Liggett Restaurant Group, Inc. v. City of Pontiac

• Decision Date: 05 March 2004
• Docket Number: Docket No. 240495.
• Citation: 260 Mich App 127,676 N.W.2d 633
• Parties: LIGGETT RESTAURANT GROUP, INC., Plaintiff-Appellant, v. CITY OF PONTIAC and City of Pontiac Stadium Building Authority, Defendants-Appellees.
• Court: Court of Appeal of Michigan — District of US

676 N.W.2d 633

260 Mich App 127

LIGGETT RESTAURANT GROUP, INC., Plaintiff-Appellant, v. CITY OF PONTIAC and City of Pontiac Stadium Building Authority, Defendants-Appellees.

Docket No. 240495.

Court of Appeals of Michigan.

Submitted October 15, 2003, at Detroit.

Decided December 18, 2003, at 9:10 a.m.

Released for Publication March 5, 2004.

Timmis Inman PLLC (by Robert R.Cleary and Michael J. Sheehan) for the plaintiff.

Butzel Long (by Michael J. Lavoie, James A. Gray III, and Thomas D. Noonan), Mark J. Hotz, and Timothy Kozub, Detroit, Pontiac, for the defendants.

Before: GAGE, P.J., and WHITE and COOPER, JJ.

COOPER, J.

Plaintiff Liggett Restaurant Group, Inc., appeals as of right the February 14, 2002, trial court order granting defendants city of Pontiac and City of Pontiac Stadium Building Authority's motion for summary disposition, pursuant to MCR 2.116(C)(8). We affirm in part, reverse in part, and remand for further proceedings.

In this contract action involving the concessions in the Pontiac Silverdome, we are asked to determine whether the doctrine of frustration of purpose relieves plaintiff of its duties under the contract and whether Michigan recognizes the doctrine as a basis for contract rescission. Plaintiff alleges that its primary purpose for entering into the concessions contract was frustrated when the Detroit Lions discontinued their use of the Silverdome for home games and that rescission is therefore warranted. Because the parties' contract contains an express clause that addresses the contingency of lack of home games, we conclude that the doctrine of frustration of purpose is inapplicable in this case. Similarly, we find that plaintiff's unjust enrichment claim must fail given the existence of an express contract governing the subject matter at issue. Nevertheless, we agree that remand is necessary to allow plaintiff the opportunity to amend its pleadings.

I. Factual Background and Procedural History

In August 1975, Elias Brothers Restaurants, Inc., entered into a contract with defendant City of Pontiac Stadium Building Authority (stadium authority) to provide concessions at the Silverdome until 2000. The parties renegotiated the contract in 1990. Elias Brothers agreed to pay additional consideration for the option to extend the contract until 2005—to coordinate with the end of the Detroit Lions' sublease.¹ This option was exercised on December 1, 1998. The Detroit Lions, however, prematurely discontinued playing in the Silverdome after the 2001 football season.

Plaintiff, as the assignee or successor in interest to Elias Brothers, filed this action for rescission and unjust enrichment. The complaint stated that the Detroit Lions' abandonment of the Silverdome frustrated the primary purpose of the agreements, and sought to recover money previously paid for the contract extension. Specifically, plaintiff alleged that the presence and tenancy of the Detroit Lions was an integral and essential assumption of the parties to the concession agreement. According to plaintiff, Elias Brothers' agreement to pay the increased percentages was based on the "mutual understanding and premise" that the Detroit Lions were obligated to play in the Silverdome for the duration of the contract extension. Because the Detroit Lions' premature departure from the Silverdome frustrated the essential purpose of the contract extension, plaintiff requested rescission of the concession agreement "and/or" the 1990 amendment. Upon rescission, plaintiff demanded restitution "of the consideration it paid to Defendants in part performance or reliance on the contract prior to the Detroit Lions' abandonment of the Silverdome."

Plaintiff also raised a claim of unjust enrichment on the basis that defendants received the benefits of the consideration plaintiff paid in exchange for the 1990 amendment. According to plaintiff, it never received the projected benefits of the 1990 amendment because of the Detroit Lions' early departure. Plaintiff further noted the fact that defendants were seeking damages for lost concession revenue in a separate action against the Detroit Lions.

Defendants moved for summary disposition pursuant to MCR 2.116(C)(8). In pertinent part, defendants argued that they were entitled to judgment because the doctrine of frustration of purpose had not been recognized in Michigan as a basis for rescission of a contract. The trial court agreed with defendants' argument that plaintiff's claims were deficient. In this respect, the trial court stated:

On review of the cases that have been presented by the Plaintiff, there's no authority in Michigan that provides for rescission based on frustration of purposes. Further, under Tri-State Rubber & Equipment, Inc v. Central States Southeast & Southwest Areas Pension Fund,²] the Court says, and I quote:

"The Frustration of Purpose Doctrine does not apply to errors in prediction as to future occurrences or non-concurrence. A party cannot enter into a contract, expecting to make a profit, and then demand rescission when the deal turns out to be less lucrative than he had hoped."

Thus, the rescission claim must be dismissed.

The trial court also denied plaintiff's claim for unjust enrichment on the basis that there was an express contract covering the same subject matter.

Similarly, the trial court denied plaintiff's request for leave to amend its complaint under MCR 2.116(I)(5) as an effort in futility. The trial court then entered the order granting defendants' motion for summary disposition pursuant to MCR 2.116(C)(8). Plaintiff's subsequent motion for reconsideration was denied.

II. Frustration of Purpose Doctrine

Plaintiff initially challenges the trial court's decision to grant defendants' motion for summary disposition against plaintiff for failure to state a claim, MCR 2.116(C)(8). In particular, plaintiff argues that it properlyset forth a claim for rescission based on the doctrine of frustration of purpose. We disagree. A trial court's grant or denial of a motion for summary disposition is reviewed de novo on appeal.³

A motion for summary disposition under MCR 2.116(C)(8) tests the legal sufficiency of a complaint.⁴ Under this subrule "[a]ll well-pleaded factual allegations are accepted as true and construed in a light most favorable to the nonmovant."⁵ When reviewing such a motion, a court must base its decision on the pleadings alone.⁶ In a contract-based action, however, the contract attached to the pleading is considered part of the pleading.⁷ Summary disposition is appropriate under MCR 2.116(C)(8) "if no factual development could possibly justify recovery."⁸

Plaintiff asserts that rescission is appropriate in this situation because its purpose for entering into the concessions contract was frustrated when the primary tenant at the Silverdome, the Detroit Lions, prematurely terminated its contract. The doctrines of frustration of purpose and supervening impossibility/impracticability are related excuses for nonperformance of contractual obligations and are governed by similar principles.⁹ Frustration of purpose is generally asserted where "a change in circumstances makes one party's performance virtually worthless to the other, frustrating his purpose in making the contract."¹⁰ Under this doctrine, however, there is not anything actually impeding either party's ability to perform.¹¹

While the frustration of purpose doctrine has yet to be considered by the Michigan Supreme Court, this Court discussed the doctrine in Molnar v. Molnar.¹² Molnar, the doctrine was utilized in connection with a property settlement in a divorce case that required the husband to pay partial mortgage payments on the home where his ex-wife and minor son lived.¹³ When the child passed away before his eighteenth birthday, a panel of this Court held that the father could discontinue the partial payments to his ex-wife because they were intended for the minor child's benefit.¹⁴ According to Molnar, the changed circumstances fundamentally altered the parties' positions and frustrated the purpose for which the property settlement was entered.¹⁵

Before a party may avail itself of the doctrine of frustration of purpose, the following conditions must be present:

(1) the contract must be at least partially executory; (2) the frustrated party's purpose in making the contract must have been known to both parties when the contract was made; (3) this purpose must have been basically frustrated by an event not reasonably foreseeable at the time the contract was made, the occurrence of which has not been due to the fault of the frustrated party and the risk of which was not assumed by him¹⁶

As noted in the Second Restatement of Contracts, "[t]he frustration must be so severe that it is not fairly to be regarded as within the risks that he assumed under the contract."¹⁷ Further, "the non-occurrence of the frustrating event must have been a basic assumption on which the contract was made."¹⁸ On the record before us, we find that plaintiff has failed to establish that the event in question was not contemplated when the parties entered into the concessions agreement. Rather, a review of the contract leads us to conclude that the parties not only anticipated, but explicitly provided for, the possibility that the Detroit Lions might miss home games in the Silverdome. In particular, we note paragraph 37 in the operating phase of the parties' original contract:

It is contemplated by the parties that the stadium shall be opened on or before August 23, 1975, in order to permit the Detroit Lions to play its full first year schedule of nine (9) home games in the stadium. In the event that the stadium is not opened, and, as a result, one or more of the home games cannot be played there, then the amount of the first guarantee minimum annual payment due on August 20, 1976, shall be reduced by the proportion that the number of such unplayed games bear to the total of nine home games

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