In Docket No. 306215, defendant Northtowne Development Company appeals by right the trial court’s August 29, 2011 judgment granting plaintiff AFP Specialties, Inc., a construction lien foreclosure judgment against the interest of Northtowne and also granting defendant/cross-plaintiff Etna Supply Company a construction lien foreclosure judgment against the interest of Northtowne. For the reasons discussed herein, we hold that the trial court erred by finding that defendant Gregory Vereyken was the implied agent of Northtowne when Vereyken “contracted for the improvement to the real property.” MCL 570.1107(1). The trial court also erred by ruling that the land contract between Northtowne and Vereyken “required the improvement.” Id. Therefore, we reverse in Docket No. 306215 and remand for modification of the judgment.
Docket No. 307540 involves an attorney-fee claim by Etna, one of AFP’s subcontractors. Etna filed a counterclaim against AFP for its contract price plus a time-price differential. AFP disputed only the added amount for the time-price differential. After Etna prevailed at trial and further hearings were held, the trial court awarded it reasonable attorney fees as an offer-of-judgment sanction. MCR 2.405. We conclude that the trial court did not clearly err by finding that the attorney fees it assessed against AFP were necessitated by AFP’s rejection of Etna’s offer of judgment. MCR 2.405(A)(6). Furthermore, AFP has not established that the trial court abused its discretion by declining to invoke the “interests of justice” exception of MCR 2.405(D)(3). Therefore, we affirm in Docket No. 307540.
I. DOCKET NO. 306215
A. FACTUAL BACKGROUND
Vereyken entered into a land contract on October 12, 2006, to purchase property Northtowne owned in Kalkaska County that included a vacant building that had formerly been used as a hardware store. Vereyken intended to convert the building into a restaurant. The terms of sale were payment of $360,000, with a $36,000 down payment, monthly installments of $2,610.12, and a balloon payment for the balance on November 12, 2008. Although the principals of Northtowne knew that Vereyken intended to operate a restaurant, the land contract did not require the property to be used for that purpose.
On April 10, 2007, Vereyken contracted with AFP to install a fire suppression system in the building. Michigan’s construction code requires that a fire suppression system be installed if a building is to be used as a restaurant. Vereyken hoped to open his restaurant for business by the summer of 2007, but AFP did not begin installing the fire suppression system until June 29, 2007. By September 12, 2007, the work was sufficiently completed for Kalkaska County to issue a temporary certificate of occupancy. Between September 12, 2007, and November 2, 2007, when AFP replaced a part in the system, AFP did not provide any labor or materials for the improvement of the property. After AFP replaced the part, Kalkaska County determined that the system did not meet the construction code’s requirements and revoked the temporary certificate of occupancy. This forced the restaurant to close from mid-November 2007 until June 2008 and resulted in Vereyken’s missing payments on the land contract during the closure.
Vereyken also suffered additional financial setbacks when in the same month that he reopened the Kalkaska restaurant, another restaurant he owned, in Bellaire, burned. A dispute with his insurance company contributed to Vereyken’s being unable to refinance the Kalkaska restaurant
When Vereyken failed to pay AFP as required, AFP filed a complaint against him for breaching their contract. AFP sought a money judgment and to foreclose AFP’s construction lien on the property. On September 10,2009, AFP obtained partial summary disposition against Vereyken for $54,650.95, which included $41,180 for breach of contract and attorney fees and costs of $11,582.82 through July 14, 2009.
AFP sought to foreclose its construction lien on the property and alleged that an implied agency existed between Vereyken and Northtowne as the fee owner and land contract vendor. Northtowne denied that Vereyken was acting as its agent when he contracted for the installation of a fire suppression system in the building. After discovery, AFP and Northtowne both moved for summary disposition. AFP contended that an implied agency existed between Vereyken and Northtowne because Northtowne had approved of, or at least tacitly permitted the construction improvements to continue, thus enhancing the value of the property, while Vereyken was in default on his land contract obligations. Northtowne contended that indicia of an implied agency were not present and that no implied agency arose between it and Vereyken. Also, Northtowne argued that Vereyken was current in his land contract obligations when he contracted with AFP and that Norcross Co v Turner-Fisher Assoc,
In an opinion and order, the trial court concluded that AFP’s construction lien attached to Northtowne’s entire interest in the subject property because Northtowne both contracted for and required the improvement for purposes of the Construction Lien Act (CLA), MCL 570.1101 et seq. As to implied agency, the trial court reasoned that holding a fee owner responsible for improvements that its implied agent contracted for is consistent with construing the CLA liberally. See MCL 570.1302(1); Norcross,
The trial court also concluded that Northtowne’s land contract with Vereyken required the installation of the fire suppression system. The court observed that “[t]he relevant provision of the land contract provides that the purchaser (i.e. Vereyken) agrees ‘[t]o keep the permission[
B. STANDARDS OF REVIEW
We review de novo a trial court’s decision on a motion for summary disposition. DLF Trucking Inc v Bach,
This case also presents questions regarding the interpretation of the court rules, which are also reviewed de novo. Henry v Dow Chem Co,
C. DISCUSSION
1. DID AN IMPLIED AGENCY EXIST?
The trial court erred by ruling that the undisputed facts presented on the parties’ motions for summary disposition under MCR 2.116(0(10) established as a matter of law that Vereyken was acting as Northtowne’s implied agent when Vereyken contracted with AFP for the installation of a fire suppression system in a building of which Vereyken was the equitable owner as the land contract vendee. Consequently, the trial court erred by ruling as a matter of law that AFP’s construction lien attached to Northtowne’s entire interest in the property because Northtowne was “the owner .. . who contracted for the improvement to the real property . .. .” MCL 570.1107(1).
Initially, we conclude that the trial court erred by applying the liberal rule of construction for interpreting the CLA, set forth in MCL 570.1302(1), when considering whether an implied agency existed between Vereyken and Northtowne. This provision further states that a contractor need only “substantially] complly]” with
There are two problems with applying the liberal-construction rule to the question whether an implied agency arose under the undisputed facts of . this case. First, the pertinent statutory provision at issue is not ambiguous; therefore, it needs no construction, liberal or otherwise, to determine its meaning. See Sun Valley Foods Co v Ward,
The pertinent provision of MCL 570.1107(1) provides that “[e]ach contractor, subcontractor, supplier, or laborer who provides an improvement to real property has a construction lien upon the interest of the owner or lessee who contracted for the improvement to the real propertyt.]” It is undisputed that Vereyken was an “owner” of the property under MCL 570.1105(3)
Given that the undisputed facts of this case establish that Vereyken was the “owner” who contracted with AFP for the improvement, the only question is whether Vereyken was Northtowne’s implied agent when he contracted with AFP This is a factual question, Nor-cross,
“An implied agency must be an agency in fact-, found to be so by reasonable deductions, drawn from disclosed facts or circumstances.” Weller v Speet,
Here, the trial court found an implied agency between Vereyken and Northtowne on the basis that Northtowne “was aware of and acquiesced to” Vereyken’s making improvements to the building when Vereyken was in default on his land contract. Specifically, the trial court found that Northtowne was
aware that Vereyken was behind in the land contract payments and failed to pay the property taxes during the time AFP was installing the system. Thus, the fact that Northtowne permitted improvements to continue on the building, knowing that it could potentially get the property back, gave rise to an implied agency relationship. [Emphasis added.]
But Vereyken’s not timely paying a portion of the winter 2006 property taxes by February 14, 2007
Although Vereyken’s failure to timely pay the winter 2006 property taxes could have resulted in an action for forfeiture 45 days after February 14, 2007, there is nothing in the land contract that gave Northtowne any control over what improvements Vereyken made to the property. Hence, a critical element for finding an implied agency—control by the alleged
The trial court also misapplied Norcross to the facts of this case. First, in Norcross, there was a bench trial, and the issue on appeal concerned whether the trial court had clearly erred by finding as matter of fact that an implied agency existed. Norcross,
We conclude that the trial court misread Norcross to impose a duty on a land contract vendor to apprise other potential contracting parties of its vendee of the vendee’s financial status. Nothing in Norcross alters the general rule that each contracting party is responsible for performing its own due diligence. There is no basis in Norcross for altering the common-law rule of caveat emptor in real estate transactions. See Roberts v Saffell,
In sum, the trial court erred by ruling that undisputed facts established as a matter of law that Vereyken was acting as Northtowne’s implied agent when Vereyken contracted with AFP for the installation of a fire suppression system. Consequently, the trial court erred by ruling on that basis that AFP’s construction lien attached to Northtowne’s entire interest in the property as “the owner . . . who contracted for the improvement to the real property ____” MCL 570.1107(1).
2. DID THE CONTRACT REQUIRE THE IMPROVEMENT?
a. PRELIMINARY ARGUMENTS
Before discussing the merits of the trial court’s ruling on this issue, we first consider and reject Northtowne’s arguments that (1) the trial court erred procedurally by ruling in AFP’s favor on this basis because AFP did not allege in its complaint or in its motion and brief for summary disposition that the contract required the improvement, and (2) Northtowne was denied due process—that is, notice and a meaningful opportunity to be heard—when AFP raised this issue for the first time at oral arguments on the parties’ motions for summary disposition.
Northtowne first argues that the trial court erred by granting summary disposition to AFP after finding that § 2(c) of the land contract required Vereyken to install the fire suppression system because AFP did not plead that theory of liability under MCL 570.1107(1). AFP essentially concedes that it did not specifically plead § 2(c) of the land contract as a theory of liability but maintains that the trial court correctly ruled that provision required Vereyken to install the fire suppression system to operate his restaurant. Northtowne accepts that a trial court may sua sponte grant summary disposition if the pleadings show that a party is entitled to judgment as a matter of law, MCR 2.116(I)(1), but it argues that the trial court erred by doing so because the land contract was not part of the pleadings, MCR 2.110(A), even though it was attached to AFP’s complaint as an exhibit. Northtowne contends that the land contract did not become part of the pleadings under MCR 2.113(F)(2) because it was not the basis of AFP’s claim under MCR 2.113(F)(1).
We reject Northtowne’s procedural argument based on the court rules. First, establishing the land contract vendor-vendee relationship between Northtowne and Vereyken with respect to the property was an essential element of AFP’s claims. That is, it was necessary for AFP to establish that both Northtowne and Vereyken were “owners” under the CLA. MCL 570.1105(3).
Second, even if the land contract had not been part of the pleadings, it was attached to other documents submitted to the trial court for the purpose of deciding the parties’ motions for summary disposition. Specifically, Northtowne submitted the land contract as an exhibit by itself and as an attachment to the affidavit of Northtowne partner Randall Atwood. Under MCR 2.116(I)(1), a trial court may grant summary disposition to a party entitled to judgment as a matter of law in two ways: (1) if “the pleadings show”' that a party is entitled to it, and (2) “if the affidavits or other proofs show that there is no genuine issue of material fact. . ..” See Boulton v Fenton Twp,
Additionally, MCR 2.116(1)(2) provides: “If it appears to the court that the opposing party, rather than the moving party, is entitled to judgment, the court may render judgment in favor of the opposing party.” Northtowne submitted the land contract between it and Vereyken to the trial court in support of its own motion for summary disposition and argued that the contract did not require Vereyken to make improvements to the property. At the hearing on the parties’ summary disposition motions, AFP argued that § 2(c) required Vereyken to install the fire suppression system because it was required by the building code to operate a restaurant. Northtowne argued that § 2(c) merely required the vendee to “keep” and maintain the premises in good repair. Thus, the meaning of § 2(c) of the land contract was properly before the trial court on the parties’ motions for summary disposition either because the contract was part of the pleadings or because it had been submitted to the court as part of the documentary evidence to consider. Furthermore, the trial court properly concluded that although the parties differed about the meaning of § 2(c), it was still subject to interpretation by the court as a matter of law. See Henderson v State Farm Fire & Cas Co,
The trial court’s ruling granting summary disposition to AFP on the theory that § 2(c) of the land contract rendered Northtowne an “owner who has required the improvement,” MCL 570.1107(1), did not deny Northtowne due process of law. Due process is a flexible concept requiring fundamental fairness by providing notice of the nature of the proceedings and a meaningful opportunity to be heard by an impartial decision-maker. Reed,
b. THE MERITS
Whether the trial court correctly decided the issue on the merits is another matter. While the trial court correctly ruled that § 2(c) of the land contract required Vereyken in his use of the building to comply “with all police, sanitary and other regulations imposed by any governmental authority,” this provision did not by itself require Vereyken to install a fire suppression system. Rather, the land contract permitted Vereyken to use the property in any way he desired. Nothing in the land contract compelled the property to be used as a restaurant. It was Vereyken’s decision to convert the building into a restaurant that triggered the building code requirement for the installation of the fire suppression system. And it was the building inspector who compelled Vereyken’s restaurant to close after it determined that AFP’s sprinkler system did not comply with the building code. Northtowne took no action to enforce § 2(c) of the land contract to require that certain improvements be made after it learned that Vereyken intended to use the building as a restaurant. Although we recognize that this issue is a bit of a conundrum, we conclude that the trial court erred by determining that the land contract required Vereyken to install a fire suppression system. Rather, Vereyken decided to open a restaurant, and to do so, the building code and building inspector required Vereyken to install a fire suppression system. In other words, for Vereyken to open a restaurant, he would have been required to install a fire suppression system regardless of whether § 2(c) was included in the land contract. Consequently, the trial court erred by ruling that under § 2(c) of the land contract, Northtowne was an “owner who has required the improvement” under MCL 570.1107(1).
In sum, the court rules permitted the trial court to consider this issue on the parties’ motions for summary disposition, and the trial court did not deny Northtowne due process of law by doing so. But the trial court erred by concluding that the land contract between Northtowne and Vereyken “required the improvement.” MCL 570.1107(1). Consequently, the trial court erred by ruling on this basis that AFP’s construction lien attached to Northtowne’s entire interest in the property.
II. DOCKET NO. 307504
A. STANDARD OF REVIEW
In general, the interpretation and application of the offer-of-judgment rule is reviewed de novo. Castillo v Exclusive Builders, Inc,
The trial court’s determination of the reasonableness of an attorney fee is reviewed on appeal for an abuse of discretion. Smith v Khouri,
B. DISCUSSION
AFP’s argument that the trial court awarded attorney fees that were not “necessitated by [its] failure to stipulate to the entry of judgment,” MCR 2.405(A)(6), is without merit. AFP has not established that the trial court clearly erred in determining that the attorney fees it awarded Etna were necessitated by AFP’s rejection of Etna’s offer of judgment. Froling Trust,
There is no dispute in this case that the adjusted verdict
In this case, the record supports the trial court’s ruling finding a nexus between the attorney fees it awarded and the rejected offer. AFP presents no meaningful argument that the trial court clearly erred in finding that the attorney fees it awarded were “necessitated by the failure to stipulate to the entry of judgment.” MCR 2.405(A)(6); see also Froling Trust,
Moreover, AFP has failed to establish that the trial court abused its discretion by refusing to award attorney fees by applying the interest-of-justice exception of MCR 2.405(D)(3). Derderian,
First, AFP argues that it did the “heavy lifting” in prosecuting the construction lien claims against Vereyken and Northtowne, and that Etna merely “piggybacked” on AFP’s efforts. This argument fails to establish an “unusual circumstance” because the trial court considered this fact in limiting its award of attorney fees to those actually necessitated by AFP’s refusal to accept the offer of judgment, i.e., matters related to the time-price differential dispute.
Second, whatever merit there is to AFP’s claim that Etna owes it an unrelated credit is irrelevant to this case because that claim is not part of this case. Hence, like a party’s ability to pay, AFP’s unrelated claim does not present an “unusual circumstance” requisite to invoke the “interest of justice” exception.
Last, AFP claims that Etna’s offer of judgment was “gamesmanship” justifying invocation of the “interest of justice” exception because it was not much of a compromise and did too little to encourage settlement. But there was no case evaluation award to compare with Etna’s offer of judgment to conclude that it was a “gamesmanship” or de minimis offer. Rather, Etna’s offer of judgment was only slightly more than what AFP admitted that it clearly owed to Etna. Moreover, AFP did not make a counteroffer in an effort to resolve the dispute between it and Etna. MCR 2.405(A)(2). The record also suggests that AFP was simply unwilling to compromise at all regarding paying any time-price differential to Etna. At best, AFP’s rejection of the offer was reasonable. But the reasonableness of AFP’s refusal of the offer does not “constitute the unusual circumstances encompassed by the ‘interest of justice’ exception.” Derderian,
The trial court ruled “that the interest of justice exception should [not] apply here. This time price differential claim by Etna has still not been paid years after entering into the contract that supplied materials to AFP Plaintiffs argument in that regard is rejected.” AFP’s arguments on appeal do not establish that the trial court abused its discretion. Derderian,
III. CONCLUSION
In Docket No. 306215, we reverse the trial court’s August 29, 2011 judgment to the extent it imposes a construction lien foreclosure judgment against Northtowne’s interest in the subject property on the bases that Vereyken was the implied agent of Northtowne when Vereyken “contracted for the improvement to the real property” and that Northtowne was “an owner who has required the improvement.” MCL 570.1107(1). We remand for
In Docket No. 307540, we affirm the trial court because it did not clearly err in concluding that the attorney fees it assessed against AFP were necessitated by AFP’s rejection of Etna’s offer of judgment. MCR 2.405(A)(6). Further, AFP has not established that the trial court abused its discretion by not invoking the “interests of justice” exception. MCR 2.405(D)(3). Defendant Etna may tax costs pursuant to MCR 7.219 as the prevailing party.
Notes
All parties agree that “permission” is a typographical error that should read “premises in ... .”
MCL 570.1105(3) defines “owner” as “a person holding a fee interest in real property or an equitable interest arising out of a land contract.”
Vereyken’s failure to pay the winter 2006 taxes by February 14, 2007, would result in the assessment of a collection fee and interest charges. See MCL 211.44.
See note 2 of this opinion.
“ ‘Adjusted verdict’ means the verdict plus interest and costs from the filing of the complaint through the date of the offer.” MCR 2.405(A)(5).