M-59 Joy LLC v. Lamar Advertising of Michigan Inc

STATE OF MICHIGAN
COURT OF APPEALS
M-59 JOY, LLC, UNPUBLISHED
October 26, 2017
Plaintiff-Appellant,
v No. 333266
Macomb Circuit Court
LAMAR ADVERTISING OF MICHIGAN, INC., LC No. 2015-003035-CB
Defendant-Appellee.
Before: BORRELLO, P.J., and MURPHY and RONAYNE KRAUSE, JJ.
PER CURIAM.
Plaintiff and real property owner M-59 Joy, LLC, appeals as of right the trial court’s
order granting summary disposition in favor of defendant and billboard company Lamar
Advertising of Michigan, Inc., with respect to plaintiff’s action for breach of contract arising out
of two leases that were terminated early by defendant. The crux of the dispute concerns the
interpretation of a contractual clause and whether defendant was indeed entitled to prematurely
terminate the leases under the clause and the surrounding circumstances. We affirm.
I. BACKGROUND
A. FACTUAL HISTORY
Plaintiff is the owner of a narrow strip of real property situated adjacent to I-94 in Mt.
Clemens. Historically, two outdoor billboards have been located on the property. The parties’
lease agreements, referred to as sign location leases, described the leased premises as the “West
Side of I-94 .2 Miles South of Joy Blvd. Facing North and South.” The leases, one for each of
the two billboards on the property, were entered into in April 2008. They provided that plaintiff
leased to defendant “as much of the . . . described lease premises as may be necessary for the
construction, repair and relocation of an outdoor advertising sign . . ., including necessary
structures, advertising devices, utility service, power poles, communications devices and
connections, with the right of access to and egress from the sign . . . .” The leases were for 10-
year terms with an annual rent of $24,000 per lease or billboard.
The leases had been prepared by defendant, and plaintiff’s owner and member Joseph
Oram struck three of the clauses contained in each lease prior to execution of the agreements. A
clause that remained part of both contracts and which forms the heart of the dispute provided:
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LESSEE may terminate this lease upon giving thirty (30) days written
notice in the event that the sign becomes entirely or partially obstructed in any
way or in LESSEE’S opinion the location becomes economically or otherwise
undesirable. . . . . [Emphasis added.]
Hereinafter, we shall refer to this provision, and specifically the emphasized language, as the
termination clause.
In November 2009, due to a major downturn in the economy and a resulting decline in
advertising revenues generated by its billboards, defendant requested a reduction in the rent to
$3,706 annually relative to each lease. Plaintiff was unwilling to reduce the annual rent,
demanding that defendant honor the lease agreements and make payments in timely fashion. In
response, in December 2009, defendant invoked the termination clause and gave plaintiff the
required 30 days’ notice. In the letter to plaintiff invoking the termination clause, defendant
asserted that it had demonstrated to plaintiff that the location, as well as other locations,1 had
become economically undesirable.
On March 22, 2010, defendant entered into a sign location lease with another nearby
property owner on land described as being “On the West Side of I-94, Approximately 1/10 Mile
South of Joy Blvd., Facing North & South.” This was a 20-year lease, commencing with an
annual rent of $8,500 that is scheduled to increase by $400 in two-year increments over the life
of the lease. In an affidavit executed by Oram, he averred that defendant had removed its two
billboards from plaintiff’s property by April 15, 2010, that defendant obtained a permit to
construct a new billboard on the neighboring lessor’s property that would be located less than
500 feet from the former site of the northernmost billboard that had once stood on plaintiff’s
land, and that the location of defendant’s new billboard would be identical to the old location
with respect to traffic counts, impressions, and expected ad revenue.
B. PROCEDURAL HISTORY
Nearly six years after defendant terminated the leases, plaintiff filed a two-count
complaint against defendant, alleging breach of contract for not abiding by the 10-year leases
and tortious interference with business expectancies. Plaintiff later voluntarily dismissed the
tortious interference claim. In November 2015, defendant filed a motion for summary
disposition under MCR 2.116(C)(10), arguing that plaintiff’s breach of contract claim failed as a
matter of law because defendant had properly invoked the termination clause. Defendant stated
that “[t]he location on [plaintiff’s property] became economically undesirable because the
advertising revenue [defendant] generated from [each] billboard could not support the $24,000
annual rent, which [plaintiff] refused to reduce.” Defendant attached to its motion a 2009 article
from Advertising Age that supplied statistics showing the dramatic drop in advertising spending
caused by the faltering economy. The article indicated that “the bottom line is brutally clear:
2009 saw the sharpest percentage decline in ad spending since the Great Depression.”
1
Plaintiff owned other parcels in various areas that were also leased to defendant, but they are
not at issue in this case.
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In response, plaintiff argued that the termination clause did not allow for defendant to
extricate itself from the leases simply because it wished to reduce its rental burden. Plaintiff
contended that the termination clause required any economically undesirable change to be tied
directly to the property’s “location,” such as a reduction in traffic counts, views, and
impressions, which had not changed, and which were exactly the same with respect to the
property covered by defendant’s new lease. Stated otherwise, the termination clause could not
be invoked if the “rent” became economically undesirable, but only if the “location” became
economically undesirable, which did not occur. In his affidavit attached to plaintiff’s response
brief, Oram averred:
9. Prior to signing the Lease, I interpreted [the termination clause] to
mean that the Defendant could only terminate the Lease if the location became
undesirable, not if the lease terms or rent became undesirable.
10. The Defendant never indicated to me prior to the execution of the
Leases that it interpreted the word “location” to mean that it could terminate the
Lease[s] if it determined that the rent was too high.
11. I would not have entered into the Leases if the Defendant was
permitted to terminate the Leases at any time it felt the rent was undesirable.
On January 4, 2016, the trial court entertained oral argument on defendant’s motion for
summary disposition and took the matter under advisement. On May 18, 2016, the trial court
issued a written opinion and order granting defendant’s motion for summary disposition. In
pertinent part, the court, after noting that plaintiff did not dispute defendant’s assertion that the
country, including the area of plaintiff’s property, suffered an economic downturn in 2009, ruled
as follows:
In this case, the Leases unambiguously provide that Defendant may
terminate the Leases if, in its opinion, the locations in question become
economically undesirable. In its response, Plaintiff concedes that Defendant was
able to, and did, enter into leases for billboard(s) in virtually the same location
with a different company for a lower rental rate than the rate provided for under
the Leases. Accordingly, the Court is convinced that such circumstances rendered
the locations rented under the Leases economically undesirable in light of the fact
that Defendant could obtain billboard space in the same general area for less
money. Consequently, the Court is satisfied that Defendant was authorized to
terminate the Leases in question based on Plaintiff’s refusal to lower the rental
rate. Further, because both of Plaintiff’s claims are based upon their contention
that Defendant was not permitted to terminate the Leases for the stated reason, a
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position that has been rejected by this Court, Defendant is entitled to summary
disposition of both of Plaintiff’s claims.[2]
Plaintiff now appeals as of right.
II. ANALYSIS
A. STANDARD OF REVIEW
We review de novo a trial court’s ruling on a motion for summary disposition. Loweke v
Ann Arbor Ceiling & Partition Co, LLC, 489 Mich. 157, 162; 809 NW2d 553 (2011).
“[Q]uestions involving the proper interpretation of a contract or the legal effect of a contractual
clause are also reviewed de novo.” Rory v Continental Ins Co, 473 Mich. 457, 464; 703 NW2d
23 (2005). We likewise review de novo the question whether contractual terms are ambiguous.
Rossow v Brentwood Farms Dev, Inc, 251 Mich. App. 652, 658; 651 NW2d 458 (2002).
B. PRINCIPLES REGARDING SUMMARY DISPOSITION UNDER MCR 2.116(C)(10)
With respect to the well-established principles that govern our analysis of a motion for
summary disposition brought under MCR 2.116(C)(10), this Court in Pioneer State Mut Ins Co v
Dells, 301 Mich. App. 368, 377; 836 NW2d 257 (2013), observed:
In general, MCR 2.116(C)(10) provides for summary disposition when
there is no genuine issue regarding any material fact and the moving party is
entitled to judgment or partial judgment as a matter of law. A motion brought
under MCR 2.116(C)(10) tests the factual support for a party's claim. A trial court
may grant a motion for summary disposition under MCR 2.116(C)(10) if the
pleadings, affidavits, and other documentary evidence, when viewed in a light
most favorable to the nonmovant, show that there is no genuine issue with respect
to any material fact. A genuine issue of material fact exists when the record,
giving the benefit of reasonable doubt to the opposing party, leaves open an issue
upon which reasonable minds might differ. The trial court is not permitted to
assess credibility, weigh the evidence, or resolve factual disputes, and if material
evidence conflicts, it is not appropriate to grant a motion for summary disposition
under MCR 2.116(C)(10). A court may only consider substantively admissible
evidence actually proffered relative to a motion for summary disposition under
MCR 2.116(C)(10). [Citations and quotation marks omitted.]
2
The court’s recitation of the case’s history revealed that the court was unaware of plaintiff’s
voluntary dismissal of the tortious interference claim, which explains why the court ruled that
defendant was entitled to summary dismissal of “both” of plaintiff’s claims.
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C. THE LAW OF CONTRACTS
“A party asserting a breach of contract must establish by a preponderance of the evidence
that (1) there was a contract (2) which the other party breached (3) thereby resulting in damages
to the party claiming breach.” Miller-Davis Co v Ahrens Constr, Inc, 495 Mich. 161, 178; 848
NW2d 95 (2014). A contract requires mutual assent or a meeting of the minds on all the
essential terms of an agreement. Burkhardt v Bailey, 260 Mich. App. 636, 655; 680 NW2d 453
(2004). “The cardinal rule in the interpretation of contracts is to ascertain the intention of the
parties[;] [t]o this rule all others are subordinate.” McIntosh v Groomes, 227 Mich. 215, 218; 198
N.W. 954 (1924). In light of this, “[i]f the language of the contract is clear and unambiguous, it is
to be construed according to its plain sense and meaning; but if it is ambiguous, testimony may
be taken to explain the ambiguity.” New Amsterdam Cas Co v Sokolowski, 374 Mich. 340, 342;
132 NW2d 66 (1965) (citations omitted); see also Frankenmuth Mut Ins Co v Masters, 460 Mich.
105, 111; 595 NW2d 832 (1999). However, a court will not create ambiguity where the terms of
the contract are clear. Frankenmuth Mut, 460 Mich. at 111.
D. DISCUSSION AND HOLDING
Again, the termination clause allowed for termination of the leases on 30 days’ notice “in
the event that . . . in LESSEE’S opinion the location becomes economically or otherwise
undesirable.” This is extremely broad language. The clause contemplates the occurrence of
some type of future event that renders the location of the billboards or plaintiff’s property
economically undesirable. Plaintiff does not dispute defendant’s claim that the economy spiraled
downward in 2009, leading to a decline in advertisement spending and negatively impacting
advertisers’ revenue streams. Plaintiff essentially wishes us to view the economic desirability of
the location through a narrow lens that only takes into consideration physical characteristics and
features of the location, including the surrounding environment, e.g., traffic flow and counts
relative to vehicles that pass by the billboards. But, in the context of the business of advertising,
the economic desirability of a location must also necessarily take into account the advertising
revenues that can be generated at a particular location in conjunction with the costs incurred by
an advertiser in being able to utilize that location, e.g., any rent associated with a location. A
location’s economic viability for purposes of operating a business would be judged, at least in
part, on any rental costs. And the simple fact is that the economic collapse in 2009 – a future
event – made plaintiff’s property and the location of the billboards economically undesirable
when taking into consideration the revenue that could be generated by the billboards and the
amount of rent that needed to be paid under the existing leases. The fact that locations used for
advertising all across the country were similarly suffering as a result of the financial crisis is not
pertinent, nor does it undermine defendant’s position.
Moreover, although not touched upon by the trial court, the question whether the location
actually became economically undesirable is not truly the decisive issue under the plain language
of the termination clause. Rather, under the clear and unambiguous language of the termination
clause, the pertinent question is whether the location became economically undesirable in
defendant’s opinion. Plaintiff does not dispute that defendant genuinely held the opinion that the
location became economically undesirable, which effectively harpoons plaintiff’s action for
breach of contract. An unsound opinion or one lacking in factual support is nonetheless an
opinion. We find no ambiguity in the termination clause.
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In sum, under the circumstances that evolved, defendant was permitted to terminate the
leases under the plain language of the termination clause. Accordingly, plaintiff, as a matter of
law, cannot succeed on a breach of contract action, and the trial court thus did not err in granting
summary disposition in favor of defendant.
Affirmed. Having fully prevailed on appeal, defendant is awarded taxable costs pursuant
to MCR 7.219.
/s/ Stephen L. Borrello
/s/ William B. Murphy
/s/ Amy Ronayne Krause
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