# Appendix — Fishell v. Soltow > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386012_2029%3A3 ## Record - **Collection:** Supreme Court brief - **Document type:** Appendix - **Published:** January 1, 1995 - **Citation:** 516 U.S. 862 ## Text \ Suprema four, U8, y1tteDdD 95 30 wis ™% No. IN THE SUPREME COURT OF THE UNITED STATES October Term 1994 RICHARD L. FISHELL and DOROTHY M. FISHELL Petitioners vs ROBERT SOLTOW and ROSALEE SOLTOW and JOHN A. PORTER, Trustee Respondents PETITION FOR WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT APPENDIX VOLUME II Lester N. Turner 1005 Timber Pass Harbor Springs, MI 49740 (616) 526-9222 Counsel for Petitioners — rye - “pe a RG PUT OPE IF Ie EE Re OES ares ora Release and Settlement Agreement This Agreement is made this 12th day of June 1992, by and between Robert and Rosalee Soltow, Michigan residents, whose address is 13665 Tallman Road, Eagle; Michigan 48822 (the "Soltows"), and John A. Porter, Trustee of the Estate of Richard L. and Dorothy M. Fishell, Debtors ("Fishells"), Bank- ruptcy Court Case No 90-85144, whose address is 622 Commerce Building, 5 Lyon Street, N.W., Grand Rapids, Michi- gan 49503-3122 ("Trustee") ("Agreement") Recitals A. In 1986, the Fishells borrowed money from the Soltows. The Fishells gave the Soltows a promissory note and mortgage to secure the loan made by the Soltows ("1986 loan"). The real estate described in Exhi- bit A was given by the Fishells to the Sol- tows as security for repayment of the loan ("the property"). Al69 B. After defaulting on payment of the 1986 loan, the Fishells and the Soltows entered into an amended promissory note, mortgage modification agreement and escrow holding agreement in August 1988 ("1988 loan documents"). The 1988 loan documents superseded the 1986 loan. The loan docu- ments provided that the Soltows would not foreclose immediately but gave the Fishells until February 15, 1989 in which to make payment. C. The 1988 loan documents required the Fishells to execute and deliver a deed to the property to an escrow agent, Lawyers Title Insurance Corporation. The 1988 loan documents further provided that if the amount owed by the Fishells was not paid on time then the cauren agent was required to release to the Soltows the warranty deed conveying the property to them. D. The Fishells never paid the Soltows and the escrow agent delivered the warranty A170 a deed in March 1989 to the Soltows, who then recorded the deed to the property on March 16, 1989. E. On April 27, 1989, the Fishells sued the Soltows in Eaton County Circuit Court, Case No 89-366-CH, seeking to cancel the warranty deed and seeking other relief. The Fishells also filed a lis pendens against the property. The Soltows filed | a counterclaim against the Fishells on June 12, 1989 alleging slander of title. This lawsuit is referred to as the "Eaton County Lawsuit". F. On November 16, 1990 the Fishells filed bankruptcy seeking protection under Chapter 11 of the United States Bankruptcy Code. Initially the Fishells were permitted to stay in possession of their property. G. On December 12, 1990, the Fishells made application to the Bankruptcy Court to remove the Eaton County Lawsuit to the Federal Bankruptcy Court as part of the — Al71 Chapter 11 proceedings. The Bankruptcy Court authorized the removal and the Eaton County Lawsuit became Adversary Proceeding No 91-8015 (“Adversary Proceeding"). H. Upon motion of the United States Trustee and certain creditors, on January 13, 1992, the bankruptcy court, following a hearing on the motions for conversion of the Chapter 11 to Chapter 7, ordered the conversion of the Chapter 11 proceed- ings to Chapter 7 liquidation. Thereaf- ter, the Trustee was appointed to admini- ster the Chapter 7 proceedings. I. The Soltows and the Trustee have agreed to settle all disputes arising out of the Eaton County Lawsuit and the Adversary Proceeding (collectively the "Lawsuit™) on the terms and conditions contained in this Agreement. Now, therefore, in consideration of the mutual promises and agreements made in this Agreement and intending to be A172 legally bound, the parties agree as follows: 1. Approval of Bankruptcy Court. The Trustee and the Soltows agree that this Agreement (except for the provisions of this paragraph 1) shall become effective only if the Bankruptcy Court enters an order approving it on or before the 10th day of July 1992 (“Approval”). Trustee and the Soltows agree to use their best efforts to obtain the Approval as soon as reasonably possible. The Soltows agree not to sell, convey or transfer the Pro- perty or any interest in the Property until the entry of the Bankruptcy Court's order approving this Agreement. 2. Dismissal of the Lawsuit. Trustee shall cause the Lawsuit to be dismissed with prejudice and without costs to either party. At the Soltow's request, the Trus- tee shall promptly cause any other docu- ments they request to be executed in order A173 to more fully effectuate the dismissal of the Lawsuit and termination of the lis pendens. The order of dismissal shall be substantially in the form of attached Exhi- bit 1. The Soltows shall cause their coun- terclaim made in connection with the Law- suit to be dismissed with prejudice and without costs to either party. The order of dismissal shall be substantially in the form of attached Exhibit 2. 3. Mutual Release and Discharge of Claims. For and in consideration of the provisions of this Agreement, the Soltows release and forever discharge the Trustee and the Fishells, together with, to the extent applicable, their agents, officers, employees, attorneys, affiliated organiza- tions and insurers, from any and all claims, demands, equitable relief, damages, costs, expenses, administrative actions and cause of action of any kind or character which now exists or may later arise which were A174 known or should have been known by the parties relating in any matter to or ari- sing from or which could have arisen from the Lawsuit, except as provided in the terms of this Agreement. Anything in this Agreement to the contrary notwith- standing, the Soltows are not waving any claim they may have against the Fishells or the Trustee with respect to determina- tion of the Soltows' interest in the real estate legally described in attached Exhi- bit B (the “Andre property") and in connec- tion with the purchase at foreclosure sale, or the alleged redemption of the Andre pro- perty. The Trustee and the Soltows agree that this Agreement shall not act as a bar or waiver of the Soltow's claim of owner- ship of the Andre property. All other claims against the Trustee and the bankruptcy estate shall be considered released by the Soltows pursuant to this Agreement. The Trustee forever discharges the Sol- A175 tows, together with, to the extent appli- ) cable, their agents, assigns, officers, employees, attorneys, affiliated organiza- tions and insurers, from any and all claims demands, equitable relief, damages, costs, expenses, administrative actions and cause of action of any kind or character which now exists or may later arise which were known or should have been known by the Fishells or by Trustee, relating in any matter to, or arising from, or which could have arisen from the Lawsuit or related occurrences pertaining to the Property, except as provided in this Agreement. 4. Indemnification. Each party agrees to indemnify the other against any and all cost, loss and expense, including attorneys fees, which may be incurred as a result of defending any additional claim made by the other party arising out of the Lawsuit or any transaction involving the Property ex- cept that this indemnification shall not : A176 apply to expenses incurred in connection with any appeal of the Approval of this Agreement. 5. Payment by the Soltows. The Soltows agree to pay the Trustee the sum of $2,000 within 30 days of the date on which the Approval is obtained. 6. Non-Admission of Liability. This Agreement shall not be construed as an admission nor is it an admission by either party or any of their officers, employees, agents or attorneys in any respect for any claim or causes of action which arose out of or could have arisen out of the Lawsuit or out of transactions involving the Pro- perty. Each party expressly denies any ad- mission of liability to the other party. This Agreement is being entered into solely for the purpose of resolving and settling any and all of the claims that arose out of or could have arisen out of the Lawsuit or out of any transaction involving the property A177 in accordance with Paragraph 3. 7. Agreement as Defense. The parties fully understand and agree that this Agreement may be pled as a complete defense in any past, present or future claim of entitlement which has been released by this Agreement. 8. Attorney's Fees. The parties agree that nothing in this Agreement shall be interpre- ted to render any party liable for payment of the attorney's fees of another party, ex- cept as specifically provided in this Agree- ment. 9. Notices. All notices and other communi- cations required or permitted under this Agreement shall be deemed to have been given if mailed by registered or certified mail, postage prepaid, or otherwise delivered by hand or messenger, to the parties at their addresses listed on page l, or to such other changed address as such party may have given notice. 10. Applicable Law. This Agreement has A178 been executed, delivered and accepted at and shall be deemed to have been made in Lansing, Michigan and shall be interpreted and the rights and liabilities of the par- ties shall be determined in accordance with the laws of the State of Michigan. ll. Integration. This Agreement sets forth the entire agreement and understanding between the parties as to the subject matter hereof, and supersedes a) prior discus- sions, representations, amendments or under- standings of every kind and nature between them. 12. Amendments. Any amendment, alteration, supplement, modification or Waiver shall be invalid unless it is set forth in writing, signed by the party intending to be bound thereby. 13. Severability. If any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, un- enforceable or void, this Agreement sha]] A179 continue in full force and effect without the provisions. 14. Assignability. This Agreement may not be assigned by any party without the prior written consent of the other parties. 15. Benefit. This Agreement shall be bind- ing upon and inure to the benefit of the Soltows, the Fishells and the Trustee and their respective personal representatives, successors and assigns. 16. Captions. Captions contained in this Agreement are inserted for reference and in no way define, limit, extend or describe the Agreement or the intent of any provision herein. 17. Counterpart. This Agreement may be exe- cuted in one or more counterparts, each of which shall be enforeceable against the par- ty actually executing such counterparts and all of which together shall constitute one instrument. 18. Pronouns. All pronouns and any vari- A180 ation thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural as the identity of the parties may require. | 19. Construction of Agreement. The parties agree that this Agreement has been jointly drafted and neither party may assert an ambiguity in the construction of this Agreement against the other party because the other party allegedly drafted the alleged ambiguous provision. 20. Representations, Warranties and Agree- ments of the Soltows. For the Purposes of Bs inducing the Trustee to enter into this Agreement, they warrant that they have authority to enter into the Agreement and, once the Approval Le obtained, the Agree- ment will be binding on them. 21. Representations, Warranties and Agree- ments of Trustee. For the purpose of induc- ' ing the Soltows to enter into this Agreement the Trustee represents that: A181 a. He is the duly appointed and acting trustee of the Fishells' Chapter 7 bankruptcy. b. He has the power and sole authority to enter into the Agreement and, once the Ap- proval is obtained, the Agreement will be bin- ding upon him and the Fishells. c. The Lawsuit is property of the bank- ruptcy estate and the Trustee, subject to court approval, has exclusive control over its disposition. 22. Voluntary Execution. The parties ack- nowledge that they have read the Agreement, that they understand its terms, and they have entered into it voluntarily. Further, the parties specifically acknowledge that they have met and conferred with their res~ pective attorneys regarding the terms of the settlement and that their respective attor- ; neys have advised them that this Agreement constitutes final resolution of any and all claims which they may have against one another. A182 In Witness Whereof, the parties have exe- cuted this Agreement on the date stated above. /s/ /s/ Robert Soltow John A. Porter, Trustee of the Estate of Richard L and Doro- thy M. Fishell, /s/ Debtors Rosalee Soltow, by her attorney in fact (Omitted hereafter: Durable Power of Attorney of Rosalee Soltow, 2 legal descriptions of real estate noted in above Agreement, and pro- posed form of orders referred to as Ex 1 and 2 in above Agreement ) A183 UNITED STATES BANKRUPTCY COURT WESTERN DISTRICT OF MICHIGAN IN RE RICHARD L. FISHELL and DOROTHY M. FISHELL Debtors Case No 90-85144 Hon Jo Ann C. Stevenson RICHARD L. FISHELL and DOROTHY M. FISHELL Chapter 11 Plaintiffs vs Adversary No 91-8015 ROBERT SOLTOW amd ROSALEE SOLTOW Defendants FIRST AMENDED COMPLAINT Plaintiffs, as debtors in possession, allege: JURISDICTION Jurisdiction of this court over this adversary proceeding is based upon 28 USC 1334 and 28 USC 157 in that this action is otherwise related to the Chapter ll, A184 Title 11 case of Richard L. Fishell and Dorothy M. Fishell, debtors, filed 16 November 1990 and now pending before this Court, Pile No 90-85144. This is a non- core proceeding under 28 USC 157(c). Plaintiffs do not consent to the entry of final orders or judgments by the bank- ruptcy court in this action. However, Plaintiffs have filed a demand for jury trial and Plaintiffs would consent to the entry of final orders or judgments by the bankruptcy judge on all matters sub- mitted to a jury. Plaintiffs have been duly appointed as debtors in possession, are qualified to so serve and are pre- sently acting as such. COUNT I 1. This is an action to cancel or rescind a deed to real property located in Eaton County, Michigan and for other relief. 2. That Plaintiffs are adults and A185 the grantors pursuant to the Warranty Deed which is the subject matter of this action. Said Warranty Deed, recorded in Liber 792 of Deeds, pages 198-199 on the 16th day of March 1989, is attached here- to as Exhibit "A". 3. That the Defendant, Robert Soltow, is an adult and the grantee under the aforesaid Warranty Deed, Exhibit "A". The Defendant, Rosalee Soltow, is, and was, the wife of the said Robert Soltow, and has, or may have, some interest in the property. 4. That prior to the recordation of the said Warranty Deed, Plaintiffs were the record fee owners of the premises described herein by virtue of a certain warranty deed recorded on the 14th day of July 1986 in Liber 707 of Deeds, page 627. A copy of said warranty deed is attached hereto as Exhibit "B". 5. That on or about the 7th day of A186 July 1986, Plaintiffs were engaged in the business of developing real property and, as mortgagors, executed and deli- vered to the Defendant, Robert Soltow, as mortgagee, a mortgage on the above premises, same having been recorded in Liber 707, page 630, Eaton County records. 6. That the amount of the loan from Defendant to Plaintiffs on or about July 7, 1986, that gave rise to the mortage mentioned in paragraph 5, was $350,000 at 15% interest per annum and a default interest rate of 20% per annum. 7. That Defendant Robert Soltow claims that Plaintiff Richard Fishel] signed five additional notes, with Defen- dant, Robert Soltow as payee, from on or about April 23, 1982 through March 24, 1988. Defendant claims those notes were as follows: a) Noted dated 4/23/82 ($10,625 princi- A187 pal amount) at 12 1/2 % interest per annum; b) Note dated 1/29/86 ($6,250 princi- pal amount) at 12 1/2 % interest pre annum; c) Note date 7/16/87 ($25,000 princi- pal amount) at 12% interest per annum; d) Note dated 9/3/87 ($25,000 princi- pal amount) at 12% interest per annum; e) Note dated 3/24/88 ($55,000 princi- pal amount) at 12% interest per annum. 8. That on or about August 25, 1988, Defendant Robert Soltow caused to be pre- pared the following: a) an amended promissory note, alleged- ly combining the principal and interest due on the note of July 7, 1986 for $350,000 and the principal and interest due on the notes set forth in paragraph 7, supra. The total amount set forth in the amended note was in the amount of $610,446.14. b) a mortgage modification agreement securing a larger principal sum. c) an escrow holding agreement. A188 d) a declaration of storm drain easement over adjoining lands for the benefit of the property described in the mortgage and war- ranty deed at issue herein. e) the warranty deed (attached hereto as Exhibit "A"™). 9. In order to induce Plaintiffs to execute the documents set forth in paragraph 8 a- e, Defendants made the following repre- sentations to Plaintiffs: a) On August 12, 1998, Defendants noti- fied Plaintiffs that Plaintiffs were in default on the $350,000 note to Defendant Soltow and under mortgage foreclosure Plain- tiffs’ redemption period would have expired the end of December, 1988; therefore, Plain- tiffs would benefit from signing said docu- ments; b) That the public or people that Plain- tiffs were dealing with on selling or develop- ing the property would not have any notice of the dealings between Plaintiffs and Defen- A189 dants, other than the mortgage from Plain- tiffs to Defendant Robert Soltow which would be recorded; c) Defendant represented to Plaintiffs that he just wanted his money repaid and there were verbal agreements that Plaintiff, Richard Fishell, would be allowed to treat the property as his own and to sell same without any hinderance from Defendant even after the February 15, 1989 date set forth in the escrow holding agreement. 10. Relying upon those representations, Plaintiffs signed the documents on August 25, 1988, with the understanding said docu- ments were security on the monies owed by Plaintiffs to Defendant Robert Soltow. ll. The representations made by Defen- dants, as set forth in paragraph 9 a-c were false. 12. That Plaintiffs relied upon said representations in signing the documents on August 25, 1988. A190 13. That Plaintiffs were deceived by said representations to their detriment in that: a) Plaintiffs believed that they were gaining additional time to sell and/or develop said property; b) Plaintiffs believed Defendants would do nothing to hinder Plaintiffs' efforts; c) Plaintiffs believed that Plaintiffs would be able to continue their efforts without hinderance even after February 15, 1989; d) Plaintiffs believed Defendants were just taking the deed in escrow as security for the indebtedness; 14. That Plaintiffs were in privity with Defendants in the transactions of August 25, 1988. 15. Purther, that the foregoing repre- sentations made by Defendants were false and known to be false when made. A191 16. Defendants did not intend, at the time of making the representations, and do not now intend to perform as agreed, as evidenced by: a) The Defendant and his agent, from and after 25 August 1988, represented to others dealing with the property, includ- ing local government officials, that Plain- tiffs need no longer be dealt with respect- ing same; b) Defendants could not have foreclosed on the mortgage and had the redemption period expire by December 31, 1998; c) Defendants caused to be filed on Febru- ary 7, 1989, an affidavit prepared and signed by Douglas Austin advising the world that by February 15, 1989, Plaintiffs would have no interest in said property; d) Attempting in April and May of 1989 to have Plaintiffs sign off on any verbal rights that Plaintiffs had to sell and/or develop said property; A192 e) Defendants took the position, in April and May of 1989, that they owned the property and did not wish to merely be repaid the indebtedness. 17. That contrary to the agreement and understanding of the parties, the afore- said deed was recorded upon the public records of Eaton County, Michigan on March 15, 1989, and claimed to have vested absolute fee ownership in Defendant, Robert Soltow, at that time. 18. That the Defendant, Robert Soltow, asserts fee ownership of the property and has refused Plaintiffs' demands to either cancel the deed or reconvey. 19. That if the Defendants are allowed to assert title to said property, Plaintiffs will suffer losses which would result in unmerited benefits to Defendants due to said representations by Defendants in that Pl iuntiffs property was worth in excess of $1,200,000 and Defendant only had a mort- A193 P) gage on said property for $350,000. Due to the documents signed on August 25, 1988, Defendants are claiming ownership of said property which results in an un- earned benefit of excess of $850,000. 20. Plaintiffs were led to believe by Defendants or their agents that attorney Douglas Austin, a duly licensed attorney (who prepared all documents relevant herein, including the affidavit of 7 February 1989 and the warranty deed at issue, had repre- sented Plaintiffs over a prolonged period in matters related to the real property), had a confidential or fiduciary relation- ship with Plaintiffs throughout the course of the foregoing events and circumstances. 21. The Plaintiffs’ interests, contrary to their belief throughout, were not served either by said attorney or by the documents described herein but were, in fact, frus- trated. 22. That, as a result of the foregoing, A194 Plaintiffs were misled as to all material matters concerning the Property and their rights therein and have relied to their detriment upon the conduct and represen- tations of the Defendant and attorney Austin. 23. That, by reason of the foregoing and by reason of the recording of the warranty deed described in Paragraph #2 above, Plaintiffs: have no effective means of protecting their interests in the pro- perty and the Defendant appears now to possess the present ability to transfer or otherwise encumber same. 24. The sole consideration running to Plaintiffs was the agreement of Defendant to allow Plaintiffs to effect a favorable disposition of the Property without being hindered in that effort by Defendant through foreclosure or public notice, either by recording or otherwise. 25. That the Purpose anc intent of the A195 above agreement was to assure Plaintiffs continued ability to market the property and otherwise fully protect their interests therein and, as a specific inducement to Plaintiffs for the execution of the docu- ments of 25 August 1988, the Defendant had represented and agreed to do nothing to frustrate Plaintiffs’ rights. 26. That contary to the foregoing agree- ment, the Defendant recorded, without cause, notice or necessity, the affidavit of his agent regarding the state of Plain- tiffs' interest in the property and the impending forfeiture to the Defendant. As a direct result thereof, Plaintiff could not pursue prospective purchasers who had shown an interest in the pro- perty; or pursue others that may be interested in the property. A copy of the agent's affidavit, recorded 7 Febru- ary 1989, is attached hereto as Exhibit"c”. 27. That due to the foregoing the A196 Plaintiffs were deprived of the benefit of their agreement of 25 August 1988 and that agreement has entirely failed of its consideration. 28. That the interest charged by Defen- dant to Plaintiff on the six notes set forth in paragraphs 6 and 7, supra, were at illegal rates and were usurious. 29. That in combining the six notes into one note by adding together the prin- cipal due and the usurious interest a new usurious note in the amount of $610,446.14 was created. 30. That the amounts claimed tobe owed on said note of August 25, 1988, by Defen- dant, from time to time to pay off said indebtedness and have the warranty deed and other documents of August 25, 1988 nullified, included usurious interest demands. 31. That, even if the figure of $610,446.14 had been a correct amount, A197 it was inadequate consideration to allow a transfer of the property in question from Plaintiffs to Defendant, because the property was worth in excess of one million two hundred thousand ($1,200,000) dollars. 32. That, as a result, Plaintiffs suffer from immediate and irreparable harm for which there is no adequate remedy at law. 33. That Plaintiffs have offered to do equity and have requested Defendant do the same, however Defendant has refused. 34. That the execution and delivery of the aforesaid documents executed by Plain- tiffs on the 25th day of August, 1988, were without lawful consideration as no legal benefit flowed to Plaintiffs and no legal detriment flowed to Defendants as a result of such execution and delivery. 35. That, as a result, no enforceable transaction was consumated between the A198 parties and same is therefore void. WHEREFORE, the Plaintiffs demand that 1. The defendant be immediately enjoined and restrained from conveying or eneutnes-- ing the real property described in the documents at issue herein; 2. The warranty deed described in para- graph #2 above and attendant documents be cancelled of record; 3. Cancel all interest because same was usurious, Determine Plaintiffs' indebted- ness on the mortgage to be $350,000, less whatever damages this Court may assess against Defendants under Count IV of this complaint. 4. The Court grant such othe relief as is appropriate. COUNT ifr 36. That this is an action for the impo- sition of a constructive trust upon real property located in Eaton County, Michigan and for other relief. A199 37. Plaintiffs reallege paragraphs 2-35 of Count I. 38. That, in accordance with the above agreement of the parties, the deed from Plaintiffs to Defendant, Robert Soltow, was intended to operate merely as security for the indebtedness and not as an abso- lute conveyance of Plaintiffs’ interest in the property. 39. That Plaintiffs have not, at any time, relinquished any right in the pro- perty, whether it be the right to pos- session, redemption or reconveyance and Plaintiffs have not, at any time, recog- nized the Defendant, Robert Soltow, as owner of the property. 40. That the entire agreement of the parties, as aforesaid, has never been memorialized in writing contrary to the agreement and expectation of the parties. 41. That Plaintiffs had, and still have, substantial equity in the property and A200 have never relinquished or transferred same. 42. That, since the recording of the deed on 16 March 1989, the Defendant has made unauthorized entry upon the property and purports to have the lawful right to convey, improve or occupy the property as his own, toon of which Plaintiffs have objected. 43. That, the foregoing, whether the product of fraud or mistake, has deprived Plaintiffs of their rights in the pro- perty and has unjustly enriched the Defen- dant Robert Soltow. WHEREFORE, Plaintiffs pray the Court: 1. To declare Plaintiffs' right in the premises. 2. To declare that the Defendant holds Same as trustee for Plaintiffs. 3. That the deed be construed as a mort- gage. 4. That the court direct the Defendant, A201 Robert Soltow, to reconvey to Plaintiffs or in the alternative that the court enter such judgment as will operate as the recon- veyance. 5. That the court determine the amount owed on said mortgage is $350,000. 6. That the court grant such other relief as is appropriate. COUNT III 44. That this is an action for a declara- tory judgment. 45. That Plaintiffs reallege paragraphs 2-35 of count 46. That the execution and delivery of the documents described herein had the effect, and were intended by the parties at the time to have the effect, of creat- ing additional security for Defendant, Robert Soltow, and were made and given, and agreed to be made and given, and accepted for no other or further purpose. A202 47. That contrary to the intent and agreement of the parties, the documents now of record and writings attendant thereto, without more, may tend to esta- blish the deed, Exhibit A, as an abso- lute conveyance of Plaintiffs’ interest and the Defendant, Robert Soltow, now appears to so assert. ae That Plaintiffs allege that said deed was intended to be treated and should be treated and held to be in the nature of a mortgage and not an absolute conveyance of Plaintiffs' interest. 49. That Plaintiffs are in doubt as to their rights in the property described in the deed and Plaintiffs’ position in this regard is presently controverted by the Defendant, Robert Soltow, since Defendant appears to assert ownership of the fee without condition. 50. That the following facts would support Plaintiffs’ contention as to A203 the intent and effect of the above des- cribed documents of the 25th day of August 1988: A. The Plaintiffs believed, and : were led to believe by Defendant, Robert Soltow, and attorney Douglas J. Austin, that no acts or neglect on the part of the Defendant, Robert Sol- tow would interfere with or hinder Plaintiffs in their continued efforts to market the property; however same was untrue as the Defendant, Robert Soltow, by his apparent agent, has by specific act(s) impaired Plaintiffs’ ability by, among other things, recording the affi- davit of 7th day of February 1989 upon the public records. B. The Plaintiffs believed, and were led to believe by the Defendant, Robert Soltow, and attorney, Douglas J. Austin, that Plaintiffs retained the right to redeem the property following the event A204 of any recording of the deed, however, same was untrue as Defendant, Robert Sol- tow, now asserts in this context that he is the owner of the property and that the mortgage debt has been extinguished and the Plaintiffs have no subsisting rights with respect to the property. C. That although Defendant, Robert Soltow, asserts absolute ownership and ex- tinguishment of the debt, the mortgage has not been discharged nor has the note or amended note been cancelled or returned to Plaintiffs and some remain in Defendant Robert Soltow's possession. CD. There was no consideration for the execution of the documents of 25th day of August 1988, including the deed, and the result of the execution of same has been to deprive Plaintiffs of the protection accorded by the prior mortgage, while those same documents of 25th day of August 1988, granted to the Defendant, A205 } es Brae ee A ee eS ; : Robert Soltow, the advantage of a greater secured debt, and earlier mortgage due date, and rights in adjacent property, not available under the original mortgage. E. That, as all parties well knew, the Defendant, Robert Soltow, had made an attempt, prior to 25th day of August 1988, to purchase the subject property from Plaintiffs and had been denied, and the Defendant, Robert Soltow, well knew of its fair market value, and that the fair mar- ket value greatly exceeded the sums due under the mortgage and amended mortgage. F. That the Defendant, Robert Soltow, and attorney, Douglas J. Austin, had made, on the 25th day of August 1988, an there- after, verbal assurances to Plaintiffs that the Defendant, Robert Soltow, no longer desired to own the property, that Defendant, Robert Soltow, could not obtain title without observing Plaintiffs’ redemp- tion rights, that such rights were pre- A206 served, that no interference with Plain- tiffs’ efforts to market the property would be committed by Defendant, Robert Soltow, that Defendant, Robert Soltow, would cooperate whenever Plaintiffs could arrange any sale or conveyance and that no further written agreements, other than as set forth in the documents of the 25th day of August 1988 were necessary for any- one’s protection. G. That Defendant, Robert Soltow, knew on the 25th day of August 1988, and at al] times thereafter, that Plaintiffs had no intention to execute an absolute convey- ance of the property, and that Plaintiffs did not believe, at any time, that they had done so, but Plaintiffs merely sought and intended some refinancing arrangement. H. That attorney Douglas J. Austin had prepared all of the documents of the 25th day of August 1988, the exact form, con- tent and extent of which had not been A207 requested by Plaintiffs. I. That attorney Douglas J. Austin super- vised the execution of the documents of the 25th day of August 1988 and site thee only attorney present or participating in same. J. That the Defendant, Robert Soltow, and attorney Douglas J. Austin, well knew at the time of the execution of the docu- ments on the 25th day of August 1988, that Plaintiffs believed that attorney Douglas J. Austin was acting as Plain- ) tiffs’ attorney, that their rights in the property were being protected and obser- ea a ae a a hee ee ved by those documents, and by his con- duct, yet the attorney, Douglas J. Austin did not, at that time, or at any time indicate or suggest to Plaintiffs that other counsel should be obtained by them. 51. That Plaintiffs assert that the documents operated only as further secu- rity for Defendant, Robert Soltow, and A208 that their right of redemption exists. 52. That the Defendant, Robert Soltow, apparently asserts that the conveyance was absolute and that Plaintiffs’ rights in the property have terminated. 53. That the entire transaction is without consideration and if sustained, will result only in the unjust enrich- ment of the Defendant, Robert Soltow, at Plaintiffs’ expense. 54. That as a result of the foregoing scheme or design, effectuated through misrepresentation, Plaintiffs have been damaged and suffer a forfeiture in the absence of the relief herein requested. 55. That Plaintiffs have offered, and hereby offer, to do equity. WHEREFORE, Plaintiffs pray the Court: a) to declare the rights of the parties under the above transaction; b) that the deed be declared and held to be a mortgage; A209 c) that the amount due and owing on the note and mortgage be §350,000; d) that Plaintiffs be permitted to have six months before the said note and shane are due; e) if it becomes necessary for Defendant to foreclose on said note and mortgage that Plaintiff be permitted to redeem according to law; f) that the court grant Plaintiffs what- ever additional relief equity demands. COUNT IV 56. Plaintiffs reallege paragraphs 2- PO Py a Oe a ee ee ee POL Oe oa oe 35 of Count I. 57. That the transaction of August 25, 1988, from Plaintiffs to Defendants was in violation of Section 4 and/or Section 5 of Michigan Public Acts of 1919, No 310, as ' amended, (MCL 566.14 and MCL 566.15) in that said Plaintiffs were insolvent or became insolvent due to said transaction A210 and the transaction was made without fair consideration; and/or the transaction, which was without fair consideration, was at a time when the Plaintiffs were engaged in the business of selling and/or develop- ing real estate and said transaction left Plaintiffs with an unreasonably smal] capital. 58. That the transaction or transfer of August 25, 1988, is voidable and must be set aside. WHEREFORE, Plaintiffs pray the Court: 1. Declare the transfer to be null and void; 2. Order the return of the Property to Plaintiffs, subject to a mortgage to Defen- dants in the amount of $350,000; 3. Grant such other relief as is just and proper. COUNT V 53. That this is an action for damages which exceed $10,000. A211 60. Plaintiffs reallege paragraphs 2-35 of Count I, paragraphs 38-43 of Count II and paragraphs 46-50 of Count III. 61. That on or about the 7th day of February 1989 and prior thereto Plaintiffs were negotiating with various prospective purchasers for the sale of all or various portions of Plaintiffs above described pro- perty, all of which was well known to the Defendant, Robert foltow, and his agent at the time. 62. That on or about the 7th day of February 1989, and prior thereto, the Defen- dant, Robert Soltow, and his agent, published and declared to others, including Plain- tiffs’ prospective purchasers, that Plain- tiffs title was impaired, that they had no right to convey or that the title was otherwise defective. 63. That the aforesaid publications were communicated to others, including various prospective purchasers, and after A212 7th of February 1989 to the public gener- ally, all of whom understood the publica- tions to mean that Plaintiffs did not own or could not convey title to the property. 64. That Plaintiffs were unable to pur- sue prospective purchasers after learning of the recordation of the affidavit of February 7, 1989. 65. That the above statements and pub- lications made by Defendant, Robert Soltow, and his agent, were false when made, known by Defendant and his agent to have been false when made and were specifically made for the purpose of preventing Plaintiffs from entering an agreement to convey to the then existing Prospective purchasers for the further purpose of preventing, after 7 February 1989, Plaintiffs from entering an agreement with any and all Prospective purchasers. 66. That Plaintiffs have been unable to secure any other prospective purchasers A213 UMN i for the property or any part thereof, and such inability is solely attributable to the wrongful conduct of the Defendant and his agent. 67. The aforesaid conduct on the part of the Defendant, Robert Soltow, and his agent, was purposeful, willful and intentional, and done specifically for the purpose of defeating Plaintiffs" lawful rights and constitutes a continuing invasion of their rights sufficiently outrageous to support an award of punitive damages. 68. That at the time of the aforesaid wrongful conduct of the Defendant's emplo- yee or agent, such employee or agent was acting within the course and scope of his employment or agency duties or, in the alternative, was acting within the course and scope of his apparent authority, or in the alternative, was acting only in accordance with the specific authority or approval of the Defendant, given in ad- A214 vance, or in the alternative, such con- duct of the Defendant's employee or agent was subsequently ratified by Defendant, any or all of which is sufficient for liability to be imputed to the Defendant, Robert Soltow. WHEREFORE, Plaintiffs demand judgment against the Defendant Robert Soltow for compensatory and punitive damages, al] costs hereof and such other relief as is appropriate. /s/ Richard L. Fishell, Plaintiff Subscribed and sworn to before me this 22d day of February 1991. /s/ Susan J. Oberlin, Notary Public Ingham County My Commission Expires: 6/15/92 LESTER N. TURNER P.C. By /s/ Lester N. Turner (P21632) Attorney for Plaintiffs Business Address 4970 Northwind Drive Suite 200 East Lansing, MI 48823 Telephone No (517)332-790 (Omitted: Exhibit A Warranty Deed Fishells to Soltow, 8/25/88 Exhibit B Warranty Deed Wight to Fishell, 7/8/86 Exhibit C Affidavit of Attorney Douglas Austin) A216 11 USC 502 Allowance of claims or interests (a) A claim or interest, proof of which is filed under section 501 of this title, is deemed allowed, unless a party in interest, including a creditor of a general partner in a partnership that is a debtor in a case under chapter 7 of this title, objects. (b) Except as provided in subsections (e)(2) (f), (9g), (h) and (i) of this section, if such objection to a claim is made, the court, after notice and a hearing, shall determine the amount of such claim inlawful currency of the United States as of the date of the filing of the petition, and shall allow such claim in such amount, except to the extent that- (1) such claim is unenforceable against the debtor and Property of the debtor, under any agreement or applicable law for a reason other than because such claim is contingent Or unmatured; (2) such claim is for unmatured interest: (3) if such claim is for a tax assessed A217 against property of the estate, such claim exceeds the value of the interest of the estate in such property; (4) if such claim is for services of an insider or attorney of the debtor, such claim exceeds the reasonable value of such services; (5) such claim is for a debt that is un- matured on the date of the filing of the petition and that is excepted from discharge under section 523(a)(5) of this title; (6) if such claim is the claim of a lessor for damages resulting from the termination of a lease of real property, such claim exceeds- (A) the rent reserved by such lease, without acceleration, for the greater of one year, or 15 percent, not to exceed three years, of the remaining term of such lease, following the earlier of- (i) the date of the filing of the petition; and A218 (ii) the date on which such lessor repossessed, or the lessee surrendered, the leased property; plus (B) any unpaid rent due under such lease, without acceleration, on the earlier of such dates; (7) if such claim is the Claim of an em- ployee for damages resulting from the termi- nation of an employment contract, such claim exceeds- (A) the compensation Provided by such contract, without acceleration, for one year following the earlier of- (i) the date of the filing of the petition: or (ii) the date on which the employer directed the employee to terminate, or such employee terminated, performance under such contract; plus (B) any unpaid compensation due under such contract, without acceleration, on the earlier of such dates; or A219 (8) such claim results from a reduction, due to late payment, in the amount of an otherwise applicable credit available to the debtor in connection with an employment tax on wages, salaries, or commissions earned from the debtor. 28 USC 158 Appeals (a) The District Courts of the United States shall have jurisdiction to hear appeals from final judgments, orders and decrees, and, with leave of the court, from interlocutory orders and decrees, of bankruptcy judges entered in cases and proceedings referred to the bankruptcy judges under section 157 of this title. An appeal under this subsection shall be taken only to the district court for the judicial district in which the bankruptcy judge is serving. (d) The courts of appeals shall have juris- diction of appeals from all final decisions, judgments, orders and decrees entered under subsections (a) and (b) of this section. A220 28 USC 1254 Courts of appeals; certiorari; certified questions Cases in the courts of appeals may be re- viewed by the Supreme Court by the following methods: (1) By writ of certiorari granted upon the petition of any Party to any civil or crimina] case, before or after rendition of judgment or decree; Rule 3007 Objections to Claims An objection to the allowance of a claim shall be in writing and filed. A copy of the objection with notice of the hearing thereon shall be mailed or otherwise delivered to the claimant, the debtor or debtor in possession and the trustee at least 30 days prior to the hearing. If an objection to a claim is joined with a demand for relief of the kind specified in Rule 7001, it becomes an adversary proceeding Rule 9019 Compromise and Arbitration (a) Compromise. On motion by the trustee and after notice and a hearing, the court may approve a compromise or settlement. Notice shall be given to creditors, the United States trustee, the debtor, and indenture trustees as provided in Rule 2002 and to any other entity as the court may direct. Rule 9023 New Trials; Amendment of Judgments Rule 59 F R Civ P applies in cases under the Code, except as provided in Rule 3008. A222 [NOTICE LIS PENDENS ] [Sec]27A.2701 Lis Pendens as constructive notice; filing; contents; recording, evidence. ] Sec. 2701. (1) To render the filing of a com- plaint constructive notice to a purchaser of any real estate, the Plaintiff shall file for record, with the register of deeds of the county in which the lands to be affected by such constructive notice are Situated, a notice of the pendency of such action, setting forth the title of the cause, and tiie genera] object thereof, together with a description of the lands to be affected thereby. (2) Such a notice may be filed with the complaint before the Service of the summons; but, in that case, personal or substituted service of the smmons must be made upon a defendant, within 60 days after the filing, Or else, before the expiration of the same time, publication must be commenced, or *srvice thereof must be made without the State, as prescribed by law. If the defen- A223 dant dies within 60 days after the filing of the notice and before commencement or completion of service of the summons, the summons may be served upon the person ‘eileen stituted for the defendant within 60 days after such substitution. (3) The register of deeds shall record such notice, in a book kept for that purpose, upon the payment of the fee as is provided by law. A copy of such record, authenticated by the register of deeds, is evidence of such notice, and the recording of the same, in all courts and places. (MCL 600.2701) Sec 27A.2711 Same; notice by defendant. ] Sec. 2711. Where a defendant sets up in his answer a counterclaim, upon which he demands an affirmative judgment affecting the title to, or the possession, use or enjoyment of real property, he may file for record a like notice at the time of filing his answer or at any time afterwards before final judgment. For these purposes, the defendant filing A224 such a notice is regarded as a plaintiff and the plaintiff is regarded as a defendant. (MCL 600.2711). Sec 27A.2715 Duration of notice; extension] Sec. 2715. (1) A notice of pendency hereafter filed for record shall be effective as notice for a period of 3 years from the date of filing. Before the expiration of the period, the court upon application of the plaintiff and upon such notice as may be directed or approved by the court, and for good cause shown, may from time to time grant additiona] Orders each extending the period of duration of the notice of pendency for a period of not more than 3 years. If extended, a copy of the notice stating the date of filing of the immediately Preceding notice, and stamped or marked "extended", shall be filed for record, recorded and indexed prior to the expiration of the notice of pendency then in force in the manner prescribed in this Chapter. MR (2) A notice of pendency heretofore filed shall be effective for a period of 3 years from the effective date of this act, and shall be subject to extension as herein pre- scribed. (MCL 600.2715) Sec 27A.2721 Index] Sec. 2721. Each register of deeds shall enter in an index to be kept in his office, such references to the said notices, as will enable all persons interested to search his office for such notices without inconvenience. (MCL 600.2721). Sec 27A.2725 Cancellation of notice; liability of plaintiff for costs and ex- : penses.] Sec. 2725 (1) If a plaintiff filing the notice before the service of a summons fails to serve the same within the time prescribed in this chapter, or after the action is settled, discontinued or abated, or final judgment is rendered there- in against the party filing the notice, and the time to appeal therefrom has expired, A226 the court, upon the application of any person aggrieved and upon such notice as may be directed or approved by it, shall direct that a notice of the pendency of an action be cancelled of record by a parti- cular register of deeds, or by all the registers of deeds, with whom it is filed. (2) If a plaintiff filing the notice unreasonably neglects to proceed in the action, or does not commence or prosecute the action in good faith, the court, in its discretion, upon the application of any person aggrieved and upon such notice as may be directed or approved by it, may direct that a notice of pendency of an action be cancelled of record by a parti- cular register of deeds, or by all the registers of deeds, with whom it is filed. (3) The cancellation shall be made by a note to that effect, on the margin of the record, referring to the order. A certified copy of the order shall be filed for record with the register of deeds before the notice is cancelled. (4) The court, in its discretion, upon directing cancellation of the notice upon termination of the action, or during the pen- dency thereof if satisfied that the plaintiff who filed the notice unreasonably neglected to proceed in the action or did not commence or prosecute the same in good faith, may direct the plaintiff to pay all or any of the costs and expenses occasioned by filing the notice and the cancellation of the record, aside from the costs of the action itself. (MCL 600.2725) Sec 27A.2731 Same; by bond; security if not cancelled; recovery on bond.] Sec. 2731. (1) In any pending or future action, other than an action to foreclose a mortgage or ELE NS eee ene ame ee See oe EN ES ee ee ae ae ee —— for the partition of real property or for dower, in which a notice of the pendency thereof has been filed and in which it appears to the court that adequate relief can be A228 secured to the party who filed the same by the giving of a bond, where the cancellation of such notice is not otherwise expressly provided for or regulated, any person having an interest in the property affected by the action may apply for the cancellation. thereof upon notice to all the parties to the action and to such other persons as the court may direct. (2) The court in which the action is pen- ding may make an order for the bond upon such terms as to costs or otherwise as may seem just. The discretion vested in the court by this section may be exercised in any such action, notwithstanding the same may have been brought to recover a judgment affecting the title to, or the possession, use or enjoyment, of specific real property. (3) Upon an application as provided in subdivision (1) for cancellation of the notice of pendency, made in any pending or future action for specific performance of A229 a contract to convey real property, whether or not the court determines that adequate relief can be secured to the party filing the notice of pendency by the giving of a bond, the court may order that the notice be cancelled, upon the giving of a bond by the applicant upon terms fixed in the order, as provided in subdivision (2), unless the person filing the notice of pendency gives a bond, upon terms to be fixed by the order. (4) The bond shall be in an amount which the court, upon consideration of the affi- davits submitted upon the application, deems sufficient to indemnify the applicant for the damages he may incur if the notice of pendency is not cancelled. (5) The order shall provide that upon failure of the person filing the notice of pendency to give a bond in accordance with the order, the notice of pendency shall be cancelled upon the giving of a bond by the applicant, as provided herein. A230 (6) Where the person who filed the notice of pendency has given a bond as provided in the order, recovery may be had upon the bond without further leave of the court, upon the discontinuance or abatement of the action, or the cancellation of the notice of pendency because of the neglect of such person to proceed in the action, or upon final judgment against him. The recovery may be obtained by a separate civil] action, or by motion in the action as to which the notice was filed. (MCL 600.2731) Sec 27A.2735 Federal courts: application of chapter.] Sec. 2735 (1) This chapter applies to suits affecting title to real property in the federal courts. (2) The register of deeds shall file and index notices of the pendency of actions in the federal courts as prescribed herein. (3) If a suit is removed to a federal court, or remanded to a state court, no additional notice need be filed: the notice filed in the action prior to removal or remand remains in effect. (MCL 600.2735) ee Ty ane A232 UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT 94-1109 IN RE Richard L. Fishell and Dorothy M. Fishel] Debtors Richard L. Fishell and Dorothy M. Fishel] Plaintiffs/Appellants vs Robert Soltow and Rosalee Soltow Defendants/Appellees PETITION FOR REHEARING AND SUGGESTION FOR REHEARING IN BANC Roger L. Fishe]] 1900 Main St #210 Sarasota, Florida 34236 (813) 365-1930 Attorney for Petitioners A233 UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT 94-1109 IN RE Richard L. Fishell and Dorothy M. Fishell Debtors Richard L. Fishell and Dorothy M. Fishell Plaintiffs/Appellants vs Robert Soltow and Rosalee Soltow Defendants/Appel lees PETITION FOR REHEARING AND SUGGESTION FOR REHEARING IN BANC REQUIRED STATEMENTS FOR REHEARING IN BANC I express a belief, based on a reasoned and studied professional judgment, that the A234 I i panel decision is contrary to the following decision(s) of the United States Court of Appeals for the Sixth Circuit or the Sup- reme Court of the United States and that consideration by the full Court is neces- Sary to secure and maintain uniformity of decisions: Protective Committee for Independent Stockholders of TMT Trailer Ferry, Inc. v Anderson, 390 US 414, 88 S Ct 1157, 20 L Ed 2d 1 (1968) reh den 391 US 909, 88 S Ct 1649, 20 L Ed 2d 425 (1968). And further, I express a belief, based on reasoned and studied professional judgment, that this appeal involves one or more questions of exceptional importance: 1. The above Supreme Court case was cited by the parties to this appeal and by this Court in the panel opinion and its proper interpretation is signficant because in the words of the above cited Supreme Court decision, "We granted certiorari, (cite omitted), because this case presents A235 ee important questions under the bankruptcy laws." 390 US at 418. 2. Whether the panel decision in this case announces a departure from prior pre- cedent concerning the evidentiary standards or burdens placed upon compromise propo- nents in compromise proceedings in bank- ruptcy court under Rule 9019 of the Bank- ruptcy Rules. 3. Whether the panel decision in this case announces a departure from prior pre- cedent concerning the adequacy of the com- promise hearing record which must be made before the bankruptcy court so that an appellate court may determine whether the bankruptcy court has rendered "an informed and independent judgment™ on the propriety of a compromise which that court approves. 4. Whether the panel decision properly , determined that the Debtors lacked stand- | ing to appeal an order of the bankruptcy 7 court, rendered pursuant to Rule 9019, A236 entered over the Debtors" objection, where no 6th Circuit authority is cited in support of the panel decision and the panel decision conflicts with the dactaion of the lst Circuit, cited by the panel as authority, and conflicts with 7th circuit authority more directly and factually relevant. 5. Whether Debtors in cases, such as this,one, which are not "no-asset" cases may be denied standing to appeal an order rendered pursuant to Rule 9019, entered over their objection where such order, both, forecloses the Debtors from possible recovery of property through an adversary Proceeding and concurrently forecloses consideration of the Debtors objection, filed pursuant to Rule 3007, to a Proof of Claim filed against their bankruptcy estate. 6. Whether the panel decision results in the creation of a conflict between the A237 law of this circuit and the law of the 7th and 9th circuits as well as that set forth by the United States Supreme Court. __/3/ Roger L. Fishell Attorney for Petitioners PETITION FOR REHEARING Pursuant to Rule 40, Fed R App Pro, and Sixth Circuit Rule 14, the appellants move the court to grant rehearing or reconsider- ation of the decision entered in the above cause on 16 February 1995 and in support of this motion submit the following. THE FACTS Appellants respectfully submit that the court may have overlooked or misapprehended the following matters of a factual nature. The opinion contains factual errors which may well bear upon the ruling of the Court. These are set forth below. 1. The opinion states at p. 1 that "Fishells used the money to purchase a certain parcel of real estate and gave the A238 Soltows promissory note and a mortgage on the property.” Fishells had purchased the property prior to the time that any loan to them was made by Soltow. See Appellants’ Brief, p. 8, fn 23 & 24, [R1(14)][R1(G)}. 2. The opinion further states at p. 2? that, as regards the amended agreement of 25 August 1988, “the Soltows agreed not to start foreclosure proceedings and extended the time for repayment of the loan." This is misleading because there was no extension of time provided, in practical effect, since the cut off date provided for in the amended agreement, to-wit, 15 February 1989, was less than six (6) months from the date of that amended agreement, to-wit, 25 August 1988. The deed in lieu of foreclosure aspect of the amended agree- ment of 25 August 1988 effectively cut off Fishells redemption rights (without speci- fically saying so). As a result, Fishells A239 rights in the property were terminated more fully at an earlier point than would have been the case under the original mortgage. See Appellants’ Brief, p. 10, fs 32, pw. 12. 4m 434. 3<- 3h’ ae Ue See) (14)]. These issues were relevant to the allegations of fraud and lack of considera- tion raised by Fishells as grounds for setting aside the deed to Soltow. (R(6)). 3. The panel opinion concludes at p. 2 that the Fishells had defaulted under the Original mortgage, and Soltow did so allege, however, no court ruling ever concluded this to be so and the Debtors contended that no default had occurred because, under the interest-only repayment provisions, the admitted presence of usury rendered no such interest due. See (R1(11)(14), Appellants’ Brief, 9-11, & 12, fns 27-38 & 44, [Tr 7/10/92, p. 21-22] 4. The panel opinion also concludes at p. 6 that the bankruptcy court had the A240 a rrner =" ea ner os record of the state court proceedings in the case, however the state court never ruled on the merits of the case as the state court only determined that the Fra- ser firm, as attorneys for Soltow, need not be disqualified as his counsel] in that case. See (R1(5))(Bankruptcy docket sheet entries, #4-6), see also Appellee Soltow's Brief, p. 6. 5. The record before the bankruptcy court (the bankruptcy judge did not con- clude that the Debtors lacked standing to object to the compromise) and the District Court contained the Debtors' asset and lia- bility information, contrary to the opinion of the District Court. See p. 4 of the 16 February 1995 opinion. This information was provided in the Debtors schedules, in argu- ment at the compromise hearing, in the exhi- bits to submissions filed by Soltow in the bankruptcy court and in District Court. This information was included in the appea] A241 ee record in this court and was supplied in the Joint Appendix filed with this court. As such the record consistently reflected that the Debtors’ assets significantly ex- ceeded their liabilities at the commence- ment of the bankruptcy proceedings. See Appellants’ Brief, p. 35, fn 82, p. 40, fn 91, p. 42, #n 93, [B1(8)(11)(14)] [R1(P)(Q)], [Tr 7/10/92, p. 20-29]. 6. The opinion at p. 7 addresses the merits of the adversary proceeding. As to the issue of fraud, lack of consideration and equitable mortgage, the loss of Fis- hells‘ redemption rights through the 1988 agreement is highly relevant. See Appel- lants’ Brief, p12, fn 43 & p. 25, 71. As to the issue of costs of litigation, the validity of the usury claim is relevant because its effect could deny Soltow both interest and attorneys fees incurred rela- tive to enforcement of the amended mort- gage. See Appellants' Brief, p.12, fn 44, A242 [R1(11)(14)]. This is doubly relevant because of the substantial divergence of debt to equity, i.e. approximately $450,000 as the principal amount of the debt, vs. $1.38 million, as the appraised property value. See Appellants’ Brief, p. 9, fn 25, p. 10, fns 30-32 and p. 11, [R1(11)(14)]. The absence of merit to the Soltow slander of title claim reduced any potential for loss to the estate through litigation. See Appellants’ Brief, p. 9, fn 25, [R1(8-11) (13)(14)]. A finding by the bankruptcy court that Soltow's slander of title claim lacked merit, had it considered the issue, could have led the Trustee to either go forward with the trial of the adversary proceeding in August 1992, see Appellants’ Brief, p. 4-5, 11, 20-21, & 40, or could have led the Trustee to abandon the adver- Sary proceeding to Appellants’ pursuant to ll usc 554. The Debtors possessed standing to appeal A243 resolution of the Soltow Amended Proof of Claim, also compromised as part of the set- tlement orders appealed, since under ll USC 502 and Rule 3007, they were “aggrieved parties" who had properly filed an objection to that proof of claim. See Appellants’ Brief, p. 37-39. THE LAW Appellants respectfully submit that the court may have overlooked or misapprehended the following points of law. 1. Standing. The Debtors possessed standing to appeal under any analysis. In the 16 February 1995 decision, the court relies on In Re El] San Juan Hotel, 809 F 2d 151 ; (lst Cir 1987). Three bases for standing 7 are noted with approval in that case, one of which is whether the order appealed "“im- pairs his (appellant's) rights". 809 F 2d at 154. The compromise of the adversary proceeding diminished the prospect that the Appellants in this case could emerge A244 from liquidation proceedings with some assets and thus “impaired their rights" under the El San Juan analysis. In any event, El San Juan did not involve the appeal of an order of the nature involved here because the order in that case did not foreclose the right of the litigant to protect his interest. The order sought to be appealed in El] San Juan merely author- ized another action wherein the allegedly aggrieved party would have full opportunity to protect its rights. See El San Juan 809 F 2d at p 155. In the present case, Appel- lants were forever foreclosed from any relief by the settlement or compromise which is the subject of this appeal. The equity involved in the disputed pro- perty, and the possibility that this could have been ultimately been restored to these Debtors upon a successful appeal to this court, gave the Debtors standing to appeal an order which forever deprived them of A245 this opportunity. A successful appeal could have resulted, ultimately, in a trial in bankruptcy court and a result favorable to the Debtors. An order, such as the order on appeal, which extinguishes the Debtors' chance of obtaining a surplus suf- ficiently adversely affects the “pecuniary interest" to give standing. Matter of Andre- uccetti, 975 F 2d at 417. Under the Andre- uccetti analysis, these Debtors had standing to appeal. See Appellants' Brief, p. 40, fn 91, p 43-44. The Appellants possessed standing to appeal disposition of the Soltow Amended Proof of Claim under 11 USC 502 and Rule 3007. See Appellants' Brief, p. 37-39. 2. Standards for Approval of Compromise. Each of the cases cited by the Court sup- ports the position asserted by the Appel- lants rather than the position taken by the compromise proponents. The bankruptcy court in the present case allotted 60 A246 minutes for consideration of the proposed compromise, of which 40 minutes was allot- ted to the compromise proponents and 20 minutes was allotted to the Debtors/Appel- lants. See Appellants' Brief, p. 6 and p 14 fn 52 [R1(26)], [Tr 7/10/92, p 4-5]. No evidence was presented, in any form, by the proponents of the compromise, see Appel- lents* Srief, p. 37, [t¥ 7/10/82, ». 31}, and no findings, material to the issues raised in the Fishells' adversary complaint or Soltow's amended proof of claim, appear in the bankruptcy court's opinion approving the compromise. See Appellants’ Brief, Pp. 17 fn 58 & 61, [Tr 7/10/92, p. 5-15 and p. 32-37}. This court notes, in its 16 February 1995 opinion, reliance upon Protective Com- mittee for Independent Stockholders of TMT Trailer Ferry, Inc., v Anderson, 390 US 414 (1968), In Re American Reserve Corporation, 841 F 2d 159 (7th Cir 1987) and In RE A&C A247 Properties, 784 F 2d 1377 (9th Cir) cert den 479 US 854 (1986). In In Re A & C Proper- ties the appellate court affirmed a compro- mise approved by the bankruptcy court where "the bankruptcy court held five days of hearings on the Trustee's application for compromise" 784 F 2d at 1381. In In Re American Reserve Corp., the appellate court reversed the lower court's approval of a compromise on the basis that the record contained inadequate findings despite the fact that the bankruptcy court in that case had heard “testimony"™ from the Trustee as well as argument of the Trustee's attorneys, appellants and others. In TMT Trailer Ferrv. see Appellants’ Brief, p. 45-49, which sets forth the current governing standard, the United States Supreme Court reversed appro- val of a compromise made after hearings and evidentiary submissions had been made in the lower court. At 390 US at 450, the Supreme Court. though recognizing the neces- A248 ei rn aie a ot sity for avoiding protracted proceedings, noted that “The need for expedition, however, is not a justification for abandon- ing proper standards." The bankruptcy court decision complained of by the Debtors in this case was arrived at without evidentiary’ submission in any form and contained no findings or analysis by the bankruptcy court on the issues set forth in either of the two (2) matters being compromised, to-wit, 1) the adver- Sary complaint filed by Fishells or 2) in the Amended Proof of Claim filed by Soltow. See Appellants' Brief, p 22-28, [Tr 7/10/92 Pp. 37-42). This procedure does not comport with any authority cited to the court in the briefs and does not accord with any authority cited by this court in its 16 Feb- ruary 1995 opinion. In the 16 February 1995 opinion, the court authorizes a departure from the stan- dards affirmed in each of the above cited A249 cases and results in a decision which does not accord with the standard adopted by the Supreme Court, as noted above, nor with the standard adopted in any circuit. Wherefore, the Appellants respectfully submit that this matter should be reconsi- dered or reheard and respectfully pray that this court grants such relief. SUGGESTION FOR REHEARING IN BANC Pursuant to Rule 35,. Fed R App Pro, and 6th Cir Rule 14, the Petitioners respect- fully suggests to this Honorable Court that the above entitled cause is appropriate for consideration on rehearing by all the Judges of this Court convened in banc. In support hereof the Petitioners show: | 1. The panel opinion in the above cause , contains the factual misstatements and the | erroneous legal conclusions noted in the petition for rehearing. The deficiencies alleged by Petitioners are of substantia] significance in terms of the Petitioners’ A250 case and in terms of the development of the law on these significant bankruptcy within the Sixth Circuit. The elements of the petition are hereby incorporated in this suggestion for rehearing in banc as if fully set forth herein verbatim. 2. The case involves the proper stan- dard to be observed for proceedings in bankruptcy courts relative to the settle- ment of controversies pursuant to Federal] Bankruptcy Rule 9019. This case also in- volves the proper application of the man- dutes outlined by the United States Supreme Court in Protective Committee for Indepen- dent Stockholders of TMT Trailer Ferry Inc., v Anderson, 390 US 414 (1968). 3. The panel opinion cites as authority for its decision the above noted Supreme Court decision as well as authorities from the 7th and 9th circuits. These authorities set forth certain requisites regarding the evidentiary threshholds which must be met A251 by settlement proponents and the bankruptcy judge before the bankruptcy court may proper- ly approve a settlement of a controversy under Rule 9019. The cited authorities also outline certain standards for bankruptcy court analyses and findings of fact which must be met for the creation of a bankruptcy court record which would be sufficient to enable meaningful appellate review of the adequacy of the bankruptcy court's consider- ation and analyses of the settlement propo- sal. 4. The panel opinion does not cite any 6th Circuit authority on these issues. A review of the panel opinion and the bank- ruptcy court record reveals that the authori- ties upon which the panel opinion purports to rely can not be reconciled with the opi- nion of the panel in this case. A review of the bankruptcy court record of the compro- Pi a eer eo mise proceedings and the panel opinion would support the conclusion that the 6th Circuit A252 has now permitted bankruptcy court settle- ments based upon an evidentiary showing that is markedly less rigorous than the showing that is required by TMT Trailer Ferry or by the 7th and 9th circuits. 5. A review of the authorities cited by the panel opinion demonstrates that those authorities consistently employed, and envi- Sioned, some evidentiary submission before the bankruptcy court, in some testimonial] or other evidentiary form, by the settlement proponents, in support of a proposed settle- ment under Rule 9019 so that the record of the bankruptcy court proceedings would ade- quately reveal, to a reviewing court, that the compromise ultimately approved by the bankruptcy judge 1) was the product of "an informed and independent judgment", at 390 US p. 424, 2) which had considered "al] other factors relevant to a full and fair assessment of the wisdom of the proposed compromise”, at 390 US p. 424, and 3) repre- A253 sented a decision that was “fair and equit- able”. at 390 US p. 434. The reviewing court must be given, as noted in TMT Trailer Ferry, at 390 US p 434, " ..some basis for distinguishing between well reasoned conclusions arrived at after a comprehensive consideration of all relevant fac- tors, and mere boiler plate appro- val phrased in appropriate language but unsupported by evaluation of the facts or analysis of the law.” Appellants’ Brief, p 48-49. 6. The facts of the particular case at issue reveal that 1) there were no eviden- tiary submissions, whether written or tes- timonial, or in any form, offered by the proponents of the compromise on any issue material to consideration of that compromise and 2) no findings of fact or other specific analysis of the merits of the two (2) con- F troversies being settled were recited or made by the bankruptcy judge. Despite the panel's admitted dissatisfaction with the record made in the bankruptcy court, see Panel Opinion, p. 6, it nonetheless sus- A254 tained approval of the compromise. In so doing, the panel has established a diminished threshhold for Rule 9019 compliance which is markedly at odds with the requirements set out in TMT Trailer Ferry and the other authorities noted. It necessarily follows that the panel decision is in conflict with the standards adopted in the 7th and 9th circuits and it further follows that the panel decision is in conflict with the stan- dards adopted by the Supreme Court in TMT Trailer Ferry. Wherefore, the Petitioners respectfully request that a rehearing of the appeal in the above case be granted and Petitioners respectfully request that the members of this Honorable Court order that the above case be reheard in banc. As counsel for Petitioners herein I certify that the foregoing Petitions are advanced upon good grounds and in complete A255 ee good faith and not for the purpose of delay. eee SF Roger L. Fishell 1900 Main St #210 Sarasota, Florida 34236 (813) 365-1930 Attorney for Petitioners/ Appellants (Certificate of Service omitted) A256 UNITED STATES BANKRUPTCY COURT WESTERN DISTRICT OF MICHIGAN In Re: RICHARD L. FISHELL and DOROTHY M. FISHELL, | Case No. 90-85144 HON. DAVID E. NIMS, JR. Debtors. Chapter 1] RICHARD L. FISHELL and DOROTHY M. FISHELL, Plaintiffs, Vv Adversary No. ROBERT SOLTOW and ROSALEE SOLTOw, Defendants. / Lester N. Turner (P21632) LESTER N. TURNER, P.C. Attorney for Plaintiffs 4970 Northwind Drive, Ste. 200 East Lansing, MI 48823 (517) 332-7900 Mark A. Bush (P35775) Fraser, Trebilcock, Davis & Foster, P.C. Attorney for Defendants 1000 Michigan National Tower Lansing, MI 48933 (517) 482-5800 A257 91-8015 PLAINTIFFS' BRIEF IN OPPOSITION TO DEFENDANTS' MOTION FOR SUMMARY JUDGEMENT AND IN SUPPORT OF PLAINTIFFS' MOTION FOR SUMMARY JUDGEMENT TABLE OF CONTENTS INTRODUCTION ...cccccccccccccccces 1 STATEMENT OF FACTS RE: LOANS PRIOR TO AUGUST 25, 1988.........2-4e. 3 ARGUMENT ON USURY........-2eeeeee- 7 FACTUAL STATEMENT LEADING TO DOCUMENTS OF AUGUST 25, 1988... 20 AUGUST 25, 1988 TRANSACTION...... 26 DID DRAFTING A RENEWAL NOTE ON AUGUST 25, 1988 AFFECT THE USURIOUS INTEREST CHARGED ON THE SIX (6) LOANS . cc ccccccccccccscsccscseese 29 CLAIMS... cccccccccccscscccscces 31 RELIEF... ccccccccccccvccccccccs 35 FACTUAL STATEMENT CONCERNING AUGUST 25, 1988 DOCUMENTS AND A258 eer ee eee eee ee ae eee 4 EVENTS SUBSEQUENT THERETO..... 36 RESPONSE TO TESTIMONY RELIED UPON BY DEFENDANTS IN THEIR BRIEF IN SUPPORT OF MOTION FOR SUMMARY JUDGEMENT. ....... £856. SS okhs 47 THE DEFENDANT R. SOLTOW'S AND ATTORNEY AUSTIN'S MISREPRESENTA- TIONS, CONDUCT AND FAILURE TO DISCLOSE CERTAIN FACTS CONSTITUTED ACTUAL FRAUD, INNOCENT MISREPRE- SENTATION, AND SILENT FRAUD... 51 et! bit PPP reee ret SEL Ie TIE 56 BBE © ib ows WOH 05650 0 SES TA 59 THE WARRANTY DEED PLACED IN ESCROW ON AUGUST 25, 1988 IS CONSTRUED AS es PP ee ee eee re 60 THE PAROL EV’ DENCE RULE IS NOT APPLICAB).E IN THIS CASE....... 69 DEFENDANTS' MOTION AND MEMORANDUM OF FACTS AND LAW IN SUPPORT OF MOTION FOR SUMMARY JUDGMENT IS A259 DEFICIENT UNDER FR CIV P 56... 71 INTRODUCTION On April 23, 1982, Defendant R. Soltow loaned Plaintiffs the sum of $10,000 and made additional loans through March 24, POEL ET IES STI NN TT 1988, wherein Defendant R. Soltow had loaned either to Richard Fishell or to Sneetincepaea coatiacta es meme aee Richard Fishell and Dorothy Fishell six separate loans totaling in principal amount the sum of $456,250. Defendant Soltow made the last loan to Plaintiff Richard Fishell on March 24, 1988, in the amount of $55,000. There were six of these transactions and $106,250 of the total principal sum owed was made up of five notes with no security. The sixth note was for $350,000 and took the subject property as security. Defendant R. Soltow charged Plaintiffs a usurious rate of interest on all six loans. These loans : A260 were consolidated into one amended promis- sory note on August 25, 1988. That note carried forward and included all the usurious interest charged on all six loans prior to August 25,°'1988. Also on August 25, 1988, Defendant Soltow received from Plaintiffs a mortgage on the subject property included the indebtedness of all six loans together with all the usurious interest charged on all six loans. Plaintiffs discuss three issues or three remedies concerning these transac- tions between the Plaintiffs and Defendant Robert Soltow. The first claim is that Defendants charged usurious interest rates on all six loans which were carried over and included in the amended note on August 25, 1988. The second claim is fraud, which includes actual fraud, innocent misrepresentation and silent fraud committed on the Plaintiffs by Defendant Robert Soltow individually and A261 through Attorney Douglas J. Austin, and said fraud gave rise to the documents ex- ecuted August 25, 1988. The third claim is that Defendants have an equitable mortgage against Plaintiffs' property. Defendant Robert Soltow is claiming that the documents signed on August 25, 1988, gave him title to the property rather than security. Defendant Robert Soltow is therefore claiming ownership of property valued in excess of $1,380,000 based on making a loan of $350,000, secured by said property. Obviously, this is a very brief intro- duction to a very voluminous and detailed factual situation. However, Plaintiffs will very carefully and thoroughly take this Court through the duress, fraud and overreaching practiced by Defendant Robert Soltow on Plaintiffs. Plaintiffs will demonstrate to the Court that Plaintiffs are entitled to summary judgment on all A262 three issues. Plaintiffs will interweave statements of facts with legal argument because Plaintiffs believe that the approach will make it easier to follow Defendant Robert Soltow's and Attorney Austin's paper trail. Plaintiffs will present the matters in a chronological fashion to the Court. (3) STATEMENT OF FACTS RE: LOANS PRIOR TO AUGUST 25, 1988 TRANSACTION The Plaintiffs and Defendants have been neighbors for at least twenty years. Plaintiff Richard Fishell and Defendant Robert Soltow have had a personal rela- tionship, which Plaintiff Richard Fishell, assumed to be a friendship, for the last twelve to fourteen years. Plaintiff Richard Fishell and Defendant Robert Soltow would get together socially on a fairly regular basis from the last twelve to fourteen years up until the time this A263 present dispute arose. Due to this neigh- borly and personal relationship, Plaintiff Richard Fishell asked Defendant Robert Soltow, on or about April 23, 1982, if Defendant Robert Soltow would make a $10,000 loan to Plaintiff R. Fishell for personal use, i.e. to buy fertilizer for the farm on which Plaintiffs Fishells re- side. Defendant Robert Soltow agreed to same, and on April 23, 1982, Defendant Robert Soltow loaned to Plaintiff Richard Fishell the sum of $10,000 at O% per annum interest. The promissory note required payment in 160 days (October 1, 1982). Defendant Soltow had both Plaintiffs sign said note and named the payees as Robert Soltow or Rosalee M. Soltow. Plaintiff Richard Fishell and Defendant Robert Soltow continued their neighborly personal relationship and also became in- volved in many additional situations wherein Defendant Robert Soltow loaned A264 | money to Plaintiff Richard Fishell. A summary of those transactions is as follows: (4) 1. Loan to Fishells from Soltows dated April 23, 1982, in the amount of $10,000, due and payable in 160 days (October : This was the personal loan for fertilizer for Fishells' farm, where Plaintiffs re- Side. The note provides for no interest. However, Defendant Robert Soltow prepared the note that called for repayment of $10,625 on October 1, 1982 (Plaintiffs' Exhibit 1 and Soltow Deposition, P. 28). According to documents prepared by De- fendants (Plaintiffs' Exhibits 2, 3 & 7), Defendants claim they charged Plaintiffs 12 1/2% interest on the no interest note. However, on November 13, 1983, Plaintiffs made a payment on this note of $6,000 (13 1/2 months after the whole note was due). Defendant Robert Soltow's records indicate that after receipt of this payment, A265 a aaa a iain Plaintiffs still owed $6,221 on this $10,000 loan. Defendants reach this con- clusion by purporting to have charged Plaintiffs 12 1/2% interest. However, Plaintiffs' Exhibit 2 shows that Defen- dants charged interest of $2,221 from 4/23/82 to 11/13/83. This is 538 days and works out to be $3.81 a day or $1,390.65 a year, which is really 13.9% interest. So not only was 12 1/2% usurious, but Defen- dants then chared the Plaintiffs $2.14 a day from 11/13/83 until the note of August 25, 1988 was signed (Plaintiffs' Exhibits 2, 3, 7 and Austin Deposition of 3/20/91, Pp. 62 & 63), which is 12.55% interest. 2. Loan of January 29, 1986, in the amount of $6,250 from Defendant R. Soltow to Plaintiff R. Fishell for personal (5) use for Mr. Fishell to pay off an in- debtedness on a tractor for his farm so that Mr. Fishell could pick up the tractor for his farm use. No promissory note was A266 executed; therefore, no interest rate was provided. However, as will be discussed later, Defendant charged Plaintiff 12% interest on this loan (Plaintiffs' Exhibit 3, 4 and 7). 3. July 8, 1986, loan from Defendant R. Soltow to Plaintiff R. Fishell in the amount of $350,000 to pay off the purchase of the property at issue herein. This loan was evidenced by a promissory note signed by both Plaintiffs, in the amount of $350,000 at 15% per annum interest on the unpaid balance until paid and 20% per annum on the unpaid balance until paid during the period of any default. The principal sum of $350,000 was to be due July 7, 1989. Interest payments were to be made each January 7th and July 7th, be- ginning January 7, 1987, and ending July 7, 1989, the amount of the payment to be the interest accrued on the unpaid prin- cipal balance during the immediately pre- A267 ceding six months. The note was secured by a mortgage given by Plaintiffs to Defendant Robert Soltow on July 8, 1986, and said mortgage covered the property involved in this litigaton. The note and mortgage were prepared by Douglas J. Austin of the Fraser, Trebilcock, Davis & Foster law firm (note, Plaintiffs' Exhibit 5). As will be discussed later, Defendant charged Plaintiffs in excess of 20% in- terest on this note (Plaintiffs' Exhibit 3). (6) 4. Loan in the amount of $10,000 on July 16, 1987, and evidenced by a promissory note on same date, signed by both Plaintiffs with Robert Soltow named as payee. The note was payable on demand and provided for interest at the rate of 12% per annum (Plaintiffs' Exhibit 6). Soltow does not remember this unsecured loan for $10,000 and believes it was $25,000 on July 16, 1987; however there is no note for $25,000 in July 1987. How- A268 ever, as will be dicussed later, Soltow charged Plaintiffs 12% interest on a $10,000 loan of July 16, 1987 (Plaintiffs' Exhibits 3 and 7; also see Robert Soltow's deposition of March 20, 1991, Pp. 49-53). 5. Loan in the amount of $25,000 evi- denced by a promissory note dated Septem- ber 3, 1987. This note was Signed by both Plaintiffs and named Robert Soltow as the payee. It was a demand note and set forth interest at the rate of 12% per annum (Plaintiffs' Exhibit 8). 6. Loan in the amount of $55,000 evi- denced by a promissory note dated March 24, 1988. This promissory note was Signed by Plaintiff Richard Fishell and named Defen- dant Robert Soltow as the payee. It was a demand note and provided no interest. (Plaintiffs' Exhibit 9). Defendant Soltow received a bill of sale on a Case tractor for loan #2 set forth above (the loan in the amount of $6,250) A269 (Plaintiffs' Exhibit 10). The only other loan that was collateralized was loan #3, being the $350,000 loan, which was secured by a mortgage on the real estate involved herein. There (7) were no sworn statements from either Plaintiffs in writing indicat- ing that any of the above loans wee for business purposes, except for $70,000 of the $350,000 loan made on July 8, 1986 (Plaintiffs' Exhibit 11). There were no payments made on any of the loans, except the $6,000 payment made on loan #1, supra. As indicated above, three of the notes required no interest payments and no interest accrual. The first note in fact had the space where the percentage of interest is to be written in marked through. All the exhibits referred to above are exhibits from Defendants or their attorney. ARGUMENT ON USURY MCL 438.31; MSA 19.15(1) contains the general provision as to the interest rate A270 ans nee caer err eenema men legally permissible in Michigan. It provides in pertinent part: "The interest of money shall be at the rate of $5.00 upon $100.00 for a year, and at the same rate for a greater or lesser sum, and for a longer or shor- ter time, except that in all cases it shall be lawful for the parties to stipulate in writing for the payment of any rate of interest, not exceed- ing 7% per annum." MCL 438.31c; MSA 19.15(1c) sets forth excep- tions to this general usury provision, in- cluding exceptions with regard to indebted- ness secured by a lien against real property. Of the six loans listed above, the only loan that was secured by real property was loan #3, in the amount of $350,000. The subsection pertinent to that loan is as follows: "(11) The parties to a note, bond or other indebtedness of $100,000 or more, the bona fide primary security for which is a lien (8) against real property other than a single family residence, or the parties to a land contract of such amount and nature, may agree in writing for the payment of any rate of interest." MCL 438.61; MSA 19.15(71) sets forth a A271 business entity exception. This exception is applicable because the $350,000 loan of July 8, 1986 included a business purpose affidavit for at least $70,000 of the $350,000 loan (Plaintiffs' Exhibit 11). MCL 438.61; MSA 19.15(71) provides: "438.61. Business entities, definition, interest rate agreements. Sec. 1(1) As used in this act 'business entity' means:... (b) A natural. person who furnishes to the extender of the credit a sworn state- ment in writing specifying the type of business and business purpose for which the proceeds of the loan or other exten- sion of credit will be used, but the exemption provided by this act does not apply if the extender of credit has notice that the person signing the sworn statement was not engaged in the business indicated. (2) Notwithstanding the provisions of Act No. 326 of the Public Acts of 1966 as amended, being sections 438.31 to 438.33 of the Michigan Compiled Laws, but subject to any other applicable law of this state or of the United States which regulates the rate of interest, it is lawful in connection with an extension of credit to a business entity by a state or national chartered bank, insurance carrier, or finance subsidiary of a manufacturing corporation for the parties to agree in writing to any rate of interest. (Emphasis supplied) A272 (3) Notwithstanding the provisions of Act No. 326 of the Public Acts of 1966, it is lawful in connection with an ex- tension of credit to a business entity by any person other than a state or nationally chartered bank, insurance carrier, or finance subsidiary of a manufacturing corporation for the par- ties to agree in writing to any rate of interest not exceeding 15% per year." (Emphasis supplied) (9) MCL 438.32; MSA 19.15(2) sets forth the penal provision incurred by a viola- tion of the interest limit established in MCL 438.31; MSA "Any seller who enters ment which provisions 19.15(1), which provides: or lender or his assigns into any contract or agree- does not comply with the of this act or charges interest in excess of that allowed by this act is barred from the recovery of any interest, any official fees, delinquency or collection charge, attorney fees or court costs and the borrower or buyer shall be entitled to recover his attorney fees and court costs from the seller, lender or assigns." As pointed out above, Defendant charged Plaintiff 12 1/2% interest on note Gis 12% interest on notes #2, #4, #5 and #6 and in excess of 20% interest on note #3 (Plain- tiffs' Exhibits 3 and 7, Soltow's Deposi- A273 tion, Pp. 59-64). Note #1 had a line through the space that called for interest payments and another line through the space that called for interest after the note became due if it was still unpaid. Therefore, there was no written interest rate for note #1. There was no note for loan #2. Note #6 had no interest rate provided. Therefore, pursuant to MCL 438.31; MSA 19.15(1), Defendant could not charge Plaintiff in excess of 5% interest because there was no stipulation or agreement in writing by the parties for any rate in excess of 5%. Therefore, the 12 1/2% charged on note #1 and the 12% charged on loan #2 and note #6 were usurious and the penal provisions of MCL 438.32 are applicable. (10) Notes #4 and #5, for which Defendant charged Plaintiff 12% interest were likewise usurious because MCL 438.31 only allows the parties to charge an interest rate of 7% A274 unless the agreement fits into one of the exceptions of MCL 438.3l1c or the business entity exception of MCL 438.61. Neither of these notes fit into either of those excep- tions, and the charging of 12% interest brings into effect the penal provisions of MCL 438.32. Note #3, as set forth above, involved loan of $350,000 and was secured by a first mortgage on the real estate involved herein. In addition, there was a business purpose affidavit as to at least $70,000 of the loan. The real estate was not a single family dwelling and therefore under the exception set forth above in MCL 438.31c(1l), the parties could have agreed to any interest rate on that portion of the loan not covered by the business purpose affi- davit. Plaintiffs will address this note under both the real estate mortgage excep- tion of MCL 438.3ic(11); and the business purpose exception of MCL 438.61, because A275 under either exception Defendants would be guilty of charging Plaintiffs usurious interest rates on this ioan too, bringing into effect the penal provisions of MCL 438.32 Business Purpose Exception: The above quoted language of MCL 438.61(3) sets forth that since defendant is "any person" other than an excepted bank, insurance company or finance corporation of a manufacturer, Defendant could not charge an interest rate in excess of 15% per year. According to Defen(1l)dants own record (Plaintiffs' Ex- hibit 3) and Defendants' attorney's record (Plaintiffs' Exhibit 7), Defendants charged Plaintiffs in excess of 20% interest on this note since the inception of the note, July 8, 1986. Defendants claimed they charged 20% because Defendants said since Plaintiffs never made their first interest payment on January 7, 1987, Plaintiffs were in default and therefore the 20% default A276 interest rate was applicable (Soltow Depo- sition, 3/20/91, p. 62). Real Estate Mortgage Exception: $280,000 of the $350,000 loan of July 8, i986, was not covered by the business pur- pose affidavit and so we must look to the real estate mortgage exception covered by MCL 438.31c(11) (quoted on p. 7, supra). That section provides that the parties may agree in writing to any rate of interest if the note is secured by a mortgage on real estate. It is Plaintiffs' contention that only $280,000 of the $350,000 loan is covered by this section, since the parties specifically provided that $70,000 of the loan was covered by the business purpose exception. However, for purposes of argu- ment Plaintiffs are assuming in this dis- cussion that the whole $350,000 loan of July 6, 1986 is covered by the real estate mortgage exception. Defendants' conduct, assuming the whole $350,000 is within the A277 real estate mortgage exception, creates an usurious rate of interest on the $350,000 loan. There are several ways in which the interest demanded by Defendants on this $350,000 loan are usurious. (12) First, the court should look at the pertinent language of the promissory note of July 8, 1986 (Plaintiffs' Exhibit 5), which provides: "For value received, the undersigned, jointly and severally, promise to pay to the order of Robert Soltow the principal sum of Three Hundred Fifty Thousand Dollars ($350,000) with interest from this date at the rate of fifteen percent (15%) per annum on the unpaid balance until paid and twenty percent (20%) per annum on the unpaid balance until paid during the period of any default herein.... The principal sum of $350,000 shall be due July 7, 1989. Interest payments shall be made each January 7th and July 7th, beginning January 7, 1987 and ending July 7, 1989, the amount of the payment to be the interest accrued on the unpaid prin- cipal balance during the immediately preceding six (6) months. Notwith- standing the foregoing, all interest accrued to the date of the final principal payment shall be paid with the final principal payment. Princi- A278 pal may be prepaid without penalty." (Emphasis supplied) From the date of the inception of the note of July 8, 1986, until the time it was replaced with an amended promissory note on August 28, 1988, Plaintiffs never made any payment of interest or principal on said note. According to Defendants' calculations and demands for interest on this note, Plaintiffs were charged interest of $119,232.67 to April 6, 1988 (Plaintiffs' Exhibit 3; Plaintiffs' Exhibit 7 and Soltow deposition, 3/20/91, Pp. 59 & 60). Further, using the Defendants’ calculation of con- tinuing interest at $206.17 per day, Attor- ney Austin calculated the interest demanded by Defendants of Plaintiffs from April 6, 1988 to August 25, 1988. Mr Austin brought the (13) figures to date for the renewal note of August 25, 1988 by multiplying the number of days since April 6, 1988 to the renewal on August 25, 1988 (Plaintiffs' A279 Exhibit 7 and Austin Deposition of 3/20/91, Pp. 62 & 63). Plaintiffs will now discuss the various ways in which the interest charged to Plaintiffs by Defendants on this note was illegal. 1. Defendants factually charged Plain- tiffs an interest rate in excess of the in- terest rates set forth in the note. The interest provided for in the note of July 8, 1986, is usurious. The interest charged to Plaintiffs by Defendants and demanded by Defendants from Plaintiffs was usurious and the renewal note of August 25, 1988 included these usurious interest charges. First, let's examine the interest actually charged to Plaintiffs by Defendants for the note of July 8, 1986. For purposes of this discussion, Plaintiffs assume argu- endo that the interest rates set forth in the note are legal. (Plaintiffs will dis- cuss the legality of the interest rates set forth in the note after this discussion on A280 the actual interest demanded from and charged to Plaintiffs by Defendants). An interest rate demanded and charged which is in excess of the amount set forth in the note cannot be legally allowed and is usurious. Under MCL 438.31c(11), the parties can agree to any interest rate in writing for a real estate mortgage note. These parties agreed to 15% interest when not in default and 20% when the note was in default. No principal payments were due (14) until July 7, 1989. Interest payments were due every 6 months commencing January 7, 1987. Plaintiffs made no payments under this note. For purposes of this argument, Plaintiffs will assume that when Plaintiffs failed to make the first interest payment on January 7, 1987, Plaintiffs were in default of the note. With that assumption, Plaintiffs owed 15% interest from July 8, 1986 to January 7, 1987 and owed 20% from January A281 7, 1987 to the renewal note of August 25, 1988. The calculations are simple. A. Interest due under the note. (1) $350,000 at 15% interest from date of note, July 8, 1986, to when first interest payment was due, January 7, 1987, which is 183 days. $350,000 x 15% = $52,500 per year (divided by) 365 days = $143.84 per day X 183 days = $26,322.72. (2) $350,000 at 20% interest from January 8, 1987 (first date interest was due and unpaid and assume for this argument that Plaintiffs are then in default). Since Defendants' calculations (Plain- tiffs' Exhibits 3 & 7) calculate the interest owed to April 6, 1988, Plaintiffs will do same. January 8, 1987 to April 6, 1988 is 453 days. $350,000 at 20% per year is $70,000 in interest per year (divi- ded by) 365 is $191.78 per day x 453 days = $86,876.34 in interest due January 8, 1987 to April 6, 1988. Amount that Defendants A282 should have demanded and charged Plain- tiffs as of April 6, 1988 should have been: $350,000.00 Principal 26,322.72 15% interest to 1/7/87 86,876.34 20% interest from 1/7/87 to 4/6/88 $463,199.06 (14) B. Amount Defendants actually demanded and charged to Plaintiffs. (1) According to Plaintiffs' Ex- hibits 3 & 7, which were prepared by Defendant Robert Soltow and Attorney Douglas Austin, Defendants demanded and charged to Plaintiffs as of April 6, 1988, the sum of $469,232.67. (2) According to Plaintiffs' Ex- hibits 3 & 7, the Defendants were charging Plaintiffs $206.17 per day on this $350,000 loan. Even at 20%, the per day interest rate on $350,000 is $191.78 (cal- culations set out above). The $206.17 charge per day in interest is $21.5% interest. ($350,000 x 21.5% = $75,250 per year (divided by) 365 = $206.16 per day.) A283 C. Conclusion. Even if the note of July 8, 1986 is not usurious, the demands and charges made by Defendants, purportedly pursuant to that note, are illegal and usurious. D. Possible defenses that Defendants may raise: (1) Defendants mistakenly compounded interest. Interest can- not be compounded. MCL 438.31c(9) pro- vides: "(9) A mortgage loan or land contract made under this act shall not provide for a rate of interest added or deducted in advance and interest on the mortgage or land contract shall be computed from time to time only on the basis of its unpaid balances." Further, under Michigan law, even when interest on interest was allowed, in- terest on interest could not be charged (16) where not specifically provided ina written agreement. Voight v Beller (1985) 56 Mich 40; 22 NW 270 and Hoyle v Page A284 (1879) 41 Mich 533; 2 NW 665. (2) Defendants conduct is due to an innocent mistake and this usurious rate of 21.5% was not done intentionally. The law in Michigan clearly pro- vides that an innocent mistake does not excuse Defendants from their charging a usurious interest rate. Even if the us- urious interest rate had been at the insistence of Plaintiffs, Defendants could not charge a usurious rate. The law does not recognize unintentional and innocent usury charges; nor, can Defendants raise the issue of estoppel to keep Plaintiffs from asserting usury. Bebee v Gretten- berger (1978) 82 Mich App 416; 266 Nw2d 829 and Osinski v Yowell (1984) 135 Mich App 279; 354 Nw2d 318. 2. The note of July 8 did not authorize an increase to 20% until July 8, 1989. Even if Defendants had just charged A285 Plaintiffs 15% interest on the whole $350,000 from July 8, 1986 to January 7, 1987 (the date the first interest payment was due) and then charged Plaintiffs 20% from then until the note of August 25, 1988, the Defendants would still be guilty of usury. The note of July 8, 1986 does not provide for an increase in interest from 15% to 20% unless there was default by Plaintiffs in making the first prin- cipal payment (a balloon payment of the (17) entire principal amount), which was due July 7, 1989. The note provides: "., . . with interest at the rate of fifteen percent (15%) per annun on the unpaid bal- ance until paid and twenty percent (20%) per annum on the unpaid balance until paid during the period of any de- fault herein. The principal sum of $350,000 shall be due July 7, 1989. .." There was no intent and the note does not say that the interest rate will be increased from 15% to 20/% due to nonpay- A286 LSchsy Sylbhdb) deter auth Eten ok? eee ne A as ment of just an interest payment. The usury statute makes it very clear that 5% is the maximum rate unless the agreement is in writing and the writing must clearly provide for additional interest rates under proper exceptions or exemptions. In addition, this note was prepared by Defendants and any ambiguity must be re- solved against said Defendants. Alternatively, the most the language could permit would be an increase from 15% to 20% on that portion of the note which is in default, which is only the in- terest payment. There was never a default on the principal payment because no prin- cipal payment was due until July 7, 1989. However, the Defendants' document (Plain- tiffs' Exhibits 3 & 7) show that Defen- dants computed 20% interest on the prin- cipal and 20% interest on the interest payment that was due January 7, 1987. 3. The note of July 8 was usurious A287 on its face. (18) In argument 1, under this real estate mortgage exception, Plaintiffs stated that for purposes of that argument Plaintiffs would assume the note as drafted was not usurious. Under argument 2 of this excep- tion, Plaintiffs pointed out that the note aid not permit an increase in the interest rate from 15% to 20% until and unless there was a default on the principal pay- ment. If the Court concludes that the note as written permitted the Defendants to increase the interest rate from 15% to 20% on both principal and unpaid interest or just on principal, on January 1, 1987, when the first interest payment was not made, then it is Plaintiffs' position that the language that would permit that is usurious. MCL 438.101; MSA 19.21 pro- vides: "438.101 Interest on due and unpaid interest; rate Sec. 1. That when any installment of interest upon any A288 note, bond, mortgage or other written contract shall have become due and the same shall remain unpaid, inter- est may be computed and collected on any such installment so due and un- paid, from the time at which it became due at the same rate as specified in any such note, bond, mortgage or other written contract, not exceeding 10 percent and if no rate of interest be specified in such instrument, than at the rate of 7 per centum per annum." (Emphasis supplied) According to the computations set forth below, the Defendants calculated 15% on the principal amount through January 7, 1987. The Defendants calculated at 20% on the principal balance of $350,000 together with the interest to January 7, 1987 (as calculated by Defendants of $26,250) for a total of $376,250. These are the calcula- tions that must have been made by Defen- dants: (19) $350,000 x 15% = $52,500 x 1/2 year July 8, 1986 to January 7, 1987) = $26,250. $376,250 x 20% = $75,250 (divided by) 365 days = $206.1643836 per day, which Defendants must have rounded up to $206.17 A289 per day. Defendants then continued to charge Plaintiffs 20% on that amount $376,250 ($206.17 per day) until the note of August 25, 1988. Therefore, after January 7, 1987, Defendants were charging Plaintiffs 20% interest on the principal and on the interest due on January 7, 1987. a) The interest rate of 20% on the interest due on January 7, 1987 is usurious. MCL 438.101 makes it clear that the maximum interest that could be charged on interest is 10%. So assuming the language in the note authorizes interest on interest, the rate could not exceed 10% and Defendants charged 20%. b) The 20% charged by Defendants against Plaintiffs on the principal would be usurious. Visoneering v Belle River (1986) 149 Mich App 327, 337, 286 NW2d 185, provides: "MCL 438.101; MSA 19.21 permits A290 Pe FS ee EET al 2 BD ee. Ce a oe the computing of interest at a rate not exceeding ten percent (or the amount specified in the mortgage) on any due and unpaid installments of interest, but not principal." Emphasis supplied) 4. Business purpos portion of $350,000 loan of July 8, 1986. Further, as pointed out earlier, $70,000 of the $350,000 loan was under the business purpose exception and would be limited to 15% interest. That being the case, the daily rate (20) charged by Defen- dants of 20% on $376,250 wuld be grossly usurious. FACTUAL STATEMENT LEADING TO DOCUMENTS OF AUGUST 25, 1988 The only payment that Plaintiffs made to Defendants, on any of the above loans, was the $6,000 payment on loan #1 (Plain- tiffs' Exhibit 2). The last loan was for $55,000 made on March 24, 1988, a note from Richard Fishe’l to R. Soltow (Plaintiffs' Exhibit 9). According to Defendant R. A291 Soltow this $55,000 loan was so Plaintiff R. Fishell could have the contractor fin- ish the work on a storm drain located on the Andre property (Soltow Deposition, P. 65). In fact, the Andre property was property Plaintiff R. Fishell was buying that is adjacent to the property involved herein and the storm drain constructed by Plaintiff R. Fishell was really for the benefit of the subject property. Once the storm drain was completed all the utilities would be supplied to the subject property. The subject property has been appraised by an MAI, SREA appraiser as having a fair market value of $1,380,000 (Plaintiffs' Exhibit 12). This appraisal was contracted for by a potential purchaser dealing with Plaintiff R. Fishell. It would appear that Defendant R. Soltow placed a value on this property in November of 1989 of $1,500,000 (Plaintiffs' Exhibit 24, Lowe Deposition 2/20/91, Pp. 8 & 9). During the time that A292 Plaintiff R. Fishell was dealing with De- fendant R. Soltow, Plaintiff R. Fishell had installed a $198,000 sewer project to ex- i tend the water and sewer along M-43 to the site and had constructed the storm drain mentioned above. Defendant R. Soltow was aware of all of this progress. Defendant R. Soltow never made any demand of Plain- tiffs' default (21) on any of the notes #1 through #5, supra; and, on March 24, 1988 made the additional loan to Plaintiff R. Fishell of $55,000. March 24, 1988, Defendant R. Soltow made the $55,000 loan to Richard Fishell. Defendant Robert Soltow never made any de- mand on Plaintiffs to cure any "defaults" on any notes to Defendants. Just after the $55,000 loan Plaintiff Richard Fishell had 12 lots on the Andre property which ; were just to the point where he could sell them. Defendant R. Soltow came to see Plaintiff R. Fishell and wanted to buy 5 A293 lots for $100,000. Defendant Soltow knew Plaintiff was asking $28,000 for each of the lots and Fishell told Defendant he could not afford to take a $40,000 loss on these lots. Thirteen (13) days after this loan of $55,000 Defendant R. Soltow had his office personnel calculate what Defen- dant R. Soltow claims Plaintiffs owe him on the now 6 notes (Plaintiffs' Exhibit 3, showing calculations made as of 4/6/88). Then 23 days after that, on April 29, 1988, Defendant Soltow has attorney Douglas Austin write Mr. Fishell a letter that sets forth what Defendant Robert Soltow claims is due on each of the six notes as of April 6, 1988. The letter also says: "To the extent the obligations are demand obligations, or ob- ligations due by a date certain which has passed, demand hereby made for full payment. To the extent they are installment obligations in default, default is hereby declared and accel- eration elected." (Plaintiffs' Exhibit 7) Unbeknownst to Plaintiffs, the plot A294 or scheme of Defendant R. Soltow is going into high gear. Defendant Soltow has been very friendly and very neighborly. ‘Plain- tiff R. (22) Fishell and Defendant R. Soltow had lunch together regularly, visited with each other constantly. Defen- dant Soltow loaned Plaintiff Fishell what- ever money he needed to improve the prop- erty without ever demanding repayment. Defendant Soltow let Plaintiff Fishell get Plaintiff Fishells' property all prepared for sale or development. In February or March of 1988, just before Defendant Soltow loaned Plaintiff Fishell the $55,000, De- fendant Soltow asked Plaintiff Fishell what he would take to sell the subject property to Defendant Soltow. Plaintiff Fishell answered that he was not interested in selling the property. Defendant Soltow then offered Plaintiff Fishell One Million Three Hundred Thousand to One Million Four Hundred Thousand for the subject property A295 and the Andre preperty. Further, Defendant Soltow offered to put Plaintiff Fishell on his payroll for two years. Plaintiff R. Fishell said he didn't work for anyone. He said he couldn't see himself being valuable to anyone because he had never worked for anyone. Plaintiff Fishell also told him he did not wish to sell. He had been working to development or sell the properties in sections and he wasn't dead yet and wanted to see it through. At this time, Defendant Soltow had a mortgage for $350,000 on property that was worth at least $1,300,000. He wanted to buy it and had been rejected. There were no hard feelings expressed at that time. March 24, 1988, he had just loaned Plain- tiff Fishell $55,000 to complete some utilities. Now without any mention to Plaintiff Richard Fishell in their (23) almost daily visits, Defendant r. Soltow has Attorney Austin send the above letter A296 demanding payment on all six notes. It is significant to point out at this juncture that attorney Douglas J. Austin, a shareholder in the law firm of Fraser, Trebilcock, Davis & Foster, P.C. was Defendant Robert Soltow's attorney and was also Plaintiffs' attorney when he wrote his letter of April 29,1988. He had been Plaintiffs exclusive attorney since July, 1986. He represented the Plaintiffs on numerous matters and continued to bill Plaintiffs for legal services through April 20, 1989 and for costs and expenses as late as June 28, 1989. (See Plaintiffs' Exhibit 13, R. Fishell's Affidavit, and Plaintiffs' Ex- hibit 14, statements for services rendered by Austin to Plaintiffs, which were sub- mitted in Eaton County Circuit Court in support of Plaintiffs' motion to disqualify the Fraser law firm from representing Defendants in this matter.) Then on August 12, 1988, Attorney Austin sent a letter to Plaintiffs (which A297 salutation said: Dear Dick and Dorothy, Plaintiffs' Exhibit 15). The letter in- cluded the following: (1) A proposed land contract cover- ing the subject property. Defendant R. Soltow was the vendor and Plaintiffs were the vendees. The purchase price was $613,683.64, which was suppose to be the outstanding indebtedness on the six loans owed from Plaintiffs to Defendants, with the usurious interest calculated to 8/16/88 (the proposed land contract is Plaintiffs' Exhibit 16); (24) (2) The letter advised the Plaintiffs that they would have to sign a warranty deed to Soltow and Soltow would sign a discharge of mortgage and would cancel the six notes. The Plaintiffs would also have to sign a business purpose affidavit; (3) This transaction was suppose to be in lieu of the mortgage note and other out- standing obligations; A298 (4) The land contract was to be at 15% interest and was due to be paid in full September 30, 1988, which was only 45 days after the land contract was to be signed on August 16, 1988; (5) Austin also advises the Plain- tiffs will gain more time to pay off Defen- dant by this approach and them provides the Plaintiffs with some very interesting, but disturbing, legal advise. Of course, this advise comes from Attorney Austin who, ac- cording to his testimony, specializes in real estate law, including foreclosures (Austin Deposition 3/20/91, P. 47). The letter states: "As discussed, if the land con- tract is not paid by the end of September, Bob will, through us, mail a 15-day notice of forfeiture to you. If, within the 15 days, the contract is not paid, we will start a forfeiture action in District Court, which will have a 90-day redemption period. This would mean the property would become Bob's at approximately the end of January, 1988 unless re- A299 deemed. This i lly a month 1 er th u_ would have h r r re- closure, assuming we had published in June, with a sale in early July with six-month redemption period." (Emphasis supplied) (25) When Plaintiffs received this infor- mation, they relied on the accuracy of the representations made in the letter and in the proposed land contract (Eaton County Transcript of 2/27/90, Pp. 59 & 60. There were at least two very significant repre- sentations that were made that were incor- rect. The first was that the Plaintiffs were indested to Defendants for $613,683.54, without disclosing to Plain- tiffs that the interest charges were usurious; and (2) that if Austin had, on behalf of Defendants, commenced foreclosure by advertising back in June the Plaintiffs' redemption period would have run prior to the end of January, since there is only a 6 month redamption. Ignore that Austin is representing that the redemption time would A300 have run before the end of January if ad- vertising had been in June, which it had not been and this was August. Ignore that if there was a six month redemption period and if Attorney Austin commenced advertis- ing by August 15, there could not have been a sale held until at least Sextesbur 15 (MCL 600.3208; MSA 27A.3208) causing Attorney Austin's six month redemption period to expire March 15, 1989. The real serious problem with Attorney Austin's misrepresentations is the misrepresentation that Plaintiffs only had a six month re- demption in a foreclosure by advertising. This is patently inaccurate. The subject property is approximately 43 acres in Oneida Township, Eaton County. In 1986 when the mortgage was given and in 1988 when this letter was written the property was farm land. Plaintiff R. Fishell bought the subject property in 1985 and it had a crop of soy beans on it (26) when Plaintiff A301 R. Fishell purchased it. The owner of the land retained ownership of the crop of soy beans. In 1986 Plaintiff Fishell had a crop of oats planted on shares on said property. In 1987 the farm land was idle because Plaintiff R. Fishell had to con- struct a drain on the subject property. The farm was also idle in 1988. There was a crop of white beans grown on it by farmer Huhn in 1989 or 1990. MCL 600.3240; MSA 27A.3240 sets forth the redemption periods for foreclosure by advertising and the ap- plicable section is secton (8), which provides: "(8) In any other case, the redemption period shall be 1 year from the date of sale." Therefore, had Attorney Austin commenced foreclosure by advertisement August 15, 1988, Plaintiffs would have had until approximately September 15, 1989 to redeem. Further, they could have challenged the usurious interest had Attorney Austin ad- A302 vised them that it was usurious. The land contract that was proposed to Plaintiffs by letter of August 12, 1988 was never executed. Attorney Austin testified that the land contract proposal was with- drawn because he advised his client Defen- dant R. Soltow that it would not work (Austin's deposition of 3/20/91, P. 47). AUGUST 25, 1988 TRANSACTION The next thing that occurs is Attorney Austin has Plaintiffs and Defendant R. Soltow meet a Defendant R. Soltow's office to sign the infamous documents of August 25, 1988. It should first be noted that Attorney Austn did not tell the (27) Plain- tiffs that he was not looking out for their interests (Eaton County Circuit Court tran- scriptof hearing, 2/27/90, R. Fishell - Pp. 45 & 46; Mrs. Fishell - Pp. 112-115; Defen- dant R. Soltow deposition 3/20/91, Pp. 78 & 79). The documents that were prepared by Attorney Austin and presented to the A303 parties for signature, without any explana- tion to Plaintiffs, which were signed on August 25, 1988, were: 1. Amended Promissory Note, $610,446.14 (Plaintiffs' Exhibit 17); This note was at the interest rate of 15%. It states "This note replaces the note dated July 8, 1986 given by the undersigned to Robert Soltow in the principal amount of $350,000"; 2. Mor e Modification Agreement (Plaintiffs' Exhibit 18). It amends the mortgage of July 8, 1986 from $350,000 to $610,446.14 and provides: "The mortgage shall continue in full force and effect and except as above specifically modified and amended the mortgage shall be unamended, unchanged, and unmodified by this agreement and shall continue to secure to mortgagee the repayment of mortgagor's indebtedness or other obligations to mortgagee." 3. Escrow Holding Agreement (Plain- tiffs' Exhibit 19). This sets forth the A304 six loans from Defendant Soltow to Plain- tiff Fishell, says they are all in default, claims Defendant Soltow has accelerated all of them and states the balance on all six notes to be $610,446.14. It states the current balance on the $350,000 note of 7/8/86 to be $498,302.64 and the balance Owing on the other notes, as accelerated, is $112,093.50. It also (28) covers the other documents that are being executed at that time. It provides that Plaintiffs will provide a warranty deed to the subject property to Defendant, which will be held in escrow along with a discharge of mort- gage from Defendant R. Soltow to Plain- tiffs. If Soltow notifies the escrow agent the note is paid, Plaintiffs will receive the discharge of mortgage and get back their warranty deed. If Soltow advises the escrow agent the note is in default, the discharge of mortgage and the warranty deed will be delivered to defendant R. Soltow. A305 4. Warranty Deed on the subject property from Plaintiffs Fishells to Defen- dant R. Soltow (Plaintiffs' Exhibit 20). The deed signed by the Fishells provides: "This deed is given in lieu of foreclosure of the mortgage recorded in Liber 707, Page 630, Eaton County Records. This conveyance shall not operate as a merger of Gran- tee's interest as the mort- gagee under the previously described mortgage with Gran- tee's title acquired under this conveyance." 5. Declaration of Storm Drain (Plain- tiffs' Exhibit 21). Plaintiffs Fishells were purchasing property contiguous to the subject proeprty over which Plaintiff R. Fishell had constructed a storm drain basically for the benefit of the subject property. This document gave the subject property a permanent easement over the con- tiguous property. It also provides that Fishells shall bear the cost of maintaining the drain "until such time, if at all, that Robert Soltow, his heirs, assigns or perso- A306 \ nal representatives take title to parcel one through fore-(29)closure or through deed in lieu of foreclosure." (Emphasis supplied). 6. Discharge of Mortgage - Signed only by Defendant R. Soltow (Plaintiffs' Exhibit 22). All these executed documents, except the promissory note were mailed to Plaintiffs by Attorney Austin on August 26, 1988 (Plaintiffs' Exhibit 23). Attorney Austin testified that in arriving at the $610,446.14 indebtedness placed on the amended note of August 25, 1988, he made the calculations. He referred to Plain- tiffs' Exhibit 3 (Soltow Deposition Exhibit 10) and used the per diem interest rate for each loan and brought current the balance on each note (Austin Deposition 3/20/91, P. 64). That means Austin continued to apply the usurious rates of interest on each of the six loans, as discussed in de- tail above, including the per diem of A307 $206.17 on the $350,000 loan. As shown earlier $206.17 per day on $350,000 is 21.5% interest. Therefore when the amended note was prepared and executed on August 25, 1988 for $610,446.14, it in- cluded all the usurious interest charges on all six loans. DID DRAFTING A RENEWAL NOTE ON AUGUST 25,1988 AFFECT THE USURIOUS INTEREST CHARGED ON THE SIX (6) LOANS? The law in Michigan is firmly estab- lished that since the amended note of August 25, 1988 includes usurious interest charges, it continues to be usurious. It isn't even necessary to examine or review whether the interest rate charged in the amended note of August 25, 1988, being 15%, is usurious. The (30) Michigan law is set forth in Mathews v Tripp (1938) 285 Mich 705, at 710; 281 NW 412, wherein the Court in quoting the Restatement of the Law of Contracts says as follows: "In 2 Restatement of the Law A308 of Contracts, S535, it is said: ‘Where a bargain is usurious, an agreement in renewal thereof, or in substitution therefor, w [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386012_2029%3A3. Public record. Not legal advice.