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145988 - Majestic Golf v Lake Walden Country Club

Majestic Golf, L.L.C.,
 
Graham K. Crabtree
 
Plaintiff/Counter-Defendant/Appellee,
 
v
(Appeal from Ct of Appeals)
 
 
(Livingston – Hatty, M.)
 
Lake Walden Country Club, Inc.,
 
Larry J. Saylor
 
Defendant/Counter-Plaintiff/Appellant.
 


Summary

In 1991, Waldenwoods Properties, L.L.C. started planning for a “golf course-real estate development” on approximately 1,400 acres of land it owned. On December 8, 1992, Waldenwoods, as landlord, entered into a 25-year lease agreement for part of the property with Lake Walden Country Club as the tenant, with the country club having an option to purchase that property; Waldenwoods retained the rest of the property for residential development. One of the conditions of the agreement was that the country club “shall permit drainage and utility easements and road crossings to be developed by Landlord on the Premises as required to permit development to occur on Landlord’s Other Real Estate.”

 

The agreement also stated, “If Tenant shall fail to perform any of the agreements, terms, covenants, or conditions hereof on Tenant’s part to be performed (other than payment of rent) and such non-performance shall continue for a period within which performance is required to be made by specific provision of this Lease, or if no such period is so provided for, a period of thirty (30) days after notice thereof by Landlord to Tenant … Landlord shall have the right to cancel and terminate this Lease, as well as all of the right, title and interest of Tenant hereunder.”

 

In March 2003, Waldenwoods and the country club, which had built a golf course on the property, began negotiating a merger. On October 27, 2006, Waldenwoods’ manager sent a letter to the country club’s president, listing six necessary points of agreement for a successful merger, including the club’s approval of a “road easement” between holes 21 and 22 on the golf course. The manager stated that Waldenwoods needed the club’s consent to the easement to obtain Hartland Township’s final approval of Waldenwoods’ master plan for the entire property.

 

On April 3, 2007, Waldenwoods conveyed title to the golf property to Majestic Golf, L.L.C. On April 26, 2007, Majestic Golf presented to the club a document titled “Consent to Grant of Easements.”

 

Discussions continued, culminating in an October 7, 2008 letter from Majestic Golf’s representative to the club, asking the club to “execute the Consent portion of the enclosed Grant of Easement and return it to me for recording.” He noted that “a proposed easement … was sent to [the country club] on April 26, 2007 for review and consent. Following receipt and review of the document, you requested some changes. Those were made, and the document was resubmitted to golf course management with a request to execute the Consent. This occurred, I believe, late in 2007. Despite the request, the written Consent has not been received. Concurrence by Lake Walden is urgently required. I am requesting that Lake Walden fulfill its obligation under the lease. Please sign and return the enclosed Consent within thirty (30) days.” The next day, in an e-mail to club representatives, Majestic Golf’s manager stated that “While we still very much hope that a cooperative merger will take place, we have found it necessary to prepare for the circumstance that it may not, because the differences are found to be irreconcilable.” He again requested that the country club concur in the easement, adding, “We do not intend any of these items to be interpreted that we do not wish to successfully conclude a merger – as you recall, it is [Waldenwoods] that has attempted to have this matter continue to receive consideration.” According to the manager, on November 10, the club sent him revised merger documents that were drafted to favor the club.

 

On November 24, 2008, Majestic Golf’s lawyer sent a letter to the country club advising the club that it was in violation of the lease and that Majestic Golf was terminating the lease immediately. “Because of this termination, all rights granted to Lake Walden Country Club, Inc. to purchase the property pursuant to Paragraph 17 K of the Lease are also terminated, effective immediately,” the letter stated.

 

In a letter dated December 11, 2008, the club’s attorney responded that it was always the parties’ intent to execute the road easement at the merger closing, and that the club interpreted the November 24, 2008, letter as the formal 30-day notice required under the Lease. He included the club’s revised version of the easement grant, stating that the club would agree to the new terms of the grant to comply with the lease. The revised documents were unsigned. In a second letter dated December 22, the club’s attorney stated that his client was exercising its option to purchase the golf property.

 

Majestic Golf sued the country club, and the club countersued. Both parties moved for summary disposition. The trial court held that the October 7, 2008 letter provided the 30-day notice required by the lease agreement; because the club did not provide its consent to the requested easements within 30 days of receiving the letter, the club breached the lease. But, the trial court said, although the club did default, terminating the lease would be “unduly harsh and oppressive.” The club’s breach of the agreement was not material; the court said the club had invested over $6 million in the golf property and had paid its rent in a timely manner. Moreover, any wrongful withholding of consent to the easement would be compensable in money damages. The court declined to address the issue of the appraisals the parties had submitted for the property.

 

Ultimately, Majestic Golf appealed, arguing that the trial court had erred in applying the “material breach” doctrine. In a published opinion, the Court of Appeals agreed. “[A]according to the plain and unambiguous terms of the Lease, plaintiff could ‘cancel and terminate’ the Lease if defendant failed to comply with any obligation (with the exception of the failure to pay rent) and that failure to perform continued for 30 days after defendant was formally notified… there is no question of fact that the October 7, 2008, letter complied with the notice requirements of ¶ 31 of the Lease. Therefore, to avoid defaulting under the terms of the Lease, defendant had 30 days from October 8, 2008, to cure its non-performance. The record is clear that defendant did not respond to plaintiff’s letter by November 7, 2008. Therefore, under the plain language of ¶ 26, the default occurred on or about November 7, 2008.”

 

The Court of Appeals continued, “Because plaintiff in this case seeks to enforce the termination clause in the contract, we conclude that the equitable remedy of rescission is not applicable. We further conclude that, by reading the default provision of the Lease to include the term ‘material breach,’ the trial court effectively rewrote or reformed the contract.” For a court to do so violates “our Supreme Court’s consistent pronouncements that an unambiguous contract must be enforced as written unless it violates the law, is contrary to public policy, or is unenforceable under traditional contract defenses.” None of these exceptions applied in this case, the Court of Appeals concluded.

 

“As a result, the trial court erred when it failed to enforce the forfeiture clause of the Lease based on defendant’s breach not being a ‘material breach.’ As a matter of law, plaintiff successfully invoked the default provision of the Lease and terminated the Lease on November 24, 2008 …. Hence, because the Lease was terminated on that date, defendant’s attempt to exercise the Lease’s option-to-purchase provision on December 22, 2008, was void.”

 

The Court of Appeals also rejected the country club’s argument that it did not breach the contract by failing to consent to the easement agreement.  The lease stated that the club “shall permit” easements “in areas mutually agreeable.” “As such, the only valid reason to withhold consent to the Road Easement would have been the failure to agree on a location. However, there was no evidence to show that defendant’s refusal to consent was based on an objection to the location.”

 

The panel rejected the club’s other arguments, including its contention that the October 7, 2008 letter from Majestic Golf did not amount to “notice” as required by the lease agreement. “Defendant claims that the October 7, 2008, letter was deficient in several ways: (1) it was not sent via registered mail, (2) the letter did not provide any notice, and (3) the letter did not indicate what consequences would happen if the 30-day deadline was not met. Nothing in the record supports defendant’s claim that the letter was not sent via registered mail … Defendant’s remaining claims of deficiencies are also without merit. The Lease does not require the written notice to contain any specific words, such as ‘notice’ or ‘default.’ In this case, the letter referred to defendant’s continuing obligation under ¶ 22 of the Lease to provide the consent, explained that defendant has been delinquent for nearly a year, and established a 30-day time period to cure the defect. This 30-day time period matches the 30-day time period of ¶ 26. Therefore, the trial court correctly concluded that the letter satisfied the notice requirements of the Lease.”

The country club appealed, and in an April 3, 2013 order, the Supreme Court granted leave to appeal.