Homespun Market LLC v. W & L Pearl Arts Inc

STATE OF MICHIGAN
COURT OF APPEALS
HOMESPUN MARKET, LLC, UNPUBLISHED
April 24, 2018
Plaintiff-Appellee,
v No. 337367
Livingston Circuit Court
W & L PEARL ARTS, INC, and LISA WONG, LC No. 16-029155-NZ
Defendants-Appellants.
Before: MURPHY, P.J., and JANSEN and SWARTZLE, JJ.
PER CURIAM.
This case arises out of a dispute regarding a lease of commercial property located in
Brighton, Michigan. On December 29, 2016, the trial court granted plaintiff’s motion for entry
of a settlement agreement. We reverse, vacate the entry of the settlement agreement, and remand
for further proceedings consistent with this opinion.
I. RELEVANT FACTS AND PROCEDURAL HISTORY
On January 23, 2016, the parties entered into a lease agreement, whereby plaintiff,
Homespun Market, LLC, agreed to lease commercial space from defendants, W&L Pearl Arts,
Inc, (WLPA) and Lisa Wong (Wong). Shortly thereafter, the parties had a dispute over the use
and division of the front and back portions of the leased premises, the front portion having been
reserved under the lease for plaintiff. Plaintiff alleged that it received a certificate of occupancy
for the entire space from the City of Brighton in February 2016, but subsequently learned in June
2016 that defendant had entered into a lease for the back portion of the building. Defendants
informed plaintiff that the new tenants would be building a bathroom and handicap accessible
ramp to the rear entrance of their store.
Plaintiff alleged that sometime in July 2016, Wong indicated that the tenants in the back
suite would need to access plaintiff’s bathroom and basement, and that plaintiffs responded “that
they would not be willing to make any changes to their leased space” or modify the lease itself.
Plaintiff claimed it discovered through public records that it held the certificate of occupancy for
the entire main level of the leased premises. Plaintiff alleged that the City of Brighton denied the
new tenant’s request for a certificate of occupancy on or around July 2016, but that defendant
permitted their occupancy and other acts not allowed under the lease. Plaintiff further alleged
that the City of Brighton placed a notice of violation on the back suite of the premises, which
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invalidated any and all certificates of occupancy issued for the entire first floor and basement of
the premises.
Plaintiff claimed that after it gave defendants notice of the alleged lease violations, Wong
responded by indicating that she was denying building access to anyone without a certificate of
occupancy, and that all activities concerning the premises required her written consent. Further,
plaintiff alleged that in September 2016, defendants arranged for an architect to create a shared
space and bathroom plan, even though the lease agreement did not permit the planned
modification to the premises. Additionally, Wong approved and paid for the installation of a
door that divided the front space and back space. Plaintiff claimed it subsequently received a
demand for possession from defendants.
Plaintiff filed suit against defendants, seeking a preliminary injunction, specific
performance, and declaratory relief. The trial court granted plaintiff a preliminary injunction in
October 2016, and ordered that defendants would be prohibited from taking action that would
jeopardize the certificate of occupancy; entering the premises for any purpose other than
inspection allowed pursuant to the lease; changing the locks and removing personal property
from the premises; disrupting plaintiff’s business and taking action to change the premises’
physical structure until the parties’ respective rights were adjudicated; and taking further steps to
eject plaintiff from the premises.
At some point, the parties began to engage in settlement discussions. Plaintiff filed a
motion to enforce a purported settlement agreement, claiming that the parties had reached a
binding settlement agreement. The trial court determined that various text messages, email
chains, and other writings, when read together, amounted to evidence of a final, enforceable
settlement agreement. Accordingly, it granted plaintiff’s motion. This appeal followed.
II. ANALYSIS
Defendants argue that the trial court clearly erred by granting plaintiff’s motion for the
entry of a settlement agreement when the parties had not entered into an enforceable agreement.
We agree.
“[A]n agreement to settle a pending lawsuit constitutes a contract, and therefore the
agreement is governed by legal principles applicable to the interpretation and construction of
contracts.” Columbia Assoc, LP v Dep’t of Treasury, 250 Mich. App. 656, 669; 649 NW2d 760
(2002). We review the existence and interpretation of such a contract de novo. Kloian v
Domino’s Pizza, LLC, 273 Mich. App. 745, 767; 773 NW2d 766 (2006). A settlement agreement
must also satisfy the requirements of MCR 2.507(G), and the trial court’s interpretation of a
court rule is also reviewed de novo. Michigan Mut Ins Co v Indiana Ins Co, 247 Mich. App. 480,
483-485; 637 NW2d 232 (2001). Absent a finding of an abuse of discretion, a trial court’s
finding concerning the validity of a parties’ consent to a settlement agreement will not be
overturned. Vittiglio v Vittiglio, 297 Mich. App. 391, 397; 824 NW2d 591 (2012). A trial court’s
factual findings are reviewed for clear error, MCR 2.613(C), and an abuse of discretion occurs
only when the trial court makes a decision that falls outside the range of “reasonable and
principled outcome[s].” Maldonado v Ford Motor Co, 476 Mich. 372, 388; 719 NW2d 809
(2006); MCR 2.504(B).
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As in any other contract, a settlement agreement must include an offer and acceptance, as
well as “mutual assent or a meeting of the minds on all essential terms.” Kloian, 273 Mich. App.
at 452-453; Walbridge Aldinger Co v Walcon Corp, 207 Mich. App. 566, 571; 525 NW2d 489
(1994). Acceptance must be unambiguous and in strict conformity with the offer, otherwise no
contract is formed. Kloian, 273 Mich. App. at 452-453. (citation omitted). Even if a settlement
agreement meets all the formation requirements of contract law, it will not be enforced unless
“the agreement also satisfies the requirements of” MCR 2.507(G). Id. at 456. MCR 2.507(G)
provides:
An agreement or consent between the parties or their attorneys respecting the
proceedings in an action is not binding unless it was made in open court, or unless
evidence of the agreement is in writing, subscribed by the party against whom the
agreement is offered or by that party's attorney.
“Subscribe means to append, as one’s signature, at the bottom of a document or the like; sign.”
Kloian, 273 Mich. App. at 459 (quotation marks and citation omitted). An electronic signature
will satisfy this requirement, as will a signature at the bottom of an email, so long as the email
also contains the terms of the settlement. Id. at 459-460, citing MCL 450.837(4).
Our review of the documents considered by the trial court indicates that both parties were
interested in settling this matter, and were actively working towards a comprehensive written
agreement. However, even if we were to conclude that there was a meeting of the minds on all
material terms, the purported settlement agreement relied on by the trial court did not comport
with the requirements of MCR 2.507(G), and therefore, is unenforceable. The parties did not
place the terms of the settlement on the record, and the purported agreement relied on by the trial
court, offered by plaintiff against defendants, was not subscribed to by defendants or their
counsel. In fact, defendants remained adamant that the ongoing settlement negotiations had not
yet come to a resolution, and plaintiff concedes in its briefs on appeal that there were some
details to be finalized. Plaintiff correctly argues that defendants, or their counsel, could have
subscribed to the agreement via email. Kloian, 273 Mich. App. at 459-460. However, plaintiff
does not cite to any email containing all of the mutually agreed to settlement terms subscribed to
by defendants or their counsel, and our review of the record yields none. Accordingly, the trial
court’s finding that a valid settlement agreement had been reached was clearly erroneous, and
likewise, the trial court abused its discretion by enforcing the purported settlement agreement.
See Henry v Prusak, 229 Mich. App. 162, 170; 582 NW2d 193 (1998) (“A court cannot ‘force’
settlements upon parties.”)
We reverse, vacate the entry of the settlement agreement, and remand for further
proceedings consistent with this opinion. We do not retain jurisdiction.
/s/ William B. Murphy
/s/ Kathleen Jansen
/s/ Brock A. Swartzle
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