Docket No. 31452.
Decided October 25, 1977.
Appeal from Wayne, Benjamin D. Burdick, J. Submitted June 23, 1977, at Detroit. (Docket No. 31452.) Decided October 25, 1977.
Complaint by Magdalena E. Predeteanu against Freud, Markus, Slavin Mountain, a dissolved Michigan partnership consisting of Harold E. Mountain, deceased, and John Slavin, and against Freud, Markus, Slavin Mountain, P.C., a professional corporation in the practice of law, and against John M. Rady, executor of the estate of Harold E. Mountain, deceased, for damages for malpractice in the practice of law. Judgment for defendants. Plaintiff appeals. Affirmed.
Sommers, Schwartz, Silver, Schwartz Tyler, P.C. (by John H. Shepherd), for plaintiff.
Sullivan, Ranger, Ward Bone, for defendant.
This case involves the application of the dead man's statute. Plaintiff, the owner of a travel agency, retained Harold E. Mountain, a member of defendant law firm and now deceased, to represent her in selling her business. Apparently, she furnished the purchaser a false financial statement. However, she insists that she told her lawyer the financial statement was inaccurate and that he told her not to worry since it would not make any difference. She also claims that her lawyer told her that payment of the purchase price would be guaranteed by a third entity. Finally, she claims that she told the purchaser the financial statement was inaccurate.
MCLA 600.2166; MSA 27A.2166.
The purchaser defaulted in payments and successfully sued plaintiff on the basis of the false financial statement she had furnished. While this suit was in progress, and after Mountain had died, she started suit against Mountain's estate and the law firm in which he had been a partner, claiming malpractice.
Allegedly, her husband and two employees of her travel agency would testify on her behalf. In an effort to expedite trial, the parties agreed that plaintiff would make an offer of proof on a separate record after which the trial judge would rule as to application of the amended dead man's statute.
The separate record contains the testimony of plaintiff and her husband. That testimony revealed that the husband had received substantial financial assistance from plaintiff, that the husband had recommended Mr. Mountain to his wife, and that the husband had been involved in the sales transaction. In addition, the opinion of the trial court indicates that the proceeds of the sale, as they had been received, had been deposited in a joint bank account bearing the names of plaintiff, her mother and her husband. After hearing the testimony on the separate record, the trial judge ruled that the husband "clearly has an interest in the present case which is antagonistic to that of the deceased party's estate making the husband an opposite party under the Statute". The judge, therefore, ruled that the husband's testimony did not qualify as material evidence tending to corroborate plaintiff's testimony.
Plaintiff's offer of the testimony of her corporate employees was met by a similar ruling. The trial judge made a finding that, although the corporation was nominally a separate entity, still plaintiff's total control of the corporation was such that its employees were, in fact, her own agents for purposes of the dead man's statute. The employees' testimony, thus, would be subject to the same restrictions as the plaintiff's and could not be used to supply the necessary corroboration. In addition, the trial court ruled that the employees' testimony would also be precluded because it was hearsay.
Since the husband's testimony and the employees' testimony were all that plaintiff offered to corroborate her testimony, and since none of the offered testimony qualified as material evidence so tending to corroborate her testimony, the trial court ruled that the plaintiff's testimony was inadmissible because of the dead man's statute. The parties and the court recognized that this ruling would have the effect of a summary judgment for defendants, and this appeal followed.
The issue now on appeal is whether the trial court correctly ruled that neither the husband's testimony nor the offered agents' testimony qualified as material evidence corroborating the plaintiff's testimony for purposes of the dead man's statute. For the following reasons, we affirm the trial court's ruling.
The husband's testimony will be considered first. In Michigan, a spouse is competent to testify in support of a contractual claim, brought by the other spouse, against an estate. However, as noted by the trial court, a direct interest, antagonistic to the estate, could disqualify such a spouse. Here, the trial court found that plaintiff's husband did have an interest antagonistic to the estate; that finding was based upon the financial and personal involvement of the husband in the transaction. Even under the close examination urged by appellant, that finding, on this record, is not clearly erroneous.
Slack v Norton, 111 Mich. 213; 69 N.W. 497 (1896).
Appellant distinguishes between the husband's interest, if any, in the original sale and his interest, if any, in the suit against Mr. Mountain's estate. On the facts of this case, our holding would be the same even if this distinction is accepted.
The offered testimony of the two travel agency employees was the other presented source of evidence to corroborate plaintiff's testimony. The substance of the offered testimony was that the plaintiff, while not in the presence of defendant, told the employees that the financial statements were not accurate. This was said to tend to corroborate plaintiff's testimony in that, if plaintiff openly acknowledged the inaccuracy, it was unlikely that she had made contrary representations to her attorney, the defendant. Defendant's first objection to this testimony was that the employees, although in name agents of the travel agency corporation, were, in fact, plaintiff's own agents because of her total control of the corporation. The trial court's ruling adopted defendant's position and excluded the offered testimony.
The trial court noted that the testimony of plaintiff and her husband did not provide much information concerning the employees and their duties regarding the corporation. However, the trial court did have before it testimony concerning plaintiff's relationship to the corporation. For example, plaintiff had difficulty testifying as to her exact salary because:
"1969, I worked only until August, but that's when I sold the agency, and I just can't remember how much, because the reason why I used to draw money as I needed it and not as a salary set up. So, therefore, this is why it's so terribly hard for me to tell you how much I made, and * * *." (Emphasis added.)
Some evidence was introduced showing that the intermingling of corporate and personal affairs extended to areas besides salary; in particular, travel and entertainment expenses for both plaintiff and her husband were treated in the same casual manner that the salary was.
After reviewing all the evidence, the trial judge ruled, in effect, that, to an outsider, the plaintiff did not maintain the separate identities of the corporation and herself. Therefore, in his words, the trial judge "pierced the corporate veil" and treated the corporation's agents as plaintiff's own agents.
We have also reviewed the evidence and tested the trial court's findings under the closer scrutiny appropriate to such nonjury determinations. As is evident from the parties' positions, the evidence is not clear cut, and it is subject to different interpretations. In addition, we are especially sensitive to the general purpose of the dead man's statute to prevent fraud against estates and to the general proposition that courts will not allow the separate corporate identity to be used to further fraud or injustice.
See, 1 Fletcher, Cyclopedia Corporations, § 45, pp 252-263.
Here, we are not left with a definite and firm conviction that a mistake has been committed. Therefore, we hold that the trial judge was not clearly in error when he found that the agents of the corporation, on these facts, were agents of the plaintiff for purposes of evaluating offered testimony under the dead man's statute.
In so holding, we do not decide whether the facts would justify disregarding, for all purposes, the separate identities of plaintiff and her corporation.
Given our holding regarding the testimony of the corporation's agents, it is unnecessary to decide whether that testimony also was inadmissible hearsay.
Affirmed, with costs to appellees.