ELAINE FRANKLIN V SCOTT FRANKLIN
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STATE OF MICHIGAN
COURT OF APPEALS
ELAINE FRANKLIN,
UNPUBLISHED
June 1, 2010
Plaintiff-Appellant,
v
No. 289255
Oakland Circuit Court
LC No. 2008-093752-PS
SCOTT FRANKLIN,
Defendant-Appellee.
Before: SAAD, P.J., and HOEKSTRA and SERVITTO, JJ.
PER CURIAM.
Plaintiff appeals as of right a trial court order granting summary disposition in favor of
defendant pursuant to MCR 2.116(C)(10). Because the Uniform Fraudulent Transfer Act does
not encompass transfers of stolen or otherwise illegally obtained assets, we affirm.
Defendant is an adult son of plaintiff. In a prior trial court action, plaintiff sued and
obtained a judgment against defendant’s brother (plaintiff’s other son), Jason Franklin, for fraud.
Apparently, Jason withdrew a significant amount of funds from a bank account held jointly in his
and plaintiff’s name, without authority. Jason then placed the funds in an account he held jointly
with defendant, withdrew some of the funds from that account for his own use, and then left the
remaining funds in the joint account for defendant’s use. Defendant thereafter withdrew the
funds, alleged to be approximately $235,000, from the joint account. A jury trial concerning the
matter ensued and, after a judgment was entered in plaintiff’s favor and against Jason, plaintiff
moved for a judgment against defendant, who was not a party to the action. According to
plaintiff, the transfer of her funds from Jason to defendant was fraudulent under the Uniform
Fraudulent Transfer Act (UFTA), MCL 566.31 et seq., thus entitling her to a judgment against
defendant. The trial court denied the motion and plaintiff did not appeal that ruling. Plaintiff
instead initiated the instant action against defendant, again contending that the transfer of money
to defendant fell within the parameters of the UFTA and seeking a judgment against defendant.
In lieu of answering plaintiff’s complaint, defendant moved for summary disposition
pursuant to MCR 2.116(C)(8) and (10). The trial court granted the motion relying upon MCR
2.116(C)(10), opining that in plaintiff’s prior action against her son Jason, the trial court had
ruled “judgment debtor Jason Franklin had no interest in the monies, which is a prerequisite to a
UFTA claim. . . .Moreover the Court likewise ruled that the Revised Judicature Act (RJA) is not
applicable.” On appeal, plaintiff contends that the trial court erred in entering summary
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disposition in defendant’s favor when defendant clearly received a transfer of $235,000 from a
judgment debtor, without consideration, thus rendering the transfer assailable under the UFTA.
We review de novo the trial court's summary disposition ruling. Walsh v Taylor, 263
Mich App 618, 621; 689 NW2d 506 (2004). A motion for summary disposition under MCR
2.116(C)(10) tests the factual sufficiency of the complaint. Corley v Detroit Bd of Ed, 470 Mich
274, 278; 681 NW2d 342 (2004). We review a motion brought pursuant to this subrule by
considering the pleadings, admissions, and other evidence submitted by the parties in the light
most favorable to the nonmoving party. Latham v Barton Malow Co, 480 Mich 105, 111; 746
NW2d 868 (2008). Where there is no genuine issue of material fact and the moving party is
entitled to judgment as a matter of law, summary disposition is appropriate under MCR
2.116(C)(10). Additionally, issues of statutory interpretation are reviewed de novo. Griffith v
State Farm Mut Automobile Ins Co, 472 Mich 521, 525-526; 697 NW2d 895 (2005).
We first note that plaintiff claims the trial court made no definitive rulings concerning her
UFTA claims against this defendant in the first trial court action, and thereafter directed her to
file a separate lawsuit against this defendant under the UFTA. We disagree with both assertions.
In its November 27, 2007 opinion and order in the Jason Franklin lawsuit, the trial court
discussed the applicability of the UFTA to Jason’s transfer of monies to defendant, indicating
that in entering a judgment in plaintiff’s favor and against Jason, it “implicitly rejected any
contention that Jason had a property right in the money.” The trial court also addressed the
application of the RJA as it related to plaintiff’s request for a judgment against defendant stating,
“none of the three circumstances of MCL 600.6128 is applicable here.” The trial court did make
specific rulings concerning the applicability of the UFTA and the RJA to defendant and, as
previously noted, it does not appear that plaintiff appealed these rulings. While the trial court
may have indicated that if plaintiff wished to secure a judgment against defendant she should file
a separate lawsuit, the trial court did not advise or direct plaintiff as to the nature of the cause of
action that should be pled in the complaint. Instead, the trial court simply ruled that, “. . .
Plaintiff’s proper course of action, if she seeks to pursue a claim against Scott Franklin, is to file
a separate lawsuit.”
Turning to whether summary disposition of the UFTA claim was appropriate in the
instant action, we note that the circumstances under which a debtor’s transfer of an asset is
considered fraudulent are found at MCL 566.34. That statute provides, in relevant part:
(1) A transfer made or obligation incurred by a debtor is fraudulent as to a
creditor, whether the creditor's claim arose before or after the transfer was made
or the obligation was incurred, if the debtor made the transfer or incurred the
obligation in either of the following:
(a) With actual intent to hinder, delay, or defraud any creditor of the debtor.
(b) Without receiving a reasonably equivalent value in exchange for the transfer
or obligation, and the debtor did either of the following:
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(i) Was engaged or was about to engage in a business or a transaction for which
the remaining assets of the debtor were unreasonably small in relation to the
business or transaction.
(ii) Intended to incur, or believed or reasonably should have believed that he or
she would incur, debts beyond his or her ability to pay as they became due.
MCL 566.31(l) defines “transfer” as:
. . . every mode, direct or indirect, absolute or conditional, voluntary or
involuntary, of disposing of or parting with an asset or an interest in an asset, and
includes payment of money, release, lease, and creation of a lien or other
encumbrance.
According to MCL 566.36 a transfer is made under the UFTA when, with respect to an asset that
is not real property,
. . . the transfer is so far perfected that a creditor on a simple contract cannot
acquire a judicial lien otherwise than under this act that is superior to the interest
of the transferee. MCL 566.36(1)(b).
It is undisputed that a transfer of approximately $235,000 was made to defendant, from Jason,
and that Jason did not receive a reasonably equivalent value for the money. Relevant to the
instant matter, however, MCL 566.36(4) provides that “[a] transfer is not made under this act
until the debtor has acquired rights in the asset transferred.” Whether Jason made a transfer
under the UFTA is, then, ultimately dependent upon whether Jason acquired rights in the
transferred funds. We hold that he did not.
An “asset” under the UFTA is “property of a debtor.” MCL 566.31(b). “Property” for
purposes of the UFTA means “anything that may be the subject of ownership.” MCL 566.31(j).
“Ownership” is defined in Black’s Law Dictionary (6th ed.) as the “Collection of rights to use
and enjoy property, including [the] right to transmit it to others. The complete dominion, title, or
property right in a thing or claim. The entirety of the powers to use and disposal allowed by
law.”
Of significance, in the prior action between plaintiff and Jason, a jury found that Jason
had defrauded plaintiff out of a substantial amount of money—including the money Jason
transferred to defendant. The jury found that Jason had no ownership in or legal right to the
money. In denying plaintiff’s motion for a judgment against a non-party defendant in the prior
action, the trial court also noted, “this Court having entered a judgment for Plaintiff against Jason
Franklin, has implicitly rejected any contention that Jason had any property right in the money.”
See also, Restatement (Second) Torts, § 229, comment d, (a thief acquires no legal interest in the
goods he stole). Thus, while Jason may have had physical custody and control of the stolen
money at some point, the money was not his “property” nor did he have “ownership” of the
same, as these terms are defined in the UFTA.
The few published Michigan cases addressing the UFTA exclusively involve the transfer
of assets to which a debtor undisputedly had legal title. See, e.g., Estes v Titus, 481 Mich 573,
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581; 751 NW2d 493 (2008)(property held by spouses as tenants by the entirety, which was later
disposed of in a divorce judgment, was not subject to UFTA); Mather Investors, LLC v
Larson, 271 Mich App 254, 256; 720 NW2d 575, 576 - 577 (2006). In contrast, here, the asset
alleged to have been transferred was acquired illegally and thus was not the debtor’s asset or
property. Accordingly, the UFTA is inapplicable. This is not to say that one in plaintiff’s
position is without any recourse against the recipient of a stolen asset or that such a recipient
would always be given a free pass to keep illegally obtained funds. Equitable causes of action,
for example, may be viable against a third-party recipient of a stolen asset. Our holding today,
however, is merely that where an asset is illegally obtained by an individual and then transferred
to another, because the individual had no legal right or legitimate interest in the asset, any
transfer of the asset to another does not fall within the parameters of the UFTA.
Affirmed.
/s/ Henry William Saad
/s/ Joel P. Hoekstra
/s/ Deborah A. Servitto
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