Cole Lakes, Inc. v. Linder

• Court: Court of Appeal of Michigan
• Writing for the Court: GILLESPIE
• Citation: Cole Lakes, Inc. v. Linder, 297 N.W.2d 918, 99 Mich.App. 496 (Mich. App. 1980)
• Decision Date: 25 August 1980
• Docket Number: Docket No. 78-2774
• Parties: COLE LAKES, INC., a Michigan Corporation; Richard S. Metzger and Virginia P. Metzger, his wife; Gerald A. Geile and Evelyn Geile, his wife; Andrew P. Shonk and Lillian K. Shonk, his wife; Stanley Burson and Christine Burson, his wife; Walter A. Bielski and Wanda Bielski, his wife; Vincent Dardzinski and Sophie Dardzinski, his wife, Plaintiffs-Appellants, v. Max LINDER, C. Robert Beltz, Robert Benton, Carl A. Brownell, Jr., and Bill E.Cottrill, Defendants-Appellees.

Page 918

297 N.W.2d 918

99 Mich.App. 496

COLE LAKES, INC., a Michigan Corporation; Richard S. Metzger and Virginia P. Metzger, his wife; Gerald A. Geile and Evelyn Geile, his wife; Andrew P. Shonk and Lillian K Shonk, his wife; Stanley Burson and Christine Burson, his wife; Walter A. Bielski and Wanda Bielski, his wife; Vincent Dardzinski and Sophie Dardzinski, his wife, Plaintiffs-Appellants, v. Max LINDER, C. Robert Beltz, Robert Benton, Carl A Brownell, Jr., and Bill E.Cottrill, Defendants-Appellees.

Docket No. 78-2774.

Court of Appeals of Michigan.

Aug. 25, 1980.

Released for Publication Nov. 5, 1980.

James L. Winckler, Lansing, for plaintiffs-appellants.

Richard J. Behm, Flint, for Linder, Beltz and Benton.

William H. Merrill, Midland, for Brownell and Cottrill.

Before CYNAR, P. J., and KELLY and GILLESPIE, ^* JJ.

GILLESPIE, Judge.

In 1967 a land speculator by the name of James Cole purchased by land contract 3,000 wooded acres in Alcona County. Through this land there flowed a stream known as Comstock Creek. Cole's intent was to dam Comstock Creek creating a lake which he would name Lake Kewanee. He then planned to develop the remaining land into residential lots. To carry out this project he formed a corporation in which he was the sole shareholder, known as Cole Lakes, Inc., hereafter referred to as Cole Lakes. Norman McIntyre was a contractor who had worked with Cole and who started the actual construction on this project. Orville Meier was a developer who had worked with Cole before and invested money in this project. Cole assigned his land contract to Cole Lakes. He found in early 1970 that he could not do the project for lack of capital and conveyed his stock to McIntyre and Meier in exchange for the release of his indebtedness to them.

In May, 1970, the land contract was foreclosed, but an extension was negotiated to allow for redemption until September 5, 1970. Meier and McIntyre unsuccessfully attempted to sell the project to two development corporations. In early summer of that year a Flint real estate salesman by the name of Max Linder learned of the property and obtained permission to try to sell it.

About a week before September 5, 1970, Linder interested Robert Benton, a Flint attorney, in the project. Benton recruited his law partner, Robert Beltz, and Linder, Benton and Beltz raised $100,000.

Much of the case centers about a meeting in Alcona County on September 4th and 5th, 1970, at which time Linder, Benton and Beltz met with Meier and McIntyre to purchase the latter's redemption rights in the land contract. Also present at that meeting were Bill Cottrill, a real estate land developer formerly from Flint, and Carl Brownell, another Flint attorney. Cottrill and Brownell had the experience of developing a similar project known as Lakewood Shores in Oscoda and were advising Benton and Beltz.

Attorney James Cook of Harrisville was present representing McIntyre and Meier and actually drafted the documents.

On September 5th the project was sold to Benton, Beltz and Linder, who paid over $100,000, and the contract was redeemed.

Brownell and Cottrill, by virtue of being present at the negotiations, became interested in the property. About a week after September 5, 1970, Brownell and Cottrill bought Benton, Beltz and Linder's interest in the contract. There were further negotiations between the Flint group and McIntyre and Meier resulting in Brownell and Cottrill, doing business as a partnership known as Conel Enterprises, being assigned the interest of Benton, Beltz and Linder in the September 5th contract.

Cottrill and Brownell tried for three or four years to make the project go but were unable to do so and forfeited the land contract in May, 1976, after investing between $400,000 and $500,000 in it and unsuccessfully trying to resell it. At the time that the land was forfeited there was a balance due on the contract of September 5th to Cole Lakes.

Nothing in particular occurred until July, 1976 when Cole Lakes and the balance of the plaintiffs, who were persons who had paid money to Cole Lakes for options to purchase lots once the lands were developed and platted and who released their claims in return for an assignment of a share of the lawsuit, filed a complaint against Linder, Beltz, Benton, Brownell and Cottrill.

The trial in April, 1978, before Judge Philip C. Elliott in Genesee County resulted in a judgment for the defendants.

The plaintiffs appeal and the following claims were raised.

THE TRIAL COURT ERRED IN FINDING THAT A NOVATION HAD OCCURRED WHEREBY THE PARTIES MUTUALLY AGREED TO THE SUBSTITUTION OF DEFENDANTS BROWNELL AND COTTRILL FOR DEFENDANTS LINDER, BENTON AND BELTZ AS OBLIGORS UNDER A CONTRACT.

This issue was decided favorably for defendants Linder, Benton and Beltz by the trial court in a bifurcated trial. As it turned out later in the trial, this issue became moot when the court found fraud. We do not find error in the decision of the trial court in its determination that there was fraud in the inducement and it therefore is unnecessary for this court to comment on this claim.

THE TRIAL COURT ERRED IN CONCLUDING THAT DEFENDANTS WERE FRAUDULENTLY INDUCED TO PURCHASE PROPERTY BY MATERIAL MISREPRESENTATIONS OF FACT MADE BY PLAINTIFF'S AGENTS.

Defendants claim Meier and McIntyre made material representations of fact at the meeting of September 4th and 5th, 1970, which were false, including the following: (1) that a valid dam permit from the DNR had been obtained which would allow the holder to build an artificial lake with 18 to 20 miles of shoreline at an elevation of 872.5 feet above sea level; (2) only one dam was necessary, which would cost $50,000 to construct; (3) a necessary bay excavation called "Garvey's Bay" could be accomplished at a cost of $10,000 to $14,000; and (4) water impounded by the dam would naturally reach Garvey's Bay. McIntyre and Meier knew that such representations were false, since they had been involved in the project for three years and were familiar with the land and engineering for the project. McIntyre participated in lake level hearings in circuit court and both parties knew from a prior attempt to sell the project that additional dams and dikes would be required. The false representations were made with the intention of inducing action by defendants and defendants relied on the misrepresentations. Damages resulted.

"The general rule is that to constitute actionable fraud it must appear: (1) (t)hat defendant made a material representation; (2) that it was false; (3) that when he made it he knew that it was false, or made it recklessly, without any knowledge of its truth and as a positive assertion; (4) that he made it with the intention that it should be acted upon by plaintiff; (5) that plaintiff acted in reliance upon it; and (6) that he thereby suffered injury. Each of these facts must be proved with a reasonable degree of certainty, and all of them must be found to exist; the absence of any one of them is fatal to a recovery."

Hi-Way Motor Co. v. International Harvester Co., 398 Mich. 330, 336, 247 N.W.2d 813 (1976); Candler v. Heigho, 208 Mich. 115, 121, 175 N.W. 141 (1919). See also A & A Asphalt Paving Co. v. Pontiac Speedway, Inc., 363 Mich. 634, 639, 110 N.W.2d 601 (1961); Marshall v. Ullmann, 335 Mich. 66, 73-74, 55 N.W.2d 731 (1952); Waldbauer v. Hoosier Casualty Co., 285 Mich. 405, 408-409, 280 N.W. 807 (1938).

The Plaintiffs' first position is that the actions of Meier and McIntyre were not consistent with the actions of a party seeking to defraud another and point out that Meier offered $72,000 to redeem the land contract and McIntyre offered to complete the dam for $50,000 and to excavate Garvey Bay for $17,000.

The representations that were made and their falsity were fact questions. The trial judge found that: Meier and McIntyre were "(t)he agents of Cole Lakes, desperate to salvage their investment which would be lost in 24 hours if they did not sell the project, (who) deliberately misled the defendants about the true cost of the lake in order to sell the project. * * * (I)n these circumstances, we are satisfied that McIntyre and Meier, on behalf of plaintiffs, made material misrepresentations, which were false and known to be false, in order to induce the defendants to buy this land. Defendants Benton, Beltz and Linder did buy the land and they would not have done so if the false representations had not been made. Defendants Cottrill and Brownell also heard the false representations and relied on them when they agreed to buy out and take over the obligations of the original purchasers. All defendants suffered some financial injury as a result."

In this case credibility was an important factor. Credibility is for the trier of the fact. Appellate courts, in reviewing controverted issues of fact in a nonjury law case do not consider the case de novo as in equity and will not reverse the judgment of the trial court unless the judgment is against the clear preponderance of the evidence. Baith v. Knapp-Stiles, Inc., 380 Mich. 119, 156 N.W.2d 575 (1968).

The trial court complied with GCR 1963, 517 and the decision was supported by substantial evidence and there was no error.

Plaintiffs next argue that the representations of McIntyre and Meier pertained to future conditions and cite several Michigan cases which hold that promises of future action, promises that future events will occur, statements of expected profits, value and opinion will not support an action of fraud.

In this case some of the representations were concerning topography of the land. McIntyre and Meier represented that a lake with a shoreline of 18 to 20 miles would be formed by the erection of a single dam costing $50,000. McIntyre had been familiar with the property all his life. Both Meier and McIntyre had worked on the project for three years. They well knew that the topography would not create such a lake without a...