Hill v. General Motors Acceptance Corp.

• Decision Date: 21 November 1994
• Docket Number: Docket No. 156325
• Citation: 525 N.W.2d 905,207 Mich.App. 504
• Parties: Beatrice HILL and Beatrice Strozier, Plaintiffs-Appellants, v. GENERAL MOTORS ACCEPTANCE CORPORATION, Defendant-Appellee.
• Court: Court of Appeal of Michigan — District of US

Page 905

525 N.W.2d 905

207 Mich.App. 504

Beatrice HILL and Beatrice Strozier, Plaintiffs-Appellants, v. GENERAL MOTORS ACCEPTANCE CORPORATION, Defendant-Appellee.

Docket No. 156325.

Court of Appeals of Michigan.

Submitted May 19, 1994, at Detroit.

Decided Nov. 21, 1994, at 9:10 a.m.

Released for Publication Jan. 24, 1995.

Richard A. Lenter, P.C. (Ronald M. Rothstein, of counsel), Southfield, for Beatrice Hill and Beatrice Strozier.

Garan, Lucow, Miller, Seward, Cooper & Becker, P.C. by James L. Borin and Mark C. Smiley, Detroit, for General Motors Acceptance Corp.

Before MICHAEL J. KELLY, P.J., and CORRIGAN and CORWIN, ^* JJ.

MICHAEL J. KELLY, Presiding Judge.

Plaintiffs appeal as of right an order of the circuit court granting defendant General Motors Acceptance Corporation's motion for summary disposition under MCR 2.116(C)(10). We reverse.

I

On October 31, 1985, Rodderick Toliver entered into a signed or forged lease agreement with GMAC for a 1986 Buick Skylark. The sixty-month agreement required Toliver to purchase insurance and contained an option to buy, which could be exercised before or at the end of the lease term. The agreement also contained a provision enabling Toliver to continue the lease in the event the Skylark was destroyed by substituting a comparable vehicle. Ownership of the vehicle was registered in GMAC's name.

On August 29, 1987, the Skylark was totaled in a collision. On September 17, 1987, Toliver exercised the option of substitution contained in the lease and obtained a 1986 Buick Somerset. On June 5, 1989, the Somerset collided with a car driven by plaintiff Beatrice Hill. Plaintiff Beatrice Strozier was a passenger in Hill's car. At the time of the accident, James Smith, Jr., was driving the Somerset with Toliver's consent. On the basis of GMAC's status as titleholder of the vehicle, plaintiffs sued GMAC for damages sustained as a result of the collision. On November 22, 1991, the trial court granted GMAC's motion for summary disposition on the ground that GMAC did not qualify as "owner" of the Somerset for purposes of the owner liability provisions of the Vehicle Code, M.C.L. § 257.401; M.S.A. § 9.2101.

II

A motion for summary disposition under MCR 2.116(C)(10) tests whether a genuine issue of material fact exists for the trier of fact to resolve. In reviewing such a motion, this Court construes all relevant affidavits, depositions, admissions, and other documentary evidence in favor of the nonmoving party. Summary disposition is inappropriate where the evidence presents a genuine issue of material fact upon which reasonable minds could differ. Farm Bureau Mutual Ins. Co. v. Stark, 437 Mich. 175, 184-185, 468 N.W.2d 498 (1991).

III

The issue on appeal is whether the trial court erred in granting GMAC's motion for summary disposition under the owner liability provisions of the Vehicle Code, which exempt lessor-owners from liability under special circumstances. These provisions were amended by 1988 P.A. 125.

Section 401 of the preamendment code imposed liability on owners of negligently operated motor vehicles. M.C.L. § 257.401; M.S.A. § 9.2101. Section 37 of the code defined "owner" as follows:

"Owner" means: (a) Any person, firm, association, or corporation renting a motor vehicle or having the exclusive use thereof, under a lease or otherwise, for a period of greater than 30 days.

(b) A person who holds the legal title of a vehicle or in the event a vehicle is the subject of an agreement for the conditional sale or lease thereof with the right of purchase upon performance of the conditions stated in the agreement and with an immediate right of possession vested in the conditional vendee or lessee or in the event a mortgagor of a vehicle is entitled to possession, then such conditional vendee or lessee or mortgagor shall be deemed the owner. [M.C.L. § 257.37; M.S.A. § 9.1837.]

In Barksdale v. Nat'l Bank of Detroit, 186 Mich.App. 286, 463 N.W.2d 258 (1990), this Court held that § 37(b) did not deem both the lessee and lessor "owners" of a vehicle leased under an agreement granting the lessee an option to purchase and an immediate right to possession; rather, § 37 excepted the lessor from the definition of "owner" and deemed the lessee "owner." Id. at 289-290, 463 N.W.2d 258, citing Moore v. Ford Motor Credit Co., 166 Mich.App. 100, 104, 420 N.W.2d 577 (1988).

The amended code now provides in pertinent part:

"Owner" means any of the following:

(a) Any person, firm, association, or corporation renting a motor vehicle or having the exclusive use thereof, under a lease or otherwise, for a period that is greater than 30 days.

(b) Except as otherwise provided in section 401a, a person who holds the legal title of a vehicle.

(c) A person who has the immediate right of possession of a vehicle under an installment sale contract. [M.C.L. § 257.37; M.S.A. § 9.1837.]

Section 401a provides:

As used in this chapter, "owner" does not include a person engaged in the business of leasing motor vehicles who is the lessor of a motor vehicle pursuant to a lease providing for the use of the motor vehicle by the lessee for a period that is greater than 30 days. [M.C.L. § 257.401a; M.S.A. § 9.2101(1).]

While § 401 still imposes liability on "owners" of negligently operated vehicles, paragraph 2 reinforces § 401a by exempting from liability lessors who meet the criteria set forth in § 401a. M.C.L. § 257.401(2); M.S.A. § 9.2101(2).

Under the terms of the original lease agreement between GMAC and Toliver, GMAC does not qualify as an "owner" for purposes of both the pre-1988 and post-1988 versions of the Vehicle Code. With respect to the preamendment provisions, it is undisputed that the agreement granted the lessee immediate possession and an option to purchase. With respect to the amended provisions, it is undisputed that GMAC is engaged in the business of leasing motor vehicles and that the original lease agreement extended well beyond thirty days.

However, plaintiffs challenge the validity of the original lease agreement and the substitution agreement, alleging that the former contains a forgery and that the latter lacks a signature by a proper GMAC agent and fails to incorporate the original lease agreement. In response, GMAC contends that these arguments arise under the statute of frauds, which plaintiffs, as nonparties to the lease and substitution agreements, may not invoke. GMAC also argues that the lease agreement does not fall under the statute of frauds because it is capable of being performed within one year.

The statute of frauds, M.C.L. § 566.132; M.S.A. § 26.922, provides in pertinent part:

In the following cases an agreement, contract, or promise is void unless that agreement, contract, or promise, or a note or memorandum of the agreement, contract, or promise is in writing and signed with an authorized signature by the party to be charged with the agreement, contract, or promise:

(a) An agreement that, by its terms, is not to be performed within 1 year of the making of the agreement.

This Court has construed the one-year rule strictly:

[I]f there is any possibility that an oral contract is capable of being completed within a year, it is not within the statute of frauds, even though it is clear that the parties may have intended and thought it probable that it would extend over a longer period and even though it does so extend. [Drummey v. Henry, 115 Mich.App. 107, 111, 320 N.W.2d 309 (1982). Emphasis added.]

GMAC is correct in asserting that the statute of frauds does not apply to the original lease agreement because the agreement was capable of being performed within one year of its making. Although it was a five-year lease, Toliver had the option to purchase the car and was entitled to exercise this option within the first year of the lease. This alone is sufficient to remove the agreement from the scope of the statute of frauds.

Even assuming that the lease agreement had to be in writing, GMAC is also correct in asserting that plaintiffs, as third parties to the lease and substitution agreements, may not assert the statute of frauds in an effort to have the agreement declared void. This Court held in Hoehner v. Western Casualty & Surety Co., 8 Mich.App. 708, 714-715, 155 N.W.2d 231 (1967), that the statute of frauds is a personal defense available only to parties to a contract.

However, GMAC's arguments do not preclude plaintiffs from challenging the content of the lease agreement between GMAC and Toliver. The owner liability provisions of the Vehicle Code grant an injured party recourse to the lessor-owner of a vehicle under special circumstances that are determined in part by the terms of the lease agreement. The statute of frauds declares void an unwritten agreement that cannot be performed within one year. The condition precedent to the application of the statute of frauds is the existence of such an agreement. Nothing in the statute of frauds or in the case law concerning a third party's standing to invoke the statute prohibits that party from challenging the content of the underlying agreement and thereby defining rights under the owner liability provisions of the Vehicle Code. Cf. Hoehner, supra at 713-714, 155 N.W.2d 231 (treating as separate issues the defendant's arguments, first, that there was insufficient evidence to infer the existence of a contract between the plaintiff and a third party and, second, that the statute of frauds invalidated that contract).

IV

Plaintiffs argue that the terms of the original lease do not automatically apply to the Somerset. We agree. The only document mentioning the Somerset is the substitution agreement. That document contains no lease terms of its own. Although it purports to incorporate by reference "the conditional sale contract (chattel mortgage) in the original amount of $_____ dated 10 31 85 19__ between said RODDERICK TOLIVER (Buyer) and JOHN ROGIN BUICK INC (Dealer)," no conditional sale...