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STATE OF MICHIGAN 

COURT OF APPEALS 

MJ DEVELOPMENT COMPANY, INC., 

 Plaintiff-Appellant, 

UNPUBLISHED 

February 23, 2017 

v No. 330496 

Emmet Circuit Court 

INN AT BAY HARBOR ASSOCIATION, LC No. 15-104943-CZ 

 Defendant-Appellee, 

and 

LORI JODAR, JANE HOURANI, and JEANENE 

CALABRESE, 

 Defendants. 

Before: HOEKSTRA, P.J., and SAAD and RIORDAN, JJ. 

PER CURIAM. 

 In this breach of contract action, plaintiff appeals the order of the trial court that granted 

defendants’ motion for summary disposition. Plaintiff challenged management decisions made 

by appellee, the Inn at Bay Harbor Association (defendant Association). The Inn at Bay Harbor 

(the Inn) is a condominium project located in northwest Michigan.1

 We affirm. 

 Plaintiff’s breach of contract claim is predicated on actions taken by defendant 

Association with respect to work done on gutters and downspouts, installation of a gas fireplace, 

and the handling of a special assessment for the addition of a service elevator. Plaintiff argues 

that in each of these circumstances, defendant Association violated the terms of its bylaws. As to 

the question of whether such bylaws constitute a contract, this Court has made the following 

relevant observations: 

 

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 Previously, the trial court granted defendants’ motion for summary disposition on plaintiff’s 

claims brought under MCL 450.2489 (illegal or fraudulent acts by person in control of 

corporation, MCL 600.3605 (compel accounting), and MCR 2.605 (declaratory judgment). 

However, that ruling and those claims are not at issue on appeal. 
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When validly promulgated, an entity’s bylaws or similar governing instrument 

will constitute a binding contractual agreement between the entity and its 

members. See Mayo v Great Lakes Greyhound Lines, 333 Mich 205, 214; 52 

NW2d 665 (1952) (providing that the members of a voluntary association are 

bound by the association’s constitution and general laws); Kauffman v The 

Chicago Corp, 187 Mich App 284, 287; 466 NW2d 726 (1991) (stating that the 

constitutions, rules, and bylaws of the entity at issue “constitute[d] a contract by 

all members” of the entity “with each other and with the [entity] itself”); Allied 

Supermarkets, Inc v Grocer’s Dairy Co, 45 Mich App 310, 315; 206 NW2d 490 

(1973) (“The bylaws of a corporation, so long as adopted in conformity with state 

law, constitute a binding contract between the corporation and its shareholders.”). 

In this case, the parties do not dispute that the [defendant Association] had the 

authority to adopt bylaws and that the bylaws were adopted by a majority of the 

Association’s members. Thus, to the extent that they do not conflict with the 

Association’s articles of incorporation or this state’s law, the bylaws would 

constitute a binding contractual agreement between the Association and its 

various members. [Colin v Upton, 313 Mich App 243, 255; 881 NW2d 511 

(2015).] 

Because there is no dispute about the validity of the bylaws, they constitute a binding contract. 

 Defendants brought their motion for summary disposition under MCR 2.116(C)(8) 

(failure to state a claim) and (C)(10) (no genuine issue of material fact). Although the court did 

not indicate which subrule it relied on in granting summary disposition, because it looked 

beyond the pleadings, we treat it as having been granted under MCR 2.116(C)(10). Krass v TriCounty Security, Inc, 233 Mich App 661, 664-665; 593 NW2d 578 (1999). The standard of 

review for challenges to a trial court’s granting of summary disposition under MCR 2.116(C)(10) 

is de novo, Johnson v Recca, 492 Mich 169, 173; 821 NW2d 520 (2012), as are issues of 

contract interpretation, AFT Mich v Michigan, 497 Mich 197, 208; 866 NW2d 782 (2015). 

 A motion for summary disposition brought under MCR 2.116(C)(10) tests the factual 

support for a claim. Maiden v Rozwood, 461 Mich 109, 120; 597 NW2d 817 (1999). To succeed 

under MCR 2.116(C)(10), the moving party must first “specifically identify the issues as to 

which [it] believes there is no genuine issue as to any material fact,” MCR 2.116(G)(4), and must 

support its position with “affidavits, depositions, admissions, or other documentary evidence,” 

MCR 2.116(G)(3)(b). All factual disputes must be resolved in favor of the nonmoving party. 

Foreman v Foreman, 266 Mich App 132, 135-136; 701 NW2d 167 (2005). The motion is 

properly granted if there are no genuine issues of material fact and the moving party is entitled to 

judgment as a matter of law. Odom v Wayne Co, 482 Mich 459, 467; 760 NW2d 217 (2008). 

I. BUSINESS JUDGMENT RULE 

 At various times, the trial court relied, either implicitly or explicitly, on the business 

judgment rule. The applicability of the business judgment rule to decisions made by 

condominium association boards is discussed in 15B Am Jur 2d, Condominiums, § 23: 
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 Ordinarily, the decisions made by a condominium association board 

should be reviewed by a court using the same business judgment rule that governs 

decisions made by other types of corporate directors. The business judgment rule 

limits the judicial review of decisions made by a condominium’s board of 

managers to whether the board’s actions are authorized, and whether the actions 

were taken in good faith and in furtherance of the legitimate interests of the 

condominium. It can be gleaned from the case law that so long as a condominium 

board acts for the purposes of the condominium, within the scope of its authority

and in good faith, the courts will not substitute their judgment for that of the 

board’s. [Id. at p 591 (emphasis added; citations omitted).] 

 In this case, plaintiff alleges that defendant Association breached the bylaws by acting 

outside its authority when it added a fireplace to the facility that cost over $10,000 without 

getting approval via a special assessment. If true, the business judgment rule would not shield 

defendant Association. Id.; see also 9 ALR7th, Art 5 (stating that deference is afforded to an 

association under the business judgment rule so long as the association’s acts are authorized). 

Thus, to the extent that the trial court implied that the business judgment rule insulated the 

Association board’s decision on what constitutes a replacement as opposed to an addition, the 

trial court erred. When the underlying facts are not disputed, whether the Association exceeded 

its authority is a matter law to be decided by the courts. However, for the reasons provided 

below, any error is harmless, as the trial court ultimately found that the defendant Association’s 

actions were authorized, and we agree. 

II. ACTIONS OF DEFENDANT ASSOCIATION 

 Article II of the Inn’s bylaws provide as follows: 

Section 2. Determination of Assessments. Assessments shall be determined in 

accordance with the following provisions: 

 (a) Budget: Regular Assessments. . . . Should the Association at any time 

decide, in its sole discretion: (1) that the assessments levied are or may prove to 

be insufficient (a) to pay the costs of operation and management of the 

Condominium, (b) to provide replacements of existing Common Elements, (c) to 

provide additions to the Common Elements not exceeding $10,000 annually for 

the entire Condominium Project, or (2) that an emergency exists, the Association 

shall have the authority to increase the general assessment . . . . 

 (b) Special Assessments. Special assessments, in addition to those 

required in subparagraph (a) above, may be made by the Association from time to 

time and approved by the Co-owners as hereinafter provided to meet other 

requirements of the Association, including, but not limited to: (1) assessments for 

additions to the Common Elements of a cost exceeding $10,000 for the entire 

Condominium Project per year. 

 “The primary goal in the construction or interpretation of any contract is to honor the 

intent of the parties.” Rasheed v Chrysler Corp, 445 Mich 109, 127 n 28; 517 NW2d 19 (1994). 
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“[T]he intent of the contracting parties is best discerned by the language actually used in the 

contract.” Rory v Continental Ins Co, 473 Mich 457, 469 n 21; 703 NW2d 23 (2005). “Unless 

otherwise defined, contractual language is given its plain and ordinary meaning.” Cole v AutoOwners Ins Co, 272 Mich App 50, 53; 723 NW2d 922 (2006). 

A. FIREPLACE 

 At issue is whether the defendant Association’s construction of a new fireplace in its 

lobby is an “addition” or a “replacement” under the bylaws. If the fireplace is a replacement, 

then the Association was within its power to authorize the associated expenses, regardless of the 

amount. On the other hand, if the fireplace is an addition, whose costs exceeds $10,000, then the 

Association was required to obtain the co-owners’ approval. The bylaws, however, do not define 

the terms “addition” or “replacement.” As such, resort to a dictionary is appropriate. Vushaj v 

Farm Bureau Gen Ins Co of Mich, 284 Mich App 513, 515; 773 NW2d 758 (2009). 

Random House Webster’s College Dictionary (2d ed) defines “replacement” as “1. the 

act of replacing. 2. a person or thing that replaces another. . . . .” In turn, “replace” is defined as 

“1. to assume the function of; substitute for: to replace gas lights with electric lights. 2. to 

provide a substitute for: to replace a broken dish.” Id. “Addition” is defined, in relevant part, as 

“something added” and, alternatively, “a wing, room, etc., added to a building.” Id.

 Here, the “old” fireplace was an electric fireplace that did not provide for an open fire 

and was attached to the wall. The “new” fireplace that was installed consists of a framed 

opening in a chimney that is designed to hold an open fire. While the functionality of the two 

units is different, this fact is not controlling. As common sense dictates, replacements do not 

have to be of the same specific character. Indeed, the dictionary example illustrates that one can 

“replace gas lights with electric lights.” Here, the replacement is the converse: an electric 

fireplace being replaced with a gas fireplace. Thus, we hold that the new fireplace was a 

replacement under the bylaws. Clearly, the new fireplace “assume[d] the function” and was a 

“substitute for” the prior fireplace. Therefore, according to the plain terms of the bylaws, the 

defendant Association was authorized to fund and replace the old fireplace, though the cost 

exceeded $10,000. 

 We note that if the drafters of the bylaws desired to ensure more stringent requirements 

for what constitutes a “replacement,” such as not exceeding the value of the thing being replaced, 

then the drafters could have used such language. We decline to read any such limits into the 

text’s language. And, indeed, if the co-owners want to more tightly define what constitutes a 

replacement, then they can amend the bylaws. But under the bylaws at issue, the board was 

authorized to make any and all replacements without obtaining any approval from the co-owners, 

and the new fireplace undoubtedly took the place of—or replaced—the old fireplace. 

B. GUTTERS AND DOWNSPOUTS 

 Plaintiff also argues that the work done on the gutters and downspouts violated the 

bylaws regarding additions to the building. Plaintiff claims that the work cost in excess of 

$38,000 and that the work cannot be categorized as a “replacement.” 
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 The bylaws specifically state, “An adequate reserve fund for maintenance, repairs and 

replacement of those Common Elements that must be replaced on a periodic basis shall be 

established in the budget and must be funded by regular payments as set forth in Section 2(c) 

below rather than by special assessments.” Thus, the defendant Association is required to use 

general funding, as opposed to special assessment for all of the following: (1) maintenance, (2) 

repairs, and (3) replacement of “Common Elements that must be replaced on a periodic basis.” 

 The applicable definition of “maintenance” is “the upkeep of property or equipment.” 

Merriam Webster’s Collegiate Dictionary (11th ed). And “upkeep” is defined as “the act of 

maintaining in good condition.” Id. Here, it is clear that gutters and downspouts relate to the 

“upkeep of property,” as they serve the vital role of diverting rain water away from buildings and 

structures, which acts to keep the property “in good condition.” Therefore, because the gutters 

and downspouts are considered maintenance of the common elements under the bylaws, the 

Association’s actions pertaining to the gutters and downspouts are authorized. 

C. SERVICE ELEVATOR 

 Plaintiff argues that defendant Association breached the bylaws in its handling of the 

service elevator special assessment. Specifically, plaintiff argues that the bylaws were breached 

because the 2015 budget included the special assessment for the elevator prior to the co-owner’s 

vote. Plaintiff claims that it is immaterial that after the co-owners voted “no” on the special 

assessment, the project did not advance because the members were assessed for the cost of 

installing an elevator nonetheless. 

 The bylaws provide, “The Association shall establish an annual budget in advance for 

each fiscal year and such budget shall project all expenses for the forthcoming year which may 

be required for the proper operation, management and maintenance of the Condominium 

Project, including a reasonable allowance for contingencies and reserves.” (Emphasis added.) 

Thus, because the board determined that an additional elevator was a high priority item for the 

2015 year, the bylaws required that the expense of the elevator project should be projected in the 

that annual budget. 

 A little over one month after the co-owners were informed of the projected budget, they 

were sent a letter explaining why the service elevator was needed. Defendants asked the coowners to approve the completion of the service elevator, with its estimated cost of $140,000. 

Defendants also stated, “In anticipation of your support, the portion of the cost for this project to 

be paid by the HOA has been budgeted for 2015. No additional funding will be necessary.” 

When the special assessment failed, the money that was allocated for the elevator project was 

simply used for other authorized projects. Thus, defendants were in compliance with Article II

of the bylaws because no monies were spent on constructing an elevator after the special 

assessment failed. Accordingly, because the bylaws were complied with, the Association did not 

breach the contract. 
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 Affirmed. Defendant Association, as the prevailing party, may tax costs pursuant to 

MCR 7.219. 

/s/ Joel P. Hoekstra 

/s/ Henry William Saad 

/s/ Michael J. Riordan