents attaching to a person acting in her own right", including the right to separate ownership of property and the power to make personally binding contracts. Burdeno v. Amperse, 14 Mich. 90, 92 (1866); Tong v. Marvin, 15 Mich. 60, 66 (1866); Note, The Impact of Michigan's Common-Law Disabilities of Coverture on Married Women's Access to Credit, 74 Mich.L.Rev. 76, 78-79 (1975).

To remedy some of the injustices resulting from women's disabilities of coverture, the Michigan Legislature enacted a married women's property act. The key provision, unchanged since 1855, is today codified as M.C.L. § 557.1:

"That the real and personal estate of every female, acquired before marriage, and all property, real and personal, to which she may afterwards become entitled by gift, grant, inheritance, devise, or in any other manner, shall be and remain the estate and property of such female, and shall not be liable for the debts, obligations and engagements of her husband and 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."

This provision granted married women significant control over their separate property and the concomitant power to contract with regard to that property. Michigan courts, however, early established that the forerunner of M.C.L. § 557.1 had not conferred upon married women a "general capacity to contract". West v. Laraway, 28 Mich. 464, 465 (1874). The purpose of the statute was primarily to protect the wife in the enjoyment and disposal of her property for her benefit and that of her family free from her husband's potentially pernicious control. De Vries v. Conklin, 22 Mich. 255 (1871); Artman v. Ferguson, 73 Mich. 146, 40 N.W. 907 (1888). The remedial legislative design was to remove a married woman's contractual disabilities only insofar as they might operate unjustly and oppressively to subject her separate property to dissipation by her husband or another. De Vries, supra. ³

In keeping with this protective, limited interpretation of statutory intent, Michigan courts have consistently held that a married woman may not contract to become personally liable on a debt except where the contract is related to her separate ownership of property nor can she act as surety for the debt of another. For example, in De Vries, supra, a creditor brought an action in assumpsit against a husband and wife on a promissory note jointly executed in consideration for the creditor's discontinuance of a suit against the husband alone. The Court held:

"(The) statute neither in terms authorizes a married woman to make herself liable personally for the debt of another, nor where no consideration moves to her can it be presumptively for her benefit. It was no part of the design of the statute to relieve her of common law disabilities for any such purpose." 22 Mich. at 259.

Then, in West, supra, plaintiff sued husband and wife jointly upon their joint promissory note, which had been given to obtain an extension of time on the husband's debt. The Court upheld the wife's defense that her separate estate was not bound by the note, emphasizing that a married woman only had limited statutory capacity to contract.

"* * * She can only make such contracts as relate to her own property, while in regard to that she has very full powers. She may purchase property and bind herself for the purchase money * * * But she cannot become personally liable except on account of her own matters; and cannot enter into an undertaking jointly with her husband as his surety. De Vries v. Conklin, 22 Mich. 255. And she can never be held without affirmative proof that the contract is her own and within her powers * * *." 28 Mich. at 465.

The principles enunciated in West And De Vries, that a married woman cannot be held personally liable on any contract unless some consideration flows directly to her separate estate and that she cannot act as surety for another, have proven remarkably hardy through the years. See, E. g., Kitchell v. Mudgett, 37 Mich. 81 (1877); Johnson v. Sutherland, 39 Mich. 579 (1878); Koengeter v. Holzbaugh, 332 Mich. 280, 283-285, 50 N.W.2d 778 (1952); National Bank of Rochester v. Meadowbrook Heights, Inc., 80 Mich.App. 777, 782, 265 N.W.2d 43 (1978). Also compare Kirby v. Orloff, 226 Mich. 413, 197 N.W. 371 (1924), with Monroe State Savings Bank v. Orloff, 232 Mich. 486, 205 N.W. 596 (1925).

Nevertheless, beginning with Watson v. Thurber, 11 Mich. 457, 469 (1863), Michigan courts have also recognized the principle that "(there) is no legal objection to the making by a wife of a mortgage to secure her husband's debts". Watson accordingly allowed foreclosure on a wife's mortgage of her sole property given to secure her husband's preexisting debt. See also Marx v. Bellel, 114 Mich. 631, 633, 72 N.W. 620 (1897), where the Court seems to rule that a wife may create a lien upon her separate estate for her husband's debt. Numerous other decisions have similarly held that a married woman may mortgage or convey her separate property as security for her husband's or another's debt. See, E. g., Damon v. Deeves, 57 Mich. 247, 23 N.W. 798 (1885), Lewis v. Doyle, 182 Mich. 141, 148 N.W. 407 (1914), People's Wayne County Bank v. Wesolowska, 256 Mich. 45, 239 N.W. 367 (1931), Shepard v. Bestar, 271 Mich. 219, 259 N.W. 895 (1935), Collateral Liquidation, Inc. v. Manning, 287 Mich. 568, 283 N.W. 691 (1939).

Moreover, even the Courts in De Vries, supra, and West, supra, distinguished a married woman's conveyance by mortgage to secure another's debt, which they found permissible under the married women's property act on the authority of Watson, from a contract making her personally liable without reference to her separate estate, which they ruled the act did not authorize. Their analysis logically implies a crucial distinction between a married woman's assignment of a specific interest in an identifiable part of her separate property, which is enforceable whether or not her property derives...