Media One Communications LLC v. MacAtawa Bank Corporation ( 2017 )

STATE OF MICHIGAN
COURT OF APPEALS
MEDIA ONE COMMUNICATIONS LLC, UNPUBLISHED
July 13, 2017
Plaintiff-Appellant,
v No. 333153
Ottawa Circuit Court
MACATAWA BANK CORPORATION, LC No. 15-004299-CB
COASTAL REAL ESTATE,
Defendants-Appellees,
and
MACATAWA LEGENDS HOMEOWNERS
ASSOCIATION,
Defendant.
Before: SAWYER, P.J., and HOEKSTRA and BECKERING, JJ.
PER CURIAM.
In this action for breach of contract, following a foreclosure and the purchase of real
property by defendant Macatawa Bank Corporation (“the bank”),1 plaintiff Media One
Communications, LLC (“Media One”) seeks to hold the bank liable for a contract entered into
between Media One and the former owner of the property, Partners Fore Development Group,
LLC (“PFD”). The trial court granted summary disposition to the bank under MCR 2.116(C)(8).
Media One filed a delayed application for leave to appeal, which this Court granted.2 Because
1
According to Media One’s complaint, the bank has since assigned certain property to defendant
Coastal Real Estate, a wholly owned subsidiary of the bank. On appeal, the parties do not
distinguish between the bank and Coastal Real Estate in terms of their potential liability. For
ease of discussion, we will simply refer to “the bank” throughout this opinion; but, our decision
should be read to apply equally to Coastal Real Estate.
2
Media One Communications LLC v Macatawa Bank Corp, unpublished order of the Court of
Appeals, entered August 29, 2016 (Docket No. 333153).
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we conclude that no contractual obligation to pay Media One arose from the bank’s consent to
the creation of an easement, we affirm.
The present case is a claim for breach of contract involving three documents. The first
document, the “Fiber Optic Agreement,” is a contract between Media One and PFD, in which
Media One agreed to install and maintain a fiber optic network at Macatawa Legends, a housing
development being built by PFD. In the Fiber Optic Agreement, PFD agreed to pay Media One
for its services. In the second document, also between PFD and Media One, PFD granted Media
One an easement to enter the Macatawa Legends property to install, repair, and maintain the
fiber optic cables. The easement states that the easement “shall be subject to all of the terms and
conditions contained in the Fiber Optic Agreement.” Finally, in the third document, the bank—a
mortgagee with a recorded mortgage on the property—consented to the creation of the easement
and agreed to “honor and recognize” the rights granted by the easement.3
PFD failed to pay Media One for its services as set forth in the Fiber Optic Agreement.
PFD also defaulted on its mortgage to the bank. As a result, the bank initiated foreclosure
proceedings, and the bank subsequently purchased the Macatawa Legends property at a sheriff’s
sale. Thereafter, Media One filed the current lawsuit against the bank, claiming breach of
contract and seeking payment from the bank under the Fiber Optic Agreement.
The basic question posed in this case is whether, considering the documents at issue, the
bank’s consent to the easement gives rise to a contractual obligation on the part of the bank to
pay PFD’s obligations to Media One under the Fiber Optic Agreement. We conclude that the
bank’s consent did not constitute an assumption of PFD’s obligations under the Fiber Optic
Agreement. Accordingly, we affirm the trial court’s grant of summary disposition to the bank
under MCR 2.116(C)(8).
I. STANDARD OF REVIEW
We review de novo a trial court’s decision to grant a motion for summary disposition.
Diem v Sallie Mae Home Loans, Inc, 307 Mich. App. 204, 210; 859 NW2d 238 (2014).
“Summary disposition under MCR 2.116(C)(8) is appropriate where the complaint fails to state a
claim on which relief may be granted.”4 Id. (citation omitted). Whether a contract exists is a
question of law, which we review de novo. Klein v HP Pelzer Auto Sys, Inc, 306 Mich. App. 67,
3
There are actually three easement documents and three corresponding consents. However, any
distinctions between the documents are not relevant to our analysis because the documents
contain the same pertinent language.
4
“In deciding a motion under MCR 2.116(C)(8), a trial court may only consider the pleadings.”
Arabo v Mich Gaming Control Bd, 310 Mich. App. 370, 389; 872 NW2d 223 (2015). In this case,
the Fiber Optic Agreement, the easement, and the consent were attached to the complaint as the
basis for Media One’s breach of contract claim, meaning that these documents are properly
considered in relation to the bank’s motion for summary disposition under MCR 2.116(C)(8).
Laurel Woods Apartments v Roumayah, 274 Mich. App. 631, 635; 734 NW2d 217 (2007).
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75; 854 NW2d 521 (2014). Likewise, the “interpretation of a contract and the legal effect of a
contractual clause are questions of law,” which we review de novo. Sherman-Nadiv v Farm
Bureau Gen Ins Co of Mich, 282 Mich. App. 75, 78; 761 NW2d 872 (2008).
II. ANALYSIS
The party claiming a breach of contract “must establish by a preponderance of the
evidence that (1) there was a contract, (2) the other party breached the contract, and (3) the
breach resulted in damages to the party claiming breach.” Bank of Am, NA v First Am Title Ins
Co, 499 Mich. 74, 100; 878 NW2d 816 (2016). “The rights and duties of parties to a contract are
derived from the terms of the agreement.” Wilkie v Auto-Owners Ins Co, 469 Mich. 41, 62; 664
NW2d 776 (2003). “The burden is on [the] plaintiffs to show the existence of the contract
sought to be enforced, and no presumption will be indulged in favor of the execution of a
contract since, regardless of the equities in a case, the court cannot make a contract for the
parties when none exists.” Kamalnath v Mercy Mem Hosp Corp, 194 Mich. App. 543, 549; 487
NW2d 499 (1992), quoting Hammel v Foor, 359 Mich. 392, 400; 102 NW2d 196 (1960). “It
goes without saying that a contract cannot bind a nonparty.” AFSCME Council 25 v Wayne Co,
292 Mich. App. 68, 80; 811 NW2d 4 (2011) (citation omitted).
Although a contract does not ordinarily bind a non-party, non-parties to a contract may
still be held to an agreement by applying “ordinary contract-related legal principals,” including
assumption of contractual obligations. Id. at 81. For instance, a party may agree to assume the
liabilities of another, as through a surety or guaranty, in the event that the principal obligee fails
to perform. See Will H Hall & Son, Inc v Ace Masonry Const, Inc, 260 Mich. App. 222, 228; 677
NW2d 51 (2003); Angelo Iafrate Co v Detroit & N Sav & L Ass'n, 80 Mich. App. 508, 514; 264
NW2d 45 (1978). However, “[o]rdinary experience teaches that assumption of another's debt is
a substantial undertaking, and thus the courts will not assume such an obligation in the absence
of a clearly expressed intention to do so.” Bandit Indus, Inc v Hobbs Intern, Inc, 463 Mich. 504,
513; 620 NW2d 531 (2001).
Whether a party has agreed to assume the obligations of another is a question of contract
interpretation. Angelo Iafrate Co, 80 Mich. App. at 514. The “primary task in construing a
contract is to give effect to the parties' intentions at the time they entered into the contract, which
requires an examination of the language of the contract according to its plain and ordinary
meaning.” Beck v Park W Galleries, Inc, 499 Mich. 40, 45-46; 878 NW2d 804 (2016). Contracts
should be read “as a whole,” giving meaning to all terms; Royal Prop Group, LLC v Prime Ins
Syndicate, Inc, 267 Mich. App. 708, 715; 706 NW2d 426 (2005); and, “[w]here one writing
references another instrument for additional contract terms, the two writings should be read
together,” Forge v Smith, 458 Mich. 198, 207; 580 NW2d 876 (1998). “If the language of the
contract is clear and unambiguous, it must be enforced as written.” Clark v Al-Amin, 309 Mich
App 387, 394; 872 NW2d 730 (2015) (citation omitted).
Turning to the present case, Media One’s contractual right to payment for the installation
of the fiber optic infrastructure arises from the Fiber Optic Agreement. Undisputedly, the bank
was not a party to the Fiber Optic Agreement. Rather, the only signatories to the Fiber Optic
Agreement were PFD and Media One. It follows as a basic proposition that, as a non-party to
the Fiber Optic Agreement, the bank cannot be bound by the agreement and cannot be compelled
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to perform PFD’s obligations under the Fiber Optic Agreement. See AFSCME Council 25, 292
Mich. App. at 80; see also Booth v Dingley, 148 Mich. 197, 202; 111 N.W. 851 (1907).
In contrast to this conclusion, Media One asserts that the bank’s consent to the easements
rendered the bank liable for PFD’s obligations under the Fiber Optic Agreement, as a successor
to the Fiber Optic Agreement, in the event of a foreclosure. In particular, because the easement
is “subject to” the Fiber Optic Agreement, Media One maintains that, by signing the consent and
agreeing to “honor and recognize” Media One’s rights, the bank agreed to honor Media One’s
contractual right to payment under the Fiber Optic Agreement. According to Media One, the
bank’s obligation to pay Media One under the Fiber Optic Agreement was triggered when the
bank purchased the property at the foreclosure sale.
Considering the plain language of the three documents involved, Media One’s circuitous
argument is plainly without merit, and it is readily apparent that the bank’s only intent in
agreeing to the easement was to permit PFD to grant the easement for installation of the fiber
optic cables and to ensure that this easement would survive in the event of foreclosure. In
relevant part, the most recent consent provides:
MACATAWA BANK, a Michigan banking corporation . . . being the mortgagee
and secured party pursuant to the Mortgages between [the bank], as mortgagee,
and [PFD], as mortgagor, which has been recorded in Liber 4635, at Page 505 on
September 2, 2004 . . . in the Ottawa County Records, . . . consents to the attached
[easement] dated as of August 15, 2006 and agrees that it shall honor and
recognize the releases and rights made and granted by that [easement].
Considering the language of this consent, it is clear that the bank only agreed to the
creation of the easement and not the assumption of PFD’s contractual indebtedness to Media One
under the Fiber Optic Agreement. To begin with, in ascertaining the parties’ intent, it is notable
that the consent identifies the bank as “being the mortgagee and secured party” in connection
with a previously recorded mortgage. This reference to the bank as “mortgagee and secured
party” relative to PFD as “mortgagor” makes plain that the bank executed the consent document,
not as a party assuming PFD’s contractual obligations under the Fiber Optic Agreement, but as a
mortgagee with a superior recorded interest in the property and the ability to otherwise cut-off
the proposed easement in the event of foreclosure.5 In other words, absent the bank’s consent as
5
Michigan is a race-notice state, wherein the holder of an interest in land, including a mortgage
or lien, “can protect his or her interest by properly recording it, and the first to record an interest
typically has priority over subsequent purchasers or interest holders.” Wells Fargo Bank, NA v
SBC IV REO, LLC, 318 Mich. App. 72, 96; __ NW2d __ (2016). Following a foreclosure, if the
property is not redeemed, under MCL 600.3236, the purchaser receives “all the right, title, and
interest which the mortgagor had at the time of the execution of the mortgage . . . .” The effect is
to “extinguish[] any ‘right, title, and interest’ created subsequent to the creation of the mortgage
being foreclosed upon[.]” In re Receivership of 11910 S Francis Rd (Price v Kosmalski), 492
Mich. 208, 223; 821 NW2d 503 (2012). However, parties holding superior interests in property
may agree to waive the statutory right of priority and consent to giving someone else a superior
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mortgagee, PFD could not grant an easement to Media One that could be enforced against the
bank and, if the bank did not explicitly agree to “honor and recognize” the rights granted by the
easement, the easement would not survive in the event of foreclosure. See Hanson, 339 Mich. at
134. Thus, as a general matter, when the bank gave its “consent” as “mortgagee and secured
party” and agreed to “honor and recognize” the rights granted by the easement, the purpose of
the consent document was to ensure that Media One received a valid easement, which would not
be extinguished in the event of foreclosure.
While conceding that the bank’s consent was necessary for the creation of the easement,
Media One nevertheless attempts to transform this plainly worded consent into an assumption of
pecuniary liability by endeavoring to finagle a link between the consent and the Fiber Optic
Agreement. First, Media One argues that the phrase “honor and recognize,” as used in the
consent evinces the bank’s intent to “honor and recognize” Media One’s right to payment under
the Fiber Optic Agreement. But, clearly this is not so for the simple reason that the bank did not
agree to “honor and recognize” the Fiber Optic Agreement; rather, the bank agreed to “honor and
recognize” the rights granted by the easement. “An easement is the right to use the land of
another for a specified purpose,” Heydon v MediaOne, 275 Mich. App. 267, 270; 739 NW2d 373
(2007); and, “the conveyance of an easement gives to the grantee all such rights as are incidental
or necessary to the reasonable and proper enjoyment of the easement” as determined from the
language of the easement document, Blackhawk Dev Corp v Vill of Dexter, 473 Mich. 33, 41-42;
700 NW2d 364 (2005). Turning to the easement in this case, it is clear that Media One’s right to
payment is not a right granted by the easement. Instead, as set forth in the easement, the rights
granted to Media One consisted of rights to enter the property and to use it for purposes of
installing and maintaining fiber optic lines.6 Thus, by agreeing to “honor and recognize” the
rights granted by the easements, the bank agreed to do nothing more than honor and recognize
Media One’s right to use the property for these specific purposes. While Media One contends
that such an understanding of “honor and recognize” somehow renders the terms meaningless, as
discussed, had the bank not agreed to honor and recognize the rights granted by the easement, the
bank could have extinguished the easement by foreclosure. See Hanson, 339 Mich. at 134;
Dolese v Bellows-Claude Neon Co, 261 Mich. 57, 61; 245 N.W. 569 (1932).
Second, Media One emphasizes that the easement is “subject to” the Fiber Optic
Agreement, which, according to Media One, somehow renders the bank liable for the Fiber Optic
Agreement. This argument is also unavailing. As noted, the bank only agreed to “honor and
recognize” the rights granted by the easement. And, the phrase “subject to,” as used in the
easement, does not denote a grant of rights to Media One. See Englestein v Mintz, 345 Ill 48, 61;
interest, provided that the mortgagee makes this waiver unequivocally. See id. at 228, 230;
Shapero v Picard, 235 Mich. 481, 487; 209 N.W. 576 (1926). For this reason, absent consent from
a mortgagee, an easement granted by a mortgagor after the execution of a mortgage will not
survive foreclosure. Hanson v Huetter, 339 Mich. 130, 134; 62 NW2d 663 (1954).
6
More fully, the easement provided Media One with “the right to enter upon sufficient land
adjacent to the same, owned by [PFD], as is required for the construction, installation,
maintenance, repair, replacement, reinstallation, operation, and inspection of said utility lines.”
This right of entry to install and maintain utility lines also included the right to excavate a trench
or ditch and to remove trees and other obstructions.
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177 N.E. 746 (1931) (“The words ‘subject to,’ used in their ordinary sense, mean ‘subordinate to,’
‘subservient to’ or ‘limited by.’ There is nothing in the use of the words ‘subject to,’ in their
ordinary use, which would even hint at the creation of affirmative rights.”). Rather, the phrase
“subject to” denotes a limitation on a grant, in this case a limitation on the easement. See
Netahla v Netahla, 301 Kan 693, 699; 346 P3d 1079 (2015); Cockrell v Texas Gulf Sulphur Co,
157 Tex 10, 17; 299 S.W.2d 672 (1956); Winberry v Salisbury, 5 NJ 240, 244; 74 A2d 406, 408
(1950). Thus, while the “subject to” language in the easement indicates some interaction
between the Fiber Optic Agreement and the easement, see Mayor of Lansing v Michigan Pub
Serv Com'n, 470 Mich. 154, 160 & n 4; 680 NW2d 840 (2004), the phrase does not grant Media
One any rights of payment which are enforceable against the bank by virtue of the bank’s
agreement to “honor and recognize” the rights granted by the easement.
Ultimately, Media One’s right to payment for its fiber optic services arises from the Fiber
Optic Agreement between Media One and PFD. Even when all of the documents are considered,
there is simply no indication that the bank agreed to perform PFD’s obligations under the Fiber
Optic Agreement, and in the absence of the bank’s clearly expressed intent to do so, we will not
assume such a substantial undertaking.7 See Bandit Indus, Inc, 463 Mich. at 512-514. Absent a
showing that the bank has a contractual obligation to pay PFD’s indebtedness to Media One
under the Fiber Optic Agreement, Media One’s claim for breach of contract against the bank is
clearly unenforceable and the trial court properly granted summary disposition to the bank.
Affirmed. Having prevailed in full, appellees may tax costs pursuant to MCR 7.219.
/s/ David H. Sawyer
/s/ Joel P. Hoekstra
/s/ Jane M. Beckering
7
There is also no merit to Media One’s suggestion that the bank became a successor to the
contract at the time of foreclosure. As a general rule, the purchaser at a foreclosure sale is under
no obligation to perform the previous landowner’s contractual obligations. 7 Fletcher Cyc. Corp.
§ 3331. See also Kraushaar v Bunny Run Realty Co, 298 Mich. 233, 240; 298 N.W. 514 (1941).
While the bank now owns the property, the bank did not acquire PFD’s interest in the Fiber
Optic Agreement, and thus there is no privity of contract which would render the bank liable for
breach of contract as a successor to the Fiber Optic Agreement. See generally Detroit, T & IR
Co v WU Tel Co, 200 Mich. 2, 8; 166 N.W. 494 (1918); Riverbend Inv'rs v Progressive Surface
Preparation, LLC, 255 Mich. App. 327, 335; 660 NW2d 373 (2003). Further, insofar as Media
One suggests that the right to payment under the Fiber Optic Agreement was intended to “run
with the land,” this argument alluding to the creation of a covenant is insufficiently briefed and
therefore abandoned. See Dunn v Bennett, 303 Mich. App. 767, 775; 846 NW2d 75 (2013).
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