DAVID E FEJEDELEM V DANIEL L KASCO
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STATE OF MICHIGAN
COURT OF APPEALS
DAVID E. FEJEDELEM,
FOR PUBLICATION
January 24, 2006
9:00 a.m.
Plaintiff-Appellant,
v
DANIEL L. KASCO, RENEE R. KASCO,
JEFFREY M. BERLIN, and JC GROUP, INC.,
No. 256090
Genesee Circuit Court
LC No. 02-074153-CK
Defendants,
and
RICHARD DIMMER, d/b/a
R.D. DIMMER & ASSOCIATES,
Defendant-Appellee.
Official Reported Version
Before: Donofrio, P.J., and Borrello and Davis, JJ.
DAVIS, J.
Plaintiff appeals as of right an order granting defendant's motion for summary disposition
pursuant to MCR 2.116(C)(10). We affirm.
Plaintiff became interested in purchasing National Truck Refinishers, Inc. (NTR), on the
basis of real estate broker Rob Smith's recommendation. NTR was owned by Daniel and Renee
Kasco, and defendant Richard Dimmer (defendant) was their accountant. Plaintiff initially
thought that NTR's asking price was too high, but Daniel Kasco allegedly indicated that NTR
was more profitable than it appeared because Kasco had been "taking money out of the company
kind of off the books" as unreported income. Kasco obtained a number of financial documents
prepared by defendant and forwarded copies to plaintiff during their negotiations.
Defendant is not a certified public accountant (CPA), but he prepares tax returns.
Defendant had prepared NTR's tax returns for several years, pursuant to which he received
spreadsheets, bank statements, and check ledgers. He compiled balance sheets and profit and
loss statements for the Kascos' use in selling NTR. Defendant had never performed an audit on
any records. Defendant testified that the documents were prepared entirely on the basis of
confusing and largely incomplete data supplied by Daniel Kasco. Defendant filled in the gaps
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using "balancing factors," which he had been told by the Internal Revenue Service was
acceptable. Defendant admitted a number of other irregularities, such as carrying over a balance
from the Kascos' prior business, "National Truck Refinishing, Inc.," when it was dissolved and
immediately reincorporated as "National Truck Refinishers, Inc.," without regard for the change
in corporate form or employer identification number. He also listed accounts payable as income.
Defendant admitted that he knew plaintiff was working with Rob Smith to purchase NTR
at the time defendant forwarded documents to Smith's office. Those documents included some
income tax returns for NTR. Defendant testified that he had spoken directly to plaintiff,
informing him that the documents were unaudited and that some figures were estimates. After
receiving these records, and before purchasing the business, plaintiff hired a consultant who was
a CPA. The consultant concluded that NTR's financial records were in order despite Daniel
Kasco's refusal to turn over NTR's checkbook and check ledger. Plaintiff alleges that he relied
on the financial records in agreeing to purchase NTR, and that he did not find out until
afterwards that the records inflated NTR's value. Plaintiff filed a number of claims, but only the
claim of negligent misrepresentation against defendant Dimmer is at issue here.
The trial court granted summary disposition on the ground that plaintiff could not
justifiably rely on the documents because plaintiff knew they were unaudited. We review de
novo motions for summary disposition. Maiden v Rozwood, 461 Mich 109, 118; 597 NW2d 817
(1999). Plaintiff argues that the trial court erred in its conclusion. We disagree. Plaintiff was
not precluded as a matter of law from justifiably relying on the documents provided by
defendant, but, under the totality of the circumstances in this case, we agree with the trial court's
ultimate conclusion.
A claim for negligent misrepresentation "requires plaintiff to prove 'that a party
justifiably relied to his detriment on information prepared without reasonable care by one who
owed the relying party a duty of care.'" Mable Cleary Trust v Edward-Marlah Muzyl Trust, 262
Mich App 485, 502; 686 NW2d 770 (2004), quoting Law Offices of Lawrence J Stockler, PC v
Rose, 174 Mich App 14, 30; 436 NW2d 70 (1989). For the purposes of this appeal, we presume
without deciding that the documents at issue were prepared by defendant without reasonable
care, that defendant owed plaintiff a duty of care,1 and that plaintiff was harmed by relying on
the documents. We are presented solely with the question of whether that reliance was
"justifiable."
In Stockler, supra at 36, this Court adopted "[3] Restatement Torts, 2d, § 552, as the
minimum standard applicable in reviewing the scope of an accountant's potential third-party
liability for negligent misrepresentation." Michigan courts have not explicitly set forth when
reliance is justifiable because justifiable reliance is not a purely legal standard. The trial court
1
Defendant argued in the trial court that he could not owe plaintiff a duty of care because he did
not know, and had no reason to know, that plaintiff would rely on the documents. The trial court
did not grant summary disposition on this ground, apparently because defendant himself testified
that he directly discussed the documents with plaintiff.
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held, essentially as a matter of law, that reliance on unaudited financial statements can never be
justifiable. We disagree with such a bright-line rule.
Whether a person justifiably relies on a document is indistinguishable from whether the
person reasonably relies on it. Indeed, courts sometimes treat the two words essentially as
synonyms. See, e.g., People v Taylor, 253 Mich App 399, 404; 655 NW2d 291 (2002). Further,
in adopting § 552 in Stockler, we relied on the reasoning in Raritan River Steel Co v Cherry,
Bekaert & Holland, 322 NC 200; 367 SE2d 609 (1988). In that case, the relevant element was
whether "that person reasonably relies on the information in a transaction . . . ." Id. at 210
(emphasis added). Thus, the test in Michigan is identical to the test set forth in 3 Restatement
Torts, 2d, § 552A, p 140, which states that "[t]he recipient of a negligent misrepresentation is
barred from recovery for pecuniary loss suffered in reliance upon it if he is negligent in so
relying." In other words, the test is factual, not legal, and turns on whether the reliance was itself
an act of negligence.
We conclude that plaintiff actually was negligent, under the circumstances of this case, in
relying on the unaudited financial information provided by defendant. It is undisputed that the
parties actually discussed the financial statements directly with each other, and plaintiff was
aware that they were not only unaudited but also estimated. Plaintiff then attempted to obtain
NTR's checkbook and expense records on the advice of an independent CPA consultant who
examined the initial set of documents supplied by defendant, but Kasco refused repeated requests
for these more specific records. In light of these indicia that the information plaintiff did receive
was uncertain and incomplete, we find no genuine issue of fact that plaintiff could not reasonably
have relied on it.
Affirmed.
/s/ Alton T. Davis
/s/ Pat M. Donofrio
/s/ Stephen L. Borrello
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