LOLA MELBOURNE V WAYNE BOWLING & RECREATION INC
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STATE OF MICHIGAN
COURT OF APPEALS
LOLA MELBOURNE,
UNPUBLISHED
March 6, 2007
Plaintiff-Appellee,
v
No. 263783
LC No. 00-010650-NO
LAWN WORKS,
Defendant,
and
WAYNE BOWLING AND RECREATION, INC.,
Defendant/Garnishee
Defendant-Appellant.
LOLA MELBOURNE,
Plaintiff-Appellee,
v
No. 263819
LC No. 03-314738-CK
WAYNE BOWLING AND RECREATION, INC.,
Defendant-Appellant.
Before: Borrello, P.J., and Jansen and Cooper, JJ.
PER CURIAM.
Defendant appeals the trial court’s ruling, following a bench trial, that plaintiff was
entitled to recover from defendant on the basis of an indemnity provision in a contract between
defendant Wayne Bowling and assignor Lawn Works. We affirm.
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I. Facts and Procedural History
On December 3, 1996, Wayne Bowling entered into a written contract for snow removal
services with Lawn Works.1 The contract included this provision: “Customer agrees to defend
and hold contractor harmless from any and all liability, including attorney fees, which the
contractor may accrue resulting from the contractor’s work on the customers [sic] property.”
The written contract expired on May 1, 1997. In the fall of 1997, Wayne Bowling and Lawn
Works agreed orally to renew the contract for snow plowing for the 1997-1998 season. On
January 15, 1998, plaintiff Lola Melbourne slipped and fell in the parking lot of Wayne Bowling.
Melbourne filed suit against Wayne Bowling on April 3, 2000. Wayne Bowling named
Lawn Works as a non-party at fault, and on July 25, 2000, plaintiff amended her complaint to
add Lawn Works as a defendant. Lawn Works, however, had ceased business operations in early
2000. The trial court entered an order on October 20, 2000, allowing alternate service of the
complaint on Brian Shelton as Lawn Works.
Shelton failed to contact Wayne Bowling to claim his right to defense under the
indemnity provision in the contract, to consult an attorney on his own, or to reply to the
complaint in any way. On September 7, 2001, on plaintiff’s motion, a default judgment was
entered against Lawn Works in the amount of $646,400.2
Wayne Bowling, the remaining defendant, and Melbourne agreed to binding arbitration.
An arbitration award was entered against Wayne Bowling on February 12, 2002, in the amount
of $650,000. Wayne Bowling paid this award.
On October 29, 2002, plaintiff served a writ of garnishment on Wayne Bowling, claiming
the right to garnish the contractual obligation to indemnify allegedly owed to Lawn Works by
Wayne Bowling (Docket No. 263819). Wayne Bowling denied liability. While the garnishment
action was proceeding, on January 28, 2003, plaintiff obtained an assignment from Thomas
Scott, former partner of Shelton3; on April 23, 2003, plaintiff brought an action against Wayne
Bowling as assignee of Scott for Lawn Works (Docket No. 263783).
1
On December 7, 1994, Lawn Works was created as a DBA by Brian Shelton and Thomas Scott.
Scott withdrew from the business within a week, and Shelton continued as sole owner and
operator. Only Shelton signed the Wayne Bowling contract for Lawn Works, identifying himself
as “Owner.”
2
Plaintiff’s injuries were such that she would be permanently unable to work and would require
home care. Net income loss was calculated at $288,000. The cost of home care services was
calculated at $218,400. Plaintiff’s counsel requested an additional $400,000 in non-economic
damages. The trial judge accepted the figure of $506,400 in total economic damages, and
granted $150,000 in non-economic damages, for a total of $646,400.
3
On January 12, 2004, plaintiff obtained an assignment from Shelton. However, plaintiff did not
(continued…)
-2-
The trial court consolidated the two pending actions, and Wayne Bowling filed for
summary disposition of the consolidated matter on December 17, 2003. Wayne Bowling alleged
that plaintiff had no right to double recover, that there was no valid indemnity provision in the
oral contract, that Lawn Works had failed to defend or tender the defense to Wayne Bowling,
that Lawn Works was insolvent and had suffered no loss that obliged indemnification, and that as
a matter of law, an indemnity contract cannot be enforced by garnishment. The trial court denied
the motion in an opinion issued on May 11, 2004, rejecting all arguments as a matter of law
except the claim that there was no enforceable indemnity provision in the contract for the second
plowing season, reasoning that a question of fact remained as to the terms of the contract in force
at the time of the slip and fall.
To address this question, a four-day bench trial was held on March 16, March 21, June 2,
and June 8, 2005. The testimony of Kenneth Roth, general manager of Wayne Bowling,
confirmed that Wayne Bowling had admitted the written contract controlled at the time of the
accident. Plaintiff’s counsel elicited from Roth the fact that in Wayne Bowling’s Answer to
Melbourne’s First Amended Complaint, in response to the allegation that “Lawn Works, by
contract, had a duty to salt and clear the area where Lola Melbourne slipped and fell,” Wayne
Bowling admitted that “Wayne Bowling and Lawn Works entered into a ‘snow plowing
contract’ dated December 3, 1996.”
The trial judge, as trier of fact, concluded:
The dispute is whether or not the contract continued as written. But no matter
how it’s couched in terms of language, clearly to this Court, the intention of both
Lawn Works and Mr. Shelton and Mr. Roth and Wayne Bowling was that the
terms of the contract from December 3rd of 1996 continue as written.
The court found that “the provision of indemnification was in effect at the time of Ms.
Melbourne’s injury, and the Court finds in favor of the Plaintiff.”
Defendant raises many issues on appeal, the two most important being the terms of the
contract and the viability of double recovery in this case. We agree with the trial court as to
both. Although we find these two issues dispositive of defendant’s claims, so as to resolve all of
the issues raised by defendant, we will also briefly address the issues related to the operation of
the indemnification clause, the applicability of garnishment to plaintiff’s claim, and the validity
of the assignment plaintiff obtained.
II. The Contract
Defendant first argues that the oral agreement between Wayne Bowling and Lawn Works
did not include all of the terms of the precursor written contract, and that the trial court clearly
(…continued)
move to amend her complaint to add the assignment from Shelton until opening arguments on
the first day of trial. The trial judge nonetheless allowed the amendment to the complaint at that
time.
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erred in finding that the indemnity provision was therefore still in effect after the written contract
expired.
“Findings of fact by the trial court may not be set aside unless clearly erroneous.” MCR
2.613(C). “A finding is clearly erroneous when, although there is evidence to support it, the
reviewing court on the entire record is left with the definite and firm conviction that a mistake
has been committed.” Walters v Snyder, 239 Mich App 453, 456; 608 NW2d 97 (2000).
Here, we find there is no error, let alone clear error.
The trial court stated, at the close of the proofs at trial: “The Court is of the opinion that
based upon all of the testimony that it has heard, that the contract was in fact extended with all of
its provisions until the 1998 snow season ended.” Upon review of the record, there is no
evidence to support a definite and firm conviction that this finding was clear error.
In any case, the issue may more easily be resolved by reference to Wayne Bowling’s own
admissions in prior pleadings. Wayne Bowling made an admission in a prior pleading that the
December 3, 1996 contract was in effect at the time of plaintiff’s fall, and Wayne Bowling is
bound by that admission. Lola Melbourne alleged in her First Amended Complaint that “at all
times relevant hereto, Lawn Works, [sic] was contracted by Wayne Bowling to provide the
winter maintenance of the parking lot owned by Wayne Bowling.” In its Answer, Wayne
Bowling admitted “Wayne Bowling and Lawn Works entered into a ‘snow plowing contract’
dated December 3, 1996.” This admission is dispositive of the issue of which contract terms
control. The trial court did not err in finding that Wayne Bowling had a contractual obligation to
indemnify Lawn Works at the time of Melbourne’s fall.
III. Double Recovery
Defendant next argues that in Michigan, a plaintiff may not double recover for the same
injury; a prior award must be deducted from a subsequent award if for an identical injury. Grace
v Grace, 253 Mich App 357; 655 NW2d 595 (2003).
We note first that plaintiff’s claim for damages, at the time of the arbitration hearing,
exceeded 1.6 million dollars in combined economic and non-economic damages. Given that, we
would find a question as to whether the two damage awards are indeed duplicative, but we need
not explore that question for the following reasons.
While defendant is clearly correct that double recovery is in general not allowed,4 we
agree with the trial court that the stipulation signed by defense counsel is dispositive of this
issue. Defendant stipulated, in an order entered by the court on September 7, 2001:
4
Great Northern Packaging, Inc v General Tire & Rubber Co, 154 Mich App 777, 781; 399
NW2d 408 (1986).
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[S]hould a default judgment be entered against Brian Shelton, Lawn Works,
and/or Brian Shelton d/b/a Lawn Works, then Wayne Bowling & Recreation, Inc.,
shall not be entitled to a set-off of said default judgment, from any verdict,
judgment, or settlement against Wayne Bowling & Recreation, Inc., in this matter.
In addition, in the arbitration between Wayne Bowling and Melbourne, counsel for both parties
read the arbitration agreement into the record on October 22, 2001. That agreement included this
provision:
This arbitration agreement, the arbitration, the dismissal and the satisfaction of
arbitration shall not in any fashion affect or limit Plaintiff’s rights to collect the
previously entered judgment against Lawnworks [sic], which was formerly a
defendant in this matter.
Wayne Bowling is therefore precluded from arguing that the judgment against Lawn Works must
be set-off against the amount already paid by Wayne Bowling as a result of the arbitration
judgment; defendant cannot now argue that plaintiff cannot double recover for the same
damages.
As to defendant’s argument that the economic damages were calculated incorrectly, we
note that these factual findings were not challenged in the court below; the damages were
determined on September 7, 2001 (default judgment) and February 12, 2002 (arbitration award).
This unpreserved claim of error is not properly appealable now before this Court, and our
discretionary review is limited to clear error apparent on the record. Upon review of the record,
it appears that while the income figures were not adjusted for present value, neither were they
adjusted for inflation, which could serve as offsetting adjustments. We note also that at the time
the default judgment was rendered, there was no request or argument for either adjustment. We
find no clear error.
IV. Operation of Indemnification Clause
Defendant argues that Lawn Works is not entitled to indemnification for several reasons:
Lawn Works neither tendered the defense to Wayne Bowling nor did anything at all to defend
the claim, but rather allowed a default judgment to enter; Lawn Works did not enter into a
“reasonable settlement”; Lawn Works has not paid anything on the judgment and therefore has
suffered no loss.
Defendant argues that tender is the essential first step to trigger the right of indemnity,
and that absent tender, the right is forfeit. Because failure to tender precludes the indemnitor
from defending claim, the indemnitor should not be bound by a default judgment against the
indemnitee.5
5
Defendant cites Ford v Clark Equipment Company, 87 Mich App 270, 277; 274 NW2d 33
(1978), for this proposition.
-5-
In the hearing on Wayne Bowling’s motion for summary disposition, the trial court noted
both that the indemnification clause in the contract did not include a notice-of-suit provision, and
that in any case Wayne Bowling did have notice of the claim against Lawn Works. As the trial
court stated, notice to an indemnitor is not required where the indemnitor is a party to the action.
Detroit v Grant, 135 Mich 626, 629; 98 NW 405 (1904). The trial court also correctly noted that
the cases relied on by Wayne Bowling for the argument that tender is required to invoke the right
to indemnity are factually distinguishable, as they involve insurance contracts, rather than
contractual indemnity outside the insurance context.
At the close of the trial, the trial court briefly re-addressed the issue of tender, stating:
[T]he court is ever mindful of the fact that there would’ve been no necessity for
Lawn Works to do anything had they been – had they not been named a third
party at fault. That’s what brought them into the case in the first place.
Both sides were very familiar with the contract, and if the indemnity provision is
in fact in effect, then Wayne Bowl was equally as aware of that as Mr. Shelton
and Lawn Works would’ve been.
That being the situation, Lawn Works didn’t have to tender any defense.
Tender is a means of ensuring proper notice to the indemnitor. Farmer v Christensen,
229 Mich App 417, 429; 581 NW2d 807 (1998) (“[A]n indemnitor's due process interests would
be adversely affected if it were bound by its indemnitee's unilateral acts without providing notice
and an opportunity to be heard.”) Here, the indemnitor had such notice, having essentially
brought the indemnitee into the litigation by naming it as a non-party at fault. We find that on
these facts, tender was not required to trigger Wayne Bowling’s obligation to indemnify Lawn
Works.
Defendant also argues that an indemnitee is bound to make a “reasonable settlement,” if
the indemnitor is to be bound to pay, citing Clark Equipment Company, supra. Here, however,
Lawn Works did not actually make a settlement; rather, Lawn Works did nothing at all.
The reasoning underlying the reasonable settlement rule is that an indemnitee should not
be able to bind an indemnitor to a settlement that exceeds the value of a claim, but the facts of
this case present no such danger. Wayne Bowling was aware that Lawn Works had taken no
steps to defend the claim, and could have intervened at any time before the default judgment
entered to clarify its obligations. Wayne Bowling was served with a motion for entry of default
judgment against Lawn Works, which motion included a copy of the damages claimed. The
circumstances that merit requiring a reasonable settlement are simply not present here.
Defendant further argues that because Lawn Works has not paid anything on the default
judgment, it has suffered no loss, and therefore is not entitled to indemnification. Defendant
reiterates an argument, premised on the Insurance Code, which defendant raised before the trial
court. The trial court summarily rejected that argument for the reason that the term “insurer” as
defined in the Code at MCL 500.106, does not cover defendant Wayne Bowling, and the
Insurance Code therefore does not apply to Wayne Bowling. We agree.
-6-
The only authority cited by defendant, Leiberman v Solomon, 24 Mich App 495, 502; 180
NW2d 324 (1970), states in dicta that “an indemnitee cannot recover on the agreement in the
absence of proof of actual damages.” However, in addition to being dicta, this statement is
actually a quotation from a much earlier case, Richards v F C Matthews & Co, 256 Mich 159,
164; 239 NW 381 (1931), which the Leiberman Court goes on to distinguish. In Richards, the
Court noted that plaintiff had failed to provide sufficient evidence of a business loss where an
oral promise for indemnification ancillary to a written contract was at issue, and held that it
would not overturn the trial court’s judgment in favor of defendant. The present case is plainly
factually distinguishable.
Here, the plain language of the contract holds Wayne Bowling accountable for any
“liability . . . which the contractor may accrue.” Because the contract provides for indemnity
when liability accrues, rather than when actual loss or damages are suffered, Lawn Works need
not have suffered actual loss to trigger the indemnity obligation. Sherman v Spalding, 132 Mich
249, 251; 93 NW613 (1903). See also Black’s Law Dictionary, 5th Ed. at 692 (defining
“indemnity against liability” as an obligation “irrespective of whether person indemnified has
suffered actual loss.”)
Although the indemnitee has not paid the judgment, Wayne Bowling is still obligated to
indemnify; to hold otherwise would preclude any recovery where, as here, the indemnitee is
insolvent. The plain language of the contract does not require an actual loss; Wayne Bowling
therefore acquired the obligation to pay when the judgment entered against Lawn Works.
V. Garnishment
Defendant next argues that garnishment is not an appropriate means of collecting an
indemnity obligation. Because a statute and a court rule specifically address garnishment, this
issue is a question of law subject to de novo review. Rory v Continental Ins Co, 473 Mich 457,
464; 703 NW2d 23 (2005).
Garnishment clearly applies to obligations.6 However, defendant argues that an
indemnity obligation does not meet any of the definitions of assets subject to garnishment in the
garnishment rule, MCR 3.101(G)(1)(a) - (i).
MCR 3.101(G)(1) states: “Subject to the provisions of the garnishment statute and any
setoff permitted by law or these rules, the garnishee is liable for . . . (d) all debts, whether or not
due, owing by the garnishee to the defendant when the writ is served on the garnishee.”
The indemnification clause states: “Customer agrees to defend and hold contractor
harmless from any and all liability, including attorney fees, which the contractor may accrue
6
Per MCL 600.4011, “. . . the court has power by garnishment to apply the following property or
obligation, or both, to the satisfaction of a claim evidenced by contract, judgment of this state, or
foreign judgment . . ..” MCR 3.101(B)(2) reiterates that garnishment may apply to property or to
obligations.
-7-
resulting from the contractor’s work on the customers [sic] property.” When the default
judgment entered against Lawn Works, liability clearly accrued in a specific amount, triggering
this indemnity clause and thereby creating Wayne Bowling’s obligation to pay. The obligation
to pay is a debt.7 We find that this debt falls within the parameters set by MCR 3.101(G)(1), and
that garnishment is therefore an appropriate means of enforcing this indemnity obligation.
VI. Validity of Assignment
Defendant finally argues that plaintiff failed to obtain a valid assignment before filing her
claim as assignee of Lawn Works. Defendant asserts that Melbourne obtained an assignment
from Scott on January 28, 2003, eight years after he ceased involvement with the Lawn Works
business entity; on January 12, 2004, nine months after filing the claim, Melbourne obtained an
assignment from Shelton, owner of Lawn Works.
Here, although Scott had effectively walked away from the business during the week
following the filing of the Certificate of Assumed Name8 by Scott and Shelton, Scott never took
any affirmative step to remove his name from the business documents. We find that he was
therefore still bound as a partner, and the assignment he signed was valid.
Because the assignment from Scott was a valid assignment of Lawn Works’ rights, the
trial court was well within its discretion in amending the complaint to add the assignment from
Shelton. Although this amendment to the complaint was allowed at the start of the trial, we
cannot see any prejudice to Wayne Bowling in allowing it, since the assignment had been
obtained more than a year before trial, and both partners in Lawn Works were deposed.
Affirmed.
/s/ Stephen L. Borrello
/s/ Kathleen Jansen
/s/ Jessica R. Cooper
7
“The word ‘debt’ is itself commonly understood to mean ‘something that is owed or that one is
bound to pay to or perform for another’ or ‘a liability or obligation to pay or render something.’”
Shinkle v Shinkle, 255 Mich App 221, 227; 663 NW2d 481 (2002) (citation omitted).
8
The Certificate form states clearly that the Certificate of Assumed Name expires five years
after it is filed with the County Clerk; neither party was therefore legally able to act as Lawn
Works after December 7, 1999.
-8-
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