Court Opinion

ID: 4295130
Source: CourtListenerOpinion
Date Created: 2018-07-18 09:07:14.410615+00
Date Added: 2024-06-11T14:39:58.939204
License: Public Domain

STATE OF MICHIGAN

                           COURT OF APPEALS

STERLING ORGANIZATION, LLC,                                        UNPUBLISHED
                                                                   July 17, 2018
              Plaintiff/Counter-Defendant,
V                                                                  No. 336256
                                                                   Wayne Circuit Court
FORD BUILDING, INC.,                                               LC No. 15-011448-CB

              Defendant/Counter-Plaintiff/Third-
              Party Plaintiff-Appellant,

and

CHARLES MADY and EXCLUSIVE REALTY,
LLC,

              Third-Party Defendants-Appellees.

Before: BORRELLO, P.J., and M. J. KELLY and BOONSTRA, JJ.

PER CURIAM.

       Third-party plaintiff Ford Building, Inc. (Ford) appeals by right the trial court’s orders
dismissing its third-party complaint against third-party defendants Charles Mady (Mady) and
Exclusive Realty, LLC (Exclusive) (collectively, appellees), and requiring Ford to pay a
broker’s commission to Exclusive. We affirm.1

1
  Appellees’ contend that this Court lacks jurisdiction over Ford’s appeal because Ford failed to
timely file its claim of appeal. We disagree. The trial court entered its final judgment on
June 23, 2016. Ford filed a motion for relief from judgment on July 14, 2016, which the trial
court denied on December 5, 2016. Ford filed its claim of appeal with this Court on
December 21, 2016. Because Ford filed its claim of appeal within 21 days after the trial court
entered its order denying the motion for relief from judgment, and because the motion for relief
from judgment was itself filed within the 21-day period after entry of the final judgment, the
claim of appeal was timely filed. MCR 7.204(A)(1)(b). The fact that the motion may have
sought relief from an earlier order does not change its character as a timely-filed postjudgment

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                   I. PERTINENT FACTS AND PROCEDURAL HISTORY

        This case arises from the sale of an office building in Detroit. Ford entered into an
Agreement of Sale (Agreement) to sell the building to plaintiff Sterling Organization, LLC
(Sterling). The Agreement also provided for Ford to pay Exclusive a specified commission at
closing.2 Sterling filed suit against Ford in August 2015, asserting that Ford had agreed to sell
the property to Sterling with a closing date of August 18, 2015, but had “backed out and now
says it will not sell the building to [Sterling] because of comments supposedly made by the real
estate broker.”

        The Agreement set forth an inspection period during which Sterling had the option of
inspecting the property, and, if providing notice of dissatisfaction, terminating the Agreement. A
separate provision concerning notice states that

       [a]ll notices to a Party required or permitted hereunder may be given by overnight
       delivery, certified mail, return receipt requested, or by facsimile, email or hand
       delivered, . . . and will be deemed effective two days after mailing and/or upon
       verification that the overnight delivery, facsimile, email or hand delivery was
       received.

The provision further provides that “[a] copy of all notices sent to Seller shall be emailed” to
three specified addresses.

        Attached to Sterling’s complaint was a copy of a fax from Ford to Sterling, dated as of
the last day of the inspection period, which states, “This will confirm that you have repudiated
the above agreement by your requirement of a $500,000.00 price reduction.” Also attached was
a copy of an e-mail from Sterling’s representative to Ford, dated later the same day, advising
Ford that “the purchaser will be proceeding to closing” on the contractual closing date.
Sterling’s complaint denied that it had repudiated or terminated the Agreement.

          Sterling alleged that Ford had breached the Agreement and requested that the trial court
enjoin Ford from selling the building to any other party and that it order specific performance of
the Agreement. Ford filed a counterclaim alleging breach of contract, civil conspiracy, quiet
title, claim and delivery, and declaratory relief.

        Ford also filed a third-party complaint against appellees. Ford alleged that Mady had
called Ford on the morning of the last day of the inspection period “and stated that [Sterling] was
dissatisfied with the inspections, and . . . would consummate the sale only if [Ford] agreed to
reduce the purchase price by $500,000.00 and delay the closing until September 1, 2015,” that

motion under MCR 7.204(A)(1)(b), which operated to extend the period in which to file a claim
of appeal.
2
 The Agreement identified Exclusive as the broker entitled to a commission. So did the trial
court’s order. Mady is Exclusive’s chief executive officer.

                                                -2-
Mady appeared personally at Ford’s offices that afternoon “and demanded to know if [Sterling’s]
conditions had been accepted,” that Ford informed appellees that Sterling “had repudiated the
Agreement by its requirement of a price reduction and a delay of closing,” and that Ford had
“confirmed [Sterling’s] repudiation by email” later that day. The third-party complaint also
asserted that Sterling shortly thereafter “attempted to rescind its repudiation and reinstate the
Agreement.”

        Ford additionally alleged that appellees had consistently acted as Sterling’s agent, not
Ford’s agent, and had made fraudulent misrepresentations in that role; alternatively, Ford alleged
that in the event the court were to determine that appellees were Ford’s agent (rather than
Sterling’s), appellees had breached their fiduciary duties to Ford. Ford requested “compensatory
and exemplary damages” against appellees, and also a declaration that Ford “has no obligation to
pay a commission to [appellees] under the terms of the Agreement or otherwise.” Appellees
moved for summary disposition under MCR 2.116(C)(8) (failure to state a claim). In response,
Ford argued that it was not required to pay a commission to appellees under the “faithless servant
doctrine.”3

        The trial court granted summary disposition in favor of Sterling on Ford’s counterclaim.
The trial court granted summary disposition in favor of appellees on Ford’s third-party
complaint. The trial court entered judgment in favor of Sterling for specific performance of the
Agreement, stating in part that “[a]t closing [Ford] must pay [Exclusive] its commission as
provided in . . . the Agreement of Sale.” The trial court thereafter denied Ford’s motion for
partial relief from judgment regarding Ford’s obligation to pay the commission. This appeal
followed.4

                                 II. STANDARD OF REVIEW

        “This Court reviews de novo a trial court’s decision regarding a motion for summary
disposition under MCR 2.116(C)(8) to determine whether the claim is so clearly unenforceable
as a matter of law that no factual development could establish the claim and justify recovery.”
Smith v Stolberg, 231 Mich. App. 256, 258; 586 NW2d 103 (1998). “A motion for summary
disposition under MCR 2.116(C)(8) tests the legal sufficiency of a claim by the pleadings alone.”
Id. In reviewing a trial court’s decision on a (C)(8) motion, this Court accepts as true all factual
allegations in the complaint and reasonable inferences that may be drawn from them. Id.

3
  See Anno: Application of “Faithless Servant Doctrine,” 24 A.L.R. 6th 399; Sweeney & Moore,
Inc v Chapman, 295 Mich. 360, 363; 294 N.W. 711 (1940) (“a broker may forfeit his right to
compensation by misconduct, breach of duty, or wilful disregard, in a material respect, of an
obligation imposed upon him by the law of agency”).
4
 Ford does not challenge the judgment in favor of Sterling, or the dismissal of its counterclaim
against Sterling; rather, its appeal is limited to the dismissal of its third-party complaint.

                                                -3-
                                         III. ANALYSIS

       Ford argues that the trial court erred by concluding that it had failed to plead a valid
cause of action for misrepresentation or breach of fiduciary duty in its third-party complaint. We
disagree. The trial court found that Ford had failed to allege any facts to show that it had
detrimentally relied on statements made by Mady regarding Sterling’s alleged request for a price
reduction, and had failed to allege any damages arising from Mady’s alleged misrepresentation.
We agree with the trial court.

                                           A. AGENCY

        As a threshold issue, we note that the trial court did not expressly decide whether
appellees’ role in the underlying real estate transaction was that of Sterling’s agent, Ford’s agent,
or a dual agent. However, because the trial court is obliged when considering a motion filed
under MCR 2.116(C)(8) to consider all factual allegations as true, Smith, 231 Mich. App. at 258,
and because the trial court based its grant of summary disposition on Ford’s lack of detrimental
reliance and damages, it appears that the trial court accepted for purposes of the (C)(8) motion
Ford’s principal position that appellees were Sterling’s agent, not Ford’s.

        Ford’s position throughout the litigation was that appellees were acting as Sterling’s
agent, not Ford’s. It only argued in the alternative, and only if the trial court found appellees to
be Ford’s agent, that appellees had breached their fiduciary duty to Ford and that the “faithless
servant doctrine” relieved it of its obligation to pay a commission. Because the trial court did not
make such a finding, it properly dismissed Ford’s claims for breach of fiduciary duty.

                                   B. MISREPRESENTATION

        The question therefore becomes whether the trial court correctly dismissed Ford’s claim
of fraudulent misrepresentation premised on appellees’ actions as Sterling’s agent.

               In Michigan, the elements of the common-law tort of intentional mis-
       representation are: (1) the defendant made a material misrepresentation; (2) it was
       false; (3) when he made the representation, he knew that it was false; (4) he made
       the representation with the intention that the plaintiff should act on it; (5) the
       plaintiff did in fact act in reliance on it; and (6) the plaintiff thereby suffered
       injury or damage. [Appalachian Railcar Servs, Inc v Boatright Enterprises, Inc,
       602 F Supp 2d 829, 880 (WD Mich, 2008), citing Hi-Way Motor Co v Int’l
       Harvester Co, 398 Mich. 330, 336; 247 NW2d 813 (1976).]

                               1. FALSE STATEMENT OF FACT

        “[A]n action for fraudulent misrepresentation must be predicated upon a statement
relating to a past or an existing fact.” Hi-Way Motor Co, 398 Mich. at 336. “[A] fraudulent
misrepresentation may be based upon a promise made in bad faith without intention of
performance.” Id. at 337-338. “[W]hen there is a legal or equitable duty of disclosure, ‘[a] fraud
arising from the suppression of the truth is as prejudicial as that which springs from the assertion

                                                -4-
of a falsehood.’ ” Titan Ins Co v Hyten, 491 Mich. 547, 557; 817 NW2d 562 (2012) (citation
omitted).

        Again, Ford’s third-party complaint alleged that Mady had told Ford that Sterling was
dissatisfied with the property and wanted a price reduction and a later closing date in order to go
forward with the sale. Ford made no allegation that in doing so Mady had actually represented
that he had the power to repudiate or otherwise terminate the agreement on behalf of Sterling, or
that Sterling intended to repudiate or terminate the Agreement. In fact, in its third-party
complaint, Ford pointed out that Mady had testified by affidavit that Sterling had never
expressed a desire to terminate the Agreement, and that Mady lacked the authority to do so.
Although Ford alleged that Mady had failed to disclose his lack of authority to terminate the
Agreement if Ford did not agree to his request for modified terms, for an omission to constitute
actionable misrepresentation, there must be “a legal or equitable duty of disclosure.” Titan Ins
Co, 491 Mich. at 557. Ford cites no authority for the proposition that Mady was obliged during
negotiations to disclose to Ford the limits of his authority to alter the deal. And as the trial court
stated, “[t]he parties provided the court with no Michigan authority holding that an attempt to get
a price reduction in a real estate transaction is misleading or deceitful.”

                                          2. RELIANCE

        Further, the trial court found that Ford had failed to allege any facts supporting its claim
that it detrimentally relied on Mady’s statements that Sterling had requested a price reduction.
The court noted that, based on Ford’s third-party complaint, what occurred essentially was that
Mady requested that the price be reduced, and that Ford declined to reduce the price and
subsequently interpreted Mady’s statements as indicating that Sterling had repudiated or
terminated the Agreement. The trial court further noted that “despite alleging that it believed
Mady’s statement to constitute a termination of the agreement, there is no allegation of any
action and/or omission taken in reliance on that alleged termination that caused any damages.”

        Ford argues on appeal because of Mady’s statements it “understood the Agreement to
have been terminated,” and that it consequently sent an email to Sterling and Mady “confirming
that the deal was terminated because of the requirement of a price reduction,” to which neither
Sterling nor Mady responded.5 Thus, Ford argues, Mady’s misrepresentations caused Ford to
take the position that Sterling had terminated or repudiated the contract, and it suffered damages
as a result. We disagree.

        A party needing to prove reliance must show that it “took action or failed to take action,
that he would not have otherwise, resulting in some detriment.” Greeley v Fairview Health
Servs, 479 F3d 612, 614-165 (CA 8, 2007). Ultimately, as the trial court noted, Ford suffered no

5
  Ford argues that Sterling’s email stating that it would “be proceeding to closing,” which it
received shortly after its own communication characterizing Sterling as having repudiated the
agreement, somehow did not address Ford’s contention that Sterling had repudiated the contract
when Ford refused to reduce the price.

                                                 -5-
detriment from being held to its agreement with Sterling; it sold the building at the price to
which it had agreed, notwithstanding Mady’s attempts to negotiate a price reduction.

         Moreover, as the trial court additionally held, Ford “could not have relied on the
statements as they were not made in writing as required by the agreement of sale.” As noted
earlier, the Agreement specified that “[a]ll notices to a Party required or permitted hereunder
may be given by overnight delivery, certified mail, return receipt requested, or by facsimile,
email or hand delivered.” Further, all notices would be “deemed effective two days after mailing
and/or upon verification that the overnight delivery, facsimile, email or hand delivery was
received,” and “[a] copy of all notices sent to Seller shall be emailed” to three specified
addresses.

        The trial court held that “assuming for purposes of this court’s decision that [Mady] made
the misrepresentation alleged by the Ford Building, it was not valid as it was not given in
accordance with the terms of the Agreement of Sale.” Ford argues that the Agreement specified
“written” notice in only some situations, that it was not required by the contractual provisions
relating to the expression of dissatisfaction with the inspection and the termination of the
agreement, and that the trial court should have interpreted the use of “may” in the notice
provision as indicating permissive, not mandatory, procedures. We disagree.

        The notice provision refers to “[a]ll notices,” not “all written notices,” thus indicating that
what follows applies to all notice situations. And, although the provision states that all notices to
a party “may” be given by a variety of methods, and the word “may” is typically permissive, see
Walters v Nadell, 481 Mich. 377, 383; 751 NW2d 431 (2008), it is clear from context that a party
to the Agreement “may” choose from the Agreement’s list of ways to provide notice, not
substitute its own method not listed. See Bradley v Saranac Community Sch Bd of Ed, 455 Mich.
285, 298; 565 NW2d 650 (1997) (discussing the maxim expressio unius est exclusio alterius).
Assuming for the sake of argument, as the trial court did, that Mady’s statements were meant to
constitute notice of Sterling’s intent to repudiate the contract, the oral statements could not be
mailed, emailed or hand delivered to the addresses provided and thus could not be deemed
effective. Further, Sterling sent written notice to Ford with copies to the relevant parties that
same day confirming that it would pay the price specified in the Agreement and close at the
specified time.

                                           3. DAMAGES

        Finally, Ford argues that the trial court erred by concluding that Ford had suffered no
damages from Mady’s alleged misrepresentations. Ford’s third-party complaint requested
“compensatory and exemplary damages,” and asserted that appellees were liable in equity for
any amounts for which Ford was determined to be liable to Sterling. But it neither offered
specific damages amounts nor explained how Ford had suffered any damages. Sterling in fact
prevailed on its complaint for specific performance, but the result was only that Ford was
required to perform under the agreement that it had made. As the trial court observed, “there
was no injury as Ford did not agree to the price reduction.”

       On appeal, Ford characterizes its alleged damages as expenses incurred in litigation, as
well as the payment of Exclusive’s commission. Ford additionally cites authority for the

                                                 -6-
proposition that a party is entitled to exemplary damages where that party has suffered from
tortious conduct involving malice, insult, wanton disregard for his or her rights, or criminal
indifference to civil obligations. See, e.g., Oppenhuizen v Wennersten, 2 Mich. App. 288, 296-
297; 139 NW2d 765 (1966). We are not persuaded.

         Ford agreed to pay a commission upon the close of sale. Ultimately the sale went
through at the price the parties had agreed to; the trial court did not err by failing to characterize
Ford’s contractual obligation as damages. Further, attorney fees incurred in litigating a matter do
not constitute “damages” unless a statute or court rule explicitly provides otherwise. See
Phinney v Perlmutter, 222 Mich. App. 513, 560; 564 NW2d 532 (1997), impliedly overruled on
other grounds by Garg v Macomb Co Community Mental Health Servs, 472 Mich. 263, 290; 696
NW2d 646, amended 473 Mich. 1205 (2005) (stating that “[a]wards of costs and attorney fees are
recoverable only where specifically authorized by a statute, a court rule, or a recognized
exception.”); see also Cooley v Mid-Century Ins Co, 52 Mich. App. 612, 617; 218 NW2d 103
(1974) (listing statutes and court rules that provide for fees and explaining that “[a]s a general
rule, our courts have refused to allow recovery of attorneys’ fees, either as an element of the
costs of the suit or as an item of damages, unless allowance of a fee is expressly authorized by
statute or court rule”). A party thus recovers litigation costs and attorney fees not by claiming
them as damages, but by persuading the trial court that one of the recognized exceptions justifies
an award of such costs and fees. Accordingly, the trial court correctly held that Ford had failed
to set forth a valid claim for ordinary damages.

        As for exemplary damages, we see nothing in Ford’s allegations concerning Mady’s
attempts to secure a price reduction for his client that rises to the level of tortious or criminal
conduct. See Yamaha Motor Corp, U.S.A. v Tri-City Motors & Sports, Inc., 171 Mich. App. 260,
281; 429 NW2d 871 (1988). Therefore, the trial court correctly concluded that, taking Ford’s
factual assertions as true, it had failed to allege any damages suffered as a result of Mady’s
statements. Smith, 231 Mich. App. at 258.

       For these reasons, the trial court correctly granted summary disposition in favor of
appellees on Ford’s third-party complaint, and correctly required Ford to pay Exclusive its
contractually-specified commission. MCR 2.116(C)(8); Smith, 231 Mich. App. at 258.

       Affirmed.

                                                              /s/ Stephen L. Borrello
                                                              /s/ Michael J. Kelly
                                                              /s/ Mark T. Boonstra

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