7.2Summary Proceedings to Recover Possession of Property Held Pursuant to a Forfeited Land Contract

MCR 4.202 applies specifically to summary proceedings involving land contracts. Unless otherwise provided by MCR 4.202 or the Summary Proceedings Act, the Michigan Court Rules govern “a summary proceeding to recover possession of premises after forfeiture of an executory contract for the purchase of premises as described in MCL 600.5726[.]”¹ MCR 4.202(A).²

MCL 600.5726 states:

“A person entitled to any premises may recover possession thereof by a proceeding under [the Summary Proceedings Act] after forfeiture of an executory contract for the purchase of the premises but only if the terms of the contract expressly provide for termination or forfeiture, or give the vendor the right to declare a forfeiture, in consequence of the nonpayment of any moneys required to be paid under the contract or any other material breach of the contract. For purposes of this chapter, moneys required to be paid under the contract shall not include any accelerated indebtedness by reason of breach of the contract.”

“Forfeiture of the contract is a prerequisite to commencement of summary proceedings for possession of the premises. Thus, a seller wishing to avail himself [or herself] of the remedy of summary proceedings must first send notice of forfeiture.” Gruskin v Fisher, 405 Mich 51, 59 (1979). Proof of a valid forfeiture is essential to the vendor’s case in summary proceedings. Burke v Henry, 261 Mich 74, 75 (1932). MCL 600.5728(1) expressly states that “[p]ossession may be recovered . . . only after the vendee or person holding possession under him [or her] has been served with a written notice of forfeiture and has failed in the required time to pay moneys required to be paid under the contract or to cure any other material breach of the contract.”

A vendor who sends a vendee a notice of forfeiture has not irrevocably elected the remedy of possession. Gruskin, 405 Mich at 59. Rather, a vendor who sends a notice of forfeiture may still bring “an action to foreclose with a view to obtaining a deficiency judgment[,]” as long as the vendor has not been awarded possession of the property after summary proceedings. Id.

A pleading or other document filed by an unrepresented individual who is incarcerated in prison or jail “must be deemed timely filed if it was deposited in the institution’s outgoing mail on or before the filing deadline. Proof of timely filing may include a receipt of mailing, a sworn statement setting forth the date of deposit and that postage has been prepaid, or other evidence (such as a postmark or date stamp) showing that the document was timely deposited and that postage was prepaid.” MCR 1.112.

A.Initiating Summary Proceedings

A vendor may initiate summary proceedings to recover possession of property held under a land contract “when the premises are vacant or are in the possession of . . . the vendee, . . . a party to the contract, . . . an assignee of the contract, or . . . a third party.” MCR 4.202(B)(1)(a)-(d). “The court may do all things necessary to hear and resolve the proceeding, including but not limited to”:

•“hearing and deciding all issues,” MCR 4.202(B)(2)(a);

•“ordering joinder of additional parties,” MCR 4.202(B)(2)(b);

•“ordering or permitting amendments or additional pleadings,” MCR 4.202(B)(2)(c); and

•“making and enforcing writs and orders[,]” MCR 4.202(B)(2)(d).

“All executory contract summary proceedings conducted in open court must be recorded by stenographic or mechanical means, and only a [certified] reporter or recorder . . . may file a transcript of the record in a Michigan court.”³ MCR 4.202(G).

B.Parties Involved

The parties that must be joined as defendants in a summary proceeding for the possession of property held under a land contract are “the vendee named in the contract, . . . any person known to the [vendor] to be claiming an interest in the premises under the contract, and . . . any person in possession of the premises, unless that party has been released from liability.” MCR 4.202(C)(1)-(3).

C.Summons and Complaint

The complaint initiating summary proceedings in land contract cases must:

•“comply with the general pleading requirements[,]” MCR 4.202(D)(1);

•“allege . . . the original selling price, . . . the principal balance due, and . . . the amount in arrears under the contract[,]” MCR 4.202(D)(2)(a)-(c);

•“state with particularity any other material breach claimed as a basis for forfeiture[,]” MCR 4.202(D)(3); and

•“have attached to it a copy of the notice of forfeiture, showing when and how it was served on each named defendant[,]” MCR 4.202(D)(4).

The summons must be in compliance with the requirements of MCR 2.102(A)-(C)⁴ (issuance, form, and amendment of summons) and MCL 600.5735 (time of appearance). MCR 4.202(E). The summons must “command the defendant to appear and answer or take other action permitted by law within the time permitted by statute after service of the summons on the defendant.” Id.

MCL 600.5735(2)(a) requires a summons in land contract forfeitures to command the defendant to appear for trial within 30 days of the date the summons was issued; the summons must be served not less than ten days before the trial date.⁵ The summons and complaint must be served on the defendant as specified in MCR 2.105 (by personal delivery to the defendant or “by registered or certified mail, return receipt requested, and delivery restricted to the addressee”).⁶

D.Answer

“[A vendee’s] answer must comply with general pleading requirements and allege those matters on which the [vendee] intends to rely to defeat the claim or any part of it.” MCR 4.202(H)(1).

E.Default

If the defendant fails to appear, the plaintiff may motion for entry of a default against the defendant, the court may grant the default, and the court “may hear the plaintiff’s proofs in support of judgment.” MCR 4.202(H)(2)(a). The court must enter a default judgment under MCL 600.5741, and in compliance with MCR 4.202(J) (judgment), if the plaintiff’s proofs satisfy the court as to the complaint’s accuracy. MCR 4.202(H)(2)(a). The court clerk must mail to the defendant a copy of the default judgment. Id. If applicable, the judgment must inform the defendant that:

•“he or she may be evicted from the premises,” MCR 4.202(H)(2)(a)(i);

•“he or she may be liable for a money judgment,” MCR 4.202(H)(2)(a)(ii).

If the plaintiff fails to appear, the court may enter a default and a judgment for the defendant’s costs pursuant to MCL 600.5747. MCR 4.202(H)(2)(b).

“If [either] party fails to appear, the court may adjourn the hearing for up to 7 days. If the hearing is adjourned, the court must mail notice of the new date to the party who failed to appear.” MCR 4.202(H)(2)(c).

“For any hearing held under [MCR 4.202], in accordance with MCR 2.407, the court may allow the use of videoconferencing technology by any participant[.]” MCR 4.202(H)(3).

F.Claims and Counterclaims

Joinder of claims and counterclaims for money judgments (as described in MCL 600.5739⁷) or for equitable relief is permitted. MCR 4.202(I)(1). “A money claim must be separately stated in [a] complaint[, and a] money counterclaim must be labeled and separately stated in a written answer.” Id. “If such a joinder is made, the court may order separate summary disposition of the claim for possession, as described by MCL 600.5739.”⁸ MCR 4.202(I)(1). “A court with a territorial jurisdiction which has a population of more than 1,000,000 may provide, by local rule, that a money claim or counterclaim must be tried separately from a claim for possession unless joinder is allowed by leave of the court pursuant to [MCR 4.202(I)(3) (when adjudication of money claim will affect amount owed by the defendant to prevent eviction)].” MCR 4.202(I)(2).

If the amount of money a defendant must pay to avoid an order of eviction will be affected by the disposition of a money counterclaim and the money counterclaim appears to have merit, the court must try the money counterclaim at the same time as the possession claim, notwithstanding the requirements of MCR 4.202(I)(1) and MCR 4.202(I)(2). MCR 4.202(I)(3).

“[I]f [a] money claim or counterclaim is sufficiently shown to exceed the court’s jurisdictional limit,” the court may, on its own motion or the motion of either party, remove that part of the case to the circuit court in accordance with the procedures set forth in MCR 4.002. MCR 4.202(I)(4).

G.Judgment

A judgment in summary proceedings to recover possession of land subject to a land contract must:

•comply with MCL 600.5741 (judgment for possession), MCR 4.202(J)(1);

•state when an order of eviction will be issued, and any conditions under which it will be issued, MCR 4.202(J)(2);

•inform the parties that they have ten days in which to challenge the judgment by appeal or postjudgment motion,⁹ MCR 4.202(J)(3); and

•be mailed or delivered to the parties by the plaintiff; “[t]he time period for applying for the order of eviction does not begin to run until the judgment is mailed or delivered[.]” MCR 4.202(J)(5).

In addition, a judgment “may contain such other terms and conditions as the nature of the action and the rights of the parties require.” MCR 4.202(J)(4).

MCL 600.5741 states that a judgment for possession in the plaintiff’s favor may be enforced by an order of eviction. If, however, the judgment for possession is based on “the plaintiff’s nonpayment of moneys required to be paid under an executory contract for purchase of the premises,” the finder of fact must determine, and state in the possession judgment, the amount owed to the vendor at the time of trial. Id. This amount, the redemption amount, is stated in the possession judgment “only for the purpose of prescribing the amount which, together with taxed costs,^[10] shall be paid to preclude issuance of the writ of restitution.” Id.

See also Wilson v Taylor, 457 Mich 232, 236, 244-245 (1998), where the Court stated that a trial court’s language in the “further orders” paragraph of a judgment—“all monies paid during [the] redemption period shall first be applied to keep payments current and then to the outstanding judgment amount”—was contrary to MCL 600.5741. That is, MCL 600.5741 requires only that a defendant pay, during the redemption period, the amount due at the time of judgment, plus taxed costs, in order to avoid an order of eviction. In addition, the Wilson Court stated that MCL 600.5744(7)¹¹ clearly separates monetary breaches from nonmonetary breaches; consequently, a defendant’s failure to make current payments during the redemption period did not constitute an “other material breach” and so did not justify issuance of an order of eviction. Wilson, 457 Mich at 245-246.

The length of the redemption period depends on how much of the purchase price of the property has been paid under the land contract. If less than 50 percent of the purchase price has been paid, a defendant has 90 days from the possession judgment’s entry in which to tender the amount owed together with taxed costs to prevent the court from issuing an order of eviction. MCL 600.5744(4). If more than 50 percent of the purchase price has been paid, a defendant has a six-month redemption period within which he or she must pay the vendor the amount owed plus taxed costs to avoid an order of eviction. Id. “[F]or purposes of establishing the proper redemption period . . . , the term ‘purchase price’ means the original selling price for the property as set forth on the face of the parties’ land contract.” Entingh v Grooters, 236 Mich App 458, 461-462 (1999). Purchase price does not include unpaid taxes or insurance premiums. Id. at 462.

H.Order of Eviction (Writ of Restitution)¹²

A court must not issue an order of eviction (writ of restitution) if a defendant, within the time provided, pays to the vendor the amount stated in the judgment together with taxed costs, and if the defendant cures any other material breaches of the executory contract under which the land was being purchased. MCL 600.5744(7).

If the defendant does not pay the amount due under the judgment together with taxed costs within the time stated in the judgment, the plaintiff may apply to the court for an order of eviction. MCR 4.202(K)(1). The application for the order of eviction must:

•“be written,” MCR 4.202(K)(1)(a);

•“be verified by a person having knowledge of the facts stated,” MCR 4.202(K)(1)(b);

•“if any money due under the judgment has been paid, show the conditions under which it was accepted,” MCR 4.202(K)(1)(c); and

•“state whether the party awarded judgment has complied with its terms,” MCR 4.202(K)(1)(d).

An order of eviction may not be issued if the defendant has paid any of the amount due under the judgment unless the defendant was given notice of, and the opportunity to appear at, a hearing held on the matter. MCR 4.202(K)(2).

“Issuance of a writ of restitution following entry of a judgment for possession because of the forfeiture of an executory contract for the purchase of the premises forecloses any equitable right of redemption that the purchaser has or could claim in the premises.” MCL 600.5744(8).

A judgment for possession following the forfeiture of a land contract merges and bars any claim the vendor might have had for money payments due or in arrears at the time of trial. MCL 600.5750. Whenever an order of eviction is issued after entry of a possession judgment following forfeiture, any claim for money payments that would have become due after the order of eviction was issued are also barred. Id. However, a plaintiff obtaining a possession judgment against a land contract defendant can bring a civil action against the defendant for any damage done to the property after the defendant received the notice of forfeiture. Id. In addition, if a defendant fails to comply with an order of eviction, the vendor may bring an action against the defendant for the reasonable rental value of the property for the period of time after the date on which the defendant should have vacated the property until the date on which the defendant actually vacates the property. Durda v Chembar Dev Corp, 95 Mich App 706, 715 (1980) (“where a defaulting land contract vendee remains in possession of the property and does not redeem, he is liable for the reasonable rental value from the date the period for cure expired until he vacates the property”).

I.Appeals

“Except as provided by this rule or by law, the rules applicable to other appeals to circuit court^[13] . . . apply to appeals from judgments in land contract forfeiture cases.”¹⁴ MCR 4.202(L). “However, in such cases the time limit for filing a claim of appeal under MCR 7.104(A) is 10 days.”¹⁵ MCR 4.202(L).