Jim-Bob, Inc. v. Mehling

• Decision Date: 16 August 1989
• Docket Number: JIM-BO,105143,Docket Nos. 105142,INC
• Citation: 178 Mich.App. 71,443 N.W.2d 451
• Parties: , Plaintiff-Appellee, v. Charles W. MEHLING and Diane L. Dawson, Defendants-Appellants, and The Automobile Club of Michigan, Defendant., Plaintiff-Appellee, v. Charles W. MEHLING and Diane L. Dawson, Defendants, and The Automobile Club of Michigan, Defendant-Appellant. 178 Mich.App. 71, 443 N.W.2d 451
• Court: Court of Appeal of Michigan — District of US

Page 451

443 N.W.2d 451

JIM-BOB, INC., Plaintiff-Appellee, v. Charles W. MEHLING and Diane L. Dawson,

Defendants-Appellants,

and

The Automobile Club of Michigan, Defendant.

JIM-BOB, INC., Plaintiff-Appellee, v. Charles W. MEHLING and Diane L. Dawson, Defendants, and The Automobile Club of Michigan, Defendant-Appellant.

Docket Nos. 105142, 105143.

178 Mich.App. 71, 443 N.W.2d 451

Court of Appeals of Michigan.

Submitted March 23, 1989.

Decided July 5, 1989.

Released for Publication Aug. 16, 1989.

[178 MICHAPP 74] Thorpe, Patrick, Johnson & King, P.C. by Paul H. Johnson, Jr., Southfield, for plaintiff-appellee.

Dickinson, Wright, Moon, Van Dusen & Freeman by George R. Ashford, Robert Powell and Linda S. McAlpine, Detroit, for defendants-appellants Mehling and Dawson.

Donald K. Converse, Dearborn, for defendant-appellant The Auto. Club of Michigan.

Before BEASLEY, P.J., and J.H. GILLIS and BRENNAN, JJ.

BEASLEY, Presiding Judge.

Defendants, Charles W. Mehling, Diane L. Dawson and The Automobile Club of Michigan, appeal from a judgment in the sum of $150,000 in favor of plaintiff, Jim-Bob, Inc. The judgment was entered on a jury verdict rendered [178 MICHAPP 75] after a lengthy, five-day, trial. The jury also found for plaintiff on the counterclaim of defendant Auto Club, denying any recovery thereon.

The general facts from which the litigation arose are as follows. On August 25, 1978, defendants Mehling and Dawson leased a commercial building located at 404 Clifford in downtown Detroit to Luigi's Pizzeria and Cocktail Lounge for a five-year term, commencing on July 1, 1978, at a rental of $750 per month and with an option to renew for an additional five years. Luigi's then sold the business and, with defendants Mehling's and Dawson's consent, assigned the lease to plaintiff, Jim-Bob, Inc.

While the renewal option was not exercised, during 1983, defendant Mehling and James P. Howell, president of Jim-Bob and manager of the business, did discuss and negotiate regarding a new five-year lease at a higher rent. In fact, plaintiff began paying the higher rent in August, 1983. In December, 1983, defendant Mehling agreed to, and in the spring of 1984 did, put a new roof on the building, and plaintiff undertook major repairs and renovations of the building's interior.

In May, 1984, John Lambrecht, a real estate broker and investor, approached defendant Dawson and inquired concerning the availability of the 404 Clifford premises for purchase by his undisclosed principal. On May 18, 1984, he submitted a written offer to purchase the property on his principal's behalf for $60,000. This offer was rejected by Dawson and Mehling on June 18, 1984. In September or October of 1984, Mehling told Howell that Dawson had been approached by a prospective buyer for the building, but reassured Howell that the buyer was "just looking" and that he (Mehling) would sign a new lease.

On either October 26 or November 3, 1984 (the [178 MICHAPP 76] testimony is in dispute), Howell met with Mehling to discuss the lease. Mehling had a copy of the original lease with him. At that time, they agreed that plaintiff would lease the 404 Clifford premises for another five-year term, with a five-year renewal option, at a rent of $850 per month. Howell gave Mehling a $1,700 check for the October and November rent. Two days later, Howell received in the mail from Mehling a copy of the old lease, with lines drawn through certain provisions.

Around the same time, Lambrecht disclosed to Dawson and Mehling that he was representing defendant Auto Club in his attempts to purchase their property. Sometime during the first week of November, Lambrecht prepared and submitted a second purchase offer to Dawson and Mehling, this time for $80,000, which was accepted by defendants Dawson and Mehling on November 8, 1984. Mehling then called Howell and told him not to spend any more money on renovations because they had sold the building. Shortly thereafter, Lambrecht contacted Howell and inquired how soon plaintiff could vacate the building. On January 4, 1985, Howell received a notice to quit the premises by February 5, 1985.

On January 11, 1985, plaintiff started the within case against defendants Mehling, Dawson and the Auto Club, seeking: an injunction restraining defendants from evicting plaintiff or otherwise interfering with plaintiff's use and enjoyment of the 404 Clifford premises both temporarily, during the pendency of the action, and permanently, through June, 1988 (the term of the alleged new lease); damages for defendants Mehling's and Dawson's alleged breach of the lease and for their alleged misrepresentation and fraud in continuing to lead plaintiff to believe they would sign a long-term lease while they were, at the same time, negotiating[178 MICHAPP 77] the sale to defendant Auto Club; and a declaratory order that plaintiff had a valid lease of the premises extended through June, 1988. After a hearing, the trial court granted plaintiff's motion for a preliminary injunction, by order dated February 19, 1985, restraining defendants from evicting plaintiff from the 404 Clifford premises.

On May 20, 1985, defendant Auto Club moved for summary disposition under MCR 2.116(C)(10), claiming that there was no genuine issue of fact, in essence contending that, because plaintiff failed to exercise its renewal option in compliance with the terms of the original lease and because there was insufficient written evidence of a new lease, plaintiff was a month-to-month tenant after June, 1983, and, therefore, could not complain that defendants Mehling and Dawson had breached the lease or that defendant Auto Club had tortiously interfered with that contractual agreement.

On June 3, 1985, plaintiff filed a cross-motion for summary disposition under MCR 2.116(C)(10), contending that in November, 1984, defendant Mehling and Howell had entered into a new, valid lease, sufficient evidence of which existed in the form of the copy of the original 1978 lease of the premises on which defendant Mehling had lined through portions the parties had agreed to change. In their response to plaintiff's cross-motion, defendants Mehling and Dawson contended that the lined-through copy of the original lease was an insufficient memorandum of a new, valid lease because certain essential terms of the agreement had been stricken. After a hearing on June 14, 1985, the trial court declined to grant either motion.

The closing on the sale of the 404 Clifford premises was not immediately performed. Apparently, defendants Mehling and Dawson were reluctant to [178 MICHAPP 78] complete the sale during the pendency of plaintiff's suit because they were concerned about their potential liability. Consequently, on July 27, 1985, defendant Auto Club agreed to pay an additional $8,800 for the property, for a total purchase price of $88,800, and agreed to indemnify defendants Mehling and Dawson against all claims for damages by plaintiff arising out of plaintiff's tenancy in the 404 Clifford premises, whether arising before or after the sale. By letter dated July 29, 1985, defendant Auto Club informed plaintiff's counsel that it had purchased the property in question and that plaintiff should pay all future rents to it and, two weeks later, directed plaintiff to present proof of the $100,000 liquor liability and $300,000 public liability insurance coverage it was required to maintain under the terms of the lease by which plaintiff claimed possession.

In August or September, 1985, plaintiff removed the interior fixtures and abandoned the 404 Clifford premises. Thereafter, on October 18, 1985, pursuant to defendant Auto Club's motion, the trial court dissolved the preliminary injunction which it had ordered on February 19, 1985, and defendant Auto Club took possession of the 404 Clifford premises.

On March 21, 1986, the trial court granted defendant Auto Club permission to bring a counterclaim against plaintiff. On March 20, 1987, plaintiff filed an amended complaint, adding James P. Howell as a plaintiff, and alleging further facts in support of its claim of tortious interference against defendant Auto Club that involved events occurring after the entry of the February, 1985, preliminary injunction. On May 26, 1987, defendant Auto Club filed its counterclaim against plaintiff for unpaid rent and water bills, damage to the premises, conversion of the interior fixtures [178 MICHAPP 79] and expenses incurred by defendant as a result of plaintiff's civil action and the injunction.

On October 7, 1987, defendants Mehling and Dawson moved for summary disposition under MCR 2.116(C)(10), contending that plaintiff's claim for fraudulent misrepresentation should be dismissed because defendants made no material misrepresentation upon which plaintiff reasonably relied and because defendants had no intent to defraud plaintiff. Defendants further contended that they had not breached the covenant to repair in the lease because they had caused a new roof to be put on the building as soon as plaintiff had given proper notice and because plaintiff's business was closed by the health department, rather than due to water damage from the leaking roof. On October 19, 1987, defendants Mehling and Dawson moved for summary disposition against plaintiff James P. Howell under MCR 2.116(C)(8), alleging failure to state a claim and contending that he had no standing as an individual to bring a suit against defendants.

Prior to commencement of trial, the trial court granted summary disposition to defendants Mehling and Dawson on plaintiff's claims of fraudulent misrepresentation concerning statements made before May, 1984 (the date of Lambrecht's initial purchase offer), but denied summary disposition on fraud claims arising out of alleged statements made on or after that date. The trial court also granted summary disposition to defendants Mehling and Dawson on plaintiff's claim for breach of the lease covenant to...