Opinion
Case No. 00-71518
October 31, 2002
OPINION AND ORDER
I. INTRODUCTION
This matter is before the Court on Defendants' Motion for Summary Judgment, Plaintiff's Motion for Partial Summary Judgment, Defendant's Motion for Leave to file Motion to Strike Affidavit of Timothy Mikolajewski and Plaintiff's Motion for Partial Summary Judgment on Zervos Group's Counterclaim.
For the reasons stated below, the Court GRANTS in part and DENIES in part Defendants' Motion for Summary Judgment as to Count I; GRANTS Defendants' motion as to Count II; DENIES Plaintiff's Motion for Partial Summary Judgment in its entirety; GRANTS Plaintiff's Motion for Partial Summary Judgment on Zervos' Group's Counterclaim; and deems Defendant's Motion to Strike Affidavit of Timothy Mikolajewski MOOT.
II. BACKGROUND
Safeco Insurance Company of America (Safeco) sells insurance through independent insurance agencies throughout the United States. The Zervos Group, Inc. (Zervos) is an independent insurance agency. Safeco was in the business of bonding contractors on public works (water and sewer) projects.
On August 31, 1993, Safeco and Zervos Agency, Inc. entered into an agreement entitled "Safeco Surety Agency Agreement," (Agreement) which authorized Zervos Agency, Inc. to issue bonds on behalf of Safeco and to collect and remit premiums on the bonds. On May 19, 1995, Safeco and Zervos Agency, Inc. executed an agreement assigning the Zervos Agency, Inc. rights in the Agreement to the Zervos Group, Inc., which is the Defendant here.
Under paragraph 1.1 of the Agreement, Zervos had the authority to accept proposals for and issue surety bonds, subject to periodic instruction from Safeco via a "letter of instruction, underwriting guide or other written instruction." Zervos was expressly prohibited from accepting risks on Safeco's behalf that were deemed unacceptable in accordance with Safeco's underwriting standards as set forth in ¶ 1.1 and as periodically supplemented. There is no question, however, that no "underwriting guide", as such, was ever issued by Safeco.
In 1993, Defendant Alan W. Peterson was an experienced surety bond agent employed by Zervos as an Account Manager. In approximately December 1996 or January 1997, Peterson submitted a new account to Safeco, Civil Constructors, Inc. (Civil), for consideration. Civil was owned and operated by Thomas LaCosse. Peterson submitted a Contractor Questionnaire on Civil's behalf and advised that he knew LaCosse and had obtained bonding for Civil through different insurance companies in the past.
In the Questionnaire, which was filled out by Peterson, he responded "no" to a question asking whether LaCosse had ever filed bankruptcy. Per Safeco, Peterson knew that this response was false and also failed to make it aware that LaCosse had a history of federal tax liens and civil judgments for failing to pay payroll and employment taxes. In his deposition, Peterson acknowledged receiving a credit report on June 8, 1995 which listed two civil judgments against LaCosse (1991 and 1992), a federal tax lien (1991) and a Chapter 7 bankruptcy filing (1986). Although Peterson claimed to have no independent recollection of the conversation, he acknowledged that he would have discussed the credit items with LaCosse on June 8th or 9th Peterson also acknowledged receiving a Dunn Bradstreet (DB) report on April 15, 1996 that showed Civil with a negative net worth of $44,005. The DB listed two additional tax liens, including one pertaining to Civil's failure to pay withholding taxes to the State of Michigan.
It seems that the Questionnaire was actually completed by Peterson in May of 1995 for submission to another bonding company and was simply resubmitted for Safeco's consideration.
Peterson admitted that he did not disclose the items listed in the prior DB or credit report to Safeco when he submitted Civil as a prospective client in 1997. He did not believe that the DB was accurate with regard to Civil's net worth. Moreover, because the DB is updated quarterly and Safeco had ordered its own report, he felt that he could simply address any questions that arose from the current report. With regard to Civil and LaCosse's history of failing to pay withholding taxes, Peterson testified that he did not regard it as important because he was satisfied with their explanation.
Peterson was unsure whether or not he had discussed the tax lien listed in the credit report with anyone at Safeco.
Based upon the information that was provided, Safeco authorized Zervos to execute payment and performance bonds on behalf of Civil by way of an Authority to Execute Bonds (Authority) that was signed on March 24, 1997. The Authority gave Zervos a $6 million dollar line of authority to issue bonds for Civil, provided no single project exceeded $2.5 million dollars. Bonds issued pursuant to this line of authority did not require prior evaluation by Safeco. From March through October 1997, Peterson and Zervos issued bonds guaranteeing Civil's performance on a total of 22 construction projects totaling $26 million dollars.
Per Defendants, in addition to the Questionnaire submitted by Peterson, Rowland and Holland obtained three years of financial statements, interviewed LaCosse and spoke with a representative of one of Civil's jobs regarding its performance.
It is not clear how, with the $6 million dollar limitation, Civil could have accrued a balance of $26 million dollars. However, beyond its claims about the issuance of certain bonds, Plaintiff has not asserted any claims regarding the amount accrued.
On September 4, 1997, Zervos' owner Gus Zervos received a letter from Brent Blonigan, a Capital Indemnity Corporation underwriter who was apparently considering issuing bonds for Civil. Blonigan requested information regarding allegations made by an unidentified source, of a drug-related arrest involving one of the LaCosse's, IRS fraud and falsifying payment affidavits. Peterson responded advising that Tom LaCosse had denied all of the allegations. Neither Defendant nor Peterson forwarded Blonigan's letter to Safeco or otherwise made it aware of the allegations.
On October 22, 1997, Zervos received an anonymous package containing newspaper clippings of Tom LaCosse's 1996 drug conviction. Peterson and Gus Zervos immediately called a meeting with LaCosse, who admitted to the conviction. He also advised of his 1990 conviction for tax evasion and insurance fraud.
Thereafter, Peterson contacted Safeco underwriters, Patrick Holland and Michael Rowland and requested a meeting, without disclosing what he had learned. On October 29, 1997, the underwriters met with LaCosse, Peterson and Gus Zervos and LaCosse disclosed his prior convictions.
There is a dispute regarding whether $6 million dollars in bonds (for the Port Clinton project) and a $1.5 million dollar bond (for the Genessee County project) were discussed at the meeting and issued with Rowland's approval after LaCosse's disclosure. Peterson testified that he and Rowland specifically discussed the bonds following the meeting but that Rowland said that LaCosse's criminal conviction had no bearing on LaCosse's abilities as a contractor. Per Peterson, Rowland told him to go ahead and release the bonds. Gus Zervos, likewise, testified that, in response to his question, "Where do we stand?," Rowland stated that they should keep it (the convictions) amongst themselves because he was satisfied with the explanation given and that they would "keep it the way it was." Gus Zervos interpreted Rowland's comments to mean that Safeco would maintain the status quo with regard to issuing bonds and that the previously approved bonds would not be rescinded.
Rowland denies approving release of the bonds, claiming that he was told by Peterson that the contracts had been signed and the bonds had already been executed the day before, on October 28, 1997. Peterson testified that the Genessee County bonds were not delivered until one or two days after his conversation with Rowland. Holland claimed to have no recollection regarding whether there had been any discussion about the bonds. However, he acknowledged that if he had been told that Zervos had issued bonds after learning of LaCosse's convictions, such news would have been significant to him.
In its responsive brief, Plaintiff acknowledges that the Genessee County bond was actually issued on November 3, 1997 and that the Port Clinton bond was issued on November 11, 1997.
Without citing to specific deposition testimony, Safeco asserts that Rowland actually advised Zervos that no further bonds were to be issued until he discussed LaCosse's criminal background with his superiors. However, Defendants point out that two weeks later, on November 18, 1997, Rowland and Holland approved $3 million dollars worth of bonds to Civil for other projects. Defendants also point out that, after the meeting, Rowland did not take immediate action to rescind Zervos' line of credit or otherwise terminate the agency relationship. In fact, Rowland did not communicate what he had learned about LaCosse to his superiors until November 25, 1997. In a memo, Rowland disclosed the convictions and advocated for Safeco to continue doing business with Civil. Safeco, however, rejected Rowland's recommendation and, on December 1, 1997, advised Zervos that it would no longer issue bonds for Civil.
In July 1998, Civil and LaCosse defaulted on all of their projects and, within two months, filed corporate and personal bankruptcy. Pursuant to the terms of the bonds, Safeco was required to complete Civil's projects, including the costs of material and supplies, at a cost in excess of $9 million dollars. Safeco brings this suit claiming that Peterson made material misrepresentations and omissions regarding Civil that induced it to authorize the issuance of bonds to its detriment. Absent Peterson's acts and omissions, says Safeco, it would not have approved Civil as a new account or authorized Zervos to issue bonds for Civil.
Safeco further asserts that Peterson was required, per the Agreement and the National Association of Surety Bond Producers' (NASBP) Code of Professional Standards, to "investigate" any prospective client to determine the character of the owner and the capacity and credit worthiness of the company before presenting the account to Safeco for consideration. This investigation was to include obtaining company financial statements for the previous three years, the owner's personal financial statement, credit reports and a DB report. Prospective clients were also to fill out a Contractor Questionnaire. Safeco asserts that upon completion of the investigation, Peterson was required to disclose any information bearing upon the prospective client's character, capital or capacity, including whether the contractor had a criminal background, prior personal bankruptcy, prior personal civil judgments or prior tax liens.
Section 5 of the NASBP Code of Professional Standards states:
5.01 Surety bond producers shall maintain objectivity and integrity in the rendering of their services and shall not knowingly misrepresent facts.
5.02 Surety bond producers shall provide all relevant information needed to support the submission which they present to underwriters. Producers shall not knowingly withhold negative information even if the underwriters do not ask for it.
Note that, in its brief, Safeco mischaracterizes much of Peterson's testimony regarding what his duties/obligations were with regard to Civil. Specifically, Safeco characterizes Peterson's answers to questions regarding his obligation to disclose relevant and material information to sureties in general, per the NASBP Code, as admissions that he was required in this case to disclose LaCosse's criminal background, personal bankruptcy, personal civil judgment and prior tax liens. This is an issue in dispute and is not a fair characterization of Peterson's testimony.
Defendants deny that either the Agreement or the NASBP Code obligated Peterson to conduct an "investigation" prior to submitting Civil as a prospective client. Per Defendants, Peterson's membership in the NASBP is voluntary and its Code does not establish legal duties for the conduct of its members with their clients or insurance carriers. Defendants also point out that the NASBP Code also contains a provision discouraging an agent from violating a client/proposed insured's confidences. This is inconsistent, says Defendants, with the provision referred to by Safeco, which encourages agents to disclose any negative information, even if it is not requested. Defendants further deny that Peterson was even obligated to gather financial documents unless expressly asked to do so by Safeco underwriters.
With regard to required disclosures, Defendants argue that the only underwriting standards issued by Safeco to Zervos were those listed in the Authority, which was not executed until March 24, 1997, well after Peterson had presented Civil as a new account with the requisite paperwork. The Authority listed 11 circumstances in which Zervos was not authorized to execute a bond. Neither a contractor's prior bankruptcy nor criminal conviction is among the listed circumstances. However, the Authority does state:
This authority is automatically withdrawn upon receipt by You of reliable information from any source of any substantial change in the ownership, organization or financial condition of the contractor, otherwise, the authority granted herein will terminate and expire on the expiration date shown above.
Defendants argue that the Authority did not require Zervos to investigate the financial condition of a contractor. Rather, it implicitly indicated that Safeco had already assumed responsibility for such an investigation prior to vesting authority in Zervos.
Defendants further argue that there were no written underwriting standards that prohibited Zervos from issuing bonds to contractors with a criminal record or who had previously filed for bankruptcy. Holland testified that he did not recall whether Safeco had any written standards. He further testified that he did not recall referring to an internal checklist to determine what documentation was required when evaluating a prospective account. Rather, he would accept any documents received from an agent and ask for additional information and/or documents if needed.
Finally, Defendants assert that the question pertaining to bankruptcy on the Contractor Questionnaire is ambiguous:
Has your firm or any of its principals ever petitioned for bankruptcy, failed in business or defaulted so as to cause a loss to a surety?
Defendants read this question to only require disclosure of a bankruptcy that caused a loss to a surety. To Peterson's knowledge, says Defendants, LaCosse's prior bankruptcy had not caused such a loss. Therefore, Peterson's response was correct.
In Plaintiff's four-count Complaint, it alleges breach of agency agreement (Count 1), breach of fiduciary duty (Count II), negligent misrepresentation (Count III) and negligence (Count IV). The parties' motions are only directed at Counts I and II, and both seek summary judgment on both counts.
III. STANDARD OF REVIEW
Under Fed.R.Civ.P. 56(c), summary judgment may be granted "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 judgment as a matter of law." Copeland v. Machulis, 57 F.3d 476, 478 (6th Cir. 1995). A fact is "material" and precludes a grant of summary judgment if "proof of that fact would have [the] effect of establishing or refuting one of the essential elements of the cause of action or defense asserted by the parties, and would necessarily affect application of appropriate principle[s] of law to the rights and obligations of the parties." Kendall v. Hoover Co., 751 F.2d 171, 174 (6th Cir. 1984). The court must view the evidence in the light most favorable to the nonmoving party and it must also draw all reasonable inferences in the nonmoving party's favor. Cox v. Kentucky Dept. of Transp., 53 F.3d 146, 150 (6th Cir. 1995).
The moving party bears the initial burden of showing that there is no genuine issue of material fact. Snyder v. AG Trucking Co., 57 F.3d 484, 488 (6th Cir. 1995). To meet this burden, the movant may rely on any of the evidentiary sources listed in Rule 56(c). Cox, 53 F.3d at 149. Alternatively, the movant may meet this burden by pointing out to the court that the non moving party, having had sufficient opportunity for discovery, has no evidence to support an essential element of his or her case, and on which that party will bear the burden of proof at trial. Tolton v. American Biodyne, Inc., 48 F.3d 937 (6th Cir. 1995); Street v. J.C. Bradford Co., 886 F.2d 1472 (6th Cir. 1989). The moving party does not, however, have to support its motion for summary judgment with evidence negating its opponent's claims. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1985).
Once the moving party has met its burden, the burden shifts to the nonmoving party to produce evidence of a genuine issue of material fact. Rule 56(e); Cox, 53 F.3d at 150. The nonmoving party cannot rest on its pleadings, but must present significant probative evidence in support of its complaint. Copeland, 57 F.3d at 479. The mere existence of a scintilla of evidence to support the nonmoving party position will be insufficient; there must be evidence on which a jury could reasonably find for the non moving party. Snyder, 57 F.3d at 488; Tolton, 48 F.3d at 941.
IV. ANALYSIS
A. Cross Motions for Summary Judgment Breach of Contract
Although Plaintiff asserts arguments against both Defendants for its breach of contract claim in Count 1, the allegations in the Complaint are only made against Defendant Zervos. Nevertheless, Plaintiff essentially concedes that this Count is not viable against Defendant Alan Peterson. However, Plaintiff has established a prima facie case of breach of contract against Defendant Zervos, with regard to Peterson's negative response to prior bankruptcies and whether Zervos had authority to continue issuing bonds after LaCosse's criminal record become known to it.
Count I of Plaintiffs Complaint is based on two main grounds: 1) Zervos' alleged misrepresentations and omissions, via Peterson, regarding Civil and LaCosse's negative financial information, including prior bankruptcy, and 2) Zervos' issuance of bonds after learning of LaCosse's criminal history.
Question 20 on the Contractor Questionnaire is the source of one alleged misrepresentation/omission on the part of Zervos and Peterson. And, although the terms of the Agency Agreement do not expressly require agents to complete and submit the Questionnaire, it is clear from the testimony of Peterson, Rowland and Holland that such was the parties' course of dealing when a new account was submitted for consideration:
[t]he circumstances under which the parties [sic] contract may be looked at to establish an ambiguity, as well as to indicate the proper choice of possible meanings; and the common knowledge and the understanding of the parties themselves as shown by their previous negotiations is sometimes such a circumstance.Stark v. Budwarker, Inc, 25 Mich App. 305, 314 (1970) (quoting Restatement of Contracts, § 242, comment, a, p. 341) (footnote omitted)). Thus, the Questionnaire is relevant to this breach of contract allegation.
Question 20 on the Questionnaire reads:
Has your firm or any of its principals ever petitioned for bankruptcy, failed in business or defaulted [so as to cause a loss to a surety?]
Defendant argues that it read "so as to cause a loss to a surety" as a modifier of bankruptcy, failed in business and defaulted. Plaintiff argues to the contrary. The Court finds there to be ambiguity in the language.
Presumably, the Questionnaire was drafted by Plaintiff and it is well settled that ambiguities are to be construed against the drafter. Stark v. Kent Products, Inc, 62 Mich App. 546, 547-548 (1975); Petrovello v. Murray, 139 Mich App. 639, 641 (1985). However, at the summary judgment stage, contract terms that are subject to more than one reasonable interpretation create a question of fact:
If the contract is subject to two reasonable interpretations, factual development is necessary to determine the intent of the parties and summary disposition is therefore inappropriate.Meagher v. Wayne State University, 222 Mich App. 700, 722 (1997), app den, 457 Mich. 874 (1998). See also SSC Associates Limited Partnership v. General Retirement System of City of Detroit, 192 Mich App. 360, 363 (1992); Petrovello, 139 Mich App. at 641.
Accordingly, the Court finds that there is a question of fact as to whether Defendant's failure to disclose the prior bankruptcy constituted a breach of the Agency Agreement.
Likewise, there is a question of fact regarding whether the following language in the Authority to Execute Contract Bonds required Defendant to make certain disclosures and/or prohibited it from issuing additional bonds after learning of LaCosse's criminal convictions:
This authority is automatically withdrawn upon receipt by You of reliable information from any source of any substantial change in the ownership, organization or financial condition of the contractor, otherwise, the authority granted herein will terminate and expire on the expiration date shown above. Bonds requested of you after that date must be approved by SAFECO prior to execution. Any notice of adverse developments or of a potential claim against any bond must be referred at once to the office which you report.
Plaintiff has not tendered any evidence that the first sentence should not be construed by its plain meaning. The express language only automatically withdraws Defendant's authority if there is a substantial change in the "ownership, organization or financial condition of the contractor." There is no evidence that LaCosse's criminal record affected Civil's financial, structural or professional standing.
The final sentence, however, is subject to interpretation and could support Plaintiff's contention that the criminal information discovered constituted an "adverse development" which should have been reported to Plaintiff immediately. Defendant admits that it received a letter from another insurer in September 1997, which alleged that LaCosse or one of his family members had been convicted of several crimes. Defendant further admits that this information was not relayed to Plaintiff, until sometime after Defendant received a packet over one and one-half months later containing evidence which confirmed the allegations.
There is a question of fact regarding whether Defendant's failure to timely advise Plaintiff of the allegations constituted a breach of the terms of the Authority. Although Defendant claims that Rowland authorized it to continue issuing bonds after the convictions were disclosed, Rowland denies Defendant's claim, thereby creating another question of fact.
However, with regard to the balance of Plaintiff's allegations, Plaintiff has failed to clearly identify language in the parties' Agency Agreement that required Zervos to disclose the balance of the negative financial information at issue. Plaintiff has further failed to offer any parol evidence from which the Court could infer that Defendant was required to make the disclosures.
Plaintiff claims that the terms of the Agency Agreement required Defendant to disclose "relevant" information about LaCosse and Civil's negative financial histories. The only language in the Agreement that sets forth Defendant's duties are set forth in paragraphs 1.1-1.3, which state that Defendant had the authority to accept proposals and issue surety bonds on Plaintiff's behalf, subject to periodic instruction from Plaintiff, via a "letter of instruction, underwriting guide or other written instruction." At paragraph 2.1, Defendant was prohibited from accepting risks on Plaintiff's behalf that were deemed unacceptable in accordance with Plaintiff's underwriting standards, as set forth in 1.1, and as periodically supplemented by Plaintiff.
Plaintiff, however, has failed to tender any evidence that it ever subsequently relayed underwriting standards to which Defendant was expected to adhere, in writing or otherwise. Plaintiff also has not tendered any evidence that it ever advised or otherwise made known to Defendant what factors it regarded as "relevant."
As set forth above, the Court is at liberty to consider the parties' course of dealing or other parol evidence in order to ascertain the true intent of the parties. Stark, 25 Mich App. at 314. However, Plaintiff has not offered any such evidence to establish that the implicit terms of the Agreement imposed a duty upon Defendant to disclose negative financial information about the proposed insured and its owner that was discovered by Defendants agent two years prior.
There is also no evidence that Defendants had a duty to "investigate" a proposed client, beyond the apparent practice between Plaintiff and Defendants of providing a completed Questionnaire, financial statements for the company for the prior three years, the owner's personal financial statement for the prior year, (current) credit reports and a (current) DB report. According to the testimony of Rowland and Holland, it was the practice of Safeco underwriters to review these initial documents and request any additional information Safeco deemed necessary.
In sum, the Court finds that there are triable issues of fact as to whether the criminal conviction allegations received in September 1997 should have been disclosed immediately and whether Defendant should have ceased issuing bonds after learning this criminal history; and, as to whether prior bankruptcy information should have been disclosed on the Questionnaire. However, the Court finds as a matter of law that Defendant's failure to disclose all other negative financial information was not a breach of the contract between Safeco and Zervos.
Breach of Fiduciary Duty
In its motion for partial summary judgment, Plaintiff asserts that both Defendants were its agents, with a fiduciary duty to Plaintiff to disclose information which the agent knows or should know would be of significance to Plaintiff. That information has all been discussed above. Plaintiff contends that this agency relationship was created under the original, 1993 Agreement and that if that remains disputed, that clearly Defendants were its agents after the March, 1997 Authority was executed. Plaintiff contends that if not sooner, by that date Defendants had a contractual and common law duty to disclose all negative financial information — LaCosse's personal bankruptcy, prior personal civil judgments and prior tax liens.
In response, Zervos contends that it had a longstanding relationship with Civil and acted as its agent in securing bonds long before its 1993 agreement with Safeco. It contends that Civil's surety needs were being met by Capital Indemnity Corporation, but that Capital was at full capacity when Safeco approached Zervos about doing business. It was at that point in time that Peterson mentioned to Safeco, the possibility of Safeco issuing surety bonds on behalf of Civil. Civil was presented as a potential new account to Safeco by Peterson/Zervos in late 1996 or early 1997.
Even though Safeco argues that Defendants are its agents, it does not dispute that Zervos is an independent insurance agency. Nor does it dispute that Peterson was Zervos' employee working as an Account Manager. As an independent agency, Zervos had the power to place insurance with various insurance companies, and Peterson did this on behalf of Zervos.
Under Michigan law, "[o]rdinarily, an independent insurance agent or broker is an agent of the insured, not the insurer." Harwood v. Auto-Owners Ins. Co., 211 Mich. App. 249, 254 (1995); Mayer v. Auto-Owners Ins Co, 127 Mich App. 23, 26 (1983). See also 43 Am. Jur.2d Ins. § 113 ("An insurance broker is ordinarily employed by the person seeking insurance, and . . . is distinguished from the ordinary insurance agent who is employed by insurance companies to solicit and write insurance. . ."). In Harwood, the Court held that this rule applied to an individual agent who worked for the independent agency. 211 Mich App. at 254. The Court concluded that since there was no question of material fact that the independent agency was not the agent of defendant Auto owners, the trial court properly granted the independent agency's motion for summary judgment. Although an unpublished opinion, the Sixth Circuit, in Paul Revere v. Wilner, 230 F.2d 1359 (6th Cir. 2000), cited the Harwood case approvingly.
As in Harwood, in this case it is undisputed that Zervos was an independent agent which had the right to and, in fact, did place insurance with various insurance companies on behalf of potential insureds. The 1993 Agreement in no way modified Zervos' independent status or non-exclusive right to seek insurance for its clients through other companies. Thus, it cannot be contested that Zervos/Peterson was acting as Civil's agent when it presented Civil to Safeco, and had no fiduciary duty to Safeco. Plaintiff's position is also contrary to the terms of the Agreement and the parties' course of dealing. The Agreement did not restrict Zervos' right to act independent of Safeco and solicit policies from other companies on behalf of potential insureds. Also, it was Safeco's apparent practice to conduct its own evaluation of new clients before giving Zervos authority to act on its behalf with respect to that client. This is further evidence that, when a client was first presented, Zervos was acting in its capacity as an independent agent with no authority to bind Safeco.
This Court finds the holding in Harwood and Mayer to be persuasive and, therefore, finds that Zervos was not acting as Plaintiff's agent when it presented Civil as a potential client prior to execution of the Authority. The Court further finds that there is no genuine issue of material fact that Peterson was the agent of Zervos; that he was not in privity with Safeco; and, that he, thus, owed no fiduciary duty to Safeco at any time.
Circumstances did change, however, in March, 1997 with execution of the Authority. Zervos does not dispute that it became an agent of Safeco upon execution of the Authority in March, 1997, which set the parameters within which Zervos could countersign bonds for Civil on Safeco's behalf without prior evaluation by Safeco. Plaintiff asserts that when it and Zervos executed the Authority, Zervos and Peterson had a duty then to disclose the information not previously disclosed — all of the negative financial information.
Plaintiff does not cite any authority for its position and the Court can find none. While a duty may have arisen on March 24, 1997 on the part of Zervos, that duty did not trigger the disclosure of information that came into Defendants' possession while it was agent for Civil, particularly since Plaintiff had already extended authority to Defendants to execute the bonds, and nothing in that authority required the disclosure of negative financial information. Accordingly, it is the Court's ruling that neither Zervos nor Peterson had a fiduciary duty to disclose the negative financial information of which Peterson had become aware through his prior dealings with Civil and LaCosse. The Court will, therefore, GRANT Defendants' motion with respect to Count II of Plaintiff's complaint.
B. Plaintiffs Motion for Partial Summary Judgment on Zervos Group's Counterclaim
"If a contract fairly admits of but one interpretation, it is not ambiguous." Auto Owners Ins. Co. v. Zimmerman, 162 Mich App. 459, 461 (1987). "[A]n unambiguous contract is not subject to construction and must be enforced according to its terms." Barner v. City of Lansing, 27 Mich App. 669, 671 (1971). Here, the express terms of the Agency Agreement and the Bonus Commission Agreement are clear and subject to only one interpretation. Either party was entitled to terminate the Agency Agreement with 90 days written notice. By its express terms and as a necessary consequence of the termination of the Agency Agreement, the Bonus Commission Agreement, likewise, terminated with the Agency Agreement. As an alternative to terminating the Agreement, Plaintiff could, but was not obligated to, agree to a period of rehabilitation. Plaintiff elected not to enter any such agreement.
Defendant does not deny that it received proper notice under the contract. There is no support for Defendant's claim that it was entitled to a conference prior to the termination of the Agreement. Consequently, Defendant has failed to tender any evidence that reasonable minds could differ regarding whether Plaintiff properly terminated its contractual relationship with Defendant and the Court will grant Plaintiff's motion.
Plaintiff only requests partial summary judgment. However, as the Court finds that there is no liability, there are also no damages. Therefore, summary judgment shall be granted against all of Defendant's claims and the Counterclaim dismissed.
C. Defendants' Motion for Leave to File Motion to Strike Affidavit of Timothy Mikolajewski
In light of the Court's ruling as to Plaintiff's breach of fiduciary duty claim, Defendants' motion is moot.
V. CONCLUSION
Therefore, Defendant and Plaintiff's motions are DENIED as to whether Defendant's negative response regarding LaCosse's bankruptcy filing constituted a breach of the parties' Agency Agreement and whether Defendant violated the terms of the Authority when it issued bonds after learning of LaCosse's convictions. Defendant's motion is GRANTED (and Plaintiff's DENIED) as to the remaining grounds upon which Plaintiff's breach of contract claim is based.
Further, the Court DENIES Plaintiff's Motion for Partial Summary Judgment in its entirety; GRANTS Plaintiff's Motion for Partial Summary Judgment on Zervos' Group's Counterclaim, and; deems Defendant's Motion to Strike Affidavit of Timothy Mikolajewski MOOT.