KHEIREDDIN HAMADE V SUNOCO INC
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STATE OF MICHIGAN
COURT OF APPEALS
FOR PUBLICATION
May 25, 2006
9:00 a.m.
KHEIREDDIN HAMADE,
Plaintiff-Appellant,
and
NOUHAD HAMADE
Plaintiff,
v
SUNOCO, INC. (R&M), JOHN G. DROSDICK,
ANN C. MULE, PAUL A. MULHOLLAND,
ROBERT J. DARNALL, URSULA F. FAIRBAIRN,
THOMAS P. GERRITY, ROSEMARIE B. GRECO,
JAMES G. KAISER, ROBERT D. KENNEDY,
RICHARD H. LENNY, NORMAN S. MATTHEWS,
R. ANDERSON PEW, G. JACKSON RATCLIFFE,
LARRY WILCOX, J. MCMAHON, JEFF BYARD,
and ARETHA BATTLE,
Defendants-Appellees.
No. 265226
Wayne Circuit Court
LC No. 01-104505-CL
Official Reported Version
Before: Smolenski, P.J., and Owens and Donofrio, JJ.
SMOLENSKI, P.J.
In this dispute arising out of the breakdown in the business relationship between plaintiff,
Kheireddin Hamade,1 and defendant, Sunoco, Inc. (R&M) (Sunoco),2 plaintiff appeals as of right
the trial court's grant of summary disposition in favor of defendants. We affirm.
1
Nouhad Hamade is not a party to this appeal. On April 1, 2002, the parties stipulated the
dismissal of Nouhad from the lawsuit, and, on April 16, 2002, the trial court entered an order to
that effect. However, Nouhad was retained as a plaintiff on the caption of the first amended
complaint, which was filed on July 3, 2003, and was not subsequently dismissed from the action.
(continued…)
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I. Facts and Procedural History
In 1986 Hamade purchased an existing gas station with the Sunoco brand from its owner
with the approval of Sunoco. At that time, Hamade entered into a dealer supply franchise
agreement with Sunoco, which lasted until 1989.3 After the expiration of the first agreement in
1989, Hamade entered into a new dealer supply franchise agreement with Sunoco, which lasted
until 1992 (the 1989 Agreement). From 1992 to 1997, Hamade continued operating his station
as a Sunoco station by obtaining extensions of the 1989 Agreement.
In 1997 Hamade still had not obtained a new dealer supply franchise agreement with
Sunoco. At his deposition, Hamade stated that Sunoco insisted that he make numerous
improvements to his station before it would be interested in signing a new agreement. The
improvements included enlarging and modernizing the station islands, installing larger fuel
tanks, installing a canopy, and remodeling the service station store. In addition, Hamade claimed
that Sunoco required him to significantly increase his motor fuel sales. After he completed the
improvements and began to negotiate a new agreement with Sunoco, Hamade stated that he
asked Sunoco's representative, Jeff Byard, about placing a provision in the contract preventing
Sunoco from approving another Sunoco station within a certain distance of his station on the
same line of traffic. Hamade testified that Byard responded by saying that he did not need to
worry about that because Sunoco would never do that. Hamade said that he took Byard at his
word and entered into a new dealer supply franchise agreement (the 1997 Agreement).
In September 2000, Sunoco approved a new Sunoco station at a location that was
approximately one mile from Hamade's station on the same road. At his deposition, Hamade
stated that, in December 2000, he had problems with customers who experienced engine trouble
after purchasing fuel from his station. Hamade claimed that the problems arose from a bad batch
of fuel delivered by Sunoco. Hamade testified that his business suffered as a result of the
opening of the new Sunoco station and the delivery of bad fuel.
On February 8, 2001, plaintiff filed suit. In the complaint, plaintiff alleged that Sunoco
breached its agreement not to approve another Sunoco station within Hamade's exclusive
territory, violated Michigan's Franchise Investment Law (MFIL),4 converted Hamade's exclusive
territory, and tortiously interfered with his business relations when it deliberately delivered
(…continued)
Hence, the lower court pleadings use the plural "plaintiffs." However, for ease of reference we
shall use the singular "plaintiff" throughout this opinion.
2
Plaintiff 's original complaint only named Sunoco as defendant. In plaintiff 's first amended
complaint, plaintiff added Sunoco's officers and board of directors as of 2003, as well as four
Sunoco employees who had dealings with Hamade, as defendants. For ease of reference, we
shall use "Sunoco" and "defendants" interchangeably.
3
The agreement was titled "Dealer Supply Franchise Agreement" because it constituted a
franchise for purposes of the federal Petroleum Marketing Practices Act. See 15 USC 2801 et
seq.
4
MCL 445.1501 et seq.
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defective fuel in an attempt to induce his customers to switch to the new Sunoco station.
Plaintiff also alleged a claim based on promissory estoppel. On April 11, 2002, Sunoco moved
for summary disposition. In orders dated July 17 and 29, 2002, the trial court granted summary
disposition in favor of defendants on all of plaintiff 's claims except the claims of breach of
contract and tortious interference with a business relationship.
On July 3, 2003, plaintiff filed an amended complaint with 14 separate counts. Counts I
through III were for various violations of the MFIL. Count IV restated plaintiff 's original breach
of contract claim. Count V alleged a claim based on promissory estoppel. Count VI alleged a
breach of Sunoco's duty to set an open price term in good faith under Michigan's Uniform
Commercial Code (MUCC).5 Count VII alleged a breach of the Michigan Antitrust Reform
Act.6 Count VIII alleged a claim for unjust enrichment. Count IX restated plaintiff 's original
claim for conversion. Count X restated plaintiff 's original claim for tortious interference with a
business relationship. Counts XI through XIII alleged claims based on fraud, and count XIV
alleged a civil conspiracy claim. On October 15, 2003, defendants moved for summary
disposition of plaintiff 's first amended complaint. On May 25, 2004, the trial court granted
defendants' motion with respect to counts VII, IX, X, XI, and XIV.
On July 25, 2005, defendants again moved for summary disposition of plaintiff 's first
amended complaint. The trial court held a hearing on this motion on August 15, 2005. At the
hearing, the trial court granted defendants' motion for summary disposition of plaintiff 's claims
based on the MUCC and unjust enrichment. The trial court also granted defendants' motion for
summary disposition of plaintiff 's MFIL claims. The trial court reasoned that summary
disposition of the MFIL claims was appropriate because plaintiff failed to show that Hamade
paid a fee for the privilege of entering into business under a franchise agreement and, therefore,
the 1997 Agreement was not subject to the requirements imposed by the MFIL.
The trial court continued the hearing on defendants' motion for summary disposition on
August 16, 2005. At the continuation of the hearing, the trial court determined that in light of
the written agreement, Hamade's reliance on any representation made by Sunoco was not
reasonable as a matter of law and, therefore, there could be no promissory estoppel claim. The
trial court also noted that the agreement disclaimed any warranties on the part of Sunoco
regarding present or future competitive activities. Because the agreement also contained an
integration clause, the trial court concluded that the parol evidence rule barred plaintiff 's
attempts to present evidence to contradict the terms of the written agreement. Therefore, the trial
court concluded that plaintiff 's contract claim and claims based on fraud must also fail.
The trial court entered an order dismissing plaintiff 's case in its entirety on August 26,
2005. This appeal followed.
5
See MCL 440.1101 et seq.
6
See MCL 445.771 et seq.
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II. The MFIL Claims
On appeal, plaintiff first argues that summary disposition of the MFIL claims was
inappropriate because plaintiff presented sufficient evidence before the trial court to either
establish that the 1997 Agreement constituted a "franchise" for purposes of the MFIL or to create
a factual question on that issue.7 We disagree.
This Court reviews de novo the trial court's decision to grant summary disposition.
Moore v Cregeur, 266 Mich App 515, 517; 702 NW2d 648 (2005). A motion for summary
disposition under MCR 2.116(C)(10) tests the factual sufficiency of a claim. Dressel v
Ameribank, 468 Mich 557, 561; 664 NW2d 151 (2003). Summary disposition is appropriate
under MCR 2.116(C)(10) if "there is no genuine issue as to any material fact, and the moving
party is entitled to judgment or partial judgment as a matter of law." When determining whether
there is a genuine issue regarding any material fact, the trial court must consider the evidence
presented by the parties in the light most favorable to the party opposing the motion. Smith v
Globe Life Ins Co, 460 Mich 446, 454-455; 597 NW2d 28 (1999). "A genuine issue of material
fact exists when the record, giving the benefit of reasonable doubt to the opposing party, leaves
open an issue upon which reasonable minds might differ." West v Gen Motors Corp, 469 Mich
177, 183; 665 NW2d 468 (2003), citing Shallal v Catholic Social Services of Wayne Co, 455
Mich 604, 609; 566 NW2d 571 (1997), and Quinto v Cross & Peters Co, 451 Mich 358, 369;
547 NW2d 314 (1996). "Where the proffered evidence fails to establish a genuine issue
regarding any material fact, the moving party is entitled to judgment as a matter of law." Maiden
v Rozwood, 461 Mich 109, 120; 597 NW2d 817 (1999).
This Court also reviews de novo the proper interpretation of a statute. Macomb Co
Prosecutor v Murphy, 464 Mich 149, 157; 627 NW2d 247 (2001). This Court begins the
interpretation of a statute by examining the language of the statute itself. If the language is not
ambiguous, the Court shall not construe it, but will enforce it as written. Id. at 158.
Under MCL 445.1502(3), a "franchise" is defined as
a contract or agreement, either express or implied, whether oral or written,
between 2 or more persons to which all of the following apply:
(a) A franchisee is granted the right to engage in the business of offering,
selling, or distributing goods or services under a marketing plan or system
prescribed in substantial part by a franchisor.
7
We note that, in plaintiff 's statement of the question presented, plaintiff challenges the validity
of the trial court's grant of summary disposition on all of his "remaining claims," without
specifying which claims constitute "remaining claims." This Court need not address issues that
are insufficiently argued or briefed on appeal. People v Van Tubbergen, 249 Mich App 354,
364-365; 642 NW2d 368 (2002). Accordingly, we shall limit our analysis to those issues
properly raised and argued in plaintiff 's brief.
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(b) A franchisee is granted the right to engage in the business of offering,
selling, or distributing goods or services substantially associated with the
franchisor's trademark, service mark, trade name, logotype, advertising, or other
commercial symbol designating the franchisor or its affiliate.
(c) The franchisee is required to pay, directly or indirectly, a franchise fee.
Defendants did not contest the existence of the first two requirements before the trial
court and have not contested them on appeal. Instead, defendants argued and presented evidence
that Hamade never paid a franchise fee and, therefore, the 1997 Agreement was not a franchise
subject to the MFIL.
Pursuant to MCL 445.1502(3)(c), an agreement will not be considered a franchise within
the meaning of the MFIL unless the "franchisee is required to pay, directly or indirectly, a
franchise fee." At his deposition, Hamade admitted that he did not pay a direct franchise fee.
However, plaintiff contends that Sunoco compelled him to indirectly pay a franchise fee when it
(1) required him to purchase excess inventory and meet an increased monthly quota of fuel sales,
(2) required him to make a $10,000 collateral deposit, (3) compelled him to make numerous
improvements to his station, (4) conditioned the agreement on his ability to repay a cash loan, (5)
compelled him to attend training seminars, (6) charged him a fee for equipment that it loaned to
him, and (7) failed to pass on the reduction in price occasioned by a reduction in the federal
excise tax.
Under MCL 445.1503(1), a "franchise fee" is defined as "a fee or charge that a franchisee
or subfranchisor is required to pay or agrees to pay for the right to enter into a business under a
franchise agreement, including but not limited to payments for goods and services." Hence, the
primary inquiry is whether Hamade was required or agreed to pay a fee or charge to Sunoco for
the "right to enter into a business under a franchise agreement . . . ." Furthermore, although a
franchise fee may include payments for goods and services, MCL 445.1503(1)(a) specifically
states that the payment of a franchise fee does not include the "purchase or agreement to
purchase goods, equipment, or fixtures directly or on consignment at a bona fide wholesale
price."
We shall first address plaintiff 's contention that Sunoco required him to indirectly pay a
franchise fee by compelling him to purchase and sell an excessive monthly quota of fuel and to
purchase excess inventory. Specifically, plaintiff alleged that Sunoco required him to sell 94,000
gallons of fuel a month as opposed to his previous quota of 40,000 gallons a month and that
Sunoco "charges the franchisees for their signs to advertise their products and name of gas
station, and charges excessive prices for toys and articles with Sunoco's name and emblem,
which are items that are forced upon their franchisees to sell beyond a bona fide price."
Under Michigan law, minimum purchase or minimum inventory requirements may
constitute a "franchise fee" as that term is defined by MCL 445.1503(1). See 1999 AC, R
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445.101(2)(e). However, a minimum purchase or minimum inventory requirement will not
constitute a franchise fee under the MFIL if the price charged for the goods required to be
purchased or held in inventory is "a bona fide wholesale price"8 and there is "a well-established
market in this state"9 for those goods. Id. While not binding on this Court, the reasoning
employed by the court in Digital Equipment Corp v Uniq Digital Technologies, Inc, 73 F3d 756
(CA 7, 1996) (interpreting Illinois franchise law) is instructive on the issue of indirect fees
through inventory requirements. In Uniq, the court explained that
an obligation to carry a large inventory can be the economic equivalent of a
franchise fee. An excessively large inventory transfers cash to the seller without
producing benefits for the buyer; and the interest the seller earns by making the
sales earlier is a kind of fee. Like a cash payment, it transfers wealth from buyer
to seller (one can speak of a "transfer" because, by hypothesis, the buyer gets no
benefit from the inventory). [Id. at 760.]
See also Wright-Moore Corp v Ricoh Corp, 908 F2d 128, 136 (CA 7, 1990) (noting that, under
Indiana law, excess inventory requirements may constitute an indirect franchise fee if the
inventory is illiquid, but a normal sales quota will not be a franchise fee under the bona fide
wholesale price exception). The requirements of Rule 445.101(2)(e) are consistent with the
reasoning stated in Uniq. If a franchisee is forced to pay a price in excess of a bona fide
wholesale price for goods or if the franchisee is required to purchase excess goods for which
there is no well-established market in this state, the excess costs borne by the franchisee in favor
of the franchisor effectively constitute a transfer of wealth from the franchisee to the franchisor,
which in turn constitutes the payment of an indirect franchise fee as contemplated by MCL
445.1502(3)(c).
Pursuant to § 3.02 of the 1997 Agreement, Hamade was required to purchase his monthly
quota of fuel at the dealer tank wagon price (DTW) in effect at the time and place of delivery. In
their original motion for summary disposition, defendants presented the affidavit of Albert B.
Khleif, who averred that the DTW is the wholesale price of fuel sold to Sunoco dealers.
Furthermore, in their subsequent motion for summary disposition, defendants presented the
8
The term "bona fide wholesale price" "refers to a price that constitutes a fair payment for goods
purchased at a comparable level of distribution, and no part of which constitutes a payment for
the right to enter into, or continue in, the franchise business." Rule 445.101(6). Goods may
include "goods sold to the franchisee for resale, as well as fixtures, equipment, raw materials,
supplies, and other goods used by the franchisee in the conduct of the franchise business." Id.
9
The existence of a well-established market is a question of fact determined by analyzing the
following nonexhaustive list of factors: (1) the number of presently existing wholesale and retail
outlets of the franchisor or competitors in a similar line of business, (2) the quantity and price of
like or similar products presently sold in an existing geographical area in Michigan, (3) the
ability of the purchaser to resell at the suggested retail price of the manufacturer or wholesaler or
at a reasonable markup over the purchaser's cost, and (4) the ability of the purchaser to return
any unsold portion of the product without penalty. Rule 445.101(7).
-6-
affidavit of Paul T. Schwab. In his affidavit, Schwab stated that Sunoco markets fuel both to
direct dealers, such as Hamade, and to jobbers or distributors, who then resell the fuel to dealers
or market the fuel from their own stations. Schwab averred that he and his staff are responsible
for setting the daily DTW and that it is determined by a variety of factors, including local
competitive factors, historic sales volume, market trends, Sunoco's costs and margin, and current
inventory. Schwab also averred that the final DTW for each day is the price charged to all
dealers within the applicable zone, with the goal that the price will be from six to nine cents
below the street average in order to allow dealers to realize a profit.
In response to these affidavits, plaintiff failed to present any substantively admissible
evidence that the DTW was anything other than a bona fide wholesale price. Plaintiff merely
alleged that Sunoco charged him a higher DTW that included charges for the equipment loaned
to him and did not properly reflect a decrease in the federal excise tax. In support of this
allegation, plaintiff presented the trial court with a copy of a station evaluation and an invoice for
one of his fuel purchases. However, these exhibits do not on their face support plaintiff 's
contention that he was charged a higher DTW than other dealers within his zone, and plaintiff
failed to offer any testimony by a witness capable of interpreting these documents. Hence, this
evidence was insufficient to create a factual question whether the DTW paid by Hamade was
anything other than a bona fide wholesale price.
In addition, plaintiff failed to present evidence that his fuel quota was so unreasonably
large that it essentially rendered his inventory illiquid. First, on appeal, plaintiff does not contest
that there is a well-established market in this state for fuel. See Rule 445.101(7). Second,
although plaintiff correctly notes that, under the 1989 Agreement, his fuel quota was only 40,000
gallons a month, there is also record evidence that for the entire year preceding the signing of the
1997 Agreement, Hamade was selling a monthly average of fuel closer to the agreed-upon
amount of 94,000 gallons a month. Furthermore, Hamade successfully met his fuel quota for
two years after the signing of the 1997 Agreement. Hence, the fuel quota negotiated in the 1997
Agreement appears reasonable in light of Hamade's sales history and, therefore, did not
constitute an indirect franchise fee. See James v Whirlpool Corp, 806 F Supp 835, 843 (ED Mo,
1992) (concluding that the plaintiff failed to establish the indirect payment of a franchise fee
where it presented no evidence that the inventory requirements were unreasonable).
On appeal, plaintiff argues that Sunoco's subsequent decision to permit another Sunoco
station to operate on the same line of traffic and its delivery of allegedly tainted fuel effectively
eliminated his ability to meet the 94,000-gallon monthly quota. These subsequent developments,
plaintiff further contends, rendered his inventory illiquid and, as a result, transformed the 1997
Agreement into a franchise agreement. This argument is without merit. The MFIL imposes
notice, disclosure, and substantive requirements on a contract or agreement that meets the
definition of "franchise." See, e.g., MCL 445.1505, 445.1507a, 445.1508, and 445.1527.
Because the MFIL seeks to protect prospective franchisees by imposing various requirements on
the franchisor in connection with the offer and sale of a franchise, see MCL 445.1504(1),
whether a contract or agreement constitutes a franchise for purposes of the MFIL must be
determined from the circumstances present at the time of the offer or sale. Subsequent market
developments cannot transform an agreement that was not subject to the MFIL at its inception
into a franchise subject to the requirements imposed by the MFIL. Thus, the fact that Hamade
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later had difficulty meeting the quota is irrelevant to a determination whether the agreement
constituted a franchise within the meaning of MCL 445.1502(3) at the time it was offered or
sold.
Furthermore, there is also no record evidence to support plaintiff 's claim that Sunoco
required him to purchase signs, toys, or other articles with Sunoco's trademarks. Likewise, there
is no evidence that such goods were purchased at anything other than a bona fide wholesale
price. Consequently, plaintiff 's contention that he indirectly paid a franchise fee through other
inventory requirements is also unsupported by the record.
Plaintiff next contends that the $10,000 collateral deposit required by the 1997
Agreement constituted the payment of an indirect franchise fee. We disagree.
Pursuant to § 1.07 of the 1997 Agreement, Hamade was required to deposit $10,000 with
Sunoco as collateral. Under § 4.02(b) of the agreement, the $10,000 served as collateral "for the
discharge and payment of all or any part of any present, past or future obligation, indebtedness or
liability of Dealer to Company." Although the collateral deposit was held by Sunoco and subject
to its claims, see § 3.04 of the 1997 Agreement, under §§ 4.05 and 4.06 of the agreement,
Sunoco was obligated to pay interest on the collateral deposit and had to return it to Hamade at
the end of the agreement. For the definition of "franchise fee" to be satisfied, the franchisee
must either be required or agree to pay the franchisor a fee for the right to enter into a business
under a franchise agreement; i.e., there must be a transfer of wealth from the franchisee to the
franchisor. See MCL 445.1503(1); see also Implement Service, Inc v Tecumseh Products Co,
726 F Supp 1171, 1179 (SD Ind, 1989) (interpreting Indiana franchise law and holding that a
good or service must be rendered to the franchisor and not to a third party in order to constitute
an indirect payment of a franchise fee); Uniq, supra at 760 (noting that excess inventory
requirements can constitute an indirect transfer of wealth from the franchisee to the franchisor).
Because Hamade retained ownership of the deposited funds and was not deprived of the time
value of the funds, there was no transfer of wealth to Sunoco. Consequently, the collateral
deposit did not constitute the payment of a franchise fee.
Plaintiff next argues that Sunoco compelled him to indirectly pay a franchise fee when it
conditioned approval of the 1997 Agreement on the making of improvements to his station.
As already noted, from 1992 through the signing of the 1997 Agreement, Hamade
continued to operate the station as a Sunoco station through extensions of the 1989 Agreement.
In 1997 Hamade made numerous improvements to his station, including the remodeling of his
garage bays into a store, the replacement of his underground storage tanks, and improvements to
the fuel pump locations and the canopy covering them. Hamade averred that the total cost of
these improvements was from $400,000 to $500,000 and that Sunoco required these
improvements before it would agree to enter into the 1997 Agreement. Assuming that Sunoco
did in fact require Hamade to make the improvements before it would enter into the 1997
Agreement, plaintiff has failed to demonstrate how such requirements constituted the indirect
payment of a franchise fee to Sunoco.
Plaintiff did not present any evidence that the moneys spent on the improvements were
paid directly to Sunoco. Indeed, Hamade averred that he hired the Oscar W. Larson Co. to
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perform the work. Furthermore, in order to help Hamade make improvements to his station,
Sunoco loaned over $40,000 worth of equipment to him and gave him $55,000 to pay for the
installation of the loaned equipment. In addition, the improvements to Hamade's station
primarily benefited Hamade. This is certainly true of the remodeling of the garage bays into a
convenience store, whose profits benefited only Hamade. Finally, although Sunoco indirectly
benefited from the improvements to the extent that the improvements might contribute to an
increase in the sale of fuel, any increase in the sale of fuel also benefited Hamade. Because the
improvements primarily benefited Hamade rather than Sunoco, plaintiff failed to establish that
the improvements constituted the payment of a direct or indirect fee to Sunoco for the privilege
of entering into a franchise.10
Next, plaintiff contends that Sunoco charged him an indirect franchise fee when it
conditioned its consent to the 1997 Agreement on his ability to repay the $55,000 loan made
with the signing of the agreement. Again, we disagree.
Pursuant to § 2.02 of the 1997 Agreement, Sunoco agreed to pay Hamade $55,000 in upfront consideration to cover the costs of installing the loaned equipment. Although the $55,000
was immediately paid to Hamade upon entering into the agreement, pursuant to § 2.03 of the
agreement, the $55,000 advance was actually amortized over the term of the agreement. If the
agreement was terminated for any reason, Hamade was obligated to return the unamortized
portion of the advance. Under the terms of § 2.03, the amortization of the advance was linked to
the total fuel Hamade was required to purchase during the period covered by the agreement. For
every gallon of fuel Hamade purchased, the advance was amortized by ".00975 cents."11 Thus, if
Hamade fulfilled his obligations under the 1997 Agreement, he would not be obligated to return
the advanced funds. Consequently, on the face of the 1997 Agreement, the $55,000 advance was
not a loan. Instead, it was a transfer of wealth from Sunoco to Hamade, albeit a transfer that was
amortized over the life of the agreement.
The only evidence submitted by plaintiff to refute the plain terms of the 1997 Agreement
was his affidavit, in which he stated that the $55,000 advance was a loan,12 and the station
evaluation, which plaintiff claimed indicated that Sunoco assessed a fee on every gallon sold to
10
In his reply brief on appeal, plaintiff argues that the trial court impermissibly engaged in factfinding when it determined that Sunoco did not benefit from, among other things, the
improvements to his station. We disagree. When it noted that the improvements benefited
Hamade rather than Sunoco, the trial court simply recognized that plaintiff failed to present
evidence that the improvements constituted a transfer of wealth from Hamade to Sunoco.
11
This is the factor as stated in the agreement. However, we note that, when this factor is
applied to Hamade's required purchase amount of 5.64 million gallons, it is clear that the number
is off by two decimal points and that the factor necessary to amortize the advance is actually
0.975 cents (or $0.00975) a gallon.
12
This affidavit is directly contradicted by Hamade's deposition testimony, in which he
acknowledged that, if he fulfilled the terms of the contract, he would not have been obligated to
return any portion of the $55,000.
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Hamade to cover the cost of the advance and loaned equipment. However, mere conclusory
allegations within an affidavit that are devoid of detail are insufficient to create a question of
fact. Quinto, supra at 371-372; MCR 2.119(B)(1). Likewise, as noted above, the station
evaluation does not on its face support the contention that Sunoco included hidden fees in the
price it charged Hamade for his fuel, and plaintiff failed to present the testimony of a witness
capable of meaningfully interpreting the station evaluation. Hence, Hamade's affidavit and the
station evaluation were insufficient to refute the plain language of the 1997 Agreement and
establish a question of fact regarding whether the $55,000 advance was a loan.
Even were we to conclude that the $55,000 advance was a loan that Hamade was
obligated to repay, the repayment of the $55,000 would not constitute the payment of a franchise
fee. Under the plain language of the MFIL, a payment will not constitute a franchise fee unless
the payment was for the right to enter into business under a franchise agreement. MCL
445.1503(1). Plaintiff presented no evidence that Hamade was required to accept a loan from
Sunoco as a condition of entering into the 1997 Agreement. Likewise, the repayment of a loan
principal is not a transfer of wealth from the franchisee to the franchisor. Finally, although the
payment of interest in excess of a fair market rate on a loan that the franchisor required of the
franchisee might arguably constitute the indirect payment of a franchise fee, plaintiff did not
present any evidence that he was charged any interest at all, let alone interest in excess of a fair
market rate. Consequently, the $55,000 advance, even if it were a loan, could not be
characterized as the indirect payment of a franchise fee.
Plaintiff next argues that Sunoco charged him an indirect franchise fee by compelling
him to attend seminars. Although mandatory attendance at seminars for which the franchisee
must pay a fee might constitute the payment of an indirect franchise fee, see Ricoh, supra at 136,
plaintiff completely failed to support the claim that he was required to attend seminars and pay a
fee for his attendance with any substantively admissible evidence.13 In contrast, defendants
presented the affidavit of Thomas E. Iannetta, who stated that Sunoco does not require
attendance at seminars for dealers such as Hamade and does not charge a fee for the voluntary
seminars that it does offer to its dealers. Consequently, plaintiff failed to create a question of
fact regarding whether he indirectly paid a franchise fee through attendance at mandatory
seminars.
Finally, plaintiff contends that Sunoco charged him a hidden fee for each gallon for the
more than $40,000 worth of loaned equipment and failed to pass on the savings occasioned by a
decrease in the federal excise tax on fuel. Plaintiff 's only evidentiary support for these
allegations is the station evaluation and the invoice already discussed. Because these documents
do not facially establish that Sunoco added hidden fees to the price Hamade paid for fuel, they
13
In his brief on appeal, plaintiff cites his brief in response to defendants' motion for summary
disposition in support of this contention. However, the reply brief merely contains a conclusory
statement that Hamade was required to attend these seminars without citation to record evidence.
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are insufficient to rebut the evidence presented by defendants that Hamade paid the same DTW
as every other dealer within his price zone.
Because plaintiff failed to present evidence sufficient to create a question of fact
regarding whether Hamade paid a franchise fee, the trial court properly determined that the 1997
Agreement was not a franchise for purposes of the MFIL. Therefore, summary disposition of
plaintiff 's claims based on the MFIL was appropriately granted.
III. Contract and Fraud Claims
Plaintiff next argues that the trial court erred when it determined that the integration
clause contained in the 1997 Agreement barred the admission of extrinsic evidence to prove that
Sunoco promised him that it would not permit another Sunoco station within a certain distance
of his station. For this reason, plaintiff further argues, summary disposition was improperly
granted. We disagree.
This Court reviews de novo the trial court's decision to grant summary disposition of
these claims. Moore, supra at 517. This Court also reviews de novo the proper interpretation of
a contract. Clark v DaimlerChrysler Corp, 268 Mich App 138, 141; 706 NW2d 471 (2005).
Likewise, whether a contract's terms are ambiguous is a question of law this Court reviews de
novo. Wilkie v Auto-Owners Ins Co, 469 Mich 41, 47; 664 NW2d 776 (2003). When a contract
is unambiguous, it must be enforced according to its terms. DaimlerChrysler Corp v G-Tech
Professional Staffing, Inc, 260 Mich App 183, 185; 678 NW2d 647 (2003).
Plaintiff argued in the trial court that Sunoco breached the 1997 Agreement when it
permitted another Sunoco station to open down the road from Hamade's station. In support of
this argument, plaintiff presented evidence that Sunoco induced Hamade to enter into the 1997
Agreement by promising him that it would not allow another Sunoco station to open within three
to five miles of Hamade's station on the same line of traffic. Plaintiff also contended that this
same evidence supported his fraud claims. The trial court disagreed and determined that plaintiff
was barred by the parol evidence rule from presenting this evidence to vary the unambiguous
terms of the 1997 Agreement and, for that reason, ruled that plaintiff 's contract and fraud claims
must fail. On appeal, plaintiff argues that the trial court erred in applying the parol evidence rule
to bar the evidence that Sunoco promised Hamade an exclusive territory.
In UAW-GM Human Resource Ctr v KSL Recreation Corp, 228 Mich App 486, 492; 579
NW2d 411 (1998), the Court explained the nature of the parol evidence rule:
The parol evidence rule may be summarized as follows: "[p]arol evidence
of contract negotiations, or of prior or contemporaneous agreements that
contradict or vary the written contract, is not admissible to vary the terms of a
contract which is clear and unambiguous." Schmude Oil Co v Omar Operating
Co, 184 Mich App 574, 580; 458 NW2d 659 (1990). This rule recognizes that in
"[b]ack of nearly every written instrument lies a parol agreement, merged
therein." Lee State Bank v McElheny, 227 Mich 322, 327; 198 NW 928 (1924).
"The practical justification for the rule lies in the stability that it gives to written
contracts; for otherwise either party might avoid his obligation by testifying that a
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contemporaneous oral agreement released him from the duties that he had
simultaneously assumed in writing." 4 Williston, Contracts, § 631. In other
words, the parol evidence rule addresses the fact that "disappointed parties will
have a great incentive to describe circumstances in ways that escape the explicit
terms of their contracts." Fried, Contract as Promise (Cambridge: Harvard
University Press, 1981) at 60.[14]
Although the parol evidence rule generally bars the submission of extrinsic evidence, there are
exceptions to its application. First, it is a prerequisite to application of the parol evidence rule
that there be a finding that the parties intended the written instrument to be a complete
expression of their agreement with regard to the matters covered. For this reason, "[e]xtrinsic
evidence of prior or contemporaneous agreements or negotiations is admissible as it bears on this
threshold question of whether the written instrument is such an 'integrated' agreement." NAG
Enterprises, Inc v All State Industries, Inc, 407 Mich 407, 410; 285 NW2d 770 (1979). Second,
extrinsic evidence may be presented to attack the validity of the contract as a whole. Thus,
extrinsic evidence may be presented to show (1) that the writing was a sham, not intended to
create legal relations, (2) that the contract has no efficacy or effect because of fraud, illegality, or
mistake, (3) that the parties did not integrate their agreement or assent to it as the final
embodiment of their understanding, or (4) that the agreement was only partially integrated
because essential elements were not reduced to writing. Id. at 410-411.
In the present case, plaintiff does not argue that the contract was a sham, illegal, or the
product of a mistake. Instead, plaintiff argues that he was fraudulently induced into executing an
incomplete agreement by Sunoco's representation that he did not need an exclusive territory
clause because it was Sunoco's policy not to authorize a new Sunoco station within three to five
miles of an existing station. Although plaintiff claims that the 1997 Agreement was incomplete,
it contained the following merger clause:
NOTE TO DEALER: BEFORE SIGNING IN THE SPACE PROVIDED
BELOW YOU SHOULD CAREFULLY READ ALL PARTS OF THIS
AGREEMENT, WHICH IS A BINDING LEGAL DOCUMENT CONTAINING
SEVERAL PARTS AND ATTACHMENTS (INCLUDING ALL ADDENDA,
AMENDMENTS, SCHEDULES AND DOCUMENTS INCORPORATED
HEREIN). THIS IS THE ENTIRE AGREEMENT BETWEEN COMPANY
AND DEALER, AND MERGES AND SUPERCEDES ALL PRIOR
AGREEMENTS,
UNDERSTANDINGS,
REPRESENTATIONS
AND
WARRANTIES (ORAL OR WRITTEN, EXPRESS OR IMPLIED)
CONCERNING DEALER'S OPERATION OF A FRANCHISE AT THE
PREMISES. NO MODIFICATIONS OR UNDERSTANDING CONCERNING
THIS AGREEMENT SHALL BE BINDING UNLESS IN WRITING AND
SIGNED BY COMPANY'S AUTHORIZED REPRESENTATIVE.
14
The parol evidence rule applicable to transactions in goods is codified at MCL 440.2202.
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This clause appears alone at the top of the page containing the signature lines for the parties. No
other clauses appear on this page. Furthermore, a substantially similar clause appears at
§ 3.25(d) of the 1997 Agreement. Hence, by its unambiguous terms, the 1997 Agreement
represents the "entire agreement" between Sunoco and Hamade and any prior "agreements,
understandings, representations and warranties" were merged and superseded by the agreement.
Where the parties have included an express integration or merger clause within the agreement,
"it is conclusive and parol evidence is not admissible to show that the agreement is not integrated
except in cases of fraud that invalidate the integration clause or where an agreement is obviously
incomplete 'on its face' and, therefore, parol evidence is necessary for the 'filling of gaps.'"
UAW-GM, supra at 502, quoting 3 Corbin, Contracts, § 578, p 411. The 1997 Agreement is
detailed and complete on its face; therefore, there is no need to fill gaps. Hence, plaintiff is left
only with his claim that Sunoco's representations constituted fraud.
Parol evidence is generally admissible to demonstrate fraud, which, if proved, would
render the contract voidable by the innocent party. UAW-GM, supra at 503.
However, in the context of an integration clause, which releases all
antecedent claims, only certain types of fraud would vitiate the contract. 3
Corbin, Contracts, § 578, p 411, states in part:
"To establish fraud, it is not sufficient merely to show that the writing
states that there was no antecedent agreement when the fact is that there had been
one. If by artifice or concealment, one party induces the other to suppose that the
antecedent agreement is included in the writing, or to forget that agreement and to
execute an incomplete writing, while describing it as complete, the written
provision may be voidable on the ground of fraud."
In other words, while parol evidence is generally admissible to prove fraud, fraud
that relates solely to an oral agreement that was nullified by a valid merger clause
would have no effect on the validity of the contract. Thus, when a contract
contains a valid merger clause, the only fraud that could vitiate the contract is
fraud that would invalidate the merger clause itself, i.e., fraud relating to the
merger clause or fraud that invalidates the entire contract including the merger
clause. 3 Corbin, Contracts, § 578. [Id.]
In the present case, plaintiff 's fraud claims were based solely on an oral representation by
Sunoco that it would not authorize a Sunoco station within three to five miles of Hamade's
station. Because this representation was expressly nullified by the integration clause, if the
integration clause is valid, fraud based on this representation will have no effect on the validity
of the contract. Id. Thus, plaintiff must demonstrate that the fraud in question invalidated the
integration clause itself.
Plaintiff does not contend that he was misled into believing that the 1997 Agreement
contained a clause granting him an exclusive territory when in fact it did not. Instead, plaintiff
argues that he was induced into entering into an incomplete agreement that described itself as
complete. In order to prevail on this theory, plaintiff must show not only that he requested the
inclusion of a clause guaranteeing him an exclusive territory, but also that, as a result of
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Sunoco's fraudulent representations, he was induced to forget about the inclusion of that term
and sign an agreement that omitted it while describing itself as the parties' entire agreement. By
his own admission, Hamade did not forget about the inclusion of the term. Rather, he elected to
forgo a term providing for an exclusive territory on the basis of Sunoco's alleged representation.
Hamade knew that the agreement he signed did not contain a clause granting him an exclusive
territory. His only claim on appeal is that he was led to believe that he did not need such a
clause. Furthermore, the 1997 Agreement actually contains an express term applicable to
Sunoco's decision to authorize another Sunoco station near Hamade's station. Pursuant to §
3.24(a)(2), Hamade warranted to Sunoco that
[t]here have been no promises, claims or representations made to [Hamade] by
[Sunoco] or its representatives of any kind, including but not limited to promises
(i) concerning price, quality or quantity of products and services sold or supplied
by [Sunoco]; (ii) the condition, future repairs to or replacement of Loaned
Equipment; (iii) present or future market conditions or competitive activities
other than as set forth in this Agreement or any other written documents signed by
the parties as a part of the Franchise relationship. [Emphasis added.]
In light of this warranty, plaintiff may not now claim that the absence of an exclusive territory
clause within the 1997 Agreement rendered the agreement incomplete.
Plaintiff failed to demonstrate fraud that would invalidate the integration clause or
otherwise invalidate the entire contract. UAW-GM, supra at 505. Furthermore, because the
valid integration clause nullified all prior and contemporaneous agreements, understandings,
representations, and warranties, plaintiff may not use parol evidence to contradict the explicit
terms of the integration clause. Id. at 507. Hence, plaintiff 's contract claim must fail. Likewise,
the valid integration clause renders reliance on the representation unreasonable as a matter of
law. Id. at 504. Therefore, plaintiff 's claims based on silent fraud, fraudulent misrepresentation,
and innocent misrepresentation, all of which require reliance on a misrepresentation, see id.,
must also fail. Consequently, the trial court did not err when it granted summary disposition in
favor of defendants on plaintiff 's contract and fraud claims.
Plaintiff also argues that the extrinsic evidence is admissible to show that there was no
mutual assent to the integration clause contained in the 1997 Agreement. Plaintiff relies on the
dissent in UAW-GM, which argued that extrinsic evidence is admissible with regard to the
threshold question whether the parties assented to the written document as a completely
integrated contract, even if the contract contains a merger or integration clause. Id. at 515-517
(D.E. Holbrook, Jr., J., dissenting). However, the majority rejected the dissent's argument that
parol evidence is admissible to prove that a contract was not assented to as an integrated contract
when the contract contains an express integration clause. See id. at 502, 507 n 13. Because the
majority opinion is binding precedent, see MCR 7.215(J)(1), plaintiff 's reliance on the dissent is
misplaced.
IV. Conclusion
Because Hamade did not directly or indirectly pay a "franchise fee," as that term is
defined by MCL 445.1503(1), the 1997 Agreement did not qualify as a "franchise" under MCL
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445.1502(3). Therefore, the 1997 Agreement was not subject to the requirements imposed by
the MFIL, and summary disposition of plaintiff 's MFIL claims was appropriately granted.
Likewise, the trial court properly determined that, pursuant to the parol evidence rule, plaintiff
could not present extrinsic evidence to contradict or vary the terms of the fully integrated 1997
Agreement. Consequently, summary disposition of plaintiff 's contract and fraud claims was also
properly granted.
Given our resolution of these issues, we need not address plaintiff 's argument that the
1997 Agreement was not exempted from the requirements imposed by the MFIL pursuant to the
exception stated under MCL 445.1506(1)(e) or that the economic loss doctrine does not bar his
fraud or MFIL claims. We also decline to address plaintiff 's claim that the economic loss
doctrine does not bar his tortious interference with a business relationship claim. On appeal,
plaintiff failed to properly raise and brief an argument questioning the validity of the trial court's
grant of summary disposition on this claim. Therefore, plaintiff abandoned any claim of error in
the grant of summary disposition on his tortious interference claim. People v Van Tubbergen,
249 Mich App 354, 364-365; 642 NW2d 368 (2002).
Affirmed.
/s/ Michael R. Smolenski
/s/ Donald S. Owens
/s/ Pat M. Donofrio
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