Gawron v. Robert Development Corp.

362 Mich. 577 (1961) 107 N.W.2d 878

GAWRON
v.
ROBERT DEVELOPMENT CORPORATION.
SAME
v.
LEE LAND CORPORATION.

Docket Nos. 1, 2, Calendar Nos. 48,607, 48,608.

Supreme Court of Michigan.

Decided March 1, 1961.

Robert R. Lewiston, for plaintiff.

J. Leonard Hyman (Carl Levin, of counsel), for defendants.

KAVANAGH, J.

Appellants are land developers. They contracted to sell several lots to plaintiff, who is a builder. These contracts were entered into on August 17, 1955, and January 24, 1956. The contracts contained a provision that the sellers shall install at their own cost and expense water, sewer, and paving, all to be finished within 6 months from the date of the contracts. The contracts further contained a provision that the sellers represent that the said land complies with all offsite land requirements of the Federal housing administration. One of the Federal housing administration's requirements was the closing of the open drain through the subdivision. This drain, which constituted part of the Red Run drain, had the subdivision sewers connected to it. The contracts contained a further provision that the sellers agreed to convey the land free from any liens attaching prior to the date of the land contracts. The special assessment for the improvement of the Red Run drain was levied on January 14, 1955.

On January 17, 1957, plaintiff made payment of the balance of the purchase price and was given warranty deeds containing a clause that the grantors would not be liable for any liens attaching to the premises subsequent to the dates of the contracts.

After the dates the contracts were entered into, the proceedings and assessments of Red Run drain by the county drain commissioner were challenged in the circuit court for the county of Wayne. The circuit judge by decree sustained the proceedings and improvements and validated them, except he decreed no proper notice had been given the property owners liable for the assessment. He ordered the Wayne county drain commissioner to forthwith respread the levy in accordance with the statute. A reassessment was made July 23, 1957, which increased the cost of the benefits to the lands here involved. The new assessment was paid by the plaintiff-builder and suits were instituted against the sellers to recover the amount of the new assessment.

The defendants admitted liability for the amount of the original assessment, but denied liability for the additional amount created by the second assessment on the theory that the lien and assessment having been voided by the Wayne county circuit court, the provisions in the contracts and deeds had been fulfilled by the delivery of a marketable title free and clear of all liens which attached to the premises prior to the dates of the contracts and deeds. Defendants contend that the respread assessment constituted a lien affecting the property as of July 23, 1957. The trial court held the whole reassessment reverted to the date of the original assessment. He held the full amount of the assessment constituted a lien on the land at the dates of the land contracts and rendered a judgment against the defendants for the full amount of the reassessment. Defendants appeal contending they should be liable only for the amount of the original assessment which was a lien on the lands at the dates of the land contracts.

Two questions are raised:

(1) Are obligations of the vendor in a land contract, not performed by the vendor at the time of the delivery of the deed, merged therein and extinguished by the deed?

(2) When a public improvement has been properly processed and installed and the lien thereon exists at the time of conveyance, said conveyance containing a covenant against encumbrances and liens, if by court decree the amount of the original assessment is set aside and a larger assessment is imposed, is the vendor liable for the payment of such larger assessment?

The contracts executed between plaintiff and defendants created the obligation on the part of the sellers to pay all taxes and assessments which were a lien on the land at the dates of the land contracts. They further created the obligation specifically requiring the sellers to install sewers and to comply with Federal housing administration's offsite land requirements. The closing of the open drain was such a requirement. An additional obligation assumed was that, upon the payment by the purchaser of the balance of the contracts, the sellers were obligated to deliver warranty deeds free and clear from all liens and encumbrances accruing prior to the dates of the land contracts. The subsequent conveyances by warranty deeds failed to satisfy all of the above covenants. Plaintiff bases his causes of action upon the covenants not performed.

We are of the opinion these covenants were not merged with the deed covenants when the warranty deeds were executed and delivered. The deeds were not in full performance of the agreements between the parties. Allen v. Currier Lumber Co., 337 Mich. 696; Folkerts v. Marysville Land Co., 236 Mich. 294.

The assessment for the Red Run drain improvement was made and constituted a lien prior to the time of the execution of the land contracts. This lien has not been removed. The circuit court held the assessment valid and only the method of arriving at the amount void. It directed a new spread of the costs to be made. In the cases relied upon by appellants, not only the amount of the assessment and lien were changed but the entire lien and assessment were voided. Those cases do not apply to the facts in the instant case.

The covenant made by the sellers was to remove the liens regardless of the amount. The contracting parties had in mind that what was purchased and sold were lots with the improvements made and the assessments and liens thereon paid in full. This reasoning is supported by the court in White v. Stretch, 22 NJ Eq 76, where the court said (p 80):

"But the assessment was merely the mode of ascertaining the share of the cost of the sewer to be paid by these lots; they were liable to pay for the cost of the sewer from the time the proceedings were completed by the confirmation of the first assessment. That liability was the real encumbrance. It existed at the date of the deed, and it was never for a moment removed; the same judgment that set aside the assessment, affirmed the proceedings which created the encumbrance, and affirmed the continuance of that encumbrance by appointing commissioners to ascertain the proportion which each lot should pay. If, then, the cost of this sewer was an encumbrance on these lots at the date of the deed, and that encumbrance has never been removed, but the only change has been that the assessment of the amount, which is the share of these lots, has been changed, the conclusion is inevitable, that White is liable to relieve the premises from it, and Stretch is entitled to have the amount of it deducted from his mortgage."

The judgment of the trial court is affirmed, with costs in favor of the plaintiff.

DETHMERS, C.J., and CARR, KELLY, SMITH, BLACK, EDWARDS, and SOURIS, JJ., concurred.