Md Holdings, LLC v. R. L. Deppmann Co.

MD HOLDINGS, LLC, JOHN ALESI, JEREMY STEINER, and EVERWORKS, INC., Plaintiffs-Appellants/Cross-Appellees, v. R. L. DEPPMANN COMPANY, Defendant-Appellee/Cross-Appellant, and LEE &ASSOCIATES OF MICHIGAN, LLC, and LARRY KELLY, Defendants.

No. 357462

Court of Appeals of Michigan

October 27, 2022

UNPUBLISHED

Oakland Circuit Court LC No. 2020-181300-CB2020-181300-CB

Before: RONAYNE KRAUSE, P.J., and JANSEN and MURRAY, JJ.

PER CURIAM

In this dispute arising out of the sale of commercial real estate plaintiffs challenge the trial court order granting summary disposition in favor of defendant R. L. Deppmann Company.^[1]Defendant filed a cross-appeal challenging the trial court's failure to award it costs and attorney fees as sanctions. We affirm.

I. FACTUAL AND PROCEDURAL BACKGROUND

In 2018, plaintiffs were seeking suitable commercial property in which to conduct business. Plaintiffs learned of the subject commercial property in Southfield, which was owned by defendant. On April 30, 2018, the parties entered into a purchase agreement, which was subject to two amendments. Of significance, the agreement contained the following provisions:

15. It is understood that the Property is being purchased in its present condition and that it will be delivered by the Seller to the Purchaser in substantially the same condition as when this Agreement was made reasonable wear and tear and damage by the elements excepted.

ADDITIONAL CONDITIONS:

16. Purchaser shall have a period ("Inspection Period") of (60) days from the Date of this Agreement to inspect the Property and to satisfy, in Purchaser's sole and absolute discretion, the following conditions: a) The obtaining by Purchaser of a satisfactory commitment for mortgage financing in such amount and containing such terms and provisions as are acceptable to Purchaser.

b) Purchaser's satisfaction with all aspects of the physical and structural condition of the Property.

c) Purchaser's satisfaction with the present zoning of the Property and obtaining all governing entities['] approval to use the property for its intended use.

d) Purchaser's obtaining and being satisfied with the results of a Phase I Environmental Assessment of the Property.

23. Survival of Representation and Warranties: The representations and warranties as set forth in this Agreement shall be continuing and survive the Closing.

28. No Knowledge of Proceedings: Seller represents and warrants that it has no knowledge of any judicial or administrative proceedings pending or threatened against the real estate and Seller is not aware of any facts which might result in an action, suit or other proceedings.

37. "As-is" Condition. Purchaser warrants and acknowledges to, and agrees with, Seller that Purchaser is a sophisticated purchaser, has a 60 day inspection period to satisfy itself, and that Purchaser is purchasing the Property "AS IS", "WHERE IS" and "WITH ALL FAULTS" with no right of set-off or reduction in the Purchase Price.

In the second amendment, the parties agreed to, among other things, an additional two-week inspection period beyond the 60-day inspection period to address the environmental and appraisal contingencies. Notably, plaintiffs also expressly agreed that they were "satisfied with all other conditions of the property." The parties closed on the sale of the property on July 26, 2018.

After plaintiffs purchased the property, they encountered difficulty obtaining an occupancy permit for the premises, principally because the physical state of the property did not match the approved site plan with the city. For instance, the approved site plan from 1980 showed that the property had 26 parking spots and approximately 4,000 square feet of office space, but the property actually had 45 parking spots and approximately 6,000 square feet of office space. The differences were attributable to improvements that were previously made without obtaining permits or approvals from the city of Southfield. Plaintiffs' lawsuit was premised on defendant knowing about these nonconformances and not disclosing them.

In lieu of filing an answer, defendant moved for summary disposition under MCR 2.116(C)(8) or MCR 2.116(C)(10). The trial court granted the motion. With respect to the breach-of-contract claim, the court concluded that there was no evidence that defendant was aware of any facts at the time of the sale that might result in an action, suit, or other proceedings. Although defendant's representatives currently recognized that the 1980 site plan differed from the presentday physical appearance of the property, they denied being aware that any changes to the property were made without the city's approval. The trial court also dismissed plaintiffs' tort claims because they were barred by the economic-loss doctrine. In other words, the court ruled that plaintiffs failed to allege any fraud or misrepresentations that were factually distinguishable from their breach-of-contract claims. The trial court also concluded that because there were no valid underlying torts, plaintiffs' claim of civil conspiracy also failed.

II. PLAINTIFFS' APPEAL

Plaintiffs challenge the trial court's grant of summary disposition in favor of defendant on most of their claims.^[2] We review a trial court's decision on a motion for summary disposition de novo. Odom v Wayne Co, 482 Mich. 459, 466; 760 N.W.2d 217 (2008).

A. BREACH-OF-CONTRACT CLAIM

Plaintiffs argue that the trial court erred by granting summary disposition in favor of defendant on their breach-of-contract claim. We disagree.

Although defendant's motion for summary disposition was brought under both MCR 2.116(C)(8) and MCR 2.116(C)(10), because the parties relied on materials outside the pleadings, the trial court granted the motion with respect to the breach-of-contract count under MCR 2.116(C)(10). See Silberstein v Pro-Golf of America, Inc, 278 Mich.App. 446, 457; 750 N.W.2d 615 (2008) ("Where a motion for summary disposition is brought under both MCR 2.116(C)(8) and (C)(10), but the parties and the trial court relied on matters outside the pleadings, . . . MCR 2.116(C)(10) is the appropriate basis for review."). "A motion under MCR 2.116(C)(10) tests the factual sufficiency of the complaint." Maiden v Rozwood, 461 Mich. 109, 120; 597 N.W.2d 817 (1999). "In evaluating such a motion, a court considers the entire record in the light most favorable to the party opposing the motion, including affidavits, pleadings, depositions, admissions, and other evidence submitted by the parties." Corley v Detroit Bd of Ed, 470 Mich. 274, 278; 681 N.W.2d 342 (2004). A motion under MCR 2.116(C)(10) is properly granted if there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Michalski v Bar-Levav, 463 Mich. 723, 730; 625 N.W.2d 754 (2001).

Plaintiffs' breach-of-contract claim is based on a purported violation of ¶ 28 of the purchase agreement, which states:

28. No Knowledge of Proceedings: Seller represents and warrants that it has no knowledge of any judicial or administrative proceedings pending or threatened against the real estate and Seller is not aware of any facts which might result in an action, suit or other proceedings.

Plaintiffs aver that defendant breached this portion because it failed to disclose facts of which it was aware that might result in an action, suit, or other proceedings. In particular, plaintiffs contend that Robert Schmitt, defendant's vice president of finance, knew as of 2011 that the parking lot did not conform to the 1980 site plan, which directly contradicts defendant's assertion in ¶ 28 that it possessed no such knowledge.^[3]

There is no factual dispute that the most current, approved site plan is the 1980 site plan. There also is no dispute that this site plan calls for approximately 30 parking spots on the property.^[4]Further, there is no dispute that at the time of the sale in 2018, the parking lot actually had 45 parking spots. The parties agree that, at some point, defendant had the extra parking spots added without obtaining approval from Southfield. However, it is unknown when this revision to the parking lot occurred. Jan MacDonald, who had been an employee of defendant since 1978, testified that she was aware that some changes occurred in the north parking lot, but it did not seem that its condition changed much at all. Indeed, MacDonald thought that the essential condition of the lot had remained the same since 1980. Finally, there is no dispute that no one ever informed plaintiffs about any such discrepancies before the sale closed.

Plaintiffs argue that there is a factual dispute regarding whether Schmitt had knowledge of the property's discrepancies from the approved site plan. Schmitt denied knowing that there were any discrepancies until this lawsuit was filed. He explained that the property remained unchanged during his entire time with the company.^[5] The main evidence on which plaintiffs rely to contradict Schmitt's asserted lack of knowledge is a May 25, 2011 e-mail Schmitt received from the city of Southfield that contained as attachments the 1980 site plan and an aerial photograph of the premises.

In 2011, Schmitt was responsible for a project that involved tearing up, repaving, and restriping defendant's entire parking lot. Because Schmitt thought that the project would require the pulling of permits, he inquired of the contractor, Alan's Asphalt, to ensure that permits were pulled. Although Schmitt did not recall asking MacDonald to do any work on facilitating the obtaining of a permit MacDonald received an e-mail from Sarah Mulally, Southfield's Senior Planner in the Planning Department, on May 24, 2011, at 3:01 p.m. Mulally's e-mail contained no message in the body of the...