Court Opinion

ID: 4307035
Source: CourtListenerOpinion
Date Created: 2018-08-24 09:08:04.112144+00
Date Added: 2024-06-11T14:40:14.454081
License: Public Domain

STATE OF MICHIGAN

                              COURT OF APPEALS

ROSA WOODS,                                                           UNPUBLISHED
                                                                      August 23, 2018
                 Plaintiff-Appellant,

and

ROSETTA HALL,

                 Plaintiff,

v                                                                     No. 338139
                                                                      Wayne Circuit Court
RE INVESTMENT, INC.,                                                  LC No. 16-006341-CH

                 Defendant,

and

CITIFINANCE, INC., CITIMORTGAGE, INC.,
and CITI, INC.,

                 Defendants-Appellees.

Before: CAMERON, P.J., and RONAYNE KRAUSE and TUKEL, JJ.

PER CURIAM.

        Plaintiff Rosa Woods appeals by right the circuit court’s order dismissing her contract
and tort claims against defendants CitiFinance, Inc., CitiMortgage, Inc., and Citi Inc.1 under
MCR 2.116(C)(10) (no genuine issues of material fact). We affirm the circuit court’s grant of
summary disposition on plaintiff’s contract claims, reverse the grant of summary disposition on
plaintiff’s tort claims, and remand for further proceedings.

1
    RE Investment, Inc. was also a defendant but is not a party on appeal.

                                                  -1-
                                         I. BASIC FACTS

        Plaintiff’s mother, Rosetta Hall, 2 entered into a land contract to purchase a home. Hall
never lived in the home, and plaintiff, Hall’s daughter who did live in the home, made the
payments. Plaintiff was not a party to the contract, and Hall never assigned her rights under the
contract to plaintiff. Plaintiff fell behind on the payments in 2004 and received delinquency
notices from 2005 until 2014, when the home was eventually paid off. Plaintiff believed that
defendants failed to apply sums to the delinquency and that they harassed her with notifications
that she was behind on her payments.

        On May 18, 2016, plaintiff and Hall filed a complaint against defendants, asserting fraud,
negligence, negligent misrepresentation, negligent infliction of emotional distress, breach of
contract, and breach of the Fair Credit Reporting Act, 15 USC 1681 et seq. While defendants did
not assert lack of standing as a defense in their original answer, they later sought and received
leave to amend their answer to do so. The circuit court ultimately granted defendants’ motion
for summary disposition, which was based in part on plaintiff’s lack of standing.

                       II. PLEADINGS AND AFFIRMATIVE DEFENSES

        Plaintiff first argues that the circuit court should have stricken defendants’ answer
because in the answer, defendants failed to respond to plaintiff’s allegations with particularity.
Plaintiff failed to raise this issue in the trial court; accordingly, the issue is not preserved for
appellate review. See Peterman v Dep’t of Natural Res, 446 Mich 177, 183; 521 NW2d 499
(1994). This Court reviews unpreserved issues for plain error affecting a party’s substantial
rights. Duray Dev, LLC v Perrin, 288 Mich App 143, 150; 792 NW2d 749 (2010). An error is
plain if it is clear or obvious, and it affects substantial rights if it affected the outcome of the
lower court proceedings. Id.

        In a responsive pleading, a party must (1) state an explicit admission or denial, (2) plead
no contest, or (3) state that the pleader lacks sufficient information to form a belief as to the truth
of the allegation. MCR 2.111(C). If the party states a denial, it must also “state the substance of
the matters on which the pleader will rely to support the denial.” MCR 2.111(D). If a party does
not deny an issue, it is effectively admitted. MCR 2.111(E)(1). Courts must view pleadings as a
whole to determine whether the answer is “sufficiently specific so that a plaintiff will be able to
adequately prepare his case.” Stanke v State Farm Mut Auto Ins Co, 200 Mich App 307, 318;
503 NW2d 758 (1993).

        A review of the answer in this case indicates that defendants clearly stated their belief
that plaintiff’s claims were meritless because they had committed no wrongdoing and because
plaintiff had supported her complaint with an “incomplete and marked up” payment ledger.
Defendants denied that plaintiff had paid off the land contract in July 2014. Defendants admitted
they had sent correspondence to plaintiff, but they denied the correspondence was improper.

2
 Hall was a plaintiff below but has not appealed. Consequently, only Woods’s claims are before
us on appeal.

                                                 -2-
Defendants denied that they had harassed plaintiff. Further, when defendants stated that
plaintiff’s allegations contained a legal conclusion to which no response was required, it was an
explanation for why defendants were denying the allegation as untrue.

        We conclude that defendants’ responses in their answer were sufficient to indicate that
they intended to proceed on the basis that, while they had sent notices to plaintiff, those notices
were not harassment and had not caused damages. Defendants’ answer also indicated that they
would argue that Hall had breached the contract and had not actually overpaid on it. For these
reasons, the circuit court did not commit a clear or obvious error by failing to sua sponte strike
defendants’ answer as insufficient.

        Plaintiff next contends that the circuit court erred when it allowed defendants to amend
their answer so they could add the affirmative defense of standing. We review a circuit court’s
decision on a motion for leave to amend pleadings for an abuse of discretion. Titan Ins v North
Pointe Ins, 270 Mich App 339, 346; 715 NW2d 324 (2006).

        “A defense not asserted in the responsive pleading or by motion as provided in these
rules is waived,” subject to exceptions that do not apply in this case. MCR 2.111(F)(2).
“Affirmative defenses must be stated in a party’s responsive pleading, either as originally filed or
as amended in accordance with MCR 2.118.” MCR 2.111(F)(3). Affirmative defenses include
several specific defenses, MCR 2.111(F)(3)(a), as well as those that “seek[] to avoid the legal
effect of or defeat the claim of the opposing party, in whole or in part,” MCR 2.111(F)(3)(b).
MCR 2.118(A)(2) allows a party to amend a pleading “by leave of the court or by written
consent of the adverse party.”

        We hold that the circuit court did not abuse its discretion when it granted defendants’
motion to amend their answer. “It is a fundamental rule of civil procedure in this state that leave
to amend pleadings should be given freely.” Stanke, 200 Mich App at 321. In support of her
position, plaintiff primarily relies on the fact that defendants did not do their due diligence in
determining that plaintiff was not a party to the contract and their delay in asserting this defense
is not excusable. However, “[a]lthough delay is a factor to be considered in granting a motion to
amend pleadings, delay alone does not warrant denial of a motion to amend.” Id. (citations
omitted). “Delay may give rise to a legitimate basis for denying a motion to amend, such as
where the delay was in bad faith or causes actual prejudice to the opponent.” Id. But here,
plaintiff failed to provide any facts to show that defendants acted with bad faith. Further,
plaintiff cannot show how she was prejudiced. When defendants moved for summary
disposition on March 17, 2017, one of the arguments raised was that plaintiff lacked standing.
Thus, plaintiff was not caught off-guard when defendants later moved to amend their pleadings
to assert lack of standing. In other words, with plaintiff being aware as of March 17 of
defendants’ intention to challenge her standing, plaintiff was not denied a fair chance to oppose
the defense when the circuit court granted defendants’ motion to amend their pleading a month
later on April 17, 2017. Therefore, we cannot conclude that the circuit court abused its
discretion when it granted defendants’ motion to amend their answer.

                                                -3-
        Plaintiff also asserts that the circuit court should not have relied on the economic loss
doctrine,3 as defendants had not invoked it as an affirmative defense. We review this
unpreserved issue for plain error affecting substantial rights. Duray Dev, 288 Mich App at 150.
There are two fundamental problems with plaintiff’s view. First, although defendants did rely on
the economic loss doctrine as one of their reasons that summary disposition should be granted,
the circuit court did not rely on that doctrine when it granted defendants’ motion, see Note 4,
infra. Moreover, plaintiff cites no law to support her assertion that the economic loss doctrine is
an affirmative defense that a defendant must state in a responsive pleading. The economic loss
doctrine is not listed in MCR 2.111(F)(3)(a), and we have not identified any caselaw that
supports plaintiff’s position. Accordingly, the circuit court did not clearly or obviously err by
failing to conclude that the economic loss doctrine was an affirmative defense that defendants
were required to state in their first responsive pleading.

                                III. SUMMARY DISPOSITION

        Plaintiff argues that the circuit court should not have granted defendants’ motion for
summary disposition.4 We hold that the circuit court did not err by granting summary
disposition on plaintiff’s contract-based claims because plaintiff, an incidental third-party
beneficiary to the contract, lacked standing to sue. However, the circuit court did not apply the
proper legal analysis with respect to plaintiff’s tort claims, and we reverse the grant of summary
disposition with respect to these claims.

        This Court reviews de novo issues of standing. Huntington Woods v Detroit, 279 Mich
App 603, 614; 761 NW2d 127 (2008). This Court reviews de novo the trial court’s decision on a
motion for summary disposition. Maiden v Rozwood, 461 Mich 109, 118; 597 NW2d 817
(1999). When a party moves for summary disposition under MCR 2.116(C)(8) and (10) and the
trial court considers documents outside the pleadings when deciding the motion, this Court
reviews the trial court’s decision under MCR 2.116(C)(10). Hughes v Region VII Area Agency
on Aging, 277 Mich App 268, 273; 744 NW2d 10 (2007). A party is entitled to summary
disposition under MCR 2.116(C)(10) if there is no genuine issue as to any material fact and the
moving party is entitled to judgment as a matter of law. Hazle v Ford Motor Co, 464 Mich 456,
461; 628 NW2d 515 (2001). A genuine issue of material fact exists if, when viewing the record
in the light most favorable to the nonmoving party, reasonable minds could differ on the issue.
Gorman v American Honda Motor Co, Inc, 302 Mich App 113, 116; 839 NW2d 223 (2013).

3
  The economic loss doctrine provides that “[w]here a purchaser’s expectations in a sale are
frustrated because the product he bought is not working properly, his remedy is said to be in
contract alone, for he has suffered only ‘economic’ losses.” Neibarger v Universal Coops, Inc,
439 Mich 512, 520; 486 NW2d 612 (1992) (citation and some quotation marks omitted).
4
 Plaintiff claims that the circuit court improperly relied upon the economic loss doctrine when it
granted summary disposition to defendants on plaintiff’s tort claims. But the circuit court did not
grant summary disposition on this ground. While defendants did cite the economic loss doctrine
as one of its reasons summary disposition was appropriate, the circuit court did not cite that
doctrine. Instead, it stated, “[Y]ou can’t bring a tort claim for a breach of contract case.”

                                                -4-
                              A. BREACH OF CONTRACT CLAIM

        “A litigant has standing whenever there is a legal cause of action.” Lansing Sch Ed Ass’n
v Lansing Bd of Ed, 487 Mich 349, 372; 792 NW2d 686 (2010). A party asserting a breach of
contract must establish that there was a contract resulting in damages to the party claiming
breach. Pontiac Police & Fire Retiree Prefunded Group Health & Ins Trust Bd of Trustees v
City of Pontiac No 2, 309 Mich App 611, 623; 873 NW2d 783 (2015). A party outside of a
contract is not a party in interest to the contract and is thus not the proper party to assert a breach
of the contract. Id.

        In this case, it is not contested that plaintiff was not a party to the land contract. Indeed,
plaintiff’s complaint admits that “she is not a party in the land contract.” Instead, the land
contract was between Hall and the seller, Wayne Rose. The documentary evidence indicated that
Rose’s interest in the contract was later assigned to defendant CitiMortgage. While plaintiff
demonstrated that Hall gave her a quitclaim deed regarding Hall’s interests in the property,
plaintiff provided no evidence that Hall’s interest in the contract was ever assigned to plaintiff.

        Additionally, while plaintiff claims that Hall intended to benefit her by the contract, a
mere intent to benefit someone else with a contract, not expressed in its terms, is not sufficient to
grant that person standing. With respect to beneficiaries of a contract, “only intended, not
incidental, third-party beneficiaries may sue for breach of a contractual promise in their favor.”
Schmalfeldt v North P Ins Co, 469 Mich 422, 427; 670 NW2d 651 (2003). And a person is an
intended third-party beneficiary only if the contract itself establishes an intent to directly benefit
the third party. Id. at 428.

        In this case, although Hall testified that she signed the land contract with the belief that
plaintiff would be making payments, the contract itself contains no statement that it was for the
benefit of plaintiff. Accordingly, plaintiff did not have standing to sue as a third-party
beneficiary to the contract because she was not an intended third-party beneficiary. For these
reasons, we conclude that the circuit court did not err when it granted summary disposition on
the basis that plaintiff lacked standing to pursue contractual claims.

                                        B. TORT CLAIMS5

       In her complaint, plaintiff brought four tort claims: fraud, negligence, negligent
misrepresentation, and negligent infliction of emotional distress. The circuit court granted
summary disposition on these counts, ruling that plaintiff could not “bring a tort claim for a
breach of contract case.” While “[a] plaintiff cannot maintain an action in tort for
nonperformance of a contract,” Casey v Auto Owners Ins Co, 273 Mich App 388, 401; 729
NW2d 277 (2006), the same cannot be said when it is alleged that there is misfeasance on the
defendant’s part, Hart v Ludwig, 347 Mich 559, 564; 79 NW2d 895 (1956). Courts are to

5
 In her brief on appeal, plaintiff does not put forth any argument related to the dismissal of her
Fair Credit Reporting Act claim. Accordingly, any appeal with respect to this particular claim is
abandoned. See Prince v MacDonald, 237 Mich App 186, 197; 602 NW2d 834 (1999).

                                                 -5-
“analyze tort actions based on a contract and brought by a plaintiff who is not a party to that
contract by using a ‘separate and distinct’ mode of analysis. Specifically, the threshold question
is whether the defendant owed a duty to the plaintiff that is separate and distinct from the
defendant’s contractual obligations. If no independent duty exists, no tort action based on a
contract will lie.” Fultz v Union-Commerce Associates, 470 Mich 460, 467; 683 NW2d 587
(2004). However, because the circuit court did not address the tort claims under these principles,
we decline to address them for the first time and instead remand to allow the court to make its
determinations under this proper framework.

                           IV. PLAINTIFF’S REMAINING ISSUES

        Plaintiff contends that the circuit court erred by failing to rule on her discovery motion
before granting summary disposition. We note that the circuit court never issued an order
granting or denying plaintiff’s discovery motion. When the trial court fails to make a specific
ruling on an issue, this Court may remand to the trial court to determine the merits of the issue.
Wells Fargo Bank NA v Null, 304 Mich App 508, 540; 847 NW2d 657 (2014). While we note
that summary disposition would not have been premature were it properly granted,6 on remand,
we ask the trial court to address the merits of plaintiff’s discovery motion.

        Plaintiff also contends that the circuit court erred by not holding an evidentiary hearing
on the propriety of defendants’ chain of title. But, for the reasons previously discussed, plaintiff
lacks standing to challenge defendants’ status under the land contract.

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

                                                             /s/ Thomas C. Cameron
                                                             /s/ Amy Ronayne Krause
                                                             /s/ Jonathan Tukel

6
   Summary disposition under MCR 2.116(C)(10) is premature before the completion of
discovery if further discovery “stands a fair chance of uncovering factual support for the
opposing party’s position.” Marilyn Froling Revocable Living Trust v Bloomfield Hills Country
Club, 283 Mich App 264, 292; 769 NW2d 234 (2009). Plaintiff did not identify any disputed
issue on which further discovery would uncover factual support, much less provide an affidavit
to support the existence of the disputed issue with independent evidence.

                                                -6-