Green Tree Servicing LLC v. Margaret Epperson
326784
| Mich. Ct. App. | Aug 23, 2016Background
- In 1979 James and Margaret Epperson acquired Detroit real property by warranty deed; the deed created a tenancy by the entirety.
- In 1993 James signed a quitclaim deed purporting to convey the property to Margaret and their son Thomas, but Margaret did not sign that deed.
- Margaret executed a promissory note in 2002 secured by a mortgage on the property; she defaulted in 2009.
- GMAC (later assigned to Green Tree) sued in 2011 seeking reformation or an equitable mortgage against Thomas; the trial court denied an equitable mortgage and entered judgment for Thomas.
- In 2013 Green Tree sued Margaret and Thomas for breach of the note and foreclosure; defaults were entered but Thomas moved to set aside the default claiming res judicata and lack of standing. The trial court denied default judgment and dismissed Green Tree’s complaint as barred by res judicata.
- The Court of Appeals reversed: it held the trial court erred to consider Thomas’s defense after default without setting aside the default, that res judicata did not bar Green Tree’s foreclosure/breach claims, and that the 1993 quitclaim deed was invalid so Margaret holds full ownership by survivorship.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether trial court could consider Thomas’s res judicata defense after defaults entered | Defaults were in effect; Thomas may not proceed to defend without court setting aside default | Thomas argued res judicata barred the new action and thus sought to set aside default on meritorious-defense grounds | Court of Appeals: trial court erred to consider res judicata defense in plaintiff’s default-judgment hearing without first setting aside defaults under MCR 2.603(D) |
| Whether res judicata barred Green Tree’s complaint | Green Tree argued the 2011 action resolved mortgagor issues so claims could be relitigated | Thomas argued the foreclosure/breach claims arose from same transaction and were barred | Court of Appeals: res judicata does not apply; the 2011 action sought reformation/equitable mortgage (not foreclosure or breach) and later defaults/nonpayments occurred after that case closed |
| Validity of 1993 quitclaim deed conveying to Margaret and Thomas | Green Tree relied on public-record deed only to assert Thomas’s interest | Thomas relied on the 1993 quitclaim as evidence of his interest | Court of Appeals: 1993 quitclaim deed invalid because Margaret (co-tenant by entirety) did not sign; James alone could not convey an interest in entireties property |
| Remedy and scope of judgment | Green Tree sought default judgment and foreclosure against property interests of both defendants | Thomas sought dismissal on res judicata and challenge to standing | Court of Appeals: reverse dismissal, remand for entry of default judgment against defendants; default judgment as to Margaret reaches her 100% ownership interest (quitclaim invalid) |
Key Cases Cited
- Henderson v State Farm Fire & Cas. Co., 460 Mich 348 (Supreme Court of Michigan) (standard of review for questions of law)
- Estes v Titus, 481 Mich 573 (Supreme Court of Michigan) (res judicata standard)
- Adair v State, 470 Mich 105 (Supreme Court of Michigan) (transactional approach to res judicata)
- Shawl v Spence Bros, Inc., 280 Mich App 213 (Court of Appeals of Michigan) (standards for setting aside default; review for abuse of discretion)
- Hill v City of Warren, 276 Mich App 299 (Court of Appeals of Michigan) (trial courts may reconsider prior rulings while proceedings pending)
- Walters v Leech, 279 Mich App 707 (Court of Appeals of Michigan) (creation of tenancy by entirety when deed to husband and wife is silent)
- Tamplin v Tamplin, 163 Mich App 1 (Court of Appeals of Michigan) (entireties presumption where instrument silent)
- Tkachik v Mandeville, 487 Mich 38 (Supreme Court of Michigan) (tenancy by entirety and survivorship)
- Rogers v Rogers, 136 Mich App 125 (Court of Appeals of Michigan) (spouse cannot unilaterally convey entireties property)
- Bergeron v Busch, 228 Mich App 618 (Court of Appeals of Michigan) (purpose of res judicata to ensure finality and prevent repetitive litigation)