Michigan Bank-Midwest v. D.J. Reynaert, Inc., BANK-MIDWES
| Citation | 165 Mich.App. 630,419 N.W.2d 439 |
| Decision Date | 26 February 1988 |
| Docket Number | P,BANK-MIDWES,Docket Nos. 92285,94573 and 94574 |
| Parties | MICHIGANlaintiff-Appellee, v. D.J. REYNAERT, INC., Donald J. Reynaert, Patricia K. Reynaert and G. Alex Monteith, Defendants-Appellees, and Kip D. Anderson, Peter C. Hanley and Elias A. Shaptini, Intervenors-Appellants, and Eastern Indemnity Company of Maryland, Triangle Plumbing, Inc., Innes and Gentile and Johncock Brayton Asphalt Paving, Inc., Defendants. MICHIGANlaintiff-Counter-Defendant-Appellee, v. D.J. REYNAERT, INC., Donald J. Reynaert, Patricia K. Reynaert, Eastern Indemnity Company of Maryland, Triangle Plumbing, Inc., Innes and Gentile and Johncock Brayton Asphalt Paving, Inc., D and G. Alex Monteith, Defendant-Counter-Plaintiff-Appellant. MICHIGANlaintiff-Counter-Defendant-Appellee, v. EASTERN INDEMNITY COMPANY OF MARYLAND, Triangle Plumbing, Inc., Innes and Gentile and Johncock Brayton Asphalt Paving, Inc., Defendants, and G. Alex Monteith, Defendant-Counter-Plaintiff, and D.J. Reynaert, Inc., Donald J. Reynaert and Patricia K. Reynaert, Defendants-Appellants. 165 Mich.App. 630, 419 N.W.2d 439 |
| Court | Court of Appeal of Michigan — District of US |
[165 MICHAPP 634] Curtis, Davidson & Curtis, P.C. by Robert M. Craft and Phillip J. Curtis, Jackson, for plaintiff-counter-defendant-appellee.
Gandelot, Stoepker & Dickson, P.C. by Thomas A. Stoepker, Detroit, for defendants-appellants Reynaert.
Alan R. Miller, P.C. by John J. Schrot, Jr., Birmingham, for defendant-counter-plaintiff-appellant Monteith.
Rockwell and Kotz, P.C. by Jerry R. Hamling, Detroit, for intervenors.
Before CYNAR, P.J., and SAWYER and J.A. GILLIS, * JJ.
In these consolidated cases, defendants, D.J. Reynaert, Inc., Donald J. and Patricia K. Reynaert, and G. Alex Monteith, and intervenors, Kip D. Anderson, Peter C. Hanley and Elias A. Shaptini, appeal as of right from a judgment of foreclosure by default entered on August 26, 1985, by Calhoun Circuit Judge Paul Nicolich. We affirm in part, reverse in part and remand for an evidentiary hearing. For purposes of clarity, separate facts will be summarized for each of the cases.
[165 MICHAPP 635] Docket No. 92285:
Intervenors allege that sometime during 1982 they entered into an oral partnership agreement with Donald Reynaert, wherein the intervenors (and possibly Michael J. Kelly, not a party to the instant suit) agreed to contribute funds for the purpose of buying and selling real estate for profit. Pursuant to this alleged oral agreement, the intervenors contributed $6,781 each toward the purchase of the Warnock Spring Warehouse Building located at 227 Iron Street, Detroit, Michigan. The intervenors did not execute and file a formal partnership agreement. However, they did file a certificate of copartnership with the Wayne County Clerk's office.
On December 13, 1982, Reynaert, Kelly and the three intervenors entered into a written "memorandum agreement" whereby each of these individuals acquired a one-fifth interest in the warehouse property and its liabilities. Reynaert was empowered to perform all acts necessary and incidental to the purchase and management of the warehouse, including making, executing, acknowledging, mortgaging and insuring the property. Reynaert was not empowered to sell or transfer the property.
Reynaert executed a valid first mortgage for $53,000 on December 14, 1982, with Michigan National Bank of Detroit.
The next day, December 15, 1982, Reynaert, Kelly and the intervenors executed an amendment to the memorandum agreement. The amendment read as follows:
Afterwards, on July 3, 1984, Reynaert and Monteith, as partners, entered into a $600,000 construction loan agreement with plaintiff, Michigan Bank-Midwest. The loan was secured by a real estate mortgage on an Albion, Michigan, restaurant site for $600,000 and a real estate mortgage on the Detroit warehouse in the amount of $200,000. Intervenors Anderson, Hanley and Shaptini had no knowledge of nor did they consent to the $200,000 mortgage.
Reynaert and Monteith defaulted on the construction loan and, on January 2, 1985, plaintiff commenced foreclosure on the two mortgaged properties. Subsequently, on August 26, 1985, intervenors filed a motion to intervene, alleging inter alia that, pursuant to an oral partnership agreement, intervenors advanced money to Reynaert for the purchase of the warehouse and that Reynaert had mortgaged the property without the partnership's authority.
That same day (August 26, 1985), Judge Paul Nicolich entered a default judgment of foreclosure against Reynaert and Monteith.
Thereafter, on December 17, 1985, Judge Stanley Everett entered an order allowing intervention [165 MICHAPP 637] and restraining disposition of the warehouse. While the instant action was pending, Reynaert defaulted on the first mortgage on the warehouse, and, consequently, Michigan National Bank sought foreclosure by advertisement.
Intervenors filed an action in Wayne Circuit Court and obtained an order restraining Michigan National Bank from disposing of the warehouse property until the intervenors' equitable rights were adjudicated and the title quieted.
In a deposition connected with the Wayne Circuit Court action, the existence of the memorandum agreement and amendment was revealed to plaintiff. Based on this revelation, on February 21, 1986, plaintiff filed a motion to set aside the order of intervention under MCR 2.612(C)(1)(c), alleging that intervenors had perpetrated fraud and misrepresentation upon the court and plaintiff by failing to disclose the existence of the memorandum agreement and the amendment thereto.
Plaintiff's motion was heard on March 17, 1986, before Judge Nicolich. At the hearing, Judge Nicolich concluded that intervenors had misled the court by not revealing the memorandum agreement and its amendment. The judge found that the language of the amendment was clear and unambiguous as to the fact that the intervenors had relinquished any property rights to the warehouse. Accordingly, he granted plaintiff's motion and imposed costs and reasonable attorney fees. An order setting aside the intervention was entered on April 14, 1986.
Intervenors moved for reconsideration on April 18, 1986, seeking an evidentiary hearing on plaintiff's fraud claim. Judge Nicolich denied the motion on May 16, 1986, by way of a written opinion. Judge Nicolich recognized that, when a party alleges fraud on the court, an evidentiary hearing is [165 MICHAPP 638] normally necessary to determine whether such fraud exists. However, the judge concluded that a hearing was unnecessary because his decision was based on the existence of the memorandum agreement and its amendment. Intervenors had not denied that they executed these documents. Further, in reaffirming his earlier decision, Judge Nicolich stated:
On June 17, 1986, Judge Nicolich entered an order denying intervenors' motion for reconsideration and awarded costs, expenses and reasonable attorney fees incurred by plaintiff in responding to the intervention motion in the amount of $2,853.50. The instant appeal followed. On September 26, 1986, this Court consolidated this appeal with the other two appeals considered herein.
As previously indicated, a judgment of foreclosure was entered on August 26, 1985, against Reynaert and Monteith. On November 4, 1985, Monteith moved to set aside the default judgment pursuant to MCR 2.603(D) and 2.612(B) and (C). In the motion, Monteith alleged that the judgment was procured by fraud, mistake and other misconduct on the part of plaintiff. Specifically, Monteith averred that he did not retain counsel and defend [165 MICHAPP 639] against the foreclosure due to plaintiff's representation that such action was unnecessary since defendants had sufficient collateral to satisfy the loan obligation and all attendant expenses. In addition, Monteith averred that plaintiff told him that it would pursue only Reynaert should a deficiency exist after the disposal of the mortgaged properties. Monteith's motion was accompanied by an affidavit which contained the same averments as those alleged in his motion.
Some of the averments in Monteith's motion included the following: (1) plaintiff failed to avail itself of the collateral in a timely manner; (2) plaintiff failed to dispose appropriately of the collateral; and (3) substantial defects and irregularities existed in the default proceedings and the default was taken without notice.
The motion was heard on November 25, 1985, before Judge Nicolich. At the hearing, Monteith's counsel asked that the default judgment be set aside only as to Monteith and that Monteith be permitted to adjudicate any deficiency judgment....
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