Court Opinion

ID: 4179339
Source: CourtListenerOpinion
Date Created: 2017-06-21 11:10:45.553524+00
Date Added: 2024-06-11T13:24:57.516098
License: Public Domain

STATE OF MICHIGAN

                             COURT OF APPEALS

DRAGO MIHAJLOVSKI, JADRANKA                                          UNPUBLISHED
MIHAJLOVSKI, and ZIVE MIHAJLOVSKI,                                   June 20, 2017

               Plaintiffs-Appellants,

v                                                                    No. 331284
                                                                     Oakland Circuit Court
BIRACH BROADCASTING CORPORATION                                      LC No. 2014-140471-CK
and SIMA BIRACH,

               Defendants-Appellees,

and

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

               Defendants.

Before: MARKEY, P.J., and METER and SHAPIRO, JJ.

PER CURIAM.

        In this fraud and contract action, plaintiffs appeal by right the circuit court’s January 14,
2016 order clarifying that its prior orders granting plaintiffs default judgment did not apply to
defendants Sima Birach (Birach, Sr.) and Birach Broadcasting Corporation (BBC), because of
the court’s June 3, 2015, order granting those defendants summary disposition. The modified
default judgment in favor of plaintiffs applies only against defendants Sima Birach, Jr. (Birach,
Jr.) and the Sima Birach, Jr. Trust (the Trust). On appeal, plaintiffs argue Birach, Sr. and BBC
can be held vicariously liable for the actions of Birach, Jr. based on the theory of ostensible
agency. We conclude that questions of fact still exist regarding whether Birach, Jr. was the
ostensible agent of Birach, Sr. and BBC, whether Birach, Sr. and 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. Accordingly, we reverse and remand.

                    I. RELEVANT FACTS AND PROCEDURAL HISTORY

                                                -1-
        Drago Mihajlovski (Drago) met Birach, Jr. through Drago’s son, Zive Mihajlovski
(Zive), who had known Birach, Jr. since the 1990s. Zive also knew 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 to Birach, Jr. and Birach Holdings
Corporation (BHC) all of WCAR 1090 AM’s airtime.

         Through the course of Drago and Birach, Jr.’s relationship, Drago and his wife, Jadranka
Mihajlovski (Jadranka), invested $950,000 in Birach, Jr.’s company, 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, not BHC, because it was
affiliated with ESPN Detroit, a network with which he was familiar. 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 Birach, Jr. Trust” (the Trust).
Attached to the Memorandum of Understanding was a payment schedule, detailing the
particulars of Drago and Jadranka’s investment. The attachment also stated that as part of the
investment, Jadranka and Zive would be given lifetime employment contracts.

        These employment contracts were drafted on ESPN Detroit (WCAR 1090 AM)
letterhead, and were addressed to Jadranka and Zive, respectively, 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, operated 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 contracts 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 against Birach, Sr., BBC, Birach
Jr., the Trust, and BHC. Against Birach, Jr., plaintiffs alleged fraud, two counts of breach of
contract, misrepresentation, fraud in the inducement, and conversion, and requested an
accounting of BHC and the Trust. Additionally, plaintiffs alleged 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 liable 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 agency relationship existed such that
Birach, Sr. and BBC could be held vicariously liable for the misrepresentations of Birach, Jr.
The trial court subsequently denied plaintiffs’ motion for reconsideration.

                                 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 regarding whether Birach, Jr. was
the ostensible agent of Birach, Sr. and BBC at the time he entered into agreements with
plaintiffs. We agree.

                                               -2-
        A trial court’s grant or denial of summary disposition is reviewed 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 consideration of all the pleadings,
admissions, and other evidence the parties have submitted, in the light most favorable to the
nonmoving party, there is no genuine issue regarding any material 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 issue of material fact when
reasonable minds could differ on an issue after viewing the record 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, admissions, or other documentary evidence.” McCoig Materials, LLC v
Galui Construction, Inc, 295 Mich. App. 684, 693; 818 NW2d 410 (2012). If the moving party
does so, the nonmoving party then must demonstrate that a genuine issue of material fact exists.
Id. The nonmoving party may use affidavits, depositions, and other documentary evidence to
meet their burden but the content 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 party fails
to establish the existence of a material factual dispute, the moving 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 by 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 principle, the plaintiff must prove:

       [First] the person dealing with the agent must do so with belief in the agent’s
       authority and this belief must be a reasonable one; [second] such 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 the 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 authority as
       an agent and who is not otherwise liable as a party to a transaction purportedly
       done by the actor on that person’s account is subject to liability to a third party

                                                -3-
       who justifiably is induced to make a detrimental change in position because the
       transaction is believed to be on the person’s account if

               (1) the person intentionally or carelessly caused such belief, or

               (2) having notice of such belief and that it might induce others to change
       their position, the person did not take reasonable steps to notify 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 implicitly 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 of 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 broadcast business community, to the
financial detriment of Birach, Sr. The order enjoined Birach, Jr. from using the BBC name or
logo in connection with broadcasting, and enjoined Birach, Jr. from using the BBC name to enter
into any legally binding financial arrangement. Birach, Jr. was also enjoined from representing
himself as being associated with BBC, and was “enjoined from filing 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 with any state or local government in the United States.”

        Nevertheless, despite the injunction, Birach, Sr., by either want of ordinary care or sheer
negligence, continued to allow Birach, 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 injunction, Birach, Sr. allowed
Birach, Jr., as Chairman and CEO of BHC, to file a certificate of assumed name with the
Michigan Department of Licensing and Regulatory Affairs. This filing stated that BHC had
assumed the name, and would be transacting business as, WCAR Radio, 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 use of air-time without seeking or
obtaining permission from anyone.” Birach, Sr. further admitted that Birach, Jr. “represented to
the media and general public that he had the authority to operate the on-air operations of WCAR
[1090 AM], including providing programming and selling time for advertisement broadcasts.”
During his deposition, Birach, Sr. conceded that Birach, Jr. had not paid any monies under the
lease, despite being contractually obligated to remit $20,000 per month, $10,000 to BBC and
$10,000 “in escrow account for Alexander 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.”

                                                -4-
       On top of the foregoing, Birach, Jr. consistently operated WCAR 1090 AM as though he
was the owner of the station, although he was not. He hired and payed employees through BHC,
and told multiple people, including employees, that not only did he own WCAR 1090 AM, but
he also owned radio stations in Pontiac, Michigan and Pittsburgh, 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 Birach, Sr. and BBC.

        Michigan jurisprudence imposes upon third parties seeking to hold 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 order 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 respect to the ownership of
WCAR 1090 AM, he would have known 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 testified that prior to making his
investment, he went to his attorney to do the investigation. Drago stated, “[t]he attorney know
better than that [sic] to check the record, whatever they supposed to do. That’s why you hire the
attorney.” Drago’s attorney informed him that everything was “fine” with regards to the
investment. It is not negligent, or even unreasonable, to trust 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., and failed to “perform the most elementary due diligence,” is a
question of fact.

         Defendants further argue their point by noting that Zive had worked for BBC at WCAR
1090 AM, and he knew that the broadcasting license was in the name of BBC, not BHC. Zive
testified that he had seen the license for WCAR 1090 AM, and that he knew the station was
owned by Birach, Sr. However, Zive also testified that he did not discuss Drago’s investment
before Drago paid Birach, Jr. Further, Zive recalled that Birach, 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 employment 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 dealings with Drago that Drago
would be investing in BHC, not BBC or WCAR 1090 AM, and accordingly, 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 Memorandum of Understanding itself is an
agreement between Drago and Birach, Jr., as trustee for the Trust, and BHC. Attached to the
Memorandum of Understanding is the investment schedule, which also mentions that Drago’s
investment is in exchange for lifetime employment agreements for Jadranka and Zive. Thus, the
employment contracts are incorporated by reference into the Memorandum of Understanding.

                                               -5-
         The employment contracts are key to the analysis because they show exactly how Birach,
Jr. was holding himself out as having some authority over WCAR 1090 AM. Specifically, they
show that Jadranka’s and Zive’s employment contracts were drafted on ESPN Detroit, WCAR
1090 AM letterhead, but were addressed to Jadranka and Zive, respectively, from Sima Birach,
Jr., in his capacity as President and CEO of BHC. The employment contracts indicate that they
serve as “official employment agreement[s] at ESPN Radio Detroit, operated as a division of
[BHC].” Both Jadranka and Zive in their respective positions were to report directly to Birach,
Jr., “in his capacity as Chairman and CEO.” Based on the foregoing, 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 underlying agreement with plaintiffs
under the guise that he was Chairman and CEO of BHC, and ESPN Detroit, WCAR 1090 AM,
was a division of BHC, when in reality, it was owned by BBC. Through 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 remains regarding whether
Birach, Sr. and defendants should be estopped from denying that Birach, Jr. acted as an
ostensible agent for Birach, Sr. and BBC, and whether Birach, Sr. and BBC should be held
vicariously liable for Birach, Jr.’s misrepresentations.

         We briefly acknowledge that defendants present alternative grounds for affirmance on
appeal. Defendants are permitted to advance alternative grounds for affirmance on appeal, “even
if the alternative ground was considered and rejected by the lower 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 there is no support in Michigan law to support the theory that
because Birach, Jr. operated WCAR 1090 AM as if he owned it, “that somehow makes Birach,
Sr. and [BBC] liable for Birach, Jr.’s misrepresentations.” Because 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 unpersuasive. Defendants’
argument mistakenly relies on a theory of respondeat superior in the context of an employer-
employee relationship. As defendants correctly point out, under the doctrine of respondeat
superior, when an employee acts solely to further its own individual interests, it cannot be
characterized as falling within the scope of the agent’s employment 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 Birach, Sr. vicariously liable for
Birach, Jr.’s actions as an employee under the doctrine of respondeat superior, but rather, under
the theory of ostensible agency. Ostensible agency, unlike respondeat superior, does not require
that the agent be an employee, or that the principal received any 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 relationship 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 371 Fed Appx 814 (2010), an order
of the United States District court for the Western District of Washington, laying out the court’s

                                                -6-
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, and 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 previously 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 retain jurisdiction.

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

                                                -7-