Lorenzo v. Noel

• Court: Court of Appeal of Michigan
• Writing for the Court: PER CURIAM
• Citation: Lorenzo v. Noel, 522 N.W.2d 724, 206 Mich.App. 682 (Mich. App. 1994)
• Decision Date: 07 September 1994
• Docket Number: Docket No. 151948
• Parties: Linda LORENZO, Plaintiff-Appellant, v. Lurlene NOEL, Defendant-Appellee.

Page 724

522 N.W.2d 724

206 Mich.App. 682

Linda LORENZO, Plaintiff-Appellant, v. Lurlene NOEL, Defendant-Appellee.

Docket No. 151948.

Court of Appeals of Michigan.

Submitted Feb. 9, 1994, at Detroit.

Decided Sept. 7, 1994, at 9:10 a.m.

Released for Publication Oct. 31, 1994.

UAW-Chrysler Legal Services Plan by Donald D. Beller and Barbara G. Robb, Warren, for plaintiff.

Glime Daoust, P.C. by Donald G. Miller, Mt. Clemens, for defendant.

Before GRIBBS, P.J., and HOOD and BROWN, ^* JJ.

PER CURIAM.

This case involves the sale of an allegedly defective home. Plaintiff appeals as of right from the trial court's order granting defendant's motion for summary disposition under MCR 2.116(C)(10). We reverse.

Plaintiff bought defendant's home in 1988 without having it inspected. The basement started leaking in 1989. In 1991, she had the paneling removed from the basement walls and discovered that the walls were bowed-in and cracked. She sued.

Plaintiff's amended complaint alleged fraud and misrepresentation by nondisclosure and, in a separate count, fraud and mutual mistake. She prayed for either rescission or damages. Plaintiff argues that the trial court erred in finding that there were no questions of material fact and that defendant was entitled to judgment as a matter of law. ¹ We agree in part.

The beginnings of the "silent-fraud" doctrine alleged by plaintiff have been traced as far back as 1886: " 'A fraud arising from the suppression of the truth is as prejudicial as that which springs from the assertion of a falsehood, and courts have not hesitated to sustain recoveries where the truth has been suppressed with the intent to defraud.' " Williams v. Benson, 3 Mich.App. 9, 18-19, 141 N.W.2d 650 (1966), quoting Tompkins v. Hollister, 60 Mich. 470, 483, 27 N.W. 651 (1886). Thus, "the suppression of a material fact, which a party in good faith is duty-bound to disclose, is equivalent to a false representation and will support an action in fraud." Williams, 3 Mich.App. at 19, 141 N.W.2d 650.

In Williams, the sellers failed to inform the buyers that the premises had once been infested by termites. Id. at 13, 141 N.W.2d 650. When the sellers themselves purchased the motel, four years earlier, they had been informed of the infestation by the previous owner. Id. at 12-13, 141 N.W.2d 650. It was this previous owner who had discovered and assertedly exterminated the termites. Id. This Court held that the trial court properly granted summary disposition to the buyers regarding the question of liability premised on the "silent-fraud" doctrine; the Supreme Court reversed and remanded for trial in 378 Mich. 721, 1966 WL 146 (1966).

In Ball v. Sweeney, 354 Mich. 616, 93 N.W.2d 298 (1958), the sellers of a resort neglected to inform the buyers that they had been having problems with the Department of Health because the sewer system had been installed improperly. Although the Court did not discuss the "silent-fraud" doctrine, it noted that the plaintiffs' complaint alleged fraud on the basis of the sellers' "failure to inform" the buyers of the sewer problem. Id. at 618, 93 N.W.2d 298. The Supreme Court affirmed the trial court's decision to permit rescission of the contract.

A similar doctrine has been applied in the negligence area in the context of determining whether the former owner of land owes a duty to subvendees injured by a dangerous condition (contaminated water) that the seller failed to disclose to the original buyer. See Christy v. Prestige Builders, Inc., 415 Mich. 684, 693-694, 329 N.W.2d 748 (1982). The Christy Court noted that, at "common law, a land vendor who surrenders title, possession, and control of property shifts all responsibility for the land's condition to the purchaser. Caveat emptor prevails in land sales, and the vendor, with two exceptions, is not liable for any harm due to defects existing at the time of sale." Id. at 694, 329 N.W.2d 748. "The first exception is the vendor's duty to disclose to the purchaser any concealed condition known to him which involves an unreasonable danger." Id. "Failure to make such a disclosure or efforts to actively conceal a dangerous condition render the vendor liable for resulting injuries." Id. "The second exception is that a vendor is liable to those outside the land for a dangerous condition on the land after the sale until the purchaser discovers or should have discovered it." Id. "Once the purchaser discovers the defect and has had a reasonable opportunity to take precautions, third parties such as subvendees have no further recourse against the vendor. Under both exceptions, then, knowledge of the defect on the part of the purchaser relieves the vendor of any duty or liability." Id. at 694-695, 329 N.W.2d 748.

This language has been relied upon in real estate cases that involve neither negligence claims nor third-party buyers. See, e.g., Clemens v. Lesnek, 200 Mich.App. 456, 459, 505 N.W.2d 283 (1993); Conahan v. Fisher, 186 Mich.App. 48, 463 N.W.2d 118 (1990); Farm Bureau Mutual Ins. Co. v. Wood, 165 Mich.App. 9, 16, 418 N.W.2d 408 (1987); Stewart v. Isbell, 155 Mich.App. 65, 75, 399 N.W.2d 440 (1986).

Wood and Stewart involved arguably dangerous conditions: an improperly installed wood-burning stove and an improperly capped artesian well. Conahan involved termites but was decided on other grounds. However, Clemens involved improper roof repairs and a defective septic system. The Clemens Court, without discussion, held that a buyer need not establish that a defect was unreasonably dangerous in order to show liability. Id., 200 Mich.App. 456 at 460-461, 505 N.W.2d 283. We agree with Clemens that, in the context of a real estate action between a buyer and a seller based on fraud, not negligence, an unreasonable danger need not be shown. ²

Defendant argues, however, that the "as is" clause in the purchase agreement bars plaintiff's action in this case. We disagree.

"As is" clauses allocate the risk of loss arising from conditions unknown to the parties. See Lenawee Co. Bd. of Health v. Messerly, 417 Mich. 17, 32-33, 331 N.W.2d 203 (1982). Thus, plaintiff's mutual mistake claim is therefore barred. "As is" clauses also transfer the risk of loss where the defect should have reasonably been discovered upon inspection, but was not. See Conahan, supra, 186 Mich.App. at 49-50, 463 N.W.2d 118. They do not, however, transfer the risk of loss where "a seller makes fraudulent representations before a purchaser signs a binding agreement." Clemens, supra, 200 Mich.App. at 460, 505 N.W.2d 283. That is, at least arguably, what happened here.

Plaintiff submitted the affidavit of Leon Mancour, a licensed contractor, who indicated that he inspected plaintiff's leaky basement after the wall paneling was removed. ³ He found that the stud wall onto which the paneling was...