Jason Howard v. National City Mortgage

STATE OF MICHIGAN
COURT OF APPEALS
JASON HOWARD and KARRIE HOWARD, UNPUBLISHED
January 12, 2016
Plaintiffs-Appellees,
v No. 323118
Genesee Circuit Court
NATIONAL CITY MORTGAGE, a/k/a PNC LC No. 10-094343-CK
MORTGAGE,
Defendant,
and
AMERICAN SECURITY INSURANCE
COMPANY,
Defendant-Appellant.
Before: MURRAY, P.J., and METER and RIORDAN, JJ.
PER CURIAM.
Plaintiffs Jason and Karrie Howard brought this action for common-law conversion and
statutory conversion, MCL 600.2919a, with respect to defendant American Security Insurance
Company’s (“ASIC”) payment of insurance proceeds for fire damage to a residential property
owned by plaintiff Jason, which was subject to a mortgage held by defendant National City
Mortgage, a/k/a PNC Mortgage (“PNC”). The trial court granted plaintiffs’ motion for summary
disposition against each defendant on the common-law conversion claim and awarded plaintiffs a
judgment of $75,482.75 with regard to the common-law conversion claim.
Following a bench trial on stipulated facts, the trial court also determined that both
defendants were liable for statutory conversion and awarded plaintiffs treble damages under
MCL 600.2919a, resulting in a judgment for plaintiffs in the amount of $226,448.25. The court
later entered a stipulated order allocating fault on a 50% basis to each defendant. The court also
awarded plaintiff attorney fees of $59,829.74 pursuant to MCL 600.2919a and MCR
2.405(D)(1), requiring each defendant to pay one-half of the fees.
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On appeal, defendant ASIC challenges the judgment for plaintiffs.1 We affirm the
judgment for plaintiffs with respect to their common-law conversion claim against ASIC, but
reverse with respect to their statutory conversion claim, as plaintiffs failed to prove the additional
element under MCL 600.2919a(1)(a) that ASIC converted property to their own use.
Accordingly, we remand for further proceedings for the reallocation of fault between the
defendants.
I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY
The underlying facts are not in dispute. In 2006, plaintiff Jason Howard,2 who later
married plaintiff Karrie Howard, purchased residential property in Flint and obtained a mortgage
loan to finance the transaction, which was secured by a mortgage on the property.
The home was insured under a homeowner’s insurance policy issued by ASIC. The
policy contained a standard mortgage clause and a lender’s loss payable endorsement, which
granted the mortgagee priority in receiving proceeds for loss under the policy. The mortgage
agreement entitled the lender to receive direct payment of insurance proceeds for property
damage and gave the lender discretion to apply the proceeds toward the restoration of the
property or a reduction of the mortgagor’s indebtedness.
On December 11, 2008, PNC notified Howard that his loan was in default, and that PNC
intended to initiate foreclosure proceedings if he did not rectify the default. On December 19,
2008, the home was substantially damaged by fire. On March 20, 2009, and March 23, 2009,
ASIC issued two checks, which listed plaintiffs and PNC as co-payees. The March 20 check was
in the amount of $75,069, and represented the dwelling loss payment under the policy. The
March 23 check was in the amount of $413.75, and represented reimbursement under the
policy’s inflation guard provision. The checks were delivered to plaintiffs’ agent, but plaintiffs
never endorsed the checks or delivered them to PNC.
On July 22, 2009, PNC purchased the property at a foreclosure sale by placing a full
credit bid of $69,399.43, the amount of Howard’s indebtedness. After the foreclosure sale, PNC
was unable to obtain plaintiffs’ endorsement on the previously issued checks. Thus, PNC
requested that ASIC reissue the joint checks, but make them only payable to PNC. ASIC agreed
and sent the reissued checks directly to PNC. The reissued checks “were made payable to [PNC]
for the account of Jason and Karrie Howard,” but plaintiffs were not named as co-payees. PNC
received and deposited the checks, and ASIC stopped payment on the original checks.
1
This appeal was previously consolidated with PNC’s appeals from the trial court’s judgment for
plaintiffs and the trial court’s award of attorney fees. However, PNC filed an unopposed motion
to withdraw its appeals, which we granted. Howard v National City Mortgage, unpublished
order of the Court of Appeals, entered January 5, 2016 (Docket Nos. 323223, 325623).
Accordingly, only ASIC’s appeal remains.
2
All subsequent references to “Howard” in this opinion denote plaintiff Jason Howard.
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PNC applied the $75,482.75 in insurance proceeds paid by ASIC toward repairs on
property, ultimately expending more than $80,000 on repairs. The property value was
“essentially worthless” at the time of the foreclosure, but the property had a fair market value of
$30,000 following the repairs.
Plaintiffs brought this action against defendants for common-law and statutory
conversion, MCL 600.2919a. Plaintiffs asserted that they were entitled to the insurance proceeds
because their debt to PNC was extinguished by PNC’s full credit bid at the foreclosure sale, and
that PNC and ASIC converted the insurance proceeds that were owed to plaintiffs by reissuing
the checks payable only to PNC.
As explained supra, the trial court granted summary disposition in favor of plaintiffs with
respect to the common-law conversion claim and found, following a bench trial, that PNC and
ASIC both converted plaintiffs’ property under MCL 600.2919a. Accordingly, the trial court
entered judgments in favor of plaintiffs with regard to both claims and awarded attorney fees.
II. GENERAL STANDARDS OF REVIEW
This Court reviews de novo a trial court’s grant or denial of summary disposition.
Moraccini v Sterling Hts, 296 Mich App 387, 391; 822 NW2d 799 (2012). Plaintiffs’ motion for
summary disposition was brought under MCR 2.116(C)(9) and (10), but we will consider the
motion as brought under MCR 2.116(C)(10) because the trial court considered documentary
evidence in its analysis of plaintiffs’ motion. See Besic v Citizens Ins Co of the Midwest, 290
Mich App 19, 23; 800 NW2d 93 (2010).
When reviewing a motion for summary disposition pursuant to MCR 2.116(C)(10), this
Court may only consider, in the light most favorable to the party opposing the motion, the
evidence that was before the trial court, which consists of “the ‘affidavits, together with the
pleadings, depositions, admissions, and documentary evidence then filed in the action or
submitted by the parties.’ ” Calhoun Co v Blue Cross Blue Shield Michigan, 297 Mich App 1,
11-12; 824 NW2d 202 (2012), quoting MCR 2.116(G)(5). Under MCR 2.116(C)(10),
“[s]ummary disposition is appropriate if there is no genuine issue regarding any material fact and
the moving party is entitled to judgment as a matter of law.” Latham v Barton Malow Co, 480
Mich 105, 111; 746 NW2d 868 (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). “This Court is liberal in finding genuine issues of material fact.” Jimkoski v Shupe, 282
Mich App 1, 5; 763 NW2d 1 (2008).
We review the trial court’s conclusions of law in a bench trial de novo. Chapdelaine v
Sochocki, 247 Mich App 167, 169; 635 NW2d 339 (2001). Issues involving the interpretation
and application of statutes present questions of law, which we also review de novo. LaFontaine
Saline, Inc v Chrysler Group, LLC, 496 Mich 26, 34; 852 NW2d 78 (2014).
III. COMMON-LAW CONVERSION
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ASIC first argues that the trial court erred in granting plaintiffs’ motion for summary
disposition with respect to their claim for common-law conversion in reliance on Smith v Gen
Mtg Corp, 402 Mich 125; 261 NW2d 710 (1978). We disagree.
“Under the common law, conversion is any distinct act of dominion wrongfully exerted
over another’s personal property in denial of or inconsistent with his rights therein.” Aroma
Wines & Equip, Inc v Columbian Distrib Servs, Inc, 497 Mich 337, 346; 871 NW2d 136 (2015)
(quotation marks and citation omitted). ASIC contends that it properly paid the insurance
proceeds to PNC, and the insurance proceeds were not plaintiffs’ personal property. In addition,
ASIC contends that even if plaintiffs were entitled to the insurance proceeds, only PNC is
obligated to surrender the proceeds to plaintiffs. Accordingly, ASIC asserts that it is not liable
for damages arising from a conversion claim and is not required to pay the insurance proceeds
again.
Contrary to ASIC’s claims on appeal, we conclude that the Michigan Supreme Court’s
decision in Smith, 402 Mich 125, is dispositive of this issue, and that ASIC’s claims regarding its
liability for common-law conversion have no merit.
A. APPLICATION OF SMITH AND ITS PROGENY
In Smith, the plaintiffs were the owners and mortgagors of property, and the defendants
were the Federal National Mortgage Association (“FNMA”) (also known as Fannie Mae) and the
named mortgagee and servicing agent for FNMA. Smith, 402 Mich at 126. The mortgage
agreement required the plaintiffs to pay for casualty insurance, “but payment in the event of loss
was to be sent to the mortgagee to be applied to reduce the mortgage debt or to repair the
property.” Id. at 126-127. While the plaintiffs were in default on their mortgage loan, the home
was destroyed by a fire. Id. at 127. The mortgage servicer initiated foreclosure proceedings. Id.At the subsequent foreclosure sale, FNMA placed a bid equivalent to “the amount of the
outstanding debt plus foreclosure costs and attorney fees.” Id.Six months after the foreclosure sale, the insurance company sent a check to the
mortgage servicer, which listed the servicer and the plaintiffs as co-payees. Id. The plaintiffs
brought an action in equity to compel the mortgage servicer to endorse the check or,
alternatively, an action to obtain equitable relief on the basis of unjust enrichment. Id. The trial
court awarded approximately $14,000 of the insurance proceeds to the defendants and the
remaining $4,000 to the plaintiffs. Id.On appeal, the Michigan Supreme Court concluded that “when the loss occurs before a
foreclosure sale in which the mortgagee purchases the property for a bid which extinguishes the
mortgage debt, the mortgagee is not entitled to the insurance proceeds.” Id. at 128. The Court
quoted with approval Whitestone S&L Ass’n v Allstate Ins Co, 28 NY 2d 332, 336-337; 321
NYS2d 862; 270 NE2d 694 (1971), which stated:
The theory of recovery by a mortgagee is indemnity. The risk insured
against is an impairment of the mortgaged property which adversely affects the
mortgagee’s ability to resort to the property as a source for repayment. Where the
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debt has been satisfied in full subsequent to the fire, neither reason nor precedent
suggest recovery on the policy by the mortgagee.
* * *
The rule is not harsh and it is eminently practical. None disputes that the
mortgagee is entitled to recover only his debt. Any surplus value belongs to
others, namely, the mortgagor or subsequent lienors. Indeed, it is not conceivable
that the mortgagee could recover a deficiency judgment against the mortgagor if it
had bid in the full amount of the debt at foreclosure sale. To allow the mortgagee,
after effectively cutting off or discouraging lower bidders, to take the property
and then establish that it was worth less than the bid encourages fraud, creates
uncertainty as to the mortgagor’s rights, and most unfairly deprives the sale of
whatever leaven comes from other bidders. [Smith, 402 Mich at 128-129(quotation marks omitted).]
Accordingly, the Court concluded that “[t]he rights of the parties under the insurance policy were
fixed at the time of the fire, and the mortgagee’s right to the proceeds terminated when the
mortgage debt was satisfied.” Id. at 129.
Although the Supreme Court agreed with the principles in Whitestone S&L Ass’n, it
concluded that “[s]trict application of the rule . . . would work an injustice in this case” for the
following reasons: “Enforcement of this previously unannounced rule would confer an unearned
benefit on the plaintiffs. The plaintiffs were compensated for the fire loss when their debt was
satisfied.” Id. at 130. Moreover, it concluded that “[i]t would be unfair to also award [the
plaintiffs] the insurance proceeds when the defendants paid the amount of the debt for worthless
property.” Id. Accordingly, the Supreme Court ordered the following relief:
The foreclosure was improper and the plaintiffs should not be charged for the cost
of that foreclosure. The parties should be placed in the position they would have
been in had their expectations and intent been carried out. The foreclosure is set
aside and title to the property is returned to the plaintiffs. Plaintiffs shall endorse
the check from the insurance company now held by defendant General Mortgage.
From the proceeds of that check, defendant General Mortgage shall pay $13,000
to defendant FNMA and pay the remaining $5,000 jointly to the plaintiffs. [Id. at
129-130.]
ASIC argues that the instant case is distinguishable from Smith, and that the full credit
bid rule3 has never been applied to establish a plaintiff’s entitlement to insurance proceeds in the
3
This Court previously explained the full credit bid rule as follows:
When a lender bids at a foreclosure sale, it is not required to pay cash, but rather
is permitted to make a credit bid because any cash tendered would be returned to
it. If this credit bid is equal to the unpaid principal and interest on the mortgage
plus the costs of foreclosure, this is known as a “full credit bid.” When a
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context of an action for conversion. We reject ASIC’s argument because our review of Michigan
caselaw following Smith confirms that the full credit bid rule is applicable in this case.
In Heritage Fed Savings Bank v Cincinnati Ins Co, 180 Mich App 720, 722-723; 448
NW2d 39 (1989), this Court considered a case in which the plaintiff mortgagee initiated an
action against the mortgagors and an insurance company after the insurer denied the mortgagee’s
claim for fire loss benefits following the mortgagee’s purchase of the property for a price greater
than the underlying debt at a foreclosure sale. On appeal, this Court held that “[a]lthough the
rule in Smith regarding ‘loss before foreclosure’ was announced in the context of a mortgagee-
mortgagor dispute, we conclude that it also applies to this case to extinguish the right of plaintiff
to recover insurance benefits under the mortgage-loss-payable clause of the insurance policy.”4
Id. at 726; see also id. at 727. Consequently, the plaintiff’s foreclosure of the property and
purchase of the property for a price greater than the indebtedness satisfied the debt, terminating
the mortgagee’s right to the proceeds. Id. at 726. The Court explained that “[t]he rule [in Smith]
is intended to prevent a mortgagee, as a creditor, from receiving a double payment.” Id.
In Emmons v Lake States Ins Co, 193 Mich App 460, 461-464; 484 NW2d 712 (1992),
the plaintiff mortgagor, whose home was partially destroyed by a fire, argued that it was entitled
to insurance proceeds following a fire because the mortgagee’s claim to the insurance proceeds,
despite an assignment clause in the mortgage,5 was extinguished when it foreclosed on the
property. This Court held that the bank lost its claim to the insurance proceeds when it
foreclosed on the mortgage. Id. at 463-465. Relying on Smith, 402 Mich at 128, this Court
stated that, in general, “a mortgagee is not entitled to insurance proceeds when a loss occurs
before a foreclosure sale in which the mortgagee purchases for a bid which extinguishes the
mortgage debt.” Id. This Court rejected the defendant’s argument that Smith was
distinguishable on the basis that the defendant bank claimed the proceeds “as an assignee, not as
a mortgagee,” explaining that “the bank’s interest in the insurance proceeds vested at the time of
the fire but expired upon satisfaction of the debt at the foreclosure sale.” Id. at 463-464.6 As
mortgagee makes a full credit bid, the mortgage debt is satisfied, and the
mortgage is extinguished. [New Freedom Mortg Corp v Globe Mortg Corp, 281
Mich App 63, 68; 761 NW2d 832 (2008) (citations omitted).]
4
“The standard mortgage-loss-payable clause gives the proceeds to the mortgagee to the extent
that they equal or are less than the mortgage indebtedness of the property,” but “the mortgagor’s
interest in the proceeds is for the damages actually done to the insured building.” Id. at 724.
5
The assignment clause stated: “If under paragraph 19 the Property is acquired by Lender,
Borrower’s right to any insurance policies and proceeds resulting from damage to the Property
prior to the acquisition shall pass to Lender to the extent of the sums secured by this Security
instrument immediately prior to the acquisition.” Id. at 464 (quotation marks omitted).
6
The Court explained:
The assignment was collateral security for the mortgage debt. An
assignment made as collateral security for a debt gives the assignee only a
qualified interest in the assigned chose, commensurate with the debt or liability
secured. This is true even though the assignment is absolute on its face. 6A CJS,
Assignments, § 82, pp 730-733. After the debt secured has been paid, the right to
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such, “although the assignment survived foreclosure, the debt did not,” so the mortgagee no
longer held a right to the assignment. Id. at 465. Thus, because “[t]he insurance was an
alternative source of payment,” “any right to the insurance proceeds was extinguished” “[o]nce
the debt was paid by other means.” Id. Likewise, “[w]hether [the mortgagee] realized the full
amount of the debt on resale after foreclosure is of no relevance. The bank purchased the
property for the full amount of the indebtedness. Since the debt was satisfied, any right in the
bank to the insurance proceeds was extinguished.” Id.
In New Freedom Mtg Corp v Globe Mtg Corp, 281 Mich App 63, 70-71; 761 NW2d 832
(2008), this Court once again reviewed the application of the full credit bid rule in cases
involving insurance proceeds after Smith, recognizing that this Court applied the rule in Heritage
Fed Saving Bank and Emmons. The Court also noted that “[t]he rule of caveat emptor applies
with full force” to a judicial sale. Id. at 71 (quotation marks and citation omitted). After
reviewing several other cases involving full credit bids, the Court concluded that the plaintiff, a
company that originated and purchased residential mortgage loans, was not entitled to relief for
its claims because it suffered no damages due to the fact that (1) it received compensation for the
relevant mortgage loans by assigning them to another corporation for valuable consideration, and
(2) the mortgagee who ultimately held the mortgages placed full credit bids at the foreclosure
sales. New Freedom Mtg Corp, 281 Mich App at 74-75.
It is clear that New Freedom Mtg Corp, Heritage Fed Savings Bank, and Emmons
consistently applied the full credit bid rule announced in Smith, 402 Mich 125, to bar a
mortgagee’s claim of entitlement to insurance proceeds or damages when the mortgagee
extinguished the mortgage debt by placing a full credit bid at a foreclosure sale. ASIC does not
cite, and we have not found, any Michigan authority precluding consideration of the full credit
bid rule in order to determine a plaintiff’s property interest in proceeds for purposes of proving
conversion. Likewise, we have found no authority exempting an insurer from a claim of
conversion or another theory of liability when the plaintiff insured asserts that the insurer
converted insurance proceeds by paying them to the wrong party.7
We are not persuaded that ASIC’s lack of familiarity with the full credit bid rule provides
a basis for relief, because “[o]ne engaged in business in this state is presumed to know the law as
it relates to the operation of that business.” American Way Serv Corp v Comm’r of Ins, 113 Mich
App 423, 433; 317 NW2d 870 (1982). Therefore, ASIC should have known that PNC’s decision
to satisfy plaintiffs’ delinquent loan by presenting a full credit bid at the foreclosure sale would
have the effect of extinguishing the mortgage and terminating PNC’s entitlement to insurance
benefits.
hold the assigned collateral ceases, and the assignee has no interest in the
collateral. Id. [Emmons, 193 Mich App at 464.]
7
Such an argument is suspect, as the Michigan Supreme Court previously recognized, “If the
defendant has breached a legal duty owed to the plaintiff apart from the contract of insurance,
then there may be liability in tort.” Hearn v Rickenbacker, 428 Mich 32, 39; 400 NW2d 90
(1987).
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B. ADDITIONAL ARGUMENTS
ASIC argues that Smith, 402 Mich 125, does not apply here because it issued the joint
checks before the foreclosure sale, i.e., before the mortgage was extinguished. However, after
the foreclosure, when plaintiffs’ debt to PNC was deemed satisfied under the law, ASIC stopped
payment on the original checks and reissued checks solely payable to PNC. The foreclosure was
a significant event that altered the rights of the parties, and ASIC’s issuance of checks contrary
to these rights cannot be deemed appropriate based on the parties’ rights before the foreclosure.
ASIC argues that it cannot be held liable for conversion with regard to plaintiffs when it
merely issued the checks to the wrong party in a dispute between plaintiffs and PNC. ASIC
emphasizes that the Supreme Court in Smith did not address the insurer’s liability for paying the
wrong party. This is correct, but ASIC was required to pay the proceeds in accordance with
settled law governing the parties’ entitlement to the proceeds. Cf. Marketos v Am Employers Ins
Co, 240 Mich App 684, 691-693; 612 NW2d 848 (2000) (discussing the law applicable in cases
where a mortgagee is entitled to proceeds under a standard mortgage loss-payable clause), rev’d
in part on other grounds 465 Mich 407 (2001). The decision in Smith governs the underlying
dispute over entitlement to the insurance proceeds. Again, as a casualty insurer operating in
Michigan, ASIC is presumed to know the way in which Michigan law operates with regard to
insurance claims on foreclosed property. American Way Serv Corp, 113 Mich App at 433.
ASIC had a contractual duty to pay benefits in accordance with the insurance policy, see
Marketos v Am Employers Ins Co, 240 Mich App at 691-693, which necessarily encompassed a
duty to determine the insured owner’s and lender’s respective rights to the proceeds. If ASIC
was uncertain of the parties’ respective rights to the proceeds, it could have protected itself by
initiating an interpleader action before reissuing the checks to PNC. See Better Valu Homes, Inc
v Preferred Mut Ins Co, 60 Mich App 315, 319-320; 230 NW2d 412 (1975).
Additionally, ASIC argues that this Court should follow the Supreme Court’s decision in
Smith, 402 Mich 125, by declining to apply the full credit bid rule in plaintiffs’ favor in the
interest of avoiding an injustice to both defendants in this case. As noted supra, the Supreme
Court in Smith held that enforcing the full credit bid rule would be unjust to the mortgagee
because the rule was not previously adopted in Michigan, and the mortgagee did not have notice
that its tender of a full credit bid would extinguish its right to insurance proceeds. Id. at 129-130.
In this case, however, ASIC cannot argue lack of notice that the full credit bid rule is firmly
established in Michigan law. Although the Smith Court also noted that “[i]t would be unfair to
also award [the plaintiffs] the insurance proceeds when the defendants paid the amount of the
debt for worthless property,” id. at 130, we do not find that this statement requires such a result
in this case given the strict application of the full credit bid rule in subsequent cases.
For these reasons, we affirm the trial court’s judgment for plaintiffs with respect to their
claim for common-law conversion against ASIC.
IV. STATUTORY CONVERSION
ASIC next argues that plaintiffs failed to prove the additional elements necessary to
prove statutory conversion under MCL 600.2919a. We agree.
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Unlike common-law conversion, statutory conversion is governed by MCL 600.2919a(1),
which provides:
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.
(b) Another person’s buying, receiving, possessing, concealing, or aiding
in the concealment of stolen, embezzled, or converted property when the person
buying, receiving, possessing, concealing, or aiding in the concealment of stolen,
embezzled, or converted property knew that the property was stolen, embezzled,
or converted.[8]
In Aroma Wines & Equip, the Michigan Supreme Court examined the scope of
Michigan’s common law rules regarding conversion, 497 Mich at 348-353, and observed that
“Michigan law’s understanding of conversion shifted away from requiring an additional showing
that the conversion occurred for the other person’s ‘own use’ and toward allowing a property
owner to recover for any act of dominion inconsistent with that person’s rights in that property,”
id. at 354. Thus, “[b]y enacting MCL 600.2919a, the Legislature intended to create a separate
statutory cause of action for conversion ‘in addition to any other right or remedy’ a victim of
conversion could obtain at common law.” Id. at 340 (footnote omitted). The Court concluded
that “the Legislature’s inclusion of the phrase ‘to the other person’s own use’ in § 2919a(1)(a)
indicates its intent to limit § 2919a(1)(a) to a subset of common-law conversions in which the
common-law conversion was to the other person’s ‘own use.’ ” Id. at 355, quoting MCL
600.2919a(1)(a). Therefore, in order to be entitled to statutory treble damages in this case,
plaintiffs were required to prove that ASIC converted the property to its “own use,” meaning that
ASIC “employed the converted property for some purpose personal to [ASIC’s] interests, even if
that purpose is not the object’s ordinarily intended purpose.” Id. at 340.
Here, the stipulated facts demonstrate that ASIC exercised dominion over the insurance
proceeds contrary to plaintiffs’ rights by delivering the proceeds to PNC without plaintiffs’
authorization, which constituted common-law conversion. Dep’t of Agriculture v Appletree
Marketing, LLC, 485 Mich 1, 14; 779 NW2d 237 (2010) (“Conversion may occur when a party
properly in possession of property uses it in an improper way, for an improper purpose, or by
delivering it without authorization to a third party.”). However, we cannot conclude that ASIC
8
As indicated in the trial court’s judgment, plaintiff’s conversion claim against ASIC falls under
MCL 600.2919a(1)(a), not MCL 600.2919a(1)(b), because it arises from ASIC’s own payment of
the insurance proceeds to the wrong party in the discharge of its policy obligations, not the
“buying, receiving, possessing, concealing, or aiding in the concealment of [already] stolen,
embezzled, or converted property.” Accordingly, we will not consider the parties’ arguments
regarding whether ASIC meets the knowledge requirement under (1)(b).
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converted the insurance proceeds for a purpose personal to its own interests. Aroma Wines &
Equip, 497 Mich at 340.
We disagree with plaintiffs’ argument that ASIC converted the proceeds for its own use
because it paid the proceeds to PNC for the purpose of discharging its obligation to plaintiffs
under the insurance policy. Payment of an insured’s valid claim of loss in accordance with an
insurance policy was ASIC’s obligation and legal detriment under the policy. It was not a
benefit that ASIC bargained for; instead, it was the benefit that ASIC granted to the insured in
exchange for the payment of premiums. See Citizens' Life Ins Co v Commr of Ins, 128 Mich 85,
90-91; 87 NW 126 (1901) (defining an insurance contract); cf. Hess v Cannon Twp, 265 Mich
App 582, 592; 696 NW2d 742 (2005) (describing the elements of a contract); Hall v Small, 267
Mich App 330, 334-335; 705 NW2d 741 (2005) (discussing the role of consideration and
mutuality of obligation in contracts). Moreover, ASIC’s only interest in the transaction was to
distribute proceeds under the policy to the correct payee. It neither had an interest in whether the
correct payee was plaintiffs, PNC, or both, nor did it gain an advantage in providing the funds to
one of the parties instead of the other. Cf. Aroma Wines & Equip, 497 Mich at 360-361
(describing a situation when the defendant may have converted wine “for its own use” when it
moved the plaintiff’s wine in order to accomplish its own purpose in the space where the wine
was previously stored or to acquire leverage against the plaintiff). Therefore, ASIC was not
converting the funds for its own use or benefit when it provided the proceeds to PNC.
Because the stipulated facts failed to demonstrate that ASIC converted the insurance
proceeds for its own use, the trial court erred as a matter of law in finding that ASIC was liable
to plaintiffs for statutory conversion. Thus, we reverse the trial court’s judgment for plaintiffs
against ASIC with respect to plaintiffs’ statutory conversion claim.
Given this conclusion, ASIC is not liable for treble damages or attorney fees under MCL
600.2919a(1)(a). Accordingly, we remand this case to the trial court for the reallocation of
damages consistent with this opinion.
V. CONCLUSION
We affirm the trial court’s judgment for plaintiffs with respect to their common-law
conversion claim against ASIC, but reverse the judgment against ASIC with respect to the
statutory conversion claim. Because our decision affects the trial court’s allocation of fault
between the defendants, we remand for further proceedings.
Affirmed in part, reversed in part, and remanded for further proceedings consistent with
this opinion. We do not retain jurisdiction.
/s/ Christopher M. Murray
/s/ Patrick M. Meter
/s/ Michael J. Riordan
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