Echelon Homes, LLC v. Carter Lumber Co.
Decision Date | 24 June 2004 |
Docket Number | Docket No. 243180.,Docket No. 243112 |
Citation | 261 Mich.App. 424,683 N.W.2d 171 |
Parties | ECHELON HOMES, L.L.C., Plaintiff-Counterdefendant-Appellee, v. CARTER LUMBER COMPANY, Defendant-Counterplaintiff-Appellant. Echelon Homes, L.L.C., Plaintiff-Counterdefendant-Appellant, v. Carter Lumber Company, Defendant-Counterplaintiff-Appellee. |
Court | Court of Appeal of Michigan — District of US |
Wasinger Kickham and Hanley (by Stephen Wasinger and Timothy O. McMahon), Royal Oak, for Echelon Homes, L.L.C.
Russell & Stoychoff, P.C. (by Paul M. Stoychoff), Troy, for Carter Lumber Company.
Before: HOEKSTRA, P.J., and SAWYER and GAGE, JJ.
In Docket No. 243180, plaintiff-counterdefendant-appellant Echelon Homes, L.L.C. (Echelon), appeals as of right from an order granting defendant-counterplaintiff-appellee Carter Lumber Company's (Carter) motion for summary disposition regarding Echelon's complaint. In Docket No. 243112, defendant-counterplaintiff-appellant Carter appeals as of right from an order denying its motion for summary disposition and granting Echelon's motion for summary disposition regarding Carter's counterclaim. The appeals were consolidated. We affirm in part, reverse in part, and remand for further proceedings.
Echelon, a limited liability company with two members, James T. Hysen and Carroll Strange, builds and develops residential housing. Carter, a corporation headquartered in Kent, Ohio, operates a chain of retail stores selling building supplies.
The events giving rise to the instant case center on the acts of a former Echelon employee, Carmella Wood. Echelon hired Wood as a secretary, administrative assistant, and bookkeeper in 1997. In July of 2000, Strange and Hysen discovered that Wood had engaged in a scheme with several members of her family to embezzle from Echelon. The scheme included fraudulently obtaining credit accounts with several vendors, including Carter, and then using those accounts for their own personal use, including purchasing building supplies for Wood's residence. Echelon reported Wood's actions to the Michigan State Police and terminated her employment. Wood pleaded guilty to one count of embezzlement of more than $20,000 and four counts of uttering and publishing a forged instrument.
On February 7, 2001, Echelon commenced an action against Carter. Its complaint alleged that Carter (1) aided and abetted Wood in the conversion of Echelon's assets by knowingly or recklessly allowing Wood to charge tens of thousands of dollars to unauthorized accounts; (2) aided and abetted Wood's breach of her fiduciary duties to Echelon; (3) converted Echelon's assets and property to its own use; and (4) committed fraud by sending Echelon invoices for goods and services that were not provided to it. In response, Carter filed a counterclaim alleging that between March 1999 and January 2000, it sold goods to Echelon on credit. Carter alleged the existence of an account stated between the parties and that Echelon owes Carter $26,987.82.
At a hearing held on March 27, 2002, the circuit court found that Echelon had not provided any information to show that Carter had acted intentionally, and granted Carter's motion for summary disposition with regard to Echelon's complaint. In a second hearing held on July 10, 2002, the court denied Carter's motion for summary disposition on its counterclaim and granted summary disposition in favor of Echelon.
We review de novo decisions to grant or deny summary disposition. Veenstra v. Washtenaw Country Club, 466 Mich. 155, 159, 645 N.W.2d 643 (2002). Under MCR 2.116(C)(10), summary disposition is appropriate when there is "no genuine issue as to any material fact...." A question of material fact exists "when the record, giving the benefit of reasonable doubt to the opposing party, leaves open an issue upon which reasonable minds might differ." West v. Gen. Motors Corp., 469 Mich. 177, 183, 665 N.W.2d 468 (2003). The issue must be material to the parties' dispositive legal claims. Auto Club Ins. Ass'n v. State Automobile Mut. Ins. Co., 258 Mich.App. 328, 333, 671 N.W.2d 132 (2003), citing State Farm Fire & Cas. Co. v. Johnson, 187 Mich.App. 264, 267, 466 N.W.2d 287 (1990). In deciding a motion under this rule, the trial court must consider "the affidavits, pleadings, depositions, admissions, and other documentary evidence in the light most favorable to the nonmoving party...." Ritchie-Gamester v. City of Berkley, 461 Mich. 73, 76, 597 N.W.2d 517 (1999).
Carter first asserts that, in denying its motion for summary disposition, the court ignored unrebutted evidence that Wood was Echelon's agent with the apparent authority to open a credit account and that Echelon is therefore bound by her actions and is liable for the balance due on the account.
Carter's claim is premised on the existence of an account stated between itself and Echelon. An account stated consists of a "`balance struck between the parties on a settlement....'" Keywell & Rosenfeld v. Bithell, 254 Mich.App. 300, 331, 657 N.W.2d 759 (2002), quoting Watkins v. Ford, 69 Mich. 357, 361, 37 N.W. 300 (1888). "`[W]here a plaintiff is able to show that the mutual dealings which have occurred between two parties have been adjusted, settled, and a balance struck, the law implies a promise to pay that balance.' "Id. In Kaunitz v. Wheeler, 344 Mich. 181, 185, 73 N.W.2d 263 (1955), quoting from White v. Campbell, 25 Mich. 463, 468 (1872), the Michigan Supreme Court explained as follows:
[Emphasis in original.]
In the instant case, the trial court found that there was no question of material fact regarding the existence of an account stated. Carter failed to present any evidence of an agreement between itself and Echelon. But Carter argues that an account stated arose because of its agreement with Wood. It further asserts that, because Wood acted with apparent authority, her dealings with Carter bind Echelon and satisfy the requirement that the parties assent to an account stated.
The actions of an agent bind a principal where the agent acts with either actual or apparent authority. Meretta v. Peach, 195 Mich.App. 695, 698, 491 N.W.2d 278 (1992). This Court has stated that "[a]pparent authority may arise when acts and appearances lead a third person reasonably to believe that an agency relationship exists." Id. at 698-699, 491 N.W.2d 278. But "[a]pparent authority must be traceable to the principal and cannot be established by the acts and conduct of the agent." Id. at 699, 491 N.W.2d 278, citing Smith v. Saginaw S & L Ass'n, 94 Mich.App. 263, 271, 288 N.W.2d 613 (1979).
The evidence shows that Carter relied solely on Wood's acts and conduct in forming the belief that Wood had the authority to open an account. Wood opened the account with Carter by forging the signature of one of Echelon's owners, James Hysen. The manager of the store at which Wood opened the account admitted that he had never done business with or even heard of Echelon before receiving the credit application prepared by Wood. He did not attempt to investigate further or determine what type of business Echelon conducted. Furthermore, in arguing that Echelon failed to properly supervise Wood, Carter admits that Echelon was unaware of the credit account until the summer of 2000. The evidence shows that the only contact between Echelon and Carter took place through Wood. Any acts or appearances that might reasonably have led Carter to believe that Wood had authority to open the account cannot be traced to Echelon as required by Meretta.
Even when viewed in the light most favorable to Carter, the evidence shows that Echelon did not grant Wood the authority to open a credit account. Because Wood did not have the authority to act on Echelon's behalf in this matter, no binding agreement exists between Echelon and Carter. Under Kaunitz, there can be no account stated because Echelon never assented to the creation of the account. Therefore, Echelon is not liable for the outstanding balance and the trial court did not err in denying Carter's motion for summary disposition.
Carter next asserts that, even if Wood did not act with apparent authority, the agreements she entered into with Carter are binding because they were ratified by Echelon. The Supreme Court in David v. Serges, 373 Mich. 442, 443-444, 129 N.W.2d 882 (1964), stated that "[w]hen an agent purporting to act for his principal exceeds his actual or apparent authority, the act of the agent still may bind the principal if he ratifies it." The Court, id. at 444, 129 N.W.2d 882, then adopted the following definitions from the Restatement Agency, 2d, §§ 82 and 83:
Further, this Court has stated that "[u]nauthorized acts of an agent are ratified if a principal accepts the benefits of the unauthorized acts with knowledge of the material facts." Bruno v. Zwirkoski, 124 Mich.App. 664,...
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