Bishop v. Brown

• Decision Date: 09 November 1982
• Docket Number: Docket No. 59158
• Citation: Bishop v. Brown, 118 Mich.App. 819, 325 N.W.2d 594 (Mich. App. 1982)
• Parties: Herbert L. BISHOP and Judy A. Bishop, husband and wife, Plaintiffs-Appellees, v. Richard W. BROWN and Kathy Sue Brown, husband and wife, Defendants, and Jeffrey Lee Van Nortwick, Defendant-Appellant.
• Court: Court of Appeal of Michigan

Page 594

325 N.W.2d 594

118 Mich.App. 819

Herbert L. BISHOP and Judy A. Bishop, husband and wife Plaintiffs-Appellees, v. Richard W. BROWN and Kathy Sue Brown, husband and wife, Defendants and Jeffrey Lee Van Nortwick, Defendant-Appellant.

Docket No. 59158.

Court of Appeals of Michigan.

Submitted June 9, 1982.

Decided Aug. 25, 1982.

Released for Publication Nov. 9, 1982.

Thomas R. Blaising, Battle Creek, for plaintiffs-appellees.

Kreis, Enderle, Halpert & Etter, P.C. by James B. Ford, Kalamazoo, for defendant-appellant.

Before WALSH, P.J., and ALLEN and GILLESPIE, ^* JJ.

ALLEN, Judge.

Defendant Jeffrey Lee Van Nortwick appeals as of right from a judgment of foreclosure of a land contract entered July 17, 1981, following a bench trial. Judgment was also entered by default against defendants Richard W. and Kathy Sue Brown, but the Browns have not appealed. Two questions of apparent first impression, each common to the language customarily found in land contracts, are raised on appeal: (1) when are taxes "past due", and (2) where taxes are admittedly past due, is the sole remedy of the land contract seller payment of the taxes himself and addition of the amount paid to the contract balance, or may the seller foreclose without first paying the taxes?

On September 25, 1976, the Browns and Van Nortwick entered into a land contract with plaintiffs' assignors for the purchase of property in Calhoun County. The purchase price was $20,000, of which $1,000 was paid down and the balance of $19,000 plus interest at 8 1/2% was payable at $188 per month plus taxes when due. Payments were made in full until the spring of 1980 when defendant Van Nortwick became involved in the final stages of a divorce, as a result of which he failed to make the monthly installments due for April, May, and June, 1980. In addition, Van Nortwick had not paid the 1979 winter school, county and township taxes which were mailed to all property owners in the county on December 1, 1979.

On June 25, 1980, plaintiffs served notice of default and intent to accelerate payment on defendants, demanding payment within 15 days of the three past due monthly installments ($566), the past due winter taxes together with interest and penalty thereon ($770.47), plus $50 for preparation and service of the notice of default, for a total of $1,384.47, and stating that if that sum were not paid within 15 days plaintiffs would declare all sums remaining unpaid on the contract due and payable. When payment was not made within 15 days, plaintiffs, on July 17, 1980, accelerated the balance of $16,815.73 due on the contract and on August 11, 1980, filed a foreclosure action in circuit court. On July 21, 1980, Van Nortwick did offer plaintiffs $754 for the then past due monthly installments, ¹ but that tender was refused by plaintiffs, who proceeded with the foreclosure.

On appeal, Van Nortwick contends that the trial court erred in granting judgment of foreclosure for two reasons: First, through section 6 of the contract provides that the purchaser pay the taxes "when due", nothing in the contract itself states the exact date when taxes are due. In support of this position, defendant relies on Union Trust Co. v. Grant, 148 Mich. 501, 111 N.W. 1039 (1907). Second, regardless of when taxes should be paid, the demand for payment "was misleading and fraudulent" because the sole remedy of plaintiffs under the contract was to pay the past due taxes themselves and add that amount to the contract as provided by section 8 of the contract. Defendant argues that he could have paid the past due monthly installments, and in fact did make a tender of such amount, but he did not have the ability to pay the taxes in addition.

The land contract was prepared by plaintiffs' attorney on a printed form of the Calhoun County Bar Association, revised October 20, 1973. The relevant portions of that contract provide:

"6. Vendor represents that all general property taxes which have heretofore become due and payable upon said lands and all special assessment taxes which have become a lien against said lands, whether payable in installments or otherwise, have been fully paid except: General property taxes for the year 1976, first due and payable on or about December 1, 1976, which the parties have agreed to prorate and pay when first due and payable, and of which the vendors shall pay 269/365ths and the balance which purchaser agrees to pay. Purchaser also agrees to pay when due all other taxes and assessments of every nature which shall become a lien upon said premises hereafter until said purchase price has been paid in full as herein agreed.

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"8. Should purchaser fail to perform his obligation as agreed in paragraph 6 and/or 7 of this contract, vendor may pay such unpaid tax and/or assessment, and/or insurance premium, and the amount thus expended shall forthwith be added to the balance then unpaid on this contract, and shall become due at once, and shall bear interest at the rate applicable to said balance until paid.

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"12. Time of payment shall be of the very essence of this contract. If any money which purchaser agrees to pay to the vendor by the terms of this contract shall remain due and unpaid for thirty days, vendor may declare the whole balance then owing hereon due and payable forthwith, when this is not prohibited by law in the court in which the forfeiture or foreclosure action is brought.

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"16. Upon default by the purchaser in making any of the payments required by this contract, or in any of the other covenants or agreements required by this contract to be performed by the purchaser, the vendor may: (a) bring an action against the purchaser at law for the balance of the agreed purchase price, or for any and all past due sums due and owing on said land contract; (b) foreclose this contract by action in the circuit court; (c) terminate or forfeit this land contract by summary proceedings in the district court, in the manner and with the remedies and effect now provided by Act 120 Michigan Public Acts, 1972, (MSA 27A.5701 et seq.) or any future amendment thereto." (Emphasis added.)

We find section 12 of the land contract dispositive of the instant case. That section provides that time is of the essence of the contract and that "if any money" which the purchaser has agreed to pay to the vendor "shall remain due and unpaid for thirty days", the vendor may declare the whole balance due and payable forthwith. Monthly installments of principal and interest are payments due the vendor. Since appellant admits that he failed to make the three monthly payments from April 1 through June 1, 1980, and since two of those installments were more than 30 days unpaid when the notice of intent to default was given appellant on June 25, 1980, and the third installment became more than 30 days overdue prior to the 15-day deadline for payment set forth in the notice of intent to default, plaintiffs were clearly entitled to proceed with foreclosure quite apart from any alleged defects in the notice regarding when taxes became due or whether plaintiffs' sole remedy for past due taxes was payment of the taxes themselves and adding the amount to the balance due.

Nevertheless, because the issues raised by appellant are of obvious interest to the practicing bar, we take this occasion to respond to them in detail.

When do winter taxes become due under a land contract which provides that the buyer shall "pay when due" all taxes? That provision, appearing in section 6 of the instant contract, is common to the verbiage in the vast majority of land contracts. Surprisingly, the General Property Tax Act, M.C.L. Sec. 211.1 et seq.; M.S.A. Sec. 7.1 et seq., does not per se give a precise date. However, the statute provides that winter taxes become a lien on December 1, and continue to be a lien until payment. M.C.L. Sec. 211.40; M.S.A. Sec. 7.81. The assessment and collection of real property taxes under Michigan law is excellently described in United States v. State of Michigan, 346 F.Supp. 1277, 1279-1280 (E.D.Mich., 1972). That case holds that real and personal property taxes are "due" on December 1, which is the day when collection commences and is also the day the amounts assessed become a lien upon such property.

"The tax roll must be delivered to the treasurer on or before the first day of December and immediately the treasurer 'must proceed to collect such taxes'. These taxes (pursuant to statute) have been 'a debt due to the township, city, village and county' since the preceding December 31, i.e., 'the tax day provided for in sections 2 and 13' of the General Property Tax Law. On December 1 (the day when collection commences, i.e., the 'due date') 'the amounts assessed (on any interest in real property) shall * * * become a lien upon such real property, and the lien for such amounts, and for all interest and charges thereon, shall continue until payment thereof.'

"Thus, on December 31 all real property in the State of Michigan is given a taxable status. Subsequent to this tax day the land takes on a new characteristic, that of carrying a tax liability which will become due and payable on December 1 of the succeeding year. This taxable status being a matter of public record constitutes notice to all future vendees." (Footnotes omitted.)

But becoming "due" on December 1 does not mean that the taxes are "overdue" or delinquent. Winter taxes are not normally mailed out until December 1, and no one may rationally claim that a land contract purchaser would be delinquent if the taxes were not paid on December 2. The relevant question is not when do taxes first become due, but instead, when do taxes become overdue. Stated another way, when does the purchaser "fail to perform his obligation" to pay taxes as those words are used in section 6, or when is "default by the purchaser in making any of the payments required by the contract" as that...