Simcor Construction Inc v. Carl J Trupp III , 322 Mich. App. 508 ( 2018 )

STATE OF MICHIGANS
COURT OF APPEALS
SIMCOR CONSTRUCTION, INC, FOR PUBLICATION
January 9, 2018
Plaintiff-Appellee, 9:05 a.m.
v No. 333383
Oakland Circuit Court
CARL J TRUPP III and JENNIFER M. TRUPP, LC No. 2016-151468-AV
Defendants-Appellants.
Before: CAMERON, P.J., and SERVITTO and GLEICHER, JJ.
CAMERON, P.J.
Defendants, Carl J. Trupp III and Jennifer M. Trupp, appeal by leave granted the circuit
court’s May 26, 2016 order affirming the district court’s January 22, 2016 order denying their
motion for offer of judgment sanctions against plaintiff, Simcor Construction, Inc. We reverse
and remand.
I. BACKGROUND
This case arises out of plaintiff’s breach of contract claim against defendants, which
originated in district court. Pursuant to a contractual provision, the district court ordered the
parties to arbitration on September 18, 2014. Defendant made an offer of judgment in favor of
plaintiff for $2,200 on November 6, 2014. Plaintiff rejected the offer and made a counteroffer of
judgment for $9,383.39. The parties did not reach a settlement, the case went to arbitration, and
the arbitrator dismissed plaintiff’s claim “with prejudice and without costs.”
On February 17, 2015, the district court denied plaintiff’s motion to vacate the arbitration
award, confirmed the arbitration award in favor of defendants, and entered “a Judgment of No
Cause of Action” that was “in favor of Defendants and against Plaintiff.” On March 9, 2015, the
district court denied defendants’ motion for offer of judgment costs and attorney fees under
MCR 2.405. On June 8, 2015, the circuit court affirmed the district court’s denial of plaintiff’s
motion to vacate the arbitration award.1 On October 7, 2015, the circuit court held a hearing on
1
Plaintiff filed an application for leave to appeal on August 10, 2015, to appeal the circuit
court’s affirmance of the district court’s denial of plaintiff’s motion to vacate the arbitration
award. This Court denied plaintiff’s application for leave to appeal on February 4, 2016. Simcor
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defendants’ appeal of the district court’s denial of their motion for offer of judgment costs. The
circuit court remanded the case to the district court to allow it the opportunity to more thoroughly
explain its reasoning under MCR 2.405(D) regarding the “interest of justice” exception.
On remand, the district court granted costs to defendants under MCR 2.405(D). On
January 22, 2016, the district court held a hearing on plaintiff’s motion for reconsideration.
After some confusion as to the scope of the remand from the circuit court,2 the district court
changed course and entered an order concluding that MCR 2.405(D) did not apply, relying
heavily on Kequam ex rel Macklam v Lakes States Ins Co, unpublished opinion per curiam of the
Court of Appeals, issued April 11, 1997 (Docket No. 189433), p 1, and held that the
confirmation of the arbitration award did not constitute a “verdict” under MCR 2.405(A)(4). The
circuit court affirmed the district court’s order, concluding that the confirmation of an arbitration
award does not constitute a “verdict” within the meaning of MCR 2.405(A)(4) because a court
that confirms the arbitration award is essentially acting in an appellate capacity and not rendering
a “verdict.” Defendants filed leave to appeal the circuit court’s order affirming the district
court’s order. On appeal, defendants argue that the circuit court erred when it affirmed the
district court’s order denying defendants’ motion for offer of judgment sanctions. First,
defendants claim that they are entitled to offer of judgment costs because the district court’s
judgment confirming the arbitration award constitutes a “verdict” under MCR 2.405(A)(4)(c).
Second, defendants claim that if offer of judgment costs apply, plaintiff cannot prove an “interest
of justice” exception that would nonetheless prevent the imposition of costs.
II. STANDARD OF REVIEW
Generally, this Court reviews de novo “[t]he interpretation of statutes and court rules.”
Estes v Titus, 481 Mich. 573, 578-579; 751 NW2d 493 (2008), citing Cardinal Mooney High Sch
v Michigan High Sch Athletic Ass’n, 437 Mich. 75, 80; 467 NW2d 21 (1991). Additionally, this
Court reviews “de novo the interpretation and application of the offer of judgment rule.”
Marilyn Froling Revocable Living Trust v Bloomfield Hills Country Club, 283 Mich. App. 264,
297; 769 NW2d 234 (2009), citing Castillo v Exclusive Builders, Inc, 273 Mich. App. 489, 492;
733 NW2d 62 (2007). We review “for an abuse of discretion the trial court’s decision regarding
whether to refuse to award attorney fees under the interest-of-justice exception.” AFP
Specialties, Inc v Vereyken, 303 Mich. App. 497, 516; 844 NW2d 470 (2014) (citations omitted).
“An abuse of discretion occurs ‘when the trial court’s decision is outside the range of reasonable
and principled outcomes.’ ” Id. at 517, quoting Smith v Khouri, 481 Mich. 519, 526; 751 NW2d
472 (2008).
Constr, Inc v Trupp, unpublished order of the Court of Appeals, entered February 4, 2016
(Docket No. 328731).
2
There was confusion at the district court’s hearing on the motion for reconsideration as to
whether the district court was to address the applicability of MCR 2.405, or if the circuit court
had already ruled on that and the only question was whether an “interest of justice” exception
applied under MCR 2.405(D)(3).
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III. ANALYSIS
Defendants first claim that MCR 2.405 applies to the district court’s confirmation of the
arbitration award, and therefore, offer of judgment costs are merited. We agree.
“Generally, the rules governing statutory interpretation apply equally to the interpretation
of court rules. If the plain meaning of the language of the court rule is clear, then judicial
construction is neither necessary nor permitted, and unless explicitly defined, every word or
phrase should be accorded its plain and ordinary meaning, considering the context in which the
words are used.” Castillo, 273 Mich. App. at 492 (citations and quotation marks omitted).
“MCR 2.405(D) provides for the imposition of costs following the rejection of an offer to
stipulate the entry of a judgment[.]” Castillo, 273 Mich. App. at 491, citing MCR 2.405(D). This
is known as “the offer of judgment rule.” Froling Trust, 283 Mich. App. at 297. “The purpose of
MCR 2.405 is ‘to encourage settlement and to deter protracted litigation.’ ” Luidens v 63rd Dist
Court, 219 Mich. App. 24, 31; 555 NW2d 709 (1996), citing Hamilton v Becker Orthopedic
Appliance Co, 214 Mich. App. 593, 596; 543 NW2d 60 (1995). MCR 2.405(D)(1) provides, in
relevant part:
(D) Imposition of Costs Following Rejection of Offer. If an offer is rejected,
costs are payable as follows:
(1) If the adjusted verdict is more favorable to the offeror than the average offer,
the offeree must pay to the offeror the offeror’s actual costs incurred in the
prosecution or defense of the action.
As stated by this Court, MCR 2.405(A)(4) previously provided that “the term ‘verdict’ ”
was “defined as ‘the award rendered by a jury or by the court sitting without a jury, excluding all
costs and interest.’ ” Parkhurst Homes, Inc v McLaughlin, 187 Mich. App. 357, 362; 466 NW2d
404 (1991), citing former MCR 2.405(A)(4), effective March 1, 1985. MCR 2.405(A)(4)3 has
since been amended and currently states:
(4) “Verdict” includes,
(a) a jury verdict,
(b) a judgment by the court after a nonjury trial,
(c) a judgment entered as a result of a ruling on a motion after rejection of
the offer of judgment.
3
The current version of MCR 2.405(A)(4) came into effect on October 1, 1997. See 454 Mich.
cxxii, cxxxiv (1997).
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Plaintiffs argue that MCR 2.405 does not apply to arbitration disputes, such as this case,
because the district court’s judgment confirming the arbitration award is not a “verdict” under
MCR 2.405(A)(4)(c). Determining whether MCR 2.405 applies to the district court’s
confirmation of the arbitration award is a two-step analysis. First, we must address whether the
district court’s judgment confirming the arbitration award is a “judgment” under MCR 2.405,
and if it is, then we must address whether the judgment was “entered as a result of a ruling on a
motion after rejection of the offer of judgment.” MCR 2.405(A)(4)(c). We conclude that
defendants have met both requirements.
To first determine whether the judgment confirming the arbitration award falls within the
provisions of MCR 2.405(A)(4), we examine the relevant arbitration provisions. MCL 691.1702
of the Uniform Arbitration Act states:
Sec. 22. After a party to an arbitration proceeding receives notice of an award,
the party may move the court for an order confirming the award at which time the
court shall issue a confirming order unless the award is modified or corrected
under section 20 or 24 or is vacated under section 23.
MCR 3.602(J)(5) provides: “If the motion to vacate is denied and there is no motion to modify or
correct the award pending, the court shall confirm the award.” As to judgments relating to
arbitration, MCR 3.602(L) states:
(L) Judgment. The court shall render judgment giving effect to the award
as corrected, confirmed, or modified. The judgment has the same force
and effect, and may be enforced in the same manner, as other judgments.
Plaintiff contends that the district court’s ruling was correct because both MCR 3.602 and
MCL 691.1702 do not expressly refer to MCR 2.405, and therefore, MCR 2.405 is inapplicable
to judgments confirming arbitration awards. This argument lacks merit. Under MCR 3.602(L),
judgments confirming arbitration awards carry “the same force and effect . . . as other
judgments” and “may be enforced in the same manner.” MCR 3.602(L). Under MCR
2.405(A)(4)(c), a verdict is “a judgment entered as a result of a ruling on a motion after rejection
of the offer of judgment.” (Emphasis added.) There is nothing that excludes judgments
confirming arbitration awards from the provisions of MCR 2.405, and we see no reason to do so
in light of MCR 3.602(L).4 The only restriction under MCR 2.405 is stated in section (E): “Costs
may not be awarded under this rule in a case that has been submitted to case evaluation under
MCR 2.403 unless the case evaluation award was not unanimous.” Thus, only unanimous case
evaluations are outside the scope of MCR 2.405 because MCR 2.403 governs such cases. The
4
The circuit court erred when it held that the district court’s confirmation of the arbitration
award was not a “verdict” because it was acting as an appellate court in the arbitration
proceedings and not entering a judgment applicable under MCR 2.405. MCR 3.602(L) expressly
states that a judgment confirming an arbitration award has the same force and effect as any other
judgment, and we conclude that a judgment, as described under MCR 3.602(L), falls within the
provisions of MCR 2.405.
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drafters could have excluded from MCR 2.405 judgments confirming arbitration awards, yet no
such provision exists. The plain language in MCR 3.602, MCL 691.1702, and MCR 2.405 is
clear, and we need not look further to reach this result.
Because we find that the district court’s judgment confirming the arbitration award
constitutes a “judgment” under MCR 2.405(A)(4)(c), the next question is whether the judgment
was “entered as a result of a ruling on a motion after rejection of the offer of judgment.” MCR
2.405(A)(4)(c). There is no dispute on appeal that plaintiff rejected defendants’ offer of
judgment, or that the district court denied plaintiff’s motion to vacate the arbitration award,
confirmed the arbitration award in favor of defendants, and entered a judgment “in favor of
[d]efendants and against [p]laintiff.” After plaintiff rejected defendants’ offer of judgment, the
district court entered a judgment in favor of defendants “as a result of” its ruling on plaintiff’s
motion to vacate the arbitration award, thereby satisfying the second requirement under MCR
2.405(A)(4)(c), i.e., that the judgment be entered as a result of a ruling on a motion after
rejection of the offer of judgment.
We find instructive the Michigan Supreme Court’s holding in Acorn Investment Co v
Mich Basic Prop Ins Ass’n, 495 Mich. 338, 342; 852 NW2d 22 (2014). In Acorn, the Court
analyzed the availability of case evaluation sanctions under MCR 2.403(O)(1) and (O)(2), which
defines “verdict” as “a judgment entered as a result of a ruling on a motion after rejection of the
case evaluation.” Acorn, 495 Mich. at 350. The definition of “verdict” provided by MCR
2.403(O)(2)(c) is nearly identical to the definition of verdict provided by MCR 2.405(A)(4)(c),
with the exception of the last portion of each rule referring respectively to a case evaluation or an
offer of judgment. In Acorn, the Michigan Supreme Court first inserted the definition of the term
“verdict” as defined by MCR 2.403(O)(2)(c) into the language of MCR 2.403(O)(1), which
resulted in the following rule:
If a party has rejected an evaluation and the action proceeds to a judgment entered
as a result of a ruling on a motion after rejection of the case evaluation, that party
must pay the opposing party’s actual costs unless the verdict is more favorable to
the rejecting party than the case evaluation. [Acorn, 495 Mich. at 350.]
While Acorn concerned case evaluations and the interpretation of MCR 2.403(O)(2)(c), we find
its analysis persuasive considering the definitions of “verdict” found in MCR 2.403(O)(2)(c) and
MCR 2.405(A)(4)(c) are virtually identical. In Acorn, the Court held that a motion for entry of
judgment of an appraisal panel’s award satisfied the definition of verdict under MCR
2.403(O)(2)(c) because it was the “the court, not the appraisal panel, that made the final
determination of the parties’ rights and obligations.” Acorn, 495 Mich. at 351. The Court
explained that the trial court “would still have had matters to attend to, including awarding
interest under MCL 500.2006 for [the] defendant’s failure to pay in a timely fashion.” Id. at 351-
352.
In this case, it was the district court, not the arbitrator, that made the final determination
of whether to confirm, correct, modify, or vacate the arbitration award. See MCL 691.1702.
The district court still had to determine whether it should modify or correct the award under
MCL 691.1700 and MCL 691.1704, or to vacate the award entirely under MCL 691.1703.
Because the court had the final determination as to the arbitration award, the judgment
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constitutes a verdict. Thus, we hold that if a party rejects an offer of judgment, an arbitrator
enters an arbitration award, and a judgment is entered as a result of a ruling on a motion to vacate
the arbitration award, then the rejecting party must pay the opposing party’s actual costs unless
the judgment affecting the arbitration award is more favorable to the rejecting party than the
offer of judgment. Plaintiff rejected defendants’ offer of judgment in the amount of $2,200. At
the arbitration, the arbitrator dismissed the case, finding no cause of action. The district court
confirmed the arbitrator’s decision, which was an outcome less favorable to the rejecting party.
Therefore, the district court’s judgment falls within the plain meaning of “verdict,” as defined by
MCR 2.405(A)(4)(c), and the circumstances in this case mandate the award of offer of judgment
costs to defendants.
We note that the district court denied defendants’ motion for offer of judgment costs
because “[t]he arbitrator specifically did not grant any costs or attorney fees to either party.”
Additionally, plaintiff argues that the arbitrator ruled that “[a]ll claims not expressly granted
herein are hereby denied,” and therefore, allowing the district court to impose costs contravenes
the arbitrator’s award. Under MCR 2.405(D)(1), “costs are payable” if “the adjusted verdict is
more favorable to the offeror than the average offer[.]” Until the arbitration award was
confirmed by the district court, there was no “verdict,” and the issue of offer of judgment costs
was not before the arbitrator. Plaintiff also fails to acknowledge that the arbitrator ruled that
“[t]his Award is in full settlement of all claims submitted to this Arbitration.” The claim for
offer of judgment costs was not submitted to arbitration, and no such claim existed at that time
because there was no verdict. To that point, plaintiff concedes on appeal that the arbitrator did
not consider the issue of offer of judgment costs.
Further, MCR 3.602 defines an arbitrator’s power to impose costs. MCR 3.602(M)
states, “The costs of the proceedings may be taxed as in civil actions, and, if provision for the
fees and expenses of the arbitrator has not been made in the award, the court may allow
compensation for the arbitrator’s services as it deems just.” The use of the term “proceedings”
refers to the arbitration proceedings over which the arbitrator presides. The offer of judgment is
not part of the arbitration proceedings, and any costs involving the offer of judgment is outside
the scope of the arbitrator’s power to impose costs. Therefore, plaintiff’s argument fails, and the
district court erred to the extent that it concluded that the arbitration award barred defendants’
motion for offer of judgment costs.
The district court also expressly found Kequam persuasive in its order denying
defendants’ motion for offer of judgment costs because, in that case, an arbitration award did not
satisfy the definition of “verdict” in MCR 2.405(A)(4). Kequam, unpub op at 1. Not only is
Kequam nonbinding authority under MCR 7.215(C)(1), its holding pertained to the former
version of MCR 2.405(A)(4), and therefore, was entirely irrelevant to the current version of
MCR 2.405(A)(4). The prior version did not contain MCR 2.405(A)(4)(c), which is the
controlling provision at issue here. Therefore, the district court erred when it relied on Kequam.
Finally, defendant contends that the “interest of justice” exception under MCR
2.405(D)(3) does not apply here. MCR 2.405(D)(3) states as follows:
(D) Imposition of Costs Following Rejection of Offer. If an offer is rejected,
costs are payable as follows:
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* * *
(3) The court shall determine the actual costs incurred. The court may, in the
interest of justice, refuse to award an attorney fee under this rule.
This Court has held that “the interest of justice exception should be applied only in unusual
circumstances.” Stitt v Holland Abundant Life Fellowship, 243 Mich. App. 461, 472; 624 NW2d
427 (2000) (citation and quotation marks omitted). “[T]he unusual circumstances necessary to
invoke the ‘interest of justice’ exception may occur where a legal issue of first impression is
presented, or ‘where the law is unsettled and substantial damages are at issue, where a party is
indigent and an issue merits decision by a trier of fact, or where the effect on third persons may
be significant. . . .’ ” Haliw v City of Sterling Hts (On Remand), 266 Mich. App. 444, 448; 702
NW2d 637 (2005) (citation omitted).
The district court’s order does not address this exception. “ ‘[A] court speaks through its
written orders and judgments, not through its oral pronouncements.’ ” City of Sterling Hts v
Chrysler Group, LLC, 309 Mich. App. 676, 682; 873 NW2d 342 (2015), quoting In re Contempt
of Henry, 282 Mich. App. 656, 678; 765 NW2d 44 (2009) (alteration in original). Because the
district court did not reach the issue of whether the “interest of justice” exception applies in its
order, we cannot determine whether the exception to MCR 2.405(D)(3) applies to the facts of
this case. For that reason, we must remand the case to the district court for a determination of
the applicability of the exception and to articulate the basis for its decision. If the exception does
not apply, the district court must impose offer of judgment costs.
Reversed and remanded for further proceedings consistent with this opinion. We do not
retain jurisdiction.
/s/ Thomas C. Cameron
/s/ Deborah A. Servitto
/s/ Elizabeth L. Gleicher
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