5504 Reuter LLC v. Deutsche Bank National Trust Company ( 2014 )

STATE OF MICHIGAN
COURT OF APPEALS
5504 REUTER, L.L.C., UNPUBLISHED
December 18, 2014
Plaintiff-Appellant,
v No. 317854
Wayne Circuit Court
DEUTSCHE BANK NATIONAL TRUST LC No. 11-011647-CK
COMPANY,
Defendant-Appellee,
and
OLD REPUBLIC NATIONAL TITLE
INSURANCE COMPANY,
Defendant.
Before: RIORDAN, P.J., and BECKERING and BOONSTRA, JJ.
PER CURIAM.
Plaintiff, 5504 Reuter LLC, appeals as of right the January 31, 2013 order granting
summary disposition to defendant1 Deutsche Bank National Trust Company on plaintiff’s claims
for breach of contract, silent fraud, and fraudulent inducement. We affirm.
I. PERTINENT FACTS AND PROCEDURAL HISTORY
The underlying action concerns property sold to plaintiff; the property was scheduled to
be demolished at the time of the sale and plaintiff did not discover as much until after the sale
was consummated, despite the fact that the demolition notice was a matter of public record.
1
Defendant Old Republic National Title Insurance Company entered into a settlement agreement
with plaintiff after plaintiff filed its complaint. Hereinafter, all references to “defendant” will
refer solely to Deutsche Bank National Trust Company.
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Plaintiff is an entity engaged in purchasing and rehabilitating houses and then selling
those houses for a profit.2 On or about April 25, 2011, plaintiff, by “special or limited warranty
deed,” purchased a previously foreclosed and bank-owned residential structure located at 5504
Reuter in Dearborn (“the property”). The seller listed on the sales contract was “Ocwen Loan
Servicing, LLC,” which acted as a loan servicing agent for defendant pursuant to a pooling and
servicing agreement dated May 1, 2003. Defendant was not mentioned in the sales agreement;
however, it is undisputed that defendant owned the property before it was sold to plaintiff.
Plaintiff paid $21,765 for the property, $20,000 of which was for the purchase of the property,
and the remaining $1,765 of which was for unpaid taxes and closing costs. Addendum A to the
sales agreement explained that the property was being sold “as-is, where-is, and with all
faults[,]” that the seller did not make any representations about the property, and that plaintiff did
not rely on any representations made by the seller.
As part of the sales transaction, plaintiff purchased title insurance from Old Republic
National Title Insurance Company. Old Republic performed a title search and did not identify
any encumbrances or defects in the title. Significantly, Old Republic’s title search did not reveal
the demolition notice, which was recorded in the Wayne County Register of Deeds. It is unclear
why Old Republic’s title search did not reveal the demolition notice.
Plaintiff purchased the property and began renovating the home. During the midst of
renovations, a representative from the city of Dearborn visited the property and ordered that all
work cease immediately. The city representative informed plaintiff that, since June 2005, the
property had been the subject of demolition proceedings and that it was scheduled for demolition
because the city had declared the home to be in a dangerous and unsafe condition. The
demolition notice was recorded in the Wayne County Register of Deeds in June 2005.
On September 22, 2011, plaintiff filed a four-count complaint against defendant and Old
Republic. Plaintiff asserted claims for breach of contract, silent fraud, and fraudulent
inducement against defendant. It also asserted a claim for breach of contract against Old
Republic. Plaintiff subsequently settled its claim against Old Republic, and the action proceeded
against defendant.3
After the close of discovery, defendant moved for summary disposition pursuant to MCR
2.116(C)(8) and (C)(10). Concerning plaintiff’s breach of contract claim, defendant noted that
Ocwen, not defendant, was listed as the seller in the sales agreement with plaintiff and argued
that, where it was not a party to the contract, it could not be held liable for breach of that
agreement. Defendant also noted the “as-is” clause in Addendum A to the sales contract and
argued that this clause prevented plaintiff from asserting a claim for breach of contract based on
2
According to plaintiff’s representations in its brief on appeal and in its opposition to
defendant’s motion for summary disposition, plaintiff is well versed in real estate and purchasing
distressed houses.
3
According to representations by defendant’s counsel at a January 17, 2013 motion hearing,
plaintiff settled with Old Republic for $20,000—the full policy limit.
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the demolition order. Regarding plaintiff’s claims for fraudulent inducement and silent fraud,
defendant argued that it never made any representations or withheld any information from
plaintiff. It also argued that plaintiff’s claims should fail because plaintiff was charged with
constructive notice of the demolition order, as it was a matter of public record.
Following a hearing on defendant’s motion, the trial court granted summary disposition
to defendant. The trial court noted that plaintiff alleged that it made inquiries about the property,
but it failed to provide evidence of the substance of the inquiries, to whom the inquiries were
made, and when the inquiries were made. The trial court noted that plaintiff’s affidavit from
Joseph A. Traficante, Jr., a member of plaintiff, purported to provide evidence of the inquiries
that plaintiff made to defendant, but the affidavit was “really vague[.]” The trial court, probing
plaintiff’s counsel for more factual details, inquired whether discovery had closed, and plaintiff’s
counsel confirmed that it had. After a thorough discourse regarding plaintiff’s claims and the
sufficiency of its proofs, the trial court ultimately opined that plaintiff “got the . . . shaft”, but
granted summary disposition to defendant on all of plaintiff’s claims. Concerning the breach of
contract claim, the trial court found that there was no proof of a breach; it also noted that the
sales contract was not signed by a representative of defendant and that the contract sold the
property “as is.” Concerning fraudulent inducement and silent fraud, the trial court noted that
plaintiff failed to identify specific statements or specific individuals who allegedly made
statements to plaintiff. Further, it found that there was no duty to disclose something that was a
matter of public record, so summary disposition was appropriate on plaintiff’s silent fraud claim.
Thereafter, the trial court denied plaintiff’s motion for reconsideration. This appeal
followed.
II. STANDARD OF REVIEW
An appellate court reviews de novo the trial court’s decision to grant summary
disposition. Latham v Barton Malow Co, 480 Mich. 105, 111; 746 NW2d 868 (2008). Defendant
moved for summary disposition pursuant to MCR 2.116(C)(8) and (C)(10). It is apparent from
the trial court’s comments at the summary disposition hearing that the trial court considered
information outside of the pleadings. As such, this Court considers the motion to have been
granted under MCR 2.116(C)(10). Hughes v Region VII Area Agency on Aging, 277 Mich. App.
268, 273; 744 NW2d 10 (2007). In reviewing the trial court’s decision on a motion for summary
disposition under MCR 2.116(C)(10), this Court “review[s] the evidence and all legitimate
inferences in a light most favorable to the nonmoving party.” Coblentz v Novi, 475 Mich. 558,
567-568; 719 NW2d 73 (2006). Under MCR 2.116(C)(10), “[s]ummary disposition is
appropriate if there is no genuine issue regarding any material fact and the moving party is
entitled to judgment as a matter of law.” Latham, 480 Mich. at 111.
Resolution of plaintiff’s issues also requires interpretation of the sales agreement and first
addendum thereto. Contract interpretation is a question of law that this Court reviews de novo.
Citizens Ins Co v Secura Ins, 279 Mich. App. 69, 72; 755 NW2d 563 (2008). “The goal of
contract interpretation is to first determine, and then enforce, the intent of the parties based on
the plain language of the agreement.” Harbor Park Market, Inc v Gronda, 277 Mich. App. 126,
130; 743 NW2d 585 (2007).
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III. BREACH OF CONTRACT
“A party asserting a breach of contract must establish by a preponderance of the evidence
that (1) there was a contract (2) which the other party breached (3) thereby resulting in damages
to the party claiming breach.” Miller-Davis Co v Ahrens Constr, Inc, 495 Mich. 161, 178; 848
NW2d 95 (2014). “It goes without saying that a contract cannot bind a nonparty.” AFSCME
Council 25 v Wayne Co, 292 Mich. App. 68, 80; 811 NW2d 4 (2011) (citation and quotation
omitted).
As an initial matter, summary disposition with regard to plaintiff’s breach of contract
claim was appropriate because defendant was not a party to the contract. The sales contract and
first addendum thereto only refer to Ocwen as the seller and the party with whom plaintiff
contracted. The documents make no mention of defendant. “It goes without saying that a
contract cannot bind a nonparty.” Id. (citation and quotation omitted). Moreover, plaintiff has
not made an argument that Ocwen was acting as an agent for defendant in the underlying
transaction or that, because of such an agency relationship, defendant should be held liable for
any breaches by Ocwen. This Court should not make such an argument for plaintiff. “It is not
enough for an appellant in his brief simply to announce a position or assert an error and then
leave it up to this Court to discover and rationalize the basis for his claims, or unravel and
elaborate for him his arguments . . . .” Mudge v Macomb Co, 458 Mich. 87, 105; 580 NW2d 845
(1998) (citation and quotation omitted).
Further, even ignoring that defendant is not listed on the sales contract, plaintiff cannot
establish a breach of the contract. Plaintiff makes two arguments in support of its breach of
contract claim. Plaintiff initially points to a city ordinance. The ordinance requires that the
owner of property, or the owner’s agent, must, before consummating a sale of real property in
the city of Dearborn, present the purchaser with a copy of an inspection report or certificate of
occupancy. Dearborn Ordinance, § 11-42(a). One who violates the ordinance is subject to a
misdemeanor or fine. Dearborn Ordinance, § 1-9(a). The ordinance does not provide a private
right of action, nor does it permit a party to void an otherwise valid contract if the buyer failed to
provide an inspection report. Here, it is undisputed that neither defendant nor Ocwen provided
an inspection report to plaintiff. However, plaintiff makes no argument that this ordinance was a
part of the contract. And, a review of the contract contains no mention of the ordinance or a duty
on the part of the seller to provide an inspection report. Rather, the contract provides the
opposite; it expressly stated that the seller, Ocwen, would not provide an inspection report and
encouraged plaintiff to obtain an inspection report.4 Plaintiff’s argument lacks merit.
Next, plaintiff argues that defendant breached the implied duty of good faith and fair
dealing. This argument is meritless. “Unlike some other jurisdictions, Michigan does not
recognize a cause of action for breach of the implied covenant of good faith and fair dealing.” In
re Leix Estate, 289 Mich. App. 574, 591; 797 NW2d 673 (2010) (citation and quotation omitted).
See also Belle Isle Grill Corp v Detroit, 256 Mich. App. 463, 476; 666 NW2d 271 (2003)
4
Plaintiff concedes that its representative did perform a visual inspection of the property before
the sale.
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(explaining that “Michigan does not recognize a claim for breach of an implied covenant of good
faith and fair dealing . . . and therefore [the trial court] properly dismissed this claim.”). In order
to succeed on a breach of contract claim, plaintiff would need to show a breach of the terms of
the contract itself; it cannot premise a breach of contract action on a breach of the implied duty
of good faith and fair dealing. In re Leix Estate, 289 Mich. App. at 591. Plaintiff has not done so.
Accordingly, there was no genuine issue of material fact on the breach of contract claim and
plaintiff is not entitled to relief. See Latham, 480 Mich. at 111.
IV. SILENT FRAUD
Plaintiff next argues that the trial court erred when it granted summary disposition on its
silent fraud claim. “Silent fraud has also long been recognized in Michigan.” Titan Ins Co v
Hyten, 491 Mich. 547, 557; 817 NW2d 562 (2012).
This doctrine holds that when there is a legal or equitable duty of disclosure, [a]
fraud arising from the suppression of the truth is as prejudicial as that which
springs from the assertion of a falsehood, and courts have not hesitated to sustain
recoveries where the truth has been suppressed with the intent to defraud. [Id.
(citation and quotation omitted).]
“To prove silent fraud, also known as fraudulent concealment, the plaintiff must show that the
defendant suppressed the truth with the intent to defraud the plaintiff and that the defendant had a
legal or equitable duty of disclosure.” Lucas v Awaad, 299 Mich. App. 345, 363-364; 830 NW2d
141 (2013). “A plaintiff cannot merely prove that the defendant failed to disclose something;
instead, a plaintiff must show some type of representation by words or actions that was false or
misleading and was intended to deceive.” Id. at 364 (citation and quotation omitted). “Silent
fraud is essentially the same [as fraudulent misrepresentation] except that it is based on a
defendant suppressing a material fact that he or she was legally obligated to disclose, rather than
making an affirmative misrepresentation.” Alfieri v Bertorelli, 295 Mich. App. 189, 193; 813
NW2d 772 (2012).
Whether a duty to disclose exists is a question of law. Lucas, 299 Mich. App. at 365.
“Such a duty may arise by law or equity; an example of the latter is a buyer making a direct
inquiry or expressing a particularized concern.” Alfieri, 295 Mich. App. at 193. “A misleading
incomplete response to an inquiry can constitute silent fraud.” Id. at 193-194. As explained in
M&D, Inc v WB McConkey, 231 Mich. App. 22, 29; 585 NW2d 33 (1998)
Our Supreme Court has recognized a vendor’s duty to disclose material facts
when the vendor and purchaser have generally discussed the condition at issue-
when the purchaser has expressed some particularized concern or made a direct
inquiry-and the seller fails to fully disclose the material facts within the seller’s
knowledge related to the condition and the buyer detrimentally relies upon the
resulting misdirection.
Fraud “is not to be lightly presumed, but must be clearly proved . . . by clear, satisfactory and
convincing evidence . . . .” Cooper v Auto Club Ins Ass’n, 481 Mich. 399, 414; 751 NW2d 443
(2008) (citations and quotations omitted).
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We find that summary disposition was appropriate because plaintiff failed to produce
evidence to demonstrate a genuine issue of material fact concerning whether defendant had a
duty to disclose the existence of the recorded demolition order. Plaintiff contends that it made a
“direct inquiry” to defendant concerning whether there were any problems or issues with the
property. However, plaintiff failed to provide factual support for this assertion. Plaintiff cites
Traficante’s affidavit, which states:
I made several inquiries with the seller as to the current status of the home. . . . I
was told repeatedly by the seller and the listing agent that other than the physical
and aesthetic shortcomings, there were no other issues pending that would impede
my ownership of this house, or my plans to renovate same.
This affidavit does not suffice to create a genuine issue of material fact as to whether plaintiff
made a particularized inquiry to defendant that would create an equitable duty of disclosure.
Traficante’s affidavit only mentions “the seller,” which was Ocwen, not defendant. Where
defendant was not the seller, it is unclear if this allegation even refers to defendant, and plaintiff
has not articulated an agency theory in an attempt to hold defendant liable for any acts by
Ocwen. Further, Traficante’s affidavit does not specify the individual who made the alleged
representation or when the alleged representation was made, and it is vague as to the substance
of the representation. The affidavit amounts to nothing more than conclusory statements that are
devoid of detail, and, even when viewed in a light most favorable to plaintiff, these statements do
not create a genuine issue of material fact on the issue of whether defendant owed plaintiff a duty
of disclosure. See Quinto v Cross & Peters Co, 451 Mich. 358, 371-372; 547 NW2d 314 (1996)
(explaining that conclusory allegations that are devoid of detail are insufficient to create a
genuine issue of material fact). Additionally, the record does not contain any other factual
support for plaintiff’s claim. At most, plaintiff asserted that defendant knew the truth; plaintiff
did not support its contention that defendant made any representations or any attempts to conceal
the truth. That is not enough to create a genuine issue of material fact on a silent fraud claim.
See Lucas, 299 Mich. App. at 363-364. See also Roberts v Saffell, 280 Mich. App. 397, 404; 760
NW2d 715 (2008) (explaining that it is not enough to merely allege that the defendant knew the
truth but made no representations).
In addition, there was no genuine issue of material fact concerning whether defendant
was under a legal duty to disclose the demolition notice. A legal duty of disclosure may arise by
contract. M&D, Inc, 231 Mich. App. at 33. Here, as noted, defendant was not a party to the
contract. And, to the extent defendant could be considered a party to the contract, the contract
expressly stated that it disclaimed any warranties and that the property was being sold “as is.”
This could not create a legal duty of disclosure. See id. (finding that the plaintiff failed to
establish a legal duty pursuant to a sales contract when the contract expressly disclaimed
representations and warranties and stated that the property was being sold “as is.”).
In arguing that summary disposition was inappropriate, plaintiff attempts to compare this
case to cases involving latent defects. See, e.g., Clemens v Lesnek, 200 Mich. App. 456, 460-461;
505 NW2d 283 (1993) (discussing cases where latent defects were concealed). However, this
was not a case involving a latent defect. Rather, it was a case where the matter that was alleged
to have been concealed—the existence of the demolition notice—was a matter of public record.
And, more importantly, there is no genuine issue of material fact regarding whether defendant
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had a duty to disclose the demolition notice to plaintiff. Therefore, the trial court did not err in
granting summary disposition to defendant.
V. FRAUDULENT INDUCEMENT
Plaintiff next argues that the trial court erred by granting summary disposition on its
fraudulent inducement claim. This claim required plaintiff to establish that:
(1) the defendant made a material representation; (2) the representation was false;
(3) when the defendant made the representation, the defendant knew that is was
false, or made it recklessly, without knowledge of its truth and as a positive
assertion; (4) the defendant made the representation with the intention that the
plaintiff would act upon it; (5) the plaintiff acted in reliance upon it; and (6) the
plaintiff suffered damage. [Rooyakker & Sitz, PLLC v Plante & Moran, PLLC,
276 Mich. App. 146, 161; 742 NW2d 409 (2007) (citations and quotation
omitted).]
The trial court did not err by granting summary disposition under MCR 2.116(C)(10)
because plaintiff failed to establish a genuine issue of material fact on its fraudulent inducement
claim. Plaintiff’s brief, as well as the documents submitted before the trial court, fail to identify
a material, false representation made by defendant. Plaintiff’s proofs failed to allege any
representation by defendant. Traficante’s affidavit alleged, generally, “I was told repeatedly by
the seller and the listing agent” that there were “no other issues pending that would impede my
ownership of this house, or my plans to renovate the same.” Notably, this affidavit does not
allege any representations made by defendant. It only refers to representations made by “the
seller”—Ocwen—and “the listing agent,” neither of whom are defendant. Further, plaintiff does
not argue an agency theory whereby it seeks to hold defendant liable for representations made by
its agents. More significantly, even if plaintiff had advanced such a theory, the claim would not
survive a motion for summary disposition pursuant to MCR 2.116(C)(10). Traficante’s affidavit
makes nothing more than conclusory, sweeping allegations. It makes no reference to the specific
individual who made the alleged representations, the specific content of the alleged
representation, or the timing of the alleged representation. Fraud must be proved by clear and
convincing evidence. Cooper, 481 Mich. at 414. These broad, conclusory allegations by
plaintiff, which are wholly lacking in detail, are insufficient to create a genuine issue of material
fact. See Quinto, 451 Mich. at 371-372. See also LaMothe v Auto Club Ins Ass’n, 214 Mich. App.
577, 586; 543 NW2d 42 (1995) (“[M]ere speculations are not sufficient to overcome a motion
for summary disposition. As a result, plaintiff’s claims of fraud were appropriately dismissed
pursuant to MCR 2.116(C)(8) and (10).”).
VI. MOTION FOR RECONSIDERATION
With no development of the issue, plaintiff contends that the trial court erred in denying
its motion for reconsideration. Because plaintiff failed to adequately brief this issue, we could
find the matter abandoned. See Mudge, 458 Mich. at 105. Furthermore, the issue is meritless.
This Court reviews the trial court’s decision on a motion for reconsideration for an abuse of
discretion. Yoost v Caspari, 295 Mich. App. 209, 219; 813 NW2d 783 (2012). Concerning a
motion for reconsideration, MCR 2.119(F)(3) provides:
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Generally, and without restricting the discretion of the court, a motion for
rehearing or reconsideration which merely presents the same issues ruled on by
the court, either expressly or by reasonable implication, will not be granted. The
moving party must demonstrate a palpable error by which the court and the
parties have been misled and show that a different disposition of the motion must
result from correction of the error.
Here, plaintiff’s motion for reconsideration merely raised the same arguments that plaintiff now
raises in its brief on appeal. These arguments raised the same issues that had already been ruled
upon by the trial court. And, as noted above, these arguments lacked merit. Therefore, the trial
court did not abuse its discretion when it denied plaintiff’s motion for reconsideration. Yoost,
295 Mich. App. at 220.
VII. DEFENDANT’S ALTERNATE GROUNDS FOR AFFIRMANCE
As an alternate ground for affirmance, defendant argues that plaintiff is not entitled to
any relief because it contends that the only party who should be liable to plaintiff in this instance
is Old Republic, and that defendant should not be held responsible for Old Republic’s failure to
identify the demolition notice in its title search. Because summary disposition was appropriate
for the reasons discussed above, we need not consider defendant’s alternate grounds for
affirmance. See Bloemendaal v Town & Country Sports Center, Inc, 255 Mich. App. 207, 216;
659 NW2d 684 (2002).
Affirmed.
/s/ Michael J. Riordan
/s/ Jane M. Beckering
/s/ Mark T. Boonstra
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