Blazer Foods, Inc. v. RESTAURANT PROP., INC.

• Decision Date: 08 January 2004
• Docket Number: Docket No. 232489.
• Citation: 673 N.W.2d 805,259 Mich. App. 241
• Court: Court of Appeal of Michigan — District of US
• Parties: BLAZER FOODS, INC., North Bay Foods, Inc., H & N Corp., L & P Food, Inc., R-Own Corporation, GGM, Inc., MMV, Inc., DNB Corporation, P & B Corporation, J-Max, Inc., and Will-Ame High, Inc., Plaintiffs-Appellants, v. RESTAURANT PROPERTIES, INC., f/k/a Hot `n Now, Inc., Taco Bell Corporation, and PepsiCo, Inc., Defendants-Appellees.

673 N.W.2d 805

259 Mich. App. 241

BLAZER FOODS, INC., North Bay Foods, Inc., H & N Corp., L & P Food, Inc., R-Own Corporation, GGM, Inc., MMV, Inc., DNB Corporation, P & B Corporation, J-Max, Inc., and Will-Ame High, Inc., Plaintiffs-Appellants, v. RESTAURANT PROPERTIES, INC., f/k/a Hot `n Now, Inc., Taco Bell Corporation, and PepsiCo, Inc., Defendants-Appellees.

Docket No. 232489.

Court of Appeals of Michigan.

Submitted May 7, 2003, at Grand Rapids.

Decided October 30, 2003, at 9:00 a.m.

Released for Publication January 8, 2004.

Silverman, Smith, Bingen & Rice, P.C. (by Robert W. Smith and Stephen M. Rice), Kalamazoo, for the plaintiffs.

Varnum, Riddering, Schmidt & Howlett, LLP (by John W. Allen and Eric J. Guerin), Kalamazoo, for the defendants.

Before: SAAD, P.J., and METER and OWENS, JJ.

METER, J.

Plaintiffs appeal as of right from an order granting summary disposition in favor of defendants in this mixed contract and tort action involving a suit by plaintiff franchisees to recover damages allegedly arising from defendants' contractual breaches and corporate mismanagement. We conclude that neither the "continuing wrong" nor the "continuing services" theory of recovery applies to the instant case, and we therefore affirm the trial court's conclusion that plaintiffs' lawsuit is barred by the applicable statutes of limitations.

Plaintiffs are franchise owners of Hot `n Now restaurants. Their claims against defendant Restaurant Properties, Inc. (RP), arose out of numerous separate agreements between the respective plaintiffs and RP for the establishment and management of Hot `n Now restaurants located throughout Michigan and Indiana. Plaintiffs alleged in their complaint that RP committed various misdeeds, such as failing to provide adequate training, delaying site approval for new restaurants, and changing menu items in violation of the franchise agreements. Plaintiffs alleged breach of contract and other legal theories against RP. Plaintiffs also sued defendants Taco Bell Corporation and PepsiCo, Inc., corporate parents of RP,¹ alleging that both companies caused RP to change the original Hot `n Now concept to the detriment of plaintiffs and other franchisees. Plaintiffs argued that Taco Bell and PepsiCo essentially turned the Hot `n Now restaurants into a "laboratory experiment." Plaintiffs raised theories of tortious interference and "corporate usurpation" against Taco Bell and PepsiCo.

RP filed a motion for summary disposition under MCR 2.116(C)(7) (claim barred by statute of limitations), alleging, in part, that plaintiffs' claims were barred by the applicable statutes of limitations because, according to plaintiffs' admissions, they were aware of alleged contractual breaches in 1990 but did not file their lawsuit until March 2, 2000. RP argued that no continuing wrong or continuing services theory of recovery served to extend the periods of limitations. RP also moved for summary disposition under MCR 2.116(C)(8) (failure to state a claim on which relief can be granted), arguing that various legal theories raised by plaintiffs were untenable. Taco Bell and PepsiCo also filed a motion for summary disposition under MCR 2.116(C)(8), arguing, among other things, that a parent corporation or an affiliate corporation cannot tortiously interfere with the contract of a subsidiary or affiliate corporation and that the legal theory of corporate usurpation is not recognized under Michigan law.

The trial court dismissed all plaintiffs' claims. It noted that an action for breach of contract must be brought within six years from the time the claim accrues and that a tort action must be brought within three years of accrual of the claim. The court found that, on the basis of plaintiffs' admissions, plaintiffs' claims accrued shortly after PepsiCo or Taco Bell acquired RP in 1990—more than six years before plaintiffs filed their complaint. The court also found that each plaintiff signed a release as part of its franchise agreement that, if valid, would preclude future litigation against PepsiCo or Taco Bell. The court held that the releases were valid under MCL 566.1, even in the absence of consideration, and found that the releases barred all plaintiffs' claims.

Additionally, the trial court disagreed with plaintiffs' argument that the statutory periods of limitations were extended because the franchise agreements required the performance of continuous services. The court found that the continuing wrong or continuing services doctrines had not been extended to cover the applicable causes of action and that extending the doctrines in such a fashion would "[thwart] the intention of the Michigan Legislature as well as [subject] franchisors to similar suits after many years of continuous business dealings with a franchisee." The court found that, while the alleged breaches of contract and tortious conduct may have been continuous, plaintiffs' causes of action began accruing in 1990 and, because they did not bring their claims until well after the periods of limitations had expired, the claims were barred by law. Plaintiffs argue that, because they were subject to a continuing wrong, the trial court erred in dismissing plaintiffs' claims against RP as untimely.

"We review a trial court's grant or denial of a motion for summary disposition pursuant to MCR 2.116(C)(7) de novo to determine whether the moving party was entitled to judgment as a matter of law." DeCaminada v. Coopers & Lybrand, LLP, 232 Mich.App. 492, 496, 591 N.W.2d 364 (1998).² In reviewing a motion under MCR 2.116(C)(7), this Court accepts as true the plaintiffs' well-pleaded allegations and construes them in the plaintiffs' favor. Abbott v. John E. Green Co., 233 Mich. App. 194, 198, 592 N.W.2d 96 (1998). This Court considers the pleadings, affidavits, depositions, admissions, and documentary evidence filed or submitted by the parties to determine whether the claim is barred by law. See MCR 2.116(G)(5) and Employers Mut. Cas. Co. v. Petroleum Equip., Inc., 190 Mich.App. 57, 62, 475 N.W.2d 418 (1991).

Under MCL 600.5807(8), an action to recover damages for breach of contract must be brought within six years of the time the claim first accrues.³ Under MCL 600.5827,

[e]xcept as otherwise expressly provided, the period of limitations runs from the time the claim accrues. The claim accrues at the time provided in [MCL 600.5829 to MCL 600.5838[⁴], and in cases not covered by these sections the claim accrues at the time the wrong upon which the claim is based was done regardless of the time when damage results.

Thus, this Court has generally held that a cause of action for breach of contract accrues when the breach occurs, i.e., when the promisor fails to perform under the contract. See H J Tucker & Assoc., Inc. v. Allied Chucker & Engineering Co., 234 Mich.App. 550, 562, 595 N.W.2d 176 (1999), Cordova Chem. Co. v. Dep't. of Natural Resources, 212 Mich.App. 144, 153, 536 N.W.2d 860 (1995), and Vandendries v. Gen. Motors Corp., 130 Mich.App. 195, 201, 343 N.W.2d 4 (1983). Here, plaintiffs admit that RP failed to perform properly under the contract beginning in 1990, more than six years before plaintiffs filed their complaint. They contend, however, that the limitations period was extended by virtue of a continuing wrong.

Under the continuing wrong doctrine, "an alleged timely actionable event will allow consideration of and damages for connected conduct that would be otherwise barred." Sumner v. Goodyear Tire & Rubber Co., 427 Mich. 505, 510, 398 N.W.2d 368 (1986). Thus, in certain cases, the doctrine recognizes that "`[w]here a defendant's wrongful acts are of a continuing nature, the period of limitation will not run until the wrong is abated; therefore, a separate cause of action can accrue each day that defendant's tortious conduct continues.'" Jackson Co. Hog Producers v. Consumers Power Co., 234 Mich.App. 72, 81, 592 N.W.2d 112 (1999), quoting Horvath v. Delida, 213 Mich.App. 620, 626, 540 N.W.2d 760 (1995). In order to recover under this doctrine, the plaintiff must establish a "continuing wrong" by showing "continual tortious acts, not by continual harmful effects from an original completed act." Id. at 627, 540 N.W.2d 760 (emphasis in original).

Plaintiffs contend that the continuing wrong theory applies to the instant case because breaches occurred continually during the period that PepsiCo or Taco Bell had control of the Hot `n Now concept. However, as noted by the trial court, this doctrine has thus far been given only limited application. Id. The doctrine has historically been applied to cases of trespass. See Defnet v. Detroit, 327 Mich. 254, 258, 41 N.W.2d 539 (1950). In Sumner, supra at 510, 398 N.W.2d 368, the Supreme Court extended the doctrine to cases involving civil rights claims, and this Court extended the doctrine to claims of nuisance in Moore v. City of Pontiac, 143 Mich.App. 610, 614, 372 N.W.2d 627 (1985). Subsequently, this Court refused to extend the doctrine to cases involving products liability actions seeking damages for personal injury, see Asher v. Exxon Co., USA, 200 Mich.App. 635, 639-641, 504 N.W.2d 728 (1993), and in Traver Lakes Community Maintenance Ass'n. v. Douglas Co., 224 Mich.App. 335, 341, 568 N.W.2d 847 (1997), the Court declined to extend the doctrine to negligence claims.

Plaintiffs contend that the continuing wrong theory has been extended to claims of breach of contract by virtue of H J Tucker, supra at 562-563, 595 N.W.2d 176. We disagree that H J Tucker involved the continuing wrong doctrine. In H J Tucker, the defendant argued that the trial court erred in failing to find that the plaintiff's entire claim of breach of contract (for nonpayment of commissions) was barred by the statute of limitations. Id. at 562, 595 N.W.2d 176. The Court deemed the damages sought in H J Tucker as analogous to claims for payments under an installment contract. Id. The Court noted that "the commissions...