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Detroit Club Holdings, LLC v. Edward

Court of Appeals of Michigan

June 18, 2019

DETROIT CLUB HOLDINGS, LLC, Plaintiff-Appellant,
v.
JAY EDWARD, a/k/a J. EDWARD KLOIAN, Defendant-Appellee. and CHARLES SOULE and JEREMY LANGENDERFER, Intervenors-Appellants,

          Wayne Circuit Court LC No. 16-015714-AV

          Before: Beckering, P.J., and Cavanagh and Ronayne Krause, JJ.

          RONAYNE KRAUSE, J.

         Plaintiff Detroit Club Holdings, LLC (DCH) and intervenors Charles Soule and Jeremy Langenderfer appeal by leave granted the trial court's order reversing a denial by the district court of a motion for relief from judgment filed by defendant Jay Edward Kloian (Kloian), and vacating the district court's default judgment previously entered against defendant. This matter arises out of summary proceedings for possession of a condominium originally owned by defendant, purchased by DCH at a foreclosure sale, and subsequently re-sold to intervenors. The foreclosure is not at issue in this appeal. Rather, defendant contends that DCH did not provide him with adequate notice of its claim for possession. We affirm in part, vacate in part, and remand for further proceedings.

         I. BACKGROUND

         On April 27, 2010, defendant purchased condominium unit 20 in the Belle Point Estates Condominium by covenant deed. The deed was recorded, and it showed defendant's home address in Ann Arbor, Michigan. Defendant then sold the unit to non-party Aisha Crawford on land contract. Crawford failed to pay property taxes or condominium association dues, as required by the land contract. In October of 2014, the condominium association sent a notice to Kloian at his Ann Arbor address of a lien for unpaid condominium assessments. The association also recorded a notice of the lien, which also listed Kloian's Ann Arbor address. Kloian received the notice, but took no action because he relied on Crawford's assurances that she would pay any outstanding dues. Crawford continued to evade payment. Kloian contends that on March 30, 2016, to avoid tax foreclosure, he paid $8, 200.31 on the 2014 delinquent real estate taxes to the Wayne County Register of Deeds. Kloian further contends that after pursuing foreclosure against Crawford, she agreed to vacate the condominium by May 1, 2016, and quit-claim her interest back to Kloian.

         However, in the meantime, on March 16, 2016, the Association posted a Notice of a Foreclosure Sale on the condominium and published the notice in the Detroit Legal News. The notice stated an amount owed of $4, 950.00 and a Sheriff's sale date of April 21, 2016. No notice was sent to Kloian's Ann Arbor address. Unbeknownst to Kloian, the Sheriff's sale was held as scheduled, and DCH purchased the condominium unit for $45, 249.25. That same day, DCH posted a Notice to Inspect at the condominium unit and sent a copy of the notice by certified mail, addressed to the condominium unit. Although Kloian protests the failure to notify him of the sale, he does not challenge the legality of the foreclosure or the foreclosure sale in this action.

         DCH contends that on April 27, 2016, it was unable to gain access to the condominium unit when its representative attempted to conduct an inspection. The inspector deemed the property vacant and in damaged condition-a broken window, a damaged garage door, and overgrown grass. Relying on MCL 600.3238(6), DCH then initiated summary proceedings for possession of the property, asserting that Kloian unreasonably refused to allow DCH access to the condominium unit for an inspection and that damage to the property had occurred. On April 28, 2016, DCH mailed a notice of an action for possession to defendant, addressed to him at the condominium unit's address. DCH was aware that the U.S. Postmaster had posted a vacancy notice on the property at that time, indicating that the property was vacant. In May of 2016, DCH recorded a "Sheriff's Deed on Association Dues/Fees Sale" pertaining to the condominium with the Wayne County Register of Deeds, detailing the foreclosure sale of the condominium to plaintiff. DCH searched for Kloian's address on LexisNexis and found the address of the condominium to be Kloian's last known address. DCH did not make any other efforts to discover where Kloian might be found. DCH then mailed a notice to Kloian of Demand for Possession/Health Hazard, again only addressed to him at the condominium unit.

         On May 20, 2016, DCH filed a complaint in district court against Kloian, alleging that Kloian remained in possession of the condominium, and asserting that DCH had a right to enter into possession of the condominium pursuant to MCL 600.3238 and MCL 600.5714(1)(d) because Kloian unreasonably refused an inspection by DCH and the property was in damaged condition. The district court addressed a summons to Kloian "and all other [o]ccupants" of the condominium, informing Kloian of DCH's complaint to evict him from the condominium. The summons and the complaint listed Kloian's address as that of the condominium unit. On June 9, 2016, the district court entered a default judgment of possession against Kloian, ordering that DCH had a right to possession and that Kloian was to be evicted. DCH then recorded an "affidavit of termination of redemption rights" with the Wayne County Register of Deeds. On June 22, 2016, DCH conveyed the property to intervenors for $115, 000.00.

         Kloian contends that he first learned of the proceedings the next month, when he sent a locksmith to change the locks on the condominium unit. Kloian apparently sent the locksmith because he had a prospective buyer for the property, who had previously tried to view the property but had been unable to gain access. According to Kloian, the locksmith was ordered to leave the property by a person who claimed to have purchased the property. On July 28, 2016, Kloian sent a request to DCH for a calculation of the redemption amount for the property and expressing his intent to redeem the property. DCH did not respond to that request.

         On September 1, 2016, Kloian filed a motion for relief from judgment pursuant to MCR 2.612(B), contending, in relevant part, that he had never received notice of any actions against the property, and DCH had constructive notice of his correct address in Ann Arbor because that address had been listed on the 2010 deed. The district court denied Kloian's motion for relief from judgment, finding that DCH provided adequate notice to Kloian. The district court also held that under MCR 2.612(B), personal jurisdiction over Kloian was unnecessary because this was an in rem proceeding. Furthermore, the district court stated that there were innocent third-party purchasers, and granting Kloian's motion would be prejudicial to those purchasers. Kloian appealed to the circuit court.

         The circuit court held a hearing at which it rendered a somewhat piecemeal bench ruling. The circuit court held that the notice requirements set forth in MCL 600.3238, which addresses the right to inspect property after a mortgage foreclosure sale by advertisement, were inapplicable because no mortgage was involved; however, the circuit court also opined that DCH failed to comply with the notice requirements in that statute. The trial court noted that "everybody knew" that Kloian did not live at the condominium, yet DCH continued to mail notices to the vacant property and made no further efforts to discover Kloian's whereabouts. The circuit court also found that Kloian had standing to appeal despite having failed to tender a redemption amount pursuant to MCL 559.208(2), which pertains to the foreclosure of condominium liens, because any such tender would have been futile. The circuit court ultimately concluded that MCL 600.3240 and MCL 559.208, when read in conjunction, indicated that Kloian's period to exercise his right of redemption would have been "six months." The trial court declined to address whether intervenors were subsequent bona fide purchasers without notice.

         On April 3, 2018, this Court entered an order granting appellants' application for leave to appeal. Detroit Club Holdings, LLC v Edward, unpublished order of the Court of Appeals, entered April 3, 2018 (Docket No. 340874).

         II. STANDARD OF REVIEW

         "Whether a party has standing is a question of law that this Court reviews de novo." In re Gerald L Pollack Trust, 309 Mich.App. 125, 154; 867 N.W.2d 884 (2015). "Issues of statutory construction are questions of law," which this Court reviews de novo. Corwin v DaimlerChrysler Ins Co, 296 Mich.App. 242, 253; 819 N.W.2d 68 (2012). "Court rules are interpreted using the same principles that govern statutory interpretation." Pellegrino v AMPCO Sys Parking, 485 Mich. 1134, 1135 n 1; 789 N.W.2d 777 (2010). "We review for an abuse of discretion a circuit court's ultimate decision to grant or deny relief from a judgment." Rose v Rose, 289 Mich.App. 45, 49; 795 N.W.2d 611 (2010). We review for clear error a trial court's findings of fact. Herald Co, Inc v Eastern Mich. Univ Bd of Regents, 475 Mich. 463, 470-472; 719 N.W.2d 19 (2006). Under the clear error standard, this Court defers to the trial court unless definitely and firmly convinced that ...


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