United States District Court, E.D. Michigan, Southern Division
Jeffrey H. Bigelman, William C. Blasses, Osipov Bigelman, P.C., Louis P. Rochkind, Paul R. Hage, Jaffe, Raitt, Southfield, MI, for Appellant.
Mark H. Shapiro, Steinberg, Shapiro, Tracy M. Clark, Steinberg Shapiro & Clark, Southfield, MI, for Appellee.
ORDER AFFIRMING DECISION OF BANKRUPTCY COURT
STEPHEN J. MURPHY, III, District Judge.
The matter before the Court is an appeal by Stavenkan Fund, Inc. (" Stavenkan" ) from an order of the bankruptcy court in favor of the Chapter 7 trustee. For the following reasons, the Court will affirm the decision of the bankruptcy court.
The present dispute arises from Stavenkan's assertion of interest in four parcels of property located in Flint, Michigan (the " Flint properties" ) to which the Debtor, First Mortgage Fund, Inc. (" First Mortgage" ) holds record title. The relevant facts are undisputed.
On February 24, 2005, Samuel A. Ragone purchased the Flint properties. Halls Mortgage, Inc. (" Halls" ) financed the purchase. Ragone executed a balloon note (" Note" ) in the sum of $1,531,000 in favor of Halls, and the note was secured by mortgages on the properties. Halls assigned the note and the mortgages to First Mortgage. The mortgages and the assignments were recorded with the Genesee Country Register of Deeds.
On May 23, 2005, First Mortgage assigned its entire interest in the note and mortgages to Stavenkan. It is undisputed that the assignment from First Mortgage to Stavenkan was never recorded. Accordingly, First Mortgage remained the mortgagee of record and no recorded evidence of Stavenkan's interest in the properties existed.
Approximately three years later, First Mortgage, as mortgagee of record, foreclosed on the Flint properties, and then purchased the properties in a credit bid at the foreclosure sale. On March 5, 2008,
the sheriff deeds for the properties were recorded with the Genesee County Register of Deeds in favor of First Mortgage.
After another three years, in March 2011, First Mortgage filed for bankruptcy. After First Mortgage filed for bankruptcy, Stavenkan— whose owner and operator Michael Stacey was also the majority shareholder and president of First Mortgage— for the first time sought to assert its interest in the properties by filing a motion to lift the bankruptcy stay. On June 26, 2012, the Trustee filed an adversary action, seeking to avoid the transfer of First Mortgage's interest in the properties pursuant to 11 U.S.C. § 544(a). See Adversary Compl. to Avoid Transfers, ECF No. 2 at 6. On July 10, 2012, Stavenkan filed a counter complaint, raising claims for (1) quiet title; (2) specific performance; and (3) constructive trust. The trustee and Stavenkan filed cross motions for judgment. See Trustee's Mot. for Summ. J., ECF No. 2. at 93; Stavenkan's Mot. for Summ. J., ECF No. 2 at 181. On September 11, ...