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### STATE OF MICHIGAN

COURT OF APPEALS

MIDWEST MEMORIAL GROUP LLC, ACACIA PARK CEMETERY, ALBION MEMORY GARDENS, CADILLAC MEMORIAL GARDENS EAST, CADILLAC MEMORIAL GARDENS WEST, CHAPEL GARDENS,
EASTLAWN MEMORIAL GARDENS AND MAUSOLEUM, ELM LAWN CEMETERY, FLORAL VIEW MEMORIAL GARDENS, FOREST LAWN MEMORIAL GARDENS, GARDEN OF REST MEMORIAL PARK,
GRACELAND MEMORIAL PARK AND MAUSOLEUM, GRANDLAWN CEMETERY AND MAUSOLEUM, HILLCREST MEMORIAL PARK, KENT MEMORIAL GARDENS, MIDLAND MEMORIAL GARDENS, MOUNT HOPE MEMORIAL GARDENS, NORTHLAND CHAPEL GARDENS, OAKLAND HILLS MEMORIAL GARDENS, OAKLAWN CHAPEL GARDENS, OAKVIEW CEMETERY, OAKWOOD MEMORIAL MAUSOLEUM, RESTLAWN MEMORIAL GARDENS, ROSELAND PARK CEMETERY, ROSELAWN MEMORIAL GARDENS, UNITED MEMORIAL GARDENS, WASHTENONG MEMORIAL PARK AND MAUSOLEUM, WOODLAWN CEMETERY, and WOODMERE CEMETERY,

Plaintiffs-Appellants/CrossAppellees, UNPUBLISHED September 17, 2015

v No. 322338 Ingham Circuit Court CITIGROUP GLOBAL MARKETS, INC., d/b/a SMITH BARNEY, CURRI E KENDALL, PETER JENSEN, CLAYTON SMART, KIMBERLY SINGER, MARK SINGER, MKS FAMILY LLC, and INTERNATIONAL FUND SERVICES, LC No. 10-000025-CR

Defendants,-2- and

PLANTE & MORAN PLLC,

Defendant-Appellee/CrossAppellant.

Before: B ORRELLO , P.J., and H OEKSTRA and O’C ONNELL , JJ.

O’C ONNELL
, J. ( concurring in part and dissenting in part ).

Plaintiffs’ claims present a Gordian knot of interrelated doct rines, rules, and exceptions that they weave into a case of professional accounting malpract ice against defendant Plante & Moran, PLLC (Plante Moran). The majority valiantly attempts to unravel the knot; I prefer to slice to the center. I concur with the majority’s conclusions regarding the scope of engagement, assignment of the claims, 1 and causation, but dissent from its analysis of the wrongful c onduct rule. Therefore, I would hold th at the trial court’s error in granting summary disposition was harmless, and I would affirm.

I. THE WRONGFUL CONDUCT RULE

“[A]n assignee stands in the shoes of the assignor and acquire s the same rights as the assignor possessed.” Prof Rehab Assoc v State Farm Mut Auto Ins Co , 228 Mich App 167, 177; 577 NW2d 909 (1998). Plaintiffs thus stand in the shoes of Sum merfield in this action and have no greater rights against Plante Moran than Summerfield would h ave had.

As the majority states, “no man shall take advantage of his ow n wrong.” Garwols v
Bankers Trust Co , 251 Mich 420, 426; 232 NW 239 (1930) (quotation marks and cit ation omitted). Under the wrongful conduct rule, a plaintiff may not take advantage of his or her wrongful conduct to pursue a claim against a defendant. Orzel v Scott Drug Co , 449 Mich 550, 558; 537 NW2d 208 (1 995). And if both parties acted wrongfully , “the law will not lend itself to afford relief to one as against the other, but will leave them as it finds them.” Id . (quotation marks and citation omitted).

Because a corporation can only act through its employees, the knowledge of the employees is imputed to the corporation itself. Upjohn Co v New Hampshire Ins Co , 438 Mich 197, 213; 476 NW2d 392 (1991). When a plaintiff corporation’s claims are based on the wrongful conduct of corporate officers, the wrongful conduct is imputed to the corporation itself

1 For the purposes of the assignment of the claim, I note that t he assignment assigned not only the cemetery properties themselves, but also assigned “[a]ll of the . . . Seller’s . . . existing, pending and future . . . causes of action . . . against all thi rd parties relating to the . . . Michigan Cemeteries . . . .” (Emphasis added.)-3- and may bar the corporation’s claims. MCA Fin Corp v Grant Thornton, LLP , 263 Mich App 152, 157; 687 NW2d 850 (2004).

In this case, Smart committed fraud while he was an officer of Summerfield. 2 It is undisputed that Smart’s conduct was wrongful and criminal. Und er the general rule, Smart’s wrongful conduct may be imputed to Summerfield.

But the plaintiffs contend that the wrongful conduct rule does not bar their claims because Smart’s actions did not benefit Summerfield. Generally , “the fraudulent acts of a corporate officer may be imputed to a corporation where those a cts (1) are in the course of employment, and (2) are for the benefit of the corporation.” Id . at 163. This is the adverse interest exception. Id . at 164. Under this exception, when the agent’s actions are a dverse to the interests of the corporation and the agent acts solely in his o r her own interests, the wrongful conduct rule will not apply. Id . By plaintiffs’ logic, Smart’s actions may not be imputed to
Summerfield because Summerfiel d did not benefit from Smart’s fr aud.

Of course, even exceptions to rules have exceptions. “The sol e actor rule is an exception to the adverse interest exception . . . .” Id . at 169. The sole actor rule applies when “the wrongdoer is, in essence, the corpo ration (the “sole actor”).” Id . An example of a situation in which the sole actor rule applie s is when “a sole shareholder l oots the corporation of its assets[.]”
Id

.

Here, Smart was the sole shareholder of Summerfield. Under th ose auspices, Smart looted Summerfield of its assets. The sole actor rule is preci sely on point. However, plaintiffs attempt to squeak past the sole actor rule by relying on the “i nnocent decision maker exception,” an exception to the exception to the exception to the wrongful conduct rule.

The innocent decision maker exception has never been applied i n Michigan, but this Court briefly referred to it in MCA Fin . The Court in MCA Fin cited In re Sharp Int’l Corp , 278 BR 28 (Bankr ED NY, 2002) for the proposition that fraud would not be imputed to the corporation “where there exists at least one innocent decision maker who, if he had been alerted to the fraud, could have stopped it.” MCA Fin , 263 Mich App at 169. In other words, if an innocent decision maker could have stopped the sole actor from committing fraud, the actor’s actions cannot be imputed to t he corporation, and the wrongful conduct rule will not apply.

Even if this exception was app licable, it only applies in case s where the innocent decision
maker makes decisions as part of the corporation . In Sharp , the “innocent decision maker” was a 13% shareholder who regularly v isited the offices, consulted with the corporation, and received
and reviewed financial statements. Sharp , 278 BR at 37. The innocent decision maker did not have a controlling share, but was part of the decision making p rocess. The Court relied on the
fact that the shareholder reviewed financial statements and cou ld have stopped the fraud while it

2 Summerfield also provided Plant e Moran the fraudulent investme nt information that Plante Moran relied on for its accounting.-4- was occurring. See id . at 39 (stating that the shareholder could have ended the fraudulent activity).

There is no evidence that this is the case here. In this case , neither Paskin, nor Funk, nor the cemetery commissioner held sha res in Summerfield or exercis ed any level of control over the corporation at the time of the fraudulent investment decisions. The majority recognizes that there is no evidence that, while innocent, any of these parties were decision makers. 3 I cannot conclude that the innocent decision maker exception applies, ev en presuming it is the law in Michigan.

This Court does not reverse where the trial court reaches the right result for the wrong

reason. Taylor v Laban , 241 Mich App 449, 458; 616 NW2d 229 (2000). The trial court reached the correct result because, under the wrongful conduct rule, plaintiffs may not hold Plante Moran responsible for any professional negligence. Plai ntiffs’ claims are based on the alleged malpractice between Plant e Moran and Summerfield. To a llow plaintiffs—whose claim arises through Summerfield, who in turn committed fraud through Smart—to pursue a cause of action against Plante Moran would be “a mockery.” See id . at 160. This Court should not “allow the active fraudfeasors (plaintiffs) to prevail against defendants who merely committed
malfeasance.” Id . Because the plaintiffs’ claims against Plante Moran are base d on the wrongful conduct of Smart, the sole corporate actor, they should be barr ed under the wrongful conduct
rule.

I would affirm the trial court’s grant of summary disposition.

/s/ Peter D. O’Connell

3 Plante Moran is not responsible for the lack of facts on this point. To survive a motion for summary disposition, once the nonmoving party has identified is sues in which there are no disputed issues of material fact, the burden is on the plaintif f to show that disputed issues exist. MCR 2.116(G)(4); Quinto v Cross & Peters Co , 451 Mich 358, 362; 547 NW2d 314 (1996). The nonmoving party “must go beyond the pleadings to set forth specific facts showing that a genuine issue of material fact exists.” Id . at 362. The burden was squarely on plaintiffs to provide some facts showing that a disputed issue existed. Plai ntiffs did not provide facts supporting their third level of exception.