Trail Clinic, P.C. v. Bloch

• Decision Date: 28 May 1982
• Docket Number: Docket No. 53185
• Citation: 114 Mich.App. 700,319 N.W.2d 638
• Parties: TRAIL CLINIC, P.C., a Michigan corporation, Plaintiff-Appellee, v. Bernard BLOCH, D.O., and Blue Cross Blue Shield of Michigan, a Michigan nonprofit insurance corporation, Defendants-Appellants, and Westminster Medical Clinic, P.C., a Michigan professional corporation, Dudley W. Goetz, D.O., Orekonde Ganesh, M.D., and B. G. S. Murthy, M.D., Defendants. 114 Mich.App. 700, 319 N.W.2d 638
• Court: Court of Appeal of Michigan — District of US

Page 638

319 N.W.2d 638

TRAIL CLINIC, P.C., a Michigan corporation Plaintiff-Appellee, v. Bernard BLOCH, D.O., and Blue Cross Blue Shield of Michigan a Michigan nonprofit insurance corporation Defendants-Appellants and Westminster Medical Clinic, P.C., a Michigan professional corporation, Dudley W. Goetz, D.O., Orekonde Ganesh, M.D., and B. G. S. Murthy, M.D., Defendants.

Docket No. 53185.

114 Mich.App. 700, 319 N.W.2d 638

Court of Appeals of Michigan.

Submitted Jan. 6, 1982.

Decided April 6, 1982.

Rehearing Denied May 11, 1982.

Released for Publication May 28, 1982.

[114 MICHAPP 702] Colman & Goodman, Utica, for Trail Clinic, P.C.

Ralph D. Gilpin, Detroit, for Blue Cross and Blue Shield of Michigan.

Bernard Bloch, in pro. per.

Before BASHARA, P. J., and T. M. BURNS and ALLEN, JJ.

T. M. BURNS, Judge.

This case involves the alleged conversion of several checks which belonged to [114 MICHAPP 703] plaintiff, Trail Clinic, P. C., by Dr. Bernard Bloch. Plaintiff took a default judgment against defendant Westminster Clinic on March 25, 1977. The subsequent bench trial in Wayne County Circuit Court on July 9, 1980, resulted in a finding that Dr. Bloch had participated in the conversion of these checks. Dr. Bloch was held individually liable for $4,701.51, plus interest, costs and attorney fees. The trial court found no cause of action against defendant Blue Cross-Blue Shield and granted D. W. Goetz, Orekonde Ganesh and B. G. S. Murthy's motion to dismiss the action as to them. Dr. Bloch appeals as of right.

Plaintiff in this action, Trail Clinic, P. C., is a health care provider that employed Dr. Lal Gopal Banerji, M.D., on or about April 14, 1976. Prior to this time, Dr. Banerji had been an employee of Westminster Medical Clinic, a professional corporation which defendant Bernard Bloch helped organize and incorporate. Defendant Bloch and other doctors also incorporated Westminster Medical Management Corporation to manage the financial and administrative burdens of the medical clinic.

Cindy Thompson, clinic secretary for Trail Clinic, testified that physicians are issued "provider" identity numbers by Blue Cross-Blue Shield (hereinafter Blue Cross) so that the bills could be sent out to Blue Cross for services rendered by the physician. Without this provider number bills could not be sent to Blue Cross for payment. Clara Thompson, the Blue Cross supervisor for provider services, testified that Blue Cross received a payment authorization form from Dr. Banerji on February 2, 1976, and that it listed the payee's address as 25501 Van Dyke Avenue, Centerline, Michigan. Clara Thompson further testified that Blue Cross received a letter from Westminster [114 MICHAPP 704] Clinic, signed by the administrator and Dr. Bloch, authorizing a change in the payees' address for the clinic's doctors, including Dr. Banerji, on May 3, 1976, and that Blue Cross made the change in address for all the doctors. All payments, regardless of the date of the services rendered by the physicians, were sent thereafter to Westminster's new address.

When Dr. Banerji started to work for Trail Clinic, the latter tried to procure a new provider number from Blue Cross in order to receive payment from Blue Cross for work performed by Dr. Banerji at their clinic. It normally took Trail Clinic about one month to obtain a new "provider number" for physicians that it employed. However, due to administrative problems at Blue Cross, plaintiff was forced to use Dr. Banerji's old "provider number".

Despite Bloch's claim of nonassociation with the Westminster group, he wrote Blue Cross on May 3, 1976, to inform it of a change of address for payment of doctors employed by Westminster Clinic. In this letter Dr. Bloch referred to a list of doctors and their respective "provider numbers", and these doctors all were represented as being employed by Westminster Clinic. Dr. Banerji and his "provider number" were listed by Bloch as a doctor still employed by Westminster and who was affected by the change in payee address even though Dr. Banerji in fact had not been an employee of Westminster since April 14, 1976.

The Westminster Medical Clinic began receiving payments from Blue Cross for the services Dr. Banerji was rendering for Trail Clinic. Each check from Blue Cross was accompanied by a computer printed stub with a detailed summary of when the reimbursal services were performed. Clara Thompson[114 MICHAPP 705] testified that the May 3, 1976, letter changed the payee address and altered the earlier directive to change Dr. Banerji's payee address to Trail Clinic's address. Clara Thompson also testified that if the May 3, 1976, letter had not been received the checks would have gone to the address on the payee authorization signed by Dr. Banerji, i.e., 25501 Van Dyke, Westminster's old address.

Dr. Lawrence Baker, the sole shareholder of Trail Clinic, testified that his efforts to effect a recovery from defendant Bloch resulted in a proposed repayment schedule which was never honored by Bloch. Plaintiff's unsuccessful, informal efforts to effect a recovery resulted in the filing of a complaint against Westminster Clinic, Dr. Bloch, the other incorporators of the defendant clinic and Blue Cross.

Bloch's first argument is that the trial judge clearly erred in finding that he actively participated in the conversion of the checks. We hold this argument to be without merit.

Conversion is any distinct act of dominion wrongfully exerted over another's personal property. It occurs at the point that such wrongful dominion is asserted. Thoma v. Tracy Motor Sales, Inc., 360 Mich. 434, 438, 104 N.W.2d 360 (1960); Wronski v. Sun Oil Co., 89 Mich.App. 11, 20-21, 279 N.W.2d 564 (1979); Gum v. Fitzgerald, 80 Mich.App. 234, 238, 262 N.W.2d 924 (1977); Embrey v. Weissman, 74 Mich.App. 138, 143, 253 N.W.2d 687 (1977). Checks are considered to be the property of the designated payee and may be the subject of a suit for conversion. Continental Casualty Co. v. Huron Valley National Bank, 85 Mich.App. 319, 322-323, 271 N.W.2d 218 (1978); Warren Tool Co. v. Stephenson, 11 Mich.App. 274, 298-299, 161 N.W.2d 133 (1968). Because conversion is an intentional tort, [114 MICHAPP 706] the defense of "good faith" is not available to the defendant. Willis v. Ed Hudson Towing, Inc., 109 Mich.App. 344, 349, 311 N.W.2d 776 (1981); Warren Tool Co. v. Stephenson, supra.

In Gum, this Court opined that a demand for return of the property is not necessary if a conversion has occurred. Gum, supra, 80 Mich.App. 238, 262 N.W.2d 924. A demand is unnecessary where the act of the defendant amounts to a conversion regardless of whether a demand is made. However, if a demand is necessary for a conversion to exist, the demand may be made by a duly authorized agent of the person entitled to possession. 18 Am.Jur.2d, Conversion, Secs. 63, 65, pp. 197-199. Furthermore, a person may be guilty of a conversion by actively aiding or abetting or conniving with another in such an act. Indeed, one may be liable for assisting another in a conversion though acting innocently. These rules are especially applicable where the defendant received benefit from the conversion and subsequently approved and adopted it. 18 Am.Jur.2d, Conversion, Sec. 120, p. 231.

Bloch, on appeal, argues that, because Dr. Banerji never made a demand for his money to him or Westminster Medical Clinic, plaintiff could not maintain an action for conversion. Bloch further argues that it was error for the trial court to hold that he actively participated in a conversion because he did not possess, retain or refuse to deliver the checks and never attempted to convert the checks to his own use or to the use of Westminster Medical Clinic.

A demand is unnecessary where the conversion results from fraud or other wrongful conduct and the defendant denies possession of the property or where the property has been wrongfully appropriated by the defendant for his own use and benefit. [114 MICHAPP 707] 18 Am.Jur.2d, Conversion Sec. 63, p. 198. Although there was testimony that if the May 3, 1976, letter had not been sent the checks still would have been sent to Westminster Medical Clinic, the same witness also indicated that this letter altered any communication to Blue Cross, by its employee who dealt with Trail, that the checks under Banerji's provider number should be sent to Trail Clinic. Furthermore, the record clearly establishes the fact that Westminster Clinic had no right to endorse and deposit these checks into its account inasmuch as these checks were for services rendered by Dr. Banerji at Trail Clinic and not for services rendered at Westminster Clinic. These checks were wrongfully appropriated by Westminster, so a demand for the checks was not necessary. See 6 Callaghan's Michigan Civil Jurisprudence, Sec. 22, pp. 33-34.

Even if a demand was required before a conversion can be said to have existed, the record indicates that such a demand was made. Dr. Lawrence Baker, sole stockholder of Trail Clinic, P. C., testified that Dr. Banerji was paid a flat salary by Trail Clinic for the services he performed for it. Dr. Baker stated that checks that came into the clinic for services rendered by Dr. Banerji were directly deposited into Trail Clinic's account, inasmuch as Dr. Banerji had signed an authorization form allowing Trail Clinic's bank to accept Trail Clinic's endorsement on his checks. Thus, these Blue Cross checks essentially were the property of Trail Clinic due to the financial arrangement between Banerji and Trail Clinic. Since Trail Clinic was entitled to possession of the Blue Cross checks, it was the proper party to make a demand for them. The record shows that Dr. Baker informed Bloch of these misdirected checks and that Dr. Bloch responded[114 MICHAPP 708] by setting up a payment schedule whereby he would pay Dr. Baker $1000 per week until the amount was paid off. When Bloch did not pay the money as promised, Dr....