Joseph & Anita Russell Trust v. Russell

• Docket Number: 354511
• Decision Date: 22 July 2021
• Citation: 338 Mich.App. 170,979 N.W.2d 672
• Parties: JOSEPH AND ANITA RUSSELL TRUST, BY Acting Trustee Joni WHITE, Plaintiff-Appellant, v. Joshua J. RUSSELL and Kelly M. Russell, Defendants-Appellees.
• Court: Court of Appeal of Michigan — District of US

338 Mich.App. 170

979 N.W.2d 672

JOSEPH AND ANITA RUSSELL TRUST, BY Acting Trustee Joni WHITE, Plaintiff-Appellant,

v.Joshua J. RUSSELL and Kelly M. Russell, Defendants-Appellees.

No. 354511

Court of Appeals of Michigan.

Submitted July 14, 2021, at Lansing.

Decided July 22, 2021, at 9:00 a.m.

The Gallagher Law Firm, PLC, Lansing (by Byron P. Gallagher ) for plaintiff.

Chalgian & Tripp Law Offices, PLLC (by Daniel S. Hilker) for defendants.

Before: Hood, P.J., and Markey and Gleicher, JJ.

Markey, J.

In this action seeking immediate payment in full with respect to a promissory note and an oral loan agreement, plaintiff Joni White, acting by power of attorney as trustee of the Joseph and Anita Russell Trust, appeals by right the trial court's order granting summary disposition in favor of defendants Joshua and Kelly Russell under MCR 2.116(C)(10). Defendants were the obligors under the promissory note and oral loan agreement, and, under the terms of the two loans, they were repayable in monthly installments. Defendants had been making monthly installment payments on the loans for several years, occasionally missing a payment. Plaintiff argues that the trial court erred when it ruled that the promissory note and oral loan agreement were not payable on demand. We disagree and affirm.

Defendant Joshua Russell, who is married to defendant Kelly Russell, is a grandson of trust creators Joseph and Anita Russell. Plaintiff is a daughter of Joseph and Anita and is Joshua's aunt. In 2013, Joseph and Anita deeded property to defendants so they could build a home. Joseph and Anita also loaned money to defendants to cover the costs of building the home. On May 7, 2015, defendants executed a promissory note associated with the 2013 transactions. The promissory note provided as follows:

The undersigned hereby promise to pay to the order of Joseph L. Russell and Anita J. Russell, as Trustees of the Joseph L. Russell and Anita J. Russell Trust dated November 3, 1997, of ... Olivet, Michigan 49076, the sum of $88,878.91 as follows: $500.00, or more, each and every month commencing 30 days from the date hereof, including interest on the unpaid balance at the rate of three (3%) percent per annum.

If any payment hereunder shall remain unpaid for more than 60 days, the promisees may declare the entire unpaid balance due and payable forthwith and pursue any available remedies.

Defendants made the required monthly payments on the promissory note, except with respect to those payments due during the timeframe of December 25, 2018, through March 2, 2019. Documentary evidence reflects that defendants made a $500 cash payment to Joseph and Anita on December 24, 2018. A couple of months earlier, in October 2018, Anita had granted plaintiff durable power of attorney.¹ According to an affidavit executed by Joshua, there was to be a transition from making payments to Joseph and Anita to making payments to plaintiff. Joshua averred that defendants had contacted plaintiff, asking her where and how payments should be delivered to her, but, initially, plaintiff did not respond. Joshua claimed that plaintiff's failure to respond in a timely fashion caused the lapse in the monthly payments. Joshua further asserted that once plaintiff responded, payments were resumed, with a $1,500 payment being made to plaintiff on March 3, 2019, to make up for the missed payments. Defendants then made the required monthly payments on the promissory note through January 29, 2020, at which time the balance on the note was $66,865.51. Plaintiff's lawsuit was filed on February 18, 2020.

With respect to the oral loan agreement, on November 2, 2015, Joseph and Anita deeded 77 acres of farm property to defendants. And Joshua averred in his affidavit that, in exchange for the farm property, he and his wife "agreed to pay Joseph and Anita $172,000 in monthly installments of $500 at 0% interest." Defendants submitted copies of receipts showing that $500 monthly payments were made to Joseph and Anita starting on January 16, 2016, and ending on December 26, 2018. But the receipts did reveal that during this timeframe there were occasional months when payment was not made. By our count, 25 monthly payments of $500 were made to Joseph and Anita during this period. Similarly to what had occurred with regard to the promissory note, there were no payments made under the oral loan agreement in January and February 2019, but in March 2019, defendants made two $500 payments to plaintiff. For the remainder of 2019 and January 2020, defendants made all of the monthly $500 payments, plus one extra $500 payment.² The balance on the oral loan agreement after the January 2020 payment was $152,000, and the suit was filed the following month.

In October 2019, about seven months after plaintiff had started accepting payments from defendants on the two loans, plaintiff's attorney sent a demand letter to defendants, asserting that the promissory note and the oral loan agreement were payable on demand and insisting on full payment of the two loan balances by November 15, 2019. Plaintiff did give defendants the option of executing a new promissory note covering the balances on both loans, with a 7% annual interest rate amortized over 15 years and secured by a mortgage on the 77-acre farm property that had been deeded to defendants by Joseph and Anita. In November 2019, defendants' counsel responded, stating as follows: "It seems clear to me that all parties have agreed and acquiesced over a substantial period of time that the Promissory Note and the oral loan agreement were installment arrangements, with no indicia of being treated as a ‘payment on demand.’ " Defendants refused to pay the full balances on the two loans, rejected the option of executing a new promissory note and accompanying mortgage, and indicated their intent to continue making the monthly payments on the loans.

Plaintiff subsequently commenced the instant action against defendants in February 2020, seeking full payment on the promissory note and oral loan agreement, along with attorney fees, costs, and interest. Defendants moved for summary disposition under MCR 2.116(C)(10), arguing that the two loans were not payable on demand. The trial court concluded as a matter of law that the promissory note was not payable on demand, ruling from the bench:³

I don't have an issue about the (C)(10) motion as it relates to the Promissory Note. As it relates to the Promissory Note, the Court finds that based on the case law and authority cited by the parties, I do not find that the Promissory Note is payable on demand. I find the Note is clear and unambiguous that the agreement was an installment contract where the payments were due at the end of each month. The Note is also clear that the note was only to be payable on demand if payment was late by more than 60 days. Plaintiff has failed to cite any authority to support her position that the Note is payable upon demand if it does not include a final payment date. I would note that the authority Plaintiff cited is not binding in Michigan.

Based on the writing of the Note it is clear that the parties contemplated and intended under what circumstances the Note could be payable upon demand. Plaintiff claims Defendant has not consistently paid on the Promissory Note but based on the records, the only instance where the Defendant was late on a payment by more than 60 days was from November of 2018 to March of 2019.

Joseph Russell passed away in January of 2019, so his death may explain some of the late payments. In March of 2019, it appears that Defendant made several payments to make the account current. Plaintiff accepted the payments as opposed to requested payment in full as she may have had the right to do so under the Promissory Note. For these reasons, I believe the Defendant motion for summary disposition should be granted as it relates to the Promissory Note.

The trial court also concluded that plaintiff's claim regarding the oral loan agreement should be summarily dismissed. The court noted that the receipts showed that defendants paid $500 without interest and that the payments were generally made once a month. The trial court also addressed an argument posed by plaintiff that defendants had not made consistent payments over the years, ruling:

I understand that Plaintiff says Defendant hasn't been consistent with their payments; however, since the property was conveyed there have been five time periods where no payments were made, which was June to October, 2016, November to March, 2017, April to June, 2017, and November, 2018 to January 2018 and then December '18 to March of '19. However, there were also occasions where extra payments were made. None of these instances occurred after Plaintiff took over receiving payments. So, to the extent Plaintiff wants to claim the inconsistent payments are a basis to demand them now, I find that she's estopped from doing so.

In an order entered on July 28, 2020, the trial court granted defendants' motion for summary disposition under MCR 2.116(C)(10).⁴ Plaintiff now appeals.

On appeal, plaintiff argues that the trial court erred by ruling that the promissory note and the oral loan agreement were not payable on demand. This Court reviews de novo a trial court's ruling on a motion for summary disposition. Hoffner v. Lanctoe , 492 Mich. 450, 459, 821 N.W.2d 88 (2012). Additionally, this Court reviews de novo issues concerning the proper interpretation of a contract and the legal effect or application of a contract. Rory v. Continental Ins. Co. , 473 Mich. 457, 464, 703 N.W.2d 23 (2005). And we likewise review de novo issues of statutory construction. Estes v. Titus , 481 Mich. 573, 578-579, 751 N.W.2d 493 (2008).⁵

A promissory note constitutes a written contract. Collateral Liquidation, Inc. v. Renshaw , 301 Mich. 437, 443, 3 N.W.2d 834 (1942). In Highfield Beach at Lake Mich. v. Sanderson , 331 Mich. App. 636, 654, 954 N.W.2d 231 (2020), this Court set...