S & M GOLDEN INC V ALARM MGT II LLC
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STATE OF MICHIGAN
COURT OF APPEALS
S & M GOLDEN, INC., d/b/a FOODLANE
MARKET,
UNPUBLISHED
January 19, 2006
Plaintiff-Appellant,
v
No. 263722
Wayne Circuit Court
LC No. 04-430804-CZ
ALARM MANAGEMENT II, L.L.C., d/b/a
SONITROL TRI COUNTY,
Defendant-Appellee.
Before: Cavanagh, P.J., and Cooper and Donofrio, JJ.
PER CURIAM.
Plaintiff S & M Golden, Inc. appeals as of right the trial court’s order granting defendant
Alarm Management II’s motion for summary disposition pursuant to MCR 2.116(C)(10) in this
action for breach of contract and gross negligence. We affirm.
I. Facts and Procedural History
Plaintiff contracted with defendant to provide security monitoring services at its place of
business, Foodlane Market. In exchange for a $60 monthly fee, defendant agreed to monitor
plaintiff’s security system and, “when warranted,” to notify the police if the system detected an
unauthorized entry or other emergency. The parties’ service contract included a conspicuous
“limitations of damages” provision. That provision stated, in relevant part, that defendant “is not
an insurer and that insurance, if any, covering personal injury and property loss or damage . . .
shall be obtained by [plaintiff], at [plaintiff’s] sole expense.” The contract also included a
liquidated damages clause, which limited plaintiff’s monetary damages in the event that
defendant was found liable for any loss incurred:
CLIENT UNDERSTANDS AND AGREES THAT IF DEALER SHOULD BE
FOUND LIABLE FOR ANY LOSS OR DAMAGE DUE FROM A FAILURE
TO PERFORM ANY OF ITS OBLIGATIONS . . . DEALER’S LIABILITY
SHALL BE LIMITED TO A SUM EQUAL TO THE TOTAL OF ONEHALF YEAR’S MONITORING PAYMENTS, OR FIVE HUNDRED
DOLLARS ($500) WHICHEVER IS THE LESSER, AS LIQUIDATED
DAMAGES . . . AND THIS LIABILITY SHALL BE EXCLUSIVE AND
SHALL APPLY IF LOSS OR DAMAGE, IRRESPECTIVE OF CAUSE OR
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ORIGIN, RESULTS DIRECTLY OR INDIRECTLY TO PERSONS OR
PROPERTY FROM PERFORMANCE OR NON-PERFORMANCE OF ANY
OF DEALER’S OBLIGATIONS OR FROM NEGLIGENCE, ACTIVE OR
OTHERWISE OF DEALER, ITS EMPLOYEES OR AGENTS.[1]
At 4:53 a.m. on June 22, 2004, the security system at plaintiff’s store detected an
unauthorized entry. The console operator at defendant’s headquarters immediately notified the
local police department and plaintiff’s designated representative. The officers who responded to
the scene informed the console operator that there was no sign of forced entry. Therefore, the
operator determined that the signal was only a false alarm. The following night, the same
console operator received an alarm signal that plaintiff’s system had again detected an
unauthorized entry. The operator, acting alone, decided that this was another false alarm and, as
a result, failed to contact law enforcement or plaintiff’s representative. In the morning, one of
plaintiff’s employees discovered that Foodlane Market had, in fact, been burglarized during the
night. As a result, plaintiff suffered $60,000 in damages.
Defendant admitted that its operator violated company policy by failing to notify the
proper authorities of the alarm and offered plaintiff $360, the maximum liquidated damages for
its loss. Plaintiff refused this offer and filed suit. Plaintiff contended that the liquidated damages
clause was inapplicable under the circumstances, as the conduct of defendant’s console operator
amounted to gross negligence. Although plaintiff had served notice of its intent to depose the
chief executive officer of defendant’s corporation, the trial court granted defendant’s motion for
summary disposition prior to the close of discovery. The trial court determined based on the
pleadings that the plaintiff could not create a question of fact on the issue of gross negligence.
Accordingly, the court determined that plaintiff’s recovery was limited by the contract and
dismissed its claims against defendant.
II. Summary Disposition
Plaintiff contends that the trial court improperly, and prematurely, granted defendant’s
motion for summary disposition. While defendant’s employee clearly should have notified the
police of the alarm, we must agree with the trial court that plaintiff cannot support its claim of
gross negligence.
We review a lower court’s determination regarding a motion for summary disposition de
novo. A motion under MCR 2.116(C)(10) tests the factual support of a plaintiff’s claim.3 “In
2
1
Plaintiff does not contend that this contract is unenforceable. In fact, in St Paul Fire & Marine
Ins Co v Guardian Alarm Co of Michigan, 115 Mich App 278; 320 NW2d 244 (1982), this Court
found an identical limitations of damages provision to be enforceable against the client of an
alarm monitoring company. See also USAA Group v Universal Alarms, Inc, 158 Mich App 633;
405 NW2d 146 (1987).
2
MacDonald v PKT, Inc, 464 Mich 322, 332; 628 NW2d 33 (2001).
3
Auto-Owners Ins Co v Allied Adjusters & Appraisers, Inc, 238 Mich App 394, 396-397; 605
NW2d 685 (1999).
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reviewing a motion for summary disposition brought under MCR 2.116(C)(10), we consider the
affidavits, pleadings, depositions, admissions, or any other documentary evidence submitted in
[the] light most favorable to the nonmoving party to decide whether a genuine issue of material
fact exists.”4 Summary disposition is appropriate only if there are no genuine issues of material
fact, and the moving party is entitled to judgment as a matter of law.5 As a general rule, a trial
court should only grant a party’s motion for summary disposition following the completion of
discovery. However, dismissal may be appropriate earlier if “there is no disputed issue [of fact]
before the court or if further discovery does not stand a fair chance of finding factual support for
the nonmoving party.”6 The nonmoving party bears the burden of producing “‘some
independent evidence that a factual dispute exists.’”7
It is undisputed that defendant breached its contract with plaintiff. Defendant admitted
that its agent violated company policy and offered plaintiff the applicable liquidated damages
amount for its loss. Contrary to plaintiff’s assertion, however, its damages are limited by the
parties’ contract. While a party may not contractually limit its liability for gross negligence as a
matter of public policy, it may freely limit its liability for ordinary negligence.8 To establish a
claim of ordinary negligence, a plaintiff must show: (1) that the defendant owed the plaintiff a
duty; (2) that the defendant breached that duty; (3) causation; and (4) damages.9 To establish
gross negligence, a plaintiff must show that the defendant engaged in “‘conduct so reckless as to
demonstrate a substantial lack of concern for whether an injury results.’”10 Evidence of ordinary
negligence will not suffice to create a material question of fact concerning gross negligence.11
Defendant was clearly negligent. Its employee breached defendant’s contractual duty to
notify the police when the alarm system detected a break-in, resulting in a significant loss to
plaintiff. However, plaintiff has not established, and could not establish by further discovery,
4
Singer v American States Ins, 245 Mich App 370, 374; 631 NW2d 34 (2001).
5
MacDonald, supra at 332.
6
VanVorous v Burmeister, 262 Mich App 467, 476-477; 687 NW2d 132 (2004).
7
Id. at 477, quoting Michigan Nat’l Bank v Metro Institutional Food Service, Inc, 198 Mich App
236, 241; 497 NW2d 225 (1993).
8
See Xu v Gay, 257 Mich App 263, 269; 668 NW2d 166 (2003); Universal Gym Equipment, Inc
v Vic Tanny Int’l, Inc, 207 Mich App 364, 367-368; 526 NW2d 5 (1994), vacated in part on other
grounds 209 Mich App 511; 531 NW2d 719 (1995).
9
Henry v Dow Chemical Co, 473 Mich 63, 71-72; 701 NW2d 684 (2005).
10
Xu, supra at 269, quoting Jennings v Southwood, 446 Mich 125, 136; 521 NW2d 230 (1994).
In Xu, this Court extended the statutory definition of “gross negligence” found in several
immunity statutes and the standard jury instructions, M Civ JI 14.10, to a case involving a
contractual waiver of liability. This Court reasoned that a contractual waiver of liability, like an
immunity statute, “serves to insulate against ordinary negligence, but not gross negligence.” Xu,
supra at 269.
11
Maiden v Rozwood, 461 Mich 109, 122-123; 597 NW2d 817 (1999).
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that defendant’s conduct amounted to gross negligence. Defendant breached its duty on a single
occasion—one night after a purported false alarm at plaintiff’s store. This case is similar to this
Court’s opinion in USAA Group v Universal Alarms, Inc.12 In USAA Group, a private home was
destroyed by fire. The homeowner and his insurance company asserted that the alarm
monitoring company servicing the home was liable for the damages, either because the alarm
malfunctioned or because its agents failed to contact the proper authorities.13 This Court
enforced the liquidated damages clause in the parties’ contract against the homeowner.14 Under
these circumstances, plaintiff cannot establish that the operator’s conduct was so reckless as to
demonstrate a substantial lack of concern for whether an injury results. Accordingly, the trial
court properly determined that plaintiff’s recovery from defendant was limited to the remedy
provided by the contract’s liquidated damages clause.
Affirmed.
/s/ Mark J. Cavanagh
/s/ Jessica R. Cooper
/s/ Pat M. Donofrio
12
USAA Group, supra.
13
Id. at 635.
14
Id.
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