Up Hydro LLC v. Daniel Artibee ( 2016 )

STATE OF MICHIGAN
COURT OF APPEALS
UP HYDRO, LLC, UNPUBLISHED
December 29, 2016
Plaintiff/Cross Defendant-Appellee,
v No. 329710
Alger Circuit Court
DANIEL ARTIBEE, LC No. 2013-007306-CH
Defendant/Cross Plaintiff-
Appellant.
Before: MARKEY, P.J., and MURPHY and KRAUSE, JJ.
PER CURIAM.
Defendant appeals by right the trial court’s order granting plaintiff’s motion for summary
disposition under MCR 2.116(C)(10) (no genuine issue of material fact) on defendant’s
counterclaims for breach of contract and to quiet title. We reverse and remand for further
proceedings consistent with this opinion.
Defendant and his wife purchased a home and garage in Michigan’s Upper Peninsula in
1988 that was situated on leased land. The land was at the time owned by the Cleveland Cliffs
Iron Company. By 2002, the land had been transferred to the Upper Peninsula Power Company,
from whom defendant and his wife leased three separate parcels, including the parcel on which
their home and garage were located. The land and leases were transferred to plaintiff in 2010.
On May 28, 2013, defendant received a letter from plaintiff that stated as follows:
Dear Mr. Artibee:
This letter is sent on behalf of UP Hydro, LLC (“UP Hydro”), lessor under the
above referenced lease or leases (whether one or more, the “Lease”).
UP Hydro is prepared to offer you, pursuant to the terms and conditions of a
separate offer agreement to be signed by us, the following in regard to the Lease:
1) UP Hydro will sell you the land your home and garage occupy
(subject to survey and creation of a legal description[] acceptable
to both parties) for Ten thousand dollars ($10,000.00), including
the old school house/VFW building located on UP Hydro’s land.
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Please confirm in writing to the address below before June 15, 2013 whether the
above general terms are acceptable to you. If we receive notice from you on or
before June 15, 2013 that these terms are acceptable to you, then we will
immediately prepare and send you a form of offer for your review. If you reject
these terms or fail to notify us on or before June 15, 2013, then we will assume
that you have rejected these terms and will proceed accordingly with our rights
under the Lease.
On June 6, 2013, defendant responded with the following handwritten letter addressed to
plaintiff’s representative, Tom Berutti:
Dear Mr. Berutti:
Pursuant to the terms as defined in this letter and per our personal
conversation(s), I and my wife Gloria Artibee Accept said terms as stated pending
survey and legal description(s) acceptable to both parties.
We eagerly await your response and action(s) so we can at last finalize our
concerns over this matter.
Defendant and Berutti walked around the property with defendant, flagging the presumed
boundary lines, though defendant acknowledged that Berutti informed him that that boundary
was subject to the survey. Defendant also acknowledged his concern that had he later rejected
the survey, “probably the contract would have been negated, but we accepted it.”
Plaintiff contracted with a surveyor, who created a survey and legal description of the
property that varied in some respects from where defendant and Berutti had presumed the
boundary lines to exactly be when they had walked around the property. The surveyor testified
that the change was necessary so that the property line would lie a certain distance from a
Federal Energy Regulatory Commission (FERC) line. The surveyor testified that this move then
brought one of the boundary lines very close to defendant’s garage, perhaps even touching it.
While defendant initially expressed his disapproval, he eventually found the survey and resulting
legal descriptions acceptable.
Plaintiff, however, refused to consummate the sale, and less than a month after the survey
and legal description were created, plaintiff served defendant with a notice to quit. Plaintiff
sought to reclaim possession of the property under the lease agreements. Plaintiff then filed in
the district court an action to recover real property. Defendant brought counterclaims for breach
of contract and to quiet title. The action was then removed to circuit court, which granted
plaintiff summary disposition on defendant’s counterclaims, finding that no contract to sell the
property had been formed because no formal purchase agreement had been created and because a
mutually acceptable legal description of the property had not been obtained. The court explained
that plaintiff could pursue its remedies under the lease agreements with defendant.
We review the trial court’s order granting plaintiff summary disposition de novo. See
Maiden v Rozwood, 461 Mich. 109, 118; 597 NW2d 817 (1999). “A motion under MCR
2.116(C)(10) tests the factual sufficiency of the complaint.” Maiden, 461 Mich. at 120. “In
presenting a motion for summary disposition, the moving party has the initial burden of
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supporting its position by affidavits, depositions, admissions, or other documentary evidence.”
Quinto v Cross & Peters Co, 451 Mich. 358, 362; 547 NW2d 314 (1996). The burden then shifts
to the party opposing the motion “to establish that a genuine issue of disputed fact exists.” Id. A
court deliberating on the motion considers the evidence submitted in a light most favorable to the
non-moving party. Maiden, 461 Mich. at 120. A mere pledge to establish an issue of fact at trial
is insufficient to survive summary disposition under MCR 2.116(C)(10). Id. at 121.
The existence and interpretation of a contract are questions of law that we review de
novo. Kloian v Domino’s Pizza LLC, 273 Mich. App. 449, 452; 733 NW2d 766 (2006), citing
Bandit Industries, Inc v Hobbs Int’l, Inc (After Remand), 463 Mich. 504, 511; 620 NW2d 531
(2001). Where a contract has been formed, it must be interpreted according to the plain and
ordinary meaning of its terms. Rory v Cont’l Ins Co, 473 Mich. 457, 464; 703 NW2d 23 (2005);
Alpha Capital Mgt Inc v Rentenbach, 287 Mich. App. 589, 611; 792 NW2d 344 (2010). “If the
contractual language is unambiguous, courts must interpret and enforce the contract as written.”
In re Smith Trust, 480 Mich. 19, 24; 745 NW2d 754 (2008); see also Rory, 473 Mich. at 468.
Plaintiff’s offer clearly states that it would sell defendant the land his home and garage
occupy for $10,000 but conditions the offer on the conducting of a “survey and [the] creation of
a legal description[] acceptable to both parties.” Defendant promptly responded in writing and
advised that he and his wife accept “said terms as stated pending survey and legal description(s)
acceptable to both parties.” The clear and unambiguous language of the writings show the
parties’ intent to enter a contract for the sale of the land that defendant’s house and garage were
on for $10,000, but only if a legal description acceptable to both parties could be created
following a survey. The record shows a survey was in fact prepared that varied somewhat from
the parties’ understanding of where the property boundaries lay: a legal requirement pertaining
to another entity in turn required that a property line be moved closer to defendant’s garage.
Plaintiff argues that no binding contract ever existed between the parties because its offer
stated it was “pursuant to the terms and conditions of a separate offer agreement to be signed by
us.” Plaintiff argues that this renders its initial offer letter and defendant’s acceptance nothing
more than an unenforceable agreement to negotiate. While we agree that the writings may be
construed as a contract to enter into a subsequent agreement, “[a] contract to make a subsequent
contract is not per se unenforceable; in fact, it may be just as valid as any other contract.”
Opdyke Investment Co v Norris Grain Co, 413 Mich. 354, 359; 320 NW2d 836 (1982). Although
“a contract to make a contract can fail for indefiniteness if the trier of fact finds that it does not
include an essential term to be incorporated into the final contract[,]” id., “where agreement is
expressed on all essential terms, the instrument is considered a contract, and is considered a mere
memorial of the agreement already reached.” Hansen v Catsman, 371 Mich. 79, 82; 123 NW2d
265 (1963). The dispositive question becomes whether the writings of the parties expressed all
the essential terms for a contract for the sale of land. We conclude that they did.
The material provisions for a contract for the sale of land “are the identification of (1) the
property, (2) the parties, and (3) the consideration.” Zurcher v Herveat, 238 Mich. App. 267, 290-
291; 605 NW2d 329 (1999). It is undisputed that the writings identify the parties (plaintiff and
defendant), the consideration ($10,000), and a general description of the property, i.e., “the land
[defendant’s] home and garage occupy.” Plaintiff argues that because the writings state that the
contract is subject to reaching agreement on the legal description of the land, the writings do not
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identify the property. Defendant argues that the general description of the property sufficiently
identifies it to form a binding contract. We agree.
A sufficient description of the property in a contract for the sale of land is one that
“ ‘when read in the light of the circumstances of possession, ownership, situation of the parties,
and their relation to each other and to the property, as they were when negotiations took place
and the writing was made, . . . identifies the property.’ ” Id. at 294, quoting Stanton v Dachille,
186 Mich. App. 247, 259; 463 NW2d 479 (1990). When the parties began their negotiations and
entered into written correspondence pertaining to the potential land sale, defendant had been
leasing three separate parcels of property from plaintiff and plaintiff’s predecessors for many
years-- since 1988 when defendant and his family moved to the Upper Peninsula. Given the
length of this arrangement and the specific descriptions of the property subject to each lease, we
find the statement in plaintiff’s offer identifying the property as “the land your home and garage
occupy,” as supplemented by the reference to the leases, was sufficient to identify the property.
Although the parties’ writings reflect an intent to draft a contract for the sale of land
subject to a condition precedent, the next inquiry is whether there was a condition precedent that
failed to occur, and, if so, whether that failure was plaintiff’s fault, as defendant alleges.
Liability does not attach to an agreement when it is conditioned on a future event which,
through no fault of the parties, never occurs. Opdyke, 413 Mich. at 359. But Michigan follows
the rule stated in Hayes v Beyer, 284 Mich. 60, 64-65; 278 N.W. 764 (1938) (citation and
quotation marks omitted):
Where a contract is performable on the occurrence of a future event, there is an
implied agreement that the promisor will place no obstacle in the way of the
happening of such event, particularly where it is dependent in whole or in part on
his own act; and where he prevents the fulfillment of a condition precedent or its
performance by the adverse party, he cannot rely on such condition to defeat his
liability.
“Where a party prevents the occurrence of a condition, the party, in effect, waives the
performance of the condition.” Harbor Park Mkt, Inc v Gronda, 277 Mich. App. 126, 131-132;
743 NW2d 585 (2007). In general, “a party must prevent the condition from occurring by either
taking some affirmative action, or by refusing to take action required under the contract, before a
court will find a waiver of a condition precedent.” Id. at 132.
Moreover, in general, every contract includes an implied covenant of good faith. “It has
been said that the covenant of good faith and fair dealing is an implied promise contained in
every contract ‘that neither party shall do anything which will have the effect of destroying or
injuring the right of the other party to receive the fruits of the contract.’ ” Hammond v United of
Oakland, 193 Mich. App. 146, 151-152; 483 NW2d 652 (1992) (citations omitted); see also In re
Leix Estate, 289 Mich. App. 574, 586; 797 NW2d 673 (2010), and 2 Restatement Contracts, 2d, §
205, p 99 (“Every contract imposes upon each party a duty of good faith and fair dealing in its
performance and its enforcement.”).
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There is no evidence that plaintiff or plaintiff’s representative, Berutti, agreed to the
surveyor’s legal description of the property—the surveyor that plaintiff had itself hired. Indeed,
the notice to quit given to defendant indicates the opposite. Defendant argues that plaintiff’s
refusal to find the legal description acceptable is simply because either plaintiff or Berutti had a
change of heart and no longer wanted to sell the property. The fact is that the survey plaintiff had
generated described a smaller piece of property than what plaintiff and defendant initially
envisioned when they walked the property. Where the only change in the parties’ understanding
of the property lines as a result of the survey appears to be to the disadvantage of defendant, we
agree with defendant that the failure of the purported condition precedent was entirely within
plaintiff’s control. Plaintiff has not fulfilled its duty of good faith with respect to the parties’
contract. Hammond, 193 Mich. App. at 151-152. Because plaintiff has not offered a good-faith
basis for its refusal to agree to the survey-generated property description, we hold that plaintiff
has no basis to invoke this condition precedent of agreement on a survey-generated property
description to nix the agreed upon sale of the property. Hayes, 284 Mich. at 64-65; Harbor Park
Mkt, 277 Mich. App. at 131-132. Defendant has a legal, binding contract for the sale of the
property on which defendant’s home and garage are situated as described in the survey prepared
pursuant to the parties’ agreement.
We reverse and remand for further proceedings consistent with this opinion. As the
prevailing party, Defendant may tax costs pursuant to MCR 7.219.
/s/ Jane E. Markey
/s/ William B. Murphy
/s/ Amy Ronayne Krause
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