Sweet Air Inv. V. Kenney

• Citation: 275 Mich. App. 492,739 N.W.2d 656
• Decision Date: 15 May 2007
• Docket Number: Docket No. 265691.
• Parties: SWEET AIR INVESTMENT, INC, Plaintiff/Counter-Defendant-Appellant, v. Linda L. KENNEY a/k/a Linda L. Disanto, Frank Disanto, individually and as Trustee and Beneficiary of the Frank J. Disanto Revocable Living Trust, Defendants/Counter-Plaintiffs-Appellees.
• Court: Court of Appeal of Michigan (US)

739 N.W.2d 656

275 Mich. App. 492

SWEET AIR INVESTMENT, INC, Plaintiff/Counter-Defendant-Appellant, v. Linda L. KENNEY a/k/a Linda L. Disanto, Frank Disanto, individually and as Trustee and Beneficiary of the Frank J. Disanto Revocable Living Trust, Defendants/Counter-Plaintiffs-Appellees.

Docket No. 265691.

Court of Appeals of Michigan.

Submitted April 10, 2007, at Lansing.

Decided May 15, 2007, at 9:00 a.m.

Released for Publication September 12, 2007.

Dykema Gossett PLLC (by Thomas M. Hanson and Krista L. Lenart), Ann Arbor, for plaintiff.

Fraser Trebilcock Davis & Dunlap, P.C. (by Michael H. Perry and Joshua S. Smith), Lansing, for defendants.

Trott & Trott, P.C. (by Jeffrey D. Weisserman), Bingham Farms, for Michigan Mortgage Lenders Association.

Before: SERVITTO, P.J., and TALBOT and SCHUETTE, JJ.

PER CURIAM.

Plaintiff appeals as of right the trial court's order denying its motion for summary disposition. Plaintiff also appeals as of right the trial court's conversion of the July 1, 2005, hearing on plaintiff's motion for summary disposition into an immediate bench trial under MCR 2.116(I), at which the trial court set aside the foreclosure sale on the basis that the property should have been sold in two different parcels rather than one. We reverse and remand for entry of a judgment of possession in plaintiff's favor.

I. FACTS

The property in question consists of about 66 acres located on Marr Lake. The buildings on the property include an 8,000-square-foot main house, five outbuildings, dog kennels, and a caretaker's home. The legal descriptions in the deed to the entire property indicate that there are five different parcels. The property has three different tax identification numbers and is covered by one insurance policy.

Defendant Linda L. Kenney purchased the entire property on January 12, 1993, from the Campfire Girls. Later in 1993, Kenney conveyed the property to herself and defendant Frank DiSanto as tenants by the entirety. In 1995, defendants conveyed the property to the Frank J. DiSanto Revocable Living Trust (Trust), of which DiSanto is the trustee. Kenney has used the property's main house as her residence and has raised show dogs on the property since 1995. Both Kenney and DiSanto reside in the main house at 300 Marr Lake Road (main parcel). The caretakers for the property reside on the parcel with the address of 750 Marr Lake Road (caretaker parcel). A bridge that crosses a small creek connects the main parcel and the caretaker parcel. The caretakers and defendants have an arrangement whereby the caretakers provide services in lieu of paying rent; however, the caretakers pay their own utilities. There was never a written lease agreement between the caretakers and defendants.

On March 15, 2000, the Trust took out a $475,000 loan from Eastern State Bank, and the loan was secured by a mortgage on the property. The legal description of the property in the mortgage consists of the entire 66 acres, as previously outlined. The Trust failed to make its January and February 2001 payments, and Eastern sent a letter on February 15, 2001, notifying DiSanto that the Trust was in default and that it had 30 days to cure before Eastern accelerated the mortgage and foreclosed. DiSanto claims that he did not receive any letters from Eastern notifying him of the default. DiSanto made no effort to cure, and Eastern instituted foreclosure proceedings by advertisement. On December 20, 2001, Eastern successfully bid the amount of the indebtedness, $591,601.28, at the foreclosure sale and received a sheriff's deed. Eastern then quitclaimed the property to plaintiff, Sweet Air Investments, Inc., a wholly owned subsidiary of Eastern. Under MCL 600.3240, the redemption period expired on January 24, 2003.

Sweet Air filed a complaint in the district court on March 11, 2004, seeking possession of the property, eviction, restitution, and an order enjoining defendants from causing any damage to the property. Defendants filed an answer and a counterclaim asserting several claims in excess of the district court's jurisdiction, and the parties stipulated removal to the circuit court. Plaintiff and defendants filed crossmotions for summary disposition. The trial court visited the property for inspection, with the parties' counsel present and over plaintiff's objections. At the hearing on plaintiff's motion for summary disposition, the trial court converted the hearing into an immediate bench trial under MCR 2.116(I) and held, as a matter of law, that the foreclosure sale should be set aside because the property consisted of two distinct parcels that were occupied separately. Plaintiff now appeals.

II. STANDARD OF REVIEW

This Court reviews de novo the trial court's conclusions of law and equitable decisions. Glen Lake-Crystal River Watershed Riparians v. Glen Lake Ass'n, 264 Mich.App. 523, 531, 695 N.W.2d 508 (2004); Webb v. Smith (After Second Remand), 224 Mich.App. 203, 210, 568 N.W.2d 378 (1997). Likewise, "[t]he interpretation and application of court rules ... present a question of law that is ... reviewed de novo." Associated Builders & Contractors v. Dep't of Consumer Industry Services Director, 472 Mich. 117, 123-124, 693 N.W.2d 374 (2005).

III. ANALYSIS

A. Parceling Under MCL 600.3224

Plaintiff argues that the trial court was incorrect in setting aside the foreclosure sale under MCL 600.3224. We agree.

"The Michigan Supreme Court has held that it would require a strong case of fraud or irregularity, or some peculiar exigency, to warrant setting a foreclosure sale aside." United States v. Garno, 974 F.Supp. 628, 633 (E.D.Mich., 1997), citing Detroit Trust Co. v. Agozzinio, 280 Mich. 402, 405-406, 273 N.W. 747 (1937), and Calaveras Timber Co. v. Michigan Trust Co., 278 Mich. 445, 450, 270 N.W. 743 (1936), MCL 600.3224 provides that

[i]f the mortgaged premises consist of distinct farms, tracts, or lots not occupied as 1 parcel, they shall be sold separately, and no more farms, tracts, or lots shall be sold than shall be necessary to satisfy the amount due on such mortgage at the date of the notice of sale...."

However, if the distinct lots are "occupied as 1 parcel, they may in such case be sold together." MCL 600.3224.

This Court has stated that MCL 600.3224 is mandatory rather than discretionary. Cox v. Townsend, 90 Mich.App. 12, 15, 282 N.W.2d 223 (1979). The proper inquiry in determining if the property consists of one parcel is whether, at the time of the foreclosure sale, the property was "held, treated, occupied or used" as one parcel. Id. at 16, 282 N.W.2d 223. MCL 600.3224 does not require that the parcels be sold separately when doing so would be arbitrary or impractical. Id. at 18, 282 N.W.2d 223, citing Grand River Avenue Christian Church v. Berkshire Life Ins. Co., 254 Mich. 480, 236 N.W. 881 (1931). Further, this Court has stated that "[w]hen land is mortgaged as a single parcel, it may be sold as such." Cox, supra at 17, 282 N.W.2d 223, citing Dunn v. Fish, 46 Mich. 312, 9 N.W. 429 (1881). Finally, the mortgagor has the burden of proof in establishing that the lots were not occupied as one parcel. Cox, supra at 16, 282 N.W.2d 223.

The caselaw interpreting the Michigan parceling statute goes back more than 100 years, and we take this opportunity to examine and clarify the precedents relied on by the parties. Plaintiff first relies on this Court's decision in Cox, in which the foreclosed property in question was a 1,100-acre tract used for farming that was acquired through 13 different conveyances over a 12-year period. Id. at 13-14, 282 N.W.2d 223. The property consisted of more than 20 different parcels according to the survey map, and the survey certificate's written description showed 4 separate parcels. Id. at 18, 282 N.W.2d 223. Further, the property consisted of 13 different tax parcels, and the title examination showed 11 different parcels. The fences that separated the original tracts had been removed, and the current fences separated crop and livestock use. There were four houses located on the property that were rented to nonfarming tenants. Id. In holding that the property was properly sold as one parcel during the foreclosure sale, this Court stated that "[w]e are dealing here with a large farm, which by its very nature consists of numerous types of land and may have various houses and outbuildings situated on the property." Id. This Court further stated that "[t]here is no reasonable or logical method of dividing the property without adhering to an entirely different use than that made of it by defendants." Id.

Plaintiff also relies on Grand River Avenue Christian Church, supra at 486-488, 236 N.W. 881, in which the mortgagor claimed that the mortgaged property should have been sold separately because the property contained an oil station and stores leased to various tenants and was, therefore, occupied separately from the mortgagor's church. The stores and the church were part of the same structure, but the oil station was separated from the rest of the property by a lattice fence. Id. at 488-489, 236 N.W. 881. At the time the property was mortgaged, the tenant of the oil station was not in possession. Id. at 488, 236 N.W. 881. Further, separating the oil station from the rest of the property would have diminished the value of the property because the property occupied by the oil station was "irregularly shaped" and separating it would have seriously impaired the value of the whole property because it would have isolated the back lots. Id. at 489, 236 N.W. 881. Our Supreme Court held that the property was properly sold as one parcel and stated that "`[w]hile a mortgagor's right of redemption of part of the premises is to be safeguarded, it is not superior to the right of the mortgagee to collect the debt.'" Id. at 491, 236 N.W. 881, quoting Security Trust Co. v. Sloman, 252 Mich. 266, 271, 233 N.W. 216 (1930).

In Security Trust, supra at 269-270, 233 N.W. 216,...