The Supreme Court decided the case on Application for Leave to Appeal. Rather than grant leave to appeal, the Court instead ordered that oral argument be held upon the application for leave to appeal, and reversed the Court of Appeals.

The Supreme Court essentially adopted the dissenting opinion from the Court of Appeals, ruling that although MERS did not own the mortgage note itself, MERS was “recordholder of the mortgage,” which was a sufficient “interest in the indebtedness” to satisfy the statutory requirement that the foreclosing entity be an “owner of an interest in the indebtedness.”  Essentially, the Supreme Court determined that the Court of Appeals improperly interpreted the meaning of the language of the foreclosure by advertisement statute.

This Supreme Court Order appears to definitively resolve the issue of whether MERS can foreclose a mortgage by advertisement in MERS’ name, rather than the name of the owner of the note, in the State of Michigan.

Laverne and Marilyn Dutkavich (the “Dutkaviches”) “obtained a judgment lien against Steve Pelletier (“Pelletier”) in the amount of $29,183” in 2004.  In 2006, Pelletier purchased a condominium unit and recorded a warranty deed on January 24, 2007.  In July 2007, the “Dutkaviches filed a notice of judgment lien with the register of deeds” on the condominium.  In September 2007, Pelletier conveyed the property to Robert Thomas (“Thomas”).  None of the proceeds from the sale were dispersed to the Dutkaviches, even though the judgment lien had been filed prior to closing. The Dutkaviches recorded a notice of levy on the property after the property had already been transferred to Thomas.  In 2009, Thomas filed suit to quiet title to the property.

The Dutkaviches claimed that “payment in full is a prerequisite to discharging a judgment lien under the” Michigan Judgment Lien Act (“MJLA”).  Because there was no payment here, the Dutkaviches claim that the judgment lien clouded the title, and that Thomas was not a bona fide purchaser for value because Thomas “failed to demand that the lien be discharged with the proceeds from the sale.”

“Thomas contends that MCL 600.2819 requires that the judgment debtor alone to pay the judgment creditors with proceeds from the sale.”  Thomas argued that the purchaser of the property has no duty to satisfy the judgment, regardless of whether or not they had notice of the judgment lien.

The Court of Appeals held that the MJLA did not permit the foreclosure of the judgment lien.  Further, the MJLA did not give Thomas any obligation to make payment to the Dutkaviches, as Pelletier, the judgment creditor was required to make that payment.

The Court of Appeals held that the MJLA did require that the judgment lien remain attached to the property.   The Court reasoned that the Legislature had provided that a partial discharge of a lien would continue as an encumbrance on the property, then certainly a non-payment would continue to remain attached to the property. This may seem unfair to Thomas, but he proceeded with the closing without demanding that the judgment lien be extinguished.

The Court of Appeals also held that MCL 600.6018 may allow the Dutkaviches to claim a levy on the property and force the sale of the property.  MCL 600.6018 provides a separate remedy from the MJLA, which allows the levying against land conveyed in fraud of creditors.  The Court of Appeals remanded the case to the trial court to determine whether MCL 600.6018 would allow the Dutkaviches to make such a claim.

This article was written by Matt Ehrlich from Demorest Law Firm.

Courts try to ensure predictability and will strictly construe private agreements. However, certain contracts are void or voidable for public policy.  In many real estate transactions, the cost of obtaining information regarding environmental contamination for prospective purchasers or tenants is too high, which prevents them from entering into beneficial transactions.  The Michigan Legislature sought to remedy this problem by requiring certain property owners to disclose known existing environmental contamination to prospective purchasers.  As a result, purchasers do not need to take risks, or waste money in order to determine whether a property is environmentally contaminated. In furtherance of this policy, the Michigan Court of Appeals held:

if a person has knowledge that his real property is a facility, he “shall not” transfer an interest in that real property                         unless he or she provides written notice to the transferee that the real property is a facility. Because defendant was                           prohibited from transferring any interest in the property at issue unless he provided plaintiffs with written notice that                     the property was a facility, and he did not do so, the contract was founded on an act prohibited by statute and was thus,                 void.

A “facility” is property that has been environmentally contaminated in excess of the clean-up standards for residential property.  Specifically, under the Natural Resources and Environmental Protection Act, facility is defined as:

any area, place, or property where a hazardous substance in excess of the concentrations which satisfy the                                       requirements of section 20120a(1)(a) or (17) or the cleanup criteria for unrestricted residential use under part 213 has                   been released, deposited, disposed of, or otherwise comes to be located. Facility does not include any area, place, or                       property at which response activities have been completed which satisfy the cleanup criteria for the residential category                 provided for in section 20120a(1)(a) and (17) or at which corrective action has been completed under part 213 which                     satisfies the cleanup criteria for unrestricted residential use.

An operator or owner of a “facility” must disclose to potential purchasers the fact that the property is a facility before entering into an agreement to transfer ownership of the property. In the event that the owner or operator does not disclose this fact, Michigan Courts will hold that the agreement is void for public policy.

This article was written by Matt Ehrlich, Associate Attorney at Demorest Law Firm.

The Uniform Condemnation Public Act (UCPA) provides that:

if the property owner…successfully challenges the agency’s right to acquire the property….and the court finds the proposed acquisition improper, the court shall order the agency to reimburse the owner for actual reasonable attorney fees and other expenses incurred in defending against the improper acquisition. (Emphasis Added).

Attempting to avoid paying attorney’s fees, Grosse Isle argued that there was nothing to “reimburse” to the Company because the attorney’s fees had not yet been paid.   In rejecting Grosse Isle’s argument, the Court of Appeals reasoned that “the Legislature’s primary purpose in the attorney fee provisions of the UCPA is that property owners ‘not be forced to suffer because of an action that they did not initiate and that endangered through condemnation proceedings, their right to private property.’”  Reading the term “reimburse” to foreclose attorney’s fees that were incurred but not yet paid was contrary to the Legislature’s intent.

The Court of Appeals held, “[c]ontrary to plaintiff’s argument, the words ‘incurred’ and ‘reimburse’…do not require a property owner to have actually paid its attorney before the property owner’s right to recover from the government agency its ‘actual reasonably attorneys fees. The Court rejected the view that attorney’s fees need actually have been paid.”

This decision has broader implications for private individuals.  Although specifically tailored to the UCPA, this decision indicates the willingness of courts to entertain broader readings of the term “reimburse” as applied to other statutes and contracts.  A party may not need to actually make a payment first before seeking “reimbursement.”

This article was written by Matthew Ehrlich, Legal Clerk at Demorest Law Firm.

Courts give “teeth” to the case evaluation process by punishing parties that reject the offered amount and do not do at least 10% better at trial.  If a party rejects the amount and does not do 10% better at trial, then they will have to pay the other sides costs and attorneys fees after the case evaluation. This is called “case evaluation sanctions.”

There is an exception to the requirement to pay case evaluation sanctions. MCR 2.403(O)(11) allows courts to avoid awarding case evaluation sanctions in the “interest of justice.”

In Fowler v. Detroit Symphony Orchestra, Inc., the trial court sought to assist the Detroit Symphony Orchestra (“DSO”) in avoiding the payment of case evaluation sanctions. The Court held in part that there was an interest of justice because the DSO is an indigent entity that provides a public service while being supported by corporations and donations.  Further, the Court held that there was no misconduct on the part of the DSO in deciding not to accept the case evaluation amount.

The Court of Appeals rejected the trial court’s analysis and held that the trial court abused its discretion by declining to award case evaluation sanctions against the DSO.  The Court of Appeals ruled that the DSO’s financial status, public service and DSO’s lack of misconduct were not sufficient factors to avoid case evaluation sanctions.

Instead, the Court of Appeals held that there must be an unusual circumstance to warrant the application of the interest of justice exception. Courts have found unusual circumstances to include: (1) where a legal issue of first impression is presented, (2) where the law is unsettled and substantial damages are at issue, and (3) where the effect on third persons may be significant.  The common thread in the examples listed above is that there was a public interest in having the issue judicially decided rather than merely settled.

This article was written by Matthew Ehrlich, Legal Clerk at Demorest Law Firm.

A $14.9 Million verdict was recently overturned by the Michigan Supreme Court.  The Supreme Court determined that there was error on part of the trial judge in the jury selection process.  The Michigan Supreme Court also inferred in its opinion that the trial judge overseeing the case could be in hot water with the Michigan Judicial Tenure Commission as a result of his conduct.

This case arose out of an auto accident on an icy road while Anthony and Shirley Pellegrino were riding as passengers in an airport shuttle.  Anthony suffered severe injuries, while his wife Shirley died.  The only issue at trial was the amount of damages, because the defendant had admitted liability.

Prior to voir dire (the selection and empanelling of the jury) the judge directed the parties that he sought to have a “jury that represented the racial composition of [Wayne] [C]ounty.”  It was a goal of the trial court to use race as a factor in determining which members of the jury pool would be permitted to serve on the jury.

During voir dire, Defendant sought to dismiss an African American female by using a peremptory challenge. In this case, Plaintiff’s counsel objected under the grounds that a peremptory challenge may not be exercised on the basis of race.  Defense counsel argued that his challenge was not racially motivated, and instead was based on the fact that the prospective juror “wanted to excuse Greene because she had been widowed two times and was in the process of grieving over her dead mother.”  The trial court denied Defendant’s right to use the peremptory challenge without making any findings about the Defendant’s motivation.  The trial judge used the prospective juror’s race as his sole basis in determining whether to uphold Plaintiff’s objection.  The judge denied the peremptory challenge in order to maintain his desired racial composition of the jury.

Michigan law is clear that race may not be used as a factor in peremptory challenges, even by the trial court.  The Michigan Supreme Court held that a judge “may not deny a party the use of a peremptory challenge on the basis of the court’s desire to attain a racially proportionate jury.”

The Michigan Supreme Court also discussed the various violations of the trial judge.  Particularly disturbing to the Supreme Court was the fact that the trial judge indicated that “he would continue to apply his own personal view of the law, rather than the law of this state, until ‘either removed from the bench by the disciplinary committee or ordered to have a new trial.’”

The Michigan Supreme Court determined that on retrial, another judge would hear the case.

This article was written by Matthew Ehrlich, Legal Clerk at Demorest Law Firm.

The only exception to this rule allows an employee to recover damages from the employer if the employee can prove that the employer committed an intentional tort. In order to prevail, the employee must prove the employer acted deliberately, and with intent to cause an injury. Intent to injure will be imputed to the employer if the employer (1) had actual knowledge that an injury was certain to occur and  (2) disregards that knowledge.

In a recent Michigan Court of Appeals decision (Click Here to See a Copy of the Court’s Decision), the court ruled that liability for an intentional tort may exist where “the employer subjects an employee to a continuously operative dangerous condition that the employer knows will cause an injury, that it knows employees are taking insufficient precautions to protect themselves, and that the employer takes no action to remedy the situation.” This case presented a unique situation where multiple injuries occurred, management knew of the injuries, solutions to preventing injuries were discussed, and no changes were made. This created a “certainty of harm” because the employees had no effective means of protecting themselves from injury.

The Court of Appeals, in noting that the employers could have prevented the injuries by adopting some remedial safety equipment, seemed to adopt a negligence standard. Had the employer taken certain safety precautions it would not be open to liability. Only time will tell whether this case  is the first step toward judicial erosion of the prior strict interpretation of the exclusive remedy provision.

This article was written by Michael K. Hayes, Legal Clerk at Demorest Law Firm.

There are several exceptions to this general rule. Specifically, an insurance agent can form a “special relationship” with the insured when the agent does one or more of the following:

(1) the agent misrepresents the nature or extent of the coverage offered or provided;

(2) an ambiguous request is made that requires a clarification;

(3) an inquiry is made that may require advice and the agent, though he need not, gives advice that is inaccurate; or

(4) the agent assumes an additional duty by either express agreement or promise to the insured.

In the above-mentioned case, the insured claimed that the insurance premiums they were charged were too high and that the insurance agent did not seek enough competitive bids. The insured claimed that the insurance agent had “represented that it would work diligently to obtain the best appropriate insurance coverage for the best premium reasonably available in the market.” The Court of Appeals ruled that this was insufficient to warrant a legal action against the agent by the insured. The Court of Appeals affirmed a ruling on this issue in favor of the insurance agent without a trial.

This case shows the importance of researching insurance rates and premiums on your own, or seeking competitive bids from more than one insurance agent. The agent’s first goal is to sell the insurance and it is not necessarily a top priority to find the best or least expensive insurance coverage for the insured. Furthermore, the insured will have no recourse if it later decides that it got a bad deal on the insurance coverage.

This article was written by Mark S. Demorest, Managing Member of Demorest Law Firm.

When will a Court treat two separate written contracts as a single agreement? In

The buyer defaulted and failed to complete the purchase, and the seller then filed a lawsuit. The purchase agreement provided that the seller could retain the earnest money deposit as liquidated damages. In addition to keeping the deposit, the seller sought damages for the buyer’s failure to complete the purchase of the personal property. The Court of Appeals held that because the two contracts were really a single agreement, the seller was limited to keeping the deposit. The Court stated:

Because the two contract were intended to operate together to spell out a single transaction, the trial court did not err in concluding that the provision in the one for personal property tying its closing to the closing on the contract for real property indicated that there was requirements to close on the former if there was no closing of the latter.

The Court of Appeals looked at several factors to conclude that there really a single agreement between the seller and the buyer: (1) The contracts were drafted simultaneously. (2) The sale of the real estate and personal property were supposed to occur simultaneously. (3) Much of the personal property being sold consisted of fixtures or large equipment that was intended to remain with the house, such as kitchen appliances, a washer and dryer and a hot tub. Based on these factors, the Court of Appeals ruled that, “The structuring of the transaction into separate contracts for the sale of certain real property and related personal property resulted in a single agreement composed of two complementary components.”

It is common to have multiple related agreements as part of a business or real estate transaction. The lesson of this case is that the contracts must not only be read separately, but they must be read together as a whole. The contracts should specify how a default under one agreement affects the other agreements.

This article was written by Mark S. Demorest, Managing Member of Demorest Law Firm.

Traditionally, interest has been calculated on judgments by using the date of the filing of the Complaint as the starting date. Each January 1^st and July 1^st, the interest rate is recalculated by the State Court Administrator’s Office, and is raised or lowered at that time based on prevailing interest rates.

In Chelsea Investment Group, LLC v. City of Chelsea and Michael Steklac (Click here for a PDF copy), the Court of Appeals ruled that the traditional method of interest calculations was incorrect. The Court ruled that interest is still to be calculated starting at the date of filing of the Complaint, but the interest rate is to be adjusted every 6 months from the date of filing. In other words, every January 1^st and July 1^st the judgment interest rate will be recalculated, but the adjusted rate will not apply to a particular case until the next six-month anniversary of the filing of the Complaint. It may seem like a minor tweak, but in many cases this delay in the interest rate change will drastically affect the total amount of the Judgment. Who is benefited or harmed will depend on whether the Judgment interest rate goes up or goes down.

The Court of Appeals did not address whether this change is retroactive, and it is unclear how this ruling will apply to a case previously filed or a Judgment previously entered.

This article was written by Mark S. Demorest, Managing Member of Demorest Law Firm.