Gruskin v. Fisher, Docket No. 58719
| Decision Date | 10 January 1979 |
| Docket Number | No. 7,Docket No. 58719,7 |
| Citation | 405 Mich. 51,273 N.W.2d 893 |
| Parties | Myron GRUSKIN and Ellen Gruskin, his wife, Ben Gruskin and Frances Gruskin, his wife, and Joan H. Volin, Plaintiffs-Appellants, v. Irene R. FISHER and Gordon L. Fisher, Co-Executors of the Estate of Marshall Fisher, Deceased, and Charles F. Burger, Jointly and Severally, Defendants- Appellees. Calendar |
| Court | Michigan Supreme Court |
by Robert H. Golden, Southfield, for plaintiffs-appellants.
Lieberman & Tukel, P. C. by Albert L. Lieberman, Southfield, for defendants-appellees.
The question is whether a land contract seller who sends notices of intent to forfeit and of forfeiture has made an irrevocable election requiring him to accept possession of the property when tendered by the purchaser in lieu of money damages for breach of the contract.
We hold that while the seller may not accept or take possession and still seek money damages, he may, even after sending notice of forfeiture, refuse tender of possession and either commence an action for money damages or for foreclosure of the land contract.
One can agree with our colleagues that § 5750 1 does not evince a "clear and plainly expressed legislative intention to abrogate the common law rule" without agreeing with their conclusion that sending notice of forfeiture is an election of remedy barring enforcement of the contract. Even if the Legislature did not intend to abrogate the common law rule, neither did it evince a clear and plain purpose to retain it. It at least left the question of the effect of sending a notice for this Court to resolve, as it does so many other questions.
In all events, it is for this Court to decide whether a common-law rule shall be retained unless the Legislature states a rule that is inconsistent with or precludes a change in the common-law rule. Moreover, practice and procedure in the courts is constitutionally confided to this Court.
Strict adherence to the common-law rule that forfeiture of a land contract is an election of remedies ignores the many changes in the practice since the common-law rule developed and often causes an unjust result.
Sellers no longer are at liberty immediately after forfeiture of a land contract to seize possession of premises and put purchasers out on the street. Forfeiture can be effected only upon observance of procedures which provide land contract purchasers with protections similar to, in many cases equal to or better than, those provided mortgagors.
Mortgagees may obtain a deficiency judgment, whether the foreclosure is by action or advertisement. While the statute precludes a land contract seller from seeking a deficiency judgment If he obtains a writ of restitution and (by implication) if he otherwise obtains possession of the premises, it does not in terms require that result where he has merely announced a forfeiture of a land contract.
Forfeiture of the contract is a prerequisite to commencement of summary proceedings for possession of the premises. 2 Thus, a seller wishing to avail himself of the remedy of summary proceedings must first send notice of forfeiture. It does not follow that the consequence of sending notice of forfeiture should be an irrevocable election precluding an action for damages for nonperformance or an action to foreclose with a view to obtaining a deficiency judgment.
While the seller has other options he can commence an action for money damages or to foreclose such actions are, by comparison with summary proceedings, cumbersome, lengthy and therefore frequently ineffectual.
In the context that summary proceedings are the customary form of action against a defaulting purchaser, forfeiture should not, despite the formal language of notices of intent to forfeit and of forfeiture (which we could henceforth change by court rule), be viewed as anything other than a condition precedent to the commencement of summary proceedings. The function of the notices is primarily to inform the purchaser that unless he cures the delinquency he faces court action.
Sending a notice of forfeiture is, except in the extraordinary case, but an early step in a seller's often long drawn out efforts to obtain compliance by a delinquent purchaser with his obligations under the contract. If the purchaser's response to the notice is, atypically, "I am willing to surrendermy equity," or if he so responds after the commencement of summary proceedings, the seller must, indeed, by reason of the statute, make an election. He is then required to decide whether to accept possession or to seek a deficiency judgment.
In the instant case the land contract concerned an apartment building located at 1550 Seward, one and a half blocks east of Twelfth Street, in Detroit.
The purchase price was $40,000, with no down payment, payable with interest at 7% Per annum in monthly installments of $400 beginning January 1, 1970, and the entire purchase money and interest was payable within 8 years from the date of the contract. The contract included all stoves, refrigerators and other appliances and goods located on the premises.
It was stated that "a City of Detroit inspection dated 8/12/69 consisting of 68 items in 7 pages" had been made, and the purchasers agreed to correct "all violations of record" within six months as "part of the consideration of purchase price."
Installments of principal and interest were paid in 1970 and 1971. The principal balance on October 1, 1971, was $36,386.10.
About one year later, September 19, 1972, at a time when 12 installments at $400 ($4,800) plus taxes and insurance were in default, the sellers sent the purchasers notice of intention to forfeit the land contract. 3 When the ten days for response expired on September 29, 1972, notice of forfeiture was sent. 4
The purchasers responded by letter to the sellers' attorney enclosing a quit-claim deed. The deed stated that it was "given to surrender and deliver up possession of said premises pursuant to" the notice of forfeiture. The letter suggested that the sellers
Six days later, October 25, 1972, sellers' attorney responded by letter to the purchasers' attorney, returning the quit-claim deed, stating that it had been "refused by my clients." The stated reason for refusal was that demand had been made for surrender of possession on September 19, "which your clients did not see fit to do until long after notice of forfeiture was served upon them." The letter continued:
The purchasers' attorney responded the following day that the deed was delivered in compliance with the demand for possession. "Your clients are, therefore, in possession of the real estate." 5
The purchasers' motion for summary judgment on the ground that the sellers had elected their remedy and may not sue in the circuit court for deficiency was denied by the circuit judge who stated that § 5750 "provides, in the absence of a judgment in summary proceedings, the service of a notice of forfeiture is not a bar to circuit court foreclosure of land contract proceedings."
The sellers' motion for summary judgment claimed that, by reason of the building code and other violations, the City of Detroit had torn the building down and had placed a lien on the property for the cost of demolition, an amount greater than the value of the land. The property in question was located in an area of unoccupied and vandalized apartment buildings in various states of disrepair, some of which had been torn down by the city. It was opined that the property was without value.
Purchasers responded that the decreased value of the property was the result of the demolition of the building by the city, if such demolition had taken place, and that the demolition was the result of the sellers' failure to act upon notices sent by the city to the sellers after they had regained possession of the property from the purchasers.
The sellers' motion for summary judgment was granted and judgment entered in the amount of $36,386.10 principal, $5,305.53 interest and costs, with interest from November 1, 1973. The Court of Appeals reversed, holding that the common-law rule had not been changed by the statute and that sending of the notice of forfeiture was an election of remedies precluding an action to foreclose.
Land contract purchasers generally do not willingly surrender possession or forfeit their equity. Most sellers do not seek a return of the property, but payment.
There is no reason to burden the circuit courts with actions to foreclose land contracts. Land contract sellers should not be encouraged to commence such proceedings.
Since the seller's legitimate interests are generally protected by summary proceedings, he should not be constrained to commence foreclosure proceedings unless it appears that the purchaser does not wish to preserve and is willing to surrender his equity. There is no reason to put him to an election when he does not yet know whether the purchaser intends to protect his equity.
Suppose that a seller were to commence a circuit court action for foreclosure. In the Wayne Circuit Court such an action...
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