Court Opinion

ID: 9396040
Source: CourtListenerOpinion
Date Created: 2023-05-19 05:07:02.925142+00
Date Added: 2024-06-11T17:19:13.378739
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

ANNE MARIE HALL,                                                     UNPUBLISHED
                                                                     May 18, 2023
               Plaintiff/Counterdefendant-Appellant,

v                                                                    No. 362063
                                                                     Oakland County Court
BASMA EL-BATHY and RAMI S. MOSTAFA,                                  LC No. 2021-189384-CH

               Defendants/Counterplaintiffs-
               Appellees.

Before: LETICA, P.J., and BORRELLO and RIORDAN, JJ.

PER CURIAM.

        In this breach of contract action regarding the purchase of real property,
plaintiff/counterdefendant, Anne Marie Hall (plaintiff), appeals as of right the order partially
granting summary disposition under MCR 2.116(C)(8) and MCR 2.116(C)(10) to
defendants/counterplaintiffs, Basma El-Bathy and Rami S. Mostafa,1 the trial court having
determined plaintiff committed the first substantial breach. On appeal, plaintiff contends the trial
court erred by: (1) requiring plaintiff to show prejudice caused by defendants’ repudiation;
(2) conflating the doctrine of anticipatory repudiation and the first substantial breach rule;
(3) concluding defendants’ repudiation was not a substantial breach; (4) dismissing the claims
when contract ambiguity existed; (5) failing to find a substantial breach in defendants’ failure to
act in good faith and fair dealing; and (6) failing to find any breach on the part of plaintiff was
waived. We reverse and remand for proceedings consistent with this opinion.

                      I. BASIC FACTS AND PROCEDURAL HISTORY

       This case arises out of a Purchase Agreement (the “Purchase Agreement”) executed on
May 20, 2021, between plaintiff and defendants for the sale of real property owned by defendants
in Troy, Michigan (the “Property”). Plaintiff, a licensed realtor, had been living at the Property as

1
 For clarity, when referencing El-Bathy and Mostafa, we will use “defendants.” Each defendant
will be identified by name when facts or statements are pertinent only to each individually.

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defendants’ tenant for approximately a year at the time of the execution of the Purchase
Agreement.

      The purchase price agreed on in the Purchase Agreement was $300,000. The Purchase
Agreement states, in relevant part:

           This Agreement is contingent upon [plaintiff] being able to secure a conventional
           mortgage in the amount of 90% and pay 10% down plus mortgage costs, pre-paid
           items, and adjustments in cash. [Plaintiff] agrees to apply for such mortgage within
           2 calendar days from acceptance of this offer. [Plaintiff] agrees that in connection
           with said application to lender, [plaintiff] will promptly comply with lender’s
           request for all information required to process the loan application. If a firm
           commitment for such mortgage cannot be obtained within 27 calendar days from
           date of acceptance, at [defendants’] or [plaintiff’s] written option, this offer can be
           declared null and void . . . . [Underlining and bold omitted.]

The Purchase Agreement goes on to state: “Closing must take place on or before May 31, 2021.”

           The day after the Purchase Agreement was executed, El-Bathy sent plaintiff a text message
stating:

           Please let us know if you have some free time after 5pm Eastern time today for us
           to talk. We hate to be doing this, but unfortunately the real estate market in Troy
           & Chicago has jumped significantly from February when we agreed on a price. At
           this point, the current selling price would result in compounded loss for us—loss
           on the house in Troy and further disadvantage in our current home-buying efforts
           given that sharp spike in home prices over the past few months. We hate these
           changes in the market, and hate that we have no option but to renegotiate the selling
           price. Just to give you time to think about this before we talk, we would list the
           house for $340ishk now. For you, we can accept a minimum of $310k (price
           includes the 10k for roof) and we would be looking to split the title cost evenly
           between us. We studied closely house sale prices over the past 2 years for the
           market that Brooklawn is situated in and think this is quite a competitive price. We
           frankly are as aggrieved by all these changes as we are sure you are bound to feel,
           but we are all bound by this aggressive market in which banks are the primary
           winners. Please think it over and let us know what’s a good time for us to talk.

        Five days later, plaintiff notified defendants she believed their refusal to adhere to the terms
of the Purchase Agreement was a breach of contract and, because of defendants’ default, she had
recorded a claim of interest. Defendants responded by asserting they “never failed or refused to
consummate the sale,” and they “expect[ed] the closing to take place no later than May 31, 2021
as the contract requires . . . .”

       Plaintiff contends defendants were in sole possession of the fully executed Purchase
Agreement until they provided it to the title company, eight days after the Purchase Agreement
execution. On the same day, plaintiff’s lender composed a letter addressed “[t]o whom it may
concern,” stating: “The item that we need to proceed is the purchase contract signed by all parties.

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When this is received, we can proceed to appraisal and underwriting.” The lender received the
fully executed Purchase Agreement three days later, after the closing deadline specified in the
Purchase Agreement.

       Plaintiff requested the parties execute an addendum extending the date of closing 30 days,
maintaining defendants’ delay in providing the executed Purchase Agreement was a breach of
contract, which made it impossible for plaintiff to provide everything required to her lender. The
next day, plaintiff submitted an application to her lender to obtain a mortgage to purchase the
Property.

        Ten days later, defendants’ counsel sent an e-mail to plaintiff’s counsel stating: “I spoke
to my clients. They would be willing to extend the closing deadline to June 28th, provided that
your client would be willing to pay her own mortgage insurance premium. If she can agree to this
concession, we can put this behind us.” Defendants contend plaintiff failed to respond to this offer.

       Eleven days later, on June 25, 2021, plaintiff received notification from her lender that her
loan was approved on the condition of receipt of her 2020 tax transcripts from the Internal Revenue
Service. Defendants allege plaintiff did not notify them of this conditional approval, and they only
learned of it through discovery.

       Six days later, defendants’ counsel contacted plaintiff’s counsel through e-mail, stating:

       The Purchase Agreement dictated that the closing was to take place no later than
       May 31, 2021. [Plaintiff] did not secure financing, or close the sale prior to that
       date. Since then, my clients have waited patiently for [plaintiff] to apply for
       financing and complete the purchase (though they had no obligation to do so) . . . .

               My clients have continued to work towards the closing in good faith, despite
       the fact that the contract expired on May 31st. They have dutifully and timely
       complied with all requests from the title company. We offered [plaintiff] a formal
       extension through June 28th, which she ignored. [Plaintiff] herself requested a
       timeline which would have extended the closing date through the end of June, but
       failed to ever provide an addendum to that effect. June has now come and gone.

               . . . Unfortunately, my clients need to move on. We are now exercising the
       option to declare the Purchase Agreement null and void. They will be re-listing the
       property.

        Plaintiff filed a complaint, alleging she had been “willing, ready, and able to purchase,”
the Property, but “[n]otwithstanding Plaintiff’s full compliance with the Agreement, Defendants
refused to comply with the terms and conditions of the Agreement and further refused to convey
the Property to Plaintiff—without any valid basis.” Plaintiff brought a claim of breach of contract
against defendants for “advis[ing] Plaintiff they were no longer intending to adhere to the terms of
the Agreement and/or refusing to close.” Plaintiff also sought specific performance.

       Defendants moved for summary disposition of plaintiff’s claims under MCR 2.116(C)(8)
and (10). Defendants alleged plaintiff breached the Purchase Agreement by (1) failing to apply
for a mortgage within two calendar days of the execution of the Purchase Agreement, (2) failing

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to provide a firm loan commitment within 27 days of execution of the Purchase Agreement, and
(3) failing to close on or before May 31, 2021. Defendants contended plaintiff entered into the
Purchase Agreement in bad faith, because she lacked the ability to obtain a mortgage or make the
down payment by the closing date.

        Plaintiff opposed the dispositive motion, asserting defendants anticipatorily breached the
Purchase Agreement when El-Bathy sent the text requesting they renegotiate the purchase price
after the execution of the Purchase Agreement, entitling plaintiff to specific performance
regardless of her performance of obligations. Next, plaintiff submitted the Purchase Agreement
was ambiguous regarding the closing date, requiring court interpretation of the document and
rendering summary disposition inappropriate. Plaintiff further contended defendants were in
breach on the basis of a failure to act in good faith and fair dealing, citing in particular, their
purposeful delay in delivering a copy of the executed Purchase Agreement.

        The trial court granted defendants’ motion for summary disposition of plaintiff’s claims in
a written opinion. The trial court found: “Plaintiff’s concerns [about] Defendants’ May 21 text
message asserting a renegotiation of the purchase price, and Defendants’ delay in providing a copy
of the executed Purchase Agreement until May 28, are both valid.” However, the trial court
considered these “concerns” only as delays, which extended the deadline for a loan commitment,
a deadline plaintiff still failed to meet. The trial court found the text message and delay in the
delivery of the executed Purchase Agreement did not cause plaintiff any prejudice once accounted
for by a corresponding extension of the loan commitment deadline, and were therefore not
substantial or material breaches. “As of May 28,” the trial court reasoned, “Plaintiff had the
executed Purchase Agreement in hand and, by all accounts, the purchase price in the Purchase
Agreement, allegedly repudiated in the May 21 text message, was being honored.” The trial court
further found that plaintiff’s failure to secure a mortgage commitment by the Purchase Agreement
deadline was a substantial breach of an express and material provision, for which plaintiff had
provided no evidence of cure, and therefore found this the “initial, substantial breach of contract.”

       Rejecting plaintiff’s argument of repudiation, the trial court stated:

       Additionally, there is no merit to Plaintiff’s argument that Defendants’ purported
       repudiation of the Purchase Agreement on May 21 had lasting ramifications on
       Plaintiff’s ability to enforce the Purchase Agreement beyond June 24. If anything,
       the ongoing negotiations between Plaintiff and Defendants . . . indicate a
       willingness to proceed under the previously agreed-upon purchase price, as the
       purchase price was not part of those discussions. This was a strong indication that
       any purported dispute over the purchase price was no longer an issue.

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On this reasoning, the trial court found defendants appropriately declared the Purchase Agreement
null and void, and ruled that summary disposition in favor of defendants regarding plaintiff’s
claims was proper.2 This appeal followed.

                                  II. STANDARD OF REVIEW

         “The interpretation of a contract is a question of law reviewed de novo on appeal.” Lueck
v Lueck, 328 Mich App 399, 404; 937 NW2d 729 (2019) (quotation marks and citations omitted).
A trial court’s decision on a motion for summary disposition is reviewed de novo. Batista v Office
of Retirement Servs, 338 Mich App 340, 354; 980 NW2d 107 (2021). A motion for summary
disposition premised on MCR 2.116(C)(10)3 tests the factual sufficiency of the complaint. Charter
Twp of Pittsfield v Washtenaw Co Treasurer, 338 Mich App 440, 449; 980 NW2d 119 (2021).
The moving party must identify and support the issues to which the moving party believes there is
no genuine issue of material fact, and the affidavits, pleadings, depositions, admissions, and other
documentary evidence submitted with the motion must be examined. Id. Once the moving party
makes and supports its motion, the opposing party may not rest on mere allegations or denials in
the pleadings, but must submit documentary evidence setting forth specific facts to demonstrate a
genuine issue for trial. Id.

                                         III. ANALYSIS

        The trial court erred in granting summary disposition because questions of material fact
existed regarding whether defendants’ repudiated the contract terms, whether this alleged
repudiation continued through the remainder of the parties’ dealings, and whether this repudiation
constituted a breach of the implied covenant of good faith and fair dealing or an otherwise
substantial breach.

        As a preliminary matter, “the primary goal of contract interpretation is to ascertain and
effectuate the intent of the contracting parties. The law presumes that the contracting parties’
intent is embodied in the actual words used in the contract itself.” City of Grosse Pointe Park v
Mich Munil Liability & Prop Pool, 473 Mich 188, 218-219; 702 NW2d 106 (2005). Courts give
contractual language its plain and ordinary meaning unless otherwise defined. English v Blue
Cross Blue Shield of Mich, 263 Mich App 449, 471; 688 NW2d 523 (2004). However, “[i]f two
provisions of the same contract irreconcilably conflict with each other, the language of the contract
is ambiguous.” Kendzierski v Macomb Co, 503 Mich 296, 311; 931 NW2d 604 (2019) (quotation
marks and citation omitted). “Where a written contract is ambiguous, a factual question is
presented as to the meaning of its provisions, requiring a factual determination as to the intent of

2
   The trial court also dismissed defendants’ counterclaims in favor of plaintiff under
MCR 2.116(I)(2). Defendants did not file a crossappeal challenging this ruling or request
reinstatement of the counterclaims in the event plaintiff succeeded in her appeal. Therefore, we
do not address it.
3
 Because the parties and the trial court considered documentary evidence aside from the pleadings,
we treat and consider the motion as having been granted under MCR 2.116(C)(10) rather than
(C)(8). Le Gassick v Univ of Mich Regents, 330 Mich App 487, 494 n 2; 948 NW2d 452 (2019).

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the parties in entering the contract. Thus, the fact finder must interpret the contract’s terms . . . .”
Klapp v United Ins Group Agency, Inc, 468 Mich 459, 469; 663 NW2d 447 (2003) (quotation
marks and citations omitted).

        Turning specifically to breach of contract, to prove such a claim a party must establish:
“(1) there was a contract, (2) the other party breached the contract, and (3) the breach resulted in
damages to the party claiming breach.” Bank of America, NA v First America Title Ins Co, 499
Mich 74, 100; 878 NW2d 816 (2016). “The 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.” Michaels v Amway Corp, 206 Mich App 644, 650; 522 NW2d 703 (1994)
(quotation marks and citations omitted). But this rule of first breach only applies when the initial
breach is substantial. Id.

       This Court has delineated factors that aid in determining if the first “material” breach is
substantial. See Able Demolition, Inc v City of Pontiac, 275 Mich App 577, 585; 739 NW2d 696
(2007). “In determining whether a breach is material, the court should consider whether the
nonbreaching party obtained the benefit it reasonably expected to receive.” Omnicom of Mich v
Giannetti Investment Co, 221 Mich App 341, 348; 561 NW2d 138 (1997).

       Other considerations include the extent to which the injured party may be
       adequately compensated for damages for lack of complete performance, the extent
       to which the breaching party has partly performed, the comparative hardship on the
       breaching party in terminating the contract, the willfulness of the breaching party’s
       conduct, and the greater or lesser uncertainty that the party failing to perform will
       perform the remainder of the contract. [Id.]

        The implied covenant of good faith and fair dealing is also important when assessing
breach-of-contract claims. This covenant is an agreement that “neither party shall do anything
which will have the effect of destroying or injuring the right of the other party to receive the fruits
of the contract.” Hammond v United of Oakland, Inc, 193 Mich App 146, 151-152; 483 NW2d
652 (1992) (citations omitted). Also, parties to a written contract may waive provisions in their
contract. Quality Prods & Concepts Co v Nagel Precision, Inc, 469 Mich 362, 364-365; 666
NW2d 251 (2003). “[A] valid waiver may be shown by express declarations or by declarations
that manifest the parties’ intent and purpose, or be an implied waiver, evidenced by a party’s
decisive, unequivocal conduct reasonably inferring the intent to waive.” Patel v Patel, 324 Mich
App 631, 634; 922 NW2d 647 (2018) (quotation marks and citations omitted). Regarding the
remedy in cases concerning breaches of real estate contracts, land is “presumed to have a unique
and peculiar value, and contracts involving land are generally subject to specific performance.” In
re Smith Trust, 480 Mich 19, 26; 745 NW2d 754 (2008).

        Under the doctrine of anticipatory repudiation, “if, before the time of performance, a party
to a contract unequivocally declares the intent not to perform, the innocent party has the option to
either sue immediately for the breach of contract or wait until the time of performance.” Stoddard
v Mfr Nat’l Bank of Grand Rapids, 234 Mich App 140, 163; 593 NW2d 630 (1999). “In
determining whether an anticipatory breach has occurred, it is the party’s intention manifested by
acts and words that is controlling, and not any secret intention that may be held.” Paul v Bogle,
193 Mich App 479, 493-494; 484 NW2d 728 (1992). Specific to real estate contracts, our Supreme

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Court has held when a seller of land anticipatorily repudiates, a buyer need not perform an
obligation to tender the purchase price to preserve his right to specific performance. See
Hanesworth v Hendrickson, 320 Mich 577, 579-580; 31 NW2d 726 (1948).

        The trial court failed to address whether defendants “unequivocally declare[d] the intent
not to perform” in the May 21, 2021 text sent by El-Bathy. In the text, El-Bathy made the
following statements: “we have no option but to renegotiate the selling price;” “we can accept a
minimum of $310k . . . and we would be looking to split the title cost evenly between us;” and “we
are all bound by this aggressive market.” Additionally, and in light of these statements, some of
defendants’ actions after El-Bathy’s May 21, 2021, text message could be interpreted as further
evidence of their intent not to perform. For instance, a day before defendants delivered the
executed Purchase Agreement, an event which happened only three calendar days and zero
business days before the closing deadline, defendants asserted they “never failed or refused to
consummate the sale,” and they “expect[ed] the closing to take place no later than May 31, 2021
as the contract requires . . . .” This timeline of actions and statements could cause one to conclude
that defendants “expect[ation]” of closing before May 31, 2021, was disingenuous and they had
no intention of proceeding with the deal at the price term in the Purchase Agreement. This
interpretation is especially applicable when considering on June 14, 2021, defendants
communicated a willingness to extend the closing date only on the condition plaintiff would pay
the $6,210 mortgage insurance premium defendants had agreed to pay in the Purchase Agreement.

        Whether an intention not to perform was manifest in defendants’ statements and actions
currently presents an open question of fact, when evaluating plaintiff’s argument the trial court
improperly conflated the doctrine of anticipatory repudiation and the first substantial breach rule.
Anticipatory repudiation excuses the nonrepudiating party from performing while the repudiation
continues. Our Supreme Court has specifically found an anticipatory repudiation excuses a
buyer’s contractual obligations to tender the full purchase price. Hanesworth, 320 Mich at 579-
580. This obligation is similar to the obligation to obtain a mortgage in the instant case, the
attainment of the loan being a step in the tendering of the purchase price.

        The trial court concluded that plaintiff must show prejudice, caused by either the May 21,
2021 text, or the delay in delivery of the Purchase Agreement. The trial court reasoned once the
loan commitment deadline was hypothetically extended to account for the delay, no prejudice can
be shown by plaintiff. The trial court went on to state that “[a]s of May 28 . . . the purchase price
in the Purchase Agreement, allegedly repudiated in the May 21 text message, was being honored,”
on the basis of its reasoning that “the purchase price was not part of those discussions.” But this
ignores the fact that following the request to renegotiate and after causing the obstruction of the
delay in delivering the Purchase Agreement, defendants repeatedly insisted on changing the terms
of the Purchase Agreement. Furthermore, the trial court failed to address plaintiff’s deposition
testimony that her efforts at securing the financing, and in turn proceed to closing, were hampered
by defendants’ failure to timely act, including the return of the signed Purchase Agreement, and
request for modifications to the agreement.4

4
 Although plaintiff sat for a deposition which was continued to secure additional information and
dates, there was no indication that defendants were deposed.

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        In sum, in determining defendants’ breach was not substantial, the trial court’s focus on
what it saw as a lack of prejudice was erroneous for two reasons. First, the trial court ignored the
anticipatory repudiation doctrine principle that manifestation of one party’s continued intention
not to perform excuses the other party from having to perform to maintain its rights under the
contract—that repudiation, in and of itself, is an event which alters the state of the dealings so as
to change the nature of the parties’ obligations. Second, the contextual consideration of the
timeline and communications reflected by the renegotiation request supports plaintiff’s allegation
of an intention not to proceed unless there was, in one way or another, a change in the price term;
this being the first substantial breach.

        Reversed and remanded for proceedings consistent with this opinion. We do not retain
jurisdiction.

                                                              /s/ Anica Letica
                                                              /s/ Stephen L. Borrello
                                                              /s/ Michael J. Riordan

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