Perry v. Chase Auto Finance et al
Filing
37
OPINION AND ORDER granting 33 defendant's Motion to Dismiss. 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
v.
HON. GEORGE CARAM STEEH
CHASE AUTO FINANCE and
J.P. MORGAN CHASE BANK, N.A.,
Defendants.
_______________________________/
OPINION AND ORDER GRANTING
DEFENDANT’S MOTION TO DISMISS
On May 22, 2018, the court granted Defendants’ motion for summary
judgment on Plaintiff’s claims of detrimental reliance, conversion, fraud,
and negligence. The court permitted Plaintiff to file a second amended
complaint alleging a claim of negligent misrepresentation. Defendants filed
a motion to dismiss the second amended complaint on June 14, 2018,
which has been fully briefed. Pursuant to LR 7.1(f)(2), the court finds that
its decision in this matter will not be aided by oral argument. For the
reasons explained below, Defendants’ motion is granted.
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BACKGROUND FACTS
In his second amended complaint, Plaintiff Bruce Perry alleges one
count of negligent misrepresentation against Defendants Chase Auto
Finance and J.P. Morgan Chase Bank, N.A. (collectively “Chase”). Doc.
32. Perry alleges that in September 2014, he purchased a 2011 Mercedes
automobile, financing it with Chase for approximately $35,000. Id. at ¶ 5.
The terms of the parties’ agreement are stated in a retail installment sales
contract. By May 2016, the balance on the loan was $23,108.06. At that
time, Perry agreed to sell the vehicle to a Vance Cumberland of Ohio for
$40,000. Id. at ¶ 7. Cumberland was to deposit the $40,000 directly with
Chase, paying off the auto loan and leaving approximately $16,000 for
Perry. Id. at ¶ 7.
On May 16, 2016, Cumberland deposited a check for $40,000 with
Chase to pay off Plaintiff’s loan. On May 23, 2016, Chase sent a letter to
Perry acknowledging the check and stating that it was releasing its lien on
the vehicle. Id. at ¶ 9. Perry alleges that he phoned Chase on May 23 and
on May 27 and “received verbal confirmation that the lien on the vehicle
had been released and that he was in line for a refund.” Id. at ¶¶ 10-11.
Based upon the confirmation he received from Chase, Perry met “Vance
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Cumberland” and delivered the title and keys to the Mercedes to him on
May 29. Id. at ¶ 11.
On May 31, 2016, Perry alleges that he visited a Chase branch and
received a payment confirmation letter from the manager. Id. at ¶ 13.
Perry contends that when he called the bank to inquire about his refund on
June 3, he was told that the $40,000 check had been declined. Id. at ¶ 14.
Perry states that he released the vehicle to Cumberland in reliance upon
the bank’s negligent misrepresentation that the “$40,000 transaction had
gone through.” Id. at ¶ 15.
LAW AND ANALYSIS
Defendants seek dismissal of Perry’s negligent misrepresentation
claim pursuant to Fed. R. Civ. P. 12(b)(6). A motion under Rule 12(b)(6) of
the Federal Rules of Civil Procedure seeks dismissal based upon the
plaintiff's failure to state a claim upon which relief can be granted. To
survive a motion to dismiss, the plaintiff must allege facts that, if accepted
as true, are sufficient Ato raise a right to relief above the speculative level@
and to Astate a claim to relief that is plausible on its face.@ Bell Atlantic
Corp. v. Twombly, 550 U.S. 544, 555 (2007). See also Ashcroft v. Iqbal,
129 S.Ct. 1937, 1949-50 (2009). The complaint “must contain either direct
or inferential allegations respecting all the material elements to sustain a
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recovery under some viable legal theory." Advocacy Org. for Patients &
Providers v. Auto Club Ins. Ass'n, 176 F.3d 315, 319 (6th Cir.1999) (internal
quotation marks omitted).
In order to state a claim for negligent misrepresentation, a plaintiff
must show that he “justifiably relied to his detriment on information
prepared without reasonable care by one who owed the relying party a duty
of care.” Unibar Maint. Servs. v. Saigh, 283 Mich. App. 609, 621 (2009).
Chase argues that it did not have a duty to Plaintiff independent from any
duties set forth in the parties’ contract. See Rinaldo’s Const. Corp. v.
Michigan Bell Tel. Co., 454 Mich. 65, 83-86 (1997). In order to support a
tort claim between contracting parties, there must be a “violation of a legal
duty separate and distinct from the contractual obligation.” Id. at 84. “[I]f a
relation exists which would give rise to a legal duty without enforcing the
contract promise itself, the tort action will lie, otherwise not.” Id. (citations
omitted).
In previously dismissing Plaintiff’s negligence claim, the court
determined that Chase did not owe Perry a duty under Michigan’s Uniform
Commercial Code “to ensure that the $40,000 check cleared before telling
Perry his loan had been paid off.” Doc. 31 at 11-12. The court permitted
Plaintiff an opportunity to amend his complaint to state a negligent
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misrepresentation claim and, by implication, to identify a duty supporting
such a claim.
In support of his negligent misrepresentation theory, Plaintiff argues
that Chase has a duty based upon an “undertaking” – it “voluntarily
undertook” the task of informing Perry that the payment had been received
and that Chase released its lien. Plaintiff relies upon Sexton v. American
Aggregates, 60 Mich. App. 524 (1975), for the proposition that “having
chosen to act and chosen to warn, defendant had the duty to use
reasonable care in the exercise of those actions.” Id. at 530. Sexton is not
applicable here, however, because it considers a person’s liability to third
parties for physical harm when the person undertakes to render services to
another. See id. (“One who undertakes, gratuitously or for consideration, to
render services to another which he should recognize as necessary for the
protection of a third person or his things, is subject to liability to the third
person for physical harm resulting from his failure to exercise reasonable
care to protect his undertaking.”) (quoting Restatement (Second) of Torts §
324A (1965)). See also Smith v. Allendale Mut. Ins. Co., 410 Mich. 685
(1981) (“It is not enough that the [defendant] acted. It must have
undertaken to render services to another. Its acts do not constitute such an
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undertaking unless it agreed or intended to benefit the [third party by the
acts].”).
Here, there is no allegation that Chase undertook to render services
to benefit a third party or that a third party suffered physical harm. Rather,
Perry alleges that he suffered economic losses as a result of negligent
misrepresentations related to the parties’ direct contractual relationship.
Although “[g]enerally speaking, there is a duty to exercise reasonable care
in how one acts to avoid physical harm to persons and tangible things. . . .
This duty . . . does not extend to “intangible economic losses.” Rinaldo’s,
454 Mich. at 84 (citation omitted). For such losses, the “manifested intent
of the parties should ordinarily control the nature and extent of the
obligations of the parties.” Id. (citation omitted).
Aside from any contractual duty, Perry has not identified a duty on
Chase’s part “of due care in communicating to Plaintiff whether the check
deposited by Plaintiff had ‘cleared’” or whether Plaintiff’s debt was paid.1
See Second Amend. Compl. at ¶ 17. Although there is no reported
Michigan case on point, an unreported case from the Michigan Court of
The Second Amended Complaint identifies the source of this duty as Michigan
common law and Michigan’s Uniform Commercial Code, M.C.L. 440.4202 and
440.4214. The court has already ruled that these statutory provisions do not create
such a duty. Doc. 31 at 11-12. Plaintiff has not pressed this argument in his response
brief.
1
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Appeals held that a “bank’s statement regarding the status of a check does
not shift liability from the customer to the bank if the check is later
dishonored.” Wesseling & Brackmann v. Huntington Bancshares Financial
Corp., 2018 WL 1176334 (Mich. App. Mar. 6, 2018). In Wesseling, a law
firm received a counterfeit check from a purported client and deposited it in
its trust account. A few days later, the firm called the bank to determine the
status of the check and was told that the check had “cleared” and “you’re
good to go.” Id. at *1. Based upon this response, the law firm initiated a
wire transfer of the funds. Subsequently, the law firm learned that the
check had been dishonored and it lost $58,000. The firm filed suit against
the bank, alleging that it should be liable because it falsely represented that
the check had cleared. In finding that the law firm had no cause of action,
the Michigan Court of Appeals noted that UCC places the risk of loss for a
counterfeit check on the depositor, not the bank. The court “reasoned that
a bank manager’s statements that the check had cleared, and subsequent
actions to lift a hold on funds, ‘did not absolve [the defendant customer] of
[its] threshold duty not to deposit a fraudulent check.’” Id. at *3 (citation
omitted).
Similarly, other jurisdictions have found that a depositor of a
fraudulent check does not have a cause of action for negligent
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misrepresentation against a bank that mistakenly informs the depositor that
the check has “cleared.” See Greenberg, Trager & Herbst, LLP v. HSBC
Bank USA, 17 N.Y.3d 565 (2011) (“[A]n arm’s length borrower-lender
relationship . . . does not support a cause of action for negligent
misrepresentation” and the “UCC is clear that, until there is final settlement
of the check, the risk of loss lies with the depositor”); Dixon, Laukitis, and
Downing v. Busey Bank, 993 N.E. 2d 580, 587 (Ill. App. 2013) (“[T]here is
no duty under the common law to inspect a check for genuineness or to
remind customers that they bear the risk of loss before a deposited check
is finally settled.”).
Under the circumstances, Perry has not demonstrated that Chase
owed him a duty of care that would support a negligent misrepresentation
claim. Accordingly, the court will grant Chase’s motion to dismiss Perry’s
second amended complaint.
CONCLUSION
IT IS HEREBY ORDERED that Defendant’s motion to dismiss
Plaintiff’s second amended complaint (Doc. 33) is GRANTED.
Dated: November 15, 2018
s/George Caram Steeh
GEORGE CARAM STEEH
UNITED STATES DISTRICT JUDGE
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CERTIFICATE OF SERVICE
Copies of this Order were served upon attorneys of record on
November 15, 2018, by electronic and/or ordinary mail.
s/Marcia Beauchemin
Deputy Clerk
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