LAKER GROUP LLC V GLORIA JACKSON
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STATE OF MICHIGAN
COURT OF APPEALS
GLORIA JACKSON,
UNPUBLISHED
November 3, 2005
Plaintiff-Appellant,
V
No. 261588
Oakland Circuit Court
LC No. 04-058216-CH
LAKER GROUP, L.L.C., and KROLL
CONSTRUCTION COMPANY,
Defendants-Appellees.
LAKER GROUP, L.L.C.,
Plaintiff-Appellee,
v
No. 261594
Oakland Circuit Court
LC No. 04-058945-CK
GLORIA JACKSON,
Defendant-Appellant.
Before: White, P.J,. and Jansen and Wilder, JJ.
WHITE, P.J. (dissenting.)
I respectfully dissent. I would reverse in both cases.
The majority fails to present and view the facts in a light most favorable to plaintiff, thus
to its factual recitation I would add that about one month after Kroll Construction purportedly
finished the remodeling work, the bathroom tiles began cracking, and other problems with
Kroll’s workmanship emerged as well. Jackson contacted Kroll Construction several times for
the work to be repaired, but it was not.
I would also add that Jackson’s complaint to quiet title, filed in the circuit court, asserted
that she was not required to pay defendant Kroll Construction until the bathroom remodeling
work was completed, which it was not, and that she received no notice of the impending
foreclosure sale. Jackson alleged that because she was unaware of the sheriff’s sale, she did not
attend the sale or take action during the six-month statutory redemption period following the
sale. Jackson alleged that when Laker purchased the property from defendant Kroll
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Construction, Laker had knowledge that the property had been sold at a sheriff’s sale and that
Jackson was in possession of the property. Jackson alleged that Laker should have inquired
further into her interest in the property, and that Laker was not a bona fide purchaser because it
knew she was in possession of the property, and because it purchased the property for far less
than its fair market value. Jackson maintained that because a sheriff’s deed on a foreclosure sale
of a mortgage on which no money is owing passes no title to the purchaser, neither Kroll nor
Laker obtained title to the property.
The circuit court concluded that the mortgage gave defendant Kroll Construction the
power of sale, which became operative when plaintiff failed to fulfill her obligations, and that
there was no issue of fact that the foreclosure sale followed the required statutory procedures.
Jackson presented evidence to support a finding that defendant Kroll Construction’s
power to sell was not invoked because the mortgage installment payments, which were due upon
completion of the remodeling work, never became due because the remodeling work was not
completed. There was thus a material issue of fact whether her failure to make payments to
defendant Kroll constituted a default in the mortgage.
“Foreclosure sales by advertisement are defined and regulated by statute. Once the
mortgagee elects to foreclose a mortgage by this method, the statute governs the prerequisites of
the sale, notice of foreclosure and publication, mechanisms of the sale, and redemption.” Senters
v Ottawa Savings Bank, FSB, 443 Mich 45, 50; 503 NW2d 639 (1993). MCL 600.3204 sets
forth the prerequisites of a foreclosure by advertisement, which include “(a) A default in a
condition of the mortgage has occurred, by which the power to sell became operative . . . .”
There is no dispute that Jackson’s first payment on the mortgage was not due until
“completion” of the bathroom-remodeling job. The form contract1 defendant Kroll used at the
time of contracting with Jackson, which defendant Kroll produced below in lieu of the actual
contract Kroll entered into with Jackson, states:
In consideration of the said work and services to be done by the Contractor, the
Owner agrees to pay the Contraction THE SUM OF ____ ( ) as follows: $____
As a deposit: $____ on completion of said work: and the balance of $ ___
payable in ___ equal consecutive monthly payments of $ ___ first payment shall
commence ___ days after completion.
***
1
In answers to interrogatories, Kroll stated: “Kroll Construction Company gave its records of he
construction contract it entered into to Pines Investment for collection of the Gloria Jackson
account. Kroll Construction does have standard construction contracts executed during the same
time frame that Gloria Jackson entered into her construction that exemplify the standard
construction contract entered into with Gloria Jackson.”
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It is further agreed that Contractor shall have the right at any time to sell, transfer
or assign this contract and the monies to be paid under the contract for value, and
in the event of such assignment the Owner hereby agrees that he has no defense in
whole or in part to the payment of the sum agreed by him to be paid as evidence
by the note signed herewith. [Emphasis added.]
The only promissory note defendant Kroll produced, which was signed by Jackson, was payable
to the order of National City Bank. This promissory note required Jackson to begin payment “60
days from the date a signed completion certificate is delivered or disbursement of he Loan
proceeds, whichever is later.” [Emphasis added.] Jackson’s affidavit stated that Kroll never had
her sign a certificate of completion indicating the bathroom remodeling job was complete, and
Kroll does not dispute that it did not request from Jackson, or obtain from her, a signed
completion certificate. Avery Warnick, a Kroll representative, testified at deposition that it is not
Kroll’s business practice to have customers sign certificates of completion, and that Jackson
would therefore not have been asked to sign one.
Defendant Kroll Construction conceded below that Jackson contacted it because the
remodeling job was unsatisfactory and requested that the work be corrected. Defendant Kroll
Construction maintained that the remodeling job was completed, relying on the affidavit of Kroll
employee, Scott Johnson. Johnson’s affidavit states that after the completion of the remodeling,
Jackson had some minor complaints; that he returned to Jackson’s home while Jackson was there
and “resolved all workmanship issues;” and that Jackson was satisfied with the completed
bathroom-remodeling job.
Jackson submitted documentary evidence below, including her deposition testimony, that
about a month after the tile floor was installed, the tiles started cracking, and that she called Kroll
to complain and Kroll said they would send someone to her house, but never did. Jackson
further testified that she called Kroll a second time, that they returned her call and said they
would send someone out, but never did. Jackson also submitted an affidavit below stating that
there were still unresolved workmanship issues to be completed by Kroll, and that she had never
been satisfied with the remodeling job. Jackson submitted the report of builder Leon Mancour,
who examined the bathroom and took sixteen photographs, also submitted below. Mancour’s
Inspection Report, dated April 14, 2004, stated in pertinent part:
The bathroom had been completely remodeled. Ms. Jackson said it had been
done in 2001. The problem I am listing should not have occurred in three years.
All of these things should hold up for 10 years or more. The floor tile ceramic
was cracked heavily in the middle of the floor (picture #14). The ceramic in the
shower surround was cracked heavily in both corners (pictures # 9 and 10). The
window trim was open approximately ¼” in one corner (picture #5). Both the
vanity faucet and the tub faucet leaked (pictures # 4 and 7). The toilet was very
loose from the floor and leaking (pictures #3, 8 and 11). The tub drain and or tile
were also leaking (picture #12). There were tissue holders and towel bars pulled
off the wall . . . The door on the vanity was peeling off on the face . . . The clothes
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chute door was coming off . . . The toilet leak and the tub leak had caused some
problems in the sub floor (pictures # 11 and 12).
Mancour’s inspection report included estimates of costs to repair Kroll’s work, totaling $2,800.2
I conclude that Jackson presented evidence from which a reasonable fact-finder could
conclude that she did not default on the mortgage. The circuit court’s conclusion that she had
defaulted was erroneous when a question of fact remained on that issue. If Jackson did not
default, one of the statutory prerequisites for foreclosure by advertisement was not present, and
the foreclosure sale was improper.
A sheriff’s deed on foreclosure of a mortgage on which nothing is due at the time of
foreclosure passes no title to the purchaser. Bowen v Brogan, 119 Mich 219; 77 NW 942 (1899).
If Jackson did not default on the mortgage, Pines Investment was not entitled to institute a
foreclosure sale by advertisement, no title would have passed to defendant Kroll Construction
after the foreclosure, and Laker would thus acquire no title from Kroll.
Jackson also asserts that Laker was not a bona fide purchaser. “A good-faith purchaser
is one who purchases without notice of a defect in the vendor’s title.” Oakland Hills Dev Corp v
Lueders Drainage Dist, 212 Mich App 284, 297; 537 NW2d 258 (1995). Possession by another
may disqualify a person from being a bona fide purchaser for value. See Cameron, 1 Michigan
Real Property Law 3d ed, § 11.25, p 402. “Open, manifest, and unequivocal possession of
premises constitutes constructive notice of the rights of one in such possession as effectively as
compliance with the recording law.” Kastle v Clemmons, 330 Mich 28, 31; 46 NW2d 450
(1951). “When a person has knowledge of such facts as would lead any honest man, using
ordinary caution, to make further inquiries concerning the possible rights of another in real
estate, and fails to make them, he is chargeable with notice of what such inquiries and the
exercise of ordinary caution would have disclosed.” Id.
Jackson submitted evidence below that Laker was not a bona fide purchaser of the
property because it had constructive notice of Jackson’s presence on the property. Jackson
submitted below the Title Commitment Laker obtained, dated August 19, 2003, which stated that
two mortgages Jackson had on the property, executed on September 29, 1995, had to be
discharged. Jackson also submitted below excerpts of the deposition testimony of Allen Saulter,
an agent of Laker, in which Saulter testified that before purchasing the property, he was aware
that Jackson was living there. Saulter also testified that he did wonder why there was a sheriff’s
deed taken in 2001 and the property was not being transferred until November of 2003, but made
no inquiries of Jackson. I conclude that Jackson’s evidence raised a genuine issue of fact
whether Laker knew she was in possession of the home, and thus whether Laker was a bona fide
purchaser.
2
Mancour’s estimate list included $2,300 to replace the ceramic floor and sub floor and to
remove and reinstall the toilet and vanity, and $500 to regrout the tub area, replace two cabinet
doors, and repair the trim and accessories.
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I would reverse the grant of summary disposition to defendants Kroll Construction and
Laker in Docket No. 261588. In Docket No. 261594, I would reverse the grant of summary
disposition to plaintiff Laker. I would remand for further proceedings consistent with this
opinion.
/s/ Helene N. White
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