Central Truck Center, Inc. v. Central GMC, Inc.

J. FREDERICK SHARER, J. (Retired, Specially Assigned). This appeal arises from the grant of summary judgment by the Circuit Court for Prince George’s County in favor of appellees, Central GMC, Inc. and Burgess-Katz, LLC, (“Central GMC”) on claims of fraud, concealment, and negligent misrepresentation, asserted by appellants, Central Truck Center, Inc. and 3839 Ironwood Place, LLC (“Central Truck”). All of the claims and disputes in this litigation relate to a contract for the sale of a truck dealership by Central GMC to Central Truck.

Appellants’ question to this Court, which we have rephrased slightly, is: Did the trial court err by granting summary judgment in favor of appellees on appellants’ claims of fraud, concealment, and negligent misrepresentation by enforcing an integration clause in a contract whose execution was arguably induced by the alleged fraud, concealment, and misrepresentation? Central GMC filed a cross-appeal based on the trial court’s overall net judgment entered with respect to the parties’ contract-based claims and counterclaims, and asks us to consider: Whether the trial court erred in calculating the overall net judgment with respect to the parties’ contract based claims and counterclaims? ³⁸⁰ Finding neither error nor abuse of discretion, we shall affirm the judgments. FACTS and PROCEEDINGS In January 2006, the parties entered into an Asset and Real Estate Purchase Agreement (the “Agreement”), whereby Central GMC agreed to sell, and Central Truck agreed to buy, certain truck dealership assets and associated real property then owned by Central GMC. In its complaint, filed in December 2006, Central GMC averred that following the May 1, 2006 closing of the sale, Central Truck materially breached the terms of the Agreement by failing to pay the full settlement amount — leading to a $44,700 shortfall of the purchase price— and by failing to fulfill certain other requirements set forth in the Agreement.

Central GMC further alleged that Central Truck had failed to account for money and/or property owed to Central GMC. 1 Ultimately, by way of its fourth amended counterclaim, Central Truck alleged causes of action for breach of contract, fraud, concealment, and negligent misrepresentation by Central GMC and its principals, based, in part, on its claim that, following the purchase of the truck dealership, its income during the summer months of 2006 was considerably less than anticipated, given Central GMC’s sales history. It was those figures, Central Truck alleged, upon which it relied in negotiating a price for the purchase of the dealership. This shortfall, Central Truck contended, was due to an inaccuracy in Central GMC’s financial statements, resulting in large part from the cancellation of a contract between Central GMC and the District of Columbia Public Schools (“DCPS”). 2 Central Truck asserted that the proceeds of the DCPS contract had ³⁸¹ inflated Central GMC’s sales and service figures prior to the closing of the sale in May 2006. Central Truck averred that Central GMC had overbilled DCPS for parts and service and used the overbilled figures to enhance gross receipts and, hence, inflate the value of the truck dealership.

Central Truck said it relied upon those figures in settling on the purchase price for the dealership as a going concern. On April 18, 2008, Central GMC responded to Central Truck’s fourth amended counterclaim by filing its second amended motion for summary judgment. Therein, Central GMC argued that the Agreement constituted a complete integration of the terms of the contract and did not provide for any representations or stipulations to Central Truck as to a continuation of Central GMC’s past income. 3 Central GMC further asserted in its motion that the Agreement explicitly notified Central Truck that, while attempted collection of accounts receivable from DCPS on a contract that expired in September 2005 was continuing, DCPS had disputed the claim. Central GMC also noted in its motion that the DCPS contract represented income only to Central GMC and not to Central Truck, as the DCPS contract expired in September 2005, well before the effective date of the Agreement.

Thus, Central GMC’s argument continued, given the expiration of the DCPS contract in 2005, and the fact that the Agreement granted Central GMC retention of its right to collect its accounts receivable, Central Truck could not claim that it had an expectation of income from DCPS on the expired contract. Central GMC further contended that Central Truck was aware, by virtue of Schedule 5.1.7 to the Agreement, that the ³⁸² DCPS had notified Central GMC of its intent to conduct an audit of the parts and service department provided on its account. 4 Therefore, Central GMC argued, it was entitled to summary judgment as to the fraud, concealment, and negligent misrepresentation claims, as no material facts were in dispute. Moreover, in its view, Central Truck had not demonstrated the requisite intent and scienter on the part of Central GMC to prove its claims of fraud and concealment. On August 29, 2008, the trial court (Hon.

Sean D. Wallace) ruled on the fraud, negligent misrepresentation, and concealment issues in Central GMC’s motion for summary judgment, 5 as follows: THE COURT:____That leaves the remaining issues, which are the fraud, negligent misrepresentation, and concealment issues. Again, and as Mr. Lyman [Central Truck’s attorney] characterized it, essentially varieties and flavor of the fraud and the inducement type of claim. Again, the defendant has to show by clear and convincing evidence that there was false representations [sic] and that they were made with the intent that the defendant rely on them and the defendant did rely on them. The problem for me the[n], and Mr. Lyman has gone to great lengths to try to convince me otherwise, but it seems to me the problem for the[m] is the integration clause, which says that this agreement sets forth all promises and understanding and supercedes any prior agreements, understandings, or inducements.

So there may be some factual issues as to whether or not Mr. Burgess [Central GMC’s principal] made the factual ³⁸³ representations, but the bottom line is, by the time they got it all down on paper, they were saying the ones that we’re attaching here are the representations and the inducements and understandings that exist. Anything else, it’s all forgotten. And I understand defendant’s argument is it’s Mr. Key-ton’s [Central Truck’s principal] position that he priced this based on his review of the books and accounts and records, and the price would have been lower if he had realized what he now knows or what he now claims to know. But the fact is, he didn’t ask for any of that to be included in the agreement.

It was very simple for him to have said, and also, we do attach as a schedule, or reference as part of a schedule, all the books and records that were provided to us. And they are an integral part of this agreement, and they weren’t an inducement that we relied on. Instead, he did the contrary. Furthermore, there’s no evidence in the record that I could find on the summary judgment that the plaintiff made false representations and, moreover, that he intended to act, he intended the defendant to act in reliance on these.

These are books and records and accounts which were in existence, obviously, long before the agreement and long before the agreement was contemplated. And then, finally, the D.C. Schools issues was [sic] disclosed to the defendant and that’s undisputed. What’s disputed is how much they should have disclosed the characterization of that, and he’s saying that it was an audit. The defendant characterizes it as an investigation.

The fact is they did let the defendant know that D.C. Public Schools was looking into the billing and the accounts, and so the defendant was on notice that that was an issue. I don’t find, in light of that, that there is sufficient evidence, especially clear and convincing evidence, that the plaintiff intended to defraud the defendant as to the nature of that D.C. Public Schools account, which had terminated again under any analysis. It’s undisputed that it had terminated in September of 2005. Of course, the question in ³⁸⁴ dispute is whether it should have and how was it terminated and if it expired.

Was it terminated by the D.C. upon the findings of some problems? Nonetheless, it was over before this, months and months and months before the closing. So based on all those things, I find as a matter of law that there’s insufficient evidence to rise to the level of clear and convincing evidence that the plaintiff engaged in fraud, concealment, or negligent misrepresentation. So for those reasons, I’m going to grant the motion for summary judgment as to those claims.

I believe that resolves all the issues that are before me. Does anybody think there’s anything else out there? [COUNSEL FOR CENTRAL GMC]: Your Honor, just for the point of clarification as to the Court’s ruling on the motion for summary judgment, the Court has indicated that there’s insufficient clear and convincing evidence, but under 2-501 did the Court find that there are material facts is [sic] dispute that would lead to that? THE COURT: I don’t find that there are any material facts that are in dispute. I acknowledge that there appear to be factual disputes, although I do note that the affidavit doesn’t conform with the rule.

The affidavit upon information and belief doesn’t conform with the rule. What I’m saying is even if that affidavit were in conformity with the rules and that it was based on personal knowledge, any factual disputes generated as a result are not material to the ruling that I have made. The trial court additionally ruled that, based on all the disputes alleged in the complaints and counterclaims, Central GMC owed Central Truck damages in the amount of $1,197.11. Judgment was entered on September 18, 2008.

Central GMC filed a motion to alter or amend the judgment, alleging that the trial court’s damage calculations were incorrect, in that all amounts it owed to Central Truck had been paid and, in fact, Central Truck owed Central GMC $44,516.73. The court denied the motion on December 2, 2008. ³⁸⁵ Central Truck noted its appeal from the grant of Central GMC’s motion for summary judgment on September 22, 2008. Central GMC noted its cross-appeal from the judgment, and from the trial court’s denial of its motion to alter or amend the judgment, on December 11, 2008. Additional facts will be set forth as necessary.

DISCUSSION I. Central GMC’s Motion for Summary Judgment Appellant, Central Truck, contends that the trial court erred in granting summary judgment on the fraud, concealment, and negligent misrepresentation counts of its fourth amended counterclaim. Central Truck puts forth several arguments. First, it argues that in granting the motion for summary judgment, the trial court employed the incorrect standard in evaluating the claims 6 and wrongly concluded there was no dispute of material fact. Central Truck further alleges that the trial court improperly relied on the Agreement’s integration clause to foreclose argument on the fraud, concealment, and negligent misrepresentation tort claims.

Central Truck urges us to evaluate the tort claims on their own merits, separate from the contractual duties and remedies, asserting that it was improperly induced into executing the Agreement by false and/or ³⁸⁶ inadequate representations by Central GMC. In short, Central Truck argues that the integration clause cannot be applied to thwart its tort claims. Central GMC counters that the trial court correctly ruled that the integration clause barred the court’s consideration of any document outside the four corners of the Agreement, including the financial statements that Central Truck alleged fraudulently induced it to enter into the Agreement. Thus, it concludes, the tort claims fail.

Furthermore, Central GMC contends that the trial court correctly ruled that the record does not support a finding that Central GMC made any false representations to Central Truck related to the financial statements. Finally, Central GMC argues that the grant of summary judgment was proper because the trial court correctly concluded that any reliance Central Truck might have made on representations by Central GMC, as it related to the DCPS contract, was unjustifiable because Central GMC had given Central Truck adequate notice of the DCPS audit prior to execution of the Agreement. Therefore, the argument continues, Central Truck could not have justifiably relied on any representations or concealments concerning Central GMC’s sales to DCPS. Summary Judgment — Standard of Review The entry of summary judgment is governed by Md. Rule 2-501, which provides, in pertinent part: (f) Entry of judgment.

The court shall enter judgment in favor of or against the moving party if the motion and response show that there is no genuine dispute as to any material fact and that the party in whose favor judgment is entered is entitled to judgment as a matter of law. Summary judgment is appropriate if “the nonmoving party ‘has failed to make a sufficient showing on an essential element of [its] case with respect to which [it] has the burden of proof.’ ” Berger v. U.S., 87 F.3d 60, 65 (2d Cir.1996) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548 , 91 L.Ed.2d 265 (1986)). In considering a trial court’s grant of a ³⁸⁷ motion for summary judgment, this Court seeks to determine whether any material facts are in dispute, and, if they are, we resolve them in favor of the non-moving party, in this case, Central Truck. Bednar v. Provident Bank of Md., Inc., 402 Md. 532, 542 , 937 A.2d 210 (2007).

If no material facts are in dispute, the appellate court must determine whether the trial court correctly entered summary judgment as a matter of law. Anderson v. Council of Unit Owners of The Gables on Tuckerman Condominium, 404 Md. 560, 571 , 948 A.2d 11 (2008). In addition, it is the “established rule of Maryland procedure that, ‘in appeals from grants of summary judgment, Maryland appellate courts, as a general rule, will consider only the grounds upon which the [trial] court relied in granting summary judgment.’ ” Lovelace v. Anderson, 366 Md. 690, 695 , 785 A.2d 726 (2001) (quoting PaineWebber v. East, 363 Md. 408, 422 , 768 A.2d 1029 (2001)). In reviewing a trial court’s grant of summary judgment, we examine “ ‘the same information from the record and determine the same issues of law as the trial court.’ ” La Belle Epoque, LLC v. Old Europe Antique Manor, 406 Md. 194, 209 , 958 A.2d 269 (2008) (quoting Miller v. Bay City, 393 Md. 620, 632 , 903 A.2d 938 (2006)).

We look only to the evidence submitted in opposition to, and in support of, the motion for summary judgment in reviewing the trial court’s decision to grant the motion. Id. Central Truck alleges that it relied on Central GMC’s past sales figures and false representations in Central GMC’s financial statements, which included inflated sales and service figures related to the DCPS contract, in assessing the value of Central GMC as a going concern. Moreover, Central Truck claims the fact that its income during the summer months of 2006 was less than anticipated was due to the inaccuracy in Central GMC’s financial statements, resulting in large part from Central GMC’s overbilling of DCPS which, in turn, led to the cancellation of the DCPS contract. ³⁸⁸ Central GMC, of course, disagrees and argues that the trial court’s grant of summary judgment was based on a record in which there was no evidence of false representations in its financial statements.

Furthermore, Central GMC argues, any reliance Central Truck might have placed on representations by Central GMC, as they related to the DCPS contract, was unjustifiable because Central GMC had given Central Truck adequate pre-Agreement notice of the DCPS audit. Finally, Central GMC contends that the trial court correctly ruled that the tort claims, as well as contract claims, were barred by the integration clause. We conclude that the trial court correctly granted summary judgment to Central GMC on Central Truck’s claims of fraud, concealment, and negligent misrepresentation, as Central Truck has failed to make a sufficient showing of essential elements of its fraud-based claims. Specifically, Central Truck did not show that Central GMC made any false representations, that it justifiably relied on any such representations, or that it suffered compensable injury resulting from the representations.

A. Fraud Under Maryland law, the elements of a fraud claim are: (1) that the defendant made a false representation to the plaintiff, (2) that its falsity was either known to the defendant or that the representation was made with reckless indifference as to its truth, (3) that the misrepresentation was made for the purpose of defrauding the plaintiff, (4) that the plaintiff relied on the misrepresentation and had the right to rely on it, and (5) that the plaintiff suffered compensable injury resulting from the misrepresentation. Gourdine v. Crews, 405 Md. 722, 758 , 955 A.2d 769 (2008). A plaintiff must present clear and convincing evidence of each element in its claims. Id. at 758-59 , 955 A.2d 769 . 1.

False Representations The trial court ruled, in part: ³⁸⁹ Furthermore, there’s no evidence in the record that I could find on the summary judgment that the plaintiff made false representations and, moreover, that he intended to act, he intended the defendant to act in reliance on these. These are books and records and accounts which were in existence, obviously, long before the agreement and long before the agreement was contemplated. The trial court found no evidence that Central GMC made any false representations to Central Truck with regard to the status of the DCPS contract or its financial statements, nor that Central GMC intended that Central Truck would act in reliance on any such representations. The court found, correctly, that the DCPS contract, books, and records were found to be in existence long before the Agreement was contemplated.

We agree with the trial court that there is no evidence that Central GMC’s principals made any representations, fraudulent or otherwise, to Central Truck regarding the financial statements or their accuracy. 7 Schedule 5.1.7 clearly put Central Truck on notice of the existence of the pending DCPS audit. Central Truck does not dispute that it received such notice but argues that, despite its knowledge of the audit and the possibility or certainty of cancellation of the DCPS contract before Central Truck took ownership of the dealership, Central GMC somehow represented that Central Truck could expect the same income as Central GMC had enjoyed while the DCPS contract was in force. ³⁹⁰ We do not follow the logic of Central Truck’s argument. Central GMC made no representation, fraudulent or otherwise, about likely income Central Truck could expect from the DCPS contract. Nor did Central GMC, on the record before us, warrant the validity of its financial statements or their relevance to Central Truck’s future enterprise.

Central GMC merely provided its financial statements, the same ones relied upon by Central GMC in the course of its own operation of the dealership, to Central Truck, at the latter’s request. There was no evidence adduced by Central Truck that Central GMC ever represented the statements as accurate, and, while Central GMC may or may not have overbilled DCPS — a point not proven on the record — Central Truck knew or should have known that Central GMC’s contract with DCPS would end prior to the implementation of the Agreement. Central Truck, therefore, had no reasonable expectation that revenues from DCPS, inflated or otherwise, would continue into its ownership of the dealership. Central GMC did not represent the facts otherwise.

The trial court did not find that Central GMC made any misrepresentation to Central Truck related to sales