Frederick L Kubik Revocable Trust v. the Home Apartments LLC ( 2017 )

STATE OF MICHIGAN
COURT OF APPEALS
FREDERICK L. KUBIK REVOCABLE TRUST UNPUBLISHED
dated 12/16/00, December 19, 2017
Plaintiff-Appellee,
v No. 332958
Genesee Circuit Court
THE HOME APARTMENTS, LLC, and ZEEV LC No. 14-103134-CZ
SAGI,
Defendants-Appellants.
Before: METER, P.J., and SAWYER and SHAPIRO, JJ.
PER CURIAM.
Defendants appeal the trial court’s order approving the eighth report of the court-
appointed receiver, approving the receiver’s fees and costs, granting a final accounting and
distribution, and discharging the receiver. Defendants also challenge several prior orders entered
by the trial court. For the reasons stated below, we affirm.
I. BASIC FACTS
This case arises from plaintiff’s ownership and sale of apartment complexes. On May 30,
2012, plaintiff, as the seller, entered into a land contract with defendant Sagi’s company, Sharon
Apartments, LLC, for the sale of apartment complexes for $450,000. A receiver was appointed
when defendant Sagi and Sharon Apartments, LLC failed to pay taxes and insurance on the
properties, and plaintiff defaulted on its note to Talmer Bank. The receiver then entered into a
purchase agreement with defendant The Home Apartment, LLC (“THA”), which was owned by
defendant Sagi. On October 22, 2013, the trial court entered a stipulated order, authorizing the
sale and requiring THA to: (1) pay $50,000 to plaintiff at closing; (2) pay $164,820.59 plus
interest to Talmer Bank; (3) pay various costs and fees to Talmer Bank, plaintiff, and the
receiver; and (4) execute a note, secured by a mortgage, to plaintiff in the amount of $134,000,
calling for payments of $1,500 a month for 36 months and with the balance of $80,000 due on or
before three years. The stipulated order also provides that the agreement and any related
documents could be modified, amended, or supplemented by the parties. In an addendum to the
purchase agreement and stipulated order, THA and plaintiff modified the purchase price such
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that plaintiff would receive $35,000 at closing, and the note would be in the amount of $119,000.
On November 4, 2013, the receiver sold the property to THA. According to the receiver, he
received $284,076.01 in cash from THA at closing, and he issued a deed to THA.1 The receiver
admitted, however, that the deed did not refer to any mortgage or note, and that the note was
never delivered to plaintiff.
In July of 2014, plaintiff filed a complaint seeking monetary damages based on THA’s
failure to make the required payment on the note and asking for the appointment of a receiver.
Plaintiff contended that without a receiver, THA would be unjustly enriched by collecting rent
payments without paying plaintiff what it was owed, and that the appointment of a receiver
would protect its interests and ensure that the rent collected was used appropriately. Although
the court appointed a receiver, it subsequently removed the receiver, on THA’s motion, after it
received documentation showing that the property’s insurance and water bill was being paid.
On December 15, 2014, the trial court, again, reappointed the receiver. On four
occasions, thereafter, defendants moved to remove the receiver but the court denied the various
motions. In an amended complaint filed against defendant Sagi and THA on August 18, 2015,
plaintiff sought foreclosure of the mortgage and reformation or rescission of the sales documents,
and alleged that defendant Sagi made material misrepresentations. After a bench trial, the court
held that the receiver could sell the properties by open bidding and allowed defendant Sagi to bid
on the properties.
In its December 29, 2015 opinion, the trial court phrased the issue at trial as: “[D]id a real
estate closing which took place on November 4, 2013 establish Home/Sagi as the owner of the
property—without obligation to [plaintiff]. Or did that closing serve as a segue to a new
relationship between [plaintiff] and Home/Sagi where [plaintiff] was still owed money for this
property.” The court concluded that the goal of the November 4, 2013 closing was “to get
Talmer out of [the] picture.” The court credited plaintiff’s and the receiver’s testimony that the
sale had two purposes—to take Talmer Bank out of the picture and to allow plaintiff to forge a
new deal with defendants. The court also stated that both plaintiff and the receiver testified that
the money paid to plaintiff at closing did not end plaintiff’s interest in the properties. On the
basis of the testimony, the trial court found that plaintiff retained an interest in the properties.
The trial court also found that the fact that defendants could not produce all of the funds
required underscored that a continuing obligation existed, especially where the stipulated order
and addendum specifically provided for a $1,500-a-month obligation by THA to plaintiff. The
trial court also found that the purchase agreement could not be read as freezing out plaintiff’s
1
The “Buyer’s Final Settlement Statement” indicates that $284,076.02 was charged to the buyer
at the closing on November 4, 2013. This included consideration of $238,913.62 plus various
title/escrow charges and disbursements. The “Seller’s Final Settlement Statement” similarly
states that the total consideration credited to the seller was $238,913.62. It then list the total
charges to the seller in the amount of $239,413.62, which included the loan payoff to Talmer
Bank, the Receiver’s fees, the payment to plaintiff, and other costs and fees. Neither document
refers to the note or mortgage.
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interest in the property and that the promissory notes suggested a future obligation by THA. In
addition, the trial court found that the correspondence contradicted the notion that THA owed no
further monies to plaintiff. It rejected defendants’ argument that the failure to deliver the note
and the mortgage rendered them unenforceable because “whatever hold-up occurred was because
of lingering disputes on the amount of the note, not because no money was owed.” The court
then ruled that defendants were in default on the obligation and that plaintiff was entitled to the
remedies allowed by the agreement. It ordered the receiver to put the properties up for bid
pursuant to its prior order. The trial court also denied defendants’ motion for reconsideration.
II. LEGAL ANALYSIS
A. APPOINTMENT OF THE RECEIVER
On appeal, defendants first argue that the trial court erred by appointing a receiver to
manage the property in question. They contend that the circumstances did not warrant or justify
appointment of a receiver. We disagree.2
The trial court properly exercised its discretion in appointing a receiver. In its January 5,
2015 amended order, the trial court cited MCL 600.2926 and MCL 600.2927 as its basis to
appoint a receiver. At a subsequent hearing, the trial court explained that defendants failed to
care for the properties and that the taxes were not being paid. MCL 600.2926 provides, in part,
that “[c]ircuit court judges in the exercise of their equitable powers, may appoint receivers in all
cases pending where appointment is allowed by law.” “Under this provision, a circuit court has
‘broad jurisdiction’ to appoint a receiver in appropriate cases.” Arbor Farms, LLC v GeoStar
Corp, 305 Mich. App. 374, 390; 853 NW2d 421 (2014) (citation omitted). In Reed v Reed, 265
Mich. App. 131, 161-162; 693 NW2d 825 (2005), this Court explained:
[MCL 600.2926] has been interpreted as authorizing a circuit court to appoint a
receiver when specifically allowed by statute and also when no specific statute
applies but the facts and circumstances render the appointment of a receiver an
appropriate exercise of the trial court’s equitable jurisdiction. The purpose of
appointing a receiver is to preserve property and to dispose of it under the order of
the court. In general, a receiver should only be appointed in extreme cases. But a
party’s past unimpressive performance may justify the trial court in appointing a
receiver. [Quotation marks and citations omitted.]
MCL 600.2927(2) provides:
2
A trial court’s decision to appoint a receiver is reviewed for an abuse of discretion. Ypsilanti
Fire Marshall v Kircher (On Reconsideration), 273 Mich. App. 496, 523; 730 NW2d 481 (2007).
A trial court abuses its discretion when it chooses an outcome that is outside the range of
principled outcomes. Pontiac Fire Fighters Union Local 376 v City of Pontiac, 482 Mich. 1, 8;
753 NW2d 595 (2008).
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If such mortgagor or grantor in such instrument fails to pay such taxes or
insurance premiums upon property subject to the terms of a mortgage, trust
mortgage, or deed of trust containing such agreement the circuit court having
jurisdiction of such property may, in its discretion upon complaint or motion filed
by such mortgagee, grantee, assignee thereof or trustee under such instrument and
upon such notice as the court may require, appoint a receiver of the property for
the purpose of preventing such waste. Subject to the order of the court, the
receiver may collect the rents and income from such property and shall exercise
such control over such property as to such court may seem proper.
Defendants cite Meyer Jewelry Co v Meyer Holdings, Inc, 906 F Supp 428, 432 (ED
Mich, 1995), which lists several factors that courts may consider in the exercise of their
discretion to appoint receivers, and they argue that “none of the preceding requirements were
present that warranted or justified the appointment of the Receiver.” Defendants, however, fail
to elaborate on their argument or apply the listed factors to the facts of this case. “A party
abandons a claim when it fails to make a meaningful argument in support of its position.”
Fellows v Mich Comm for the Blind, 305 Mich. App. 289, 295 n 5; 854 NW2d 482 (2014)
(quotation marks and citation omitted). Defendants also fail to address the trial court’s reliance
on MCL 600.2926 and MCL 600.2927, and they do not dispute the trial court’s findings that they
were not maintaining the properties or paying taxes on the properties, which are circumstances
supporting the appointment of a receiver under those statutes.
Accordingly, defendants have failed to establish that the trial court’s appointment of the
receiver constitutes an abuse of discretion.
B. FORECLOSURE SALE WITHOUT A REDEMPTION PERIOD
Defendants next argue that the trial court erred by allowing a sale of the properties
without a foreclosure sale and without redemption rights. Defendants did not preserve this
issue for appellate review because they first raised it in their motion for reconsideration. Vushaj
v Farm Bureau Gen Ins Co of Mich, 284 Mich. App. 513, 519; 773 NW2d 758 (2009) (holding
that “[w]here an issue is first presented in a motion for reconsideration, it is not properly
preserved.”). Therefore, our review is for plain error affecting substantial rights. Demski v
Petlick, 309 Mich. App. 404, 426-427; 873 NW2d 596 (2015). Although we agree that the trial
court’s failure to order a foreclosure sale with a redemption period was plain error, we conclude
that the error did not affect defendants’ substantial rights, and therefore, reversal is not required.
Generally “sales of real estate must be followed by a period of redemption.” Nat’l Bank
of Commerce v Corliss, 217 Mich. 435, 438; 186 N.W. 717 (1922). The trial court did not provide
an explanation for allowing the sale of the properties without a redemption period, and did not
address the argument in its order denying defendants’ motion for reconsideration. However, at a
later hearing, the court explained that it had given the receiver the power of sale in a prior order
and that order was never appealed. The trial court also stated that it had given defendant Sagi the
opportunity to bring money to court and redeem the properties, but he failed to do so. Although
defendants claim that they were entitled to six months to redeem the property, they do not assert
that they would have actually redeemed. In addition to the trial court giving defendants the
opportunity to recover the property, it also allowed defendant to bid at the auction but they failed
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to do so. In the case of irregularities in a foreclosure proceeding, the Michigan Supreme Court
has held that plaintiffs must show that they were prejudiced by a defendant’s failure to comply
with the applicable statute, i.e. “that they would have been in a better position to preserve their
interest in the property absent defendant’s noncompliance with the statute.” Kim v JPMorgan
Chase Bank, NA, 493 Mich. 98, 115-116; 825 NW2d 329 (2012). Defendants in this case have
not made such a showing.
Furthermore, the sale of the property has already occurred, and defendants do not seek to
vacate the sale on appeal.3 Rather, defendants seek reversal of the appointment of the receiver,
the order finding that plaintiff had an interest in the property, and a return of the money paid to
plaintiff, its attorney, and the receiver. However, as previously discussed, the receiver was
properly appointed and the trial court did not err in its interpretation of the parties’ agreement.
Defendants also argue that the trial court erred by granting relief that contravened the
specific language of the note and mortgage, which required a foreclosure sale.
Defendants are correct that the mortgage itself provided for foreclosure in the event of a
default. Moreover, a foreclosure with a redemption period was required for the sale of real
estate. Nonetheless, defendants have not established that the error affected their substantial
rights and they do not seek to vacate the sale of the property. To the extent that defendants claim
that the mortgage provided that they were entitled to any surplus as a result of a foreclosure sale,
the trial court ordered that defendant Sagi was to receive any surplus from the sale. Accordingly,
appellate relief is not warranted.
C. RELIEF NOT SOUGHT IN COMPLAINT
Defendants also argue that the trial court erred by granting relief not sought by plaintiff in
its amended complaint. Specifically, defendants argue that the trial court’s decision giving the
receiver the right to sell the property at bid was beyond the scope of relief sought in the
complaint. We disagree because sale of the property was within the scope of the relief sought.4
In its second amended complaint, plaintiff sought a monetary judgment, appointment of a
receiver, injunctive relief, an order of foreclosure and sale of the property, reformation or
rescission of the sales documents, and all other reliefs appropriate under the circumstances.
Even if the relief granted by the trial court was covered by the catchall provision of the
complaint requesting all other appropriate reliefs, a foreclosure sale with the right of redemption
was required for the sale of real estate. Nonetheless, as previously explained, defendants have
not established that the error affected their substantial rights and they do not seek to vacate the
sale of the property. Therefore, appellate relief is not warranted.
D. EVIDENTIARY ISSUES
3
Defendants were awarded any surplus from the sale.
4
Again, defendants did not preserve this issue because they first raised it in their motion for
reconsideration. Vushaj, 284 Mich. App. at 519.
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Defendants argue that the trial court erred by admitting evidence in violation of the parole
evidence rule and the statute of frauds, and by reinterpreting the parties’ agreements and
writings. Specifically, defendants contend that the trial court was required to rely only on the
parties’ written agreement, which they claim was embodied in the stipulated order, the
addendum, and the closing statements. According to defendants, the trial court erred by
considering the parties’ testimony and evidence of other communications between the parties to
find the existence of the note and mortgage. In ruling on defendants’ motion for reconsideration,
the trial court found, however, that the record as a whole, including the pre- and post-closing
written documents, supported its finding that the financial relationship between the parties did
not end at the closing.5
“The parole evidence rule may be summarized as follows: [p]arole evidence of contract
negotiations, or of prior or contemporaneous agreements that contradict or vary the written
contract, is not admissible to vary the terms of a contract which is clear and unambiguous.”
Hamade v Sunoco Inc (R & M), 271 Mich. App. 145, 166; 721 NW2d 233 (2006) (quotation
marks and citation omitted). The Michigan Supreme Court has acknowledged that there are
“many exceptions to the parole evidence rule.” Ferd L Alpert Indus, Inc v Oakland Metal
Stamping Co, 379 Mich. 272, 276; 150 NW2d 765 (1967). One of the specific exceptions is that
the rule does not preclude consideration of evidence that shows that the parties did not integrate
their agreement or that the agreement in question was only partially integrated. Hamade, 271
Mich. App. at 167-168.
With regard to the parole evidence rule, although not expressly stated in these terms, the
trial court found that, to the extent that the stipulated order, addendum, and closing statements
did not reference the note or mortgage, the parties did not intend those documents “to be a
complete expression of their agreement.” Id. at 167-168. The trial court’s finding is supported
by the trial testimony of the receiver and plaintiff that the note and mortgage were not mentioned
in the closing statements, but was part of the agreement between plaintiff and defendant Sagi.
Therefore, because an exception to the parole evidence rule applied, the trial court did not err by
considering extrinsic evidence to find that the note and mortgage were part of the parties’
agreement.
Further, under the statute of frauds, “an oral promise to sell land is unenforceable.”
Pontiac Country Club v Waterford Twp, 299 Mich. App. 427, 441; 830 NW2d 785 (2013). With
regard to the statute of frauds, the trial court found that the written documents established the
relationship between the parties. Although it relied, in part, on testimony from the receiver and
5
To preserve an evidentiary error for appeal, a party must object at trial on the same ground that
it presents on appeal. Klapp v United Ins Group Agency, 259 Mich. App. 467, 475; 674 NW2d
736 (2003). Defendants did not object at trial to the admission of any evidence on the basis of
the parole evidence rule or the statute of frauds. They first raised these arguments in their
motion for reconsideration. Therefore, this issue is unpreserved. See Vushaj, 284 Mich. App. at
519. This Court reviews unpreserved error for plain error affecting substantial rights. Demski,
309 Mich. App. at 426-427.
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plaintiff, it found that the stipulated order and addendum both referenced the $1,500-a-month
obligation. Similarly, the promissory note itself established the obligation. These findings are
not clearly erroneous. Because the parties’ agreement was in writing, there was no violation of
the statute of frauds.
Similarly, we reject defendants’ argument that the trial court re-interpreted the parties’
agreement. The trial court found that the mortgage and note were part of the agreement based on
the stipulated order, the addendum, the promissory notes, the email correspondence, and the
testimony of plaintiff and the receiver. For the reasons discussed earlier, the extrinsic evidence
was properly considered. The stipulated order, the addendum, and the trial testimony supported
the trial court’s finding that the note and mortgage were valid and enforceable. The stipulated
order and addendum both referenced the note and mortgage. Moreover, both plaintiff and the
receiver testified that the note and mortgage were part of the agreement. Furthermore, given the
cash offer of $375,000 pending at trial, a sale price of approximately $400,000 was reasonable.
Contrary to defendants’ argument that the stipulated order provided that the sale was free
and clear of all liens and encumbrances, the stipulated order provided only that the sale was free
and clear of certain specified mortgage and liens, and it did not list the mortgage and note in
favor of plaintiff from THA. The trial court also rejected defendants’ argument based on the
lack of delivery of the note and mortgage, finding that the delay was based on a dispute
regarding the amount of the note. The letter to the title agency on November 27, 2013, further
demonstrated that the note and mortgage were delivered to the title company with instructions
for it to hold them in escrow pending instructions from defendant Sagi. Moreover, defendants
have abandoned on appeal any argument regarding the lack of delivery by failing to cite any
authority. See Prince v MacDonald, 237 Mich. App. 186, 197; 602 NW2d 834 (1999) (stating
that “where a party fails to cite any supporting authority for its position, the issue is deemed
abandoned.”).
In sum, although the closing documents did not refer to the note or mortgage, the
stipulated order and addendum did, and additional evidence supports the trial court’s finding that
the note and mortgage were part of the parties’ agreement.
D. MERGER DOCTRINE
Finally, defendants contend that the trial court erred by considering the mortgage and any
claims based on the mortgage, which no longer existed once the deed was granted. We
disagree.6
In Chapdelaine v Sochocki, 247 Mich. App. 167, 171; 635 NW2d 339 (2001), we stated,
“Generally, a deed executed in performance of a contract for the sale of land operates as
6
Defendants did not preserve this issue on appeal by failing to raise it below. Therefore our
review is for plain error affecting substantial rights. Demski, 309 Mich. App. at 426-427.
Notably, to the extent that defendants’ attorney mentioned merger at trial, he was referring only
to the merger of the purchase agreement with the deed.
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satisfaction and discharge of the terms of the executory contract. However, an exception exists
where the deed does not constitute full performance of the purchase agreement.” (Quotation
marks and citations omitted). Thus, “where delivery of the deed represents only partial
performance of the preceding contract, the unperformed portions are not merged into it.”
Johnson Family Ltd Partnership v White Pine Wireless, LLC, 281 Mich. App. 364, 375; 761
NW2d 353 (2008).
Although this issue was not considered by the trial court, nonetheless, it essentially found
that the deed did not constitute full performance of the purchase agreement because THA
remained obligated on the note to plaintiff after closing. Accordingly, THA’s unperformed
obligation on the note was not merged into the deed. Therefore, the trial court’s consideration of
the note and mortgage did not constitute plain error.
Affirmed.
/s/ Patrick M. Meter
/s/ David H. Sawyer
/s/ Douglas B. Shapiro
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