Russo v. Wolbers

• Decision Date: 01 September 1982
• Docket Number: Docket No. 55139
• Citation: 116 Mich.App. 327,323 N.W.2d 385
• Parties: Wanda F. RUSSO, Plaintiff-Appellee, v. Robert E. WOLBERS and M. Elisabeth Wolbers, Defendants-Appellants. 116 Mich.App. 327, 323 N.W.2d 385
• Court: Court of Appeal of Michigan — District of US

Page 385

323 N.W.2d 385

Wanda F. RUSSO, Plaintiff-Appellee, v. Robert E. WOLBERS and M. Elisabeth Wolbers Defendants-Appellants.

Docket No. 55139.

116 Mich.App. 327, 323 N.W.2d 385

Court of Appeals of Michigan.

Submitted March 4, 1982.

Decided May 19, 1982.

Released for Publication Sept. 1, 1982.

[116 MICHAPP 329] Krolczyk & Danielson, Manistee, for plaintiff-appellee.

Schnelle & Wilson, P.C., Manistee, for defendants-appellants.

Before WALSH, P. J., and CYNAR and HOOD, ^* JJ.

CYNAR, Judge.

Defendants appeal by right the foreclosure of their vendee's interest in a land contract.

On July 17, 1974, plaintiff and her husband, Joseph A. Russo (now deceased), as vendors, entered into a land contract with defendants as vendees. The land contract covered a tavern in the City of Manistee. The parties also exchanged personal property contained in the bar for a promissory note for the value of the property. The security agreement underlying the promissory note and the land contract were cross-collateralized. Defendants made a down payment of $7,000 on the $30,000 purchase price of the real estate and one of $7,000 on the $25,000 purchase price of the personal property.

On July 10, 1979, plaintiff commenced foreclosure proceedings on the land contract. She alleged she had paid the 1975 tax bill ($1,484.93) and demanded reimbursement. Defendants were obligated to pay taxes under the contract. Additionally, the 1976, 1977 and 1978 property taxes were [116 MICHAPP 330] overdue. Plaintiff also claimed waste and inadequate insurance. Defendants defaulted.

An hour before the scheduled hearing to enter judgment of foreclosure, plaintiff and her attorney met with defendants and their attorney. They orally agreed to drop the foreclosure proceedings in return for the defendants taking care of the defaults existing under the contract. This agreement was reduced to writing by plaintiff's attorney. Defendants then signed the agreement. Plaintiff refused, however, to sign, until several paragraphs were added. Plaintiff's attorney prepared another writing which was satisfactory to plaintiff but not to defendants.

On January 8, 1980, plaintiff noticed the foreclosure for hearing. The hearing was adjourned so defendants could obtain new counsel. On January 24, 1980, a hearing was held at which plaintiff alleged that the parties had not entered into an agreement to forestall foreclosure proceedings. She asked the court to allow her to proceed with the foreclosure. Defendants alleged that a valid agreement had been made and the judge agreed. The judge held that an oral agreement had been reached which did not have contractual force because of the Statute of Frauds. Nonetheless, plaintiff was estopped from disavowing the agreement by the payment of certain sums by defendants pursuant to the agreement. He also stated that "equity abhors a forfeiture and does everything possible to avoid one".

By a court order dated January 24, 1980, the said stipulation and agreement was determined to be valid and binding on the parties and, if the conditions therein were followed, no default of the land contract would enter. The stipulation and agreement acknowledged reimbursement on the [116 MICHAPP 331] 1975 taxes and provided a schedule for the defendants to cause the 1976, 1977, 1978 and 1979 tax payments to become current. Further, the 1980 and subsequent taxes were to be paid within one year of the due date, all land contract payments as set forth were to be paid promptly and both parties were to follow the terms of the land contract. Defendants agreed to owe plaintiff $667.87 on a July 18, 1974, promissory note and $400 for attorney fees to prosecute the foreclosure action, both sums to be added to the land contract balance. Paragraph 6 provided as follows:

"6. If any of the terms or conditions as indicated above or which are part of the Land Contract which are not met wholly and completely and during those time periods as set forth, Defendants herein agree to waive their right of redemption and allow the Plaintiff to proceed for the Court requesting an immediate Order allowing the sale of the property here in question."

On August 14, 1980, a hearing was held for defendants to show cause why a judgment of foreclosure should not be entered. No payments had been made on the land contract for the last three months, resulting in a breach of the agreement which the parties had entered into at the time of the previous default. Defendants asked the court to allow them to cure their default by paying all arrearages within a short period of time. The court held that plaintiff was entitled to foreclosure due to the breach of the agreement entered into subsequent to the default. A judgment of foreclosure was entered on August 27, 1980. The trial judge set October 28, 1980, as the date for judicial sale and provided that defendants could redeem the property by paying the full amount due before that date. He explicitly stated that in accordance [116 MICHAPP 332] with the prior agreement and stipulation, no right of redemption accrued to defendants.

On September 18, 1980, defendants were ordered to appear in court and show cause why prospective purchasers should not be permitted to enter onto the premises involved in the foreclosure. On the same day, the court heard a motion by defendants requesting that the August 27, 1980, judgment be set aside. Defendants argued that the judgment had been improperly entered and was therefore invalid, that since no verification of the amount due had been made before judgment was entered, the amount might be inaccurate, and that the provision eliminating the statutory redemption period after judicial sale was unenforceable and illegal. The trial judge rejected the arguments. He held that failure to comply with the rules concerning entry of judgment had not prejudiced defendants since the court was willing to make modifications upon a showing of good cause. He instructed the parties' attorneys to consult with plaintiff's collection agent to determine if agreement could be reached on the amount owed. He found that defendants had contracted away their post-judicial sale redemption rights by making the agreement and stipulation which followed the original default.

A hearing was held on October 21, 1980, on defendants' claim that, by instituting proceedings to obtain a writ of execution against defendants, plaintiff had waived her rights in the collateral, both real and personal. The judge entered an order rejecting this claim.

In plaintiff's appellate brief, she states that on December 12, 1980, before a judicial sale of the real property took place, the U.S. bankruptcy court confirmed defendants' Chapter 13 [116 MICHAPP 333] plan and stayed further proceedings in the foreclosure action. Defendants remain in possession of the bar and are making land contract payments to plaintiff in compliance with the Chapter 13 plan. Plaintiff claims that any arguments or complaints by defendants are therefore moot and asks that the lower court's decision be affirmed. Since plaintiff does not support her mootness claim with argument or authority (its only mention is in the conclusion of plaintiff's brief), it is not considered.

The primary question submitted for our consideration is whether the trial court erred by holding that defendants' waiver of their post-judicial redemption rights was valid.

Defendants' contention that the waiver language is unclear is not persuasive. The term "right of redemption" is a legal term of art used to define the right granted by statute to redeem after judicial sale. Banking Corp. of Montana v. Hein, 52 Mont. 238, 156 P. 1085 (1916), Hummel v. Citizens' Building & Loan Ass'n, 38 Ariz. 54, 57-58, 296 P. 1014 (1931). Defendants' argument that the language of the agreement might be interpreted to preclude redemption before the judicial sale or to preclude redemption before judgment of foreclosure rather than eliminating the right of redemption after the judicial sale is strained under the record herein. The judge's interpretation that "right of redemption" referred to post-judicial sale right of redemption was correct.

The trial judge rejected defendants' claim that the alleged waiver of redemption rights was invalid. This issue was raised by defendants in their motion to set aside the judgment of foreclosure. The judge held that redemption rights could be contracted away and found that allowing defendants to escape their contract would do injustice to plaintiff.

[116 MICHAPP 334] The right of redemption after judicial sale is granted in M.C.L. Sec. 600.3140; M.S.A. Sec. 27A.3140, which states in part:

"The vendee of a land contract, his heirs, executors, administrators, or any person lawfully claiming from or under him or them may redeem the entire premises sold within 6 months from the time of the sale by paying to the purchaser, his executors, administrators, or assigns or to the register of deeds in whose office the deed of sale is deposited as provided in the court rules, for the benefit of the purchaser, the sum which was bid with interest from the time of the sale at the rate percent borne by the land contract."

A statutory right of redemption after judicial sale was granted with respect to land contracts for the first time in this section of the revised judicature act, 1961 P.A. 236. A statutory right of redemption has been granted with respect to mortgaged property since 1899. See 1915 C.L. 12677. Decisions concerning waiver of redemption rights in land contract contexts are few in number. This being so, we find cases concerning redemption rights of mortgagors helpful since the statute treats redemption rights in both mortgage and land contract contexts alike and the practice on foreclosure of mortgages and land contracts is closely analogous. Barnard v. Huff, 252 Mich. 258, 262, 233 N.W. 213, 77 A.L.R. 259 (1930).

Defendants rely on the Supreme Court's decision in Birznieks...