Cherry Ridge, LLC v. Canton Charter Twp., Case No. 12-cv-15126
| Decision Date | 15 October 2013 |
| Docket Number | Case No. 12-cv-15126 |
| Parties | CHERRY RIDGE, LLC, a Michigan Limited Liability Company, Plaintiff/Counter-Defendant, v. CANTON CHARTER TOWNSHIP, a Michigan Municipal Corporation, Defendant/Counter-Plaintiff. |
| Court | U.S. District Court — Eastern District of Michigan |
HON. GERSHWIN A. DRAIN
ORDER DENYING CHERRY RIDGE, LLC'S MOTION TO STAY OR DISMISS
PROCEEDINGS[#43], DENYING WITHOUT PREJUDICE CANTON CHARTER
TOWNSHIP'S MOTION TO HOLD CHERRY RIDGE, LLC IN CONTEMPT OF
COURT [#46], DENYING CHERRY RIDGE, LLC'S MOTION TO STRIKE [#52],
The instant action involves a dispute concerning the parties' ownership interests in real property, specifically certain public improvements1 ("Improvements") that are located in, and maintained by, Defendant/Counter-Plaintiff, Canton Charter Township (the "Township"). Presently before the Court is Plaintiff/Counter-Defendant Cherry Ridge, LLC's ("Cherry Ridge") Motion to Stay or Dismiss Proceedings, filed on June 25, 2013. On July 8, 2013, the Township responded to Cherry Ridge's Motion and Cherry Ridge filed a Reply Brief on July 18, 2013. Also before theCourt is the Township's Motion to Hold Cherry Ridge in Contempt of Court, filed on July 2, 2013. Cherry Ridge filed a Response on July 19, 2013, and the Township filed a Reply Brief on August 2, 2013. Upon review of the parties' submissions, the Court finds that oral argument will not aid in the resolution of these matters, accordingly the parties' motions will be resolved on the briefs. See E.D. Mich. L.R. 7.1(f)(2). For the reasons stated below, the Court denies Cherry Ridge's Motion to Stay or Dismiss Proceedings and denies without prejudice the Township's Motion to Hold Cherry Ridge in Contempt of Court.
The real property that is the subject of this action, namely the Concord and the Village Parking Lot parcels (the "Parcels"), which include the Improvements, was allegedly donated to the Township by the former and original owner of the Parcels, Cherry Hill Investors, L.L.C. ("CHI"). According to the Township, CHI donated the subject Parcels so the Township could have a civic presence in this "core" area, located directly across from the Township's historic Cherry Hill School House. CHI and the Township entered into various agreements which encompassed the future construction and maintenance of the Improvements. Between 2003 and 2004, West Road, School House Road, the detention basin and the parking lot were constructed, primarily at Township expense. The Township has maintained, and the public has enjoyed the use of the subject Improvements since their construction.
In July of 2011, Cherry Ridge acquired an interest in the subject Parcels by way of a Deed in Lieu of Foreclosure. Cherry Ridge claims it had no prior knowledge of the Township's interests in the Parcels, while the Township maintains that Cherry Ridge had actual knowledge of the Improvements. In late 2011, Cherry Ridge made a request for amendments to increase the densityfor planned development in the Parcels and other land Cherry Ridge had acquired, however the Township denied its request. Thereafter, Cherry Ridge sent a demand letter requesting the Township "cease and desist" its use of the parking lot and to remove the other Improvements. While the parties were in discussions, Cherry Ridge installed concrete barriers and no trespassing signs prohibiting public access to the parking lot and the school, as well as blocked several fire lanes.
On February 26, 2013, this Court ordered the removal of the concrete barriers when it granted the Township's Motion for Preliminary Injunction. See Dkt. No. 27. In concluding the Township was entitled to preliminary injunctive relief, the Court rejected Cherry Ridge's argument that its title was superior; finding the Township was likely to succeed on the merits of its claims because Cherry Ridge had constructive notice of the Township's interests that were obtained by public dedication.
It was not disclosed in Cherry Ridge's briefing, nor during the hearing on the Township's Motion for Preliminary Injunction, that Cherry Ridge held not only title to the property in question, but also the former mortgage. Specifically, Cherry Ridge failed to advise the Court that it acquired the mortgage by a Partial Assignment and Assumption of Loan Sale and Purchase Agreement from Comerica on July 21, 2011. Cherry Ridge purchased the mortgage in the amount of $21, 750,000.00 from Comerica for the discounted sum of $1,117, 850.00.
On April 25, 2013, Gary Sakwa, as sole member, executed an Operating Agreement between himself and Ruby Investments, LLC ("Ruby"). Sakwa then assigned his member interest in Ruby to Cherry Ridge on April 29, 2013. Ruby is a wholly owned subsidiary of Cherry Ridge. On April 30, 2013, Cherry Ridge assigned its interest in the mortgage to Ruby in order to initiate a foreclosure action in state court. Cherry Ridge asserts this transfer was not done in bad faith, rather it wasnecessary to effectuate judicial foreclosure remedies under Michigan law.
On May 7, 2013, Ruby initiated foreclosure proceedings against Cherry Ridge, the Township, and others in the Wayne County Circuit Court, seeking to foreclose its mortgage, which includes the Parcels. Both Cherry Ridge and Ruby acknowledged the existence of this Court's Preliminary Injunction in the pleadings, however they suggested that this Court's injunction dealt only with the removal of the concrete barriers and otherwise had nothing to do with the subject Improvements.
On June 3, 2013, the Township filed a counterclaim against Ruby and a cross-claim against Cherry Ridge, which subsequently defaulted in the foreclosure proceeding. The Township filed a Motion to Stay in the foreclosure action, and the state court judge entered an order granting a stay until this Court resolves Cherry Ridge's Motion to Stay or Dismiss Proceedings.
Cherry Ridge argues that after it loses title to the Parcels in the state case, the principal claims in this lawsuit will be moot. Consequently, Cherry Ridge requests this Court stay the present matter pending resolution of the foreclosure action or dismiss this action without prejudice. The Township objects to a stay of these proceedings, as well as maintains that Cherry Ridge should be held in contempt of court for filing the foreclosure action in the first instance. The Township argues that Cherry Ridge's conduct, specifically the assignment of an already discharged mortgage to Cherry Ridge's wholly owned subsidiary in order to initiate a sham foreclosure proceeding and extinguish the Township's interests in the Improvements, is a direct attack on this Court's Preliminary Injunction.
Cherry Ridge argues that this Court should exercise its inherent discretion to manage its docket and stay this proceeding pending the outcome of the state foreclosure proceeding. Cherry Ridge maintains that this Court should abstain from hearing this matter pursuant to the Younger abstention doctrine because the instant proceeding interferes with an ongoing state proceeding. See Younger v. Harris, 401 U.S. 37 (1971). Alternatively, Cherry Ridge suggests that the Colorado River abstention doctrine also compels the conclusion that a stay of this matter is warranted. See Colorado River Water Conservation District v. United States, 424 U.S. 800 (1976).
"The decision to enter a stay ordinarily rests within the sound discretion of the District Court." Ohio Envil. Council v. United States Dist. Ct. Southern Dist. of Ohio, 565 F.2d 393, 396 (6th Cir. 1977). Younger abstention, based on comity, provides that a federal court may abstain and decline to interfere with pending state proceedings involving important state interests if extraordinary circumstances are present. Younger, 401 U.S. at 37. While Younger has been extended to non-criminal proceedings, it has only been applied in situations where the federal court's intervention would unduly interfere with or implicate legitimate activities of the state or important state interests. Middlesex County Ethics Comm. v. Garden State Bar Ass'n, 457 U.S. 423, 432 (1982). The Younger abstention framework permits a federal court to decline to hear a case when: (1) The challenged state proceeding is currently pending, (2) the state proceeding implicates important state interests, and (3) the state proceeding affords the plaintiff an adequate opportunity to raise constitutional claims. Id.; see also Eidson v. Tenn. Dep't of Children's Servs., 510 F.3d 631, 638 (6th Cir. 2007). Upon review of the circumstances herein, the Court finds that Younger does not apply.
While it is permissible for Younger to be applied in cases where state proceedings are begunafter a federal complaint is filed and "before any proceedings of substance on the merits have taken place," Younger is generally applied when there is a pending state action before the federal complaint is filed. Hicks v. Miranda, 422 U.S. 332, 349 (1975); see also Kevorkian v. Thompson, 947 F. Supp. 1152, 1162 (E.D. Mich. 1997); Carroll v. City of Mt. Clemens, 139 F.3d 1072, 1075 (6th Cir. 1998), Loch v. Watkins, 337 F.3d 574, 578 (6th Cir. 2003). All of the cases relied on by Cherry Ridge in support of its request for a stay are actions where the state lawsuit was pending prior to the federal case. In the current matter, the federal action was pending for six months before the state claim was filed, and after the parties and this Court spent a considerable amount of resources and time on the case.
Cherry Ridge argues that the foreclosure lawsuit involves important state interests, however the Court disagrees. Contrary to Cherry Ridge's argument, the foreclosure action does not involve significant state interests. See Fru-Con Constr. Corp. v. Controlled Air, Inc., 574 F.3d 527, 539 (...
To continue reading
Request your trial