Koenig v. Van Reken, Docket No. 77-4176

• Citation: 279 N.W.2d 590,89 Mich.App. 102
• Decision Date: 19 March 1979
• Docket Number: Docket No. 77-4176
• Parties: Helen K. KOENIG, Plaintiff-Appellant, v. Stanley R. VAN REKEN and Harriett E. Van Reken, and Michigan National Bank, Defendants-Appellees.
• Court: Court of Appeal of Michigan (US)

Page 590

279 N.W.2d 590

89 Mich.App. 102

Helen K. KOENIG, Plaintiff-Appellant, v. Stanley R. VAN REKEN and Harriett E. Van Reken, and Michigan National Bank, Defendants-Appellees.

Docket No. 77-4176.

Court of Appeals of Michigan.

March 19, 1979.

Rehearing Denied May 18, 1979.

Released for Publication June 15, 1979.

Hampton, Snavely, Ranno, Lightbody & Girard by Verne C. Hampton, Bloomfield Hills, for plaintiff-appellant.

Glazer & Cotton by J. Kingsley Cotton, Birmingham, for defendants-appellees.

Before V. J. BRENNAN, P. J., and ALLEN and PAUL F. O'CONNELL, ^* JJ.

V. J. BRENNAN, Presiding Judge.

In October of 1974, plaintiff Helen Koenig brought suit in Oakland County Circuit Court to have a warranty deed executed by her to defendants Van Reken declared an equitable mortgage. The original complaint was later supplemented to add a count against the defendants for unjust enrichment. The defendants moved for a summary judgment under GCR 1963, 117.2(1) claiming that the plaintiff failed to state a claim upon which relief could be granted. The plaintiff appeals by right the lower court's granting of the defendants' motion, but contests only the dismissal of the equitable mortgage count. Our review is thus limited to the question of whether the trial court under GCR 1963, 117.2(1) properly dismissed the action regarding the imposition of an equitable mortgage.

A motion based on GCR 1963, 117.2(1) challenges the legal sufficiency of a plaintiff's complaint and is to be considered by an examination of the pleadings alone. It is the duty of the reviewing court to accept as true the well-pleaded facts in the plaintiff's complaint and determine whether those claims are so clearly unenforceable as a matter of law that no factual development can possibly justify a right to recovery. Merit Electric Co., Inc. v. J. Boyle, Inc., 77 Mich.App. 503, 258 N.W.2d 539 (1977); Three Lakes Ass'n v. Whiting, 75 Mich.App. 564, 255 N.W.2d 686 (1977); Stewart v. Troutt, 73 Mich.App. 378, 251 N.W.2d 594 (1977).

Accordingly, the factual situation comprising the subject matter of the present appeal is derived from the various allegations in the plaintiff's complaint.

In 1970, plaintiff owned a home in Oakland County with a market value of $60,000 that was encumbered by three mortgages totaling $25,933.26. The real estate taxes on plaintiff's home had become delinquent and foreclosure proceedings had begun on one of the mortgages. Plaintiff was then approached by defendant, Stanley Van Reken, who proposed that for a fee of 10% He would "service" the mortgages and pay the delinquent taxes. Subsequently, on June 16, 1970, plaintiff and defendant Stanley Van Reken executed three documents that form the basis of this action.

The first of these documents, entitled "AGREEMENT", stated that plaintiff desired to prevent the loss of her home and provided that defendant Stanley Van Reken purchase the property, redeem it from tax sale and mortgage foreclosure, and give plaintiff an exclusive right to repurchase according to the terms of a lease-option agreement that was also executed between the parties.

The second document was a warranty deed which conveyed the property from plaintiff to defendants for a stated consideration of $28,600. Plaintiff alleges that the deed was silent as to consideration when she signed it, that the figure of $28,600 was added subsequently, and that she never received any such consideration.

The third document provided that Stanley Van Reken was to lease the premises to plaintiff for a 3-year period at a fixed monthly rent of $300. Plaintiff was also to receive an exclusive option to repurchase the premises during the term of the lease for a price of $32,318.79, with a downpayment of $3,500 and monthly payments of $300 which were to include taxes, insurance, principal and interest.

At no time during the negotiations that led to the execution of these documents was plaintiff represented by an attorney, and all three documents were prepared by Stanley Van Reken.

The parties operated under the lease from June 16, 1970, to February, 1972, and during this time plaintiff made total payments of $5,800. In February, 1972, plaintiff defaulted in a monthly rental payment. Plaintiff was thereupon evicted from the home.

The defendants argue on appeal that the subject transaction cannot be deemed to create an equitable mortgage since it has not been alleged that the deed was given to secure an obligation owed by the plaintiff to the defendants. The defendants contend that the "obligation owed" is a necessary requisite to establish an equitable mortgage "as a matter of law".

The defendants' argument not only shows a lack of understanding of the nature and purpose of equitable relief but overlooks well-established Michigan case law on point. The court of equity protects the necessitous by looking through form to the substance of the transaction. Although no set criterion has been established, the controlling factor in determining whether a deed...