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### STATE OF MICHIGAN

COURT OF APPEALS

DRAGO MIHAJLOVSKI, JADRANKA MIHAJLOVSKI, and ZIVE MIHAJLOVSKI,

Plaintiffs-Appellants, UNPUBLISHED June 20, 2017

v No. 331284
Oakland Circuit Court

BIRACH BROADCASTING CORPORATION and SIMA BIRACH, LC No. 2014-140471-CK

Defendants-Appellees,

and

BIRACH HOLDINGS CORPORATION, SIMA BIRACH, JR., and SIMA BIRACH, JR., TRUST

Defendants.

Before: M ARKEY

, P.J., and M ETER and S HAPIRO , JJ.

P ER C URIAM

.

In this fraud and contract action, plaintiffs appeal by right the circuit court’s January 14, 2016 order clarifying that its pri or orders granting plaintiffs default judgment did not apply to defendants Sima Birach (Birach, Sr.) and Birach Broadcasting Co rporation (BBC), because of the court’s June 3, 2015, order gr anting those defendants summa ry disposition. The modified default judgment in favor of plai ntiffs applies only against de fendants Sima Birach, Jr. (Birach, Jr.) and the Sima Birach, Jr. Tr ust (the Trust). On appeal, pl aintiffs argue Birach, Sr. and BBC can be held vicariously liable for the actions of Birach, Jr. b ased on the theory of ostensible agency. We conclude that questions of fact still exist regardi ng whether Birach, Jr. was the ostensible agent of Birach, Sr. and BBC, whether Birach, Sr. an d BBC can be estopped from denying Birach, Jr. was an ostensible agent, and whether Birach , Sr. and BBC can be held vicariously liable for Birach, Jr.’s misrepresentations. Accor dingly, we reverse and remand.

I. RELEVANT FACTS AND PROCEDURAL HISTORY-2- Drago Mihajlovski (Drago) met B irach, Jr. through Drago’s son, Zive Mihajlovski (Zive), who had known Birach, Jr. since the 1990s. Zive also k new Birach, Sr., as he worked for WCAR 1090 AM, a radio station owned solely by BBC, Birach, Sr.’ s broadcasting company. At all times relevant to this appeal, Birach, Sr. and BBC leased t o Birach, Jr. and Birach Holdings Corporation (BHC) all of W CAR 1090 AM’s airtime.

Through the course of Drago and Birach, Jr.’s relationship, Dr ago and his wife, Jadranka Mihajlovski (Jadranka), invest ed $950,000 in Birach, Jr.’s comp any, BHC, in exchange for a 25% interest in BHC, the company that plaintiffs believed owned WCAR 1090 AM. Drago maintained that he believed he had invested in WCAR 1090 AM, no t BHC, because it was affiliated with ESPN Detroit, a network with which he was famil iar. The agreement was memorialized in a Memorandum of Understanding between Drago and Birach, Jr., and was signed by Birach, Jr. in his capacity as “Trustee of the Sima B irach, Jr. Trust” (the Trust). Attached to the Memorandum of Understanding was a payment sched ule, detailing the particulars of Drago and Jadranka’s investment. The attachment also stated that as part of the investment, Jadranka and Zive w ould be given lifetime employmen t contracts.

These employment contracts were drafted on ESPN Detroit (WCAR 1090 AM) letterhead, and were addressed to Jadranka and Zive, respective ly, from Birach, Jr. in his capacity as President and CEO of BHC. The employment contracts indicated that they served as “official employment agreement[s] at ESPN Radio Detroit, operat ed as a division of [BHC].” Jadranka and Zive were to report directly to Birach, Jr. in his capacity as Chairman and CEO. Jadranka and Zive were paid monthly salaries under the contract s for approximately three months, when the payments stopped. Jadranka and Zive contacted Birach, Jr. about the outstanding payments but Birach, Jr. did not make the payments owed.

On April 28, 2014, plaintiffs filed a 10-count complaint again st Birach, Sr., BBC, Birach Jr., the Trust, and BHC. Against Birach, Jr., plaintiffs alleg ed fraud, two counts of breach of contract, misrepresentation, fraud in the inducement, and conve rsion, and requested an accounting of BHC and the Trust. A dditionally, plaintiffs alle ged Birach, Sr. and BBC should be estopped from “denying the existence” of an agency relationship between Birach Sr. and Birach Jr., and that Birach, Sr. and BBC should be held vicariously li able for the acts and business transactions of Birach, Jr. and BHC.

Birach, Sr. and BBC moved for summary disposition pursuant to MCR 2.116(C)(10). The trial court granted defendants’ motion, finding that no age ncy relationship existed such that Birach, Sr. and BBC could be held vicariously liable for the mi srepresentations of Birach, Jr. The trial court subsequently de nied plaintiffs’ motion for reco nsideration.

II. STANDARD OF REVIEW

On appeal, plaintiffs argue the trial court erred in granting summary disposition in favor of Birach, Sr. and BBC because there was a question of fact reg arding whether Birach, Jr. was the ostensible agent of Birach, Sr. and BBC at the time he ente red into agreements with plaintiffs. We agree.-3- A trial court’s grant or denial of summary disposition is revi ewed de novo. Beaudrie v

Henderson , 465 Mich 124, 129; 631 NW2d 308 (2001). A motion for summary disposition under MCR 2.116(C)(10) should be granted when, after considerat ion of all the pleadings, admissions, and other evidence the parties have submitted, in t he light most favorable to the nonmoving party, there is no genui ne issue regarding any materi al fact and the moving party is entitled to judgment as a matter of law. BC Tile & Marble Co, Inc v Multi Bldg Co, Inc , 288 Mich App 576, 583; 794 NW2d 76 (2010). “There is a genuine iss ue of material fact when reasonable minds could differ on an issue after viewing the rec ord in the light most favorable to the nonmoving party.” Allison v AEW Capital Mgmt

, LLP , 481 Mich 419, 425; 751 NW2d 8 (2008).

“The moving party has the initial burden to support its claim for summary disposition by affidavits, depositions, admissi ons, or other documentary evide nce.” McCoig Materials, LLC v Galui Construction, Inc , 295 Mich App 684, 693; 818 NW2d 410 (2012). If the moving pa rty does so, the nonmoving party then must demonstrate that a genui ne issue of material fact exists.

Id . The nonmoving party may use a ffidavits, depositions, and oth er documentary evidence to
meet their burden but the conten t or substance of such material must be admissible as evidence.

See Maiden v Rozwood , 461 Mich 109, 121, 123 n 5; 597 NW2d 817 (1999). Conclusory allegations, devoid of any detail, are insufficient to create a genuine issue of material fact. Kozak v City of Lincoln Park , 499 Mich 465, 468; 885 NW2d 443 (2016). If the nonmoving par ty fails to establish the existence of a material factual dispute, the m oving party’s motion is properly granted. Karbel v Comerica Bank , 247 Mich App 90, 97; 635 NW2d 69 (2001).

III. ANALYSIS

“An agency is ostensible when the principal intentionally or b y want of ordinary care, causes a third person to believe another to be his agent who is not really employed by him . . . .” Grewe v Mt Clemens General Hospital , 404 Mich 240, 252; 273 NW2d 429 (1978) (quotation marks and citation omitted); see also VanStelle v Macaskill , 255 Mich App 1, 9; 662 NW2d 41 (2003). To prove someone is the ostensible agent of a principl e, the plaintiff must prove:

[First] the person dealing with the agent must do so with belie f in the agent’s authority and this belief must be a reasonable one; [second] su ch belief must be generated by some act or neglect of the principle sought to be charged; [third] and the third person relying on the agent’s apparent authority must not be guilty of negligence. [ Grewe , 404 Mich at 253 (quotation marks and citations omitted); see
also VanStelle , 255 Mich App at 9-10.]

Essentially, the principal must have done something that would create in the third party’s mind the reasonable belief that the agent was acting on behalf of th e principal. VanStelle , 255 Mich App at 10. Further, 1 Restatement Agency, 3d, § 2.05 (Estoppel to Deny Existence of Agency Relationship), pp 145-146, provides:

A person who has not made a manifestation that an actor has au thority as an agent and who is not otherwise liable as a party to a transa ction purportedly done by the actor on that person’s account is subject to liabil ity to a third party-4- who justifiably is induced to mak e a detrimental change in posi tion because the
transaction is believed to be on the person’s account if

(1) the person intentionally or c arelessly caused such belief, or

(2) having notice of such belief and that it might induce othe rs to change their position, the person did not t ake reasonable steps to not ify them of the facts.

In this case, a question of fact remains whether the evidence establishes that Birach, Jr. was the ostensible agent of BBC and Birach, Sr., sufficient to impose vicarious liability. Although Birach, Sr. did not imp licitly hold out Birach, Jr. as his agent, or the agent of BBC, Birach, Sr. had notice of Birach, Jr.’s propensity to represent himself as an owner of WCAR 1090 AM. In 2009, Birach, Sr. took legal action in the United States District Court for the Eastern District of Virginia for the sole purpose of protecting himself and BBC from Birach, Jr. by obtaining a permanent consensual injunction. The language o f the order suggests that Birach, Sr. sought protection from Birach, Jr. because Birach, Jr. had previously misrepresented himself as an agent of Birach, Sr., or of BBC, causing confusion in bro adcast business co mmunity, to the financial detriment of Birach, Sr. The order enjoined Birach, Jr. from using the BBC name or logo in connection with broadcas ting, and enjoined Birach, Jr. from using the BBC name to enter into any legally binding financial arrangement. Birach, Jr. wa s also enjoined from representing himself as being associated with BBC, and was “enjoined from fi ling any application to register or registering, in his own name, the service mark or trade name Birach Broadcasting Corporation and from filing any application for a certificate of authority to do business under the same [sic] Birach Broadcasting Corporation w ith any state or local governm ent in the United States.”

Nevertheless, despite the inj unction, Birach, Sr., by either w ant of ordinary care or sheer negligence, continued to allow Bi rach, Jr. to represent to the general public that he had authority with respect to WCAR 1090 AM. In 2011, a mere two years after obtaining the permanent injunction, Birach, Sr. gave up the protection that injunction afforded by allowing Birach, Jr. to lease WCAR 1090 AM. Additionally, in direct violation of the i njunction, Birach, Sr. allowed Birach, Jr., as Chairman and CEO of BHC, to file a certificate of assumed name with the Michigan Department of Licensi ng and Regulatory Affairs. This filing stated that BHC had assumed the name, and would be transacting business as, WCAR Ra dio, even though WCAR 1090 AM was and is owned by BBC.

Birach, Sr. also provided little to no oversight as lessor of WCAR 1090 AM. He allowed Birach, Jr. to be the sole authority regarding programming and marketing for WCAR 1090 AM, and confirmed that Birach, Jr. was “entitled to contract for us e of air-time without seeking or obtaining permission from anyone.” Birach, Sr. further admitte d that Birach, Jr. “represented to the media and general public tha t he had the authority to opera te the on-air operations of WCAR [1090 AM], including providing pro gramming and selling time for advertisement broadcasts.” During his deposition, Birach, Sr. conceded that Birach, Jr. ha d not paid any monies under the lease, despite being contractually obligated to remit $20,000 p er month, $10,000 to BBC and $10,000 “in escrow account for Ale xander and Nicholas,” Birach, Jr.’s sons. Lastly, and perhaps most telling, is that the lease agreement specifically indicates that Birach, Jr. is to be solely “in charge of any legal problems he/she creates.”-5- On top of the foregoing, Birach, Jr. consistently operated WCA R 1090 AM as though he was the owner of the station, al though he was not. He hired an d payed employees through BHC, and told multiple people, including employees, that not only di d he own WCAR 1090 AM, but
he also owned radio stations in Pontiac, Michigan and Pittsburg h, Pennsylvania. In light of this evidence, there is a question of fact regarding whether Birach, Sr. carelessly, or negligently, allowed Birach, Jr. to represent to the general public that he was the owner and operator of WCAR 1090 AM, such that a third party could reasonably believe that Birach, Jr was the ostensible agent of B irach, Sr. and BBC.

Michigan jurisprudence imposes upon third parties seeking to h old a purported principle liable for the dealings of its ostensible agent the requirement that they themselves were not negligent in their own dealings with the ostensible agent in or der to recover from a principal under a theory of vicarious liability. Grewe , 404 Mich at 253; VanStelle , 255 Mich App at 10. Defendants maintain that if Drago had done his homework with re spect to the ownership of WCAR 1090 AM, he would have know n that Birach, Jr. did not own WCAR 1090 AM. However, there is evidence that Drago did, in fact, take steps to investigate Birach, Jr.’s involvement with WCAR 1090 AM. In his deposition, Drago testif ied that prior to making his investment, he went to his attorn ey to do the investigation. D rago stated, “[t]he attorney know better than that [sic] to check the record, whatever they suppo sed to do. That’s why you hire the attorney.” Drago’s attorney inf ormed him that everything was “ fine” with regards to the investment. It is not negligent, or even unreasonable, to trus t retained counsel to thoroughly vet a corporation that his client his seeking to invest in. Thus, whether Drago blindly entered into a transaction with Birach, Jr., a nd failed to “perform the most e lementary due diligence,” is a question of fact.

Defendants further argue their point by noting that Zive had w orked for BBC at WCAR 1090 AM, and he knew that the broadcasting license was in the n ame of BBC, not BHC. Zive testified that he had seen the license for WCAR 1090 AM, and th at he knew the station was owned by Birach, Sr. However, Zive also testified that he did n ot discuss Drago’s investment before Drago paid Birach, Jr. Further, Zive recalled that Bira ch, Jr. had previously represented to him that he either owned WCAR 1090 AM, a station in Pontiac, and a station in Pittsburgh, or that he was going to own them. Regardless, Zive did not make a financial investment, Drago did. Zive’s only claim in this lawsuit is for breach of his em ployment contract. Accordingly, what Zive knew or did not know with respect to the ownership of WCAR 1090 AM at the time of Drago’s investment, or what Zive’s relationship with Birach, Jr. or Birach Sr. was, is
irrelevant.

Defendants next argue that Birach, Jr. made it clear in his de alings with Drago that Drago would be investing in BHC, not BBC or WCAR 1090 AM, and accordi ngly, neither Birach, Sr. nor BBC can be held vicariously liable for breach of contract, fraud, and misrepresentation on Birach, Jr.’s behalf. This argument, too, fails. The Memorand um of Understanding itself is an agreement between Drago and Birach, Jr., as trustee for the Tru st, and BHC. Attached to the Memorandum of Understanding is the investment schedule, which a lso mentions that Drago’s investment is in exchange for lifetime employment agreements fo r Jadranka and Zive. Thus, the employment contracts are incorp orated by reference into the Mem orandum of Understanding.-6- The employment contracts are key to the analysis because they show exactly how Birach, Jr. was holding himself out as ha ving some authority over WCAR 1090 AM. Specifically, they show that Jadranka’s and Zive’s employment contracts were draft ed on ESPN Detroit, WCAR 1090 AM letterhead, but were addressed to Jadranka and Zive, re spectively, from Sima Birach, Jr., in his capacity as President and CEO of BHC. The employme nt contracts indicate that they serve as “official employment agreement[s] at ESPN Radio Detroi t, operated as a division of [BHC].” Both Jadranka and Zive in their respective positions w ere to report directly to Birach, Jr., “in his capacity as Chairman and CEO.” Based on the foreg oing, it is not crystal clear, as defendants claim, that Birach, Jr . was acting solely on his own behalf, or on the behalf of BHC. To the contrary, it appears that Birach, Jr. entered into the u nderlying agreement with plaintiffs under the guise that he was Chairman and CEO of BHC, and ESPN D etroit, WCAR 1090 AM, was a division of BHC, when in reality, it was owned by BBC. T hrough defendants’ negligence, Birach, Jr. was able to hold himself out, at the very least, as an ostensible agent of WCAR 1090 AM, which was owned by BBC. Therefore, a question of fact rema ins regarding whether Birach, Sr. and defendants shoul d be estopped from denying that Birach, Jr. acted as an ostensible agent for Birach, Sr. and BBC, and whether Birach, S r. and BBC should be held vicariously liable for Birach, Jr.’s misrepresentations.

We briefly acknowledge that defen dants present alternative gro unds for affirmance on appeal. Defendants are permitted to advance alternative ground s for affirmance on appeal, “even if the alternative ground was considered and rejected by the lo wer court or tribunal.” Boardman v Dep’t of State Police , 243 Mich App 351, 358; 622 NW2d 97 (2000), citing Middlebrooks v Wayne Co , 446 Mich 151, 166, n 41; 521 NW2d 774 (1994).

First, defendants argue that th ere is no support in Michigan l aw to support the theory that because Birach, Jr. operated WCA R 1090 AM as if he owned it, “t hat somehow makes Birach, Sr. and [BBC] liable for Birach, Jr.’s misrepresentations.” Be cause Birach, Jr. acted solely for his own benefit, and not for the benefit of Birach, Sr. or BBC, his actions therefore were outside the scope of any agency he may have had. This argument is unpe rsuasive. Defendants’ argument mistakenly relies on a theory of respondeat superior i n the context of an employeremployee relationship. As defe ndants correctly point out, unde r the doctrine of respondeat superior, when an employee acts solely to further its own indiv idual interests, it cannot be characterized as falling within the scope of the agent’s employ ment such that the employer is vicariously liable for the employee’s actions. Hamed v Wayne Co , 490 Mich 1, 10-11; 803 NW2d 237 (2011). However, plaintiffs do not seek to hold Birac h, Sr. vicariously liable for Birach, Jr.’s actions as an employee under the doctrine of resp ondeat superior, but rather, under the theory of ostensible agency. Ostensible agency, unlike res pondeat superior, does not require that the agent be an employee, or that the principal received a ny benefit from the agent’s actions.

Grewe , 404 Mich at 253; VanStelle , 255 Mich App at 10. Only that the principal, even negligently, allowed a third party to believe that an agency re lationship existed between the principal and the purported agent. Grewe , 404 Mich at 253; VanStelle , 255 Mich App at 10. Accordingly, defendants’ argument is misplaced.

Next, in claiming “Drago had some responsibility to attempt to confirm Birach, Jr.’s representations of ownership,” defendants rely on Dhillon v BBC Holdings, Inc , 2009 US App LEXIS 28865; 2009 WL 959875 (WD Wash, 2009), aff’d 3 

### 71 Fed Appx 814 (2010), an order
of the United States District court for the Western District of Washington, laying out the court’s-7- findings of facts and conclusions of law after a four day trial . This Court is not bound to follow
the result in Dhillon because it is a lower court order from another jurisdiction, a nd therefore, is nonbinding authority, Hiner v Mojica , 271 Mich App 604, 612; 722 NW2d 914 (2006), but also because it is merely a trial court order. Further still, as pr eviously discussed, there is a question of fact regarding whether Drago attempted to confirm Birach, Jr .’s representations of ownership by relying on his attorney.

We reverse and remand for further proceedings. We do not reta in jurisdiction.

/s/ Jane E. Markey
/s/ Patrick M. Meter /s/ Douglas B. Shapiro