Court Opinion

ID: 4295638
Source: CourtListenerOpinion
Date Created: 2018-07-19 07:22:55.189193+00
Date Added: 2024-06-11T14:39:34.820102
License: Public Domain

STATE OF MICHIGAN

                            COURT OF APPEALS

CHARLES MAGLEY III,                                                  FOR PUBLICATION
                                                                     July 17, 2018
               Plaintiff-Appellant,                                  9:15 a.m.

v                                                                    No. 340507
                                                                     St. Joseph Circuit Court
M & W INCORPORATED,                                                  LC No. 16-001080-NZ

               Defendant-Appellant.

Before: HOEKSTRA, P.J., and MURPHY and MARKEY, JJ.

PER CURIAM.

        In this tort case arising from the repossession of farm equipment, plaintiff appeals as of
right the order granting summary disposition to defendant under MCR 2.116(C)(10). Because
the trial court erred by concluding that defendant could not be held liable when acting as an
agent for a third-party, and material questions of fact remain regarding the wrongfulness of
defendant’s conduct, we reverse the grant of summary disposition to defendant and remand for
further proceedings.

        Plaintiff is a farmer and the owner of a John Deere tractor. Plaintiff had a loan with
Kellogg Community Credit Union (“Kellogg”) relating to the tractor, and under the terms of
plaintiff’s “Loan and Security Agreement” with Kellogg, the tractor was secured collateral,
subject to repossession and sale in the event that plaintiff defaulted on his loan. Defendant is an
“asset recovery” company that repossesses property and sells it on behalf of lienholders.
Plaintiff defaulted on his tractor loan, and on June 28, 2016, acting on Kellogg’s behalf,
defendant repossessed plaintiff’s tractor. Notably, when defendant repossessed the tractor, it
also took other farm equipment, specifically a “front-mounted tank” and a “sprayer,” both of
which plaintiff had recently attached to the tractor in preparation for his annual herbicide
spraying of his crops. Unlike the tractor itself, plaintiff owned the sprayer and tank outright, and
these items were not mentioned in the loan documents. Despite plaintiff’s demands for the
return of his property, defendant kept plaintiff’s items for approximately one month and posted
pictures of the tractor—with the sprayer and tank attached—on Facebook as a featured item in an
upcoming auction. After plaintiff resolved his loan dispute with Kellogg, defendant eventually

                                                -1-
released plaintiff’s tractor, sprayer, and tank to him.1 However, by the time the property was
released, plaintiff had been deprived of the use of his equipment for a month, he had to pay
someone else to spray his crops, and he had suffered damages to his crops because he missed the
“most opportune time” for spraying his crops.

        Plaintiff filed the current lawsuit against defendant, alleging: (1) common law
conversion, (2) statutory conversion, (3) trespass to chattels, and (4) negligence. Briefly stated,
plaintiff alleged that defendant wrongfully repossessed the sprayer and the tank, that defendant
wrongfully withheld those items from him, and that defendant wrongfully posted the items for
auction, despite plaintiff’s demands for the return of his farm equipment. Defendant moved for
summary disposition under MCR 2.116(C)(10), arguing that it acted lawfully when repossessing
the tank and sprayer and that, if there was any wrongdoing, defendant could not be held liable
while acting on Kellogg’s behalf based on information provided by Kellogg. The trial court
granted defendant’s motion for summary disposition under MCR 2.116(C)(10), stating that it
agreed with defendant’s position. Plaintiff now appeals as of right.

        On appeal, plaintiff argues that the trial court erred by concluding that defendant could
not be held liable for wrongful conduct while acting on Kellogg’s behalf to repossess property.
Additionally, plaintiff argues that the tank and sprayer were not subject to repossession because
these items do not qualify as “accessions” within the meaning of the Loan and Security
Agreement. Plaintiff acknowledges that, under the Loan and Security Agreement, attached
items, even if not accessions, may be taken incidentally to repossession of secured property; but,
plaintiff argues that defendant’s conduct in this case was nevertheless wrongful because
defendant made no attempt to return plaintiff’s items and refused plaintiff’s demands for the
return of his property. We agree.

        We review de novo a trial court’s decision to grant a motion for summary disposition.
Ligon v Detroit, 276 Mich App 120, 124; 739 NW2d 900 (2007). “When reviewing a motion
under MCR 2.116(C)(10), which tests the factual sufficiency of the complaint, this Court
considers all the evidence submitted by the parties in the light most favorable to the non-moving
party and grants summary disposition only where the evidence fails to establish a genuine issue
regarding any material fact.” Sisk-Rathburn v Farm Bureau Gen Ins Co of Mich, 279 Mich App
425, 427; 760 NW2d 878 (2008). “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 Mgt, LLP, 481 Mich 419, 425; 751 NW2d 8 (2008).
To this extent this case involves questions concerning the interpretation of a contract or a statute,
our review is de novo. Rodgers v JPMorgan Chase Bank NA, 315 Mich App 301, 307; 890
NW2d 381 (2016).

1
  In addition to the tractor, plaintiff also had a loan with Kellogg for a Ford F-350 truck. The
truck was also repossessed by defendant and eventually returned to plaintiff. However, the
repossession of the truck is not at issue on appeal.

                                                -2-
        The first issue on appeal is whether defendant may be held liable when repossessing
property on behalf of Kellogg based on information provided by Kellogg.2 “Agency in its
broadest sense includes every relation in which one person acts for or represents another by his
authority.” Saums v Parfet, 270 Mich 165, 171; 258 NW 235 (1935) (quotation marks and
citation omitted). Generally, an agent may be held personally liable for his or her own tortious
conduct, even when acting on behalf of a principal. See Dep’t of Agriculture v Appletree Mktg,
LLC, 485 Mich 1, 17-18 & n 39; 779 NW2d 237 (2010). More fully, our Supreme Court has
quoted with approval from 2 Restatement Agency, 3d, stating:

       An agent is subject to liability to a third party harmed by the agent's tortious
       conduct. Unless an applicable statute provides otherwise, an actor remains
       subject to liability although the actor acts as an agent or an employee, with actual
       or apparent authority, or within the scope of employment. [Appletree Mktg, LLC,
       485 Mich 1, 17-18 & n 39, quoting 2 Restatement Agency, 3d, § 7.01, p 115.]

However, under this rule, an agent is only liable for his or her own “tortious conduct” and cannot
be held liable for torts committed by “the agent’s principle that do not implicate the agent’s
conduct.” 2 Restatement Agency, 3d, § 7.01, comment d.

        Notably, with regard to the tort of conversion in particular, a defendant who wrongfully
exerts dominion over property is not shielded from liability on the basis that the action was
undertaken in good faith on behalf of a third-party. “Conversion, both at common law and under
the statute, is defined as any distinct act of domain wrongfully exerted over another's personal
property in denial of or inconsistent with the rights therein.” Aroma Wines & Equip, Inc v
Columbian Distribution Servs, Inc, 303 Mich App 441, 447; 844 NW2d 727 (2013) (quotation
marks and citation omitted).3 Conversion is “an intentional tort in the sense that the converter's

2
  On appeal, defendant asserts that the trial court’s agency ruling was quite narrow—i.e., that the
trial court only held that defendant could not be held liable for prematurely taking plaintiff’s
property insofar as the property was taken on June 28th despite the fact that plaintiff had until
June 30th to bring his loan current. However, the trial court more broadly stated that because
defendant was an agent acting under Kellogg’s orders, only Kellogg could be held liable for “any
claims for the wrongful conversion or the premature repossession.” (emphasis added.) Given
this statement, although the trial court’s reasoning is not entirely clear, it appears that the trial
court intended for this agency rationale to apply to the premature repossession and “any” other
claims of wrongful conversion. Plaintiff does not raise the premature repossession issue on
appeal.
3
  Treble damages for statutory conversion are available under MCL 600.2919a(1)(a), but, in
addition to the common-law elements for conversion, a plaintiff claiming statutory conversion
must show that the conversion was for the defendant’s “own use.” Aroma Wines & Equip, Inc v
Columbian Distribution Services, Inc, 497 Mich 337, 356; 871 NW2d 136 (2015). “[S]omeone
alleging conversion to the defendant's ‘own use’ under MCL 600.2919a(1)(a) must show that the
defendant employed the converted property for some purpose personal to the defendant's
interests, even if that purpose is not the object's ordinarily intended purpose.” Id. at 359.

                                                -3-
actions are willful.” Foremost Ins Co v Allstate Ins Co, 439 Mich 378, 391; 486 NW2d 600
(1992). However, conversion “can be committed unwittingly if [the defendant is] unaware of the
plaintiff's outstanding property interest.” Id. See also Lawsuit Fin, LLC v Curry, 261 Mich App
579, 591; 683 NW2d 233 (2004). Good faith, mistake, and ignorance are not defenses to a claim
of conversion. See Moore v Andrews, 203 Mich 219, 233; 168 NW 1037 (1918); Willis v Ed
Hudson Towing, Inc, 109 Mich App 344, 349; 311 NW2d 776 (1981); see also 90 CJS Trover
and Conversion § 31. Thus, for example, under the common law, when “an auctioneer receives
and takes the property into his possession” from a third-party, “and sells it, paying over the
proceeds, less his commission, he is liable, although he has no knowledge or want of title in the
party for whom he sells, and acts in good faith.” Kearney v Clutton, 101 Mich 106, 111-112; 59
NW 419 (1894). Likewise, in the absence of governmental immunity, a sheriff or court officer is
liable for conversion for unlawfully seizing personal property, “even if he or she does so in the
execution of a court order.” Aroma Wines & Equip, Inc 497 Mich at 352-353, 359. As one
Court succinctly explained: “It is not a defense to say, ‘I supposed I had authority to do so.’ ”
Kenney v Ranney, 96 Mich 617, 618; 55 NW 982 (1893). Instead, a defendant’s actions in
reliance on the asserted rights of a third-party are only lawful when the third-party actually has a
“legal right” to the property. See Gibbons v Farwell, 63 Mich 344, 349; 29 NW 855 (1886).

        It follows that in this case, contrary to the trial court’s conclusions, defendant may be
held liable for its own torts, including conversion, even if acting on Kellogg’s behalf. Although
defendant purports to have repossessed plaintiff’s property in reliance on Kellogg’s “Summary
of Account” document and repossession request, a mistaken belief that Kellogg had a right to the
items is not a defense.4 Moore, 203 Mich at 233; 168 NW 1037 (1918); Kearney, 101 Mich at
111-112; Willis, 109 Mich at 349. Instead, the question is whether Kellogg truly had a legal right
to the property, Gibbons, 63 Mich at 349, and it was defendant’s obligation to ensure that it
exercised only those rights that Kellogg possessed, see Kenney, 96 Mich at 618; Kane v
Hutchinson, 93 Mich 488, 490; 53 NW 624 (1892). If Kellogg did not have a legal right to the
sprayer and tank, the fact that defendant acted on Kellogg’s behalf is immaterial and thus the
existence of an agency relationship did not entitle defendant to summary disposition.

        Given that defendant acted on behalf of Kellogg, the issue in this case thus becomes
whether Kellogg had a legal right to take, and refuse to return, plaintiff’s tank and sprayer.
Generally, if a borrower defaults on a loan, a secured creditor may take possession of the
collateral. MCL 440.9609(1)(a). However, repossession of property in which a creditor does not
have a security interest can constitute conversion. See generally Larson v Van Horn, 110 Mich
App 369, 379; 313 NW2d 288 (1981). Even if there is a valid security interest in some property,
the incidental taking of other property can support a claim for conversion, “unless the loan
agreement includes the debtor’s consent to the incidental taking.” Clark v Auto Recovery Bureau

4
  Even if good faith were a defense to conversion, defendant’s reliance on the “Summary of
Account” as a basis to justify its actions is nevertheless unavailing because the “Summary of
Account” document identifies a “tractor” as the item to be repossessed. It is entirely
disingenuous to also blindly seize the sprayer and tank—and to then make no inquiry about the
propriety of seizing these items—based solely on the order for the repossession of the “tractor.”

                                                -4-
Conn, Inc, 889 F Supp 543, 548 (D Conn, 1994).5 See also 46 Causes of Action 2d 513, § 10;
Kane, 93 Mich at 490 (“It was the duty of the officer to see that no other articles were taken
except those described in his writ.”). Moreover, a refusal to return property can support a claim
for conversion. Aroma Wines & Equip, Inc, 497 Mich at 352. If property is eventually returned
after a period of wrongful detention, the owner may nevertheless be entitled to damages,
including damages for the reasonable value of the property’s use during the period of detention.
See Maycroft v Jennings Farms, 209 Mich 187, 192; 176 NW 545 (1920); Cent Transp, Inc v
Fruehauf Corp, 139 Mich App 536, 546; 362 NW2d 823 (1984); Jay Dee Contractors v Fattore
Const Co, 96 Mich App 519, 523; 293 NW2d 620 (1980);18 Am Jur 2d Conversion § 136.

        In this case, whether Kellogg had a security interest in the tank and sprayer, and whether
plaintiff otherwise agreed to allow Kellogg to take, and retain possession of, the tank and
sprayer, are questions of contract interpretation. “In interpreting a contract, it is a court's
obligation to determine the intent of the parties by examining the language of the contract
according to its plain and ordinary meaning.” In re Smith Truth, 480 Mich 19, 24; 745 NW2d
754 (2008). Contracts must be read as a whole, and words must be considered in context.
Henderson v State Farm Fire & Cas Co, 460 Mich 348, 356; 596 NW2d 190 (1999). Courts
must “give effect to every word, clause, and phrase, and a construction should be avoided that
would render any part of the contract surplusage or nugatory.” Royal Prop Group, LLC v Prime
Ins Syndicate, Inc, 267 Mich App 708, 715; 706 NW2d 426 (2005). “Inartfully worded or
clumsily arranged contract terms do not render a contract ambiguous if it fairly admits of one
interpretation.” Village of Edmore v Crystal Automation Sys Inc, 322 Mich App 244; 911 NW2d
241 (2017). Unambiguous contracts must be enforced as written. In re Smith Truth, 480 Mich at
24.

       The Loan and Security Agreement between plaintiff and Kellogg contained the following
provisions regarding Kellogg’s security interest and repossession of property:

       1. THE SECURITY FOR THE LOAN – You give us what is known as a
       security interest in the property described in the “Security” section of the Truth in
       Lending Disclosure that is part of this document (“the Property”). The security
       interest you give includes all accessions. Accessions are things which are
       attached to or installed in the Property now or in the future. The security interest
       also includes any replacements for the Property which you buy within 10 days of
       the Loan and any extensions, renewals or refinancing of the Loan. It also includes
       any money you receive from selling the Property or from insurance you have on
       the Property. If the value of the Property declines, you promise to give us more
       property as security if asked to do so.

                                             * * *

5
 Although non-binding, authority from other jurisdictions may be considered for its persuasive
value. Abela v Gen Motors Corp, 469 Mich 603, 607; 677 NW2d 325 (2004).

                                               -5-
       9. WHAT HAPPENS IF YOU ARE IN DEFAULT – When you are in default,
       we may demand immediate payment of the outstanding balance of the Loan
       without giving you advance notice and take possession of the Property. You
       agree [Kellogg] has the right to take possession of the Property without judicial
       process if this can be done without breach of the peace. If we ask, you promise to
       deliver the Property at a time and place we choose. If the property is a motor
       vehicle or boat, you agree that we may obtain a key or other device necessary to
       unlock and operate, it when you are in default. We will not be responsible for
       any other property not covered by this Agreement that you leave inside the
       Property or that is attached to the Property. We will try to return that property to
       you or make it available for you to claim. [Italics added.]

In relevant part, the “Security” section of the Truth in Lending Disclosure identifies plaintiff’s
John Deere tractor as the collateral for the loan. Under the terms of the agreement, after taking
possession of “the Property,” Kellogg had the power to “sell it and apply the money to any
amounts” plaintiff owed Kellogg.

        The security agreement does not specifically mention the tank or sprayer. However, both
¶ 1 and ¶ 9 refer to items that are “attached to” “the Property,” and in this case the tank and
sprayer were attached to the tractor when defendant arrived to repossess the tractor.
Significantly, although both ¶ 1 and ¶ 9 use the word “attached,” when the contract is read as a
whole, it is clear that there are two distinct categories of attached property and that Kellogg’s
rights with regard to these two categories of attached property are very different. Under ¶ 1,
things “attached to” the tractor are accessions subject to a security interest, and these accessions
may be lawfully repossessed and sold. See MCL 440.9609(1)(a). However, under ¶ 9 there may
be other things “attached to” the secured property that are “not covered by” the Agreement and
that are not subject to a security interest. Paragraph 9 makes plain that things attached to the
tractor that are not covered by the agreement may be incidentally taken during repossession
insofar as Kellogg disavows any responsibility for these items and promises to “try to return that
property to [plaintiff] or make it available for [plaintiff] to claim.” But, the fact remains that
attached property taken incidentally under ¶ 9 is not subject to a security interest, and Kellogg
must make a good faith attempt to return it or make it available to plaintiff to claim.6 When
repossessing property on Kellogg’s behalf, defendant must abide by these provisions, and adhere
to the distinction between ¶ 1 and ¶ 9, because defendant’s actions are only lawful to the extent
that Kellogg has a legal right to the property being repossessed.

       At first glance ¶ 1 and ¶ 9 may seem discordant insofar as they both use the term
“attached” to describe two different categories of property. However, these somewhat inartful
provisions can be easily harmonized when the contract is read as a whole and the use of the word
“attached” is considered in the context of each paragraph. In particular, in ¶ 1 accessions are
defined as property “attached to or installed in the Property” (emphasis added), while in ¶ 9, the

6
  Every contract under the UCC “imposes an obligation of good faith in its performance and
enforcement.” MCL 440.1304.

                                                -6-
“attached” property not covered by the agreement is grouped with property that plaintiff
“leave[s] inside the Property.” Clearly, ¶ 1 envisions a more permanent attachment, comparable
to installing something, while ¶ 9 contemplates a more temporary attachment on par with leaving
something inside the property. Stated differently, the “attached” or “installed” items under ¶ 1
essentially become part of “the Property,” and thus these accessions are subject to repossession
and sale.7 In contrast, property that is “attached to” or left inside the property under ¶ 9 retains
its identity, distinct from the secured property, and it can be readily removed without damaging
the secured property; consequently, while this property under ¶ 9 may be incidentally taken
during repossession, it must be returned to plaintiff because it is not part of the secured collateral.
Fairly read, the parties’ agreement evinces an understanding of “accessions” consistent with the
general rule that “a good that is affixed to another good so that it is easily removable or
completely retains its own identity is not an accession.” 9 Anderson UUC, § 9-314:4 (3d ed).
See also Fane v Detroit Library Com'n, 465 Mich 68, 79; 631 NW2d 678 (2001) (concluding
that ramp was not an accession to a building when it could be “readily” removed and had a
“possible existence” apart from the building); Contl Cablevision of Michigan, Inc v Roseville,
430 Mich 727, 737; 425 NW2d 53 (1988) (finding that term “accessions” “implies a transfer of
ownership and control over the property attached”). Whether an item is an accession to property
is generally a question of fact. See Lakeside Resort Corp v Sprague, 274 Mich 426, 432; 264
NW 851 (1936).

        On appeal, defendant attempts to ignore the distinction between accessions and non-
accessions. That is, when moving for summary disposition in the trial court, defendant initially
argued that the tank and sprayer were accessions. However, at least for the purposes of this
appeal, defendant abandons its assertion that the sprayer and tank were accessions, and defendant
instead argues that its actions regarding the tank and sprayer were lawful regardless of whether
these items fall under ¶ 1 and ¶ 9. Contrary to this argument, if the tank and sprayer are covered
by ¶ 9, they are not subject to repossession and sale, and, viewing the evidence in a light most
favorable to plaintiff, at a minimum, plaintiff could maintain a conversion claim based on
defendant’s refusal to return these items.8

7
  Indeed, upon default, Kellogg has the right to “take possession of the Property” (emphasis
added), and “the Property” is the “property described in the ‘Security’ section of the Truth in
Lending Disclosure,” which in this case is the tractor. The accessions are also properly
repossessed because they become part of “the Property” when they are attached to or installed in
the tractor.
8
  On appeal, defendant argues that plaintiff may not challenge defendant’s post-repossession
conduct on appeal—i.e., defendant’s refusal to return the items—because plaintiff did not raise
the issue in the trial court. Contrary to this argument, in the trial court, plaintiff consistently
maintained that the items were not accessions and that defendant’s actions, in taking the items,
refusing to return them and posting them for sale, constituted conversion. These issues are
properly before this Court. Defendant also argues that plaintiff has attempted to improperly
expand the record. While it is true that a litigant may not expand the record on appeal, Sherman
v Sea Ray Boats, Inc, 251 Mich App 41, 56; 649 NW2d 783 (2002), defendant does not identify

                                                 -7-
        More specifically, reasonable minds could conclude that the tank and sprayer were not
accessions, but separate items with their own identities that could be readily detached without
harming the tractor. Indeed, one of the things that is troubling in this case is that defendant
disconnected the sprayer from the tractor before transporting the tractor, and yet defendant also
loaded the unattached sprayer onto a truck and took it to defendant’s place of business.
Admittedly, by the time defendant removed the sprayer, the tractor had been driven off plaintiff’s
property and down the road, and from this it could be concluded that the repossession had
already occurred when the sprayer was removed. See Clark, 889 F Supp at 547 (“Once a
repossession agent has gained sufficient dominion over collateral to control it, the repossession
has been completed.”). But, even if the sprayer and tank could be taken incidentally to the
repossession of the tractor, under ¶ 9, defendant had an obligation to try to return the items or to
make the items available for plaintiff to claim. Rather than drive the sprayer to its place of
business, defendant could have returned the unattached sprayer to plaintiff’s property. On the
facts of this case, reasonable minds could conclude that defendant wrongfully exercised
dominion over plaintiff’s property by taking the sprayer rather than returning it to plaintiff.
Moreover, by all accounts, plaintiff contacted defendant on numerous occasions demanding the
return of his property, and yet defendant refused to return anything. 9

        Rather than return the items, defendant reattached the sprayer to the tractor and posted a
picture of the tractor—with the sprayer and tank attached—as a featured item in an upcoming
auction. Only after plaintiff resolved his loan problem with Kellogg did defendant release the
sprayer and tank to plaintiff, and by that time, plaintiff had been deprived of the use of the items
for about a month. Although defendant emphasizes that the items were eventually returned, this
does not bar plaintiff’s claims. See Baxter v Woodward, 191 Mich 379, 386; 158 NW 137

any evidence cited by plaintiff that is not part of lower court record, and we see no merit to
defendant’s argument.
9
  On appeal, defendant contends that there is no evidence that plaintiff specifically demanded the
return of the sprayer and the tank. This argument is legally flawed because, under the
agreement, defendant had to try to return those items to plaintiff or to make those items available
for plaintiff to claim. The agreement says nothing that would require plaintiff to make a demand
for the return of these items. In any event, as a factual matter, among other evidence
demonstrating plaintiff’s repeated demands for the return of his property, defendant specifically
admitted, in response to requests for admissions, that plaintiff attempted to have the sprayer and
tank returned to him as follows:
       Request for Admission 7: Admit Plaintiff attempted to have the implements
       returned to him after they were removed from his place of business.
       Answer: Defendant objects to this Request because the term “farm
       implements” is vague, ambiguous, and subject to multiple meanings. In an
       effort to be responsive, without waiving the prior objections(s), and to the
       extent that “farm implements” means the sprayer and tank that were affixed
       to the John Deere tractor at the time of repossession, this Request is
       ADMITTED.

                                                -8-
(1916). To the contrary, plaintiff may still maintain a claim for conversion, and plaintiff can
recover damages for the reasonable value for the loss of use during the period that the items were
unlawfully kept from plaintiff. See Maycroft, 209 Mich at 192; Cent Transp, Inc, 139 Mich App
at 546; 18 Am Jur 2d Conversion § 136. In sum, there is no merit to defendant’s assertion that
its actions were lawful regardless of whether the tank and sprayer were accessions, and
defendant was not entitled to summary disposition on this basis. Instead, questions of fact
remain as to whether the items were accessions and whether defendant’s conduct regarding the
items was lawful. See Lakeside Resort Corp, 274 Mich at 432; Kane, 93 Mich at 490.
Accordingly, the trial court erred by granting defendant’s motion for summary disposition.

        Reversed and remanded for further proceedings. We do not retain jurisdiction. Having
prevailed in full, plaintiff may tax costs under MCR 7.219.

                                                            /s/ Joel P. Hoekstra
                                                            /s/ William B. Murphy
                                                            /s/ Jane E. Markey

                                               -9-