Dillard v. Schlussel
308 Mich. App. 429
| Mich. Ct. App. | 2014Background
- Dillard sued under MUFTA alleging Mark Schlussel transferred assets to Rose Lynn to hinder collection of a judgment.
- The court addressed statute of limitations and whether household-expense transfers immunize against MUFTA liability.
- Transfers at issue include Mark’s law-firm earnings wired to Rose Lynn and then to M&A, plus a Pacific Life policy loan reallocation.
- Dillard’s judgment against Mark was entered in 2008 (Arizona judgment domesticated in 2009), with discovery proceeding thereafter.
- The circuit court granted summary disposition on several MUFTA transfers, relying on living-expense theory; the opinion reverses and remands for fact-finding.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Statute of limitations bar | Discovery rule tolling applies due to concealment by defendants | No fraudulent concealment; timely discovery possible | Six-year window applies; no tolling; pre-2005 transfers barred |
| Actual fraud under MUFTA §4(1)(a) | Transfers to Rose Lynn show intent to hinder, delay, or defraud | Expenditures on household living negate actual fraud defense | Genuine issues of material fact; summary disposition inappropriate; remand warranted |
| Constructive fraud under MUFTA §5(1) | Transfers lacked reasonably equivalent value | Living-expense use constitutes value; may defeat constructively fraudulent claim | Value issue is factual; not conclusively resolved; remand for trial |
| Treatment of the Pacific Life policy transfer | Transfer of policy loan proceeds may be a fraudulent transfer | Policy ownership and timing negate liability | Remand to determine whether loan proceeds constitute property and whether transfer violated MUFTA |
| Effect of ‘reasonably equivalent value’ defense in actual fraud | No defense where transfers were gratuitous | Any later value does not validate the transfer for §4(1)(a) | Reasonably equivalent value cannot neutralize actual-fraud claim; multiple badges of fraud sustain liability |
Key Cases Cited
- BFP v. Resolution Trust Corp., 511 U.S. 531 (U.S. 1994) (badges of fraud; actual intent framework)
- Goforth, 465 F.3d 730 (6th Cir. 2006) (FDCPA context; handling of ‘reasonably equivalent value’ defense in living-expense transfers)
- In re Cohen, 199 B.R. 709 (Bankr. C.D. Cal. 1996) (distinction between actual and constructive fraud; value analysis)
- Morse v. Roach, 229 Mich. 538, 201 N.W. 471 (1924) (ownership skirts do not shield debtors from creditors; early Michigan stance on fraud transfer)