Boylan v. Fifty Eight Ltd. Liab. Co.

• Decision Date: 07 September 2010
• Docket Number: Docket No. 291141.
• Citation: 808 N.W.2d 277,289 Mich.App. 709
• Parties: BOYLAN v. FIFTY EIGHT LIMITED LIABILITY COMPANY.
• Court: Court of Appeal of Michigan — District of US

289 Mich.App. 709

808 N.W.2d 277

BOYLAN

v.FIFTY EIGHT LIMITED LIABILITY COMPANY.

Docket No. 291141.

Court of Appeals of Michigan.

Submitted Aug. 6, 2010, at Detroit.Decided Sept. 7, 2010, at 9:10 a.m.

Pierce, Duke, Farrell & Tafelski, PLC, Bloomfield Hills (by Mark C. Pierce), for Fifty Eight Limited Liability Company.

Berry, Johnston, Sztykiel & Hunt, P.C., Troy (by James F. Hunt and W. James Fitzgibbons), for Pamar Enterprises, Inc.

Before: GLEICHER, P.J., and ZAHRA and K.F. KELLY, JJ.

PER CURIAM.

In early 2007, flooding and sewage backup damaged a residence owned by Fifty Eight Limited Liability Company (Fifty Eight). An investigation revealed that surface water pooling in the home's front yard had incapacitated the septic system. Fifty Eight concluded that during the construction of a water main for Lyon Township, Pamar Enterprises, Inc., had eliminated a swale protecting the home from surface-water runoff. We must now decide whether Pamar owed Fifty Eight any duty separate and distinct from those under Pamar's contract with Lyon Township. We find that Pamar did owe Fifty Eight a duty separate and distinct from those under the Pamar–Lyon Township contract, and on that basis we reverse the circuit court's order granting Pamar summary disposition of Fifty Eight's negligence claim. We also reverse the circuit court's order granting Pamar summary disposition of Fifty Eight's common-law trespass count, but we affirm the circuit court's orders granting Pamar summary disposition of Fifty Eight's statutory trespass and surface-water-law claims and denying Fifty Eight's motion to file an amended third-party complaint.

I. UNDERLYING FACTS AND PROCEEDINGS

Fifty Eight owned a home located on Ten Mile Road in Lyon Township, which it rented to plaintiff Cheryl Boylan. Between January 2007 and March 2007, various portions of the home flooded and sewage backed up into the bathroom and kitchen sinks. Boylan reported the flooding to Fifty Eight, which undertook an investigation into the cause. Fifty Eight's property manager, William Clark, concluded that during Pamar's participation in the installation of a new water main for Lyon Township, Pamar had improperly graded the earth on Fifty Eight's property. An affidavit of Clark attests, in pertinent part:

3. ... I have reviewed the video taken prior to construction of the property ... and it is my opinion that the flooding experienced by the property involved in this lawsuit was directly caused by improper final grading by Defendant Pamar.

4. During the approximate [sic] ten years that we have owned the property, we never experienced any flooding in the front yard until January, 2007. As a result of the grading of our property by Pamar at the conclusion of the installation of the water main, Pamar negligently graded the property so that the surface water run-off from 10 Mile Road flowed to the house instead of to the catch basin that was on the east side of the property. Prior to the installation of the water main by Pamar, there was a swale that ran parallel to Ten Mile Road that directed the surface water run-off to a catch basin. Pamar eliminated the swale, and as a result, water ponded on the front yard of the house.

5. The septic system is located underneath the front yard of the house. The ponding of water on top of the septic system caused the septic system to become saturated to the point of failure. As a result, raw sewage backed up into the house....

In May 2007, Boylan filed suit against Fifty Eight in the 52–1 District Court, alleging negligence, breach of contract, and several other claims. In October 2007, Fifty Eight filed a third-party complaint against Pamar and Giffels–Webster Engineering, Inc., asserting claims for negligence, trespass, and “violation of Michigan's law of surface waters.” ¹ According to Fifty Eight's third-party complaint, Pamar violated its duty to

properly design the grade of the earth, and to grade the earth so as to not cause a larger volume or velocity of water to enter or flow to the Property after the completion of the Project when compared to the volume or velocity of water that entered or flowed to the Property before the Project was started.Pamar moved for summary disposition under MCR 2.116(C)(8) and (10), contending that pursuant to Fultz v. Union–Commerce Assoc., 470 Mich. 460, 683 N.W.2d 587 (2004), it owed no duty to Fifty Eight as a matter of law. Pamar further argued that because it had entered Fifty Eight's land with authorization, Fifty Eight could not prove trespass, and that Michigan's law of surface waters lacked applicability under the circumstances of this case.

The district court granted Pamar's motion for summary disposition and denied Fifty Eight's request to file an amended complaint that would have added a third-party beneficiary contract claim. Fifty Eight appealed in the Oakland Circuit Court, which affirmed the district court's decisions. Both the district and circuit courts opined that pursuant to the Supreme Court's decision in Fultz, Pamar owed Fifty Eight no duty in tort. The circuit court concluded that Pamar's grading of the worksite on Fifty Eight's land did not give rise to “a separate and distinct duty” or a “new hazard,” but instead constituted “a foreseeable consequence of the terms of the contract that caused this undisputed screw up by Pamar and it's because it trickles from the very terms of the contract that the court finds it doesn't qualify as a new hazard....” We granted Fifty Eight leave to appeal.

II. SUMMARY DISPOSITION STANDARD OF REVIEW

Fifty Eight contests the circuit court's summary disposition ruling, which we review de novo.² Walsh v. Taylor, 263 Mich.App. 618, 621, 689 N.W.2d 506 (2004). “Summary disposition is appropriate under MCR 2.116(C)(10) if there is no genuine issue regarding any material fact and the moving party is entitled to judgment as a matter of law.” West v. Gen. Motors Corp., 469 Mich. 177, 183, 665 N.W.2d 468 (2003). “In reviewing a motion under MCR 2.116(C)(10), this Court considers the pleadings, admissions, affidavits, and other relevant documentary evidence of record in the light most favorable to the nonmoving party to determine whether any genuine issue of material fact exists to warrant a trial.” Walsh, 263 Mich.App. at 621, 689 N.W.2d 506. “A genuine issue of material fact exists when the record, giving the benefit of reasonable doubt to the opposing party, leaves open an issue upon which reasonable minds might differ.” West, 469 Mich. at 183, 665 N.W.2d 468.

III. NEGLIGENCE

Fifty Eight first contends that the circuit court's determination that Pamar owed no duty to Fifty Eight rests on a misinterpretation of Fultz. Fifty Eight maintains that Fultz does not stand for the proposition that the mere existence of a contract between Pamar and Lyon Township completely “immunizes” Pamar from any potential tort liability relating to its construction of the water main. Pamar responds that Fultz plainly dictates that it owed no duty to “a third party to its contract” with Lyon Township. Because the parties argue at length concerning the interpretation and application of Fultz, we now turn to a careful examination of that decision.

The plaintiff in Fultz slipped and fell in an icy parking lot owned by Comm–Co Equities. Fultz, 470 Mich. at 461, 683 N.W.2d 587. Comm–Co had contracted with Creative Maintenance Limited (CML) for snow removal services. Id. at 462, 683 N.W.2d 587. The plaintiff sued both Comm–Co and CML, claiming that CML's negligent failure to plow or salt the parking lot had caused her fall. Id. The plaintiff theorized that CML owed her “a common-law duty ... to exercise reasonable care in performing its contractual duties” and that CML breached this duty by failing to perform its contractual duty of plowing or salting the parking lot. Id. at 463–464, 683 N.W.2d 587. The Supreme Court observed that the plaintiff had “allege[d] no duty owed to her independent of the contract,” but instead relied on “common-law tort principles expressed in Restatement Torts, 2d, § 324A....” Id. at 464, 468, 683 N.W.2d 587.

The Supreme Court held that as a matter of law, CML “owed no contractual or common-law duty to plaintiff to plow or salt the parking lot.” Id. at 463, 683 N.W.2d 587. In reaching this conclusion, the Supreme Court rejected that a common-law duty to the plaintiff arose solely from CML's breach of its contract with Comm–Co. The Court instructed lower courts to instead analyze tort claims brought by third parties to a 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.” Id. at 467, 683 N.W.2d 587.

The “separate and distinct duty” analysis described in Fultz refutes Pamar's sweeping assertion that a contractor owes no duties to any third party. Rather, Fultz specifically contemplated that despite the existence of a contract, under certain circumstances tort duties to third parties may lie:

If defendant negligently performs a contractual duty or breaches a duty arising by implication from the relation of the parties created by the contract, the action may be either in contract or in tort. In such cases, however, no tort liability arises for failing to fulfill a promise in the absence of a duty to act that is separate and distinct from the promise made. [ Id. at 469–470, 683 N.W.2d 587.]

Stated differently, tort liability may attach in the presence of a duty that arises separately and distinctly from the contractual agreement.

In Fultz, the Supreme Court posited that the creation of a “ new hazard” may give rise to a breach of a duty separate and distinct from the contract. Id. at 469, 683 N.W.2d 587 (emphasis in original). Fultz's “new hazard” reference derived from this Court's...