Samuel D. Begola Services, Inc. v. Wild Bros.

• Decision Date: 19 May 1995
• Docket Number: 160285,Docket Nos. 154050
• Citation: 534 N.W.2d 217,210 Mich.App. 636
• Parties: SAMUEL D. BEGOLA SERVICES, INC., Plaintiff/Cross-Defendant-Appellant, v. WILD BROTHERS, Louis E. Wild, L. Donald Wild, E. D'Wayne Wild, Wild Brother, Inc., Jointly and Severally, Defendants/Cross-Plaintiffs/Third-Party Plaintiffs-Appellees, and Christian Commercial, Inc., Defendant, and Samuel D. Begola, Third-Party Defendant.
• Court: Court of Appeal of Michigan — District of US

Page 217

534 N.W.2d 217

210 Mich.App. 636

SAMUEL D. BEGOLA SERVICES, INC., Plaintiff/Cross-Defendant-Appellant, v. WILD BROTHERS, Louis E. Wild, L. Donald Wild, E. D'Wayne Wild, Wild Brother, Inc., Jointly and Severally Defendants/Cross-Plaintiffs/Third-Party Plaintiffs-Appellees and Christian Commercial, Inc., Defendant and Samuel D. Begola, Third-Party Defendant.

Docket Nos. 154050, 160285.

Court of Appeals of Michigan.

Submitted Feb. 22, 1995, at Lansing.

Decided May 19, 1995, at 9:10 a.m.

Released for Publication July 12, 1995.

Ryan A. Husaynu, P.C. by Ryan A. Husaynu, Southfield, for plaintiff.

Foster, Swift, Collins & Smith, P.C. by Scott A. Storey, Lansing, for Wild Bros., Louis E. Wild, L. Donald Wild, and E. D'Wayne Wild.

Before HOLBROOK, P.J., and JANSEN and O'CONNELL, JJ.

O'CONNELL, Judge.

In these consolidated appeals, plaintiff challenges an order denying reconsideration of the involuntary dismissal of its complaint and a subsequent order granting defendants an award of their costs and attorney fees. We affirm.

Defendants owned two parcels of heavily wooded land that plaintiff agreed to purchase by land contract. Under the terms of the purchase agreements, plaintiff was authorized to develop the properties for recreational and residential use during the term of the contracts, but was prohibited from removing timber for commercial purposes beyond the extent necessary for authorized development.

Before closing on the properties, plaintiff attempted to negotiate new sales agreements. Rather than purchasing the properties by land contract, plaintiff offered a substantial down payment, with defendants to hold a mortgage note for the balance. Under such an arrangement, legal title would have passed to plaintiff immediately, thereby circumventing the timber removal restriction. This second offer, which would have superseded the parties' original agreements, was not accepted, although it is not clear whether it was definitively rejected.

Unbeknownst to defendants, plaintiff had contracted with a timber harvester two weeks after the purchase agreements were executed to remove all trees on the properties that were over a certain diameter. Defendants learned of this when they discovered an employee of the timber harvester marking trees on the properties. Defendants refused to close on the properties, and plaintiff brought suit, seeking specific performance. After plaintiff presented its evidence to the bench, defendants moved for a "directed verdict," which the court granted on the basis of plaintiff's fraud in misrepresenting its intention to harvest the timber. The court then denied plaintiff's motion for reconsideration.

Defendants later moved for an award of costs and attorney fees. The purchase agreements contained provisions to the effect that the prevailing party in any action to enforce the agreements would be entitled to such expenses. The court granted this motion on the basis of the contractual provisions, awarding defendant approximately $34,000 in costs and fees.

We treat defendants' motion for a "directed verdict" as a motion for an involuntary dismissal pursuant to MCR 2.504(B)(2). Armoudlian v. Zadeh, 116 Mich.App. 659, 671, 323 N.W.2d 502 (1982); Angelo Iafrate Co. v. M & K Development Co., 80 Mich.App. 508, 512-513, 264 N.W.2d 45 (1978). The involuntary dismissal of an action is appropriate where the trial court, when sitting as the finder of fact, is satisfied at the close of the plaintiff's evidence that "on the facts and the law the plaintiff has shown no right to relief." MCR 2.504(B)(2). Therefore, plaintiff's suit for specific performance being an equitable action, Godwin v. Lindbert, 101 Mich.App. 754, 757, 300 N.W.2d 514 (1980), we review the ultimate determination de novo and review for clear error the findings of fact supporting that determination. Webb v. Smith (After Remand), 204 Mich.App. 564, 568, 516 N.W.2d 124 (1994). A trial court's findings are clearly erroneous only where "we are left with a definite and firm conviction that a mistake has been made." Id.

Plaintiff argues that the court erred in finding a fraud to have been perpetrated where any misrepresentations allegedly made pertained solely to future actions, that is, to the future removal of trees in violation of the purchase agreements. While plaintiff is correct in asserting that, in general, actionable fraud must be predicated on a statement relating to a past or an existing fact, see, e.g., Scott v. Harper Recreation, Inc., 444 Mich. 441, 446, n. 3, 506 N.W.2d 857 (1993), Michigan also recognizes fraud in the inducement. Fraud in the inducement occurs where a party materially misrepresents future conduct under circumstances in which the assertions may reasonably be expected to be relied upon and are relied upon. Kefuss v. Whitley, 220 Mich. 67, 82-83, 189 N.W. 76 (1922); see also Adams v. Gillig, 199 N.Y. 314, 92 N.E. 670 (1910), cited with approval in Kefuss, supra, p. 86, 189 N.W. 76; Judd v. Judd (On Rehearing), 192 Mich. 198, 207, 160 N.W. 548 (1916). Fraud in the inducement to enter a contract renders the contract voidable at the option of the defrauded party. Whitcraft v. Wolfe, 148 Mich.App. 40, 52, 384 N.W.2d 400 (1985).

In the present case, the trial court made detailed findings of fact on the record and concluded that plaintiff had perpetrated a fraud in inducing defendants to enter into the purchase agreements where plaintiff had no intention of abiding by their terms. The evidence clearly supports such a finding, and the evidence suggesting otherwise is minimal. Therefore, defendants were entitled to rescind the agreements and effected a rescission by refusing to proceed to closing. To the extent that the trial court's application of Michigan law may be construed to be inconsistent with the discussion above, we decline to reverse where the right result was reached for the wrong reason. Gray v. Pann, 203 Mich.App. 461, 464, 513 N.W.2d 154 (1994).

Despite our conclusion that the purchase agreements were rescinded, we hold that the contractual attorney fee provisions survive such rescission. The purchase agreements provided that "[i]n the event either party shall prevail in any legal action commenced to enforce this agreement, he shall be entitled to all costs incurred in such action including legal fees." While the elements of this provision were satisfied, enforcement of this provision meets with one apparent difficulty--the contract was rescinded.

In general, rescission abrogates a contract completely. Livingston v. Krown Chemical Mfg., Inc., 394 Mich. 144, 152, 229 N.W.2d 793 (1975). All former contract rights are annulled; it is as if no contract had been made. Cushman v. Avis, 28 Mich.App. 370,...