Title Agency must defend claim of gross negligence

When BCV Colonnade attempted to sell the K-Mart it owned in Jackson, it relied upon United Realty Companies, LLC and the Morris Home Title Agency to close the transaction. It required the buyer to maintain a $100,000.00 cash deposit with Chicago Title Insurance Company and Morris Home until the closing date, and was twice assured by Morris that the deposit was secure.  The buyer failed to perform, and when BCV sought the escrow from Morris, it was informed that the buyer had also failed to place the cash deposit with Morris. 

The trial court dismissed BCV's lawsuit against the defendants, based upon Morris' claim that the mistake it made [twice] confirming a deposit that was never, in fact made, was an innocent mistake and neither fraud nor gross negligence.  The Court of Appeals unanimously rejected the lower court's analysis and returned the case to the jury to decide whether the actions by Morris constituted "gross negligence."

Under the terms of the escrow, Morris Title was relieved of any liability except for "willful misconduct or gross negligence" if it acted "in good faith."  The court noted that under Michigan law, "gross negligence 'falls somewhere between ordinary negligence and an intentional act.' "  It is "conduct so reckless as to demonstrate a substantial lack of concern for whether an injury results" and "suggests 'almost a willful disregard of precautions or measures to attend to safety and a singular disregard for substantial risks.' "  The court concluded:  "It is as though, if an objective observer watched the actor, he could conclude, reasonably, that the actor simply did not care about the safety or welfare of those in his charge." 

On this factual presentation, all three appellate judges agreed that BCV had established a question of fact for the jury to decide.  As the Court concluded, "Defendants' actions were surprisingly and significantly lacking...[they] failed to exercise even the slightest degree of attention or care with regard to their role...[they] had all of the necessary information [with] which to perform their duties....[yet they incorrectly led the plaintiff] to believe, quite convincingly, for months" that the plaintiff's interests had been protected. 

The Court further concluded that the plaintiff had established a question of fact with regard to its fraud and misrepresentation claim, given the apparently reckless nature of the reassurances provided to the plaintiff.