Gore v. Flagstar Bank, FSB

Citations: 711 N.W.2d 330; 474 Mich. 1075Docket: 127669

Court: Michigan Supreme Court; March 9, 2006; Michigan; State Supreme Court

Original Court Document: View Document

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On March 10, 2006, the Michigan Supreme Court issued an order reversing a prior judgment from the Court of Appeals regarding a case involving plaintiffs James and Bobbie Gore and defendant Flagstar Bank. The Supreme Court remanded the case to the Oakland Circuit Court for the entry of a Judgment Notwithstanding the Verdict (JNOV) in favor of Flagstar Bank. Chief Justice Taylor concurred, emphasizing that the plaintiffs' promissory estoppel claim lacked merit as the promise they relied upon was not "actual, clear, and definite." The conditional approval letter from Flagstar Bank included stipulations that were not satisfied by the plaintiffs, thus undermining their claim of reliance on the promise. Justice Cavanagh would have denied the leave to appeal, while Justice Weaver dissented, advocating for the affirmation of the Court of Appeals' decision. Justice Kelly also dissented, disagreeing with the trial court's granting of JNOV and supporting the Court of Appeals' judgment. The factual background reveals that the plaintiffs borrowed money secured by mortgages on their property but defaulted, leading to foreclosure by their lender, National Bank of Detroit (NBD). Subsequently, the plaintiffs sought financing from Flagstar Bank to redeem their foreclosed farm, and discussions with the bank's loan officer indicated no objections to the loan process.

Plaintiffs provided multiple documents to the defendant, who then sent an appraiser to evaluate their farm, noting its acreage and status as a working farm. Plaintiffs agreed not to seek financing from other lenders. One week before the expiration of the redemption period, NBD requested and received a conditional loan approval letter from the defendant. Relying on this approval, plaintiffs sold other property to prepare for the farm's redemption. However, shortly before the extended redemption period ended, the defendant decided against issuing the loan, leaving plaintiffs unable to secure alternative financing in time, resulting in the loss of their farm.

Plaintiffs subsequently sued the defendant for breach of contract, promissory estoppel, and fraud. At trial, the defendant argued the loan conditions were not met, particularly citing the farm’s foreclosure status and its acreage, which were not included in the approval letter. The jury sided with the defendant on the breach of contract and fraud claims, but ruled in favor of the plaintiffs on promissory estoppel, awarding them $206,856 in damages. The trial court granted the defendant's motion for judgment notwithstanding the verdict (JNOV), concluding that a contract existed due to the approval letter. 

However, the Court of Appeals reversed this decision, asserting no contract was present. The jury did not find a contract existed but only that the approval letter satisfied the statute of frauds. The court emphasized that the jury's determinations did not imply a contract, as the approval letter lacked the essential elements of consideration and mutuality required for a contract. The letter was unilaterally a promise from the defendant without any corresponding obligation from the plaintiffs, thus failing to establish a binding contract.

The trial court incorrectly determined that a contract existed based on the defendant's approval letter, which was deemed a denial due to the impossibility of meeting one of its conditions. A document cannot constitute a contract if it both makes and withdraws an offer. The court correctly submitted a promissory estoppel claim to the jury because, under Michigan law, a party can assert multiple claims, including inconsistent ones, unless an enforceable contract is established. Since no contract existed in this case, the plaintiffs could rely on promissory estoppel without substituting it for established consideration. The jury found all elements of promissory estoppel satisfied: there was a promise by the defendant for financing, the defendant expected that this promise would induce the plaintiffs to forbear seeking other financing, the plaintiffs indeed refrained from doing so, and the defendant's failure resulted in the plaintiffs losing their property. The jury's finding regarding the promise was not clearly erroneous, and the trial court's decision to set it aside was incorrect. The defendant's argument that the promissory estoppel claim could not stand due to the promise being conditional was rejected; a conditional promise can still support a promissory estoppel claim if the condition is satisfied.

Several courts have accepted the restatement position on promissory estoppel, allowing claims based on conditional promises if the conditions are fulfilled. The existence and scope of such promises are factual questions for the jury. In this case, the jury sided with the plaintiffs regarding whether certain conditions were met, specifically that the property could not be a working farm, could not exceed ten acres, and that the NBD mortgage needed to be current. Despite these alleged conditions, the defendant did not raise them as issues when approving the loan, which led the jury to reasonably conclude that these conditions were nonexistent at the time of the promise. The defendant's attorney acknowledged that at least one condition—property size—could not be altered by the plaintiffs. Furthermore, the plaintiffs had no intention or obligation to change the nature of the farm, and the defendant was aware that the NBD loan was not current, which motivated the plaintiffs to seek financing. The defendant's argument that the approval letter should be interpreted as a denial was deemed unreasonable, as the letter explicitly approved the loan. The jury’s finding that the plaintiffs met all known conditions was not erroneous, and the trial court incorrectly granted a judgment notwithstanding the verdict (JNOV). The Court of Appeals correctly reversed this decision, affirming that the jury found all elements of promissory estoppel were satisfied, while the faxed approval letter did not constitute a contract.