Preview:

STATE OF MICHIGAN
COURT OF APPEALS


METRO HAMPTON COMPANY, Plaintiff-Appellee, v EDGAR J. DIETRICH and THERESITA K. DIETRICH, Defendants/Cross-DefendantsAppellants, and DONALD J. HOULAHAN and SYLVIA A. HOULAHAN, Defendants/Cross-Plaintiffs-Appellees, and OLYMPIC GROWTH PROPERTIES, MULTIGROWTH PROPERTIES, and NOTRE DAME MANAGEMENT COMPANY, Defendants. .

UNPUBLISHED December 28, 1999

No. 210050 Wayne Circuit Court LC No. 96-610965 NZ

Before: Gribbs, P.J., and Murphy and Griffin, JJ. PER CURIAM. Defendants Edgar Dietrich and Theresita Dietrich appeal as of right from two orders. The first granted plaintiff's motion for partial summary disposition pursuant to MCR 2.116(C)(10), against the Dietrichs on the issue of their liability on a $150,000 promissory note. The second order granted

-1

defendants/cross-plaintiffs' (the Houlahans) motion for summary disposition pursuant to MCR 2.116(C)(10), for indemnification in the amount of $100,000 from the Dietrichs. This case arises out of the purchase of two apartment complexes from plaintiff by Olympic Growth Properties, L.P., a partnership in which Edgar Dietrich and Donald Houlahan had an interest and which subsequently defaulted on a land contract and a promissory note that the Houlahans and the Dietrichs had personally guaranteed.1 We affirm both orders. I The Dietrichs first argue that a novation occurred when (1) plaintiff altered the terms of the land contract by executing an "Amendment to Land Contract" dated March 27, 1997, and/or when (2) the trustee in Olympia West's subsequent bankruptcy case sold the apartments to Concorde Club, thereby materially altering the terms of the guaranty by removing the security for the note. They conclude that this novation extinguished any further liability under the note as to them. We disagree. This Court reviews de novo a trial court's grant of partial summary disposition under MCR 2.116(C)(10). In deciding a motion pursuant to MCR 2.116(C)(10), the trial court considers the affidavits, pleadings, depositions, admissions, and other documentary evidence in the light most favorable to the nonmoving party to determine whether a genuine issue of any material fact exists to warrant a trial. Spiek v Dep't of Transportation, 456 Mich 331, 337; 572 NW2d 201 (1998); Chandler v Dowell Schlumberger, Inc, 456 Mich 395, 397; 572 NW2d 210 (1998). A novation requires (1) parties capable of contracting, (2) a valid obligation to be displaced, (3) consent of all parties to the substitution based on sufficient consideration, and (4) the extinction of the old obligation and the creation of a valid new one. In re Yeager Bridge Co, 150 Mich App 386, 410; 389 NW2d 99 (1986); George Realty Co v Gulf Refining Co, 275 Mich 442, 447-448; 266 NW 411 (1936). All parties must consent to the novation, and consent can be implied from the surrounding facts and circumstances. Gorman v Butzel, 272 Mich 525, 529; 262 NW 302 (1935); Chicago Boulevard Land Co v Nutten, 268 Mich 541, 545; 256 NW 541 (1934). The Dietrichs rely on Gorman, supra, in support of their argument that plaintiff's actions triggered a novation. Their reliance is misplaced because, unlike the instant case, Gorman did not involve a situation in which individuals agreed to guarantee a note in their personal capacities. The Dietrichs and Houlahans executed the guaranty on June 30, 1982. Paragraph 3 of the guaranty specifies that the Dietrichs' obligations would not be affected by the "substitution, exchange, or release of any collateral securing payment of the Note"; the "waiver, release or termination of any of the covenants or agreements of Olympic under the Note or under the Collateral Agreement"; or the "modification or amendment (whether material or otherwise) of any obligation, covenant or agreement set forth in the Note or Collateral Agreement to the extent such does not increase the principal amount due or the rate of interest." This agreement covers both of the alleged novation-triggering events

Download METRO HAMPTON CO V EDGAR J DIETRICH.pdf

Michigan Law