Kubczak v. Chemical Bank & Trust Co.
| Citation | 456 Mich. 653,575 N.W.2d 745 |
| Decision Date | 24 March 1998 |
| Docket Number | No. 6,Docket No. 105755,6 |
| Parties | Sally KUBCZAK, Plaintiff-Appellee, v. CHEMICAL BANK & TRUST COMPANY, Defendant-Appellant. Calendar |
| Court | Supreme Court of Michigan |
In this premises liability action, we consider whether defendant-appellant Chemical Bank, as the mortgagee and nominal owner during the mortgage foreclosure redemption period, should be considered a "possessor" for purposes of premises liability. In the present case, plaintiff-appellee realtor was injured while showing the foreclosed property during the statutory right of redemption period. Her ensuing premises liability action resulted in judgment against defendant-appellant Chemical Bank, and the Court of Appeals affirmed. We find that the bank was not a "possessor" of the property and, therefore, reverse the decision of the Court of Appeals and remand this case to the circuit court for entry of a judgment of no cause of action in favor of defendant-appellant Chemical Bank. 1
In 1979, Aldon and Nancy Hines purchased a house in Bay City. They financed most of the purchase price with a mortgage that they obtained from defendant- Chemical Bank & Trust Company. The ten-year mortgage provided for a "balloon" payment of the entire balance in June 1989. The Hineses lived in the house from 1979 until late October 1989.
Over the years, the Hineses occasionally fell behind on their payments, but were able to catch up. Employment problems caused more serious difficulty in 1988 and 1989. The parties arrived at an interim solution, but soon the Hineses were again in arrears. Their final payment was made in August 1989. By that point, the final balloon payment was overdue.
On August 1, 1989, the bank notified the Hineses in writing of its intention to begin a foreclosure by advertisement. M.C.L. § 600.3201 et seq.; M.S.A. § 27A.3201 et seq. The bank's letter gave a figure in excess of $50,000 for the total amount due, including principal, interest, and late fees.
In September 1989, the Hineses listed their house for sale with Dial Real Estate. In October, the bank initiated the foreclosure process. Near the end of that month, the Hineses moved out of the house and into an apartment. The parties disagree with regard to the reason for the move. The Hineses say the bank ordered them to move and that Ms. Hines mailed their only key to W. Roger Mikusek, the bank loan officer who was handling this file. Mr. Mikusek and the bank deny those allegations.
A sheriff's sale was held in November 1989. The bank bid the amount owed by the Hineses, and received a sheriff's deed. Under the foreclosure statute, however, a homeowner has six months to redeem a foreclosed house, and a sheriff's deed does not actually take effect until the redemption period expires. 2
After moving out in October, Nancy Hines instructed the utility companies to have all the service billings put in the name of the bank. The bank's only involvement with the property during the redemption period was to observe the house from the street, confirm with the realtor that the heat was operating in the home, pay the utilities, and list the property on the bank's insurance policy because the homeowner had allowed the insurance coverage to lapse for nonpayment of premiums. At no time did any representative of the bank enter the house. 3
At some point, the Hineses renewed the listing for an additional three months and reduced the asking price. The bank emphasizes that this demonstrates the Hineses' continued exercise of dominion over the property.
Plaintiff Sally J. Kubczak is a real estate agent for Bay City Realty Company. On March 14, 1990, six weeks before the end of the redemption period, she made arrangements with the listing agency, Dial Real Estate, to show the house to one of her clients. 4 As she and her clients were leaving through the garage, she slipped and fell, sustaining a broken hip that required surgery. Plaintiff alleges that her fall was caused by a combination of oil, water, and leaves that made the garage floor dangerously slippery.
The last day for the Hineses to redeem the property from foreclosure was May 3, 1990. A few weeks before that date, another real estate agent found potential buyers but, because of the foreclosure situation and IRS tax liens, it became apparent that the deal could not be finalized before May 3. The bank agreed to sell the house for the real estate agency after the sheriff's deed took effect, and, on May 9, 1990, the house was sold for $65,000. The bank received approximately $58,000, which covered the mortgage balance, interest, late fees, and foreclosure costs, while the IRS realized about $4,000 from its liens. After the usual closing costs were paid, the real estate agency received as commission the remainder of the proceeds, an amount slightly under $3,000. The Hineses received nothing from the sale, owing both to the fact that their equity of redemption had expired and that no balance was left after everyone else had been paid.
In October 1990, plaintiff brought the present suit against Chemical Bank, Dial Real Estate Agency, and the Hineses. Dial settled the claim for $10,000, and the cause continued to trial against the bank. 5 The basis for plaintiff's complaint was that, at the time of her March 1990 accident, the bank was the "possessor" of the property and she was a business invitee of the bank. The trial court denied the bank's motion for a directed verdict, ruling that the evidence would permit the jury to find that the bank had been a possessor of the property, even if the possession had been nonexclusive and the Hineses also had remained possessors. The bank preserved this issue by timely objection. The jury found for plaintiff and, answering specific questions, found that the bank was a possessor of the premises at the time plaintiff fell and was negligent, and that the bank's negligence was a proximate cause of her injury. After reductions for comparative negligence, the settlement with Dial, and payments from collateral insurance sources, plaintiff was awarded approximately $78,500, plus costs and judgment interest.
In an unpublished per curiam opinion, the Court of Appeals upheld the circuit court's ruling that a jury could find the bank to have been in possession of the premises, stating:
The trial court did not err in refusing to direct a verdict in favor of defendant on the issue of possession and control. Premises liability is conditioned upon the presence of possession and control, not necessarily ownership. Merritt v. Nickelson, 407 Mich. 544, 287 N.W.2d 178 (1980). Moreover, a mortgagee may be placed in possession by the mortgagor. Morse v. Byam, 55 Mich. 594, 22 N.W. 54 (1885). The evidence presented was sufficient to support the verdict that defendant was a possessor of the premises. [ 6]
The bank applied for leave to appeal, which this Court granted. 454 Mich. 918 (1997).
It is well established, as the Court of Appeals noted, that "[p]remises liability is conditioned upon the presence of both possession and control over the land." Merritt v. Nickelson, supra at 552, 287 N.W.2d 178; Orel v. Uni-Rak Sales Co., 454 Mich. 564, 563 N.W.2d 241 (1997).
In the present case, the bank had no legal right of possession during the six- month redemption period. It is certainly true, as the Court of Appeals stated, that the Hineses, as mortgagors, had the authority to place the mortgagee-bank in possession of the premises. However, we have consistently given careful scrutiny to any transaction in which a mortgagor waives its statutory right of redemption. The rule we stated in Massachusetts Mut. Life Ins. Co. v. Sutton, 278 Mich. 457, 461, 270 N.W. 748 (1936), remains sound:
[I]t has been the definite and continuous policy of this State to save to mortgagors the possession and benefits of the mortgaged premises, as against the mortgagees, until expiration of the period of redemption.
Thus, a mortgagee can obtain possession, but only for consideration, id. at 463, 270 N.W. 748, and pursuant to an explicit agreement. Bennos v. Waderlow, 291 Mich. 595, 600, 289 N.W. 267 (1939); Russo v. Wolbers, 116 Mich.App. 327, 323 N.W.2d 385 (1982). 7
Nothing in the record indicates that any agreement was made between the bank and the Hineses that would provide the bank with the immediate right to possess the foreclosed property. The fact that the bank was the high bidder at foreclosure proceedings did not grant it any rights of ownership or possession, but, rather, gave the bank a contingency interest in the property with respect to title ownership. Accordingly, any interest the bank had would not vest until after expiration of the redemption period.
The bank asserts that because it was not entitled to immediate occupation of the land under our mortgage law, it could not have been a "possessor" of the property in question for purposes of premises liability. Although we agree that the bank had no legal right of possession before May 3, 1990, possession for purposes of premises liability does not turn on a theoretical or impending right of possession, but instead depends on the actual exercise of dominion and control over the property. Merritt, supra. If we were to accept the bank's formulation, one who wrongfully exercised dominion and control over property would escape liability solely on the basis that there was no legal or theoretical possession.
The purpose behind the principle requiring actual possession and control was best expressed in Nezworski v. Mazanec, 301 Mich. 43, 56, 2 N.W.2d 912 (1942):
"It is a general proposition that liability for an injury due to...
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