CITIZENS AND SOUTHERN MORTGAGE V JERRY LUPTAKAnnotate this Case
STATE OF MICHIGAN
COURT OF APPEALS
NATIONSBANC MORTGAGE CORPORATION
OF GEORGIA, f/k/a CITIZENS AND
SOUTHERN MORTGAGE CORPORATION,
December 12, 2000
JERRY LUPTAK, JERRY D. LUPTAK
REVOCABLE TRUST, NINA LUPTAK, NINA
D. LUPTAK REVOCABLE TRUST, HAROLD
BEZNOS, HAROLD BEZNOS REVOCABLE
TRUST, NORMAN BEZNOS, NORMAN
BEZNOS REVOCABLE TRUST, MAURICE
BEZNOS, MAURICE JERRY BEZNOS
REVOCABLE TRUST and SHELDON KORN,
Oakland Circuit Court
LC No. 93-453050-CZ
February 2, 2001
THE KORN FAMILY LIMITED PARTNERSHIP,
Before: Holbrook, Jr., P.J., and Kelly and Collins, JJ.
HOLBROOK, JR., P.J.
Plaintiff in this garnishment action appeals as of right from the trial court's order granting
summary disposition in favor of garnishee defendant the Korn Family Limited Partnership
(KFLP) pursuant to MCR 2.116(C)(8). We affirm.
I. Factual Background and Procedural History
Sheldon Korn, the Luptak defendants, and the Beznos defendants1 were guarantors of a
mortgage loan procured from plaintiff by Beztak Homes, Inc., a Michigan corporation, for the
development of a residential subdivision in Florida. Following Beztak's default on the mortgage
loan, plaintiff instituted foreclosure proceedings in Florida.
In 1992, a final judgment of
foreclosure was entered against Beztak. Subsequently, plaintiff instituted proceedings against
Sheldon Korn and the Luptak and Beznos defendants in the Circuit Court for Broward County,
Florida, and obtained a judgment against them, jointly and severally, in the amount of
In April 1993, plaintiff instituted proceedings in the Oakland Circuit Court, seeking to
make the Florida judgment against the guarantors a domestic judgment. The Luptak and Beznos
defendants later entered into a settlement agreement with plaintiff, and trial was held for the sole
purpose of determining Sheldon Korn's liability. In March 1996, the trial court entered judgment
against Sheldon Korn in the amount of $2,267,800.
Following entry of the judgment, plaintiff held a creditor's examination of Sheldon Korn.
The creditor's examination revealed that, one week after plaintiff had demanded full payment
from Beztak in 1991, Sheldon Korn had formed the KFLP and had transferred to the KFLP his
interests in five real estate partnerships. Plaintiff immediately served the KFLP with a writ of
nonperiodic garnishment. The KFLP denied that it was indebted to Sheldon Korn or that it
possessed or controlled any property belonging to Sheldon Korn. The trial court subsequently
entered an order granting the KFLP's motion for summary disposition, holding that (1) the writ of
garnishment did not provide adequate notice to the KFLP of the basis for plaintiff 's garnishment
claim, and (2) plaintiff was not permitted to pursue a fraudulent conveyance claim under the
Uniform Fraudulent Conveyance Act (UFCA), MCL 566.11 et seq.; MSA 26.881 et seq., within
the context of the garnishment proceedings.
II. Standards of Review
This Court reviews decisions on motions for summary disposition de novo to determine if
the moving party was entitled to judgment as a matter of law. UAW-GM Human Resource
Center v KSL Recreation Corp, 228 Mich App 486, 490; 579 NW2d 411 (1998). A motion
under MCR 2.116(C)(8) tests the legal sufficiency of a claim by the pleadings alone. Maiden v
Rozwood, 461 Mich 109, 119; 597 NW2d 817 (1999).
All factual allegations in support of the claim are accepted as true, as well
as any reasonable inferences or conclusions that can be drawn from the facts. The
motion should be granted only when the claim is so clearly unenforceable as a
matter of law that no factual development could possibly justify a right of
recovery. [Kuhn v Secretary of State, 228 Mich App 319, 324; 579 NW2d 101
Additionally, this appeal presents questions concerning the interpretation of court rules.
"Interpretation of the court rules presents a question of law, which is reviewed de novo." Waatti
& Sons Electric Co v Dehko, 230 Mich App 582, 586; 584 NW2d 372 (1998).
III. Whether the Writ of Garnishment Provided Adequate Notice
to Garnishee Defendant of the Basis for Plaintiff 's Garnishment Claim
Garnishment actions are authorized by statute. MCL 600.4011(1); MSA 27A.4011(1).
The court may exercise its garnishment power only in accordance with the Michigan Court
Rules. MCL 600.4011(2); MSA 27A.4011(2); Waatti, supra at 587; Royal York of Plymouth
Ass'n v Coldwell Banker Schweitzer Real Estate Services, 201 Mich App 301, 305; 506 NW2d
MCR 3.101 governs postjudgment garnishment proceedings, and subrule
3.101(G)(1) delineates the various categories of items for which a garnishee is liable. Plaintiff
argued below that the KFLP is liable pursuant to MCR 3.101(G)(1)(h), which provides that the
garnishee is liable for
all tangible or intangible property of the defendant that, when the writ is served on
the garnishee, the garnishee holds by conveyance, transfer, or title that is void as
to creditors of the defendant, whether or not the defendant could maintain an
action against the garnishee to recover the property . . . .
The trial court granted the KFLP's motion for summary disposition in part on the basis of
its conclusion that the writ of garnishment served on the KFLP provided no notice of plaintiff 's
claim of fraudulent conveyance. The court reasoned, in part, that summary disposition was
proper because plaintiff 's writ neither indicates that the property at issue was transferred to the
KFLP "by a void transaction" nor "state[s] the facts on which plaintiff relies and the allegations
necessary to inform the limited partnership of the pleader's claims, MCR 2.111(B)(1)." We
MCR 3.101(M)(2) provides that the plaintiff 's verified statement serves as the
"complaint" against the garnishee defendant, that the garnishee defendant's disclosure serves as
the answer, and that "[t]he garnishee's liability to the plaintiff shall be tried on the issues thus
framed." MCR 3.101(D) specifically sets forth the allegations that must be included in the
(1) that a judgment has been entered against the defendant and remains
(2) the amount of the judgment and the amount remaining unpaid;
(3) that the person signing the verified statement knows or has good reason
to believe that
(a) a named person has control of property belonging to the defendant,
(b) a named person is indebted to the defendant, or
(c) a named person is obligated to make periodic payments to the
Plaintiff 's verified statement included each of the required allegations, including the statement
that "the garnishee possesses or controls property belonging to the defendant."
The garnishment proceeding "complaint," as contemplated by MCR 3.101, is not required
to contain specific information regarding the debts or property that are subject to the writ. MCR
2.111(B) generally requires that a complaint contain a "statement of the facts" and the "specific
allegations necessary reasonably to inform the adverse party of the nature of the claims" against
it. The verified statement submitted in the instant case complies with MCR 2.111(B) by setting
forth the pertinent information concerning the judgment against Sheldon Korn and the specific
allegation that the KFLP possessed or controlled property belonging to Sheldon Korn. This
result makes particular sense in light of MCR 3.101(H)(1), which requires the garnishee
defendant to file a disclosure "revealing the garnishee's liability to the defendant as specified in
subrule (G)(1) . . . ."
Moreover, as a general rule of construction, when two statutes or provisions conflict and
one is specific while the other is more general, the specific statute or provision prevails. Haberl
v Rose, 225 Mich App 254, 261-262; 570 NW2d 664 (1997). Accordingly, if and to the extent
that MCR 3.101(D) and (M) conflict with MCR 2.111(B), MCR 3.101, which specifically
governs garnishment proceedings, prevails. See LeDuff v Auto Club Ins Ass'n, 212 Mich App 13,
17-18; 536 NW2d 812 (1995).
Therefore, because plaintiff complied with the requirements of the court rule, we
conclude that summary disposition was not properly granted on the basis of a lack of notice.
IV. Whether Plaintiff Has Properly Stated a Fraudulent Conveyance Claim
The trial court also held that the KFLP was entitled to summary disposition because "a
fraudulent conveyance is merely a voidable transaction and must be set aside using the proper
The trial court noted that plaintiff 's garnishment claim pursuant to MCR
3.101(G)(1)(h) was based on the UFCA,2 and held that the KFLP was not subject to liability
under MCR 3.101(G)(1)(h) until the conveyance to it from Sheldon Korn had been declared void
pursuant to the UFCA. We agree.
MCR 3.101(G)(1)(h) clearly indicates that it applies only to conveyances that are void as
to creditors at the time the writ is served on the garnishee defendant. Given the legal import
attached to the term "void," and crediting the Supreme Court with full knowledge of such
significance, we read the court rule as requiring a previous judicial determination that the transfer
at issue is indeed void.
We also believe that such a reading is consistent with the requirements set forth in MCR
3.101(D) regarding the statement of claim made in a garnishment proceeding. Given the limited
information that is required to be set forth in the verified statement, we believe that requiring a
plaintiff to specifically allege the factual basis for a claim of fraudulent conveyance in a separate
proceeding comports with due process guarantees.
Without such specific pleadings, the
garnishee's ability to resist a mistaken deprivation of property is severely compromised. This is
especially so when the garnishee was not even a named party in the prior lawsuit and judgment
from which the garnishment proceeding stems.3
In the instant case, the conveyance from Sheldon Korn to the KFLP had not been declared
"void."4 Accordingly, we conclude that summary disposition was appropriately granted.
Collins, J., concurred.
/s/ Donald E. Holbrook, Jr.
/s/ Jeffrey G. Collins
The Luptak and Beznos defendants and defendant Sheldon Korn are not participants in the
The UFCA has recently been repealed, MCL 566.43; MSA 26.895(13), and was replaced by the
similar Uniform Fraudulent Transfer Act (UFTA), MCL 566.31 et seq.; MSA 26.895(1) et seq.,
effective December 30, 1998. 1998 PA 434, § 13.
We do believe, however, that if the parties so agreed, adjudication of a fraudulent conveyance
claim could be disposed of in garnishment proceedings, assuming proper notice of the issues in
We note that the UFTA refers to fraudulent transfers as being "voidable" under the act, see
MCL 566.38(1), (2), (5), and (6); MSA 26.895(8)(1), (2), (5), and (6), and specifically provides a
statute of limitations for "[a] cause of action . . . under this act," MCL 566.39; MSA 26.895(9)