In this suit to enforce several notes, letters of credit, and guaranties, defendants Daniel J. Aronoff; Arnold Y. Aronoff; their related trusts, the Daniel J. Aronoff Living Trust and the Arnold Aronoff Revocable Trust; and their business entities, Eagle Park Associates Limited Partnership, Tampa Associates Limited Partnership, The Star Group, Inc., Edison Farms, Inc., and Strategic Equities, Inc.,
I. BASIC FACTS
Daniel and Arnold Aronoff own and operate various businesses. They financed their business activities in part through loans from Huntington. Eagle Park obtained a loan from Huntington for more than $14 million in December 2001, which Arnold Aronoff, his trust, Tampa Associates, and Strategic Equities guaranteed. Tampa Associates, under its former name, obtained a loan of more than $7 million from Huntington in December 2003. Arnold Aronoff, his trust, Eagle Park, and Strategic Equities guaranteed that loan. Daniel and Arnold Aronoff and their trusts took out a loan for more than $13 million from Huntington in February 2009. Tampa Associates, Eagle Park, The Star Group, Glades Enterprises, and Edison Farms each guaranteed that loan. Arnold Aronoff and Tampa Associates secured a standby letter of credit from Huntington in favor of the City of Novi. The City of Novi drew on the letters of credit in January 2010 and Arnold Aronoff and Tampa Associates became liable to Huntington for the outstanding balance.
After defaults on the notes and letters of credit, Huntington demanded payment from the obligors and guarantors of each note and letter of credit, but was unable to obtain full payment on the debts. In May 2010, Huntington sued Daniel Aronoff, Arnold Aronoff, and the Aronoff entities. By May 2011, it had amended its complaint to include all the outstanding notes and letters of credit involved. In its second amended complaint, Huntington asked the trial court to enter a judgment of more than $27 million each against Arnold Aronoff, his trust, Eagle Park, Tampa Associates, and Strategic Equities. It also asked for a judgment of almost $15 million each
In answer to Huntington’s claims, defendants alleged numerous affirmative defenses. In relevant part, they alleged that Huntington’s claims were barred because it was impossible to perform after the advent of “unprecedented and unforeseen economic conditions” affecting business in Michigan and Florida. They also alleged that Huntington “reneged” on a $5 million loan commitment that it made to them in October 2007. They explained that Huntington’s failure to meet its commitment placed them in a “distressed economic position and near insolvency.” Had Huntington fulfilled the loan commitment, they further stated, the debt would have been significantly reduced. For that reason, they asked the trial court to offset Huntington’s claims by the amount that they would have been able to repay had Huntington not “breach[ed]” its obligations under the October 2007 loan commitment. They also claimed that Huntington’s actions with regard to the October 2007 loan commitment amounted to fraud or misrepresentation, which negated their own liability under the notes, letters of credit, and guaranties.
In June 2011, Huntington moved for summary disposition under MCR 2.116(C)(9) and (10). Huntington argued that it was undisputed that defendants executed the notes, letters of credit, and guaranties at issue and failed to make the required payments under those agreements. Huntington also argued that the affirmative defenses that defendants alleged in their answer could not serve as a bar to Huntington’s claims. It noted that the loan commitment allegedly made in October 2007 predated one loan and predated the amendments to others. For that reason, whatever effect that loan commitment might have had, it was superseded by subsequent agreements. Huntington also argued that MCL 566.132(2) barred any defense arising from the alleged October 2007 loan commitment because the loan commitment was not in writing and signed by someone authorized to act on Huntington’s behalf. Finally, Huntington argued that a downturn in economic conditions did not amount to a defense to the required payments. Because the undisputed evidence showed that defendants were hable for the payments required under the notes, letters of credit, and guaranties, and had no valid defense to the claims, Huntington asked the trial court to grant summary disposition and enter judgment in its favor.
In response to Huntington’s motion, defendants did not directly contest the validity and amounts due under the notes, letters of credit, and guaranties. Instead, they presented evidence and argued that their inability to pay under those agreements arose from Huntington’s wrongful conduct.
They presented evidence that Daniel Aronoff began to negotiate a $5 million line of credit with Huntington in June 2007. The line of credit was to be secured by the proceeds from financial institutions in Florida that Daniel and Arnold Aronoff were in the process of acquiring. Huntington purportedly approved the line of credit in a letter dated July 2007 and the parties were to close on the line of credit by the end of October 2007. However, Huntington failed to close the loan. Despite reassurances that the closing would occur and that the loan documents were being drafted, Huntington still had not closed on the line of credit by November 2007. Finally, in December 2007, Huntington
Defendants claim that Huntington’s refusal to close the loan led to financial distress; they were even unable to meet their January 2008 payroll. They stated that Huntington then used their financial distress to compel them to accept a modified loan deal. The new loan was for $4.3 million rather than $5 million and required them to pledge their remaining assets as security for the loan. The parties agreed to the new loan in February 2008. Defendants presented evidence that, because they pledged the additional property as collateral for the new loan, they were unable to take advantage of other loan and sale offers.
In their answer to Huntington’s motion for summary disposition, defendants argued that Huntington’s refusal to meet the $5 million loan agreement in October 2007 was wrongful and proximately caused significant losses. They maintained that MCL 566.132(2) did not apply because that statute applied only to “actions” and not defenses. In any event, they explained, the documents and e-mails circulated before the proposed closing on the original commitment were sufficient to satisfy MCL 566.132(2). Because their “lender liability defense” would “fully defeat” Huntington’s right to recover under the notes, letters of credit, and guaranties, they asked the trial court to deny Huntington’s motion for summary disposition. Finally, in the alternative, defendants argued that summary disposition was premature because the parties had not yet concluded discovery.
In November 2011, the trial court issued its opinion and order granting Huntington’s motion. The trial court first noted that defendants did not “dispute the existence of the loans, the terms, the payments, or that they are in default.” Instead, the court explained, they argued that they would not have defaulted but for Huntington’s failure to abide by its promise to loan them an additional $5 million in October 2007. The trial court, however, determined that MCL 566.132(2) barred any defense premised on an attempt to enforce Huntington’s oral promise to loan them money on terms other than those that the parties ultimately reduced to writing in February 2008. The trial court examined the evidence and concluded that, before February 2008, Huntington had not obligated itself to make the disputed loan in a properly signed promise or commitment:
To be sure, these documents suggest that the parties negotiated a $5 million loan in 2007, and that [Huntington’s] representatives orally committed to closing the loan. The documents do not, however, constitute a written “promise or commitment” sufficient to satisfy the statute of frauds. The July 18 letter, for example, explicitly notes that [Huntington] is only “prepared to discuss a possible extension of credit for your operation,” and that “the terms outlined above are not all-inclusive, but merely reflect our discussions to date, are subject to change and will be supplemented by our standard loan requirements and documentation.” Thus, that document does not constitute a “promise or commitment” by [Huntington] to lend money, as it suggests only that [Huntington] was willing to consider such a loan, but had not yet committed to it. Nor could the November 29 “closing checklist” be considered a “promise or commitment” by [Huntington] to lend money, as it does not even describe the transaction in question, much less identify its terms. Rather, that document is simply a list of items that [the borrowers] must provide before a closing can occur. Finally, theclosing documents themselves do not satisfy the statute since they are not signed by an authorized representative of [Huntington].
Because the undisputed evidence showed that Huntington never actually committed to make the disputed loan in writing, the trial court concluded that defendants could not rely on the loan negotiations to establish a defense to Huntington’s claims.
The trial court also rejected the contention that MCL 566.132(2) does not apply to defenses. The trial court determined that it would elevate form over substance to allow a party to indirectly enforce an oral agreement as a defense when the statute of frauds would preclude that party from directly enforcing the oral promise in a claim. The trial court similarly rejected the notion that a grant of summary disposition would be premature, ruling that there was no reason to believe that further discovery would reveal documents beyond those already discussed. After discussing the arguments and evidence, the trial court concluded that the undisputed evidence showed that defendants had breached the agreements at issue and were liable to Huntington in the amounts established in Huntington’s motion for summary disposition.
The trial court entered its order and judgment in favor of Huntington in December 2011. The judgment provided that Arnold Aronoff, his trust, Eagle Park, Tampa Associates, and Strategic Equities had to pay Huntington approximately $28.5 million and that Daniel Aronoff, his trust, the Star Group, Glades Enterprises, and Edison Farms had to pay Huntington approximately $15.3 million. The judgment further stated a collective maximum amount of liability for defendants and ordered that their individual liability must be reduced by the amount of any payment or collateral that Huntington received from any of them toward the debt for the underlying note or letter of credit. The judgment also provided for costs and attorney fees.
In January 2012, defendants moved for reconsideration of the trial court’s judgment. They argued that the trial court palpably erred when it rejected their defense as barred under MCL 566.132(2) and when it determined that there was no fair likelihood that further discovery would yield support for their defense. They also argued that the judgment should have included a provision that adjusted the amounts owed by reducing the interest on the debt for amounts paid before the judgment and that the trial court should have given them an opportunity to amend their answer. Finally, they argued that the trial court erred when it ordered them to pay attorney fees without first granting them a hearing to determine whether the fees were reasonable.
Later that same month, the trial court denied the motion for reconsideration in part. The trial court rejected defendants’ efforts to revisit the evidence that they submitted to establish that Huntington had committed to loan them $5 million in October 2007 and to raise new evidence and new claims or defenses. It did, however, consider the potential that summary disposition may have been premature. The trial court indicated that it wanted to further consider their argument that the statute of frauds could be satisfied through “internal documents which were never shared with the other party . ...” It also invited Huntington to respond to their argument that the judgment should have included a provision for adjusting interest and should not have included attorney fees without first conducting a hearing.
In March 2012, the trial court entered its final order resolving defendants’ motion for reconsideration. The trial court first
The parties later came to an agreement on the amount of attorney fees and filed a stipulation with the trial court. In April 2012, the trial court entered an order amending the judgment to reflect the stipulated amount.
Defendants then appealed in this Court.
II. SUMMARY DISPOSITION
A. STANDARDS OF REVIEW
Defendants first argue that the trial court erred when it granted Huntington’s motion for summary disposition. Specifically, they contend that the trial court erred when it determined that MCL 566.132(2) barred their defense premised on Huntington’s allegedly wrongful refusal to abide by the terms of the loan negotiated in October 2007. In the alternative, they argue that the trial court’s decision was premature because there was a fair likelihood that further discovery would have established their defense. Finally, they argue that the trial court should have permitted them to amend their answer to revise their defense or add a defense or counterclaim premised on the October 2007 loan commitment.
This Court reviews de novo a trial court’s decision on a motion for summary disposition. Barnard Mfg Co, Inc v Gates Performance Engineering, Inc,
B. LENDER LIABILITY DEFENSE
When in the trial court, defendants did not contest the validity of the agreements underlying Huntington’s claims against them. Instead, they argued that those claims were unenforceable as a result of, or should be offset by, Huntington’s “lender liability” arising from its failure to abide by the terms of a loan that they negotiated with Huntington in October 2007. It is not clear that Michigan recognizes a defense whereby a borrower can avoid liability under a lawfully made note by pleading and proving that the lender engaged in wrongful conduct unrelated to that note. From their allegations, however, it is clear that defendants’ “lender liability” defense is more aptly characterized as a breach of contract counterclaim framed as an affirmative defense. That is, defendants alleged and argued that Huntington entered into a valid and binding agreement to loan them $5 million in October 2007 and that Huntington’s
As the proponents of this alleged loan commitment, defendants have the burden to prove its existence. Hammel v Foor,
In addition to these basic elements of a contract claim, defendants had to comply with the applicable statute of frauds. The Legislature long ago provided that certain types of agreements, contracts, or promises are “void” unless in writing and signed by the party to be charged with the agreement. See MCL 566.132(1). Typically, a party can meet the requirements of a statute of frauds by presenting a written document or documents that individually or collectively summarize the essential elements of the alleged agreement. See Fothergill v McKay Press,
In 1992, Michigan’s Legislature decided to provide greater protection to financial institutions from potentially fraudulent or spurious claims by disgruntled borrowers. See
As the trial court recognized, it is noteworthy that the Legislature did not provide that a party may meet the writing requirement of MCL 566.132(2) with evidence of a “note or memorandum of the agreement, contact, or promise”, as it did under MCL 566.132(1). Instead, it barred any “action” to enforce a promise or commitment to lend money unless the “promise or commitment” is in writing and signed with an authorized signature. MCL 566.132(2). By requiring that the “promise or commitment” — as opposed to some other document — must be in writing and have an authorized signature, it is evident that the Legislature intended to provide financial institutions with a greater degree of protection than that afforded generally under MCL 566.132(1). See Crown Technology Park v D&N Bank, FSB,
Here, defendants presented evidence that tended to suggest that Huntington had reached a preliminary agreement to loan them $5 million in about October 2007. However, the undisputed evidence also showed that the parties never finalized that agreement because Huntington decided not to proceed with the closing as originally discussed. Instead it renegotiated the terms and ultimately provided the loan that the parties agreed to in February 2008. Because defendants did not provide any evidence that Huntington executed a written agreement, with an authorized signature, to provide a loan under the terms that they claimed were negotiated in October
Even assuming that defendants could meet the requirements stated under MCL 566.132(2) with memoranda and other documentary evidence tending to show that Huntington agreed to loan them money under terms that were different from those found in the February 2008 agreement, the trial court still did not err when it concluded that the written evidence presented to the court was insufficient to establish the essential terms of the agreement. Under MCL 566.132(1), the proponent’s written evidence must still be sufficient to establish the terms without the need to fill in gaps with oral testimony: “Basically, such a writing must contain all of the essential terms of the contract with the degree of certainty which would obviate any necessity for parol evidence. There should be no cause for inquiring beyond the writing to identify the terms and conditions of the agreement.” Ass’n of Hebrew Teachers v Jewish Welfare Federation,
Here, defendants relied heavily on the checklist prepared by Huntington for the proposed closing in October 2007. While this closing checklist refers to documents that would presumably contain the terms for the proposed loan, it plainly does not include sufficient detail to satisfy the statute of frauds by itself. The checklist does not define the interest rate, does not provide for periodic payments, does not specify the term of the loan, and does not indicate whether it refers to a revolving line of credit or a fixed loan. Indeed, the checklist clearly identifies several critical documents— including the loan agreement itself — as being in the draft stage. Similarly, as the trial court correctly noted, the July 2007 letter from Huntington cannot serve to fill in these missing gaps because it clearly identifies the terms as proposals for discussion on a possible extension of credit. And defendants did not present any other signed documents that might establish these missing elements. In addition, despite claiming that the primary difference between the proposed loan commitment from October 2007 and the agreement entered into in February 2008 involved the collateral requirements, defendants did not provide a signed document to establish the collateral requirements required under the terms of the loan that the parties purportedly agreed to in October 2007. Because defendants failed to establish the essential terms of the October 2007 loan commitment, the trial court properly determined that MCL 566.132(2) barred them from trying to enforce that commitment in the present action.
C. FURTHER discovery and contract claims
Defendants also argue that, even if the checklist and other evidence that they presented in response to Huntington’s motion for summary disposition did not satisfy the requirements stated under MCL 566.132(2), summary disposition was nevertheless premature because further discovery might have disclosed evidence that would satisfy the statute. As this Court recently reiterated, a grant of summary disposition may be premature if the party opposing the motion has not had a reasonable opportunity to conduct discovery. See Thomai v MIBA Hydramechanica Corp,
The trial court initially determined that defendants had been given sufficient time to conduct discovery before Huntington’s motion. However, on reconsideration, defendants argued that further discovery might reveal that Huntington prepared internal documents for the original loan closing, which might satisfy MCL 566.132(2). We, however, agree with the trial court’s determination that such internal documents cannot satisfy the statute. With MCL 566.132(2), the Legislature limited a party’s ability to enforce a “promise or commitment” by a financial institution to those situations when the promise or commitment is in writing and signed with an authorized signature. By referring to a promise or commitment that is itself in writing and signed, the Legislature plainly intended to limit enforcement to a promise or commitment that was actually made. A purely internal document cannot satisfy the requirements stated under MCL 566.132(2) because such a document could not induce reliance. See Zaremba Equip, Inc v Harco Nat’l Ins Co,
For similar reasons, we also agree with the trial court’s determination that defendants would not benefit from an opportunity to amend their answer to better allege their “lender liability” defense or allege a counterclaim. In both cases they rely on Huntington’s purported breach of the October 2007 loan commitment, but, as already explained, they failed to present any evidence that the October 2007 loan commitment met the requirements stated under MCL 566.132(2). Because that statute would bar any defense or counterclaim premised on the October 2007 loan commitment, the proposed amendments would be futile. See Weymers v Khera,
The claim made by defendants — that Huntington’s February 2008 loan of $4.3 million lacked adequaté consideration — also necessarily fails. Their argument presupposes that the October 2007 loan commitment for $5 million was enforceable and, for that reason, the subsequent loan constitutes a modification of that loan without adequate consideration. Even assuming that parties cannot modify an existing agreement without additional consideration, see Adell Broadcasting Corp v Apex Media Sales, Inc,
The trial court did not err when it granted Huntington’s motion for summary disposition.
III. RECONSIDERATION
Defendants further maintain that the trial court erred when it refused to
In order to establish the right to relief, the party bringing the motion for reconsideration must establish that the trial court made a palpable error and a different disposition would result from correction of the error. Luckow Estate v Luckow,
IV DUE PROCESS
Defendants finally argue that the trial court’s decision to grant summary disposition must be reversed because the trial court violated their rights to due process by treating them unfairly. Specifically, they contend that the trial court demonstrated its bias by allowing Huntington to file briefs that exceeded the page limit; by allowing Huntington to file an extra brief, which even included new exhibits, while criticizing their own lawyer for doing the same; by allowing Huntington to amend its complaint, but refusing to allow them to amend their answer; and generally by maligning their lawyer.
On appeal, defendants claim that this evidence of bias constitutes structural error. However, they do not support this claim of error by meaningful discussion of the authorities and record — they merely cite a few federal criminal cases establishing a criminal defendant’s right to a fair trial and list the trial court’s actions that they feel show evidence of bias. By failing to properly address this issue on appeal, defendants have abandoned this claim of error. See Mitcham v Detroit, 355 Mich 182, 203;
In any event, after having examined the record, we conclude that defendants have not established bias warranting relief. Generally, this Court will presume that the trial judge is impartial and the party asserting otherwise bears a heavy burden to overcome that presumption. In re MKK,
V CONCLUSION
The trial court did not err when it concluded that the undisputed evidence showed that Huntington was entitled to summary disposition; defendants did not dispute their liability under the terms of the notes, lines of credit, and guaranties and failed to support their proposed “lender liability” defense with evidence that Huntington breached a written agreement to loan them $5 million in order to extort more favorable terms at a later date. In addition, the trial court did not err when it determined that defendants would not benefit from further discovery or be able to cure the deficiencies in their position through amendment of their answer. Finally, there were no other errors warranting relief.
Affirmed. As the prevailing party, Huntington may tax its costs. MCR 7.219(A).
Notes
For convenience, we shall collectively refer to the trusts, partnerships, and corporations as the Aronoff entities.
The court in Barclae did not construe MCL 566.132(2), but instead assumed that the caselaw construing MCL 566.132(1) applied equally to the facts of Barclae. It then determined that the evidence was insufficient to satisfy the statute of frauds because the evidence failed to establish mutuality of agreement. Given these limitations, we find it inapposite.