Preview:

STATE OF MICHIGAN
COURT OF APPEALS


THOMAS M. SHOAFF, Plaintiff-Appellee, v ESTATE OF DUANE BALDWIN, DUANE V. BALDWIN TRUST and THOMAS E. WOODS, as Personal Representative of the Estate of Duane Baldwin and as Trustee of the Duane V. Baldwin Trust, Defendants-Appellants, and GARY D. BALDWIN, as Former Personal Representative of the Estate of Duane Baldwin, MARY JO BALDWIN, as Former Trustee of the Duane V. Baldwin Trust, JACOBS MANAGEMENT, LLC, FFM CO, INC., DGM CORPORATION, AGRICON, LLC, STOCKBRIDGE LIMITED PARTNERSHIP #1, STOCKBRIDGE LIMITED PARTNERSHIP #2, STOCKBRIDGE LIMITED PARTNERSHIP #3, STOCKBRIDGE PARTNERSHIP #4 and STOCKBRIDGE LIMITED PARTNERSHIP #5, Defendants/CrossPlaintiffs/Counterplaintiffs.

UNPUBLISHED July 1, 2008

No. 270693 Ingham Circuit Court LC No. 99-090282-CZ

Before: Donofrio, P.J., and Sawyer and Murphy, JJ. PER CURIAM. Defendants appeal from orders of the circuit court awarding plaintiff title and possession of certain property pursuant to the execution of judgment, along with an award of costs and attorney fees associated with the execution of that judgment. We reverse.

-1-


This appeal concerns post-judgment proceedings. Plaintiff had obtained a judgment, awarding him in excess of $1.3 million, including prejudgment interest, arising out of a business transaction with decedent in the 1990s. The transaction involved a sod farm in Florida. Plaintiff's participation was to provide guarantees for bank loans, eventually totaling $700,000, to the business venture. Decedent had agreed to indemnify and hold plaintiff harmless in the event of the failure of the venture to meet its obligations, resulting in plaintiff having to repay the loans under the guarantee. Decedent had represented sufficient assets to cover the obligations. Unknown to plaintiff at the time, decedent had five years previously transferred the bulk of his assets to the various defendant companies (referred to below and in this opinion as the "entity defendants"), isolating those assets from his creditors. The sod farm failed in 1998 without making any payments on the loans, and within a few months, decedent died suddenly from a heart attack. Decedent's estate was worth less than $15,000. Pursuant to the guarantee, plaintiff paid the loans. Thereafter, plaintiff petitioned for the estate to be reopened and he pursued an action based upon the indemnity agreement, as well as other claims. Plaintiff was to obtain a consent judgment against the estate and trust and, following a trial in circuit court, was able to have the various property transfers from decedent to the entity defendants set aside under the Uniform Fraudulent Conveyances Act, MCL 566.11 et seq. Defendants appealed and this Court affirmed in an unpublished opinion per curiam. Shoaff v Estate of Duane V Baldwin (Docket Nos. 248606, 248609, and 255460, issued February 3, 2005). In April 2006, the circuit court entered an order transferring title to the property to plaintiff to satisfy the judgment. The order provided the property was to be valued at $1.8 million, plaintiff was to pay any liens on the property that had a higher priority than plaintiff's judgment and, if the equity in the property after payment of the superior liens exceeded the amount of plaintiff's judgment, plaintiff was to file a satisfaction of judgment with the court and pay into the probate court the difference between the remaining equity and the amount necessary to satisfy plaintiff's judgment to be administered as part of the Baldwin estate. The post-judgment proceedings have resulted in three separate appeals that were submitted to this panel, with this appeal being the primary one. We will begin our analysis by considering what is certainly the most significant issue in this case: whether the plaintiff could execute on his judgment against the property in circuit court or whether plaintiff had to pursue his claim in probate court as a creditor of the estate. This issue is significant because it appears that the obligations of the estate exceed the value of the property and that plaintiff's claim may be subordinate to other claims that have a greater priority for payment under the Estates and Protected Individuals Code (EPIC). MCL 700.1101 et seq. Defendants argue on appeal that, once the circuit court set aside the conveyances to the entity defendants, title reverted to decedent and, therefore, became assets of the estate to be administered pursuant to EPIC. We agree and reverse the circuit court. Whether plaintiff could execute directly on the property to enforce his judgment under MCL 600.6104 or whether the property became an asset of the estate and had to be administered under EPIC presents a question of statutory construction which we review de novo. ISB Sales Co v Dave's Cakes, 258 Mich App 520, 526; 672 NW2d 181 (2003). MCL 700.3812 restricts the execution under a judgment on estate property:

-2-


An execution shall not issue upon nor shall a levy be made against estate property under a judgment against a decedent or personal representative. This section shall not be construed to present the enforcement of a mortgage, pledge, or lien upon property in an appropriate proceeding. Thus, the question becomes whether this property was estate property. defendants that it was. We agree with

The original judgment in this matter set aside the conveyances from the decedent to the entity defendants: IT IS FURTHER ORDERED AND ADJUDGED that all transfers of property, real, personal or mixed, to the Entity Defendants are hereby set aside to the extent necessary to satisfy Plaintiff's claim under this Judgment and Plaintiff's Partial Consent Judgment against Defendants [sic] Estate of Duane V. Baldwin and the Defendant Duane V. Baldwin Trust. Attached to this Judgment as Exhibit "A" is a list of real property, the transfers of which, are hereby set aside for the benefit of Plaintiff to satisfy his Judgment against defendants together with interest, costs and attorney fees. That judgment was affirmed by this Court, Shoaff, slip op at 18, which also noted that the property reverted to decedent: Pursuant to the final judgment, plaintiff may now execute against the property held by the entity defendants, deemed alter egos of Duane Baldwin, to the extent necessary to satisfy his claim. Any recorded liens or taxes will have to be satisfied first according to law and, then, to the extent that any of the property, i.e., sham entity, is liable for any debts of the debtor, such property shall be included in his [decedent's] assets and is not exempt from liability for his debts. In our view, the conclusion is inescapable: if the conveyances are set aside (which they were), then the property reverts to previous state: ownership by Duane V. Baldwin. Because he is deceased, the property becomes an asset of his estate. The property, as well as the debt owed plaintiff under the judgment, must be administered as part of the estate in accordance with the provisions of EPIC, including the provision of MCL 700.3812 precluding execution against the property. Indeed, we note with interest that plaintiff himself recognized that this property was an asset of the estate and that the estate had to liquidate the asset and pay plaintiff's claim at a proceeding in the probate court. On February 16, 2005, two weeks after the issuance of this Court's opinion in this matter, a hearing was held in the probate court on plaintiff's petition to remove defendant Woods as the personal representative for failure to marshal the assets after the circuit court had set aside the conveyances and to pay plaintiff's claim. The following exchanges occurred between plaintiff's attorneys and the probate judge: MR. ZACK: Circuit Court issued a judgment setting aside the conveyances. We asked Mr. Woods to then take charge of the real estate as personal representative of the estate as called for in the Probate Court. -3-


***
THE COURT: Right. So as I understand it, you have a Circuit Court judgment against the estate? MR. ZACK: Correct. THE COURT: And you've taken no steps to collect on that judgment, true? MR. ZACK: We are precluded from executing on the real estate. THE COURT: How? MR. ZACK: By the Probate Code, Your Honor. There is a ---THE COURT: You have a Circuit Court judgment against an estate. Now, there's no stay on appeal. So you could engage in whatever collection proceedings in Circuit Court you'd like. MR. ZACK: There is a section of the Probate Court --THE COURT: Code? MR. ZACK: Probate Code, that states that you cannot execute against estate assets. THE COURT: Give me the cite. MR. ZACK: Your Honor, it's 700.3812. THE COURT: One moment. Is the real property an asset of the estate or the trust? MR. ZACK: It is an asset of the estate. *** THE COURT: So as I understand it, your objection to Mr. Woods boils down to the fact that there is property out there that belongs to the estate that the estate has not taken possession of, so to speak. MR. ZACK: Correct. THE COURT: Which would allow, apparently, the real estate to be then poured into the trust, which would allow you to execute against it.

-4-


MR. ZACK: Or, if it were in the estate, it would allow the personal representative to sell the real estate so that it could be used to pay the judgment credit. THE COURT: Is that it? MR. ZACK: Yes. *** MR. ZACK: Okay. When the decedent died, if you looked at the record title to the real estate, the real estate was in the name of these limited partnerships. THE COURT: Okay. MR. ZACK: Judge Houk's second judgment set aside the conveyances to those entities. THE COURT: From the decedent to the LLP's [sic]. MR. ZACK: Correct, which we interpreted as meaning those conveyances were a nullity. THE COURT: And he did that after the decedent died? MR. ZACK: Yes. THE COURT: So how is it that Judge Houk had jurisdiction to decide anything regarding what was in or outside of the estate? MR. ZACK: He didn't decide what was in or outside of the estate. He decided whether or not the decedent had made fraudulent conveyances

Download THOMAS M SHOAFF V ESTATE OF DUANE BALDWIN.pdf

Michigan Law