Roberts v. Saffell

760 N.W.2d 715

280 Mich. App. 397

ROBERTS v. SAFFELL.

Docket No. 275458.

Court of Appeals of Michigan.

Submitted June 11, 2008, at Detroit.

Decided August 21, 2008, at 9:15 a.m.

Mark Granzotto, P.C. (by Mark Granzotto), Royal Oak, for the plaintiffs.

Traverse Legal, P.L.C. (by C. Enrico Schaefer), Traverse City, (Bendure & Thomas, by Mark R. Bendure, of counsel), Detroit, for the defendants.

Before: MARKEY, P.J., and WHITE and WILDER, JJ.

MARKEY, P.J.

Defendants appeal by right a judgment entered after a jury trial awarding plaintiffs $86,813 in damages and costs. Plaintiffs claim that defendants failed to disclose a termite infestation in the residence plaintiffs purchased from defendants. Before trial, the trial court granted plaintiffs' motion to dismiss all theories of liability except innocent misrepresentation. This claim was based on defendants "no" answer on their seller's disclosure statement (SDS), MCL 565.957, in response to SDS item: "History of infestation, if any: (termites, carpenter ants, etc.)." We agree with defendants' argument that innocent misrepresentation is not a viable theory of liability under the Seller Disclosure Act (SDA), MCL 565.951 et seq. Consequently, we reverse and remand for entry of judgment for defendants.

Plaintiffs' complaint originally alleged breach of contract and three fraud claims: fraudulent misrepresentation or common-law fraud, silent fraud, and innocent misrepresentation. All plaintiffs' claims were based on defendants' response to the query regarding infestation on the SDS. After discovery, defendants moved for summary disposition under MCR 2.116(C)(8) and (10), arguing, among other things, that a claim for innocent misrepresentation cannot exist under the SDA. The trial court denied this motion.

Less than one week before trial, plaintiffs moved to voluntarily dismiss all claims except innocent misrepresentation and to amend their complaint to allege that defendants misrepresented whether structural modifications had been made without necessary permits. At the hearing on plaintiffs' motions and other pretrial matters, defendants again asserted their position that innocent misrepresentation was not a cognizable theory of liability under the SDA. The trial court denied plaintiffs' motion to amend the complaint, ruling that the evidence concerning permits would be admitted on credibility issues. The court, however, granted plaintiffs' motion to dismiss all claims except innocent misrepresentation. With respect to defendants' argument that a claim for innocent misrepresentation was not viable under the SDA, the court reserved its ruling on the issue until the close of plaintiffs' proofs and until after defendants had moved for a directed verdict.

In essence, defendants argued below that liability for an error, inaccuracy, or omission in the SDS exists only if defendants had actual knowledge of the error, inaccuracy, or omission. MCL 565.955(1). Defendants relied on several unpublished opinions of this Court, including Pena v. Ellis, unpublished opinion per curiam of the Court of Appeals, issued April 18, 2006 (Docket No. 257840), 2006 WL 1006444; Huhtasaari v. Stockemer, unpublished opinion per curiam of the Court of Appeals, issued December 20, 2005 (Docket No. 256926), 2005 WL 3481429; Timmons v. DeVoll, unpublished opinion per curiam of the Court of Appeals, issued February 24, 2004 (Docket No. 241507), 2004 WL 345495; and Paule v. Iwaniw, unpublished opinion per curiam of the Court of Appeals, issued October 5, 2001 (Docket No. 225590), 2001 WL 1179682. The trial court rejected defendants' argument on the basis of this Court's decision in Bergen v. Baker, 264 Mich.App. 376, 691 N.W.2d 770 (2004), which held that in adopting the SDA, "the Legislature intended to allow for seller liability in a civil action alleging fraud or violation of the act brought by a purchaser on the basis of misrepresentations or omissions in a disclosure statement, but with some limitations." Id. at 385, 691 N.W.2d 770. The trial court reasoned that Bergen prevails over this Court's unpublished opinions and held that actions for innocent misrepresentation may be brought for alleged errors, inaccuracies, or omissions in an SDS, subject to certain limitations. In this regard, Bergen held liability is precluded "for errors, inaccuracies, or omissions in a seller disclosure statement that existed when the statement was delivered where the seller lacked personal knowledge, and would not have had personal knowledge by the exercise of ordinary care ...." Id.

We review de novo a trial court's decision to grant or deny summary disposition. Id. at 381, 691 N.W.2d 770. A motion for summary disposition under MCR 2.116(C)(8) tests the legal sufficiency of the complaint on the basis of the pleadings alone. Corley v. Detroit Bd. of Ed., 470 Mich. 274, 277, 681 N.W.2d 342 (2004). The motion should be granted if the pleadings fail to state a claim upon which relief can be granted and no factual development could possibly justify recovery. Id.

Similarly, the Court reviews de novo the trial court's decision on a motion for a directed verdict. Sniecinski v. Blue Cross & Blue Shield of Michigan, 469 Mich. 124, 131, 666 N.W.2d 186 (2003). A directed verdict is appropriate only when no factual question exists upon which reasonable minds could differ. Smith v. Foerster-Bolser Constr., Inc., 269 Mich. App. 424, 427-428, 711 N.W.2d 421 (2006).

This case also involves statutory construction, a question of law we review de novo. Niles Twp. v. Berrien Co. Bd. of Comm'rs., 261 Mich.App. 308, 312, 683 N.W.2d 148 (2004). The primary goal of judicial interpretation of statutes is to ascertain and give effect to the intent of the Legislature. Id. at 313, 683 N.W.2d 148. Our Supreme Court provided guiding principles for performing this task in Roberts v. Mecosta Co. Gen. Hosp., 466 Mich. 57, 63, 642 N.W.2d 663 (2002):

An anchoring rule of jurisprudence, and the foremost rule of statutory construction, is that courts are to effect the intent of the Legislature. To do so, we begin with an examination of the language of the statute. If the statute's language is clear and unambiguous, then we assume that the Legislature intended its plain meaning and the statute is enforced as written. A necessary corollary of these principles is that a court may read nothing into an unambiguous statute that is not within the manifest intent of the Legislature as derived from the words of the statute itself. [Citations omitted.]

The common-law rule with respect to real estate transactions is caveat emptor.¹ Christy v. Prestige Builders, Inc., 415 Mich. 684, 695 n. 7, 329 N.W.2d 748 (1982). Thus, at common law "a land vendor who surrenders title, possession, and control of property shifts all responsibility for the land's condition to the purchaser." Id. at 694, 329 N.W.2d 748. In Christy, the Court recognized two exceptions to the general rule of caveat emptor regarding negligence actions arising from real estate sales. Id. First, the seller has a duty to disclose to the buyer any concealed condition known to the seller that involves an unreasonable danger. Second, after the sale, the seller is liable to those outside the land for a dangerous condition on the land until the buyer discovers or should have discovered it. Id.; see also M&D, Inc. v. McConkey, 231 Mich.App. 22, 34, 585 N.W.2d 33 (1998). Outside the context of a negligence action for personal injury, Michigan recognizes several theories of fraud as exceptions to the common-law rule of caveat emptor in real estate transactions: (1) traditional common-law fraud, (2) innocent misrepresentation, and (3) silent fraud. Id. at 26-27, 585 N.W.2d 33. In this case, in addition to a claim of breach of contract, plaintiffs originally asserted all three theories of fraud.

To prove a claim of fraudulent misrepresentation, or common-law fraud, a plaintiff must establish that: (1) the defendant made a material representation; (2) the representation was false; (3) when the representation was made, the defendant knew that it was false, or made it recklessly, without knowledge of its truth, and as a positive assertion; (4) the defendant made it with the intention that the plaintiff should act upon it; (5) the plaintiff acted in reliance upon the representation; and (6) the plaintiff thereby suffered injury. See id. at 27, 585 N.W.2d 33; see also Mable Cleary Trust v. Edward-Marlah Muzyl Trust, 262 Mich.App. 485, 499-500, 686 N.W.2d 770 (2004), quoting Hord v. Environmental Research Institute of Michigan (After Remand), 463 Mich. 399, 404, 617 N.W.2d 543 (2000).

Silent fraud or fraudulent concealment has also long been recognized in Michigan. See Lorenzo v. Noel, 206 Mich. App. 682, 684, 522 N.W.2d 724 (1994). "`"A fraud arising from the suppression of the truth is as prejudicial as that which springs from the assertion of a falsehood, and courts have not hesitated to sustain recoveries where the truth has been suppressed with the intent to defraud."'" Id., quoting Williams v. Benson, 3 Mich. App. 9, 18-19, 141 N.W.2d 650 (1966), quoting Tompkins v. Hollister, 60 Mich. 470, 483, 27 N.W. 651 (1886). But for the suppression of information to constitute silent fraud there must exist a legal or equitable duty of disclosure. United States Fidelity & Guaranty Co. v. Black, 412 Mich. 99, 125, 313 N.W.2d 77 (1981). Further, establishing silent fraud requires more than proving that the seller was aware of and failed to disclose a hidden defect. McConkey, supra at 30-32, 585 N.W.2d 33. Instead, to prove a claim of silent fraud, a plaintiff must show some type of representation by words or actions that was false or misleading and was intended to deceive. Id. at 31-32, 36, 585 N.W.2d 33.

As noted already, plaintiffs chose to voluntarily dismiss their claims of fraudulent misrepresentation, silent fraud, and breach of contract. Plaintiffs chose to rely solely on their claim of innocent...