Opinion
No. 333984
12-12-2017
WALBRO ENGINE MANAGEMENT, LLC, Plaintiff/Counter-Defendant-Appellee, v. SURECAN, INC., Defendant/Counter-Plaintiff-Appellant.
UNPUBLISHED Tuscola Circuit Court
LC No. 15-028666-CK Before: Jansen, P.J., and Cavanagh and Cameron, JJ. PER CURIAM.
Defendant, Surecan, Inc., (Surecan), appeals as of right from a July 1, 2016 opinion and order granting summary disposition to plaintiff, Walbro Engine Management, LLC (Walbro), under MCR 2.116(C)(10), and also challenges a portion of a August 13, 2015 opinion and order granting summary disposition to Walbro under MCR 2.116(C)(8) on Surecan's counterclaims involving a breach of an implied contract and promissory estoppel. We affirm the trial court's August 13, 2015 opinion and order, but reverse the July 1, 2016 opinion and order granting summary disposition under MCR 2.116(C)(10).
The trial court also treated plaintiff's motion as if filed under MCR 2.116(C)(7) as it related to plaintiff's statute of frauds claim. The trial court held there was a valid quantity term, and therefore, it denied plaintiff's motion regarding this claim.
I. FACTS
This case arises out of a failed business arrangement between the parties. According to Surecan, it "developed and designed a plastic molded portable [fuel] tank for the consumer market which has unique features, including a flexible rotating nozzle." As the developer of the gas tank, Surecan began discussing a business relationship with Walbro, where Walbro would be the exclusive manufacturer of the fuel tanks. The parties discussed price, quantity, packaging, design and insurance during a May 2014 meeting. Surecan's president, Brad Ouderkirk, acknowledged the fact that, at the May 2014 meeting, Walbro's vice president, Chris Quick, expressed that he would not be able to execute the contract until "the board or some higher-up group . . . [gave] its final approval."
Subsequently, on October 21, 2014, Ouderkirk and Surecan's Operations Vice President, Carson Jones, traveled to Walbro's facility to meet with Quick, along with Walbro's business unit director, Dan Collins, and its production manager, John Graves, for the purpose of finalizing and signing a written agreement (the Agreement). According to Surecan, before signing the Agreement, the parties agreed on pricing. However, a set price was not included in the Agreement. Instead, the Agreement provided that Walbro "agrees that the agreed upon prices for fuel tanks shall be firm, subject to design or component changes." Ouderkirk signed the agreement, believing that Walbro's board had approved the Agreement prior to the October 21 meeting. According to Collins, he drafted and also signed the Agreement between Walbro and Surecan, having been given the authority to do so by Quick.
Surecan asserts that after the parties signed the contract, it built molds for the fuel tanks, submitted sample tanks made by Walbro for government certification, and prepared a forecast for the number of tanks necessary for the product launch. Surecan further asserts it leased a building, purchased equipment in order to assemble the fuel tanks, and hired employees. According to Surecan, it received a "Formal Quotation" from Walbro on November 5, 2014, that correctly reflected the pricing agreed to by the parties when the Agreement was signed. Approximately three weeks later, Jones emailed a purchase order to Walbro, with a per unit price less than the unit price stated on the Formal Quotation. Jones explained to Walbro that the difference in price reflected that Surecan would supply its own packaging. An employee of Walbro sent an email to Jones asking when Walbro would receive the packaging, informing Jones that "we are working to run the first 1000 tanks the first week of December."
The formal quotation for the 2 gallon gas tanks was $4.74 per tank.
The purchase order indicated that the price of a 2 gallon gas tank was $4.26 per tank.
On December 1, 2014, Walbro sent Surecan a three-page amendment to the Agreement. The amendment restated that Walbro agreed to sell, and Surecan agreed to purchase, the fuel tanks. Additionally, the amendment contained a term that incorporated the higher per unit price stated in the formal quotation, as well as a clause requiring Surecan to carry a certain amount of liability insurance. Surecan did not sign this amendment. One week later, Quick informed Ouderkirk that Walbro's board had rejected the project, and that his company would not be manufacturing the fuel tanks.
Walbro filed a two-count suit seeking a declaratory judgment under MCR 2.605 that the Agreement was not an enforceable contract, Count I, or that in the alternative, Surecan breached first by failing to have the fuel tanks validated, by failing to provide the appropriate tooling required to assemble the fuel tanks, by hiring away key employees of Walbro, and by "[m]isrepresenting the status of its customer and supply base," Count II. In response, Surecan filed a two-count counterclaim, asserting that Walbro anticipatorily breached the Agreement when it refused to manufacture fuel tanks, Count I, or in the alternative, that Walbro was promissorily estopped from denying the existence of a contract between the parties because Walbro should have known Surecan would rely on a promise to manufacture the fuel tanks, Count II. After hearing plaintiff's motion for summary disposition under MCR 2.116(C)(8), the trial court, treating the motion as if it was filed under MCR 2.116(C)(7), concluded in its first opinion and order that the Agreement complied with the statute of frauds because there was a valid quantity term, and it dismissed Surecan's implied contract and promissory estoppel claims under MCR 2.116(C)(8) because the parties had entered into an express, enforceable contract. The following year, after entertaining motions for summary disposition under MCR 2.116(C)(10) filed by both parties, the trial court granted summary disposition to Walbro as to its Count I in a second opinion and order, explaining that the Agreement's provisions did not "constitute a meaningful meeting of the minds on any of the material terms that would be required to bind these parties to each other." The trial court also held that the Agreement was not binding because Collins, Walbro's representative, did not have the authority to execute the contract. Surecan now appeals.
II. STANDARDS OF REVIEW
This Court reviews de novo a trial court's decision on a motion for summary disposition. See Maiden v Rozwood, 461 Mich 109, 118; 597 NW2d 817 (1999). "A motion under MCR 2.116(C)(10) tests the factual sufficiency of the complaint." Id. at 120. "In reviewing a motion under MCR 2.116(C)(10), this Court considers the pleadings, admissions, affidavits, and other relevant documentary evidence of record in the light most favorable to the nonmoving party to determine whether any genuine issue of material fact exists to warrant a trial." Barrow v Detroit Election Comm, 305 Mich App 649, 661; 854 NW2d 489 (2014) (quotation marks and citation omitted). "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).
"A motion under MCR 2.116(C)(8) tests the legal sufficiency of the complaint," and "[a]ll well-pleaded factual allegations are accepted as true and construed in a light most favorable" to the nonmoving party. Maiden, 461 Mich at 119. The court must grant the motion "if no factual development could justify the plaintiff's claim for relief." Spiek v Michigan Dep't of Transp, 456 Mich 331, 337; 572 NW2d 201 (1998). A motion under MCR 2.116(C)(7) can be based on a challenge under the statute of frauds. "If there is no factual dispute, whether a plaintiff's claim is barred under a principle set forth in MCR 2.116(C)(7) is a question of law for the court to decide." RDM Holdings, Ltd v Continental Plastics Co, 281 Mich App 678, 687; 762 NW2d 529 (2008). However, summary disposition is inappropriate if a factual dispute exists. Id.
III. CONTRACT VALIDITY
Surecan argues that the trial court erred because the parties entered into a valid contract under Article 2 of the UCC. We agree.
The UCC applies to "transactions in goods." Home Ins Co v Detroit Fire Extinguisher Co, Inc, 212 Mich App 522, 526; 538 NW2d 424 (1995); MCL 440.2102. Under the UCC, "[a] contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract." MCL 440.2204(1). "Even though one or more terms are left open a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy." MCL 440.2204(3). Only the quantity term has to be specified in writing. Lorenz Supply Co v American Standard, Inc, 419 Mich 610, 616; 358 NW2d 845 (1984); see MCL 440.2201(1). A contract does not fail simply because the parties have not settled on price: "The parties if they so intend can conclude a contract for sale even though the price is not settled. In such a case the price is a reasonable price at the time for delivery if (a) nothing is said as to price; or (b) the price is left to be agreed by the parties and they fail to agree . . . ." MCL 440.2305(1)(a) and (b). Furthermore, if the parties have not agreed on some terms, the UCC provides standard supplementary terms, such as payment, MCL 440.2304, MCL 440.2307, and MCL 440.2310, the delivery method, MCL 440.2307, time of performance, MCL.2309, and multiple provisions involving warranties, MCL 440.2312 to MCL 440.2318.
A. MUTUAL ASSENT
Surecan argues the trial court erred when it held that there was no mutual assent, i.e., a meeting of the minds, between the parties because the Agreement failed to include a number of essential terms, including price. We agree.
"[A] fundamental tenet of all contracts is the existence of mutual assent or a meeting of the minds on all essential terms of a contract." Burkhardt v Bailey, 260 Mich App 636, 655; 680 NW2d 453 (2004). "Where mutual assent does not exist, a contract does not exist." Quality Prods & Concepts Co v Nagel Precision, Inc, 469 Mich 362, 372; 666 NW2d 251 (2003). " 'Meeting of the minds' is a figure of speech for mutual assent." Kamalnath v Mercy Mem Hosp Corp, 194 Mich App 543, 548-549; 487 NW2d 499 (1992) (citation omitted). An objective standard is used to judge whether a meeting of the minds occurred, "looking to the express words of the parties and their visible acts, not their subjective states of mind." Calhoun Co v Blue Cross Blue Shield Mich, 297 Mich App 1, 13; 824 NW2d 202 (2012) (quotation marks and citations omitted).
At the May 2014 meeting, the parties manifested their intent to enter into a contract. This intent was memorialized in writing on October 21, 2015, when the Agreement was signed by representatives for Walbro and Surecan. Importantly, the UCC does not bar formation of a contract simply because one or more terms are left open. MCL 440.2204. The fact that price, payment method, and other terms were not included in the writing does not alone render the agreement invalid. Even if the parties dispute the price for the fuel tanks, which looks be the case given the difference in price between the formal quotation and the purchase order, MCL 440.2305(1)(b) provides for a "reasonable price" to be established at the time of delivery.
Walbro also highlights the fact that the Agreement omitted any terms on payment method, packaging, and insurance. But the UCC provides its own payment terms if the parties have not agreed on such terms. See MCL 440.2304, MCL 440.2307, MCL 440.2310. The parties do not dispute the fact that they both signed the contract and understood that Walbro would manufacture up to 5,000,000 gas tanks for Surecan. Just because the parties left open some terms, including packaging, does not overcome the evidence that the parties may have mutually assented to the Agreement. Surecan was clearly under the impression that a contract had been executed, having built molds, leased a building, purchased equipment for assembly, and hired employees. Walbro actually manufactured sample gas tanks for governmental testing. Overall, the actions of Walbro's executives creates a question of fact whether there was mutual assent. For instance, Walbro drafted the Agreement, the executives expressed an intent to enter the Agreement, they in fact signed the agreement, and they later issued a formal quotation pursuant to the Agreement.
With that said, given that the gas tanks would be designed to contain volatile liquid, obtaining the proper insurance may have been an essential term necessary to the execution of the contract. Ouderkirk explained that the parties orally agreed that insurance would be obtained just before the gas tanks were distributed—not at the time of signing. Yet, Walbro claims that insurance was necessary to the Agreement's execution. Therefore, a genuine issue of material fact exists as to whether insurance was an essential term for the execution of the contract, and the trial court erred when it held there was no genuine issue of material fact and concluded that the Agreement was invalid for a lack of mutual assent.
Surecan argues in its brief on appeal that the trial court erred when it held that Surecan obtaining an insurance policy was a condition precedent to Walbro's obligations under the Agreement. Walbro, however, admits that the trial court's ruling was not based on the failure of a condition precedent. Rather, the lack of an insurance term was evidence of a lack of mutual assent. Therefore, we do not address whether the insurance term was, in fact, a condition precedent. --------
B. APPARENT AUTHORITY
Next, Surecan argues that the trial court erred when it determined that Collins lacked the authority to bind Walbro. We agree.
An agent's actions bind the principal when the agent's actions are "within the agent's actual or apparent authority." James v Alberts, 464 Mich 12, 15; 626 NW2d 158 (2001). "Apparent authority may arise when acts and appearances lead a third person reasonably to believe that an agency relationship exists," but that authority "must be traceable to the principal and cannot be established by the acts and conduct of the agent." Meretta v Peach, 195 Mich App 695, 698-699; 491 NW2d 278 (1992).
Here, Ouderkirk testified that Quick had explained at the May 2014 meeting that final board approval was necessary before proceeding with the project. Walbro's chief executive officer, Anthony Martin, stated that Quick, and thus Collins, had the authority to enter into the Agreement provided that any agreement passed the company's review procedures. While Quick stated that he was not aware of the review procedures, Collins claimed he had obtained authorization from Quick, and that is why he signed the contract. Therefore, it appears there was action "traceable to the principal" considering Martin gave authority to Quick who in turn gave authority to Collins to enter the Agreement. Id. at 699. The fact that Quick did not follow Walbro's internal review procedures does not necessarily preclude Collins from having apparent authority to execute the Agreement. Ouderkirk testified that he believed that Quick and Collins had the authority to bind Walbro at the October 21, 2014 meeting, especially considering Quick stated months earlier that he would have to get board approval and then attended the meeting in October with the proposed contract in hand. Overall, there is a question of fact as to whether the action was traceable to the principal and whether Quick and Collins possessed the authority to bind Walbro considering their actions could have led Ouderkirk to reasonably believe that they had authority to bind Walbro to the Agreement.
C. QUANTITY TERM
Walbro claims that if we conclude that the contract is enforceable, then the trial court erred when it held that the Agreement included a valid quantity term, and therefore, complied with the statute of frauds. We disagree.
While Walbro did not appeal the trial court's August 13, 2015 opinion and order, we nonetheless address this issue. To establish a valid contract under the UCC, a quantity term must be specifically stated. Lorenz Supply Co, 419 Mich at 614-615. However, it need not be certain because "to require that it be stated with certainty would put most distributorship agreements out of compliance" with MCL 440.2201. Id. at 614. Here, the Agreement included a valid quantity term. In paragraph 1 of the Agreement, the parties agreed to a term of five years or 5,000,000 units. While the final quantity of gas tanks to be produced is not certain, the quantity term, which is expressly stated in the agreement, puts a cap on the number of gas tanks that Walbro would be required to manufacture. Therefore, it is valid, and the trial court did not err when it reached the same conclusion in its first opinion and order.
D. IMPLIED CONTRACT AND PROMISSORY ESTOPPEL
Lastly, Surecan argues that the trial court erred when it did not vacate the portion of its first opinion and order that had precluded Surecan from asserting an implied contract or promissory estoppel claim. The trial court initially held that the Agreement had satisfied the statute of frauds, and therefore, it dismissed the implied contract and promissory estoppel claims because there was an express agreement covering the same subject matter. According to Surecan, because the trial court ultimately held that the Agreement was unenforceable, it should have allowed the implied contract and promissory estoppel claims to go forward absent the express agreement. Because we reverse the trial court's holding that the Agreement was unenforceable, we need not address this argument.
We affirm the trial court's first opinion and order pursuant to MCR 2.116(C)(7) and (C)(8), but we reverse the trial court's second opinion and order granting Walbro's motion for summary disposition pursuant to MCR 2.116(C)(10) and remand for further proceedings consistent with this opinion. We do not retain jurisdiction.
/s/ Kathleen Jansen
/s/ Mark J. Cavanagh
/s/ Thomas C. Cameron