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In re Milford Housing LLC

United States District Court, E.D. Michigan, Northern Division

March 24, 2017

IN RE MILFORD HOUSING LLC, Debtor.
v.
VILLAGE OF MILFORD, Defendant, MILFORD HOUSING LLC, Plaintiff,

          ORDER OVERRULING OBJECTIONS, ADOPTING REPORT AND RECOMMENDATION, GRANTING JUDGMENT FOR DEFENDANT, AND DISMISSING PLAINTIFF'S COMPLAINT

          THOMAS L. LUDINGTON United States District Judge

         On July 22, 2011, Plaintiff Milford Housing LLC filed a complaint against Defendant Village of Milford asserting due process and inverse condemnation claims in an adversary proceeding before Bankruptcy Judge Daniel S. Opperman. The dispute between the parties arises out of the condemnation and destruction of an apartment building owned by Plaintiff. After a bench trial was held, the parties submitted briefs and proposed findings of fact and conclusions of law. On March 26, 2015, Judge Opperman filed a report recommending that judgment be granted for Defendant and that Plaintiff's complaint be dismissed. ECF No. 1. On April 8, 2015, Plaintiff filed objections to Judge Opperman's report and recommendation. ECF No. 3. Although Federal Rule of Bankruptcy Procedure 9033(b) and Eastern District of Michigan Local Rule 5.1.1(a) put the burden on Plaintiff to obtain and file transcripts of the bench trial on this docket, the transcripts were not filed until January 5, 2017. On January 19, 2017, Defendants filed a response to Plaintiff's objections. ECF No. 7. For the reasons stated below, Plaintiff's objections will be overruled, the report and recommendation will be adopted, and judgment will be entered for Defendant.

         I.

         Judge Opperman has issued proposed findings of fact. See Rep. & Rec. at 2-6, ECF No. 1. In its objections, Plaintiff provides a copy of the proposed findings of fact it submitted after the bench trial. Objs. at 2-8. That reiteration of arguments previously made is not a sufficiently “specific” objection to trigger de novo review pursuant to Bankruptcy Rule 9033(d). Plaintiff also provides several specific objections to Judge Opperman's findings of fact. Id. at 9-10. Those objections take issue with Judge Opperman's credibility determinations and refusal to draw certain inferences in favor of Plaintiff. Plaintiff's objections do not specifically identify portions of Judge Opperman's proposed findings of fact where he ignored important facts, misconstrued testimony, or otherwise made objectively incorrect statements. Because the objections challenge only Judge Opperman's treatment of subjective issues of fact, Judge Opperman's findings of fact will be summarized below. Afterwards, Plaintiff's objections to particular aspects of those findings of fact will be addressed.

         A.

         The property at issue was purchased by Plaintiff in June of 2000. The property included a 24-unit apartment building and five acres of land. Subsequent to Plaintiff's purchase of the property, the apartment building repeatedly experienced problems related to the boiler heating system, which resulted in burst pipes and collapsed ceilings. In January 2003, cold weather caused several water pipes to burst, saturating the ceiling and causing collapse in areas. Randall Sapelak, the Building Official for Defendant, inspected the building and concluded that it was not a “dangerous building” as defined by the relevant local ordinance. At the time, there was no full-time, live-in building manager even though that was required by the building's special use permit. Trial Tr. I at 95-96. The pipes and ceilings were repaired. Similar incidents occurred in March 2008 and December 2008. After the March 2008 incident, an official with the Michigan Department of Labor and Economic Growth opined that the structure should be designated as “a dangerous and unsafe building.” Trial Tr. I at 33, ECF No. 5. At the time, Mr. Sapelak did not agree. However, when Mr. Sapelak discovered that the ceiling collapses were occurring again in December 2008, he decided that further action needed to be taken.

         On December 30, 2008, Mr. Sapelak sent a letter to the attorney for the Village of Milford in which he indicated his desire to “‘close the place down or, if that can't happen, have the building totally vacated until all repairs are completed.'” Rep. & Rec. at 2. Mr. Sapelak expressed his belief that “‘[t]he problem with having it closed only temporarily is that the problems will repeat themselves as long as the building is owned by the same person that has it now.'” Id. He also summarized the known problems with the building:

To date, I know the roof needs complete replacement and probably some of the roof sheathing will have to be removed. Some of the trusses may be compromised due to water damage. Some ceilings and walls are missing drywall and heat in some of the unoccupied units. Mold is in some of the ceilings. Some of the brick outside has pulled away from the walls and is open to the weather. A lot of external flashing needs repair. I am not certain about the safety of any of the interior mechanical systems.

Id. at 3.

         Three weeks later, Mr. Sapelak prepared another letter wherein he updated his opinions about the building's condition. He stated that the building was “‘in immediate need of repair” and needed to be vacated while being repaired. Id. He identified the following issues: “foundation sagging in both the east and south wings, causing sinkage and leaving open air visible from some apartments; varied and insufficient heating; water damage; and the roof being in need of immediate repair.” Id. Mr. Sapelak believed that at least the two sagging wings would need to be demolished (if not the entire building). He also recommended that: “‘if it is restored that it is inspected monthly . . . due to the current owner[']s history, while charging the owner for the time involved.” Id.

During the bench trial, Mr. Sapelak testified that by January 22, 2009, he had concluded:
[T]his owner will not take care of this building. That he's not interested in taking care of this building. My opinion was he didn't care who you rented to. He didn't care what kind of conditions whoever he rented to lived in. He didn't care whether or not it was safe enough for them to live in.

Trial Tr. I at 119.

         In a memo Mr. Sapelak wrote on January 26, 2009, he recommended that:

Anything we can do to condemn the entire building until the entire building is brought up to code and site plan compliance by providing a live-in manager before even one unit is reoccupied will be the best solution. Until that time I would like to see the place vacated entirely (all units) and to forbid any advertising of any rent space until that happens.

Rep & Rec. at 3.

         Mr. Sapelak then sent a letter to Plaintiff which listed the conditions with the building, informed Plaintiff that it was a dangerous building as defined by the ordinance, and ordered that the building be demolished. Id. at 3-4. The letter explained that a dangerous building hearing would be held and that the Plaintiff would have the opportunity to explain why the building should not be demolished.

         The hearing was held by building hearing officer Timothy Brandt. Plaintiff argued at the hearing that it should be given the opportunity to repair the building. Plaintiff estimated that repairs would cost $125, 000 and testified that it had assets which could be leveraged to pay for the repairs.

         Mr. Brandt concluded that the structure was a dangerous building under the ordinance and that it should be demolished by May 1, 2009. Plaintiff appealed that decision to the Village of Milford Counsel.

         Mr. Sapelak prepared a letter which was presented at the appeal hearing and stated:

Due to all of the problems associated with this site I can only see this situation getting worse as time progresses. Even though the owner seems to express that doing some work with change the situation . . . I have no confidence that ...

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