Opinion
No. 346657
04-18-2019
SIMMONS PROPERTIES, LLC, Plaintiff/Counterdefendant-Appellant, v. LANSING ENTERTAINMENT AND PUBLIC FACILITIES AUTHORITY, Defendant/Counterplaintiff-Appellee.
If this opinion indicates that it is "FOR PUBLICATION," it is subject to revision until final publication in the Michigan Appeals Reports. UNPUBLISHED Ingham Circuit Court
LC No. 18-000474-CK Before: BORRELLO, P.J., and SHAPIRO and RIORDAN, JJ. PER CURIAM.
Plaintiff/counter-defendant Simmons Properties, LLC (plaintiff), appeals by right the trial court's order granting summary disposition in favor of defendant/counter-plaintiff's Lansing Entertainment and Public Facilities Authority's (defendant) and granting defendant a possession judgment. For the reasons set forth in this opinion, we affirm.
I. BACKGROUND
In July 2010, plaintiff leased space from defendant, the Lansing Entertainment and Public Facilities Authority (LEPFA), in the Lansing City Market (the market) to operate the Waterfront Bar & Grill. On November 19, 2015, rather than extending the 2010 lease, the parties entered into a new lease (the lease). The lease provided that "[t]he term of this Agreement is to begin on November 19, 2015, ending on July 1, 2018." The lease contained a provision indicating there was "no option to renew." However, the parties modified the clause by striking the former language and adding new language as follows:
16.NO OPTION TO RENEW: The Lessee understands, this Agreement does not contain or imply an option to renew. If either party opts not to renew the
agreement they must inform the opposite party in writing thirty (30) days before expiration of agreement.Option to renew every 3 years for up to 15 years. Initial LEPFA___ Initial John S. Simmons___.
Neither party initialed the modification to ¶ 16.
The 2015 lease also contained the following provision governing a lessee holdover:
17. RENEWAL: In the event that Lessee holds over after the expiration of the term of this Agreement or any renewal thereof, tenancy shall automatically become month-to-month from and after the expiration of the term of this Agreement or any renewal thereof.
The 2015 lease contained the following provisions governing a default by the lessee and the lessor's right to terminate the lease:
28. DEFAULT BY LESSEE: If the Lessee shall default in complying with any of the terms, conditions, and obligations of this Agreement, then the Lessor may serve written notice upon the Lessee to cure the default within five (5) days. If the Lessee falls [sic] to cure the default within such five (5) day period, then the Lessor may, at its discretion, serve the Lessee a written notice terminating this Agreement as of a date not less than three (3) days after service of such notice.
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37. TERMINATION BY LESSOR: This Agreement may be terminated by the Lessor, for cause or any breach of rule or lease terms, by submitting a notice of termination to the Lessee. Such notice shall be in writing and shall be effective ten (10) days from day submitted.
Before the 2015 lease expired on July 1, 2018, on May 1, 2018, defendant sent plaintiff a letter indicating that defendant would not renew the 2015 lease and that plaintiff should be prepared to vacate the premises by July 1, 2018. Plaintiff replied by letter indicating that it planned to exercise its right to renew the lease for another three years pursuant to ¶ 16. Defendant responded on June 20, 2018, by sending defendant a "Notice to Quit" letter in which defendant informed plaintiff that it had until July 31, 2018 to vacate the premises or defendant may commence eviction proceedings.
Thereafter, plaintiff commenced this suit alleging breach of contract and intentional interference with a business expectation. Plaintiff requested declaratory and injunctive relief. Plaintiff maintained that under ¶ 16 of the 2015 lease it had a unilateral option to renew for another three years for up to 15 years.
Thereafter, defendant moved for summary disposition, arguing that plaintiff did not have a unilateral right to renew the lease. Defendant also argued that, even if plaintiff did have a right to renew the lease, during the term of the 2015 lease, plaintiff violated rules and regulations, applicable laws, codes, and ordinances. Specifically, defendant listed 11 separate violations including improper installation of fixtures, performing work without the proper permits, violations of plaintiff's liquor license, noise violations, violations of the health code, parking infractions, and failing to timely make a monthly rental payment. Therefore, defendant argued, it had a right to terminate the lease pursuant to ¶ 37. Defendant also argued that plaintiff's tort claim was barred by governmental immunity.
The trial court granted defendant's motion for summary disposition. The trial court held that ¶ 16 was, at best, ambiguous. The phrase "option to renew every three years" was unclear as to whether "that means tenant alone or with the ascent of both." The trial court held that resolution of the ambiguity required a factual determination. However, the trial court held that it was not necessary to resolve the factual dispute because defendant had a right to terminate the lease under ¶ 37 for cause. Specifically, plaintiff admitted during discovery to four separate health code violations. In addition, plaintiff admitted that it failed to make a timely rental payment in January 2017. Therefore, there was no issue of fact that these violations amount to a breach of the lease and defendant had the right to terminate the lease for cause pursuant to ¶ 37. The trial court also granted summary disposition as to plaintiff's tort claim, holding that the claim was barred by governmental immunity.
II. BREACH OF CONTRACT
Plaintiff argues that the trial court erred in granting summary disposition in favor of defendant as to its breach of contract claim.
"We review de novo a trial court's decision on a motion for summary disposition to determine whether the moving party is entitled to judgment as a matter of law." Cuddington v United Health Servs, Inc, 298 Mich App 264, 270; 826 NW2d 519 (2012). "[B]ecause the trial court considered documentary evidence beyond the pleadings, we construe the motion as having been granted pursuant to MCR 2.116(C)(10)." Id. "In reviewing a motion brought under MCR 2.116(C)(10), we review the evidence submitted by the parties in a light most favorable to the nonmoving party to determine whether there is a genuine issue regarding any material fact." Id. This appeal requires that we construe and apply the relevant provisions of the lease agreement, which involve a question of law that we review de novo. McDonald v Farm Bureau Ins Co, 480 Mich 191, 197; 747 NW2d 811 (2008).
Plaintiff argues that the trial court erred in finding that the lease permitted defendant to terminate the agreement for any breach. According to plaintiff, the lease terms conflicted and were ambiguous, creating a genuine issue of material fact. We disagree.
"The primary goal in interpreting contracts is to determine and enforce the parties' intent." Old Kent Bank v Sobczak, 243 Mich App 57, 63; 620 NW2d 663 (2000). "To do so, this Court reads the agreement as a whole and attempts to apply the plain language of the contract itself." Id. "The initial question whether contract language is ambiguous is a question of law." Port Huron Ed Ass'n, MEA/NEA v Port Huron Area Sch Dist, 452 Mich 309, 323; 550 NW2d 228 (1996). "If the contract language is clear and unambiguous, its meaning is a question of law." Id. However, "[w]here the contract language is unclear or susceptible to multiple meanings, interpretation becomes a question of fact." Id.
In this case, the trial court did not err in holding that ¶ 16 of the lease was ambiguous. The language "Option to renew every 3 years for up to 15 years" is subject to two different meanings. The language could mean that both parties have the option to mutually renew the lease, or, alternatively, the same language can be read to mean that either party has the right to unilaterally renew the lease. Given this ambiguity, there was a factual dispute as to the meaning of ¶ 16. See id. However, during the parties' dispute over the right to renew, the contract expired and plaintiff remained on the premises. During this dispute, plaintiff remained a holdover and the lease converted to a month-to-month lease pursuant to ¶ 17 and all of the other terms of the lease remained in effect. The central issue in this appeal involves whether the trial court erred in holding that, irrespective of ¶ 16, defendant had the right to terminate the lease for cause based on plaintiff's previous breach of the lease agreement.
In this case, ¶ 8 of the lease provided as follows:
8. COMPLIANCE WITH APPLICABLE CODE AND LAWS: Lessee shall comply with all laws, rules and regulations affecting sales space, the Market, or the activities conducted by the Lessee which are now or may hereafter be made effective by the United States or its agencies; the State of Michigan or its departments or divisions; the City of Lansing; and the Lansing Entertainment and Public Facilities Authority.
In this case, in responding to defendant's requests for admissions, plaintiff admitted that the Ingham County Health Department found violations of the health code on multiple occasions. Plaintiff also admitted that it failed to make a timely rent payment in January 2017, which amounted to a breach of ¶ 4 of the lease. In addition, defendant submitted documentation showing that plaintiff previously violated its liquor license on March 15, 2016, and May 30, 2018. These violations established that, during the term of the lease, plaintiff did not "comply with all laws, rules and regulation affecting sales space, the Market, or the activities conducted by the Lessee," and that plaintiff breached ¶ 8 during the lease term.
Defendant also submitted documentation showing a liquor license violation in 2014; however, that violation did not occur during the term of the 2015 lease; therefore, it is irrelevant. --------
Having determined that plaintiff breached a provision of the lease, we must determine whether the trial court erred in holding that defendant had authority to terminate the lease for cause under ¶ 37.
As noted above, the lease contains two provisions that address default and termination as follows:
28. DEFAULT BY LESSEE: If the Lessee shall default in complying with any of the terms, conditions, and obligations of this Agreement, then the Lessor
may serve written notice upon the Lessee to cure the default within five (5) days. If the Lessee falls [sic] to cure the default within such five (5) day period, then the Lessor may, at its discretion, serve the Lessee a written notice terminating this Agreement as of a date not less than three (3) days after service of such notice.
* * *
37. TERMINATION BY LESSOR: This Agreement may be terminated by the Lessor, for cause or any breach of rule or lease terms, by submitting a notice of termination to the Lessee. Such notice shall be in writing and shall be effective ten (10) days from day submitted. [Emphasis added.]
On appeal, plaintiff contends that the trial court erred in holding that defendant could proceed under either ¶ 28 or ¶ 37 following a default. Instead, according to plaintiff, defendant cannot terminate the lease under ¶ 37 unless it has first complied with ¶ 28 and provided plaintiff an opportunity to cure its default. This argument lacks merit. Importantly, ¶ 28 includes permissive language; it provides that, in the event of a default, defendant "may serve written notice upon the Lessee to cure the default . . . " (emphasis added). See Atchison v Atchison, 256 Mich App 531, 535; 664 NW2d 249 (2003) ("Under the plain-meaning rule, courts must give the ordinary and accepted meaning to the mandatory word 'shall' and the permissive word 'may . . . "). Here, use of the permissive word "may" indicates that defendant was not required to first provide notice and an opportunity to cure under ¶ 28 before it availed itself of the termination option set forth in ¶ 37. In other words, compliance with ¶ 28 was not a condition precedent to effectuating termination under ¶ 37.
The broad language in ¶ 37 reinforces that defendant had the authority to terminate the lease for plaintiff's breach irrespective of when the breach occurred and irrespective of whether defendant afforded plaintiff an opportunity to cure the breach. Specifically, ¶ 37 provides that the lease "may be terminated by the Lessor, for cause or any breach of rule or lease terms . . . " (emphasis added). This wording is broad and all-inclusive; it does not impose any condition precedent on defendant's ability to terminate the lease; rather, defendant may terminate the lease for "any breach of rule or lease terms." Read together, ¶ 37 is unambiguous and does not conflict with ¶ 28. The paragraphs provide defendant with discretion to either allow plaintiff an opportunity to cure the breach or alternatively terminate the lease.
Plaintiff argues that defendant waived the right to terminate the lease under ¶ 37 by failing to terminate immediately after the breaches. This argument is unpersuasive.
"Waiver is the intentional relinquishment of a known right." Book Furniture Co v Chance, 352 Mich 521, 526; 90 NW2d 651 (1958); see also McDonald v Farm Bureau Ins Co, 480 Mich 191, 204; 747 NW2d 811 (2008). Typically, a party waives its rights "by acts which indicate an intention to relinquish it . . . or by so neglecting and failing to act as to induce a belief that it was the intention and purpose to waive." Id. at 526-527.
In this case, ¶ 37 did not impose timing restrictions on defendant's ability to terminate the lease. Rather, the paragraph provided defendant the discretion to terminate the lease for "any breach." This language implies that defendant may terminate the lease at any time for a breach that occurred during the lease term. Indeed, the only restrictions in ¶ 37 concern the manner in which defendant may terminate the lease. Specifically, to terminate under ¶ 37, defendant must submit "a notice of termination to the Lessee. Such notice shall be in writing and shall be effective ten (10) days from day submitted." The inclusion of restrictions on the manner in which defendant may terminate a lease and the failure to include similar timing restrictions indicates that the contract was drafted to afford defendant discretion to terminate for any breach occurring during the lease term irrespective of the remoteness of the breach. Accordingly, defendant did not waive its right to terminate the lease under ¶ 37.
Plaintiff argues alternatively that even assuming that defendant had the discretion to terminate the lease, it could not do so because it failed to give adequate notice. We disagree. As noted above, ¶ 37 permitted termination of the lease but required that defendant "submit[] a notice of termination to the lessee. Such notice shall be in writing and shall be effective ten (10) days from day submitted." The Notice to Quit letter that defendant sent to plaintiff was in writing and provided adequate notice of termination. The notice was provided via an official State Court Administrative Office form, and it clearly informed plaintiff that it was required to vacate the property or face eviction proceedings. The lease did not impose any further requirements.
III. TORT CLAIM
Finally, plaintiff argues that the trial court erred in holding that its tort claim was barred by governmental immunity. We disagree.
"We review de novo a trial court's decision on a motion for summary disposition to determine whether the moving party is entitled to judgment as a matter of law." Cuddington, 298 Mich App at 270. MCR 2.116(C)(7) provides in relevant part that summary disposition is proper where dismissal of the action or entry of judgment is proper because of "immunity granted by law."
Under MCL 691.1407(1), "a governmental agency is immune from tort liability if the governmental agency is engaged in the exercise or discharge of a governmental function." "A governmental function is an activity that is expressly or impliedly mandated or authorized by constitution, statute, local charter or ordinance, or other law." Herman v City of Detroit, 261 Mich App 141, 144; 680 NW2d 71 (2004) (quotation marks and citations omitted). "This definition is to be broadly applied." Id. Moreover, to be considered a governmental function, there only need be "some constitutional, statutory, or other legal basis for the activity in which the governmental agency was engaged." Id. (quotation marks and citation omitted). Additionally, "[a] determination of whether an activity was a governmental function must focus on the general activity and not the specific conduct involved at the time of the tort." Id.
MCL 691.1413 provides an exception to governmental immunity for tort actions "arising out of the performance of a proprietary function." MCL 691.1413. To constitute a proprietary function, the conduct "(1) must be conducted primarily for the purpose of producing a pecuniary profit; and (2) it cannot be normally supported by taxes and fees." Herman, 261 Mich App at 145 (quotation marks and citation omitted).
Governmental immunity is not an affirmative defense; it is a characteristic of government, and a plaintiff must plead in avoidance of governmental immunity. Mack v Detroit, 467 Mich 186, 199-200; 649 NW2d 47 (2002). "A plaintiff pleads in avoidance of governmental immunity by stating a claim that fits within a statutory exception or by pleading facts that demonstrate that the alleged tort occurred during the exercise or discharge of a nongovernmental or proprietary function." Id. at 204.
In the present case, plaintiff did not allege facts or present evidence to establish that defendant's operation of the market was an activity "conducted primarily for the purpose of producing a pecuniary profit." Herman, 261 Mich App at 145. Plaintiff alleged that defendant was a city agency and asserted that it had rented out space in the city market to plaintiff. However, there were no facts alleging that defendant was engaged in an activity primarily for profit and plaintiff did not present any evidence to the trial court establishing a question of fact whether defendant was engaged in a profit-making operation. See id. Additionally, there were no allegations that defendant's activity was not generally supported by taxes nor any evidence to so indicate. See id. In short, plaintiff failed to allege-sufficient facts or produce evidence to meet its burden of pleading in avoidance of governmental immunity. See Odom v Wayne Co, 482 Mich 459, 478-479; 760 NW2d 217 (2008).
Affirmed.
/s/ Stephen L. Borrello
/s/ Douglas B. Shapiro
/s/ Michael J. Riordan