Modern Indus. v. Oxford Bank Corp.
| Decision Date | 27 January 2022 |
| Docket Number | 356456 |
| Parties | MODERN INDUSTRIES, INC., LIVINGSTON COUNTY CONCRETE, INC., TWO THIRDS INVESTMENTS, LLC, and RONALD LAMMY, Plaintiffs-Appellants, v. OXFORD BANK CORPORATION, Defendant-Appellee. |
| Court | Court of Appeal of Michigan — District of US |
UNPUBLISHED
Oakland Circuit Court LC No. 2019-178262-CB
Before: David H. Sawyer, P.J., and Deborah A. Servitto and Michelle M. Rick, JJ.
Plaintiffs appeal as of right the trial court's orders granting summary disposition in favor of defendant. We affirm.
This case arises from a contract dispute regarding commercial loans issued to plaintiffs by defendant. Before December 2017, Ronald Lammy was the sole owner of Modern Industries Inc. (Modern), and co-owner of Livingston County Concrete, Inc. (Livingston). In 2017, Michael T. Horan, Lammy's business partner and Livingston's other co-owner, agreed to sell his 50% ownership interest in Livingston to Lammy for $2, 250, 000, if the transaction closed before December 31, 2017. Accordingly, in August 2017, Lammy engaged with defendant to fund the buyout of Livingston and refinance the debt of Modern. After a series of loan proposals, Lammy and defendant agreed on two loans: the Livingston loan, to buy out Horan's ownership interest, and the Modern loan, to refinance Modern's debts.
The Livingston loan consisted of two promissory notes: a five-year note for $1, 492, 500 and a three-year note for $1, 012, 000. The payment terms for this loan required "equal monthly installments of principal and interest[.]" Additionally, the loan documents corresponding to the Livingston loan included a release provision, stating "Borrower waives, releases and affirmatively agrees not to allege or otherwise pursue any and all . . . claims . . . it may have, or claim to have[, ] . . . against Bank . . . from the date of the Borrower's first contact with Bank up to the date of this Agreement." The parties closed on the Livingston loan in December 2017. The Modern loan consisted of one Small Business Administration (SBA) loan for $1, 794, 000. The payment terms for this loan stated: "Borrower must pay one payment of interest only on the disbursed principal balance one month from the month this Note is dated," and then "pay principal and interest payments" each month thereafter. Unlike the Livingston loan, the Modern loan did not contain a release provision in the loan documents. The parties closed on the Modern loan in January 2019.
After closing the Livingston loan, Lammy objected to the changes in the amount of the notes and the payment terms of the Modern loan from the initial September 2017 proposal. In the initial proposal, the Livingston loan amounted to $2, 013, 930 for the five-year note and $786, 000 for the three-year note, and the Modern loan amounted to $1, 995, 780. The estimated monthly payment provision for the Modern loan stated: At the closing of the Modern loan, Lammy also objected to the proposed distribution and cash flow terms. It is disputed whether defendant promised Lammy it would modify the loan documents accordingly if Lammy proceeded with closing the Modern loan. After closing the Modern loan, several meetings were held "in an attempt to reconstruct the loans however . . . it was impossible to accomplish in an orderly fashion without [p]laintiff[s'] business being completely destroyed." As a result, Lammy sought refinancing with another lender and repaid the loans to defendant in November 2018.
Plaintiffs thereafter filed a complaint against defendant, alleging defendant negligently engaged in self-dealing and unilaterally changed the terms of the loans contrary to the parties' agreement. Plaintiffs also alleged defendant breached its fiduciary duty to plaintiffs by failing to properly distribute the Modern loan proceeds to plaintiffs, rather than itself. Further, plaintiffs alleged defendant engaged in constructive fraud and misrepresentation by waiting to disclose unilateral changes to the final loan documents until plaintiffs had no choice but to close on the loans.
Defendant moved for summary disposition under MCR 2.116(C)(7), MCR 2.116(C)(8), and MCR 2.116(C)(10). Defendant argued that plaintiffs' claims related to the Livingston loan were barred by the release provision contained within the loan documents and that plaintiffs' negligence claims were barred because the parties' relationship was governed by a contract, and not a distinct and separate tort duty. Defendant also argued plaintiffs' breach of fiduciary duty claim warranted dismissal because plaintiffs failed to establish the type of unique facts necessary to establish a fiduciary relationship beyond that of a lender-borrower, and that plaintiffs failed to plead fraud with specificity, as required under MCR 2.112(B)(1), and further failed to establish a genuine issue of material fact to support their claim.
The trial court denied defendant's motion regarding plaintiffs' claims of fraud and misrepresentation, but granted defendant's motion for summary disposition on the remainder of plaintiffs' claims. Specifically, the trial court reasoned the broad release language in the loan documents left "no question" that Livingston and Lammy agreed to release defendant from any claim related to the Livingston loan and thus dismissed all claims made by these plaintiffs pursuant to MCR 2.116(C)(7). The trial court determined plaintiffs' negligence claims failed under MCR 2.116(C)(8) because plaintiffs failed to establish a "separate and distinct" duty outside of any contractual duty between the parties and that their breach of fiduciary duty claim failed under MCR 2.116(C)(8) because plaintiffs did not establish a fiduciary duty between plaintiffs and defendant to support this claim. While the trial court acknowledged plaintiffs had not pleaded their fraud claim "with any particularity as required under MCR 2.112(8)(1) to survive summary disposition[, ]" the trial court afforded plaintiffs the opportunity to amend their pleading under MCR 2.116(I)(5).[1]
Plaintiffs thereafter amended their complaint, restating their fraud and negligent misrepresentation claims against defendant with purportedly more specificity. Defendant again moved for summary disposition, arguing plaintiffs' attempt to enforce defendant's allegedly oral promise to modify the loans after the closing was unenforceable under MCL 566.132(2). Further, defendant argued because the trial court dismissed plaintiffs' negligence claims, plaintiffs could not reassert their negligence claim as part of their fraud claim. The trial court agreed and granted defendant's motion for summary disposition under MCR 2.116(C)(8).
Plaintiffs first argue the trial court erred in granting summary disposition with respect to plaintiffs' fraud claim because they properly pleaded and established the claim and it was not barred by MCL 566.132(2). We disagree.
This Court reviews de novo a trial court's decision regarding a motion for summary disposition under MCR 2.116(C)(8), which tests the legal sufficiency of a claim, and MCR 2.116(C)(10), which tests the factual sufficiency of a claim. Eplee v Lansing, 327 Mich.App. 635, 644; 935 N.W.2d 104 (2019); Pontiac Police & Fire Retiree Prefunded Group Health & Ins Trust Bd of Trustees v Pontiac No 2, 309 Mich.App. 611, 617-618; 873 N.W.2d 783 (2015). When deciding a motion for summary disposition under MCR 2.116(C)(8), "[a]ll well-pleaded factual allegations are accepted as true and construed in a light most favorable to the nonmovant. Eplee, 327 Mich.App. at 644 (quotation marks and citation omitted). Moreover, this Court only considers the pleadings. Id. Summary disposition should be granted when "the claims alleged are so clearly unenforceable as a matter of law that no factual development could possibly justify recovery." Id. at 644-645 (quotation marks and citation omitted).
When deciding a motion for summary disposition under MCR 2.116(C)(10), this Court considers the pleadings, affidavits, depositions, admissions, and other documentary evidence submitted in a light most favorable to the nonmoving party. Corley v Detroit Bd of Ed, 470 Mich. 274, 278; 681 N.W.2d 342 (2004). Summary disposition should be granted when "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).
Contract interpretation presents a question of law reviewed de novo. White v Taylor Distrib Co, Inc, 289 Mich.App. 731, 734; 798 N.W.2d 354 (2010). Likewise, this Court reviews de novo whether the trial court properly interpreted and applied the relevant statutes. Mich Ass 'n of Home Builders v Troy, 504 Mich. 204, 212; 934 N.W.2d 713 (2019). In interpreting a statute, the reviewing court's role is to determine the legislative intent that may reasonably be inferred the express language in the statute. Id. If the statutory language is unambiguous, then the statute must be applied as written without judicial interpretation. Id. It is presumed "the Legislature intended the meaning it plainly expressed . . . ." Cox v Hartman, 322 Mich.App. 292, 298-299; 911 N.W.2d 219 (2017) (quotation marks and citation omitted).
To establish a claim of fraud or negligent misrepresentation, plaintiffs must establish:
(1) the defendant made a material representation; (2) the representation was false; (3) when the representation was made, the defendant knew that it was false, or made it recklessly, without knowledge of its truth, and as a positive assertion; (4) the defendant made it with the intention that the...
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