Alisa a Peskin-Shepherd Pllc v. Nicole Blume ( 2020 )

If this opinion indicates that it is “FOR PUBLICATION,” it is subject to
revision until final publication in the Michigan Appeals Reports.
STATE OF MICHIGAN
COURT OF APPEALS
ALISA A. PESKIN-SHEPHERD, PLLC, UNPUBLISHED
November 5, 2020
Plaintiff-Appellee,
v No. 348023
Oakland Circuit Court
NICOLE BLUME formerly known as NICOLE LC No. 2016-154544-CK
KNUFF,
Defendant-Appellant,
and
SEAN BLUME,
Defendant.
Before: LETICA, P.J., and FORT HOOD and GLEICHER, JJ.
GLEICHER, J. (concurring in part and dissenting in part).
The majority holds that defendant Nicole Blume converted plaintiff Alisa A. Peskin-
Shepherd’s lien interest in real property in Escanaba by selling the property and using the sale
proceeds to pay other debts. Whether the tort of conversion applies in this case presents a difficult
question, as the length and depth of the majority opinion reflects. If it does—a proposition I do
not accept—the majority has misperceived the nature of the “property” converted. I would hold
that Michigan tort law does not support that a conversion occurred under the circumstances
presented. If I am incorrect on that score, I would nevertheless remand for a recalculation of the
principal and interested owed.
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I
Peskin-Shepherd represented Nicole Blume in a contentious divorce action.1 The divorce
judgment provided: “Plaintiff’s attorney, ALISA A. PESKIN-SHEPHERD, shall retain a lien on
the assets awarded to Plaintiff, NICOLE M. KNUFF, including Plaintiff’s interest in the Escanaba
property, to insure payment of attorney fees.” The amount of the lien was not litigated or
memorialized anywhere, and the lien itself was not recorded. Nicole sold the Escanaba property
for $39,109.08 and deposited the proceeds in her bank account. She used the money to pay
creditors other than Peskin-Shepherd. At that point, she owed Peskin-Shepherd over $50,000.
Peskin-Shepherd’s third amended complaint described a claim for common-law
conversion involving the Escanaba property as follows:
117. Nicole . . . knowingly and wrongfully . . . exerted dominion over
Peskin-Shepherd’s interest in the Escanaba property by . . . arranging for Nicole to
obtain all the proceeds from the sale of the Escanaba property without first
satisfying Peskin-Shepherd’s lien and paying Peskin-Shepherd the balance owed
for attorney services and costs.
118. Nicole utilized the proceeds from the sale of the Escanaba property
without first paying Peskin-Shepherd the balance owed for attorney services and
costs.
119. Nicole thereby disposed of the . . . Escanaba propert[y] in a manner
that was inconsistent with and in violation of Peskin-Shepherd’s interest in [this]
properties.
* * *
122. Nicole[’s] actions constituted common law conversion.
The third amended complaint also stated a claim for statutory conversion, which permits trebling
the “actual damages” resulting from “[a]nother person’s . . . converting property to the other
person’s own use.” MCL 600.2919a(1)(a). The statutory conversion averments mirror those in
the common-law conversion count, with the addition of the allegation that Nicole converted
Peskin-Shepherd’s interest in the proceeds “to her [Nicole’s] own use.”
The trial court granted partial summary disposition in Peskin-Shepherd’s favor on the
common-law and statutory conversion claims, reserving the question of damages. Following a
trial, the court trebled the amount of Peskin-Shepherd’s total lien amount ($51,098.68), rather than
the actual proceeds of the Escanaba property sale. The majority affirms this ruling, holding that
“the ‘personal property’ that was converted was plaintiff’s lien, not the Escanaba property itself.”
1
Following the majority’s lead, I will refer to Nicole Blume as Nicole. At the time of the divorce,
she was Nicole Knuff.
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I am unconvinced that Michigan caselaw supports an action for conversion under these
circumstances. Foreign authority supports that a conversion may have occurred, but adoption of
that precedent is for the Supreme Court. I part ways with the majority more definitively regarding
the calculation of damages.
II
The majority concedes that neither this Court nor our Supreme Court has ever “specifically
stated that an attorney’s lien is a property interest capable of being converted[.]” According to the
majority, both Courts have generated “a basis of law that could lead to no other conclusion.” In
my view, the issue is not so clear cut, and the caselaw cited by the majority points decidedly in the
other direction.
Historically, the tort of conversion applied only to chattels or tangible property capable of
being lost or found. Prosser tells us that conversion originated in the late 15th century as a remedy
(then called trover) in “cases in which the finder of lost goods did not return them, but used them
himself, or disposed of them to someone else.” Prosser & Keeton, Torts (5th ed), § 15, p 89.
Losing and finding lost goods eventually became unnecessary, but the requirement that the
involved property qualify as tangible remained. “[T]rover became the standard remedy for any
form of interference with a chattel.” Id.
The tort evolved somewhat over time, but in many jurisdictions, including Michigan, its
crux remained rooted in the idea that only the intentional interference with physical things—
chattels or goods—could establish a conversion. Prosser tells us that some jurisdictions now
recognize that the tort may embrace intangible rights that have been merged into something
tangible, such as a check, a bond, or a stock certificate. Id. at 91. Yet as recently as 1992, our
Supreme Court recited the historic formulation of conversion: “[C]onversion 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; 486
NW2d 600 (1992) (emphasis added). And even more recently, in Aroma Wines & Equip, Inc v
Columbian Distrib Servs, Inc, 497 Mich. 337, 352; 871 NW2d 136 (2015), the Supreme Court
reaffirmed its previous adoption of the definition of conversion provided in the First Restatement
of Torts. That definition focuses solely on misuse of a “chattel,” which denotes tangible, personal
property:
“A conversion may be committed by
(a) intentionally dispossessing another of a chattel,
(b) intentionally destroying or altering a chattel in the actor's possession,
(c) using a chattel in the actor's possession without authority so to use it,
(d) receiving a chattel pursuant to a sale, lease, pledge, gift or other transaction
intending to acquire for himself or for another a proprietary interest in it,
(e) disposing of a chattel by sale, lease, pledge, gift or other transaction intending
to transfer a proprietary interest in it,
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(f) misdelivering a chattel, or
(g) refusing to surrender a chattel on demand.” [Id. at 352, quoting 1 Restatement,
Torts, § 223.2]
The salient question presented in this case is whether the proceeds of a lien can be regarded
as a “chattel” capable of being converted. The majority answers in the affirmative, drawing
primarily on language located in three cases: Stewart v Young, 247 Mich. 451, 455; 226 N.W. 222
(1929); Garras v Bekiares, 315 Mich. 141, 148-149; 23 NW2d 239 (1946); and Warren Tool Co v
Stephenson, 11 Mich. App. 274; 161 NW2d 133 (1968). I do not read these cases as capaciously
as does the majority and find them either unhelpful or in conflict with the majority’s holding.
Stewart was an action for an accounting that arose from the parties’ real estate investments
and joint ventures—agreements that were never reduced to writing. When the involved real
properties were sold, the defendant pocketed the profit and the plaintiff demanded an accounting.
Stewart, 247 Mich. at 454-455. The defendant refused the accounting, invoking the statute of
frauds. The trial court denied the plaintiff relief on statute-of-frauds grounds. The Supreme Court
reversed, explaining that the statute of frauds did not apply because the sale proceeds “are not real
estate but personal property,” and adding that “[t]he contract has been partially performed.” Id. at
455.3 Stewart concerns the right to an accounting in a business venture that happens to involve
real estate. It is not a case about conversion. The Court’s throw-away line characterizing the
proceeds of the joint ventures as “personal property” brought the dispute outside the statute of
frauds but does not provide much guidance in the tort context. The Court likely used the term
“personal property” simply to distinguish the money earned by selling the real estate from the real
estate itself.
Garras is more enlightening, but does not advance the majority’s position. There, the
defendant agreed to sell hams on consignment from the plaintiff. The parties agreed that title to
the hams would remain with the plaintiff until the hams were sold, and that the defendant would
pay the plaintiff for “all accounts receivable” from the proceeds of the ham sales. Garras, 315
Mich. at 143-144. The plaintiff believed that the defendant was not properly accounting for the
hams sold and the money collected, and so the parties entered into a settlement agreement that
included the following provisions characterizing the defendant’s actions as “conversion”:
2
In Aroma Wines, the Supreme Court did not even mention the definition of conversion contained
in the Second Restatement of Torts, which also describes a chattel-centric tort: “Conversion is an
intentional exercise of dominion or control over a chattel which so seriously interferes with the
right of another to control it that the actor may justly be required to pay the other the full value of
the chattel.” Restatement Torts, 2d, § 222A(1). As discussed below, the Second Restatement also
includes a provision that might allow for a lien to be considered personal property creating liability
if converted.
3
“[U]nder the well-settled rule in equity, partial performance excepts . . . a contract [for the sale
of an interest in real estate] from the operation of the statute of frauds[.]” Frank v American Trust
Co, 259 Mich. 394, 397; 243 N.W. 240 (1932).
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Whereas, second party (defendant) has heretofore obtained merchandise in
the nature of meat products from first party (plaintiff), on consignment under the
terms of a written agreement heretofore entered into between the parties hereto; and
Whereas, second party has disposed of said merchandise contrary to the
terms of said agreement, and wilfully converted the same or the monies derived
from the sale of the said merchandise to his own use and benefit . . . . [Id. at 144.]
The settlement fell apart when the defendant defaulted on his agreement to pay. The plaintiff sued,
and the defendant admitted that he owed the plaintiff $3,988.21. The trial court found for the
plaintiff only “in assumpsit” (contract) rather than for conversion in tort.4 The question presented
in the Supreme Court was whether the plaintiff was entitled to judgment in tort or contract. Id. at
146.
The Supreme Court held that that the plaintiff “was not entitled to a judgment in tort for
conversion” because the plaintiff “was not entitled to the specific or identical moneys collected by
defendant from his customers[.]” Id. at 147 (emphasis added). The “specific or identical money”
distinction was critical to the Court’s holding. The Court explained that under the parties’
consignment agreement, “when defendant sold the merchandise, title passed to him and from him
to his customers[,]” and no conversion occurred. Id. at 146. The plaintiff “carried a running
account,” and “[a]lthough the assignment agreement provided in general terms for the assignment
and transfer of all defendant's accounts receivable to plaintiff, the record does not show specifically
what money, if any, he collected on these accounts and failed to account for.” Id. at 147. The
Court observed that the defendant “was not required to deliver to plaintiff the specific or identical
moneys which he collected for merchandise sold or on accounts receivable, but was only required
to pay plaintiff the invoiced price for merchandise delivered to him.” Id. For this reason, an action
in conversion could not lie. Citing older authority, the Court reminded that “[t]rover is not
maintainable for money unless there be an obligation on the part of the defendant to return the
specific money intrusted to his care.” Id. at 148 (quotation marks and citation omitted).
Garras instructs that when it comes to money, there can be no conversion unless the
plaintiff identifies the specific money that a defendant was obligated to deliver. Failure to pay a
debt from the proceeds of a pot of money is not conversion under Garras, unless the defendant’s
share is in some manner specifically identified.5
Like Garras, the facts of this case do not provide support for the proposition that Peskin-
Shepherd was entitled to the “specific or identical” money that was paid for the Escanaba property.
4
“The remedy in tort is more favorable to the aggrieved party in some respects than is the asserted
right of action in assumpsit, although as a general rule the measure of damages is the value at time
of conversion.” Janiszewski v Behrmann, 345 Mich. 8, 36; 75 NW2d 77 (1956).
5
For example, if the parties had agreed that the plaintiff was entitled to all of the $20 bills or gold
coins collected or earned in an enterprise, an action for conversion could be sustained under
Garras.
-5-
Most likely there was no actual money, just electronic transfers of funds. More concretely, the
divorce judgement does not mention the amount of money that Nicole owed in attorney fees. At
the time Peskin-Shepherd’s lien was incorporated into the divorce judgment, no one knew the sale
value of the Escanaba property, either. No “specific” sum of money was identified at all, placing
this case in precisely the same factual frame as Garras. The lien represented a simple debt (like
the overdue account in Garras), rather than “specific” money. See also Thrift v Haner, 286 Mich.
495, 496; 282 N.W. 219 (1938) (finding no conversion related to money collected by an officer of
a hockey league who failed to turn over the plaintiff’s share of the profits from a contract regarding
the use of an ice hockey rink).
Which brings us to Warren Tool Co v Stephenson, 11 Mich. App. 274. This Court’s lengthy
opinion centers primarily on whether the facts supported the existence of an equitable lien. Id. at.
281-298. The final pages of the opinion address conversion, but this Court did not decide whether
the tort had been established. Rather, this Court provided guidance regarding conversion for the
trial court on remand; I interpret the thrust of that guidance differently than does the majority.
The majority correctly notes that in Warren Tool, this Court held that the defendants’
withholding of money due to the plaintiff created an equitable lien in the plaintiffs’ favor. In its
haste to analogize an equitable lien with the lien imposed in this case, the majority skims over the
Warren Tool Court’s analysis regarding conversion. That analysis is not fairly reduced to the
general proposition that a lien is a form of chattel capable of being converted, contrary to the
majority’s efforts to fit it into that box.
The plaintiff in Warren Tool was a toolmaking company. It agreed to provide tooling for
the defendants’ company to sell to a third party, Highway Products, Inc. Id. at 277.6 Because the
plaintiff was concerned about getting paid, it demanded some sort of security for the tooling. The
parties ultimately agreed that an Ohio bank, rather than Stephenson Industries, would write the
payment checks to suppliers, including the plaintiff. Id. at 277-278. The parties’ letter agreement
included the specific order number associated with the Highway job and the specific amount
($16,820) that would be paid by Highway by check, deposited in the Ohio bank, and disbursed by
the bank to the plaintiff and others. Id.
But the letter omitted a promise on the part of the defendants to actually deposit Highway’s
payment into the defendants’ business account at the Ohio bank. Id. When the defendants received
Highway’s check, they did not deposit in the Ohio bank. Instead, they negotiated it elsewhere and
used the funds for purposes other than paying the plaintiff. Id. at 279-280. The plaintiff sued for
conversion. Id. at 280.
The trial court ruled that the parties had only an “illusory” arrangement because the
defendants’ company never put in writing that it would deposit the check into the Ohio bank. Id.
Based on an exhaustive review of the law governing equitable liens, this Court held that the
plaintiffs established an equitable lien on the Highway proceeds. Id. at 294-296. In other words,
the plaintiffs had a property interest in the Highway check regardless of whether they had a
6
As noted in the opinion, the defendants’ company—Stephenson Industries—was bankrupt, and
the plaintiffs sued the former president and general manager personally. Id. at 279.
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contract. The next question was whether that property interest gave rise to a tort claim for
conversion.
This Court’s discussion of conversion centered firmly on the check issued by Highway.
This Court stated:
When Stephenson Industries deliberately obliterated plaintiffs’ interest in
the check, it would appear on the present record that it converted property
belonging to the plaintiffs which had a value of $16,820. A negotiable instrument
may be the subject of a suit for conversion and one who is authorized to collect a
note and remit the proceeds may be sued for conversion if he collects but does not
remit the proceeds.
However, where there is no duty to pay the plaintiff the specific moneys
collected, a suit for conversion may not be maintained. . . . [Id. at 298-299
(citations omitted, emphasis added).]
Both an equitable lien and the tort of conversion require proof that “the moneys have been
particularly designated and dedicated to the claimant,” the Court stressed. Id. at 299. And in
Warren Tool, “[t]he diverted moneys were specifically allocated in the letters to the plaintiffs.”
Id. at 300.
Post-Warren Tool, this Court has more specifically acknowledged that a purloined check
may be the subject of a conversion action. In Pamar Enterprises, Inc v Huntington Banks of Mich,
228 Mich. App. 727, 734-735; 580 NW2d 11 (1998), we noted that “[a] check is considered the
personal property of the designated payee,” and can be converted “if a bank makes or obtains
payment with respect to the instrument for a person nontitled to enforce the instrument or receive
payment.” (Quotation marks and citation omitted.) In that circumstance, the intended payee may
bring an action “against either the depositary bank or the drawee bank.” Id. at 734.
No specific check is at issue in this case and therefore, Warren Tool is readily
distinguishable. There, the defendants had in their possession a tangible object—a check made
out to their company—representing a known sum as payment for an agreed-upon debt. Unlike in
Warren Tool, the parties in this case never reached a meeting of the minds regarding Nicole’s debt,
there was no mutual understanding as to the value of the lien, and no specific check was ever
issued (that we know of). The lien amount was undefined, unmentioned, and amorphous rather
than tangible. Peskin-Shepherd had a right to be paid from the proceeds of the Escanaba sale, but
no evidence supports an agreement entitling her to the actual check issued by the buyer of the
property. As precedent supporting a conversion in this case, Warren Tool falls short.
Michigan law simply does not support the majority’s conversion analysis. To the contrary,
the caselaw—including Aroma Wines—supports that an intangible interest, such as a lien that has
not been recorded or reduced to actual numbers, cannot be converted. It is more than tempting to
reach the opposite conclusion, given the odiousness of Nicole’s conduct. But doing so is simply
inconsistent with the precedent we are bound to follow.
Nevertheless, I would urge our Supreme Court to adopt a broader view of conversion.
When most business exchanges involved physical products, it made sense that the existence of a
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“chattel” was a fundamental requirement of the tort. Today, however, intangibles are the subjects
of much of the world’s commerce. The Second Restatement of Torts recognizes this reality, as it
enlarges the tort of conversion to include intangible property rights that are merged into a
document: “One who effectively prevents the exercise of intangible [property] rights of the kind
customarily merged in a document is subject to a liability similar to that for conversion, even
though the document is not itself converted.” Restatement Torts, 2d, § 242(2). This section of the
Restatement recognizes that “an intangible property right can be united with a tangible object for
conversion purposes.” Thyroff v Nationwide Mut Ins Co, 8 NY3d 283, 289; 832 NYS2d 873; 864
NE2d 1272 (2007). Society’s “growing dependence on intangibles” such as electronic data and
digital information has spurred the adoption of § 242(2) by other jurisdictions. Id. at 291 (quotation
marks and citation omitted). But § 242(2) has not been adopted by any court in Michigan.
Perhaps the most interesting discussion of the conversion of intangibles involves a domain
name, “sex.com,” in Kremen v Cohen, 337 F3d 1024 (CA 9, 2003). Construing California law,
the United States Court of Appeals for the Ninth Circuit proposed in Kremen a view of conversion
expanding the tort well beyond the Restatement requirement of merger in a document, observing
that conversion has been applied to: “music recordings, radio shows, customer lists, registry
filings, confidential information and even domain names.” Id. at 1033. Characterizing the strict
application of a merger requirement as “vestigial,” the Ninth Circuit declared: “Were it necessary
to settle the issue once and for all, we would . . . hold that conversion is a remedy for the conversion
of every species of personal property.” Id. (quotation marks and citation omitted).7 See also
Thyroff, 8 NY3d at 292-293 (“[W]e believe that the tort of conversion must keep pace with the
contemporary realities of widespread computer use. We therefore . . . hold that the type of data
that Nationwide allegedly took possession of—electronic records that were stored on a computer
and were indistinguishable from printed documents—is subject to a claim of conversion in New
York.”).
Peskin-Shepherd’s lien on the Escanaba property was an intangible property interest
reduced to writing. For that reason, the Second Restatement might very well support that Nicole
converted the lien when she sold the property and did not honor her debt to Peskin-Shepherd. But
both the trial court and the majority approached the issue from a different perspective, skipping
over the “chattel” requirement that is today firmly engrafted in Michigan tort law. While there
may be good grounds to look the other way in this case, doing so writes a new chapter in our state’s
tort jurisprudence. I would leave that task to the Supreme Court.
7
Obviously the definition of “personal property” underlying the Ninth Circuit’s opinion in Kremen
differs from the majority’s interpretation of the term as it was used by our Supreme Court in
Stewart. “Property is a broad concept that includes every intangible benefit and prerogative
susceptible of possession or disposition,” the court explained. Kremen, 337 F3d at 1030 (quotation
marks and citation omitted). But while first charactering a domain name as “personal property,”
the Court carefully analyzed the reasons that the tort of conversion should be reimagined to include
property other than physical chattels. Id. at 1030-1032. This is the step that the majority’s
discussion of Stewart ignores.
-8-
III
Were I to accept that Nicole committed the tort of conversion, I would nonetheless disagree
with the majority’s analysis of the measure of Peskin-Shepherd’s damages. The majority holds,
in essence, that Nicole converted the entirety of Peskin-Shepherd’s lien by pocketing the proceeds
of the Escanaba land sale. The caselaw, however, supports that the “property” converted by Nicole
was the cash value of the land in Escanaba, not the lien itself. “The general rule for
the measure of damages for conversion is the value of the converted property at the time of
the conversion.” Ehman v Libralter Plastics, Inc, 207 Mich. App. 43, 45; 523 NW2d 639 (1994).
Nicole converted the proceeds of her sale of the property; she turned real property into money, and
it was the money that she wrongfully withheld from Peskin-Shepherd. The third amended
complaint admits this proposition by alleging that Nicole wrongfully “exerted dominion over
Peskin-Shepherd’s interest in the Escanaba property.” That “interest” was the amount Nicole
acquired when the property sold: $39,109.08.
The language of the conversion statute also compels the conclusion that the amount
converted was the amount of money that Nicole applied to her “own use.” MCL 600.2919a(1)(a).
Nicole applied the proceeds of the sale to her own use, not the lien itself. When she used the sale
proceeds to pay other debts, she deprived Peskin-Shepherd of a specific sum, not an inchoate,
intangible lien interest in real property. Here is another way of looking at it: think about the tort
of conversion as the civil analogue for theft. Nicole stole from Peskin-Shepherd the money that
Nicole made on the land sale—she did not steal the lien itself.
The Second Restatement supports this common-sense method of measuring the damages
attributable to the conversion of a document. Restatement Torts, 2d, § 242, comment c, states:
“Where a negotiable instrument is converted, the measure of the converter’s liability is presumed
to be the face amount of the instrument.” See Aroma Wines, 497 Mich. at 358-359 (“[C]onversion
‘to the other person’s own use’ requires a showing that the defendant employed the converted
property for some purpose personal to the defendant’s interest[.]”). The “property” converted here,
if the tort applies at all, was the money obtained from the sale. I would remand for a recalculation
of damages based on that principle.8
/s/ Elizabeth L. Gleicher
8
I concur with the majority’s resolution of the remaining issues presented in this appeal.
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