Pazdzierz v. First American Title Insurance Co. (In re Pazdzierz)

Summarized by Geoffrey Peters , Weltman, Weinberg & Reis Co., LPA
12 years 8 months ago

Citation:

2013 FED App. 0162P (6th Cir.)

Tag(s):

Ruling:

Affirming the United States District Court for the Eastern District of Michigan, the Sixth Circuit Court of Appeals held that claims of fraud that are grounded in tangible property rights such as judgments or promissory notes are assignable under Michigan law. The Sixth Circuit distinguished naked claims of fraud, not based upon a tangible property right, which are not assignable under Michigan law. The Sixth Circuit held that the assignee of a tangible property right can seek non-dischargeability under 11 U.S.C. section 523(a)(2)(B) .

Procedural context:

Appeal from the United States District Court for Eastern District of Michigan reversing the decision of the bankruptcy court.

Facts:

Prior to filing bankruptcy, Debtor/Defendant Bryan Pazdzierz ("Defendant") obtained loans totalling $1,018,350 to purchase four car washes. The loan closings were conducted by Patriot Title Agency, LLC ("Patriot"), which was owned or controlled by Randy Saylor ("Saylor"). Defendant and Saylor had previous business relationships. Patriot issued title commitments underwritten by First American Title Insurance Company ("Plaintiff"). Plaintiff also issued closing protection letters that indemnified the lenders and their assigns from losses arising out of fraud of the issuing agent. Immediately after the loans were closed, the notes and mortgages were assigned to Bayview Financial, LLC ("Bayview"). After Defendant defaulted on the notes, Bayview discovered that Defendant did not hold title to any of the properties securing the notes. Bayview filed claims and ultimately sued Plaintiff. Bayview and Plaintiff entered into a settlement whereby Bayview assigned 75 percent of its interest in the notes to Plaintiff in exchange for an undisclosed sum of money. Plaintiff discovered Saylor had used Patriot for questionable transactions that resulted in dozens of claims arising out of title commitments and policies issued by Patriot. Plaintiff obtained a default judgment against Saylor for $10,172,840. Defendant filed bankruptcy on September 11, 2009. Defendant included Bayview as a secured creditor. Plaintiff filed an adversary complaint seeking the debt Defendant owes Plaintiff as assignee on the Bayview notes in the amount of $763,762.50, (75% of $1,018,760.50) to be held non-dischargeable under 11 U.S.C. Section 523(a)(2)(B). On Defendant's motion for summary judgment, the bankruptcy court held that Plaintiff could not pursue an action under section 523(a)(2)(B) because it was an assignee of an interest in the notes and under Michigan law, claims for fraud cannot be assigned. On appeal, the district court reversed the order on summary judgment concluding that because Plaintiff's claim was based on unpaid promissory notes, which is a tangible property right, Plaintiff could assert assignor's reliance on Defendant's alleged misrepresentations to satisfy section 523(a)(2)(B).

Judge(s):

Circuit Judges Boggs and White, Chief District Judge McCalla for the Western District of Tennessee, sitting by designation

ABI Membership is required to access the full summary. Please Sign In using your ABI Member credentials. Not a Member yet? Join ABI now - it is absolutely worth it!