Court Opinion

ID: 9913957
Source: CourtListenerOpinion
Date Created: 2023-12-29 06:05:40.106935+00
Date Added: 2024-06-11T13:09:43.021333
License: Public Domain

If this opinion indicates that it is “FOR PUBLICATION,” it is subject to
                 revision until final publication in the Michigan Appeals Reports.

                           STATE OF MICHIGAN

                            COURT OF APPEALS

NICK YONO,                                                           UNPUBLISHED
                                                                     December 28, 2023
               Plaintiff-Appellant,

v                                                                    No. 362536
                                                                     Ingham Circuit Court
COUNTY OF INGHAM, INGHAM COUNTY                                      LC No. 20-000697-CZ
TREASURER, and INGHAM COUNTY LAND
BANK FAST TRACK AUTHORITY,

               Defendants-Appellees.

Before: GLEICHER, C.J., and JANSEN and RICK, JJ.

PER CURIAM.

        Plaintiff appeals as of right the trial court order granting summary disposition in favor of
defendants, the County of Ingham, Ingham County Treasurer, and the Ingham County Land Bank
Fast Track Authority. We affirm in part, reverse in part, and remand for further proceedings
consistent with this opinion.

                                 I. FACTUAL BACKGROUND

       Plaintiff was the sole owner of a commercial industrial property located at 1506 N. Grand
River Avenue in Lansing, Michigan. He purchased the property in 2006 by land contract, which
was recorded with the register of deeds. In 2016, a certificate of forfeiture of real property was
recorded with the register of deeds, indicating that plaintiff failed to pay $1,891 in property taxes
in 2014. In 2017, a certificate of forfeiture of real property was recorded for nonpayment of
property taxes in 2015 for $15,684.41. The property was worth $378,400. Under the Michigan
General Property Tax Act (GPTA), MCL 211.1 et seq., the county and the treasurer foreclosed the
property and held an auction for sale, but the property was not purchased. Thus, the county
executed a quit claim deed transferring the property to the Land Bank for $1. The Land Bank may
have since sold the property for redevelopment.

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         Plaintiff filed suit, alleging that defendants unconstitutionally took his property without
just compensation in violation of Const 1963, art 10, § 2, and that he had a vested property interest
equal to the fair market value minus the amount of property taxes overdue and costs attributable
to the tax foreclosure. Plaintiff also alleged a bailment claim because he believed that defendants
were in possession of certain items of his personal property that remained on the land after the
foreclosure.

        Defendants denied the allegations of liability and moved for summary disposition.
Defendants argued that they were entitled to summary disposition of plaintiff’s takings claim under
Rafaeli, LLC v Oakland Co, 505 Mich 429; 952 NW2d 434 (2020), in which the Michigan
Supreme Court held that a foreclosed taxpayer is entitled to compensation for the amount of any
surplus proceeds actually realized through a tax foreclosure sale. Defendants explained that the
transfer of the property from the county to the Land Bank did not yield any surplus proceeds, and
argued that under Rafaeli, plaintiff had no right to recovery. Defendants claimed entitlement to
governmental immunity as a defense to plaintiff’s bailment claim, arguing that the bailment issue
sounded in tort. They further argued that even if they could be found liable under a bailment
theory, they never had possession of plaintiff’s personal property. Plaintiff responded that the
facts of this case did not fit under Rafaeli because there was no sale and therefore no surplus
proceeds. He contended that nevertheless, his equity in the property was taken without just
compensation. Plaintiff also asserted that defendants were not entitled to governmental immunity
because they were not performing a governmental function when they seized his property without
just compensation. The trial court granted defendants’ motion for summary disposition. This
appeal followed.

                                          II. ANALYSIS

                                     A. TAKINGS CLAUSE

        Plaintiff first argues that summary disposition was improper because an unconstitutional
taking of his property occurred when defendants transferred the property to the Land Bank for far
less than what was owed in delinquent taxes. Plaintiff claims this was a violation of the Takings
Clause of the Michigan Constitution, Const 1963, art 10, § 2, because he received no just
compensation. We agree.

        “This Court reviews de novo the grant or denial of a motion for summary disposition to
determine if the moving party is entitled to judgment as a matter of law.” Glasker-Davis v
Auvenshine, 333 Mich App 222, 229; 964 NW2d 809 (2020) (quotation marks and citation
omitted). Although defendants moved for summary disposition under several subsections of
MCR 2.116(C), the trial court specifically granted summary disposition of plaintiff’s takings claim
under MCR 2.116(C)(10). Summary disposition is appropriate under MCR 2.116(C)(10) “when
the affidavits or other documentary evidence, viewed in the light most favorable to the nonmoving
party, show that there is no genuine issue as to any material fact and the moving party is therefore
entitled to judgment as a matter of law.” Id. (quotation marks and citation omitted). The
interpretation of statutes, court rules, and legal doctrines is also reviewed de novo. Id.

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        The GPTA, MCL 211.1 et seq., provides for the recovery of unpaid real property taxes,
penalties, interest, and fees through the foreclosure and sale of the property for which there is a
tax delinquency. After being given notice of a delinquency, if a property owner fails to timely
redeem the property, fee simple title is vested in the county treasurer. MCL 211.78 et seq. After
the foreclosure, the state or municipality may claim the property. MCL 211.78m(1). If the state
or municipality fails to exercise their right of first refusal, the property is put up for sale at public
auction. MCL 211.78m(1) and (2). However, if the property is not sold at auction and the
foreclosing unit (other than the state) retains possession, the foreclosing unit may “[t]ransfer the
property to a land bank fast track authority created under the land bank fast track act,”
MCL 124.751 et seq. MCL 211.78m(7)(a).

        There is no dispute that plaintiff was delinquent in paying taxes on the property in 2014
and 2015. The record does not indicate that he ever tried to redeem the property. Thus, the
certificates of forfeiture of real property were recorded with the register of deeds, and title was
vested in the treasurer. MCL 211.78 et seq. The property was not sold at public auction, so the
county deeded the property to the Land Bank for $1, per the procedure described under
MCL 211.78m(7)(a). Plaintiff alleges that defendants’ actions violated the Takings Clause of the
Michigan Constitution, which provides:

                Private property shall not be taken for public use without just compensation
        therefore being first made or secured in a manner prescribed by law. If private
        property consisting of an individual’s principal residence is taken for public use,
        the amount of compensation made and determined for that taking shall not be less
        than 125% of that property’s fair market value, in addition to any other
        reimbursement allowed by law. . . .

                “Public use” does not include the taking of private property for transfer to a
        private entity for the purpose of economic development or enhancement of tax
        revenues. Private property otherwise may be taken for reasons of public use as that
        term is understood on the effective date of the amendment to this constitution that
        added this paragraph. [Const 1963, art 10, § 2.][1]

        “The government’s seizure of real property is the clearest form of a taking requiring just
compensation.” Rafaeli, 505 Mich at 455. Although general concepts involving the Takings
Clause apply to this issue, Rafaeli is ultimately controlling here.2 See Jackson v Southfield
Neighborhood Revitalization Initiative, ___ Mich App ___; ___ NW2d ___ (2023) (Docket
No. 361397); slip op at 22 (finding that Rafaeli did not preclude an unjust-takings claim where the
subject property was foreclosed on and then transferred to a land bank following an unsuccessful
foreclosure sale). Plaintiff argues that Rafaeli does not go far enough, because unlike the property

1
 Plaintiff brings his takings claim only under the Michigan Constitution. He makes no claims
addressing the Takings Clause of the United States Constitution.
2
  Rafaeli applies retroactively “to pending cases . . . in which a challenge has been raised and
preserved.” Proctor v Saginaw Co Bd of Comm, 340 Mich App 1, 23; 985 NW2d 193 (2022).
                                                  -3-
at issue in Rafaeli, his property was not successfully sold at auction and there were no surplus
proceeds for defendants to retain. We agree that the Rafaeli Court was not dealing with a situation
where property failed to sell at auction and was instead given over to a land bank. Even so, Rafaeli
informs much of our thinking about foreclosure cases, even if the facts of that case are not identical
to those we are dealing with in the instant matter.

        In Rafaeli, 505 Mich at 437, the two plaintiffs owed unpaid property taxes to Oakland
County. The county and its treasurer foreclosed the properties for the delinquencies, sold the
properties for an amount much greater than the taxes owed, and retained the proceeds. Id. The
issue before our Supreme Court was whether the defendants committed an unconstitutional taking
by retaining surplus proceeds from the sale of the properties that exceeded the amount the plaintiffs
owed in unpaid delinquent taxes, interest, penalties, and fees under the GPTA. Id. The GPTA did
not provide any recourse for the plaintiffs, as it contains no procedures allowing property owners
to recover the surplus proceeds generated by a foreclosure sale. Id. at 449. Consequently, the
Rafaeli Court decided the issue under the Takings Clause of the Michigan Constitution, and held
that the defendants’ “retention of those surplus proceeds [was] an unconstitutional taking without
just compensation under” Const 1963, art 10, § 2. Id.

        Defendants argue that there can be no unlawful taking here because no surplus proceeds
were generated from the foreclosure of plaintiff’s property. They note that under Rafaeli, “a
former property owner only has a right to collect the surplus proceeds from the tax-foreclosure
sale; that is, a former property owner has a compensable takings claim if and only if the tax-
foreclosure sale produces a surplus.” 505 Mich at 477. As such, defendants argue, there could
not have been an unlawful taking here. However, defendants ignore the key fact that, unlike in
Rafaeli, where a tax foreclosure sale occurred, no such sale occurred in this case. Thus, on that
point, Rafaeli is distinguishable from the instant matter. Jackson, ___ Mich App at ___; slip op
at 20. Even so, this Court recently opined that Rafaeli did not preclude an unjust-takings claim
under the Michigan Takings Clause, where the plaintiffs’ properties were foreclosed upon and
transferred over to a land bank after being purchased by the city of Southfield from the Oakland
County Treasurer for the minimum bid, meaning that no surplus equity was generated from the
sale. Id.; slip op at 4-5; 22.

        Although the Court in Rafaeli did state that “a former property owner has a compensable
takings claim if and only if the tax-foreclosure sale produces a surplus[,]” id. at 477, the Sixth
Circuit in Hall v Meisner, 51 F 4th 185, 189-190 (6th Cir 2022), was “dictum.” The Jackson Court
agreed, stating:

               In Rafaeli, our Supreme Court had no reason to consider what result would
       be required when the government merely retained title to the subject property and
       transferred it to another governmental entity for the cost of the tax debt and
       associated fees and costs. The right to the retention of surplus proceeds necessarily
       relies on an arms-length public auction, which allows for a real-time evaluation of
       the value of the subject property. When no such auction occurs, such as was the
       case here, the lack of surplus proceeds can hardly be described as not a taking—
       plaintiffs still lost their equitable title in their properties. The crux of Rafaeli was
       that the government cannot receive more than it was owed (including costs and
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       fees, of course). In cases where there was a public tax-foreclosure sale, the amount
       the [foreclosing governmental unit (FGU)] received was the monetary value for
       which the property was sold. When there is no public sale, what did the FGU
       receive? A piece of real property with a certain value. Despite the lack of an
       exchange of currency, the government still received more than it was owed.
       Consequently, like the Sixth Circuit, we conclude the specific language in Rafaeli
       about former property owners having only an interest in the surplus from a public
       tax-foreclosure sale was obiter dicta. [Jackson, ___ Mich App at ___; slip op at
       21.]

We agree with this analysis completely. As this Court aptly pointed out in Jackson, the Rafaeli
Court was not dealing with a scenario like that which has been presented here, and thus had no
cause to consider what might happen if property was not sold in a foreclosure sale and was instead
given to a land bank. Even though no sale occurred, the fact that there were no surplus proceeds
does not at all imply that there was no taking, or that the property lacked any inherent value.
Plaintiff here still lost his equitable interest in the property, which certainly had some value, as
every parcel of property does, one way or another. This is clearly the sort of taking that the
Michigan Takings Clause is designed to prevent, and even though there was no real sale or
purchase of the property as a result of the foreclosure, defendants necessarily got more than what
they were owed by virtue of retaining the property without paying anything to plaintiff. Thus, we
agree with the Jackson and Hall Courts that Rafaeli’s pronouncement that former property owners
only have a compensable claim if a surplus exists was obiter dicta, and is not binding on this Court.
See Estate of Pearce v Eaton County Rd Comm, 507 Mich 183, 197; 968 NW2d 323 (2021)
(“Unlike holdings, [o]biter dicta are not binding precedent. Instead, they are statements that are
unnecessary to determine the case at hand and, thus, lack the force of an adjudication.” (quotation
marks and citation omitted; alteration in original)).

         This conclusion also tracks with the Sixth Circuit’s overall holding in Hall. In that case,
the defendants foreclosed on the plaintiffs’ properties and ultimately turned them over to a land
bank. Hall, 51 F 4th at 188-189. The Sixth Circuit concluded that the GPTA violated the Takings
Clause of the United States Constitution to the extent that it allowed the defendants to take absolute
title to the plaintiffs’ properties without just compensation. Id. at 194. Considering the ruling in
Hall, which concerned the federal Takings Clause, it would certainly be bizarre for this Court to
reach a different result under the Michigan Takings Clause, which the Rafaeli Court specifically
noted “has been interpreted to afford property owners greater protection than its federal counterpart
when it comes to the state’s ability to take private property for a public use under the power of
eminent domain.” Rafaeli, 505 Mich at 454, citing Wayne Co v Hathcock, 471 Mich 445; 684
NW2d 765 (2004); see also Jackson, ___ Mich App at ___; slip op at 21-22.

        Additionally, the United States Supreme Court essentially adopted the reasoning set forth
in Hall when it issued Tyler v Hennepin Co, Minn, 598 US 631, 638; 143 S Ct 1369; 215 L Ed 2d
564 (2023). There, the Supreme Court stated that unjust taking occurs in the federal context if the
government takes a person’s property and keeps it instead of holding a foreclosure sale. Id. at 643.
The Court discussed United States v Lawton, 110 US 146; 3 S Ct 545; 28 L Ed 100 (1884), an
earlier decision in which it “extended a taxpayer’s right to surplus” by holding “that the taxpayer

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was still entitled to the surplus under the statute, just as if the Government had sold the property.”
Tyler, 598 US at 643, citing Lawton, 110 US at 149-150. Thus, the Supreme Court held that a
property owner is entitled to compensation based on his or her equitable interest in a foreclosed
property, even if no sale of the property occurred. Id.

        We recognize that Hall is not binding on this Court, but agree with the Jackson Court that
its reasoning is persuasive. Jackson, ___ Mich App at ___; slip op at 18. And even if that were
not the case, Tyler is certainly binding on this Court, and necessarily informs our determination of
how best to apply the more broadly protective Michigan Takings Clause. See id. We also find
Lawton and Tyler instructive in determining the appropriate remedy here. In Lawton, the surplus
amount was calculated based on the value of the property, since there was no sale price to consider.
Tyler, 598 US at 643, citing Lawton, 110 US at 148-150. Notably, our Supreme Court extensively
cited Lawton in Rafaeli, albeit in the context of a case involving a tax foreclosure sale. Rafaeli,
505 Mich at 458-459. Thus, the Rafaeli Court essentially acknowledged the applicability of the
Lawton line of cases, which includes Tyler. Accordingly, for all of the foregoing reasons, we
conclude that Rafaeli applies and that plaintiff has successfully proven that defendants violated the
Michigan Takings Clause in this matter. We therefore reverse the order granting summary
disposition to defendants. As was the case in Lawton, we direct the trial court to calculate the
“surplus” owed on the property by reference to the value of the property, less what plaintiff owed
on it when the foreclosure occurred. Jackson, ___ Mich App at ___; slip op at 22.

                                          B. BAILMENT

        Plaintiff argues the trial court erred in granting summary disposition to defendants with
regard to his bailment claim because defendants were not entitled to governmental immunity and
a genuine issue of material fact existed whether defendants were in possession of his personal
property. We disagree.

        The trial court granted defendants’ summary disposition of plaintiff’s bailment claim under
MCR 2.116(C)(7) as well as (C)(10). Summary disposition is appropriate under MCR 2.116(C)(7)
if the defendant is entitled to “immunity granted by law.” “A party may support a motion under
MCR 2.116(C)(7) by affidavits, depositions, admissions, or other documentary evidence. If such
material is submitted, it must be considered.” Maiden v Rozwood, 461 Mich 109, 118; 597 NW2d
817 (1999). Summary disposition is appropriate under MCR 2.116(C)(10) “when the affidavits or
other documentary evidence, viewed in the light most favorable to the nonmoving party, show that
there is no genuine issue as to any material fact and the moving party is therefore entitled to
judgment as a matter of law.” Glasker-Davis, 333 Mich App at 229 (quotation marks and citation
omitted).

       Bailments are a form of express or implied contract. Nat’l Ben Franklin Ins Co v Bakhaus
Contractors, Inc, 124 Mich App 510, 512 n 2; 335 NW2d 70 (1983), citing 8 Am Jur 2d, Bailments,
§ 2, p 738, and In re George L Nadell & Co, Inc, 294 Mich 150, 154; 292 NW 684 (1940).
“ ‘Bailment,’ in its ordinary legal signification, imports the delivery of personal property by one
person to another in trust for a specific purpose, with a contract, express or implied, that the trust
shall be faithfully executed and the property returned or duly accounted for when the special
purpose is accomplished.” Goldman v Phantom Freight, Inc, 162 Mich App 472, 479-480; 413
                                                  -6-
NW2d 433 (1987). “[I]t is a relationship wherein a person gives to another the temporary use and
possession of property other than money, the latter agreeing to return the property to the former at
a later time.” Id. at 480. Michigan law classifies bailments as either gratuitous (for the sole benefit
of either the bailor or bailee) or mutual (for the benefit of both parties). Godfrey v City of Flint,
284 Mich 291, 295; 279 NW 516 (1938). If a bailment relationship exists, standards of care are
automatically imputed on both the bailor and bailee. Id. at 297.

        “One of the essential elements of a bailment is that the property be taken into the possession
of the bailee, and the bailee must, at a minimum, knowingly take the property into possession or
control for there to be a bailment.” 8 Am Jur 2d, Bailments, § 4. Plaintiff’s bailment claim merely
alleged the following:

       33. It is believed that Defendants are in possession of the Plaintiff’s personal
       property (“Personal Property”) that which remains on the Property after the
       foreclosure.

       34. This has created a constructive (or implied) Bailment relationship between
       Defendant’s [sic] (bailee) and Plaintiff (bailor).

       35. As a result, Defendant’s [sic] or bailees[] have an obligation to protect and
       account for Plaintiff’s Personal Property.

       36. If Defendants fail to protect or account for Plaintiff’s Personal Property,
       Plaintiff seeks compensatory and punitive damages.

Thus, there was no evidence in the record that the Land Bank was in possession of plaintiff’s
personal property. Eric Schertzing, a member of the Board of Directors of the Land Bank, attested
in an affidavit that there was no personal property on the premises when it was transferred to the
Land Bank in 2018. He further attested that the Land Bank has kept the premises secure from
intrusion in anticipation of a future sale. In response, plaintiff submitted his own affidavit in an
attempt to contest the facts stated by Schertzing. Plaintiff attested that the property was not vacant
until he was evicted, and at that time he had “personal property in the building with a value of
$60,000, consisting of equipment (labeling machine, hi lo [sic]), product inventory, miscellaneous
equipment, racking systems and shelving.” However, plaintiff’s affidavit fails to establish that
these items of personal property were actually on the land or that defendants were in possession of
said property. Plaintiff presented no further documentary evidence to establish that defendants
had possession of any of his personal property, or to show that a bailment existed between the
parties. Therefore, plaintiff has not presented a genuine issue of material fact as to whether
defendants possessed his personal property, and his bailment claim fails as a matter of law.
Summary disposition was proper under MCR 2.116(C)(10).3

3
 Having decided that summary disposition was proper under MCR 2.116(C)(10), this Court need
not decide if summary disposition was also proper under MCR 2.116(C)(7).
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                                       III. CONCLUSION

        The trial court erred by granting defendants’ motion for summary disposition as to
plaintiff’s Takings Clause claim, but did not err by granting summary disposition as to defendant’s
bailment claim. We therefore affirm in part, reverse in part, and remand for further proceedings
consistent with this opinion.

                                                            /s/ Elizabeth L. Gleicher
                                                            /s/ /Michelle M. Rick

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