Court Opinion

ID: 2791955
Source: CourtListenerOpinion
Date Created: 2015-04-08 12:03:55.984539+00
Date Added: 2024-06-11T15:24:11.031385
License: Public Domain

STATE OF MICHIGAN

                          COURT OF APPEALS

STONECREST BUILDING COMPANY,                                 UNPUBLISHED
                                                             April 7, 2015
and

RICHARD J. SABLE,

              Plaintiffs-Appellees,

v                                                            No. 319841
                                                             Macomb Circuit Court
CHICAGO TITLE INSURANCE COMPANY,                             LC No. 2008-001055-CH

              Defendant-Appellant.

CHICAGO TITLE INSURANCE COMPANY,

              Plaintiff-Appellant,

v                                                            No. 319842
                                                             Macomb Circuit Court
STONECREST BUILDING COMPANY,                                 LC No. 2008-002153-CH

and

RICHARD J. SABLE,

              Defendants-Appellees.

Before: RONAYNE KRAUSE, P.J., and K. F. KELLY and SHAPIRO, JJ.

PER CURIAM.

                                           -1-
         In these consolidated appeals,1 Stonecrest Building Company (Stonecrest) and its
president, Richard J. Sable, and Chicago Title Insurance Company (CTIC) appeal by right from
the trial court orders that interpreted a personal guaranty entered into by the parties arising from
several construction projects. We affirm in part and reverse and remand in part.

         This case arises out of construction projects and contracts between Stonecrest and Stock
Building Supply Company (Stock). Stonecrest was engaged in building several residential
condominium projects. Stock contracted to furnish labor and materials for the project. This
arrangement was evidenced by a Sales Agreement, entered into by Stonecrest and Stock on
December 3, 2003. The Sales Agreement explicitly provided that Sable assumed no personal
liability for sums due under the Sales Agreement.

       In 2006 and 2007, Stonecrest began experiencing financial difficulties such that it was
unable to meet its obligations to Stock and other contractors. Accordingly, on July 30, 2007,
Sable executed the personal guaranty (Guaranty) that is the main subject of the instant litigation.
The guaranty provides in relevant part:

              The undersigned, RICHARD J. SABLE, (“Guarantor”), in order to induce
       STOCK BUILDING SUPPLY, LLC, a Delaware limited liability company,
       (“Stock”), to extend credit to STONECREST BUILDING COMPANY, a
       Michigan corporation (“Stonecrest”), to accept a promissory note in the sum of
       Thirty Nine Thousand Two Hundred Four and 00/100 ($39,204.00) Dollars, and
       to forbear from commencing suit, does hereby unconditionally and absolutely
       guarantee to Stock, its successors and assigns, the full and prompt payment, when
       due, or all sums payable by Stonecrest to Stock pursuant to (a) the Promissory
       Note of even date executed and delivered by Stonecrest to Stock in the foregoing
       principal amount (the “Note”), and (b) the Sales Agreement dated December 3,
       2003 between Stonecrest and Stock (the “Sales Agreement”).

On the same date, the parties executed the referenced promissory note (Promissory Note) in the
amount of $39,204.00.

       In March 2008, Stock filed suit against Stonecrest and Sable for breach of contract under
the Sales Agreement and the Guaranty. Also in March 2008, Stonecrest and Sable filed a
separate lawsuit against Stock for declaratory relief seeking, among other things, a declaration
that under the Guaranty, Sable was liable for only the Promissory Note and sums due under the
Sales Agreement accruing after July 30, 2007. While these cases were not formally consolidated
before the trial court, they were litigated together and were consolidated on appeal before this
Court.

        CTIC became involved in this litigation on behalf of homeowners who were sued as a
result of Sable and Stonecrest’s failure to pay contractors, subcontractors, suppliers, and laborers.

1
  Stonecrest Bldg Co v Chicago Title Ins Co, unpublished order of the Court of Appeals, entered
January 15, 2014 (Docket Nos. 319841 & 319842).

                                                -2-
CTIC reached a settlement on behalf of its insureds with various lien claimants. As part of its
settlement with Stock, CTIC was assigned all of Stock’s claims against Sable and Stonecrest.

         On January 15, 2013, CTIC moved for summary disposition under MCR 2.116(C)(10),
arguing that “Stonecrest materially breached the Sales Agreement by, among other things, failing
to tender payment when due” and that, under the Guaranty, Sable was personally liable for this
breach in the amount of $9,092,433.53. On August 13, 2013, the trial court issued a written
opinion granting summary disposition in favor of CTIC in part, ruling that under the Guaranty,
Sable was “only liable under the Guaranty for repayment of the July 30, 2007 Promissory Note
and those sums accruing under the Sales Agreement on and after July 30, 2007.” Following a
subsequent hearing on October 30, 2013, the court clarified its opinion, ruling that Sable’s
liability “is limited to the sums for purchases from and after July 30, 2007 and interest and
carrying charges to those obligations only[,]” i.e., that Sable was not personally liable for any
obligations incurred prior to July 30, 2007.

        After another hearing held December 19, 2013, the parties stipulated to entry of a
judgment in favor of CTIC and against Sable in the amount of $51,154.69 “for labor and
materials provided from and after July 30, 2007, inclusive of time price differential accruing on
labor and material provided from and after July 30, 2007, costs and attorneys’ fees.” This
stipulation included language providing that: “The parties do not waive, and expressly reserve,
any right they may have, to seek appellate review of the Orders except that the amount of labor
and materials from and after July 30, 2007 and the time price differential accruing on labor and
materials provided from an after July 30, 2007 is not appealable nor subject to further review.”

         CTIC argues that the clear and unambiguous language of the Guaranty provides that
Sable assumed personal liability for all sums owed by Stonecrest to Stock under the Sales
Agreement, including all debts incurred prior to July 30, 2007. The trial court disagreed,
essentially finding that the Guaranty unambiguously provided that Sable only assumed personal
liability for the amounts that came due on or after July 30, 2007. After conducting a review de
novo, we conclude that the Guaranty is ambiguous and, accordingly, reverse and remand.2

2
  This Court reviews de novo a trial court’s grant of summary disposition under MCR
2.116(C)(10). Ernsting v Ave Maria College, 274 Mich. App. 506, 509; 736 NW2d 574 (2007).
“When deciding a motion for summary disposition under MCR 2.116(C)(10), a court must
consider the pleadings, affidavits, depositions, admissions, and other documentary evidence
submitted in the light most favorable to the nonmoving party.” Id. at 509-510. All reasonable
inferences are to be drawn in favor of the nonmoving party. Dextrom v Wexford Co, 287 Mich
App 406, 415; 789 NW2d 211 (2010). “Summary disposition is proper under MCR
2.116(C)(10) if the documentary evidence shows that there is no genuine issue regarding any
material fact and the moving party is entitled to judgment as a matter of law.” Ernsting, 274
Mich. App. at 509. “This Court is liberal in finding genuine issues of material fact.” Jimkoski v
Shupe, 282 Mich. App. 1, 5; 763 NW2d 1 (2008). “A genuine issue of material fact exists when
the record, giving the benefit of any reasonable doubt to the opposing party, leaves open an issue
upon which reasonable minds could differ.” Ernsting, 274 Mich. App. at 510. “The proper

                                               -3-
        “Contracts of guaranty are to be construed like other contracts, and the intent of the
parties, as collected from the whole instrument and the subject-matter to which it applies, is to
govern.” Comerica Bank v Cohen, 291 Mich. App. 40, 46; 805 NW2d 544 (2010) (quotation
marks and citation omitted). However, “a guaranty contract . . . is a special kind of contract” and
must be strictly interpreted. Bandit Indus, Inc v Hobbs Int’l, Inc, 463 Mich. 504, 512; 620 NW2d
531 (2001). Thus, “a court must approach with caution a claim that the parties have formed a
guaranty contract.” Id. “[A]ssumption of another’s debt is a substantial undertaking, and thus
the courts will not assume such an obligation in the absence of a clearly expressed intention to do
so.” Id.

        Sable does not dispute the validity of the Guaranty nor his personal liability thereunder.
That is, there is no question that the Guaranty is enforceable. There is similarly no question that
Sable “clearly expressed” his intention to assume some personal liability under the Guaranty.
Sable does not dispute that he was personally liable for the amount of the Promissory Note and
the sums due under the Sales Agreement accruing on and after July 30, 2007. He merely seeks
affirmance of the trial court’s rulings. Thus, the question before us is whether Sable assumed
personal liability for those debts incurred under the Sales Agreement prior to July 30, 2007.

       In interpreting a contract, this Court’s obligation is to determine the intent of the
       parties. This Court must examine the language of the contract and accord the
       words their ordinary and plain meanings, if such meanings are apparent. If the
       contractual language is unambiguous, courts must interpret and enforce the
       contract as written. Thus, an unambiguous contractual provision is reflective of
       the parties’ intent as a matter of law. [In re Smith Trust, 274 Mich. App. at 285
       (quotation marks and citations omitted).]

By contrast, “[a] contract is ambiguous if the language is susceptible to two or more reasonable
interpretations.” D’Avanzo v Wise & Marsac, PC, 223 Mich. App. 314, 319; 565 NW2d 915
(1997). In such a situation, summary disposition is inappropriate because an ambiguity creates a
question of fact, and this Court will remand for “factual development [] necessary to ascertain
the parties’ intent.” Id. at 320.

        The parties each contend that the Guaranty unambiguously evidences their advocated
interpretation. CTIC’s argument is based primarily on the sentence that reads that Sable “does
hereby unconditionally and absolutely guarantee to Stock, its successors and assigns, the full and
prompt payment, when due, of all sums payable to by Stonecrest to Stock pursuant to . . . the
Sales Agreement . . . .” (Emphasis added). However, Sable argues that the phrase “when due”
unambiguously means that he was not providing a personal guaranty for those sums that were
already due when the document was signed. He therefore argues that nowhere in the Guaranty is
it “clearly expressed” that he agreed to assume personal liability for all sums owed by Stonecrest.
Bandit Indus, Inc, 463 Mich. at 512.

interpretation of a contract is a question of law that this Court reviews de novo.” In re Smith
Trust, 274 Mich. App. 283, 285; 731 NW2d 810 (2007).

                                                -4-
        We conclude, particularly in light of the special nature of a guaranty contract, that each
party has presented a reasonable reading of the Guaranty. Thus, although each party asserts that
its advocated reading is clear and unambiguous, we conclude that the document is ambiguous as
to the scope of Sable’s personal liability; specifically, if that liability extends to all sums owed or
only those that came due on or after its July 30, 2007. Thus, the trial court’s grant of summary
disposition was inappropriate, D’Avanzo, 223 Mich. App. at 319, and we remand for further
proceedings on the issue, including the admission and consideration of extrinsic evidence as
necessary,3 see Zurich Ins Co v CCR & Co, 226 Mich. App. 599, 604; 576 NW2d 392 (1997).

        While we are remanding as just described, we do find error in the trial court’s failure to
consider ongoing accumulations of contractual interest (described in the Sales Agreement as
time-price differential). Those interest payments, while based on principal payments due prior to
July 30, 2007, continued to accrue after that date. Under the plain language of the Guaranty,
even as argued by Sable, all payments coming due after July 30, 2007 are within the Guaranty
and there is no exception provided for interest. Accordingly, on remand, when determining the
amount of damages payable by Sable for “sums payable by Stonecrest” after July 30, 2007, the
trial court shall calculate and include the amount of interest incurred after that date for principal
debts incurred prior to that date.

       Sable also argues that the final judgment entered by the trial court operated to dismiss
with prejudice any claims CTIC may have against Stonecrest under the Sales Agreement. We
disagree.4

       The final judgment in this case was stipulated to by the parties. MCR 2.504(A)(1)(b)
provides that the “filing [of] a stipulation of dismissal signed by all the parties” shall be without
prejudice “[u]nless otherwise stated in the notice of dismissal[.]” The final judgment in this case
makes no reference to any claims against Stonecrest by CTIC being dismissed with prejudice.
Accordingly, to the extent those claims were dismissed, it was done without prejudice. This
outcome is supported by reading the rest of the final judgment in context. The parties clearly
intended that the stipulation only regard Sable’s personal liability for the Promissory Note and
the sums incurred under the Sales Agreement on or after July 30, 2007. The parties also
expressly stipulated that all appeal rights were preserved except as to those two issues,
demonstrating their intent that the judgment did not foreclose, waive, or dismiss with prejudice
any claims outside of those two limited damage issues.

3
  In light of our finding of ambiguity, we need not address the trial court’s additional ruling
regarding consideration. However, as adequate legal consideration in an element of a legally
enforceable contract, Calhoun Co v Blue Cross Blue Shield of Mich, 297 Mich. App. 1, 13-14; 824
NW2d 202 (2012), neither party is precluded from challenging consideration in the proceedings
on remand.
4
 Both the interpretation of court rules, Al-Shimmari v Detroit Med Ctr, 477 Mich. 280, 287; 731
NW2d 29 (2007), and a court order, Silberstein v Pro-Golf of America, Inc, 278 Mich. App. 446,
460; 750 NW2d 615 (2008), involve questions of law reviewed de novo.

                                                 -5-
        In sum, we affirm the trial court’s rulings that Sable was personally liable for the amount
of the Promissory Note and sums due under the Sales Agreement accruing on or after July 30,
2007. However, we reverse the trial court’s damage findings as to that sum and, on remand, it
shall recalculate damages so as to including contractual interest accruing after July 30, 2007. We
also reverse the trial court’s ruling that the unambiguous language of the Guaranty provided that
Sable was not personally liable for sums accruing under the Sales Agreement prior to July 30,
2007, and remand for further proceedings on that issue consistent with this opinion. We do not
retain jurisdiction.

                                                            /s/ Amy Ronayne Krause
                                                            /s/ Kirsten Frank Kelly
                                                            /s/ Douglas B. Shapiro

                                                -6-