ANTON, SOWERBY & ASSOCIATES, INC v MR. C‘S LAKE ORION, LLC
Docket Nos. 317935 and 321827
Court of Appeals of Michigan
Submitted March 3, 2015. Decided March 12, 2015.
309 Mich. App. 535
Martha D. Anderson, J.
Plaintiff Anton, Sowerby & Associates, Inc., a commercial real estate brokerage firm, brought an action in the Oakland Circuit Court against Mr. C‘s Lake Orion, LLC (Mr. C‘s), and Flagstar Bank, FSB, to foreclose its broker‘s lien on property purchased by Mr. C‘s with a mortgage from Flagstar Bank.
The Court of Appeals held:
1. The trial court correctly concluded that plaintiff was required to release the lien it held on Mr. C‘s property and that plaintiff could not recover its commission through the present action. According to
2. The trial court properly granted Mr. C‘s motion for summary disposition because plaintiff‘s refusal to release the lien on Mr. C‘s property resulted in a cloud on the title and substantiated the elements of slander of title. Slander of title, under either the common law or
3. The trial court did not abuse its discretion when it refused to permit plaintiff to amend its complaint to add the receiver as a party defendant. MCR 2.118(A)(2) provides that a party may amend a pleading only by leave of the court or by the written consent of the adverse party and that leave shall be freely given when justice so requires. Under MCR 2.118(A)(4), amendments must be submitted in writing. The court may deny a motion to amend because of (1) undue delay, (2) bad faith or a dilatory motive by the moving party, (3) repeated failures to cure deficiencies in previously allowed amendments, (4) undue prejudice to the opposing party, or (5) futility. Plaintiff cursorily claimed that the amount of money held in escrow had not been properly calculated, but plaintiff did not articulate its claim against the receiver with adequate specificity. Moreover, plaintiff failed to submit the proposed amendment in writing.
4. The trial court properly awarded Mr. C‘s special damages for attorney fees and costs expended both before and after the court‘s order granting summary disposition to Mr. C‘s and removing the lien from Mr. C‘s property.
Affirmed.
1. PROPERTY — COMMERCIAL REAL ESTATE — COMMERCIAL REAL ESTATE BROKER‘S LIEN ACT — COLLECTING COMMISSIONS.
A commercial real estate broker is entitled to collect its commission under the Commercial Real Estate Broker‘s Lien Act,
2. PROPERTY — SLANDER OF TITLE.
Both the common law and
3. PLEADING — AMENDMENT OF COMPLAINT.
Under MCR 2.118(A)(2), a party may amend a pleading only by leave of the court or written consent of the adverse party, and leave should be freely given when justice requires it; a proposed amendment must be submitted in writing; a party‘s motion to amend may be denied when (1) an amendment would result in undue delay, (2) the party‘s motive for an amendment was in bad faith or for dilatory purposes, (3) the party repeatedly failed to cure deficiencies in amendments previously allowed, (4) an amendment would cause undue prejudice to the opposing party, or (5) an
Schienke, Staugaard & Hearsch (by Francis J. Hearsch, Jr.) for Anton, Sowerby & Associates, Inc.
The Zalewski Law Firm (by Paul J. Zalewski) for Mr. C‘s Lake Orion, LLC.
Richard E. Segal & Associates, PC (by Richard E. Segal and Todd W. Grant), for Flagstar Bank, FSB.
Before: GLEICHER, P.J., and CAVANAGH and FORT HOOD, JJ.
PER CURIAM. The Commercial Real Estate Broker‘s Lien Act,
Plaintiff sought relief under the act but failed to name as a party defendant the seller who agreed to the listing agreement. As a result, plaintiff‘s challenges to the commission amount (and thereby the escrow account) could not be resolved by the circuit court. And plaintiff never clearly stated any objection that could be raised against the seller. Accordingly, the circuit court‘s summary dismissal of plaintiff‘s claims under the act and the denial of its motion to amend the complaint are supported by the record. The circuit court also properly granted summary disposition in the buyer‘s favor on its slander-of-title action. Moreover, plaintiff‘s legal challenges to the special damages awarded to the buyer lack merit. We therefore affirm.
Plaintiff, Anton, Sowerby & Associates, Inc., is a licensed commercial real estate brokerage firm. Plaintiff entered a listing agreement with nonparty GAM Properties, L.L.C., providing plaintiff the exclusive rights to “sell, lease or exchange” the property at 720 S. Lapeer Road in Lake Orion. The contract promised plaintiff 5% to 6% of the ultimate sale or lease price depending on certain factors. Plaintiff located a potential buyer for the property — defendant Mr. C‘s Lake Orion, LLC — and introduced Mr. C‘s agent to GAM. Plaintiff alleges that Mr. C‘s and GAM thereafter engaged in secret negotiations in an attempt to avoid paying plaintiff‘s commission.
During this period of secret negotiations, GAM defaulted on its mortgage and its lender secured the appointment of a receiver to continue the sale of the subject property. Mr. C‘s ultimately agreed to lease the property for $5,000 monthly with an option to buy. Mr. C‘s exercised its purchase option almost immediately and promised to pay $1.2 million for the property with a mortgage loan through defendant Flagstar Bank, and the receiver offered to settle plaintiff‘s commission dispute. A resolution was not reached, however, and plaintiff recorded a broker‘s lien of $60,000 (5% of the purchase price) against the property pursuant to the Michigan Commercial Real Estate Broker‘s Lien Act (CREBLA),
In its complaint, plaintiff asserted that it had “requested documentation concerning the purchase price for the Property paid by Mr. C‘s.... That information has not been forthcoming. Therefore, the exact amount of the Lien will abide discovery of that information in this litigation.” Plaintiff contended that it wanted to foreclose upon its lien. Notably, plaintiff filed suit against Mr. C‘s and Flagstar, but not GAM or its receiver. Mr. C‘s, in turn, filed a counterclaim to quiet title in the property and accusing plaintiff of slandering its title.
Mr. C‘s subsequently sought summary dismissal of plaintiff‘s action and judgment in its favor on the counterclaim, and requested special damages. Mr. C‘s contended that the plain language of the CREBLA required plaintiff to release its lien upon the creation of the escrow account and that no exception existed. Plaintiff retorted that its claim actually sounded in breach of contract regarding the underlying exclusive listing agreement and therefore the CREBLA did not control its duty to release the lien. In response, Mr. C‘s emphasized that plaintiff had not joined the proper parties for a breach-of-contract action; plaintiff‘s contract was with GAM alone and yet plaintiff did not name that entity as a defendant. Plaintiff pointed to GAM‘s financial difficulties and the receivership to support its decision to not include GAM as a party defendant.
II. SUMMARY DISPOSITION IN RELATION TO THE ESCROW ACCOUNT
Plaintiff contends that the circuit court erred in concluding that the escrow agreement between Mr. C‘s and the receiver discharged plaintiff‘s lien. Accordingly, plaintiff continues, the court erred in summarily dismissing plaintiff‘s claim for recovery. We review de novo a lower court‘s summary disposition ruling. Rambin v. Allstate Ins. Co., 495 Mich. 316, 325; 852 NW2d 34 (2014). The propriety of the circuit court‘s ruling centers on its interpretation and application of the CREBLA, a question of law that we review de novo. Tomecek v. Bavas, 482 Mich. 484, 490; 759 NW2d 178 (2008). When interpreting a statute, a court‘s objective is to discern and give effect to the Legislature‘s intent based on the statute‘s plain and unambiguous language. Wurtz v. Beecher Metro. Dist., 495 Mich. 242, 250; 848 NW2d 121 (2014).
Historically, real estate brokers had no guarantee of payment of their commissions. Brokers attempting to secure payment by encumbering the property were informed “that equities of those who furnished the money [for the purchase] are far superior to those of the broker.” Biddle v. Biddle, 202 Mich. 160, 166; 168 NW 92 (1918). This was true until the enactment of the CREBLA by 2010 PA 201.
A commercial real estate broker licensed in accordance with Article 25 of the Occupational Code (Real Estate Brokers and Salespersons Act),
(1) If a claim of lien recorded under [
MCL 570.584 ] would otherwise prevent the closing of a transaction involving commercial real estate, the parties to the transaction shall, subject to subsection (2),1 establish an escrow account from the proceeds of the transaction in an amount sufficient to satisfy the lien. A buyer or seller shall not refuse to close the transaction because of the requirement of establishing an escrow account under this subsection. The money shall remain in the escrow account until the rights to the money have been determined by a written agreement of the parties, a judgment or order by a court of competent jurisdiction, or any other method agreeable to the parties.
*
* *
(3) If an amount sufficient to satisfy a commercial real estate broker‘s lien is escrowed under subsection (1), the lien is extinguished and the real estate broker shall provide a release of lien that meets the requirements of ... MCL 565.201 to565.203 ... [.]
Plaintiff argues that Mr. C‘s and Flagstar were not entitled to summary disposition because Mr. C‘s failed to comply with
Although plaintiff contends that the real estate broker is a party to the sales transaction, a real estate broker‘s right to a commission arises from a separate contractual agreement between the broker and the seller. The parties to the sale are the buyer and the seller. Moreover,
That the broker‘s presence is not required to negotiate the escrow amount is further supported by
Mr. C‘s and the receiver looked to plaintiff‘s recorded lien to determine the amount to place into escrow. Plaintiff listed the amount of its interest as $60,000 in the lien. Mr. C‘s and the receiver chose to provide a buffer and placed $75,000 in escrow. Mr. C‘s and the receiver complied with the CREBLA by escrowing the amount cited by plaintiff.
Accordingly, the circuit court properly granted summary disposition in favor of defendants. The lien was extinguished under the statute, and the court was required to remove it.
III. SLANDER OF TITLE
Plaintiff contends that in rendering its summary disposition ruling, the circuit court erroneously determined that the refusal to discharge the lien constituted slander of title. Claims for slander of title were recognized at common law “as a remedy for malicious publication of false statements that disparage a plaintiff‘s right in property.” B & B Investment Group v. Gitler, 229 Mich. App. 1, 8; 581 NW2d 17 (1998). “In Michigan, slander of title claims have both a common-law and statutory basis.” Id. To establish either, a claimant must show falsity, malice, and special damages. Id.; see also
In Wells Fargo Bank v. Country Place Condo Ass‘n, 304 Mich. App. 582, 596; 848 NW2d 425 (2014), this Court provided the following guidance regarding the malice element:
The crucial element is malice. A slander of title claimant must show some act of express malice, which implies a desire or intention to injure. Malice may not be inferred merely from the filing of an invalid lien; the plaintiff must show that the defendant knowingly filed an invalid lien with the intent to cause the plaintiff injury. A plaintiff may not maintain a slander of title claim if the defendant‘s claim under the mortgage or lien was asserted in good faith upon probable cause or was prompted by a reasonable belief that the defendant had rights in the real estate in question ... [Quotation marks, citations, and alterations omitted.]
Given this guidance, the malice necessary for a slander-of-title action does not exist when the offending party‘s actions rest on a rational, yet incorrect, interpretation of law. See id. at 598.
The claimant also must show that the alleged slander caused special damages. B & B Investment, 229 Mich. App. at 8. “[S]pecial damages ... include litigation costs, impairment of vendibility, and loss of rent or interest.” Id. at 9 (citations omitted). Attorney fees may be awarded pursuant to
In B & B Investment, 229 Mich. App. at 4-5, the plaintiff and the defendant entered into a business relationship to purchase real estate from mortgage foreclosure and sheriff‘s sales. During their relationship, a dispute arose regarding the disbursement of funds involving two properties unrelated to the litigation. Id. at 5. Unable to resolve their differences, the defendant filed claims of interest against seven other properties owned by the plaintiff. Id. The district court concluded that the defendant had committed slander of title with malicious intent because she held no cognizable interest in those seven properties, knew it was improper to file such claims, and was advised not to file them. Id. at 5. In Sullivan v. Thomas Org., PC, 88 Mich. App. 77, 80; 276 NW2d 522 (1979), the plaintiffs alleged that the defendants had disparaged title by inappropriately filing a mechanic‘s lien out of revenge. This Court held that “the filing of an invalid lien may be a falsehood, even if the matter contained in the lien is correct.” Id. at 83.
Here, the circuit court did not err by holding that the elements of slander of title were established as a matter of law.
But conditions requiring release of the lien also existed.
Additionally,
In light of
IV. COMPLAINT AMENDMENT
Plaintiff also challenges the circuit court‘s denial of its motion to amend its complaint to add GAM‘s receiver as a party defendant. Under the CREBLA, a real estate broker “may bring an action to enforce the lien,” but must “name as defendants all persons that, at the time the action is filed, have an interest in the commercial real estate ... that would be divested or impaired by the foreclosure of the lien.”
MCR 2.118(A)(2) provides, “[A] party may amend a pleading only by leave of the court” and “[l]eave shall be freely given when justice so requires.” Moreover, MCR 2.116(I)(5) demands that a court allow a disappointed plaintiff the opportunity to amend its complaint after summary disposition is granted under MCR 2.116(C)(8), (9), or (10), unless the evidence reveals that amendment would not be justified. Weymers v. Khera, 454 Mich. 639, 658; 563 NW2d 647 (1997). And pursuant to MCR 2.206(A)(2)(b), “[a]ll persons may be joined in one action as defendants ... if their presence in the action will promote the convenient administration of justice.” A motion to amend may be denied because of undue delay, bad faith or dilatory motive by the moving party, repeated failures to cure deficiencies in previously allowed
Here, plaintiff sought to add the receiver as a party defendant within the period of limitations governing its lien claim. See
V. SPECIAL DAMAGES
A. BACKGROUND
After dismissing plaintiff‘s claim and concluding that Mr. C‘s had proven its slander-of-title count, the circuit court ordered the parties to proceed toward establishing Mr. C‘s “special damages.” Mr. C‘s filed a motion for recompense of “all costs and attorney fees incurred” along with interest in relation to the slander claim. Mr. C‘s also requested costs and sanctions in connection with plaintiff‘s continued failure to release its lien in contravention of court orders. Plaintiff contended that Mr. C‘s motion was not the proper vehicle for the special damages request, contending that a damages trial had to be conducted. Plaintiff further contended that it could not be held in contempt because no court order specifically required it to release its broker‘s lien.
Following an October 2013 show cause hearing, the court ordered plaintiff to file a lien release. It also scheduled an evidentiary hearing to calculate Mr. C‘s special damages. Before the hearing, the parties submitted briefs disputing the legal scope of the special-damages award. Specifically, plaintiff argued that Mr. C‘s could collect only those costs necessary to remove the cloud on the title, a result achieved by the May 29, 2013 summary disposition judgment. Therefore, any costs accumulated in the assessment and collection of the damages award would not qualify. Plaintiff challenged any attorney-fee award to Flagstar. And plaintiff contended that Mr. C‘s was not permitted to rely on the slander-of-title statute as it raised a solely common-law claim. Despite the parties’ divergent opinions on the legal scope of the damages award, plaintiff did not dispute the reasonableness or accuracy of Mr. C‘s documents supporting the various elements that might be incorporated into the award.
The circuit court rejected plaintiff‘s challenges and awarded Mr. C‘s the full amount of its litigation costs. This included costs for which Mr. C‘s had indemnified Flagstar. The special-damages award totaled more than $20,000.
B. ANALYSIS
Plaintiff now reiterates its claims that
Damages are “compensation which the law authorizes for an injury inflicted.” Strong v. Neidermeier, 230 Mich. 117, 122; 202 NW 938 (1925). General damages are those that the law implies or that presumably accrue from the alleged wrong. Kratze v. Indep. Order of Oddfellows, 442 Mich. 136, 148; 500 NW2d 115 (1993). Special damages arise from the events that transpired, not those implied by law, and may be awarded “if specifically pleaded and proved.” Id. at 148-149. Michigan follows the “American rule,” which prohibits an award of attorney fees unless a statute, rule, or contractual provision expressly provides to the contrary. Watkins v. Manchester, 220 Mich. App. 337, 342; 559 NW2d 81 (1996).
Plaintiff contends that the circuit court erred by awarding costs and attorney fees because Mr. C‘s did not plead the statutory cause of action. Indeed, Mr. C‘s counterclaim did not expressly identify whether it was premised on the statute or on the common law. However, in Mr. C‘s motion for summary disposition, responses to plaintiff‘s motions for relief from judgment and to amend the complaint, motion to strike interrogatories, and the motion for an order to show cause, Mr. C‘s alleged that plaintiff‘s actions were wrongful and frivolous and reflected continued violations of court orders. Mr. C‘s had also requested special damages, including costs and attorney fees. Thus, plaintiff was on notice that Mr. C‘s was requesting costs and attorney fees permitted by statute even absent a direct citation.
Plaintiff also alleged that costs and attorney fees could only be awarded for the period during which the cloud remained on the title, i.e., before the summary disposition judgment entered. However, as noted, special damages in a slander-of-title action include litigation costs, such as attorney fees, and are not limited to the period before the title cloud is removed. B & B Investment, 229 Mich. App. at 11 (“The statute contemplates recovery of attorney fees ... expended in actions for slander of title, not simply to quiet title.“).
Lastly, plaintiff contends that the circuit court erroneously awarded Mr. C‘s recovery of costs and attorney fees remitted to Flagstar because it constituted a “double dip.” The court did not rule on whether the legal services provided to Mr. C‘s and Flagstar were duplicative. However, plaintiff stipulated to the legal cost assessments without citing any potentially dupli-cative services. The circuit court correctly noted that Mr. C‘s mortgage documents required it to indemnify Flagstar for the costs incurred in this action, bringing those costs into Mr. C‘s special-damages claim. Plaintiff does not challenge the court‘s interpretation of those contractual agreements, thereby precluding relief. See Derderian v. Genesys Health Care Sys., 263 Mich. App. 364, 388; 689 NW2d 145 (2004).
We affirm.
GLEICHER, P.J., and CAVANAGH and FORT HOOD, JJ., concurred.
Notes
No person shall use the privilege of filing notices hereunder for the purpose of slandering the title to land, and in any action brought for the purpose of quieting title to land, if the court shall find that any person has filed a claim for that reason only, he shall award the plaintiff all the costs of such action, including such attorney fees as the court may allow to the plaintiff, and in addition, shall decree that the defendant asserting such claim shall pay to plaintiff all damages that plaintiff may have sustained as the result of such notice of claim having been so filed for record.