Douglass v. Firstmerit Bank (In re Douglass)
| Decision Date | 28 September 2015 |
| Docket Number | Case No. 13-32823-dof,Adversary Proceeding Case No. 13-03284-dof |
| Parties | IN RE: CHARLES M. DOUGLASS, DANA D. DOUGLASS, Debtors. CHARLES M. DOUGLASS, DANA D. DOUGLASS, Plaintiffs, v. FIRSTMERIT BANK, Defendant. |
| Court | U.S. Bankruptcy Court — Eastern District of Michigan |
Charles M. Douglass ("Charles M.") and Dana D. Douglass ("Dana") ("Plaintiffs" or "Debtors") commenced this adversary proceeding to determine the value of FirstMerit Bank's (the "Defendant") interest in residential real property owned by the Plaintiffs and to avoid the Defendant's security interest in that property. In their Motion for Summary Judgment, the Plaintiffs question the legal effect of the Defendant's mortgage. For the reasons stated in this Opinion, the Court denies the Plaintiffs' Motion for Summary Judgment.
The following facts can be stated with certainty after close review of the pleadings. Pursuant to a warranty deed executed on April 14, 2000, Charles R. Douglass ("Charles R.") purchased real property located in Genesee County at 5190 Olde Saybrooke Road, Grand Blanc, Michigan 48439 (the "Property"). On October 22, 2001, Charles R. and Susan K. Douglass ("Susan"), his wife, executed a Quitclaim Deed of the Property to Charles R. and their son, Charles M. The Quitclaim Deed reads, in part: "That Charles R. Douglass and Susan K. Douglass, his wife . . . Quit Claims to: Charles R. Douglass, a married man and Charles M. Douglass, a married man." At the time the Quitclaim Deed was executed, Charles M. was married to Dana. On March 26, 2004, Charles M. and Charles R. granted a mortgage against the Property to Citizens Bank, the predecessor of the Defendant. The promissory note executed in connection with the mortgage established a debt of $105,600.00. Charles R. was liable as the only signatory to the note. This mortgage properly described Charles M. as a married man. On February 12, 2007, Charles M. granted a second mortgage against the Property to Citizens Bank securing a credit limit of $40,000.00.1 The mortgage described Charles M. as a single man and only contained the signature of Charles M. and not his wife Dana or his father Charles R. On August 16, 2013, Charles M. and Dana subsequently filed a Chapter 13 petition. The Plaintiffs then filed this adversary proceeding to determine the value of the Defendant's interest in the Property and to avoid the Defendant's security interest in the real property.
Relying on Fisher v. Meister, 24 Mich. 447 (1872), the Plaintiffs argue that the second mortgage on the Property is void because a conveyance or mortgage of the homestead by a husband without the signature of his wife is void. Additionally, the Plaintiffs argue that when a lender makes a loan secured by a mortgage on jointly owned residential real estate, the failure to secure the signature of all of the property owners on the mortgage instrument renders the mortgage invalid. Thus, the Plaintiffs assert that pursuant to 11 U.S.C. § 506(a) and Lane v. W. Interstate Bancorp (In re Lane), 280 F.3d 663 (6th Cir. 2002), the Defendant has no allowable secured claim in the property and as such the Defendant's claim should be treated as unsecured under the Debtors' plan. The Defendant argues that Charles R. and Charles M. hold the Property as tenants in common pursuant to M.C.L.A. § 554.44, thus making the signature of the wife unnecessary on the second mortgage. The Defendant also asserts that there is equity in the property exceeding the balance owing on the first mortgage, therefore the second mortgage cannot be stripped pursuant to 11 U.S.C. § 506(a).
This Court has jurisdiction over this matter pursuant to 28 U.S.C. § 157, 28 U.S.C. § 1334, and E.D. Mich. LR 83.50. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(K) ().
The issues in this matter arise from Title 11 of the United States Code and do not involve any matter which limits this Court's jurisdiction as detailed by the United States Supreme Court in Stern v. Marshall, ---- U.S. ----, 131 S. Ct. 2594, 2608, 180 L.Ed.2d 475 (2011), and later by the United States Supreme Court in Executive Benefits Ins. Agency v. Arkison, 134 S. Ct. 2165 (2014) and Wellness Int'l Network, Ltd. v. Sharif, 135 S. Ct. 1932 (2015). See also Waldman v. Stone, 698 F.3d 910 (6th Cir. 2012).
Federal Rule of Civil Procedure 56 is made applicable in its entirety to bankruptcy adversary proceedings by Fed. R. Bankr. P. 7056. Federal Rule of Bankruptcy Procedure 7056(c) provides that summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." See Choate v. Landis Tool Co., 46 F. Supp. 774 (E.D. Mich. 1980). The moving party bears the burden of showing the absence of a genuine issue of material fact as to an essential element of the non-moving party's case. Street v. J.C. Bradford & Co., 886 F.2d 1472 (6th Cir. 1989) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)). The burden then shifts to the nonmoving party once the moving party has met its burden, and the nonmoving party must then establish that a genuine issue of material fact does indeed exist. Janda v. Riley-Meggs Industries, Inc., 764 F. Supp. 1223, 1227 (E.D. Mich. 1991).
The facts establish that Charles R. and Charles M. hold the Property as tenants in common. Notably, the Quitclaim Deed conveying the Property from Charles R. and Susan to Charles R. and Charles M. was silent regarding the type of tenancy that it created. M.C.L.A. § 554.44 states: "All grants and devises of lands, made to 2 or more persons, except as provided in the following section,2 shall be construed to create estates in common, and not in joint tenancy, unless expressly declared to be in joint tenancy." Since the conveyance did not expressly declare that a joint tenancy was created, Charles R. and Charles M. hold the Property as tenants in common. The Property cannot be held as tenants by the entireties because the Property was not conveyed to two parties who were husband and wife. Moreover, the Michigan Supreme Court has held that a conveyance of real estate to two unmarried people that included the words "as tenants by the entireties" creates a tenancy in common. In re Estate of Kappler, 418 Mich. 237, 239, 341 N.W.2d 113, 114 (1983).
The Court also determines that Dana has a dower interest in the Property. A debtor's dower interest is determined by state law. Under Michigan Law, "[t]he widow of every deceased person, shall be entitled to dower, or the use during her natural life, of 1/3 part of all the lands whereof her husband was seized of an estate of inheritance, at any time during the marriage, unless she is lawfully barred thereof." M.C.L.A. § 558.1.
A dower interest attaches on marriage and applies to land that the husband owned before marriage and brings into marriage, as well as land acquired during the marriage. See Bartkowiak v. Bartkowiak, 286 Mich. 623, 624-25, 283 N.W. 49, 50 (1938). A wife's right of dower is an "inchoate" right that is not consummated until the death of the spouse. United States v. Chalmers (In re Wheeler), 252 B.R. 420, 426 (W.D. Mich. 2000) (citing Cummings v. Schreur, 239 Mich. 178, 214 N.W. 199 (1927)). Although a dower right does not attach to any individual interest in real estate held by a husband as a joint tenant during the pendency of the joint tenancy, a dower right does attach to a tenancy in common. See, e.g., Schmidt v. Jennings, 359 Mich. 376, 387, 102 N.W.2d 589, 595 (1960); Midgley v. Walker, 101 Mich. 583, 584, 60 N.W. 296 (1894) (); 1 JOHN G. CAMERON, JR., MICHIGAN REAL PROPERTY LAW: PRINCIPLES AND COMMENTARY § 8.2 and § 8.4 (3d ed. 2005).
After determining that Dana's dower interest does attach to the Property, the Court must determine if the second mortgage is valid in light of the absence of Dana's signature.
Generally, the extent of a dower right is first measured by determining whether a mortgage is executed before or after the marriage. If the mortgage is executed before the marriage, the widow is entitled to claim a dower right out of the mortgaged land against all except the mortgagee and assigns. M.C.L. § 558.8. If the mortgage is executed after the marriage, the mortgagee's rights are subject to the widow's dower rights. Cameron has summarized this situation as:
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