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### STATE OF MICHIGAN

COURT OF APPEALS

BENTELER AUTOMOTIVE CORPORATION,

Plaintiff-Appellee/Cross-Appellant, UNPUBLISHED March 21, 2017

v No. 328329 Wayne Circuit Court WELLINGTON INDUSTRIES, INC, LC No. 13-011361-CK

Defendant-Appellant/CrossAppellee.

Before: T ALBOT , C.J., and M URRAY and B OONSTRA , JJ.

P ER C URIAM

.

Defendant appeals by right follo wing the trial court’s entry o f a final stipulated order dismissing all claims and counterclaims. At issue on appeal is the trial court’s April 27, 2015 order denying in part defendant’s motion to enforce a settlemen t between the parties; specifically, defendant challenges the trial court’s determinat ion that the agreed-upon release language was insufficiently broad to encompass indemnification claims relating to potential, future claims by third parties re garding allegedly defective pa rts. 1 Plaintiff cross-appeals the trial court’s June 15, 2015 order resolving further cross-motions to enforce the settlement; specifically, plaintiff challeng es the trial court’s holding th at it is not entitled to deduct (from amounts owed to defendant) a port ion of the revenue received fr om the sale of scrap metal generated by defendant’s production of parts for plaintiff. We reverse and remand in the main appeal, and affirm in the cross-appeal.

I. PERTINENT FACTS AND PROCEDURAL HISTORY

Plaintiff is a Delaware corpor ation headquartered in Auburn Hi lls, Michigan, and is a “Tier One” automotive parts supplier to many major vehicle manu facturers. Defendant is a Michigan corporation headquarter ed in Belleville, Michigan, and is a “Tier Two” automotive parts supplier that supplies parts to various Tier One automoti ve parts suppliers. In 2013, the parties entered into a series of agreements in which plaintiff outsourced to defendant the production of certain parts for Ford Motor Company.

1 For ease of future reference, we will refer to such claims as the Indemnification Claims.-2- Later in 2013, a dispute arose between the parties after plain tiff declined to make payment as demanded for parts that defendant had produced. Pla intiff filed suit, alleging several breach of contract claims and seeking a declaratory judgment re lative to defendant’s obligations under various agreements. Plaintiff’s allegations, in part, co ncerned defendant’s alleged failure to provide sufficient parts of a sufficient quality as required under the various agreements.

Defendant asserted various counter claims related to plaintiff’s alleged nonpayment and breach of its contractual obligations.

After over a year of discovery and various proceedings, the pa rties reached a settlement following facilitation. The parties memorialized the terms of the settlement in a term sheet, initialed by the parties and the facilitator, that contained bo th typewritten and handwritten entries. The parties placed the settlement on the record befor e the trial court in November 2014, agreeing that the term sheet reflected the terms of their settl ement and that it “resolves any and all claims between [plaintiff] and [defendant] arising out of t his contractual relationship.” The term sheet provided that settlement documentation was to be com pleted and executed by a date certain, and that the litigation would be dismissed with prejud ice and without costs to either

party.

Following the facilitation, the initialing of the term sheet, and the placement of the settlement on the record, the pa rties were unable to agree on l anguage for the settlement documentation called for in the term sheet. The parties disagr eed whether the term sheet provided for the release of t he Indemnification Claims.

In March 2015, the parties filed cross motions to enforce the settlement, with defendant seeking an order declaring that plaintiff had released defendan t from all claims, including the Indemnification Claims, while p laintiff sought an order declari ng that defendant was not released from the Indemnification Claims. At the hearing on the opposin g motions, the trial court stated that it would be applying an objective test relative to the int erpretation of the term sheet and its release language, and stated:

I can tell you right now, gentlemen, without ruling that my fo cus is more on process than parts because even if there were problems with parts, those were covered by scrap debi ts. The counterclaim – the original claim was, hey, I wanted to produce these, Benteler vers us Wellington, and don’t stop th em from producing them because the whole Ford Explorer line with come to a screec hing halt. The counterclaim was, well, look, these dies, they weren’t PPAP’d a nd we’re losing money, a significant amount of money, and we’ll lose a signific ant amount over the course, whether it’s FLCA or non-FLCA parts.

Ultimately that will be my focus on this. And I will be exclud ing whatever I consider to be parole evidence inconsistent. And I will be a pplying the Lucy versus Zimmer test which has been adopted in Michigan to lookin g to what objectively, based upon the litigat ion, this is a ll about. Aga in, my focus is more is on process than on parts because that’s what we discussed at na useam. Two weeks and I’ll give you my ultimate decision after I sift throu gh everything that’s

been filed.-3- At a hearing held two weeks later, the trial court announced i ts decision denying defendant’s motion to enforce the settlement agreement relative to the scope of the release, holding that the language of the term sheet was clear and unamb iguous and that defendant “remains liable for the defect of [sic] parts that it may have manufactured” under the relevant agreement. The trial court subs equently denied defendant’s mot ion for reconsideration.

After the trial court’s decision on the release issue, the par ties filed further cross-motions to enforce the settlement, this time concerning the “scrap debi ts” that represented plaintiff’s share of the revenue generated from the sale of scrap metal cre ated as a byproduct of defendant’s production of parts for plaintiff. 2 The issue of scrap debits was the subject of paragraphs 4 and 6 of the term sheet. The parties disagreed whether plaintiff cou ld take any future scrap debits after the deduction (from the settleme nt amount) of an initial dollar amount specified in the term sheet. The trial court ultimately held that the term sheet pro vided that plaintiff could not take any future scrap debits after the initial deduction. The trial court issued an order to that effect on June 15, 2015.

The final stipulated order of dismissal was entered on June 29 , 2015. This appeal and cross-appeal followed.

II. MAIN APPEAL

In the main appeal, defendant argues that the language of the term sheet unambiguously releases it from liability for all future claims by plaintiff, including the Indemnification Claims. We agree. A settlement agreement is interpreted according to t he principles governing the interpretation of contracts. Walbridge Aldinger Co v Walcon Corp , 207 Mich App 566, 571; 525 NW2d 489 (1994). Accordingly, we review de novo as a question of law the trial court’s interpretation of the language of the term sheet. DeFrain v State Farm Mut Auto Ins Co , 491 Mich 359, 366-367; 817 NW2d 504 (2012). We also review de novo the trial court’s determination that the language of the term sheet was not ambig uous. See Farm Bureau Mut Ins

Co v Nikkel , 460 Mich 558, 563; 596 NW2d 915 (1999).

A court’s primary goal in interpreting a contract is to honor the intent of the parties. Klapp v United Ins Group Agency

, Inc , 468 Mich 459, 473; 663 NW2d 447 (2003). Contractual language is to be given its or dinary and plain meaning. Singer v American States Ins , 245 Mich App 370, 374; 631 NW2d 34 (2001). A court should construe a co ntract so as to give effect to every word, clause, and phrase, and avoid rendering any part of the contract surplusage or

nugatory. Klapp , 468 Mich at 467. Further, an unambiguous contract must be en forced as

written. Farmers Ins Exch v Kurzmann , 257 Mich App 412, 418; 668 NW2d 199 (2003). A contract is unambiguous if it “fairly admits of but one interpr etation.” Nikkel , 460 Mich at 566 (citation omitted).

2 In the ordinary course of business, plaintiff would deduct its share of scrap metal revenues as a

“debit” from the amount it ow ed to defendant for parts.-4- As stated earlier, the term sheet reflects both typewritten la nguage and handwritten entries. Paragraph 8, as reflect ed in the following excerpt, g overns releases:

As this excerpt of the term sheet reflects, the underlining in paragraph 8 is handwritten. Additionally, along the left side of the paragraph are the hand written words “Tom/George.”, “To fix wording.”, and “Martin/John adjudicate.” 3 The notations “Tom/George.” and “Martin/John adjudicate.” appear adjacent to the underlined language in the second sentence of paragraph 8, and “To fix wording.” extends upward from the “Tom/George.” not ation.

In interpreting this provision, the trial court stated that it s decision was also informed by paragraph 12 of the term sheet, which provides:

Again, as this excerpt reflects, the “12” is circled in pencil or pen. In addition (and while not reflected in the excerpt) 4 a handwritten question mark appears next to it. 5

3 Plaintiff represents that “Tom/George” refers to legal counsel for the respectiv e parties, and

that “Martin/John” refers to hi gh-level executives of the parti es.

4 The term sheet was filed under s eal in this Cour t. The excerp ts of the term sheet, as reflected in this opinion, are taken not from the sealed exhibit, but rather from publicly-filed briefs.-5- The trial court found that the term sheet was unambiguous, but concluded that defendant “remains liable for the defect of [sic] parts that it may have manufactured under this agreement.” We agree that the term sheet is unambiguous in all relevant res pects, 6 but disagree that it does

not release defendant from liabil ity for the Indemnification Cl aims.

Paragraph 8 of the term sheet provides for releases of “ all actual and potential, known and unknown, liabilities, demands , causes of action, damages, c osts, expenses, fees, debts, debits, setoffs, invoices, sums of money, accounts, agreements, contracts . . . scheduling agreements, duties, obligations, and claims of every nature ari sing from or related to all transactions and dealings between the parties.” (Emphasis added ; underlining omitted). “[T]here cannot be any broader classification than the word ‘all’. In i ts ordinary and natural meaning, the word ‘all’ leaves no room for exceptions.” Heritage Resources, Inc v Caterpillar Fin Serv Corp

, 284 Mich App 617, 642; 774 NW2d 332 (2009) (citation omitted). In Heritage Resources , this Court found that language releasi ng a party from “any and all a ctual and potential claims” was “very broad,” and “sweeping.” So too here, plaintiff granted a sweeping release of “all actual and potential, known and unknown . . . claims of every nature a rising from or related to all transactions and dealings between the parties.” We conclude th at this language of the first sentence of paragraph 8 is suffi ciently broad to discharge the Indemnification Claims. Further, that sentence specifically discha rges claims arising from the L ong Term Agreement of 2013 (LTA), which contained express wa rranties from defendant on the parts supplied to plaintiff as well as promises of indemnification. While plaintiff argues th at the handwritten notations and the underlining within and adjoining the second sentence of par agraph 8 indicate that the parties did not intend for the term sheet to supersede the LTA, we conc lude that the handwritten underlining of some words in the second sentence, along with the described notations, is insufficient to support the interpretation of the trial court ( or to create an ambiguity), as such an interpretation would render much of the first (and unmarked by handwritten alterations) sentence surplusage or nugatory. Klapp , 468 Mich at 467.

Further, we do not find that paragraph 12 undermines our inter pretation of the unambiguous language of paragrap h 8. The retention of product liability and automotive recall insurance (in paragraph 12) is not inconsistent with a broad re lease (in paragraph 8) that encompasses the Indemnification Claims; after all, defendant co uld be sued directly by a third party for claims related to the parts it provided to plaintiff. Without regard to the release of claims by plaintiff, the insuran ce could protect defendant in t he event of such third party claims, and could additionally provide for the payment of defense or ot her costs in that event. Finally, even if the retention of insurance was unnecessary, this sort o f “belts and suspenders” approach to protecting defendant’s interest is certainly understandable in dissolving a complex contractual

5 Paragraph 13 of the term sheet (relating to a different issue) reflects a similar circle and question mark but, unlike parag raph 12, also reflects a squiggl y line indicating the excision of the typewritten language from the term sheet.

6 Neither party disagrees with the trial court’s (or our) conclu sion that the term sheet is unambiguous. To the contrary, bot h parties assert that the ter m sheet indeed is unambiguous, although they disagree r egarding its meaning.-6- relationship with a high dollar value. Surplusag e alone does n ot render a contract ambiguous. Mich Twp Participating Plan v Pavolich , 232 Mich App 378, 388; 591 NW2d 325 (1998).

For these reasons, we conclude t hat the trial court erred by h olding that the term sheet did not provide for the release of all present and future claims between the parties related to the contractual relationship at issu e, including the Indemnificatio n Claims. In the main appeal, we remand for entry of an order c onsistent with this holding.

III. CROSS-APPEAL

In its cross-appeal, plaintiff argues that the trial court err ed when it concluded that the term sheet provided that plaintiff could not take any scrap deb its, beyond the initial dollar amount specified in the term sheet. We disagree.

Plaintiff argues that the following notations on the term shee t together indicate the parties’ intent that plaintiff w ould be able to take scrap debi ts in the normal course of business: (1) the handwritten underlining of the words “debits” and “seto ffs” in paragraph 8, (2) the underlining and circling of the phrase “with no additional offs ets, debits, or deductions” in paragraph 4 with an arrow drawn to the handwritten phrase “Just against the [initial settlement amount]”, and (3) the underlining of the following language in paragraph 6, “Except for said steel cost, Wellington will not be subject to any additional of fsets, debits or deductions (including scrap debits).” Thos e notations are set forth in th e term sheet as reflected in the above-excerpted paragraph 8 and in t he following additional exc erpts of paragraphs 4 and 6:

* * *-7- We do not find plaintiff’s argument concerning these notations convincing. In short,

none of the handwritten notations referenced by plaintiff under mine the unambiguous meaning of the language in paragraph 6, “Except for said steel cost, We llington will not be subject to any additional offsets, debits or de ductions (including scrap debit s).” The underlining or circling of language in no way equates to exc ising it from the document. A nd although plaintiff argues that

the addition of handwritten la nguage and notations to paragraph 4 indicates the parties’ intent to allow future scrap debits, the most that can be inferred from t hose entries is that the ”offsets,

debits or deductions” are limited to the specified initial dedu ction. It is at best a strained construction to say that this la nguage alters the clear languag e of paragraph 6. See Singer , 245 Mich App 374. The term sheet is re plete with examples of the p arties crossing out language they found problematic and substituting other handwritten language; this did not occur with regard to paragraph 6. Additionally, because the language of paragraph 6 is unambiguous, the trial court properly gave no weight to plai ntiff’s argument that subsequent , unsuccessful negotiations of the terms of the settlement documentation indicated an intent by th e parties to allow plaintiff to take scrap debits. See Klapp

, 468 Mich at 470.

Reversed with regard to defendant’s appeal, and remanded for e ntry of an order consistent with this opinion. Affirmed with regard to plaintif f’s cross appeal. As the prevailing party, defendant may tax cos ts. MCR 7.219(A). We do not retai n jurisdiction.

/s/ Michael J. Talbot /s/ Christopher M. Murray

/s/ Mark T. Boonstra