Shell Oil Co. v. Estate of Kert, Docket No. 94741

• Decision Date: 18 September 1987
• Docket Number: Docket No. 94741
• Citation: 411 N.W.2d 770,161 Mich.App. 409
• Parties: SHELL OIL COMPANY, a Delaware Corporation, Plaintiff-Appellee, v. ESTATE OF Benjamin KERT, Defendant-Appellant, and Harriet Housman, a/k/a Harriet Houseman, Personal Representative of the Estate of Benjamin Kert, Esther Kert, Janet Scheinfield Levenson, Betty Schwartz, Samuel Scheinfield and Dennis Scheinfield, Defendants. 161 Mich.App. 409, 411 N.W.2d 770
• Court: Court of Appeal of Michigan — District of US

Page 770

411 N.W.2d 770

SHELL OIL COMPANY, a Delaware Corporation, Plaintiff-Appellee, v. ESTATE OF Benjamin KERT, Defendant-Appellant, and Harriet Housman, a/k/a Harriet Houseman, Personal

Representative of the Estate of Benjamin Kert, Esther Kert,

Janet Scheinfield Levenson, Betty Schwartz, Samuel

Scheinfield and Dennis Scheinfield, Defendants.

Docket No. 94741.

161 Mich.App. 409, 411 N.W.2d 770

Court of Appeals of Michigan.

Submitted March 19, 1987.

Decided July 7, 1987.

Released for Publication Sept. 18, 1987.

[161 MICHAPP 412] Giles & Lucas, P.C. by Thomas V. Giles and John M. Lucas, Birmingham, for plaintiff.

Ackerman & Ackerman, P.C. by Alan T. Ackerman, and Michael A. Szymanski, Detroit, for Estate of Benjamin Kert.

Before MacKENZIE, P.J., and BEASLEY and QUINNELL, ^* JJ.

BEASLEY, Judge.

Plaintiff, Shell Oil Company, filed this action on February 22, 1985, seeking a declaratory judgment that a 1972 amendment to a lease of which plaintiff was lessee was valid and enforceable. Both plaintiff and defendant, estate of Benjamin Kert, moved for summary disposition. Plaintiff's motion was brought pursuant to MCR 2.116(C)(9) on the basis that defendant estate had failed to state a valid defense to plaintiff's declaratory judgment action. Defendant's motion was brought pursuant to MCR 2.116(C)(8) and (10) on the grounds that plaintiff had failed to state a claim on which relief could be granted and that, except as to the amount of damages, there was no genuine issue as to any material fact so that defendant was entitled to judgment as a matter of law. On June 23, 1986, the trial court denied [161 MICHAPP 413] defendant's motion and granted plaintiff's motion. On August 4, 1986, defendant's motion for reconsideration was denied, and defendant now appeals as of right.

The essential bare facts are not disputed, but the parties do not agree as to their legal significance. On July 10, 1958, Benjamin Kert and his wife, Esther Kert, leased a parcel of property located at the northeast corner of Orchard Lake and Maple Roads in West Bloomfield Township, Oakland County, to plaintiff. The lease, typed on plaintiff's printed form, identified the couple as "Ben Kert and Esther Kert, His Wife, ... (herein called 'Lessor', whether one or more)." It also contained the following provisions, among others:

"Lessor covenants that Lessor is well seized of and has good right to lease the premises, will warrant and defend the title thereto, and will indemnify Shell against any damage and expense which Shell may suffer by reason of any lien, encumbrance, restriction or defect in the title to or description herein of the premises. If, at any time, Lessor's title or right to receive rent hereunder is disputed, or there is a change of ownership of Lessor's estate by act of the parties or operation of law, Shell may withhold rent thereafter accruing until Shell is furnished proof satisfactory to it as to the party entitled thereto.

* * *

"This lease merges and supersedes all prior negotiations, representations and agreements, and constitutes the entire contract, between Lessor and Shell concerning the leasing of the premises and the consideration therefor. Neither this lease nor any amendment or supplement thereto shall be binding on Shell unless and until it is signed in Shell's behalf by a representative duly authorized by its Board of Directors, and a copy thereof so signed is delivered to Lessor. This lease shall be [161 MICHAPP 414] binding on and inure to the benefit of the heirs, administrators, executors, successors and assigns of Lessor, and the successors and assigns of Shell."

The lease as drafted ran for a term of fifteen years, but plaintiff had the option of extending it for two additional five-year periods under generally the same terms and conditions. The lease commenced when Shell completed construction of an automobile service station on the premises, which apparently occurred in 1959 and meant that the lease expired in 1974. If the two options were exercised, as they were, the lease would end in 1984. Both Benjamin and Esther Kert signed the lease. Following its execution, plaintiff constructed the service station on the property and subleased it.

Benjamin Kert died testate in 1969, leaving one-half of his estate to his widow, Esther Kert, and the other half to various children and grandchildren, who are named defendants in this case. His will was not probated, however, until Esther Kert initiated probate proceedings in January, 1984.

In the interim following her husband's death, Esther Kert contacted plaintiff in 1970 and requested that payments be made directly to her. When plaintiff requested a "letter testamentary," Esther Kert's attorney, Harvey Tennen, responded by letter claiming that under Michigan law Benjamin and Esther Kert, his wife, were tenants by the entirety, so that on Benjamin's death Esther Kert became the sole owner as surviving tenant by the entirety. Plaintiff responded by requesting the furnishing to it of a copy of the warranty deed establishing the alleged tenancy by the entirety. Tennen responded by sending a copy of an administrator's deed dated February 5, 1952, which conveyed the subject real property to Benjamin Kert [161 MICHAPP 415] only. ¹ In his letter of transmittal, Tennen made no further reference to the matter of a tenancy by the entirety but, nevertheless, after that plaintiff Shell apparently paid the rent to Esther Kert.

On June 29, 1972, Esther Kert and plaintiff Shell amended the 1958 lease, purporting to give plaintiff the option for two additional five-year extensions of the lease which, if exercised, would cause the lease term to extend to 1994. In the agreement amending the lease, Esther Kert was merely described as "a widow." If these options were exercised, the renewals would be on the same terms and conditions as the original lease except that the rental minimums and maximums would be increased. ² After execution of the amendment, plaintiff Shell claims to have invested more than $200,000 for improvements to the service station on the property.

In April, 1974, Shell exercised its first five-year option to renew by sending written notice to Esther Kert. Apparently, Shell also exercised its option in 1979. In early 1984, as part of a road-widening project, the Oakland County Road Commission notified defendant, estate of Benjamin Kert, that the road commission believed the estate had an interest in the subject real property. Thereafter, in a letter of February 2, 1984, Harriet Housman, personal representative of the estate, requested that plaintiff contact her to discuss the negotiation of a new lease, asserting that the original lease had expired. Plaintiff tried to rely on the amended lease, but defendant's counsel replied that the amendment was of no force or effect, [161 MICHAPP 416] stating: "Shell's attempted exercise of an option that may have been granted by someone other than the titleholder, or the estate of the titleholder, is null and void." The letter concluded that the estate intended to take possession of the property on June 30, 1984, the time when the 1958 lease would expire. This lawsuit resulted.

After granting plaintiff's motion for summary disposition, as previously indicated, the trial judge signed a judgment which provided that (1) plaintiff's rights under the lease amendment of June 29, 1972, "are valid and bind the heirs at law of Ben Kert"; (2) defendants are tenants in common with respect to their interests in said property; and (3) defendants, the estate of Benjamin Kert and the named heirs, are entitled to an accounting from defendant, Esther Kert, for all monies received by her since Ben Kert's death on September 27, 1969, under the terms of the 1958 lease agreement between plaintiff Shell and Ben and Esther Kert, and the 1972 lease amendment between plaintiff Shell and Esther Kert.

The issues presented on appeal are these: (1) whether the amendment should be rescinded for mutual mistake; (2) if not, whether the amendment is binding on the estate; (3) whether defendant estate is entitled to an accounting or compensation; and (4) if so, whether it is plaintiff or Esther Kert who is compelled to make that accounting or compensation.

The record before us indicates that at the time of the original Shell lease in July, 1958, Ben Kert was the owner of the subject real estate and his wife, Esther Kert, was not an owner. As Ben's wife, Esther did possess an inchoate dower right ³ [161 MICHAPP 417] in 1958, but there was no tenancy by the entirety. ⁴ Thus, when Ben died in 1969, Esther did not take this real property as a surviving widow. As previously indicated, Ben died testate, leaving one-half of his estate to his widow, Esther Kert. Thus, on Ben's death, Esther Kert had a choice. She could either take under his will or she could take her dower rights and other statutory rights under the intestacy laws. Although we assume that her share under his will exceeded her dower and other statutory rights under the intestacy laws, she made no choice for fifteen years.

However, also as previously indicated, Esther Kert did sign the 1958 lease as a party, along with her husband. It is not surprising that Esther signed since the lease contained a provision that permitted Shell to match any bona fide offer to purchase that Kert might receive and, in such event, required the lessor to convey good and marketable title to Shell. Since Esther possessed an inchoate dower right in the real property, Shell's right to purchase would only be effective if Esther, as Ben's wife, was obligated to join in the conveyance. By being a party to the lease, she was so obligated to join in such a conveyance: thus, one good reason for her signing the lease. Further, since by signing Esther became a party to the lease, it is clear that during the life of the lease the notice provisions could be complied with by Shell by directing written notice to either...