Jackson Land Holding Co LLC v. City of Detroit
328418
| Mich. Ct. App. | Dec 13, 2016Background
- Plaintiff (Jackson Land Holding Co., LLC) purchased Lafayette Towers from the City of Detroit on Nov. 30, 2012, for $5,849,330 and agreed to complete substantial repairs.
- Prior owner defaulted on a 2009 HUD‑insured mortgage; HUD foreclosed under the Multifamily Mortgage Foreclosure Act (MMFA) and conveyed the property to the City, which then conveyed it to plaintiff.
- Sale documents (RFP, HUD–City contract, City–plaintiff contract, title commitment) repeatedly stated "no proration" and disavowed seller liability for liens, and the title exceptions listed 2012 unpaid taxes.
- Plaintiff argued the MMFA and HUD regulations preempt state law and effectively extinguished 2012 property tax liens because foreclosure proceeds left no surplus to pay post‑mortgage liens.
- Defendants argued MMFA governs priority/disbursement of foreclosure proceeds but does not extinguish liens; contract language and tax-tribunal consent judgment provided plaintiff sufficient notice and allocated tax liability to plaintiff.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| 1. Does the MMFA (and HUD regulation) extinguish 2012 property tax liens? | MMFA preemption and federal first‑in‑time rule removed state priority and, because sale proceeds left no surplus, post‑mortgage liens (including 2012 taxes) were extinguished. | MMFA/§3712 governs priority and disbursement only; it does not extinguish liens recorded after the mortgage. State tax liens therefore continue. | MMFA does not extinguish the 2012 tax lien; liens continue under state law. |
| 2. Did plaintiff receive adequate notice of tax liability? | Plaintiff contends lack of explicit language in some documents made tax liability unclear. | RFP, sale contracts, HUD notice, and title exceptions expressly disavowed seller liability and referenced unpaid 2012 taxes; plaintiff also participated in Tax Tribunal proceedings. | Plaintiff received adequate notice of the tax liens. |
| 3. Is the "no proration" contract provision ambiguous? | Plaintiff claims the provision is ambiguous regarding who assumes outstanding taxes. | The provision unambiguously disavows seller liability and states no proration; ordinary meaning governs. | The contract is not ambiguous; it disavows seller liability and places tax risk on buyer. |
| 4. Does MCL 211.2 require proration or impose tax liability on the City? | Plaintiff invokes MCL 211.2 to argue proration or seller liability should apply. | The statutory provisions cited are inapplicable: property was not acquired for public purposes as described and no agreement imposes proration on the City. | MCL 211.2 does not mandate proration or shift tax liability to the City in these circumstances. |
Key Cases Cited
- Bonner v. City of Brighton, 495 Mich. 209 (Mich. 2014) (summary‑disposition standards and evidence view for C(10) motions)
- Sylvan Twp. v. City of Chelsea, 313 Mich. App. 305 (Mich. Ct. App. 2015) (standard of review for summary disposition)
- C D Barnes Assoc., Inc. v. Grand Haven Hideaway Ltd. P’ship, 406 F. Supp. 2d 801 (W.D. Mich. 2005) (discussing MMFA preemption of state lien priority rules)
- Klapp v. United Ins. Group Agency, Inc., 468 Mich. 459 (Mich. 2003) (contract interpretation; ambiguity standards)
- Quality Prods. & Concepts Co. v. Nagel Precision, Inc., 469 Mich. 362 (Mich. 2003) (giving contractual language its plain and ordinary meaning)