Singhal v. Simon (In re Oakland Med. Ctr., LLC)
| Decision Date | 13 August 2019 |
| Docket Number | Case No. 18-12147 |
| Parties | IN RE OAKLAND MEDICAL CENTER, LLC d/b/a DOCTOR'S HOSPITAL OF MICHIGAN Debtor, YATINDER SINGHAL, Appellant, v. BASIL SIMON, as Trustee Appellee. |
| Court | U.S. District Court — Eastern District of Michigan |
This is a bankruptcy case. Basil Simon, as trustee of the Oakland Physician Medical Center, LLC Liquidation Trust ("Trustee"), sued Yatinder Singhal ("Singhal") in bankruptcy court (Adv. Doc. 102).1 The second amended complaint contains seven counts:
(Adv. Doc. 102). Singhal objected to bankruptcy court jurisdiction and filed a motion to withdraw the reference, which the Court granted as to the Count IV (Breach of Statutory Duty) and Count V (Conversion). Specifically, the Court said:
Singhal has the right to withdraw Counts IV and V because they are "non-core" proceedings that entitle him to an Article III court determination. However, this Court has the authority to direct the bankruptcy court to "recast its judgment as to [the] claims as proposed findings of fact and conclusions of law, which the district court shall review de novo." Waldman v. Stone, 698 F.3d at 910, 922 (2012); see also Fed. R. Bankr. P. 9033(d); 28 U.S.C. § 157.
(Doc. 10). Accordingly, the bankruptcy court filed a report and recommendation ("R&R") regarding the withdrawn claims. (Doc. 11). The bankruptcy court's R&R recommends: (1) granting summary judgment in favor of Trustee on Count V (Conversion) in the amount of $1,078,500.00; (2) granting summary judgment in favor of Singhal on Count V (Statutory Conversion); and (3) denying Singhal's summary judgment motion on Count IV (Breach of Statutory Duty). (Doc 11).
Singhal filed objections relating to the bankruptcy court's R&R, specifically, the portion that recommends granting summary judgment on the common law conversion claim. (Doc. 12). Because there are no objections before the Court as to the R&R's other findings, the Court adopts that portion of the R&R verbatim; summary judgment in favor of Singhal on Count V (Statutory Conversion) is GRANTED, and Singhal's summary judgment motion on Count IV (Breach of Statutory Duty) is DENIED. The Court need only decide Singhal's objections to the common law conversion claim.
The Court held oral argument on the issue of common law conversion. The Court noted that although Singhal says he is entitled to dispute "the quantum of damages for which [he] would be liable," he did not submit evidence (or even argument) that contests the amount of damages shown by Trustee. (Doc. 12). Accordingly, the Court permitted Singhal to submit supplemental briefing for the purposes of disputing damages. Singhal submitted a supplemental brief (Doc. 16), and Trustee filed a responsive brief. (Doc. 17).
Now before the Court is the bankruptcy court's R&R and the related objections. (Docs. 11, 12, 13, 16, 17). For the following reasons, the bankruptcy court's R&R is adopted in full; Trustee's motion for summary judgment for common law conversion in the amount of $1,078,500.00 is GRANTED.
Oakland Physicians Medical Center, LLC, d/b/a Doctor's Hospital of Michigan, operated a student program that accepted students from different medical schools for clinical rotations. In return, the medical schools agreed to compensate the Trustee, which was memorialized by several contracts. Relevant here were the Ross University School of Medicine ("Ross") agreement and the Windsor University School of Medicine ("Windsor") agreement.2
At all relevant times, Singhal was a member of Trustee's board of directors. Also, Singhal held a 50% interest in two corporate entities with other doctors: American Medical Education Group, LLC ("AMEG") and DHOM Education. Although Singhal was not authorized to "take action on behalf of the [Trustee] in his [] individual capacity except pursuant to specific authorization by the Board of Directors," Singhal redirected payments under the Ross and Windsor agreements to AMEG and DHOM. (Doc. 11, p. 10). Singhal's actions redirecting payments to AMEG and DHOM—in which he had a 50% interest—that the Trustee was entitled to under the Ross and Windsor agreements, forms the basis for Trustee's common law conversion claim.
The bankruptcy court found no evidence that Singhal had board approval to redirect the payments under the Ross and Windsor agreements. The R&R discusses Singhal's deposition, which Singhal says creates an issue of material fact. The R&R illustrates that nothing Singhal said evidences that he had authorization to redirect the payments. See (Doc. 11, p. 11-12).
The R&R also addresses the issue of missing board minutes. There are no meeting minutes for the board from October 17, 2011 to December 21, 2012 and from May 13, 2013 to November 27, 2013. There is no evidence that suggests board approval is contained in the missing minutes, however, there is evidence that neither AMEG nor DHOM had authorization to redirect payments. (Doc. 11, p. 13). The R&R says that Singhal cannot point to the absence of evidence to create a factual dispute, especially when there is affirmative evidence to the contrary.
The R&R engages in a detailed legal discussion and concludes that Singhal's redirection of payments (and/or the right to payments) constitutes common law conversion.
Singhal has six objections to the R&R. (Doc. 12). First, Singhal takes issue with the R&R's conclusion that he waived his right to dispute the amount of damages stated in Trustee's motion. Singhal says that he did not need to argue damages to preserve his right to do so later.
Second, Singhal says that the R&R failed to follow proper standards for summary judgment. Singhal says that the bankruptcy court made evidentiary determinations, which should be left to a jury.
Third, Singhal says that the R&R erred in finding that his testimony regarding board approval did not create a genuine issue of material fact. He says that the record shows that he received approval from the Board of Directors, or at least, there is a genuine issue of fact regarding whether he had board approval.
Fourth, Singhal takes issue with the R&R's conclusion that the redirection of payments from Ross and Windsor to AMEG and DHOM constituted common law conversion. He says that the bankruptcy court did not cite any cases where the right to payments constituted common law conversion. In addition, he says that because no specific money can be traced to him, he cannot be liable for common law conversion.
Fifth, Singhal says that the R&R erred in rejecting his in pari delicto defense. He says that Trustee's argument—that conversion was not a crime—was insufficient to defeat his in pari delicto defense.
Sixth, Singhal says that the R&R erred in concluding that he owed damages to Trustee for conversion in the amount of $1,078,500.00. He also says the Trustee settled $490,000 of the $1,078,500.00 claim with one of his business partners, and as a result, a judgment for $1,078,500 is erroneous and entitles Trustee to double recovery.
In Michigan, "[i]t is a familiar principle that the agents and officers of a corporation are liable for torts which they personally commit, even though in doing so they act for the corporation, and even though the corporation is also liable for the tort." Warren Tool Co. v. Stephenson, 11 Mich.App. 274, 300 (1968) (citing Zaino v. North Woodward Construction Company, 355 Mich. 425, 429 (1959); Allen v. Morris Building Company, 360 Mich. 214, 218 (1960); Wines v. Crosby & Co., 169 Mich. 210, 214 (1912); Bush v. Hayes, 286 Mich. 546, 549 (1938); Hempfling v. Burr, 59 Mich. 294, 295 (1886)). Thus, "[c]orporate officers are not excused from personal liability for the conversion of other people's property simply because the corporation benefits from the wrong and because the corporate officers realize no personal profit from their acts of conversion." Id. at 300-301. (citing Bush 286 Mich. at 549; Hirsch v. Philly, 4 N.J. 408, 73 A.2d 173, 177 (1950)); see also Courtney W. Franks, Analyzing the Urge to Merge: Conversion of Intangible Property and the Merger Doctrine in the Wake of Kremen v. Cohen, 42 HOULR 489 (2005) ().
Common law conversion in Michigan is defined as "any distinct act of domain 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 (1992) (citing Nelson & Witt v. Texas Co., 256 Mich. 65, 70 (1931); Thoma v. Tracy Motor Sales, Inc., 360 Mich. 434, 438 (1960); Citizens Ins. Co. v. Delcamp, 178 Mich.App. 570, 575 (1989)). "The act of dominion is wrongful when it is inconsistent with the ownership rights of another." Armstrong v. O'Hare, Case No. 08-118283, 2014 WL 1614474 at *4 (April 22, 2014) (citing Check Reporting Servs. Inc. v. Mich. Nat'l Bank-Lansing, 191 Mich.App. 614, 626 (1991)).
"Initially . . . conversion was limited to tangible property." Franks, supra, at 498. "However, few will now dispute that intangibles have value, and the other reasons for denying recovery for converted intangibles are holdovers from the old pleading requirements—hardly valid reasons to deny recovery today." Id. (...
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