Agency; Actual authority (express or implied); Meretta v Peach; Wigfall v Detroit; Apparent authority; Alar v Mercy Mem’l Hosp; Fraud & negligent misrepresentation; Titan Ins Co v Hyten; Reasonable reliance element; Bev Smith, Inc v Atwell; Asset Campus Housing (ACH)

The court held that plaintiff could not reasonably rely on alleged statements made by employees of defendant-ACH who did not have agency authority to bind three other defendants (referred to as the Sellers). Further, there was no genuine issue of fact as to “whether plaintiff reasonably relied on misrepresentations defendants made” about the condition of the property in question to approve and make the mortgage loan. Thus, the court affirmed summary disposition for defendants. Plaintiff was the assignee of a mortgage loan made by a nonparty (Fortress) to finance another nonparty’s (referred to as SQK) purchase of a student housing community. The Sellers owned and sold the property to SQK. On appeal, plaintiff argued there was a genuine issue of material fact as to “whether ACH served as an agent of the Sellers with actual or apparent authority to make representations regarding the physical and financial condition of the Property and Fortress reasonably relied on such to make the loan.” The court disagreed. While plaintiff asserted the Sellers, under a management agreement, “granted ACH broad authority to represent” them in the sale, the court concluded the “agreement neither expressly nor impliedly authorized ACH to serve as the Sellers’ agent with authority to bind the Sellers by representations regarding the physical or financial condition of the Property, or to communicate with any lender of a buyer of the Property. Nothing in the management agreement remotely suggests that ACH had actual, express or implied, or apparent authority to do so.” Further, there was no record evidence indicating “the Sellers separately gave ACH express or implied authority to engage in the sale transaction other than to cooperate with the Sellers to assist them in providing” requested information. As to plaintiff’s reliance on Titan in support of its fraud claims, “Titan does not undermine the longstanding doctrine that a plaintiff cannot claim to have been defrauded where he had information available to him that he chose to ignore.” The court found that from the inspection reports and financial documents that were provided “to Fortress, Fortress possessed the information and had the unimpeded ability to know the truth but chose to ignore it. Fortress, as a matter of law, could not and did not reasonably rely on any alleged misrepresentations by defendants. Plaintiff, as assignee of Fortress, therefore, cannot prevail on its fraud claims.”