Asam Hirmiz v. Jaust LLC ( 2018 )

STATE OF MICHIGAN
COURT OF APPEALS
ASAM HIRMIZ, UNPUBLISHED
September 11, 2018
Plaintiff-Appellant,
v No. 337269
Oakland Circuit Court
JAUST, LLC, and JANE SAMUEL, LC No. 2016-152808-CB
Defendants-Appellees.
Before: CAMERON, P.J., and RONAYNE KRAUSE and TUKEL, JJ.
PER CURIAM.
Plaintiff appeals as of right the order requiring him to pay the net amount of $15,142,
dissolving defendant Jaust, LLC, pursuant to MCL 450.4801, liquidating the company assets,
using the remaining funds to satisfy the company’s debts, and distributing any leftover amount to
the parties, with defendant Jane Samuel receiving a 51% share and plaintiff receiving a 49%
share. We affirm.
This case arises out of a joint business venture between Hirmiz and Samuel, who are first
cousins. Samuel is an Australian citizen residing in the U.S. on an E-2 visa. Hirmiz and Samuel
decided to go into business selling Australian clothing and opened a dress shop at 311 East
Maple Road in Birmingham. Jaust, LLC, was formed on March 30, 2015. Originally, Hirmiz
and Samuel were going to share a 50/50 ownership interest, but because Samuel alleged that she
needed a majority ownership in order to satisfy her visa requirements, the operating agreement
provided for a 51% to 49% ownership interest for Samuel and plaintiff, respectively. The seven-
year lease, which Hirmiz and Samuel personally guaranteed, was signed in June of 2015, while
Samuel was still in Australia awaiting approval of her E-2 visa. The following month, plaintiff
began the buildout of the dress shop, and in August, Samuel arrived from Australia. The retail
outlet was opened in October of the same year. At some point, a 2014 Jeep Cherokee became a
business asset of Jaust, LLC.
Up until the underlying dispute, Samuel had been managing the store and plaintiff had
been involved “behind the scenes” by handling payroll and other administrative tasks, including
making changes to the website that maintained the business’s clothing inventory. At some point
around January of 2016, the relationship between the parties deteriorated. Plaintiff argues
Samuel got angry after he challenged her for spending company money on a personal trip, which
included travel to Australia, Las Vegas, and Cancun. Samuel, however, argues that plaintiff got
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angry when she rebuffed his romantic advances. Plaintiff testified that in March of 2016, he was
prevented from accessing the store because Samuel had changed the locks on him.
On May 4, 2016, plaintiff filed a complaint alleging that Samuel had violated MCL
450.4515 and her duties pursuant to the operating agreement when she unilaterally: (1) locked
plaintiff out of all of Jaust LLC’s social media accounts and computer equipment, (2) removed
the business’s alarm system, such that plaintiff was prevented from detecting when she was
onsite, (3) refused to communicate with plaintiff, (4) paid employees “under the table” without
withholding taxes, (5) prevented plaintiff’s access to company books and records, (6) changed
the resident agent from plaintiff to herself, (7) updated the articles of organization to indicate that
the business was now managed by the “manager,” (8) drove, and continued to drive, a 2014 Jeep
that is titled in the company’s name, and (9) made decisions to pay for her personal matters with
company funds. Accordingly, plaintiff sought several forms of relief from the trial court, which
included, as relevant to the issue on appeal, the dissolution and liquidation of Jaust, LLC, and
monetary damages for plaintiff’s losses.
On June 3, 2016, defendants answered the complaint generally denying all of the
allegations. On June 13, 2016, plaintiff filed a motion for a preliminary injunction seeking
access to the business premises, business records, business accounts, including online access, and
the voiding of the amendment to the articles of organization that mandated that the business be
managed by Samuel.
On June 28, 2016, defendants filed a response to plaintiff’s motion for preliminary
injunction arguing that the injunction was unnecessary as Samuel had not violated the operating
agreement because of her large financial contribution to the company, and her 51% majority
allowed her to manage the business’s day-to-day operations. Accordingly, as defendants
explained, plaintiff’s claim was unlikely to succeed on its merits and there was no irreparable
harm from her handling of the business.
Also on June 28, 2016, the trial court granted plaintiff’s motion for a preliminary
injunction and ordered that (1) plaintiff be given access to all business, financial, and online
accounts, (2) plaintiff receive keys, and have access, to the retail location, (3) neither party act in
a harassing manner towards each other or other employees, and (4) Samuel file a certificate of
correction with the state regarding the improper amendment to the articles of organization.
In September of 2016, plaintiff learned that Samuel had recently flown to Australia, so he
drove to the airport where he presumed the company’s Jeep Cherokee would be parked. After
locating the vehicle in the airport parking lot, he drove it home using a spare key. On November
4, 2016, plaintiff sold the Jeep, still titled in the name of Jaust, LLC, for $11,500. Plaintiff
testified that he had used $717 of the sale proceeds to partially pay the balance of a credit card
held in the name of Jaust, LLC, and applied the rest towards his personal credit with which he
had been financing the legal action against defendants. Plaintiff testified that he sold the Jeep for
$11,500 instead of accepting offers that ranged from $13,000 to 16,000 because it was the
highest cash offer, and he “couldn’t take a check because if [he] took a check, [he] would have to
deposit it into the business account. If [he] did that, then [Samuel] would transfer that money out
into her personal account.”
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On October 19, 2016, the trial court entered a stipulated order appointing a receiver for
Jaust, LLC. However, a receiver was never found who would accept the trial court’s
appointment and, therefore, was never actually appointed.
On December 8, 2016, a bench trial was held, which will be discussed in more detail
infra. At the trial’s conclusion on December 9th, the court stated:
In order [for Samuel] to meet the immigration requirements, she was also required
to invest $100,000 into the business.
The testimony is clear that she used artifice, fraud, and deception to reach
the $100,000 figure . . . one of the exhibits introduced by the plaintiff, shows that
she was utilizing airline tickets to Vegas and Cancun and taking that out of the
business or using that as part of an investment into the business. And it’s clear
that those trips really had absolutely nothing to do with the business. . . . There
[were] a lot of personal expenses in her testimony that she was using to meet the
$100,000 investment [figure].
Her actual cash investment into the business, according to the testimony,
was $37,000; and Mr. Hirmiz’s actual cash contribution was about $30,000[.]
* * *
[A]t some point, Ms. Samuel decided this was going to be her business and she
was going to conspire to keep Mr. Hirmiz somewhat out of it. And she began
paying herself a salary of $4,000. She ended up taking $24,000 out of the
business.
The operating agreement indicated that any distributions were to be made
at 51 percent to Ms. Samuel and 49 percent to Mr. Hirmiz.
The Court makes a determination that the distribution -- or the salary was,
in fact, a distribution and that while she took 24,000, Mr. Hirmiz was also due
then a 49 percent distribution. So if she took $24,000, he gets $23,058, which
would be . . . 51/49. He took $3,700.[1] So the business owes him $19,358.
Having said that, Mr. Hirmiz at some point decided that he was going to
convert corporate property to his own. His testimony is extremely clear and he
admits it, and I give him credit for admitting that he basically stole the Jeep, sold
it for $11,500, and did not put that money into the business because he was afraid
Ms. Samuel would write a check out of the business to herself . . . so that number
1
During trial, plaintiff acknowledged that he took $3,300 in disbursements in an effort to recover
some of the money he felt he was owed. Accordingly, it appears that the trial court erred when it
stated that plaintiff “took $3,700.” However, plaintiff does not challenge this point on appeal.
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is trebled. So he would owe the $11,500 plus the trebling, which is $34,500, for a
total of owing the business $46,000. But . . . the business owes him $19,358. So
he owes the business $26,642.
* * *
[Y]ou were both using this business as your own piggy bank. And you shouldn’t
have done that.
* * *
I find both of your testimony inherently incredible, to be perfectly honest.
On December 28, 2016, the trial court entered a judgment that stated plaintiff owed the net
amount of $26,642 to Jaust LLC.
On January 18, 2017, plaintiff filed a motion seeking a new trial or amended judgment
pursuant to MCR 2.611 (M). In the motion, plaintiff argued that the trial court should not have
assessed treble damages whatsoever; however, since the trial court had, it erred because the
award essentially quadrupled the price of the Jeep sale. Further, plaintiff argued that the trial
court failed to properly award damages for Samuel’s violation of MCL 450.45152.
On January 27, 2017, defendants responded contending that plaintiff had abandoned his
arguments because he failed to provide the trial court with the trial transcripts. Notwithstanding
the abandonment, defendants argued that the $46,000 award was substantially equivalent to
treble damages of $15,000, which was the amount of an offer made by a potential buyer, but
which plaintiff rejected. Defendants further contended that the trial court was under no
obligation to award damages pursuant to MCL 450.4515.
On February 8, 2017, a motion hearing was held regarding plaintiff’s motion for a new
trial or amended judgment where the parties argued consistently with their briefs. On the issue
of treble damages, plaintiff argued that the trial court’s original finding that plaintiff owed
$46,000 was in error, as this was a quadrupling of the $11,500 sale price. As plaintiff averred,
the proper amount should have been $34,500. Defendants did not address the treble argument
directly; instead, defendants argued that the price of the Jeep should have been set at $15,000
based on the trial testimony. Accordingly, defendants argued that, if the trial court was inclined
to reduce the amount, then the correct amount should be $45,000, i.e., three times $15,000. The
2
MCL 450.4515, which will be discussed in greater detail below, allows for a limited liability
company member to recover damages for “acts of the managers or members in control” that are
“illegal or fraudulent or constitute willfully unfair and oppressive conduct toward the limited
liability company or the member.” MCL 450.4515(1).
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trial court stated, “I think I was wrong. So I’ll reduce the judgment to $34,500, which is treble
damages on the $11,500.”
On the issue of whether the trial court should have awarded plaintiff additional damages,
plaintiff argued that there was $8,769 in unaccounted cash that Samuel took after locking him
out of the store. Defendants argued that all the cash had been accounted for. The trial court held
that it would not adjust the damages beyond the treble damages issue stated above. Specifically,
the trial court stated, “I did make the one mistake on the conversion. The other stuff I took into
consideration and I came to a decision. That’s the decision of the Court. If you don’t like it, the
Court of Appeals is up the street.”
On February 13, 2017, the trial court entered an order and an amended final judgment
consistent with its ruling, which reduced the gross amount that plaintiff owed from $46,000 to
$34,500, and thus, reduced the net amount that plaintiff owed Jaust, LLC, to $15,142.
On appeal, plaintiff argues that the trial court erred by (1) finding that he owed treble
damages for converting company property, (2) refusing to award him additional damages
pursuant to MCL 450.4515, and (3) not awarding him damages based on cash receipts that were
not deposited into the business account. We disagree.
“The proper interpretation and application of a statute is a question of law, which we
review de novo.” DC Mex Holdings LLC v Affordable Land LLC, 320 Mich. App. 528, 533; 907
NW2d 611 (2017) (citation omitted). “[A] trial court’s findings of fact are reviewed for clear
error.” Hastings Mut Ins Co v Grange Ins Co of Michigan, 319 Mich. App. 579, 587; 903 NW2d
400 (2017). “This Court reviews the trial court’s determination of damages following a bench
trial for clear error.” Alan Custom Homes, Inc v Krol, 256 Mich. App. 505, 513; 667 NW2d 379
(2003). A decision is clearly erroneous when the reviewing court is left with a “definite and firm
conviction that a mistake has been made.” Id. at 512.
I. CONVERSION
Plaintiff first argues that the trial court erred when it awarded treble damages related to
his conversion of the Jeep to his personal use because conversion was never raised in the
pleadings. We disagree.
During trial, plaintiff admitted that he intentionally took the Jeep, which he knew was
company property, from where Samuel had parked it and then sold the Jeep for $11,500, in order
to recover funds that he felt defendants owed him. When the trial court rendered its decision, it
stated:
[Plaintiff] decided that he was going to convert corporate property to his own.
His testimony is extremely clear and he . . . that he basically stole the Jeep, sold it
for $11,500, and did not put that money into the business [account] . . . so that
number is trebled. [Emphasis added.]
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As an initial matter, we point out that conversion, in statutory or common-law form, was
never raised in the pleadings by either party. Notwithstanding the pleadings, it appears from the
record that, despite the fact that the trial court did not state so explicitly, 3 it had relied on
Michigan’s conversion statute, MCL 600.2919a, when it computed damages to include the
tripled value of the Jeep’s sale price of $11,500. MCL 600.2919a states, in relevant part:
(1) A person damaged as a result of either or both of the following may recover 3
times the amount of actual damages sustained, plus costs and reasonable attorney
fees:
(a) Another person’s stealing or embezzling property or converting property to the
other person’s own use.
* * *
(2) The remedy provided by this section is in addition to any other right or
remedy the person may have at law or otherwise.
Statutory conversion requires a showing that a person converted the property “to [his] own use.”
Aroma Wines & Equip, Inc v Columbian Distribution Services, Inc, 497 Mich. 337, 358-359; 871
NW2d 136 (2015). The purpose of the conversion statute is not merely to restore the plaintiff to
his or her original condition, but to penalize the converting offender by authorizing treble
damages. New Properties, Inc v George D Newpower, Jr, Inc, 282 Mich. App. 120, 137; 762
NW2d 178 (2009).
As plaintiff freely acknowledged at trial, he took the Jeep and drove it back to his home,
at which point he had converted it to his personal possession instead of that of the LLC. He then
proceeded to sell the Jeep and used the funds to pay personal accounts—thus, completing the
absolute conversion of corporate property for his own use. Therefore, the essential issue
remaining is whether the trial court erred in applying treble damages despite the fact that
defendants never raised statutory conversion in the pleadings. On appeal, plaintiff does not
provide relevant authority that would persuade this Court to conclude that the trial court clearly
erred. We hold that Jaust, LLC, would have been entitled to the treble damages had it initiated
the claim within the pleadings, as the conversion statute allows for the recovery to be “in
addition to any other right or remedy the person may have at law or otherwise.” See MCL
600.2919a(2).
As to a legal remedy, MCR 2.118(C)(1) permits the trial court’s decision. Specifically,
MCR 2.118(C)(1) states:
When issues not raised by the pleadings are tried by express or implied consent of
the parties, they are treated as if they had been raised by the pleadings. In that
3
The trial court also stated to Samuel, “why you didn’t go to the police for theft is beyond me,
but I’m going to deal . . . with that later.”
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case, amendment of the pleadings to conform to the evidence and to raise those
issues may be made on motion of a party at any time, even after judgment.
At trial, both parties addressed the fact that plaintiff converted the vehicle, thereby impliedly
consenting to the issue, and therefore, the treble-damage issue should be treated as if it had been
raised by the pleadings. See id. Specifically, plaintiff testified that the Jeep was a “company
car,” that he sold it for $11,500, and that he used those proceeds to reimburse himself for
personal attorney fees. The trial court questioned plaintiff as to whether Samuel, as a majority
member, had given him permission to sell the Jeep, to which plaintiff responded that she had not.
Defendants emphasized in their questioning that although plaintiff had a key for the Jeep, it was
an asset of Jaust, LLC, and further, that he sold the Jeep without getting Samuel’s permission.
Further, defendants repeatedly questioned plaintiff as to the manner he sold the Jeep, placing
emphasis on the fact that plaintiff sold the Jeep for less money than the Jeep was actually worth.
II. MCL 450.4515
Next, plaintiff argues that the trial court erred when it did not award damages to him
despite the fact that Samuel substantially interfered with his interests as a member of Jaust, LLC.
We disagree.
Plaintiff brought the action pursuant to MCL 450.4515, which states, in relevant part:
(1) A member of a limited liability company may bring an action . . . to establish
that acts of the managers or members in control of the limited liability company
are illegal or fraudulent or constitute willfully unfair and oppressive conduct
toward the limited liability company or the member. If the member establishes
grounds for relief, the circuit court may issue an order or grant relief as it
considers appropriate, including, but not limited to, an order providing for any of
the following:
(a) The dissolution and liquidation of the assets and business of the limited
liability company.
* * *
(c) The direction, alteration, or prohibition of an act of the limited liability
company or its members or managers.
* * *
(e) An award of damages to the limited liability company or to the member.
(2) As used in this section, “willfully unfair and oppressive conduct” means a
continuing course of conduct or a significant action or series of actions that
substantially interferes with the interests of the member as a member. [Emphasis
added.]
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Where a plaintiff argues on appeal that sufficient proof was provided at trial to support a
different award, this essentially “is a credibility argument, and we defer to the trial court’s
superior position to observe and evaluate witness credibility.” Marshall Lasser, PC v George,
252 Mich. App. 104, 110; 651 NW2d 158 (2002). This Court will not “set aside a nonjury award
merely on the basis of a difference of opinion.” Id. (citation omitted).
The trial court recognized that Samuel had made the decision to exclude plaintiff from
the business. Supporting this premise, the trial court heard evidence that Samuel changed the
locks, prevented his access to financial and social media accounts, altered the articles of
organization to give her management control, and unilaterally decided to close the store.
Additionally, the testimony demonstrated that Samuel, to some extent, was attempting to open
the same type of business, under a similar name, and in potentially the same location.
Based on the testimony, the trial court ordered the dissolution and liquidation of the
assets of Jaust, LLC. The trial court also directed Jaust, LLC, to make a distribution to plaintiff
in the amount of $23,058, which represented the 49% share owed to him to compensate for
Samuel’s distribution of $24,000. Therefore, the record reflects that the trial court granted relief
pursuant to MCL 450.4515(a) and (c). Plaintiff essentially argues that, pursuant to MCL
450.4515(1)(e), he was entitled to additional damages based on Samuel’s interference with his
business interest. However, as the statute clearly states, “the circuit court may . . . grant relief to
a member” that it considers appropriate in the matter; noticeably absent is the word “shall.”4 See
MCL 450.4515(1). The trial court clearly found that granting additional damages was not
appropriate, as it had two opportunities to make such an award—first, during the original trial,
and second, during the hearing regarding plaintiff’s motion for a new trial or amended judgment,
where it explicitly decided against doing so.
Supporting the trial court’s decision, evidence was provided at trial that both parties had
used the business as their “piggy bank” for personal gains, and, as the trial judge stated, “I find
both of your testimon[ies] inherently incredible, to be perfectly honest.” Further, the trial court
stated midtrial, “So far I haven’t had any credible evidence as to what [plaintiff’s] damages are.”
See Marshall Lasser, PC, 252 Mich. App. at 110. Therefore, the trial court did not err when it
refused to assess additional damages against defendants.
III. UNACCOUNTED FUNDS
Lastly, plaintiff argues that the trial court erred when it did not consider the $8,769 in
unaccounted for cash receipts as a disbursement to Samuel, and thus, it erred by not awarding
him his pro rata share of that disbursement. We disagree.
Plaintiff, at some point after regaining access to the business’s point of sale system,
concluded that Samuel did not deposit any cash into the business’s account between June 24,
4
In general, our courts have said that the term “may” is “permissive,” as opposed to the term
“shall,” which is considered “mandatory.” Manuel v Gill, 481 Mich. 637, 647; 753 NW2d 48
(2008).
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2016, and September 29, 2016; further, he quantified the unaccounted-for cash to equal $8,769.
However, there is no additional testimony regarding the alleged unaccounted-for cash besides
plaintiff’s self-serving testimony. In fact, even if that amount of cash sales was received, there
was no additional testimony from any other witness that Samuel distributed those funds to
herself, or in the alternative, whether she may have used the funds for business expenses.
Therefore, plaintiff’s computation of alleged damages on this issue is speculative, at best. See
Marshall Lasser, PC, 252 Mich. App. at 110 (stating that damages should not be awarded where
they are “too speculative to satisfy the award” being sought.). Also, as stated above, the trial
court found plaintiff “inherently incredible,” and we should not interfere with the trial court’s
determination on credibility. See id. Additionally, the trial court noted that it considered all of
the “other stuff” when it made its decision. Accordingly, the trial court did not clearly err in this
regard. The defendants having prevailed in full, may tax costs.
Affirmed.
/s/ Thomas C. Cameron
/s/ Amy Ronayne Krause
/s/ Jonathan Tukel
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