Steven Hamilton v. Arthur Jeannot

STATE OF MICHIGAN
COURT OF APPEALS
STEVEN HAMILTON, UNPUBLISHED
September 3, 2015
Plaintiff/Counter-Defendant-
Appellant,
v No. 321952
Benzie Circuit Court
ARTHUR JEANNOT AND MAUREEN LC No. 13-009645-CZ
JEANNOT,
Defendants-Appellees,
and
EDEN BROOK, LLC,
Defendant/Counter-Plaintiff-
Appellee,
and
ROBERT KAUFMAN,
Appellant.
Before: SAWYER, P.J., and M. J. KELLY and SHAPIRO, JJ.
PER CURIAM.
In this dispute arising from a failed business relationship, plaintiff, Steven Hamilton,
appeals by right the trial court’s order dismissing his claims against defendants, Arthur Jeannot,
Maureen Jeannot,1 and Eden Brook, LLC, granting Eden Brook’s motion for summary
disposition of its counter-claims against Hamilton for breaching two promissory notes, and
ordering Hamilton to pay sanctions for filing frivolous claims. For the reasons more fully
explained below, we conclude that the trial court erred when it dismissed Hamilton’s claims.
Moreover, although the trial court did not err when it determined that Eden Brook was entitled to
1
Because the events at issue primarily involve allegations against Arthur Jeannot, we shall refer
to him as Jeannot. We shall refer to Arthur and Maureen Jeannot collectively as the Jeannots.
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summary disposition on one of its counter-claims for breach of a promissory note, because there
was evidence from which a reasonable jury could conclude that Eden Brook failed to advance
the consideration in support of the other promissory note, the trial court erred when it granted
summary disposition in favor of Eden Brook on that note. Finally, we conclude that the trial
court clearly erred when it found that Hamilton’s claims were frivolous. For these reasons, we
affirm in part, reverse in part, vacate in part, and remand for further proceedings.
I. BASIC FACTS
The events at issue arise from the parties’ efforts to renovate and reopen the Brookside
Inn and Restaurant in Benzie County, Michigan.2 Kirk Lorenz formerly owned the inn with his
wife, but they were unable to meet their financial commitments to Honor State Bank. The bank
sued Lorenz and his wife and the Circuit Court entered a judgment against them in October
2008. In the judgment, the Circuit Court ordered the foreclosure and sale of the Brookside Inn.
It also provided that Honor State Bank was “entitled to immediate possession of all of the
personal property of Kirk and Pamela Lorenz, individually and doing business as Brookside Inn,
including, without limitation, all of the accounts receivable, inventory, equipment, instruments
and general intangibles associated with the business . . . .”
Benzie Enterprises, Inc eventually acquired title to the personal property. In May 2011,
Benzie Enterprises transferred the inn’s personal property to Eden Brook. As part of the transfer,
Honor State Bank agreed “to assist and cooperate and provide documentation reasonably
requested” to confirm Eden Brook’s ownership of the personal property. Eden Brook also
purchased the real property upon which the Brookside Inn is located. Jeannot is the sole member
of Eden Brook.
According to Hamilton, Jeannot approached him about helping with the reopening of the
Brookside Inn. Hamilton had apparently been associated with the inn when Lorenz owned and
operated it and had experience with operating a restaurant. Hamilton said that Jeannot told him
that he would finance a new entity to operate the inn and, if Hamilton would manage and assist
with the reopening, he would give Hamilton an equity interest in the new entity. Hamilton
averred that he relied on the promise of a future equity interest and invested a “great deal of time
to the reopening and refurbishing of the Brookside Inn.” Indeed, he stated that he worked from
February 2011 to June 2012 in reliance on Jeannot’s representations. He also averred that he
brought numerous items of personal property and equipment to the business.
2
We have used depositions, affidavits, and documentary evidence that were submitted to the trial
court, but not necessarily cited by the parties, in order to provide a fuller understanding of the
background facts. However, to the extent that the evidence was not specifically cited as
evidence in support or opposition to the motion for summary disposition under MCR
2.116(C)(10), we have not considered it in our review of the motion. See Barnard Mfg Co, Inc v
Gates Performance Engineering, Inc, 285 Mich. App. 362, 380; 775 NW2d 618 (2009) (“When
reviewing a motion for summary disposition, this Court’s review is limited to review of the
evidence properly presented to the trial court.”).
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Jeannot stated that, in July 2011, Lorenz asked through Hamilton for permission to
remove certain personal items from the inn. Jeannot said Hamilton had three days to remove the
items claimed by Lorenz. Lorenz did not thereafter make any formal claim to the personal
property located at the inn.
Jeannot stated that he consulted with Hamilton regarding the remodeling of the inn and
compensated him for his work, but never promised or agreed to give Hamilton an ownership
interest in the inn or any other business. According to Jeannot, Hamilton intended to operate a
restaurant at the Brookside Inn with financing from Jeannot.
In February 2012, Hamilton executed a promissory note with a principal amount of
$4,000, which was “for the purpose of corporate start up funds and other related living
expenses.” Under the terms of the note, Hamilton agreed to pay “to the order of Art Jeannot of
Eden Brook LLC” the principal and 10% interest with one payment of $4,267 in September
2012. Hamilton executed a substantially similar promissory note in March 2012. In that note,
Hamilton promised to pay principal of $35,000, plus 10% interest with one payment of $38,500
in March 2013. In addition, Hamilton executed a commercial lease with Eden Brook in March
2012. Hamilton agreed to lease portions of the Brookside Inn—the restaurant, bakery, deck and
basement—from Eden Brook for $8,000 per month.
The Brookside Inn reopened under Hamilton’s management in June 2012. Jeannot
testified that all of the receipts from the inn were deposited into the accounts of an entity owned
by him and his wife. Similarly, although Jeannot stated that Hamilton employed the inn’s staff,
he admitted that one of his entities paid the payroll for the employees at the inn. Later that same
month, Jeannot met Hamilton in the inn’s parking lot and told him that “his services would no
longer be needed at the Brookside.” He asked Hamilton to turn over a “Micros card, a key to the
building, [and] a key to the post office box.” Jeannot stated that he severed his relationship with
Hamilton because Hamilton failed to obtain a liquor license for the Brookside Inn and engaged
in other incidents of mismanagement and misuse of funds. The staff at the inn did not leave with
Hamilton after Jeannot asked Hamilton to leave.
In March 2013, Hamilton sued the Jeannots and Eden Brook. For his first count,
Hamilton stated that Jeannot defamed him on two occasions: he alleged that Jeannot told Nadine
Lamont that Hamilton “either embezzled or attempted to embezzle funds” owned by Jeannot or
his business and told Hamilton’s landlady, Linda Sherman, that Hamilton no longer worked at
the Brookside Inn and “would never find work in Benzie County again” because he had
“ ‘burned too many bridges.’ ”
Hamilton alleged for his second count that he only worked to prepare the Brookside Inn
for reopening on Jeannot’s promise that he would receive compensation in the form of an
ownership interest in the entity that would operate the inn, which he did not receive. Hamilton
alleged that Jeannot and Eden Brook were unjustly enriched by retaining the benefit of his
services without paying him compensation.
Hamilton also alleged that he had brought personal property to the inn for use in its
operation. For his third and fourth counts, Hamilton claimed that the Jeannots and Eden Brook
wrongfully converted these items and demanded that they return them.
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Eden Brook counter-sued Hamilton in April 2013. It alleged that Hamilton breached his
promise to repay the $4,000 and $35,000 notes with interest. It also alleged that Hamilton’s
failure to repay amounted to a breach of contract and unjust enrichment.
In answer to Eden Brook’s complaint, Hamilton alleged that he was fraudulently induced
to work to reopen the Brookside Inn without compensation. He also asserted that he executed
the $4,000 note under duress and that the note for $35,000 was a sham and that he never received
the principal amount stated in the note. Further, he claimed that any amount he might owe
should be set-off against the damages that Jeannot or Eden Brook might owe to him.
In July 2013, the trial court ordered this case to be consolidated with a suit brought by
Lorenz against Jeannot and Eden Brook. The trial court provided that the cases were only
consolidated for purposes of discovery and motion practice. Like Hamilton, Lorenz had alleged
a claim for conversion and claim and delivery involving property that he had at the inn.
In August 2013, the Jeannots and Eden Brook moved for summary disposition of
Hamilton’s claims against them and Eden Brook moved for summary disposition on its counter-
claims. The trial court held a hearing on the motion in February 2014.
After hearing the parties’ arguments, the trial court determined that the Jeannots and
Eden Brook were entitled to summary disposition on all the claims and counter-claims. It stated
that there was no factual dispute concerning Hamilton’s liability on both notes. It also
determined that Hamilton and Jeannot structured their relationship under the terms of the lease
agreement. Because there can be no unjust enrichment where there is an explicit contract
governing the parties’ relationship, the court explained, Hamilton’s unjust enrichment claim
failed as a matter of law. The trial court also determined that Hamilton’s long delay in bringing
his claims for conversion and claim and delivery prejudiced the ability of the Jeannots and Eden
Brook to present a defense to those claims. Accordingly, it applied the equitable doctrine of
laches to bar those claims. Finally, the trial court noted that Jeannot submitted an affidavit where
he stated that any statements that he had made concerning Hamilton were opinions. Because
Hamilton failed to present any evidence that Jeannot made the alleged statements with malice,
the trial court determined that there was no factual dispute that the statements were not
actionable.
The trial court further opined that the Jeannots and Eden Brook were entitled to their
attorney fees. Because the trial court found that Hamilton’s claims were frivolous, it determined
that the Jeannots and Eden Brook were entitled to the fees they incurred defending against
Hamilton’s claims. The trial court also determined that the Jeannots and Eden Brook were
entitled to the fees incurred to enforce the notes under the terms of those notes.
In March 2014, the trial court entered an order dismissing Hamilton’s claims and granting
judgment in favor of Eden Brook on the two promissory notes. The trial court further ordered
Hamilton and his lawyer, Robert Kaufman, to pay the Jeannots and Eden Brook $18,423.38 in
attorney fees as a sanction under MCL 600.2591 and MCR 2.114 for filing frivolous claims.
Hamilton and Kaufman then appealed in this Court.
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II. CONVERSION AND CLAIM AND DELIVERY
A. STANDARDS OF REVIEW
Hamilton first argues that the trial court erred when it applied the equitable doctrine of
laches to bar his claims for conversion and claim and delivery of his personal property.
Specifically, he maintains that the trial court could not apply an equitable defense to bar his
claims because those claims were claims at law, not equity. He argues in the alternative that the
trial court erred when it determined that Hamilton’s delay in asserting his rights warranted
application of laches. This Court reviews de novo a trial court’s decision on a motion for
summary disposition. Barnard Mfg Co, Inc v Gates Performance Engineering, Inc, 285 Mich
App 362, 369; 775 NW2d 618 (2009). This Court also reviews de novo whether the trial court
properly applied an equitable doctrine, such as the doctrine of laches, to the facts of the case.
Knight v Northpointe Bank, 300 Mich. App. 109, 113; 832 NW2d 439 (2013).
B. ANALYSIS
1. LACHES AND CLAIMS AT LAW
A court sitting in equity would not grant equitable relief to a complainant who
unreasonably failed to assert his or her claim: “If a plaintiff has not exercised reasonable
diligence in vindicating his or her rights, a court sitting in equity may withhold relief on the
ground that the plaintiff is chargeable with laches.” Knight, 300 Mich. App. at 114. The equitable
doctrine of laches is a “tool used to provide a remedy for the inconvenience resulting from the
plaintiff’s delay in asserting a legal right that was practicable to assert.” Id. at 115. Thus, the
doctrine of laches was part of the balancing of the equities involved in the claim and courts
would apply it only when the prejudice occasioned by the delay justified barring it. Id.
Before the merger of law and equity, it was well-settled that an equitable defense could
not be used to defeat a claim at law. See Thompson v Doore, 269 Mich. 466, 470-472; 257 N.W.
864 (1934) (stating that defenses in equity cannot be raised in an action at law and holding that
the complainant’s failure to arrest the proceedings at law in order to assert his defenses in a court
of equity precluded his later suit in equity). Indeed, our Supreme Court stated that, because
claims at law were subject to periods of limitation set by the Legislature, laches could not be
asserted to defeat a claim at law. Lowry v Lyle, 226 Mich. 676, 684; 198 N.W. 245 (1924)
(holding that the defense of laches was not available to defeat an action for ejectment during the
period of limitations fixed by law because “commencing suit within the period allowed by law
does not constitute unreasonable delay”); see also Wehrman v Conklin, 155 U.S. 314, 326; 15 S. Ct.
129; 39 L. Ed. 167 (1894) (“It is scarcely necessary to say that complainants cannot avail
themselves, as a matter of law, of the laches of the plaintiff in the ejectment suit. Though a good
defense in equity, laches is no defense at law.”). Hamilton’s claims for conversion and claim
and delivery are claims at law. See Alger v Davis, 345 Mich. 635, 643-644; 76 NW2d 847 (1956)
(affirming the trial court’s decision to dismiss the plaintiffs’ complaint in equity because the
plaintiffs had adequate remedies at law: “If defendant has disposed of property belonging to
plaintiffs, then an action for trover or conversion is an appropriate remedy, or if the personal
property remains intact, then an action in replevin [claim and delivery] is an appropriate
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remedy.”). Therefore, under prior practice, the trial court could not have applied the doctrine of
laches to bar his claims.
After the merger of law and equity, this Court continued to assert that laches was
inapplicable to a claim at law brought within the applicable period of limitations. Head v
Benjamin Rich Realty Co, 55 Mich. App. 348, 356; 222 NW2d 237 (1974) (stating that the
defense of laches is inapplicable to a claim at law, but determining that—in any event—there
was no prejudice occasioned by the delay). Although our Supreme Court has not directly
considered the application of laches to actions at law after the merger, it has held that a related
equitable defense—the clean hands doctrine—cannot be invoked to deny relief in an action at
law. Rose v Nat’l Auction Group, 466 Mich. 453, 467-468; 646 NW2d 455 (2002). Moreover,
the Legislature enacted a comprehensive statutory scheme governing periods of limitation and
did not see fit to adopt the doctrine of laches or something similar for application to all periods of
limitation. It did, nevertheless, preserve the doctrine of laches for actions involving equity: “The
prescribed period of limitations shall apply equally to all actions whether equitable or legal relief
is sought. The equitable doctrine of laches shall also apply where equitable relief is sought.”
MCL 600.5815. By specifically providing that the doctrine of laches continues to apply, but
only to actions involving equitable relief, the Legislature expressed its intent to limit the
application of laches to claims involving equity; that is, the Legislature effectively codified
practice as it existed prior to the merger of law and equity. And, our Supreme Court has held
that courts should not apply common law rules that conflict with the Legislature’s balancing of
interests in setting limitations periods, times of accrual, and tolling for civil cases. See
Trentadue v Buckler Automatic Lawn Sprinkler Co, 479 Mich. 378, 390-393; 738 NW2d 664
(2007). Notwithstanding these authorities, this Court has held that courts may apply the doctrine
of laches to bar actions at law, even when the period of limitations set by the Legislature has not
passed. Tenneco, Inc v Amerisure Mut Ins Co, 281 Mich. App. 429, 457; 761 NW2d 846 (2008),
relying in relevant part on Eberhard v Harper-Grace Hospitals, 179 Mich. App. 24, 36; 445
NW2d 469 (1989). Although we would enforce prior practice and continue to limit the
application of laches to actions in equity, as our Legislature apparently intended, the decision in
Tenneco is binding on this Court. MCR 7.215(C)(2). Consequently, we are compelled to
conclude that the trial court did not err when it determined that laches could apply to Hamilton’s
claims for conversion and claim and delivery. We do not, however, agree that the trial court
properly applied the doctrine to the facts of this case.
2. APPLICATION OF LACHES TO THE FACTS
The Jeannots and Eden Brook filed a consolidated motion for summary disposition in
August 2013. In their motion, they maintained that Lorenz had had an opportunity to retrieve his
personal items from the inn in July 2011, which was shortly after Eden Brook purchased the inn
and personal property. By refusing to contest the ownership of the personal property when Eden
Brook’s predecessors in interest took possession and failing to claim the property when he had
the opportunity in July 2011, they maintained, Lorenz prejudiced their ability to defend his
claims of conversion and claim and delivery. Accordingly, they asked the trial court to apply the
equitable doctrine of laches to bar those claims.
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In a supplemental brief in support of their motion, the Jeannots and Eden Brook argued
that Hamilton had a similar opportunity to contest the ownership of any items that he had at the
inn and failed to do so. They then asked the trial court to apply laches to bar his claims for
conversion and claim and delivery on the same grounds. The trial court agreed that laches
applied. It noted that the personal property had been foreclosed and Eden Brook was now the
“third entity to have the property since the foreclosure.” The court also felt that Hamilton had
not vigorously asserted his right to the property:
Plaintiff Hamilton was at the auction where many, if not most or all of these items
which he claims, were auctioned off. Essentially, he slept on his rights through
the auction and now comes back and says, oh, by the way, you sold off my
property and I want it back.
And, incidentally, it’s interesting that he claims some of the same property as
Plaintiff Lorenz claimed in a companion lawsuit.
The claims are frivolous. There’s no showing, no demonstration whatsoever that
the foreclosing entity, the sheriff, or the purchasing entity at the sheriff’s sale, or
the entity that bought from the purchasing entity at the sheriff’s sale, that any of
these people were ever put on notice that there was a claim for personal property
that was still on the premises.
For these reasons, the trial court applied laches to bar Hamilton’s claims for conversion
and claim and delivery.
As this Court has explained, when a party seeks summary disposition under MCR
2.116(C)(10), it must present evidence to the trial court that, if left unrebutted, would establish
its right to relief. Barnard Mfg, 285 Mich. App. at 369-370, citing MCR 2.116(G)(3). A
defendant to a civil action does not satisfy this burden by asserting his or her belief that the
plaintiff will be unable to establish one or more elements of the claim at trial.3 Rather, the
moving party must demonstrate that the undisputed facts show that the moving party is entitled
to judgment or partial judgment as a matter of law. MCR 2.116(C)(10). If the moving party
fails to present evidence that if left unrebutted would establish his or her right to judgment as a
matter of law, then the opposing party has no obligation to respond and the trial court should
deny the motion on that basis alone. Barnard Mfg, 285 Mich. App. at 370; see also Grandberry-
Lovette v Garascia, 303 Mich. App. 566, 580-581; 844 NW2d 178 (2014) (stating that the trial
court should have denied the defendant’s motion for summary disposition on the grounds that he
had no notice of the defect because the defendant failed to present any evidence that a reasonably
prudent premises possessor would not have discovered the defect with a reasonable inspection).
3
Where the defendant is convinced that the plaintiff will be unable to support an element of the
claim at trial, but does not wish to go to the effort to marshal his or her own proofs in a properly
supported motion for summary disposition before trial, the defendant can simply wait for trial
and move for a directed verdict after the plaintiff presents his or her case. See Napier v Jacobs,
429 Mich. 222, 229-230; 414 NW2d 862 (1987).
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It is only when the moving party adequate supports his or her motion for summary disposition
under MCR 2.116(C)(10) that the burden shifts to the nonmoving party to present evidence that
establishes a genuine issue of disputed fact. Barnard Mfg, 285 Mich. App. at 370.
The Jeannots and Eden Brook did not present any evidence to support their argument that
Hamilton’s failure to earlier assert his right to the property was unreasonable or caused them to
suffer prejudice. The Jeannots and Eden Brook asserted in their brief that the property changed
hands twice “since Lorenz and Hamilton had filled the restaurant with their claimed
possessions”, but failed to present any evidence that the items actually identified by Hamilton in
his complaint were the same items of personal property present in the inn at the time of the
foreclosure.4 They also mentioned in their recitation of the facts that Hamilton had the
opportunity to claim the items in July 2011 when he was given permission to remove items on
Lorenz’ behalf, but failed to present evidence that the items at issue were in the inn at that time
or that Hamilton’s authorization included the right to remove items on his own behalf. They also
failed to analyze whether it would be practicable or reasonable for Hamilton to assert his rights
to any personal property that he had at the inn at a time when he was actively supporting the
effort by the Jeannots and Eden Brook to reopen the Brookside Inn. They also assert—again
without citing any evidence to support the assertion—that Hamilton was at the auction where his
items were purportedly sold in 2013, but failed to assert his rights at that time. Because the
Jeannots and Eden Brook failed to present any evidence to identify the items at issue and
demonstrate that Hamilton’s failure to earlier assert his rights in the property prejudiced their
ability to defend against Hamilton’s claims for conversion and claim and delivery, the trial court
should have denied their motion for summary disposition premised on laches. Id.
4
If the Jeannots and Eden Brook had evidence that the items were subject to the judgment
against Lorenz, then they would presumably be able to establish that they had superior rights to
the property and could have prevailed on that basis. See Thoma v Tracy Motor Sales, Inc, 360
Mich. 434, 438-439; 104 NW2d 360 (1960) (noting that the mechanic sold the car at issue in
compliance with the relevant statutes to recover the value of the unpaid mechanic’s lien and
stating that, because the mechanic properly exercised his statutory right to sell the car, the sale
did not constitute an act of wrongful dominion as to the plaintiffs); Prime Financial Services
LLC v Vinton, 279 Mich. App. 245, 275; 761 NW2d 694 (2008) (stating that, as between two
secured creditors, the junior creditor could not—as a matter of law—establish conversion of the
collateral at issue because Article 9 of Michigan’s Uniform Commercial Code authorized the
senior creditor’s actions with regard to the collateral); Rohe Scientific Corp v National Bank of
Detroit, 133 Mich. App. 462, 468; 350 NW2d 280 (1984) (“Liability for conversion does not arise
if the actor is privileged to dispossess another of the chattel. . . . If defendant’s right to
possession was greater than that of plaintiff’s, plaintiff could not maintain an action for
conversion.”), reversed on other grounds on rehearing, 135 Mich. App. 777.
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The trial court erred when it applied the doctrine of laches to dismiss Hamilton’s claims
for conversion and claim and delivery.5
III. DEFAMATION
A. STANDARDS OF REVIEW
Hamilton also argues that the trial court erred when it determined that his claim for
defamation against Jeannot failed as a matter of law. This Court reviews de novo the trial court’s
decision on a motion for summary disposition. Barnard Mfg, 285 Mich. App. at 369. This Court
also reviews de novo whether the trial court properly applied the common law. Roberts v Salmi,
308 Mich. App. 605, 612; 866 NW2d 460 (2014).
B. ANALYSIS
Jeannot argued in his brief in support of his motion for summary disposition that
Hamilton’s claim for defamation failed as a matter of law because there was no evidence that
Jeannot ever “issued any statements to any party that there was ‘embezzlement’ committed by
Plaintiff Hamilton.” Jeannot also argued that Hamilton’s claim was unenforceable because
Jeannot averred that any statements that he made were merely opinion.
The trial court agreed that the statements identified in Hamilton’s complaint were not
actionable. The court explained that the statement that Jeannot allegedly made to Sherman—that
Hamilton would be unable to “find work” because he had “burned too many bridges”—was not
actionable because it was just opinion. The court also determined that the statement Jeannot
allegedly made accusing Hamilton of embezzlement was not actionable because Jeannot averred
that the statement was opinion and Hamilton failed to present evidence that Jeannot actually
made the statement.
In order to establish a claim of defamation at trial, the plaintiff must prove: (1) that the
defendant made a false and defamatory statement concerning the plaintiff, (2) that the defendant
made an unprivileged publication of the statement to a third-party, (3) that the defendant
published the statement with fault amounting to at the least negligence, and (4) that the
defamatory statement is actionable without regard to special harm (defamation per se) or that the
publication caused special harm (defamation per quod). Burden v Elias Bros Big Boy
Restaurants, 240 Mich. App. 723, 726; 613 NW2d 378 (2000). Although Hamilton had the
5
Further, as we explain later in this opinion, the lease does not govern the parties’ oral
agreements concerning the restoration of the inn and, in any event, the lease does not purport to
give the Jeannots or Eden Brook the right to convert Hamilton’s personal property if left on the
premises. Indeed, the lease specifically provides in sections 5.03 and 6.02 that Eden Brook
remains liable for gross negligence or willful misconduct. Therefore, on this record, we decline
to consider whether summary disposition as to these claims was appropriate on alternate
grounds. Whether Hamilton’s claims for conversion and claim and delivery remain viable is
matter best addressed in a properly supported motion for summary disposition or at trial.
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ultimate burden to prove his claim, because Jeannot was the moving party, he had the initial
burden to identify the issue as to which he believed there was no genuine issue of fact and to
present evidence that, if left unrebutted, established that he was entitled to judgment as a matter
of law on that issue. Barnard Mfg, 285 Mich. App. at 369-370.
Jeannot argued before the trial court that there was no evidence that he made the alleged
statements, but he did not present any evidence from which one could infer that he did not in fact
make the statements. He did cite his own affidavit in support of his motion, but in that affidavit
he carefully avoided discussing whether he actually made the statements: he averred that “[a]ny
and all statements made by me . . . were statements of opinion” and that any “such statements
were not made with actual malice or [any other] defamatory intent.” Because Jeannot failed to
present evidence that he did not make the statements, the trial court erred when it shifted the
burden to Hamilton to present evidence that Jeannot did in fact make the statements. Id. at 370.
Nevertheless, Jeannot would still be entitled to summary disposition if he demonstrated
that the alleged statements were not actionable, even if actually made. Ireland v Edwards, 230
Mich. App. 607, 616; 584 NW2d 632 (1998) (stating that courts may decide as a matter of law
whether a statement is actually capable of defamatory meaning and that summary disposition is
appropriate when the statement as alleged is incapable of carrying such a meaning). “A
communication is defamatory if, considering all the circumstances, it tends so to harm the
reputation of another as to lower him in the estimation of the community or to deter third persons
from associating or dealing with him.” Id. at 619.
In this case, Hamilton alleged, in relevant part, that Jeannot told a third-party that
Hamilton either embezzled money from Jeannot or attempted to do so. Jeannot did not deny that
he made the statement, but averred that any statements that he might have made—such as
accusing Hamilton of embezzlement—were merely his opinion, which he formed from his
experiences with Hamilton. A statement of fact that another person has committed a particular
crime or engaged in illegal conduct is defamatory per se. Kevorkian v American Med Assoc, 237
Mich. App. 1, 8; 602 NW2d 233 (1999). Moreover, Jeannot’s averments that his statements—if
he made them—were merely his opinion did not establish that this statement was not actionable.
See id. (“Language that accuses or strongly implies that someone is involved in illegal conduct
crosses the line dividing strongly worded opinion from accusation of a crime.”). Because
Jeannot did not deny that he made the statement and did not provide any context supporting an
inference that a reasonable listener would not have taken the statement as an assertion of fact,
Jeannot failed to establish that the statement to Lamont was not actionable as a matter of law.
See Ireland, 230 Mich. App. at 617.
We also do not agree with the trial court’s determination that the statement to Sherman
was not actionable on its face. “[A] defamatory statement must be provable as false to be
actionable.” Kevorkian, 237 Mich. App. at 5. Statements that represent an opinion may or may
not be actionable, depending on whether the opinion is objectively verifiable. Ireland, 230 Mich
App at 616 (citations omitted). Whether Hamilton was employable in Benzie County is a
subjective opinion that cannot be verified or proved false. But when taken in context, the
statement implies more than just Jeannot’s purported opinion about Hamilton’s future
employability—it implies that Hamilton engaged in inappropriate conduct that would justify
members of the community in refusing to do business with him. Specifically, Hamilton alleged
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that Jeannot told Sherman that Hamilton was unemployable in Benzie County because he
“burned too many bridges.” The ordinary understanding of the phrase “burned too many
bridges” is that the person who burned the bridges has so abused his or her relationships with
others that the others justifiably severed their relationships with that person. In the context of a
statement about someone’s employability, the phrase could be understood as an assertion of fact
concerning Hamilton’s mistreatment of his past business partners (that he engaged in dishonest
business practices) and a reasonable finder of fact could infer that Jeannot offered the statement
in an attempt to deter third-persons from associating or dealing with him. Thus, a reasonable
jury could conclude that—understood in context—the statement that Jeannot allegedly made to
Sherman was also capable of carrying a defamatory meaning. See id. at 619.
Because Jeannot did not present evidence that he did not make the statements as alleged
by Hamilton, and the statements were either defamatory per se or capable of carrying a
defamatory meaning, the trial court should have denied Jeannot’s motion for summary
disposition. Barnard Mfg, 285 Mich. App. at 370.
IV. UNJUST ENRICHMENT
A. STANDARDS OF REVIEW
Hamilton argues that the trial court also erred when it determined that the lease
agreement he executed with Eden Brook barred his claims, including his claim for unjust
enrichment. This Court reviews de novo a trial court’s decision on a motion for summary
disposition. Barnard Mfg, 285 Mich. App. at 369. This Court also reviews de novo the proper
interpretation of a contractual agreement. Rory v Continental Ins Co, 473 Mich. 457, 464; 703
NW2d 23 (2005).
B. ANALYSIS
Hamilton alleged that Eden Brook and the Jeannots had unjustly retained the value of the
labor he expended in preparing the inn for reopening without adequate compensation. Our
Supreme Court “has long recognized the equitable right of restitution when a person has been
unjustly enriched at the expense of another.” Michigan Ed Employees Mut Ins Co v Morris, 460
Mich. 180, 198; 596 NW2d 142 (1999). “[U]nder the equitable doctrine of unjust enrichment,
‘[a] person who has been unjustly enriched at the expense of another is required to make
restitution to the other.’ ” Kammer Asphalt Paving Co v East China Twp Schools, 443 Mich. 176,
185; 504 NW2d 635 (1993), quoting Restatement Restitution, § 1, p 12. In order to remedy an
unjust enrichment, courts will indulge the fiction of a quasi or constructive contract to pay for the
benefits received. Id. at 185-186. Nevertheless, because this “doctrine vitiates normal contract
principles,” Michigan courts will employ it with caution. Id. at 186.
The elements of a claim for unjust enrichment “are the receipt of a benefit by a defendant
from a plaintiff, which benefit it is inequitable that the defendant retain.” Moll v Wayne Co, 332
Mich. 274, 278-279; 50 NW2d 881 (1952) (quotation marks, citation, and emphasis removed),
overruled on other grounds in Brown v Dep’t of Military Affairs, 386 Mich. 194, 200-201; 191
NW2d 347 (1971). Courts use the phrase “unjust enrichment” to characterize the result that
would follow if a party who obtained property or a benefit from another failed to make
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restitution. Buell v Orion State Bank, 327 Mich. 43, 56; 41 NW2d 472 (1950). The key
consideration is whether the defendant’s retention of the benefit would be unjust as between the
parties. Id. (“No person is unjustly enriched unless the retention of the benefit would be
unjust.”). Generally, the test to determine whether the retention of a benefit is unjust as between
two parties depends on a reasonable person standard: whether “reasonable men in like situation
as those who received and are benefited . . . naturally would and ought to understand and expect
compensation was to be paid.” In re Camfield Estate, 351 Mich. 422, 432; 88 NW2d 388 (1958)
(quotation marks and citations omitted). “However, a contract will be implied only if there is no
express contract covering the same subject matter.” Belle Isle Grill Corp v City of Detroit, 256
Mich. App. 463, 478; 666 NW2d 271 (2003).
On this record, the trial court erred when it determined that the lease barred Hamilton’s
claim for unjust enrichment. The parties did not execute the lease until March 2012, which was
months after Hamilton began to work at the inn. Further, under a plain reading of the agreement,
Eden Brook merely leased portions of the Brookside Inn to Hamilton for the purpose of running
a restaurant during the term of the lease. The lease does not purport to govern any other aspect
of the relationship—prior or future—between Hamilton and Eden Brook. Further, the Jeannots
were not parties to the lease. Consequently, the lease does not on its face expressly address
Hamilton’s efforts on behalf of the Jeannots or Eden Brook in preparing the inn for reopening.
In addition, Hamilton claimed that Eden Brook and the Jeannots actually retained control
over the operation of the inn and restaurant; he averred that he merely acted as an employee and
there was record evidence to support an inference that Hamilton served as an employee in some
capacity. The evidence concerning the manner by which Jeannot ended Hamilton’s association
with the inn also suggests that Jeannot treated Hamilton as an employee and not a tenant; one
does not normally evict a tenant by telling him that you no longer need his services. It is unclear
what, if anything, the parties agreed to in terms of salary or compensation for Hamilton, and
there is no written employment contract in the record. Because it is apparent that the lease
agreement does not cover Hamilton’s employment relationship with Eden Brook or the Jeannots,
its existence does not bar Hamilton’s claim that he is entitled to compensation for his services
under a quantum meruit theory.
There is similarly a question of fact as to whether Eden Brook and the Jeannots unjustly
retained the benefit of Hamilton’s labor. Hamilton averred that he worked for them for 45 to 50
hours per week from February 2011 to June 2012. He stated that he did so under the belief that
he would be given an ownership interest in the business and a salary of $1,000 per week for his
services—neither of which materialized. Hamilton attested that he received a total of $1,000 in
compensation for his work. Eden Brook and the Jeannots, by contrast, contend that they fully
and fairly compensated Hamilton for his work. Because there is a factual dispute regarding
whether Eden Brook and the Jeannots were unjustly enriched at Hamilton’s expense, the trial
court erred when it dismissed Hamilton’s claim for unjust enrichment under MCR 2.116(C)(10).
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V. PROMISSORY NOTES
A. STANDARDS OF REVIEW
Hamilton further contends that the trial court erred when it granted summary disposition
in favor of Eden Brook on its claims that he breached his agreement to repay the two promissory
notes at issue. Specifically, he maintains that there was factual dispute as to whether he received
consideration for the notes. This Court reviews de novo a trial court’s decision on a motion for
summary disposition. Barnard Mfg, 285 Mich. App. 369.
B. ANALYSIS
“In a suit on a promissory note, lack or failure of consideration is a good defense against
any person not a holder in due course.” Klimmer v Klimmer, 66 Mich. App. 310, 312; 238 NW2d
586 (1975). The undisputed evidence showed that Hamilton received the consideration recited
for the first note. In that note, which is dated February 2012, Hamilton agreed to repay $4,000 at
10% interest. Eden Brook presented evidence of a canceled check for $4,000 that was written
from Eden Brook to Hamilton with the same date and which has the word “loan” written in the
memo line. Hamilton did not respond by presenting evidence that he did not receive the $4,000
in consideration for the note. Rather, he stated that he only executed the note because he
believed that he would have the wherewithal to repay the note after the inn became successful.
Hamilton’s belief about his future ability to repay did not establish a question of fact as to
whether he received consideration. The trial court did not err when it determined that Eden
Brook was entitled to judgment as a matter of law on this note.
The evidence in support of the consideration for the second note—which had a face value
of $35,000—is less clear. “Every negotiable instrument is deemed prima facie to have been
issued for valuable consideration; and every person whose signature appears thereon to have
become a party thereto for value.” In re Booth’s Estate, 326 Mich. 337, 343; 40 NW2d 176
(1949) (quotation marks and citation omitted). “To have consideration there must be a
bargained-for exchange.” Gen Motors Corp v Dep’t of Treasury, Revenue Div, 466 Mich. 231,
238; 644 NW2d 734 (2002). Moreover, courts generally do not “inquire into the sufficiency of
consideration.” Id. at 239.
Here, there was no evidence that Eden Brook (or the Jeannots) transferred $35,000 to
Hamilton in exchange for his promise to repay. Instead, it was Eden Brook’s position that it,
through the Jeannots, transferred thousands of dollars pursuant to the note over a period of time.
The note does not, however, on its face provide for a line of credit or the payment of the
consideration in installments. In addition, several of the checks proffered as evidence of
Hamilton’s indebtedness were written directly to him; others were made out to “cash” and
indorsed by Hamilton. And still other documents proffered by Eden Brook as proof that the
money was tendered are simply receipts and other evidence of goods or services purchased.
There is no other evidence or indication that these purchases were made by Hamilton or on his
behalf. Eden Brook correctly notes that courts do not inquire into the sufficiency of
consideration. However, the issue here is not whether the consideration would be sufficient, but
rather whether Eden Brook actually performed its obligation by lending the money to Hamilton
under the terms of the note. A reasonable fact-finder examining the evidence might conclude
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that the checks and receipts reflect purchases that were made for Eden Brook’s benefit and do
not reflect the transfer of the funds contemplated under the second note. Because there is a
question of fact as to whether Eden Brook ever transferred the funds, the trial court erred when it
granted summary disposition on Eden Brook’s claim concerning that note.
VI. SANCTIONS
Hamilton argues that the trial court erred when it determined that his claims were
frivolous under MCL 600.2591 and MCR 2.114, and, on that basis, ordered him and his lawyer
to pay the attorney fees incurred by Eden Brook and the Jeannots. Because there were questions
of fact that must be resolved at trial for all of Hamilton’s claims, we conclude that the trial court
clearly erred when it found that all of Hamilton’s claims were frivolous. See Kitchen v Kitchen,
465 Mich. 654, 661-662; 641 NW2d 245 (2002). Further, although we have determined that the
trial court did not err when it granted Eden Brook’s motion for summary disposition on the note
for $4,000, we elect to vacate the trial court’s order to the extent that it ordered Hamilton and his
lawyer to pay any of the attorney fees incurred by the Jeannots and Eden Brook. See MCR
7.216(A)(7). The majority of the fees were plainly unrelated to the collection of the $4,000 note
and Hamilton may be entitled to offset any damages for breaching his promise to repay that note.
VII. JUDICIAL BIAS
Finally, Hamilton argues that the trial judge was biased against him and that we should
assign this case to a new judge on remand. Although the record suggests that the trial court was
unsympathetic to Hamilton and his lawyer, we do not agree that the evidence established that the
court harbored an actual bias or prejudice against him. See In re Contempt of Henry, 282 Mich
App 656, 680; 765 NW2d 44 (2009). And the mere fact that the judge ruled against Hamilton is
not sufficient to require disqualification or reassignment. Id.
VIII. CONCLUSION
We affirm the trial court’s order to the extent that it granted summary disposition in Eden
Brook’s favor on the note for $4,000. However, we reverse the trial court’s decision and vacate
its order to the extent that it dismissed Hamilton’s claims and granted summary disposition in
favor of Eden Brook on the $35,000 note. We also vacate the trial court’s order to the extent that
it ordered Hamilton and his lawyer to pay attorney fees. Finally, we remand this case to the trial
court for further proceedings consistent with this opinion.
Affirmed in part, reversed in part, vacated in part, and remanded for further proceedings
consistent with this opinion. We do not retain jurisdiction. We further order that Hamilton is the
prevailing party on appeal and may tax his costs. MCR 7.219(A).
/s/ David H. Sawyer
/s/ Michael J. Kelly
/s/ Douglas B. Shapiro
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