TRPKO PAVLOVICH V ARBOR DRUGS INC
Annotate this Case
Download PDF
STATE OF MICHIGAN
COURT OF APPEALS
TRPKO PAVLOVICH, MARCIA PAVLOVICH
and OLIVERA PAVLOVICH,
UNPUBLISHED
May 10, 2002
Plaintiffs-Appellants,
V
No. 223087
Wayne Circuit Court
LC No. 98-811501-CK
ARBOR DRUGS, INC.,
Defendant-Appellee.
Before: Neff, P.J., and Wilder and Cooper, JJ.
PER CURIAM.
Plaintiffs appeal as of right from an order granting defendant summary disposition
pursuant to MCR 2.116(C)(10) and denying plaintiffs summary disposition. We affirm.
I. Facts and Proceedings
Plaintiffs owned and operated the “Hunter-Wayne Party Store,” located on the southwest
corner of Hunter and Wayne Roads in the city of Westland. Across Wayne Road, defendants
operated a drug store that was located in a strip mall. Adjacent to the strip mall was an
undeveloped out-lot, which was not owned by defendant’s landlord or plaintiffs.
As defendant’s lease renewal date approached in early 1997, defendant was exploring the
construction of a free standing drug store. Defendant considered the adjacent out-lot for this
expansion, but since this lot was not owned by its landlord and did not appear to be large enough
to accommodate the site plan for a free-standing drug store, defendant entered into a lease
agreement with plaintiffs on May 28, 1997. The lease agreement provided that defendant would
lease plaintiffs property, located at 35201 Hunter Road, for the purpose of constructing a freestanding drug store, and that the lease term would be for twenty-five years, with five additional
five-year automatic renewal provisions. In order to construct the drug store, plaintiffs existing
store was going to be demolished.
The lease agreement also included several condition precedents found in section 39 of the
lease. Among these conditions were provisions 39(a) and (c), which provided, in part:
-1-
(a) This Lease is conditional upon Tenant [defendant] satisfying and/or
waiving each of the following conditions within one hundred eighty (180) days
after the date of this Lease.
(i) This Lease is conditional upon final approval by the City of Westland
and all other necessary governmental bodies of Tenant’s site plan for the
development of the Demised Premises. Tenant shall have complete discretion in
the preparation of such site plan for submission to the City of Westland.
***
(v) This Lease is conditioned upon Tenant obtaining building permits for
its development of the Demised Premises without the imposition of conditions or
expense unacceptable to Tenant in its sole and absolute discretion.
***
If Tenant shall be diligently procuring the satisfaction of the foregoing
conditions, Tenant shall have the right to extend such one hundred eighty (180)
day period for an additional ninety (90) days. Tenant shall exercise such right, if
at all, by written notice to Landlord [plaintiffs] prior to the expiration of such one
hundred eighty (180) day period.
***
(c) Within one hundred eighty (180) days after the date of this Lease (or
two hundred seventy (270) days, if such period shall have been extended), Tenant
shall notify Landlord in writing if the foregoing conditions have been satisfied or
waived by Tenant. In the event Tenant fails to notify Landlord within such one
hundred eighty (180) day period (or two hundred seventy (270) days, if such
period shall have been extended), if all of such conditions have been satisfied or
waived, it shall be deemed that such conditions have been satisfied or waived and
this Lease shall continue in full force and effect.[1]
After entering into the lease, defendant submitted its original site plan to the Westland
Planning Commission for approval. As part of the approval process, defendant’s architect met
with city planning officials to discuss any revisions to the plan that would enable the plan to
meet applicable city ordinance requirements. These discussions led defendant to revise its
original plan in several respects; defendant would obtain additional land, change the street access
to the store, increase landscaping, keep the existing trees as a buffer for the neighbors, and not
1
Other condition precedents set forth in section 39 included adequate soil and environmental
conditions for the drug store (this was to be determined by defendant’s “sole and absolute
discretion”); the purchase of three additional lots by defendant; that plaintiffs provide good and
marketable title to the property; that plaintiffs cooperate with defendant in its efforts to meet the
conditions; and that plaintiffs turn over the property to defendant within ten days of the
conditions being satisfied or waived. These conditions are not in dispute.
-2-
construct a drive-through pharmacy. According to the undisputed testimony of defendant’s land
broker, these revisions caused the project to become one of defendant’s most expensive
developmental projects. Nonetheless, defendant submitted the revised plan to the planning
department and appeared before the Westland Planning Commission on August 5, 1997, seeking
approval of the plan. At the meeting, several neighbors voiced concerns about the store and the
commission tabled the matter and encouraged defendant to meet with the neighbors to see if their
concerns might be accommodated. Representatives of defendant met with the individual
spearheading the opposition, whose home was next to the proposed development. This
individual informed defendant that she would only support the development if defendant agreed
to purchase her home at a cost above fair market value.
On September 3, 1997, defendant’s site plan was again scheduled for consideration by
the Commission. Once again the Commission tabled the matter and requested that defendant try
to satisfy the concerns of those opposing the project. Westland’s planning director invited all
interested parties to an informal meeting to be held on September 16, 1997. However, defendant
instead advised Westland that it was withdrawing its site plan and no longer pursuing the project.
Defendant stated in these letters its belief that because of the strong neighborhood opposition to
the drug store, the plan would never win the approval of the Planning Commission. Defendant
also expressed concern that even if the plan was approved, the long and drawn out planning
process would prevent the drug store from being built in a timely fashion. Defendant’s vice
president also sent a letter to plaintiffs advising them that defendant was unable to fulfill the
conditions stated in section 39(a) of the lease agreement, and that therefore the lease was
terminated.
Plaintiffs’ second amended complaint alleges that defendant breached the lease
agreement by acting in bad faith, and further that defendant committed fraud by making false
statements to plaintiffs.2 Defendant denies the allegations and asserts as affirmative defenses
that (1) plaintiffs failed to state a claim for which relief could be granted, (2) plaintiffs’ claims
were barred by the doctrine of waiver or estoppel, and (3) plaintiffs’ fraud claim was barred by
the economic loss doctrine. Defendant moved for dismissal pursuant to MCR 2.116(C)(8) and
(10), contending that it is undisputed that the contract provisions were not met, and that therefore
it did not breach the lease agreement. Alternatively, defendant contends that plaintiffs suffered
no damages as a result of its decision to terminate the lease and therefore, even if it did breach
the agreement, plaintiffs are not entitled to relief.
Plaintiffs filed their own motion for summary disposition in response, contending that
defendant did breach the agreement, that they had suffered damages as a result of defendant’s
breach, and that defendant’s breach was not excused by the failure of the conditions provided in
section 39(a). Plaintiffs also asserted that defendant had acted in bad faith, demonstrated by its
negotiations to acquire the out-lot adjacent to the strip mall. In support of this allegation of bad
2
While fraud is pleaded in plaintiffs’ second amended complaint, plaintiffs did not raise the
fraud allegation in their summary disposition motion or on appeal. Thus, plaintiffs have both
abandoned and waived this issue. Cf. Etefia v Credit Technologies, Inc, 245 Mich App 466,
471-472 ; 628 NW2d 527 (2001), American Trans, Inc v Channel 7 of Detroit, Inc, 239 Mich
App 695, 705; 609 NW2d 607 (2000), and Haworth, Inc v Wickes Mfg Co, 210 Mich App 222,
230; 532 NW2d 903 (1994).
-3-
faith dealing by defendant, plaintiffs attached to its motion a memorandum, dated September 16,
1997, from the owner of the out-lot to defendant’s vice president, stating that the framework of
an agreement between defendant and the owner of the out-lot.
Following arguments on the parties’ motions, the trial court granted defendant’s motion
pursuant to MCR 2.116(C)(10). Specifically, the trial court stated:
[T]he Court does find that [defendant] had an implied duty to act in good
faith as it proceeded through the conditions precedent to performance that were
set forth in the lease. And I want to note, for this record, that the lease gave the
defendant broad latitude, and I might say, complete discretion, when pursuing
both the approval for this site plan and for the building permits, if it got that far,
that were needed for actual construction . . . nothing also in this lease expressly
required the defendant to wait 180 days before deciding to terminate the lease. . . .
I think good faith has to be focused on what actions they took through the City of
Westland, through the planning commission efforts. And the fact that they were
talking to other people [about potential leases], there’s nothing in the lease that
says that that’s not appropriate.
***
I don’t think there’s any evidence that the defendant wrongfully sought to
prevent the fulfillment of the conditions precedent on this record. They’re
planning for the contingency, but there’s nothing in this record that shows that
they willfully sought to cause their efforts to comply with the conditions
precedent to fail. And accordingly, the defendant was within its rights in terms of
the contract when it terminated the lease. And for these reasons, the motion is
granted based on [MCR] 2.116(C)(10).
On September 14, 1999, the trial court entered an order granting defendant summary disposition,
denying plaintiffs summary disposition, and dismissing the case. Plaintiffs filed a motion for
reconsideration, arguing that the trial court misconstrued the contractual language when it
determined that defendant had the sole discretion with regard to the site plan approval, but that it
only had discretion as to the content of the site plan. This motion was denied on October 14,
1999.
II. Standard of Review
This Court reviews de novo a trial court’s grant of summary of summary disposition
pursuant to MCR 2.116(C)(10). Dressel v Ameribank, 247 Mich App 133, 136; 635 NW2d 328
(2001), citing Spiek v Dep’t of Transporatation, 456 Mich 331, 337; 572 NW2d 201 (1998). In
reviewing a motion under (C)(10), we consider the pleadings, affidavits, depositions, admissions,
and any other documentary evidence in a light most favorable to the nonmoving party to
determine whether any genuine issue of material fact exists that would preclude judgment for the
moving party as a matter of law. GC Timmis v Guardian Alarm, 247 Mich App 247, 252; 635
NW2d 370 (2001), citing Unisys Corp v Comm’r of Ins, 236 Mich App 686, 689; 601 NW2d 155
(1999).
-4-
In addition, the construction and interpretation of an unambiguous contract is a question
of law that we review de novo. Henderson v State Farm Fire & Cas Co, 460 Mich 348, 353;
596 NW2d 190 (1999); Morley v Auto Club of Michigan, 458 Mich 459, 465; 581 NW2d 237
(1998); see also Mich Nat’l Bank v Laskowski, 228 Mich App 710, 714; 580 NW2d 8 (1998) and
Zurich Ins Co v CCR & Co (On Rehearing), 226 Mich App 599, 604; 576 NW2d 392 (1997).
Whether terms of a contract are ambiguous is also a question of law that we will review de novo.
Henderson, supra; Port Huron Ed Ass’n v Port Huron Area School District, 452 Mich 309, 323;
550 NW2d 228 (1996). In determining whether a contract provision is ambiguous, we are to
give the language used its ordinary and plain meaning, Mich Nat’l Bank, supra, to see if “its
words may reasonably be understood in different ways.” Trierweiler v Frankenmuth Mut Ins Co,
216 Mich App 653, 656-657; 550 NW2d 577 (1996). Thus, “if a word or phrase is unambiguous
and no reasonable person could differ with respect to application of the term or phrase to
undisputed material facts,” summary disposition should be granted to the proper party.
Henderson, supra, citing Moll v Abbott Laboratories, 444 Mich 1, 28 n 36; 506 NW2d 816
(1993).
III. Analysis
On appeal, plaintiffs first argue that defendant’s decision to terminate the project before
November 24, 1997 (the 180th day after the lease agreement was signed), and before the
planning commission had made a final decision regarding approval of the project constituted a
breach of the lease agreement. We disagree. Plaintiffs also contend that defendant’s
negotiations for an alternate site for their project was evidence of bad faith in defendant’s
dealings with plaintiffs, and that defendant could not equitably terminate the agreement. Again,
we disagree.
A. The Breach Issue
In interpreting contract language, our main goal is to ensure that the intent of the parties
is honored, Mikonczyk v Detroit Newspapers, Inc, 238 Mich App 347, 349-350; 605 NW2d 360
(1999). In order to honor that goal, we must first look for the intent of the parties in the words of
the contract itself. UAW-GM v KSL Recreation Corp, 228 Mich App 486, 491; 579 NW2d 411
(1998). If, after looking at the contract language itself, the intent is not discernable and
susceptible to more than one interpretation, then factual development is warranted in order to
determine the intent of the parties and therefore summary disposition would be inappropriate.
Meagher v Wayne State Univ, 222 Mich App 700, 722; 565 NW2d 401 (1997).
After reviewing the disputed language in this case, we conclude that the language is clear
and unambiguous, id. at 721, and that the trial court correctly interpreted the language as a matter
of law.
As stated previously, the contract states in part:
(a) This Lease is conditional upon Tenant satisfying and/or waiving each
of the following conditions within one hundred eighty (180) days after the date of
this Lease.
-5-
(i) This Lease is conditional upon final approval by the City of Westland
and all other necessary governmental bodies of Tenant’s site plan for the
development of the Demised Premises. Tenant shall have complete discretion in
the preparation of such site plan for submission to the City of Westland.
This provision does not prohibit defendant from withdrawing its site proposal from the approval
process. The contract also does not require the 180 day time period to expire before the contract
could be terminated, or specify any specific number of times defendant was required to submit
its proposal to the Planning Commission for approval. In addition to this language, section
39(a)(v) permits defendant to determine whether the imposition of conditions or expenses were
unacceptable to defendant in its “sole and absolute discretion.” As noted earlier, defendant was
convinced that it would not obtain the commission’s approval on conditions and at an expense it
considered acceptable. Thus, the clear and unambiguous language of section 39(a)(v) permitted
defendant to terminate the lease. We reject the contract interpretation articulated by plaintiffs
because it would create ambiguity where none exists. UAW-GM, supra at 491.
B. Bad Faith Issue
It is well settled that under Michigan law parties to a contract have a duty of good faith
and fair dealing in both their performance and the enforcement of the contract. Flynn v
Korneffel, 451 Mich 186, 213, n 8; 547 NW2d 249 (1996), citing 2 Restatement, Contracts 2d,
§ 205, p 99; see also Stark v Budwarker, Inc, 25 Mich App 305, 317, n 7; 181 NW2d 298 (1970).
This is especially true when a party’s performance with a contract provision is a “matter of its
own discretion.” See Ferrell v Vic Tanny Inter, Inc, 137 Mich App 238, 243; 357 NW2d 669
(1984), citing 3A Corbin, Contracts, § 644, pp 78-84.
Here, the lease agreement clearly gave defendant “broad latitude” and “complete
discretion” in its site plan design, the quest for city approval, and acquiring the building permits.
The record does not support plaintiffs’ claim that defendant acted in bad faith by using the
latitude and discretion it was granted by the contract. Rather, the record establishes that
defendant attempted several times to obtain approval of the proposal, engaged in negotiations
with disgruntled neighbors, and made significant changes to its original site plan in a good faith
effort to reach a mutually agreed upon proposal. Because the lease agreement did not bar
defendant from conducting negotiations separate from those conducted in furtherance of the
agreement with plaintiffs, the fact of these negotiations is not evidence of bad faith.
C. Waiver of Condition Precedents Issue
Because we conclude that defendant did not act in bad faith, we also conclude that
defendant did not waive the right to rely on the failure of the condition precedents to occur and
could permissibly rely on such failure to terminate the contract.
A condition precedent is a fact or event that the parties intend must take place before
there is a right to performance. Mikonczyk, supra at 350; Reed v Citizens Ins Co, 198 Mich App
443, 447; 499 NW2d 22 (1993). A condition precedent is different from a promise because a
condition precedent creates no right or duty in and of itself, but is only a limiting or modifying
factor. Mikonczyk, supra. Courts are disinclined from construing contract language as a
condition precedent unless it is compelled to by the plain language of the contract. Id. If the
-6-
condition precedent does not take place, the parties to the contract are excused from
performance. MacDonald v Perry, 342 Mich 578, 586; 70 NW2d 721 (1955), quoting Knox v
Knox, 337 Mich 109; 59 NW2d 108 (1953); Lee v Auto-Owners Ins Corp, 201 Mich App 39, 43;
505 NW2d 866 (1993), vacated on other grounds 445 Mich 998 (1994). To determine if a
provision in a contract is a condition precedent that excuses performance, or simply a promise
that does not, the court must consider the “‘fair and reasonable construction of the language used
in light of all of the surrounding circumstances when they executed the contract.’” McDonald,
supra, quoting Knox, supra. Here, section 39(a) of the lease agreement clearly stated that the
lease was “conditional upon [defendant] satisfying and/or waiving each of the following
conditions within . . . 180 days.” Thus, it is evident that section 39(a) provided condition
precedents that can excuse performance of the contract. Id.
A party to a contract may not prevent or hinder the satisfaction of a condition precedent.
If it does, the party is deemed to have waived the condition and is then obligated under the
contract to perform. Mehling v Evening News Ass’n, 374 Mich 349, 352; 132 NW2d 25 (1965);
see also Stanton v Dachille, 186 Mich App 247, 258; 463 NW2d 479 (1990). Plaintiffs contend
that by withdrawing the proposal from consideration, defendant prevented the satisfaction of a
condition precedent and is therefore obligated to perform. However, we again note that the
record establishes that defendant made several costly revisions to its original site plan, even
though it was not obligated to, and negotiated with concerned neighbors in an effort to obtain
commission approval of the proposal. Thus, the record does not support plaintiff’s claim that
defendant attempted to prevent or hinder the satisfaction of any condition precedents, Mehling,
supra, and defendant could permissibly terminate the contract pursuant to section 39(c).
Affirmed.3
/s/ Janet T. Neff
/s/ Kurtis T. Wilder
/s/ Jessica R. Cooper
3
Because we conclude that defendant properly terminated the lease agreement, we need not
decide defendant’s argument regarding plaintiffs failure to mitigate damages.
-7-
Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
