Burkhardt v. Bailey, No. 243354 (MI 2/19/2004)

• Decision Date: 19 February 2004
• Docket Number: No. 243354.,243354.
• Parties: TERRANCE BURKHARDT, Plaintiff-Appellant, v. MICHAEL L. BAILEY, Defendant-Appellee, and BOND CORPORATION, Defendant, and RALPH HAMILTON, SR and LONA HAMILTON, Intervening Defendants-Appellees.
• Court: Michigan Supreme Court

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TERRANCE BURKHARDT, Plaintiff-Appellant, v. MICHAEL L. BAILEY, Defendant-Appellee, and BOND CORPORATION, Defendant, and RALPH HAMILTON, SR and LONA HAMILTON, Intervening Defendants-Appellees.

No. 243354.

Court of Appeals of Michigan.

February 19, 2004 at 9:05 a.m.

Updated Copy May 7, 2004.

Appeal from the Ogemaw Circuit Court, LC No. 99-652674-CH.

Before: Murray, P.J., and Murphy and Markey, JJ.

MARKEY, J.

Plaintiff, a tax purchaser of certain vacant property in Ogemaw County, appeals by right the trial court's order granting defendant Michael L. Bailey and intervening defendants Ralph Hamilton, Sr., and Lona Hamilton summary disposition under MCR 2.116(C)(10) on plaintiff's complaint to quiet title. The trial court also declared plaintiff's tax deed void and ordered the property redeemed and reconveyed to Bailey and the Hamiltons pursuant to the Hamiltons' tender of the statutory redemption amount.¹ We conclude that the trial court erred by applying principles of equity to overcome the plain language of the relevant document that discharged a mortgage held by defendant Bond Corporation, extinguishing its right of redemption. Therefore, we reverse and remand for entry of summary disposition for plaintiff.

I. Summary of material facts and proceedings

This is not the first time this case has been before this Court. In Burkhart v Bailey, unpublished opinion per curiam of the Court of Appeals, issued September 21, 2001 (Docket No. 223706), we affirmed in part and reversed in part the trial court's grant of summary disposition to Bailey and Bond. We repeat some of the historical facts set forth in our first opinion.

Bailey owned vacant property secured by a mortgage held by Bond Corporation. Bailey failed to pay property taxes and, in May 1997, Burkhardt purchased the property at a tax sale. On August 31, 1998, Burkhardt obtained a tax deed to the property. Burkhardt served Bailey with notice of reconveyance; however, Bailey took no steps to redeem the property within six months after receiving the notice. See MCL 211.73a; MCL 211.140(1).

On July 7, 1999, Burkhardt filed a complaint seeking to quiet title to the property, seeking to reform the mortgage, or in the alternative to have the mortgage declared satisfied. Bailey did not answer the complaint, and was defaulted. Bond Corporation moved for summary disposition pursuant to MCR 2.116(C)(8) and (10), arguing that Burkhardt's failure to provide it with the required notice rendered the tax deed void. The trial court granted summary disposition in favor of both Bond Corporation and Bailey, and declared Burkhardt's tax deed void.

We noted that under MCL 211.73a² plaintiff would be barred from asserting title if he failed to make a bona fide effort to serve the required notice of the tax sale and the right of reconveyance upon payment of the applicable redemption amount.³ We continued:

After purchasing the property and obtaining a tax deed, Burkhardt served the required notice on Bailey but did not serve notice on Bond Corporation, notwithstanding the fact that the mortgagee named in an undischarged, recorded mortgage is entitled to notice. MCL 211.140(1)(d). At the time he filed the action to quiet title, approximately four years remained for Burkhardt to give the required notice to Bond Corporation. Burkhardt's action was in effect premature; however, he was not yet precluded from claiming ownership of the property under the tax deed because five years had not yet passed without notice being given to all parties entitled to receive notice.

Accordingly, this Court held that the trial court correctly granted Bond summary disposition but erred by declaring plaintiff's tax deed void. But added, "[i]f Burkhardt fails to serve the required notice on Bond Corporation within the specified five-year period, he will be barred from claiming title to the property under the tax deed." We also held that

the trial court erred by granting summary disposition in favor of Bailey. Bailey took no steps to redeem the property within six months of receiving the notice of redemption. He lost the opportunity to redeem the property when he did not act in a timely manner to do so, and was not entitled to rely on Bond Corporation's argument that it did not receive proper notice.

The trial court entered its first order in this matter on September 16, 1999. Later in 1999, while the appeal of that order was still pending,⁴ the Hamiltons, through their daughter-in-law Shelley Hamilton, who owned a mortgage company, paid the mortgage debt Bailey owed to Bond. The Hamiltons were aware of the pending appeal; Bailey is Lona Hamilton's brother. Lona and Ralph Hamilton (the Hamiltons) aver they asked Shelley Hamilton to help them assume Bond's position and rights as mortgagee. Bailey also averred that he believed the Hamiltons intended to "take over" Bond's position as primary mortgagee. To accomplish this, the Hamiltons loaned Bailey $ 25,000, of which $10,000 was used to pay Bailey's debt to Bond. On December 2, 1999, Bailey granted the Hamiltons a $25,000 mortgage on the subject property. The Hamiltons never engaged in any direct negotiations with Bond. Likewise, Bailey averred he had no contact with Bond regarding the payoff of his debt.

In an affidavit, Shelley Hamilton testified that the Hamiltons "intended to assume Bond's position as first mortgagee," and she believed that she structured the transaction to accomplish that intent. But she also averred that she conducted the transactions with Bond by mail. She further averred that it "was not until after I had received the new mortgage from Bailey to Hamilton [sic], and disbursed the funds to Bond Corporation, that I forwarded the new mortgage and the executed discharge of Bond's mortgage, together, for recording." (Emphasis added.) The discharge of Bailey's mortgage to Bond was recorded on January 14, 2000, and provides:

DISCHARGE OF MORTGAGE

KNOWN ALL MEN BY THESE PRESENTS, That Bond Corporation, a Michigan Corporation, whose address is 2007 Eastern, S.E., Grand Rapids, Michigan 49507 does hereby certify, That a certain Mortgage dated July 24, 1992, made and executed by Michael L. Bailey and Patty J. Bailey of the first part, to Bond Corporation of the second part, and recorded in the office of the Ogemaw County Register of Deeds in Liber 383 Page 443-448 on August 3, 1992 is fully paid, satisfied and discharged.

Dated this 15th day of November, 1999.

On September 21, 2001, this Court affirmed in part and reversed in part the trial court's first order in favor of defendants. In the trial court, on remand, plaintiff presented a proposed order setting aside the summary disposition order, reinstating the tax deed, dismissing Bond without prejudice, and issuing a judgment of quiet title against Bailey. The Hamiltons moved to intervene and objected to plaintiff's proposed order. After a December 14, 2001, hearing, the trial court declined to adopt plaintiff's proposed order and instead merely vacated the portions of its prior decision granting summary disposition to Bailey and finding the tax deed void. The trial court ordered that all other aspects of the earlier decision remained in effect.

Meanwhile, Ralph Hamilton requested and received from Bond an assignment of its rights and a quitclaim deed. Hamilton averred that these documents did not create new rights, "but only reflected my intent relative to the transaction." (Emphasis added.) Bond's quitclaim deed, dated November 28, 2001, recites it is "[f]or full consideration of funds advanced by [the Hamiltons] to discharge [Bailey's] mortgage . . . ." (Emphasis added.)

Bond's "assignment" to the Hamiltons, also dated November 28, 2001, provides, in pertinent part:

It is the intent of this document to assign and convey any and all interest of the Assignor, if any, in the described premises, including, but not limited to, any and all rights, if any, as Mortgagee, under or through a certain Mortgage dated July 24, 1992, made and executed by Michael L. Bailey and Patty J. Bailey to Bond Corporation . . . .

This assignment and conveyance is made, expressly, without warranty or representation on behalf of Bond Corporation as to the existence of any particular rights.

This assignment is made by Bond Corporation, a Michigan corporation, upon the request of Ralph Hamilton, Sr. and Lona Hamilton, and upon a representation of said persons that the funds paid to Bond Corporation to discharge the above-referenced mortgage were advanced by Ralph Hamilton, Sr. and Lona Hamilton, pursuant to their understanding that they were accepting and assuming its position as primary mortgagee for said premises. [Emphasis added.]

In January 2002, the trial court granted the Hamiltons' motion to intervene. In March 2002, the Hamiltons tendered a reconveyance payment of $2,493.51 to the register of deeds, which the trial court ordered held by the county treasurer. Later, the Hamiltons moved for summary disposition under MCR 2.116(C)(10). At a hearing on the motion on July 11, 2002, the trial court found that Bond's interest in the subject property had been conveyed to or assumed by the Hamiltons who had advanced "purchase money" to pay Bailey's debt to Bond. The trial court reasoned that plaintiff had never given Bond notice of the right to reconveyance; therefore, Bond could have redeemed the property for the benefit of itself and all other holders of interests in the property, including Bailey. In essence, Bond or Bond's successors in interest, the Hamiltons, could redeem the property because plaintiff had not given Bond statutory notice and, upon redemption, Bailey's contingent interest would be revived. The trial court relied heavily on the fact that Bond's mortgage discharge and the new mortgage from Bailey to the Hamiltons were recorded on the same day. Thus, the trial court viewed the payoff to Bond and the new mortgage as one transaction. Further, the trial court concluded that...