MELISSA KNEPPER V HOLLEY DEVELOPMENT CO LLC
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STATE OF MICHIGAN
COURT OF APPEALS
MELISSA KNEPPER,
UNPUBLISHED
March 3, 2009
Plaintiff-Appellant,
V
HOLLEY DEVELOPMENT COMPANY, LLC,
DENNIS HOLLEY, JOY HOLLEY, and
THOMAS HOLLEY,
No. 283668
Washtenaw Circuit Court
LC No. 07-001003-CZ
Defendants-Appellees.
Before: Donofrio, P.J., and K. F. Kelly and Beckering, JJ.
PER CURIAM.
Plaintiff appeals as of right1 from the circuit court’s orders granting summary disposition
to defendants, a building concern and its operators, and confirming an arbitration award. We
affirm. This appeal has been decided without oral argument pursuant to MCR 7.214(E).
I. Facts
Plaintiff contracted with the corporate defendant for construction of a residential home.
The individual defendants are the owners and operators of that corporation. The contract called
for binding arbitration to resolve “all claims, disputes and other matters in question between the
Contractor and the Owner.” Disputes arose during the course of construction, and plaintiff and
the corporate defendant entered into a binding arbitration agreement. Plaintiff claimed
$797,541.33 in damages, but the arbitrator awarded her just $113,419.10.
Before the scheduled arbitration date, plaintiff filed this action, asking the circuit court to
convert the arbitration award to a partial judgment. Plaintiff additionally named the operators of
the corporate defendant as defendants, and asserted that defendants were perniciously
1
Defendants contend that plaintiff’s issues other than judgement on the arbitrator’s award are not
appealable by right. We disagree. Plaintiff properly claimed an appeal from a final order. See
MCR 3.602(N); MCR 7.203(A); and MCR 7.204.
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reorganizing the corporation and retaining certain funds of hers. In dismissing the case, the
circuit court held as follows:
The Court finds no material or substantial legal error apparent on the face
of the award, thus plaintiffs’ [sic] allegations and arguments challenging the
award are beyond the scope of proper judicial review. An arbitration award shall
be vacated only where the arbitrator exceed[ed] his or her powers[,] refused to
postpone the hearing on a showing of sufficient cause, refused to hear material
evidence, or otherwise conducted the hearing to prejudice substantially a party’s
rights . . . . Plaintiff submits no evidence of any of these criteria.
The Court finds plaintiff’s arguments that she can file a civil case against
the individuals because the agreement to arbitrate was only with the business and
not the individual business owners, and that additional issues need to be resolved
by the Court without merit. A court may compel . . . a non-signatory to an
arbitration agreement to arbitrate that party’s claims that are a derivative of . . .
and essentially identical to the relating and underlying claims of a signatory of the
arbitration agreement, if the signatory is contractually bound to submit the related
and underlying claims to arbitration.
Here, plaintiff agreed to arbitrat[e] claims under the construction contract.
Therefore her claims against . . . any individual agents or non-signatories are a
derivative of . . . and essentially are identical to her primary underlying claim.
Thus the Court finds that . . . claims against the individuals and any related or
additional issues should have been arbitrated.
The circuit court reduced its judgment to separate orders, signed the same day, granting
defendants’ motion for summary disposition and entering judgment for plaintiff in the amount of
the arbitration award.
On appeal, plaintiff asserts that the circuit court misapplied the doctrine of res judicata,
erred in dismissing the case before the completion of discovery, and erred in failing to take
cognizance of admissions now presumed because of defendants’ failure to answer the request for
admissions.
II. Res Judicata
We review both applications of res judicata, and decisions on motions for summary
disposition, de novo as questions of law. Wayne Co v Detroit, 233 Mich App 275, 277; 590
NW2d 619 (1998).
“Under the doctrine of res judicata, ‘a final judgment rendered by a court of competent
jurisdiction on the merits is conclusive as to the rights of the parties and their privies, and, as to
them, constitutes an absolute bar to a subsequent action involving the same claim, demand or
cause of action.’” Id., quoting Black’s Law Dictionary (6th ed, 1990), p 1305. “The doctrine
operates where the earlier and subsequent actions involve the same parties or their privies, the
matters of dispute could or should have been resolved in the earlier adjudication, and the earlier
controversy was decided on its merits.” Wayne Co, supra. The doctrine applies “to every point
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which properly belonged to the subject of litigation, and which the parties, exercising reasonable
diligence, might have brought forward at the time.” Peterson Novelties, Inc v City of Berkley,
259 Mich App 1, 11; 672 NW2d 351 (2003) (internal quotation marks and citations omitted). “If
the same facts or evidence would sustain both, the two actions are the same for the purpose of res
judicata.” Id.
An arbitration award has the force of res judicata in relation to matters within the
arbitrator’s authority. Hopkins v Midland, 158 Mich App 361, 370; 404 NW2d 744 (1987).
MCR 2.116(C)(7) authorizes motions for summary disposition premised upon “an
agreement to arbitrate . . . .” When deciding a motion under that rule, “this court accepts as true
plaintiff’s well-pleaded allegations and construes them in plaintiff’s favor. We must consider the
pleadings, affidavits, depositions, admissions, and documentary evidence filed or submitted by
the parties to determine whether a genuine issue of material fact exists.” Watts v Polaczyk, 242
Mich App 600, 603; 619 NW2d 714 (2000) (citations omitted).
Plaintiff emphasizes that the arbitration agreement was between herself and the corporate
defendant, and argues that she should have been allowed to pursue claims against the individual
defendants in court. However, for operation of res judicata, “perfect identity of the parties is not
required, only a substantial identity of interests that are adequately presented and protected by
the first litigant.” Adair v Michigan, 470 Mich 105, 122; 680 NW2d 386 (2004) (internal
quotation marks omitted). Also instructive is the rule that persons with claims derivative of
those of parties to an arbitration agreement may be bound by that arbitration despite their not
being party to the agreement to arbitrate in the first instance. Jozwiak v Northern Michigan
Hosps, Inc, 207 Mich App 161, 167-168; 524 NW2d 250 (1994). In this case, the substantial
identity of interests between the corporate defendant and its individual owners and operators is
obvious.
Plaintiff also asserts that she became aware of a statutory conversion claim only after
arbitration commenced. However, plaintiff points to no evidence showing the existence of such
a claim, nor does she explain why due diligence would not have brought any such claim to light
in time to include it in the arbitration. Plaintiff characterizes this claim as separate and distinct
from her arbitration action against the corporate defendant, even though it is beyond dispute that
defendants obtained funds from her exclusively through operation of the contract that required
arbitration of “all claims, disputes and other matters in question between the Contractor and the
Owner.”
For these reasons, plaintiff’s attempt to avoid operation of the doctrine of res judicata
must fail.
III. Discovery
Plaintiff argues that the circuit court erred in granting summary disposition to defendants
when she had only begun the process of discovery. We disagree. We review a lower court’s
decisions concerning discovery for an abuse of discretion. Baker v Oakwood Hosp Corp, 239
Mich App 461, 478; 608 NW2d 823 (2000).
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Plaintiff asserts that she needed further discovery to develop her claim of conversion,
arguing that the “issue of conversion arose after the arbitration, as the corporate Appellee
admitted during the arbitration discovery that it was still in possession of [plaintiff’s] money
from her trust fund account.” Plaintiff thus admits that the matter of her money remaining in
defendants’ hands came up in the arbitration process. For that reason, and because all claims and
disputes arising from the building contract were subject to arbitration, plaintiff could have
developed and litigated her conversion claim in arbitration, and only in arbitration. The circuit
court thus correctly dismissed the case without awaiting further discovery.
We further note that MCR 3.602(F)(2) authorizes an arbitrator, on a party’s request, to
permit the “taking of a deposition, for use as evidence, of a witness who cannot be subpoenaed
or is unable to attend the hearing,” but that neither subrule (K), governing modification or
correction of an award, nor subrule (L), governing judgments giving effect to arbitration awards,
make any provision for discovery for purposes of those court proceedings.
The circuit court likewise did not err in dismissing the case without regard for certain
unanswered requests for admissions. Plaintiff asserts that she served a request for admissions
that went unanswered in the required time, thus causing the matters in question to be deemed
admitted. See MCR 2.312(B). Plaintiff further asserts that defendants have thus admitted that
they have a trust fund containing funds deposited by plaintiff for the construction project, which
defendants have used for improper purposes. But, again, this is a dispute arising from
performance of the construction contract, which was thus a matter for arbitration, not trial in the
circuit court.
For these reasons, plaintiff fails to show that the circuit court erred in any matters relating
to discovery.
Affirmed.
/s/ Pat M. Donofrio
/s/ Kirsten Frank Kelly
/s/ Jane M. Beckering
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