CRAIG BROWN V INDIANA BUILDING SYSTEMS LLC
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STATE OF MICHIGAN
COURT OF APPEALS
CRAIG BROWN and LYNETTE MYERSBROWN,
UNPUBLISHED
June 29, 2010
Plaintiffs-Appellants,
v
No. 289102
Midland Circuit Court
LC No. 06-001398-NO
INDIANA BUILDING SYSTEMS LLC, doing
business as HOLLY PARK MANUFACTURER
and PLEASANT STREET HOMES, and ROYAL
MORTGAGE INC and BORROWERS
NETWORK LLC and LORRIE GLASSFORD,
Defendant-Appellees.
Before: K. F. KELLY, P.J., and JANSEN and ZAHRA, JJ.
PER CURIAM.
Plaintiffs Craig Brown and Lynette Meyers-Brown appeal as of right an order granting
defendant Indiana Building Systems, doing business as Holly Park Manufacturer and Pleasant
Street Homes (Indiana Building) summary disposition. Plaintiffs also challenge an order issued
by the circuit court granting defendants Royal Mortgage Inc (Royal Mortgage), Borrowers
Network LLC (Borrowers Network) and Lorrie Glassford (Glassford) summary disposition. We
affirm.
I. BASIC FACTS AND PROCEDURE
Indiana Building manufactured a home, under the Holly Park product line, and sold it to
Paul Brown1 and Eileen Weimer through an authorized dealer, Chuck’s Reliable Mobile Homes
and Service (Chuck’s Reliable). Indiana Building transported the home from its Indiana factory
to Oil City, Michigan, where it was installed. Royal Mortgage financed the sale and secured a
mortgage on the subject property. Plaintiffs submitted an affidavit by Paul Brown averring that
he moved into the house around October 2001. He averred that after living several months in the
1
Paul Brown is not related to plaintiff Craig Brown.
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home he began to notice problems. Specifically, he averred that “[t]he floor in the utility room
started to dip and in the kitchen, the floor started to drop and the ceiling started to crack.” He
further averred that the home was under warranty and that he requested the problems be fixed.
He specifically averred that he mentioned the problems with the house to Glassford, an employee
of Royal mortgage, “but she did not seem to care.” Paul Brown also averred that while living in
the home he “was getting headaches and felt tired a lot, but . . . thought it was from the stress I
was going through at the time.” However, Paul Brown and Eileen Weimer soon defaulted on the
mortgage and executed a deed of foreclosure on September 18, 2002.
There is no dispute that the home was not winterized the winter of 2002-2003, and the
electricity was turned off on November 26, 2002. Defendant presented evidence that in March
2003, Jeff Begley, an employee of Chuck’s Reliable, inspected the home on behalf of Royal
Mortgage. He averred “there was no heat in the home and the plumbing in the house was frozen
and that I suspected there was quite a bit of plumbing damage.” He indicated that he reported
this condition to Royal Mortgage and explained that the utilities would have to be turned on to
assess the damage, but that Royal Mortgage did not further contact him on the matter.
On August 14, 2003, Craig Brown entered a land contract with Royal to purchase the
home for $96,000. Glassford executed the land contract on behalf of Royal. In connection with
the sale, Glassford executed a seller’s disclosure statement that indicated she had “never lived”
in the home and that it was “unknown, whether there was “settling, flooding, drainage, structural
or grading problems.”
In June 2004, Craig Brown reported damage from a water leak in the bathroom to his
home insurer, Farm Bureau. Farm Bureau sent a licensed professional engineer, Chad Zielinski,
to investigate the insurance claim. After a re-investigation, Zielinski reported:
At the time of the re-inspection the washer was removed from its original
location and the lines were disconnected. The access panel was still in position.
The panel was removed for inspection of the supply and drain lines in the wall
cavity. Mold, water stains, and black discolorations were on the inside of the
drywall and wall framing. The washer was hooked back up and operated. During
the draining of the washer, the water was running down the drain line and
saturating the building materials. The vent cap on top of the drain for the washer
was not installed. It was sitting up top of the drain line.
***
Mold, black discoloration, and water stains were observed on the subfloor and
floor joists in the area around the washer and drier [sic]. The subfloor is poorly
deteriorated and in some area starting to decay. At the time of the inspection,
condensation was observed on the underside of the subfloor in this area. The
subfloor is severely warped and sagging. The moisture content of the subfloor
was recorded at 100%. A significant amount of moisture was observed on the
subfloor in the vicinity of the drain line and supply lines feeding the washer and
drier.
Zielinski indicated that,
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“[t]he second leak has occurred directly adjacent to the washer and dryer. The
leak is due to an improperly installed vent on the drain line. The vent is
disconnected and is sitting on top of the drain line. As the washer drains, water
discharges from the drain line saturating the building materials. Based on the
level of deterioration and amount of mold, indicates [sic] that the problem has
been ongoing for several years. As the vapor barrier in the crawlspace has been
removed, the subfloor is highly susceptible to water damages due to the excessive
moisture in the crawlspace.
In a November 9, 2006 supplemental report, Zielinski stated:
Based on our recent telephone conversation and my original report, the water
damage in the kitchen and laundry room was due to water leaking from the drain
line in the wall cavity adjacent to the washing machine. The vent cap was not
properly attached to the drain line. When I removed the access panel to the
plumbing and drain lines, the vent cap was lying on its side, on top of the drain
line. This condition allowed a small amount of water to discharge from the open
drain line during operation of the washing machine. The mold and water damage
in the wall cavity was consistent with long-term leakage, indicating that the vent
cap had been loose for several years. The vent cap—was not handled, nor was the
washing machine and access panel re-installed. The water damage in the kitchen
and laundry room occurred on the north half of the marriage line and is unrelated
to the water damage from the plumbing leak on the shower enclosure, which is
located on the south half.
Farm Bureau denied the insurance claim in part stating:
“It is the position of Farm Bureau that any mold remediation and/or significant
damage to the structure was the result of a faulty and defective construction of
this home by the manufacturer. It is clear that there was a defect in the area of the
utility room which permitted and allowed for continuous seepage and discharge of
water from washer line.
Plaintiff presented testimony from Craig Brown that Farm Bureau advised him to remove wet
insulation and the vapor barrier under the home, which he did. Craig Brown testified that he
soon afterwards became sick and went to the hospital complaining of difficulty breathing, a
swollen face, and watering eyes. He claims he was told at the hospital not to return to the home.
Craig Brown defaulted on the land contract, and after several proceedings, an order of
“Judgment of Possession after Land Contract Forfeiture” was entered that provided Craig Brown
until June 14, 2005 to pay $9,920.40. He did not pay and Royal Mortgage gained title to the
subject property.
On November 27, 2006, plaintiffs, acting pro se, filed a complaint against Indiana
Building. The complaint alleged Indiana Building “failed to due [sic] their duty as a
Manufacturer Business, by not inspecting their homes before sending them out to the public,”
and Indiana Building “failed to install the water line vent in the wall.” Plaintiffs sought damages
for structural damage to the home and Craig sought damages for personal injury, citing
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“permanent mold in lungs,” “allergies,” “breathing difficulty” and “rashes on legs.” Lynette
Meyers-Brown also claimed damages for loss of consortium.
On March 21, 2007, plaintiffs sought to amend their complaint to add Royal Mortgage,
Borrowers Network and Glassford as defendants, alleging misrepresentation. Royal Mortgage,
Borrowers Network and Glassford answered the motion, maintaining the plaintiffs had executed
the sale of the home, “as is,” and that a seller disclosure form was not required because the home
had been obtained through a deed in lieu of forfeiture.
On June 11, 2007, plaintiffs, through an attorney, filed a more detailed amended
complaint alleging Indiana Building failed to properly secure an air vent cap (vent cap) atop the
dishwasher drain line, which was located behind a wall. Plaintiffs alleged that Royal Mortgage,
Borrowers Network and Glassford knew or should have known of the faulty vent cap and
disclosed it to Craig Brown. The complaint alleged two counts: product liability against Indiana
Building and silent fraud against Royal Mortgage, Borrowers Network and Glassford.
Royal Mortgage, Borrowers Network and Glassford moved for summary disposition.
They argued that they had no duty to make disclosures in connection with the sale of the home.
Indiana Building also moved for summary disposition, and in its supporting brief, arguing that
plaintiffs could not show that there was evidence of mold or plumbing leaks at the time the home
left the factory. Indiana Building noted that, upon its installation, the home had been inspected
several times and passed every plumbing test. Indiana Building argued that Royal Mortgage
“altered” the home by failing to winterize it and that Royal Mortgage’s actions posed an
intervening cause.
On November 13, 2007, Royal Mortgage, Borrowers Network and Glassford filed a
response to Indiana Building’s motion for summary disposition. They argued that “[i]t is
absolutely egregious that [Indiana Building] would make accusations against Royal that it would
allow the ‘home to lie through harsh winter weather without utilities and winterization, allowing
the home’s plumbing to freeze, and then to sell the home ‘as is’ to an owner who would allow
the plumbing leak without repair until the home had developed mold’ when all the reports
concluded that the damage was caused by . . . a leak in the shower on the south half of the house
due to a broken fitting.” Citing Zielinski’s report, Royal Mortgage, Borrowers Network and
Glassford maintained that any water damage resulted from an improperly installed vent cap.
On November 16, 2007, plaintiffs responded to Royal Mortgage, Borrowers Network and
Glassford’s motion for summary disposition, maintaining that Glassford had actual knowledge
that the floor in the utility room and kitchen were sagging and that the kitchen ceiling was
cracking. Plaintiffs noted that because Glassford only disclosed that “seller never lived at
property,” she withheld knowledge of a defect constituting fraud. On November 21, 2007,
plaintiffs responded to Indiana Building’s motion for summary disposition, arguing that the vent
cap was not installed at the factory. Plaintiffs attached an affidavit from a licensed plumber, Carl
Jenkins, averring that “[I]f the cap were installed properly, you should be able to see the seal tape
impressions on the cap, there are none.” He further averred that winterizing would not affect the
vent cap because the dishwasher drainpipe would not have contained water.
On November 29, 2007, Indiana Building responded that the plumbing had been tested,
and further stated that the dryer improperly vented below the home trapping accumulated
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moisture. Indiana Building further claimed that the vent cap would have released water
regardless of installation, that no seal tape impressions were fond because petroleum jelly was
used, that the vent cap would have fallen during transportation, and noted that Jenkins’ affidavit
was not sworn.
After a hearing, the circuit court held, in regard to plaintiffs’ product liability claim, that
“the mere fact that leaks were not found at the time of the issuance of the plumbing permit in
2001 does not, when viewed in the light most favorable to the Browns, preclude a finding that
the plumbing system, and the vent cap in particular, was nonetheless defective by virtue of either
having been improperly installed or not installed at all.” The court did not address Indiana
Building additional assertions. In regard to plaintiffs’ silent fraud claim, the court held there was
no basis for imposing personal liability on Glassford because she was an agent of Royal
Mortgage acting within her authority, and that Borrowers Network could not be liable because it
did not exist at the time of alleged fraud. The court further held that Royal Mortgage was not
liable because it was not required to make disclosures under the Seller’s Disclosure Act (SDA),
MCL 565.951 et seq., and that the Browns could have discovered any defect through an
inspection. The court denied Indiana Building’s motion for summary disposition and granted
summary disposition to Royal Mortgage, Borrowers Network and Glassford.
Following further discovery Indiana Building filed a second motion for summary
disposition in August 2008.2 Plaintiffs, now again pro se, filed a motion opposing summary
disposition.
At the September 26, 2008 hearing, Royal Mortgage argued that plaintiffs could not
establish that the vent cap was not installed when it left the factory. Royal Mortgage attached a
second affidavit from Zielinski indicting, “I cannot state that the position of the air admittance
valve, when I saw it, was like that when the home left the home manufacturer’s facility.” The
circuit court indicated to plaintiffs that the picture of the vent cap on top of the pipe “is not going
to demonstrate to a jury that it was defective when it left Indiana Building Systems.” The court
asked, “[w]hat evidence are you going to have should this matter proceed to trial that it was
defective when it left the control of Indiana Building Sytems?” In response, plaintiffs indicated
that “a statement from Michael Smith which [sic] was hired by Midland County. That is the one
that actually replaced the vent cap.” Plaintiffs then alleged “in [Smith’s] statement, he says there
was never a cap on it when it left Indiana Buildings Systems in shipment.” However, plaintiffs
admitted that Smith’s statement was not in the lower court file, but claimed it was “[a]t my house
in four boxes of paperwork.” The court then allowed plaintiffs to retrieve the Smith’s statement
and return to court. Lynette Brown went home and returned to court unable to find Smith’s
statement. In an October 14, 2008 order, the court granted Indiana’ Building’s motion for
summary disposition and dismissed the case with prejudice.
That same day, October 14, 2008, plaintiffs filed a motion for reconsideration. Plaintiffs
attached an affidavit from Michael Smith, a licensed mold remediation specialist, in which he
2
This writer has not located this motion in the lower court record, only “defendants exhibits A –
M in support of its second motion for summary disposition.”
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states that “[d]uring my investigation, it appeared the leak started from the washer and dryer
area. It is my professional opinion upon examining the original plumbing; piping the cap for the
washing machine vent line, sand pipe had never been installed and was missing causing damage
to the structure.” Indiana Building responded, noting that Michael Smith’s “affidavit” was dated
after the summary disposition hearing, and did not meet the formalities of an affidavit; i.e., no
confirmation by oath and not properly notarized. Further, Indiana Building noted that Michael
Smith had not seen the home before June 2008 and could not testify that the home left the
manufacturer in defective condition in 2001. Also, Indiana Building pointed out that Smith was
not an expert. In a supplemental motion to the response to plaintiffs’ motion for reconsideration,
Indiana Building attached an affidavit from Michael Smith averring that he “signed [the original]
affidavit prior to reading it in its entirety,” and that he “asked that changes be made to certain
language contained in the document, which changes do not appear.” Smith further averred that
“I have no information as to how that drain pipe came to be in that condition which was missing
a cap,” and that “I am not qualified to determine whether a cap had been on that pipe at any time,
nor did I perform any scientific tests or investigation to make that determination.”
At the November 7, 2008 hearing, the circuit court highlighted the second affidavit
executed by Michael Smith. Plaintiffs asserted that Smith had only signed the affidavit because
Indiana Building had threatened him with contempt for failing to attend a deposition. The court
rejected plaintiffs’ claim and denied plaintiffs’ motion for reconsideration. This appeal ensued.
II. ANALYSIS
A. STANDARD OF REVIEW
On appeal, a court’s decision on a motion for summary disposition is reviewed de novo.
Latham v Barton Malow Co, 480 Mich 105, 111; 746 NW2d 868 (2008). A motion under MCR
2.116(C)(10) tests the factual support for a claim. When reviewing a motion under MCR
2.116(C)(10), a court must examine the documentary evidence presented and, draw all
reasonable inferences in favor of the nonmoving party, and determine whether a genuine issue of
material fact exists. Quinto v Cross & Peters Co, 451 Mich 358, 362; 547 NW2d 314 (1996).
The nonmoving party has the burden of establishing through affidavits, depositions, admissions,
or other documentary evidence that a genuine issue of disputed fact exists. Id. A question of
fact exists when reasonable minds can differ on the conclusions to be drawn from the evidence.
Glittenberg v Doughboy Recreational Industries (On Rehearing), 441 Mich 379, 398-399; 491
NW2d 208 (1992). Only “the substantively admissible evidence actually proffered” may be
considered. Maiden v Rozwood, 461 Mich 109, 121; 597 NW2d 817 (1999); see also MCR
2.116(G)(6). Review is limited to the evidence that had been presented to the court at the time
the motion was decided. Innovative Adult Foster Care, Inc v Ragin, 285 Mich App 466, 476;
___ NW2d ___ (2009). Summary disposition is properly granted when there are no genuine
issues of material fact and the moving party is entitled to judgment as a matter of law. Maiden,
461 Mich at 120.
B. PRODUCT LIABILITY THEORY
We conclude that the circuit court did not err in granting Indiana Building summary
disposition because plaintiffs failed to submit admissible evidence to establish that the vent cap
was improperly installed at the time the home left Indiana Building’s control.
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MCL 600.2946 provides, in part, that,
[i]n a product liability action brought against a manufacturer or seller for
harm allegedly caused by a production defect, the manufacturer or seller is not
liable unless the plaintiff establishes that the product was not reasonably safe at
the time the specific unit of the product left the control of the manufacturer or
seller . . .
Thus, plaintiff must prove that (1) the product was not reasonably safe when it left the control of
the manufacturer or seller, and (2) “a practical and technically feasible alternative” design
“would have prevented the harm without significantly impairing the usefulness or desirability of
the product to users and without creating equal or greater risk of harm to others.” Here, the issue
on appeal is limited to whether the product was not reasonably safe when it left the control of the
manufacturer or seller.
First, we note that much of the evidence plaintiffs presented was not admissible. In
particular, plaintiffs, acting pro se, proffered statements from Paul Brown, Michael Smith, Carl
Jenkins (a plumber) and Jerry Stockton (a mobile home dealer who also sets up and repairs
mobile homes), in so-called affidavits. However, “[f]or a document to constitute a ‘valid
affidavit,’ it must be: ‘(1) a written or printed declaration or statement of facts, (2) made
voluntarily, and (3) confirmed by the oath or affirmation of the party making it, taken before a
person having authority to administer such oath or affirmation.’” Detroit Leasing Co v City of
Detroit, 269 Mich App 233, 236; 713 NW2d 269 (2005), quoting Holmes v Michigan Capital
Medical Ctr, 242 Mich App 703, 711; 620 NW2d 319 (2000).
Here, the document signed by Michael Smith includes a “notary signature,” by Melinda
L. Hervert, but there is no indication that Hervert is a notary public, i.e., none of the formalities
that would indicate the county in which she was authorized and nothing indicating the date on
which her commission expires. The document also does not indicate that a notary public
“acknowledged” that the document was executed before him/her.3 The documents signed by
Jerry Stockton and Carl Jenkins contain no mention of a notary at all. And although the alleged
“affidavit statement” of Paul Brown appears notarized, there is no indication that the statement
3
Further, Michael Smith’s affidavit is not part of the lower court record. Generally, this Court’s
review is limited to the record of the trial court. In re Rudell Est, 286 Mich App 391, 404-405;
780 NW2d 884 (2009); Amorello v Monsanto Corp, 186 Mich App 324, 330; 463 NW2d 487
(1990). “In ruling on a motion for summary disposition, a court considers the evidence then
available to it.” Quinto, 451 Mich 366 n 5, quoting Apfelblat v Nat’l Bank Wyandotte-Taylor,
158 Mich App 258, 263; 404 NW2d 725 (1987). Here, Smith’s affidavit was not before the
circuit court when it decided the motion for summary disposition. The court even extended
plaintiffs an opportunity to retrieve Michael Smith’s affidavit and present it to the court.
Plaintiffs returned without the affidavit. Further, as Indiana Building notes, the affidavit
submitted at the reconsideration hearing is dated after the summary disposition hearing, which
proves the affidavit was not in existence at the time of the summary disposition hearing. Thus,
this Court need not consider Michael Smith’s affidavit as part of the lower court record.
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was taken under oath or affirmation. The document merely provides that “I, Paul Brown, have
given the statement above to the best of my ability.” This statement is not an oath nor does it
indicate that Paul Brown “solemnly and sincerely” affirmed the statement “under the pains and
penalties of perjury.” MCL 600.1434. Thus, the only valid affidavit relied on by plaintiffs
appears to be Chad Zielinski’s affidavit. Detroit Leasing Co, 269 Mich App at 236.
Further, several of plaintiffs’ contentions are not supported by admissible evidence. In
particular, plaintiffs contend that summary disposition was improperly granted because the vent
cap was “more or less in a sealed package.” Plaintiffs assert the that vent cap was “concealed
between the house frame and the outer wall covering, above the access panel to the plumbing in
the utility room.” However, neither Zielinski’s initial report or his supplemental report indicates
that the vent cap was “above the access panel.” Zielinski’s initial report states that “[t]he vent
cap on top of the drain line for the washer was not installed. It was sitting on top of the drain
line.” The supplemental report states that [w]hen I removed the access panel to the plumbing
and drain lines, the vent cap was lying on its side, on top of the drain.” There is also no mention
in Zielinski’s affidavits that the vent cap was inaccessible. On the other hand, Zielinski’s later
affidavit expressly indicates that “[a]nyone who removes the access panel can reach the drain
line and unscrew the air admittance valve.” Although plaintiffs maintain that the vent cap was
hidden or located above the access panel, there is no evidence to support this assertion. Rather,
the picture depicts the vent cap as behind the access panel. Plaintiffs have not established that
the vent cap was inaccessible.4
Plaintiffs main contention is that there is circumstantial evidence that the vent cap was
not installed in the factory; specifically, that “Zielinski concluded in 2004 that the cap had been
loose for several years,” because “the mold formation and water damage were consistent with a
leak that had been ongoing for several years.” Plaintiffs argue that “Zielinski’s 2004 conclusion
of long term leakage, considered in conjunction with Paul Brown’s complaints in 2001 of a
sagging floor in the area of the leak, certainly permits a reasonable inference that the cap was
never properly installed by [Indiana Building] and that the pipe stand has been leaking ever since
the washer was first used.”
The only evidence that arguably supports plaintiffs’ claim that the vent cap was
improperly installed at the time the home left Indiana Building’s control is Zielinski’s reports.
The initial report stated that, “[b]ased on the level of deterioration and amount of mold, indicates
that the problem has been ongoing for several years.” The supplemental report similarly
indicated that, “[t]he mold and water damage in the wall cavity was consistent with long-term
leakage, indicating that the vent cap had been loose for several years.”
4
Plaintiffs did provide the above mentioned so-called affidavit from Jerry Stockton, which states
that “[t]he drain pipe/air vent is about 3 to 5 feet up the wall, after the plumbing access panel is
removed. For a person to reach their hand up into the wall to remove that cap, they must have
rubber arms and also be very strong. It is not possible.” However, as discussed above,
Stockton’s statement is not notarized and thus not an admissible affidavit.
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We conclude that while Zielinski’s reports may be consistent with plaintiffs’ theory, they
do not establish that the vent cap was improperly installed when it left Indiana Building’s
control. The lack of evidence establishing that the vent cap was improperly installed when it left
Indiana Building is fatal to plaintiff’s claim:
“As a theory of causation, a conjecture is simply an explanation consistent
with known facts or conditions, but not deducible from them as a reasonable
inference. There may be 2 or more plausible explanations as to how an event
happened or what produced it; yet, if the evidence is without selective application
to any 1 of them, they remain conjectures only. On the other hand, if there is
evidence which points to any 1 theory of causation, indicating a logical sequence
of cause and effect, then there is a juridical basis for such a determination,
notwithstanding the existence of other plausible theories with or without support
in the evidence.” [Skinner v Square D Co, 445 Mich 153, 162-163; 516 NW2d
475 (1994) (citation omitted).]
Further,
“The plaintiff must introduce evidence which affords a reasonable basis for the
conclusion that it is more likely than not that the conduct of the defendant was a
cause in fact of the result. A mere possibility of such causation is not enough; and
when the matter remains one of pure speculation or conjecture, or the
probabilities are at best evenly balanced, it becomes the duty of the court to direct
a verdict for the defendant.” [Id. at 165 (citations omitted).]
Plaintiffs have merely presented a mere possibility that the vent cap was improperly
installed when it left the factory. Reports in 2001 of “sagging floor in the area of the leak” do
not establish that there was actual water damage at that time. A sagging floor can be indicative
of many circumstances. Again, speculation and conjecture are insufficient to establish a question
of fact. Ghaffari v Turner Constr Co (On Remand), 268 Mich App 460, 464; 708 NW2d 448
(2005); Detroit v GMC, 233 Mich App 132, 139; 592 NW2d 732 (1998).
Further, Zielinski’s assertion that the leak had been ongoing for several years based on
mold growth is likewise only consistent with theory that the vent cap was not installed when the
home left the factory. As the circuit court noted, “there are million things that could . . . have
happened to it after it left their control.” Moreover, there is no evidence that Zielinski is even
qualified to determine “based on deterioration and amount of mold” that the leak had been
ongoing for several years. Zielinski was not qualified as an expert in this area and there is no
indication that a “licensed professional engineer” is qualified to make this determination. While
plaintiffs’ insurance company may have accepted Zielinski’s assessment for purposes of an
insurance claim, courts of law are not bound to accept that assessment. The court properly
granted summary disposition in favor of Indiana Building.
C. SILENT FRAUD
The circuit court also properly granted Royal Mortgage, Borrowers Network and
Glassford summary disposition.
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Silent fraud or fraudulent concealment has also long been recognized in
Michigan. Fraud arising from the suppression of the truth is as prejudicial as that
which springs from the assertion of a falsehood, and courts have not hesitated to
sustain recoveries where the truth has been suppressed with the intent to defraud.
But for the suppression of information to constitute silent fraud there must exist a
legal or equitable duty of disclosure. Further, establishing silent fraud requires
more than proving that the seller was aware of and failed to disclose a hidden
defect. Instead, to prove a claim of silent fraud, a plaintiff must show some type
of representation by words or actions that was false or misleading and was
intended to deceive. [Roberts v Saffell, 280 Mich App 397, 404; 760 NW2d 715
(2008) (citations and quotations omitted).]
The circuit court dismissed the instant claim of silent fraud on the basis that Royal
Mortgage, Borrowers Network and Glassford did not have a legal duty to disclose.
In regard to a legal duty to disclose, MCL 565.952 provides that:
The seller disclosure requirements of sections 4 to 13 apply to the transfer of any
interest in real estate consisting of not less than 1 or more than 4 residential
dwelling units, whether by sale, exchange, installment land contract, lease with an
option to purchase, any other option to purchase, or ground lease coupled with
proposed improvements by the purchaser or tenant, or a transfer of stock or an
interest in a residential cooperative.
However, MCL 565.953, provides that:
The seller disclosure requirements of sections 4 to 13 do not apply to any of the
following:
***
(c) Transfers by a sale under a power of sale or any foreclosure sale under a
decree of foreclosure after default in an obligation secured by a mortgage or deed
of trust or secured by any other instrument containing a power of sale, or transfers
by a mortgagee or a beneficiary under a deed of trust who has acquired the real
property at a sale conducted pursuant to a power of sale under a mortgage or deed
of trust or a sale pursuant to a decree of foreclosure or has acquired the real
property by a deed in lieu of foreclosure.
Here, there is no dispute that Royal Mortgage, a mortgagee, acquired the real property by a
warranty “deed in lieu of foreclosure. The SDA expressly “does not apply to” . . . “transfers by a
mortgagee” that “acquired the real property by a deed in lieu of foreclosure.” Thus, the court
correctly held that Royal Mortgage, Borrowers Network and Glassford did not have a legal duty
of disclosure in connection with the sale of the home.
Despite defendants’ compliance with the SDA, plaintiffs nonetheless maintain that it may
maintain its silent fraud claim pursuant to MCL 565.961, which provides that, “[t]he
specification of items for disclosure in this act does not limit or abridge any obligation for
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disclosure created by any other provision of law regarding fraud, misrepresentation, or deceit in
transfer transactions.” Here, although the phrase, “provision of law” likely only refers to enacted
laws, nonetheless address plaintiffs’ assertion that MCL 565.961 does not limit or abridge
plaintiffs’ silent fraud common law cause of action. Since there is no legal duty to disclose
under the SDA, the only other potential duty to disclose is equitable.
Here, plaintiffs purchased the home “as is,” and thus cannot maintain an equitable claim.
The circuit court properly granted summary disposition to Royal Mortgage, Borrowers Network
and Glassford.
Affirmed. Defendants may tax costs.
/s/ Kirsten Frank Kelly
/s/ Kathleen Jansen
/s/ Brian K. Zahra
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