TOV Injury and Safety Blog

Consumer cannot sue banks for fraud: pleadings lack sufficient particularity

Robert S. Zuk  attempted to sue US Bank Home Mortgage and others, alleging fraud.  Unfortunately for Zuk, fraud claims must be pleaded with great particularity, and in the  context of the recent banking/mortgage boondoggle, even the banks don't know what actions they took, what liens they held, who owns title to properties and who has enforcement rights.  Since many of the transactions were based on fudged records and included the conglomeration of thousands of debts into separate securities transactions, the banks have achieved fraud protection by their very mis-management.  Zuk's case was dismissed by Michigan's Court of Appeals because he couldn't meet the high threshold of fraud pleading.

Defamation and malicious prosecution claims are dismissed; conversion reinstated

Joseph S. Ajlouny and Ali Bajrami became involved in a despicable incident involving sex with a 14-year old girl. Eventually, Ajlouny filed a civil action against Bajrami, accusing him of defamation, malicous prosecution, intentional infliction of emotional distress and conversion of items of personal property.  All but the conversion claim were dismissed by the trial court, and the dismissal was upheld on appeal. The court concluded that Ajlouny had not adequately supported his claims with admissible evidence.

Homeowner cannot sue court-appointed receiver for negligence

Mark and Randa Mangano became embroiled in a dispute with their attorney.  Apparently they had financial trouble, generally, and the attorney sued them for fees.  The Manganos had moved from their home in Canton Township to Tennessee, when a judgment for the attorney was entered against them.  The Court appointed a receiver to take custody of the Canton residence and the current tenants moved out.  The Manganos filed for bankruptcy and the Tennessee-area bankruptcy referee assumed control of the home.  In the meantime, the home had suffered frozen pipes and water damage.

Federal court dismisses employees' claim of fiduciary fraud against union, employer and ERISA plan administrator

Dominic Cataldo was the lead plaintiff in a case filed against the United States Steel Corporation, the United Steelworkers Union, their pension fund, and the USX Corporation. The plaintiff workers claimed that the defendants mis-led them about how pension benefits would be calculated and the effect of early retirement.  The plaintiffs were employees of the Lorain, Ohio, Works, which were sold by US Steel ,passed through several hands, and then re-purchased years later. 

In essence, the sale at one point resulted in a reduction of workers' pension rights by limiting their "best five years" income, upon which pensions were calculated, to the years prior to 1999.  The Lorain workers sought--and believed they were promised --treatment similar to other USS retirees, but this promise or expectation was never fulfilled.  They also argued that some employees had retired with an expectation of equal treatment, and that the Union and the other defendants had failed to provide them with accurate information and advice.

Court of Appeals amends damage award in bench verdict in software dispute and rejects the award of sanctions

Philip Allor developed a software package called FOPS and sold it to DeClark, Inc.  He was paid a monthly license fee of $985.00, with a balloon payment due at the end of the license period.  DeClark, Inc., allowed the owners' son to use FOPS in operating his business called Superior Press and Automation, Inc. 

Being unaware of the licensing agreement and monthly payment, younger DeClark sought help in operating the FOPS software from Mr. Allor.  Not surprisingly, Allor inquired how Superior Press acquired his software and why it wasn't paying a license fee.  After being told that the two companies were one entity, he filed suit on a claim of "unjust enrichment" to recover the proper fee when he learned that the companies were not the same entity.  

At trial, the judge awarded him the same monthly license fee that he had charged DeClark for the months that Superior used FOPS.  At the same time, the judge denied Superior's request for Case Evaluation sanctions, even though Allors had turned down a much larger recommendation.  Both sides appealed.

Insurer need not provide coverage where plaintiff's claims are reduced to fraud counts

JoAnn Wreford sued the developer of her condominium after the unit was subjected to flooding.  She joined several arguments in her complaint, including claims sounding in fraud and silent fraud.  The Court dismissed several of the counts, leaving for trial only claims that the developer had induced her to purchase condominium through fraudulently misrepresenting the suitability and drainage of the property.  The developer's insurer, Frankenmuth Mutual, then sought summary disposition, arguing that the remaining legal counts were intentional misconduct excluded from coverage.  The Court agreed that the allegations, if proven, did not constitute an "occurrence" under the policy and allowed Frankenmuth to withdraw from representing the developer.

Plaintiff cannot file new claim of fraud based on perjury in previous case

Michael Zattlin sued the Alden State Bank and its attorneys, arguing that together they had conspired to defraud him in a debt and mortgage action.   Zattlin claimed that the Defendants had filed affidavits in support of their Motion for Summary Disposition which they knew to be false. He alleged that all parties who assisted in preparing the affidavits knew that the affiants did not have first-hand knowledge of the allegations contained in the affidavits.

The appellate court ruled that while Zattlin had raised questions of perjury, the perjury was a fraud intrinsic to the prior lawsuit and therefore it could not serve as the basis of a subsequent claim.  Only extrinsic fraud ("fraud outside the facts of the case that prevents a party from an adversarial proceeding") can serve as the basis for a separate cause of action.  The remedy for intrinsic fraud must be found within the rules governing due process in the initial cause of action.

Court allows fraud claim against adoption agency to go forward

Seven couples sued the "Waiting Angels Adoption Services, Inc.," arguing that they were defrauded by the agency and individuals Simone Boraggina and Joseph Beauvais.  The Defendants sought summary disposition of the claims and in response the couples identified four specific acts as evidence that the agency was a "Racketeer Influenced and Corrupt Organization."  The trial court held that the evidence put forward by the couples was not adequate to pursue a RICO claim against the Defendants, however, the Sixth Circuit reversed and reinstated the claim.  Among the misrepresentations documented by the couples were claims by the Defendants that the agency was a non-profit, and claims that specific children were currently awaiting adoption.

Constructive trust is imposed on property to prevent unjust enrichment due to fraud

Richard Darling sued Tanesha Pryor and John W. Barcume, alleging that Pryor had transferred title to a home in an effort to defraud him.  Darling and Pryor had renovated a home in St. Clair Shores with the intent of sharing the resulting profit at the time of sale.  In the interim, however, Pryor sold her interest to Barcume, who made plans to rent the property.  Darling sued, asking the court to impose a constructive trust on the property so that he could recapture his investment.  The Court agreed with Darling that such a trust was appropriate and explained the equities involved in situations such as this one.  While Barcume did not participate in the fraud, he was aware of some degree of involvement by Darling in the property and therefore he could not claim to be an innocent victim of Pryor's actions.

Non-lawyer Personal Representative's fiduciary duty does not extend to accurately explaining the law to Interested Person

Step-siblings Julie Ann Schaffer and James Patrick Moore became embroiled in a dispute over their father's Estate.  In short, the father had mortgaged a home where Moore lived, and then deeded a survivorship interest in the home to Moore.  When Dad died, Schaffer, a non-lawyer, was made the Personal Representative of the Estate.  She (incorrectly) told Moore that he was obligated to pay the mortgage on the home, even though he had not signed the mortgage or promissory note.  When he fell into arrears and lost the home, he sued Schaffer for not accurately explaining his rights to the property and the Estate's duty to pay the mortgage debt. 

Michigan Court reinstates case involving allegations of fraud and misuse of corporate identity

The Woodridge Hills Association sued Dougals Walter Williams and his corporation, alleging that Williams defrauded them and then hid from creditors behind a new corporate entity.   The Plaintiffs argued that Williams, a licensed builder, performed shoddy work in replacing their condominium roof, and then avoided financial responsibility by creating a new corporate entity.  The Plaintiffs argued that Williams transferred the assets of his corporate alter ego, Redford Roofing, into a new solely-owned corporation, D.W. Williams, LLC, and then put Redford into bankruptcy to avoid creditors.  The trial court dismissed the Plaintiff's attempts to "pierce the corporate veil" and to hold the second company liable as a "successor in liability."  The Court of Appeals reversed, holding that the Plaintiff had created a question of fact to be resolved at trial and not on summary disposition.

Court of Appeals re-examines fraud verdict against sellers' realtors

This week the Court of Appeals granted re-hearing and issued a second opinion with regard to Frank Alfieri and Tonya Alfieri's fraud claim against Marc Bertorelli, Meryl Greene and Weber Seiler Realtors, Inc.  The opinion addresses the bases for the jury's verdict in favor of the Alfieris and rejects the various appellate issues raised by the Defendants.

Party claiming fraud is not precluded from establishing unlawful transfers where injunction was denied.

Timothy and Jennifer Nottingham sought to enforce a judgment against Dennis and Cyndia Pearson.  The Nottinghams obtained the judgment in litigation arising out of the purchase of Pearsons' home.  They learned that Dennis Pearson was about to receive a $200,000.00 payment on a judgment he had obtained against a third-party and sought an injunction to prevent the Pearsons from transfering the money.  The court in Pearson's third-party case denied the Nottinghams' request for an injunction.

Tenant must prove landlord denied opportunity to obtain personal property

Patrick and Kimberly Hoffmeyer sued their landlords, Lon and Bonny Ingram, after they were unable to recover personal property in their commercial tenancy.  The Hoffmeyers had agreed with the Ingrams to leave the premises if certain payments were not made within a stipulated time frame.  When no payments were forthcoming, the landlords padlocked the premises.  The court held that in order to prevail, the Hoffmeyers were required to offer proof that they had made reasonable efforts to secure possession of their propery.  The plaintiffs argued that this ruling improperly increased the burden of establishing a conversion of property.  The Court of Appeals upheld the ruling.

Alleged conspirator is allowed opportunity to amend answer after allegations are deemed "admitted."

Joseph Blouin sued Robert V. Yeo, Jr., Michael Sayers and others, alleging that they had promulgated a scheme to defraud Blouin of $500,000.00 under the guise of a real estate investment.  Sayers answered every count in the Complaint with the phrase "Defendant neither admits nor denies but leaves plaintiff to his proofs."  Blouin's attorneys persuaded the judge that this noncommital response violates the pertinent court rule and therefore constituted and admission--as a matter of court rule--of the Plaintiff's claims.  Since all of the claims were deemed admitted, the court granted Blouin summary disposition and Sayers appealed. 

Fraud claim against Williams Chevrolet is reinstated

Fred Williams sued the Traverse City dealership after his used car died on the 80 mile drive home from the dealership.  He claimed that the car had numerous mechanical problems that could not have been overlooked if the dealership had conducted the basic safety inspection that it claimed to have performed.  The dealership pointed to the "as is, no warranty" language in the sales agreement and prevented Plaintiff Williams (apparently no relation) from relying on the oral representations that he argued the salesman had made.  Based on the "as is" language, the Court dismissed all counts of Plaintiff Williams' complaint and Williams appealed.  On appeal, the Court of Appeals unanimously reinstated two of the Plaintiff's claims.  It held that the language of the sales agreement was not inconsistent with a fraud or Michigan Consumer Protection Act claim.  It noted that the claim of a lie about inspection was not inconsistent with the "as is" clause, and that a jury could reasonably find from the facts alleged that the dealership fraudulently informed Williams that the vehicle had been  found to have no deficiencies or mechanical problems on inspection."

Law firm accused of colluding with client to defraud cannot claim attorney-client privilege

Randy H. Bernstein, a podiatrist, sued Barry R. Bess and the Seyburn Kahn law firm, arguing that the lawyers conspired with Kenneth Poss, another podiatrist, to fraudulently convert a jointly-owned corporation into a second corporation owned almost entirely by Poss.  The lawyers claimed an attorney-client privilege and objected to discovery of their file and communications with Poss. The trial court allowed them to assert the privilege, however, the Court of Appeals reversed.  It held, unanimously, that the fraud exception to the privilege applies where the Plaintiff has alleged specific facts supporting the perpetration of fraud.

Tenants' claim of conversion by landlord is dismissed

Frank Turner Ministries, Inc., and Mr. and Mrs. Turner sued Bank Of America and numerous other defendants after they participated in the removal of the Turners' personal property from a leasehold after eviction.  The Turners acknowledged that the order of eviction was valid but complained that the property should have been moved to the curbside rather than taking it to a storage facility.  The Court of Appeals upheld the trial judge's determination that safely storing the Plaintiffs' property, rather than leaving it on the lawn, did not constitute wrongful conversion.  Most likely the Turners felt aggrieved by an inability to pay the moving and storage fees in order to recover their property, but that issue was not addressed in the Court's opinion.

Tenants' claim of conversion by landlord is dismissed

Frank Turner Ministries, Inc., and Mr. and Mrs. Turner sued Bank Of America and numerous other defendants after they participated in the removal of the Turners' personal property from a leasehold after eviction.  The Turners acknowledged that the order of eviction was valid but complained that the property should have been moved to the curbside rather than taking it to a storage facility.  The Court of Appeals upheld the trial judge's determination that safely storing the Plaintiffs' property, rather than leaving it on the lawn, did not constitute wrongful conversion.  Most likely the Turners felt aggrieved by an inability to pay the moving and storage fees in order to recover their property, but that issue was not addressed in the Court's opinion.

Jury verdict for interference with business relationship is upheld

CH Holding Company sued Bruce Miller and CH Brand Parking Associates, arguing that Miller had breached a fiduciary duty to CH by the manner in which it negotiated potential sales of a Casino parking ramp.  In essence, the plaintiff, an investment group, claimed that Miller's company interfered with several prospective sales of the ramp, to the detriment of investors, by inserting language that would have benefitted Miller's parking operations company.

Realtors required to defend fraud claim

Frank and Tonya Alfieri sued Marc Bertonelli and others, including Coldwell Banker Weber Seiler Realtors, allegin fraud in the sale of a condominium.  The Alfieris bought a condominium in an restored, previously abandoned factory.  They alleged that the defendants failed to disclose that the factory, which had previously been contaminated with the chemical TCE, had not been adequately decontaminated. 

Landlord pays treble damages for illegal "lockout" of tenant

J. Franklin Interests, LLC sued Mu Meng and Mengs Properties for conversion after a rent dispute led Meng to change the locks on Franklin's business and seize Franklin's property.  The Court noted that conversion is a strict liability tort and that Meng had exceeded his rights in seizing Franklin's premises and assets. The Court did return the case to the Muskegon Circuit Court for futher analysis of one aspect of Franklin's damage claim.

Estate's conversion case dismissed

The Court of Appeals upheld the dismissal of Michael Lozen's conversion case against Diane Williams and other defendants. The Lozen Estate argued that the Defendants converted to their own possession gold and silver owned by Lozen's father. He had no direct evidence of conversion, however, and could only prove circumstantially that the Defendants enjoyed an "opportunity" to convert the property.  Under the circumstances, this proof was deemed inadequate to hold the Defendants responsible for the loss of the property.

Deputy Sheriffs can be held responsible for helping landlords to take tenant's property during eviction

Rodney Cochran's landlords evicted him when he fell behind on rent.  They secured an eviction notice when he owed one- and one-half months' rent and obtained the help of Sheriff's Deputies in executing the eviction.  Although the eviction notice made no mention of Cochran's personal property, the Deputies not only helped to carry it out of the home, but they also took possession and may have "purchased" some of Cochran's things.  When Cochran's family attempted to intervene, the Deputies protected the landlords' assumption of possession and deflected interference by the State Police.  Ultimately, Cochran lost possession of all of his property, the Landlords declared bankruptcy, thus avoiding any remediation, and Cochran's property was scattered between the landlords and law enforcement.  His television, for example,  ended up at the Sheriff's office, entertaining Deputies.  Cochran sued under 42 USC 1983, claiming the Deputies participated in a violation of his rights under the 4th and 14th Amendments to the Constitution.

Appellate Court rejects fraud claim

Luevina Doyle sued the Detroit Development Real Estate LLC, claiming that through a series of false misrepresentations, it had induced her to rent an apartment under the assumption that she would be eligible to purchase it on favorable terms.  She claimed that the Corporation and its agents committed fraud by inducing her to believe she would be the beneficiary of a governmental program intended to encourage inner city property ownership.

Fraud suit against bank is dismissed, despite contradictory bank documents

Francois A. Farah and others sued Bank of America in Genessee County Circuit Court. The Plaintiffs argued that improper actions of the bank caused them financial loss.  The trial court dismissed the Plaintiffs' claims and the Court of Appeals upheld the dismissal.  The Plaintiffs apparently submitted bank documents which confirmed their claims that the bank had reversed it's initial default arguments and bank memoranda that found Plaintiffs to be in compliance with their loan obligations.  Nevertheless, the Court rejected the argument that these documents and oral statements by bank loan officers created a question of fact with regard to the Plaintiff's fraud and misconduct claims.  Among other holdings, the appellate judges ruled that Plaintiffs' claims--even if true--did not establish "extreme and outrageous" conduct.

Plaintiffs in fraud case held to have waived their right to jury trial

Anthony L. Barclae and others sued Ernest  M. Zarb for fraud.  They filed a Jury Demand in their Wayne County case, and Zarb's attorneys immediately filed a motion to strike the jury demand, citing documents executed by the plaintiffs at the time their original financial transactions were entered into.  The transaction documents contained a clause that provided that "each party knowingly and voluntarily...waives the right to a jury trial..."  The Court noted that while the right to jury trial is Constitutionally protected, it may be waived--in advance--by an informed citizen.    On that basis, Zarb could enforce the agreement's terms and waiver.

Woman can pursue claim that jeweler replaced diamond in wedding ring

Victoria Harris sued J.B. Robinson Jewelers, alleging that when she took her diamond wedding in for repair, the jewelers replaced her original stone with an inferior stone.  Although she didn't have expert documentation of any change in the stone, she provided affidavits from herself and other witnesses, alleging that the stone was not the same after it  came back from the jeweler. The trial court determined that this proof was inadequate to go to the jury and dismissed her claim.  The Sixth Circuit disagreed and returned the case to the lower court for trial.  It noted that the "lay opinions" of the several witnesses were admissible to prove that the stone had changed.  Proving the diminution of value in the ring may be a more difficult story, however, without expert opinion support. 

Tenant can sue for lost possessions, landlord who fought demolition of fire-damaged premises may not

Charles Costa and his tenant, Ronald Carey Scott, sued the City of Detroit, claiming it was responsible for the loss of their personal property caused by the demolition of a fire-damaged building.  The Court of Appeals panel ruled that Costa, the owner, could not sue because he did not join his claim for personal property in his emergency legal action attempting to enjoin destruction of the property.  It upheld the tenant's right to sue on a limited basis because Scott, the tenant, was not a party to that action and not "in privity" with the landlord.

Family Trust engenders litigation and fails to execute parents' intent

A Wayne County family ended up in the Court of Appeals after the surviving children--four brothers--could not resolve their dispute over their parents' assets.  The problem originated in their initially-surviving mother's attempt to share her estate equally among the four brothers, after she had already placed title to some assets in various brothers' names, either as joint owners or as beneficiaries.  After she died, the sons who enjoyed vested title refused to contribute all of the property back to the common estate for division.  The excluded brothers filed suit, alleging fraud, conversion, interference with a trust relationship and abuse of fiduciary duty, but the Court of Appeals held that they could not establish the elements of any of these causes of action.   The attorney who drew up her plans for testacy claimed that when she was warned of the need to re-title assets, the mother told him that "she trust[ed the boys] to do the right thing and to make sure my desires are carried out." 

Insurer avoids paying for damage caused by insured's employee

BFC Management owns an adult establishment named Cheetah's.  It was induced by Jani-King of Michigan to change janitorial services, allegedly in part because Jani-King claimed that it stood behind and insured all employees.  The Jani-King sales department assigned the contract to a local franchisee who couldn't do the work because of his regular full-time job.  The franchisee then hired a friend of a relative to clean the club. 

Court addresses "fraud in the inducement"

Mediaform LLC fired Daniel Suszko after learning that he had diverted client funds to a PayPal account.  It executed a termination agreement with Suszko in which it released him from any other misbehavior (he claimed there wasn't any) in return for a covenant not to compete.  Within weeks, Suszko went to work for a competitor [arguably in a different role] and Mediaform learned of other diversion of funds and misappropriation of inventory.  Mediaform sued Suszko, claiming the executed termination agreement was void because Suszko had fraudulently induced it to sign the agreement.  The Court held that it was a question of fact for the jury to determine whether Suszko had wrongfully and knowingly induced Mediaform to sign the termination agreement.

Stolen money transferred without consideration does not invoke the UFTA

In a sad case of a dysfunctional family, Elaine Franklin sued her son Scott to recover $235,000.00 he received from his brother, Jason.  Scott argued that Elaine could not recover the money because she had not complied with the Uniform Fraudulent Transfer Act.  The Court held, unanimously, that Elaine did not need to meet the terms of the UFTA because Scott had not received the stolen funds as the result of an arm's length transaction: they constituted stolen "property" not subject to the Act.