Kubczak v. Chemical Bank & Trust Co.

Brickley, J.

In this premises liability action, we consider whether defendant-appellant Chemical Bank, as the mortgagee and nominal owner during the mortgage foreclosure redemption period, should be considered a “possessor” for purposes of premises liability. In the present case, plaintiff-appellee realtor was injured while showing the foreclosed property during the statutory right of redemption period. Her ensuing premises liability action resulted in judgment against defendant-appellant Chemical Bank, and the Court of Appeals affirmed. We find that the bank was not a “possessor” of the property and, therefore, reverse the decision of the Court of Appeals and remand this case to the circuit court for entry of a judgment of no cause of action in favor of defendant-appellant Chemical Bank.1

i

In 1979, Aldon and Nancy Hines purchased a house in Bay City. They financed most of the purchase price with a mortgage that they obtained from defendant-appellant Chemical Bank & Trust Company. The ten-*656year mortgage provided for a “balloon” payment of the entire balance in June 1989. The Hineses lived in the house from 1979 until late October 1989.

Over the years, the Hineses occasionally fell behind on their payments, but were able to catch up. Employment problems caused more serious difficulty in 1988 and 1989. The parties arrived at an interim solution, but soon the Hineses were again in arrears. Their final payment was made in August 1989. By that point, the final balloon payment was overdue.

On August 1, 1989, the bank notified the Hineses in writing of its intention to begin a foreclosure by advertisement. MCL 600.3201 et seq.-, MSA 27A.3201 et seq. The bank’s letter gave a figure in excess of $50,000 for the total amount due, including principal, interest, and late fees.

In September 1989, the Hineses listed their house for sale with Dial Real Estate. In October, the bank initiated the foreclosure process. Near the end of that month, the Hineses moved out of the house and into an apartment. The parties disagree with regard to the reason for the move. The Hineses say the bank ordered them to move and that Ms. Hines mailed their only key to W. Roger Mikusek, the bank loan officer who was handling this file. Mr. Mikusek and the bank deny those allegations.

A sheriff’s sale was held in November 1989. The bank bid the amount owed by the Hineses, and received a sheriffs deed. Under the foreclosure statute, however, a homeowner has six months to redeem a foreclosed house, and a sheriff’s deed *657does not actually take effect until the redemption period expires.2

After moving out in October, Nancy Hines instructed the utility companies to have all the service billings put in the name of the bank. The bank’s only involvement with the property during the redemption period was to observe the house from the street, confirm with the realtor that the heat was operating in the home, pay the utilities, and list the property on the bank’s insurance policy because the homeowner had allowed the insurance coverage to lapse for nonpayment of premiums. At no time did any representative of the bank enter the house.3

*658At some point, the Hineses renewed the listing for an additional three months and reduced the asking price. The bank emphasizes that this demonstrates the Hineses’ continued exercise of dominion over the property.

Plaintiff Sally J. Kubczak is a real estate agent for Bay City Realty Company. On March 14, 1990, six weeks before the end of the redemption period, she made arrangements with the listing agency, Dial Real Estate, to show the house to one of her clients.4 As she and her clients were leaving through the garage, she slipped and fell, sustaining a broken hip that required surgery. Plaintiff alleges that her fall was caused by a combination of oil, water, and leaves that made the garage floor dangerously slippery.

The last day for the Hineses to redeem the property from foreclosure was May 3, 1990. A few weeks before that date, another real estate agent found potential buyers but, because of the foreclosure situation and IRS tax liens, it became apparent that the deal could not be finalized before May 3. The bank agreed to sell the house for the real estate agency after the sheriff’s deed took effect, and, on May 9, 1990, the house was sold for $65,000. The bank received approximately $58,000, which covered the mortgage balance, interest, late fees, and foreclosure costs, while the IRS realized about $4,000 from its liens. After the usual closing costs were paid, the real estate agency received as commission the remainder of the proceeds, an amount slightly under $3,000. The *659Hineses received nothing from the sale, owing both to the fact that their equity of redemption had expired and that no balance was left after everyone else had been paid.

In October 1990, plaintiff brought the present suit against Chemical Bank, Dial Real Estate Agency, and the Hineses. Dial settled the claim for $10,000, and the cause continued to trial against the bank.5 The basis for plaintiffs complaint was that, at the time of her March 1990 accident, the bank was the “possessor” of the property and she was a business invitee of the bank. The trial court denied the bank’s motion for a directed verdict, ruling that the evidence would permit the jury to find that the bank had been a possessor of the property, even if the possession had been nonexclusive and the Hineses also had remained possessors. The bank preserved this issue by timely objection. The jury found for plaintiff and, answering specific questions, found that the bank was a possessor of the premises at the time plaintiff fell and was negligent, and that the bank’s negligence was a proximate cause of her injury. After reductions for comparative negligence, the settlement with Dial, and payments from collateral insurance sources, plaintiff was awarded approximately $78,500, plus costs and judgment interest.

In an unpublished per curiam opinion, the Court of Appeals upheld the circuit court’s ruling that a jury could find the bank to have been in possession of the premises, stating:

*660The trial court did not err in refusing to direct a verdict in favor of defendant on the issue of possession and control. Premises liability is conditioned upon the presence of possession and control, not necessarily ownership. Merritt v Nickelson, 407 Mich 544; 287 NW2d 178 (1980). Moreover, a mortgagee may be placed in possession by the mortgagor. Morse v Byam, 55 Mich 594; 22 NW 754 (1885). The evidence presented was sufficient to support the verdict that defendant was a possessor of the premises.[6]

The bank applied for leave to appeal, which this Court granted. 454 Mich 921 (1997).

n

It is well established, as the Court of Appeals noted, that “[pjremises liability is conditioned upon the presence of both possession and control over the land.” Merritt v Nickelson, supra at 552; Orel v Uni-Rak Sales Co, Inc, 454 Mich 564; 563 NW2d 241 (1997).

In the present case, the bank had no legal right of possession during the six-month redemption period. It is certainly true, as the Court of Appeals stated, that the Hineses, as mortgagors, had the authority to place the mortgagee-bank in possession of the premises. However, we have consistently given careful scrutiny to any transaction in which a mortgagor waives its statutory right of redemption. The rule we stated in Massachusetts Mut Life Ins Co v Sutton, 278 Mich 457, 461; 270 NW 748 (1936), remains sound:

[I]t has been the definite and continuous policy of this State to save to mortgagors the possession and benefits of *661the mortgaged premises, as against the mortgagees, until expiration of the period of redemption.

Thus, a mortgagee can obtain possession, but only for consideration, id. at 463, and pursuant to an explicit agreement. Bennos v Waderlow, 291 Mich 595, 600; 289 NW 267 (1939); Russo v Wolbers, 116 Mich App 327; 323 NW2d 385 (1982).7

Nothing in the record indicates that any agreement was made between the bank and the Hineses that would provide the bank with the immediate right to possess the foreclosed property. The fact that the bank was the high bidder at foreclosure proceedings did not grant it any rights of ownership or possession, but, rather, gave the bank a contingency interest in the property with respect to title ownership. Accordingly, any interest the bank had would not vest until after expiration of the redemption period.

The bank asserts that because it was not entitled to immediate occupation of the land under our mortgage law, it could not have been a “possessor” of the property in question for purposes of premises liability. Although we agree that the bank had no legal right of possession before May 3, 1990, possession for purposes of premises liability does not turn on a theoretical or impending right of possession, but instead depends on the actual exercise of dominion and control over the property. Merritt, supra. If we were to accept the bank’s formulation, one who wrongfully exercised dominion and control over property would *662escape liability solely on the basis that there was no legal or theoretical possession.

The purpose behind the principle requiring actual possession and control was best expressed in Nezworski v Mazanec, 301 Mich 43, 56; 2 NW2d 912 (1942):

“It is a general proposition that liability for an injury due to defective premises ordinarily depends upon power to prevent the injury and therefore rests primarily upon him who has control and possession.”
* * *
“Liability for negligence does not depend upon title; a person is liable for an injury resulting from his negligence in respect of a place or instrumentality which is in his control and possession, even though he is not the owner thereof.” [Citations omitted; emphasis added.]

In the present case, plaintiff alleges that she was injured because the parties who were in possession and control allowed a dangerous condition to develop on the garage floor. As we observed in Nezworski, supra, it is appropriate to impose liability on the person who created the dangerous condition or who had knowledge of and was in a position to eliminate the dangerous condition. Plaintiff asserts that the bank’s actions toward the mortgaged property meet the requisite level of control for purposes of premises liability. We disagree.

The record before us indicates that the bank commenced foreclosure by advertisement proceedings on October 5, 1989. A foreclosure sale occurred on November 3, 1989, and the statutory period of redemption expired on May 3, 1990. The bank’s only involvement with the property during the redemption *663period was to observe the house from the street, pay the utilities after the Hineses changed the billing, confirm with the realtor that the heat was operating in the home, and list the property on the bank’s insurance policy once the Hineses allowed their insurance to lapse.8 On these actions, which comprise the sum and substance of the bank’s conduct toward the mortgaged premises, we do not find the requisite control. In reviewing a trial court’s ruling on a motion for a directed verdict, this Court examines “the testimony and all legitimate inferences that may be drawn in the light most favorable to the [nonmoving party].” Mulholland v DEC Int’l Corp, 432 Mich 395, 415-416; 443 NW2d 340 (1989). Here, making all reasonable inferences in plaintiff’s favor, we conclude that the trial court erred in denying the bank’s motion for a directed verdict and, accordingly, the Court of Appeals erred in affirming the trial court’s ruling.

It is clear to us that the bank’s limited actions during the redemption period were taken in connection with the foreclosure proceedings and for the sole purpose of preserving the value of the premises during the redemption period.9 Rather than accepting plaintiff’s assertion that these actions evidenced an exer*664cise of control over the property, we believe that the bank’s actions are better characterized as those of a secured party concerned with preserving the value of its collateral asset.

m

On the record before us, we can locate no basis for finding the bank liable as a “possessor” for the painful accident that befell Ms. Kubczak. We find that the bank did not exercise the requisite dominion and control over the property and, therefore, cannot be considered a “possessor” for purposes of premises liability. Accordingly, we reverse the decision of the Court of Appeals and remand this case to the circuit court for entry of a judgment of no cause of action in favor of defendant-appellant Chemical Bank.

Mallett, C.J., and Boyle, Weaver, and Taylor, JJ., concurred with Brickley, J.

The bank also appeals the decision below, finding that plaintiff was a business invitee of the bank. Our determination that the bank was not a “possessor” for purposes of premises liability makes resolution of that issue unnecessary.

The applicable redemption statute, MCL 600.3240(4); MSA 27A.3240(4), provides in part:

[I]f the amount claimed to be due on the mortgage at the date of the notice of foreclosure is more than 66-2/3% of the original indebtedness secured by the mortgage, the redemption period shall be 6 months.

This provision is now found in MCL 600.3240(8); MSA 27A.3240(8), as amended by 1996 PA 214.

MCL 600.3236; MSA 27A.3236 governs the effect of a mortgagor’s failure to redeem:

Unless the premises described in such deed shall be redeemed within the time limited for such redemption as hereinafter provided, such deed shall thereupon become operative, and shall vest in the grantee therein named ... all the right, title, and interest which the mortgagor had at the time of the execution of the mortgage ....

Although the parties stipulate that the redemption period was six months, the period is shortened to one month if the mortgagors abandon the property. MCL 600.3240(6); MSA 27A.3240(6) (this provision is now MCL 600.3240[10]; MSA 27A.3240[10], as amended by 1996 PA 214). Although the bank evidently considered whether it could invoke that provision, its apparent conclusion was that the Hineses’ action of listing the property for sale precluded the bank from arguing that they had abandoned the house.

Dial controlled access to the property by placing a key, obtained from the Hineses, in a realtor’s lockbox on the door of the house. It was through the use of this key that plaintiff gained access to the house on the day she was injured.

A default judgment was entered against the Hineses, who have since discharged the judgment in bankruptcy.

6 Issued February 9, 1996 (Docket No. 166480).

Alternatively, a mortgagee can gain possession if the mortgagor abandons the property. See n 3. The plaintiff has disclaimed this theory in both the circuit court and this Court.

The statutes applicable to mortgaged property permit a mortgagee to maintain payments of taxes and insurance premiums if the mortgagor fails to make those payments, particularly during a redemption period. MCL 600.2927; MSA27A.2927, MCL 600.3240; MSA 27A.3240.

Plaintiff asserts that the bank’s officer, W. Roger Mikusek, made misrepresentations to the Hineses concerning their rights during the redemption period. We note that the alleged misrepresentations, even if true, were not actions toward the property and, although potentially actionable by the Hineses in their own right, are irrelevant to the instant issue of premises liability. Similarly, the dissenting opinion’s discussion of possible fraud, oppression, or overreaching does not bear on whether the bank exercised the requisite control to subject it to liability for plaintiff’s injury under a premises liability theory.