Brownell Realty, Inc. v. Kelly

• Decision Date: 17 February 1981
• Docket Number: Docket No. 46810
• Parties: BROWNELL REALTY, INC., a Michigan Corporation, and Carl A. Brownell, Jr., Plaintiffs-Appellants, v. L. B. KELLY and Holly H. Kelly, his wife; Mildred L. Moore and Frederick C. Barrett and Debra S. Barrett, his wife; and Northwestern Savings and Loan Association, a Michigan Savings and Loan Association, Defendants-Appellees, and State Bank and Trust Company of Petoskey, Defendant. 103 Mich.App. 690, 303 N.W.2d 871
• Court: Court of Appeal of Michigan — District of US

Page 871

303 N.W.2d 871

BROWNELL REALTY, INC., a Michigan Corporation, and Carl A Brownell, Jr., Plaintiffs-Appellants, v. L. B. KELLY and Holly H. Kelly, his wife; Mildred L. Moore and Frederick C. Barrett and Debra S. Barrett, his wife; and Northwestern Savings and Loan Association, a Michigan Savings and Loan Association, Defendants-Appellees and State Bank and Trust Company of Petoskey, Defendant.

Docket No. 46810.

103 Mich.App. 690, 303 N.W.2d 871

Court of Appeals of Michigan.

Feb. 17, 1981.

Rehearing Denied March 31, 1981.

Released for Publication April 15, 1981.

[103 MICHAPP 692] Richard W. May, Boyne City, for plaintiffs-appellants; Roger E. Craig, Detroit, of counsel.

Ronald W. Powers, Petoskey, for L. B. Kelly, H. H. Kelly and M. L. Moore.

Paul E. Nettleman, Petoskey, for F. C. Barrett and D. S. Barrett.

Jack E. Boynton, Traverse City, for Northwestern S. & L. Assn.

Before ALLEN, P. J., and WALSH and McDONALD, ^* JJ.

ALLEN, Presiding Judge.

The question presented is whether the assignee of a creditor who has obtained a judgment setting aside a fraudulent conveyance of real estate as to such creditor can, to the extent necessary to satisfy his claim, obtain good title by quitclaim deed from the fraudulent grantor of such real estate in lieu of an execution sale of the property? The facts in this case are straightforward and uncontested, leaving a question of law for our determination: Who has title to a certain parcel of land in Emmet County, Michigan, the assignee of a judgment creditor of the grantor-debtor or the grantee of the property by reason of [103 MICHAPP 693] a conveyance to him by the fraudulent grantee of the grantor-debtor? Responding favorably to defendants' motion to dismiss pursuant to GCR 1963, 504.2, made at the close of plaintiffs' proofs, the trial judge ruled in favor of the latter, ruling that title to the parcel rested with the grantee and her successors in interest of the grantor-debtor.

In late 1955, Oris E. Moore obtained title by warranty deed to the parcel of land which is the subject of this action. In March, 1958, Oris Moore and his wife, Mildred Moore, who joined in order to dispose of her dower rights in the property, conveyed by warranty deed to Mabel Kobs. On the same day, Mabel Kobs conveyed the property back to Mildred Moore by warranty deed. Both instruments of conveyance were recorded with the Emmet County Register of Deeds on the following day.

In September, 1959, Circuit Court Judge Dehnke, sitting in Iosco County, rendered a judgment for the Oscoda State Savings Bank against Oris Moore in the amount of $5,000 plus interest and costs, arising out of monies owed the bank on a promissory note. Pursuant to an amended judgment authorizing the same, the bank attempted to levy and execute on the property of Oris Moore but was unsuccessful. Thereafter, the Oscoda State Savings Bank filed a bill in aid of execution to set aside the 1958 conveyances from Oris Moore through Mabel Kobs to his wife, Mildred Moore. In December, 1965, and pursuant to this request, Emmet County Circuit Court Judge Fenlon ruled that, conveyance of the subject property was fraudulent and that, therefore, the deeds conveying title to Mildred Moore were "set aside and vacated and declared to be null and void and of no effect whatsoever as against the plaintiff, Oscoda State [103 MICHAPP 694] Savings Bank". In addition, the ruling authorized the bank to proceed upon its writ of execution by allowing the sheriff to levy upon and sell the property unless the debt of $5,000, plus interest and costs, was paid to the bank. This judgment was not recorded until November 1, 1976.

In July, 1966, the Oscoda State Savings Bank assigned its rights in the claim due them from Oris Moore to plaintiff Carl Brownell. Valuable consideration was paid by Brownell for this assignment. Brownell did not record this assignment until November 2, 1976. In lieu of an execution sale of the property which was pending at the time, Brownell sought to obtain a deed from Oris and Mildred Moore. In February, 1969, Oris Moore tendered a quitclaim deed to the property to Brownell in exchange for a discharge of the full debt owed to Brownell as assignee of the bank (by now, $9,000) and for $1,000 cash. This deed was recorded in March, 1969. Mildred Moore refused to sign this quitclaim deed or to tender one of her own to Brownell.

Thereafter, Brownell took possession of the premises, rented the property to tenants, paid all property taxes, and made improvements on the property. In 1973, Brownell deeded the property to Brownell Realty, Inc., a business enterprise which he owned. Brownell Realty retained possession of the premises until ousted by defendant L. B. Kelly sometime after he obtained a warranty deed from Mildred Moore for $100 in April, 1976. This deed was recorded in July, 1976. At the instant trial, Kelly admitted that at the time he took the deed from Mildred Moore he was aware of Brownell's claim to the property and that Brownell had been paying the property taxes on the premises.

On May 5, 1977, plaintiffs filed suit for a declaration[103 MICHAPP 695] of title and for damages and recorded a notice of lis pendens on the property. While this lawsuit was pending, Kelly sold the property to defendants Barrett for $26,500. On May 19, 1978, the Barretts gave defendant Northwestern Savings and Loan Association a mortgage on the property.

At the close of plaintiffs' proofs during trial held May 14, and 15, 1979, the trial court granted defendants' motion to dismiss. The trial court concluded that the 1965 judgment set aside the conveyance from Oris Moore to Mildred Moore only to the extent of Oris Moore's debt, and that, therefore, record title to the property was with Mildred Moore.

In his final order granting defendants' motion for dismissal, the trial judge observed that the only ways in which Brownell could claim paramount title would be through the assignment from Oscoda State Savings Bank of all of its claims against Oris Moore or by quitclaim deed from Oris Moore to Brownell. The trial judge concluded that neither method conferred legal title in the plaintiffs and held that title to the subject property was vested in defendants Barrett, subject to the mortgage of defendant Northwestern Savings and Loan Association, as successors in interest to Mildred Moore and L. B. Kelly. Review of the pertinent law and facts in this case persuades us that the trial judge did not err in reaching this conclusion.

It is clear beyond dispute that the grantee from a party conveying by quitclaim deed acquires the right and title which his grantor had and no other. Roddy v. Roddy, 342 Mich. 66, 68 N.W.2d 762 (1955), Doelle v. Read, 329 Mich. 655, 46 N.W.2d 422 (1951). Thus, the quitclaim deed from Oris Moore to Brownell conveyed only that interest which Moore had in the property at the time of the conveyance. [103 MICHAPP 696] Consequently, if Oris Moore had no interest in the property at the time he conveyed to Brownell, then it follows that title could not pass to Brownell superior to Mildred Moore and her successors.

Likewise, although the assignment by Oscoda State Savings Bank of its claims against Oris Moore to Brownell was valid, it conferred no greater proprietary interest in the subject property than possessed by the bank at the time of the assignment. 3 Michigan Law & Practice, Assignments, §§ 11, 12, 16, 17, 35, 36, pp. 6, 7, 14, 15, 27, 29. Accordingly, Brownell obtained no greater interest in the subject property by reason of the assignment from the bank than the bank had by reason of its claims against Oris Moore. Hence, legal title could pass to Brownell only if Oris Moore had legal title at the time of his conveyance by quitclaim deed or, only if the bank had some claim to the land by reason of their judgments against Moore taken September, 1959, and December, 1965.

Resolution of the issues raised in this case requires an analysis of the meaning and effect of Judge Fenlon's December, 1965, ruling setting aside the conveyances from Oris and Mildred Moore to Mabel Kobs, and Mabel Kobs to Mildred Moore. Other than the challenge which was raised by Oscoda State Savings Bank as to the validity of the conveyances, it must be presumed that they were valid and that legal title rested solely with Mildred Moore as of the time she conveyed to L. B. Kelly. However, her title to the property was clearly affected by Judge Fenlon's decision since, at least in part, the conveyances were set aside thereby. ¹ Accordingly, the question presented can [103 MICHAPP 697] be resolved only by determining the legal effect and meaning of Judge Fenlon's decision that the challenged conveyances to Mildred Moore:

" * * * are set aside and vacated and declared to be null and void and of no effect whatsoever as against the plaintiff, Oscoda State Savings Bank."

The clear language of this ruling indicates that the challenged conveyances were invalid only with respect to the claims of the Oscoda State Savings Bank, and that otherwise the conveyance to Mildred Moore was valid and effectual. Plaintiffs contend that when Judge Fenlon entered the judgment setting aside the fraudulent conveyance to Mildred Moore, full title in the property was to be returned to Oris Moore, the grantor. In contrast, defendants claim that the conveyance to Mildred Moore was set aside only to the extent necessary to satisfy the creditor's claim. Thus, according to defendants, aside from the interest of Oscoda State Savings Bank, the conveyance remained valid as between the parties thereto, i. e., title remained with the grantee Mildred Moore.

Reference to Judge Fenlon's opinion on the matter indicates that his reason for setting aside the conveyance to Mildred Moore was because of Oris Moore's "actual intent to defraud" his creditor, Oscoda State Savings Bank. Relying on the Uniform Fraudulent Conveyance Act (M.C.L. § 566.11 et seq.; M.S.A. § 26.881 et...