Patricia Paruch, Kemp Klein Law Firm
COA Upholds Uncapping in Pre-2014 Parent-Child Transfer
By Gregg A. Nathanson, Couzens Lansky Fealk Ellis Roeder & Lazar, PC
The Michigan Court of Appeals held that family members could not use a 2012 corrective deed to change the grantees on a 2004 deed and avoid a 2004 uncapping. Lewallen v. Twp of Porter, Mich Ct App No. 312677, Feb. 20, 2014.
In 2004, Mom and Dad quitclaimed residential property to their two adult children as tenants in common. In 2011, the municipality declared the 2004 deed an uncapping event. MCL 211.27a. The parents then executed a "corrective" deed and supporting affidavit stating the 2004 deed was really intended to grant title to the parents and children as joint tenants with rights of survivorship to avoid uncapping. The family claimed the 2012 corrective deed retroactively nullified the 2004 deed.
The Court disagreed. The Court relied in part on Michigan Land Title Standard 3.3, which states "[A] grantor who has conveyed real property by an effective, unambiguous instrument cannot, by executing a subsequent instrument, make a substantial change in the name of the grantee . . . ." Although MLTS 3.3 notes circumstances under which a later "corrective" deed may be effective, the Court found this exception inapplicable here.
The family also argued public policy supports their position, since the Michigan Legislature recently amended the uncapping statute to add a new exemption for transfers to persons related by blood or affinity to the first degree. MCL 211.27a(7)(s). The Court found the Legislature did not intend the new uncapping exemption to be retroactive.
Take away: Always review the language of the uncapping statute and current Michigan State Tax Commission "Transfer of Ownership Guidelines" available on the "Property Tax" section of the Michigan Department of Treasury website at www.michigan.gov/taxes when advising clients on drafting deeds and completing property transfer affidavits.
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July 16-19, 2014
"Right of Way"—Limited Fee or Easement? Or, "Can We Avoid the Takings Clause?"
By Ronald E. Reynolds, Vercruysse Murray PC
In Marvin Brandt Revocable Trust v. United States, __ US __; 134 S Ct 1257 (2014), the Supreme Court settled whether the U.S. could avoid the Fifth Amendment's Takings Clause when converting railroad ROW granted by the federal government after 1875 to a "trail" under the federal "Rails to Trails" statute.
The government strategically sought to quiet title in itself to avoid Takings Clause liability arising under prior precedent. The government argued that the ROW was a limited fee interest grant with a reversionary right to the U.S. rather than an easement, which upon termination would give full rights to the underlying fee owner (the Trust). The Court expended little effort in an 8-1 ruling against the government: "The Government loses that argument today, in large part because it won when it argued the opposite before this Court more than 70 years ago . . ." (citing Great Northern v. United States, 315 US 262 . . . (1942)). In Great Northern, the government successfully argued that the railroad ROW was only an easement which precluded mineral extraction rights.
Justice Sotomayor lamented in dissent the potential high cost of just compensation. Justice Holmes previously addressed this dilemma: "We are in danger of forgetting that a strong public desire to improve the public condition is not enough to warrant achieving the desire by a shorter cut than the constitutional way of paying for the change." Pennsylvania Coal v. Mahon, 260 US 393, 416 (1922).
This case affects newly abandoned federal grants of rail ROW made after 1875 and should have no impact on established trails in Michigan. Michigan precedent is consistent with Brandt Trust. See MDNR v. Carmody-Lahti, 472 Mich 359 (2005).
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The views and opinions expressed in these articles are those of the authors, and they do not reflect in any way the positions of the State Bar of Michigan or the Real Property Law Section. These columns are meant for informational purposes only and should not be construed as legal advice.