Citimortgage Inc v. Kevin Casey ( 2017 )

STATE OF MICHIGAN
COURT OF APPEALS
CITIMORTGAGE, INC., UNPUBLISHED
November 9, 2017
Plaintiff/Counter-Defendant-
Appellee,
v No. 332908
Macomb Circuit Court
KEVIN CASEY, LC No. 2014-000423-CH
Defendant/Cross-Defendant-
Appellant,
and
KEVIN G. BURGESS,
Defendant/Counter-Plaintiff/Cross-
Defendant-Appellant,
and
BANK OF AMERICA, N.A., SORREL WOODS
COMMUNITY ASSOCIATION, and SORREL
WOODS CONDOMINIUM ASSOCIATION,
Defendants,
and
MATTHEW EBERSOLE and BRIANNA KRUK,
Defendants/Cross-Plaintiffs-
Appellees.
Before: BECKERING, P.J., and O’BRIEN and CAMERON, JJ.
PER CURIAM.
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Defendants/cross-defendants Kevin Casey and Kevin G. Burgess appeal as of right an
April 22, 2016 opinion and order entered in favor of defendants/cross-plaintiffs Matthew
Ebersole and Brianna Kruk following a bench trial. We affirm.
I. BACKGROUND
Casey and Burgess acquired title to a condominium unit by warranty deed in 2004, and
together they owned the unit as joint tenants with full rights of survivorship. Casey executed a
mortgage on the property in favor of ABN AMRO Mortgage Group, Inc. (ABN), CitiMortgage’s
predecessor in interest. In 2011, Casey stopped making payments on the mortgage. In 2012,
CitiMortgage filed an action seeking reformation of the mortgage to establish Burgess as a
mortgagor. The trial court granted summary disposition in favor of Casey and Burgess, finding
that equity should not be invoked to save a sophisticated commercial lender from its own
mistake. The day after the trial court entered its order, Casey quitclaimed his interest in the
property to Burgess, who then sold the property on land contract to Ebersole and Kruk in 2013.
In 2014, Casey wrote a letter to the Greater Macomb Title Agency claiming that the prior
mortgage was “effectively discharged” in the 2012 action.
CitiMortgage brought the instant action against Casey and Burgess to, inter alia, quiet
title to the property and confirm the continued existence of the 2004 mortgage that Casey
executed.1 Ebersole and Kruk later intervened as defendants and filed a cross-complaint against
Casey and Burgess. The trial court granted CitiMortgage’s motion for summary disposition and
ruled that Casey, who had previously quitclaimed his interest in the property to Burgess, no
longer had any interest in the property, and that CitiMortgage’s mortgage continued to be
enforceable and encumbered the titles of Burgess, Ebersole, and Kruk. The trial court dismissed
CitiMortgage’s additional claims. Following a bench trial, the trial court entered a judgment in
favor of Ebersole and Kruk on their cross-complaint against Casey and Burgess, finding that
Burgess breached the land contract and was liable for fraud for falsely representing that the
property was not encumbered by a mortgage, and that Casey was liable for aiding or abetting
Burgess in committing fraud. This appeal followed.
II. JURISDICTION
Initially, CitiMortgage challenges this Court’s jurisdiction over Casey’s and Burgess’s
claims on appeal. CitiMortgage argues that because it was granted relief only on its claim to
quiet title and its remaining claims were dismissed, and because Casey claimed no interest in the
property, Casey is not an aggrieved party with regard to any claim made by CitiMortgage.
CitiMortgage further argues that Casey lost standing to challenge CitiMortgage’s interest when
he conveyed his title to Burgess. Lastly, CitiMortgage argues that Burgess can only claim a right
of appeal from orders that he directly challenged in the trial court.
1
The claims against defendants Bank of America, N.A., Sorrell Woods Community Association,
and Sorrell Woods Condominium Association were dismissed in 2016.
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MCR 7.203(A) requires an appeal by right to be brought by an aggrieved party. In
Federated Ins Co v Oakland Co Rd Comm, 475 Mich. 286, 291-292; 715 NW2d 846 (2006), the
Michigan Supreme Court stated:
To be aggrieved, one must have some interest of a pecuniary nature in the
outcome of the case, and not a mere possibility arising from some unknown and
future contingency. An aggrieved party is not one who is merely disappointed
over a certain result. Rather, to have standing on appeal, a litigant must have
suffered a concrete and particularized injury, as would a party plaintiff initially
invoking the court’s power. The only difference is a litigant on appeal must
demonstrate an injury arising from either the actions of the trial court or the
appellate court judgment rather than an injury arising from the underlying facts of
the case. [Citations and quotation marks omitted.]
CitiMortgage argues that Casey is not an aggrieved party with regard to any of
CitiMortgage’s claims because the trial court found that he had no interest in the property and
dismissed all remaining claims against him. The only claim brought by CitiMortgage that is at
issue on appeal is its claim to quiet title (Count I). Counts II through V of its complaint were
dismissed. Casey does not dispute that he has no interest in the property. Therefore, we agree
that Casey is not an aggrieved party with regard to CitiMortgage’s claim to quiet title. Casey is,
however, an aggrieved party with respect to the trial court’s judgment finding him liable for
aiding or abetting fraud, which is discussed in Parts III and IV of this opinion.
With regard to the other issues on appeal, CitiMortgage argues that Burgess can only
claim an appeal of right from orders that he challenged in the trial court, and this Court should
only consider the arguments asserted by Burgess below. However, although Burgess would have
had to file a motion or raise an objection below to preserve an issue on appeal, he was not
required to do so to qualify as an aggrieved party. Burgess meets the definition of an aggrieved
party because (1) he had an interest in the property as a land contract vendor, (2) this property
interest was affected by the trial court’s decision to quiet title in favor of CitiMortgage, and (3)
his interest in the outcome of the case was of a pecuniary nature. Federated Ins Co, 475 Mich. at
291.
We agree, however, that the issue challenging the trial court’s decision to deem admitted
CitiMortgage’s requests for admissions filed against Casey is not properly before this Court.
Because the admissions applied only to Casey, Burgess is not an aggrieved party with regard to
this issue. Given that Casey has no interest in the property and is not an aggrieved party with
respect to CitiMortgage’s claim, we dismiss that issue on appeal.
III. RES JUDICATA AND COMPULSORY JOINDER
Burgess contends that the trial court should have dismissed CitiMortgage’s claims
because (1) they were barred by the doctrine of res judicata, (2) the rule of compulsory joinder
applied, and (3) CitiMortgage failed to establish damages with regard to Counts IV and V of its
complaint.
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“For an issue to be preserved for appellate review, it must be raised, addressed, and
decided by the lower court.” Mouzon v Achievable Visions, 308 Mich. App. 415, 419; 864 NW2d
606 (2014) (citation and quotation marks omitted). With regard to the claim that this lawsuit was
barred by the doctrine of res judicata, this issue was raised by Burgess in his answer to
CitiMortgage’s motion for summary disposition on Count I. The trial court granted
CitiMortgage’s motion for summary disposition on the quiet title claim, thereby rejecting
Burgess’s assertion of the doctrine of res judicata. Therefore, this issue is preserved.2
Burgess’s claims regarding compulsory joinder and that Counts IV and V should have
been dismissed because there was no evidence of damages are unpreserved, because they were
not raised, addressed, and decided by the trial court. See Mouzon, 308 Mich. App. at 419.
Nevertheless, this Court may review unpreserved issues “if a miscarriage of justice will result
from a failure to pass on them, or if the question is one of law and all the facts necessary for its
resolution have been presented, or where necessary for a proper determination of the case.”
Heydon v MediaOne, 275 Mich. App. 267, 278; 739 NW2d 373 (2007) (citation and quotation
marks omitted).
“We review de novo both a trial court’s decision on a motion for summary disposition
and its application of the legal doctrine of res judicata.” Garrett v Washington, 314 Mich. App.
436, 440-441; 886 NW2d 762 (2016). We also “review de novo the proper interpretation and
application of a court rule.” Id. at 450.
CitiMortgage’s complaint contained five counts. Burgess argues that all five counts were
barred by the doctrines of res judicata and compulsory joinder, and Counts IV and V should have
been dismissed based on CitiMortgage’s failure to establish damages. As CitiMortgage argues,
however, the trial court dismissed Counts II, III, IV, and V. Therefore, only CitiMortgage’s
claim to quiet title (Count I) is at issue on appeal. Because the trial court has already dismissed
Counts II, III, IV, and V, any claims regarding those counts are moot. See City of Jackson v
Thompson-McCully Co, LLC, 239 Mich. App. 482, 493; 608 NW2d 531 (2000) (“An issue is
moot if an event has occurred that renders it impossible for the court, if it should decide in favor
of the party, to grant relief.”).
2
Although the trial court did not expressly address Burgess’s argument regarding res judicata, it
had previously rejected Casey’s assertion of res judicata, agreeing with CitiMortgage that it was
required to file a new quiet title action based on Casey’s representation to a third party that the
mortgage had been discharged. Moreover, “where the lower court record provides the necessary
facts, appellate consideration of an issue raised before, but not decided by, the trial court is not
precluded.” Hines v Volkswagen of America, Inc, 265 Mich. App. 432, 443-444; 695 NW2d 84
(2005).
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A. RES JUDICATA
In order for the doctrine of res judicata to preclude a claim, three elements must be
satisfied: “(1) the prior action was decided on the merits, (2) both actions involve the same
parties or their privies, and (3) the matter in the second case was, or could have been, resolved in
the first.” Garrett, 314 Mich. App. at 441 (citation and quotation marks omitted). “[T]he burden
of proving the applicability of the doctrine of res judicata is on the party asserting it.” Id.
(citation and quotation marks omitted; alteration in original).
The prior 2012 action brought by CitiMortgage was decided on the merits and involved
the same parties as this action. The dispute in this case involves whether CitiMortgage’s claim
to quiet title could have been resolved in the 2012 action. In Garrett, 314 Mich. App. at 442, this
Court explained:
Our Supreme Court has taken a broad approach to the doctrine of res
judicata, holding that it bars not only claims already litigated, but also every claim
arising from the same transaction that the parties, exercising reasonable diligence,
could have raised but did not. Accordingly, when examining factors for the third
element of res judicata, Michigan courts employ the broad, pragmatic same
transaction test, often referred to as the transactional test, rather than the narrower
same evidence test. Thus, while the question whether the same evidence is
necessary to support claims may have some relevance, the determinative question
is whether the claims in the instant case arose as part of the same transaction as
did [the plaintiff’s] claims in the original action. Under the transactional test, a
claim is viewed in factual terms and considered coterminous with the transaction,
regardless of the number of substantive theories, or variant forms of relief flowing
from those theories, that may be available to the plaintiff[.] The Court explained
that [t]he transactional test provides that the assertion of different kinds or
theories of relief still constitutes a single cause of action if a single group of
operative facts give rise to the assertion of relief. Whether a factual grouping
constitutes a transaction for purposes of res judicata is to be determined
pragmatically, by considering whether the facts are related in time, space, origin
or motivation, [and] whether they form a convenient trial unit. . . . [Citations and
quotation marks omitted; alterations in original.]
As CitiMortgage argues, the 2012 action arose out of Burgess’s failure to execute the
original ABN mortgage. In that action, CitiMortgage sought to reform the mortgage to include
Burgess as a mortgagor. This case arose out of Casey’s subsequent quitclaim to Burgess and
attempt to have a title company remove the mortgage as an encumbrance. In Count I,
CitiMortgage alleged that “[f]ollowing the disposition of the Prior Action Defendant Casey
claimed that the ABN Mortgage was ‘effectively discharged’ pursuant to the Opinion and
Order.” CitiMortgage further alleged that “[t]he ABN Mortgage remains a valid mortgage” and
“Defendant Casey’s characterization of the ABN Mortgage as ‘effectively discharged’
jeopardizes and diminishes Plaintiff’s mortgagee interest in the Property.” Accordingly,
CitiMortgage brought the quiet title action to determine the parties’ interests in the property.
Because it was based on events that occurred after the 2012 action was resolved, it could not
have been raised in the 2012 action. Thus, this claim did not arise from the same transaction as
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the action to reform the mortgage, and the trial court did not err by rejecting Burgess’s
arguments and granting CitiMortgage’s motion for summary disposition on the quiet title count.
Burgess argues that when the 2012 action was filed, Casey had already defaulted on the
mortgage, so CitiMortgage could have foreclosed or collected on the note in that action. Counts
II and III of CitiMortgage’s complaint in the instant case involve claims for default of a
promissory note and foreclosure of the ABN Mortgage. Even if CitiMortgage could have
asserted those claims in the prior action, those counts are not at issue because they have been
dismissed. As discussed earlier, only Count I is at issue, and that count is based on Casey’s
conduct after the 2012 action had been resolved.
B. COMPULSORY JOINDER
MCR 2.203(A) provides:
In a pleading that states a claim against an opposing party, the pleader
must join every claim that the pleader has against that opposing party at the time
of serving the pleading, if it arises out of the transaction or occurrence that is the
subject matter of the action and does not require for its adjudication the presence
of third parties over whom the court cannot acquire jurisdiction.
“In determining whether two claims arise out of the same transaction or occurrence for purposes
of MCR 2.203(A), res judicata principles should be applied.” Garrett, 314 Mich. App. at 451.
Accordingly, for the same reasons discussed above, Count I could not have been joined in the
2012 action.
C. DAMAGES
Finally, Burgess argues that CitiMortgage failed to establish a basis for relief with respect
to Counts IV and V because there was no evidence that it suffered a diminution in value. Again,
however, because Counts IV and V were dismissed, this argument is moot. See City of Jackson,
239 Mich. App. at 493.
IV. FRAUD
Casey and Burgess contend that the trial court should not have found them liable for
fraud, or aiding or abetting fraud. We disagree.
In Trahey v City of Inkster, 311 Mich. App. 582, 593; 876 NW2d 582 (2015), this Court
stated:
This Court reviews a trial court’s factual findings in a bench trial for clear
error, and reviews its conclusions of law de novo. A finding is clearly erroneous
if there is no evidentiary support for it or if this Court is left with a definite and
firm conviction that a mistake has been made. To the extent that our review
requires the interpretation of a statute, our review is also de novo. [Citations and
quotation marks omitted.]
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A. BURGESS’S LIABILITY FOR FRAUD
In 1031 Lapeer LLC v Rice, 290 Mich. App. 225, 236; 810 NW2d 293 (2010), this Court
stated:
To establish actionable fraud, a plaintiff must show that (1) the defendant
made a material representation, (2) the representation was false, (3) the defendant
knew the representation was false or recklessly made the representation as a
positive assertion without knowledge of its truth, (4) the defendant made the
representation with the intention that the plaintiff act on it, (5) the plaintiff acted
in reliance on the representation, and (6) the plaintiff suffered injury.
“Importantly, to sustain a claim of fraud, the plaintiff must have reasonably relied on the false
representation. There can be no fraud where a person has the means to determine that a
representation is not true.” Id. at 236-237 (citation and quotation marks omitted).
The trial court found that Burgess committed fraud for falsely representing that there was
no mortgage on the property and that Casey was liable for aiding or abetting that fraud. Casey
and Burgess first argue that Ebersole and Kruk’s alleged reliance on Burgess’s representation
was not reasonable because Kruk testified that Burgess told her and Ebersole that there was a
court case pending. Casey and Burgess misinterpret Kruk’s testimony. Kruk testified that
although she and Ebersole purchased the property from Burgess on land contract in December
2013, Burgess did not tell them about the pending court case until October 2014. So, at the time
of purchase, Ebersole and Kruk did not know the condominium unit was the source of pending
litigation. They learned that the property was encumbered by a mortgage when the foreclosure
notice was posted, and Burgess thereafter said he would obtain a quitclaim deed from Casey.
Kruk expressly testified that Burgess did not tell them about the mortgage before they entered
the land contract and that she did not learn about the mortgage until October 2014.
Casey and Burgess further argue that there was no indication that the trial court found
Burgess’s testimony “not credible” when he claimed at trial that he told Ebersole and Kruk about
the mortgage. However, relying on Ebersole and Kruk’s testimony, the trial court found that
Burgess committed fraud, and therefore, it necessarily found Burgess’s testimony not credible.
Based on Ebersole and Kruk’s testimony, the trial court did not clearly err when it found that
Burgess failed to disclose the mortgage. See Trahey, 311 Mich. App. at 593.
Casey and Burgess also claim that it was unreasonable for Ebersole and Kruk to rely on
Burgess’s real estate agent to validate his representation that there was no mortgage on the
property because they should have realized that the agent represented Burgess’s interest as the
seller. Casey and Burgess further argue it was unreasonable for Ebersole and Kruk to not obtain
a title insurance policy. Ebersole testified that he did not have an attorney review the land
contract because a reputable real estate agent showed them the condominium unit, and Burgess
said he would receive a clear title after the land contract was paid in full. The trial court
explained, however, in reliance on In re People v Jory, 443 Mich. 403, 417 n 10; 505 NW2d 228
(1993), that a “defendant who obtains money or property by an affirmative misrepresentation
that the property is free from encumbrances is not relieved from guilt by the fact that the
purchaser could have detected the fraud by examining the public records[.]” In Jory, the Court
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stated that “[t]he fact that a mortgage is a matter of public record is no defense to a prosecution
for false pretenses.” Id. Moreover, this Court has stated that the “general rule that there cannot
be any fraud if the party allegedly defrauded had the means to determine for him- or herself the
truth of the matter” “is only applied when the plaintiffs were either presented with the
information and chose to ignore it or had some other indication that further inquiry was needed.”
Alfieri v Bertorelli, 295 Mich. App. 189, 194-195; 813 NW2d 772 (2012) (citation and quotation
marks omitted). In Titan Ins Co v Hyten, 491 Mich. 547, 555 n 4; 817 NW2d 562 (2012), our
Supreme Court further explained:
Concerning the reliance prong, it is true that fraud is not perpetrated upon
one who has full knowledge to the contrary of a representation. But there is no
common-law duty to attempt to acquire such knowledge. For it is well settled law
that a payment . . . may be recovered, even if the mistake be due to lack of
investigation.
The Court of Appeals in the instant case held that [t]here can be no fraud
where a person has the means to determine that a representation is not true. When
read in isolation, this statement might support the panel’s conclusion that an
insurer has a duty to investigate representations made by a potential insured.
However, when the statement is read in the full context of the Nieves [v Bell
Indus, Inc, 204 Mich. App. 459; 517 NW2d 235 (1994)] opinion, as well as other
precedent, it is clear that an insurer has no duty to investigate the representations
of a potential insured. [Citations and quotation marks omitted; alteration in
original.]
Thus, Ebersole and Kruk had no duty to investigate Burgess’s representation that there was no
mortgage on the property, and Burgess may not defend the claim of fraud based on Ebersole and
Kruk’s failure to examine the public records. Accordingly, the trial court did not err by finding
that Ebersole’s and Kruk’s reliance on Burgess’s misrepresentation was reasonable, even though
the existence of the mortgage could have been discovered in a title search.
Lastly, Casey and Burgess argue that the trial court erred by finding that Casey’s
argument below, i.e., that Ebersole and Kruk were good-faith purchasers because they had no
knowledge of the mortgage, negated their claim that Ebersole and Kruk knew about the
mortgage. Casey and Burgess argue that they were entitled to assert inconsistent arguments. We
note, first, that this argument was asserted by Casey alone in his motion for declaration of
judgment. Moreover, Casey argued that even if Ebersole and Kruk had knowledge of the
mortgage, they had no notice of a defect in the title because they were shown the quitclaim deed
and the 2012 judgment, which would have led a reasonable person to believe that the mortgage
had no effect on Burgess’s interest. Thus, Casey’s prior argument was not actually inconsistent
with Casey and Burgess’s claim that Burgess told Ebersole and Kruk about the mortgage.
Nonetheless, the trial court’s decision was not based on this prior argument alone, which it
merely pointed out in a footnote. Rather, as discussed earlier, the court relied primarily on
Burgess’s representation that there was no mortgage on the property, which is supported by
Ebersole’s and Kruk’s testimony at trial.
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B. CASEY’S LIABILITY FOR AIDING AND ABETTING FRAUD
Casey and Burgess also argue that if Burgess did not commit fraud, then Casey could not
have aided or abetted fraud. For the reasons already discussed, however, the trial court did not
err by finding that Burgess was liable for fraud. Casey and Burgess make no other argument
with regard to the aiding and abetting claim. Therefore, the trial court did not err by finding
Casey liable for aiding or abetting fraud.
C. DAMAGES
Finally, Casey and Burgess argue that the trial court’s determination of damages is not
supported by the evidence. The trial court found that Ebersole and Kruk lost their entire
investment of $154,040, and they were entitled to damages in the amount of $140,540 (their
investment less a reasonable rental fee of $1,500 a month for January 2014 until September
2014). The trial court found that Ebersole and Kruk paid $72,000 in deposits, a lump-sum
payment of $20,000, $20,300 in payments under the land contract, $12,600 for house painting,
$5,140 for granite countertops, $5,500 for hardwood floors, and $22,700 to finish the basement.
These findings are not clearly erroneous. Kruk testified that they made a down payment of
$72,000, and Ebersole testified that they paid $2,900 a month from February 2014 to September
2014, and made a $20,000 enhanced payment in June 2014. These payments totaled $112,300.
With regard to the improvements, Kruk testified that they paid $12,600 for painting, $5,140 for
the countertops, $5,550 for the flooring, and $22,700 for the basement. Ebersole and Kruk,
however, do not dispute the lower figures used by the trial court, including only $5,500 for
hardwood floors and $18,500 to finish the basement. Therefore, the improvements totaled
$41,740. Based on these amounts, Ebersole and Kruk’s total investment was $154,040, as the
trial court found.
Casey and Burgess also argue that Ebersole and Kruk should not have been awarded the
full value of the improvements because they benefitted from the use of the floors, countertops,
painting, and basement work while they lived at the property. The trial court, however, deducted
a rental fee for their use of the property. With regard to the amount of the rental fee, Casey and
Burgess inaccurately assert that the trial court deducted a total amount of $1,500, based on a
monthly rate of $150, which they contend is clearly inadequate given the size of the residence.
This calculation is incorrect. The trial court deducted $1,500 a month, not $150 a month, for a
total deduction of $13,500. Casey and Burgess do not dispute that $1,500 a month is reasonable.
V. QUIET TITLE AND BREACH OF CONTRACT
Casey and Burgess contend that the trial court should not have found that Burgess
breached the land contract or “quieted title in the property to CitiMortgage.” We disagree.
CitiMortgage’s motion for summary disposition was filed pursuant to MCR
2.116(C)(10). We review de novo a trial court’s grant of summary disposition under MCR
2.116(C)(10). McLean v Dearborn, 302 Mich. App. 68, 72; 836 NW2d 916 (2013).
In reviewing a motion under MCR 2.116(C)(10), the trial court considers
affidavits, pleadings, depositions, admissions, and other evidence introduced by
the parties to determine whether no genuine issue of material fact exists and the
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moving party is entitled to judgment as a matter of law. The evidence submitted
must be considered in the light most favorable to the opposing party. [Id. at 73
(citations and quotation marks omitted).]
“This Court reviews a trial court’s factual findings in a bench trial for clear error, and reviews its
conclusions of law de novo.” Trahey, 311 Mich. App. at 593.
Casey and Burgess argue that Burgess’s interest was not subject to the mortgage because
Burgess was not a party to the mortgage and, therefore, he did not breach the land contract.
They rely on Townsend v Chase Manhattan Mtg Corp, 254 Mich. App. 133, 134; 657 NW2d 741
(2002), in which the plaintiff and his mother, Donna Townsend, were joint tenants with full
rights of survivorship. Townsend alone executed a mortgage on the property. Id. After
Townsend’s death, the plaintiff did not make payments on the mortgage and the defendant
foreclosed. Id. This Court held “that plaintiff is not liable on the mortgage because he was not a
party to the mortgage, therefore the mortgage was effectively terminated by [Townsend’s] death
because her interest in the property was extinguished with her death.” Id. at 137.
In this case, however, Casey did not die. Instead, he transferred his interest to Burgess.
As the court found in the 2012 action, Casey’s interest remained subject to the mortgage. When
Casey subsequently quitclaimed his interest to Burgess, Burgess acquired Casey’s interest
subject to the mortgage, which was duly recorded and of which Burgess had actual knowledge.
MCL 565.29 provides:
Every conveyance of real estate within the state hereafter made, which
shall not be recorded as provided in this chapter, shall be void as against any
subsequent purchaser in good faith and for a valuable consideration, of the same
real estate or any portion thereof, whose conveyance shall be first duly recorded.
The fact that such first recorded conveyance is in the form or contains the terms
of a deed of quit-claim and release shall not affect the question of good faith of
such subsequent purchaser, or be of itself notice to him of any unrecorded
conveyance of the same real estate or any part thereof.
“Under MCL 565.29, the holder of a real estate interest who first records his or her interest
generally has priority over subsequent purchasers.” Richards v Tibaldi, 272 Mich. App. 522, 539;
726 NW2d 770 (2006). “[A] good-faith purchaser is one who purchases without notice of a
defect in the vendor’s title.” Id. (citation and quotation marks omitted). “ ‘Notice’ in the context
of real estate law can be actual or constructive[.]” Id. Therefore, the trial court properly found
that Burgess’s interest was subject to the mortgage and entered an order of quiet title finding that
the mortgage encumbered the titles of Burgess, Ebersole, and Kruk.
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The trial court also properly found that Burgess breached the land contract. The land
contract provided, in relevant part:
3. Seller and Purchase [sic] Mutually Agree
* * *
(b) That if the title of Seller is evidence by land contract or now or
hereafter encumbered by mortgage, Seller shall meet the payments of principal
and interest there on as they mature and produce evidence thereof to Purchaser on
demand. . . . When the amount owing hereon is reduced to that owning upon such
contract or mortgage . . . a conveyance shall be made in the form above provided
with a covenant by the grantee to assume and pay the same.
The court found that Burgess failed to use any of the land contract payments to bring the
mortgage current, and he failed to convey a warranty deed when the amount that Ebersole and
Kruk owed on the land contract became less than the mortgage balance. Casey and Burgess do
not dispute these findings. Rather, they argue only that Burgess was not obligated on the
mortgage. As discussed earlier, however, Burgess’s interest was subject to the mortgage.
Affirmed.
/s/ Jane M. Beckering
/s/ Colleen A. O'Brien
/s/ Thomas C. Cameron
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