Samuel D Begola Services, Inc. v. Wild Bros.

534 N.W.2d 217, 210 Mich. App. 636
CourtMichigan Court of Appeals
DecidedMay 19, 1995
DocketDocket 154050, 160285
StatusPublished
Cited by126 cases

This text of 534 N.W.2d 217 (Samuel D Begola Services, Inc. v. Wild Bros.) is published on Counsel Stack Legal Research, covering Michigan Court of Appeals primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Samuel D Begola Services, Inc. v. Wild Bros., 534 N.W.2d 217, 210 Mich. App. 636 (Mich. Ct. App. 1995).

Opinion

O’Connell, J.

In these consolidated appeals, plaintiff challenges an order denying reconsideration of the involuntary dismissal of its complaint and a subsequent order granting defendants an award of their costs and attorney fees. We affirm.

Defendants owned two parcels of heavily wooded land that plaintiff agreed to purchase by land contract. Under the terms of the purchase agreements, plaintiff was authorized to develop the properties for recreational and residential use during the term of the contracts, but was prohibited *638 from removing timber for commercial purposes beyond the extent necessary for authorized development.

Before closing on the properties, plaintiff attempted to negotiate new sales agreements. Rather than purchasing the properties by land contract, plaintiff offered a substantial down payment, with defendants to hold a mortgage note for the balance. Under such an arrangement, legal title would have passed to plaintiff immediately, thereby circumventing the timber removal restriction. This second offer, which would have superseded the parties’ original agreements, was not accepted, although it is not clear whether it was definitively rejected.

Unbeknownst to defendants, plaintiff had contracted with a timber harvester two weeks after the purchase agreements were executed to remove all trees on the properties that were over a certain diameter. Defendants learned of this when they discovered an employee of the timber harvester marking trees on the properties. Defendants refused to close on the properties, and plaintiff brought suit, seeking specific performance. After plaintiff presented its evidence to the bench, defendants moved for a "directed verdict,” which the court granted on the basis of plaintiff’s fraud in misrepresenting its intention to harvest, the timber. The court then denied plaintiff’s motion for reconsideration.

Defendants later moved for an award of costs and attorney fees. The purchase agreements contained provisions to the effect that the prevailing party in any action to enforce the agreements would be entitled to such expenses. The court granted this motion on the basis of the contractual provisions, awarding defendant approximately $34,000 in costs and fees.

*639 We treat defendants’ motion for a "directed verdict” as a motion for an involuntary dismissal pursuant to MCR 2.504(B)(2). Armoudlian v Zadeh, 116 Mich App 659, 671; 323 NW2d 502 (1982); Angelo Iafrate Co v M .& K Development Co, 80 Mich App 508, 512-513; 264 NW2d 45 (1978). The involuntary dismissal of an action is appropriate where the trial court, when sitting as the finder of fact, is satisfied at the close of the plaintiffs evidence that "on the facts and the law the plaintiff has shown no right to relief.” MCR 2.504(B)(2). Therefore, plaintiff’s suit for specific performance being an equitable action, Godwin v Lindbert, 101 Mich App 754, 757; 300 NW2d 514 (1980), we review the ultimate determination de novo and review for clear error the findings of fact supporting that determination. Webb v Smith (After Remand), 204 Mich App 564, 568; 516 NW2d 124 (1994). A trial court’s findings are clearly erroneous only where "we are left with a definite and firm conviction that a mistake has been made.” Id.

Plaintiff argues that the court erred in finding a fraud to have been perpetratéd where any misrepresentations allegedly made pertained solely to future actions, that is, to the future removal of trees in violation of the purchase agreements. While plaintiff is correct in asserting that, in general, actionable fraud must be predicated on a statement relating to a past or an existing fact, see, e.g., Scott v Harper Recreation, Inc, 444 Mich 441, 446, n 3; 506 NW2d 857 (1993), Michigan also recognizes fraud in the inducement. Fraud in the inducement occurs where a party materially misrepresents future conduct under circumstances in which the assertions may reasonably be expected to be relied upon and are relied upon. Kefuss v Whitley, 220 Mich 67, 82-83; 189 NW 76 (1922); see also Adams v Gillig, 199 NY 314; 92 NE 670 *640 (1910), cited with approval in Kefuss, supra, p 86; Judd v Judd (On Rehearing), 192 Mich 207, 208; 160 NW 548 (1916). Fraud in the inducement to enter a contract renders the contract voidable at the option of the defrauded party. Whitcraft v Wolfe, 148 Mich App 40, 52; 384 NW2d 400 (1985).

In the present case, the trial court made detailed findings of fact on the record and concluded that plaintiif had perpetrated a fraud in inducing defendants to enter into the purchase agreements where plaintiff had no intention of abiding by their terms..The evidence clearly supports such a finding; and the evidence suggesting otherwise is minimal. Therefore, defendants were entitled to rescind the agreements and effected a rescission by refusing to proceed to closing. To the extent that the trial court’s application of Michigan law may be construed to be inconsistent with the discussion above, we decline to reverse where the right result was reached for the wrong reason. Gray v Pann, 203 Mich App 461, 464; 513 NW2d 154 (1994).

Despite our conclusion that the purchase agreements were rescinded, we hold that the contractual attorney fee provisions survive such rescission. The purchase agreements provided that "[i]n the event either party shall prevail in any legal action commenced to enforce this agreement, he shall be entitled to all costs incurred in such action including legal fees.” While the elements of this provision were satisfied, enforcement of this provision meets with one apparent difficulty — the contract was rescinded.

In general, rescission abrogates a contract completely. Livingston v Krown Chemical Mfg, Inc, 394 Mich 144, 152; 229 NW2d 793 (1975). All former contract rights are annulled; it is as if no contract had been made. Cushman v Avis, 28 Mich App 370, 372; 184 NW2d 294 (1970).

*641 However, in the present case, the attorney fee provisions were severable from the purchase agreements proper. A general rule of contract law is that the failure of a distinct part of a contract does not void valid, severable provisions. Robinson v A Z Shmina & Sons Co, 96 Mich App 644, 649; 293 NW2d 661 (1980); see also 17A CJS, Contracts, § 331, p 308. While our review of Michigan case law has uncovered no pertinent discussion of the appropriate factors to consider when determining whether a contractual provision is severable, it is clear that the primary consideration is the intention of the parties. Robinson, supra, p 650; see also 17A CJS, Contracts, §332, pp 309-310; 17A Am Jur 2d, Contracts, § 415, pp 441-442.

In concluding that the parties intended, the attorney fee provisions to be severable, this Court is guided by the remarkably similar case of Reistroffer v Person, 247 Va 45; 439 SE2d 376 (1994). In Reistroffer,

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534 N.W.2d 217, 210 Mich. App. 636, Counsel Stack Legal Research, https://law.counselstack.com/opinion/samuel-d-begola-services-inc-v-wild-bros-michctapp-1995.