WILDER, P.J.
In this case involving a commercial real-estate contractual relationship, plaintiff, Majestic Golf LLC, appeals as of right from an opinion and order granting it summary disposition in part and denying it summary disposition in part. Defendant, Lake Walden Country Club, Inc., cross-appeals as of right from the same order. We affirm in part, reverse in part, and remand.
In 1991, Waldenwoods Properties, L.L.C. (WPL) started planning for a "golf course-real estate development" on approximately 1,400 acres of land it owned. As planned, the golf course was to be constructed on approximately 400 acres, and residential properties were going to surround the golf course. WPL planned to lease the land for the golf course ("the Golf Property" or "the Premises") to a different entity that would be responsible for constructing and operating the golf course.
On December 8, 1992, WPL (as landlord) and defendant (as tenant) entered into a lease agreement (the Lease) for a period of 25 years. The Lease contained the following relevant paragraphs:
At the time the Lease was originally signed, both parties anticipated the construction of the "golf-real estate development." Defendant was to develop the then-undeveloped Golf Property into 27 golf course holes, and WPL was to develop the surrounding land into residential real estate.
Defendant complied with its obligation under the Lease to construct the 27-hole golf course. Plaintiff has not yet initiated construction on the residential real estate. Defendant had paid rent in a timely manner and fully complied with its other obligations under the Lease until the instant litigation commenced.
According to defendant, it has invested more than $6 million in the Golf Property and has paid over $1.6 million in rent to plaintiff. According to Frank Crouse, a manager of both WPL and plaintiff, defendant recovered its investment in the Golf Property within the first six years.
In March 2003, defendant and WPL (later, plaintiff, as WPL's successor in interest), began merger negotiations. In the potential merger, defendant was to transfer all of its interest in the Golf Property to plaintiff in exchange for an 85 percent membership interest in plaintiff. These merger negotiations continued until the present litigation began.
On October 27, 2006, Crouse (as manager of WPL) sent a letter to Pat Hayes, defendant's president. In this letter, he discussed the status of the ongoing merger negotiations and also discussed the status of the zoning approval process for WPL's "Master Plan" for development. He listed six necessary points of agreement for a successful merger and approval of the Master Plan. The fifth point of agreement required defendant's approval of a "road easement" between holes #21 and #22 (the Road Easement). WPL needed defendant's approval of the Road Easement to obtain Hartland Township's final approval of WPL's Master Plan.
On April 3, 2007, WPL conveyed title to the Golf Property to plaintiff,
On June 1, 2007, Crouse met with defendant's representatives to discuss the proposed merger and proposed Master Plan. According to the summary of the meeting, defendant reviewed plaintiff's proposed Road Easement and suggested certain changes. According to Crouse, none of defendant's suggested changes addressed the Road Easement's location.
On June 19, 2007, Crouse sent an e-mail to James Hile (a representative of defendant).
According to Crouse, a revised version of the Road Easement was delivered to defendant on November 5, 2007, for defendant's consent. According to Crouse, the revised version incorporated some of defendant's recommended changes to the Road Easement, although the location of the easement remained the same.
The discussions between plaintiff and defendant continued and finally culminated in a letter dated October 7, 2008, from Crouse to Hayes that read as follows:
The next day, on October 8, 2008, Crouse sent an e-mail to both Hile and Hayes, which stated in relevant part:
According to Crouse, on November 10, 2008, defendant presented plaintiff with defendant's revised merger documents. These documents continued to claim that consent to the Road Easement was contingent upon finalization of the merger. Crouse stated that these documents were unreasonably one-sided in favor of defendant.
On November 24, 2008, legal counsel for plaintiff sent a letter to defendant that stated in relevant part:
On December 11, 2008, counsel for defendant sent a responding letter to plaintiff. Defendant's counsel stated that it was always the parties' intent to execute the Road Easement at the merger closing. He further stated that defendant was interpreting the November 24, 2008, letter as the formal 30-day notice required under the Lease. He included defendant's revised version of the Grant of Easement and concluded by stating that defendant would agree to the new terms of the Grant of Easement to comply with the Lease. The revised documents were unsigned. In fact, defendant never signed any document to consent to plaintiff's Road Easement.
On December 22, 2008, counsel for defendant sent another letter to plaintiff, informing plaintiff that defendant was exercising its option to purchase the Golf Property under ¶ 17 of the Lease. Defendant stressed that under the terms of the Lease each party must obtain an appraisal. The parties both procured appraisals. Plaintiff's appraisal value of the Golf Property was $800,000, and defendant's effective market value of the Golf Property was zero dollars.
Plaintiff filed its first amended complaint on May 21, 2009. Count I sought specific performance of ¶ 29 of the Lease, which required defendant to vacate the Golf Property upon termination of the Lease. Count II sought a declaratory order stating that defendant's attempt to exercise the option to purchase under ¶ 17 of the Lease was invalid because the Lease had terminated before defendant's attempt to exercise the option. Count III sought a stay of the 90-day appraisal period stated in ¶ 17 of the Lease, pending the trial court's resolution of the other issues of the case. Count IV sought a declaratory judgment and order for payment for defendant's reasonable rental value of the Golf Property during the case. Count V sought a declaratory judgment that defendant's option to purchase was void because defendant's appraisal of zero dollars was submitted in bad faith.
Defendant filed its counterclaim on June 26, 2009. Count I sought specific performance of the appraisal and option to purchase provisions of ¶ 17 of the Lease. Count II sought a declaratory order stating that (1) defendant did not breach the
Defendant moved for summary disposition under both MCR 2.116(C)(8) and MCR 2.116(C)(10) on August 27, 2009. Plaintiff, without citing a court rule, countered by moving for summary disposition on September 24, 2009.
The trial court, while applying only MCR 2.116(C)(10), issued its opinion and order on December 23, 2009. It identified three issues:
The trial court first held that defendant defaulted under the terms of the Lease. It explained that ¶ 22 of the Lease obligated defendant to agree to the requested easements. It further explained that the October 7, 2008, letter provided the requisite notice under ¶ 26 of the Lease, stating:
The trial court held that, because defendant did not provide its consent to the requested easements within 30 days of receiving the October 8 letter, defendant breached the Lease.
The trial court then held that termination of the Lease was not proper under principles of equity. The trial court concluded that termination was not warranted because defendant's breach was not material. It reasoned that defendant had invested over $6 million in the Golf Property and had paid its rent in a timely manner. The trial court also reasoned that any wrongful withholding of consent to the easement would be compensable in money damages. Thus, the trial court concluded that forfeiture of the Lease would be "unduly harsh and oppressive."
On January 22, 2010, plaintiff moved for reconsideration. Plaintiff urged the trial court to reconsider its holding that equitable considerations prohibited plaintiff from terminating the Lease. Plaintiff also urged the trial court, as a procedural matter, to dismiss count IV of plaintiff's first amended complaint without prejudice. On March 31, 2010, the trial court declined to reconsider the substance of its previous order. However, the trial court agreed to dismiss count IV without prejudice.
On August 23, 2010, the parties stipulated to dismissal of count II of defendant's counter-complaint, which resolved the final issue and closed the case.
We review de novo a trial court's decision on a motion for summary disposition brought under MCR 2.116(C)(10). Dressel v. Ameribank, 468 Mich. 557, 561, 664 N.W.2d 151 (2003). When deciding a motion for summary disposition under this rule, a court must consider the pleadings, affidavits, depositions, admissions, and other documentary evidence then filed in the action or submitted by the parties in the light most favorable to the nonmoving party. MCR 2.116(G)(5); Wilson v. Alpena Co. Rd. Comm., 474 Mich. 161, 166, 713 N.W.2d 717 (2006). The motion is properly granted if the evidence fails to establish a genuine issue regarding any material fact and the moving party is entitled to judgment as a matter of law. Michalski v. Bar-Levav, 463 Mich. 723, 730, 625 N.W.2d 754 (2001).
Issues involving either contractual interpretation or the legal effect of a contractual clause are reviewed de novo. McDonald v. Farm Bureau Ins. Co., 480 Mich. 191, 197, 747 N.W.2d 811 (2008). "When reviewing a grant of equitable relief, an appellate court will set aside a trial court's factual findings only if they are clearly erroneous, but whether equitable relief is proper under those facts is a question of law that an appellate court reviews de novo." Id.
Plaintiff first argues that the trial court improperly utilized the "material
"A contract must be interpreted according to its plain and ordinary meaning." Alpha Capital Mgt. v. Rentenbach, 287 Mich.App. 589, 611, 792 N.W.2d 344 (2010). When "contractual language is unambiguous and no reasonable person could differ concerning application of the term or phrase to undisputed material facts, summary disposition should be awarded to the proper party." Id. at 612, 792 N.W.2d 344.
The forfeiture clause is located in ¶ 26 of the Lease and provides as follows:
Thus, according to the plain and unambiguous terms of the Lease, plaintiff could "cancel and terminate" the Lease if defendant failed to comply with any obligation (with the exception of the failure to pay rent) and that failure to perform continued for 30 days after defendant was formally notified, pursuant to ¶ 31 of the Lease, of the failure to perform.
As we discuss later in this opinion when we discuss defendant's cross-appeal, we conclude that there is no question of fact that the October 7, 2008, letter complied with the notice requirements of ¶ 31 of the Lease. Therefore, to avoid defaulting under the terms of the Lease, defendant had 30 days from October 8, 2008, to cure its non-performance. The record is clear that defendant did not respond to plaintiff's letter by November 7, 2008. Therefore, under the plain language of ¶ 26, the default occurred on or about November 7, 2008. The trial court correctly reached this conclusion.
Defendant, however, asserts that plaintiff breached the contract first when it recorded a document in the Livingston County Register of Deeds in February 2008. But defendant does not explain what covenant of the Lease plaintiff allegedly violated and also does not provide any authority in support of why this alleged "breach" prevented plaintiff from adhering to other aspects of the Lease. "An appellant may not merely announce his or her position and leave it to this Court to discover and rationalize the basis for his or her claims." In re Temple Marital Trust, 278 Mich.App. 122, 139, 748 N.W.2d 265 (2008). Consequently, we decline to consider defendant's argument.
Even though the trial court correctly found that defendant breached the Lease, the trial court refused to allow plaintiff to terminate the Lease because it concluded under the "material breach doctrine" that forfeiture of a lease pursuant to a termination clause is not warranted when the
This Court has not, in a published opinion, addressed the applicability of the material breach doctrine when the contract at issue contains an express forfeiture clause. Before addressing that question directly, we first note that there is a difference between "rescission," "termination," and "forfeiture" of a contract. Rescission is an equitable remedy that is used to avoid a contract. See Alibri v. Detroit/Wayne Co. Stadium Auth., 254 Mich.App. 545, 555, 658 N.W.2d 167 (2002), rev'd on other grounds 470 Mich. 895, 683 N.W.2d 147 (2004); Black's Law Dictionary (9th ed).
In addition:
In sum, "rescission" terminates a contract and places the parties in their original position, even if restitution is necessary, and "forfeiture" terminates a contract without restitution. Because plaintiff in this case seeks to enforce the termination clause in the contract, we conclude that the equitable remedy of rescission is not applicable. We further conclude that, by reading the default provision of the Lease to include the term "material breach," the trial court effectively rewrote or reformed the contract. See Titan Ins. Co. v. Hyten, 291 Mich.App. 445, 451-452, 805 N.W.2d 503 (2011) (noting that reformation allows a court to consider a contract to have different terms than provided in the document when those terms fail to express the intentions of the party), rev'd on other grounds 491 Mich. 547, 817 N.W.2d 562 (2012).
Our view is supported by our Supreme Court's consistent pronouncements that an unambiguous contract must be enforced as written unless it violates the law, is contrary to public policy, or is unenforceable under traditional contract defenses. Rory v. Continental Ins. Co., 473 Mich. 457, 470, 703 N.W.2d 23 (2005);
Although Rory did not expressly decide whether a contract forfeiture clause was enforceable, it made clear that a court has no power to ignore a contract's plain and unambiguous term because the court holds the view that the term ostensibly was "unreasonable." Rory, 473 Mich. at 468-469, 703 N.W.2d 23. Rory is applicable here on this very point; this Court cannot refuse to enforce the plain and unambiguous terms of the lease herein on the basis that the forfeiture clause is "unfair." Hence, we reiterate the Supreme Court's holding that courts are not free to rewrite or ignore the plain and unambiguous language of contracts except in exceptional circumstances. Id. at 470, 703 N.W.2d 23.
Defendant has not established that the requisite exceptional circumstances exist in this case sufficient to justify ignoring the plain language of its contract with plaintiff. First, defendant makes no claim that the forfeiture provision violates the law. Likewise, we find that the forfeiture clause is not contrary to public policy.
While the Legislature has limited the effectiveness of express forfeiture clauses in land contracts, MCL 600.5726 (requiring the occurrence of a material breach as a
As the Rory Court stated, "[o]nly recognized traditional contract defenses may be used to avoid the enforcement of [legal] contract provision[s]." Rory, 473 Mich. at 470, 703 N.W.2d 23. Such defenses include duress, waiver, estoppel, fraud, and unconscionability. Id. at 470 n. 23, 703 N.W.2d 23. The only recognized defense that could possibly be relied on in this case, based on defendant's pleadings, is the doctrine of unconscionability. However, "[i]n order for a contract or contract provision to be considered unconscionable, both procedural and substantive unconscionability must be present." Clark v. DaimlerChrysler Corp., 268 Mich.App. 138, 143, 706 N.W.2d 471 (2005) (emphasis added).
Here, there was no evidence that defendant was in a weaker position than plaintiff and was forced to accept the forfeiture term. Thus, defendant cannot establish any procedural unconscionability. We also conclude that the forfeiture clause was not substantively unconscionable. While the term undoubtedly favors plaintiff, the advantage given to plaintiff in the contract does not shock the conscience. In addition, forfeiture did not occur immediately upon defendant's breach; the Lease allowed defendant 30 days to cure any breach before the Lease would be terminated. Under these circumstances, the forfeiture clause was not "substantively unreasonable." Therefore, the forfeiture provision was not avoidable under the unconscionability doctrine.
In sum, "a court may not revise or void the unambiguous language of [an] agreement to achieve a result that it views as fairer or more reasonable." Rory, 473 Mich. at 489, 703 N.W.2d 23. As a result, the trial court erred when it failed to enforce the forfeiture clause of the Lease based on defendant's breach not being a "material breach." As a matter of law, plaintiff successfully invoked the default provision of the Lease and terminated the Lease on November 24, 2008. Under ¶ 17 of the Lease, the Lease's termination also extinguished defendant's option to purchase. Hence, because the Lease was terminated on that date, defendant's attempt to exercise the Lease's option-to-purchase provision on December 22, 2008, was void.
Defendant argues that it did not breach the contract when it failed to consent to the easement agreement. Specifically,
In pertinent part, ¶ 22 of the Lease stated:
Thus, defendant was required to consent to plaintiff's Road Easement. The Lease, however, did provide that the location of any easements must be "in areas mutually agreeable." As such, the only valid reason to withhold consent to the Road Easement would have been the failure to agree on a location. However, there was no evidence to show that defendant's refusal to consent was based on an objection to the location.
Defendant also argues that consent to the Road Easement was not required because it was contingent upon finalization of the merger agreement. While the parties undoubtedly discussed that consent would occur contemporaneous to a merger, there was no evidence that the parties intended to amend, or did amend, the provision of the Lease that defendant give consent "as required."
Defendant further contends that the easement agreement was not ripe for its consent because the agreement failed to capture other conditions, such as (1) noting that all costs were plaintiff's responsibility, (2) ensuring that the integrity of the golf course would not be disturbed, and (3) ensuring that the golf course would be left in an equal or better condition when the work was complete. Nothing in Paragraph 22 makes defendant's requirements to grant an easement contingent on these asserted conditions.
Last, defendant claims that plaintiff's October 7, 2008, letter did not satisfy the notice requirements spelled out in ¶ 31 of the Lease. We disagree. Paragraph 31 provides in pertinent part,
Defendant claims that the October 7, 2008, letter was deficient in several ways: (1) it was not sent via registered mail, (2) the letter did not provide any notice, and (3) the letter did not indicate what consequences would happen if the 30-day deadline was not met.
Nothing in the record supports defendant's claim that the letter was not sent via registered mail. Defendant cites to the letter itself and cites to Crouse's affidavit as evidence of the letter not being sent via registered mail. However, the letter does not identify either way how it was mailed. And Crouse states in his affidavit that he mailed the letter "consistent with notice provisions contained in the Lease."
Defendant's remaining claims of deficiencies are also without merit. The Lease does not require the written notice to contain any specific words, such as "notice" or "default." In this case, the letter referred to defendant's continuing obligation under ¶ 22 of the Lease to provide the consent, explained that defendant has been delinquent for nearly a year, and established a 30-day time period to cure the defect. This 30-day time period matches the 30-day time period of ¶ 26. Therefore, the trial court correctly concluded that the letter satisfied the notice requirements of the Lease.
Defendant's final issue on cross-appeal relates to whether its invoking of the option to purchase was invalid. As already discussed, we conclude that plaintiff properly terminated the Lease prior to defendant invoking the option, thereby making defendant's attempt to purchase void. Although the trial court concluded that defendant could not invoke the option to purchase for different reasons, we will not reverse a trial court's ruling when it reaches the right result for the wrong reason. Coates v. Bastian Bros., Inc., 276 Mich.App. 498, 508-509, 741 N.W.2d 539 (2007).
In conclusion, the trial court erred when it did not interpret the Lease according to its plain and unambiguous terms. On remand, the trial court is to enter an order granting summary disposition in favor of plaintiff on counts I, II, and V of its complaint.
Affirmed in part, reversed in part, and remanded for further proceedings consistent with this opinion. We do not retain jurisdiction. Plaintiff, the prevailing party, may tax costs pursuant to MCR 7.219.
TALBOT and SERVITTO, JJ., concurred with WILDER, P.J.
