Order Michigan Supreme Court
Lansing, Michigan
December 14, 2007 Clifford W. Taylor,
Chief Justice
134608 Michael F. Cavanagh
Elizabeth A. Weaver
Marilyn Kelly
In re Petition of WAYNE COUNTY Maura D. Corrigan
TREASURER for Foreclosure. Robert P. Young, Jr.
Stephen J. Markman,
_______________________________________/ Justices
WAYNE COUNTY TREASURER and
AVENUE INVESTORS,
Petitioners-Appellees,
and
STATE OF MICHIGAN,
Petitioner-Appellant,
v SC: 134608
COA: 265426
Wayne CC: 03-318698-PZ
HENRY WATSON II,
Respondent-Appellee.
_______________________________________/
On order of the Court, the application for leave to appeal the May 8, 2007
judgment of the Court of Appeals is considered and, pursuant to MCR 7.302(G)(1), in
lieu of granting leave to appeal, we REVERSE the judgment of the Court of Appeals and
we REINSTATE the June 10, 2005 order of the Wayne Circuit Court that set aside the
foreclosure sale and provided other relief. The foreclosure sale of publicly owned
property is prohibited. MCL 211.7l; MCL 211.78g(1). The Wayne County Treasurer
had reason to know that the property was publicly owned during the tax years that led to
the tax foreclosure, because the County was engaged in litigation with the State of
Michigan concerning tax liability and other matters pertaining to the property. Further,
prior to the property being sold to the respondent, a settlement of the litigation required
removal and rescission of the assessments that were the basis for the foreclosure sale.
MARKMAN, J., dissents and states as follows:
I would deny leave to appeal in this case because the state of Michigan received
notice of the action to foreclose its property and failed to protect its interests. The trial
2
court lacked jurisdiction to grant relief under MCR 2.612(C) when there was no due
process violation.
The state purchased the property at issue in 1989, and the warranty deed was
recorded. The Wayne County Treasurer mistakenly taxed the property and, in June 2003,
instituted foreclosure proceedings based on the 2001 tax year and some previous tax
years. In December 2003, the state filed a complaint to quiet title and to settle the tax
issue. On March 5, 2004, while the case was pending, the county treasurer was granted a
foreclosure of the property. On April 21, 2004, the state’s case was settled, with property
taxes being rescinded and the county being obligated to take steps to reverse the sale of
the foreclosed property. Despite this, the county treasurer auctioned the property on
April 27, 2004, and respondent Watson purchased the property. Watson recorded the
deed on November 1, 2004.
On January 20, 2005, the county treasurer filed a motion to set aside the
foreclosure judgment and the auction sale. The state also filed a motion to set aside the
foreclosure judgment on February 25, 2005. The trial court granted these motions. The
Court of Appeals reversed, concluding that the trial court lacked the authority to set aside
the foreclosure. The Court of Appeals agreed that the property was exempt from taxation
and should not have been subject to foreclosure. However, the state was aware of the
foreclosure proceedings and did not object, failing to avail itself of its rights under the
General Property Tax Act (GPTA), MCL 211.1 et seq. The Court of Appeals also held
that the trial court’s authority under MCR 2.612(C) to set aside a foreclosure judgment is
limited to proceedings that are invalidated by a due process violation.
MCL 211.78g(1) states, in pertinent part:
A county treasurer shall withhold a parcel of property from
forfeiture for any reason determined by the state tax commission. The
procedure for withholding a parcel of property from forfeiture under this
subsection shall be determined by the state tax commission.
The state cites an April 17, 2002, State Tax Commission bulletin, which provides:
A property owned by the U.S. Government, the State of Michigan, a
county, a city, a village or a township shall be withheld from foreclosure.
Procedure: If the property is forfeited in error, the County Treasurer
removes all of the fees attached to the parcel, files a certificate of
cancellation of forfeiture (form 3839) with the Register of Deeds. Notifies
the State Treasurer and the Contractor of the error. The State Treasurer will
withhold the parcel from foreclosure and stop all title work on the parcel.
3
In this case, the Court of Appeals acknowledged that the county treasurer had
failed to comply with the bulletin, but found that even if public property should be
withheld from foreclosure, that did not mean that it cannot be foreclosed under the
GPTA. I agree. In this case, the property was forfeited in error, the county treasurer did
not cancel the forfeiture, the property was foreclosed, and the property was sold to a third
party. The bulletin does not provide a remedy for property foreclosed in error that is sold
to a third party. There is no language stating that such a foreclosure is void or that the
foreclosure falls outside the realm of the GPTA. And there is nothing in the GPTA
exempting state property from its provisions. Indeed, should the State Tax Commission
revoke its bulletin, state property would then be treated no differently under the GPTA
than any other property. Once the property was foreclosed, the county treasurer had fee
simple title to the property, which was transferred to Watson pursuant to MCL 211.78k.
MCL 211.78k(6) provides, in pertinent part:
[F]ee simple title to property set forth in a petition for foreclosure
filed under section 78h on which forfeited delinquent taxes, interest,
penalties, and fees are not paid . . . shall vest absolutely in the foreclosing
governmental unit, and the foreclosing governmental unit shall have
absolute title to the property . . . . The foreclosing governmental unit's title
is not subject to any recorded or unrecorded lien and shall not be stayed or
held invalid except as provided in subsection (7) or (9).
The state did not pursue the remedy available in subsection 7 by appealing the
foreclosure judgment in the Court of Appeals. Subsection 9 provides:
After the entry of a judgment foreclosing the property under this
section, if the property has not been transferred under section 78m to a
person other than the foreclosing governmental unit, a foreclosing
governmental unit may cancel the foreclosure by recording with the register
of deeds for the county in which the property is located a certificate of error
in a form prescribed by the department of treasury, if the foreclosing
governmental unit discovers any of the following:
(a) The foreclosed property was not subject to taxation on the date of
the assessment of the unpaid taxes for which the property was foreclosed
. . . . [MCL 211.78k(9).]
The county treasurer did not cancel the foreclosure in this case before the property was
sold to Watson.
This Court considered the constitutionality of MCL 211.78k(6) in In re Petition by
Wayne Co Treasurer, 478 Mich 1 (2007) (Perfecting Church). In Perfecting Church, the
4
county treasurer failed to comply with the notice provisions of the GPTA when it
foreclosed the church’s property. Id. at 5. This Court considered whether MCL
211.78k(6) deprived the circuit court of jurisdiction to alter the judgment of foreclosure
under MCR 2.612(C) when a property owner does not redeem the property or appeal the
foreclosure judgment within 21 days:
[The intervening parties] argue that MCL 211.78k(6) precludes the
circuit court from staying or holding the governmental unit’s title invalid.
Furthermore, because the church did not avail itself of the redemption or
appeal provision contained in subsections 6 and 7, it is limited to an action
for monetary damages under MCL 211.78l.
The intervening parties accurately construe these provisions of the
GPTA. If a property owner does not redeem the property or appeal the
judgment of foreclosure within 21 days, then MCL 211.78k(6) deprives the
circuit court of jurisdiction to alter the judgment of foreclosure. MCL
211.78k(6) vests absolute title in the foreclosing governmental unit, and if
the taxpayer does not redeem the property or avail itself of the appeal
process in subsection 7, then title “shall not be stayed or held invalid . . . .”
This language reflects a clear effort to limit the jurisdiction of courts so that
judgments of foreclosure may not be modified other than through the
limited procedures provided in the GPTA.13 The only possible remedy for
such a property owner would be an action for monetary damages based on
a claim that the property owner did not receive any notice. In the majority
of cases, this regime provides an appropriate procedure for foreclosing
property because the statute requires notices that are consistent with
minimum due process standards.
____________________________________________________________
13
The recent amendments of the GPTA add further support to this
conclusion. See MCL 211.78k(5)(g).
____________________________________________________________
[Id. at 8 (third emphasis added).][1]
1
MCL 211.78k(5)(g) provides:
A judgment entered under this section is a final order with respect to the
property affected by the judgment and except as provided in subsection (7)
shall not be modified, stayed, or held invalid after the March 31
immediately succeeding the entry of a judgment foreclosing the property
under this section, or for contested cases 21 days after the entry of a
judgment foreclosing the property under this section.
5
This Court went on to hold that, to the extent the statute limited the trial court’s
jurisdiction to modify judgments of foreclosure when property owners are denied due
process, the statute is unconstitutional:
[I]n cases where the foreclosing entity fails to provide
constitutionally adequate notice, MCL 211.78k permits a property owner to
be deprived of the property without due process of law. Because the
Legislature cannot create a statutory regime that allows for constitutional
violations with no recourse, that portion of the statute purporting to limit
the circuit court’s jurisdiction to modify judgments of foreclosure is
unconstitutional and unenforceable as applied to property owners who are
denied due process. [Id. at 10-11 (second emphasis added).]
Perfecting Church did not purport to rule that MCL 211.78k was unconstitutional in any
respect other than cases in which there is a due process violation.
There is no due process claim in this case. The state knew about the foreclosure
proceedings and auction and chose to file a separate suit rather than objecting to the
foreclosure action. While the property should never have had property taxes assessed in
the first place, MCL 211.7l, and the county treasurer auctioned the property in violation
of the settlement agreement in the separate case, I agree with the Court of Appeals that
the state neglected to pursue its available remedies under the GPTA to protect its
interest.2 Given the holding in Perfecting Church, the trial court did not have jurisdiction
to grant relief under MCR 2.612(C) when there was no due process violation.
In conjunction with Perfecting Church, the instant decision renders the purchase
of foreclosed property less certain and more tentative. However, while Perfecting
Church was compelled by the constitution, there is neither a constitutional nor a statutory
imperative for the present decision.
2
This case can be distinguished from Detroit Bldg Authority v Wayne Co Treasurer, 480
Mich ___ (2007) (Docket Nos. 129741, 129743, and 129745), in which the plaintiff city
did not receive notice and was therefore deprived of an opportunity to protect its interests
under the GPTA.
I, Corbin R. Davis, Clerk of the Michigan Supreme Court, certify that the
foregoing is a true and complete copy of the order entered at the direction of the Court.
December 14, 2007 _________________________________________
d1211 Clerk