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In re Underwood

United States District Court, E.D. Michigan, Southern Division

March 13, 2017

In re GLENN RICHARD UNDERWOOD Debtor.
v.
PATRICIA SELENT, ET AL., APPELLEES. GLENN RICHARD UNDERWOOD, Appellant, Bankr. No. 06-55754 Adv. Pro. No. 14-4966

          Honorable Thomas J. Tucker Judge

          OPINION AND ORDER

          LINDA V. PARKER U.S. DISTRICT JUDGE

         This matter is before the Court as an appeal from the United States Bankruptcy Court for the Eastern District of Michigan, the Honorable Thomas J. Tucker presiding. Debtor and Appellant Glenn Richard Underwood (“Underwood”) appeals two decisions entered by Judge Tucker in an adversary proceeding Underwood filed against several of his creditors in his Chapter 11 bankruptcy case and the bankruptcy liquidating trustee, Gene R. Kohut (“Liquidating Trustee”). Specifically, Underwood challenges Judge Tucker's December 10, 2014 order granting a motion to dismiss filed by Patricia Selent and Lynda Carto and dismissing the first three counts of Underwood's adversary complaint. Underwood also challenges Judge Tucker's July 9, 2015 order adjudicating the fourth count of Underwood's complaint, requiring certain property re-deeded to the Liquidating Trustee, and allowing the Liquidating Trustee to sell any of the properties as permitted by the confirmed plan in Underwood's Chapter 11 case, as modified by an October 14, 2008 order. For the reasons that follow, this Court affirms Judge Tucker's decisions.

         I. Standard of Review

         The bankruptcy court's findings of fact are reviewed under the clearly erroneous standard. Fed.R.Bankr.P. 8013. “A finding of fact is clearly erroneous ‘when although there is evidence to support it, the reviewing court, on the entire evidence, is left with the definite and firm conviction that a mistake has been committed.' ” United States v. Mathews (In re Matthews), 209 B.R. 218, 219 (B.A.P. 6th Cir. 1997) (quoting Anderson v. City of Bessemer City, 470 U.S. 564, 573 (1985)). The bankruptcy court's conclusions of law are reviewed de novo. Nuvell Credit Corp. v. Westfall (In re Westfall), 599 F.3d 498, 501 (6th Cir. 2010). This means the Court reviews the law independently and gives no deference to the conclusions of the bankruptcy court. Myers v. IRS (In re Meyers), 216 B.R. 402, 403 (B.A.P. 6th Cir.1998). “[I]f a question is a mixed question of law and fact, then [the reviewing court] must break it down into its constituent parts and apply the appropriate standard of review for each part.” Investors Credit Corp. v. Batie (In re Batie), 995 F.2d 85, 88 (6th Cir. 1993).

         II. Factual and Procedural Background

         This bankruptcy matter arises from an Oakland County Circuit Court case that Selent, Carto, and other family members of Underwood (i.e., the defendants in the bankruptcy adversary case, but for the Liquidating Trustee) filed in 2004 against Underwood and Underwood Property Management Company, a sibling partnership that owned and managed numerous real estate properties. See Underwood v. Carto, No. 315949, 2014 WL 4263229, at *1 (Mich. Ct. App. Aug. 28, 2014). The 2004 lawsuit resulted in a judgment of $392, 752, plus interest, against Underwood and in favor of the plaintiffs (hereafter “Judgment Creditors”). (Id.) To protect himself from the judgment while he pursued his state court appellate remedies, Underwood filed a Chapter 11 bankruptcy petition on October 30, 2006.

         On July 24, 2007, the bankruptcy court entered an order confirming Underwood's bankruptcy plan. Order, In re Underwood, No. 06-55754 (Bankr. E.D. Mich. July 24, 2007), ECF No. 114. The bankruptcy plan provides that the Judgment Creditors possess allowed claims against Underwood “only to the extent that the Judgment Creditors … are deemed to have [] claim[s] against [Underwood] after all appellate rights are exhausted by [Underwood] and the claims by the Judgment Creditors … against [Underwood] are both final and non-appealable under the laws of the State of Michigan.” Id. at 2-3. The amount of the claims, the plan states, is in the amount determined by the Michigan courts.[1] Id. at 4. The bankruptcy plan requires Underwood to escrow and maintain a balance of no less than $450, 000 with Bank of America by May 31, 2008, for payment of the Judgment Creditors' allowed unsecured claims.[2] Id. at 3. The plan further requires Underwood to make “[p]ayment to the Judgment Creditors … by the later of: (1) May 31, 2008; or (2) ten (10) days after all appellate rights are exhausted by [Underwood] and the claims by the Judgment Creditors … against [Underwood] are both final and non-appealable under the laws of the State of Michigan (‘Disbursement Date').” Id.

         Pursuant to a stipulation between Underwood and the Judgment Creditors, the bankruptcy plan was modified on October 13, 2008. Stip. & Order, id., ECF No. 169. The modified plan inter alia reduces the amount of the escrow balance and requires Underwood to execute quit claim deeds to the Liquidating Trustee with respect to the following properties: (a) 6085 and 6185 White Lake Road, White Lake, MI; (b) 9230 Dixie Hwy. (with four lots), Clarkston, MI; (c) 9237 Hillcrest, Clarkston, MI; 11875 Milford, Holly, MI; and (d) 137 Hudson and 158 Summit (4 units), Pontiac, MI. Id. at 2-3. The modified plan orders the Liquidating Trustee to “hold the quit claim deeds in escrow and not record the same until twenty (20) days after all appellate rights are exhausted by [Underwood] and the claims by the Judgment Creditors … against [Underwood] are both final and non-appealable under the laws of the State of Michigan.” Id. at 3. The modified bankruptcy plan provides that, after such time, the Liquidating Trustee may record the deeds and “to the extent reasonably necessary … effectuate the sale of such real property in order to satisfy any outstanding obligation to the Judgment Creditors on Appeal or the Liquidating [Trustee].” Id.

         In June 2008, the Michigan Court of Appeals ruled on Underwood's appeal of the Oakland County Circuit Court judgment. Carto v. Underwood Prop. Mgmt. Co., No. 272747, 2008 WL 2389493 (Mich. Ct. App. June 12, 2008). The court of appeals affirmed the trial court's grant of summary disposition in favor of the Judgment Creditors and against Underwood, but vacated the trial court's damages award. Id. The court remanded the matter to the trial court for a recalculation of damages. Id.

         On remand, the trial court appointed a certified public accountant (“CPA”) as an expert to assist it in properly calculating the damages. Underwood, 2014 WL 4263229, at *1. Based on the CPA's calculations, the trial court issued a revised judgment of $200, 823 against Underwood on November 15, 2010. Id. Underwood filed three unsuccessful motions for the trial court to reconsider its revised judgment and one unsuccessful motion for relief from judgment. Id. Underwood appealed the trial court's decisions to the Michigan Court of Appeals, without success as well. Id. and n.3

         Underwood filed additional lawsuits in the Michigan courts seeking to overturn the Oakland County Circuit Court's judgment. Id. In February 2010, he filed a civil complaint against Selent, which the trial court dismissed on summary disposition in favor of Selent on res judicata grounds. Id. at *2. The Michigan Court of Appeals affirmed. Underwood v. Selent, No. 298312 (Mich. Ct. App. Oct. 20, 2011) (unpublished). The appellate court explained “this is at least the third time that [Underwood] has brought suit against the same defendant.” Id. The court also stated that, “[e]ven though he is dissatisfied, [Underwood] cannot merely re-label and then couch his assertions in different arguments in repeated attempts to relitigate the same matter hoping for a result he finds more favorable.” Id.

         In December 2012, Underwood sued Carto “generally alleg[ing] that the trial court in the 2004 case ignored facts, improperly appointed a CPA, and used procedures that denied him a fair trial.” Underwood, 2014 WL 4263229, at *2. Carto moved for summary disposition on res judicata grounds, which the trial court granted with respect to all but one claim (slander) on April 5, 2013. Id. The court concluded that Underwood raised or could have raised most of his claims during the 2004 litigation. Id. The trial court subsequently granted summary disposition to Carto on Underwood's slander claim. Id. Underwood appealed.

         On August 28, 2014, the Michigan Court of Appeals affirmed the trial court's decision. Id. The court determined not only that res judicata barred Underwood's claims, but that Underwood's appeal was vexatious. Id. The court wrote:

We determine that Underwood's appeal is vexatious because it was taken for the purposes of hindrance and without any reasonable basis for belief that there was a meritorious issue for this Court to determine on appeal. This is the third appeal in which this Court has affirmed the trial court's dismissal of suits related to or based on conduct in the 2004 case on res judicata grounds. And this is the second appeal from a complaint against one of the plaintiffs in the 2004 case.
The panel's decision in Selent informs our determination. In Selent, Underwood sued Selent, another sibling involved in his 2004 lawsuit, on substantially [the same] claims as he made against Carto in this lawsuit. The trial court dismissed Underwood's suit against Selent on res judicata grounds. Underwood appealed that dismissal, and a panel of this Court affirmed the trial court's dismissal in no uncertain terms. The Selent panel explained that res judicata barred Underwood's claims, “for the same reasons clearly and succinctly stated by the previous panel of this court in In re Estate of Underwood when [Underwood] brought the case for the second time[.]” The panel further warned Underwood that he could not repeatedly attempt to relitigate the issues in the 2004 case and that his repeated lawsuits wasted judicial resources.
Despite this Court's decision in Selent, Underwood filed a new lawsuit against a different sibling involved in the 2004 case. Underwood's suit in this case presents substantially the same allegations against Carto as he presented against Selent: allegations that a panel of this Court painstakingly explained were barred by res judicata. The most reasonable explanation for Underwood's behavior is that he has engaged in it for the purposes of hindrance. Further, Underwood cannot have a reasonable basis for believing that there is a meritorious issue to be determined. This Court has twice explained that res judicata bars all claims related to the 2004 lawsuit. But Underwood explicitly based his December 2012 complaint in this case on Carto's alleged conduct during the 2004 lawsuit.

Id. at 4-5 (footnotes omitted). The court of appeals awarded Carto actual damages and expenses for defending against Underwood's appeal and remanded the matter to the trial court, ordering the trial court to assess punitive damages in an additional ...


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