author: Cynar, P.J.

text:
    HINDERER v DEPARTMENT OF SOCIAL SERVICES
    Docket No. 78-5015.
    Submitted June 19, 1979, at Lansing.
    Decided March 4, 1980.
    Paula M. Hinderer receives monthly benefits under the aid to families with dependent children program (AFDC). The dispensing authority, Department of Social Services, used a lag budgeting system (LBS) in making the monthly payments. Paula’s needs were established at $295 per month. Her monthly payments varied under LBS. She had months during which she received more than $295 in benefits plus reported income and months in which the total funds she received fell well below $295 because of income she received earlier but, because of the lag system, she did not have during the grant period. Paula objects to this form of budgeting. She appeals from an order entered in Midland Circuit Court, David S. DeWitt, J., upholding the decision of an administrative law judge of the Department of Social Services. The court affirmed the law judge’s determination that LBS was a proper method of computing benefit payments. Plaintiff appeals. On appeal plaintiff contends that because her benefit rate resulted in overpayments during certain periods and underpayments in other periods, LBS does not comply with Federal regulations regarding the current availability of income and that LBS does not conform to the Administrative Procedures Act. Held:

    1. Only currently available resources may be properly considered in reducing AFDC monthly benefits; however, "currently available” does not necessarily mean in hand, readily liquidated or under control of the recipient. Therefore, the state agency could employ a lag payment budget system because the income received to defray monthly expenses is income which is currently available within the meaning of applicable statutes and regulations. LBS is valid and such income can be properly utilized in reducing a recipient’s AFDC grant in a subsequent payment month.

      References for Points in Headnotes
    [1] 79 Am Jur 2d, Welfare Laws § 14.
    [2] 79 Am Jur 2d, Welfare Laws § 7.
    [3, 4] 79 Am Jur 2d, Welfare Laws §§ 19, 20.
    [5] 79 Am Jur 2d, Welfare Laws § 9.
    [6] 79 Am Jur 2d, Welfare Laws §6 et seq.

      2. Plaintiffs contention that LBS punishes the needy child for parental mismanagement of funds and ignores the practical economic realities facing AFDC families is unpersuasive. A Department of Social Services regulation provides for supplemental payment where undue hardship is shown by a marked increase in current need by the recipient.
    3. LBS is not subject to the Administrative Procedures Act.
    Affirmed.
    1. Social Services — Aid to Dependent Children — Statutes.
    Controlling Federal law requires that any state electing to participate in the aid to families with dependent children programs shall, upon determining that a family is eligible for benefits, furnish the same with reasonable promptness to all eligible individuals (42 USC 602[a][10]).
    2. Social Services — Aid to Dependent Children — Statutes.
    Care and protection of needy dependent children is the overriding purpose of the aid to families with dependent children program (42 USC 601 etseq.).

    3. Social Services — Aid to Dependent Children — Available Income.
    A state agency may properly consider only currently available income and resources in determining the needs of any child or relative claiming aid to families with dependent children and the amount of payments to or for them.
    4. Social Services — Aid to Dependent Children — Available Income — Lag Payment Program — Reduction of Payments.
    Any reduction in monthly benefits to recipients of aid to families with dependent children must be based upon the currently available resources of the recipient; however, "currently available” does not necessarily mean in hand, readily liquidated or under control of the recipient; therefore, a state agency may employ a lag payment budget system because the income received to defray monthly expenses is income which constitutes currently available resources in the payment month within the meaning of the applicable statutes and regulations and such income can be utilized in reducing a recipient’s benefits in a subsequent payment month.

      5. Social Services — Aid to Dependent Children — Undue Hardship — Emergency Payments.
    A Department of Social Services regulation provides for a supplemental payment after issuance of the regular warrant to avoid undue hardship where a marked increase in current need is shown by a recipient of aid to families with dependent children.
    6. Social Services — Aid to Dependent Children — Rules and Regulations — Lag Payment Program — Validity — Statutes.
    A three-month lag budget period by the Department of Social Services for the payment of benefits to recipients of aid to families with dependent children is not subject to the Administrative Procedures Act; the lag budget payment program is an agency policy of general applicability, affects the rights of the public, implements Federal and state statutory regulations and comports therewith (MCL 24.207, 400.14[l][b]; MSA 3.560[107], 16.414[l][b]).
    Legal Services of Eastern Michigan (by Ronald B. Eskin), for plaintiff.

      Frank J. Kelley, Attorney General, Robert A. Derengoski, Solicitor General, and Janis Meija and R. Philip Brown, Assistants Attorney General, for defendant.
    Before: Cynar, P.J., and Mackenzie and L. W. Corkin, JJ.

       Former circuit judge, sitting on the Court of Appeals by assignment pursuant to Const Í963, art 6, § 23 as amended in 1968.

   Cynar, P.J.

Plaintiff appeals from an order entered in Midland County Circuit Court upholding the decision of an administrative law judge of the Michigan Department of Social Services. The order affirmed the administrative law judge’s determination that the methods of budgeting employed by the Department of Social Services in computing Aid to Families with Dependent Children (AFDC) benefit payments was proper, as against plaintiffs challenge that the budgeting procedure conflicted with certain provisions of the Federal Social Security Act and the regulations enacted thereunder.

I. Facts

This case involves AFDC benefits received by plaintiff for the months of April, 1977, through September, 1977. Plaintiffs needs were established by defendant at $295 per month, and plaintiff therefore became eligible to receive monthly AFDC payments in that amount. Defendant reduced such payments by any income earned by plaintiff over and above a so-called "earned income disregard” amount, defined in 42 USC 602(a)(8)(A). Both parties agree that the "earned income disregard” was properly computed in this case.

During the relevant time period, defendant used a lag budgeting system (LBS), sometimes labeled prior month budgeting or retrospective budgeting, in making the reductions from plaintiff’s AFDC benefits. LBS involves a three-month period. The base month is the calendar month in which income is received by the AFDC recipient. The transaction month is the calendar month following the base month, in which the previously received income is reported to the caseworker and the budget adjusted accordingly. The payment month is the month following the transaction month. Income received in the base month is reflected by reducing the amount of the benefits received in the payment month. Thus, there is approximately a two-month lag between the time income is received by the AFDC recipient and when it is reflected in a reduced benefit payment.

Therein lies the nub of the controversy. Plaintiff had months during which she received more than $295 in benefits plus reported income, and months in which the total funds she received fell below $295, directly as a result of LBS. Plaintiff objects to this state of affairs, arguing that LBS does not comport with Federal requirements which permit reduction of AFDC benefits only by considering currently available resources. What constitutes currently available resources is at the core of this dispute.

II. Currently Available Income

Prefatorily, we note that what is not in issue in the instant case, contrary to plaintiffs contention, is the recoupment of a prior overpayment of benefits caused by administrative error. On this point we disagree with the case heavily relied on by plaintiff, Garcia v Swoap, 63 Cal App 3d 903; 134 Cal Rptr 137 (1976), cert den 436 US 930; 98 S Ct 2829; 56 L Ed 2d 775 (1978). Instead, the real concern is the delay in reflecting the receipt of income by the AFDC recipient in that recipient’s assistance grant. The propriety of such delay in large measure turns upon the meaning to be attributed to the phrase "currently available resources”.

The first question for decision is therefore whether LBS, as in effect from April, 1977, through September, 1977, failed to comply with controlling state and Federal statutes and administrative regulations.

Controlling Federal law requires that any state electing to participate in the AFDC program shall, upon determining that a family is eligible for AFDC benefits, furnish the same with reasonable promptness to all eligible individuals. 42 USC 602(a)(10). This is consonant with the overriding purpose of the program, i.e., encouraging the care of and maintaining protection of needy dependent children. 42 USC 601.

Plaintiff’s position is that LBS failed to further this purpose, and, to the contrary, thwarted it because it reduced a recipient’s grant by income which was no longer "in hand”, having previously been spent. This, it is argued, punishes the needy child for parental mismanagement of funds and ignores the practical economic realities facing AFDC families. It is further claimed that LBS, as then in effect, did not provide any supplemental source of payments for a recipient who suffers undue hardship from a significant decrease in income in a single month and who would otherwise be without funds with which to meet "current” needs, and thereby LBS failed to comply with Federal requirements. Finally, plaintiff contends LBS may not be upheld solely because it promotes the integrity of the state fisc. Defendant, of course, takes exception to each of these propositions.

The notion of "currently available resources”, which has engendered this controversy, is a product of Federal statute and administrative regulations. 42 USC 602(a)(7) provides in relevant portion:

"(a) A state plan * * * must * * *

"(7) * * * provide that the State agency shall, in determining need, take into consideration any other income and resources of any child or relative claiming aid to families with dependent children, or of any other individual (living in the same home as such child and relative) whose needs the State determines should be considered in determining the need of the child or relative claiming such aid, as well as any expenses reasonably attributable to the earning of any such income:”

The administrative regulation promulgated thereunder reads as follows:

"(a) Requirements for State Plans: A State Plan for * * * AFDC * * * must, as specified below:

"(ii) Provide that, in determining need and the amount of the assistance payment, after all policies governing the reserves and allowances and disregard or setting aside of income and resources referred to in this section have been uniformly applied:

"(D) Net income available for current use and currently available resources shall be considered; income and resources are considered available both when actually available and when the applicant or recipient has a legal interest in a liquidated sum and has the legal ability to make such sum available for support and maintenance; * * *.” 45 CFR 233.20(a)(3)(ii)(D).

Michigan has promulgated 1970-1971 AACS R 400.12(25), which adopts in the main the Federal regulation. The Michigan provision provides:

"(25) Only income and resources which are available in fact for current use are to be considered in determining the need of individuals for assistance and the amount of payments to or for them.”

The mandate is clear. Only currently available resources may be properly considered in reducing AFDC benefits. What then is the definition of that phrase? Michigan appellate courts have not previously addressed this question.

However, we are not without guidance in deciding this question. In Randall v Goldmark, 495 F2d 356 (CA 1, 1974), a unanimous court rejected the recipient’s argument that "currently available” meant "in hand, readily liquidated, or under the control of the individual”. Randall, supra, at 361. Instead, the panel stated, albeit in dicta, that to qualify as a currently available resource, it need only be shown that regular payments made by third parties directly benefit an AFDC recipient in such a manner that they are actually used to defray expenses which such recipient would otherwise incur. A resource is available when the sum received actually reduces expenses for which the recipient would otherwise be liable. Id., 361. Accord, Schmidt v New Jersey Dep’t of Institutions & Agencies, 147 NJ Super 150; 470 A2d 892 (1977), Englewood Hospital Association v Knox, 49 Ill App 3d 515; 7 Ill Dec 367; 364 NE2d 528 (1977).

We note that the use of "regular” as a modifier of the word payments is no longer apropos, as the Federal regulation to which it was addressed no longer limits offsets to income received only on a regular basis, but allows reduction of benefits by income received sporadically. See 45 CFR 233.20(a)(3)(ii)(D) and former 45 CFR 233.20(a)(3)(ii)(C). With that lone excision from the definition as expounded in Randall, we adopt said language as the rule in Michigan. Accordingly, we conclude that the income received by plaintiff in the base month under LBS, used by her to defray expenses, is income which constitutes a "currently available resource” in the payment month, within the meaning of the applicable statutes and regulations. It is therefore properly utilized in reducing a recipient’s AFDC grant in the payment month. As such, we find no infirmity in LBS on this basis.

We likewise reject plaintiffs argument that LBS was defective in failing to include a provision for a supplemental source of benefits for a recipient who suffers a significant decrease in income in a particular month, as a result of the operation of LBS or otherwise, and thereby meets with undue hardship. Department of Social Services regulations issued prior to the implementation of LBS include such a supplemental payment program where a marked increase in current need is shown by the recipient, allowing a supplemental warrant to be issued to a recipient so affected after issuance of the regular warrant.

Therefore, insofar as plaintiff’s challenges to the mechanics of LBS are concerned, we find no ground for invalidating the same, and conclude that LBS indeed comports with all controlling state and Federal statutes and regulations.

III. Implementation of LBS and the Administrative Procedures Act

As a final argument, plaintiff claims that LBS is invalid because it was never promulgated as a rule as required by the Administrative Procedures Act (APA), MCL 24.201 et seq.; MSA 3.560(101) et seq., and that it does not fall under any of the exceptions to the rulemaking requirements of the APA. Defendant argues that LBS is not a rule under the APA definition thereof, and did not have to be promulgated as such.

The parties agree that LBS as applied to plaintiff was implemented October 1, 1976, and thus is subject to the APA.

The section of the APA which is central to deciding this issue is MCL 24.207; MSA 3.560(107), and reads in relevant portion:

"Sec. 7. 'Rule’ means an agency regulation, statement, standard, policy, ruling or instruction of general applicability, which implements or applies law enforced or administered by the agency, or which prescribes the organization, procedure or practice of the agency, including the amendment, suspension or rescission thereof, but does not include the following:

"(g) An intergovernmental, interagency or intraagency memorandum, directive or communication which does not affect the rights of, or procedures and practices available to, the public.

"(h) A form with instructions, an interpretive statement, a guideline, an informational pamphlet or other material which in itself does not have the force and effect of law but is merely explanatory.

"(j) A decision by an agency to exercise or not to exercise a permissive statutory power, although private rights or interests are affected thereby.”

Defendant claims that LBS falls under all the quoted exceptions to the definition of "rule”. We address the applicability vel non of each exception seriatim.

We initially conclude that LBS is an agency policy of general applicability, contrary to defendant’s assertion, as reduction of benefits under LBS is theoretically possible with respect to all recipients.

Next, defendant urges us to conclude that the exception to the rulemaking requirement of the APA found in subsection (g) of MCL 24.207 controls the disposition of this issue, as plaintiff has no "right” to AFDC benefits, but a mere "entitlement”. This argument is sophistic, as an "entitlement” is but a right bestowed upon one by another. Black’s Law Dictionary (4th ed 1968), 626. The "entitlement” in this case is the right to participate in the AFDC benefit program, which right is ab initio bestowed upon the recipient by the Department of Social Services. Cf. Bohlen v Weinberger, 483 F2d 918, 922 (CA 3, 1973), Goldberg v Kelly, 397 US 254, 262; 90 S Ct 1011; 25 L Ed 2d 287 (1970). Upon a determination of eligibility for AFDC benefits, a recipient acquires the right to receive them, at least vis-á-vis the strictures of the APA. Therefore, we conclude that LBS affects rights of the public, and, as such, does not fall under the first quoted exception to the rule-making requirement of the APA, i.e., subsection (g) of MCL 24.207.

We likewise find subsection (h) of § 7 of the APA an inappropriate vehicle for excepting LBS from the rulemaking mandate. LBS is more than a mere explanation of Federal and state requirements, is not merely informational, nor a mere guideline. It implements Federal and state statutes and regulations, and has the direct effect of determining exactly the amount of aid a recipient receives. In this sense, it has the force and effect of law, and cannot fit under the exception found in subsection (h).

However, we are persuaded that subsection (j) of MCL 24.207 provides an exception to the rulemaking edict of the APA which is applicable to the facts of the case sub judice. We find the administration of the AFDC program and the use of LBS, thereunder to be tantamount to the exercise vel non of a permissive statutory power. As noted in Village of Wolverine Lake v State Boundary Comm, 79 Mich App 56, 59; 261 NW2d 206 (1977), if an agency policy (here LBS) follows from its statutory authority, the policy is an exercise of a permissive statutory power and not a rule requiring formal adoption. Accord, Colombini v Director, Dep’t of Social Services, 93 Mich App 157; 286 NW2d 77 (1979). We find necessary statutory authority to lie contained in MCL 400.14(l)(b); MSA 16.414(l)(b), as we read it to empower the defendant to adopt, for purposes of dispersal of AFDC benefit payments, a budgetary method of the director’s own choosing, so long as it comports with Federal statutes and regulations. We have already concluded that LBS surmounts this Federal obstacle.

Since the use of LBS follows directly from this statutory authority, the policy (LBS) is an exercise of a permissive statutory power, and is excepted from formal adoption and promulgation under the APA. Therefore, LBS is valid in its entirety.

The decision of the circuit court is affirmed. No costs, a public question being involved.

       42 USC 601 et seq.

       The following chart indicates plaintiffs total monthly income and benefits for the time in question. The broken lines indicate AFDC adjustments made as a result of income reported a month prior to the AFDC payment, and received two months prior thereto. The two numbers connected by each broken line total $295, with the exception of the last broken line, because no reduction was made from the October benefit payment for the income received in August, the last month plaintiff worked.

        Plaintiff's Total Monthly Income and Benefits

        Month 2/77 3/77 4/77 5/77 6/77 7/77 8/77 9/77 10/77
      Reported
      Income $ 52^$143^ $151^ $143^$215^ $106^ $ 53^$-0- $-0-
      AFDC
      Benefits -0- -0- "243 "l52 "l44 "152 ''"80 "189 "295
      Monthly
      Total N/A N/A $394 $295 $359 $258 $113 $189 $295

       The statute provides in relevant part:
      "Sec. 14. (1) The state department shall have and be vested with the following additional powers and duties:
      "(b) To distribute as provided in this act, subject to federal rules and regulations, and in accordance with the rules promulgated by the director, moneys appropriated by the legislature or received from the federal government for the granting of aid to dependent children and supplemental security income; for medical, dental, optometric, nursing, pharmaceutical, and burial relief, and the services furnished by professions under Act No. 162 of the Public Acts of 1903, as amended, being sections 338.101a to 338.121 of the Michigan Compiled Laws, Act No. 145 of the Public Acts of 1933, as amended, being sections 338.151 to 338.159 of the Michigan Compiled Laws and Act No. 115 of the Public Acts of 1915, as amended, being sections 338.301 to 338.308a of the Michigan Compiled Laws; and for other relief or welfare services provided by law.


source: Caselaw Access Project

author: D. F. Walsh, J.

license: Public Domain

text:
    HEILMAN v HEILMAN
    Docket No. 78-5016.
    Submitted December 6, 1979, at Detroit.
    Decided March 4, 1980.
    Leave to appeal applied for
    Marlene Heilman obtained a judgment of divorce from Edward Heilman, Wayne Circuit Court, Charles S. Farmer, J. During their marriage the Heilmans instituted a products liability action in regard to an injury suffered by Mr. Heilman. That action was still pending at the time of the divorce, and the trial court included in the divorce judgment any recovery to be realized in the products liability action as part of the marital estate and provided that division of any such recovery would be made at the time the recovery is realized. Defendant appeals, alleging that inclusion of the products liability claim in the marital estate was error and that the trial court also erred by ordering defendant to pay child support and by placing a lien for the child support on the potential products liability recovery. Held:

    1. A right of action is property subject to distribution in a divorce action, and the trial court did not abuse its discretion in ruling that the plaintiff had a possible interest in any future recovery in the products liability action.
    2. The trial court did not abuse its discretion by delaying the determination of the amount of recovery each of the parties will be entitled to until such time as recovery is made in the products liability action. Knowledge of the amount of that recovery will be necessary to insure an equitable distribution.
    3. The trial court’s award of child support and the placing of a lien for that obligation on the tort recovery was not an abuse of discretion. The defendant was serving a prison term at the time of the divorce, and in the event that he recovers nothing in the products liability action the support obligation for the period of time that he was in prison, and thus had no earning capacity and no assets, should be cancelled.

      References for Points in Headnotes
    [1] 24 Am Jur 2d, Divorce and Separation § 925.
    41 Am Jur 2d, Husband and Wife § 105.
    [2] 41 Am Jur 2d, Husband and Wife §§ 37, 443 et seq.

    [3] 24 Am Jur 2d, Divorce and Separation § 933.
    Adequacy or excessiveness of amount of money granted as combined award of alimony and child support. 2 ALR3d 537.
    [4] 24 Am Jur 2d, Divorce and Separation § 839.

      Affirmed with modifications.
    1. Divorce — Property Division — Statutes.
    A trial court in a divorce action is authorized to divide the parties’ personal property between them (MCL 552.19; MSA 25.99).
    2. Divorce — Property — Right of Action.
    A right of action is as much property as any tangible possession; for purposes of equitable distribution incident to a divorce a spouse’s chose in action for personal injuries and the other spouse’s per quod claim constitute property subject to such distribution.
    3. Divorce — Property Division — Fairness to Parties.
    A trial court distributing marital property in a divorce case is guided by several equitable factors including the source of the property, contribution toward acquisition of the property, the duration of the marriage, the needs and earning capacities of the parties, and the cause for the divorce; there are no set mathematical rules to be applied, but the amounts awarded to each party must be fair in light of their respective overall financial circumstances.
    4. Divorce — Child Support — Ability to Work.
    A parent’s income does not determine his or her duty to pay child support; a court may take into consideration the parent’s ability to work and earn money, and award child support even though the parent owns no property.

      Anthony Lutostanski, for plaintiff.

      Zeff & Zeff (by Marvin L. Berris), for defendant.
    Before: Mackenzie, P.J., and V. J. Brennan and D. F. Walsh, JJ.
   D. F. Walsh, J.

Defendant, Edward Heilman, appeals the property settlement provisions of the November 8, 1978, judgment of divorce which dissolved the parties’ marriage.

During the marriage, defendant suffered the loss of his right eye in a work-related accident. In 1976, along with his wife, plaintiff Marlene Heilman, he instituted a products liability action against the manufacturer of the industrial press involved in the accident. Plaintiff’s complaint for divorce was filed in 1977. At the time of the judgment of divorce, the products liability action was still pending in the Wayne County Circuit Court.

With respect to division of property, the judgment of divorce provides:

"It is further ordered and adjudged that any monies realized by and through the case of edward HEILMAN and MARLENE HEILMAN VerSUS NATIONAL MACHINE corp. and boyer Campbell and sales, inc. (Wayne Circuit No. 76 627 677 NP) be and the same are hereby made part of the marital estate in the case at bar.

"It is further ordered and adjudged that the percentage each party is to receive from the recovery on the personal injury action will be determined at a hearing brought at the time of trial on said action.

It is further ordered and adjudged that any monies realized in the above personal injury action shall be placed forthwith in an escrow account.

"It is further ordered and adjudged that Defendant’ attorney in the personal injury action shall be allowed to subtract from said monies realized the amounts owing him under his contingent fee contract with the Defendant EDWARD HEILMAN

"it is further ordered and adjudged that Defendant’s attorney A. Robert Zeff shall notify Anthony Lutostanski, attorney at law, of when the above personal injury action comes to trial or is settled.”

On appeal, defendant challenges the trial court’s ruling that the personal injury claim was a part of the marital estate. In his excellent opinion, the trial judge set forth the basis for his ruling. We are in full agreement with the judge’s conclusion.

It is not disputed that the trial court in a divorce proceeding is authorized to divide the parties’ personal property between them. MCL 552.19; MSA 25.99, Engemann v Engemann, 53 Mich App 588, 594; 219 NW2d 777 (1974). It is also clear that a right of action is "as much property as any tangible possession”. Dunlap v Toledo, Ann Arbor & Grand Trunk R Co, 50 Mich 470, 474; 15 NW 555 (1883). We concur in the trial court’s determination that the following principle set forth in DiTolvo v DiTolvo, 131 NJ Super 72, 79; 328 A2d 625, 629 (1974), is valid and applicable in Michigan:

"We * * * hold that for purposes of equitable distribution incident to a divorce, a spouse’s chose in action for personal injuries and the other spouse’s per quod claim constitute property subject to such distribution.”

Defendant argues that, if the trial court did not err in ruling that the chose in action was part of the marital estate, then the court nevertheless abused its discretion in two related respects. First, defendant suggests that the court abused its discretion in determining that plaintiff would perhaps be entitled to a portion of the ultimate recovery in defendant’s personal injury action. Defendant’s injuries, however, affected his earning capacity during the marriage and, therefore, possibly reduced the amount of assets that may have become a part of the marital estate if the injury had not occurred. The court, therefore, did not abuse its discretion in ruling that plaintiff had some possible interest in defendant’s future recovery in the personal injury action.

Second, defendant alleges abuse of discretion in the trial court’s delay in determining the exact percentage of the personal injury recovery, if any, to which each party will be entitled.

In distributing marital property, the trial court is guided by several equitable factors. These include the source of the property, contribution toward acquisition of the property, the duration of the marriage, the needs and earning capacities of the parties, and the cause for the divorce. Johnson v Johnson, 346 Mich 418, 431; 78 NW2d 216 (1956). While there are no set mathematical rules to be applied, the amounts awarded to each party must be fair in light of their respective overall financial circumstances. McDermott v McDermott, 84 Mich App 39; 269 NW2d 299 (1978).

In our view, a truly equitable distribution of property in this case would be impossible without knowledge of the amount of the personal injury recovery. With the exception of the parties’ personal items such as clothing, the personal injury claim is the sole marital asset. In order for the trial court to apply most fairly the equitable factors delineated supra, exact dollar amounts must be known. If the court is to make a distribution based at least in part on relative need, for example, mere designation of a percentage of an unknown amount is meaningless. The trial court, therefore, acted responsibly and reasonably in this regard.

The final issue raised on appeal concerns that portion of the judgment of divorce which sets forth defendant’s obligation to pay child support. The court ordered defendant to make weekly support payments and placed a lien for child support on the contingent products liability recovery. At the time of the divorce defendant was serving a prison term in Jackson Prison.

Defendant argues that the trial court erred in awarding child support payments to plaintiff in view of his imprisonment and lack of funds.

It is clear that a parent’s income does not determine his or her duty to pay child support. The court may take into consideration the parent’s ability to work and earn money, and award child support even though the parent owns no property. Travis v Travis, 19 Mich App 128, 130; 172 NW2d 491 (1969).

We find no abuse of discretion in the trial court’s ordering defendant to pay child support and in placing a lien for that obligation on the tort recovery. In our view, however, defendant’s child support obligation for the period of time when he had no earning capacity and no assets (i.e., the time he spent in prison), should be cancelled in the event he recovers nothing in the products liability action. With this modification, the award of child support payments is affirmed.

The provisions of the judgment of divorce are affirmed as modified.

       As noted by the trial judge, "the injury to, or disability of the husband would become one of the factors in determining the needs of the two parties when the marital estate is divided”.


author: Bashara, J.

text:
    PEOPLE v HUNTER
    Docket No. 78-5185.
    Submitted January 3, 1980, at Detroit.
    Decided March 4, 1980.
    Defendant, Floyd Hunter, was convicted of two counts each of kidnapping, armed robbery and first-degree criminal sexual conduct in the Recorder’s Court of Detroit, John Patrick O’Brien, J. Defendant appeals, alleging that the prosecutor erroneously and prejudicially referred to a notice of alibi during the trial, even though defendant did not raise the defense during the trial. Held:

    Reference by the prosecutor to the filing of a notice of alibi prior to the defendant’s actually putting forth an alibi constitutes an impermissible comment on the defendant’s right to remain silent.
    Reversed and remanded.
    Criminal Law — Alibi Defense — Notice of Alibi — Prosecutor’s Comment — Right to Remain Silent.
    Reference by the prosecutor to the filing of a notice of alibi prior to the defendant’s actually putting forth an alibi constitutes an impermissible comment on the defendant’s right to remain silent.
    Reference for Points in Headnote
    [1] 75 Am Jur 2d, Trial §§ 250, 242.

      Frank J. Kelley, Attorney General, Robert A. Derengoski, Solicitor General, William L. Cahalan, Prosecuting Attorney, Edward Reilly Wilson, Principal Attorney, Appeals, and Timothy C. Scallen, Assistant Prosecuting Attorney, for the people.

      Ruby & Ruby, P.C., for defendant on appeal.
    Before: T. M. Burns, P.J., and Bashara and N. J. Kaufman, JJ.
   Bashara, J.

Defendant was convicted by a jury of two counts of kidnapping, MCL 750.349; MSA 28.581, armed robbery, MCL 750.529; MSA 28.797, and criminal sexual conduct in the first degree, MCL 750.520b; MSA 28.788(2).

Defendant makes several allegations of error, only one of which requires serious discussion. It is defendant’s claim that the prosecutor erroneously and prejudically referred to his alibi notice even though defendant did not raise the defense of alibi during trial.

Defense counsel filed a notice of alibi prior to trial, pursuant to MCL 768.20; MSA 28.1043. Before any indication that the defendant would testify, the prosecutor made the following statement before the jury:

"Your Honor, before I start with this witness here, I’d like the Court to take judicial notice of People’s Proposed Exhibit Number 4 and that would be an Alibi Notice that has been filed with this Court on behalf of the Defendant.”

Defense counsel immediately moved for a mistrial and asked that the jury be excused. After extensive discussion, the trial judge denied the motion but, in the presence of the jury, ordered the prosecutor’s remarks stricken. He further instructed that the comments and statements of the lawyers were not to be considered as evidence, nor were they to consider anything the court ordered stricken from the record.

Subsequently, out of the presence of the jury, the prosecutor indicated that he wished to bring out the question of defendant’s notice. of alibi. After being cautioned by the court not to mention the notice of alibi, the following questions were asked of a police witness:

"Q Ma’am, did you receive a Document from the Defendant with a couple of names mentioned on the Document?

"A Yes, I did.

"Q And did you read the allegations contained in the Document?

"A Yes.

"Q And did you take statements from those people?

"A Yes.

"Q That were mentioned in that Document?

"A Yes. '

"Q Who are those people mentioned in that Document and their names?

"A Barry Singleton and Willie Martin.

"MR. KING [prosecutor]: I have no further questions.”

Defendant took the stand and testified in his own behalf. He did not offer the alibi defense. On cross-examination, the prosecutor immediately attempted to introduce the notice of alibi by asking defendant if he could identify a document filed in the Recorder’s Court. Defense counsel objected and asked that the jury be excused.

The ensuing colloquy revealed that the prosecutor was attempting to get the notice of alibi admitted as a "judicial admission”. The trial judge indicated that admission of the document would be too prejudicial and denied the prosecutor’s plea to introduce it. When the jury was returned, the next series of questions were:

"Q Now, where were you on August 28th?

"A August 28th?

"Q Yes.

"A At any particular time, I was here in the City of Detroit.

"Q Where were you that night?

"A The night of August 28th I was at 10302 Maple-lawn, it’s in the City of Detroit.

"Q Who lives there?

"A My mother-in-law.”

In closing argument, the prosecutor made the following comments:

"Then the Police Department checked out alibi witnesses. You didn’t see any alibi witnesses here so Officer Stevenson said she took statements from those witnesses, you didn’t see the Defendant’s mother-in-law testify, but he said he was over to her house that night.

"Now, he brought out that his brother, Kenneth, told the Defense Counel [sic] the names of two alibi witnesses. Now Mr. O’Connell has been around a long time—

"Now, maybe my hearing’s bad, I thought I heard the Defendant say my brother told the Defense Counsel and we had ten days to file an alibi before trial. This trial did not sneak up on him on August 29th, 1977. His brother allegedly tells his Defense Counsel about witnesses on May 5th, 1978, and lo and behold, it’s not his mother-in-law.

"But look at the other footwork, the alibi witnesses. May 5th, 1978, Gary Singleton, Willie Morgan, he had to have them ten days before trial and have them say, 'Hey, we didn’t do anything — .”

We are of the opinion that the statements and questions propounded as hereinbefore reflected were so prejudicial that reversal is required. In People v Shannon, 88 Mich App 138; 276 NW2d 546 (1979), the defendant filed notice of alibi. However, after speaking with the alibi witness, defense counsel chose not to call him. The defendant himself did not testify. This Court found that the prosecutor’s and trial court’s references to the appearance of the alibi witness and his subsequent failure to testify impermissibly shifted the burden of proof to the defendant.

In Shannon, the Court stated the purpose of the notice of alibi requirement:

"Further, there is no useful purpose served by informing the jury of defendant’s original intention to produce an alibi and his subsequent decision not to call a supporting witness. The notice of alibi requirement was provided for the benefit and protection of the public. People v Merritt, 396 Mich 67, 77; 238 NW2d 31 (1976), People v McFadden, 347 Mich 357, 363; 79 NW2d 869 (1956). Its purpose is to enable the prosecution to investigate the merits of such a defense prior to trial, Merritt, supra, and not to alert the jury of the defendant’s proposed defense.” 88 Mich App 138, 144.

The only feature distinguishing Shannon from the case at bar is that the defendant, in that matter, did not testify. However, the Court was careful to point out the difference between cases allowing prosecutorial comment upon defendant’s failure to produce a corroborating witness:

"Where a defendant testifies to an alibi and calls no additional witnesses to support it, the prosecution, by commenting on the nonproduction of corroborating alibi witnesses, is merely pointing out the weakness in defendant’s case. When, however, the defendant produces no testimony to support an alibi, the prosecutor, by commenting on the nonproduction of alibi witnesses, is not exposing a weakness in defendant’s case, but is rather improperly shifting the burden of proof to the defendant.” Id., 145.

We conclude that any reference made to the filing of a notice of alibi prior to the defendant’s actually putting forth an alibi defense constitutes an impermissible comment on the defendant’s right to remain silent. To find otherwise would elevate the procedural requirement of filing the notice of alibi into a waiver of defendant’s substantive right to remain silent.

Reversed and remanded for a new trial.


author: V. J. Brennan, P.J. Beasley, J.

text:
    PEOPLE v CORLIN
    Docket No. 78-5282.
    Submitted November 7, 1979, at Grand Rapids.
    Decided March 4, 1980.
    Thomas D. Corlin was charged with two counts of delivery of a controlled substance. Subsequently, the defendant was convicted, on his plea of guilty, of one count of delivery of a controlled substance, Kent Circuit Court, George R. Cook, J. The defendant was sentenced to 12 months in the Kent County Jail. It immediately became apparent that the presentence report, upon which the sentencing judge relied, erroneously stated that the defendant had pled guilty to a charge of possession of a controlled substance rather than a charge of delivery of a controlled substance. Over the defendant’s objection, the trial court resentenced the defendant to a term of 3 to 7 years for delivery of a controlled substance. The defendant appeals. Held:

    Once a trial court imposes a valid sentence, it cannot set aside that sentence and impose a new and different one. However, to be valid, a sentence must be based on accurate information. In the instant case the defendant’s sentence was based on clearly erroneous information contained in the presentence report. The defendant’s first sentence was invalid and the trial court acted properly in resentencing the defendant. This was a correction in the sentence, not a double sentence. There was no double punishment.
    Affirmed.
    Beasley, J., dissented. He would hold that the original sentence was valid since both the prosecutor and the defense attorney called the judge’s attention to the fact he was sentencing for delivery of a controlled substance. He would set aside the second sentence and reinstate the original sentence of 12 months in the county jail.
    References for Points in Headnotes
    [1] 21 Am Jur 2d, Criminal Law § 569.
    [2, 3] 21 Am Jur 2d, Criminal Law §§ 303, 572.

      Opinion op the Court
    1. Criminal Law — Sentences — Setting Sentence Aside — Validity op Sentence.
    A sentencing court cannot set aside a valid sentence and impose a new and different one once a valid sentence has been imposed; however, to be valid, a sentence must be based on accurate information.
    2. Criminal Law — Sentences — Guilty Plea — Sentence for Wrong Offense.
    A sentence based upon an offense other than the offense to which a defendant entered a plea of guilty is invalid and after discovery of the error, the trial court has authority to properly sentence the defendant for the offense to which the plea was entered.
    Dissent by Beasley, J.
    3. Criminal Law — Sentences — Plea of Guilty — Validity of Sentence.

      A sentence imposed by a trial judge was valid and the trial judge was without authority to rescind the sentence and impose a new and different sentence where, although the presentence report indicated that the conviction was for an offense other than the one to which the defendant had entered a plea of guilty, the judge was informed at sentencing, by both the prosecutor and the defense attorney, of the mistake and of the proper offense for which the defendant was to be sentenced and the judge then proceeded to sentence the defendant.

      Frank J. Kelley, Attorney General, Robert A. Derengoski, Solicitor General, David H. Sawyer, Prosecuting Attorney, and Carol S. Irons, Assistant Prosecuting Attorney, for the people.

      Walter L. Harrison, for defendant on appeal.
    Before: V. J. Brennan, P.J., and Beasley and G. E. Bowles, JJ.

       Circuit judge, sitting on the Court of Appeals by assignment pursuant to Const 1963, art 6, § 23 as amended in 1968.

   V. J. Brennan, P.J.

Defendant was originally charged with two counts of delivery of a controlled substance, to-wit: pentobarbital and methaqualone. On August 31, 1978, he pled guilty to one count of delivery of pentobarbital, MCL 335.341(l)(b); MSA 18.1070(41)(l)(b). On October 13, 1978, Judge Cook sentenced defendant to 12 months in the Kent County Jail. Immediately thereupon, it became apparent that the presentence report, upon which Judge Cook relied, erroneously stated that defendant had pled to possession, not delivery, and that the maximum sentence which could be imposed was two years. Judge Cook thereupon adjourned the proceedings one week in order to establish exactly what the conviction was. Defendant’s bond was revoked and he was remanded to Kent County Jail.

On October 20, 1978, defendant was returned to court. Acknowledging that his previous sentencing of defendant was based upon an error contained in the presentence report, Judge Cook, over objection of defense counsel, resentenced the defendant to 3 to 7 years for delivery of pentobarbital, crediting him with the 2 days previously served. The crime for which defendant was originally and erroneously sentenced carried a maximum sentence of 2 years. MCL 335.341(4)(b); MSA 18.1070(41)(4)(b). The crime to which defendant pled guilty carries a maximum sentence of 7 years. MCL 335.341(l)(b); MSA 18.1070(41)(l)(b).

Relying upon People v Fox, 312 Mich 577; 20 NW2d 732 (1945), defendant correctly argues that once the trial court imposes a valid sentence, it cannot set aside that sentence and impose a new and different one. See People v Meservey, 76 Mich 223, 226; 42 NW 1133 (1889), and People v Kelley, 79 Mich 320, 321; 44 NW 615 (1890). To be valid, however, the sentence must be based on accurate information. United States v Tucker, 404 US 443; 92 S Ct 589; 30 L Ed 2d 592 (1972), People v Malkowski, 385 Mich 244, 249; 188 NW2d 559 (1971), People v Zachery Davis, 41 Mich App 683, 692; 200 NW2d 779 (1972). Here defendant’s sentence was based on clearly erroneous information contained in the presentence report.

A sentence based upon an offense to which defendant has not pled guilty is invalid and after discovery of the error the trial court has authority to properly sentence defendant for the offense to which he did plead. In re Pardee, 327 Mich 13, 18; 41 NW2d 466 (1950), and People v Johnson, 60 Mich App 371; 230 NW2d 438 (1975). People v Johnson, supra, is virtually identical to the instant case. In Johnson, defendant pled guilty to charges of gross indecency and assault with intent to rob being unarmed. Based on an error in the presentence report, he was sentenced to two concurrent 3 to 5 year sentences for gross indecency and attempted robbery not armed. When the error was subsequently discovered, the trial court changed one of defendant’s two 3 to 5 year sentences to 5 to 15 years for assault with attempt to rob being unarmed. Upon appeal we affirmed. The error in the Johnson presentence report was not discovered until after sentencing and thus differs from the instant case where there was some discussion as to the existence of a possible mistake prior to sentencing. This factual disparity, however, is a distinction without a difference not requiring a different result.

Defendant also argues that in contravention of North Carolina v Pearce, 395 US 711, 717; 89 S Ct 2072; 23 L Ed 2d 656 (1969), he has been twice punished for the same offense. We disagree. The sentence of 3 to 7 years is a correction of the first sentence, not a double sentence. In re Pardee, supra, at 18.

Affirmed.

G. E. Bowles, J., concurred.

Beasley, J.

(dissenting). I respectfully dissent.

The sentencing was as follows:

"MR. HOEKSTRA [Prosecuting Attorney]: May it please the Court, this is criminal case number 22775, the People of the State of Michigan v Thomas David Corlin. Mr. Corlin is here represented by his attorney, Wade Seys, and is here for purposes of sentencing on the charge of delivery of a controlled substance.

"There may be some confusion here, your Honor; I’ve been informed that the pre-sentence indicates that the charge was possession — yes, and this is a case that I, myself, handled, and I think Mr. Seys would agree that the plea, or the agreement at least, was to plead to a delivery charge.

"MR. SEYS [Defense counsel]: That’s correct.

"THE COURT: Mr. Seys?

"MR. SEYS: I have read the pre-sentence report, your Honor, and I find it complete except for that one exception, and I have no further comment.

"THE COURT: Mr. Corlin, do you have anything to say before sentence is imposed?

"THE DEFENDANT: No.

"THE COURT: It is the sentence or judgment of this Court that you be remanded to the custody of the Kent County Jail for a period of 12 months, with two days credit for time previously served, that sentence to commence October 13, 1978.

"This is a final sentence or judgment of this Court and you can appeal to the Court of Appeals as a matter of right within the next 60 days, and the Clerk is now handing you a form showing you how to take or perfect that appeal, and if you cannot afford an attorney to do it, the People will provide one for you at no cost or expense to yourself.” (Emphasis added.)

I would hold that the trial court imposed a valid sentence upon defendant. Both attorneys called the judge’s attention to the fact that he was sentencing for delivery of a controlled substance, after which he described his sentence as a ñnal sentence, subject to appeal. It was only after sentence that the trial court had second thoughts.

Unlike People v Johnson, this sentence is not based upon an offense to which defendant had not pled guilty. Rather, I would find this case controlled by People v Robert Jackson and People v Fox.

I would vote to set aside the sentence subsequently imposed and to reinstate the initial sentence of 12 months in the county jail.

       60 Mich App 371; 230 NW2d 438 (1975).

       63 Mich App 249, 255; 234 NW2d 471 (1975).

       312 Mich 577; 20 NW2d 732 (1945).


author: P. C. Elliott, J.

text:
    PAPCUM v L R JACOBS CONSTRUCTION COMPANY REGAN v L R JACOBS CONSTRUCTION COMPANY
    Docket Nos. 78-5288, 78-5289.
    Submitted December 11, 1979, at Detroit.
    Decided March 4, 1980.
    Leave to appeal applied for.
    Thomas Papcum and his wife and Fred B. Regan and his wife started separate actions against L. R. Jacobs Construction Company claiming that the basements in their respective homes, both of which were constructed by the defendant, began to leak shortly after purchase, with that condition worsening despite defendant’s attempts to correct the situation. The theories of relief and the relief sought were identical in the two actions. The defendant filed in each action an identical counterclaim for damages to its reputation, contending that each lawsuit was unwarranted. Plaintiffs moved to consolidate the two actions for trial. The Macomb Circuit Court, Kenneth N. Sanborn, J., granted the motion to consolidate. Defendant appeals by leave granted. Held:

    1. Consolidation for trial of separate actions should not be ordered if a substantial right of a party would thereby be prejudiced or if the consolidation would result in confusion of the jury.
    2. The question of whether there should be consolidation for trial of separate actions is a question addressed to the sound discretion of the trial court. The Court of Appeals will not overturn the action of the trial court unless an abuse of discretion on the part of the trial court is clearly shown.
    3. Since the two actions raised common questions of law and fact and since there was no showing that consolidation for trial of the two actions would prejudice defendant or lead to undue confusion of the jury, no abuse of discretion on the part of the trial court warranting reversal of the order of consolidation has been shown.

      References for Points in Headnotes
    [1] 1 Am Jur 2d, Actions § 156 et seq.

    [2] 1 Am Jur 2d, Actions § 157.
    Appealability of state court order granting or denying consolidation of actions. 77 ALR3d 1082.
    [3] 1 Am Jur 2d, Actions § 158.

      Affirmed.
    1. Actions — Consolidation of Actions — Prejudice — Court Rules.
    Consolidation for trial of separate actions should not be ordered if a substantial right of a party would be prejudiced or if confusion of a jury would result (GCR 1963, 505).
    2. Actions — Consolidation of Actions — Discretion — Appeal and Error — Court Rules.
    The question of whether there should be consolidation for trial of separate actions is a question addressed to the sound discretion of the trial court which will not be overruled by the Court of Appeals unless an abuse of discretion is clearly shown (GCR 1963, 505).
    3. Actions — Consolidation of Actions — Discretion — Court Rules.
    A trial court’s order consolidating for trial separate claims brought by home owners against the builder is not an abuse of discretion where the plaintiffs’ claims and the defendant’s counterclaim raised common questions of law and fact, where no substantial prejudice to the parties was shown and where there was little likelihood of jury confusion (GCR 1963, 505).

      Law Offices of Joseph E. Mihelich (by Carl F. Gerds, III), for plaintiffs.

      Schwartz, Juneau & Diskin, for defendant.
    Before: M. J. Kelly, P.J., and M. F. Cavanagh and P. C. Elliott, JJ.

       Circuit judge, sitting on the Court of Appeals by assignment.

   P. C. Elliott, J.

Defendant appeals, by leave granted, a 1978 order of the circuit court which consolidates these cases for a joint trial, under GCR 1963, 505.

Plaintiffs are next-door neighbors who purchased new homes from the defendant builder in March and July of 1972. Both actions were begun in July 1976 and sought identical relief on several identical theories. Both couples claim their basements began to leak soon after purchase and that the condition worsened over the years while defendant tried from time to time to correct the situation. One of the homeowners finally hired someone else. The same lawyers represent the parties in both cases. The witnesses will be nearly the same in each case, and the same expert will testify for the plaintiffs in each case. In each case, the defendant has filed a counterclaim for damages to its reputation, contending that each lawsuit is unwarranted and malicious.

The cases involve common questions of law. What warranties are implicit in a sale of a new home? What standard of care applies to a general contractor during construction and repair? When does the law permit recovery of exemplary damages, by counterclaim, if a lawsuit is unwarranted? There are questions of fact common to each case. Were the defendant’s basement plans and specifications adequate? Did it hire and supervise subcontractors properly? As to the counterclaim, there is the common question of: What is the extent of damages to defendant’s business reputation because of these lawsuits?

As noted in the "Authors’ Comments” concerning Rule 505 in 2 Honigman & Hawkins, Michigan Court Rules Annotated (2d ed), pp 365-366:

"Rule 505 is based upon Federal Rule 42. The qualifying words 'substantial and controlling’ do not appear in the Federal Rule and they were not in the draft of the Rule 505 as it was submitted to the Supreme Court. * * * Thus these words were added by the Supreme Court, apparently to emphasize that the issue which is used as the basis of joinder must not be a trifling or inconsequential question. This is only a matter of emphasis and should not result in a significant departure from federal practice.

<<* * * A question of law or fact should be considered 'substantial and controlling’ if it is a proposition which must be established in order to sustain any one theory of the claim of defense. A question of law or fact does not cease to be 'substantial and controlling’ simply because the disposition of other issues in a certain way might make it unnecessary to pass upon the common question of law or fact, although such a possibility might well be taken into consideration as one of the factors influencing the discretion of the court in deciding whether to grant consolidation.”

The common questions of law and fact mentioned above are substantial and controlling.

Defendant claims that consolidation was sought by plaintiffs largely to avoid the expense of separate trials and that it was ordered by the court for that reason and to benefit its docket by disposing of two trials in one. If so, we see nothing wrong in that. The purpose of the Michigna rule, and of the Federal rule from which it is taken, is to achieve trial convenience and economy in administration, generally, and to avoid needless duplication of time, effort and expense. De Figueiredo v Trans World Airlines, Inc, 55 FDR 44, 46 (SD NY, 1971).

Consolidation should not be ordered if a substantial right of a party would be prejudiced significantly or if confusion of a jury would result. Balancing the benefits against the disadvantages to the court and parties is a matter requiring sound judicial discretion, and the exercise of that discretion will not be overrruled on appeal unless it is clearly abused.

"Consolidation under Federal Rule 42, like Michigan Rule 505, rests in the sound discretion of the trial court”. 2 Honigman & Hawkins, supra, 365. See Kelley v Frank D. McKay Realty Co, 34 Mich App 370, 378; 191 NW2d 123, 127-128 (1971), and Dupont v Southern Pacific Co, 366 F2d 193, 198 (CA 5, 1966), cert den 386 US 958; 87 S Ct 1027; 18 L Ed 2d 106 (1967).

We do not think jury confusion is likely. Juries are regularly called upon to keep separate in their minds facts that are far more complicated than those that will be presented in a joint trial of these cases. Nor has any substantial prejudice to defendant been shown. Perhaps a jury might be more inclined to find fault knowing that a similar problem exists next door; but, if separate trials were conducted, the jury would probably learn of the neighbors’ lawsuit because that fact is at least relevant to the defense of the counterclaim.

In Blumenthal v Berkley Homes Inc, 342 Mich 36; 69 NW2d 183 (1955), eight dissatisfied new home buyers brought actions for fraud against the same contractor. Different defects were involved in each case, and the court assumed that, in separate trials, evidence of the other cases would be excluded. The consolidation order was reversed. That case does not control this one. In Blumenthal, the cumulative effect of otherwise inadmissible evidence of several other fraud claims, none of which were part of a single scheme or plan, would have resulted in substantial prejudice, and the potential of jury confusion was multiplied by consolidation of eight cases, each claiming a variety of different building defects. Moreover, the Blumenthal case was decided before the present rule.

Being modeled on FR Civ P 42(a), our rule 505 should be given the same liberal interpretation as the federal rule; and Michigan decisions that preceded the rule may not now control.

"Rule 505 differs from the prior statute in a number of significant features.” 2 Honigman & Hawkins, supra, 363.

Affirmed.

       See MRE 404(b) and compare Mason v Vogue Knitting Corp, 365 Mich 552; 114 NW2d 154 (1962).


author: R. M. Ransom, J.

text:
    FORT WAYNE MORTGAGE COMPANY v CARLETOS
    Docket No. 78-5294.
    Submitted June 11, 1979, at Detroit.
    Decided March 4, 1980.
    Leave to appeal denied, 408 Mich-.
    Fort Wayne Mortgage Company brought an action seeking the recovery of funds disbursed to Carlos Carletos and Swiss Construction Company, Inc., a corporation whose sole stockholder is Carletos, for construction work allegedly done on a building rehabilitation project. Plaintiff alleged that, because of forged draw request forms which had been submitted by defendants, the Federal Housing Administration, insurer of the loan, had refused to pay Fort Wayne, upon default of the loan, that portion of the loan represented by the forged draw requests. Defendant Carletos filed a counterclaim for malicious prosecution, alleging that the plaintiff had submitted to Federal officials the draw request forms for the purpose of avoiding its obligations to the defendants, knowing that the Federal officials would bring criminal charges and that the plaintiff did this despite knowing the defendants had no - intent to defraud the FHA by the submission of the draw release forms. Carletos further alleged that he had been indicted by a Federal grand jury on fraud charges arising out of his submission of the draw requests, had been tried and had been acquitted on the charges. Plaintiff moved for summary judgment on the malicious prosecution counterclaim on the basis that Carletos had failed to state a cause of action upon which relief would be granted. The Wayne Circuit Court, Thomas Roumell, J., granted the motion for summary judgment on the counterclaim and entered a final order of judgment dismissing the counterclaim. Carletos appeals. Held:

    1. Since the motion for summary judgment on the malicious prosecution counterclaim was based on the premise that Carletos failed to state a claim upon which relief could be granted, the trial court could look only to the allegations contained in the counterclaim in its consideration of the motion. For the purpose of consideration of that motion, all well-pleaded material allegations contained in the counterclaim had to be taken as true.

      References for Points in Headnotes
    [1] 61 Am Jur 2d, Pleading § 229.
    [2] 52 Am Jur 2d, Malicious Prosecution § 6.
    [3] 52 Am Jur 2d, Malicious Prosecution §§ 83, 174.
    [4] 52 Am Jur 2d, Malicious Prosecution § 177.
    Malicious prosecution: effect of grand jury indictment on issue of probable cause. 28 ALR3d 748.
    [5] 52 Am Jur 2d, Malicious Prosecution §§ 140-142.
    [6] 52 Am Jur 2d, Malicious Prosecution §§ 122, 123.

      2. The elements of malicious prosecution are: (1) a criminal proceeding instituted or continued by the defendant against the plaintiff, (2) termination of proceedings in favor of the accused, (3) absence of probable cause for the proceeding, and (4) "malice” or a primary purpose other than that of bringing the offender to justice.
    3. While normally the return of a grand jury indictment will form the basis upon which to establish probable cause and thereby negate the lack of probable cause element necessary to sustain an action for malicious prosecution, where, as here, the malicious prosecution defendant fails to make a full and fair disclosure of all facts to the public officials, the mere fact that a grand jury returns an indictment does not, standing alone, establish probable cause. The trial court was therefore in error in holding that the malicious prosecution counterclaim could not be established because of the grand jury indictment.
    4. While the malice necessary to establish a malicious prosecution action may be inferred from the absence of probable cause under certain circumstances, that rule should not be extended to the present situation. To apply such a rule where, as here, the inference would also require reliance upon the rule that imputes to the principal the knowledge of each of its agents would render the inference of malice so uncertain or speculative as to be a mere conjecture or possibility. In the absence of any allegation that the mortgage company employees having knowledge of inculpatory facts were aware of the exculpatory facts or that the mortgage company employees having knowledge of the exculpatory facts were aware of the prosecution of Carletos, an inference of malice based upon lack of probable cause cannot fairly be drawn.
    5. The element of malice, however, we sufficiently pled by the allegation in the malicious prosecution complaint which alleged that the motive of the mortgage company in submitting the allegedly forged documents to government officials was for a private purpose rather than in the interest of bringing Carletos to justice. Such an allegation, if taken as true, as it must for the purpose of a motion for summary judgment on the basis of failure to state a claim upon which relief can be granted, is sufficient to satisfy the malice element necessary for an action for malicious prosecution.
    Reversed and remanded.
    1. Motions — Summary Judgment — Failure to State Claim — Pleading — Allegations — Court Rules.
    A motion for summary judgment based on failure to state a claim upon which relief can be granted is to be tested by the pleadings alone and on such a motion all of the nonmoving party’s well-pleaded material allegations must be taken as true (GCR 1963, 117.2[1]).
    2. Malicious Prosecution — Elements.
    The elements of malicious prosecution are: (1) a criminal proceeding instituted or continued by the defendant against the plaintiff, (2) termination of the proceeding in favor of the accused, (3) absence of probable cause for the proceeding, and (4) "malice” or a primary purpose other than that of bringing the offender to justice.
    3. Malicious Prosecution — Good Faith — Material Facts.
    A defendant may escape liability for malicious prosecution where he in good faith fully and fairly revealed all material facts within his knowledge to the police or to the prosecutor who in the exercise of discretion proceeded to prosecute; however, if the defendant failed to make a full and fair disclosure of all material facts, if he gave false information, or if he interfered with the police or prosecutor’s discretion, he may not escape liability.
    4. Malicious Prosecution — Grand Jury Indictment — Probable Cause — Material Facts.
    The return of a grand jury indictment does not alone establish probable cause, such that a defendant can escape liability for malicious prosecution, where the defendant has not made a full and fair disclosure of all the facts.
    5. Malicious Prosecution — Want of Probable Cause — Malice — Inferences.
    Malice may not be inferred in a malicious prosecution action from a failure of a corporate defendant to disclose fully and completely both inculpatory and exculpatory facts where there is no allegation by the plaintiff that the employee of the corporation who disclosed to authorities the inculpatory facts was aware of the exculpatory facts or that the employees having knowledge of the exculpatory facts were aware of the prosecution of plaintiff.
    6. Malicious Prosecution — Malice — Corporation Motive — Sufficiency of Pleadings.
    An allegation in a complaint for damages for malicious prosecution that a corporation had submitted to public officials documents which were allegedly forged by the plaintiff for the purpose of avoiding its obligations to the plaintiff is sufficient to plead the element of malice necessary to state a cause of action for malicious prosecution, since the alleged motive of the corporation was other than bringing the plaintiff to justice.

      Collins & Einhorn, P.C., for plaintiff.

      James F. Finn and Mark S. Michael, for defendant.
    Before: J. H. Gillis, P.J., and Beasley and R. M. Ransom:, JJ.

       Circuit judge, sitting on the Court of Appeals by assignment.

        Drobczyk v Great Lakes Steel Corp, 367 Mich 318; 116 NW2d 736 (1962), Weiden v Weiden, 246 Mich 347; 224 NW 345 (1929).

   R. M. Ransom, J.

Defendant Carlos Carletos (hereinafter defendant) appeals as of right from the trial court’s order granting plaintiff’s motion for summary judgment, which dismissed defendant’s counterclaim alleging malicious prosecution.

The record indicates money was loaned by plaintiff for several construction projects being undertaken by various construction companies controlled by defendant. The loans were insured by the Federal Housing Administration (FHA). In order to have the money distributed as needed, Carletos would obtain a "construction draw” by submitting a "draw request form”, FHA form 2403. Before plaintiff would release any money, the form had to be signed by various persons, including certain FHA officials.

Barbara Peterson, an employee of plaintiff in the accounting department, discovered a $.60 discrepancy in one of defendant’s accounts. The FHA was informed of the discrepancy and a Federal investigation followed, which appeared to indicate that $419,000 had been paid to defendant by means of forged draw requests. Defendant was prosecuted on the charge of violating 18 USC 1010 and was acquitted.

Thereafter, plaintiff filed a complaint against defendant and one of his construction companies seeking recovery of the monies which the defendant allegedly had obtained by fraudulent means. Defendant filed a counterclaim in which he alleged that he had become short of money on one project and, thus, had entered into an agreement with certain of plaintiff’s agents, whereby plaintiff would be able to advance the necessary moneys to defendant. The agreement allegedly called for defendant to present to plaintiff forged draw requests relating to one of defendant’s construction projects, with plaintiff then advancing monies to defendant for the other project which needed the additional monies, on the understanding the advances would be repaid by defendant when he received additional funding from the Federal government. According to defendant, plaintiff’s employees knew the above arrangement was undertaken "solely for the purpose of internal accounting control” and not to defraud the Federal government.

Defendant further alleged that in spite of its knowledge concerning the above agreement, plaintiff presented the forged draw requests either to HUD or the FBI as evidence of defendant’s intent to defraud the Federal government.

Plaintiff sought summary judgment on the counterclaim pursuant to GCR 1963, 117.2(1) on the ground that Barbara Peterson only provided information to Federal authorities and that prosecution was based "solely upon the judgment and discretion of Assistant United States Attorney”.

On appeal, defendant argues the trial court erred in granting plaintiff’s motion for summary judgment because the counterclaim did state a claim upon which relief could be granted. We agree.

A motion for summary judgment pursuant to GCR 1963, 117.2(1), which alleges the opposing party has failed to state a claim or defense, is tested by reference to the pleadings alone. Todd v Biglow, 51 Mich App 346, 349; 214 NW2d 733 (1974). The well-pleaded allegations of the claimant must be accepted as true, and summary judgment must be denied unless the claim is so untenable as a matter of law that no factual development could support the claim. Bob v Holmes, 78 Mich App 205, 211; 259 NW2d 427 (1977).

The elements of malicious prosecution are: "(1) a criminal proceeding instituted or continued by the defendant against the plaintiff, (2) termination of the proceeding in favor of the accused, (3) absence of probable cause for the proceeding, and (4) 'malice’ or a primary purpose other than that of bringing the offender to justice.” Wilson v Yono, 65 Mich App 441, 443; 237 NW2d 494 (1975). The Court in Ringo v Richardson, 88 Mich App 684, 691; 278 NW2d 717 (1979), further stated:

"It is true that a defendant may escape liability for malicious prosecution by showing that he in good faith fully and fairly revealed all material facts within his knowledge to the police or prosecutor, who then in exercise of his uncontrolled discretion proceeded to prosecute, see Wilson v Yono, supra, and cases cited therein. A defendant may not escape liability, however, if he failed to make a full and fair disclosure of all material facts, if he gave false information, or if he interfered with the official’s discretion.”

On the basis of the above law, we find the trial court was incorrect , in ruling an action for malicious prosecution could not be established because defendant was indicted by a Federal grand jury. Normally, an indictment by a grand jury will form the basis upon which to establish probable cause. Nevertheless, if a full and fair disclosure is not made, a defendant may not escape liability for malicious prosecution, even if a grand jury returns an indictment. Thus, the return of an indictment by a grand jury, standing alone, will not establish probable cause.

Although certain malicious prosecution cases have held that malice may be inferred from a want of probable cause, we are unwilling to extend such rule to the case at bar. In those cases wherein it is alleged that the individual or entity which instituted the proceedings had actual knowledge of all the material facts but engaged in selective disclosure of only inculpatory information, such rule is properly applied. In such cases, the inference that the person or entity acted for a primary purpose other than that of bringing the offender to justice is warranted.

Such conclusion does not obtain here. It was not here alleged that the employee who disclosed the inculpatory information knew of the exculpatory information nor that those who knew of such exculpatory information knew that Carletos was being prosecuted. Lack of probable cause here is premised on the general rule of law which charges a principal with the knowledge of each of its agents.

An inference cannot be based upon evidence which is uncertain or speculative or which raises merely a conjecture or possibility. See People v Orsie, 83 Mich App 42; 268 NW2d 278 (1978). We hold that to infer malice from a lack of probable cause under the circumstances of the present case would effect a violation of this rule. The inference here cannot fairly be drawn.

The inference, however, is not necessary in this case. The malice of a corporation consists in the motives which prompt the action of its representatives. Tutton v Olsen & Ebann, 251 Mich 642, 650; 232 NW 399 (1930). Defendant’s counterclaim for malicious prosecution alleges that plaintiff submitted to Federal officials the allegedly forged documents "all for the purpose of seeking to avoids [sic] its obligations to [the defendant]”. The allegation satisfies the malice element of defendant’s cause of action in the sense that it states that plaintiff’s primary purpose was other than that of bringing the defendant to justice. See Ringo v Richardson, supra.

The other elements of defendant’s cause having been sufficiently alleged, the grant of summary judgment on the ground that defendant failed to state a claim upon which relief can be granted, GCR 1963, 117.2(1), was erroneous. We remand to the trial court but note that our ruling should not be interpreted to prejudice the right of Fort Wayne Mortgage Company to seek summary judgment under GCR 1963, 117.2(3) if deemed appropriate.

Reversed and remanded.

         Macomb v Wilkinson, 83 Mich 486; 47 NW 336 (1890), Loveland v Bump, 198 Mich 564; 165 NW 855 (1917).


text:
    PEOPLE v DORRIS PEOPLE v MURRAY
    Docket Nos. 43162, 77-4860.
    Submitted January 4, 1980, at Detroit.
    Decided March 4, 1980.
    Leave to appeal applied for.
    Jo Ann Dorris and John Murray were convicted of possession of an incendiary device, Recorder’s Court of Detroit, Henry L. Heading, J. The defendants appeal, alleging that 1) the trial judge improperly denied a motion for directed verdicts of acquittal because the proofs offered by the prosecution did not sufficiently comply with the charge in the information, 2) the people failed to prove that the "Molotov cocktails” would explode, 3) the doctrine of ejusdem generis requires that the term "highly incendiary” be restricted to a definition which incorporates an explosive device, 4) the prosecution concluded its proofs without presenting testimony that the defendants had an unlawful intent, and 5) the court should have advised the jury of the prosecution’s burden of proving that the containers involved were "Molotov cocktails”. Held:

    1. The denial of the defendants’ motion for directed verdicts was proper. Although the information incorrectly called the devices in question "Molotov cocktails”, the information still was very similar to the language in the statute under which the defendants were charged and the defendants were fully aware of the specific act said to violate the law. There was sufficient evidence presented by the prosecution for the jury to conclude that all elements of the crime were established beyond a reasonable doubt.
    2. The prosecution did not have to prove that the devices were "Molotov cocktails”, nor that they would explode.
    3. The doctrine of ejusdem generis has no application to the instant case. The statute under which the defendants were convicted expresses a legislative intent to prohibit fire-starting or fire-spreading devices and is not limited to bombs or explosive implements.

      References for Points in Headnote's
    [1] 41 Am Jur 2d, Indictments and Informations § 89.
    [2] 5 Am Jur 2d, Appeal and Error § 886.
    [3] 29 Am Jur 2d, Evidence §§ 9-11.

      4. The statute specifically provides that possession of a prohibited device is prima facie evidence of the possessor’s intent to use the devices unlawfully. There was sufficient evidence adduced to allow the jury to conclude that the defendants had possession of the devices. It is neither unreasonable nor unconstitutional to presume unlawful intent from possession Of the devices in the instant case.
    5. The crime as charged in the information was in fact proven. There was no need to prove that the devices were "Molotov cocktails”.
    Affirmed.
    1. Criminal Law — Information — Statutes.
    A criminal charge in an information is sufficient where the illegal conduct of a defendant is phrased in the language of the applicable criminal statute.
    2. Criminal Law — Appeal and Error — Motions — Directed Verdict of Acquittal — Reasonable Doubt.
    A reviewing court, in passing on a motion for a directed verdict of acquittal in a criminal case, must consider only the evidence which had been introduced at the time the motion was made, view that evidence in the light most favorable to the prosecution, and determine whether that evidence would justify a reasonable man in concluding that all elements of the crime were established beyond a reasonable doubt.
    3. Criminal Law — Statutes — Presumptions.
    Legislative presumptions in criminal statutes are valid so long as there is a rational connection between the proven facts and the fact to be presumed; if the presumed fact is more likely than not to flow from the proven facts, the presumption is constitutionally valid.

      Frank J. Kelley, Attorney General, Robert A. Derengoski, Solicitor General, William L. Cahalan, Prosecuting Attorney, Edward R. Wilson, Principal Attorney, Appeals, and Anne B. Wetherholt, Assistant Prosecuting Attorney, for the people.
    I. Goodman Cohen (by Charles E. Kovsky), for defendants on appeal.

      Before: T. M. Burns, P.J., and Bashara and N. J. Kaufman, JJ.
   Bashara, J.

Defendants appeal from their convictions by a jury of possession of an incendiary device, MCL 750.211A; MSA 28.408(1).

Defendants first contend that the trial judge improperly denied a motion for directed verdicts because the proofs offered by the prosecutor did not sufficiently comply with the charge in the information. They argue that, therefore, the trial judge should have granted their motion for directed verdicts at the close of the prosecution’s proofs. Count I of the information alleged that defendants

"did have in their possession 5 molotov cocktails device which was [sic] designed to explode upon impace [sic] or explode upon the application of heat or a flame, or which was highly incendiary and with intent to use the device unlawfully against the person or property of another, contrary to Sec. 750.211a, M.C.L.A.”

The gist of defendants’ argument is that the testimony of the only qualified expert was that defendants were not in possession of "Molotov cocktails”.

The prosecution presented two witnesses who testified as to the contents and properties of the containers found in the trunk of the auto owned by one of the defendants and in which they were riding when apprehended. The first, from the Detroit Police Department arson squad, referred to the containers as "Molotov cocktails”. The second, from the State Department of Public Health crime detection laboratory, testified that the containers would not be classified as "Molotov cocktails” because they lacked sulphuric acid. However, both witnesses agreed that the containers were filled with gasoline and each contained a wick. They also concurred in the opinion that the containers would be highly inflammable. The State Health Department witness indicated that if the wick was lighted and the container thrown, the liquid in the container would ignite as it spilled out on impact.

A review of the testimony leads us to conclude that the defendants were fully aware of the specific act said to violate the law. Other than the term "Molotov cocktails”, the information is very similar to the statutory language. All that need be proved is that defendants had in their "possession any device * * * which * * * is highly incendiary, with intent to use the device unlawfully against the person or property of another”. MCL 750.211a; MSA 28.408(1).

A charge in which the illegal conduct of the defendant is phrased in the language of the statute is sufficient. People v Lightstone, 330 Mich 672; 48 NW2d 146 (1951), People v Kelley, 78 Mich App 769; 260 NW2d 923 (1977).

The standard for review of a trial court’s denial of a motion for a directed verdict was well stated in People v Royal, 62 Mich App 756, 757-758; 233 NW2d 860 (1975):

"In passing on a motion for a directed verdict of acquittal in a criminal case, the reviewing court must 1) consider only the evidence which had been introduced at the time the motion was made, * * * 2) view that evidence in the light most favorable to the prosecution, * .* * and 3) determine whether that evidence, if credible and believed, would justify a reasonable man in concluding that all elements of the crime were established beyond a reasonable doubt.” (Citations and footnotes omitted.)

Viewed in light of the foregoing parameters, we find the court’s denial of the motion for directed verdicts to be proper.

Defendants also claim that the people failed to prove that the "Molotov cocktails” would explode. We reject the argument. The prosecution did not have to prove that the confiscated containers were "Molotov cocktails”, nor that they would explode. As previously stated, the language of the statute permits a showing that the device was highly incendiary.

Defendants contend the doctrine of ejusdem generis requires that the term "highly incendiary” be restricted to a definition which incorporates an explosive device. To the contrary, In re Mosby, 360 Mich 186, 192; 103 NW2d 462 (1960), advises:

"The rule of ejusdem generis is not to be invoked in every case where general words follow (or possibly precede) specific words. For example, it applies only where the specific words relate to subjects of a single kind, class, character, or nature, as noted above. In all events, the rule is useful only for the purpose of aiding the judicial search for the sometimes elusive scrivener’s intent. Where the language used, considered in its entirety, discloses no purpose of limiting the general words used, the rule of ejusdem generis may not be invoked to defeat or limit the purpose of the enactment.”

See also, People v Powell, 280 Mich 699; 274 NW 372 (1937), and People v O’Hara, 278 Mich 281; 270 NW 298 (1936).

Before the enactment of the present statute in 1966, and amendment in 1968, MCL 750.210; MSA 28.407 was the only statutory prohibition against such devices and it specifically referred to "bombs”. MCL 750.211a should be viewed as expressing the legislative intent to prohibit fire-starting or spreading devices, and not restricted to "bombs” or explosive implements. We conclude that the doctrine of ejusdem generis has no application to the case at bar.

The record supports the prosecution’s charge. It was within the province of the jury to determine whether the crime was proved beyond a reasonable doubt.

Defendants argue that the people concluded their proofs without presenting testimony that the defendants had an unlawful intent. The statute specifically provides that possession of a prohibited device under this section is prima facie evidence of the possessor’s intent to use the devices unlawfully. Clearly, there was sufficient evidence adduced to allow the jury to conclude that defendants had possession of the devices.

Legislative presumptions are valid so long as there is a rational connection between the proven facts and the fact to be presumed. People v Gallagher, 404 Mich 429; 273 NW2d 440 (1979), People v John E. Moore, 78 Mich App 565; 261 NW2d 3 (1977), aff'd 402 Mich 538; 266 NW2d 145 (1978). If the presumed fact is more likely than not to flow from the proven fact, the presumption is constitutionally valid. People v Gallagher, supra.

Explosive and incendiary devices generally have no legal purpose, except for use by military personnel. It is more likely than not that one in possession of the type of device referred to in the statute possesses the article with unlawful intent. Therefore, presuming intent from possession in the case at bar would be neither unreasonable nor unconstitutional.

It is true that the statute speaks to prima facie evidence rather than a mere presumption. However, in People v Kayne, 268 Mich 186; 255 NW 758 (1934), an ordinance using the term prima facie evidence, rather than presumption, was before the Michigan Supreme Court. A fair reading of that case would make it appear that the Court has given these terms the same legal meaning for purposes of testing an enactment’s validity.

Defendants finally assert that the court should have advised the jury of the prosecution’s .burden of proving that the containers involved were "Molotov cocktails”. Reading the jury instructions in their entirety, we are convinced that the crime as charged in the information was in fact proven. In view of our prior holding, this argument is without merit.

Affirmed.

       MCL 767.45; MSA 28.985 states that the information or indictment shall "fairly apprise the accused and the court of the offense charged”.

       The full text of MCL 750.211a; MSA 28.408(1) is as follows:
      "Sec. 211a. Any person who shall make, construct or have in his possession any device which is designed to explode or which will explode upon impact or with the application of heat or a flame, or which device is high incendiary, with intent to use the device unlawfully against the person or property of another is guilty of a felony. For the purposes of prosecution under this section, possession of such a device is prima facie evidence of the possessor’s intent to use the device unlawfully against the person or property of another.”