Real Property Notes Blog
Failure to hold annual meetings does not displace board members
In Channel View East Condominium Association v Ferguson, an unpublished Michigan Court of Appeals decision, the nonprofit corporation was formed in 2001 and the articles appointed an initial board of directors. Although annual meetings of the association should have been called, at the latest, in 2003. Defendants began construction of a home on their site condominium unit in 2003; when construction was still unfinished in 2005, the association started fining them for violation of the bylaws, which required construction to be finished within 12 months of commencement. The association imposed fines through 2016, when the association started a lawsuit for foreclosure and sale of the property for the $137,800 in fines and interest that had accrued.
Defendants filed a summary disposition motion claiming the association lacked capacity to sue because no annual meeting was called and, without a validly elected board of directors, the association could take no valid actions such as instituting the lawsuit. The circuit court agreed and dismissed the lawsuit. The association appealed.
The Michigan Court of Appeals reversed. As stated by the court, the essential question is whether the plaintiff has a valid board of directors at the time suit was filed in 2016. After analyzing the condominium documents and the Michigan Nonprofit Corporation Act, as well as prior case law, the court held that board members are not divested of their positions because no annual meetings were held; they continued in office and would continue until successors were elected. The court remanded for consideration of the other issues in the case.
Most condominium bylaws provide that directors remain in office until their successors are elected. Some further provide that directors remain in office until their successors are elected AND hold their first meeting.
Supreme Court overrules Court of Appeals decision on definition of “modular home"
In Thiel v Goyings, a 68-page Michigan Supreme Court opinion, the court by a 5-2 majority overruled the decision of the Michigan Court of Appeals and upheld the trial court’s decision denying a request for an injunction compelling removal of a home.
The restrictive covenants prohibited moving modular, pre-fabricated, or mobile homes to a lot. The covenants also required homes to be stick-built on site and prohibited pre-fabricated or modular homes to be erected on a parcel. The defendants’ construction began in the traditional manner with the pouring of foundation and basement walls, but then three “modules” constructed off site were truck in and craned into location on the foundations. The neighbors sued, claiming the construction violated the covenants. After a three-day trial, the trial court ruled in favor of the defendants. The plaintiffs appealed and the Michigan Court of Appeals overturned and remanded the case for entry of an injunction compelling the removal of the home, as previously reported here. However, the defendants appealed to the Michigan Supreme Court.
In this author’s opinion, the decision could have gone either way. After some sophisticated semantic analysis, the majority held that, while aspects of the home were modular, overall the home was not a modular home in violation of the covenants.
After reading the majority opinion, the concurrence, and the dissent, it seems clear that each side is able to garner support for its position and to show holes in the opposite’s sides analysis on whether or not the covenants were violated in this case, but in the end, five justices disagreed with two others. While not of any compelling precedential value because of the unique circumstances (indeed, the majority notes that deciding whether covenants are violated is a case-by-case analysis), the opinions do contain a fairly complete recitation of the law pertaining to enforcement of restrictive covenants.
Because Detroit landlords are required to obtain certificate of compliance under Detroit Ordinance, MI Consumer Protection Act does not apply to failure to do so
In Davis v Boydell Development Co., an unpublished Michigan Court of Appeals opinion, the plaintiffs were tenants and former tenants in defendants’ residential buildings located in the city of Detroit. Plaintiffs alleged that defendants violated the Michigan Consumer Protection Act (MCPA) by fraudulently renting the properties without first obtaining a certificate of compliance as required by Detroit city ordinances. Defendants moved for summary disposition on the ground that the Plaintiff’s complaint failed to state a cause of action because the MCPA does not apply to a "transaction or conduct specifically authorized under laws administered by a regulatory board or officer acting under statutory authority of this state or the United States.” MCL 445.904(1)(1). The trial court agreed, granting the motion and denying Plaintiff’s oral motion to amend their complaint; and the Michigan Court of Appeals affirmed.
Because the transaction of renting residential property in the city of Detroit is specifically authorized by city Ordinances and Michigan law, the exception applies and the plaintiffs’ claims under the MCPA failed to state a claim.
Regarding the denial of leave to amend the complaint, the court of appeals noted that Plaintiffs never filed a written motion as required by MCR 2.118(A)(4) and never presented to the court a proposed amended complaint for the court to consider whether the amendment was justified.
The exception contained in the MCPA severely limits its applicability; if the transaction is regulated, the MCPA does not apply. Although several cases have so held, the Michigan Legislature has not amended the MCPA, leaving it unavailing when a transaction is regulated.
This case also highlights the need to file both a written motion to amend one’s pleadings when faced with a summary disposition motion, and to attach a proposed amended pleading to the motion.
Landlord’s duties under MCL 554.139 measured from objective “reasonable person” standard
In Coppola v Edward Rose & Sons, LLC, an unpublished Michigan Court of Appeals opinion, a handicapped tenant slipped and fell in the parking lot of the apartment complex, injuring her hand and shoulder. She sued the landlord and the snowplow contractor claiming that the parking lot was not kept fit for the use intended by the parties as required by MCL 554.139.
The court considered whether the duties imposed by the statute should be measured from an objective standard; i.e., the reasonable person using the parking lot, or from a subjective standard; i. e., the tenant as a disabled person. The court held that the landlord did not owe the tenant a higher standard of care because she was a handicapped person using a handicapped parking space.
However, although the tenant argued she was owed a higher standard of care due to her disability, she cited no authority for that proposition and the court held the argument abandoned on appeal. Because this is an unpublished opinion, the question whether a disabled tenant is owed a higher standard of care remains open to debate.
Provision in MI Condominium Act that condominium liens may be “foreclosed in the same manner as mortgages” incorporates all provisions of Foreclosure by Advertisement statute
In Detroit Club Holdings, LLC v Edward, a published Michigan Court of Appeals opinion, a condominium unit was sold at public auction under Michigan’s foreclosure by advertisement statute in foreclosure of a condominium lien for unpaid assessments. A third party purchased at the sheriff’s sale, then posted a Notice to Inspect on the property and sent a copy of the notice to the owner at the condominium unit address by certified mail. The owner never lived at the condominium unit; his home address was stated in the deed by which he obtained title to the unit.
The third party subsequently filed an eviction proceeding under MCL §600.3238 seeking to shorten the redemption period. Again, the owner was only listed and served at the unit address. Obtaining a default judgment shortening the redemption period, the purchaser then sold the unit to plaintiff. Upon finding out about the judgment a month later, the owner filed a motion to set aside the judgment. The trial court denied the motion, finding that adequate notice had been given. The owner appealed to the circuit court, which also denied relief to the owner, who subsequently appealed by leave granted to the Michigan Court of Appeals.
Among other issues decided by the court, the court concluded that the reference in the Michigan Condominium Act (PDF) to foreclosing condominium liens in “the same manner as a foreclosure relating to foreclosure of real estate mortgages by advertisement" unambiguously incorporated all of the provisions of the foreclosure by advertisement statutes. The fact that some of the terminology is not literally applicable to condominium liens is a matter of form over substance, which the court looks past.
The court went on to hold that, based upon the record before it, it could not determine the basis for the trial court’s holding that the owner received adequate notice and remanded for development of that record. Because the trial court held that the owner received adequate notice, it did not reach the issue whether the purchasers were innocent third parties whose rights might be jeopardized by setting aside the judgment and remanded for consideration of this issue as well.
UPDATE: The Court of Appeals has issued a new opinion in this case, reversing in part, affirming in part, and remanding to the circuit court, with the admonition that the circuit court can remand to the district court if necessary. This opinion, issued on reconsideration, is unpublished. The previous opinion has been vacated, meaning it is no longer of precedential value.
The only real take-away for readers of this blog is that the MI Condominium Act incorporates all provisions of the Foreclsoure by Advertisement statute, including those provisions allowing for shortening of the redemption period.
Homeowner ordered to remove fence; accommodation claim rejected
In Fox Bay Civic Assn v Cresswell, an unpublished Michigan Court of Appeals opinion, the defendant purchased a home in a subdivision and fenced her yard without seeking permission from the homeowner’s association. The restrictions required prior board approval before the erection of a fence “except as required by state or township requirements for swimming pool safety.” The association requested that she remove it and install an invisible fence or a dog run. It also advised her that she would be allowed to retain the fence if she obtained written approval from all of her neighbors, which she failed to obtain. The association filed suit to compel removal of the fence. The homeowner defended on the basis that she was disabled and the association violated the Fair Housing Act (overview here) and Michigan’s Persons with Disabilities Civil Rights Acts (PDF) by failing to allow the fence as a reasonable accommodation. The court granted an injunction by summary disposition to the association and the homeowner appealed.
Parties asserting a claim under these acts must demonstrate that a requested modification or accommodation is both reasonable and necessary to their equal enjoyment of housing of their choice. In determining whether a proposed accommodation is reasonable, the court must consider the benefits of the proposed accommodation against the extent that the legitimate purposes and effects of a regulation are undermined by the request. A disabled individual is not entitled to the accommodation of his or her choice, but to a reasonable accommodation.
In determining whether a proposed modification is reasonable, the court must weigh the burden the modification imposes against the benefits it provides to a protected individual. Again, a disabled person is entitled to a reasonable modification, not necessarily the one her or she requests.
Regarding her accommodation request, the court held that her request that the association simply overlook her violation of the restrictions was neither reasonable nor necessary. Approving her actions after the fact and without consent of her neighbors undermines the restriction and threatens the benefits the other members derive from the restriction.
Regarding her modification request, the court held that she did not establish that there were no reasonable alternatives to her fence, or that the fence was necessary to provide her equal enjoyment of her property. The association had offered the alternative of an invisible fence; while the defendant argued that her dogs would be subject to attack by animals running loose in the subdivision, the court pointed out that such risk was shared by all members and not unique to her disability. The association also offered a dog run, and defendant did not adequately explain why a dog run would not be sufficient. Because she did not establish that no other modification other than her fence was both reasonable and necessary, the court found that the association had not violated the statutes.
Adult Foster Care Facility allowed to operate in subdivision
In Saunders v Counts, an unpublished Michigan Court of Appeals decision, several homeowners in a subdivision filed suit against the owner of a home and her corporation which was operating a licensed adult foster care facility consisting of six elderly residents with disabilities. The plaintiffs alleged that the operation of the facility violated a restrictive covenant forbidding the operation of a business enterprise. The trial court granted judgment in favor of the defendants.
In a decision surveying prior cases regarding adult foster care facilities and family day care homes and the public policy regarding adult foster care homes as expressed in legislation, the court of appeals affirmed. While the court held out the possibility that an adult foster care facility might be barred by an appropriate covenant, the court found that this operation did not.
In this author’s opinion, any challenge to an adult foster care facility in either a subdivision or a condominium is likely to be rejected on public policy grounds.
Reducing attorney fees without considering all Khouri/Pirgu factors reversed on appeal
In Powers v Brown, a published Michigan Court of Appeals opinion, plaintiff sued defendant for conversion after defendant repossessed and sold an automobile plaintiff purchased from defendant under the conversion statute, MCL Sec 600.2919a. Plaintiff obtained a judgment and sought a recovery of its reasonable attorney fees under the statute. The trial court started an analysis under the framework of Smith v Khouri and Pirgu United Servs Auto Assn by determining that the hourly rate and number of hours expended were reasonable, but they reduced the attorney fees to the maximum amount which could have been obtained on a 1/3 contingency fee, because the case was a contingency case. Plaintiff appealed, and the Michigan Court of Appeals reversed and remanded for additional consideration.
After determining a reasonable hourly rate and number of hours expended, the Khouri/Pirgu analysis requires the court to consider at least 8 other factors in determining a reasonable attorney fee. The trial court erred by considering only one of the 8 factors, whether the matter was a contingency fee or hourly case. The case was remanded to the trial court to consider the other factors, as well as any other relevant factors.
Failure to redeem from judicial foreclosure renders appeal moot.
In Can IV Packard Square LLC v Packard Square LLC, a published opinion of the Michigan Court of Appeals, the plaintiff obtained a judgment of foreclosure of its mortgage. The defendant appealed, but the judicial sale went forward during the pendency of the appeal. After the redemption period expired, the appellee filed a supplemental brief on appeal arguing that the issues raised by the appellant were moot due to the failure to redeem.
Relying upon the analysis made in Bryan v JPMorgan Chase Bank, which held that a mortgagor who failed to redeem from a foreclosure by advertisement lacked standing to challenge the underlying foreclosure, the court held that the failure to redeem the property from a judicial sale similarly ended all of the mortgagor’s rights to the property foreclosed. Since the court was unable to grant the appellant any relief even if it prevailed, the appeal was moot.
The procedural history recites that the appellant tried twice while the appeal was pending and prior to the redemption period to either expedite the appeal or to stay the running of the statute of limitations, but failed to cure defects in its motions, resulting in the motions being denied.