                           STATE OF MICHIGAN

                            COURT OF APPEALS



DASCH, INC., d/b/a PEGASUS GROUP, DDJ-                                UNPUBLISHED
BIRMINGHAM, L.L.C., GATEWAY-                                          August 25, 2015
ROCHESTER, L.L.C., DAILEY-ROCHESTER,
L.L.C., and PG 4301 STERLING HEIGHTS,
L.L.C.,

               Plaintiffs-Appellants,

v                                                                     No. 321147
                                                                      Oakland Circuit Court
SIGNATURE ASSOCIATES, INC., BRUCE                                     LC No. 2012-126590-NZ
MORRISON, CUSHMAN & WAKEFIELD, INC.,
and JOHN DOE CORPORATION,

               Defendants-Appellees.


Before: RONAYNE KRAUSE, P.J., and GLEICHER and STEPHENS, JJ.

PER CURIAM.

        Plaintiffs appeal as of right the trial court’s judgment of no cause of action, entered after
a bench trial, in this case in which plaintiffs alleged that defendants committed negligent
misrepresentation during the course of a real estate transaction that resulted in a financial loss for
plaintiffs. We affirm.

                                        I. BACKGROUND

        Plaintiff Dasch, Inc., d/b/a Pegasus Group, a California-based real estate investment
company, contacted defendant Signature Associates, Inc., a brokerage company in the Detroit
area, regarding office buildings in Rochester, Birmingham, and Sterling Heights, Michigan,
offered for sale on a sale/leaseback basis and brokered by Signature. Signature provided
information on the properties, and Dasch, via its Director of Acquisitions, Phil Jones, offered to
purchase the buildings for $22,700,000.

         Subsequently, Jones requested that defendants furnish some rent comparables so that
Jones and Robert Dailey, Dasch’s co-president, could confirm that the market would support
rental rates similar to those paid by the buildings’ sole tenant, Century 21, if Century 21
defaulted on its leases for the office buildings. Defendants sent a comps list to Jones; however,
the list had been prepared several months earlier for another client. David Green, a real estate
salesperson for Signature, compiled the comps list from various sources.


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        Dailey and Jones sought to verify the information in the comps list. Jones stated that he
spoke with Green by telephone and requested Green’s opinion regarding market rents for
buildings comparable to the office buildings. Jones testified that Green told him that market
rents for buildings in Birmingham and Rochester were $30 NNN and were $20 NNN for Sterling
Heights.1 Green testified that he had no recollection of speaking with Jones, and asserted that he
would not opine on market rents for properties in Birmingham, Rochester, or Sterling Heights
without performing an analysis of those areas. Dailey traveled to Michigan and toured the office
buildings with Bruce Morrison, the Director of Signature’s Investment Sales Division. Dailey
observed the areas in which the buildings were located and saw similar properties. Jones
performed an analysis of the financial terms of the proposed transaction and concluded that even
if market rental rates were 40 percent below the lease rates, Dasch could still realize a return of
7.5 percent.

         Plaintiffs entered into a purchase agreement for the properties.2 The total purchase price
for all the properties was $19,698,400. The limited liability purchasing companies then entered
into new lease agreements with Century 21. Century 21 began defaulting under the terms of the
leases and eventually declared bankruptcy. Plaintiffs disposed of the office buildings at a total
loss of $14,005,900.

        Plaintiffs filed suit alleging fraud and misrepresentation (Count I) and negligent
misrepresentation (Count II). In Count I, plaintiffs alleged that defendants misrepresented
market rental rates by falsely stating the rent paid by tenants in comparable buildings, and using
dated and inaccurate comparable rents when accurate and current comparable rents were
available. In Count II, plaintiffs alleged that defendants created a “special relationship” with
plaintiffs and it was foreseeable that plaintiffs would rely on the information defendants gave
them without retaining another broker. Plaintiffs argued in the alternative that defendants’
actions “created an exception to the general rule limiting the duty owed by a seller’s agent to a
prospective buyer.” Plaintiffs alleged that defendants violated their duties of care by falsely
stating the levels of rent paid by tenants in comparable buildings, falsely stating that tenants were
paying higher rents for lesser buildings, misrepresenting that retail rents were comparable to the
office buildings, and using inaccurate and dated rent comparables when accurate and current
information was available.

        The trial court entered a verdict of no cause of action against plaintiffs. In reaching its
verdict, the court found that the comparable lists were factually inaccurate and incomplete. In
addition, it noted that of the 55 properties on the comps list, many were retail rather than
commercial properties, few of the properties were in Rochester, and no properties were in
Sterling Heights. However, the court viewed the comps list as “merely a starting point and not a
detailed comp report that any reasonable investor would rely on to make investment decisions.”


1
 “NNN” or “Triple Net” is a commercial real estate term of art for a lease under which the tenant
pays taxes, utilities, and maintenance separately and not as part of the rent.
2
 Dasch assigned its right to purchase the properties to the plaintiff limited liability companies,
which were formed for the purpose of purchasing the buildings.



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The court stated that Green’s representation that market rent rates for similar properties were
$30.00 NNN for Birmingham and Rochester properties, and $20.00 NNN for Sterling Heights
properties, were “ballpark figures” on which no reasonable investor would base a decision. The
court also observed that experts for the parties and the trial court testified that lease values in
2007 were “materially less” than the figures quoted by Green. The court noted that its
independent expert, Michael Cotter, valued the 2007 lease rates at $24.75 NNN for Birmingham,
$17.00 NNN for Rochester, and $13.00 NNN for Sterling Heights. The trial court adopted those
figures.

        The court held that Morrison’s e-mail to Jones in which Morrison gave an opinion of
market rates for the properties, the comps list, the Green-Jones telephone call, and the Morrison-
Dailey property tour could not serve as the basis for a misrepresentation claim because they were
based on opinion or created an issue of fact. The trial court found that defendants made a
material representation by giving plaintiffs a comps list that had in fact been prepared for another
potential purchaser. The representation was false because the comps list contained several
errors. However, the trial court found that plaintiffs did not establish that defendants knew or
should have known that errors existed in the report when it was given to plaintiffs. In addition,
the trial court found no evidentiary support for plaintiffs’ allegation that defendants made the
representation with the intent that plaintiffs rely on it. The trial court observed that the
undisputed evidence showed that plaintiffs purchased the office buildings and incurred damages,
but the court concluded that plaintiffs did not rely on the comps list to make the decision to
purchase the office buildings. The trial court stated that, “Dailey’s and Jones’ testimony
supports the notion that Plaintiffs had more questions than answers as a result of the list.” The
trial court stated that because the comps list was “incomplete, questionable, [and] suspicious[,]”
any reliance on it would have been unreasonable. Accordingly, the trial court found no cause of
action on plaintiffs’ claim of fraudulent misrepresentation.

        Regarding plaintiffs’ claim of negligent misrepresentation, the trial court noted that
plaintiffs’ witnesses acknowledged “that they needed more information and analysis of the
market rental rates than the list provided.” The trial court found that plaintiffs’ established that
defendants “prepared the list without reasonable care[,]” but that plaintiffs did not establish that
defendants owed it a duty of due care because no evidence showed that defendants learned of the
errors in the comps list before plaintiffs discovered them. The trial court found no cause of
action on plaintiffs’ claim of negligent misrepresentation.

                             II. NEGLIGENT REPRESENTATION

       On appeal, plaintiffs argue that the trial court erred in finding no cause of action on their
claim of negligent misrepresentation. We disagree. We review for clear error a trial court’s
findings of fact in a bench trial, and review de novo a trial court’s conclusions of law. Redmond
v Van Buren Co, 293 Mich App 344, 352; 819 NW2d 912 (2011).

        “A claim for negligent misrepresentation requires [a] plaintiff to prove that a party
justifiably relied to his detriment on information prepared without reasonable care by one who
owed the relying party a duty of care.” Unibar Maintenance Servs, Inc v Saigh, 283 Mich App
609, 621; 769 NW2d 911 (2009) (citations and quotation marks omitted). “There can be no



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fraud where a person has the means to determine that a representation is not true.” Nieves v Bell
Industries, Inc, 204 Mich App 459, 464; 517 NW2d 235 (1994).

       Plaintiffs allege defendants made misrepresentations either verbally or in writing in the
following four instances: 1) Morrision’s e-mail to Jones; 2) the Century 21 comps list; 3) the
phone call between Green and Jones; and 4) the property tour. Plaintiffs assert that in each
instance defendants materially overstated the comparable rents for each of the markets where the
properties were located.

       Plaintiffs rely on this Court’s decision in Alfieri v Bertorelli, 295 Mich App 189; 813
NW2d 772 (2012), in support of their assertion that defendants owed them a duty of due care
because they voiced a particularized concern regarding market rents. In Alfieri, the plaintiffs
purchased a condominium built in what had been an abandoned factory. The site had been
contaminated with chemicals, and while a vapor barrier was installed when the condominiums
were built, the site was not actually decontaminated. The plaintiffs believed that the site had
been decontaminated; their belief was based on a newspaper article and a sales brochure, both of
which stated that decontamination had taken place. The plaintiffs discovered that the site was in
fact contaminated and filed suit, alleging, among other counts negligent misrepresentation. A
jury found the defendants liable for negligent representation, but found the plaintiffs to be 35
percent comparatively negligent. Id. at 191-192.

        This Court observed that negligent misrepresentation requires the defendant to owe a
duty to the plaintiff. This Court noted that while “Michigan jurisprudence had never imposed on
sellers’ agents a duty per se of disclosure to buyers,” such a duty “may be imposed on a seller’s
agent to disclose newly acquired information that is recognized by the agent as rendering a prior
affirmative statement untrue or misleading.” Alfieri, 295 Mich App at 194. This Court found
that a genuine issue of fact existed with regard to whether the defendants owed a duty to the
plaintiffs because evidence in the record showed that the plaintiffs had relied in part on
information in the brochure, that the plaintiffs had directly inquired about the condition of the
property, that the Department of Environmental Quality had informed the defendants that the
brochure contained inaccurate information, and that the defendants had not disclosed the updated
information to the plaintiffs. Alfieri, 295 Mich App at 194.

        In this case, the trial court found that while defendants prepared the comps list without
reasonable care, any statements verbally or in writing to plaintiffs were only opinions and not
reliable. Plaintiffs assert that the trial court erred in finding that defendants did not owe them a
duty of due care because no evidence showed that defendants learned of the errors in the comps
list before plaintiffs informed defendants of the errors years after the sale was finalized.
Essentially, plaintiffs argue that they were not required to establish that defendants learned that
the information in the comps list was false before they themselves made that discovery.
Plaintiffs’ argument is mistaken as to the law. As stated in Alfieri, a seller’s agent must disclose
newly discovered information that the seller’s agent recognizes “as rendering a prior affirmative
statement untrue or misleading.” Id. at 194. This duty may arise if a buyer expresses a
particularized concern about a particular issue. Id. Here, is it undisputed that plaintiffs
repeatedly expressed concern about market rental rates and that plaintiffs wanted this
information in order to determine whether the purchase of the office buildings would continue to
be a profitable enterprise if Century 21 breached the leases under which it occupied the


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buildings. However, Alferi held that even under these circumstances, the duty to disclose
attaches only where the seller’s agent discovers the error prior to the purchaser becoming aware
of the error. The trial court made a fact-finding that plaintiffs failed to prove that defendants
knew that the statements defendants made orally or in the comps list were untrue or that
defendants discovered that the statements were untrue before plaintiffs made the discovery. This
fact-finding was not clearly erroneous. Accordingly, the trial court did not err in concluding that
plaintiffs did not establish that defendants owed them a duty of due care. Id. at 194.

        In addition, and regardless of whether defendants could be found to have owed plaintiffs
a duty of care, the trial court did not clearly err in finding that any reliance by plaintiffs on the
comps list was not justifiable. The purchasers, exercising reasonable care, should have noted
some of the glaring problems with the comp list. Plaintiffs cannot establish negligent
misrepresentation when plaintiffs “were either presented with the information and chose to
ignore it or had some other indication that further inquiry was needed.” Id. at 195. Dailey
traveled to Michigan to tour the office buildings and to see the surrounding area. Jones did an
analysis of the proposed transaction and concluded that the transaction would be viable even if
market rental rates were 40 percent below Century 21’s lease rates. This evidence supports the
trial court’s finding that plaintiffs knew that the comps list raised questions and could not be
taken at face value.

        For these reasons, the trial court did not err in concluding that plaintiffs failed to establish
that defendants were liable for negligent misrepresentation.

       Affirmed.

                                                               /s/ Amy Ronayne Krause
                                                               /s/ Elizabeth L. Gleicher
                                                               /s/ Cynthia Diane Stephens




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