Christopher Keefer v. Scott Neal ( 2022 )

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
CHRISTOPHER KEEFER, KATHERINE KEEFER, UNPUBLISHED
CASEY KEEFER, LISA KEEFER, JASON October 6, 2022
BROWN, and DARCEL BROWN,
Plaintiffs-Appellants/Cross-Appellees,
v No. 357491
Midland Circuit Court
SCOTT NEAL, LC No. 17-004954-CB
Defendant-Appellee/Cross-Appellant.
Before: M. J. KELLY, P.J., and CAMERON and HOOD, JJ.
PER CURIAM.
Plaintiffs appeal as of right the trial court’s order dismissing their remaining claim against
defendant, Scott Neal. On appeal, they challenge the order granting in part Neal’s motions for
summary disposition. In a cross-appeal, Neal contests the order allowing the disputed funds to
remain in escrow through the pendency of this appeal. We affirm.
I. BACKGROUND FACTS AND PROCEDURAL HISTORY
Plaintiffs Christopher Keefer and Casey Keefer are experienced hunting guides and
outdoor television hosts. Neal is a wealthy businessman from California. Christopher and Casey
met Neal around 2008 when Neal traveled to Michigan to hunt white-tailed deer. Some time later,
Christopher became interested in purchasing the rights to a particular deer feed formula.
Christopher, Casey, and their father, Charles Keefer, approached Neal about financing a new
company to produce and market the formula. Neal agreed, and the foursome became partners in
Rack1, LLC. Neal owned 50% interest in Rack1 and Christopher, Casey, and Charles each owned
equal parts of the remaining 50%.
Over the years Neal made a number of loans to Rack1 for operating and other expenses.
Neal demanded payment on the loans, which Rack1 timely made. At some point, it became clear
Rack1 was, in effect, defunct. Even so, Christopher and Casey made sure to timely pay on the
Rack1 debt, funded mostly through other businesses they owned. In 2013, Rack1 renegotiated its
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debt agreement with Neal to include, among other things, the addition of plaintiff Jason Brown as
an obligor.
Rack1 continued paying on its debt to Neal, however, nearly two years later, in 2014,
Christopher, Casey, and Jason wanted to move the obligor on the debt to R3 Holdings, another
company they owned. Christopher signed a “Letter Agreement” which included this
clause: “Assignment of Membership Interest Agreement. Neal will assign his 50% Membership
Interest in Rack1, LLC back to the Company for $1.00 and a release by the Company and other
Members of any and all liability associated with Rack1, LLC.” In the caption below Christopher’s
signature, it stated: “Christopher Keefer, individually and on behalf of R3 Holdings, LLC, Rusted
Rooster, LLC, Hatch Marketing Group, LLC, Rack1, LLC, Casey Keefer, and Jason Brown.”
Neal’s signature line was blank.
In the summer of 2015, Christopher, Casey, and Jason entered negotiations with a third
party to invest in their other companies, including R3 Holdings (“R3”). The investor apparently
believed R3 held an interest in Rack1’s debt. To close the deal, R3 would have to be relieved of
any encumbrances, including the Rack1 debt. Christopher contacted Neal to renegotiate Rack1’s
debt.
On October 15 and 16, 2015, the parties executed a number of agreements
titled: (1) Business Loan Agreement (“BLA”), (2) Restated Promissory Note, and (3) Assignment
of Membership Interest Agreement (“the October 2015 assignment and release”).1 The Restated
Promissory Note included as borrowers Christopher, Casey, Jason, and their respective spouses,
Katherine Keefer, Lisa Keefer, and Darcel Brown.2
The October 2015 assignment and release was “made by and among Rack1, LLC . . ., and
Charles R. Keefer, Christopher Keefer, Casey Keefer, and Scott Neal.” It contained the following
clause:
Release. In consideration of, among other things, the benefits set forth in
this Agreement, the Company and the remaining Members Charles R. Keefer,
Christopher Keefer, and Casey Keefer, irrevocably and unconditionally release,
waive, and discharge Scott Neal with respect to and from any and all claims,
actions, obligations, liabilities, damages, losses, and expenses of any nature
whatsoever, in law or in equity, which the Company and Members now have, or
may have in the future, whether known or unknown, based upon or arising out of
any contract, agreement, circumstance, event, acts, omissions, or facts occurring or
existing before the signing of this Agreement, related to the Company, its operation,
its Operating Agreement, or otherwise.
1
Collectively, we call these three agreements the “October 2015 agreements.”
2
We refer to plaintiffs Katherine Keefer, Lisa Keefer, and Darcel Brown, collectively, as “plaintiff
spouses.”
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Plaintiffs continued to pay on the loan, but almost two years later, they filed the complaint
in this case. The complaint made a number of allegations, including fraud, breach of contract, and
unjust enrichment. The trial court granted plaintiffs’ motion to remit the debt payments to an
escrow account through the pendency of the litigation.
Neal moved for summary disposition against Christopher and Casey under MCR
2.116(C)(7), (8), and (10), alleging in part that the October 2015 assignment and release relieved
Neal of liability with respect to his interest in Rack1. Neal moved for summary disposition against
Jason under MCR 2.116 (C)(8) and (10), asserting there was no evidence of any fraudulent conduct
by Neal towards Jason. He moved for summary disposition against plaintiff spouses on a similar
basis. The trial court largely granted the motions for summary disposition, but denied them as to
plaintiffs’ claims of promissory estoppel.
Plaintiffs then moved to amend their complaint to add a claim of member oppression, but
the trial court denied the motion. Plaintiffs moved for reconsideration of the order on the motions
for summary disposition and the order on the motion to amend. The trial court also denied these
motions. However, it granted plaintiffs’ motion to dismiss their remaining claim of promissory
estoppel and to continue the escrow order through the pendency of an appeal. This appeal
followed.
II. TENDER-BACK RULE
Plaintiffs’ first argument challenges the grant of summary disposition against Christopher
and Casey’s claims. The trial court granted summary disposition to Neal because Christopher and
Casey failed to tender back to Neal the consideration received under the October 2015 assignment
and release before they filed this lawsuit. Plaintiffs contend the trial court incorrectly applied the
tender-back rule to Christopher and Casey’s claims. They also argue the trial court erred when it
concluded the October 2015 assignment and release barred Christopher and Casey’s claims
because, in their view, the assignment and release were invalid. We disagree.
A. STANDARD OF REVIEW
This Court reviews de novo a trial court’s decision on a motion for summary disposition.
Smith Living Trust v Erickson Retirement Communities, 326 Mich App 366, 380; 928 NW2d 227(2018). We also review de novo “the parties’ agreement, and any questions of statutory
interpretation.” Id. The trial court granted Neal’s motion for summary disposition against
Christopher and Casey’s claims under MCR 2.116(C)(7).
A party may support a motion under MCR 2.116(C)(7) by affidavits,
depositions, admissions, or other documentary evidence. If such material is
submitted, it must be considered. Moreover, the substance or content of the
supporting proofs must be admissible in evidence. Unlike a motion under
subsection (C)(10), a movant under MCR 2.116(C)(7) is not required to file
supportive material, and the opposing party need not reply with supportive material.
The contents of the complaint are accepted as true unless contradicted by
documentation submitted by the movant. [Maiden v Rozwood, 461 Mich 109, 119;
597 NW2d 817 (1999) (citations omitted).]
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B. ANALYSIS
Michigan jurisprudence favors the binding nature of a release of liability. See, e.g., Radu
v Herndon & Herndon Investigations, Inc, 302 Mich App 363, 374; 838 NW2d 720 (2013). Where
a plaintiff seeks to invalidate a release and file a lawsuit against a released party, the plaintiff must
first tender back their consideration received under the release. See Stefanac v Cranbrook Ed
Community, 435 Mich 155, 165; 458 NW2d 56 (1990), quoting Niederhauser v Detroit Citizens’
Street R Co, 131 Mich 550, 552; 91 NW 1028 (1902) (“[I]f one seeks to rescind a settlement on
the ground of fraud or mistake, he must, after discovering the fraud, place the other party in statu
quo.”). Tender back must happen before a plaintiff “may even attempt to repudiate the release.”
Rinke v Auto Moulding Co, 226 Mich App 432, 436; 573 NW2d 344 (1997). This “tender-back”
rule has only two exceptions: (1) when a defendant has waived a plaintiff’s duty; and (2) where
there is evidence of fraud in the execution. Stefanac, 435 Mich at 165.
Plaintiffs’ complaint challenged whether they, in their individual capacities, were obligated
to Neal for Rack1’s debt. Neal moved for summary disposition, in part, on the basis of the October
2015 assignment and release, asserting that Christopher and Casey released Neal from potential
liability with respect to his interest in Rack1. The trial court found Christopher and Casey were
barred from filing a lawsuit against Neal because they failed to tender back their consideration
received under the October 2015 assignment and release—Neal’s membership interest in Rack1
We agree.
Plaintiffs filed suit against Neal for actions taken with respect to Neal’s membership
interest in Rack1. Under the terms of the October 2015 assignment and release, Neal was released
from liability “with respect to and from any and all claims, actions, obligations, liabilities,
damages, losses, and expenses of any nature whatsoever” related to his Rack1 membership
interest. It is undisputed that Christopher and Casey did not tender back Neal’s membership
interest before filing this lawsuit. Therefore, the trial court was correct in its conclusion the tender-
back rule barred Christopher and Casey’s claims against Neal.
Plaintiffs present three arguments contesting the trial court’s application of the tender-back
rule. First, they contend the October 2015 assignment and release was not the type of agreement
contemplated by the tender-back rule. Second, they argue Neal “waived” the tender-back rule as
a defense. Finally, they aver that the exceptions to the tender-back rule apply to this case and it
was not necessary for Christopher and Casey to have tendered back Neal’s membership interest in
Rack1 before filing suit. Although we address each argument, we conclude that each is meritless.
1. APPLICABILITY OF THE TENDER-BACK RULE
Plaintiffs argue that the tender-back rule is limited to “settlement situations where the
parties have agreed to settle or compromise known claims between them to avoid litigation in
exchange for a monetary payment of not pursuing those claims.” In their view, this case does not
involve an avoidance of litigation, nor “monetary payment.” Therefore, the tender-back rule does
not apply.
We disagree with the first assertion that this case does not involve an avoidance of
litigation. Again, the October 2015 assignment and release states that Christopher, Casey, and
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Charles “irrevocably and unconditionally release, waive, and discharge Scott Neal with respect to
and from any and all claims, actions, obligations, liabilities, damages, losses, and expenses of any
nature whatsoever, in law or in equity, which the Company and Members now have, or may have
in the future.” Plaintiffs characterize the October 2015 agreements as “debt restructuring.” Yet,
it is clear from the language of the October 2015 assignment and release that they were drafted in
part to avoid litigation.
Likewise, there is no merit to plaintiffs’ contention that, for the tender-back rule to apply,
the consideration received must have some monetary value. In making this argument, it seems
plaintiffs believe that Neal’s 50% membership interest lacked monetary value. This is untrue.
During his deposition, Christopher testified that Rack1’s remaining members sold the company to
a third party for $200,000 sometime after they executed the October 2015 agreements. Thus, it is
unreasonable to conclude Neal’s membership interest lacked monetary value. To the extent
plaintiffs believe actual money must be exchanged for the tender-back rule to apply, this is also
untrue. In Rinke, 226 Mich App at 434-435, for example, the consideration exchanged under the
release agreement were shares of stock.
2. WAIVER OF DEFENSE
Plaintiffs next argue Neal “did not at the outset raise the tender-back rule as a defense to
[p]laintiffs’ claims and thus, the defense was waived.” This argument defies logic. Again, the
tender-back rule requires a plaintiff to tender back any consideration received under an agreement
“before he may even attempt to repudiate the release.” Rinke, 226 Mich App at 436. The law
requires the tender back to occur before a plaintiff files their claim. Plaintiffs seem to argue that a
defendant should assert the tender-back defense before any tender back occurs. Thus, the
defendant should assert the tender-back defense while the plaintiff is contemplating—but has not
yet filed—the lawsuit. This is nonsensical.
Plaintiffs also suggest that by attempting to tender back Neal’s membership interest on
December 18, 2019—after the trial court issued the opinion and order granting Neal’s motion for
summary disposition against Christopher and Casey—plaintiffs somehow satisfied their
obligations under the tender-back rule. But a plaintiff who seeks to invalidate an agreement on
the basis of fraud must first tender back their consideration under the agreement before they file
the lawsuit. Rinke, 226 Mich App at 436. By waiting more than two years after they filed the
complaint to tender back Neal’s membership interest, plaintiffs plainly failed to meet this
requirement. It appears plaintiffs’ “tender back” of Neal’s membership interest was merely a
perfunctory move by plaintiffs to address the trial court’s concerns regarding plaintiffs’ failure to
return Neal’s membership interest.
3. EXCEPTIONS TO THE TENDER-BACK RULE
Plaintiffs next argue that the trial court should not have granted summary disposition
because Neal “took advantage of Chris[topher’s] and Casey’s belief that they were responsible for
Rack 1’s debt . . . .” They allege that the claim should have been allowed to proceed because they
“have raised issues of material fact whether the transaction is void based on [Neal’s] fraudulent
conduct.” Again, there are only two exceptions to the tender-back rule: (1) “waiver of the
plaintiff’s duty by the defendant;” and (2) “fraud in the execution.” Stefanac, 435 Mich at 165.
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Plaintiffs do not explain how either of these exceptions is satisfied. Thus, this argument is
abandoned. See MOSES Inc v SEMCOG, 270 Mich App 401, 417; 716 NW2d 278 (2006) (“If a
party fails to adequately brief a position, or support a claim with authority, it is abandoned.”).
Because the trial court correctly concluded that the tender-back rule barred Christopher and
Casey’s claims, we need not address plaintiffs’ arguments regarding the validity of the release.
III. MEMBER OPPRESSION
Plaintiffs next argue that the trial court erred in denying the motion to amend their
complaint because there was a question of fact whether the proposed member oppression claim
was barred by the October 2015 assignment and release. Plaintiffs also challenge the trial court’s
denial of their motion for reconsideration regarding the motion to amend. In their view, the trial
court abused its discretion in refusing to consider evidence showing Jason was a Rack1 member
in October 2015. We disagree.
A. STANDARD OF REVIEW
This Court reviews for an abuse of discretion a trial court’s decision on a motion to amend.
Diem v Sallie Mae Home Loans, Inc, 307 Mich App 204, 215-216; 859 NW2d 238 (2014).
Similarly, the grant or denial of a motion for reconsideration is also reviewed for an abuse of
discretion. St John Macomb-Oakland Hosp v State Farm Mut Auto Ins Co, 318 Mich App 256,
261; 896 NW2d 85 (2016). “An abuse of discretion occurs when the trial court’s decision is
outside the range of reasonable and principled outcomes.” Smith v Khouri, 481 Mich 519, 526;
751 NW2d 472 (2008).
B. ANALYSIS
1. MOTION TO AMEND
Under MCR 2.118(A)(2), “a party may amend a pleading only by leave of the court or by
written consent of the adverse party.” A trial court should “freely” grant leave to amend “when
justice so requires.” MCR 2.116(A)(2). A motion to amend may be denied only for particularized
reasons, such as: “(1) undue delay, (2) bad faith or dilatory motive on the part of the movant,
(3) repeated failure to cure deficiencies by amendments previously allowed, (4) undue prejudice
to the opposing party by virtue of allowance of the amendment, or (5) futility of the amendment.”
Lane v KinderCare Learning Centers, Inc, 231 Mich App 689, 697; 588 NW2d 715 (1998). An
amendment is futile if it is “legally insufficient on its face, and the addition of allegations that
merely restate those allegations already made . . . .” Wormsbacher v Seaver Title Co, 284 Mich
App 1, 9; 772 NW2d 827 (2009).
The trial court denied plaintiffs’ motion to amend on the basis of futility, relying on its
earlier reasoning in the motions for summary disposition. Again, there is no error on this basis.
Plaintiffs sought to add a claim of member oppression, which plaintiffs stated concerned “exactly
the same facts set forth in the initial complaint”—specifically, Neal’s membership interest in
Rack1. As discussed, any claim by Christopher and Casey against Neal arising from Neal’s
membership interest in Rack1 was barred by the tender-back rule. See discussion, supra.
Plaintiffs’ proposed member oppression claim was futile because it also concerned Neal’s
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membership interest in Rack1. Thus, the trial court did not abuse its discretion in denying the
motion to amend.
Plaintiffs’ argument challenging the trial court’s conclusion is meritless. They contend the
trial court should have considered Jason and Rack1’s tax documents from 2014 and 2015 as
evidence that there was a question of fact as to the validity of the October 2015 assignment and
release. In their view, leave to amend should be “freely” given and the trial court abused its
discretion in failing to consider the tax documents as evidence that the October 2015 assignment
and release was invalid.
Plaintiffs’ argument fails to account for the tender-back rule. Again, as a prerequisite to
their lawsuit, Christopher and Casey should have tendered back their consideration received under
the October 2015 assignment and release, which the brothers did not do. Plaintiffs’ argument,
which challenges the validity of the October 2015 assignment and release, fails to explain how
their lawsuit circumvents the tender-back rule. Moreover, this argument misstates the timeline of
this case. The tax documents were not produced until after the trial court had already denied the
motion to amend. Plaintiffs’ counsel alluded to the existence of the documents during oral
argument on the motion, but they were not produced at that time.
Plaintiffs’ argument also fails to account for the fact that it was plaintiffs who possessed
the tax documents in question. These documents were from tax years 2014 and 2015, but plaintiffs
did not file suit until 2017. Presumably, the tax documents were in plaintiffs’ possession
throughout this case. Plaintiffs cannot fault the trial court’s failure to consider evidence when it
was plaintiffs who failed timely produce the evidence. Marshall Lasser, PC v George, 252 Mich
App 104, 109; 651 NW2d 158 (2002) (citation omitted) (“A party is not allowed to assign as error
on appeal something which his or her own counsel deemed proper at trial since to do so would
permit the party to harbor error as an appellate parachute.”).
2. MOTION FOR RECONSIDERATION
Plaintiffs’ arguments on appeal also challenge the trial court’s denial of plaintiffs’ motion
for reconsideration of the denial of the motion to amend. Plaintiffs’ statement of the questions
presented does not allege that the trial court erred in denying plaintiffs’ motion for reconsideration.
Thus, this argument is abandoned and we decline to consider it now. See Maple BPA, Inc v
Bloomfield Charter Twp, 302 Mich App 505, 517; 838 NW2d 915 (2013) (“A party abandons an
issue when it fails to include the issue in the statement of questions presented in its appellate brief
and fails to provide authority to support its assertions.”).
IV. PLAINTIFFS’ FRAUD CLAIMS
Plaintiffs argue the trial court erred in granting Neal’s motion for summary disposition as
to Jason and plaintiff spouses’ claims of actual fraud and fraud in the inducement. They allege
that Neal made fraudulent statements to Christopher and Casey, which they claim should have
been imputed to Jason and plaintiff spouses. We disagree.
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A. STANDARD OF REVIEW
The trial court granted Neal’s motion for summary disposition of plaintiffs’ actual fraud
and fraud in the inducement claims under MCR 2.116(C)(10).
A motion under MCR 2.116(C)(10) tests the factual sufficiency of the
complaint. In evaluating a motion for summary disposition brought under this
subsection, a trial court considers affidavits, pleadings, depositions, admissions,
and other evidence submitted by the parties . . . in the light most favorable to the
party opposing the motion. Where the proffered evidence fails to establish a
genuine issue regarding any material fact, the moving party is entitled to judgment
as a matter of law. [Maiden, 461 Mich at 120 (citations omitted).]
B. ANALYSIS
The term “fraud” is defined as “[a] knowing misrepresentation or knowing concealment of
a material fact made to induce another to act to his or her detriment.” Black’s Law Dictionary
(11th ed). To sustain a claim of actual fraud or fraud in the inducement, a plaintiff must
demonstrate:
(1) the defendant made a material representation; (2) the representation was
false; (3) when the defendant made the representation, the defendant knew that it
was false, or made it recklessly, without knowledge of its truth and as a positive
assertion; (4) the defendant made the representation with the intention that the
plaintiff would act upon it; (5) the plaintiff acted in reliance upon it; and (6) the
plaintiff suffered damage. [Bank of America, NA v Fidelity Nat’l Title Ins Co, 316
Mich App 480, 499; 892 NW2d 467 (2016) (citation omitted); see also Belle Isle
Grill Corp v Detroit, 256 Mich App 463, 477; 666 NW2d 271 (2003).]
Both actual fraud and fraud in the execution require a plaintiff to demonstrate an intent to deceive.
See Gen Electric Credit Corp v Wolverine Ins Co, 420 Mich 176, 184; 362 NW2d 595 (1984).
In granting Neal’s motion for summary disposition against Jason, the trial court reasoned
that it was likely true that Jason was personally liable on the Rack1 debt because Jason signed the
Amended Promissory note in 2013. The trial court noted Jason’s sworn testimony where he stated
he signed the amended promissory note to “support [his] business partners.” Thus, the trial court
concluded that any statement regarding Jason’s personal liability was likely true. It determined
that summary disposition was appropriate as to Jason’s claims because plaintiffs failed to “point
to any other statements that would have induced [Jason] into signing the 2015 BLA and Promissory
Note.” Similarly, with respect to the motion for summary disposition against plaintiff spouses, the
trial court stated, “[t]here is no evidence within the record that shows that [Neal] made any
representation to Plaintiff Spouses.”
There is no error in the trial court’s reasoning. When a party moves for summary
disposition under MCR 2.116(C)(10), they must “specifically identify the issues as to which [they]
believe[] there is no genuine issue as to any material fact.” Coblentz v Novi, 475 Mich 558, 569;
719 NW2d 73 (2006), quoting MCR 2.116(G)(4). Once the movant has identified these issues,
“an adverse party may not rest upon the mere allegations or denials of his or her pleading, but
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must, by affidavits or as otherwise provided in this rule, set forth specific facts showing that there
is a genuine issue for trial.” Coblentz, 475 Mich at 569, quoting MCR 2.116(G)(4). The trial court
is directed to grant the motion for summary disposition if the non-movant’s response is inadequate.
Coblentz, 475 Mich at 569.
Neal argued in his motions for summary disposition that he never made any
misrepresentations to Jason or plaintiff spouses and, to the extent Neal did make any
representations to Jason and plaintiff spouses, these were merely statements of opinion. Plaintiff
spouses’ response to the motion contained no exhibits or other documents dispelling Neal’s
assertions. Jason’s response included Neal’s e-mail stating Jason had “a personal guarantee” on
the loan to Neal. However, this statement could hardly show a genuine dispute of fact because, by
signing the Amended Promissory Note in his individual capacity, Jason likely was personally
liable to Neal. In short, Neal satisfied his burden as the moving party, and plaintiffs failed refute
Neal’s assertions.
On appeal, plaintiffs claim that the trial court nevertheless erred in granting Neal’s motion
for summary disposition as to plaintiffs’ allegations of fraud. They claim Neal’s statements to
Christopher and Casey should be imputed to Jason and plaintiff spouses. That is, Neal’s
purportedly fraudulent statements made to Christopher and Casey are presumed to have been
conveyed to Jason and plaintiff spouses, and that Jason and plaintiff spouses acted upon the
statements by signing the October 2015 agreements.
It is true a party may be found liable for fraudulent statements made to a third party. See
Cormack v American Underwriters Corp, 94 Mich App 379, 386; 288 NW2d 634 (1979).
However, plaintiffs’ argument suffers from the same defect discussed above. In response to Neal’s
motions for summary disposition, plaintiffs presented no evidence showing that the allegedly
fraudulent statements were ever made to Jason or plaintiff spouses. In fact, their deposition
testimonies demonstrated Jason and plaintiff spouses did not talk to Christopher or Casey about
any statements made by Neal in relation to the Rack1 loans. Because plaintiffs failed to present
any evidence demonstrating a genuine question of fact, the trial court had to grant Neal’s motions
for summary disposition as to Jason and plaintiff spouses’ actual fraud and fraud in the inducement
claims. Coblentz, 475 Mich at 569.
V. UNJUST ENRICHMENT
Plaintiffs argue the trial court erred in dismissing their unjust enrichment claim because
Neal received payments beyond what was due under the 2015 agreements. We disagree.
A. STANDARD OF REVIEW
The trial court granted Neal’s motion for summary disposition as to the unjust enrichment
claim under MCR 2.116(C)(8).
A motion under MCR 2.116(C)(8) tests the legal sufficiency of the
complaint. All well-pleaded factual allegations are accepted as true and construed
in a light most favorable to the nonmovant. A motion under MCR 2.116(C)(8) may
be granted only where the claims alleged are so clearly unenforceable as a matter
of law that no factual development could possibly justify recovery. When deciding
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a motion brought under this section, a court considers only the pleadings. [Maiden,
461 Mich at 119-120 (citations omitted).]
“Whether a specific party has been unjustly enriched is generally a question of fact.”
Morris Pumps v Centerline Piping, Inc, 273 Mich App 187, 193; 729 NW2d 898 (2006).
“However, whether a claim for unjust enrichment can be maintained is a question of law, which
we review de novo.” Id.B. ANALYSIS
To establish a claim of unjust enrichment, a party must show: “(1) receipt of a benefit by
the defendant from the plaintiff, and (2) an inequity resulting to plaintiff from defendant’s retention
of the benefit.” Bellevue Ventures, Inc v Morang-Kelly Investment, Inc, 302 Mich App 59, 64;
836 NW2d 898 (2013). Where these criteria are satisfied, courts will imply a contract between the
parties. Belle Isle Grill Corp, 256 Mich App at 478. “However, a contract will be implied only if
there is no express contract covering the same subject matter.” Id.In granting Neal’s motion for summary disposition as to the unjust enrichment claim, the
trial court reasoned that the parties “signed the Business Loan Agreement and Promissory Note
that made them personally liable for the original loan to Rack 1 [sic]. Those contracts control the
Parties’ relationship with respect to the Rack 1 [sic] debt. Since those contracts cover the ‘same
subject matter,’ summary disposition is appropriate.” The evidence presented to the trial court
shows that, before the parties executed the October 2015 agreements, they completed the Amended
Promissory Note which was intended to cover “the amount of the original Promissory Note dated
March 20, 2012” and “the Additional Loan amount of $100,000 . . . give[n] by Scott Neal . . . to
Rack1, LLC and Jason Brown.” At first blush, it appears summary disposition was appropriate
because the Amended Promissory Note was an express contract covering the payments predating
the October 2015 agreements.
However, the trial court decided this issue under MCR 2.116(C)(8). Again, a trial court’s
decision under subsection (C)(8) may only consider the pleadings. Maiden, 461 Mich at 119-120.
In granting Neal’s motion for summary disposition as to the unjust enrichment claim, the trial court
clearly relied on evidence outside the pleadings, which normally would not justify summary
disposition under subsection (C)(8). Maiden, 461 Mich at 119-120.
Even so, this Court “will not reverse where the right result is reached for the wrong reason.”
Glazer v Lamkin, 201 Mich App 432, 437; 506 NW2d 570 (1993). Neal also moved for summary
disposition under MCR 2.116(C)(10), which does not allow the nonmoving party to “rest upon the
mere allegations or denials of his or her pleading” Maiden, 461 Mich at 120, quoting MCR
2.116(G)(4). Under subsection (C)(10)’s burden-shifting framework, the movant “must
specifically identify the issues as to which the moving party believes there is no genuine issue as
to any material fact.” Maiden, 461 Mich at 120. Once they have done this, “an adverse party may
not rest upon the mere allegations or denials of his or her pleading, but must, by affidavits or as
otherwise provided in this rule, set forth specific facts showing that there is a genuine issue for
trial.” Id.-10-
Neal alleged plaintiffs’ claim of unjust enrichment was invalid because there was an
express contract covering the same subject matter. He supported this assertion with documentary
evidence of the loan agreements that predated the October 2015 agreements. In their brief
contesting the motion for summary disposition, plaintiffs again argued Neal was unjustly enriched
by the payments predating the October 2015 agreement. They did not provide any exhibits
disputing the express contract covering the payments at issue. Had the trial court considered this
issue under MCR 2.116(C)(10), it would have concluded summary disposition was appropriate
under MCR 2.116(C)(10) because Neal satisfied his burden by showing that there was an express
contract covering the payments, and plaintiffs failed to refute this assertion with documentary
evidence to the contrary. Although summary disposition was granted under MCR 2.116(C)(8),
which prohibits consideration of evidence outside the pleadings, the trial court reached the right
result, albeit for the wrong reason, when it concluded plaintiffs’ unjust enrichment claim was
unsustainable.
VI. ESCROW ORDER
Neal contends the trial court erred when it ordered plaintiffs’ loan payments to remain in
the escrow account throughout the appeal to this Court. Neal argues he prevailed in the trial court
and, therefore, the trial court’s final order should have triggered the release of the funds from the
escrow account. We disagree.
A. PRESERVATION AND STANDARD OF REVIEW
An issue is preserved if it is raised in the trial court. Peterman v State Dep’t of Natural
Resources, 446 Mich 177, 183; 521 NW2d 499 (1994). Neal argues the trial court erred in ordering
that its earlier escrow order be continued while the appeal was pending before this Court. On
April 7, 2021, plaintiffs moved the trial court to order the escrow order continue and Neal did not
challenge this motion. Neal made earlier arguments regarding the initial grant of the escrow order.
However, Neal’s specific argument—that the trial court erred in granting plaintiffs’ motion to
continue the escrow order through this appeal—is unpreserved because Neal waited to raise it until
after the trial court entered the final order in this case. Id.Generally, our review of this issue is de novo because this issue concerns the interpretation
of court rules and an award of equitable relief. McDonald v Farm Bureau Ins Co, 480 Mich 191,
197; 747 NW2d 811 (2008); Bint v Doe, 274 Mich App 232, 234; 732 NW2d 156 (2007). Because
Neal’s argument is unpreserved, it is reviewed for plain error. Kern v Blethen-Coluni, 240 Mich
App 333, 336; 612 NW2d 838 (2000). “To avoid forfeiture under the plain error rule, three
requirements must be met: 1) the error must have occurred, 2) the error was plain, i.e., clear or
obvious, 3) and the plain error affected substantial rights.” Id., quoting People v Carines, 460
Mich 750, 763; 597 NW2d 130 (1999). “[A]n error affects substantial rights if it caused prejudice,
i.e., it affected the outcome of the proceedings.” Lawrence v Mich Unemployment Ins Agency,
320 Mich App 422, 443; 906 NW2d 482 (2017), quoting In re Utrera, 281 Mich App 1, 9; 761
NW2d 253 (2008).
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B. ANALYSIS
We do not need to consider Neal’s arguments as to this issue. In the preceding issues,
plaintiffs make a number of challenges to the trial court’s order on the motions for summary
disposition. We conclude plaintiffs’ arguments are meritless and the trial court correctly found in
Neal’s favor by dismissing plaintiffs’ claims. This issue, which concerns the allocation of
plaintiffs’ payments on their promissory note to Neal during the pendency of this appeal, is moot.
See Black’s Law Dictionary (11th ed) (Defining the term “moot” as: “[h]aving no practical
significance; hypothetical or academic.”). Plaintiffs maintain a debt to Neal under the October
2015 agreements. The trial court “f[ound] it equitable and just the [trial] [c]ourt’s September 17,
2018 Escrow Order continue while Plaintiffs seek an appeal.” The question of whether the trial
court erred in granting plaintiffs’ motion to maintain the escrow order is moot because plaintiffs
no longer have a legitimate claim to the funds.
Affirmed.
/s/ Michael J. Kelly
/s/ Thomas C. Cameron
/s/ Noah P. Hood
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