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Real Estate Law Update – a Court Case Discussing Laches.

From a lawyer’s perspective, real estate disputes are often messy.

The parties are often driven by emotion. The facts are often complex.

Simply put – it is usually a mess.

2017-04-09 21.33.41

Often the doctrine of laches gets raised in such a lawsuit.

A few years back I wrote a post about the legal (technically, “equitable”) doctr ine of Laches and how laches is an often raised defense in real estate disputes.  

The argument usually goes something like this:

“Hey, Plaintiff! You should have brought your claim sooner! Because you were so late in suing me, there are specific related reasons that make it unjust for the court to hold me responsible!”

A June 2017 Michigan Court of Appeals decision came out, where laches was raised as a defense.

You can check out the case here:   DeGhetto v Beaumont’s, et al. (unpublished) No. 330972 (June 22, 2017).

In this case – the court opined that the facts were “muddled”.  (my interpretation – “a mess”)

But first, as a recap…

 

The Equitable Doctrine of Laches:

 

“Laches is an equitable tool used to remedy the inconvenience resulting from the plaintiff’s delay in asserting a legal right that was practicable to assert.” Public Health Dept v. Rivergate Manor, 452 Mich. 495, 507; 550 NW2d 515 (1996).

As such, “when considering whether a plaintiff is chargeable with laches, [a court] must afford attention to prejudice occasioned by the delay.” Lothian, 414 Mich. at 168. It is the prejudice occasioned by the delay that justifies the application of laches.Dunn v. Minnema, 323 Mich. 687, 696; 36 NW2d 182 (1949) .

 

Stated another way,

“the equitable doctrine of laches bars a claim “when the passage of time combined with a change in condition would make it inequitable to enforce the claim ag

 

ainst the defendant.” Township of Yankee Springs v Fox, 264 Mich App 604, 612; 692 NW2d 728 (2004) (Emphasis added.)

Therefore in deciding on the issue of Laches, a Court will ask two questions:

1. was there a delay in bringing the claim and, if so,

2. did it prejudice the Defendant?

Question: Why is laches relevant to real estate disputes?

Answer: Because many real estate claims are based in “equity” as opposed to “law”-  e.g. –an injunction, specific performance, action for quiet title…

 

The Case of DeGhetto v Beaumonts, et al.

The case involved homeowners and an Association.

The dispute was about the “ongoing viability of restrictive covenants o

 

n plaintiffs’ lots” and the ability of an Association to assess Association dues against Association members.

The Association believed it could enforce deed restrictions – the homeowners disagreed.

Certain disagreements arose, including l.iens recorded on some properties,

and thereafter the Homeowners sued the Association.

The Homeowners asked the Court to declare the deed restrictions were unenforceable, and that the Association had no rights to assess dues.

The Court admitted that the facts are a bit “muddled” – as is often the case in real estate disputes.

One of the Association’s defense was that laches should bar the homeowners’ lawsuit.

“Defendant argues that the doctrine of laches should apply to bar plaintiff’s suit
because there was a change in conditions that made granting relief to plaintiffs inequitable—plaintiffs’ sudden refusal to pay dues, which prejudiced defendant because it had relied on their payments for years.” DeGhetto. Pg 8

 

 

The Court of Appeals disagreed with the Association, holding that:

“Plaintiffs did not delay in filing suit. There was debate over whether the
dues were enforceable and two attorneys rendered different opinions on the matter. Plaintiffs asserted their right by filing suit after defendant indicated that the dues were mandatory as opposed to voluntary. Furthermore, defendant cannot show prejudice.” Id.

 
The Court held that Defendants did not satisfy the requirements to establish Laches.

As the Court held in Charter Township of Lyons v James E. Petty, et al. (unpublished) No. 327686 (Oct. 13, 2016):

“Prejudice is a mandatory element.” and

“The prejudice necessary to establish a laches or estoppel defense cannot be a de minimis harm…” Id. pg 5.

 

Lesson:

Laches is an often raised and valid defense, applicable in many real esta

te disputes. When raising a defense of laches in real estate disputes, Defendant must show Plaintiff delayed in bringing forth the claim.

Showing merely the passage of time is not sufficient.

Further, showing the presence of de minimis harm due to the passage of time is not sufficient.

Significant harm must be shown along with delay.

 

E-mail: Jeshua@dwlawpc.com

http://www.dwlawpc.com

Twitter: @JeshuaTLauka

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Real Estate Law Update: A Discussion on Laches

December 14, 2016 Leave a comment

 

A few years back I wrote a post about the legal doctrine of Laches and how laches relates to real estate disputes.  

Since then, I consistently get a lot of hits on that post – and a lot of searches for “laches in real estate.

Why?

I don’t know. Maybe because its an unfamiliar term, unless you went to law school (even then).

Maybe because it is a valid defense to some real estate related lawsuits. (which it is if you read my previous post).

An October 2016 Michigan court of appeals decision came out on the subject, so I thought I would write about it.

The case:   Charter Township of Lyons v James E. Petty, et al. (unpublished) No. 327686 (Oct. 13, 2016).

But first, as a recap…

The Equitable Doctrine of Laches:

“Laches is an equitable tool used to remedy the inconvenience resulting from the plaintiff’s delay in asserting a legal right that was practicable to assert.” Public Health Dept v. Rivergate Manor, 452 Mich. 495, 507; 550 NW2d 515 (1996).

As such, “when considering whether a plaintiff is chargeable with laches, [a court] must afford attention to prejudice occasioned by the delay.” Lothian, 414 Mich. at 168. It is the prejudice occasioned by the delay that justifies the application of laches.Dunn v. Minnema, 323 Mich. 687, 696; 36 NW2d 182 (1949) .

Therefore in deciding on the issue of Laches, a Court will ask two questions:

1. was there a delay in bringing the claim and, if so,

2. did it prejudice the Defendant?

Question: Why is laches relevant to real estate disputes?

Answer: Because many real estate claims are based in “equity” as opposed to “law”-  e.g. –an injunction, specific performance, action for quiet title…

 

 

Recent Case Discussing Laches: Charter Township of Lyon v Petty, et al.

The Lyons case emphasizes “what type of harm (or prejudice) is a party required to show in order to succeed in a laches defense.”

 

This case was highlight by the Michigan Small Business Association (“SBAM”), since it clarified certain restrictions of small businesses operated on residential lands.

As SBAM reported:

“Two families that operated small businesses out of their homes have to cease their activity on their land because it violated Lyon Township’s zoning ordinance, which had designated the land “residential agricultural.”

 

However, for our purposes, the Pettys, who were operating their businesses on the property, argued that the township’s “decades-long pattern of ignoring their zoning violations, and the investments they made in their business as a result, precluded the township from taking enforcement action…” Id. pg 4.

The Pettys claimed Laches as one of several defenses to the Township’s enforcement of its ordinance.

The Court went through the legal analysis for laches and noted:

“Prejudice is a mandatory element.” and

“The prejudice necessary to establish a laches or estoppel defense cannot be a de minimis harm…” but “…property owners must establish ‘a financial loss…so great as practically to destroy or greatly to decrease the value of the..premises…” Id. pg 5.

 

Lesson:

When utilizing a defense of Laches in real estate disputes, showing merely the passage of time is not sufficient.

Showing the presence of harm due to the passage of time is not sufficient.

Significant harm must be shown.

 

E-mail: Jeshua@dwlawpc.com

http://www.dwlawpc.com

Twitter: @JeshuaTLauka

 

 

 

 

 

Real Estate Investors: A Discussion on Laches

November 10, 2015 2 comments

If you aren’t into real estate investment in Grand Rapids – maybe you should be.

According to an MLIVE article posted last week, Grand Rapids has one of the hottest real estate markets in the country.

As reported by MLIVE:

“For landlords and real estate investors, Grand Rapids is the second best rental market in the Midwest and one of the hottest markets in the U.S., according a study of 75 real estate markets by All Property Management (APM)

Great news!

Now on to some legal stuff…

Laches.

A few years back I wrote a post about the legal doctrine of Laches and how laches relates to real estate disputes.  

Since then, I consistently get a lot of hits on that post – and a lot of searches for “laches in real estate.

Why?

I don’t know. Maybe because its an unfamiliar term, unless you went to law school (even then).

Maybe because it is a valid defense to some real estate related actions. (which it is if you read my previous post).

A recent Michigan court of appeals decision came out on the subject, so I thought I would write about it.

As a recap…

The Equitable Doctrine of Laches:

“Laches is an equitable tool used to remedy the inconvenience resulting from the plaintiff’s delay in asserting a legal right that was practicable to assert.” Public Health Dept v. Rivergate Manor, 452 Mich. 495, 507; 550 NW2d 515 (1996).

As such, “when considering whether a plaintiff is chargeable with laches, we must afford attention to prejudice occasioned by the delay.” Lothian, 414 Mich. at 168. It is the prejudice occasioned by the delay that justifies the application of laches.Dunn v. Minnema, 323 Mich. 687, 696; 36 NW2d 182 (1949) .

Therefore in deciding on the issue of Laches, a Court will ask two questions:

1. was there a delay in bringing the claim and, if so,

2. did it prejudice the Defendant?

Question: Why is laches relevant to real estate disputes?

Answer: Because many real estate claims are based in “equity” as opposed to “law”-  e.g. –an injunction, specific performance, action for quiet title… 

Another Question: If someone fails to bring a legal claim in a timely manner can it be barred by laches?

Another Answer: See Hamilton v Jeannot.

Let’s fast forward to the September 3, 2015 case of Hamilton v Jeannot

Facts:

Like most cases that end up going to trial, the facts of this case are a bit complex, including various business entities, bank work outs, and various individual investors. You can tell that what appeared to start out as a good business relationship turned south quite abruptly.

The case surrounds the various “parties’ efforts to renovate and reopen the Brookside Inn and Restaurant in Benzie County, Michigan.”Hamilton v. Jeannot, 2015 Mich. App. LEXIS 1654, *2 (Mich. Ct. App. Sept. 3, 2015)

It lead to one of the parties, Hamilton, filing suit against the others for conversion, claim and delivery, defamation, and unjust enrichment.

The Trial Court dismissed all of those claims.

relevant to our discussion on laches, the trial court  determined that “Hamilton’s long delay in bringing his claims for conversion and claim and delivery prejudiced the ability of the Jeannots and Eden Brook to present a defense to those claims. Accordingly, it applied the equitable doctrine of laches to bar those claims.”

On Appeal, the Court answered the question: is Laches only an “equitable defense” or does it apply to a legal claim?

Laches: Equity versus Law.

The Court of appeals explained at some length and cited historic case law and legislative history that show a clear intent that “laches” applies to equitable claims, but not to legal claims.

Legal claims are governed by “statutes of limitations” – e.g. if you don’t bring a breach of contract claim within 6 years of the date it was breached, you are likely to be barred from recovery.

However, in Hamilton the Court was “compelled” to apply laches to legal claims, given the binding case law precedence. Per the Court: “[t]his Court has held that courts may apply the doctrine of laches to bar actions at law, even when the period of limitations set by the Legislature has not passed.” Id, page 14.

So, even though the Court of Appeals really did not want to apply laches as a defense to a claim at law, it did.

But, the court decided that the facts of the case did not justify compel applying laches, so it reversed the trial court on that point.

Two take aways:

1. If you own investment real estate and are sued, the doctrine of laches may apply as a defense to bar the party that is suing you from recovery.

2. Much to the Hamilton Court’s dismay, even if there is a relevant statute of limitations that has not yet passed, laches may bar recovery if you can show a delay in bringing the claim that has caused you to be prejudiced.

Questions? Comments?

e-mail: Jeshua@dwlawpc.com

“Laches” in Real Estate Disputes. Its Basically About Fairness.

March 13, 2013 Leave a comment
“Laches” no, I don’t mean Latches.  In a legal sense, “laches” means failing to bring your claim in a timely manner and to the prejudice of the opposing party.
A recent Michigan Court of Appeals decision highlights an example of “laches” in the context of real estate disputes and how delaying in bringing a claim in court, even a claim that might otherwise succeed, could be devasting to your case.
THE FACTS:
The case is Knight v Northpointe Bank, No. 310206, 2013 WL 276067 (Mich Ct App January 24, 2013). The Property in dispute was 240 acres of real property in Kalkaska County, Michigan.  A summary of the relevant facts are as follows:
The dispute was over Plaintiff’s sister’s ability to convery 200 acres of Property to herself by using a power of attorney that her mother had given her.
Plaintiff’s mother, Laurene Marian Coe (“Mother”) owned the Property,  was widowed at the time and living in Florida. Plaintiff”s sister, Charlene Diane Cutro, (“Sister”) lived in Ann Arbor, Michigan. At some point prior to June 2001, Mother executed a power of attorney that gave Sister the authority to transfer Mother’s real property in Michigan.  In June 2001, Sister signed a warranty deed on behalf of Mother that transferred to herself 200 of the 240 acres.   In February 2002, Mother signed a warranty deed transferring the remaining 40 acres to Plaintiff.
In March 2005, Sister borrowed $180,000 from the Defendant, Northpoine Bank (“Bank”). Sister granted the Bank a mortgage on the 200 acres that she obtained from her Mother. In October of the same year, sister transferred the 200–acre parcel to her trust. Sister died in October 2006 and Mother died in February 2007.
In August 2007, Sister’s daughter, Edith Enders, acting as the successor trustee to her mother’s trust, transferred the 200 acre parcel to herself. Thereafter, Enders made payments on the Bank’s note, but fell into arrears. The Bank foreclosed on the 200 acre parcel and purchased it at a sheriff’s sale in September 2010 for more than $193,000. The redemption period for the 200 acre parcel expired in October 2011 and the Bank began to seek a purchaser for the property.
In November 2011, Plaintiff sued the Bank, alleging that her sister, Cutro, was “disabled as a matter of law” from making the “self-dealing conveyance” of the 200 acre parcel to herself as the attorney-in-fact for her mother. Moreover, because the “defect” in Cutro’s title was “plain on the face of the public record,” the Bank could not claim to be a bona fide purchaser from the Sister, Cutro. On the basis of these allegations, Plaintiff asked the trial court to “decree” that she was the rightful owner of the property and that she owned it free of any claims by the Bank.
Bank asserted that, since Plaintiff was asking for the court to declare with its “equitable powers” that Plaintiff owned the Property, Bank asserted the equitable defense of laches. The trial court agreed with the Bank. It held that Knight’s decision to wait so long to sue prejudiced the Bank and therefore dismissed Knight’s claim as untimely under the equitable doctrine of laches.
PLAINTIFF IS ASKING THE COURT TO DO “EQUITY”
The Court made a point of noting that the Plaintiff had come to the Court asking for “equity” – Plaintiff was asking  the Court to declare that she was the rightful owner of the Property, not the Bank. What Plaintiff asked for is also called a “quiet title action.” The Court, in its decision, went on to expound that there are certain requirements for a Plaintiff when they come to a Court asking the court to do “equity”.
“As our Supreme Court has explained, a complainant in equity must come to the court with a clean conscience, in good faith, and after acting with reasonable diligence: “ ‘Nothing can call forth this court into activity but conscience, good faith and reasonable diligence; where these are wanting the court is passive, and does nothing.’ “ Henderson v. Connolly’s Estate, 294 Mich. 1, 19; 292 NW 543 (1940), quoting Campau v. Chene, 1 Mich. 400, 405 (1850).

Knight v Northpointe Bank, No. 310206, 2013 WL 276067 (Mich Ct App January 24, 2013)
THE DOCTRINE OF LACHES:
The Court went on to cite the rule of law concerning laches: “Laches is an equitable tool used to remedy the inconvenience resulting from the plaintiff’s delay in asserting a legal right that was practicable to assert.” citing Public Health Dept v. Rivergate Manor, 452 Mich. 495, 507; 550 NW2d 515 (1996). As such, “when considering whether a plaintiff is chargeable with laches, we must afford attention to prejudice occasioned by the delay.” Lothian, 414 Mich. at 168. It is the prejudice occasioned by the delay that justifies the application of laches. Dunn v. Minnema, 323 Mich. 687, 696; 36 NW2d 182 (1949) Knight v Northpointe Bank, No. 310206, 2013 WL 276067 (Mich Ct App January 24, 2013).
Therefore in deciding on the issue of Laches, the Court asked the question: was there a delay in bringing the claim and, if so, did prejudice the Defendant?
The Court find that Laches prevented Plaintiff from succeeding on her claims, holding as relevant that Paintiff sued to quiet title to the 200–acre parcel more than 10 years after the transfer that she claims was invalid. Further , that during that ten-year period, the property was transferred several times.  Moreover, Plaintiff’s decision to delay suing until after the Bank acquired the property at the sheriff’s sale clearly prejudiced the Bank’s ability to defend itself against Plaintiff’s lawsuit. During the ten-year delay, the two most important witnesses to the underlying facts died. Knight v Northpointe Bank, No. 310206, 2013 WL 276067 (Mich Ct App January 24, 2013)
LESSON OF THE STORY:
Under Michigan law, parties suing over real estate matters will often ask the Court to make a judgment in “equity”. They are relying on the fairness of the Court to “make the right decision.” It is a good reminder that if you are asking the Court to do some act in “equity”, that you yourself have proven you have acted equitably as well. This means, in good faith, honesty, and with diligence.  If an opposing party can show that you have delayed in acting, and that it has plainly prejudiced them, the Northpointe Bank Case tells us that Courts will dismiss such actions, regardless of the merits of the underlying claim.
Categories: Uncategorized

Michigan Construction Law Update

September 15, 2016 Leave a comment

Real estate transactions can be complex.

Real estate lawsuits can be complex.

Sometimes a statute or case does not speak directly on point to the exact circumstances of a legal dispute.

This latest case is a good reminder of those points.

 

Today I read a construction law case issued on September 13. The case involved  an issue of first impression – an issue not decided before, under the Michigan Construction Lien Act.

You can check out the case of Stock Building Supply, LLC v Crosswinds, et al.

This case involved a Construction Project gone bad.

In construction projects there are multiple levels of parties involved, from owners, to general contractors, to sub-contractors, to suppliers, tradesman, lenders, etc…

This is one of those cases.  You can read the facts, I will paraphrase:

  • Contractors obtained construction liens and foreclosed on those liens. Also, lenders foreclosed on their mortgages.
  • It appears that a receiver was appointed to sell off condo units.
  • The main issue in this case was that the receiver sold units “free and clear from all liens”.
  • One of the contractors came back years after such a sale and claimed it had mortgages on the property that were not discharged.

(The Trial Court would dismiss the case for the reasons set forth below. The trial court also dismissed the case under the doctrine of laches – see my prior post for a discussion on this topic.)

The issue that came up: Whether a trial court is permitted to discharge mortgages pursuant to a sale by a receiver of encumbered property.

The Statute in issue:

MCL 570.1123(2):

“The receiver may petition the court for authority to sell the real property interest under foreclosure for cash or on other terms as may be ordered by the court…

The Court of Appeals indicated in its opinion that it was concerned with that language – what did it mean?

The contractor who claimed it had a mortgage argued that nothing in that statute expressly provides a court with authority to discharge its mortgage.

The Court recognized that the particular language in the statute “on other terms” is not defined.

The Court went on to interpret the statute and held that its plain reading allowed the Court the authority to determine the terms that it would place on the sale.

In sum, the Court of Appeals saw no reason why a trial court could not place as a condition for “terms of sale” that property be sold “free and clear of all claims, liens and encumbrances.”

The courts in that county had been doing this in practice. Now they had legal binding precedent to do so.

 

Take away for Real Estate professionals:

This is now (unless appealed to the Michigan Supreme Court) a clarified issue of law that construction industry folk can rely on.

However, it is a good example that many sticky situations that those in the real estate industry find themselves  in (I’m particularly thinking about the application of MCL 600.3238, for example) are not as clear. Maybe the statute is silent. Maybe there is no case law developed on the issue.

 

http://www.dwlawpc.com

e-mail: Jeshua@dwlawpc.com

 

 

 

 

Categories: Uncategorized

Michigan Law Update: Patent Trolls, Aggressive Solicitation, and a Real Estate dispute

February 12, 2016 Leave a comment

Happy Friday!

A few brief legal updates on proposed Bills and a Court decision.

Patent Trolls!

Back in July I wrote a post about legislation that was introduced in the House : A Tool for Business in Fighting Against Patent Trolls

That House Bill has sat for about 8 months. The House Judiciary Committee is meeting Tuesday and this is an agenda item.  Let’s see if there’s any movement on this bill after the committee meetings.

Aggressively Soliciting For Money at the ATM…a punishable (ticket)?

The Aggressive Solicitation Prohibition Act  was introduced back on December 1st.  It prohibits anyone for “soliciting” for my money under numerous circumstances.

Good idea. The penalty is a little confusing – a $100 ticket? Civil infraction? I’m not sure what this is expected to deter, but I don’t write the laws…

Court of Appeals Decision – Romance and Real Estate

I just read a brief unpublished court of appeals decision, you can check out the case of Male v Russell.

Sometimes “rash” decisions (like signing of over real estate to a boyfriend) are made as a result of a romantic relationship….

I find this case interesting for several reasons:

1. It shows that a Judge will use its equitable powers to craft an “equitable” remedy in order to due justice.

2. It shows the equitable doctrine of laches won’t protect you if a judge determines that you don’t actually have “equity” on your side.

Questions? Comments?

e-mail: Jeshua@dwlawpc.com

http://www.dwlawpc.com