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Recent Appelate Court Decisions in Housing Law

MPLP Summer 2007 Housing Law Section Newsletter Article

                Issue 34, Summer 2007

Recent Appelate Decisions in Housing Law

Michigan Supreme Courtt says tax foreclosure statute limit on relief from judgment is unconstitutional

In a unanimous result (2 concurrences), the Michigan Supreme Court ruled that, as applied to property owners who were denied procedural due process (“constitutionally adequate notice’), MCL 211.78k(6), the provision of the property tax foreclosure statute (part of the General Property Tax Act, “GPTA”) which limits the jurisdiction of a circuit court to modify a foreclosure judgment, is unconstitutional.  The case is In re Petition by Treasurer of Wayne County for Foreclosure, Wayne County Treasurer v. Perfecting Church, No. 129341 (May 23, 2007),

Perfecting Church owned 2 parcels of land.  Through a series of errors by the Wayne County Treasurer (including sending notices to the previous owner and posting a notice to a neighboring property), it never received notice of a tax delinquency until after foreclosure and subsequent sale of the property by the treasurer to Kelly.  The church filed a motion for relief from the judgment in circuit court.  The circuit court granted the motion.  The Court of Appeals denied Kelly’s delayed application for leave to appeal; the Supreme Court granted such an application.


Majority opinion

In reaching its decision, the Court, by Justice Young, primarily examined MCL 211.78k(6) which says that if the foreclosure judgment redemption amount is not paid within 21 days of the judgment’s entry, title shall absolutely vest in the “foreclosing governmental unit”, unless the judgment is appealed from, as provided in 211.78k(7) (which limits the scope of an appeal and requires that the owner pay the judgment amount to the treasurer within at most 21 days of judgment entry.)   Otherwise, statutorily, a foreclosed owner’s only remedy is a claim for money damages, under 211.78l.

The church claimed that because the treasurer had denied it due process, it could avoid the limits of the statute.  The Court, in narrow terms, said that, where a treasurer “fails to provide constitutionally adequate notice”, the statute is unconstitutional in limiting a circuit court’s jurisdiction to modify a foreclosure judgment.

Concerning what satisfies the due process notice requirement, the opinion cited the U.S. Supreme Court’s decision in Jones v. Flowers, 547 U.S. 220 (2006), where that court said that while the means used to provide such notice “must be such as one desirous of actually informing the absentee might reasonably adopt to accomplish it”, due process does not mandate that “a property owner receive actual notice before the government may take his property.”

Concurring opinions

In their concurring opinion, Justices Cavanagh and Kelly noted that they do not agree that the GPTA’s notice procedures “necessarily satisfy due process”, and so, despite a treasurer’s being compliant with the statute, it “may still fail to give a property owner constitutionally required reasonable notice.”

In her concurring opinion, Justice Weaver said that the statute, when MCL 211.78i(10) is considered (it says as long as owner gets the minimum constitutional due process, failure of the treasurer to comply with any provision of the statute does not invalidate a foreclosure) does not divest the circuit court of the power to grant relief from judgment under MCR 2.612, but rather prevents a displaced property owner from filing a “new action for possession.”   Unlike the other opinions, she cited a court of appeals case that recognized the authority of a circuit court to grant relief from judgment affected by due process shortcomings.  In re Petition by Wayne Co Treasurer, 265 Mich App 285 (2005).

Commenting on the 2 basic components of procedural due process – notice and an opportunity to be heard, and in response to the argument that the purpose behind the 1998 changes to the statutory tax foreclosure process – to accelerate the process for clearing title to tax delinquent property, she cited a passage from Stanley v. Illinois, 405 U.S 645 (1972) (quoted in Dow v. Michigan, 396 Mich 192 (1976), the case that first recognized the requirements of due process in tax foreclosures) that “the Constitution recognizes higher values than speed and efficiency.” 

She also noted that MCL 211.78k(5)(g), added to the GPTA in 2003, before the dispute here arose, may also be unconstitutional because it deprives due process rights.  That section says that a judgment is a final order which except under subsection (7) (concerning appeals) cannot be modified, stayed, or held invalid after the redemption/appeal period expires.

This decision is a good one, and will be helpful in challenging tax foreclosures.  It would have been better if a majority of the Court had adopted the suggestion of Justices Cavanagh and Kelly that the GPTA’s foreclosure notice requirements do not satisfy due process. 


Court of Appeals sets aside foreclosure because of false start          

In a decision for publication, the Michigan Court of Appeals held that where a foreclosing mortgage assignee published the first notice of publication 4 days before it received its assignment of the mortgage, it “lacked the statutory authority to foreclose, [and so,] the foreclosure proceedings were void ab initio.”  The case is Davenport v. HSBC Bank USA, Ct of App. No. 273897 (

The case involved interpretation of MCL 600.3204, part of the mortgage foreclosure by advertisement statute.  Section 1 of that provision identifies the circumstances which must exist before a party can foreclose by advertisement; its subsection (d) says that the foreclosing party must either own or have an interest in the indebtedness secured by the mortgage, or by the servicing agent of the mortgage.  HSBC claimed it was excused from satisfying (1)(d) because it fulfilled MCL 600.3204(3), which says that if the foreclosing party is not the original mortgagee, a record chain of title evidencing an assignment to that party must exist “prior to the date of the sale.”  The Court of Appeals said that subsection (3) did not allow HSBC to disregard the plain requirement of subsection (1), and so, HSBC “was not eligible to commence the foreclosure when it did so because it did not yet own the indebtednesss.”

The panel stressed that the case did no present a mere notice issue (which would make the sale voidable rather than absolutely void), but a “structural defect that goes to the very heart of defendant’s ability to foreclose by advertisement in the first place.”  On this point, the decision cites the Michigan Supreme Court case of Arnold v. DMR Financial Services, 448 Mich 671 (1995) which held that only the record holder of the mortgage may foreclose.

The Court of Appeals decision vacated a circuit court summary disposition which said that if HSBC had been technically deficient, “’the deficiency had nothing to do with the substantive rights of the parties’”, and that “’it would be laughable, if not tragic, to upset this whole arrangement because of that hair breadth of a thread the plaintiff [Davenport] is hanging on.”  However laughable or tragic, this decision is a good one, and shows that it is possible to vacate a foreclosure by advertisement for a violation of a statutory requirement.


Court of Appeals says no private foreclosure under current property tax law


In a case that involved some reconciling of the former and current property tax foreclosure statutes (the General Property Tax Act, “GPTA”, MCL 211), a Michigan Court of Appeals panel concluded that a tax sale purchaser under the former process could not foreclose a lien it acquired under the current process.  The case is AAA Invest  v. Taylor, Ct of App. No. 265266;

AAA purchased the unpaid 1998 taxes at a sale and eventually acquired a tax deed under the former process.  While the property owner Taylor was still in the redemption period for that tax deed, the county treasurer foreclosed the 1999 taxes under the current process.  To avoid loss of its interest, AAA redeemed the 1999 taxes.  Taylor timely redeemed the 1998 taxes, voiding the tax deed.   AAA then sued Taylor in circuit court, seeking to foreclose upon its “tax lien” for the 1999 taxes.  When Taylor didn’t answer the complaint, a default was entered, and the court entered a foreclosure judgment, and ordered that a public sale be held, from which Taylor would have a 6 month redemption period.  Agboruche purchased the property at that sale and after the 6 month redemption period expired, filed a “writ of assistance” to take possession of the property.  Taylor filed a motion to stay the writ of assistance and to set aside the foreclosure judgment.  The circuit court set aside the judgment (and dismissed the underlying complaint) and the sale to Agboruche, and ordered Taylor to reimburse AAA and Agboruche for the taxes.  The court of appeals affirmed.

Noting first that a trial court’s power to set aside (relieve a party from) a judgment is broad under MCR 2.612, the court found that under the current GPTA that the foreclosure proceeding AAA pursued to enforce its lien for payment of the 1999 taxes was only available to governmental entities.  The decision offers a survey of the past and current property tax foreclosure processes.

In reaching its result, the panel focused primarily on MCL 211.78g(5) of the current statute, which provides that a person with an interest in the property other than the owner who redeems a foreclosure judgment it entitled to a lien which is in addition to whatever interest it already has and has “the same priority as the existing lien, title, or interest.”  AAA argued that its lien under this section for 1999 taxes had the same priority as its lien for 1998 taxes, entitling it for seek foreclosure and sale under the former GPTA provisions.  The panel rejected that argument, saying that “’priority’ simply refers to the relative ranking of competing interests to property.  This case does not involve a priority dispute.”  According to the decision, the payment of the 1999 taxes  gave AAA a “statutory redemption lien” rather than a “tax lien” subject to foreclosure under the former statute.

Its analysis led the court to find that the circuit court had not abused its discretion (the standard of review for a decision on a motion to set aside a judgment).  Relying on Heugel v. Heugel, 237 Mich App 471 (1999), it observed that the case both warranted the circuit court’s exercising its “’grand reservoir of equitable power to do justice” and presented “extraordinary circumstances that require[d] setting aside the judgment to achieve justice.”  While the decision cited In re Wayne County Treasurer, 265 Mich App 285 (2005) for the proposition that the “GPTA no longer requires strict compliance with statutory notice provisions as long as minimum due process is afforded, citing Geraldine v. Miller, 322 Mich 85 (1948), it stated that “the policy of the law nevertheless favors redemption of property sold for taxes.”

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