Court Opinion

ID: 4510399
Source: CourtListenerOpinion
Date Created: 2020-02-26 10:05:25.915294+00
Date Added: 2024-06-11T12:13:32.752860
License: Public Domain

If this opinion indicates that it is “FOR PUBLICATION,” it is subject to
                  revision until final publication in the Michigan Appeals Reports.

                           STATE OF MICHIGAN

                            COURT OF APPEALS

 NICOLAS SULAKA,                                                       UNPUBLISHED
                                                                       February 25, 2020
                Plaintiff-Appellee,

 v                                                                     No. 344400
                                                                       Wayne Circuit Court
 SAMUEL FORGACIU,                                                      LC No. 16-010301-CZ

                Defendant-Appellant.

Before: SHAPIRO, P.J., and JANSEN and M. J. KELLY, JJ.

PER CURIAM.

       This action involves an alleged joint venture agreement between plaintiff, defendant, and
nonparty Alan Rayis with regard to commercial real property in Detroit. The property was
purchased solely in the name of defendant, and the parties did not have an express written
agreement regarding the project. Following a bench trial, the trial court found that the parties
formed an enforceable joint venture agreement to develop, operate, or sell the property. The court
found that upon a sale of the property, plaintiff was entitled to one-third of the net sales proceeds,
less $30,000 in expenses already advanced by defendant. After the trial court denied defendant’s
motion for a new trial, he appealed the judgment in favor of plaintiff. For the reasons stated in this
opinion, we affirm.

                                        I. BACKGROUND

        Plaintiff testified that in 2015, he learned from a friend that a large commercial property
on Hoover Road in Detroit was for sale for $20,000. According to plaintiff, he talked to defendant
and Rayis about purchasing the property and they discussed possible uses. Plaintiff considered
leasing the property as a warehouse for his own business and they also discussed using it as a
location for a medical-marijuana facility. Plaintiff explained that the three of them decided to
purchase the property and jointly operate or sell it for a profit. He contributed $5,000 toward the
purchase price, and defendant and Rayis each contributed $7,500. They were each to have a one-
third interest. Plaintiff testified that although he contributed less cash, he was to receive an equal
share because he found the property. At the time of the purchase, the seller executed a quitclaim
deed conveying the property to defendant only. According to plaintiff, their plan was to have the

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property held by a new entity in which they would each have a one-third interest, but the entity
had not been organized at the time the property was purchased, so the property was placed solely
in defendant’s name, with the intent of transferring ownership to the new entity after it was formed.
Rayis later sold his interest to defendant, giving defendant a two-thirds interest.

       Plaintiff explained that they wanted defendant involved in the project because he had
experience rehabilitating and remodeling properties. Per plaintiff’s testimony, it was expected that
defendant would initially assume the cost of securing and rehabilitating the property, but plaintiff
acknowledged that he would remain liable for one-third of the expenses. Soon after the property
was purchased, defendant performed work to secure, clean, and repair it. Defendant estimated that
he spent about $30,000. During that time, the parties still had not agreed on how to use the
property. Plaintiff showed it to one potential buyer.

        In 2016, plaintiff prepared documents, including a proposed operating agreement, for the
formation of a new entity, Sanick Holdings, LLC, that would hold title to the property. However,
defendant refused to sign the documents and the parties were unable to work out their differences.
Plaintiff testified that defendant mentioned that plaintiff had not paid any money toward the work
performed on the building, but that defendant did not respond to plaintiff’s requests for
documentation of the work. Plaintiff said he was leery about paying money to defendant until
their disagreements were resolved. Eventually, after not being able to resolve their disputes,
plaintiff filed this action.

         Defendant denied that plaintiff ever acquired any interest in the property. Defendant
claimed that the $5,000 payment plaintiff made at the time of purchase was actually repayment of
a debt that plaintiff owed to Rayis, which in turn Rayis applied toward the purchase price as part
of Rayis’s contribution. According to defendant, plaintiff was only interested in a business that
they might operate at the property, and it was contemplated that plaintiff would receive a one-third
interest in that business entity, but not the property. Defendant testified that plaintiff promised to
assist in locating funding for a new business, but that never materialized. Defendant spent time
and money upgrading the property, and plaintiff contributed nothing toward that work. Defendant
agreed that if plaintiff had made payments toward that work, defendant would have treated him as
a partner. But because plaintiff did not contribute toward the project, defendant advised him that
he was going ahead with the project on his own. At the time of trial, defendant had located a buyer
who was willing to purchase the property for $265,000.

        Rayis testified that he, plaintiff, and defendant were all involved in the initial purchase of
the property and their plan was for the three of them to hold a one-third interest in the company
they intended to form that would hold title to and operate the property. Rayis explained that only
defendant’s name was listed on the deed because they were all friends and they trusted him. Rayis
denied that the money plaintiff contributed at the time the property was purchased was to pay back
a loan from Rayis.

        The trial court found that the parties had formed an agreement for a joint venture to own
the subject property and form a business. The court held that the joint venture agreement was valid
as an oral agreement. Because the parties also contemplated selling the property instead of
developing it, the court found that when defendant located a buyer and refused to share the sale
proceeds with plaintiff, defendant breached the agreement. The court rejected defendant’s

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argument that plaintiff first breached the agreement by failing to timely pay his share of the
expenses. The court held that upon a sale of the property, plaintiff was “entitled to one-third of
the net proceeds less the $30,000 in expenses advanced by [defendant].”

                                          II. STANDING

       Defendant first argues that plaintiff lacked standing to bring this action because the action
belonged to plaintiff’s then-existing business entity, Savannah Properties, LLC, not plaintiff
individually. The trial court rejected defendant’s standing argument because it found that plaintiff
was seeking to enforce an agreement that he made in his individual capacity.1

        “To have standing, a party must have a legally protected interest that is in jeopardy of being
adversely affected.” Dep’t of Treasury, Revenue Div v Comerica Bank, 201 Mich. App. 318, 329-
330; 506 NW2d 283 (1993). “The purpose of the standing doctrine is to assess whether a litigant’s
interest in the issue is sufficient to ensure sincere and vigorous advocacy.” Lansing Sch Ed Ass’n
v Lansing Bd of Ed, 487 Mich. 349, 355; 792 NW2d 686 (2010) (quotation marks and citation
omitted). “When a party’s standing is contested, the issue becomes whether the proper party is
seeking adjudication, not whether the issue is justiciable.” Tennine Corp v Boardwalk
Commercial, LLC, 315 Mich. App. 1, 7; 888 NW2d 267 (2016).

        Defendant’s standing argument is premised on the terms of the proposed operating
agreement that plaintiff had prepared, which would have named the holder of the one-third interest
associated with plaintiff’s $5,000 payment as Savannah’s Properties, LLC, which is plaintiff’s
business entity. However, the proposed Operating Agreement was never executed, and plaintiff
was not seeking to enforce an alleged agreement between his business entity, Savannah’s
Properties, and defendant. Instead, plaintiff was seeking to enforce an alleged joint venture
agreement that he personally made with defendant, in which it was contemplated that the real
property would eventually be held by the corporation they were going to create, Sanick Holdings,
LLC. The proposed operating agreement, which was never consummated, is not dispositive of
whether plaintiff personally formed an agreement with defendant. As the trial court found, the
evidence showed that plaintiff was acting in his personal capacity when he entered into an
agreement with defendant and Rayis to acquire the subject property. Any terms of an agreement
related to how that property would later be held and controlled would involve a separate agreement,
which would not impact plaintiff’s standing to pursue this action to enforce the agreement entered
into by him personally. Further, as the trial court noted in denying defendant’s motion for a
directed verdict, the fact that the source of plaintiff’s $5,000 payment toward the property involved
funds from plaintiff’s business entity does not prove that plaintiff did not enter into the joint
venture agreement with defendant and Rayis in his individual capacity. For these reasons, the
trial court did not err by rejecting defendant’s argument that plaintiff lacked standing to bring this
action.

1
 We review de novo as a question of law whether a party has standing. In re Gerald Pollack
Trust, 309 Mich. App. 125, 154; 867 NW2d 884 (2015).

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                                   III. BREACH OF CONTRACT

       Next, defendant argues that the trial court erred by finding that he, and not plaintiff, first
breached the joint venture agreement that the parties formed.2

        Defendant relies on “[t]he rule in Michigan is that one who first breaches a contract cannot
maintain an action against the other contracting party for his subsequent breach or failure to
perform.” Able Demolition, Inc v City of Pontiac, 275 Mich. App. 577, 585; 739 NW2d 696 (2007)
(quotation marks and citations omitted). He argues that plaintiff first breached their agreement by
failing to provide funds to secure, repair, and rehabilitate the subject property. The trial court
rejected this argument because (1) the parties contemplated that defendant would make the initial
expense contributions and (2) the parties had not agreed that plaintiff would lose his interest in the
venture if he failed to pay his share of the expenses by a specified date. Instead, the trial court
reasoned, there was only an agreement that plaintiff was required to pay his share of the financial
expenses, which he did not dispute. Thus, the court recognized that defendant was entitled to be
reimbursed for his expense contributions before plaintiff could recover for his interest in the joint
venture, and accordingly, it ordered that upon a sale of the property, plaintiff was “entitled to one-
third of the net proceeds less the $30,000 in expenses advanced by [defendant].”

         While defendant is correct that plaintiff admitted that he had not actually paid any share of
the expenses related to securing, rehabilitating, or repairing the property, there was no agreement
between the parties as to when plaintiff was to pay his share. When defendant requested payment
for work after experiencing financial problems, plaintiff did not refuse to pay defendant, but rather
asked for documentation of the work done, which defendant did not provide. To the extent that
this could be considered a breach, it was not a substantial breach given that plaintiff did not refuse
to pay for his one-third of the expenses and there was no agreement on when defendant was to be
reimbursed. See Able Demolition, Inc, 275 Mich. App. at 585 (the rule precluding the party who
first breached the contract from maintaining a breach-of-contract action “only applies if the initial
breach was substantial.”). Accordingly, the trial court did not err by rejecting defendant’s
argument that plaintiff was the first party to substantially breach the parties’ agreement such that
plaintiff could not maintain his own action for breach of contract.

                                       IV. JOINT VENTURE

        Defendant also argues that the trial court erred by finding that plaintiff had a one-third
interest in the subject real property. This argument miscomprehends the basis of the trial court’s
decision. The court did not find that plaintiff had a one-third interest in the real property itself, but
rather that the parties had an “enforceable joint venture agreement whereby they will develop,

2
  We review a trial court’s factual findings following a bench trial for clear error, and its
conclusions of law de novo. Trahey v City of Inkster, 311 Mich. App. 582, 593; 876 NW2d 582
(2015); MCR 2.613(C). “A finding of fact is clearly erroneous if there is no evidentiary support
for it or this Court is left with a definite and firm conviction that a mistake has been made.” Trahey,
311 Mich. App. at 593 (citation omitted). In reviewing the trial court’s findings, “regard shall be
given to the special opportunity of the trial court to judge the credibility of the witnesses who
appeared before it.” MCR 2.613(C).

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operate or sell the Hoover real estate.” The court found that the parties’ agreement included that
defendant “would have the deed in his name.” The court did not award plaintiff an interest in the
real property itself, but ruled only that plaintiff had a one-third interest in the joint venture that
pertained to the operation, development, or ultimate sale of the property.

        Defendant argues that the trial court’s decision is unclear and needs to be clarified, because
he cannot determine under which theory or theories it granted plaintiff relief. We disagree. It is
apparent from the trial court’s conclusions of law that it viewed plaintiff’s action as one for breach
of contract. The court found that the parties formed a joint venture agreement to buy a building to
jointly operate a business or sell for profit. The court specifically found that the parties’ agreement
did not involve a contract for the sale or purchase of land that would be barred by the statute of
frauds. As indicated earlier, the court rejected defendant’s argument that plaintiff could not
maintain this action because he committed the first breach by not reimbursing defendant for his
financial contributions to the property. The court’s findings are sufficiently clear and definite to
determine that the trial court granted plaintiff relief under a breach-of-contract theory. Remand
for clarification of the trial court’s findings or decision is not necessary.

        Defendant also argues that the trial court clearly erred by finding that the parties had an
enforceable joint venture agreement related to the subject property, but his argument only involves
the statute of frauds, which is addressed in section IV, infra. Defendant does not otherwise
challenge the trial court’s factual findings in support of its conclusion that the parties formed a
joint venture agreement to develop, operate, or sell the property. Accordingly, we affirm the trial
court’s ruling with respect to that issue.

        The trial court also found that the parties contemplated selling the property for a profit as
an alternative to developing or operating a business on the property. Therefore, the court provided
as a remedy that if the property was sold, plaintiff would be “entitled to one-third of the net
proceeds less the $30,000 in expenses advanced by [defendant].” Defendant complains that the
court’s decision forces him to work with plaintiff to either continue to develop the property, operate
a business, or sell it. The trial court merely decided the nature of the joint venture that the parties
agreed to form and held that plaintiff had a one-third interest in that joint venture. The court did
not otherwise dictate what was to be done with the property or how the parties should handle
matters going forward, other than specifying that, should the property be sold, plaintiff would be
entitled to a one-third share of the net sales proceeds, consistent with the parties’ joint venture
agreement. We note, however, that the property has since been sold and all that remains is the
distribution of the sale proceeds. Accordingly, defendant’s argument regarding the effect of the
trial court’s decision on the parties’ future course of conduct is moot.

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                                    V. STATUTE OF FRAUDS

       As noted, defendant argues that the trial court erred by rejecting his argument that the
alleged agreement between the parties was void under the statute of frauds. We again disagree.3

       MCL 566.106 provides:

               No estate or interest in lands, other than leases for a term not exceeding 1
       year, nor any trust or power over or concerning lands, or in any manner relating
       thereto, shall hereafter be created, granted, assigned, surrendered or declared,
       unless by act or operation of law, or by a deed or conveyance in writing, subscribed
       by the party creating, granting, assigning, surrendering or declaring the same, or by
       some person thereunto by him lawfully authorized by writing.

        In Summers v Hoffman, 341 Mich. 686, 689-690; 69 NW2d 198 (1955), the Court
considered the enforceability of an oral agreement to acquire and develop real estate. The Court
held that the statute of frauds did not require a writing for a joint venture that involved the division
of profits from the sale of land. Id. at 692-697. It explained that an agreement to share in the
profits derived from the sale of reality is not within the statute of frauds and, therefore, need not
be in writing. Id. at 697-698. See also In re Handelsman, 266 Mich. App. 433, 440-441; 702 NW2d
641 (2005) (holding that when an oral agreement relates to money generated by real property,
rather than an interest in the real property itself, the statute of frauds is not implicated).

        In this case, the trial court did not purport to adjudicate any property interest in the Hoover
Road property, but instead found that the parties formed a separate joint venture agreement to
develop, operate, or sell the property. Similar to Summers, the trial court did not err by ruling that
this type of agreement was not barred by the statute of frauds.

                                 VI. OPERATING AGREEMENT

        Finally, defendant complains that the effect of the trial court’s decision was to enforce the
proposed Operating Agreement that plaintiff had prepared, but which the parties never signed. We
disagree because the trial court’s decision was not based on the proposed operating agreement,
but rather was based on other evidence indicating that the parties agreed to form a joint venture to
acquire, operate, or sell the business property to earn a profit. Plaintiff offered the proposed
operating agreement as evidence that, by presenting the proposed agreement to defendant, he was
acting consistently with the parties’ prior agreement to jointly operate or sell the business property.
The trial court did not find that this proposed agreement established the basis for the joint venture
agreement between the parties, nor did it find that it governed the parties’ business relationship.

       Defendant also argues that the trial court erroneously ordered him to sell property for which
he was the sole record owner. However, the court did not order defendant to sell the property, but

3
  We review de novo questions of law, including whether the statute of frauds bars enforcement of
a purported contract.” Zander v Ogihara Corp, 213 Mich. App. 438, 441; 540 NW2d 702 (1995).

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merely ordered that plaintiff would be entitled to one-third of the net sales proceeds after
reimbursement of defendant’s expense advances if the property was sold. That decision is
consistent with the joint venture agreement found by the trial court. The evidence supports the
trial court’s findings that the parties were ultimately concerned with profiting from the property
through the joint venture, whether that meant developing it or selling it.

       Affirmed. As the prevailing party, plaintiff may tax costs. MCR 7.219(A).

                                                            /s/ Douglas B. Shapiro
                                                            /s/ Kathleen Jansen
                                                            /s/ Michael J. Kelly

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