Wayne
Circuit Court LC No. 17-006650-CK
Before: Tukel, P.J., and Jansen, and Riordan, JJ.
JANSEN, J.
In this
civil action involving a contract for the cultivation and
distribution of medical marijuana, plaintiff appeals as of
right the order granting summary disposition under MCR
2.116(C)(8) in favor of defendants. We affirm.
I.
FACTUAL BACKGROUND
Plaintiff
is registered as a qualifying patient and primary caregiver
under the Michigan Medical Marihuana Act (the MMMA), MCL
333.26421 et seq. In April 2016, defendants offered
to purchase a two-story industrial warehouse building in the
city of Detroit and lease it to plaintiff and his business
partner, Derek Powers, "for the purpose of cultivating
marihuana." Defendants also offered to enter into a
partnership agreement where defendants would finance the
start-up costs and operating expenses of a marijuana growing
operation in exchange for a return on the investment over a
five-year period. In exchange, plaintiff would be in charge
of growing and harvesting the marijuana. In September 2016,
the parties entered into two agreements: a five-year lease
agreement for the warehouse and a five-year partnership
agreement. The whole of the partnership agreement provided:
1. Anticipated grow start date: July 15, 2016.
2. Revenue generated from harvests will be initially split
as: Investors will calculate their total investment as of the
first harvest less the cost of the building ($150, 000) and
divide this amount by 12 in order to generate a 1 year
payback (i.e. $200, 000 / 12 = $16, 700 per month) - this
amount will be fixed and subtracted from the total revenue
generated from the harvests for this 1 year period, much like
the operating expense. Once investors are fully compensated
for their initial investment total (see investor expense
spreadsheet) then revenue split reverts to 40% Investors and
60% growers. Investor payback shall commence January 2017.
3. Zach Varela and/or Zach's LLC will sign a building
occupancy lease to be effective September 1, 2016 and run for
5 years with month to month renewal thereafter.
4. The express purpose of lease is to allow Investors to
create a legal device to convert cash revenue from the grow
operation into a financial Institution deposit.
5. After each harvest has been monetized, all operating
expenses (i.e. utilities, nutrients, soil, etc.) for the next
grow cycle will be set aside prior to distribution of profits
to Investors and Growers in an escrow account or other
mutually agreed account for the purpose of producing the next
harvest. Investors will provide documentation of this
operating expense (i.e. utilities, etc.).
6. Investors will pay all applicable taxes and building
insurance through the term of the lease.
7. Should the cultivation operation be temporarily or
permanently halted for any reason (I.e. Government
Intervention, Act of God, etc.) prior to Investors being
fully compensated for their initial investment, Investors
will retain ownership of the building and cultivation
equipment. Otherwise, Investors will transfer ownership of
all grow equipment once reimbursement takes place.
8. It is estimated that each plant given a 15 week growing
period will produce 2.2 lbs. per plant and have a market
value of $2500 per pound based on initial economics provided
to Investors.
9. The maximum number of plants will be strictly enforced
based on the Medical Marihuana Act of Michigan (2008) or
until such time the partners receive a state license to
produce additional plants upon new legislation.
10. Grower's responsibilities: Zach will manage plants on
a d-t-d along with necessary equipment maintenance. Derek
will manage the sales and transfer of product to buyer(s) -
Derek will also compensate Investors Immediately after the
sale of product or in another mutually agreeable method and
timeframe.
Last, this document is personal and confidential and is a
document to expressly state ownership and compensation of the
partnership and in no way shall be shared with anyone outside
of the partnership as stated as "Investors" and
"Growers" above.
The
partnership agreement was signed and dated by plaintiff, his
business partner, and defendants.
Initially,
the parties' execution of their contractual obligations
went smoothly: defendants purchased the subject property and
cultivation equipment and hired contractors to build out the
warehouse in a manner intended for marijuana cultivation;
plaintiff oversaw the build out and set up a specialized
marijuana cultivation system. However, despite
plaintiff's request to do so, defendants failed to
install a security system, and in December 2016, a street
gang allegedly robbed the building of plaintiff's first
harvest.
After
the robbery, plaintiff continued to cultivate 70 marijuana
plants, for which he had valid MMMA registration cards.
However, defendants began showing the property and in March
2017, informed plaintiff that "new investors" were
taking over the property. In April 2017, defendants ordered
plaintiff to turn over his keys to the building and informed
him that he no longer had authority to use or access the
building. Plaintiff was not permitted to retrieve his
marijuana plants or his personal belongings.
After
failed attempts to resolve the dispute and retrieve his
possessions, plaintiff filed an eight-count complaint
alleging breach of the lease agreement, breach of the
partnership agreement, tortious interference with contracts,
conversion, misappropriation of trade secrets, unjust
enrichment, and breach of implied covenant of good faith and
fair dealing. Plaintiff also sought injunctive relief.
However, plaintiff failed to attach the lease agreement and
the partnership agreement to his complaint, claiming that
defendants had destroyed evidence of the agreements in order
to thwart all legal obligations to plaintiff.
Defendants
sought summary disposition of all of plaintiff's claims
under MCR 2.116(C)(8), arguing that all of plaintiff's
claims were barred by the wrongful conduct rule. Defendants
argued that plaintiff would have to rely on his illegal
conduct to support all of his claims, the wrongful conduct
rule prohibited the trial court from granting him any relief.
Moreover, defendants argued, plaintiff had failed to plead
any exception to the wrongful conduct rule, and therefore his
complaint must be dismissed in its entirety.
The
trial court agreed. Specifically, the trial court concluded
that "the party's contracts would be enforceable if
they called for the production of marijuana consistent with
the terms of the MMMA." However, the MMMA "does not
grant caregivers and patients a license to possess, to
manufacture or to distribute marijuana," and that the
MMMA only grants an affirmative defense for criminal
chargers. Moreover, plaintiff was the only party to the
contract with caregiver status under the MMMA, and that under
the statute, he was precluded from growing marijuana for more
than five patients. Observing that the party's agreement
required plaintiff to pay over $16, 000.00 in rent each
month, the trial court deduced that plaintiff would have to
produce over one pound of marijuana each month for each
patient, which would not be consistent with conduct permitted
by the MMMA. Finally, the allegations in plaintiff's
complaint were conclusory and plaintiff had failed to
"establish even a question of fact as to whether the
conduct called for in the party's agreement would be
legal or otherwise consistent with Michigan Public
Policy." Accordingly, the trial court granted summary
disposition in favor of defendants. This appeal followed.
II.
STANDARD OF REVIEW
We
review a trial court's decision on a motion for summary
disposition under MCR 2.116(C)(8) de novo. Bedford v
White, 318 Mich.App. 60, 64; 896 N.W.2d 69 (2016).
A motion under MCR 2.116(C)(8) tests whether the opposing
party has failed to state a claim on which relief can be
granted. When deciding a motion under (C)(8), this Court
accepts all well-pleaded factual allegations as true and
construes them in the light most favorable to the nonmoving
party. A trial court may grant summary disposition under MCR
2.116(C)(8) only when the claim is so clearly unenforceable
as a matter of law that no factual development could possibly
justify a right of recovery. [Mendelson Orthopedics PC v
...