Bietler et al v. State of Michigan, Department of Treasury - Collections, a Governmental entity et al
ORDER GRANTING IN PART AND DENYING IN PART THE UNITED STATES MOTION FOR SUMMARY JUDGMENT [#26], CANCELING HEARING AND DISMISSING ACTION. Signed by District Judge Gershwin A. Drain. (TBan)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
CYNTHIA M. BIETLER and
Case No.: 16-11800
Honorable Gershwin A. Drain
STATE OF MICHIGAN, et al.,
ORDER GRANTING IN PART AND DENYING IN PART THE UNITED
STATES’ MOTION FOR SUMMARY JUDGMENT [#26], CANCELING
HEARING AND DISMISSING ACTION
On June 7, 2017, Defendant and Counterclaim Plaintiff, the United States of
America, brought the present motion for Summary Judgment . The United
States asserts that its federal tax liens against Dorothy Palmer have priority over
the requested attorney fees and interest on the unpaid balance of the land contract
between Counterclaim Defendant Paul Misiewicz and Palmer. Upon review of the
parties’ briefing, the Court finds that oral argument will not aid in the resolution of
this matter. Accordingly, the Court will resolve the United States’ present motion
on the submitted briefs. See E.D. Mich. L.R. 7.1(f)(2).
II. PROCEDURAL POSTURE
Plaintiffs Cynthia M. Bietler and Stephanie Starks filed the instant action in
the Oakland County Circuit Court seeking to quiet title on a parcel of property. The
original Defendants included both the State of Michigan and the United States of
America; however, the State of Michigan conceded to Plaintiffs’ request and is no
longer involved in the matter. Dkt. No. 7, p. 3 (Pg ID 66). The United States
removed the action to this Court and filed a Counterclaim against Bietler and
Starks and joined Paul Misiewicz, who was formerly married to Bietler and
currently engaged to Starks, which introduced questions of priority. Dkt. No. 2, p.
7 (Pg. ID 35).
The United States then filed its first Motion for Summary Judgment
asserting that the federal tax liens take priority over the Counterclaim Defendants’
interests in the property in question. . Though, upon further litigation, the
United States acknowledged Misiewicz’s priority and withdrew the motion. Dkt.
No. 25, p. 1 (Pg. ID 188). The United States’ second Motion for Summary
Judgment solely concerns whether attorney fees and interest also have priority over
the United States’ federal tax liens. .
On July 26, 2010, Plaintiff and Counterclaim Defendant Bietler and
Counterclaim Defendant Misiewicz sold, by land contract, the real property at
30649 Whittier Ave., Madison Heights, MI 48071 to Dorothy Palmer. Dkt. No. 1,
p. 16 (Pg. ID 16). The agreed upon price came to $119,900.00. Id. Palmer made all
payments under the land contract except for the final lump sum of $82,746.56. Dkt.
No. 26-3, p. 1 (Pg. ID 209). Additionally, on three different dates in 2011 and one
final date in 2015, the United States recorded Notices of Federal Tax Liens against
Dorothy Palmer. Dkt. No. 1, pp. 18, 20, 22, 26 (Pg. ID 18, 20, 22, 26). The liens
were never satisfied. Id.
Misiewicz gave Palmer a notice of forfeiture of the land contract and
subsequently filed suit in Michigan State Court in August 2015. Dkt. No. 26-4, p. 5
(Pg. ID 221). After receiving notice of the filing, Palmer informed Misiewicz that
she would vacate the property and quit claim her interest to whomever he
requested. Dkt. No. 26-6, p. 1 (Pg. ID 231). On September 8, 2015, Palmer
executed and recorded a quitclaim deed to the property in favor of Bietler and
Starks. Dkt. No. 1, p. 28 (Pg. ID 28). The forfeiture action was thereafter dismissed
because Misiewicz failed to show up for the hearing on September 9, 2015. Dkt.
No. 26-4, p. 5 (Pg. ID 221).
On April 15, 2016, Bietler and Starks filed the current action to quiet title
against the State of Michigan and the United States of America, asserting priority
over the liens filed by each Defendant against Palmer. Dkt No. 1, p. 1 (Pg. ID 1).
The Defendants removed the action on May 20, 2016. Id. On June 22, 2016, this
Court entered a stipulated order quieting title against Defendant State of Michigan
because it chose to concede to Plaintiffs’ requests. . Further, on May 24, 2017,
the parties agreed to sell the property in question and hold the disputed proceeds
from the sale in escrow pending the Court’s adjudication of priority. .
The United States joined Misiewicz so that it could assert its priority against
each individual who claimed to have interest in the property. Dkt. No. 2, p. 7 (Pg.
ID 35). Misiewicz’s counsel asserted from the beginning that the United States had
priority over Bietler and Starks, but not over Misiewicz, the original land contract
vendor. Dkt. No. 15, p. 4 (Pg. ID 111). Accordingly, the United States focused its
claim against Misiewicz, the original land contract vendor.
At the time of the sale, the United States admitted Misiewicz was due the
principle under the land contract, which he was paid at closing. Id. The title
company from the closing is holding $69,818.99 in escrow from the sale. The
interest sought by Misiewicz comes to a total of $12,174.82. Id. Misiewicz also
seeks to recover attorney fees in the amount of $26,587.50, bringing his requested
relief to a total of $38,762.32. Id. Finally, if the proceeds are disbursed so that
Misiewicz receives the interest and attorney fees, the United States will receive
$31,056.67 towards Palmer’s tax indebtedness. Id.
As previously mentioned, the United States conceded after its first motion
for summary judgment that Misiewicz has priority over the federal liens.
Therefore, the only issue presently before the court involves the United States’
assertion that the proceeds of the sale should not extend to the payment of interest
and attorney fees. .
Federal Rule of Civil Procedure 56(a) “directs that summary judgment shall
be granted if there is no genuine issue as to any material fact and that the moving
party is entitled to a judgment as a matter of law.” Cehrs v. Ne. Ohio Alzheimer’s
Research Ctr., 155 F.3d 775, 779 (6th Cir. 1998) (quotations omitted). The court
must view the facts, and draw reasonable inferences from those facts, in the light
most favorable to the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). No genuine dispute of material
fact exists where the record “taken as a whole could not lead a rational trier of fact
to find for the non-moving party.” Matsushita Elec. Indus., Co. v. Zenith Radio
Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). Ultimately, the
court evaluates “whether the evidence presents a sufficient disagreement to require
submission to a jury or whether it is so one-sided that one party must prevail as a
matter of law.” Anderson, 477 U.S. at 251–52, 106 S.Ct. 2505.
The only dispute that remains in this case is whether priority of the land
contract payment should extend to the interest accrued and attorney fees incurred
by the original land contract vendor, Paul Misiewicz. The United States’ present
motion raises a novel issue of law in this district. Neither the parties, nor the court
has been successful in locating controlling, on point authority.
Both parties agree that 26 U.S.C. § 6323(e) governs the issue, allowing for
priority over federal tax liens to extend to “the reasonable expenses, including
reasonable compensation for attorneys, actually incurred in collecting or enforcing
the obligation secured.” The statute is only applicable “to the extent that, under
local law, any such item has the same priority as the lien or security interest to
which it relates.” Id.
Counterclaim-Defendants rely on two unpublished cases that allude to the
main issue in the case at hand. In United States v. Chung, No. 07-00570, 2010 WL
4176066 (D. Haw. Oct. 19, 2010), the court discussed the origin of the governing
statute and Congress’s intent to permit a holder of a security interest or lien to
recover attorney fees incurred in establishing the priority of said interest or lien.
Id. at *11-12. In addition, in Harris NA v. United States, No. C2352, 2011 WL
833620 (N.D. Ill.
Mar. 4, 2011), the court concluded that because the
government’s conduct generated the need for attorneys, their fees are reasonable
expenses under the statute and should also take priority over federal tax liens. Id. at
A. Whether Attorney Fees were Actually Incurred
The United States asserts that forfeiture of the land contract between
Misiewicz and Palmer was enforced without accruing any attorney fees. In this
regard, the United States is correct that Misiewicz accepted Palmer’s forfeiture
offer and directed a quitclaim deed to the people of his choosing without assistance
from counsel. In addition to the peaceful resolution, Misiewicz never asserts that
he used counsel for this decision. However, the United States’ argument is
Misiewicz seeks to recover attorney fees not for the forfeiture of the land
contract with Palmer, but for the attorney work performed in connection with
enforcing his priority against the United States thereafter. This is clearly distinct
from the forfeiture negotiations between Misiewicz and Palmer. In this case, the
United States asserted priority over Misiewicz’s interest until finally recanting its
position. The past year of litigation requiring Misiewicz to defend against the
United States’ position generated the $26,587.50 in attorney fees that he seeks to
Pursuant to 26 U.S.C. § 6323(e), Misiewicz may extend the priority of his
secured interest to the reasonable attorney fees actually incurred in collecting or
enforcing the obligation. Misiewicz spent resources defending his priority against
the United States in an effort to collect what the United States now admits he is
owed. While Misiewicz was not working to collect from the original vendee, the
language of the statute does not require this sort of specificity and rather only
refers broadly to “collecting or enforcing the obligation.” Id.
Finally, the United States claims that any “attorney’s fees incurred in this
lawsuit were incurred in trying to prevent the United States from exercising its
lawful right to enforce its own liens.” Dkt. No. 26. However, this argument lacks
merit. The attorney fees incurred are a direct result of the United States arguing a
position it now concedes was incorrect. Therefore, Misiewicz never attempted to
prevent the United States from exercising any lawful rights; rather, he defended his
priority successfully. Accordingly, attorney fees are recoverable and summary
judgment in this regard is denied.
B. Whether Attorney Fees are Recoverable under Michigan Law
The United States also asserts that even if attorney fees were incurred in
collecting or enforcing the land contract, attorney fees are not collectable under
Michigan Law. The United States relies upon the principle that forfeiture is a
complete remedy and therefore no additional damages are to be awarded. Mazur v.
Young, 507 F.3d 1013, 1020 (6th Cir. 2007).
The United States reasons that the vendor is precluded from seeking a
deficiency because, unlike in a foreclosure, the “forfeiture discharges the buyer
from liability for the debt.” Mazur, 507 F.3d at 1018. Further, “at that point, the
[vendor] can keep the property, sell the property, or do with it whatever the
[vendor] pleases. What the victorious [vendor] cannot do, however, is continue to
pursue the buyer for any deficiency.” Id. at 1017.
In this case, Misiewicz obtained the remedy of forfeiture and can no longer
go after Palmer for any deficiencies. This fact is undisputed. However, the United
States’ reliance on this particular rule is again misplaced because Misiewicz is not
requesting anything further from the original vendee. Instead, Misiewicz is
attempting to recover from the government, for the government’s actions, after the
property was forfeited. Therefore, the United States’ argument is not on point and
does not carry any weight. In this regard, summary judgment in favor of the
moving party is denied.
C. Whether Interest is Recoverable under Michigan Law
The final dispute regards whether Misiewicz can recover lost interest
generated throughout this dispute. The United States follows the same rule which
provides that upon the election of forfeiture, the victorious vendor cannot continue
to pursue the buyer for any deficiencies. Id. at 1017.
Misiewicz is not able to recover owed interest on the land contract. While
the attorney’s fees at issue herein were not incurred as a result of the original land
contract between Misiewicz and Dorothy Palmer, the interest he seeks is directly
related to the failed contract between Misiewicz and Palmer. Therefore, when
Misiewicz accepted Palmer’s settlement of forfeiture, he thereby waived his rights
to recover any more from the failed contract. In this regard, the Court will grant the
United States’ Motion for Summary Judgment.
For the reasons discussed above, the United States’ Motion for Summary
Judgment [#26] is GRANTED IN PART and DENIED IN PART. Accordingly, the
request to render attorney fees unrecoverable is denied but the request to render
interest unrecoverable is granted. Misiewicz is therefore entitled to $26,587.50 in
attorney’s fees but zero in interest. The United States is entitled to $43,231.49
towards Palmer’s indebtedness. This cause of action is dismissed.
Dated: August 30, 2017
/s/Gershwin A. Drain
GERSHWIN A. DRAIN
United States District Judge
CERTIFICATE OF SERVICE
Copies of this Order were served upon attorneys of record on
August 30, 2017, by electronic and/or ordinary mail.
/s/ Tanya Bankston
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