RICE v. RICE, (Unpublished #253843), November 17, 2005
Domestic Relations ReviewWhile Brian Rice and his wife, Thelma, were married, Brian was gifted a parcel of unimproved realty. The real estate was titled solely in Brian’s name. After the couple separated but while they were still married, Brian conveyed the realty to his father and mother. The property transferred was to serve as collateral for a contractor’s agreement to build a house on the realty. That agreement was with Great Lakes Builders (a company owned by Brian’s parents). Once the contract was paid in full, the property would be deeded back to Brian otherwise it would remain titled with his parents. Thelma never signed the contractor’s agreement or the deed conveying the realty to Brian’s mother and father.
After the house was built and Brian did not make the required payments, Great Lakes Builders foreclosed on the property. The trial court granted summary disposition against Thelma for failing to state a valid defense to Great Lake’s foreclosure action. The trial court concluded that the transfer from Brian to his parents was a mortgage that did not require Thelma’s signature. While Thelma retained a right of redemption as a result of any foreclosure action, that dower right did not prevent the foreclosure action from proceeding. Thelma appealed.
During the pendency of the foreclosure proceedings, Brian and Thelma’s divorce was finalized. On appeal of the divorce proceeding, the Court of Appeals reduced Thelma’s interest in the house to a money judgment established at ½ of the value of the gifted land (without the house). The Court provided her a judgment lien against the realty involved in the foreclosure action to secure that money judgment.
In Thelma’s appeal of the summary disposition against her in the foreclosure case she claimed that Brian’s parents could not foreclose her dower interest because she did not sign the deed or the contractor’s agreement. Thus, she believed she had a valid defense to the foreclosure suit. She also contended that Brian’s parents’ case should be dismissed as a result of the Court of Appeal’s decision in the divorce case. The Court of Appeals in the foreclosure appeal opined that the law of the case doctrine was inapplicable in the foreclosure case because it applies only to subsequent appeals of the same case (i.e. the divorce matter). Furthermore, since the parties in the divorce were not the same parties as in the foreclosure litigation, collateral estoppel did not warrant dismissal of the foreclosure case.
With regard to the merits of the foreclosure appeal, the Court of Appeals determined that Michigan law does not explicitly require a wife’s signature for a husband to create a mortgage (which is what contractor’s agreement was according to the Appeals Court) as opposed to a sale of land. Accordingly, the Court of Appeals held that the trial court did not err in determining that the contract was a valid mortgage. Thelma’s dower rights were not a valid defense to the foreclosure proceedings.
In addition, however, the Court of Appeals held that the Brian and Thelma’s divorce judgment transformed Thelma’s dower rights into a money judgment secured by a lien on the subject property. The question then became one of priority of security interests in the property—Brian’s parents mortgage (contractors’ agreement) or Thelma’s money judgment lien. The Court of Appeals held that because the parents knew of the impending divorce when they executed their mortgage with Brian, they had actual notice of Thelma’s rights in the property. Thus, they could not be good faith purchasers after the foreclosure because they were aware of Thelma’s interest. Accordingly, Thelma’s judgment lien has priority over the parents’ mortgage.
The parents’ also requested that Thelma’s lis pendis be canceled because she did not redeem the property within the statutory redemption period. The purpose of the lis pendis notice is to give prospective purchasers notice of the pending litigation. Given that the rights of the parents and Thelma were resolved and the foreclosure sale had already occurred at the time the “foreclosure appeal” was processed, the Court concluded there was no longer a need for the lis pendis and ordered that it be canceled.
Lastly, the Court of Appeals ordered Brian to pay the attorney fees awarded to his parents in the foreclosure action. In doing so, it reasoned that Thelma was never a party to the contractors’ agreement. By the time of the foreclosure, she was a fellow interest holder in the property by virtue of the judgment lien in the divorce case. Even so, Thelma was left with the full burden of processing this “foreclosure appeal” which Brian did not defend. So, he should pay all of the plaintiffs’ costs as taxable in the foreclosure action.
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