Hatem v. State Farm Fire and Casualty Company

Filing 30

OPINION AND ORDER denying 21 Motion for Summary Judgment. Signed by District Judge Marianne O. Battani. (BThe)

UNTIED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
GHALEB HATEM,
Plaintiff,

CASE NO. 09-14649

v.
HON. MARIANNE O. BATTANI
STATE FARM FIRE AND CASUALTY
COMPANY,
Defendant.
_________________________________/
OPINION AND ORDER
DENYING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT
This matter is before the Court on Defendant State Farm’s Motion for Summary
Judgment. (Doc. 21). The Court heard oral argument on July 14, 2011. The parties
filed timely supplemental briefs on the proof of damages issue the Court identified at the
hearing. For the reasons that follow, Defendant’s motion is DENIED.
I.

STATEMENT OF FACTS
Plaintiff Ghaleb Hatem owns a large, two-story, mixed-use building that is located

at 7845 Schaefer Road in Dearborn, Michigan.

Defendant State Farm insured the

building against fire damage under a commercial insurance policy. (Doc. 21 Ex. L).
The policy limit for fire damage is $784,700.00.
In mid-2007, after sitting vacant for nearly two years, Plaintiff decided to renovate
the building for commercial use. He acted as the general contractor in the project, but
did not submit a master-building plan to the City of Dearborn. (Doc. 23 at 4). Plaintiff
hired several subcontractors to perform general demolition, electrical, and plumbing
work. The subcontractors filed for building permits with the City. (Doc. 23 Ex. D). The

parties disagree on whether the City actually issued the permits. (Doc. 23 at 5; Doc. 21
Ex. E at 58, 60, 67-68).

They also disagree on the scope and quality of the

subcontractor’s work. (Doc. 21 at 4; Doc. 23 at 6). While the renovations were on
going, on September 19, 2007, Plaintiff secured a commercial tenant and signed a fiveyear lease that was to begin on January 1, 2008. (Doc. 23 Ex. F).
On December 1, 2007, a fire broke out in the building that caused severe fire,
smoke, and water damage.

At the time of the fire, Plaintiff’s renovations were

incomplete and the building did not comply with current building code. Plaintiff alleges
to have spent more than $117,000 on renovations prior to the fire. (Doc. 23 Ex. B;
Ex.C).
On December 6, 2007, upon Defendant’s request, Jim Peldo of Balfour USA
inspected the building to make an estimate of the cost to return the building to pre-fire
condition, the agreed upon measure of loss. (Doc. 25 at 1). Peldo originally estimated
that it would cost $288,315.96 to repair the building to pre-fire condition. (Doc. 23 Ex.
H).

Peldo’s estimate included the cost of completing the renovations that Plaintiff

started, but did not have the opportunity to finish. Peldo later raised his estimate to
$336,596.27 after Plaintiff objected that the initial amount was insufficient to repair the
building. (Id.)
In early March 2008, Dearborn City Inspector Bill Greenhalgh issued a report
which recommended that the building be demolished, but also listed steps that would be
required to repair the building to current code. (Doc. 23 Ex. I). At the time of his report,
Greenhalgh had not determined whether the fire caused such structural damage as to
render the building unrepairable. (Doc. 22 Ex. L at 84). Plaintiff claims that, regardless

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of Greenhalgh’s tentative conclusions, Andy Pizzino, Senior Section Supervisor of the
City’s Building and Safety Department, told Plaintiff that the City would still order
demolition because the fire severely damaged the building’s steel support beams.
(Doc. 23 at 6).
Plaintiff hired Adnan Al-Saati of A&M Consultants to perform a structural
evaluation of the building in March 2008. (Doc. 23 Ex. J). After a site inspection, AlSaati concluded:
The fire-damaged structures will have to be removed and replaced in its
entirety in order to achieve the requirements for a safe structure. In the
process of removing fire damaged unsafe structural members, it is our
experience that the remaining structure will be damaged and the structural
integrity of the building will be compromised. Accordingly, we recommend
that the entire structure be removed and replaced with a structure that
meets current codes.
(Id. at 1-2).
In May 2008, Plaintiff solicited estimates from Bassem Saleh of George H. Pastor
& Sons General Contracting and Ali El-Zein of Starnet Construction Inc. on the cost to
repair to the building and the cost to demolish and rebuild. Pastor estimated it would
cost $867,500 to rebuild and $515,700 to repair. (Doc. 21 Ex. Q; Ex. R). El-Zein
estimated it would cost $604,564 to rebuild and $534,685 to repair. (Id. Ex. O; Ex.P).
Saleh and El-Zein wrote the estimates to return the building to a code-compliant, movein ready condition. When pressed to give an estimate to rebuild to pre-fire condition,
i.e., a building in the middle of extensive renovations and not in compliance with current
building code, El-Zein testified his original estimate should be reduced by approximately
$20,000. (Doc. 28 Ex. 2 at 64). Saleh could not estimate what it would cost to return
the building to pre-fire condition.

(Doc. 21 Ex. H at 71-77).

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Additionally, El-Zein

believed the latent structural damage would make demolition the only viable option.
(Doc. 28 Ex. 2 at 48-49).
Plaintiff provided these estimates and Al-Saati’s report to Defendant in support of
his position that Peldo’s estimate was too low.

He also claimed Al-Saati’s report

undermined Peldo’s conclusion that the building was repairable. Defendant disagreed
and conditioned the issuance of policy proceeds on the acceptance of Peldo’s estimate.
Plaintiff rejected Defendant’s offer and filed suit in state court on October 4, 2009. (Doc.
1 Ex. 2). Defendant timely removed to this Court. (Doc. 1).
In June of 2010, the City of Dearborn ordered a hearing to show cause why the
building should not be demolished since “extensive fire damage, exposure to the
elements, and a complete lack of maintenance” had caused the building to become a
safety hazard. (Doc. 21 Ex. M). Plaintiff, Defendant’s counsel, and Greenhalgh testified
at the hearing.

(Doc. 23 Ex. L).

The City ultimately concluded the fire caused

“numerous structural deficiencies” and ordered demolition.
In September 2010, Defendant hired structural engineer Curt Egerer of Paragon
Forensic to inspect Plaintiff’s building and review Peldo’s estimate. (Doc. 21 Ex. T).
Egerer concluded:
The fire-related damage to this building is routine, repairable, and typical
of fire damage to similar age/type buildings. There was nothing
extraordinary about this particular fire or the damage it caused. Further,
there are no conditions present to warrant any special structural testing or
any further structural investigation of the building or its components prior
to beginning the repair work itemized by [Peldo].
(Id. at 2). Egerer also agreed with the scope of Peldo’s repair estimate. (Doc. 21 Ex. G
at 7).

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On May 3, 2011, after discovery was complete, Defendant filed a motion for
summary judgment under Fed. R. Civ. P. 12(c) and/or 56. (Doc. 21). The Court heard
oral argument on July 14, 2011. At the end of the hearing, the Court instructed the
parties to file supplemental briefing on the issue of whether Plaintiff has sufficient proofs
on how much it would cost to either rebuild or repair the building to pre-fire condition.
The parties filed timely briefs; Defendant’s motion is now before the Court.
II.

STANDARD OF REVIEW
A. Fed. R. Civ. P. 12(c)
Federal Rule of Civil Procedure 12(c) allows a party to move for a judgment on

the pleadings after the pleadings are closed, but early enough not to delay trial. Fed. R.
Civ. P. 12(c). In reviewing such a motion, “all well-pleaded material allegations of the
pleadings of the opposing party must be taken as true, and the motion may be granted
only if the moving party is nevertheless clearly entitled to judgment.” JPMorgan Chase
Bank, N.A. v. Winget, 510 F.3d 577, 581 (6th Cir. 2007) (citation omitted). Accordingly,
“[a] Rule 12(c) motion is granted when no material issue of fact exists and the party
making the motion is entitled to judgment as a matter of law.” Id. (quotation omitted).
B. Fed. R. Civ. P. 56
Summary judgment is appropriate only when there is “no genuine dispute as to
any material fact and the movant is entitled to judgment as a matter of law.” Fed. R.
Civ. Pro. 56(a). The central inquiry is “whether the evidence presents a sufficient
disagreement to require submission to a jury or whether it is so one-sided that one party
must prevail as a matter of law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52
(1986). Rule 56 mandates summary judgment against a party who fails to establish the

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existence of an element essential to the party's case and on which that party bears the
burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986).
The moving party bears the initial burden of showing the absence of a genuine
issue of material fact. Celotex, 477 U.S. at 323. Once the moving party meets this
burden, the non-movant must come forward with specific facts showing that there is a
genuine issue for trial. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574,
587 (1986).

In evaluating a motion for summary judgment, the evidence must be

viewed in the light most favorable to the non-moving party. Adickes v. S.H. Kress &
Co., 398 U.S. 144, 157 (1970). The Court “must lend credence” to the non-moving
party’s interpretation of the disputed facts. Marvin v. City of Taylor, 509 F.3d 234, 238
(6th Cir. 2007) (citing Scott v. Harris, 127 S.Ct. 1769, 1775 (2007)). The non-moving
party may not rest upon its mere allegations, but rather must set out specific facts
showing a genuine issue for trial. Fed. R. Civ. P. 56(c)(1). The mere existence of a
scintilla of evidence in support of the non-moving party's position will not suffice.
Rather, there must be evidence on which the jury could reasonably find for the nonmoving party. Hopson v.DaimlerChrysler Corp., 306 F.3d 427, 432 (6th Cir. 2002).
III.

ANALYSIS
The parties dispute whether Plaintiff has sufficient damages proofs. Defendant

argues Plaintiff’s experts do not opine on the cost to rebuild or repair the building to prefire condition - a building in the midst of substantial renovations and not code-complaint.
Plaintiff argues Ali El-Zein testified a pre-fire condition building would be approximately
$20,000 less than his estimate for a code-complaint, “move-in” ready building. Plaintiff

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also maintains there are genuine issues of material fact regarding the pre-fire condition
of the building and whether the building is repairable.
The Court agrees with Plaintiff and finds three genuine issues of material fact for
trial: (1) the state of the renovation work prior to the fire; (2) whether the building is
repairable; and (3) the cost to return the building to pre-fire condition. Regarding the
first issue, the circumstances surrounding the scope, progress, and quality of the
renovation work will directly affect Plaintiff’s damages as the parties agree the measure
of loss is the cost to return the building to a “pre-fire” condition. The parties vigorously
dispute the nature of the building’s pre-fire condition and the record shows a fact
question on this issue.
As for whether the building is repairable, Defendant’s expert, Curt Egerer, says it
is and Plaintiff’s expert, Adnan Al-Saati, says it is not. Like above, resolution of this
dispute will affect the quantum of Plaintiff’s damages because the cost to demolish and
rebuild is different from the cost to repair. On this issue, the parties have set up a
“battle of the experts.” “[C]ompeting expert opinions present the ‘classic battle of the
experts' and it [is] up to a jury to evaluate what weight and credibility each expert
opinion deserves.”

Phillips v. Cohen, 400 F.3d 388, 399 (6th Cir. 2005) (citation

omitted); see also Conde v. Velsicol Chemical Corp., 804 F.Supp. 972, 984 (S.D. Ohio
1992) (“[W]hen the Court is confronted with a ‘battle of the experts,’ the jury must decide
the victor.”). Since the evaluation of expert opinion is properly left to the jury, and that
evaluation controls the boundaries of Plaintiff’s damages, it would be inappropriate for
the Court to grant Defendant summary judgment.

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Finally, although Plaintiff does not dispute that Bassem Saleh did not estimate
the cost to return the building to a pre-fire condition, Ali El-Zein testified that such a cost
is $20,000 less that his estimate to deliver a fully finished building. (Doc. 28 Ex. 2 at 5764).

Defendant objects to El-Zein’s estimate as unreliable “sheer speculation and

guesswork.” (Doc. 29 at 3). “An expert's opinion must be supported by more than
subjective belief; it requires support by ‘good grounds’ based on what is known.
McClean v. Ontario, Ltd., 224 F.3d 797, 800-01 (6th Cir. 2000) (citations omitted). ElZein had a reasonable factual basis for his estimate. Having written two estimates to
deliver Plaintiff a “move-in” ready, code-complaint building, El-Zein was sufficiently
familiar with the specifics of Plaintiff’s building to offer an opinion as to the cost to
deliver a pre-fire condition building. Moreover, El-Zein made the estimate during his
deposition after reviewing the available information concerning the pre-fire condition of
the building.

Defendant’s critique of the factual basis of El-Zein’s estimate simply

persuades the Court that the jury should resolve this issue.

See Moross Ltd.

Partnership v. Fleckenstein Capital, Inc., 466 F.3d 508, 516 (6th Cir. 2006) (“[M]ere
weaknesses in the factual basis of an expert witness' opinion . . . bear on the weight of
the evidence rather than on its admissibility.” (citation omitted)). Accordingly, summary
judgment is improper.
IV.

CONCLUSION
For the reasons stated above, Defendant’s Motion for Summary Judgment (Doc.

21) is DENIED.
IT IS SO ORDERED.

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s/Marianne O. Battani
MARIANNE O. BATTANI
UNITED STATES DISTRICT JUDGE

DATE: August 17, 2011
CERTIFICATE OF SERVICE
I hereby certify that on the above date a copy of this Order was served upon all
Parties of record, electronically.
s/Bernadette M. Thebolt
Case Manager

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