Summary
recognizing application of the doctrine only in connection with actions in trespass, nuisance, and civil rights
Summary of this case from Saginaw Educ. Ass'n v. Eady-MiskiewiczOpinion
No. 232489.
Submitted May 7, 2003 at Grand Rapids.
Decided October 30, 2003 at 9:00 a.m. Updated December 30, 2003.
Appeal from Kalamazoo Circuit Court, LC No. 00-000108-CK.
Silverman, Smith, Bingen Rice, P.C. (by Robert W. Smith and Stephen M. Rice), for the plaintiffs.
Varnum, Riddering, Schmidt Howlett, LLP (by John W. Allen and Eric J. Guerin), for the defendants.
Before: Saad, P.J., and Meter and Owens, JJ.
Plaintiffs appeal as of right from an order granting summary disposition in favor of defendants in this mixed contract and tort action involving a suit by plaintiff franchisees to recover damages allegedly arising from defendants' contractual breaches and corporate mismanagement. We conclude that neither the "continuing wrong" nor the "continuing services" theory of recovery applies to the instant case, and we therefore affirm the trial court's conclusion that plaintiffs' lawsuit is barred by the applicable statutes of limitations.
Plaintiffs are franchise owners of Hot 'n Now restaurants. Their claims against defendant Restaurant Properties, Inc. (RP), arose out of numerous separate agreements between the respective plaintiffs and RP for the establishment and management of Hot 'n Now restaurants located throughout Michigan and Indiana. Plaintiffs alleged in their complaint that RP committed various misdeeds, such as failing to provide adequate training, delaying site approval for new restaurants, and changing menu items in violation of the franchise agreements. Plaintiffs alleged breach of contract and other legal theories against RP. Plaintiffs also sued defendants Taco Bell Corporation and PepsiCo, Inc., corporate parents of RP, alleging that both companies caused RP to change the original Hot 'n Now concept to the detriment of plaintiffs and other franchisees. Plaintiffs argued that Taco Bell and PepsiCo essentially turned the Hot 'n Now restaurants into a "laboratory experiment." Plaintiffs raised theories of tortious interference and "corporate usurpation" against Taco Bell and PepsiCo.
It appears from the record that either PepsiCo or its subsidiary, Taco Bell, acquired the Hot 'n Now chain in 1990.
RP filed a motion for summary disposition under MCR 2.116(C)(7) (claim barred by statute of limitations), alleging, in part, that plaintiffs' claims were barred by the applicable statutes of limitations because, according to plaintiffs' admissions, they were aware of alleged contractual breaches in 1990 but did not file their lawsuit until March 2, 2000. RP argued that no continuing wrong or continuing services theory of recovery served to extend the periods of limitations. RP also moved for summary disposition under MCR 2.116(C)(8) (failure to state a claim on which relief can be granted), arguing that various legal theories raised by plaintiffs were untenable. Taco Bell and PepsiCo also filed a motion for summary disposition under MCR 2.116(C)(8), arguing, among other things, that a parent corporation or an affiliate corporation cannot tortiously interfere with the contract of a subsidiary or affiliate corporation and that the legal theory of corporate usurpation is not recognized under Michigan law.
The trial court dismissed all plaintiffs' claims. It noted that an action for breach of contract must be brought within six years from the time the claim accrues and that a tort action must be brought within three years of accrual of the claim. The court found that, on the basis of plaintiffs' admissions, plaintiffs' claims accrued shortly after PepsiCo or Taco Bell acquired RP in 1990 — more than six years before plaintiffs filed their complaint. The court also found that each plaintiff signed a release as part of its franchise agreement that, if valid, would preclude future litigation against PepsiCo or Taco Bell. The court held that the releases were valid under MCL 566.1, even in the absence of consideration, and found that the releases barred all plaintiffs' claims.
Additionally, the trial court disagreed with plaintiffs' argument that the statutory periods of limitations were extended because the franchise agreements required the performance of continuous services. The court found that the continuing wrong or continuing services doctrines had not been extended to cover the applicable causes of action and that extending the doctrines in such a fashion would "[thwart] the intention of the Michigan Legislature as well as [subject] franchisors to similar suits after many years of continuous business dealings with a franchisee." The court found that, while the alleged breaches of contract and tortious conduct may have been continuous, plaintiffs' causes of action began accruing in 1990 and, because they did not bring their claims until well after the periods of limitations had expired, the claims were barred by law.
Plaintiffs argue that, because they were subject to a continuing wrong, the trial court erred in dismissing plaintiffs' claims against RP as untimely.
"We review a trial court's grant or denial of a motion for summary disposition pursuant to MCR 2.116(C)(7) de novo to determine whether the moving party was entitled to judgment as a matter of law." DeCaminada v. Coopers Lybrand, LLP, 232 Mich. App. 492, 496; 591 N.W.2d 364 (1998). In reviewing a motion under MCR 2.116(C)(7), this Court accepts as true the plaintiffs' well-pleaded allegations and construes them in the plaintiffs' favor. Abbott v. John E. Green Co., 233 Mich. App. 194, 198; 592 N.W.2d 96 (1998). This Court considers the pleadings, affidavits, depositions, admissions, and documentary evidence filed or submitted by the parties to determine whether the claim is barred by law. See MCR 2.116(G)(5) and Employers Mut. Cas. Co. v. Petroleum Equip., Inc., 190 Mich. App. 57, 62; 475 N.W.2d 418 (1991).
Moreover, "[w]hether a cause of action is barred by the statute of limitations is a question of law that we also review de novo." McKiney v. Clayman, 237 Mich. App. 198, 201; 602 N.W.2d 612 (1999).
Under MCL 600.5807(8), an action to recover damages for breach of contract must be brought within six years of the time the claim first accrues. Under MCL 600.5827,
Certain specialized contracts have different limitations periods, see MCL 600.5807, but these periods are not applicable in the instant case.
[e]xcept as otherwise expressly provided, the period of limitations runs from the time the claim accrues. The claim accrues at the time provided in [MCL 600.5829 to MCL 600.5838], and in cases not covered by these sections the claim accrues at the time the wrong upon which the claim is based was done regardless of the time when damage results.
These provisions are not applicable here.
Thus, this Court has generally held that a cause of action for breach of contract accrues when the breach occurs, i.e., when the promisor fails to perform under the contract. See H. J. Tucker Assoc., Inc. v. Allied Chucker Engineering Co., 234 Mich. App. 550, 562; 595 N.W.2d 176 (1999), Cordova Chem. Co. v. Dep't of Natural Resources, 212 Mich. App. 144, 153; 536 N.W.2d 860 (1995), and Vandendries v. Gen. Motors Corp., 130 Mich. App. 195, 201; 343 N.W.2d 4 (1983). Here, plaintiffs admit that RP failed to perform properly under the contract beginning in 1990, more than six years before plaintiffs filed their complaint. They contend, however, that the limitations period was extended by virtue of a continuing wrong.
Under the continuing wrong doctrine, "an alleged timely actionable event will allow consideration of and damages for connected conduct that would be otherwise barred." Sumner v. Goodyear Tire Rubber Co., 427 Mich. 505, 510; 398 N.W.2d 368 (1986). Thus, in certain cases, the doctrine recognizes that "`[w]here a defendant's wrongful acts are of a continuing nature, the period of limitation will not run until the wrong is abated; therefore, a separate cause of action can accrue each day that defendant's tortious conduct continues.'" Jackson Co. Hog Producers v. Consumers Power Co., 234 Mich. App. 72, 81; 592 N.W.2d 112 (1999), quoting Horvath v. Delida, 213 Mich. App. 620, 626; 540 N.W.2d 760 (1995). In order to recover under this doctrine, the plaintiff must establish a "continuing wrong" by showing "continual tortious acts, not by continual harmful effects from an original completed act." Id. at 627 (emphasis in original).
Plaintiffs contend that the continuing wrong theory applies to the instant case because breaches occurred continually during the period that PepsiCo or Taco Bell had control of the Hot 'n Now concept. However, as noted by the trial court, this doctrine has thus far been given only limited application. Id. The doctrine has historically been applied to cases of trespass. See Defnet v. Detroit, 327 Mich. 254, 258; 41 N.W.2d 539 (1950). In Sumner, supra at 510, the Supreme Court extended the doctrine to cases involving civil rights claims, and this Court extended the doctrine to claims of nuisance in Moore v. City of Pontiac, 143 Mich. App. 610, 614; 372 N.W.2d 627 (1985). Subsequently, this Court refused to extend the doctrine to cases involving products liability actions seeking damages for personal injury, see Asher v. Exxon Co., USA, 200 Mich. App. 635, 639-641; 504 N.W.2d 728 (1993), and in Traver Lakes Community Maintenance Ass'n. v. Douglas Co., 224 Mich. App. 335, 341; 568 N.W.2d 847 (1997), the Court declined to extend the doctrine to negligence claims.
Plaintiffs contend that the continuing wrong theory has been extended to claims of breach of contract by virtue of H. J. Tucker, supra at 562-563. We disagree that H. J. Tucker involved the continuing wrong doctrine. In H J Tucker, the defendant argued that the trial court erred in failing to find that the plaintiff's entire claim of breach of contract (for nonpayment of commissions) was barred by the statute of limitations. Id. at 562. The Court deemed the damages sought in H. J. Tucker as analogous to claims for payments under an installment contract. Id. The Court noted that "the commissions earned by plaintiff were separately computed, were to be paid monthly, and were of a periodic nature." Id. at 563. It further noted that "`every periodic payment made that is alleged to be less than the amount due . . . constitutes a continuing breach of contract and the limitation period runs from the due date of each payment.'" Id., quoting Harris v. City of Allen Park, 193 Mich. App. 103, 107; 483 N.W.2d 434 (1992). See also MCL 600.5836 ("[t]he claims on an installment contract accrue as each installment falls due"). The Court held that the trial court correctly divided the sales commissions due the plaintiff into two categories. H. J. Tucker, supra at 563. The plaintiff was not entitled to sue for unpaid commissions that accrued more than six years before the time the plaintiff filed its complaint, but it was entitled to seek reimbursements for commissions that fell within the six-year limitations period. Id.
Plaintiffs contend that H. J. Tucker is analogous to the instant case and indicates that the continuing wrong doctrine has been extended to situations involving breaches of contract. However, H. J. Tucker is not a continuing wrong case, despite the Court's use of the phrase "continuing breach of contract." See id. Indeed, under the continuing wrong theory, wrongs occurring within the limitations period essentially "save" the earlier wrongs that occurred outside the period. The Sumner Court noted that
once jurisdiction is attained through the continuing violations doctrine, the remedy should be designed to make the plaintiff whole for the entire injury he has suffered. This has been the view of the great majority of the federal courts. See, e.g., Thompson v. Sawyer, 219 US App. DC 393; 678 F.2d 257 (1982); McKenzie v. Sawyer, 221 US App. DC 288, 298; 684 F.2d 62 (1982) [questioned in part on other grounds by Berger v. Iron Workers Reinforced Rodmen, Local 201, 335 US App. DC 179; 170 F.3d 1111 (1999)] ("Once having shown discrimination continuing into the actionable period, . . . the plaintiffs may also recover for portions of the persistent process of illegal discrimination that antedated the limitations period"); Tarvesian v. Carr Div. of TRW, Inc., 407 F. Supp. 336, 339 (D Mass, 1976) ("If plaintiff can prove . . . an integrated pattern of discrimination, the defendants become liable for the whole of it")[.] [ Sumner, supra at 542 n. 15.]
See also Meek v. Michigan Bell Tele. Co., 193 Mich. App. 340, 345; 483 N.W.2d 407 (1992). In contrast to this theory, the H. J. Tucker Court made clear that each improper payment at issue in H. J. Tucker constituted a separate breach that was not tied to earlier breaches falling outside the limitations period. H. J. Tucker, supra at 562-563. The Court essentially found that there were repeated breaches that gave rise to separate claims of breach of contract, each of which arose, accrued, and became extinguished separately. Id. The plaintiff could recover only for those breaches occurring within the limitations period. Id. at 563. Accordingly, H. J. Tucker is not pertinent to plaintiffs' primary argument, i.e., that the continuing wrong theory served to extend the period of limitations in the instant case.
Although panels of this Court have held that, "[w]here the continuing-wrongful-acts doctrine applies, the damages recoverable are limited to those occurring within the applicable limitation period and, where appropriate, after the filing of the complaint," see Horvath, supra at 627; see also Slayton v. Michigan Host, Inc., 144 Mich. App. 535, 556; 376 N.W.2d 664 (1985), this is not compatible with the Supreme Court's decision in Sumner. See Sumner, supra at 542 n. 15; see also Meek, supra at 345.
Plaintiffs also cite Hanover Ins. Co. v. Eleven One-Half Mile Drainage Dist., 52 Mich. App. 658; 218 N.W.2d 109 (1974), a case involving continuing services, in their attempt to show that the Court has applied a doctrine similar to the continuing wrong doctrine to some contracts. Plaintiffs contend that the instant case is analogous to Hanover and thus falls within a continuing services theory of recovery. In Hanover, the plaintiff, a financial institution, sought to recover for extra costs the contractor incurred as a result of a previously undisclosed problem with the subsurface conditions that appeared during the construction of the defendants' drainage system. Id. at 660. The defendants raised the statute of limitations to bar recovery on the theory that the breach occurred, and the six-year period of limitations began running, when the contractor discovered the problem with the subsurface conditions. Id. at 661. This Court disagreed and held that the wrong on which the plaintiff's claim was based was committed when the defendants, over two years later, failed to compensate for the extra costs incurred. Id. at 661-662. The Court relied on previous Michigan case law holding that, if the transaction is an entirety and requires the performance of a continuous service, the action is not barred until six years after the conclusion of the service. Id. at 662, citing Carter v. Carter, 36 Mich. 207 (1877), Burch v. Woodworth, 68 Mich. 519; 36 N.W. 721 (1888), and Wisniewski v. Wisniewski's Estate, 254 Mich. 663; 236 N.W. 899 (1931).
However, plaintiffs in the instant case are not in the same position as the contractor in Hanover, the caregiver in Wisniewski, the log cutter in Burch, or the housekeeper in Carter. Hanover, supra at 660; Wisniewski, supra at 664; Burch, supra at 519; Carter, supra at 207. Those cases involved plaintiffs who provided personal services and who continued performance notwithstanding the failure of the breaching party to compensate them for their services; the courts concluded that the claims did not accrue until after the conclusion of the services and the final refusal of the breaching parties to pay for the services. Hanover, supra at 660-662; Wisniewski, supra at 664; Burch, supra at 522; Carter, supra at 207-208. Here, plaintiffs are seeking recovery for a contractual breach based on the lack of services performed by another. Hanover and the cases cited therein are simply not analogous to the instant case.
Plaintiffs have identified no cases extending the continuing wrong or continuing services theories to a situation in which a party to a contract fails to perform adequately under the contract. Given the clear inapplicability of the continuing services doctrine to the instant case and given the generally limited nature of the continuing wrong doctrine, we decline to extend either doctrine to plaintiffs' situation.
As stated in Proctor Schwartz, Inc. v. United States Equip. Co., 624 F.2d 771, 773 n. 3 (CA 6, 1980), "Michigan courts have found certain acts, such as trespass and nuisance, were continuing wrongs, but we find no authority for treating a breach of contract in the same manner."
It is possible that some recovery would be appropriate in the instant case under the reasoning of H. J. Tucker, supra at 562-563. In a reply brief, plaintiffs state, in one sentence, that "at worst, only Plaintiffs' claims arising out of breaches which occurred prior to March 1, 1994, would be time barred." We decline to reach this issue, however, for three reasons. First, plaintiffs have waived the issue by giving it such cursory treatment. See Goolsby v. Detroit, 419 Mich. 651, 655 n. 1; 358 N.W.2d 856 (1984), Magee v. Magee, 218 Mich. App. 158, 161; 553 N.W.2d 363 (1996), and Mann v. Mann, 190 Mich. App. 526, 536-537; 476 N.W.2d 439 (1991). Second, plaintiffs did not argue below for the possibility of such a "bifurcation." Instead, they maintained that all the claims accrued after the conclusion of the contractual arrangement. "A party may not take a position in the trial court and subsequently seek redress in an appellate court that is based on a position contrary to that taken in the trial court." Living Alternatives for the Developmentally Disabled, Inc. v. Dep't of Mental Health, 207 Mich. App. 482, 484; 525 N.W.2d 466 (1994). Finally, because the "bifurcation" claim is first raised in plaintiffs' reply brief, it is untimely. Reply briefs may contain only rebuttal argument, and raising an issue for the first time in a reply brief is not sufficient to present the issue for appeal. MCR 7.212(G); Check Reporting Services, Inc. v. Michigan Nat'l. Bank-Lansing, 191 Mich. App. 614, 628; 478 N.W.2d 893 (1991).
When one party to a contract materially breaches the contract by failing to perform duties under it, the other party can either consider the contract terminated and sue for total breach, or he can continue his performance and sue for partial breach. See, generally, Schnepf v. Thomas L. McNamara, Inc., 354 Mich. 393, 397; 93 N.W.2d 230 (1958), Arnone v. Chrysler Corp., 6 Mich. App. 224, 228; 148 N.W.2d 902 (1967), and 2 Restatement Contracts, 2d (1981), § 236, comment b, p. 214. Thus, when one elects to continue performance and a second breach occurs, it should give rise to a separate claim for specific damages arising from the second breach, whether or not the contract is deemed an installment contract. See, e.g., H. J. Tucker, supra at 576 (Markman, J., concurring).
The trial court did not err in concluding that plaintiffs' claims against RP were barred by the statute of limitations.
The trial court's opinion indicates that all plaintiffs' claims against RP were barred by the statutes of limitations and were not saved by the continuing wrong or continuing service doctrines. On appeal, plaintiffs focus on the allegations of breach of contract against RP, arguing that these allegations were saved by the doctrines in question. Because of inadequate briefing, plaintiffs have waived any contention that the additional claims against RP should survive. See, generally, Goolsby, supra at 655 n. 1 (discussing inadequate briefing). Moreover, because plaintiffs' claims of corporate usurpation against Taco Bell and PepsiCo are merely derivative of their claims against RP (plaintiffs argue, in this count of the complaint, that Taco Bell and PepsiCo were "alter egos" of RP), the claims of corporate usurpation cannot survive.
In its opinion, the trial court dismissed the claims against Taco Bell and PepsiCo simultaneously with the dismissal of the claims against RP. The court concluded that all plaintiffs' claims were banned because of, among other things, the applicable statutes of limitations. Evidently recognizing the interrelatedness of plaintiffs' claims, the court reached this conclusion even though Taco Bell and PepsiCo did not specifically raise a statute of limitations defense in their motion for summary disposition. Although plaintiffs point out this fact on appeal — stating that "[n]either PepsiCo nor Taco Bell raised the statute of limitations as a defense to their claims, although this appears to be the Court's basis for disposition of these claims" — plaintiffs make no reasoned argument that the court was not empowered to make such a ruling. Accordingly, any argument in this regard has been waived because of inadequate briefing. See Goolsby, supra at 655 n. 1.
Taco Bell and PepsiCo did raise a statute of limitations defense in their list of affirmative defenses.
Instead, plaintiffs argue that their claims against Taco Bell and PepsiCo survive a summary disposition challenge because of the continuing wrong theory. We disagree. As noted by the trial court, plaintiffs' claims against Taco Bell and PepsiCo of tortious interference with a contract and tortious interference with a prospective economic advantage were governed by a three-year period of limitations. See MCL 600.5805(10), and James v. Logee, 150 Mich. App. 35, 37-38; 388 N.W.2d 294 (1986). Limitations periods in tort actions begin to run at the time all elements, including damages, can be alleged in a proper complaint. MCL 600.5827; Stephens v. Dixon, 449 Mich. 531, 534-535; 536 N.W.2d 755 (1995); Travelers Ins. Co. v. Guardian Alarm Co. of Michigan, 231 Mich. App. 473, 479; 586 N.W.2d 760 (1998). Thus, a claim of tortious interference with a contract or a prospective economic advantage is complete upon a showing of the existence of a valid business relationship or the expectation of such a relationship between the plaintiff and some third party, knowledge of the relationship or expectation of the relationship by the defendant, and an intentional interference causing termination of the relationship or expectation, resulting in damages to the plaintiff. BPS Clinical Laboratories v. Blue Cross Blue Shield of Michigan (On Remand), 217 Mich. App. 687, 699; 552 N.W.2d 919 (1996); Winiemko v. Valenti, 203 Mich. App. 411, 416; 513 N.W.2d 181 (1994).
As noted in footnote 8, supra, the claim of corporate usurpation cannot survive.
As noted earlier, under the continuing wrong theory, continuing wrongful acts occurring within a statutory limitations period can extend a plaintiff's recovery to encompass acts occurring outside the period. See Oakwood Homeowners Ass'n., Inc. v. Ford Motor Co., 77 Mich. App. 197, 220 n. 7; 258 N.W.2d 475 (1977). However, as also noted earlier, this doctrine has been given only limited application to trespass, nuisance, and civil rights cases. Horvath, supra at 627; Traver Lakes, supra at 341; Asher, supra at 639-640. Defendants have failed to cite any authority to support an extension of the doctrine to claims of tortious interference.
Moreover, the decision in Lucy v. Amoco Oil Co., 582 F. Supp. 1168 (ED Mich, 1984), provides a persuasive discussion concerning the doctrine in the context of claims of tortious interference. In that case, an action was brought against a franchisor for tortious interference with a prospective business advantage. Id. at 1169. The district court held that the plaintiff's cause of action was time-barred, rejecting the claim that the damages arose from a continuous tort. Id. at 1173-1174. The court, noting that the plaintiff was actually describing a series of discrete events, held that the fact that the defendant may have had an underlying motivation to interfere with plaintiff's business was not enough to preclude operation of the statute of limitations regarding those actions that occurred outside the limitation period. Id. at 1173. The court stated:
Any overt conduct on the part of defendant which gave rise to a cause of action for tortious interference with prospective business advantage that occurred prior to September 27, 1979, is barred by operation of the statute of limitations. The fact that such conduct may have been motivated by policies or prejudices which continued to exist subsequent to that date, which policies may have motivated similar conduct within the statutory period for bringing claims, does not prevent application of the statute to the earlier claims. The pleading of an ongoing conspiracy is not necessary to the statement of a cause of action for tortious interference with prospective business advantage. The tort is complete upon a showing of the existence of a valid business relationship or the expectation of such a relationship between the plaintiff and some third party, knowledge of the relationship or expectation of the relationship by the defendant, and an intentional interference causing termination of the relationship or expectation which results in damages to the plaintiff[.] Meyer v. Hubbell, 117 Mich. App. 699, 324 N.W.2d 139 (1982). The cause of action accrues and the statute of limitations begins to run upon the simultaneous occurrence of each of the elements of the tort.
Consequently, plaintiffs' allegations that Amoco engaged in conduct within the period of limitations which interfered with Ray Lucy's prospective business advantage does not serve to permit the cause of action which may have accrued within the period of limitations to "relate back" to conduct which occurred outside of the period of limitations. [ Lucy, supra at 1173-1174.]
Given the limited application of the continuing wrong doctrine in our case law and the persuasive reasoning in Lucy, we decline to extend the doctrine to plaintiffs' claims of tortious interference. Appellate relief is unwarranted. In light of our rulings, we need not address the additional arguments raised by the parties on appeal.
Affirmed.