MICHAEL USKIEWICZ V CITY OF ALPENA
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STATE OF MICHIGAN
COURT OF APPEALS
MICHAEL USKIEWICZ,
UNPUBLISHED
January 21, 2010
Plaintiff/Counter DefendantAppellant,
v
No. 285834
Alpena Circuit Court
LC No. 07-001455-CK
CITY OF ALPENA,
Defendant/Counter PlaintiffAppellee.
Before: Cavanagh, P.J., and Fitzgerald and Shapiro, JJ.
PER CURIAM.
Plaintiff appeals by right the summary dismissal of his breach of contract claim premised
on defendant’s failure to abide by the terms of an unambiguous, fully integrated severance
agreement. We reverse.
On December 11, 2006, plaintiff was defendant’s city manager and was asked to resign
during the course of a telephone conversation with the mayor. Following that conversation,
plaintiff authored a letter of resignation and attached to it a “letter of understanding” which he
signed. The “letter of understanding” indicated that it reflected plaintiff’s understanding of the
benefits he would receive upon his resignation, and included: (1) three months of pay to run
through March 12, 2007, (2) three months of benefits to run through March 12, 2007, (3)
payment of unused vacation and personal time, (4) favorable reference for future job prospects,
and (5) that the situation be handled in a positive way by both parties.
Thereafter, a severance agreement was drafted by defendant and executed by the mayor,
the deputy clerk/treasurer, and plaintiff. The severance agreement indicated that defendant and
plaintiff were parties to an employment contract and that plaintiff “has indicated his intent to
resign his employment.” In consideration for plaintiff’s agreement to release defendant from any
and all future claims against defendant, legal and otherwise, defendant agreed to (1) accept the
resignation, (2) continue plaintiff’s pay and benefits “to and including March 12, 2007,” and (3)
pay plaintiff for “unused vacation and sick days to the present date.” The agreement also
provided that it constituted the entire agreement between the parties, and “fully supercedes any
and all prior agreements or understandings between the parties hereto pertaining to the subject
matter hereof.” Further, it provided that there were “no additional promises, representations,
terms or provisions.”
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When defendant failed to pay plaintiff for his unused sick days, plaintiff sued for breach
of contract and promissory estoppel. He eventually filed a motion for summary disposition.
Defendant filed a countercomplaint for reformation of the severance agreement or to rescind the
agreement. Defendant averred that during the telephone conversation between the mayor and
plaintiff before plaintiff resigned, “the parties reached an agreement regarding the terms of
[plaintiff’s] resignation.” Defendant further averred that this “agreement was memorialized in a
Letter of Understanding (“LOU”) signed by [plaintiff].” Defendant alleged that the ultimate
severance agreement “memorialized the agreement,” except that a mistake was made. Instead of
indicating that defendant would pay plaintiff for unused personal time, it mistakenly indicated
that defendant would pay plaintiff for unused sick time. Defendant averred that this constituted a
‘scrivener’s error and/or a mutual mistake of the parties” and that reformation of the severance
agreement was the proper remedy. Subsequently defendant filed a motion for summary
disposition asserting these same claims. Plaintiff opposed that motion, primarily arguing that
there was no mistake in the severance agreement but, if there was, it was defendant’s—who
actually drafted the agreement—mistake alone, and thus reformation was not permitted.
First, by opinion and order dated January 17, 2008, the trial court denied plaintiff’s
motion for summary disposition. The trial court noted that, generally, reformation is not granted
unless there is a mutual mistake or there is a unilateral mistake that the other party knows about
and conceals, i.e., fraud. In this case, the court held, “there are facts in this matter which, if
proven by clear and convincing evidence, may lead to a proper reformation of the severance
agreement. Specifically, questions of material fact remain pertaining to whether or not Plaintiff
knew of, and concealed, the mistake made by the Defendant in drafting the contract.”
Second, by opinion dated May 6, 2008, the trial court granted defendant’s motion for
summary disposition that sought reformation of the severance agreement. The trial court
referenced the fact that plaintiff testified in his deposition that he noticed that the severance
agreement provided that he would be paid for unused sick time rather than for unused personal
time as indicated in his “letter of understanding,” and signed the agreement without comment.
The court also noted that after plaintiff notified defendant that he had not received the agreed
upon payment for unused sick time, defendant sent plaintiff an “Amended and Corrected
Severance Agreement which included, verbatim, the five items listed on Plaintiff Uskiewicz’s
Letter of Understanding, including the terms ‘unused vacation and personal time,’” which
plaintiff refused to sign. Because plaintiff knew of the “mistake” in the severance agreement and
failed to notify defendant of its mistake, the trial court determined that reformation of the
severance agreement was proper and granted defendant’s motion for summary disposition. This
appeal followed.
Plaintiff argues that the trial court’s decisions denying his motion for summary
disposition and granting summary disposition in defendant’s favor were erroneous for several
reasons, including that the fully integrated severance agreement was unambiguous and should
not have been reformed. We agree. The trial court’s decisions to grant summary disposition and
equitable relief are reviewed de novo. See Spiek v Dep’t of Transportation, 456 Mich 331, 337;
572 NW2d 201 (1998); Webb v Smith (After Remand), 204 Mich App 564, 568; 516 NW2d 124
(1994).
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The law regarding reformation of written instruments is well established:
Courts will reform an instrument to reflect the parties’ actual intent where
there is clear evidence that both parties reached an agreement, but as the result of
mutual mistake, or mistake on one side and fraud on the other, the instrument
does not express the true intent of the parties. [Mate v Wolverine Mut Ins Co, 233
Mich App 14, 24; 592 NW2d 379 (1998), quoting Olsen v Porter, 213 Mich App
25, 29; 539 NW2d 523 (1995).]
A court has the equitable power to reform a contract based on clear and convincing evidence that
the contract, as drafted, did not conform to the agreement actually made. Casey v Auto Owners
Ins Co, 273 Mich App 388, 398; 729 NW2d 277 (2006). Accordingly, before a written contract
can be reformed, the court must first find that there was a prior agreement already made (and a
mistake in reducing that agreement to writing). See 27 Williston, Contracts (4d ed), § 70:100, p
510 (“Reformation is unavailable without evidence of a prior agreement to which the existing,
mistaken, written contracts may be reformed.”). And, “courts are required to proceed with
utmost caution in exercising jurisdiction to reform written instruments.” Olsen, supra at 28.
Here, before reformation is considered, it must first be determined if there was a prior
agreement actually made, i.e., there must be “clear evidence that both parties reached an
agreement” as to the terms of plaintiff’s resignation. See id. at 29. That is, until there is proof of
the parties’ actual intent with respect to the terms of plaintiff’s resignation, there is no reference
to guide reformation of the severance agreement. Defendant has staunchly contended that
plaintiff’s “letter of understanding” fulfills that requirement, i.e., it is clear evidence that both
parties reached an agreement as to the terms of plaintiff’s resignation. We cannot agree.
First, to the extent that plaintiff argues that his “letter of understanding” was inadmissible
under the parol evidence rule, we disagree. Such evidence is admissible even in this case
involving an unambiguous, fully integrated written contract in an effort to show that the contract
was a sham, illegal, or the product of fraud or mistake. See UAW-GM Human Resource Ctr v
KSL Recreation Corp, 228 Mich App 486, 492; 579 NW2d 411 (1998); Clark v Johnson, 214
Mich 577, 581-582; 183 NW 41 (1921). Here, defendant claimed that the severance agreement
required reformation because of a mistake in the document—it purportedly did not reflect the
intentions of the parties, and defendant relied on the “letter of understanding” to establish that
claim. According to defendant, the “letter of understanding” proved the alleged mistake. It did
not.
The document that has been referred to as a “letter of understanding” is just a written
declaration of plaintiff’s understanding of benefits he would receive upon his resignation.
Plaintiff’s understanding could certainly have been wrong or incomplete and, considering the
terms—and lack of terms—in the severance agreement, his understanding was, indeed, incorrect.
In any case, defendant has failed to indicate how this document is “clear evidence that both
parties reached an agreement,” as to the terms of plaintiff’s resignation. This “letter of
understanding” is not binding and is not a contract. Defendant’s mayor, who actually had the
telephone conversation with plaintiff, did not execute this “letter of understanding.” This “letter
of understanding” was not referenced at the City Council meeting during the discussion and
acceptance of plaintiff’s resignation.
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In fact, the severance agreement itself actually belies any claim that plaintiff’s “letter of
understanding” is “clear evidence that both parties reached an agreement” with respect to the
terms of plaintiff’s resignation. First, the severance agreement does not include two other
“benefits” set forth in plaintiff’s “letter of understanding”—a favorable reference for future job
prospects and that the situation be handled in a positive way. Second, the severance agreement
does not incorporate by reference plaintiff’s “letter of understanding” but, instead, by its
integration clause, expressly disavows any intent to incorporate plaintiff’s “letter of
understanding” into the severance agreement.1 And, third, the severance agreement contained
another item not referenced in the “letter of understanding”—plaintiff’s agreement to release
defendant from any and all future claims against defendant, legal and otherwise.
In summary, plaintiff’s “letter of understanding” is not clear and convincing evidence
that both parties reached an agreement as to the terms of plaintiff’s resignation. See Casey,
supra. Thus, contrary to the trial court’s holding and defendant’s claims, plaintiff could not have
had knowledge of a “mistake” with regard to the terms in the severance agreement. The terms of
plaintiff’s resignation were not agreed upon before the severance agreement was executed. And
we reject the trial court’s conclusion that plaintiff’s “letter of understanding” was a contractual
offer that was accepted by defendant. If it was an offer, it was clearly rejected and a counteroffer in the form of the severance agreement was made which (1) failed to include certain terms
that were in plaintiff’s “letter of understanding,” and (2) included other terms not in plaintiff’s
“letter of understanding.” In any case, because there is no clear evidence that both parties
reached an agreement on the terms of plaintiff’s resignation—including the salary and benefit
terms, before they entered into the severance agreement, reformation is impossible and the trial
court erred in granting this equitable relief.
When contractual language is unambiguous, courts must interpret and enforce the
contract as written because an unambiguous contract reflects the parties’ intent as a matter of
law. In re Smith Trust, 480 Mich 19, 24; 745 NW2d 754 (2008). The contested term of the
severance agreement at issue here—the payment of plaintiff’s unused sick days—was clearly set
forth in the severance agreement and must be enforced as written. Thus, plaintiff’s motion for
summary disposition should have been granted.
Reversed and remanded for entry of an order granting plaintiff’s motion for summary
disposition. We do not retain jurisdiction. Plaintiff is entitled to costs as the prevailing party.
MCR 7.219(A).
/s/ Mark J. Cavanagh
/s/ E. Thomas Fitzgerald
/s/ Douglas B. Shapiro
1
The integration clause is lengthy and includes, for example, the following sentence: “This
agreement contains and comprises the entire understanding and agreement of and between the
City and Uskiewicz and fully supercedes any and all prior agreements or understandings between
the parties hereto pertaining to the subject matter hereof.”
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