GENERAL MOTORS CORP V ALUMI-BUNK INC
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STATE OF MICHIGAN
COURT OF APPEALS
GENERAL MOTORS CORPORATION,
UNPUBLISHED
July 24, 2007
Plaintiff-Appellant,
v
No. 270430
Wayne Circuit Court
LC No. 04-422587-CB
ALUMI-BUNK, INC., and ERIC JAIN,
Defendants-Appellees.
Before: Meter, P.J., and Kelly and Fort M. Hood, J.J.
Kelly, J. (dissenting).
I respectfully dissent from that portion of the majority opinion reversing the trial court’s
order granting defendant’s motion for summary disposition on plaintiff’s claim of fraudulent
inducement. I would affirm the trial court’s ruling in all respects.
In 2003, the parties entered into negotiations to allow AB to purchase hundreds of
Chevrolet Silverado trucks from an Ohio dealer at a substantial discount. Eric Jain handled the
negotiations on behalf of Alumi-Bunk, Inc. (AB). General Motors Corporation (GM) submitted
a written offer to defendant entitled “Competitive Assistance Program” (CAP). According to the
terms of the CAP, GM’s offer was “based on [defendant’s] representation that they have
received a competitive offer lower than that offered by General Motors Fleet and Commercial
Operations.”1 AB accepted the CAP in total. Although GM now contends that defendants
agreed to modify, or “upfit,” the vehicles before reselling them so they would not compete with
the sale of non-modified vehicles on the market, this “term” or “representation” was not included
in the CAP that was drafted and presented to defendants by GM and accepted by AB.2
1
This is consistent with GM employee Erich Raich’s position that he did not “really care how
they get sold as long as we can conquest this current Ford customer. Five hundred or more units
a year is 500 units we don’t currently have. I just want to get the business if at all possible.”
2
Although Mark Kline, a former employee with Ganley Chevrolet, Inc., the dealership that sold
the trucks in question, stated that GM would not offer a CAP discount “without a requirement
that the vehicles purchased be up-fitted,” it is uncontested that GM did, in fact, offer the CAP
without such a requirement.
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GM filed its complaint alleging fraud; negligent, innocent, and/or intentional
misrepresentation; and breach of an express or implied contract. Each count explicitly referred
to defendant’s failure to “upfit” the vehicles after purchase and prior to resale. Defendants
thereafter moved for summary disposition. When granting defendants’ motion, the trial court
stated, in part:
There’s clearly a contract here where [AB] is purchasing these vehicles.
And it’s a written contract and the written contract I think it’s pretty much agreed
doesn’t say anything about upfitting. There’s a significant discount, to be sure,
but the contract doesn’t speak to that. And there’s no representation in the
contract about upfitting and what’s required for the upfitting. And this is really
GM’s contract and any ambiguities or unclearness is construed against [GM].
And really, as I looked at the whole issue, because I was really kind of
struggling with this case, the only case that I thought came close to keeping
[GM’s] case alive is the argument that you make about fraud in the inducement. . .
.
But . . . really the fraud claim has to be independent of contract claims.
And there, the fraud and the contract claim is [sic] so intertwined and it’s really
the contract claim itself, and this fraud in the inducement that you’re arguing
really is part and parcel of the contract itself.
And, you know, to get right to the bottom line, I really just don’t see that
[GM] has any leg to stand on in this case. The UCC applies and you’ve done a
very creative job in trying to separate out this representation about the upfitting
from the contract itself, but that’s a very extremely [sic] strained argument to say
that this case doesn’t fall within the UCC.
***
And I think this is really just a case where GM kind of got caught with, as
they say, with their pants down because the upfitting agreement or any upfitting
allegations should have been written right into the contract. It should have been
part and parcel of the written contract. And now for GM to turn around and say
that this upfitting obligation is part of this agreement and they were – [AB] was to
do this or that and nobody even knows what this or that was. And again, that
ambiguity is to be construed against the drafter. [Emphasis added.]
In my opinion, the trial court did not err in granting summary disposition.
The majority correctly concludes that the Uniform Commercial Code (UCC) and the
economic loss doctrine govern this transaction. And, as noted by the majority, “[t]he economic
loss doctrine, simply stated, provides that [w]here a purchaser's expectations in a sale are
frustrated because the product he bought is not working properly, his remedy is said to be in
contract alone, for he has suffered only economic losses.” Neibarger v Universal Cooperative,
Inc, 439 Mich 512, 520; 486 NW2d 612 (1992) (emphasis added, punctuation omitted). In this
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case, GM is claiming only economic losses stemming from a written contract. Consequently, it
is limited to contractual remedies.
While under certain circumstances claims of fraudulent inducement are not barred by the
economic loss doctrine, Huron Tool & Engineering Co v Precision Consulting Services, Inc, 209
Mich App 365, 372-374; 532 NW2d 541 (1995), such circumstances are not present in this case.
As noted in Huron Tool,
Fraud in the inducement presents a special situation where parties to a contract
appear to negotiate freely – which normally would constitute grounds for
invoking the economic loss doctrine – but where in fact the ability of one party to
negotiate fair terms and make an informed decision is undermined by the other
party's fraudulent behavior. In contrast, where the only misrepresentation by the
dishonest party concerns the quality or character of the goods sold, the other party
is still free to negotiate warranty and other terms to account for possible defects in
the goods. [Id. at 372.]
The Huron Tool panel further noted:
The distinction between fraud in the inducement and other kinds of fraud
is the same as the distinction drawn by a New Jersey federal district court between
fraud extraneous to the contract and fraud interwoven with the breach of contract.
With respect to the latter kind of fraud, the misrepresentations relate to the
breaching party's performance of the contract and do not give rise to an
independent cause of action in tort.
“Such fraud is not extraneous to the contractual dispute among the parties,
but is instead but another thread in the fabric of [the] plaintiffs' contract claim. . . .
[It] is undergirded by factual allegations identical to those supporting their breach
of contract counts. . . . This fraud did not induce the plaintiffs to enter into the
original agreement nor did it induce them to enter into additional undertakings. It
did not cause harm to the plaintiffs distinct from those caused by the breach of
contract. . . .” [Id. at 373 (citations omitted).]
Pursuant to Huron Tool, a claim for fraudulent inducement must be separate from the
claim of breach of contract:
[A] claim of fraud in the inducement, by definition, redresses misrepresentations
that induce the buyer to enter into a contract but that do not in themselves
constitute contract or warranty terms subsequently breached by the seller.
***
To that end, we must look to the four corners of plaintiff’s complaint, accept all
factual allegations as true, and determine whether the fraud claim falls out side the
economic loss doctrine. . . . The fraudulent representations alleged by plaintiff
concern the quality and characteristics of the software system sold by defendants.
These representations are indistinguishable from the terms of the contract and
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warranty that plaintiff alleges were breached. Plaintiff fails to allege any
wrongdoing by defendants independent of defendants’ breach of contract and
warranty. Because plaintiff’s allegations of fraud are not extraneous to the
contractual dispute, plaintiff is restricted to its contractual remedies under the
UCC. [Id. at 375.]
Applying these principles and reviewing GM’s complaint, it becomes clear that its fraud
claim is not viable. The alleged misrepresentations that form the basis of GM’s fraud claim are
precisely the same as those alleged in its breach of contract claim:
FACTUAL BACKGROUND
“26. Based upon information and belief, almost immediately after defendant
Alumi-Bunk took delivery of the vehicles, Alumi-Bunk and/or its brokers and
agents began selling those vehicles as “new” across the country without having
upfitted them for a specialized purchase and in direct breach of its representation
to GM that the vehicles were purchased for the express purpose of being upfitted.
27. Based upon information belief, defendant Alumi-Bunk resold all of the
vehicles purchased from GM under the Competitive Assistance Program without
having upfitted any of them in direct breach of its representations to GM.
***
FRAUD
32. Defendants Jain and Alumi-Bunk knowingly misrepresented that any fleet
vehicles purchased under the Competitive Assistance Program would be upfitted
before the resale of those vehicles to the general public. . . .
***
NEGLIGENT, INNOCENT AND/OR INTENTIONAL
MISREPRESENTATION
39. Defendants Jain and Alumi-Bunk represented to GM on several occasions
that any fleet vehicles purchased under the Competitive Assistance Program
would be upfitted before the resale of those vehicles to the public.
***
BREACH OF EXPRESS/IMPLIED CONTRACT
48. On or about August 18, 2003, GM and defendants Jain and Alumi-Bunk
agreed that Alumi-Bunk could participate in the Competitive Assistance Program
and purchase up to 400 light duty trucks only on the condition that Alumi-Bunk
upfit any such vehicles before reselling them to the general public.
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49. That agreement constituted a valid and binding express and binding contract
by and among GM, on the one hand, and defendants Jain and Alumi-Bunk, on the
other hand.
50. In breach of the express and/or implied contract by and among the parties,
defendants Jain and Alumi-Bunk resold the fleet vehicles . . . .
Clearly, the fraud allegations are not extraneous to the contractual dispute as GM’s allegations of
fraud are so intertwined with its allegations of breach of contract to be indistinguishable.
The majority disregards Huron Tool’s requirement that “we must look to the four corners
of plaintiff’s complaint, accept all factual allegations as true, and determine whether the fraud
claim falls out side the economic loss doctrine,” id. at 376, by simply declaring “[h]ere there was
both evidence of improper inducement on the part of defendants and evidence that defendants
agree to the upfitting with the present intent not to perform.” In addition to disregarding the
proper method for reviewing this claim, I would also note that the majority fails support this
blanket assertion with any reference either in the complaint or the lower court record. In this
record, there is a glaring absence of any evidence at all that would even inferentially support this
speculative assertion. Under these circumstances, I believe GM is restricted to its contractual
remedies under the UCC.
Finally, GM has failed to allege any specific facts that would support a claim of
fraudulent inducement. Such an action may only be predicated on statements relating to a past or
existing fact. “Future promises cannot constitute actionable fraud.” Kamalnath v Mercy
Memorial Hosp Corp, 194 Mich App 543, 554; 487 NW2d 499 (1992). The entirety of GM’s
allegations regarding AB’s representations all relate to future promises. A party’s “intention
must be gathered not from what a party now says he then thought but from the contract itself.”
Fletcher v Bd of Ed of Sch Dist Fractional No 5, 323 Mich 343, 348; 35 NW2d 177 (1948)
(citation and punctuation omitted). By definition, all contract negotiations occur before a
contract is formed. Under the reasoning of the majority, parole evidence of any statement made
prior to the signing of a contract and related to the contract would be admissible to support an
action in fraud regardless of what terms are included in a written contract. As argued by
defendants, I agree that this would turn contract law on its head, render the UCC meaningless,
and cause contract law to “drown in a sea of tort.” Neibarger, supra at 531 (citation omitted).
What GM asserts amounts to fraudulent inducement was actually GM’s unilateral
mistake of failing to include in a term in the CAP that GM later realized was critical. This Court
does not consider a unilateral mistake sufficient to modify a previously negotiated agreement.
Hilley v Hilley, 140 Mich App 581, 585-586; 364 NW2d 750 (1985). At all times, GM was free
to guard against any potential or perceived economic risk of defendants’ failure to upfit the
vehicles by including a provision in the CAP. Defendants cannot be held liable for GM’s failure
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to do so.3
The trial court did not err in granting defendants’ motion for summary disposition on
GM’s claim of fraudulent inducement. The language of the CAP is straightforward,
unambiguous and clearly falls within the scope of the UCC and the economic loss doctrine. I
would affirm.
/s/ Kirsten Frank Kelly
3
The policy behind the economic loss doctrine “ ‘encourages parties to negotiate economic risks
through warranty provisions and price’ ” and “ ‘shield[s] a defendant from unlimited liability for
all economic consequences of a negligent act, particularly in a commercial setting, thus keeping
the risk of liability reasonably calculable.’ ” Huron Tool, supra at 372 (citations omitted).
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