Perry v. Chase Auto Finance et al

Filing 31

OPINION AND ORDER granting 17 defendant's Motion for Summary Judgment; granting 22 plaintiff's Motion for leave to file second Amended Complaint. Signed by District Judge George Caram Steeh. (MBea)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION

BRUCE K. PERRY,
Plaintiff,
Case No. 17-10017
HON. GEORGE CARAM STEEH

vs.
CHASE AUTO FINANCE and
JP MORGAN CHASE BANK, N.A.,
Defendants.
__________________________/

OPINION AND ORDER GRANTING DEFENDANT’S
MOTION FOR SUMMARY JUDGMENT (DOC. 17) AND
GRANTING PLAINTIFF’S MOTION FOR LEAVE TO
FILE SECOND AMENDED COMPLAINT (DOC. 22)
Plaintiff Bruce K. Perry brings various tort claims against defendants
JP Morgan Chase Bank, N.A. and Chase Auto Finance (hereinafter
collectively referred to as Chase). This matter is presently before the Court
on Chase’s motion for summary judgment, (Doc. 17), and Perry’s motion
for leave to file a second amended complaint, (Doc. 22). Pursuant to Local
Rule 7.1(f)(2), the Court shall rule without oral argument. For the reasons
stated below, Chase’s motion is GRANTED and Perry’s motion is
GRANTED.

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I. Background
In August 2014, Perry obtained a $34,809.70 loan from The Auto
Place, Inc. to purchase a 2010 Mercedes-Benz S550. The terms of the loan
and the parties’ respective obligations are stated in a Retail Installment
Sales Contract (the RISC). (Doc. 17-2). Pursuant to the RISC, Perry
agreed to pay the sum owed under the contract “even if the vehicle is
damaged, destroyed, or missing.” (Doc. 17-2 at PageID 116). Perry further
agreed not to “sell, rent, lease, or transfer any interest in the vehicle”
without written permission from The Auto Place, Inc. (Doc. 17-2 at PageID
116). The Auto Place, Inc. thereafter transferred its interest in the RISC to
Chase.
In May 2016, Perry listed the vehicle for sale on Craigslist. (Doc. 17-3
at PageID 119). At this time, Perry owed approximately $24,000 on the
loan. Perry did not advise Chase of his intent to sell the vehicle. (Doc. 17-4
at PageID 137). He ultimately agreed to sell the vehicle to an individual
identifying himself as Desmond Moore. (Doc. 17-3 at PageID 119). Moore
was to send a check for $40,000 directly to Chase.
On or about May 17, 2016, Chase received a personal check
purportedly drawn from an USAA Federal Savings Bank account held in the
name of Vance Cumberland. (Doc. 17-5 at PageID 187; 17-6 at PageID
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189). On May 23, 2016, Chase sent Perry a letter congratulating him on
“paying off [his] account with [Chase].” (Doc. 17-6 at PageID 189). Chase
acknowledged Perry’s “final payoff amount of $40,000.00 was received on
Tuesday, May 17, 2016.” (Id.). Chase released its lien on the vehicle on
May 23, 2016. (Doc. 17-7 at PageID 191).
Perry alleges that he relied on this information when he delivered the
vehicle’s title and keys to Vance Cumberland on May 29, 2016. (Doc. 12 at
PageID 67).
On or about June 1, 2016, USAA Federal Savings Bank returned the
check to Chase as altered or fictitious. (Doc. 17-8 at PageID 199). On June
2, 2016, Chase notified Perry that the check had been returned by USAA
Federal Savings Bank and that Perry’s loan account had been reopened.
(Doc. 17-9 at PageID 205).
Perry filed this civil action in Wayne County Circuit Court on
December 7, 2016. (Doc. 1-1 at PageID 13). He raised three claims;
detrimental reliance, conversion, and fraud. (Doc. 1-1 at PageID 11-12). On
June 21, 2017, the parties stipulated to allow Perry to file an amended
complaint that added a negligence claim. (Doc. 11). Perry filed his first
amended complaint on June 21, 2017. (Doc. 12).

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Chase filed a motion for summary judgment on October 30, 2017.
(Doc. 17). In his response, filed on November 20, 2017, Perry seemed to
request that the Court remand a negligent misrepresentation claim to
Wayne County Circuit. His brief began with the following:
STIPULATION AND WAIVER OF
THEORIES OF RECOVERY
Plaintiff acknowledges Defendant’s argument on
detrimental reliance, conversion, and fraud. Plaintiff
also acknowledges and stipulates that he cannot
recover an amount over $75,000; he waives any
claim for an amount over $75,000. The amount in
dispute is no longer sufficient for this Court’s
jurisdiction. 28 U.S.C.A. § 1332(a). Now, this Court
may decline to supplemental jurisdiction over the
remaining state law claim for negligence or
negligent misrepresentation. See Bergeron v.
Busch, 228 Mich.App. 618, 620, 579 N.W.2d 124
(1998); Pierson Sand and Gravel, Inc. v Keeler
Brass Co., 460 Mich. 372, 378-379, 596 N.W.2d
153 (1999). Plaintiff will bring a motion to that effect.
(Doc. 18-1 at PageID 235). On December 4, 2017, Perry filed a motion to
remand, (Doc. 21), and a motion for leave to file a second amended
complaint, (Doc. 22). Chase filed response briefs in opposition to both
motions. (Doc. 26 and 27). The Court denied Perry’s motion to remand on
January 11, 2018. (Doc. 30).

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II. Summary Judgment
A. Legal Standard
Federal Rule of Civil Procedure 56(c) empowers a court to render
summary judgment “if the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits, if any,
show that there is no genuine issue as to any material fact and that the
moving party is entitled to a judgment as a matter of law.” Williams v.
Mehra, 186 F.3d 685, 689 (6th Cir. 1999) (en banc) (citing Fed. R. Civ. P.
56(c)). The standard for determining whether summary judgment is
appropriate 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.’” Amway Distrib. Benefits Ass’n v.
Northfield Ins. Co., 323 F.3d 386, 390 (6th Cir. 2003) (quoting Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986)). Mere allegations or
denials in the non-movant's pleadings will not meet this burden, nor will a
mere scintilla of evidence supporting the non-moving party. Anderson, 477
U.S. at 248, 252. There must instead be evidence from which a jury could
reasonably find for the non-movant. McLean v. 988011 Ontario, Ltd., 224
F.3d 797, 800 (2000) (citing Anderson, 477 U.S. at 252).The evidence and
all reasonable inferences must be construed in the light most favorable to
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the non-moving party. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio
Corp., 475 U.S. 574, 587 (1986); Redding v. St. Eward, 241 F.3d 530, 532
(6th Cir. 2001).
B. Analysis
1. Counts II-IV
“[I]f a plaintiff fails to respond or to otherwise oppose a defendant’s
motion, then the district court may deem the plaintiff to have waived
opposition to the motion.” Scott v. State of Tenn., 878 F.2d 382, 382 (6th
Cir. 1989). Chase moved for summary judgment on Perry’s claims for
detrimental reliance, (Count II), conversion, (Count III), and fraud, (Count
IV). (Doc. 17 at PageID 101-07). In his response, Perry “acknowledge[d] he
has no cause of action for detrimental reliance, conversion, or fraud.” (Doc.
18-1 at PageID 234). The Court deems Perry to have waived opposition to
Chase’s motion for summary judgment on these counts. Chase’s motion is
granted as it pertains to Counts II, III, and IV.
2. Count V
The final claim in the Amended Complaint is “Count V: negligence.”
(Doc. 12 at PageID 69). “The requisite elements of a negligence cause of
action are that the defendant owed a legal duty to the plaintiff, that the
defendant breached or violated the legal duty, that the plaintiff suffered
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damages, and that the breach was a proximate cause of the damages
suffered.” Schultz v. Consumers Power Co., 443 Mich. 445, 449 (1993).
Chase argues that it did not owe Perry any duty outside of those
contained in the RISC. Perry asserts that Chase owed him “a duty of due
care” pursuant to Michigan Compiled Laws §§ 440.4202 and 440.4214.
(Doc. 18-1 at PageID 248). Mich. Comp. Laws § 440.4202 states:
(1) A collecting bank must exercise ordinary care in
all of the following:
(a) Presenting an item or sending it for presentment.
(b) Sending notice of dishonor or nonpayment or
returning an item other than a documentary draft to
the bank's transferor after learning that the item has
not been paid or accepted, as the case may be.
(c) Settling for an item when the bank receives final
settlement.
(d) Notifying its transferor of any loss or delay in
transit within a reasonable time after discovery
thereof.
(2) A collecting bank exercises ordinary care under
subsection (1) by taking proper action before its
midnight deadline following receipt of an item,
notice, or settlement. Taking proper action within a
reasonably longer time may constitute the exercise
of ordinary care, but the bank has the burden of
establishing timeliness.
(3) Subject to subsection (1)(a), a bank is not liable
for the insolvency, neglect, misconduct, mistake, or
default of another bank or person or for loss or
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destruction of an item in the possession of others or
in transit.
A collecting bank is defined as “a bank handling the item for collection
except the payor bank.” Mich. Comp. Laws § 440.4105(e). A payor bank is
“a bank that is the drawee of a draft.” Mich. Comp. Laws § 440.4105(c).
Chase asserts that it “was not the drawee, depository, nor payor bank” but
rather merely a lienholder until it submitted the check for payment by
USAA. (Doc. 23 at PageID 295-96). Upon submitting the check, however,
Chase appears to qualify as a collecting bank. Out of an abundance of
caution for the non-moving party, the Court shall proceed as if Chase is a
collecting bank.
If Chase has a duty of ordinary care under Mich. Comp. Laws §
440.4202, its negligence liability under this statute is limited to breaching a
duty defined by Mich. Comp. Laws § 440.4202(1). Perry does not specify
which enumerated action Chase failed to execute with ordinary care. Mich.
Comp. Laws § 440.4202(2) states that “[a] collecting bank exercises
ordinary due care under subsection (1) by taking proper action before its
midnight deadline following receipt of an item, notice, or settlement.” A
bank’s midnight deadline is “midnight on its next banking day following the
banking day on which it receives the relevant item or notice or from which
the time for taking action commences to run, whichever is later.” Mich.
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Comp. Laws § 440.4101(1)(j). An “item” is “an instrument or a promise or
order to pay money handled by a bank for collection or pay. The term does
not include a payment order governed by article 4a or a credit or debit card
slip.” Mich. Comp. Laws § 440.4104(1)(i). “Notice” appears to refer to a
notice of dishonor, see Mich. Comp. Laws § 440.4104(3), which is defined
as a communication that “reasonably identifies the instrument and indicates
that the instrument has been dishonored or has not been paid or accepted.”
Mich. Comp. Laws § 440.3503(2). Finally, the definition of settlement may
be ascertained from Mich. Comp. Laws § 440.4104(1)(k), which defines
“settle” as “to pay in cash, by clearing-house settlement, in a charge or
credit or by remittance, or otherwise as agreed. A settlement may be either
provisional or final.”
Perry does not provide any evidence to create a genuine issue of
material fact on whether Chase failed to exercise ordinary care under Mich.
Comp. Laws § 440.4202(2). To the contrary, the record reflects that Chase
complied with its duty under this statute. On June 1, 2017, USAA notified
Chase that the check was marked fictitious/altered. (Doc. 17-8 at PageID
199). The next day, Chase sent Perry a letter notifying him that the $40,000
check was returned and payment was reversed. (Doc. 17-9 at PageID
205). Chase appears to have taken proper, timely action following
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notification from USAA. The Court concludes that even if Chase owed
Perry a duty under Mich. Comp. Laws § 440.4202, there is no genuine
issue of material fact on whether the duty was breached.
Michigan Compiled Laws § 440.4214 states:
(1) If a collecting bank has made provisional
settlement with its customer for an item and itself
fails by reason of dishonor, suspension of payments
by a bank or otherwise to receive a settlement for
the item which is or becomes final, the bank may
revoke the settlement given by it, charge back the
amount of any credit given for the item to its
customer's account or obtain refund from its
customer whether or not it is able to return the items
if by its midnight deadline or within a longer
reasonable time after it learns the facts it returns the
item or sends notification of the facts. If the return or
notice is delayed beyond the bank's midnight
deadline or a longer reasonable time after it learns
the facts, the bank may revoke the settlement,
charge back the credit, or obtain return from its
customer, but it is liable for any loss resulting from
the delay. These rights to revoke, charge-back and
obtain refund terminate if and when a settlement for
the item received by the bank is or becomes final.
(2) A collecting bank returns an item when it is sent
or delivered to the bank's customer or transferor or
pursuant to its instructions.
(3) A depositary bank that is also the payor may
charge-back the amount of an item to its customer's
account or obtain refund in accordance with the
section governing return of an item received by a
payor bank for credit on its books (section 4301).

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(4) The right to charge-back is not affected by either
of the following:
(a) Previous use of a credit given for the item.
(b) Failure by any bank to exercise ordinary care
with respect to the item, but a bank so failing
remains liable.
(5) A failure to charge-back or claim refund does not
affect other rights of the bank against the customer
or any other party.
(6) If credit is given in dollars as the equivalent of
the value of an item payable in a foreign money the
dollar amount of any charge-back or refund shall be
calculated on the basis of the bank-offered spot rate
for the foreign money prevailing on the day when
the person entitled to the charge-back or refund
learns that it will not receive payment in ordinary
course.
Perry’s reliance on Mich. Comp. Laws § 440.4214 is misguided; the
statute does not create a duty nor specify circumstances in which a bank
owes a duty of ordinary care. Perry highlights subsection (4)(b), but this
subsection merely states that a bank’s right to charge-back any credit given
for a provisional settlement is not affected by a failure to exercise ordinary
care. Perry has failed to establish that Chase owed him a duty outside of
the RISC.
In his Amended Complaint, Perry pleaded that Chase “owed a duty”
to ensure that the $40,000 check cleared before telling Perry his loan had
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been paid off. (Doc. 12 at PageID 68). Michigan Compiled Laws §§
440.4202 and 440.4214 do not create this duty. Perry does not present any
evidence or allegations to establish that Chase owed him such a duty
under the RISC or outside the contract. As such, Perry’s negligence claim
fails.
III. Leave to Amend
Pursuant to Federal Rule of Civil Procedure 15(a)(2), after a
responsive pleading is filed, “a party may amend its pleading only with the
opposing party’s written consent or the court’s leave. The court should
freely grant leave when justice so requires.” The court shall consider
several factors in determining whether to grant a motion to amend,
including “[u]ndue delay in filing, lack of notice to the opposing party, bad
faith by the moving party, repeated failure to cure deficiencies by previous
amendments, undue prejudice to the opposing party, and futility of
amendment . . . .” Wade v. Knoxville Utilities Bd., 259 F.3d 452, 458 (6th
Cir. 2001). “Delay by itself is not sufficient reason to deny a motion to
amend. Notice and substantial prejudice to the opposing party are critical
factors in determining whether an amendment should be granted.” Id. at
458-59.

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Perry filed a motion for leave to file his second amended complaint on
December 4, 2017. (Doc. 22). Although his prior complaints listed different
causes of action, the pleadings gave Chase notice of the allegations
underlying Perry’s negligent misrepresentation claim. The Court shall
therefore GRANT Perry leave to file a Second Amended Complaint with a
single count of negligent misrepresentation.
IV. Conclusion
For the reasons stated above, Chase’s motion for summary judgment
is GRANTED and Perry’s motion for leave to file a second amended
complaint is GRANTED.
IT IS SO ORDERED.
Dated: May 22, 2018
s/George Caram Steeh
GEORGE CARAM STEEH
UNITED STATES DISTRICT JUDGE

CERTIFICATE OF SERVICE
Copies of this Order were served upon attorneys of record on
May 22, 2018, by electronic and/or ordinary mail.
s/Marcia Beauchemin
Deputy Clerk

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