Kelly-Stehney & Associates, Inc. v. MacDONALD'S INDUS. PRODUCTS, INC.

• Decision Date: 26 March 2003
• Docket Number: Docket No. 238079.
• Citation: 658 N.W.2d 494,254 Mich. App. 608
• Parties: KELLY-STEHNEY & ASSOCIATES, INC., Plaintiff-Appellant, v. MacDONALD'S INDUSTRIAL PRODUCTS, INC., Defendant-Appellee.
• Court: Court of Appeal of Michigan — District of US

658 N.W.2d 494

254 Mich. App. 608

KELLY-STEHNEY & ASSOCIATES, INC., Plaintiff-Appellant, v. MacDONALD'S INDUSTRIAL PRODUCTS, INC., Defendant-Appellee.

Docket No. 238079.

Court of Appeals of Michigan.

Submitted December 3, 2002, at Detroit.

Decided January 3, 2003, at 9:00 a.m.

Released for Publication March 26, 2003.

Colombo and Colombo (by Michael J. O'Shaughnessy), Bloomfield Hills, for the plaintiff.

Miller, Johnson, Snell & Cummiskey, P.L.C. (by David J. Gass and S. Grace Davis), Grand Rapids, for the defendant.

Before: BANDSTRA, P.J., and ZAHRA and METER, JJ.

ZAHRA, J.

Plaintiff appeals as of right from the trial court's order granting defendant's motion for summary disposition. We affirm.

I. Factual and Procedural History

On February 23, 1994, the parties entered into a Manufacturer's Representative Agreement (MRA), which provided that plaintiff would work for defendant as an independent contractor selling products manufactured by defendant to other manufacturers in the automotive industry. The MRA provided that plaintiff would receive three percent commissions on new product sales of defendant's products unless otherwise agreed in writing. The MRA bound both parties for three years and automatically extended in one-year increments after the initial three years. The MRA further provided that all modifications had to be in writing.

After the parties entered into the MRA, defendant made an agreement with DaimlerChrysler Corporation in which defendant was scheduled, commencing in the summer of 1997, to produce a line of automobile window frames called the Daylight Opening (DLO). In early 1997, defendant's president, Robert MacDonald, orally proposed a three-year special arrangement regarding the DLO program to Edward Stehney, one of plaintiff's main shareholders (the oral DLO agreement). MacDonald proposed that defendant would extend the MRA, but would pay plaintiff DLO commissions on a reduced sliding scale as follows: three percent for model year (MY) 1998,¹ two percent for MY 1999, and 1.5 percent for MY 2000. Under this agreement, defendant would pay plaintiff commissions based on a fixed rate of $21.86 for each piece.² MacDonald testified that Stehney orally agreed to this arrangement. MacDonald attested that the only reason he agreed to extend the term of the MRA was because plaintiff agreed to continue working for reduced commissions under the oral DLO agreement.

In MYs 1998 through 2000, defendant paid plaintiff commissions based on $21.86 for each piece. Defendant paid plaintiff three percent commissions in MY 1998, two percent in MY 1999, and 1.5 percent in MY 2000. Defendant terminated the MRA on January 7, 2000. After this termination, plaintiff demanded that defendant pay plaintiff its commissions for MYs 1999 and 2000 at a rate of three percent. When defendant refused, plaintiff sued, requesting damages based on the commissions to which it was originally entitled under the MRA. The trial court granted defendant's motion for summary disposition, concluding that the oral DLO agreement was not barred by the statute of frauds and the parties were bound by this agreement. The trial court further concluded that plaintiff's claims were barred by equitable estoppel.

II. Analysis

A. Standard of Review

Defendant filed its motion for summary disposition pursuant to MCR 2.116(C)(10). A motion for summary disposition under MCR 2.116(C)(10) tests the factual sufficiency of the complaint. Veenstra v. Washtenaw Country Club, 466 Mich. 155, 163, 645 N.W.2d 643 (2002). A motion for summary disposition should be granted when, except in regard to the amount of damages, there is no genuine issue in regard to any material fact and the moving party is entitled to judgment or partial judgment as a matter of law. MCR 2.116(C)(10), (G)(4); Veenstra, supra at 164, 645 N.W.2d 643. In deciding a motion brought under this subsection, the trial court must consider affidavits, pleadings, depositions, admissions, and other evidence submitted by the parties, MCR 2.116(G)(5), in a light most favorable to the nonmoving party. Veenstra, supra at 164, 645 N.W.2d 643. The moving party has the initial burden of supporting its position with documentary evidence, but once the moving party meets its burden, the burden shifts to the nonmoving party to establish that a genuine issue of disputed fact exists. Quinto v. Cross & Peters Co., 451 Mich. 358, 362, 547 N.W.2d 314 (1996). "Where the burden of proof at trial on a dispositive issue rests on a nonmoving party, the nonmoving party may not rely on mere allegations or denials in pleadings, but must go beyond the pleadings to set forth specific facts showing that a genuine issue of material facts exists." Id. The moving party is entitled to a judgment as a matter of law when the proffered evidence fails to establish a genuine issue regarding any material fact. Veenstra, supra at 164, 645 N.W.2d 643. The decision whether to grant a motion for summary disposition is a question of law that is reviewed de novo. Id. at 159, 645 N.W.2d 643.

B. Judicially Created Exceptions to the Statute of Frauds

Plaintiff argues that the oral DLO agreement is barred by the statute of frauds. "It is well established that a written contract may be varied by a subsequent parol agreement unless forbidden by the statute of frauds; and that this rule obtains though the parties to the original contract stipulate therein that it is not to be changed except by agreement in writing." Reid v. Bradstreet Co., 256 Mich. 282, 286, 239 N.W. 509 (1931) (emphasis added). Generally, where an original contract was required to be made in writing under the statute of frauds, any modification of the agreement should also be in writing. Zurcher v. Herveat, 238 Mich. App. 267, 299-300, 605 N.W.2d 329 (1999). The statute of frauds provides, in pertinent part:

In the following cases an agreement, contract, or promise is void unless that agreement, contract, or promise, or a note or memorandum of the agreement, contract, or promise is in writing and signed with an authorized signature by the party to be charged with the agreement, contract, or promise:

(a) An agreement that, by its terms, is not to be performed within 1 year from the making of the agreement. [M.C.L. § 566.132(1)(a).]

Defendant does not dispute that the oral DLO agreement could not be fully performed within one year of making the agreement. However, defendant argues that the statute of frauds does not apply to the oral DLO agreement because: (1) the oral DLO agreement satisfied the writing requirement of the statute of frauds;³ (2) plaintiff is equitably estopped from asserting the statute of frauds; (3) the parties fully performed the agreement; and (4) plaintiff ratified the agreement.

We reluctantly agree with defendant that the statute of frauds does not apply because plaintiff was equitably estopped from denying the validity of the agreement. We apply the equitable estoppel doctrine only because our Supreme Court has recognized that estoppel was "developed to avoid the arbitrary and unjust results required by an overly mechanistic application of the [statute of frauds]." Opdyke Investment Co. v. Norris Grain Co., 413 Mich. 354, 365, 320 N.W.2d 836 (1982).⁴ We nonetheless question the wisdom of such judicially created exceptions to the statute of frauds as equitable estoppel, ratification, and part performance.⁵ Rather than deferring to the Legislature to address through the legislative amendment process any perceived inequity in the statute of frauds, Michigan courts have by judicial fiat created gaping holes in the statute of frauds that are inconsistent with the express language of the statute and the policy supporting it:

Unlike a traditional common-law contract claim or defense, the statute of frauds is legislatively mandated. The Michigan Legislature has determined that, for those contracts specifically identified in the statute of frauds, it is important to provide certainty and to avoid controversy over the terms of alleged contracts. Thus, such contracts must be reduced to writing. As noted by Judge Peterson in his dissenting opinion, in Lovely v. Dierkes, 132 Mich. App. 485, 493, 347 N.W.2d 752 (1984)], "[w]e start any discussion of the statute of frauds with the posit that its application may result in substantial injustice. Real and honest contracts will not be enforced because of the statute of frauds; honest [people] will lose the benefits of their bargains because they neglected to reduce them to writing." Given this premise, the role of the judiciary is to apply the statute of frauds as written, without second-guessing the wisdom of the Legislature. [Crown Technology Park v. D & N Bank, FSB, 242 Mich.App. 538, 548, n. 4, 619 N.W.2d 66 (2000).]

Allowing judge-made doctrines such as estoppel to override and preclude the application of legislatively created laws such as the statute of frauds "is contrary to well-founded principles of statutory construction and is inconsistent with traditional notions of the separation of powers between the judicial and legislative branches of government." Id. at 548, n. 4, 619 N.W.2d 66, citing Scalia, A Matter of Interpretation: Federal Courts and the Law (New Jersey: Princeton University Press, 1997), pp. 14-29. Although we question the propriety of applying the equitable estoppel doctrine and other common-law exceptions to the statute of frauds, we will continue to do so until our Supreme Court states otherwise.

C. Plaintiff is Equitably Estopped from Denying the Oral DLO Agreement

The general principles regarding the doctrine of equitable estoppel are as follows:

"Equitable estoppel is not an independent cause of action, but instead a doctrine that may assist a party by precluding the opposing party from asserting or denying the existence of a particular fact. Equitable estoppel may arise where (1) a party, by representations, admissions, or silence intentionally or negligently

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