John Kenney v. Daniel P Boss
331905
| Mich. Ct. App. | Jul 18, 2017Background
- Five property owners (three plaintiffs on appeal) formed Ventura Capital LLC with Boss Cogo (managed by Daniel Boss) to develop 33 acres into condominiums; Operating Agreement required members to pay sewer/water assessments "proportionately."
- Boss Cogo initially paid most assessments; in 2008 Daniel Boss told owners Boss Cogo would stop paying assessments unless owners transferred free-and-clear title to Ventura Capital.
- Owners obtained 23 REUs (residential equivalent units) for sewer/water connections; the REUs remained allocated to the homeowners’ properties and assessments were billed to the homeowners and Howell Township.
- Owners defaulted and lost their homes to foreclosure; plaintiffs sued Boss Cogo, Boss Engineering, Daniel Boss, and Ventura Capital for breach of contract, fraudulent misrepresentation (three counts), and silent fraud; six-day jury trial ensued.
- Jury found Boss Cogo breached the Operating Agreement (and pierced Boss Cogo’s veil to hold Boss Engineering liable), and found Daniel Boss liable for silent fraud and three fraudulent misrepresentations (no damages awarded on fraud claims); jury awarded contract damages to each plaintiff.
- Trial court denied defendants’ JNOV motion; Court of Appeals affirmed in part, reversed in part, and remanded—affirming contract and veil-piercing holdings but reversing fraud and silent-fraud verdicts (JNOV should have been granted as to those tort claims).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Breach of contract | Boss Cogo breached by refusing to pay any assessments contrary to its obligation to pay a proportionate share | Defense: verdict rested on promise contradicting the Operating Agreement; lack of proximate cause; lack of standing | Held for plaintiff: reasonable jurors could find contract ambiguous re: "proportionately," extrinsic evidence admissible, proximate cause and standing established; JNOV denied as to breach |
| Piercing corporate veil | Boss Engineering used Boss Cogo to commit the wrong; Boss Eng. should be liable | Defense: alter-ego not pleaded; no evidence of fraud, misuse, or wrongdoing to justify piercing | Held for plaintiff: evidence permitted reasonable jurors to find Boss Engineering used Boss Cogo to commit the breach; JNOV denied as to veil-piercing |
| Fraudulent misrepresentation | Daniel Boss told owners they were required to convey free and clear title and that assessments/mortgages were conditional on title; owners relied | Defense: alleged misrepresentations contradict the Operating Agreement (unreasonable reliance); insufficient evidence and lack of proximate cause | Held for defendants: JNOV should have been granted—fraud claims fail as matter of law because representations contradicted the Agreement and plaintiffs’ reliance was unreasonable or unsupported |
| Silent fraud (suppression) | Boss told owners to sign REU request but failed to disclose that REUs would encumber properties with huge assessments | Defense: no legal/equitable duty to disclose; Operating Agreement disclosed assessments and required proportional payment; proximate cause lacking | Held for defendants: JNOV should have been granted—silent-fraud claim merely restated contract breach and tort cannot be based solely on nonperformance of contractual duty |
Key Cases Cited
- Dell v. Citizens Ins. Co. of Am., 312 Mich. App. 734 (standard of review for JNOV and viewing evidence for nonmoving party)
- Rory v. Continental Ins. Co., 473 Mich. 457 (contract interpretation reviewed de novo)
- Hamade v. Sunoco Inc., 271 Mich. App. 145 (parol evidence and integration clause principles)
- Miller-Davis Co. v. Ahrens Const., Inc., 495 Mich. 161 (elements for breach of contract)
- Fultz v. Union-Commerce Assoc., 470 Mich. 460 (tort action will not lie for mere nonperformance of contractual duty)
- Florence Cement Co. v. Vettraino, 292 Mich. App. 461 (piercing veil analysis for LLCs)
- Bergen v. Baker, 264 Mich. App. 376 (elements of fraudulent misrepresentation)
- Barclae v. Zarb, 300 Mich. App. 455 (silent fraud requires duty to disclose and misrepresentation by omission)