Compatible Laser Products Inc v. Main Street Financial Supplies ( 2016 )

STATE OF MICHIGAN
COURT OF APPEALS
COMPATIBLE LASER PRODUCTS, INC., UNPUBLISHED
September 20, 2016
Plaintiff/Counter Defendant-
Appellant/Cross-Appellee,
v No. 323122
Oakland Circuit Court
MAIN STREET FINANCIAL SUPPLIES and LC No. 2012-124642-CK
ARCHIE E. WELCH,
Defendants/Counter
Plaintiffs/Third-Party Plaintiffs-
Appellees/Cross-Appellants,
v
SUSAN CAVE,
Third-Party Defendant-
Appellant/Cross-Appellee,
and
ANTHONY CAVE,
Third-Party Defendant-Cross-
Appellee.
Before: SAAD, P.J., and WILDER and MURRAY, JJ.
PER CURIAM.
Plaintiff, Compatible Laser Products, Inc. (Compatible), and third-party defendant Susan
Cave appeal as of right the order compelling the parties to arbitrate the remaining claims in this
action involving, inter alia, claims of breach of contract. Defendants Main Street Financial
Supplies (Main Street) and Archie E. Welch cross-appeal as of right several other orders entered
by the circuit court in this case. We affirm.
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I. FACTS AND PROCEEDINGS
A. RELEVANT FACTS
Susan and Anthony Cave are the sole owners of Compatible, which remanufactures toner
cartridges and ships them on behalf of customers who provide Compatible with purchase orders.
Main Street, owned by Welch, sold toner cartridges to Office Depot. Compatible began shipping
for Main Street in 2007. Main Street was Compatible’s customer and the two companies had an
oral agreement.
Susan testified that Compatible acts on its customer’s behalf and follows the customer’s
instructions. Susan did not recall telling Welch that she would not ship directly to his customers,
but she agreed that when shipping on behalf of a customer there is a level of trust involved and
that she would follow the customer’s instructions and not harm the customer. She testified that
Compatible does a “good job to represent” the customer. Susan had never shipped to a
customer’s client without the customer’s consent. Susan did not recall having a conversation
with Welch in which she told him that their relationship would be held in strict confidence, but
she agreed that her relationships with dealers are held in strict confidence. Susan testified that
she would ship pursuant to Welch’s instructions and on behalf of Main Street, and that she
represented Main Street.
In June 2011, Susan became concerned about the amount of Main Street’s receivables
that were past due, as well as the fact that the payment amounts had reduced. Susan sent an
email to Welch on June 7, 2011, which indicated that Compatible would ship all orders through
August 1, 2011, so long as Main Street was at “net-80” (payment within 80 days of being
invoiced) and would ship all orders through September 30, 2011, if Main Street was at “net-70.”
On July 6, 2011, after she was unable to reach Welch, Susan called Steve Gividen, a
salesperson with Office Depot and Welch’s friend, to inform Office Depot that Compatible
would not be shipping products to its customers that day. Susan informed Gividen that
Compatible would not ship until it received $25,000 from Main Street. According to Susan,
Main Street owed approximately $160,000 at that time. Susan’s intent was to “rattle some
cages”; Welch had told her that his slowed payments to Compatible resulted from Office Depot’s
failure to pay him funds owed. Susan admitted that Welch was upset with her for contacting
Office Depot.
Susan testified that, after her call to Gividen, Gividen approached her about Compatible
becoming a backup vendor. Susan admitted that, under such an arrangement, Compatible’s
prices would have been lower than Main Street’s because Main Street’s profit margin would be
eliminated. At the request of Office Depot, Susan concealed the vendor-application process
from Welch. Susan informed Office Depot that she did not want Welch to lose the business. In
October 2011, Compatible signed a vendor agreement with Office Depot. Susan admitted that
she told Office Depot that she did not have any agreements with Welch. She was approved as an
Office Depot vendor at the end of October. Susan heard that Office Depot had a corporate
directive to eliminate the middlemen. However, she was not aware that she had actually
received Office Depot’s business until she received a purchase order in January 2012.
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Gividen denied having asked Susan to become a backup vendor or fill out an application
to become a backup vendor. However, Gividen heard that Compatible was in the process of
becoming a direct vendor. Teresa Thompson, also an Office Depot employee, testified that
Susan did not ask for a vendor application, but Thompson recalled talking to Susan about setting
her up as a backup vendor. Gividen testified that Susan never told him that she had an
agreement with Main Street not to ship directly to its customers and that, if she had, he would not
have asked her to violate that agreement. Gividen never saw any documentation of a policy
within Office Depot to eliminate the middleman and never discussed any such policy.
In late November 2011, based on the fact that Welch had not met the terms that had been
agreed to in June 2011, the Caves decided to obtain a personal guaranty from Welch in order to
receive more consistent payment from him. Welch was the only customer from whom the Caves
sought a guaranty. The guaranty was drafted by an attorney. Welch told Susan that his attorney
recommended a non-compete agreement. Susan testified that she said that she would look at a
non-compete agreement. Susan intended for the guaranty and non-compete agreement to be
separate documents.
On December 29, 2011, Welch emailed Susan, stating in part:
Finally heard back from my lawyer. He is fine with the guaranty but strongly
suggested that it be ammended [sic] to indicate that Compatible guarantees not to
call or sell directly to Office Depot or any OD accounts. If you’re good with that
ammend [sic] the guaranty, sent it over and I’ll get it signed.
That same day, Susan responded, in part:
If you want to have something drafted in the form of a non-compete, that’s fine,
get one over to me. The guaranty, however, is something we need on file for all
dealers that we extend credit to, especially in the large amounts.
Welch then replied, in part:
Sounds good (on the non-compete, not the lack of OD payments). I’ll get my
lawyer to draft one or find a standard non-compete. I’ll sign guaranty and get it
over to you.
In discussions with Welch in December 2011, Susan honored Office Depot’s request not to
inform Welch about its corporate directive to eliminate middlemen.
The personal guaranty was signed by Welch and dated January 4, 2012. The guaranty
provided, in part:
In consideration of the extension of credit granted by Compatible Laser Products,
Inc., the undersigned do hereby unconditionally guaranty payment of whatever
amount, Main Street Financial Supply Co., Inc., shall at any time be owing on
account of materials and services hereafter or previously delivered, furnished, or
supplied, whether said indebtedness is in the form of invoices, statements, bills or
open account.
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In an email dated January 4, 2012, Welch stated that he had sent the guaranty form by mail and
that he would “work on the non-compete form” and get it to Susan. Susan testified that she did
not believe she would have actually signed the non-compete agreement if it restricted her from
selling to Office Depot. According to Susan, there was no agreement regarding what Welch
would receive in exchange for signing the personal guaranty.
Welch admitted guaranteeing the debts Main Street owed to Compatible but testified that
he did so in exchange for Cave signing the non-compete agreement. Welch, however, also
admitted that the personal guaranty did not mention the non-compete agreement and that he
never actually sent a draft of the non-compete agreement to Compatible.
In January 2012, Office Depot switched its business to Compatible, i.e., Compatible
began shipping directly to Office Depot without Main Street’s involvement. Susan was still
trying to obtain money from Welch at that time. On January 18, 2012, Compatible received a
purchase order from Office Depot.
Anthony testified that Susan runs the company. He and Susan had discussions related to
becoming a direct vendor. Anthony testified that he gave Susan his opinion, but the ultimate
decision was Susan’s.
Thompson testified that she believed that it was Rich Mercurio, another Office Depot
employee, who decided to use Compatible instead of Main Street, further testifying that the
decision to switch to Compatible was made because Compatible offered lower prices.
Contrastingly, in an email dated February 8, 2012, Mercurio told Welch that he did not initiate
the change, but acknowledged that Compatible’s prices were lower and that, as such, Office
Depot decided to eliminate the middleman. Nadine Brocci, also of Office Depot, testified that
Office Depot decided to switch to Compatible because of pricing, a desire to limit exposure, and
Main Street’s failure to timely respond to customer service issues.
On February 8, 2011, Welch emailed Susan, stating in part:
I trusted you, you were my friend. You agreed to sign a non-compete if I signed
the business and personal guaranty. In accordance with our agreement I mailed
the signed guaranty on January 6th.
* * *
While I was in the process of getting the non-compete that you agreed to sign you
went directly to Office Depot and took my customer base. You are aware that this
is over $700,000.00 a year in revenue. By February 2, 2012 after taking my
business you contacted a lawyer to sue me for your receivables after you
destroyed my ability to pay and violated our agreement.
I am demanding that you go forward with the non-compete, return my customers,
the lost revenue, and drop the law suit.
Welch admitted selling Compatible products worth $112,723.40 to Office Depot and
receiving approximately $135,000 from Office Depot. Welch refused to pay Compatible
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because he believed Compatible “defrauded” him out of his business. According to Welch, the
only date on which he ever sent a written document disputing invoices was February 8, 2012.
Regarding his claims against Anthony, Welch testified that Anthony was an owner and
officer of Compatible, and thus Welch assumed that Anthony discussed the decision to steal
Main Street’s business with the other officer, Susan (i.e., Anthony’s wife). Welch testified that
Anthony’s email showed that he was involved in the process of lowering costs and production.
Antony was also present at meetings. Welch admitted that the only evidence he had to support
the claims against Anthony was that he was an officer, that he communicated with Welch, and
that he was at meetings.
B. PROCEDURAL HISTORY
1. CLAIMS
Compatible initiated the action below by filing a complaint against Main Street and
Welch alleging that they owed unpaid account invoices in the amount of $112,723 (count I),
alleging claims of breach of contract (count II) and breach of the personal guaranty (count III),
and seeking attorney fees in the amount of $37,574.33 (count IV). Main Street and Welch filed
numerous counterclaims against Compatible and third-party claims against Susan and Anthony.
The counter and third-party complaint alleged claims of breach of an oral and written contract
against Susan and Compatible (count I), promissory estoppel against Susan and Compatible
(count II), intentional interference with contractual and/or advantageous relationship against
Susan, Anthony, and Compatible (count III), unjust enrichment against Susan, Anthony, and
Compatible (count IV), breach of fiduciary duties against Susan and Compatible (count V), fraud
by misrepresentation against Susan and Compatible (count VI), silent fraud against Susan and
Compatible (count VII), and conspiracy against Susan, Anthony, and Compatible (count VIII).
Compatible also filed an amended complaint, which alleged claims of account stated against
Main Street (count I), breach of contract against Main Street (count II), breach of guaranty
against Welch (count III), common law conversion against Main Street and Welch (count IV),
statutory conversion against Main Street and Welch (count V), breach of fiduciary duty against
Main Street and Welch (count VI), fraudulent misrepresentation against Main Street and Welch
(count VII), innocent misrepresentation against Main Street and Welch (count VIII), silent fraud
against Main Street and Welch (count IX), civil conspiracy against Main Street and Welch
(count X), concert of action against Main Street and Welch (count XI), and unjust enrichment
against Main Street and Welch (count XII).
2. MOTION IN LIMINE
Compatible and the Caves filed a motion in limine, arguing that Main Street and Welch
failed to file a witness list or list of proposed exhibits and failed to name any experts by
December 10, 2012, as required by the amended scheduling order. Compatible and the Caves
requested that Main Street and Welch be enjoined from introducing any exhibits at trial or
calling any non-party witnesses to testify at trial. After Main Street and Welch filed a response
and a hearing was held, the circuit court granted the motion precluding Main Street and Welch
from introducing any exhibits and calling any non-party witnesses to testify at trial.
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Subsequently, the circuit court also denied Main Street and Welch’s motion for rehearing or
relief from the order precluding them from introducing exhibits and calling non-party witnesses.
3. COMPATIBLE’S MOTION FOR SUMMARY DISPOSITION OF AMENDED
COMPLAINT
Compatible moved for summary disposition under MCR 2.116(C)(8) and (10), arguing
that there was no genuine issue of material fact regarding, or viable defenses to, its claims of
breach of contract, account stated, or breach of guaranty. Regarding the breach of contract
claim, Compatible argued that (1) Welch admitted that he agreed to pay Compatible for products
shipped to Office Depot’s customers, (2) Welch admitted that Main Street sold $112,723.40 of
Compatible products to Office Depot for which Compatible was never paid, and (3) Main
Street’s defense that Compatible stole Main Street’s business was not viable because it was
Office Depot’s decision to terminate its relationship with Main Street. Regarding the account
stated claim, Compatible argued that Main Street failed to state a valid defense because there was
an agreement on the amount due and a promise to pay that amount. With regard to the breach of
guaranty claim, Compatible argued that Welch admitted that he signed the guaranty and a non-
compete agreement was not a condition of that guaranty.
Main Street and Welch filed an answer to Compatible’s motion for summary disposition
in which they claimed that Compatible hindered and prevented their ability to pay by stealing
their business, and that Compatible and Susan put Welch out of business while acting as their
agents. Main Street and Welch also argued (1) that they had the right to a set-off for amounts
owed by Compatible and the Caves that exceeded the amount owed by Welch and Main Street,
(2) that Compatible was not paid because it breached the contract, (3) that Compatible’s claims
were barred because Compatible and the Caves were agents and fiduciaries of Main Street and
Welch, (4) that Compatible and the Caves obtained Welch’s guaranty through fraud and
violations of their duties as agents and fiduciaries (5) that there was no bargained-for
consideration for the guaranty because Compatible had already extended credit, (6) that there is
no statutory or common law conversion claim for failing to pay amounts claimed owing under a
contract, (7) that there were no grounds for an unjust enrichment claim because there was an
express contract and promissory estoppel is inapplicable because Compatible had a breach of
contract claim, (8) that the fraud claims were actually breach of contract claims because future
promises are contractual and do not constitute fraud, (9) that Main Street and Welch were not
fiduciaries of Compatible, and (10) that the conspiracy and concert of action claims failed for
lack of an underlying tort and because a corporation cannot conspire or act in concert with an
employee.
After a reply by Compatible, and a hearing on Compatible’s motion, the circuit court (1)
denied Compatible summary disposition regarding the breach of contract claim, determining that
it was “possible for a reasonable juror to determine [Compatible] breached the contract by failing
to provide the non-compete agreement,” (2) granted Compatible summary disposition regarding
the account stated claim, reasoning that Main Street and Welch did not contest the amount owed,
but rather sought a set-off, and (3) denied Compatible summary disposition regarding the breach
of personal guaranty and unjust enrichment claims, finding that a reasonable juror could find that
Compatible breached the agreement first. The circuit court also denied Compatible summary
disposition regarding the claims for conversion, fraud, breach of fiduciary duty, conspiracy, and
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concert of action. With regard to the account stated claim, the circuit court entered judgment in
favor of Compatible and against Main Street in the amount of $130,814.29.
4. COMPATIBLE AND THE CAVES’ MOTION FOR SUMMARY DISPOSITION OF
COUNTER AND THIRD-PARTY COMPLAINT
Compatible and the Caves moved for summary disposition under MCR 2.116(C)(8) and
(10) regarding the counter and third-party complaint. They argued that Main Street and Welch
failed to state any specific complaints against Anthony and admitted that they had no evidence to
support the claims against him, and further that Main Street and Welch failed to state a claim
upon which relief could be granted regarding the remaining claims.
Main Street and Welch filed an answer in which they argued that summary disposition
was not appropriate because Susan was not credible. They argued that the Caves took Welch’s
business and violated their duties as agents. Main Street and Welch also argued that there were
questions of fact regarding the terms of the contract and whether Compatible and the Caves
breached the contract, further arguing that there were questions of fact regarding the promissory
estoppel claim, whether an agency relationship existed, the fiduciary duty claim, the unjust
enrichment claim, the intentional interference claim, the fraud claim, and the conspiracy claim.
Following the ensuing motion hearing, the circuit court entered an order granting in part
and denying in part Compatible and the Caves’ motion for summary disposition on the counter
and third-party complaint. The circuit court granted summary disposition to Anthony on all
counts and granted the motion regarding the claims of intentional interference, unjust
enrichment, and conspiracy. On the other hand, the circuit court denied the motion regarding the
claims of breach of contract, promissory estoppel, breach of fiduciary duties, fraud by
misrepresentation, and silent fraud. Finally, the circuit court denied the motion for rehearing or
relief from the order granting summary disposition filed by Main Street and Welch.
5. MAIN STREET AND WELCH’S MOTION FOR SUMMARY DISPOSITION OF
AMENDED COMPLAINT
Main Street and Welch filed a motion for summary disposition regarding the amended
complaint, arguing that (1) the statutory and common law conversion claims for failure to pay
amounts owed under a contract failed because there were no specific funds, (2) the guaranty was
unenforceable because there was no bargained-for consideration, which Susan admitted, (3) there
was an oral agreement and, therefore, no unjust enrichment or promissory estoppel claims, (4)
Compatible and the Caves violated agent and fiduciary duties, (5) the alleged fraud claims were
actually breach of contract claims because the alleged misrepresentations were future promises to
pay and were barred by the economic loss doctrine, (6) there was no material misrepresentation
of fact or duty to support a silent fraud claim, (7) the claims of conspiracy and concert of action
failed for lack of an underlying tort and because a corporation cannot conspire with or act in
concert with an employee, and (8) Main Street and Welch did not have a fiduciary duty to
Compatible and were not agents of Compatible or the Caves.
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Compatible filed a response to Main Street and Welch’s motion. It argued that the
motion should be denied on the basis of the circuit court’s prior ruling on Compatible’s motion
for summary disposition and its finding that there were genuine issues of material fact.
Following a hearing on the motion, the circuit court entered an order granting in part and
denying in part Main Street and Welch’s motion for summary disposition on the amended
complaint. The circuit court granted the motion on the claims of common law conversion,
statutory conversion, fraudulent misrepresentation, innocent misrepresentation, and silent fraud,
but denied the motion on the claims of breach of contract, breach of guaranty, breach of fiduciary
duty, civil conspiracy, concert of action, and unjust enrichment.
6. MAIN STREET AND WELCH’S MOTION FOR PARTIAL SUMMARY DISPOSITION
Main Street and Welch also moved for partial summary disposition under MCR
2.116(C)(10), arguing that Compatible and the Caves failed to state a valid defense to Main
Street and Welch’s claims that there was an oral contract between the parties. Following a
response by Compatible and the Caves, including a cross motion for summary disposition on
Main Street and Welch’s counter complaint, and a hearing on the various motions, the circuit
court ruled that Compatible and the Caves were agents of Main Street and Welch. The court
reasoned that Compatible and the Caves failed to respond to the agency arguments or supply
substantively admissible evidence to contradict such arguments. The circuit court further found
that Compatible and the Caves failed to respond with any substantively admissible evidence to
rebut the terms of the oral contract and granted the motion. The circuit court denied the motion
regarding the existence of a fiduciary relationship, finding that a question of fact existed, and
also denied Compatible and the Caves’ counter motion for summary disposition. Finally, the
circuit court denied Compatible and the Caves’ motion for reconsideration.
7. MOTION TO COMPEL ARBITRATION
The circuit court entered an order granting Main Street and Welch’s motion to compel
arbitration of the remaining claims. The order provided that the circuit court “retains jurisdiction
to enforce the terms of the arbitration order and any awards,” further providing, “This is a final
order that resolves the last pending claim and closes the case. Arbitration to be scheduled as
soon as possible. . . . No stays pending any appeals have been made.” This appeal and cross-
appeal ensued.
II. JURISDICTION
On cross-appeal, Main Street and Welch argue that the arbitration agreement bars
Compatible and Susan’s appeal regarding the breach of guaranty claim and other remaining
claims. While the parties’ agreement does not define this Court’s jurisdiction, we agree that the
July 23, 2014 order was not a final order because it provided that the circuit court retained
jurisdiction. See Green v Ziegelman, 282 Mich. App. 292, 301 n 6; 767 NW2d 660 (2009)
(concluding that the summary disposition order at issue was not a final order because it merely
sent the case to arbitration and the case would return to the circuit court for entry of a judgment
on the arbitration award). Therefore, the appeal is not proper as an appeal by right. See MCR
7.203(A)(1). However, Main Street and Welch did not move to dismiss the appeal on this
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ground and we exercise our discretion to treat the faulty claim of appeal as an application for
leave to appeal, grant leave, and decide the appeal and cross appeal on the merits. See MCR
7.203(B)(1).
Moreover, while the parties have agreed to arbitrate all of the remaining claims, we may
review the circuit court’s earlier rulings on the motions for summary disposition, including its
findings related to the claims that were to be arbitrated. For example, while the breach of
guaranty claim is a remaining claim to be arbitrated, we may review the circuit court’s denials of
summary disposition on that claim to determine whether the circuit court should have granted
judgment as a matter of law.1
III. SUMMARY DISPOSITION
Both parties dispute the circuit court’s rulings on the various motions for summary
disposition. We review a circuit court’s ruling on a motion for summary disposition de novo.
Doe v Henry Ford Health Sys, 308 Mich. App. 592, 596; 865 NW2d 915 (2014). Although the
parties filed motions for summary disposition under MCR 2.116(C)(8) and (10), the circuit court
considered evidence outside the pleadings; therefore, it could not have ruled under MCR
2.116(C)(8). See Spiek v Mich Dep’t of Transp, 456 Mich. 331, 338; 572 NW2d 201 (1998).
A motion for summary disposition under MCR 2.116(C)(10) tests the factual
support of the plaintiff’s claim and should be granted, as a matter of law, if no
genuine issue of any material fact exists to warrant a trial. This Court considers
the pleadings, affidavits, depositions, admissions and other evidence submitted by
the parties in a light most favorable to the nonmoving party. A material question
of fact exists when, after viewing the evidence in a light most favorable to the
nonmoving party, reasonable minds could differ on the issue. [Doe, 308 Mich
App at 596-597 (citations omitted).]
A. BREACH OF GUARANTY CLAIM
Compatible and Susan contend that the circuit court erred by denying Compatible’s
motion for summary disposition on the breach of guaranty claim. We disagree.
In support of its holding, the circuit court reasoned that a reasonable juror could find that
Compatible breached the guaranty first. The circuit court found “some support” in the email
exchanges between the parties for Welch’s claim that he signed the personal guaranty based
upon an oral agreement that Compatible would execute a non-compete agreement.
1
We also reject Compatible and the Caves’ jurisdictional challenge to the cross-appeal.
Although Main Street and Welch’s claim of cross-appeal did not list the order regarding the
motion in limine, that order was entered before the July 23, 2014 order and the claim of cross-
appeal was properly viewed as taken from the July 23, 2014 order with the attendant right to
challenge the earlier orders. See Green, 282 Mich. App. at 301 n 6.
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The circuit court properly determined that there was a question of fact regarding the
breach of guaranty claim. Although the guaranty expressly stated that the consideration was the
continued extension of credit, the emails between Susan and Welch created a question of fact
regarding whether Susan agreed to sign a non-compete agreement in exchange for the guaranty.
Compatible contends that any such evidence regarding a non-compete agreement was
inadmissible under the parol evidence rule. We disagree. “The parol evidence rule may be
summarized as follows: [p]arol evidence of contract negotiations, or of prior or contemporaneous
agreements that contradict or vary the written contract, is not admissible to vary the terms of a
contract which is clear and unambiguous.” UAW-GM Human Resource Ctr v KSL Recreation
Corp, 228 Mich. App. 486, 492; 579 NW2d 411 (1998) (quotation marks and citation omitted).
“However, parol evidence of prior or contemporaneous agreements or negotiations is admissible
on the threshold question whether a written contract is an integrated instrument that is a complete
expression of the parties’ agreement.” Id.
[E]xtrinsic evidence is admissible to show (1) that the writing was a sham, not
intended to create legal relations, (2) that the contract has no efficacy or effect
because of fraud, illegality, or mistake, (3) that the parties did not integrate their
agreement or assent to it as the final embodiment of their understanding, or (4)
that the agreement was only partially integrated because essential elements were
not reduced to writing. [Id. at 493 (emphasis added).]
Thus, although the guaranty expressly stated that the consideration was continued credit,
the parties’ prior communications were admissible to show that the personal guaranty was not a
complete expression of their agreement. Those communications create a question of fact
regarding whether the personal guaranty was “the final embodiment of their understanding.”
UAW-GM Human Resource Ctr, 228 Mich. App. at 493. Based on the communications between
Susan and Welch, a reasonable juror could find that Susan agreed to sign a non-compete
agreement in exchange for the personal guaranty. Based on that finding, a reasonable juror
might conclude that it was Compatible and Susan who first breached the guaranty agreement, not
Welch. Accordingly, the circuit court properly denied summary disposition regarding the breach
of guaranty claim.
Moreover, even though Welch never provided a non-compete agreement for Susan to
sign, Susan’s testimony suggested that she never intended to sign a non-compete agreement
despite her statements to Welch. Susan testified that she did not believe she would have actually
signed the non-compete agreement, particularly if it restricted her from selling to Office Depot.
Based on this, Main Street and Welch argue that the guaranty was invalid because it was
obtained through fraud and violations of fiduciary duties. Main Street and Welch’s claims of
breach of fiduciary duty, fraudulent misrepresentation, and silent fraud all related to, in part, the
signing of the guaranty and are remaining claims to be decided in arbitration. Compatible and
the Caves do not raise issues on appeal related to those claims. Given that those claims relate to
the validity of the guaranty and have yet to be resolved, the circuit court properly denied
summary disposition on the breach of guaranty claim.
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B. TERMS OF THE ORAL CONTRACT
Compatible and Susan argue that circuit court improperly granted partial summary
disposition on the counter claim, determining the terms of the oral contract. We disagree.
In deciding a motion for summary disposition, a circuit court may not make findings of
fact. Jackhill Oil Co v Powell Prod, Inc, 210 Mich. App. 114, 117; 532 NW2d 866 (1995).
However, summary disposition is proper if no genuine issues of material fact exist to warrant a
trial. Doe, 308 Mich. App. at 596.
Here, the circuit court found that Compatible and the Caves failed to respond with any
substantively admissible evidence to rebut the terms of the oral contract alleged by Main Street
and Welch. Accordingly, the circuit court found that the terms of the oral contract were as
follows:
A. Susan Cave and Compatible would ship on behalf of Main Street and Welch
to Office Depot and its customers;
B. Susan Cave and Compatible would not have contact with or call Office Depot
or its customers without Archie Welch’s/Main Street’s knowledge and consent;
C. Caves and Compatible would keep all matters regarding the relationship,
conversations and financial information with Main Street and [Welch]
confidential;
D. Susan Cave and Compatible would only act pursuant to Arch Welch’s/Main
Street’s instructions;
E. All of the shipping would be through Main Street and representing Main
Street;
F. The relationship and conversations between Welch/Main Street with
Compatible would be in the strictest confidence;
G. Main Street and [Welch] were Compatible customers; and
H. Office Depot and its customers were Main Street and [Welch’s] customers.
On appeal, Compatible and Susan only dispute three of the above terms. First, they
contend that the circuit court’s finding that Susan and Compatible would ship on behalf of Main
Street and Welch to Office Depot and its customers was inconsistent with Welch’s admission
that Compatible and the Caves agreed they would not ship directly to Office Depot. However,
Compatible and the Caves did not make this argument below in response to Main Street and
Welch’s motion. Moreover, this argument lacks merit because the fact that Compatible and the
Caves were not to ship directly to Office Depot is not inconsistent with the finding that they were
to ship on behalf of Main Street to Office Depot. The term “directly” implies shipping without
Main Street’s involvement. Susan testified that Compatible ships on behalf of customers such as
Main Street and that she shipped to Office Depot’s customers on behalf of Main Street.
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Compatible and Susan also dispute the circuit court’s finding that Compatible and Susan
would not have contact with or call Office Depot or its customers without Main Street and
Welch’s knowledge and consent. Susan testified that she never contacted another dealer’s
customer to obtain business. She also admitted that Welch was upset with her when contacted
Office Depot without his knowledge, but she did not recall Welch telling her she was not
authorized to do that, only that she should call him as soon as possible. Welch, on the other
hand, testified that he told Susan that she had no right to call the customer directly. Compatible
and Susan attach to their brief on appeal pages of Susan’s deposition in which she testified that
she was told to contact customers directly if they had questions and it was not unusual for her to
contact Office Depot without first contacting Welch. However, they admit that those pages were
not attached to Main Street and Welch’s motion, and Compatible and Susan did not attach those
pages to their response to Main Street and Welch’s motion. Accordingly, those pages are not
part of the record and, based on the testimony before it, the circuit court did not err by finding no
genuine issue of material fact regarding this term. See Barnard Mfg Co, Inc v Gates
Performance Engineering, Inc, 285 Mich. App. 362, 380-381; 775 NW2d 618 (2009) (holding
that a trial court has no duty to independently pore over the record; rather, the parties have a duty
to cite evidence in support of their respective positions).
Finally, Compatible and Susan dispute the circuit court’s finding that the relationship and
conversations between Main Street and Welch with Compatible would be in the strictest
confidence. They rely on Susan’s testimony that she did not have a conversation with Welch in
which she told him that their relationship would be held in the strictest confidence; however,
Susan also testified that her relationships with dealers are held in strict confidence. Thus, the
circuit court did not err by finding no genuine issue of material fact regarding this term.
C. AGENCY
Compatible and Susan contend that the circuit court erred by granting Main Street and
Welch’s motion for partial summary disposition, determining that Compatible and Susan were
agents of Main Street or Welch. We disagree.
The circuit court found that Compatible and the Caves were agents of Main Street and
Welch, reasoning that Compatible and the Caves “failed to respond to the argument regarding
agency.” The existence of an agency relationship is a question of fact. Hertz Corp v Volvo
Truck Corp, 210 Mich. App. 243, 246; 533 NW2d 15 (1995). Main Street and Welch cited
Meretta v Peach, 195 Mich. App. 695; 491 NW2d 278 (1992), in support of their agency
argument. In Meretta, this Court stated that “[a]n agency relationship may arise when there is a
manifestation by the principal that the agent may act on his account” and “[t]he test of whether
an agency has been created is whether the principal has a right to control the actions of the
agent.” Id. at 697. Main Street and Welch attached deposition testimony of Susan to their
motion for partial summary disposition that supported the existence of an agency relationship.
Specifically, Susan testified that Compatible shipped on behalf of customers and shipped
according to Welch’s instructions. Although Compatible and the Caves denied the allegation
that they were agents of Main Street and Welch, they did not specifically address the agency
issue in their brief. Thus, the circuit court properly granted summary disposition because there
was no genuine issue of material fact on the issue of agency.
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Moreover, Compatible and Susan’s argument on appeal lacks merit. On appeal,
Compatible and the Caves focus on the fact that Welch admitted that Main Street was
Compatible’s customer, which they claim is inconsistent with Compatible being Main Street’s
agent. However, Susan’s testimony established that (1) she represented her customers, such as
Main Street, (2) Compatible acted on behalf of its customers, and (3) Compatible followed the
instructions of its customers. Thus, while Main Street and Welch were customers of Compatible,
there was no genuine issue of material fact that Compatible and Susan were also agents of Main
Street and Welch.
D. BREACH OF FIDUCIARY DUTY
Main Street and Welch argue that there were material issues of fact regarding whether
Compatible and the Caves were fiduciaries of Main Street and Welch. This issue is moot
because Main Street and Welch have already received the relief they request.
The circuit court denied Main Street and Welch’s motion for partial summary disposition
regarding the existence of a fiduciary relationship, finding that it presented a question of fact.
Accordingly, Main Street and Welch’s issue on cross-appeal related to this claim, in which they
argue that there is a question of fact regarding whether Compatible and the Caves are fiduciaries
of Main Street and Welch, is moot. See Gen Motors Corp v Dep’t of Treasury, 290 Mich. App.
355, 386; 803 NW2d 698 (2010) (“An issue is moot if an event has occurred that renders it
impossible for the court to grant relief. An issue is also moot when a judgment, if entered,
cannot for any reason have a practical legal effect on the existing controversy.” (citations
omitted).) See also People v Billings, 283 Mich. App. 538, 548; 770 NW2d 893 (2009) (“Because
defendant has already received the relief that she requested, this issue is moot.”).
E. ACCOUNT STATED
Main Street and Welch contend that the circuit court erred in granting summary
disposition on Compatible’s account stated claim of $130,814.29. We disagree.
An “account stated” refers to a “contract based on assent to an agreed balance,”
which, like all contracts, must be created through mutual assent. “[P]arties assent
to a sum as the correct balance due from one to the other; and whether this
operation has been performed or not, in any instance, must depend upon the
facts.” An express contract arises when the parties expressly agree to the sum
due. A party’s acceptance may also be inferred when the party makes payments
on the amount due or receives an accounting and fails to object within a
reasonable time. [Dunn v Bennett, 303 Mich. App. 767, 770-771; 846 NW2d 75
(2013).]
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Here, Welch admitted that he sold $112,723.40 of Compatible’s products to Office
2
Depot. Welch also testified that he always paid the invoices and that he never disputed invoices
until February 8, 2012. At that time, he refused to pay because he claimed that Compatible and
the Caves defrauded him. Welch’s express agreement with the balance due established an
account stated. See Dunn, 303 Mich. App. at 770-771. Although Main Street and Welch refused
to pay based on their claims of breach of contract, breach of fiduciary duty, and fraud, these were
not defenses to Compatible’s account stated claim. Rather, as the circuit court found, Main
Street and Welch were seeking a setoff. As discussed below, if Main Street and Welch succeed
on any of their remaining claims in arbitration, they may be entitled to damages that may
“setoff” the money owned to Compatible and the Caves.
F. CLAIMS AGAINST ANTHONY CAVE
Main Street and Welch argue that the circuit court erred in granting summary disposition
in favor of Anthony on all counts. We disagree.
The counter and third-party complaint only mentioned Anthony with regard to the claims
of intentional interference, unjust enrichment, and conspiracy. The circuit court dismissed the
claims against Anthony, holding that there was “a lack of substantively admissible evidence as to
any liability.” On cross-appeal, Main Street and Welch argue that because the circuit court
found Anthony was an agent, he could be liable for violating fiduciary duties. Main Street and
Welch also argue that there were questions of fact regarding Anthony’s liability for unjust
enrichment, intentional interference, and conspiracy.
As discussed below, the unjust enrichment claim was properly dismissed because there
was an express contract and the intentional interference claim was properly dismissed because
there was no genuine issue of material fact regarding causation. Moreover, the circuit court
properly found a lack of evidence to support Anthony’s liability for any of the claims. As
Compatible and the Caves correctly point out, Welch admitted that the only evidence he had to
support the claims against Anthony was that Anthony was an officer of Compatible, that he
communicated with Welch, and that he was at meetings. While Main Street and Welch claim
that Anthony “agreed” with Susan’s decisions, Anthony’s testimony established that Susan ran
the company and made the decisions. Accordingly, the circuit court properly granted summary
disposition in favor of Anthony on all counts.
G. UNJUST ENRICHMENT
Main Street and Welch argue that there were material issues of fact regarding their unjust
enrichment claim. We disagree.
The circuit court granted summary disposition in favor of Compatible based on its
finding that it was “not disputed that Welch and/or Main Street did not confer a benefit upon
2
In addition to the $112,723.40 in damages, the circuit court also awarded $17,865.89 in interest
and $225 in taxable costs for a total award of $130,814.29.
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Compatible or Susan Cave.” “[U]njust enrichment is (1) receipt of a benefit by the defendant
from the plaintiff and (2) an inequity resulting to the plaintiff because of the retention of the
benefit by the defendant.” Keywell & Rosenfeld v Bithell, 254 Mich. App. 300, 327; 657 NW2d
759 (2002) (quotation marks and citation omitted). “When unjust enrichment exists, the law
operates to imply a contract in order to prevent it. However, a contract will be implied only if
there is no express contract covering the same subject matter.” Id. at 327-328 (quotation marks
and citation omitted). While the circuit court found Main Street and Welch did not confer a
benefit upon Compatible or Susan, Main Street and Welch’s unjust enrichment claim failed
because there was an express contract covering the same subject matter. Main Street and
Welch’s claims of breach of contract and unjust enrichment involved similar allegations. As
discussed above, the circuit court made findings regarding the terms of the oral contract,
including that:
A. Susan Cave and Compatible would ship on behalf of Main Street and Welch
to Office Depot and its customers;
B. Susan Cave and Compatible would not have contact with or call Office Depot
or its customers without Archie Welch’s/Main Street’s knowledge and consent;
C. Caves and Compatible would keep all matters regarding the relationship,
conversations and financial information with Main Street and [Welch]
confidential;
D. Susan Cave and Compatible would only act pursuant to Arch Welch’s/Main
Street’s instructions;
E. All of the shipping would be through Main Street and representing Main
Street;
F. The relationship and conversations between Welch/Main Street with
Compatible would be in the strictest confidence;
G. Main Street and [Welch] were Compatible customers; and
H. Office Depot and its customers were Main Street and [Welch’s] customers.
Main Street and Welch’s breach of contract claim remained to be decided at arbitration. Because
the circuit court determined that a contract existed, it properly granted summary disposition on
the unjust enrichment claim.
H. INTENTIONAL INTERFERENCE
Main Street and Welch argue that the circuit court erred in granting summary disposition
in favor of Compatible and the Caves on their claim of intentional interference. We disagree.
The basic elements of tortious interference with a business relationship are
the existence of a valid business relation or expectancy, knowledge of the
relationship or expectancy on the part of the interferer, an intentional interference
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inducing or causing a breach or termination of the relationship or expectancy, and
resultant damage to the party whose relationship has been disrupted. [Lakeshore
Community Hosp, Inc v Perry, 212 Mich. App. 396, 401; 538 NW2d 24 (1995).]
In order to establish tortious interference with a contract or business
relationship, plaintiffs must establish that the interference was improper. In other
words, the intentional act that defendants committed must lack justification and
purposely interfere with plaintiffs’ contractual rights or plaintiffs’ business
relationship or expectancy. The “improper” interference can be shown either by
proving (1) the intentional doing of an act wrongful per se, or (2) the intentional
doing of a lawful act with malice and unjustified in law for the purpose of
invading plaintiffs' contractual rights or business relationship. [Advocacy Org for
Patients & Providers v Auto Club Ins Ass’n, 257 Mich. App. 365, 383; 670 NW2d
569 (2003), aff’d 472 Mich. 91 (2005) (citations omitted).]
Although there may have been a question of fact regarding whether Compatible and the
Caves engaged in improper interference, the circuit court found no evidence that Office Depot
made the change to Compatible based on wrongful acts attributable to Susan. Thus, the circuit
court found no evidence of causation; i.e., that an intentional interference induced or caused a
breach of termination of the relationship or expectancy. See Lakeshore, 212 Mich. App. at 401.
According to Susan, Gividen of Office Depot approached her about Compatible
becoming a backup vendor. Gividen denied that he asked Susan to become a backup vendor;
however, Thompson also testified that Susan did not ask for a vendor application, Thompson
discussed with Susan the possibility of Compatible becoming a backup vendor, and Thompson
believed that it was Mercurio, also of Office Depot, who decided to use Compatible instead of
Main Street. Susan testified that she heard that Office Depot had a corporate directive to
eliminate the middlemen and Mercurio’s email supports the existence of a corporate decision to
eliminate the middlemen. Susan also admitted that she told Office Depot that she did not have
any agreements with Welch. Office Depot decided to switch to Compatible not only because of
the pricing, but also based on customer service issues with Main Street. According to Welch,
however, there was no national plan to eliminate the middlemen.
Given this testimony, the circuit court properly found no question of fact regarding
whether Compatible and the Caves’ actions caused the termination of Office Depot’s relationship
with Main Street; it was Office Depot’s unilateral decision to end the relationship. Although
Susan admitted that she told Office Depot that she did not have any agreements with Welch,
there was no evidence that this statement affected Office Depot’s decision to switch to
Compatible. Gividen testified that he would not have asked Susan to violate any agreement with
Compatible, but Gividen did not make the decision to switch to Compatible. Moreover, Welch’s
own testimony that Office Depot did not have a national plan to eliminate the middlemen, of
which he would have no personal knowledge, did not create a genuine issue of material fact for
trial.
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I. CONSPIRACY
Main Street and Welch contend that there are material issues of fact regarding whether
Anthony, Susan, and Compatible engaged in a conspiracy. We disagree.
“A civil conspiracy is a combination of two or more persons, by some concerted action,
to accomplish a criminal or unlawful purpose, or to accomplish a lawful purpose by criminal or
unlawful means.” Admiral Ins Co v Columbia Cas Ins Co, 194 Mich. App. 300, 313; 486 NW2d
351 (1992). This Court has stated that “there can be no conspiracy between a corporation and its
directors if the directors are acting on behalf of the corporation.” Blair v Checker Cab Co, 219
Mich. App. 667, 674; 558 NW2d 439 (1996). An exception exists “where the directors have an
independent personal stake in a particular action and, therefore, are actually acting on their own
behalf.” Id. at 674-675.
The circuit court granted summary disposition in favor of Compatible and the Caves,
finding a lack of evidence to support the conspiracy claim. As discussed above, summary
disposition was properly granted in favor of Anthony on all counts. Accordingly, only Susan
and Compatible could be liable for conspiracy. There was no evidence that Susan had any
independent personal stake such that she was acting on her own behalf. Accordingly, the circuit
court properly granted summary disposition in favor of Compatible and the Caves on this claim.
J. BREACH OF CONTRACT
Main Street and Welch contend that there are material issues of fact regarding
Compatible and the Caves hindering and preventing Main Street and Welch’s ability to pay by
stealing their business and breaching the contract. Compatible filed a motion for summary
disposition on its breach of contract claim against Main Street and Welch. Main Street and
Welch argued in response to the motion that Compatible hindered and prevented their ability to
pay by stealing their business. The circuit court denied summary disposition regarding the
breach of contract claim, finding that it was “possible for a reasonable juror to determine
[Compatible] breached the contract by failing to provide the non-compete agreement.”
Accordingly, Compatible’s breach of contract claim and any defenses were to be decided in
arbitration. Therefore, Main Street and Welch’s issue on cross-appeal related to this claim, in
which it argues that there is a question of fact regarding whether Compatible and the Caves
hindered and prevented their ability to perform, is moot. See Gen Motors Corp, 290 Mich. App.
at 386; Billings, 283 Mich. App. at 548.
IV. RIGHT TO A SETOFF
Main Street and Welch contend that they have a right to setoff. This issue is abandoned.
“It is axiomatic that where a party fails to brief the merits of an allegation of error, the
issue is deemed abandoned by this Court. And, where a party fails to cite any supporting legal
authority for its position, the issue is deemed abandoned.” Prince v MacDonald, 237 Mich. App.
186, 197; 602 NW2d 834 (1999) (citations omitted). Main Street and Welch provide one
paragraph of argument in support of this issue and merely state that they are entitled to a setoff.
Because Main Street and Welch fail to properly brief the merits of their argument and fail to cite
any legal authority supporting their argument, this issue is abandoned. Nonetheless, the circuit
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court recognized that Main Street and Welch were seeking a setoff; however, because Main
Street and Welch have not yet succeeded on any of their claims, they were not entitled to a setoff
below. If Main Street and Welch succeed on any of their remaining claims in arbitration they
may be entitled to damages from Compatible or the Caves that may “set off” the amount they
owe Compatible and the Caves.
V. MOTION IN LIMINE
Main Street and Welch contend that the circuit court should have denied Compatible and
the Caves’ motion in limine. This issue is moot. The order in limine precluded Main Street and
Welch from introducing exhibits or calling non-party witnesses to testify at trial, but a trial was
never held in this case. Rather, after ruling on the motions for summary disposition, the parties
agreed to arbitrate the remaining claims. Accordingly, it is impossible for this Court to grant
relief. See Gen Motors Corp, 290 Mich. App. at 386.
Affirmed. Neither party having prevailed in full, no costs may be taxed. See MCR
7.219.
/s/ Henry William Saad
/s/ Kurtis T. Wilder
/s/ Christopher M. Murray
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