Dept of Agriculture and Rural Development v. Kenneth L Engle ( 2022 )

If this opinion indicates that it is “FOR PUBLICATION,” it is subject to
revision until final publication in the Michigan Appeals Reports.
STATE OF MICHIGAN
COURT OF APPEALS
DEPARTMENT OF AGRICULTURE AND FOR PUBLICATION
RURAL DEVELOPMENT and ACME November 10, 2022
TOWNSHIP, 9:30 a.m.
Plaintiffs-Appellees,
V No. 359098
Grand Traverse Circuit Court
KENNETH L. ENGLE and JANET C. ENGLE, LC No. 2020-035493-CZ
Defendants/Cross-Defendants-
Appellants
and
YUBA ORCHARD COMPANY, LLC,
Defendant/Cross-Plaintiff-Appellee.
Before: MARKEY, P.J., and SAWYER and BOONSTRA, JJ.
PER CURIAM.
Defendants Engle (defendants) appeal by leave granted from an order of the circuit court
denying their motion for summary disposition and granting summary disposition to plaintiffs and
rescinding the sale of property by defendants to defendant Yuba Orchard Company (Yuba). We
affirm.
The trial court provided the following concise statement of the facts underlying this appeal:
The Engles owned two adjoining parcels, consisting of 102.91 total acres,
of real property (“Protected Property”) in Acme Township. On March 30, 2012,
the Engles granted a Conservation Easement to Acme Township, the Michigan
Department of Agriculture and Rural Development (MDARD) by and for the State
of Michigan, the United States Department of Agriculture by and for the United
States of America, and the Natural Resources Conservation Service (NRCS) acting
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on behalf of the Commodity Credit Corporation. The Conservation Easement was
conveyed in consideration for $402,900. Under the Conservation Easement, the
Engles (hereinafter the “Grantor”) retained the right to convey the Protected
Property, including the right to sell, lease, mortgage, bequeath, assign or donate the
land.[1] However, the Conservation Easement expressly prohibited the Grantor
from “dividing, subdividing, partitioning or otherwise creating or permitting
separate ownership of the Protected Property.”[2]
On April 5, 2019, the Grantor entered into a Purchase Agreement with
[Defendant] Yuba Orchard Company (“Yuba”), and on July 12, 2019, conveyed
the north parcel of the Protected Property to Yuba in exchange for $328,800.
Pursuant to the remedies outlined in the Conservation Easement, MDARD and
Acme notified the Grantor on January 10, 2020, of the violation and requested that
it be cured. Subsequently, on September 25, 2020, MDARD filed a complaint for
declaratory and injunctive relief, entreating the Court to order the Protected
Property be returned to single ownership. On February 16, 2021, Yuba filed a Cross
Claim against the Grantor asserting breach of contract. The Grantor filed a Motion
for Summary Disposition on February 22, 2021, asserting that: (1) the Conservation
Easement should not be interpreted to prohibit the sale of one of the parcels; (2) the
Court lacks authority to reverse the sale to Yuba; (3) the prohibition against division
constitutes an unreasonable restriction on alienation; and (4) laches should bar the
Plaintiff’s claim. On April 12, 2021, the Court heard oral arguments on the
Grantor’s motion and took the matter under advisement.
The trial court concluded that the subject easement protected “the entirety of the 102.91
acres” without distinguishing between the two separate tax parcels, and that the prohibition on
division or separate ownership was not an unreasonable restraint on alienation. The court further
rejected the defendants’ invocation of the doctrine of laches. The court additionally decreed that,
“Following resolution on appeal, . . . Plaintiff shall record a copy of this Decision and Order and
that recording shall act to rescind the Warranty Deed, dated July 12, 2019, from the Grantor to
Yuba”.
Defendants first argue that the trial court erred in determining that a restraint on alienation
was reasonable. We disagree.
This Court reviews a trial court’s decision on a motion for summary disposition de novo
as a question of law. Ford Credit Int’l, Inc v Dep’t of Treasury, 270 Mich App 530, 534; 716
NW2d 593 (2006). More particularly, the parties and court below regarded this issue as one of
first impression to be decided by the court as a question of law. Questions of law are reviewed de
novo. Rapistan Corp v Michaels, 203 Mich App 301, 306; 511 NW2d 918 (1994), citing Cardinal
Mooney High Sch v Mich High Sch Athletic Ass’n, 437 Mich 75, 80; 467 NW2d 21 (1991).
1
Section 5(A).
2
Section 6(A).
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We agree with the trial court that the restraint on alienation at issue here is reasonable. As
explained in LaFond v Rumler, 226 Mich App 447, 451; 574 NW2d 40 (1997):
Michigan follows the common-law rule against unreasonable restraints on
alienation of property. A restraint on alienation of property is defined as an attempt
by an otherwise effective conveyance or contract to cause a later conveyance (1) to
be void (disabling restraint), (2) to impose a contractual liability upon the
conveyance for conveying in breach of the agreement not to convey (promissory
restraint), or (3) to terminate all or part of a conveyed property interest (forfeiture
restraint). [Citations omitted.]
At issue here is a disabling restraint, given that the trial court ordered rescission of defendants-
appellants’ sale of the northern parcel to defendant Yuba.
In LaFond, this Court noted generally that, “ ‘If one’s interest in property is absolute, as a
fee simple, restriction on his right of alienation is void as repugnant to the grant,’ ” but that
“ ‘[w]here the grantor retains an interest in the property . . . the interest generally will support the
imposing of a restriction on alienation.’ ” Id., quoting Sloman v Cutler, 258 Mich 372, 374-376;
242 NW 735 (1932). In this case, the conservation easement left defendants retaining many basic
ownership rights over the protected property, while conveying to plaintiffs the rights to insist that
uses of the protected property be limited as specified in order to conserve its agricultural or open-
space character.
This Court in LaFond cited authorities for the “basic premise . . . that nonassignability
provisions in land contracts exist for the benefit of the vendor to safeguard performance,” and,
“[u]nder reasonable circumstances, these restrictions will be enforced solely for that purpose.”
LaFond, 226 Mich App at 455. Accordingly, LaFond noted with approval other cases involving
land contracts in which the question of reasonableness depended on whether the vendor was
vulnerable to suffering waste, or impairment or loss of security, with regard to the subject real
property. Id. at 453-454, 457.
Defendants argue that the trial court erred by not concerning itself with waste or
impairment of security, suggesting that, where there is no finding of such hazards, any attendant
restraint on alienation is necessarily unreasonable and thus invalid. Defendants attach too much
significance to the inquiry into waste or impairment of security. A vendor performing a land
contract obviously retains a dire interest in the subject real property until the sale is completed,
and so guarding against waste or other impairments of security is reasonable. The conservation
easement underlying this case, however, was not part of any actual or envisioned conveyance of
the fee. In short, neither party have much to fear from the other as to concerns of waste or
impairment of security.
Moreover, neither LaFond, nor the cases it cited, suggested that waste, or impairment of
security, were the sole bases for finding a restraint on alienation reasonable. LaFond, in fact, noted
generally that, after Sloman, 258 Mich 372, “the few cases dealing with the issue of restraints on
alienation in land contract provisions have taken a more measured approach and have focused on
the reasonableness of the restriction at issue.” LaFond, 226 Mich App at 453. See also id. n 2
(noting that the Restatement, Property, § 406, p 2406 (1944), “specifies that a restraint is
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permissible if it is reasonable under the circumstances”). For these reasons, the trial court did not
err by deciding the question of reasonableness without narrowly tying the inquiry to concerns over
waste or impairment of security.
Additionally, these conservation easements serve an important public function. “The social
utility of devoting property to conservation, historic preservation, and charitable purposes is strong
enough to justify severe restraints on alienation that are reasonably necessary or convenient to
assure that the property will be used to carry out the intended purposes.” Restatement 3d, Property:
Servitudes, § 3.4, comment I, p 448. Accordingly, “Restraints on alienation of conservation
servitudes . . . are valid as a matter of common law so long as they are imposed to serve a
conservation or other legitimate purpose and are rationally related to accomplishing that purpose.”
Id.
More to the point, § 6(A) of the easement states that the “[g]rantor is prohibited from
dividing, subdividing, partitioning or otherwise creating or permitting separate ownership on the
Protected Property.” And § 1(D) expresses the grantor’s willingness to convey, i.e., surrender as
part of the deal, “the interest in and the right to use and subdivide land for any and all residential,
commercial and industrial purposes and activities which are not incident to agricultural and open
space uses” as part of the transaction. In short, defendants agreed to restrict their right to subdivide
the parcel.
For these reasons, we agree with the trial court that the restraint on alienation at issue is a
reasonable one.
Next, defendants argue that the trial court erred when it interpreted the easement to include
an unreasonable restraint on alienation when alternative interpretations were consistent with the
easement language and would not render any part of the agreement void. We disagree.
Resolution of this issue requires that we interpret the easement itself. “The language of an
express easement is interpreted according to rules similar to those used for the interpretation of
contracts.” Wiggins v City of Burton, 291 Mich App 532, 551; 805 NW2d 517 (2011). This Court
reviews de novo issues of contract interpretation. See Sands Appliance Servs, Inc v Wilson, 463
Mich 231, 238; 615 NW2d 241 (2000).
Defendants propose as a saving interpretation that the provision be read as applying to
division of the two individual tax parcels composing their land, such that each may be sold
separately if in its entirety. Defendants do not argue that their interpretation is more faithful to the
express terms of the easement, or otherwise tout it as superior to the one the trial court adopted,
except that “applying this reasonable interpretation of the Easement would not render the ‘multiple
owner’ language void, as an unreasonable restriction on alienation.” But, setting aside that, as
discussed above, the trial court correctly concluded that the easement, as interpreted, was not void
as an unreasonable restraint on alienation, defendants cite no authority for the proposition that a
court has some duty to interpret easement language so as to minimize the burdens on the servient
estate.
The trial court explained as follows:
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As the language of the Conservation Easement is not ambiguous, it must be
enforced as written. The Conservation Easement does not distinguish between the
two separate tax parcels, but instead defines the Protected Property as the entirety
of the 102.91 acres owned by the Grantor. Thus, the sale of the northern parcel of
the Protected Property to Yuba was expressly prohibited by the terms of the
Conservation Easement. There can be no alternate interpretation.
We agree with the trial court.
The easement references no subdivisions of the protected property, which itself is defined
on the first page as “all or any part or portion of this land” described in the legal description
provided with the easement and the certificate of survey. The legal descriptions of three separate
areas of land are set forth: the “2012 CONSERVATION EASEMENT” which “contains 98.73
Acres of land,” the “FARMSTEAD COMPLEX” (1.22 acres), and the “BUILDING
ENVELOPE/FARMSTEAD COMPLEX” (2.96 ACRES). These add up to 102.91 acres. The
certificate of survey repeats the legal descriptions, then sets forth a diagram of the premises, which
includes a notation, “ENGLE FARM 2011 easement 98.73 AC. Gross (Not including USDA
easement or 2 exceptions).” Nothing in the description or diagram implies any recognition of that
what defendants now call the northern parcel as having any status rendering it severable from the
protected property as a whole.
For these reasons, the trial court did not clearly err by concluding that the protected
property consisted of the whole, not two separately recognized parcels.
Defendants next argue that the trial court erred in ordering rescission of the warranty deed
from defendants to Yuba. Again, we disagree.
“Rescission abrogates a contract and restores the parties to the relative positions that they
would have occupied if the contract had never been made.” Bazzi, 502 Mich at 409. “Specific
performance is a remedy of grace and not of right, resting within the sound discretion of the court,
the granting of which depends upon the peculiar circumstances of each case.” Zenko v Boucher,
60 Mich App 699, 703; 233 NW2d 30 (1975) (quotation marks and citation omitted).
In this case, § 10(F) of the conservation easement states as follows:
The Grantor agrees that the Township’s remedies at law for any violation of the
terms of this Easement are inadequate and that the Township shall be entitled to
injunctive relief, both prohibitive and mandatory, in addition to such other relief to
which the Township may be entitled, including specific performance of the terms
of this Conservation Easement, without the necessity of proving either actual
damages or the inadequacy of otherwise available legal remedies.
The trial court held that, given its conclusion that defendants-appellants “violated the
express terms of the Conservation Easement by dividing the Protected Property and creating
separate ownership . . . , rescission or nullification of the Warranty Deed to Yuba is warranted in
order to restore the Plaintiff and the Grantor to their original positions under the Conservation
Easement”.
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Defendants argue that it is a mischaracterization for the trial court to grant rescission of the
deed under the label of specific performance. But defendants’ obligations under the easement
were principally to refrain from taking certain actions, including subdividing the property.
Therefore, in this context, specific performance would include precluding defendants from
subdividing the property. Similarly, defendants argue that plaintiffs did not request rescission.
But plaintiffs’ request to return the property to single ownership would include the remedy of
rescinding the deed.
Defendants also cite caselaw for the proposition that rescission of a deed may be
appropriate in cases of fraud, mistake of fact, coercion, or undue influence, and protest that the
instant case involves none of those. That principle might apply were Yuba wishing to rescind the
deed. Yuba might cite a misunderstanding regarding defendants’ right to sell only part of the
protected property as a mistake of fact, see Garb-Ko, Inc v Lansing-Lewis Servs, Inc, 167 Mich
App 779, 782; 423 NW2d 355 (1988) (a contract for the sale of commercial real property “may be
rescinded because of a mutual mistake of the parties”), or a defect in title, see Stover v Whiting,
157 Mich App 462, 468; 403 NW2d 575 (1987) (“Generally speaking, the vendor is under an
obligation to convey a merchantable or marketable title. Marketable title is one of such character
which should assure the vendee the quiet and peaceful enjoyment of the property, which must be
free from encumbrance. A title may be regarded as ‘unmarketable’ where a reasonably prudent
man, familiar with the facts, would refuse to accept title in the ordinary course of business, and it
is not necessary that the title actually be bad in order to render it unmarketable.”). That is, in light
of the easement, title to only a portion of the property would be unmarketable. But as plaintiffs
point out, this case is not a dispute between the parties to the deed at issue, but rather a dispute
over the rights of plaintiffs, who are strangers to that deed, but parties to the conservation easement
with a right to enforce it.
In sum, defendants agreed in the easement to keep the property whole. They violated that
agreement by subdividing the property. Legal remedies are inadequate and, therefore, the trial
court reasonably turned to the equitable remedy of rescinding the deed and making the property
whole again. We note that defendants do not offer any other preferable remedy that would achieve
this end.
Defendants’ final argument is to attempt to invoke the doctrine of laches. We review de
novo the trial court’s decision whether to apply the equitable doctrine of laches. Knight v
Northpointe Bank, 300 Mich App 109, 113; 823 NW2d 439 (2013).
In rejecting defendants’ invocation of the doctrine of laches, the trial court noted that the
subject easement included the provision, “No delay in enforcement shall be construed as a waiver
of the . . . right to enforce the terms of this Conservation Easement at a later date”. The court
further explained:
Here, the Grantor improperly attempts to shift the burden to Plaintiff for
failing to prevent the transfer, however, the Plaintiff had no duty or obligation to
prevent the Grantor from violating the express terms of the Conservation Easement.
Additionally, the assertion that Plaintiff had sufficient time to seek an injunction to
prevent the transfer is somewhat disingenuous given that the sale occurred less than
a month after Plaintiff was made aware of the Grantor’s intent. Finally, Grantor
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has failed to adequately demonstrate how it has been prejudiced by Plaintiff’s
inaction. The Court finds that the situation of neither party has changed materially
since June 2019 and the delay of the Plaintiff in seeking relief has not put the
Grantor in a worse condition, therefore, the defense of laches is inappropriate.
We agree with the trial court that the quoted clause from the easement precludes application of the
doctrine of laches. Similarly, the trial court correctly concludes that plaintiffs had no obligation
to prevent defendants from violating the express terms of the easement.3
Affirmed. Plaintiffs may tax costs.
/s/ Jane E. Markey
/s/ David H. Sawyer
/s/ Mark T. Boonstra
3
Indeed, this point would seem to suggest the application of the clean-hands doctrine and, by
violating the easement, defendants do not come to court with clean hands, thus denying their right
to an equitable defense. See Save Our Downtown v Traverse City, ___ Mich App ___, slip op at
9; ___ NW2d ___ (No. 359536, issued 10/13/2022).
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