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### STATE OF MICHIGAN

COURT OF APPEALS

LAURA ABBONIZIO, MELANIE HULSLANDER, a Minor, by Next Friend BRYAN HULSLANDER, and PRESTON HULSLANDER,

Plaintiffs-Appellants, UNPUBLISHED June 1, 2017

v No. 330022 Wayne Circuit Court BANK OF AMERICA, NA, COMERICA BANK & TRUST, NA, and LEVEL ONE BANK, LC No. 15-005474-NZ

Defendants-Appellees.

Before: S ERVITTO , P.J., and C AVANAGH and F ORT H OOD , JJ.

P ER C URIAM

.

Plaintiffs, Laura Abbonizio, Mel anie Hulslander, a minor, by n ext friend Bryan Hulslander, and Preston Hulslander, appeal as of right the orde r granting summary disposition in favor of defendants, Bank of America, NA, Comerica Bank & Trust , NA, and Level One Bank, regarding plaintiffs’ claim of conversion of checks under the U niform Commercial Code (UCC),

MCL 440.1101 et seq. We affirm.

This matter arises out of the misappropriation of funds by pla intiffs’ attorney, Brian J. Benner, following his representation for claims stemming from a motor vehicle accident. Abbonizio was voluntarily paid personal injury protection (PIP) benefits in the amount of $7,737.78. The third-party negligence action was settled for $ 400,000. The checks written by the insurers to plaintiffs and Be nner were received by Benner, signed by Benner as plaintiffs’ personal representative, with Be nner designated in the signator y line as having power of attorney for all plaintiffs, and deposited in his client trust fund (IOL TA) account. Thereafter, Benner
removed all of the funds wit hout payment to plaintiffs.

Plaintiffs asserted a claim for conversion against defendants under the UCC

. Plaintiffs contended that the banks, and in particular Level One Bank as a depository bank, violated the provisions of the UCC by negotiating a check without the proper authorization by all payees, thus breaching the presentm ent warranties. See MCL 440.4208.

Defendants moved for summary disposition pursuant to MCR 2.116 (C)(4) and (10), and the trial court granted the motion. In granting summary dispos ition in favor of defendants, the-2- trial court did not specifically address the provisions of the UCC cited by plaintiffs in support of their claim of violation of the statutory provisions and the im position of liability. Rather, the trial court found that plaintiffs ’ claims were not sustainable due to the absence of proximate causation; in other words the harm suffered by plaintiffs was n ot attributable to the banks, but rather, the subsequentwrongdoing of Benner.

As discussed in Bernardoni v City of Saginaw , 499 Mich 470, 472; 886 NW2d 109 (2016), a trial court’s decision on a motion for summary dispos ition is reviewed de novo “to determine if the moving party is entitled to judgment as a matt er of law.” “Jurisdictional questions under MCR 2.116(C)(4) are questions of law, which are reviewed de novo.” Fulicea v State of Michigan , 308 Mich App 230, 232; 863 NW2d 385 (2014) (citation and quot ation marks omitted). “A motion for summary disposition made under MCR 2.1 16(C)(10) tests the factual sufficiency of the complaint. The Court considers all affidavi ts, pleadings, depositions, admissions, and other evidence submitted by the parties in the light most favorable to the party opposing the motion.” Bernardoni , 499 Mich at 472-473 (citation omitted). Pursuant to MCR 2.116(G)(4):

A motion under subrule (C)(10) must specifically identify the i ssues as to which the moving party believes there i s no genuine issue as to any m aterial fact. When a motion under subrule (C)(10) is made and supported as provide d in this rule, an adverse party may not rest upon the mere allegations or denials of his or her pleading, but must, by affidavits or as otherwise provided in t his rule, set forth specific facts showing that there is a genuine issue for trial. If the adverse party does not so respond, judgment, if ap propriate, shall be entered against him or her.

Hence, “[t]his rule requires the adverse party to set forth spe cific facts at the time of the motion showing a genuine issue for tri al. A reviewing court should co nsider the substantively admissible evidence actually proffered by the opposing party. When the proffered evidence fails to establish a genuine issue regarding any material fact, the m oving party is entitled to judgment
as a matter of law.” Bernardoni , 499 Mich at 473 (citations omitted).

On appeal, plaintiffs assert th at the trial court erred in granting summary disposition to defendants because the signatures on behalf of the Hulslander p laintiffs were unauthorized, rendering the check invalid and its deposit a conversion. Plai ntiffs further assert that the powers of attorney signed by Abbonizio were invalid and that the Hulsl anders’ claims should not be bifurcated based on jurisdictional limits. Finally, plaintiffs suggest that the grant of summary disposition was premature give n the need for c ontinuing discove ry. We disagree.

Initially, a point of clarific ation is required. Plaintiffs f requently refer to Benner’s endorsement of the checks as a “forged” signature. This is not an accurate characterization premised on the statutory language, which determines the applic able provision of the UCC and
the related defenses that are available. MCL 440.3420 referenc es and is relevant to instruments paid to “a person not entitled to enforce the instrument or rec eive payment.” MCL 440.3420(1). “This language is broad and encompasses many circumstances.” John Hancock Fin Servs, Inc v-3- Old Kent Bank , 185 F Supp 2d 771, 777 (ED Mich, 2002), aff’d 346 F3d 727 (CA 6, 2003). 1 In contrast, MCL 440.3406 “limits the preclusion defense to instan ces in which ‘an alteration of an instrument’ or ‘the making of aforged signature’ occurs.” Id. As such, the language comprising
MCL 440.3406 is deemed to be “narrower” than that contained in MCL 440.3420, leading to the conclusion that the cited “provisions do not encompass the same circumstances.” Id. MCL 440.3406, comment 2, states in releva nt part: “Unauthorized si gnature is a broader concept that includes not only forgery but also the signature of an agent wh ich does not bind the principal under the law of agency. The age ncy cases are resolved indepen dently under agency law. Section 3-406 is not necessary in those cases.” Thus, while anunauthorized agent is a “person not entitled to enforce the instrument” and payment on a check to an unauthorized agent would
constitute conversion under § 440.3420, the preclusion defense 2 would be inapplicable. John Hancock Fin Servs, Inc , 185 F Supp 2d at 777.

Because Benner’s signature, asserted in a representative capac ity for Bryan Hulslander,
would constitute an unauthorized signature and not a forgery, M CL 440.3420 governs this claim. MCL 440.3420 states, in relevant part:

(1) The law applicable to conversion of personal property appl ies to instruments. An instrument is also converted if it is taken by transfer, oth er than a negotiation, from a person not entitled to en force the instrument or a bank makes or obtains payment with respect to the instrument for a person not entitle d to enforce the instrument or receive payment . . .

* * *

(3) A representative, other t han a depository bank, who has in good faith dealt with an instrument or its proceeds on behalf of one who was not the person
entitled to enforce the instrument is not liable in conversion to that person beyond the amount of any proceeds that it has not paid out.

A “depository bank” is defined in MCL 440.4105(b) as “the first bank to take an item even though it is also the payor bank, unless the item is presented for immediate payment over the counter.” It is undisputed by the parties that Level One Bank is a “depository bank” in accordance with the statutory definition.

The $400,000 check issued by Auto-Owners Insurance indicated t hat it was payable, “to the Order of Laura Abbonizio, Bryan Hulslander as Next Friend o f Preston Hulslander and
Melanie Hulslander and their attorney Brian J. Benner, P.C.” The five checks issued by AAA were payable to “Benner & Foran and Laura Abbonizio.” The use of the word “and” in

1 Although not binding on this Court, federal caselaw may be vie wed as “persuasive authority.” Travelers Property Cas Co of America v Peaker Servs, Inc , 306 Mich App 178, 188; 855 NW2d 523 (2014) (citation omitted).

2 See UCC 3-406, e.g.-4- identifying the payees is relevant. In accordance with the app licable portion of MCL 440.3110(4), “If an instrument is payable to 2 or more persons not alternatively, it is payable to all of them and may be negotiated, discharged, or enforced only by all of them .” (Emphasis added.). Thus, the Auto-Owners check must have been signed by all identified payees.

Although Abbonizio challenges the validity of her signed power s of attorney, the initial dispute centers on the accepta nce and negotiation of the $400,0 00 check by Level One Bank based on Benner’s alleged unautho rized endorsement of the instr ument in the absence of an executed power of attorney for Bryan Hulslander in his capacityas next friend for the minor children. There is, in actuality, no dispute that Benner’s end orsement of the check on behalf of Bryan Hulslander as next friend of the minor children was unaut horized given the absence of any documentation executed by Hulslander granting such authority to Benner. As such, MCL 440.3110(4) establishes that a conv ersion occurred with respect to Hulslander. Specifically, MCL 440.3110(4) provides, in pertinent part, “If an instrument is payable to 2 or more persons not alternatively, it is payable to all of them and may be nego tiated, discharged, or enforced only by all of them.” This is buttre ssed by the associated Comments discussing this subsection, which explain:

If an instrument is payable to X and Y, neither X nor Y acting alone is the person to whom the instrument is payable. Neither person, acting alon e, can be the
holder of the instrument. The ins trument is “payable to an ide ntified person.” The “identified person” is X and Y acting jointly. Thus, . . . X or Y, acting alone, cannot be the holder or the person entitled to enforce or negot iate the instrument because neither, acting alone, is the identified person stated in the instrument. [MCL 440.3110, comment 4 (citations omitted.)]

While Benner had no executed power of attorney for Bryan Hulsl ander in his capacity as next friend for the minor children, Abbonizio, as an individual , cannot establish conversion of the checks with respect to herself. This is necessarily so, ba sed on her execution of powers of attorney granting Benner the authority to negotiate and deposit the checks issued from Bank of
America and Comerica Bank & Trust into his IOLTA account.

Abbonizio, at the outset of the automobile negligence action, signed a retainer agreement that granted “a specific power of attorney” to Benner “to endor se and deposit into the client trust account any . . . checks received . . . and made payable to [Be nner] in whole or p art . . .” Later in the litigation, following settlement of the third-party action, Abbonizio signed a second power of attorney, on her own behalf, granting Benner “a limited power o f attorney to sign my name onto any settlement check received in the matter of my personal inju ry claim for the purpose of depositing said check into the Brian J. Benner, IOLTA account.” Benner, as Abbonizio’s agent, was thus acting with actual auth ority on her behalf, defined in Black’s Law Dictionary (10th ed), as the “[a]uthority that a princi pal intentionally confers on a n agent or authority that the agent reasonably believes he or she has as a result of the agent’s de alings with the principle,” when depositing all of the checks (vol untary PIP payments and third- party settlement monies) into his
trust account and no conversio n of those checks occurred with r espect to Abbonizio. This comports with MCL 440.3402(1), whic h states, in relevant part:-5- If a person acting, or purporting to act, as a representative s igns an instrument by signing either the name of the rep resented person or the name o f the signer, the represented person is bound by the signature to the same extent the represented person would be bound if the signature were on a simple contrac t. If the represented person is bound, the signature of the representativ e is the “authorized signature of the represented person” and the represented personis liable on the instrument, whether or not ide ntified in the instrument.

So long as the powers of attorney were valid Benner had the ac tual authority to endorse and deposit into the client trust account any checks received a nd made payable to Benner in whole or part on Abbonizio’s behalf , as set forth in the retain er agreement.

Abbonizio’s assertion that the powers of attorney were invalid because they do not comport with the formalities of a durable power of attorney und er MCL 700.5501 is disingenuous. Abbonizio contests the validity of the powers of attorney based on the failure to have her signature witnessed and notarized. See MCL 700.5501(2 ). This formality is, however,
irrelevant because of the absen ce of any indication that either power of attorney was intended or designed to be a durable power of attorney, which requires the inclusion of very specific language. To be construed as a durable power of attorney, the document must contain the words “This power of attorney is not a ffected by the principal’s subs equent disability or incapacity, or by the lapse of time,” for example, or “This power of attorney is effective upon the disability or incapacity of the principal,” or “similar words showing the pri ncipal’s intent that the authority
conferred is exercisable notwith standing the principal’s subseq uent disability or incapacity and, unless the power states a termination time, notwithstanding the lapse of time since the execution of the instrument.” MCL 700.5501(1). Hence, the failure to ab ide by the formalities for executing a durable power of attorney are not applicable where the power of attorney does not contain the requisite language necessary to be construed as a d urable power of attorney.

Plaintiffs contend, however, that the endorsements cannot be b ifurcated; in other words the unauthorized endorsement by Benner for Bryan Hulslander neg ates the entire transaction and imposes liability. In Pamar Enterprises, Inc v Huntington Bank of Mich , 228 Mich App 727; 580 NW2d 11 (1998), a drawee and depository bank were sued for allegedly violating their statutory duties in improperly paying a check to one of the ide ntified payees in the absence of an endorsement of a second payee. Id. at 730-731. The Court in Pamar determined that the endorsement of one payee, in the absence of an endorsement by t he second payee, “was not sufficient to allow negotiation of the check.” Id. at 733. The Court, citing MCL 440.3420(1), found, “a bank may be liable for conversion if it makes or obta ins payment on a check that is payable to two payees, not alternatively, but endorsed by only one of the payees.” Id . at 734. Thus, in accordance with Pamar and MCL 440.3420(1), “an instrume nt is converted if a bank ‘makes or obtains payment with respect to the instrument for a person not entitled to enforce the instrument or receive payment.’ . . . A conversion action may be brought by the intended payee against either the depository bank or the drawee bank.” Pamar , 228 Mich App at 734 (citations omitted). Given the above, we agree with plaintiffs that the n egotiation of the check received in the amount of $400,000 from Bank of America constituted a conve rsion under MCL 440.3110(4) and MCL 440.3420(1) due to the unaut horized signature of Benner on behalf of Bryan Hulslander. That, however, does not resolve the matter. The i ssue of ultimate liability rests on
whether a defense is available to the banks.-6- This Court addressed possible defenses available to banks for breach of the presentment warranty as an issue of first impression in Comerica Bank v Mich Nat’l Bank , 211 Mich App 534, 538; 536 NW2d 298 (1995), which recognized “that a bank ma y escape liability for honoring a check on a faulty or improper endorsement, or even w ith no endorsement, if the bank can prove that the intended payee received the proceeds of the check.” The principles underlying the intended-payee defense were explained as “preventing a draw er from being unjustly enriched by recovering for an improperly paid check where the proceeds o f the check in fact were received by the payee” and in instances “where a bank’s imprope r payment is not a cause of the drawer’s injury flowing from the transaction.” Id. As a consequence, this Court held “that the intended-payee defense is available to a bank in defending an a ction for breach of its presentment warranties.” Id.

The intended-payee defense has been explained as providing “th at a drawee bank is not
liable to the drawer of a check f or an improper payment if (1) the proceeds of th e check reach the person the drawer intended to re ceive them and (2) the drawer s uffers no loss prox imately caused by the drawee’s improper payment.” Pamar Enterprises, Inc , 228 Mich App at 737. Plaintiffs contend that Abbonizio and the Hulslanders were the intended pa yees and did not receive any of the monies, obviating defendants’ ability to establish the firs t element of the intended-payee defense. Defendants, on the other hand, contend that the check was received by the intended payee because it was received by plaintiffs’ attorney and depos ited into his IOLTA account for distribution. Defendants argue that because the proceeds were not ultimately used for their intended purpose is not relevan t because the monies went into t he proper account. We agree
with defendants.

The checks for the PIP benefits were received by the intended payee, Abbonizio and her attorney, premised on their “payable to” designation and the po wers of attorney executed by Abbonizio. The powers of attorney authorized Benner’s signatur e and deposit into his IOLTA
account on behalf of Abbonizio. The loss of the monies associa ted with these checks was caused by Benner’s fraudulent conduct in removing the money from the I OLTA account and not distributing the proceeds in accordance with the retainer agree ment. Because Abbonizio’s loss was not proximately caused by any improper payment by defendant s, on her behalf, her claim
cannot be sustained.

No different outcome occurs with reference to the Hulslanders. There is no evidence that Bryan Hulslander approved, directed or agreed to permit Benner to sign for him in a representative capacity. Given this deficiency, plaintiffs’ ar gue that the check that was payable to him as one of the identified payees did not reach the intend ed payee through its deposit in the
IOLTA account. This is called in to question, however, by assertions made within plaintiffs’ complaint indicating:

9. Benner’s obligation was to communicate to plaintiffs that the check had arrived, obtain their endorsement, deposit the checks in his Tr ust or Iolta account and upon the checks clearing, distribute funds to plaintiffs fo r their portion of the
settlement and distribute to oth ers any obligation plaintiffs w ere required to pay
out of the settlement funds.-7- The complaint states that it was the exp ectation of Abbonizio a nd the Hulslanders that the checks would be deposited in the IOLTA account. Plaintiffs’ retainer agreement also indicated the
inclusion of the minor childre n, with Abbonizio signing as the adult on their behalf. Hence, although the $400,000 check was deposited into the IOLTA accoun t with an unauthorized signature, pursuant to the allega tions within the complaint, th e funds did reach their intended destination or payee. There is no dispute or suggestion by pla intiffs that Benner was not functioning as their legal repre sentative; as such, it would be the expectation of the insurance companies issuing the checks that the individual or entity inte nded to receive the payment was legal counsel, on behalf of his c lients. Thus, it must be conc luded, based on the factual circumstances and plaintiffs’ pleadings, that the checks were w ritten with the intended purpose of being remitted to plaintiffs’ legal counsel or representativ e for subsequent distribution.

In addition, to establish the in tended-payee defense it is nec essary to demonstrate that the loss suffered was not the proximate cause of the improper payme nt. Plaintiffs’ contend that had the bank refused to negotiate the check due to the unauthorized signature, the check would not have been placed into the IOLTA account and, therefore, would n ot have been accessible for Benner’s fraud and conversion. This argument is without merit or legal support. The check was placed into the IOLTA account; at this juncture the banks had n o control regarding the distribution of the proceeds. The loss incurred by plaintiffs is the immediate, direct and proximate result of Benner’s fraud and wrongdoing.

Plaintiffs’ contention that the deposit of the check into the IOLTA account comprises the proximate cause of the loss is too attenuated to be viable. Ou r Supreme Court has defined “proximate cause as that which in a natural and continuous sequ ence, unbroken by any new, independent cause, produces the i njury, without which such inju ry would not have occurred. An intervening cause breaks the chai n of causation and constitutes a superseding cause which relieves the original actor of liability; unless it is found th at the intervening act was reasonably foreseeable. If reasonable minds could not differ regarding th e proximate cause of a plaintiff’s injury, courts should decide the issue as a matter of law.” Black v Shafer , 499 Mich 950; 879 NW2d 642 (2016) (citations and quotation marks omitted). Defen dants’ negotiation or acceptance of the check did not constitute a proximate cause of the harm suffered by plaintiffs. Rather, it was Benner’s misuse and fraud in withdrawing the ent irety of the funds from the IOLTA account that constituted an intervening cause of the inju ry, breaking the chain of causation and alleviating defendants’ liability.

Plaintiffs further assert that the grant of summary dispositio n was premature and that they should have been afforded additional discovery to depose Benner regarding his intentions. The trial court rejected plaintiffs’ request for continued discover y, impliedly indicating that the issue before the trial court comprised a matter of law. “[A] grant o f summary disposition may be premature if the party opposing the motion has not had a reason able opportunity to conduct discovery.” Huntington Nat’l Bank v D aniel J Aronoff Living Trust , 305 Mich App 496, 513; 853 NW2d 481 (2014). “Whether a motion for summary dispositionunder this rule would be premature depends on whether further discovery stands a fair ch ance of uncovering factual support for the litigant’s position.” Id. (citation and quotation marks omitted).

This is not a situation where th ere was a lack of discovery. Rather, plaintiffs’ suggest that the ability to depose Benner to uncover his intentions wit h regard to the checks and deposits-8- would permit them to ascertain relevant information for the tri al court’s consideration. The trial court rejected the need for the d iscovery requested, noting the unlikely probability that the information sought could be obtai ned given Benner’s current cri minal charges and his assumed reluctance to engage in any admissions or statements that would further implicate his criminal liability and the lack of relevance of Benner’s intent to the l egal issue before the trial court. As such, the trial court did not err in finding that the continuat ion, or extension, of discovery was unlikely to assist the trial court in ruling on the motion for summary disposition or develop information pertinent to the legal issue before it.

Based on the above analysis, thi s Court need not address plain tiffs’ additional challenge to the trial court’s grant of s ummary disposition premised on j urisdictional requirements.

Affirmed.

/s/ Deborah A. Servitto /s/ Mark J. Cavanagh
/s/ Karen M. Fort Hood