MLCC Policy Change

Notice to all municipal clients: The Liquor Control Commission has changed its practice regarding “Special Licenses” under MCL 436.1527. For years, they have issued one-day licenses to “nonprofit” organizations, including Downtown Development Authorities, under the theory that DDAs are tax-exempt. Commencing a few weeks ago, they started issuing Special Licenses only to organizations that have 501(c)(3) or 501(c)(4) status. If your municipality or municipal authority has been receiving a special liquor license for a short-term event, you’ll need to do things differently now.

The City and the Firecracker

People are pretty excited about Michigan’s new fireworks law that went into effect on January 1st. It will improve Michigan retailers’ ability to compete with retailers south of the state line.

The problem is, the legislation leaves some pretty big holes in it when it comes to local ordinances. Section 7 of the act prohibits local units of government from enacting or enforcing an ordinance pertaining to the “sale, display, storage, transportation or distribution of fireworks regulated under the act.” A municipality, however, may regulate the “ignition, discharge, and use of consumer fireworks”, but any such regulation cannot be effective on the day before, the day of, or the day after a national holiday.

But that leaves some questions: Do these provisions preclude the enforcement of general noise ordinances on those days? How do these provisions square with Section 12 of the Act, which requires a person to get permission before using fireworks on public property, and with Section 16, which says a municipality may set a fee and grant permits for the use of agricultural or wildlife fireworks, display fireworks, and special effects for outdoor pest control or agricultural purposes?

Also: What is a “national holiday” (it’s not defined in the act). The Fourth of July is presumably included, but Thanksgiving? Ground Hogs Day? MLK Jr. Day?

Oh well. It’ll keep Michigan lawyers busy.

Eric J. Scheske

Bureaucratic Fascism Gets Smacked

On a few occasions, I’ve seen the Michigan Bureau of Commercial Services reject Articles of Organization because it suspected that, due to the name on the document, the organization might be used to conduct activities that can’t be carried on by limited liability companies in Michigan.

Fortunately, the Michigan Court of Appeals has told the Bureau to knock it off. In Jackson v Department of Energy, Labor & Economic Growth, 2011 Mich App LEXIS 1159 (June 23, 2011), the Court ordered the Bureau to accept Articles for filing. The Bureau had earlier rejected the Articles on grounds that the name made the Bureau suspicious that the company might be used for banking purposes.

The Court noted that, though the statute requires that the Bureau approve Articles for filing, it does not give the Bureau any discretion to look beyond the documents actually submitted. The Bureau must simply review the documents, determine whether they substantially conform with the statute’s requirements, and, if they do, endorse and file them. Even if the Bureau suspects or knows that the organizing member intends to use the company to engage in an unlawful business activity, the Bureau must still endorse and file them.

Eric J. Scheske

You’re a creditor with a lien on the debtor’s property. The debtor hasn’t paid you, and you want to take back the collateral, but the debtor has filed bankruptcy.

Due to the Bankruptcy Code’s automatic stay (a federal injunction that the federal courts take very seriously), you can’t repossess the collateral. The only option: Get the automatic stay lifted, then move forward with repossession. There are basically four ways for the stay to lift:

1. File a Motion for Relief from Stay. The filing fee is $150, and typically a lawyer is going to spend about 2.5 hours working on it, depending on how complicated it is, and assuming the court doesn’t schedule a hearing (if the court schedules a hearing–which is rare–the fees escalate).

2. Get the debtor’s attorney and the bankruptcy trustee to stipulate to the Relief from Stay. There is no filing fee, so that’s good. Unfortunately, it’s often very difficult to get the debtor’s attorney and trustee to stipulate.

3. Wait for the debtor to obtain a discharge (which, in a simple bankruptcy case, typically happens in about three-four months), then ask the trustee to abandon the property. The discharge, when combined with an abandonment, equals relief from the automatic stay for purposes of repossessing collateral.

4. Wait for the bankruptcy case to terminate. After the Order of Final Decree is entered, the automatic stay lifts for all purposes.

Eric J. Scheske

Michigan Legislature Enacts Changes

Late last year, the Michigan legislature went back through and cleaned up some of the mess it made with its earlier changes to the consumer mortgage foreclosure laws. Effective December 22, 2011, the following three laws went into effect:

Public Act No. 301 allows a borrower to contact a mortgage holder or servicer directly or through a housing counselor, rather than only through a counselor; requires the contact to be made within 30 days (rather than 14 days) after a Notice of Foreclosure is mailed to the borrower; requires the mortgage holder or servicer to designate a contact person who will attend meetings and facilitate negotiations with the borrower; and provides that a borrower is liable for property damage caused during the redemption period following a foreclosure sale.

Public Act No. 302 deletes the requirement that the foreclosing party publish a notice of borrower’s rights (this is a huge change that will prevent a lot of fraud, as well as a lot of unnecessary embarrassment for debtors). The Act also: revises the foreclosure notice by, among other things, requiring the borrower to be informed of the number of days in the redemption period; sets deadlines for a borrower to provide requested documents and for a designated person to give certain information to the borrower; extends the contact period for modification negotiations to 30 days instead of 14 days; requires determination of qualification for modification information to be provided to a borrower within 90 days after the required notice was sent or 10 days after the meeting with the borrower, whichever is later; and delays repeal of the Mortgage Modification Program until December 31, 2012.

Public Act No. 303 deletes the three-acre limit on residential property subject to a six-month redemption period if the amount due exceeds two-thirds of the original loan; prescribes a one-year redemption period for property used for agricultural purposes; and establishes a rebuttable presumption that property was used for agricultural purposes if certain criteria are met.

Roger A. Bird and Eric J. Scheske