In Miller-Davis, the plaintiff, a general contractor, filed a breach of contract claim against the defendant, a subcontractor who was hired to rebuild the roof of a YMCA swimming pool. The Plaintiff alleged that the defendant’s work failed to conform to the contract’s specifications. The plaintiff did not file a tort claims against the subcontractor. The problems with the roof were so severe that the roof had to be replaced, which is how the problem was identified.

Because the lawsuit was filed over six years after the work had been performed, there was an argument as to whether the statute of limitations for breach of contract, or the statute of repose applied. The subcontractor argued that Michigan’s statute of repose protected it from actions “to recover damages for any injury to property, real or personal, or for bodily injury or wrongful death arising out of the defective and unsafe condition of an improvement to real property. …” Under the statute of repose, all claims must be filed within six years after occupancy. The plaintiff argued that the statute of repose did not apply because the claims were for breach of contract, not claims in tort.

Even though both statutes have six-year limitation periods, there is a significant difference between the two. Under the statute of repose, a claim accrues at the time of “occupancy of the completed improvement, use or acceptance of the improvement.” However, the statute of limitations for a breach of contract claim begins to run at the time the claim accrues.

The Michigan Supreme Court ruled that the statute of limitations for breach of contract applied because the claim was not a tort claim. The court noted that MCL 600.5839 “does not apply to a claim against an engineer or contractor for a defect in an improvement when the nature and origin of the claim is the breach of a contract.” The court ruled that the statute of repose applied only to tort actions.

The Supreme Court ruled that the claim did not fall under the statute of repose because:

There was no allegation that the roof deck system caused any “injury to property” or “bodily injury or wrongful death.” Nor was there any allegation of a “defective and unsafe condition.” Rather, plaintiff claimed that, because defendant failed to build the roof to the agreed-upon specifications, plaintiff was forced to expend money repairing it.

This case is significant because it narrows the scope of Michigan’s statute of repose exclusively to tort actions.

In Price v. High Pointe Oil Company (available at: http://coa.courts.mi.gov/documents/OPINIONS/FINAL/COA/20110825_C298460_35_298460.OPIN.PDF) the plaintiff homeowner sued the defendant oil company after her home was flooded with oil. The plaintiff had previously used the defendant to fill up her oil-burning furnace. After some time, the plaintiff purchased a new, non oil-burning furnace and discontinued purchasing oil from the defendant. After purchasing the new furnace, the plaintiff sold her old furnace and the oil tank to a third party. After a clerical error, the oil company set up an oil delivery. The oil company began to pump oil into the line that used to be connected to the oil tank. Because the oil tank was no longer in place the oil pumped directly in the plaintiff’s basement. In all, just under 400 gallons of oil were pumped into the basement.

As a result of the oil company’s negligence, the plaintiff’s home had to be demolished and the plaintiff lost a number of personal items. In addition to economic damages the defendant was depressed over the loss of her home. She felt great shame, embarrassment and humiliation in moving into her parents’ house. The plaintiff was awarded $100,000 in non-economic damages and the defendants challenged the award.

In Price, the Michigan Court of appeals ruled that non-economic plaintiffs may seek non-economic damages in negligence actions for the destruction of real property. The court’s decision turned on the historical and theoretical differences between personal property and real property. One of the most important distinctions between real property and personal property (generally) is that the former is completely unique. No piece of land is exactly the same. While Michigan courts have refused to allow non-economic damages for the destruction personal property (like a dog, car, or bicycle), the court failed to extend those prior holdings to real property.

In addition to each parcel of land’s unique characteristics, the court noted that homes have a unique value “which often provides as much if not more feelings of emotion and memories as it does shelter.” Moreover, the court noted that property allows special remedies for the breach of contracts for the sale of land such as specific performance.

This case is just one of many that highlights the special importance that land plays in our society. The implications of this case remain unclear, although it could often be cited for the enduring proposition that real property, above all else, holds a special place under the law.

In Premer, the Michigan Court of Appeals confirmed how to properly state a claim for unjust enrichment. In order to state a claim for unjust enrichment the party making the claim must make two showings: First, the claiming party must show that the other party received some benefit; Second, there must be an inequity. In showing that a benefit was conferred, the Premer Court considered a number of factors, but reaffirmed that the key factor in these cases is that unjust enrichment must be determined by the benefit conferred on the defendant, such as the increase in value provided by the work.

For example, in Premer, the plaintiffs sued under a theory of unjust enrichment. The plaintiffs argued that they should be compensated based on value of the services they provided in improving the land. The court rejected this argument and stated that unjust enrichment is determined based on the value added to the land based on the work completed. Additionally the court noted that additions in value to the land needed to be offset by the costs incurred by the defendant in foreclosing on the land. As a result, the plaintiff’s claims for unjust enrichment failed.

Despite the often-complicated world of contract law, it is important to remember that this area seeks to reach fair and equitable results. As a result, contract law often provides remedies where those unfamiliar with the topic might not realize. Unjust enrichment is one these doctrines that seeks to reach fair results.

For those not familiar the intricacies of the legal world, legal jargon may seem like a foreign language (and in some cases it is). One of the more difficult subject areas of law is contract law. Contract law, at its essence, seeks to protect the expectations of the parties to the contract and to reach fair results.

Even where no contract exists between parties, the law has developed doctrines meant to provide for fair and equitable results. One such doctrine, called unjust enrichment, seeks to protect the party that conferred a benefit upon another party. Unjust enrichment is a substitute for damages. It may apply where either no contract between the parties existed, or where the benefit conferred was outside the scope of any contract that did exist between the parties. Unjust enrichment is unavailable when there is an express contract between the parties, because damages are available under the express contract, and the court is not supposed to re-write the deal that the parties themselves have negotiated.

In a recent case, Hosford Bros. Concrete, Inc. v. Premer (available at www.michbar.org/opinions/appeals/2011/072611/49429.pdf), the Michigan Court of Appeals discussed the principle that unjust enrichment is not available where an express contract exists. The parties had two express contracts for the lending of money to purchase land and the land contract entered into as a result of the loan. The plaintiff in Premer sought payment for unjust enrichment following work they completed in developing a subdivision. Due to the real estate market collapse, they were unable to fully develop the land and the land was foreclosed on by the defendants. The plaintiffs sought payment for the improvements they made to the land.

The court noted that although there were two express agreements in the case, an unjust enrichment claim was still actionable because the improvements to the land were outside the scope of the two express land sale contracts. Next, how the defendant was unjustly enriched by the improvements to the land needed to be determined and calculated.

In Bailey, a man was brandishing a firearm and threatening to shoot people. A witness informed two security guards working for a company hired by the landlord of the dangerous situation. The witness pointed in the direction of the trouble, which was visible to the guards. Instead of calling the police or attempting to defuse the situation, the security guards dropped off an intoxicated person at another apartment. While security guards took the intoxicated person to the apartment, shots were fired and Bailey struck by two bullets. As a result of his injuries, Bailey sued the apartment complex and the security company. Bailey argued that the landlord and security company had a duty to call the police once they were apprised of the dangerous situation.

Because of the novel issue presented, the court discussed the evolution of premises liability with respect to merchants. The court then concluded that the same rules that apply to merchants also apply in a landlord-tenant relationship. The specific duty at issue in Bailey was the duty owed to persons on the premises when a situation poses a risk of imminent and foreseeable harm to those present.  The court ruled that the landlords owe their tenants and any invitees to the property a duty “to respond reasonably to situations occurring on the premises.” This includes the duty to call “the police when the criminal acts of a third party endanger a readily identifiable invitee.”

Although landlords have a duty to contact the police, it should be remembered that there is no duty to take further action. The landlord is under no obligation to personally break up any altercation. In order for landlords to protect themselves, they should put policies in place and train employees on how to handle dangerous situations as they arise. When landlords contract with private security firms, landlords should be diligent in confirming that the security guards are aware and trained in these situations.

In some circumstances, and often in the context of a loan, parties may enter into multiple agreements with one another. When there are multiple agreements between the same parties, one party may want to negotiate the inclusion of  “cross default” provisions in those agreements.  A cross default provision provides that a party’s default under one agreement triggers an automatic default of all of the other agreements between the parties. Banks or Lenders often include a cross default provision in their loan documents to protect their financial interests.  Once the cross default provision is invoked, the defaulting party is not likely to have many options for recourse.

In order to be effective, the cross default provision must be included in each of the agreements subject to the cross default. Eagle Ridge LLC v Albert Homes LLC, 2009 Mich App, LEXIS 2382 (November 17, 2009).  In the recent case of Eagle Ridge LLC v Albert Homes LLC, the Michigan Court of Appeals refused to enforce a cross default provision that was found in only one of two simultaneously signed agreements.

The Michigan Court of Appeals used basic contract principals to support its decision.  Quoting Randolph v Reisig, 272 Mich App 331 (2006), the Court found that “an unambiguous contractual provision is reflective of the parties’ intent as a matter of law, and if the language of the contract is unambiguous, we construe and enforce the contract as written.”  Therefore, because one of the agreements at issue did not contain a cross default provision, the Court concluded that the parties must not have intended that the agreement be subject to a cross default provision.

This article was written by Natalie C. Najarian, Associate at Demorest Law Firm.

Recently, our firm won two separate awards of attorney’s fees for two companies in lawsuits they were forced to file or defend.    In the first case, the statute allowed for attorney’s fees and costs to our client when the opposing bank refused to honor an irrevocable letter of credit.    Our second case involved the judge ruling that based on the statute and the Michigan Court Rules the other party’s complaint was so frivolous that sanctions, including attorney’s fees and costs were warranted.

This article was written by Michael R. Dorfman, Senior Associate at Demorest Law Firm.

In the Michigan Court of Appeals case Bronco Oil v Citizens Bank (click here to download), the contract language, in essence, immunized the breaching party from having to pay the damages it allegedly caused because they occurred outside of a 12-month period before the lawsuit was filed. Even though the lawsuit was timely, the potential damages were lost because of when the lawsuit was filed.

This article was written by Michael R. Dorfman, Senior Associate at Demorest Law Firm.

Under the Michigan Court Rules, there are only four grounds to vacate an arbitration award.  These focus on the fairness of the proceeding, rather than whether the arbitrator’s decision was correct or incorrect.  The arbitrator can be set aide only if:

(1)  The award was procured by corruption, fraud or other undue means;

(2)  There was evident partiality by an arbitrator appointed as a neutral, corruption of an arbitrator, or misconduct prejudicing a party’s rights;

(3)  The arbitrator exceed his or her powers; or

(4)  The arbitrator refused to postpone the hearing on a showing of sufficient cause, refused to hear evidence material to the controversy, or otherwise conduct the hearing to prejudice substantially a party’s rights.

If you are dissatisfied with the outcome of an arbitration, it is also very important to act promptly.  There is a very short time period to file a complaint in court to vacate an arbitration award.  Depending on the grounds for challenging the arbitration award, the complaint must be filed within 21 days or 91 days after the date of the arbitration award.  If the complaint is not timely filed, it is too late to challenge the arbitration award later.

This article was written by Mark S. Demorest, Managing Member of Demorest Law Firm

Here is a scenario where a general release was used, which demonstrates the importance of reviewing the specific language used.   The example comes from the recent case of Levy v Ford Motor Company (Click here for a PDF of this decision).   Party A had a history of contracting with Party B for delivery of construction materials and services. In October 1998, an incident occurred involving a truck owned by Party A and a train owned by Party B. Each party maintained that the other was responsible. Party B issued a debit memorandum in 2001, and thereafter stopped paying invoices to offset its alleged losses from damage to its train.   In connection with other contracts, Party A sued Party B for payment for ready-mix concrete shipped after May 2004. The parties settled that case, and their agreement included a release that comprehensively waived any further claims Party A might have against Party B “from the beginning of time,” but “with the sole exception of any claim arising out of damage to the train equipment.

In 2007, Party A filed an action as a claim for payments due under invoices dating from “2001 and before” in connection with deliveries of materials to Party B.  Party A sought monetary contract damages plus an accounting.   However, the Court held that Party A had already released any and all claims it might have otherwise had against Party B arising from events prior to 2004, despite the fact that the claims were not related to the train accident. Because of the comprehensive language and nature of the release it had signed in the first settlement, Party A wound up releasing any and all claims it could have had against Party B, despite the fact the causes of action were completely different.

Always have an attorney review your settlement and release documents to ensure you are preserving valuable rights and not being taken advantage of in the settlement.

This article was written by Michael R. Dorfman, Senior Associate at Demorest Law Firm.