Court Opinion

ID: 4168052
Source: CourtListenerOpinion
Date Created: 2017-05-12 11:12:00.54259+00
Date Added: 2024-06-11T14:38:35.909506
License: Public Domain

STATE OF MICHIGAN

                             COURT OF APPEALS

SHAMEE CATWILMAT, LLC,                                                 UNPUBLISHED
                                                                       May 11, 2017
               Plaintiff-Appellant,

v                                                                      No. 330616
                                                                       Kent Circuit Court
SHAMEE DEVELOPMENT COMPANY, LLC,                                       LC No. 13-003206-CK
JITEN D. SHAH, CEREAL CITY
INVESTMENTS, INC, and MICHAEL A. MEAD,

               Defendants-Appellees,

and

ADVANTAGE HOME BUILDERS, INC, and
ADVANTAGE HOUSING, INC,

               Defendants.

Before: WILDER, P.J., and BOONSTRA and O’BRIEN, JJ.

PER CURIAM.

        In this real estate dispute concerning the collateralized business assets of defendant
Shamee Development Company, LLC (Shamee Development), plaintiff, Shamee Catwilmat,
LLC, appeals as of right the trial court’s order that plaintiff discharge all liens it held against the
real or personal property associated with the mobile home park principally at issue in this appeal,
Village View. We affirm.

                                  I. FACTUAL BACKGROUND

        Shamee Development used both the real and personal property comprising its three
mobile home parks as collateral to secure loans from original plaintiff Fifth Third Bank (the
Bank), which is no longer a party to this action after having assigned its rights in this case to
plaintiff. The Bank held mortgages and promissory notes secured by the various parcels of real
estate on which the mobile home parks were situated. Of particular importance, the parties agree
that Village View was not situated on a single parcel of land; it was situated on two. The first
(Village View Parcel 1), encompassed the majority of the Village View development. The
second (Village View Parcel 2), was largely undeveloped but contained one building. Each of

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the Village View parcels was the subject of its own mortgage. Although the legal descriptions of
both parcels are given in the metes-and-bounds format, the descriptions are noticeably different
upon inspection, and each parcel has its own unique tax identification number.

        Defendants Jiten D. Shah (Shah) and Michael A. Mead (Mead) are the sole members of
Shamee Development, each holding a 50% membership interest.1 At some point, Shah and
Mead began to disagree about the management of Shamee Development. Unable to reconcile
their conflicting viewpoints, they reached a “membership deadlock” that prevented Shamee
Development from continuing to service its debt to the Bank and from taking the necessary steps
to refinance or renegotiate such debt. After Shamee Development failed to make payments as
agreed, the Bank accelerated the debt, including the mortgages, and instituted this action against
defendants. The Bank asserted, among others, claims for breach of contract and for judicial
foreclosure concerning the subject properties of three mortgages—one related to each of the
three mobile home parks—but it failed to list both mortgages associated with Village View.
Instead, the complaint listed only the mortgage covering Village View Parcel 2 (i.e., the largely
undeveloped parcel).

        After plaintiff was substituted as a party in the Bank’s stead pursuant to MCR 2.202(B),
the trial court entered a money judgment in plaintiff’s favor against Shamee Development,
Mead, Shah, and Cereal City, jointly and severally, for roughly $2.7 million. Plaintiff filed a
motion seeking an order directing foreclosure on the subject properties of each of the three
mortgages listed in the Bank’s complaint (the three subject properties), which the trial court
granted in an order modeled on plaintiff’s proposed order. At the parties’ stipulation, the
sheriff’s sale of those subject properties took place on October 29, 2014, at which time plaintiff
purchased Village View Parcel 2 for $875,000.

       Following the sheriff’s sale, the trial court entered the parties’ March 23, 2015 stipulated
order, which listed the legal descriptions of the three subject properties and, in pertinent part,
provided as follows:

             STIPULATED ORDER CONFIRMING SALES, AWARDING
           ATTORNEY’S FEES AND COSTS AND FOR DISBURSEMENT OF
                                 FUNDS

                                             * * *

              B.        The sales for all three properties were regular and pursuant to law,
       and the . . . sale prices are agreed to be adequate. . . .

                                             * * *

1
  The remaining defendants, Cereal City Investments, Inc (Cereal City), Advantage Home
Builders, Inc, and Advantage Housing, Inc (Advantage Housing), are all business entities
associated with Shah and Mead. Advantage Housing was dismissed without prejudice below for
nonservice of process.

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               G.      The Court is holding $700,000.00 in excess sale proceeds.

       Now, therefore,

                IT IS ORDERED that the sales and sheriff’s deeds resulting from the
       sales . . . are confirmed to the purchasers as identified herein.

                                               * * *

               IT IS FURTHER ORDERED that the Clerk of the Court is immediately
       directed to pay $414,000.00 to Plaintiff . . . out of the excess sale proceeds
       currently held by this Court as full satisfaction of the Judgments owing to Plaintiff
       which pays in full any indebtedness owing from any of the Defendants to
       Plaintiff. Upon receipt of these funds, Plaintiff shall immediately file a
       satisfaction of Judgment in full satisfaction of the August 8, 2014 Judgment and
       this Judgment. . . .

Consistent with the March 23, 2015 stipulated order, plaintiff subsequently filed satisfactions of
the money judgments it had received against defendants. The parties then promptly submitted
another stipulated order, stipulating to a proposed disbursement of the remaining sale proceeds
and to the termination of the receivership over the mobile home parks at issue.

        Two days later, however, plaintiff—having been notified by Shamee Development’s
attorney that plaintiff had foreclosed upon, and received a sheriff’s deed for, only one of the two
Village View parcels—filed an emergency motion to temporarily stay the scheduled termination
of the receivership. Plaintiff subsequently filed the motion that is principally at issue in this case,
its motion for relief from judgments and to reform the sheriff’s deed. Plaintiff argued that equity
required reformation of the sheriff’s deed. Particularly, plaintiff contended that the failure to
include Village View Parcel 1 in the various pleadings, stipulations, orders, and the sheriff’s
deed in this case constituted a mutual mistake—of the parties, the court, and the receiver—that
justified reformation via the trial court’s equitable powers. Plaintiff also argued that defendants
were estopped equitably, judicially, and by laches from arguing that the mistake had not been
mutual. Plaintiff further argued that, even if the mistake in question had been unilateral,
reformation was still warranted because Shah or his attorney knew of the mistake before the
judicial foreclosure was complete and, despite such knowledge, failed to correct the obvious
belief of plaintiff, the other parties, and the court that Village View was situated on one parcel:
Village View Parcel 2. Finally, plaintiff posited that reformation of the trial court’s earlier
judgments and orders was permissible under several subparts of MCR 2.612(C)(1), including for
mistake under (C)(1)(a).

       In response, Shamee Development acknowledged that “[s]ometime” between August 26,
2014, and October 29, 2014 (i.e., the date of the foreclosure sales), Shah and his attorney had
become aware that the Bank “negligently misrepresented that it had attached all mortgages
covering the Village View Park to its complaint[.]” In pertinent part, Shamee Development
argued (1) that the negligence of the Bank and plaintiff in pursuing this action did not constitute
a mutual mistake and, thus, that it did not provide a basis for relief from judgment under MCR
2.612(C)(1)(a), (2) that equitable reformation was inappropriate under the circumstances, (3) that

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the doctrines of judicial estoppel, equitable estoppel, and estoppel by laches were inapplicable,
and (4) that plaintiff’s equitable theories were barred by the doctrine of unclean hands.

        After considering the matter, the trial court issued an opinion and order denying
plaintiff’s motion for relief from judgments and to reform the sheriff’s deed. With regard to
mistake as a ground for relief from judgment under MCR 2.612(C)(1)(a), the trial court found
that the mistake in this case was unilateral, not mutual, because “neither Defendant Shamee
Development nor Defendant Shah shared” plaintiff’s “mistaken understanding at the time the
foreclosure sale occurred.” Because the mistake was unilateral, the trial court decided that relief
was unavailable to plaintiff under MCR 2.612(C)(1)(a). After recognizing that it possessed
broad equitable powers to reform the parties’ instruments to match their true intent, the court
held that it could not exercise such powers under the facts at bar:

               Here, the Court cannot readily discern and carry out the parties’ intentions.
       Plaintiff . . . surely intended to foreclose upon Village View in its entirety and
       then purchase the whole mobile-home park for a reasonable price. But the
       defendants fought [plaintiff] almost every step of the way because their financial
       circumstances were manageable and the properties comprising the receivership
       estate were worth far more than [plaintiff] seemed willing to pay for them.
       Although the Court has a great deal of sympathy for [plaintiff] and the utmost
       respect for their able attorneys, the Court cannot blithely undo a complicated
       series of orders and judgments that have been years in the making. Equity
       constitutes strong medicine in the hands of a judge under the appropriate
       circumstances, but the chancellor’s foot cannot justifiably solve the problem that
       [plaintiff] – with the aid of its predecessor, Fifth Third – created for itself in this
       case.

Plaintiff filed a motion for reconsideration, which the trial court denied, and plaintiff was
subsequently ordered to discharge all liens it held against the real or personal property associated
with Village View. This appeal ensued.

                                          II. ANALYSIS

        On appeal, plaintiff argues that the trial court abused its discretion by refusing to grant
plaintiff relief from judgment under MCR 2.612(C)(1)(a). In the alternative, plaintiff contends
that the trial court erred by refusing to use its equitable powers to reform the sheriff’s deed and
the related orders, judgments, and stipulations. We disagree in both respects.

                                A. RELIEF FROM JUDGMENT

        A trial court’s decision whether to grant relief from judgment under MCR 2.612(C)(1)(a)
is reviewed for an abuse of discretion. Rental Properties Owners Assoc of Kent Co v Kent Co
Treasurer, 308 Mich. App. 498, 531; 866 NW2d 817 (2014). A decision constitutes an abuse of
discretion if it “results in an outcome falling outside the range of principled outcomes” or is
founded upon an error of law. Ronnisch Construction Group, Inc v Lofts On The Nine, LLC, 306
Mich. App. 203, 208; 854 NW2d 744 (2014).

                                                -4-
        Under MCR 2.612(C)(1)(a), a trial court “may relieve a party or the legal representative
of a party from a final judgment, order, or proceeding” on the basis of “[m]istake, inadvertence,
surprise, or excusable neglect.” Although a trial court’s discretion under this rule is broad and
includes the authority to relieve parties of the consequences of both consent judgments, Wolf v
Mahar, 308 Mich. App. 120, 128; 862 NW2d 668 (2014), and stipulations, the rule “was not
designed to relieve counsel of ill-advised or careless decisions,” Limbach v Oakland Co Bd of Co
Rd Comm’rs, 226 Mich. App. 389, 393-394; 573 NW2d 336 (1997) (quotation marks and citation
omitted). See also Farm Bureau Mutual Ins Co Of Mich v Buckallew, 471 Mich. 940 (2004)
(“Plaintiff had access to all the necessary information, and its error is not excused by its own
carelessness or lack of due diligence.”), citing Lark v Detroit Edison Co, 99 Mich. App. 280, 283-
284; 297 NW2d 653 (1980) (“We will not equate this lack of due diligence with the mistake or
excusable neglect required under the rule for setting aside a judgment.”).

         As in Buckallew and Lark, in this case plaintiff had unfettered access to all of the
information necessary to avoid its instant predicament; it cannot now complain that defendants
were required or otherwise failed to exercise due diligence on its behalf. It is undisputed that the
mortgages and deeds associated with Village View were duly recorded, which placed plaintiff on
constructive notice of the Village View parcels and their associated mortgages. See Wells
Fargo, NA v SBC IV REO, LLC, ___ Mich App ___, ___; ___ NW2d ___ (2016) (Docket No.
328186); slip op at 20 (“Notice, which can be actual or constructive, is whatever is sufficient to
direct attention of the purchaser of realty to prior rights or equities of a third party and to enable
him to ascertain their nature by inquiry. Constructive notice involves imputed notice to a person
regarding all matters properly of record.”) (quotation marks and citation omitted). As evidenced
by plaintiff’s inclusion of the legal description for Village View Parcel 2 in at least one proposed
order submitted to the trial court, plaintiff also had actual notice of that legal description, which
was sufficient to enable plaintiff to discern the parcel’s physical boundaries. Had plaintiff
exercised due diligence, performing a reasonable inquiry, it would have avoided its current
dilemma. Because any mistake—whether mutual or unilateral—was the result of plaintiff’s
failure to exercise due diligence, the trial court did not abuse its discretion by denying plaintiff
relief from judgment under MCR 2.612(C)(1)(a).

                                B. EQUITABLE REFORMATION

       Because it is an equitable remedy, issues concerning reformation are reviewed de novo,
Kaftan v Kaftan, 300 Mich. App. 661, 665; 834 NW2d 657 (2013), as is the question of
“[w]hether a grant of equitable relief is proper under a given set of facts,” Johnson Family Ltd
Partnership v White Pine Wireless, LLC, 281 Mich. App. 364, 371; 761 NW2d 353 (2008)
(Johnson Family). “[A] stipulation is a type of contract, and contract defenses are available to a
party who seeks to avoid a stipulation.” Limbach, 226 Mich. App. at 394.

         Both mutual and unilateral mistakes can justify contractual reformation under the right
circumstances, including reformation of a deed. Johnson Family, 281 Mich. App. at 379-380.
However, “[a] high degree of care and caution should be exercised in reforming written
instruments affecting title of lands.” Bock v Newkirk, 251 Mich. 447, 449; 232 N.W. 207 (1930).
“It is essential in order to obtain a decree rescinding or reforming a written conveyance, contract,
assignment or discharge for mistake, that the facts necessary for the allowance of the remedy
shall be proved by clear and convincing evidence,” Woolner v Layne, 384 Mich. 316, 318-319;

                                                 -5-
181 NW2d 907 (1970), quoting 2 Restatement Contracts, § 511, which is the highest evidentiary
standard applicable in civil actions, In re Martin, 450 Mich. 204, 227; 538 NW2d 399 (1995).
Evidence is clear and convincing only if it produces “in the mind of the trier of fact a firm belief
or conviction as to the truth of the allegations sought to be established”; in other words, when it
is “evidence so clear, direct and weighty and convincing as to enable [the factfinder] to come to a
clear conviction, without hesitancy, of the truth of the precise facts in issue.” Id. (quotation
marks and citation omitted; alteration in original).

        On this record, we discern no error in the trial court’s conclusion that plaintiff failed to
prove by clear and convincing evidence that a mistake justifying reformation had occurred. On
the contrary, plaintiff supported its motion for relief from judgments and to reform the sheriff’s
deed with very little documentary evidence of the parties’ respective intents, primarily offering
conjecture about what the parties knew and when they knew it. As the trial court properly
determined, the minimal evidence of intent presented by plaintiff was not sufficiently clear,
direct, weighty, and convincing to come to a clear conviction, without hesitancy, that there had
been a mistake warranting reformation.

        In any event, even assuming, arguendo, that the opposite is true—that plaintiff did
present clear and convincing evidence of the parties’ intent—reversal is yet unwarranted because
the trial court reached the proper outcome. See Lewis v Farmers Ins Exch, 315 Mich. App. 202,
216; 888 NW2d 916 (2016). Equity will not lend relief to a party for “[c]ulpable ignorance of a
material fact,” which occurs when the fact should have been discovered through the exercise of
“common prudence” but was not. JW Wells Lumber Co v Menominee River Boom Co, 203 Mich.
14, 38; 168 N.W. 1011 (1918). See also Maclem v Bacon, 57 Mich. 334, 342; 24 N.W. 91 (1885)
(“In order to invoke the equitable powers of a court to be relieved against his misapprehension
induced by ignorance, he must be free from negligence as a cause of his mistake, and also in
discovering the existence thereof.”). Similarly, a party bearing the risk of a mistake cannot use
that mistake to avoid enforcement of a contract. See Lenawee Co Bd of Health v Messerly, 417
Mich. 17, 30; 331 NW2d 203 (1982) (Messerly). A party that “is aware, at the time the contract
is made, that [it] has only limited knowledge with respect to the facts to which the mistake
relates but treats [its] limited knowledge as sufficient,” bears the risk of loss arising out of that
mistake. 2 Restatement Contracts, § 154; Messerly, 417 Mich. at 30 n 12. Put differently,
“[i]gnorance is never sufficient to constitute a ground of relief if it appears that the requisite
knowledge might have been obtained by reasonable diligence. He who averts knowledge to
himself cannot later claim lack of knowledge.” Canpro Investments Ltd v United States, 130 Fed
Cl 320, 342 (2017) (Canpro) (quotation marks and citation omitted; alteration in original)
(discussing assumption of risk and 2 Restatement Contracts, § 154).2

       As we have already explained, plaintiff had constructive notice of the mortgages and
deeds associated with Village View and had actual notice of Village View Parcel 2’s legal
description. Despite such notice, plaintiff proceeded on the basis of the limited information

2
 Such assumption of risk principles apply to both mutual and unilateral mistakes. See 2
Restatement Contracts, §§ 152 and 154 (mutual); Canpro, 130 Fed Cl at 342 n 10 (unilateral).

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available to it. There can be no real dispute that the metes-and-bounds legal description of
Village View Parcel 2 was insufficient, standing alone without further inquiry, to reasonably
inform plaintiff whether Village View actually fell within that parcel’s boundaries.
Notwithstanding, plaintiff treated its limited knowledge on the subject as sufficient, failing to
make further inquiries. By doing so, plaintiff assumed the risk of the mistake at issue here, and it
also failed to exercise common prudence, willfully choosing to proceed despite its ignorance of
material facts. Hence, plaintiff cannot use its mistake as a ground to avoid its stipulated
agreements in this case and the resulting judgments and deeds.3

       Affirmed. As the prevailing parties, defendants may tax costs pursuant to MCR 7.219.

                                                             /s/ Kurtis T. Wilder
                                                             /s/ Mark T. Boonstra
                                                             /s/ Colleen A. O’Brien

3
  Additionally, “error requiring reversal may only be predicated on the trial court’s actions and
not upon alleged error to which the aggrieved party contributed by plan or negligence.” Lewis v
LeGrow, 258 Mich. App. 175, 210; 670 NW2d 675 (2003). The foreclosure sales in this case
resulted from an order based almost entirely on plaintiff’s proposed order. Because plaintiff
negligently contributed to the purported error in this case, it is unentitled to reversal.

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