600 EAST 11 MILE LLC V JOHN DEMUCH
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STATE OF MICHIGAN
COURT OF APPEALS
600 EAST 11 MILE, LLC,
UNPUBLISHED
November 30, 2010
Plaintiff-Appellee,
v
No. 293456
Oakland Circuit Court
LC No. 2007-086578-CK
JOHN DEMUCH,
Defendant-Appellant.
Before: BECKERING, P.J., and JANSEN and TALBOT, JJ.
PER CURIAM.
In this commercial lease dispute, defendant John Demuch appeals as of right the trial
court’s order granting plaintiff 600 East 11 Mile, LLC summary disposition under MCR
2.116(C)(10), and awarding plaintiff damages. We reverse and remand.
I
Plaintiff owns the property at 600 East 11 Mile Road in Royal Oak, Michigan. It entered
into a five-year commercial lease with defendant, who was an antiques dealer. The lease was
effective October 12, 2005 through October 31, 2010, and provided for a monthly rent of $3,500.
Paragraph 17 of the lease, however, allowed for plaintiff to terminate the agreement at its
discretion. The paragraph states:
17.
Early Termination.
Landlord may terminate this Lease by providing John Demuch one
hundred eighty (180) days prior written notice of its election to so terminate this
Lease. Rent shall be due and payable during such one hundred eightieth [sic]
(180) day period pursuant to the terms of this Lease. Should Landlord elect to
terminate this Lease under this Paragraph 17, John Demuch shall vacate the
Premises within six (6) months of its receipt of notice from Landlord, or such
earlier date as John Demuch may elect, provided, however, that in all events John
Demuch shall remain liable and responsible for the payment of all Rent due under
this Lease until such time as John Demuch vacates the Premises. See 17A.
Paragraph 17A, which was inserted by the parties at the end of the lease, states:
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It is understood by and between landlord and tenant that during the first 12
months of this 5 year lease term, the tenant shall have the right to use the space
for the entire 12 months without cancellation of the lease agreement per paragraph
17.
Landlord hereby guarantees tenant uninterrupted occupancy of premises at
a base rate for the initial 12 month period, nothing herein to the contrary. In the
event landlord chooses to exercise early termination per paragraph 17, tenant
shall have right [sic] to continue said occupancy for months 13-18 at a rate not to
exceed $4,000 per month.
Tenant furthermore shall have option to guarantee said occupancy for
months 19-24 at a rate not to exceed $4,250 per month, nothing herein to the
contrary. (Emphasis added.)
On December 28, 2006, plaintiff sent defendant a letter stating in part:
You have completed a year in your lease term. Per your lease, please
forward the following in order to catch up with the current lease rate of $4000 a
month. As stated in your lease agreement Months 13-18 are at a rate of $4000 per
month and 19-24 are at a rate of $4250 a month.
November:
Paid $3500
Correct Lease Amount $4000
Currently Owe $500
December
Paid $3500
Correct Lease Amount $4000
Currently Owe $500
Plaintiff’s letter indicated that defendant owed $1,000 and was to pay $4,000 per month
thereafter. Defendant did not pay the extra money allegedly owed, and instead, continued to pay
$3,500 per month. Plaintiff sent defendant monthly invoices seeking payment of $4,000 per
month in rent, as well as an accumulating rent balance equal to $500 for each month defendant
had paid only $3,500 instead of $4,000 dating back to November, 2006. Plaintiff also sent
defendant several letters over the ensuing months, referring at various times to the rent increase
“per the lease agreement” or “per the rental agreement” and the “rental increase letter sent to you
dated December 28, 2006,” and instructing defendant that he must make up the balance of the
rent owed.
On April 25, 2007, defendant sent plaintiff a letter “to summarize the highlights of our
recent telephone discussion and our meeting” and stating that in response to plaintiff’s decision
to terminate the lease under paragraphs 17 and 17A, he was exercising his right to vacate the
premises on May 31, 2007. Apparently, defendant later expressed a desire to vacate the premises
on June 30, 2007.
Plaintiff sent defendant an invoice dated June 1, 2007 seeking $4,000 in rent.
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On June 18, 2007, plaintiff sent defendant a “Demand for Possession Non-Payment of
Rent,” claiming that defendant owed $10,500 for past due rental payments, plus late fees and
interest, although no itemization of the amount due was provided.1 The demand letter reflected a
monthly rate of $3,500.
On June 24, 2007, defendant held a liquidation auction at the premises. He vacated by
the end of the month.
On June 26, 2007, plaintiff sent defendant a letter disputing that it was attempting to
terminate the lease.2 The letter explained that “[t]here appears to have been some confusion” or
a “potential misunderstanding” regarding when the base rent would increase, but that plaintiff
never referenced Paragraph 17 of the lease and never used the words “terminate” or
“termination” in its letters seeking increased rental payments. Accordingly, plaintiff was not
relieving defendant of the five-year lease obligation.
In December 2007, plaintiff leased the premises to “Goldstar Mortgage/Elk Finance”
(hereinafter “Elk Finance”). Elk Finance made a “buildout payment” to plaintiff, which, in turn,
spent those funds. Elk Finance, however, never took occupancy of the premises or paid any rent.
Before leasing the premises to Elk Finance, plaintiff filed this action, alleging that
defendant breached the lease between the parties. Plaintiff subsequently moved for summary
disposition under MCR 2.116(C)(10), arguing that defendant breached the lease by vacating the
premises without paying the full amount of rent owed. Plaintiff further argued that billing
defendant $4,000 per month after the first year of the lease could not be construed as an intent to
terminate the lease; rather, it was merely a mistake. Plaintiff indicated, however, that the amount
of its damages should be determined by the trial court at a separate hearing. In response,
defendant argued that because plaintiff attempted to terminate the lease, he had the right to
vacate the premises under paragraph 17A. Defendant also argued that even if he breached the
lease, plaintiff breached first, rendering any claim by plaintiff not actionable.
The trial court granted plaintiff’s motion for summary disposition, finding that there was
no genuine issue of material fact because plaintiff never communicated an intent to terminate the
lease. The court found that defendant breached the lease by failing to pay rent in the amount of
$3,500 per month for the five-year term. The court held that defendant owed plaintiff rent for
the remainder of the lease term, which was 40 months. Thus, the total amount defendant owed
plaintiff was $140,000.
1
The letter is dated June 15, 2007, but a proof of service provided at the bottom of the letter
reflects a mailing date of June 18, 2007.
2
The letter is dated June 21, 2007, but a proof of service provided at the bottom of the letter
reflects a mailing date of June 26, 2007.
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Defendant filed a motion for reconsideration. He argued that the trial court erred in
holding that plaintiff was entitled to $140,000 in damages, when plaintiff’s own motion for
summary disposition acknowledged the need for a separate hearing on the issue of damages.
Defendant further argued that plaintiff’s lease with Elk Finance created two exclusive rights of
possession in the premises, which, under the doctrine of surrender, terminated defendant’s
obligations under the lease. In addition, according to defendant, plaintiff engaged in activities
that delayed Elk Finance’s ability to take possession, relieving defendant of his lease obligations.
The court upheld its award of damages to plaintiff, stating that plaintiff’s reletting of the
premises did not constitute an acceptance of surrender nor relieve defendant of any obligation.
II
On appeal, defendant first argues that the trial court erred in granting plaintiff’s motion
for summary disposition under MCR 2.116(C)(10). We agree.3
We review a trial court’s decision on a motion for summary disposition de novo. Maiden
v Rozwood, 461 Mich 109, 118; 597 NW2d 817 (1999). A motion under MCR 2.116(C)(10)
tests the factual sufficiency of a claim. Maiden, 461 Mich at 119-120. All admissible evidence
submitted by the parties is reviewed in the light most favorable to the nonmoving party and
summary disposition is appropriate only when the evidence fails to establish a genuine issue
regarding any material fact. Id.; MCR 2.116(G)(6).
In granting plaintiff summary disposition, the trial court held that plaintiff’s December
28, 2006, letter and three follow-up letters to defendant only reflected plaintiff’s
“misunderstanding concerning the amount of rent due under the terms of the lease” and not an
intent to invoke the early termination provision of the lease. As indicated, the December 28,
2006, letter references a current lease rate of $4,000 per month, “[p]er [the] lease.” The letter
then explains the rental rate, stating: “As stated in your lease agreement Months 13-18 are at a
rate of $4000 per month and 19-24 are at a rate of $4250 a month.” Two of plaintiff’s follow-up
letters reference a rate of $4,000 per month “per the rental agreement” or “per the lease
agreement.” While none of the letters explicitly state that plaintiff was terminating or intended
to terminate the lease, the only provision in the lease modifying the monthly rental rate is
paragraph 17A, which pertains to early termination of the lease. The sentence that addresses an
increase in the rental rate is preceded by the phrase, “In the event Landlord chooses to exercise
early termination per paragraph 17. . . .” As the trial court itself acknowledged, reading the lease
as a whole and considering the unambiguous language of paragraph 17A, “the rent should not
have increased to $4000 if Plaintiff did not invoke the early termination clause.” Given that
plaintiff repeatedly referenced the lease in demanding increased rent from defendant, and that the
only provision in the lease modifying the rental rate pertains to plaintiff’s right to exercise an
early termination, whether plaintiff’s actions invoked the early termination clause under the lease
is a genuine issue of material fact for the finder of fact. Concluding that plaintiff merely
3
Because we find there is a genuine issue of material fact, we do not agree with defendant’s
argument that he is entitled to summary disposition under MCR 2.116(I)(2).
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misunderstood the amount of rent due when billing defendant an increased amount on multiple
occasions over a period of several months is a credibility determination that should be left to the
factfinder. See Shuler v Mich Physicians Mut Liability Co, 260 Mich App 492, 519; 679 NW2d
106 (2004) (explaining that where there is conflicting evidence, the question of credibility is left
to the factfinder).
Because we find that plaintiff was not entitled to summary disposition under MCR
2.116(C)(10), and we reverse the trial court’s order, it is not necessary for us to address
defendant’s other issues on appeal regarding damages.
Reversed and remanded for further proceedings consistent with this opinion. We do not
retain jurisdiction.
/s/ Jane M. Beckering
/s/ Kathleen Jansen
/s/ Michael J. Talbot
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