PAUL HOWARD SUTHERLAND V KIMBERLY A CREAMER SUTHERLAND
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STATE OF MICHIGAN
COURT OF APPEALS
PAUL HOWARD SUTHERLAND,
UNPUBLISHED
January 20, 2004
Plaintiff/CounterdefendantAppellee,
v
No. 240158
Leelanau Circuit Court
LC No. 99-005033-DM
KIMBERLY A. CREAMER SUTHERLAND,
Defendant/CounterplaintiffAppellant.
Before: Zahra, P.J., and Cavanagh and Cooper, JJ.
PER CURIAM.
Defendant appeals as of right a judgment of divorce. We affirm.
I. Facts and Procedure
After plaintiff filed for divorce, the parties agreed to binding arbitration of, among other
issues, property division. The parties had three separate appraisals done for plaintiff’s two
businesses, Financial & Investment Management Group, Ltd. (FIMG), and Pension Service
Design, Inc. (PSD). The first appraisal estimated the fair market value of plaintiff’s combined
businesses to be $2,800,000, the second appraisal estimated the fair market value to be
$1,030,000, and the third appraisal estimated the fair market value to be $2,010,717. At a later
settlement conference, the parties stipulated to an independent appraisal of plaintiff’s businesses
that would be binding on the parties for purposes of the litigation. Defense counsel stated on the
record that the parties agreed to have Joseph Cunningham, C.P.A., of Plante & Moran, L.L.P., do
the appraisal, and that the appraisal would be binding. Plante & Moran subsequently estimated
the investment value1 of plaintiff’s businesses to be $308,000.
1
In its appraisal, Plante & Moran defined “investment value” as: “the specific value of a
business to a particular owner—distinguished from fair market value, which is impersonal and
detached.”
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Defendant filed a motion for relief from the parties’ stipulation, arguing that Plante &
Moran should have considered the fair market value of plaintiff’s businesses, as it said it would,
rather than relying solely on the investment value. Defendant argued that she was entitled to
relief from the stipulation based on mistake and unconscionable advantage. Plaintiff responded
that Plante & Moran had informed the parties that it had the discretion to determine how much
weight to give to each valuation method, so even if it did not consider the fair market value, it
would not have been a mistake for Plante & Moran to rely solely on the investment value
approach. Furthermore, plaintiff added that the stipulation did not specify that Plante & Moran
would consider the fair market value of plaintiff’s businesses in making its appraisal. The trial
court denied defendant’s motion, concluding that the appraisal was not unconscionable and was
not the result of a mistake. Consequently, the arbitrator used Plante & Moran’s appraisal value
when distributing the parties’ property. The judgment of divorce subsequently adopted the
arbitrator’s property division.
II. Analysis
A. Stipulation to Appraisal
Defendant argues that the trial court erred in denying her motion for relief from the
stipulation. We disagree. A trial court’s ruling on a motion to set aside a stipulation is reviewed
for an abuse of discretion. Limbach v Oakland Co Bd of Co Rd Comm’rs, 226 Mich App 389,
394; 573 NW2d 336 (1997); Wilson v Gauck, 167 Mich App 90, 95; 421 NW2d 582 (1988).
As a rule, parties are bound by their stipulations. Thompson v Continental Motors Corp,
320 Mich 219, 224-225; 30 NW2d 844 (1948). This Court observed in Meyer v Rosenbaum, 71
Mich App 388, 393; 248 NW2d 558 (1976), that “[a]s a matter of public policy, it is extremely
difficult to find any rationale for permitting a litigant to eschew a bargain knowingly made in
open court, on the record of the court, and with the intent that the court and opposite party should
rely thereon.” Nevertheless, because a stipulation is a type of contract, parties who seek to avoid
a stipulation may use contract defenses. Limbach, supra at 394. Accordingly, a stipulation may
be set aside where there is evidence of mistake, fraud, or unconscionable advantage. Id.
1. Mistake
Defendant first argues that the trial court should have set aside the stipulation based on
mistake. Defendant cites Thompson, supra at 224-225:
“As a rule, parties are bound by their stipulations, but the courts will not
permit a mistake to remain uncorrected when the opposite party has not been
misled, a delay has not been suffered thereby, the documentary evidence of the
mistake appears in the files and record before the court.” Basner v Defoe
Shipbuilding Co, 319 Mich 67, 72; 29 NW2d 140 (1947).
In Wagner v Myers, 355 Mich 62, 68; 93 NW2d 914 (1959), the Supreme Court discussed the
quantum of proof necessary to demonstrate mistake of fact in a court-recorded stipulation:
The litigant who so asserts to a stipulation freely entered into in open court
carries a heavy burden of persuasion. Every presumption of judicial care, of
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professional competence, and of decretal stability is against the overthrow, in the
appellate court, of such stipulation and of orders and decrees based thereon.
We conclude that the trial court in this case did not abuse its discretion in refusing to set
aside the stipulation based on the alleged mistake. The record does not support defendant’s
claim that Plante & Moran was mistaken regarding which valuation method to use in conducting
the appraisal of plaintiff’s businesses. The parties’ stipulation on the record did not specify the
precise valuation method to be used in appraising plaintiff’s businesses, and defense counsel
conceded on the record at the hearing on her motion for relief from the stipulation that the parties
“didn’t ask for a specific methodology.” In fact, it was only defendant who was mistaken
regarding the valuation method Plante & Moran would use to appraise plaintiff’s businesses.
Defendant apparently assumed, based on the previous appraisals and out-of-court conversations
with Cunningham,2 that Plante & Moran’s appraisal would use the fair market value or a blended
approach that included the fair market value. But there is nothing in the parties’ stipulation or
anywhere else on the record indicating that defendant’s assumption was correct. A unilateral
mistake of fact, unsupported by the record, does not justify setting aside an in-court, on-therecord stipulation. Meyer, supra at 394. Accordingly, the trial court did not abuse its discretion
in refusing to set aside the stipulation based on mistake.
2. Unconscionable Advantage
Second, defendant argues that the trial court should have set aside the stipulation because
it created an unconscionable advantage for plaintiff. Defendant also argues in her reply brief that
the result of the Plante & Moran appraisal was unconscionable because it did not take into
account the fact that plaintiff draws a significant salary each year from the businesses, and the
amount of plaintiff’s salary impacts the amount of the appraisal. Defendant’s arguments are
without merit.
“This Court has suggested that a stipulation may be set aside where there is evidence of .
. . unconscionable advantage.” Limbach, supra at 394. There is a two-prong test for determining
whether an agreement is unconscionable: “(1) What is the relative bargaining power of the
parties, their relative economic strength, the alternative sources of supply, in a word, what are
their options?; (2) Is the challenged term substantively reasonable?” Hubscher & Son, Inc v
Storey, 228 Mich App 478, 481; 578 NW2d 701 (1998), quoting Northwest Acceptance Corp v
Almont Gravel, Inc, 162 Mich App 294, 302; 412 NW2d 719 (1987). Reasonableness is the
primary consideration regarding whether an agreement is unconscionable. Id. Even if the
relative bargaining power of the parties is uneven under the first prong of the test, the agreement
is enforceable if it is substantively reasonable. Stenke v Masland Dev Co, Inc, 152 Mich App
562, 573; 394 NW2d 418 (1986).
2
Plaintiff contends that Cunningham explained to both parties that he had discretion to
determine how much weight to give to each valuation method and that he would use the fair
market value only as a “gut check” against the number he was going to come up with.
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Defendant argues that the substance of Plante & Moran’s appraisal was unconscionable.
However, defendant does not argue that there was anything unreasonable about the parties’
stipulation to be bound by Plante & Moran’s appraisal of plaintiff’s businesses. The terms of the
stipulation—not the substance of the appraisal—constituted the agreement between the parties.
The focus of the determination whether the stipulation is unconscionable is on the terms of the
stipulation, not the resulting actions of an independent third party. Consequently, Plante &
Moran’s appraisal done according to the parties’ stipulation does not render that stipulation
unconscionably advantageous to plaintiff.3 Additionally, defendant has not alleged that plaintiff
had unconscionably advantageous bargaining power in entering the stipulation. See Limbach,
supra at 394. Therefore, we conclude that the trial court did not abuse its discretion in refusing
to set aside the stipulation based on unconscionable advantage.4
B. Arbitrator’s Award
3
Furthermore, because the stipulation did not explicitly specify that the Plante & Moran must
use the fair market value to establish the appraisal value of plaintiff’s business, Plante & Moran’s
decision to appraise plaintiff’s businesses using the investment value was reasonable. In its
appraisal, Plante & Moran explained that, in a divorce situation, determining the fair market
value is not necessarily the appropriate method of determining the value of a business. Plante &
Moran explained that determining the investment value can be a more appropriate way to
determine the value of a business that is ongoing, such as plaintiff’s. This Court has held that
there is no one proper method to determine the value of businesses and business assets.
Kowalesky v Kowalesky, 148 Mich App 151, 155-156; 384 NW2d 112 (1986). Therefore, it was
reasonable for Plante & Moran to base its appraisal of plaintiff’s businesses on the businesses’
investment value.
4
In defendant’s reply brief, she also argues that the Plante & Moran appraisal resulted in an
unconscionable advantage to plaintiff because, in arriving at the appraisal amount, Plante &
Moran deducted $394,571 from the value of plaintiff’s businesses based on the fact that FIMG
had resolved to enter into an agreement to purchase Mission Shores Financial Management,
L.L.C., for that price. According to defendant, the $394,571 value of Mission Shores Financial
Management should have been included in the marital assets. However, defendant did not apply
in the trial court to have the arbitration award modified or corrected based on this alleged
mistake. See MCL 600.5081(1); MCR 3.602(K)(1). Additionally, defendant did not raise this
argument before the trial court and the trial court did not address or decide this issue. Therefore,
this issue was not properly preserved for appeal. Fast Air, Inc v Knight, 235 Mich App 541, 549;
599 NW2d 489 (1999). Furthermore, defendant’s argument is without merit because, as
previously discussed, this argument attacks the substance of Plante & Moran’s calculations
rather than the stipulation made between the parties. Therefore, Plante & Moran’s alleged
mistake in appraising plaintiff’s property did not give plaintiff an unconscionable advantage in
entering the stipulation. Even if, rather than attacking the validity of the stipulation, defendant
directly attacked the arbitration award on these grounds, the arbitrator did not find any mistake in
Plante & Moran’s appraisal when dividing the marital assets. “Claims that quarrel with a
binding arbitrator’s factual findings are not subject to appellate review.” Krist v Krist, 246 Mich
App 59, 67; 631 NW2d 53 (2001).
-4-
Defendant argues that the arbitration award should be vacated and the trial court should
be ordered to instruct the arbitrator to consider, in addition to Plante & Moran’s appraisal of
plaintiff’s businesses, the three previous appraisals of plaintiff’s businesses. However, defendant
never applied in the trial court to have the arbitration award vacated. See MCL 600.5081(1);
MCR 3.602(J)(1). Therefore, this argument was not preserved for appeal. Furthermore, the trial
court’s power to modify, correct, or vacate an arbitration award is very limited. Gordon SelWay, Inc v Spence Bros, Inc, 438 Mich 488, 495; 475 NW2d 704 (1991). An arbitration award
may not be vacated unless: (1) the award was procured by corruption, fraud, or other undue
means; (2) the arbitrator evidenced partiality, corruption, or misconduct prejudicing a party’s
rights; (3) the arbitrator exceeded his powers; or (4) the arbitrator refused to postpone the hearing
on a showing of sufficient cause, refused to hear evidence material to the controversy, or
conducted a hearing to prejudice substantially a party’s rights. MCL 600.5081(2); MCR
3.602(J)(1); Dick v Dick, 210 Mich App 576, 588; 534 NW2d 185 (1995). Here, the arbitrator
properly adhered to the parties’ stipulation to rely solely on Plante & Moran’s appraisal when
making the property distribution. As discussed, parties are bound by their stipulations.
Thompson, supra at 224-225. Because there was no evidence of mistake, fraud, or
unconscionable advantage surrounding the stipulation, the arbitrator properly relied on it, so the
arbitration award may not be vacated. Limbach, supra at 394.5
Affirmed.
/s/ Brian K. Zahra
/s/ Mark J. Cavanagh
/s/ Jessica R. Cooper
5
Plaintiff urges this Court to sanction defendant under MCR 7.216(C) for filing a vexatious
appeal. Although defendant’s arguments are ultimately unpersuasive, we do not believe that
defendant’s appeal was for purposes of hindrance or was without any reasonable basis for belief
that there was a meritorious issue to be determined on appeal. MCR 7.216(C)(1)(a); Resteiner v
Sturm, Ruger & Co, Inc, 223 Mich App 374, 377; 566 NW2d 53 (1997). Accordingly, we reject
plaintiff’s request to impose sanctions upon defendant.
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