Opinion
No. 352049
02-11-2021
RITE-WAY TRANSPORT CO., INC., Plaintiff-Appellee, v. TRANSPORT SYSTEMS, LLC, ALI SALEH, ANWAR SHARIF, and AAS TRANSPORT SERVICES, LLC, Defendants-Appellants.
If this opinion indicates that it is "FOR PUBLICATION," it is subject to revision until final publication in the Michigan Appeals Reports. UNPUBLISHED Wayne Circuit Court
LC No. 18-011818-CB Before: CAVANAGH, P.J., AND SERVITTO AND CAMERON, JJ. PER CURIAM.
Defendants, Transport Systems, LLC ("Transport Systems"), Ali Saleh, Anwar Sharif, and AAS Transport Services, LLC ("AAS"), appeal the trial court's December 10, 2019 order, which awarded plaintiff, Rite-Way Transport Co., Inc. ("Rite-Way Transport"), a judgment in the amount of $85,850.98, which included attorney fees and costs. Defendants also challenge the trial court's November 13, 2019 order, which granted Rite-Way Transport's motion for summary disposition under MCR 2.116(C)(10) (no genuine issue of material fact). We affirm in part, vacate in part, and remand for further proceedings consistent with this opinion.
I. BACKGROUND
In January 2018, Rite-Way Transport entered into a contract with Transport Systems, which is owned by Saleh, for the transportation of freight. Under the contract, Transport Systems agreed to transport automotive parts owned by Ford Motor Company ("Ford") from Michigan to a Ford assembly plant in Missouri. Rite-Way Transport leased a freight trailer from a nonparty and loaded the automotive parts into the trailer. Transport Systems subcontracted the transportation work to AAS, through its owner and driver, Sharif. The vehicle used to tow the trailer was a tractor owned by AAS. In April 2018, Sharif was involved in a motor vehicle accident while in route to Missouri. Ford later rejected the automotive parts. According to Rite-Way Transport, in July 2018, Saleh promised to pay for Rite-Way Transport's damages. When Saleh failed to follow through with his alleged promise, Rite-Way Transport filed suit against defendants.
Following discovery, Rite-Way Transport filed a motion for summary disposition under MCR 2.116(C)(9) (failure to state a valid defense) and (C)(10), arguing that there was no genuine issue of material fact regarding whether Transport Systems breached its contract with Rite-Way Transport, whether AAS was liable for its failure to maintain an insurance policy for the vehicle driven by Sharif under MCL 500.3101(1), and whether AAS was liable for the negligence of Sharif under a theory of respondeat superior. Defendants opposed the motion, arguing that genuine issues of material fact existed for trial. The trial court disagreed with defendants and granted summary disposition in favor of Rite-Way Transport on its breach of contract claim. The trial court subsequently entered a judgment in favor of Rite-Way Transport in the amount of $85,850.98, which included attorney fees and costs. This appeal followed.
II. SUMMARY DISPOSITION
Defendants argue that the trial court erred when it granted Rite-Way Transport's motion for summary disposition in regard to Rite-Way Transport's breach of contract claim against Transport Systems. We disagree.
A. STANDARDS OF REVIEW
Questions involving the proper interpretation and application of a contract are reviewed de novo. Rory v Continental Ins Co, 473 Mich 457, 464; 703 NW2d 23 (2005). This Court also "review[s] de novo a trial court's decision on a motion for summary disposition." El-Khalil v Oakwood Healthcare, Inc, 504 Mich 152, 159; 934 NW2d 665 (2019).
A motion under MCR 2.116(C)(10) . . . tests the factual sufficiency of a claim. When considering such a motion, a trial court must consider all evidence submitted by the parties in the light most favorable to the party opposing the motion. A motion under MCR 2.116(C)(10) may only be granted when there is no genuine issue of material fact. A genuine issue of material fact exists when the record leaves open an issue upon which reasonable minds might differ. [El-Khalil, 504 Mich at 160 (quotation marks and citations omitted).]
"If the moving party properly supports its motion, the burden then shifts to the opposing party to establish that a genuine issue of disputed fact exists. If the moving party fails to properly support its motion for summary disposition, the nonmoving party has no duty to respond and the trial court should deny the motion." Barnard Mfg Co, Inc v Gates Performance Engineering, Inc, 285 Mich App 362, 370; 775 NW2d 618 (2009) (quotation marks and citation omitted).
When reviewing a trial court's decision on a motion for summary disposition, this Court's "review is limited to the evidence that had been presented to the [trial] court at the time the motion was decided. Courts are liberal in finding a factual dispute sufficient to withstand summary disposition." Innovative Adult Foster Care, Inc v Ragin, 285 Mich App 466, 475-476; 776 NW2d 398 (2009) (citation omitted).
B. ANALYSIS
"A party claiming breach of contract must establish (1) that there was a contract, (2) that the other party breached the contract and, (3) that the party asserting breach of contract suffered damages as a result of the breach." Dunn v Bennett, 303 Mich App 767, 774; 846 NW2d 75 (2013) (quotation marks and citation omitted).
In this case, the parties do not dispute the existence of a valid contract between Rite-Way Transport and Transport Systems. Rather, the disputes lies in whether Transport Systems breached the contract. This requires interpretation of the contract. "The primary goal in the construction or interpretation of any contract is to honor the intent of the parties[.]" Klapp v United Ins Group Agency, Inc, 468 Mich 459, 473; 663 NW2d 447 (2003) (quotation marks and citation omitted). "Absent an ambiguity or internal inconsistency, contractual interpretation begins and ends with the actual words of a written agreement." Universal Underwriters Ins Co v Kneeland, 464 Mich 491, 496; 628 NW2d 491 (2001).
The contract between Rite-Way Transport and Transport Systems provided, in relevant part, that Transport Systems
assumes full liability for the full value and actual loss of the property tendered to [Transport Systems] and agrees to indemnify and hold RITE-WAY harmless from any such claims and be liable to the owner of the property, whether Shipper/Consignor or Receiver/Consignee. [Transport Systems] further agrees to defend, hold harmless and indemnify RITE-WAY from any and all liability claims, including costs and attorney fees, for death/injuries/damages to persons and/or property arising out of [Transport Systems] transportation of freight.
Thus, under the plain language of the contract, Transport Systems agreed to assume "full liability for the full value and actual loss of the property" that was tendered to it. Transport Systems also agreed to indemnify Rite-Way Transport for "any and all liability claims," including property damage claims, arising out of Transport Systems's transportation of freight.
We conclude that there was no genuine issue of material fact regarding whether an actual loss occurred with respect to the automotive parts. Rene Arnal, Rite-Way Transport's general manager, averred in an initial affidavit that Rite-Way Transport tendered automotive parts owned by Ford to Transport Systems on or about April 22, 2018. According to Arnal, Rite-Way Transport loaded the automotive parts into a trailer that was leased by Rite-Way Transport, and Transport Systems agreed to transport the trailer to a Ford assembly plant. Arnal averred that the automotive parts were damaged in transit as a result of the accident and that Ford filed a claim "in the amount of $36,055.59." According to Arnal, as of the date of the affidavit, Transport Systems had "failed to indemnify [Rite-Way Transport] for the losses sustained."
In the trial court, Transport Systems conceded that it was required to compensate Rite-Way Transport for damages to the trailer and for the towing charge in relation to the trailer.
Arnal's statements regarding the damage to the automotive parts were corroborated by a claim for payment sent from Ford to Rite-Way Transport on May 18, 2018. The claim for payment provided that Ford sought compensation from Rite-Way Transport in the amount of $36,055.59 because the material received by Ford was "damaged at destination." Arnal's affidavit was further corroborated by a notarized memorandum in which a Ford representative stated (1) that it was not possible to evaluate the functionality of internal electrical components in the automotive parts, (2) that the internal electrical components were compromised and could not be used in the production of vehicles, (3) that, although there was "no evident surface damage" to the automotive parts, "several parts were found dislodged from their nests," and (4) that the entire load of automotive parts was scrapped for public safety concerns because "[t]he use of any of this said material with questionable internal component and/or sensor damage creates a consumer safety violation[.]" In Arnal's supplemental affidavit, Arnal averred that Rite-Way Transport paid Ford $36,055.59 for the damaged automotive parts. Arnal's statement was corroborated by an image that appears to be one of Rite-Way Transport's records; the image supports that Rite-Way Transport paid Ford $36,055.59 on March 7, 2019.
In opposition to this evidence, Transport Systems relied upon their response to one of Rite-Way Transport's interrogatories, in which Rite-Way Transport requested that Transport Systems indicate the method used to value the Ford cargo. In their response, Transport Systems stated, "[d]efendant did not and had no reason to 'value' the cargo. It was not damaged." Transport Systems also relied upon another response to one of Rite-Way Transport's interrogatories, in which Rite-Way Transport requested that Transport Systems indicate whether Transport Systems had the ability to inspect the automotive parts in Rite-Way Transport's trailer following the accident. In the response to this interrogatory, Transport Systems stated, "[d]efendant Sharif took pictures at the site of the accident, the cargo was still in the trailer."
Based upon the evidence presented, there was no genuine issue of material fact regarding whether actual loss occurred. Notably, Transport Systems failed to present any evidence to support that the internal components of the automotive parts were not compromised. In an interrogatory response, Transport Systems stated that Sharif took pictures of the automotive parts at the site of the accident. Transport Systems also stated, without providing an additional explanation, that the automotive parts were not damaged. However, "mere allegations or denials" are not sufficient to overcome a motion for summary disposition. MCR 2.116(G)(4). Moreover, the Ford representative stated in a notarized memorandum that, although there was no visible external damage to the automotive parts, the internal electrical components were compromised and could not be used in the production of vehicles because of public safety concerns. The Ford representative stated that the entire load of automotive parts was scrapped. Considering that Ford rejected and then scrapped the automotive parts, we conclude that there was no genuine issue of material fact regarding whether actual loss occurred.
In so concluding, we note that Transport Systems argues for the first time on appeal that Rite-Way Transport improperly failed to "preserve the cargo following its removal from the scene, over Saleh's objections." According to Transport Systems, "[t]his is clear evidence of spoliation and should have been considered by the trial court when evaluating the affidavit from [the Ford representative] in support of the claim for 'actual loss.' " However, M Civ JI 6.01, at most, would have allowed the trier of fact to infer that inspection of the automotive parts would have produced evidence that was adverse to Rite-Way Transport. Transport Systems essentially argues that the trial court should equally have been permitted to consider an adverse inference in the context of ruling on Rite-Way Transport's motion for summary disposition because of the alleged spoliation of evidence. However, even if this adverse inference was made, the undisputed record evidence would still establish that Ford scrapped the parts, thereby establishing that Ford suffered an actual loss. Moreover, because Rite-Way Transport paid Ford $36,055.59 as a result of the actual loss, Rite-Way Transport was entitled to indemnification under the contract. Consequently, Transport Systems's spoliation argument is unavailing.
In sum, even when viewing the evidence in a light most favorable to Transport Systems, we conclude that there was no genuine issue of material fact regarding whether Transport Systems's refusal to reimburse Rite-Way Transport for the value of the automotive parts constituted a breach of contract. Consequently, the trial court did not err by granting summary disposition in favor of Rite-Way Transport on the breach of contract claim.
Given this holding, we need not consider defendants' other arguments concerning Rite-Way Transport's motion for summary disposition. Although Rite-Way Transport filed a four-count complaint, review of the first-amended complaint establishes that Rite-Way Transport was pleading alternate theories of relief. Indeed, on appeal, Rite-Way Transport indicates that "[i]f the Trial Court's decision is to be sustained, then there will be no reason to further litigate the other Counts contained in Plaintiff/Appellee's First Amended Complaint."
III. ATTORNEY FEES
Next, defendants challenge the trial court's December 10, 2019 judgment, which awarded Rite-Way Transport $85,850.98. This amount included over $20,000 in attorney fees. In relevant part, defendants argue that the trial court erred by failing to assess the reasonableness of the attorney fees requested before entering the judgment. We agree.
A. PRESERVATION AND STANDARD OF REVIEW
Generally, for an issue to be preserved for appellate review, it must be raised in and decided by the trial court. Glasker-Davis v Auvenshine, ___ Mich App ___; ___ NW2d ___ (2020) (Docket No. 345238); slip op at 3. In this case, defendants did not raise any challenges to the requested attorney fees in the trial court, either in a written response, in a motion for reconsideration, or in a motion for relief from judgment. Although Rite-Way Transport argues that defendants are precluded from raising arguments concerning the trial court's award of attorney fees because the issue is not preserved, "issue preservation requirements only impose a general prohibition against raising an issue for the first time on appeal." Id. at ___; slip op at 3. Indeed, this Court "has the power to consider an issue when necessary, even if unpreserved[.]" Id. at ___; slip op at 3.
Under MCR 2.119(C)(4), defendants' response was required to be filed "at least 3 days before the hearing." --------
We review unpreserved claims of error in civil cases for plain error affecting a litigant's substantial rights. Duray Dev, LLC v Perrin, 288 Mich App 143, 150; 792 NW2d 749 (2010). "Plain error occurs at the trial court level if (1) an error occurred (2) that was clear or obvious and (3) prejudiced the party, meaning it affected the outcome of the lower court proceedings." Id.
B. ANALYSIS
"As a general rule, attorney fees are not recoverable as an element of costs or damages absent an express legal exception." Fleet Business Credit v Krapohl Ford Lincoln Mercury Co, 274 Mich App 584, 589; 735 NW2d 644 (2007). "An exception exists where attorney fees are provided by contract of the parties." Id. (quotation marks and citation omitted). "The parties to a contract may include a provision that the breaching party will be required to pay the other side's attorney fees and such provisions are judicially enforceable," although any "recovery is limited to reasonable attorney fees." See Zeeland Farm Servs, Inc v JBL Enterprises, Inc, 219 Mich App 190, 195-196; 555 NW2d 733 (1996).
In this case, it is undisputed that Rite-Way Transport and Transport Systems's contract provided for an award of attorney fees. Specifically, the relevant contractual provision provided as follows:
[Transport Systems] . . . agrees to defend, hold harmless and indemnify RITE-WAY from any and all liability claims, including costs and attorney fees, for death/injuries/damages to persons and/or property arising out of [Transport Systems's] transportation of freight.
Thus, Transport Systems agreed to "hold harmless and indemnify" Rite-Way Transport from claims relating to property damage arising out of Transport Systems's "transportation of freight." This included attorney fees, and there is no argument that Rite-Way Transport is not permitted under the contract to recover attorney fees from Transport Systems. Rather, defendants argue on appeal that the trial court erred by failing to make any findings as to whether the attorney fees requested by Rite-Way Transport were reasonable.
The framework set forth by our Supreme Court in Smith v Khouri, 481 Mich 519; 751 NW2d 472 (2008), remains the standard for determining the reasonableness of requested attorney fees. Pirgu v United Servs Auto Ass'n, 499 Mich 269, 278-279; 884 NW2d 257 (2016). Under the Smith framework, the trial court begins its analysis by "determining the fee customarily charged in the locality for similar legal services" based on "reliable surveys or other credible evidence of the legal market." Smith, 481 Mich at 530-531. Next, "[t]his number should be multiplied by the reasonable number of hours expended in the case[.]" Id. at 531. "The number produced by this calculation should serve as the starting point for calculating a reasonable attorney fee." Id. Finally, the trial court should consider the following list of non-exhaustive factors to determine whether an upward or downward adjustment of attorney fees is appropriate:
(1) the experience, reputation, and ability of the lawyer or lawyers performing the services,
(2) the difficulty of the case, i.e., the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly,
(3) the amount in question and the results obtained,
(4) the expenses incurred,
(5) the nature and length of the professional relationship with the client,
(6) the likelihood, if apparent to the client, that acceptance of the particular employment will preclude other employment by the lawyer,
(7) the time limitations imposed by the client or by the circumstances, and
(8) whether the fee is fixed or contingent. [Pirgu, 499 Mich at 281-282.]
"In order to facilitate appellate review, the trial court should briefly discuss its view of each of the factors above on the record and justify the relevance and use of any additional factors." Id. at 282.
In this case, the trial court did not acknowledge its duties under the Smith framework, much less its responsibility to evaluate the appropriateness of an upwards or downwards adjustment. Rather, it appears that the trial court simply awarded Rite-Way Transport the amount of attorney fees that it requested, without considering whether the fees were reasonable. This resulted in defendants being responsible to pay over $20,000 in attorney fees. Moreover, although only Rite-Way Transport and Transport Systems were parties to the contract, the trial court's December 10, 2019 judgment required "all Defendants" to pay attorney fees. Considering that Rite-Way Transport failed to assert any other exception to the general rule that attorney fees are not recoverable as an element of costs or damages, Rite-Way was not entitled to recover attorney fees from AAS, Saleh, or Sharif. The trial court therefore erred by holding otherwise. See Fleet Business Credit, 274 Mich App at 589.
Because the trial court failed to make findings of fact on the issue of attorney fees, we must vacate the December 10, 2019 judgment and remand this matter to permit the trial court to make the necessary findings of fact. On remand, the trial court shall follow the framework outlined earlier in this opinion and explain the rationale for its decision. See Prins v Mich State Police, 299 Mich App 634, 645-646; 831 NW2d 867 (2013). Based on our decision to remand this matter to the trial court, we need not consider defendants' due process argument, which was raised for the first time in their reply brief on appeal.
Affirmed in part, vacated in part, and remanded for further proceedings consistent with this opinion. We do not retain jurisdiction.
/s/ Mark J. Cavanagh
/s/ Deborah A. Servitto
/s/ Thomas C. Cameron