Business Law

This summary also appears under Contracts

 

Issues: Breach of contract claim related to a development agreement (DA); Agent signing in a representative capacity; Riddle v. Lacey & Jones; Whether there was any "latent ambiguity" as to the term "Developer"; Shay v. Aldrich; A corporate entity acting through its employees; Upjohn Co. v. New Hampshire Ins. Co.; "Piercing the corporate veil"; Dutton Partners, LLC v. CMS Energy Corp.; Waiver; People v. Kevorkian; Role of "centralized manager or paymaster"; Judson Atkinson Candies, Inc. v. Latini-Hohberger Dhimantec (7th Cir.); Lowell Staats Mining Co. v. Pioneer Uravan, Inc. (10th Cir.); MI Admin. Code 421.190; Contempt; Inability to comply with an order as a defense to a civil contempt proceeding; United States v. Rylander; City of Detroit v. Department of Soc. Servs.; Silent fraud; Hord v. Environmental Research Inst. of MI; Misrepresentations relating to the performance of a contract; Huron Tool & Eng'g Co. v. Precision Consulting Servs., Inc.; Rinaldo's Constr. Corp. v. Michigan Bell Tel. Co.; Specific performance; Claim that breach of the DA amounted to wrongdoing that harmed the plaintiff-city; United States Fire Ins. Co. v. Polestar Constr. of FL (Unpub. ED MI); Motion to amend to add a fraud in the inducement claim; Rooyakker & Sitz, PLLC v. Plante & Moran, PLLC; MCL 450.4501(4); Alleged irregularities in the case evaluation process; A panelist's potential bias; MCR 2.403(E); Mitchell v. Mitchell; MCR 2.003(C)(1)(d); People v. Upshaw; Cain v. Department of Corrs.; Waiver of any objection to an ex parte communication; Acorn Inv. Co. v. Michigan Basic Prop. Ins. Ass'n; MCR 2.403(K)(2); Discovery; MRE 612(a); Single-purpose entity (SPE)

Court: Michigan Court of Appeals (Unpublished)

Case Name: City of Dearborn v. Burton-Katzman Dev. Co., Inc.

e-Journal Number: 58914

Judge(s): Per Curiam – Markey, Sawyer, and Wilder

 

Holding that no latent ambiguity existed as to the term "Developer" in the DA, the court found that the trial court erred in ruling that defendant-Burton-Katzman Development Company (BKDC) was a Developer and in granting the plaintiff-city summary disposition on its breach of contract claim. Further, the trial court abused its discretion in finding BKDC in contempt for failing to specifically perform the Developer's obligations. The court also held that the city could not pierce BKDC's corporate veil to hold defendant-Burton-Share Management Company (BSMC) liable for the Developer's duties, and it rejected the city's claims on cross-appeal alleging irregularities in the case evaluation process. The court concluded the that DA's language was plain - the parties to the contract were the city and defendant-West Village Commons. BKDC was not a listed party to the contract. As BKDC argued on appeal, "BKDC was an agent of West Village. The signature page evidences this relationship." Defendant-Burton "signed on behalf of BKDC, which was acting on behalf of West Village. Where an agent signs in a representative capacity on behalf of the principal, the agent is not a party." While the city "cited the fact that the BKDC, not West Village, performed actions in the recitals and throughout the Development Agreement, which were required to be performed by the Developer," West Village "was an SPE created for the purpose of financing the project, and BKDC was acting as an agent of West Village. That BKDC performed certain actions on behalf of the SPE is not inconsistent with this agency relationship." The court also concluded that when the trial court found BKDC, West Village and defendant-Abbey Homes "in contempt for failing to specifically perform and ordered them to pay the city's accumulated debt service, each of the entities was unable to comply" and an "inability to comply with a trial court's order is a defense to a civil contempt proceeding." Given the trial court's "factual conclusion that BKDC had no resources, it was outside the range of principled outcomes for the trial court to use an order of contempt to attempt to coerce BKDC to perform the duties of the Developer." As to piercing the corporate veil to hold BSMC liable, the court concluded that regardless of whether a question of fact existed "regarding whether BSMC was a mere instrumentality," the city "failed to establish fraud, wrongdoing, or misuse of the corporate form that caused the city unjust injury or loss." The trial court erred in granting the city summary disposition of the breach of contract claim against BSMC by piercing the corporate veil and ordering it to specifically perform the duties of the Developer. Reversed in part and affirmed in part.

 

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