As this blog previously mentioned, the Michigan Court of Appeals ruled, in Fisher Sand and Gravel v Sweebe, that the four-year limitations period applied. The Court of Appeals ruled that the four-year statute of limitations applied, despite the open agreement being a separate contract. The court reasoned that the open account existed “solely to facilitate [the] sale of goods.” The Court of Appeals also noted that its ruling was consistent with court cases from other states and that the UCC’s purpose of promoting uniformity among states with respect to transactions in goods was met.

Although a decision from the Supreme Court will not be announced for some time,  we will be sure to keep you updated.

The only problem with this strategy was they stopped making payments to Wells Fargo on revenue bonds that were issued to construct two of the city’s parking garages. Wells Fargo took the city to court and won a judgment against the city.

To read more about this story “California City Hit With $2 Million Parking Ticket” by Rich Smith please copy the following link into your web browser.

http://www.dailyfinance.com/2012/04/17/stockton-calif-2-million-dollar-parking-ticket/

            In Awad v GMAC, the Michigan Court of Appeals considered whether a plaintiff has standing to challenge a foreclosure once the redemption period has expired.  In Awad, the defendant foreclosed on the plaintiff’s property. The plaintiff failed to redeem the property, and 18 days before the expiration of the redemption period, the plaintiff filed suit. The Plaintiff, however, failed to ask the court to stay the foreclosure before it occurred.

            The Court of Appeals ruled that the plaintiff lacked standing to challenge the foreclosure. The Court noted that a lawsuit challenging the foreclosure, after the sale has occurred, does not toll the redemption period. Once the redemption period expired during the pendency of the lawsuit, so too did any rights belonging to the plaintiff in the property. As a result, the plaintiff no longer had standing to sue.

After years of experience with clients and the IRS, an observation I will add is that you should never ignore the notices. While this may seem obvious, on too many occasions clients choose avoidance thinking somehow these matters resolve themselves. Perhaps they conclude there is no risk in this approach as they have no exposure or, even worse, conclude that they have exposure but since they can’t make good on a legitimate obligation too the IRS they don’t feel compelled to respond at all. You should know that avoidance is never an effective strategy.

Even under the worst of circumstances we have found that we are able to work with the IRS and that more often than not they are willing to work with us. This is so unless the IRS feels that the taxpayer simply refuses to responsibly mange the process.

Please copy the following link into your web browser for more detail:

http://archive.constantcontact.com/fs014/1102394474495/archive/1109162382954.html

In Greenville Lafayette, LLC v Elgin State Bank, the Michigan Court of appeals had to determine whether MCL 600.3204(1)(b), the one-action rule, prevented a mortgagor from collecting on personal guaranties securing the debt on a mortgage. The Sixth Circuit Court of Appeals had previously ruled, in US v Leslie that MCL 600.3204(1)(b) permitted a mortgagor to foreclose on property and also collect on a personal guaranty.

Although the previous courts had ruled in favor of allowing two actions; one to foreclose on a mortgage, and one on a personal guaranty, the Michigan Court of Appeals ruled, in Greenville Lafayette, that the mortgagor could not both foreclose and collect on the guaranty.

The Michigan Court of Appeals noted a critical distinction: that the mortgage in Greenville Lafayette defined the personal guaranty as part of the debt secured by the mortgage. Whereas personal guaranties are generally treated as separate and distinct obligations from the mortgage securing a loan, the mortgage in Greenville Lafayette specifically referenced the personal guaranty as debt secured by the mortgage. As a result, the guaranty was incorporated into the mortgage and became “debt secured by the mortgage” for the purposes of MCL 600.3204(1)(b). Thus, the one-action rule prohibited a second suit based on the personal guaranty.

Greenville Lafayette likely has no impact on whether a mortgage holder may pursue a deficiency judgment. First, the Court of Appeals never considered that issue. Second, MCL 600.3204(1) governs when foreclosure by advertisement may be commenced. It does not govern the parties’ rights after the foreclosure sale.

In order to prevent this undesirable result, mortgagors should refrain from defining personal guaranties as being secured by the mortgage. Doing so prevents the mortgagor from collecting on a personal guaranty, while not proving any real benefit to the mortgage holder.

To view the entire list, copy the following link.

http://www.irs.gov/newsroom/article/0,,id=238262,00.html

In Primetime Landscaping & Snow Removal, LLC v Damico Development, INC., the Michigan Court of Appeals considered whether a trial judge could completely disallow all pre-judgment interest.   The trial court ruled that plaintiff was not entitled to pre-judgment interest because plaintiff breached the contract by charging double the contract price for the salt.

During the litigation, the sole shareholder, Asaro, of plaintiff attempted to represent the corporation without an attorney. Additionally, three other attorneys were either fired or withdrew from representation due to difficulties with Asaro, causing months of delay in the case.

In considering whether pre-judgment interest could be withheld, the Court of Appeals ruled that absent a substantial breach of contract by the plaintiff, that pre-judgment interest should be assessed.  The Court of Appeals noted that there was no substantial breach by the plaintiff because it provided the services it was required to under the contract. The fact that it tried to charge double the contract price for the salt did not constitute a substantial breach.

The Court of Appeals did rule that pre-judgment interest should not accrue during points in time where a delay resulted as a result of the actions seeking interest.

The court also noted that pre-judgment interest would not accrue after the defendant tendered payment to the trial court.  Tendering payment to the other party was not sufficient to stop interest from accruing.

In Cohen v Park West Galleries, the Michigan Court of Appeals considered whether arbitration agreements contained in invoices for subsequent purchases could bind consumers to arbitration over claims arising out of the purchase of items previously made, when the invoices of those purchases did not contain arbitration agreements.

For example, in Cohen, plaintiffs made multiple purchases from an art gallery. On some of the purchases, invoices contained arbitration agreements, but for other purchases the invoices contained no arbitration agreement. The lower court ruled the later arbitration agreements covered the previous purchases, even though the invoices for those purchases contained no arbitration clause.

The Court of Appeals reversed the lower court holding that the arbitration agreements did not reach the invoices that failed to mention arbitration. The Court noted that Michigan law requires “that separate contracts be treated separately.” Because each purchase of art had a separate invoice each purchase was subtract to a separate and distinct contract. As a result, only the purchases subject to the arbitration agreements were forced into arbitration. The claims regarding the purchases without arbitration agreements would remain in the Michigan Courts.

In order for businesses to get the full benefit of an arbitration clause, it is important that those clauses be used in every contract, invoice, or other documents consummating a sale of goods or performance of services. Businesses cannot rely on the clause of one agreement to carry over to another.

The Posting Rule has been the subject of constant litigation. On March 2, 2012, a federal judge ruled that the NLRB could require employers to hang the poster. However, on April 13, 2012, a federal judge for the district of South Carolina ruled that the NLRB exceeded its authority by requiring employers to hang the poster.

Now, the US Court of Appeals for the District of Columbia has ruled that the Posting Rule cannot take effect until all of the legal questions have been resolved.

            The plaintiff sued the defendant arguing that defendant would violate the restrictive covenant because Taco Bell sells “hamburger products.” The plaintiff argued that “hamburger products” was synonymous with “ground beef products”, and that because Taco Bell sold tacos containing ground beef; the terms of the restrictive covenant were violated. The defendant made two arguments in response: (1) That the restriction prohibited hamburger restaurants that would compete with a Wendy’s; and (2) that the language of the restrictive covenant was vague, and as a result, it was unenforceable.

            The Michigan Court of Appeals was left to determine what “hamburger products” meant. In doing so, the Court of Appeals relied on a 1984 dictionary definition of hamburger. The dictionary contained three different definitions, all of which described a hamburger as “ground beef.” Accordingly, the Court of Appeals ruled that the plain and popular meaning of “hamburger products” was “items made of ground beef.”

            Surprisingly, the Court of Appeals ruled that the term as used in the restrictive covenant was not ambiguous, because it was not susceptible to multiple meanings.  The Court of Appeals prohibited the Taco Bell restaurant on the basis that it was going to sell “hamburger products.”

            The moral of the story is that parties to contracts should carefully define key terms so that the courts need not resort to nearly thirty-year old dictionary definitions, and reach a result which is probably contrary to the intent of the parties.