Haliw v. City of Sterling Heights

Decision Date25 January 2005
Docket NumberDocket No. 125022. Calendar No. 5.
Citation471 Mich. 700,691 N.W.2d 753
PartiesValeria HALIW and Ilko Haliw, Plaintiffs-Appellants, v. CITY OF STERLING HEIGHTS, Defendant-Appellee.
CourtMichigan Supreme Court

Haliw, Siciliano, Mychalowych, Van Dusen and Feul, P.L.C. (by Raymond L. Feul, Elaine Stypula, and Lindsay James), Farmington Hills, MI, for the plaintiffs.

O'Reilly Rancilio P.C. (by Robert Charles Davis and William N. Listman), Sterling Hts., MI, for the defendant.

John P. Jacobs, P.C. (by John P. Jacobs), Detroit, MI, for amicus curiae, Michigan Defense Trial Counsel, Inc.

OPINION

MICHAEL F. CAVANAGH, J.

At issue in this case is whether appellate attorney fees and costs are recoverable as case evaluation sanctions under MCR 2.403(O). We hold that "actual costs" pursuant to MCR 2.403(O) do not include appellate attorney fees and costs. Because the Court of Appeals held to the contrary, we reverse its decision, reinstate the trial court's award, and remand the case to the Court of Appeals for consideration of plaintiffs' cross-appeal.

I. FACTS AND PROCEEDINGS

Plaintiff Valeria Haliw was walking on a snow-covered sidewalk when she slipped and fell on a patch of ice that formed in a depressed area where two sections of the sidewalk met. Mrs. Haliw and her husband, plaintiff Ilko Haliw, brought suit under M.C.L. § 691.1402, alleging that defendant city of Sterling Heights breached its duty to maintain the sidewalk so that it was reasonably safe and convenient for public travel. Defendant moved for summary disposition under MCR 2.116(C)(7) and (10), asserting that plaintiffs' claim was barred by the natural accumulation doctrine. Before the trial court ruled on the motion, however, the matter was submitted to case evaluation pursuant to MCR 2.403.1

On September 8, 1997, the trial court denied defendant's motion for summary disposition. On October 13, 1997, both parties rejected the unanimous case evaluation award of $55,000 in plaintiffs' favor. Defendant then appealed by leave granted the trial court's denial of its motion for summary disposition, and the Court of Appeals affirmed.2 This Court granted defendant's application for leave to appeal and reversed, determining that the natural accumulation doctrine precluded plaintiffs' claim.3 Consequently, this Court remanded the case to the trial court for entry of summary disposition in favor of defendant. In addition to moving on remand for entry of an order granting it summary disposition, defendant also requested case evaluation sanctions under MCR 2.403(O). Defendant sought $31,618 in sanctions; included in this amount were defendant's appellate costs and attorney fees. Consistent with this Court's decision, the trial court entered summary disposition in defendant's favor. The trial court, however, rejected defendant's request for appellate attorney fees and costs. Defendant subsequently moved to recover $5,335 in case evaluation sanctions for its trial court fees and costs. After considering defendant's supplemental motion, the trial court awarded defendant $1,500 in case evaluation sanctions.

Defendant appealed, asserting that the trial court impermissibly excluded its appellate attorney fees and costs. Plaintiffs cross-appealed the trial court's award, arguing that the trial court abused its discretion by failing to apply the "interest of justice" exception, MCR 2.403(O)(11), to deny defendant any of its attorney fees and costs.

In a published two-to-one decision, the Court of Appeals reversed, holding that appellate attorney fees may be awarded under MCR 2.403(O) because (1) such fees are not expressly excluded, (2) a trial is not necessary to trigger sanctions, and (3) the applicable verdict for assessing sanctions is the verdict rendered after appellate review.4 Because the Court of Appeals majority held that the trial court erred by refusing to consider defendant's appellate attorney fees and costs, the panel did not determine whether the trial court abused its discretion in failing to invoke the "interest of justice" exception under MCR 2.403(O)(11). We granted plaintiffs' application for leave to appeal, limited to the issue whether appellate attorney fees and costs are recoverable as case evaluation sanctions under MCR 2.403(O).5

II. STANDARD OF REVIEW

The proper interpretation and application of a court rule is a question of law, which this Court reviews de novo. Bauroth v. Hammoud, 465 Mich. 375, 378, 632 N.W.2d 496 (2001); CAM Constr. v. Lake Edgewood Condo. Ass'n, 465 Mich. 549, 553, 640 N.W.2d 256 (2002).

III. ANALYSIS

When called upon to interpret and apply a court rule, this Court applies the principles that govern statutory interpretation. Grievance Administrator v. Underwood, 462 Mich. 188, 193, 612 N.W.2d 116 (2000). Accordingly, this Court begins with the language of the court rule. Id. at 194, 612 N.W.2d 116. At the time both parties rejected the case evaluation award, MCR 2.403(O) provided in pertinent part:

(1) If a party has rejected an evaluation and the action proceeds to verdict, that party must pay the opposing party's actual costs unless the verdict is more favorable to the rejecting party than the mediation evaluation. However, if the opposing party has also rejected the evaluation, a party is entitled to costs only if the verdict is more favorable to that party than the mediation evaluation.
(2) For the purpose of this rule "verdict" includes,
(a) a jury verdict,
(b) a judgment by the court after a nonjury trial (c) a judgment entered as a result of a ruling on a motion after rejection of the mediation evaluation.
* * *
(6) For the purpose of this rule, actual costs are
(a) those costs taxable in any civil action, and
(b) a reasonable attorney fee based on a reasonable hourly or daily rate as determined by the trial judge for services necessitated by the rejection of the mediation evaluation.
For the purpose of determining taxable costs under this subrule and under MCR 2.625, the party entitled to recover actual costs under this rule shall be considered the prevailing party.
* * *
(8) A request for costs under this subrule must be filed and served within 28 days after the entry of the judgment or entry of an order denying a timely motion for a new trial or to set aside the judgment.
* * *
(11) If the "verdict" is the result of a motion as provided by subrule (O)(2)(c), the court may, in the interest of justice, refuse to award actual costs.

The intent of the rule must be determined from an examination of the court rule itself and its place within the structure of the Michigan Court Rules as a whole. When interpreting a court rule or statute, we must be mindful of "the surrounding body of law into which the provision must be integrated...." Green v. Bock Laundry Machine Co., 490 U.S. 504, 528, 109 S.Ct. 1981, 104 L.Ed.2d 557 (1989) (Scalia, J., concurring). Here, neither the language of MCR 2.403(O) nor the entire structure of our court rules supports the Court of Appeals construction. Accordingly, we conclude that appellate attorney fees and costs are not recoverable as case evaluation sanctions.

MCR 1.103 provides that specific court rules control over general court rules. The court rule governing case evaluation sanctions appears in chapter two, which addresses civil procedure. Appellate fees and costs are addressed under chapter seven, the chapter specifically controlling appellate procedure. Thus, the lack of any reference to appellate attorney fees and costs in MCR 2.403(O) is understandable because they are covered under an entirely separate section of the court rules.6 The Court of Appeals failure to appreciate this organization of the court rules led it to incorrectly conclude that because MCR 2.403(O) did not specifically exclude appellate attorney fees and costs, the court rule necessarily included them as a case evaluation sanction.

We note that Michigan follows the "American rule" with respect to the payment of attorney fees and costs. Dessart v. Burak, 470 Mich. 37, 42, 678 N.W.2d 615 (2004). Under the American rule, attorney fees generally are not recoverable from the losing party as costs in the absence of an exception set forth in a statute or court rule expressly authorizing such an award. Id. The American rule is codified at M.C.L. § 600.2405(6), which provides that among the items that may be taxed and awarded as costs are "[a]ny attorney fees authorized by statute or by court rule." The American rule stands in stark contrast to what is commonly referred to as the "English rule," whereby the losing party pays the prevailing party's costs absent an express exception. MCR 2.403(O)(6) exemplifies the American rule by expressly authorizing the recovery of attorney fees and costs as case evaluation sanctions.

While MCR 2.403(O)(6) expressly authorizes recovery of "a reasonable attorney fee" and "costs," and the court rule does not distinguish between trial and appellate attorney fees and costs, the Court of Appeals erred in concluding that because MCR 2.403(O) does not expressly exclude appellate attorney fees and costs, such expenses are recoverable. That conclusion runs contrary to the American rule governing the payment of attorney fees. As noted, the American rule permits recovery of fees and costs where expressly authorized. As such, the fact that MCR 2.403(O) does not expressly exclude appellate fees and costs is not determinative. Therefore, we do not believe that the failure of MCR 2.403(O) to expressly exclude appellate attorney fees and costs is necessarily dispositive under these limited circumstances.

Our conclusion is supported by the fact that MCR 2.403(O) is trial-oriented. For example, at the time of this action, MCR 2.403(O)(1) provided, "If a party has rejected an evaluation and the action proceeds to verdict, that party must pay the opposing party's actual costs unless the verdict is more favorable to the rejecting party than...

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