Summary
In Carpenter v. Smith, 147 Mich. App. 560, 564-65 (1985), the court held that refusal to perform is a breach of contract.
Summary of this case from Sygnetics, Inc. v. Hops Int'l, Inc.Opinion
Docket Nos. 78377, 79279.
Decided December 16, 1985. Leave to appeal applied for.
Paul V. Gadola, for plaintiff.
Charles R. Cole, for defendants.
Defendants appeal as of right from a judgment of foreclosure on a land contract. The court granted acceleration of the payments remaining on the contract. Defendants have filed a separate claim of appeal from the trial court's subsequent order confirming the foreclosure sale and from a deficiency judgment against defendants of $88,559.34. We affirm.
The deceased, Henry Lang, sold defendants certain real estate in Genesee County. The land contract shows a price of $88,000, with a $30,000 down payment and monthly installments of $500. Lang also sold his bar business (conducted on the same property) and equipment to defendant J.D. Smith for $80,000, with a $20,000 down payment. Lang accepted a promissory note of $60,000, payable in $600 monthly installments.
Later, the bar building and equipment burned. There was a fire insurance policy with coverage up to $120,000. The parties agreed that Lang would receive $44,000 from the insurance proceeds, to be credited against the balance on the promissory note. The note was cancelled and the remaining balance added to the balance under the land contract. Defendants agreed to an increase of the monthly payments to $800. They also agreed to reconstruct the bar building in a manner equivalent to its former condition. Defendants received $76,000 from the insurance proceeds.
Before trial, defendants stipulated that they had no intention of fulfilling any of their obligations under the agreement written after the fire. They had made no payments on the land contract and no repairs to the building. They also failed to pay the property taxes as required by the land contract. Defendants had stripped the property of valuable fixtures. The local authorities condemned the building. In addition, defendants entered into a contract to sell the liquor license.
Though the land contract contained no acceleration clause, the trial court granted acceleration of the remaining payments. The court concluded that, since defendants had evinced an intention to renounce the contract, "the doctrine of anticipatory breach [was] clearly applicable".
The court entered the judgment of foreclosure on April 9, 1984, and fixed April 13 as the time for payment. The sheriff posted notice of the foreclosure sale on April 10. Publication began on April 20 and continued once each week until May 25. The estate of Henry Lang purchased the property at the foreclosure sale on May 29, 1984, Mr. Lang having died. On June 18, 1984, the trial court entered the deficiency judgment against defendants, "jointly and severally".
Defendants raise four issues.
I. ACCELERATION OF PAYMENTS IN ABSENCE OF ACCELERATION CLAUSE.
Defendants argue that the trial court erred by granting acceleration of the payments in the absence of an acceleration clause. We conclude that the court properly applied the doctrine of anticipatory repudiation to this matter.
Ordinarily, the court lacks authority "to decree the entire amount due in the absence of an acceleration clause in the contract". Lutz v Dutmer, 286 Mich. 467, 488; 282 N.W. 431 (1938), Benincasa v Mihailovich, 31 Mich. App. 473, 478; 188 N.W.2d 136 (1971). But "where there has been an anticipatory breach of a contract by one party * * * the other party may treat the entire contract as broken and may sue immediately for the breach". 17 Am Jur 2d, Contracts, § 448, p 910 (citations omitted). An unqualified refusal to perform enables the other party to sue immediately for future payments. Mott v Penoyar, 153 Mich. 273, 276; 116 N.W. 1110 (1908); Obenauer v Solomon, 151 Mich. 570, 576; 115 N.W. 696 (1908); Hosmer v Wilson, 7 Mich. 294, 304; 74 Am Dec 716 (1859). "In ascertaining whether an anticipatory breach of a contract has been committed by a party, it is the intention manifested by his acts and words which controls, and not his secret intention." 17 Am Jur 2d, supra, p 911.
In this case, defendants' conduct shows an intention not to perform their contractual obligations. They made no payments and did not begin to reconstruct the building. They paid no property taxes and arranged to sell the liquor license. These actions amount to a complete renunciation of the contract. In addition, defendants stipulated that they had no intention to perform at any time in the future and chose to rely solely on the absence of an acceleration clause in the land contract.
In their reply brief, defendants cite Restatement Contracts, 2d, § 243 for the proposition that the doctrine of anticipatory repudiation does not apply where the only remaining obligation is payment of money in installments. This rule may also be found in Jackson v American Can Co, 485 F. Supp. 370 (WD Mich, 1980). Defendants cannot find refuge there, however, since their contractual obligations include restoration of the building in addition to the monthly payments.
II. ADEQUACY OF NOTICE AND PUBLICATION
Defendants argue that the notice of foreclosure sale was inadequate under MCL 600.6052; MSA 27A.6052:
"Prior to the sale of any real estate taken on execution, notice of the time and place of holding the sale, the notice to describe the real estate with common certainty by setting forth the name or number of the township in which it is located, and the number of the lot, or by other appropriate description of the premises shall be given as follows:
"(1) A written or printed notice shall be displayed in 3 public places in the township or city where the real estate is to be sold at least 6 weeks prior to the sale, and if the sale is in a township or city other than that wherein the premises are located, notice shall also be displayed in 3 public places in the township or city in which the premises are located.
"(2) A copy of the notice shall be published once each week for the 6 successive weeks prior to the sale in a newspaper printed in the county in which the premises are located * * *." (Emphasis added.)
Also noteworthy is GCR 1963, 745.3:
"Sales under judgments of foreclosure shall not be ordered on less than 6 full weeks or 42 days' notice, and publication shall not commence until the time fixed by the judgment for payment has expired * * *."
See, also, MCR 3.410(C).
Each of these provisions requires a full 42 days notice of some sort. Plaintiff contends that notice was sufficient because the sheriff posted a written notice on April 10, 49 days before the sale, and a copy was published once during each of the six weeks in advance of the sale. Defendants argue that publication, as well as posting, must begin at least six full weeks before the sale.
We hold that publication was sufficient in this case because it was made once in each of the six weeks prior to the sale and there were more than 42 days notice by posting. The statute and court rule each allow for a distinction between posting and publication. The statute clearly requires a full six weeks notice by posting, but does not clearly require the same of publication. MCL 600.6052. The Legislature could have easily used the same language with respect to publication as with the posting requirement, but it did not. The court rule is no clearer. It requires "6 full weeks" notice, but discloses nothing as to the method.
The courts of other jurisdictions are split in their resolutions of this precise issue:
"The statutes regarding foreclosure sales usually specify the length of time for which a notice thereof must be given or published. Where notice of a mortgage sale is required to be given for a certain number of weeks successively, there is a difference of judicial opinion as to whether or not 7 days must be given as a week's notice. In some jurisdictions such a provision is considered to be complied with if notice is published once in each week for that number of weeks, although the number of days from the first publication to the day of sale is not equal to the number of days in that number of weeks. But other authorities take the view that a publication for a certain number of weeks must be made for as many days before the day of sale as there are days in the number of weeks required." 55 Am Jur 2d, Mortgages, § 638, p 599 (citations omitted).
A statement in 16 Michigan Law Practice, Mortgages, § 313, p 543, supports defendants' interpretation of the statute, but is itself supported only by reference to a single, ancient circuit court opinion. Goodwin v Burns, 1 Mich NP 228 (1870), aff'd 21 Mich. 211 (1870). In Wesbrook Lane Realty Corp v Pokorny, 250 Mich. 548, 550; 231 N.W. 66 (1930), the Supreme Court held that, in calculating the number of days of notice given, the first day of publication does not count but the date of sale should be counted. The Court appeared to assume that the first publication must be made at least 42 days before the sale. However, the Court's opinion does not disclose whether in that case, as here, notice was posted well in advance of the initial publication. We are satisfied that a reasonable interpretation of the statute makes publication sufficient if it occurs one time in each of the six weeks prior to sale even if 42 days do not elapse between the first publication and the date of sale — provided that the 42 day notice requirement has been met.
Although we hold that there was sufficient notice in this case, we would not grant defendants relief even if we held the opposite view. Defendants did not challenge the adequacy of the notice in the trial court. Where, for the first time on appeal, the defendant challenges the foreclosure sale "based upon mere technical irregularities", the sale will not be set aside. Madill v Michigan National Bank, 302 Mich. 251, 255; 4 N.W.2d 538 (1942). For example, in Goodwin, supra, the Supreme Court acknowledged that the foreclosure sale "had not been sufficiently noticed", but affirmed the trial court's refusal to reopen the matter because the defendant did not make a timely objection on that ground in circuit court. 21 Mich. 212-213. In this case, defendants objected only on the ground that the judgment did not fix a time for payment, an objection which was properly denied because the judgment specifically set April 13, 1984, as the payment date. Defendants have waited too long to raise the notice issue.
III. JOINT AND SEVERAL LIABILITY OF HUSBAND AND WIFE
Next, defendants assert that defendant Ina Smith's assets may not be used to satisfy the joint debt which she entered into with her husband. In City Finance Co v Kloostra, 47 Mich. App. 276; 209 N.W.2d 498 (1973), one panel of this Court held that the Married Women's Property Act, MCL 557.52 et seq.; MSA 26.182 et seq., was not superseded by Const 1963, art 10, § 1. The Court held that execution was limited to the personal assets of a woman who co-signed a promissory note with her husband, "unless consideration for the note passed directly to her separate estate". 47 Mich. App. 284-285. We agree with the panels which have more recently reached the opposite conclusion. Manufacturers National Bank of Detroit v Pink, 128 Mich. App. 696, 699-700; 341 N.W.2d 181 (1983); Schenck v Seamon, 124 Mich. App. 438, 441-442; 335 N.W.2d 63 (1983); Michigan National Leasing Corp v Cardillo, 103 Mich. App. 427; 302 N.W.2d 888 (1981). We also note that the above-cited statute has been repealed. Defendants may be held jointly and severally liable.
1981 PA 216. See, MCL 557.29(c); MSA 26.165(9)(c).
IV. ADEQUACY OF FORECLOSURE SALE PRICE
Defendants challenge the adequacy of the foreclosure sale price, which was $14,200. According to defendants, this was grossly inadequate, given the state equalized value of more than $15,000 and the location of the property on a main thoroughfare.
"[T]he court may fix and determine the minimum price at which the real property covered by the mortgage or land contract may be sold" at the foreclosure sale. MCL 600.3155; MSA 27A.3155, Kramer v Davis, 371 Mich. 464, 471; 124 N.W.2d 292 (1963). The court may exercise its discretion to decline confirmation of a foreclosure sale if the amount bid is so inadequate as to shock the conscience of the court. Detroit Trust Co v Hart, 274 Mich. 144, 146; 264 N.W. 321 (1936).
We find no abuse of discretion in this case. Mr. Lang, the land contract vendor, was the only bidder. His bid was based on an appraisal by a local realtor. Defendants submitted no real evidence of the property's value. The state equalized value does not reflect the forced nature of the foreclosure sale. "[T]he element of compulsion reduces the value of property." United Growth Corp v Kelly Mortgage Investment Co, 86 Mich. App. 82, 86; 272 N.W.2d 340 (1978), lv den 406 Mich. 855 (1979). "Reality requires that the court make some concession to the forced nature of the sale." Id.
Affirmed.
R.B. BURNS, P.J., concurred.
I respectfully dissent. Today, the lead opinion applies the doctrine of anticipatory breach to a land contract foreclosure proceeding and thus permits the circuit court to accelerate the installment payments not yet due under the parties' contract to purchase real estate in Genesee County.
The foreclosure of land contracts is governed by statute. See MCL 600.3103 et seq.; MSA 27A.3101 et seq. Under Chapter 31 of the Revised Judicature Act, there is no provision for the doctrine of anticipatory breach. On the contrary, the act provides that a complaint in foreclosure "shall be dismissed upon the defendant's bringing into court, at any time before the judgment of sale, the principal and interest due, with costs". See MCL 600.3110; MSA 27A.3110. It follows, therefore, that although there is a breach, or even an anticipatory breach, of a land contract, the defendant may cure this breach at any time by paying the principal, interest, and costs into court before judgment is finally entered.
The long-standing rule in Michigan has been that absent an acceleration clause in the parties' land contract, the circuit court lacks the authority to decree the entire contract price due. See Lutz v Dutmer, 286 Mich. 467, 488; 282 N.W. 431 (1938); Brown v Mudge, 242 Mich. 324; 218 N.W. 687 (1928); Cady v Taggart, 223 Mich. 191, 195; 193 N.W. 848 (1923); Benincasa v Mihailovich, 31 Mich. App. 473, 478; 188 N.W.2d 136 (1971). The reason for this rule is that "[t]o require a sale to satisfy payments to become due in the future would be to declare a forfeiture, which under repeated decisions of [the Supreme] [C]ourt a court of equity may not do". Cady v Taggart, supra, p 195. To date, actions under Chapter 31 of the Revised Judicature Act are still "equitable in nature". MCL 600.3180; MSA 27A.3180.
Forfeiture proceedings are also governed by statute. See MCL 600.5726 et seq.; MSA 27A.5726 et seq. However, an executory contract, which must provide for such forfeiture, "shall not include any accelerated indebtedness by reason of breach of the contract". MCL 600.5726; MSA 27A.5726. Plaintiff's action is not one to forfeit the land contract.
The anticipatory-breach exception now advanced by the lead opinion has never before existed in either law or equity in land contract foreclosure proceedings in Michigan. Therefore, unless or until the Supreme Court or Legislature decide to carve out such an exception in land contract foreclosure proceedings, I cannot follow the lead opinion's view. See and compare Dumas v Helm, 15 Mich. App. 148, 151-152; 166 N.W.2d 306 (1968), lv den 382 Mich. 759 (1969), where this Court held that, notwithstanding a plaintiff's investment in property, a defendant has a right to declare the total unpaid balance due if the contract contains an acceleration clause because a court of equity can neither enlarge nor abridge legal rights created by statute.
The lead opinion cites three Supreme Court cases to support the proposed anticipatory-breach exception to the rule that the circuit court lacks authority to accelerate future installment payments under a land contract which does not have an acceleration clause. However, none of these three cases involved the foreclosure of a land contract. See Mott v Penoyar, 153 Mich. 273; 116 N.W. 1110 (1908) (breach of timber contract); Obenauer v Solomon, 151 Mich. 570; 115 N.W. 696 (1908) (breach of timber sale contract); Hosmer v Wilson, 7 Mich. 294; 74 Am Dec 716 (1859) (breach of labor and materials contract).
Accordingly, I would hold that the circuit court erred in accelerating the installments not yet due under the parties' land contract.