STATE OF MICHIGAN
IN THE SUPREME COURT
ON APPEAL FROM THE COURT OF APPEALS
Borrello, P.J., and Servitto and Stephens, JJ.
REYES GALVAN and
MINHWA KIM,
Supreme Court
Plaintiffs/Appellees, Docket No. 163741
v. Court of Appeals
Docket No. 352559
YAM FOO POON,
HWAI-TZU HONG POON, and Washtenaw County
DANIEL Y. POON, jointly and severally, Circuit Court Case
No. 17-1249-NZ
Defendants/Appellants.
Supplemental Brief Amicus Curiae of the Real Property
Law Section of the State Bar of Michigan
Jason C. Long (P59244)
WILLIAMS WILLIAMS RATTNER
& PLUNKETT, PC
380 N. Old Woodward Ave., Ste. 300
Birmingham, MI 48009
(248) 642-0333
Attorneys for Amicus Curiae Real
Property Law Section of the State
Bar of Michigan
RECEIVED by MSC 7/11/2022 10:00:56 AM
ii
Table of Contents
Table of Authorities .................................................................................................... iv
Statement of the Basis for this Court’s Jurisdiction ................................................. ix
Statement of Interest of the Real Property Law Section ........................................... x
Statement of the Question Presented ....................................................................... xi
I. Introduction .............................................................................................................. 1
II. Statement of Facts .................................................................................................. 3
III. Legal Analysis........................................................................................................ 5
A. The Issue in this Case is Subject to De Novo Review ......................................... 6
B. Longstanding Michigan Law Establishes that the
Warranty Against Incumbrances Applies to a Property’s
Title Rather than its Physical Condition ............................................................. 6
1. The Common Law Treated the Covenant Against Incumbrances
as Warranting a Property’s Title, Not its Physical Condition ...................... 8
2. Building Code Violations Pertain to a Property’s
Physical Condition, Not its Title .................................................................. 10
C. The Out-of-State Cases that the Court of Appeals
Cited Do Not Treat the Covenant Against Incumbrances
as Warranting that a Property’s Physical Condition
Complies with Building Codes ........................................................................ 13
1. Many Courts that Have Considered the Issue have
Concluded that a Building Code Violation Is Not a
Breach of the Covenant Against Incumbrances .......................................... 13
2. The Parties’ Knowledge of the Condition Creating a
Breach of the Warranty Against Incumbrances
Does Not Provide a Distinction ................................................................... 17
3. The Court of Appeals Erred by Relying on Cases that
Did Not Analyze Building Code Violations as Alleged
Breaches of the Covenant Against Incumbrances ...................................... 18
RECEIVED by MSC 7/11/2022 10:00:56 AM
iii
D. Michigan Law Provides Remedies for Grantees Like
Plaintiffs Without the Need to Alter the Meaning
of the Covenant Against Incumbrances ......................................................... 22
E. The Court of Appeals Decision Would Render a Grantor
in a Warranty Deed the Guarantor that a Property’s
Physical Condition Complies with Building Codes Regardless
of the Grantor’s Knowledge or Actions .......................................................... 24
IV. Conclusion and Request for Relief ....................................................................... 25
RECEIVED by MSC 7/11/2022 10:00:56 AM
iv
Table of Authorities
Michigan Statutes
MCL 8.3a .................................................................................................................. 7
MCL 125.1501 ........................................................................................................ 11
MCL 125.1502a ...................................................................................................... 20
MCL 125.1504 ........................................................................................................ 12
MCL 565.25 ............................................................................................................ 13
MCL 565.151 ................................................................................................ 1, 3, 6, 7
MCL 565.951 .......................................................................................................... 23
MCL 565.957 .......................................................................................................... 23
MCL 565.960 .......................................................................................................... 23
Michigan Court Rules
MCR 3.411 .............................................................................................................. 11
MCR 7.312 ................................................................................................................ 1
Ann Arbor Code
Ann Arbor Code § 8:101 ......................................................................................... 12
Ann Arbor Code § 8:116 ......................................................................................... 13
Michigan Decisions
Beeker v Hastings,
1
5 Mich 47 (1866) ..................................................................................................... 24
Bergen v Baker,
264 Mich
App 376; 691 NW2d 770 (2004) ............................................................. 23
Case v Erwin
,
18 Mich 434 (1869) ................................................................................................... 9
RECEIVED by MSC 7/11/2022 10:00:56 AM
v
Clemens v Lesnak
,
200 Mich App 456; 505 NW2d 283 (1993) ....................................................... 18, 22
Darr v First Fed Savings & Loan Assoc’n
,
426 Mich 11; 393 NW2d 152 (1986) ........................................................................ 9
Detroit & M R Co v Griggs
,
12 Mich 45 (1863) ..................................................................................................... 9
Dwight v Cutler
,
3 Mich 566 (1855) ..................................................................................................... 6
Edwards v Clark,
83 Mich 246; 47 NW 112 (1890) ............................................................................ 17
Galvan v Poon
,
unpublished opinion per curiam of the Court of Appeals,
Docket No. 352559 (issued Aug. 19, 2021) ........................................................... 3-5
Grange Ins Co v Lawrence
,
494 Mich 475; 835 NW2d 363 (2013) ...................................................................... 7
Haldane v Sweet
,
55 Mich 196; 20 NW 902 (1884) .............................................................................. 9
In re Forfeiture of $53,
178 Mich App 480; 444 NW2d 182 (1989) ............................................................. 11
In re Rudell Estate,
286 Mich App 391; 780 NW2d 884 (2009) ............................................................... 6
Lavey v Graessle,
245 Mich 681; 224 NW 436 (1929) .......................................................... 3, 9, 17, 18
Lindsay v Eastwood
,
72 Mich 336; 4 NW 455 (1888) ................................................................................ 9
Lorenzo v Noel
,
206 Mich App 682; 522 NW2d 724 (1994) ............................................................. 22
People v Bruner
,
501 Mich 220; 912 NW2d 514 (2018) ...................................................................... 6
RECEIVED by MSC 7/11/2022 10:00:56 AM
vi
Post v Campau,
42 Mich 90; 3 NW 272 (1879) ........................................................................
passim
Sam v Balardo
,
411 Mich 405; 308 NW2d 142 (1981) ...................................................................... 8
Sanford v Michigan
,
506 Mich 10; 954 NW2d 82 (2020) .......................................................................... 6
Reed v Rustin
,
375 Mich 531; 134 NW2d 767 (1965) .................................................................... 10
Simons v Diamond Match Co,
159 Mich 241; 123 NW 1132 (1909)......................................................................... 9
Smith v Lloyd,
29 Mich 382 (1874) ................................................................................................... 7
Titan Ins Co v Hyten
,
491 Mich 547; 817 NW2d 562 (2012) .................................................................... 24
Twitchell v Drury
,
25 Mich 393 (1872) ................................................................................................... 9
Walker v Bowen,
333 Mich 13; 52 NW2d 574 (1952) ........................................................................ 11
White v Gibson,
146 Mich 547; 109 NW 1049 (1906) .................................................................... 2, 9
Out-of-State Decisions
Berger v Weinstein,
63 Pa Super Ct 153 (1916) ............................................................................... 13, 20
Bethurem v Hammett
,
736 P2d 1128 (Wy, 1987) .................................................................................... 2, 19
Bragdon v Town of Vassalboro
,
780 A2d 299 (Me, 2001) ......................................................................................... 20
Brunke v Pharo,
3 Wis2d 628; 89 NW2d 221 (1958) ........................................................................ 21
RECEIVED by MSC 7/11/2022 10:00:56 AM
vii
Carstensen v Cambridge Zoning Bd of App,
11 Mass App Ct 348; 416 NE2d 522 (1981)........................................................... 20
Domer v Sleeper
,
533 P2d 9 (Alas, 1975) ........................................................................... 2, 15, 16, 17
Feit v Donahue,
826 P2d 407 (Colo App, 1992) .......................................................................... 21, 22
FFG, Inc v Jones,
6 Haw App 35; 708 P2d 836 (1985) ........................................................... 17, 20, 21
Frimberger v Anzelotti
,
25 Conn App 401; 594 A2d 1029 (1991) ................................................................ 16
Garrison v Berryman
,
225 Kan 644; 594 P2d 159 (1979) .......................................................................... 20
Gaier v Berkow
,
90 NJ Super 377; 217 A2d 642 (App Div, 1966) ................................................ 2, 16
Lohmeyer v Brown
,
170 Kan 442; 227 P2d 102 (1951) .......................................................................... 20
McCrae v Giteles
,
253 So2d 260 (Fla App, 1971) ................................................................................ 16
Monti v Tangora
,
99 Ill App3d 575; 425 NE2d 597 (1981) ................................................................ 16
Moyer v De Vincentis Const Co,
107 Pa Super 588; 164 A 111 (1933) ................................................................ 19, 20
Oatis v Delcuze
,
226 La 751; 77 So2d 28 (1954)............................................................................... 20
Praegner v Kinnebrew & Ratcliff
,
156 La 132; 100 So 247 (1924) ............................................................................... 19
Silverblatt v Livadas
,
340 Mass 474; 164 NE2d 875 (1960) ..................................................................... 17
Stone v Sexsmith
,
28 Wn2d 947; 184 P2d 567 (1947) ......................................................................... 15
RECEIVED by MSC 7/11/2022 10:00:56 AM
viii
Other Authorities
Nykanen & Long, 2005 Annual Survey of Michigan Law,
Real Property
,
52 Wayne L Rev 941 (2006) ................................................................................... 23
14 Powell on Real Property ..................................................................................... 6
Timmer,
Seller and Agent Liability for Property Defects,
46 Mich Real Prop Rev 58 (2019) .................................................................... 22, 23
RECEIVED by MSC 7/11/2022 10:00:56 AM
ix
Statement of the Basis for this Court’s Jurisdiction
Amicus Curiae Real Property Law Section of the State Bar of Michigan (the
“RPLS”) does not dispute the statements of jurisdiction set forth in the supplemental
briefs from Defendants-Appellants (“Defendant”) and Plaintiffs-Appellees
(“Plaintiffs”).
RECEIVED by MSC 7/11/2022 10:00:56 AM
x
Statement of Interest of the Real Property Law Section
The RPLS is a voluntary membership society of the State Bar of Michigan.
RPLS membership is open to all members of the State Bar of Michigan, but generally
consists of attorneys that practice and are interested in real property law. The RPLS’
mission includes providing information about current issues in real property law and
promoting the accurate and efficient administration of real property law in Michigan.
The Court of Appeals decision that a property’s latent violation of a building code
provision represents the seller’s breach of the warranty against encumbrances in a
warranty deed is an issue of interest to the membership of the RPLS. That issue may
affect the practice of real property law in Michigan including conveyancing,
transactions, and title insurance. The parties have indicated that there is no
published Michigan case that addresses the issue, meaning that the Court of Appeals
decision may have broad influence despite its unpublished status. Because the Court
of Appeals decision has potentially wide impact, and the RPLS membership has an
interest in the correct resolution of the issue in this case, the RPLS requested leave
to submit a Brief Amicus Curiae concerning the application for leave to this Court.
When the Court granted leave to appeal in its April 20, 2022 Order, it invited the
RPLS to submit a supplemental brief amicus curiae.
RECEIVED by MSC 7/11/2022 10:00:56 AM
xi
Statement of the Question Presented
Michigan law establishes that the covenant against incumbrances in a
warranty deed provides the grantor’s warranty that there are no interests in or rights
to the property that are a burden on the property’s title. Title pertains to ownership,
while a building code violation arises out of a property’s physical condition. Did the
Court of Appeals reversibly err when it decided that a building code violation
breached a grantor’s warranty against incumbrances?
Plaintiffs answer “no.”
Defendants answer “yes.”
The RPLS answers “yes.”
RECEIVED by MSC 7/11/2022 10:00:56 AM
1
I. Introduction
The issue in this appeal involves whether a building code violation is a breach
of a warranty deed’s warranty against incumbrances.
1
Importantly, the issue is not
whether Plaintiffs are entitled to recovery under any theory. Plaintiffs presented
theories of recovery including fraud, misrepresentation, fraudulent concealment, and
others. The jury granted Plaintiffs relief on those theories, concluding that
Defendants failed to disclose material facts about the property’s physical condition,
and awarded damages for both economic and noneconomic losses. Those issues are
not before this Court. Rather, the issue is whether there was a breach of the warranty
against incumbrances that arose out of the physical condition of the property in
violation of a building code.
Under Michigan law, a property’s violation of a building code is not a breach of
a deed’s warranty against incumbrances because the warranties provided in a deed
pertain to a property’s title and not its physical condition. The Legislature provided
that any conveyance “worded in substance” as “A.B. conveys and warrants to C.D.” is
a conveyance that includes warranties that the property is “free from all
incumbrances.”
2
Michigan law at the time that the Legislature adopted that
language, afterward, and today, establishes that incumbrances pertain to whether
the grantor can deliver title unencumbered by other interests in or liens against the
1
No counsel for any party authored this Brief in whole or in part, and no counsel or party made any
monetary contribution intended to fund the preparation or submission of this Brief. No person made
any monetary contribution to this Brief’s preparation.
See
MCR 7.312(H)(4).
2
MCL 565.151. Courts and statutes have been inconsistent with the form of the term as
“incumbrances” or “encumbrances.” Because MCL 565.151 refers to “incumbrances,” the RPLS uses
that form.
RECEIVED by MSC 7/11/2022 10:00:56 AM
2
property’s title.
See, e.g., Post v Campau,
42 Mich 90, 94-95 (1879) (holding that an
incumbrance is “a burden upon the
title
,” such as “a right of way,” “a condition which
may work a forfeiture of the estate,” “a right to take off timber,” a “right of dower,” or
other “right to, or interest in the land” (emphasis added));
White v Gibson,
146 Mich
547, 549; 109 NW 1049 (1906) (“taxes, unpaid when title passes, which have by the
tax law become a lien upon the land, are incumbrances”).
Contrary to the Court of Appeals’ suggestion, courts in other states have held
that violations of building codes do not breach a deed’s warranty against
incumbrances because they pertain only to a property’s physical condition.
See, e.g.,
Gaier v Berkow
, 90 NJ Super 377, 379; 217 A2d 642 (App Div, 1966) (“plaintiffs’ claim
for breach of a covenant against encumbrances cannot be predicated on the necessity
of repair or alteration to conform to the provisions of” a statute regulating housing
construction). Indeed, the Alaska Supreme Court described the “majority view” that
“an ‘unknown’ or ‘hidden’ building code violation does not constitute an encumbrance”
under a warranty deed.
Domer v Sleeper
, 533 P2d 9, 12 (Alas, 1975). The cases that
the Court of Appeals cited address encroachments and zoning issues, not building
code violations.
See, e.g., Bethurem v Hammett
, 736 P2d 1128, 1132, 1137 (Wy, 1987)
(explaining that there, “the fence encroached approximately 17 feet into the city
street” along with other encroachments, and therefore “rescission was legally
justified”). Those cases therefore addressed different issues than the issue in this
case.
RECEIVED by MSC 7/11/2022 10:00:56 AM
3
Similarly, Michigan cases explain that the parties’ knowledge of an
incumbrance against title that breaches the warranty is immaterial.
See Lavey v
Graessle
, 245 Mich 681; 224 NW 436 (1929). The Court of Appeals’ decision that the
warranty against incumbrances includes physical defects imposes strict liability on
sellers for the property’s compliance with building codes. Plaintiffs’ focus on
Defendants’ knowledge of the alleged physical problems demonstrates that Plaintiffs
possessed other claims against Defendants that do not require this Court to expand
the warranty against incumbrances beyond its established meaning under Michigan
law. The RPLS therefore respectfully requests that this honorable Court issue an
opinion confirming that a building code violation is not a breach of the warranty
against incumbrances.
II. Statement of Facts
The RPLS accepts the facts recited in the parties’ briefing. It emphasizes that
the deed from Defendants to Plaintiffs provided that Defendants “convey and warrant
to” Plaintiffs the subject property, meaning that the deed was a warranty deed under
MCL 565.151. Otherwise, the facts that will be known to the bench and bar as they
attempt to apply the Court of Appeals’ decision are the facts recited in that court’s per
curiam opinion. That recitation was as follows:
This case arises out of Galvan’s purchase of defendants’ condominium
unit in 2017. Prior to the purchase, plaintiffs had the home inspected.
They also received a seller’s disclosure form, which did not disclose any
known problems with the unit, and so they made an offer, which
defendants accepted. Plaintiffs received a warranty deed for the Ann
Arbor property. Before moving in, Galvan painted and installed new
flooring, but while doing so, he found staining on the drywall in the
kitchen. Galvan contacted the condominium association and saw a
number of records of previous maintenance visits for leaks and plumbing
RECEIVED by MSC 7/11/2022 10:00:56 AM
4
issues in the unit. Galvan also saw that one of defendants, Hwai-Tzu,
had signed a unit modification responsibility form, which showed that
the upstairs walls had been moved and the neighboring unit encroached
on Galvan’s unit in the upstairs bathroom. Galvan hired a professional
to remediate the moisture and mold found in the unit, and the company
found that there was no firewall between Galvan’s unit and the
neighboring unit.
Galvan contacted the City of Ann Arbor and learned that the lack of a
firewall “was a major hazard.” The City of Ann Arbor’s building
department director sent Galvan a letter informing him that the
Michigan building code required firewalls between units and that a
previous owner of plaintiffs’ unit had combined it with the neighboring
units in 1984. It was unknown when the units were converted back into
separate units, but Galvan learned that there were no firewalls between
his unit and either of the neighboring units. In order to rebuild the
firewalls between the units, one of plaintiffs’ neighbors would need to
lose square footage in their unit. As a result of the work that needed to
be done on the condominium, plaintiffs moved into a separate apartment
in September 2017.
In January 2018, the City of Ann Arbor sued plaintiffs and their two
neighbors, seeking installation of firewalls between the units. The trial
court ordered that Galvan pay $9,000 to bring one of the neighboring
walls into compliance and $9,000 to the other neighbor in order to
compensate her for the transfer of a portion of her unit to him, as was
necessary in order to install the firewall. Plaintiffs did not have enough
money to pay the total, so the condominium association placed a lien on
the property until they paid it, which plaintiffs later did.
Plaintiffs thereafter sued defendants for fraud, misrepresentation,
fraudulent concealment, silent fraud, innocent misrepresentation,
breach of warranty, and loss of consortium due to the water issues, mold,
and a lack of firewalls between units, which violated the City of Ann
Arbor’s building codes and condominium bylaws. Plaintiffs alleged that
defendants accepted responsibility for the unit modifications, including
the previous construction on the walls, and that defendants were aware
of the water problems in the home yet failed to disclose the same.
The matter proceeded to trial and, at the end of the trial, defendants
moved the court to hold as a matter of law that the building code
violations did not constitute an encumbrance under the warranty deed.
The trial court granted defendants’ motion. Ultimately, the jury found
that defendants failed to disclose material facts about the condition of
RECEIVED by MSC 7/11/2022 10:00:56 AM
5
the property and awarded damages for Galvan’s economic losses and
Kim’s noneconomic losses. Plaintiffs moved the trial court for
reconsideration on the directed verdict, and the trial court denied the
motion on the basis that plaintiffs “failed to demonstrate a palpable
error.” This appeal followed.
Galvan v Poon
, unpublished opinion per curiam of the Court of Appeals, Docket No.
352559 (issued Aug. 19, 2021) (footnotes omitted).
III. Legal Analysis
This case presents a far-reaching issue because it involves the meaning of the
warranty against incumbrances in a statutory warranty deed. The Court of Appeals
held that, rather than being limited to incumbrances on title, the warranty against
incumbrances encompasses building code violations. This means that the grantor
delivering a statutory warranty deed not only warrants that the grantor is conveying
title that is not subject to other ownership interests – like mortgages, easements, and
liens – but also that the grantor warrants that there are no building code violations.
This places the grantor in the position of warranting, for example, that all
improvements, repairs, and other work done on the property, whether by the grantor
or the grantor’s predecessors, and whether the grantor is aware of it or not, complies
with the building codes in effect at the time of the conveyance. That expands the
warranty well beyond its established meaning under longstanding Michigan law. It
also makes grantors the guarantors of a building’s compliance with building codes
regardless of any other term of the agreement between the grantor and grantee. This
issue impacts every grantor of a warranty deed in this state.
RECEIVED by MSC 7/11/2022 10:00:56 AM
6
A. The Issue in this Case is Subject to De Novo Review
The issue in this case involves the application and interpretation of MCL
565.151 and the language in a warranty deed, which are both subject to de novo
review.
See In re Rudell Estate,
286 Mich App 391, 402-03; 780 NW2d 884 (2009)
(holding that the proper interpretation of a deed is “reviewed de novo on appeal”);
Sanford v Michigan
, 506 Mich 10, 14; 954 NW2d 82 (2020) (“This Court reviews de
novo questions of statutory interpretation”). De novo review means that this Court
owes no deference to the lower courts’ decisions.
See People v Bruner
, 501 Mich 220,
226; 912 NW2d 514 (2018).
B. Longstanding Michigan Law Establishes that the
Warranty Against Incumbrances Applies to a Property’s
Title Rather Than its Physical Condition
This Court’s decisions dating back to the early days of Michigan’s statehood,
before the Legislature adopted a standardized statutory form of warranty deed, make
clear that the warranty against incumbrances applies to a property’s title. As a
historical matter, deed covenants originated under the English common law. They
provided one of the few forms of assurance that a person purporting to convey
property owned that property in the first place.
See
14 Powell on Real Property,
§ 81A.06[1];
see also Dwight v Cutler
, 3 Mich 566, 576 (1855) (discussing “the rule in
England” that a grantor must “prove affirmatively that he has a good title”). The
covenants fell into six categories that are not entirely discrete, identified as the
covenants of seisin, the right to convey, freedom from incumbrances, warranty, quiet
enjoyment, and further assurances.
See
14 Powell on Real Property, § 81A.06[1].
Which covenants were included in any given deed depended on the agreement of the
RECEIVED by MSC 7/11/2022 10:00:56 AM
7
parties to that deed, which lead to varying and in some instances unusual deed
provisions.
See id.; see also Smith v Lloyd,
29 Mich 382 (1874) (referring to the
“somewhat peculiar” covenants in a deed).
In 1881, the Legislature included the warranty against incumbrances as a
term in a standardized warranty deed when it adopted the provision that today is set
forth in MCL 565.151. That provision establishes that a deed worded in substance as
conveying and warranting property grants several specific covenants including the
covenant against incumbrances:
That any conveyance of lands worded in substance as follows: “A.B.
conveys and warrants to C.D. (here describe the premises) for the sum
of (here insert the consideration),” the said conveyance being dated and
duly signed, sealed and acknowledged by the grantor, shall be deemed
and held to be a conveyance in fee simple to the grantee, his heirs and
assigns, with covenant from the grantor for himself and his heirs and
personal representatives, that he is lawfully seized of the premises, has
good right to convey the same, and guarantees the quiet possession
thereof; that the same are free from all incumbrances, and that he will
warrant and defend the title to the same against all lawful claims.
The statute does not address the breadth of the covenant from the grantor that the
property is free from all incumbrances. But because the warranty against
incumbrances was one of the covenants that arose out of the common law, the
common law meaning of the warranty against incumbrances in place when the
Legislature adopted this language controls the covenant’s breadth.
See
MCL 8.3a
(“technical words and phrases, and such as may have acquired a peculiar and
appropriate meaning in the law, shall be construed and understood according to such
peculiar and appropriate meaning”);
see also Grange Ins Co v Lawrence
, 494 Mich
475, 493; 835 NW2d 363 (2013) (holding that terms with a meaning at common law
RECEIVED by MSC 7/11/2022 10:00:56 AM
8
“must be understood according to that particular meaning”);
Sam v Balardo
, 411 Mich
405, 425; 308 NW2d 142 (1981) (“words employed by the Legislature derive their
meaning from the common-law usage at the time of the passage of the act”).
1. The Common Law Treated the Covenant Against Incumbrances
as Warranting a Property’s Title, Not its Physical Condition
This Court’s decisions establish that the common law meaning of the covenant
against incumbrances is that the grantor warrants that there are no incumbrances
on the property’s title. An early example comes from
Post v Campau
. There, the
plaintiff sued “for the breach of a covenant against encumbrances.”
Id
., 42 Mich at
92. The property involved had been subject to an execution sale that allowed a right
of redemption through which the former owner could recover the property. Before
the right of redemption expired, the property was conveyed with a covenant against
incumbrances. The existence of the former owner’s right to redeem the property was
the basis for the alleged breach of that covenant. Analyzing when the breach
occurred, this Court reviewed the meaning of incumbrances, explaining that they
include anything that is a burden on title:
But anything is an encumbrance which constitutes
a burden upon the
title
; a right of way; a condition which may work a forfeiture of the
estate; a right to take off timber; a right of dower, whether assigned or
unassigned. In short,
every right to, or interest in the land
, to the
diminution of the value of the land, but consistent with the passage of
the fee by the conveyance.
Id.
at 94-95 (cleaned up; emphasis added). In other words, an incumbrance does not
prevent the conveyance of title, but results in the title conveyed being subject to some
burden in the form of a “right to, or interest in the land.”
RECEIVED by MSC 7/11/2022 10:00:56 AM
9
Other early cases from this Court, decided both before and in the years after
the Legislature provided a statutory form of warranty deed that includes the
covenant against incumbrances, reinforce the common law meaning of an
incumbrance as a right to or interest in land. The rights and interests that may be
an incumbrance have been held to include mortgages, leases, easements, and other
liens on the property.
See, e.g., Detroit & M R Co v Griggs
, 12 Mich 45, 51 (1863)
(discussing a mortgage as an incumbrance);
Case v Erwin
, 18 Mich 434, 444-45 (1869)
(discussing a mortgage on property as breaching the covenant against
encumbrances);
Twitchell v Drury
, 25 Mich 393, 394-95 (1872) (discussing a mortgage
as an incumbrance);
Haldane v Sweet
, 55 Mich 196, 199-200; 20 NW 902 (1884)
(discussing a lease as an incumbrance);
Lindsay v Eastwood
, 72 Mich 336, 337-38; 4
NW 455 (1888) (discussing a tax lien as an incumbrance);
White v Gibson,
146 Mich
at 549 (“taxes, unpaid when title passes, which have by the tax law become a lien
upon the land, are incumbrances”);
Simons v Diamond Match Co,
159 Mich 241, 247;
123 NW 1132 (1909) (discussing a lease as an incumbrance);
Lavey v Graessle,
245
Mich at 683 (discussing an easement as an encumbrance).
This Court has continued to turn to the definition of “incumbrance” that it
discussed in
Post v Campau
in contemporary cases. In
Darr v First Fed Savings &
Loan Assoc’n
, 426 Mich 11; 393 NW2d 152 (1986), this Court analyzed whether a land
contract vendee’s interest in a property was an incumbrance. To do so, the Court
cited
Post
and reiterated that an incumbrance includes a “right to, or interest in the
RECEIVED by MSC 7/11/2022 10:00:56 AM
10
land, to the diminution of the value of the land, but consistent with the passage of
the fee by the conveyance.”
Id.
, 426 Mich at 20.
Incumbrances referring to a right to or interest in property dovetails with the
principle that the covenant against incumbrances is breached when it is made. After
all, the covenant confirms that property is not subject to some other person’s “right
to, or interest in” the property. That right or interest either exists or not at the time
of the conveyance.
See, e.g., Reed v Rustin
, 375 Mich 531, 534; 134 NW2d 767 (1965)
(holding that a permanent easement in the property conveyed was an incumbrance
that breached the covenant at the time that the grantor provided the warranty deed).
If such a right or interest exists at the time of the conveyance, the covenant is
breached when it is made; if not, there is no breach.
2. Building Code Violations Pertain to a Property’s Physical Condition,
Not its Title
The Court of Appeals’ decision conflicts with these decisions because it expands
the breadth of the covenant against incumbrances to embrace a property’s compliance
with building codes, which is not a right to or an interest in the property. That court
seemed to focus on language, recited in cases including
Darr
, that an incumbrance is
anything that causes a “diminution of the value” for the property. But
Darr,
and
Post
v Campau
long before, discuss a diminution in value because of a “right to, or interest
in” the property that is a “burden upon the title.”
Post,
42 Mich at 95. The focus on
anything that might cause a diminution in value, without accounting for the
precedents offering that phrase in the context of burdens on title, resulted in the court
expanding the warranty beyond anything established in Michigan law.
RECEIVED by MSC 7/11/2022 10:00:56 AM
11
The context of the precedential cases involved disputes over “title,” which
refers to ownership.
See Post,
42 Mich at 95;
see also
MCR 3.411(D) (providing for
courts to determine “title to the premises” in an action to determine interests in land);
Walker v Bowen,
333 Mich 13, 21; 52 NW2d 574 (1952) (discussing a “claim of title”
as a person intending to “hold [property] as his own”);
In re Forfeiture of $53,
178
Mich App 480, 493; 444 NW2d 182 (1989) (identifying an “owner” as a person in whom
is vested the “title of property”). There is nothing in the Court of Appeals decision
that suggests that Defendants did not own the property or that the building code
violations threatened the ownership or title that Plaintiffs obtained from Defendants.
In other words, there is nothing that suggests that the issue in this case had anything
to do with title.
Rather, the Court of Appeals held that the code violations were an
incumbrance on the property because they subjected Plaintiffs to a lawsuit and
rendered the property unlivable and unmarketable. It may be true that the property
was undesirable and even unlivable, but that has nothing to do with title to the
property.
Rather, the property’s issues with livability and marketability arose out of its
physical condition, which apparently violated the building code. The Stille-DeRossett-
Hale Single State Construction Code Act, MCL 125.1501
et seq
., authorizes the state
to promulgate a building code, which is the code that the City of Ann Arbor enforced.
It explains that the purpose of the code pertains to construction, materials, and other
factors affecting the physical condition of but not the title to property:
RECEIVED by MSC 7/11/2022 10:00:56 AM
12
The code shall be designed to effectuate the general purposes of this act
and the following objectives and standards:
(a) To provide standards and requirements for construction and
construction materials consistent with nationally recognized standards
and requirements.
(b) To formulate standards and requirements, to the extent practicable
in terms of performance objectives, so as to make adequate performance
for the use intended the test of acceptability.
(c) To permit to the fullest extent feasible the use of modern technical
methods, devices, and improvements, including premanufactured units,
consistent with reasonable requirements for the health, safety, and
welfare of the occupants and users of buildings and structures.
(d) To eliminate restrictive, obsolete, conflicting, or unnecessary
construction regulations that tend to increase construction costs
unnecessarily or restrict the use of new materials, products, or methods
of construction, or provide preferential treatment to types or classes of
materials or products or methods of construction.
(e) To ensure adequate maintenance of buildings and structures
throughout this state and to adequately protect the health, safety, and
welfare of the people.
MCL 125.1504(3);
see also
Ann Arbor Code § 8:101 (“The Building Code, as
promulgated by the State of Michigan under the authority of the Stille-DeRossett-
Hale Single State Construction Code Act . . . shall be enforced by the City”).
Likewise, the litigation that the City of Ann Arbor brought against Plaintiffs
arose out of the property’s condition, not its title. In other words, regardless of
whether the property was desirable, livable, or anything else, Defendants conveyed
title to that property to Plaintiffs, and Plaintiffs became the owners, not subject to
any other person’s right to, or interest in, the property. Indeed, if Plaintiffs had not
become the owners, the City of Ann Arbor would not have looked to them to remedy
RECEIVED by MSC 7/11/2022 10:00:56 AM
13
the code violations
. See
Ann Arbor Code § 8:116 (providing for notice of building code
violations to a property’s “owner”). Because the code violations pertain to the
property’s physical condition and not its title, the code violations do not fall within
the definition of incumbrances under Michigan law, which include only a “right to, or
interest in” property that is a “burden upon the title.”
3
C. The Out-of-State Cases that the Court of Appeals Cited Do Not Treat
the Covenant Against Incumbrances as Warranting that a Property’s
Physical Condition Complies with Building Codes
The Court of Appeals cited several out-of-state cases to support its conclusion
that the covenant against incumbrances warrants a property’s compliance with
building codes, but the cases that it cited do not stand for that proposition. A number
of cases from other states that actually analyze whether the covenant against
incumbrances guarantees compliance with a building code, however, conclude that it
does not.
1. Courts that Have Considered the Issue have Concluded that a Building
Code Violation Is Not a Breach of the Covenant Against Incumbrances
Perhaps the first case to directly address whether the covenant against
incumbrances protects against building requirements was the Pennsylvania Superior
Court’s decision in
Berger v Weinstein,
63 Pa Super Ct 153 (1916). There, defendants
hired a contractor to construct a party wall in a house; the wall was built four inches
thick. Defendants later conveyed the property to plaintiff. After some time, legal
3
Post v Campau
, 42 Mich at 94-95. If, on the other hand, a lien or a lis pendens was recorded against
the property’s title, including possibly because of a code violation, that lien or lis pendens may have
qualified as an “incumbrance.”
See
MCL 565.25(2)(e) (identifying a lis pendens as an “instrument of
encumbrance”).
RECEIVED by MSC 7/11/2022 10:00:56 AM
14
proceedings were brought against plaintiff for maintaining a party wall that was not
the required nine-inches thick. Plaintiff had to pay to correct the wall’s thickness to
avoid legal penalties.
See id
. at 155-56. Plaintiff then sued defendants, arguing that
the defendants breached the covenant against incumbrances, and obtained a
judgment against defendants on that basis.
See id.
at 156-57.
The superior court reversed, holding that the covenant against incumbrances
did not protect against the party wall’s failure to comply with building requirements.
It began its analysis by noting the definition of an incumbrance, which, identical to
Michigan law, included rights to or interests in land:
An encumbrance is any right to, or interest in, land which may subsist
in third persons to the diminution of the value of the estate of the tenant
but consistently with the passing of the fee . . . Familiar illustrations
are mortgages, judgments and other liens, leases, executory contracts of
sale and taxes assessed. Some easements have been held to be
encumbrances because of their nature and the fact that they are
appurtenant to the land: ways, water rights and the like. But whether
lien, easement or otherwise the impediment is a right to, or interest in,
land.
Id.
at 157. The court then noted that, as under Michigan law, the covenant against
incumbrances is breached when the deed is delivered, if at all:
The covenant against encumbrances is in praesenti and is broken when
the deed is delivered, if broken at all. It does not include charges created
after the execution of the contract . . . It is not claimed that any lien
existed at the time the defendants conveyed the property, nor was there
any easement.
Id.
Rather than a lien that was in place at the time of the deed, the court explained
that the “defect alleged was a condition of a portion of the party wall in violation of
the building law. This was a condition which, if it existed, the law authorized the
proper authorities to suppress in the manner pointed out in the statute.”
Id.
The court
RECEIVED by MSC 7/11/2022 10:00:56 AM
15
then pointed out how, if the covenant against incumbrances warranted against
municipal enforcement of building laws, every grantor would become a guarantor of
the property’s compliance with those laws.
See id.
(stating that the building laws
apply “to any one who may become an owner thereof after the work has been done”).
That is contrary to the definition of an incumbrance:
Some defects go to the condition of the building rather than to the
quality of the title . . . The condition of the premises as to dilapidation
or the existence of a nuisance or the necessity of reparation to conform
to building laws has not so far as we have been able to discover ever been
held to be a fact affecting the title or in the class of encumbrances.
Id.
at 158. Plaintiff’s claim therefore did not demonstrate “the existence of
encumbrances” in breach of the covenant.
Id
. at 161.
A number of other courts have taken the same view. In
Stone v Sexsmith
, 28
Wn2d 947; 184 P2d 567 (1947), defendants conveyed a property to plaintiffs through
a warranty deed covenanting that the property was “free from all encumbrance.”
Id
.
at 950. Several months afterward, the state electrical inspector required “extensive
changes” to the property’s wiring. Plaintiffs argued that “the defective wiring
constituted an encumbrance within the purview of an agreement to convey ‘free from
all encumbrance.’”
Id.
The court rejected that argument, holding that “the condition
of the wiring, which the state thereafter, in the exercise of its police power, compelled
to be repaired and replaced, did not constitute an encumbrance.”
Id
. at 952.
Similarly, in
Domer v Sleeper
a property was constructed in a manner that did not
comply with the building code. The builder conveyed it to defendant, who in turn
conveyed it to plaintiff through a warranty deed that included a covenant against
incumbrances. During plaintiff’s ownership, a fire damaged the property.
RECEIVED by MSC 7/11/2022 10:00:56 AM
16
Subsequent inspections revealed building code violations. Plaintiff sued defendants,
arguing that the “code violations constituted encumbrances which have rendered
[plaintiff’s] title to the premises unmarketable” and seeking damages to remedy the
violations.
Id
., 533 P2d at 10. Citing
Stone,
the Alaska court noted that “electric,
plumbing, sanitary, fire, safety, and building inspectors, and perhaps others, may
restrict or prohibit the use of property in the exercise of police power,” and that this
“may be an inconvenience and a restriction upon the use of the property,” but it “is
not an encumbrance.”
Domer,
533P2d at 12. The Alaska court explained that under
Alaska law, as under Michigan law, an incumbrance is a “right to, or interest in”
property.
Id.
at 11.
Domer
stated that the principle that “an ‘unknown’ or ‘hidden’ building code
violation does not constitute an encumbrance” that breaches a warranty deed
“appears to be the majority view.”
Id.
at 12. Certainly other states in addition to
Pennsylvania, Washington, and Alaska, have also adopted the approach that a
building code violation is not a breach of the covenant against incumbrances.
See,
e.g., Gaier v Berkow
, 90 NJ Super at 379 (“plaintiffs’ claim for breach of a covenant
against encumbrances cannot be predicated on the necessity of repair or alteration to
conform to the provisions of” construction regulations);
McCrae v Giteles
, 253 So2d
260, 261 (Fla App, 1971) (“a housing code violation is not an ‘encumbrance’ within the
meaning of a covenant against encumbrances”);
Monti v Tangora
, 99 Ill App3d 575,
582; 425 NE2d 597 (1981) (“a building code violation is not of itself an encumbrance”);
Frimberger v Anzelotti
, 25 Conn App 401, 408-09; 594 A2d 1029 (1991) (“Although,
RECEIVED by MSC 7/11/2022 10:00:56 AM
17
under the statute, [the government] could impose fines or restrict the use of the
property until it is brought into compliance, such a restriction is not an
encumbrance”);
FFG, Inc v Jones
, 6 Haw App 35, ; 708 P2d 836 (1985) (agreeing that
“building code violations do not constitute encumbrances);
see also Silverblatt v
Livadas
, 340 Mass 474, 479; 164 NE2d 875 (1960) (holding that inchoate building
code violations were not an encumbrance).
2. The Parties’ Knowledge of the Condition Creating a Breach of the
Warranty Against Incumbrances Does Not Provide a Distinction
Plaintiffs’ discussion of the out-of-state cases, including
Domer v Sleeper
for
example, emphasize that building code violations were held not to breach the
warranty against incumbrances when the sellers were not aware of them. But that
should not make any difference. Critically, Michigan law attributes no significant to
the parties’ knowledge of an incumbrance that breaches the covenant against
incumbrances. If an incumbrance is present, the covenant is breached, and
knowledge of the incumbrance “
is entirely immaterial
.”
Lavey v Graessle
, 245 Mich
at 684 (emphasis added). This harkens back to the warranty against incumbrances
protecting title to the property, not the property’s physical condition. A seller may or
may not know or understand that the property being sold has incumbrances on title,
but the incumbrance burdens title all the same, and the warranty is breached
regardless of that knowledge or understanding. Likewise, Michigan courts have held
that the covenant against incumbrances applies against both known and unknown
“incumbrances or defects of title; and, with a covenant of this kind, the purchaser is
not called upon for the exercise of any diligence.”
Edwards v Clark
, 83 Mich 246, 249;
RECEIVED by MSC 7/11/2022 10:00:56 AM
18
47 NW 112 (1890). If building code violations are within the warranty against
incumbrances, the same rule would apply. The warranty would both impose strict
liability on sellers for conditions of a property that violate a building code, and relieve
buyers of any burden of conducting diligence into such matters before purchasing a
property.
The Court must consider, also, other consequences of the rule that Plaintiffs
seem to favor. If the warranty against incumbrances in a deed depended on the
seller’s knowledge of the incumbrance, that would mean that sellers could use
warranty deeds to convey property subject to burdens on title such as liens,
easements, mortgages, and others, and escape responsibility for the presence of those
incumbrances if they simply did not know about them. There is no basis for this
change. The current state of the law has served buyers and sellers in Michigan well,
with knowledge of actual incumbrances on title being immaterial, while knowledge
concerning the physical condition of a property may be a factor that could render
sellers liable for damages.
See Lavey v Graessle
, 245 Mich 684 (explaining that
knowledge of title incumbrances is immaterial);
Clemens v Lesnak
, 200 Mich App
456, 460; 505 NW2d 283 (1993) (addressing a seller’s misrepresentation concerning
the condition of property). There is no sound reason for any change in this aspect of
Michigan real property law.
3. The Court of Appeals Erred by Relying on Cases that Did Not Analyze
Building Code Violations as Alleged Breaches of the Covenant Against
Incumbrances
Regardless of the parties’ knowledge of a burden, the cases that the Court of
Appeals cited in support of its decision addressed actual problems with title, or
RECEIVED by MSC 7/11/2022 10:00:56 AM
19
zoning. For example, the first out-of-state case that the Court of Appeals cited was
Praegner v Kinnebrew & Ratcliff
, 156 La 132; 100 So 247 (1924). That case involved
an agreement for plaintiff to purchase defendants’ interest in a lease. Plaintiff
retained an attorney to review title to the leased property. The attorney found “an
apparent conflict of title between the” person that defendants believed to own the
property and another person.
Id.
at 134. Learning that there were “two chains of
title covering this particular property,” plaintiff refused to close the purchase. The
Louisiana court agreed with plaintiff, stating that “a party cannot be compelled to
accept a title upon which a claim rests and which is suggestive of serious future
litigation.”
Id
. at 136. From that, the Court of Appeals concluded that a building
code violation is a breach of the covenant against incumbrances.
Similarly, the Court of Appeals relied on the Wyoming Supreme Court’s
decision in
Bethurem v Hammett
, which did not involve anything about a building
code but instead concerned “structures that encroached into the dedicated street.”
Id.,
736 P2d at 1129. This created an issue about title – ownership – of the buildings
and the property underlying them.
See id.
at 1134. On that basis, the Wyoming court
rescinded the sale.
See id
. at 1137.
Another out-of-state case that the Court of Appeals cited was
Moyer v De
Vincentis Const Co,
107 Pa Super 588; 164 A 111 (1933), from the Pennsylvania
Superior Court. There, plaintiff contracted to purchase a house that defendant built,
but refused to close because defendant built the house in the zoning setback area.
See id.
at 589. The court compared this to an encroachment, concluded that defendant
RECEIVED by MSC 7/11/2022 10:00:56 AM
20
could not deliver unincumbered title, and held that plaintiff could not be required to
purchase the property.
See id.
at 593. There was no discussion of a building code,
which is telling coming from the same court that decided
Berger v Weinstein.
Whatever the court thought about the encroachment into the setback area in
Moyer,
the court viewed that as distinct from the building code issues pertaining to the
“condition of the premises as to dilapidation or the existence of a nuisance or the
necessity of reparation to conform to building laws,” which that court held in
Berger
does not affect title and is not an incumbrance.
4
The other out-of-state cases that the Court of Appeals cited are similarly
inapplicable. They involved either subdivision restrictions or zoning violations.
See
Lohmeyer v Brown
, 170 Kan 442, 444; 227 P2d 102 (1951) (allowing rescission where
a house was built in a setback and in violation of a subdivision dedication restriction);
Oatis v Delcuze
, 226 La 751, 753; 77 So2d 28 (1954) (allowing a purchaser to recover
a deposit and other costs for refusing to purchase a three-unit building that was
located on property zoned only for one- or two-unit buildings);
Garrison v Berryman
,
4
Id.
, 63 Pa Super at 158. Notably, an analogy between violations involving zoning and violations
involving building codes is unavailing. The Legislature made clear in the Stille-DeRossett-Hale Single
State Construct Code Act that they are not the same.
See
MCL 125.1502a (1)(o) (“Construction
regulation does not include a zoning ordinance or rule issued pursuant to a zoning ordinance and
related to zoning”). The distinction set forth in this Act reflects that zoning ordinances and building
codes serve different purposes. “Whereas the main purpose of zoning is to stabilize the use of property
and to protect an area from deleterious uses, a building code relates to the safety and structure of
buildings.”
Carstensen v Cambridge Zoning Bd of App,
11 Mass App Ct 348, 356-57; 416 NE2d 522
(1981) (cleaned up);
see also
Bragdon v Town of Vassalboro
, 780 A2d 299, 302 (Me, 2001) (stating that
zoning divides a municipality into zones that are treated differently, while building codes treat all
buildings the same). A structure that violates a zoning ordinance, for example, is not even supposed
to be located where it is; that is the reason that zoning can affect title and may be an incumbrance. A
structure that violates a building code, on the other hand, requires repair to meet safety standards.
That does not impact title and does not breach the covenant against incumbrances. “To rule otherwise
[would] create instability in real estate transactions since every minor [zoning] code violation would
potentially cloud title.”
FFG, Inc v Jones
, 6 Haw App at 48.
RECEIVED by MSC 7/11/2022 10:00:56 AM
21
225 Kan 644; 594 P2d 159 (1979) (“rescinding a real estate transaction on the ground
of mutual mistake” without any mention of incumbrances).
To support the Court of Appeals’ conclusion, Plaintiffs cite to the Wisconsin
court’s decision in
Brunke v Pharo
, 3 Wis2d 628; 89 NW2d 221 (1958), but that case
involved different facts. There, the court held that a code violation was an
incumbrance when a governmental agency had already begun enforcement against
the code violations before the property was even sold.
See id
. at 631. That does not
help Plaintiffs on the facts of this case. Further, it represents an approach that most
courts have found unwise. For example, declining to adopt the approach from
Brunke
, the New Jersey Supreme Court explained that, rather than expanding the
warranty against incumbrances to encompass physical defects, the better approach
is to leave such matters to be contracted between buyers and sellers:
To expand the concept of encumbrance as urged by plaintiffs would
create uncertainty and confusion in the law of conveyancing and title
insurance. A title search would not have disclosed the violation, nor
would a physical examination of the premises. The better way to deal
with violations of governmental regulations, their nature and scope
being as pervasive as they are, is by contract provision which can give
the purchaser full protection in a situation such as is here presented.
Fahmie v Wulster
, 81 NJ 391, 397; 408 A2d 789 (1979);
see also FFG, Inc v Jones
, 6
Haw App at 49 (rejecting
Brunke
in favor of
Fahmie
). Were this Court to rely on
Brunke
in the instant case, it would not only be expanding that decision beyond its
facts, it would also be placing itself at odds with authorities that “nearly uniformly
hold that the sale of a property with structures built in violation of a building code is
RECEIVED by MSC 7/11/2022 10:00:56 AM
22
not a breach of the covenant against encumbrances.”
Feit v Donahue
, 826 P2d 407,
411 (Colo App, 1992).
D. Michigan Law Provides Remedies for Grantees Like Plaintiffs Without
the Need to Alter the Meaning of the Covenant Against Incumbrances
Grantees in the position that Plaintiffs are in should and do have remedies
available to them, but those remedies do not depend on the warranty against
incumbrances in a deed. Here, Plaintiffs focus on Defendants knowledge of the
defects, but that brings Plaintiffs’ claims within theories that have nothing to do with
deed warranties. Under Michigan law, if Defendants made false representations
about the property’s condition before Plaintiffs’ purchase, Defendants would
generally be liable to Plaintiffs to the extent that Plaintiffs relied on those
representations.
See Clemens v Lesnak
, 200 Mich App at 460 (holding a seller liable
for false representations about a property’s roof and septic system notwithstanding
that the sale contract included an “as is” clause). Moreover, purchasers like Plaintiffs
are protected because Michigan law establishes that a seller cannot escape
responsibility for defects known to the seller through an “as is” clause. The Court of
Appeals has addressed those situations and held that, “‘As is’ clauses allocate the risk
of loss arising from conditions unknown to the parties.”
Lorenzo v Noel
, 206 Mich
App 682, 687; 522 NW2d 724 (1994). Indeed, buyers that find themselves in a position
like the Plaintiffs found themselves here have a range of remedies available to them
against sellers and even sellers’ agents.
See
Timmer,
Seller and Agent Liability for
Property Defects,
46 Mich Real Prop Rev 58, 60-62 (2019) (explaining that aggrieved
buyers may assert claims against sellers and agents for causes of action including
RECEIVED by MSC 7/11/2022 10:00:56 AM
23
fraud, negligent misrepresentation, silent fraud, breach of contract, mutual mistake,
and others).
In conjunction with Michigan’s Seller Disclosure Act, MCL 565.951
et seq
.,
these principles provide significant protection for purchasers. The Seller Disclosure
Act requires sellers to “Report known conditions affecting the property,” in addition
to specifically requiring disclosure of “Structural modifications, alterations, or repairs
made without necessary permits or licensed contractors.” MCL 565.957. These
disclosures must “be made in good faith,” which “means honesty in fact in the conduct
of the transaction.” MCL 565.960. So if a seller fails to disclose a known condition,
the seller will have made a misrepresentation and the buyer will have a remedy.
See
Bergen v Baker,
264 Mich
App 376, 385; 691 NW2d 770 (2004) (“the Legislature
intended to allow for seller liability in a civil action alleging fraud or violation of the
act brought by a purchaser on the basis of misrepresentations or omissions in a
disclosure statement”);
see also
Nykanen & Long, 2005 Annual Survey of Michigan
Law,
Real Property
, 52 Wayne L Rev 941, 963 (2006) (explaining that the Seller
Disclosure Act is a “tool” for buyers “to use in a fraud claim”). These remedies protect
buyers that are in the position that Plaintiffs find themselves, without the need for
this Court to expand the warranty against incumbrances beyond its established
meaning protecting against “right to, or interest in” property that is a “burden upon
the title.”
Post v Campau
, 42 Mich at 94-95.
RECEIVED by MSC 7/11/2022 10:00:56 AM
24
E. The Court of Appeals Decision Would Render a Grantor of a Warranty
Deed the Guarantor that a Property’s Physical Condition Complies with
Building Codes Regardless of the Grantor’s Knowledge or Actions
The Court of Appeals decision, and the expansion that Plaintiffs seem to seek
in the meaning of the warranty against incumbrances, would render every grantor of
a warranty deed strictly liable as the guarantor of property’s compliance with
building codes. This contrasts with certain claims on which Plaintiffs prevailed,
including fraud and misrepresentation, both of which include an element of
knowledge or recklessness as to knowledge.
See Titan Ins Co v Hyten
, 491 Mich 547,
555; 817 NW2d 562 (2012). The Court of Appeals holding that building code
violations are a breach of the covenant against incumbrances eliminates any
requirement of knowledge, action, or anything else on the part of the grantor in a
warranty deed, making the grantors strictly liable. Under the Court of Appeals
decision, grantors of warranty deeds are therefore liable for all building code
violations in the properties that they convey.
Michigan law does not support the Court of Appeals decision that violations of
a building code are breaches of a covenant against incumbrances. Plaintiffs have
other remedies available to them, and apparently succeeded with those remedies in
the trial court. As this Court explained in
Beeker v Hastings,
15 Mich 47 (1866), a
case observing that deed warranties including the covenant against incumbrances
protect against a “defect of title,” this Court cannot hand “down a principle which
might disturb many titles, and which would be likely to do more injury in other cases
than [it] would remedy in this.”
Id.
at 53, 52. A principle that the covenant against
incumbrances is breached by a property’s violation of a building code would alter
RECEIVED by MSC 7/11/2022 10:00:56 AM
25
many titles, creating liability and other issues where none was bargained between
grantor and grantee, causing more injury in those instances than it would solve here.
This Court should instead reverse the Court of Appeals analysis and confirm that the
covenant against incumbrances does not pertain to a property’s condition but protects
against matters that present a “right to, or interest in” property that is a “burden
upon the title.”
Post v Campau
, 42 Mich at 94-95.
IV. Conclusion and Request for Relief
The RPLS therefore respectfully requests that this honorable Court issue an
opinion reversing the Court of Appeals.
Respectfully Submitted,
WILLIAMS WILLIAMS RATTNER
& PLUNKETT, PC
By: /s/ Jason C. Long
Jason C. Long (P59244)
Attorneys for Amicus Curiae the Real
Property Law Section of the State Bar
of Michigan
Dated: July 11, 2022
RECEIVED by MSC 7/11/2022 10:00:56 AM
