Spe Utility Contractors LLC v. All Seasons Sun Rooms Plus LLC ( 2015 )

STATE OF MICHIGAN
COURT OF APPEALS
SPE UTILITY CONTRACTORS, LLC, UNPUBLISHED
October 13, 2015
Plaintiff/Counter-Defendant-
Appellant,
v No. 323363
St. Clair Circuit Court
ALL SEASONS SUN ROOMS PLUS, LLC, LC No. 12-003177-CK
Defendant/Counter-Plaintiff/Third-
Party-Plaintiff-Appellee,
and
DAVID P. POSTILL and LAURA POSTILL,
Third-Party Defendants.
Before: BORRELLO, P.J., and JANSEN and OWENS, JJ.
PER CURIAM.
Plaintiff/counter-defendant SPE Utility Contractors, LLC (“SPE”) appeals as of right an
order of judgment in favor of defendant/counter-plaintiff/third-party plaintiff All Seasons Sun
Rooms Plus, LLC (“All Seasons”) and against SPE. We affirm.
I. FACTS AND PROCEDURAL HISTORY
This case arises from a contract dispute between SPE and All Seasons regarding the
installation of a three-level sunroom enclosure on a residential property. Third-party defendant
David Postill (“Postill”) is the sole member of SPE. Postill and third-party defendant Laura
Postill (“Laura”) constructed a three-level porch on their house sometime between 2008 and
2011. The Postills decided to enclose the three-level porch in order to create three sunrooms that
they could use year-round. SPE was the general contractor on the project. The construction
project was ultimately referred to All Seasons, which is a private labeled dealer that provides
installation services. Mark Malloy (“Malloy”) owns All Seasons. Postill contacted Malloy, and
Malloy came out to the house. Postill told Malloy that the parties intended to use transom
windows in the sunrooms. A transom window is a fixed piece of glass. Malloy took pictures
and measurements of the porch area. Postill and Malloy also sent e-mails to each other regarding
the project. On December 12, 2011, Malloy sent Postill a proposal via e-mail detailing the plan
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to install glass panels around the three levels of the porch and the costs associated with the job.
The e-mail stated that 1/3 of the total price was due when the contract was signed, 1/3 was due
when construction began, and 1/3 was due upon completion.
On December 16, 2011, Postill and Malloy met and signed an agreement. Postill wrote a
deposit check on behalf of SPE to Malloy for $12,565 when the parties signed the contract. The
agreement consisted of the December 12, 2011 e-mail from Malloy to Postill, an e-mail from
Postill to Malloy, another copy of the December 12, 2011 e-mail from Malloy to Postills with
Postill’s handwritten amendments, a document from All Seasons that included a quotation for the
project, and several drawings of the proposed construction. The e-mail from Postill to Malloy
stated that “[o]nce plans are approved by SPE. [sic] SPE shall issue a contract to All Season
[sic] sunrooms to commence construction.” The e-mail further provided, “You will provide final
plans subject to our final approval,” and “You are approved to proceed with plans on the upper
unit & Middle Unit.” The quotation sheet that was part of the contract provided that custom
transom windows were included in the plan for the “TOP” and “BOTTOM.” The quotation also
provided, “This Contract Subject to Acceptance of Drawings.” The quotation also noted that
there was approval to start the plans.
Postill made handwritten changes to the agreement before the parties signed it. Postill
made a handwritten alteration on the e-mail from Malloy to Postill noting that the sill height for
the windows in the middle-level sunroom should “match existing center sunroom.” Postill also
wrote the individual costs for each level of the sunroom on the agreement and made a
handwritten note that the kitchen door and bottom-level sunroom projects were on hold. The
total cost of all of the projects was $37,695. Malloy testified that Postill told him to get going as
soon as he could.
All Seasons commenced construction after the parties signed the agreement. Postill
wrote a check for $14,930 upon the start of construction. On January 27, 2012, Malloy wrote an
e-mail to Postill asking if there were any changes to the agreement. Postill responded that “[t]he
lay out [sic] looks great for the top floor.” Postill and Malloy met again after construction was
complete on the top level of the porch. The two discussed the placement of the windows for the
middle level relative to the columns that surrounded the middle level. According to Malloy, he
showed Postill drawings for the middle-level sunroom, which Postill said he loved and for
Malloy to “keep going.” Postill travelled to Florida. According to Malloy, Postill called him
and left a voice mail directing him to continue the project and finish the middle-level sunroom.
However, Malloy also testified that Postill would not commit to construction on the middle level.
Sometime after he finished construction on the upper-level sunroom, Malloy created a “mockup”
of the framework for the windows in the middle level of the sunroom, which the superintendent
of SPE and Laura approved.
Postill became dissatisfied with the middle sunroom after All Seasons or a contractor
working for All Seasons cut off the bottom of the several columns surrounding the middle level
of porch in order to install the windows. Postill was also dissatisfied with several other aspects
of the middle-level sunroom, including that All Seasons did not install transom windows on the
upper portion of the windowpanes to match the transom windows on the rest of the house. On
March 9, 2012, Postill and Malloy exchanged e-mails regarding the issues with the installation.
Ultimately, All Seasons never installed the windows in the middle level of sunroom.
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On June 18, 2012, SPE filed a complaint in the Macomb Circuit Court, alleging that All
Seasons breached the contract when it delivered and installed windows and materials that failed
to conform with the construction plans, damaged columns surrounding the middle-level sunroom
by performing labor that was contrary to industry standards, failed to complete the work outlined
in the contract, and demanded the final payment under the contract in spite of the fact that the
project was not complete. The summons was issued on the same day and stated that Malloy was
the resident agent of All Seasons. The summons and complaint were served on Rebecca Malloy
(“Rebecca”) on July 13, 2012. According to the proof of service, Rebecca is a co-owner of All
Seasons. On July 25, 2012, Rebecca sent SPE’s attorney a letter indicating that she talked with
Postill and that the two agreed to meet to rectify the issues with the sunroom in lieu of pursuing
litigation. Rebecca instructed SPE’s attorney to place the court file on hold until the meeting.
On July 31, 2012, SPE’s attorney wrote a letter to Rebecca extending the time to file an answer
until August 10, 2012. All Seasons failed to file an answer on August 10, 2012, and default was
entered for failure to plead or otherwise defend on August 13, 2012.
On October 15, 2012, All Seasons filed a motion to set aside the default and transfer
venue to the St. Clair Circuit Court. All Seasons argued that service was not made on the
resident agent and that All Seasons had a meritorious defense. All Seasons contended that it
filed a construction lien that would become the subject of a foreclosure action in the St. Clair
Circuit Court and that the action should be transferred to the St. Clair Circuit Court. On
November 14, 2012, SPE filed a response to All Seasons’s motion to set aside the default and
transfer venue. SPE denied that All Seasons had a defense. SPE argued in its corresponding
brief that All Seasons never completed the project and failed to address the fact that it did not
install transom windows. SPE also argued that All Seasons failed to show that the venue was
inconvenient.
The trial court held a hearing on the motion to set aside the default and transfer venue on
November 19, 2012. The parties argued consistent with the motion and response. SPE’s
attorney noted that the parties met on August 1, 2012, but could not reach an agreement. The
court ruled that All Seasons presented a meritorious defense and established good cause. On
December 7, 2012, the trial court entered an order granting defendant’s motion to set aside the
default and transfer venue to the St. Clair Circuit Court. All Seasons filed an answer to the
complaint on December 12, 2012, contending that SPE breached its contractual obligations.
On December 27, 2012, All Seasons filed a counter-complaint against SPE and a third-
party complaint against the Postills in the St. Clair Circuit Court, alleging breach of contract,
entitlement to foreclosure of the construction lien, and unjust enrichment. All Seasons alleged
that SPE and the Postills became dissatisfied with aspects of the project after the project was
substantially completed. SPE and the Postills refused to engage in talks with All Seasons or
make additional payments. SPE and the Postills filed an answer to All Seasons’s counter-
complaint and third-party complaint. SPE denied that it breached the contract for failure to make
a payment since defendant breached the contract first. The Postills denied the allegations
regarding foreclosure of a lien and unjust enrichment.
On January 3, 2014, SPE filed a motion for partial summary disposition under MCR
2.116(C)(10), arguing that All Seasons breached the contract when it did not obtain SPE’s
approval before constructing the middle level of the sunroom. SPE contended that there was no
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genuine issue of material fact regarding whether All Seasons was required to provide final plans
for SPE to approve and failed to do so. On January 21, 2014, All Seasons filed a response to the
motion for partial summary disposition, arguing that there were genuine issues of material fact
regarding whether it was required to submit final plans, whether it did submit final plans for the
middle level of the sunroom, and whether SPE approved the project. All Seasons also argued
that there were facts indicating that David Postill waived the requirement that he approve final
plans and noted that David Postill could not recall receiving final plans for the project.
The trial court held a hearing on the motion on January 27, 2014. The parties argued
consistent with the motion and response. The court determined that there was evidence
indicating that the parties waived the requirement that All Seasons provide plans for the middle
sunroom and that consent was given to proceed. The court denied SPE’s motion for partial
summary disposition. The case ultimately proceeded to trial on April 29, 2014. The jury
determined that SPE committed a material breach of the contract and that All Seasons was
entitled to $15,150 in damages.
II. SUMMARY DISPOSITION
SPE first argues that the trial court erred when it denied its motion for partial summary
disposition because the court did not require a showing of clear and convincing evidence that
there was a modification or waiver of the contract. We disagree.
“A trial court’s decision on a motion for summary disposition is reviewed de novo.”
Bullard v Oakwood Annapolis Hosp, 308 Mich. App. 403, 408; 864 NW2d 591 (2014). “A
motion for summary disposition under MCR 2.116(C)(10) challenges the factual sufficiency of a
claim, and we consider the evidence—including ‘affidavits, depositions, admissions, or other
documentary evidence’—in the light most favorable to the nonmoving party.” Id. (citation
omitted). Summary disposition is proper under MCR 2.116(C)(10) if “ ‘there is no genuine issue
regarding any material fact and the moving party is entitled to judgment as a matter of law.’ ”
Id. (citation omitted). Additionally, we review de novo issues of the existence and interpretation
of a contract. Klein v HP Pelzer Auto Sys, Inc, 306 Mich. App. 67, 75; 854 NW2d 521 (2014).
This Court interprets a contract according to the plain and ordinary meaning of the
contract. Klein, 306 Mich. App. at 75.
Under ordinary contract principles, if contractual language is clear, construction
of the contract is a question of law for the court. If the contract is subject to two
reasonable interpretations, factual development is necessary to determine the
intent of the parties and summary disposition is therefore inappropriate. If the
contract, although inartfully worded or clumsily arranged, fairly admits of but one
interpretation, it is not ambiguous. [Id. at 76 (citations and quotation marks
omitted).]
The parties to a contract may modify the contract orally or in writing. Kloian v Domino’s Pizza,
LLC, 273 Mich. App. 449, 454; 733 NW2d 766 (2006). The parties must provide mutual consent
for the modification. Id. Mere silence on the part of one party does not constitute waiver.
Quality Prod & Concepts Co v Nagel Precision, Inc, 469 Mich. 362, 365; 666 NW2d 251 (2003).
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“ ‘The mutuality requirement is satisfied where a modification is established through clear and
convincing evidence of a written agreement, oral agreement, or affirmative conduct establishing
mutual agreement to waive the terms of the original contract.’ ” Kloian, 273 Mich. App. at 454
(citation omitted).
The trial court did not err when it denied SPE’s motion for partial summary disposition
because the contract language was ambiguous, and there was evidence indicating that All
Seasons submitted final plans and received approval. The contract requires that All Seasons
submit “final plans subject to our final approval.” However, the contract does not define the
phrase “final plans” and does not specify who must provide final approval. The contract also
does not specify whether All Seasons was required to submit final plans with regard to each level
of the sunroom. Thus, the contract is subject to more than one reasonable interpretation, and
factual development was necessary to determine the intent of the parties. See Klein, 306 Mich
App at 76.
There was also evidence indicating that All Seasons submitted final plans and received
approval. Malloy testified during his deposition that he created a “mockup” of the framework
for the windows in the middle level of the sunroom, which the superintendent of SPE and Laura
approved. It is not clear from the language of the contract whether the “mockup” could
constitute final plans for the construction of the middle-level sunroom or whether Laura and the
superintendent were able to give approval on behalf of SPE. Thus, there is a genuine issue of
material fact with regard to whether the “mockup” constituted the final plans for the middle-level
sunroom. See Bullard, 308 Mich. App. at 408; Klein, 306 Mich. App. at 76.
In addition, SPE attached to its motion for partial summary disposition a set of drawings
that were not part of the original contract. The drawings are for the middle-level sunroom and
have a confirmation date of February 8, 2012. The drawings also indicate that they were drawn
on March 14, 2012. According to Malloy, he showed Postill the drawings, and Postill told him
to keep going on the project. According to Postill, he was unfamiliar with the drawings, and the
drawings were generated after construction began on the middle level. This testimony raises a
genuine issue of material fact regarding whether All Seasons submitted final plans and received
approval. See Bullard, 308 Mich. App. at 408.
Additionally, the fact that SPE issued a final contract to commence construction also
indicates that All Seasons provided final plans and received approval. The contract provided that
“[o]nce plans are approved by SPE. [sic] SPE shall issue a contract to All Season [sic] sunrooms
to commence construction.” Postill testified in his deposition that SPE issued a final contract to
All Seasons. The fact that SPE issued a final contract to commence construction indicates that
SPE approved final plans since SPE was not required to issue a contract to commence
construction until it approved the plans that All Seasons submitted. See Bullard, 308 Mich. App.
at 408. Thus, All Seasons presented evidence establishing a genuine issue of material fact on the
issue whether it presented final plans for the middle-level sunroom and whether SPE approved
the plans. See id.; Klein, 306 Mich. App. at 76.
Furthermore, Postill’s testimony regarding whether All Seasons submitted final plans was
ambiguous. Postill testified regarding the final plans during his deposition as follows:
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Q. All right. But you don’t believe [Malloy] submitted a plan for the
second level.
A. I don’t recollect. I know there was a top porch one and I believe that
was approved. The other ones I don’t believe were approved. I don’t even think I
have a copy of them, I don’t think they were sent to me.
Thus, Postill testified that he could not remember whether Malloy submitted a plan for the
middle-level sunroom, and he testified that he did not believe that the plans were approved. It is
apparent from Postill’s testimony that he was unsure whether All Seasons provided final plans
for the middle-level sunroom, which further supports All Seasons’s argument that there was a
genuine issue of material fact regarding whether the plans were submitted. See Bullard, 308
Mich. App. at 408.
Even assuming that All Seasons did not supply final plans or receive approval, All
Seasons presented evidence creating a genuine issue of material fact with regard to whether the
parties waived the requirement that All Seasons provide plans for the middle level of the
sunroom before beginning construction. Malloy testified during his deposition that Postill called
him sometime after the upper-level sunroom was complete. Malloy testified, “At that point he
called, left me a voice mail, looks fantastic, Mark, keep going, I want to go ahead and get the
middle unit done as well, which was the breezeway.” Malloy also testified that Postill sent him
e-mails indicating that Malloy could begin construction on the middle-level sunroom. This
testimony raises a genuine issue of material fact with regard to whether the parties engaged in
affirmative conduct establishing a mutual agreement to waive the requirement that All Seasons
provide final plans before beginning construction on the middle-level sunroom. See Bullard,
308 Mich. App. at 408; Kloian, 273 Mich. App. at 454. Accordingly, the trial court did not err
when it denied SPE’s motion for partial summary disposition. See Bullard, 308 Mich. App. at
408.
III. MOTION TO SET ASIDE THE DEFAULT
SPE next argues that the trial court abused its discretion when it granted All Seasons’s
motion to set aside entry of the default. We disagree.
We review a trial court’s decision on a motion to set aside a default for an abuse of
discretion. Huntington Nat’l Bank v Ristich, 292 Mich. App. 376, 383; 808 NW2d 511 (2011).
“A trial court abuses its discretion when it reaches a decision that falls outside the range of
principled outcomes.” Id. “Although the law favors a determination of a claim on the basis of
its merits, the policy of this state is generally against setting aside defaults and default judgments
that have been properly entered.” ISB Sales Co v Dave’s Cakes, 258 Mich. App. 520, 526; 672
NW2d 181 (2003).
MCR 2.603(D)(1) provides, “A motion to set aside a default or a default judgment,
except when grounded on lack of jurisdiction over the defendant, shall be granted only if good
cause is shown and an affidavit of facts showing a meritorious defense is filed.” Good cause is
shown if there was “a substantial irregularity or defect in the proceeding on which the default is
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based or a reasonable excuse for failure to comply with the requirements that created the
default.” ISB Sales Co, 258 Mich. App. at 531. The strength of the defense affects the showing of
good cause that is required under the court rule. Alken-Ziegler, Inc v Waterbury Headers Corp,
461 Mich. 219, 233; 600 NW2d 638 (1999). “[I]f a party states a meritorious defense that would
be absolute if proven, a lesser showing of ‘good cause’ will be required than if the defense were
weaker, in order to prevent a manifest injustice.” Id. at 233-234.
A. GOOD CAUSE
All Seasons established good cause to set aside the default since there was a substantial
irregularity in the proceeding on which the default was based and a reasonable excuse for failure
to comply with the requirements creating the default. See ISB Sales Co, 258 Mich. App. at 531.
The Michigan Court Rules do not address the proper manner for service of process on a limited
liability company (LLC). However, MCR 2.105(H)(1) provides, “Service of process on a
defendant may be made by serving a summons and a copy of the complaint on an agent
authorized by written appointment or by law to receive service of process.” MCL
450.4207(1)(b) requires an LLC to have a resident agent. MCL 450.4207(2) adds, “The resident
agent appointed by a limited liability company is an agent of the company upon whom any
process, notice, or demand required or permitted by law to be served upon the company may be
served.” Thus, the court rules indicate that the resident agent is the proper party to receive
service of the summons and complaint since the resident agent is authorized by law to receive
service of process. See MCL 450.4207(1)(b) and (2); MCR 2.105(H)(1).
All Seasons established a substantial irregularity in the proceeding on which default was
based. Malloy, the resident agent of All Seasons, was not served with the summons and
complaint. This constitutes a substantial irregularity in the proceeding since the proper party was
not served with a copy of the summons and complaint. See ISB Sales Co, 258 Mich. App. at 531.
Although the proof of service indicated that Rebecca was a co-owner of All Seasons, SPE failed
to present evidence showing that Rebecca was a co-owner of All Seasons. The parties also do
not dispute the fact that Rebecca was not the resident agent of All Seasons. Therefore, the
failure to serve the proper party with process constitutes a substantial irregularity in the
proceeding on which default was based. See id.
SPE argues that All Seasons had actual notice of the lawsuit, which cured the defect in
service of process. MCR 2.105(J)(3) provides, “An action shall not be dismissed for improper
service of process unless the service failed to inform the defendant of the action within the time
provided in these rules for service.” MCR 2.105(I)(1) adds, “On a showing that service of
process cannot reasonably be made as provided by this rule, the court may by order permit
service of process to be made in any other manner reasonably calculated to give the defendant
actual notice of the proceedings and an opportunity to be heard.”
On July 25, 2012, Rebecca sent a letter to SPE’s attorney, in which she stated that the
parties planned to negotiate the issues in lieu of going to court. Rebecca instructed SPE’s
attorney, “We are interested in resolving these issues in lieu of going to court. Please place the
file on hold until we meet.” However, Rebecca did not state that All Seasons received a copy of
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the summons and complaint. Instead, it is equally probable that Rebecca requested that SPE’s
attorney refrain from filing a lawsuit in the case until after the parties met. Furthermore, even
assuming that Rebecca’s letter constituted actual knowledge of the lawsuit, actual knowledge of
the lawsuit merely prevented the court from dismissing the lawsuit. It did not prevent All
Seasons from establishing good cause to set aside the default. See MCR 2.105(J)(3); ISB Sales
Co, 258 Mich. App. at 531. Therefore, even assuming that All Seasons had actual knowledge of
the lawsuit, All Seasons established a substantial irregularity in the proceeding that established
good cause to set aside the default. See ISB Sales Co, 258 Mich. App. at 531.
All Seasons also showed a reasonable excuse for failure to comply with the requirements
that created the default. On July 25, 2012, Rebecca sent SPE’s attorney the letter indicating that
she was going to meet with Postill to negotiate the issues with the sunroom in lieu of litigation.
On July 31, 2012, the attorney for SPE wrote a letter to Rebecca extending the time to file an
answer until Friday, August 10, 2012. However, All Seasons did not file an answer, and default
was entered for failure to plead or otherwise defend on Monday, August 13, 2012. Although All
Seasons did not file an answer within the extended time frame, it has a reasonable excuse for
failing to do so since there were ongoing negotiations to resolve the issues outside of court. As
the trial court noted, default was entered “rather quick” after All Seasons failed to file a response
since the default was filed the next business day. Thus, although All Seasons failed to file an
answer within the proper time frame, All Seasons had a reasonable excuse for doing so because
the parties were attempting to negotiate. See ISB Sales Co, 258 Mich. App. at 531. To the extent
that All Seasons’s showing of good cause is weakened by the fact that it failed to file an answer
before the extended deadline, a lesser showing of good cause is required since All Seasons
presented an absolute meritorious defense, as discussed in further detail below. See Alken-
Zeigler, Inc, 461 Mich. at 233-234. For the reasons discussed above, All Seasons established
good cause to set aside the default. See id.; ISB Sales Co, 258 Mich. App. at 531.
B. MERITORIOUS DEFENSE
In addition, All Seasons attached an affidavit to its motion to set aside the default that
established a meritorious defense. All Seasons attached an affidavit of Malloy to its motion to
set aside the default. In his affidavit, Malloy stated that All Seasons installed the sunroom that
the parties agreed to install. He added that Postill did not object to the materials used or the
workmanship involved in the installation of the sunroom until after All Seasons completed
installation. Malloy added that he noticed during his last visit to the construction site that the
work site was occupied and that it did to appear that any of the materials were replaced or
changed. Malloy stated that Postill refused to make the final payment that was due under the
contract and that All Seasons was in the process of initiating litigation to foreclose upon a
construction lien that All Seasons filed on the home. Finally, Malloy stated that All Seasons
complied with the terms of the contract. The affidavit established a meritorious defense to the
complaint since Malloy stated that All Seasons complied with the requirements of the contract
and that Postill refused to pay All Seasons for the work under the contract. See ISB Sales Co,
258 Mich. App. at 531. This defense would be absolute if proven since Malloy stated that All
Seasons fully complied with the contract, and SPE failed to comply with the contract. See
Alken-Ziegler, Inc, 461 Mich. at 233-234. Accordingly, the trial court properly granted the
motion to set aside the default since All Seasons established good cause and a meritorious
defense. See MCR 2.603(D)(1).
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Affirmed.
/s/ Stephen L. Borrello
/s/ Kathleen Jansen
/s/ Donald S. Owens
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