Michigan Court of Appeals Holds Statute of Limitations Tolled in Religious Property Dispute

UPDATE:  On May 20, 2015, the Michigan Supreme Court summarily reversed the Michigan Court of Appeals decision in this matter holding that the statute of limitations was equitably tolled because the parties must first resolve their differences through religious dispute resolution rules.

On May 22nd, 2014, the Michigan Court of Appeals held in a civil case that the statute of limitations did not begin to run until the parties had first finished attempting to resolve their problems under religious dispute resolution rules.

In Chabad-Lubovitch of Michigan et al v Dr. Dov Schuchman et al, Docket No. 312037, the Michigan Court of Appeals addressed an appeal in a civil case involving a property dispute from the trial court's grant of summary disposition in favor of defendants.

The Court first recited the facts of the case.

This case arises out of a property ownership dispute between plaintiff, Chabad-Lubavitch of Michigan and defendants. The property at the center of the dispute is currently titled in the name of defendant Bais Chabad Torah Center of West Bloomfield (hereafter “Bais Chabad”). Plaintiff maintains that defendants are part of the Chabad-Lubavitch religious hierarchy, and that the property must be titled in its name pursuant to Chabad-Lubavitch religious doctrine and polity and the orders of several ecclesiastical bodies.

Defendants argue that no religious or legal doctrine requires it to transfer title of its property and the hierarchy does not control its financial or property interests. The parties also dispute whether the applicable statutes of limitations have expired. Plaintiff appeals the trial court’s order granting summary disposition in favor of defendants and denying its motion for summary disposition. Plaintiff asks this Court to reverse the trial court and order the transfer of the property to its name consistent with the orders of the Chabad-Lubavitch hierarchy.

Because we conclude that the applicable statutes of limitations were tolled during the ecclesiastical dispute resolution proceedings and because there are genuine issues of material fact, we reverse the trial court’s order granting summary disposition in favor of defendants and remand for further proceedings consistent with this opinion. 

There are two pieces of property at issue. The first parcel was acquired by Bais Chabad in 1984, and is located at 5595 Maple in West Bloomfield. Bais Chabad built its house of worship, which it continues to operate, on this property. In 1994, Bais Chabad acquired real property located at 6624 Tamerlane in West Bloomfield. This property is an outlot near the first property that provides a walkway to access the adjacent neighborhood. The first dispute regarding the property occurred in 1995, when defendant Rabbi Silberberg instituted judicial proceedings before a two-person rabbinic panel regarding complaints he had about Rabbi Berel Shemtov, who is the head Chabad-Lubavitch Rabbi in Michigan. After Silberberg began rabbinic proceedings, Shemtov raised counter-complaints within the rabbinic proceeding regarding Silberberg, including the fact that the property was titled in Bais Chabad’s name, and not in the name of Chabad-Lubavitch of Michigan. Plaintiff maintains that Chabad-Lubavitch doctrine and polity requires all subordinate congregations to title property in the name of a higher authority within the religious hierarchy. Defendants disagree. 

The parties do not dispute that Chabad-Lubavitch religious doctrine and polity requires internal dispute resolution by means of one of various rabbinic judicial panels or courts. Permission to file a lawsuit in a civil, secular court is required before a dispute may be taken outside of the religious organization. There have been five different ecclesiastical decisions made by various panels regarding the property dispute in this case. All five decisions concluded that the property at issue should be titled in plaintiff’s name and that transfer of the property’s title should be undertaken as soon as possible. Defendants have refused to comply with these directives, maintaining their right to independent property ownership . . .

The Court's analysis of the statute of limitations issue followed.

Resolution of this issue requires us to determine when plaintiff’s claims accrued. Under MCL 600.5827, the period of limitations runs from the time the claim accrues, and “the claim accrues at the time the wrong upon which the claim is based was done regardless of the time when damage results.” However, the doctrine of equitable tolling can alter the accrual date. See, e.g., Trentadue v Buckler Lawn Sprinkler, 479 Mich 378, 405-406; 738 NW2d 664 (2007). At issue here is whether, under the circumstances in this case, the applicable limitations periods were equitably tolled while the parties were engaged in ecclesiastical dispute resolution proceedings. 

The doctrine of equitable tolling has been recognized by Michigan courts; however it has a limited application. See, e.g., id. at 405-406; Devillers v Auto Club Ins Ass’n, 473 Mich 562, 590 n 65; 702 NW2d 539 (2005). Nevertheless, in AFSCME v Highland Park Bd of Ed, 457 Mich 74, 82; 577 NW2d 79 (1998), the Court considered whether the applicable statute of limitations was tolled when the parties negotiated a dispute resolution agreement that provided for a mandatory grievance procedure ending with nonbinding arbitration. The Court noted that caselaw favors exhaustion of grievance procedures before filing suit. Id. at 83. Ultimately, the Court held that where grievance procedures are mandatory, the applicable statute of limitations is tolled during the exhaustion of the mandatory procedure. Id. at 90. 

In this case, plaintiff specifically argues that even if the applicable statutes of limitations expired before the filing of its lawsuit, the running of the statutes of limitations were tolled by the ecclesiastical dispute resolution proceedings because Chabad-Lubavitch’s polity requires express permission before a lawsuit in a secular court may be filed. Moreover, it maintains that application of the First Amendment’s guarantees precludes the enforcement of the statutes of limitations without considering Chabad-Lubavitch’s own process for resolution of ecclesiastical disputes. 

The record in this case shows that following the final decision of the highest authority within the Chabad-Lubavitch hierarchy, plaintiff was granted permission to pursue its claims in the civil courts on December 24, 2009, and thereafter filed its complaint on April 17, 2012. This intervening period of time was within the applicable limitations period for each of its respective claims. Highland Park Bd of Ed, 457 Mich at 90, holds that a plaintiff’s claims are tolled during the exhaustion of mandatory dispute resolution procedures. Applying this principle to the issue in this case, the applicable statutes of limitations were tolled during the exhaustion of plaintiff’s ecclesiastical remedies. Thus, plaintiff’s claims were timely. 

Additionally, defendants dispute the date that the ecclesiastical dispute resolution process was concluded. Plaintiff maintains that the process was not complete until it received permission to bring a lawsuit in civil court on December 24, 2009. Defendants maintain that plaintiff should have sought permission earlier so as to comply with the applicable statutes of limitations. Thus, the question becomes whether the December 24, 2009 date marks the completion of the ecclesiastical dispute resolution process. However, the parties’ dispute regarding when the internal procedure was final constitutes a factual question that is not appropriate for resolution by this Court on appeal. Moreover, resolution of the parties’ disagreement about when the internal dispute resolution process was final would require this Court to interpret religious doctrine or polity. Engaging in such an interpretation would be improper because the First Amendment “requires that civil courts defer to the resolution of issues of religious doctrine or polity by the highest court of a hierarchical church organization.” Jones v Wolf, 443 US 595, 602; 99 S Ct 3020; 61 L Ed 2d 775 (1979). Accordingly, we are required to defer to plaintiff’s claim that the procedure was not final until it received permission to file a civil lawsuit. Id. Therefore, plaintiff’s complaint was timely filed. 

In further support of our conclusion that the doctrine of equitable tolling applied in this case, we note that Michigan law has previously recognized the necessity of exhaustion of religious dispute resolution remedies prior to filing an action in the civil courts. In Buettner v Frazer, 100 Mich 179, 181; 58 NW 834 (1894), our Supreme Court declined to consider a dispute between a pastor and the trustees of the German Evangelical Lutheran Christus Church of Detroit until both parties exhausted “the remedies afforded by the ecclesiastical body,” because the issues raised were “of ecclesiastical cognizance.” Similarly, in Miller v McClung, 4 Mich App 714, 722-723; 145 NW2d 473 (1966), this Court implicitly held that exhaustion of under MCR 2.605, declaring that Chabad-Lubavitch is hierarchical, that Bais Chabad is subordinate, and that Chabad-Lubavitch has the right to ownership and control of the property. Actions for declaratory relief derive from the underlying claim for substantive relief and are subject to the statute of limitations applicable to the underlying claim. Taxpayers Allied for Constitutional Taxation v Wayne Co, 450 Mich 119, 128; 537 NW2d 596 (1995). Because there is no specific statute of limitations governing the claim underlying plaintiff’s request for declaratory relief, the six-year residual statute of limitations set forth by MCL 600.5813 applies (“All other personal actions shall be commenced within the period of 6 years after the claims accrue and not afterwards unless a different period is stated in the statutes.”). Count three requests a determination of interests in land under MCL 600.2932 and MCR 3.411, wherein plaintiff asks the court to find that Chabad-Lubavitch has established title to the property by virtue of the religious hierarchy and is entitled to an order requiring defendants to transfer title to plaintiff; actions to determine the interest in land are subject to a 15-year statute of limitations under MCL 600.5801(4). Finally, count four alleges trespass on the basis of defendants’ continued use of the property. Actions for trespass are subject to a three-year statute of limitations under MCL 600.5805(10) (“The period of limitations is 3 years after the time of the . . . injury for all other actions to recover damages for . . . injury to a person or property.”). . .

Finally, we note that the primary purposes behind the enactment of statutes of limitations “can be summarized as (1) encouraging the plaintiffs to diligently pursue claims and (2) protecting the defendants from having to defend against stale and fraudulent claims.” Wright v Rinaldo, 279 Mich App 526, 533; 761 NW2d 114 (2008). Thus, the policy behind the enactment of statutes of limitations is not circumvented by applying the doctrine of equitable tolling in this case because plaintiff has not slept on its rights and defendants are not being asked to defend a stale claim for which the evidence is long gone or forgotten. Rather, the parties have been working toward a resolution of the issues raised in this case for several years in the ecclesiastical context, and there has been very little delay between the religious dispute resolution proceedings and the instant lawsuit. Thus, this case does not present the type of circumstances that statutes of limitations are meant to prevent. 

Defendants also argue that equitable tolling cannot be applied in this case because the parties were engaged in voluntary arbitration proceedings, and that under Varga v Heritage Hosp, 139 Mich App 358, 359-360; 362 NW2d 282 (1984), which specifically held that voluntary arbitration proceedings do not toll the limitations period, the statutes of limitations were not tolled. However, contrary to defendants’ argument, as discussed, we conclude that the parties were not engaged in arbitration proceedings. While the parties did sign a document that was titled “arbitration contract,” the document was an agreement to accept as binding the decision of the rabbinic panel that was convened to resolve the dispute under Chabad- Lubavitch’s ecclesiastical procedures. Other than the title of one document, nothing about the dispute resolution process that the parties were involved in suggested that the parties were engaged in voluntary arbitration. Rather, it is plain that the parties were attempting to resolve their dispute under Chabad-Lubavitch’s mandatory ecclesiastical procedure. 

In summary, we conclude that the applicable statues of limitations were equitably tolled during the time that the parties were engaged in the mandatory ecclesiastical dispute resolution process. Thus, the statutes of limitations did not begin to run until the resolution of the ecclesiastical proceedings. Accordingly, we conclude that plaintiff’s claims were timely filed and the trial court erred by granting summary disposition under MCR 2.116(C)(7).