Michael D Young v. Tina M Burton
334231
Mich. Ct. App.Dec 19, 2017Background
- Landlord (Michael & Wendy Young, assignees of the Young Revocable Trust) leased commercial property to tenants Tina Burton and Justin Fare for a restaurant; Burton later formed Grandma Kay’s LLC and operated the business.
- Lease required tenants to obtain and maintain fire insurance on the building and included provisions about repair of fire damage (¶13 insurance; ¶15 repairs by landlord).
- Insurance policy eventually named Grandma Kay’s as sole named insured and the Youngs as loss payees.
- Fire destroyed the property in Feb 2015; insurer paid two checks: $220,541 (building) and $5,611 (personal property). Grandma Kay’s refused to consent to distribution to the Youngs.
- Plaintiffs sued to determine distribution; matter submitted to arbitration. Arbitrator awarded $220,541 to the Youngs (for building/repairs) and $5,611 to Burton (personal property). Circuit court confirmed the award; defendants sought vacatur and appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether arbitrator exceeded authority interpreting lease provisions on insurance/repairs | Youngs: arbitrator properly construed ¶13 and ¶15 to allow insurance proceeds to fund landlord’s repair obligation | Burton/Grandma Kay’s: arbitrator ignored controlling law and altered lease terms; ¶15 makes landlord solely responsible to repair at landlord’s expense, not use tenant-obtained insurance | Court: arbitrator was arguably construing/applying the lease; no facial legal error shown; award upheld |
| Whether damages awarded ($220,541) exceed contract remedies | Youngs: award compensates landlord for breaches that prejudiced recovery of intended insurance proceeds | Defendants: damages not authorized because defendants did not cause the fire; contract damages must reflect breach-proximate loss | Court: Arbitrator found breaches (naming nonparty insured, subletting) that prejudiced recovery; factual findings not reviewable and no facial legal error shown |
| Whether Grandma Kay’s had insurable interest and could be paid | Youngs: regardless of any occupancy-based interest, Youngs as owners/loss payees had superior right to proceeds under the contract/policy | Defendants: Grandma Kay’s had insurable interest; if named insured lacked insurable interest, loss payee cannot recover | Court: Arbitrator’s comment on insurable interest, even if erroneous, was harmless; insurer paid and dispute was distribution — award stands |
| Whether loss-payee recovery depends on named insured’s insurable interest | Youngs: exceptions exist to the rule barring loss-payee recovery when named insured lacks interest; insurer paid liability was not contested | Defendants: If named insured cannot collect, loss payee also cannot | Court: Rule is not absolute; insurer paid; arbitrator’s distribution decision resolved competing claims — no vacatur warranted |
Key Cases Cited
- Gordon Sel-Way, Inc. v. Spence Bros., 438 Mich. 488 (arbitration awards vacated only in very limited circumstances)
- DAIIE v. Gavin, 416 Mich. 407 (facial-review standard for arbitration awards; factual findings generally unreviewable)
- Washington v. Washington, 283 Mich. App. 667 (legal error must be evident on the face of the award)
- Ann Arbor v. AFSCME Local 369, 284 Mich. App. 126 (de novo review of court’s decision to confirm/vacate arbitration)
- Miller v. Miller, 474 Mich. 27 (arbitrator exceeds power when acting beyond contract or controlling law)
- Old Kent Bank v. Chaddock, Winter & Alberts, 197 Mich. App. 372 (loss-payee recovery may be barred if named insured lacks insurable interest; subject to exceptions)
- Gallant v. Lake States Mut. Ins. Co., 142 Mich. App. 183 (same rule and its limitations)
- Fette v. Peters Constr. Co., 310 Mich. App. 535 (statutory arbitration when judgment may be entered on award)