Sterling Bank & Trust Fsb v. Sc Southfield-Twelve Associates LLC ( 2015 )


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  •                           STATE OF MICHIGAN
    COURT OF APPEALS
    STERLING BANK & TRUST, F.S.B.,                                     UNPUBLISHED
    November 19, 2015
    Plaintiff-Appellee,
    v                                                                  No. 322325
    Oakland Circuit Court
    SC SOUTHFIELD-TWELVE ASSOCIATES,                                   LC No. 2009-103711-CK
    L.L.C., and MARK A. CANVASSER,
    Defendants-Appellants.
    Before: JANSEN, P.J., and MURPHY and RIORDAN, JJ.
    PER CURIAM.
    The proceedings underlying this appeal spanned nearly five years, during which plaintiff,
    Sterling Bank and Trust, FSB, sought to recover on a promissory note and leasehold mortgage
    executed by defendant SC Southfield-Twelve Associates, LLC, and a guaranty executed by
    defendant Mark A. Canvasser.1 The trial court entered a judgment awarding plaintiff
    $902,120.85 in damages against SC STA on the basis of its liability for the mortgage debt. The
    trial court ordered Canvasser to pay a 25% share of SC STA’s outstanding debt, and it ordered
    foreclosure of the leasehold mortgage. Defendants appeal as of right. We affirm.
    I. FACTUAL BACKGROUND
    On April 16, 1998, SC STA executed a promissory note and mortgage, under which SC
    STA received a $1,125,000 commercial loan and plaintiff obtained a leasehold mortgage on SC
    STA’s leasehold interest in commercial property located in Southfield, Michigan. At the time,
    Canvasser and David L. Steuer, who is not a party in this case, signed a guaranty agreement,
    under which they unconditionally guaranteed, among other things, “the full and prompt payment
    and collection when due, whether by acceleration or otherwise, and at all times hereafter, of: (a)
    the top twenty five percent (25 %) of the outstanding indebtedness on the Mortgage Note . . . .”
    1
    We will refer to defendant SC Southfield-Twelve Associates, LLC, as “SC STA” and defendant
    Mark Canvasser as “Canvasser” in this opinion.
    -1-
    Following two loan modifications, plaintiff filed a two-count complaint against SC STA
    in September 2009, under which it (1) alleged that SC STA breached the promissory note and (2)
    requested the appointment of a receiver over the property covered by the leasehold mortgage. In
    October 2009, the trial court appointed a receiver over the property. In February 2010, plaintiff
    filed a first amended complaint, which included an additional count against Canvasser alleging
    that he violated the terms of the guaranty agreement.2
    In July 2010, plaintiff filed a motion for summary disposition under MCR 2.116(C)(10)
    regarding the extent of Canvasser’s liability under the guaranty agreement. Defendants
    subsequently filed a motion to compel plaintiff to mitigate its damages by immediately
    foreclosing on the leasehold mortgage. Additionally, Canvasser filed a response in opposition to
    plaintiff’s motion for summary disposition, in which he sought the entry of judgment in his favor
    under MCR 2.116(I). The trial court granted plaintiff’s motion for summary disposition,
    entering a judgment against Canvasser for $209,979.71, and denied defendants’ motion to
    compel foreclosure on the leasehold mortgage.
    In September 2011, the trial court held a bench trial on plaintiff’s breach of contract
    claim against SC STA and the judicial foreclosure claim. In February 2014, the trial court
    entered an opinion and order in favor of plaintiff. In June 2014, the trial court entered a final
    judgment (1) awarding plaintiff $902,120.85 in damages against SC STA for breaching the
    promissory note and mortgage, (2) amending the original judgment against Canvasser so that
    Canvasser is liable for 25% of the current judgment against SC STA, and (3) ordering judicial
    foreclosure on the leasehold mortgage, with the understanding that the money judgments against
    defendants would be adjusted following the foreclosure sale.
    II. STANDARDS OF REVIEW
    On appeal, defendants challenge multiple orders and judgments entered by the trial court.
    However, defendants’ claims are rooted in the trial court’s order granting summary disposition in
    favor of plaintiff as to Canvasser’s liability under the guaranty, its opinion and order after trial on
    plaintiff’s breach of contract and judicial foreclosure claims, and its final judgment against
    defendants.
    This Court reviews de novo a trial court’s grant or denial of summary disposition.
    Moraccini v Sterling Hts, 
    296 Mich. App. 387
    , 391; 822 NW2d 799 (2012). When reviewing a
    motion for summary disposition pursuant to MCR 2.116(C)(10), which tests the factual
    sufficiency of the plaintiff’s claim, Walsh v Taylor, 
    263 Mich. App. 618
    , 621; 689 NW2d 506
    (2004), this Court may only consider, in the light most favorable to the party opposing the
    motion, the evidence that was before the trial court, which consists of “the ‘affidavits, together
    with the pleadings, depositions, admissions, and documentary evidence then filed in the action or
    submitted by the parties,’ ” Calhoun Co v Blue Cross Blue Shield Michigan, 
    297 Mich. App. 1
    ,
    11-12; 824 NW2d 202 (2012), quoting MCR 2.116(G)(5). Under MCR 2.116(C)(10),
    2
    Much later in the proceedings, plaintiff filed a second amended complaint, under which
    plaintiff requested judicial foreclosure.
    -2-
    “[s]ummary disposition is appropriate if there is no genuine issue regarding any material fact and
    the moving party is entitled to judgment as a matter of law.” Latham v Barton Malow Co, 
    480 Mich. 105
    , 111; 746 NW2d 868 (2008). “There is a genuine issue of material fact when
    reasonable minds could differ on an issue after viewing the record in the light most favorable to
    the nonmoving party.” Allison v AEW Capital Mgt, LLP, 
    481 Mich. 419
    , 425; 751 NW2d 8
    (2008). “This Court is liberal in finding genuine issues of material fact.” Jimkoski v Shupe, 
    282 Mich. App. 1
    , 5; 763 NW2d 1 (2008).
    After a bench trial, we review the trial court’s findings of fact for clear error and its
    conclusions of law de novo. Florence Cement Co v Vettraino, 
    292 Mich. App. 461
    , 468; 807
    NW2d 917 (2011). “As with other findings of fact, an award of damages is reviewed on appeal
    pursuant to the clearly erroneous standard.” Triple E Produce Corp v Mastronardi Produce, Ltd,
    
    209 Mich. App. 165
    , 177; 530 NW2d 772 (1995). “A factual finding is clearly erroneous if there
    is no substantial evidence to sustain it or if, although there is some evidence to support it, the
    reviewing court is left with the definite and firm conviction that a mistake has” occurred. Miller-
    Davis Co v Ahrens Constr, Inc, 
    495 Mich. 161
    , 173-173; 848 NW2d 95 (2014).
    III. CONSTRUCTION OF THE GUARANTY CONTRACT
    Defendants first argue that the trial court erroneously interpreted the guaranty executed
    by Canvasser and, as a result, improperly granted summary disposition in favor of plaintiff with
    regard to Canvasser’s liability and incorrectly ruled that Canvasser remained liable for a portion
    of SC STA’s debt under the final judgment and after proceeds from the foreclosure were applied
    to the debt. We disagree.
    A. RULES OF CONTRACT INTERPRETATION
    The following standards of review and rules of interpretation are applicable in contract
    cases:
    We review de novo questions involving the proper interpretation of a
    contract. In ascertaining the meaning of a contract, we give the words used in the
    contract their plain and ordinary meaning that would be apparent to a reader of the
    instrument. We must give effect to every word, phrase, and clause in a contract
    and avoid an interpretation that would render any part of the contract surplusage
    or nugatory. We cannot read words into the plain language of a contract.
    [Northline Excavating, Inc v Livingston Co, 
    302 Mich. App. 621
    , 627-628; 839
    NW2d 693 (2013) (quotation marks and citations omitted).]
    Likewise, “all [of a contract’s] parts are to be harmonized so far as reasonably
    possible[.]” Comerica Bank v Cohen, 
    291 Mich. App. 40
    , 46; 805 NW2d 544 (2010) (quotation
    marks and citation omitted). “If the language of the contract is unambiguous, we construe and
    enforce the contract as written. Thus, an unambiguous contractual provision is reflective of the
    parties’ intent as a matter of law. Once discerned, the intent of the parties will be enforced
    unless it is contrary to public policy.” Quality Products & Concepts Co v Nagel Precision, Inc,
    
    469 Mich. 362
    , 375; 666 NW2d 251 (2003) (citations omitted).
    -3-
    “Contracts of guaranty are to be construed like other contracts, and the intent of the
    parties, as collected from the whole instrument and the subject-matter to which it applies, is to
    govern.” Comerica 
    Bank, 291 Mich. App. at 46
    (quotation marks and citation omitted).
    However, the Michigan Supreme Court has recognized that “a guaranty contract—like a surety
    contract—is a special kind of contract,”3 and has applied to guaranty contracts the principles of
    construction that apply to surety contracts. Bandit Indus, Inc v Hobbs Int’l, Inc (After Remand),
    
    463 Mich. 504
    , 511-512; 620 NW2d 531 (2001) (citations omitted).
    The undertaking of a surety is to receive a strict interpretation. . . . The
    liability of a surety is not to be extended by implication beyond the terms of his
    contract. A surety cannot be held beyond the precise terms of his agreement. . . .
    [Id. (quotation marks and citations omitted).]
    B. APPLICATION
    Defendants argue that the trial court erroneously disregarded the word “top” in
    interpreting the extent of Canvasser’s liability, emphasizing that the adjective “top” serves as a
    limitation of Canvasser’s liability and asserting that Canvasser’s liability was limited to the “top
    25%” of the outstanding indebtedness at the time of default minus any amount subsequently
    received by plaintiff, including proceeds from foreclosure on the mortgage.4 The plain language
    of the guaranty provides otherwise, and we cannot identify any provision in the agreement that
    could reasonably be construed as supporting Canvasser’s contention that SC STA’s outstanding
    liability was required to be fixed at a particular time for purposes of determining his liability.
    The guaranty states, “The Undersigned, Mark A. Canvasser and David L. Steuer, hereby
    unconditionally guarantee the full and prompt payment and collection when due, whether by
    acceleration or otherwise, and at all times hereafter, of: (a) the top twenty five percent (25 %) of
    the outstanding indebtedness on the Mortgage Note . . . .” (Emphasis added.) Additionally, the
    guaranty also provides, “Any amount received by Lender from whatever source and applied by it
    toward the payment of the Liabilities shall be applied in such order of application as Lender may
    from time to time elect.” Given this clear and unambiguous language, and the absence of any
    language setting a time for establishing the amount of Canvasser’s liability, the trial court
    properly concluded that the plain language of the guaranty does not establish a particular time for
    3
    A surety and a guarantor are similar in that both “promise to answer for the debt or default of
    another,” but the primary distinction between a surety contract and a guaranty contract is as
    follows: “ ‘[W]hile the surety assumes liability as a regular party to the primary undertaking, the
    guarantor does not, as his or her liability depends on an independent collateral agreement by
    which he or she undertakes to pay the obligation if the primary payor fails to do so.’ ” Bandit
    
    Indus, 463 Mich. at 507-508
    n 4, quoting 23 Michigan Civil Jurisprudence, Surety, § 14, p 50.
    4
    Similarly, defendants also contend that even if the trial court correctly calculated the
    outstanding liability of SC STA, the court should have interpreted the guaranty to demand no
    further repayment from Canvasser because plaintiff could receive from SC STA more than 25%
    of outstanding debt.
    -4-
    the calculation of Canvasser’s liability and does not prescribe a particular timeframe or order for
    applying payments in the calculation of SC STA’s outstanding debt for purposes of determining
    Canvasser’s “top 25%” share. Similarly, the trial court properly found that the guaranty includes
    no provision that could be reasonably construed as indicating that SC STA’s outstanding liability
    had to be fixed at a particular time. Rather, the guaranty indicates that Canvasser remains liable
    for the “top 25%” of SC STA’s outstanding liability when payment on the loan is due and “at all
    times hereafter.”
    Defendants assert on appeal that both parties agreed in the trial court that the word “top”
    means that Canvasser promised to pay the first or initial 25% portion of SC STA’s liability under
    the promissory note and only disagreed as to the time at which the “top” is calculated and the
    effect of proceeds from foreclosure on the “top.” On this basis, defendants assert that the
    meaning of “top” is unambiguous and that “the trial court erred in failing to ascribe any meaning
    to it.” However, the record shows that the trial court considered the word “top” and properly
    construed the plain language of the guaranty. Additionally, as the trial court recognized, the
    word “outstanding” is significant in ascertaining Canvasser’s obligations under the guaranty and
    in construing the word “top.” The plain meaning of “outstanding,” which is not defined in the
    guaranty or the loan agreement,5 under these circumstances is “unpaid” or “continuing to exist.”
    Merriam-Webster’s Collegiate Dictionary (11th ed). Likewise, in Black’s Law Dictionary (10th ed),
    “outstanding” is defined as “[u]npaid; uncollected .” Thus, in construing the
    guaranty as a whole and in a manner that harmonizes its provisions as much as reasonably possible,
    Comerica 
    Bank, 291 Mich. App. at 46
    , we conclude that the ordinary meaning of the guaranty was
    that Canvasser unconditionally promised to pay the first or initial 25% of SC STA’s unpaid or
    uncollected debt when the debt was due, or at any time after it became due, regardless of any
    other payments received by plaintiff.
    Defendants also incorrectly assert that plaintiff was required to foreclose on the leasehold
    mortgage and subtract the proceeds from SC STA’s outstanding indebtedness before calculating
    Canvasser’s 25% liability. Likewise, we reject defendants’ argument that the trial court erred in
    denying Canvasser’s request that all funds collected by plaintiff be applied to the “top” portion
    of the debt in a manner that satisfies Canvasser’s obligation under the guaranty. The following
    clear and unambiguous language in the guaranty belies defendants’ claims:
    The obligations of the undersigned hereunder are independent of the
    obligations of Borrower [SC STA], and a separate action or actions for payment,
    damages or performance may be brought and prosecuted against the
    undersigned, or any one of them, whether or not an action is brought against
    Borrower or the security for Borrower’s obligations, and whether or not
    Borrower be joined in any such action or actions, and whether or not notice be
    given or demand be made upon Borrower.
    5
    “Courts may consult dictionary definitions to ascertain the plain and ordinary meaning of terms
    undefined in an agreement.” Holland v Trinity Health Care Corp, 
    287 Mich. App. 524
    , 527-528;
    791 NW2d 724 (2010).
    -5-
    Lender may, from time to time, without notice to the undersigned . . . and
    without affecting, diminishing or releasing the liability of the undersigned . . . (g)
    resort to the undersigned . . . for payment of any of the Liabilities, or any portion
    thereof, whether or not Lender shall have resorted to any property securing any
    of the Liabilities or any obligation hereunder or shall have proceeded against any
    other of the undersigned or any other party primarily or secondarily liable on any
    of the Liabilities . . . . [Emphasis added.]
    This language plainly allows plaintiff to (1) seek recovery from Canvasser without first seeking
    recovery through foreclosure of the leasehold mortgage and (2) file suit against Canvasser for
    damages, payment, or performance without first filing suit against SC STA or otherwise
    recovering from SC STA. See Comerica 
    Bank, 291 Mich. App. at 47-48
    (holding, with regard to
    a guaranty agreement that included terms similar to those in this case, that “[t]he plain language
    of the limited guarant[y] forecloses defendant’s arguments” that the plaintiff was required to
    foreclose on the collateral before collecting on the guaranty).
    Therefore, consistent with our duty to read the language of the contact as a whole and
    “harmonize[] [its parts] so far as reasonably possible[,]” 
    id. at 46
    (quotation marks and citation
    omitted), we conclude that defendants’ interpretation of “top” is not supported by the precise
    terms of the agreement, and plaintiff was not required to foreclose on the leasehold mortgage at a
    particular time or apply the proceeds from the foreclosure or other funds received from SC STA
    in a manner that satisfied Canvasser’s liability under the guaranty, see Bandit 
    Indus, 463 Mich. at 511-512
    .
    IV. MITIGATION OF DAMAGES
    Next, defendants argue that the trial court incorrectly denied their motion to compel
    plaintiff to mitigate its damages by foreclosing on the leasehold mortgage. Additionally,
    defendants contend that, after the bench trial, the trial court erroneously found that plaintiff had
    pursued reasonable mitigation efforts, arguing “that the [l]easehold [m]ortgage held as collateral
    was a depleting asset,”6 and that the trial court failed to adequately explain how any funds
    advanced by plaintiff preserved the collateral. We disagree.
    6
    Defendants briefly assert for the first time in their reply brief that the trial court erred in
    “foreclosing from consideration at trial the reasonableness of what [plaintiff] now claims were
    efforts to mitigate.” “Reply briefs must be confined to rebuttal, and a party may not raise new or
    additional arguments in its reply brief.” Kinder Morgan Michigan, LLC v City of Jackson, 
    277 Mich. App. 159
    , 174; 744 NW2d 184 (2007), citing MCR 7.212(G). Nevertheless, the record
    does not support defendants’ claim that the trial court precluded consideration of this issue at
    trial. The reasonableness of plaintiff’s mitigation efforts was an issue specifically identified by
    defendants in the joint final pretrial order, plaintiff expressly acknowledged defendants’
    argument regarding its mitigation efforts during its opening statement at trial, and defense
    counsel extensively cross-examined witnesses at trial regarding the reasonableness of plaintiff’s
    mitigation efforts.
    -6-
    A. APPLICABLE LAW
    “Mitigation of damages is a legal doctrine that seeks to minimize the economic harm
    arising from wrongdoing.” Morris v Clawson Tank Co, 
    459 Mich. 256
    , 263; 587 NW2d 253
    (1998). “The question whether [a] plaintiff’s efforts to mitigate damages were reasonable under
    the circumstances is one for the trier of fact.” 
    Id. at 270.
    A plaintiff’s duty to reasonably
    mitigate its damages is as follows:
    Where one person has committed a tort, breach of contract, or other legal
    wrong against another, it is incumbent upon the latter to use such means as are
    reasonable under the circumstances to avoid or minimize the damages. The
    person wronged cannot recover for any item of damage which could thus have
    been avoided. [Id. at 263-264 (quotation marks and citation omitted).]
    Because “[t]he failure to mitigate damages is an affirmative defense,” Fothergill v McKay Press,
    
    374 Mich. 138
    , 140; 132 NW2d 144 (1965), “[t]he defendant bears the burden of proving that the
    plaintiff failed to make reasonable efforts to mitigate damages,” 
    Morris, 459 Mich. at 266
    .
    B. APPLICATION
    1. FORECLOSURE
    First, the trial correctly rejected defendants’ claim, under their motion to compel plaintiff
    to mitigate its damages by foreclosing on the leasehold mortgage, that plaintiff had to pursue
    foreclosure on the leasehold mortgage before it could seek damages from Canvasser. As we
    
    explained supra
    , the plain language of the guaranty did not require plaintiff to foreclose on the
    leasehold interest. Given the clear intent of the parties under the guaranty agreement, see
    Comerica 
    Bank, 291 Mich. App. at 46
    , it would be counterintuitive to conclude that foreclosure
    was a means of mitigation required before it could seek damages from Canvasser, see 
    Morris, 459 Mich. at 263-264
    . In addition, the leasehold mortgage indicates that plaintiff was permitted
    to commerce foreclosure proceedings, but was not required to do so, in the event of default, and
    that plaintiff could “[s]eek the [court] appointment . . . of a receiver to manage the mortgage
    premises and collect rent profits and income therefrom.” As such, there is no indication that
    foreclosure was the only reasonable means to avoid or minimize plaintiff’s damages, especially
    in light of the other remedies identified in the leasehold mortgage. See Quality 
    Products, 469 Mich. at 375
    . Likewise, “the intent of the parties will be enforced unless it is contrary to public
    policy,” 
    id. (citations omitted),
    and, for the same reason, there is no indication that the agreement
    was contrary to public policy in this case.
    Again, mitigation is an affirmative defense, which a defendant must plead and adequately
    support with proofs at trial. Lawrence v Will Darrah & Assoc, Inc, 
    445 Mich. 1
    , 15; 516 NW2d
    43 (1994). Under the legal doctrine of mitigation, a plaintiff generally cannot later recover
    damages which could have been avoided by reasonable effort or expenditure. 
    Morris, 459 Mich. at 263-264
    . We find no basis for concluding, and defendants have provided no authority
    indicating, that the trial court erred in failing to compel mitigation; instead, the proper remedy is
    precluding damages when a plaintiff failed to make reasonable efforts to mitigate those damages.
    -7-
    See 
    id. at 263-266.
    As the trial court concluded, plaintiff continued to have a duty to mitigate its
    damages, but it was not required to foreclose on the leasehold mortgage.
    2. REASONABLE MITIGATION EFFORTS
    Next, we reject defendants’ claim that the trial court erred in finding that plaintiff
    fulfilled its duty to mitigate its damages. In its opinion and order entered after the trial, the court
    concluded that plaintiff reasonably mitigated its damages based on upon the following reasoning:
    [Plaintiff] sought the appointment of a receiver early on in this litigation and as a
    result of the receiver’s efforts, [plaintiff] has maintained the value of its security. .
    . . [Plaintiff] also has advanced a substantial amount of funds to avoid tax
    forfeiture, defaults, vacancies and waste on the property. Had [plaintiff] not taken
    these steps, it logically follows that the building would be worth substantially less
    than it is today. . . .
    Given the unrebutted evidence that plaintiff introduced establishing its mitigation efforts, the
    trial court’s conclusion is not in error. See 
    id. at 263,
    266.
    At trial, Perry Allen, a portfolio manager for plaintiff, testified that as of September 2011,
    defendants owed plaintiff $88,591.30 for “tax escrow” payments, and plaintiff continuously
    advanced funds for the payment of the real property taxes on the property since 2009 in order to
    avoid property tax foreclosure and the penalties and late fees associated with delinquent property
    taxes. Allen also testified that plaintiff had paid approximately $190,000 in expenses necessary
    to preserve, protect, and improve the physical condition and income potential of the collateral in
    order to preserve its interest in the commercial property. These expenses, which were incurred
    based on the decisions of the court-appointed receiver, were associated with securing a large
    tenant, making repairs and improvements on the property necessary to secure that tenant,
    performing other maintenance on the premises, and maintaining insurance. Plaintiff’s advances
    also covered monthly lease payments owed by SC STA under the ground lease in order to
    preserve its interest in the property, as the ground lessor was permitted to initiate termination of
    the ground lease or eviction upon default.
    David Gronbach, an employee of court-appointed receiver Retail Center Management,
    LLC, which assumed possession and full control over the premises in 2009, similarly testified
    that plaintiff protectively advanced funds for approximately $100,000 in property maintenance
    and repairs, including renovations that were necessary to make the space “habitable” or
    “leaseable” to property’s largest, or “anchor,” tenant, which only became a tenant following the
    appointment of a receiver. Gronbach also recalled that he had paid SC STA’s monthly lease
    payments, real property taxes, and insurance with funds supplied by plaintiff, although the lease
    payments and insurance premiums were paid out of the operating fund once the fund included
    sufficient capital—from leasing additional space and properly managing the premises—to cover
    the payments. Likewise, according to Gronbach, the commercial property’s cash flow increased
    after the appointment of a receiver, and all of the protective advances were necessary and
    commercially reasonable.
    -8-
    Defendants presented no evidence at trial rebutting plaintiff’s mitigation efforts and only
    attempted to undermine plaintiff’s efforts through cross-examination, which only elicited
    additional testimony supporting the conclusion that plaintiff’s mitigation efforts were
    reasonable.7
    Thus, on this record, we cannot conclude that the trial court’s ruling was clearly
    erroneous, as defendants failed to sustain their “burden of proving that . . . plaintiff failed to
    make reasonable efforts to mitigate damages.” 
    Morris, 459 Mich. at 266
    .
    V. LIABILITY FOR PROTECTIVE ADVANCES
    Lastly, defendants contend that none of them are liable for the protective advances paid
    by plaintiff to the receiver, arguing that the advances were made for the protection of the
    underlying real property, not for the priority and protection of plaintiff’s interest under the
    leasehold mortgage. We disagree.
    Defendants’ characterization of plaintiff’s interest in the commercial property is not
    supported by the express terms of the leasehold mortgage. The mortgage covers, inter alia, SC
    STA’s “estate, title, interest, and rights” in the leased real property, the buildings on the
    premises, and the rents and profits arising from the buildings and the premises. Thus, it is
    apparent that the physical condition and the profitability of those components were relevant to
    plaintiff’s preservation of the collateral securing the loan.
    Defendants also emphasize the language of the guaranty, which guarantees payment of
    “any indebtedness resulting from advances made on Borrowers [sic] behalf by Lender to protect
    or preserve the priority and security of its first lien,” and briefly acknowledge that the leasehold
    mortgage permits expenditures to preserve the premises. (Emphasis added.) However,
    defendants fail to recognize that the plain language of the leasehold mortgage undermines their
    claim that they are not liable for money advanced by plaintiff to the receiver. See Quality
    
    Products, 469 Mich. at 375
    .
    In relevant part, sections “seventh,” “eighth,” “tenth,” and “twenty-second” of the
    leasehold mortgage provide that (1) plaintiff may make advances or pay taxes and assessments,
    procure and maintain insurance, and make necessary repairs to the premises if SC STA defaults
    on its obligation to do so; (2) SC STA is responsible for payment of those expenditures, and
    payment is secured by the mortgage; (3) if the premises or any part of the premises, in the sole
    discretion of plaintiff, requires “inspection, repair, care or attention of any kind or nature not
    7
    On appeal, in support of their claim that foreclosure was the only reasonable means of
    mitigation, defendants heavily rely on defendant Canvasser’s statement in an affidavit that SC
    STA’s leasehold interest was a depleting asset. However, even if we assume that is the case, that
    fact does not, on its own, demonstrate that plaintiff’s mitigation efforts were unreasonable given
    the lack of evidence regarding the rate at which the asset was depleting, especially in light of the
    testimony indicating that plaintiff’s efforts were commercially reasonable and actually preserved
    the value of the leasehold interest.
    -9-
    theretofore provided by [SC STA], [plaintiff] may . . . enter or cause entry to be made upon the
    [p]remises and inspect, repair and/or maintain the same as [plaintiff] may deem necessary or
    advisable, and may . . . make such expenditures and outlays of money as [plaintiff] may deem
    appropriate for the preservation of the premises”; (4) SC STA is responsible for payment of
    expenditures or outlays for repairs or maintenance that plaintiff finds necessary for the
    preservation of the premises, and payment is secured by the mortgage; (5) if SC STA defaults on
    its obligations under the mortgage, plaintiff may request that the court appoint “a receiver to
    manage the mortgaged premises and collect rent profits and income therefrom”; (6) if SC STA
    fails to comply with any of the terms, covenants, and conditions under the ground lease,8 plaintiff
    may take any action that it deems necessary or desirable to prevent or cure SC STA’s default
    under the lease and may expend any sum of money, at plaintiff’s sole discretion, that is necessary
    to prevent or cure the default; and (7) SC STA is liable for payment of any funds expended by
    plaintiff in order to prevent or cure SC STA’s default under the ground lease, and payment is
    secured by the mortgage.
    Further, the clear and unambiguous language of the guaranty make Canvasser liable for
    the top 25% of SC STA’s outstanding indebtedness under the promissory note and “any
    indebtedness resulting from advances made on Borrower[’]s behalf by Lender to protect or
    preserve the priority and security of its first lien.” In addition, the guaranty made Canvasser
    liable for all of SC STA’s obligations under the terms and conditions of the leasehold mortgage:
    The undersigned further unconditionally guarantee the faithful, prompt
    and complete compliance by Borrower with all terms and conditions of the
    Mortgage Note, the Mortgage securing payment of the Liabilities and all other
    agreements, documents and instruments securing payment of the Liabilities or
    related thereto (such Mortgage Note, Mortgage and all other instruments
    collectively referred to hereinafter as the “Loan Documents”) and the payment of
    all costs, expenses, charges and other expenditures required to be made by
    Borrower, or which Borrower agrees to make, under the terms and provisions of
    any Loan Document.
    Accordingly, given the unrebutted evidence presented at trial establishing that the
    protective advances were made in accordance with the decisions of the court-appointed receiver
    and in accordance with the provisions of the mortgage, we conclude that the trial court did not
    err in finding SC STA and Canvasser liable for the protective advances.
    VI. CONCLUSION
    Defendants have failed to establish that the trial court improperly interpreted the language
    of the guaranty contract. Further, defendants have failed to show that the trial court erroneously
    8
    Under section 13 of the ground lease, the “[t]enant makes all repairs, including structural
    repairs to the plate glass, required to maintain the demised premises in the condition required in
    order for [the t]enant to conduct its business in the demised premises and to fulfill the
    requirement of any public authority having jurisdiction over the same.”
    -10-
    concluded that plaintiff met its duty to mitigate its damages or erroneously found that SC STA
    and Canvasser were liable for the protective advances.
    Affirmed.
    /s/ Kathleen Jansen
    /s/ William B. Murphy
    /s/ Michael J. Riordan
    -11-
    

Document Info

Docket Number: 322325

Filed Date: 11/19/2015

Precedential Status: Non-Precedential

Modified Date: 4/18/2021