Court Opinion

ID: 9376592
Source: CourtListenerOpinion
Date Created: 2023-03-03 06:05:37.28615+00
Date Added: 2024-06-11T17:17:07.746944
License: Public Domain

If this opinion indicates that it is “FOR PUBLICATION,” it is subject to
                 revision until final publication in the Michigan Appeals Reports.

                          STATE OF MICHIGAN

                            COURT OF APPEALS

BRIAN YAFFA,                                                         UNPUBLISHED
                                                                     March 2, 2023
               Plaintiff-Appellant,

V                                                                    No. 360732
                                                                     Oakland Circuit Court
RANDOLPH WILLIAMS and GWENDOLYN                                      LC No. 2021-191442-CH
WILLIAMS,

               Defendants-Appellees.

Before: RICK, P.J., and M. J. KELLY and RIORDAN, JJ.

PER CURIAM.

        Plaintiff, Brian Yaffa, appeals as of right the trial court order confirming an arbitration
award favoring defendants, Randolph and Gwendolyn Williams. Because the trial court did not
err by confirming the arbitration award, we affirm.

                                        I. BASIC FACTS

        The Williamses purchased a home from Yaffa in 2020. In the seller’s disclosure statement,
Yaffa represented that the septic tank and the drain field were in working order. A later inspection
report noted that the home had a public sewer system, but it also indicated that the bathroom
drainage system was not adequately functioning. The inspector suggested that further
investigation was needed. No further inspection occurred. Instead, the parties agreed to an
addendum to the purchase agreement, which required Yaffa to provide an additional $2,000 toward
the closing costs. After the Williamses took possession of the home, they discovered that the septic
system was not operational.

       The Williamses initially filed a complaint in the circuit court; however, because the
purchase agreement included an arbitration clause, the court dismissed the complaint. The matter
was submitted to arbitration.

       At the arbitration hearing, the arbitrator heard testimony from several witnesses and
considered documentary evidence. Randolph Williams testified that after he and his wife took
possession of the property, they could not use the plumbing system. He described having to

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remove “human waste” from the toilet area by hand and having to clean up the area around the
toilet multiple times each day. He also stated that he could not shower because the dirt in the septic
tank prevented the water from draining. Additionally, a neighboring property owner testified that,
in the fall of 2019, she observed Yaffa using a bulldozer to spread dirt in the backyard, which was
flooded. While Yaffa was driving the bulldozer, it fell into the septic tank behind the house.
Thereafter, the neighbor would often smell a “bad odor.” In response, Yaffa testified that he
merely thought that he got the bulldozer “stuck in a water hole.”

        Following the hearing, the arbitrator determined that Yaffa had fraudulently
misrepresented that the septic system was in working order when he sold the home. Accordingly,
the arbitrator awarded the Williamses exemplary damages and costs.1

        Yaffa filed a complaint in the circuit court to vacate the arbitration award. In response, the
Williamses filed a motion to enforce the arbitration award. At a hearing on the motion, Yaffa
argued that he had disclosed problems with the drainage, grading, and flooding in the seller’s
disclosure statement and that he had believed that there were no problems with the septic field
when he made the seller’s disclosure statement. He also asserted that he had provided the Williams
with an additional $2,000 to address the drainage problems noted in the inspection and that the
arbitration award was improper because the Williamses had failed to mitigate their damages. The
circuit court determined that there was no error or violation of any law in the arbitrator’s decision.
As a result, the court entered an order confirming the award and denying Yaffa’s request to vacate
the award.

                                    II. ARBITRATION AWARD

                                    A. STANDARD OF REVIEW

        Yaffa argues that the arbitrator erred by confirming the arbitration award. Although this
Court reviews de novo a trial court’s decision to enforce an arbitration award, our review is
“extremely limited.” Fette v Peters Const Co, 310 Mich App 535, 541; 871 NW2d 877 (2015).
“A reviewing court may not review the arbitrator’s findings of fact, and any error of law must be
discernible on the face of the award itself.” Washington v Washington, 283 Mich App 667, 672;
770 NW2d 908 (2009) (citations omitted). Thus, “only a legal error that is evident without scrutiny
of intermediate mental indicia will suffice to overturn an arbitration award.” Id. (quotation marks
and citation omitted). This Court will not review “the arbitrator’s mental path leading to the
award.” Id. (quotation marks, citation, and alteration omitted). “[A]ny error of law must be so
substantial that, but for the error, the award would have been substantially different.” Id.
(quotation marks and citation omitted). Because “courts may not substitute their judgment for that
of the arbitrators,” any claims of legal error “must be carefully evaluated in order to assure that
[they are] not used as a ruse to induce the court to review the merits of the arbitrator’s decision.”
Id. at 675 (quotation marks and citation omitted).

1
    The arbitrator did not award actual damages or attorney fees for either party.

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                                          B. ANALYSIS

       Yaffa argues that the trial court erred by affirming the arbitrator’s award because the
Williamses failed to demonstrate that he made a fraudulent misrepresentation. 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 that it was
       false, or made it recklessly, without knowledge of its truth or falsity, and as a
       positive assertion; (4) the defendant made the representation with the intention that
       the plaintiff would act on it; (5) the plaintiff acted in reliance on the representation;
       and (6) the plaintiff suffered damage. [Derderian v Genesys Health Care Sys, 263
       Mich App 364, 378; 689 NW2d 145 (2004) (quotation marks and citation omitted).]

        Yaffa first argues that there was no evidence that the Williamses reasonably relied on his
representation in the seller’s disclosure statement that the septic system was in working order. A
party’s reliance on a fraudulent misrepresentation must be reasonable. Bergen v Baker, 264 Mich
App 376, 389; 691 NW2d 770 (2004). Yaffa asserts that the Williamses could not have reasonably
relied upon his statement in the seller’s disclosure statement because a home inspection showed
them that further investigation of the drainage system was needed. He also points out that, because
of the inspector’s report, he agreed to pay the Williamses an extra $2,000 toward closing costs.
However, the inspector’s report did not address the septic system, so it did not, in fact, contradict
Yaffa’s representation that the septic system did not have any problems.
       Moreover, the arbitrator found that, based on the evidence presented, the Williamses
reasonably relied upon Yaffa’s representation. The arbitrator reasoned:
       Claimant Randolph Williams made two statements relating to reliance. He testified
       he relied “100%” on the professionals. He also testified he would not have
       purchased the home if he knew there was a problem with the septic tank and field.
       The problem with the reliance on the professionals is that they were not told about
       the septic problem. And [Yaffa’s] defense that [the Williamses] proper claims
       should be directed at Claimant’s agent and the inspector, does not relieve [Yaffa]
       of the responsibility to honestly complete the Seller Disclosure Statement. The
       Arbitrator finds that [the Williamses] relied on both the truth of the Disclosure
       Statement and his professionals. Perhaps [the Williamses] could pursue a claim
       against their agent and the inspector, but those claims are not before the Arbitrator.
       There can be more than one reason for a defrauded person’s action.

                                               * * *

              A reasonable person could conclude here, and the Arbitrator so finds, that
       [Yaffa’s] misrepresentation exerted a material influence on [the Williamses’]
       decision to buy the home even if it was not the only reason.

In doing so, the arbitrator did not credit the evidence suggesting that the Williamses reliance on
Yaffa’s representation was not reasonable. Instead, based on his view of the evidence, the
arbitrator found that the reliance was reasonable.

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        This Court may not review that factual finding. See Fette, 310 Mich App at 541 (“A court
may not review an arbitrator’s factual findings or decision on the merits.”). When an arbitrator
“did not disregard the terms of his or her employment and the scope of his or her authority as
expressly circumscribed in the contract,” then “judicial review effectively ceases.” Ann Arbor v
American Federation of State, Co, and Municipal Employees (AFSCME) Local 369, 284 Mich
App 126, 144; 771 NW2d 843 (2009) (quotation marks and citation omitted). Moreover, a claim
of legal error “must be carefully evaluated in order to assure that this claim is not used as a ruse to
induce the court to review the merits of the arbitrator’s decision,” and to observe the principle that
“courts may not substitute their judgment for that of the arbitrators.” Washington, 283 Mich App
at 675 (quotation marks and citation omitted). Yaffa’s argument is not that the arbitrator failed to
apply the proper legal framework, but rather that he applied the law to erroneous factual findings.
“It is simply outside the province of the courts to engage in a fact-intensive review” of the
arbitrator’s award and “whether the evidence that he relied on was the most reliable or credible
evidence presented.” Id. Thus, we do not review Yaffa’s argument because neither the trial court
nor this Court is “required or authorized to review the arbitrator’s findings of fact.” Id.

        Next, Yaffa argues that the arbitrator also erred by finding that Yaffa’s representation was
fraudulent. The arbitrator made findings to support its determination that Yaffa had made a
fraudulent disclosure by (1) stating that the septic system was functional and (2) by representing
that a second question about the “condition, if known, of the Septic tanks/drain fields” was not
applicable. The arbitrator determined that Yaffa knew that the septic system was inoperable at the
time of the seller’s disclosure statement. He reasoned:

       based on the testimony of [the neighboring property owner], that [Yaffa] had
       personal knowledge there was a septic tank and septic field behind the house and
       knew that the bulldozer he drove fell into the septic field and tank behind the house
       causing damage to the septic tank and field. He did not exercise ordinary care in
       transmitting information to [the Williamses] regarding the septic tank and field.
       Because he had such personal knowledge, he cannot rely on the safe harbor
       provision of Section (5)(3), even if the home inspector was an expert as defined in
       Section 3.

               The Arbitrator finds that [the neighboring property owner’s] testimony is
       also reasonable considering [Yaffa’s] experience in buying and selling homes.
       [Yaffa] made no effort to counter [the neighbor’s] testimony other than . . .
       testifying he did not know that the bulldozer he operated fell into a septic tank. The
       Arbitrator chooses to believe [the neighbor]. Had [Yaffa] disclosed what happened
       in the back yard to [the Williamses], they would have been able to discover the
       nature of the harm caused by the bulldozer falling into the septic tank and field.
       The Arbitrator emphasizes that [Yaffa] has not contested that there was damage to
       the septic tank and field at the time of the sale of the house.

       On appeal, Yaffa points out that although he stated in one part of the seller’s disclosure
statement that the septic system was functioning properly, in another part of the statement he
disclosed that the property had problems with “[s]ettling, flooding, drainage, structural, or grading
problems.” Again, however, he seeks a determination by this Court that the arbitrator erred by

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applying the correct legal framework to erroneous factual findings. Such a review of the
arbitrator’s award by the trial court or by this Court is not required or authorized. See id.

        Yaffa also argues that the arbitrator erred by awarding exemplary damages and by failing
to consider whether defendants failed to mitigate the damages. The arbitrator awarded $29,550
plus interest to the Williamses in exemplary damages. Exemplary damages compensate a
claimant, but exemplary damages “pick up where actual damages leave off,” increasing actual
compensation. Cetera v Mileto, ___ Mich App ___, ___; ___ NW2d ___ (2002) (Docket No.
356868) (quotation marks and citation omitted); slip op at 7-8. Exemplary damages are awarded
to compensate the injured party, not punish the liable party. McPeak v McPeak (On Remand), 233
Mich App 483, 490; 593 NW2d 180 (1999). Exemplary damages are proper if they compensate
the injured party for “humiliation, sense of outrage, and indignity” that was “maliciously, wilfully
and wantonly” caused by the other party. Unibar Maintenance Servs, Inc v Saigh, 283 Mich App
609, 630; 769 NW2d 911 (2009). Direct evidence of injury to a victim’s feelings is not required.
Id. at 631-632. “Rather, the question is whether the injury to feelings and mental suffering are
natural and proximate in view of the nature of the defendant’s conduct.” Id. (quotation marks and
citation omitted).

       In this case, the arbitrator reasoned:
               The Arbitrator finds that the misrepresentation here was willful and wanton
       and demonstrates a reckless disregard for [the Williamses’] rights. One can easily
       understand and appreciate the horrible and disgusting process that [the Williamses]
       endured each day and the humiliation, outrage, and indignity that [the Williamses]
       suffered. Randolph Williams testified to such conditions. He testified he cleaned
       the bathrooms daily, at least, and removed human waste from the house. Given the
       deplorable conditions that [the Williamses] lived in since taking possession of the
       home, as described by Mr. Williams, the Arbitrator finds that exemplary damages
       are awardable to [the Williamses] for the humiliation, outrage, and indignity
       suffered by [the Williamses] since they took possession of the home in March 2020.
       [The Williamses] certainly did not receive what they expected to receive—a home
       with a working sewage removal system—whether it was a septic system or city
       sewer system. Given the condition of the septic system and effort required by Mr.
       Williams, a charge of $50 per day to clean the toilet areas and remove waste from
       the home is reasonable. Accordingly, the Arbitrator awards [the Williamses] $50
       per day from possession (we don’t have the exact date, but the Arbitrator will use
       March 31, 2020, as the possession date for damage purposes) until November 12,
       2021, totaling 591 days multiplied by $50 per day for a total exemplary damage
       award of $29,550, together with interest at the statutory rate, MCL 600.6455(2),
       from the filing of the arbitration demand until the award is satisfied.

         Yaffa argues that the court’s findings were erroneous because “[a]ny alleged feelings of
humiliation, sense of outrage, and indignity were not the result of injustices maliciously, willfully,
and wantonly inflicted by [him], but rather those alleged feelings are a result of [the Williamses’]
failure to act.” Yaffa additionally asserts that the Williamses’ manually removing waste from their
toilet for 591 days was not the natural and proximate result of any misrepresentation by him
involving their septic system, but was caused by their failure to ascertain and remedy the plumbing

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problem. Again, this is not an argument about an error of law apparent on the face of the
arbitrator’s award, but rather a challenge to the arbitrator’s thought process in applying the proper
legal framework to the facts. Accordingly, this Court must defer to the opinion of the arbitrator.
See Fett, 310 Mich App at 541.

        Yaffa next asserts that the Williamses failed to mitigate their damages because they did not
address the septic tank problem immediately upon discovering that the toilet did not function. The
arbitrator did not directly address this issue. An injured party has an “obligation to use reasonable
means under the circumstances to avoid or minimize his or her damages.” Landin v Healthsource
Saginaw, Inc, 305 Mich App 519, 538; 854 NW2d 152 (2014). A litigant may not recover damages
that could have been avoided. Id. The liable party “bears the burden of proving that the plaintiff
failed to make reasonable efforts to mitigate damages,” and “[t]he question whether the plaintiff’s
efforts to mitigate damages were reasonable under the circumstances is one for the trier of fact.”
Id. at 539.

        Yaffa suggests that the Williamses could have tapped into any home equity they accrued
in 591 days to pay for a septic system. However, it was not established in the evidence that the
Williamses could have immediately remedied the septic problem. Nor does the record support a
finding that the damages would have been minimized if the Williamses had installed a new septic
system instead of manually removing human waste from the toilet. For these reasons, Yaffa has
not met his burden of showing that the Williamses failed to make reasonable efforts to mitigate
their damages.2

       Affirmed.

                                                              /s/ Michelle M. Rick
                                                              /s/ Michael J. Kelly
                                                              /s/ Michael J. Riordan

2
  Yaffa contends that the trial court may have denied his motion to vacate the arbitration award
because it may have erroneously found that his motion was untimely. However, although the court
did not directly reject the Williamses’ argument that the motion was untimely, the court
nevertheless decided the motion on the merits. Yaffa’s supposition that the court may have also
denied his motion on procedural grounds is, therefore, not grounds for reversal.

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