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143123-B - In re Estate of DARRYL HOUSTON PRICE

Natasha Price and Erin Duffy-Price,
Personal Representatives of the Estate of Darryl Houston Price
 
 
 
Plaintiffs,
 
v
(Appeal from Ct of Appeals)
 
 
(Ingham – Collette, W.)
 
Lori Jean Kosmalski and Trade Development Company, a/k/a Trade World Company, Inc.,
 
 
 
Defendants,
 
and
 
 
Estate of Rudaford R. Sterrett, Jr.,
 
and
Thomas Woods, Receiver,
and
Dart Bank
Defendant-Appellee,
 
 
 
Allan Falk
 
Intervening Defendant-Appellant.
 
 
Peter A. Teholiz

Summary

In August 2003, Rudy Sterrett took out a loan with Dart Bank for $192,000, and granted Dart a mortgage on his DeWitt home. Soon after that, Sterrett died, and Lori Jean Kosmalski inherited the property. Three years later, Nastassia Price and Erin Duffy-Price, personal representatives of the Estate of Darryl Houston Price, filed a lawsuit to collect a judgment against various defendants, including Kosmalski. At the Prices’ request, the court appointed a receiver, Thomas Woods, to seize and sell the property to satisfy the judgment. Dart claims that it did not seek the appointment of a receiver or consent to the receiver’s appointment.

Shortly after his appointment, Woods learned that the DeWitt home was uninhabitable; it had to be cleaned, disinfected, repaired, and painted. In total, the repairs cost approximately $20,000. When Woods started these repairs, the city assessor valued the property at $350,000; the mortgage balance was less than $170,000.

Meanwhile, Dart’s mortgage was in default. Despite warnings from Woods to Dart’s counsel that a foreclosure on the property would constitute a contempt of court and a violation of the receivership order, Dart proceeded with a sheriff’s sale in 2008. Dart was the sole bidder, and it bid only the balance due on its mortgage – $169,312.50.

Woods filed a motion to vacate the foreclosure, and to hold Dart in contempt for violating the court’s receivership order. The trial judge left Dart’s foreclosure in place, but he extended the redemption period to allow Woods additional time to sell the property at a favorable price. Due to the collapse in the housing market, Woods was unable to find a buyer at a price that was sufficient to pay off Dart’s mortgage as well as the receiver’s fees and expenses.

The receiver filed a motion to compel Dart to pay all of his fees and costs in connection with the property. He argued that Dart was aware of his appointment as receiver and did not challenge it. Moreover, Woods contended, Dart had worked with him on a continuing basis throughout the receivership period and should be deemed to have acquiesced in his appointment. The receiver also noted that Dart did not claim that the property had not been benefitted by the receiver’s efforts in repairing and maintaining it, and in preparing it for sale. The trial court granted Woods’ motion, granting him a lien of $41,874.57 on the net proceeds from the property’s sale for his services and to reimburse him for his costs. This lien was to have priority over Dart’s mortgage. The trial court also approved the receiver’s turnover and relinquishment of the property to Dart.

Dart appealed, but the Court of Appeals affirmed the trial court’s ruling in a published opinion. The trial court had the authority to place a lien on the property to collect the costs of the receivership even though Dart did not consent to the receivership, the Court of Appeals said: “[B]ecause [Dart] benefited from the receivership, it may be held responsible for the receivership expenses.” Dart appeals.