Can IV Packard Square LLC v. Packard Square LLC
350519
Mich. Ct. App.Jun 24, 2021Background
- Can IV (lender) made a construction loan to Packard Square, LLC (borrower) for a mixed‑use development; Packard Square defaulted on construction milestones and liens arose.
- Trial court appointed a receiver; the receiver was authorized to borrow and obtain a mortgage to complete construction under the Construction Lien Act and the mortgage/appointment order.
- The receiver obtained loans and supplemental/amended budgets to continue work; disputes arose over the receiver’s authority, budgets, and document production.
- Plaintiff foreclosed, credit‑bid $75 million at sheriff’s sale, and purchased the property; Packard Square failed to redeem and its rights in the property were extinguished.
- The trial court granted summary disposition to plaintiff on Packard Square’s counterclaims, approved receiver settlements/discharges, and denied various discovery and post‑sale challenges.
- Packard Square appealed the approval of receiver loans/budgets, discovery rulings, receiver control/immunity, summary disposition on counterclaims, and confirmation of the sheriff’s sale; the Court of Appeals affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Validity/approval of receiver loans and budgets | Receiver loans and budgets were authorized by mortgage §9.3, MCL 570.1123(1), and the court’s appointment order; procedures complied with court rules. | Receiver loans/budgets were unauthorized, not properly noticed or documented to defendant. | Affirmed: approvals were authorized and, even if procedural rule issues existed, defendant showed no prejudice; moot in light of foreclosure. |
| Approval of amended receiver loan and amended budget | Adequate evidentiary support (affidavit, revised budgets, bids) showed necessity and value‑added per MCL 570.1123(1). | Insufficient documentation; cost‑overrun figures unreliable; inadequate time to respond. | Affirmed: trial court did not abuse discretion; issues also moot after foreclosure. |
| Discovery rulings (subpoenas, receiver records, emails, expert materials) | Court protected third parties and privileged work product; ordered extensive production where appropriate and enforced deadlines. | Quashed subpoenas, limited receiver records and withheld privileged materials; temporal limits on emails and denial of expert materials were improper. | Affirmed: rulings within discretion; subpoenas overbroad; receiver produced court‑ordered records; expert reports protected as work product; temporal cutoff reasonable; many arguments abandoned for inadequate briefing. |
| Whether receiver controlled borrower’s claims vs. borrower retained control | Receiver had sole control per MCR 2.622(E)(1) and the appointment order; receiver could sue, settle, and control claims related to the property. | Packard argued it retained rights to pursue claims against contractor/subcontractors and bonds. | Affirmed: receiver legitimately controlled claims related to the property; dismissal/settlements appropriate; moot as to relief now. |
| Receiver good faith and immunity/exposure to suit | Receiver acted as arm of the court; no bad faith shown; discharge appropriate and quasi‑judicial immunity applies to court‑integral functions. | Receiver acted in bad faith, overcharged, delayed, joined plaintiff against borrower; immunity inappropriate. | Affirmed: no actionable bad faith pleaded; negligence/business judgment not actionable; issue moot post‑foreclosure. |
| Summary disposition on borrower’s counterclaims (breach of contract, liens, maintenance, milestones, force majeure) | Lender properly exercised contractual remedies after multiple defaults: failure to cure liens, failure to maintain/winterize, missed interim/substantial/final milestones; no valid notices meeting force majeure clause. | Borrower blamed lender for failing to fund; disputed milestone extensions and asserted force majeure notices; alleged lender first breached. | Affirmed: no genuine issue of material fact; borrower defaulted under loan/mortgage; force majeure notice requirements not met; lender not contractually required to fund. |
| Other tort/ equitable counterclaims (lender liability, fiduciary duty, conversion, tortious interference) | These claims fail as a matter of law because no fiduciary relationship arose; alleged failure to disburse funds was contractual, not conversion; lender's conduct had legitimate business justification. | Borrower alleged fiduciary duties, conversion of funds, and improper interference. | Affirmed: claims abandoned or failed on law (no fiduciary duty, no separate property converted, no improper motive shown). |
| Confirmation of sheriff’s sale and credit bid | Sale conformed to foreclosure judgment; plaintiff’s credit bid proper; borrower did not object and failed to preserve arguments; rights extinguished by failure to redeem. | Challenge to sale confirmation, credit bid amount, and liabilities under receiver loan. | Affirmed: challenges unpreserved and/or moot; sale confirmation proper and foreclosure of receiver mortgage was authorized. |
Key Cases Cited
- Band v. Livonia Associates, 176 Mich. App. 95 (Mich. Ct. App.) (receiver is an arm of the court; receiver powers).
- Ypsilanti Charter Twp v. Kircher, 281 Mich. App. 251 (Mich. Ct. App.) (abuse of discretion review for receiver financial decisions).
- El‑Khalil v. Oakwood Healthcare, Inc., 504 Mich. 152 (Mich.) (summary disposition standard under MCR 2.116(C)(10)).
- In re Receiver of Venus Plaza, 228 Mich. App. 357 (Mich. Ct. App.) (must allege bad faith to sue a court‑appointed receiver).
- D’Alessandro Contracting Group, LLC v. Wright, 308 Mich. App. 71 (Mich. Ct. App.) (work‑product doctrine for materials prepared in anticipation of litigation).
- Augustine v. Allstate Ins. Co., 292 Mich. App. 408 (Mich. Ct. App.) (discovery rulings reviewed for abuse of discretion; limits on fishing expeditions).
- Provident Mut. Life Ins. Co. v. Vinton Co., 282 Mich. 84 (Mich.) (broad discretion to confirm foreclosure sale).
- Price v. Kroger Co. of Mich., 284 Mich. App. 496 (Mich. Ct. App.) (court may not make factual findings on summary disposition; clarifies evidentiary scope).