Summary
holding that the discovery rule does not apply to the accrual of actions for fraud
Summary of this case from Good v. Howmedica Osteonics Corp.Opinion
No. 121661.
Decided May 28, 2003. Updated September 24, 2003.
Appeal from Wayne Circuit Court, Jeanne Stempien, J.
Court of Appeals, Neff, P.J., and Fitzgerald and Talbot, JJ. 250 Mich. App. 499 (2002).
Feeney Kellett Wienner Bush, P.C. (by Seth D. Gould and Mary Theresa Moran) [35980 N. Woodward Avenue, Bloomfield Hills, MI 48304 [248.258.1580] ( Carol H. Lesnek-Cooper, of counsel) [400 Renaissance Center, P.O. Box 400, Detroit, MI 48265-4000] [313.665.7384], for the defendants-appellants.
This case presents the question whether an action for fraud accrues under MCL 600.5827 at the time the wrong was done, or whether it accrues on the date the plaintiff knew or should have known of the fraud or misrepresentation. The Court of Appeals reversed summary disposition for defendants, holding that a discovery rule of accrual applies to fraud actions. 250 Mich. App. 499; 655 N.W.2d 233 (2002). We reverse the judgment of the Court of Appeals and reinstate the order of the circuit court because MCL 600.5827 clearly applies and because prior decisions by this Court rejecting a discovery rule in fraud cases have never been overruled.
Although MCL 600.5855 allows a cause of action that was fraudulently concealed to be brought within two years after it is discovered, plaintiffs do not allege fraudulent concealment.
I
Plaintiff Patricia Boyle took over an existing car dealership in September 1988. The dealership went out of business in September 1992. Plaintiffs claim that they learned in September 1995 that the dealership was undercapitalized, even though plaintiffs raised the amount of money defendants said was sufficient to run the business. Plaintiffs also claim that in 1995 they learned that defendants falsely represented that a "rent factor" in a proposed agreement to sell the dealership did not conform with defendants' standards, as a result of which the sale was not completed.
Plaintiffs filed a complaint alleging two counts of fraud in August 1999. Defendants filed a motion for summary disposition, arguing that plaintiffs' claims are barred by the six-year period of limitation in MCL 600.5813. Defendants argued that plaintiffs' claims accrued under MCL 600.5827 at the time the wrongs on which the claims are based were done. Plaintiffs responded that a discovery rule applies to the accrual of a fraud action, i.e., a fraud action does not accrue until a plaintiff discovers, or should have discovered by the exercise of reasonable care, the cause of action, citing Fagerberg v. LeBlanc, 164 Mich. App. 349; 416 N.W.2d 438 (1987). Defendants replied that there is no discovery rule in fraud cases, relying on Thatcher v. Detroit Trust Co., 288 Mich. 410; 285 N.W. 2 (1939). The circuit court determined that it was bound by the Thatcher decision and granted defendants' motion for summary disposition.
"All other personal actions shall be commenced within the period of 6 years after the claims accrue and not afterwards unless a different period is stated in the statutes." MCL 600.5813.
On appeal as of right, the Court of Appeals reversed. The Court noted that in Thatcher and Ramsey v. Child, Hulswit Co., 198 Mich. 658; 165 N.W. 936 (1917), this Court rejected application of a discovery rule to fraud cases. However, the Court noted that Fagerberg held that the discovery rule applies in actions for fraud or misrepresentation without any discussion of the apparent conflict with the decisions in Thatcher and Ramsey. The Court of Appeals concluded that Fagerberg was correctly decided and that the subsequent adoption of the discovery rule in Michigan undercut the precedential value of Thatcher and Ramsey.
While it is true that our Supreme Court declined to apply the discovery rule in Thatcher and Ramsey, it is also true that Thatcher predated the adoption of the discovery rule in Michigan. See Johnson [ v. Caldwell, 371 Mich. 368, 378-379; 123 N.W.2d 785 (1963)]. Moreover, in a case involving negligent misrepresentation by an abstract company, our Supreme Court in Williams v. Polgar, 391 Mich. 6, 25, n. 18; 215 N.W.2d 149 (1974), quoted with approval a case involving fraud, Hillock v. Idaho Title Trust Co., 22 Idaho 440, 449; 126 P. 612 (1912), that had been quoted with approval in the Court of Appeals opinion in Williams [ v. Polgar], 43 Mich. App. 95, 98; 204 N.W.2d 57 (1972): "`"If the statute runs in favor of the abstractor from the delivery of the abstract, the company would be released long before the falsity of the abstract could reasonably be discovered by the purchaser. This would not be justice, and ought not to be the law."'" The Supreme Court's approval of Hillock supports the argument that there is no bar to the use of the discovery rule in fraud actions. Further, the Fagerberg panel was aware of and quoted the Supreme Court's decision in Williams in concluding that the discovery rule applies. Thus, we conclude that line Fagerberg is good law and, therefore, we reverse the decision of the trial court. [ 250 Mich. App. 504-505.]
Defendants have applied for leave to appeal.
II
We review de novo the interpretation and application of a statute as a question of law. If the language of the statute is clear, no further analysis is necessary or allowed. Pohutski v. City of Allen Park, 465 Mich. 675, 683; 641 N.W.2d 219 (2002). In the absence of disputed facts, the question whether a cause of action is barred by the statute of limitations is also a question of law. Moll v. Abbott Laboratories, 444 Mich. 1, 26; 506 N.W.2d 816 (1993).
III
This is not the first time that this Court has considered the question whether a cause of action for fraud accrues when it is or should have been discovered. The discovery rule was rejected in Ramsey, which held that the Legislature effected a compromise between the rule at law, under which the period of limitations begins to run from the time the fraud is perpetrated, and the rule at equity, under which the period begins to run when the fraud is discovered. In addition to the six-year period of limitations applicable to frauds, the Legislature provided that if the cause of action was fraudulently concealed, it could be brought two years after it was discovered or should have been discovered.
At issue in Ramsey were 1915 CL 12323 and 12330, the predecessors of MCL 600.5813 and 600.5855, the six-year statute of limitations applicable to fraud actions and the fraudulent-concealment statute, respectively. In Ramsey, this Court explained:
It will be observed that the legislature did not see fit to adopt the equitable rule to the full extent of allowing the six-year limitation period to be considered as beginning at the date of discovery of the cause of action, but chose rather to allow a period of two years from date of such discovery within which to bring suit, as a special right, when by the strict terms of the general rule the action would be barred before the expiration of such two-year period. Under the two sections above quoted, a plaintiff now has, in any case, the full period of six years from the date of the fraudulent act, or other act creating his cause of action, within which to institute suit, and moreover, where the defendant has fraudulently concealed from him his cause of action, he has, under any circumstances, not less than the full period of two years from date of discovery in which to bring his action. [ 198 Mich. 667.]
Subsequently, in Thatcher, this Court again rejected the claim that a cause of action for fraud accrues when it is discovered or should have been discovered, basing that conclusion on Ramsey and the statutes then in effect.
The period of limitation and the exception for fraudulent concealment at that time were codified at 1929 CL 13976 and 13983.
The discovery rule has been adopted for certain cases. For example, in Johnson v. Caldwell, the Court held that the discovery rule applies to actions for medical malpractice. This Court has not, however, overruled Ramsey and Thatcher, or held that the discovery rule applies to actions for fraud or intentional misrepresentation. Moreover, after Ramsey and Thatcher were decided the Legislature enacted MCL 600.5827, which provides:
Except as otherwise expressly provided, the period of limitations runs from the time the claim accrues. The claim accrues at the time provided in sections 5829 to 5838, and in cases not covered by these sections the claim accrues at the time the wrong upon which the claim is based was done regardless of the time when damage results.
Under MCL 600.5827 a claim accrues when the wrong is done, unless §§ 5829 to 5838 apply. Plaintiff does not claim that any of those sections apply.
The wrong is done when the plaintiff is harmed rather than when the defendant acted. Stephens v. Dixon, 449 Mich. 531, 534-535; 536 N.W.2d 755 (1995).
Those sections govern the accrual of claims regarding entry on or recovery of land, mutual and open account current, breach of warranty or fitness, common carriers to recover charges or overcharges, life-insurance contracts where the claim is based on the seven-year presumption of death, installment contracts, alimony payments, and malpractice.
The Court of Appeals erred in holding that the discovery rule applies to the accrual of actions for fraud. That holding directly contradicts Ramsey and Thatcher and ignores the plain language of MCL 600.5813 and 600.5827.
Plaintiffs' cause of action accrued when the wrong was done, and they had six years thereafter to file a complaint. Because plaintiffs failed to do so, their cause of action is barred. Accordingly, we reverse the judgment of the Court of Appeals and reinstate the order of the circuit court granting summary disposition for defendants. MCR 7.302(G)(1).
CORRIGAN, C.J., and CAVANAGH, TAYLOR, YOUNG, and MARKMAN, JJ., concurred.
WEAVER, J., dissented and would grant leave to appeal.
KELLY, J., took no part in the decision of this case.