STATE OF MICHIGAN COURT OF APPEALS DROST LANDSCAPE, INC. Plaintiff-Appellant, UNPUBLISHED March 5, 2013 v No. 308146 Charlevoix County Circuit Court DERITA AND ROBERT DOWNEY, LC No. 11-000498-23-CK Defendants-Appellee/Cross- Appellant. Before: WHITBECK, P.J., and SAAD and SHAPIRO, JJ. PER CURIAM. Following the grant of defendants motion for summary disposition, defendants were awarded sanction in the amount of $7,500 based on the filing of a frivolous complaint. Plaintiff appeals as of right and defendants cross-appeal. We reverse. John and Diane Vick defaulted on a land contract with defendants and ultimately there was a forfeiture. Language in the land contract stated that defendants would retain any improvements if the Vicks defaulted. Plaintiff had done substantial landscaping work and was only partially paid by the Vicks. Plaintiff filed suit against the Vicks and obtained a consent judgment for $180,998.25. However, the consent judgment stated that plaintiff could not collect against the Vicks until it exhausted all legal claims against defendants. Plaintiff subsequently filed a complaint against defendants stating claims of unjust enrichment, quantum meruit and quantum valebant. 1 Ultimately, the trial court dismissed plaintiff s claim under MCR 2.116(C)(7) based on res judicata. The trial court also dismissed plaintiff s claim under MCR 2.116(C)(8) finding that plaintiff failed to state a claim upon which relief could be granted. It then awarded sanctions for the filing of a frivolous claim. We agree that plaintiff may not pursue claims that initially belonged to the Vicks and were later assigned to plaintiff. However, plaintiff s claim of unjust enrichment are wholly their 1 These claims are all essentially the same. The gist of each is that defendants received the benefit of the labor and materials supplied by plaintiff, and that defendants therefore should pay plaintiff. -1-
own, and not dependent on the Vicks rights. Therefore, they could not have been subject to res judicata because there was no prior litigation between the parties to the present case. We must therefore determine whether the quantum meruit claim set forth in plaintiff s complaint was frivolous. MCL 600.2591(3)(a) states that a claim is frivolous when: (1) the party s primary purpose was to harass, embarrass or injure the prevailing party ; (2) [t]he party had no reasonable basis to believe that the facts underlying that party s legal position were true ; or (3) [t]he party s position was devoid of arguable legal merit. Kitchen v Kitchen, 465 Mich 654, 662; 641 NW2d 245 (2002). There is no suggestion that plaintiff s purpose was to harass, embarrass or injure defendants. As to whether plaintiff had a reasonable basis for its quantum meruit pleadings, we conclude that this case is controlled by Morris Pumps v Centerline Piping, 273 Mich App 187; 729 NW2d 898 (2006). In that case, the supplier to a subcontractor was not paid before the subcontractor went out of business. The replacement subcontractor used the supplies on site to finish the project but neither the replacement subcontractor nor the general contractor paid the supplier. The supplier brought a claim of unjust enrichment against the general contractor. The general contractor argued that the unjust enrichment claim was barred because of the express contract between the supplier and the subcontractor. The Court noted that, [g]enerally, an implied contract may not be found if there is an express contract between the same parties on the same subject matter. 273 Mich App at 194 (emphasis added), quoting 42 CJS, Implied and Constructive Contracts, 34, p 33. However, it concluded that this principal did not bar a quantum meruit claim against the general contractor because the only express contract was between the supplier and the original subcontractor. The general contractor also claimed that its retention of the materials was not inequitable. The Court noted that not all enrichment is necessarily unjust in nature. 273 Mich App at 196. In that case, the general contractor was responsible for overseeing construction and supervising subcontractors, would have been aware of the delivery of the supplies and would likely have been aware they were not paid for, and was necessarily a party to the decision to use and retain the materials without paying benefits. 273 Mich App at 197. The Court found that the enrichment was unjust, stating: If defendant s retention of the materials supplied by plaintiffs had been completely innocent and without knowledge, we might be inclined to conclude that defendant s enrichment was not unjust.... However, we simply cannot classify defendant s act of retaining and using the materials, without ever ensuring that plaintiffs were compensated for the materials, as innocent, just, or equitable. Id. In the present case, plaintiff asserted that defendants were complicit in allowing the landscaping to go forward and that their retention of the benefit would be unjust. Defendants were the beneficiaries of approximately $200,000 of landscaping and ultimately stood to make a considerable profit on the home. In addition, there is some evidence that defendants were aware of the landscaping project, although, unlike in Morris Pumps, defendants had no authority to stop the landscaping project from proceeding and could not simply have returned the materials used to plaintiff because the work was already finished. Plaintiff has not appealed the grant of summary disposition, and we need not decide whether mere knowledge of the project is enough to render the defendants enrichment unjust. However, the circumstances of the present case are -2-
sufficiently similar to Morris Pumps that, plaintiff s claim, at least at the outset, was not devoid of arguable merit. Therefore, the grant of sanctions against plaintiff was inappropriate. Given our disposition of plaintiff s appeal, we need not address defendant s claim on cross-appeal that the amount of sanctions was deficient, and we decline defendants invitation to impose sanctions on appeal. Reversed and remanded. We do not retain jurisdiction. /s/ Henry William Saad /s/ Douglas B. Shapiro -3-
STATE OF MICHIGAN COURT OF APPEALS DROST LANDSCAPE INC. Plaintiff-Appellant/Cross-Appellee, UNPUBLISHED March 5, 2013 v No. 308146 Charlevoix Circuit Court DERITA DOWNEY and ROBERT DOWNEY, LC No. 11-049823-CK Defendants-Appellees/Cross- Appellants. Before: WHITBECK, P.J., and SAAD and SHAPIRO, JJ. WHITBECK, J. (concurring). With great respect for my colleagues approach to this case, I must concur in result only. I do so for several reasons. First, we must remember that this appeal involves only whether the trial court erred in awarding sanctions to the defendants Derita and Robert Downey on the basis that the plaintiff Drost Landscape, Inc. filed a frivolous claim. Drost did not appeal the trial court s dismissal of its claim under MCR 2.116(C)(7) (res judicata) or, alternatively, under MCR 2.116(C)(8) (failure to state a claim on which relief should be granted). These dismissals are only relevant to the extent that they bear upon the sole question before us: were Drost s claims so devoid of arguable legal merit that sanctions against it were appropriate? But, indirectly, the majority weighs in on the merits of the res judicata issue when it states that Drost s claim of unjust enrichment could not have been subject to res judicata because there was no prior litigation between the parties to the present case. If I understand Downey s position at the trial court level, it was that Drost should have joined the Downeys in Drost s lawsuit against the Vicks under the mandatory joinder rule, MCR 2.205(A), as necessary parties. This was apparently the trial court s reasoning when it dismissed Drost s claim on the basis of res judicata. Again, Drost did not appeal this dismissal and makes no real mention of it in its brief on appeal. Thus, Drost has abandoned on appeal the whole question of the validity of the dismissal based on res judicata. This Court should not be in the business of deciding, even in a single sentence, issues that the parties have abandoned and that are not before us. Based on the facts of this case and the utter lack of briefing on this issue, the only thing I am prepared to say is that a judge s ultimate decision to dismiss a case based on res judicata is, in my opinion, in and of itself -1-
not enough to automatically find that the dismissed claim is devoid of arguable legal merit and therefore frivolous. Second, the majority s statement that Drost s claims of unjust enrichment are wholly their own, and not dependent on the Vicks rights runs contrary to Drost s assertions below and on appeal. According to Downey s brief to this Court, Drost s attorney below indicated it was claiming its unjust enrichment claim arose from the Assignment it received from Mr. and Mrs. Vick and that Drost was enforcing the Vicks rights against the Downeys. Ordinarily, I would not rely exclusively upon one party s brief and I am not doing so here, for the simple reason that Drost asserted below that its unjust enrichment claim arose from the assignment, and asserts exactly the same thing on appeal: Admittedly, a third party is not unjustly enriched when it receives a benefit from a contract between two other parties... in the absence of some misleading act by the third person.... Because of that rule, Drost does not itself have a direct claim against the Downeys, which is the very reason that led Drost to negotiate an assignment from the Vicks of their claims against the Downeys.... Accordingly, in the instant lawsuit, Drost is enforcing the Vicks claim of unjust enrichment against the Downeys. [Emphasis supplied]. As with the res judicata dismissal, the trial court s alternative ruling that Drost failed to state a claim on which relief can be granted is not before us. However, the parties have extensively briefed this issue both parties cite Morris Pumps v Centerline Piping 1 and the majority relies on this case as controlling. Certainly Morris Pumps is not controlling if Drost is only enforcing the Vicks claim of unjust enrichment against the Downeys. I agree, however, that Morris Pumps has considerable factual similarity to this case if we can conclude as the majority does contrary to Drost s own direct assertions to this Court that Drost s claim of unjust enrichment is wholly its own and is not dependent on the Vicks rights. I do note, however, the following general statement in Morris Pumps, taken from 66 Am Jur 2d, Restitution and Implied Contracts: [a] third party is not unjustly enriched when it receives a benefit from a contract between two other parties, where the party benefitted has not requested the benefit or misled the other parties.... Otherwise stated, the mere fact that a third person benefits from a contract between two other persons does not make such third person liable in quasi-contract, unjust enrichment, or restitution. Moreover, where a third person benefits from a contract entered into between two other persons, in the absence of some misleading act by the third person, the mere 1 Morris Pumps v Centerline Piping, 273 Mich App 187; 729 NW2d 898 (2006). -2-
failure of performance by one of the contracting parties does not give rise to a right of restitution against the third person. 2 Here there are two contracts: (1) the land contract between the Vicks and Derita Downey for the conveyance of the property, and (2) the contract, of whatever sort, between Drost and the Vicks for landscaping at the property. For purposes of the Drost claims, the land contract is irrelevant, other than for its provision stating that the improvements become the property of the seller (Downey) if the purchaser (the Vicks) defaulted, which of course they did. The second contract again, in whatever form as the record is unclear on this was between two other persons : Drost and the Vicks. And Downey is the third, non-contracting person. Assuming that Downey actually did achieve some advantage from the landscaping improvements, which is disputed on the record, Downey would be the person who benefitted from the Drost/Vicks landscaping contract. But there is absolutely no evidence that Downey committed some misleading act or requested the benefit of the landscaping improvements. Thus, it appears to me, the majority s reliance on Morris Pumps stumbles at the outset: there is no misleading act and no request for the benefit of the landscaping improvements that leads us away from the Am Jur general rule. Accordingly, the inquiry into whether Downey, the non-contracting party, was unjustly enriched and retained an independent benefit 3 may not have been triggered; Morris Pumps would therefore be instructive, but not controlling. However, whether Drost and the majority have misread Morris Pumps is only a predicate question. Let us assume that Drost and the majority are wrong and Morris Pumps does not control. As the majority notes, MCL 600.2591(3)(a) states that a claim is frivolous when: (1) the party s primary purpose was to harass, embarrass or injure the prevailing party ; (2) [t]he party had no reasonable basis to believe that the facts underlying that party s legal position were true ; or (3) [t]he party s position was devoid of arguable legal merit. 4 I cannot conclude that Drost s claims were devoid of arguable legal merit, a most difficult standard to meet. Because a judge ultimately finds a party to have been wrong does not mean that party s claim was automatically frivolous. There needs to be more much more and I am not prepared to conclude that there is a sufficient factual underpinning in this case to determine that the Drost s claims were frivolous at either the trial or appellate court level. Consequently, I concur in the majority s result, despite my disagreement with its reasoning. /s/ William C. Whitbeck 2 Morris Pumps, 273 Mich App at 196, quoting 66 Am Jur 2d, Restitution and Implied Contracts, 32, p 628 (emphasis supplied). 3 Id. 4 Kitchen v Kitchen, 465 Mich 654, 662; 641 NW2d 245 (2002). -3-