RICHARD J GIBBS JR V JOSEPH C GIBBS
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STATE OF MICHIGAN
COURT OF APPEALS
RICHARD J. GIBBS, JR., and GIBBS
INDUSTRIES, LTD.,
UNPUBLISHED
March 20, 2007
Plaintiffs/Counter DefendantsAppellees,
v
JOSEPH C. GIBBS, RICHARD J. GIBBS, SR.,
GIBBS MACHINERY COMPANY, INC.,
BRENTWOOD HOLDINGS, INC., RM
ENGINEERING, INC., PGG PROPERTIES,
L.L.C., and GGG INDUSTRIES LIMITED
LIABILITY COMPANY,
No. 266718
Macomb Circuit Court
LC No. 2003-004347-CB
Defendants/Counter PlaintiffsAppellants.
Before: Cooper, P.J., and Cavanagh and Meter, JJ.
PER CURIAM.
In this action involving business disputes between family-owned companies, defendants
appeal as of right from an order enforcing a settlement agreement that was reached between
plaintiff Richard J. Gibbs, Jr. (hereinafter “Jamie”), and his father, defendant Richard J. Gibbs,
Sr. (hereinafter “Richard Sr.”), without the assistance of their attorneys, and thereby dismissing
all claims pursuant to that agreement. We affirm.
While this action was pending, Jamie and Richard Sr. each signed the following written
agreement in settlement of this action.
August 12, 2005
Agreement between Richard J. Gibbs, Jr. AND Richard J. Gibbs, Sr.
For a settlement of $1,350,000 One Million Three Hundred Fifty Thousand net,
Richard J. Gibbs, Jr. has agreed to sell all his interest in the following to Richard
J. Gibbs, Sr. as full and final settlement of all claims on each other. No lawsuits
will continue or ever occur again. With no recourse against each other in any or
all the assets of this agreement.
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The Property is Richard J. Gibbs, Jr. interest in
1.
25%
21500 Hoover Building
2.
1/3
33.3%
2 acres on Grand River known as PPG [sic, PGG]
Properties
3.
1/3
33.3%
40810 Brentwood, Sterling Heights
30%
of GGG LLC – Property at 21550 Hoover 21590
Hoover and approximately 5 acres on Negle.
4.
In the event the Property at 21550 and 21590 is sold within one year, R. J. Gibbs
will receive his 30% of any money over $2,600,000.00.
Defendants argue that the settlement agreement was not enforceable because the
contemplated transfers of Jamie’s interests in the business entities were not permissible under the
governing documents of the entities involved. Defendants additionally argue that the proposed
agreement lacks essential terms and is ambiguous.
An agreement to settle a pending lawsuit is a contract, and both the existence and
interpretation of a contract are questions of law to be reviewed de novo by this Court. Kloian v
Domino’s Pizza, LLC, ___ Mich App ___; ___ NW2d ___ (Docket No. 263882, issued
December 28, 2006), slip op at 2. Because an agreement to settle a lawsuit is a contract, it is
governed by the same principles that apply to the construction and interpretation of ordinary
contracts. Id. A settlement agreement must also conform to MCR 2.507(G),1 Kloian, supra, slip
op at 4. In this case, there is no dispute that a writing purporting to settle all claims exists and
was signed by both Jamie and Richard Sr. The only issue is whether the agreement sufficiently
conforms to contract principles to be enforceable.
“The primary goal in the construction or interpretation of any contract is to honor the
intent of the parties.” Mikonczyk v Detroit Newspapers, Inc, 238 Mich App 347, 349-350; 605
NW2d 360 (1999).
Courts are required to enforce unambiguous contracts according to their
terms. Quality Products [& Concepts Co v Nagel Precision, Inc, 469 Mich 362,
370; 666 NW2d 251 (2003)]; Wilkie v Auto-Owners Ins Co, 469 Mich 41, 51-52;
664 NW2d 776 (2003). “A court cannot ‘force’ settlements upon parties,” Henry
v Prusak, 229 Mich App 162, 170; 582 NW2d 193 (1998), or enter an order
pursuant to the consent of the parties which deviates in any material respect from
the agreement of the parties.” Scholnick’s Importers-Clothiers, Inc v Lent, 130
Mich App 104, 112; 343 NW2d 249 (1983). [Kloian, supra, slip op at 8.]
Settlement agreements normally should not be set aside and a party may not disavow an
agreement that has been reduced to writing or placed on the record merely because the party has
1
MCR 2.507(G) was previously codified as MCR 2.507(H).
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a change of heart. Metropolitan Life Ins Co v Goolsby, 165 Mich App 126, 128-129; 418 NW2d
700 (1987).
Defendants argue that the settlement agreement was not enforceable because performance
was impossible or there was a failure of consideration. The doctrine of impossibility provides
that when strict performance of a contract is impossible due to unanticipated circumstances
beyond the contemplation and control of the contracting parties, the party failing to perform is
exonerated for breaching the contract. Bissell v L W Edison Co, 9 Mich App 276, 287; 156
NW2d 623 (1967). The doctrine of failure of consideration is closely related to the doctrine of
impossibility. It involves consideration that the parties believed was valid at the time an
agreement was made, but has since become worthless or nonexistent and no longer has value.
This doctrine essentially involves the inability to perform due to the lack of consideration,
making the contract void. See Adell Broadcasting Corp v Apex Media Sales, Inc, 269 Mich App
6, 12-13; 708 NW2d 778 (2005). We conclude that neither doctrine affects the validity of the
agreement here.
Defendants first argue that Jamie was not free to convey his 1/3 interest in “40810
Brentwood, Sterling Heights” to Richard Sr. The property is owned by Brentwood Holdings,
Inc., a real estate holding company in which Jamie, Richard Sr., and defendant Joseph Gibbs
each owned a 1/3 interest. Defendants argue that Brentwood Holdings’ bylaws prohibited Jamie
from selling his interest in Brentwood Holdings to Richard Sr. without the approval of Joseph,
thereby making the settlement agreement unenforceable. We disagree.
Contrary to what defendants argue, § 6.03 of Brentwood Holdings’ bylaws does not
require Joseph’s consent to a transfer of Jamie’s interest to Richard Sr. That section merely
provides that corporate action may be taken without a meeting if all shareholders consent to it in
writing. The section does not address the transfer of one shareholder’s interest to another
shareholder, and defendants have not identified any other provision that restricts the transfer of
one shareholder’s interest to another shareholder. Although Brentwood Holdings was not a party
to the settlement agreement, it benefited from the dismissal of all claims against it. Richard Sr.
did not require approval of the corporation for this transaction because he was not acting as
Brentwood Holdings’ agent. Defendants have not established that performance of the settlement
agreement was impossible or excused on this basis.
PGG Properties, L.L.C., is also a real estate holding company that exists solely to hold
title to undeveloped land in Wixom. The only owners of PGG are Brentwood Holdings and its
manager, Pete Pheil. Jamie, Richard Sr., and Joseph have only an indirect interest in PGG
through their ownership of shares in Brentwood Holdings. The settlement agreement provides
that Jamie agreed to transfer a 1/3 interest in two acres of land on Grand River Avenue known as
PGG properties to Richard Sr. Defendants argue that PGG’s operating agreement required a
unanimous vote of all members to approve the transfer of Jamie’s interest in PGG.
We agree with plaintiffs that PGG’s operating agreement does not affect the settlement
agreement because Jamie did not have a direct interest in PGG. Jamie had only an indirect
interest in PGG through his shares of Brentwood Holdings. The settlement agreement required
Jamie to convey his indirect interest in PGG through Brentwood Holdings to Richard Sr., but did
not otherwise affect Brentwood Holdings’ interest in PGG.
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GGG Industries operates a machinery and equipment warehouse and owns the property
on which it is located. Under the terms of the settlement agreement, Jamie agreed to sell his 30
percent interest in GGG, which primarily consists of the real property where GGG is located on
Hoover and Negle Roads, to Richard Sr., as part of the consideration for the payment of $1.35
million. Defendants argue that the settlement agreement could not be performed pursuant to §§
5.1, 5.2, 5.3, and 8.1 of GGG’s operating agreement. We disagree.
Section 8.1 provides that transfers of membership interests must be made pursuant to
GGG’s operating agreement. Section 5.1 provides specific instances where the operating
agreement may prohibit a transfer of interest, but defendants have not shown that any of those
situations apply in this case. Furthermore, §§ 5.2 and 5.3 provide that transfers of interests
require the unanimous consent of other members for a substitute member to become a full
member with the right to participate in the management and affairs of the company. If a
substitute member does not receive approval to become a full member, however, the transfer is
not invalid, but the substitute member may only receive distributions from the company and
cannot participate in running the company. Because the transfer could still occur without the
other members’ approval, defendants have failed to show that Jamie’s transfer of his interest in
GGG violates GGG’s operating agreement.
Defendants also argue that the trial court erroneously ordered Brentwood Holdings, PGG,
and GGG to approve the transfers of Jamie’s membership interests in the respective corporations.
For the reasons previously discussed, we conclude that approval of the corporations was not
required.
Defendants also argue that the settlement agreement is not enforceable because it lacks
essential terms. A contract requires mutual assent or a meeting of the minds on all essential
terms. Kloian, supra, slip op at 2. “A meeting of the minds is judged by an objective standard,
looking to the express words of the parties and their visible acts, not their subjective states of
mind.” Id., slip op at 3, quoting Kamalnath v Mercy Mem Hosp Corp, 194 Mich App 543, 558;
487 NW2d 499 (1992). “[T]he essential elements of a valid contract are (1) parties competent to
contract, (2) a proper subject matter, (3) a legal consideration, (4) mutuality of agreement, and
(5) mutuality of obligation.” Thomas v Leja, 187 Mich App 418, 422; 468 NW2d 58 (1991).
For purposes of satisfying the statute of frauds, only essential terms need be reduced to writing.
Opdyke Investment Co v Norris Grain Co, 413 Mich 354, 369; 320 NW2d 836 (1982). For the
transfer of land, the essential terms “are the identification of (1) the property, (2) the parties, and
(3) the consideration.” Zurcher v Herveat, 238 Mich App 267, 290-291; 605 NW2d 329 (1999).
Contrary to what defendants argue, failure to address the time of performance is not fatal
to enforcement of the agreement because it is not an essential term. “[W]hen a written contract
is silent as to time of performance, a reasonable time is to be presumed without reference to parol
evidence.” Brady v Central Excavators, Inc, 316 Mich 594, 607; 25 NW2d 630 (1947).
The agreement unambiguously provides that Jamie agreed to sell his interests in various
assets to Richard Sr. for $1,350,000. We agree with the trial court that the settlement
contemplates a contemporaneous transfer of Jamie’s various interests in exchange for the agreed
cash payment from Richard Sr. There is no basis for concluding that any type of payment
schedule was contemplated.
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Defendants also argue that the trial court improperly included language in the final
judgment requiring the transfer of Jamie’s 33.3% interest in Brentwood Holdings when the terms
of the settlement agreement referred only to the conveyance of “40810 Brentwood.” It was
undisputed, however, that Jamie’s interest in the described asset existed only through his interest
in Brentwood Holdings. Defendants have failed to show that the trial court’s final order is
inconsistent with the terms of the settlement agreement.
Defendants also argue that the settlement agreement is ambiguous because it omits any
mention of Gibbs Machinery Company, the family’s primary business, of which Jamie
apparently holds a five percent interest. There is no indication, however, that the absence of
Gibbs Machinery was anything other than intentional. The agreement also does not refer to RM
Engineering, Inc. The failure to mention these entities does not render the agreement
ambiguous.
For these reasons, we conclude that the trial court properly enforced the settlement
agreement between Jamie and Richard Sr.
Affirmed.
/s/ Jessica R. Cooper
/s/ Mark J. Cavanagh
/s/ Patrick M. Meter
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