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### STATE OF MICHIGAN

COURT OF APPEALS

JOHN M. CEBULA, as trustee of the JOHN M. CEBULA REVOCABLE TRUST,

Plaintiff/Counter-DefendantAppellee,

and

JOHN M. CEBULA, individually, and CHERYL A. CEBULA,

Third-party Defendants-Appellees, UNPUBLISHED September 29, 2015

v No. 321791
Branch Circuit Court M. RHOADES CONSTRUCTION COMPANY, MICHAEL RHOADES, RHOADES CONSTRUCTION, and RHOADES CONSTRUCTION COMPANY, LC No. 12-030131-CZ

Defendant/Counter-Plaintiffs/Thirdparty Plaintiffs-Appellants.

Before: B ECKERING , P.J., and M ARKEY and S HAPIRO , JJ.

P ER C URIAM

.
In this claim arising out of the construction of a home, defen dants/counterplaintiffs/third-party plainti ffs, M. Rhoades Construction Comp any, Michael Rhoades, Rhoades Construction, and Rhoades Constr uction Company (hereinafter “de fendants”), appeal as of right the October 11, 2013 order awarding case evaluation sanctions t o plaintiff/counter-defendant, John M. Cebula, as trustee of t he John M. Cebula Revocable Trus t and third-party defendants-2- John M. Cebula, individually, and Cheryl A. Cebula 1 following a bench trial on the underlying claims. Because the trial court erred in awarding case evaluat ion sanctions to plaintiff and thirdparty defendants, we reverse and remand.

I. PERTINENT FACTS AND PROCEDURAL HISTORY

In October 2010, plaintiff contracted with defendants to const ruct the frame of a new home at a total cost, after amen dments to the contract, of $135 ,413.63. John, who was a licensed builder at the time, was to serve as the general contractor, an d defendants were to serve as one of the subcontractors. Defendants began working on the project an d plaintiff made payments to defendants in the amount of $116,500. After a few months, Johnbecame concerned about the quality of defendants’ workmanship and ceased making payments u nder the contract. Shortly thereafter, defendants filed a nd recorded a construction lien o n the property in the amount of $18,913.63, which was the amount p laintiff had not paid on the contract.

Plaintiff filed a complaint against defendants, seeking to inv alidate the lien and to hold defendants jointly and severally l iable on theories of slander of title and breach of contract. Defendants responded with a counterclaim, seeking to foreclose on the lien and seeking damages for breach of contract, account stated, and unjust enrichment, all in reference to the $18,913.63 that had not been paid on the cont ract. Defendants also added a third-party complaint and named Cheryl and John as third-party defendants.

The matter proceeded to case evaluation. The record does not contain any indication that the parties sought to exclude any claims from case evaluation. On February 13, 2013, the case evaluation panel returned an award that simply stated “$25,000 to Π [plaintiff]” with no further explanation. All of the par ties rejected the award.

Thereafter, the trial court commenced a two-day bench trial at which plaintiff presented evidence of repair costs it incurred because of instances of al legedly poor workmanship by defendants. Defendants denied the allegations and argued that they were entitled to collect the unpaid debt on the construction contract. The trial court foun d that plaintiff incurred $31,829 in repair costs. It also noted tha t plaintiff had “rightfully” wi thheld $18,913.63—the amount claimed by defendants in their construction lien—from defendant s. The trial court took the amount of repair costs, $31,829, subtracted as an offset $18,91 3.63, and arrived at a figure of $12,905.37 “in damages to be paid to Cebula, ultimately providi ng the value of the contract had the breaching party [defendants] fully performed.” 2 The trial court ordered defendants to pay

1 Hereinafter, this opinion will refer to John M. Cebula, truste e, as “plaintiff,” and will refer to John M. Cebula, as an individual, and Cheryl A. Cebula by first name or, when acting together, as “third-party defendants.”

2 The trial court mathematically erred in calculating its award, as $31,829 minus $18,913.63 equals $12,915.37, and thus, there is a $10 discrepancy, but th at part of the award is not at issue on appeal and neither party a ddresses the issue.-3- plaintiff this amount and to rem ove the construction lien. In addition, the trial court dismissed the third-party claims.

Plaintiff, third-party defendant s, and defendants all sought c ase evaluation sanctions. The trial court adopted plaintiff’s arguments that the verdict was more favorable to it than the case evaluation award, and granted pl aintiff’s request for case eval uation sanctions. The trial court also granted case evaluation sanctions to third-party defendant s, adopting their arguments that the case evaluation award was $0 as to them and that the resultof trial—dismissal of the claims—was a more favorable outcome. On October 11, 2013, the trial court entered a judgment in plaintiff’s favor for $12,905.37 on its underlying claims an d ordered defendants to pay attorney fees to plaintiff and third-party defendants. On Octo ber 23, 2013, the trial court entered a separate order denying defendants’ request for case evaluatio n sanctions. On April 24, 2014,
the trial court entered an order denying defendants’ motion for reconsideration of the October 11, 2013 order. This appeal followed.

II. CASE EVALUATION SANCTIONS

A. STANDARD OF REVIEW

The decision whether to award case-evaluation sanctions is a q uestion of law that this
Court reviews de novo. Van Elslander v Thomas Sebold & Assoc, Inc , 297 Mich App 204, 211; 823 NW2d 843 (2012). We also review de novo the interpretation of a court rule. Acorn Investment v Mich Basic Prop Ins Ass’n , 495 Mich 338, 348; 852 NW2d 22 (2014).

B. CASE EVALUATION SANCTI ONS AWARDED TO PLAINTIFF

Pursuant to MCR 2.403(A)(1), the parties’ various claims, coun terclaims, and third-party claims were submitted to case evaluation. Within 28 days of a case evaluation panel’s decision, each party “shall file a written acceptance or rejection of the panel’s evaluation . . . .” MCR 2.403(L)(1). A party who rejects the panel’s evaluation is sub ject to sanctions if he or she fails to improve upon his or her position at trial. Van Elslander , 297 Mich App at 213. MCR 2.403(O)(1) provides that:

If a party has rejected an evaluation and the action proceeds t o verdict, that party must pay the opposing party’s act ual costs unless the verdict i s more favorable to the rejecting party than the cas e 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 th an the case evaluation.

A verdict is considered “more favorable” to the plaintiff if it is more than 10 percent above the evaluation, and it is considered “more favorable” to the defend ant if it is more than 10 percent below the evaluation award. MCR 2.403(O)(3).

MCR 2.403(O)(4) applies in cases involving multiple parties an d provides in pertinent
part:

(a) Except as provided in subrule (O)(4)(b), in determining whe ther the verdict is more favorable to a party than the case evaluation, the court s hall consider only-4- the amount of the evaluation and verdict as to the particular p air of parties, rather than the aggregate evaluation or verdict as to all parties. Ho wever, costs may not be imposed on a plaintiff who obtains an aggregate verdict more favorable to the plaintiff than the a ggregate evaluation.

(b) If the verdict against more than one defendant is based on their joint and several liability, the plaintiff may not recover costs unless t he verdict is more favorable to the plaintiff than the total case evaluation as to those defendants, and a defendant may not recover costs unless the verdict is more fa vorable to that
defendant than the case eval uation as to that defendant.

Here, it was undisputed that all parties rejected the case eva luation award, which was an award of $25,000 to plaintiff. The award was against all defen dants, and the trial court’s verdict in favor of plaintiff was against all defendants, jointly and s everally. Thus, MCR 2.403(O)(4)(b) applies, and “plaintiff may not recover costs unless the verdic t is more favorable to the plaintiff than the total case evaluation as to” all defendants. For purp oses of determining whether case evaluation sanctions are warranted, the “verdict” that is to be considered includes, in pertinent part, “a judgment by the court af ter a nonjury trial[.]” MCR 2 .403(O)(2)(b).

On appeal, the parties dispute what constitutes the “verdict” for purposes of determining
whether case evaluation sanctions were appropriate, as well as whether the case evaluation award considered the $18,913.63 that the trial court had credited def endants. Plaintiff contends that the “verdict” in this case was the cost of repairs awarded by the t rial court, which was $31,829. Defendants argue that the “verdi ct” is the net recovery plainti ff obtained, i.e., $12,905.37. Defendants are correct. The “verdict” for purposes of determin ing entitlement to case evaluation
sanctions is the net amount award ed to plaintiff, not the gross amount before any amounts owed
to defendants are satisfied. See Minority Earth Movers, Inc v Walter Toebe Constr Co , 251 Mich App 87, 94; 649 NW2d 397 (2002), citing Dirkes v Lenzen , 239 Mich 270, 273; 214 NW 84 (1927). See also Marketos v American Employers Ins Co , 465 Mich 407, 414; 633 NW2d 371 (2001) (“For purposes of awa rding sanctions under MCR 2.403 (O), a ‘verdict’ must represent a finding on the amount that the prevailing party sho uld be awarded.”); Klinke v Mitsubishi Motors Corp , 219 Mich App 500, 517-518; 556 NW2d 528 (1996), aff’d 458 Mic h 582 (1998). As stated in 11 Corb in, Contracts (rev ed), § 60.1 , p. 608, concerning damages for the cost of completion of a building caused by a breach on the part of the contractor, “[o]f course, as against the cost of completion the owner must deduct the part of the price that he has not yet paid. . . .” Even though the trial court found that pl aintiff rightfully withheld the remaining $18,913.63 due under the c ontract, plaintiff was not entitled to count it as damages; plaintiff never paid that amount to defendant. Instead, it con stituted the remaining amount plaintiff expected to pay (and did, to someone else, as part of the $31,829 repair costs) for completion of the building projec t as planned. Thus, plaintiff ’s net loss, being the amount paid over and above the $135,413.63 anticipated for completion of th e project, was $12,905.37, payment of which would provide plaintiff, as noted by the trial court, “the value of the contract had the breaching party [defenda nts] fully performed.”

Having determined that the verdict was $12,905.37 for plaintif f, the next inquiry is whether that verdict was more favorable to plaintiff than the c ase evaluation award of $25,000 to plaintiff. The parties dispute whether the case evaluation award contemplated defendants’ claim-5- for damages under the contract and the amount of its constructi on lien. Plaintiff contends that the $25,000 award did not consider defendants’ construction lie n, meaning that plaintiff was required to satisfy the lien out of the $25,000 award, leaving it with a net recovery, having had accepted case evaluation, of $6,086.37. According to plaintiff , a $12,905.37 verdict is far more favorable than such a case evaluation award, and it easily exce eds the 10 percent threshold of MCR 2.403(O)(3). Defendants disagr ee, contending that the case evaluation aw ard was $25,000, and that this amount took the construction lien and $18,913.63 debt into consideration. Thus, defendants argue, the trial court’s verdict was less favorable to plaintiff, and case evaluation sanctions in plaintiff’s favor were not appropriate.

We agree with defendants. The record reveals that all of the parties’ claims were submitted to case evaluation, with no exceptions. 3 In this posture, if the p arties accepted the case evaluation award, the case would have been dismissed. CAM Constr v Lake Edgewood Condo

Ass’n , 465 Mich 549, 557; 640 NW2d 256 ( 2002) (“If all parties accep t the panel’s evaluation, the case is over.”). See also MCR 2.403(M)(1). This included a determination as to the amount, if any, of the construction lien. See Dane Constr, Inc v Royal’s Wine & Deli, Inc , 192 Mich App 287; 480 NW2d 343 (1991). An examination of this Court’s decis ion in Dane Constr is illustrative on this point. In that case, the plaintiff, a con tractor, filed a complaint against the defendants, alleging breach of c ontract and seeking to foreclos e on a construction lien. Id. at 289. The defendants filed a counterclaim for breach of contrac t. Id. A case evaluation panel awarded $40,000 against both defe ndants on plaintiff’s claims, and it awarded $3,000 to
defendants on their counterclaim. Id. The trial court construed both sides’ responses to the case evaluation award as an acceptance, and entered judgment accordi ngly. Id. In doing so, the trial court ordered that the plainti ff’s foreclosure action did not s urvive the entry of judgment. Id. On appeal, this Court was asked to decide, among other matters, wh ether the trial court’s entry of judgment based on the case evaluation award precluded the plain tiff from exercising its right to
enforce the construction lien. Id. at 292. In resolving this issue, this Court noted that an act ion to enforce a construction lien was equitable in nature and was “an in rem proceeding against property that has been improved through the lienholder’s servic es.” Id. The enforcement of that lien through foreclosure, this C ourt explained, was a cumulativ e remedy that could be pursued simultaneously with an action on th e contract from which the li en arose. Id. at 293.

With that in mind, this Court held that the plaintiff’s constr uction lien survived the case evaluation panel’s award. Id. at 293-294. This Court explaine d that although the case evalu ation panel could not have made a separate award for equitable relief , it could have, and did, consider the plaintiff’s equitable claim in determining the amount of the lien

. Id. at 293, citing MCR 2.403(K)(3) (“The evaluation may not include a separate award o n any claim for equitable relief, but the panel may consider such claims in determining the amoun t of an award.”). The case

3 MCR 2.403(A)(3) permits a trial court to exempt claims seeking equitable relief—such as defendants’ construction lien—from case evaluation “for good ca use shown or motion or by stipulation of the parties if the court finds that case evaluat ion of such claims would be inappropriate.” However, there is no indication in the record that any of the claims were
excluded from case evaluation.-6- evaluation award could not have provided relief on the plaintif f’s claim for foreclosure, but the award could have considered the amount of damages—i.e., the amo unt of the lien. Id. at 293- 294. This Court explained “that although the amount of damages that plaintiff can recover for breach of contract has been fixed by the mediation award, there by limiting the amount that may
be claimed under the constructi on lien, plaintiff maintains its right to collect those damages through the remedy provided by the construction lien.” Id. at 294.

The facts of this case are not exactly analogous to Dane Constr given that the amount of defendants’ lien was determined to be worthless, but this Court ’s reasoning—that the case evaluation panel considered the amount of the lien—is nonetheless appl icable and dispositive of the issue raised. All of the parties’ claims were submitted to case evaluation; this included
defendants’ claim for breach of contract. The claim for breachof contract established the
amount that defendants could reco ver on their construction lien . See id. By considering the amount of damages, if any, to which defendants were entitled on their claims against plaintiff, the case evaluation panel determined the worth of the construct ion lien filed by defendants. Id. By granting an award to plaintiff of $25,000, the case evaluati on panel concluded that, when weighing all of the claims in this case, plaintiff was entitled to $25,000 over and above anything
to which defendants were entitled. The value of defendants’ br each of contract claim, and, in turn, the value of its construc tion lien, was null, pursuant to the case evaluation panel. As such, any assertion by plaintiff that t he case evaluation award did n ot include the $18,913.63 claimed by defendants on their construction lien is meritless. Plainti ff would not have had to, as it contends, satisfy the construction lien out of the $25,000 awar d; the award already considered the claim upon which the lien w as based and found it to be wort hless. See id.

Consequently, the trial court’s conclusion that plaintiff rece ived a more favorable verdict at trial is erroneous. Case evaluation yielded a $25,000 award for plaintiff, free and clear of any
of defendants’ claims. The trial court’s verdict awarded plain tiff $12,905.37. MCR 2.403(O)(3) requires that in order to determine whether a verdict was more favorable, it must be adjusted “by adding to it assessable costs and interest . . . .” The term “ assessable costs” is limited to costs
incurred between the filing of the complaint and the date of th e case evaluation award. Dessart v
Burak , 470 Mich 37, 42; 678 NW2d 615 (2004). In its November 8, 201 3 “Taxation of Costs,” plaintiff listed assessable costs in the amount of $1,377.92. The adjusted verdict ($12,905.37 + $1,377.92) is $14,283.29. This verdict was substantially lower than the case evaluation award. The trial court’s decision to award case evaluation sanctions p ursuant to MCR 2.403(O) was

erroneous.

We also reject plaintiff’s alternative argument that the value of equitable relief should be considered pursuant to MCR 2.403(O)(5). Plaintiff did not rece ive the equitable relief it sought, and the mere fact that the trial court considered equitable iss ues does not mean that it granted equitable relief. Forest City Enterprises, Inc v Leemon Oil Co. , 228 Mich App 57, 79; 577 NW2d 150 (1998). Here, the trial court’s order requiring defen dants to remove the lien was not a grant of equitable relief. R ather, the trial court required defendants to release the lien because the trial court’s calculation of monetary damages already satis fied the amount secured by the lien. Defendants initially sought to foreclose on the construc tion lien as an alternative means for enforcing the debt owed to them. See Dane Constr , 192 Mich App at 293-294. By crediting $18,913.63 against the $31,829 in repair costs incurred by plai ntiff, the trial court awarded defendants what they were owed (effectively nothing but a set o ff), thereby discharging any debt-7- that was secured by the construction lien. Accordingly, any or der by the trial court requiring defendants to discharge the lien was not relief granted to plai ntiff on its claims to invalidate the lien. MCR 2.403(O)(5) uses the term “equitable relief,” which this Court has defined as “[t]hat species of relief sought in a court with equity powers as, for example, in the case of one seeking an injunction or specific performance instead of money damages. ” Forest City Enterprises , 228 Mich App at 79, quoting Black’s Law Dictionary (5th ed). Here, plaintiff did not receive any of the equitable relief it sought; rather, the court simply ordere d that the debt owed to defendants could no longer be collected thr ough a construction lien, given that it was satisfied. This was more of a ministerial order than equitable relief granted to pl aintiff. Moreover, even assuming
the trial court’s order to remove the now-worthless lien could be considered equitable relief granted to plaintiff, this would not change our conclusion that plaintiff failed to receive a more
favorable result.

C. THIRD-PARTY DEFENDANTS’ ENTITLEMENT TO SANCTIONS

The trial court’s October 11, 2013 order also awarded case eva luation sanctions to thirdparty defendants. The trial cour t adopted third-party defendan ts’ argument that the case evaluation award of “$25,000 to Π” meant that the case evaluati on panel found that the thirdparty claims filed by the Rhoades defendants against third-part y defendants were worth $0. As noted above, the trial court dism issed the claims against third -party defendants. In pertinent part, MCR 2.403(O)(3) provides that if the case evaluation award “was zero, a verdict finding that a defendant is not liable to the plaintiff shall be deemed more f avorable to the defendant.” We do not agree that third-party defenda nts are entitled to case eval uation sanctions.

We note that the case evalua tion award of “ $25,000 to Π” did n ot mention any third-party claims, and that, when proceeding in case evaluation, plaintiff and third-party defendants acted as a single entity. Acting together, they paid one case evalua tion fee. Although “[o]nly a single fee is required of each party, even where there are counterclai ms, cross-claims, or third-party claims[,]” MCR 2.403(H)(2), the Court Rules are clear that “[e] ach party must send a check” in the requisite amount, MCR 2.403(H)(1), in advance of case evalu ation. Moreover, plaintiff and third-party defendants together submitted a single rejection of the case evaluation award. This was contrary to MCR 2.403(L)(1), which expressly states that “[ e]ach party shall file a written acceptance or rejection of the panel’s evaluation . . . .” Acc ordingly, it appears that the case evaluation panel’s decision to tre at third-party defendants and plaintiff as a single entity was the product of plaintiff’s and third- party defendants’ actions. Th ey cannot complain about these actions on appeal. See Hilgendorf v St John Hosp & Med Center Corp , 245 Mich App 670, 683; 630 NW2d 356 (2001) (citation omitted) (explaining that a partyis not allowed to assign error to conduct to which the party contributed).

Moreover, apart from the fact that third- party defendants and plaintiff appear ed to act as a single party, we decline to adopt third-party defendants’ posit ion that the case evaluation award found that the third-party claims against them were worth $0. The case evaluation panel’s award of “$25,000 to [plaintiff]” is s o ambiguous that it would requi re this Court to speculate as to what it meant. What can fairly be deciphered from the order is that plaintiff, i.e., John M. Cebula as trustee, had claims that, in the aggregate, exceeded the value of defendants’ claims by $25,000. Any interpretation as to what this meant with regard to the thi rd-party defendants would be, at best, speculation. Any attempt to determine whether third-party defendants received a more-8- favorable outcome at trial would be speculative as well. In th is regard, our Supreme Court’s
order in Kusmierz v Schmitt , 477 Mich 934; 723 NW2d 833 (2006), is instructive. 4 In that case, our Supreme Court reversed this Court’s award of case evaluatio n sanctions:

Because the parties stipulated to a lump sum case evaluation aw ard, there was no
“amount of the evaluation . . . as t o . . . particular pair[s] of parties” for purposes of MCR 2.403(O)(4)(a). [MCR 2.403( O)(4)(a) requires that, in acase involving multiple parties, except in cases involving joint and several l iability, a court should consider the amount of the evaluation and verdict only a s to a particular pair of parties, rather than the aggregate evaluation or verdic t, in order to determine whether the verdict was more favorable.] Without suc h an amount, the court cannot compare the verdict to the case evaluation award f or each pair of parties as required by the court rules, and the court cannot de termine whether either party received a more favorable verdict. Therefore, nei ther party is entitled to case evaluation sanctions. [ Id. ]

In other words, given the ambiguity in the case evaluation pane l’s award, the Court was unable to determine whether either party received a more favorable ver dict; therefore, neither party was
entitled to case evaluation sanctions. See id. In the instant matter, the case evaluation panel’s cursory award does not allow for a determination of whether thi rd-party defendants received a more favorable outcome. The award made no mention of third-par ty defendants or the claims against them. Any determination as to whether the case evaluat ion panel valued defendants’ claims against third-party defe ndants at $0 would be entirely s peculative. We decline to engage in such speculation, and reverse the trial court’s award of cas e evaluation sanctions to third-party
defendants. See id.

D. DEFENDANTS’ ENTITLEMENT TO SANCTIONS

Lastly, defendants very loosely contend that they are entitled to an award of case
evaluation sanctions. 5 As noted above, the trial court rejected this argument in its October 23,
2013 order. This is a final order that is appealable as of rig ht. See MCR 7.202(6)(a)( iv ). However, defendants have not filed a separate claim of appeal w ith regard to this order, nor did they list the order on their claim of appeal of the October 11, 2013 order. Thus, this issue is not within the scope of the presen t appeal. See MCR 7.203(A)(1); M CR 7.204(A)(1). Moreover, we
note that defendants failed to rai se this issue in their statem ent of questions presented.

4 An order from our Supreme Court is binding if the rationale ca n be understood. Evans & Luptak, PLC v Lizza , 251 Mich App 187, 196; 650 NW2d 364 (2002).

5 Defendants did not raise the issue in their statement of ques tions presented, and the arguments in their brief center around plaintiff’s lack of entitlement to case evaluation sanctions. Although defendants note in their brief that, if anything, they are enti tled to case evaluation fees, and they ask for an order of attorney fees pursuant to MCR 2.403(O) in t heir conclusion and prayer for relief, given the facts and defendants’ reliance in Kusmierz , they also admit that “[i]n fact, neither party should have been awa rded case evaluation sanction s.”-9- Accordingly, we could decline to address the matter on those gr ounds. Bouverette v Westinghouse Electric Corp , 245 Mich App 391, 404; 628 NW2d 86 (2001). Nevertheless, given the ambiguity noted above w ith regard to the case evaluat ion award, we do not find it appropriate to award case evalua tion sanctions to any party in this case. See Kusmierz , 477 Mich
at 934.

We reverse the trial court’s October 11, 2013 order to the ext ent that it awarded costs and attorney fees to plaintiff and th ird-party defendants and reman d for the trial court to amend the order accordingly. We do notretain jurisdiction.

/s/ Jane M. Beckering /s/ Douglas B. Shapiro