Rose v. Pheney, Inc. , 6 Mich. App. 639 ( 1967 )

T. G. Kavanagh, P. J.

Plaintiffs sold their hotel and bar to Dee’s, Inc., on November 6, 1961. The transaction was evidenced by two instruments, a lease purchase contract covering the realty and a bill of sale with a note and chattel mortgage covering the personal property.

A rider to the lease purchase contract provided:

“Rider to a certain, land lease contract dated: November 6,1961, between William Rose and Shirley S. Rose, his wife, and George Rose, Jr., and Frances T. Rose, his wife, as sellers and Dee’s Incorporated, a Michigan corporation, as buyers.

Said parties of the first part also covenant and agree that in default of this land lease contract, or in the payment of the obligations which this land lease contract secures, hereby agree to reassign the then existing liquor license on the North Channel Hotel & Bar and convey all interest in the premises occupied by the business to the parties of the second part, all subject to the approval of the State of Michigan liquor control commission. Further, both parties agree that a default in the terms and conditions of a certain chattel mortgage and chattel mortgage note executed simultaneously by Dee’s Incorporated, a Michigan corporation in favor of George Rose, Jr. and William Rose relating to North Channel Hotel and Bar, North Island, 1001 North Channel, Clay township, St. Clair county, Michigan, would likewise constitute a default in the terms and conditions of this land lease contract.”

The chattel mortgage included the following provision :

“Said party of the first part also covenants and agrees that in the event of default of this mortgage, or in the payment of the obligation which this mortgage secures, to reassign the then existing liquor licenses on the North Channel Hotel & Bar and convey all interest in the premises occupied by the business to the parties of the second part, all subject to the approval of the State of Michigan liquor control commission, further parties of the first part agree that a default in the terms and conditions of a certain land lease agreement executed simultaneously herewith by Dee’s Inc., a Mich. Corp. by Anthony D’Agostino, its Pres., and Dorothy Oake, its Yice-Pres. & Secy., relating to a lease hold interest and W-287Sd-3 lots #74, 75 & 76 St. Clair Plats, North Channel, would likewise constitute a default in the terms and conditions of this chattel mortgage and chattel mortgage note.”

Thereafter defendant Pheney, Inc., remodeled the premises and when Dee’s, Inc., failed to pay for its work, foreclosed its mechanic’s lien on the real estate and acquired Dee’s interest therein at the foreclosure sale. Dee’s right to redeem from this sale expired on November 30, 1965.

In January, 1966, the plaintiffs brought suit against Pheney, Inc., and Dee’s, Inc., asserting that a balance of $14,300 plus interest was due on the lease purchase agreement and $14,300 plus interest was due on the note.

The complaint prayed for the following relief (in part):

“(a) That the aforesaid sums of money he declared due plaintiffs from the respective defendants and defendants ordered to pay the same to plaintiffs, within 90 days from date of decree.

“(b) That since default in the lease contract purchase agreement constitutes a default in the chattel mortgage and defendant Pheney, Incorporated, has succeeded to the rights and duties of defendant, Dee’s, Incorporated, in the lease purchase agreement and since the land and chattels constitute one business, that defendant Pheney, Incorporated, have the right to redeem from the chattel mortgage foreclosure if desired.

“(c) That if the full amount due plaintiffs from defendants is not paid as aforesaid, that the title to the premises sold under contract and the personal property sold on chattel mortgage, be restored to the plaintiffs free and clear from any claims of defendants, and that defendants Dee’s, Incorporated, be ordered to re-assign the liquor license to plaintiffs in accordance with the agreement attached hereto and upon failure to do so, a copy of this decree may be -filed with the Michigan State liquor control commission and operate as assignment and transfer of said license.”

Defendant Pheney’s answer admitted all of the allegations in plaintiffs’ complaint but set up their tender of the balance due on the lease purchase agreement and asked for a judgment requiring plaintiffs to convey the real property upon defendant Pheney’s payment of the amount determined to be due on the lease purchase agreement.

Plaintiffs replied, asserting that the mutual default provisions of the agreements required redemption from both defaults, and moved for summary judgment.

Summary judgment granting relief prayed for by the plaintiffs was entered on April 25, 1966, and this appeal tests the correctness of the court’s ruling.

The nature of the interest acquired by the defendant determines the issue.

Appellant concedes that the consent judgment of foreclosure against Dee’s, Inc., which appellant obtained on June 28, 1965 was subject to the prior rights of plaintiffs herein.

"What were those prior rights? As vendor under the lease purchase contract he was entitled to have the conditions and terms of the contract performed. See Scales v. Griffin (1845), 2 Doug 54, and Wagar v. Briscoe (1878), 38 Mich 587.

One of the terms of the contract was that payment for the chattels would be made according to the terms of the note before the land purchase contract could be considered performed.

No reason is advanced by appellant why plaintiffs should be estopped from asserting this right or defense interposed to defeat it.

Upon the state of the record before him the entry of a summary judgment by the trial court was correct. See GCR 1963, 117.2 and Durant v. Stahlin (1965), 375 Mich 628.

Affirmed, with costs to appellee.

J. H. Gillis and McGeegob, JJ., concurred.