Church & Church, Inc. v. Sunset Homes, LLC

1

CHURCH AND CHURCH, INC., doing business as CHURCH'S LUMBER YARDS, Plaintiff-Appellant/Cross-Appellee, v. SUNSET HOMES, LLC, and PAUL ESPOSITO, Defendants/Cross-Defendants- Appellees, and CHEMICAL BANK, also known as HUNTINGTON BANK, PINAKIN PATEL, and BELA PATEL, Defendants/Cross-Plaintiffs- Appellees, and ATA NATIONAL TITLE GROUP and GRECO TITLE AGENCY, LLC, Defendants-Appellees/Cross- Appellants.

No. 364296

Court of Appeals of Michigan

June 27, 2024

UNPUBLISHED

Macomb Circuit Court LC No. 2020-004610-CH

Before: MALDONADO, P.J., and PATEL and N. P. HOOD, JJ.

PER CURIAM.

Plaintiff Church and Church, Inc., doing business as Church's Lumber Yards (Church), sued to recover the cost of materials it supplied to Sunset Homes, LLC (Sunset) and its principal Paul Esposito, for Sunset's residential construction projects where Sunset failed to pay Church. Church also sued ATA National Title Group (ATA) and Greco Title Agency, LLC (Greco), the title agencies involved with the residential construction projects, seeking to recover payment for the materials and supplies. As part of the same case, Church also sued to foreclose on a single construction lien on residential property owned by defendants Pinakin Patel and Bela Patel (the Patels).

This appeal involves three parts. First, Church challenges the trial court's August 3, 2022 opinion and order granting summary disposition in favor of ATA and Greco pursuant to MCR 2.116(C)(10) (no genuine issue of material fact), and thereby dismissing Church's claims for fraudulent misrepresentation, silent fraud, and civil conspiracy. Second, Church challenges the trial court's September 30, 2022 opinion and order denying its motion for summary disposition and granting summary disposition in favor of the Patels pursuant to MCR 2.116(C)(10) on Church's construction-lien claim. Third, and finally, ATA and Greco cross-appeal, challenging the trial court's failure to grant their request for sanctions.

We affirm in part and remand. We affirm the trial court's decision granting summary disposition in favor of ATA and Greco because Church failed to establish a fraudulent misrepresentation supporting its fraudulent-misrepresentation claim; it failed to establish a legal or equitable duty supporting its silent-fraud claim; and it failed to establish a viable underlying tort supporting its civil-conspiracy claim. We affirm the trial court's decision in favor of the Patels because it correctly concluded that Church's lien did not attach to the Patels' lot because the Patels filed an affidavit consistent with MCL 570.1118a(1). But we remand on the cross-appeal for the trial court consider in the first instance ATA and Greco's request for sanctions.

I. BACKGROUND

This case arises out of Church's attempts to collect payment for supplies it furnished on a construction project. Church furnished lumber and other materials to Sunset for the construction of multiple residences in Macomb County, Michigan. Sunset was the builder or contractor. Church was the supplier, furnishing building materials to Sunset between 2016 and 2019.

ATA and Greco relate to this case because they were involved with the payment. ATA was the title agency, and Greco was a related title agency.^[1] Residential new home construction involves a construction lender disbursing loan proceeds to the builder as the work continues. Typically, a builder (in this case Sunset) would submit a request to draw loan proceeds as the work is gradually completed. The title agency (ATA) would receive sworn statements and lien waivers and distribute loan proceeds from lenders and borrowers once the lender permits the release of funds. The builder is then supposed to pay its subcontractors and suppliers, like Church. Here, the parties appear to agree that Sunset did not pay Church. This is the substance of this case: Church's allegations that it was not paid for the materials, which were valued at more than $1.2 million.

Church also recorded a construction lien against Lot 87, owned by the Patels, in the amount of $76,559.22, which it sought to foreclose in this suit. The Patels averred in their homeowners' affidavit that they entered into a contract with Sunset for improvements to their residential lot and had paid Sunset $446,620 to date in accordance with the contract. They also submitted documentary evidence detailing the disbursements, including sworn statements, a copy of a check, and payment authorizations from their lender that reflected some of the disbursements.

In December 2020, Church filed its initial complaint alleging that ATA and Greco, as title agents for Sunset, were liable under theories of fraudulent misrepresentation, innocent misrepresentation, silent fraud, breach of fiduciary duty, and civil conspiracy. Specifically, Church claimed that its president, David Kohl, and its vice president, Kevin Ches, both spoke personally with Terry Skawski, an employee of Greco, and advised him that Sunset had not paid Church for the materials it furnished and asked that any closing fund disbursements be paid directly to Church.

Broadly, ATA and Greco argued that, as title agents, they did not owe any duty to Church, a supplier, and therefore, the claims should be dismissed. They asserted that their liability was limited to the terms of the governing title insurance policy, and they otherwise had no obligation regarding Church's financial interests. Specifically, Skawski denied making any affirmative statements to Kohl or Ches regarding the disposition of funds, and further denied that ATA and Greco otherwise owed any duty to Church. Skawski shared his understanding that Kohl and Sunset's principal, Esposito, had reached a "gentlemen's agreement" regarding the payment of Church by Sunset.

In an affidavit, Church's vice president, Ches, averred that he had a conversation with Skawski in February 2018 in which he advised Skawski that Church was not receiving payments from Sunset and instructed Skawski to ensure that payments were made directly to Church, and that he sent a follow-up e-mail to confirm this conversation. Ches further attested that it was his "belief and understanding that Skawski was aware of Church's nonpayment, and would ensure that, going forward, Church's should be communicated with directly." Likewise, Church's president, Kohl, averred in an affidavit that he told Skawski in 2018 that Church was not being paid and directed Greco to provide future payments directly to Church, and that it was his "belief and understanding that Skawski was aware of Church's nonpayment, and would ensure that, going forward, Church's should be communicated with directly." In his affidavit, Kohl also stated that if Skawski told him that Greco would not issue payments directly to Church, Church would not have continued to furnish materials to Sunset. Neither affidavit indicated that Skawski actually made an affirmative representation regarding any intention to pay Church directly.

During his deposition, Kohl testified that during a conversation with Esposito, Esposito promised to make sure that Church was paid, and Kohl explained that Church had decided not to enforce its lien rights. When asked if Skawski from Greco was part of those conversations, Kohl testified that "[Skawski] wasn't part of that," but that officers of Church had discussed with Skawski that Church had not been paid for the materials it provided to Sunset. Kohl said he went to Skawski's office and spoke to him personally, and they talked about how Sunset was "closing houses" and allowing the purchasers to move in, and "we don't want that to happen." Kohl also detailed the rest of his conversation with Skawski as follows:

We want to get paid, get notified of those closings. And if we need to send you a waiver, conditional waiver, whatever it is, we will. And [Skawski] said, well, you know how [Esposito] works, some such thing, and that was the end of it.

When specifically asked, "So during that meeting, Skawski didn't make any promises to you, is that fair?," Kohl responded, "No, he didn't make any promises." At that time, Sunset owed Church $500,000. Counsel again asked Kohl, "No one from the title company ever promised you that [Skawski] would make payment to you, right?" Kohl responded, "No." Kohl was then asked, "So again with respect to . . . Greco Title and [Skawski], what promises, if any, did they make to you concerning properties on which they were acting as title agent where Sunset was the builder?" Kohl responded: "None. I wish they would have."

While Kohl shared his belief that Greco had an obligation and responsibility to notify Church when a Sunset closing was about to take place, particularly once Skawski received the email from Ches on February 23, 2018, Kohl repeatedly conceded that Skawski did not promise or represent that Greco would tender payments directly to Church.

Before the close of discovery, ATA and Greco moved for summary disposition on Church's claims. The trial court denied the motion without prejudice and allowed Church to amend its complaint, which it did. Following a hearing in August 2021, the trial court dismissed Church's claims for innocent misrepresentation and breach of fiduciary duty. The dismissal of those claims is not at issue in this appeal.

After additional discovery, ATA and Greco again moved for summary disposition, this time under MCR 2.116(C)(10). In substance they argued that the evidence did not show that ATA or Greco intentionally lied to Church about the ability of Sunset or Esposito to pay for Church's supplies, or whether Sunset or Esposito would obtain financing to pay for the materials. ATA contended that the evidence did not support the existence of a legal duty owed to Church because agents for title...