Court Opinion

ID: 4201968
Source: CourtListenerOpinion
Date Created: 2017-09-08 09:10:50.216381+00
Date Added: 2024-06-11T14:40:46.291383
License: Public Domain

STATE OF MICHIGAN

                          COURT OF APPEALS

MARIA T. PROSE,                                                   UNPUBLISHED
                                                                  September 7, 2017
              Plaintiff-Appellee,

v                                                                 No. 330886
                                                                  Wayne Circuit Court
THOMAS M. PROSE,                                                  LC No. 15-004686-CZ

              Defendant-Appellant.

MARIA T. PROSE,

              Plaintiff-Appellant,

v                                                                 No. 331265
                                                                  Wayne Circuit Court
THOMAS M. PROSE,                                                  LC No. 15-004686-CZ

              Defendant-Appellee.

Before: GADOLA, P.J., and METER and FORT HOOD, JJ.

PER CURIAM.

        The parties appeal by leave granted the trial court’s opinion and order granting
defendant’s motion for summary disposition of plaintiff’s claims of fraud arising from the
parties’ prior divorce proceeding, but granting plaintiff leave to file an amended complaint. In
Docket No. 330886, defendant appeals the portion of the trial court’s order granting plaintiff
leave to amend her complaint. In Docket No. 331265, plaintiff appeals the portion of the trial
court’s order granting defendant summary disposition of her claims pursuant to MCR
2.116(C)(8) and (10). We affirm in part, vacate in part, and remand this case for further
proceedings.

                               I. FACTS AND PROCEEDINGS

       In 2010, plaintiff filed a complaint for divorce against defendant, which resulted in the
entry of a divorce judgment on March 22, 2011. The judgment ordered the parties to arbitrate

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the allocation of personal property, including artworks, in the marital home. An initial
arbitration award did not allocate two sculptures, Joie de Vivre and Sleep Marcel Sleep, because
they were not in the marital home when the parties met with the arbitrator to divide the property.
In a second arbitration award, the arbitrator found that the sculptures were missing and it was not
possible to determine which party was responsible for the absence of these works. The arbitrator
ordered the parties to file an insurance claim for their loss. The trial court issued an order
affirming the second arbitration award on November 28, 2012. Plaintiff filed an insurance claim,
but the claim was denied as untimely. Defendant did not participate in the filing of the insurance
claim.

        During their marriage, defendant owned and operated a medical practice, General
Medicine, P.C. In 1996, General Medicine brought an action for breach of contract against
Horizon/CMS Health Care Corporation in the United States District Court for the Eastern
District of Michigan (the “Horizon litigation”).          In 1997, HealthSouth Corporation
(“HealthSouth”) acquired Horizon in a transaction that resulted in Horizon becoming a
subsidiary of HealthSouth. General Medicine later filed a lawsuit against HealthSouth in
Alabama state court, seeking to set aside HealthSouth’s transfers of Horizon’s assets under the
Alabama Uniform Fraudulent Transfer Act (“UFTA”) (the “HealthSouth litigation”). The
parties’ divorce judgment included the following provision:

               To the extent that General Medicine, P.C. or any of its related entities
       should ever recover anything from the Health South [sic] litigation, Defendant
       shall become and be the sole and separate owner of same, free and clear of all
       claims by Plaintiff.

General Medicine alleged in the HealthSouth litigation that HealthSouth fraudulently stripped
Horizon of its assets in order to prevent General Medicine from enforcing a judgment against
Horizon. At the time the divorce judgment was entered, General Medicine appeared to be at a
disadvantage because the federal district court had set aside a $376,000,000 consent judgment
between General Medicine and Horizon on a motion by non-party HealthSouth. In 2012,
however, after entry of the parties’ divorce judgment, the Sixth Circuit Court of Appeals
reversed the federal district court’s decision and reinstated the consent judgment. Gen Medicine,
PC v Horizon/CMS Health Care Corp, 475 Fed Appx 65 (CA 6, 2012). In 2015, General
Medicine and HealthSouth entered into a confidential settlement agreement, the terms of which
were not disclosed to plaintiff.

        Plaintiff filed the instant action against defendant in 2015, asserting claims for fraudulent
inducement, fraudulent misrepresentation, silent fraud, and innocent misrepresentation. Plaintiff
alleged that defendant falsely represented during the divorce proceeding, in discovery and during
negotiation of the property division, that General Medicine would abandon the Horizon litigation
because it lacked resources to continue the litigation. Plaintiff also alleged that defendant
concealed the existence of the HealthSouth litigation in Alabama and that defendant
misrepresented the status of the Alabama action. Defendant moved for summary disposition of
plaintiff’s claims under MCL 2.116(C)(8) and (10). Defendant argued that plaintiff’s claims
were an invalid and untimely attempt to obtain relief from the divorce judgment under MCR
2.612.

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        Plaintiff opposed defendant’s motion and also moved for leave to amend her complaint to
add claims for fraudulent inducement, fraudulent misrepresentation, silent fraud, and innocent
misrepresentation in regard to the Joie de Vivre and Sleep Marcel Sleep sculptures. Defendant
opposed the amendment, reiterating his argument that these claims were an invalid and untimely
attempt to obtain relief from the divorce judgment under MCR 2.612. The trial court granted
defendant summary disposition for the HealthSouth and Horizon litigation fraud claims, but
granted plaintiff leave to amend her complaint. This Court granted the parties’ applications for
leave to appeal.

                                   II. DOCKET NO. 330886

        Defendant argues that the trial court erred in granting plaintiff leave to amend her
complaint. A trial court’s decision on a motion to amend pleadings is reviewed for an abuse of
discretion. Ormsby v Capital Welding, Inc, 471 Mich 45, 53; 684 NW2d 320 (2004). To the
extent this issue requires the interpretation and application of court rules, such matters are
reviewed de novo as questions of law. CAM Constr v Lake Edgewood Condo Ass’n, 465 Mich
549, 553; 640 NW2d 256 (2002).

        Plaintiff argues that defendant failed to preserve this issue because his response to her
motion to amend her complaint was not timely filed. We disagree, because defendant argued his
position at the hearing on plaintiff’s motion. In any event, even if an issue is unpreserved, a
party can avoid forfeiture of a claim of error if three requirements are met: “ ‘1) the error must
have occurred, 2) the error was plain, i.e., clear or obvious, 3) and the plain error affected
substantial rights.’ ” Kern v Blethen-Coluni, 240 Mich App 333, 336; 612 NW2d 838 (2000),
quoting People v Carines, 460 Mich 750, 763; 597 NW2d 130 (1999).

        MCR 2.118(A)(2) permits a party to “amend a pleading only by leave of the court or by
written consent of the adverse party. Leave shall be freely given when justice so requires.”
Leave to amend should be denied only for particularized reasons, such as undue delay, bad faith
or dilatory motive on the movant’s part, repeated failure to cure deficiencies by amendment
previously allowed, undue prejudice to the opposing party, or where amendment would be futile.
Ben P Fyke & Sons, Inc v Gunter Co, 390 Mich 649, 656; 213 NW2d 134 (1973). Defendant
contends that the trial court abused its discretion in permitting plaintiff to amend her complaint
because her fraud claims related to the two sculptures are, in substance, an untimely attempt to
obtain relief from the divorce judgment, and because they are an improper collateral attack on
the judgment affirming the second arbitration award.

        Defendant implies that the fraud claims in plaintiff’s amended complaint are, in
substance, a request for relief from judgment under MCR 2.612. Although plaintiff did not cite
MCR 2.612 in her motion to amend her complaint, the trial court initially cited MCR 2.612 as
authority for granting her motion to amend, but subsequently retracted this statement when
denying defendant’s motion for reconsideration. Plaintiff argues that MCR 2.612 and its time
constraints are not relevant to her amended complaint because she is asserting an independent
action for fraud, not seeking relief from a prior judgment. Plaintiff maintains that she has no
need for relief from judgment because her complaint is that defendant’s fraud thwarted proper
enforcement of the divorce judgment.

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       Defendant relies on Nederlander v Nederlander, 205 Mich App 123; 517 NW2d 768
(1994), in which this Court summarized the pertinent facts as follows:

                Following a trial, the entry of a divorce judgment on May 24, 1988, ended
       a marriage that began in June 1975. More than one year after entry of the
       judgment, the plaintiff sought to reopen discovery in an attempt to set aside the
       judgment under MCR 2.612(C)(1)(c). The trial court determined that the
       plaintiff's motion was untimely under MCR 2.612(C)(2), but allowed the plaintiff
       to file an amended complaint. On February 14, 1990, the plaintiff filed her first
       amended complaint in this proceeding, alleging fraud on the court, fraudulent
       misrepresentations and omissions, breach of fiduciary duty, intentional infliction
       of emotional distress, conspiracy to defraud, and abuse of process. The amended
       complaint does not seek to set aside the divorce judgment. Instead, the plaintiff's
       complaint is an independent action for monetary damages. Plaintiff claimed that
       the defendant misrepresented the value of his interest in Ticketmaster, Inc., and
       Nederlander Realty of Illinois. Specifically, the plaintiff alleged that the
       defendant knew during the divorce proceedings that Ticketmaster would be
       merged into a new entity, with the defendant redeeming his stock, and that the
       realty company was in the process of selling valuable real estate known as Poplar
       Creek. [Id. at 124-125.]

The trial court granted summary disposition to the defendant under MCR 2.116(C)(10), “ruling
that the evidence did not create a genuine issue of material fact regarding whether the defendant
or his witnesses falsely testified at trial or concealed material evidence from the court.” Id. at
125. On appeal, this Court held that the case was controlled by the Supreme Court’s decision in
Triplett v St Amour, 444 Mich 170; 507 NW2d 194 (1993); this Court stated:

       If a party suspects that the other party has committed fraud during a divorce
       proceeding, then MCR 2.612(C)(1)(c) and (2) allows the party to seek redress
       within one year after the judgment is entered. On the other hand, we believe that
       allowing a party to file an independent action for fraud whenever the other party,
       more than one year after the divorce judgment is entered, liquidates assets or
       consummates a business transaction is contrary to the public policy behind the
       finality of judgments. The exercise of due diligence during the course of liberal
       discovery should expose any intrinsic fraud that may be present in the divorce
       proceeding. Accordingly, we find that the trial court did not err in granting the
       defendant summary disposition because the claim was so clearly unenforceable as
       a matter of law that no factual development could establish the claim and justify
       recovery. [Nederlander, 205 Mich App at 126-127.]

        Plaintiff relies on Grace v Grace, 253 Mich App 357; 655 NW2d 595 (2002), in which
parties to a divorce action “entered into a separation agreement . . . that was incorporated, but not
merged, into the divorce judgment.” Id. at 359. The plaintiff subsequently alleged that the
defendant defrauded her by concealing substantial marital assets and undervaluing other assets
before the parties entered into the separation agreement. Id. at 359-360. This Court
distinguished Nederlander because the separation agreement was a distinct contract from the
judgment of divorce. Id. at 364-365. Plaintiff also relies on Foreman v Foreman, 266 Mich App

                                                -4-
132; 701 NW2d 167 (2005), in which the parties’ mediated property settlement “was
incorporated, but not merged,” into the parties’ divorce judgment. Id. at 134. This Court held
that “the Grace Court’s ruling, that an independent cause of action for fraud lies where a
settlement agreement is incorporated, but not merged, into the judgment,” was binding
precedent. Id. at 141. This Court noted that the plaintiff was “not seeking relief from or
amendment of the judgment of divorce,” but instead was seeking “to recover money damages for
fraud relating to the underlying contract, the property settlement between defendant and her.” Id.

       We agree with plaintiff that Grace and Foreman provide authority for allowing her
amended complaint. Plaintiff cites paragraphs 61, 62, and 65 of the divorce judgment. These
provisions state:

               61. Each of the parties affirms that he/she has disclosed all assets that
       he/she owns or has any interest in . . . . This Judgment of Divorce is intended to
       effectuate a distribution and allocation of all the property of the parties. In the
       event that either party hereto has failed, either intentionally, or unintentionally, to
       disclose any of his or her assets, the issue of property settlement shall be reopened
       upon the petition of either party for the purpose of determining and resolving the
       distribution of the previously undisclosed asset or assets. In the event that any
       substantial assets or liabilities are later discovered, the party failing to disclose or
       hiding such assets and/or liabilities, may be subject to costs, sanctions, and
       attorney fees.

                62. The contents of this Judgment of Divorce are made in full satisfaction
       of any and all rights and claims of whatsoever kind or nature from the beginning
       of time until the date of execution of this Judgment of Divorce, including but not
       limited to contract, personal injury, and tort claims, which either party may claim
       against the other, except for fraud pertaining to the negotiation and enforcement
       of this Judgment of Divorce.

                                                ***

              65. The Court shall retain jurisdiction over this matter in order to enforce
       the terms of this Judgment of Divorce. All of the terms of this Judgment of
       divorce shall be enforced by the Court through the use of its contempt powers and
       other powers.

These provisions essentially serve the same function as the unmerged settlement agreements in
Grace and Foreman. Indeed, paragraph 62 specifically states that the judgment constitutes full
satisfaction of all claims “except for fraud pertaining to the negotiation and enforcement of this
Judgment of Divorce.” The judgment of divorce provided that the parties’ artwork would be
divided in binding arbitration. Subsequently, the arbitrator found that the party responsible for
the loss of the two sculptures could not be determined and ordered that an insurance claim be
filed. Toward the end of 2014, plaintiff discovered, by way of photographs of defendant’s home
that were published in a newspaper, that defendant possibly had possession of the sculptures.
Her amended complaint thus relates to fraud pertaining to the enforcement of the judgment of
divorce. The wording of the divorce judgment—and specifically the language that essentially

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allows an action for fraud in effectuating the arbitration provision—indicates that this case is
sufficiently distinguishable from Nederlander1 and Triplett.

        Defendant argues that plaintiff’s claims are barred by the doctrines of res judicata and
collateral estoppel. These arguments are unpersuasive. The prior litigation did not resolve issues
of fraud. In addition, the claims relate to evidence arising after the litigation in question.
Defendant admits that res judicata applies when the “evidence or essential facts are identical” in
the prior and current litigation. Sewell v Clean Cut Mgmt, Inc, 463 Mich 569, 575; 621 NW2d
222 (2001). Here, the essential facts are not identical. Collateral estoppel requires that the
parties had a full and fair opportunity to litigate the issue in the prior litigation. Monat v State
Farm Ins Co, 469 Mich 679, 682-683; 677 NW2d 843 (2004). Here, there was no such
opportunity. See, generally, id. at 683 n 2 (discussing the absence of a fair opportunity to litigate
an issue because of the conduct of one’s adversary).

        Defendant argues that the trial court erred in ordering the parties to arbitrate the claims in
plaintiff’s amended complaint because the arbitration agreement did not encompass tort claims.
The enforceability of an arbitration agreement is reviewed de novo as a question of law.
Michelson v Voison, 254 Mich App 691, 693-694; 658 NW2d 188 (2003).

         “Arbitration is generally recognized as a matter of contract.” Bayati v Bayati, 264 Mich
App 595, 598; 691 NW2d 812 (2004). Arbitration agreements must be enforced according to
their terms to effectuate the intentions of the parties. Id. at 599.

        The trial court quoted the arbitrator’s statement that he “specifically adopt[ed]” testimony
that the sculpture Dance the Dawn had a value of $35,000 and that the sculpture The Rose had a
value of $21,000. The court then stated:

               The lack of similar testimony regarding Joie De Vivre and Sleep Marcel
       Sleep or other competent evidence of their value means that neither res judicata
       nor collateral estoppel applies. For, in order for res judicata or collateral estoppel
       to apply, the Arbitrator would have had to determine a value of the items, which
       he did not, and this Court would have had to make a judicial determination about
       the items, which it did not.

              Therefore, the Court is granting Plaintiff’s Motion for Leave to file an
       Amended Complaint pursuant to MCR 2.118(A)(2) and shall refer the parties
       back to binding arbitration with Gil Gugni.

1
   We note that, in Nederlander, 205 Mich App at 124-125, the plaintiff claimed that the
defendant misrepresented the probable future value of a known asset. This present case is
different in that plaintiff is alleging that defendant actively hid marital assets and therefore made
it difficult for the arbitrator to properly allocate the assets. The arbitrator was forced to resort to
ordering an insurance claim, which was never successfully completed. In Nederlander the asset
was essentially “available” to be assessed by either party, but such was not the case with the
statues at issue here.

                                                 -6-
We agree that at this stage in the proceedings, when plaintiff has simply been allowed to proceed
on her amended complaint in the circuit court, it was premature for the court to refer any issue
back to arbitration with Gil Gugni. We vacate that part of the trial court’s order referring the
case to arbitration; any relief stemming from plaintiff’s independent action for fraud is left, at
this point, for further proceedings in the trial court.

      Defendant also claims that the trial court erred in denying his motion for reconsideration.
Motions for reconsideration are governed by MCR 2.119(F). MCR 2.119(F)(3) provides:

                Generally, and without restricting the discretion of the court, a motion for
       rehearing or reconsideration which merely presents the same issues ruled on by
       the court, either expressly or by reasonable implication, will not be granted. The
       moving party must demonstrate a palpable error by which the court and the
       parties have been misled and show that a different disposition of the motion must
       result from correction of the error.

Defendant’s motion for reconsideration did not demonstrate that an error mandating a different
disposition occurred (aside from the referral to arbitration, which we have addressed
immediately above). We find no basis for further relief.

                                   III. DOCKET NO. 331265

        Plaintiff argues that the trial court erred in granting defendant’s motion for summary
disposition under MCR 2.116(C)(8) and (10). A trial court’s decision on a motion for summary
disposition is reviewed de novo. Maiden v Rozwood, 461 Mich 109, 118; 597 NW2d 817
(1999). “A motion under MCR 2.116(C)(8) tests the legal sufficiency of the complaint” and
“[a]ll well-pleaded factual allegations are accepted as true and construed in a light most
favorable” to the nonmoving party. Id. at 119. Summary disposition may be granted under
MCR 2.116(C)(8) if the plaintiff’s claims are so unenforceable “as a matter of law that no factual
development could possibly justify recovery.” Id. (quotation marks and citation omitted).
Summary disposition may be granted under MCR 2.116(C)(10) when “there is no genuine issue
as to any material fact and the moving party is entitled to judgment . . . as a matter of law.” This
Court must consider any evidence submitted by the parties and view that evidence in the light
most favorable to the nonmoving party to determine whether a genuine issue of material fact
exists. Maiden, 461 Mich at 120.

       Plaintiff argues that the trial court erred in determining that she failed to plead valid
claims of fraud. We disagree. Plaintiff’s fraud claims are based on representations defendant
made concerning the progress of General Medicine’s litigation during the pendency of their
divorce action. Plaintiff alleged these instances of falsity:

      Defendant’s Verified Emergency Motion stated that General Medicine did not have
       sufficient funds to cover Horizon litigation expenses. Defendant requested permission to
       abandon the litigation. Instead of abandoning the litigation, General Medicine’s
       attorneys filed an appeal in the Sixth Circuit the day after the order was entered (August
       17-18, 2010).

                                                -7-
      In October 2010, defendant told plaintiff’s financial expert, Esser that he was “dropping
       the lawsuit” when, in fact, the appeal was pending in the Sixth Circuit.

      Defendant testified in his deposition in February 2011 that he was not familiar with the
       ruling allowing him to abandon the litigation. He denied knowing if General Medicine
       was still involved in the HealthSouth litigation. He denied instructing his attorneys about
       plans to continue or discontinue the litigation. Despite his professed lack of knowledge,
       defendant stated that “Corbett O’Meara, the federal judge,” dismissed General
       Medicine’s case. Defendant stated that he “lost” in the HealthSouth litigation, and that
       the judgment was “thrown out.”

      In response to plaintiff’s requests for admissions, defendant denied that General Medicine
       withdrew its appeal in the HealthSouth litigation, but he stated that he left a message for
       his attorney requesting withdrawal of the appeal.

      When the parties met to draft the divorce judgment, although defendant indicated that he
       wanted to be the sole recipient of recovery from the HealthSouth litigation, his attorneys
       “confirmed that the litigation and federal appeal were absolutely dead.”

      Defendant did not reveal to plaintiff that General Medicine was involved in two “sets” of
       litigation, the Horizon litigation in Michigan federal court and the HealthSouth litigation
       in Alabama state court. Plaintiff did not learn about the Alabama litigation until 2014.

Plaintiff argues that she relied on these statements by agreeing to relinquish any claim to
damages that defendant might receive in the HealthSouth litigation.

        Plaintiff’s allegation that defendant concealed from her the HealthSouth litigation in
Alabama is untenable. The Alabama litigation was not a secret and was clearly referenced in the
federal district court’s General Medicine opinion in 2009. We note that even though she filed a
reply brief, plaintiff does not dispute defendant’s assertion that, in response to discovery
requests, plaintiff received a copy of this opinion. Defendant was entitled to summary
disposition of plaintiff’s fraud claims as they pertained to his alleged concealment of the
HealthSouth litigation.

       The elements of fraudulent misrepresentation are:

               (1) the defendant made a material representation; (2) the representation
       was false; (3) when the defendant made the representation, the defendant knew it
       was false, or made it recklessly, without knowledge of its truth as a positive
       assertion; (4) the defendant made the representation with the intention that the
       plaintiff would act upon it; (5) the plaintiff acted in reliance upon it; and (6) the
       plaintiff suffered damage. [Bergen v Baker, 264 Mich App 376, 382; 691 NW2d
       770 (2004) (quotation marks and citations omitted).]

Generally, a fraud claim must arise from a statement relating to a past or existing fact; therefore,
a promise relating to a future action is usually considered contractual and does not constitute
fraud. Hi–Way Motor Co v Int'l Harvester Co, 398 Mich 330, 336; 247 NW2d 813 (1976).

                                                -8-
However, when “a party materially misrepresents future conduct under circumstances in which
the assertions may reasonably be expected to be relied upon and are relied upon,” a claim for
fraud in the inducement may be stated. Custom Data Solutions, Inc v Preferred Capital Inc, 274
Mich App 239, 242-243; 733 NW2d 102 (2006) (quotation marks and citations omitted).

         Plaintiff’s remaining bases for fraud are untenable. Plaintiff claims that defendant falsely
stated that General Medicine lacked the funds to continue the litigation, falsely stated that he was
dropping the lawsuit, and also falsely stated that he requested permission to end the litigation.
However, plaintiff then admits that defendant, in February 2011, denied telling his attorneys that
he wanted to discontinue the litigation and also denied knowing whether General Medicine was
still involved in the HealthSouth litigation. Plaintiff cannot ignore information that contradicts
an alleged misrepresentation. Titan Ins Co v Hyten, 491 Mich 547, 555 n 4; 817 NW2d 562
(2012). Moreover, defendant’s statements that he “lost” and that the judgment was “thrown out”
did not preclude the possibility that he would pursue appeals. In addition, the admission by
defendant that he had merely left a message for his attorney requesting withdrawal of the appeal
was not a statement of fact indicating that the appeal was actually withdrawn, especially when
defendant denied that the appeal had been withdrawn at that point. Defendant’s attorneys’
statements in settlement negotiations, before release of the Sixth Circuit’s opinion, that “the
litigation and federal appeal were absolutely dead” were too subjective to be construed as
assurances of fact that General Medicine had exhausted all legal recourse against HealthSouth
and Horizon. See, generally, Cummins v Robinson Twp, 283 Mich App 677; 770 NW2d 421
(2009) (discussing legal opinions). Plaintiff has failed to establish that the trial court erred in
granting defendant’s motion for summary disposition.

         Plaintiff argues that the trial court erred in concluding that defendant’s collection of
monies arising from the $376 million consent judgment derived from the HealthSouth litigation
as opposed to the Horizon litigation. She claims that the HealthSouth litigation was inextricably
linked to the Horizon litigation. The trial court essentially concluded that the issue of whether
the money should be considered derived from the Horizon litigation or from the HealthSouth
litigation was relevant only if plaintiff had presented sufficient evidence of fraud. We agree that
the issue becomes relevant only if the fraud claims were to be deemed viable, because
fraud/misrepresentation is what plaintiff alleged in her complaint. Because the fraud claims are
not viable, we decline to address the issue. Plaintiff contends in a reply brief that we must
address this issue because of the possibility of “future enforcement actions.” We decline to
address an unripe issue. See Citizens Protecting Michigan’s Constitution v Secretary of State,
280 Mich App 273, 282; 761 NW2d 210 (2008) (discussing ripeness).

        Affirmed in part, vacated in part, and remanded for further proceedings. We do not retain
jurisdiction.

                                                              /s/ Michael F. Gadola
                                                              /s/ Patrick M. Meter
                                                              /s/ Karen M. Fort Hood

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