Estate of Prichard, Matter of

• Citation: 169 Mich.App. 140,425 N.W.2d 744
• Decision Date: 18 July 1988
• Docket Number: E,BANK-DETROI,82087,Docket Nos. 82086
• Parties: In the Matter of the ESTATE OF C. Carlton PRICHARD, Deceased. PARAGON TRANSPORT, INC., Plaintiff-Appellant, v. Ronald C. MURRELL and Murrell Enterprises, Inc., a Michigan corporation, Defendants-Appellees. COMERICAxecutor of the Estate of C. Carlton Prichard, Deceased, Appellant, v. PARAGON TRANSPORT, INC., Appellee. 169 Mich.App. 140, 425 N.W.2d 744
• Court: Court of Appeal of Michigan (US)

Page 744

425 N.W.2d 744

In the Matter of the ESTATE OF C. Carlton PRICHARD,

Deceased.

PARAGON TRANSPORT, INC., Plaintiff-Appellant, v. Ronald C. MURRELL and Murrell Enterprises, Inc., a Michigan

corporation, Defendants-Appellees.

COMERICA BANK-DETROIT, Executor of the Estate of C. Carlton

Prichard, Deceased, Appellant, v. PARAGON TRANSPORT, INC., Appellee.

Docket Nos. 82086, 82087.

169 Mich.App. 140, 425 N.W.2d 744

Court of Appeals of Michigan.

Submitted March 10, 1987.

Decided June 7, 1988.

Released for Publication July 18, 1988.

[169 MICHAPP 142] Simpson & Moran by Patrick A. Moran and David M. Black, Birmingham, for Paragon Transport, Inc.

Smith & Brooker, P.C. by Albert C. Hicks, Bay City, for Comerica Bank-Detroit, Executor of the Estate of C. Carlton Prichard, deceased.

Matheson, Parr, Schuler, Ewald, Ester & Cooke by James D. Osmer, Bloomfield Hills, for Ronald C. Murrell and Murrell Enterprises, Inc.

Before CYNAR, P.J., and WEAVER and CHERRY, ^* JJ.

CHERRY, Judge.

I

These consolidated appeals involve actions by Ronald C. Murrell and Murrell Enterprises, Inc. (Murrell), and Comerica Bank-Detroit, formerly known as [169 MICHAPP 143] Detroit Bank & Trust Company (Comerica), to recover damages on letters of credit given as security obtained by Paragon Transport, Inc. (Paragon) pursuant to a 1977 preliminary injunction order. The letters of credit were in the amounts of $500,000 and $200,000 payable to the account of Murrell and Comerica, respectively. In December, 1983, a judgment of $609,606.53 was entered for Murrell and a judgment denying any relief to Comerica on equitable estoppel grounds was entered. Paragon and Comerica, respectively, appeal as of right from the December, 1983, judgments.

The facts are not in substantial dispute. C. Carlton Prichard (Prichard) died testate on May 6, 1976. Comerica was appointed executor of his estate. Prichard's will granted to Murrell, an employee of Earl C. Smith, Inc. (Smith), one of two corporations owned by Prichard, the right of first refusal to purchase all the capital stock owned by Prichard at its fair market price. The other corporation owned by Prichard was known as Magra, Inc. (Magra). Comerica solicited bids on the stock, subject to Murrell's right of first refusal. Paragon was the successful bidder. Murrell chose to exercise his right to purchase the stock, but ran into difficulty obtaining financing. One potential financing source, Manufacturer's National Bank, rejected his loan application. On January 24, 1977, Comerica notified Murrell that his right to consummate the stock purchase was being terminated; Paragon's latest offer was accepted. Murrell responded by filing a petition in the St. Clair County Probate Court for construction of Prichard's will and for an injunction to prevent Comerica from selling Prichard's stock to Paragon. In February, 1977, Murrell obtained a loan commitment from Michigan National Bank of Port Huron. On February 28, 1977, an order was entered construing Prichard's will favorably to [169 MICHAPP 144] Murrell and recognizing that his right of first refusal existed. An order granting a preliminary injunction enjoining Comerica from selling the stock of Smith and Magra to any party other than Murrell was entered by the probate court.

Paragon appealed the two probate court orders to the St. Clair Circuit Court and also requested an injunction preventing Comerica from selling the stock to Murrell. On August 23, 1977, the preliminary injunction order was entered, with the condition that Paragon file the two letters of credit which are the subject matter of this appeal.

On December 30, 1977, the circuit court entered an order affirming the two probate court orders and remanding the matter to the probate court for further proceedings. Paragon appealed that determination to this Court, which reversed the circuit court order in three separate opinions. In re Prichard Estate, 94 Mich.App. 116, 288 N.W.2d 598 (1979). On March 10, 1981, our Supreme Court reversed the determination of this Court and reinstated the judgments of the circuit and probate courts. In re Prichard Estate, 410 Mich. 587, 302 N.W.2d 554 (1981), reh. den. 411 Mich. 1120 (1981).

Comerica filed a petition in the probate court for instructions on how to proceed to finalize the sale of Prichard's capital stock to Murrell. The probate court entered an order instructing Comerica to proceed to negotiate with Murrell, to present areas of disagreement to the probate court, and to present the final sales agreement to the probate court for approval. On December 21, 1981, the sales agreement was approved. In January, 1982, the preliminary injunction issued by the circuit court was dissolved and the capital stock sale between Comerica and Murrell closed.

Comerica and Murrell filed separate motions to recover damages from Paragon under the letters of [169 MICHAPP 145] credit. Murrell's motion, filed June 30, 1981, under GCR 1963, 525 and 763, now MCR 3.604, preceded the close of the stock sales transaction. Comerica's motion, filed May 10, 1982, or subsequent to the closing, was made under GCR 1963, 525 and 763 and 718.3, now MCR 3.604 and 3.310(D). Damages caused by Paragon's "wrongful enjoinment" were sought. On July 19, 1982, the motions were ordered consolidated for purposes of a hearing on whether Paragon was liable under the two letters of credit for wrongful enjoinment, with separate hearings on damages to follow in the event that Paragon was found liable.

The hearing focused on three primary factual matters. First, many of the facts pertaining to the 1977 events at issue in the prior appeal decided by our Supreme Court were introduced. Second, evidence was introduced pertaining to the relationship of the various business entities involved in the litigation.

The third factual matter addressed at the hearing pertained to damages. Testimony disclosed that subsequent to our Supreme Court's 1981 decision, upholding Murrell's right to acquire the Smith and Magra capital stock, Murrell was unable to obtain a financing commitment from Michigan National Bank of Port Huron under the same loan terms as the 1977 commitment made by that bank. The 1977 loan commitment was for $2,445,000, consisting of two five-year term loans at ten percent per annum, totaling $1,385,000, and two revolving loans totaling $1,060,000, renewable annually at the bank's discretion with interest at the prime rate plus two percent. The original sales agreement negotiated between Murrell and Comerica for the sale of Smith and Magra capital stock was dated March 10, 1977, and approved by the probate court. The purchase was to be made on a [169 MICHAPP 146] cash basis. In 1981, Murrell, in view of his inability to obtain the 1977 loan terms from Michigan National Bank of Port Huron, negotiated with Comercia to pay for Smith and Magra stock partially in cash and partially by executing secured notes. On December 21, 1981, Murrell and Comerica entered into a "first amendment to agreement of sale." The selling price of $2,649,728.25 was the same as that originally agreed to by Comerica and Murrell in the original agreement. The amended agreement required that Murrell execute a secured five-term note with interest of thirteen percent per annum in the principal amount of $1,961,728.25. Other payment terms included cash and noninterest-bearing notes. Other negotiated terms included an indemnity clause, profit-sharing clause, a personal guarantee on the part of Murrell, and a release clause. The sale closed on January 19, 1982.

Murrell's damage claim was based on the expectation that the sale should have closed by June 30, 1977. By comparison, Comerica's damage claim was based on the theory that, but for the preliminary injunction being obtained by Paragon, the sale would have closed during the week of November 7, 1977. Damages in excess of $1,000,000 were claimed by Comerica, based on a theory that, had the sale closed, the Prichard estate would have had cash to invest and could have avoided certain expenses. The most significant claim was for $966,065 which represented alleged investment income which would have been earned between November 9, 1977, and January 31, 1982. Other claims included $167,000 for accrued interest on the estate's tax liability, a claim exceeding $30,000 for services provided by Comerica concerning Smith and Magra affairs, and interest exceeding $30,000 paid on funds borrowed to pay a widow's allowance.

[169 MICHAPP 147] On April 15, 1983, the circuit court held that Murrell was wrongfully enjoined by Paragon from consummating the purchase of the Smith and Magra stock and could recover damages. Comerica, as executor of Prichard's estate, however, was estopped from recovering damages, because it induced Paragon to enter into the stock purchase agreement and thereby put Paragon into a position on which it relied to its detriment. On December 12, 1983, judgment was entered awarding $609,606.53 in damages to Murrell. A judgment denying relief to Comerica was entered the same day.

On December 19, 1983, Paragon filed an appeal with this Court. On December 22, 1983, the circuit court entered an order requiring the proceeds of the letters of credit in favor of Murrell to be deposited with an escrow agent during the pendency of this appeal or until further order of the circuit court.

On December 29, 1983, Comerica filed a claim of appeal with this Court. Both appeals were dismissed in April, 1984, for lack of jurisdiction. Comerica and Paragon's delayed applications for leave to appeal were also denied. On November 30, 1984, our Supreme Court vacated this Court's orders and remanded the Paragon and Comerica appeals to this Court for consideration as on leave granted. 419 Mich. 964, 357 N.W.2d 663 (1984).

II

The first issue we address is whether the circuit court erred as a matter of law in finding that Murrell was entitled to recover damages from Paragon for "wrongful...