BUCKEYE RETIREMENT CO LLC LTD V MEIJER INC
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STATE OF MICHIGAN
COURT OF APPEALS
BUCKEYE RETIREMENT CO., LLC, LTD,
UNPUBLISHED
September 18, 2008
Plaintiff-Appellant,
v
No. 279625
Kent Circuit Court
LC No. 06-012747-CK
MEIJER, INC.,
Defendant-Appellee.
Before: Meter, P.J., and Hoekstra and Servitto, JJ.
PER CURIAM.
Plaintiff Buckeye Retirement Co. appeals as of right from an order granting summary
disposition to defendant Meijer, Inc. The case arose from Buckeye’s attempt to hold Meijer
liable for a portion of a debt owned to Buckeye from Pells, Inc. We affirm.
Pells was a shoe repair and supply business that, until the summer of 2006, leased space
and operated near the checkout area of Meijer stores. Customers could pay for Pells’ products at
either Pells’ or Meijer’s checkout counters. According to the “Master In-Store License”
agreement, at the end of each business day Pells would deliver all receipts and cash from the
day’s sale of merchandise to Meijer. Each week, Meijer would total all receipts and subtract its
licensing fee of 9% before remitting the remainder to Pells.
In the 1990s, Pells obtained a loan from Old Kent Bank, now known as Fifth Third Bank;
Pells borrowed over $900,000. As security, Pells granted Old Kent Bank first priority security
interests and liens in all its “personal property, e.g. accounts, contract rights, chattel paper,
general intangibles, inventory, equipment and fixtures,” in addition to real property owned by
Paul Pell individually and a life insurance policy. Buckeye, a purchaser of bad debt, later
acquired rights to the loan from the bank. By July 2005, Pells was in default on the loan, and
Buckeye brought suit in the Kent County Circuit Court to enforce Pells’ obligations.
Buckeye’s claim against Meijer arose from two incidents. On the evening of September
4, 2005, Buckeye representative John Benitis, along with an associate, entered the Meijer store in
Westerville, Ohio, and attempted to gain entry to Pells’ leased space in order “to execute on the
collateral” located there. From there, accounts of the event differ.
Meijer claims that Pells’ space was secured by a gate and padlock, that Benitis showed
the manager on duty a document that allegedly allowed Buckeye to seize Pells’ equipment, and
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that Buckeye requested access to Pells’ area. The Meijer manager refused and instead called the
police, with the intent that if the police instructed her to do so, she would grant Benitis access to
Pells’ area. The police stated that Benitis’ documentation was not sufficient to allow him to
break into Pells’ store and declined to intervene.
Buckeye, on the other hand, declares that there was no barrier denying access to Pells’
area from the rest of the store and that, in fact, Pells’ inventory was accessible to the public to be
taken off the shelves and purchased at Meijer’s register. Instead, claims Buckeye, the manager
on duty refused to allow Buckeye to seize Pells’ property. Buckeye claims that the police were
called and declared Buckeye’s paperwork to be in order, but the manager still refused to allow
Benitis to continue, rendering any further effort to seize Pells’ property futile. Later, Benitis was
informed by other representatives of Meijer that attempts to seize property from Pells at other
Meijer locations would be similarly rebuffed.
The second incident occurred on May 10, 2006, when an attorney for Buckeye sent a
letter to Meijer, addressed to “Meyer Real Estate,” claiming it was owed and had the right to
collect a debt from Pells. The letter requested that Meijer “hold all future receivable amounts
due to Pells, Inc. in escrow until there is a resolution of the current litigation between Buckeye
and Pells, Inc.”1 Attached to the letter were numerous notes, a contract, and other documents
governing Pells’ indebtedness. Meijer notified Pells of Buckeye’s request and sought
clarification regarding whether Pells was in agreement with Buckeye’s legal position concerning
Buckeye’s right to receivables. On May 17, 2006, Pells’ attorney sent a letter to Meijer
indicating that Pells’ stance was that Buckeye was not entitled to any payment from Meijer from
any amounts owed by Meijer to Pells under the Master In-Store License. Further, Pells’ letter
stressed that none of the documents Buckeye had provided Meijer referenced any assignment of
monies held by Meijer on behalf of Pells to Buckeye. That same day, Meijer sent a fax to
Buckeye’s counsel, with Pells’ response attached, requesting Buckeye’s legal basis for its claims
to the Pells’ proceeds held by Meijer as well as its disagreement with Pells’ position. On June 1,
2006, Buckeye’s counsel sent a fax to Meijer expressing disagreement with Pells’ position and
promising to send the full legal basis for its own views on the matter later. However, on June 7,
Buckeye stated in an email that they would not be providing any further information and that
“the documentation originally sent to Meijer Stores [was] sufficient to demonstrate a legitimate
debt and our security interest in that debt.” During this time, Meijer continued to fulfill its
obligations to Pells as provided in the Master In-Store License. On August 1, 2006, Pells ceased
its operations.
On December 21, 2006, Buckeye sued Meijer. Buckeye’s complaint alleged three causes
of action. Count I claimed that Meijer committed statutory conversion of income, receivables,
inventory, and other secured assets by refusing to pay a valid obligation and by exercising
dominion over Pells’ property, despite Buckeye’s claims of entitlement and demands for the
property. Count II alleged that Meijer violated MCL 440.9607, a provision of the Uniform
1
The reference to “current litigation” refers to the lawsuit initiated in the Kent County Circuit
Court by Buckeye on July 11, 2005.
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Commercial Code (UCC), MCL 440.9101 et seq., by failing to follow Buckeye’s request in its
May 10, 2006, letter and continuing to make payments to Pells. Count III alleged “constructive
trust,” indicating that Meijer unjustly enriched itself at Buckeye’s expense by retaining money
and collateral that belonged to Buckeye under security agreements.
The lawsuit entered discovery, but no depositions were taken. Meijer moved for
summary disposition under MCL 2.116(C)(10) on May 11, 2007. The summary disposition
hearing occurred on June 18, 2007. The lower court found that Buckeye’s claims incorrectly
relied on MCL 400.9607 because subsection 5 of that statute states, “This section does not
determine whether an account debtor, bank or other person obligated on collateral owes a duty to
a secured party.” The court ruled that, instead, Buckeye should have brought its claim under
MCL 440.9406. The court stated:
This section points out that an account debtor on an account (Meijer) may
discharge its obligation by paying the assignor (Pells) until, but not after, the
account debtor receives a notification authenticated by the assignor (Pells) or the
assignee (Buckeye), that the amount due or to become due has been assigned and
that the payment is to be paid to the assignee (Buckeye).
The court emphasized that the notification must identify the rights assigned and the assignee
must provide reasonable proof that the assignment has been made, upon request of the account
debtor. The court went on to note that, if the assignee does not comply with a reasonable request
for proof, then the account debtor may continue to pay the assignor.
The court found that none of the documents that Buckeye provided to Meijer furnished
sufficient notice of the assignment of Pells’ debt, making Meijer’s request for proof reasonable.
Then, because Buckeye did not provide reasonable proof of assignment, Meijer was correct in
continuing to pay Pells under the Master In-Store License. Ultimately, the trial court granted
Meijer summary disposition on all counts.
On appeal, Buckeye first argues that the trial court improperly treated the three counts of
the complaint as one count governed by the UCC.
We review a lower court’s summary disposition ruling de novo. West v General Motors
Corp., 469 Mich 177, 183; 665 NW2d 468 (2003). “Summary disposition is appropriate under
MCR 2.166(C)(10) if there is no genuine issue regarding any material fact and the moving party
is entitled to judgment as a matter of law.” West, supra at 183.
We find no error requiring reversal in the trial court’s analysis of Buckeye’s complaint
because findings under the UCC were related to all three counts alleged by Buckeye.
The trial court’s opinion focused on Count II, which alleged a violation of MCL
440.9607. That statute outlines the actions a holder of a secured interest may take in the event of
a default. The court noted that MCL 440.0607(5) precludes Buckeye from taking any action
under the statute against Meijer. The court deduced that Buckeye meant to bring suit under
MCL 440.9406, which states that Meijer would have to pay any obligations it had to Pells to
Buckeye, on receipt of authenticated notice. The trial court determined that the notice that
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Buckeye provided Meijer in order to demonstrate its secured interest in Pells’ collateral did not
fulfill the notification requirement of MCL 440.9406. After determining that there was no claim
under the UCC, the lower court granted summary disposition on all counts.
We conclude that the trial court acted properly in granting summary disposition on all
claims after considering the claim brought in Count II under the UCC. The trial court essentially
determined that Buckeye had not provided appropriate notification of its secured interest to
Meijer. The court found this dispositive with regard to the remaining counts of conversion and
constructive trust, and we agree. If Meijer did not receive proper notice, then Counts I and III of
the complaint were unavailing; the conversion and constructive trust counts clearly required
knowledge on the part of Meijer. We find no basis for reversal with respect to this issue.
Buckeye next claims that the trial court erred in dismissing the statutory conversion
claim. It first contends that, under MCL 440.9609, it was entitled to take inventory during the
September 2005 incident. Buckeye cites the following portions of MCL 440.9609:
(1) After default, a secured party may do 1 or more of the
following:
(a) Take possession of the collateral.
(b) Without removal, render equipment unusable and dispose of
collateral on a debtor's premises under section 9610.
(2) A secured party may proceed under subsection (1) either
pursuant to judicial process, or without judicial process if it proceeds without
breach of the peace.
Buckeye states that, under these sections, it had a right to seize the inventory and that Meijer
improperly interfered with this seizure.
Under the circumstances of this case, statutory conversion consists of a party’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. [MCL
600.2919a(1)(b).]
Conversion occurs when a “distinct act of domain [is] wrongfully exerted over another’s
personal property in denial of or inconsistent with the rights therein.” Foremost Ins Co v Allstate
Ins Co, 439 Mich 378, 391; 486 NW2d 600 (1992). “[A] defendant’s knowledge that property
was stolen, embezzled, or converted can be established by circumstantial evidence.” Echelon
Homes, LLC v Carter Lumber Co., 472 Mich 192, 200; 694 NW2d 544 (2005). Constructive
knowledge is not enough for statutory conversion. Id. No duty is imposed on a party to make a
reasonably diligent inquiry into whether property was converted, stolen, or embezzled. Id. at
201-202.
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Buckeye appears to be arguing that knowledge on the part of Meijer was not required
here, because the transaction was between Pells and Buckeye, and Meijer should have essentially
just “kept out of the situation.” We cannot agree with this argument. Meijer had technical
possession of the inventory, essentially as a landlord, and did not become liable for conversion
by preventing the seizure of the property, given what it knew. Meijer was merely presented with
a financing statement. “The purpose of a financing statement is to place third parties on notice of
the existence of a security agreement.” Federal Land Bank of St. Paul v Bay Park Place Inc.,
162 Mich App 1, 7; 412 NW2d 222 (1987). It does not indicate whether there has been a default
on payment. See, e.g., Continental Oil Co v Citizens Trust & Savings Bank, 397 Mich 203, 212213; 244 NW2d 243 (1976) (discussing financing statements in general). Given the
circumstances, the trial court did not err in concluding that the September 2005 incident did not
give rise to any liability on the part of Meijer.
Buckeye next contends that Meijer committed statutory conversion by continuing to
accept Pells’ receivables, despite Buckeye’s interest. Buckeye states, “Meijer has committed
statutory conversion by aiding in the concealment of converted assets in violation of MCL
600.2919a(1), and therefore Meijer is liable for three times the amount of Buckeye’s actual
damages . . . .” The financing statement discussed earlier did not provide Meijer with the
requisite knowledge for conversion. Accordingly, Buckeye must necessarily be relying on the
letter of May 10, 2006. In this letter, Buckeye attached loan agreements and stated that Pells had
made no payments on them, resulting in a debt of over $830,000. The letter states, “We would
ask that you hold all future receivable amounts due to Pells, Inc. in escrow until the resolution of
the current litigation between Buckeye and Pells, Inc.” We cannot discern how Meijer’s
continuing to pay Pells after receiving this letter, which referred to current litigation and asked
for money to be placed in escrow, gave rise to liability for statutory conversion. As noted by the
trial court, after receiving the letter, Meijer sought clarification regarding Pells’ position in the
dispute and was informed that Pells’ position was that Buckeye was not entitled to any payment
from Meijer. Meijer then sought further information from Buckeye but was provided with
nothing more.
MCL 440.9406 states, in part:
(1) Subject to subsections (2) through (9), an account debtor [Meijer] on
an account, chattel paper, or a payment intangible may discharge its obligation by
paying the assignor until, but not after, the account debtor receives a notification,
authenticated by the assignor or the assignee, that the amount due or to become
due has been assigned and that payment is to be made to the assignee. After
receipt of the notification, the account debtor may discharge its obligation by
paying the assignee and may not discharge the obligation by paying the assignor.
***
(3) Subject to subsection (8), if requested by the account debtor, an
assignee shall seasonably furnish reasonable proof that the assignment has been
made. Unless the assignee complies, the account debtor may discharge its
obligation by paying the assignor, even if the account debtor has received a
notification under subsection (1).
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We agree with the trial court that Meijer did not obtain satisfactory proof that the money owed
was to be paid to Buckeye as opposed to Pells. The letter of September 10, 2006, merely
requested that the money be placed in escrow, and we find no basis on which to disturb the trial
court’s ruling.2
Buckeye next argues that the trial court erred in dismissing the claim for a constructive
trust. “A court may impose a constructive trust when necessary to do equity or avoid unjust
enrichment.” Morris Pumps v Centerline Piping, Inc, 273 Mich App 187, 202; 729 NW2d 898
(2006). “[T]he burden of proof is on the person seeking to establish a constructive trust . . . .”
MacKenzie v Fritzinger, 370 Mich 284, 292; 121 NW2d 410 (1963).
[W]here a person occupies a fiduciary relationship as agent for another,
and thereby gains something for himself which in equity and good conscience he
should not be permitted to keep, equity will raise a constructive trust and compel
him to turn it over to the person equitably entitled to it, or to otherwise execute
the trust as the court may direct. [Id. at 291 (citations and quotation marks
omitted).]
We find no basis on which to disturb the trial court’s ruling.3 The constructive trust claim was
based on Meijer’s retaining its licensing and leasing fees. Meijer was receiving from Pells funds
it was entitled to under the Master In-Store License; we cannot construe this as an
unconscionable act that required a constructive trust.4
Buckeye next argues that the trial court erred in its analysis of MCL 440.9607 and that
Meijer had sufficient notice that “Buckeye had a right to the collateral upon demand.” We
disagree that the court erred in analyzing this statute. As noted earlier, MCL 440.9607(5) states,
“This section does not determine whether an account debtor, bank, or other person obligated on
collateral owes a duty to a secured party.” The sixth comment to the statute provides, in part:
Neither this section nor former Section 9-502 should be understood to regulate
the duties of an account debtor or other person obligated on collateral. . . . This
section establishes only the baseline rights of the secured party vis-a-vis the
2
We disagree with Buckeye’s contention that the trial court failed to address the issue regarding
the alleged statutory conversion of receivables. The court’s opinion, read as a whole, indicates
that the court did address that issue.
3
Contrary to Buckeye’s assertion, we believe that the trial court’s opinion, read as a whole,
adequately addressed the issue of a potential constructive trust.
4
Buckeye’s argument that the trial court erred by not allowing discovery to be completed before
ruling on the summary disposition motion is unfounded. “[S]ummary disposition before the
close of discovery is appropriate if there is no reasonable chance that further discovery will result
in factual support for the nonmoving party.” Colista v Thomas, 241 Mich App 529, 537-538;
616 NW2d 249 (2000). Nothing Buckeye has asserted justifies the conclusion that discovery
could reasonably produce further factual support for its claims.
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debtor – the secured party is entitled to enforce and collect after default or earlier
if so agreed. [Emphasis in original.]
Given the pertinent statutory language, the trial court did not err in concluding that Buckeye did
not have a valid cause of action under MCL 440.9607.
Affirmed.
/s/ Patrick M. Meter
/s/ Joel P. Hoekstra
/s/ Deborah A. Servitto
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