Title: ECHELON HOMES LLC V CARTER LUMBER CO
Citation: N/A
Docket Number: 125995
State: Michigan
Issuer: Michigan Supreme Court
Date: April 12, 2005

_______________________________ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Michigan Supreme Court 
Lansing, Michigan 
Chief Justice:  
Justices: 
Clifford W. Taylor  
Michael F. Cavanagh 
Elizabeth A. Weaver 
Marilyn Kelly 
Opinion 
Maura D. Corrigan 
Robert P. Young, Jr. 
Stephen J. Markman 
FILED APRIL 12, 2005 
ECHELON HOMES, L.L.C., 
Plaintiff/Counter-Defendant-Appellee, 
v 
Nos. 125994, 125995 
CARTER LUMBER COMPANY, 
Defendant/Counter-Plaintiff-Appellant. 
BEFORE THE ENTIRE BENCH 
WEAVER, J.   
MCL 600.2919a provides that a person who buys, 
receives, or aids in concealing stolen, embezzled, or 
converted property can be held liable for treble damages if 
he knew that the property was stolen, embezzled, or 
converted. 
The sole issue before this Court is whether 
constructive knowledge that property is stolen, embezzled, 
or converted is sufficient to impose liability under MCL 
600.2919a. 
We hold that under the plain language of the 
statute, constructive knowledge is not sufficient to impose 
liability under MCL 600.2919a. 
 
 
 
 
 
Therefore, we reverse the judgment of the Court of 
Appeals and hold that the statute requires exactly what it 
says—that the person knew that the property had been 
stolen, embezzled, or converted. 
We remand this case to the trial court for a hearing 
on whether there is a material issue of fact regarding 
whether there is sufficient circumstantial evidence to 
establish that defendant knew the property was stolen, 
embezzled, or converted. 
FACTS and PROCEDURAL HISTORY 
Plaintiff Echelon Homes, L.L.C., employed Carmella 
Wood as its bookkeeper and office manager from 1997 to 
2000. 
During her employment, Wood engaged in fraudulent 
schemes against Echelon, including, but not limited to, 
forging company checks to herself, opening company credit 
cards in her name, and opening lines of credit to herself 
in Echelon’s name. 
During this time, Wood opened an 
unauthorized account with defendant Carter Lumber Company 
and purchased approximately $87,000 in materials used to 
remodel her home and her brother’s home. 
Echelon did not 
discover Wood’s fraudulent activity until June 2000, when 
it learned that Wood had embezzled over $500,000. 
When 
Wood’s 
embezzlement 
was 
discovered, 
Echelon 
had 
an 
outstanding invoice from Carter for approximately $27,000. 
2  
 
 
 
 
 
Carter had extended a line of credit to Wood under 
Echelon’s company name. Wood forged the credit application 
to initially obtain the account. 
Subsequently, Carter 
continued to increase the line of credit to Wood, to the 
point that Echelon became one of its largest credit 
customers. 
Carter never verified that Echelon had in fact 
authorized the credit account, nor did it ever verify that 
Wood had the authority to receive credit increases. Carter 
delivered goods to Wood’s relatives and allowed her 
relatives to pick up goods without verifying that they were 
authorized by Echelon. 
Carter signed lien waivers for 
goods purportedly delivered to Echelon for specific jobs 
when Carter knew it had never delivered goods for those 
jobs. 
Wood has testified that she was not working with 
Carter, or any of Carter’s agents, and that she was 
“scamming” Carter as well. 
Echelon filed suit against Carter under various 
theories, including MCL 600.2919a, aiding and abetting 
conversion. 
Carter filed a counterclaim against Echelon 
for the $27,000 outstanding invoice. 
The trial court 
granted both parties’ motions for summary disposition. 
Both parties appealed. 
The Court of Appeals affirmed the 
summary dismissal of Carter’s claims against Echelon, but 
reversed the summary dismissal of two of Echelon’s claims 
3  
 
 
 
 
 
against Carter. Echelon Homes, LLC v Carter Lumber Co, 261 
Mich App 424; 683 NW2d 171 (2004). 
Carter filed an application for leave to appeal with 
this Court. 
This Court scheduled oral argument on the 
application for leave to appeal, limited to whether the 
Court of Appeals correctly held that constructive knowledge 
was sufficient to impose liability under MCL 600.2919a. 
Echelon Homes, LLC v Carter Lumber Co, 471 Mich 916 (2004). 
ANALYSIS 
The issue before us is whether constructive knowledge 
is sufficient to impose liability under MCL 600.2919a, 
which requires that a person “knew” that property was 
stolen, embezzled, or converted in order to be held liable 
for aiding and abetting. 
This is a question of statutory interpretation, which 
this Court reviews de novo. 
Stozicki v Allied Paper Co, 
Inc, 464 Mich 257, 263; 627 NW2d 293 (2001). In reviewing 
questions of statutory construction, our purpose is to 
discern and give effect to the Legislature's intent. People 
v Morey, 461 Mich 325, 329-330; 603 NW2d 250 (1999). “We 
begin by examining the plain language of the statute; where 
that 
language 
is 
unambiguous, 
we 
presume 
that 
the 
Legislature 
intended 
the 
meaning 
clearly 
expressed—no 
further judicial construction is required or permitted, and 
the statute must be enforced as written.” Id. at 330. 
“We 
4  
 
 
 
 
 
 
 
must give the words of a statute their plain and ordinary 
meaning . . . .” Id.
 The plain and ordinary meaning of 
words 
can 
be 
ascertained 
by 
looking 
at 
dictionary 
definitions. 
Koontz v Ameritech Services, Inc, 466 Mich 
304, 312; 645 NW2d 34 (2002). 
A 
MCL 600.2919a states: 
A person damaged as a result of another
person's buying, receiving, or aiding in the 
concealment 
of 
any 
stolen, 
embezzled, 
or 
converted 
property 
when 
the 
person 
buying,
receiving, or aiding in the concealment of any
stolen, embezzled, or converted property knew 
that the property was stolen, embezzled, or 
converted may recover 3 times the amount of 
actual 
damages 
sustained, 
plus 
costs 
and 
reasonable attorney's fees. [Emphasis added.] 
A plain reading of this statute indicates that a person 
must know that the property was stolen, embezzled, or 
converted in order to be held liable. 
That the person 
“should have known” is not sufficient to impose liability 
under the statute. 
The term “know” does not encompass constructive 
knowledge, that one “should have known.” 
Black’s Law 
Dictionary (8th ed) defines “knowledge” as “[a]n awareness 
or understanding of a fact or circumstance; a state of mind 
in which a person has no substantial doubt about the 
existence of a fact.” 
“Constructive knowledge,” on the 
other hand, is defined as “[k]nowledge that one using 
5  
 
 
 
 
 
 
                                                 
    
reasonable care or diligence should have, and therefore 
that is attributed by law to a given person.” Id. 
Constructive knowledge is a distinct concept from 
knowledge, and cannot replace the requirement of knowledge 
in a statute. 
The Legislature uses the terms “knew” and 
“should have known” to indicate a difference between 
knowledge and constructive knowledge.1
 We found thirty­
eight statutes that refer to constructive knowledge, using 
a variation of the phrase “knew or should have known.” See 
MCL 205.14(2)(d) (a tobacco seller or distributor can be 
1 The dissent argues that the Legislature’s frequent
use of the term “actual knowledge” refutes our position
that the term “knew,” as used in this statute, is not
satisfied by constructive knowledge. 
But the dissent 
overlooks the fact that the Legislature uses the terms
“knowledge” and “knew” very differently. 
There are some thirty-eight statutes that use a 
variation of the phrase “knew or should have known”; for
those statutes constructive knowledge is sufficient. 
By
contrast, there is only one statute, MCL 554.636, that uses
the phrase “actually knew.” 
(Ten statutes, including this
one, use the bare word “knew.”) 
The Legislature’s ability
to denote the type of knowledge required is better 
evidenced 
by 
the 
thirty-eight 
statutes 
in 
which 
it 
explicitly called for constructive knowledge than by the
one occasion in which it used the term “actually.” 
The dissent cites forty-eight statutes in which the 
Legislature uses the phrase “actual knowledge.” 
By
contrast, there are only seven statutes that refer to
“actual or constructive knowledge.” 
The multiple citations to statutes referencing “actual
knowledge” do not affect the correct interpretation of the
statute at issue here, which uses the term “knew.” 
6  
 
 
held liable for illegally selling tobacco products if it 
“knew or should have known that the manufacturer intended 
the tobacco product to be sold or distributed” outside the 
prescribed 
area); 
MCL 
691.1417(3)(c) 
(to 
receive 
compensation for property damage or physical injury from a 
governmental agency the claimant must show that “[t]e 
governmental agency knew, or in the exercise of reasonable 
diligence should have known, about the defect”); MCL 
565.831(4) (a person who provides a statement used in an 
application for registration or property report is liable 
only for false statements and omissions in his statement 
and only “if it is proved he knew or reasonably should have 
known of the existence of the true facts by reason of which 
the liability is alleged to exist”); MCL 445.1902(b)(ii)(B) 
(misappropriation of a trade secret includes one who 
disclosed or used a trade secret of another when, at the 
time of disclosure or use, the person “knew or had reason 
to know that his or her knowledge of the trade secret was 
derived from or through a person who had utilized improper 
means to acquire it”). 
 
Relying on People v Tantenella, 212 Mich 614; 180 NW 
474 (1920), Echelon argues that this Court has historically 
used constructive knowledge to impose liability under a 
criminal aiding and abetting statute. 
7  
 
 
 
 
In 
Tantenella, 
the 
defendant 
was 
charged 
with 
receiving a stolen car. 
The defendant claimed that he did 
not know that the car was stolen. 
However, the Court 
determined 
that 
the 
defendant 
had 
sufficient 
guilty 
knowledge to be guilty of the crime. 
Id. at 620. 
The 
Tantenella Court stated, “Guilty knowledge means not only 
actual 
knowledge, 
but 
constructive 
knowledge, 
through 
notice of facts and circumstances from which guilty 
knowledge may fairly be inferred.” Id. at 621. 
The Court 
went on to list facts that implied the guilty knowledge of 
the defendant: receiving possession of the car hours after 
it had been stolen, driving to Chicago with the suspected 
thief, changing the motor number and license number, 
claiming ownership, producing a fraudulent bill of sale, 
and giving authorities conflicting names. Id. 
All these 
facts were used by the Court to determine that the 
defendant was guilty of receiving stolen property. 
Although 
the 
Tantenella 
Court 
characterized 
its 
analysis of these facts as examining the defendant’s 
constructive knowledge, the Court was, in fact, determining 
that the defendant had knowledge, proven by circumstantial 
evidence, that the car was stolen. 
This is shown by the 
Court’s extensive analysis of the facts that led it to 
believe that the defendant had knowledge. 
The Tantenella 
Court used the term “constructive knowledge” synonymously 
8 
 
 
 
 
with knowledge proven through circumstantial evidence. 
Thus, the Court’s use of the term “constructive knowledge” 
is a misnomer; what the Court really meant was knowledge 
proven by circumstantial evidence. 
The Tantenella Court’s holding regarding “constructive 
knowledge” has correctly been interpreted by subsequent 
courts to mean actual knowledge proven by circumstantial 
evidence. See, e.g., People v Westerfield, 71 Mich App 618; 
248 NW2d 641 (1976)(the defendant was found guilty of 
receiving 
a 
stolen 
car 
on 
the 
basis 
of 
suspicious 
circumstances 
surrounding 
his 
purchase); 
People 
Blackwell, 61 Mich App 236, 240-241; 232 NW2d 368 (1975) 
(“although the term may convey a special meaning to 
lawyers, it is apparent that the Tantenella Court and the 
others which have used the identical instructions since 
Tantenella used the term “constructive knowledge” as a 
shorthand way of saying that this element of the charge may 
be proven circumstantially”); People v White, 22 Mich App 
65, 68; 176 NW2d 723 (1970) (the defendant was charged with 
knowingly concealing stolen property on the basis of 
circumstantial evidence); People v Keshishian, 45 Mich App 
51, 53; 205 NW2d 818 (1973) (circumstantial evidence 
sufficient 
to 
make 
prima 
facie 
showing 
of 
guilty 
knowledge). 
9  
v 
 
 
 
 
 
 
 
We hold that, under MCL 600.2919a, constructive 
knowledge is not sufficient; a defendant must know that the 
property was stolen, embezzled, or converted. 
To the 
extent that Tantenella stated otherwise, it is overruled. 
But consistent with the actual holding in Tantenella, a 
defendant’s 
knowledge 
that 
the 
property 
was 
stolen, 
embezzled, 
or 
converted 
can 
be 
established 
by 
circumstantial evidence. 
B 
Echelon also argues, and the Court of Appeals agreed, 
that Carter was required to make a reasonably diligent 
inquiry into whether Wood was authorized to open credit 
accounts and conduct transactions in Echelon’s name. 
In 
support of this argument Echelon relies on In re Thomas 
Estate, 211 Mich App 594; 536 NW2d 579 (1995). 
In Thomas, 
a bank improperly released funds to the former guardian of 
a minor, despite the fact that her guardianship had been 
terminated. 
At the time of the transaction, the bank had 
in its possession a letter that explicitly stated that the 
guardianship had been terminated. 
The bank was found 
liable for the improper release, and was required to 
compensate the estate of the minor for the loss. 
The Court of Appeals in the present case reasoned that 
just as the bank in Thomas was required to make a diligent 
inquiry about the authority of the guardian, Carter was 
10  
 
 
 
 
 
 
 
required to inquire about Wood’s authority concerning 
Echelon. We disagree. 
Thomas dealt with MCL 700.483, which in relevant part 
before its repeal stated: “The fact that a person knowingly 
deals with a conservator does not alone require the person 
to inquire into the existence of a power or the propriety 
of its exercise, except that restrictions on powers of 
conservators which are indorsed on letters as provided in 
section 485 are effective as to third persons.” 
(Emphasis 
added.) 
This statute explicitly stated that a bank does 
not need to make further inquiry into the powers of a 
conservator except when there are letters that restrict the 
conservator’s powers. 
In Thomas, there were letters— 
letters 
that 
explicitly 
stated 
the 
date 
when 
the 
guardianship was to terminate. 
The bank did not consult 
these letters when it statutorily had an affirmative duty 
to do so. 
As a result, the bank was held liable for 
improper disbursement of funds. 
But the statute in the present case, MCL 600.2919a, 
imposes no duty on the defendant to make an inquiry. 
Therefore, Carter was not statutorily bound to make an 
inquiry into Wood’s authority, and Echelon’s analogy to 
Thomas is misplaced. 
11  
 
 
 
 
 
 
 
CONCLUSION  
Constructive knowledge is not sufficient to impose 
liability under MCL 600.2919a. 
The term “knew” in the 
statute means knowledge that the property is stolen, 
embezzled, or converted. 
In lieu of granting leave to appeal, we reverse the 
Court of Appeals holding that constructive knowledge is 
sufficient 
to 
impose 
liability 
under 
MCL 
600.2919a. 
However, the trial court did not determine whether there 
was a material issue of fact concerning whether there was 
sufficient circumstantial evidence to establish that Carter 
knew 
that 
Wood’s 
transactions 
were 
fraudulent. 
Accordingly, we remand this case to the trial court for a 
hearing on this issue. 
Defendant’s application for leave 
to appeal on the remaining issues is denied, because we are 
not persuaded that the questions presented should be 
reviewed by this Court. 
Elizabeth A. Weaver 
Clifford W. Taylor
Maura D. Corrigan
Robert P. Young, Jr.
Stephen J. Markman 
12  
 
 
 
 
 
 
 
 
 
 
_______________________________ 
 
 
 
 
                                                 
 
 
v 
S T A T E O F M I C H I G A N  
SUPREME COURT  
ECHELON HOMES, LLC, 
Plaintiff/Counter-Defendant/Appellee, 
Nos. 125994, 125995 
CARTER LUMBER COMPANY, 
Defendant/Counter-Plaintiff/Appellant. 
CAVANAGH, J. (dissenting). 
I agree with the majority that circumstantial evidence 
can be sufficient to establish the knowledge requirement of 
MCL 600.2919a. 
However, I disagree with the majority’s 
contention 
that, 
as 
it 
relates 
to 
MCL 
600.2919a, 
constructive 
knowledge 
is 
a 
distinct 
concept 
from 
knowledge.1
 The word “knew” as used in MCL 600.2919a 
1 MCL 600.2919a states the following: 
A person damaged as a result of another
person’s buying, receiving, or aiding in the 
concealment 
of 
any 
stolen, 
embezzled, 
or 
converted 
property 
when 
the 
person 
buying,
receiving, or aiding in the concealment of any
stolen, embezzled, or converted property knew 
that the property was stolen, embezzled, or 
converted may recover 3 times the amount of 
actual 
damages 
sustained, 
plus 
costs 
and 
reasonable attorney’s fees. This remedy shall be
in addition to any other right or remedy the
person may have at law or otherwise. 
 
 
 
 
 
encompasses actual and constructive knowledge; therefore, I 
must respectfully dissent. 
The Legislature knows how to use the term “actual 
knowledge” and has used this term on numerous occasions. 
The number of statutes in which the Legislature plainly 
expresses that actual knowledge is required belies the 
majority’s position that the term “knew” means only actual 
knowledge. 
For example, in the following statutes the Legislature 
had no difficulty expressing the requirement of actual 
knowledge. 
MCL 15.305(1) (“with actual knowledge of such 
prohibited 
conflict”); 
MCL 
15.325(1) 
(“with 
actual 
knowledge of the prohibited activity”); MCL 28.425a(2)(c) 
(“The prosecuting attorney shall disclose to the concealed 
weapon licensing board any information of which he or she 
has actual knowledge that bears directly on an applicant’s 
suitability to carry a concealed pistol safely.”); MCL 
35.501 (“without actual knowledge”); MCL 205.29(2) (“had 
actual knowledge”); MCL 286.192(1) (“unless the person has 
actual 
knowledge”); 
MCL 
324.5531(7) 
(“in 
proving 
a 
defendant’s possession of actual knowledge, circumstantial 
evidence may be used”); MCL 324.11151(5)(b) (“in proving 
the 
defendant’s 
possession 
of 
actual 
knowledge, 
circumstantial evidence may be used”); MCL 333.2843b(1) (“a 
2  
 
 
physician . . . has actual knowledge”); MCL 333.5475a(1)(b) 
(“the property manager, housing commission, or owner of the 
rental unit had actual knowledge of the lead paint 
hazard”); MCL 333.13738(5)(b) (“in proving the defendant’s 
possession of actual knowledge, circumstantial evidence may 
be used”); MCL 333.17015(14) (“the physician who relied 
upon 
the 
certification 
had 
actual 
knowledge”); 
MCL 
390.1553(3)(a) (“does not have actual knowledge”); MCL 
418.131(1) (“if the employer had actual knowledge that an 
injury was certain to occur”); MCL 432.207c(7) (“report all 
information . . . of which it has actual knowledge”); MCL 
440.1201(25) (“[a] person has ‘notice’ of a fact when he or 
she has actual knowledge of it”); MCL 441.107(a) (“unless 
it is shown that he acted with actual knowledge”); MCL 
445.813(1) (“unless done with actual knowledge”); MCL 
449.1303(a) 
(“with 
actual 
knowledge 
of 
the 
limited 
partner’s 
participation 
in 
control”); 
MCL 
450.1472(2) 
(“with 
actual 
knowledge 
of 
the 
restriction”); 
MCL 
450.4406(b) 
(“has 
actual 
knowledge”); 
MCL 
487.717(1) 
(“shall not be chargeable with changes in rights of 
withdrawal due to death or incompetency in absence of 
actual knowledge”); MCL 490.385(1) (“has actual knowledge 
of a dispute”); MCL 491.422(2) (“with actual knowledge of 
the restriction”); MCL 491.604 (“unless it has actual 
3  
 
 
knowledge that the facts set forth in the affidavit are 
untrue”); MCL 500.1371(2) (“with actual knowledge”); MCL 
500.8127(2)(c) (“A person having actual knowledge of the 
pending rehabilitation or liquidation shall be considered 
not to act in good faith.”); MCL 554.636(3)(b) (“which the 
lessor actually knew was in violation”); MCL 554.636(3)(c) 
(“the lessor actually knew that the provision was not 
included”); MCL 557.206(d) (“without actual knowledge of 
such breach”); MCL 600.1403(1) (“the seller had no actual 
knowledge of the actual age”); MCL 600.2945(j) (“does not 
have actual knowledge”); MCL 600.2949a (“the defendant had 
actual knowledge that the product was defective”); MCL 
600.2974(3)(d) (“with the actual knowledge that the conduct 
was injurious to consumers”); MCL 700.2910(1)(c) (“after 
actual 
knowledge 
that 
a 
property 
right 
has 
been 
conferred”); MCL 700.3714(2) (“with actual knowledge of the 
limit”); MCL 700.5318 (“has actual knowledge that the 
guardian is exceeding the guardian’s powers or improperly 
exercising 
them”); 
MCL 
700.5504(1) 
(“without 
actual 
knowledge of the principal’s death”); MCL 700.5505(1) (“the 
attorney in fact did not have actual knowledge of the 
principal’s death”); MCL 700.5510(2) (“did not have actual 
knowledge”); MCL 700.7404 (“without actual knowledge”); MCL 
750.159k(4)(a) (“did not have prior actual knowledge”); MCL 
4  
 
 
 
 
 
750.159m(4) (“did not have prior actual knowledge”); MCL 
750.159q(1)(b) 
(“had 
prior 
actual 
knowledge 
of 
the 
commission of an offense”); MCL 750.159r(1)(a) (“who did 
not have prior actual knowledge”); MCL 750.219e(3)(a) 
(“without prior actual knowledge”); MCL 750.219f(4)(a) 
(“without prior actual knowledge”); MCL 750.411j(b) (“with 
the approval or prior actual knowledge”); MCL 750.411k(1) 
(“with prior actual knowledge”); MCL 750.540d(a) (“had 
prior actual knowledge of and consented to the violation”). 
I list these statutes not to overwhelm the reader, but 
to show the fallacy of the majority’s position. 
The 
Legislature is fully aware of how to ensure a statutory 
requirement of actual knowledge. 
In MCL 600.2919a, it has 
not done so. 
This Court does not have the authority to 
impose an actual knowledge requirement when the Legislature 
has not seen fit to do so. 
See In re MCI Telecom 
Complaint, 460 Mich 396, 413; 596 NW2d 164 (1999). 
The Legislature’s ability to clearly state an actual 
knowledge requirement is indisputable given the number of 
statutes 
in 
which 
it 
expresses 
this 
requirement. 
Therefore, the Legislature’s use of the term “knew” in MCL 
600.2919a must be viewed as allowing a broad range of 
knowledge to meet the statutory knowledge requirement. 
5  
 
 
 
 
 
This Court recognized the difference in specificity 
between using the terms “actual knowledge” and “knowledge” 
in Travis v Dreis & Krump Mfg Co, 453 Mich 149, 173; 551 
NW2d 132 (1996). 
As this Court stated in Travis, supra at 
173, “Because the Legislature was careful to use the term 
‘actual 
knowledge,’ 
and 
not 
the 
less 
specific 
word 
‘knowledge,’ we determine that the Legislature meant that 
constructive, implied, or imputed knowledge is not enough.” 
Logically, the opposite is also true. 
The Legislature’s 
careful selection of the term “knew,” instead of “actually 
knew,” indicates that a broad range of knowledge is 
sufficient to meet the statutory requirement. 
Because the 
Legislature’s 
choice 
of 
the 
word 
“knew” 
encompasses 
constructive knowledge, defendant had a duty to make 
obvious inquiries that an honest person using ordinary 
caution 
would 
have 
made, 
instead 
of 
avoiding 
these 
inquiries. 
See Deputy Comm’r of Agriculture v O & A 
Electric Co-op, Inc, 332 Mich 713, 716-717; 52 NW2d 565 
(1952). 
Because this Court must follow the plain text of a 
statute and because the Legislature used the term “knew,” 
which encompasses actual and constructive knowledge, I 
disagree with the majority’s contention that constructive 
6  
 
 
 
 
 
 
knowledge is insufficient to satisfy the requirement of MCL 
600.2919a. Accordingly, I respectfully dissent. 
Michael F. Cavanagh
 
 
 
 
 
 
Marilyn Kelly 
7