ECHELON HOMES LLC V CARTER LUMBER CO
Annotate this Case
Download PDF
Michigan Supreme Court
Lansing, Michigan
Chief Justice:
Opinion
Justices:
Clifford W. Taylor
Michael F. Cavanagh
Elizabeth A. Weaver
Marilyn Kelly
Maura D. Corrigan
Robert P. Young, Jr.
Stephen J. Markman
FILED APRIL 12, 2005
ECHELON HOMES, L.L.C.,
Plaintiff/Counter-Defendant-Appellee,
v
Nos. 125994, 125995
CARTER LUMBER COMPANY,
Defendant/Counter-Plaintiff-Appellant.
_______________________________
BEFORE THE ENTIRE BENCH
WEAVER, J.
MCL
receives,
600.2919a
or
aids
provides
in
that
concealing
a
person
stolen,
who
buys,
embezzled,
or
converted property can be held liable for treble damages if
he
knew
converted.
that
the
property
was
stolen,
embezzled,
or
The sole issue before this Court is whether
constructive knowledge that property is stolen, embezzled,
or converted is sufficient to impose liability under MCL
600.2919a.
We hold that under the plain language of the
statute, constructive knowledge is not sufficient to impose
liability under MCL 600.2919a.
Therefore, we reverse the judgment of the Court of
Appeals and hold that the statute requires exactly what it
says—that
the
person
knew
that
the
property
had
been
stolen, embezzled, or converted.
We remand this case to the trial court for a hearing
on whether there is a material issue of fact regarding
whether
there
establish
is
that
sufficient
defendant
circumstantial
knew
the
property
evidence
was
to
stolen,
embezzled, or converted.
FACTS and PROCEDURAL HISTORY
Plaintiff
Echelon
Homes,
L.L.C.,
employed
Carmella
Wood as its bookkeeper and office manager from 1997 to
2000.
schemes
During her employment, Wood engaged in fraudulent
against
Echelon,
including,
but
not
limited
to,
forging company checks to herself, opening company credit
cards in her name, and opening lines of credit to herself
in
Echelon’s
name.
During
this
time,
Wood
opened
an
unauthorized account with defendant Carter Lumber Company
and purchased approximately $87,000 in materials used to
remodel her home and her brother’s home.
Echelon did not
discover Wood’s fraudulent activity until June 2000, when
it learned that Wood had embezzled over $500,000.
Wood’s
embezzlement
was
discovered,
Echelon
When
had
outstanding invoice from Carter for approximately $27,000.
2
an
Carter had extended a line of credit to Wood under
Echelon’s company name.
to
initially
obtain
Wood forged the credit application
the
account.
Subsequently,
Carter
continued to increase the line of credit to Wood, to the
point
that
Echelon
customers.
became
one
of
its
largest
credit
Carter never verified that Echelon had in fact
authorized the credit account, nor did it ever verify that
Wood had the authority to receive credit increases.
delivered
goods
to
Wood’s
relatives
and
Carter
allowed
her
relatives to pick up goods without verifying that they were
authorized
by
Echelon.
Carter
signed
lien
waivers
for
goods purportedly delivered to Echelon for specific jobs
when Carter knew it had never delivered goods for those
jobs.
Wood has testified that she was not working with
Carter,
or
any
of
Carter’s
agents,
and
that
she
was
“scamming” Carter as well.
Echelon
theories,
including
conversion.
for
the
granted
filed
against
MCL
600.2919a,
Carter
under
various
and
abetting
aiding
Carter filed a counterclaim against Echelon
$27,000
both
suit
outstanding
parties’
Both parties appealed.
invoice.
motions
for
The
summary
trial
court
disposition.
The Court of Appeals affirmed the
summary dismissal of Carter’s claims against Echelon, but
reversed the summary dismissal of two of Echelon’s claims
3
against Carter. Echelon Homes, LLC v Carter Lumber Co, 261
Mich App 424; 683 NW2d 171 (2004).
Carter filed an application for leave to appeal with
this Court.
This Court scheduled oral argument on the
application for leave to appeal, limited to whether the
Court of Appeals correctly held that constructive knowledge
was
sufficient
to
impose
liability
under
MCL
600.2919a.
Echelon Homes, LLC v Carter Lumber Co, 471 Mich 916 (2004).
ANALYSIS
The issue before us is whether constructive knowledge
is
sufficient
which
to
requires
impose
that
a
liability
person
under
“knew”
MCL
that
600.2919a,
property
was
stolen, embezzled, or converted in order to be held liable
for aiding and abetting.
This is a question of statutory interpretation, which
this Court reviews de novo.
Stozicki v Allied Paper Co,
Inc, 464 Mich 257, 263; 627 NW2d 293 (2001). In reviewing
questions
of
statutory
construction,
our
purpose
is
to
discern and give effect to the Legislature's intent. People
v Morey, 461 Mich 325, 329-330; 603 NW2d 250 (1999). “We
begin by examining the plain language of the statute; where
that
language
Legislature
is
intended
unambiguous,
the
meaning
we
presume
clearly
that
the
expressed—no
further judicial construction is required or permitted, and
the statute must be enforced as written.” Id. at 330.
4
“We
must give the words of a statute their plain and ordinary
meaning . . . .” Id.
words
can
be
definitions.
The plain and ordinary meaning of
ascertained
by
looking
at
dictionary
Koontz v Ameritech Services, Inc, 466 Mich
304, 312; 645 NW2d 34 (2002).
A
MCL 600.2919a states:
A person damaged as a result of another
person's buying, receiving, or aiding in the
concealment
of
any
stolen,
embezzled,
or
converted
property
when
the
person
buying,
receiving, or aiding in the concealment of any
stolen, embezzled, or converted property knew
that the property was stolen, embezzled, or
converted may recover 3 times the amount of
actual
damages
sustained,
plus
costs
and
reasonable attorney's fees. [Emphasis added.]
A plain reading of this statute indicates that a person
must
know
that
the
property
was
stolen,
converted in order to be held liable.
embezzled,
or
That the person
“should have known” is not sufficient to impose liability
under the statute.
The
term
knowledge,
that
“know”
one
does
not
“should
have
encompass
known.”
constructive
Black’s
Law
Dictionary (8th ed) defines “knowledge” as “[a]n awareness
or understanding of a fact or circumstance; a state of mind
in
which
a
person
has
no
substantial
doubt
about
the
existence of a fact.”
“Constructive knowledge,” on the
other
as
hand,
is
defined
“[k]nowledge
5
that
one
using
reasonable
care
or
diligence
should
have,
and
therefore
that is attributed by law to a given person.” Id.
Constructive
knowledge
is
a
distinct
concept
from
knowledge, and cannot replace the requirement of knowledge
in a statute.
“should
have
The Legislature uses the terms “knew” and
known”
to
indicate
a
knowledge and constructive knowledge.1
difference
between
We found thirty-
eight statutes that refer to constructive knowledge, using
a variation of the phrase “knew or should have known.”
See
MCL 205.14(2)(d) (a tobacco seller or distributor can be
1
The dissent argues that the Legislature’s frequent
use of the term “actual knowledge” refutes our position
that the term “knew,” as used in this statute, is not
satisfied by constructive knowledge.
But the dissent
overlooks the fact that the Legislature uses the terms
“knowledge” and “knew” very differently.
There are some thirty-eight statutes that use a
variation of the phrase “knew or should have known”; for
those statutes constructive knowledge is sufficient.
By
contrast, there is only one statute, MCL 554.636, that uses
the phrase “actually knew.” (Ten statutes, including this
one, use the bare word “knew.”) The Legislature’s ability
to denote the type of knowledge required is better
evidenced by the thirty-eight statutes in which it
explicitly called for constructive knowledge than by the
one occasion in which it used the term “actually.”
The dissent cites forty-eight statutes in which the
Legislature uses the phrase “actual knowledge.”
By
contrast, there are only seven statutes that refer to
“actual or constructive knowledge.”
The multiple citations to statutes referencing “actual
knowledge” do not affect the correct interpretation of the
statute at issue here, which uses the term “knew.”
6
held liable for illegally selling tobacco products if it
“knew or should have known that the manufacturer intended
the tobacco product to be sold or distributed” outside the
prescribed
area);
MCL
691.1417(3)(c)
(to
receive
compensation for property damage or physical injury from a
governmental
agency
the
claimant
must
show
that
“[t]e
governmental agency knew, or in the exercise of reasonable
diligence
should
have
known,
about
the
defect”);
MCL
565.831(4) (a person who provides a statement used in an
application for registration or property report is liable
only for false statements and omissions in his statement
and only “if it is proved he knew or reasonably should have
known of the existence of the true facts by reason of which
the liability is alleged to exist”); MCL 445.1902(b)(ii)(B)
(misappropriation
of
a
trade
secret
includes
one
who
disclosed or used a trade secret of another when, at the
time of disclosure or use, the person “knew or had reason
to know that his or her knowledge of the trade secret was
derived from or through a person who had utilized improper
means to acquire it”).
Relying on People v Tantenella, 212 Mich 614; 180 NW
474 (1920), Echelon argues that this Court has historically
used
constructive
knowledge
to
impose
criminal aiding and abetting statute.
7
liability
under
a
In
Tantenella,
the
defendant
was
charged
with
receiving a stolen car.
The defendant claimed that he did
not
was
know
that
determined
the
that
car
the
stolen.
defendant
However,
had
the
sufficient
knowledge to be guilty of the crime.
Court
guilty
Id. at 620.
The
Tantenella Court stated, “Guilty knowledge means not only
actual
knowledge,
notice
of
facts
but
and
constructive
knowledge,
circumstances
from
through
which
knowledge may fairly be inferred.” Id. at 621.
guilty
The Court
went on to list facts that implied the guilty knowledge of
the defendant: receiving possession of the car hours after
it had been stolen, driving to Chicago with the suspected
thief,
changing
the
motor
number
and
license
number,
claiming ownership, producing a fraudulent bill of sale,
and giving authorities conflicting names. Id.
All these
facts
that
the
characterized
its
were
used
by
the
Court
to
determine
defendant was guilty of receiving stolen property.
Although
analysis
of
the
these
Tantenella
facts
as
Court
examining
the
defendant’s
constructive knowledge, the Court was, in fact, determining
that the defendant had knowledge, proven by circumstantial
evidence, that the car was stolen.
This is shown by the
Court’s extensive analysis of the facts that led it to
believe that the defendant had knowledge.
The Tantenella
Court used the term “constructive knowledge” synonymously
8
with
knowledge
proven
through
circumstantial
evidence.
Thus, the Court’s use of the term “constructive knowledge”
is a misnomer; what the Court really meant was knowledge
proven by circumstantial evidence.
The Tantenella Court’s holding regarding “constructive
knowledge”
has
correctly
been
interpreted
by
subsequent
courts to mean actual knowledge proven by circumstantial
evidence. See, e.g., People v Westerfield, 71 Mich App 618;
248
NW2d
641
receiving
(1976)(the
a
stolen
circumstances
defendant
car
on
surrounding
was
the
his
found
basis
guilty
of
purchase);
of
suspicious
People
v
Blackwell, 61 Mich App 236, 240-241; 232 NW2d 368 (1975)
(“although
the
term
may
convey
a
special
meaning
to
lawyers, it is apparent that the Tantenella Court and the
others
which
Tantenella
have
used
used
the
the
term
identical
instructions
“constructive
knowledge”
since
as
a
shorthand way of saying that this element of the charge may
be proven circumstantially”); People v White, 22 Mich App
65, 68; 176 NW2d 723 (1970) (the defendant was charged with
knowingly
concealing
stolen
property
on
the
basis
of
circumstantial evidence); People v Keshishian, 45 Mich App
51,
53;
205
sufficient
to
NW2d
make
818
(1973)
prima
(circumstantial
facie
knowledge).
9
showing
of
evidence
guilty
We
hold
that,
under
MCL
600.2919a,
constructive
knowledge is not sufficient; a defendant must know that the
property
was
stolen,
embezzled,
or
converted.
To
the
extent that Tantenella stated otherwise, it is overruled.
But consistent with the actual holding in Tantenella, a
defendant’s
knowledge
embezzled,
or
that
the
converted
can
property
be
was
stolen,
established
by
circumstantial evidence.
B
Echelon also argues, and the Court of Appeals agreed,
that
Carter
was
required
to
make
a
reasonably
diligent
inquiry into whether Wood was authorized to open credit
accounts and conduct transactions in Echelon’s name.
In
support of this argument Echelon relies on In re Thomas
Estate, 211 Mich App 594; 536 NW2d 579 (1995).
In Thomas,
a bank improperly released funds to the former guardian of
a minor, despite the fact that her guardianship had been
terminated.
At the time of the transaction, the bank had
in its possession a letter that explicitly stated that the
guardianship
liable
for
had
the
been
terminated.
improper
release,
The
and
bank
was
was
found
required
to
compensate the estate of the minor for the loss.
The Court of Appeals in the present case reasoned that
just as the bank in Thomas was required to make a diligent
inquiry about the authority of the guardian, Carter was
10
required
to
inquire
Echelon.
about
Wood’s
authority
concerning
We disagree.
Thomas dealt with MCL 700.483, which in relevant part
before its repeal stated: “The fact that a person knowingly
deals with a conservator does not alone require the person
to inquire into the existence of a power or the propriety
of
its
exercise,
except
that
restrictions
on
powers
of
conservators which are indorsed on letters as provided in
section 485 are effective as to third persons.”
(Emphasis
added.)
This statute explicitly stated that a bank does
not
to
need
make
further
inquiry
into
the
powers
of
a
conservator except when there are letters that restrict the
conservator’s
letters
powers.
that
In
explicitly
Thomas,
stated
guardianship was to terminate.
there
the
were
date
letters—
when
the
The bank did not consult
these letters when it statutorily had an affirmative duty
to do so.
As a result, the bank was held liable for
improper disbursement of funds.
But the statute in the present case, MCL 600.2919a,
imposes
no
Therefore,
inquiry
duty
Carter
into
on
the
was
Wood’s
not
defendant
to
make
an
inquiry.
statutorily
bound
to
make
an
analogy
to
authority,
Thomas is misplaced.
11
and
Echelon’s
CONCLUSION
Constructive
knowledge
is
not
liability under MCL 600.2919a.
statute
means
knowledge
that
sufficient
to
impose
The term “knew” in the
the
property
is
stolen,
embezzled, or converted.
In lieu of granting leave to appeal, we reverse the
Court
of
Appeals
sufficient
to
holding
constructive
liability
impose
that
under
knowledge
MCL
is
600.2919a.
However, the trial court did not determine whether there
was a material issue of fact concerning whether there was
sufficient circumstantial evidence to establish that Carter
knew
that
Wood’s
transactions
were
fraudulent.
Accordingly, we remand this case to the trial court for a
hearing on this issue.
Defendant’s application for leave
to appeal on the remaining issues is denied, because we are
not
persuaded
that
the
questions
presented
should
reviewed by this Court.
Elizabeth A. Weaver
Clifford W. Taylor
Maura D. Corrigan
Robert P. Young, Jr.
Stephen J. Markman
12
be
S T A T E
O F
M I C H I G A N
SUPREME COURT
ECHELON HOMES, LLC,
Plaintiff/Counter-Defendant/Appellee,
v
Nos. 125994, 125995
CARTER LUMBER COMPANY,
Defendant/Counter-Plaintiff/Appellant.
_______________________________
CAVANAGH, J. (dissenting).
I agree with the majority that circumstantial evidence
can be sufficient to establish the knowledge requirement of
MCL 600.2919a.
contention
However, I disagree with the majority’s
that,
as
constructive
knowledge
knowledge.1
The
1
word
it
relates
is
“knew”
a
to
MCL
distinct
as
used
in
600.2919a,
concept
MCL
from
600.2919a
MCL 600.2919a states the following:
A person damaged as a result of another
person’s buying, receiving, or aiding in the
concealment
of
any
stolen,
embezzled,
or
converted
property
when
the
person
buying,
receiving, or aiding in the concealment of any
stolen, embezzled, or converted property knew
that the property was stolen, embezzled, or
converted may recover 3 times the amount of
actual
damages
sustained,
plus
costs
and
reasonable attorney’s fees. This remedy shall be
in addition to any other right or remedy the
person may have at law or otherwise.
encompasses actual and constructive knowledge; therefore, I
must respectfully dissent.
The
Legislature
knows
how
to
use
the
term
“actual
knowledge” and has used this term on numerous occasions.
The number of statutes in which the Legislature plainly
expresses
that
actual
knowledge
is
required
belies
the
majority’s position that the term “knew” means only actual
knowledge.
For example, in the following statutes the Legislature
had
no
difficulty
expressing
the
requirement
of
actual
knowledge.
MCL 15.305(1) (“with actual knowledge of such
prohibited
conflict”);
MCL
15.325(1)
(“with
actual
knowledge of the prohibited activity”); MCL 28.425a(2)(c)
(“The prosecuting attorney shall disclose to the concealed
weapon licensing board any information of which he or she
has actual knowledge that bears directly on an applicant’s
suitability
to
carry
a
concealed
pistol
safely.”);
MCL
35.501 (“without actual knowledge”); MCL 205.29(2) (“had
actual knowledge”); MCL 286.192(1) (“unless the person has
actual
knowledge”);
MCL
324.5531(7)
(“in
proving
a
defendant’s possession of actual knowledge, circumstantial
evidence may be used”); MCL 324.11151(5)(b) (“in proving
the
defendant’s
possession
of
actual
knowledge,
circumstantial evidence may be used”); MCL 333.2843b(1) (“a
2
physician . . . has actual knowledge”); MCL 333.5475a(1)(b)
(“the property manager, housing commission, or owner of the
rental
unit
had
actual
knowledge
of
the
lead
paint
hazard”); MCL 333.13738(5)(b) (“in proving the defendant’s
possession of actual knowledge, circumstantial evidence may
be
used”);
upon
MCL
the
333.17015(14)
certification
390.1553(3)(a)
(“does
(“the
had
not
physician
actual
have
who
relied
knowledge”);
actual
knowledge”);
MCL
MCL
418.131(1) (“if the employer had actual knowledge that an
injury was certain to occur”); MCL 432.207c(7) (“report all
information . . . of which it has actual knowledge”); MCL
440.1201(25) (“[a] person has ‘notice’ of a fact when he or
she has actual knowledge of it”); MCL 441.107(a) (“unless
it is shown that he acted with actual knowledge”); MCL
445.813(1)
(“unless
449.1303(a)
(“with
partner’s
(“with
actual
withdrawal
be
due
death
of
the
with
the
MCL
MCL
MCL
limited
450.1472(2)
restriction”);
knowledge”);
chargeable
to
knowledge”);
control”);
of
actual
actual
knowledge
in
knowledge
(“has
not
with
actual
participation
450.4406(b)
(“shall
done
MCL
487.717(1)
in
rights
of
incompetency
or
changes
in
absence
of
actual knowledge”); MCL 490.385(1) (“has actual knowledge
of a dispute”); MCL 491.422(2) (“with actual knowledge of
the
restriction”);
MCL
491.604
3
(“unless
it
has
actual
knowledge that the facts set forth in the affidavit are
untrue”); MCL 500.1371(2) (“with actual knowledge”); MCL
500.8127(2)(c) (“A person having actual knowledge of the
pending rehabilitation or liquidation shall be considered
not to act in good faith.”); MCL 554.636(3)(b) (“which the
lessor actually knew was in violation”); MCL 554.636(3)(c)
(“the
lessor
actually
knew
that
the
provision
was
not
included”); MCL 557.206(d) (“without actual knowledge of
such breach”); MCL 600.1403(1) (“the seller had no actual
knowledge of the actual age”); MCL 600.2945(j) (“does not
have actual knowledge”); MCL 600.2949a (“the defendant had
actual
knowledge
that
the
product
was
defective”);
MCL
600.2974(3)(d) (“with the actual knowledge that the conduct
was injurious to consumers”); MCL 700.2910(1)(c) (“after
actual
knowledge
that
a
property
right
has
been
conferred”); MCL 700.3714(2) (“with actual knowledge of the
limit”);
MCL
700.5318
(“has
actual
knowledge
that
the
guardian is exceeding the guardian’s powers or improperly
exercising
them”);
MCL
700.5504(1)
(“without
actual
knowledge of the principal’s death”); MCL 700.5505(1) (“the
attorney
in
fact
did
not
have
actual
knowledge
of
the
principal’s death”); MCL 700.5510(2) (“did not have actual
knowledge”); MCL 700.7404 (“without actual knowledge”); MCL
750.159k(4)(a) (“did not have prior actual knowledge”); MCL
4
750.159m(4) (“did not have prior actual knowledge”); MCL
750.159q(1)(b)
(“had
prior
actual
knowledge
of
the
commission of an offense”); MCL 750.159r(1)(a) (“who did
not
have
prior
actual
knowledge”);
MCL
750.219e(3)(a)
(“without
prior
actual
knowledge”);
MCL
750.219f(4)(a)
(“without prior actual knowledge”); MCL 750.411j(b) (“with
the approval or prior actual knowledge”); MCL 750.411k(1)
(“with
prior
actual
knowledge”);
MCL
750.540d(a)
(“had
prior actual knowledge of and consented to the violation”).
I list these statutes not to overwhelm the reader, but
to
show
the
fallacy
of
the
majority’s
position.
The
Legislature is fully aware of how to ensure a statutory
requirement of actual knowledge.
not done so.
In MCL 600.2919a, it has
This Court does not have the authority to
impose an actual knowledge requirement when the Legislature
has
not
seen
fit
to
do
so.
See
In
re
MCI
Telecom
Complaint, 460 Mich 396, 413; 596 NW2d 164 (1999).
The Legislature’s ability to clearly state an actual
knowledge requirement is indisputable given the number of
statutes
in
which
it
expresses
this
requirement.
Therefore, the Legislature’s use of the term “knew” in MCL
600.2919a
must
be
viewed
as
allowing
a
broad
range
knowledge to meet the statutory knowledge requirement.
5
of
This Court recognized the difference in specificity
between using the terms “actual knowledge” and “knowledge”
in Travis v Dreis & Krump Mfg Co, 453 Mich 149, 173; 551
NW2d 132 (1996).
As this Court stated in Travis, supra at
173, “Because the Legislature was careful to use the term
‘actual
knowledge,’
and
not
the
less
specific
word
‘knowledge,’ we determine that the Legislature meant that
constructive, implied, or imputed knowledge is not enough.”
Logically, the opposite is also true.
The Legislature’s
careful selection of the term “knew,” instead of “actually
knew,”
indicates
that
a
broad
range
of
knowledge
is
sufficient to meet the statutory requirement.
Because the
Legislature’s
encompasses
constructive
obvious
choice
knowledge,
inquiries
caution
would
inquiries.
of
that
have
See
the
word
defendant
an
honest
made,
Deputy
had
a
duty
person
using
instead
Comm’r
of
“knew”
of
to
ordinary
avoiding
Agriculture
make
v
these
O
&
A
Electric Co-op, Inc, 332 Mich 713, 716-717; 52 NW2d 565
(1952).
Because this Court must follow the plain text of a
statute and because the Legislature used the term “knew,”
which
encompasses
actual
and
constructive
knowledge,
I
disagree with the majority’s contention that constructive
6
knowledge is insufficient to satisfy the requirement of MCL
600.2919a.
Accordingly, I respectfully dissent.
Michael F. Cavanagh
Marilyn Kelly
7
Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
