Court Opinion

ID: 4466289
Source: CourtListenerOpinion
Date Created: 2019-12-20 10:13:12.066667+00
Date Added: 2024-06-11T15:03:53.188929
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

BRANDON LESNIAK, AUTUMN LESNIAK,                                  UNPUBLISHED
CASEY FRUSHOUR, ANNA M. FRUSHOUR,                                 December 19, 2019
RAHUL CHANDE, and ANUSHREE CHANDE,

              Plaintiffs-Appellees,

v                                                                 No. 345228
                                                                  Washtenaw Circuit Court
ARCHON BUILDERS, LLC, also known as                               LC No. 17-000637-CK
ARCHCON BUILDERS, LLC, RODWAN
RAJJOUB, HIGHPOINT BUILDERS, LLC, also
known as HIGHPOINTE BUILDERS, LLC,
JOHNSON BUILDING GROUP, LLC, and
LOUIS JOHNSON,

              Defendant-Appellants,

and

STEWART TITLE GUARANTY COMPANY,
CHICAGO TITLE INSURANCE COMPANY, and
LIBERTY TITLE AGENCY, INC.,

       Defendants.

Before: TUKEL, P.J., and SAWYER and RIORDAN, JJ.

PER CURIAM.

       Defendants Archon Builders, LLC; Rodwan Rajjoub; Highpoint Builders, LLC; Johnson
Building Group, LLC; and Louis Johnson, appeal as of right the trial court’s order denying their
motion for summary disposition against plaintiffs Brandon and Autumn Lesniak, Casey and Ana
Frushour, and Rahul and Anushree Chande. Defendants argue that the trial court erred by
denying their motion for summary disposition because they were entitled to arbitration under the
terms of the construction agreements entered into by the parties. We reverse the trial court’s
order denying defendants’ motion for summary disposition because (1) the arbitration terms of

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the construction agreements sufficiently relate to plaintiffs’ claims to require arbitration, and (2)
defendants have not waived their right to arbitration.

                                             I. FACTS

         This case arose out of a series of contracts, hereinafter referred to as the construction
agreements and the purchase agreements, relating to plaintiffs’ purchases of three lots for the
construction of three new homes in the Lohr Woods Site Condominium complex located in
Pittsfield Township, Michigan. Archon Builders, Inc. developed and owned the condominium
site. Plaintiffs contracted with Highpoint Builders, LLC, and Johnson Building Group, LLC,
both owned by Louis Johnson, to build plaintiffs’ homes on the lots at issue. Before plaintiffs
entered into any contracts with defendants, Archon conveyed to Highpoint an option to purchase
the three empty lots in Lohr Woods that plaintiffs subsequently bought.

        In late 2015 and early 2016, Highpoint entered into agreements with plaintiffs to
construct new single family homes on each of the three lots and to convey its option to purchase
these lots to plaintiffs. Johnson signed each of the construction agreements as the representative
of Highpoint. Plaintiffs signed each respective construction agreement as customers. Neither
Archon nor Rajjoub signed the construction agreements. The construction agreements provide in
relevant part as follows:

               15. Title. Builder shall convey its option to purchase the lot from
       Archcon Builders Inc., shall accept responsibility for the now outstanding “capital
       benefit charge” which must be paid as a condition of building permit and the
       Customer shall acquire good title to the real estate from another. The Builder
       shall provide shall provide [sic] lien waivers to the Customer showing that the
       premises are free and clear of liens at all times and upon completion.

                                              * * *

               20. Arbitration. Any controversy, claim or dispute arising out of or
       relating to this Agreement shall be settled by arbitration in accordance with the
       Construction Industry Arbitration Rules of the American Arbitration Association
       (“AAA”) and the Federal Arbitration Act (Title 9 of U.S. Code) and judgment
       rendered by the arbitrator(s) may be confirmed, entered and enforced in any court
       having jurisdiction. As a condition precedent to arbitration, the dispute shall first
       be mediated in accordance with the Construction Industry Mediation Rules of
       AAA, or such other mediation services selected by the Builder. This includes, but
       is not limited to, any complaints and/or claims issued by the Department of
       Consumer and Industry Services as contemplated by MCLA 339.2411.
       Enforcement of this contract regarding court costs, arbitration, administration,
       and/or attorney fees should be the responsibility of Customer.

Under the construction agreements’ terms, Highpoint agreed to convey to plaintiffs its option to
purchase the lots from Archon. In addition, the parties agreed to arbitrate “[a]ny controversy,
claim or dispute arising out of or relating to this agreement.”

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       Plaintiffs each signed purchase agreements for the lots on the same day that they signed
the construction agreements. Specifically, each purchase agreement provided in relevant part:

              This agreement is by and between Archcon Management, LLC, by its
       Agent, Highpointe Builders, LLC, . . . (Seller) and [plaintiffs’ respective names
       and address] (“Buyers”) and provides the terms and conditions on which the
       Buyer shall purchase a residential lot in the subdivision known as “Lohr Woods
       Subdivision,” being Lot [number], and has its effective date the date of the
       signature of the parties.

                                              * * *

              Seller shall convey to Buyer by Warranty Deed, clear title and a title
       insurance policy by Liberty Title of Ann Arbor, showing only typical easements
       and the aforementioned covenants.

        In 2017, plaintiffs began to notice significant flooding and standing water in the
backyards of their homes. After contacting Pittsfield Township, plaintiffs were informed that
their properties were covered in water because the backyards were in a floodplain area. When
plaintiffs inquired about making modifications to the floodplain areas, they discovered that each
of their lots was subject to a conservation easement that precluded modifications. Neither the
existence of the floodplains nor the existence of the conservation easement was disclosed to
plaintiffs before they signed the purchase agreements and construction agreements.

        In July 2017, plaintiffs sued defendants under various theories of fraud and innocent
misrepresentation, alleging that defendants’ actions diminished values of their properties and that
defendants knew or should have known about this conservation easement. Plaintiffs alleged that
defendants breached the purchase agreements, but did not allege that defendants breached the
construction agreements. However, plaintiff’s allegations made reference to a provision in the
construction agreements stating that Highpoint had the authority to remove all vegetation from
the lots.

        In response, defendants filed their answer and affirmative defenses. Defendants argued
that plaintiffs’ claims were covered by the arbitration clause in the construction agreements.
Defendants additionally filed a counterclaim alleging that plaintiffs breached the construction
agreements by not proceeding to arbitration.

        In March 2018, defendants filed a motion for summary disposition under MCR
2.116(C)(7), (C)(8), (C)(9), and (C)(10). Defendants argued, in pertinent part, that the arbitration
clause in the construction contracts covered defendants’ alleged breach of contract. Thus,
defendants argued, plaintiffs should bring their claims to arbitration, not the courts. Plaintiffs
responded that their claims were not subject to the arbitration clause in the construction
agreements because plaintiffs’ claims arose out of the purchase agreements, not the construction
agreements. After a brief oral argument, the trial court denied defendants’ motion for summary
disposition. In its written order denying defendants’ motion for summary disposition, the trial
court stated that it was denying defendants’ motion because it felt that there were “too many
factual issues in dispute.”

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        Defendants subsequently moved for reconsideration, essentially reiterating their previous
arguments. Plaintiffs responded, also largely reiterating their previous arguments. Plaintiffs,
however, additionally argued for the first time that defendants waived the right to compel
arbitration by their inaction and failure to actually enforce the arbitration clause. The trial court
denied defendants’ motion for reconsideration. Defendants now appeal as of right.

                   II. APPLICABILITY OF THE ARBITRATION CLAUSE

                                  A. STANDARD OF REVIEW

         “This Court reviews de novo a trial court’s decision on a motion for summary disposition
brought under MCR 2.116(C)(7). Under MCR 2.116(C)(7), summary disposition is appropriate
if a claim is barred because of an agreement to arbitrate . . . .” Beck v Park West Galleries, Inc,
499 Mich. 40, 45; 878 NW2d 804 (2016) (quotation marks and citation omitted; alteration in
original). 1 Neither the movant nor responding party under MCR 2.116(C)(7) is required to file
supportive material. Maiden v Rozwood, 461 Mich. 109, 119; 597 NW2d 817 (1999). Any
documentation that is provided to the court, however, must be substantively admissible evidence
and must be considered by the court. Id. The plaintiff’s well-pleaded factual allegations must be
accepted as true unless contradicted by documentation submitted by the movant. Id.

        Furthermore, “[w]hether an issue is subject to arbitration is also reviewed de novo.”
Beck, 499 Mich. at 45; Madison Dist Pub Sch v Myers, 247 Mich. App. 583, 594; 637 NW2d 526
(2001). “Whether one has waived his right to arbitration depends on the particular facts and
circumstances of each case.” Madison Dist Pub Sch, 247 Mich. App. at 588. We review de novo
whether particular circumstances establish a waiver of the right to arbitration. Id. In addition,
we review for clear error a trial court’s factual determinations regarding such circumstances. Id.
“A finding is clearly erroneous if, after a review of the entire record, the reviewing court is left
with a definite and firm conviction that a mistake has been made.” McNamara v Horner, 249
Mich. App. 177, 182-183; 642 NW2d 385 (2002). Finally, “questions involving the proper
interpretation of a contract or the legal effect of a contractual clause are also reviewed de novo.”
Rory v Continental Ins Co, 473 Mich. 457, 464; 703 NW2d 23 (2005).

                                          B. ANALYSIS

        “An agreement to arbitrate is a contract.” Ferndale v Florence Cement Co, 269 Mich
App 452, 458; 712 NW2d 522 (2006). “Accordingly, we must apply the same legal principles
that govern contract interpretation to the interpretation of an arbitration agreement.” Beck, 499
Mich. at 45. “The cardinal rule in the interpretation of contracts is to ascertain the intention of
the parties.” Ferndale, 269 Mich. App. at 458; see also Beck, 499 Mich. at 45. Determining the
parties’ intent “requires an examination of the language of the contract according to its plain and
ordinary meaning.” Beck, 499 Mich. at 45-46. We “must interpret and enforce clear and

1
  While defendants moved for summary disposition under MCR 2.116(C)(7), (C)(8), (C)(9), and
(C)(10), they only argue on appeal that the trial court should have granted summary disposition
to them under MCR 2.116(C)(7).

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unambiguous language as written.” Id. at 46. The existence of an arbitration agreement is a
judicial question for the courts. Ferndale, 269 Mich. App. at 458.

       To ascertain the arbitrability of an issue, the court must consider whether there is
       an arbitration provision in the parties’ contract, whether the disputed issue is
       arguably within the arbitration clause, and whether the dispute is expressly
       exempt from arbitration by the terms of the contract. Any doubts regarding the
       arbitrability of an issue should be resolved in favor of arbitration. [Madison Dist
       Pub Sch, 247 Mich. App. at 595 (citation omitted).]

But “[a] party cannot be required to arbitrate an issue which he has not agreed to submit to
arbitration.” Beck, 499 Mich. at 46 (alteration in original; quotation marks and citation omitted).
Furthermore, “Michigan law requires that separate contracts be treated separately.” Id.

        There are several contracts involved in the transactions in this case. However, only the
construction agreements contain arbitration clauses, which state in pertinent part: “Any
controversy, claim or dispute arising out of or relating to this Agreement shall be settled by
arbitration . . . .” Defendants now seek to apply the arbitration clauses of the construction
agreements to encompass the entirety of the transactions between the parties. Defendants argue
that the phrase “arising out of or relating to this Agreement” located within the arbitration clause
is sufficiently broad to encompass the purchase agreements and other related documents
regarding purchase of the lots at issue.

       As a general matter, our Supreme Court previously has recognized that absent express
references to other agreements, there is insufficient evidence to determine that parties intended to
apply an arbitration clause in one contract to other contracts between parties. See Beck, 499
Mich. at 47-48 (reversing this Court’s conclusion that the term “[a]ny disputes or claims of any
kind” was sufficient to apply the arbitration clause retroactively to earlier agreements because
“[e]ach unique transaction, accompanied by a separate invoice, constituted a separate and distinct
contract, capable of independent enforcement.”). “[A] general policy favoring arbitration cannot
trump the actual intent and agreement of the parties.” Id. at 49.

        The construction and purchase agreements in this case establish the parties’ intent to
arbitrate because they are temporally and substantively integral to one another such that they
must be construed together. “When there are several agreements relating to the same subject
matter, the intention of the parties must be gleaned from all the agreements.” Omnicom of Mich
v Giannetti Inv Co, 221 Mich. App. 341, 346; 561 NW2d 138 (1997). By using the language
requiring the parties to the construction agreements to arbitrate claims or disputes “relating to
this Agreement,” the parties expressed a clear intent to subject to arbitration all disputes arising
from the construction contracts. The purchase agreements could only be entered into because
the construction agreements conferred to plaintiffs the right to purchase their lots. Thus, it was
within the contemplation of the parties that any claimed breach of contract claim based on the
purchase agreements would be considered in pari materia with the arbitration provision of the
construction agreements, which created the right to purchase in the first instance. See id. at 346-
347 (holding that when parties enter into multiple contracts their intent “must be gleaned from all
the agreements”). Moreover, the temporal and substantive relationship between the contracts
indicates a type of “ongoing” business relationship beyond the individual contracts themselves.

                                                -5-
See Beck, 499 Mich. at 50 (distinguishing federal arbitration cases based on the ongoing business
relationships of the litigants). Accordingly, in light of the interplay between these two contracts,
there is sufficient evidence of intent from the parties to apply the arbitration agreement in the
construction agreements to the purchase agreements. By signing the construction agreements
containing an arbitration clause, plaintiffs agreed to arbitrate not only disputes regarding the
construction of the homes, but also disputes regarding the purchase of the lots on which the
homes were to be constructed. See Omnicom of Mich, 221 Mich. App. at 346-347.

        We additionally note that plaintiffs contend that the arbitration clauses should not apply
because they have not alleged a violation of the construction agreements. Rather, they assert, the
focus of their claims is fraud, misrepresentation, and contract violation entirely on the basis of
the sale of the property itself, not the construction of the homes. Notably, however, in their
complaint, plaintiffs expressly invoked the terms of the construction agreements to support their
claim of fraud against defendants. Specifically, they alleged, “[t]he Developer Defendants
represented that it [sic] had the ability to remove any vegetation necessary to complete
construction.” Although plaintiffs did not provide a citation for this allegation, it is a clear
reference to ¶ 7 of the construction agreements. Accepting this factual allegation, see Maiden,
461 Mich. at 119, plaintiffs have in fact invoked the terms of the construction agreement, and
concomitantly, the arbitration clause. Furthermore, even if plaintiffs did not specifically invoke
the language of the construction agreements, the gravamen of their complaint is that defendants
failed to notify plaintiffs of the conservation easements on their properties. Plaintiffs were only
able to purchase the properties because, through the construction agreements, they received an
option to buy them. Consequently, their complaints necessarily arose out of the construction
agreements. See Adams v Adams, 276 Mich. App. 704, 710-711; 742 NW2d 399 (2007) (“It is
well settled that the gravamen of an action is determined by reading the complaint as a whole,
and by looking beyond mere procedural labels to determine the exact nature of the claim.”).

        Finally, “[a]ny doubts about the arbitrability of an issue should be resolved in favor of
arbitration.” Huntington Woods v Ajax Paving Indus, Inc, 196 Mich. App. 71, 75; 492 NW2d 463
(1992). Because of this mandate, we resolve any ambiguity that may exist in favor of allowing
defendants to invoke the arbitration clauses of the construction agreements. Thus, the trial court
erred by denying summary disposition in this case because plaintiffs’ claims were subject to the
arbitration clause in the construction agreements.

                       III. WAIVER OF THE ARBITRATION CLAUSE

        Even though plaintiffs’ claims are subject to the arbitration clause in the construction
agreements, defendants could have waived their right to invoke the arbitration clause. We hold
that they have not. In resolving this issue, we first note that plaintiffs have not properly
preserved their waiver argument. An issue raised in the trial court and pursued on appeal is
preserved even if the trial court failed to address or decide the issue. Peterman v Dep’t of
Natural Resources, 446 Mich. 177, 183; 521 NW2d 499 (1994). Plaintiffs argue as an alternative
ground for affirmance in their brief on appeal that defendants waived arbitration. Plaintiffs,
however, did not raise this issue in the lower court until filing their response to defendants’
motion for reconsideration. “[W]here an issue is first presented in a motion for reconsideration,
it is not properly preserved.” Vushaj v Farm Bureau Gen Ins Co of Mich, 284 Mich. App. 513,
521; 773 NW2d 758 (2009). Nevertheless, “[t]his Court may review an unpreserved issue if it is

                                                -6-
an issue of law for which all the relevant facts are available.” Id. Because the facts relevant to
arbitration waiver are present in the lower court record, we choose to address this issue.

                                 A. STANDARD OF REVIEW

       “Whether one has waived his right to arbitration depends on the particular facts and
circumstances of each case.” Madison Dist Pub Sch, 247 Mich. App. at 588. We review de novo
“whether the relevant circumstances establish a waiver of the right to arbitration.” Id.

       Waiver of a contractual right to arbitrate is disfavored. The party arguing there
       has been a waiver of this right bears a heavy burden of proof and must
       demonstrate knowledge of an existing right to compel arbitration, acts
       inconsistent with the right to arbitrate, and prejudice resulting from the
       inconsistent acts.” [Id. (quotation marks and citation omitted).]

                                         B. ANALYSIS

        With respect to knowledge of an existing right to compel arbitration, e-mail
correspondence between Brandon Lesniak and Johnson demonstrates that Johnson was
continuously aware of the potential to resolve the dispute via arbitration. In an e-mail dated
April 24, 2017, in response to Brandon’s inquiries regarding the ongoing flooding issue, Johnson
stated, “[i]t sounds like you want money and if so then I think that would need to be a process,
possibility [sic] an arbitration.”

         In Madison Dist Pub Sch, 247 Mich. App. at 589, this Court noted that “a [party] has been
held to have waived the right to arbitration of the dispute involved by filing an answer without
properly demanding or asserting the right to arbitration, by filing an answer containing a
counterclaim . . . without demanding arbitration . . . .” (first and second alterations in original;
citation omitted). In this case, defendants raised arbitration as an affirmative defense in their
initial responsive pleading. They also filed a counterclaim alleging that plaintiffs breached their
contracts by not proceeding to arbitration. This Court further noted that filing a motion for
summary disposition could be viewed as inconsistent with an intent to proceed to arbitration. Id.
And in this case, defendants did file a motion for summary disposition raising multiple grounds
for dismissal. Their primary argument, however, was their arbitration defense. Thus, it is clear
that defendants knew of an existing right to compel arbitration and maintained arbitration as a
defense throughout, thus belying any claim of waiver.

        Plaintiffs nevertheless contend that, despite defendants’ initial pleadings, defendants
nevertheless waived the arbitration issue by waiting six months after filing their affirmative
defenses before filing their motion for summary disposition. See North West Mich Constr, Inc v
Stroud, 185 Mich. App. 649; 462 NW2d 804 (1990). In North West, the defendants answered the
plaintiff’s complaint in June 1988 affirmatively pleading that the plaintiff was required to submit
its dispute to arbitration. Id. at 650-651. In December 1988, the defendants filed their pretrial
statement, again raising the arbitration provision. Id. at 651. And in February 1989, the
defendants moved to dismiss the plaintiff’s complaint on the ground that the plaintiff was
required to submit its claim to arbitration. Id. The trial court in that case denied the defendants’
motion to dismiss because “ ‘[w]ith the passage of time, the Defendant’s [sic] active

                                                -7-
participation in the litigation and the Defendant’s [sic] failure to seek enforcement of the
arbitration provision . . . there has been a waiver of that contractual right.’ ” Id. (second and
third alterations in original; citation omitted). This Court affirmed, reasoning that the
defendants, “by their active participation in the proceedings, had waived their right to assert
arbitration as a ground for dismissal.” Id. at 652.

         North West does appear to support a conclusion that defendants in this case similarly
waived their right to assert arbitration. As in North West, defendants answered plaintiffs’
complaint in September 2017, affirmatively pleading that plaintiffs were required to submit their
dispute to arbitration. And it was not until March 2018 that defendants moved to dismiss
plaintiffs’ complaint on the ground that plaintiffs were required to submit their claims to
arbitration. However, North West is not binding on us, as it was issued in October 1990. See
MCR 7.215(J)(1) (providing that Court of Appeals cases decided prior to November 1, 1990, are
not binding). Although decisions issued before November 1990 should be “considered to be
precedent and entitled to significantly greater deference than are unpublished cases,” we are not
“strictly required to follow” such decisions. Woodring v Phoenix Ins Co, 325 Mich. App. 108,
114-115; 923 NW2d 607 (2018) (emphasis omitted). Moreover, as recognized in Madison Dist
Pub Sch, “[w]hether one has waived his right to arbitration depends on the particular facts and
circumstances of each case.” Madison Dist Pub Sch, 247 Mich. App. at 588; North West, 185
Mich. App. at 651 (“[E]ach case is to be decided on the basis of its particular facts.”). And
“[w]aiver of a contractual right to arbitrate is disfavored.” Madison Dist Pub Sch, 247 Mich. App.
at 588. We reiterate that plaintiffs failed to preserve this issue for our review by failing to raise it
until their response to defendants’ motion for reconsideration. See Vushaj, 284 Mich. App. at
521. Under these circumstances, we hold that plaintiffs have failed to meet their heavy burden of
demonstrating prejudice, in that they failed to raise this waiver issue sooner. See Madison Dist
Pub Sch, 247 Mich. App. at 588-589.

        Additionally, from a temporal perspective, defendants’ delay in litigating their arbitration
defense is less significant than previous cases in which this Court found a waiver of arbitration.
See Madison Dist Pub Sch, 247 Mich. App. at 600 (holding that there was a waiver of arbitration
after “1½ years” of litigation); North West, 185 Mich. App. at 650-651 (holding that there was a
waiver of arbitration when the defendants waited eight months to file their motion for dismissal).
In this case, only six months passed between defendants’ answer and their motion for summary
disposition. Accordingly, this delay is less significant and fails to demonstrate “acts inconsistent
with [the] right to arbitrate.” Madison Dist Pub Sch, 247 Mich. at 590. This also lessens any
alleged prejudice plaintiffs argue. See id. at 599-600.

        Because the purpose of arbitration is to preserve the time and resources of the courts in
the interests of judicial economy, the time frame and relatively efficient manner in which
defendants have litigated this case disfavors a finding of waiver. Simply put, defendants have
not taken action which clearly waives their arbitration claims.

                                                  -8-
        Reversed and remanded. We do not retain jurisdiction. Defendants, as the prevailing
party, may tax costs pursuant to MCR 7.219.

                                                        /s/ Jonathan Tukel
                                                        /s/ David H. Sawyer
                                                        /s/ Michael J. Riordan

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