Held Construction Co.v.Michigan National Bank

Michigan Court of AppealsFeb 11, 1983
124 Mich. App. 472 (Mich. Ct. App. 1983)
124 Mich. App. 472335 N.W.2d 8

Docket No. 56746.

Decided February 11, 1983. Leave to appeal denied, 417 Mich ___.

Berkey Braun (by Jen H. Berkey and Jonathan A. Braun), for plaintiff.

Nederlander, Dodge McCauley, P.C. (by Gary L. Visseher), for Michigan National Bank of Detroit.

George E. Ward, for Michigan National Bank West-Oakland.

Before: J.H. GILLIS, P.J., and WAHLS and R.H. BELL, JJ.

Circuit judge, sitting on the Court of Appeals by assignment.


Plaintiffs appeal by leave granted from the trial court's grant of summary judgment to defendants under GCR 1963, 117.2(3), dismissing three of four counts in plaintiffs' second amended complaint.

The underlying facts of this controversy arise out of an oral contract between Held Construction Company and defendants to construct a branch banking office for West-Oakland Bank in Oakland County. Plaintiffs Drennan and Lipscomb are principal officers and sole shareholders of the plaintiff corporation.

In Count I of their complaint, plaintiffs alleged the existence of the oral contract, its performance by plaintiffs, and a failure to pay the balance due for the completed construction by defendants. In this count plaintiffs sought damages of $99,096.61, the balance alleged to be due.

Count II averred that defendants were notified, without specification of date, that Held Construction Company was in dire need of funds which were due and that defendants intentionally withheld payment. As a result, the corporate plaintiff alleged it lost sizeable future profits and was rendered insolvent, "with its economic relationships utterly destroyed and its credit standing irrevocably impaired", and sought additional damages of $500,000.

In Counts III and IV plaintiffs Drennan and Lipscomb alleged that as a result of defendants' failure to complete payments due under the contract each "has been rendered extremely financially embarrassed, such as to cause him extensive and lasting impairment of his credit standing and business reputation in his social and business community". They each sought additional damages of $250,000.

Defendants filed a motion for summary judgment, claiming plaintiffs were not entitled to the damages sought in Counts II, III, and IV because defendants had not been notified of such special damages at the time of the making of the contract. Accompanying defendants' motion was an affidavit correctly pointing out that, according to deposition testimony of the individual plaintiffs, defendants were not notified of the dire need for payments until four or five months after the contract was entered into.

We conclude that summary judgment was properly granted. Plaintiffs' own depositional statements, which are binding upon them for the purpose of determining whether summary judgment would be appropriate, see Braman v Bosworth, 112 Mich. App. 518; 316 N.W.2d 255 (1982), revealed that no genuine issue of fact existed such as would preclude dismissal of those counts seeking damages in excess of the monetary value of the contract.

Under the rule of Hadley v Baxendale, 9 Exch 341; 156 Eng Rep 145 (1854), as reiterated in Kewin v Massachusetts Mutual Life Ins Co, 409 Mich. 401, 414; 295 N.W.2d 50 (1980), the damages recoverable for breach of contract are those that arise naturally from the breach or those that were in the contemplation of the parties at the time the contract was made. Accordingly, in a commercial contract situation such as is involved here, application of this principle generally results in a limitation of damages to the monetary value of the contract had the breaching party fully performed under it. Kewin, supra, pp 414-415.

The failure of a party to make payments due under a contract for work or services performed by the other party does not usually result in the financial failure of the performing party or the "financial embarrassment" of its shareholders or officers. The financial ruin of a contracting corporation or its officers is plainly not a consequence arising naturally from a breach of the contract. Therefore, absent evidence that a risk of insolvency was within the actual contemplation of the parties at the time the contract was made, damages are not recoverable for such a consequence.

As the parties opposing the motion for summary judgment, it was incumbent upon plaintiffs to come forward with a showing that there was a dispute as to whether defendants had been made aware, at the time the contract was made, of the risk of plaintiffs' financial ruin attending any future breach of the contract. See Hollowell v Career Decisions, Inc, 100 Mich. App. 561; 298 N.W.2d 915 (1980).

The only factual allegation in the record below supporting plaintiffs' claim that such damages were within the contemplation of the parties was that in the complaint, i.e., that defendants had been expressly notified of plaintiffs' dire need for funds due under the contract. Plaintiffs' own deposition testimony, however, revealed that defendants were not informed or notified of this situation until well after the contract was made.

Thus, in the absence of any factual support for plaintiffs' claim that damages in excess of the monetary value of the contract were recoverable under the rule of Hadley v Baxendale, supra, summary judgment was properly granted.

Plaintiffs argue, however, that Counts II, III, and IV also state a cause of action in tort. Accordingly, reason plaintiffs, damages recoverable would not necessarily be limited to those obtainable in contract under the rule of Hadley v Baxendale, supra.

We recognize, as did the Supreme Court in Oliver v Perkins, 92 Mich. 304; 52 N.W. 609 (1892), a case relied upon by plaintiffs, that the same set of facts establishing a breach of contract might also establish a cause of action in tort. We do not find, however, that the facts alleged by plaintiffs in this case state a cause of action independent of that for breach of contract.

Plaintiffs have alleged no more than the failure of defendants to discharge their obligation to pay under the oral contract. Where, as here, there is no allegation that a duty existing independent of and apart from the contractual undertaking has been violated, a tort action will not lie. Kewin, supra, 422-423, Hart v Ludwig, 347 Mich. 559, 565-566; 79 N.W.2d 895 (1956). We find applicable, as did the Court in Kewin, the following statement from Hart:

"We have simply the violation of a promise to perform the agreement. The only duty, other than that voluntarily assumed in the contract to which the defendant was subject, was his duty to perform his promise in a careful and skillful manner without risk of harm to others, the violation of which is not alleged. What we are left with is defendant's failure to complete his contracted-for performance. This is not a duty imposed by the law upon all, the violation of which gives rise to a tort action, but a duty arising out of the intentions of the parties themselves and owed only to those specific individuals to whom the promise runs. A tort action will not lie."

No cause of action independent of that for breach of contract having been alleged, summary judgment was proper.