COGSDILL ENTERPRISES V MAC PRECISION INC
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STATE OF MICHIGAN
COURT OF APPEALS
COGSDILL ENTERPRISES, INC.,
UNPUBLISHED
June 4, 1999
Plaintiff-Appellant,
v
MAC PRECISION, INC.,
Defendant,
and
No. 201884
Macomb Circuit Court
LC No. 93-000628 CK
FLEX MANUFACTURING, INC.,
Defendant-Appellee.
Before: Jansen, P.J., and Holbrook, Jr., and MacKenzie, JJ.
PER CURIAM.
Plaintiff appeals as of right from the trial court’s order entering judgment in favor of defendant
appellee following a bench trial. We affirm.
I. Basic Facts and Procedural History
Defendant Mac Precision, Inc. (hereinafter Mac), who is not a party to this appeal, placed an
order with plaintiff on May 14, 1992, for five hundred deburring tools. At a cost of $32 per tool, the
total cost of the contract was $16,000. Mac agreed to pay cash for the tools upon delivery. Sometime
later, Mac told plaintiff that it needed to ship some of the tools early. Plaintiff agreed, and Mac took
delivery of sixty tools on June 30, 1992. Because Mac could not pay for the tools upon delivery,
plaintiff agreed to hand over the tools in return for Mac’s promise to pay for the tools within thirty days.
Mac eventually paid the $1,920 due on the sixty tools sometime in September 1992.
Plaintiff then called Mac when the remaining 440 deburring tools were ready. On August 4,
1992, Charles Foresi, a sales representative employed by Mac, went to plaintiff’s place of business to
pick up the remaining tools. Foresi told plaintiff that Mac could not pay for the tools at that time, and
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asked that Mac be allowed to take the tools in exchange for a promise to pay within thirty days.
Cameron Cogsdill, president and owner of plaintiff Cogsdill Enterprises, testified at trial that when he
rejected this offer, Foresi then produced a written guarantee of payment from Flex. Plaintiff contended
below that the letter was not written until August 11, 1992. The guarantee, which was typed on
defendant’s letterhead, read in pertinent part:
Gentlemen:
This letter is to advise you concerning our guarantee of payment.
Mac Precision, Inc. has ordered (500) deburring tools from you for a total of
$16,000.00.
Flex Mfg., Inc. will guarantee timely payment in full for the order.
Thank you.
Respectfully yours,
Flex Mfg., Inc.
Quin R. Gleason, President
The guaranty was dated August 11, 1992, and bore the signature “Quin R. Gleason.” Gleason testified
at trial that his signature was placed on the guaranty by his daughter while Gleason was away from the
office. Gleason’s daughter, who works as a secretary for defendant, testified that she typed the letter at
the request of Don McGregor, the president of Mac. Gleason indicated that although he never gave his
daughter the authority to sign his name to this guaranty, and although he never intended to enter into a
guaranty contract with plaintiff, he nonetheless “authorized” the signature after he was told by his
daughter what she had done. In Gleason’s words, “it was too late to get the letter back.” Gleason
never communicated with plaintiff either about the fact that the signature was not his, or that he had
subsequently decided to authorize the signature. Plaintiff was never paid for the 440 tools.
On December 14, 1992, plaintiff filed a five-count complaint against Mac and defendant.
Counts I, II, and III were aimed at Mac. Count IV (promissory estoppel) named both Mac and
defendant, and count V (seeking to enforce the alleged guaranty) named defendant only. On January
15, 1993, the trial court entered a default judgment in the amount of $14,220 against Mac. Both
plaintiff and defendant filed motions for summary disposition on counts IV and V. On January 7, 1994,
the trial court denied plaintiff’s motion and granted defendant’s motion pursuant to MCR 2.116(C)(8)
and (10). Concluding that the trial court had erred in granting summary disposition to defendant, this
Court reversed and remanded the case in an unpublished per curiam opinion. Cogsdill Enterprises,
Inc v Mac Precision, Inc, unpublished opinion per curiam of the Court of Appeals, issued February
27, 1996 (Docket No. 173009).
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A one-day bench trial was held on January 27, 1997. In support of its finding of no cause of
action, the trial court stated:
The Court is making a factual finding that on August 4, 1992, . . . the tools were
given by the plaintiff to the defendant MAC Precision, that the letter was drafted, the
guaranty on August 11[,] 1992. The Court is finding further that there has been a failure
on the part of the plaintiff to prove justifiable reliance. The Court is not convinced that
indeed Mr. Gleason did authorize this guaranty. [Cogsdill] consistently throughout his
testimony indicated that he assumed that Flex was going to guaranty and that by a mere
phone call to Flex Manufacturing, Incorporated, . . . he on his own verified the
legitimacy of this guaranty.
Although the employee may have had the authority to take and sign her
employer’s name, the Court is convinced by the testimony of Mr. Gleason that he never
did authorize the guaranty, and I do accept defendant’s argument with respect to the
fact that it possibly would have been more beneficial to the plaintiff’s case if the guaranty
was presented to the plaintiff by a member of Flex. . . .
So I’m concluding by saying that plaintiff has failed to prove justifiable reliance
and further that the guaranty was written almost a week after the tools were delivered,
and for that reason I’m finding no cause of action.
II. Allegations of Error
A. Dating of the Guaranty Letter
Plaintiff argues that the trial court committed error requiring reversal when it found that the
guaranty was written on August 11, 1992. We disagree. This Court will not set aside a trial court’s
findings of fact unless they are clearly erroneous. MCR 2.613(C). “A finding is clearly erroneous if this
Court is left with a definite and firm conviction that a mistake has been made.” Davidson v Bugbee,
227 Mich App 264, 268; 575 NW2d 574 (1997). On this matter, we are not left with such a
conviction.
Gleason’s daughter testified at trial that she had no doubt that she had typed the guaranty
agreement and signed the document with Gleason’s signature on August 11, 1992. She testified that
she normally placed the current date on a letter whenever she types one. Although Cogsdill testified that
the written guaranty was given to him on August 4, 1992, the same day that Mac received the remaining
440 deburring tools, there were no additional witnesses or documentation to support Cogsdill’s
testimony that the guaranty was given to him on that day. Deferring to the trial court’s special
opportunity to judge the credibility of the witnesses, MCR 2.613(C), we believe that there was
sufficient evidence that the guaranty was written and signed on August 11, 1992.
B. Enforceability of the Guaranty
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Plaintiff also argues that because it had a right to, and did in fact rely on plaintiff’s promise to
guarantee payment of Mac’s debt, the trial court erred in not holding that the guaranty should not be
given legal effect. We again disagree.
A guaranty contract is “an enforceable undertaking or promise by one person collateral to a
primary or principal obligation of another which binds the person making the promise to performance of
the primary obligation in the event of nonperformance; the secondary party thus becomes primarily
responsible for performance.” Angelo Iafrate Co v M & K Development Co, 80 Mich App 508,
514; 264 NW2d 45 (1978). See also Restatement Suretyship and Guaranty, §§ 1, 2, pp 4-5, 19-20.
Generally, a guaranty contract must be supported by consideration. See Angelo Iafrate Co, supra at
516; Restatement Suretyship and Guaranty, § 9(1), p 34. However, there are certain situations where
an enforceable contract will be found in the absence of consideration.1 See Restatement Suretyship and
Guaranty, § 9(2), pp 34-35; 1 Restatement Contracts, 2d, § 88, p 234.
One of the recognized substitutes for consideration is the doctrine of promissory estoppel.
Restatement Suretyship and Guaranty, § 9(2)(d), p 35; 1 Restatement Contracts, 2d, § 88(c), p 234.
Plaintiff asserts that because the evidence established that it justifiably relied on the guaranty when it
released the remaining tools to Mac, the trial court should have held that defendant was estopped from
avoiding enforcement of its promise. Initially, we note that plaintiff’s argument appears to be firmly
rooted on a finding that the guaranty letter was delivered on August 4, 1992. Given our earlier
conclusion regarding the trial court’s finding on the date the letter was written, see discussion IIA, ante,
we believe the soundness of plaintiff’s reasoning is undercut by such a presumption. To the extent that
plaintiff’s argument is not predicated on the dating of the guaranty letter, we still find it to be without
merit.
The framework of a promissory estoppel claim in guaranty law is found in §9(2) of the
Restatement of the Law of Suretyship and Guaranty,2 which states:
(2) A secondary obligation does not fail for lack of consideration if:
***
(d) the secondary obligor should reasonably expect its promise to induce
action or forbearance of a substantial character on the part of the obligee or a third
person, and the promise does induce such action or forbearance.3
Under the promissory estoppel doctrine, a promise to guarantee payment “is binding if injustice can be
avoided only by enforcement of the promise.” 1 Restatement Contracts, 2d, § 90(1), p 242. Accord
Joerger v Gordon Food Service, Inc, 224 Mich App 167, 173; 568 NW2d 365 (1997).
The facts of the case before us clearly show that a forbearance of a substantial character
occurred. When the extension of time to pay was given on August 4, 1992, plaintiff could have brought
suit for the money owed on the previously-delivered sixty tools, as well as for Mac’s failure to pay for
the remaining 460 tools upon delivery. Instead, plaintiff modified the contract by extending the time for
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payment. Plaintiff’s extension of time to pay for the deburring tools was, in effect, both a forbearance to
sue, 38 Am Jur 2d, Guaranty, § 47, p 1051, and an extension of credit to Mac. See Ryco Packaging
Corp of Kansas v Chapelle International, Ltd, 926 P2d 669, 675 (Kan App, 1997).
However, plaintiff failed to establish that plaintiff’s forbearance or reliance was induced by a
promise extended by defendant. There is no evidence whatsoever that defendant was personally
involved in the negotiations that took place between plaintiff and Foresi for an extension of time to pay
for the tools. Pratt v Bates, 40 Mich 37, 39 (1879); Calkins v Chandler, 36 Mich 320, 321; 24 Am
Rep 593 (1877). Further, there is nothing in the record to indicate that defendant had any fore- or
contemporaneous knowledge that Foresi would be offering defendant as a secondary obligor on the
debt. Rather, defendant’s involvement began a week after the extension was given and the tools were
delivered. In other words, there was no promise on the part of defendant that would be enforceable at
law under a theory of promissory estoppel. See Restatement Contracts, 2d, § 1, p 5 (“A contract is a
promise or a set of promises for the breach of which the law gives a remedy, or the performance of
which the law in some way recognizes as a duty.”).4 Justice simply does not demand a contrary result.
Finally, we reject plaintiff’s assertion that its reliance was justifiable under e
ither the law of
agency or respondeat superior. Even if the signature on the guaranty letter was somehow effective
under either theory, plaintiff still cannot show how its actions on August 4, 1992, were made in reliance
on a promise that was not made by the alleged secondary obligor until a week later. In any event, we
do not believe that the trial court committed clear error when it found that Gleason never intended to
officially authorize the guaranty of Mac’s debt.
Affirmed.
/s/ Kathleen Jansen
/s/ Donald E. Holbrook, Jr.
/s/ Barbara B. MacKenzie
1
The concept of consideration “refers to an element of exchange which is legally sufficient” to make a
promise legally binding. Restatement Contracts, 2d, §17, cm d. The element of exchange is one of
“the two essential elements of a bargain.” Id., cm b. Accord id., § 3 (“A bargain is an agreement to
exchange promises or to exchange a promise for a performance or to exchange performances.”);
Corbin, Corbin on Contracts, § 193, p 277 (One volume ed, 1952) (“Most contacts are ‘bargains’
whereby two parties express mutual assent to an exchange of equivalents . . . .”).
2
The commentary to § 9 notes that “[s]ubsection (2)(d) is an application of Restatement, Second,
Contracts § 90 to reliance on a secondary obligation.” Restatement Suretyship and Guaranty, § 9, cm
e. Restatement Contracts, 2d, § 90(1) states:
A promise which the promisor should reasonably expect to induce action or
forbearance on the part of the promisee or a third person and which does induce such
action or forbearance is binding if injustice can be avoided only by enforcement of the
promise. The remedy granted for breach may be limited as justice requires.
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3
The other subsections of §9(2) state that a guaranty contract can be found in the absence of
consideration where:
(a) the underlying obligation is supported by consideration and the later
creation of the secondary obligation was part of the exchange for which the obligee
bargained; or
(b) the promise of the secondary obligor is in writing and signed by the
secondary obligor and recites a nominal purported consideration; or
(c) the promise of the secondary obligor is made binding by statute . . . .
None of these situations are implicated by the circumstances of the case at hand.
4
Although the trial court was not presented with, and did not examine whether the alleged contract was
supported by consideration, we note that plaintiff’s forbearance would also serve as sufficient
consideration f any guaranty contract between plaintiff and defendant. See Bates, supra at 40; 38
or
Am Jur 2d, Guaranty, § 47, p 1051 (“Any delay is a detriment or inconvenience to the creditor or
obligee and also a benefit to the debtor in that he is afforded further opportunity to meet the obligation .
. . .”). However, because plaintiff’s act of forbearance was not bargained for by defendant, the
presence of consideration would not support the conclusion that a legally recognized guaranty contract
had been formed. Defendant’s creation of the guaranty letter was sufficiently contemporaneous with
plaintiff’s expressed willingness to extend the time of payment to Mac, but the evidence establishes that
these two events were not bound up in a transaction in which both parties were active and
knowledgeable participants. Further, until the written promise is delivered, “there is no basis for contact
because, until the creditor is aware of the guarantor’s promise, the creditor cannot extend the requested
consideration as a part of the acceptance of the offer.” 38 Am Jur 2d, Guaranty, § 50, p 1053.
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