WHIPPERWILL & SWEETWATER LLC V AUTO OWNERS INS CO
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STATE OF MICHIGAN
COURT OF APPEALS
WHIPPERWILL & SWEETWATER, LLC.,
UNPUBLISHED
March 10, 2011
Plaintiff-Appellee,
v
No. 295467
Monroe Circuit Court
LC No. 08-025932-CK
AUTO OWNERS INSURANCE CO.,
Defendant,
and
IOTT INSURANCE AGENCY, INC. and
WILLIAM PALMER,
Defendants-Appellants.
Before: MURPHY, C.J., and STEPHENS and M. J. KELLY, JJ.
PER CURIAM.
Defendants Iott Insurance Agency, Inc. (Iott) and William Palmer appeal by leave
granted the trial court’s order denying in part their motion for summary disposition under MCR
2.116(C)(7) and MCR 2.116(C)(10). On appeal, Iott and Palmer argue in relevant part that
plaintiff Whipperwill & Sweetwater, LLC’s contract claim was in reality a claim premised on
negligence and, for that reason, was subject—at least—to the three-year period of limitations
applicable to claims to recover damages for injury to persons and property. We conclude that
Whipperwill’s contract claim sounded in negligence rather than contract and was subject to the
period of limitations applicable to claims seeking to recover damages for injury to persons or
property. Because the applicable period of limitations had passed, the trial court should have
granted Iott and Palmer’s motion for reconsideration of its decision to deny their earlier motion
for summary disposition. Accordingly, we reverse the trial court and remand for entry of
summary disposition in favor of Iott and Palmer.
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I. BASIC FACTS AND PROCEDURAL HISTORY
Whipperwill operated an auction gallery out of a building on Monroe Street in Monroe,
Michigan. Karl Kurtz testified at his deposition that he purchased Whipperwill from its prior
owner in 2003. Kurtz stated that he purchased the building for between “two and 300,000” and
purchased the business itself for “around 100,000.” The latter price included all the contents of
the building. Kurtz said that he formed Four Friends Land Group, LLC to own the building out
of which Whipperwill operated.
Kurtz said he contacted Palmer at the Iott agency to secure insurance for Whipperwill.
He met with Palmer at the building on Monroe to discuss his insurance needs. He specifically
requested “[r]eplacement coverage for everything that we had in the building including the
building.” Kurtz admitted that he did not request a specific amount of coverage for the building
and that, in order to determine the replacement value of the building and its contents, Palmer
would have had to conduct an investigation. He stated that he told Palmer that he wanted at least
$200,000 in coverage on the contents, but he assumed that Palmer independently determined the
total amount of contents coverage necessary to replace every item as new. Kurtz explained that,
to him, replacement coverage meant that the amount of insurance would be equal to the cost to
replace the building and every item in it without regard to the actual value of the item at the time
of the loss.
With Palmer’s help, Whipperwill secured a policy from Auto-Owners Insurance
Company (Auto-Owners). He renewed the policy in 2004. The renewed policy was effective
May 1, 2004 and lasted through May 1, 2005. The policy provided $300,000 for building loss,
$200,070 for contents, and $30,000 for lost business.
In March 2005, the building on Monroe caught fire and was destroyed along with all the
contents. In April 2005, Whipperwill received a copy of an adjuster’s report that indicated that
the cost to rebuild the building would be in excess of $820,000 and that the actual value of the
building was also greater than the coverage provided in the insurance. In June 2005,
Whipperwill also learned that the cost to replace the building’s contents would exceed $300,000
even though its insurance only provided for coverage of $200,070. Auto-Owners eventually paid
Whipperwill $300,00 for the building loss and $200,070 for the contents loss.
In August 2008, Whipperwill sued Auto-Owners, Iott and Palmer. Whipperwill alleged
that Auto-Owners breached the insurance contract and violated certain statutory provisions when
it refused to pay additional compensation under an inventory endorsement that provides for an
increase of 25% in contents coverage to cover temporary variations in inventory value.1
Whipperwill also alleged claims of negligence and breach of contract against Palmer and Iott.
Specifically, Whipperwill alleged—for both its negligence and contract claims—that Palmer and
Iott had a duty to properly advise Whipperwill about the coverage levels that should be
1
Whipperwill’s claims against Auto-Owners are not at issue in this appeal.
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purchased and breached that by advising Whipperwill to purchase “commercial insurance in
woefully inadequate amounts.”
In August 2009, Palmer and Iott moved for summary disposition under MCR 2.116(C)(7)
and (C)(10). Palmer and Iott argued that, because Whipperwill sued more than three years after
it suffered the fire loss and learned of the discrepancy between the coverage levels and the
replacement costs, its negligence claim was clearly untimely whether one applied a two year or
three year period of limitations. They also argued that Whipperwill’s contract claim was really a
claim premised on negligence and, even if it were not, there is no evidence that Whipperwill had
a contract with Palmer or Iott. As such, Palmer and Iott asked the trial court to dismiss
Whipperwill’s contract claim as untimely or because there was no material question of fact that
there was no contract between the parties. In response, Whipperwill conceded that its negligence
claim was untimely, but argued that it pleaded a valid contract claim. Specifically, it argued that
its application for insurance coverage was an express contract between Whipperwill, Palmer and
Iott. In the alternative, it argued that the application is evidence of an implied contract between
the parties or that the parties had an oral agreement based on Palmer’s promise to procure
replacement coverage for Whipperwill.
In October 2009, the trial court denied Palmer and Iott’s motion for summary disposition
in its entirety. Iott and Palmer then moved for reconsideration. In their motion for
reconsideration, Iott and Palmer noted that Whipperwill conceded that its negligence claim was
untimely and, on that basis, argued that the trial court erred when it denied their motion for
summary disposition as to that count. They also argued that the trial court committed a palpable
error when it denied their motion as to the contract claim for reasons that were similar to those
proffered in their motion for summary disposition.
In November 2009, the trial court denied Iott and Palmer’s motion for reconsideration.
Nevertheless, in December 2009, the trial court granted their motion for summary disposition in
part; it dismissed Whipperwill’s negligence claim as untimely.
Palmer and Iott then applied for leave to appeal the trial court’s decision to deny its
motion for reconsideration, which this Court granted. See Whipperwill & Sweetwater LLC v Iott,
unpublished order of the Court of Appeals, entered on February 1, 2010 (Docket No. 295467).
II. MOTION FOR RECONSIDERATION
A. STANDARDS OF REVIEW
On appeal, Iott and Palmer argue that the trial court erred when it denied their motion for
reconsideration. Specifically, they argue that the trial court committed a palpable error when it
denied their motion for summary disposition and, for that reason, should have granted their
motion for reconsideration. This Court reviews a trial court’s denial of a motion for
reconsideration for an abuse of discretion. Woods v SLB Property Mgt, LLC, 277 Mich App 622,
629; 750 NW2d 228 (2008). To the extent that this issue also involves the trial court’s decision
on a motion for summary disposition, this Court reviews de novo a trial court’s decision to grant
or deny a motion for summary disposition. Barnard Mfg Co, Inc v Gates Performance
Engineering, Inc, 285 Mich App 362, 369; 775 NW2d 618 (2009). Finally, this Court also
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reviews de novo the proper interpretation and application of statutes and court rules. Estes v
Titus, 481 Mich 573, 578-579, 751 NW2d 493 (2008).
B. THE MOTION FOR SUMMARY DISPOSITION
Iott and Palmer argue on appeal that the trial court erred when it denied their motion for
reconsideration because it palpably erred—in a variety of ways—when it denied their motion for
summary disposition. That is, Palmer and Iott’s argument with regard to their motion for
reconsideration necessarily depends on the propriety of the trial court’s decision to deny their
motion for summary disposition—at least with regard to Whipperwill’s contract claim.
Therefore, we shall first examine whether the trial court erred when it denied Iott and Palmer’s
motion for summary disposition of Whipperwill’s contract claim.
In their motion for summary disposition, Iott and Palmer primarily argued that
Whipperwill’s contract claim was really a mislabeled claim for negligence. And, because
Whipperwill filed the claim more than three years after the point at which the claim accrued, it
was untimely under either MCL 600.5805(6) or MCL 600.5805(10), whichever applied. The
period of limitations under MCL 600.5805 applies to actions seeking “to recover damages for
injuries to persons or property.” MCL 600.5805(1). If the action to recover damages to persons
or property arises from malpractice, the plaintiff must sue within two years after the claim first
accrued. See MCL 600.5805(6). For all other actions to recover for injury to a person or
property, the plaintiff must sue within three years after the claim first accrued. See MCL
600.5805(10). However, for actions seeking to recover damages for a breach of contract, the
plaintiff must sue within six years after the breach. See MCL 600.5807(8). Accordingly, if
Whipperwill’s contract claim is indeed a claim seeking to recover damages for breach of
contract, it is timely. But if it is actually a claim seeking to recover damages for injury to
persons or property, it is untimely.
It is well-settled that a plaintiff may not avoid a period of limitations through artful
drafting. Simmons v Apex Drug Stores, Inc, 201 Mich App 250, 253; 506 NW2d 562 (1993).
Hence, a plaintiff may not avoid the period applicable to a malpractice claim by characterizing
the defendant’s conduct as a breach of a contract for professional services. See Barnard v Dilley,
134 Mich App 375, 378; 350 NW2d 887 (1984) (noting that the plaintiff’s claim against her
attorney did not sound in contract: “Her claim is that damages flowed not from his failure to
represent her, but from his failure to represent her adequately. This is a claim grounded on
malpractice and malpractice only.”); Penner v Seaway Hospital, 169 Mich App 502, 510; 427
NW2d 584 (1988) (stating that the plaintiff could not avoid the period of limitations applicable
to a medical malpractice claim by pleading a breach of contract claim where the gravamen of the
claim was the failure to provide proper care); see also Brownell v Garber, 199 Mich App 519,
524-526; 503 NW2d 81 (1993) (noting that, where the duty allegedly imposed under the contract
is no different than that imposed by law—in the absence of a special agreement—the applicable
period is that for claims seeking to recover damages for injuries to persons or property rather
than contract). Similarly, where a plaintiff does not have an express contract, the plaintiff may
not avoid the period of limitations applicable under MCL 600.5805 by arguing that the claim
arises under an implied contract. See Coates v Milner Hotels, 311 Mich 233, 239-240; 18 NW2d
389 (1945) (explaining that a claim premised on an implied contract is subject to the three year
period of limitations applicable to claims seeking recovery for damages to persons). Rather, for
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every cause of action, courts must look past the label chosen by the plaintiff to determine which
period of limitations properly applies. See Local 1064, RWDSU AFL-CIO v Ernst & Young, 449
Mich 322, 327 n 10, 535 NW2d 187 (1995) (stating that “in ruling on a statute of limitations
defense the court may look behind the technical label . . . to the substance of the claim
asserted.”).
Although Michigan courts have articulated it in a variety ways, the test to determine
which period of limitations properly applies to a given claim depends on the nature of the interest
allegedly harmed. See Huhtala v Travellers Ins Co, 401 Mich 118, 126-127; 257 NW2d 640
(1977) (holding that, when an action to recover damages for injury to persons or property arises
under a duty imposed by law, it cannot be maintained under a contract theory); Aldred v O’HaraBruce, 184 Mich App 488, 490, 458 NW2d 671 (1990) (“The type of interest allegedly harmed is
the focal point in determining which limitation period controls.”); Stroud v Ward, 169 Mich App
1, 9; 425 NW2d 490 (1988) (determining the applicable period of limitations by examining the
nature of the acts alleged to have caused the damages); Baldyga v Independence Health Plan,
162 Mich App 441, 445; 413 NW2d 30 (1987) (holding that the “plaintiff’s claims that [the]
defendant was negligent in hiring these doctors and in failing to supervise them was not based on
the parties’ express contract but was implied in law, making a three-year period of limitation
applicable.”). Whatever the test’s formulation, courts must look to the gravamen of the claim—
to its true nature—and then apply the period of limitations that governs that type of claim.
Adams v Adams, 276 Mich App 704, 710; 742 NW2d 399 (2007).
As already stated, the period of limitations provided under MCL 600.5805, applies to
claims seeking to recover damages for injuries to persons or property. Typically, if an injury
concerns only a person’s financial expectations or commercial benefits under a contract, the
claim will not be subject to the period of limitations under MCL 600.5805. See Fries v Holland
Hitch Co, 12 Mich App 178, 185; 162 NW2d 672 (1968). However, a claim premised on an
injury to persons or property does not have to involve physical injuries; it may be pecuniary
alone. Local 1064, 449 Mich at 328. And, because traditional common-law torts vindicate the
rights of persons, the period of limitations applicable to claims seeking to recover damages for
injuries to persons or property, see MCL 600.5805, generally applies to traditional common-law
torts. Local 1064, 449 Mich at 328.
In its complaint, Whipperwill alleged that Iott and Palmer owed a “contractual duty” to
provide it “with the appropriate limits of insurance to purchase in order to protect their property
and business losses in the event of a fire.” But Whipperwill did not attach a contract to its
complaint nor did it specifically identify the terms of an oral agreement that gave rise to this
contractual duty. Instead, Whipperwill alleged that there was “a special relationship” between it
and Palmer and Iott that gave rise to the duty: “Because of the special relationship between
[Whipperwill] and [Iott and Palmer], and the contractual duties that had been assumed,” Palmer
and Iott had a duty to “properly advise” Whipperwill “regarding the amount of insurance that
should be purchased” and to “advise [Whipperwill] on how the insurance policy [sic] would
respond in the amount of a loss.” Whipperwill alleged that Palmer and Iott breached the duty to
properly advise Whipperwill by advising it to purchase “woefully inadequate” coverage and
failing to inform it about how Auto-Owners would apply the contract. Finally, Whipperwill
stated that these breaches of contract proximately caused it to suffer damages.
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Although labeled as a claim for breach of contract, with this claim, Whipperwill clearly
alleged the traditional elements of a common-law negligence claim: duty, breach, cause, harm.
See Case v Consumers Power Co, 463 Mich 1, 6; 615 NW2d 17 (2000). Indeed, Whipperwill
focused on the special nature of the relationship between it and its agent—a relationship that
must be demonstrated in order to show that the agent had a common-law duty to advise. See
Harts v Farmers Ins Exchange, 461 Mich 1, 8-10; 597 NW2d 47 (1999) (discussing when the
common law will impose upon an insurance agent a duty to properly advise a potential insured).
And Whipperwill also alleged that Palmer and Iott proximately caused it damages by failing to
properly advise it consistent with the duty that arose from this special relationship. When read as
a whole, and in light of the fact that Whipperwill never identified a specific contract or
contractual provision, it is evident that this claim was actually a common-law claim premised on
the failure to properly advise.
In response to Palmer and Iott’s motion for summary disposition, Whipperwill argued
that the application for insurance was an express contract that required Palmer and Iott to
properly advise it as to the amount of coverage necessary to replace the building and its contents.
It also argued that the evidence warranted the imposition of an implied contract with the same
duty. Finally, Whipperwill presented evidence that permitted an inference that Palmer had
explicitly or implicitly promised to procure replacement coverage for Whipperwill. Even if we
were to disregard the way in which Whipperwill actually pleaded this claim, it is nevertheless
apparent that the claim—as argued in Whipperwill’s response to the motion for summary
disposition—is still a claim premised on the common-law rather than contract.
There is no evidence in this case that Palmer guaranteed a particular result, agreed to
perform a specific type of investigation, promised to procure an express dollar amount of
coverage, or otherwise promised to perform at a level beyond that normally performed by an
insurance agent. Cf. Stewart v Rudner, 349 Mich 459, 467-468; 84 NW2d 816 (1957) (involving
a doctor’s express promise to perform a Caesarean Section, which the promisor did not perform).
Instead, even assuming that Palmer actually promised Whipperwill that it would procure
replacement coverage or would identify an amount of coverage sufficient to replace the insured
property, that promise was, in effect, no more than a promise to use his best efforts to ascertain
the cost to replace the building and contents and to advise Whipperwill appropriately. In order to
prove its claim, Whipperwill would therefore have to show that Palmer negligently determined
that $300,000 was sufficient to replace the building, negligently determined that $200,070 was
sufficient to replace the contents, and then negligently advised Whipperwill to purchase those
levels of insurance.2 This claim clearly sounds in common-law negligence. See Harts, 461
Mich at 12 (characterizing a breach of the agent’s duty to advise as negligence). Stated another
way, the harm at issue with this claim arose from a failure to adhere to a duty implied by law—
2
We note that Kurtz stated that he purchased the building and contents shortly before he
procured the insurance at issue and these coverage levels were equal to or significantly higher
than the amount Kurtz paid to purchase the building and contents. As such, it is possible that
Palmer and Iott could show that the coverage levels were reasonable at the time.
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namely, the duty to properly advise and inform a potential insured about adequate levels of
coverage. Id. at 8-10. And the breach of a duty implied by law cannot be maintained as a cause
of action under a contract theory. Huhtala, 401 Mich at 126-127. Accordingly, Whipperwill’s
contract claim plainly sounds in tort, not contract, and MCL 600.5805 supplied the appropriate
period of limitations. See Local 1064, 449 Mich at 328. Because Whipperwill brought this
claim more than three years after it accrued, it was untimely. See MCL 600.5805(6) and (10).
Consequently, the trial court plainly erred when it denied Palmer and Iott’s motion for summary
disposition under MCR 2.116(C)(7).
C. THE MOTION FOR RECONSIDERATION
Having concluded that the trial court erred when it determined that Iott and Palmer were
not entitled to have Whipperwill’s contract claim dismissed as untimely under MCR 2.116(C)(7),
we must next determine whether the trial court should have corrected this error on Iott and
Palmer’s motion for reconsideration. This Court will only reverse a trial court’s decision to deny
a motion for reconsideration if the decision to deny the motion falls outside the range of
principled outcomes. Woods, 277 Mich App at 630. This standard of review is deferential and
recognizes that a trial court might legitimately deny a motion for reconsideration for a variety of
reasons. See Maldonado v Ford Motor Co, 476 Mich 372, 388; 719 NW2d 809 (2006) (stating
that the abuse of discretion standard is more deferential than the de novo standard and recognizes
that there will be no singe correct reason for a particularly outcome). The court rules even
provide that a trial court can generally deny a motion for reconsideration that merely reiterates
issues already resolved—presumably even if the prior resolution of those issues might have been
in error: “Generally, and without restricting the discretion of the court, a motion for rehearing or
reconsideration which merely presents the same issues ruled on by the court, either expressly or
by reasonable implication, will not be granted.” MCR 2.119(F)(3). Nevertheless, it is clear that
a trial court does have the discretion—notwithstanding MCR 2.119(F)(3)—to correct an earlier
decision that was made in error. In re Moukalled Estate, 269 Mich App 708, 714; 714 NW2d
400 (2006) (“The plain language of the court rule does not categorically prohibit a trial court
from granting a motion for reconsideration even if the motion presents the same issues initially
argued and decided.”). Consequently, it necessarily follows that a trial court can abuse its
discretion when it denies a motion for reconsideration that identifies a palpable error even if the
motion merely restates arguments and evidence already presented with regard to the earlier
decision.
In their motion for reconsideration, Iott and Palmer noted that Whipperwill had conceded
that its negligence claim was untimely. For that reason, they asked the trial court to correct its
earlier decision to deny summary disposition of that claim. And the trial court eventually
corrected that error by entering an order dismissing that claim. In all other respects, Iott and
Palmer’s motion for reconsideration merely presented issues and evidence that the trial court
explicitly or implicitly addressed in its opinion on their motion for summary disposition.
Nevertheless, it was obvious on the face of the complaint that Whipperwill’s contract claim
sounded in common-law negligence rather than contract. And, because Whipperwill conceded
that any claims that it might have under common-law negligence were untimely, it is equally
plain that Iott and Palmer were entitled to have Whipperwill’s mislabeled contract claim
dismissed under MCR 2.116(C)(7). Because the trial court’s decision to deny Iott and Palmer’s
motion for summary disposition on this basis was so plainly in error for the reasons already
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addressed in Iott and Palmer’s motion for summary disposition, the trial court could not
reasonably deny the motion for reconsideration on the sole basis that the motion for
reconsideration merely presented the same issues. The trial court had a duty to correct its
erroneous decision in the absence of other considerations that might independently warrant
denial of the motion for reconsideration. Because there were no such other considerations, we
conclude that the trial court abused its discretion when it denied Palmer and Iott’s motion for
reconsideration.
For these reasons, we reverse the trial court’s decision to deny Iott and Palmer’s motion
for reconsideration and remand this case to the trial court for entry of an order dismissing
Whipperwill’s remaining claim against Iott and Palmer with prejudice. Given our resolution of
this issue, we need not address any of Iott and Palmer’s alternative arguments for reversal.
Reversed and remanded for entry of an order dismissing Whipperwill’s remaining claim
against Iott and Palmer. We do not retain jurisdiction. As the prevailing parties, Iott and Palmer
may tax their costs. MCR 7.219(A).
/s/ William B. Murphy
/s/ Cynthia Diane Stephens
/s/ Michael J. Kelly
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