Riversbend Rehabilitation Inc v. Jeffrey Enos ( 2015 )

STATE OF MICHIGAN
COURT OF APPEALS
RIVERSBEND REHABILITATION, INC., UNPUBLISHED
October 29, 2015
Plaintiff-Appellant,
v No. 321631
Isabella Circuit Court
JEFFREY ENOS, LC No. 2013-010619-CK
Defendant-Appellee.
Before: M. J. KELLY, P.J., and MURRAY and SHAPIRO, JJ.
PER CURIAM.
In this contract dispute, plaintiff, Riversbend Rehabilitation, Inc, appeals by right the trial
court’s opinion and judgment in favor of defendant, Jeffrey Enos. Riversbend argues on appeal
that the trial court erred in several respects, which warrant reversal. For the reasons more fully
explained below, we conclude that there were no errors warranting relief. Accordingly, we
affirm.
I. BASIC FACTS
Michael Wilson owns Riversbend, which provides rehabilitation services to the general
public. Before the dispute in this case, Wilson was married to Enos’ sister.
In 2006, Riversbend entered into an agreement with Enos in which Riversbend agreed to
support Enos while he attended school to become a physical therapist. Specifically, Riversbend
agreed to pay Enos a salary of $40,000 per year, which Enos would repay while working for
Riversbend after his graduation. The parties did not provide specific terms for repayment—that
is, they did not provide for periodic payments of interest and principal. Instead, they agreed that
Enos would repay the prepaid salary by working for Riversbend. The agreement gave the
following example: “If the going rate of a [physical therapist] is $80,000.00 at time of graduation
then [Enos] may choose to reduce his salary to $40,000 or any other reasonable and acceptable
amount until the payback has been satisfied.” As another example, the agreement provided:
“Lets [sic] say it takes 5 years for [Enos] to graduate, $200,000 in salary has been utilized,
[Enos] can pay it [b]ack in 5 years of employment or 1 year or 10 years, but during that time is
committed to work for” Riversbend. Additionally, the agreement stated that “[i]f [Enos] wants
to terminate this contract,” “he must set up an acceptable payback schedule for the monies
utilized.” The agreement also provided that Riversbend would pay Enos’ tuition, which he had
no obligation to repay.
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Wilson and Enos’ sister divorced in early 2011. Nevertheless, in October of that same
year, Riversbend and Enos executed a “Confirmation of Agreement.” By that time, Riversbend
had already advanced Enos more than $200,000 in salary. In the confirmation, Riversbend and
Enos reaffirmed their prior agreement and stated that “following [Enos]’s college graduation and
the start of his agreed to employment with Riversbend, an agreed upon portion of his then
established salary will be deferred and considered a repayment against the advance salary
amounts received.” Enos was to “remain employed at Riversbend for a sufficient period of time
to establish deferral amounts sufficient to repay the entire amount of advanced salaries.” In the
event that Enos chose not to complete his education or work for Riversbend, the confirmation
provided that Enos must make arrangements to repay the advanced salary:
In the event [Enos] terminates his college attendance prior to graduation;
graduates from college but chooses not to become employed at Riversbend;
terminates his employment with Riversbend prior to the full repayment of the
advanced salary amount or otherwise breaches his obligations then [Enos] shall
repay Riversbend the advanced salary amount pursuant to the terms of a
Promissory Note attached hereto and executed contemporaneous with this
Confirmation Of Agreement Between Riversbend And Jeff Enos.
The parties executed a promissory note for “$212,307.64 and any additional advances
made by” Riversbend to Enos. The note provided the terms by which Enos agreed to repay
Riversbend:
1. Following [Enos]’s college graduation and the start of his agreed to
employment with Riversbend, an agreed upon portion of his then established
salary will be deferred and considered a repayment against the advanced salary
amounts received. It is intended between the parties that [Enos] will remain
employed at Riversbend for a sufficient period of time to establish deferral
amounts sufficient to repay the entire amount of the advanced salaries; or,
2. In the event [Enos] terminates his college attendance prior to graduation;
graduates from college but chooses not to become employed at Riversbend
terminates his employment with Riversbend prior to the full repayment of the
advanced salary amount or otherwise breaches his obligations (“the triggering
event”), then [Enos] shall repay Riversbend the advanced salary amount pursuant
to the terms of this Promissory Note. [Enos] shall make equal monthly payments
amortized so that the repayment of the entire advanced salary amount be made no
later than five years from the date of the “the triggering event”. The first payment
is due thirty days following the date of the “the triggering event” and a similar
payment due each thirty days thereafter.
It is undisputed that the relationship between Wilson and Enos deteriorated in 2012. In
June, Wilson asked Enos to purchase $300,000 in life insurance in case he died before he could
repay Riversbend. Enos applied for life insurance in July. In August, Wilson e-mailed Enos that
he felt it “would be in everyone’s best interest for you to work at a different place.” He
explained:
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This decision was based on and not limited to the following, i.e. the estrangement
that you have had towards [R]iversbend and me, especially since the divorce,
which really affect my perception of you [sic] loyalty motives. Lack of
communication, lack of accountability, your avoidance and estrangement with
current key [R]iversbend staff, Your demands for personal items that where [sic]
between me and [your sister] and your dad, especially in light for all I/Riversbend
has done for you. With all that in mind, I still honored my side of the agreement,
but I think it is best for some time to allow healing.
Wilson further wrote that he would have his lawyer draft amendments to the agreements.
Enos responded later that same month and stated that he was “[s]orry to hear about
[Wilson’s] decision to release [him] from [his] obligation to” Riversbend. He subsequently
wrote to Wilson and explained his position on Wilson’s decision not to employ him at
Riversbend:
I am truly troubled by our recent correspondence. I have been struggling to find
the appropriate words to convey to you my feelings given your request that I not
work for Riversbend upon graduation. First and foremost I truly appreciate all
that you have done for me. I understand it has been a great undertaking and
burden for you and Riversbend to support me the way you have. I could not have
accomplished what I have, personally or professionally, without your support.
I have taken on a great deal of debt to you which I agreed to do base [sic] in large
part on the promise of employment upon graduation. I am not sure I would have
pursued a doctoral degree and taken on this financial responsibility had the
circumstances been different.
At this point I think it is too early to make a final decision as to the future of our
arrangement. This would be contingent on my ability to find employment
elsewhere which would pay at least equal to what I could earn at Riversbend.
And at such time make arrangements for the release of any obligations to work for
[Riversbend].
In September and December 2012, Wilson emailed Enos a proposed amended agreement
and promissory note reflecting that Enos would not work for Riversbend. However, Enos did
not execute them. Thereafter, Riversbend did not pay Enos’ tuition for the Fall 2012 and Spring
2013 terms. It also ceased paying Enos a salary in December 2012. Enos in turn refused to
repay the salary that Riversbend advanced to him.
Riversbend sued Enos for refusing to repay the advanced salary in February 2013.
Riversbend alleged claims of breach of contract, promissory estoppel, unjust enrichment, and
breach of promissory note. In lieu of trial, the parties agreed to submit the claims to the trial
court for a decision on the basis of joint exhibits and trial briefs. In April 2014, the trial court
issued its opinion and judgment in Enos’ favor.
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The trial court first determined that Riversbend’s claims for promissory estoppel and
unjust enrichment failed as a matter of law: “These causes of action cannot be maintained when
there is a written contract covering the same subject matter, which is the case here.” Regarding
Riversbend’s contract claim, the court found that Riversbend breached the agreement when
Wilson informed Enos that he would not be working for Riversbend, refused to pay his tuition
for Fall 2012 and Spring 2013, and removed him from its payroll. The court rejected
Riversbend’s argument that it had substantially performed under the contract: “[a]n important
element of the contract between the parties was the promise that [Enos] would be granted
employment after graduation.” By refusing to employ Enos after his graduation, the court stated,
Riversbend breached the agreement in a substantial way.
The court also concluded that—even if Riversbend had not first breached the
agreement—Riversbend failed to establish that Enos breached the agreement. The court found
that Enos was “ready, willing, and able to perform his obligations” but was prevented from doing
so by Riversbend’s decision to refuse to employ him. The court added that the contract had not
contemplated a breach by Riversbend. Rather, the agreement specifically contemplated that
Enos was obligated to repay Riversbend by working for it. The agreement further provided that,
in the alternative, Enos would be obligated to repay the advanced salary if he took certain
specified actions, which the promissory note referred to as “triggering events.” He would be
obligated to repay if he stopped attending school, graduated but chose not to work for
Riversbend, ended his employment with Riversbend before full repayment, “or otherwise
breache[d] his obligations.” Because “[n]one of the conditions that would trigger a different
payment method occurred,” the trial court reasoned, Enos had not breached the contract.
Finally, the court rejected Riversbend’s contention that Enos’ failure to sign the
amendments amounted to anticipatory repudiation. The court explained that Enos was under “no
obligation to agree to [Riversbend’s] modification of the agreement.”
For the reasons stated in its opinion and order, the trial court dismissed Riversbend’s
claims for promissory estoppel and unjust enrichment, and entered judgment of no cause of
action on Riversbend’s remaining claims.
Riversbend now appeals in this Court.
II. CONTRACT CLAIMS
Riversbend first argues that the trial court erred in construing the contract; specifically, it
argues that the contract unambiguously required Enos to repay Riversbend under any
circumstance. This Court reviews de novo the proper interpretation of a contract. Coates v
Bastian Bros, Inc, 276 Mich. App. 498, 503; 741 NW2d 539 (2007).
This Court’s objective in interpreting a contract is to determine the intent of the parties by
examining the language of the contract. In re Smith Trust, 480 Mich. 19, 24; 745 NW2d 754
(2008). This Court must construe the contract according to its plain and ordinary meaning and
must enforce an unambiguous contract as written. Id.
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In the 2006 agreement, Riversbend agreed to pay Enos a salary of $40,000 per year while
in school and Enos agreed to repay the advanced salary once he graduated and started working.
The terms regarding repayment were not explicitly set forth, although the agreement gave
examples of methods of repayment. The agreement also provided that if Enos chose to terminate
the contract, “he must set up an acceptable payback schedule for the monies utilized.” The
agreement did not explicitly state that Enos was responsible for repaying the advanced salary
under any and all circumstances or in the event that Riversbend breached the contract.
The 2011 “Confirmation of Agreement” reiterated that “following [Enos]’s college
graduation and the start of his agreed to employment with Riversbend, an agreed upon portion of
his then established salary will be deferred and considered a repayment against the advance
salary amounts received.” Enos was to “remain employed at Riversbend for a sufficient period
of time to establish deferral amounts sufficient to repay the entire amount of advanced salaries.”
In the event that Enos could not fulfill his obligations, the confirmation provided for repayment,
and the parties executed a promissory note that also stated that Enos would be required to repay
Riversbend once he began working for it or if he breached the agreement. Again, the
confirmation agreement and note did not explicitly provide that Enos would be required to repay
Riversbend under any and all circumstances.
Riversbend argues that “[a] simple reading of the agreement (all agreements) is that
whether [Enos] works for Riversbend, or if he does not, some repayment structure will be
determined.” This argument is unsupported by the terms of the actual agreements. As the trial
court recognized, the parties did not contemplate what would happen if Riversbend refused to
employ Enos or refused to make the required payments. The agreements nevertheless clearly
delineated the circumstances under which Enos’ obligation to repay the advanced salary would
arise and those circumstances did not include Riversbend’s refusal to employ Enos or make the
contemplated payments. Enos had an obligation to repay Riversbend by accepting employment
with Riversbend, which repayment would be made through acceptance of a reduced salary for a
period of time, or, in the event that Enos breached the agreement or elected not to work for
Riversbend, he had an obligation to repay Riversbend with payments over time. The evidence
showed that Enos did not refuse employment with Riversbend or otherwise engage in acts that
would trigger his obligation to repay the advanced salary. Accordingly, under the plain terms of
his agreement with Riversbend, Enos had no obligation to repay the advanced salary.
Riversbend suggests that the conduct of the parties served to modify the contract. It cites
evidence in the form of e-mails in which the parties purportedly “continued to negotiate re-
payment options” and the fact that Enos purchased life insurance, as requested. Although the
parties’ understanding of their obligations under a contract can shed light on the correct
interpretation of the contract, this principle only applies to the interpretation of ambiguous
contract language. See Detroit Greyhound Employee Fed Credit Union v Aetna Life Ins Co, 381
Mich. 683, 685-686; 167 NW2d 274 (1969). The contract in this case clearly provided specific
circumstances that would trigger Enos’ obligation to repay—it did not state that Enos would be
obligated to repay Riversbend under any and all circumstances. That Enos may have mistakenly
believed that he had some obligation to repay, but later declined to do so, does not serve to
change the contract language.
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Riversbend also argues that the trial court erred in finding that its breach of its promise to
employ Enos after he graduated was substantial. Whether the breach of a contract is
“substantial” is a question of fact, which we review for clear error. Omnicom of Michigan v
Giannetti Investment Co, 221 Mich. App. 341, 348; 561 NW2d 138 (1997). “A finding is clearly
erroneous if there is no evidentiary support for it or if this Court is left with a definite and firm
conviction that a mistake has been made.” Chelsea Investment Group LLC v Chelsea, 288 Mich
App 239, 251; 792 NW2d 781 (2010). We give great deference to the trial court’s findings of
fact, “because it is in a better position to examine the facts.” Id.
“The rule in Michigan is that one who first breaches a contract cannot maintain an action
against the other contracting party for his subsequent breach or failure to perform.” Able
Demolition v Pontiac, 275 Mich. App. 577, 585; 739 NW2d 696 (2007) (quotation marks and
citations omitted). For this rule to apply, the breach must have been “substantial.” Id. In
determining whether a breach was substantial, “a trial court considers whether the nonbreaching
party obtained the benefit which he or she reasonably expected to receive.” Id. (quotation marks
and citation omitted).
The trial court found that Riversbend breached the contract first when Wilson notified
Enos that Riversbend would not employ him. The court concluded that “[a]n important element
of the contract between the parties was the promise that [Enos] would be granted employment
after graduation.” The court premised this finding on Enos’ e-mail in which he wrote that he
might not have gone to school to become a physical therapist without the promise of
employment following graduation. The court added that the parties themselves emphasized the
importance of Enos’ employment with Riversbend by providing that “the method of repayment
in the contract was based on the idea that [Enos] would work for [Riversbend] until all money
had been repaid.”
The trial court’s finding was not clearly erroneous. Enos’ correspondence indicated that
he promised to go to school and take on the debt at issue in significant part—and perhaps
exclusively—because Riversbend promised to employ him after graduation. Moreover, the
repeated references in the agreements to Enos’ employment with Riversbend strongly showed
that Riversbend also considered this to be an essential part of the bargain. Indeed, the contract
terms require repayment on less favorable terms if Enos chooses not to work for Riversbend.
Enos—the nonbreaching party—did not obtain the central benefit of the contract that he
reasonably expected to receive: he did not receive the promised employment at a level of
compensation sufficient to meet his obligations. Under these circumstances, we cannot conclude
that the trial court clearly erred when it found that Riversbend’s breach was substantial.
Finally, we reject Riversbend’s suggestion that Enos’ initial indications that he would not
repay Riversbend after it refused to employ him and that Enos’ failure to sign the amendments to
the agreements somehow amount to an anticipatory repudiation of the contract. As the trial court
stated, Enos had no obligation to accept Riversbend’s proposed changes. Rather, he had every
right to rely on the contracts to which he and Riversbend mutually agreed. Riversbend cites no
authority for the proposition that a party anticipatorily repudiates a contract by refusing to
concede to the other party’s demand to modify the agreement.
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Riversbend complains that the trial court’s decision caused “an unreasonable and
unconscionable result” by allowing Enos to retain approximately $240,000 in prepaid salary and
$71,000 in tuition without ever working for Riversbend or being required to repay. Riversbend’s
lamentations belie the facts. As the trial court found, Enos was ready, willing, and able to work
for Riversbend; it was Riversbend who prevented Enos from performing under the agreement.
Despite having deprived Enos of his contemplated source of income in violation of the parties’
agreement, Riversbend now demands that Enos repay his debt under new terms and without any
further obligations to him. But that is not the agreement that Riversbend made with Enos. The
agreement provided that Riversbend would employ Enos and Enos would repay Riversbend
through reduced compensation. If—and only if—Enos took certain specified actions would
Enos have any obligation to repay other than by working for Riversbend. The trial court did not
clearly err when it found that Enos did not take any of those actions. Had it so desired,
Riversbend could have included a provision in the agreement concerning its right to refuse Enos
employment or terminate his employment before Enos completed repaying. It did not do so. It
should not now be heard to complain about the shortcomings of its own agreement or the equities
of the result occasioned by its decision to breach that agreement. See, e.g., Haines v Gibson, 115
Mich. 131, 134; 73 N.W. 126 (1897) (“If, therefore, this was a ‘jug-handled’ or ‘one-sided’
contract, as defendants’ counsel call it, all the parties entered into it with complete knowledge of
its terms, and cannot now be heard to complain.”).
IV. CONCLUSION
The trial court did not clearly err when it found that Riversbend breached the agreements
involved here and that the breach was substantial. Moreover, because the agreements
unambiguously provided that Enos did not have an obligation to repay under the circumstances,
the trial court correctly determined that Riversbend’s contract claims failed as a matter of law.
Given our resolution of these issues, we decline to address Riversbend’s remaining arguments.
Affirmed. As the prevailing party, Enos may tax his costs. MCR 7.219(A).
/s/ Michael J. Kelly
/s/ Christopher M. Murray
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