Michigan

Warning: The following opinion is provided for purposes of discussion only. We have not Shepardized™ this opinion, and do not know the subsequent disposition of this case nor whether the effect of the opinion has been overruled or superceded by other law.

W.S. TOWNSEND, doing business as CLASSIC FLOORS & INTERIORS, doing business as THE KITCHEN SHOP, also known as MICHIGAN KITCHEN DISTRIBUTORS, Plaintiff/Counter Defendant-Appellee, v GERALD L. NYE and SHARON V. NYE, Defendants/Counter Plaintiffs/Cross Defendants-Appellants, and BRADFORD GROUP, Defendant, and EXECUTIVE HOUSING CORPORATION and NEIL FISK CONSTRUCTION, INC., Defendants/Cross Defendants-Appellees, and APPLEGATE HEATING & AIR CONDITIONING, Defendant/Counter Plaintiff-Appellee, and MICHIGAN HOMEOWNERS CONSTRUCTION LEIN RECOVERY FUND, Defendant/Cross Plaintiff.

No. 235396

COURT OF APPEALS OF MICHIGAN

July 1, 2003, Decided

NOTICE: [*1] THIS IS AN UNPUBLISHED OPINION. IN ACCORDANCE WITH MICHIGAN COURT OF APPEALS RULES, UNPUBLISHED OPINIONS ARE NOT PRECEDENTIALLY BINDING UNDER THE RULES OF STARE DECISIS.

PRIOR HISTORY: Lenawee Circuit Court. LC No. 98-007863-CH.

DISPOSITION: Affirmed.

JUDGES: Before: Cavanagh, P.J., and Gage and Zahra, JJ.

OPINION: PER CURIAM.

Gerald and Sharon Nye appeal by right the summary dismissal of their claims against Executive Housing Corporation (EHC). n1 We affirm.

- - - - - - - - - - - - - - Footnotes - - - - - - - - - - - - - - -

n1 The Nyes asserted the same claims against EHC's president, William Snyder, and raised the same issue on appeal in Michigan Kitchen Distributors v Nye, docket number 235423, which was resolved by an opinion issued on the same day as this opinion.

- - - - - - - - - - - - End Footnotes- - - - - - - - - - - - - -

The Nyes contracted with EHC for the construction of their home and the contract included monetary allowances for kitchen cabinetry and flooring for the home. After the materials had been supplied, EHC, through William Snyder, submitted false sworn statements indicating that the cabinetry and flooring were paid in full although no payment [*2] had been made. After liens were filed against the Nyes, they filed a third-party complaint against Snyder alleging negligent performance of contract, breach of fiduciary duty, misrepresentation and fraud, and slander of title. The Nyes also requested that EHC's corporate veil be pierced. Subsequently, the trial court summarily dismissed the Nyes' claims against EHC and Snyder under MCR 2.116(C)(10) and, here, the Nyes appeal the dismissal of their case against EHC.

The grant or denial of a motion for summary disposition is reviewed de novo. Groncki v Detroit Edison Co, 453 Mich. 644, 649; 557 N.W.2d 289 (1996). A motion under MCR 2.116(C)(10) tests the factual sufficiency of the complaint, considering the documentary and other evidence in a light most favorable to the nonmoving party to determine whether the moving party is entitled to judgment as a matter of law. Maiden v Rozwood, 461 Mich. 109, 118; 597 N.W.2d 817 (1999).

First, the Nyes argue that their negligent performance of contract claim should not have been dismissed because Snyder's negligent performance of his employment contract with EHC caused their injuries. [*3] We disagree. To establish a prima facie case of negligent performance of contract, the Nyes must prove that Snyder owed them a duty that he breached, causing damages. See Case v Consumers Power Co, 463 Mich. 1, 6; 615 N.W.2d 17 (2000). A duty of care owed to the public may arise from a contract in that "accompanying every contract is a common-law duty to perform with ordinary care the thing agreed to be done." Clark v Dalman, 379 Mich. 251, 260-261; 150 N.W.2d 755 (1967).

Here, the Nyes argue that as a direct consequence of Snyder's breaches of duty, EHC did not finish constructing their home and they were unable to secure refinancing at a lower interest rate. However, even if we assumed that Snyder owed a duty to the Nyes, his breach was not the direct cause of their damages. EHC's failure to finish construction on their home was caused by a series of events, including the corporation's insolvency. Further, the Nyes' inability to obtain refinancing was speculative. More importantly, because Snyder did not file the liens against the Nyes' property, he did not directly affect their ability to obtain refinancing. Therefore, [*4] the trial court did not err in dismissing the Nyes' claim for negligent performance of contract against Snyder.

Next, the Nyes contend that Snyder breached his fiduciary duty. We disagree. The Nyes rely on James Lumber Co, Inc v J & S Constr, Inc, 107 Mich. App. 793, 795-796; 309 N.W.2d 925 (1981), for the proposition that a corporate officer may be held liable for a violation of the Michigan Building Contract Fund Act (MBCFA), MCL 570.151 et seq. The MBCFA was originally enacted in 1931 as a measure to provide additional protection to subcontractors and materialmen. DiPonio Constr Co, Inc v Rosati Masonry Co, Inc, 246 Mich. App. 43, 49; 631 N.W.2d 59 (2001), quoting People v Miller, 78 Mich. App. 336, 342; 259 N.W.2d 877 (1977). "It is clear that the design of the act is to prevent contractors from juggling funds between unrelated projects." Id.

In James Lumber Co, Inc, supra, the panel noted that "if the money received by the contractor in fact was used to pay laborers, subcontractors, or materialmen on the specific job in question, the [*5] purpose of the act is carried out and no remedies under the act, civil or criminal, are available to the other, unpaid laborers, subcontractors, or materialmen." Id. at 795-796, citing Nat'l Bank of Detroit v Eames & Brown, 396 Mich. 611, 622; 242 N.W.2d 412 (1976). The Nyes do not contend that Snyder used their funds to pay suppliers or contractors from other construction projects. Like the plaintiff in James Lumber Co, Inc, supra at 796-797, the Nyes have failed to meet their burden. Thus, the trial court did not err in dismissing their claim for breach of fiduciary duty against Snyder.

Next, the Nyes contend that Snyder misrepresented facts and defrauded them. However, the Nyes have presented no evidence of injury or damages caused by Snyder's misrepresentation that he was a licensed builder. Also, although Snyder falsely obtained a full unconditional waiver of lien, there is no evidence that Snyder caused damage to the Nyes. All liens against the property have been dismissed. Therefore, we conclude that the trial court did not err in dismissing the Nyes' claim for misrepresentation and fraud against Snyder.

The Nyes also [*6] argue that their claim for slander of title against Snyder is valid. We disagree. To establish slander of title at common law, a plaintiff must show that the defendant maliciously published false statements that disparaged the plaintiff's right in property, causing special damages. B & B Investment Group v Gitler, 229 Mich. App. 1, 8; 581 N.W.2d 17 (1998). The Nyes admit that all liens against their property were filed by parties other than Snyder. Therefore, the trial court did not err in dismissing the Nyes' claim for slander of title against Snyder.

Finally, the Nyes contend that EHC's corporate veil should be pierced to expose Snyder to liability. We disagree. Although the line between EHC and Snyder was somewhat blurry and many corporate formalities were disregarded, disregard of the corporate formalities alone is not sufficient to justify piercing. In addition, fraud, illegality, or injustice must be shown. Soloman v Western Hills Dev Co (After Remand), 110 Mich. App. 257, 262-263; 312 N.W.2d 428 (1981). Although it is clear that the corporate form may be disregarded to prevent injustice and to reach an equitable result, [*7] the injustice sought to be prevented must in some manner relate to a misuse of the corporate form "to defeat public convenience, justify a wrong, protect fraud or defend crime." Id., quoting Kline v Kline, 104 Mich. App. 700, 702-703; 305 N.W.2d 297 (1981) (citations omitted). The Nyes have failed to establish that Snyder used EHC merely as an instrumentality to commit a fraud on the Nyes. In addition, all liens against their property were dismissed. We conclude the trial court did not err by refusing to pierce the corporate veil. Affirmed./s/ Mark J. Cavanagh

/s/ Hilda R. Gage

/s/ Brian K. Zahra

The legal opinions are a matter of public record (that's how we got them), and as such there can be no defamation for republishing them. Sometimes, however, legal opinions are reversed, vacated, or significantly modified, etc., and we do not discover this fact until somebody points it out to us. As we do not desire to publish inaccurate or outdated information, if a legal opinion has been reversed, vacated, or significantly modified, please advise us of this fact immediately, by fax to (877) 698-0678 or you may also send regular postal correspondence to Riser Adkisson LLP at 1827 Powers Ferry Road, Building One, Suite 200, Atlanta GA 30339.