PRIME FINANCIAL SERVICES LLC V CASEY VINTON
Annotate this Case
Download PDF
STATE OF MICHIGAN
COURT OF APPEALS
PRIME FINANCIAL SERVICES, L.L.C.,
UNPUBLISHED
January 6, 2011
Plaintiff-Appellee,
v
No. 290735
Kent Circuit Court
LC No. 01-010952-CK
CASEY VINTON,
Defendant,
and
BANK ONE, N.A., f/k/a BANK ONE
MICHIGAN,
Defendant-Appellant.
Before: HOEKSTRA, P.J., and JANSEN and BECKERING, JJ.
PER CURIAM.
Defendant Bank One, N.A. (Bank One) appeals by right the trial court’s order granting its
motion for costs but denying its motion for attorney fees on the basis of MCR 2.405(D)(3). We
reverse and remand for further proceedings consistent with this opinion.
I
This is the second time that this matter has been before this Court. See Prime Fin
Services LLC v Vinton, 279 Mich App 245; 761 NW2d 694 (2008). In the first appeal, Bank One
challenged the jury’s verdict in favor of plaintiff Prime Financial Services, LLC (Prime
Financial).1 This Court reversed and remanded, concluding that the trial court should have
granted Bank One’s motion for judgment notwithstanding the verdict (JNOV). Id. at 279.
1
The jury also returned a verdict against defendant Casey Vinton. However, that judgment was
not at issue in the first appeal, Prime Fin Services LLC, 279 Mich App at 255 n 5, nor is Vinton a
party to the present appeal.
-1-
This case initially arose out of the failure of Bedford Financial, Inc. (Bedford), which was
in the business of making short-term subprime loans to consumers. Because Bedford lacked the
cash reserves to fund all of its lending activities, it obtained funding through investor Arthur
Bott. In the summer of 1997, Bott organized Prime Financial with Patrick Hundley, the owner of
Bedford. Eventually, Bott became Prime Financial’s sole officer. He began funding Bedford
through Prime Financial, although he continued to provide some funding through his trust. In
November 1997, Bank One agreed to provide a short-term construction loan facility to Prime
Financial for $5 million. Bott gave his personal guaranty and that of his trust to Bank One. In
January 1998, Prime Financial provided a $10 million credit facility to Bedford. Bedford
granted Prime Financial a security interest in certain notes, which it was required to deliver to
Prime Financial with the corresponding mortgage. Bedford was also required to assign the
mortgage to Prime Financial. Despite this requirement, Prime Financial permitted Bedford to
retain the notes in its possession. Thereafter, Prime Financial funded loans originated by
Bedford with its own funds, as well as funds drawn on its facility with Bank One. But Prime
Financial also funded other loans originated by Bedford without drawing on the credit facility
with Bank One.
After Prime Financial provided the credit facility to Bedford, Bott became concerned
with Bedford’s loan practices. In March 1999, Bott told Hundley to find another lender. In June
1999, Bank One provided Bedford with a new $15 million credit facility under which Bank One
would directly fund Bedford’s lending. The facility was made possible in part by the personal
guaranty of investor Richard Baidas. Bank One was required to pay off the amount currently
owed by Prime Financial to Bank One under the prior $5 million credit facility, effectively
transferring the debt from Prime Financial to Bedford and relieving Bott and his trust of liability
under their guaranties. Bedford granted Bank One a security interest in property “now owned, or
at any time hereafter acquired,” including “all Mortgage Notes and Mortgages . . . which from
time to time are delivered, or caused to be delivered, to the Bank . . . pursuant hereto or in
respect of which an extension of credit has been made by the Bank under the Credit Agreement.”
At Bank One’s request, Bedford brought all its notes and mortgages to the closing, including
some notes funded solely by Prime Financial, and obtained Uniform Commercial Code (UCC)
termination statements from several lenders, including Prime Financial.
In May 2000, Bank One informed Bedford that it considered Bedford to be in default on
the $15 million credit facility. Bank One settled with Baidas, accepting a payment of
approximately $5.5 million. Bank One agreed to transfer to Baidas the collateral it held under its
agreement with Bedford, which included 23 notes originated by Bedford using funds provided by
Prime Financial. Bedford also owed Prime Financial almost $1.7 million. Pursuant to a
settlement agreement between Prime Financial, Bedford, and Hundley, Hundley was required to
apply the $825,000 he had personally guaranteed to reduce debts owed to the Bott trust.
In October 2001, Prime Financial sued Vinton, an employee of Bedford, for conversion.
Prime Financial subsequently amended its complaint, adding numerous claims against Bank
One. The case proceeded to trial, and the trial court submitted five claims against Bank One to
the jury. The first four claims—conversion, unjust enrichment, aiding and abetting conversion,
and aiding and abetting breach of fiduciary duty—were all related to the 23 notes and mortgages
originated by Bedford using funds from Prime Financial and given to Bank One as collateral for
-2-
the $15 million credit facility. The jury returned a verdict in favor of Prime Financial and
against Bank One in the amount of $1,180,358.16.
Bank One appealed the judgment. The primary issues before this Court were “whether
prior Article 9 of the [UCC] governed the creation of a security interest in a note secured by a
mortgage and, if it did, whether a properly recorded assignment of mortgage could give the
assignee greater rights to the note than the assignee had under Article 9.” Prime Fin Services
LLC, 279 Mich App at 248. This Court issued a published opinion, concluding “that Article 9
governed the creation of the security interests at issue and that an assignment of mortgage can
give no greater rights to the assignee than it has in the note underlying the mortgage.” Id. It
further concluded that “after applying Article 9 to the undisputed facts of this case, Bank One’s
interest in the notes was superior to that of Prime [Financial].” Id. Accordingly, this Court held
that Bank One’s “actions cannot—as a matter of law—constitute conversion, unjust enrichment,
or aiding and abetting conversion or breach of fiduciary duty” because “Bank One’s dispositions
of the notes and mortgages were specifically authorized under Article 9.” Id. It reversed “the
trial court’s decision to deny Bank One’s motion for [JNOV] and remand[ed] for entry of
judgment in favor of Bank One on all of Prime [Financial]’s claims.” Id. This Court denied
Prime Financial’s motion for reconsideration, Prime Fin Services LLC v Vinton, unpublished
order of the Court of Appeals, entered July 16, 2008 (Docket No. 273264), and our Supreme
Court denied leave to appeal, Prime Fin Services LLC v Vinton, 482 Mich 1069 (2008).
The trial court subsequently entered a judgment of no cause of action in favor of Bank
One and dismissed with prejudice all claims asserted by Prime Financial against Bank One.
Thereafter, Bank One moved for costs and attorney fees pursuant to MCR 2.405, asserting that
Prime Financial had rejected its counteroffer to settle the case. The trial court granted Bank
One’s motion for costs, but declined to award attorney fees under the interest-of-justice
exception of MCR 2.405(D)(3). The trial court opined that this Court had addressed several
issues of first impression in the first appeal, “and that the development of the law in this
important and prevalent area was furthered by this case not settling.” Bank One now appeals the
trial court’s decision in this regard.
II
Bank One argues that the trial court abused its discretion by refusing to award it attorney
fees on the basis of the interest-of-justice exception of MCR 2.405(D)(3). We agree.
“Generally, attorney fees are not recoverable as an element of costs or damages unless
expressly allowed by statute, court rule, common-law exception, or contract.” Marilyn Froling
Revocable Living Trust v Bloomfield Hills Country Club, 283 Mich App 264, 297; 769 NW2d
234 (2009). Under the offer-of-judgment rule, MCR 2.405, parties may serve on their opponents
a written offer to stipulate to the entry of a judgment. Marilyn Froling Revocable Living Trust,
283 Mich App at 297. The offer of judgment rule’s purpose is “to avoid protracted litigation and
encourage settlement.” Id. Under MCR 2.405(D)(1), “[i]f the offeree rejects the offer and the
adjusted verdict is more favorable to the offeror than the average offer, the offeror may recover
actual costs from the offeree.” Marilyn Froling Revocable Living Trust, 283 Mich App at 297.
For purposes of MCR 2.405, “[a]ctual costs” include “reasonable attorney fee[s].” MCR
2.405(A)(6). However, the trial court “may, in the interest of justice, refuse to award attorney
-3-
fee[s.]” MCR 2.405(D)(3). Here, it is undisputed that Bank One was entitled to costs under
MCR 2.405(D)(1).2 The trial court awarded Bank One costs, but refused to award it attorney
fees on the basis of the interest-of-justice exception of MCR 2.405(D)(3).
In general, “[t]he decision to award sanctions under the offer of judgment rule is
reviewed for an abuse of discretion.” Pitsch v Blandford, 264 Mich App 28, 34; 690 NW2d 120
(2004), rev’d on other grounds 474 Mich 879 (2005). A trial court’s application of the interestof-justice exception to specific facts is also reviewed for an abuse of discretion. Derderian v
Genesys Health Care Sys, 263 Mich App 364, 374; 689 NW2d 145 (2004). The Legislature’s
use of the term “may” rather than “shall” in MCR 2.405(D)(3) indicates a discretionary action.
See Murphy v Ameritech, 221 Mich App 591, 600; 561 NW2d 875 (1997); see also Sanders v
Monical Machinery Co, 163 Mich App 689, 692; 415 NW2d 276 (1987) (observing that “MCR
2.405 by its terms is discretionary”). We review de novo underlying questions of law, such as a
trial court’s interpretation of MCR 2.405(D). See Castillo v Exclusive Builders, Inc, 273 Mich
App 489, 492; 733 NW2d 62 (2007); see also Marilyn Froling Revocable Living Trust, 283 Mich
App at 296-297.
Michigan courts decide the applicability of the interest-of-justice exception on a case-bycase basis. Lamson v Martin (After Remand), 216 Mich App 452, 463; 549 NW2d 878 (1996).
Significantly, our courts have limited the applicability of the exception. Absent unusual
circumstances, the interest-of-justice exception does not preclude an award of attorney fees
under the offer of judgment rule. Luidens v 63rd Dist Court, 219 Mich App 24, 32; 555 NW2d
709 (1996). In Hamilton v Becker Orthopedic Appliance Co, 214 Mich App 593, 596; 543
NW2d 60 (1995), this Court observed that even though a trial court has discretion to deny an
award of attorney fees, there are few situations in which the interest-of-justice exception will
actually justify such a denial. This Court has been “particularly concerned with limiting the
exception because of its susceptibility to broad interpretations that could potentially consume the
general rule and thus nullify MCR 2.405’s purpose of encouraging settlement.” Reitmeyer v
Schultz Equip & Parts Co, Inc, 237 Mich App 332, 338-339; 602 NW2d 596 (1999); see also
Luidens, 219 Mich App at 33. When a trial court decides not to award attorney fees on the basis
of the interest-of-justice exception, it “must articulate why the ‘interest of justice’ will be served
in light of the role that MCR 2.405 was designed to serve in the administration of our judicial
process under the Michigan Court Rules.” Hamilton, 214 Mich App at 597.
Although MCR 2.405 does not describe the circumstances that would trigger application
of the interest-of-justice exception, our case law provides examples of such circumstances. In
Luidens, 219 Mich App at 35-36, this Court noted that making an offer of judgment for
gamesmanship purposes or other misconduct on the part of a party otherwise entitled to attorney
fees may trigger application of the exception. This Court further noted that “a case involving a
2
Prime Financial made an offer of judgment to settle the case for $1,100,000. Bank One
rejected that offer and made a counteroffer of $285,000. As indicated, all of Prime Financial’s
claims against Bank One were ultimately dismissed with prejudice.
-4-
legal issue of first impression or a case involving an issue of public interest that should be
litigated are [also] examples of unusual circumstances in which it might be in the ‘interest of
justice’ not to award attorney fees . . . .” Id. at 35. The Luidens Court suggested that “the
exception would [also] apply ‘where the law is unsettled and substantial damages are at issue,
where a party is indigent and an issue merits decision by a trier of fact, or where the effect on
third persons may be significant.’” Id. at 36 (citation omitted). “The common thread in these
examples is that there is a public interest in having an issue judicially decided rather than merely
settled by the parties.” Id.3
It is true that this Court decided issues of first impression in Prime Fin Services LLC.
Indeed, that case involved several matters arising under Article 9 of the UCC that had not been
previously addressed by the Michigan courts. See Prime Fin Services LLC, 279 Mich App at
248-272. However, we cannot conclude that the interest in having such matters judicially
decided “override[s] MCR 2.405’s purpose of encouraging settlement,” Luidens, 219 Mich App
at 36, especially given that the parties to this case are sophisticated business entities represented
by experienced counsel. As explained earlier, the general rule is that “[a]ctual costs” include
“reasonable attorney fee[s]” for purposes of the offer-of-judgment rule, MCR 2.405(A)(6), and
that the interest-of-justice exception “does not preclude an award of attorney fees,” Luidens, 219
Mich App at 32; see also Hamilton, 214 Mich App at 597. There is a significant public interest
in encouraging settlement between sophisticated business entities, particularly when complicated
financial transactions are at issue. After all, sophisticated business entities like Prime Financial
and Bank One certainly “know how to protect their own interests, and they are well equipped to
evaluate risks and rewards.” United States v Charles George Trucking, Inc, 34 F3d 1081, 1088
(CA 1, 1994). We believe that awarding attorney fees in matters involving sophisticated parties
and complex financial transactions furthers “MCR 2.405’s purpose of encouraging settlement[.]”
Luidens, 219 Mich App at 35.
3
Bank One dismisses much of the Luidens Court’s discussion of the interest-of-justice exception
as obiter dictum. Obiter dictum is “judicial comment made during the course of delivering a
judicial opinion, but one that is unnecessary to the decision in the case and therefore not
precedential (though it may be considered persuasive).” Carr v Lansing, 259 Mich App 376,
383-384; 674 NW2d 168 (2003) (quotation marks and citations omitted). “When necessary to
determine an issue in a case, a statement of law cannot be dictum.” Ross v Blue Care Network of
Mich, 480 Mich 153, 173; 747 NW2d 828 (2008). In Luidens, 219 Mich App at 36-37, this
Court ultimately concluded that the trial court abused its discretion by refusing to award attorney
fees on the basis of interest-of-justice exception. In reaching that conclusion, this Court first
sought to define the interest-of-justice exception and then cited several examples of
circumstances that might trigger the exception. Id. at 31, 35-36. We consider the Luidens
Court’s analysis of the interest-of-justice exception necessary to the resolution of that case.
Regardless, the analysis is persuasive given the Court’s in-depth discussion and review of the
relevant case law.
-5-
We acknowledge that this litigation has involved several novel issues of law and that the
trial court relied on this fact when it decided to invoke the interest-of-justice exception.
However, we cannot conclude that the trial court’s denial of attorney fees served the interests of
justice in this case. See Hamilton, 214 Mich App at 597. Instead, when sophisticated financial
companies are involved, “we believe that the interest of justice is served by awarding attorney
fees and costs to vindicate the purpose of the rule, thereby increasing the prospect that parties
seriously will engage in the type of settlement process the rule clearly contemplates.” Id. On the
facts of this case, we hold that the trial court abused its discretion by invoking the interest-ofjustice exception of MCR 2.405(D)(3) and by declining to award attorney fees in favor of Bank
One. Luidens, 219 Mich App at 37. On remand, the trial court shall award Bank One its
“reasonable attorney fee[s] . . . necessitated by [Prime Financial’s] failure to stipulate to the entry
of judgment.” MCR 2.405(A)(6); see also Sanders, 163 Mich App at 694.4
In light of our resolution of the issues, we need not consider the remaining arguments
raised by the parties on appeal.
Reversed and remanded for further proceedings consistent with this opinion. We do not
retain jurisdiction. As the prevailing party, Bank One may tax costs pursuant to MCR 7.219.
/s/ Joel P. Hoekstra
/s/ Kathleen Jansen
4
“It is inherent in the court’s power to determine reasonableness” for purposes of MCR
2.405(A)(6). Sanders, 163 Mich App at 694. In calculating the amount of reasonable attorney
fees due to Bank One, the trial court on remand should consider factors such as those enumerated
in MRPC 1.5(a) and Smith v Khouri, 481 Mich 519, 529-530 (opinion of TAYLOR, C.J.), 538-539
(opinion of CORRIGAN, J.); 751 NW2d 472 (2008).
-6-
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.