author: Cynar, J.

text:
    CRESTWOOD EDUCATION ASSOCIATION v EMPLOYMENT RELATIONS COMMISSION
    Docket Nos. 77-3336, 77-3337.
    Submitted March 22, 1978, at Detroit.
    Decided February 5, 1979.
    Replacement teachers were hired in 1975 by the Crestwood Board of Education to replace teachers, members of the Crestwood Education Association (CÉA), terminated by the board after a labor dispute. The CEA then brought an action in the Wayne Circuit Court alleging that the school board had not bargained in good faith and had committed certain unfair labor practices. The circuit court set the terminations aside. The Court of Appeals affirmed, 57 Mich App 636 (1975). The board appealed to the Supreme Court which reversed the Court of Appeals and upheld the terminations holding that individual termination hearings were not required prior to a teacher’s termination, 393 Mich 616 (1975). Subsequently, the CEA pursued charges previously filed against the board with the Michigan Employment Relations Commission (MERC) alleging that the board had unilaterally changed the terms and conditions of employment. MERC accepted the administrative law judge’s opinion recommending dismissal and also dismissed other charges of unfair labor practices brought by the CEA. The CEA appealed. Affirmed, 71 Mich App 347 (1976). Thereafter a group called the Crestwood Teachers Organization (CTO) petitioned MERC for recognition as the sole bargaining agent for teachers in the Crestwood School District. The CEA intervened alleging certain unfair labor practices by the board and contending that the CTO was made up of only temporary teachers. The administrative law judge held that the board had violated the public employee relations act by conditioning reemployment on the renunciation of union representation at the hearings ordered by the Supreme Court and a cease and desist order was therefore entered. The CTO’s representation petition was accepted and an election ordered, which subsequently led to the CTO being chosen as the teachers’ bargaining representative. In an opinion dated thereafter MERC accepted the recommendations of the administrative law judge. The CEA appeals raising issues regarding the sufficiency of the unfair labor practice remedy, the validity of the CTO election and the role of MERC in adjudicating the dispute. Held:

      References for Points in headnotes

       48 Am Jur 2d, Labor and Labor Relations §§ 1171, 1186-1190.

       48 Am Jur 2d, Labor and Labor Relations § 1192.

       48 Am Jur 2d, Labor and Labor Relations §§ 613, 1162, 1194-1197.
    Labor law: Right of public employees to strike or engage in work stoppage. 37 ALR3d 1147.

       1 Am Jur 2d, Administrative Law § 70.

      1. The cease and desist order was a sufficient remedy to effectuate the policies of the public employees relations act in light of the fact that the violations were not widespread, none of the three teachers involved received an absolute guarantee that they would be rehired or told that they would not be rehired if they appeared at the hearings ordered by the Supreme Court with a CEA attorney, and because the order was not a patent attempt to achieve ends other than those which can fairly be said to effectuate the policies of the act.
    2. The employment relations commission properly ordered the election that resulted in the CTO being chosen as the teachers’ bargaining representative and properly limited the right to vote in such election to the replacement teachers.
    3. The discharged teachers were not entitled to vote in the election since they had been previously discharged but may, if reinstated, petition for a decertification election regarding CTO’s representation of the teachers.
    4. The employment relations commission properly limited its role in this matter to that of adjudicating the dispute before it; the commission did not have a statutory duty to investigate and prosecute the unfair labor practice charges.
    Affirmed.
    1. Appeal and Error — Court of Appeals — Scope of Review — Employment Relations Commission — Statutes.
    The Court of Appeals’ scope of review of Michigan Employment Relations Commission remedial determinations empowers the Court, after the filing of petitions, to summarily grant to the commission or to any prevailing party such temporary relief or restraining order as it deems just and proper, enforcing, modifying, enforcing as so modified, or setting aside in whole or in part the order of the commission; the remedial orders of the commission are not to be disturbed unless it can be shown that the order is a patent attempt to achieve ends other than those which can fairly be said to effectuate the policies of the public employee relations act (MCL 423.216; MSA 17.455[16]).

      2. Labor Relations — Public Employees — Labor Organizations — Public Employers — Statutes.
    It is lawful for public employees to organize together or to form, join or assist in labor organizations; it is unlawful for a public employer or an official or agent of a public employer to discriminate in regard to hire, terms or other conditions of employment in order to encourage or discourage membership in a labor organization. (MCL 423.209, 423.210; MSA 17.455[9], 17.455[10]).
    3. Schools and School Districts — Teachers — Strikes — Public Employee Relations Act — Hearings — Labor Relations — Statutes.
    A teacher who strikes in violation of the public employee relations act may be disciplined without a prior hearing; a predisciplinary hearing is not necessary before the discharge of a public employee for striking (MCL 423.201 et seq.; MSA 17.455[1] et seq.).

    4. Labor Relations — Public Employees — Public Employee Relations Act — Employment Relations Commission — Statutes.
    The public employee relations act contains no provision authorizing the Michigan Employment Relations Commission to investigate and prosecute complaints; the act merely authorizes the commission to issue complaints (MCL 423.216; MSA 17.455[16]).
    5. Administrative Law — Agencies — Authority.
    Administrative agencies possess only that authority delegated to them by the Legislature.

      Levin, Levin, Garvett & Dill (by Harvey I. Wax), for Crestwood Education Association.

      Smith, Poplar & Kalis, for Crestwood Teachers Organization.

      Targan & Homeier, for Crestwood Board of Education.

      Frank J. Kelley, Attorney General, Robert A. Derengoski, Solicitor General, and Francis W. Edwards, Assistant Attorney General, for Michigan Employment Relations Commission.

      Before: D. C. Riley, P.J., and T. M. Burns and Cynar, JJ.
   Cynar, J.

A short history of this dispute is necessary, due to the nature of the issues presented herein.

The Crestwood Education Association (CEA) has, for some time, acted as the certified bargaining agent for teachers employed by the Crestwood Board of Education (Board). Labor difficulties began in the district in the fall of 1971 when coaches of the student athletic teams and sponsors of student clubs refused to perform their assignments. This dispute eventually was brought before the Michigan Employment Relations Commission (MERC). In an opinion dated April 2, 1973, the administrative law judge ruled that the teachers’ failure to perform the above-noted duties constituted an illegal strike. Thus, it was held that the Board’s failure to rehire the football coaches did not violate any of the sections of the public employee relations act (PERA). However, the Board’s action of unilaterally instituting wage increases for the coaches hired was found to violate §§ 10(l)(a) and 10(l)(e) of the act. Accordingly, a cease and desist order was entered and the Board was ordered to bargain in good faith with the CEA. That opinion was adopted in full by MERC on May 4, 1973.

The labor problems in the school district subsided until the fall of 1974. On the first day of class for the 1974-1975 school year, September 3, 1974, the members of the CEA failed to report for work. The teachers had been without a collective bargaining agreement since August of 1973. An injunction was obtained by the Board, which was subsequently violated by the teachers in December 1974. The teachers were then told to report to work or resign. Pursuant to this ultimatum, 38 teachers reported for work and one resigned. On December 30, 1974, the remaining 184 teachers in the school district were terminated and replacements hired to take their place.

On January 10, 1975, this termination was set aside by the Wayne County Circuit Court. The Court of Appeals affirmed. On April 4, 1975, the Supreme Court reversed the Court of Appeals and upheld the termination, holding that, under the circumstances, individual termination hearings were not required prior to termination. The Court held that the teachers were presently entitled to individual hearings under § 6 of the PERA to determine if they took part in the strike. The Court also added that teachers could be entitled to reinstatement if MERC found that the Board committed unfair labor practices.

Subsequently, the CEA pursued charges against the Board which had been previously filed on March 8, 1974. These alleged that, after the expiration of the prior labor contract in August of 1973, the Board had unilaterally changed the terms and conditions of employment under which the teachers were expected to work. The administrative law judge’s opinion, recommending dismissal of these charges, was accepted by MERC on July 31, 1975. On that same date MERC also dismissed other charges of unfair labor practices brought by the CEA against the Board. In an opinion dated September 27, 1976, this Court affirmed the MERC decision. Leave to appeal was denied by the Michigan Supreme Court.

The present action arises as a result of the Board’s conduct in conjunction with the § 6 hearings ordered by the Supreme Court and the efforts by the replacement teachers to organize into a new bargaining unit. In the fall of 1975 those teachers hired to replace the teachers fired by the Board began organizing into a group called the Crestwood Teachers Organization (CTO). On November 27, 1975, the CTO petitioned MERC for recognition as the sole bargaining agent for teachers in the Crestwood School District. The CEA intervened in that proceeding, alleging certain unfair labor practices by the Board and contending that the CTO was made up of only "temporary teachers”.

A hearing was held on these matters on December 22 and 29, 1975, and January 16, 1976. At the hearing three former Crestwood teachers testified as to improprieties committed by the Board. James Brown testified that he had been contacted by the superintendent who had told him he would consider rehiring him if he waived his § 6 hearing or went there without a union-provided attorney. Gerald Miller testified that he contacted the superintendent concerning his old job. Miller asked him what would happen if he were not represented by the union and was told that his § 6 hearing would be expedited. He also testified that his attorney told him it was likely he’d get his job back if he refused union representation at the hearing. This information allegedly came from the Board’s attorney. Charles Kotulski testified that he approached a member of the school Board and was told he could get his job back if he went to the § 6 hearing without an attorney.

In an opinion dated June 3, 1976, the administrative law judge held that the Board had violated § 10(l)(c) of PERA by conditioning reemployment on the renunciation of union representation at the §6 hearings. A cease and desist order was thus entered. In addition, the CTO’s representation petition was accepted and an election ordered, which subsequently led to the CTO being elected as the teachers’ bargaining representative. In an opinion dated December 29, 1976, MERC accepted the recommendations of the administrative law judge. The CEA now appeals as a matter of right, raising three issues for consideration.

I. The sufficiency of the unfair labor practice remedy.

Appellant initially contends that the cease and desist order was an insufficient remedy in light of the nature of the unfair labor practices committed by the Board. It argues that the three teachers involved should have been reinstated with back pay. In limiting its remedy to a cease and desist order, MERC concluded that the violations were "individual, not widely disseminated and isolated in scope”.

In confronting the adequacy of the remedy imposed, it is first necessary to determine this Court’s scope of review of MERC’s remedial determination. This Court’s power of review is established by MCL 423.216(e); MSA 17.455(16)(e) which empowers this Court, after the filing of petitions, to

"* * * summarily grant to the commission or to any prevailing party such temporary relief or restraining order as it deems just and proper, enforcing, modifying, enforcing as so modified, or setting aside in whole or in part the order of the commission.”

As the statute is silent as to the weight to be given MERC’s view of the proper remedy in a given instance, we must look elsewhere for guidance. MCL 423.216(b); MSA 17.455(16)(b) requires MERC to issue a cease and desist order and to "take such affirmative action * * * as will effectuate the policies of this act”. This language is nearly verbatim that used in the Nationál Labor Relations Act, 29 USC 160(c). Under the Federal act, the remedial orders of the National Labor Relations Board are not to be disturbed,

"unless it can be shown that the order is a patent attempt to achieve ends other than those which can fairly be said to effectuate the policies of the Act.” Virginia Electric & Power Co v NLRB, 319 US 533, 540; 63 S Ct 1214; 87 L Ed 1568 (1943), NLRB v Retail Store Employees Union, Local 876, 570 F2d 586, 593 (CA 6, 1978).

This standard was adopted and applied to the PERA in Van Buren Public School District v Wayne Circuit Judge, 61 Mich App 6, 33; 232 NW2d 278 (1975). In the absence of any clear legislative statement to the contrary we adopt this standard in reviewing the present case. Although other standards have been adopted in different contexts, when reviewing remedies the above standard of review seems appropriate in light of the mandate of MCL 423.216(b); MSA 17.455(16)(b) to fashion remedies so as to "effectuate the policies of this act”.

MERC found that the Board violated § 10(l)(c) of the act. That section states in pertinent part:

"It shall be unlawful for a public employer or an official or agent of a public employer * * * (c) to discriminate in regard to hire, terms or other conditions of employment in order to encourage or discourage membership in a labor organization * * (Emphasis added.)

It is true that anti-union activity here goes to the very heart of one of the policies of the act, the right of public employees to organize in labor organizations. MCL 423.209; MSA 17.455(9) expressly recognizes this right, stating:

"It shall be lawful for public employees to organize together or to form, join or assist in labor organizations * * * »

This section not only provides public employees with the right to organize, but also states the public policy of this state regarding the unionization of public employees, City of Escanaba v Labor Mediation Board, 19 Mich App 273, 281; 172 NW2d 836 (1969).

It is also true that the Board’s timing in this matter was abominable. We are dealing here with a longstanding dispute which has engendered considerable litigation, including an appeal to the Michigan Supreme Court. These unfair labor practices took place at a time when the dispute between these parties was in the process of being resolved. The Board’s efforts should have been directed toward reconciliation, not further divisiveness and a continuation of litigation between the parties.

However, we note that the violations here were not widespread. Furthermore, we note, as did MERC below, that none of the three teachers involved received an absolute guarantee that they would be rehired. Nor were they ever told they would not be rehired if they appeared at the § 6 hearing represented by a CEA attorney.

In light of these above considerations and the stringent standard of review, we decline to disturb the remedy imposed by MERC in this case. Although we might believe a more stringent remedy is warranted, it is not our role to replace the remedy fashioned by MERC with one consistent with our own views. Under these circumstances the cease and desist order was sufficient to effectuate the policies of the act.

II. The validity of the election.

Appellant further claims that MERC erred in certifying a representation election held by those teachers who replaced the discharged teachers. Appellant’s argument, however, is premised upon the assumption that the discharged teachers will all be reinstated. After hearings and an initial appeal, only 12 of 141 teachers who requested § 6 hearings have been reinstated. On appeal to this Court none of the remaining discharged teachers were ordered reinstated. Arnold v Crestwood Board of Education, 87 Mich App 625; 277 NW2d 158 (1978).

We believe that MERC properly ordered the election and properly limited the right to vote in such an election to the replacement teachers. Since the replacement teachers had a right to organize and since MERC found that they had fulfilled all the necessary requirements, the election was properly ordered. Under the circumstances, the right of the replacement teachers to organize outweighs the rights of the discharged teachers.

Nor were the discharged teachers entitled to vote in such an election. As Rockwell v Crestwood School District Board of Education, 393 Mich 616; 227 NW2d 736 (1975), makes abundantly clear, these teachers had been previously discharged. No prior hearing was required before such discharge. Therefore, the right to vote in the election was properly limited to their replacements.

Of course, there still remains the possibility that the discharged teachers may yet be reinstated by a higher court. If that were to occur, it would be extremely unfair to require them to be bound by the result of a representation election in which they did not participate. If that were the necessary result, we might be inclined to rule otherwise. However, MCL 423.212; MSA 17.455(12) permits the employees to petition for a decertification election. Such an election may take place at any time after one year from the date of a valid election. MCL 423.214; MSA 17.455(14). Since the one-year period has no doubt already passed, the discharged teachers, upon reinstatement, would be able to petition once more for representation by the CEA. Therefore, the discharged teachers are in no way prejudiced by the election of the CTO as the replacement teachers’ representative and the result of the election should stand.

III The. role of MERC.

Appellant lastly contends that MERC erred in rejecting an alleged statutory duty to investigate and prosecute the unfair labor practice charge. We find no merit to this contention. The PERA contains no provision analogous to 29 USC 153 of the National Labor Relations Act authorizing MERC to investigate and prosecute complaints. MCL 423.216; MSA 17.455(16) merely authorizes MERC to issue complaints. Although the PERA was modeled after the Federal act, we are unable to conclude that the omission of investigatory and prosecutorial powers was accidental. Nor is it our role to conclude that it is "necessary” for MERC to be so empowered. Administrative agencies possess only that authority delegated to them by the Legislature. Civil Service Comm of the City of Hamtramck v Pitlock, 44 Mich App 410, 412; 205 NW2d 293 (1973). Therefore, we hold that MERC properly limited its role in this matter to that of adjudicating the dispute before it.

Conclusion

The decision of the commission is affirmed. No cost, interpretation of a statute being involved.

       MERC Op C72 1-161, May 4, 1973.

       MCL 423.201 et seq.; MSA 17.455(1) et seq.

        Rockwell v Crestwood School District Board of Education, 57 Mich App 636; 226 NW2d 596 (1975).

        Rockwell v Crestwood School District Board of Education, 393 Mich 616; 227 NW2d 736 (1975).

        Crestwood Education Association v MERC, 71 Mich App 347; 248 NW2d 266 (1976).

        Crestwood Education Association v MERC, 399 Mich 853 (1977).

       Contrast the standard of review used in the following instances:
      1) MERC’s administrative decision of lack of interest for decertification election not to be disturbed unless "so perverse or palpably wrong as to effectively amount to a breach of its statutory duty.” Hepler v Dep’t of Labor, 64 Mich App 78, 87; 235 NW2d 161 (1975).
      2) MERC’s determination that a group of employees did not constitute a proper bargaining unit is not to be disturbed unless unsupported by substantial evidence or in violation of the constitution or statute. Local 547, International Union of Operating Engineers, AFL-CIO v Henry Ford Hospital, 59 Mich App 625, 628; 229 NW2d 925 (1975).

        Note also NLRB v Food Store Employees Union, Local 347, 417 US 1; 94 S Ct 2074; 40 L Ed 2d 612 (1974), which held that the reviewing court was powerless to modify the NLRB’s order denying the union’s request for attorneys’ fees and costs.


source: Caselaw Access Project

author: Bronson, J. Danhof, C.J.

license: Public Domain

text:
    PEOPLE v STEVENS
    Docket No. 77-3434.
    Submitted April 11, 1978, at Lansing.
    Decided February 6, 1979.
    Leave to appeal applied for.
    Donald Stevens was convicted of unarmed robbery, and subsequently pled guilty to a supplemental information charging him as a habitual offender, Livingston Circuit Court, Paul R. Mahinske, J. Defendant appeals, alleging that certain articles were erroneously admitted into evidence because of a break in the chain of custody, and that his guilty plea to the habitual offender charge should be vacated because the proceeding did not comply with the court rule governing the taking of guilty pleas. Held:

    1. The articles were properly admitted into evidence. Alleged breaks in the chain of custody go to the weight of the evidence, not its admissibility, where there is sufficient evidence that the items are what they are purported to be and that they are connected with the crime.
    2. A habitual offender proceeding is a critical stage of a criminal prosecution which is subject to the same evidentiary and procedural rules as a regular trial. A guilty plea proceeding must, therefore, comply with the court rule governing guilty plea proceedings.
    Defendant’s unarmed robbery conviction is affirmed; his guilty plea is vacated and the case remanded.
    Danhof, C.J., dissented. He would hold that the court rule does not apply to a habitual offender proceeding because the defendant is not being charged with a separate criminal offense, it is not constitutionally required that the defendant be advised of the full panoply of rights guaranteed in the trial of a criminal offense, and the factual issues involved in a habitual offender proceeding are limited in scope.

      References for Points in Headnotes

       29 Am Jur 2d, Evidence § 774.

       39 Am Jur 2d, Habitual Criminals and Subsequent Offenders §§ 18, 23.

       21 Am Jur 2d, Criminal Law §§ 484-496.
    39 Am Jur 2d, Habitual Criminals and Subsequent Offenders § 19,

       21 Am Jur 2d, Criminal Law § 490.
    39 Am Jur 2d, Habitual Criminals and Subsequent Offenders § 20.
    Court’s duty to advise or admonish accused as to consequences of plea of guilty, or to determine that he is advised there of. 97 ALR2d 549.

      Opinion of the Court
    1. Criminal Law — Evidence — Chain of Custody — Weight of Evidence.
    Breaks in the chain of custody of profferred physical evidence do not require that the evidence be excluded where the prosecution lays a foundation identifying the articles as what they are purported to be and shows that they are connected with the crime or with the accused; any breaks in the chain of custody go to the weight of the evidence, not its admissibility.
    2. Criminal Law — Habitual Offenders — Critical Stage — Statutes.
    A habitual offender proceeding is a critical stage of a criminal prosecution, in which the defendant has a right to a trial by jury and the prosecution must prove the charges beyond a reasonable doubt; the proceeding is subject to the same evidentiary and procedural rules as a regular trial (MCL 769.13; MSA 28.1085).
    3. Criminal Law — Habitual Offenders — Plea of Guilty — Court Rules.
    The court rule governing pleas of guilty is to be generally complied with in the case of a. defendant pleading guilty to a habitual offender charge; specifically, the defendant should be advised of the possible maximum sentence, of his right to be tried by a jury or by the court, of his presumption of innocence, of the people’s burden of proof, of his right to confrontation of witnesses and to compulsory process, and of his right to testify or to remain silent, as well as certain rights under the court rule (GCR 1963, 785.7).
    Dissent by Danhof, C.J.
    4. Criminal Law — Habitual Offenders — Distinct Offense — Statutes.

      A habitual offender information does not charge a defendant with committing a criminal offense but merely informs the court of the fact of the defendant’s prior convictions, and the statutory provisions concerning habitual offenders provide for an en

      hanced punishment for the current offense (MCL 769.12, 769.13; MSA 28.1084, 28.1085).

    5. Criminal Law — Habitual Offenders — Plea of Guilty — Statutes — Court Rules.

      The court rule governing the acceptance of a guilty plea does not apply to a habitual offender proceeding because the defendant charged with being a habitual offender is not charged with a separate criminal offense, it is not constitutionally required that the defendant be advised of the full panoply of rights guaranteed in the trial of a criminal offense, and the factual issues involved in a habitual offender proceeding are limited in scope (MCL 769.13; MSA 28.1085; GCR 1963, 785.7).

      Frank J. Kelley, Attorney General, Robert A. Derengoski, Solicitor General, and Frank R. DelVero, Prosecuting Attorney (by Keith D. Roberts, Assistant Attorney General, Prosecuting Attorneys Appellate Service), for the people.

      Lawrence R. Greene, for defendant on appeal.
    Before: Danhof, C.J., and Bronson and Cynar, JJ.
   Bronson, J.

Defendant was convicted by a jury of unarmed robbery, MCL 750.530; MSA 28.798. He subsequently pled guilty to a supplemental information charging him as a habitual offender pursuant to MCL 769.12; MSA 28.1084 and was sentenced to a prison term of 15 to 30 years. He now appeals as of right.

On July 20, 1976, a lone gunman entered Val’s Pizzeria in Brighton, Michigan, and demanded that the contents of the cash register be placed in his hat. The gunman fled the store and entered a red Chevrolet Nova, which left the area. This car was spotted by Trooper Gary Groth of the Michigan State Police and he pursued and stopped the vehicle. After a back-up unit arrived, the occupants were told to leave the car. The officers then saw a gun in the car and the occupants were placed under arrest. Defendant was one of these occupants, although the testimony at trial established that he was not the gunman who had entered Val’s. A subsequent search of the car uncovered a hat containing cash and a Val’s menu card.

At trial, defendant objected to the admission of various exhibits offered by the prosecution on the ground that there were breaks in the chain of custody. The trial court overruled the objection. We find no error in the trial court’s ruling. The fact that there are breaks in the chain of custody does not require that the evidence be excluded. To be admissible, the prosecution must merely lay a foundation identifying the articles as what they are purported to be and showing that they are connected with the crime or the accused. People v Kremko, 52 Mich App 565, 573; 218 NW2d 112 (1974), People v Burrell, 21 Mich App 451, 456-457; 175 NW2d 513 (1970). In the present case there was sufficient evidence of the exhibits’ identity and connection to the crime to support their admission at trial. Any breaks in the chain of custody go to the weight of the evidence, not its admissibility. People v King, 58 Mich App 390, 398-399; 228 NW2d 391 (1975), People v Mitchell, 37 Mich App 351, 356; 194 NW2d 514 (1971). Thus, no error occurred.

Defendant next contends that his guilty plea to the habitual offender information should be vacated because the plea proceedings did not comply with the requirements of the guilty plea rule, GCR 1963, 785.7. The prosecution contends that compliance with the guilty plea rule is not mandatory, and a plea proceeding is proper as long as the trial court has complied with the procedures set forth in the habitual offender act. For the reasons stated below, we hold that GCR 1963, 785.7 is applicable to proceedings in which a defendant pleads guilty to a habitual offender information.

As the dissent points out, unlike a regular criminal information, a supplemental information charging defendant as a habitual offender does not charge a defendant with a separate crime, but instead provides for enhanced punishment for the current conviction. People v Hendrick, 398 Mich 410; 247 NW2d 840 (1976). This distinction is not determinative.

Perhaps the most appropriate method of addressing the question of the applicability of the guilty plea rule in these situations is to compare a habitual offender proceeding with a regular criminal trial, where the guilty plea rule is applicable, Guilty Plea Cases, 395 Mich 96; 235 NW2d 132 (1975), and a probation revocation hearing where the rule is not applicable, People v Rial, 399 Mich 431; 249 NW2d 114 (1976).

The habitual offender proceeding is similar to a probation revocation hearing in that in neither case is defendant charged with a criminal offense, and in both situations the proceeding is concerned with a fairly narrow factual issue. At this point, however, the similarities end.

The habitual offender proceeding, like an ordinary criminal trial, is a critical stage of a criminal prosecution. See People v Johnson, 386 Mich 305; 192 NW2d 482 (1971), People v Burton, 44 Mich App 732; 205 NW2d 873 (1973). Defendants in both instances have the right to a trial by jury, MCL 769.13; MSA 28.1085, and the prosecution must prove the charges by proof beyond a reasonable doubt. People v Covington, 70 Mich App 188, 191; 245 NW2d 558 (1976), lv den 402 Mich 843 (1977). Furthermore, the habitual offender proceeding is subject to the same evidentiary and procedural rules as a regular trial, MCL 769.13; MSA 28.1085. A probation revocation hearing is not a stage of a criminal prosecution, Rial, supra, at 435. Defendant does not have the right to a jury trial, People v Gladdis, 77 Mich App 91, 96; 257 NW2d 749 (1977), and the violation need only be proven by a preponderance of the evidence. People v Miller, 77 Mich App 381, 387; 258 NW2d 235 (1977). Moreover, the revocation proceeding is deemed to be summary and informal, and the normal evidentiary and procedural rules of a criminal trial are not applicable. Rial, supra, at 436.

Taking all these factors into consideration, it seems clear that the habitual offender proceeding is much closer to a regular criminal trial than a probation revocation hearing, and also that a guilty plea to a habitual offender charge involves the waiver of substantial criminal trial rights not afforded a defendant at a probation revocation hearing. For these reasons, the guilty plea rule should apply to habitual offender proceedings. To hold otherwise merely because the proceeding does not technically charge defendant with any crime appears to exalt form over substance. A defendant pleading guilty to a recidivist charge is waiving substantial rights and is subjecting himself to the possibility of enhanced punishment. From the defendant’s point of view such a charge is no different from any other criminal charge. In order to establish that the plea is intelligently, understandingly, and voluntarily given, compliance with GCR 1963, 785.7 is required.

Because the sentencing consequences can be more severe than the individual convictions upon which the habitual offender charge is premised, it is imperative that the defendant understand his rights when pleading guilty to the habitual charge. Therefore, the defendant should be advised of the possible maximum sentence, right to be tried by the court or jury, his presumption of innocence, the people’s burden of proof, his right to confrontation and compulsory process, his right to testify or remain silent without having the silence used against him as well as his rights under subsections (2) and (3) of GCR 1963, 785.7.

We realize that People v Parker, 50 Mich App 537; 213 NW2d 576 (1973), held that a defendant need not be informed of his Jaworski rights prior to pleading guilty to a supplemental information charging him with being a habitual offender. This case was decided prior to the promulgation of the guilty plea rule, GCR 1963, 785.7. We feel that due to the increased judicial awareness of the problems which may arise at a guilty plea proceeding and the greater scrutiny of these proceedings which has been engendered by the guilty plea rule and subsequent cases, the rule announced in Parker is no longer controlling. However, since trial judges may have justifiably relied on Parker when taking pleas to habitual offender charges, the rule announced in this opinion is to be given prospective application.

Defendant’s conviction for unarmed robbery is affirmed. His guilty plea to the recidivist charge is vacated, and the case is remanded for further proceedings consistent with this opinion.

Cynar, J., concurred.

Danhof, C.J.

(dissenting). Defendant was convicted by a jury of unarmed robbery, MCL 750.530; MSA 28.798, and was subsequently sentenced as a habitual offender, MCL 769.12; MSA 28.1084. On appeal defendant claims that the trial judge erred reversibly by allowing certain items to be admitted into evidence and by failing to follow the procedures required by GCR 1963, 785.7 in accepting defendant’s guilty plea to the habitual offender charges. While I agree with the majority’s conclusion that the trial judge did not err in allowing this evidence to be admitted, I do not agree with the holding that the judge erred reversibly by failing to comply with GCR 1963, 785.7 in accepting defendant’s plea to the habitual offender supplemental information.

Stated simply, the issue to be resolved is whether GCR 1963, 785.7 applies to proceedings under MCL 769.13; MSA 28.1085. GCR 1963, 785.7 is silent as to whether it applies to habitual offender proceedings. This silence is ambiguous. A defendant at a habitual offender proceeding is pleading to a supplemental information and this, at first glance, tends to support the conclusion that this proceeding is a stage of a criminal prosecution to which GCR 1963, 785.7 applies. However, this information does not charge defendant with committing a criminal offense, but rather, it merely informs the court of the fact of defendant’s prior convictions, see People v Shotwell, 352 Mich 42; 88 NW2d 313 (1958), cert den 356 US 976; 78 S Ct 1141; 2 L Ed 2d 1149 (1958), People v Palm, 245 Mich 396; 223 NW 67 (1929). Also, Justice Levin’s concurring opinion in People v Rial, 399 Mich 431, 438; 249 NW2d 114 (1976), which describes GCR 1963, 785.7 as "governing acceptance of an accused person’s plea of guilty to an information charging commission of a criminal offense”, supports the conclusion that the rule does not apply to habitual offender proceedings. The habitual offender provisions of the Code of Criminal Procedure do not create a separate criminal offense, but rather provide for an enhanced punishment for the current offense, People v Hendrick; 398 Mich 410; 247 NW2d 840 (1976).

The idea that proceedings under the habitual offender provisions do not charge a crime separate from the current felony charge has long been recognized, see Graham v West Virginia, 224 US 616; 32 S Ct 583; 56 L Ed 917 (1912), People v Hendrick, supra, People v Hatt, 384 Mich 302; 181 NW2d 912 (1970), People v Shotwell, supra, People v Judge of Recorder’s Court, 251 Mich 626; 232 NW 402 (1930), People v Fountain (After Rem), 77 Mich App 71; 257 NW2d 671 (1977), People v Holbrook, 60 Mich App 628; 231 NW2d 469 (1975), People v Ungurean, 51 Mich App 262; 214 NW2d 873 (1974). The placement of the habitual offender provisions in the Code of Criminal Procedure, MCL 760.1 et seq.; MSA 28.841 et seq., rather than in the Penal Code, MCL 750.1 et seq.; MSA 28.191 et seq., reflects this idea, see People v Shotwell, supra.

Under the original statute, the accusation of a previous conviction was charged in the indictment and admitted or subject to proof at trial. When the Code of Criminal Procedure, supra, was enacted in 1927, it provided for an alternative method to determine whether a defendant had been previously convicted of a felony, see MCL 769.13; MSA 28.1085. This procedure was established to avoid prejudicing the defendant by exposing the jury to evidence of his prior criminal offenses. It is no longer required that the defendant be indicted and convicted as a previous offender in order to receive the increased punishment, MCL 769.12; MSA 28.1084. MCL 769.13; MSA 28.1085, sets up a separate post-trial procedure. That section allows the prosecutor to file a supplemental information after a conviction and requires the judge to inform the defendant of the accusations, of his right to .trial according to law, and to ask the defendant whether he is the same person as charged in such information. The section then provides for a jury trial on the factual questions involved if defendant remains silent or denies that he is the same person. Although this section is silent on this matter, if defendant acknowledges that he is the person who was convicted of the earlier felonies, this is viewed as an admission of those convictions. These admissions by the defendant, after being advised of the charges and his right to trial, are sufficient to support the application of habitual offender sentencing provisions.

Although this procedure does not grant defendant the full panoply of rights guaranteed in proceedings charging the commission of a separate criminal offense, it does adequately preserve the right to a jury trial and is not constitutionally infirm, see People v Parker, 50 Mich App 537; 213 NW2d 576 (1973). Also, the statute implicitly provides that an acknowledgment by the defendant that he is the same person who was convicted of the earlier crimes constitutes a sufficient waiver of defendant’s right to a trial by jury. Even though MCL 769.13; MSA 28.1085 does not require a recital of the rights defendant would be waiving by admitting the previous convictions, as is required in pleas to criminal offenses, this procedure was upheld in People v Parker, supra, in the face of Jaworski challenges. If a judge is not constitutionally required to advise a defendant of his Jaworski rights at a habitual offender proceeding, then, a fortiori, he would not be constitutionally required to advise defendant of his non -Jaworski rights, Cf. Guilty Plea Cases, 395 Mich 96, 122; 235 NW2d 132 (1975). As a constitutional matter, the difference in the requirements and protections accompanying a trial for the commission of a criminal offense and for habitual offender proceedings is justified on the basis of the more limited nature and scope of the issues involved in habitual offender proceedings and on the basis that the habitual offender provisions do not create a separate crime distinct from the current felony. As the United States Supreme Court noted in Graham v West Virginia, supra, at 627, "To repeat, the inquiry is not into the commission of an offense; as to this, indictment has already been found and the accused convicted. There remains simply the question as to the fact of previous conviction.” The issue of whether defendant was convicted of an earlier felony is a very narrow one, is usually limited to questions of identification and is normally not difficult to prove.

Considering that the habitual offender provisions do not charge defendant with a separate criminal offense but only provide for the enchancement of punishment for the current offense, People v Hendrick, supra, and that advice on the full panoply of rights constitutionally guaranteed in the trial of a criminal offense is not constitutionally required in habitual offender proceedings, People v Parker, supra, and the limited scope of the factual issues involved in habitual offender proceedings, I conclude that the Supreme Court did not intend GCR 1963, 785.7 to apply to habitual offender proceedings. While I agree with the majority’s conclusion that probation revocation proceedings are distinguishable in many respects from proceedings under MCL 769.13; MSA 28.1085, I think the analysis used by the Supreme Court in People v Rial, supra, in holding that GCR 1963, 785.7 does not apply to probation revocation hearings is applicable to the issue involved in this case. The waiver of a jury trial in habitual offender proceedings is similar to the waiver of a full hearing at a probation revocation proceeding in that it is not necessarily unconstitutional for the defendant to waive these later hearings without being advised of his Jaworski rights. This similarity is relevant to the issue of whether GCR 1963, 785.7 applies. Many of the provisions of GCR 1963, 785.7 were inserted into the rule to explicitly require the judge to be certain that the proceedings complied with all the constitutional requirements applicable to a plea of guilty to a criminal charge. The fact that advice of all these rights is not constitutionally required in habitual proceedings, People v Parker, supra, demonstrates that one of the primary rationales supporting some provisions of GCR 1963, 785.7 does not directly apply to habitual offender proceedings. This does not necessarily indicate that the rule was not intended to apply to habitual offender proceedings but rather it demonstrates that one of the major purposes behind applying GCR 1963, 785.7 has already been fulfilled by the procedure required by MCL 769.13; MSA 28.1085, even if GCR 1963, 785.7 is not applied.

Another important similarity to People v Rial, supra, is the limited nature and scope of the issues involved at habitual offender proceedings. Although habitual offender proceedings are distinguishable from probation revocation proceedings by the fact that the right to a trial by jury is preserved, the scope of the factual issues involved in habitual offender proceedings is very narrow. In most cases, the fact issues involved in habitual offender proceedings are probably more narrow and easier to resolve than the issues presented in probation revocation hearings.

In summary, I conclude that GCR 1963, 785.7 does not apply to proceedings under MCL 769.13; MSA 28.1085. This conclusion is based on the recognized principle that the habitual offender provisions do not create a separate offense but rather provide for the enhancement of punishment for the current offense. This conclusion is also supported by the procedure established by MCL 769.13; MSA 28.1085 for resolving the limited issues involved in habitual offender proceedings. It is undisputed that the judge in this case fully complied with the procedures under MCL 769.13; MSA 28.1085, and since defendant does not claim that his admissions of the previous convictions and the waiver of his right to trial by jury were not knowingly, voluntarily or understanding^ made, I would affirm the conviction.

       The pistol was identified by the robbery victim as similar to that used by the robber and was identified by police officers as the pistol found in the car and placed in the box. The menu card was identified by a pizzeria employee as one used at the store. The hat was identified by the robbery victim as similar to that used by the robber and was further identified by police officers as the hat found in the car. The envelopes were identified by the officers as those in which the money found in the hat and in the car had previously been placed. Furthermore Chief Eugene Alii of the Brighton State Police Post testified that he retained custody of all eight exhibits commencing July 23, 1976, with the exception of one day when they were subjected to tests at the State Police laboratory.

       "If at any time after conviction and either before or after sentence it shall appear that a person convicted of a felony has previously been convicted of crimes as set forth in any of the 3 foregoing sections, the prosecuting attorney of the county in which such conviction was had, in his discretion, may file a separate or supplemental information in such cause accusing the said person of such previous convictions. Whereupon the court in which such conviction was had shall cause the said person whether confined in prison or otherwise, to be brought before it and shall inform him of the allegations contained in such information, and of his right to be tried as to the truth thereof according to law, and shall require such offender to say whether he is the same person as charged in such information or not If he says he is not the same person, or remains silent, the court shall enter a plea of not guilty, and a jury of 12 jurors shall be empanelled from the petit jurors serving at the then or a following term of said court to determine the issues raised by such information and plea. The accused may waive trial by jury in the manner provided by this act. The usual practice in the trial of criminal cases shall be followed * * (Emphasis added.) MCL 769.13; MSA 28.1085.

       Since these cases hold that sentencing is a critical stage and the habitual offender proceeding is a procedure for determining what sentence defendant is to be given, see Hendrick, supra, it necessarily follows that the habitual offender proceeding is a critical stage of the criminal prosecution.

       This Court realizes that whenever it mandates requirements for the trial court to follow, an extra burden is thrust upon the trial court’s already burgeoning dockets. However, considering compliance with the guilty plea rule is required before accepting a plea to even a six-month misdemeanor (GCR 1963, 785.10), it is not reasonable to ask the trial courts to spend a few extra minutes to comply with the guilty plea rule before it accepts a habitual offender plea which could subject defendant to life imprisonment.

       Since we perceive no set of facts under which a defendant could be further charged as a recidivist or have his probation or parole revoked as a result of pleading guilty to a habitual offender charge, subsections (c) and (e) of GCR 1963, 785.7(1) need not be followed.

       In People v Jaworski, 387 Mich 21; 194 NW2d 868 (1972), the Michigan Supreme Court held that before a trial court could accept defendant’s guilty plea, it must inform the defendant of his right to' trial by jury, his right to confront his accusers, and his privilege against self-incrimination.

       1915 CL 15612, 15613; 1897 CL 11785, 11786; 1857 CL 5948, 5949.

       See People v Judge of Recorder’s Court, 251 Mich 626; 232 NW 402 (1930), People v Palm, 245 Mich 396; 223 NW 67 (1929); People v Holbrook, 60 Mich App 628; 231 NW2d 469 (1975); People v Ungurean, 51 Mich App 262; 214 NW2d 873 (1974).

        People v Jaworski, 387 Mich 21; 194 NW2d 868 (1972).


author: M. F. Cavanagh, J. V. J. Brennan, J.,

text:
    PEOPLE v FACE
    Docket No. 77-3937.
    Submitted April 6, 1978, at Lansing.
    Decided February 6, 1979.
    On October 15, 1976, defendant, Judy Face, was arrested for negotiating bad checks in Lenawee County and placed in jail pending trial. On October 19, 1976, a "hold” was placed on her due to a Hillsdale County warrant concerning other bad checks. On December 1, 1976, she was placed on probation in Lenawee County with the provision that she serve six months in the county jail, with credit for the time spent in jail awaiting sentence. She was released on March 10, 1977, and immediately arrested in Hillsdale County, where she stayed in jail until March 17, 1977, when she posted bond. On April 4, 1977, she pled guilty and was placed on five years probation. On April 12, 1977, she was arrested on a probation violation and on April 26, 1977, sentenced to 3 to 14 years in prison without credit for time previously served. Judge Kenneth J. Prettie, on a motion to modify the sentence, granted defendant credit for the period from April 12 to April 26, 1977, the time she was incarcerated awaiting sentence on the probation violation, but denied credit for the periods from October 15, 1976, to March 10, 1977, her jail sentence in Lenawee County, and from March 10, 1977, to March 17, 1977, the stay in the Hillsdale County jail subsequent to arrest and prior to posting bond. Defendant appeals. Held:

    1. The defendant is entitled to credit for time served in jail due to inability to post bond pending arraignment on the charge.
    2. The defendant is entitled to credit for time served in another county where a "hold” was put on her while serving time in the other county but where no formal charges were brought in the case until after her release; to hold otherwise would be to impose consecutive sentences upon her by denying her the benefit of concurrent sentencing, which is mandatory absent specific statutory authority to the contrary.

      References for Points in Headnotes

       21 Am Jur 2d, Criminal Law §§ 545, 567.

       21 Am Jur 2d, Criminal Law §§ 545, 547, 548, 567.
    Sentences by different courts as concurrent. 57 ALR2d 1410.

       21 Am Jur 2d, Criminal Law §§ 545, 567, 568.

      Sentence modified.
    V. J. Brennen, J., dissented. He opined that because of the discretionary nature of probation, the Court of Appeals could only assume the sentencing courts had taken her prior incarceration into account in placing her on probation in the first place. He would hold that the defendant is only entitled to credit for the 14 days from April 12 to April 26, 1977.
    Opinion of the Court
    1. Criminal Law — Sentencing — Credit for Time Served — Statutes — Probation Violation.
    A defendant is entitled to credit for time served in jail due to inability to post bond pending arraignment on the charge where he was placed on probation on the charge and was subsequently imprisoned for violation of probation (MCL 769.11b; MSA 28.1083[2]).
    2. Criminal Law — Sentencing — Credit for Time Served — Subsequent Charges — "Hold” Filed While in Jail.
    A defendant sentenced for violation of probation is entitled to credit for time served on charges in another county where a "hold” was put on him while serving time in the other county but where no formal charges were brought in the case until after his release; to hold otherwise would be to impose consecutive sentences upon him by denying him the benefit of concurrent sentencing, which is mandatory absent specific statutory authority to the contrary (MCL 769.11b; MSA 28.1083[2]).
    Dissent by V. J. Brennan, J.
    3. Appeal and Error — Criminal Law — Sentencing — Modification of Sentence — Credit for Prior Incarceration.

      The Court of Appeals, on a silent record, can only assume that, because of the discretionary nature of probation, a sentencing court took a defendant’s prior incarceration regarding the same criminal episode into account in deciding to place the defendant on probation and the Court of Appeals should not modify the sentencing court’s subsequent sentence following a probation violation and allow credit for such prior incarceration.

      Frank J. Kelley, Attorney General, Robert A. Derengoski, Solicitor General, Ronald C. Zellar,
      Prosecuting Attorney, and Mark I. Leach, Assistant Attorney General, for the people.

      Donald L. Sanderson, for defendant on appeal.
    Before: Allen, P.J., and V. J. Brennan and M. F. Cavanagh, JJ.
   M. F. Cavanagh, J.

The facts here are not at all in dispute. Between October 1 and October 7, 1976, defendant negotiated $2,000 worth of bad checks in both Lenawee and Hillsdale Counties in violation of MCL 750.249; MSA 28.446. On October 15, 1976, she was arrested in Lenawee County and placed in jail pending trial. On October 19, 1976, a "hold” was placed on her due to a Hillsdale County warrant. On December 1, 1976, defendant was placed on probation in Lenawee County with the first six months to be served in the county jail, with credit given for the time spent in jail awaiting sentence. Upon her release on March 10, 1977, defendant was formally arrested in Hillsdale County and placed in jail, where she stayed until posting bond on March 17, 1977.

On March 21, 1977, defendant pled guilty to the charge and on April 4, 1977 was placed on probation for five years. On April 12, 1977, defendant was arrested for violating the terms of her probation and was sentenced on April 26, 1977, to 3 to 14 years imprisonment. No credit was given for time previously served. On August 22, 1977, a hearing was held on defendant’s motion to modify this sentence. There the judge ruled that defendant was entitled to credit on her sentence for the period of April 12 to April 26, 1977, when she was in jail awaiting sentencing for the probation violation. However, she was not given credit for the period from October 15, 1976, to March 10, 1977, when she was serving her six-month term in the Lenawee County jail. Nor was she given credit for the period from March 10 to March 17, 1977, when she was in the Hillsdale County jail because she could not post bail. Defendant now appeals as a matter of right.

Defendant raises two issues for our review and they can be stated as follows:

I. Where defendant was eventually imprisoned for violation of probation, was she entitled to credit for time served in jail due to her inability to post bond pending arraignment on the charge that led to the probation?

II. Where defendant was eventually imprisoned for violation of probation, was she entitled to credit for time served pursuant to charges in another county, when a "hold” was put on her while serving time in the other county, but when no formal charges were brought in this case until after her release?

We answer both questions in the affirmative.

The statute here involved is MCL 769.11b; MSA 28.1083(2) and it reads:

"Whenever any person is hereafter convicted of any crime within this state and has served any time in jail prior to sentencing because of being denied or unable to furnish bond for the offense of which he is convicted, the trial court in imposing sentence shall specifically grant credit against the sentence for such time served in jail prior to sentencing.”

It should be remembered that the statute is remedial and:

"* * * should be liberally construed to effectuate the salutary purpose sought to be achieved by the Legislature in its enactment.” People v Groeneveld, 54 Mich App 424, 427; 221 NW2d 254 (1974), lv den 393 Mich 814 (1975).

That purpose is:

"* * *to equalize as far as possible the status of the indigent and the less financially well-circumstanced, accused with the status of the accused who can afford to furnish bail.” People v Pruitt, 23 Mich App 510, 513; 179 NW2d 22 (1970).

In order to put defendant in the same position as one who could have posted bail, it is necessary to give her credit for the seven days spent in the Hillsdale County jail pending her arraignment on the bad check charge. Defendant’s six-month term in the Lenawee County jail had expired and the sole reason for the week-long imprisonment in the Hillsdale County jail was her inability to post bond.

In coming to this conclusion we rely upon People v Groeneveld, supra, pp 427-428, and the proposition that:

"To be entitled to credit, the time spent in confinement must 'bear an intimate and substantial relationship to the crime for which such person is subsequently convicted.’ ”

We conclude that such a nexus exists between defendant’s confinement awaiting her bad check charge and her conviction for violating the probation imposed for the bad check charge.

There remains the question of whether defendant is entitled to further credit for the time served in the Lenawee County jail. Reviewing again the applicable statute, it is difficult to credit the arguments defendant proffers. The time spent in the Lenawee County jail was for a sentence imposed in another case. Nor was bail in the Hillsdale County bad check case set until after defendant was released from jail in Lenawee County. Thus, no time was served in Lenawee County "because of being denied or unable to furnish bond”. Nor was the time served "for the offense of which he is convicted”. See People v Finn, 74 Mich App 580; 254 NW2d 585 (1977), and People v Risher, 78 Mich App 431; 260 NW2d 121 (1977), for somewhat analogous situations.

Defendant’s reliance on People v Chattaway, 18 Mich App 538; 171 NW2d 801 (1969), and People v Donkers, 70 Mich App 692; 247 NW2d 330 (1976), is misplaced. In these cases defendant was arrested for a crime while serving a sentence in another case. He was given credit for the time served from the date of his arrest, since he was unable to furnish bond while serving the time. The Court in Chattaway, supra, p 543 stated:

"We hold that the statute entitles a convicted person to sentence credit without regard to the reason why he was denied or unable to furnish bond.” (Emphasis added.)

Here, however, no arrest took place in the Hills-dale County charge until after defendant was released from the Lenawee County jail. Thus, there is no basis at all for the contention that the detention was due to defendant’s inability to set bail. At least in Chattaway, supra, and Donkers, supra, the inability to post bond was one of the reasons for defendant’s incarcerations.

We also are not persuaded by defendant’s argument that a "hold” is equivalent to an arrest.

However, we are persuaded that defendant should be given credit for this time for the reason that the effect of the action taken by the authorities in waiting to arrest defendant until after she served the Lenawee County sentence is to impose consecutive sentences upon her. Defendant could have been sent to Hillsdale County for arraignment at the time the "hold” was placed on her. If that had occurred, defendant would have been denied bail in the Hillsdale County case and Chattaway, supra, and Donkers, supra, would be applicable, entitling her to credit for the time subsequently served in Lenawee County. Instead, however, the authorities delayed arresting defendant, thereby circumventing Donkers, supra, and Chattaway, supra. Because of this delay, defendant lost the benefit of concurrent sentencing, which is required absent explicit statutory authority to the contrary, People v Lawson, 75 Mich App 726, 730; 255 NW2d 748 (1977). Such a result seems particularly unfair in this case, especially when it is noted that the offenses in Hillsdale and Lenawee counties both occurred in the same week.

In People v Patterson, 392 Mich 83; 219 NW2d 31 (1974), the Court denied credit for pretrial incarceration in a consecutive sentence situation. While Patterson is distinguishable from this case for that reason, its reasoning is noteworthy. There, the Court interpreted MCL 769.11b; MSA 28.1083(2) in such a way as to avoid undermining a statute permitting consecutive sentencing. Here, MCL 769.11b; MSA 28.1083(2) should be interpreted so as to avoid imposing consecutive sentences in a situation where such sentences are not authorized.

We do so interpret it here and allow defendant credit from the date of the "hold”, October 19, 1976, until her release from the Lenawee County jail, March 10, 1977, a period of 143 days.

Accordingly, we modify the sentence imposed below to allow defendant a total credit of 150 days.

Allen, P.J., concurred.

V. J. Brennan, J.,

(dissenting). I must dissent.

As stated by the majority, the defendant served six months in jail on the Lenawee County charge.

Upon release, defendant was arrested in Hills-dale County and spent seven days in jail until posting bond. Defendant then pled guilty to the Hillsdale County charge and was sentenced to probation only, no incarceration. At this point, due to the discretionary nature of a sentence of probation, this Court can only assume that the prior incarceration was then taken into account by the sentencing court. Upon the new conviction of violation of probation, the sentencing court was free to impose the 3- to 14-year term with credit only for the time spent in jail awaiting sentence on the violation, namely, the 14 days between April 12, 1977, and April 26, 1977.


author: M. J. Kelly, J.

text:
    LANZO CONSTRUCTION COMPANY v CITY OF PORT HURON
    Docket No. 77-4858.
    Submitted October 5, 1978, at Detroit.
    Decided February 6, 1979.
    Leave to appeal applied for.
    Lanzo Construction Company was awarded a contract by the City of Port Huron for the installation and construction of sanitary sewers, storm sewers, and roadways. After completion of the project, Lanzo submitted a claim to the city requesting an additional $44,000-plus as costs for restoration of sidewalks and driveways which had been removed. The city’s engineer, who was designated as the arbitrator of certain disputes arising under the contract, concluded that the restoration costs were supposed to have been included in Lanzo’s base bid on the sewer project and denied the claim. Lanzo then commenced an action seeking to recover for the restoration costs. The St. Clair Circuit Court, Ernest F. Oppliger, J., granted judgment for plaintiff. The defendant appeals, raising the issue of whether the trial court erred in refusing to apply the construction contract’s arbitration clause. Held:

    The trial court’s ruling that the project engineer, as an agent of the city, was not an appropriate person to act as an arbitrator of plaintiff’s claim for additional compensation was erroneous. Michigan’s case law recognizes the propriety of using the engineer to resolve such disputes. Further, the claim for further compensation for the restoration work was a question within the arbitrator’s authority since the restoration work was within the specifications of the contract.
    Reversed.
    1. Arbitration and Award — Municipal Corporations — Construction Contracts — City Engineers — Appeal and Error.
    Michigan case law recognizes the propriety of using a city engineer to act as an arbitrator of claims for additional compensation under a construction contract between a contractor and the city; where a construction contract provides that the city engineer will serve as arbitrator between the city and the contractor and that his decision will be final, the engineer’s decision cannot be reviewed by the court absent fraud or bad faith.

      References for Points in Headnotes

       13 Am Jur 2d, Building and Construction Contracts § 34.

       5 Am Jur 2d, Arbitration and Award § 145.

       5 Am Jur 2d, Arbitration and Award § 41.

       5 Am Jur 2d, Arbitration and Award § 14.

      2. Arbitration and Award — Contracts — Arbitration Agreements — Courts — Circuit Court.
    The circuit court does not sit as a reviewing court, either in fact or in law, to examine the results or the merits of an arbitration decision pertaining to a contract dispute covered by an arbitration clause in the contract; it is well established that an arbitrator can be plain wrong and yet his award not be subject to reversal by the courts.
    3. Arbitration and Award — Public Policy.
    Public policy in this state favors arbitration in the resolution of disputes.
    4. Arbitration and Award — Arbitration Clauses — Liberal Construction — Court Rules.
    Arbitration clauses contained in contracts are to be liberally construed, resolving any disputes about the arbitrability of an issue in favor of arbitration; if the arbitration clause arguably includes the asserted dispute, then arbitration should be ordered upon proper motion (GCR 1963, 769).

      Hyman, Gurwin, Nachman, Friedman & Winkelman (by Thomas J. Beale), for plaintiff.

      Bush, Luce, Henderson, Black & Bankson, for defendant.
    Before: Bronson, P.J., and M. J. Kelly and B. C. Riley, JJ.
   M. J. Kelly, J.

This is an appeal by defendant City of Port Huron from a decision of the St. Clair County Circuit Court awarding plaintiff Lanzo Construction Company $38,240 in its breach of contract suit against defendant. A single issue is presented, that is, did the trial court err in refusing to apply the construction contract’s arbitration clause which allowed the designated arbitrator/ engineer to resolve plaintiffs claim for additional compensation? We hold that it did.

Lanzo Construction Company was awarded a contract for the installation and construction of sanitary sewers, storm sewers and roadways by the city. As part of the job, Lanzo restored sidewalks and driveways which had necessarily been removed in order to lay the sewer lines. After completion of the project, Lanzo submitted a claim to the city requesting an additional $44,000-plus as costs for the restoration work. The engineer, pursuant to the contract arbitration clause, concluded that the restoration costs were supposed to have been included in Lanzo’s base bid on the sewer project and denied the claim. Lanzo then filed this suit.

The contract between the parties contained the following arbitration clause:

"In case any inconsistency, omission, or conflict shall be discovered in either specifications or drawings, or if in any place, the meaning of either or both shall be obscure, or uncertain, or in dispute, the Engineer shall decide as to the true intent and his decision shall be final and binding.”

The trial court viewed this case as presenting two related issues: (1) whether or not the construction contract was ambiguous; and (2) if so, whether the contract’s arbitration clause requires the engineer to resolve the ambiguity. The lower court found the contract to be ambiguous and this finding is not contested on appeal. As to the second issue, the trial court concluded that, although the arbitration clause empowers the engineer "to construe and define the intent and meaning of planned [sic] specifications * * * the power to construe the contract itself and determine what is within and what is without such contract belongs primarily to the Courts”. The trial court deemed it inequitable to allow the city’s agent, that is, the engineer, to pass upon the contractor’s "reasonable interpretation” of the contract. Holding that the question of whether or not Lanzo was entitled to additional compensation was one for the courts, the lower court construed the ambiguous contract against the drafter, the city, and awarded Lanzo $38,240.

We find erroneous the trial court’s conclusion that the project engineer, as an agent of the city, was not an appropriate person to act as arbitrator of plaintiffs claim for additional compensation. Michigan case law has recognized historically the propriety of using the engineer to resolve disputes between the parties. Algate v City of Lansing, 180 Mich 484; 147 NW 561 (1914), Fisher v Burroughs Adding Machine Co, 166 Mich 396, 397; 132 NW 101 (1911), E C Nolan Co, Inc v Dep’t of State Highways, 45 Mich App 364, 366-367; 206 NW2d 472 (1973). See also, Anno: Right of architect or engineer to construe building or construction contract, 137 ALR 530. Illustrative of this view is the case of Schneider v Ann Arbor, 195 Mich 599, 606; 162 NW 110 (1917), wherein the Court upheld a provision in a public works contract which provided that the city’s own engineer would serve as arbitrator between the city and its contractor and that the decision of that engineer would be final in any matter. The Court stated:

"He [the engineer] was made by their agreement the final arbitrator, and his action cannot be reviewed by the courts, in the absence of fraud or bad faith. Such provisions are designed to prevent the possibility of disputes arising between the parties, and to avoid expensive and frequently ruinous litigation, and are uniformly upheld. * * * The burden is on the plaintiff to impeach the determination of the engineer if he claims fraud or bad faith. There is no evidence of either. The determination of the engineer is therefore final.”

Having established that the engineer was competent to serve as the arbitrator, we address the issue whether the plaintiffs claim for additional compensation for the restoration work was a question within the arbitrator’s authority. As the cited arbitration clause limits the arbitrator’s authority to disputes involving specifications or drawings, the issue turns on whether the restoration work is within the specifications of the contract.

Initially, the controversy concerning the restoration work required that the parties go to the contract and determine where defendant city had made provision for that work. Our review of the language and organization of the contract indicates that the general heading "specifications” includes three sections relevant to the subject of restoration work. These contract sections state:

"4. Sewer Construction
"Work Not Included. Casing pipe construction, restoration of permanent type roadway surfaces, concrete sidewalks, curbs and gutters, and driveways.
"11. Restoration Work
"Work Included. This work shall include the replacement of all permanent type roadways surfaces, concrete sidewalks, curbs and gutters, and driveways, damaged or removed due to the construction of the pipe and appurtenant structures. All such work shall be in accordance with the best modern practice and the city standards.
"15. Method of Payment
"Sewers * * * Payment for this work shall include the furnishing, installation, infiltration or exfiltration testing, excavation, trenching, cofferdams, dewatering, all backfilling unless otherwise specified disposal of excess material, temporary sheeting and bracing, tree removal, removal of existing sewers or drains, repair and replacing of all existing utilities, lawn areas, connection of existing sewers and all other work required for a complete job. Items not listed in the proposal shall be considered as incidental to the work unless otherwise noted. ” (Emphasis added.)

The trial court found that the conflicting language of §§ 4, 11 and 15 created ambiguity as to whether the restoration work might or might not have been contemplated by the parties as included in the contract language as "work not included” or "restoration work”. That of course only defines the controversy. It is the next step which the trial court took that constituted error. The court stated that compensation for the restoration work related to "what is within and what is without such contract” and thus was beyond the competence of the arbitrator. The court excised the question from the general heading "specifications” simply by ignoring the places within the contract documents under which the conflicting provisions were contained.

There is no difficulty in placing the source of the ambiguity. In fact it is more than an ambiguity, it is a contradiction. The project engineer who prepared the specifications for McNamee, Porter & Seeley, Mr. John Adams, testified as to its origin that he inserted in § 4 of the specifications a standard specification which erroneously contained the following clause: "Work Not Included. Casing pipe construction, restoration of permanent type roadway surfaces, concrete sidewalks, curbs and gutters, and driveways.” Mr. Adams clearly, unequivocally and concisely testified:

"[T]hat section, work not included, should have been omitted from that particular spec because that was not the intent nor was that clause consistent with the remainder of the specifications.”

With that as a predicate the conclusion is somewhat compelling that Lanzo Construction Company’s "reasonable interpretation” of the contract should have been implemented during the arbitration process by the engineer. Perhaps equitable considerations played some part in the result which obtained at the circuit court level. However the circuit court does not sit as a reviewing court either in fact or in law to examine the results or the merits of an arbitration decision. It is well established law that the arbitrator can be plain wrong and yet his award not be subject to reversal by the courts. See E E Tripp Excavating Contractor, Inc v Jackson County, 60 Mich App 221, 250-251; 230 NW2d 556 (1975), and authorities therein cited.

There are, or course, two sides to the question of whether in the overall context the decision of the arbitrator was correct. The original contract was for just under two million dollars and with the additions, extras and addenda it was remarked at trial that the total reached 2-1/2 million dollars. The damages complained of for the contractor’s interpretation of the surplus "work not included” clause are slight in comparison. Also this was one part of a four-part contract and the testimony was that the other contractors had interpreted the clause in accordance with the city’s and the engineer’s intentions. In any event there is room for argument.

There is no room for argument as to whether or not the offending surplus clause was contained in the specifications. It clearly was.

Public policy in this state favors arbitration in the resolution of disputes. Kaleva-Norman-Dickson School Dist No 6 v Kaleva-Norman-Dickson School Teachers’ Ass’n, 393 Mich 583; 227 NW2d 500 (1975) . Arbitration clauses contained in contracts are to be liberally construed, Stadel v Granger Brothers, Inc, 4 Mich App 250, 258; 144 NW2d 609 (1966), resolving any disputes about the arbitrability of an issue in favor of arbitration. See also, Chippewa Valley Schools v Hill, 62 Mich App 116; 233 NW2d 208 (1975). If the arbitration clause arguably includes the asserted dispute, then arbitration should be ordered upon proper motion. GCR 1963, 769, Ferris State College v Ferris Faculty Ass’n, 72 Mich App 244; 249 NW2d 375 (1976).

Therefore, we reverse the trial court and hold that the dispute between the city and the contractor concerning the restoration work attendant upon the installation of a sewer line related to specifications, rather than to the content of the construction contract, and thus, was a proper subject for decision by the project engineer pursuant to the contract’s arbitration clause.

Reversed.


author: Bashara, J.

text:
    BRETZ v CITY OF CENTER LINE
    Docket No. 78-284.
    Submitted November 16, 1978, at Detroit.
    Decided February 6, 1979.
    Plaintiff Julie Ann Bretz was denied employment by the City of Center Line as a lifeguard. The refusal was based on a city ordinance which barred the employment of anyone within the second degree of consanguinity to any other city employee. The plaintiff’s brother was a lifeguard employed by the city at the time.
    Plaintiff, by her next friend, Don Bretz, commenced an action seeking to have the ordinance declared unconstitutional. Ma-comb Circuit Court, Howard R. Carroll, J., granted partial summary judgment for the plaintiff and issued an interim order declaring the ordinance unconstitutional. The defendant appeals. Held:

    The broad terms of the ordinance go far beyond the legitimate objective sought to be reached, that of preventing persons in high supervisory position from engaging in nepotism and "cronyism”. The ordinance is overbroad.
    Affirmed. The issue of damages is to be decided at the trial level.
    1. Constitutional Law — Statutes — Classification — Substantial-Relation-to-the-Object Test.
    The substantial-relation-to-the-object test should be applied to determine whether a statutory classification is unconstitutional where a challenged statute carves out a discrete exception to a general rule and the statutory exception is no longer experimental.
    2. Constitutional Law — Statutes — Classification — Persons Similarly Circumstanced — Substantial-Relation-to-the-Object Test.
    A statutory classification must be reasonable, not arbitrary, and must rest upon some ground of difference having a fair and substantial relation to the object of the legislation so that all persons similarly circumstanced shall be treated alike.

      References for Points in Headnotes

       16 Am Jur 2d, Constitutional Law §§ 494, 498.

       16 Am Jur 2d, Constitutional Law § 502.

      Louis J. Burnett, for plaintiff.

      Rogensues, Hacker & Associates, for defendant.
    Before: N. J. Kaufman, P.J., and V. J. Brennan and Bashara, JJ.
   Bashara, J.

Defendant, City of Center Line, appeals from an interim order of the Macomb Circuit Court declaring unconstitutional its ordinance barring the employment of anyone within the second degree of consanguinity to any other city employee.

The plaintiff was denied employment with the defendant as a lifeguard. Defendant admitted plaintiff had not been hired because her brother was also employed by the city as a lifeguard.

Defendant based its action upon city ordinance 180, chapter 10 of the Code of Ordinances for the City of Center Line which states in pertinent part:

"Sec. 2-1001 Deñnitions.—The terms used in this ordinance are hereby defined as follows:
"(a) 'Official’ or 'employee’.—Any person elected to, appointed to, or employed or retained by any public office or public body of the city, whether full-time or part-time.
"(b) 'Public body’.—Any agency, board, body, commission, committee, department or office of the City of Center Line.
"(c) 'Immediate family’.—Those persons within the second degree of consanguinity or affinity, as computed by the civil law method, either lineal or collateral. (Ord. 180, sec. 1, adopted 5/14/73)
"Sec. 2-1002 Nepotism prohibited.—No official or employee shall employ or appoint to any clerkship, office, position, employment or duty for any public body any person who, at the time of his proposed appointment or employment, is a member of the immediate family of an official or employee of any public body at that time. (Ord. 180, sec. 1, adopted 5/14/73)”

Plaintiff argues that ordinance 180 is arbitrary, unreasonable, overbroad, and lacking any reasonable relationship to its legitimate purpose. Defendant contends that the ordinance was a valid exercise of its power and did not violate any constitutional guarantees. They also assert that the ordinance was rationally related to the object sought and was not impermissibly discriminatory.

The trial judge, in granting plaintiff’s motion for partial summary judgment, found that the ordinance went beyond its purpose of discouraging nepotism.

We initially consider what test should properly be used to determine the constitutionality of the subject ordinance. In Manistee Bank & Trust Co v McGowan, 394 Mich 655, 671; 232 NW2d 636 (1975), Justice Levin, speaking for a plurality, set forth the appropriate guideline:

"In my judgment, at least where the challenged statute carves out a discrete exception to a general rule and the statutory exception is no longer experimental, the substantial relation to the object test should be applied. ” (Emphasis supplied.)

The United States Supreme Court has voiced a similar opinion. Chief Justice Burger, speaking for a unanimous Court in Reed v Reed, 404 US 71, 76; 92 S Ct 251; 30 L Ed 2d 225 (1971), stated:

"A classification 'must be reasonable, not arbitrary, and must rest upon some ground of difference having a fair and substantial relation to the object of the legislation, so that all persons similarly circumstanced shall be treated alike.’ ” (Emphasis supplied.) (Citations omitted.)

See also Eisenstadt v Baird, 405 US 438; 92 S Ct 1029; 31 L Ed 2d 349 (1972).

The appellant argues that the trial judge considered only the question of nepotism in arriving at the conclusion that the statute is overbroad and therefore unconstitutional. Its aim, according to the appellant, is to prevent "cronyism” as well. However, an ordinance which prohibits the hiring of the relatives of any employee goes far beyond the object which the ordinance seeks to reach.

The case at bar provides an illustrative case in point. Julie Ann Bretz is admittedly qualified to fill the position for which she applied. The sole reason for her disqualification was that her brother, also a qualified lifeguard, was employed by the city.

Had the ordinance sought to prohibit anyone in a supervisory position from hirng a close relative, it might be said to be reasonably related to its objective of preventing nepotism. Likewise, to prevent the hiring of a relative within the second degree of consanguinity of a highly placed supervisory employee in another department could arguably be reasonably related to the prevention of "cronyism”.

The broad terms of the ordinance can lead us to no other conclusion than that its sweep goes far beyond the legitimate objectives sought to be reached. The cases cited by appellant in support of its argument involve, as appellee points out, statutes limited to the disqualification of relatives of appointing officials or department heads. Barton v Alexander, 27 Idaho 286; 148 P 471 (1915), Fairless v Cameron County Water Improvement Dist No. 1, 25 SW2d 651 (Tex Civ App, 1930), and Graham County v Buhl, 76 Ariz 275; 263 P2d 537 (1953).

Mindful as we are that the objective of the legislation is laudable and necessary for implementation of effective and fair government, we must concur in the trial judge’s opinion that the ordinance is overbroad. We also agree that the question of damages is yet to be decided at the trial level.

Affirmed, no costs, a public question being involved.


author: C. J. Byrns, J.

text:
    FLETCHER v KENTUCKY INNS, INC.
    Docket No. 77-422.
    Submitted October 4, 1978, at Grand Rapids
    Decided February 6, 1979.
    Leave to appeal denied, 406 Mich 959.
    Plaintiffs Charles S. White and Virginia S. White were the owners of certain stock in defendant Kentucky Inns, Inc., which was subject to a transfer restriction by virtue of the articles of incorporation. The restriction allowed the corporation 30 days in which to accept "in its entirety” any bona fide offer to purchase the shares. Plaintiff Ralph G. Fletcher, Jr., offered to purchase the shares in return for a promissory note from his company personally guaranteed by him and agreeing to assume the liability of the Whites on two loans by a bank to Kentucky Inns, which the Whites had personally guaranteed. The Whites submitted the offer to Kentucky Inns, Inc., in compliance with the stock transfer restrictions. Kentucky Inns sought to exercise its right by offering to give the Whites a promissory note secured by the stock and to assume the Whites’ liability on the loans. The Whites transferred the stock to Mr. Fletcher and, when Kentucky Inns refused to transfer the shares on its books plaintiffs began a lawsuit to compel the transfer of the shares and for money damages. Defendant counterclaimed for damages. The Alpena Circuit Court, Philip J. Glennie, J., granted judgment against defendant compelling the transfer and denying any money damages to any party. Defendant appeals. Held:

    The offer was not accepted "in its entirety” within the 30-day period and plaintiffs are entitled to the transfer on the books of defendant.
    Affirmed.
    Corporations — Stock — Transfer of Stock — Restrictive Transfer — Right of First Refusal.
    An offer by a corporation to purchase stock by executing a note promising payment for the stock according to a fixed schedule, pledging that stock as security and agreeing to assume any liability the seller may have incurred to a bank by virtue of being a guarantor of notes made by the corporation to the bank is not a valid exercise of the corporation’s right of first refusal where the terms of the other offer included a note from the buyer’s corporation personally guaranteed by the buyer, and the buyer agreed to personally assume the liability of the seller on the notes to the bank.

      References for Points in Headnotes

       18 Am Jur 2d, Corporations §§ 381-387, 424-432.
    Registration: remedy for refusal of corporation or its agent to register or effectuate transfer of stock. 22 ALR2d 12.
    Construction and application of provision restricting sale or transfer of corporate stock. 2 ALR2d 745.

      Boyce, Yahne, Wenzel & White, for plaintiffs.

      Thomas R. Lewis, for defendant.
    Before: D. F. Walsh, P.J., and T. M. Burns and C. J. Byrns, JJ.

       Circuit judge, sitting on the Court of Appeals by assignment.

   C. J. Byrns, J.

Defendants appeal of right from that portion of the trial court’s January 23, 1978, judgment, entered after a bench trial, which ordered defendant Kentucky Inns, Inc. to transfer on its corporate books ownership of 1500 shares of its stock from plaintiffs Charles S. and Virginia S. White to plaintiff Ralph G. Fletcher, Jr. At issue in this case is paragraph V(3)(b) of Kentucky Inns’ articles of incorporation which contains the following stock transfer restriction:

"Any stockholder who desires to sell all or part of such stock shall first offer in writing such stock for sale to the corporation at the same price and upon the same terms offered to such stockholder by a bona fide prospective purchaser of such shares. The corporation shall have the option for thirty days after receipt of such written offer to accept such offer. If, within such 30 day period, the corporation shall fail to accept such offer in its entirety, the option hereunder to purchase such stock shall terminate. If the corporation shall not exercise the option, then the stockholder so desiring to sell a part or all of his stock shall have the right for a period of sixty days after the expiration of the aforesaid thirty day period to sell such stock to, and only to, the aforesaid bona fide prospective purchaser in the same quantity, at the same price, and upon the same terms as were offered to the corporation. Upon the expiration of such 60 day period, stock not sold by such stockholder shall be subject to all of the restrictions with respect to transferability and shall be held subject to by-laws and articles of incorporation of the corporation.” (Emphasis added.)

We hold that under all of the facts and circumstances of this case defendant Kentucky Inns, Inc. did not properly exercise its right of first option to purchase the Whites’ stock and we therefore affirm the well reasoned decision of the trial judge.

At the time of the events which engendered the present action, Kentucky Inns, Inc. was a closely held corporation of which plaintiffs White were shareholders. Plaintiff Fletcher owned 100% of Fletcher Motels, Inc. and was a business competitor of Kentucky Inns. Fletcher, by letter dated August 11, 1976, offered to purchase the Whites’ Kentucky Inns stock. The total price, payment schedule, and rate of interest are not contested.

In his offer Fletcher stated that the Whites would receive the note of Fletcher Motels, Inc.; that he would personally guarantee this note; and that he would assume the Whites’ liability on two loans made to Kentucky Inns, Inc. by the Peoples Bank and Trust of Alpena, Michigan, of which either or both of the Whites were personal guarantors, and which totaled $37,500.

By letter dated August 17, 1976, Fletcher indicated he would withdraw his offer to purchase the Whites’ stock if his offer were not accepted by August 25, 1976. Plaintiff Charles S. White on August 21 wrote "Accepted” on Fletcher’s August 11 letter. White on August 23 advised Kentucky Inns, Inc. by letter of Fletcher’s stock purchase offer and included a copy of this offer.

Kentucky Inns’ board of directors held a special meeting on September 15, 1976, to consider the offer by the Whites and another individual of their stock to the corporation. The minutes of this meeting state in pertinent part:

"Since the letter of Charles S. White did not specifically offer his stock for sale to the corporation, Mr. White was asked as to the intention of his letter and he advised the Directors that he was doing whatever was required to be done with the corporation as a condition to selling his stock to a person other than the corporation. He specifically stated he was fulfilling the requirements of Article V of the Articles of Incorporation.”

The board voted to exercise its option to purchase the Whites’ stock in accordance with the restrictive stock transfer provision of article V(3)(b). The directors proposed that Kentucky Inns execute a note promising payment for the stock according to a fixed schedule and pledging the stock as security. The board also agreed that the corporation would assume any liability which Mr. White might have to the bank, incurred as an officer, director or shareholder of the corporation. The corporation’s purchase of the Whites’ stock was specifically conditioned upon approval of the transaction by Peoples Bank and Trust. Mr. White advised the directors at this meeting that he did not necessarily agree that the security offered by Kentucky Inns was the same as the security offered by Fletcher in the latter’s offer to purchase the Whites’ stock.

By letter dated September 16, 1976, the corporation advised Mr. White that it would purchase the Whites’ 1500 shares of stock, would execute a promissory note promising payment of the indebtedness, would pledge the stock as collateral for payment of the indebtedness, and would "assume any and all liability which you may have to Peoples Bank and Trust of Alpena incurred as a shareholder, director, or officer of Kentucky Inns, Inc. or any predecessor corporation”. A copy of this letter and a copy of a letter from the bank approving Kentucky Inns’ stock purchase offer was hand delivered to plaintiffs’ home on September 21, 1976. However, Mr. White was out of town on business at that time and consequently did not read the letter until his return on September 23. On September 28, 1976, Mr. White met with Kentucky Inns’ president and wrote "Refused” on the corporation’s September 16 letter.

The minutes of Kentucky Inns’ September 22, 1976, board of directors meeting contain the cryptic comment that "Stanley Beck had been satisfied and that the John Baker Trust is willing to do the same with Charles S. White”. However, it was not until November 16, 1976, that a Peoples Bank and Trust officer officially notified the Whites regarding the willingness of Mrs. Thelma Baker, individually and as co-trustee of the John Baker trust, to tender additional guarantees to them. The corporation on that same date advised plaintiffs of the offer by Mrs. Baker and the John Baker trust to guarantee payment of the corporation’s note for purchase of the Whites’ stock and to substitute for plaintiffs as guarantors of the corporation’s bank loans.

On November 23, 1976, the Whites transferred their stock to Fletcher. The stock certificates, duly completed, signed, and witnessed, were subsequently delivered to defendant corporation. When the corporation refused to transfer the Whites’ stock to Fletcher on the corporation records, the present lawsuit commenced.

The pivotal issue in the instant case is whether defendant corporation, within the 30-day option period described in paragraph V(3)(b) of its articles of incorporation, agreed "to accept such offer in its entirety”. (Emphasis supplied.) To resolve the question presented it is necessary to ascertain when the 30-day option period commenced and whether Kentucky Inns during this period communicated to plaintiffs White acceptance of the Whites’ offer "in its entirety”, i.e., whether the terms of Kentucky Inns’ offer to purchase the Whites’ stock were equivalent to the terms offered to the Whites by Fletcher for the same stock.

The minutes of the September 15, 1976, special meeting of defendant corporation’s board of directors clearly reflect that as of that date defendant corporation was well aware that the Whites were offering their stock to the corporation pursuant to the requirements of article V(3)(b). The 30-day option period during which Kentucky Inns could "accept such offer in its entirety” therefore commenced on September 15, 1976.

We turn next to a determination of whether defendant corporation within the 30-day option period communicated to the Whites an acceptance of their offer which was equivalent in its terms to the terms of the offer already tendered to the Whites by Fletcher. In this connection it is necessary to interpret the phrase "in its entirety” as that phrase is used in the stock transfer restriction appearing in defendant corporation’s articles of incorporation.

The proper standard for interpreting restrictions on transfer of corporate stock has been stated in 12 Fletcher, Cyclopedia of Corporations, § 5461.3, p 198 as follows:

"As indicated, a power to deny or restrict the transferability of stock will not be implied and will be strictly construed, because 'shares of stock are transferable as other personal property, and the courts have jealously guarded facilities for the transfer of title, and all unreasonable attempts to restrain the right to pass title have been declared void as against public policy’.” (Footnotes omitted.)

In 2 O’Neal, Close Corporations, § 7.05a, p 16, it is stated:

"On the one hand, the courts tend to strictly construe restrictions on the transfer of stock. On the other hand, they are reluctant to give such a restriction an interpretation that will permit outsiders to become shareholders in the corporation against the wishes of those who are already participants, and thus defeat one of the principal objectives of a first option provision.” (Footnotes omitted.)

See generally in this connection O’Neal & Moeling, Problems of Minority Shareholders in Michigan Close Corporations, 14 Wayne L Rev 723 (1968).

Even if this Court were to construe the stock transfer restriction liberally in favor of defendant corporation, we would be unable to agree with defendants’ contention that Kentucky Inns accepted the Whites’ offer "in its entirety” within the allotted time period. For, whether interpreted liberally or strictly, the phrase "in its entirety” certainly connotes that the salient conditions of the offer originally made by Fletcher to the Whites must have been met by Kentucky Inns and communicated to the Whites within 30 days. However, there exist two important terms of the Fletcher offer which were not met by defendant corporation and communicated to plaintiffs White within the option period.

First, it will be recalled that Fletcher in his offer to the Whites stated that he would personally guarantee his corporation’s note for the purchase of their stock, and there exists no doubt in the instant case of his financial ability to do so. By contrast, Kentucky Inns in its September 16, 1976, letter to Mr. White stated that it would execute a promissory note promising payment of its indebtedness, but made no mention of any personal guarantor of this note. The minutes of defendant corporation’s September 15, 1976, board of directors meeting clearly reveal that Mr. White at that meeting pointed out that he did not necessarily agree that the security offered by the corporation was the same as the security being offered him by Fletcher. Consequently, defendant corporation should have been on notice that this term of its offer was not equivalent to the corresponding term of Fletcher’s offer and therefore could not be said to constitute an acceptance of the Whites’ offer "in its entirety”.

The second substantive term of the Fletcher offer which was not timely matched by Kentucky Inns in its acceptance of plaintiffs’ offer pursuant to paragraph V(3)(b) was Fletcher’s offer to assume any liability plaintiffs might incur as personal guarantors of two loans by Peoples Bank and Trust to Kentucky Inns, Inc. totaling $37,500. The best defendant corporation could offer in this regard was its statement that the corporation itself would assume any and all liability which Mr. White might have to Peoples Bank and Trust incurred as a shareholder, director, or officer of defendant corporation. However, since the corporation was already the principal debtor of the two loans to it by the bank, its offer to Mr. White to assume any liability he might have to the bank arising from his relationship with the corporation was in reality a mere cipher. Kentucky Inns’ failure to meet this term of the original Fletcher offer buttresses the conclusion that it did not accept the Whites’ offer "in its entirety” within the option period.

The trial judge in the case at bar found that defendant corporation had not met these two essential terms of the original Fletcher offer within the 30-day option period. It was not until after the option period had expired that defendant corporation communicated to the Whites the willingness of Mrs. Baker, individually and as co-trustee of the John Baker trust, to guarantee Kentucky Inns’ note for the stock purchase and to assume plaintiffs’ liability as personal guarantors of the loans by the bank to Kentucky Inns. These factual findings by the lower court are not clearly erroneous. GCR 1963, 517.1. Plaintiffs Whites’ subsequent transfer of their stock to Fletcher was therefore valid according to the provisions of paragraph V(3)(b) of defendant corporation’s articles of incorporation.

The trial court’s January 23, 1978, judgment ordering defendant corporation to transfer on its books and records ownership of the 1500 shares of stock from plaintiffs White to plaintiff Fletcher is affirmed.