Ottoman v. Glass

1

ROGER OTTOMAN and MARCIA OTTOMAN, Plaintiffs/Counterdefendants-Appellants, v. DAVID GLASS, DENISE M. NICHOLS, and JAN E. SLOTNICK, also known as JAN E. SLOTKIN, Defendants-Appellees, and RL &DG INVESTMENTS LLC, Defendant/Cross-Defendant-Appellee, and MICHAEL S. HAKALA and DANIELLE HAKALA, Defendants/Counterplaintiffs/Cross-Plaintiffs-Appellees.

No. 361457

Court of Appeals of Michigan

February 29, 2024

UNPUBLISHED

Washtenaw Circuit Court LC No. 18-000919-NZ

Before: M. J. KELLY, P.J., and JANSEN and GARRETT, JJ.

PER CURIAM.

This case arises out of a series of lawsuits brought by plaintiffs, Roger and Marcia Ottoman, involving their claim to a property in Chelsea, Michigan. Undeterred by prior legal setbacks, the Ottomans brought the current lawsuit in 2018 alleging that they were defrauded out of the property because their signatures were forged on a deed. The circuit court quieted title to the property in favor of defendants, Michael and Danielle Hakala, and granted summary disposition and awarded sanctions to the Hakalas and defendants, David Glass Denise Nichols, and RL &DG Investments LLC (RLDG and the RLDG defendants). The circuit court correctly determined that the Ottomans' claims were barred by the doctrines of res judicata and collateral estoppel. The court also did not err in awarding sanctions against the Ottomans for their continued pursuit of a legally meritless lawsuit. We affirm.

I. BACKGROUND

The Ottomans have been embroiled in legal battles over the property at 12634 McKinley Heights since 2003. To save their home from a prior creditor, the Ottomans arranged for RLDG to purchase the property. The Ottomans would remain on the land and pay monthly rent with the option to purchase. The Ottomans fell behind in payments and RLDG filed a district court action to take possession of the property. In a 2008 judgment, the district court ruled that RLDG had an equitable mortgage and the Ottomans had a right of redemption.

Claiming that the Ottomans defaulted on the equitable mortgage, RLDG filed a circuit court action to seek foreclosure in 2009. Defendant, Jan Slotnick, an attorney who had represented the Ottomans in the earlier district court proceeding, filed an answer and counterclaim on the Ottomans' behalves. The matter resolved in a December 2009 settlement agreement, which allowed the Ottomans to live rent-free on the property until March 1, 2012, gave them until that date to secure financing to purchase the home from RLDG, and required the Ottomans to execute a quitclaim deed to be held in escrow. The circuit court later entered a stipulated order dismissing the case.

Before the settlement agreement was entered, the Ottomans filed for Chapter 7 bankruptcy and Marcia Ottoman was incarcerated in federal prison after pleading guilty to charges of attempting to defraud her in-laws.^[1] At a December 2009 creditor's hearing, Roger Ottoman testified on his own behalf and with Marcia Ottoman's power of attorney. He testified that Slotnick was presently representing the Ottomans and negotiated a settlement allowing them to retain possession of the property rent-free for two years. The bankruptcy court accepted this testimony as true and treated the right to live rent-free as an asset. The Ottomans paid the value of that asset to the bankruptcy trustee.

The Ottomans did not pay off the property by March 1, 2012. RLDG filed an affidavit of lost deed with the register of deeds. Denise Nichols notarized the affidavit signed by David Glass, an RLDG member. RLDG asserted that it lost the original quitclaim deed, which was signed by the Ottomans on July 1, 2010, so it filed a copy of the signed deed. RLDG then filed a district court action to evict the Ottomans and take possession based on the quitclaim deed.

Assisted by new counsel, the Ottomans filed an answer and counterclaim. They asserted fraud as an affirmative defense and alleged that RLDG defrauded them into signing the quitclaim deed. They also complained that RLDG moved its offices and purposefully withheld the new address from the Ottomans, hindering their efforts to secure financing to redeem the property under the settlement agreement. At a June 2012 hearing, with the Ottomans present, their attorney argued that enforcement of the settlement agreement was premature. The Ottomans' attorney also claimed that the settlement agreement was a "component of fraud" and alleged that "this whole transaction stem[s] from my client walking into [RLDG] to obtain a mortgage, only to come out of that place, signing the Deed away to the place and not even realizing it." The Ottomans did not allege that their signatures had been forged on any documents. The district court ordered discovery, but the Ottomans did not respond to discovery requests. The Ottomans' attorney asserted a breakdown in the attorney-client relationship and withdrew. But the Ottomans claimed that their attorney did not communicate with them and that they never received the discovery requests. The district court found no triable issue of fact and granted judgment in RLDG's favor. The Ottomans left the home in October 2012, and RLDG sold the property to the Hakalas in May 2013.

The Ottomans claim that they slowly received information leading them to believe someone had forged their signatures on the quitclaim deed. They hired an expert in 2016, who opined that someone cut their signatures from a 2006 document and pasted them onto the 2010 deed. The Ottomans waited until August 2018 to file the current circuit court action. The Ottomans raised a claim of fraud by forgery against the RLDG defendants, alleging that they forged the Ottomans' signatures on the 2009 settlement agreement and 2010 quitclaim deed. The Ottomans also accused all defendants of a civil conspiracy to defraud them of their property. The Ottomans denied any knowledge of the 2009 circuit court action, claiming that Slotnick acted without their knowledge or consent. The Ottomans also claimed that they did not know the 2009 settlement agreement had been entered or a quitclaim deed had been signed. The Hakalas counterclaimed against the Ottomans, seeking to quiet title in the property. In October 2018, counsel for RLDG wrote a letter to the Ottomans' counsel, warning that the Ottomans were attempting to relitigate issues already decided in the 2012 district court case and advising the Ottomans' counsel that RLDG intended to seek sanctions if the Ottomans did not dismiss their complaint. The Hakalas and the RLDG defendants ultimately filed motions for summary disposition, contending that the Ottomans' claims were precluded by res judicata and judicial estoppel. The Ottomans responded to the motions, arguing that their claim of fraud by forgery had never been raised or litigated before the current lawsuit. Attached to their response were affidavits from Roger and Marcia Ottoman; the Ottomans both attested that they were unaware of any settlement agreement, they never signed the quitclaim deed, and they did not hire Slotnick to represent them in the 2009 circuit court case.

The Ottomans also successfully petitioned to reopen their bankruptcy case, leading to a stay in the current circuit court action. In the bankruptcy court, the Ottomans sought to void the 2009 settlement agreement, 2010 quitclaim deed, and 2012 district court judgment as violations of an automatic stay that had been issued in the 2009 bankruptcy proceeding. The parties submitted several rounds of pleadings to the bankruptcy court and hearings were conducted. The Ottomans presented the issue of fraud to the court, contending that their signatures on the 2009 settlement agreement and 2010 quitclaim deed were forged. In an October 2020 opinion, the bankruptcy court cited Roger Ottoman's testimony at the December 2009 bankruptcy court hearing as evidence that he was aware of the settlement agreement and its terms. The court also cited discussions from the June 2012 district court hearing as evidence that the Ottomans knew about- and possessed copies of-the settlement agreement, the affidavit of lost quitclaim deed, and the signed copy of the deed. Because the Ottomans participated in the violations of the stay that they alleged and never made any argument about the stay in earlier proceedings, the bankruptcy court ruled that the Ottomans waived their right to challenge violations of the stay. The bankruptcy court also determined that, under the doctrines of res judicata and collateral estoppel, the 2012 district court judgment precluded relitigation of the Ottomans' claim of ownership of the property. The bankruptcy court therefore denied the Ottomans' request to void any documents and court judgments.

Back in the circuit court, the Hakalas and the RLDG defendants filed renewed motions for summary disposition, arguing that the 2020 bankruptcy opinion also precluded the Ottomans' fraud claims. The RLDG defendants also requested an award of attorney fees and costs as sanctions for the Ottomans' frivolous lawsuit. The circuit court granted the motions and dismissed the Ottomans' claims on res judicata and collateral estoppel grounds. The court also sanctioned the Ottomans, awarding attorney fees and costs incurred by the RLDG defendants following the 2020 bankruptcy opinion. In a subsequent order, the court quieted title in the Hakalas' favor.^[2]

The Ottomans now appeal as of right.

II. SUMMARY DISPOSITION

The Ottomans seek reversal of the circuit court's ruling on summary disposition, arguing that their claims were not barred by the doctrines of res judicata, collateral estoppel or judicial estoppel. They assert that the presence of extrinsic fraud prevented them from having an adversarial trial on the issue of the allegedly forged deed, and they posit that the...