Jeff a Moyer v. Old National Bancorp ( 2019 )

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
JEFF A. MOYER, Chapter 7 Trustee for the UNPUBLISHED
ESTATE OF CHARLES H. LEONARD and the February 26, 2019
ESTATE OF SHANNON K. LEONARD,
Plaintiff-Appellant,
v No. 340678
Kent Circuit Court
OLD NATIONAL BANCORP and DAVID LC No. 15-010557-CZ
KINSMAN,
Defendants-Appellees.
Before: METER, P.J., and SAWYER and CAMERON, JJ.
PER CURIAM.
Plaintiff, Jeff A. Moyer, as Chapter 7 Trustee for the Estate of Charles H. Leonard and
the Estate of Shannon K. Leonard, appeals as of right an order granting defendants’, Old
National Bancorp and David Kinsman, motion for summary disposition pursuant to MCR
2.116(C)(10) (no genuine issue of material fact) and denying plaintiff’s motion to amend his
complaint pursuant to MCR 2.116(I)(5). We affirm.
This case arises out of the sale of the Leonards’ closed captioning businesses in 2009.
The Leonards and their businesses banked with Founders Bank1 and worked closely with
defendant David Kinsman, a loan officer and credit analyst with Founders. The Leonards
executed a purchase agreement on November 1, 2009. The purchasers of the Leonards’
businesses continued to bank with Founders, and the Leonards’ names were not immediately
removed from the businesses’ accounts and loans.
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Defendant Old National Bancorp purchased Founders Bank on January 1, 2015. Old National
Bancorp now stands in the shoes of Founders Bank. Old National Bancorp has acknowledged
that it may be held legally responsible for any acts committed by Founders Bank.
Shortly after the purchase agreement with the Leonards was executed, the purchasers sold
the businesses’ assets to a third party and breached the purchase agreement with the Leonards.
Plaintiff alleges that in doing so, the purchasers committed a number of fraudulent acts. Plaintiff
brings this case alleging that defendants’ knowledge of these fraudulent acts was fraud in and of
itself: plaintiff alleges that defendants were aware of all of the purchasers’ breaches but
affirmatively assured the Leonards that everything was going to be fine. Plaintiff alleges that
this assurance amounts to common-law fraud. Plaintiff further alleges that defendants owed the
Leonards a fiduciary duty, that defendants’ intentional failure to disclose the purchasers’
breaches to the Leonards was a breach of this fiduciary duty, and through these actions
defendants have committed silent fraud.
At the close of discovery, defendants moved for summary disposition, arguing that
plaintiff had failed to create a genuine question of material fact for trial. At the hearing on the
motion for summary disposition, plaintiff orally moved to amend his complaint pursuant to MCR
2.116(I)(5) if the motion for summary disposition was granted in favor of defendants. Plaintiff
never filed a written amendment. The trial court issued an opinion and order granting
defendants’ motion for summary disposition and denying plaintiff’s motion to amend his
complaint. This appeal followed.
This Court reviews the trial court’s decision on a motion for summary disposition de
novo. Maiden v Rozwood, 461 Mich 109, 118; 597 NW2d 817 (1999). A motion under MCR
2.116(C)(10) tests the factual sufficiency of the claim in question. Id. at 120. This Court
reviews the record in the same manner as the trial court, considering all record evidence in the
light most favorable to the party opposing the motion. Id.MCR 2.116(C)(10) provides that the trial court may grant summary disposition in favor
of the moving party when, “[e]xcept as to the amount of damages, there is no genuine issue as to
any material fact, and the moving party is entitled to judgment or partial judgment as a matter of
law.” The moving party “must specifically identify the issues as to which the moving party
believes there is no genuine issue as to any material fact” and support its motion with
documentary evidence. Maiden, 461 Mich at 120, citing MCR 2.116(G)(4). Then, the party
opposing the motion must set forth specific facts establishing a genuine issue of material fact to
survive a motion for summary disposition. Id. at 120-121, citing MCR 2.116(G)(4). A genuine
issue of material fact exists when the evidence presented “leave[s] open an issue upon which
reasonable minds might differ.” Debano-Griffin v Lake Co, 493 Mich 167, 175; 828 NW2d 634
(2013) (quotation marks and citation omitted). “Where the proffered evidence fails to establish a
genuine issue regarding any material fact, the moving party is entitled to judgment as a matter of
law.” Maiden, 461 Mich at 120. A “mere possibility” or “promise” that the claim will be
supported by evidence produced at trial is insufficient to survive a motion for summary
disposition. Id. at 121.
Plaintiff first argues common-law fraud. The elements of common-law fraud are: “(1)
That defendant made a material representation; (2) that it was false; (3) that when he made it he
knew that it was false, or made it recklessly, without any knowledge of its truth and as a positive
assertion; (4) that he made it with the intention that it should be acted upon by plaintiff; (5) that
plaintiff acted in reliance upon it; and (6) that he hereby suffered injury.” Titan Ins Co v Hyten,
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491 Mich 547, 555; 817 NW2d 562 (2012) (citation omitted). “[A]n action for fraud must be
predicated upon a false statement relating to a past or existing fact; promises regarding the future
are contractual and will not support a claim of fraud.” Cummins v Robinson Twp, 283 Mich App
677, 696; 770 NW2d 421 (2009).
Plaintiff’s argument on common-law fraud is centered around two sentences that
Kinsman said in a voicemail to Charles Leonard: “that’s all I know. And now you know it.”
Plaintiff alleges that this statement is fraudulent because defendants had stated that “the
Leonards should not be concerned” when the purchasers “had failed to assume financial
responsibility for all of the accounts and debts by the deadline stated in the purchase agreement.”
However, this is not a material misrepresentation of fact for two reasons: first, the material
information was known to the Leonards, and second, it is a statement about the future.
Contained within plaintiff’s allegation is the Leonards’ knowledge that contrary to the
purchase agreement, the purchasers of the company had not taken responsibility for all of the
accounts and debts yet. In fact, the Leonards reached out to Kinsman to see when this issue
would be resolved: plaintiff states in his complaint that “the Leonards asked Mr. Kinsman if they
should be worried about the Purchasers’ failure to assume the debts by the deadline.” Therefore,
as the trial court recognized, the Leonards had received the material information from
defendants. The Leonards knew that the purchasers were not complying with their obligations as
required under the purchase agreement. Thus, the Leonards were aware of the material facts, and
Kinsman did not make a material misrepresentation about those facts. Further, this statement is
not a present or existing fact. Rather, Kinsman’s statement that the Leonards “should not be
concerned” is a forward-looking prediction. Therefore, this statement is not a present or existing
fact and cannot be the basis for common-law fraud. See id. at 696.
Plaintiff does not point to any other record evidence of possible misrepresentations, and
in fact stated to the trial court that sentence “is all the Court needs” to find in his favor. On
appeal, plaintiff states that it is not any “statements, taken separately, that the plaintiff argues
amounts to fraud.” Rather, plaintiff argues that the Leonards’ trust in Kinsman and their
relationship with him was the “context” that made the statements fraudulent. This is a fatal flaw.
Plaintiff must show that defendants made a statement containing a material misrepresentation.
See Titan, 491 Mich at 555. Plaintiff has failed to do so, instead focusing on the reliance and
relationship between the Leonards and Kinsman.
Plaintiff has not provided any record evidence showing a material misrepresentation by
either defendant. Therefore, plaintiff has not created a genuine issue of material fact, and the
trial court properly granted summary disposition on the issue of common-law fraud. See Lowrey
v LMSP & LMPJ, Inc, 500 Mich 1, 9; 890 NW2d 344 (2016); Maiden, 461 Mich at 120.
Plaintiff next argues that defendants have committed silent fraud. Silent fraud “ ‘is based
on a defendant suppressing a material fact that he or she was legally obligated to disclose . . . .’ ”
Barclae v Zarb, 300 Mich App 455, 476; 834 NW2d 100 (2013), quoting Alfieri v Bertorelli, 295
Mich App 189, 193-194; 813 NW2d 772 (2012). Silent fraud therefore requires a defendant to
owe a duty to the plaintiff. Barclae, 300 Mich App at 477. A fiduciary duty “generally does not
arise within the lender-borrower context . . . .” Farm Credit Serv of Michigan’s Heartland, PCA
v Weldon, 232 Mich App 662, 680; 591 NW2d 438 (1998), citing Ulrich v Fed Land Bank of St
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Paul, 192 Mich App 194, 196-197; 480 NW2d 910 (1991), and Smith v Saginaw S&L Ass’n, 94
Mich App 263, 274; 288 NW2d 613 (1979). The court in Weldon made clear that for a fiduciary
duty to arise, the relationship must be more than “[t]he borrower’s allegations of inexperience
and reliance on the lender . . . .” Id., citing Ulrich, 192 Mich App at 196. When a defendant
does not have “ultimate control” over a plaintiff’s business decisions, no fiduciary duty arises.
Id.
Plaintiff argues that the relationship that Kinsman had with the Leonards was “different”
from the typical lender-borrower relationship, and relies heavily on Smith, 94 Mich App 263. In
Smith, the Smiths borrowed money from Saginaw Savings & Loan Association to build a home.
Id. at 266. Because of Mr. Smith’s poor health, the branch manager of Saginaw Savings & Loan
Association informed the Smiths that he would oversee the project and ensure the work was
completed properly and within budget. Id. at 266-267. The branch manager hired a contractor
that was headed for bankruptcy but failed to protect the Smiths from that risk. Id. at 267.
Rather, the branch manager represented to the Smiths that everything was going smoothly. Id. at
268. Unfortunately, the Smiths completed their project at a much higher cost than anticipated
because of the branch manager’s failure to disclose the contractor’s potential for bankruptcy to
the Smiths. Id. at 267. The Smiths sued Saginaw Savings & Loan Association, alleging that the
branch manager breached a fiduciary duty owed to them. The Court found that the Smiths had
placed “trust and confidence” in the bank manager when he oversaw the construction of their
home, that a fiduciary duty existed because of these unique facts, and that the branch manager
had breached that fiduciary duty. Id. at 275-276.
Plaintiff draws only one parallel between Smith and Kinsman’s relationship with the
Leonards: “Kinsman took it upon himself to be the point of communication between” the
purchasers and the Leonards. Plaintiff reiterates that the Leonards placed “trust and faith” in
Kinsman, but he points to no record evidence showing Kinsman having “ultimate control” over
any aspect of the Leonards’ business decisions. Unlike in Smith, where the defendant made
decisions about whom to hire, when to make payments, and oversaw construction, defendants in
this case are simply the Leonards’ lender. Therefore, plaintiff has failed to demonstrate any facts
that give rise to a special relationship between Kinsman and the Leonards. Without a special
relationship, there is no fiduciary duty, and it follows that there can be no silent fraud. See
Weldon, 232 Mich App at 681.
Plaintiff has failed to demonstrate a genuine issue of material fact on both the common-
law fraud issue and the silent fraud issue. Therefore, we affirm the trial court’s grant of
summary disposition to defendants. See Lowrey, 500 Mich at 9.
Plaintiff next argues that the trial court improperly denied his motion to amend his
complaint under MCR 2.116(1)(5).
When the trial court grants summary disposition to a party “based on subrule (C)(8), (9),
or (10), the court shall give the parties an opportunity to amend their pleadings as provided by
MCR 2.118, unless the evidence then before the court shows that an amendment would not be
justified.” MCR 2.116(I)(5). “Amendments must be filed in writing . . . .” MCR 2.118(A)(4).
When a party makes an oral request to amend the complaint pursuant to MCR 2.116(I)(5), that
party must also offer a proposed amendment in writing. Lown v JJ Eaton Place, 235 Mich App
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721, 726; 598 NW2d 633 (1999). Where a plaintiff fails to do so, plaintiff has failed to comply
with the court rule and the trial court does not abuse its discretion in denying the request to
amend. Id., citing Burse v Wayne Co Med Examiner, 151 Mich App 761, 768; 391 NW2d 479
(1986).
In this case, plaintiff made an oral motion to amend his complaint to add a claim that
defendants aided and abetted fraud committed by the purchasers of the Leonards’ businesses.
Plaintiff did not file a proposed written amendment. This Court has repeatedly held that the
failure to file a proposed amended complaint in writing is fatal to an oral motion for amendment.
Lown, 235 Mich App at 726; Burse, 151 Mich App at 768.
Plaintiff argues that this Court should do away with this interpretation of MCR 2.118
because it is inconsistent with the plain language of the statute. Plaintiff argues that under MCR
2.118(A)(4), only “[a]mendments must be filed in writing,” not proposed amendments. This
argument is without merit. MCR 2.118(A)(4) simply states that amendments must filed in
writing. It makes no distinction between proposed amendments and actual amendments. This
Court has interpreted this to mean that all amendments, including proposed amendments, must
be filed in writing. Lown, 235 Mich App at 726; Burse, 151 Mich App at 768. This Court’s
jurisprudence does not add language to the statute, as plaintiff argues; it simply interprets the
word “amendments” to include all amendments. Therefore, plaintiff’s argument is meritless.
Because plaintiff failed to file a proposed amendment in writing, the trial court did not abuse its
discretion when it denied plaintiff’s motion to amend. See Lown, 235 Mich App at 726.
Even if plaintiff’s failure to file a written motion to amend was not fatal, the motion is
prejudicial to defendants and futile.
A court may deny a motion to amend if an adverse party suffered actual prejudice as a
result. Weymers v Khera, 454 Mich 639, 659; 563 NW2d 647 (1997). A trial court may
properly “find prejudice when the moving party seeks to add a new claim or a new theory of
recovery on the basis of the same set of facts, after discovery is closed, just before trial, and the
opposing party shows that he did not have reasonable notice, from any source, that the moving
party would rely on the new claim or theory at trial.” Id. at 659-660. Plaintiff made an eleventh
hour motion adding a new theory of liability with no notice to defendants. Plaintiff agreed with
the trial court when it asked, “[W]e’re, essentially, going to have to start all over again on a
whole new theory, right?” Therefore, the trial court properly found plaintiff’s motion to be
prejudicial to defendants.
A court may also deny a motion to amend if amendment would be futile. “An
amendment would be futile if (1) ignoring the substantive merits of the claim, it is legally
insufficient on its face; (2) it merely restates allegations already made; or (3) it adds a claim over
which the court lacks jurisdiction.” PT Today, Inc v Comm’r of the Office of Fin & Ins Servs,
270 Mich App 110, 143; 715 NW2d 398 (2006) (citations omitted). Here, plaintiff seeks to
change the theory of liability but has still failed to prove that any fraud occurred. Plaintiff points
to no new record evidence to support the theory that defendants aided and abetted any fraud on
behalf of the purchasers. Therefore, the addition of a claim that defendants aided and abetted the
purchasers’ fraudulent actions would continue to be legally insufficient. See id.; Hakari v Ski
Brule, Inc, 230 Mich App 352, 355; 584 NW2d 345 (1998). Additionally, plaintiff has not
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proven that Kinsman owed the Leonards a fiduciary duty. Therefore, to add a claim that
defendants aided and abetted some breach of this duty is legally insufficient. See Hakari, 230
Mich App at 355. Plaintiff’s proposed amendments are futile, so the trial court did not abuse its
discretion in denying the motion to amend. See PT Today, 270 Mich App at 143.
Affirmed.
/s/ Patrick M. Meter
/s/ David H. Sawyer
/s/ Thomas C. Cameron
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