Court Opinion

ID: 4550838
Source: CourtListenerOpinion
Date Created: 2020-07-24 09:07:00.244021+00
Date Added: 2024-06-11T13:02:48.627096
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

TIMOTHY HORTON and KATHLEEN HORTON,                                  UNPUBLISHED
                                                                     July 23, 2020
               Plaintiffs/Counterdefendants-
               Appellees,

v                                                                    No. 348461
                                                                     Oceana Circuit Court
DAVID GEBOLYS,                                                       LC No. 18-012840-CH

               Defendant/Counterplaintiff-Appellant.

Before: BORRELLO, P.J., and SAWYER and SERVITTO, JJ.

PER CURIAM.

        In this property-dispute action, defendant appeals by right the trial court’s order granting
plaintiffs possession of the property in dispute on the bases that the parties had no binding
agreement for the sale of the property and that defendant’s lease on the property had expired. We
affirm.

                                        I. BASIC FACTS

        Plaintiffs owned a piece of property on Crystal Lake that was subdivided into four parts.
In 2003, defendant and his then-wife entered into a lease agreement to purchase the part of the
property referred to as Parcel B. The lease agreement included an option to exercise a purchase of
Parcel B until January 30, 2004. The option expired on January 30, 2004, the same day as the
lease. The purchase price would be $112,500, and defendant and his wife would get credit against
the purchase price for all lease payments in the event the option was exercised. The transfer could
be by land contract or warranty deed. The purchase price was to be paid in full at the time of
closing with certified funds. However, the option further stated that if defendant failed to exercise
the option before it expired, the option would expire, and plaintiffs would retain all the
consideration and have no further obligation to defendant and his wife, who were required to
exercise the option in writing. The agreement also indicated that it could not be amended or
released in whole or in part except for a writing signed by all the parties.

       Defendant and his wife divorced in 2005. Thereafter, defendant alone remained in
possession of the property. In 2014, defendant stopped making payments on the property, and

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thereafter, in 2018, plaintiffs filed a notice to quit and sought possession of the property.
Defendant filed a countercomplaint alleging that the parties had a land contract, which he alleged
was satisfied. Alternatively, defendant argued that he should be granted an equitable remedy on
the basis of the payments he had made, the services he allegedly provided to plaintiffs, and the
improvements he had made to the property.

         Throughout the pendency of the case, the parties participated in discovery and a case
evaluation. Plaintiffs accepted the result of the case evaluation, while defendant did not.
Ultimately, after a two-day trial, the trial court questioned defendant’s credibility and concluded
that the parties did not have a valid contract for the purchase of the property. More specifically,
the trial court determined that defendant’s status in relation to the property was that of a holdover
tenant. Accordingly, the trial ordered that defendant vacate the property, denied defendant’s
request for an equitable remedy, and issued a judgment granting plaintiffs’ request for possession
of the property.

                           II. EXISTENCE OF A LAND CONTRACT

        Defendant argues that the trial court erred when it concluded that the parties did not have
a valid contract and that the existence of such a contract was barred by the statute of frauds. We
disagree.

       The existence of a contract is a question of law that this Court reviews de novo. Kloian v
Domino’s Pizza LLC, 273 Mich App 449, 452; 733 NW2d 766 (2006). This Court also reviews
de novo the question whether the statute of frauds bars a contract claim. Id. at 458.

       “Before a contract can be completed, there must be an offer and acceptance. Unless an
acceptance is unambiguous and in strict conformance with the offer, no contract is formed.”
Kloian, 273 Mich App at 452 (quotation marks and citation omitted). To form a contract, there
must be “mutual assent or a meeting of the minds on all the essential terms.” Id. The essential
elements in a land contract are identification of the property, parties, and consideration, and, where
payments are deferred, the amount and time of installment payments, and the rate of interest.
Zurcher v Herveat, 238 Mich App 267, 284-291; 605 NW2d 329 (1999).

        Further, “[a]n option is basically an agreement by which the owner of the property agrees
with another that he shall have a right to buy the property at a fixed price within a specified time.”
Oshtemo Twp v Kalamazoo, 77 Mich App 33, 37; 257 NW2d 260 (1977). “[S]trict compliance
with the terms of [the option] is required; acceptance must be in compliance with the terms
proposed by the option both as to the exact thing offered and within the time specified; otherwise
the right is lost.” Le Baron Homes v Pontiac Housing Fund, 319 Mich 310, 315; 29 NW2d 704
(1947). “[S]ubstantial compliance with the terms of the option is not sufficient to constitute an
acceptance of the offer.” Bergman v Dykhouse, 316 Mich 315, 319; 25 NW2d 210 (1946)
(quotation marks and citation omitted).

        Throughout the lower court proceedings, the only written agreement presented to the court
evidencing the parties’ agreement in regard to Parcel B was the parties’ 2003 lease agreement,
which provided defendant an option to purchase. Defendant suggests that the parties “knew” that
the option for a land contract was exercised during the initial agreement period and that the parties’

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subsequent acts evidenced the existence of a land contract. However, on appeal, as he did before
the trial court, defendant fails to present any evidence to support a conclusion that he accepted the
option in accordance with the written terms of the agreement. Indeed, at trial defendant could not
confirm that the option was exercised in writing. In contrast, Timothy Horton (Timothy), who was
the primary party responsible for representing plaintiffs throughout all the real estate transactions,
testified that defendant never exercised the option to purchase the property, and instead requested
a letter in the midst of his divorce evidencing that defendant and his wife had no interest in the
property and had not exercised the option to purchase the property.

        Further, a tenant under a lease agreement becomes a “holdover tenant” by remaining in a
leased space after the expiration of the lease agreement. TCG Detroit v Dearborn, 261 Mich App
69, 88; 680 NW2d 24 (2004). Indeed, the Michigan Supreme Court has previously determined
that a tenant’s holding over and the landlord’s acceptance of rent create a presumption that the
parties intend to renew the tenancy. Kokalis v Whitehurst, 334 Mich 477, 477; 54 NW2d 628
(1952). Defendant did not present any evidence before the trial court or on appeal to rebut this
presumption. Given the lack of written evidence that defendant ever exercised the option to
proceed with a purchase under a land contract or warranty deed, we agree with the trial court’s
determination that defendant remained on the property after the expiration of the option and
original lease as a holdover tenant. Further, because no further evidence of a subsequent land
contract was proven by defendant, the trial court did not err by concluding that the parties did not
have an enforceable land contract.

       Nonetheless, defendant argues that the parties reached an oral agreement for the purchase
of the property in 2006, following the completion of his divorce, and the trial court erred by
concluding that the statute of frauds barred the existence of this renewed land contract. This
argument is unpersuasive.

        In Michigan, the sale of land is controlled by the statute of frauds. Zurcher, 238 Mich App
at 276. “The statute of frauds exists for the purpose of preventing fraud or the opportunity for
fraud, and not as an instrumentality to be used in the aid of fraud or prevention of justice.” Lakeside
Oakland Dev, LC v H & J Beef Co, 249 Mich App 517, 526-527; 644 NW2d 765 (2002). In
relevant part, MCL 566.132 states:

               (1) In the following cases an agreement, contract, or promise is void unless
       that agreement, contract, or promise, or a note or memorandum of the agreement,
       contract, or promise, is in writing and signed with an authorized signature by the
       party to be charged with the agreement, contract, or promise:

                                               * * *

               (e) An agreement, promise, or contract to pay a commission for or upon the
       sale of an interest in real estate.

Similarly, MCL 566.106 requires contracts establishing an interest in land to be in writing:

              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

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       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.

However, the writing requirement “may be satisfied by several writings made at different times”
and can also be satisfied by a series of writings, rather than one single writing establishing all the
terms of the contract in question. Id. at 111-114; Zurcher, 238 Mich App at 277-278.

        While defendant contends that his monthly rental payments were written evidence of a
continued agreement, he provided no evidence that the payments were anything more than his
rental obligations. Further, to the extent that defendant argues that the 2003 land contract was
“renewed” by means of an oral agreement with Timothy, it is clear to that such an agreement would
not have been subject to renewal, orally or otherwise, particularly in light of defendant’s divorce
and how the change in parties would require a written change to the agreement under the terms of
the lease.

        Additionally, throughout the proceedings, defendant was unable to establish any evidence
signed by plaintiffs after 2003 that evidenced an agreement to sell the property. On the contrary,
a letter requested by defendant and executed by Timothy during the pendency of defendant’s
divorce made clear that defendant had no interest in the property and had not exercised his option
to purchase the property. Moreover, even if defendant began performance on the alleged contract,
he unilaterally ceased making payments in 2014, several years before the 30-year term of the land
contract defendant testified to would have expired. Further, although Timothy undeniably failed
to correct defendant’s assertions of interest in the property in some e-mail communications in
2014, and did not advise defendant of the nonexistence of a land contract, the evidence presented
also does not reflect that Timothy ever confirmed the existence of a land contract or defendant’s
interest in the property, either. Accordingly, on this record, we find no evidence of a single writing,
or even multiple writings, that corroborate the existence of a land contract in 2006, or any other
year. In sum, aside from defendant’s assertion about an oral agreement to renew the nonexistent
land contract, defendant is unable to establish the existence of an agreement for sale of property
and is therefore barred by the statute of frauds from asserting the existence of such a contract.

                                     III. EQUITABLE RELIEF

        Defendant further argues that the trial court erred when it denied his request for equitable
relief on the basis of unjust enrichment and promissory estoppel. We disagree.

        This Court reviews the trial court’s factual findings after a bench trial and in an equitable
action for clear error, and its legal conclusions de novo. Harbor Park Market, Inc v Gronda, 277
Mich App 126, 130; 743 NW2d 585 (2007). More specifically, the question whether a party has
been unjustly enriched is generally a factual question, but the trial court’s dispositional rulings on
equitable matters, including claims of unjust enrichment, are reviewed de novo. Morris Pumps v
Centerline Piping, Inc, 273 Mich App 187, 193; 729 NW2d 898 (2006). The decision to grant
equitable relief rests within the sound discretion of the deciding court. See Tkachik v Mandeville,
487 Mich 38, 45; 790 NW2d 260 (2010).

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        Under the equitable doctrine of unjust enrichment, a person who has been unjustly enriched
at the expense of another is required to make restitution to the other. Morris Pumps, 273 Mich
App at 193. “The theory underlying quantum meruit recovery is that the law will imply a contract
in order to prevent unjust enrichment when one party inequitably receives and retains a benefit
from another.” Id. at 194. A claim of unjust enrichment requires the complaining party to establish
(1) the receipt of a benefit by the other party from the complaining party and (2) an inequity
resulting to the complaining party because of the retention of the benefit by the other party. Id. at
195. Further, “[f]or quantum meruit or unjust enrichment to apply, there must not be an express
contract between the parties covering the same subject matter.” Meisner Law Group PC v Weston
Downs Condo Ass’n, 321 Mich App 702, 726; 909 NW2d 890 (2017). Instead, the law will imply
a contract to prevent unjust enrichment only if the defendant has been unjustly or inequitably
enriched at the plaintiff’s expense. Morris Pumps, 273 Mich App at 195.

        Likewise, under the doctrine of promissory estoppel, courts may enforce a contract in
equity if there was a promise, the promisor reasonably should have expected the promise to cause
the promisee to act in a definite and substantial manner, the promisee did in fact rely on the promise
by acting in accordance with its terms, and the promise must be enforced to avoid injustice. Klein
v HP Pelzer Auto Sys, Inc, 306 Mich App 67, 83; 854 NW2d 521 (2014). However, once again,
the courts will impose such equitable remedies only if there is no express contract governing the
subject matter of the controversy. Martin v East Lansing Sch Dist, 193 Mich App 166, 177; 483
NW2d 656 (1992).

        As a preliminary matter, defendant’s arguments are all premised on the fact that the trial
court concluded that the parties did not have a valid land contract. However, in this case, the
parties’ 2003 lease with option to purchase was a valid written contract governing the subject
matter of the controversy and expressly provided that the option to purchase could be exercised
before the expiration of the lease. Although defendant did not exercise the option to purchase, as
noted above, defendant became a holdover tenant subject to the renewed lease. Under these
circumstances, it is clear that defendant was still required to make monthly payments as required
for the lease, but he was not entitled to any equity in the property during that time. Moreover, the
only promise that defendant can show was a promise that he could lease the premises with the
option to buy. As noted above, the option expired without being exercised, and defendant has not
shown that any subsequent promises for the sale of the property were made. Accordingly,
defendant’s argument that he is entitled to restitution, including the full sum he paid plaintiffs
during his occupancy, is meritless and the trial court did not err by refusing to grant defendant
equitable relief under the doctrine of promissory estoppel.

         Defendant also contends that plaintiffs were unjustly enriched because of the various land
improvements that defendant undertook over the years. However, the overwhelming testimony at
trial established that the value of the primarily landscaping improvements did not significantly
affect the value of the property. Further, it is clear that defendant had exclusive enjoyment of the
property and his improvements during his possession of the property. In whole, defendant cannot
establish that the value added to the property unjustly enriched plaintiffs.

       Lastly, although defendant renews his assertion that he should be entitled to payment for
services he completed during his possession of the property, we are not persuaded by this
argument. Although defendant testified that he performed significant work on Parcel B and also

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for Timothy, Timothy denied that he employed defendant for such purposes or established a “tab”
with defendant whereby services were exchanged for equity in the property. Instead, Timothy
indicated that defendant was paid for those services that were agreed upon. Moreover, given the
trial court’s credibility determination regarding defendant’s testimony, we are not persuaded that
the trial court erred by concluding that defendant was not entitled to recover those costs. In whole,
we are unable to conclude that the trial court erred when it denied defendant’s request for equitable
remedies.

       Affirmed.

                                                              /s/ Stephen L. Borrello
                                                              /s/ David H. Sawyer
                                                              /s/ Deborah A. Servitto

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