PINE OAKS LLC V DANNY DEVRIES
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STATE OF MICHIGAN
COURT OF APPEALS
PINE OAKS, LLC,
UNPUBLISHED
December 9, 2004
Plaintiff-Appellee,
v
No. 249163
Ottawa Circuit Court
LC No. 03-045297-AV
DANNY DEVRIES and JAYNE DEVRIES,
Defendant-Appellants.
Before: Neff, P.J., and Smolenski and Schuette, JJ.
PER CURIAM.
Defendants appeal by leave granted an order of the circuit court affirming a judgment of
possession entered by the district court following a jury trial in this summary proceedings action
filed by plaintiff for possession of defendants’ home. Plaintiff obtained a sheriff’s deed to the
home after a foreclosure sale and expiration of the subsequent redemption period. We vacate the
judgment of possession, and reverse and remand for further proceedings.
I
In 1979, defendants purchased a home from Jack Poll and his wife, which Poll had
mortgaged to Grand Rapids Mutual Federal Savings and Loan Association (“Grand Rapids
Mutual”).1 According to Poll and defendants, under the sale, defendants assumed Poll’s
mortgage. For the next twenty-one years, defendants paid the monthly mortgage payments on
the home, pursuant to billings and communications they received in their name from the bank.
During this time, Grand Rapids Mutual merged with Comerica Bank, which became the
mortgage holder.
In 2000 and 2001, defendants fell behind on their mortgage payments after Danny
suffered health problems and was off work. Comerica initiated foreclosure proceedings under
MCL 600.3201 et seq., foreclosure by advertisement, with a balance due on the mortgage of
1
The factual record in this case is sketchy due to the limited nature of the summary proceedings.
Our recitation of the underlying facts is not intended to be conclusive with regard to disputed
issues.
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$4,439.12. The foreclosure was undertaken against Poll, not defendants, although a notice of the
foreclosure was posted on defendants’ home. On August 23, 2001, plaintiff, through its sole
member Lynn Hunt, purchased defendants’ home in the foreclosure sale for $5,374.22.
During this time, defendants were pursuing refinancing to pay off the balance due on
their mortgage. According to defendants, on August 25, 2001, two days after the foreclosure
sale, they contracted with Enterprise Mortgage Corporation to refinance their home and redeem
it. Apparently, due to a mistake of the title company and other mistakes and misrepresentations
of Enterprise Mortgage, the redemption payment was forwarded to the mortgagee,2 rather than
the register of deeds or plaintiff as required by statute. The mortgagee did not inform defendants
that it was not the proper party to receive the redemption payment, and based on paperwork
defendants received, they believed that redemption had occurred. The net result was that the
refinancing company failed to properly redeem the property within the statutory redemption
period. The first defendants learned their home had not been redeemed was after the redemption
period expired, when plaintiff filed this summary proceedings action on August 29, 2002, to gain
possession of their home.
Defendants raised a number of affirmative defenses to the possession proceedings,
essentially arguing that the foreclosure was invalid and that procedural irregularities, combined
with the grossly inadequate sale price of $5,374.22 for their home, worth approximately
$120,000, entitled them to equitable relief. On November 5, 2002, defendants moved to
consolidate this case with plaintiffs’ pending circuit court case contesting the foreclosure, and
moved for discovery or to stay the district court proceedings pending completion of discovery in
or resolution of the circuit court action. Defendants also moved for leave to file a counterclaim
to quiet title in the home.
Plaintiff opposed both motions, essentially arguing that the only matter for trial in the
summary proceedings was whether plaintiff was entitled to possession based on its deed
following the sheriff’s sale. Plaintiff argued that a stay would violate the court rules, which
requires a trial within fifty-six days in a summary proceeding for possession. Plaintiff then filed
a motion to exclude from the jury any evidence concerning the disparity between the home’s
value and the sale price or evidence of defenses other than those, if any, directly related to
possession under the summary proceedings statute. The district court denied defendants’
motions and granted plaintiff’s motion, ruling that “issues involving the appraised value of the
subject property, compliance or noncompliance with any contractual notice of default or breach
and inappropriate attempts to redeem the property shall not be mentioned to the jury and
excluded from evidence at trial.”
2
The redemption payment was apparently sent to Washington Mutual Home Loans, Inc, which
assumed the handling of defendants’ mortgage as of January 31, 2001, although whether
Washington Mutual was the mortgage holder or merely a mortgage servicing agent for Comerica
is unclear from the record.
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Following a brief trial on November 25, 2002, the jury found that plaintiff was entitled to
possession. On appeal, the circuit court affirmed the district court’s rulings on the motions and
affirmed the judgment in favor of plaintiff.
II
Defendants argue that the district court erred in conducting summary proceedings for
possession, while disallowing defenses that the foreclosure process was flawed, and excluding
evidence of the gross disparity between the purchase price and the value of the defendants’
home. They also argue that the court erred in denying leave to add a counter claim to quiet title
against plaintiff or consolidate the claim with defendants’ action in circuit court. We agree that
the district court’s rulings were erroneous and require reversal.
Essentially, the question presented is whether the district court properly proceeded with
plaintiff’s summary action for possession despite defendants’ claims concerning the validity of
the foreclosure and their entitlement to equitable relief to preclude being dispossessed of their
home. We hold that the summary proceedings for possession were improper in these
circumstances. Although the legal authority is somewhat murky with regard to the disposition of
a summary proceeding for possession in district court in the face of a pending quiet title action in
circuit court, it seems clear that possession cannot properly be granted via a summary proceeding
when the claim to title is legitimately disputed.
A
In 1972, the Legislature enacted a new summary proceedings act, which involved “a
complete revision and enactment of all statutes covering civil actions to recover possession of
premises.” 51 Mich Bar J 361 (1972). Chapter 57 of the Revised Judicature Act, added by
Public Act 120 of 1972, provides for summary proceedings for recovery of possession of
premises. MCL 600.5701 defines “summary proceedings” as “a civil action to recover
possession of premises and to obtain certain ancillary relief as provided by this chapter and by
court rules adopted in connection therewith.” MCR 4.201 governs summary proceedings to
recover possession of premises.
Jurisdiction over summary proceedings to recover possession of real property is vested in
the district court. MCL 600.5704; Ames v Maxson, 157 Mich App 75, 79; 403 NW2d 501
(1987). Although possession proceedings were at one time strictly limited to the issue of
possession, that is no longer the case under the current scheme for resolution of competing title
claims. The former separation of actions at law and equitable claims, which mandated that
equitable defenses could not be raised in a summary proceeding, McCreery v Roff, 189 Mich
558, 565; 155 NW 517 (1915), is therefore no longer viable.
Joinder of claims is permitted in summary proceedings. MCL 600.5739; MCR 4.201(G);
Admaski v Cole, 197 Mich App 124, 128; 494 NW2d 794 (1992); Ames, supra. However, “[t]he
statute limits joinder of claims to those over which the district court may properly exercise
jurisdiction.” Adamski, supra; see also Ames, supra. The court rule provides:
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A summary proceedings action need not be removed from the court in which it is
filed because an equitable defense or counterclaim is interposed.
If a money claim or counterclaim exceeding the court’s jurisdiction is introduced,
the court, on motion of either party or on its own initiative, shall order removal of
that portion of the action to the circuit court, if the money claim or counterclaim is
sufficiently shown to exceed the court’s jurisdictional limit.
[MCR
4.201(G)(2)(a) and (b).]
Thus, “[a] party has a right to join claims and counterclaims, legal and equitable, in a summary
proceedings action as permitted by [MCL] 600.5739, except as modified by MCR 4.201(G).”
Longhofer & McKenna, Michigan Court Rules Practice, § 4201.8, pp 682-683.
A summary proceedings action need not be transferred to circuit court because
an equitable defense or counter claim is interposed. [MCL] 600.8302 grants
equitable jurisdiction to the district courts in cases arising under the Summary
Proceedings Act sufficient to resolve most controversies which may arise. Should
the court determine that it lacks jurisdiction over an unusual claim or defense,
transfer of the action is permitted under MCR 4.002.
If, however, a money claim or counterclaim is introduced that seeks damages
in excess of the court’s jurisdictional limits, the court on motion of a party or on
its own motion must transfer the money claim or counterclaim to the circuit court.
The action for possession will be retained by the district court. [Michigan Court
Rules Practice, § 4201.8, p 683 (footnotes omitted).]
Plaintiff argues that Michigan case law establishes that the defense of the invalidity of
foreclosure may not be raised in summary proceedings. However, in Federal Nat’l Mortgage
Ass’n v Wingate, 404 Mich 661, 676-677, n 5; 273 NW2d 456 (1979), our Supreme Court
observed, to the contrary, that there was “some precedential support” in this state for such a
defense in summary proceedings:
The proper issue in Landlord-Tenant Court is right to possession and the few
Michigan cases on point support the position that validity of foreclosure is to be
considered. In Gage v Sanborn, 106 Mich 269, 279; 64 NW 32 (1895), this Court
held:
"The questions to be tried before the commissioner under this statute (for
summary proceedings) in a foreclosure case are: (1) the fact of the mortgage sale
and its validity; (2) the holding over after expiration of the period of redemption.
If these questions cannot be tried by the commissioner the statute is farcical, as
jurisdiction would always be lost as soon as a plausible claim of invalidity of the
sale should be raised. Hence a mortgagor is permitted to question the validity of
the sale in this proceeding . . . ." (Emphasis added.)
The language of the statute in Gage is very similar to RJA, § 5714(1)(e)
quoted in part in footnote 6, infra. See also Reid v Rylander, 270 Mich 263, 267;
258 NW 630 (1935) ("We again hold that validity of the [foreclosure] sale may be
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tested in a summary proceeding based thereon, insofar as invalidity thereof
appears in the procedure . . ."). See, e. g., Guardian Depositors Corp v Keller,
286 Mich 403, 409; 282 NW 194 (1938).
Subsequently, in Manufacturers Hanover Mortgage Corp v Snell, 142 Mich App 548,
553; 370 NW2d 401 (1985), this Court expressly recognized the general availability of equitable
defenses in foreclosure and summary eviction proceedings:
The Supreme Court has long held that the mortgagor may hold over after
foreclosure by advertisement and test the validity of the sale in the summary
proceeding. Reid[, supra, at] 267; Gage[, supra, at] 279. Otherwise, the typical
mortgagor who faces an invalid foreclosure would be without remedy, being
without the financial means to pursue the alternate course of filing an independent
action to restrain or set aside the sale. Reid, supra [at] 267; see also, 16 Michigan
Law and Practice, Mortgages, § 174, pp 438-439. The mortgagor may raise
whatever defenses are available in a summary eviction proceeding. MCL []
600.5714 []; Federal National Mortgage Ass'n[, supra at] 676 n 5. The district
court has jurisdiction to hear and determine equitable claims and defenses
involving the mortgagor's interest in the property. MCL [] 600.8302(3);[]; DCR
754.7(b)(1). [Emphasis added.]
Given this precedent, we conclude that, at the very least, the district court erred in disregarding
defendants’ equitable claims and proceeding with the summary proceedings action for
possession.
Nonetheless, when there are competing claims of title to real property, the proper action
is one of quiet title, under MCL 600.2932, and accompanying court rules under MCR 3.411:
The summary proceeding is available only to determine the bare right of
possession. If the plaintiff seeks to eject the defendant on grounds that his title is
superior to the defendant’s adversely claimed title, or if the defendant claims a
right to possession by virtue of his own superior title or under the adverse title of
a third person, the remedy must be by an action to determine interest in land in the
circuit court, under [MCL] 600.2932 and MCR 3.411. [Longhofer & McKenna,
§ 3411.13, p 564 (emphasis added; footnote omitted).]
“A statutory summary proceeding is provided in cases, inter alia, when any person continues in
possession of any premises sold by virtue of a mortgage after the expiration of the time limited
by law for the redemption of the premises. If the occupant asserts claims that have not been
foreclosed by the decree, a summary possessory proceeding will not lie.” Michigan Law and
Practice Encyclopedia, Real Property, § 1029, Possession by Purchaser, p 476 (footnotes
omitted).3
3
MCL 600.2932(2) bars mortgagees from using § 2932 to recover mortgaged property until title
to the property has become absolute.
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In this case, defendants presented ample evidence of a competing claim for title to their
home. There was evidence of significant procedural irregularities with respect to the default,
foreclosure, and redemption. The home was sold for more than $100,000 less than its alleged
value. The foreclosure was not undertaken against defendants, the owners of the home, but
instead against Poll, who had received no communications from the mortgagee in more than
twenty years. Poll received no notice of default or foreclosure. According to defendants and
Poll, defendants assumed Poll’s mortgage. This certainly raised an issue whether there was an
assumption of the mortgage, either by a formal assumption or waiver. There was evidence to
support defendants’ claim that they believed the home to be redeemed following their
refinancing. The district court had jurisdiction to consider defendants’ equitable claims, if
nothing else to determine whether they merited recognition such that the summary proceedings
for possession were improper. The court could then have granted appropriate relief to permit
resolution of the title claims, either by hearing the claims in district court or dismissing or
staying the possession action until the title claims were resolved in circuit court.
Plaintiff argues that its action for possession of defendants’ home on the basis of the
sheriff’s deed should have priority over defendants’ equitable claims of title to their home.
Plaintiff asserts that “[t]o allow the occupants to raise defenses extrinsic to this record would
place an impossible burden on potential bidders and discourage anyone from submitting bids” on
foreclosure property because bidders cannot determine whether the foreclosure process was
flawed. We disagree. Absent bizarre or extraordinary circumstances, it is unlikely that an owner
would sacrifice a $120,000 home by failing to redeem it after a foreclosure sale for merely
$4,439.12, particularly here, where the home was occupied and owned by the same family for
more than twenty years. Anyone bidding on this property would surmise something was amiss
under these circumstances, and, consequently, plaintiff’s public policy argument fails.
Reversed and remanded for further proceedings consistent with this opinion. We do not
retain jurisdiction.
/s/ Janet T. Neff
/s/ Michael R. Smolenski
/s/ Bill Schuette
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