Author: LegalEase Solutions
RESPONSE BRIEF TO DEFENDANTS’ PARTIAL MOTION FOR
- Genuine issues of material fact remain on the issue of impossibility of performance, as the Plaintiff does not claim that the $1800 payments were for rent of the building/real property
If in fact the monthly payments which it was agreed would be received by the Plaintiff through 2013 are ultimately found to be unrelated to any rent or lease, the Defendants’ claim of impossibility of performance must fail, as the subsequent sale of the building/real property would be wholly irrelevant to the continuation of the $1800.00 payments.
The Defendants cannot rely on the doctrine of impossibility of performance in the instant matter, because it is clear that there was never an intention to keep the promise with regard to the monthly payments owed to the Plaintiff. According to the case of Rogers Plaza, Inc. v. S. S. Kresge Co., 32 Mich. App. 724,
“Where performance of a contract is impossible because of facts existing when the promise is made, the promise is void unless the risk of its impossibility is assumed, as where the parties know that performance may be impossible and base their contract upon the assumption. Where the impossibility of performance is known to both parties at the time of making the agreement, the promise is not binding. However, nonperformance of a promise is not excused because of impossibility where it is impossible because of facts which the promisor alone knew when he made the contract.” Id. at 743.
In the instant matter, the Plaintiff did not base her acquiescence to the sale of the property on knowledge that it might be considered by the Defendants to render performance of their existing agreement impossible. Such an outcome was simply not in the Plaintiff’s contemplation, as the two events/transactions were unrelated to one another. In fact, in her deposition testimony, the Plaintiff stated that in negotiations with the Defendants, she had expressed hesitation with regard to transferring her interest in the business, only to be reassured by Joe Mosed, who asserted “…you’re going to have your rent money…you’ll still get your rent money. If I’m still in the building you’ll still get rent and if not you’ll still own one-third of the building.” (Gloria Mosed Deposition Transcript, page 15).
Never, during the entire scope of negotiations between the Plaintiff and the Defendants, was there any mention of a subsequent sale of the building rendering payment of the agreed monthly amounts an impossibility. The Plaintiff has testified that Ron Latiff guaranteed that “by his word”, she would receive the monthly payments “before [she] knew there was any negotiations whatsoever on the real property”. (Gloria Mosed Deposition Transcript, page 45). The events were simply unrelated to one another. The ownership or utilization of the building by DSS was wholly irrelevant to the Plaintiff’s right to the payments.
While the Defendants claim that the subsequent sale of the building obviously and conclusively renders continuation of the monthly payments of what they now deem to have been “rent” impossible, that characterization is contrary to the Plaintiff’s deposition testimony. The parties to the agreements at issue never articulated the notion that they were entering into any type of lease or rental relationship. The Plaintiff has testified that both before and after the buyout, there was never any sort of written lease executed which would lend credence to the Defendants’ present argument that the $1800 monthly installments were in fact lease payments on the property, and once they no longer owned the building, they owed no further rent. (See Gloria Mosed Deposition Transcript, page 74).
The Defendants’ argument that the monthly payments were in fact rent which was no longer owed after the building was sold is further weakened by the fact that the $1800 per month figure was not tied to any estimates of market rental value of the Plaintiff’s share of the building, but was rather a number that was agreed to in an ad hoc manner, in which Joe Mosed and Ron Latiff presented the Plaintiff with a number which she deemed to be an acceptable level of monthly income through 2013. The Plaintiff has testified to her understanding that the act of signing the warranty deed three years later was one solidifying and effectively memorializing the prior agreements entitling her to the monthly payments through 2013. When asked if the deed was “evidence of a writing reflecting [the] agreement with Joe Mosed, Jr.”, the Plaintiff responded, “yes”. (Gloria Mosed Deposition Transcript, page 74).
In Bissell v. L. W. Edison Co., 9 Mich. App. 276; 156 NW2d 623 (1967) the Defendant contractor sought review of the decision of the Kent County Court which granted judgment for plaintiff subcontractor in a lawsuit dealing with impossibility as a defense to breach of contract. The Plaintiff having entered into a contract to provide fill material for defendant. It became impossible for plaintiff to fulfill the contact because the state placed a water main on the right of way. Plaintiff substantially complied with the contract and defendant paid him for part of the contract. The court affirmed the judgment of the trial court entered in favor of plaintiff. The court held that plaintiff was excused from strict compliance by the doctrine of impossibility because the supervening event was not reasonably foreseeable when he entered into the contract.
The court held that defendant knew that it might be impossible for plaintiff to strictly comply with the contract, but did not inform plaintiff. The court held that impossibility meant impracticability because of extreme and unreasonable difficulty, expense, injury, or loss involved. The court affirmed the decision in favor of plaintiff because it was impossible for plaintiff to comply with all the terms of the contract and defendant had waived his right to strict performance of the contract. In the instant action, the Defendants, having made a conscious decision to sell the property cannot now take refuge under the doctrine of impossible performance.
The Defendants cannot establish before the court an inability to continue making the monthly payments due to extreme and unreasonable difficulty, expense injury or loss involve as has been adumbrated in the case law. Further, the Plaintiff in no way waived her right to the strict performance of the oral contract through which the Defendants promised to make monthly payments, when she consented to the sale of the building. The court in Bissell, supra, stated:
“A waiver may be shown by proof of express language of agreement or inferably established by such declarations, acts and conduct of the party against whom it is claimed as are inconsistent with a purpose to exact strict performance.” Bissell at 287.
Absolutely no evidence has been set forth, or indeed exists, to support a contention that the Plaintiff waived her right to receive monthly payments of $1800.00 through 2013, pursuant to her existing agreement with the Defendants. Rather, the evidence points to a contrary conclusion, as the Plaintiff’s deposition testimony unequivocally states that she transferred her interests to Joe Mosed that she did so with the explicit understanding that she would continue to receive “a monthly amount of monies throughout the buyout” which would run through 2013. (Gloria Mosed Deposition Transcript, page 74, lines 18-20). Furthermore, Ron Latiff called the Plaintiff and “verified that we would be getting the rent through the buyout”, a statement to which Joe Mosed had previously ascribed as well. The Plaintiff has testified that Mr. Mosed told her that she would “receive [her] monthly payments throughout the buyout.” (Gloria Mosed Deposition Transcript, page 44).
The Supreme Court of United States in Columbus R. Power & Light Co. v. Columbus, 249 U.S. 399, 412 (U.S. 1919) held “It certainly was not intended to question the principle, frequently declared in decisions of this court, that if a party charge himself with an obligation possible to be performed, he must abide by it unless performance is rendered impossible by the act of God, the law, or the other party. Unforeseen difficulties will not excuse performance. Where the parties have made no provision for a dispensation, the terms of the contract must prevail. See United States v. Gleason, 175 U.S. 588, 602, 44 L. Ed. 284, 20 S. Ct. 228, and authorities cited; Carnegie Steel Co. v. United States, 240 U.S. 156, 164, 165, 60 L. Ed. 576, 36 S. Ct. 342.
Applying the above principle, the Defendants cannot excuse themselves from performance by arguing that there were unforeseen difficulties that prevented fulfillment of the promises made to the Plaintiff.
Similarly, the Supreme Court of United States in Carnegie Steel Co. v. United States, 240 U.S. 156 (1916) held “If what is agreed to be done is possible and lawful, it must be done. Difficulty or improbability of accomplishing the undertaking will not avail defendant. It must be shown that the thing cannot by any means be effected. Nothing short of this will excuse performance”.
- Plaintiff is entitled to the benefit of her bargain under principles of Michigan contract law.
It is a well settled principle that the goal in awarding damages where a contract
has been breached is to provide the innocent party the “benefit of his bargain”, or in other words, to place him in a position equivalent to that which he would have attained if the contract had been performed as promised. Tel-Ex Plaza, Inc. v. Hardees Restaurants, Inc. 76 Mich App 131, 134; 255 NW2d 794 (1977). The injured party, of course, is always required to make every reasonable effort to minimize the loss suffered. Maraldo Asphalt Paving, Inc. v. Harry D. Osgood Co., Inc. 53 Mich App 324, 326; 220 NW2d 50 (1974). As long as the aggrieved party has complied with the duty to mitigate damages in whatever manner possible, the object and measure of compensatory damages for breach remains “to put the injured party in as good a position as he would have had if performance had been rendered as promised”. Dierickx v. Vulcan Industries 10 Mich App 67; 158 NW2d 778 (1968), quoting 5 Corbin on Contracts § 992, p. 5. It has long been held that “the law aims to make compensation adequate to the real injury sustained…as far as money can do it…” Brodsky v. Allen Hayosh Industries, Inc. 1 MIch App 591, 597, 598 (1965), quoting Hammond v. Hannin 21 Mich. 374, 384 (1870).
Applying this established maxim of contract law to the instant facts, it is clear that the Plaintiff must be put into the same position she would have occupied had the Defendants not decided to breach their obligations pursuant to the agreements. In the August 4, 2005 deposition, the Plaintiff was asked if, by transferring her interest in property to Joe Mosed, Jr., she had an expectation of getting something in return. She answered unequivocally, “absolutely…a monthly amount of monies throughout the buyout.” (Gloria Mosed Deposition Transcript, page 74). The Plaintiff contracted to receive monthly income payments of $1800.00, through the year 2013, and additional sums to be determined on a graduated scale, based upon the adjusted net income of DSS. However, on or about February 8, 2005, DSS announced its intention to cease monthly payments to the Plaintiff, and declared that she would no longer receive the insurance coverage that had been promised to her. In addition, the Defendants repeatedly prevented the Plaintiff from making examination of DSS books and records in an attempt to ensure she was receiving the proper amounts to which she was entitled, based upon the adjusted net income levels of the corporation.
Therefore, in keeping with the contract principle that the party harmed by a breach of contract is entitled to receive the benefit of the bargain, it is imperative that the Defendants be enjoined from ceasing the monthly payments to the Plaintiff required by their agreement. The Plaintiff bargained to receive monthly installments of $1800.00 through 2013, and she is entitled to that aggregate amount. Further, the Plaintiff bargained with the Defendants to receive other sums, the size of which were to be determined by the adjusted net income of DSS. Therefore, in order to assess the exact amount of funds to which she is entitled, the Plaintiff must have regular, unimpeded access to the corporate records.
- Genuine issues of material fact remain regarding the Plaintiff’s claim for fraudulent misrepresentation, and summary disposition as to this count is therefore inappropriate.
Assuming arguendo, that the monthly payments were indeed rental payments, and also that the Plaintiff had consented to the sale of the building, the Defendants misrepresented to the Plaintiff the precise implications of the sale, in terms of her expectancy of monthly income through 2013. The Defendant fraudulently misled the Plaintiff into agreeing to the sale of the property, by withholding information relevant to the transaction, namely, that the monthly payments would permanently cease.
In an action for fraudulent misrepresentation the Plaintiff must prove the following elements: (1) that defendant made a representation; (2) that it was false; (3) that when the defendant made the representation, they knew it was false, or made it recklessly, without any knowledge of its truth, and as a positive assertion; (4) that the defendants made the representation with the intention that it should be acted upon by the plaintiff; (5) that the plaintiff acted, in reliance upon the representation; (6) that the plaintiff suffered injury as a result. U.S. Fidelity and Guaranty Co., v. Black, 412 Mich. 99, 313 N.W.2d 77 (1981); Ford v. Nationwide Mut. Ins. Co., 1998 U.S. Dist. LEXIS 21189, 6-7 (E. D. Mich. 1998).
It is well settled in Michigan that the test for determining the existence of reliance is not whether the misrepresentation was the sole influence upon the complaining party in deciding to sign the agreement but rather, “whether the misrepresentation exerted a material influence upon the minds of [the complainants], although it might be only 1 of several motives, acting together, which produced the result”. Callihan v. Talkowski, 372 Mich 1, 6; 124 NW2d 788 (1963).
A misrepresentation, even though made innocently, resulting in an effectively deceptive influence, and consequences as detrimental as if they had stemmed from a vicious purpose, gives the victim an action for the damages caused when the benefit inures to the party making the representation. Id.
Parties to a business transaction generally are under an obligation to exercise reasonable care to disclose to the other party, before the transaction is consummated, any subsequently acquired information which he recognizes as rendering untrue, or misleading, previous representations which, when made, were true or believed to be true. Id. See also Hi-Way Motor Co. v. International Harvester Co., 398 Mich. 330, 336 (Mich. 1976).
A fraudulent misrepresentation may be based on a promise made in bad faith without the intention of performance. Thus, a claim of fraud lies where although no proof of the promisor’s intent exists, the facts of the case compel the inference that the promise was but a device to perpetrate a fraud. In any event, future statements support an action for fraud where the representations of fact are intended to be relied upon and accepted, and where the matter was within the particular knowledge of the speaker. Foreman v. Foreman, 266 Mich. App. 132. 147 (Mich App 2005).
Thus, it can be concluded that the Defendants had deliberately misrepresented to the Plaintiff that she would receive monthly payments of $1800.00 through 2013, thereby influencing her to transfer her 8 and 1/3rd share of interest in the property. The Defendants further failed to disclose material facts to the Plaintiff, namely, that she would no longer be entitled to those monthly payments if and when the building was sold.
- There are genuine issues of fact still in contention with regard to the Plaintiff’s claim for innocent misrepresentation. Therefore it is inappropriate for the court to grant the Defendant’s motion for partial summary disposition on this count
The “innocent misrepresentation” doctrine permits recovery of damages for a misrepresentation of fact, though made innocently, if the consequences to the plaintiff are the same as though it had proceeded from a vicious purpose. Application of the innocent misrepresentation rule is limited to cases where the misrepresentation is made in connection with a contract. Not only must the plaintiff in such a case show that he has suffered an injury; he must also show that the injury inures to the benefit of the party making the representation. Schwartz v. Electronic Data Systems, Inc., 913 F.2d 279 (6th Cir. 1990).
In the instant matter, the Plaintiff would not have agreed to transfer her share in the partnership and her interest in the building if the Defendant had not made representations promising to continue monthly payments of $1800.00 through 2013. The Plaintiff acted to her ultimate detriment in reliance on these representations, and the benefit of such reliance has inured entirely to the Defendants.
The court in Pasternak v. Sagittarius Recording Co., 617 F. Supp. 1514, 1517 (E. D. Mich. 1985) listed “six elements for a common law claim for fraudulent misrepresentation in Michigan: (1) that the defendant made a material misrepresentation; (2) that it was false; (3) that the defendant knew the statement was false when made, or made the statement recklessly, without any knowledge of its truth and as a positive assertion; (4) that the defendant made it with the intention that it should be acted upon by the plaintiff; (5) that the plaintiff acted in reliance upon it; and (6) that the plaintiff thereby suffered injury. See Hi-Way Motor Co. v. International Harvester Co., 398 Mich. 330, 336, 247 N.W.2d 813 (1976). It can be concluded from the behavior of the Defendants that representations were made to the Plaintiff with the hope that the Plaintiff would place reliance on it and act upon the same to her own detriment.
The innocent misrepresentation rule represents a species of fraudulent misrepresentation but has, as its distinguished characteristics, the elimination of the need to prove a fraudulent purpose or an intent on the part of the defendant that the misrepresentation be acted upon by the plaintiff, and has, as added elements the necessity that it be shown that an unintendedly false representation was made in connection with the making of a contract and that the injury suffered as a consequence of the misrepresentation inure to the benefit of the party making the misrepresentation. Thus, the party alleging innocent misrepresentation is not required to prove that the party making the misrepresentation intended to deceive or that the other party knew the representation was false. Id. at 9. Watson Wyatt & Co. U.S. Retirement Comm. ex rel. Watson Wyatt & Co. Sav. Plan for United States Emples. v. NBD Bank, 1998 U.S. Dist. LEXIS 9541 (E. D. Mich. 1998).
Therefore, even if at the time of the agreement, the Defendants did not intend to deceive the Plaintiff by failing to discuss the implications of any subsequent sale of the property on her expectancy of monthly income through 2013, their omission of specific negotiation regarding such an outcome amounts to innocent, yet actionable misrepresentation.
- There are genuine issues of facts still in contention with regard to the Plaintiff’s claim for conversion, and therefore, it is inappropriate for the court to grant the Defendant’s motion for summary disposition.
The Plaintiff’s amended complaint includes a claim of conversion, asserting
that the Defendants have been withholding payments due under the agreements, and also that the Defendants have been diverting funds to their own personal benefit. Numerous genuine questions of material fact remain unresolved with regard to this claim, concerning the time, place and motives behind the conversion of the plaintiff’s assets. The Defendants have made ambiguous statements with regard to the sale of the Southfield property, stating that the price received was “approximately” $400,000.00. The vagueness of the assertion itself raises some question as to the actual substance of the transaction and the funds resulting therefrom. The purchase price of a property for which the proceeds are to be shared among members of a partnership is a fixed amount, susceptible to precise measurement. The ambiguous nature of the Defendants’ characterizations of the sale proceeds calls into question the true amount resulting from the transaction, and therefore the true amounts owed to the Plaintiff.
The Defendants have attempted to suppress or disguise the actual sale price of the
Southfield property, and have failed to disburse funds legitimately due to the Plaintiff pursuant to their agreements, and therefore have converted the Plaintiff’s funds. The true amount of funds still due to the Plaintiff, as well as the whereabouts of those funds are genuine issues of material fact for the jury.
Further, the stock redemption and covenant called for fixed payments to the Plaintiff, subject to acceleration based on the adjusted net income of DSS. The Plaintiff has been prevented from examining the books in attempts to ascertain the true amounts due to her under the agreements. The Plaintiff has also become aware of “certain evidence that looks suspicious”, which clearly necessitates access to the corporate records. (Gloria Mosed Deposition Transcript, page 45). The Defendants’ refusal to grant such access indicates the likelihood of wrongful appropriation and diversion of funds owed to the Plaintiff, and therefore dismissal of the count alleging conversion is inappropriate.
Therefore, based upon the foregoing, the Plaintiff, Gloria J. Mosed, respectfully requests that this Honorable Court deny the Defendants’ Partial Motion for Summary Disposition.