Todd Oakley v. Robert Rutan ( 2018 )

STATE OF MICHIGAN
COURT OF APPEALS
TODD OAKLEY, UNPUBLISHED
April 24, 2018
Plaintiff-Appellant,
v No. 337546
Jackson Circuit Court
ROBERT RUTAN, DEBORAH RUTAN, and LC No. 16-002005-CK
NATURS DESIGN, INC., doing business as
REMZZZS.COM,
Defendants-Appellees.
Before: MURPHY, P.J., and JANSEN and SWARTZLE, JJ.
PER CURIAM.
Plaintiff appeals as of right the trial court’s order granting summary disposition in favor
of defendants under MCR 2.116(C)(10) in this case involving a contractual dispute. We affirm,
albeit for reasons different than those expressed by the trial court.
In 2013, plaintiff sued defendants, and the parties engaged in mediation in 2014 in an
effort to settle the litigation. The mediation was successful, resulting in a settlement agreement
in April 2014, pursuant to which defendants were to pay plaintiff $290,000 by August 12, 2014.1
Defendants failed to pay the $290,000 required under the settlement agreement, and in February
2015, plaintiff filed a motion for entry of judgment against defendants, which was denied, given
that, according to plaintiff, the court wished to delay entering a judgment. In June 2016, plaintiff
filed a second renewed motion for entry of judgment, and this time the trial court entered a
judgment in favor of plaintiff in the amount of $271,336, plus $20,461 in statutory interest,
making for a total judgment of $291,797. The judgment was scheduled to become final on July
12, 2016, 21 days after its entry on June 21, 2016.
1
The mediation settlement is not contained in the record, but there is no dispute that part of the
settlement required defendants to pay plaintiff $290,000 by August of 2014. Defendants indicate
in their brief that the mediation settlement also required them to pay plaintiff $50,000 within 30
days, which was done, and to make 72 monthly installment payments of $2,000, which provision
was also satisfied, presumably early.
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Beginning on July 5, 2016, there were numerous phone and email communications and
negotiations between the parties for purposes of giving defendants additional time so that they
could obtain financing to pay the judgment or to otherwise arrange for some type of payment
plan relative to the judgment. On the evening of July 19, 2016, plaintiff’s counsel emailed
defendants’ attorney the outline of a deal between the parties as plaintiff’s counsel understood it.
Pursuant to the email, the purported agreement entailed defendants withdrawing a motion for
reconsideration, plaintiff conditionally dismissing the judgment, and defendants paying plaintiff
$200,000 by 5:00 p.m. on July 25, 2016, and another $130,000 by 5:00 p.m. on October 14,
2016. With regard to the initial $200,000 payment, the alleged agreement provided that it was to
be paid in two cashier’s checks, one for $30,000 “for the consideration specific to the agreement
to delay collection” and one for $170,000 “to be applied to the outstanding Judgment.” The
email from plaintiff’s counsel additionally indicated that, if the two cashier’s checks were
received by the July 25 deadline, the agreement would involve plaintiff withdrawing or canceling
a request and writ for garnishment that was tendered to the court earlier in the day. The email
concluded with a request for confirmation that the recited provisions accurately reflected the
parties’ negotiated agreement. On the morning of July 20, 2016, defendants’ attorney responded,
stating, “Yes. Unless we pay the whole thing off in the next couple of days.” The record does
not contain a specific documented response by plaintiff’s counsel to defendants’ reply and the
statement about the possibility of defendants paying the “whole thing off in the next couple of
days.” However, plaintiff has proceeded as if that payoff “condition” had been acceptable and
part of the agreement.2
Between July 20, 2016, and 5:00 p.m. on July 25, 2016, defendants made payments to
plaintiff amounting to $260,000.3 The payments, however, were not in the form of two cashier’s
checks for $30,000 (delay collection) and $170,000 (toward judgment), although they exceeded
by $60,000 the amount allegedly due to plaintiff by the July 25 deadline for purposes of delaying
collection on the judgment. In an email from defendants’ attorney to plaintiff’s counsel at 4:05
p.m. on July 25, 2016, the attorney noted that $260,000 had been submitted to plaintiff and that
defendants were “ready to tender the balance of the amount you are seeking in the garnishment.”
The email further indicated that it was counsel’s understanding that the garnishment was
approximately $271,000, but she asked plaintiff’s attorney to let her know how much needed to
be paid to satisfy the balance owed. At 4:34 p.m. on July 25, 2016, plaintiff’s attorney
2
The flurry of emails that were exchanged between the parties during negotiations referenced, at
times, phone conversations regarding the negotiations. Possibly the payoff condition had been
discussed and approved by plaintiff’s attorney but was inadvertently not included in the
attorney’s email to defense counsel outlining the agreement. Regardless, plaintiff accepts that
the payoff condition was part of the agreement.
3
Defendants state in their brief that “[o]n July 25, 2016, [they] tendered a cashier’s check for
$260,000.00” to plaintiff’s attorney. However, in an accounting worksheet generated by
plaintiff’s counsel, it reflected that counsel received from defendants a $100,000 payment on
July 21, 2016, a $100,000 payment on July 25, 2016, and a second payment on July 25 of
$60,000. Either way, there is no dispute that $260,000 was paid to plaintiff by 5:00 p.m. on July
25, 2016.
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responded by email, sending defendants’ counsel a prejudgment interest calculation worksheet
showing an outstanding balance of $62,424, which included $30,000 per the agreement to delay
collection. At 4:51 p.m. that same day, defendants’ attorney emailed plaintiff’s counsel stating
that “[a]lthough I have not received a response[,4] my clients are on the way to your office with
an additional check for $12,000.00.” Apparently, this amount was to cover the difference
between the $260,000 in payments and the amount that defendants’ attorney believed was the
amount listed in a request and writ for garnishment. It appears from the record that defendants
arrived at the office of plaintiff’s counsel with the $12,000 payment a short time after he left at
5:10 p.m., but the office was closed, and the $12,000 was never paid to plaintiff.
In an email from plaintiff’s attorney to defense counsel dated July 26, 2016, the attorney
stated in full:
It is my understanding, from our multiple discussions yesterday, that none
of the funds paid to [plaintiff] to date . . . are to be applied toward the $30,000
referenced in my email . . . dated July 19 . . . . I want to be certain that we are on
the same page with respect to how the payments are being applied.
In response ten minutes later by email, defendants’ attorney stated, “To be clear, all payments are
to be applied to the judgment entered in June. We obviously have no agreement to delay
collection.” The file contains a request and writ of garnishment, dated July 25, 2016, indicating
that the unsatisfied judgment was $32,424, which calculation included judgment interest and
postjudgment costs, minus the $260,000 that defendants paid to plaintiff. 5 Defendants’ bank was
the garnishee. There does not appear to be a dispute that plaintiff successfully garnished the full
$32,424 from defendants’ bank account, resulting in plaintiff collecting a total of $292,424 from
defendants when the $260,000 is added to the garnishment amount. There also does not appear
to be any dispute that the $292,424 satisfied the judgment.
On July 28, 2016, plaintiff filed the present lawsuit against defendants, alleging breach of
contract arising out of the postjudgment negotiations and agreement, as reflected in the email by
plaintiff’s counsel setting forth the understood agreement and the email by defendants’ attorney
confirming the agreement, unless the judgment was paid “off in the next couple of days.” The
crux of this dispute concerns the $30,000 that plaintiff seeks for his agreement to delay collection
efforts on the judgment.
On defendants’ motion for summary disposition under MCR 2.116(C)(8) and (10), the
trial court granted the motion pursuant to MCR 2.116(C)(10) in a written opinion and order,
ruling as follows:
4
Two different attorneys from the law firm representing defendants were involved in the
communications and negotiations with plaintiff’s counsel, which may have created some
confusion at times.
5
Plaintiff alleged that the request and writ for garnishment was filed with the court at 4:30 p.m.
on July 25, 2016.
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In this case the plaintiff’s bargained for $30,000 dollars and the defendants
bargained for the plaintiffs not to garnish their bank account. Here the defendants
tendered a check for $260,000 dollars on July 25, 2016[,] $60,000 dollars over the
agreed upon $200,000 which was to be applied $30,000 to the consideration of
the agreement and the remainder was to be applied to the judgement. The entire
amount was applied to the judgement, the plaintiffs failed to take the
consideration as agreed upon. Then the plaintiffs turned around and garnished the
bank account of the defendants that same day not giving the defendants the
benefit that they bargained for. Therefore this court finds that there was no legal
consideration to form a binding contract.
For the second part of this analysis this court looks at the evidence in the
light most favorable to the non-moving party and here there is no evidence that
this court can look to that a contract was formed between these two parties and
that the defendants breached that contract. This court finds that for this agreement
to form a contract the plaintiff would have had to take $30,000 from the $260,000
that was paid putting the remained to the judgement and then hold off on
collecting the rest of the judgement till October 14, 2016, now if that would have
happed there would have been a valid contract formed between the parties. That
is not the case the plaintiff applied the entire $260,000 to the judgement and
garnished the rest of the judgement from the bank account that same day which
then satisfies the judgement, now the plaintiff is asking the court to grant them
$30,000 when they did not do what they were supposed to under the agreement,
which in this courts view would be giving the plaintiff what they bargained for
when the defendants would not get what they had bargained for in the agreement
which was time.
This court finds that there was no legal consideration to form a binding
contract on July 25, 2016 due to the plaintiff’s actions and in finding that there
was no consideration finds that there is no issue of material fact to the case.
Plaintiff appeals as of right.
We review de novo a trial court’s ruling on a motion for summary disposition. Spiek v
Dep’t of Transp, 456 Mich 331, 337; 572 NW2d 201 (1998). Additionally, this Court reviews de
novo issues concerning the proper interpretation of a contract and the legal effect or application
of a contract. Rory v Continental Ins Co, 473 Mich 457, 464; 703 NW2d 23 (2005).6 “The
6
In regard to the principles governing a motion for summary disposition brought pursuant to
MCR 2.116(C)(10), this Court in Pioneer State Mut Ins Co v Dells, 301 Mich App 368, 377; 836
NW2d 257 (2013), observed:
In general, MCR 2.116(C)(10) provides for summary disposition when
there is no genuine issue regarding any material fact and the moving party is
entitled to judgment or partial judgment as a matter of law. A motion brought
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cardinal rule in the interpretation of contracts is to ascertain the intention of the parties[;] [t]o this
rule all others are subordinate.” McIntosh v Groomes, 227 Mich 215, 218; 198 NW 954 (1924).
In light of this rule, “[i]f the language of the contract is clear and unambiguous, it is to be
construed according to its plain sense and meaning; but if it is ambiguous, testimony may be
taken to explain the ambiguity.” New Amsterdam Cas Co v Sokolowski, 374 Mich 340, 342; 132
NW2d 66 (1965); see also Frankenmuth Mut Ins Co v Masters, 460 Mich 105, 111; 595 NW2d
832 (1999). However, a court cannot create ambiguity where the terms of the contract are clear.
Frankenmuth Mut, 460 Mich at 111.
“A party asserting a breach of contract must establish by a preponderance of the evidence
that (1) there was a contract (2) which the other party breached (3) thereby resulting in damages
to the party claiming breach.” Miller-Davis Co v Ahrens Constr, Inc, 495 Mich 161, 178; 848
NW2d 95 (2014). “A valid contract requires five elements: (1) parties competent to contract, (2)
a proper subject matter, (3) legal consideration, (4) mutuality of agreement, and (5) mutuality of
obligation.” AFT Mich v Michigan, 497 Mich 197, 235; 866 NW2d 782 (2015). “The party
seeking to enforce a contract bears the burden of proving that the contract exists.” Id. Moreover,
“a contract may consist of a mutual exchange of promises, or the performance of a service in
exchange for a promise.” Id. at 235-236 (citation omitted). With respect to legal consideration,
it exists “if the promisee in return for a promise does anything legal which he is not bound to do
or refrains from doing anything which he has a right to do, whether there is any actual loss or
detriment to him or actual benefit to the promissor or not.” Stott v Stott, 258 Mich 547, 552; 242
NW 747 (1932).
Contrary to the trial court’s conclusion, there was legal consideration sufficient to form a
binding contract. In return for defendants’ promise to pay plaintiff an additional $30,000 over
the amount of the judgment, plaintiff promised to refrain from doing something he had a legal
right to do – taking immediate steps to collect on the judgment, such as through a garnishment.
All of the elements regarding the formation of a contract were established. Next, it is necessary
to characterize the nature of the contract. The delayed-collection component of the contract,
under MCR 2.116(C)(10) tests the factual support for a party's claim. A trial court
may grant a motion for summary disposition under MCR 2.116(C)(10) if the
pleadings, affidavits, and other documentary evidence, when viewed in a light
most favorable to the nonmovant, show that there is no genuine issue with respect
to any material fact. A genuine issue of material fact exists when the record,
giving the benefit of reasonable doubt to the opposing party, leaves open an issue
upon which reasonable minds might differ. The trial court is not permitted to
assess credibility, weigh the evidence, or resolve factual disputes, and if material
evidence conflicts, it is not appropriate to grant a motion for summary disposition
under MCR 2.116(C)(10). A court may only consider substantively admissible
evidence actually proffered relative to a motion for summary disposition under
MCR 2.116(C)(10). [Citations and quotation marks omitted.]
-5-
which included the promise by defendants to pay the additional $30,000, was subject to a
provision akin to a condition precedent. Contract law recognizes that some agreements are not
binding at the outset, entailing a condition precedent, which is a fact or event that the parties
intend must take place before a contract is enforceable. Wells Fargo Bank, NA v SBC IV REO,
LLC, 318 Mich App 72, 93; 896 NW2d 821 (2016). A condition precedent can be “in the
affirmative or negative.” Sauer v McClintic Marshall Constr Co, 179 Mich 618, 626; 146 NW
422 (1914). Here, the delayed-collection provision was only intended to be implicated and
enforceable if defendants failed to pay off the existing judgment in full “in the next couple of
days” following July 20, 2016, which defendants failed to accomplish, even if we took into
consideration the entire $260,000 that had been paid by defendant over the next five days.7
Accordingly, the delayed-collection agreement was triggered, requiring defendants to deliver to
plaintiff by 5:00 p.m. on July 25, 2016, two cashier’s checks, one for $30,000 “for the
consideration specific to the agreement to delay collection” and one for $170,000 “to be applied
to the outstanding Judgment.”
Although by 5:00 p.m. on July 25, 2016, defendants had paid plaintiff $260,000, the
payments did not specifically include a $30,000 cashier’s check targeted to or designated for
delaying collection of the judgment. Any doubt on that issue was eliminated when defendants’
attorney clearly and unambiguously informed plaintiff’s counsel that none of the $260,000 was
to be applied toward the delayed-collection amount of $30,000. Furthermore, defense counsel
also stated that there was “no agreement to delay collection,” plainly establishing wholesale
repudiation of the contract with no intent to ever perform by paying $30,000 in addition to the
judgment. Under these circumstances, defendants were in substantial breach of the contract.
We conclude that, faced with the breach of contract, plaintiff had one of two options, the
first of which was to not perform his obligation under the contract, i.e., temporarily refrain from
collecting on the judgment, in light of defendants’ substantial breach. See Michaels v Amway
Corp, 206 Mich App 644, 650; 522 NW2d 703 (1994) (a party who first breaches a contract
cannot maintain an action against the other contracting party for failure to perform). Plaintiff
took this course of action and immediately garnished defendants’ bank account, collecting the
amount necessary to fully satisfy the judgment. Indeed, plaintiff was essentially in the same
position had defendants themselves been able to meet the contingency of paying off the
7
Assuming that use of the word “couple” was not intended to mean that defendants would only
have “two” days to pay the judgment, but rather a “few” days to do so, see Merriam-Webster’s
Collegiate Dictionary (11th ed), it is clear that a few days had elapsed by 5:00 p.m. on July 25,
2016, considering that defendants’ attorney confirmed the agreement on the morning of July 20,
2016. Moreover, the fact that defendants were scrambling in an effort to pay off the judgment
late in the day on July 25 indicates to us that they viewed that date as a deadline to pay the
judgment in full. Also, given that 5:00 p.m. on July 25, 2016, was the deadline relative to
delivering two cashier’s checks to plaintiff, one of which was to be dedicated to paying the
$30,000 consideration for a delay in collection efforts, it would make little sense to conclude that
the parties intended a later deadline with respect to defendants’ opportunity to satisfy the entire
judgment.
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judgment in full.8 And plaintiff was not forced to wait until possibly as late as October 14, 2016,
to collect the balance of the judgment. Stated otherwise, plaintiff did not have to incur the legal
consideration he had promised in the contract.
Having opted to treat his duty to perform under the contract as discharged because of
defendants’ breach, plaintiff was not entitled to additionally file suit for breach of contract and
attempt to collect the $30,000 delayed-collection amount. If plaintiff wished to seek the $30,000
as damages in a contract action, he should not have immediately garnished defendants’ bank
account and collected the full judgment. Instead, plaintiff should have refrained from collecting
on the judgment until October 14, 2016, and then filed a contract action, assuming that
defendants had not paid him the judgment plus the $30,000 delayed-collection amount by that
date (this was the second option available to plaintiff). To rule that plaintiff could garnish
defendants’ bank account as was done and also potentially collect $30,000 in a contract action
would be to award plaintiff the benefit of having the judgment paid off in full without having
waited the additional three months, while also allowing him to recover the $30,000, which was
intended to compensate plaintiff for having to wait for that three-month period.
“In an action based on contract, the parties are entitled to the benefit of the bargain as set
forth in the agreement.” Ferguson v Pioneer State Mut Ins Co, 273 Mich App 47, 54; 731
NW2d 94 (2006). And the proper measure of damages for breach of contract is the value of
benefits the aggrieved party would have received had the contract not been breached. Id.“Damages awarded in a common-law breach of contract action are ‘expectancy’ damages
designed to make the plaintiff whole.” Frank W Lynch & Co v Flex Technologies, Inc, 463 Mich
578, 586 n 4; 624 NW2d 180 (2001) (emphasis added). Here, while plaintiff is asking for the
benefit of the bargain in terms of damages, he is doing so without acknowledging all aspects of
the bargain, which was supposed to have entailed plaintiff waiting up to three additional months
to collect the full judgment. Awarding plaintiff $30,000 in contract damages despite the fact that
the judgment was fully paid before the three-month delay period commenced would result in
plaintiff being awarded damages making him beyond “whole.” Had the contract not been
breached, plaintiff would have received the $30,000 and the amount owing on the judgment, but
he might have been forced to wait another three months to make the full recovery. In sum,
plaintiff fails, as a matter of law, to make the requisite showing that defendants’ breach of the
contract resulted in recoverable damages to plaintiff, Miller-Davis Co, 495 Mich at 178, given
that plaintiff elected to treat his obligation under the contract as terminated and immediately
garnished defendants’ bank account, thereby collecting the full amount of the judgment absent
the need to await later payment. Accordingly, we affirm the trial court’s order granting summary
disposition in favor of defendants, albeit for reasons different than those expressed by the court.
8
One could argue that the contingency was satisfied, where defendants’ funds – the $260,000
and the $32,424 garnishment from their bank account – were ultimately paid to plaintiff,
although the garnishment amount was not voluntarily provided by defendants. We do note that it
is not clear from the record the exact point in time the garnishment was accomplished and
plaintiff received the monies, although the trial court’s opinion indicated that the account was
garnished on July 25, 2016.
-7-
Gleason v Dep’t of Transp, 256 Mich App 1, 3; 662 NW2d 822 (2003) (“A trial court's ruling
may be upheld on appeal where the right result issued, albeit for the wrong reason.”).9
Affirmed. Having fully prevailed on appeal, defendants are awarded taxable costs under
MCR 7.219.
/s/ William B. Murphy
/s/ Kathleen Jansen
/s/ Brock A. Swartzle
9
This case was difficult to untangle, factually and legally, and the trial court’s opinion, while
wrongly determining that no contract was formed, reflected the concerns or problems with
plaintiff’s action that underlie our ruling.
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