Ameli-Tehrani v. Whiteman
Filing
98
OPINION AND ORDER DENYING 44 Plaintiff's Motion for Summary Judgment and GRANTING IN PART AND DENYING IN PART 59 Defendant's Motion for Partial Summary Judgment. Signed by District Judge Mark A. Goldsmith. (Goltz, D)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
ROSHANAK AMELI-TEHRANI,
Plaintiff,
Civil Action No. 09-CV-14126
HON. MARK A. GOLDSMITH
vs.
L. KENT WHITEMAN,
Defendant.
_____________________________/
OPINION AND ORDER DENYING PLAINTIFF’S MOTION FOR SUMMARY
JUDGMENT (D.E. 44) AND GRANTING IN PART AND DENYING IN PART
DEFENDANT’S MOTION FOR PARTIAL SUMMARY JUDGMENT (D.E. 59)
Before the court are Plaintiff’s motion for summary judgment and Defendant’s motion
for partial summary judgment. For the reasons set out below, Plaintiff’s motion is denied and
Defendant’s motion is granted, in part, and denied, in part.
I.
Factual and Procedural Background
Beginning at some point in the 1990s, Ameli-Tehrani and Whiteman, an attorney, began
engaging in business deals together while romantically involved. Docket Entry (D.E.) 1 ¶ 5
(complaint). In 1999, Ameli-Tehrani gave Whiteman funds, and together they invested in a real
estate venture in Florida. Id. ¶¶ 6-8. The parties contemplated further investments together,
created a joint bank account for that purpose, and invested in other ventures. Id. ¶ 9. According
to Ameli-Tehrani, pursuant to this arrangement, Whiteman invested some amount of his own
money and over $400,000 of her money in five separate ventures. Id. The parties agree that they
ceased participating in real estate ventures together in or around 2003. Id. ¶ 11; D.E. 11 ¶ 11
(answer). At some point after that, Ameli-Tehrani asked Whiteman to return her money.
Whiteman did not have the funds to pay Ameli-Tehrani. Instead, in 2004 Whiteman gave
Ameli-Tehrani a promissory note in the amount of $550,000, which she accepted. D.E. 15 ¶¶ 14,
16 (counterclaim). The note read:
PROMIS[S]ORY NOTE
I Kent Whiteman promise to repay to Roshanak Ameli $550,000 at 10% interest
per annum. That if there is a default on this obligation I will sign over my share
to the South University Properties LLC properties as collateral for this debt.
D.E. 44-2. The note, signed by Whiteman, was dated August 1, 2004. At some point in 2007
Ameli-Tehrani demanded payment on the note. It is undisputed that Whiteman did not pay
Ameli-Tehrani the $550,000 plus interest.
On November 15, 2007, the parties entered into a “Membership Purchase Agreement”
related to Whiteman’s share of South University Properties. The agreement provided in part:
THIS AGREEMENT is made and entered into this 15th day of November, 2007,
by and between Kent L. Whiteman (“Seller”) and Roshan[ak] Ameli[-Tehrani]
(“Buyer”).
...
WHEREAS, Seller desires to sell to Buyer and Buyer desires to purchase from
Seller a membership interest in S. University Properties, ([“LLC”]), upon the
terms and conditions set forth below,
...
Agreement to Sell. Seller agrees to sell an undivided Fifty (50%) percent interest
in the LLC to the Buyer subject to any encumbrance on the LLC[’]s property.
Buyer agrees to assume and perform any obligation of the Seller with respect to
the LLC[’]s property and to obtain the release of the Seller from the mortgage and
any guarantee within three (3) years of Closing.
...
Consideration. In consideration for the sale and transfer of the interest, Buyer
shall pay to Seller the purchase price of Two Hundred Thousand ($200,000)
2
Dollars . . .
D.E. 58-4 (Membership Purchase Agreement). Importantly, the agreement also contained a
merger clause, which provided that
“[t]his Agreement embodies the entire agreement and understanding of the
parties hereto with respect to the subject matter hereof, and supersede[s] all prior
and contemporaneous letters, agreements and understandings relative to said
subject matter.”
Id. The 2004 promissory note is not mentioned in the agreement.
The parties dispute the significance of the property transfer effectuated by the November
2007 Membership Purchase Agreement.
Whiteman maintains that, pursuant to the default
provision on the promissory note, he had transferred his interest in South University Properties to
Ameli-Tehrani, thereby discharging his obligations under the note. D.E. 58 at 2 (brief opposing
summary judgment). Despite the agreement’s failure to mention the promissory note, Whiteman
maintains that prior to the November 2007 Membership Purchase Agreement, “Ameli-Tehrani
and Whiteman negotiated and agreed that Whiteman’s transfer of his 50% interest in [South
University Properties] to Ameli-Tehrani would fully satisfy, release[,] and discharge any and all
obligations and liabilities of Whiteman to Ameli-Tehrani under the Promissory Note.” D.E. 58
at 6.
Whiteman points to several pieces of evidence in support. First, he cites an October 21,
2007 email from Ameli-Tehrani to Larry Ferguson (the attorney who drafted the Membership
Purchase Agreement) and Heinz Schmidt (Ameli-Tehrani and Whiteman’s accountant). In the
email, Ameli-Tehrani states, in part,
I wanted to give you a breakdown of how Kent and I have decided to handle the
buyout. It is outlined in the attached excel spreadsheet. Essentially, Kent will be
receiving $200,000 in cash from me for his 50% in SUP LLC.1 This is based on
1
The parties frequently refer to South University Properties as “SUP”.
3
amounts that he owes me and the treatment of his initial investment as essentially
a mortgage.
D.E. 58-3 at 2 (emphasis added). The attached spreadsheet, created by Ameli-Tehrani, shows
calculations for the then-current amount that Whiteman owed Ameli-Tehrani under the
promissory note, along with calculations for the money value of Whiteman’s share in South
University Properties, and subtracts the amount Whiteman owed Ameli-Tehrani from the amount
South University Properties “owed” Whiteman, showing a final amount of $200,000 “net to
KW.”2 D.E. 58-3 at 4. In addition, a subsequent email by Ameli-Tehrani to Ferguson the next
day stated, “I would like the buyout to take place right away as kent is paying his debt to me
back through the buyout.” D.E. 58-3 at 9 (emphasis added).
Whiteman also cites other pieces of evidence. Ferguson, the attorney who was jointly
retained by Whiteman and Ameli-Tehrani to draft the Membership Purchase Agreement and had
represented both parties in the past, submitted a sworn affidavit stating that Ameli-Tehrani and
Whiteman requested that he draft the agreement to “assign Whiteman’s 50% interest in SUP to
Ameli-Tehrani in exchange for payment to Whiteman of $200,000 and a discharge of the
Promissory Note. . . .” D.E. 58-6 ¶ 5 (Ferguson affidavit). In addition, Schmidt, who prepared
individual tax returns for both Whiteman and Ameli-Tehrani along with the tax return for South
University Properties, submitted a sworn affidavit stating that it was clear to him from AmeliTehrani’s October 2007 email as well as “other emails and other communications” that he had
had with Ameli-Tehrani and Whiteman, that “the purpose of the SUP Transaction was to settle
any financial and other obligations existing between the two of them, including the promissory
note and any other debts Whiteman owed to Ameli-Tehrani.” D.E. 58-7 ¶ 7 (Schmidt affidavit).
2
In the document the parties are represented by their initials or first names. Roshanak AmeliTehrani is “R,” or “RAT.” Kent Whiteman is “KW” or Kent. D.E. 58-3 at 4.
4
Finally, in an April 29, 2009 email sent by Ameli-Tehrani to Whiteman, Ameli-Tehrani
expresses regret about making calculations in the South University Properties sale in a manner
benefitting Whiteman and asks him for financial help. D.E. 58-9 at 2-4. In the email, AmeliTehrani recounts the spreadsheet calculations and how she made several adjustments in
Whiteman’s favor, indicating multiple times that the promissory note amount that Whiteman
owed her was calculated into the original transaction. See e.g., D.E. 58-9 at 2-3 (“I also lowered
the amount you owed me from $550,000 to $450,000 as well as lowering the rate of interest on
my loan to you from 12% to 6%.”).3 Whiteman also argues that if Ameli-Tehrani truly believed
that the promissory note was still in effect, she could have simply demanded repayment on the
note at that point instead of asking for Whiteman to undo the S. University Properties
transaction.
Ameli-Tehrani vigorously disputes Whiteman’s contention that the property transfer
discharged Whiteman’s obligation to her under the promissory note. She maintains that the
evidence Whiteman cites is “immaterial,” given the plain language of the Membership Purchase
Agreement, which contains a merger clause and does not mention the promissory note. See D.E.
62 at 1 n.1 (Plaintiff’s reply brief). She also states that the language of the signed agreement
“reflected [her] understanding of the transaction.” Id.
Notwithstanding her position that the evidence Whiteman cites does not matter, AmeliTehrani does address the spreadsheet. According to Ameli-Tehrani, the spreadsheet she created
and sent to Ferguson and Schmidt did not set out the parties’ intentions for the Membership
Purchase Agreement. Instead, Ameli-Tehrani maintains that the spreadsheet came about because
3
For the sake of clarity, the Court notes that Ameli-Tehrani’s recollection was not quite correct.
She lowered the amount Whiteman owed her to $500,000, and lowered the rate of interest to 6%
from an original rate of 10%. See D.E. 58-3 at 4.
5
of the following circumstances. Whiteman approached her in 2007 and asked her to buy him out
of South University Properties for $200,000 because he needed money and needed to
demonstrate to his new wife that he was no longer doing business with Ameli-Tehrani. D.E. 62
at 1 n.1.
However, “after it became clear from the appraisals that [the South University
Property] was not worth what the Defendant had hoped and told Plaintiff it was, Defendant asked
Plaintiff to create and send to Larry Ferguson and Heinz Schmidt . . . a spread sheet showing
various ‘what if’ scenarios under which they maintained the $200,000 purchase price but allowed
Defendant to obtain ‘favorable business/tax treatment.’” D.E. 62 at 1 n.1. According to AmeliTehrani, the spreadsheet she created was in response to this request by Whiteman. AmeliTehrani states that she “[knew] the spreadsheet scenarios did not correspond with reality”; that is
why she asked Whiteman “if her rights under the note would be prejudiced.” D.E. 62 at 1 n.1.4
He assured her that they would not be. Id. Ameli-Tehrani states that “months later”5 the
Membership Purchase Agreement was signed, and she “thought nothing more of the earlier
spreadsheet.” D.E. 62 at 1 n.1.
4
In support of this fact, Ameli-Tehrani points to an October 27, 2007 email she wrote to
Whiteman six days after she sent the spreadsheet email. In her email to Whiteman, she states in
part,
I thought the whole reason we are doing all these calculations was because you
want to be able to use[] your tax losses against supposed gains for [Schmidt] and
to show Elisabeta that you have settled all ‘dealings’ between us. Why then are
you telling me not to email [Schmidt]? And what are [the] tax conseque[n]ces for
me? I’m so stressed about this, with [the] huge payment that I am now saddled
with because of the new mortgage. When do you think you can pay me back?
D.E. 62-7 at 2 (emphasis added).
5
Although the Membership Purchase Agreement is dated November 15, 2007, less than a month
after Ameli-Tehrani emailed the spreadsheet to the lawyer and accountant, a March 5, 2008
email from Ameli-Tehrani to Ferguson indicates that at least her signature was likely not secured
until around that time. See D.E. 62-8 at 2 (stating that she “just” faxed her copies of the signed
document and that she “guess[es] the Nov 15 2007 dating of documents is ok with [Schmidt].”)
6
Accordingly, Ameli-Tehrani contends that Whiteman’s obligation on the promissory note
has not been discharged.
On October 20, 2009, Ameli-Tehrani filed suit in this Court against Whiteman raising
claims of (i) breach of contract for failing to pay the promissory note, (ii) breach of fiduciary
duty, and (iii) unjust enrichment. D.E. 1. Whiteman filed a counterclaim seeking a declaratory
judgment that the property transfer under the Membership Purchase Agreement discharged his
obligations under the note.
In the alternative, the counterclaim seeks reformation of the
agreement based upon (i) mutual mistake, (ii) mistake and/or fraud, or (iii) fraudulent and/or
innocent misrepresentation. D.E. 15. The parties engaged in discovery. On September 24,
2010, Ameli-Tehrani filed a motion for summary judgment. D.E. 44. On October 15, 2010,
Whiteman filed a motion for partial summary judgment. D.E. 59. The motions were fully
briefed, and on December 9, 2010, this Court held a hearing on the motions.
II.
Discussion
Summary judgment should be granted only if there is no genuine dispute as to any
material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P.
56(a). As the Sixth Circuit has explained,
[t]he burden is generally on the moving party to show that no genuine issue of
material fact exists, but that burden may be discharged by “showing – that is,
pointing out to the district court – that there is an absence of evidence to support
the nonmoving party’s case.” Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.
Ct. 2548, 91 L. Ed. 2d 265 (1986) (internal quotation marks omitted). In
reviewing a summary judgment motion, credibility judgments and weighing of
the evidence are prohibited. Rather, the evidence should be viewed in the light
most favorable to the non-moving party. Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 255, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986). Thus, the facts and any
inferences that can be drawn from those facts[ ] must be viewed in the light most
favorable to the non-moving party. Matsushita Elec. Indus. Co. v. Zenith Radio
Corp., 475 U.S. 574, 587, 106 S. Ct. 1348, 89 L. Ed. 2d 538 (1986).
Biegas v. Quickway Carriers, Inc., 573 F.3d 365, 373 (6th Cir. 2009) (quotation marks omitted).
7
A.
Ameli-Tehrani’s Motion for Summary Judgment
Ameli-Tehrani argues that she is entitled to summary judgment on Count I of her
complaint (alleging that Whiteman breached the promissory note).6
The amount of the
promissory note and Ameli-Tehrani’s demand for payment of the note are not in dispute. The
only question is whether the subsequent property transfer discharges Whiteman’s debt to AmeliTehrani.
Because the Membership Purchase Agreement (i) does not mention the promissory note
and (ii) contains a merger clause stating that the agreement itself embodies the entire
understanding of the parties, Ameli-Tehrani contends that Whiteman may not present extrinsic or
parol evidence showing that the Membership Purchase Agreement was supposed to discharge the
promissory note. According to Ameli-Tehrani, under Michigan law, if the parties have included
an express merger clause in their agreement, it is conclusive and extrinsic evidence is not
admissible unless (i) fraud invalidates the merger clause, (ii) the agreement is incomplete on its
face, or (iii) a term within the agreement is ambiguous. D.E. 44 at 6. Ameli-Tehrani argues that,
because none of the exceptions applies here, Whiteman’s extrinsic evidence cannot be
considered to show that the contract is not integrated or to otherwise attempt to contradict, vary,
or explain its terms. Id. at 6-7.
Whiteman offers several responses. First, he argues that there is an ambiguity in the
written agreement. D.E. 58 at 13. Second, he argues that Michigan law permits extrinsic
evidence where the “actual consideration” exchanged by the parties differs from what is
expressed in the agreement. Id. at 14-15. Third, Whiteman argues that extrinsic evidence is
admissible to demonstrate that the agreement should be reformed because of mutual mistake,
6
Ameli-Tehrani titled the motion a “Motion for Summary Judgment.” D.E. 44. However
because Ameli-Tehrani only moves for summary judgment on Count I of her complaint, see id.
at 3, the motion is actually a partial motion for summary judgment.
8
unilateral mistake/fraud, or scrivener’s error. See id. at 15-19. Whiteman asks the Court “to
modify the Membership Purchase Agreement in accordance with the intent, understandings[,]
and agreements between the parties that the Membership Purchase Agreement released,
discharged, and/or canceled any and all obligations that Whiteman may have owed AmeliTehrani under the Promissory Note.” Id. at 15.
1. Ambiguity
Whether a contract is ambiguous is a question of law determined by the court. Coates v.
Bastian Brothers, Inc., 741 N.W.2d 539, 543 (Mich. Ct. App. 2007). When construing a merger
clause, a court “must look for the intent of the parties in the words used in the instrument”; a
court “does not have the right to . . . look to extrinsic testimony to determine their intent when
the words used by them are clear and unambiguous and have a definite meaning.” UAW-GM
Human Res. Ctr. v. KSL Recreation Corp., 579 N.W.2d 411, 414 (Mich. Ct. App. 1998) (quoting
Michigan Chandelier Co. v. Morse, 297 N.W. 64, 67 (Mich. 1941)). If the contract language is
clear and unambiguous, a court must interpret and enforce the contract as written. Frankenmuth
Mut. Ins. Co. v. Masters, 595 N.W.2d 832, 837 (Mich. 1999).
In contrast, a contract is
ambiguous when two provisions “irreconcilably conflict with each other” or when a term is
equally susceptible to more than one meaning. Coates, 741 N.W.2d at 543. If the contract
language is ambiguous, its meaning is a question of fact to be decided by the jury. Klapp v.
United Ins. Group Agency, Inc., 663 N.W.2d 447, 453-54 (Mich. 2003).
To resolve an
ambiguous contract, the jury may consider relevant extrinsic evidence. Id. at 454.
Whiteman argues that the Membership Purchase Agreement is ambiguous by virtue of
the phrase “with respect to the subject matter hereof” in the merger clause. The entire merger
clause states:
9
“[t]his Agreement embodies the entire agreement and understanding of the parties
hereto with respect to the subject matter hereof, and supersede[s] all prior and
contemporaneous letters, agreements and understandings relative to said subject
matter.”
D.E. 58-4 (emphasis added). The Court understands Whiteman’s argument to be as follows.
While a reasonable interpretation of the “subject matter hereof” phrase is that it refers to the
subject matter expressly addressed in the Membership Purchase Agreement, another plausible
interpretation of the phrase is that the “subject matter” of the Membership Purchase Agreement
“include[s] the components of the . . . calculations” that Ameli-Tehrani made on the spreadsheet
in order to arrive at the $200,000 amount. D.E. 58 at 13. The evidence Whiteman offers in
support of this alternate interpretation is the fact that Ferguson “testified that he drafted the
Membership Purchase Agreement to cancel Whiteman’s obligations under the Promissory Note.”
Id. Thus, Whiteman argues, there are two reasonable interpretations of the phrase, making it
ambiguous.
The Court rejects Whiteman’s argument because the phrase “subject matter hereof” is not
equally susceptible to more than one meaning. The natural reading of the term is that it refers to
the subject matter expressly addressed in the Membership Purchase Agreement. Ferguson’s
subjective and extra-textual understanding that the Membership Purchase Agreement was
supposed to address Whiteman’s debt to Ameli-Tehrani does not change the natural reading of
the phrase. See UAW-GM, 579 N.W.2d at 414.
Accordingly, the contract is not ambiguous.7
7
The Court also rejects Whiteman’s argument that extrinsic evidence is permissible where the
“actual consideration” exchanged by the parties is different than that expressed in the agreement.
The cases that Whiteman cites in support of this argument are all limited to a specific situation –
the recital of consideration in a deed. See, e.g., In re Rudell Estate, 780 N.W.2d 884, 895 (Mich.
Ct. App. 2009). This authority, addressing how conveyance instruments should be interpreted, is
readily distinguishable from the circumstances of the instant case involving contract
10
2. Parol Evidence and Reformation
Except where equitable considerations may counsel otherwise, see discussion infra at 1214, Ameli-Tehrani is correct that Whiteman cannot present extrinsic or parol evidence to show
that the contract is not integrated or to otherwise attempt to contradict, vary, or explain its terms.
With regard to parol evidence, the general rule states:
When two parties have made a contract and have expressed it in writing to which
they have both assented as the complete and accurate integration of that contract,
evidence, whether parol or otherwise, of antecedent understandings and
negotiations will not be admitted for the purpose of varying or contradicting the
writing.
NAG Enterprises, Inc. v. All State Indus., Inc., 285 N.W.2d 770, 771 (Mich. 1979) (citing 3
Corbin on Contracts, § 573). In the absence of a valid merger clause, it is a prerequisite to
application of the parol evidence rule that there be a finding that the parties intended the written
instrument to be a complete expression of their agreement with regard to the matters covered;
thus, “[e]xtrinsic evidence of prior or contemporaneous agreements or negotiations is admissible
as it bears on this threshold question of whether the written instrument is such an ‘integrated’
agreement.” Id. However, where a contract includes a merger or integration clause, parol
evidence is not needed to resolve the threshold question, and thus is not permissible. As the
Michigan Court of Appeals has explained,
if parol evidence were admissible with regard to the threshold issue whether the
written agreement was integrated despite the existence of an integration clause,
there would be little distinction between contracts that include an integration
clause and those that do not. When the parties choose to include an integration
clause, they clearly indicate that the written agreement is integrated; accordingly,
there is no longer any “threshold issue” whether the agreement is integrated and,
correspondingly, no need to resort to parol evidence to resolve this issue. Thus
NAG, which allows resort to parol evidence to resolve this “threshold issue,” does
not control when a contract includes a valid merger clause.
interpretation. Importing this authority into the law of contract interpretation would entirely
eviscerate the effectiveness and utility of a merger clause.
11
UAW-GM, 579 N.W.2d at 416. Accordingly, “when the parties include an integration clause in
their written contract, it is conclusive and parol evidence is not admissible to show that the
agreement is not integrated.” Id. at 418. The only exceptions are “in cases of fraud that
invalidate the integration clause or where an agreement is obviously incomplete ‘on its face’ and,
therefore, parol evidence is necessary for the ‘filling of gaps.’” Id.
This is not a case where fraud invalidates the integration clause. Nor is the agreement
obviously incomplete on its face. Thus, parol evidence is not permissible in this context.
However, Whiteman’s demand for reformation of the contract is based on the basic claim
that the written contract did not reflect the intent of the parties at the time it was entered into.
According to Whiteman, the parties intended for the November 2007 Membership Purchase
Agreement to discharge the promissory note that Whiteman signed in 2004 – but due to the
parties’ mistake or a drafting error, that is not reflected in the text of the 2007 Membership
Purchase Agreement.8 Equitable principles counsel that Whiteman may present parol evidence
in support of this claim.
It is well established in Michigan that courts have the power to reform contracts so that
they accurately reflect the intent of the parties at the time the contract was entered. See Casey v.
Auto Owners Ins. Co., 729 N.W.2d 277, 284-85 (Mich. App. 2006) (“A court of equity has
power to reform the contract to make it conform to the agreement actually made.”) (citations and
quotations omitted). Courts are required to “proceed with the utmost caution in exercising
jurisdiction to reform written instruments.” Olsen v. Porter, 539 N.W.2d 523, 525 (Mich. Ct.
App. 1995). Accordingly, “[t]he burden of proof is upon the party seeking reformation to
8
By necessity, Whiteman’s reformation claim is an alternative to Whiteman’s counterclaim for
declaratory judgment that the Membership Purchase Agreement does set out the understanding
that his obligation under the Note is discharged by the agreement. See D.E. 15 (“This Claim is
brought in the alternative to Count I.”)
12
present clear and convincing evidence that the contract should be reformed in order to carry out
the true agreement of the parties.” See Chicago Title Ins. Co. v. East Arm, L.L.C., No. 242372,
2003 WL 22801883 at *5 (Mich. Ct. App. Nov. 25, 2003); see also Casey, 729 N.W.2d at 285.
Significantly, parol evidence can be considered in deciding whether reformation is
appropriate under this standard. This is a general principle of contract law. See Joseph M.
Perillo, Calamari and Perillo on Contracts § 9.31, at 375 (5th ed. 2003) (“[T]he parol evidence
rule has no application in reformation cases.”); Restatement (Second) of Contracts § 214(e)
(1981) (“Agreements and negotiations prior to or contemporaneous with the adoption of a
writing are admissible in evidence to establish . . . ground for granting or denying rescission,
reformation, specific performance, or other remedy.”). And, Michigan courts have applied this
principle. See, e.g., US Bank, N.A. v. Whittier, No. 293481, 2010 WL 4628692, at *7 (Mich. Ct.
App. Nov. 16, 2010) (noting that “[r]eformation is proper if the parties agreed to accomplish a
particular object by an executed instrument, but the instrument as executed failed to effectuate
their intentions” and that “[f]or purposes of reformation, parol evidence can be used to determine
whether a contract evidences a mistake”); see also Goldberg v. Cities Service Oil Co., 266 N.W.
321, 325 (Mich. 1936) (“Parol evidence is sufficient to warrant the reformation of a written
instrument.”) (citations and quotations omitted); Northpointe Bank v. Brotherton, No. 279035,
2008 WL 4181737, at *3 (Mich. Ct. App. Sept. 11, 2008) (in evaluating claim for reformation,
“parol evidence was admissible not to vary the terms of the contract, but to show an alleged
mutual mistake and the true intention of the parties.”).
Finally, this is true even where, as here, the contract contains a merger clause. See Joyce
v. Joyce, No. 281175, 2009 WL 3929961, at *2 (Mich. Ct. App. Nov. 19, 2009) (relying on parol
evidence in ordering the reformation of the contract to reflect the true bargain between the
13
parties, despite a merger clause); City of Detroit v. TXU Energy Retail Co. L.P., No. 03-74279,
2005 WL 2319013 (E.D. Mich. Sept. 21, 2005) (same); see also 2 Dan B. Dobbs, Law of
Remedies § 9.5, at 623 (2d ed. 1993) (“The mere fact that there is a writing that purports to
integrate the entire agreement of the parties, does not prevent the plaintiff from showing that the
writing is not in fact the one agreed upon and that it does not express the true contract.”).
Turning, then, to the content of Whiteman’s parol evidence, the question under the
summary judgment standard is whether a genuine issue of material fact exists as to whether the
parties intended that the 2007 Membership Purchase Agreement would discharge the 2004
Promissory Note. There is evidence from which a fact finder could so conclude. The evidence
includes (i) the October 2007 email and spreadsheet in which Ameli-Tehrani explains that the
calculations are based on the amount that Whiteman owed her from the note, (ii) the affidavit of
Ferguson stating that Ameli-Tehrani and Whiteman asked him to draft the agreement to
discharge the note, (iii) the affidavit of Schmidt, who had the same understanding, based upon
the October 2007 email and other communications with the parties, and (iv) Ameli-Tehrani’s
later April 2009 email to Whiteman, referring to the earlier spreadsheet and its inclusion of
Whiteman’s debt in its calculations. Although Ameli-Tehrani offers evidence of her own – in
the form of an email she sent days after making the spreadsheet asking Whiteman when he
would pay her back – on summary judgment this Court must not weigh the evidence and must
instead view it in the light most favorable to Whiteman. Accordingly, summary judgment is
inappropriate.
In conclusion, Whiteman is entitled to consideration of his parol evidence by a fact
finder. Accordingly, Ameli-Tehrani is not entitled to summary judgment on her breach of
contract claim.
14
B.
Whiteman’s Motion for Partial Summary Judgment
Whiteman argues that he is entitled to summary judgment on Count II (breach of
fiduciary duty) and Count III (unjust enrichment) of Ameli-Tehrani’s complaint. He makes three
arguments: (i) that Ameli-Tehrani’s breach-of-fiduciary-duty claim is barred by the three-year
statute of limitations, (ii) that Ameli-Tehrani offered no evidence to support the fiduciary-duty
claim, and (iii) that the unjust enrichment claim is barred because it is predicated on an implied
agreement that was subsumed by an express agreement (i.e., the promissory note). D.E. 59.
1. Breach of Fiduciary Duty
a. Statute of Limitations
Under Michigan law, the limitations period for breach of fiduciary duty is three years.
Mich. Comp. Laws § 600.5805(10); Moross Ltd. Partnership v. Fleckenstein Capital, Inc., 466
F.3d 508, 518 (6th Cir. 2006). Ameli-Tehrani filed her complaint on October 20, 2009. Thus,
claims accruing before October 20, 2006 are presumptively time-barred. See, e.g., Drake v. City
of Detroit, 266 F. App’x 444, 448 (6th Cir. 2008) (unpublished).9
The allegations in the complaint specific to Ameli-Tehrani’s breach-of-fiduciary-duty
claim are:
¶ 26.
Whiteman has breached his fiduciary duties to Ameli-Tehrani by using her
funds for his own purposes without her informed consent.
9
The Court rejects Ameli-Tehrani’s assertion that the statute of limitations for an action for
breach of fiduciary duty does not begin to run until the fiduciary relationship ends. See D.E. 70
(citing Carpenter v. Mumby, 273 N.W.2d 605 (Mich. Ct. App. 1978)). Pursuant to Mich. Comp.
Laws § 600.5827, the limitation period begins “from the time the claim accrues.” Here, the
claim accrues “at the time the wrong upon which the claim is based was done regardless of the
time when damage results.” Id. The “time the wrong . . . was done” has been interpreted to be
when all elements of the plaintiff’s cause of action are present. See Borock v. Comerica BankDetroit, 938 F. Supp. 428, 431 (E.D. Mich. 1996). This, rather than the end of the fiduciary
relationship, triggers the statute of limitations. See Moross Ltd. Partnership v. Fleckenstein
Capital, Inc., 466 F.3d 508, 518 (6th Cir. 2006) (statute of limitations for fiduciary-duty claim
related to misrepresentations on a form triggered when form was filed with SEC,
notwithstanding parties’ ongoing fiduciary relationship).
15
¶ 27.
Whiteman has breached his fiduciary duties by misrepresenting his
financial circumstances to Ameli-Tehrani.
¶ 28.
Whiteman has breached his duty of honesty, care and good faith by
inducing Ameli-Tehrani to accept a promissory note based on false
statements.
¶ 29.
To Ameli-Tehrani’s knowledge, Defendant continues to misappropriate
her money for his own use in connection with his business ventures in
Idaho and elsewhere.
D.E. 1 ¶¶ 25-30. Although Ameli-Tehrani does not specify the timing of her allegations, the
record provides some assistance. Because Ameli-Tehrani accepted the promissory note in 2004,
her claim regarding Whiteman inducing her to accept the note (¶ 28) necessarily occurred
sometime in 2004, and thus, beyond the statute of limitations. Conversely, because AmeliTehrani’s claims that Whiteman currently continues to misappropriate her money, that claim (¶
29) is not time-barred (although Ameli-Tehrani would not be entitled to damages from
misappropriation occurring before three years prior to the complaint). Less clear are AmeliTehrani’s allegations that Whiteman breached his fiduciary duties by “misrepresenting his
financial circumstances to her” (¶ 27) and that he used “her funds for his own purposes without
her informed consent” (¶ 26). The temporal scope of these allegations is not clear.10
Accordingly, Whiteman’s statute-of-limitations argument defeats the allegations of
paragraph 28, but not the balance of Ameli-Tehrani’s breach-of-fiduciary-duty claims. The
Court thus turns to Whiteman’s second argument: that Ameli-Tehrani has offered no evidence to
10
The misrepresentation-of-financial-circumstances allegation (¶ 27) may relate to the
inducement-to-accept-promissory-note claim (¶ 28). Ameli-Tehrani alleges elsewhere that
Whiteman told her he could not pay the note because he was in dire financial straits and was
about to foreclose on his home. D.E. 1 ¶ 16. If this is the activity to which the claim refers, it
would be time-barred. However, because the Court cannot draw this conclusion based on the
current record, Whiteman has not sustained his burden of showing the allegations of paragraph
27 are time-barred. See Biegas, 573 F.3d at 373 (burden on moving party to show that no
genuine issue of material fact exists)
16
support her fiduciary-duty allegations.
b. Lack of Evidence to Support the Fiduciary-Duty Claim
The parties vigorously contest whether Whiteman and Ameli-Tehrani were in a fiduciary
relationship.
In her complaint, Ameli-Tehrani alleges that Whiteman was her “business partner and
legal advisor.” D.E. 1 ¶ 5. As evidence in support of that claim, Ameli-Tehrani stated in her
deposition that she relied upon Whiteman’s “legal expertise” in conversations with him where
“he led [her] to believe that [she] had unwittingly given up certain rights on [the promissory]
note.” D.E. 62-2 at 11. These conversations apparently occurred around the time Ameli-Tehrani
emailed Whiteman asking for money in April 2009. Id. In addition, more recently, AmeliTehrani has also submitted an affidavit accompanying her response to Whiteman’s motion for
partial summary judgment.
The affidavit contains several additional assertions, potentially
relevant to showing a fiduciary relationship between the parties, including that (i) Whiteman
was the trustee of Ameli-Tehrani’s estate until November 2006, (ii) Whiteman and AmeliTehrani had two joint bank accounts until May 2007, (iii) the parties’ business relationship as
“50/50 members” of South University Properties lasted until at least November 2007, (iv) AmeliTehrani agreed to accept the promissory note in 2004 without consulting an attorney because she
trusted Whiteman, (v) Ameli-Tehrani is not sophisticated in matters of business, (vi) AmeliTehrani prepared the 2007 spreadsheet “on [Whiteman’s] express representation that the
spreadsheet would not affect the debt,” (vii) in 2009 Whiteman “advise[d] Ameli-Tehrani that
she had waived her right to repayment under the Note,” and (viii) Ameli-Tehrani “followed
[Whiteman]’s directions in speaking with bankers, accountants[,] and lawyers right up until he
told her that he no longer owed her anything under the Note.” D.E. 70 at 2-3 (response to
17
motion); D.E. 71 (Ameli-Tehrani affidavit). Ameli-Tehrani also submitted exhibits supporting
the first two claims. D.E. 71-2 (Ameli-Tehrani will); D.E. 71-7 (joint bank accounts).
In response, Whiteman argues that any fiduciary relationship he and Ameli-Tehrani may
have had would have been severed in 2004 because the parties became adverse when AmeliTehrani demanded payment and accepted the promissory note from Whiteman. D.E. 73 at 5.
Whiteman also argues that the Court should disregard the events related in the affidavit, pursuant
to Federal Rule of Civil Procedure 37(c)(1), because Ameli-Tehrani failed to disclose them in a
timely fashion in response to his discovery request. Id. at 2.
For Ameli-Tehrani’s fiduciary duty claim to survive summary judgment, she must
establish a genuine issue of material fact concerning two elements: (i) that the parties were in a
fiduciary relationship and (ii) that the party having a fiduciary obligation breached it. Because
the Court concludes that there is a lack of evidence as to the second point, the Court need not
definitively determine whether the parties were in a fiduciary relationship.
Even assuming that Whiteman did owe some sort of fiduciary duty to Ameli-Tehrani,
there is no evidence of a breach of fiduciary duty during the relevant time period. The complaint
allegations of breach that are not conclusively time barred are that Whiteman (i) “us[ed AmeliTehrani’s] funds for his own purposes without her informed consent,” (ii) “misrepresent[ed] his
financial circumstances to Ameli-Tehrani,” and (iii) “continues to misappropriate her money for
his own use in connection with his business ventures in Idaho and elsewhere.” D.E. 1. With
regard to the first, it is not clear to the Court what actions Whiteman allegedly took. Regardless,
the only evidence in the record that could fit the description of Whiteman using Ameli-Tehrani’s
funds without her consent is Ameli-Tehrani’s affidavit statement that Whiteman wired money
from their joint account to entities in Idaho for his own use. D.E. 71 ¶ 9. But the evidence
18
Ameli-Tehrani provides shows a transfer that occurred in August 2004, making this allegation
time-barred. D.E. 71-8 (8/30/04 wire transfer from joint account). With regard to the second
alleged misconduct, the complaint is again vague as to what actions Whiteman took in
misrepresenting his financial circumstances to Ameli-Tehrani. Regardless of what the specific
actions were, Ameli-Tehrani does not explain how Whiteman’s alleged misrepresentation of his
financial circumstances harmed her or otherwise breached a fiduciary duty to her. (In addition, if
the allegation is related to inducing her to accept the promissory note, as explained above, this
claim is time-barred.) As to the third allegation – that Whiteman continues to misappropriate
Ameli-Tehrani’s money – Ameli-Tehrani has provided no legitimate evidence. The records of
the August 2004 wire transfers, even assuming they show misappropriation, are not evidence of
continuing activity. There are bank documents showing that Ameli-Tehrani and Whiteman had
joint bank accounts until at least May 2007. D.E. 71-7. But they provide no evidence of
misappropriation of funds by Whiteman.
In conclusion, on this record, there is no genuine issue of material fact as to AmeliTehrani’s fiduciary duty claim. Accordingly, Whiteman is entitled to summary judgment on
Count II of Ameli-Tehrani’s complaint.
2. Unjust Enrichment
Whiteman contends that he is entitled to summary judgment on Ameli-Tehrani’s unjust
enrichment claim. His argument is as follows: Under Michigan law, a contract will be implied
pursuant to unjust enrichment only if there is no express contract addressing the same subject
matter. D.E. 59 at 9. Ameli-Tehrani’s unjust enrichment claim is that Whiteman did not pay
back in 2004 the money she had given him for their joint business ventures, and that he has since
been unjustly enriched by being able to retain those funds money and the benefits derived from
19
them. D.E. 1 ¶ 32. But Ameli-Tehrani accepted a promissory note for the money in 2004.
According to Whitman, that express agreement (the promissory note) covers the same subject
matter as Ameli-Tehrani’s unjust enrichment claim. And because Ameli-Tehrani has filed a
breach of contract claim concerning the express agreement, under Michigan law, she is not
permitted to also maintain an unjust enrichment claim. For the reasons below, the Court rejects
Whiteman’s argument.
It is the case that “[i]n order to grant relief on the basis of unjust enrichment, the court
must imply a contract between the parties” and that “‘a contract will be implied only if there is
no express contract covering the same subject matter.’”
Johnson Controls, Inc. v. Jay Indus.,
Inc., 459 F.3d 717, 731 (6th Cir. 2006) (citing Belle Isle Grill Corp. v. City of Detroit, 666
N.W.2d 271, 280 (Mich. Ct. App. 2003). However, in this case, contrary to Whiteman’s
argument, the express contract and the potential implied contract do not address the same subject
matter. The express contract (the breach-of-contract claim relating to the promissory note)
involves damages of $550,000, plus interest. See D.E. 1 ¶ 21. The implied contract (the unjust
enrichment claim) involves additional damages. In addition to the $550,000 plus interest, AmeliTehrani requests “all other damages Ameli-Tehrani has suffered as a result of Defendant’s
breach of his duties to Plaintiff.” Id. at 4. The unjust enrichment allegations of the complaint
also refer to Whiteman having derived additional benefits from the use Ameli-Tehrani’s funds.
Id. ¶¶ 32, 34. Such benefits are not expressly limited to the funds that are the subject of the
promissory note. Id.
At this stage, the Court cannot say, as a matter of law, that there is an express contract
covering the same subject matter.
Accordingly, Whiteman is not entitled to summary judgment
on Ameli-Tehrani’s unjust enrichment claim.
20
III.
Conclusion
For the reasons explained above, Ameli-Tehrani’s motion for summary judgment (D.E.
44) is denied. Whiteman’s motion for partial summary judgment (D.E. 59) is granted in part and
denied in part.
s/Mark A. Goldsmith
MARK A. GOLDSMITH
United States District Judge
Dated: May 13, 2011
Flint, Michigan
CERTIFICATE OF SERVICE
The undersigned certifies that the foregoing document was served upon counsel of record
and any unrepresented parties via the Court's ECF System to their respective email or First Class
U.S. mail addresses disclosed on the Notice of Electronic Filing on May 13, 2011.
s/Deborah J. Goltz
DEBORAH J. GOLTZ
Case Manager
21
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