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Magley v. M & W Inc.

Court of Appeals of Michigan

July 17, 2018

CHARLES MAGLEY III, Plaintiff-Appellant,
M & W INCORPORATED, Defendant-Appellant.

          St. Joseph Circuit Court LC No. 16-001080-NZ

          Before: Hoekstra, P.J., and Murphy and Markey, JJ.

          PER CURIAM.

         In this tort case arising from the repossession of farm equipment, plaintiff appeals as of right the order granting summary disposition to defendant under MCR 2.116(C)(10). Because the trial court erred by concluding that defendant could not be held liable when acting as an agent for a third-party, and material questions of fact remain regarding the wrongfulness of defendant's conduct, we reverse the grant of summary disposition to defendant and remand for further proceedings.

         Plaintiff is a farmer and the owner of a John Deere tractor. Plaintiff had a loan with Kellogg Community Credit Union ("Kellogg") relating to the tractor, and under the terms of plaintiff's "Loan and Security Agreement" with Kellogg, the tractor was secured collateral, subject to repossession and sale in the event that plaintiff defaulted on his loan. Defendant is an "asset recovery" company that repossesses property and sells it on behalf of lienholders. Plaintiff defaulted on his tractor loan, and on June 28, 2016, acting on Kellogg's behalf, defendant repossessed plaintiff's tractor. Notably, when defendant repossessed the tractor, it also took other farm equipment, specifically a "front-mounted tank" and a "sprayer," both of which plaintiff had recently attached to the tractor in preparation for his annual herbicide spraying of his crops. Unlike the tractor itself, plaintiff owned the sprayer and tank outright, and these items were not mentioned in the loan documents. Despite plaintiff's demands for the return of his property, defendant kept plaintiff's items for approximately one month and posted pictures of the tractor-with the sprayer and tank attached-on Facebook as a featured item in an upcoming auction. After plaintiff resolved his loan dispute with Kellogg, defendant eventually released plaintiff's tractor, sprayer, and tank to him.[1] However, by the time the property was released, plaintiff had been deprived of the use of his equipment for a month, he had to pay someone else to spray his crops, and he had suffered damages to his crops because he missed the "most opportune time" for spraying his crops.

         Plaintiff filed the current lawsuit against defendant, alleging: (1) common law conversion, (2) statutory conversion, (3) trespass to chattels, and (4) negligence. Briefly stated, plaintiff alleged that defendant wrongfully repossessed the sprayer and the tank, that defendant wrongfully withheld those items from him, and that defendant wrongfully posted the items for auction, despite plaintiff's demands for the return of his farm equipment. Defendant moved for summary disposition under MCR 2.116(C)(10), arguing that it acted lawfully when repossessing the tank and sprayer and that, if there was any wrongdoing, defendant could not be held liable while acting on Kellogg's behalf based on information provided by Kellogg. The trial court granted defendant's motion for summary disposition under MCR 2.116(C)(10), stating that it agreed with defendant's position. Plaintiff now appeals as of right.

         On appeal, plaintiff argues that the trial court erred by concluding that defendant could not be held liable for wrongful conduct while acting on Kellogg's behalf to repossess property. Additionally, plaintiff argues that the tank and sprayer were not subject to repossession because these items do not qualify as "accessions" within the meaning of the Loan and Security Agreement. Plaintiff acknowledges that, under the Loan and Security Agreement, attached items, even if not accessions, may be taken incidentally to repossession of secured property; but, plaintiff argues that defendant's conduct in this case was nevertheless wrongful because defendant made no attempt to return plaintiff's items and refused plaintiff's demands for the return of his property. We agree.

         We review de novo a trial court's decision to grant a motion for summary disposition. Ligon v Detroit, 276 Mich.App. 120, 124; 739 N.W.2d 900 (2007). "When reviewing a motion under MCR 2.116(C)(10), which tests the factual sufficiency of the complaint, this Court considers all the evidence submitted by the parties in the light most favorable to the non-moving party and grants summary disposition only where the evidence fails to establish a genuine issue regarding any material fact." Sisk-Rathburn v Farm Bureau Gen Ins Co of Mich, 279 Mich.App. 425, 427; 760 N.W.2d 878 (2008). "There is a genuine issue of material fact when reasonable minds could differ on an issue after viewing the record in the light most favorable to the nonmoving party." Allison v AEW Capital Mgt, LLP, 481 Mich. 419, 425; 751 N.W.2d 8 (2008). To this extent this case involves questions concerning the interpretation of a contract or a statute, our review is de novo. Rodgers v JPMorgan Chase Bank NA, 315 Mich.App. 301, 307; 890 N.W.2d 381 (2016).

         The first issue on appeal is whether defendant may be held liable when repossessing property on behalf of Kellogg based on information provided by Kellogg.[2] "Agency in its broadest sense includes every relation in which one person acts for or represents another by his authority." Saums v Parfet, 270 Mich. 165, 171; 258 N.W. 235 (1935) (quotation marks and citation omitted). Generally, an agent may be held personally liable for his or her own tortious conduct, even when acting on behalf of a principal. See Dep't of Agriculture v Appletree Mktg, LLC, 485 Mich. 1, 17-18 & n 39; 779 N.W.2d 237 (2010). More fully, our Supreme Court has quoted with approval from 2 Restatement Agency, 3d, stating:

An agent is subject to liability to a third party harmed by the agent's tortious conduct. Unless an applicable statute provides otherwise, an actor remains subject to liability although the actor acts as an agent or an employee, with actual or apparent authority, or within the scope of employment. [Appletree Mktg, LLC, 485 Mich. 1, 17-18 & n 39, quoting 2 Restatement Agency, 3d, § 7.01, p 115.]

         However, under this rule, an agent is only liable for his or her own "tortious conduct" and cannot be held liable for torts committed by "the agent's principle that do not implicate the agent's conduct." 2 Restatement Agency, 3d, § 7.01, comment d.

         Notably, with regard to the tort of conversion in particular, a defendant who wrongfully exerts dominion over property is not shielded from liability on the basis that the action was undertaken in good faith on behalf of a third-party. "Conversion, both at common law and under the statute, is defined as any distinct act of domain wrongfully exerted over another's personal property in denial of or inconsistent with the rights therein." Aroma Wines & Equip, Inc v Columbian Distribution Servs, Inc, 303 Mich.App. 441, 447; 844 N.W.2d 727 (2013) (quotation marks and citation omitted).[3] Conversion is "an intentional tort in the sense that the converter's actions are willful." Foremost Ins Co v Allstate Ins Co, 439 Mich. 378, 391; 486 N.W.2d 600 (1992). However, conversion "can be committed unwittingly if [the defendant is] unaware of the plaintiff's outstanding property interest." Id. See also Lawsuit Fin, LLC v Curry, 261 Mich.App. 579, 591; 683 N.W.2d 233 (2004). Good faith, mistake, and ignorance are not defenses to a claim of conversion. See Moore v Andrews, 203 Mich. 219, 233; 168 N.W. 1037 (1918); Willis v Ed Hudson Towing, Inc, 109 Mich.App. 344, 349; 311 N.W.2d 776 (1981); see also 90 CJS Trover and Conversion § 31. Thus, for example, under the common law, when "an auctioneer receives and takes the property into his possession" from a third-party, "and sells it, paying over the proceeds, less his commission, he is liable, although he has no knowledge or want of title in the party for whom he sells, and acts in good faith." Kearney v Clutton, 101 Mich. 106, 111-112; 59 N.W. 419 (1894). Likewise, in the absence of governmental immunity, a sheriff or court officer is liable for conversion for unlawfully seizing personal property, "even if he or she does so in the execution of a court order." Aroma Wines & Equip, Inc 497 Mich. at 352-353, 359. As one Court succinctly explained: "It is not a defense to say, 'I supposed I had authority to do so.'" Kenney v Ranney, 96 Mich. 617, 618; 55 N.W. 982 (1893). Instead, a defendant's actions in reliance on the asserted rights of a third-party are only lawful when the third-party actually has a "legal right" to the property. See Gibbons v Farwell, 63 Mich. 344, 349; 29 N.W. 855 (1886).

         It follows that in this case, contrary to the trial court's conclusions, defendant may be held liable for its own torts, including conversion, even if acting on Kellogg's behalf. Although defendant purports to have repossessed plaintiff's property in reliance on Kellogg's "Summary of Account" document and repossession request, a mistaken belief that Kellogg had a right to the items is not a defense.[4] Moore, 203 Mich. at 233; 168 N.W. 1037 (1918); Kearney, 101 Mich. at 111-112; Willis, 109 Mich. at 349. Instead, the question is whether Kellogg truly had a legal right to the property, Gibbons, 63 Mich. at 349, and it was defendant's obligation to ensure that it exercised only those rights that Kellogg possessed, see Kenney, 96 Mich. at 618; Kane v Hutchinson, 93 Mich. 488, 490; 53 N.W. 624 (1892). If Kellogg did not have a legal right to the sprayer and tank, the fact that defendant acted on Kellogg's behalf is immaterial and thus the existence of an agency relationship did not entitle defendant to summary disposition.

         Given that defendant acted on behalf of Kellogg, the issue in this case thus becomes whether Kellogg had a legal right to take, and refuse to return, plaintiff's tank and sprayer. Generally, if a borrower defaults on a loan, a secured creditor may take possession of the collateral. MCL 440.9609(1)(a). However, repossession of property in which a creditor does not have a security interest can constitute conversion. See generally Larson v Van Horn, 110 Mich.App. 369, 379; 313 N.W.2d 288 (1981). Even if there is a valid security interest in some property, the incidental taking of other property can support a claim for conversion, "unless the loan agreement includes the debtor's consent to the incidental taking." Clark v Auto Recovery Bureau Conn, Inc, 889 F.Supp. 543, 548 (D Conn, 1994).[5] See also 46 Causes of Action 2d 513, § 10; Kane, 93 Mich. at 490 ("It was the duty of the officer to see that no other articles were taken except those described in his writ."). Moreover, a refusal to return property can support a claim for conversion. Aroma Wines & Equip, Inc, 497 Mich. at 352. If property is eventually returned after a period of wrongful detention, the owner may nevertheless be entitled to damages, including damages for the reasonable value of the ...

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