Representative Cases and Appellate Decisions
Representative Cases and Appellate Decisions (updated Feb. 25, 2008):
In re: Certified Question from U.S. District Court, Eastern District of Michigan, 411 Mich. 727; 311 N.W.2d 731 (1981)
Decision regarding applicability of Michigan’s Builder’s Contract Fund Act, MCLA 570.151, et seq., to public construction contracts (we represented the General Contractor and prevailed in a decision which limited the Act to private construction contracts, only). Under the Builder’s Contract Trust Fund Act it is a crime for a contractor to receive funds from an owner, use those funds for other purposes instead of paying them to the subcontractors and suppliers to the project. Essentially the Act provides that such contract funds paid to the contractor are “trust funds” to be held in trust for subcontractors and suppliers. Use of the funds for any other purpose by a contractor is deemed to be fraud and is a felony. Michigan Courts have crafted from this criminal act, a civil cause of action that is available for companies injured by a contractor who violates that act and uses money it receives from an owner for other purposes instead of paying it subcontractors.
Star-Batt, Inc. v. City of Rochester Hills, 251 Mich.App. 502; 650 N.W.2d 422 (2002)
This was a case of first impression before the Michigan Court of Appeals. As a result of the decision in this case we assisted our client in recovering interest upon cash bonds that had been deposited with Avon Township and Rochester Hills, after the bonds had been returned. The effective rule of the case is that a municipality which collects cash bonds for building and related projects, and invests those cash bonds in interest bearing accounts, must pay the interest that is earned to the person who has deposited the cash bond, when the bonds are returned.
Janiero, Inc. v. End of the Park, Inc., 2002 WL 31929307 (Mich. App 2002)
This was a case which involved an option to purchase and a right of first refusal in a lease for a party store when a prior option to purchase the unused property plus adjacent property had been given to a different tenant. We successfully defended the holder of the “larger” option who purchased the larger parcel and improved the property leased. The technical holding in the Michigan Court of Appeals was that the lesser option terminated automatically when the larger option had been exercised.
L&R Homes, Inc. v. Christenson, 2002 WL 1803943 (Mich.App. 2002)
This was a landlord tenant suit for unpaid rent after early termination of the lease by tenant. Because the nominal tenant was insolvent and was merely serving as an alter-ego or front for the “shareholder”, the landlord sought to pierce the corporate veil of the tenant to reach the principal. From a ruling in favor of this tenant in the Circuit Court based upon a failure to prove fraud (where we had urged that was not necessary), we appealed to the Court of Appeals which reversed the Circuit Court and held that the landlord had stated a cause of action to pierce the corporate veil to reach the principal.
L&R Homes, Inc. v. Christenson, 2005 WL 782696 (Mich.App. 2005)
At the trial which followed the remand of the earlier court of appeals decision (above) in this Landlord/Tenant pierce the corporate veil case, the trial court ruled that because our client, the Landlord, had failed to prove “fraud”, it could not pierce the corporate veil to reach beyond the nominal tenant on the lease. The trial court entered a judgment of “no cause for action” against the Landlord. On behalf of the Landlord, we again appealed, based upon the earlier court of appeals decision (2002 WL1803943), which was the law of the case and which stood for the proposition that the Landlord was not required to prove fraud in order to pierce the corporate veil. The court of appeals reversed the trial court and remanded the case to the trial court for further proceedings.
Ameriquest Mortgage Company v. Alton, 271 Mich App 660, 726 N.W.2d 424 (2006), special panel, Ameriquest v. Alton, 273 Mich App 84, 731 N.W.2d 99 (2006), lv. denied 480 Mich 944, 741 N.W.2d 14 (2007)
In this “conflict panel” case, the issue of the application of the doctrine of equitable subrogation in the residential mortgage refinancing context and the role of Michigan’s recording statutes (specifically MCL 565.25) in equitable subrogation claims, was resolved by a special panel of the Michigan Court of Appeals. Douglas A. Tull, P.C. represented Mr. Alton, who held a second mortgage which was duly recorded with the Register of Deeds before the mortgage of Ameriquest Mortgage. The Ameriquest mortgage paid off the first mortgage, thereby causing Mr. Alton’s mortgage to become a first mortgage lien by virtue of the application of Michigan’s recording statutes. The original Court of Appeals panel in the Ameriquest/Alton case declared a conflict with the prior published Court of Appeals decision in Washington Mutual Bank, F.A. v. Shorebank Corp., 267 Mich.App. 111; 703 N.W.2d 486 (2005). The original panel agreed with the trial court which had ruled that Ameriquest was entitled to a first mortgage lien under the doctrine of equitable subrogation to the extent that it had paid off the first mortgage and felt that Michigan should follow a more liberal reading of the equitable subrogation rule as set forth in the Restatement (Third) of Property (Mortgages), § 7.6 (1997). Generally, equitable subrogation in Michigan is allowed in order to protect an interest of a person who is compelled to pay another’s debt, to be substituted in place of and vested with the rights of the previous creditor. Alton, our client, issued and recorded a mortgage on a certain property. The conflict panel, agreeing with the Alton position and Washington Mutual, held that Washington Mutual was properly decided and that Michigan’s recording statute controls the priority of encumbrances against real property in the absence of fraud, mutual mistake, or other unusual circumstances. As a result, this case has clarified property law in Michigan regarding the application of the doctrine of equitable subrogation as it relates to mortgage refinancing. The case was subsequently featured in Michigan Lawyers Weekly, December 25, 2006 issue. Ameriquest’s application for Leave to Appeal to the Michigan Supreme Court was denied.