M & D, Inc. v. McConkey

• Court: Court of Appeal of Michigan
• Writing for the Court: YOUNG
• Citation: M & D, Inc. v. McConkey, 573 N.W.2d 281, 226 Mich.App. 801 (Mich. App. 1997)
• Decision Date: 14 November 1997
• Docket Number: Docket No. 175201
• Parties: M & D, INC., Donmar, Inc., Donald Gundle, Marie J. Gundle and Donna Gundle-Krieg, Plaintiffs-Appellants, v. W.B. McCONKEY, d/b/a Relenco Partnership, McConkey Real Estate Company, Barbara C. Weed, Lou Anne Hessemer, Richard Paschack, Thomas J. Sullivan, Pamela M. Sullivan, Charles H. Aymond, Dana C. Aymond, and State of Michigan, Defendants-Appellees, and Carl Engineers, Inc., C. Donovan Carl, and Linda G. Carl, Defendants. . Released

Page 281

573 N.W.2d 281

226 Mich.App. 801

M & D, INC., Donmar, Inc., Donald Gundle, Marie J. Gundle and Donna Gundle-Krieg, Plaintiffs-Appellants, v. W.B. McCONKEY, d/b/a Relenco Partnership, McConkey Real Estate Company, Barbara C. Weed, Lou Anne Hessemer, Richard Paschack, Thomas J. Sullivan, Pamela M. Sullivan, Charles H Aymond, Dana C. Aymond, and State of Michigan, Defendants-Appellees and Carl Engineers, Inc., C. Donovan Carl, and Linda G. Carl, Defendants.

Docket No. 175201.

Court of Appeals of Michigan.

Released Nov. 14, 1997. at 9:00 a.m.

Vacated Nov. 26, 1997.

Released for Publication Feb. 10, 1998.

Before YOUNG, P.J., and CORRIGAN and M.J. CALLAHAN ^*, JJ.

ORDER

M & D, Inc. v. W.B. McConkey, Docket No. 175201. The Court orders that a special panel shall be convened pursuant to MCR 7.215(H) to resolve the conflict between this case and Shimmons v. Mortgage Corp. of America, 206 Mich.App. 27, 520 N.W.2d 670 (1994).

The Court further orders that the opinion in this case released November 14, 1997, is hereby vacated.

The appellants may file a supplemental brief within 28 days of the clerk's certification of this order. Appellees may file a supplemental brief within 21 days of service of appellants' brief. Nine copies must be filed with the Clerk of the Court.

YOUNG, Presiding Judge.

Plaintiffs purchased on an "as is" basis commercial property on West Michigan Avenue in Jackson, Michigan. Following its purchase, the property suffered a damaging flood. Plaintiffs later discovered that the property had an undisclosed history of significant flooding. Plaintiffs argue that both the sellers and the real estate agents are liable for fraud, misrepresentation, and negligence for failing to disclose this flooding problem. In addition, plaintiffs claim that defendant State of Michigan, Department of Transportation (MDOT), is liable for failing to maintain or properly construct a drain located adjacent to the property. Plaintiffs contend that this failure causes water from heavy rainfalls to flood their property.

Plaintiffs appeal as of right from a March 1994 jury verdict rendered in favor of defendant Relenco Partnership and its individual partners. Plaintiffs also appeal the trial court's previous order dismissing plaintiffs' fraud and misrepresentation claims against defendant McConkey Real Estate Company and defendants W.B. McConkey, Barbara C. Weed, and Richard Paschack, individually; the order dismissing plaintiffs' trespass-nuisance claim against the MDOT; the order dismissing the claims of plaintiffs Donald Gundle, Marie J. Gundle, and Donna Gundle-Krieg; and the order dismissing the fraud and misrepresentation claims of plaintiffs M & D, Inc., and Donmar, Inc., against defendant Relenco Partnership and its individual partners. ¹

But for our obligation under MCR 7.215(H), we would affirm in their entirety the judgment and orders plaintiffs have appealed. However, being so constrained, for the reasons stated herein, we affirm in part, reverse in part, and remand for further proceedings.

I

The Parties, Nature of the Dispute, and Procedural History

in the Circuit Court

A. Plaintiffs

Plaintiffs M & D, Inc., and Donmar, Inc., are corporate entities formed by individual plaintiffs Donald and Marie Gundle. M & D was formed for the purpose of purchasing the property in question. Donmar was formed to operate a pet supply franchise, "Pet Supplies Plus," and to lease from M & D store space for the franchise in the commercial building located on the property. Plaintiff Donna Gundle-Krieg was the vice president and general manager of Donmar.

B. Defendants

Defendant Relenco Partnership owned the property at 1715 W. Michigan Avenue from 1974 until January 1991, when it sold the property to plaintiff M & D. Relenco Partnership is now dissolved. At the time of the sale of the property, the partnership included the following partners who are relevant for purposes of this opinion: defendants W.B. McConkey and Barbara C. Weed. Unless otherwise indicated in this opinion, "Relenco" refers to the partnership and its individual partners.

Defendant McConkey Real Estate Company handled the listing and sale of the property. W.B. McConkey is a licensed real estate broker and owner of McConkey Real Estate Company. Barbara Weed is the treasurer of the real estate agency, and defendant Richard Paschack is the real estate salesperson involved in the sale of the property. Unless otherwise indicated in this opinion, "McConkey Real Estate" refers to the real estate agency, its officers, employees, and agents.

Defendant MDOT constructed the drain on Michigan Avenue that connected a catch basin adjacent to plaintiffs' property. The drain was constructed in 1972. This drain is a component of a three-part drainage system. The other components include the county drainage system and the private drainage system of Westwood Mall located across from plaintiffs' property.

C. The Real Estate Transaction

The property in question was purchased by plaintiff M & D in January 1991 on an "as is" basis from defendant Relenco. The property is located on the southeast corner of 18th Street and Michigan Avenue in Jackson, Michigan. The property included an existing building that had been used as commercial property for over thirty years. The building was situated at a low point on the property and below Michigan Avenue.

The purchase agreement documents contained various disclaimers denying seller representations and warranties about the property and imposing upon the purchaser the obligation to inspect the property and the responsibility for making any corrections required by those inspections. Relenco also refused to prepare a seller's disclosure statement and made this refusal an explicit part of the purchase agreement. Indeed, on the face of the preprinted seller's disclosure statement, the following "as is" disclaimer appears: "Owner has never occupied this property. No representations or warranties implied as to condition. Property being sold in 'as is' condition."

D. The Nature of the Flooding Problem

Before the purchase, plaintiffs apparently never asked whether the property had ever experienced flooding and defendants never made any representation concerning flooding to plaintiffs. Before purchasing the property, and consistent with their obligation under the purchase agreement to inspect the property, plaintiffs hired Dennis Krieg, the husband of plaintiff Donna Gundle-Krieg, to inspect the property. Krieg concluded that there was no evidence of flooding on the property.

After purchasing the property, M & D added an addition to the building and then leased the property to plaintiff Donmar for the operation of the pet supply franchise. Donmar opened the store in June 1991. In late August 1991, the property flooded after a heavy rainfall. Witnesses described the flooding as coming from Michigan Avenue in "waves." Plaintiffs produced evidence at trial that inventory and store displays were among the items destroyed. They also introduced evidence that the building and equipment inside required extensive repairs after the flood.

According to the proofs adduced at trial, the property had experienced flooding problems over many years. Residential neighbors around the property testified that the property flooded after a heavy rainfall and some residents had observed flooding as early as nineteen years before the instant action. Former tenants of the building testified that they experienced flooding and discontinued their businesses at that location because of the flooding problem. Defendant W.B. McConkey, Relenco's managing partner, testified that, after the partnership purchased the property in 1974, the property experienced a "puddling problem" that was later fixed. However, McConkey also acknowledged that he had witnessed flooding on the property.

E. Procedural History

Plaintiffs commenced this action in October 1992, raising breach of contract, negligence, innocent misrepresentation, and fraud claims against Relenco and McConkey Real Estate. Plaintiffs alleged that these defendants were aware that plaintiffs intended to use the property for a retail store and, on this basis, were thus liable for failing to disclose that the property had a flooding problem. Plaintiffs also sued the MDOT for trespass-nuisance, alleging that the flooding was caused by the MDOT's failure to properly construct or maintain its drain.

Pursuant to the defendants' various motions for summary disposition, the circuit court dismissed plaintiffs' claims of fraud and misrepresentation against defendant McConkey Real Estate and plaintiffs' claims of trespass-nuisance against the MDOT. The circuit court also dismissed the claims of all the individual plaintiffs. Finally, the circuit court granted Relenco's motion for partial summary disposition, dismissing plaintiffs M & D and Donmars' fraud and innocent misrepresentation claims under MCR 2.116(C)(10). However, the circuit court allowed M & D and Donmar to proceed against Relenco on a negligence cause of action as recognized in Christy v. Prestige Builders, Inc., 415 Mich. 684, 329 N.W.2d 748 (1982). The circuit court further ordered that M & D and Donmar were limited in the negligence action to the recovery of damages incurred as a direct result of Relenco's failure to disclose the flooding condition but which damages occurred before the time that M & D, as purchaser, discovered or should have discovered the flooding condition. ²

Trial commenced in March 1994 against Relenco on the Christy negligence claim. After the parties rested, the circuit court granted Relenco's motion for a directed verdict with respect to M & D's claims on the basis that M & D suffered no damages because it had continued to receive lease payments from plaintiff Donmar. The jury later returned a verdict of no cause of action in favor of Relenco and against plaintiff Donmar. Consequently, the trial court entered judgment in favor of...