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Laches defeats attempts to amend a settlement agreement



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Buyer's remorse insufficient to amend settlement agreement

Claxton Street Apartments, LLC, appealed the order for payment of $ 81,727.19 in transferred insurance income to the defendant, the City of Detroit, under a settlement agreement between the plaintiff, City and Defendant, Western World Insurance Company in Claxton Street Apartments, LLC v Western World Insurance Company and City of Detroit No. 350507, State of Michigan Court of Appeals (February 1

8, 2021). Claxton was outraged at the terms of an agreement they reached with the defendants five years earlier.

BACKGROUND

In November 2012, the plaintiff suffered a fire loss in his Detroit apartment building. In June 2013, the plaintiff sued Western World and received an order for the appointment of a judge who in January 2014 awarded the plaintiff $ 376,908.76. Of that amount, Western World had already paid $ 96,168.85, leaving an outstanding balance of $ 280,739.91.

Prior to the balance paid, Western World received a memorandum from the city stating that Michigan Statute MCL 500.2227 required Western World to pay the city 25% of the judge's award to ensure that the plaintiff's building, which violated the building code, was repaired or demolished. The parties agreed and the trial court entered into a settlement agreement in which the parties agreed that the plaintiff's attorney would hold $ 81,727.19 in custody until the vandalism claim was resolved in March 2013, at which time the plaintiff would use the disputed funds to demolish the building. ] In May 2018, the city demolished the plaintiff's building at a cost of $ 86,860. In June 2019, the plaintiff filed a motion to reinstate this case, claiming that the settlement agreement was invalid because the parties at the time of formation wrongly believed that MCL 500.2227 applied facts in this case, when for numerous reasons it did not.

ANALYSIS

Settlement Agreement

Although the plaintiff formulated his proposal to pay the deposited funds as a proposal for a summary disposition, the court regarded the plaintiff's proposal as a proposal to terminate a settlement agreement. The plaintiff claims that the parties made a reciprocal mistake regarding the applicability of MCL 500.2227 to the facts in this case.

MCL 500.2227 (5) allows the city to take part of the insurance revenue to finance demolition if the insured does not demolish or repair the building. This case was initiated when the plaintiff sued his insurance company, Western World, and requested the appointment of a judge to resolve conflicting assessments of a fire loss.

On 24 April 2014, all parties signed and the Court of Justice entered into a conciliation decision stating, in the relevant part: “The disputed funds shall be released to Claxton within 21 days from the date of this order; B. The disputed funds shall be deposited in a escrow account maintained by Claxton (or its attorney or any other person or entity appointed by Claxton) for use in the demolition of the property; … the city of Detroit, … shall use the disputed funds, … Once the property has been demolished, any portion of the disputed funds that is not necessary to pay for the demolition costs may be used by Claxton for any purpose it desires; ….

As a rule, conciliation agreements are final and cannot be changed. This is because settlements benefit from the law and therefore will not be set aside except for fraud, mutual mistake or coercion. A reciprocal mistake is a misconception, shared and relied on by both parties, about a material fact that affects the content of the transaction. A mutual mistake is not just a mistake or a misunderstanding – it is an extreme mistake that must be so significant that it forms the basis of the agreement. And a reciprocal mistake must be reciprocal – it is not enough for one party to claim a mistake when the other party was aware of the alleged mistake in question.

Revocation is not available to release a party who has assumed the risk of loss in connection with a mistake. A party may not avoid a contract due to mistakes if at the time of the agreement he is aware that he has only limited knowledge of the facts to which the mistake relates but treats his limited knowledge as sufficient, ie. , if he assumes the risk of a mistake.

In this case, there is no reason to believe that the parties were wrong about any factual or legal material to the settlement agreement. Instead of trying to enforce MCL 500.2227, the plaintiff agreed that it would detain the disputed funds, use them to demolish the building when the vandalism language was resolved in March 2013 (or earlier if decided by the trial) and retain the remaining funds after demolition.

Laches

Five years later, the plaintiff filed a motion to terminate the settlement agreement. All the arguments concerning the applicability of MCL 500.2227 which the plaintiff raised five years after the settlement agreement could have been pursued instead of concluding the settlement agreement. When the plaintiff entered into the settlement agreement, it deliberately assumed the risk that it forfeited a valid claim regarding the application of MCL 500.2227 to the facts in this case. The trial court therefore did not abuse its discretion in rejecting the plaintiff's proposal to rescind the settlement agreement.

Laches is an affirmative defense based primarily on circumstances that make it unfair to grant a dilating plaintiff. The Lache doctrine is based on long passivity in asserting a right, with such an intermediate change in the conditions that makes it unfair to enforce the right. The party claiming the defense bears the burden of proof that it was affected by the other party's delay and that it would be unfair to ignore the prejudice thus created.

In this case, a maximum of three years and ten months have elapsed between the plaintiff's breach of the settlement agreement and the city's proposal to enforce the settlement agreement.

The plaintiff did not show prejudice in this case. It would be unfair to allow the plaintiff to delay his attempt to avoid the settlement agreement for several years, but to prevent the city from responding by trying to enforce the agreement. The plaintiff has not shown that the application of laches is appropriate in this case.

ZALMA OPINION

There is no good reason to sit on one's rights for three to five years, after the city destroyed the structure the risk of loss of which was insured before arguing against the settlement you reached. The plaintiff simply wasted time on the trial and appeals and would be glad that he was not sanctioned by the court. Catalog


© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to working as an insurance consultant specializing in insurance coverage, insurance claims management, cheating and insurance fraudsters almost equally for insurers and insurance policyholders . He also acts as an arbitrator or mediator for insurance-related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims lawyer and more than 52 years in the insurance industry. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine / ACE Legend Award.

For the past 53 years, Barry Zalma has devoted his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to enable insurers and their claims staff to become insurance claims staff.

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