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[b]Jim C. wrote:[/b]
[quote]I found the following, hope it helps:

There are a variety of remedies available to rectify disputes in real estate sales transactions. However, no one is ever eager to spend time and money litigating a transaction. The most common response to a transaction that fails to close, especially in residential sales, is an angry decision to drop the entire matter. On the other hand, commercial transactions are generally viewed from an economic perspective. If the transaction is sufficiently important to the business, the wronged party might seek a remedy. The wronged party is likely to sue only if a recovery is expected that will exceed the cost of litigation.

Counsel’s priority is to close the transaction so that it will not have to be litigated. Although you should attempt to ensure enforceability, the first rule of remedies is to avoid having to use them. The nature of real estate transactions creates a need for precise drafting and predictable results. Usually, the buyer is moving its offices, adding a new location, opening a business, starting or adding to a development, or similar event—any delay, particularly the lengthy and expensive delay of litigation, is likely to greatly disrupt the business schedule and perhaps kill the project. In this modern world, almost everyone views time as money. The time and cost of litigation are the banes of a client. This makes this topic difficult for a real estate attorney whose whole goal is to avoid litigation. As you anticipate a transaction, you need to try to ensure that any agreements that are entered into will not lead to litigation and that any closings that are held will not result in litigation.

Whenever an attorney is drafting an agreement, the potential remedies of the parties must be anticipated. In some instances, those are specifically stated in default provisions that allow remedies ranging from no remedies at all (except termination of the agreement) to any remedies available under Michigan law. If a client has a significant amount invested in events leading up to the transaction, the client may want to recoup its losses if the transaction fails. However, in many instances clients recognize that the cost and time involved in litigation make it an unacceptable remedy. Hence, many agreements are drafted to simply provide for the parties to withdraw if the due diligence or other actions leading to the closing of the transaction are not acceptable to the buyer.

These issues must be anticipated in the drafting of agreements. For example, should the seller make a number of representations and warranties to the buyer that may lead to a claim of liability later or should the seller simply leave it to the buyer’s due diligence to determine the state of the property being sold? Will the buyer want to purchase a property where certain minimal warranties and representations are not made? The issue has a different perspective after closing. If the buyer has relied on some number of documents from the seller and they turn out to be in error, the buyer will want to know that it received a representation as to the correctness and completeness of the documents, so that it can consider a claim against the seller. If the seller refuses to make any representations and warranties, then of course the buyer must ensure that it investigates the due diligence issues that much more thoroughly. The common law embodies the concept of caveat emptor—“buyer beware.” Every buyer must ensure that the property is in an acceptable condition when closing the transaction.

With the complications of many modern-day transactions, buyers often try to enhance due diligence investigations with representations and warranties from the seller. The seller, not wanting to give cause to possible future litigation, may be leery of making those representations and warranties. This is true even though the representation may seem to be a nondescript matter. Given today’s litigious world, many statements that seem innocent have a way of being construed in a manner that was not intended or of being misconstrued to support a claim. Hence, there are transactions where the seller, selling a multi-million-dollar piece of property, will declare that it is only giving a quitclaim deed, not a warranty deed, noting that it is buying an owner’s policy of title insurance for the buyer and that the buyer will get its representation of the warranty from the title insurance company.

These different positions must be considered when preparing transaction documents and undertaking the other actions leading up to a closing. Both the attorney and the client need to keep the concept of remedies in the back of their minds. This includes considering the remedies they may wish to pursue, and the evidence that will be needed to support a claim if the transaction fails in one manner or another. As much as that is the position that every real estate attorney wants to avoid, the attorney must also contemplate those issues leading up to the closing of the transaction.

Transactions usually fail for one of two reasons: (I) one of the parties fails or refuses to complete the transaction or (ii) there is a failure of consideration. In the first case, the remedy is a claim for specific performance or damages. If there is a failure of consideration, the available remedies are specific performance, damages, rescission, or reformation. Each of these remedies has evolved under common law and their application greatly varies depending on the facts of the individual case. Statutory remedies, such as land contract forfeiture or foreclosure, mortgage foreclosure, or bankruptcy, may also be available.

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II. Procedure

A. Jurisdiction and Venue

§22.2   The circuit courts have general original jurisdiction over real estate actions, MCL 600.605, and have express jurisdiction over foreclosure actions, MCL 600.3101, and questions involving title to land, MCL 600.2932.

If the relief desired is damages, the district courts have exclusive jurisdiction in actions in which the amount in question does not exceed $25,000. MCL 600.8301. They are denied jurisdiction in equitable matters except where the equitable issue is adjunct to a summary proceedings case. MCL 600.8315. The district court also has jurisdiction and power under MCL 600.8315 to make any order proper to effectuate the court’s jurisdiction and judgments. District courts are specifically given jurisdiction over summary proceedings to recover possession, MCL 600.5704, and may also rule on any matters joined to those actions. These additional matters may include claims or counterclaims that do not exceed $25,000, MCL 600.5739, and equitable defenses raising claims to title, foreclosure, partition, or nuisance. MCL 600.8302; see Bruwer v Oaks (On Remand), 218 Mich App 392, 554 NW2d 345 (1996) (district court has jurisdiction to enter a judgment on an appeal bond given to stay execution of a judgment in a summary proceeding for forfeiture of a land contract under MCL 600.8302(3), even though the amount of the judgment against the bond exceeds the jurisdictional limit under MCL 600.8301(1)).

Actions concerning realty must be brought in the county where the real estate is located. MCL 600.1605.

B. Necessary Parties

§22.3   As with any litigation, any person whose interests will be affected by the judgment must be included in the suit. For example, if title to real property is at issue, all parties whose interests the plaintiff wishes to be subject to the court’s decision, such as subsequent or prior lienholders, must be named. In some actions, the court rules mandate that all parties with an interest be brought into the action. For example, MCR 4.202(C) mandates that any party with an interest in property being forfeited under a land contract be named as a necessary party. The land contract seller cannot sue only the land contract buyer and expect to have all other issues fully resolved. A title search might be needed to identify all interested persons and in extended litigation, the search might need to be updated during the action to determine whether any subsequent interests such as tax liens have arisen that would have priority.

C. Lis Pendens

§22.4    What's New in this Section  At the time of filing any action that might affect title to real estate, a notice of lis pendens should be recorded with the register of deeds. MCL 600.2701 et seq. The litigation, however, must directly involve the property: the judgment sought must affect title, possession, or an interest in the property. Ruby &amp; Assocs, PC v Shore Fin Servs, No 266312, 2007 Mich App LEXIS 1666 (Apr 19, 2007) (because claimed fraudulent transfer was of embezzled funds, not the property itself, plaintiff’s lis pendens had no effect on subsequently acquired interests). The notice should be recorded with the register of deeds in the county where the property is located and should have a copy of the complaint attached to it. The lis pendens expires after three years unless it is renewed. MCL 600.2715. It creates a cloud on title and gives notice to potential buyers, mortgagees, and others that title to the premises is in dispute and that they are taking a risk if they purchase or take some interest in the premises without accounting for the claim in litigation. The statutes governing recording of a notice of lis pendens allow the complaint to be filed with the notice before service of the summons. Sixty days are allowed between the date the notice of lis pendens is filed and the date the summons must be served on the defendant. MCL 600.2701.

The recording requirements for filing a claim of lien establish penalties for persons who encumber property without lawful cause and with the intent to harass or intimidate a landowner. MCL 600.2907a. The mere act of recording a levy, attachment, lien, lis pendens, sheriff’s certificate, marshal’s certificate, or other document of encumbrance is no longer sufficient to perfect the encumbrance. Documentation supporting the claim of lien must be filed with the lis pendens along with proof that the landowner was served with the notice of the claim of lien before filing. A court must find that the following accompanied the document when it was presented to the register of deeds for a filing to properly perfect a claim of lien:

(a) A full and fair accounting of the facts that support recording of the document of encumbrance and supporting documentation, as available.

(b) Proof of service that actual notice has been given to the recorded landowner of the land to which the document of encumbrance applies.

MCL 565.25(2). Subsequent owners who purchase the property after the recording of the notice of lis pendens or subsequent encumbrances are subject to the lis pendens only if the lien was properly perfected. MCL 565.25(4).

Certain encumbrances do not need to comply with the requirements that a claim of lien must be filed with supporting documentation and proof of service. These include property tax liens; encumbrances authorized by state statute or federal statute; consensual agreements to encumber real property between the owner and the lienholder such as mortgages, loan agreements, land contracts, or other consensual or contractual agreements; encumbrances authorized in a final court order; and any liens, levies, attachments, lis pendens, sheriff’s certificates, marshal’s certificates, or other document of encumbrance by a commercial lending institution. MCL 565.25(3).

A person who encumbers property without properly perfecting the lien as provided in the statute “without lawful cause with the intent to harass or intimidate any person” is liable to the property owner for the costs incurred in bringing an action to remove the lien, including actual attorney fees, all damages the owner may have sustained as a result of the filing of the encumbrance, and exemplary damages. MCL 565.25(5), 600.2907a. Filing a lien in violation of MCL 600.2907a is a felony punishable by imprisonment for not more than three years, a fine of not more than $5,000, or both.

Filing a lis pendens without a valid claim of lien with intent to cause injury may also result in an action by the landowner for slander of title. See §22.16 for a further discussion.

D. Statute of Frauds

§22.5   The statute of frauds is a common-law rule based on the presumption that certain important matters should be put in writing. Failure to put such matters in writing was considered a fraud, precluding enforcement of unwritten promises. The rule is now codified at MCL 566.108 and .132. In general, real estate transactions and agreements to pay real estate commissions must be in writing. See §4.2.

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III. General Real Property Remedies

A. Specific Performance

§22.6   Since each piece of real estate is treated as unique under common law, an agreement for its transfer is subject to specific performance. Kent v Bell, 374 Mich 646, 132 NW2d 601 (1965). No court rule or statute governs specific performance actions. These actions are brought under the court’s equitable jurisdiction, subject to the requirements of equity and susceptible to the usual defenses for equitable actions, including unclean hands, waiver, laches, estoppel, and inequitable conduct by the plaintiff. The plaintiff should avoid conduct that could give rise to these defenses. No payments should be made or accepted from the other party without considering the implications, all correspondence should be answered promptly, and the party seeking specific performance should not delay in bringing suit. Above all, the complaint and relief requested should be specific, and the relief requested should be fair. Specify what action the court is being asked in order to remedy the unjust situation. Do not make the court have to ask what relief is sought.

Suits for specific performance are essentially actions for breach of contract and are usually brought by buyers who claim that damages at law are inadequate and want to force the seller to comply with the purchase agreement. In such a case, the action should include any successors or assigns of the seller so that the resulting judgment can compel anyone with an interest in the real property to participate to allow completion of the sale if the plaintiff wins the litigation. See Jefferson v Wagman, 261 Mich 678, 274 NW 92 (1933). If another buyer has acquired the property from the seller in good faith, specific performance is no longer available, and the plaintiff must seek damages. A good-faith buyer would not have had knowledge of the plaintiff’s claim, so the court may not order the buyer to turn over the property. See Soloman v Western Hills Dev Co, 110 Mich App 257, 312 NW2d 428 (1981).

While a buyer’s suit for specific performance might appear simple, complications often develop. Often, the seller raises a contingency from the purchase agreement as a defense. For example, in Todd v Ratz, 313 Mich 111, 20 NW2d 830 (1945), the purchase agreement called for delivery of a warranty deed conveying marketable title and provided for refunding the earnest money if the title was not clear. Although the defects discovered in the title were corrected, the seller sought to avoid the conveyance and tried to return the earnest money under the provisions of the purchase agreement. The court found that the seller had an obligation to proceed under the purchase agreement and could not avoid the purchase agreement by returning the earnest money in those circumstances. Similarly, in Reinink v Van Loozenoord, 370 Mich 121, 121 NW2d 689 (1963), the transaction was conditioned on the buyer’s ability to obtain an FHA loan. The seller argued that since the loan had not been granted, the action could not proceed. The court found that the buyer would have been granted the loan if the seller had cooperated, and it decreed specific performance as the remedy. However, to receive specific performance, plaintiff had to show that she was in a position to perform under the purchase agreement. Derosia v Austin, 115 Mich App 647, 321 NW2d 760 (1982). Whether a binding contract exists is a question for the court, not a jury, in an equitable claim for specific performance. Zurcher v Herveat, 238 Mich App 267, 605 NW2d 329 (1999). In Zurcher, the seller claimed that her changes to the purchase agreement after the buyers signed constituted a counteroffer. The court remanded to the trial court for a factual finding of whether the changes were to a material term of the contract (e.g., consideration) and, if so, whether the change was of the magnitude and materiality to convert the acceptance into a counteroffer.

Usually, sellers do not seek specific performance since they have both earnest money to compensate for short-term damages and the real estate, which can be conveyed to another party, to recover the long-term benefit of the bargain. In addition, a seller is not likely to want to force a reluctant buyer into an agreement if the buyer would have to make continuing payments to the seller. However, a seller might seek specific performance if the transaction would be particularly profitable or if the value of the real estate has decreased since the date that the purchase agreement was signed.

The possibility that the circumstances of the property could change in the interim should be covered in the purchase agreement. Many purchase agreements require that there be no significant change in either the real estate or its usefulness to the buyer before the closing, thus placing the risk of loss or change on the seller until the closing. If the purchase agreement does not address this issue, the rights of the parties with respect to casualties such as fires and tornadoes are governed by the Uniform Vendor and Purchaser Risk Act, MCL 565.701 et seq. See §4.28. In most instances that act leaves the risk with the seller.

In addition to granting specific performance, a trial court may award other necessary relief to put the parties, as nearly as possible, in the position they would have occupied if the conveyance of property had occurred when required by the contract. Giannetti v Cornillie (On Remand), 209 Mich App 96, 530 NW2d 121 (1995). Relief may include compensation for any loss of the property during the delay in conveying the property, such as loss of the rental value. Id.

A sample copy of a claim for relief seeking specific performance is shown as Form 22.1. The complaint basically alleges that the defendant refused to close on the purchase agreement. The plaintiff seeks specific performance, incidental and consequential damages, and, in an alternative claim, a judgment of quiet title.

B. Rescission

1. Introduction

§22.7   Rescission is another equitable remedy that may be exercised by either the seller or the buyer. Rescission permits the entire transaction to be reversed. The aggrieved party must seek a rescission of the entire transaction. Brown v Miller, 63 Mich 413, 29 NW 879 (1886). Grounds for rescission generally include failure of consideration, unreasonable delay in performance, fraud, and mutual mistake of fact. See §§22.8–22.11.

Several interesting examples of demands by buyers for rescission have resulted from circumstances in which the property did not have the value that the buyer anticipated. In two cases, the buyers discovered that the sellers had conveyed the properties to third parties without exceptions for the buyers’ rights under a land contract, and buyers claimed that the sellers’ actions amounted to rescissions. The courts found that the conveyances to third parties effected rescissions and barred the sellers’ alternate remedies of forfeiture or foreclosure and damages. Hornbeck v Midwest Realty, 287 Mich 230, 283 NW 39 (1938); In re Reason’s Estate, 276 Mich 376, 267 NW 863 (1936). If a party has a claim for rescission, it is not necessary that the transaction be rescinded. The aggrieved party may seek specific performance or bring an action for damages with regard to any misrepresentations. De Propris v Smith, 342 Mich 457, 70 NW2d 712 (1955).

A sample complaint for a claim of rescission is shown as form 22.2.

2. Failure of Consideration

§22.8   Failure of consideration provides the grounds for the majority of rescission claims. Either the seller or the buyer may seek rescission for failure of consideration. For example, a seller may seek rescission if payment for the property is not completed or a buyer may seek rescission if the title is unmarketable or if the seller’s covenants are breached. See Ihlenfeldt v Guastella, 42 Mich App 384, 202 NW2d 327 (1972). The failure of consideration must be substantial enough to warrant rescission and damages must not be an adequate remedy. See Abbate v Shelden Land Co, 303 Mich 657, 7 NW2d 97 (1942); Schnitz v Grand River Ave Dev Co, 271 Mich 253, 259 NW 900 (1935); Rose v Lurvey, 40 Mich App 230, 198 NW2d 839 (1972).

3. Delay in Performance

§22.9   Claims of delay in performance are based on the other party’s failure to perform an obligation within a stated period of time. This type of case is greatly aided by specific time requirements in the agreement and a clause stating that time is of the essence in the performance of the contract. However, a simple declaration that time is of the essence in an agreement might not suffice if the stipulation is unreasonable or unwarranted. MacRitchie v Plumb, 70 Mich App 242, 245 NW2d 582 (1976). A time is of the essence clause is more likely to be enforced if the boilerplate is explained. For example, a statement that a timely completion is essential for business might be more likely to be enforced. If a contract does not state that time is of the essence, rescission on this ground is justified only if it can be demonstrated that the delaying party’s actions were willful and intentional or that the delay caused damage that renders specific performance inequitable and insufficient. Miller v Smith, 276 Mich 372, 267 NW 862 (1936). Hence it is a good idea to try and have a “time is of the essence in the performance of this agreement” clause in every executory agreement. Without it, a potential claim for dilatory action by the other party is much more difficult.

4. Fraud or Misrepresentation

§22.10   Rescission is a possible remedy for fraud or intentional misrepresentation. See, e.g., Samuel D Begola Servs v Wild Bros, 210 Mich App 636, 534 NW2d 217 (1995); Urban v Doolan, 282 Mich 271, 276 NW 445 (1937); Schnitz v Grand River Ave Dev Co, 271 Mich 253, 259 NW 900 (1935). To support this type of claim, a material fact must have been misrepresented with an intent to deceive and the defrauded party must have relied on the misrepresentation. See Id. A seller might respond that the buyer did not rely on the seller’s misrepresentation but on the buyer’s own judgment and the judgment of third parties in making the decision. In Young v Zavitz, 365 Mich 354, 112 NW2d 493 (1961), this argument was apparently accepted by the trial court, whose decision was affirmed on appeal. However, in Lewis v Peck, 251 Mich 501, 232 NW 219 (1930), the court rejected this type of argument by the seller. Statements of mere opinion or “puffing” that do not amount to misrepresentations do not constitute fraud. See Urban.

The measure of damages is the difference between the actual value of the land and the value as represented, measured at the time of the contract. But see Clemens v Lesnek (After Remand), 219 Mich App 245, 556 NW2d 183 (1996) (court allowed damages in the amount of the replacement cost for a water softener, roof, and septic system for failure to disclose known defects). In addition, consequential damages such as attorney and survey fees, increased construction costs from the delay caused by the misrepresentation, and the costs of curing the misrepresentation appear to be available. See Price v Long Realty, Inc, 199 Mich App 461, 502 NW2d 337 (1993); Fagerberg v Le Blanc, 164 Mich App 349, 416 NW2d 438 (1987).

Sellers are not the only parties liable for fraud. In Swimm v Bush, 23 Mich 99 (1871), the buyer defrauded a nonresident seller into selling property by misrepresenting the property’s value. Although the case is old, it is a good illustration of a situation in which a buyer fraudulently misrepresents superior knowledge of a piece of property to induce a sale.

A person need not make affirmations to commit fraud. Michigan recognizes “silent fraud” as a cause for action. See the discussion in §§3.10 and 4.12.

5. Mutual Mistake of Fact

§22.11   If a mutual mistake of fact significantly affects the consideration and relates to the parties’ basic assumptions, rescission is an appropriate remedy. Britton v Parkin, 176 Mich App 395, 438 NW2d 919 (1989); Garb-Ko, Inc v Lansing-Lewis Servs, Inc, 167 Mich App 779, 423 NW2d 355 (1988). However, the remedy is not available if the party seeking rescission has assumed the risk of loss. In Lenawee County Bd of Health v Messerly, 417 Mich 17, 331 NW2d 203 (1982), all the parties to a land contract erroneously assumed that the property had a working sewer system. It did not. However, the buyers were not granted rescission of the contract because they had agreed to accept the property “as is.”

6. Defenses

§22.12   Because rescission is equitable and subject to the court’s discretion, equitable defenses may bar the right of rescission or the court may find that damages adequately compensate the plaintiff. See Abbate v Shelden Land Co, 303 Mich 657, 7 NW2d 97 (1942) (damages do not justify rescission); Browne v Briggs Commercial &amp; Dev Co, 271 Mich 191, 259 NW 886 (1935) (laches may bar rescission).

The party seeking rescission must act promptly. A delay as short as six months has been found to waive a claim for rescission. Bennett v Hickey, 112 Mich 379, 70 NW 900 (1897). While modern courts might be more lenient, the moral is clear: the less delay the better. However, a delay induced by the words or actions of the defendant, on which the plaintiff relies, should not constitute a waiver. Taylor v Fry, 255 Mich 333, 238 NW 274 (1931).

A waiver may also result from acts of affirmation by a party who later seeks rescission. Monroe v Hoffman, 276 Mich 281, 267 NW 836 (1936). But see Elson v Harris, 356 Mich 175, 96 NW2d 767 (1959) (allowing plaintiff to still seek damages in these circumstances). If a buyer who takes possession and discovers a defect continues to exercise possession, makes improvements, or makes payments, the buyer may be found to have waived a claim for rescission.

You should distinguish defenses to rescission from using rescission as a defense. For example, after a lengthy dispute, a seller may seek to forfeit a land contract, to which the buyer may respond by seeking rescission in a counterclaim. However, that type of delay in bringing a claim for rescission often permits the defense to make the counterclaim of waiver or laches. Similarly, a buyer who raises a defense of rescission in a land contract forfeiture action may find that the contract has already been forfeited, thus excluding rescission as a defense. This exclusion occurs when a contract is forfeited at the end of the notice of default period. The court proceeding under the Summary Proceedings chapter of the Revised Judicature Act, MCL 600.5701 et seq., is simply to regain possession following forfeiture.

C. Reformation

§22.13   Rather than seek rescission, a party can bring an action to reform the agreement. Reformation can also serve to correct drafting or other errors that have compromised the clarity of the agreement. Reformation is subject to the requirements of equity. The rule is that the document should reflect the intent of the parties and it may be changed only when an intent contrary to the writing can be shown. Langschwager v Pinney, 351 Mich 473, 88 NW2d 276 (1958). Reformation claims are often based on the parties’ mutual mistake about the location of a boundary or some similar aspect of the transaction. Usually, the problem can be corrected by contacting the other party, but if the other party cannot be located, has died, or will not consent and the issue is material, it is necessary to file a reformation action. Note that a court will not reform a contract that is drafted as intended, even if it is based on a mutual mistake. Olsen v Porter, 213 Mich App 25, 539 NW2d 523 (1995) (reformation inappropriate when parties agreed on an incorrect statutory maximum land contract interest rate).

A sample complaint for a claim of reformation is attached as form 22.3. The complaint is drafted in the form of a counter-claim and recites multiple counts for the proposed relief. First is acquiescence followed by a claim for adverse possession, then prescriptive easement, and finally the claim for a reformation of the conveyance document that conveyed property some 30 years earlier. The counter-plaintiff, as is common in many situations, is stating its claim in multiple counts. With regard to the reformation, it is essentially suggesting that the parties have treated the conveyance in a certain manner for the past 27 years and a discovery of the title error at this time should not undo the intended action of the parties. The document that conveyed the property should be deemed to be reformed to meet what the actions of the parties over the past 27 years reflected. Most claims of reformation will come to the attention of the parties and be raised much sooner following the closing of a transaction.

D. Damages

§22.14   The most direct action for resolving a dispute over real estate transactions is a claim for damages. The plaintiff seeks damages for the difference between the value of the consideration as understood and as received. For example, this type of action may be brought instead of an action for rescission if the aggrieved party does not want to undo the transaction but simply to be compensated for any lost value. If the transaction is completed but a defect or a cloud on title exists, the buyer may sue for the reduction in value caused by the defect or cloud. Reed v Rustin, 375 Mich 531, 134 NW2d 767 (1965). If the seller fails to convey the property as required, the buyer can sue for the difference between the market value of the property when the contract was breached and the contract price. Bucuss v Schuler, 254 Mich 690, 236 NW 908 (1931). In an anticipatory breach of a purchase agreement, the measure of damages is the difference between the market value of the land on the date of performance (not on the date of repudiation) and the contract price. Stanton v Dachille, 186 Mich App 247, 463 NW2d 479 (1990).

If the buyer refuses to complete the transaction, the seller may sue for the difference between the contract price and the value of the land at the time of the default. Credit should be given for any payments made. The parties must use the market value of the property and not a subsequent resale price, although the resale price may be evidence of the market value. MacRitchie v Plumb, 70 Mich App 242, 245 NW2d 582 (1976). Real estate values are usually determined by obtaining an appraisal of the property to show the reduced value of the premises due to a title defect or other encumbrance.

The sample complaint for a breach of contract action that seeks only damages is not included. Form 22.1 includes a claim for damages, along with a request for specific performance. However when seeking only damages, the claimant will have to include more than the just incidental and consequential damages as stated in that form. The form of pleading is essentially the same for the breach of damages due to failure to breach of contract. Form 22.2 also includes a breach of contract claim along with the request for rescission.

E. Quiet Title

§22.15    What's New in this Section  An action to quiet title, formerly called an action of ejectment, seeks to clarify an interest in real estate and extinguish any claims contrary to it. It is equitable in nature and may be brought only in the circuit courts. Grand Rapids v Green, 187 Mich App 131, 466 NW2d 388 (1991). The clean-hands doctrine may bar an action to quiet title. In McFerren v B&amp;B Inv Group (After Remand), 253 Mich App 517, 655 NW2d 779 (2002), plaintiff bought property but never recorded the deed, in an attempt to conceal his assets from his wife and the federal government. The court held that plaintiff’s quiet title action was barred, despite the fact that plaintiff’s misconduct was directed to unrelated third parties rather than to defendant.

An action to quiet title may be brought by anyone who claims an interest in real estate, whether or not the party is in possession. The only restriction on proper parties is that a mortgagee may not bring an action to quiet title until the mortgagee’s title to the mortgaged premises becomes absolute. MCL 600.2932(2). Plaintiffs who held equitable title to a condominium unit pursuant to a reservation and subscription agreement were not obligated to assert their equitable title in an action to quiet title and for specific performance of the agreement until after their rights were repudiated by eviction proceedings. Steward v Panek, 251 Mich App 546, 652 NW2d 232 (2002). Actions to quiet title can be used to clear clouds on title, Cole v Cardoza, 441 F2d 1337 (6th Cir 1971), and to clear up boundary disputes, Corrigan v Miller, 96 Mich App 205, 292 NW2d 181 (1980).

Actions to quiet title are codified in MCL 600.2932 and specific requirements are set forth in MCR 3.411. The complaint must specify the land with reasonable certainty, preferably by a legal description of the property. The complaint must identify the interest claimed by both the plaintiff and the defendants. Except for title acquired by adverse possession, the judgment binds only the interests of parties to the action. MCR 3.411(H) (amended eff. Sept 1, 2007). MCR 3.411 also states that any written evidence of title to be introduced at trial must be referred to in the pleadings by the page and liber where it is recorded; copies of any unrecorded conveyances on which a party has relied must be furnished within a reasonable period of time to a party who demands such copies.

The statute of limitations for a quiet title action brought under MCL 600.2932 is 15 years. MCL 600.5801(4); Adams v Adams, No 274497, 2007 Mich App LEXIS 2273 (Sept 27, 2007) (on reconsideration). If ownership is asserted under color of deed, the quiet title claim accrues when the record owner first receives notice of the adverse deed. Recording of an instrument with the register of deeds constitutes notice of all persons “except the recorded landowner.” MCL 565.25(4). The record owner, therefore, is not required to search the public record for notice of adverse deeds.

After hearing the evidence, the court determines the parties’ rights in the premises and enters a judgment and a writ of possession or restitution if necessary. A judgment may also be rendered to a party who is not in possession of the property for any damages from a wrongful possession. MCR 3.411(D), (E).

Complications can arise if the premises have been improved. If a party who has made improvements is found not to have title to the premises, that person may have a claim for the improvements. MCR 3.411(F). If a party found not to have title establishes a claim for improvements, the party with title may abandon the premises and seek a judgment against the party claiming the improvements for the value of the premises without the improvements at the time of the trial. MCR 3.411(G). The judgment for the value of the premises becomes a lien on the premises. If the person found to have title does not pay the amount of the judgment for improvements within the time prescribed by the judgment, that party is deemed to have abandoned the title to the party favored by the judgment for the value of the improvements.

Forms 22.1, 22.4, and 22.5 are sample forms of complaints to quiet title. Form 22.1 is a quiet title action coupled with a with a claim for specific performance; it asks the court to grant title due to the defendant’s refusal to sign documents or to appear for a closing. Form 22.4 is a form of complaint to quiet title under adverse possession based on a party’s use of property as their own for 15 years. The form seeks to quiet title to obtain marketable title to a parcel. Finally, in form 22.5, a claim for title is stated in conjunction with an action against the defendant for a nuisance, based on the defendant’s intrusion of the plaintiff’s property, giving rise to both a nuisance and a trespass cause of action. In form 22.5, the plaintiffs are asking the court to quiet title to the property on which the defendant has intruded. These are only three examples of the many forms on which a quiet title action might be brought.

F. Slander of Title

§22.16   An action for slander of title arises when a party records a document with the register of deeds that unjustifiably creates a cloud, claim, or encumbrance on a title. For example, if a prospective buyer records a notice of a purchase agreement to acquire a parcel of real property, which the seller believes has expired, then the seller may bring an action for slander of title based on the buyer’s recording of the notice. This type of action may occur in conjunction with other actions concerning title to real estate. In addition, a counterclaim for slander of title might arise if a party brings an action affecting the premises and records a lis pendens.

The purpose of recording documents with the register of deeds is to give notice of title to real estate, so a party who records a document unjustifiably clouding title can create problems for the rightful titleholder. The register of deeds does not review which is a tortious offense under common law and is also codified in MCL 565.108. To maintain an action for slander of title, the plaintiff must show that the defendant filed an invalid document with the intent to cause the plaintiff injury. Michigan Nat’l Bank &amp; Trust Co v Morren, 194 Mich App 407, 487 NW2d 784 (1992); see GKC Michigan Theaters v Grand Mall, 222 Mich App 294, 564 NW2d 117 (1997) (when there is more than one reason for delay of closing, causation standard that plaintiff must prove in slander of title claim is substantial factor test: publication of disparaging matter need not be exclusive or predominant factor causing delay but must be one of considerations that has substantial weight in causing delay). Remedies include damages and equitable relief, under which the court may order documents to be recorded that clear the slandered title. Exemplary damages are not recoverable in a slander of title action pursuant to MCL 565.108. B&amp;B Inv Group v Gitler, 229 Mich App 1, 581 NW2d 17 (1998). Prejudgment interest under MCL 600.6013 may be properly awarded in a statutory slander of title action when the verdict for the plaintiff is for costs and attorney fees. B&amp;B Inv Group. Filing a lis pendens without other evidence does not constitute a basis of an action. Kauffman v Shefman, 169 Mich App 829, 426 NW2d 819 (1988). It may, however, be the basis for damages and criminal penalties under the recording requirements for filing a claim of lien or an encumbrance without lawful cause with the intent to harass or intimidate as provided in MCL 565.25(5). See §22.4 for a further discussion. A one-year period of limitations applies to actions for slander of title. MCL 600.5805(8); Bonner v Chicago Title Ins Co, 194 Mich App 462, 487 NW2d 807 (1992).

Form 22.6 includes a count for slander of title. This slander of title count is coupled with claims under the statute of frauds, tortious interference with a contractual relationship, and a request for a declaratory judgment. The facts in form 22.6 are complex: a husband signed two purchase agreements on behalf of himself and his wife but later claimed that neither was enforceable because the wife did not sign either agreement. A third party recorded notice of the purchase agreement, and the plaintiff alleged this was slander of title because the purchase agreement was invalid, making any recording of that agreement slander of title. The somewhat confusing factual situation found in form 22.6 is the plaintiff’s effort to find a way out of a difficult situation.

G. Partition

§22.17   Partition is an action to divide the otherwise common interests of various parties in a single parcel of real estate. For example, if tenants in common cannot agree on the use or division of their interests in a parcel of real estate, one or more of the tenants might bring a partition action, which is an equitable action asking the court to divide the property or to order its sale, with the proceeds of the sale to be distributed as the court directs. Such actions are governed by MCL 600.3301 et seq. and MCR 3.401–.403. Partition actions can seek actual division of the property or in the alternative, sale of the property and division of the proceeds.

Form 22.7 is a complaint for partition. As alleged in the complaint, the multiple owners are no longer able to own and operate the property together. Hence, one or all of the other parties may request the court to order the property to be sold and the proceeds divided.

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IV. Land Contract Remedies

A. Introduction

§22.18   Since a land contract is a unique type of real estate transaction, there are unique remedies for the breach of a land contract. A land contract is simply a contract for the sale of land, so it is always appropriate for an aggrieved party to bring a claim for breach of contract. In fact, the Uniform Commercial Code appears to govern land contract transactions since the contract interest is actually personalty (see §5.2). Because the seller does not convey title to the buyer until the contract is completed, the real estate claims of the buyer arising in the interim are equitable in nature based on any possessory interest of the buyer and on principal payments on the debt. See chapter 5 for a more comprehensive discussion of land contracts. The courts, however, tend to view land contracts as real estate documents rather than personalty, which is understandable since they are used to convey real estate and are similar in form to other real estate documents. Based on this perspective, the legislature has codified two remedies for land contract defaults by buyers: forfeiture and foreclosure. See §§22.19 and 22.34–22.45. Although a breach of contract action is always an option, litigants tend to favor the statutory alternatives. The Summary Proceedings Act, MCL 600.5701 et seq., is also a potential remedy to recover possession. See §§22.20–22.33.

B. Self-Help Forfeiture

§22.19   Forfeiture is the most common remedy for land contract sellers. A forfeiture is a termination by the seller of the buyer’s interest under the contract. Although the common-law action of forfeiture is codified under the Summary Proceedings chapter of the Revised Judicature Act, MCL 600.5701 et seq., it still exists in the form of a self-help remedy. Day v Lacchia, 175 Mich App 363, 437 NW2d 400 (1989). Self-help repossession is a common-law right and is available only if the repossession may be peacefully accomplished. Emmons v Easter, 62 Mich App 226, 233 NW2d 239 (1975). Further this remedy is available only if it is specifically provided for in the contract. If the buyer is in possession, the seller must file an action under the Summary Proceedings chapter of the Revised Judicature Act for forfeiture. If the buyer is not in possession, the seller may proceed either under the Summary Proceedings chapter or through a self-help remedy. If the contract provides for forfeiture and the buyer is not in physical possession of the land, thus allowing possession to be recovered peacefully, the seller may declare a forfeiture and give the buyer the right to cure the default within the time period that the contract provides. Rothenberg v Follman, 19 Mich App 383, 172 NW2d 845 (1969), distinguished by Durda v Chembar Dev Corp, 95 Mich App 706, 291 NW2d 179 (1980). Once notice of forfeiture is given, if the buyer does not cure the default within the time period that the land contract provides, the seller may take whatever reasonable, peaceful actions are necessary to reclaim possession. At the end of the specified notice period, the property reverts to the seller and no further action is required. Emmons. If the property reverts to the seller, legal as well as equitable title resides in the seller.

To strengthen a title acquired by a self-help forfeiture, the seller may bring a quiet title action to eliminate any claims to the property by the buyer. See §22.15. Such an action might be necessary to obtain title insurance for a subsequent buyer. A quiet title action must name as a defendant the prior buyer whose interest was apparently extinguished. A buyer whose interest is extinguished through self-help forfeiture may also bring a quiet title action asking the court, under its equitable powers, to find the seller’s actions inappropriate and to order either that the contract is not forfeited and possession be returned to the buyer or that some form of redemptive rights be granted.

Buyers often overlook the possibility of self-help forfeiture. They are particularly vulnerable to it if the property is vacant or unimproved, allowing the seller to recover possession without a breach of the peace. The seller’s position is strengthened by land contract forms that state that the buyer is deemed in constructive possession of vacant property only as long as the buyer is not in default; if the buyer defaults, the seller is deemed in possession under the contract. If that type of language defining constructive possession is not in the land contract, the requirements for constructive possession are unclear. If there is a default, the buyer should demonstrate some evidence of possession, such as the construction of improvements to the property or periodic use of the property, so that summary proceedings must be used to terminate the interest of the buyer.

C. Summary Proceedings

1. Background

§22.20   Summary proceedings provide for recovery of possession of real property. They are governed by MCR 4.202 and the Summary Proceedings Act, MCL 600.5701 et seq. The act governs recovery of possession in actions under land contracts, leases, and other possessory interests. It establishes grounds for regaining possession if the party in possession has violated the law or the contract. Presumably, the Summary Proceedings Act also applies to a party who holds possession under a purchase agreement that does not state whether possession is as a tenant or as a land contract buyer. This remedy may also be used if a buyer under a purchase agreement takes possession before closing but fails to consummate the closing. If the purchase agreement has no provision for the buyer to pay rent in the interim, the buyer could be found to hold possession pursuant to an executory contract for the transfer of property.

An action may be brought under the Summary Proceedings Act in any dispute involving real property. Under the Summary Proceedings Act, the term premises includes lands, tenements, condominium property, cooperative apartments, air rights, and all manner of real property. “It includes structures fixed or mobile, temporary or permanent, vessels, mobile trailer homes and vehicles that are used or intended for use primarily as a dwelling or as a place for commercial or industrial operations or storage.” MCL 600.5701(b).

2. Jurisdiction and Venue

§22.21   Jurisdiction over summary proceedings actions lies with the district courts and the few remaining municipal courts in Grosse Pointe. MCL 600.5704. A summary proceedings action can be an expeditious procedure for returning possession if the claim is undisputed or does not exceed the jurisdiction of the district court. If other issues are raised that remove the case from the district court’s jurisdiction, the nature of the proceeding remains the same, but it will not be expedited unless the court to which it is removed orders an expedited hearing. If the issues joined with the summary proceedings are beyond the district court’s jurisdiction, the forfeiture action may remain with the district court while the other issues are removed to circuit court. However, the courts do not like to add to already overcrowded dockets by creating such bifurcated actions. See §22.2 for a further discussion of jurisdictional issues and joinder of claims.

The proper venue is the court in whose geographic area the premises are located. The complaint may be filed in another district or municipal court and tried there if the defendant does not move for a change of venue. However, if the defendant properly requests a change of venue, the court should transfer the case to the location of proper venue and award costs and any other justified fees, including attorney fees, to the defendant. The court may also order a change of venue on its own motion. MCL 600.5706. If you decide to file an action in a district other than where the property is located for the plaintiff’s convenience and the defendant requests a proper change of venue, you should stipulate to the change rather than lose a contested hearing, which would allow the defendant to recover costs and possibly attorney fees.

3. Complaints

§22.22   Complaints must comply with general pleading requirements and allege the original selling price, the principal balance due, and the amount in arrears under the contract. Any other material breach claimed as a basis for forfeiture must be stated with particularity. A copy of the notice of forfeiture, showing when and how it was served on each defendant, must be attached to the complaint. MCR 4.202(D). The approved district court form (SCAO form DC 101) covers each of these matters and requires that a copy of the land contract be attached, in compliance with MCR 2.113(F). That court rule states that if a claim or defense is founded on a written document, that document should be attached unless one of the pertinent exceptions applies.

Before drafting the complaint, carefully consider whether the plaintiff has any other causes of action based on material breaches other than nonpayment of principal and interest. Any other claims should be joined with the complaint for possession. One claim that should always be joined is for the use of the premises from the date of forfeiture to the date of regaining possession. This claim is conditioned on the plaintiff’s success in the litigation. A plaintiff who ultimately recovers possession through abandonment or the issuance of a order of eviction has a claim for the fair rental value of the premises from the date of forfeiture to the date of regaining possession. Durda v Chembar Dev Corp, 95 Mich App 706, 291 NW2d 179 (1980), involved a buyer who remained in possession of the premises but failed to redeem it. The court found that the seller was entitled to recover both possession of the land and a reasonable amount for interim rent for the premises starting from the date of forfeiture. The court found implicit authorization for the suit in MCL 600.5750, which allows a civil action for damages against the buyer after the seller has obtained a judgment for possession. The court noted that to hold otherwise would unjustly enrich the buyer by allowing the buyer rent-free use of the property during the redemption period.

Before Durda, the conventional wisdom had been that any monetary claims in summary proceedings other than to recover possession were barred by MCL 600.5750 since it explicitly states that a judgment for possession after forfeiture merges and bars any claims for money payments due or in arrears at the time of trial. The Durda court interpreted other sentences in the statute to allow claims for damages that do not relate to money payments owed under the contract, including damages for the use of the property from the date the contract was forfeited. In Michigan Nat’l Bank v Cote, 451 Mich 180, 184, 546 NW2d 247 (1996), the Michigan Supreme Court found that unpaid taxes that the vendee was required to pay to the taxing authorities were not a claim for money payments due under the contract. The court held that a judgment of possession within the meaning of MCL 600.5750 bars a vendor’s claim for money damages for delinquent real estate taxes due and owing under the contract at the time of trial. Cote, 451 Mich at 184. The Cote court did note that some damages, such as a claim for waste or the reasonable rental value of the property during the time that the vendee remained in possession of the property, are recoverable under the statute. Id. at 184 n3.

A judgment for possession of property in summary proceedings does not bar other claims for relief. Claims of unjust enrichment and implied contract need not be joined for fear of being barred by res judicata. JAM Corp v AARO Disposal, Inc, 461 Mich 161, 600 NW2d 617 (1999).

Another problem in summary proceedings actions is recovering the full amount owed for both the judgment and redemption. An action can be brought for any amount past due. However, the plaintiff should always state in the complaint the payments that will accrue during the pendency of the action (monthly, quarterly, or interim principal payments), in the hope that those amounts will be added to the final judgment. MCL 600.5750 does not appear to allow any subsequent amounts that accrue during the redemption period to be added to the judgment for redemption. In other words, the defendant may redeem the property from the forfeiture even though the defendant is still in default for payments that have become due since the date of the judgment. To recoup those payments, the forfeiture proceeding must be reopened. The best you can do is ensure that all amounts owing on the date of judgment are included in the judgment. Some attorneys ask the court to include the payments that accrue during redemption in the judgment and redemption amount. It cannot hurt to ask.

4. Grounds

§22.23   MCL 600.5726 states that a proceeding may be brought for the nonpayment of money due or for any other material breach of the contract. The seller should include in the contract a provision that any breach shall be considered material. Without this language, there can be disagreement whether a particular breach is material. What remedy is available for “nonmaterial” breaches is unclear. Presumably a court will allow money damages for nonmaterial breaches. Of course, regardless of what the contract defines as a material breach, the defendant in the case might argue that the breach was de minimis and that forfeiture should therefore not be permitted based on that breach. Since most forfeiture actions are based on monetary issues, few decisions try to discern what other breaches might constitute a material breach.

There are no grounds for forfeiture under the Summary Proceedings Act unless it is expressly provided for in the contract. No remedy is otherwise granted by statute. If forfeiture is not provided for in the contract, the seller must resort to foreclosure or another remedy such as a breach of contract action or rescission.

5. Forfeiture Notices

§22.24   MCL 600.5728 requires that a notice of forfeiture state the names of the parties to the contract, the date of its signing, the address or legal description of the premises, any past-due amount unpaid under the contract, the dates the payments were due, and any other material breaches of the contract. The notice of forfeiture must give the buyer 15 days after service, or longer if specified in the contract, to cure the default. The notice must be dated and signed by the party seeking to regain possession or by that party’s agent. SCAO form DCH 101 meets the statutory requirements for a notice of forfeiture and is approved by the State Court Administrative Office.

Service of the notice of forfeiture is governed by MCL 600.5730 and MCR 4.202(F). Service may be made by personally serving the buyer or the person holding possession under the buyer; by delivering the notice on the premises to a member of the buyer’s family or household or to an employee of suitable age and discretion and requesting that it be delivered to the buyer or the person holding possession under the buyer; or by mailing it first-class to the last known address of the buyer or the person holding possession under the buyer. If the notice of forfeiture is mailed, the date of service is the next regular day for the delivery of mail after the day that the letter is mailed. The statute also provides for notice by publication if service cannot be achieved by one of the preceding methods.

6. Necessary Parties

§22.25   The statute calls for service of the complaint only on the party in possession under the land contract. MCL 600.5730. However, MCR 4.202(C) lists other necessary parties: the buyer named in the contract, any person known to claim an interest in the premises under the contract, and any person in possession of the premises who has not been released from liability. Before bringing a summary proceedings action, you should undertake a title search to determine who might claim an interest in the premises under the land contract. If necessary parties are left out of the proceeding, the forfeiture is not effective against them. If the IRS claims an interest in the premises through a tax lien, a forfeiture proceeding extinguishes the federal tax lien only if the IRS has received notice of the proceeding as required by IRC 7425(a) and the attendant regulations. See §22.49.

7. Summons and Answers

§22.26   Requirements for the contents of a summons for a summary proceedings action are stated in MCL 600.5735 and MCR 4.202(E). See SCAO form DC 104. The court must issue the summons and then arrange for its service by the court officer or through another authorized method. Any legally competent adult who is not a party to the action may serve the summons and the complaint. MCL 600.8321; MCR 2.103(A).

The summons must order the buyer to trial within 30 days of the date of issuance and must be served no less than 10 days before trial. MCL 600.5735(2). This section of the Summary Proceedings Act embodies the essence of summary proceedings: a prompt hearing so that the process of regaining possession may be initiated quickly if the seller’s claims are valid. If service is not made in a timely manner, additional summonses are issued at the plaintiff’s request. Under MCL 600.5735(6), proceedings must be held within 7 days of the defendant’s appearance; they may not be adjourned beyond that time except by stipulation of the parties. Unfortunately, most courts are hard-pressed to comply with this short time span, and there is little you can do to force a court onto the required timetable except to point out that the statute provides for an expedited hearing. You need to decide whether such badgering will further your case or only irritate the judge. Local court rules can amend the time frame established by the statute. MCL 600.5735(4). Check the local court rules for any special provisions for summary proceedings actions.

The brief time period within which the buyer must appear and respond to the complaint can result in an awkward situation. You may find yourself heading off for the initial hearing unaware of how your opponent will respond. Many defendants appear at the initial hearing only to demand a jury trial and request additional time to file an answer. Such an action is not in compliance with the summons. At a minimum, you should contend that the summons compels the defendant to appear and to state why eviction should not proceed and to bring receipts and other papers supporting the defendant’s position. If the defendant comes unprepared, you should request a summary judgment at that hearing based on failure to raise a defense. If the defendant raises other claims unrelated to the issue of possession, you should ask the court for a partial summary judgment on the issue of possession so that the redemption period may begin to run and the court may join the other claims and schedule a trial on them.

The answer must meet all general requirements for pleadings. MCR 4.202(H)(1). Since the defendant is ordered to appear and answer at the initial hearing, it appears that a written or oral answer must be presented at that time. If the defendant does not appear at the initial hearing, the court may enter a default. MCR 4.202(H)(2).

8. Jury Trials

§22.27   MCL 600.5738 permits either party to demand a jury trial. The demand must be filed in compliance with the district court rules. It is usually the buyer-defendant who demands a jury trial, sometimes as a delaying tactic to pressure the seller-plaintiff into settling the matter. This tactic can be effective if the court’s trial calendar will not permit a jury trial for an extended period of time.

9. Joinder of Claims and Counterclaims

§22.28   Joinder of claims and counterclaims are provided for under MCL 600.5739 and MCR 4.202(I). The statute allows joinder of a claim or counterclaim for money damages attributable to wrongful entry, detainer, or possession; breach of the underlying contract; waste; or malicious destruction of the premises. A party who fails to raise as a counterclaim a claim associated with the sale that could be raised in the summary proceedings action is barred, by res judicata, from raising that claim in a separate action. Sprague v Buhagiar, 213 Mich App 310, 539 NW2d 587 (1995) (fraud and misrepresentation claims barred in subsequent action). Although the claims may be joined, the statute provides for a separate disposition of the claim for possession, allowing the court to bifurcate the issues. Thus, a possession claim may proceed as a summary matter while the other claims and counterclaims proceed on the court’s regular docket. Although broad joinder is permitted, no claims or counterclaims seeking judgments in excess of the court’s jurisdictional limit of $25,000 are permitted. If such a claim or counterclaim arises, it must be removed to circuit court. The summary proceedings can remain in district court. Indeed, it can be argued that the circuit courts have no jurisdiction over summary proceedings since those matters are directed solely to the district courts. See §22.21.

MCR 4.202(I) has several seemingly contradictory provisions concerning joinder of claims. The court rule requires that money claims or counterclaims be separately stated in the complaint or counterclaim and also allows claims or counterclaims for equitable relief to be joined. MCR 4.202(I)(1). MCR 4.202(I)(2) permits certain district courts with jurisdictional populations of more than 1,000,000 to try issues other than possession separately. However, MCR 4.202(I)(3) states that if the counterclaim “will affect the amount the defendant must pay to prevent the issuance of a writ of restitution, the counterclaim must be tried at the same time as the claim for possession.” MCR 4.202(I)(4) states that if the money claim or counterclaim exceeds the court’s jurisdiction, it must be removed to circuit court. Thus, if a counterclaim must be tried separately in the circuit court and the counterclaim affects the redemption amount, the summary proceedings must await the completion of a separate (or at best concurrent) circuit court trial on the counterclaim. Although such a situation is probably rare, it is not beyond the realm of possibility. To avoid this problem, the land contract must state that the covenant calling for payments under the land contract is independent of all other covenants and that no offset is permitted.

10. Judgments

§22.29   Summary proceedings judgments are governed by MCL 600.5741 and MCR 4.202(J). See SCAO form DC 106. If the seller is found to be entitled to possession because of the buyer’s nonpayment of money, the fact-finder must determine the amount in arrears at the time of trial, and that amount must be stated in the judgment for possession. The statement of the amount does not entitle the seller to collect it; it is only to establish the amount owed to preclude the issuance of an order of eviction. The amount may include an award of costs, enforceable against the defendant as a civil money judgment.

Pursuant to MCR 4.202(J), the judgment must also state under what conditions an order of eviction will issue and that any appeal, postjudgment motion, or challenge of judgment must be filed within 10 days. The court must mail the judgment to the parties. The time period for applying for the writ of restitution begins when the judgment is mailed. This rule a[/quote]

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Topic History of: Real Estate Dispute
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Jim C.

I found the following, hope it helps:

There are a variety of remedies available to rectify disputes in real estate sales transactions. However, no one is ever eager to spend time and money litigating a transaction. The most common response to a transaction that fails to close, especially in residential sales, is an angry decision to drop the entire matter. On the other hand, commercial transactions are generally viewed from an economic perspective. If the transaction is sufficiently important to the business, the wronged party might seek a remedy. The wronged party is likely to sue only if a recovery is expected that will exceed the cost of litigation.

Counsel’s priority is to close the transaction so that it will not have to be litigated. Although you should attempt to ensure enforceability, the first rule of remedies is to avoid having to use them. The nature of real estate transactions creates a need for precise drafting and predictable results. Usually, the buyer is moving its offices, adding a new location, opening a business, starting or adding to a development, or similar event—any delay, particularly the lengthy and expensive delay of litigation, is likely to greatly disrupt the business schedule and perhaps kill the project. In this modern world, almost everyone views time as money. The time and cost of litigation are the banes of a client. This makes this topic difficult for a real estate attorney whose whole goal is to avoid litigation. As you anticipate a transaction, you need to try to ensure that any agreements that are entered into will not lead to litigation and that any closings that are held will not result in litigation.

Whenever an attorney is drafting an agreement, the potential remedies of the parties must be anticipated. In some instances, those are specifically stated in default provisions that allow remedies ranging from no remedies at all (except termination of the agreement) to any remedies available under Michigan law. If a client has a significant amount invested in events leading up to the transaction, the client may want to recoup its losses if the transaction fails. However, in many instances clients recognize that the cost and time involved in litigation make it an unacceptable remedy. Hence, many agreements are drafted to simply provide for the parties to withdraw if the due diligence or other actions leading to the closing of the transaction are not acceptable to the buyer.

These issues must be anticipated in the drafting of agreements. For example, should the seller make a number of representations and warranties to the buyer that may lead to a claim of liability later or should the seller simply leave it to the buyer’s due diligence to determine the state of the property being sold? Will the buyer want to purchase a property where certain minimal warranties and representations are not made? The issue has a different perspective after closing. If the buyer has relied on some number of documents from the seller and they turn out to be in error, the buyer will want to know that it received a representation as to the correctness and completeness of the documents, so that it can consider a claim against the seller. If the seller refuses to make any representations and warranties, then of course the buyer must ensure that it investigates the due diligence issues that much more thoroughly. The common law embodies the concept of caveat emptor—“buyer beware.” Every buyer must ensure that the property is in an acceptable condition when closing the transaction.

With the complications of many modern-day transactions, buyers often try to enhance due diligence investigations with representations and warranties from the seller. The seller, not wanting to give cause to possible future litigation, may be leery of making those representations and warranties. This is true even though the representation may seem to be a nondescript matter. Given today’s litigious world, many statements that seem innocent have a way of being construed in a manner that was not intended or of being misconstrued to support a claim. Hence, there are transactions where the seller, selling a multi-million-dollar piece of property, will declare that it is only giving a quitclaim deed, not a warranty deed, noting that it is buying an owner’s policy of title insurance for the buyer and that the buyer will get its representation of the warranty from the title insurance company.

These different positions must be considered when preparing transaction documents and undertaking the other actions leading up to a closing. Both the attorney and the client need to keep the concept of remedies in the back of their minds. This includes considering the remedies they may wish to pursue, and the evidence that will be needed to support a claim if the transaction fails in one manner or another. As much as that is the position that every real estate attorney wants to avoid, the attorney must also contemplate those issues leading up to the closing of the transaction.

Transactions usually fail for one of two reasons: (I) one of the parties fails or refuses to complete the transaction or (ii) there is a failure of consideration. In the first case, the remedy is a claim for specific performance or damages. If there is a failure of consideration, the available remedies are specific performance, damages, rescission, or reformation. Each of these remedies has evolved under common law and their application greatly varies depending on the facts of the individual case. Statutory remedies, such as land contract forfeiture or foreclosure, mortgage foreclosure, or bankruptcy, may also be available.

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II. Procedure

A. Jurisdiction and Venue

§22.2 The circuit courts have general original jurisdiction over real estate actions, MCL 600.605, and have express jurisdiction over foreclosure actions, MCL 600.3101, and questions involving title to land, MCL 600.2932.

If the relief desired is damages, the district courts have exclusive jurisdiction in actions in which the amount in question does not exceed $25,000. MCL 600.8301. They are denied jurisdiction in equitable matters except where the equitable issue is adjunct to a summary proceedings case. MCL 600.8315. The district court also has jurisdiction and power under MCL 600.8315 to make any order proper to effectuate the court’s jurisdiction and judgments. District courts are specifically given jurisdiction over summary proceedings to recover possession, MCL 600.5704, and may also rule on any matters joined to those actions. These additional matters may include claims or counterclaims that do not exceed $25,000, MCL 600.5739, and equitable defenses raising claims to title, foreclosure, partition, or nuisance. MCL 600.8302; see Bruwer v Oaks (On Remand), 218 Mich App 392, 554 NW2d 345 (1996) (district court has jurisdiction to enter a judgment on an appeal bond given to stay execution of a judgment in a summary proceeding for forfeiture of a land contract under MCL 600.8302(3), even though the amount of the judgment against the bond exceeds the jurisdictional limit under MCL 600.8301(1)).

Actions concerning realty must be brought in the county where the real estate is located. MCL 600.1605.

B. Necessary Parties

§22.3 As with any litigation, any person whose interests will be affected by the judgment must be included in the suit. For example, if title to real property is at issue, all parties whose interests the plaintiff wishes to be subject to the court’s decision, such as subsequent or prior lienholders, must be named. In some actions, the court rules mandate that all parties with an interest be brought into the action. For example, MCR 4.202(C) mandates that any party with an interest in property being forfeited under a land contract be named as a necessary party. The land contract seller cannot sue only the land contract buyer and expect to have all other issues fully resolved. A title search might be needed to identify all interested persons and in extended litigation, the search might need to be updated during the action to determine whether any subsequent interests such as tax liens have arisen that would have priority.

C. Lis Pendens

§22.4 What's New in this Section At the time of filing any action that might affect title to real estate, a notice of lis pendens should be recorded with the register of deeds. MCL 600.2701 et seq. The litigation, however, must directly involve the property: the judgment sought must affect title, possession, or an interest in the property. Ruby & Assocs, PC v Shore Fin Servs, No 266312, 2007 Mich App LEXIS 1666 (Apr 19, 2007) (because claimed fraudulent transfer was of embezzled funds, not the property itself, plaintiff’s lis pendens had no effect on subsequently acquired interests). The notice should be recorded with the register of deeds in the county where the property is located and should have a copy of the complaint attached to it. The lis pendens expires after three years unless it is renewed. MCL 600.2715. It creates a cloud on title and gives notice to potential buyers, mortgagees, and others that title to the premises is in dispute and that they are taking a risk if they purchase or take some interest in the premises without accounting for the claim in litigation. The statutes governing recording of a notice of lis pendens allow the complaint to be filed with the notice before service of the summons. Sixty days are allowed between the date the notice of lis pendens is filed and the date the summons must be served on the defendant. MCL 600.2701.

The recording requirements for filing a claim of lien establish penalties for persons who encumber property without lawful cause and with the intent to harass or intimidate a landowner. MCL 600.2907a. The mere act of recording a levy, attachment, lien, lis pendens, sheriff’s certificate, marshal’s certificate, or other document of encumbrance is no longer sufficient to perfect the encumbrance. Documentation supporting the claim of lien must be filed with the lis pendens along with proof that the landowner was served with the notice of the claim of lien before filing. A court must find that the following accompanied the document when it was presented to the register of deeds for a filing to properly perfect a claim of lien:

(a) A full and fair accounting of the facts that support recording of the document of encumbrance and supporting documentation, as available.

(b) Proof of service that actual notice has been given to the recorded landowner of the land to which the document of encumbrance applies.

MCL 565.25(2). Subsequent owners who purchase the property after the recording of the notice of lis pendens or subsequent encumbrances are subject to the lis pendens only if the lien was properly perfected. MCL 565.25(4).

Certain encumbrances do not need to comply with the requirements that a claim of lien must be filed with supporting documentation and proof of service. These include property tax liens; encumbrances authorized by state statute or federal statute; consensual agreements to encumber real property between the owner and the lienholder such as mortgages, loan agreements, land contracts, or other consensual or contractual agreements; encumbrances authorized in a final court order; and any liens, levies, attachments, lis pendens, sheriff’s certificates, marshal’s certificates, or other document of encumbrance by a commercial lending institution. MCL 565.25(3).

A person who encumbers property without properly perfecting the lien as provided in the statute “without lawful cause with the intent to harass or intimidate any person” is liable to the property owner for the costs incurred in bringing an action to remove the lien, including actual attorney fees, all damages the owner may have sustained as a result of the filing of the encumbrance, and exemplary damages. MCL 565.25(5), 600.2907a. Filing a lien in violation of MCL 600.2907a is a felony punishable by imprisonment for not more than three years, a fine of not more than $5,000, or both.

Filing a lis pendens without a valid claim of lien with intent to cause injury may also result in an action by the landowner for slander of title. See §22.16 for a further discussion.

D. Statute of Frauds

§22.5 The statute of frauds is a common-law rule based on the presumption that certain important matters should be put in writing. Failure to put such matters in writing was considered a fraud, precluding enforcement of unwritten promises. The rule is now codified at MCL 566.108 and .132. In general, real estate transactions and agreements to pay real estate commissions must be in writing. See §4.2.

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III. General Real Property Remedies

A. Specific Performance

§22.6 Since each piece of real estate is treated as unique under common law, an agreement for its transfer is subject to specific performance. Kent v Bell, 374 Mich 646, 132 NW2d 601 (1965). No court rule or statute governs specific performance actions. These actions are brought under the court’s equitable jurisdiction, subject to the requirements of equity and susceptible to the usual defenses for equitable actions, including unclean hands, waiver, laches, estoppel, and inequitable conduct by the plaintiff. The plaintiff should avoid conduct that could give rise to these defenses. No payments should be made or accepted from the other party without considering the implications, all correspondence should be answered promptly, and the party seeking specific performance should not delay in bringing suit. Above all, the complaint and relief requested should be specific, and the relief requested should be fair. Specify what action the court is being asked in order to remedy the unjust situation. Do not make the court have to ask what relief is sought.

Suits for specific performance are essentially actions for breach of contract and are usually brought by buyers who claim that damages at law are inadequate and want to force the seller to comply with the purchase agreement. In such a case, the action should include any successors or assigns of the seller so that the resulting judgment can compel anyone with an interest in the real property to participate to allow completion of the sale if the plaintiff wins the litigation. See Jefferson v Wagman, 261 Mich 678, 274 NW 92 (1933). If another buyer has acquired the property from the seller in good faith, specific performance is no longer available, and the plaintiff must seek damages. A good-faith buyer would not have had knowledge of the plaintiff’s claim, so the court may not order the buyer to turn over the property. See Soloman v Western Hills Dev Co, 110 Mich App 257, 312 NW2d 428 (1981).

While a buyer’s suit for specific performance might appear simple, complications often develop. Often, the seller raises a contingency from the purchase agreement as a defense. For example, in Todd v Ratz, 313 Mich 111, 20 NW2d 830 (1945), the purchase agreement called for delivery of a warranty deed conveying marketable title and provided for refunding the earnest money if the title was not clear. Although the defects discovered in the title were corrected, the seller sought to avoid the conveyance and tried to return the earnest money under the provisions of the purchase agreement. The court found that the seller had an obligation to proceed under the purchase agreement and could not avoid the purchase agreement by returning the earnest money in those circumstances. Similarly, in Reinink v Van Loozenoord, 370 Mich 121, 121 NW2d 689 (1963), the transaction was conditioned on the buyer’s ability to obtain an FHA loan. The seller argued that since the loan had not been granted, the action could not proceed. The court found that the buyer would have been granted the loan if the seller had cooperated, and it decreed specific performance as the remedy. However, to receive specific performance, plaintiff had to show that she was in a position to perform under the purchase agreement. Derosia v Austin, 115 Mich App 647, 321 NW2d 760 (1982). Whether a binding contract exists is a question for the court, not a jury, in an equitable claim for specific pe

GPA:	out of 4.0
LSAT:	out of 180