Opinion
Calendar No. 5, Docket No. 51,327.
Decided August 24, 1966.
Appeal from Court of Appeals, Division 2; Watts, P.J., and J.H. Gillis and Quinn, JJ., affirming Genesee, McGregor (Louis D.), J. Submitted June 9, 1966. (Calendar No. 5, Docket No. 51,327.) Decided August 24, 1966.
1 Mich. App. 339, affirmed.
Complaint by Burton Township, Genesee County, by Joseph E. Uvick, legal agent, against John L. Speck, Paul A. Rauch, Joseph P. Richvalsky, Stephen Dodge, Herbert Winstanley, Inez McPhee, and Jack Keene to recover funds allegedly misappropriated by defendants, former or present township officers. Summary judgment for defendants affirmed by Court of Appeals. Plaintiff appeals. Affirmed.
Joseph P. Uvick ( Harold Goodman, of counsel), for plaintiff.
Milliken Magee ( David S. Magee, of counsel), for defendants.
I am in respectful disagreement with Mr. Justice ADAMS.
The whole record in this case bespeaks a course of conduct openly adopted, followed without deviation, over a period of years and approved in public meetings open to any electors interested in attending. This course of conduct is the antithesis of the definition of fraudulent concealment laid down in the De Haan Case cited by the Court of Appeals.
De Haan v. Winter, 258 Mich. 293.
I would affirm the Court of Appeals by adoption of its opinion as that of this Court and tax no costs.
T.M. KAVANAGH, C.J., and KELLY, and BLACK, JJ., concurred with O'HARA, J.
SMITH, J., did not sit.
On July 1, 1963, a new supervisor of Burton township, Genesee county, brought this suit to recover money that defendants, members of the Burton township board prior to April, 1963, had obtained from the township.
Beginning April 1, 1946, the electors of the township board annually voted a fixed expense allowance to board members. CL 1948, § 41.75 (Stat Ann 1961 Rev § 5.67) provides in part:
"No accounts shall be audited by such board, except such as are made in writing, giving the particular items of such account, and verified by oath or affirmation of the claimant or some one in his behalf." (Emphasis supplied.)
Expense allowances were paid from April, 1946, until April, 1957, even though the members filed no itemized accounts.
On April 15, 1947, the township board created four commissionerships which were designated as health officer; purchasing agent and fire commissioner; public safety and park commissioner; and chairman of study commission; and later designated as commissioner of fire; commissioner of police; commissioner of buildings, parks and grounds; and commissioner of building inspection, zoning regulation and enforcement. These positions were paid expense allowances or salaries that ranged from $150 a year in 1947 to $175 a month in 1963.
Beginning in 1957, at the annual town meeting the electors, on motions made by defendant board members, authorized appointment of and salaries for commissioners. Appointments were then made by the supervisor with board approval. Electors are authorized by statute to determine the compensation of members of the township board. CLS 1961, § 41.95 (Stat Ann 1961 Rev § 5.82).
Prior to April, 1959, the township treasurer received his statutory collection fee for the collection of taxes. Until April, 1957, the township board also voted and paid him a fixed expense allowance and an annual salary which was contrary to the requirement of CL 1943, § 211.44 (Stat Ann 1950 Rev § 7.87) that:
"All fees collected by the township treasurer in townships where the treasurer shall receive a salary, shall be credited to the contingent fund of the township."
In April, 1959, the treasurer was placed on a salary in lieu of fees. CL 1948, §§ 211.44, 211.44a (Stat Ann 1950 Rev §§ 7.87, 7.88), as amended.
At the conclusion of plaintiff's case, defendants moved for a judgment as to all claims occurring prior to July 1, 1957, because of the running of the six-year statute of limitations. The trial judge found that the expenses were matters of public record and granted the motion. Defendants then moved for judgment as to the remainder of the claims. The trial judge found there was no incompatibility in holding both the offices of trustee and commissioner and granted the motion. The Court of Appeals affirmed. Burton Township v. Speck, 1 Mich. App. 339. Leave to appeal was granted by this Court.
See CLS 1961, § 600.5813 (Stat Ann 1962 Rev § 27A.5813). — REPORTER.
I.
Was the statute of limitations suspended?
Plaintiff maintains that the statute of limitations does not operate when the same person is on both sides of a claim and that operation of the statute was suspended because the former supervisor represented both sides of these claims. This rule has been applied in many cases in other jurisdictions. See 54 CJS, Limitation of Actions, § 111, p 16; 34 Am Jur, Limitation of Actions, § 114, p 93.
A corollary of the rule was applied in Parks v. Norris, 101 Mich. 71, where it was held that until an administrator of an estate was appointed no person was authorized to bring an action for the estate.
Until plaintiff was elected to the township board, the board members were all participants in the actions upon which this suit is based. Of their number was the supervisor who, by law, was the township agent for the transaction of its legal business. CL 1948, § 41.64a (Stat Ann 1961 Rev § 5.56). He was on both sides and obviously would not be disposed to sue himself.
Defendants say, however, that since any taxpayer could have brought a suit on the authority of CL 1948, § 129.61 (Stat Ann 1958 Rev § 5.3281), there were people who could have sued and so the statute of limitations continued to run. CL 1948, § 129.61 provides:
"Any person or persons, firm or corporation, resident in any township or school district, paying taxes to such political unit, may institute suits or actions at law or in equity on behalf of or for the benefit of the treasurer of such political subdivision, for an accounting and/or the recovery of funds or moneys misappropriated or unlawfully expended by any public officer, board or commission of such political subdivision. Before such suit is instituted a demand shall be made on the public officer, board or commission whose duty it may be to maintain such suit followed by a neglect or refusal to take action in relation thereto. Security for costs shall be filed by the plaintiff or plaintiffs in any such suit or action and all costs and expenses of the same shall be paid by the person or persons instituting the same unless and until a recovery of such funds or moneys be obtained as the result of such proceedings." (Emphasis supplied.)
The requirements of this statute are onerous. Any finding that the permission granted to a taxpayer to sue provided a substitute party for the supervisor, the township's designated agent, must meet all possible objections.
In Nahikian v. Mattingly, 265 Mich. 128, an individual shareholder's right to bring suit on behalf of a corporation against its president did not cause the statute of limitations to run where the president dominated the corporation, was in a position of trust, and held assets that belonged to the corporation. The principle of estoppel was relied upon in Nahikian with the result that a small shareholder was not required to assert a claim within the statutory time because he could only minutely benefit. In the case of the ordinary taxpayer, his interest is even more minute. Such minimal interest is one reason why the supervisor's duty to represent the township should not be shifted.
Even if a taxpayer's right to sue did continue the running of the statute of limitations, the statute was tolled in this case because there was an insufficient disclosure for such a suit. The trial judge and the Court of Appeals found that because the public had access to the minutes of the annual town meeting and the township board meetings, and because taxpayers were allowed freely to attend all meetings, there was a full disclosure. However, as already noted, CL 1948, § 41.75 (Stat Ann 1961 Rev § 5.67) provides:
"No accounts shall be audited by such board, except such as are made in writing, giving the particular items of such account, and verified by oath or affirmation of the claimant or someone in his behalf."
It also provides:
"All accounts audited by such board shall be filed and preserved by the clerk, for the inspection of any of the inhabitants of the township or of any persons liable to pay taxes therein, and shall be produced at the next annual township meeting and there read by him, if the same shall be required by the meeting."
No itemized and verified accounts were filed so as to be available for inspection. Yet the township records gave every appearance of regularity on their face, being open records that were presumably kept in accordance with the law.
While, as a general rule, concealment must be designed to mislead and must be accompanied by affirmative steps to that end ( McNaughton v. Rockford State Bank, 261 Mich. 265, 268, 269), there is an exception as to one in a fiduciary or confidential relationship. Johnson v. Provincial Insurance Company of Toronto, 12 Mich. 216, 222, 223 (86 Am Dec 49); Tompkins v. Hollister, 60 Mich. 470, 479; Barrett v. Breault, 275 Mich. 482, 491; Comment note. — What constitutes concealment which will prevent running of statute of limitations, 173 ALR 576, 588. In such a case, silence can amount to fraudulent concealment. Barrett v. Breault, supra.
A public office is a public trust. Defendants were public officers. They owed, at the least, a duty of loyalty to the public no less than that of an agent to his principal. People, ex rel. Plugger, v. Township Board of Overyssel, 11 Mich. 222, 225; 43 Am Jur, Public Officers, § 261, p 78; Comment note, supra, p 606. The duties of a township board are: (1) to meet annually (CL 1948, § 41.72 [Stat Ann 1961 Rev § 5.64]), (2) to hold at least one regular meeting every three months (CLS 1961, § 41.72a [Stat Ann 1961 Rev § 5.64(1)]), and (3) to examine and audit accounts (CL 1948, § 41.73 [Stat Ann 1961 Rev § 5.65]). The duty to examine and audit accounts was that of the board, not of a taxpayer. The township board, having been appointed the watchdog of the township purse with the duty to audit correctly all accounts, may not escape the consequences of its failure to perform that duty, particularly as to its own expenses and salary, merely because a taxpayer might sue. To come to such a result would only encourage dereliction of duty in public office.
In any event, a public record does not necessarily cause the statute to run if it is insufficient to put the taxpayers on notice. This Court has held:
"We recognize the general rule that the running of the statute will not be postponed if the defrauded person may discover the fraud from public records. This rule does not apply to a person while a fiduciary relationship exists and nothing occurs to indicate the necessity for investigation." Heap v. Heap, 258 Mich. 250, 263.
Also, see Annotation, Public records as notice of facts started running of statute of limitations against action based on fraud, 137 ALR 268. Here, the public records all purported to be proper on their face, correctly examined and audited by defendants, and only careful examination of them by an accountant together with legal advice revealed the significance of the activities now challenged.
Divided compensation, at the least, presents a delusive picture. For example, trustee Joseph P. Richvalsky was on the board until April, 1963. He received $2,400 as a trustee, but he received $16,641.80 as a commissioner and $1,241.80 for expenses. While his salary appears to be only $2,400, his total compensation was $20,283.60. Because the defendants were fiduciaries whose positions demanded of them the utmost rectitude, their actions constituted fraudulent concealment within the exception of the statute. CLS 1961, § 600.5855 (Stat Ann 1962 Rev § 27A.5855).
PA 1929, No 52, as amended (CL 1948, § 14.141 et seq. [Stat Ann 1961 Rev § 3.241 et seq.]), authorizing suits by the attorney general or a prosecutor, has no application here since a petition signed by at least 25% of the registered electors of the township is required to initiate such action.
II.
Could the commissionerships be created?
Defendants would now designate the position of a commissioner as "committee chairman" and would pose the above question as follows:
"May a township Board designate certain of its members as commissioners to act as an arm of the board in administering the affairs of the township?"
The question assumes that the office of commissioner was not a distinct office but merely an adjunct to the board.
The board's authority for the creation of a public office with separate salary attached, by whatever title designated, must be found in either the Constitution or statute. 37 Am Jur, Municipal Corporations, § 226, pp 856, 857; 62 CJS, Municipal Corporations, § 465, p 896. Under the 1908 Constitution, an organized township had no power except that prescribed by law, Hanslovsky v. Township of Leland, 281 Mich. 652, 655; and a township board had no power by constitutional mandate, deriving its sole authority from the legislature, Township of Dearborn v. Dearborn Township Clerk, 334 Mich. 673, 685.
The Court of Appeals found authority for the creation of these commissionerships in CL 1948, § 41.4 (Stat Ann 1961 Rev § 5.4), which provides:
"The inhabitants of each township may, at any legal meeting, by a vote of the qualified electors thereof, make all such orders and by-laws for determining the time and manner in which cattle, horses, swine, sheep and other animals shall be restrained from going at large in the highways, and for directing and managing the prudential affairs of the township as they shall judge most conducive to the peace, welfare and good order thereof." (Emphasis supplied.)
This section has been carried unchanged from RS 1846, ch 16, § 4.
Spaulding v. City of Lowell (1839), 40 Mass. 71, is the leading decision defining and describing the meaning of "prudential affairs" as the term has been used with regard to municipal government. The supreme court of Massachusetts said, pp 77, 78, 79:
"In the case of Willard v. Newburyport, above cited, [ 29 Mass. 227] some attempt was made to describe what is understood to be 'prudential concerns,' by stating that it embraces those subjects affecting the accommodation and convenience of the inhabitants, not otherwise specifically provided for, which have been placed under the jurisdiction of towns by statute or by usage. It may be suggested that referring to usage as a source of this power, is still leaving subjects open to doubt. It does so; but as there are some subjects which have long been regarded as within the authority of towns, not made so by statute, and as such powers have never been questioned, there is no authority whence they can be derived but usage. * * * The same statute [the provincial act of 1692] gives to towns the authority to make orders and by-laws, 'for managing and ordering their prudential affairs of such town, as they shall judge most conducing to the peace, welfare and good order thereof.' From this and various other legal provisions, we think it will be found that towns were not originally incorporated with specific and enumerated powers; but that the inhabitants and settlers of each township, as organized bodies, adopted regulations for their common convenience, and when they were incorporated, or rather recognized by general laws, as established corporations, the powers which they had thus been used and accustomed to exercise, were referred to, and confirmed, under the very broad and comprehensive term, 'prudential concerns.' * * *
"And in considering this subject of usage, it is proper to add, that it is not a casual or occasional exercise of a power, by one or a few towns, which will constitute such a usage; but it must be a usage, reasonable in itself, general amongst all towns of like situation, as to settlement and population, and of long continuance." (Emphasis supplied.)
The phrase "prudential affairs" was intended to empower the electors to do those things necessary to effectuate the lawful powers of the township. See 35 Words and Phrases (Perm ed), Prudential Affairs of Town, p 6. The term is more one of limitation than a grant of authority. Spaulding v. City of Lowell, supra.
Defendants state that Burton township has a population of approximately 36,000 people and the commissionerships are necessary because of the "complexities of modern metropolitan township governments." No long and established usage is shown here.
Under PA 1951, No 57 (CLS 1961, § 41.751 et seq. [Stat Ann 1958 Rev § 5.2640(21) et seq.]), the State legislature has provided alternative ways to meet the problems of police and fire protection in townships. Whatever procedure is adopted, action by township ordinance is required. No township ordinance was passed here.
Under PA 1931, No 271, § 1, as amended by PA 1949, No 33 (CLS 1961, § 41.441) and PA 1962, No 33 (Stat Ann 1965 Cum Supp § 5.271), the State legislature provided for township park commissions. The procedure for a park commission must be initiated by 50 freeholders and taxpayers. A park commissioner's compensation is $1 for each meeting and mileage of 10¢ per mile (CL 1948, § 41.443 [Stat Ann 1961 Rev § 5.273]). No such procedure was initiated here by freeholders and the salaries were, of course, considerably in excess of $1.
These statutes pertaining to police and fire protection and to township park management, together with detailed legislation providing for township zoning (CL 1948 and CLS 1961, § 125.271 et seq. [Stat Ann 1958 Rev and 1965 Cum Supp § 5.2963(1) et seq.]) evidence a clear intention by the legislature to authorize township handling of such matters in specific ways. They are the grant and limitation of a township's powers.
CL 1948, § 41.96 (Stat Ann 1961 Rev § 5.83), relied upon by the Court of Appeals, cannot sustain the payments to the commissioners since it only authorizes payment for services rendered by township officers "in the duties of their respective offices." In the case of the commissionerships, there was no legally qualified office. The payments may be recovered.
III.
Were the offices of commissioner and township board member incompatible?
Since neither the township electors nor the board had authority to create the commissionerships, this question need not be answered. Had the authority to create the offices existed, quite clearly they would have been incompatible with any office on the township board, since there is universal agreement that, when the holder of one office can pass upon the salary of another office or otherwise supervise that office, the two are incompatible. Weza v. Auditor General, 297 Mich. 686, 688; OAG 1943-1944, p 693; OAG 1947-1948, pp 658, 659; 1 OAG 1959-1960, p 113; 2 OAG 1959-1960, p 12; OAG 1961-1962, pp 77, 392. In this case, since the defendants either set their own salaries as commissioners or were instrumental in doing so, the office of commissioner would be incompatible with that of board member.
The decision of the Court of Appeals should be reversed. The case should be remanded to the circuit court for further proceedings in accordance with this opinion. Costs to appellant.
DETHMERS, and SOURIS, JJ., concurred with ADAMS, J.