Atto v. Wandrie

1

RANDY ATTO, Plaintiff-Appellant, v. STEPHEN WANDRIE, Defendant/Third-Party Plaintiff- Appellee, and KAIZEN FINANCIAL GROUP, LLC, KAIZEN WEALTH MANAGEMENT, LLC, ALBERT LALONDE, OAK GROVE SOLUTIONS, RETIREMENT DEFENDERS ORG., INC., OAK GROVE INVESTMENT SERVICES, INC, KIMBERLY MCENANEY, GERALD NAUGHTON, DONALD WOODS, and MARK PETTYJOHN, Defendants, and MICHAEL BURKHART, Third-Party Defendant.

No. 358175

Court of Appeals of Michigan

October 27, 2022

UNPUBLISHED

Oakland Circuit Court LC No. 2019-176061-CZ

Before: LETICA, P.J., and SERVITTO and HOOD, JJ.

PER CURIAM.

Plaintiff Randy Atto, appeals as of right the trial court's order granting summary disposition in favor of defendant/third-party plaintiff, Stephen Wandrie, under MCR 2.116(C)(10) (no material questions of fact). We reverse and remand to the trial court for further proceedings. We do not retain jurisdiction.

I. BACKGROUND

This matter arises from Atto's decision to invest in a failed marihuana growing facility, which was operated by third-party defendant, Michael Burkhart, in Flint, Michigan. In 2011, Atto met Wandrie, and Wandrie became Atto's financial advisor. In 2016, Atto asked Wandrie to "review [his] 401K plan and make some suggestions." Wandrie agreed. During the meeting, Wandrie, who is childhood friends with Burkhart, told Atto about the Flint facility. After viewing the Flint facility and meeting Burkhart, Atto invested $120,000 in cash. According to Atto, Wandrie guaranteed Atto would receive a 25% return on the investment within one year. Atto never received a return on the investment.

In 2019, Atto filed suit against Wandrie and several others.^[1] The complaint contained claims of: (1) breach of contract, (2) "quantum merit and unjust enrichment," (3) promissory estoppel, (4) fraud and intentional misrepresentation, (5) fraudulent concealment, (6) innocent misrepresentation, (7) negligent misrepresentation, (8) conversion, (9) civil conspiracy, and (10) violations of the Uniform Securities Act (2002), MCL 451.2101 et seq. Atto also alleged claims of breach of fiduciary duty and requested an accounting. Wandrie generally denied liability and filed a third-party complaint against Burkhart.^[2] Discovery commenced.

In December 2020, Wandrie moved the trial court for summary disposition under MCR 2.116(C)(8) (failure to state a claim) and (C)(10). In relevant part, Wandrie argued Atto's breach-of-contract claim failed because "the primary purpose of the alleged contract violate[d] Michigan Law and public policy" and was therefore unenforceable. Wandrie also argued Atto's claims were barred because he did not have "clean hands," and summary disposition on Atto's breach of fiduciary duty claim was proper because Wandrie was not acting as Atto's fiduciary when the alleged agreement was formed. Atto opposed the motion, arguing the wrongful-conduct rule and the doctrine of unclean hands did not apply because the Flint facility was operated in accordance with the Michigan Medical Marihuana Act (MMMA), MCL 333.26421 et seq., which was in effect at all relevant times. Atto also argued, among other things, that a question of fact existed as to whether Wandrie breached a fiduciary duty.

In May 2021, the trial court held oral argument on the motion for summary disposition and took the matter under advisement. In July 2021, the trial court issued a written opinion and order, granting Wandrie's motion for summary disposition. The trial court concluded Atto's claims were barred by the wrongful-conduct rule because Atto's claims were based on conduct that was prohibited under MCL 333.7401(1) of the Public Health Code, MCL 333.1101 et seq., at all relevant times.^[3] This appeal followed.

II. STANDARDS OF REVIEW

This Court reviews de novo a trial court's interpretation and application of a statute. Detroit Pub Sch v Conn, 308 Mich.App. 234, 246; 863 N.W.2d 373 (2014). We also review de novo a trial court's decision to apply equitable doctrines. Knight v Northpointe Bank, 300 Mich.App. 109, 113; 832 N.W.2d 439 (2013). Finally, a trial court's decision regarding a motion for summary disposition is also reviewed de novo. Glasker-Davis v Auvenshine, 333 Mich.App. 222, 229; 964 N.W.2d 809 (2020).

In this case, the trial court indicated it was granting summary disposition under MCR 2.116(C)(8) and (C)(10). However, the parties relied on documentary evidence, and the trial court relied on documentary evidence to support its decision. Accordingly, MCR 2.116(C)(10) is the appropriate basis for review. See BC Tile &Marble Co, Inc v Multi Bldg Co, Inc, 288 Mich.App. 576, 582; 794 N.W.2d 76 (2010); Cuddington v United Health Servs, Inc, 298 Mich.App. 264, 270; 826 N.W.2d 519 (2012).

A motion under MCR 2.116(C)(10) . . . tests the factual sufficiency of a claim. When considering such a motion, a trial court must consider all evidence submitted by the parties in the light most favorable to the party opposing the motion. A motion under MCR 2.116(C)(10) may only be granted when there is no genuine issue of material fact. A genuine issue of material fact exists when the record leaves open an issue upon which reasonable minds might differ. [El-Khalil v Oakwood Healthcare, Inc, 504 Mich. 152, 160; 934 N.W.2d 665 (2019) (quotation marks, citations, and emphasis omitted).]

"The trial court is not permitted to assess credibility, weigh the evidence, or resolve factual disputes, and if material evidence conflicts, it is not appropriate to grant a motion for summary disposition under MCR 2.116(C)(10)." Pioneer State Mut Ins Co v Dells, 301 Mich.App. 368, 377; 836 N.W.2d 257 (2013).

III. ANALYSIS

A. WRONGFUL-CONDUCT RULE

Atto argues the trial court erred by granting summary disposition based on its application of the wrongful-conduct rule. We agree.

"Michigan courts have long recognized the existence of the wrongful-conduct rule," which is a common-law maxim. Soaring Pine Capital Real Estate &Debt Fund II, LLC v Park Street Group Realty Servs, LLC, 337 Mich.App. 529, 552; 976 N.W.2d 674 (2021) (quotation marks and citations omitted), oral argument ordered on the application. "The wrongful-conduct rule provides that when a plaintiff's action is based, in whole or in part, on his own illegal conduct, his claim is generally barred." Id. However, "[t]he mere fact that a plaintiff engaged in illegal conduct at the time of his injury does not mean that his claim is automatically barred under the wrongful-conduct rule. To implicate the wrongful-conduct rule, the plaintiff's conduct must be prohibited or almost entirely prohibited under a penal or criminal statute." Orzel by Orzel v Scott Drug Co, 449 Mich. 550, 561; 537 N.W.2d 208 (1995).

The trial court concluded MCL 333.7401(1) was violated because "[t]he contract at issue in this case was to do precisely what was, at the time of the transaction, illegal under this provision of the Public Health Code...." While the trial court did not specify whose conduct violated MCL 333.7401(1), the relevant question is whether Atto's conduct violated MCL 333.7401(1) because he is the plaintiff in this case. See Orzel, 449 Mich. at 561 ("To implicate the wrongful-conduct rule, the plaintiff's conduct must be prohibited or almost entirely prohibited under a penal or criminal statute.") (emphasis added).

MCL 333.7401(1) states, in relevant part: "a person shall not manufacture, create, deliver, or possess with intent to manufacture, create, or deliver a controlled substance, a prescription form, or a counterfeit prescription form." Marihuana is classified as a controlled substance. MCL 333.7212(1)(c) and (2). At all relevant times, marihuana was defined in the Public Health Code as all parts of the plant Cannabis sativa L., growing or not; the seeds of that plant; the resin extracted from any part of the plant; and every compound, manufacture, salt, derivative, mixture, or preparation of the plant or its seeds or resin. Marihuana does not include the mature stalks of the plant, fiber produced from the stalks, oil or cake made from the seeds of the plant, any other compound, manufacture, salt, derivative, mixture, or preparation of the mature stalks, except the resin extracted from those stalks, fiber, oil, or cake, or any sterilized seed of the plant that is incapable of germination. [MCL 333.7106(4).] ^[4]

With respect to whether Atto possessed marihuana "with intent to manufacture, create, or deliver" it, Michigan courts recognize possession can be actual or constructive and may be proven by circumstantial evidence. People v Hill, 433 Mich. 464, 469-470; 446 N.W.2d 140 (1989). To find constructive possession, there must be proximity to the contraband with an "indicia of control." People v Burgenmeyer, 461 Mich. 431, 438; 606 N.W.2d 645 (2000). Therefore, it is enough the contraband's location is known to the person and the contraband is reasonably accessible to him. Id. However, a person's mere presence in proximity to contraband is insufficient, by itself, to establish possession. People v Vaughn, 200 Mich.App. 32, 36; 504 N.W.2d 2 (1993).

"There must be some link shown between the person charged with the possession offense and the contraband discovered." Id.

In 2016, Atto went to the Flint facility. Although Atto saw marihuana plants in the facility, there is no indication Atto had any control over the marihuana. Rather, at that point Atto was considering investing in the Flint facility, and he testified he did not "sample" the marihuana. Atto later invested in the Flint facility, but there is no indication he was given a key or unfettered access to the facility or any marihuana produced there. Indeed, Burkhart testified Atto did not "step[ ] in the facility after that day that [he] first met" Atto, and Burkhart testified he had sole...