SMELA v SMELA
Docket No. 68466
141 MICH APP 602
Submitted October 3, 1984. Decided April 1, 1985.
A circuit court has no jurisdiction in a divorce proceeding to adjudicate the rights of any party other than the husband and wife except where a third party has conspired with one spouse to defraud the other spouse out of property rights. A circuit court has no power to order the conveyance of property or interests in property to third parties in a divorce proceeding. Since defendant contested at trial and continued to contest on appeal his liability to the Szczepanskis for recovery of money damages, the third-party judgment cannot be affirmed on the ground that the trial court has authority to accept whatever property settlement the parties reach by stipulation.
Vacated in part and remanded for reconsideration of the property settlement provisions of the divorce decree.
CYNAR, P.J., dissented. He would find that the trial court‘s
REFERENCES FOR POINTS IN HEADNOTES
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OPINION OF THE COURT
1. DIVORCE — COURTS — JURISDICTION.
A circuit court has no jurisdiction in a divorce proceeding to adjudicate the rights of any party other than the husband and wife except where a third party has conspired with one spouse to defraud the оther spouse out of his or her property rights; a circuit court has no power to order the conveyance of property or interests in property to third parties in a divorce proceeding.
DISSENT BY CYNAR, P.J.
2. FRAUDS, STATUTE OF — EQUITY — PARTIAL PERFORMANCE — CONTRACTS.
Equity will regard a contract which is otherwise subject to the statute of frauds as removed from the operation of the statute where one party, in reliance upon the contract, has performed his obligations thereunder so that it would be a fraud upon him to allow the other party to repudiate the contract by interposing the statute.
Ronald H. Ring, for plaintiff.
Samuel A. Ragnone, for third-party plaintiffs Frank and Madge Szczepanski.
Roger W. Kittendorf, for defendant.
Before: CYNAR, P.J., and M. J. KELLY and R. L. EVANS,* JJ.
PER CURIAM. Third-party defendant appellant appeals as of right from a divorce judgment entered Novembеr 22, 1982. Appellant challenges (1) the property settlement disposition of the marital home, and (2) a $30,000 ancillary judgment in
Carol and Stanley Smela were married on September 2, 1967. Carol Smelа filed for divorce on October 30, 1979, and on July 31, 1981, Frank and Madge Szczepanski, Carol‘s parents, filed a third-party complaint in the divorce proceeding seeking a judgment against the Smelas in the amount of $30,000. At the hearing, Carol Smela and the Szczeрanskis testified that, in 1975 and in 1976, the Szczepanskis had loaned the Smelas $30,000 to enable the Smelas to purchase their marital home in Genesee County. While the funds were loaned without execution of any written document evidencing the debt, the witnesses testified that the parties had agreed that the loan would bear 6% interest and that payments would be made in the amount of $180 per month. Carol Smela subsequently executed a promissory note and a second mortgage acknowledging the loаn. Defendant, however, testified that he understood the money to be a gift because, when he initially attempted to begin the monthly payments, Mr. Szczepanski had informed him that he should consider the money a gift. Defendant refused to sign a promissory notе five years after receiving the first installment on the loan.
The trial court first decided the merits of the third-party complaint, finding that the money was a loan and not a gift and finding both Carol and Stanley Smela liable. Following a trial on the divorce actiоn, the court awarded plaintiff the marital home encumbered by a $16,460.50 lien in favor of the defendant. The value of defendant‘s interest in the home was its market value reduced by the amount of the balance owed on the mortgage (which Carol Smеla was to assume and pay)
While neither party challenged the jurisdiction of the trial court to adjudicate the claim of the Szczepanskis, we find that question so basic as to be dispositive.
The circuit court has no jurisdiction in a divorce proceeding to adjudicate the rights of any party other than the husband and wife. Michigan divorce statutes do not permit the courts to order conveyance of property or interests in property to third parties. The only exception is where a third party has conspired with a husband or a wife to defraud the other spouse out of his or her property rights. Yedinak v Yedinak, 383 Mich 409; 175 NW2d 706 (1970); Hoffman v Hoffman, 125 Mich App 488; 336 NW2d 34 (1983); Krueger v Krueger, 88 Mich App 722; 278 NW2d 514 (1979), lv den 406 Mich 1003 (1979); Sabourin v Sabourin, 67 Mich App 100, 104-105; 240 NW2d 284 (1976).
Moreover, while defendant never challenged the right of the Szczepanskis to join the divorce proceedings, defendant contested at trial and continues to contest on appeal his liability to the Szczepanskis for recovery of money damages. Thus, the third-party judgment cannot be affirmed оn the ground that the trial court has authority to accept whatever property settlement the parties reach by stipulation. Kasper v Metropolitan Life Ins Co, 412 Mich 232; 313 NW2d 904 (1981).
We vacate the $30,000 third-party judgment against Carol and Stanley Smela. (The Szczepanskis may initiate some independent action to recover their loan and defendant may test his statute of frauds defense in a proper case.) This case is remanded to the trial court for reconsideration of the property settlement provisions of thе divorce decree. We find no showing of prejudice or bias
Vacated in part and remanded.
CYNAR, P.J. (dissenting). The third-party complaint alleges a $30,000 loan to the Smelas for purposes of purchasing the marital home. The Szczepanskis alleged the third-party action was necessary to protect their interest in the event the circuit court proceeded with the property settlement in this divorce case. In answering, while contending the money was a gift, not a loan, the defendant did not object to the third-party complaint. Plaintiff, daughter of the Szczepanskis, admitted that the money was a loan and agreed that the third-party complaint should be adjudicated in the divorce proceeding. At trial, defense counsel agreed that defendant had no objection to the third-party complaint as part of the divorce proceeding.
The third-party claim was decided before the trial court proceeded to decide the merits of thе divorce action. The court found in favor of the third-party plaintiffs in the amount of $30,000.
The Szczepanskis and defendant Smela could not agree on the terms of the third-party judgment. Following a hearing to settle the third-party judgment, the court apprоved the judgment submitted by the Szczepanskis and it was entered.
After the divorce trial was resumed, plaintiff and defendant resolved their differences concerning the property settlement. Plaintiff‘s attorney stated the terms of the parties’ settlement оn the record and both plaintiff and defendant acknowledged their understanding and acceptance of the settlement. However, plaintiff and defendant were unable to agree on the terms of the divorce judg-
Defendant filed a claim of appeal. Defendant-appellant raised two issues in his briеf, contending that the trial court erred in ruling that the loan in question was recoverable because it did not fall within the statute of frauds and requesting the disqualification of the trial judge if the case is remanded to the circuit court.
Following the filing of a brief by dеfendant-appellant, plaintiff-appellee filed a motion with this Court to remand this matter to the circuit court to resolve the question of whether the husband or wife was to pay the third-party judgment previously entered against both parties. There was no objection to the motion. The motion was granted. At the remand hearing, the parties submitted a proposed revised divorce judgment. The trial judge expressed a lack of understanding for a need of a remand but signed the proposed amended divorce judgment because both plaintiff and defendant agreed to it.
The amended judgment provides that plaintiff is awarded the marital home and is to assume the balance owed to the lending institution and is to pay the third-party judgment of $30,000, holding
I agree with the majority that there is no showing of рrejudice or bias requiring the disqualification of the trial judge in this case.
Further, the trial court made a finding of fact, that the $30,000 transaction was in fact a loan, not a gift. In reviewing factual determinations made by the court, this Court, on review, applies the “clearly erroneous” standard found in GCR 1963, 517.1. A finding of fact is not clearly erroneous unless this Court, upon review of the entire record, is left with a definite and firm conviction that a mistake has been made. In my opinion, the trial court‘s finding that the transaction was a loan and not a gift was not clearly erroneous.
The trial court reached the right result. The statute of frauds was designed to prevent fraud, not as an instrumentality to be used in aid of fraud. Mahon v Sahration, 310 Mich 563, 568; 17 NW2d 753 (1945), citing Guzorek v Williams, 300 Mich 633; 2 NW2d 796 (1942). The Szczepanskis fully performed the contract by lending the $30,000. The Smelas received the money. Defendant should not be permitted to repudiate the contract by interposing the statute of frauds.
The majority cites Yedinak v Yedinak, 383 Mich 409; 175 NW2d 706 (1970), and several Court of Appeals cases relying on Yedinak. Four justices in the Yedinak majority recognized “that it is beyond the power of a court of equity in divorce proceedings to grant а judgment to others than the husband and wife because such proceedings are strictly statutory and the statutes governing divorce do not provide for it“. Yedinak, supra, p 415.
In this case, without question, this litigation has been costly and has consumed a considerable amount of time. Reversal on the basis of a lack of jurisdiction will entail additional expense and time. In my opinion, the Michigan Supreme Court should consider revisiting Yedinak.