289 F.3d 929 (6th Cir. 2002), 00-1368, Tropf v. Fidelity Nat. Title Ins. Co.

Docket Nº:00-1368, 00-1699, 01-1550.
Citation:289 F.3d 929
Party Name:Karl F. TROPF; Catherine Tropf, Plaintiffs-Appellants, Arthur Lee Morman, Appellant, v. FIDELITY NATIONAL TITLE INSURANCE COMPANY, a Texas Corporation; Fidelity National Title Insurance Company, a California Corporation; Midwest Guaranty Bank, a Michigan Corporation; 20th Century Financial Corporation; Jorg Bierekoven; Frank Bierekoven; Lynne Wolen
Case Date:May 10, 2002
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit
 
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289 F.3d 929 (6th Cir. 2002)

Karl F. TROPF; Catherine Tropf, Plaintiffs-Appellants,

Arthur Lee Morman, Appellant,

v.

FIDELITY NATIONAL TITLE INSURANCE COMPANY, a Texas Corporation; Fidelity National Title Insurance Company, a California Corporation; Midwest Guaranty Bank, a Michigan Corporation; 20th Century Financial Corporation; Jorg Bierekoven; Frank Bierekoven; Lynne Wolenski; Mary Jane Diamond; Raymond Bischoff; Chicago Title Insurance Company, a Missouri Corporation; Atlas Appraisal Company; Thomas Gammon; Fidelity National Title Insurance Company of New York; Andrzej Zajac; Kimberly Zajac, Defendants-Appellees.

Nos. 00-1368, 00-1699, 01-1550.

United States Court of Appeals, Sixth Circuit

May 10, 2002

Argued Nov. 2, 2001.

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Arthur L. Morman (argued and briefed), Detroit, MI, for Plaintiffs-Appellants in Nos. 00-1368, 00-1699 and 01-1550.

Michael S. Leib (briefed), Mark H. Fink (argued and briefed), Maddin, Hauser, Wartell, Roth, Heller & Pesses, Southfield, MI, for Defendants-Appellees in Nos. 00-1368, 00-1699 and 01-1550.

John Sharp (argued and briefed), Strobl, Cunningham, Carettie & Sharp, Bloomfield Hills, MI, for Defendants-Appellees in Nos. 00-1368, 00-1699.

William S. Lewis (argued), Detroit, MI, for Plaintiff-Appellant in No. 01-1550.

Before: KEITH, BOGGS, and MOORE, Circuit Judges.

OPINION

MOORE, Circuit Judge.

Plaintiffs-Appellants Karl E. Tropf and Catherine Tropf ("the Tropfs") appeal the district court's dismissal of their claims and imposition of sanctions. The Tropfs' claims arose out of a complicated set of real estate transactions in Michigan in the 1980s and early 1990s, during which, the Tropfs allege, the Tropfs" house was taken from them by fraudulent conveyance. A number of state court actions ensued, and the Tropfs were denied relief by five separate state courts. Following the denial of relief in the state courts, the Tropfs filed two claims in the United States District Court for the Eastern District of Michigan, consolidated before Judge Friedman, alleging that Defendants Appellees had illegally conspired to defraud them under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq., and that Defendants Appellees had violated their constitutional due process and equal protection rights under 42 U.S.C. § 1983. Defendants Appellees, the persons who effected the alleged fraudulent conveyance, a number of banks who held mortgages on the property at issue, and the current owners of the property, filed motions to dismiss on the

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grounds that the district court lacked subject matter jurisdiction over the case under the Rooker-Feldman abstention doctrine, that the Tropfs' fraud, RICO, and due process claims were precluded by res judicata, and that the Tropfs failed to state a due process claim under Federal Rule of Civil Procedure 12(b)(6).1 The district court granted Defendants Appellees' motions to dismiss on all grounds, and further imposed monetary and injunctive sanctions on the Tropfs and their counsel. For the following reasons, we AFFIRM the dismissal of the Tropfs' claims and the imposition of monetary sanctions and an injunctive sanction related to the federal courts, but we REVERSE the imposition of an injunctive sanction related to the state courts and state administrative proceedings, and we REMAND for proceedings consistent with this opinion.

I. BACKGROUND

In 1986, Karl and Catherine Tropf purchased an unimproved lot in Oakland County, Michigan ("the property"), on which they built a house. The Tropfs mortgaged the property to First National Bank ("FNB") in exchange for a loan in April of 1990; the Tropfs took out a second mortgage with FNB in exchange for additional funds in June of 1992. According to the U.S. district court, the Tropfs defaulted on the loans, FNB foreclosed on the property, and the property was sold at a sheriff's sale on October 18, 1994.2 The U.S. district court also found that Lynne Wolenski, a principal of 20th Century Financial Corporation along with Jorg3 and Frank Bierekoven, subsequently paid FNB approximately $163,000 to redeem the Tropfs' interest in the property. On March 27, 1995, the Tropfs and Wolenski executed both a warranty deed, in which the Tropfs conveyed the property to Wolenski, and a land contract, in which the Tropfs repurchased the property from Wolenski for $250,000 to be paid in monthly installments of $2,380.81 with an interest rate of eleven percent. The Tropfs allege that both the warranty deed and the land contract were fraudulent.

First Action

On September 5, 1995, Wolenski filed a complaint against the Tropfs in the 52-3 District Court in Michigan for land contract forfeiture.4 A hearing was held on October 17, 1995 before Judge Shipper, at which the Tropfs were represented by

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counsel. At the hearing, the Tropfs argued that they had been fraudulently induced to sign the warranty deed and the land contract. The judge, however, granted Wolenski a "judgment of possession after land contract forfeiture" and ordered the Tropfs to pay Wolenski approximately $14,000 arrearage due according to the land contract. The Tropfs appealed to the Oakland County Circuit Court and recorded a notice of lis pendens.5 On January 22, 1996, the state district court issued a writ of restitution of the property to Wolenski, finding that the Tropfs had failed to pay the arrearage as previously ordered. On February 21, 1996, Judge Breck of the state circuit court affirmed the state district court's judgment, and on January 3, 1997, the Michigan Court of Appeals denied the Tropfs' petition for leave to appeal for "lack of merit." J.A. at 360 (Order of Mich. Ct.App.). On April 30, 1997, Judge Breck discharged the lis pendens.

Second Action

While the appeal in the first action was pending, the Tropfs commenced an action against Wolenski and 20th Century Financial Corporation in the Oakland County Circuit Court in November of 1995, seeking to have the warranty deed and land contract declared an equitable mortgage.6 According to the U.S. district court, the Tropfs recorded another lis pendens while the second action was pending. After a hearing on May 29, 1996, Judge Nichols, acting for Judge O'Brien, granted the defendants' motion for summary disposition and dismissed the case without prejudice, on the basis that the first action was still being appealed. On April 30, 1997, Judge O'Brien discharged the lis pendens.

Third Action

On May 4, 1995, Midwest Guarantee. Bank ("MGB") loaned Wolenski and her husband, Jorg Bierekoven, $300,000 in exchange for a mortgage on the property. Wolenski and Bierekoven subsequently defaulted on the loan, and MGB brought an action against them to foreclose on the property. Although only the warranty deed had ever been recorded, MGB named the Tropfs as persons who could claim an interest in the property because they had filed a notice of lis pendens in regard to the first action. The third action was heard in Oakland County Circuit Court before Judge Gilbert. Represented by their current counsel, the Tropfs filed a counter-claim alleging that MGB had conspired with Wolenski in violation of the Michigan Truth in Lending Act, the Federal Truth in Lending Act, and RICO. On July 31, 1997, Judge Gilbert ordered the property sold to Andrzej and Kimberly Zajac, defendants in this appeal. The proceeds of the sale were placed in an escrow account pending resolution of the dispute between the Tropfs and Wolenski. On December 17, 1997, Judge Gilbert entered a default judgment for the Tropfs against Wolenski, the Bierekovens, and 20th Century Financial Corporation.7 However, after

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the Michigan Court of Appeals denied review of the first action and after a hearing on April 29, 1998, Judge Gilbert granted MGB's motion for summary disposition in an opinion and order on June 22, 1998. Judge Gilbert concluded that "the Tropfs knowingly executed a deed and are held to the consequences of the same." J.A. at 371-72 (Opinion and Order I of June 22, 1998). In a separate opinion and order issued on the same day, Judge Gilbert found that the Tropfs were collaterally estopped by the final judgment in the first action from contesting in the third action Wolenski's title to the property. J.A. at 373-74 (Opinion and Order II of June 22, 1998). Judge Gilbert therefore ordered the proceeds of the sale of the property disbursed to MGB.8 The Tropfs appealed the orders, and on September 11, 2001, the Michigan Court of Appeals affirmed. Tropf v. State Farm Ins. Co., Nos. 213930, 217134, 219994, 227264, 2001 WL 1044875 (Mich.Ct.App. Sept.11, 2001).9

Fourth Action

In December 1998, the Tropfs brought an action to quiet title in the Oakland County Circuit Court against Andrzej and Kimberly Zajac on the ground that the warranty deed and land contract granting title in the property to Wolenski, and subsequently MGB, were fraudulent. After a hearing on May 5, 1999, Judge Tyner granted the Zajacs' motions for summary disposition and imposed sanctions on the Tropfs' counsel. On September 11, 2001, the Michigan Court of Appeals affirmed the state circuit court's grant of the Zajacs' motions for summary disposition based on collateral estoppel, but the appellate court reversed the circuit court's imposition of sanctions. Tropf v. State Farm, 2001 WL 1044875 at *5-6. The court found that "[a]t the time this action was commenced, the Tropfs were pursuing an appeal of the related case. The issues on appeal were not frivolous." Id. at *6.

Fifth Action

On January 29, 1998, the Tropfs moved for relief from judgment in the 52-3 District Court in Michigan regarding the first action, alleging fraud on the court. On March 12...

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