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untanglingwebs
El Supremo
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The monitoring report indicated the lack of oversight was not due to any technical inadequacy by Joyce parker or Glenda Dunlap. HUD observed that both women had demonstrated experience and knowledge of the HUD programs and both were aware of the strengths and weaknesses of how the City's administration of these programs.
HUD was advisd of the numerous written correspondence with the non-payment of OK Industries as well as phone calls to the principles to resolve the problem. It was Parker and Dunlap that initiated the talks between HUD and they sought assistance with the legal Department.
HUD stated it was apparent the Manhattan Place Project and OK Industries had both required greater oversight than was previously provided. |
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Sat Sep 02, 2017 9:34 am |
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untanglingwebs
El Supremo
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FindLawCaselawMichiganMI Ct. App.CITY OF FLINT v. CHRISDOM PROPERTIES LTD
CITY OF FLINT v. CHRISDOM PROPERTIES LTD
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Court of Appeals of Michigan.
CITY OF FLINT v. CHRISDOM PROPERTIES, LTD.
Docket No. 283245.
Decided: April 21, 2009
Before: CAVANAGH, P.J., and FORT HOOD and DAVIS, JJ.Mantese & Rossman, P.C. (by Gerard V. Mantese and Ian M. Williamson), Troy, for the city of Flint. Harris, Goyette, Winterfield, Penskar & Farrehi (by Alan D. Penskar), Flint, for Chrisdom Properties, Ltd., and James Crawley.
Plaintiff/counter-defendant city of Flint (Flint) appeals as of right the trial court's judgment in favor of defendants/counter-plaintiffs Chrisdom Properties, Ltd, and James Crawley (Chrisdom and Crawley).1 We affirm.
This case arises out of a downtown housing development in the city of Flint. Trial testimony was lengthy and detailed, but, in a nutshell, Flint and Chrisdom entered into a loan agreement under which Flint extended $1.8 million from the federal Department of Housing and Urban Development to Chrisdom for the purpose of converting two buildings into condominiums. One of those buildings was already owned by Crawley and 100 percent renter-occupied as a high-end apartment building and the other was an immediately adjacent dilapidated structure that Crawley had to purchase.
The loan agreement was poorly structured from the outset. However, Flint-indeed, the same department of the city that had been responsible for the loan-then inexplicably held up the issuance of a building permit to Chrisdom for 13 months after the Building Code Board of Appeals found that Chrisdom was entirely in compliance. Flint offered no justification for this; however, as a result, construction work could not be performed efficiently. Any possibility that the work could be performed within the timetable of the construction loan was abrogated by Flint.2
It is worth noting that Crawley testified without contradiction that he had been involved in contracting in Flint for over 40 years and had been issued hundreds of permits. The normal amount of time to obtain a permit never exceeded two weeks. Also, the State Construction Code requires the issuance of a permit within 15 days after an application. MCL 125.1511. Flint argues that this deadline applies only when the application conforms to the code, but the year-long delay here was after the board of appeals determined that the Manhattan Place project was in compliance.
Additionally, Flint refused to allow any individual condominium units-some of which, having originally been apartments, were ready for sale-to be released from the general mortgage for sale to potential buyers. The construction loan agreement contained no provision governing such releases, but such releases are common in condominium construction projects, and the documents did imply that they should be granted. Further, the contract between the parties provided that Flint was to receive 100 percent of the condominium sale proceeds until such time as the loan made to the contractor was paid in full, which was an unusually good deal for the lender. Moreover, Flint was repeatedly advised that the only way its loan could be repaid was by selling the individual condominium units. Crawley testified that if he could have sold the existing units, he would have paid off the loan and have enough left over to finish the entire project.
Flint did not at any time attempt to provide any sort of justification for withholding the building permit or individual condominium releases short of asserting that it was not technically required to do so. Ultimately, Crawley and Chrisdom ran out of money, by which time Crawley had spent some $200,000 of his own money on the project and had gone without rental income from the now-empty apartment building for several years.3 Flint agreed to, and did, loan Chrisdom an additional $359,465, but it had still not issued a building permit, and Crawley explained that it would still be insufficient to complete the project unless individual condominium units were released from the general lien, which release was again denied.
Flint commenced the instant suit against defendants on November 3, 2004, generally alleging breach of contract and seeking foreclosure of the mortgage. Defendants counterclaimed on March 8, 2005, alleging breach of contract and slander. Midway through the trial, the trial court permitted defendants to amend their defenses and affirmative defenses to include frustration of purpose and impossibility, noting that the addition of those theories would not be prejudicial to Flint.4 The trial court ultimately agreed with Chrisdom and Crawley that Flint had frustrated the purpose of the contract and breached the contract. The trial court then released Chrisdom and Crawley from any obligations under the loans or mortgages to Flint and awarded an additional cash amount, albeit with the expectation that it would be used to pay at least two known outstanding subcontractor liens. This appeal followed.
“We review the trial court's findings of fact in a bench trial for clear error and conduct a review de novo of the court's conclusions of law.” Chapdelaine v. Sochocki, 247 Mich.App. 167, 169, 635 N.W.2d 339 (2001). “When reviewing a grant of equitable relief, an appellate court will set aside a trial court's factual findings only if they are clearly erroneous, but whether equitable relief is proper under those facts is a question of law that an appellate court reviews de novo.” McDonald v. Farm Bureau Ins. Co., 480 Mich. 191, 197, 747 N.W.2d 811 (2008). This Court reviews de novo as a question of law the proper interpretation of a contract, including a trial court's determination whether contractual language is ambiguous. Klapp v. United Ins. Group Agency, Inc., 468 Mich. 459, 463, 663 N.W.2d 447 (2003).
Little published caselaw exists in Michigan on the doctrine of “frustration of purpose.” The parties agree that the only real leading case on point is Liggett Restaurant Group, Inc. v. City of Pontiac, 260 Mich.App. 127, 676 N.W.2d 633 (2003). There, this Court explained that “[f]rustration of purpose is generally asserted where ‘a change in circumstances makes one party's performance virtually worthless to the other, frustrating his purpose in making the contract.’ ” Liggett Restaurant Group, supra at 133-134, 676 N.W.2d 633, quoting Restatement Contracts, 2d, § 265, comment a, p. 335. Furthermore, “ ‘[t]he frustration must be so severe that it is not fairly to be regarded as within the risks that he assumed under the contract’ ” and “ ‘the non-occurrence of the frustrating event must have been a basic assumption on which the contract was made.’ ” Id. at 135, 676 N.W.2d 633, quoting Restatement, § 265, comment a, p. 335. It is undisputed that Flint did two things: (1) delayed the issuance of a building permit by more than a year after the Board of Appeals determined that the buildings were actually in compliance, which prevented Chrisdom from proceeding in a timely fashion to meet the contract's time requirements; and (2) refused to release individual ready-to-sell condominium units from the general lien despite being repeatedly advised that there was no other way to pay off the mortgage or to complete the project.
Flint primarily argues that Chrisdom assumed the risk that no building permit would be issued because such delays are predictable and Chrisdom represented in the loan agreement that it had already obtained the proper permits. Without considering the unrebutted testimony that such averments are standard boilerplate, we are unimpressed given the actual knowledge by not only Flint, but by the same department, that Chrisdom did not actually have those permits and, moreover, the actual knowledge and explicit agreement in the contract that Chrisdom had not yet actually prepared architectural plans, which the unrebutted evidence explained was a prerequisite to obtaining a building permit. While we agree that there is always some risk of a delay in any permitting process, the unchallenged evidence was that Flint never even conducted an inspection, repeatedly insisted that Chrisdom needed to modify plans that the board of appeals ruled were compliant, and generally gave Chrisdom a runaround for more than a year.
Further, at the same time Flint was inexplicably holding up the necessary building permit, it was paying out construction loan monies to Chrisdom. Indeed, by the time the permit was actually issued, the entire contract amount had been paid out, less sums arbitrarily deducted by the city for interest in advance of loan disbursement and attorney fees, neither of which was provided for in the loan agreement. This dichotomy, by itself, is powerful evidence that while the permit delay was wreaking havoc with Chrisdom's orderly progression of construction, there was no ultimate intent on the part of Flint to deny a permit if it wanted its money back. In short, the evidence does not show that Chrisdom encountered a known, if perhaps unlikely risk; rather, the evidence suggests that Flint actually interfered with Chrisdom's acquisition of the building permit, whether through incompetence or through actual malice.
Flint next presents what can best be described as a confused argument to the effect that Chrisdom brought its troubles on itself by performing work out of sequence and inefficiently without the permit. The evidence actually showed that Chrisdom essentially did what it could to keep the project running in the absence of the permit and that its only other alternative would have been to do nothing. The evidence further showed that Chrisdom tried to obtain additional third-party funding, but it could not do so because Flint refused to subordinate its loan position. Interestingly, the type of loan involved here-a HUD “Section 108 loan”-is, according to defendants' financial underwriter expert, specifically intended to be used to attract additional funding from other lenders and to be subordinated to those lenders. The expert also explained that it appeared to him that at some point, Flint inappropriately started treating the loan as its own money.
Finally, Flint refused to allow individual condominium units to be released from the general lien so that they could be sold. Flint's project manager testified that she did not recall being asked about individual lien releases; however, numerous other witnesses testified that Crawley did ask for those releases, that the project manager and other officials were indifferent and unresponsive to any attempts at communication, or both. We defer to the superior position of the trial court to evaluate witness credibility. Given the other testimony of incompetence or even active hostility toward the project on the part of Flint and the relevant department, we find overwhelming evidence that Flint intentionally or incompetently prevented its mortgagor from being able to repay the mortgage. The trial court did not commit clear error by ruling that Flint frustrated the purpose of the contract.
We also conclude that the trial court correctly found that Flint breached the contract. Flint raises a number of arguments, none of which we find have any merit. Ultimately, we conclude that Flint breached the contract on the basis of the same evidence that shows Flint frustrated the purpose of the contract: Flint's unjustified refusal to issue a building permit and unjustified refusal to release completed condominium units from the general lien guaranteed the failure of the project. We have not been presented with any evidence or argument to the contrary.
We agree with the trial court that computing the damages in this case is difficult and not easily subject to fine-tuning. We are persuaded to affirm the trial court's award for several reasons. First, the trial court clearly wrestled with the issue and it was in a better position to assess the nuances of this case. Second, at no time did Flint challenge Crawley's testimony on damages or attempt to offer its own proofs on damages. Third, Flint concedes that the total value of the trial court's award is approximately the same as Crawley's estimate. Fourth, damages need not be mathematically precise, and after careful consideration, we are of the view that the trial court's award is as close to precision as possible on these facts.
We briefly address Flint's assertion that Chrisdom and Crawley have reaped a double windfall as a result of the outcome of this matter. Specifically, Flint points out that the cash award is roughly the amount of profit Crawley expected to make from the project, but in addition, not only has he been discharged from the mortgage, he has also received the Manhattan Place properties in an improved, albeit unfinished, state. This argument is only superficially appealing, however. The cash award was for the counterclaim for breach of contract, and although it amounts to the expected profits had the project gone as it should have, it does not account for Crawley's personal contributions to the project and must be used to pay off any other liens or to complete the project.5 The discharge of the mortgage was an independent equitable award, and Flint concedes that discharging all parties' obligations is proper under the frustration-of-purpose doctrine; moreover, we find no fault in the award given Flint's inequitable behavior.
For the above reasons, we disagree that the trial court erred by denying Flint's posttrial motions. We conclude that the trial court did an admirable job handling and resolving a long, difficult case, and we find no fault with its analysis of what transpired or the resultant remedy.
Affirmed.
FOOTNOTES
1. For purposes of this appeal, Chrisdom is effectively the corporate alter ego of Crawley. We therefore treat them somewhat interchangeably.
2. Crawley explained that building construction was similar to assembly-line construction of an automobile, in that a great many activities had to be coordinated and performed in a controlled sequence, but the lack of a building permit prevented that process from functioning. Crawley described an ongoing pattern of indifference after Mayor Woodrow Stanley was recalled in 2002, after which a succession of department heads and other officials either did not respond to him or treated the project as irrelevant. Glenda Dunlap, who testified that she “was the staff person assigned to to [sic] the project,” impliedly supported Crawley's opinion by testifying that, among other things, the “City did not want this project.” Michael Anthony Freeman, a financial underwriter specialist later asked by the Genesee County Land Bank and paid by the Mott Foundation to get the project back online, testified that when he submitted various proposals to Mayor Don Williamson, Mayor Williamson's response was an explicit directive to “bust his balls,” referring to Crawley.
3. The apartment building was emptied at Flint's request; because Flint did not want to pay for relocation expenses, Crawley agreed to stop renewing his tenants' leases when the loan was originally discussed.
4. Counsel for Flint argued that amendment was untimely and improper under the court rules, but did not claim that amendment would be prejudicial to Flint.
5. There was some testimony that an incomplete condominium is worthless. Moreover, Crawley's construction business and credit were apparently destroyed, making completion of the project significantly more difficult. Finally, a completed luxury condominium in the present housing market will not be worth as much as it could have at the time the project was commenced.
DAVIS, J. |
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Sat Sep 02, 2017 9:55 am |
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untanglingwebs
El Supremo
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James Crawley still hopes to develop old Flint drugstore warehouse into Manhattan Place Condominiums
Print Email Ron Fonger | rfonger1@mlive.com By Ron Fonger | rfonger1@mlive.com
on December 30, 2008 at 7:50 AM, updated December 30, 2008 at 9:55 AM
FLINT, Michigan -- Fresh off downtown redevelopment deals at the former Durant and Berridge hotels, the Genesee County Land Bank could be closing in on a deal to take over another key downtown property.
James Crawley, who attempted to build luxury condominiums inside the one-time Herrlich's drugstore warehouse at Garland and First streets, said he's talking to the Land Bank about his stalled development and the possibility it could be finished by the county.
Although no deal is certain, Land Bank Chairman Daniel T. Kildee said the timing could be right for a deal on Manhattan Place Condominiums, which is sandwiched between the better-known Berridge and Durant, just north of the Flint River.
"They've helped everybody but me, and I started it all. I'm the guy with the arrows in his chest," Crawley said of his long, still unresolved feud with the city of Flint over the project.
"It's been a real nightmare for me, watching other projects going full steam ahead," he said.
Nothing has seemed to go easily at Manhattan Place, a 95-year-old building that Crawley has spent nearly 20 years trying to convert into housing.
The structure was built for Freeman Dairy Co., which occupied it until 1934. It was used as an auto storage warehouse in 1940 and was later used by the Herrlich's drugstore store chain.
Crawley estimates his renovation is about 70 percent complete but said he hasn't been able to complete it because of difficulty securing credit and his bitter dispute with City Hall.
The local builder finished 11 apartments and rented them for a few years before taking city-backed federal loans and trying to convert the building to 22 condominiums.
The city sued Crawley for failing to pay back loans of more than $2 million, a case that's hung up at the state Court of Appeals.
In court documents, Crawley has claimed the city contributed to delays in Manhattan Place, in part by failing to turn over loans in a timely way.
City Attorney Trachelle Young would not comment on the case Monday.
But Kildee said the sale of the former Durant Hotel and the redevelopment of Berridge Place loft apartments recently makes it a good time to take on Manhattan Place.
So far, however, Crawley and the authority haven't reached a deal on how much the builder should be paid for the property and his work to date.
"We're made a significant investment with the Durant and Berridge. We feel like that area (of Manhattan Place) needs to be filled," Kildee said. "Our preference always is for a private developer to come in and invest private capital.
"If there's a way the Land Bank can make that happen, that's great. If it turns out nobody but the Land Bank can do the project ... We're willing to step in."
The Land Bank Board of Directors recently met in a closed session to consider the purchase of real estate, but Kildee would not say whether Manhattan Place was the subject of those private talks.
Crawley, who lives in one of the units at Manhattan Place, said there's still a market for his building, which sits across the river from the former Hyatt Regency Hotel.
He said he would prefer to finish the project himself but believes the Land Bank also could do a good job bringing the condos to market.
"At least 22 people in Genesee County want to live that way -- even with the economy as bad as it is," he said. |
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Sat Sep 02, 2017 1:36 pm |
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untanglingwebs
El Supremo
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Why Flint entered into this deal after a first disastrous experience with Manhattan Place is beyond me. Starting in 1996 there was a series of lawsuits regarding Manhattan Place. Crawley sued Citizens Bank alleging fraud , misuse of funds and interference in a business relationship. He also sued departments in the City of Flint regarding a grant. Also there were lawsuits involving the DDA and the garages built for Manhattan Place.
The City ended up paying money to Crawley twice. Many of the same issues in the first lawsuit were raised in the second.
Kildee and Crawley were working out a deal about the Land Bank purchasing Manhattan Place. But then Crawley paid the back taxes and demanded full price. |
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Sat Sep 02, 2017 2:09 pm |
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untanglingwebs
El Supremo
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Two issues keep being raised. !. The city continues to be slow in the approval of permits on grants that are time restricted. Also the budget cuts had made managing and monitoring the grants more difficult resulting in HUD monitoring findings.
Staff in Grants was laid off by seniority and staff in other departments was allowed to bump. Primarily the new staff came from the finance department. Staff then had to go through a learning curve to handle the HUD rules.
However the expertise of Carol Giacalone Freeman, who transferred in from the department dealing with demolitions, earned her the praise of HUD monitors for her superior work in Flint demolitions. They also praised Glenda Dunlap and Karen Morris. Morris was awesome in that when asked a HuD related question she could rattle the rule off verbatim. |
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Mon Sep 04, 2017 7:13 pm |
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untanglingwebs
El Supremo
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The document prepared for the administration detailing the current state of grants revealed over 70 grants, many of which were high risk and would normally have been labor intensive. However, the department did not have any employee that knew about construction.
Then there were the subgrantees that failed to follow the rules and did not communicate with the grants department. It sometimes seemed like the staff was always playing catch up.
Add to that he need to commit funds and expend the funds timely or risk a HUD finding.
On July 25, 1997, The Journal story headline read FEDS WANT FLINT TO PAY BACK MONEY. The story written by reporter Michelle Lott, detailed a history of Flint having to pay back money.
The City was being asked to pay back $1.4 million on projects that included the Job Corps Centrer. |
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Mon Sep 04, 2017 7:35 pm |
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untanglingwebs
El Supremo
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The annual HUD monitoring review revealed the City began before securing the required environmental clearances. The City denied and decided to fight the allegations. Robert Turk, Director of DCED, stated the City followed all the rules.
HUD environmental officer, Lester Berman, wrote in his report that the City began projects before obtaining HUD approval. The major project in contention was the child development center being constructed for the Jobs Corps. Half of a $500,000 grant for the child car center was obligated 2 months before the environmental clearances were obtained.
Other projects with similar HUD findings included Flint Odyssey House, Carriage Town Historic Preservation, VISTA Human Services, and Flint Neighborhood Preservation Project Housing. The payback was only for the environmental issues but the rest of the grants were still under review. |
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Mon Sep 04, 2017 8:05 pm |
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untanglingwebs
El Supremo
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In 1997 the City had to repay $1.2 million of the $7.2 million in Community Development Block Grant (CDBG) funds. In 1996 the City repaid $51,000 out of that years $6.7 million CDBG funding.
HUD monitor Steve Spenser stated Flint alone had findings that resulted in repayment of these large amounts. He stated the large repayments of Flint having been repeatedly warned about the same issues.
Lott had interviewed 1st Ward Councilman Verdell Duncan. He said problems may have come from a large number of retirements in that office and personnel turnover.(Flint had given generous early retirements because of financial woes. |
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Mon Sep 04, 2017 8:23 pm |
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untanglingwebs
El Supremo
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In a chart that detailed grants fon 2002 t0 2003 had 5 Salem Housing grants.
1. Community CDBG 02-03 $50.000 final payments pending
12 signature blocks planned and implemented. 17 blocks completed eligibility requirements for small household repair grants. 485 badly damaged sidewalk squares replaced on Dewey, Josephine, and Grace Streets.
Comments: Contract extension, as well as final payment requests. Work has been completed, resolution has been misplaced in City system for several months. Re-submission has occurred 4 times. Agency was given authorization by previous director to move ahead with project while change order was pending. |
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Tue Sep 05, 2017 12:35 pm |
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untanglingwebs
El Supremo
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2. CHDO operating HOME 02-o4 $25,000 spent $$22,555 operating grant for the 14 homes that were under way . For HOME assistance on a Purchase/Rehab/ Lease proect
3. Purchase/ Rehab/lease HOME 02-04 $400,000 grant spent $242,307 $157.693 remaining total administrative costs $40,000 total project cost $360,000 on 14 home under construction
Part of this grant has administrative costs covered by the CHDO operating grant. |
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Tue Sep 05, 2017 12:45 pm |
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untanglingwebs
El Supremo
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4. Buying and Beyond Homeowner center CDBG 03-04 $25,000 expenditures $21,600 balance, $3340 administrative costs $1857 total project costs $23,143
Serviced 174 households with pre-purchase classes, pe-loan counseling, maintenance skills and post - purchase classes
First report not submitted until 3/04, after notification of recapturing due to on-compliance of reporting requirements. Contract extension requested, staff recommends denial of request. Second contract year that total grant has not been expended. |
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Tue Sep 05, 2017 12:56 pm |
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untanglingwebs
El Supremo
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HOZO Homeship zone owner assisted rehabilitation HOME 03-04 awarded $529,774
expenditures $527,839 (payments pending in Finance) balance $1,934 administrative costs $79, 466 total project cost $450,308
11 homes are currently underway for substantial rehabilitation. Grant includes 15% soft costs which are staff wages to run the program, inspections, lead testing and clearance
* comments: This program has had some problems. The funds invested are HOME funds. At the time the program was turned over to Glenda/Am, homes were already under way and work had already begun. This did not allow staff to have any input in the selection of homes being rhabilitatd. The homes that were selected by the agency were in bad disrepair and needed extensive work. This has caused many budget over runs. Currently, staff is working with the Development Division to do inspections and re-evaluate the homes to ensure that all work being requested by the agency are Code issues and not beautification issues. A contract extension is being requested and additional funds are being requested because this is a HOME grant and the houses must be brought up to code according to HUD regulations.If approved no additional funds will be released until a thorough investigation is conducted, |
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Tue Sep 05, 2017 1:17 pm |
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untanglingwebs
El Supremo
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| I was told that this department once had 22 employees. You cannot decimate an office down to a skeleton level with the same or increased work load and expect it to succeed. Nor can this City keep recycling failed employees and politicians and expect a successful outcome. |
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Fri Sep 08, 2017 12:07 pm |
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untanglingwebs
El Supremo
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Flint West Village had 7 outstanding grants at the time of the evaluation, Dave White was on the Board of Directors . When he allowed me to review records in the Kettering archives, he was shocked to find out there was a grant to fix the leaking roof . He was even more surprised to find out the agency had been sued by their insurance company and the Board was never notified. Who knew David could move that fast as he literally bounded across the room. It seems the Director had hired her friends and family and the insurance company audit noted no workmans comp had been paid.
The 01-02 CDBG Site Improvement grant for $10,000 was for an emergency roof repair of the donated building used for the agency. Only $844 was expended and the grant expired. The building was demolished and this site along with the 3 adjoining sites purchased by Kettering were used for the construction of a new fraternity.
An 03-04 &175,000 CDBG grant for Owner Occuped Rehab was never even started. |
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Fri Sep 08, 2017 12:38 pm |
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untanglingwebs
El Supremo
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A CDBG grant of $200,000 was able to spend $198,965 leaving $1,035 unspent. The agency was able to acquire and demolish 15 commercial and residential properties along the Third (UNiversity now) Avenue corridor.
Another CDBG grant of $100,000 spent only $28,544. It should be remembered that the agency was in serious financial trouble, facing bankruptcy and not expected to be an ongoing entity.
A 2002-04 HOME grant for $100,000 was for Purchase/Rehab/Resale. A Home at 1706 Concord was purchased and had the lead abatement completed. $29,809 was spent of the grant.
I believe this was the house leased to a family friend to "keep it secure", After the Board disbanded and no rent was being paid, there was no way to evict. |
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Fri Sep 08, 2017 12:59 pm |
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