Larry Pack v. JJ Development Inc ( 2024 )

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
LARRY PACK and DEBORAH PACK, UNPUBLISHED
August 1, 2024
Plaintiffs-Appellees,
v No. 366808
Oakland Circuit Court
JJ DEVELOPMENT, INC. and JOSEPH LC No. 2021-185965-CZ
TRUPIANO,
Defendants-Appellants,
and
JEFFREY S. AMBURGY, REAL ESTATE ONE,
INC., WILLIAM WESLEY MORLAND, BRANDY
MORLAND, and MORLAND PROPERTY
SERVICES,
Defendants.
Before: JANSEN, P.J., and REDFORD and D. H. SAWYER*, JJ.
PER CURIAM.
Defendants, JJ Development, Inc. and Joseph Trupiano, appeal as of right the trial court
order denying their motion for attorney fees and costs as case evaluation sanctions under the former
version of MCR 2.403.1 Defendants argue that the former version of the court rule providing
mandatory case evaluation sanctions should be applied. We disagree and affirm.
1
Although involved in the underlying facts and lower court proceedings, the remaining defendants
are not involved in this appeal. Accordingly, any reference to “defendants” in this opinion refers
only to Trupiano and JJ Development, Inc.
*Former Court of Appeals judge, sitting on the Court of Appeals by assignment.
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I. BACKGROUND FACTS
This case arises from plaintiffs, Larry and Deborah Pack, entering a contract for the
purchase of land and construction of a new home in Milford, Michigan, as part of a new
subdivision. Trupiano is the owner of JJ Development, and defendants originally owned the
property. Jeffrey S. Amburgy, a real estate broker for Real Estate One, Inc., helped negotiate an
agreement for defendants to sell the property to Morland Property Services (MPS), owned by
William Wesley Morland (Morland), who would then sell the property to plaintiffs, and then MPS
would construct the home. On June 17, 2019, plaintiffs and Morland signed a purchase agreement
for $960,000, with an attached building and specifications addendum. Plaintiffs made several
deposits to Morland and MPS before and after entering this agreement. However, Morland and
MPS never completed construction of the home, and fell behind in payments to contractors and
subcontractors who already completed work. Plaintiffs had to find other contractors to finish the
work, and eventually sold the home.
II. PROCEDURAL HISTORY
Plaintiffs filed suit on January 26, 2021, against defendants, Amburgy, Real Estate One,
Morland, his wife, Brandy Morland, and MPS, alleging breach of contract, conversion, negligence,
unjust enrichment, fraud in the inducement, fraudulent misrepresentation, conspiracy to commit
fraudulent misrepresentation, and rescission of contract. Morland and MPS were granted summary
disposition under MCR 2.116(C)(7) because plaintiffs’ claims against them were subject to an
arbitration agreement and therefore barred in the trial court. Once an arbitration award was
entered, judgment was entered against Morland and MPS in favor of plaintiffs for $400,000.
Amburgy and Real Estate One were granted summary disposition of all of plaintiffs’ claims except
the fraud claims, and plaintiffs were granted leave to file an amended complaint.
Plaintiffs filed their first amended complaint on June 25, 2021, alleging breach of contract
against defendants, and the same fraud claims against defendants, Amburgy, and Real Estate One.
Defendants moved for summary disposition, which the court granted as to plaintiffs’ breach-of-
contract claim, but again granted plaintiffs leave to amend the complaint.
Case evaluation took place on October 6, 2021. The case evaluation award against
defendants was for $1,500; defendants accepted it, and plaintiffs rejected it. At that time, MCR
2.403(O)(1) provided for mandatory case evaluation sanctions when the party who rejected the
award received a less-favorable verdict at trial. MCR 2.403 was amended effective January 1,
2022, removing the provision for mandatory case evaluation sanctions. See 508 Mich clxiii.
In the second amended complaint, filed December 15, 2021, plaintiffs renewed their fraud
claims against defendants, Amburgy, and Real Estate One, and added two new claims: intentional
and tortious interference with a contractual relationship against defendants only. Defendants,
Amburgy, and Real Estate One each moved for summary disposition, and the trial court granted
them all summary disposition of plaintiffs’ fraud claims, but denied defendants summary
disposition of plaintiffs’ interference claims. These two claims went before a jury in April 2023,
who found that defendants did not interfere with the contract between plaintiffs and MPS, and
therefore the court entered judgments of no cause of action in defendants’ favor.
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Defendants then moved for costs and attorney fees as case evaluation sanctions under
former MCR 2.403, arguing that at the time that case evaluation took place in October 2021, MCR
2.403(O)(1) provided for mandatory case evaluation sanctions, and that version of the rule should
apply. Defendants accepted the $1,500 award, plaintiffs rejected it, and at trial, the verdict entered
was not more favorable. Defendants sought $96,722.75 in costs and attorney fees. Plaintiffs
responded, asserting that the current version of MCR 2.403 applied under MCR 1.102. The trial
court heard oral argument and, relying on MCR 1.102 and Reitmeyer v Schultz Equip & Parts Co,
Inc, 237 Mich App 332; 602 NW2d 596 (1999), held that the new version of MCR 2.403 applied
because of the circumstances of the case, and denied defendants’ motion. Defendants moved for
reconsideration, which was also denied. Defendants now appeal the issue of case evaluation
sanctions only.
III. STANDARD OF REVIEW
We review the trial court’s decision whether to award case evaluation sanctions de novo.
RAD Constr, Inc v Davis, ___ Mich App ___; ___ NW3d ___ (Docket Nos. 361177; 363142)
(2023); slip op at 8. The interpretation and application of court rules is also reviewed de novo as
a question of law. Id. The trial court’s decision whether the application of a new court rule would
“work injustice” under MCR 1.102 is reviewed for an abuse of discretion. Reitmeyer, 237 Mich
App at 336. Although not determined here, the amount of an award is also reviewed for an abuse
of discretion, which occurs when the court “selects an outcome falling outside the range of
reasonable and principled outcomes.” RAD Constr, Inc. ___ Mich App at ___; slip op at 8.
IV. ANALYSIS
Defendants argue that the trial court should have applied the version of MCR 2.403 in
effect at the time of case evaluation to award case evaluation sanctions, and it did not matter that
the claims ultimately decided by the jury were not subject to case evaluation. We disagree.
At the time of case evaluation on October 6, 2021, MCR 2.403(O)(1) provided:
If a party has rejected an evaluation and the action proceeds to verdict, that
party must pay the opposing party’s actual costs unless the verdict is more favorable
to the rejecting party than the case evaluation. However, if the opposing party has
also rejected the evaluation, a party is entitled to costs only if the verdict is more
favorable to that party than the case evaluation.
With the 2022 amendment to MCR 2.403, this sanction provision was removed effective
January 1, 2022. See 508 Mich clxiii.
The issue before this Court is what version of MCR 2.403 should apply. The court rules
themselves govern their application to pending cases:
These rules take effect on March 1, 1985. They govern all proceedings in
actions brought on or after that date, and all further proceedings in actions then
pending. A court may permit a pending action to proceed under the former rules if
it finds that the application of these rules to that action would not be feasible or
would work injustice. [MCR 1.102.]
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“[T]he norm is to apply the newly adopted court rules to pending actions unless there is reason to
continue applying the old rules.” Reitmeyer, 237 Mich App at 337 (quotation marks and citation
omitted). “However, an injustice is not present merely because a different result would be reached
under the new rules. Rather, a new court rule would ‘work injustice’ where a party acts, or fails
to act, in reliance on the prior rules and the party’s action or inaction has consequences under the
new rules that were not present under the old rules.” Id. (quotation marks and citations omitted).
The “injustice exception” “must be applied narrowly and with restraint, such that the exception
does not subsume the rule itself.” Id. at 345. There is no bright-line rule for determining when an
amended or previous version of a rule applies; rather, the court “must look more closely to the
particular circumstances of the case at issue and at the purpose of the amendment.” Id. at 342.2
In Reitmeyer, the plaintiff moved for sanctions and attorney fees under the offer-of-
judgment rule, MCR 2.405, which at that time, imposed sanctions against a party who rejected an
offer of judgment and then received a less-favorable verdict. Id. at 334-335. The trial court denied
the plaintiff’s motion, concluding that the amendment applied retrospectively. Id. at 335. This
Court vacated the denial of the plaintiff’s motion because there was “no evidence that the trial
court relied on the language of MCR 1.102 to undertake an examination of whether application of
the amended version of MCR 2.405 would ‘work injustice.’ ” Id. at 336. The court’s decision
was based on the fact that procedural rules apply retrospectively in the absence of a clear intention
otherwise. Id. This analysis was improper because the determination of whether a court rule
applies retroactively or prospectively is governed by MCR 1.102. Id. at 337.
Despite plaintiffs’ assertions to the contrary, this Court’s recent decision in RAD Constr,
___ Mich App ___, does not mandate application of the amended rule. In that case, the parties
engaged in case evaluation when the former version of MCR 2.403 was in effect, the plaintiff
rejected the case evaluation award, and after trial, the plaintiff did not obtain a more favorable
verdict in an opinion and order rendered after the amended version of MCR 2.403 took effect. Id.at ___; slip op at 8. The trial court in RAD Constr granted the defendants case evaluation sanctions
under the former rule, and the plaintiff challenged this on appeal. Id. This Court held:
Our Supreme Court amended MCR 2.403 and among other things
eliminated Subpart (O). The amendments became effective January 1, 2022. See
508 Mich clxiii. MCR 1.102 requires applying the court rules to all pending cases.
Amended court rules apply to pending actions unless there is a reason to apply the
old rules. Reitmeyer, 237 Mich App at 337. We find no reason to apply the old
2
In a Supreme Court Order, ADM File No. 2020-06, regarding the amendments to Rules 2.403,
2.404, and 2.405, Justice CAVANAGH wrote in a concurring opinion that the purpose of the removal
of the case evaluation sanction provision was to “level the playing field for plaintiffs and
defendants, given the consensus that case evaluation primarily favored defendants and insurance
carriers (who could absorb the cost of sanctions across hundreds of cases) over plaintiffs with a
single case,” and that “sanctions force settlements that are not based on the merits of claims and
defenses, sanctions are not used by other states’ [alternative dispute resolution] processes, and
sanctions are no longer needed in an era in which less than one percent of circuit court civil claims
are adjudicated at trial.”
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rule in this case. The provision authorizing case evaluation sanctions having been
eliminated, the trial court had no authority to sanction RAD after January 1, 2022.
By ordering case evaluation sanctions against RAD, the trial court erred. Therefore,
we reverse the trial court’s decisions granting [the defendants’] respective motions
for case evaluation sanctions, and vacate the trial court’s case evaluation sanction
orders. [RAD Constr, ___ Mich App at ___; slip op at 8-9.]
This holding does not create a bright-line rule that prohibits the award of case evaluation sanctions
under the former version of the court rule. Rather, the trial court must engage in the proper analysis
under MCR 1.102 and Reitmeyer, and the decision on what court rule to apply depends on the
circumstances of the case. Reitmeyer, 237 Mich App at 334-337. With this background in mind,
we address the merits of this case.
Unlike the trial court in Reitmeyer, 237 Mich App at 345, the trial court in this case
undertook an analysis under the proper “works injustice” test in MCR 1.102. The trial court
provided an explanation why it believed that application of the old version of MCR 2.403
containing Subpart (O) would work an injustice. First, it explained the proper test under MCR
1.102 as explained by Reitmeyer. Then it held that the new rule applied under the circumstances
of the case. It reasoned that there was no indication that application of the new rule would not be
feasible, and that the case went to case evaluation before the second amended complaint was filed,
so the counts from the second amended complaint that were decided by the jury were never
evaluated. The court determined that an award of case evaluation sanctions on a jury verdict for
which plaintiffs’ claims were never submitted to case evaluation would be inappropriate and work
an injustice. The bills and invoices attached to defendants’ motion established that a significant
amount, if not a majority, of the fees and expenses defendants incurred were to defend claims not
part of the case evaluation award, i.e., those contained in the second amended complaint. The
court did not doubt that there was most likely discussion between counsel and defendants regarding
former MCR 2.403(O); however, the fact that the claims that were presented at trial were not part
of case evaluation was compelling, and the court determined that the new rule applied.
We find no error in the trial court’s decision to apply the current version of MCR 2.403
and deny defendants case evaluation sanctions. The record indicates that the parties engaged in
case evaluation on October 6, 2021. Defendants accepted the case evaluation award of $1,500 in
favor of plaintiffs and plaintiffs rejected the award. At that time, MCR 2.403 included Subpart
(O) providing for case evaluation sanctions. Before case evaluation took place, plaintiffs had filed
their first amended complaint, alleging breach of contract against defendants, and fraud in the
inducement, fraudulent misrepresentations, and conspiracy to commit fraud against defendants,
Amburgy, and Real Estate One, as Morland and MPS had been dismissed subject to arbitration.
Following case evaluation, the trial court granted defendants summary disposition on the first
amended complaint, but granted plaintiffs leave to file a second amended complaint, reasserting
their fraud claims as well as bringing new intentional interference and tortious interference with a
contractual relationship claims against defendants. Defendants were granted summary disposition
of the fraud claims, with the interference claims ultimately going before a jury. The jury found in
defendants’ favor, and judgments of no cause of action were entered as to both interference claims
in April 2023.
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By the time the jury reached its verdict, the amended version of MCR 2.403 had been in
effect since January 1, 2022, approximately one year and three months since the rule change. See
508 Mich clxiii. In RAD Constr, Inc, ___ Mich App ___; slip op at 8, only four months had passed
between when the rule had changed and the completion of that matter at the trial court level and
this court stated “we find no reason to apply the old rule in this case.”
In the matter at bar, the only claims that were adjudicated at trial, the intentional
interference and tortious interference with a contractual relationship claims, were pleaded in the
second amended complaint and never submitted to case evaluation. The trial was conducted in its
entirety under the new rule. Defendants could not have relied on the possibility of sanctions when
accepting the $1,500 case evaluation in relation to claims that were not yet raised at that time.
Further, as addressed by the trial court, a majority of the fees and expenses incurred by
defendants were incurred defending against the new claims and under the new rule. The second
amended complaint was filed on December 15, 2021. Although merely an approximation, we note
that 232 entries in the Register of Actions were entered between plaintiffs’ refusal of the case
evaluation on January 26, 2021, and adoption of the amended court rule on January 1, 2022.
Whereas, 371 entries in the Register of Actions were entered between adoption of the new court
rule and June 22, 2023, when the trial court denied defendants’ motion for reconsideration on
sanctions. Undoubtedly, the bulk of the proceedings in this case occurred after adoption of the
amended rule and in relation to claims not submitted to case evaluation.
Defendants assert that from the beginning of this case, there was no case against defendants
and plaintiffs merely dragged defendants through frivolous litigation. Indeed, throughout the
complex and arduous procedural history of this case, defendants ultimately received a favorable
verdict of no cause of action. However, throughout the pendency of this case, plaintiffs were
permitted to amend their complaint and overcame summary disposition in relation to the new
claims before ultimately losing at trial. Further, plaintiffs received a $400,000 arbitration award
against Amburgy and Real Estate One approximately seven months after the court rule was
amended. These facts do not counsel that plaintiffs dragged defendants through frivolous
litigation, nor take away from the fact that the majority of the litigation occurred under the new
court rule.
For the reasons stated in this opinion, defendants cannot establish that applying the
amended rule would work an injustice. The trial court properly concluded that the amended
version of MCR 2.403 applied to defendants’ motion for case evaluation sanctions. MCR 1.102;
Reitmeyer, 237 Mich App at 337. Because the amended version of the court rule eliminated the
provision allowing for such sanctions, the trial court properly denied defendants’ motion. MCR
2.403.
Affirmed.
/s/ James Robert Redford
/s/ David H. Sawyer
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