Summary
holding that "extrinsic evidence may be used to supplement, but not contradict, the terms of the written agreement"
Summary of this case from Bradley v. McNeight (In re Estate of McNeight)Opinion
Docket No. 64246.
Argued January 8, 1981 (Calendar No. 12).
Decided May 18, 1982.
Vestevich, Dritsas, McManus, Evans Payne, P.C. (by L. Stanford Evans), and Davidson, Gotshall, Kohl, Secrest, Wardle, Lynch Clark (by William P. Hampton) for plaintiff.
Beier, Howlett, McConnell, Googasian McCann (by Kenneth B. McConnell) for defendants Detroit Hockey Club and Olympia Stadium Corporation.
Schiff, Hardin Waite (by W. Donald McSweeney and Aaron J. Kramer) for defendant Norris Grain Company.
The plaintiff sued defendants for breach of an alleged contract to jointly develop a new sports arena for use by the defendant Detroit Hockey Club, Inc. The trial court granted defendants' motions for accelerated judgment, GCR 1963, 116, and summary judgment, GCR 1963, 117.2(3). A divided Court of Appeals (BEASLEY, J., dissenting) affirmed, holding that summary judgment was appropriate because the alleged contract, as embodied in a letter dated March 11, 1977, was not intended to be a binding contract and only constituted an unenforceable agreement to agree. 94 Mich. App. 770; 288 N.W.2d 362 (1979). We disagree and reverse.
We conclude that the plaintiff's sworn complaint, affidavits and other documentary evidence raise a genuine issue of material fact as to whether the parties intended to agree and in fact agreed to a binding contract. Consequently, summary judgment should not have been granted.
I
This litigation arises out of the ill-fated plan to build a new sports arena, which was to have been called Olympia II, near the Pontiac Silverdome for primary occupancy by the Detroit Red Wings. The plaintiff alleges that the defendants breached a binding contract to jointly develop the arena on property owned by the plaintiff when they abandoned the project in favor of the City of Detroit's new riverfront arena, now known as the "Joe Louis Arena". The essential terms of the contract are allegedly embodied in a "Letter of Intent" dated March 11, 1977. The trial court granted defendants' motion for accelerated judgment, GCR 1963, 116, finding that the letter was, at most, an unenforceable agreement to agree and an insufficient memorandum to satisfy the applicable statutes of frauds. The trial judge also granted summary judgment under GCR 1963, 117.2(3), asserting that the letter of intent was never accepted by "delivery back".
The plaintiff appealed the dismissal of the breach of contract claims to the Court of Appeals. That Court held that summary judgment under GCR 1963, 117.2(3) was appropriate. The statute of frauds issue was not addressed. We granted leave to appeal.
II
The trial court and Court of Appeals agreed with the defendants, as we have noted, that the letter of March 11, 1977, was "not intended to be a binding contract but operated only as an unenforceable agreement to agree". A contract to make a subsequent contract is not per se unenforceable; in fact, it may be just as valid as any other contract. 1 Corbin, Contracts, § 29, p 84; see Hansen v Catsman, 371 Mich. 79; 123 N.W.2d 265 (1963). Like any other contract, a contract to make a contract can fail for indefiniteness if the trier of fact finds that it does not include an essential term to be incorporated into the final contract. Socony-Vacuum Oil Co, Inc v Waldo, 289 Mich. 316, 323; 286 N.W. 630 (1939). Similarly, if the agreement is conditioned on the happening of a future event that, through no fault of the parties, never happens, liability does not attach. Professional Facilities Corp v Marks, 373 Mich. 673, 678; 131 N.W.2d 60 (1964): "The conditions upon which defendants' liability for a fee were to depend are not alleged to have been fulfilled at any time."
The fact that the parties in this case expressly left certain matters to be negotiated in the future is some evidence that the memorandum of March 11, 1977, was not intended to be a binding contract. The tentative language of the letter might also convince a rational factfinder that the letter contains mere expectations or intentions rather than contractual promises and undertakings. Each party may have intended to proceed at its own risk should the other party unilaterally decide to abandon the project before a legally binding final contract was executed. On the other hand, the parties may have intended to execute a series of increasingly detailed contracts as the project progressed, with each contract legally binding and protecting each party's interest in the arena project should the other party withdraw. The fact that additional contracts may have been contemplated and mentioned in the letter does not invalidate any agreement actually reached. Professor Corbin (1 Corbin, Contracts, § 29, pp 86-88) warns:
"We must not jump too readily to the conclusion that a contract has not been made from the fact of apparent incompleteness. People do business in a very informal fashion, using abbreviated and elliptical language. A transaction is complete when the parties mean it to be complete. It is a mere matter of interpretation of their expressions to each other, a question of fact."
Whether the parties intend to be bound only by a formally written and executed final document is a question of fact, not a question of law; in most cases the question is properly left to the jury. Corbin, § 30, p 97.
A genuine issue of fact is created when the affidavits, pleadings, depositions, admissions and documentary evidence, viewed in the light most favorable to the party opposing the motion, might permit inferences contrary to the facts as asserted by the movant. Durant v Stahlin (Appeal in re King, Bashara, Merrell, and Waldron), 374 Mich. 82, 88-89; 130 N.W.2d 910 (1964); compare Zimmerman v Stahlin, 374 Mich. 93; 130 N.W.2d 915 (1964); Durant v Stahlin (Appeal in re VanDusen, Elliott, Romney), 375 Mich. 628; 135 N.W.2d 392 (1965); Durant v Stahlin (Appeal in re Brucker), 375 Mich. 665; 135 N.W.2d 407 (1965). Summary judgment is rarely appropriate where "motive and intent play leading roles." 374 Mich. 90; see also cases cited therein.
The letter of March 11, 1977, is not free from ambiguity. The interpretation urged by defendant-appellee and adopted by the lower courts would deny the letter any contractual effect. On the other hand, the letter may have been intended to protect the interests of each party should either party unilaterally abandon the project. As dissenting Court of Appeals Judge BEASLEY declared at p 775:
"These conflicting approaches to the parties' meaning are the stuff of which ambiguity is made. If there is ambiguity, this is not a case for accelerated or summary judgment."
Documentary evidence extrinsic to the March 11 letter gives rise to an inference that the parties intended a binding agreement. An earlier letter of intent dated September 16, 1976, stated explicitly that:
"Neither party shall be liable to the other for any fees, costs or expenses incurred by reason of the good-faith pursuit of the intent of this letter."
Although extended, the September 16 letter of intent apparently expired on December 15, 1976. The deletion of the above-quoted language from the March 11, 1977, letter suggests at least an inference that at this point the parties did intend to be contractually liable for such fees, costs and expenses.
Further support for plaintiff-appellant's position is found in the affidavit of plaintiff's attorney, James B. Dritsas, dated May 5, 1978, in which it is asserted that representatives of the parties were willing to be bound by a letter without an expiration date. The affidavit states in paragraph five that the relationship of the parties had changed since the drafting of the first letter of intent, when they were "unknown quantities to each other". It is reasonable to infer that since the parties "knew" each other and "were working for a common goal", they intended to contractually obligate each other to see the stadium project through to completion.
The trial court and the Court of Appeals majority carefully scrutinized the March 11 letter in order to ascertain the parties' intent. We eschew that approach, in part to emphasize that such a factual inquiry should have been made only by a trial court factfinder after consideration of all of the relevant evidence to be produced at trial on the point. Consequently, the Court of Appeals majority erred in finding no genuine issue as to any material fact, holding that the letter of March 11, 1977, was "not intended to be a binding contract but operated only as an unenforceable agreement to agree". 94 Mich. App. 774.
A similar factual dispute exists concerning the question whether the alleged contract of March 11, 1976, was ever accepted by the defendants. Generally, an offer may be accepted in any manner reasonable under the circumstances, unless the offeror specifies an exclusive mode of acceptance. Corbin, supra, § 88, p 375. In this case the offer could bind the offerees if (1) the "signature and delivery back" clause was merely a suggested rather than exclusive mode of acceptance, and acceptance was made by other reasonable means; or (2) the signature requirement was met and was sufficient for acceptance, delivery back being a mere courtesy not essential to acceptance; or (3) the defendant either waived or is estopped from asserting failure to comply with the formal acceptance requirements.
The concluding paragraph of the lengthy and detailed letter reads:
"If this letter properly reflects your understanding of the spirit and intent of what the parties are attempting to achieve, would you please so indicate by signing and returning one copy of this Letter of Intent.
"Very truly yours,
"OPDYKE INVESTMENT COMPANY
"By: /s/ Robert D. Forte
"General Partner "Robert D. Forte "ACKNOWLEDGED: "Olympia Stadium Corp. "By: _________________ "Bruce A. Norris "Its: President
"Norris Grain Company "By: ________________ "Bruce A. Norris "Its: President
"Detroit Hockey Club, Inc. "By: _________________ "Bruce A. Norris "Its: President
"Dated: March , 1977"
The parties agree that the letter was not signed by Mr. Norris and returned to the plaintiff. The plaintiff claims, however, that there is evidence that it was signed by Mr. Norris but not returned.
The trial judge correctly noted a genuine issue of material fact as to whether the defendants ever signed the letter; a similar dispute exists as to whether "delivery back" was required, waived, or subject to estoppel; thus summary judgment for the defendants, based upon a finding that the alleged offer was never accepted, was inappropriate.
III
The circuit court granted accelerated judgment for the defendants based on its finding that the March 11, 1977, letter was an insufficient note or memorandum to satisfy the requirements of the applicable statutes of frauds. The plaintiff-appellant apparently concedes that at least one of the statute-of-frauds provisions cited by defendants-appellees applies, but, nevertheless, argues that the March 11, 1977, letter is sufficient to satisfy the statute and that, in any event, the complaint states a cause of action under the doctrine of promissory estoppel.
MCL 566.108; MSA 26.908, contract for the lease of land for a longer period than one year; MCL 566.132(a); MSA 26.922(a), an agreement by its terms not to be performed within one year; MCL 440.8319; MSA 19.8319, contract for the sale of securities.
A
The Statute of Frauds has enjoyed a position of prominence in Anglo-American jurisprudence for three centuries and has proven durably resistant to continuing scholarly criticism. The statute remains firmly entrenched in our law despite its repeal in England, the jurisdiction of its birth, in 1956. Forty-nine states retain the statute. Louisiana, with its French civil-law heritage, is the exception. Even the modern Uniform Commercial Code includes a modified statute of frauds. UCC 2-201; MCL 440.2201; MSA 19.2201.
An Act for Prevention of Frauds Perjuries, 29 Car 2, ch 3, §§ 4, 17; 5 Stat at Large 430 (1677).
Perillo, The Statute of Frauds in the Light of the Functions and Dysfunctions of Form, 43 Fordham L Rev 39, 42, fn 29 (1974); 2 Corbin, Contracts, § 275, p 2.
The provisions regarding promises to answer for the debt, default or miscarriage of another, as well as contracts involving interests in real estate were retained. Decker, The Repeal of the Statute of Frauds in England, 11 Am Bus L J 55, 58 (1973).
While the form of the statute has remained essentially unchanged over the centuries, judicial interpretation has undergone considerable evolution. The doctrine of "part performance" satisfying the statute is as old as the statute itself; estoppel and promissory estoppel have developed to avoid the arbitrary and unjust results required by an overly mechanistic application of the rule. It has been suggested that if the statute lacked such equitable "loopholes", the outcry would soon be such that amendments would be passed in short order.
Note, Statute of Frauds — The Doctrine of Equitable Estoppel and the Statute of Frauds, 66 Mich L Rev 170, 171-172 (1967).
Perillo, supra, p 71.
In contrast with American trial procedure, 17th Century English litigants and their relatives were disqualified from testifying. If a written contract did not exist, a jury was expected to discern and enforce oral contracts, even though the parties and those closest to them could not be heard or cross-examined. It was thought that the requirement of a signed writing greatly enhanced a jury's ability to decide such cases correctly. As this original rationale for the rule gradually disappeared, so did the policy of strict judicial enforcement.
Id., p 67.
The issue of the legal sufficiency of a "note or memorandum" to satisfy the statute of frauds is not one of first impression in this state. The "note or memorandum" involved here, of course, is the letter of March 11, 1977.
The defendants cite Gedvick v Hill, 333 Mich. 689, 695; 53 N.W.2d 583 (1952), quoting Gault v Stormont, 51 Mich. 636, 638; 17 N.W. 214 (1883), as the most recent of a long line of Michigan cases requiring that "a memorandum, to be sufficient * * * must be complete in itself, and leave nothing to rest in parol." The specific holding in Gedvick, however, was that an agreement to sell property was, in fact, never reached; the written application for approval to sell property was not intended to be a contract. As noted in Randazzo v Kroenke, 373 Mich. 61, 70; 127 N.W.2d 880 (1964), the Gedvick Court then "gratuitously added", in dictum, that the application would not have satisfied the statute of frauds even if an agreement had been reached.
Similarly, this Court's decision in Tucson v Farrington, 396 Mich. 169; 240 N.W.2d 464 (1976), also cited to us by appellee, is inapposite. In Tucson, the trial court "judicially imposed terms from the parties' offers and counteroffers made during the course of negotiations subsequent to that writing. This was error." Id., 175. The Tucson case is readily distinguishable from the case at hand because here the plaintiff seeks to supplement, explain and clarify the meaning of the writing as actually intended by the parties at the time the agreement was reached.
For purposes of this motion, we must accept as true plaintiff's factual allegation that an agreement was actually reached. Since a jury trial was demanded, that factual question must be resolved by the jury. See GCR 1963, 116.3.
Certainly nothing in the language of the statute requires adherence to the strict "nothing in parol" rule suggested in Gedvick, supra. The statute does not require the entire contract to be written; a "note or memorandum" of the full contract will suffice. See Kerner v Hughes Tool Co, 56 Cal.App.3d 924; 128 Cal.Rptr. 839 (1976). Perhaps the "nothing in parol" notion resulted from combining the statute of frauds with the so-called "parol evidence rule", or rule against contradicting integrated writings. See NAG Enterprises, Inc v All State Industries, Inc, 407 Mich. 407; 285 N.W.2d 770 (1979), reh den 407 Mich. 1164 (1980); Union Oil Co of California v Newton, 397 Mich. 486; 245 N.W.2d 11 (1976). In any event, the "nothing in parol" approach to the statute of frauds has been so dishonored in this Court that it has lost any claim to legitimacy. Wozniak v Kuszinski, 352 Mich. 431; 90 N.W.2d 456 (1958); Farah v Nickola, 352 Mich. 513; 90 N.W.2d 464 (1958); Cramer v Ballard, 315 Mich. 496; 24 N.W.2d 80 (1946); Goslin v Goslin, 369 Mich. 372; 120 N.W.2d 242 (1963); Duke v Miller, 355 Mich. 540; 94 N.W.2d 819 (1959); Goldberg v Mitchell, 318 Mich. 281; 28 N.W.2d 118 (1947); Randazzo, supra. The foregoing cases establish the principle that extrinsic evidence may be used to supplement, but not contradict, the terms of the written agreement. In the absence of extrinsic supplemental evidence, the court may infer that the parties intended a "reasonable" or "good faith" term as part of the contract.
We decline to accept the defendants' invitation to adopt narrow and rigid rules for compliance with the statute of frauds. Instead, we affirm the standard espoused by Professor Corbin and adopted by this Court in Goslin v Goslin, supra, 369 Mich. 376:
"`Let us proceed, therefore, with a general consideration of what constitutes a sufficient note or memorandum. We may well start with this one general doctrine: There are few, if any, specific and uniform requirements. The statute itself prescribes none; and a study of the existing thousands of cases does not justify us in asserting their existence. Some note or memorandum having substantial probative value in establishing the contract must exist; but its sufficiency in attaining the purpose of the statute depends in each case upon the setting in which it is found. * * * That is the rule of law to be applied with intelligence and discrimination and not like a pedant playing a game of logomachy.'"
B
The defendants-appellees assert further that the letter of March 11, 1977, does not satisfy the statute of frauds because it fails to specify the exact construction site upon which the arena was to be erected, the time for completion of construction, and the time for the defendants to take possession. As to the time for completion and possession, it is well-settled that when no time for performance appears on the face of the agreement, absent any expression of a contrary intent, the law will presume a reasonable time. Goslin, supra, 375; Duke, supra; Goldberg, supra (opinion of BUTZEL, J., approved in Duke, supra); Mull v Smith, 132 Mich. 618; 94 N.W. 183 (1903).
As to the construction site, it appears from the face of the agreement that the parties agreed to a site of "not less than 50 acres" located on the premises owned by the plaintiff. The letter went on to provide:
"The parties will mutually select and agree upon the location of selected premises. The parties will also mutually select the best available site and location for the arena building. The sites selected will be such so as not to encourage use of the Pontiac stadium parking facilities in connection with the project."
It is evident that the parties did not regard the precise construction site within the plaintiff's 117-acre parcel as an essential term of their agreement. On this basis alone it need not have been included in writing, since only "essential" terms need be reduced to writing. Cf. Commercial Factors Corp v Zephyr Awning Corp, 353 Mich. 251; 91 N.W.2d 511 (1958). Further, the "best available site" within the plaintiff's tract is reasonably specific. There is evidence from the pleadings, affidavits and exhibits of record that the parties evidenced an intention to be bound to a reasonable, good-faith selection of the arena site. Finally, we note that the plaintiff has abandoned any demand for specific performance and seeks only damages. To the extent that the selection of one particular 50-acre site materially affects the computation of plaintiff's damages, the defendants are entitled to the assumption that the most advantageous site would have been selected.
In applying the statute of frauds with "intelligence and discrimination", it is clear that the March 11 letter has "substantial probative value in establishing the contract". Goslin, supra, 376. We therefore hold that the March 11, 1977, letter was sufficiently specific to satisfy all applicable statutes of frauds.
C
Finally, to the extent that plaintiff's complaint states a cause of action based on "promissory estoppel", accelerated judgment was inappropriate. This Court acknowledged this theory of recovery in The Vogue v Shopping Centers, Inc (After Remand), 402 Mich. 546; 266 N.W.2d 148 (1978), without adopting any particular version of promissory estoppel. See, e.g., 1 Restatement Contracts, 2d, § 90, p 242; 1A Corbin, Contracts, §§ 204-205, pp 232-250; In re Timko Estate, 51 Mich. App. 662; 215 N.W.2d 750 (1974). In this case, disputed questions of fact exist as to whether a noncontractual promise was made by the defendants and reasonably relied upon by the plaintiff. Since the statute of frauds only applies to certain "contracts", recovery based on a noncontractual promise falls outside the scope of the statute of frauds. The plaintiff's alternate theory of promissory estoppel is sufficiently pleaded and supported to survive the defendants' motion for accelerated judgment based on the statute of frauds.
The judgment of the Court of Appeals is reversed and the cause is remanded to the circuit court for proceedings consistent with this opinion. Costs to plaintiff-appellant. We do not retain jurisdiction.
COLEMAN, C.J., and KAVANAGH, WILLIAMS, LEVIN, FITZGERALD, and BLAIR MOODY, JR., JJ., concurred with RYAN, J.