New Properties, Inc v. George D Newpower, Jr, Inc

762 N.W.2d 178, 282 Mich. App. 120
CourtMichigan Court of Appeals
DecidedJanuary 20, 2009
DocketDocket 280153
StatusPublished
Cited by47 cases

This text of 762 N.W.2d 178 (New Properties, Inc v. George D Newpower, Jr, Inc) is published on Counsel Stack Legal Research, covering Michigan Court of Appeals primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
New Properties, Inc v. George D Newpower, Jr, Inc, 762 N.W.2d 178, 282 Mich. App. 120 (Mich. Ct. App. 2009).

Opinion

PER CURIAM.

This case stems from a prior appeal in this Court, New Properties, Inc v Newpower (New *122 Properties I). 1 This present matter is an appeal from the trial court’s decision on remand from New Properties I. Defendant Lakes of the North Realty, Inc., appeals as of right the trial court’s judgment setting forth monetary damages payable to plaintiffs Robert W Kitchen and Harriet Kitchen. We affirm, but remand for the entry of an amended judgment consistent with this opinion.

1. BASIC FACTS AND PROCEDURAL HISTORY

No further facts were entered into the record on remand to the trial court. Thus, we quote verbatim the facts as set forth in New Properties I: 2

Introduction
George Newpower, Jr. (Newpower) was a prominent businessperson in the northern Michigan village of Mancelona. In 1996, Newpower embezzled $755,000.00 from plaintiffs Robert and Harriet Kitchen (the Kitchens), his business partners. In 1997, plaintiffs sued Newpower and the various recipients of the embezzled funds. Plaintiffs also sued the Bank and its Mancelona branch Manager Muriel Hart (Hart) for conversion under the Uniform Commercial Code (UCC) alleging that the Bank and Hart knowingly allowed and, in fact, facilitated the embezzlement. Newpower eventually pleaded guilty to embezzlement of over $100 and was sentenced to 6-10 years in prison.
Newpower and the Mancelona Community
Newpower moved to Mancelona in 1976 and purchased Hansen Realty, a local real estate agency. For the next twenty years, Newpower’s agency was actively engaged in the real estate business. Newpower formed another real estate company in 1994, Lakes of the North Realty, [Inc.,] which managed vacation rental properties in the area. *123 Newpower was the Principal Broker with Lakes of the North, served as its President, Vice President, Director, Chief Executive Officer and Chief Operating Officer and was the sole signatory of its trust accounts at the bank. Newpower kept the bank accounts for his business ventures at the Antrim County State Bank, where Muriel Hart was “his banker.” Newpower helped recruit, FMB Northwestern State Bank 1 (“the Bank”) to Mancelona and he recommended Hart to the Bank as an experienced and well-respected banker in the community who could bring them immediate business. Hart then opened the new branch in Mancelona as its manager. Newpower then moved his personal and business accounts to the Bank.
The Mancelona Area Health Clinic Scandal
Newpower was also president and a member of the board of directors of the Mancelona Area Health Clinic (MHC). Hart, too, was involved in the operation of the MHC, acting as the treasurer. In September 1993, New-power suggested that $30,000 of MHC’s money deposited into an account at the Bank could earn more interest in an investment account of his choosing. Upon taking the money from the MHC account, however, Newpower did not invest it but rather deposited it into his personal account at the Bank for his own uses. The money was eventually discovered to have been used by Newpower to make a $1400.74 mortgage loan payment to the Bank, a $165.30 personal loan payment to Hart, and a $91.67 personal loan payment to Hart and her mother.
In January or February 1995, Hart became suspicious of Newpower’s investment of the money as she had not received any statements about its performance. As early as March 1995, she pulled copies of Newpower’s accounts and determined that he had deposited the money into his personal account rather than investing it. Hart testified that she sought the advice of the Bank’s Senior Lender, Daniel Spagnuolo, who told her to investigate the matter and seek the advice of Jack McKaig, an attorney on the MHC board. Spagnulo [sic] initially testified that he “may” *124 have been told by Hart that Newpower had deposited the money in his personal account, but later testified that she did not mention this fact.
David Brooks, [an] MHC Board member, also was concerned with the whereabouts of the money. He was told by Newpower that the investment was made with “Munson & Madison Financial Service Corp.,” a Chicago investment firm, because they had a “means of pooling moneys” to get better interest rates. The Munson & Madison investment firm was fictitiously created by Newpower to attempt to hide his embezzlement. Thus, when Brooks inquired with Munson Hospital, he was unsuccessful in discovering the location of the funds. The first mention of the “investment” in MHC’s records was not until February 16, 1995, when Hart recorded that Newpower had invested the money at Munson & Madison Financial Service Corp. and that Newpower reported the account was paying 8.65% and he had given instructions for the investment firm to send Hart statements and tax information. The only statement ever received was fraudulently created by Newpower, and Hart never received any tax information regarding the investment.
The money mysteriously reappeared after this series of inquiries. A check was issued from Munson & Madison to refund the investment; however, the check was not written on a Chicago investment firm account but rather [an] NBD Bank in Traverse City. Newpower created the NBD account solely to deposit embezzled money and to subsequently issue the fraudulent Munson & Madison check. The account at NBD was only open for five days. When MHC was made whole, all other inquiries into the use of the money were dropped.
Newpower and the Kim Biehl scandal
Kim Biehl was Newpower’s secretary at Lakes of the North. Her husband, James Biehl, worked for Newpower at Hansen Realty. In August 1994, Mrs. Biehl discovered that checks she had written were bouncing because a check that Newpower had given to her husband for a commission had been dishonored. Mrs. Biehl went to the small Mancelona *125 branch of the Bank and complained loudly, asserting that the only way Newpower’s check could have bounced from the trust account it was written on was if he was “cooking the books.” This information was apparently communicated to Hart, although she was not in the Bank at the time. Hart later stated that she regarded the accusation as “hearsay.”
Newpower and the Bank
Newpower and Muriel Hart’s banking relationship
Muriel Hart had 26 years of banking experience. Hart was Newpower’s banker for both his business endeavors[,] as well as his personal finances. When Newpower recruited the Bank to come to Mancelona, he personally recommended Hart as a qualified manager to run the new business. Hart continually practiced lenient banking procedures with regards to Newpower’s various accounts.

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Bluebook (online)
762 N.W.2d 178, 282 Mich. App. 120, Counsel Stack Legal Research, https://law.counselstack.com/opinion/new-properties-inc-v-george-d-newpower-jr-inc-michctapp-2009.