                          STATE OF MICHIGAN

                           COURT OF APPEALS



CMC TELECOM, INC,                                                  UNPUBLISHED
                                                                   February 21, 2017
              Plaintiff-Appellant,

v                                                                  No. 327955
                                                                   Oakland Circuit Court
NEYER TISEO & HINDO, LTD, doing business                           LC No. 2012-125166-CK
as NTH CONSULTANTS, LTD,

              Defendant-Appellee.


Before: WILDER, P.J., and CAVANAGH and K. F. KELLY, JJ.

PER CURIAM.

        Plaintiff, CMC Telecom, Inc, appeals as of right the trial court’s verdict of no cause of
action in favor of defendant, Neyer Tiseo & Hindo, LTD, doing business as NTH Consultants,
LTD. We affirm.

                                I. FACTUAL BACKGROUND

        This breach of contract action arises out thousands of alleged fraudulent calls placed
remotely by hackers who compromised defendant’s voicemail system. The primary question
presented below was whether defendant was obligated to pay for such fraudulent calls under its
telecommunications agreement with plaintiff. There was a prior appeal in this case at the
summary disposition stage. CMC Telecom, Inc v Neyer Tiseo & Hindo, LTD, unpublished
opinion per curiam of the Court of Appeals, issued September 23, 2014 (Docket No. 315338)
(CMC I). Much of the pertinent factual background is set forth by CMC I, and the parties
stipulated to many other relevant “uncontested” facts at trial.1

       “Plaintiff is a local telephone provider who purchases long distance and international
phone service from Level 3, a wholesaler, and resells these services to [plaintiff’s] customers.”


1
  Such stipulated facts are “sacrosanct” and must be accepted as true. See Dana Corp v Appeal
Bd of Mich Employment Security Comm, 371 Mich 107, 110; 123 NW2d 277 (1963); see also
Staff v Johnson, 242 Mich App 521, 535; 619 NW2d 57 (2000). Accordingly, we quote the
parties’ stipulated facts in this opinion where practicable.


                                               -1-
Id. at 1. Plaintiff began providing telecommunication services to defendant’s Dearborn office in
2006. “Plaintiff provided Defendant with a voicemail system with an integrated call forwarding
service on certain of Defendant’s phone lines for use at the Dearborn Office.”

       During the timeframe at issue in this case, the parties’ agreement was memorialized
primarily by two “basic documents”: a “customer service order” (CSO) and a “service terms and
conditions” agreement (the Service Terms agreement). The Service Terms agreement was the
principal contract between the parties. On the other hand, the CSO was a supplemental
agreement.

       The pertinent provisions of the Service Terms agreement are as follows:

             PAYMENT.          Customer shall pay CMC for Services pursuant to this
       Agreement.

                                              * * *

       LIMITATION OF LIABILITY. . . . CMC SHALL NOT BE LIABLE FOR
       ANY LOSSES OR DAMAGES RESULTING FROM . . . THE . . .
       OPERATION, USE, OR MISUSE OF AN ACCOUNT, EQUIPMENT, OR
       SERVICES . . . .

The Service Terms agreement contains “a merger provision which expressly provides that the
Service Terms [agreement] and the documents explicitly referenced therein constitute the parties
entire agreement, and ‘supersedes all other agreements, whether written or oral.’ ” On the other
hand, in pertinent part, the CSO provides, “By executing this Customer Service Order [CSO],
Customer [defendant] is ordering the Services set forth herein and on related documentation.
Customer agrees to pay for all Services ordered or otherwise used[.]” Neither the Service Terms
agreement nor the CSO define the terms “Services,” “ordered,” or “used,” and “[n]one of
Plaintiff’s alleged contracts with Defendant reference any variation of the word fraud.”

        In early March of 2011, more than 20,000 fraudulent international calls were placed
using three lines associated with defendant’s account. Plaintiff’s “switch engineer,” Norman
Joseph Diedrich, investigated the fraudulent call incident and determined that the fraudulent calls
were placed when defendant’s voicemail system was compromised by hackers, who remotely
changed defendant’s voicemail settings to forward all calls to “an international location number.”
The hackers’ use of defendant’s “call forwarding always” function allowed them to make such a
high volume of calls despite the relatively short period of time at issue. A call so forwarded was
never routed through defendant’s hardware, only through the voicemail server and the hardware
of plaintiff and Level 3; thus, the hackers were able to place up to 240 international calls
simultaneously. Defendant would have had no way to know the fraudulent calls were being
placed until plaintiff or Level 3 alerted it of that fact. Diedrich opined that the fraudulent calls
“were definitely made,” but he admitted that his opinion in this regard was premised solely on
the fact that “[t]he calls were recorded by Level 3.” Diedrich also admitted that he “kn[e]w
nothing about Level 3’s billing.”

       “Plaintiff issued an invoice to Defendant dated April 10, 2011 for $224,082.58, including
charges for the fraudulent international calls at issue,” and “Defendant paid Plaintiff the
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undisputed portion of the invoice, leaving a disputed balance of $209,993.28. . . .” The April 10,
2011 invoice is 280 pages long and was not prepared by plaintiff or its employees but “by one of
Plaintiff’s vendors, Profitec, Inc. (‘Profitec’). . . .” Moreover, “[t]he international call charges . .
. reflected in the [April 10, 2011] invoice . . . are based on call data that was generated by Level
3 and not on any call data generated by Plaintiff.” After defendant refused to pay the disputed
balance, plaintiff instituted this action.

         Plaintiff called only three witnesses at trial. The first, Rhonie Hamel, is the accounts
receivable manager for plaintiff. Hamel testified that the person at Profitec who would have
personal knowledge about how the April 10, 2011 invoice was generated is Caren Bennett, who
was never deposed or called as a witness at trial. Hamel was unsure whether any of plaintiff’s
employees ever actually reviewed the “raw call data” from which the April 10, 2011 invoice was
compiled. Plaintiff attempted to have Hamel offer “trade usage” testimony, but such testimony
was excluded because plaintiff failed to establish that Hamel was a competent expert with the
ability to offer such testimony.

        Plaintiff’s second witness was the switch manager, Diedrich. Through Diedrich’s
testimony, plaintiff attempted to introduce documents regarding how “Comcast” and “Bright
House Networks” handle fraudulent calls, but those exhibits were excluded on hearsay grounds
after Diedrich testified that he was unfamiliar with the documents and their origin.

       Finally, plaintiff called its president and sole owner, Craig Champagne. Champagne
acknowledged that, other than asking the billing company, Profitec, to compile the April 10,
2011 invoice, plaintiff did nothing to verify the accuracy of the billed calls. During
Champagne’s testimony, plaintiff attempted to introduce several documents Champagne had
located online. The documents in question concerned the “toll fraud” policies of several major
telecommunications companies. Defendant objected, arguing that the documents were
inadmissible hearsay. Plaintiff responded by arguing that the documents were admissible under
MRE 803(24), i.e., the “catch-all” hearsay exception. The trial court held that the documents
were not admissible under the catch-all exception.

       At the conclusion of the trial, the trial court issued a written opinion and order in favor of
defendant. This appeal ensued.

                                            II. ANALYSIS

        Plaintiff first argues that the trial court committed error requiring reversal by excluding
plaintiff’s proffered trade usage evidence. We disagree.

         Plaintiff’s failure to duly preserve this issue for appeal is fatal to its instant claim of error.
“[I]t is well settled that in order to preserve the issue of the admissibility of evidence for appeal,
the proponent of evidence excluded by the trial court must make an offer of proof.” Detroit v
Detroit Plaza Ltd Partnership, 273 Mich App 260, 291; 730 NW2d 523 (2006). Plaintiff did not
make an offer of proof regarding any of its excluded trade usage evidence, and hence our review
is for plain error affecting plaintiff’s substantial rights. See Landin v Healthsource Saginaw, Inc,
305 Mich App 519, 541; 854 NW2d 152 (2014). “To avoid forfeiture under the plain error rule,
three requirements must be met: 1) error must have occurred, 2) the error was plain, i.e., clear or

                                                   -3-
obvious, 3) and the plain error affected substantial rights.” In re Contempt of Henry, 282 Mich
App 656, 666; 765 NW2d 44 (2009), quoting People v Carines, 460 Mich 750, 763; 597 NW2d
130 (1999). “The third requirement generally requires a showing of prejudice, i.e., that the error
affected the outcome of the lower court proceedings.” Carines, 460 Mich at 763. Without an
offer of proof, it is impossible for plaintiff to carry its burden of proving that the exclusion of the
trade usage evidence prejudiced it. Thus, plaintiff’s instant claim of error necessarily fails. See
People v Hampton, 237 Mich App 143, 154; 603 NW2d 270 (1999) (“Because defendant did not
make an offer of proof at trial regarding the substance of Parkman’s excluded testimony, we are
unable to conclude that the exclusion of Parkman’s testimony affected defendant’s substantial
rights.”).

       Plaintiff also argues that the trial court either erred or relied on clearly erroneous factual
findings when it decided, following trial, that plaintiff had failed to carry its burden of proving its
claims by a preponderance of the evidence. We again disagree.

        “We review a trial court’s findings of fact for clear error, giving particular deference to
the trial court’s superior position to determine witness credibility.” Miller-Davis Co v Ahrens
Construction, Inc, 495 Mich 161, 172; 848 NW2d 95 (2014) (Miller-Davis). “A factual finding
is clearly erroneous if there is no substantial evidence to sustain it or if, although there is some
evidence to support it, the reviewing court is left with the definite and firm conviction that a
mistake has been committed.” Id. at 172-173 (footnotes omitted). On the other hand, “[t]he
existence and interpretation of a contract are questions of law reviewed de novo.” Kloian v
Domino’s Pizza LLC, 273 Mich App 449, 452; 733 NW2d 766 (2006).

        As an initial consideration, we reject plaintiff’s portrayal of the federal caselaw it cites as
“controlling” over this matter. Although “federal precedent is generally considered highly
persuasive when it addresses analogous issues,” such precedent is “not binding on this Court”
under the doctrine of stare decisis. Wilcoxon v Minnesota Mining & Mfg Co, 235 Mich App 347,
360; 597 NW2d 250 (1999). Moreover, “the interpretation of a contract is ordinarily a matter of
state law,” DIRECTV, Inc v Imburgia, ___ US ___, ___; 136 S Ct 463, 468; 193 L Ed 2d 365
(2015), and “the Michigan Supreme Court has the ultimate responsibility for determining a
question of state law,” In re Apportionment of State Legislature, 413 Mich 96, 116; 321 NW2d
565 (1982). See also Mullaney v Wilbur, 421 US 684, 691; 95 S Ct 1881; 44 L Ed 2d 508 (1975)
(“[S]tate courts are the ultimate expositors of state law”).

        In any event, based on Michigan law and the facts of the case at bar, we discern no error
warranting reversal. “A party asserting a breach of contract must establish by a preponderance
of the evidence that (1) there was a contract (2) which the other party breached (3) thereby
resulting in damages to the party claiming breach.” Miller-Davis, 495 Mich at 178. The first
element is undisputed here; both parties admit that a contract existed. The determinative
question is whether defendant was obligated to pay for the fraudulent calls and, by failing to do
so, breached the parties’ agreement.

       As explained by the Miller-Davis Court,

       [O]ur primary task in construing a contract . . . is to give effect to the parties’
       intention at the time they entered into the contract. We determine the parties’

                                                 -4-
       intent by examining the language of the contract according to its plain and
       ordinary meaning. In doing so, we avoid an interpretation that would render any
       portion of the contract nugatory. [Miller-Davis, 495 Mich at 174.]

Contractual ambiguities can be either patent or latent. Shay v Aldrich, 487 Mich 648, 668; 790
NW2d 629 (2010).

       A contract is patently ambiguous only if, after the court has engaged in its judicial
       duties of giving effect to the contract’s language, the court concludes that a term
       is equally susceptible to more than a single meaning, or that two provisions of the
       same contract irreconcilably conflict. . . . [Id. at 678 (quotation marks, citations,
       and emphasis omitted).]

Contrastingly, “[a] latent ambiguity exists when the language in a contract appears to be clear
and intelligible and suggests a single meaning, but other facts create the necessity for
interpretation or a choice among two or more possible meanings.” Id. at 668 (quotation marks
and citations omitted). “It is an elementary rule of construction . . . that in case of doubt, a
contract is to be strictly construed against the party by whose agent it was drafted.” Id. at 673.

        Here, although the trial court’s opinion and order does not contain the phrase “latently
ambiguous,” or other words to the same effect, the trial court’s analysis of extrinsic evidence
strongly suggests that it found latent ambiguity in the parties’ agreement. The trial court
reasoned, “[t]he term ‘services’ is not defined and none of Plaintiff’s witnesses provided
testimony establishing that ‘services’ included fraudulent international calls.” (Emphasis
added.) Through such analysis, the trial court considered testimony (i.e., extrinsic evidence) as a
means of discerning the parties’ intent—an exercise that was only permissible if the language of
the agreement was ambiguous. See Blackhawk Development Corp v Village of Dexter, 473 Mich
33, 49; 700 NW2d 364 (2005). Because the trial court is presumed to have known and properly
applied the law, see Charles A Murray Trust v Futrell, 303 Mich App 28, 44; 840 NW2d 775
(2013), we do not presume that the trial court impermissibly considered extrinsic evidence.
Instead, we presume that the court found the parties’ agreement to be ambiguous. And because
no patent ambiguity is apparent in the contractual language—indeed, the parties have never
argued that their agreement was patently ambiguous—we further presume that the trial court
found the parties’ agreement to be latently ambiguous.

        We perceive no error in that conclusion. Plaintiff emphasizes the “LIMITATION OF
LIABILITY” language from the Service Terms agreement, which provides that plaintiff
“SHALL NOT BE LIABLE FOR ANY LOSSES OR DAMAGES RESULTING FROM . . .
THE . . . OPERATION, USE, OR MISUSE OF AN ACCOUNT, EQUIPMENT, OR
SERVICES. . . .” Plaintiff posits that the fraudulent use of defendant’s voicemail to place
international calls constitutes “misuse of an account, equipment, or services,” further contending
that, under the terms of the agreement, plaintiff “shall not be liable” for such misuse. But the
fact that plaintiff is not “liable” to defendant does not mean that defendant is liable to plaintiff.
On the contrary, the plain language in question establishes nothing more than a limitation on
plaintiff’s liability.



                                                -5-
        Moreover, as applied to the facts of this case, we find the pertinent portion of the CSO to
be latently ambiguous. The CSO provides, “Customer agrees to pay for all Services ordered or
otherwise used. . . .” (Emphasis added.) It cannot be rationally argued that defendant “ordered”
the fraudulent calls; plaintiff’s switch manager, Diedrich, admitted at trial that defendant had no
way to know about the fraudulent calls until it was notified by plaintiff or Level 3. Hence, the
question becomes whether the fraudulent calls qualify as services “otherwise used.” It is in this
respect that the latent ambiguity arises. The construction offered by plaintiff is facially
reasonable. But the agreement does not specify whether defendant was agreeing to pay for
services used by itself only or those used by itself and third parties. Given the CSO’s lack of
specificity, either construction is reasonable. Therefore, the CSO is latently ambiguous.

        Standing alone, of course, that latent ambiguity was not fatal to plaintiff’s position, even
in light of contra proferentem. That rule of construction—“that ambiguities are to be construed
against the drafter of the contract”—“should only be applied if all conventional means of
contract interpretation, including the consideration of relevant extrinsic evidence, have left the
finder of fact unable to determine what the parties intended their contract to mean.” Woodington
v Shokoohi, 288 Mich App 352, 376; 792 NW2d 63 (2010). As explained in CMC I, “an
integrated writing ‘may be explained or supplemented by operative usages of trade, by the course
of dealing between the parties, and by the course of performance of the agreement.’ ” CMC I,
unpub op at 3, quoting Restatement Contracts, 2d, § 209, Comment A. Thus, by introducing
extrinsic evidence at trial, plaintiff could have proven that the CSO’s latent ambiguity should be
construed against defendant.

        At trial, however, despite the opportunity to do so, plaintiff was unable to produce any
admissible evidence regarding trade usage. Plaintiff’s evidence that some number of
unidentified clients had, at some time in the past, paid for allegedly fraudulent calls does not
establish that doing so is standard practice in the telecommunications industry. Plaintiff was also
unable to present any “course of dealing” or “course of performance” evidence that the trial
judge, as trier of fact, found credible or persuasive. Nor was plaintiff able to produce any
witnesses competent to testify regarding the veracity of the April 10, 2011 invoice or to explain
its seeming internal inconsistencies. Champagne admitted that plaintiff did nothing to verify the
accuracy of the billed calls. Because of the limited proofs offered by plaintiff, the trial court was
not satisfied that defendant breached the parties’ agreement or that the April 10, 2011 invoice
had been proven to be accurate, and we are not definitely or firmly convinced that the trial court
made a mistake in that regard. The ultimate failure in plaintiff’s proofs is not attributable to any
error by the trial court but rather to plaintiff’s decision to call only three witnesses, to call no
expert witnesses, and to fail to secure admissible evidence regarding trade usage.

       Thus, the trial court did not err by construing the latent ambiguity in the parties’
agreement against plaintiff. Given the lack of admissible extrinsic evidence to indicate that the
ambiguity should be construed against defendant, the trial court could properly rely on the rule of
contra proferentem. Moreover, given the fact that the burden of proof rested with plaintiff, it
was appropriate for the trial court to determine that plaintiff had failed to prove its case by a
preponderance of the evidence.




                                                -6-
Affirmed. As the prevailing party, defendant may tax costs pursuant to MCR 7.219.



                                                  /s/ Kurtis T. Wilder
                                                  /s/ Mark J. Cavanagh
                                                  /s/ Kirsten Frank Kelly




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