April 9, 2015
by Scott Neal
Orlans Associates, P.C. – USFN Member (Michigan)
In a decision entered on December 18, 2014, the Michigan Court of Appeals upheld a ruling by the lower court to dismiss a lawsuit by a group of investors against the Kent County Land Bank Authority (KCLBA), in regards to obtaining title to tax foreclosed properties.
There were various legal and procedural claims in this case, including collateral estoppel, Fourteenth Amendment due process, notice, quiet title actions, and so on; but the defining point of the case involved statutory compliance. The group of investors, referred to in the opinion as the 3830 G parties, contended that Michigan law [specifically MCR 211.78m and MCL 124.755(6)], required the properties in question to be auctioned off at a tax foreclosure sale. The 3830 G parties argued that the KCLBA obtained title to the properties in violation of these laws, by being allowed to buy these properties directly from Kent County after Kent County had bought them from the Kent County Treasurer, which had obtained title to the properties via tax foreclosure.
The court found that the laws in question only required the properties to be offered at a tax foreclosure sale if the foreclosing governmental unit retained possession of the properties. In this case, the foreclosing governmental unit, the Kent County Treasurer, did not retain possession, but sold the properties to Kent County, which then sold them to the KCLBA.
The 3830 G parties attempted to use Rutland Township v. City of Hastings (1982) to argue that the transaction was a “ruse” because the KCLBA funded Kent County’s purchase of the property from the treasurer, making Kent County a “straw man.” The court rejected this argument because Rutland was factually dissimilar, and the defendants in Rutland admitted that their actions were specifically done to take property without approval of the township or State Boundary Commission; whereas the defendants in the current case acted for the health, safety, and welfare of the community.
This decision will uphold the right of Michigan land banks to continue their activities for the public good and urban renewal, promoting positive investment in the state’s great cities. It affirms the right of the land banks to continue operating as they have been for the past 15 years since the first land bank was started in Flint.
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