Michigan Supreme Court
Lansing, Michigan 48909
____________________________________________________________________________________________
C hief Justice Justices
Maura D. Cor rigan Michael F. Cavanagh
Opinion
Elizabeth A. Weaver
Marilyn Kelly
Clifford W. Taylor
Robert P. Young, Jr.
Stephen J. Markman
____________________________________________________________________________________________________________________________
FILED JULY 3, 2001
UNIVERSAL UNDERWRITERS INSURANCE
COMPANY, as Subrogee of Betten
Toyota and BETTEN TOYOTA,
Plaintiffs-Appellees,
v No. 114900
NANCY KNEELAND,
Defendant-Appellant.
____________________________________
BEFORE THE ENTIRE BENCH
CORRIGAN, C.J.
We granted leave to determine whether a contractual
provision that assigned “all responsibility for damages” to
defendant while she rented a vehicle contravenes our no-fault
act, MCL 500.3101 et seq., and thereby voids the parties’
contract. We hold that the no-fault act does not prevent
contracting parties from voluntarily allocating liability for
collision damage to a rented vehicle. We thus affirm the
judgment of the Court of Appeals.
I. Underlying facts and procedural history
While repairing defendant’s vehicle, plaintiff Betten
Toyota loaned her a vehicle. Defendant and a Betten employee
signed a “courtesy car agreement” that stated:
2. Renter agrees to replace gasoline used.
3. Renter agrees to pay cash for rental charge.
4. Renter agrees to assume all responsibility
for damages while vehicle is in his possession.
5. Renter agrees not to sublet or loan the car
to anyone. [Emphasis added.]
While driving the rented vehicle, plaintiff was involved
in an accident. Total collision damages amounted to
$3,738.49. Betten Toyota absorbed $1,000 as a deductible;
plaintiff Universal Underwriters Insurance Company, Betten’s
insurer, paid the remainder.
Betten and Universal sought recovery from defendant, but
she refused to pay. Plaintiffs then commenced this action
alleging breach of the courtesy car agreement. Universal
seeks recovery as Betten’s subrogee of the $2,738.49 it paid
to repair the rented vehicle; Betten demands payment of the
$1,000 deductible.
Plaintiffs moved for summary disposition under MCR
2
2.116(C)(10), arguing that no genuine issue of material fact
existed regarding defendant’s contractual liability. The
district court instead granted summary disposition for
defendant under MCR 2.116(I)(2).1 It relied on an unpublished
Court of Appeals opinion to conclude that the no-fault act
does not allow contractual allocation of liability for
collision damages. Universal Underwriters Ins Co v Stout,
unpublished opinion per curiam, issued February 2, 1996
(Docket No. 171069). The circuit court affirmed.
The Court of Appeals reversed and remanded for entry of
a judgment in plaintiffs’ favor unless the district court
“determines that defendant has defenses that have not yet been
addressed, in which case the court shall conduct proceedings
consistent with” the Court of Appeals opinion. 235 Mich App
646, 662; 599 NW2d 519 (1999). It noted that while the no
fault act abrogated tort liability arising from the ownership,
maintenance, or use of a motor vehicle (except in certain
circumstances),2 it did not abolish contractual liability.
See Kinnunen v Bohlinger, 128 Mich App 635, 638; 341 NW2d 167
(1983); Nat’l Ben Franklin Ins Co v Bakhaus Contractors, Inc,
124 Mich App 510, 513; 335 NW2d 70 (1983).
1
The rule provides: “If it appears that the opposing
party, rather than the moving party, is entitled to judgment,
the court may render judgment in favor of the opposing party.”
2
MCL 500.3135(2).
3
The Court of Appeals distinguished this Court’s
peremptory order in Universal Underwriters Ins Co v Vallejo,
436 Mich 873; 461 NW2d 364 (1989). Vallejo held that the
defendant-renter was entitled to summary disposition on the
insurer’s claim for collision damages to a rented vehicle:
Although the trial court gave the plaintiff
insurer numerous opportunities to explain, with
specific factual allegations, how its conclusory
allegation of an express or implied contract of
bailment differentiated this case from any other
situation in which a permissive user of a car is
involved in a collision and therefore cannot return
the car to its owner in an undamaged condition, the
plaintiff repeatedly failed to do so. Under these
circumstances, the trial court correctly granted
the defendant’s motion for summary disposition. By
operation of the pertinent insurance statutes,
e.g., MCL 257.520(b)(2); MSA 9.2220(b)(2) and MCL
500.3009; MSA 24.13009, the defendant appears to
have been insured by the plaintiff against the very
loss at issue in this case, since a standard
automobile policy typically insures such a
permissive driver “against loss from the liability
imposed by law for damages arising out of the
ownership, maintenance or use of” a motor vehicle.
[Id.]
The Court of Appeals noted that, while the plaintiff in
Vallejo relied on a common-law bailment theory, plaintiff here
seeks recovery under the express terms of a written agreement.
The Court did not read Vallejo “as a blanket rejection of all
contract claims seeking to hold a permissive user responsible
for damage to a borrowed vehicle. Rather, we understand the
order as rejecting the insurer’s effort to convert a simple,
permissive-user, tort liability case into a contract case by
4
alleging an express or implied contract of bailment, without
providing specific factual allegations that would support such
a distinction.” Kneeland, supra at 659. The Court reasoned
that Vallejo suggested the possibility of a different result
where there is proof of an express contract.
II. Standard of Review
We review de novo a grant of summary disposition under
MCR 2.116(C)(10). Smith v Globe Life Ins Co, 460 Mich 446,
454; 597 NW2d 28 (1999). The issue under review is a question
of law, i.e., whether the no-fault act prevents contractual
assignment of liability for collision damages. We review
questions of law de novo. Cardinal Mooney High School v
Michigan High School Athletic Ass’n, 437 Mich 75, 80; 467 NW2d
21 (1991).
III. Contractual Interpretation
Before deciding whether the courtesy car agreement
contravenes public policy, we must determine what the contract
says. Absent an ambiguity or internal inconsistency,
contractual interpretation begins and ends with the actual
words of a written agreement. Henderson v State Farm Fire &
Casualty Co, 460 Mich 348, 354; 596 NW2d 190 (1999). A
contract is ambiguous if its provisions may reasonably be
understood in different ways. Farm Bureau Ins Co v Nikkel,
460 Mich 558, 566; 596 NW2d 915 (1999).
5
The fourth provision of the courtesy car agreement
states: “Renter agrees to assume all responsibility for
damages while vehicle is in his possession.” This language
clearly imposes liability on defendant. The contract is
unclear, however, regarding the extent of the shift of
liability. The provision refers to “damages,” but does not
explicate precisely the categories of damages that defendant
has agreed to pay.
The general term “damages” could refer to any harm caused
to a third party’s person or property, i.e., it could reach
damages for which no-fault insurance coverage is mandatory.
See, e.g., MCL 500.3107, 500.3121. A shift of liability to
that extent might contravene the no-fault act. Cf. State Farm
v Enterprise Leasing, 452 Mich 25, 36; 549 NW2d 345 (1996).3
Another reasonable interpretation of the contract is
available, however. Black’s Law Dictionary (6th ed) defines
“damages” as “[a] pecuniary compensation or indemnity, which
may be recovered in the courts by any person who has suffered
a loss, detriment, or injury, whether to his person, property,
or rights . . . .” The parties may reasonably have intended
3
We express no view regarding whether State Farm would
control the legality of the contract here. This agreement and
the one addressed in State Farm are arguably different in
scope and effect. We merely observe that an argument is
available that the parties’ agreement, if it reaches beyond
optional collision damages, is illegal.
6
to limit the meaning of the word “damages” to losses for which
a legal right of recovery is available.
An ambiguity arises also because the contract shifts
liability for damages “while [the] vehicle is in [defendant’s]
possession.” Damages to the vehicle itself are likely to
occur while the renter possesses the vehicle. But other types
of damages, including wage loss and medical expenses, often
arise after the rental period has ended. The contract does
not clearly shift liability for the latter kinds of damages.
We thus conclude that the words of the contract may
reasonably be understood in different ways. This ambiguity
requires us to assume that the parties knew the law and wished
to comply with it. See 3 Corbin, Contracts, § 546, pp 170
171:
[I]t is very commonly stated that when the
terms of agreement have two possible
interpretations, by one of which the agreement
would create a valid contract and by the other it
would be void or illegal, the former will be
preferred. This is an advisory rule of
interpretation, since it is believed that the
parties intend their agreement to be valid rather
than invalid, lawful rather than unlawful, and
honest and effective rather than fraudulent and
voidable.
See also Walsh v Schlecht, 429 US 401, 408; 97 S Ct 679; 50 L
Ed 2d 641 (1977) (“Since a general rule of construction
presumes the legality and enforceability of contracts, . . .
ambiguously worded contracts should not be interpreted to
7
render them illegal and unenforceable where the wording lends
itself to a logically acceptable construction that renders
them legal and enforceable”); Stillman v Goldfarb, 172 Mich
App 231, 239; 431 NW2d 247 (1988).
We follow these authorities and presume that the parties
intended to enter a valid, enforceable agreement and that the
contract thus does not shift liability for damages that may
not legally be reallocated.
IV. The dissent’s approach
The dissent first construes the contract against its
drafter and the drafter’s subrogee by extending the shift of
liability beyond collision damages. The dissent would then
invalidate the contract on the basis of its allegedly illegal
reach. We reject that analysis.
The dissent misapplies the rule requiring that
contractual ambiguities be construed against the drafter by
using the rule not to interpret the contract, but to
invalidate it. As discussed above, courts will presume that
a contract is legal if a reasonable interpretation supporting
the legality of the contract is available. The dissent
instead concludes that the parties meant to accomplish illegal
ends by their agreement.
Moreover, the dissent does not find an ambiguity
regarding whether defendant’s liability extends to collision
8
damages. As discussed above, the only ambiguity is whether
the contract shifted liability beyond collision damages. A
reasonable interpretation is not available--and even defendant
-
does not contend--that she did not agree to liability for
-
collision damages.
A proper application of the rule of construction against
the drafter would adopt the interpretation making defendant
liable to the least extent possible, i.e., for collision
damages only. Thus, regardless of whether one applies the
rule of construction against the drafter or the rule presuming
the legality of contracts, the same result is reached: the
contract shifts liability for collision damages only.
V. Is the assignment of collision damages void?
Having concluded that the contract shifts liability for
collision damages only, we now consider whether the no-fault
act prohibits the parties’ voluntary allocation of
responsibility. To decide this question, we must consider
relevant statutory provisions. Sun Valley Foods Co v Ward,
460 Mich 230, 236; 596 NW2d 119 (1999), articulated the proper
mode of interpretation:
The rules of statutory construction are well
established. The foremost rule, and our primary
task in construing a statute, is to discern and
give effect to the intent of the Legislature.
Murphy v Michigan Bell Telephone Co, 447 Mich 93,
98; 523 NW2d 310 (1994). See also Nation v W D E
Electric Co, 454 Mich 489, 494; 563 NW2d 233
(1997). This task begins by examining the language
9
of the statute itself. The words of a statute
provide “the most reliable evidence of its intent .
. . .” United States v Turkette, 452 US 576, 593;
101 S Ct 2524; 69 L Ed 2d 246 (1981). If the
language of the statute is unambiguous, the
Legislature must have intended the meaning clearly
expressed, and the statute must be enforced as
written. No further judicial construction is
required or permitted. Tryc v Michigan Veterans’
Facility, 451 Mich 129, 135; 545 NW2d 642 (1996).
Our no-fault act requires owners to carry certain
categories of insurance. Mandatory coverages include personal
injury protection and property protection benefits. MCL
500.3107; MCL 500.3121. Other types of coverage, however, are
not mandatory, but purely a matter of contract. Collision
coverage plainly falls into the latter category: our no-fault
scheme does not mandate it.
Additionally, § 3135 of our no-fault act, MCL 500.3135,
expressly abolishes tort liability arising from the ownership,
maintenance, or use of a motor vehicle (with some exceptions).
The statutory language does not reflect an intent to abolish
contractual liability for collision damages, an optional form
of insurance not required by the no-fault act. See Kinnunen,
supra at 639 (“Had the Legislature intended to abrogate
contractual liability as well, the words any ‘liability
arising out of the ownership, maintenance, or use of a motor
vehicle’ could easily have been substituted”); Ben Franklin
Ins, supra at 513 (“Nothing in the no-fault system relieves a
10
motor vehicle operator of liability which he may have incurred
in contract”).4
Further, the Court of Appeals correctly ruled that
Vallejo is distinguishable. The limited reasoning in that
peremptory order offers little guidance. It appears, however,
that the insurer in Vallejo was relying on a common-law
bailment theory. The order does not mention an express
written agreement.
Vallejo prevents a party from converting a possible tort
claim into a “contract” claim by simply alleging a bailment
and thereby subverting subsection 3135(2). Those concerns do
not arise where parties have expressly agreed in writing to
allocate their respective duties.
VI. Subrogation
Our grant order asked the parties to address “whether, if
defendant is held to be liable for damage to the automobile at
issue based on her contract with plaintiff Betten Toyota, her
liability is limited to the $1,000 deductible in Betten
Toyota’s insurance policy covering that automobile on the
ground that this was the extent of the damages suffered by
4
We emphasize that our holding is limited to contract
claims for collision damages. We offer no view regarding the
legality of a contract purporting to shift liability for other
categories of damages.
11
Betten Toyota.” 462 Mich 911 (2000). We hold that damages
are not limited to the amount of the deductible.
Betten incurred $3,738.49 in damages to its vehicle, but
had to pay only $1,000; Universal paid the balance. The plain
terms of Betten’s insurance policy grant Universal a right of
subrogation to Betten’s cause of action against defendant:
Subrogation—You and each insured must do all
in their power to preserve their rights to recover
from others. Once we have made a payment under
this policy, your or an insured’s rights to recover
from others become our rights.
Defendant has not articulated a reason why Universal may not
exercise its contractual right of subrogation.
Significantly, defendant did not challenge Universal’s
subrogee status below. In fact, her attorney implicitly
acknowledged Universal’s right of subrogation during
proceedings in the district court:
Mr. Arndt [defense counsel]: . . . I don’t
think either one of the parties made a distinction
between Universal’s claim or Betten’s claim.
Certainly Universal’s claim is derivative of their
subragor (sic) insured Betten. I guess it would be
our position that the case law and specifically
Universal versus Valajo [sic] addresses both not
only the insurer but the owners responsibility to
make sure that there is adequate protection and
insurance coverage on the vehicle. I think that
the case law that you’ve relied upon in determining
and adjudicating the issues of liability between
Universal and Kneeland are equally applicable to
Betten and Kneeland. That there would be no
distinction between the two claims, whether it was
insured or uninsured. [Emphasis added.]
12
Defendant has thus forfeited any claim that Universal has no
right of subrogation. Smith v Musgrove, 372 Mich 329, 337;
125 NW2d 869 (1964); Munson Medical Center v Auto Club Ins
Ass’n, 218 Mich App 375, 388; 554 NW2d 49 (1996).
VII. Conclusion
The no-fault act does not invalidate the parties’ written
agreement to assign liability for collision damages to
defendant. Universal has a right of subrogation under the
express terms of its insurance policy with Betten to seek
recovery of the amount it paid to repair the rented vehicle.
Accordingly, we affirm the judgment of the Court of Appeals.
TAYLOR , YOUNG , and MARKMAN , JJ., concurred with CORRIGAN , C.J.
13
S T A T E O F M I C H I G A N
SUPREME COURT
UNIVERSAL UNDERWRITERS INSURANCE
COMPANY, as Subrogee of Betten
Toyota and BETTEN TOYOTA,
Plaintiffs-Appellees,
v No. 114900
NANCY KNEELAND,
Defendant-Appellant.
___________________________________
CAVANAGH, J. (dissenting).
Because the majority opinion in this case is contrary to
well-established principles of contract law, I must dissent.
I would reverse the decision below and reinstate summary
disposition in favor of the defendant.
This case presents two questions: (1) whether a party may
contractually assume liability for damages to a borrowed
vehicle and (2) if liability can be contractually assumed,
whether the defendant assumed liability pursuant to a courtesy
car agreement. I would hold that liability can be
contractually shifted, but that the instant courtesy car
agreement cannot be enforced to impose liability on the
defendant.
I
The defendant borrowed a loaner car from Betten Toyota
while Betten was servicing her vehicle. Before taking
possession of the loaner car, the defendant was required to
sign a document entitled “Courtesy Car Agreement.” The text
of the agreement was as follows:
Courtesy Car Agreement
1. Rental fee ONLY $28.00 per day.
2. Renter agrees to replace gasoline used.
3. Renter agrees to pay cash for rental charge.
4. Renter agrees to assume all responsibility for
damages while vehicle is in his possession.
5. Renter agrees not to sublet or loan the car to
anyone.
The agreement was printed on Betten stationery.
The defendant was involved in an automobile accident for
which she bore no fault. Rather, two other vehicles collided
with each other, and the force of the impact pushed one of
those vehicles into the loaner car. The plaintiffs are
seeking to recover collision damages. Both plaintiffs assert
that the defendant is liable for the full amount of damages
sustained pursuant to clause 4 of the courtesy car agreement.
The defendant asserts that Betten Toyota formed a
2
bailment contract with her by loaning her a vehicle. She
further argues that, pursuant to the bailment contract, she
was shielded from liability because the no-fault act, MCL
500.3101 et seq., and financial responsibility act, MCL
257.520(g), require the owner of an automobile and the owner’s
insurer to provide coverage for permissive users.
According to the plaintiffs, this case sounds purely in
contract. While the no-fault act abrogated tort immunity, it
did not abrogate contractual liability. The plaintiffs thus
contend that the no-fault act would not bar their claims,
citing Kinnunen v Bollinger, 128 Mich App 635, 638; 341 NW2d
167 (1983); Nat’l Ben Franklin Ins Co v Bakhaus Contractors,
Inc, 124 Mich App 510, 513; 335 NW2d 70 (1983).
The broader question posed by this case is whether a
party may contractually assume liability for damages to a
borrowed vehicle even though Michigan’s no-fault law,
precedent, and common-law principles would normally place
liability on the lender absent any contractual agreement to
the contrary. If liability can be contractually assumed, then
we must also resolve whether the defendant assumed liability
pursuant to the courtesy car agreement.
The genesis of the arguments raised by the present
parties can be traced to this Court’s decision in Universal
Underwriters v Vallejo, 436 Mich 873 (1990). Vallejo was a
3
peremptory reversal, which, in its entirety, provided as
follows:
In lieu of granting leave to appeal, the
August 21, 1989, judgment of the Court of Appeals
is reversed [179 Mich App 637; 446 NW2d 510
(1989)], and the case is remanded to the Saginaw
Circuit Court for entry of judgment in favor of the
defendant. Although the trial court gave the
plaintiff insurer numerous opportunities to
explain, with specific factual allegations, how its
conclusory allegation of an express or implied
contract of bailment differentiated this case from
any other situation in which a permissive user of a
car is involved in a collision and therefore cannot
return the car to its owner in an undamaged
condition, the plaintiff repeatedly failed to do
so. Under these circumstances, the trial court
correctly granted the defendant's motion for
summary disposition. By operation of the pertinent
insurance statutes, e.g., MCL 257.520(b)(2); MSA
9.2220(b)(2) and MCL 500.3009; MSA 24.13009, the
defendant appears to have been insured by the
plaintiff against the very loss at issue in this
case, since a standard automobile policy typically
insures such a permissive driver “against loss from
the liability imposed by law for damages arising
out of the ownership, maintenance or use of” a
motor vehicle. Jurisdiction is not retained.
[Emphasis added.]
The defendant interprets Vallejo as holding that no
express or implied bailment action lies against a permissive
user of a loaner vehicle. In the defendant’s view, Vallejo
was not premised on the insurer’s failure to factually
establish a contractual relationship. Rather, Vallejo
specifically found the lack of an express agreement to be
inconsequential. The Court held that a bailment contract
could not supersede the insurer’s statutory duty to supply
4
insurance to permissive drivers.
The plaintiffs, on the other hand, argue that Vallejo is
inapposite. They assert that, where the action against the
defendant is purely for breach of contract and is not a tort
action arising out of rights implicit in a bailment
relationship, Vallejo and the no-fault act do not bar
plaintiffs’ claims. Instead, the plaintiffs urge us to
interpret Vallejo as determining only whether a bailment could
give rise to liability. While Vallejo recognized that any
tort liability arising out of a bailment would be barred
pursuant to the no-fault act, the plaintiffs posit that it did
not foreclose the possibility that a defendant could be held
liable if the parties agreed to rights and responsibilities
extending beyond the bailment situation. The plaintiffs
recognize Vallejo as accepting that a bailment relationship
alone would not shift liability to the defendant, but they
argue that Vallejo actually held only that the plaintiff
failed to prove the existence of any rights beyond those that
would exist in a bailment situation.
II
The Court of Appeals noted that the no-fault act bars
tort liability but not contractual liability, and held that
the defendant could be bound by her agreement to assume all
responsibility for damages while the vehicle was in her
5
possession. 235 Mich App 658-659. It then distinguished
Vallejo from this case on the ground that Vallejo did not
involve an express contract. Further, the Court expressly
stated that Vallejo was not intended to shield permissive
users from liability expressly assumed by contract. The Court
wrote:
[I]n any permissive user case, except the
unusual one in which a bailment is expressly
disavowed, it can be alleged that there is an
implied or express contract of bailment, and
therefore, an enforceable contractual duty. The
Supreme Court declined to recognize such broad
based contractual liability in these circumstances.
The Court’s express reference to the insurer’s
failure to support with factual allegations its
efforts to differentiate the case from any other
permissive-user situation implies that if the
insurer had successfully demonstrated the existence
of an express contractual assumption of
responsibility for damage to the vehicle, the
defendant might not have been granted summary
disposition. Thus, Vallejo did not say that the
existence of an express contract would not
differentiate the case from any other permissive
user situation. Rather, it suggested that the
potential different result did exist, but that the
plaintiff insurer had failed to provide proof
sufficient to support a different result. [235 Mich
App 659-660 (emphasis in original).]
After determining that Vallejo was not intended to bar all
contract claims brought against permissive users, the Court of
Appeals concluded that plaintiffs could assert a contract
claim against the defendant because of her express assumption
of liability. Therefore, the Court reversed the circuit
court’s affirmance of summary disposition for the defendant.
6
III
I agree with the Court of Appeals that Vallejo should not
be read as “a blanket rejection of all contract claims seeking
to hold a permissive user responsible for damage to a borrowed
vehicle.” 235 Mich App 659. While Vallejo limited the extent
to which liability can be shifted to a permissive driver of a
loaned automobile, it did so under circumstances where the
insurer had failed to assert a factual basis for its contract
claim. The Court’s order recognized the general rule that a
bailee must return property to his bailor in an undamaged
condition. However, Vallejo then recognized that Michigan’s
pertinent insurance statutes, MCL 257.520(b)(2) and MCL
500.3009, modify the general rule. Through those statutes,
the Legislature chose to offset the costs and problems
associated with automobile collisions by requiring that
automobile owners carry insurance. Vallejo recognized that
standard automobile policies contain language covering use by
permissive drivers, and held that the plaintiff insurer had
failed to prove that liability had somehow been shifted back
to the defendant.
I interpret Vallejo as holding that the lender, rather
than the permissive user, must pay for collision damages under
the lender’s insurance policy unless: (1) it is proven that
the policy does not extend to permissive drivers, or (2) the
7
lender or insurer carries his burden of differentiating his
case from the usual situation where a permissive user of a car
is involved in a collision. The plaintiffs’ own brief
categorizes its claim as “squarely one for breach of
contract.” Thus, this is not a case where the insurer refused
to pay on the grounds that the driver was not covered by the
terms of the policy between the insured and the dealer.
Instead, the complaint alleged that the contract between
Betten and Kneeland shifted liability to Kneeland. When she
refused to pay, she allegedly breached the courtesy car
agreement. Therefore, this case hinges on the second Vallejo
inquiry. Pursuant to Vallejo, the plaintiffs must prove that
the courtesy car agreement differentiates this case from the
usual situation where a permissive user of a car is involved
in a collision.
The plaintiffs claim that this case can be distinguished
from Vallejo because the instant defendant assumed all
responsibility for damages. While I agree with the plaintiffs
that Vallejo does not automatically bar recovery in cases
where the lender proves that the permissive driver has assumed
liability pursuant to a valid contract, I do not agree that
liability was shifted in the present case.
The majority acknowledges the potential shift of tort
liability that could occur were this Court to hold that the
8
contract is unambiguous as the plaintiffs suggest. Because of
the potential problem, the majority offers another “reasonable
interpretation of the contract.” Slip op at 6. In the
majority’s words, “[t]he parties may reasonably have intended
to limit the meaning of the word ‘damages’ to losses for which
a legal right of recovery is available.” Slip op at 7.
I agree with the majority that the courtesy car agreement
in this case is ambiguous, and may be interpreted in a fashion
that would avoid illegality. However, I disagree strongly
with the majority’s decision to construct a decision favorable
to the plaintiffs, rather than construing the contract against
the drafter, as we are bound to do. See, e.g., Vanguard Ins
Co v Clarke, 438 Mich 463, 471-472; 475 NW2d 48 (1991); Raska
v Farm Bureau Mut Ins Co, 412 Mich 355, 361-362; 314 NW2d 440
(1982). See also 2 Restatement Contracts, 2d, § 206, p 105
(“In choosing among the reasonable meanings of a promise or
agreement or a term thereof, that meaning is generally
preferred which operates against the party who supplies the
words”); 11 Williston, Contracts, § 32.12, p 471 (since the
language is within the control of the drafter, it is a
generally accepted principle that any ambiguity in that
language will be interpreted against the drafter); 5 Corbin,
Contracts, § 24.27, pp 282-283; 17A Am Jur 2d Contracts, §
348, pp 360-361 (It is fundamental that doubtful language in
9
a contract should be interpreted most strongly against the
party who has selected the language).
Two opposing interpretations of the courtesy car
agreement are offered. In the plaintiffs’ view, by signing
the courtesy car agreement, the defendant agreed to be an
insurer against damages to the automobile. The defendant
contends that she read the agreement as meaning only that she
would be responsible for her own negligence, and that she
assumed that the car was insured by the dealership. Here, the
drafter was Betten. Construing the agreement against Betten
is proper because, as the drafter, Betten had the opportunity
of drafting the language in a manner that avoided any
ambiguity or dispute. Thus, I would resolve the courtesy car
agreement in the defendant’s favor, in accordance with well
established contract principles.
The document was a one-page form contract to which no
insurer was a party and that never mentioned insurance. The
dealership never informed the defendant that she needed to
obtain her own insurance, nor did it inform the defendant that
she would be liable for damages caused by the negligence of
others. The courtesy car agreement also did not mention
collision damages. It is not unreasonable for defendant to
have assumed that she would be covered by a standard
automobile policy between the dealer and its insurer. In this
10
respect, the present case is similar to Vallejo. While
Vallejo left open the possibility that contractual liability
could be shifted to a permissive user, Vallejo also recognized
that the burden was upon the plaintiff insurer to prove that
liability had been so shifted. Here, the plaintiffs point
only to overbroad language that in no way mentions insurance
obligations. Thus, I would conclude that the plaintiff failed
to bear its burden of proving that collision damages were
validly shifted.
Contrary to the majority’s assertion, my approach is not
a method of invalidating the contract. It is, instead, a
recognition that, when choosing between valid constructions of
an ambiguous contract, we must choose the construction that
goes against the drafter of the ambiguous language. Here, the
construction offered by the defendant would not invalidate the
courtesy car agreement; rather, it would limit the scope of
the agreement.
IV
The majority chooses to construe the contract in a manner
that would be favorable to the plaintiffs who drafted the
ambiguous contract. I cannot join the majority’s decision to
find in favor of the plaintiffs when the agreement signed by
the defendant contained a provision that must be interpreted
as ambiguous or void against public policy.
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I would hold that the defendant is not liable under the
courtesy car agreement. The plaintiffs have failed to carry
their burden of establishing that a valid contract existed and
of differentiating this case from the usual situation where a
permissive user of a car is involved in a collision.
Therefore, I would reverse and reinstate summary disposition
in favor of the defendant.
WEAVER and KELLY , JJ., concurred with CAVANAGH , J.
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