Donna Walker v. Otis M Underwood Jr ( 2017 )

STATE OF MICHIGAN
COURT OF APPEALS
DONNA WALKER, WILLIAM WALKER, and UNPUBLISHED
HEAD TO TOES MASSAGE THERAPY OF September 7, 2017
OXFORD, INC.,
Plaintiffs-Appellants,
v Nos. 332129
Oakland Circuit Court
OTIS M. UNDERWOOD, JR., LC No. 2015-145545-CK
Defendant-Appellee.
DONNA WALKER, WILLIAM WALKER, and
HEAD TO TOES MASSAGE THERAPY OF
OXFORD, INC.,
Plaintiffs-Appellees,
v No. 333160
Oakland Circuit Court
OTIS M. UNDERWOOD, JR., LC No. 2015-145545-CK
Defendant-Appellant.
Before: SHAPIRO, P.J., and GLEICHER and O’BRIEN, JJ.
PER CURIAM.
The parties signed a letter agreement regarding a building owned by defendant Otis M.
Underwood, Jr. Underwood, an attorney, drafted the document. The contract provided that
Underwood would build out part of the premises for plaintiffs’ use as the new location of their
spa business, and would “use all reasonable efforts/expense to obtain a final occupancy permit of
[sic] the building.” Nine months later, plaintiffs informed Underwood that they could wait no
longer for him to complete the work necessary for an occupancy permit. They filed suit alleging
breach of contract and fraudulent misrepresentation.
The circuit court granted summary disposition in Underwood’s favor, ruling that the
“sole remedy” permitted by the letter agreement was for the aggrieved party “to declare a default
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and terminate this preliminary agreement to lease,” unless the parties agreed otherwise. We read
the contractual language differently, and reverse this ruling. 1 The circuit court denied
Underwood’s motion for sanctions; we affirm that decision.
I
We review de novo the circuit court’s summary disposition ruling. Moser v Detroit, 284
Mich App 536, 538; 772 NW2d 823 (2009). The primary question presented in this case is
whether the following paragraph of the letter agreement precluded plaintiffs from filing this
lawsuit:
10. The failure of either party to perform the preliminary duties outlined in
this agreement will permit the obligee of the duty to declare a default and
terminate this preliminary agreement to lease or other remedy that may be agreed
to by the parties.
We also review de novo the lower court’s interpretation of the contract underlying the action.
Citizens Ins Co v Secura Ins, 279 Mich App 69, 72; 755 NW2d 563 (2008). We interpret
contractual language according to its plain and ordinary meaning. Holmes v Holmes, 281 Mich
App 575, 594; 760 NW2d 300 (2008).
Under ordinary contract principles, if contractual language is clear, construction
of the contract is a question of law for the court. If the contract is subject to two
reasonable interpretations, factual development is necessary to determine the
intent of the parties and summary disposition is therefore inappropriate. If the
contract, although inartfully worded or clumsily arranged, fairly admits of but one
interpretation, it is not ambiguous. The language of a contract should be given its
ordinary and plain meaning. [Meagher v Wayne State Univ, 222 Mich App 700,
721-722; 565 NW2d 401 (1997) (citations omitted).]
“It is an elementary rule of construction of contracts that in case of doubt, a contract is to be
strictly construed against the party by whose agent it was drafted.” Shay v Aldrich, 487 Mich
648, 673; 790 NW2d 629 (2010).
We turn to the sentence comprising paragraph 10 of the contract. Plaintiffs are the
“obligee” referred to in the sentence, which consists of two clauses that we re-present separately
here:
The failure of either party to perform the preliminary duties outlined in this
agreement will permit [plaintiffs] to declare a default and terminate this
preliminary agreement to lease
1
The circuit court summarily dismissed plaintiffs’ fraudulent misrepresentation claim on an
alternate ground. Plaintiffs have abandoned any appeal of that ruling.
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or other remedy that may be agreed to by the parties.
The first clause is independent and straightforward. It has a subject and a future tense verb: “will
permit.” The verb “permit” means the same things as “allow.”2 Alternatively stated, the first
clause states that the nonbreaching party is allowed to declare a default and terminate the
preliminary agreement to lease.
The second clause, however, lacks a verb. Although this clause is unartfully worded, it
makes sense to assume that the drafter (Underwood) intended that the same verb form (“will
permit”) would apply, and that Underwood inadvertently omitted the verb. Reasonably
interpreted, this clause “fairly admits of but one interpretation”: that the nonbreaching party is
allowed to pursue any other remedy agreed upon by the parties.
The circuit court interpreted these clauses to mean that in the event of a breach of the
agreement, the parties agreed to confine themselves to either of the two remedies specifically
mentioned: declaring a default and terminating the preliminary agreement to lease, or agreeing
on some alternate remedy. The problem with this construction of the paragraph is that it requires
the insertion of a word or words limiting the available remedies for breach to those specified.
We decline to rewrite the parties’ contract by adding a concept neither identified nor fairly
inferable from the words actually used. 3 As the drafter and an attorney, Underwood was
undoubtedly aware of the bedrock legal principle that contractual vagaries are construed against
the drafter. Most likely he was also familiar with the concept of an exclusive remedy. The
absence of language to that effect, coupled with the permissive tone of paragraph 10, persuades
us that Underwood did not intend that the remedies mentioned would constitute the sole
remedies available to either side.
Had Underwood meant to make the remedies mentioned in paragraph 10 exclusive, he
could have done so simply by adding some language of limitation or restriction regarding the
available remedies for breach. Here are three examples:
2
The Merriam-Webster Collegiate Dictionary (11th ed, 2014), p 923, defines “permit” as: “1: to
consent to expressly or formally . . . 2: to give leave: AUTHORIZE 3: to make possible . . . vi : to
give an opportunity : ALLOW.”
3
We reject the notion that the expressio unius est exclusio alterius canon counsels in favor of
reading the two described remedies as exclusive. “[T]he canon expressio unius est exclusio
alterius does not apply to every statutory listing or grouping; it has force only when the items
expressed are members of an ‘associated group or series,’ justifying the inference that items not
mentioned were excluded by deliberate choice, not inadvertence.” Barnhart v Peabody Coal Co,
537 US 149, 168; 123 S Ct 748; 154 L Ed 2d 653 (2003). “The canon depends on identifying a
series of two or more terms or things that should be understood to go hand in hand.” Chevron
USA, Inc v Echazabal, 536 US 73, 80-81; 122 S Ct 2045; 153 L Ed 2d 82 (2002). The two
remedies listed are hardly so similar that they “go hand in hand.” And given the use of the verb
“permit” in conjunction with the two remedies mentioned, we must assume that the drafter
intended an expansive rather than a limited realm of remedies.
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10. The failure of either party to perform the preliminary duties
outlined in this agreement will permit the obligee of the duty either to declare a
default and terminate this preliminary agreement to lease or another remedy that
must be agreed to by the parties.
or
10. The failure of either party to perform the preliminary duties
outlined in this agreement will permit the obligee of the duty only to declare a
default and terminate this preliminary agreement to lease or other remedy that
may be agreed to by the parties.
Or
10. The failure of either party to perform the preliminary duties
outlined in this agreement will permit the obligee of the duty to declare a default
and terminate this preliminary agreement to lease or other remedy that may be
agreed to by the parties. No other remedies are permitted.
We highlight that the verb chosen by Underwood—“permit”—suggests permission or
acquiescence rather than prohibition or preclusion. Despite that the parties did not agree on a
remedy or declare the default, nothing in this paragraph (or any other part of the agreement)
provides that the two options mentioned were the only or sole remedies available. And “we may
not read into the contract terms not agreed upon by the parties.” Trimble v Metro Life Ins Co,
305 Mich 172, 175; 9 NW2d 49 (1943) (quotation marks and citation omitted).
We find additional support for our conclusion in Short v Hollingsworth, 291 Mich 271;
289 NW 158 (1939), a breach-of-contract action arising from the installment sale of the
plaintiff’s corporate stock to the defendants. The contract provided in relevant part, “If and in
the event the buyers shall fail to make any installment payment on the date specified the sellers
may, at any time after any installment payment is past due for ninety days, file a written request
with said bank to return said stock to them[.]” Id. at 272. When the buyer-defendants defaulted
on the fourth payment, the plaintiff brought an action to recover the balance of the contract price
with interest. The defendants argued that the remedy set forth in the contract (return of the
stock) was exclusive, and that the plaintiff could not bring a breach-of-contract action seeking
the balance of the purchase price. Id. at 273. The Supreme Court held that the language of the
contract did not evince an intent to limit the remedies available for breach, as the parties used the
word “may” to describe one remedy, while elsewhere in the contract they used the word “shall”
regarding other aspects of the agreement:
The intention of the parties, we believe, from a reading of the entire
contract and a consideration of all the circumstances, was not that the remedy
expressed for defendants’ breach should be exclusive. Although defendant
earnestly argues to the contrary, it is significant that the remedy provided upon
breach is made available in permissive language by the use of the word “may”,
whereas, other covenants expressed therein, creating obligations upon both
parties, are imposed in mandatory language by the use of the word “shall”.
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Typical of phrases appearing throughout the contract are: “the buyers shall pay”;
“the stock so purchased * * * shall be deposited”; “annual installments * * * shall
be paid”; “said bank shall make distribution of such payments”. The use of the
word “shall” appears throughout the contract as the choice of the parties in
imposing the obligations assumed thereunder with but few exceptions, one being
the provisions, that in the event of default the sellers may pursue the remedy
hereinbefore quoted. [Id. at 274 (emphasis in original).]
The Court held that the contractual language did not “indicate an intent to provide an exclusive
remedy[.]” Id. at 274-275. “The words used in the contract should be construed according to
their ordinary meaning unless it is clear that a different meaning was intended, and we find
nothing that would authorize us to construe the word may, used as aforesaid, as meaning shall.”
Id. at 275 (emphasis in original).
Here, the contract used the term “permit” rather than “may.” This is a distinction lacking
a meaningful difference; both words suggest permission, not restraint. As in Short, other
paragraphs in the parties’ letter agreement demonstrate that the parties used stronger language,
indicative of compulsion, elsewhere. For example, paragraph 7 states:
The Lease (form included as part of this agreement) will be signed for an initial 3
year term (and use of basement for storage, etc.)[.] A monthly rental of $1,700,
paid in advance, plus, the payment at signing, a $2,000 security deposit as well as
a refund of any costs advanced by Landlord in the build out to begin occupancy.
[Emphasis added.]
Paragraph 9 provides:
Tenant agrees that at the lease signing they will have procured liability insurance
naming landlord as additional insured in the minimum amount of $1 million/$3
million per occurrence, for liability coverage. Tenant is also responsible for
insuring against loss of the glass windows, its own furniture and
fixtures/appliances and inventory. Landlord insures the building for liability
claims made against him as well as his risk of loss from fire, and other hazards.
[Emphasis added.]
The use of this mandatory language signals to us, as it did the Supreme Court in Short, that the
parties knew how and when to use words compelling an action, and chose language of
permission rather than obligation to describe available remedies. Accordingly, we reverse the
circuit court’s grant of summary disposition to Underwood, and remand for further proceedings.
II
In a cross appeal, Underwood argues that the circuit court erred in denying his motion for
sanctions. We review a trial court’s finding whether an action is frivolous for clear error.
Kitchen v Kitchen, 465 Mich 654, 661; 641 NW2d 245 (2002). “A decision is clearly erroneous
where, although there is evidence to support it, the reviewing court is left with a definite and firm
conviction that a mistake has been made.” Id. at 661-662.
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The circuit court did not err by denying sanctions. Given our resolution of plaintiffs’
appeal, their breach of contract claim must proceed toward trial. And Underwood has presented
no caselaw holding that plaintiffs were precluded from bringing a fraudulent misrepresentation
action. Plaintiff’s’ decision to jettison this portion of their case does not render it frivolous. See
Louya v William Beaumont Hosp, 190 Mich App 151, 164; 475 NW2d 434 (1991) (“The
ultimate outcome of the case does not necessarily determine the issue of frivolousness.”).
We reverse in part, affirm in part, and remand for further proceedings. We do not retain
jurisdiction.
/s/ Douglas B. Shapiro
/s/ Elizabeth L. Gleicher
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