Blachy v. Butcher
Decision Date | 14 December 1998 |
Docket Number | No. 1:91-CV-979.,1:91-CV-979. |
Citation | 35 F.Supp.2d 554 |
Parties | Jobst W.F. BLACHY, et al., Plaintiffs, v. Robert BUTCHER, et al., Defendants. |
Court | U.S. District Court — Western District of Michigan |
David A. Lerner, Plunkett & Cooney, PC, Bloomfield Hills, MI, Jeffrey G. Raphelson, Bodman, Longley & Dahling, LLP, Detroit, MI, William W. Hofmann, Plunkett & Cooney, PC, Petoskey, MI, Kathryn D. Zalewski, Bodman, Longley & Dahling, LLP, Ann Arbor, MI, for plaintiffs.
Robert E. Butcher, Trenton, MI, for Alexander M. Butcher, Rosemary C. Butcher, Little Traverse Development Co., H.C. Development Co., defendants.
Daniel M. LaVille, Asst. U.S. Attorney, Michael H. Dettmer, United States Attorney, Grand Rapids, MI, John A. Lindquist, Trial Attorney, U.S. Department of Justice, Tax Division, Washington, DC, for Internal Revenue Service, defendant.
In this case, Plaintiffs have sued Defendants to quiet title to certain condominium interests which Plaintiffs or their predecessors-in-interest purchased from Defendants Little Traverse Development Co. and H.C. Development Co. during the early to mid-1980s. Lawyers Title Insurance Corporation ("Lawyers Title"), which insured the titles to the condominium units, is also a plaintiff in this case. Plaintiffs named the Internal Revenue Service ("Government" or "IRS") as a defendant because it filed Notices of Federal Tax Lien against the condominium units. Now before the Court are Plaintiffs' and Defendants' cross motions for summary judgment on Plaintiffs' constructive trust claim.
On June 30, 1978, Cedar Cove, a Michigan limited partnership, conveyed certain real property, described as four separate parcels located in Little Traverse Township, Emmet County, Michigan, to Alexander M. Butcher and Rosemary G. Butcher (individually "Alexander" and "Rosemary" and collectively the "Butchers"), for the price of $640,000.00. The property consisted of approximately 100 acres. By warranty deed dated July 6, 1978, the Butchers conveyed two of the four parcels, one consisting of approximately 36.65 acres and the other of approximately 4.16 acres, to Little Traverse Development Co. ("LTDC"), a Michigan corporation owned solely by Alexander.1
On July 11, 1978, LTDC obtained construction loans from City National Bank of Detroit, n/k/a First of America Bank, in the amounts of $1,180,000 and $1,380,000, which were secured by mortgages covering approximately 18.37 acres of the 35.65 acre parcel. The June 30, 1978, warranty deed from Cedar Cove to the Butchers, the July 6, 1978, warranty deed from the Butchers to LTDC, LTDC's assumption of Cedar Cove's mortgage, and the mortgages from LTDC to City National Bank of Detroit were recorded on July 12, 1978, with the Emmit County Register of Deeds. That same day, Alexander signed a deed in his capacity as President of LTDC, conveying the unmortgaged portion of the 36.65 acre parcel, consisting of about 17.83 acres (the "17.83 acres"), to the Butchers for $1.00. The deed was recorded on July 14, 1978. At Alexander's request, Lawyers Title issued a revised title commitment on July 18, 1978. Due to the fact that the July 12, 1978, warranty deed was submitted for recording only days earlier, Lawyers Title did not discover the conveyance from LTDC to the Butchers, and Alexander did not inform Lawyers Title about the conveyance.
Alexander executed a Master Deed dated November 1, 1978, on behalf of LTDC, which created a condominium project called Harbor Cove Phase II ("Phase II") that included the 17.83 acres. From 1981 through 1984, LTDC constructed and sold condominiums in Phase II on the 17.83 acres, nine of which were sold to Plaintiffs or their successors-in-interest.
On May 8, 1984, Alexander formed H.C. Development Company ("HCDC"), in which he was majority stockholder, president, and a director. On October 23, 1984, Alexander signed a warranty deed on behalf of LTDC purporting to convey to HCDC approximately 12.60 of the 17.83 acres. On November 7, 1984, Alexander, as president of HCDC, signed a Master Deed creating Harbor Cove Phase III ("Phase III") on the 12.60 acres. On November 8, 1984, Alexander, as president of HCDC, granted a mortgage to Northwestern Savings and Loan Association on the Phase III property to secure a construction loan in the amount of $1.3 million. Lawyers Title issued a commitment dated November 7, 1984, for the transaction. HCDC subsequently constructed and sold condominiums on the Phase III property to some of the Plaintiffs in this case and other purchasers.
In some of the deeds conveying the condominium units to Plaintiffs, Alexander, acting as president of either LTDC or HCDC, represented that LTDC or HCDC held title to the 17.83 acres. Alexander stated under oath on at least ten occasions in connection with LTDC's requests for construction draws from CNBD that LTDC was the owner of the Phase II property. Alexander also stated under oath on several occasions on behalf of HCDC in connection with its request for construction draws that HCDC was the owner of the Phase III property. In addition, on January 28, 1987, HCDC agreed to convey six of the Phase III units to Northwestern Savings and Loan Association in lieu of foreclosure in satisfaction of a $937,306.76 default on the construction loan.
The Butchers did not claim to own an interest in the 17.83 acres until after Rosemary filed a Chapter 7 bankruptcy petition in the United States Bankruptcy Court for the Eastern District of Michigan on March 1, 1991. Prior to that time, the Butchers had not paid taxes on the 17.83 acres and had confirmed in numerous documents that either LTDC or HCDC owned the 17.83 acres. Furthermore, in connection with an appeal from a conviction in a mail fraud case, Alexander submitted a financial affidavit in which he attested under oath that he owned no real property.
On October 16, 1991, Lawyers Title and the condominium owners to whom Lawyers Title issued title insurance policies sued Alexander LTDC, HCDC, and the IRS in Emmet County Circuit Court. Plaintiffs did not sue Rosemary because she was under the protection of the bankruptcy court. However, on February 11, 1992, Plaintiffs filed an adversary proceeding against Rosemary in her bankruptcy case. Plaintiffs sought the imposition of a constructive trust in both cases. The IRS removed the Emmet County case and Judge Benjamin Gibson transferred venue to the Eastern District of Michigan Bankruptcy Court as another adversary proceeding.
Although Rosemary did not list the Property as an asset in her original petition, she subsequently amended the schedules to include the Property after being ordered to do so by bankruptcy Judge Walter Shapero. On or about October 30, 1991, Alexander quit claimed all of his interest in the property to Rosemary. Alexander died on December 26, 1991, and Judge Shapero issued an order substituting the co-personal representatives of Alexander's estate, Rosemary and Robert E. Butcher (Defendants' counsel), for Alexander. Judge Shapero also consolidated the two adversary proceedings.
On January 18, 1995, Judge Shapero granted Plaintiffs' motion for summary judgment and imposed a constructive trust over the Property for the condominium owners' benefit. See Blachy v. Butcher (In re Butcher), Nos. 92-0173, 93-4819, slip op. at 14, 27 (Bkrtcy.E.D.Mich. Nov. 21, 1994). Judge Shapero also found that the constructive trust pre-dated the I.R.S. liens filed in 1987, 1988, 1989, and 1990. See id. at 25. Defendants appealed the order to the district court, and on July 31, 1995, Judge Lawrence Zatkoff issued an order reversing Judge Shapero's January 18, 1995, order on the grounds that under the Sixth Circuit's decision in XL/Datacomp, Inc. v. Wilson (In re Omegas Group, Inc.), 16 F.3d 1443 (6th Cir. 1994), a bankruptcy court may not impose a constructive trust over property of the estate. See Butcher v. Blachy, Nos. 95-CV-70325-DT, 70349-DT, 1995 WL 578193, *3-4 (E.D.Mich. July 31, 1995). Judge Zatkoff concluded that under In re Omegas, the remedy provided by the Bankruptcy Code was to have the debt declared nondischargeable, and he remanded the case to the bankruptcy court for further proceedings. See id. at *4.
On April 7, 1997, Judge Shapero entered an order abstaining from further consideration of the constructive trust claims because he felt that a constructive trust was still the appropriate remedy. On January 20, 1998, Judge Shapero transferred venue over Count I of the adversary proceeding against Alexander's estate back to this Court and lifted the automatic stay against Rosemary to permit Plaintiffs to add Rosemary as a defendant and add a fraudulent conveyance count against the Butchers. On October 26, 1998, Magistrate Judge Hugh Brenneman Jr. granted Plaintiffs' motion for leave to amend their complaint to add Rosemary as a defendant and add an additional claim for fraudulent conveyance against the Butchers.
Summary judgment is appropriate if there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law. Fed.R.Civ.P. 56. The rule requires that the disputed facts be material. Material facts are facts which are defined by substantive law and are necessary to apply the law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). A dispute over trivial facts which are not necessary in order to apply the substantive law does not prevent the granting of a motion for summary judgment. Id. at 248, 106 S.Ct. at 2510. The rule also requires the dispute to be genuine. A dispute is genuine if a reasonable jury could return judgment for the non-moving party. Id. This standard requires the non-moving party to present more than a scintilla of evidence to defeat the motion. Id. at 251, 106 S.Ct. at 2511 (citing Schuylkill and Dauphin Improvement Co. v. Munson, 81 U.S. 442, 14...
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Adams v. Adams
...[the] fifteen-year statute of limitations" of MCL 600.5801(4). Lorimer, supra at 593. A similar result was reached in Blachy v. Butcher, 35 F.Supp.2d 554 (W.D.Mich., 1998), rev'd in part on other grounds, 221 F.3d 896 (C.A.6, 2000). There, the plaintiffs purchased condominiums on a certain ......