Rodney Woods v. City of Saginaw ( 2019 )

If this opinion indicates that it is “FOR PUBLICATION,” it is subject to
revision until final publication in the Michigan Appeals Reports.
STATE OF MICHIGAN
COURT OF APPEALS
RODNEY WOODS, doing business as RODNEY UNPUBLISHED
WOODS BUILDER, October 15, 2019
Plaintiff-Appellant,
v No. 344025
Saginaw Circuit Court
CITY OF SAGINAW, LC No. 16-029129-CB
Defendant-Appellee.
Before: REDFORD, P.J., and JANSEN and LETICA, JJ.
PER CURIAM.
In this contract dispute, plaintiff, Rodney Woods, a demolition contractor doing business
as Rodney Woods Builder, appeals by right the trial court’s order granting defendant, the City of
Saginaw, summary disposition. We affirm.
I. PERTINENT FACTS AND PROCEDURAL HISTORY
This case involved blight demolition efforts in the Saginaw area under the Troubled
Asset Relief Program (“TARP”). Defendant and the Saginaw County Land Bank Authority
(“SCLBA”) secured over $11,000,000 in TARP funds from the Michigan State Housing
Development Authority for blight elimination. Defendant and the SCLBA entered into a
partnership to demolish up to 950 blighted properties. The SCLBA would be responsible for
acquiring, owning, and maintaining properties slated for demolition, and defendant would be
responsible for hiring demolition contractors and overseeing their work. In 2013, defendant
began soliciting bids from numerous demolition contractors to take on the role of demolishing
the blighted properties. One of these contractors was plaintiff, a sole proprietor.
Defendant created a procedure in which each contractor submitted a “per unit costs” for
various services related to demolition. Such services included foundation removal, tree removal,
and asbestos removal. Each of these services was assigned a particular number of points.
Defendant would award demolition work to the “highest qualified contractor with the lowest
accepted and approved bids” for a period of two years, and defendant had the option to extend
this period for a third year. The remaining contractors would be ranked according to the number
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of points they scored. The lowest best bid would receive the first chance for work, the second
lowest best bid would receive the second chance for work, and so on down the list. The
demolition properties would be awarded to a contractor “until such time that the contractor
cannot meet the volume demands as determined by the City at which time the City will award
work to the second lowest best bid and so on until such time as the volume demands are met.”
Plaintiff submitted his bid proposal and “won” the bidding process. As the highest
ranked contractor, plaintiff had first pick of the demolition properties and received 240 out of a
total 480 initial properties. In total, plaintiff demolished approximately 600 houses over the life
of the contract. At certain points during the life of the contract, defendant determined that
plaintiff could not handle more demolitions than those he already had, and defendant
subsequently gave demolition work to other contractors on the list.
Plaintiff filed a three-count complaint. In Count I, a breach of contract claim, plaintiff
claimed that defendant increased the scope of the contract, and then was not adequately
compensated for the extra work performed. In Count II, plaintiff sought relief under a quantum
meruit theory for the extra work performed. The extra work relevant to Count I and Count II
was primarily related to grading and seeding of the properties after demolition, which plaintiff
claimed was not included in the parties’ original contract. In support of his claim for additional
compensation, plaintiff attached a letter from John C. Stemple, Chief Inspector for defendant, in
which Stemple issued a change order acknowledging that plaintiff, and other contractors, had
been performing work beyond the original contract and would receive additional compensation
for prospective demolitions. Finally, in Count III, plaintiff made a second claim for breach of
contract, this time claiming that defendant allocated demolitions to other contractors, thereby
breaching an implied covenant of good faith.
Defendant filed its first motion for summary disposition in October 2017, which the trial
court granted in part as to Count I, and denied in part as to Count II and Count III.1 In granting
summary disposition to defendant on Count I, the trial court concluded that the change order
dealt with prospective demolitions, not demolitions already performed, and plaintiff had agreed
to receiving payment for work performed after the change order was issued. However, because
plaintiff only sought compensation for extra work performed before the change order was issued,
plaintiff was unable to maintain a breach of contract claim based solely on the change order
letter.
In March 2018, defendant filed a renewed motion for summary disposition of Count II
and Count III. The trial court granted summary disposition in favor of defendant of Count II,
plaintiff’s quantum meruit claim, under MCR 2.116(C)(8) and (C)(10), and of Count III under
MCR 2.116(C)(10) for the implied warranty of good faith claim. This appeal followed.
1
Plaintiff does not challenge the grant of summary disposition in favor of defendant as to Count
I on appeal.
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II. STANDARDS OF REVIEW
“This Court reviews de novo a trial court’s decision on a motion for summary
disposition, as well as questions of statutory interpretation and the construction and application
of court rules.” Dextrom v Wexford Co, 287 Mich. App. 406, 416; 789 NW2d 211 (2010). A
motion is properly granted pursuant to MCR 2.116(C)(8) when the opposing party fails to state a
claim upon which relief can be granted. Such a motion “tests the legal sufficiency of the claim
on the basis of the pleadings alone . . . .” Bailey v Schaaf, 494 Mich. 595, 603; 835 NW2d 413
(2013). When reviewing the motion, the trial “court must accept as true all factual allegations
contained in the complaint.” Id. The trial court must grant the motion “if no factual
development could justify the plaintiff’s claim for relief.” Id. (quotation marks and citation
omitted).
Additionally, a motion is properly granted pursuant to MCR 2.116(C)(10) when “there is
no genuine issue with respect to any material fact and the moving party is entitled to judgment as
a matter of law.” Dextrom, 287 Mich. App. at 415. This Court “must examine the documentary
evidence presented and, drawing all reasonable inferences in favor of the nonmoving party,
determine whether a genuine issue of material fact exists. A question of fact exists when
reasonable minds could differ as to the conclusions to be drawn from the evidence.” Id. at 415-
416. “This Court is liberal in finding genuine issues of material fact.” Jimkoski v Shupe, 282
Mich. App. 1, 5; 763 NW2d 1 (2008).
Finally, this Court reviews de novo the trial court’s decision on whether a claim for
unjust enrichment can be maintained as well as the trial court’s decision on an equitable matter.
Morris Pumps v Centerline Piping, Inc, 273 Mich. App. 187, 193; 729 NW2d 898 (2006).
III. ANALYSIS
A. QUANTUM MERUIT
Plaintiff first argues that the trial court erroneously awarded summary disposition on his
quantum meruit claim.
Michigan law “has long recognized the equitable right of restitution when a person has
been unjustly enriched at the expense of another” despite there being no contract between the
parties. Morris Pumps, 273 Mich. App. at 193 (quotation marks and citation omitted). The
“person who has been unjustly enriched at the expense of another is required to make restitution
to the other.” Id. (quotation marks and citation omitted). “The theory underlying quantum
meruit recovery is that the law will imply a contract in order to prevent unjust enrichment when
one party inequitably receives and retains a benefit from another.” Id. at 194. However, a party
may not recover in quantum meruit if an express contract between the parties covers the same
subject matter. Id.
In this case, plaintiff seeks additional compensation for extra work performed. Plaintiff
relies heavily on the change order from Stemple to support his claim that he should receive
additional compensation for extra work performed on demolition jobs before the change order
was issued. However, based on the record before us, the change order only applied to
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prospective demolitions; it was not to have retroactive effect. Whether Stemple had the authority
to issue the change order, or had the authority to bind defendant to the terms of the change order,
is irrelevant, as plaintiff conceded in the trial court that he did receive additional compensation
for extra work performed after Stemple issued the change order. Accordingly, we conclude that
not only was plaintiff fairly compensated for demolitions performed in accordance with the
original contract, but also, by his own admission, plaintiff was also fairly compensated for
demolitions performed after the change order was issued. In fact, plaintiff received several
million dollars for the approximately 600 demolitions he performed. Thus, plaintiff cannot
recover in quantum meruit on an unjust enrichment claim, and the trial court did not err in
granting summary disposition in favor of defendant on that basis. Having discerned no error in
the trial court’s ruling on MCR 2.116(C)(8), we need not address its alternative theory premised
on MCR 2.116(C)(10), and we decline to do so here.
B. IMPLIED COVENANT OF GOOD FAITH
Plaintiff next argues that the trial court erroneously granted summary disposition
regarding his breach-of-contract claim premised on an implied covenant of good faith.
A “covenant of good faith and fair dealing is an implied promise contained in every
contract ‘that neither party shall do anything which will have the effect of destroying or injuring
the right of the other party to receive the fruits of the contract.’ ” Hammond v United of
Oakland, Inc, 193 Mich. App. 146, 151-152; 483 NW2d 652 (1992) (citations omitted). This
implied promise applies to a contract that “makes the manner of [a party’s] performance a matter
of its own discretion . . . .” Ferrell v Vic Tanny Int’l, Inc, 137 Mich. App. 238, 243; 357 NW2d
669 (1984) (quotation marks and citation omitted). The implied promise requires such a party to
exercise its discretion “honestly and in good faith.” Id. (quotation marks and citation omitted).
Michigan law does not recognize a separate action for breach of an implied covenant of good
faith apart from a claim for breach of the contract on which the implied promise is premised.
Belle Isle Grill Corp v Detroit, 256 Mich. App. 463, 476; 666 NW2d 271 (2003). “A lack of good
faith cannot override an express provision in a contract.” Eastway & Blevins Agency v Citizens
Ins Co of America, 206 Mich. App. 299, 303; 520 NW2d 640 (1994).
In the present case, the contract provided that the demolitions would be awarded “until
such time that the contractor cannot meet the volume demands as determined by the City at
which time the City will award work to the second lowest best bid and so on until such time as
the volume demands are met” (emphasis added). There was no further instruction for how
defendant was to determine if a contractor could not meet volume demands. Accordingly, an
implied covenant of good faith applied in this instance to safeguard plaintiff against seemingly
unbridled discretion by defendant. See Ferrell, 137 Mich. App. at 243.
However, plaintiff failed to demonstrate any evidence of bad faith. Defendant, as the
moving party, submitted the Stemple affidavit in which Stemple averred that defendant had a
process to determine whether a contractor was at capacity and could not handle any further
properties for the time being. Various factors were considered in this process, including “the
contractor’s level of experience with demolitions, the contractor’s quality of work, and whether
the contractor was fully completing demolitions that had been assigned in a timely and efficient
manner.” Stemple averred that he had been concerned about plaintiff’s lack of experience with
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demolition work and the fact that he at one point had over 100 incomplete demolition properties.
Moreover, plaintiff had received continuous work throughout the contract’s life so long as he
was able to meet volume demands and was the first contractor considered when allocating
additional properties.
Accordingly, defendant provided documentary evidence to support its position that it had
not acted in bad faith in its allocution of demolition properties. The affidavit demonstrated that
there was a process by which defendant determined if a contractor was able to receive more
demolition properties, and, through this process, defendant determined that plaintiff was at
volume capacity at certain periods of time, which required defendant to allocate properties to
other contractors.
In response, plaintiff submitted an e-mail from one of his employees in which the
employee stated that plaintiff was capable of taking on more work. However, this did not rebut
the Stemple affidavit; rather the e-mail demonstrated plaintiff’s employee held the subjective
belief that plaintiff was capable of taking on more properties at that period in time. It did not
address the other periods of time, and it did nothing to demonstrate that the process defendant
utilized was undertaken in bad faith or that defendant had applied the process in bad faith.
Plaintiff may have disagreed with defendant’s determination that he was unable to meet volume
demands, but plaintiff failed to show any evidence of bad faith in making that determination.
See Ferrell, 137 Mich. App. at 243. Accordingly, defendant was entitled to summary disposition
under MCR 2.116(C)(10). Dextrom, 287 Mich. App. at 415-416.
Briefly, we note that plaintiff also argues that the trial court applied the incorrect standard
in granting summary disposition in favor of defendant. However, even assuming that the trial
court should have used the standard put forth by plaintiff, the result would not be different.
Plaintiff contends that the standard for the implied covenant of good faith is for the party to
utilize its discretion “honestly and in good faith.” Ferrell, 137 Mich. App. at 243 (quotation
marks and citation omitted). As discussed previously, the Stemple affidavit provided the process
that defendant used in allocating the properties, which included a number of factors and
considerations. The e-mail did nothing to show that the process provided by Stemple was
dishonest or undertaken in bad faith. Under plaintiff’s proposed standard, summary disposition
was still proper. See Outdoor Sys, Inc v Clawson, 262 Mich. App. 716, 720 n 4; 686 NW2d 815
(2004) (stating that this Court will not reverse the trial court for reaching the correct result for the
wrong reasons).2
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Finally, plaintiff again takes issue with the trial court’s failure to consider his affidavit.
However, as discussed previously, the affidavit was untimely, and, even if considered, it
espoused essentially the same contentions as those in the e-mail, i.e., that plaintiff was not near
capacity. Accordingly, the affidavit would not have affected the outcome because it had the
same deficiency as the e-mail: it failed to demonstrate bad faith.
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Affirmed.
/s/ James Robert Redford
/s/ Kathleen Jansen
/s/ Anica Letica
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