“Laches” no, I don’t mean Latches. In a legal sense, “laches” means failing to bring your claim in a timely manner and to the prejudice of the opposing party.
A recent Michigan Court of Appeals decision highlights an example of “laches” in the context of real estate disputes and how delaying in bringing a claim in court, even a claim that might otherwise succeed, could be devasting to your case.
THE FACTS:
The case is Knight v Northpointe Bank, No. 310206, 2013 WL 276067 (Mich Ct App January 24, 2013). The Property in dispute was 240 acres of real property in Kalkaska County, Michigan. A summary of the relevant facts are as follows:
The dispute was over Plaintiff’s sister’s ability to convery 200 acres of Property to herself by using a power of attorney that her mother had given her.
Plaintiff’s mother, Laurene Marian Coe (“Mother”) owned the Property, was widowed at the time and living in Florida. Plaintiff”s sister, Charlene Diane Cutro, (“Sister”) lived in Ann Arbor, Michigan. At some point prior to June 2001, Mother executed a power of attorney that gave Sister the authority to transfer Mother’s real property in Michigan. In June 2001, Sister signed a warranty deed on behalf of Mother that transferred to herself 200 of the 240 acres. In February 2002, Mother signed a warranty deed transferring the remaining 40 acres to Plaintiff.
In March 2005, Sister borrowed $180,000 from the Defendant, Northpoine Bank (“Bank”). Sister granted the Bank a mortgage on the 200 acres that she obtained from her Mother. In October of the same year, sister transferred the 200–acre parcel to her trust. Sister died in October 2006 and Mother died in February 2007.
In August 2007, Sister’s daughter, Edith Enders, acting as the successor trustee to her mother’s trust, transferred the 200 acre parcel to herself. Thereafter, Enders made payments on the Bank’s note, but fell into arrears. The Bank foreclosed on the 200 acre parcel and purchased it at a sheriff’s sale in September 2010 for more than $193,000. The redemption period for the 200 acre parcel expired in October 2011 and the Bank began to seek a purchaser for the property.
In November 2011, Plaintiff sued the Bank, alleging that her sister, Cutro, was “disabled as a matter of law” from making the “self-dealing conveyance” of the 200 acre parcel to herself as the attorney-in-fact for her mother. Moreover, because the “defect” in Cutro’s title was “plain on the face of the public record,” the Bank could not claim to be a bona fide purchaser from the Sister, Cutro. On the basis of these allegations, Plaintiff asked the trial court to “decree” that she was the rightful owner of the property and that she owned it free of any claims by the Bank.
Bank asserted that, since Plaintiff was asking for the court to declare with its “equitable powers” that Plaintiff owned the Property, Bank asserted the equitable defense of laches. The trial court agreed with the Bank. It held that Knight’s decision to wait so long to sue prejudiced the Bank and therefore dismissed Knight’s claim as untimely under the equitable doctrine of laches.
PLAINTIFF IS ASKING THE COURT TO DO “EQUITY”
The Court made a point of noting that the Plaintiff had come to the Court asking for “equity” – Plaintiff was asking the Court to declare that she was the rightful owner of the Property, not the Bank. What Plaintiff asked for is also called a “quiet title action.” The Court, in its decision, went on to expound that there are certain requirements for a Plaintiff when they come to a Court asking the court to do “equity”.
“As our Supreme Court has explained, a complainant in equity must come to the court with a clean conscience, in good faith, and after acting with reasonable diligence: “ ‘Nothing can call forth this court into activity but conscience, good faith and reasonable diligence; where these are wanting the court is passive, and does nothing.’ “ Henderson v. Connolly’s Estate, 294 Mich. 1, 19; 292 NW 543 (1940), quoting Campau v. Chene, 1 Mich. 400, 405 (1850).
Knight v Northpointe Bank, No. 310206, 2013 WL 276067 (Mich Ct App January 24, 2013)
THE DOCTRINE OF LACHES:
The Court went on to cite the rule of law concerning laches: “Laches is an equitable tool used to remedy the inconvenience resulting from the plaintiff’s delay in asserting a legal right that was practicable to assert.” citing Public Health Dept v. Rivergate Manor, 452 Mich. 495, 507; 550 NW2d 515 (1996). As such, “when considering whether a plaintiff is chargeable with laches, we must afford attention to prejudice occasioned by the delay.” Lothian, 414 Mich. at 168. It is the prejudice occasioned by the delay that justifies the application of laches. Dunn v. Minnema, 323 Mich. 687, 696; 36 NW2d 182 (1949) Knight v Northpointe Bank, No. 310206, 2013 WL 276067 (Mich Ct App January 24, 2013).
Therefore in deciding on the issue of Laches, the Court asked the question: was there a delay in bringing the claim and, if so, did prejudice the Defendant?
The Court find that Laches prevented Plaintiff from succeeding on her claims, holding as relevant that Paintiff sued to quiet title to the 200–acre parcel more than 10 years after the transfer that she claims was invalid. Further , that during that ten-year period, the property was transferred several times. Moreover, Plaintiff’s decision to delay suing until after the Bank acquired the property at the sheriff’s sale clearly prejudiced the Bank’s ability to defend itself against Plaintiff’s lawsuit. During the ten-year delay, the two most important witnesses to the underlying facts died. Knight v Northpointe Bank, No. 310206, 2013 WL 276067 (Mich Ct App January 24, 2013)
LESSON OF THE STORY:
Under Michigan law, parties suing over real estate matters will often ask the Court to make a judgment in “equity”. They are relying on the fairness of the Court to “make the right decision.” It is a good reminder that if you are asking the Court to do some act in “equity”, that you yourself have proven you have acted equitably as well. This means, in good faith, honesty, and with diligence. If an opposing party can show that you have delayed in acting, and that it has plainly prejudiced them, the Northpointe Bank Case tells us that Courts will dismiss such actions, regardless of the merits of the underlying claim.
