Donna Walker v. Otis M Underwood Jr
333160
| Mich. Ct. App. | Sep 7, 2017Background
- Plaintiffs (Donna & William Walker and Head to Toes Massage Therapy of Oxford, Inc.) signed a letter agreement drafted by defendant Underwood (an attorney) for build-out and occupancy of Underwood's building for plaintiffs' spa.
- Paragraph 10 of the letter agreement stated that failure to perform "will permit the obligee . . . to declare a default and terminate this preliminary agreement to lease or other remedy that may be agreed to by the parties."
- Plaintiffs waited ~9 months for an occupancy permit; then sued for breach of contract and fraudulent misrepresentation after informing Underwood they could wait no longer.
- The circuit court granted summary disposition to Underwood, concluding paragraph 10 limited remedies to terminating the preliminary lease or an agreed alternate remedy (i.e., an exclusive remedy clause).
- The Court of Appeals reviewed contract interpretation de novo and reversed the summary dismissal, holding paragraph 10 permissively authorized (not limited to) the listed remedies; remanded for further proceedings.
- The Court of Appeals affirmed denial of Underwood's sanctions motion because plaintiffs' contract claim could proceed and the fraudulent-misrepresentation claim was not clearly frivolous.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether paragraph 10 limited remedies to termination or agreed alternate remedy (i.e., exclusive remedy) | Paragraph 10 is permissive; plaintiffs may pursue other remedies including breach suit | Paragraph 10 limits remedies to declaring default/termination or any remedy the parties agree upon (exclusive) | Reversed circuit court: paragraph 10 is permissive and does not foreclose other remedies; summary dismissal improper |
| Whether contractual language was ambiguous such that extrinsic evidence/trial required | Language fairly admits single interpretation permitting other remedies; no exclusivity | Ambiguity supports exclusive-remedy reading and summary dismissal | Court read clause in ordinary meaning against the drafter; no exclusivity; remand for factual development as needed |
| Whether the drafter's omission should be construed against drafter (contra proferentem) | Contract should be strictly construed against Underwood (drafter) | Clauses reflect parties' agreement to limit remedies | Court applied rule against drafter, supporting nonexclusive reading |
| Whether sanctions for frivolous suit were warranted | Plaintiffs' claims had legal basis; not frivolous | Underwood sought sanctions arguing frivolousness | Denial of sanctions affirmed; plaintiffs' claims were not frivolous given viable contract claim and no controlling caselaw precluding fraud claim |
Key Cases Cited
- Moser v. Detroit, 284 Mich. App. 536 (standard of review for summary disposition)
- Citizens Ins. Co. v. Secura Ins., 279 Mich. App. 69 (contract interpretation de novo)
- Holmes v. Holmes, 281 Mich. App. 575 (plain and ordinary meaning rule)
- Meagher v. Wayne State Univ., 222 Mich. App. 700 (when contract language is clear court decides as a matter of law)
- Shay v. Aldrich, 487 Mich. 648 (contract construed against drafter)
- Trimble v. Metro Life Ins. Co., 305 Mich. 172 (court may not add terms parties did not agree to)
- Short v. Hollingsworth, 291 Mich. 271 (permissive remedy language does not create exclusive remedy)
- Barnhart v. Peabody Coal Co., 537 U.S. 149 (limits to expressio unius canon)
- Chevron U.S.A., Inc. v. Echazabal, 536 U.S. 73 (clarifies expressio unius application)
- Kitchen v. Kitchen, 465 Mich. 654 (standard of review for frivolousness/sanctions)
- Louya v. William Beaumont Hosp., 190 Mich. App. 151 (outcome does not by itself establish frivolousness)