Court Opinion

ID: 4397951
Source: CourtListenerOpinion
Date Created: 2019-05-17 09:07:17.231982+00
Date Added: 2024-06-11T14:23:38.000180
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

PCT BRANDS, LLC,                                                   UNPUBLISHED
                                                                   May 16, 2019
               Plaintiff-Appellee,

v                                                                  No. 342481
                                                                   Oakland Circuit Court
DIGITAL GADGETS, LLC,                                              LC No. 2017-157799-CB

               Defendant-Appellant.

Before: MURRAY, P.J., and GADOLA and TUKEL, JJ.

PER CURIAM.

        Defendant, Digital Gadgets, LLC, appeals as of right the trial court’s order of judgment
in favor of plaintiff, PCT Brands, LLC. Defendant challenges the earlier orders of the trial court
granting plaintiff partial summary disposition and denying defendant’s motions for
reconsideration and for leave to file a counterclaim. We affirm.

                                           1. FACTS

       This case arises from a contract dispute between plaintiff and defendant. The parties
dispute not whether defendant is contractually obligated to pay plaintiff for certain purchases it
made from plaintiff, but rather when that payment was due. Until the fall of 2017, plaintiff sold
mobile electronic products and accessories, including applications, or “apps,” for electronic
devices. Defendant sells consumer electronics such as computer tablets, Apple Watches, and
GoPro cameras to retail clients, who then sell the products to consumers. In the 10 years
preceding this lawsuit, defendant purchased numerous technology products from plaintiff,
including agreements for ongoing technical support referred to as “vouchers.” Defendant would
then sell the technical support services to its customers by “bundling” the technical support
vouchers with its electronic products.

        Defendant’s purchases from plaintiff were commemorated through purchase orders and
corresponding invoices. The purchase orders and invoices identified the products purchased and
the price, and each invoice indicated that the payment term was “net 45,” which the parties agree
means 45 days, and also included the statement that “[a] service charge at the rate of 1.5% per
month (18% per annum) will be charged on all accounts past due. Any account over 60 days
from the date of invoice will be automatically placed on credit hold.” But according to
defendant, this provision of the parties’ agreement was never enforced. According to defendant,
plaintiff would send defendant an invoice when delivering the goods to defendant, and defendant
would pay plaintiff after defendant performed an account reconciliation process, which would
take anywhere from 67 days to 390 days from the date the invoice was issued. 1 Defendant
contends that despite the contract language, plaintiff never considered such payments late and
never “placed a credit hold” on defendant regardless of when defendant paid.

       The parties do not dispute that between July 13, 2016, and January 30, 2017, defendant
purchased numerous products from plaintiff. According to plaintiff’s complaint, the amount of
defendant’s purchases from plaintiff during this period was $490,039.94. Plaintiff contends that
although it sent defendant a balance statement reflecting the transactions between July 13, 2016,
and January 30, 2017, defendant failed to pay plaintiff.

        Plaintiff initiated this action against defendant, alleging breach of contract, account
stated, and unjust enrichment. Specifically, plaintiff alleged that defendant had breached the
contract between the parties by failing to pay for the goods plaintiff sold to defendant between
September 23, 2016, and January 30, 2017, and additionally sought a service charge on the past-
due invoices. Defendant admitted that plaintiff sent multiple invoices between September 26,
2016, and January 30, 2017, and that it had not paid plaintiff for the invoiced amounts, but
denied that payment on the invoices was past due. Defendant asserted that the parties’ course of
dealing and various oral contracts over their 10-year business relationship permitted defendant to
pay plaintiff sometime between 67 days to 390 days from the date of the invoices without the
payments being considered past due.

        Plaintiff moved for summary disposition under MCR 2.116(C)(10), arguing that there
was no genuine issue of material fact regarding defendant’s failure to pay plaintiff $517,969.84,
which included the service charge for all outstanding amounts. Defendant argued that summary
disposition was premature because discovery had not yet taken place, and also that a genuine
issue of material fact existed whether the parties’ regular course of dealing modified the terms of
the contract to allow defendant to pay more than 45 days after the date the invoices were issued
without the payment being considered past due.

        The trial court granted in part and denied in part plaintiff’s motion for summary
disposition. The trial court found that, although discovery was incomplete, summary disposition
was not premature and no genuine issue of material fact existed. The trial court determined that
under the UCC, the express terms of the parties’ agreements prevailed over the course of their
performance and course of dealing. The trial court found that defendant failed to establish a
material factual dispute regarding the invoices for transactions exceeding $1,000, but did create a
question of fact for the invoices worth less than $1,000, which totaled $2,650. Accordingly, the
trial court granted plaintiff summary disposition regarding the invoices worth more than $1,000
and denied summary disposition with regard to the invoices worth less than $1,000. The trial

1
  Because more than 390 days now have elapsed since the last invoice was issued, defendant
presumably no longer disputes that all amounts owed are due.

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court thereafter denied defendant’s motion for reconsideration of the motion for summary
disposition.

        Meanwhile, in a separate action, plaintiff stipulated to a receivership order requested by
its creditor, Comerica Bank, after plaintiff defaulted on certain financial obligations to Comerica.
In that action, the trial court entered an order placing plaintiff in receivership on October 20,
2017. The trial court’s order stayed all pending actions by third parties against plaintiff during
the pendency of the receivership, except those permitted by leave of the trial court, stating “all
other persons and entities aside from the Receiver and Comerica are hereby stayed from taking
any action to establish or enforce any claim, right, or interest for, against, on behalf of, in, or in
the name of Defendants [PCT Brands, LLC, and DeviceAdvice, LLC] (or any of them) or against
the Receivership Assets . . .” including “[c]ommencing, prosecuting, continuing, entering, or
enforcing any suit or proceeding; . . .”

        In this action, defendant moved for leave to file a counterclaim alleging breach of
contract and anticipatory breach of contract. Defendant argued that plaintiff, by going out of
business, effectively rendered the previously sold vouchers permanently defective. Defendant
asserted that by terminating the technical support website and toll free number, plaintiff
materially breached its contract with defendant, and as a result, defendant would suffer
approximately $1 million in damages. The trial court denied defendant’s motion for leave to file
a counterclaim, holding that the counterclaim would cause undue delay and actual prejudice to
plaintiff. The trial court entered judgment in favor of plaintiff in the amount of $487,389.94.
Defendant now appeals.

                                         II. DISCUSSION

                                 A. SUMMARY DISPOSITION

       Defendant contends that the trial court erred in granting in part plaintiff’s motion for
summary disposition because there is a genuine issue of material fact regarding whether plaintiff
waived the payment term of the parties’ contract. We disagree.

       We review de novo a trial court’s decision to grant or deny summary disposition.
Johnson v Vanderkooi, 502 Mich. 751, 761; 918 NW2d 785 (2018). When reviewing an order
granting summary disposition under MCR 2.116(C)(10), we consider all documentary evidence
submitted by the parties in the light most favorable to the nonmoving party. Dawoud v State
Farm Mut Auto Ins Co, 317 Mich. App. 517, 520; 895 NW2d 188 (2016). Summary disposition
under MCR 2.116(C)(10) is warranted when there is no genuine issue as to any material fact and
the moving party is entitled to judgment as a matter of law. Id. We also review de novo issues
involving the proper interpretation of statutes and contracts. Titan Ins Co v Hyten, 491 Mich.
547, 553; 817 NW2d 562 (2012).

       The parties do not dispute that the transactions in this case are governed by Michigan’s
Uniform Commercial Code (UCC), MCL 440.1101 et seq., and also do not dispute that under
§ 2201(1) of the UCC, MCL 440.2201(1), the parties’ contract could not be orally modified.
That section provides, in relevant part:

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       Except as otherwise provided in this section, a contract for the sale of goods for
       the price of $1,000.00 or more is not enforceable by way of action or defense
       unless there is a writing sufficient to indicate that a contract for sale has been
       made between the parties and signed by the party against whom enforcement is
       sought or by his or her authorized agent or broker. A writing is not insufficient
       because it omits or incorrectly states a term agreed upon but the contract is not
       enforceable under this subsection beyond the quantity of goods shown in the
       writing. [MCL 440.2201(1).]

        Defendant, however, contends that despite this statute of frauds provision, under the UCC
the parties’ course of dealing over their 10-year business relationship demonstrates an attempt to
modify the parties’ contract, and thus, constitutes a waiver of the 45-day payment term within
the meaning of MCL 440.2209. That section provides, in relevant part:

       (3) The requirements of the statute of frauds section of this article (section 2201)
       [MCL 440.2201] must be satisfied if the contract as modified is within its
       provisions.

       (4) Although an attempt at modification or rescission does not satisfy the
       requirements of subsection (2) or (3) it can operate as a waiver.
       [MCL 440.2209(3), (4).]

In addition, MCL 440.1303 provides, in relevant part:

       (5) Except as otherwise provided in subsection (6), the express terms of an
       agreement and any applicable course of performance, course of dealing, or usage
       of trade must be construed whenever reasonable as consistent with each other.
       All of the following apply if that construction is unreasonable:

       (a) Express terms prevail over course of performance, course of dealing, and
       usage of trade.

       (b) Course of performance prevails over course of dealing and usage of trade.

       (c) Course of dealing prevails over usage of trade.

       (6) Subject to section 2209 [MCL 440.2209], a course of performance is relevant
       to show a waiver or modification of any term inconsistent with the course of
       performance. [MCL 440.1303(5), (6).]

       MCL 440.1303(2) defines a “course of dealing” as “a sequence of conduct concerning
previous transactions between the parties to a particular transaction that is fairly to be regarded
as establishing a common basis of understanding for interpreting their expressions and other
conduct.” By contrast, a “course of performance” is “a sequence of conduct between the parties
to a particular transaction. . . .” MCL 440.1303(1). In other words, “course of dealing” means
the parties’ prior dealings with each other before the contract at issue was entered into, and
“course of performance” means the parties’ actions in carrying out the contract at issue. Here,
defendant’s alleged failure to adhere to the 45-day payment term on previous contracts and

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plaintiff’s alleged acceptance of that arrangement previously relates to earlier transactions
between the parties, and therefore constitutes a course of dealing and not a course of
performance.

        Although a course of performance may show that parties have waived a specific
contractual term under MCL 440.1303(6), the statute does not similarly provide that a course of
dealing may demonstrate waiver. When statutory language is unambiguous, this Court presumes
that the Legislature intended the meaning it plainly expressed, Joseph v Auto Club Ins Ass’n, 491
Mich. 200, 206; 815 NW2d 412 (2012), and clear statutory language must be enforced as written,
Velez v Tuma, 492 Mich. 1, 16-17; 821 NW2d 432 (2012). Thus, course of dealing cannot be
considered as evidence of a modification or waiver.

        Because the parties’ course of dealing is irrelevant to determine whether the parties
waived the payment term, application of MCL 440.1303 resolves this matter. Here, each invoice
unambiguously includes a net-45-days payment term. Although the parties may have developed
a course of dealing over their 10-year business relationship in which defendant never tendered
payment within 45 days from the issuance of an invoice, MCL 440.1303(5)(a) nonetheless
dictates that the 45-day payment term prevails over any course of dealing. Any modification of
that term must satisfy the statute of frauds. MCL 440.2209(3). Here, no such written
modification exists, and the statute of frauds therefore bars defendant’s argument that plaintiff
modified the 45-day payment term.

        Defendant also argues that summary disposition was inappropriate because discovery was
incomplete. We disagree. Generally, a motion under MCR 2.116(C)(10) is premature if
discovery is incomplete, unless it is unlikely that further discovery will produce support for the
nonmoving party’s position. Liparoto Constr v Gen Shale Brick, Inc, 284 Mich. App. 25, 33-34;
772 NW2d 801 (2009). Here, the parties do not dispute the facts, and the trial court granted
plaintiff summary disposition based on the statute of frauds, which is a question of law not
requiring further discovery. See Rodgers v JP Morgan Chase Bank NA, 315 Mich. App. 301, 307;
890 NW2d 381 (2016). The trial court’s order granting partial summary disposition therefore
was not premature.

        Defendant also argues that the trial court erroneously denied its motion for
reconsideration because it asserted a disputed issue of material fact regarding plaintiff’s alleged
waiver of the net-45-days payment term and supported it with independent evidence. Again, we
disagree. This Court reviews a trial court’s decision to grant or deny a motion for
reconsideration for an abuse of discretion. Sanders v McLaren-Macomb, 323 Mich. App. 254,
264; 916 NW2d 305 (2018). A trial court abuses its discretion if it chooses an outcome outside
the range of principled outcomes. Id. MCR 2.119(F)(3) states that a motion for reconsideration
“which merely presents the same issues ruled on by the court” will not be granted. However,
“the trial court also has the discretion to give a litigant a ‘second chance’ even if the motion for
reconsideration presents nothing new.” Yoost v Caspari, 295 Mich. App. 209, 220; 813 NW2d
783 (2012). The trial court also has the discretion to decline to consider new legal arguments or
evidence that could have been presented when the motion for summary disposition was first
decided. Id. Here, the record supports the trial court’s conclusion that defendant failed to
demonstrate that it committed a palpable error when it granted plaintiff summary disposition.
Because defendant’s motion for reconsideration merely presented the same arguments previously

                                                -5-
rejected by the trial court, the trial court’s decision to deny the motion was not outside the range
of reasonable and principled outcomes.

                             B. DEFENDANT’S COUNTERCLAIM

        Defendant next contends that the trial court abused its discretion by denying its motion
for leave to amend its pleadings to add a counterclaim. We disagree.

       MCR 2.203 provides for the pleading of a counterclaim, and also for the amendment of
pleadings to state a counterclaim. That court rule provides, in relevant part:

       (B) Permissive Joinder. A pleader may join as either independent or alternate
       claims as many claims, legal or equitable, as the pleader has against an opposing
       party. If a claim is one previously cognizable only after another claim has been
       prosecuted to a conclusion, the two claims may be joined in a single action; but
       the court may grant relief only in accordance with the substantive rights of the
       parties.

       (C) Counterclaim Exceeding Opposing Claim. A counterclaim may, but need
       not, diminish or defeat the recovery sought by the opposing party. It may claim
       relief exceeding in amount or different in kind from that sought in the pleading of
       the opposing party.

                                              ***

       (E) Time for Filing Counterclaim or Cross-Claim. A counterclaim or cross-
       claim must be filed with the answer or filed as an amendment in the manner
       provided by MCR 2.118. If a motion to amend to state a counterclaim or cross-
       claim is denied, the litigation of that claim in another action is not precluded
       unless the court specifies otherwise. [MCR 2.203.]

         Thus, a trial court may permit a party to amend its pleadings to add a counterclaim as
provided in MCR 2.118, which provides that “[l]eave shall be freely given when justice so
requires.” MCR 2.118(A)(2). This Court reviews the trial court’s decision to deny a motion for
leave to amend pleadings for an abuse of discretion. Jawad A. Shah, MD, PC v State Farm Mut
Auto Ins Co, 324 Mich. App. 182, 208-209; 920 NW2d 148 (2018). Although trial courts have the
discretion to grant or deny a motion for leave to amend, leave should generally be denied only
for specific reasons, such as undue delay, bad faith or dilatory motive, repeated failure to cure
deficiencies by amendments previously allowed, undue prejudice to the nonmoving party, and
futility. Weymers v Khera, 454 Mich. 639, 658; 563 NW2d 647 (1997). “[D]elay, alone, does
not warrant denial of a motion to amend,” but may be justified “if the delay was in bad faith or if
the opposing party suffered actual prejudice as a result.” Id. at 659.

        In this case, when defendant sought leave to file a counterclaim, the trial court had not yet
ruled on defendant’s motion for reconsideration or entered judgment in favor of plaintiff, and
discovery was incomplete. Defendant could not have filed its counterclaim earlier because
plaintiff did not enter receivership until October 20, 2017. Plaintiff does not contend that critical
witnesses have died or necessary evidence has been lost or destroyed, or that it is unable to

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defend against the counterclaim. Nor does plaintiff explain how it would be prejudiced if the
trial court were to grant defendant leave to file a counterclaim. The record therefore does not
support the trial court’s determination that defendant’s request for leave to file a counterclaim
was untimely or would cause actual prejudice to plaintiff.

        However, we conclude that the proposed counterclaim was properly denied because it is
futile. Under MCR 2.116(I)(5), when a trial court grants summary disposition under MCR
2.116(C)(10), “the opportunity for the nonprevailing party to amend its pleadings pursuant to
MCR 2.118 should be freely granted, unless the amendment would not be justified.” Ormsby v
Capital Welding, Inc, 471 Mich. 45, 52-53; 684 NW2d 320 (2004). An amendment is not
justified if it would be futile. Weymers, 454 Mich. at 658. An amendment is futile if it is legally
insufficient on its face. Wormsbacher v Seaver Title Co, 284 Mich. App. 1, 8; 772 NW2d 827
(2009). Here, defendant’s counterclaim is legally insufficient because defendant cannot maintain
a breach of contract action against plaintiff without leave of the trial court in the receivership
case.2 Because defendant’s proposed counterclaim would be futile until and unless defendant
obtained leave to pursue this claim against plaintiff in the receivership case, leave to amend was
properly denied.

       Affirmed.

                                                            /s/ Christopher M. Murray
                                                            /s/ Michael F. Gadola
                                                            /s/ Jonathan Tukel

2
  We note that Michigan is not a compulsory counterclaim state. When a motion to amend to
state a counterclaim is denied, “the litigation of that claim in another action is not precluded
unless the court specifies otherwise.” MCR 2.203(E). Thus, a defendant denied leave to amend
to add a counterclaim generally has “the option to maintain its counterclaim in a separate
independent action.” Salem Indus, Inc v Mooney Process Equip Co, 175 Mich. App. 213, 216;
437 NW2d 641 (1989)

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