$0 Restitution For Ex-Wife Who Claimed Conversion, Fraudulent Transfer Of Funds

Because the plaintiff did not suffer “any actual loss or injury,” the trial court in this divorce action did not err by awarding the plaintiff $0 in restitution, the Michigan Court of Appeals has ruled.

The plaintiff-ex-wife in Baum v Baum (Docket No. 363346) claimed the defendant, her ex-husband, had transferred marital funds to his brother, Howard, in contemplation of the parties’ divorce. An Oakland County jury found the defendant fraudulently transferred the funds. The Oakland County trial court then held Howard and his company, Alliance Equities LLC, in criminal contempt and ordered restitution of $370,000. The Court of Appeals affirmed this decision in a May 2022 unpublished opinion.

The plaintiff also filed a motion in the Oakland County Circuit Court for partial quantification of restitution against Howard and Alliance, seeking more than $1.5 million. She asserted that because Howard was liable for statutory conversion, she was entitled to treble damages. The trial court awarded the plaintiff $0 in restitution, finding she did not prove that she suffered any actual loss or injury. The plaintiff appealed the $0 restitution ruling.

The Court of Appeals affirmed, concluding the trial court “did not abuse its discretion” when it awarded the plaintiff $0 in restitution.

The plaintiff presented “no concrete position on how she was injured” and offered “no evidence or argument that she had a property interest in the [funds] that had been in Alliance’s bank account,” the Court of Appeals said.

Judge Mark J. Cavanagh, Judge Kirsten Frank Kelly and Judge Michelle M. Rick were on the panel that issued the unpublished opinion.

No Loss Or Injury

To support her claim that the trial court wrongly awarded her $0 in restitution, the plaintiff relied on MCL 600.1721. That statute says: “If the alleged misconduct has caused an actual loss or injury to any person the court shall order the defendant to pay such person a sufficient sum to indemnify him, in addition to the other penalties which are imposed upon the defendant. The payment and acceptance of this sum is an absolute bar to any action by the aggrieved party to recover damages for the loss or injury. [Emphasis added.]”

The Court of Appeals rejected the plaintiff’s argument.

“The trial court initially ruled that pursuant to MCL 771.3(1)(e), MCL 600.1721, and Taylor [v Currie], 277 Mich App 85 [(2007)], [the plaintiff] was eligible to receive restitution for Howard and Alliance’s contemptuous behavior of transferring the $370,000 from Alliance’s bank account,” the Court of Appeals explained. “[The plaintiff] thereafter moved for partial quantification of the amount of restitution she was owed. In her motion, she sought restitution under a statutory conversion theory in the amount of $1,551,148.16, which is treble the $517,049.62 amount that [was] paid toward Alliance’s debt. After limiting the scope of restitution to the contemptuous conduct of transferring the $370,000, the trial court ruled that [the plaintiff] had not demonstrated that she suffered an actual loss or injury as a result of that conduct, and therefore, she was not entitled to restitution.”

Next, the Court of Appeals examined MCL 600.1721. “The first sentence of MCL 600.1721 plainly provides that the court is to order indemnification ‘[i]f the alleged misconduct has caused an actual loss or injury[.]’ The use of ‘if’ sets up a condition that must be satisfied in order for the remainder of the provision to take effect. Although [the plaintiff] initially attempts to differentiate this principle with criminal restitution, which ‘requires a direct, causal relationship between the conduct underlying the convicted offense and the amount of restriction to be awarded,’ … she ultimately concedes that in order to recover under MCL 600.1721, she must have suffered an actual loss or injury caused by Howard and Alliance’s misconduct, but qualifies it by averring that noneconomic losses satisfy that requirement as well. She further states in her reply brief that no direct evidence is needed to prove that she suffered emotional harm.”

According to the Court of Appeals, the plaintiff “offer[ed] no concrete position on how she was injured. Instead, she seemingly primarily relies on her view that Howard and Alliance’s action constituted conversion, both common law and statutory, MCL 600.2919a. Taking this position, together with her position in her reply brief focusing on noneconomic damages, we infer that [the plaintiff’s] ultimate position is that she suffered a noneconomic injury by virtue of the conversion.”

Moreover, the plaintiff “acknowledge[d] that for her to have a successful claim of conversion, she must have a property interest in the [funds] at issue,” the Court of Appeals said. “But at the hearing, [the plaintiff] offered no evidence or argument that she had a property interest in the [funds] that had been in Alliance’s bank account. [The plaintiff] even admitted on cross-examination that she was unaware of any civil proceeding establishing that Alliance owed her money.”

The plaintiff asserted that she did have an interest in the funds on account of her “chose in action” and throughout the proceedings supplemental to judgment, the Court of Appeals noted. “But these arguments were not raised in the trial court and therefore are waived.” A chose in action, the appeals court explained, “merely gives the person a right to bring claims for the recovery of property. In other words, acquiring a chose in action does not mean acquiring an actual property right in the underlying property itself. Such a right must be perfected through legal proceedings.”

Therefore, because the plaintiff did not have a property right in the funds, “the withdrawal of those funds from Alliance’s account cannot be deemed a wrongful exertion ‘over [the plaintiff’s] personal property,’ meaning that her claim of conversion is without merit.”

In addition, the plaintiff’s reliance on the order authorizing proceedings supplementary to judgment “is not persuasive,” the Court of Appeals said. “Nowhere in that order did it decree that [the plaintiff] had a property interest in any property held by Alliance or that she had a right to the property. … [T]he order never established that any property held by Alliance was [the plaintiff’s] or owed to her. The order reinforces this because it further authorized [the plaintiff] ‘to file a complaint for proceedings supplementary to judgment,’ where such a decree could happen.”

As a result, “we are not left with a definite and firm conviction that the trial court made a mistake by finding no loss or injury,” the Court of Appeals concluded, affirming the trial court’s decision.