Justia Contracts Opinion SummariesArticles Posted in Michigan Supreme Court
Wyandotte Electric Supply Co. v. Electrical Technology Systems, Inc.
In 2009 and 2010, the south wing of the Detroit Public Library was renovated. Defendant KEO & Associates, Inc. (KEO) was the principal contractor for this project. Defendant Westfield Insurance Company supplied KEO with a payment bond worth $1.3 million, as required by the public works bond act (PWBA). KEO was identified as the principal contractor and Westfield as the surety on the bond. KEO subcontracted with defendant Electrical Technology Systems, Inc. (ETS) to provide labor and materials for electrical work. The agreement between KEO and ETS included a pay-if-paid clause, obliging KEO to pay ETS only after KEO had been paid for the relevant portion of work performed. ETS in turn subcontracted with Wyandotte Electric Supply Company for materials and supplies, making Wyandotte a sub-subcontractor from KEO’s perspective. ETS and Wyandotte first formed a relationship in 2003, when they entered into an “open account” agreement that governed ETS’s purchases from Wyandotte. Over the course of the project, ETS paid Wyandotte only sporadically and the unpaid balance grew. Initially, Wyandotte supplied materials on credit and credited ETS’s payments to the oldest outstanding balance, but eventually Wyandotte began to ship materials only for cash on delivery. Wyandotte sent certified letters to KEO and Westfield asking for a copy of the payment bond related to the library renovation project. The letter, on Wyandotte’s letterhead, referred to the “Detroit Public Library South Wing with [ETS.]” According to Wyandotte, KEO provided a copy of the payment bond the next day. Wyandotte also sent KEO a 30-day “Notice of Furnishing” in accordance with MCL 129.207, explaining that it was one of ETS’s suppliers. Wyandotte also sent copies of the letter to Westfield, the library, and ETS. The issue this case presented for the Supreme Court's revie centered on whether actual notice was required for a sub-subcontractor to recover on a payment bond when that sub-subcontractor complied with the notice requirements set forth in MCL 129.207. Furthermore, this case raised the question of whether a PWBA claimant could recover a time-price differential and attorney fees that were provided for by the claimant’s contract with a subcontractor, but were unknown to the principal contractor holding the payment bond as well as the principal’s surety. The Supreme Court concluded that the PWBA contained no actual notice requirement for claimants that comply with the statute, that the trial court properly awarded a time-price differential and attorney fees on past-due invoices to Wyandotte, and that the trial court erred in awarding postjudgment interest under MCL 600.6013(7). Accordingly, the Court affirmed the Court of Appeals with regard to the first two issues and reversed with regard to the third. View "Wyandotte Electric Supply Co. v. Electrical Technology Systems, Inc." on Justia Law
Posted in: Construction Law, Contracts, Government Contracts, Michigan Supreme Court
Bank of America, NA v. First American Title Ins. Co.
Plaintiff Bank of America brought an action against First American Title Insurance Company, Westminster Abstract Company, and others, alleging breach of contract and negligent misrepresentation in connection with mortgages that plaintiff had partially financed on four properties whose value had been fraudulently inflated and whose purchasers were straw buyers who had been paid for their participation. Shortly after closing, all four borrowers defaulted. After discovering the underlying fraud in the four loans during the foreclosure proceedings, plaintiff sued, among others, First American, which had issued closing protection letters that promised to reimburse plaintiff for actual losses incurred in connection with the closings if the losses arose from fraud or dishonesty, and Westminster, alleging that it had violated the terms of the closing instructions. The other defendants either defaulted or were dismissed. The Court of Appeals held that plaintiff’s claim against First American relating to the properties on which it had made full credit bids was barred by "New Freedom Mtg Corp v Globe Mtg Corp," (281 Mich App 63 (2008)). With respect to First American’s liability on the other two closings, the Court of Appeals concluded that the trial court properly granted summary disposition to First American and Westminster because plaintiff had failed to produce evidence that created a question of fact regarding whether Westminster knew of or participated in the underlying fraud in those closings. Finally, the Court of Appeals concluded that plaintiff had not established a link between Westminster’s alleged violations of the closing instructions and the claimed damages and, even if a link had been established, there were no damages because of plaintiff’s full credit bid at the foreclosure sale. The Supreme Court reversed, finding the Court of Appeals erred by concluding that plaintiff’s full credit bids barred its contract claims against the nonborrower third-party defendants. To the extent that New Freedom held that the full credit bid rule barred contract claims brought by a mortgagee against nonborrower third parties, it was overruled. Further, the closing instructions agreed to by plaintiff and Westminster constituted a contract upon which a breach of contract claim could be brought. Finally, the lower courts erred by relying on New Freedom to interpret the credit protection letters given that the terms of the letters in New Freedom differed materially from the ones at issue here. View "Bank of America, NA v. First American Title Ins. Co." on Justia Law
Posted in: Banking, Contracts, Michigan Supreme Court, Real Estate & Property Law
Beck v. Park West Galleries, Inc.
Brian Beck, Audrey Mahoney, David and Felice Oppenheim, Patty Brown, and others brought an action in the Oakland Circuit Court against Park West Galleries, Inc., and others, alleging, inter alia, breach of contract and fraud. Defendant Park West Galleries, Inc. (Park West) sold art on various cruise ships traversing international waters. Plaintiffs purchased art from Park West on multiple occasions over the course of several years while on different cruise ships in different locations. The issue this case presented for the Michigan Supreme Court's review centered on whether an arbitration clause included in invoices for plaintiffs’ artwork purchases applied to disputes arising from plaintiffs’ previous artwork purchases when the invoices for the previous purchases did not refer to arbitration. The Court agreed with plaintiffs that the arbitration clause contained in the later invoices could not be applied to disputes arising from prior sales with invoices that did not contain the clause. Each transaction involved a separate and distinct contract, and the facts did not reasonably support a conclusion that the parties intended for the arbitration clause to retroactively apply to the previous contracts. Accordingly, the Supreme Court reversed that part of the Court of Appeals judgment that extended the arbitration clause to the parties’ prior transactions that did not refer to arbitration. The case was remanded back to the Court of Appeals for consideration of the issues raised in plaintiffs’ appeal that the Court did not address to the extent those issues relate to claims that are not subject to arbitration. In all other respects, leave to appeal was denied because the Court was not persuaded that it needed to review the remaining questions presented. View "Beck v. Park West Galleries, Inc." on Justia Law
Posted in: Arbitration & Mediation, Contracts, Michigan Supreme Court
Madugula v. Taub
Defendant Benjamin Taub founded Dataspace, Incorporated, in 1994. In 2002, Taub hired plaintiff Rama Madugula as vice president of sales and business development for Dataspace. Around this time, Dataspace also hired an individual named Andrew Flower. Taub was Dataspace's sole shareholder until 2004, when Madugula and Flower became part owners, with Madugula purchasing 29% of the outstanding shares and Flower purchasing 20%. Pursuant to a stockholders agreement, Taub became president, secretary, and treasurer of Dataspace, while Madugula and Flower became vice presidents. After becoming a shareholder, Madugula continued to work for Dataspace. In 2007, Flower exercised his right under the buy-sell agreement and voluntarily withdrew from Dataspace. Taub and Madugula purchased Flower's shares, increasing Madugula's interest to about 36% of the shares. Around this time, with Dataspace allegedly struggling, Taub switched the focus of Dataspace to marketing a new product that it developed called JPAS, a software platform. At the time, Madugula did not object to the new focus. In August 2007, Taub terminated Madugula's employment with Dataspace. Because of his termination, Madugula no longer received a salary from Dataspace, but he maintained his board position and his interest in the company. Madugula sued Taub and Dataspace, asserting: (1) shareholder; (2) breach of the duty of good faith; (3) common-law fraud and misrepresentation; (4) exemplary damages; (5) an appointment of a receiver; and (6) an accounting of Dataspace. Madugula sought damages, the removal of Taub as a director of Dataspace, the appointment of a receiver to protect the value of his stock in Dataspace, an accounting of Dataspace, and all other relief that he was entitled to in equity or law. The circuit court granted summary judgment in favor of Taub and Dataspace, dismissing all counts against them except Madugula's claim of shareholder oppression. After its review, the Supreme Court concluded that the plaint language of Michigan's shareholder-oppression statute, did not afford a claimant a right to a jury trial and, instead, expressed a legislative intent to have shareholder-oppression claims heard by a court of equity. Furthermore, the Court held that violations of a shareholder agreement may constitute evidence of shareholder oppression pursuant to the statute. Because the trial court erred by submitting plaintiff's claim to the jury and allowing it to award an equitable remedy, the Court of Appeals erred by affirming the trial court's judgment in favor of plaintiff. View "Madugula v. Taub" on Justia Law
Posted in: Business Law, Contracts, Michigan Supreme Court
Estate of Eugene Hunt v. Drielick
This appeal involved Empire Fire and Marine Insurance Company's obligations under an "Insurance for Non-Trucking Use" policy issued to Drielick Trucking. The policy contained a business-use exclusion, which included two clauses that Empire argued precluded coverage in this case. The Court of Appeals agreed that the first clause precluded coverage when the covered vehicle was not carrying property at the time of the accident, was in this case. Thus, the Court of Appeals expressly declined to address the second clause relating to leased covered vehicles. The Supreme Court held that the Court of Appeals erred in its interpretation of the first clause. The case to the trial court for further fact-finding to determine whether Drielick Trucking and Great Lakes Carriers Corporation (GLC) entered into a leasing agreement for the use of Drielick Trucking’s semi-tractors as was contemplated under the policy's clause related to a leased covered vehicle. View "Estate of Eugene Hunt v. Drielick" on Justia Law
LaFontaine Saline, Inc. v. Chrysler Group, LLC
Chrysler Group, LLC and plaintiff LaFontaine Saline Inc. (LaFontaine), an authorized Chrysler automobile dealer, entered into a Dealer Agreement in 2007, granting LaFontaine the non-exclusive right to sell Dodge vehicles from its location in Saline, Michigan, and defined LaFontaine’s Sales Locality as "the area designated in writing to [LaFontaine] by [Chrysler] from time to time as the territory of [LaFontaine’s] responsibility for the sale of [Chrysler, Jeep, and Dodge] vehicles, vehicle parts and accessories . . . ." This case centered on whether the 2010 amendment of the Motor Vehicle Dealer Act (MVDA) (expanding the relevant market area) from a six-mile radius to a nine-mile radius, applied retroactively. Upon review, the Supreme Court concluded that it did not. The Court therefore vacated the judgment of the Court of Appeals and remanded this case to the Circuit Court for reinstatement of summary judgment in favor of Chrysler. View "LaFontaine Saline, Inc. v. Chrysler Group, LLC" on Justia Law
Posted in: Business Law, Constitutional Law, Contracts, Michigan Supreme Court
Acorn Investment Co. v. Michigan Basic Property Insurance Assn.
Acorn Investment Co. sued the Michigan Basic Property Insurance Association seeking to recover losses suffered in a fire on Acorn’s property. Michigan Basic had denied coverage on the basis that the policy had been canceled before the fire occurred. The case proceeded to case evaluation, which resulted in an award of $11,000 in Acorn’s favor. Acorn accepted the award, but Michigan Basic rejected it. The circuit court granted summary judgment in Acorn’s favor, ruling that the notice of cancellation was insufficient to effectively cancel the policy. The parties then agreed to submit the matter to an appraisal panel as permitted in the insurance policy and by statute. The appraisal panel determined that Acorn’s claim was worth $20,877. Acorn moved for entry of a judgment and also sought interest, case evaluation sanctions, and expenses for the removal of debris. The court entered a judgment in Acorn’s favor for $20,877 plus interest but declined to award case evaluation sanctions or debris-removal expenses. Michigan Basic paid the judgment, and Acorn appealed the denial of the sanctions and expenses. The Court of Appeals affirmed, but the Supreme Court affirmed in part and reversed in part. The Court held that the circuit court could award actual costs to Acorn. The Supreme Court vacated the appellate court with respect to the award of debris-removal expenses: the issue was remanded to the circuit court to determine whether the appraisal panel awarded expenses as part of its award, left them for the circuit court to determine, or whether Acorn waived its right to claim them. View "Acorn Investment Co. v. Michigan Basic Property Insurance Assn." on Justia Law
Posted in: Contracts, Insurance Law, Michigan Supreme Court
Miller-Davis Co. v. Ahrens Construction, Inc.
Miller-Davis Company was an "at risk" contractor for the Sherman Lake YMCA's natatorium project. Miller-Davis hired defendant Ahrens Construction, Inc., as a subcontractor to install similar roof systems on three rooms, including the natatorium. After nearly a decade of litigation and alternative dispute resolution proceedings, the indemnification contract underlying the troubled natatorium roof in this case was brought before the Supreme Court. The Court previously held that the six-year period of limitations of MCL 600.5807(8) applied to the parties’ indemnification contract. Upon further review, the Court held that the indemnity clauses in the parties’ subcontract applied here, because the plain language of the indemnification clauses extended to Ahrens’s failure to undertake corrective work as obligated by the subcontract. Furthermore, because the Sherman Lake YMCA made a "claim" upon Miller-Davis which triggered Ahrens’s liability under the indemnity clauses, Ahrens’ failure to indemnify caused the damages Miller-Davis sustained in undertaking the corrective work itself. Finally, the Court held that Miller-Davis’ claim was not barred by the six-year statute of limitations found in MCL 600.5807(8). Rather, Miller-Davis’ breach of contract claim for Ahrens’s failure to indemnify is distinct from its breach of contract claim based on Ahrens’s failure to install the roof according to specifications, and Miller-Davis’s indemnity action necessarily accrued at a later point. The Court reversed that portion of the Court of Appeals’ opinion discussing Miller-Davis’s indemnity claim, and remanded this case to the Circuit Court for entry of judgment in Miller-Davis’s favor and to determine whether Miller-Davis is entitled to attorney’s fees under the relevant indemnification clauses. View "Miller-Davis Co. v. Ahrens Construction, Inc." on Justia Law
Posted in: Business Law, Construction Law, Contracts, Michigan Supreme Court
Grange Insurance Company of Michigan v. Lawrence
Grange Insurance Company of Michigan sought a declaratory judgment regarding its responsibility under a no-fault insurance policy issued to Edward Lawrence to reimburse Farm Bureau General Insurance Company of Michigan for personal protection insurance (PIP) benefits it paid after the death of his daughter Josalyn Lawrence following an automobile accident. The accident occurred while Josalyn's mother, Laura Rosinski, was driving a vehicle insured by Farm Bureau. Lawrence and Rosinski were divorced at the time of the accident but shared joint legal custody of the child. Rosinski had primary physical custody. Farm Bureau sought partial reimbursement of the PIP benefits it paid, arguing that Grange was in the same order of priority because Josalyn was domiciled in both parents' homes under MCL 500.3114(1). Farm Bureau counterclaimed. The circuit court granted Farm Bureau's motion for summary judgment; Grange appealed. The Court of Appeals affirmed. Automobile Club Insurance Association (ACIA) also sought a declaratory judgment to recover PIP benefits from State Farm Mutual Automobile Insurance Company under similar circumstances as in "Lawrence." Sarah Campanelli, the daughter of Francis Campaneli and Tina Taylor, died following an automobile accident. At the time of the accident, Sarah's parents, Francis Campanelli and Tina Taylor, were divorced and shared joint legal custody of Sarah; Campanelli had physical custody. Soon after the divorce, the family court modified the divorce judgment, allowing Campanelli to move and to change Sarah's domicile to Tennessee. When the accident occurred eleven years later, Sarah was staying in Michigan to attend school after a summer visit with her mother. ACIA claimed that State Farm was the responsible insurer and that that Sarah was not domiciled in Michigan, therefore it was not responsible for Sarah's PIP benefits. The circuit court granted summary judgment in favor of State Farm; the Court of Appeals reversed, concluding that there was a question of fact as to the child's domicile. Upon review, the Supreme Court reversed and remanded the "Grange" case for entry of summary judgment in favor of Grange; the Court reversed and remanded the "ACIA" case for entry of summary judgment in favor of ACIA. View "Grange Insurance Company of Michigan v. Lawrence" on Justia Law
Harris v. Auto Club Insurance Association
Brent Harris sued Auto Club Insurance Association (ACIA), seeking to recover a duplicate payment for medical expenses incurred as the result of a motorcycle-motor vehicle accident, which had been paid directly to providers by his health insurer, Blue Cross Blue Shield of Michigan (BCBSM). Harris claimed ACIA was required to pay him directly the same amounts paid by BCBSM to any healthcare provider for the medical expenses. ACIA filed a third-party complaint against BCBSM and Harris filed an amended complaint naming BCBSM as a defendant. The circuit court granted summary judgment to BCBSM and ACIA, concluding that because ACIA's policy was uncoordinated, ACIA was the primary insurer, and that the BCBSM certificate coordinated benefits with the no-fault policy. The Court of Appeals reversed the circuit court, concluding that the BCBSM certificate did not coordinate with ACIA's no-fault policy. Upon review, the Supreme Court reversed in part and reinstated the trial court's judgment: In this case, the Court of Appeals erred in concluding that Harris was entitled to double recovery; Harris was not obligated to pay his medical expenses because, as a matter of law, ACIA was liable for Harris's PIP benefits. ACIA was liable regardless of when the expenses were incurred and BCBSM's certificate that stated it would not cover those services for which Harris legally did not have to pay precluded Harris from receiving double recovery for those medical expenses. View "Harris v. Auto Club Insurance Association" on Justia Law