ATTICA HYDRAULIC EXCHANGE v. Seslar, Docket No. 249395.
| Decision Date | 02 February 2005 |
| Docket Number | Docket No. 249395. |
| Citation | 691 N.W.2d 802,264 Mich. App. 577 |
| Parties | ATTICA HYDRAULIC EXCHANGE and William Wildner, Plaintiffs, and Michigan Department of Environmental Quality, Intervening Plaintiff-Appellant, and Anton, Zorn & Associates, Intervening Plaintiff-Appellee, v. Clifford SESLAR, Vitoangelo P. Stramaglia, Philip Stramaglia, PMAV Enterprises, Ltd., and Tony Anthony Complete Demolition, Inc., Defendants, and R. John Umlauf and John M. Beeding, Jr., Defendants-Appellees. |
| Court | Court of Appeal of Michigan — District of US |
Law Office of Gerald P. Cavellier, P.L.L.C. (by Gerald P. Cavellier), Bloomfield Hills, for Attica Hydraulic Exchange and William Wildner.
Michael A. Cox, Attorney General, Thomas L. Casey, Solicitor General, and Jonathan C. Pierce, Assistant Attorney General, for the Department of Environmental Quality.
Dykema Gossett P.L.L.C. (by Alan M. Greene and Thomas J. Murray), Bloomfield Hills, for R. John Umlauf.
Honigman Miller Schwartz and Cohn L.L.P. (by Gregory J. DeMars), Detroit, for Anton, Zorn & Associates.
Before: WHITBECK, C.J., and SAAD and TALBOT, JJ.
Intervening plaintiff Michigan Department of Environmental Quality (DEQ) appeals by leave granted the June 9, 2003, order entered by Macomb Circuit Court Judge James M. Biernat allocating receivership expenses. On appeal, the DEQ asks this Court to set aside the trial court's order holding the DEQ jointly and severally liable for the expenses of a receivership instituted in this action to marshal and sell real property belonging to defendants, Clifford Seslar; Vitoangelo P. Stramaglia; Philip Stramaglia;1 PMAV Enterprises, Ltd.; and Tony Anthony Complete Demolition, Inc.,2 in order to collect on a default judgment in favor of plaintiffs, Attica Hydraulic Exchange and William Wildner. We reverse.
In 1998, Attica Hydraulic Exchange (Attica) and William Wildner filed a lawsuit against the Stramaglias alleging breach of contract, fraud, and misrepresentation in connection with the Stramaglias' sale of property at 24545 21 Mile Road to Attica and Wildner and in connection with the dumping of toxic waste onto the property by the Stramaglia defendants. On March 10, 2000, Attica and Wildner obtained a judgment against the Stramaglia defendants jointly and severally for $2,255,000.3 When Attica and Wildner encountered difficulties collecting on the judgment, they requested that a receiver be appointed. On October 18, 2000, the trial court appointed defendant R. John Umlauf as receiver to resolve all issues regarding the sale of the 21 Mile Road property. The receiver was eventually given the authority to sell two other parcels of property owned by Philip Stramaglia (the Inwood property4 and the North River Road property5) to satisfy the judgment. To accomplish this task, the receiver was authorized to retain John Beeding as counsel and to sign a listing agreement with Anton, Zorn & Associates to list the property for sale. The court ordered the receiver's fees to be paid from the proceeds of the sale of the property and be considered a priority lien. The receiver, and the receiver's attorney, incurred substantial costs and expenses in attempting to clear title to the North River Road and Inwood properties because the number of encumbrances on the properties necessitated four separate actions to quiet title.
At the same time this suit was progressing through the court, the Inwood property and the North River Road property were the subjects of a suit by the Attorney General and the DEQ against various Stramaglia family members and companies.6 In Case No. 96-5468-CZ in the Macomb Circuit Court, the DEQ alleged that these defendants violated Michigan's Natural Resources and Environmental Protection Act (NREPA)7 and the DEQ also brought several common-law claims based on the Stramaglias' operation of nine unlicensed solid waste disposal sites, including the North River Road and Inwood sites.
After the five-week bench trial in Case No. 96-5468-CZ, but before an opinion was issued, the DEQ moved to intervene in this action. The DEQ asserted it should be allowed to intervene to ensure that the sale or disposition of the North River Road and Inwood properties included provisions to clean up the environmental contamination from the Stramaglia defendants, to ensure that any excess proceeds from the sale of these properties be applied to clean up the environmental contamination at another six properties, which were the subject of Case No. 96-5468-CZ, and to reimburse the DEQ for the expenses of its cleanup of the ninth site. On March 21, 2001, the trial court granted the DEQ's motion to intervene, ordering that Attica and Wildner's judgment was to remain superior to all claims by the DEQ and further ordering that the receiver "shall continue acting in his capacity as per all prior orders and for the benefit of the State of Michigan."
On May 8, 2001, the trial court issued an eighty-page opinion in Case No. 96-5468-CZ finding Philip Stramaglia liable for remediating the environmental contamination at the North River Road and the Inwood properties and at six other sites. A judgment was entered on April 9, 2002, finding all defendants jointly and severally liable for all costs incurred for remedial action at each site. The trial court also ordered that any proceeds from the sale of the North River Road and Inwood properties be held in escrow and used to reimburse the DEQ's remediation costs. In addition, the trial court imposed fines of $250,000 on each defendant, for each site, and for each of three violations.
In September 2001, Philip Stramaglia filed for Chapter 7 bankruptcy with the United States Bankruptcy Court, Eastern District, Case No. 01-58077. On March 6, 2002, the Inwood property was sold at auction to Attica and Wildner, who submitted the sole commercially reasonable bid, for $2 million to protect their judgment against the Stramaglia defendants. Also on that date, the trial court ordered the receiver to convey title to the North River Road property to Attica and Wildner for a reduction of $200,000 against the judgment.
On July 5, 2002, the receiver filed a motion arguing that because the receivership assets were under the control of the United States Bankruptcy Court and could not be sold to satisfy the expenses of the receiver,8 the DEQ, along with Attica and Wildner, should be responsible to pay the expenses of the receivership. The receiver argued that the DEQ was responsible for the receivership fees because (1) the DEQ asserted an interest in the property that was the subject of the litigation, (2) the DEQ was aware of the existence of the receivership when it filed its motion to intervene, (3) the DEQ received notice of the work of the receivership and worked with the receiver, (4) the receiver's attorney appeared before the court in Case No. 96-5468-CZ in support of the DEQ, (5) the DEQ was aware of the existence of orders approving agreements in connection with the sale of the subject properties, (6) the DEQ did not have a receiver appointed in Case No. 96-5468-CZ, and (7) the DEQ would benefit from the work of the receiver in the marshalling and clearing title to the assets. The receiver requested that the trial court order the DEQ to pay the receivership expenses and the $200,000 fee to Anton, Zorn & Associates for marketing and auctioning the Inwood Property.
The DEQ filed a response to the receiver's motion, asserting that because the DEQ did not move for the appointment of a receiver, it should not be subject to an order directing it to pay any of the receivership expenses under MCR 2.622(D). Further, the DEQ had no secured or pecuniary interest in the property to protect. The DEQ's interest was a regulatory and law enforcement interest with no entitlement to the property. The receiver's hiring of Anton, Zorn & Associates and other professionals in his quest to sell the property subject to the receivership would have occurred regardless of whether the DEQ had intervened in the action. The DEQ acknowledged that Beeding, counsel for the receiver, appeared twice in Case No. 96-5468-CZ, providing guidance to the court in that case and support for the DEQ because of his experience with the Stramaglia defendants. Finally, the DEQ argued that the receiver's claim for his expenses against the DEQ should be brought in the Court of Claims.
The motion was heard and taken under advisement by the trial court. On July 19, 2002, the receiver submitted a supplemental brief in support of his motion9 arguing that he and his attorney could not go unpaid and that the nonpayment of their expenses was causing hardship. The receiver asserted that the policy behind MCR 2.622 — that the parties who benefited from the receivership are responsible to pay the receivership expenses where the assets of the receivership are insufficient to pay the receivership expenses — required a finding that the DEQ be responsible for the receivership expenses. The receiver stated that the DEQ benefited from the receivership in that it (1) sought to have its terms for the remediation of the properties imposed on any transfer thereof, (2) utilized the receiver's attorney in Case No. 96-5468-CZ, and (3) sought to impose and retain benefits from the pending sale of the property by requiring any prospective purchaser to post a $4 million bond. The receiver stated that the expenses of the receiver and the receiver's attorney totaled $510,419.24, and further stated that the DEQ's portion of those expenses should be half, $225,209.62.
On July 31, 2002, the trial court issued an opinion and order denying the receiver's motion to attribute receivership expenses to the DEQ for the reason that the DEQ did not intervene in the subject lawsuit until five months after the receiver was appointed and, under the plain...
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