STATE OF MICHIGAN

IN THE CIRCUIT COURT FOR THE COUNTY OF WAYNE

NATALIE JAMES, JEROME DAY, and )

ERIC INGRAM, individually, and on behalf of )
all others similarly situated, ) Hon.
)
Plaintiffs, ) Case No. 2019- -CK
)
v. ) JURY TRIAL DEMANDED
)
MICHAEL G. KELLY, an individual,
) CLASS ACTION COMPLAINT
DETROIT PROPERTY EXCHANGE, a )
Michigan Corporation, SUENA HOMES )
REALTY LLC, a Michigan Limited Liability )
Company, HOMES OF DETROIT, LLC, a )
Michigan Limited Liability Company, )
GREATER DETROIT, LLC, a Michigan )
)
Limited Liability Company, AMERICAN
)
TAX REFUND LLC, a Michigan Limited )
Liability Company, MONTLIEU, LC, a )
Michigan Limited Liability Company, )

Document received by the MI Wayne 3rd Circuit Court.

DETROIT LEASING, INC., a Michigan )
)
Corporation, SUNRISE HOMES REALTY
)
LLC, a Michigan Limited Liability Company, )
HOMES OF DETROIT LLC, a Michigan )
Limited Liability Company, CLEAR SKY )
REALTY LLC, a Michigan Limited Liability )
)
Company, DOBEL PRIZE LLC, a Michigan
)
Limited Liability Company, MIDTOWN )
HOMES REALTY LLC, a Michigan Limited )
Liability Company, BELMONT )
PROPERTIES OF MICHIGAN INC., a )
)
Michigan Corporation, WOODLAWN
)
PROPERTIES INC., a Michigan Corporation, )
DETROIT, MI LLC, a Michigan Limited )
Liability Company, PARTY CITY LC, a )
Michigan Limited Liability Company, )
)
DAKOTA KIDS GROUP, a Michigan Non-
)
profit corporation, ACRE ESTATE LLC, a )
Michigan Limited Liability Company, 13540 )
 MANSFIELD, LLC, a Michigan Limited )
Liability Company, CHEROKEE LAND LC, a )
Michigan Limited Liability Company, 9527 )
)
WHITCOMB, LLC, a Michigan Limited )
Liability Company, CHASE LOAN )
SERVICES, INC., a Michigan Limited )
Liability Company, BEBA’S BUILDINGS, )
)
LLC, a Michigan Limited Liability Company,
)
CHASE DETROIT LLC, a Michigan Limited )
Liability Company, GOOD HOMES )
REALTY, LLC, a Michigan Limited Liability )
Company, LATINO HOUSING , LLC, a )
)
Michigan Limited Liability Company,
)
CHRYSTIAN SEGURA, an individual, and )
John Doe Entities, 1-20, jointly and severally, )
)
Defendants. )
)
)
)
Gerard Mantese (P34424) Marilyn Mullane (P30998)
Theresamarie Mantese (P53275) MICHIGAN LEGAL SERVICES

Document received by the MI Wayne 3rd Circuit Court.

James A. Buster (P81186) 2727 Second Avenue, Ste. 333
Kathryn R. Eisenstein (P66371) Mailbox #37
MANTESE HONIGMAN, P.C. Detroit, MI 48201
1361 E. Big Beaver Rd. (313) 964-4130 ext. 403
Troy, Michigan 48083 [email protected]
(248) 457-9200 Attorneys for Plaintiffs
[email protected]
[email protected]
[email protected]
[email protected]
Attorneys for Plaintiffs

RECORDS PRESERVATION NOTICE

You are hereby notified to preserve during the pendency of this action all records and
documents in all forms and formats (digital, electronic, film, magnetic, optical, print, etc.)
that are relevant or may lead to relevant information, and to notify your employees, agents
and contractors that they are required to take appropriate action to do the same.

2
 CLASS ACTION COMPLAINT
There is pending civil action arising out of the transaction or occurrence alleged in the
Complaint, Natalie James et al v. Detroit Property Exchange, et al, 18-cv-13601 (E.D.
Mich., Hon. Judge Sean Cox); however, the Court in that case has declined to exercise
supplemental jurisdiction over the Plaintiffs’ state law claims. (See, ECF NO. 85)

/s/ Gerard V. Mantese

________________________________
Gerard V. Mantese (P34424)

Plaintiffs Natalie James, Jerome Day, and Eric Ingram, bring this class action complaint,

on behalf of themselves and all others similarly situated, against the following Defendants,

collectively referred to as “Defendants”: Michael G. Kelly; Detroit Property Exchange (“DPE”);

Suena Homes Realty LLC (“Suena Homes”); Homes of Detroit, LLC; American Tax Refund,

LLC; Greater Detroit, LLC; Montlieu, LC; Detroit Leasing, Inc.; Sunrise Homes Realty LLC;

Homes of Detroit LLC; Clear Sky Realty LLC; Dobel Prize LLC; Midtown Homes Realty LLC;

Belmont Properties of Michigan Inc.; Woodlawn Properties Inc.; Detroit, MI LLC; Party City LC;

Dakota Kids Group; Acre Estate LLC; 13540 Mansfield, LLC; Cherokee Land LC; 9527

Document received by the MI Wayne 3rd Circuit Court.

Whticomb, LLC; Chase Loan Services, Inc.; Beba’s Buildings, LLC; Chase Detroit LLC; Latino

Housing LLC; Good Homes Realty LLC; other John Doe Entities that are owned or controlled by

Michael Kelly who have yet to be ascertained; and Chrystian Segura (“Defendant Segura”).

NATURE OF ACTION

1. This action arises out of Defendants’ abusive, predatory seller financing scheme in

Detroit wherein Defendants (1) attract potential purchasers with the possibility of home ownership,

(2) have the purchasers sign ambiguous, opaque contracts with high interest rates that attempt to

evade state and federal law, (3) provide the purchasers every indication before and after signing

documents that the purchasers are buying a home to encourage them to keep paying the monthly

payments and to repair the dilapidated properties, (4) later evict the purchasers as tenants (rather

than utilizing the appropriate proceedings provided by law to regain possession from a property to

3
which the purchaser has equitable title as provided by law) based on Defendants’ intentional use

of ambiguous, confusing, and cherry-picked language when the purchaser almost inevitably gets

behind on the payments because Defendants failed to conduct an ability-to-repay analysis, and (5)

then restart the process with a new, unsuspecting purchaser. By engaging in the above conduct,

Defendants have violated the Michigan Consumer Protection Act, § 445.903, breached

agreements, and conspired to, and have, committed a fraud and other wrongful acts.

2. In substance, notwithstanding Defendants sprinkling of words such as “lease” or

“option” in the contracts, these are purchase money security transactions in which the consumer is

purchasing the property, paying interest and principal, taking on all the responsibilities of

ownership.

3. In the alternative, if the transactions at issue are leases, Defendants have still

engaged in conduct, described in more detail below, that violate the Michigan Consumer

Document received by the MI Wayne 3rd Circuit Court.

Protection Act, constitutes a fraud and a breach of contract.

JURISDICTION AND VENUE

4. The real estate that is the subject of this Complaint is located within Detroit, Wayne

County, Michigan.

5. Defendants have violated the Michigan Consumer Protection Act, § 445.903.

6. The Plaintiffs and each Defendant are separately a “person” as that term is defined

in MCL § 445.902(d).

7. The transactions described in this Complaint constitute “trade and commerce” as

defined in MCL § 445.902(g).

4
 8. The amount in controversy exceeds $25,000, exclusive of interest, costs, and

attorneys’ fees, and Plaintiffs also seek equitable relief. This matter is within the Jurisdiction of

the court.

9. Jurisdiction is also conferred on this Court by MCL § 445.911.

10. The alleged violations occurred and substantially all the events, transactions, and

occurrences relevant to this lawsuit arose within the geographical boundaries of County of Wayne,

State of Michigan. Therefore, venue is proper in this Court.

THE PARTIES

11. Plaintiffs were or currently are, at all relevant times, residents of Detroit, and/or

Wayne County, Michigan.

12. Each of the Defendants are Michigan companies with their principal place of

business located at 51 W. Hancock Street, Detroit, MI 48201.

Document received by the MI Wayne 3rd Circuit Court.

13. Each of the Entity Defendants as part of a joint venture with each other and

Defendant Michael Kelly and/or as the alter egos of Defendant Michael Kelly regularly engage in

the business of land contract lending and does substantial land contract business in Detroit,

Michigan.

14. In the alternative, each of the Entity Defendants as part of a joint venture with each

other and Michael Kelly and/or as the alter egos of Defendant Michael Kelly engage in the business

of investing in real estate as landlords.

15. Defendant Chrystian Segura was a licensed real estate agent in the State of

Michigan, license number 6501384416 whose license lapsed on October 31, 2018.

16. Upon information and belief, Chrystian Segura resides in Shelby Township,

Michigan.

5
 17. Michael Kelly is a licensed associate real estate broker in the State of Michigan,

license number 6502381812, associated with Dream Realty Company.

18. Upon information and believe, Defendant Michael Kelly is not a licensed mortgage

loan originator.

19. Upon information and belief, none of the Entity Defendants are licensed real estate

brokers in the State of Michigan.

20. Upon information and belief, none of the Entity Defendants are licensed mortgage

loan originators.

21. Upon information and belief, Michael Kelly owns and operates and controls all

entity Defendants which operate and transact business in Detroit, Michigan.

22. Upon information and belief, Michael Kelly, as part of joint venture/partnership

with Entity Defendants and/or by and through the Entity Defendants (and other entities yet to be

Document received by the MI Wayne 3rd Circuit Court.

discovered) as his alter egos operates that he directs and controls, engages in the business of land

contract origination by engaging in seller financing to sell real property to their customers.

23. In the alternative, Michael Kelly, as part of joint venture/partnership with Entity

Defendants or by and through the Entity Defendants (and other entities yet to be discovered) as his

alter egos, and the Entity Defendants, engage in the business of leasing real property on their own

behalf as landlord.

24. Upon information and belief, Michael Kelly is a resident of Grosse Pointe Woods,

Michigan.

6
 GENERAL ALLEGATIONS

I. THE SCHEME
Step 1: Acquire Cheap, Dilapidated Properties

25. Defendants lure potential purchasers with the prospect of attaining the American

Dream and they then perform a real estate bait-and-switch within the effectuating documentation.

Defendants take as much money from Plaintiffs and the Class up front and within a short period

of time as possible, and then, once they fall behind, evict them as tenants—even though Plaintiffs

and the Class is allegedly purchasing the properties.

26. To keep initial costs low, Defendants purchase countless properties from Wayne

County tax foreclosures, as well as other avenues, at rock bottom prices. Defendants are aware—

based on the price, location, and previous experience with real estate in the area—that these homes

are often dilapidated, and largely uninhabitable.

27. The 2008 Recession gave Defendants an opportunity to buy houses at rock bottom

Document received by the MI Wayne 3rd Circuit Court.

prices – $10,000 or even less. Defendants seized this opportunity and, today, it is believed that the

land contract scheme is around 85-90% of their business.

28. The houses are usually in terrible condition and contain latent defects. Defendants

make few, if any, repairs before selling them. The following problems are common: (a)

fundamental components such as water heaters, furnaces, electrical wiring, plumbing fixtures, and

gas lines are often missing or badly damaged; (b) basements flood and roofs leak; (c) windows

and doors are missing or broken; (d) exterior and interior walls have holes; (e) there are rodent,

cockroach, and/or termite infestations; (f) floors have holes and are damaged by animal feces and

urine; and (g) there is extensive mold because of the leaks.

29. Many of the most serious problems are latent defects and cannot be discerned by

prospective purchasers. Water issues involving the roof are generally hidden, unless it is a rainy

7
day when few people are looking at houses. Electrical, water, and gas issues may not be

immediately discernable because utilities are usually turned off.

30. Defendants are fully aware of the poor condition of their houses. After acquisition

by Defendants, many of the houses are vacant for an extended time and often deteriorate even

further due to vandalism and theft. Defendants also receive many complaints about the condition

of the houses from consumers. Defendants are aware of these complaints when they go to resell

the house to a new victim after the previous consumer vacates the property.

31. Defendants do not disclose what they paid for the house and do not provide an

independent appraisal to purchasers. As with inspections, Defendants know that their customers

are unlikely to obtain an appraisal on their own because they lack the necessary experience and

financial resources. Defendants count on customers not knowing the true condition or value of

their houses before they sign a contract.

Document received by the MI Wayne 3rd Circuit Court.

Step 2: Market the Properties as For Sale

32. Defendants and their agents carry out their scheme through a standardized course

of conduct.

33. Based on the condition and location of the houses, Defendants know that

appreciation alone is unlikely to provide a profit, so they must either sell the properties or rent

them out. If they rent out the properties, they can receive a steady stream of cash month after month

and utilize summary proceedings to evict a non-paying “tenant.”

34. Defendants know that few—if any—renters will agree to pay the monthly rent

Defendants seek for dilapidated properties in addition to all maintenance, reports, taxes (past due

and current) and utilities. There is no upside for the tenant in such a transaction.

8
 35. Further, as Defendants are no doubt aware, Michigan law prevents a landlord from

collecting a security deposit that is greater than 1.5x the monthly rent. This limits Defendants’

ability to get as much cash up front as possible.

36. So, Defendants conceived of a way to convince a consumer that paying a monthly

payment, as well as taking on all the expenses and risk of living in a home, is a worthwhile

investment.

37. Defendants turned to what they call “rent to own” agreements.

38. These transactions are land contract that Defendants try to disguise as leases with

an option to purchase.

39. Defendants use the term “rent to own” because land contracts are regulated by the

Dodd Frank Law.

40. As Defendant Michael Kelly stated, “we do not do land contracts anymore because

Document received by the MI Wayne 3rd Circuit Court.

of the Dodd Frank law.”

41. Defendants use the term “rent to own” because it connotes the idea that the

customer will own the property at the end of the term after paying monthly installment payments.

42. In the process of advertising these transactions, Defendants provide a purchase

price, a down payment, and the monthly payment for the purchase.

43. Homes that are no longer available in the advertisement are shown as “SOLD” not

leased.

44. In other advertisements, Defendants will prompt the customer with the message

“Stop Renting! Start Buying”

45. Further, under a land contract, Defendants could collect an amount greater than

1.5x the monthly payment and call it a “non-refundable down payment.”

9
 46. When the potential purchaser comes in to inquire, Defendants tell them that very

few documents are needed to qualify—State ID, a social security card, and maybe some pay stubs.

47. Upon information and belief, Defendants do not meaningfully analyze the data.

48. Upon information and belief, the homes are advertised and sold at prices that

exceed the market value of the real properties advertised.

Step 3: Have the Purchaser Sign Intentionally Confusing, Ambiguous Documents

49. When customers come to purchase a property, Defendants provide them documents

entitled “Lease with Option” or “Residential Lease with Option Agreement.”

50. The “lease with option” is usually accompanied by a “Real Estate Purchase

Agreement” that is signed either prior to the execution of the “lease with option” documents or

concurrently therewith.

51. The “Lease with Option” document, which may have a slightly different title

Document received by the MI Wayne 3rd Circuit Court.

depending on the customer, has terms that are couched in usual landlord/tenant language, referring

to the customer as a tenant, stating the lease payments and the term of payment, among other terms.

It also provides the terms to exercise the purported option to purchase the property.

52. In contrast, the title “Real Estate Purchase Agreement,” which may have varying

titles, in conjunction with other documents that to the consumer as a purchaser and directing them

to file Property Transfer Affidavits and Principal Residence Exemption Affidavits, represent that

the consumer is purchasing the property.

53. Together, the documents are ambiguous and confusing.

54. Defendants often collect a large down payment.

55. Customers are provided documents that represent the transaction as a sale.

10
 56. For example, Defendants have provided customers with a document congratulates

the customer on purchasing the Property.

57. Defendants have provided a document that refers to the customer as the “owner”

and makes them responsible for all past due property taxes and water bills.

58. Further, Defendants have provided customers with a document that directs the

customer to file a property transfer affidavit.

59. Defendants have provided additional documents that direct and/or encourage

customers to file for poverty exemptions for real property taxes.

60. Defendants continued to provide documents demonstrating that the transaction was

a purchase transaction even after closing.

61. Consumers receive invoices that purport to breakdown the payments made by the

consumer and the amount still owed.

Document received by the MI Wayne 3rd Circuit Court.

62. Importantly, these invoices provided a loan number, a maturity date, identify the

home as “collateral” and break down payments in terms of “escrow,” “principal,” and “interest.”

63. Furthermore, Detroit Property Exchange also sent IRS Mortgage Interest

Statements (form 1098s) to Plaintiffs and putative class members.

64. Eric Ingram and Natalie James received 1098s for the 2017 and 2018 tax years.

65. These are fraudulent forms as they contain a fictitious taxpayer ID number and are

never provided to the government.

66. Defendant Michael Kelly described the “rent to own” transaction in the following

terms in 2018, well after Ms. James executed her transaction in 2016:

67. “the option agreement -- you’re exercising it that day. It’s not like at the end of the

contract you decide, okay, I’m going to exercise it.”

11
 68. “The date of the signing you exercise the right to purchase it and all your payments,

a portion of your payment just like a bank, part of it goes to principal[,] part of it goes to interest

and it’s advertised exactly the same as a bank is…so that day you’re now making payments toward

principal and interest just like a bank, so therefore that’s what we see build in equity…it goes

toward the reduction [of the principal]. Again, it’s no different than if you went to Chase Bank and

got a loan.”

69. “according to this [your agreement is] a lease with an option which is similar to a

land contract [,] its just two documents instead of one. There’s a lease and there’s the option, which

is the equity part of it, saying that your payments are going toward principal and interest. Again,

it’s amortized same as a bank.”

Step 4: After the Customer Falls Behind, Defendants File Landlord-Tenant Eviction
Proceedings Pursuant to MCR 4.201

70. Ultimately, Defendants then take advantage of the ambiguous documentation and

Document received by the MI Wayne 3rd Circuit Court.

provisions that purport to make the purchaser a tenant when the purchaser—almost inevitably—

falls behind on the payments.

71. When this happens, Defendants file summary proceedings in the 36th District Court.

72. As a practice, Defendants attach only the lease (not the real estate purchase

agreement or the option agreement) to their complaints.

73. Perhaps the most insidious part of the scheme is that Defendants know—based on

income and previous experience—that most purchasers will fall behind on the payments.

74. Based on information and belief, Defendants do not conduct a good faith,

reasonable evaluation of the purchaser’s ability to pay the monthly payments, nor do Defendants

take into account the costs of repairs, utilities, taxes, and other costs associated with home

ownership.

12
 75. The scheme has resulted in defaults and delinquencies within a relatively short time

after consummating the transaction and it has also historically resulted in high levels of

delinquencies and defaults.

76. This is evidenced by the fact that DPE has a ratio of 1.49 “evictions” for each

property in its portfolio. (Ex. 1, Ackers, J & Seymour, E., Instrumental Exploitation: Predatory

Property Relations at City’s End, Elsevier Ltd, Feb 20, 2018) (hereinafter “the Study”).

77. This high level of delinquency and default demonstrates that Defendants know that

the demographic and clients they target and consummate transactions with cannot afford the

abusive, predatory terms they have placed in these contracts.

78. But Defendants do not care because the constant turnover allows them to increase

profits.

79. This constant cycle permits Defendants to continuously obtain large down

Document received by the MI Wayne 3rd Circuit Court.

payments, while receiving some income and having a third party provide revenues to pay down

delinquent tax and water bills.

80. During the course of ongoing, related federal litigation, Defendants began to solicit

broad releases from putative class members.

81. Defendants utilized deceptive, misleading practices to obtain those releases.

82. Defendants mailed a flyer to purporting to provide a “gift” of $250 if putative class

members would “stand by their side.”

83. The flyer contained a “mockup” of a $250 check.

84. The flyer did not mention that a person would only receive the money if that person

signed a broad release of claims.

85. This flyer was blatantly misleading and deceptive.

13
 86. Further, during an in-person meeting, Defendant Michael Kelly referred to a broad

release of claims as a “petition.”

87. There was no petition.

88. Mr. Kelly used the concept of a “petition” as a ruse to encourage putative class

members to sign the release of claims.

II. THE PLAINTIFFS

89. Plaintiffs Natalie James and Jerome Day approached Defendants about purchasing

a home in or around 2016.

90. They ultimately sought to purchase the real property.

91. Natalie James and Jerome Day executed documents that are substantially identical

to the documents executed by the other Plaintiffs and the Class.

92. Defendants provided Natalie James and Jerome Day with documents that are

Document received by the MI Wayne 3rd Circuit Court.

similar to the documents received by other Plaintiffs and the Class.

93. After Defendants filed summary proceedings against Natalie James and Jerome

Day pursuant to MCR 4.201, the 36th District Court held that they were land contract vendees.

94. Natalie James and Jerome Day were harmed by Defendants’ scheme and their

standardized course of unfair, deceptive acts and practices in the conduct of trade or commerce.

95. Plaintiff Eric Ingram purchased his home, located at 4417 Courville, as a land

contract vendee on March 7, 2016.

96. On or about that date, Eric Ingram signed documents substantially similar to the

other Plaintiffs and to the Class.

97. Eric Ingram has received documents from Defendants that are similar to the

documents received by the other Plaintiffs and the Class.

14
 98. Eric Ingram was harmed by Defendants’ scheme and their standardized course of

unfair, deceptive acts and practices in the conduct of trade or commerce.

CLASS ACTION ALLEGATIONS

99. Plaintiffs reallege all preceding allegations as set forth herein.

100. Plaintiffs bring this action, pursuant to MCR 3.501, on behalf of themselves and all

other similarly situated persons who have been affected by Defendants’ wrongful conduct, as

expressly permitted by MCL § 445.911(1), (3).

101. Plaintiffs and the Class request that this Court certify a Class as follows.

102. A Class of persons who, from December 27, 2013 through final judgment, executed

documents that relate to the purchase or lease of real estate from any Defendant, where such

documents are as follows:

a) any document or documents that Defendants characterize as a “Rent to

Document received by the MI Wayne 3rd Circuit Court.

Own” transaction, OR

b) two or more of the following documents drafted by or on behalf of

Defendants: “lease,” “option to purchase,” “real estate purchase agreement,” OR

c) a document with the title “Land Contract.”

103. This action is properly maintained as a class action because:

a) Joinder of all Class members is impracticable because of the size of the

Class. Plaintiffs understand that the total number of persons within the Class and sub-class exceed

50 persons.

b) Defendants have acted or refused to act on grounds generally applicable to

the Class.

c) The claims alleged on behalf of the Class raise questions of law and fact

that are common to the Class and predominate over questions affecting only individual members
15
because all Class members entered into substantially similar written contracts with Defendants

pursuant to Defendants continuous scheme. Common questions of law and fact include, among

others: (i) whether the transactions at issue are land contracts, (ii) whether the land contract

scheme as implemented by Defendants is unfair, predatory, misleading, fraudulent or confusing;

(iii) whether the Defendants’ standardized conduct is an unfair, unconscionable, or deceptive

methods, acts, or practices in the conduct of trade or commerce; (iv) whether Defendants’ use of

the phrase “Rent to Own” in relation to real estate transactions is unfair, unconscionable or

deceptive in the conduct of trade or commerce; and/or (v) whether Defendants have breached their

agreements with the Class.

104. The number of people in the class is so numerous as to make joinder impractical,

and Plaintiffs’ claims are typical of the claims of the class members, and all claims are based on

the same legal and remedial theories.

Document received by the MI Wayne 3rd Circuit Court.

105. There are questions of law and fact which are common to the numerous members

of the class, and these questions predominate over any question affecting only individual class

members.

106. The claims of the named Plaintiffs are typical of the claims of the entire class.

107. Plaintiffs will fairly and adequately protect the interest of all class members in the

prosecution of this action and in the administration of all matters relating to the claims stated

herein. Plaintiffs are similarly situated with all persons who have an interest in the Defendants’

wrongful conduct. Plaintiffs have suffered similar injuries as the members of the class the Plaintiffs

seek to represent, and they were wronged, wish to obtain redress of the wrong, and want the

Defendants stopped from perpetrating similar wrongs on others. To that end, Plaintiffs have

16
retained counsel experienced in handling class action suits. Neither the named Plaintiffs, nor

Plaintiffs’ counsel, has any interest which may cause them not to vigorously pursue this action.

108. Plaintiffs are representative of all individuals in the class and will, as representative

parties, fairly and adequately protect the interest of the entire class.

109. Maintaining this action as a class action is superior to other available methods of

adjudication since it will promote the convenient administration of justice and will achieve a fair

and efficient adjudication of the controversy in this matter because there are numerous of potential

class members.

110. Further, the prosecution of separate actions by individual members of the class

would create a risk of (i) inconsistent or varying adjudications that would confront the Defendants

with incompatible standards of conduct, and (ii) adjudications with respect to individual members

of the class that would as a practical matter substantially impair, impede, or be dispositive of the

Document received by the MI Wayne 3rd Circuit Court.

interests of other members of the class, not parties to the adjudication because of the doctrine of

res judicata.

111. Final, equitable and declaratory relief are appropriate because Defendants should

be required, in addition to the payment of damages, to begin exercising their duty of due care to

Plaintiffs and other Class members and be enjoined from violating the Michigan Consumer

Protection Act, and other equitable remedies.

112. The action is manageable as a class action because proofs are basically the same

for all members of the class on all major issues.

113. In view of the nature of the issues and the expense of litigation, the separate claims

of the individual class members are insufficient in amount to support prosecution of separate

actions in an efficient matter.

17
 COUNT I
VIOLATION OF THE MICHIGAN CONSUMER PROTECTION ACT (MCL 445.903)

114. Plaintiffs re-allege all prior and subsequent allegations as if fully stated herein.

115. Each Plaintiff and each Defendant is a “person” within the meaning of MCL

445.902(d).

116. Based on information and belief, none of the Entity Defendants are licensed real

estate brokers.

117. Based on information and belief, none of the Defendants except Chrystian Segura

are licensed mortgage loan originators.

118. Based on information and belief, Defendant Chrystian Segura was not a licensed

mortgage loan originator while he was associated with Defendant Michael Kelly or Entity

Defendants.

119. Each Defendant, at all relevant times, has engaged in “trade or commerce” as

Document received by the MI Wayne 3rd Circuit Court.

defined by MCL 445.902(g).

120. Each Defendant, individually or by and through its agent, has engaged in unfair,

unconscionable, or deceptive methods, acts, or practices in the conduct of trade or commerce.

121. Defendants have caused a probability of confusion or of misunderstanding as to the

legal rights, obligations, or remedies of the Plaintiffs and the Class to the transactions they

executed.

122. Inter alia, Defendants lead Plaintiffs and Class members to believe they are signing

land contracts and purchasing a home, but instead deceive them that they are only renters by

cherry-picking the language of the documents and filing evictions proceeding in 36th District

Court.

18
 123. Defendants have caused a probability of confusion or of misunderstanding as to the

terms or conditions of credit.

124. Inter alia, Defendants bury hidden charges into the loan documents and represent

to Plaintiffs and other Class members that the cost of the loan are based on a simple amortization

of the loan over time when there are hidden fees buried in the agreements.

125. Defendants have failed to reveal a material fact, the omission of which tends to

mislead or deceive the consumer, and which fact could not reasonably be known by the consumer.

126. Inter alia, Defendants do not tell Plaintiffs and other class members of the serious

latent defects in the homes that make them uninhabitable. Defendants also mispresent to Plaintiffs

and the other class members that they are buying their home when they are going to be treated as

renters upon default on payments.

127. Defendants have engaged in gross discrepancies between the oral representations

Document received by the MI Wayne 3rd Circuit Court.

of the seller and the written agreement covering the same transaction.

128. Inter alia, Defendants tell the Plaintiffs and Class members that they are buying a

home and congratulate them on their home purchases, and saying they will work with the Plaintiffs

and Class members if they fall behind when they all the while intend to evict them as renter upon

any default in payment of the loan.

129. Defendants have charged the consumer a price that is grossly in excess of the price

at which similar property or services are sold.

130. Inter alia, the houses are uninhabitable with no heat, infestation, defective boilers

and radiators, defective roofs, missing and defective gutters, damaged ceiling within the home,

leaky waste pipes in bathroom, faulty electrical wiring and systems, and leaky basement walls,

19
among other defects making the houses worth far below what the Plaintiffs and Class members

pay for the homes.

131. Defendants have failed to reveal facts that are material to the transaction in light of

representations of fact made in a positive manner such as the nature of the transaction and the

serious defects in the houses.

132. Defendants and their agents violated the Michigan Consumer Protection Act, MCL

§§ 445.903, by and through their actions and/or inactions described above in the following

respects: (a) causing a probability of confusion or of misunderstanding as to the legal rights,

obligations, or remedies of a party to a transaction; (b) causing a probability of confusion or of

misunderstanding as to the terms or conditions of credit if credit is extended in a transaction; (c)

failing to reveal a material fact, the omission of which tends to mislead or deceive the consumer,

and which fact could not reasonably be known by the consumer; (d) taking advantage of the

Document received by the MI Wayne 3rd Circuit Court.

consumer's inability reasonably to protect his or her interests by reason of disability, illiteracy, or

inability to understand the language of an agreement presented by the other party to the transaction

who knows or reasonably should know of the consumer's inability; (e) making gross discrepancies

between the oral representations of the seller and the written agreement covering the same

transaction or failure of the other party to the transaction to provide the promised benefits; (f)

charging the consumer a price that is grossly in excess of the price at which similar property or

services are sold; (g) Making a representation of fact or statement of fact material to the transaction

such that a person reasonably believes the represented or suggested state of affairs to be other than

it actually is; and (h) failing to reveal facts that are material to the transaction in light of

representations of fact made in a positive manner.

20
 133. Each Plaintiff is a “person who suffers loss” as that phrase is used in MCL

§§445.911(2),(3).

134. As a direct and proximate result of Defendants’ conduct, Plaintiffs and the Class

members have suffered and continue to suffer significant and ongoing damages.

135. Plaintiffs and the Class members seek any and all equitable and/or legal remedies

available.

COUNT II
DECLARATORY JUDGMENT AND INJUNCTION
(AS TO ALL DEFENDANTS)

136. Plaintiffs reallege and incorporate all prior and subsequent allegations as if set forth

fully herein.

137. The transactions described within the Complaint create an actual controversy that

places the parties in a position of uncertainty as to their respective rights in real property.

Document received by the MI Wayne 3rd Circuit Court.

138. Plaintiffs and the Class seek a declaratory judgment to adequately protect their

equitable ownership interest in their homes.

139. Plaintiffs request that the Court hold that the transactions entered into between the

Plaintiffs and certain Defendants are land contracts that those who still have possession of their

homes are the equitable owners thereof, or legal owners thereof for those who have legal title,

subject to repayment of the purchase price to the appropriate Defendant.

140. Plaintiffs further request that the Court hold that each of the following conduct,

separately and/or when used in conjunction constitute a method, act, or practice that is unlawful

under MCL § 445.903:

a) Use of the phrase “Rent-to-Own” when such phrase is used to describe a

land contract or a lease with an option to purchase;

21
 b) Providing a receipt, ledger, invoice, or any other document, to customers

who have executed a lease with an option to purchase (but who in Defendants estimation have not

exercised this option to purchase) that represent to the customer that each payment is being

allocated to principal, interest, and escrow;

c) Providing a receipt, ledger, invoice, or any other document, to customers

who have executed a lease with an option to purchase (but who in Defendants estimation have not

exercised this option to purchase) that contains a loan number;

d) Providing a receipt, ledger, invoice, or any other document, to customers

who have executed a lease with an option to purchase (but who in Defendants estimation have not

exercised this option to purchase) that represent to the customer that describes the real property as

collateral;

e) Issuing an IRS Mortgage Interest Statement (IRS From 1098) to customers

Document received by the MI Wayne 3rd Circuit Court.

who have executed a lease with an option to purchase (but who in Defendants’ estimation have

not exercised this option to purchase);

f) Representing within an advertisement that a property is a “Rent to Own”

opportunity” where the transaction is a lease with an option to purchase and where the

advertisement provides only pictures of homes, a total purchase price, a down payment figure, and

a monthly payment;

g) Representing within an advertisement that property has been “SOLD”

where such property is only being removed from the listing because another customer has executed

a lease with an option to purchase in relation to that property;

h) Implying in any advertisement that a consumer is “buying a home” by

executing a lease with an option to purchase;

22
 i) Issuing an advertisement encouraging a consumer to “stop renting [and]

start buying” come to Defendant to purchase a home where the advertiser’s intent is not to engage

in a land contract or cash sale but to have the consumer enter into a lease with an option to

purchase;

j) Representing to a consumer that the consumer is building or creating equity

with a rental payment;

k) Providing a consumer with an application entitled “home ownership

application” and then steering the consumer to execute a lease with an option to purchase;

l) Having a consumer who has exercised a land contract or a lease with an

option to purchase sign a deed back to the Seller at Closing;

m) Describing a lease with an option to purchase as being equivalent to

obtaining a loan from a financial institution;

Document received by the MI Wayne 3rd Circuit Court.

n) Encouraging a consumer who has executed a lease with an option to

purchase to file a property transfer affidavit;

o) Advertising that a consumer will receive a gift for engaging in certain

conduct where the advertiser actually intends to only provide the “gift” in consideration for

conduct not disclosed within the advertisement;

p) Selling real property for a price that exceed the market value of the property;

141. Plaintiffs also request a declaration that Defendants’ documents violate the

Michigan Consumer Protection Act and an injunction enjoined Defendants from using these

documents in any further transactions.

23
 COUNT III
BREACH OF CONTRACT
(AS TO ALL DEFENDANTS EXCEPT CHRYSTIAN SEGURA)

142. Plaintiffs reallege all prior and subsequent allegations as if set forth fully herein.

143. Defendants signed uniform agreements with Plaintiffs and Class Members that they

were purchasing a home on a land contract or equivalent security arrangement, and were the

practical owners of the home, and/or that they were building equity in the home with each payment.

144. Defendants agreed to this arrangement in its form contracts and continuously

represented to Plaintiffs and the Class that they were still purchasing the home, even where

Plaintiffs and Class Members did not comply strictly with the terms of the written agreements.

145. Defendants provided Plaintiffs and the Class with numerous indicia of purchasing

a home, which included oral representations, invoices, receipts, IRS form 1098s, referring to

Plaintiffs and class members as “purchasers,” encouraging and representing that Plaintiffs and the

Document received by the MI Wayne 3rd Circuit Court.

Class could file Property Transfer Affidavits and Principal Residence Exemption Affidavits.

146. Plaintiffs and the Class took actions in accordance with their belief that they were

purchasing the home: they attempted to repair the properties, they took on the responsibility of

large delinquent tax and water bills, they agreed to enter into long term, multi-year contracts, they

agreed to pay principal and interest.

147. Defendants breached their agreements with the Plaintiffs and the Class by

attempting to evict them from their homes as lessees rather than land contract vendees if the

Plaintiffs or the Class fell behind on their payments.

148. As a direct and proximate result of Defendants’ breaches as detailed above,

Plaintiffs and the Class members have suffered and continue to suffer significant and ongoing

damages.

24
 149. As a direct and proximate result of Defendants’ breaches they are responsible for

all damages to the Plaintiffs and Class including, but not limited to, consequential and incidental

damages.

COUNT IV
FRAUD & PIERCING THE CORPORATE VEIL, AIDING AND ABETTING, AND
CIVIL CONSPIRACY
(to impose liability upon Michael Kelly for his actions and for the action of the Entity
Defendants and to hold each Defendant responsible for the actions of the others)
150. Plaintiffs reallege all prior and subsequent allegations as if set forth fully herein.

151. Based on information and belief, Michael Kelly is the owner, operator, and

managing member or officer of: Detroit Property Exchange (“DPE”); Suena Homes Realty LLC

(“Suena Homes”); Homes of Detroit, LLC; American Tax Refund, LLC; Montlieu, LC; Greater

Detroit, LLC; Detroit Leasing, Inc.; Sunrise Homes Realty LLC; Homes of Detroit LLC; Clear

Sky Realty LLC; Dobel Prize LLC; Midtown Homes Realty LLC; Belmont Properties of Michigan

Inc.; Woodlawn Properties Inc.; Detroit, MI LLC; Party City LC; Dakota Kids Group; Acre Estate

Document received by the MI Wayne 3rd Circuit Court.

LLC; 13540 Mansfield, LLC; Cherokee Land LC; 9527 Whitcomb, LLC; Chase Loan Services,

Inc.; Beba’s Buildings, LLC; Chase Detroit LLC; Latino Housing LLC; Good Homes Realty LLC,

among other entities.

152. Based on information and belief, Michael Kelly has created (or caused to be

created), and exercised control over these entities with the intent to use each of these entities to

perpetrate a fraudulent scheme or wrong upon Plaintiffs and the Class.

153. Michael Kelly created, structured, organized, and utilized each of these entities for

the purpose of impermissibly evading common law requirements and obligations, and to perpetrate

what he, the entities, and Mr. Segura, intended to be a fraudulent scheme upon Plaintiffs and the

Class. To be clear, not every entity was used with every Plaintiff or every Class Member; however,

each entity was used as part of the scheme as a whole.

25
 154. Based upon belief, the Detroit Property Exchange has not executed any written

agreements with the other Entity Defendants.

155. Based upon belief, the Entity Defendants are under-capitalized.

156. Based upon belief, Entity Defendants do not comply with corporate formalities.

157. Based upon belief, Michael Kelly operates the entities together as partners, joint

venturers, and/or as if they were a single company.

158. For example, payments to Detroit Property Exchange from a customer’s bank

account or credit card are delivered and collected not by Detroit Property Exchange or the owning

entity of the property, but instead by Woodlawn Properties, Inc., another entity owned by Michael

Kelly.

159. Based upon information and belief, there are no written agreements between

Woodlawn Properties, Inc. and any other Defendant entities.

Document received by the MI Wayne 3rd Circuit Court.

160. Based upon information and belief, Mr. Kelly also transfers real property between

his various Entity Defendants without consideration.

161. Each of the Defendant Entities (and others to be discovered) are in fact alter egos

of Mr. Kelly and instrumentalities to achieve his scheme: his intent and action is their intent and

action.

162. Each of the Defendant Entities and Michael Kelly (or his designee), in combination

and by concerted action by and among these Defendants, represented to one or more of the

Plaintiffs and the Class Members, that Plaintiffs and Class Members are homeowners who are

purchasing properties on land contracts or through other similar means, even though Defendants

never intended to treat Plaintiffs and Class Members as property owners, intended for the

documents to not constitute land contracts/purchase money transactions, and intended to file

26
improper landlord tenant proceedings notwithstanding the continuous, consistent representations

that Plaintiffs and the Class had engaged in purchase-sale transaction and that they were,

implicitly, property owners.

163. In fact, during a meeting with Plaintiffs Natalie James and Jerome Day, Defendant

Kelly insisted that Plaintiffs James and Day own the property they are purchasing.

164. Mr. Kelly said that each payment was for principal and interest, just like in a

mortgage payment, and Plaintiffs James and Day they exercised their right to purchase the same

day when they signed the documents and that Defendants advertised land contracts and “leases

with option” the same way.

165. Mr. Kelly further told Plaintiffs James and Day that these documents were enough

to show that they were the owners of the property because Michigan recognizes equitable title

under such contracts.

Document received by the MI Wayne 3rd Circuit Court.

166. All Plaintiffs (and upon information and belief, all Class Members) received

receipts, invoices, payment histories or the like that represented they were purchasing the property

by representing that each payment was for interest, principal, escrow, providing a loan number,

maturity date, and other similar information. Plaintiff Ingram received a deed to his property; Ms.

Sherrell received a deed to her property.

167. If any Plaintiff or Class Member is not a land contract vendee or the mortgagor of

an equitable mortgage, or otherwise a purchaser holding equitable title of their respective

properties, then Defendants’ representations to that Plaintiff or Class Member were false.

168. When the Defendants made the representation, the Defendants knew that it was

false, or made it recklessly, without knowledge of its truth as a positive assertion; the Defendants

27
made the representation with the intention that each of the Plaintiffs/Class Members would act

upon it; and each Plaintiff and Class Member acted in reliance upon it.

169. Defendants’ representations were material, made with intent to deceive and mislead

the Plaintiffs and Class Members, and made with the intent that Plaintiffs and the Class would rely

on such representations.

170. Each of the Plaintiffs and Class Members reasonably relied upon Defendants’ oral

and documentary representations to them, because the representations were continuous and made

during the execution of their documents, after the execution of the documents, and even after

Defendants filed any summary proceedings in the 36th District Court, by continuing to represent

that payments were for principal and interest, and by sending each Plaintiff and Class Members an

IRS Mortgage Interest Form (Form 1098) via the U.S. mail.

171. The IRS Mortgage Interest Form is a particularly potent representation upon which

Document received by the MI Wayne 3rd Circuit Court.

each of the Plaintiffs and the Class Members relied in understanding that they were owners of the

property because: (1) each IRS Form includes information about a party’s transaction, identifying

the “origination date” and specifying the amount of “interest” that had been paid on a mortgage;

(2) it represents to the Plaintiff or Class Member that their transaction is equivalent to a purchase

transaction (i.e. a mortgage) under the law; (3) it refers to Detroit Property Exchange as their

“lender,” and (4) it bears the imprimatur of being an important, government document because it

is provided upon an IRS form.

172. As a result of the receipt of a IRS Mortgage Interest Form, in conjunction with the

other representations made by Defendants, each of the Plaintiffs and Class Members are

reasonably assured that they are purchasing the property, are implicitly discouraged from seeking

28
to mitigate damages, and are further assured that any proceeding in the 36th District Court does not

involve their status as a purchaser.

173. Michael Kelly knowingly and intentionally utilizes various agents, representatives,

and the co-defendant entities to perpetrate this fraud and other wrongs upon each Plaintiff and

Class Member. All Defendants aided and abetted each other in the commission of the wrongful

actions described herein.

174. The nature and extent of this behavior, spanning years and likely harming hundreds

of residents within the City of Detroit, demonstrates that Michael Kelly is Detroit Property

Exchange (“DPE”); Suena Homes Realty LLC (“Suena Homes”); Homes of Detroit, LLC;

American Tax Refund, LLC; Montlieu, LC; Greater Detroit, LLC; Detroit Leasing, Inc.; Sunrise

Homes Realty LLC; Homes of Detroit LLC; Clear Sky Realty LLC; Dobel Prize LLC; Midtown

Homes Realty LLC; Belmont Properties of Michigan Inc.; Woodlawn Properties Inc.; Detroit, MI

Document received by the MI Wayne 3rd Circuit Court.

LLC; Party City LC; Dakota Kids Group; Acre Estate LLC; 13540 Mansfield, LLC; Cherokee

Land LC; 9527 Whitcomb, LLC; Chase Loan Services, Inc.; Beba’s Buildings, LLC; Chase Detroit

LLC; Latino Housing LLC; Good Homes Realty LLC, and other entities as his instrumentalities,

and that he caused each of these to participate in the perpetration of a fraudulent, predatory scheme

that in violation of both Michigan common law and federal law.

175. As a direct and proximate cause of Defendants’ actions, each of the Plaintiffs and

the Class Members:

i. entered into home repair contacts and agreements in reliance upon

their status as a homeowner, and/or;

ii. made repairs to the property, and/or;

iii. paid past due utilities, and/or

29
 iv. paid past due taxes, and

v. otherwise, in some combination of the above; and

vi. paid thousands of dollars in principal and interest and closing costs

to purchase their homes.

176. As a direct and proximate result of Defendants’ actions, as detailed above, Plaintiffs

and the Class members have suffered and continue to suffer significant and ongoing damages,

including, but not limited to, exemplary damages.

177. Unless the corporate veil is pierced, Michael Kelly will likely continue to cause

new and different entities to be created, or utilize other existing entities that he may own, to

continue to perpetrate the same scheme and attempt to evade both state and federal law with new

corporate entities that are not encumbered by a money judgment or injunctive relief.

178. Each Plaintiff and Class Members is entitled to any and all equitable and/or legal

Document received by the MI Wayne 3rd Circuit Court.

remedies available.

REQUEST FOR RELIEF

WHEREFORE, Plaintiffs and the Class respectfully pray that the Court grant them the

following relief:

A. Certify this case as a class action.

B. Enter an injunction enjoined Defendants from using its form contracts to

sell property to Plaintiffs and the Class.

C. Enter a declaratory judgment that the foregoing acts, policies, and practices

of Defendants violate MCL §445.903(m), (n), (o) (s), (v), (x), (y), (z), (aa), (bb), and (cc) and

enjoin Defendants from engaging in those practices.

D. Enter a declaratory judgment that the transactions entered into between

various Defendants and the Plaintiffs and the Class are land contracts under Michigan law, granting
30
the Plaintiffs and the Class equitable title in their homes.

E. Award actual damages to Plaintiffs and the Class in an amount to be

determined by the jury that would fully compensate them for their injuries caused by the conduct

of Defendants alleged herein, and order Defendants to disgorge all monies taken from the class.

F. Pierce the corporate veil and assess all damages also as to Kelly and, further,

award exemplary and/or punitive damages for the willful and wanton conduct alleged herein.

G. Award Plaintiffs and the Class their reasonable attorneys’ fees and costs

pursuant to, but not limited to, the Michigan Consumer Protection Act; and

H. Order such other relief as this Court deems just and equitable.

Respectfully submitted,
Attorneys for Plaintiffs

/s/Gerard Mantese
Gerard Mantese (P34424)
Theresamarie Mantese (P53275)

Document received by the MI Wayne 3rd Circuit Court.

Kathryn R. Eisenstein (P66371)
James A. Buster (P81186)
MANTESE HONIGMAN, P.C.
1361 E. Big Beaver Rd.
Troy, Michigan 48083
(248) 457-9200
[email protected]
[email protected]
[email protected]
[email protected]

Marilyn Mullane (P30998)

MICHIGAN LEGAL SERVICES
2727 Second Avenue, Ste. 333
Mailbox #37
Detroit, MI 48201
(313) 964-4130 ext. 403
[email protected]
December 27, 2019

31
 DEMAND FOR JURY TRIAL

Plaintiffs request trial by jury as to all issues so triable.

Respectfully submitted,
Attorneys for Plaintiffs

/s/Gerard Mantese
Gerard Mantese (P34424)
Theresamarie Mantese (P53275)
Kathryn R. Eisenstein (P66371)
James A. Buster (P81186)
MANTESE HONIGMAN, P.C.
1361 E. Big Beaver Rd.
Troy, Michigan 48083
(248) 457-9200
[email protected]
[email protected]
[email protected]
[email protected]

Marilyn Mullane (P30998)

MICHIGAN LEGAL SERVICES
2727 Second Avenue, Ste. 333

Document received by the MI Wayne 3rd Circuit Court.

Mailbox #37
Detroit, MI 48201
(313) 964-4130 ext. 403
[email protected]
December 27, 2019

32
 Index of Exhibits
1. Ackers, J & Seymour, E., Instrumental Exploitation: Predatory Property Relations at
City’s End

Document received by the MI Wayne 3rd Circuit Court.

 Exhibit 1

Document received by the MI Wayne 3rd Circuit Court.

Document received by the MI Wayne 3rd Circuit Court.
Document received by the MI Wayne 3rd Circuit Court.
Document received by the MI Wayne 3rd Circuit Court.
Document received by the MI Wayne 3rd Circuit Court.
Document received by the MI Wayne 3rd Circuit Court.
Document received by the MI Wayne 3rd Circuit Court.
Document received by the MI Wayne 3rd Circuit Court.
Document received by the MI Wayne 3rd Circuit Court.
Document received by the MI Wayne 3rd Circuit Court.
Document received by the MI Wayne 3rd Circuit Court.
Document received by the MI Wayne 3rd Circuit Court.
Document received by the MI Wayne 3rd Circuit Court.
Document received by the MI Wayne 3rd Circuit Court.
Document received by the MI Wayne 3rd Circuit Court.