Hoffenblum v. Hoffenblum , 308 Mich. App. 102 ( 2014 )

STATE OF MICHIGAN
COURT OF APPEALS
RACHEL HOFFENBLUM, ROBYN FOR PUBLICATION
HOFFENBLUM and JARED HOFFENBLUM, November 18, 2014
9:00 a.m.
Plaintiffs-Appellants-Cross-
Appellees,
v No. 317027
Oakland Circuit Court
HARVEY HOFFENBLUM, LC No. 2012-009723-AV
Defendant-Appellee-Cross-
Appellant.
Before: FITZGERALD, P.J., and WILDER and OWENS, JJ.
WILDER, J.
Plaintiffs Rachel Hoffenblum, Robyn Hoffenblum and Jared Hoffenblum appeal by leave
granted, and defendant cross-appeals, the circuit court order that affirmed the judgment of the
district court of no cause of action in this case alleging conversion. We affirm in part and
reverse in part.
I.
This case arises out of plaintiffs’ assertion that defendant, their father, wrongfully exerted
dominion over the money in their trust accounts. At trial the parties stipulated that when
plaintiffs were minors, financial accounts were established on their behalf at some point before
October 2004 pursuant to the Michigan Uniform Transfer to Minors Act, MCL 554.521 et seq,
that defendant was the custodian of the accounts, and that in October and November 2004,
defendant was financially unstable, and removed a total of $18,305.43 from the children’s
accounts.1
Plaintiffs’ mother, Sheila Waldman, testified that she and defendant divorced on
September 3, 1997, after a “bitter” proceeding. Defendant claimed that, after the divorce,
Waldman attempted to poison plaintiffs against him.
1
Statements showing plaintiffs’ empty UTMA accounts are in the certified record.
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According to the parties’ pleadings, under the judgment of divorce, defendant was
required to pay 52% of any of plaintiffs’ unreimbursed medical expenses. Defendant testified
that he maintained health insurance for plaintiffs. But, according to defendant, Waldman
unilaterally sent plaintiffs to out-of-network providers, resulting in over $20,000 in medical bills
from 1997 to 2004, which defendant’s insurance company refused to pay.
The certified record includes many requests for health care expense payments by
Waldman to defendant through the friend of the court from about 1999 to 2001. Defendant
testified that the court ordered him to pay these medical bills, with the exception of expenses for
out-of-network providers. An October 18, 2001 order admitted at trial provided that Waldman,
alone, would pay for out-of-network medical expenses and defendant would pay for network
expenses. A September 19, 2006 order also provided, “The parties shall not use out-of-network
providers.”
Defendant testified that, when he discussed his tenuous financial situation with his
financial advisor (Harvey Markzon), Markzon suggested he utilize plaintiffs’ UTMA accounts.
As a result, defendant testified that, in the fall of 2004, he withdrew money and reimbursed
himself for medical expenses that he had previously paid. He did not remember when he had
paid the medical expenses, but testified that he used the money withdrawn from the UTMA
accounts to pay an attorney to seek parenting time.
In August 2005, Rachel attempted to withdraw money from her UTMA account for
books for college and learned the account was empty. Waldman testified that she subsequently
instructed her attorney to demand the money be returned to plaintiffs’ UTMA accounts.
According to Waldman, her attorney wrote a letter, but defendant did not return the money.
Defendant testified that no one ever asked him to return the money.
Following the bench trial, the district court addressed four issues it found applicable to
conversion: (1) plaintiffs had an enforceable right to the money, (2) defendant did not wrongly
convert the money—
I don’t care legally whether Mr. Hoffenblum paid a fee and then reimbursed or
whether he paid a doctor specifically . . . I don’t care whether [defendant] was
ordered by a Judge to pay for his children’s care or whether he was morally
required to pay for their care as a parent . . . I do believe that $20,000 for
psychological care . . . was absolutely necessary . . . And I don’t question whether
or not they needed to go to the psychiatrist. However, I do believe that that . . .
would be an extraordinary expense covered by UTMA.
(3) plaintiffs failed to ask for the money back prior to filing a claim—
The third [requirement for conversion] is did the plaintiffs ever ask for it back.
Plaintiffs’ counsel described that as a silly requirement. I would more – I would
describe it as a technical requirement, but a requirement nonetheless. A
conversion is a very strong allegation to make and you can’t say we asked for it
back once we filed. So I do believe that the plaintiffs failed to ask for the money
back prior to filing the claim.
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and (4) defendant consulted his financial advisor before taking the money, who opined that all
the withdrawals were appropriate, so plaintiffs failed to prove that defendant knew what he was
doing was wrong. The district court entered a judgment of no cause of action based on the
determination that plaintiffs had failed to prove the elements of their conversion claim.
Plaintiffs appealed to the circuit court, which reversed the district court’s finding that
defendant did not wrongly convert the money, ruling that the amount withdrawn from the
UTMA accounts did not benefit plaintiffs because they had already received the benefit of the
medical services. The circuit court also reversed the district court’s ruling that scienter was
required and remanded for reconsideration of the district court’s finding that plaintiffs never
asked for the money to be returned in light of Waldman’s testimony.
The district court held a remand hearing and found:
The failure to produce the actual letter sent by Ms. Waldman’s own attorney or a
letter rejecting the request weighs heavily on this Court’s decision. The Plaintiff
failed to call her previous attorney. The Plaintiff has the burden of proof to prove
at trial that the request was made . . . I found then and I find now, that Ms.
Waldman’s testimony did not satisfy her burden that the letter was actually sent.
Plaintiff did not confirm receipt of the letter.
The district court inquired of the parties whether a ruling on the question of treble damages was
desired, and plaintiffs requested the district court’s ruling, so that both issues would be eligible
for appeal. The district court then ruled:
I do find and I will note that the Plaintiff did not brief this issue in his brief to this
Court. What I asked is whether 600.2915 [sic] requires treble damages or if it is
discretionary. Treble damages in my opinion, is used to penalize a party. I find
that the Defendant was acting on advice from his financial planner, and that he
did not act with malice. Therefore, I would not issue treble damages.
The district court entered the followed order on remand:
IT IS HEREBY ORDERED that the original finding of this Court to the
effect that the plaintiffs did not reasonably request for the funds to be returned is
reaffirmed.
IT IS FURTHER ORDERED that treble damages are not appropriate.
Plaintiffs appealed again to the circuit court, arguing that the district court exceeded the
scope of the circuit court’s remand by considering: (1) whether Waldman “reasonably”
demanded the money be returned, and (2) treble damages. The circuit court concluded that the
district court acted within the scope of its authority and affirmed the order entered by the district
court on remand.
This Court granted plaintiffs’ application for leave to appeal, and ordered the parties to
also address whether the district court erred as a matter of law by ruling that a demand was
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required under the circumstances of this case. Hoffenblum v Hoffenblum, unpublished order of
the Court of Appeals, issued February 19, 2014 (Docket No. 317027).
II
Defendant argues that the circuit court erred by ruling on appeal that he wrongfully
exerted dominion over plaintiffs’ money in the UTMA accounts, and by reversing the district
court’s finding that defendant properly withdrew the money to reimburse himself for medical
expenses. We disagree.
To the extent this case involves the interpretation and application of a statute, specifically
the delivery, payment, or expenditure by a custodian in MCL 554.539, our review is de novo.
Aroma Wines and Equip, Inc v Columbia Distribution Servs, Inc, 303 Mich App 441, 451; 844
NW2d 727 (2013). The primary goal when interpreting a statute is to ascertain and give effect to
the Legislature’s intent. Mich Ed Ass’n v Secretary of State (On Rehearing), 489 Mich 194, 217-
218; 801 NW2d 35 (2011). “The words contained in a statute provide us with the most reliable
evidence of the Legislature's intent.” Green v Ziegelman, 282 Mich App 292, 301; 767 NW2d
660 (2009). “[S]tatutory provisions are not to be read in isolation; rather, context matters, and
thus statutory provisions are to be read as a whole.” Robinson v City of Lansing, 486 Mich 1, 15;
782 NW2d 171 (2010). If statutory language is unambiguous, the Legislature is presumed to
have intended the plain meaning of the statute. Fleet Business Credit, LLC v Krapohl Ford
Lincoln Mercury Co, 274 Mich App 584, 591; 735 NW2d 644 (2007). An unambiguous statute
must be enforced as written. Fluor Enterprises, Inc v Dep’t of Treasury, 477 Mich 170, 174; 730
NW2d 722 (2007).
“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, 303 Mich App at 446-447, quoting Lawsuit Fin, LLC v Curry, 261
Mich App 579, 591; 683 NW2d 233 (2004). The act is wrongful when it is inconsistent with the
ownership rights of another. Check Reporting Servs, Inc v Mich Nat'l Bank–Lansing, 191 Mich
App 614, 626; 478 NW2d 893 (1991).
Gifts made pursuant to the UTMA are irrevocable and property placed in a UTMA
account is “indefeasibly vested in the minor.” People v Couzens, 480 Mich 240, 248; 747 NW2d
849 (2008), quoting MCL 554.536(2). MCL 554.539 provides:
(1) A custodian may deliver or pay to the minor or expend for the minor’s benefit
so much of the custodial property as the custodian considers advisable for the use
and benefit of the minor without court order, without regard to the duty or ability
of the custodian personally or of any other person to support the minor, and
without regard to other income or property of the minor that may be applicable or
available for that purpose.
(2) On petition of an interested person or the minor if the minor is at least 14
years of age, the court may order the custodian to deliver or pay to the minor or
expend for the minor’s benefit so much of the custodial property as the court
considers advisable for the use and benefit of the minor.
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(3) A delivery, payment, or expenditure under this section is in addition to, is not
in substitution for, and does not affect an obligation of a person to support the
minor.
“[A] parent’s duty to support a minor child requires the parent to furnish all necessaries essential
to the health and comfort of the child, including, for example, medical care.” Manley v Detroit
Auto Inter-Ins Exchange, 127 Mich App 444, 453; 339 NW2d 205 (1983).
Defendant claims that any obligation of defendant or Waldman to pay for the out-of-
network medical expenses was irrelevant to the expenditure of custodial property for those
expenses. But the plain language of MCL 554.539(3) requires the expenditures of custodial
property to be “in addition to” and “not in substitution for . . . an obligation of a person to
support the minor.” In Wayne Co Prosecutor v Recorder’s Court Judge, 406 Mich 374; 280
NW2d 793 (1979), our Supreme Court explained that when the Legislature defined the offense
of felony-firearm as a “felony” and required its two-year sentence to be served “in addition to”
the sentence for the underlying felony, it demonstrated an intent “to make the carrying of a
weapon during a felony a separate crime . . . .” Here too, the Legislature’s use of the phrase “in
addition to” dictates that the expenditures should be separate from any obligation of a person to
support the minor. Moreover, the term “substitute” is defined as “a person or thing that takes the
place or function of another.” Merriam Webster’s Collegiate Dictionary (2003); see Klooster v
City of Charlevoix, 488 Mich 289, 304; 795 NW2d 578 (2011) (explaining that where a statute
does not define a term, a dictionary may be consulted to define it). Therefore, the Legislature’s
use of the phrase “not in substitution for” dictates that the expenditures should not take the place
of any obligation of a person to support the minor.
Our interpretation of the plain language of MCL 554.539(3)—that expenditures should be
separate from, and not take the place of, any obligation of a person to support the minor—is
consistent with the income tax consequences applied to UTMA accounts by the Internal Revenue
Service. Gifts to minors have been recognized as beneficial for purposes of income-tax savings
because income from the gifts is taxed at a minor’s rate, which is often lower than that of an
adult donor. See Watling v Wating, 127 Mich App 624, 630; 339 NW2d 505 (1983). But where
a parent donor uses the income from a gift to support a child, the income is taxable to the parent.
Garriss Investment Corp v Comm of Internal Revenue, 43 TCM (CCH) 396 (1982).2
Further, MCL 554.539(1) provides that payments should be made “without regard to the
duty or ability of the custodian personally or of any other person to support the minor[.]” The
term “regard” is defined by Random House Webster’s College Dictionary (2001) as “to take into
2
We note that Garriss interpreted the Uniform Gifts to Minors Act (UGMA), which preceded
the UTMA. In Michigan and the applicable statute in Garriss, the UGMA did not expressly
require expenditures to be “in addition to” and “not in substitution for” an obligation of a person
to support the minor. MCL 554.454(2), repealed by 1998 PA 433. Rather, before the UTMA
was enacted, MCL 554.454(2) provided, in relevant part, “The custodian shall . . . expend for the
minor’s benefit, so much of or all the custodial property as the custodian deems advisable for the
support, maintenance, education, and benefit of the minor . . . .”
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account; consider.” Thus, the plain language of subsection (1) dictates only that the custodian
make expenditures without considering the duty or ability of the custodian or another person to
support the minor. Unlike subsection (3), subsection (1) does not address whether those
expenditures can or cannot be used to support the minor.
The record demonstrates that defendant and Waldman were obligated to pay plaintiffs’
medical expenses, first as parents of plaintiffs, Manley, 127 Mich App at 453, and then by court
order following their divorce. The 1997 judgment of divorce obligated defendant to pay 52% of
plaintiffs’ medical expenses, making no distinction between network- or out-of-network
expenses. The 2001 order required Waldman, alone, to pay for out-of-network medical
expenses. Because defendant, Waldman, or both defendant and Waldman were obligated to pay
for plaintiffs’ out-of-network medical expenses, and the district court found that defendant used
the UTMA money to reimburse himself for those expenses, we conclude that the reimbursement
substituted or took the place of an obligation of a person to support the minor, contrary to MCL
554.539(3). Defendant therefore wrongfully exerted dominion over plaintiffs’ UTMA money,
and the circuit court properly reversed the district court’s finding that defendant properly
withdrew the money to reimburse himself for medical expenses.
We note that the fact that defendant personally paid the children’s medical expenses,
subsequently reimbursed himself for those payments with money in the UTMA accounts, and
then used that money to pay his legal fees, is not the defining principle of our decision. Had
UTMA money been withdrawn and paid to the children’s medical providers directly, the
payments would still have taken the place of an obligation of defendant, Waldman, or both
defendant and Waldman, contrary to MCL 554.539(3). We emphasize that because defendant
had an obligation to pay the children’s medical expenses, under MCL 554.539, defendant was
neither authorized to use UTMA money to satisfy those expenses nor to reimburse himself from
a UMTA account for payments he made from his own separate funds. To the extent that the
circuit court reversed the district court’s finding that defendant did not wrongfully exert
dominion over plaintiffs’ money in the UTMA accounts because plaintiffs had already received
the benefit of the medical services (i.e., reimbursed defendant instead of paying providers
directly), we conclude that the circuit court reached the right result for the wrong reason. See
Gleason v Michigan Dep’t of Trans, 256 Mich App 1, 7; 662 NW2d 822 (2003).
III
Plaintiffs argue that the circuit court erred by affirming the district court’s finding that
plaintiffs failed to demand the return of their money because, as a matter of law, no demand was
required. We agree.
“MCL 600.2919a(1) provides in part, ‘A person damaged as a result 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.’ ” Aroma, 303 Mich App at 446-447, quoting Lawsuit, 261 Mich App at 591.
1 Restatement, Torts, § 223, addresses the ways in which a conversion may be
committed:
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‘A conversion may be committed by
‘(a) intentionally dispossessing another of a chattel,
‘(b) intentionally destroying or altering a chattel in the actor’s possession,
‘(c) using a chattel in the actor’s possession without authority so to use it,
‘(d) receiving a chattel pursuant to a sale, lease, pledge, gift or other transaction
intending to acquire for himself or for another a proprietary interest in it,
‘(e) disposing of a chattel by a sale, lease, pledge, gift or other transaction
intending to transfer a proprietary interest in it,
‘(f) misdelivering a chattel, or
‘(g) refusing to surrender a chattel on demand.’
However, liability for conversion does not arise under terms of this section
if the actor is privileged to dispose of the chattel. 1 Restatement, Torts, § 222.
[Thoma v Tracy Motor Sales, Inc, 360 Mich 434, 438; 104 NW2d 360 (1960).]
In Prosser & Keeton, Torts (5th ed), § 15, pp 93-100, Professor Prosser distinguishes
between acquiring possession and withholding possession:
The defendant may, first of all, wrongfully acquire possession of the plaintiff’s
chattel. The defendant may without legal justification, take it out of the plaintiff’s
possession, or that of a third person . . . In all such cases the taking itself is
wrongful, and the tort is complete without any demand for the return of the goods.
***
Where there has been no wrongful taking or disposal of the goods, and the
defendant has merely come rightfully into possession and then refused to
surrender them, demand and refusal are necessary to the existence of the tort.
In Trail Clinic, PC v Bloch, 114 Mich App 700, 703-704; 319 NW2d 638 (1982), a
medical clinic advised an insurance company to send payments owed to a doctor to the clinic,
but the record showed that the doctor had already stopped working for the clinic. The clinic then
endorsed and deposited checks from the insurance company, which the doctor was owed for
services rendered at a new employer. Id. This Court explained, “A demand is unnecessary . . .
where the property has been wrongfully appropriated by the defendant for his own use and
benefit.” Id. at 706. Under the facts of Trail Clinic, the doctor’s new employer was not required
to prove a demand for the checks was made. Id. at 706-707.
In Hank v Lamb, 310 Mich 81, 84-85; 16 NW2d 671 (1944), the plaintiff furnished
bottles to the defendants to bottle wine for the plaintiff. The plaintiff never demanded the return
of the bottles, and the defendants never refused to furnish them. Id. at 91. Absent a demand, the
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plaintiff could not establish conversion and the defendants were not liable for the value of the
bottles. Id. at 91-92. See also Gum v Fitzgerald, 80 Mich App 234, 234-236; 262 NW2d 924
(1977) (where the defendants landlords gave the plaintiffs tenants an eviction notice, testified
that the tenants planned to leave immediately, and the landlords subsequently changed the lock
on the rental, the landlords’ withholding of the tenants’ property inside the rental constituted a
conversion because the tenants demanded the property and the landlords refused).3
The facts here establish that defendant acquired, and did not just withhold, possession of
the money in the UTMA accounts. Prosser & Keeton, § 15. Like the clinic in Trail Clinic,
which deposited another’s payment into its own account, defendant intentionally withdrew the
money in plaintiffs’ UTMA accounts and then used it to pay his attorney. We conclude that the
circuit court erred by affirming the district court’s finding that plaintiffs failed to demand the
return of their money because, as a matter of law, no demand was required.
IV
Next, plaintiffs argue that the circuit court erred by affirming the district court’s ruling,
which declined to award treble damages. We disagree. We first reject plaintiffs’ claim that the
district court’s decision was beyond the scope of its authority on remand, for the reason that at
the remand hearing, plaintiffs requested the district court to issue a ruling on treble damages. “A
party may not claim as error on appeal an issue that the party deemed proper in the trial court
because doing so would permit the party to harbor error as an appellate parachute.” Bates Assoc,
LLC v 132 Assoc, LLC , 290 Mich App 52, 64; 799 NW2d 177 (2010). We further reject
plaintiff’s claim of error on this issue because an award of treble damages is within a court’s
discretion, Aroma, 303 Mich App at 451, and here, plaintiffs cannot demonstrate that the district
court’s ruling was outside the range of principled outcomes. The district court ruled that it
would not award treble damages, which are designed to penalize or punish “dishonest
defendants,” Alken-Ziegler, Inc v Hague, 283 Mich App 99, 104; 767 NW2d 668 (2009),
because defendant’s action in withdrawing funds from the accounts, rather than being rooted in
dishonest motives, was instead in reliance on advice defendant received from his financial
planner. We find the district court’s decision to be within the range of principled outcomes, and
thus, the circuit court did not err by affirming the district court’s decision.
V
Last, defendant argues that this Court should dismiss plaintiffs’ entire appeal under MCR
7.109(B)(1)(a) because plaintiffs failed to provide transcripts for the hearings on November 16,
2011, and May 21, 2012. First, although MCR 7.109(B)(1)(a) applied to plaintiffs’ appeal to the
circuit court, the applicable court rule here is MCR 7.210(B)(1)(a), which provides:
The appellant is responsible for securing the filing of the transcript as provided in
this rule. Except in cases governed by MCR 3.977(J)(3) or MCR 6.425(G)(2), or
3
Neither Gum nor J Franklin is binding on this Court because Gum is a pre-1990 decision from
this Court, MCR 7.215(J)(1), and J Franklin is unpublished, MCR 7.215(C)(1).
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as otherwise provided by Court of Appeals order or the remainder of this subrule,
the appellant shall order from the court reporter or recorder the full transcript of
testimony and other proceedings in the trial court or tribunal. Once an appeal is
filed in the Court of Appeals, a party must serve a copy of any request for
transcript preparation on opposing counsel and file a copy with the Court of
Appeals.
Second, the November 16, 2011 transcript was provided. We therefore reject that portion
of defendant’s argument.
Third, defendant claims that, at the May 21, 2012 hearing, plaintiffs waived their
argument that the district court’s treble damages decision exceeded the scope of remand, and
dismissal is required because this Court cannot review defendant’s waiver claim because
plaintiffs failed to provide the transcript for the May 21, 2012 hearing. We agree that plaintiff
failed to provide a transcript dated May 21, 2012, but it is unclear from the register of actions
whether any proceedings occurred on the record that day. Moreover, dismissal is not appropriate
because this Court generally only declines to consider an issue when the appellant has failed to
provide a relevant transcript. See People v Dunigan, 299 Mich App 579, 587-588; 831 NW2d
243 (2013); PT Today, Inc v Comm’r of Fin & Ins Servs, 270 Mich App 110, 151-152; 715
NW2d 398 (2006). We need not decline to address the argument regarding treble damages and
the scope of the remand order, however, because we concluded earlier in this opinion that
plaintiffs waived the argument at the remand hearing, which was transcribed for appeal. Any
additional waiver by plaintiffs on May 21, 2012 would be cumulative.
VI
We affirm the portion of the circuit court’s order reversing the portion of the district
court’s decision that defendant did not wrongfully exert dominion over the money in the UTMA
accounts, we reverse the portion of the circuit court’s order affirming the district court’s ruling
regarding plaintiffs’ demand for the return of the money, and we affirm the portion of that same
circuit court order regarding treble damages. We remand to the district court for entry of a
judgment for plaintiffs. We do not retain jurisdiction. No costs, as none of the parties prevailed
in full. MCR 7.219.
/s/ Kurtis T. Wilder
/s/ E. Thomas Fitzgerald
/s/ Donald S. Owens
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