Marshall v. Campbell

1

HUBERT MARSHALL, JR., Plaintiff/Counterdefendant-Appellee, v. WILLIAM CAMPBELL, JR., Defendant-Appellant, and MACILL INTERNATIONAL, INC., Defendant/Counterplaintiff-Appellant.

No. 356634

Court of Appeals of Michigan

August 18, 2022

UNPUBLISHED

Wayne Circuit Court LC No. 19-005765-CH

Before: Gadola, P.J., and Cavanagh and K. F. Kelly, JJ.

PER CURIAM.

Defendants William Campbell, Jr. and Macill International, Inc. (Macill), appeal as of right the order of the trial court quieting the title of plaintiff, Hubert Marshall, Jr., in certain real property and reforming the land contract between the parties. We reverse and remand.

I. FACTS

This case is a dispute involving the sale of commercial real property located at 8745-8755 Grand River Avenue in Detroit which includes a bar. Campbell purchased the real property from Ben Dickerson, Annie Dickerson, and Eugene Frazier in 2006. Campbell did not purchase the previous owners' class C liquor license, however, because his criminal record prevented him from qualifying for the license. Instead, he orally agreed with Ben Dickerson and Eugene Frazier that they would continue to renew the license, issued to Ben &amp Eugene's Place, LLC, but would allow Campbell, or others designated by Campbell, to use the liquor license to operate the bar. According to Campbell, Dickerson and Frazier also orally agreed that they would transfer the license to a new owner at Campbell's request.

On November 12, 2015, Marshall and Campbell entered into an agreement by which Marshall agreed to purchase the real property from Campbell. The agreement provides under the heading "Description of Premises," that the seller agrees to convey together with the real property:

[A]ll tenements, hereditaments, improvements, and appurtenances, including any lighting and plumbing fixtures, shades, Venetian blinds, curtain rods, storm windows, storm doors, screens, awnings, liquor license, restaurant license, Berg System (liquor pouring apparatus), now on the land . . . . [Emphasis added.]

In the next paragraph, under the heading "Terms of Payment," the agreement provides that in addition to purchasing the real property, Marshall also had an option to purchase a liquor license and other items from Campbell for an additional $30,000. The agreement provides, in relevant part:

That the full consideration for the sale of the land to Purchaser is: Three Hundred Thousand Dollars and 00/00 ($300,000) dollars (the "Purchase Price"). Buyer shall pay $30,000 upon the exercise of this Option to Purchase, which consist[s] of the following: interest payment, berg system, liquor license and restaurant license. The $30,000 does not apply to the cost of the business ($300,000). [Emphasis added.]

The contract thereafter provides:

For the period of the Term, the Seller (William Campbell Jr.) shall land contract the property to Hubert Marshall Jr. (as referred to in [sic] herein ("Purchaser") on the terms and conditions set out in the following subsections and unless Hubert Marshall Jr. exercise the Option during the seventy-eight (78) months of the Term, the Seller shall be bound to the land contract of the Property for the entire duration of the Term:

Following that provision, under the heading "L/C Payment," the contract provides:

The land contract payments for the Term shall be three hundred thousand Dollars and 00/100 ($300,000.00), payable by Hubert Marshall Jr. by cashier's check or money order in equal and consecutive monthly installments of three thousand seven hundred ten Dollars and 00/100 ($3,710.00) (the "Land contract installments"), the first (5^th) day of each month during the Term. . . . Land contract payment will commence on Friday, January 5, 2016.

To summarize, the agreement provides that the purchase price of the real property is $300,000, with the payments to be made in monthly installments for a term of 78 months at $3,710 per month. The agreement does not specify when the additional amount is due (78 payments of $3,710 equals $289,380). The agreement also provides that plaintiff could exercise an "Option to Purchase" for an additional $30,000, which "consists of" the liquor license, restaurant license, berg system, and "interest payment." The agreement does not specify the interest rate of the contract.

The parties do not dispute that upon entering into the agreement, Marshall paid Campbell $30,000, and Campbell gave Marshall possession of the real property, which included a liquor license issued to Ben & Eugene's Place, LLC. The parties also do not dispute that thereafter Marshall paid Campbell 15 monthly payments of $3,710, totaling $55,650 in monthly payments. According to Marshall, after entering into the agreement he invested $25,000 in repairing the building. He opened the bar in April 2016 and operated it until March 2017, under the liquor license that had been issued to Ben & Eugene's Place, LLC, which he displayed in the bar. Campbell testified that in 2016, he delivered to Marshall a copy of the renewed liquor license in the name of Ben & Eugene's Place, LLC. Marshall testified that in 2016, the bar grossed profits of $3000 per month and in 2017 began to gross profits of $15,000 per month.

In early 2017, Eugene Frazier died,^[1] and his heirs did not renew the liquor license issued to Ben & Eugene's Place, LLC, which was scheduled to expire on April 30, 2017. In March 2017, the Michigan Liquor Control Commission (LCC) terminated the liquor license and notified Marshall that he was operating the bar without a liquor license. Marshall testified that in March 2017, he attended a hearing before the LCC and learned that his agreement with Campbell was insufficient to convey to him a liquor license because transfer of a liquor license requires approval by the LCC. Marshall testified that despite learning this information from the LCC, he and Campbell nonetheless then agreed that Campbell would obtain a liquor license and convey it to Marshall. Marshall testified that because he, too, had a criminal record, he was not sure whether he would qualify for a liquor license, so he and Campbell agreed that Campbell would obtain a liquor license and transfer it to Marshall's designee. He further testified that he and Campbell agreed that he did not have to make the monthly payments on the bar until Campbell obtained a liquor license to convey to Marshall's designee.

During the next two years, Marshall did not make payments to Campbell and Campbell did not obtain a liquor license for the bar. In January 2019, Campbell quitclaimed his interest in the real property to Macill, a corporation solely owed by Campbell, thereby effectively transferring his interest in the land contract to Macill. Macill then initiated eviction proceedings against Marshall.

Marshall filed the complaint initiating this action, seeking to quiet his title to the real property and seeking to reform the land contract on the basis of alleged fraud by Campbell. Marshall requested that the trial court order that the amount due on the land contract was $35,000, and also award him additional damages of $500,000. Macill filed a counterclaim against Marshall to enforce the land contract pursuant to an acceleration clause in the contract in light of Marshall's nonpayment of the contract.

At trial, Campbell testified that before entering into the land contract, he discussed with Marshall that the liquor license was held by a third party, but that Marshall could operate the bar using the existing license issued to Ben & Eugene's Place, LLC. He testified that Marshall agreed to the arrangement. Campbell further testified that Marshall explained that he could not obtain a liquor license himself because he (Marshall) also has a criminal record. According to Campbell, he and Marshall agreed that Campbell would direct the previous owners to convey the liquor license to whomever Marshall designated, but that Marshall never identified a designee for the liquor license.

By contrast, Marshall testified that Campbell told him that he owned the liquor license. Marshall testified that he understood the contract to require Campbell to convey the liquor license to Marshall upon the final payment of the land contract. Marshall testified that one of his main objectives in purchasing the bar from Campbell was to obtain the liquor license; he owned two additional properties near the bar and had encountered legal problems with serving alcohol at those locations because he lacked a liquor license. He was concerned that his criminal record might preclude him from obtaining a liquor license and therefore planned to have Campbell convey the liquor license to Marshall's fiancée.

At the conclusion of the bench trial on the parties' claims, the trial court found that Campbell committed fraud by representing to Marshall that he was selling to Marshall a liquor license that Campbell knew he did not own. The trial court found that Marshall was entitled to payment from Campbell of $126,800, which represented $25,000 that plaintiff expended to improve the bar, $85,000 in payments on the land contract, and $16,800 spent maintaining the property while waiting for Campbell to obtain a new liquor license. The trial court also awarded Marshall reasonable attorney fees in prosecuting this action and defending the eviction lawsuit.

The trial court also found that Marshall was entitled to quiet title of the property. The trial court found that evidence presented at trial established the current fair market value of the real property at $110,000. The trial court concluded that because Campbell could not produce a liquor license, the contract was one for purchase of the real property only and that Marshall had paid in excess of $126,000 to Campbell on the contract. The trial...