Reginald Petite v. Debra White ( 2020 )

If this opinion indicates that it is “FOR PUBLICATION,” it is subject to
revision until final publication in the Michigan Appeals Reports.
STATE OF MICHIGAN
COURT OF APPEALS
REGINALD PETITE, UNPUBLISHED
February 18, 2020
Plaintiff-Appellant,
v No. 345551
Macomb Circuit Court
DEBRA WHITE, CHEREA WHITE, and RANDY LC No. 2017-001148-NF
PATTERSON,
Defendants,
and
EVEREST NATIONAL INSURANCE
COMPANY,
Defendant-Appellee.
Before: MURRAY, C.J., and SWARTZLE and CAMERON, JJ.
PER CURIAM.
Plaintiff, Reginald Petite (“Petite”), appeals the trial court’s order granting summary
disposition in favor of defendant Everest National Insurance Company (“Everest”). We vacate
and remand to the trial court so that it can consider whether rescission is available as an equitable
remedy as between Petite and Everest.
I. FACTS AND PROCEDURAL HISTORY
This matter arises from a motor vehicle accident that occurred on April 21, 2016. At the
time of the accident, Petite was a passenger in a Mercury Grand Marquis, which was being driven
by Randy Patterson. The Grand Marquis was insured with Everest by Cherea White. In March
2017, Petite filed a complaint seeking, in relevant part, personal protection insurance (“PIP”)
benefits from Everest under the no-fault act, MCL 500.3101 et seq. In response, Everest sought
to preclude Petite’s claim, arguing that if it discovered that White made a material
misrepresentation in obtaining the insurance policy, Everest could rescind the policy. Discovery
commenced.
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After the close of discovery, Everest filed a motion for summary disposition under MCR
2.116(C)(10), arguing that it was not liable to Petite for PIP benefits. In support of its motion,
Everest asserted that White failed to list Patterson and their daughter as members of her household
when she applied for the insurance policy. Because of this misrepresentation, Everest argued that
it was entitled to rescind the policy under both the general principles of contract law and the
specific terms of White’s insurance policy. Everest also asserted that following this Court’s
decision in Bazzi v Sentinel Ins Co, 315 Mich. App. 763, 770; 891 NW2d 13 (2016), aff’d in part
and rev’d in part 502 Mich. 390 (2018), a third-party has no right to claim benefits when an
insurance policy had been rescinded because of fraud. Petite opposed the motion.
During oral argument on Everest’s motion, Petite asserted that it would be inequitable for
the trial court to deem the insurance policy rescinded as it concerned Petite. The trial court
disagreed with Petite and granted summary disposition in favor of Everest, stating that White’s
misrepresentation rendered the insurance policy void ab initio and that, because there was no
insurance policy to enforce, Everest was not liable to Petite for PIP benefits. This appeal followed.
II. ANALYSIS
Petite argues on appeal that the trial court erred by granting summary disposition in favor
of Everest given our Supreme Court’s holding in Bazzi v Sentinel Ins Co, 502 Mich. 390; 919
NW2d 20 (2018), that a trial court is required to balance the equities before holding that rescission
is an appropriate remedy when an innocent third party is involved.1 We agree.
We review de novo a trial court’s decision on a motion for summary disposition. Defrain
v State Farm Mut Ins Co, 491 Mich. 359, 366; 817 NW2d 504 (2012). Although the trial court did
not identify the subrule under which it granted summary disposition, it is apparent that the motion
was granted under MCR 2.116(C)(10) because the trial court’s consideration went beyond the
parties’ pleadings. Kosmalski ex rel Kosmalski v St John’s Lutheran Church, 261 Mich. App. 56,
59; 680 NW2d 50 (2004). A motion under MCR 2.116(C)(10) tests the factual support of a
plaintiff’s claim.
Summary 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. In
1
Everest argues on appeal that Petite failed to properly preserve his argument for review because,
in the trial court, Petite did not rely on our Supreme Court’s decision in Bazzi. While it is true that
Petite failed to specifically cite Bazzi—a then-recent case from our Supreme Court that directly
spoke to the question the trial court was attempting to decide—we nevertheless find that the
argument is preserved. Review of the record shows that Petite argued before the trial court that it
would be inequitable for the court to deny him PIP benefits because he was a third-party who was
innocent of any misrepresentation in the procurement of the insurance policy. This is the same
argument that Petite raises on appeal. Thus, we conclude that Petite’s argument is preserved. See
Steward v Panek, 251 Mich. App. 546, 554; 652 NW2d 232 (2002) (“[T]hat plaintiff[] may not have
fully briefed and argued th[e] issue in [his] lower court pleadings, or that [he] now cite[s] authority
that the circuit court did not consider, does not preclude [him] from raising the issue on appeal.”).
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reviewing a motion under MCR 2.116(C)(10), this Court considers the pleadings,
admissions, affidavits, and other relevant documentary evidence of record in the
light most favorable to the nonmoving party to determine whether any genuine
issue of material fact exists to warrant a trial. A genuine issue of material fact exists
when the record, giving the benefit of reasonable doubt to the opposing party,
leaves open an issue upon which reasonable minds might differ. [Zaher v Miotke,
300 Mich. App. 132, 139-140; 832 NW2d 266 (2013) (quotation marks and citations
omitted).]
In Bazzi, our Supreme Court held that an insurer may resort to traditional legal and
equitable remedies—including rescission—on the basis of fraud in the application for insurance
even when doing so would affect an innocent third party. However, our Supreme Court rejected
the defendant insurance company’s contention that it was “categorically entitled” to rescission of
an insurance policy under circumstances in which an innocent third party was involved. Bazzi,
502 Mich. at 408. The Bazzi Court held that, because the remedy of rescission was equitable in
nature, it was not “a matter of right[,]” but could only be granted in the trial court’s discretion. Id.,
quoting Amster v Stratton, 259 Mich. 683, 686; 244 N.W. 201 (1932). Specifically, in Bazzi, our
Supreme Court held:
When a plaintiff is seeking rescission, “the trial court must balance the
equities to determine whether the plaintiff is entitled to the relief he or she seeks.”
Johnson v QFD, Inc, 292 Mich. App. 359, 370 n 3; 807 NW2d 719 (2011).
Accordingly, courts are not required to grant rescission in all cases. For example,
“rescission should not be granted in cases where the result thus obtained would be
unjust or inequitable,” Amster, 259 Mich. at 686, or “where the circumstances of the
challenged transaction make rescission infeasible,” CJS, § 11, p 507. Moreover,
when two equally innocent parties are affected, the court is “required, in the
exercise of [its] equitable powers, to determine which blameless party should
assume the loss . . . .” [Lenawee Co Bd of Health v Messerly, 417 Mich. 17, 31; 331
NW2d 203 (1982)]. “[W]here one of two innocent parties must suffer by the
wrongful act . . . of another, that one must suffer the loss through whose act or
neglect such third party was enabled to commit the wrong.” Zucker v Karpeles, 88
Mich. 413, 430; 50 N.W. 373 (1891). “The doctrine is an equitable one, and extends
no further than is necessary to protect the innocent party in whose favor it is
invoked.” Id.
In this instance, rescission does not function by automatic operation of the
law. Just as the intervening interest of an innocent third party does not altogether
bar rescission as an equitable remedy, neither does fraud in the application for
insurance imbue an insurer with an absolute right to rescission of the policy with
respect to third parties. Equitable remedies are adaptive to the circumstances of
each case, and an absolute approach would unduly hamper and constrain the proper
functioning of such remedies. This Court has recognized that “[e]quity
jurisprudence molds its decrees to do justice amid all the vicissitudes and intricacies
of life” and that “[e]quity allows complete justice to be done in a case by adapting
its judgments to the special circumstances of the case.” Tkachik v Mandeville, 487
Mich. 38, 45-46; 790 NW2d 260 (2010) (quotation marks omitted), citing Spoon-
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Shacket Co, Inc v Oakland Co, 356 Mich. 151, 163; 97 NW2d 25 [1959], and 27A
Am Jur 2d, Equity, § 2, pp 520-521; see also Lenawee, 417 Mich. at 29 (adopting a
case-by-case approach to rescission when a “mistaken belief relates to a basic
assumption of the parties upon which the contract is made, and which materially
affects the agreed performances of the parties”), and Am Jur 2d, § 2, pp 548-549.
[Bazzi, 502 Mich. at 410-411.]
Based on the holding in Bazzi, we conclude that the trial court correctly determined that
Everest was entitled to seek rescission of the insurance policy obtained by White through
fraudulent misrepresentation. However, the trial court erred when it determined that Petite was
automatically excluded from seeking benefits under the policy. Our Supreme Court’s holding in
Bazzi is clear: when an insurance company seeks rescission, the trial court’s next step is to
determine whether the insurance company’s claim concerning the third-party is justified by the
equities of the case. In this case, the trial court did not undertake this analysis. Consequently, we
remand this matter to the trial court so that it can determine whether rescinding the insurance policy
as between Everest and Petite would be equitable. See id. at 412.
We vacate the trial court’s decision granting summary disposition to Everest and remand
to the trial court for further proceedings consistent with the principles articulated in Bazzi. We do
not retain jurisdiction.
/s/ Christopher M. Murray
/s/ Brock A. Swartzle
/s/ Thomas C. Cameron
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