In this action for breach of contract, following a foreclosure and the purchase of real property by defendant Macatawa Bank Corporation ("the bank"),
The present case is a claim for breach of contract involving three documents. The first document, the "Fiber Optic Agreement," is a contract between Media One and PFD, in which Media One agreed to install and maintain a fiber optic network at Macatawa Legends, a housing development being built by PFD. In the Fiber Optic Agreement, PFD agreed to pay Media One for its services. In the second document, also between PFD and Media One, PFD granted Media One an easement to enter the Macatawa Legends property to install, repair, and maintain the fiber optic cables. The easement states that the easement "shall be subject to all of the terms and conditions contained in the Fiber Optic Agreement." Finally, in the third document, the bank—a mortgagee with a recorded mortgage on the property—consented to the creation of the easement and agreed to "honor and recognize" the rights granted by the easement.
PFD failed to pay Media One for its services as set forth in the Fiber Optic Agreement. PFD also defaulted on its mortgage to the bank. As a result, the bank initiated foreclosure proceedings, and the bank subsequently purchased the Macatawa Legends property at a sheriff's sale. Thereafter, Media One filed the current lawsuit against the bank, claiming breach of contract and seeking payment from the bank under the Fiber Optic Agreement.
The basic question posed in this case is whether, considering the documents at issue, the bank's consent to the easement gives rise to a contractual obligation on the part of the bank to pay PFD's obligations to Media One under the Fiber Optic Agreement. We conclude that the bank's consent did not constitute an assumption of PFD's obligations under the Fiber Optic Agreement. Accordingly, we affirm the trial court's grant of summary disposition to the bank under MCR 2.116(C)(8).
I. STANDARD OF REVIEW
We review de novo a trial court's decision to grant a motion for summary disposition. Diem v Sallie Mae Home Loans, Inc, 307 Mich.App. 204, 210; 859 N.W.2d 238 (2014). "Summary disposition under MCR 2.116(C)(8) is appropriate where the complaint fails to state a claim on which relief may be granted."
The party claiming a breach of contract "must establish by a preponderance of the evidence that (1) there was a contract, (2) the other party breached the contract, and (3) the breach resulted in damages to the party claiming breach." Bank of Am, NA v First Am Title Ins Co, 499 Mich. 74, 100; 878 N.W.2d 816 (2016). "The rights and duties of parties to a contract are derived from the terms of the agreement." Wilkie v Auto-Owners Ins Co, 469 Mich. 41, 62; 664 N.W.2d 776 (2003). "The burden is on [the] plaintiffs to show the existence of the contract sought to be enforced, and no presumption will be indulged in favor of the execution of a contract since, regardless of the equities in a case, the court cannot make a contract for the parties when none exists." Kamalnath v Mercy Mem Hosp Corp, 194 Mich.App. 543, 549; 487 N.W.2d 499 (1992), quoting Hammel v Foor, 359 Mich. 392, 400; 102 N.W.2d 196 (1960). "It goes without saying that a contract cannot bind a nonparty." AFSCME Council 25 v Wayne Co, 292 Mich.App. 68, 80; 811 N.W.2d 4 (2011) (citation omitted).
Although a contract does not ordinarily bind a non-party, non-parties to a contract may still be held to an agreement by applying "ordinary contract-related legal principals," including assumption of contractual obligations. Id. at 81. For instance, a party may agree to assume the liabilities of another, as through a surety or guaranty, in the event that the principal obligee fails to perform. See Will H Hall & Son, Inc v Ace Masonry Const, Inc, 260 Mich.App. 222, 228; 677 N.W.2d 51 (2003); Angelo Iafrate Co v Detroit & N Sav & L Ass'n, 80 Mich.App. 508, 514; 264 N.W.2d 45 (1978). However, "[o]rdinary experience teaches that assumption of another's debt is a substantial undertaking, and thus the courts will not assume such an obligation in the absence of a clearly expressed intention to do so." Bandit Indus, Inc v Hobbs Intern, Inc, 463 Mich. 504, 513; 620 N.W.2d 531 (2001).
Whether a party has agreed to assume the obligations of another is a question of contract interpretation. Angelo Iafrate Co, 80 Mich App at 514. The "primary task in construing a contract is to give effect to the parties' intentions at the time they entered into the contract, which requires an examination of the language of the contract according to its plain and ordinary meaning." Beck v Park W Galleries, Inc, 499 Mich. 40, 45-46; 878 N.W.2d 804 (2016). Contracts should be read "as a whole," giving meaning to all terms; Royal Prop Group, LLC v Prime Ins Syndicate, Inc, 267 Mich.App. 708, 715; 706 N.W.2d 426 (2005); and, "[w]here one writing references another instrument for additional contract terms, the two writings should be read together," Forge v Smith, 458 Mich. 198, 207; 580 N.W.2d 876 (1998). "If the language of the contract is clear and unambiguous, it must be enforced as written." Clark v Al-Amin, 309 Mich.App. 387, 394; 872 N.W.2d 730 (2015) (citation omitted).
Turning to the present case, Media One's contractual right to payment for the installation of the fiber optic infrastructure arises from the Fiber Optic Agreement. Undisputedly, the bank was not a party to the Fiber Optic Agreement. Rather, the only signatories to the Fiber Optic Agreement were PFD and Media One. It follows as a basic proposition that, as a non-party to the Fiber Optic Agreement, the bank cannot be bound by the agreement and cannot be compelled to perform PFD's obligations under the Fiber Optic Agreement. See AFSCME Council 25, 292 Mich App at 80; see also Booth v Dingley, 148 Mich. 197, 202; 111 NW 851 (1907).
In contrast to this conclusion, Media One asserts that the bank's consent to the easements rendered the bank liable for PFD's obligations under the Fiber Optic Agreement, as a successor to the Fiber Optic Agreement, in the event of a foreclosure. In particular, because the easement is "subject to" the Fiber Optic Agreement, Media One maintains that, by signing the consent and agreeing to "honor and recognize" Media One's rights, the bank agreed to honor Media One's contractual right to payment under the Fiber Optic Agreement. According to Media One, the bank's obligation to pay Media One under the Fiber Optic Agreement was triggered when the bank purchased the property at the foreclosure sale.
Considering the plain language of the three documents involved, Media One's circuitous argument is plainly without merit, and it is readily apparent that the bank's only intent in agreeing to the easement was to permit PFD to grant the easement for installation of the fiber optic cables and to ensure that this easement would survive in the event of foreclosure. In relevant part, the most recent consent provides:
Considering the language of this consent, it is clear that the bank only agreed to the creation of the easement and not the assumption of PFD's contractual indebtedness to Media One under the Fiber Optic Agreement. To begin with, in ascertaining the parties' intent, it is notable that the consent identifies the bank as "being the mortgagee and secured party" in connection with a previously recorded mortgage. This reference to the bank as "mortgagee and secured party" relative to PFD as "mortgagor" makes plain that the bank executed the consent document, not as a party assuming PFD's contractual obligations under the Fiber Optic Agreement, but as a mortgagee with a superior recorded interest in the property and the ability to otherwise cut-off the proposed easement in the event of foreclosure.
While conceding that the bank's consent was necessary for the creation of the easement, Media One nevertheless attempts to transform this plainly worded consent into an assumption of pecuniary liability by endeavoring to finagle a link between the consent and the Fiber Optic Agreement. First, Media One argues that the phrase "honor and recognize," as used in the consent evinces the bank's intent to "honor and recognize" Media One's right to payment under the Fiber Optic Agreement. But, clearly this is not so for the simple reason that the bank did not agree to "honor and recognize" the Fiber Optic Agreement; rather, the bank agreed to "honor and recognize" the rights granted by the easement. "An easement is the right to use the land of another for a specified purpose," Heydon v MediaOne, 275 Mich.App. 267, 270; 739 N.W.2d 373 (2007); and, "the conveyance of an easement gives to the grantee all such rights as are incidental or necessary to the reasonable and proper enjoyment of the easement" as determined from the language of the easement document, Blackhawk Dev Corp v Vill of Dexter, 473 Mich. 33, 41-42; 700 N.W.2d 364 (2005). Turning to the easement in this case, it is clear that Media One's right to payment is not a right granted by the easement. Instead, as set forth in the easement, the rights granted to Media One consisted of rights to enter the property and to use it for purposes of installing and maintaining fiber optic lines.
Second, Media One emphasizes that the easement is "subject to" the Fiber Optic Agreement, which, according to Media One, somehow renders the bank liable for the Fiber Optic Agreement. This argument is also unavailing. As noted, the bank only agreed to "honor and recognize" the rights granted by the easement. And, the phrase "subject to," as used in the easement, does not denote a grant of rights to Media One. See Englestein v Mintz, 345 Ill. 48, 61; 177 NE 746 (1931) ("The words `subject to,' used in their ordinary sense, mean `subordinate to,' `subservient to' or `limited by.' There is nothing in the use of the words `subject to,' in their ordinary use, which would even hint at the creation of affirmative rights."). Rather, the phrase "subject to" denotes a limitation on a grant, in this case a limitation on the easement. See Netahla v Netahla, 301 Kan. 693, 699; 346 P.3d 1079 (2015); Cockrell v Texas Gulf Sulphur Co, 157 Tex 10, 17; 299 S.W.2d 672 (1956); Winberry v Salisbury, 5 N.J. 240, 244; 74 A.2d 406, 408 (1950). Thus, while the "subject to" language in the easement indicates some interaction between the Fiber Optic Agreement and the easement, see Mayor of Lansing v Michigan Pub Serv Com'n, 470 Mich. 154, 160 & n 4; 680 N.W.2d 840 (2004), the phrase does not grant Media One any rights of payment which are enforceable against the bank by virtue of the bank's agreement to "honor and recognize" the rights granted by the easement.
Ultimately, Media One's right to payment for its fiber optic services arises from the Fiber Optic Agreement between Media One and PFD. Even when all of the documents are considered, there is simply no indication that the bank agreed to perform PFD's obligations under the Fiber Optic Agreement, and in the absence of the bank's clearly expressed intent to do so, we will not assume such a substantial undertaking.
Affirmed. Having prevailed in full, appellees may tax costs pursuant to MCR 7.219.