Case Title: VALERIA HALIW V CITY OF STERLING HEIGHTS

Citation: 

Docket Number: 125022

State: michigan

Court: Michigan Supreme Court

Date: 2005-01-25T00:00:00Z

Document:
_______________________________ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Michigan Supreme Court 
Lansing, Michigan 
Chief Justice:  
Justices: 
Clifford W. Taylor  
Michael F. Cavanagh 
Elizabeth A. Weaver 
Marilyn Kelly 
Opinion 
Maura D. Corrigan 
Robert P. Young, Jr. 
Stephen J. Markman 
FILED JANUARY 25, 2005 
VALERIA HALIW and ILKO HALIW, 
Plaintiffs-Appellants, 
v 
No. 125022 
CITY OF STERLING HEIGHTS, 
Defendant-Appellee. 
BEFORE THE ENTIRE BENCH 
CAVANAGH, J.  
At issue in this case is whether appellate attorney 
fees and costs are recoverable as case evaluation sanctions 
under MCR 2.403(O). 
We hold that “actual costs” pursuant 
to MCR 2.403(O) do not include appellate attorney fees and 
costs. 
Because the Court of Appeals held to the contrary, 
we reverse its decision, reinstate the trial court’s award, 
and 
remand 
the 
case 
to 
the 
Court 
of 
Appeals 
for 
consideration of plaintiffs’ cross-appeal. 
 
   
                                                 
I. FACTS AND PROCEEDINGS  
Plaintiff Valeria Haliw was walking on a snow-covered 
sidewalk when she slipped and fell on a patch of ice that 
formed in a depressed area where two sections of the 
sidewalk met. 
Mrs. Haliw and her husband, plaintiff Ilko 
Haliw, brought suit under MCL 691.1402, alleging that 
defendant city of Sterling Heights breached its duty to 
maintain the sidewalk so that it was reasonably safe and 
convenient for public travel. 
Defendant moved for summary 
disposition under MCR 2.116(C)(7) and (10), asserting that 
plaintiffs’ claim was barred by the natural accumulation 
doctrine. 
Before the trial court ruled on the motion, 
however, the matter was submitted to case evaluation 
pursuant to MCR 2.403.1 
On 
September 
8, 
1997, 
the 
trial 
court 
denied 
defendant’s motion for summary disposition. On October 13, 
1997, both parties rejected the unanimous case evaluation 
award of $55,000 in plaintiffs’ favor. 
Defendant then 
appealed by leave granted the trial court’s denial of its 
motion for summary disposition, and the Court of Appeals 
1 When this action commenced, MCR 2.403(O) used the
term “mediation.” 
In 2000, this Court amended the court
rule 
and, 
among 
other 
things, 
changed 
the 
rule’s 
terminology. The term “mediation” was replaced by the term
“case evaluation.” 
Thus, for simplicity, we will use the
current terminology when discussing MCR 2.403(O). 
2  
 
 
 
  
                                                 
 
 
affirmed.2
 This Court granted defendant’s application for 
leave to appeal and reversed, determining that the natural 
accumulation 
doctrine 
precluded 
plaintiffs’ 
claim.3 
Consequently, this Court remanded the case to the trial 
court for entry of summary disposition in favor of 
defendant. 
In addition to moving on remand for entry of an order 
granting it summary disposition, defendant also requested 
case evaluation sanctions under MCR 2.403(O).  Defendant 
sought $31,618 in sanctions; included in this amount were 
defendant’s appellate costs and attorney fees. 
Consistent 
with this Court’s decision, the trial court entered summary 
disposition in defendant’s favor. 
The trial court, 
however, 
rejected 
defendant’s 
request 
for 
appellate 
attorney fees and costs. 
Defendant subsequently moved to 
recover $5,335 in case evaluation sanctions for its trial 
court fees and costs. 
After considering defendant’s 
2 Unpublished opinion per curiam of the Court of
Appeals, issued October 5, 1999 (Docket No. 206886). 
3 Haliw v Sterling Hts, 464 Mich 297; 627 NW2d 581
(2001) (Haliw I). 
In Haliw I, I joined Justice KELLY’S
dissent and would have affirmed the trial court’s ruling.
I remain committed to the view that plaintiffs presented
genuine issues of material fact sufficient to withstand
defendant’s summary disposition motion. 
3  
 
  
                                                 
supplemental motion, the trial court awarded defendant 
$1,500 in case evaluation sanctions. 
Defendant appealed, asserting that the trial court 
impermissibly excluded its appellate attorney fees and 
costs. 
Plaintiffs cross-appealed the trial court’s award, 
arguing that the trial court abused its discretion by 
failing to apply the “interest of justice” exception, MCR 
2.403(O)(11), to deny defendant any of its attorney fees 
and costs. 
In a published two-to-one decision, the Court of 
Appeals reversed, holding that appellate attorney fees may 
be awarded under MCR 2.403(O) because (1) such fees are not 
expressly excluded, (2) a trial is not necessary to trigger 
sanctions, and (3) the applicable verdict for assessing 
sanctions is the verdict rendered after appellate review.4 
Because the Court of Appeals majority held that the trial 
court erred by refusing to consider defendant’s appellate 
attorney fees and costs, the panel did not determine 
whether the trial court abused its discretion in failing to 
invoke the “interest of justice” exception under MCR 
2.403(O)(11). We granted plaintiffs’ application for leave 
to appeal, limited to the issue whether appellate attorney 
4 257 Mich App 689; 669 NW2d 563 (2003). 
4  
 
 
 
 
                                                 
fees and costs are recoverable as case evaluation sanctions 
under MCR 2.403(O).5 
II. STANDARD OF REVIEW 
The proper interpretation and application of a court 
rule is a question of law, which this Court reviews de 
novo. 
Bauroth v Hammoud, 465 Mich 375, 378; 632 NW2d 496 
(2001); CAM Constr v Lake Edgewood Condo Ass’n, 465 Mich 
549, 553; 640 NW2d 256 (2002). 
III. ANALYSIS 
When called upon to interpret and apply a court rule, 
this Court applies the principles that govern statutory 
interpretation. 
Grievance Administrator v Underwood, 462 
Mich 188, 193; 612 NW2d 116 (2000). 
Accordingly, this 
Court begins with the language of the court rule. 
Id. at 
194. At the time both parties rejected the case evaluation 
award, MCR 2.403(O) provided in pertinent part: 
(1) If a party has rejected an evaluation 
and the action proceeds to verdict, that party 
must pay the opposing party’s actual costs unless
the verdict is more favorable to the rejecting 
party than the mediation evaluation. However, if
the 
opposing 
party 
has 
also 
rejected 
the 
evaluation, a party is entitled to costs only if
the verdict is more favorable to that party than
the mediation evaluation. 
(2) For the purpose of this rule “verdict”
includes, 
5 470 Mich 869 (2004). 
5  
 
   
(a) a jury verdict, 
(b) a judgment by the court after a nonjury
trial, 
(c) a judgment entered as a result of a
ruling on a motion after rejection of the 
mediation evaluation. 
* * * 
(6) For the purpose of this rule, actual
costs are 
(a) those costs taxable in any civil action,
and 
(b) a reasonable attorney fee based on a
reasonable hourly or daily rate as determined by
the trial judge for services necessitated by the
rejection of the mediation evaluation. 
For the purpose of determining taxable costs
under this subrule and under MCR 2.625, the party
entitled to recover actual costs under this rule 
shall be considered the prevailing party. 
* * * 
(8) A request for costs under this subrule
must be filed and served within 28 days after the
entry of the judgment or entry of an order 
denying a timely motion for a new trial or to set
aside the judgment. 
* * * 
(11) If the “verdict” is the result of a 
motion as provided by subrule (O)(2)(c), the 
court may, in the interest of justice, refuse to
award actual costs. 
The intent of the rule must be determined from an 
examination of the court rule itself and its place within 
the structure of the Michigan Court Rules as a whole. 
When interpreting a court rule or statute, we must be 
6  
 
 
 
                                                 
mindful of “the surrounding body of law into which the 
provision must be integrated . . . .” Green v Bock Laundry 
Machine Co, 490 US 504, 528; 109 S Ct 1981; 104 L Ed 2d 557 
(1989) (Scalia, J., concurring). 
Here, neither the 
language of MCR 2.403(O) nor the entire structure of our 
court rules supports the Court of Appeals construction. 
Accordingly, we conclude that appellate attorney fees and 
costs are not recoverable as case evaluation sanctions. 
MCR 1.103 provides that specific court rules control 
over general court rules. 
The court rule governing case 
evaluation 
sanctions 
appears 
in 
chapter 
two, 
which 
addresses civil procedure. 
Appellate fees and costs are 
addressed under chapter seven, the chapter specifically 
controlling appellate procedure. 
Thus, the lack of any 
reference to appellate attorney fees and costs in MCR 
2.403(O) is understandable because they are covered under 
an entirely separate section of the court rules.6  The Court 
of Appeals failure to appreciate this organization of the 
court rules led it to incorrectly conclude that because MCR 
2.403(O) did not specifically exclude appellate attorney 
fees and costs, the court rule necessarily included them as 
a case evaluation sanction. 
6 See, e.g., MCR 7.213(A)(6), MCR 7.216(C), and MCR
7.316(D). 
7  
 
We note that Michigan follows the “American rule” with 
respect to the payment of attorney fees and costs. Dessart 
v Burak, 470 Mich 37, 42; 678 NW2d 615 (2004). 
Under the 
American rule, attorney fees generally are not recoverable 
from the losing party as costs in the absence of an 
exception set forth in a statute or court rule expressly 
authorizing such an award. 
Id. 
The American rule is 
codified at MCL 600.2405(6), which provides that among the 
items that may be taxed and awarded as costs are “[a]ny 
attorney fees authorized by statute or by court rule.” The 
American rule stands in stark contrast to what is commonly 
referred to as the “English rule,” whereby the losing party 
pays the prevailing party’s costs absent an express 
exception. 
MCR 2.403(O)(6) exemplifies the American rule 
by expressly authorizing the recovery of attorney fees and 
costs as case evaluation sanctions. 
While MCR 2.403(O)(6) expressly authorizes recovery of 
“a reasonable attorney fee” and “costs,” and the court rule 
does not distinguish between trial and appellate attorney 
fees and costs, the Court of Appeals erred in concluding 
that because MCR 2.403(O) does not expressly exclude 
appellate attorney fees and costs, such expenses are 
recoverable. That conclusion runs contrary to the American 
rule governing the payment of attorney fees. As noted, the 
8  
 
 
 
American rule permits recovery of fees and costs where 
expressly authorized. 
As such, the fact that MCR 2.403(O) 
does not expressly exclude appellate fees and costs is not 
determinative. 
Therefore, we do not believe that the 
failure of MCR 2.403(O) to expressly exclude appellate 
attorney fees and costs is necessarily dispositive under 
these limited circumstances. 
Our conclusion is supported by the fact that MCR 
2.403(O) is trial-oriented. 
For example, at the time of 
this action, MCR 2.403(O)(1) provided, “If a party has 
rejected an evaluation and the action proceeds to verdict, 
that party must pay the opposing party’s actual costs 
unless the verdict is more favorable to the rejecting party 
than the mediation evaluation.” 
MCR 2.403(O)(2) then 
defines “verdict” as follows: 
(a) a jury verdict, 
(b) a judgment by the court after a nonjury
trial, 
(c) a judgment entered as a result of a
ruling on a motion after rejection of the 
mediation evaluation. 
The most natural reading of MCR 2.403(O)(1) and (2) 
contemplates a trial-oriented court rule. 
Notably absent 
from the definition of “verdict,” or any part of MCR 
2.403(O) for that matter, is any mention of the appellate 
process. 
9  
 
 
 
 
In 1997, this Court amended MCR 2.403(O) and changed 
the phrase in MCR 2.403(O)(1) from “the action proceeds to 
trial” to “the action proceeds to verdict.” 
In support of 
its 
conclusion 
that 
appellate 
fees 
and 
costs 
are 
recoverable, the Court of Appeals relied on this amendment. 
The Court of Appeals reasoned that because this Court “de­
emphasiz[ed]” a trial as the “determinative proceeding,” 
this Court somehow intended that appellate attorney fees 
and costs should now be recoverable as case evaluation 
sanctions. 
Haliw, supra at 698. 
However, the purpose of 
the 1997 amendment was narrower than that assumed by the 
Court of Appeals and, thus, the amendment does not support 
the Court of Appeals rationale. 
Until this Court amended MCR 2.403(O) in 1997, it was 
sufficiently unclear whether a judgment that entered as a 
result of a dispositive motion instead of a trial would 
engender sanctions. By amending the court rule, this Court 
clarified that case evaluation sanctions may indeed be 
available when a case is resolved after case evaluation by 
a dispositive motion. 
As such, the Court of Appeals 
analysis went beyond the intent of the 1997 amendment and 
the actual language used in the amendment. 
Moreover, we believe that the Court of Appeals 
mistakenly relied on Keiser v Allstate Ins Co, 195 Mich App 
10  
 
 
 
 
369; 491 NW2d 581 (1992), and Hyde v Univ of Michigan Bd of 
Regents, 226 Mich App 511; 575 NW2d 36 (1997), to support 
its ultimate conclusion that appellate attorney fees and 
costs are recoverable. In Keiser, the plaintiff brought an 
action for no-fault benefits against the defendant. 
The 
case evaluation resulted in an award of $12,000 in the 
plaintiff’s favor. 
The plaintiff rejected the award, and 
the defendant accepted. 
As such, the case proceeded to 
trial, the defendant unsuccessfully moved for a directed 
verdict, and the jury awarded the plaintiff an amount in 
excess of the case evaluation award. 
The defendant 
appealed, and the Court of Appeals held that the trial 
court erred by denying the defendant’s directed verdict 
motion. 
Keiser v Allstate Ins Co, unpublished opinion per 
curiam of the Court of Appeals, issued March 23, 1989 
(Docket No. 101312). 
The Keiser defendant then moved for case evaluation 
sanctions under MCR 2.403(O). 
The trial court ordered the 
plaintiff to pay the defendant’s trial costs and fees. 
Notably, “[n]o costs or fees were awarded for any appellate 
or posttrial activity.”  Keiser, supra at 371. 
The 
plaintiff challenged the imposition of sanctions for the 
defendant’s trial costs and fees, and the Court of Appeals 
affirmed. The Keiser Court noted: 
11  
 
 
 
The only issue on appeal is whether, after a
party rejects a [case] evaluation [award] and,
following a trial, a verdict more favorable to
the rejecting party is returned, MCR 2.403(O)
allows 
the 
imposition 
of 
sanctions 
on 
the 
rejecting party following appellate reversal of
the verdict where the final result is no longer
favorable to that party. [Id.] 
Accordingly, the Court of Appeals in Keiser concluded 
“that it is the ultimate verdict that the parties are left 
with after appellate review is complete that should be 
measured against the [case] evaluation [award] to determine 
whether sanctions should be imposed on a rejecting party 
pursuant to MCR 2.403(O).” 
Id. at 374-375. 
The Keiser 
panel, however, clearly did not see itself deciding the 
question presented in this case—i.e., whether appellate 
attorney fees and costs are recoverable under the court 
rule. 
In fact, Keiser deliberately noted the decisions in 
American Cas Co v Costello, 174 Mich App 1; 435 NW2d 760 
(1989), and Giannetti Bros Constr Co v City of Pontiac, 175 
Mich App 442; 438 NW2d 313 (1989), which held that 
appellate fees and costs are not recoverable under MCR 
2.403(O). 
Further, 
the 
Keiser 
panel 
observed 
that 
“sanctions for appellate expenses are expressly set forth 
in 
MCR 
7.216(C), 
which 
does 
not 
provide 
for 
[case 
evaluation] sanctions.” Keiser, supra at 374. 
12  
 
 
       
                                                 
 
As such, Keiser and its progeny merely stand for the 
proposition that the instant defendant may seek case 
evaluation sanctions for its trial attorney fees and costs 
because the result following appeal governs for purposes of 
MCR 2.403(O). 
However, Keiser cannot be interpreted as 
concluding that appellate attorney fees and costs are 
recoverable under the court rule. 
Thus, we believe that 
the Court of Appeals misread the Keiser decision to support 
its ultimate holding.7 
In sum, we disagree with the Court of Appeals 
rationale because none of the bases that the panel relied 
on necessitates the conclusion that appellate attorney fees 
and costs are recoverable under MCR 2.403(O). 
Rather, our 
reading of MCR 2.403(O) compels us to conclude that the 
court rule is trial-oriented.8 
7 In Marketos v American Employers Ins Co, 465 Mich
407, 414 n 9; 633 NW2d 371 (2001), this Court expressed no
opinion regarding the validity of Keiser, supra, because
the issue raised in Keiser was not then before us. In this 
case, however, the issue is squarely before this Court.
Accordingly, we take this opportunity to approve of 
Keiser’s narrow application of MCR 2.403(O) under the facts
presented in that case. 
8 Moreover, in support of our conclusion that MCR
2.403(O) is trial-oriented, we note that a request for case
evaluation sanctions must be made within twenty-eight days
after entry of the judgment, MCR 2.403(O)(8), generally a
time before the bulk of appellate fees and costs have been
incurred. 
In addition, MCR 2.403(O)(6)(b) allows recovery 
13  
 
 
 
                                                 
IV. CONCLUSION 
We hold that appellate attorney fees and costs are not 
recoverable 
as 
case 
evaluation 
sanctions 
under 
MCR 
2.403(O). 
Accordingly, we reverse the decision of the 
Court of Appeals and reinstate the trial court’s award. 
Because the Court of Appeals did not determine whether the 
trial court abused its discretion in failing to invoke the 
“interest of justice” exception under MCR 2.403(O)(11), we 
remand to the Court of Appeals for consideration of 
plaintiffs’ cross-appeal. 
Michael F. Cavanagh
Clifford W. Taylor
Elizabeth A. Weaver 
Marilyn Kelly
Maura D. Corrigan
Robert P. Young, Jr.
Stephen J. Markman 
of attorney fees “necessitated by” the rejection of the
case evaluation. 
While a causal nexus plainly exists
between rejection and trial fees and costs, the same cannot
be said with respect to rejection and the decision to bring
an appeal. 
Rather, appellate attorney fees and costs are
arguably “necessitated by” a perceived erroneous trial 
court ruling. 
We are cognizant of prior decisions of the Court of
Appeals that have construed the phrase “necessitated by the
rejection” as a mere temporal demarcation. 
See, e.g.,
Michigan 
Basic 
Prop 
Ins 
Ass’n 
v 
Hackert 
Furniture 
Distributing Co, Inc, 194 Mich App 230, 235; 486 NW2d 68
(1992). 
On the basis of the language of MCR 2.403(O),
however, we believe the better-reasoned approach goes
beyond a temporal demarcation and requires a causal nexus
between rejection and incurred expenses. 
14