Gregory James Berg v. Fox Point Beach Association Inc ( 2024 )


Menu:
  •             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
    GREGORY JAMES BERG,                                                  UNPUBLISHED
    August 22, 2024
    Plaintiff/Counterdefendant-Appellant,
    and
    SANDY SHORES 2834, LLC,
    Counterplaintiff/Third-Party
    Defendant-Appellant,
    and
    DAVID W. BRAUER,
    Counterplaintiff/Third-Party
    Defendant,
    v                                                                    No. 365502
    Livingston Circuit Court
    FOX POINT BEACH ASSOCIATION, INC.,                                   LC No. 21-031311-CH
    Defendant/Counterplaintiff/Third-
    Party Plaintiff-Appellee.
    Before: MALDONADO, P.J., and M. J. KELLY and RICK, JJ.
    PER CURIAM.
    Plaintiff/counterdefendant, Gregory James Berg, along with counterplaintiff/third-party
    defendant Sandy Shores 2834, LLC (collectively, “plaintiffs”), appeal by leave granted1 a decision
    1
    Berg v Fox Point Beach Ass’n, Inc, unpublished order of the Court of Appeals, entered
    September 5, 2023 (Docket No. 365502). Counterplaintiff/third-party defendant David W. Brauer
    was dismissed as a party to this appeal by stipulation. Thus, the recitation of the facts herein will
    mainly focus on the claims made by Berg and Sandy Shores. To the extent necessary, and for ease
    -1-
    of the trial court granting summary disposition to defendant/counterplaintiff/third-party plaintiff
    Fox Point Beach Association, Inc., under MCR 2.116(I)(2). We reverse and remand.
    I. FACTUAL BACKGROUND
    Berg owns two residential properties in the Fox Point Beach Subdivision near Portage Lake
    in Livingston County, Michigan. Sandy Shores owns one residential property in the same
    subdivision. The subdivision was platted in December 1926, when the lots that make up the
    subdivision were conveyed from Maro M. Read to the Portage Lake Land Company. The 1926
    plat for the subdivision additionally dedicated certain “common areas” to use by lot owners,
    including a beach, park, canals, lagoons, and roads. Each lot was originally encumbered by a
    restriction stating that “[n]o building of any kind shall be erected on the property herein conveyed
    except a private family dwelling to be used for residential purposes only, and one single garage.”
    Relevant to this appeal, the dedication was left out of the chain of title from approximately 1953
    onward.
    This appeal focuses on whether plaintiffs can use their properties as short-term rental
    homes, and whether title to the common areas can be conveyed to or owned by a single person or
    entity. There are two major entities involved in this determination. The first is defendant, the Fox
    Point Beach Association (the Association), which is a voluntary homeowner’s association (HOA)
    that manages the subdivision. The Association was incorporated in 1944. The other is the Portage
    Lake Land Company (Portage), which developed the Fox Point Beach Subdivision. Portage is no
    longer in operation today. In 1962, Portage issued a resolution that extended its corporate
    existence for 30 years from November 14, 1962. But in 1973, Portage filed a certificate of
    dissolution. The certificate of dissolution was signed by John R. Laird, in his capacity as vice
    president. Portage is not a party to this lawsuit, given that the company no longer exists.
    In December 2011, Laird issued a quitclaim deed to Thomas F. Ehman that conveyed
    Portage’s “interest in all land including that covered by the waters of Portage Lake and its canals,
    inlets, and outlets[.]” Laird signed the deed as Portage’s “Last Remaining Officer.” The parties
    appear to agree that this is the conveyance that covered Portage’s interest in the common areas of
    the subdivision, which are part of the dispute on appeal. In 2020, Ehman executed a quitclaim
    deed conveying all of the common areas in the subdivision to the Association. Ehman is identified
    in the deed as a successor-in-interest to Portage. Also in 2020, the Association adopted new rules
    and regulations restricting short-term renters, defined as those who rented properties for 28 days
    or less, from using the common areas. In September 2020, the Association issued another set of
    rules indicating that homeowners could not rent their homes to short-term renters at all. In
    layman’s terms, this essentially means that homeowners could not use their homes as Airbnb-type
    rentals, and that only the residents of the properties could use the common areas in the subdivision.
    In November 2021, Berg filed a complaint against the Association. In it, he requested
    declaratory and injunctive relief, asking the trial court to
    of reference, we will refer to Brauer as part of the “plaintiff” side of this dispute, along with Berg
    and Sandy Shores.
    -2-
    enjoin[] the Association from further interference with use by Plaintiff of the
    Residences, including incidental use of Common Areas, for short-term rentals or
    other lawful purposes; declar[e] that the Restrictions are expired and unenforceable;
    declar[e] that short-term rentals are not prohibited by the Restrictions or other
    documents in the chain of title; and granting such other and further relief as the
    Court deems just and appropriate under applicable law[.]
    In December 2021, the Association answered Berg’s complaint and filed a counterclaim
    and third-party complaint against Berg, Sandy Shores, and counterplaintiff/third-party defendant
    David W. Brauer. In Count I, the Association asked the court to enter an injunction prohibiting
    plaintiffs from using their properties as short-term rentals. In Count II, the Association brought a
    claim of nuisance, stating that plaintiffs’ rental activity was causing disturbances in the
    neighborhood. In Count III, the Association requested that the court quiet title to the common
    areas in its favor.
    In June 2022, Berg filed a motion for summary disposition under MCR 2.116(C)(8) (failure
    to state a claim) and (C)(10) (no genuine issue of material fact). He argued that the Association
    could not exercise exclusive ownership of the common areas, noting that the original plat for the
    property did not indicate that Portage, as the developer of the subdivision, retained any interest or
    property rights in the common areas. Berg further argued that Portage dissolved in 1973 and thus
    could not have validly conveyed the property to Ehman in 2011, meaning that Ehman in turn could
    not have validly conveyed any interest in the common areas to the Association in 2020. According
    to Berg, once a corporation dissolves and winds up its affairs, it ceases to exist. Thus, Portage
    ceased to exist well before the 2020 conveyance. Berg asked the court to verify that he was not
    subject to the Association’s jurisdiction and did not have to abide by HOA rules.
    Berg further argued that the building and use restrictions from the 1926 property deeds did
    not operate to bar him from using his properties as short-term rentals because the restriction did
    not remain in the chain of title for more than 40 years. Berg supported this claim by noting that
    under the Marketable Record Title Act (MRTA), MCL 565.101 et seq., “any person . . . who has
    an unbroken chain of title of record to any interest in land for . . . forty years . . . shall at the end
    of the applicable period be considered to have a marketable record title to that interest[.]” Berg
    also pointed out that the Association permitted short-term rentals as recently as 2019, all of which
    suggested that the Association could not now rely on the chain of title to prohibit short-term rentals
    or other residential use restrictions.2
    The Association responded that it was the legal owner of the common areas at issue.
    According to the Association, even if a corporation is dissolved, it remains the owner of whatever
    assets it held while operative, including real property. As part of the process of winding up its
    affairs, a dissolved corporation has the responsibility to sell or transfer assets over time, which it
    did by transferring the property to Ehman in 2011. The Association also noted that Portage
    resolved to extend its corporate existence through November 14, 1992. It conveyed the property
    2
    Sandy Shores and Brauer filed their own motions for summary disposition, making essentially
    the same arguments regarding corporate dissolution and the MRTA. To avoid confusion or
    redundancy, we have only summarized the arguments most relevant to this appeal once.
    -3-
    to Ehman in 2011, approximately 19 years later. Thus, said the Association, the 38-year wind-up
    period argued by plaintiffs was inaccurate.
    The Association added that the MRTA did not apply to prevent the enforcement of use
    restrictions on the property. The Association contended that the MRTA could only extinguish the
    restrictions if notice of said restrictions was not given within five years of March 29, 2019, per an
    amendment to the MRTA. According to the Association, “[t]he Restrictions remain on title to the
    Subdivision, are not extinguished and, as such, remain enforceable.” The Association denied
    Berg’s allegation that it had allowed any subdivision properties to be used for “non-residential”
    purposes or waived any use restrictions set forth in the property deeds at issue. The Association
    asked the court to grant summary disposition in its favor under MCR 2.116(I)(2) (nonmoving party
    entitled to summary disposition).
    A hearing on the motions was held in December 2022, and the parties largely argued
    consistent with their briefs. The trial court did not expressly address plaintiffs’ argument that the
    MRTA extinguished the restrictions on the property, but did find that regardless of whether the
    specific use restriction at issue was included their deeds, plaintiffs were on record notice that the
    restriction existed, given that it had been in the original 1926 deed to each property. The court
    further found that Portage’s corporate dissolution in the 1970s did not nullify the restrictions or
    prevent the Association from claiming a property interest in the common areas of the subdivision.
    The court opined that title to the property vested in Laird, as the last remaining officer of Portage,
    upon Portage’s dissolution. The court thus determined that the conveyances in 2011 and 2020
    were proper, and quieted title to the common areas in favor of the Association. The court granted
    summary disposition to the Association under MCR 2.116(I)(2).
    Plaintiffs moved for reconsideration, which was denied by the trial court. Plaintiffs
    subsequently applied for leave to appeal in this Court, which was granted. Berg v Fox Point Beach
    Ass’n, Inc, unpublished order of the Court of Appeals, entered September 5, 2023 (Docket
    No. 365502). As noted above, this court approved a stipulation to dismiss the appeal as to Brauer
    only.3 We now address the remaining plaintiffs’ issues on direct appeal.
    II. ANALYSIS
    A. STANDARD OF REVIEW
    Plaintiffs moved for summary disposition under MCR 2.116(C)(8) and (C)(10). The trial
    court granted summary disposition to the Association under MCR 2.116(I)(2). This Court reviews
    de novo a trial court’s decision on a motion for summary disposition. El-Khalil v Oakwood
    Healthcare Inc, 
    504 Mich 152
    , 159; 
    934 NW2d 665
     (2019). A motion under MCR 2.116(C)(10)
    “tests the factual sufficiency of a claim.” 
    Id. at 160
     (citation and emphasis omitted). In considering
    a motion under MCR 2.116(C)(10), the trial court “must consider all evidence submitted by the
    parties in the light most favorable to the party opposing the motion.” 
    Id.
     The motion “may only
    be granted when there is no genuine issue of material fact.” 
    Id.
     “A genuine issue of material fact
    3
    Berg v Fox Point Beach Ass’n, Inc, unpublished order of the Court of Appeals, entered
    December 6, 2023 (Docket No. 365502).
    -4-
    exists when the record leaves open an issue upon which reasonable minds might differ.” 
    Id.
    (quotation marks and citation omitted). As further explained in El-Khalil:
    A motion under MCR 2.116(C)(8) tests the legal sufficiency of a claim
    based on the factual allegations in the complaint. When considering such a motion,
    a trial court must accept all factual allegations as true, deciding the motion on the
    pleadings alone. A motion under MCR 2.116(C)(8) may only be granted when a
    claim is so clearly unenforceable that no factual development could possibly justify
    recovery. [Id. at 159-160 (citations omitted).]
    However, if the court does not find summary disposition in favor of the moving parties is proper
    under either of these subsections, it may instead “award summary disposition to the opposing party
    under MCR 2.116(I)(2)[.]” Hambley v Ottawa Co, ___ Mich App ___; ___ NW3d ___ (2023)
    (Docket No. 365918); slip op at 3. Additional questions of law regarding the deeds and the
    application of the MRTA are reviewed de novo by this Court. Penrose v McCullough, 
    308 Mich App 145
    , 147; 
    862 NW2d 674
     (2014).
    B. CONVEYANCE OF COMMON AREAS
    Plaintiffs argue that the trial court erred by finding that the conveyance of the common
    areas of the subdivision from Laird to Ehman in 2011, and then from Ehman to the Association in
    2020, were valid. We agree.
    Initially, plaintiffs contend that they possess an irrevocable easement to the common areas,
    which prevents the Association from barring access or otherwise exercising exclusive control over
    the common areas. The plat dedication for the subdivision was recorded in 1926. Dedications of
    land that occurred before the Subdivision Control Act, 
    1967 PA 288
    ,4 took effect in 1968, “convey
    at least an irrevocable easement in the dedicated land.” Little v Hirschman, 
    469 Mich 553
    , 564;
    
    677 NW2d 319
     (2004). There is no dispute that the 1926 plat dedication here took place before
    
    1967 PA 288
     was enacted. Thus, plaintiffs are correct that they have an irrevocable easement that
    covers the common areas of the subdivision.
    Whether the dedication conveys more than an irrevocable easement—for example, a fee
    simple interest in the property—is a broader question, and depends on the original plattor’s intent.
    Dobie v Morrison, 
    227 Mich App 536
    , 540; 
    575 NW2d 817
     (1998). Plaintiffs do not present
    evidence on appeal to support the notion that Portage intended to grant a fee simple interest in the
    common areas; indeed, they hardly argue such, instead contending that their irrevocable easement
    rights are sufficient to show that the Association cannot exercise exclusive control or obtain
    exclusive ownership of the common areas. This Court is not required to make an argument that
    plaintiffs themselves have not made or substantiated. Berger v Berger, 
    277 Mich App 700
    , 712;
    
    747 NW2d 336
     (2008). Thus, we decline to further address whether plaintiffs have, or could be
    granted, a fee simple interest in the common areas.
    4
    The Subdivision Control Act of 1967 is now referred to as the Land Division Act, 
    1996 PA 591
    ,
    MCL 560.101 et seq.
    -5-
    As earlier noted, the bulk of plaintiffs’ argument focuses on the contention that the
    conveyance of the common areas of the subdivision from Portage to Ehman, and then from Ehman
    to the Association, were invalid. This issue turns on whether the 38-year period between 1973,
    when Portage dissolved, and 2011, when Laird conveyed the property to Ehman, is an appropriate
    corporate wind-up period. We conclude that it was not. A corporation that has dissolved must
    wind up its corporate affairs (i.e., the “wind-up period”), within a reasonable amount of time. Flint
    Cold Storage v Dep’t of Treasury, 
    285 Mich App 483
    , 497; 
    776 NW2d 387
     (2009). “What
    constitutes a reasonable time is generally a question of law for the court.” 
    Id. at 498
    . However,
    in Flint Cold Storage, this Court found that 32 years was not a reasonable wind-up period. See 
    id.
    (“We can scarcely, if at all, envision a case in which a 32–year winding up period might be
    considered reasonable.”). Thus, it stands to reason that the 38-year wind-up period at issue in this
    case is likewise unreasonable. Portage dissolved in 1975 and has had no corporate presence or
    dealings since that time. No evidence has been presented to explain why such a long wind-up
    period would be reasonable. Without any such explanation, the conveyance of property formerly
    owned by the corporation in 2011, nearly 40 years later, cannot possibly be considered part of a
    reasonable wind-up period. The trial court erred as a matter of law by concluding otherwise.
    The question that therefore remains is whether the conveyance of the property was valid.
    According to this Court, “a dissolved corporation’s remaining assets pass to its shareholders as
    beneficial owners once liquidation and winding up is complete and all creditors have been
    satisfied.” 
    Id. at 501
    . Portage’s shareholders have not been identified, nor is it clear that Laird
    had authority to transfer property on behalf of the corporation or its shareholders. Thus, it appears
    that the property legally passed to Portage’s shareholders when Portage dissolved, and that
    questions of fact remain regarding whether the conveyance purporting to grant ownership of the
    common areas to the Association was valid.
    In sum, plaintiffs retain an irrevocable easement to the common areas of the subdivision
    that cannot be subverted or extinguished by the Association; thus, the Association cannot preclude
    property owners, as residents of the subdivision, from utilizing those common areas. Further,
    questions of fact remain regarding whether title to the property was lawfully conveyed to the
    Association. For these reasons, summary disposition was improperly granted to the Association
    under MCR 2.116(I)(2).
    C. MARKETABLE TITLE
    Plaintiffs next argue that the MRTA applies and that the use restrictions originally set forth
    in the 1926 deeds have been extinguished because they have not been included in the chain of title
    for over 40 years. We agree.
    The 1926 deed restriction at issue in this matter states that “[n]o building of any kind shall
    be erected on the property herein conveyed except a private family dwelling to be used for
    residential purposes only, and one single garage.” The last time the restriction appears in the chain
    of title for the Berg property is 1953. Likewise, the last time the restriction appears in the chain
    of title for the Sandy Shores property is 1954. Berg obtained his properties by warranty deed in
    2012 and 2018. Sandy Shores obtained its property in 2018. Thus, on the record presented to this
    Court, it would appear that the use restriction at issue has not been in the chain of title for plaintiffs’
    properties in approximately 60 years.
    -6-
    Under section 1 of the MRTA, MCL 565.101, a property owner with an unbroken chain of
    title of record to any interest in land for 40 years has a marketable record title to that interest.
    MCL 565.106 additionally provides:
    This act shall be construed to effect the legislative purpose of simplifying and
    facilitating land title transactions by allowing persons dealing with the record title
    owner, as defined in this act, to rely on the record title covering a period of not more
    than . . . 40 years for other interests prior to the date of such dealing and to that end
    to extinguish all claims that affect or may affect the interest dealt with, the existence
    of which claims arises out of or depends upon any act, transaction, event, or
    omission antedating . . . the 40-year period for other interests, unless within the . . .
    40-year period for other interests a notice of claim as provided in section 3 has been
    filed for record. The claims extinguished by this act are any and all interests of any
    nature whatever, however denominated, and whether the claims are asserted by a
    person sui juris or under disability, whether the person is within or outside the state,
    and whether the person is natural or corporate, or private or governmental.
    In simple terms, if chain of title is unbroken in 40 years, the owner has marketable title and owns
    the land free from any interests predating that 40-year time period. See Fowler v Doan, 
    261 Mich App 595
    , 602; 
    683 NW2d 682
     (2004). If the MRTA applies here, then the use restriction at issue
    would be extinguished. This is what plaintiffs argue, and it does in fact appear to be the case. The
    use restriction has not been in plaintiffs’ deeds since the 1950s—well over the 40-year period for
    preserving a property interest or restriction per the statute. Thus, we conclude that plaintiffs have
    marketable title free and clear of any restrictions, per the plain terms of the MRTA.
    However, the Association points out that the MRTA was amended, effective March 29,
    2019, to add a grace period for preserving property interests. 
    2018 PA 572
    . The amendment stated
    that an interest in property can be preserved “by filing for record within 5 years after March 29,
    2019 or during the 20-year period for mineral interests and the 40-year period for other interests,
    a notice in writing, verified by oath, setting forth the nature of the claim[.]” 
    2018 PA 572
    . To
    benefit from the amendment, the Association would have had to file a written notice regarding the
    use restriction with the county register of deeds within five years of March 29, 2019, given that
    the 40-year period for preserving a right to other interests has long since passed. The Association
    argues that under the 2019 version of the statute, the use restriction has been preserved. This is
    not accurate, as there is no indication that the Association has filed the appropriate notice under
    MCL 565.103. Absent any evidence that the Association filed the proper notice, the MRTA
    operates to extinguish the use restriction at issue.5
    5
    While this case was pending on appeal, the MRTA was amended again, effective March 28,
    2024. Under the more recently amended version of the act, “an interest, claim, or charge may be
    preserved and kept effective by filing for record on or before September 29, 2025 or during the 20-
    year period for mineral interests and the 40-year period for other interests[.]” MCL 565.103(1)
    (emphasis added). Whether the Association could elect to file a notice within the appropriate
    statutory period under the 2024 version of MCL 565.103(1) was not raised before this Court.
    -7-
    The Association also cites MCL 565.104(1)(e) of the MRTA, which states that the act
    cannot be applied to “[b]ar or extinguish any land or resource use restriction[.]” However, the
    language cited by the Association in support of its argument was added by amendment, effective
    March 29, 2023. See 
    2022 PA 235
    . The Association makes no argument as to why the amended
    version of the statute should apply retroactively to this action, which commenced before March 29,
    2023. See Buhl v Oak Park, 
    507 Mich 236
    , 243-244; 
    986 NW2d 348
     (2021) (stating that amended
    statutes generally do not apply retroactively unless there is a clear legislative intent indicating that
    they should). This argument thus lacks merit.6 Ultimately, the trial court erred by concluding that
    the MRTA did not apply to extinguish the use restrictions first set forth in the 1926 deeds to
    plaintiffs’ respective properties. Summary disposition was improperly granted to the Association
    under MCR 2.116(I)(2).
    III. CONCLUSION
    The trial court erred by finding that title to the common areas properly passed to the
    Association. The 38-year wind-up period at issue in this case was not reasonable, and by all
    accounts, it would appear that the property passed to the corporation’s shareholders, and not solely
    to Laird, when the corporation dissolved. Further factual development is necessary to determine
    whether the conveyance from Laird to Ehman, and likewise from Ehman to the Association, was
    valid and enforceable. The trial court additionally erred by finding that the MRTA does not apply
    to this matter. The MRTA extinguished the use restriction in plaintiffs’ respective deeds, given
    that the restriction has not been included in the chain of title for more than the statutory 40-year
    period. The Association can no longer enforce the restriction to prohibit property owners from
    using their homes as short-term rentals.
    Reversed and remanded for further proceedings consistent with this opinion. We do not
    retain jurisdiction.
    /s/ Allie Greenleaf Maldonado
    /s/ Michael J. Kelly
    /s/ Michelle M. Rick
    6
    Plaintiffs also briefly argue that the Association lacks standing to enforce the use restriction.
    Since we conclude that the use restrictions are no longer enforceable, the question regarding the
    Association’s standing is moot. See Thomas M Cooley Law Sch v Doe 1, 
    300 Mich App 245
    , 254;
    
    833 NW2d 331
     (2013) (“A matter is moot if this Court’s ruling cannot for any reason have a
    practical legal effect on the existing controversy.”). Even if this were not the case, plaintiffs’
    argument is without merit, as HOAs generally have standing to enforce deed restrictions. See,
    e.g., Aldrich v Sugar Springs Prop Owners Ass’n, Inc, 
    345 Mich App 181
    ; 4 NW3d 751 (2023)
    (finding that HOA had standing to enforce restrictive covenant limiting use of property to
    residential purposes); Highfield Beach v Sanderson, 
    331 Mich App 636
    ; 
    954 NW2d 231
     (2020)
    (finding condominium association bylaw prohibiting short-term rentals enforceable).
    -8-
    

Document Info

Docket Number: 365502

Filed Date: 8/22/2024

Precedential Status: Non-Precedential

Modified Date: 8/24/2024