Case Title: GEORGE ROSE V NATIONAL AUCTION GROUP

Citation: 

Docket Number: 210666

State: michigan

Court: Michigan Supreme Court

Date: 2002-07-09T00:00:00Z

Document:
____________________________________________________________________________________________ 
____________________________________________________________________________________________________________________________ 
____________________________________ 
Michigan Supreme Court 
Lansing, Michigan 48909 
C hief Justice 
Justices 
Maura D. Corrigan  
Michael F. Cavanagh 
Elizabeth A. Weaver 
Marilyn Kelly 
Clifford W. Taylor 
Robert P. Young, Jr. 
Opinion 
Stephen J. Markman 
FILED JULY 9, 2002  
GEORGE ROSE and FRANCES ROSE,  
Plaintiffs-Appellees,  
v  
No. 116600  
THE NATIONAL AUCTION GROUP, INC, 
ANDREW BONE, WILLIAM BONE, DONALD 
BOOZER, EDDIE HAYNES and EDDIE 
HAYNES, INC.,  
Defendants-Appellants,  
and  
RANDALL R. HALL,  
Defendant.  
BEFORE THE ENTIRE BENCH  
TAYLOR, J.  
This case arises from the auction of an island formerly  
owned by plaintiffs.  In short, plaintiffs contend that  
defendants 
induced 
plaintiffs, 
by 
fraud 
and 
misrepresentation,  
into surrendering their contractual right to withdraw the  
property from the auction by offering and agreeing to use a  
false or “shill” bidder at the auction and, thus, plaintiffs  
should not have to honor their earlier negotiated contract  
with defendants.  The trial court granted summary disposition  
in favor of defendants on all claims.  The Court of Appeals  
reversed the judgment of the trial court, holding that some of  
plaintiffs’ 
claims 
should go forward.  Unpublished opinion per  
curiam, issued March 7, 2000 (Docket No. 210666).  We disagree  
and reverse the judgment of the Court of Appeals in part.  In  
particular, 
this 
case implicates the “clean hands” doctrine in  
light of plaintiff George Rose’s acknowledged agreement to  
engage in an illicit shill bidder scheme.  
I  
Plaintiffs George and Frances Rose owned an island in  
Lake Huron, known as “Crooked Island,” which they had decided  
to sell.  Mr. Rose approached defendant National Auction Group  
(NAG) through its agent Andrew Bone about selling the island  
at an auction.  There were extended contacts between Mr. Rose  
and representatives of NAG over the course of approximately  
one year.  Mr. Rose periodically had legal counsel in these  
discussions.  At one point, William Bone, another of NAG’s  
agents, met with Mr. Rose at the island, discussed NAG’s  
experiences in selling Lake Huron island property, and told  
Mr. Rose that it would be no problem to obtain Mr. Rose’s  
2  
 
  
 
 
 
desired price of $850,000 for the island.1
 To gain  
familiarity with NAG’s approaches to the auction process,  
during the course of this year, at NAG’s invitation, plaintiff  
attended four Michigan property auctions conducted by NAG.  
Plaintiffs 
thereafter 
signed 
a 
one-year 
listing 
agreement  
with NAG on July 11, 1996.  This agreement expressly provided  
that the island was to be sold at an auction with no  
guaranteed minimum selling price, a circumstance that is also  
described as an absolute auction with no reserve.  The  
agreement stated:  
The National Auction Group, Inc. will sell the 
Property at absolute auction with no minimums or 
reserves.  The Property will be sold to the highest 
bidder(s) regardless of the bid price and Seller 
understands and acknowledges that he relinquishes 
any right to place any minimum or reserve on the 
bidding with respect to the property.2  
The agreement qualified this submission to auction by  
providing that Mr. Rose “has [the] right to withdraw property  
1 Our recitation of the facts either presents such facts 
as are undisputed or, in case of a dispute, attempts to 
present the disputed matters in a light favorable to  
plaintiffs. 
We use this approach because in reviewing a 
decision on a motion for summary disposition brought by 
defendants, we are required to consider the factual record in 
a light most favorable to plaintiffs.  Quinto v Cross & Peters  
Co, 451 Mich 358, 362; 547 NW2d 314 (1996). We also note that  
all the individual defendants who are parties to this appeal 
were apparently employees or other agents of NAG.  
2  Notably, an alternative paragraph in the form used to 
draft the contract that contemplated the possibility of a 
seller setting a “reserve” or minimum selling price for the 
auction was crossed-out.  
3  
 
prior to auction.”  As to any guarantee concerning the  
ultimate 
selling 
price, 
the 
agreement 
included 
an  
acknowledgment that NAG “has made no representations or  
promises as to the price that may be bid at the auction and  
. . . has in fact stated it has no opinion as to the value of  
the property or of the price it will bring at the auction  
sale.”  Finally, the listing agreement at two points included  
language 
that 
specifically 
precluded 
oral 
modifications 
of 
the  
agreement.  
Eventually, 
after 
the 
circulation 
of 
brochures 
announcing  
the auction by NAG (which advertised that the auction would be  
an “absolute auction,” i.e., a “no reserve auction” without  
any set minimum bid3), the contemplated auction was held.  At  
the auction, Mr. Rose was concerned that only five bidders,  
including those participating by telephone, had registered,  
and he indicated to William Bone that he wanted to withdraw  
the property from the auction as was his right under the  
agreement.  William Bone, in an attempt to reassure, told Mr.  
Rose that the auction could go forward, but that he did not  
need to be concerned that the price would be less than he  
3  The cover page of the brochure, which also included 
listings for the auctioning of other property besides the 
island presently at issue, was entitled “Absolute Auction.” 
Further, in the part of the brochure with a relatively 
detailed description of Crooked Island, it was expressly 
stated, “Selling regardless of price.”  
4  
 
wanted.   The reason was that if the bidding was too low, a  
NAG shill would make a phony bid.  Only NAG agents and Mr.  
Rose would know the bid was not to actually buy the property,  
but instead to deprive the true high bidder of the property.  
Notwithstanding the obvious perfidy of this scheme, Mr. Rose  
agreed to it and, accordingly, the auction proceeded.  
As the auction proceeded, bids were few and were stalled  
at $175,000.  At this point, a recess was called. Mr. Rose  
then met with the NAG representatives, saying that $175,000  
was unacceptable and that he wanted at least $850,000 for the  
island.  For their part, the NAG representatives attempted to  
convince Mr. Rose that $175,000 was a fair bid, but he did not  
agree and directed NAG to reconvene the bidding and implement  
the shill bidder scheme.  Once reopened, whether through  
bungling or yet more chicanery, the promised NAG shill did not  
enter the bidding and, thus, the bidding closed at $175,000.  
Mr. Rose was, needless to say, dismayed with this outcome, but  
did eventually sign a purchase agreement for the sale of the  
property for $175,000 plus a six percent auction fee to be  
paid to NAG by the high bidder.4  Mr. Rose now seeks to use  
4  Mrs. Rose refused to sign the purchase agreement, but 
the Court of Appeals has held that her refusal did not 
invalidate the agreement.  The propriety of that ruling is not 
before us.  
5  
 
the courts to settle the score with his unfaithful  
confederates.  
Plaintiffs 
filed this suit against NAG and the affiliated  
individual defendants, essentially seeking reimbursement for  
the commissions paid to them pursuant to the listing agreement  
as well as damages to put them in the place they would have  
been had the shill performed.  Plaintiffs alleged two types of  
claims.5  The first were “precontract” claims of fraud,  
misrepresentation, and breach of fiduciary duty covering the  
time before the execution of the listing agreement.  The  
second were “postcontract” oral claims springing out of the  
shill scheme agreed to at the auction.  These also sounded in  
fraud, misrepresentation, and breach of fiduciary duty, and  
asked the trial court to act in equity to void the purchase  
agreements and to divest NAG of the commission paid to it.  
Defendants moved for summary disposition under MCR  
2.116(C)(7) and (10).  Defendants argued that the alleged  
precontract representations were not actionable because they  
were mere “puffing” as was made clear by the fact that the  
listing 
agreement, 
not 
once, 
but 
twice 
specifically 
disclaimed  
that defendants had made any representations concerning the  
5  Plaintiffs also named Randall Hall, the good-faith 
purchaser of the property, as a defendant.  However, Hall’s 
motion for summary disposition was granted, and he was 
dismissed from the suit. Plaintiffs do not raise any claims 
with respect to Hall in this appeal.  
6  
value of the property or the price at which it might sell.  
Regarding the postcontract claims, defendants argued that any  
oral agreement alleged by defendants would contravene the “no  
oral modification” clause of the written agreement as well as  
the applicable statute of frauds. Defendants further argued  
that because the use of shill bidders was illegal that  
plaintiffs should not be able to invoke the court’s equity  
powers to enforce this illegal contract.  
The trial court ruled in favor of defendants, holding  
that with respect to the precontract claims, the express  
language of the written agreement and the accompanying  
disclaimer specifically refuted those claims and that the  
precontract 
statements 
allegedly 
made 
by 
defendants  
“constitute either puffing, mere opinion, or are statements  
pertaining to future events . . . .” 
Regarding the  
postcontract claims, the trial court held that the oral  
understanding allegedly arrived at by the parties was illegal  
because it would require the use of false bidders, it would be  
in violation of the statute of frauds, and it would violate  
the written agreement that specifically required any changes  
to be in writing and signed by the parties.  
A unanimous Court of Appeals affirmed the trial court  
regarding 
the 
“precontract” claims, but, by a two-to-one vote,  
reversed regarding the “postcontract” claims.  As to the  
7  
 
 
 
postcontract claims, the majority essentially concluded that,  
while the oral agreement contemplating the use of a shill  
bidder was void as against public policy, this did not  
necessarily 
preclude 
plaintiffs 
from 
maintaining 
an 
action 
for  
fraud or misrepresentation or for negligence or breach of  
fiduciary duty in order to recover certain types of damages  
from defendants.  The Court further reinstated certain claims  
by plaintiffs related to defendants’ efforts in publicizing  
and conducting the auction. 
We granted defendant’s  
application for leave to appeal regarding generally the  
postcontract issues.  
II  
This case arises from the trial court’s grant of summary  
disposition in favor of defendants under MCR 2.116(C)(10).  We  
review this issue de novo.  Maiden v Rozwood, 461 Mich 109,  
118; 597 NW2d 817 (1999).  In reviewing such a decision, we  
consider the affidavits, pleadings, depositions, admissions,  
and other documentary evidence submitted by the parties in the  
light most favorable to the party opposing the motion.  Quinto  
v Cross & Peters Co, 451 Mich 358, 362; 547 NW2d 314 (1996).  
Summary disposition under MCR 2.116(C)(10) is appropriately  
granted if there is no genuine issue regarding any material  
fact and the moving party is entitled to judgment as a matter  
of law. Id.  
8  
 
III  
Before 
us 
then 
are 
the 
“postcontract” 
claims.  
Plaintiffs, in their fraud and misrepresentation claims are  
seeking, by the invocation of the court’s equity powers, to  
retrospectively revoke their obligations to NAG under the  
written contract for the holding of the auction.  That is,  
they argue they would have canceled the auction had it not  
been for the lure of the shill bidder scheme.  
Yet, Mr. Rose’s reason for not canceling the auction was  
because he chose to enter into an agreement with NAG to  
surreptitiously deprive the bidders of the no reserve auction  
that had been advertised.  It cannot be doubted that even  
those with no business world experience would understand that  
it is wrong to advertise one thing and then secretly plot to  
never deliver on the promises. Our law follows this norm as  
it is undisputed that the use of a “shill” or false bidder  
unbeknown to the sincere bidders at an auction is contrary to  
our public policy.  Under common-law principles articulated  
long ago, agreements to stifle competitive bidding are  
generally contrary to public policy. See Detroit Trust Co v  
Agozzinio, 280 Mich 402, 405; 273 NW 747 (1937); Leland v  
Ford, 245 Mich 599; 223 NW 218 (1929).6  Given improper  
6  To similar effect, see MCL 446.58, wherein the 
Legislature banned the use of shills in personal property 
auctions.  
9  
 
conduct by Mr. Rose, plaintiffs’ equitable claims of fraud and  
misrepresentation7 are barred by the bedrock principle that  
the preservation of the integrity of the judicial system means  
no court acting in equity can allow its conscience to be moved  
to give such a plaintiff relief. Indeed, the maxim that one  
“who comes into equity must come with clean hands” is “the  
expression of one of the elementary and fundamental  
conceptions of equity jurisprudence.”  2 Pomeroy’s Equity  
Jurisprudence, ch I, p 90, § 398, 92 (1941).  The courts of  
this state have held similarly.  Justice Cooley wrote for a  
unanimous Court in Rust v Conrad, 47 Mich 449, 454; 11 NW 265  
(1882):  
[I]f there are any indications of overreaching 
or unfairness on [an equity plaintiff’s] part, the 
court will refuse to entertain his case, and turn 
him over to the usual remedies.  
Writing even more pointedly and echoing Pomeroy, we have  
reiterated this rule more recently, stating in a succinct  
formulation of the doctrine “that one who seeks the aid of  
equity must come in with clean hands.”  Stachnik v Winkel, 394  
Mich 375, 382; 230 NW2d 529 (1975), quoting Charles E Austin,  
Inc v Secretary of State, 321 Mich 426, 435; 32 NW2d 694  
(1948).
 The Stachnik Court aptly described the scope and  
7  See Flood v Welsh, 334 Mich 583, 591-592; 55 NW2d 104 
(1952) 
(describing 
the cancellation of an executed contract on 
the basis of fraud as a power of a court of equity).  
10  
 
purpose of the clean hands doctrine as  
“a self-imposed ordinance that closes the doors of 
a 
court 
of 
equity 
to 
one 
tainted 
with  
inequitableness or bad faith relative to the matter 
in which he seeks relief, however improper may have  
been the behavior of the defendant.  That doctrine  
is rooted in the historical concept of the court of 
equity as a vehicle for affirmatively enforcing the 
requirements of conscience and good faith.  This  
presupposes a refusal on its part to be ‘the 
abettor of iniquity.’ Bein v Heath, [47 US] 6 How 
228, 247 [12 L Ed 416 (1848)].” 
Precision  
Instrument 
Manufacturing 
Co 
v 
Automotive  
Maintenance Machinery Co, 324 US 806, 814; 65 S Ct 
993; 89 L Ed 1381 (1944). [Id., at 382 (emphasis 
added).]  
Further, relevant to the instant case, the clean hands  
doctrine has been applied to deny equitable relief to parties  
to a fraudulent contract:  
If a contract has been entered into through 
fraud, or to accomplish any fraudulent purpose, a 
court of equity will not, at the suit of one of the 
fraudulent parties,—a particeps doli,—while the  
agreement is still executory, either compel its 
execution or decree its cancellation, nor after it 
has been executed, set it aside, and thus restore 
the plaintiff to the property or other interests 
which he had fraudulently transferred. [2 Pomeroy 
supra, § 401, p 105.][8]  
8  Unquestionably, the most famous illegal purpose 
contract case is the legendary and perhaps supposititious 
“highwayman’s case,” that generations of law students have 
trained on. There, one criminal unsuccessfully attempted to 
invoke equity to sue another for a share of their ill-gotten 
booty.  Our Court in 1956 discussed this case, quoting from 
Pothier on Obligations, in a fashion that cannot be improved 
upon, as follows:  
“There is a tradition that a suit was  
instituted by a highwayman against his companion to 
account for his share of the plunder, and a copy of  
11  
 
Accordingly, while plaintiffs emphasize the alleged improper  
behavior of defendants in devising the shill bidder scheme and  
using it to induce Mr. Rose to continue with the auction, this  
does not change the fact that plaintiffs are barred as a  
matter of law by the clean hands doctrine from advancing their  
equitable claims of fraud and misrepresentation in connection  
with that scheme.  
In 
concluding 
that 
plaintiffs’ 
fraud 
and  
misrepresentation claims in connection with the shill bidder  
scheme were not barred as a matter of law, the Court of  
Appeals concluded that “an issue of fact exists whether  
plaintiffs 
reasonably 
relied 
on 
. 
. 
. 
defendants’  
the proceedings has been published as found amongst 
the papers of a deceased attorney.  It was a bill  
in the Exchequer, which avoided stating in direct 
terms the criminality of the engagement, and is 
founded upon a supposed dealing as copartners in 
rings, watches, et cetera, but the mode of dealing 
may be manifestly inferred.  The tradition receives  
some degree of authenticity, by the order of the 
court being such as would in all probability ensue 
from such an attempt.  The order was, that the bill 
should be dismissed with costs for impertinence, 
and the solicitor fined 50£.  The printed account 
is accompanied by a memorandum which states the 
particular times and places where the plaintiff and 
defendant were afterwards executed.”  [Manning v  
Bishop of Marquette, 345 Mich 130, 133-134; 76 NW2d 
75 (1956), quoting 2 Evans’, Pothier on Obligations 
(3d Am ed), pp 2,3.]  
Fortunately for the present parties, Michigan law tends to be 
far less harsh than the early common law in England.  
12  
 
representations that they would use a false bidder to prevent  
plaintiffs’ property from being sold below their minimum  
price.”  In this regard, the Court noted that plaintiffs  
contended that they were unaware that use of a false bidder  
was illegal. 
While acknowledging the general rule that  
ignorance of the law cannot prevent its enforcement, the Court  
stated that “when a mistake of law is predicated on an  
affirmative misrepresentation by one who acts in a fiduciary  
capacity, the law is more forgiving.”  The Court quoted the  
following from Tompkins v Hollister, 60 Mich 470, 480; 27 NW  
651 (1886), in support of this analysis:  
It is true . . . that mistakes of law cannot  
usually be a ground of relief, when standing alone. 
The current of authority runs in that direction 
most strongly, although in some states even such 
relief has been granted.  
But it is also true that there are cases of  
fraudulent misrepresentations or concealments of 
matters of law by those holding confidential  
relations to the person wronged thereby which 
equity will relieve against.  Where one relies upon  
another, and has a right to so rely, and the person 
relied upon omits to state a most material legal 
consideration within his knowledge, of which the 
other is ignorant, affecting his rights, and the 
person thus ignorant acts under this misplaced 
confidence and is misled by it, a court of equity 
will afford relief, especially if such action is to 
the advantage of the person whose advice is taken, 
even though no fraud was intended[.]  [Emphasis 
added.]  
We conclude that, in its consideration of Tompkins, the  
Court of Appeals failed to appropriately consider the  
13  
 
 
 
 
emphasized language that allows a claim of fraud or  
misrepresentation related to a point of law only where the  
plaintiff “has a right to so rely” on the advice.9  Stated  
more plainly, a person cannot avoid the clean hands doctrine  
by “relying” on advice or inducement to engage in a course of  
conduct where it is plainly evident that the conduct is  
illegal or unethical. We note the following from 3 Pomeroy,  
supra, § 891, pp 509-510:  
Any representation, in order that one may be 
justified in relying upon it, must be, in some 
degree at least, reasonable; at all events, it must 
not be so self-contradictory or absurd that no 
reasonable man could believe it.  
Moreover, even underhanded conduct that does not rise to the  
level of being legally prohibited can nevertheless require  
application of the clean hands doctrine:  
Misconduct which will bar relief in a court of  
equity need not necessarily be of such nature as to 
be punishable as a crime or to constitute the basis 
of legal action.  Under this maxim, any willful act 
in regard to the matter in litigation, which would 
be condemned and pronounced wrongful by honest and 
fair-minded men, will be sufficient to make the 
hands of the applicant unclean. [2 Pomeroy, supra, 
§ 404, p 143.]  
It appears that no previously reported Michigan case squarely  
addresses the point, but we believe our conclusion that a  
party has no right to rely on advice to engage in blatantly  
9  In light of our analysis, it is unnecessary to decide 
whether defendants actually owed any fiduciary duties to 
plaintiffs.  
14  
 
unethical 
conduct 
is 
in 
harmony 
with 
our 
equity  
jurisprudence.10  We believe that this is a reasonable rule.  
While it is appropriate for a party to secure the services of  
an expert for advice about legal, technical, or complex  
matters, we see no reason that the explicit or implicit advice  
of such an expert should allow a party to violate basic  
ethical norms that are obvious to any sentient person.  Thus,  
contrary to the possible implication of the Court of Appeals  
opinion, even if a party fails to appreciate the illegality of  
certain conduct, that does not necessarily preclude the fact  
that the party engaged in such conduct from requiring  
application of the clean hands doctrine.  
In sum, the clean hands doctrine bars the present claims.  
No person capable of understanding the advertising that Mr.  
Rose caused to be published, as Mr. Rose certainly was, could  
have felt that the use of a shill bidder was ethically  
acceptable conduct.  Thus, application of the clean hands  
doctrine is justified because the claims in question are  
inextricably tied to Mr. Rose’s agreement to a fraudulent  
10  See Stachnik, supra (denying equitable relief to 
parties who misrepresented facts related to a purported 
purchase agreement on the basis of the clean hands doctrine); 
Isbell v Brighton Area Schs, 199 Mich App 188; 500 NW2d 748 
(1993) (holding that, under the clean hands doctrine, the 
plaintiff was not entitled to the equitable relief of ordering 
the school district to issue a high school diploma where she 
was denied a diploma on the basis of unexcused absences from 
school and that she had forged excuse notes).  
15  
shill bidder scheme, and Mr. Rose will not be heard to claim  
he had a right to rely on advice that he and NAG could get  
together to swindle the very individuals they had advertised  
to attract.  In the trenchant and stinging words of Justice  
Smith in Manning v Bishop of Marquette, 345 Mich 130, 131; 76  
NW2d 75 (1956), “A rogue does not appeal to our conscience.”  
Justice 
Cavanagh 
agrees 
with 
our 
rejection 
of 
plaintiffs’  
equitable claims, but finds it anomalous that, given the  
defendants’ 
alleged 
initiation 
of 
the 
treacherous 
agreement 
at  
the auction, NAG will nevertheless be able to retain its  
commission secured from plaintiffs’ proceeds for the sale of  
the island.  While this is an understandable reaction, the  
reflective 
answer 
is 
that, 
unlike 
plaintiffs, 
NAG’s  
entitlement to the commission is based in law rather than  
equity and, thus, the clean hands doctrine, which is only  
relevant in equitable actions, cannot be invoked to deny NAG  
its commission from the completed sale.  Finally, Justice  
Cavanagh discusses doctrines asserted to be applicable to NAG  
that would preclude its entitlement to a commission because  
the commission was the product of an illegal contract. This  
argument is off-target, however, inasmuch as the commission  
derives from the initial auction contract, which all  
acknowledge was legal, rather than the later “shill bidder”  
agreement, which was not. Accordingly, in our view, Justice  
16  
 
 
Cavanagh’s conclusions predicated on the illegal contract  
doctrine 
are 
unpersuasive 
because 
they 
misapprehend 
the 
origin  
of NAG’s entitlement to the commission.11  
IV  
The Court of Appeals also reversed the trial court’s  
grant of summary disposition in favor of defendants on the  
basis of plaintiffs’ claims of negligence and breach of  
fiduciary duty in connection with defendants’ conduct in  
suggesting the shill bidder scheme.  However, we conclude that  
the 
trial 
court 
correctly granted summary disposition in favor  
of defendants on these claims.  
With regard to the negligence claim, a necessary element  
to establish such a claim is showing breach of a duty owed to  
the plaintiff.  Case v Consumers Power Co, 463 Mich 1, 6; 615  
NW2d 17 (2000).  In allegedly suggesting the shill bidder  
scheme, defendants did not breach any duty to plaintiffs.  The  
public 
policy 
against 
secretly 
stifling 
competitive 
bidding 
at  
an auction is obviously for the protection of sincere bidders  
11  We are also unpersuaded by Justice Weaver’s partial 
dissent.  While she would mitigate the straightforward 
application of the clean hands doctrine, we believe that, even 
assuming the doctrine she invokes should be recognized in this 
state, Mr. Rose and NAG were of substantially equal moral 
fault with regard to the alleged shill bidder scheme (assuming 
as we must for present purposes that such a scheme was 
actually devised).  They mutually agreed to a scheme that was 
blatantly fraudulent in seeking to deceive legitimate bidders 
and, accordingly, we see no reason to depart from the clean 
hands doctrine in this case.  
17  
 
at the auction, not for the protection of sellers who may be  
willing to engage in such a scheme.  Further, it cannot be  
said that there was any breach of duty in defendants’  
“failure” to follow through with the alleged shill bidder  
scheme because there cannot be a legal duty to commit an  
illegal act.  While we would agree with the partial dissent  
that, as a general proposition, an auctioneer owes a basic  
duty of competence and fairness to a seller, this duty does  
not extend to protecting a seller against its own willingness  
to 
engage 
in 
fraudulent conduct.  Thus, plaintiffs’ negligence  
claims fail because there is no evidence of a requisite breach  
of duty to plaintiffs.  
Plaintiffs’ breach of fiduciary duty claim must likewise  
fail.  A breach of fiduciary duty claim requires that the  
plaintiff 
“reasonably 
reposed 
faith, 
confidence, 
and 
trust” 
in  
the fiduciary. Beaty v Hertzberg & Golden, PC, 456 Mich 247,  
260; 571 NW2d 716 (1997) (emphasis added).  For the reasons  
discussed 
in 
the 
preceding section of this opinion, plaintiffs  
could not reasonably have believed that it was appropriate to  
engage in a shill bidder scheme or reasonably have expected  
that they were legally entitled to have defendants follow  
through with such an illegal scheme.  Thus, the evidence does  
not support plaintiffs’ breach of fiduciary duty claim  
regardless of whether defendants actually owed any fiduciary  
18  
 
duties to plaintiffs.12  
V  
The Court of Appeals in conclusory terms also reinstated  
other claims of negligence and breach of fiduciary duty  
brought by plaintiffs.  These claims amount to allegations  
that plaintiffs did not adequately publicize and conduct the  
auction.  However, plaintiffs failed to provide evidence of  
how specifically defendants were allegedly deficient in this  
regard.  It is not enough to create a genuine issue of  
material fact to provide conclusory statements that a duty was  
breached.
 See Quinto, supra at 371-372 (holding that an  
affidavit that provided “mere conclusory allegations and was  
devoid of detail” was insufficient to avoid summary  
disposition under MCR 2.116(C)(10)). Thus, we conclude that  
the trial court properly granted summary disposition in favor  
of defendants on these claims.  
VI  
The decision of the Court of Appeals in this case is  
reversed in part to the extent that it is inconsistent with  
12  Because it is unnecessary to the resolution of this 
case, 
we 
respectfully decline to address the partial dissent’s 
conclusions regarding the scope of the fiduciary duties that 
auctioneers owe to their principals.  Whatever those duties  
may be, plaintiffs still cannot have a cognizable claim for 
breach of fiduciary duty under these circumstances because 
they could not reasonably have relied on the shill bidder  
scheme.  
19  
 
 
this opinion.  The circuit court’s orders granting summary  
disposition in favor of defendants on the relevant claims are  
reinstated.  
CORRIGAN, C.J., and YOUNG and MARKMAN, JJ., concurred with  
TAYLOR, J.  
20  
___________________________________ 
v 
S T A T E O F M I C H I G A N  
SUPREME COURT  
GEORGE ROSE and FRANCES ROSE,  
Plaintiffs-Appellees,  
No. 116600  
THE NATIONAL AUCTION GROUP, 
INC., ANDREW BONE, WILLIAM BONE, 
DONALD BOOZER, EDDIE HAYNES, and 
EDDIE HAYNES, INC.,  
Defendants-Appellants,  
and  
RANDALL R. HALL,  
Defendant.  
CAVANAGH, J. (concurring in part and dissenting in part).  
The majority holds that plaintiffs’ equitable claims are  
barred by the clean hands doctrine and in so doing affirms the  
trial court’s order awarding the commission to defendants.  
The 
majority 
also 
holds that plaintiffs’ negligence claim must  
fail because no duty to conduct the auction in a negligent­
free fashion was owed to plaintiffs, and that plaintiffs’  
 
breach of fiduciary duty claim cannot stand because it was  
unreasonable as a matter of law for the plaintiffs to believe  
defendants would execute an unlawful scheme.  I agree that  
plaintiffs are barred from recovery on their equitable  
contract claims asserting fraud and misrepresentation.  
However, I would reverse the trial court’s award of  
commission.  Further, I think it is clear that defendants owed  
a fiduciary duty to plaintiffs and thus the negligent 
auctioneer claim should not be dismissed.  Therefore, I 
respectfully dissent. 
I 
Plaintiffs’ claims arise from a contract that is void as  
against public policy.  Courts may grant one party restitution  
even though such an agreement violates public policy.  II  
Farnsworth, Contracts, § 5.9, pp 75-76.  This is rare because  
courts often leave parties as they find them when they enter  
into an illegal contract.
 Exceptions are made (1) where  
forfeiture would disproportionately affect a party whose  
conduct does not warrant such a harsh result, (2) where a  
claimant may be excusably ignorant of facts that the other  
party is not, or (3) where the parties are not equally wrong.  
Id. at 76-78.  I agree with these principles and would hold  
that the parties should be left where the courts found them.  
Because this is an illegal contract, I would reverse the trial  
court’s award of $29,050 in commission to defendants. It is  
2  
 
not just to deny all relief to plaintiffs and simultaneously  
award the defendants their commission when they are arguably  
more culpable than the plaintiffs, if the alleged facts are  
found true.  The defendants allegedly tricked their principal  
(the plaintiffs) by concocting an illegal shill scheme.  That  
the defendants failed to execute the alleged scheme does not  
make them less culpable.  The majority attempts to do justice  
by applying principles of equity, but fails by dismissing the  
effect of the trial court’s decision to order payment of the  
commission.1  Therefore, I would hold that the trial court  
abused its discretion in awarding the defendants their  
commission.  
If the defendants wish to file an action to recover the  
commission, a factfinder must first determine whether the  
alleged shill scheme was used to induce the plaintiffs to go  
forward with the auction.  If the evidence presented convinces  
the factfinder that defendants acted unlawfully or without  
good faith, the defendants’ claim for commission should be  
barred.  
1  The majority erroneously concludes that the second 
agreement is wholly separate from the original contract, and 
that the original contract remains legally enforceable and 
untainted by the shill scheme.  This ignores the fact that, as 
a result of the alleged shill offer, Mr. Rose refrained from 
exercising his right to withdraw his property from the auction 
as permitted by the original contract.  To conceive of the  
parties’ agreements separately fails to recognize the true 
nature of the alleged shill offer and leads to an unjust 
result.  
3  
 
 
 
 
 
 
 
 
II  
The majority confidently asserts no duty is owed to  
plaintiffs 
because 
the public policy prohibiting shill bids is  
concerned only with the treatment of bidders. 
This  
proposition erroneously assumes the auctioneer’s duty is  
exclusive.  
Under Michigan law, a fiduciary relationship will arise  
“only when there is a reposing of faith, confidence and trust  
and the placing of reliance by one upon the judgment and  
advice of another.”  In re Jennings Estate, 335 Mich 241, 244;  
55 NW2d 812 (1952). 
Other courts have applied this  
fundamental concept to hold that auctioneers owe fiduciary  
duties to their principals.  In Cristallina, SA v Christie,  
Manson & Woods Intl, Inc, 117 AD2d 284, 292; 502 NYS2d 165  
(1986), the court held:  
The auctioneer is the agent of the consignor. 
As an agent, Christie’s had a fiduciary duty to act 
in the utmost good faith and in the interest of 
Cristallina, 
its 
principal, 
throughout 
their  
relationship.  When a breach of that duty occurs,  
the agent is liable for damages caused to the 
principal, whether the cause of the action is based 
on 
contract 
or 
on 
negligence. 
[Citations 
omitted).]  
Similarly, in Greenwood v Koven, 880 F Supp 186, 194 (SD NY,  
1995) citing, inter alia, Restatement 2d, Agency, ch 1, § 13  
(1958) (“An agent is a fiduciary with respect to matters  
within the scope of his agency”), the court held:  
To begin with, it is indisputable that  
4  
 
 
 
Christie’s acted in the capacity of an agent on 
behalf of Koven.  It is also clear that an agent 
such as Christie’s is required under the law to act 
in a fiduciary capacity on behalf of its principal.  
Several treatises assert the same.  
It is also the duty of the auctioneer to 
maintain and exercise the utmost loyalty and good 
faith to his principal.  He must not acquire or 
have antagonistic interests.  He must not deal with  
the property on his own account without his  
principal’s full knowledge and consent.  He must  
not avail himself of his situation to make profit 
for himself at his principal’s expense, and he must 
give the principal timely notice of any matters 
coming to his knowledge material for the principal 
to know for the protection of his interests.  [2 
Mechem, Agency (1914), § 2334, p 1918.]  
Another class of agents are Auctioneers, of 
whom I shall merely observe here, that they are 
considered as agents for both parties, so that  
writing down the name of a purchaser at a sale is 
sufficient memorandum within the statute of frauds, 
and binds both buyer and seller. But this must be  
taken secundum subjectam materiam; for though he is 
agent to some purposes, he is not so to all.  He is  
an agent to each party in different things, but not 
in the same things.  When he prescribes the rules  
of bidding, and the terms of the sale, he is the  
agent of the seller; but when he puts down the name 
of buyer, he is agent for him only. [1 Livermore, 
Principal & Agent and Sales by Auction, (1986 
reprint), p 77 (emphasis added).]  
According to these principles, it is clear that an auctioneer  
has the power to bind the seller while exercising total  
control over the seller’s property interest during the  
auction.
 Thus, an auctioneer’s powers provide him with a  
significant amount of control and discretion, creating a duty  
on the part of the auctioneer to act with loyalty and in good  
faith toward his principal. Therefore, with regard to matters  
5  
within the scope of their relationship, the defendants owed a  
duty to the plaintiffs.  
Unlike the majority, I cannot conclude as a matter of law  
that the plaintiff did not reasonably rely on the defendants  
to lawfully and in good faith communicate with him about the  
impending 
auction. 
 
After learning of plaintiff’s intention to  
withdraw the property from the auction block, the defendants  
allegedly induced the plaintiff to go forward by offering to  
illegally rig the event.  Thus, I would permit the trier of  
fact to determine the reasonableness of Mr. Rose’s reliance on  
the alleged offer.  
The holding of the Court of Appeals on the negligence  
claim should, therefore, be affirmed. Nonetheless, the wisdom  
of pursuing the issue rests with the plaintiffs as they should  
consider the effect of comparative negligence on their claim.  
III  
For the reasons stated above, I would reverse the trial  
court’s order awarding defendants’ commission. In addition,  
I would affirm the judgment of the Court of Appeals reversing  
the trial court’s order granting summary disposition to  
defendants on the negligent auctioneer claim.  In all other  
respects, I concur with the majority.  
KELLY, J., concurred with CAVANAGH, J.  
6  
___________________________________ 
v 
S T A T E O F M I C H I G A N  
SUPREME COURT  
GEORGE ROSE and FRANCES ROSE,  
Plaintiffs-Appellees,  
No. 116600  
THE NATIONAL AUCTION GROUP, 
INC., ANDREW BONE, WILLIAM BONE, 
DONALD BOOZER, EDDIE HAYNES, and 
EDDIE HAYNES, INC.,  
Defendants-Appellants,  
and  
RANDALL R. HALL,  
Defendant.  
WEAVER, J. (dissenting in part).  
I respectfully dissent in part from the majority opinion  
because 
I 
would 
grant the plaintiffs limited equitable relief.  
Specifically, I would not require plaintiffs to pay the  
defendants a ten-percent commission and six-percent auction  
fee, totaling $29,050.  
I agree with the majority that we must respect the usual  
rule that “who comes into equity must come with clean hands”.  
The general rule is that when two parties are in pari delicto,  
both involved in an illegal or fraudulent transaction, the  
 
 
 
 
court will not grant the plaintiff relief.  
However, that  
rule is not meant to be applied inflexibly. 
In the  
exceptional 
circumstances of this case, the Court should apply  
the equitable principle that when both parties were involved  
in the fraudulent or illegal transaction, “the one whose wrong  
is less than that of the other may be granted relief in some  
circumstances.”  27A Am Jur 2d § 132. It has long been  
recognized that the courts may interfere from motives of  
public policy.  “Whenever public policy is considered as  
advanced by allowing either party to sue for relief against  
the transaction then relief is given to him.”  Hobbs v  
Boatright, 195 Mo 693; 93 SW 934, 938 (1906)1. See also Grim  
v Cheatwood, 208 Okla 570; 257 P2d 1049 (1953)2 and Baltimore  
1  
In Hobbs, the defendants enticed plaintiff to enter 
into a scheme to defraud other persons in a rigged footrace. 
Plaintiff agreed to the scheme, put up $6,000, and ultimately 
discovered that he had been the victim of the swindle.  The  
court took notice that this was an ongoing fraud by the 
defendants, not a unique event.  The court held that even  
though the plaintiff had participated in an illegal contract, 
plaintiff would be allowed to sue for relief.  
2  
Plaintiff was induced to enter into a pretended and 
fixed poker game, with marked cards, planned by defendants and 
his confederates.  Plaintiff was thus defrauded of a sum of  
money, and executed mineral deeds in satisfaction of the loss. 
When plaintiff discovered the fraud, he brought an action to 
cancel the deeds.  The court allowed the plaintiff to proceed 
in equity because the parties were not in pari delicto, and 
“equity will intervene in the protection of one less guilty, 
notwithstanding his unclean hands.” Grim, supra, p 572.  
2  
 
& O R Co v Carman, 71 Ohio App 508; 50 NE2d 358 (1942)3.  
Here the defendants moved for summary disposition under  
MCR 2.116(C)(7) and (10). Thus, all reasonable factual  
inferences should be drawn in plaintiffs’ favor.  Considering  
the pleadings in the light most favorable to the plaintiffs,  
one can conclude that the defendants did indeed induce the  
plaintiffs to enter into the illegal shill bidding scheme, and  
that the defendants did so for their own purposes. Given that  
defendants instigated the illegal scheme, it would be unjust  
to allow defendants to receive the auctioneer’s fee and  
commission 
that 
were 
gained by their wrongdoing.  Accordingly,  
I would reverse the order of summary disposition to allow the  
plaintiffs 
the 
opportunity 
to 
pursue 
limited 
equitable 
relief,  
to the extent of not requiring plaintiffs to pay the  
commission and auctioneer’s fee.  I would do this not because  
the plaintiffs deserve the relief, but because the defendants  
should not be allowed to profit from their shenanigans. Any  
other result would reward the defendants for enticing the  
plaintiffs into the shill bidder scheme.  
3  
In Baltimore & O R Co, p 513, plaintiff brought an 
action to quiet title.  Where plaintiff’s failure to have the 
leased lands transferred to its name contributed more to  
causing the delinquent tax land sale than defendant’s failure 
to act expeditiously in securing and recording a deed to 
himself, 
the 
court 
awarded 
defendant 
equitable 
relief, 
relying 
on the rule that “[i]f the parties appear not to have been in 
pari delicto, the one whose wrong is less than that of the 
other may be granted relief in some circumstances.”  
3  
Therefore, I would reverse the Court of Appeals in part  
and hold that if the trier of fact finds that the defendants  
induced the plaintiffs to participate in the shill bidder  
scheme, the plaintiffs should be given limited equitable  
relief to ensure that the defendants do not profit from their  
bad acts. In all other respects I concur in the result of the  
majority.  
4