Lv204 LLC v. Lucia Gatmaitan ( 2017 )

STATE OF MICHIGAN
COURT OF APPEALS
LV 204, LLC, UNPUBLISHED
October 17, 2017
Plaintiff-Appellant,
v No. 332916
Oakland Circuit Court
LUCIA GATMAITAN, LC No. 2015-149225-CH
Defendant-Appellee.
Before: GLEICHER, P.J., and FORT HOOD and SWARTZLE, JJ.
PER CURIAM.
Plaintiff LV 204, through its agent David Clapper, negotiated with defendant Lucia
Gatmaitan to purchase her historical lakefront mansion. Although the parties agreed to certain
terms, negotiations quickly fell apart and plaintiff never bought the home. The circuit court
summarily dismissed plaintiff’s action to force a sale, determining that the parties had not
formed a contractual agreement. We affirm.
I. BACKGROUND
Defendant owned a historic home on a 10-acre lakefront parcel on Lake Angelus. The
estate is “rumored to be the Fisher family’s summer mansion, designed by Albert Kahn.” On
March 2, 2013, Clapper offered to purchase the property for $1,700,000, with $1,000,000 cash
up front and the remainder in the form of a $700,000 promissory note with 6% interest per
annum payable for 10 years. Clapper desired to purchase the home with “everything that is of
the home’s vintage, including but not limited to area rugs, wall hangings, and décor.” Clapper
opted to forgo an inspection, instead requesting only 14 days to conduct his due diligence, which
he defined as “everything to evaluate the property other than the dwellings, pool and boat
house.” Clapper later assigned his interest in the purchase offer to his corporation, LV 204.
On March 6, 2013, defendant counteroffered, raising the purchase price to $1,800,000,
limiting the wall hangings included in the sale to “draperies,” and providing that the home was
being sold “as is.” Plaintiff contends that he accepted this counteroffer by signing it at the
bottom of the document. However, plaintiff admits that he did not initial each change made by
defendant as required by ¶ 27 of the purchase offer, entitled “counteroffer.”
Over the next two and a half years, the parties went back and forth over the purchase of
the property. On March 6, plaintiff notified defendant that he “may want to apply for a loan to
-1-
raise additional cash” and asked for accommodation if the closing was delayed as a result.
Defendant agreed. Thereafter, plaintiff requested numerous concessions completely inconsistent
with the original offer. Plaintiff desired to secure a mortgage loan from JPMorgan Chase Bank
and therefore scheduled an inspection and appraisal. He then demanded that defendant make
costly repairs and asserted that he would pay no more than $1,550,000. Defendant did not accept
those terms. In January 2015, plaintiff learned that defendant was entertaining another serious
buyer for the property. He filed a claim of interest with the Oakland County Recorder of Deeds,
preventing defendant from selling the property to anyone else. Purchase negotiations continued,
with plaintiff then demanding a sale with only $150,000 cash up front.
On September 21, 2015, plaintiff finally filed suit, alleging breach of contract and
requesting a declaratory judgment and injunctive relief. Defendant responded with a
counterclaim, alleging slander of title, tortious interference with prospective economic
advantage, seeking a declaratory judgment and to quiet title. Each party requested summary
disposition in its favor.
Ultimately, the circuit court dismissed plaintiff’s claims and quieted title in defendant.
The court determined that the parties had not reached a valid and binding contract. The
“counteroffer” provision of the purchase offer required plaintiff to accept a counteroffer made by
defendant by initialing next to any changes she made in the document. Plaintiff did not do so,
negating the elements of a contract.
The court continued, however, that even if the contract were valid, it would find the
contract ambiguous as plaintiff initialed a provision in the form purchase offer indicating that he
would forego a property inspection. Yet, the offer indicated that plaintiff had 14 days of “due
diligence to evaluate the Property.” And if the contract were valid and not ambiguous, the court
ruled that summary disposition would still be appropriate because plaintiff did not conduct the
property inspection within 14 days as provided in the due diligence provision. Additionally, the
court accepted defendant’s alternative argument that summary disposition of plaintiff’s claims
was proper under the doctrine of laches. Describing laches as “the equitable counterpart of a
statute of limitations,” the court noted that plaintiff waited two-and-a-half years to file his
complaint after making his initial offer to purchase the property. In the interim, plaintiff
submitted a series of futile counteroffers and amended offers with ever decreasing value to
defendant. This amounted to a lack of due diligence on plaintiff’s part.
Plaintiff now appeals.
II. EXISTENCE OF A CONTRACT
Plaintiff contends that the parties entered a valid and enforceable contract and therefore
summary disposition was inappropriate. We review de novo a circuit court’s summary
disposition ruling. Beaudrie v Henderson, 465 Mich. 124, 129; 631 NW2d 308 (2001). The
court granted summary disposition in defendant’s favor pursuant to MCR 2.116(I)(2). The court
rule provides that if “the pleadings show that a party is entitled to judgment as a matter of law, or
if the affidavits or other proofs show that there is no genuine issue of material fact, the court
shall render judgment without delay.” “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
-2-
nonmoving party.” BC Tile & Marble Co, Inc v Multi Bldg Co, Inc, 288 Mich. App. 576, 583;
794 NW2d 76 (2010) (quotation marks and citation omitted). “The existence and interpretation
of a contract are questions of law” that we also review de novo. Kloian v Domino’s Pizza, LLC,
273 Mich. App. 449, 452; 733 NW2d 766 (2006).
To form a valid contract, “there must be an offer and acceptance.” Pakideh v Franklin
Commercial Mtg Group, Inc, 213 Mich. App. 636, 640; 540 NW2d 777 (1995). There is no
question that plaintiff made an offer to defendant and that defendant responded with a
counteroffer. The question is whether plaintiff accepted that counteroffer to form a valid
contract. “Unless an acceptance is unambiguous and in strict conformance with the offer, no
contract is formed.” Id. Only “[i]f an offer does not require a specific form of acceptance, [may]
acceptance . . . be implied by the offeree’s conduct.” Id.
The purchase offer included specific means by which the buyer could accept a
counteroffer by the seller. Specifically, the offer states:
COUNTEROFFER: In the event Seller makes any written changes to terms and
conditions herein, such changes, if initialed and Seller Acceptance executed, shall
constitute a counteroffer by Seller to Buyer. . . . Acceptance of counteroffer by
Buyer occurs when Buyer initials each change, signs Buyer Acknowledgement of
Acceptance (bottom line), and delivers notice to Seller by time stipulated above.
[Emphasis added.]
We must apply and enforce the clear and plain language of this contract. Ajax Paving
Indus, Inc v Vanopdenbosch Constr Co, 289 Mich. App. 639, 644; 797 NW2d 704 (2010).
Although plaintiff complied with the other acceptance requirements, he did not initial the
changes defendant made within the document to form a counteroffer. As plaintiff’s purported
acceptance was not “in strict conformance with the offer,” it was not truly an acceptance and no
contract was formed.
Plaintiff contends, however, that even if there was a “defect or incomplete
acknowledgement in the [c]ounter-offer,” it “was either waived or rendered moot when”
defendant signed an amendment to the “contract” allowing him to seek bank financing. The
amendment was actually signed on the same day that defendant tendered her counteroffer. The
amendment applied “only . . . to the now executed agreement, if the seller agrees.” By signing
the “amendment” defendant was not ratifying the existence of a contract. No contract existed
because plaintiff had not accepted defendant’s counteroffer as provided in the document. At
most, defendant’s signature represented her agreement that if or when the parties formed a
contract, the closing could be delayed as required by a potential lender.
Plaintiff further asserts that the existence of a contract was plain from the parties’ conduct
in the following years. He notes that the parties’ attorneys “corresponded for several months . . .
and the parties moved forward pursuant to the terms of the cont[r]act.” In this vein, plaintiff
emphasizes that the parties and their attorneys frequently used the term “contract” in their
correspondence. People, even lawyers, do not always use precise and accurate language in
communications, or even in documents of legal importance. In recognition of this reality, this
Court has repeatedly held that courts must analyze a party’s legal claims on their substance and
-3-
not their labels. See Buhalis v Trinity Continuing Care Servs, 296 Mich. App. 685, 691-692; 822
NW2d 254 (2012). Courts also may not take at face value an employer’s designation of a person
as an “independent contractor” versus an “employee,” for example. See Laster v Henry Ford
Health Sys, 316 Mich. App. 726, 736; 892 NW2d 442 (2016). The use of the term “contract”
therefore is not dispositive.
Plaintiff contends that the parties’ conduct amounted to “substantial performance” under
the contract. “The doctrine of substantial performance is used to determine whether a party can
be considered to have fulfilled its obligation under a contract even though that party has not fully
performed.” Rodgers v JP Morgan Chase Bank NA, 315 Mich. App. 301, 310; 890 NW2d 381
(2016). The doctrine does not apply when “no contract was formed” in the first instance, as in
this case. Id. Moreover, the conduct cited by plaintiff as fulfilling his obligations under the
contract—property inspections, appraisals, attempts to secure financing—actually violate the
alleged contract, i.e., the purchase offer. Plaintiff offered to take the property without inspection
and without financing. His actions in contravention of that promise are further evidence that no
contractual agreement was reached.
That no contract was formed is also supported by plaintiff’s repeated offers to pay an
ever-shrinking amount for the property and to reduce the offer of cash to be paid up front, and
demands that defendant remedy issues uncovered during his inspections. Defendant never
agreed to any of these terms, expressly sticking to her counteroffer to sell the property as-is for
$1,800,000 with $1,000,000 cash down and the remaining $800,000 to be paid on land contract.
Plaintiff refused to abide by the offer and never made any attempt to pay the $1,000,000 or to
enter a land contract. Plaintiff’s continued negotiation of terms is proof positive that no contract
was entered.
As no contract was formed, the circuit court properly denied plaintiff’s motion to
summarily dispose of the matter in its favor and granted summary disposition in favor of
defendant. Given our resolution of this issue, we need not determine whether the circuit court
correctly analyzed alternative grounds to support its ruling.
We affirm.
/s/ Elizabeth L. Gleicher
/s/ Karen M. Fort Hood
/s/ Brock A. Swartzle
-4-