When determining whether to bring a claim against another party, it is first necessary to ensure that your potential claim is not barred by an applicable statute of limitations. Essentially, a statute of limitations sets the maximum time after an event for which legal action can be taken in regards to that event. It is important to realize that that the statute of limitations is more than a mere expiration date, it is the final toll upon your potential recourse for recovery. That being said, there are several different statute of limitations, applying across different types of actions, and it is imperative to know which will apply to your claim.
For example, in Stulberg Rochester, L.L.C. v. Gulf Rochester II, L.L.C., the Michigan Court of Appeals faced the question as to what was the appropriate statute of limitations for an action for breach of an agreement under which defendant, Gulf II, promised to share with plaintiff, Stulberg, the proceeds of any future use of the property.
On August 6, 1999, Stulberg sold three parcels of land to Gulf Rochester, Gulf II’s predecessor, via a land contract. The contract provided that: “In the event all or any part of Parcel C is sold or in any way transferred, leased or hypothecated to anyone at all…by Purchaser at any time in the future, Seller shall receive one-half of all amounts received then and thereafter.”
On November 9, 2004, Gulf II mortgaged the property to Comerica Bank, obtaining a loan advancement of approximately $937,200. Gulf II defaulted on its mortgage loan and on November 3, 2010, transferred the property to the bank in lieu of foreclosure. It is clear from the record that Gulf II did not notify Stulberg of any of these transactions, nor did it share the mortgage proceeds. Stulberg filed suit on January 4, 2011, alleging a breach of contract.
Gulf II argued that the case was barred by the six-year statute of limitations for contract actions from the time the mortgage was signed on November 9, 2004. Stulberg responded that the 10-year statute of limitations for mortgages applied because he retained a lien upon the property. As evident from this action, a land contract and a mortgage are not considered one and the same. “The term land contract is commonly used in Michigan as particularly referring to agreements for the sale of an interest in real estate in which the purchase price is to be paid in installments and no promissory note or mortgage is involved between the seller and the buyer.” As the Court of Appeals notes, the parties’ land contract and rider do not include the term “mortgage” anywhere within the contract and no promissory note was involved in the transaction.
Additionally, the court held that lien Stulberg retained on the property is not sufficiently akin to a mortgage to justify the use of the 10-year statute of limitations. “In equity, a mortgage is sometimes called a lien for a debt, and so it is,” but it is also something more: it is a transfer of the property itself, as security for the debt. Therefore, Stulberg’s claim was based on a contract, not a mortgage and the 6-year statute of limitations applies.
As this case illustrates, it is not always obvious which statute of limitations most readily applies to a given action. For this reason alone, one should consider hiring an attorney to help navigate this issue. Nonetheless, as a general rule, if an action revolves around a purely contractual matter, the 6-year statute of limitation applies.
This article was authored by law clerk Roger Leshinsky. Please contact Demorest Law Firm if you have any questions.
