Department of Transportation v. Detroit International Bridge Co ( 2014 )

STATE OF MICHIGAN
COURT OF APPEALS
MICHIGAN DEPARTMENT OF UNPUBLISHED
TRANSPORTATION, October 23, 2014
Plaintiff-Appellee/Cross-Appellant,
v No. 315453
Wayne Circuit Court
DETROIT INTERNATIONAL BRIDGE LC No. 09-015581-CK
COMPANY,
Defendant-Appellant/Cross-
Appellee,
and
SAFECO INSURANCE COMPANY OF
AMERICA,
Defendant/Cross-Appellee.
MICHIGAN DEPARTMENT OF
TRANSPORTATION,
Plaintiff-Appellee/Cross-Appellant,
v No. 315847
Wayne Circuit Court
DETROIT INTERNATIONAL BRIDGE LC No. 09-015581-CK
COMPANY,
Defendant-Appellant/Cross-
Appellee,
and
SAFECO INSURANCE COMPANY OF
AMERICA,
Defendant/Cross-Appellee.
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MICHIGAN DEPARTMENT OF
TRANSPORTATION,
Plaintiff-Appellee/Cross-Appellant,
v No. 315912
Wayne Circuit Court
DETROIT INTERNATIONAL BRIDGE LC No. 09-015581-CK
COMPANY,
Defendant-Appellant/Cross-
Appellee,
and
SAFECO INSURANCE COMPANY OF
AMERICA,
Defendant/Cross-Appellee.
Before: BOONSTRA, P.J., and MARKEY and K. F. KELLY, JJ.
PER CURIAM.
In Docket No. 315453, Detroit International Bridge Company (DIBC) appeals as of right from a
December 18, 2012 final order entered by Judge Prentis Edwards, raising issues dating back to Judge
Edwards’ February 1, 2010 order granting partial summary disposition in favor of Michigan Department
of Transportation (MDOT). MDOT has filed a claim of cross appeal, seeking to reverse an amended
order dated April 8, 2013 that was entered by Judge Edwards’ successor – Judge David Allen – which
adjusted the amount of damages.
In Docket No. 315847, DIBC appeals as of right from Judge Allen’s April 8, 2013 order, which
denied DIBC’s post judgment motions. MDOT has filed a claim of cross appeal of that same order.
Finally, in Docket No. 315912, DIBC’s surety, Safeco Insurance Company of America (Safeco),
appeals as of right from Judge Allen’s March 20, 2013 and April 8, 2013 orders, which found Safeco’s
liability coextensive with that of its principal DIBC. Although MDOT has filed a claim of cross appeal,
it has not raised any issues pertaining to that order as it relates to Safeco.
The three cases have been consolidated for appeal. Dep’t of Transp v Detroit Int’l Bridge Co,
unpublished order of the Court of Appeals, entered May 8, 2013 (Docket Nos. 315453, 315847, and
315912). We affirm the trial court’s order granting MDOT partial summary disposition as well as the
March 20, 2013 order denying DIBC post judgment relief. However, the trial court was divested of
jurisdiction to amend its March 20, 2013 order, rendering its April 8, 2013 order void for lack of
jurisdiction. Finally, we affirm the judgment against Safeco, whose liability was coextensive with
DIBC’s liability.
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I. BASIC FACTS AND PROCEDURAL HISTORY
This case has been before this Court on numerous occasions. The factual background has been
fully detailed in at least two opinions and will not be set forth here. See In re Moroun, 295 Mich. App.
312; 814 NW2d 319 (2012); DIBC v MDOT, unpublished opinion of the Court of Appeals, issued
December 6, 2011 (Docket No. 298276).
On remand from this Court’s In re Moroun decision, the trial court conducted further hearings on
February 9, 2012 and March 8, 2012. In its March 8, 2012 order, the trial court noted:
DIBC has shown a complete disregard for the February 1, 2010 Order of this
Court. DIBC is not presently complying and it does not appear that it intends to comply
with the Order of this Court. DIBC continues to disobey the Order of this Court. Efforts
taken by this Court to coerce compliance to this point have not been successful. Given
the steadfast position of resistance to compliance with the February 1, 2010 Order
exhibited by DIBC, it appears unrealistic to expect that DIBC’s portion of the Project will
be completed within a reasonable time if it maintains control over the construction
process.
***
DIBC’s efforts to grind to a halt an ordinary contract matter has forced this Court
to come to no other conclusion but that DIBC is not committed to complying with the
February 1, 2010 Order. This Court has exhausted every reasonable avenue available to
it to expedite DIBC’s compliance. While DIBC has deluged this Court with paperwork,
its work on the Project has been comparatively barren. Therefore, after considering all
options, this Court has no choice but to order MDOT to complete DIBC’s portion of the
Project in compliance with the February 1, 2010 Order.
Judge Edwards further directed DIBC to pay $16 million into an account to fund the project and to fully
cooperate with MDOT.1
The matter then proceeded to bench trial on the issue of damages. In its December 13, 2012
order, the trial court indicated that there were three general categories for damages: 1) expenses for the
acquisition of property; 2) expenses for the construction of the S32 bridge; and, 3) expenses for the
repair of local surface streets. The parties had entered into a partial settlement whereby DIBC agreed to
pay MDOT $1,273,402.97 for land acquisition, $165,937.12 for interest, and $627,517.62 for repair of
1
This Court denied DIBC’s application for leave to appeal Dep’t of Transp v Detroit Int’l Bridge Co,
unpublished order of the Court of Appeals, entered April 12, 2012 (Docket No. 309389). The Supreme
Court denied DIBC’s emergency application for leave. Dept’ of Transp v Detroit Int’l Bridge Co, 491
Mich. 912 (2012).
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local surface streets.2 After hearing testimony from the parties’ experts, the trial court noted that DIBC
had not contested the validity of any of the invoices and the fact that DIBC may have been able to
construct S32 more cost effectively was irrelevant. The trial court accepted Victor Judnic’s testimony
that the construction cost of $2,395,163.60 was reasonable and necessary for the construction of S32.
DIBC filed a motion for evidentiary hearing on December 11, 2012, requesting that it be
afforded the opportunity to explore the propriety of MDOT’s expenditures to determine what amount, if
any, MDOT was entitled to use or retain from the $16,000,000 special fund. For its part, MDOT filed
an emergency motion for a final order to close out the escrow account and release MDOT from its
obligations under the March 8, 2012 order.
On December 14, 2012, MDOT submitted the financial statements for the month ending
November 30, 2012, which reflected a total fund balance of $3,400,819. On December 17, 2012,
MDOT submitted the financial statements “from December 1, 2012 and ending December 13, 2012 and
Financial Statement of Revenues and Expenditures – Cash Basis for the period December 14, 2012
through Project Completion Date . . .”, which reflected a “forecasted” fund balance of $1,435,793.11.
At the December 18, 2012 hearing on MDOT’s motion for a final order, the trial court indicated:
“I’m satisfied after reviewing all of the materials that have been submitted that [MDOT] has fully
complied with the provisions of the March 8th order in construction of Part A; that, the Bridge, [DIBC’s]
Portion of the Ambassador Bridge Gateway Project.” The trial court concluded:
So with that I am satisfied again that [MDOT] has fulfilled its obligation under
the March 8th, order of this Court. The funds that are remaining from the $16 million that
was placed in the special account will be credited towards the award that was given in the
December 12th, I believe 13th.
MR. MOL: 13th.
THE COURT: December 13th order that the Court entered and this will close out
the last remaining claim in this case and it closes out the case.
The trial court entered a final order on that same day. The trial court indicated that $3,400,819
remained in the special fund. It ordered that MDOT close out the special fund and credit the remaining
balance to the damages awarded in the December 13, 2012 order.
That same day, MDOT filed a “request for correction of a final order,” wherein it pointed out
that the trial court erroneously referenced a fund balance of $3,400,819.00. MDOT wrote that the final
fund balance was, in fact, $1,435,793.11.
2
The trial court originally indicated that the agreed-upon amount was $625,517.62, but later entered an
order correcting a clerical mistake to add $2,000 additional dollars (12/17/12 Order Correcting Clerical
Mistake).
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A motion hearing was held on January 18, 2013 before Judge David Allen, at which time various
motions were heard, including DIBC’s request to be heard on the proper charge against the special fund
and whether Judge Edwards made a calculating mistake in his December 18th order. On March 20,
2013, Judge Allen entered an order denying DIBC’s post-judgment motions. Judge Allen noted:
On December 13, 2012, the Court issued an Opinion and Order determining the
amount of damages owed to MDOT for DIBC’s breach of contract. The Court ordered
DIBC to pay MDOT a total $4,462,021.31. . . .
On December 18, 2012, the Court issued its Final Order directing MDOT to close
out the special account established for the construction of Part A and to credit the amount
remaining in the account toward the December 13, 2012 award. The amount remaining
in the account at closeout was $1,435,793.11. The damages now remaining against
DIBC and its surety, Safeco Insurance Company of America, (whose liability is
coextensive with that of its principal), is $3,026,228.20.
***
IT IS FINALLY ORDERED that DIBC and Safeco are jointly and severally liable
for the remaining breach of contract damages in the amount of $3,026,228.20, as
Safeco’s liability as surety is coextensive with that of its principal DIBC.
DIBC filed its claim of appeal in this Court on March 28, 2013.
On April 8, 2013, Judge Allen agreed to modify the March 20, 2013 order and found that the
total remaining breach of contract damages was $1,059,202.31.
MDOT then filed a cross-appeal in Docket No. 315453 on April 17, 2013, referencing the April
th
8 order.
On April 23, 2013, DIBC filed its claim of appeal with this Court from Judge Allen’s April 8,
2013 order based on Judge Allen’s denial of their motion for reconsideration. MDOT cross appeals
from that same order.
II. SUMMARY DISPOSITION
DIBC argues that the trial court erred in granting MDOT summary disposition because the trial
erroneously concluded that the parties reached an “agreed design.” In light of the fact that Part A is now
complete, the issue is moot.
This Court’s duty is to consider and decide actual cases and controversies. We
generally do not address moot questions or declare legal principles that have no practical
effect in a case. 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. However, a moot
issue will be reviewed if it is publicly significant, likely to recur, and yet likely to evade
judicial review. [Barrow v Detroit Election Commission, ___ Mich App ___: ___ NW2d
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___ (Docket Nos. 317540, 318683, 318828, issued June 17, 2014) slip op p 5 (internal
citations and quotation marks omitted).]
DIBC acknowledges that “this appeal does not seek to reverse the circuit court’s various rulings
in this case for the purpose of compelling MDOT to reconstruct the Gateway Project as DIBC believes it
should have been constructed” but that the summary disposition order served as the basis for a series of
later legal rulings. DIBC then points to the numerous instances where it was sanctioned for filing
motions to have the February 2010 order set aside and for failing to abide by the terms of the order.
However, even if this Court were to conclude that the February 2010 order was improvidently entered,
neither DIBC nor its officers were relieved from complying with the order. “Contempt of court is a
wilful act, omission, or statement that tends to impair the authority or impede the functioning of a court.
Courts have inherent independent authority, as well as statutory authority, to punish a person for
contempt.” In re Robertson, 209 Mich. App. 433, 436; 531 NW2d 763 (1995). Such authority preserves
the effectiveness and power of the courts. Arbor Farms, LLC v Geostar Corp, ___ Mich App ___; ___
NW2d ___ (Docket No 314911, issued May 27, 2014), slip op p 7. “[A]n order of the court must be
complied with at the time it is entered even if the order is clearly incorrect or it is set aside on appeal.”
Johnson v White, 261 Mich. App. 332, 346; 682 NW2d 505 (2004) (internal citation omitted). “A person
may not disregard a court order simply on the basis of his subjective view that the order is wrong or will
be declared invalid on appeal.” Id. (internal quotation marks omitted). DIBC was obligated to comply
with the trial court’s February 2010 order, even if the order was wrong. Therefore, DIBC is not entitled
to any relief for sanctions arising from its subsequent contempt.
DIBC was stripped of its obligation to complete Part A of the project and that responsibility was
handed over to MDOT and financed with $16,000,000 from a court-ordered special account financed by
DIBC. DIBC argues that MDOT’s cross-appeal “for an adjustment of what remained of the
$16,000,000 is dependent on the correctness of the ruling that is the central focus of DIBC’s appeal.”
However, DIBC was ordered to place the money into the special account because it was the only way
the trial court could ensure compliance with its February 2010 order. “Circuit courts have jurisdiction
and power to make any order proper to fully effectuate the circuit courts’ jurisdiction and judgments.”
MCL 600.611. “This power is not governed so much by rule or statute, but by the control necessarily
vested in courts to manage their own affairs so as to achieve the orderly and expeditious disposition of
cases.” Muldonado v Ford Motor Co, 476 Mich. 372, 376; 719 NW2d 809 (2006). Therefore, the matter
is moot because DIBC can be afforded no relief and the matter is neither publicly significant nor likely
to recur.
Even if we were to conclude that the matter was not moot, we would nevertheless find no error
in the trial court’s order granting partial summary disposition. In interpreting a contract in a breach of
contract action, “it is a court’s obligation to determine the intent of the parties by examining the
language of the contract according to its plain and ordinary meaning. If the contractual language is
unambiguous, courts must interpret and enforce the contract as written because an unambiguous contract
reflects the parties’ intent as a matter of law.” In re Smith Trust, 480 Mich. 19, 24; 745 NW2d 754
(2008) (citations omitted).
The Implementation Agreement included a conceptual design for DIBC’s portion of the project.
This agreement stated under paragraph 2, “The PARTIES are in agreement with the PROJECT design
concept depicted in EXHIBIT I.” The agreement then set forth the obligations of the parties to prepare
design work and required the parties to “mutually approve” base and final designs for Part A, B and F1.
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Under the Amendatory Agreement, the parties specifically agreed to a revised design that included two
concentric loops to be constructed to directly connect the bridge to the interstate highways. The
Amendatory Agreement provided that Exhibit I and II had been updated “to reflect the current status of
the completed design.” Thus, the fact that these exhibits were stamped “preliminary and subject to
change” is immaterial since the agreement referenced them as “completed design” and paragraph eight
of the Implementation Agreement contemplated changes to the “base or final” plans for Parts A, B, and
F2 but only with approval from MDOT.
Moreover, DIBC was clearly obligated to construct the access road on the easement. Paragraph
6 of the Amendatory Agreement requires DIBC to convey an easement “to extend from that property to
a reasonably convenient public highway so as to provide access to the public highway system that is
reasonably equivalent to the direct highway access that exists on the date of this AMENDMENT” and to
construct “a paved driveway on that easement consistent with [MDOT’s] standards for a paved two-lane
road, to provide the replacement access.” DIBC’s obligation “to maintain that easement and driveway
ends if the DIBC obtains ownership of the property to which the obligation otherwise attaches.” These
terms clearly indicate that DIBC did not have any discretion to change the location of the access road
unless, in accordance with paragraph eight of the Implementation Agreement, MDOT gave its written
approval. Thus, DIBC’s argument regarding substantial performance by placing the road in another
location is unpersuasive.
Furthermore, the Performance Bond confirms DIBC’s obligation to construct its portion of the
project in accordance with the designs contained in exhibit I and II of the agreements as well as the
attached exhibit E. The bond provided that “the condition of this obligation is such that if the above
named principal shall and will, well and faithfully, and fully, do execute and perform all of the
obligations contained in the attached documents identified as Exhibits A through Exhibit E, listed below
. . . . then this obligation is to be void, otherwise to remain in full force and effect.” The bond further
provided:
Consistent with the obligation of this bond, the following are included and referenced as
follows:
Exhibit A: Rights and obligations set forth in Agreement Number 2004-0213, dated
April 23, 2004, between the Detroit International Bridge Company (DIBC) and the
Michigan Department of Transportation (MDOT); and
Exhibit B: Amendatory Agreement Number 2004-0213/A1, dated February 17, 2006,
between DIBC and MDOT; and
Exhibit C: October 31, 2006, letter from DIBC to MDOT; and
Exhibit D: October 6, 2006, letter from DIBC to MDOT; and
Exhibit E: Plans for DIBC portion of the Ambassador Bridge/Gateway Project (Part A,
DIBC portion) per MDOT/DIBC agreement as amended.
The bond indicates that DIBC was obligated to “execute and perform” in accordance with the plans for
DIBC portion of the project.
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DIBC contends that the trial court erroneously concluded that the parties reached an “Agreed
Design” reflected in the attachments to the Performance Bond, where this “inference” was expressly
contradicted by the affidavits of Dan Stamper and Thomas LaCross and by paragraph 8 of the parties’
Implementation Agreement. DIBC further points out that the drawings attached to the March 12, 2007
Performance Bond were marked “issued for review” and “for information only – not for construction”
and therefore, the only reasonable inference the trial court could draw is that there was not an “Agreed
Design.” DIBC also contends that substantial factual dispute exists on the issues of whether there was a
“final plan” to which DIBC is bound and whether the existing roadway constitutes substantial
performance and whether the condemnation was necessary.
However, the plain language of the parties’ agreements leaves no room for the type of
interpretation DIBC asks this Court perform. DIBC mistakenly argues that “[t]he sole evidence
supportive of the circuit court’s conclusion that the parties had reached agreement on a final design plan
was supplied in an affidavit signed by MDOT engineer, Victor Judnic.” In so arguing, DIBC asks this
Court to completely ignore the clear contractual language. The best evidence of DIBC’s breach was the
language of the contracts. The trial court could have granted summary disposition in MDOT’s favor
without reference to any of the affidavits. The language of the contracts requiring DIBC to act in
accordance with the design plan, coupled with DIBC’s admission that it did not act in conformity with
the plan because it boldly concluded that the plans were no longer relevant, would have justified
summary disposition in MDOT’s favor. Thus, the competing affidavits were effectively irrelevant.
Therefore, it is clear from the contractual language that the parties intended for DIBC to
construct Part A of the project in accordance with the design contained in exhibits I and II and exhibit E
of the Performance Bond, leaving a factual development regarding the intent of the parties unnecessary.
The plain language of the agreements is unambiguous, as conceded by counsel for DIBC. DIBC was
not at liberty to unilaterally alter the parties’ agreements as long as the gist of the design plan was met.
However, the procedure set forth in paragraph eight of the Implementation Agreement for making
material changes to the base or final design undermined many of the averments made by Stamper and
LaCross. For example, if it truly was not necessary for DIBC to construct the access road over the
easement or to construct the elevated ramps over 23rd Street, DIBC was clearly required to obtain
MDOT’s written approval since these improvements were contained in exhibits I and II to the
agreements. Contrary to DIBC’s argument, the trial court properly refused to allow the affidavits to
contradict the clear terms of the parties’ agreements.
There is no dispute that DIBC failed to construct Part A in accordance with the design plan, that
it took over and closed 23rd Street without the city’s permission, and built structures in accordance with
a design not approved by MDOT. Therefore, the trial court properly entered summary disposition in
MDOT’s favor.
III. JUDNIC’S AFFIDAVIT
DIBC argues that the trial court erred when it refused to set aside its February 1, 2010 order
granting partial summary disposition where the “essential predicate” for the court’s February 1, 2010
decision was Victor Judnic’s inadmissible affidavit. We disagree.
A trial court’s decision to deny a motion to set aside a prior judgment is reviewed for an abuse of
discretion. Heugel v Heugel, 237 Mich. App. 471, 478; 603 NW2d 121 (1999).
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On the first day of the December 2010 contempt hearing, Victor Judnic was called as a witness,
and was questioned by DIBC’s attorney, MDOT’s attorney and the trial court. Judnic admitted that
Exhibit E was a “concept drawing” and a “general plan.” He testified that he was not involved in the
Gateway Project until April 2007. He had nothing to do with the compilation of drawings for the
performance bond. He had no personal knowledge concerning the creation or execution of the bond.
During the second day of his testimony, MDOT’s attorney showed Judnic the affidavit that had
been attached to MDOT’s motion for summary disposition. MDOT’s attorney then moved to admit the
affidavit, which led to the following colloquy:
MR. JOHN: My only objection, your Honor, is that this relates to matters before you
issued your February 1st order, and I think earlier in this hearing when I attempted to do
something with respect to matters before your February 1st order you would not hear of it,
and so I’d raise the same objection that Mr. Mol raised at that point.
THE COURT: What is it being offered for, Mr --- are you done? You’re done?
MR. JOHN: Yes, your Honor. Also it doesn’t I think state that it was made on personal
knowledge anywhere, if I understand correctly. [¶] The first says he just, first duly
sworn states as follows and then at the end he says I could testify competently to the facts
but none of it says it’s on personal knowledge.
THE COURT: What is this document being offered for?
MR. MOL: Your Honor, this is the affidavit that Mr. Judnic submitted attached to
MDOT’s motion for Part A, which you granted. In it he identified the various conflicting
structures and you granted our motion. I wanted to go through it and identify what he
identified as being conflicting or construction that DIBC has not done, which your Honor
granted, and identify whether since February 1 DIBC has completed those tasks.
THE COURT: I believe Mr. John’s motion – objection is correct. This is a hearsay
document and it refers back to matters determined before February 1st. Although if he
needs this to assist him in identifying those items that were supposed to be corrected he
may do so, but the document itself will not be admitted as an exhibit.
On appeal, DIBC does not cite MCR 2.612 (pertaining to motions for relief from judgment)
except to say that “[w]hether the circuit court was correct in its assessment of the timing requirements of
MCR 2.612 is of no consequence here because the circuit court had the unquestioned authority to set
aside its erroneously entered order under another court rule, MCR 2.604(A).” Thus, it appears that
DIBC concedes that its motion was not timely.
It is true that a trial court has broad discretion to reconsider its previous rulings. MCR
2.119(F)(1) provides “[u]nless another rule provides a different procedure for reconsideration of a
decision . . ., a motion for rehearing or reconsideration of the decision on a motion must be served and
filed not later than 21 days after entry of an order deciding the motion.” However, under MCR
2.604(A), a rule expressly referenced in MCR 2.119(F), an order that does not dispose of all issues in a
case does not terminate the action and “is subject to revision before entry of final judgment adjudicating
all the claims and the rights and liabilities of all the parties.” “The court rules therefore give the trial
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court explicit procedural authority to revisit an order while the proceedings are still pending and, on that
reconsideration, to determine that the original order was mistaken . . ..” Hill v City of Warren, 276 Mich
App 299, 307; 740 NW2d 706 (2007). Thus, while a trial court does not abuse its discretion in denying
a motion for reconsideration that is filed outside of the time allotted, a trial court is not necessarily
divested of its discretion to consider untimely motions for reconsideration. MCR 604(A) does not vest a
party with a continuing substantive right to seek review of prior orders; it merely permits a trial court to
revisit prior orders before entry of a final order. Here, the trial court declined to exercise its discretion.
In any event, DIBC’s motion would have failed substantively even without a procedural
irregularity. To the extent DIBC claims that the trial court erred in relying on inadmissible hearsay,
while it is true that a party’s affidavits are normally not admissible at trial (or at a contempt hearing as
the trial court ruled in this matter), it is the substance or content that must be admissible, not the
document itself. Maiden, 461 Mich. at 123-124. Thus, while the affidavit was not admissible at the
evidentiary hearing, the contents of Judnic’s affidavit was sufficient to support the motion for summary
disposition because it was based on his personal knowledge and Judnic averred that he was competent to
testify about the substance of the affidavit. In fact, it is apparent that the trial court did not allow
admission of the affidavit primarily due to the fact that Judnic was testifying at the contempt hearing and
the trial court preferred to hear from him directly. However, the trial court’s ruling did nothing to
undermine the affidavit for purposes of the motions for summary disposition.
DIBC argues, however, that the affidavit was not based on personal knowledge and that “[i]t was
Judnic, and Judnic alone, who represented to the court at the summary disposition stage that MDOT and
DIBC had a final, agreed-upon design plan for Part A of the project. And, it was Judnic, and Judnic
alone, who supplied the circuit court with the evidence it used to support its ruling that the final, agreed-
upon version of the project design was to be found in the design drawings compiled in Exhibit E.”
However, as previously discussed, the trial court’s February 1, 2010 order did not rely exclusively on
Judnic’s affidavit. In its order granting MDOT partial summary disposition, the trial court noted:
The documentary evidence submitted by MDOT including the affidavit of Victor Judnic,
indicated that DIBC has failed to construct a two lane truck road, an access easement,
safeguard gate system, and access drive and gate for MDOT personnel as required by the
agreement. . . . In Victor Judnic’s affidavit, he explains that as Senior Delivery Engineer
he is responsible for the Contract Administration of the Ambassador Bridge/Gateway
Project. As Contract Administrator, he made a list of several design changes that he
described as material changes and unapproved construction that are in conflict with the
approved contract design.
The order further set forth that “[a]ccording to Victor Judnic’s affidavit, MDOT cannot complete its
portion of the project until DIBC constructs the truck road and bridges.” In denying DIBC’s motion for
relief from judgment, the trial court explained:
The affidavit of Victor Judnic, the Senior Delivery Engineer for MDOT who is
responsible for the Contract Administration of the Ambassador Bridge Gateway Project,
was one of the documents considered in deciding the motion for summary disposition.
The documents attached to the affidavit or referred to had already been filed in this case
and were in the possession of DIBC. The affidavit makes a brief reference to the
background of the parties’ agreements. The affidavit explains the project site plans and
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Victor Judnic’s observations regarding construction that had taken place. He also
provides information based on his observations regarding construction on the site that
conflicted with the design attached to the Performance Bond. The content of the affidavit
would be admissible as evidence. Victor Judnic would be competent to testify regarding
the content of the affidavit as he was allowed to do during the December 13, 2010
hearing.
The trial court concluded that even if there were portions of Judnic’s affidavit that were not based on
personal knowledge, it was not precluded from using other relevant portions. The trial court looked to
the plain, clear, and unambiguous language of the parties’ agreements in finding that DIBC was
breaching its contract. The trial court relied on Judnic’s affidavit, not to conclude that the parties’
agreed to a “final” plan, but to conclude that DIBC had acted in contravention of the design plan, as
contemplated by the documents. Judnic clearly had personal knowledge of the construction-related
obligations under the contracts. DIBC’s claim otherwise lacks merit.
IV. JURISDICTION TO AMEND THE FINAL ORDER
MDOT argues that the trial court was divested of jurisdiction to amend its March 20, 2013 order,
rendering its April 8, 2013 order void for lack of jurisdiction. We agree.
“Whether a court has subject-matter jurisdiction is a question of law subject to review de novo.”
Davis v Dep't of Corrections, 251 Mich. App. 372, 374; 651 NW2d 486 (2002). Likewise, “[t]he
interpretation and application of court rules present questions of law to be reviewed de novo using the
principles of statutory interpretation.” Lamkin v Engram, 295 Mich. App. 701, 707; 815 NW2d 793
(2012).
Judge Allen lacked the ability to enter the April 8, 2013 order. MCR 7.208(A) provides, in
relevant part, that “[a]fter a claim of appeal is filed or leave to appeal is granted, the trial court or
tribunal may not set aside or amend the judgment or order appealed from except . . . (2) by stipulation of
the parties . . .” See In re ITC Application, 304 Mich. App. 561, 575-576; 847 NW2d 684 (2014).3 Thus,
filing a claim of appeal prevents a trial court from amending its orders while the appeal is pending. Hill
v City of Warren, 276 Mich. App. 299, 307; 740 NW2d 706 (2007).
There is no record evidence, as DIBC claims, that the amended order was a result of a stipulation
between the parties. In fact, the record is silent as to a “stipulation.” Instead, the signed hand-written
proposed order merely indicates that the parties’ attorneys agreed that the order accurately reflected
Judge Allen’s ruling at the April 5, 2013 hearing. DIBC cannot insinuate that the parties agreed to the
modification, as the amount of damages was always a hotly contested issue. Because the trial court was
divested of jurisdiction by virtue of MCR 7.208(A) and because the parties did not stipulate to the
3
The trial court retains jurisdiction, however, over stays and bonds matters under MCR 7.208(F).
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amendment, Judge Allen’s April 8, 2013 is void for lack of jurisdiction. Judge Allen’s March 20, 2013
must stand.4
V. SURETY’S LIABILITY
On appeal, Safeco argues that the trial court erred in striking its answer and further erred by
entering a default judgment against it. We disagree.
This Court reviews a trial court’s decision on a motion to set aside a default for an abuse of
discretion. Shawl v Spence Brothers, Inc, 280 Mich. App. 213, 220; 760 NW2d 674 (2008).
MDOT filed its action against DIBC and Safeco on June 24, 2009. Safeco, the surety of a
$34,664,650 performance bond executed by DIBC on March 12, 2007, was served the complaint on
June 25, 2009.
In an effort to resolve the parties’ dispute without intervention of the courts, General Counsel for
DIBC, Patrick Moran, suggested that the parties submit the matters to facilitation. As a result, MDOT
and DIBC signed a facilitation agreement and selected retired Judge Gene Schnelz as the facilitator. As
part of their agreement, if facilitation was not successful, the time for filing an answer to MDOT’s
complaint was enlarged to 21 days after facilitation concluded. After two attempts to facilitate the
matter, the facilitation process concluded on August 6, 2010.
Craig John, an attorney retained by DIBC, requested an extension for DIBC to file its answer
beyond the agreed-upon 21 days from facilitation. In a letter dated August 14, 2009, assistant attorney
general Robert Mol states that “MDOT is agreeable to allowing DIBC an additional 21 days to file its
answer. Thus, DIBC’s answer to MDOT’s complaint is due on or before September 17, 2009.”
On August 28, 2010, MDOT filed a request for default against Safeco due to its failure to appear
and/or to file an answer. A default was entered on the same day.
Thereafter, Safeco attempted to file an answer to the complaint, but MDOT successfully had the
pleading stricken. At a September 18, 2009 hearing, the trial court addressed Safeco’s concern that a
default had only been “requested,” not “entered”:
MR. NEDELMAN [for Safeco]: There has been a Request for a Default. There
was no default. Because there was no default Safeco’s Answer is timely. The Request to
Strike it is improper because the Answer can’t be filed only if a default had already been
entered.
THE COURT: Why do you say the default was not entered?
4
Because the March 20, 2013 order stands, MDOT cannot be heard to complain regarding any “clerical
error” in Judge Edwards’ December 18, 2012 final order and its request that this Court correct the error
or remand for further proceedings is unnecessary. In essence, by affirming the validity of the March 20,
2013 order entered by Judge Allen, MDOT will receive the relief it seeks on cross appeal.
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MR. NEDELMAN: Your Honor, all that is of record is Mr. Mol’s [for MDOT]
Request. It is not signed by the Clerk of the Court. It is not – and there is a spot on the
Request that Mr. Mol submitted to the Court for the Entry of the Default. That is not
executed. The default has not been entered.
THE COURT: Well, I don’t want to get too far involved with technicalities here,
but I’ve reviewed the default and it’s recorded in the, in all of the Court’s entries that a
default was entered on the 28th of August.
The way that a default is entered is that a stamp is placed on the Request with the
date and it says “filed” and the signature of the, of the County Clerk . . .
***
But I’ve looked at that and I think that satisfies the requirements of the statute.
Once [the affidavit of sum certain] is presented it’s stamped with the – it’s not stamped
where the signature line is but it’s stamped on there, which is sufficient to satisfy the
requirements of the Court Rule.
On October 2, 2009, attorney Michael Nedelman filed a motion to set aside the default on behalf
of Safeco.5 Safeco claimed that MDOT’s request for a default was in violation of the agreement to
extend the time for filing an answer to September 17, 2009. Safeco submitted an affidavit from attorney
Moran, who claimed that he “personally advised MDOT that DIBC was representing the interests of
Safeco” at the facilitation and that during the facilitation proceedings MDOT was advised and
acknowledged that Safeco tendered its defense of the matter to DIBC, and that the parties agreed the
extension for filing an answer applied to Safeco as well, including the extension to September 17, 2009.
Judge Schnelz averred that on the first day of facilitation, he inquired about whether Safeco was
participating, to which Moran clearly stated that DIBC “had taken up the defense of Safeco because the
claims against Safeco were derivative of the claims against DIBC,” and that both attorneys for MDOT
(Mol and Isom) were present and heard the exchange. Judge Schnelz further stated that it was his
understanding that any extension of time to act agreed to by MDOT for DIBC would include Safeco
“since all parties knew Mr. Moran was acting as the attorney for both and there was no conversation to
the contrary.”
The motion also asserted that Safeco had a meritorious defense, being that the complaint failed to
state a cause of action against Safeco and that MDOT breached the agreements with DIBC by
unreasonably withholding its consent to DIBC’s requested changes. In support, Safeco submitted
affidavits from Patrick Moran and Dan Stamper, and relied upon DIBC’s brief in support of its motion
to dismiss.
MDOT filed a response claiming that it agreed to participate in facilitation with DIBC and to
extend the time for filing an answer to the complaint, that Safeco did not sign the facilitation agreement,
5
Subsequently, Safeco attempted to file an answer to MDOT’s complaint, but the trial court granted
MDOT’s motion to strike.
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that the letter sent by assistant AG Mol to attorney John only referenced the granting of an additional
extension to DIBC for filing its answer, and that none of MDOT’s representatives heard or had any
information that DIBC was representing Safeco. With respect to this latter assertion, MDOT submitted
affidavits of the attorneys and representatives who were present at the facilitation. MDOT further
claimed that there never was a misunderstanding between counsel regarding the answer due date, but
more a mistaken assumption by Moran and Safeco that the extension given to DIBC also applied to
Safeco. Finally, MDOT argued that Safeco had not submitted an affidavit showing facts that it had a
meritorious defense to the breach of contract claims.
On October 9, 2009, Nedelman and Mol appeared to argue their respective positions. In denying
the motion, the trial court noted that a default had been entered:
Now, it’s important to note here that MCR 2.603 makes a distinction between a
default and a default judgment. MCR 2.603(A) requires the clerk to enter a default if it’s
made to appear by affidavit or otherwise that a response has not been, not been made, and
that is what we have in this case. On the other hand, the default provides the basis for the
entry of a default judgment under MCR 2.603(D), and no default judgment has been
entered in this case.
***
The Defendant has failed to establish good cause. There’s no proof here that an
agreement for an extension, notwithstanding the representations made by Judge Schnelz,
I reviewed his affidavit, and there’s nothing in there indicating that there was an
agreement to postpone or extend until September 17th.
There’s nothing included in any of the documentation that has been submitted that
indicates that there was an agreement to extend the filing until September 17th for this
Defendant.
Insofar as the meritorious defense is concerned, and that’s, before we even get to
that we have to show good cause, and the Court is ruling that based on the representations
that have been made, good cause has not been shown in this case.
Further, insofar as a meritorious defense is concerned, the documents or affidavits
of Pat Moran and Dan Stamper do not set forth facts to establish a meritorious defense.
Their statements are conclusory. They do not set forth facts for a meritorious defense.
On appeal, Safeco argues that the trial court erred in refusing to set aside the default where good
cause existed and a meritorious defense was demonstrated.
MCR 2.603(D), which governs motions to set aside a default, provides in relevant part:
(1) A motion to set aside a default or a default judgment, except when grounded
on the lack of jurisdiction over the defendant, shall be granted only if good cause is
shown and an affidavit of facts showing a meritorious defense is filed.
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A party establishes good cause by showing either (1) a procedural irregularity or defect or (2) a
reasonable excuse for not complying with the requirements upon which the default is based. Alken–
Ziegler, Inc v Waterbury Headers Corp, 461 Mich. 219, 233; 600 NW2d 638 (1999).
Safeco failed to demonstrate good cause for failing to file an answer. Even if DIBC’s attorneys
represented the interests of Safeco during the facilitation and the initial extension for filing an answer
applied to Safeco as well, once the facilitation concluded, DIBC’s attorneys could no longer represent
Safeco in the litigation. Indeed, Safeco acknowledges that its interests with DIBC were only partially
aligned, and Safeco retained attorney Nedelman to set aside the default and otherwise defend in the
matter filed by MDOT. It was incumbent upon Safeco to request an extension after the facilitation
concluded, and there is no record to support that any extension was granted to Safeco beyond the 21
days following facilitation. Notably, the letter written by Mol only referenced DIBC in his agreement to
extend the deadline for filing an answer to DIBC; thus, the extension given to DIBC clearly did not
apply to Safeco. Because Safeco did not file the answer to MDOT’s complaint by August 27, 2009,
MDOT properly acquired entry of a default.
Furthermore, Safeco does not have a meritorious defense to MDOT’s claims. As previously
discussed, the trial court properly granted MDOT partial summary disposition on the breach of contract
claims against DIBC. In Will H Hall & Son, Inc v Ace Masonry Constr, Inc, 260 Mich App. 222, 229;
677 NW2d 51 (2003), this Court explained the nature of a surety contract:
A suretyship contract requires three parties; a principal, an obligee, and a surety. A
surety is one who undertakes to pay money or take any other action if the principal fails
therein. The liability of a surety is limited by the scope of the liability of its principal and
the precise terms of the surety agreement. In general, a surety may plead any defense
available to the principal, and the liability of the surety is coextensive with the liability of
the principal in the bond and can be extended no further.
The liability of a surety “is coextensive with the liability of the principal in the bond.” City of Ferndale
v Florence Cement Co, 269 Mich. App. 452, 462; 712 NW2d 522 (2006) (internal quotation marks
omitted). Its liability is limited to the amount of the bond. Northline Excavating, Inc v Livingston Co,
302 Mich. App. 621, 629; 839 NW2d 693 (2013). Even if a surety is not a party to a breach of contract
action, a judgment against the principal constitutes prima facie evidence of the surety’s liability on the
bond. PR Post Corp v Maryland Casualty Co, 403 Mich. 543, 547-548; 271 NW2d 521 (1978) quoting
74 AmJur2d, Suretyship, § 152, pp 108-109.
On appeal, Safeco claims that categorizing a surety’s liability as simply coextensive with that of
the principal is a “gross oversimplification and generalization” and that a surety is entitled to
independently assert its rights and whatever defenses it may individually maintain as well as all defenses
its principal has against actions initiated by the oblige. Safeco lists some available defenses such as:
(1) material alterations or substitutions on the contract of suretyship with prejudice the
surety’s rights, including substation of the oblige or principal or release of the principle;
(2) failure to give notice to the surety of the principal’s default; (3) an untimely lawsuit or
notice under the bond; (4) the fraud of the principal under certain circumstances; (5) the
obligee’s improper termination of the principal’s contract; and (6) where the principal’s
default arose prior to the surety becomes liable under the bond.
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However, Safeco never explains what, if any, defenses it would have or could have raised. Nor does
Safeco adequately explain how its interests were not safeguarded by DIBC’s rigorous defense. Safeco is
obligated to pay on its bond because DIBC has been found liable for breach of contract and has
materially breached its agreements with MDOT.
We affirm the orders granting MDOT partial summary disposition, denying DBIC’s motion to
set aside the order granting partial summary disposition, and entering judgment against Safeco. Because
the trial court was divested of jurisdiction to amend its March 20, 2013 order, its April 8, 2013 order is
void for lack of jurisdiction. Accordingly, we vacate the April 8, 2013 order.
/s/ Mark T. Boonstra
/s/ Jane E. Markey
/s/ Kirsten Frank Kelly
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