FEDERATED CAPITAL SERVICES V DEXTOURS INC
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STATE OF MICHIGAN
COURT OF APPEALS
FEDERATED CAPITAL SERVICES,
UNPUBLISHED
April 26, 2002
Plaintiff / Counter-DefendantAppellee,
v
No. 228208
Oakland Circuit Court
LC No. 99-017114-CK
DEXTOURS, INC., and ANTHONY B.
DEXTOR, a/k/a ANTHONY B. DEXTER,
Defendants / Counter-Plaintiffs /
Third-Party Plaintiffs-Appellants,
and
EQUIPMENT SYSTEMS, INC., and WILLIAM
ADAMS,
Third-Party Defendants-Appellees.
Before: Bandstra, P.J., and Smolenski and Meter, JJ.
PER CURIAM.
Defendants appeal as of right, challenging the circuit court’s order granting plaintiff
summary disposition on its complaint for breach of a lease financing agreement, as well as its
order dismissing defendants’ counter-claim. We affirm.
As a threshold matter, we reject plaintiff’s argument that this Court lacks jurisdiction to
review the dismissal of the counter-claim. Although the order dismissing the counter-claim was
entered on June 1, 2000, the order granting plaintiff summary disposition on its complaint was
not entered until June 5, 2000. The latter order constitutes the “final order” from which an
appeal of right could be taken. MCR 7.202(7). Defendants’ claim of appeal was timely filed on
June 26, 2000. MCR 7.203(A)(1); MCR 7.204(A)(1)(a). “Where a party has claimed an appeal
from a final order, the party is free to raise on appeal issues related to other orders in the case.”
Bonner v Chicago Title Ins Co, 194 Mich App 462, 472; 487 NW2d 807 (1992).
Defendants argue that summary disposition of plaintiff’s complaint and dismissal of the
counter-claim was improper because several questions of material fact remained for trial. A
circuit court’s decision on a motion for summary disposition is reviewed de novo to determine
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whether the moving party was entitled to judgment as a matter of law. Allen v Keating, 205
Mich App 560, 562; 517 NW2d 830 (1994). When reviewing a motion under MCR
2.116(C)(10), the court must examine the documentary evidence presented below and, drawing
all reasonable inferences in favor of the nonmoving party, determine whether a genuine issue of
material fact exists. Quinto v Cross & Peters Co, 451 Mich 358, 362; 547 NW2d 314 (1996);
see also Smith v Globe Life Ins Co, 460 Mich 446, 454-455 and n 2; 597 NW2d 28 (1999). The
nonmoving party has the burden of establishing through affidavits, depositions, admissions, or
documentary evidence that a genuine issue of disputed fact exists. Quinto, supra at 361-362.
The party may not rest on the mere allegations or denials contained in the pleadings but must
come forward with evidence of specific facts to establish the existence of a material factual
dispute. Id. at 362, 371. A question of fact exists when reasonable minds could differ as to the
conclusions to be drawn from the evidence. Glittenberg v Doughboy Recreational Industries
(On Rehearing), 441 Mich 379, 398-399; 491 NW2d 208 (1992); see also Quinto, supra at 367,
371-372 (a question of fact exists where there is sufficient evidence to allow a reasonable jury to
find in the nonmoving party’s favor).
Defendants next argue that summary disposition of plaintiffs’ complaint and dismissal of
their counter-claim was improper because a question of material fact remained concerning fraud.
The elements of fraud are: (1) a material misrepresentation, (2) that was false, (3) made
with knowledge of its falsity or recklessness of its truth, (4) made with the intent that the
claimant rely upon it, (5) that the claimant did rely on the misrepresentation, and (5) that the
claimant thereby suffered injury. Kassab v Michigan Basic Prop Ins Ass’n, 441 Mich 433, 442;
491 NW2d 545 (1992). Here, defendants did not raise fraud either as an affirmative defense to
plaintiff’s complaint and did not raise fraud in their counter-claim against plaintiff. Instead,
defendants alleged fraud and misrepresentation only against third-party defendant Adams. In
any event, pursuant to the terms of the lease agreement, defendants expressly disclaimed any
reliance on any statements or representations made by plaintiff. By its plain terms, the
agreement negates the reliance element necessary to prevail on a claim of fraud. Therefore,
defendants cannot establish a question of fact concerning fraud.
Defendants also argue that questions of fact existed concerning whether plaintiff
committed the first material breach of the agreement and whether the bus was defective. Under
the terms of the lease agreement, however, defendants’ obligation to pay the basic lease
payments was absolute and unconditional, “and not subject to any abatement, defense,
counterclaim or offset for any reason whatsoever.” The agreement also provides that defendants
“shall pay all expenses with respect to the use and operation” of the bus and that plaintiff “shall
not be obligated to provide any maintenance, repairs, labor, parts or service for any Vehicles.”
Further, defendants agreed to bear “[a]ll risk of damage to or loss . . . [and] no such damage, loss
or destruction shall abate or reduce [defendants’] . . . obligation to pay the Basic Rent.”
The agreement also contains a capitalized disclaimer of all warranties, stating that
defendants made the selection of the vehicle based upon their own judgment, that defendants
were expressly disclaiming any reliance upon any statements or representations made by
plaintiff, and that plaintiff “makes no representations or warranties . . . of any kind . . . including
without limitation . . . condition, quality, durability . . . manufacture or performance of vehicle,
and disclaims any implied warranty of merchantability or fitness for a particular purpose.” The
same disclaimer states that plaintiff “shall have no liability to defendants for any demand, claim,
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costs, loss, damage or liability of any kind . . . nor shall there be any abatement of payments,
arising out of or in connection with (i) any deficiency[,] defect or inadequacy, whether or not
known or disclosed to [plaintiff], [or] (ii) the use or performance of the vehicle[.]”
In light of the foregoing, the fact that the bus may have been in poor condition and may
have needed repairs would not constitute a breach of the contract. Further, the implied warranty
of merchantability was expressly and conspicuously disclaimed. Thus, unless defendants could
avoid the clear language of the agreement, the trial court properly found that there was no
genuine issue of material fact concerning whether plaintiff committed the first material breach of
the agreement, nor whether the bus was defective in a manner that precluded summary
disposition.
In an attempt to avoid portions of the lease, defendants claim that the agreement is
unreasonable or unconscionable, and that plaintiffs acted unreasonably or unconscionably. A
court may invalidate or modify, in whole or in part, a lease agreement that was unconscionable
as a matter of law at the time the contract was made. MCL 440.2808(1). “The examination of a
contract for unconscionability involves inquiries for both procedural and substantive
unconscionability.” Hubscher & Son, Inc v Storey, 228 Mich App 478, 481; 578 NW2d 701
(1998). Accordingly, there is a two-prong test to determine unconscionability:
(1) What is the relative bargaining power of the parties, their relative
economic strengths, the alternative sources of supply, in a word, what are their
options?; [and] (2) Is the challenged term substantively unreasonable? [Id.,
quoting Northwest Acceptance Corp v Almont Gravel, Inc, 162 Mich App 294,
302; 412 NW2d 719 (1987).]
Here, defendants failed to submit any evidence addressing the parties’ options,
bargaining power, relative economic strengths, or alternative sources of financing. Therefore,
the circuit court correctly determined that defendants failed to establish a genuine issue of
material fact concerning unconscionability.
Defendants further argue that questions of fact existed concerning whether plaintiff
improperly failed to mitigate its damages and whether it disposed of the collateral in a
commercially unreasonable manner.
Concerning the sale of the collateral, the agreement states that, upon defendants’ default,
plaintiff may “(d) sell any and all of the Vehicles at a public or private sale, with or without
notice to [defendants] or advertisement, or otherwise, (sic) dispose of, hold, use, operate, lease to
others or keep idle any such Vehicle, all as [plaintiff] in its sole discretion may determine and all
free and clear of any rights of [defendants] and without any duty to account to [defendants] for
any proceeds with respect thereof[.]” The agreement also provides that defendants “shall
continue to be liable for all its indemnities and other obligations under this Lease and for all legal
fees and costs and expenses arising in connection with the foregoing defaults or the exercise of
[plaintiff’s] remedies[.]” Further, to the extent permitted by applicable law, defendants also
agreed to “waive[] any rights now or hereafter conferred by statute or otherwise which may
require [plaintiff] to sell, lease or otherwise use any Vehicle in mitigation of [plaintiff’s]
damages or that may otherwise limit or modify any of [plaintiff’s] rights or remedies hereunder.”
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Thus, defendants contractually waived any right they had to (1) compel plaintiff to
mitigate its damages, and (2) compel plaintiff to hold a commercially reasonable sale of the
collateral. Also, as previously noted, defendants have failed to show that these provisions should
be set aside on grounds of unconscionability.
Insofar that defendants argue that the circuit court failed to state its reasons for dismissing
the counter-claim, we find no merit to this issue. It is apparent that the court addressed each of
defendants’ counter-claims in the context of explaining its decision on plaintiff’s motion for
summary disposition.
Defendants also claim that the circuit court erred in granting summary disposition
without allowing them to conduct discovery. We disagree. Generally, summary disposition is
premature if it is granted before discovery on a disputed issue is complete. State Treasurer v
Sheko, 218 Mich App 185, 190; 553 NW2d 654 (1996). However, summary disposition is not
premature if the requested discovery “does not stand a fair chance of uncovering factual support
for opposing the motion for summary disposition.” Id.
In this case, plaintiff filed its complaint on August 25, 1999, and served defendants on
November 2, 1999. Defense counsel filed an appearance on December 8, 1999, along with a
motion for summary disposition of plaintiff’s claims. That motion was denied by order dated
February 4, 2000, and defense counsel filed an answer to plaintiff’s complaint on February 17,
2000. According to trial court’s 1999 scheduling order, the discovery cutoff date was March 12,
2000. On March 23, 2000, after the close of discovery, the trial court approved the parties’
stipulation allowing defendants to file a counter-claim and a third-party complaint. However,
defendants did not actually file the counter-claim and third-party complaint until April 14, 2000.1
Plaintiff then filed a motion for summary disposition on its original complaint, as well as
a motion for summary disposition on defendants’ counter-complaint. The trial court conducted
oral arguments on those motions on May 17, 2000. At that hearing, plaintiff argued that
discovery had long since closed and that no genuine issues of material fact existed, entitling
plaintiffs to judgment as a matter of law. Defendants disagreed that discovery had closed, but on
the sole ground that the third-party complaint had not yet been served. There is no indication in
the record that defendants ever requested that the trial court extend discovery on plaintiff’s
original complaint or defendants’ counter-claim. Indeed, there is no indication in the record that
defendants even attempted to conduct any discovery before the discovery cutoff date. Under
these circumstances, we conclude that summary disposition was not premature.
Affirmed.
/s/ Richard A. Bandstra
/s/ Michael R. Smolenski
/s/ Patrick M. Meter
1
It does not appear that defendant ever accomplished service on the third-party defendant.
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