Jacob v. Absolute Motor Cars, Inc.

JOSEPH JACOB and RICHARD JACOB, Plaintiffs/Counterdefendants-Appellants, v. ABSOLUTE MOTOR CARS, INC., Defendant/Counterplaintiff-Appellee, and NICHOLAS LAZAR and DAVID MORROW, Defendants-Appellees.

No. 353651

Court of Appeals of Michigan

September 9, 2021

UNPUBLISHED

Oakland Circuit Court LC No. 2019-172645-CZ

Before: Cavanagh, P.J., Murray, C.J. and Redford, J.

Per Curiam.

Plaintiffs Joseph Jacob and Richard Jacob, appeal as of right the trial court's judgment in favor of defendants, Absolute Motor Cars, Inc., Nicholas Lazar, and David Morrow, which awarded Absolute Motor $47, 115.72 on its counterclaim for indemnification. We hold that the trial court abused its discretion by not allowing plaintiffs to conduct any discovery while opposing defendants' motion for summary disposition brought under MCR 2.116(C)(7) that challenged the validity of the release. The trial court did not err in granting summary disposition to defendants on plaintiffs' claims of statutory conversion, conspiracy, concert of action, unjust enrichment, and all claims against defendant Morrow. We therefore affirm in part, reverse in part, vacate in part, and remand for further proceedings on the breach of contract, fraudulent misrepresentation, and breach of fiduciary duty claims.

I. BASIC FACTS^[1]

In October 2014, plaintiffs purchased a 1969 Mustang from an estate sale. Plaintiffs later discovered that the Mustang was a rare Mustang GT Cobra prototype. Nicholas Lazar, who held himself out as an agent and employee of Absolute Motor, later approached plaintiffs about buying the vehicle, but plaintiffs initially refused. Later, on October 16, 2014, plaintiffs and Absolute Motor entered into a consignment agreement, which provided that plaintiffs consigned the vehicle to Absolute Motor or Lazar "[f]or the sole purpose of selling the vehicle." The agreement was to be effective for 180 days, and if the consignee sold the vehicle during this time, the consignee would be entitled to "10% of the aggregate amount of consideration" paid.

Plaintiffs alleged that on or about March 5, 2015, Lazar informed them that he had an "out-of-state" buyer "from Montana" for the vehicle. Lazar then asked Richard to e-mail him a "copy of the title and the state receipt" because he had to send the documents "to the guy." Plaintiffs complied and maintained that they were never informed that the "buyer" was Absolute Motor. Instead, when they asked who the buyer was, Lazar told them that the person refused to divulge his name.

In any event, that same day, plaintiffs executed a bill of sale, which states, in pertinent part:

This Bill of Sale ("Bill of Sale") is made as of March 5, 2015 by JOSEPH JACOB and RICHARD (RICK) JACOB (together, "Sellers"), in favor of ABSOLUTE MOTOR CARS, INC. ("Buyer").

Seller, for the sum of One Hundred Seventy-Five Thousand dollars ($173, 740), ^[2] divided equally between Sellers, hereby sell, transfer and assign to Buyer the . . . vehicle . . . .

* * *

Seller acknowledges that Buyer has fully performed and fulfilled the obligations of Buyer as set forth in the Consignment and Sales Agreement between Seller and Buyer dated October 16, 2014 ("Contract"), and that the purchase price is fair consideration for the Vehicle. Seller hereby releases and holds Buyer (its shareholders, officers, directors, and employees) harmless from, and indemnifies Buyer with regard to, any and all claims, known or unknown, related to or arising out of (i) the Contract, (ii) the sale of the Vehicle to Buyer as described herein, and (iii) any breach of this Bill of Sale by Seller.

Also, on that same day, plaintiffs endorsed their names to the certificate of title under the "sellers" portion and left the purchaser's portion blank. Absolute Motor then distributed $173, 740 to plaintiffs (with each plaintiff receiving $86, 870). The following day, Absolute Motor's name was written on the certificate of title as the "purchaser" of the vehicle.

Unbeknownst to plaintiffs, a few days later, on March 11, 2015, Absolute Motor sold the vehicle to Anthony M. King, a resident of Montana, for $300, 000. Plaintiffs alleged that they were not made aware of this purchase until the spring of 2017 when King contacted Joseph and asked for his assistance in clearing up an issue with the title to the car. When plaintiffs contacted Lazar regarding the sale to King, Lazar responded Absolute Motor had purchased the car and that plaintiffs were not entitled to any proceeds from the subsequent sale.

Plaintiffs thereafter filed suit against Absolute Motor, Lazar, and Morrow, ^[3] alleging the following counts: statutory conversion, breach of contract, fraudulent misrepresentation, breach of fiduciary duty, unjust enrichment, conspiracy, concert of action, and consequential damages. Defendant Absolute Motor filed a counterclaim, alleging claims for breach of contract and indemnification.^[4]

Morrow moved for summary disposition shortly after plaintiffs filed their complaint. Morrow argued that there were no allegations implicating him individually. The trial court agreed and granted the motion, noting that Morrow was not a party to any of the contracts, and there were no allegations that he personally had engaged in any of the tortious conduct.

Absolute Motor later moved for summary disposition under MCR 2.116(C)(7) and (8), with the primary argument being that all of the claims were barred by the release contained in the bill of sale. In response, plaintiffs asserted that, procedurally, the motion was premature because discovery was still pending. And substantively, plaintiff argued, in pertinent part, that the motion should be denied because there was a question of fact whether plaintiffs were fraudulently induced into signing the bill of sale, which would make the bill of sale containing the release void or voidable.

At the same time, Absolute Motor also moved to stay discovery on the basis that the accompanying motion for summary disposition would resolve all of plaintiffs' claims, making discovery moot. The trial court agreed, ruling that if the case was not resolved by defendant's motion for summary disposition, then plaintiffs would be allowed discovery.

The trial court granted defendant's motion for summary disposition under MCR 2.116(C)(7) because the bill of sale unambiguously released any claims plaintiffs had against defendants. While the court noted that plaintiffs had asserted fraud, the court determined that the alleged fraud was related to other matters, and not the release itself. The court also ruled that many of plaintiffs' claims failed for other, independent reasons.

Absolute Motor later moved for summary disposition pursuant to MCR 2.116(C)(9) and (10) on its counterclaim for indemnification, maintaining that the indemnification clause in the bill of sale was clear and required plaintiffs to pay for its attorney fees.

Plaintiffs moved to compel the taking of the depositions of Lazar and Morrow. The following day, defendants moved to stay discovery. Defendants argued that the only remaining issue (indemnification) was an issue of law, which required no further discovery. In relation to the remaining counterclaim of indemnification, the trial court agreed to allow plaintiffs to depose witnesses without them being required to produce any documents.

The deposition of Morrow was held, but plaintiffs' counsel sought information of questionable relevancy. For instance, even though the only remaining claim was Absolute Motor's indemnification claim, plaintiffs sought information pertaining to Absolute Motor's bank accounts. Plaintiffs also submitted a request for documents, including Absolute Motor's tax returns from 2014 through 2019, and monthly bank statements from 2014, 2015, and 2016, and they also issued a subpoena to CIBC Bank for Absolute Motor's bank records. While defendants moved for a protective order, arguing that these areas of discovery were irrelevant to the remaining issue of indemnification, plaintiffs moved to compel discovery.

The trial court ordered defendants to clearly "lay out" for plaintiffs what the remaining indemnification claim was and ordered plaintiffs to respond with what discovery was needed in order to defend against the claim. Then, if the parties still had any disputes, the court would reconvene. The court did reconvene and granted defendants' motion for a protective order, limiting any discovery to the attorney fees incurred in the matter. The court also quashed the subpoena to CIBC Bank.

In response to defendants' motion for summary disposition, plaintiffs argued that because the explicit terms of the contract controls and because there is no mention of attorney fees being recoverable, plaintiffs could not be liable for attorney fees under the indemnification clause. Plaintiffs also asserted, inter alia, that if any fees were recoverable, they were limited to those fees incurred for defending against plaintiffs' complaint, not for the prosecution of the counterclaim. The trial court granted the motion, ruling that plaintiffs were liable on the indemnification counterclaim for the attorney fees incurred by defendants.

Defendants also moved for sanctions pursuant to MCR 1.109(E), MCR 2.625(A)(2), and MCL 600.2591, arguing that plaintiffs' complaint and plaintiffs' defenses to the indemnification counterclaim were frivolous. In an opinion and order, the trial court concluded that plaintiffs' complaint was frivolous. The court further found that after it had dismissed plaintiffs' claims, plaintiffs failed to pursue any rational defense to the remaining counterclaim of indemnification, which could "only be interpreted as being for the purpose of (1) harassment and/or (2) fishing for information that allegedly supports...