Court Opinion

ID: 4322628
Source: CourtListenerOpinion
Date Created: 2018-10-19 09:11:12.435293+00
Date Added: 2024-06-11T14:45:59.975562
License: Public Domain

STATE OF MICHIGAN

                            COURT OF APPEALS

NORMAN YATOOMA & ASSOCIATES, PC,                                 UNPUBLISHED
                                                                 October 18, 2018
              Plaintiff-Appellee,

v                                                                Nos. 338368 & 339003
                                                                 Oakland Circuit Court
COHEN, LERNER & RABINOVITZ, PC, and                              LC No. 2016-153017-CB
STEVEN Z. COHEN,

              Defendants,
and

PNC BANK, NA,

              Appellant.

NORMAN YATOOMA & ASSOCIATES, PC,

              Plaintiff-Appellee,

v                                                                No. 339047
                                                                 Oakland Circuit Court
COHEN, LERNER & RABINOVITZ, PC, and                              LC No. 2016-153017-CB
STEVEN Z. COHEN,

              Defendants-Appellants.

Before: SHAPIRO, P.J., and SERVITTO and GADOLA, JJ.

PER CURIAM.

        In these consolidated appeals, defendants, Cohen, Lerner & Rabinovitz, PC and Steven Z.
Cohen, appeal as of right the order of the trial court granting summary disposition under MCR
2.116(C)(10) in favor of plaintiff Norman Yatooma & Associates, PC, and denying defendants’
motion for summary disposition under that same court rule. Appellant PNC Bank (PNC) appeals
as of right challenging the trial court’s order denying its motion to intervene. We reverse and
remand.

                                              -1-
                                             I. FACTS

        This case arises out of an arbitration award. Jeffrey Spinello and Karen Hazelwood are
former spouses who together owned a franchise known as Thomas Kinkade At The Downtown
Mall, LLC (collectively Spinello), which they operated in Charlottesville and Fredericksburg,
Virginia. In 2003, Spinello hired plaintiff to represent their interests in arbitration against Media
Arts Group, Inc. and the now-deceased artist Thomas Kinkade, as well as another related party,
whom Spinello alleged had defrauded them in connection with the franchise. The arbitration
panel ultimately awarded Spinello over $2,000,000 in damages and attorney fees. After the
arbitration proceedings concluded, however, Kinkade’s Media Arts enterprise filed for Chapter
11 bankruptcy.

        In 2012, plaintiff commenced a lawsuit against Spinello seeking payment of attorney fees
arising from the arbitration. In October 2014, Spinello, represented by defendants, entered into a
settlement agreement with plaintiff in which Spinello agreed to pay plaintiff as follows, in
pertinent part:

       1. Payment Terms. Plaintiff [Yatooma firm] shall be entitled to receive the total
       amount of Eight Hundred Thirty Seven Thousand Five Hundred Dollars
       ($837,500) which amount shall be paid by [Spinello] in the following manner:

               a. The Clerk of the Court (“Clerk”) shall immediately pay to Plaintiff,
       through its counsel . . . those funds held in the Court’s escrow account . . . . The
       Parties believe that the amount held by the Clerk is at least . . . ($264,788). . . .

              b. Plaintiff shall immediately receive . . . ($47,146) from the IOLTA trust
       account of [defendant Cohen firm], which amount constitutes a portion of the
       most recently received quarterly disbursements received from Diablo.

               c. Commencing with the Diablo quarterly disbursement of January 2015,
       Plaintiff shall be entitled to seven (7) consecutive quarterly payments of . . .
       ($65,700), which amount shall be paid from the [defendant Cohen firm’s] IOLTA
       account, if said Firm continues to be the recipient of the quarterly disbursements,
       or shall be paid from Diablo or its assign directly to Plaintiff or David W. Potts
       JD PLLC.

               d. Plaintiff shall be entitled to a final payment upon the eighth quarterly
       distribution from Diablo in whatever amount is necessary to bring the total
       payment received by Plaintiff to . . . ($837,500).

        The parties agree that plaintiff initially received $264,788, at that time held with the court
clerk, and also $47,146, at that time held by defendants on behalf of Spinello, in accordance with
the settlement agreement. Plaintiff also apparently received the first quarterly payment as
anticipated under the 2014 settlement agreement. Norman Yatooma (Yatooma) testified in his
deposition that plaintiff received between $300,000 and $350,000 as a result of the 2014
settlement agreement, constituting “some measure of what is contemplated in (c) and that’s what

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leaves us with our balance,” being a “balance of just something south of $500,000 on the total
term of $837,500 . . . .”

        Sometime after April 2015, the Kinkade bankruptcy was converted from Chapter 11 to
Chapter 7, resulting in a cessation of quarterly payments from the Chapter 11 bankruptcy plan to
Spinello, and thus a cessation of payments from Spinello to plaintiff under the 2014 settlement
agreement. Anticipating that the bankruptcy claim was unlikely to be paid from the Chapter 7
bankruptcy, Spinello, represented by defendants, sold the remaining claim in the Kinkade
bankruptcy for $550,000. According to defendant Steven Cohen (Cohen), before Spinello sold
the bankruptcy claim defendants repeatedly advised plaintiff and plaintiff’s attorney of
Spinello’s intention to do so. Cohen testified that he believed that plaintiff had approved the sale
of the bankruptcy claim and had agreed to take a pro rata share of what was owed it as
satisfaction of plaintiff’s claim against Spinello. Operating under that understanding, after
receiving the payment for the sale of the claim on behalf of Spinello, defendants contacted
plaintiff to arrange to issue a check to plaintiff for $234,531.86 upon plaintiff signing a release
indicating that Spinello’s debt to plaintiff was thereby satisfied. Plaintiff refused to sign the
release, instead demanding that defendants pay the funds to plaintiff at once. Defendants refused
to pay the funds to plaintiff unless plaintiff first signed the release.

        Cohen testified in his deposition that the “sale [of the Spinello bankruptcy claim] was
premised upon Yatooma’s agreement to take a pro rata share of the sale proceeds in exchange for
an executed Satisfaction of Settlement and Release of any actual or potential claim that Yatooma
had, or believed himself to have had, against Spinello.” In his affidavit, Cohen stated:

               Upon receipt of the $550,000 that Spinello received as a result of his sale
       of his bankruptcy claim, I issued a check to Spinello reflecting his pro rata share
       of the sale proceeds and have consistently retained $234,531.86 of the sale
       proceeds, reflecting Yatooma’s pro rata share (“the escrowed monies”), in the
       Cohen, Lerner & Rabinovitz, P.C. IOLTA account.

       In addition, Cohen testified during his deposition:

             Mr. Yatooma had agreed to sign a release, in a phone call that he made to
       my house where we discussed this.

               Mr. Potts [plaintiff’s attorney] and I talked about this, and he indicated
       that he thought it was a good idea and he would communicate it to Mr. Yatooma.

                                              * * *

       . . . Mr. Potts, in my phone conversation with him, said he understood, he would
       recommend this resolution, that he was having trouble reaching [Yatooma] but
       would reach him, and that he would make sure he would get back to me and give
       me specific permission, which he did not.

              So, I then wrote him another e-mail saying, I have a deadline, if I don’t
       hear from you, I’m going to have to make this deal on these terms, which

                                                -3-
       included a pro-rata reduction on the amount of money received by both my client
       and Mr. Yatooma, to make it fair, which is what I did.

                                               * * *

       . . . I then sent him a release agreement. And then, he wrote me back in e-mail, I
       didn’t say I would sign your agreement, I said I would review your papers, which
       was a lie. He had told me, prepare the release, get it to me, I’ll sign it.

        By contrast, Yatooma stated in his affidavit that he “never spoke with Steven Cohen
about signing any release ahead of his unilateral decision to purportedly reduce the attorney fees
due under the Settlement Agreement in Yatooma v Spinello,” and “never agreed to sign a release
as a condition of receiving partial payment under the settlement agreement.” According to
Yatooma’s deposition testimony, “[a]t some point in time I gained an understanding of the fact
that [Cohen] was trying to broker a deal to sell the debt.” Yatooma testified in his deposition
that Cohen “told me I could have a check tomorrow and then tomorrow came and he tried to
have me sign a release for the balance of my debt which . . . I ultimately refused to sign and he
refused to give me the money.” Yatooma did not “recall when in time I learned that, from whom
I learned that or what the amount was that [Cohen] was trying to sell [the Spinello bankruptcy
claim] for.” David Potts, plaintiff’s attorney, likewise averred that he never spoke with Cohen
nor agreed with Cohen regarding plaintiff signing a release.

        In 2016, plaintiff brought this action seeking declaratory judgment, requesting that the
trial court declare the disputed funds to be plaintiff’s property, and requesting that the trial court
also declare certain funds distributed to third parties to belong to plaintiff. Plaintiff also sought
damages, alleging conversion and unjust enrichment. Plaintiff subsequently amended its
complaint to allege the additional count of tortious interference with a contract.

        PNC moved to intervene in the trial court, alleging that plaintiff is indebted to PNC for an
unpaid loan in the amount of $1,759,814.70, and asserting that it had a first priority right to the
amounts being held by defendants. In support of its alleged grounds for intervention, PNC
submitted proof of its lawsuit filed in federal district court against plaintiff and Yatooma,
alleging breach of a promissory note against plaintiff and breach of guarantee against Yatooma.
Additionally, PNC provided its security agreement between plaintiff and National City Bank
(now PNC via merger), which purports to grant PNC a security interest in “All Inventory,
Chattel Paper, Accounts, Equipment and General Intangibles” of plaintiff, together with the
financing statement allegedly perfecting that security interest. The trial court denied PNC’s
motion to intervene, and likewise denied its motion for reconsideration, on the grounds that PNC
had not yet obtained a judgment against plaintiff.

       Both plaintiff and defendants moved for summary disposition under MCR 2.116(C)(10).
The trial court granted plaintiff summary disposition on the count of its complaint seeking
declaratory judgment, ordering that defendants “immediately turn over $269,530.00

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($234,531.66 plus $35,000.341) to Plaintiff.” The trial court held that plaintiff’s remaining
claims were moot, and also denied defendants’ motion for summary disposition. Defendants and
PNC now appeal.

                                           II. ANALYSIS

                              A. PNC’S MOTION TO INTERVENE

        PNC contends that the trial court erroneously denied its motion to intervene because PNC
established grounds for intervention as of right under MCR 2.209(A)(3). We agree.

        By intervening, a third party becomes a party in a suit that is pending between others.
Hill v LF Transp, Inc, 277 Mich App 500, 508; 746 NW2d 118 (2008). MCR 2.209(A) provides
for intervention as of right as follows:

       On timely application a person has a right to intervene in an action:

       (1) when a Michigan statute or court rule confers an unconditional right to
       intervene;

       (2) by stipulation of all the parties; or

       (3) when the applicant claims an interest relating to the property or transaction
       which is the subject of the action and is so situated that the disposition of the
       action may as a practical matter impair or impede the applicant’s ability to protect
       that interest, unless the applicant’s interest is adequately represented by existing
       parties.

        We liberally construe this rule to permit intervention when the applicant’s interests
otherwise might be inadequately represented. State Treasurer v Bences, 318 Mich App 146,
150; 896 NW2d 93 (2016). However, “intervention may not be proper where it will have the
effect of delaying the action or producing a multifariousness of parties and causes of action.”
Id., quoting Hill, 277 Mich App at 508 (quotation marks and citation omitted). And although
generally we review a trial court’s decision on a motion to intervene for an abuse of discretion,
Bences, 318 Mich App at 149, we review a trial court’s resolution of issues of law, including the
interpretation of statutes and court rules, de novo. Id.

       In this case, PNC does not argue that there is either a statute or court rule that confers
upon it an unconditional right to intervene, MCR 2.209(A)(1), nor that the parties stipulated to
intervention, MCR 2.209(A)(2). Rather, PNC contends that it claims an interest relating to the
disputed funds and is “so situated that the disposition of the action may as a practical matter

1
  According to defendants, the $35,000.34 in question are funds belonging to their client,
Spinello, who had authorized defendants to hold the funds for payment of future attorney fees to
defendants, if incurred.

                                                   -5-
impair or impede [PNC’s] ability to protect that interest.” MCR 2.209(A)(3). PNC submitted
documentation to the trial court in support of its motion to intervene indicating that it had
initiated a case against plaintiff in federal district court seeking to collect $1,759,814.70 by
enforcing a promissory note secured by Yatooma’s guarantee, and also by a perfected security
interest in plaintiff’s accounts, and alleging that PNC had a priority right to the amounts plaintiff
might recover from defendants. The trial court denied PNC’s motion, concluding that because
PNC had not yet obtained a judgment against plaintiff, PNC had no right to intervene.

        But even though PNC had not obtained a judgment against plaintiff, PNC certainly
claimed an interest relating to the property, that is, PNC claimed an interest in the funds that are
the subject of this lawsuit. Also, PNC was situated such that the disposition of the action might
practically impair or impede its ability to protect that interest, given that PNC’s entitlement to
plaintiff’s accounts was at that time being litigated in federal court. Further, there is no
indication that PNC’s interest in plaintiff’s accounts is adequately represented by the parties to
the lawsuit, given that plaintiff is a claimant to the disputed funds and defendants contest
plaintiff’s claim to the funds. In addition, although PNC’s intervention would add a party and a
claim, there is no indication that PNC’s intervention would delay the action or produce “a
multifariousness of parties and causes of action.” Bences, 318 Mich App at 150. We therefore
conclude that PNC was entitled to intervene under MCR 2.209(A).

                                 B. SUMMARY DISPOSITION

        Plaintiff’s complaint, as amended, sought damages for conversion, statutory conversion,
unjust enrichment, and tortious interference with a contract, and also sought declaratory relief,
asking the trial court to determine that the funds being held by defendants were plaintiff’s
property. Both plaintiff and defendants moved for summary disposition under MCR
2.116(C)(10) on the ground that there was no genuine issue of material fact, with each party
arguing that it was entitled to judgment as a matter of law. The trial court granted plaintiff
summary disposition on the count of plaintiff’s complaint seeking declaratory judgment,2 finding
no genuine issue of material fact and finding that plaintiff was entitled to declaratory relief. On
appeal, defendants contend that the trial court erred in granting plaintiff’s motion for summary
disposition. We agree.

                                 1. STANDARDS OF REVIEW

       This Court reviews de novo a trial court’s grant or denial of summary disposition.
Lowrey v LMPS & LMPJ, Inc, 500 Mich App 1, 5-6; 890 NW2d 344 (2016). A motion for
summary disposition pursuant to MCR 2.116(C)(10) tests the factual sufficiency of the
complaint, Shinn v Mich Assigned Claims Facility, 314 Mich App 765, 768; 887 NW2d 635
(2016), and should be granted if “there is no genuine issue regarding any material fact and the

2
  Plaintiff’s complaint also sought declaratory judgment “[t]hat the funds distributed to third
parties are the property of Plaintiff.” It is unclear whether the trial court’s award of declaratory
relief disposes of this request.

                                                -6-
moving party is entitled to judgment as a matter of law.” West v Gen Motors Corp, 469 Mich
177, 183; 665 NW2d 468 (2003). A party moving for summary disposition pursuant to MCR
2.116(C)(10) has the initial burden to support its motion by affidavits, depositions, admissions,
or other documentary evidence. McCoig Materials, LLC v Galui Constr, Inc, 295 Mich App
684, 693; 818 NW2d 410 (2012). Thereafter, the party opposing the motion must go beyond the
pleadings and set forth specific facts demonstrating the existence of a genuine issue of material
fact. Oliver v Smith, 269 Mich App 560, 564; 715 NW2d 314 (2006). The trial court must then
consider all the admissible evidence in the light most favorable to the nonmoving party.
Liparoto Constr, Inc v Gen Shale Brick, Inc, 284 Mich App 25, 29; 772 NW2d 801 (2009). If,
giving the benefit of reasonable doubt to the nonmoving party, the record leaves open an issue
upon which reasonable minds could differ, a genuine issue of material fact exists. Bahri v IDS
Prop Cas Ins Co, 308 Mich App 420, 423; 864 NW2d 609 (2014).

        This Court also reviews de novo a decision to grant or to deny declaratory judgment,
while reviewing the trial court’s findings regarding the decision for clear error. Ter Beek v City
of Wyoming, 297 Mich App 446, 452; 823 NW2d 864 (2012). Clear error occurs when we are
left with a definite and firm conviction that a mistake has been made. Hardrick v Auto Club Ins
Ass’n, 294 Mich App 651, 660; 819 NW2d 28 (2011).

                                2. DECLARATORY JUDGMENT

        The trial court granted plaintiff’s motion for summary disposition on plaintiff’s request
for declaratory relief, determining that there was no genuine issue of material fact and declaring
that the funds being held by defendants were plaintiff’s property. On appeal, defendants
challenge this determination, arguing that it is unsupported by the record. We conclude that the
resolution of the ownership of the funds in question hinges on two separate issues of material
fact. The first is whether plaintiff, represented by Potts, and Spinello, represented by defendants,
reached an oral agreement in which plaintiff would release its claim against Spinello in exchange
for the $234,531.86 now held by defendants. The second disputed factual issue is whether
plaintiff is entitled to the funds in the first place under its 2014 settlement agreement with
Spinello. Because a genuine issue of material fact exists as to both questions, summary
disposition under MCR 2.116(C)(10) was not warranted.

       MCR 2.605(A)(1) provides:

              In a case of actual controversy within its jurisdiction, a Michigan court of
       record may declare the rights and other legal relations of an interested party
       seeking a declaratory judgment, whether or not other relief is or could be sought
       or granted.

        “The purpose of a declaratory judgment is to enable the parties to obtain adjudication of
rights before an actual injury occurs, to settle a matter before it ripens into a violation of the law
or a breach of contract, or to avoid multiplicity of actions by affording a remedy for declaring in
expedient [fashion] the rights and obligations of all litigants.” Rose v State Farm Mut Auto Ins
Co, 274 Mich App 291, 294; 732 NW2d 160 (2007). “The language in this rule is permissive,
and the decision whether to grant declaratory relief is within the trial court’s sound discretion.”
Van Buren Charter Twp v Visteon Corp, 319 Mich App 538, 545; 904 NW2d 192 (2017).

                                                 -7-
         In this case, throughout the trial court proceedings plaintiff maintained that the funds in
question belonged to it by virtue of its 2014 settlement agreement with Spinello, and that
plaintiff had not agreed to sign a release in exchange for the funds. Specifically, Yatooma
testified by deposition that he never spoke with defendants regarding a release before the sale of
the Spinello bankruptcy claim, nor did he subsequently agree to execute a release as a condition
precedent to defendants releasing the funds. By contrast, Cohen testified in his deposition that
he acted on behalf of Spinello to sell the bankruptcy claim, believing that plaintiff was in
agreement with the sale and had agreed to accept a pro rata share as satisfaction of the amount
owed plaintiff by Spinello.

       In granting plaintiff summary disposition, the trial court reasoned, in pertinent part:

             This Court has previously recognized that the central issue in this case [is]
       “whether Plaintiff and Defendants agreed to the sale or that the release of the
       money was conditioned on Plaintiff’s signing a release.”

               On this issue, Plaintiff presents the Affidavits of Norman Yatooma and
       David Potts – as well as other documentary evidence. Both Yatooma and Potts
       specifically claim that they “never spoke with Steven Cohen about (or agreed to)
       signing any release.”

               Defendants, in contrast, appear to argue that Yatooma himself agreed to
       sign a release. But a careful reading of Cohen’s deposition and affidavit establish
       that the alleged, verbal “release agreement” post-dated the October 18, 2015
       Settlement Agreement that is the source of the $234,531.66 in funds being held by
       Defendants.

                                              ***

       And defendants admit $234,531.66 they are holding belongs to Plaintiff.

              In other words, Defendants admit that they came into possession of money
       belonging to Plaintiff. And, when they acquired said money, there was no
       agreement that Plaintiff would sign a release in order for the money to be turned
       over.

               While already holding Plaintiff’s money, in January 2016, Cohen claims
       that he spoke with Yatooma – who then agreed to sign a release. And, relying on
       this representation, Cohen claims that he sent a release to Plaintiff on February 4,
       2016. But, Cohen claims, he received a return email the same day stating that
       Yatooma would not sign the release.

               But at this point, Defendant could offer no consideration to support the
       alleged post-receipt, verbal agreement – making it enforceable. This is so because
       Defendants held Plaintiff’s money. And they came into possession of the same
       without any agreement Plaintiff would sign a release.

                                                -8-
              At that point, defendant had no legal basis to refuse to turn over Plaintiff’s
       property to Plaintiff.

        Although a trial court tests the factual support of a plaintiff’s claim when it rules upon a
motion for summary disposition under MCR 2.116(C)(10), a trial court may not resolve factual
disputes or determine the credibility of witnesses when ruling on a motion for summary
disposition. White v Taylor Distrib Co, Inc, 275 Mich App 615, 624-625; 739 NW2d 132
(2007). This is especially true when motive and intent are at issue or when the credibility of a
witness is crucial. Vanguard Ins Co v Bolt, 204 Mich App 271, 276; 514 NW2d 525 (1994).
When the truth of a movant’s material factual assertion rests on a deponent’s credibility, a
genuine issue of material fact exists and summary disposition under MCR 2.116(C)(10) should
not be granted. White, 275 Mich App at 625.

        Here, a question of material fact exists because the parties disagree regarding whether
plaintiff orally agreed to sign a release in exchange for the funds. The record thereby leaves
open an issue on which reasonable minds might differ. See Jimkoski v Shupe, 282 Mich 1, 5;
763 NW2d 1 (2008). Moreover, resolving that question required the trial court to weigh the
credibility of Cohen’s deposition testimony against that of Yatooma. The necessity of the trial
court making such credibility determinations precludes summary disposition. Arber v Stahlin,
382 Mich 300, 308; 170 NW2d 45 (1969) (“[S]ummary judgment is not available whenever a
presented issue of material fact turns upon the credibility of an affiant or witness whose
deposition has been taken.”).

        We further note that the trial court’s finding that defendants admitted that the funds
belonged to plaintiff is not supported by the record. To the contrary, that is the heart of the
dispute in this case. Defendants consistently asserted before the trial court their position that the
funds were payable to plaintiff only if plaintiff agreed to sign a release accepting that amount as
payment in full of Spinello’s obligation to plaintiff. Defendants consistently asserted that if
plaintiff did not so agree, then the funds do not belong to plaintiff because the 2014 settlement
agreement only provides for payment of funds received through the Chapter 11 bankruptcy.
Those payments ceased when the Chapter 11 bankruptcy was converted to a Chapter 7
bankruptcy. Because the Chapter 11 bankruptcy no longer exists, argue defendants, the 2014
settlement agreement is void because it is now impossible to perform (supervening
impossibility). Making the alleged obligation even murkier is that the funds at issue do not
emanate from the bankruptcy estate that was the subject of the underlying agreement, but from
Spinello’s sale of the bankruptcy claim to a third party. In any event, the record demonstrates
that defendants do not agree that the funds belong to plaintiff, and the trial court’s finding to the
contrary is therefore erroneous.

        Because a genuine issue of material facts exists, we hold that plaintiff was not entitled to
declaratory judgment and the trial court erroneously granted plaintiff summary disposition on
that count of plaintiff’s complaint.

                                 3. THE REMAINING COUNTS

        The trial court determined that the remaining counts of plaintiff’s complaint were moot in
light of its declaratory judgment, and “[f]or the same reasons” denied defendants’ motion for

                                                -9-
summary disposition. On appeal, defendants argue that they are entitled to summary disposition
of the remaining counts of plaintiff’s complaint. However, having concluded that the trial court
erred in its ruling on plaintiff’s request for declaratory judgment, we decline to reach defendants’
challenges to the remaining counts of plaintiff’s complaint, and remand to provide the trial court
an initial opportunity to address those issues.

        We reverse the order of the trial court, and remand for further proceedings consistent
with this opinion. We instruct the trial court to permit PNC to intervene. We do not retain
jurisdiction.

                                                             /s/ Douglas B. Shapiro
                                                             /s/ Deborah A. Servitto
                                                             /s/ Michael F. Gadola

                                               -10-