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REAL ESTATE 57: A CONSENT JUDGMENT WILL NOT BE VACATED WITHOUT A SHOWING OF FRAUD, MISTAKE, OR UNCONSCIONABLE ADVANTAGE

In 1987, plaintiff borrowed $20,000 from defendant’s predecessor in interest.  Plaintiff secured the debt with a mortgage on plaintiff’s land.  In 1994, the parties signed an extension of the mortgage agreement, and in 1999, plaintiff signed a note secured by the mortgage, capitalizing the unpaid interest into the principal for a new principal amount of $22,200. 

In June 2017, defendant initiated foreclosure proceedings regarding the mortgage.  Plaintiff brought this action seeking to stop the foreclosure proceedings and to discharge the mortgage.  In his complaint, plaintiff alleged that more than 15 years had passed since the last payment on the debt, and that defendant’s rights under the mortgage therefore were extinguished by the statute of limitations under MCL 600.5803 and MCL 600.3175(1).

Defendant did not respond to plaintiff’s complaint and a default was entered by the trial court’s clerk.  Plaintiff filed a motion for a default judgment.  At the hearing on the motion, no one appeared on behalf of the defendant trust.  The trial court noted that plaintiff had not served the trustee of the Trust, and adjourned the matter until plaintiff could demonstrate that the trustee had been served.   When the proceedings resumed, defendant was represented by counsel, and the trial court was satisfied that the correct party had been served with process. 

At the subsequent hearing, the trial court began the proceedings by inquiring about the status of the case and whether the parties had had an opportunity to discuss the matter.  The parties negotiated and Defendant accepted Plaintiff’s offer, and the parties agreed that plaintiff would pay defendant $5,000 by December 1, 2018.  The trial court ordered the agreement as stated on the record, and defense counsel agreed to prepare the order.  

After defense counsel prepared the order, however, plaintiff refused to sign it.  Instead, plaintiff filed a motion for summary disposition, seeking entry of a default judgment and reasserting his arguments that he was entitled to judgment because defendant had defaulted on the complaint and because the statute of limitations precluded defendant from enforcing the mortgage. 

At the hearing on the motion, the trial court read from the transcript of the earlier proceeding that demonstrated that the parties had agreed to settlement of the case.  Plaintiff moved to vacate the order.  The trial court denied the motion, explaining that the trial court had not reached the issues of the default judgment and the statute of limitations because the parties had reached a settlement agreement in lieu of having the trial court resolve those issues.  Plaintiff again moved to set aside the order, arguing that the parties’ agreement was not binding because they were not under oath when the agreement was placed on the record.  The trial court again denied plaintiff’s motion to set aside the order. 

STANDARD OF REVIEW

A trial court’s decision on a motion to set aside a consent judgment is reviewed for an abuse of discretion.  A trial court abuses its discretion when its decision is outside the range of reasonable and principled outcomes. 

MOTION TO VACATE

Plaintiff contends that the trial court erred by denying his motions to vacate the consent judgment.  Plaintiff argues that he was entitled to entry of a default judgment against defendant and also that defendant was precluded from enforcing the mortgage against him by the statute of limitations.  An agreement to settle a lawsuit constitutes a contract governed by the rules applicable to the construction and interpretation of contracts.  Settlement agreements are favored by the law, and generally are considered final and not subject to modification.  An agreement to settle pending litigation, however, is not enforceable unless it satisfies the requirements of MCR 2.507.  That court rule provide that an agreement or consent between the parties or their attorneys respecting the proceedings in an action is not binding unless it was made in open court, or unless evidence of the agreement is in writing, subscribed by the party against whom the agreement is offered or by that party’s attorney.  [MCR 2.507(G).]     Once a party has agreed in open court to the settlement of pending litigation, the party cannot thereafter refuse to sign a proposed judgment if it accurately incorporates the parties’ agreement, unless there is mistake, fraud, or unconscionable advantage justifying setting aside the settlement agreement.  In this case, review of the trial court record reveals that the parties were clear regarding the terms of the settlement agreement and consented to the terms without hesitation. 

DUE PROCESS

 Plaintiff also argues that the trial court violated his constitutional right to due process by converting a proceeding that had been scheduled for the purpose of determining liability on the promissory note into a settlement conference without notifying plaintiff of that change.  MCR 2.401 authorizes a trial court to direct the parties to appear for a conference to discuss settlement and requires that the parties be given reasonable notice of the conference.  Here, plaintiff participated in the selection of the date for the proceeding that resulted in the settlement. 

CHALLENGES TO THE CONSENT JUDGMENT

Plaintiff also contends that the consent judgment should be set aside because the parties were not under oath when they entered into the agreement.  Plaintiff argues that although the agreement to settle the litigation was made in open court, the parties were not under oath at the time and therefore it was not “attested” to.  MCR 2.507(G) does not specify “attest,” but rather only requires that an agreement be “made in open court,” which occurred in this case.     Plaintiff also contends that the consent judgment should be set aside because it is vague and also that it does not accurately reflect the parties’ agreement.  Because the consent judgment clearly reflects the terms of the parties’ agreement as stated on the record, the trial court did not err in declining to set aside the consent judgment on the ground of vagueness.  

ASSISTANCE WITH PROPERTY ISSUES

Are you involved in a real estate dispute in Michigan? Are you seeking resolution to a property litigation matter?

If you are facing a residential or commercial real estate issue, seek the advice of an experienced and skilled real estate litigation attorney at Aldrich Legal Services.

Contact Aldrich Legal Services

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