Briarwood v. Faber’s Fabrics, Inc

163 Mich. App. 784 (1987) 415 N.W.2d 310

BRIARWOOD
v.
FABER'S FABRICS, INC

Docket No. 90857.

Michigan Court of Appeals.

Decided October 20, 1987.

Miro, Miro & Weiner (by Samuel C. Damren and Bruce L. Segal), for plaintiff.

Raymond F. Clevenger, for defendants.

Before: WEAVER, P.J., and M.J. KELLY and J.R. KIRWAN,^[*] JJ.

PER CURIAM.

Defendants appeal as of right from the Washtenaw Circuit Court's order granting plaintiff's motion for summary disposition on the basis of MCR 2.116(C)(9) and (10). Defendants further appeal as of right from an order granting plaintiff's motion for summary disposition as to defendants' counterclaim on the basis of MCR 2.115(B) and 2.116(8) and (10). Plaintiff appeals as of right from the court's denial of sanctions allowable under MCR 2.114(E), and further requests expenses incurred on appeal allowable under MCR 7.216(C)(1)(a). We affirm the orders of summary disposition as to plaintiff's claim and defendants' counterclaim. We further order defendant to pay plaintiff's expenses, remanding to the trial court for determination of the amount of sanctions.

I

This suit arises from a ten-year lease agreement dated May 29, 1973, between plaintiff, Briarwood, and defendant Faber's Fabrics, owned by defendant Robert G. Faber, for premises located at Briarwood Mall in Ann Arbor, Michigan. The agreement provided that Faber was to conduct business on the leased premises for the entire term of the lease and was to pay rent and other charges set forth in the lease. The lease was to expire on January 31, 1984.

In 1983, when Faber sought an extension of the lease, Briarwood refused to extend the lease at the same location. However, Briarwood offered to let Faber continue occupancy at one of several other locations in the mall. Faber rejected these offers. Instead, Faber began withholding rent and, on October 13, 1983, abandoned the premises without Briarwood's consent. Briarwood did not lease the space to another tenant during the three and one-half months remaining on Faber's lease, but did use the empty premises for storage.

On January 31, 1984, Briarwood filed a complaint against the individual and corporate defendants, seeking $12,413.12 in unpaid charges owed by the corporate defendant at the time it vacated the premises, plus $22,412.27 in accrued rent and other charges for the period following the vacation of the premises through the end of the lease term. Defendants counterclaimed, alleging that over $100,000 had been expended for improvements to the leased premises, that the alternate locations offered by Briarwood were unsuitable to defendants' business, and that Briarwood had wrongfully refused to renew the lease, thereby causing the failure of defendant business.

The trial court granted partial summary disposition in favor of Briarwood on the issue of defendants' liability for rent and damages under the lease, but denied its motion as to amount of damages until resolution of the issues of mitigation and setoff. The trial court also granted summary disposition to Briarwood on defendants' counterclaim. The trial court's opinion did not address Briarwood's motion for expenses obtainable as sanctions under MCR 2.114(E). Defendants appeal as of right from summary disposition granted in favor of Briarwood on defendants' counterclaim. Briarwood appeals as of right from the trial court's denial of sanctions and also requests expenses incurred on appeal pursuant to MCR 7.216(C)(1)(a).

II

Defendants argue that Briarwood's refusal to extend the lease constituted constructive eviction, that the vacation of the premises constituted a surrender of the premises or termination of the lease, and that, therefore, the trial court erred in granting Briarwood's motion for summary disposition. We disagree.

The trial court granted Briarwood's motion for summary disposition on the basis of MCR 2.116(C)(9) and (10).^[1] In deciding a motion brought under MCR 2.116(C)(9), only the pleadings may be considered. MCR 2.116(G)(5). On appeal, the trial court's findings of fact will not be set aside unless clearly erroneous. MCR 2.613(C).

In deciding a motion brought under MCR 2.116(C)(10), the trial court is to consider affidavits, pleadings, depositions, admissions, and documentary evidence. MCR 2.116(G)(5). The adverse party must make some showing by opposing affidavit, testimony, depositions, admissions, or documentary evidence that there exists a genuine issue for trial. MCR 2.116(G)(4). Bennington Twp v Maple River Inter-Co Drain Bd, 149 Mich. App. 579, 584-585; 386 NW2d 599 (1986). The trial court should not grant the motion where, giving the benefit of reasonable doubt to the opposing party, it appears that such an issue exists. Brooks v Reed, 93 Mich. App. 166, 170; 286 NW2d 81 (1979).

We find no error in the trial court's granting of summary disposition under MCR 2.116(9) or (10). The parties agreed that the lease required defendants to pay rent and perform other obligations for the full ten-year term, that defendants vacated the premises before the lease expired, that defendants had been withholding rent before vacating the premises, and that defendants paid no rent after vacating. These facts establish defendants' liability under the lease.

Nor were defendants' defenses of surrender, termination and constructive eviction supported by the facts. Surrender of a lease goes beyond merely vacating or abandoning the premises and requires mutual agreement. Pyle v Orzell, 350 Mich. 298, 303; 86 NW2d 163 (1957). Mutual agreement clearly did not exist in this case. Briarwood showed no intention of releasing Faber from its obligations, having rejected defendants' request to surrender the store for the remainder of the lease. The lease specifically provided that, in case of default, Briarwood could reenter and relet the premises on defendants' behalf while continuing to hold defendants liable for any rental shortfall. Hence Briarwood's storage use of the premises was not an implicit acceptance of surrender since, even had Briarwood relet the premises, rent paid by the new tenant would have only mitigated Briarwood's damages.

Similarly, Briarwood's refusal to extend the lease and defendants' abandonment did not act as a termination. Briarwood specifically rejected defendants' offer to terminate the lease for a settlement sum, and the lease provided that Briarwood's reentry would not be construed as termination of the lease unless Briarwood so notified defendants in writing. As Briarwood never notified defendants to this effect, termination did not occur.

Finally, Briarwood's acts did not amount to constructive eviction,^[2] since defendants alleged no fact or action by Briarwood which would constitute such eviction. On the contrary, defendant Robert Faber admitted in deposition that Briarwood had denied no legal benefits of tenancy and had done nothing to cause an early abandonment of the premises.

Therefore it was not clearly erroneous for the trial court to find that, while Briarwood's storage use of the premises prevented it from charging defendants full rent, such use did not act as a termination or acceptance of surrender and that none of defendants' alleged defenses were supported by the facts.

III

Defendants also argue that the trial court erred when refusing summary disposition under MCR 2.116(C)(8)^[3] and (10) on their counterclaim of breach of contract and tortious interference with business relations. A motion for summary disposition under MCR 2.116(C)(8) is tested by the pleadings alone in order to determine the legal basis of the complaint and may be granted only when the claim is so clearly unenforceable as a matter of law that no factual development could possibly justify a right to recover. Harrison Twp v Calisi, 121 Mich. App. 777, 781-782; 329 NW2d 488 (1982). See also Allinger v Kell, 102 Mich. App. 798, 806-807; 302 NW2d 576 (1981), modified on other grounds 411 Mich. 1053; 309 NW2d 547 (1981). Here, defendants' counterclaim was so clearly unenforceable as a matter of law that no factual development could possibly have justified a right to recover. Hence it was Briarwood, not defendants, which was entitled to summary disposition, and the trial court did not err in so holding.

The public policy of Michigan is to construe leases as not granting a right of renewal; a lease will not confer such right absent specific language to this effect. DNR v Bd of Trustees of Westminster Church of Detroit, 114 Mich. App. 99, 105; 318 NW2d 830 (1982). Defendant Robert Faber alleged that Briarwood led him to believe that so long as defendant Faber's Fabrics was a good tenant, the only limitation on renewal was renegotiation of rent and incidentals. However, defendants produced no evidence of these representations or of a tacit agreement. Newspaper clippings and affidavits of Ann Arbor zoning commission members say nothing of the right to renew a lease; but, even if a tacit agreement did exist between Briarwood and the zoning commission, it was superseded by express provisions of the lease agreement signed by the parties. See Mid America Management Corp v Dep't of Treasury, 153 Mich. App. 446, 459; 395 NW2d 702 (1986). The lease unambiguously specified a term of years and contained no provision granting a right of renewal. Defendant Robert Faber testified in deposition that the parties never discussed renewal. Hence the trial court properly dismissed defendants' counterclaim for lack of legal basis and for lack of a genuine issue except as to damages.

IV

Briarwood argues that the trial court erred in failing to award its reasonable expenses pursuant to MCR 2.114(E), including attorney fees, incurred in defending defendants' counterclaim and, further, requests an award of such expenses as were incurred on appeal.

MCR 2.114, based on the 1983 amendment to FR Civ P 11, covers the signing of papers and the imposition of sanctions for unwarranted allegations or denials, providing much tougher sanctions for abuse of the pleading process than prior amendments. Fisher v Detroit Free Press, Inc, 158 Mich. App. 409; 404 NW2d 765 (1987). The rule provides for an award of sanctions against both a party and his counsel for not making reasonable inquiry as to whether a pleading is well grounded in fact and warranted by either existing law or a good-faith argument for extension, modification or reversal of existing law. Sanctions may be awarded without regard to whether a party or his attorney filed the pleadings with an improper purpose.^[4]

Under the predecessor rule, GCR 1963, 111.6, this Court has upheld the trial court's assessment of costs, including attorney fees, against a defendant on the basis that the defendant's denial of factual allegations in the complaint was unreasonable when he knew them to be true and later testified to that effect. Gilroy v Conway, 151 Mich. App. 628, 639-640; 391 NW2d 419 (1986).

In addition, the language of the rule is identical to the federal rule which served as its model. In construing FR Civ P 11, the federal courts have looked to the Advisory Committee Notes for the 1983 amendments. Olga's Kitchen of Hayward, Inc v Papo, 108 FRD 695, 702 (ED Mich, 1985). Continental Air Lines v Group Systems Int'l Far East, Ltd, 109 FRD 594, 596 (CD Cal, 1986). The language of the rule was intended to encourage imposition of sanctions against a litigant who acts in bad faith in instituting or conducting litigation, taking into account the attorney's or party's actual or presumed knowledge when the pleading or other paper was signed. Advisory Committee Notes, supra.

In contrast to its predecessor rule, FR Civ P 11 is mandatory in that the court "shall," upon finding a violation of the rule, impose sanctions liberally to deter abusive litigation tactics and reduce the filing of frivolous claims. Watch What Develops Franchise Concepts, Inc v Par Five, Inc, 110 FRD 243, 244 (ND Ohio, 1985). See also Monarch Ins Co of Ohio v Ins Corp of Ireland, Ltd, 110 FRD 590, 593 (SD NY, 1986). Also in contrast to its predecessor is the rule's application of an objective standard of reasonableness, since prior to the amendment courts would only award attorney fees on a finding that the attorney acted for vexatious or oppressive reasons in bad faith. Monarch Ins Co, supra at 593. The new rule, however, explicitly and unambiguously imposes an affirmative duty on each attorney to conduct a reasonable inquiry into the viability of the pleading before it is signed. Eastway Construction Corp v City of New York, 762 F2d 243, 253 (CA 2, 1985). This inquiry must extend to both law and fact. Continental Air Lines, supra at 596.

In this case, defendants' counterclaim had no support either in law or in fact and provided no good-faith argument for an extension of existing law. Although the counterclaim alleged that plaintiff had caused defendant Faber's Fabrics to go out of business by breaching an agreement to renew or extend the lease, defendant Robert Faber admitted in deposition that the parties never discussed renewal of the lease, and defendants' argument that the public policy of Ann Arbor grants a right of renewal is meritless. Upon reasonable inquiry into the law applicable to this case, defendants' attorney would have discovered that Michigan's settled law and public policy would not imply a right to renewal, but, contrariwise, would actually defeat defendants' arguments. See National Survival Game v Skirmish, USA, Inc, 603 F Supp 339, 342 (SD NY, 1985).

Because MCR 2.114 does not require this Court to find that defendants' counterclaim was filed for improper purposes, it is sufficient that we find its unreasonableness, objectively considered, violates the rule. Therefore we hold that the trial court erred in failing to grant Briarwood's motion for sanctions, and we remand for a finding as to the proper amount.

Regarding Briarwood's request for expenses and attorney fees pursuant to MCR 7.216(C)(1)(a), we note that the rule is similar to MCR 2.114, allowing this Court to assess actual and punitive damages against one bringing a vexatious appeal. Defendants' arguments to the trial court were meritless and, being identical, are equally so on appeal. Because defendants filed their appeal without any reasonable basis to support a meritorious issue, we grant to Briarwood its expenses, including attorney fees, incurred in defending this appeal. Fisher, supra. The amount of said expenses shall be determined by the trial court on remand. Id.; MCR 7.216(C)(2).

Affirmed in part, and remanded to determine sanctions. Costs and expenses to plaintiff on appeal.

NOTES

[*] Circuit judge, sitting on the Court of Appeals by assignment.

[1] MCR 2.116(C)(9) provides that a motion for summary disposition may be granted where the opposing party fails to state a valid defense. MCR 2.116(C)(10) provides that, where there is no genuine issue of material fact except as to damages, the moving party is entitled to judgment as a matter of law.

[2] Constructive eviction is defined as a landlord's act which deprives the tenant of beneficial enjoyment of the premises to which he is entitled under the lease, causing the tenant to abandon the premises. 49 Am Jur 2d, Landlord & Tenant, § 576, p 553.

[3] MCR 2.116(C)(8) provides that summary disposition may be granted where the opposing party fails to state a claim on which relief can be granted.

[4] MCR 2.114(E) provides:

(E) Sanctions for Violation. If a pleading is signed in violation of this rule, the court, on motion of a party or on its own initiative, shall impose upon the person who signed it, a represented party, or both, an appropriate sanction, which may include an order to pay to the other party or parties the amount of the reasonable expenses incurred because of the filing of the pleading, including reasonable attorney fees. [Emphasis added.]