Mazzola v. Vineyard Homes, Inc.

54 Mich. App. 608 (1974) 221 N.W.2d 406

MAZZOLA
v.
VINEYARD HOMES, INC.

Docket No. 16518.

Michigan Court of Appeals.

Decided August 12, 1974.

Berry, Hopson, Francis & Mack (Robert W. Kefgen, of counsel), for plaintiffs.

Daner, Freeman, McKenzie & Matthews, P.C. (by Kenneth E. Scherer), for defendant.

Before: DANHOF, P.J., and QUINN and V.J. BRENNAN, JJ.

V.J. BRENNAN, J.

On March 16, 1971, plaintiffs, Joseph and Rosemarie Mazzola, brought this action in the Macomb County Circuit Court against defendant, Vineyard Homes, Inc. By their complaint plaintiffs sought an injunction restraining defendants from building homes of a certain type in Hatherly Village, a subdivision located in the city of Sterling Heights, Michigan and damages for alleged fraudulent misrepresentations. The trial judge granted defendant's motion for accelerated judgment (GCR 1963, 116.1[5]) and plaintiffs now appeal as of right.

The difficulty in the instant case arises from the fact that the plaintiffs herein were also among the plaintiffs in an earlier class action, Lopinski v Vineyard Homes, Inc,^[1] an action brought against the same defendant. The plaintiffs in Lopinski, including the plaintiffs herein, were all alleged to be homeowners in one of two Hatherly subdivisions, denominated Hatherly Village, subdivision #1 and Hatherly Village, subdivision #2. The plaintiffs in Lopinski alleged that defendant had agreed with them, at the time they purchased their homes, to develop a 9-1/2-acre "commons" area containing paved walkways, bicycle paths, a stream with rustic bridges crossing over it and other, similar types of landscaping. The plaintiffs in Lopinski further alleged that defendant also had agreed to restrict the type of dwellings that were to be placed on a 54-acre tract owned by defendant and adjoining the Hatherly subdivisions to those types of homes permitted to be built in Hatherly. The Lopinski plaintiffs also alleged that defendant proposed to sell the 54-acre tract to a buyer who planned to develop homes thereon in a manner contrary to the alleged agreement and, further, that defendant was planning to construct homes on the commons area. They therefore sought an injunction restraining defendant from selling or otherwise disposing of the property in any manner inconsistent with the terms of the alleged agreement. Maple Associates, a Michigan co-partnership that contracted to purchase the 54-acre tract, was permitted by the trial court to intervene in the action pursuant to GCR 1963, 209.1(3). Defendant answered plaintiffs' complaint and interposed two affirmative defenses: the statute of frauds (MCLA 566.108; MSA 26.908) and laches. Thereafter, on November 18, 1970, the trial judge granted summary judgment in favor of defendant Vineyard Homes "[f]or reasons set forth in the record" and also granted summary judgment of no cause for action in favor of Maple Associates for the same reasons. No appeal from this decision was ever taken by the Lopinski plaintiffs.

Four months after the decision in Lopinski was rendered, the plaintiffs herein brought this action against defendant in two counts. Count I sought an injunction restraining defendant from building certain types of homes in Hatherly Village, subdivision # 1. Plaintiffs alleged in their complaint that during the discussions leading to their purchase of a home in Hatherly Village, subdivision # 1, one of defendant's sales personnel represented to them that all homes in this particular subdivision would be in the $60,000-and-up price range. They further stated in their complaint that certain brochures were shown to them with pictures of the types of homes to be built in the subdivision contained therein and that it was explained to them that none of the pictured homes cost less than $60,000. Plaintiffs also averred that defendant was in the process of constructing homes in the subdivision which would be offered for sale at a price not in excess of $45,000 and built upon lots smaller in size than those originally platted. They alleged that if such construction was permitted to continue they would be irreparably harmed and therefore sought an injunction restraining defendant from constructing such homes in Hatherly Village, subdivision # 1.

Count II sought damages against defendant for fraudulent misrepresentation. Plaintiffs re-alleged the allegations contained in Count I and further alleged that defendant represented to them that Hatherly Village, subdivision #1, would contain or be served by a commons area of approximately nine acres, that they relied on these representations in purchasing their home and that defendant, contrary to the representations earlier made, sold the commons area to another real estate developer or land company. Plaintiffs alleged that they suffered damage as a result of these allegedly fraudulent misrepresentations and, therefore, sought $15,000 in damages, this being the alleged diminution in the value of their property.

Defendant answered the plaintiffs' complaint by way of general denial and attacked the sufficiency of both counts of the plaintiffs' complaint for failure to state with sufficient clarity the factual circumstances upon which plaintiffs based their claim for relief. Defendant also raised, as an affirmative defense, the decision in Lopinski as being res judicata of the issues presented in this second action. Discovery was had and the trial date adjourned several times to a later term of the court. On October 2, 1972, defendant filed motions for accelerated and summary judgment pursuant to GCR 1963, 116.1 and 117.2(1). Defendant argued that Lopinski was res judicata of the instant action and that the plaintiffs' complaint was inadequate to sustain a claim of fraud because it contained no allegation that defendant made misrepresentations concerning an existing fact. Subsequently, on October 6, 1972, defendant filed another motion for summary judgment alleging that plaintiffs failed to state a claim upon which relief could be granted. GCR 1963, 117.2(1). On January 12, 1973, after a hearing was held on the above motions, the trial judge filed a written opinion granting defendant's motion for accelerated judgment. Treating the decision in Lopinski as if the summary judgment granted therein was based on both the statute of frauds and laches, Judge Carroll characterized the dominant issue in the present case as "whether an oral misrepresentation made by the defendant but not reduced into the [purchase] agreement is barred by the statute of frauds". He held that this was the same issue presented in the first action and that the prior judgment, therefore, operated "as a bar to the present litigation". It is from this decision that plaintiffs now appeal.

For the doctrine of res judicata to apply as a bar to the maintenance of a subsequent action it must appear that the prior action was rendered on the merits, on the same matter in issue and between the same parties or their privies. Zak v Gray, 324 Mich. 522; 37 NW2d 550 (1949); Hewett Grocery Co v Biddle Purchasing Co, 289 Mich. 225; 286 N.W. 221 (1939); Gomber v Dutch Maid Dairy, 42 Mich. App. 505; 202 NW2d 566 (1972), lv den, 389 Mich. 752 (1972). The plaintiffs herein do not dispute that the prior action was rendered on the merits nor that the two suits involved the same parties. Plaintiffs do contend, however, that they are here asserting a different claim.

The test for determining identity of claims was set forth in Rose v Rose, 10 Mich. App. 233, 236-237; 157 NW2d 16, 18 (1968), quoting from 30A Am Jur, Judgments, § 365, pp 407-408:

"``In the application of the doctrine of res judicata, if it is doubtful whether a second action is for the same cause of action as the first, the test generally applied is to consider the identity of facts essential to their maintenance, or whether the same evidence would sustain both. If the same facts or evidence would sustain both, the two actions are considered the same within the rule that the judgment in the former is a bar to the subsequent action. If, however, the two actions rest upon different states of facts, or if different proofs would be required to sustain the two actions, a judgment in one is no bar to the maintenance of the other.'"

A careful examination of what was sought to be adjudicated in both this case and the Lopinski case reveals that the plaintiffs here are, indeed, asserting a separate and distinct cause of action. The class of plaintiffs involved in Lopinski sought to restrain threatened violations of certain alleged agreements relating to the development of a commons area and an adjoining 54-acre tract of land. The evidence required to support this claim is not the same as that required to support the claims asserted in the instant case. Plaintiffs, by their complaint, seek an injunction and damages for alleged fraudulent misrepresentations made with respect to the development of two separate parcels of land, only one of which was the subject of the prior suit. In Lopinski no allegation was made concerning the development of Hatherly Village, subdivision #1, and the injunction sought therein did not relate to this parcel of land. The action in Lopinski only involved the 54-acre tract and the commons area — it did not involve the building of homes of less than a stated value within this particular subdivision. Since the plaintiffs' rights in this respect were not determined in the prior action, their action here seeking an injunction and damages for the alleged misrepresentation concerning the types of homes to be built in Hatherly Village, subdivision #1, is not precluded by the doctrine of res judicata. Sheridan Drive Association v Woodlawn Backproperty Owners Association, 29 Mich. App. 64; 185 NW2d 107 (1970).

Furthermore, the action in Lopinski was premised on an alleged agreement, not fraud. The evidence that would sufficiently establish a threatened breach of an enforceable agreement so as to warrant the issuance of an injunction is substantially different from that required to establish fraud. An important difference in this respect is that for plaintiffs to succeed in their action for fraud they must show that they were in some way damaged through their reliance on defendant's alleged misrepresentations.

"The general rule is that to constitute actionable fraud it must appear: (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 thereby suffered injury." Candler v Heigho, 208 Mich. 115, 121; 175 N.W. 141, 143 (1919). See also Farida v Zahar, 50 Mich. App. 137; 212 NW2d 739 (1973).^[2]

At the time the first action was brought defendant had not yet acted in any manner which would cause damage to plaintiffs — such action was merely threatened. The law is clear in this state that for actionable fraud to exist the plaintiff must have suffered damage. It is clear, therefore, that the plaintiffs' cause of action for fraudulent misrepresentations made by defendant with respect to the types of homes to be built in the subdivision and with respect to the commons area did not arise until after the decision in Lopinski — when the development of the two pieces of property contrary to the alleged earlier representations began.

Since the cause of action asserted herein is not the same as that earlier presented, Lopinski only serves as an estoppel to the issues therein actually determined. The rule in this regard was well stated in Gomber v Dutch Maid Dairy, supra, pp 509-510, quoting from Anno, Default Judgment as Res Judicata, 128 A.L.R. 472, 483:

"``It is a well-settled general rule that where a judgment is asserted as an absolute bar to another action on the same demand or cause of action, it is conclusive not only as to every matter that was offered in the former action to sustain or defeat the demand, but as to every other matter that might have been offered for that purpose. On the other hand, where the subsequent action is on a different demand or cause of action, the judgment operates as an estoppel only as to those matters in issue, or points controverted, upon the determination of which the finding or verdict was rendered. In other words, where the second action is upon the same cause of action, the judgment is conclusive upon every matter that might have been litigated in the former action, whether it was in fact litigated or not, while if the second action is upon a different cause of action, the judgment operates as an estoppel only as to the facts or questions actually litigated and determined.'"

In Lopinski the trial judge held that certain alleged agreements between plaintiffs and defendant were barred from enforcement by the statute of frauds and laches. If plaintiffs herein were proceeding on the basis of these same agreements in the present case Lopinski would be determinative. Plaintiffs here are not, however, asserting any rights under these alleged agreements but, rather, are proceeding on the basis that defendant fraudulently misrepresented certain facts to them during the course of their discussions. Lopinski, therefore does not act as an estoppel to bar plaintiffs' claims herein. The statute of frauds has no application in the instant case as plaintiffs are not proceeding on the basis of any alleged agreement. They are seeking recovery for fraud.

Defendant argues that plaintiffs' pleadings do not contain sufficient allegations to support an action in fraud. This issue is prematurely before this Court, however, since the trial judge made no express determination on this point in the proceedings below. Whether plaintiffs' complaint is sufficient under the law of this state is a decision initially to be made by the trial judge.

Reversed and remanded for proceedings not inconsistent with this opinion.

All concurred.

NOTES

[1] Macomb County Circuit Court No. X 70-5519, decided November 18, 1970.

[2] The limited applicability of this rule when scienter is in issue, as explained in Irwin v Carlton, 369 Mich. 92; 119 NW2d 617 (1963), should, of course, not be ignored. See also Callihan v Talkowski, 372 Mich. 1; 124 NW2d 788 (1963); Peoples Furniture & Appliance Co v Healy, 365 Mich. 522; 113 NW2d 802 (1962); and Freeman v Massachusetts Mutual Life Insurance Co, 27 Mich. App. 572, 183 NW2d 832 (1970).