McNeill v. Franke, 95-1235
| Citation | 84 F.3d 1010 |
| Decision Date | 29 May 1996 |
| Docket Number | No. 95-1235,95-1235 |
| Parties | Cynthia J. McNEILL, formerly known as Cynthia J. Franke, Appellant, v. William E. FRANKE, doing business as Gannon Partnership 19, L.P.; Gannon Partnership 19, L.P.; Kevin W. Kelly; Pentad Properties, Inc., formerly known as Kemmons Wilson Properties, Inc., doing business as St. Louis Associates Limited Partnership, formerly known as St. Louis Associates, Ltd.; St. Louis Associates Limited Partnership, formerly known as St. Louis Associates, Ltd.; Phillip J. Paster; Department of Housing and Urban Development, agent Jack Kemp; West Pointe Limited Partnership; Northwest Village Limited Partnership; Grandview Hills Limited Partnership; Park Ridge Apartments Limited Partnership; Lamplite Limited Partnership, Appellees. |
| Court | United States Courts of Appeals. United States Court of Appeals (8th Circuit) |
Thomas G. Berndsen, St. Louis, MO, argued (Charles F. Dufour, on the brief), for appellant.
Joe D. Jackson, St. Louis, MO, argued (F. Guthrie Castle, Jr., Martin M. Green and Mitchell A. Margo, on the brief), for appellees.
Before FAGG, HEANEY, and WOLLMAN, Circuit Judges.
Cynthia J. McNeill appeals the district court's dismissal of her action for declaratory relief and judicial foreclosure, and the denial of her motion for summary judgment. We reverse the dismissal and remand for further proceedings.
This case involves a $57.3 million promissory note and deed of trust allocated between McNeill and her former spouse, William E. Franke, in a February 1988 Missouri divorce decree. The note was on the sale of five apartment complexes to St. Louis Associates, Ltd. (SLA). A deed of trust on the apartments secured the note's repayment. In turn, Franke and McNeill owed almost $40 million on an insurance company loan and industrial bonds. The divorce decree awarded McNeill a 20% undivided ownership interest in the note as a tenant in common with Franke. W.E.F. v. C.J.F., 793 S.W.2d 446, 459 (Mo.Ct.App.1990). The decree stated McNeill's interest extended to all rights of ownership in the apartments in the case of foreclosure. Thus, McNeill's 20% interest included the security provided by the deed of trust. The decree ordered the parties to divide receipts of principal and interest on the note in proportion to their percentage interests, after making payments on the underlying debt. Because on its face the note was payable only to Franke, the decree ordered Franke to pay McNeill 20% of the net principal and interest payments received each month. The divorce decree prohibited Franke and McNeill from changing the note's terms and conditions, including the provisions about the amount, terms, and method of payment, without each other's written consent. McNeill filed a notice with the appropriate deed recorder to warn all persons of her ownership interests in the note, deed of trust, and apartment complexes.
Despite the divorce decree's terms, Franke never paid McNeill any part of the monthly note receipts. In addition, between November 1988 and February 1989, Franke refinanced all indebtedness on the property without McNeill's consent. As part of the refinancing transactions, record title to the apartments was transferred from SLA to five limited partnerships, for which SLA was the sole limited partner. The partnerships obtained a new loan from a predecessor in interest to the Department of Housing and Urban Development (HUD), and the underlying debt was paid off. Franke signed deeds of release stating the apartment complexes no longer secured the note's repayment, and deeds of trust on the apartment complexes were given to HUD's predecessor to secure the new loan. As part of the refinancing, Gannon Management Company of Missouri, a company owned by Franke, was awarded a twenty-year contract to manage the apartment complexes.
To enforce Franke's payment obligation under the divorce decree, McNeill sued Franke for contempt, and in February 1992, a state court held Franke wilfully violated the decree by failing to turn over McNeill's share of the note receipts and by refinancing the note without McNeill's consent. The court held Franke in contempt, but stated Franke could purge his contempt by paying McNeill her share of the receipts before refinancing, plus $20,000 a month until McNeill had received the value of her 20% interest in the note after refinancing, estimated by Franke at $2,472,838. Franke has failed to make all the required monthly payments.
The five limited partnerships that bought the apartment complexes from SLA filed for voluntary bankruptcy. Franke proposed a reorganization plan that was eventually accepted and confirmed by the bankruptcy court in June 1992. As a result, Gannon Partnership 19, L.P. (GP19), a Missouri limited partnership in which Franke is the sole general partner, was given title to the apartments.
In October 1992, McNeill brought this action against the parties with claims to the apartment complexes: the current titleholder of the apartment complexes, GP19; the sole general partner of GP19, William Franke; the former titleholders, SLA, West Pointe Limited Partnership, Northwest Village Limited Partnership, Grandview Hills Limited Partnership, Park Ridge Apartments Limited Partnership, and Lamplite Limited Partnership; the two general partners of SLA and the limited partnerships, Kevin W. Kelly and Pentad Properties, Inc.; the trustee under the deed of trust, Phillip J. Paster; and the current lienholder, HUD. See 28 U.S.C. § 2410(a) (1994) (). McNeill seeks a declaratory judgment that the appellees' claims to the property are subordinate to her rights, title, and interests...
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