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If you live in Ypsilanti, then you’ve probaby heard of David Kircher. He’s an infamous property owner. Some consider him a slumlord. Others think of him as a folk hero. Still others have made him Public Enemy Number One over the past eleven years or so.
On Thursday, November 2nd, the State of Michigan Court of Appeals made its ruling on the case of Ypsilanti Fire Marshal and City of Ypsilanti v. David Kircher. A lot of information was brought to light that isn’t flattering to anyone. It’s a sad read. No one won. And most importantly, everyone lost.
The Thompson Building is dead.
So much incorrect information has been written in the newspapers and blogs over the years that the building that stands at 400 North River Street has become a myth.
The chronology is pretty simple:
- In the 1980s, the City of Ypsilanti sues David Kircher over building and fire code violations.
- On May 22, 1996, the City’s building supervisor is appointed the receiver of the property and the exterior of the building is to be brought into compliance with building ordinances as well as the Historic District ordinance. The repairs in question are to the roof, tuck-pointing of the brick, and repairs to the windows. Kircher is designated the contractor as long as he “performs such duties in a timely and fashion and according to” Ypsilanti ordinances.
- Over a year passes. and Kircher fails to comply with the original court order.
- In April of 2002, the City of Ypsilanti sues alleging Kircher’s building is now in violation of the State fire prevention act as well as several local building and fire codes. As a result of this action, Robert Barnes of Barnes & Barnes is appointed the receiver of the property. The courts give the receiver “the authority to make the Thompson Building ‘economically viable,‘” allowing the receiver to make repairs beyond the original complaints.
- The broken windows that are partly to blame for the original court action against Kircher remain broken.
- In late December of 2003, Barnes & Barnes files a motion to foreclose on the lien against the property.
- In February of 2005, the building is ordered sold at a Sheriff’s sale for $187,686.38 and Robert Barnes is the sole bidder.
- On March 21, 2005, Stuart Beal is appointed the sucessor receiver.
- On November 10, 2006, Stuart Beal is rumored to be granted title on the foreclosure of the property.
The decision handed down by the Court of the Appeals raises just as many questions as it answers. Two important pieces of information are brought to light though. 1) Kircher hasn’t owned the building for more than 18 months. 2) The receivership has been terminated.
What this means is that unless there has been some undocumented sale of the property to Stuart Beal, Robert Barnes is still the owner of the Thompson Building. This is a mildly troubling problem in as much as neither the City of Ypsilanti’s web site nor Washtenaw County’s web site reflect this to be true. It’s also obvious now as to why the receivership was terminated because Kircher was pushed out of the picture immediately following the sale of the property. What’s not so obvious is why Kircher, Beal, Barnes, and the City of Ypsilanti were in court during the past eighteen months in front of Judge Shelton arguing about receivership.
What’s even more puzzling is how Beal can be set to foreclose on Kircher and the property AGAIN on November 10th.
What seems to be certain is the $346K investment Beal has put into the property cannot be billed to Kircher.
Kircher has forty-two days to appeal this to the Michigan Supreme Court — which he will surely do. While the Michigan Supreme Court can chose not to hear the case, this matter is complicated even further as Kircher has a case in federal court that is awaiting the outcome of this one. Said another way, we are probably three to five years away from this matter being resolved. In the meantime, whoever owns the building be it Barnes or Beal will surely not invest any money in the property if the chance exists that a higher court could overturn the verdict of the lower court. Said one last way, the chances of the Thompson Building being open for business in 2007 or 2008 are virtually zero.
The following quotes are some of the more interesting rulings and comments from the case. Quotes from the judgement have been italicized, whereas the unitalicized text is my own editorializing and analysis.
However, we note that it is unclear from the record exactly which municipal ordinances Ypsilanti relied on in commencing this action. After searching the record, we are unable to locate the text of any provisions of the Ypsilanti building and fire codes, and we are disinclined to speculate concerning the substance of ordinances which have not been provided on appeal. As in the case of the Thompson Building, it will be necessary on remand for the trial court to specifically identify the municipal ordinances relied on in this matter, and to determine whether Kircher in fact violated those particular ordinances. [Page 19, footnote 10]
This part of the decision is unflattering to the City of Ypsilanti in as much as it implies no evidence was ever presented to the trial court detailing which ordinances Kircher violated.
On remand, Judge Shelton did not immediately follow the Court’s remand instructions. Further, at the time the initial receiver was replaced with a successor receiver, Judge Shelton again failed to provide for the posting of a receiver’s bond. In fact, the trial court delayed compliance with our explicit remand instructions for more than one year.
Kircher raised a similar argument in his previous appeal, asserting that the trial court’s initial receivership order, as written and implemented, granted the receiver nearly unfettered authority to make repairs and renovations to the Thompson Building, and nearly unchecked power to charge Kircher for any such work. We agreed, and expressly directed the trial court on remand to narrow the scope of the receiver’s powers and authority.
Nonetheless, to date, the trial court has never amended its original order or issued a new order to limit or otherwise narrow the scope of the receiver’s authority. To make matters worse, the trial court entered an order replacing the original receiver with a successor receiver on March 21, 2005 — nearly eleven months after we issued our remand instructions in Ypsilanti Fire Marshal…Instead, the trial court left unchanged the framework under which the original receiver had operated, allowing the successor to merely continue in the shoes of the original receiver and to carry on virtually unlimited repairs and renovations on the Thompson Building without first seeking judicial permission or approval.
Because remand instructions were not followed, and the trial court did not approve the costs and repairs and renovations before they were incurred, Kircher necessarily received no opportunity to contest the individual costs incurred by Barnes or to offer evidence in response to the individual proposed projects at the Thompson Building. We recognize that Judge Shelton held after-the-fact evidentiary hearings in an attempt to comply with our remand instructions. However, we cannot determine whether Judge Shelton’s findings were clearly erroneous because we are not sufficiently presented with competing evidence, which surely would have been offered by the parties had this matter proceeded as directed under our April 27, 2004 opinion…Moreover, we cannot omit mention of the real possibility that by reserving review of all expenses until after the repairs and renovations were already completed, Judge Shelton in effect preordained his decision to allow or disallow each individual expenditure. [Page 22]
Upon reading that, how can one not come to the conclusion that Shelton was not biased?
On remand, the trial court shall take evidence from the parties regarding the necessity and appropriateness of each incurred expense. MCR 7.216(5). We expressly direct the trial court to engage in a searching review of each individual cost. The court shall take the additional evidence to determine whether each cost was in keeping with the original purpose for which the receiver was appointed — to abate the fire prevention act violations and municipal code violations alleged in Ypsilanti’s orginal complaint…The trial court should remain cognizant of the fact that Ypsilanti’s initial complaint cited both alleged fire prevention act violations and alleged city ordinance violations. As noted above, the trial court must first determine whether each expense was incurred (1) to abate a violation of the fire prevention act, or (2) to abate a violation of a specific Ypsilanti city ordinance. The trial court shall separate all costs into one of thse categories. [Page 24, footnote 13]
This means the amount of any repairs that does not fall into one of the two aforementioned categories will be refunded to Kircher from the original $187,686.38. What it does not mean is the original foreclosure sale stands and will not be undone by the Court of Appeals. This is disturbing in as much as if the trial court determines the cost of abating the fire code violations is only $10K and the cost of abating the ordinance violations is only $90K, Kircher will receive refund of the difference ($87,686.38 in my hypothetical example) rather than have the option of paying the new amount in order to get his building back. One must assume Kircher had a threshold in mind for what he would pay in order to keep possession of the Thompson Building. To take the hypothetical example even further, the trial court could determine Kircher has a $180K refund coming to him meaning he effectively sold the property for $7K.
Kircher’s counsel argued at oral arguments before this Court that the trial court had amended the initial judgement of foreclosure after the claim of appeal was filed, approving serveral new expenses and substantially increasing the lien against the Thompson Building just before the sheriff’s sale was held. Kircher argues this was erroneous. We agree…Because the lower court records were transmitted to this Court soon after the claim of appeal was filed, we are not certain of the exact extent to which the trial court amended the judgement of foreclosure after the filing of the claim of appeal. Nonetheless, we note that once a claim of appeal is filed with the Court, the trial court may not amend the judgement appealed from except pursuant to an order of this Court, by stipulation of the parties, or as otherwise provided by law…Accordingly, to the extent that the trial court amended the judgement of foreclosure and increased the amount of the lien against the Thompson Building after Kircher filed the claim of appeal in this matter, such action was erroneous and was taken without jurisdiction. We vacate any amendments made to the judgement of foreclosure or the amount of the lien after the claim of appeal was filed in this matter. [Page 27]
This, too, is confusing and troubling. It appears as though the Court of Appeals is reducing the amount of the lien and limiting it to the amount prior to Kircher’s appeal. In the judgement, it notes that Kircher claimed the amount increased significantly. While it is unclear as to what “significantly” means in this case, one has to reason the amount is in the high tens of thousands of dollars. Again, the troubling part of this is the Court of Appeals is not going to undo the Sheriff’s sale of the property. Depending on the definition of “significant” in this case, how could this possibly hold up on appeal?
Although several of Kircher’s questions presented raise the general appropriateness of certain costs, none of the questions presented specifically identifies the matter of receiver’s fees or attorney fees. We decline to further address the merits of these arguments, which have not been properly presented. [Page 28]
The terms of receivership for the Thompson Building allowed for a 25% receiver fee on top of the charges. If the receiver contracted with an architect, the receiver was entitled to bill Kircher the cost of the architect’s services plus an additional 25%. If the receiver paid an electricity bill, Kircher was billed for the amount of the bill plus an additional 25%. Receivership is a punitive endevour and meant to effectively cause foreclosure, and the Court of Appeals had no issues with the terms of the Thompson Building’s receivership.
Kircher cursorily suggests that his properties have been taken by Ypsilanti without just compensation. Even assuming the requisite state action could be demonstrated, we disagree with Kircher’s contention, which disregards the well-established nuisance exception to the prohibition on governmental takings…The Taking Clause of the Fifth Amendment is substantially similar to the Taking Clause of the Michigan Constitution…Because Ypsilanti was exercising its legitimate police power to abate the alleged nuisances on Kircher’s property, no unconstitutional takings occurred. [Page 34, footnote 19]
This means the taking of the Thompson Building was not an illegal form of eminent domain.
We vacate the judgement of foreclosure and foreclosure proceedings to the extent they involved the collection of expenses incurred solely under the municipal building and fire codes. We also vacate any amendments to the judgement of foreclosure or increase in the amount of the lien entered by the trial court after the filing of the claim of appeal in this matter. We remand for entry of an order terminating the receivership at the time of the sheriff’s sale, and for the following further proceedings…The trial court shall determine which of the individual expenses were properly incurred to abate violations of the fire protection act, and shall include these expenses in the amount of the foreclosed lien…All costs properly incurred to abate violations of the Ypsilanti building and fire codes shall be paid out of this surplus, and any remainder left after payment of these expenses shall be disbursed to Kircher. [Page 35]
The Court of Appeals is kicking the case back to the trial court in order for the financials to be sorted out one last time. Once that takes place, the Court of Appeals will need to approve the actions of the trial court. Once that takes place, everything’s over…unless the Michigan Supreme Court decides to hear the case.
And then there’s the case in federal court.
It’s not over, and may never be over. The only thing that’s for certain is that Ypsilanti and it’s residents have lost.
The text of the Court of Appeal’s opinion may be found HERE.
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