Klock v. Vaughn

UNPUBLISHED

Macomb Circuit Court LC No. 2020-000332-AV

Before: M. J. Kelly, P.J., and Stephens and Redford, JJ.

Per Curiam

Defendant Sandra Vaughn appeals by leave granted^[1] the circuit court order affirming the 38th District Court's grant of possession of the real property to plaintiff Joseph Klock in his land contract forfeiture action for possession. We affirm.

I. FACTUAL AND PROCEDURAL BACKGROUND

The parties entered into a land contract on June 26, 2015, under which Vaughn agreed to purchase a residential property located in Eastpointe, Michigan for $70, 000 to be fully paid within 10 years. The land contract required Vaughn to pay an initial $15, 000 and pay monthly installments of $583 to pay off the $55, 000 balance plus five-percent per annum interest. Among other things, the parties agreed that Klock would "satisfy all tax liens on the property prior to the end of this contract and convey the property free of any such lien." Further, under the land contract, the parties agreed that, if Vaughn failed to perform any part of the contract, after default, Klock could declare the land contract forfeited, retain what had been paid and all improvements, take possession of the land, and require Vaughn to move out.

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Vaughn resided at the property and made payments on the land contract until sometime in 2017 when she discovered an IRS tax lien on the property against a person named Mitchell Przybranowski, ^[2] so she ceased making payments under the land contract. That prompted Klock to file a land contract forfeiture action in the district court. Because of the IRS tax lien issue, Klock dismissed without prejudice that forfeiture action. Then, in 2018, Vaughn filed a complaint in Macomb Circuit Court alleging four claims against Klock: Count I-Fraud and Rescission; Count II-Fraud Damages and for Indemnification; Count III-Breach of Contract and Indemnification; and Count IV-Breach of Contract and for Indemnification. Vaughn did not seek specific performance of the land contract nor did she seek to quiet title to the land in herself. In response, Klock answered and stated affirmative defenses including that Vaughn's claims were barred and offset by her failure to pay taxes, insurance, and by using the property without paying monthly payments as required under the land contract.

Klock moved for summary disposition which the circuit court heard and took under advisement. The day after the hearing, the parties participated in case evaluation which resulted in the case evaluation panel awarding Vaughn $15, 000. Within the time allotted by MCR 2.403 and just before the circuit court ruled on Klock's summary disposition motion, both parties accepted the case evaluation award. The circuit court granted Klock's summary disposition motion. Klock did not pay the case evaluation award within 28 days so Vaughn moved to enforce the case evaluation award and for entry of judgment. On December 18, 2019, the circuit court issued an opinion and order granting Vaughn's motion and entered a final judgment under MCR 2.403(M)(1) of $15, 000 in favor of Vaughn and dismissed the case.

Meanwhile, Klock filed a land contract forfeiture action in the 38th District Court for possession of the property because Vaughn failed to make payments required under the land contract. Vaughn contested the claims and the district court held three hearings at which it heard the parties' opposing arguments. At the first hearing, Klock argued that he held title to the land and the right to possession since the land contract no longer existed because of the parties' acceptance of the case evaluation award and entry of the judgment in Vaughn's circuit court case. Vaughn countered that her circuit court case determined that the land contract had been paid in full because Klock asserted affirmative defenses that she contended were decided in her favor by the entry of judgment on the case evaluation award. She argued that res judicata precluded Klock from asserting any claims to the contrary in the district court action. Vaughn stated that the case evaluation award indicated that Klock had no entitlement to setoff because it determined that Klock owed Vaughn money over and above the land contract. Klock responded that Vaughn's complaint sought rescission and the case evaluation award and entry of judgment for her in that case essentially rescinded the land contract and provided her full recompence while extinguishing any interest she had in the land requiring the district court to grant him possession. Klock asserted that it made no sense for him to pay Vaughn $15, 000 and not retain title and the right to possession. Klock contended that the judgment made Vaughn whole. Vaughn stated that she believed herself

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entitled to a credit for payment in full of the land contract and that Klock had to provide her a deed to the land. Because of the parties' differing positions on the land contract's status and because the judgment entered by the circuit court did not indicate a ruling on the land contract or the issue of possession, the district court asked the parties to further brief the matters and adjourned the hearing.

During the pendency of the land contract forfeiture action, Klock moved in the circuit court for reconsideration of the court's December 18, 2019 opinion and order regarding Vaughn's motion for judgment. He argued that, as a precondition of his payment of the $15, 000 case evaluation award, the judgment should require Vaughn to restore possession of the land to Klock. He argued that she unlawfully continued residing on the property requiring the circuit court to rule on possession. The circuit court analyzed the pleadings in Vaughn's case and found that possession of the property had not been a claim raised or an issue decided in the case. The court noted that Vaughn's complaint stated claims for fraud and rescission of the land contract, fraud damages, and breach of contract. The circuit court observed that Klock had not filed a counterclaim. The circuit court ruled that it lacked the ability to make any finding as to possession of the subject property and stated that it had not made any findings as to Vaughn's claims because the case closed as a result of the parties' acceptance of the case evaluation award. Because a claim for possession had not been raised in the action, it had not been an issue in Vaughn's case. Accordingly, the circuit court denied Klock's motion.

A couple weeks after the circuit court's denial of Klock's motion, the district court reconvened the hearing on the land contract forfeiture. The district court noted that the circuit court's decision indicated that possession of the land had not been raised or decided in Vaughn's circuit court case. The parties made opposing arguments that they each were entitled to possession of the land and that the circuit court judgment required the district court to hold that res judicata precluded the other party's claim for possession. Vaughn argued that Klock's acceptance of case evaluation constituted his consent to judgment, a judgment that meant that he had no claim of liability against her under the land contract and res judicata barred Klock's claim for possession. Vaughn contended that, because Klock asserted affirmative defenses that Vaughn had failed to make payments entitling him to setoffs, and by not raising the issues in a counterclaim, res judicata barred Klock from raising Vaughn's nonpayment in a later action. The district court disagreed and opined that it did not make sense for Klock to pay Vaughn $15, 000 and not have the right to possession when Vaughn continued to owe a substantial amount on the land contract. Vaughn responded that res judicata barred Klock from asserting that she owed any money. The district court concluded that the circuit court's ruling on Klock's motion made clear that the possession issue had not been decided in Vaughn's case. The district court again adjourned the hearing to permit Vaughn to submit further briefing.

The district court reconvened the hearing a week later on March 2, 2020. Klock argued that Vaughn desired the property for free but the circuit court's opinion established that the possession issue had not been adjudicated in the circuit court case. Klock asserted that the district court had exclusive jurisdiction over the possession issue. Klock explained that Vaughn owed unpaid land contract payments, insurance, and taxes totaling $31, 629.24 because she missed a payment due on July 1, 2015, plus she missed 32 payments from July 7, 2017 through March 1, 2020. Klock stated that Vaughn also owed $4, 015.66 for insurance on the property that he paid when he discovered that she failed to do so as required under the land contract. Klock also asserted

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that Vaughn owed $8, 216.58 for unpaid property taxes that she had the obligation to pay under the land contract but failed to do so. Vaughn first argued that Klock did not accurately state the amount for the arrearage and sought to accelerate the balance of the ten-year land contract with five years left on the contract. Vaughn conceded that Klock could claim an arrearage of 33 months at $583 per month, but she denied that he could claim nonpayment of the entire balance of the contract amount and asked the district court to dismiss the action. Klock responded that he had submitted evidence showing the 33 missed payments, the unpaid property insurance, and the unpaid property taxes equaling approximately $31, 400. Klock next testified regarding the property insurance that he paid because Vaughn had failed to do so for several years. During cross-examination Klock testified that Vaughn had not paid property taxes since the commencement of the land contract, had only recently paid the...