Richard M Ward v. Michael Wesley Filarski ( 2019 )

If this opinion indicates that it is “FOR PUBLICATION,” it is subject to
revision until final publication in the Michigan Appeals Reports.
STATE OF MICHIGAN
COURT OF APPEALS
RICHARD M. WARD, LINDA K. WARD, and UNPUBLISHED
WARD ENTERPRISES, INC., September 17, 2019
Plaintiffs-Appellees,
v No. 340707
Genesee Circuit Court
MICHAEL WESLEY FILARSKI, LC No. 13-100022-CZ
Defendant-Appellant,
and
TROY WOOLLEY,
Defendant.
Before: MURRAY, C.J., and METER and FORT HOOD, JJ.
PER CURIAM.
Defendant, Michael Wesley Filarski, appeals as of right the trial court judgment awarding
damages, including attorney fees, to plaintiffs, Richard M. Ward (Richard), Linda K. Ward
(Linda), and Ward Enterprises, Inc., based on the trial court grant of summary disposition to
plaintiffs on the issue of liability, in this dispute over the sale of land.1 For the reasons that
follow, we affirm the trial court judgment, in part, regarding the grant of summary disposition to
plaintiffs and the amount of attorney fees awarded to plaintiffs, but we reverse the trial court
judgment, in part, with regard to the total amount of damages awarded based on the improper
value of the plaza used to calculate the total net judgment.
1
Plaintiffs’ claims against defendant Troy Woolley were settled in bankruptcy proceedings, and
he is not a party to this appeal.
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I. FACTS AND PROCEDURAL HISTORY
In April 2011, plaintiffs entered a purchase agreement with defendant and Troy Woolley
for the sale of property containing a small plaza (the plaza parcel), and the sale of adjoining
property containing a restaurant (the restaurant parcel). The purchase agreement was executed
contemporaneously with a land contract for the plaza parcel, a land contract for the restaurant
parcel, and a management agreement that allowed defendant and Woolley to operate the
restaurant before Ward Enterprises transferred its liquor license.
In March 2013, plaintiffs filed a complaint, alleging breach of the plaza land contract
because defendant and Woolley failed to make monthly principal, interest, and debt servicing
payments. In their answer to the complaint, defendant and Woolley asserted that the plaza land
contract was void because Richard and Linda lacked capacity to enter the contract in their
individual capacities because they had quitclaimed their interest in the plaza parcel to Ward
Enterprises in 2006.
In May 2013, Richard and Linda assigned their rights and obligations under the plaza
land contract to Ward Enterprises. All of the parties then filed motions for summary disposition
under MCR 2.116(C)(10). The court granted summary disposition to plaintiffs regarding
liability, and denied defendant and Woolley summary disposition. Thereafter, Woolley filed a
petition for Chapter 13 bankruptcy, and plaintiffs’ claims against Woolley were resolved by
bankruptcy court order. The bankruptcy court separated the plaza land contract and the
restaurant land contract into two claims, and allowed Woolley to assume the restaurant land
contract, and reject the plaza land contract.
The court then held a bench trial on the issue of damages for breach of the plaza land
contract. The court entered judgment in favor of plaintiffs in the amount of $245,101.39. This
included the balance owed under the plaza land contract ($250,304.34), and attorney fees and
costs accrued by plaintiffs’ previous counsel ($41,218.80) and plaintiffs’ current counsel
($16,578.25), totaling $308,101.39, minus the value of the plaza per the 2016 sheriff’s deed and
appraisal ($63,000).
II. ANALYSIS
A. SUMMARY DISPOSITION
Defendant first argues that the trial court erred in granting plaintiffs summary disposition
because genuine issues of material fact exist regarding defendant and Woolley’s liability on
plaintiffs’ breach-of-contract claim.
“This Court reviews de novo a trial court’s decision on a motion for summary
disposition.” Loweke v Ann Arbor Ceiling & Partition Co, LLC, 489 Mich. 157, 162; 809 NW2d
553 (2011). “A motion for summary disposition under MCR 2.116(C)(10) tests whether there is
factual support for a claim,” and granting the motion is appropriate when there is no genuine
issue concerning any material fact. Universal Underwriters Group v Allstate Ins Co, 246 Mich
App 713, 720; 635 NW2d 52 (2001). When deciding a motion for summary disposition under
MCR 2.116(C)(10), this Court must consider all pleadings, affidavits, depositions, and other
documentary evidence in the light most favorable to the nonmoving party. Cowles v Bank West,
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476 Mich. 1, 32; 719 NW2d 94 (2006). “Whether a statute of frauds bars enforcement of a
contract is a question of law that we review de novo.” Kloian v Domino’s Pizza, LLC, 273 Mich
App 449, 458; 733 NW2d 766 (2006). The interpretation of a contract is also a question of law
reviewed de novo. Id. at 452.
Defendant first argues that plaintiffs’ breach-of-contract claim was barred by the
applicable statute of frauds. Specifically, defendant argues that Richard and Linda had no
interest in the plaza property to sell. Defendant also argues that the subsequent assignment and
assumption agreement was void because Richard and Linda had no interest in the plaza property
to assign.
In Zurcher v Herveat, 238 Mich. App. 267, 291; 605 NW2d 329 (1999), this Court defined
a land contract:
The term “land contract” is commonly used in Michigan as particularly referring
to “agreements for the sale of an interest in real estate in which the purchase price
is to be paid in installments (other than an earnest money deposit and a lump-sum
payment at closing) and no promissory note or mortgage is involved between the
seller and the buyer.” 1 Cameron, Michigan Real Property Law (2d ed), § 16.1, p
582.
Under a land contract, the “vendor retains legal title until the contractual obligations have been
fulfilled, the vendee is given equitable title, and that equitable title is a present interest in realty
that may be sold, devised, or encumbered.” Graves v American Acceptance Mtg Corp (On
Rehearing), 469 Mich. 608, 614; 677 NW2d 829 (2004). Equitable title only passes to the
vendee upon proper execution of the land contract. Zurcher, 238 Mich. App. at 291.
The sale of land is governed by the statute of frauds, MCL 566.106 and MCL 566.108.
Lakeside Oakland Dev, LC v H & J Beef Co, 249 Mich. App. 517, 524; 644 NW2d 765 (2002).
MCL 566.106 provides:
No estate or interest in lands, other than leases for a term not exceeding
[one] year, nor any trust or power over or concerning lands, or in any manner
relating thereto, shall hereafter be created, granted, assigned, surrendered or
declared, unless by act or operation of law, or by a deed or conveyance in writing,
subscribed by the party creating, granting, assigning, surrendering or declaring the
same, or by some person thereunto by him lawfully authorized by writing.
MCL 566.108 provides, in relevant part:
Every contract for the leasing for a longer period than [one] year, or for
the sale of any lands, or any interest in lands, shall be void, unless the contract, or
some note or memorandum thereof be in writing, and signed by the party by
whom the lease or sale is to be made, or by some person thereunto by him
lawfully authorized in writing . . . .
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Thus, to satisfy a challenge under the statute of frauds, a contract for the sale of land must: “(1)
be in writing and (2) be signed by the seller or someone lawfully authorized by the seller in
writing.” Zurcher, 238 Mich. App. at 277.
“The substance of a binding contract for the sale of land is a subject separate from its
sufficiency under the statute of frauds and one that is governed by” general contract law. Id. at
279. Defendant’s challenge is made under the statute of frauds. The statute of frauds requires
that the writing sufficiently set forth the essential terms of the agreement and render the contract
enforceable. Opdyke Investment Co v Norris Grain Co, 413 Mich. 354, 369; 320 NW2d 836
(1982).2 There is no dispute that the plaza land contract set forth the essential terms of the
agreement. The plaza land contract identified Richard and Linda as the sellers of the real
property. Both Richard and Linda signed the land contract. Sufficient writings existed to satisfy
the statute of frauds.3
Defendant also argues that the plaza land contract, when read in conjunction with the
purchase agreement, is ambiguous and, therefore, summary disposition of the breach-of-contract
claim was improper.
This Court’s “primary goal in interpreting any contract is to give effect to the parties’
intentions at the time they entered into the contract.” Bank of America, NA v First American
Title Ins Co, 499 Mich. 74, 85; 878 NW2d 816 (2016). The parties’ intent is determined “by
interpreting the language of the contract according to its plain and ordinary meaning.” Id. at 85-
86. “[U]nless a contract provision violates law or one of the traditional defenses to the
enforceability of a contract applies, a court must construe and apply unambiguous contract
provisions as written.” Rory v Continental Ins Co, 473 Mich. 457, 461; 703 NW2d 23 (2005).
“A contract is ambiguous if its words may reasonably be understood in different ways.” UAW-
GM Human Resource Ctr v KSL Recreation Corp, 228 Mich. App. 486, 491; 579 NW2d 411
(1998) (quotation marks and citation omitted).
Defendant first argues that an ambiguity existed because the plaza land contract stated
that the purchase price for the plaza parcel was $215,000, but the purchase agreement indicated
that the purchase price for the real estate, which was defined in the purchase agreement as both
the plaza parcel and the restaurant parcel, was $115,000. He maintains that “it is impossible to
reconcile the plaza land contract with the purchase agreement.”
Plaintiffs’ claim for breach of contract related to the plaza land contract. The plaza land
contract clearly stated that “full consideration for the sale of the above described premises to the
2
Although this Court is not required to follow cases issued before November 1, 1990, MCR
7.215(B)(4), published decisions have precedential effect under the rule of stare decisis, MCR
7.215(C)(2).
3
To the extent that defendant is arguing that the plaza land contract was not valid because Ward
Enterprises was not a party to the land contract, the record reveals that Ward Enterprises
assumed the rights and obligations under the plaza land contract.
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Purchasers is Two Hundred Fifteen Thousand and no/100 ($215,000) Dollars.” There is nothing
ambiguous about the purchase price in the plaza land contract. Indeed, both defendant and
Woolley testified that the purchase price of the plaza parcel was $215,000.
Defendant also argues that the plaza land contract was ambiguous because a number of
items set forth in the purchase agreement that related to “closing matters” never occurred.
Defendant’s argument, which is difficult to discern, pertains to the purchase agreement. He has
not pointed out any ambiguity within the plaza land contract.
Lastly, defendant argues that Linda and Richard made fraudulent representations to
defendant and Woolley to induce them into entering into the plaza land contract, thereby
rendering the contract voidable, so defendant and Woolley chose to void the plaza land contract.
Defendant raised the affirmative defenses of “fraud-actual and/or constructive,”
misrepresentation of material facts, “including but not limited to ownership, tenants’ status and
rental income,” and “misrepresentation of the rental income and the status of the tenants on April
12, 2011.” Although defendant did not raise fraudulent misrepresentation in his motion for
summary disposition or in response to plaintiffs’ motion for summary disposition, defendant
recited some of the above facts in the statement of the facts sections of his motion for summary
disposition and his response to plaintiffs’ motion for summary disposition. Defendant did argue
at the hearing on the cross-motions for summary disposition that plaintiffs’ attorney
misrepresented to them that they needed to sign the plaza land contract to have the liquor license
transferred to defendant, but did so in the context of arguing that defendant and Woolley did not
intend to sign the land contract and be bound by its terms at the time they signed the purchase
agreement. This argument is not properly preserved. Peterman v Dep’t of Natural Resources,
446 Mich. 177, 182-183; 521 NW2d 499 (1994) (an issue is preserved if it is raised in the lower
court and pursued on appeal). An unpreserved nonconstitutional claim of error is reviewed for
plain error affecting substantial rights. Veltman v Detroit Edison Co, 261 Mich. App. 685, 690;
683 NW2d 707 (2004).
The essential elements of a fraudulent misrepresentation claim are as follows:
“(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 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.” [M & D, Inc v McConkey, 231 Mich. App. 22, 27; 585
NW2d 33 (1998) (citations omitted).]
Further, an action for fraud must be predicated upon a false statement relating to a past or
existing fact; promises regarding the future are contractual and will not support a claim of fraud.
Hi-Way Motor Co v Int’l Harvester Co, 398 Mich. 330, 336; 247 NW2d 813 (1976).
Additionally, to establish a claim of fraudulent misrepresentation, the plaintiff must have
reasonably relied on the false representation. Nieves v Bell Industries, Inc, 204 Mich. App. 459,
464; 517 NW2d 235 (1994). “There can be no fraud where a person has the means to determine
that a representation is not true.” Id.
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Defendant is asserting fraud as a defense to plaintiffs’ breach-of-contract action. He first
argues that plaintiffs’ attorney falsely represented to Woolley that all four documents—the
purchase agreement, the two land contracts, and the management agreement—needed to be
signed so that the liquor license could transfer, and that the false representation was intended by
the attorney to induce defendant and Woolley to sign the four documents. However, defendant
had the means to determine whether the representation was true. This allegation of fraud is
without merit. Id. at 464.
Next, defendant argues that Linda falsely represented to Woolley that the liquor license
transfer would take only one week when, in fact, it took several months. Again, defendant had
the means to determine whether the representation was true. Further, an action for fraud must be
predicated upon a false statement relating to a past or existing fact. Hi-Way Motor Co, 398 Mich.
at 336. Any representation regarding the amount of time that it might take for the Michigan
Liquor Control Commission to process the transfer of the liquor license was not a statement
relating to a past or existing fact.
Means also existed for defendant to determine whether Linda falsely represented that
there were several tenants in the plaza parcel with current and active leases, and that the lease
payments would cover the payment for the plaza land contract and the property taxes. Woolley
admitted that he failed to speak to any of the tenants before signing the land contract, he did
“nothing” to determine whether the leases were active and current, he proceeded with signing the
land contract despite his claim that he did not receive all of the documentation related to the
tenants, and that even after signing the land contract, he failed to speak with the tenants.
Defendant testified that he never asked plaintiffs about the terms of the tenant leases, he never
asked plaintiffs about the tenants before signing the plaza land contract, he was not aware of any
documents related to the tenants that he or Woolley asked for but did not receive, he never spoke
with any of the tenants before signing the land contract, he failed to look at any financial
information for the plaza parcel before signing the land contract, and it was merely a “bad
business decision” to purchase the plaza parcel. Additionally, defendant’s allegation with
respect to Linda’s representation that the tenants’ rent would cover defendant’s monthly payment
on the plaza land contract does not pertain to an allegedly false statement relating to a past or
existing fact, and does not support a claim of fraud. Id.
Lastly, defendant alleges that Linda falsely represented to Woolley that she intended to
purchase one of the businesses in the plaza after she learned that the business would be vacating
the plaza. Again, this allegation does not pertain to an allegedly false statement relating to a past
or existing fact, and does not support a claim of fraud. Id.
In sum, defendant has failed to create a genuine issue of material fact with respect to his
claim that the plaza land contract was void. Therefore, summary disposition in favor of plaintiffs
was proper.
B. DAMAGES AND ATTORNEY FEES
Defendant next argues on appeal that should this Court affirm summary disposition in
plaintiffs’ favor, the trial court erred in its calculation of damages against him.
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This Court reviews for clear error a trial court’s factual findings, including the calculation
of damages. See Alan Custom Homes, Inc v Krol, 256 Mich. App. 505, 512; 667 NW2d 379
(2003). “A finding is clearly erroneous where, after reviewing the entire record, this Court is left
with a definite and firm conviction that a mistake has been made.” Id.
The parties agree that the proper measure of damages in an action for breach of a land
contract, where the seller did not tender the deed to the purchaser, as in this case, is the
difference between the amount due on the land contract and the value of the property at the time
of the breach. See McColl v Wardowski, 280 Mich. 374, 376; 273 N.W. 736 (1937); St John v
Richard, 272 Mich. 670, 675; 262 N.W. 437 (1935). “[W]here a vendor seeks to recover damages
from the vendee pursuant to a contract for the transfer of real property, the measure of damages
is the difference between the contract price and the market value of the land.” In re Day Estate,
70 Mich. App. 242, 246; 245 NW2d 582 (1976), citing Calamarai and Perillo, Contracts, § 231, p
365. Market value means the market value as of the date of the breach as opposed to the price
the vendor later obtained on resale. Id. at 246-247. “Where there is some evidence of the market
value of the property around the time of the breach, the fact finder should weigh all the evidence
in an effort to make a reasonable determination of market value and, hence, damages.” McNeal
v Tuori, 107 Mich. App. 141, 147; 309 NW2d 588 (1981). However, if “evidence of resale price
is the only evidence of market value, the plaintiff has the burden of establishing that resale
occurred within a reasonable time, at the highest price obtainable, under terms as favorable as the
original contract, and that there has not been a decline in market value.” Id.
In In re Day Estate, 70 Mich. App. at 242, the defendants executed an offer to purchase
real estate, and subsequently signed a land contract for the purchase of the real estate on May 15,
1973. Id. at 243. On June 8, 1973, the defendants informed the real estate broker that they did
not intend to proceed with the purchase of the home. Id. at 244. Over a year later, on August 15,
1974, the home was sold for $40,000. Id. The plaintiff filed an action seeking to have the
defendants held liable for the $10,000 difference between the contract price and the subsequent
sale price, among other things. Id. The trial court found that the plaintiff had not failed to
mitigate his damages, and was entitled to judgment against the defendants in the sum of
$16,526.56, which included the $10,000 difference between the contract price and the
subsequent sale price. Id. at 245. This Court found that the trial court erred in its calculation and
its awarding of damages. Id. at 246. Specifically, this Court opined as follows:
In the case at bar the trial judge apparently adopted the plaintiff’s calculations of
damages which included the $10,000 difference between the contract price and
the sale price of the property approximately one year after the breach, as well as
consequential damages involving the maintenance of the property for the interim
period. We hold that the trial judge properly considered consequential damages
such as were incurred in the maintenance of the property since these damages
were reasonably foreseeable as a consequence of the breach. The record is not
clear, however, concerning whether the trial judge found as a fact that the
difference between the fair market value and the contract price at the time of the
breach was or was not $10,000. If the trial judge merely assessed damages for the
difference in the sale price and the contract price, he was in error. The judge may
properly consider a sale price, albeit one year later, as some evidence of the fair
market value at the time of breach, but he would be required to take into account
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possible differences in the market as might be occasioned by intervening
economic conditions. We are thus required to remand for further proceedings
wherein the trial judge shall make findings of fact in support of his assessment of
damages. The damages in the case at bar shall consist of the difference between
the fair market value of the property at the time of the breach and the contract
price as well as consequential damages reasonably foreseeable by the parties at
that time. [Id. at 247.]
Similarly, the trial court adopted plaintiffs’ calculation of damages, which incorporated
the amortization schedule provided in the testimony of Scott Fraim, an attorney specializing in
business-related matters. Plaintiffs’ calculation of damages made no mention of the date that the
contract was allegedly breached. However, the amortization schedule applied the default interest
rate of 6.5% as of June 1, 2011, which suggests that a breach of the contract occurred as of that
date.4 Further, plaintiffs alleged in their complaint that the plaza land contract required
defendant to pay $1,744 per month commencing June 1, 2011, and that defendant had not made
the payments. Accordingly, the record suggests that plaintiffs were seeking damages for a
breach of contract that occurred on June 1, 2011, and the parties agreed at oral argument that this
was when the breach occurred.
The trial court did not, however, specifically make findings regarding when the breach
occurred. Further, Fraim’s calculation merely calculated the difference between the balance
owed under the contract “as of August 16, 2016,” and the sale price of the property at a
foreclosure sale on May 25, 2016. Fraim did not utilize the contract price in determining
damages, but rather, utilized the contract price as a starting point in his amortization schedule.
Fraim then subtracted the sale price of the property nearly five years after the breach from the
“balanced owed under the contract.” Thus, it appears that the trial court, by adopting Fraim’s
calculations, did not utilize the appropriate measure of damages—that is, the difference between
the contract price and the market value of the land at the time of the breach. Nor did the court
appear to take into consideration the evidence presented to establish fair market value at the time
of the breach.
While the court may properly consider a sale price as some evidence of the fair market
value at the time of breach, there is no indication that the court took into account the passage of
five years, or the evidence of intervening economic conditions, loss of tenants, and the fact that
the sale occurred in the context of a foreclosure proceeding. Because the court failed to use the
appropriate measure of damages, and failed to make findings of fact in support of its assessment
of damages, the judgment of damages is reversed in part, and the case is remanded for a proper
4
Fraim’s amortization schedule calculated the amount due monthly, beginning with the loan
amount of $215,000 on April 12, 2011; the schedule credited all payments on the restaurant land
contract over $1,000 and rent received, and debited taxes and insurance paid by plaintiffs on
behalf of defendant, and included interest at the nominal annual rate of 6.5%. The calculations
were made through August 16, 2016, when Fraim applied an overpayment on the restaurant land
contract to the plaza land contract.
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calculation of damages. The damages should consist of the difference between the fair market
value of the property at the time of the breach and the contract price, as well as consequential
damages reasonably foreseeable by the parties at that time.
Defendant also argues that the trial court erred in its award of attorney fees and costs.
Specifically, defendant argues that the trial court awarded the total amount of fees and costs
sought by plaintiffs without any inquiry or findings of fact with respect to whether the fees were
reasonable in light of the services rendered. Plaintiffs maintain that the statements that they
submitted from their prior and current counsel detailing the time and costs incurred relating to
this matter were sufficient for the court to determine an award of attorney fees and costs without
an evidentiary hearing.
This Court reviews for an abuse of discretion a trial court’s award of attorney fees and
costs. Smith v Khouri, 481 Mich. 519, 526; 751 NW2d 472 (2008). “An abuse of discretion
occurs when the trial court’s decision is outside the range of reasonable and principled
outcomes.” Id.
“As a general rule, attorney fees are not recoverable as an element of costs or damages
absent an express legal exception.” Fleet Business Credit v Krapohl Ford Lincoln Mercury Co,
274 Mich. App. 584, 589; 735 NW2d 644 (2007). Attorney fees are recoverable if expressly
provided for by a contract between the parties. Id. In this case, the purchase agreement
constituted a contract between the parties. Under ¶ 12.1 of the purchase agreement, “In the event
of default in any respect of this Agreement . . . , all actual attorney fees and costs incurred by the
Sellers in enforcing its terms or pursuing damages shall be paid by the Purchasers.”
We note that defendant fails to cite any authority indicating that Michigan courts should
construe contract language providing for the recovery of “actual attorney fees” to mean
“reasonable attorney fees.” Where a contract merely provides for the recovery of “attorney fees”
or “legal fees,” without more, this language is construed to mean reasonable attorney fees. See
Zeeland Farm Servs, Inc v JBL Enterprises, Inc, 219 Mich. App. 190, 195-196; 555 NW2d 733
(1996); Papo v Aglo Restaurants of San Jose, Inc, 149 Mich. App. 285, 299; 386 NW2d 177
(1986). However, where, as here, the plain language of the contract unambiguously provides for
the recovery of “actual attorney fees,” this contract language must be enforced as written.
Mahnick v Bell Co, 256 Mich. App. 154, 158-159; 662 NW2d 830 (2003).
Plaintiffs attached to their proposed judgment copies of the billing statements from their
former and current counsel for the months of June 2016 through November 2016. Plaintiffs
sought $41,218.80 in attorney fees and costs for their former counsel, and $16,578.25 in attorney
fees and costs for their current counsel. In its written judgment, the trial court adopted plaintiffs’
“determination of damages,” including these exact amounts. Defendant argues on appeal that the
trial court erred in accepting the figures that plaintiffs submitted, and found “plaintiffs’
submission to be correct,” without making findings to determine whether the costs were
reasonable. However, because the purchase agreement explicitly provided for the award of “all
actual attorney fees and costs incurred by the Sellers,” the court was not required to make
findings regarding reasonableness, and did not abuse its discretion in making this award.
Therefore, the judgment granting plaintiffs damages is affirmed, in part, in regard to the amount
awarded to plaintiffs in attorney fees.
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III. CONCLUSION
The trial court judgment is affirmed, in part, to the extent that it grants plaintiffs summary
disposition and denies defendant summary disposition, and the amount of actual attorney fees
awarded is affirmed. The trial court judgment is reversed, in part, regarding the value of the
plaza used to calculate the total net judgment, and this matter is remanded for further
proceedings regarding the correct amount of damages to be awarded plaintiffs. We do not retain
jurisdiction.
/s/ Christopher M. Murray
/s/ Patrick M. Meter
/s/ Karen M. Fort Hood
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