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### STATE OF MICHIGAN

COURT OF APPEALS

GREEN TREE SERVICING, L.L.C.,

Plaintiff-Appellant, UNPUBLISHED August 23, 2016

v No. 326784 Wayne Circuit Court

MARGARET EPPERSON a/k/a MARGARET IB

EPPERSON and THOMAS RYAN EPPERSON, LC No. 13-011431-CH

Defendant-Appellees.

Before: J ANSEN , P.J., and F ORT H OOD and B OONSTRA , JJ.

Fort Hood, J. ( dissenting ).

I dissent. I would reverse in part and affirm in part the tri al court’s decision that plaintiff’s claims were barred by res judicata.

Initially, I address plaintiff’ s first argument that the trial court erred when it considered defendants’ untimely argument that plaintiff’s claims were barr ed by res judicata because

defendants were in default. I do not agree that defendants sho uld be barred from raising their res judicata defense on that ground.

Here, defendant Thomas Epperson filed a motion to set aside th e default, raising the defense of res judicata, but the court denied the motion. Nota bly, Thomas was not represented by an attorney, there was no hearing on the motion, and record is void of any explanation for the court’s denial. Later, upon obt aining an attorney, defendants appeared in court and verbally objected to plaintiff’s motion to enter a default judgment on t he basis of res judicata. The trial court ordered the parties to f ile supplemental briefs regarding the motion to enter the default judgment.

It is true that MCR 2.603(A)(1) provides that “[o]nce the defa ult of a party has been entered, that party may not proceed with the action until the d efault has been set aside by the court.” However, MCR 2.603 provides for the setting aside of d efaults upon the showing of good cause and a meritorious defense. MCR 2.603(D)(1). Despit e the labels assigned by the parties and the court, I would conclude plaintiff was not proce eding with the action, but reasserting his meritorious defense of res judicata. See Tipton v William Beaumont Hosp , 266 Mich App 27, 33; 697 NW2d 552 (2005) (holding that the gravamen of an action is determined by reading the claim as a whole, and looking beyond the procedu ral labels to determine the exact nature of the claim). In my opinion, the default status of def endants could easily be clarified by the court on remand in full conformity with the court rules. P laintiff also asserts that the trial-2- court could not reconsider or re visit its prior ruling, which i s not correct. A trial court is always within its full authority to reconsider an action it previously took unless divested of that authority by an appeal or some other occurrence. Hill v City of Warren , 276 Mich App 299, 307; 740 NW2d 706 (2007). For these reasons, I would conclude that the trial court properly considered

the merits of whether r es judicata applied.

I next address the res judicat a issue. Plaintiff argues that the trial court erred when it held that plaintiff’s claim was barred by res judicata. As explaine d by the majority, “[t]he doctrine of res judicata bars a subsequent action when (1) the first action was decided on the merits, (2) the

matter contested in the second action was or could have been re solved in the first, and (3) both actions involve the same parties or their privies.” Estes v Titus , 481 Mich 573, 585; 751 NW2d 493 (2008) (footnotes and quotation marks omitted). While stat ed by the majority, it bears repeating that “[o]ur Supreme Court “has taken a broad approach to the doctrine of res judicata, holding that it bars not only claims already litigated, but als o every claim arising from the same transaction that the parties, exercising reasonable diligence, could have raised but did not.”

Adair v State , 470 Mich 105, 121; 680 NW2d 386, 396 (2004).

In the first proceeding, GMAC filed a complaint for reformatio n or equitable mortgage. In the complaint, GMAC provided primarily the same factual back ground stated by plaintiff in this action. However, GMAC did not argue that Thomas’s interes t in the property was invalid, never referencing the fact that defendant Margaret Epperson did not sign the quit claim deed. Indeed, GMAC stated “Although Thomas Ryan Epperson had an inter est in the Premises pursuant to the Quit Claim Deed, Thomas Ryan Epperson did not s ign the mortgage.” GMAC first alleged that Thomas was not included in the mortgage beca use of mutual mistake, asking the court to reform the mortgage to include Thomas. Second, GMAC a lleged that the actual intent of the parties was that the mortgage be secured by the property , and asked the court to impose an equitable mortgage over Thomas. GMAC asked for relief in the f orm of foreclosure, but, notably, never made allegations regarding the nonpayment of the mortgage. In its opinion following a bench trial, the court found that James Epperson an d Margaret had owned the property as tenants in the entirety. In 1993, James conveyed t he property via quit claim deed to Margaret and Thomas. Thomas was not a signatory to the mortgag e. The court concluded that because Thomas’s interest in the property was recorded and GMAC failed to investigate, GMAC

was not entitled to reformation or an equitable mortgage agains t Thomas.

Here, the primary dispute between the parties centers on wheth er the contested matter in

the second action was or could have been resolved in the first proceeding. The first complaint was intended to solve the problem with the mortgage as it relat ed to Thomas. The current complaint, on the other hand, was filed to remedy the nonpaymen t of the mortgage by Margaret. Confining the issue to whether plaintiff should be entitled to foreclose on the basis of Margaret’s nonpayment, I agree with the majority that res judicata does no t bar the action. Margaret’s failure to pay on the mortgage is an ongoing action against pla intiff—one that renews itself each time she fails to make a payment. Since the conclusion of the first proceeding, Margaret has failed to make any payments. Indeed, plaintiff could not have asserted a claim for breach of promissory note or foreclosure in 2011 for the multiple months Margaret has failed to pay since that date. Res judicata should not be used to prevent foreclos ure on the mortgage where Margaret continually fails to pa y, essentially creating a new b asis for a cause of action each

month.-3- However, plaintiff attempted to expand the court’s considerati on to whether Thomas has an interest in the property. I w ould conclude that any dispute over whether Thomas has an interest in the property is barre d by res judicata because any dispute as to the validity of the conveyance could certainly have b een brought in the first proce eding. GMAC, plaintiff’s predecessor and privy, admitted that Thomas had an interest in the property and failed to challenge the validity of that interest.

Indeed, the result reached by the majority focuses on the defe ctive deed, and I believe takes a result-oriented approach to this claim. While I agree that the deed does appear to be defective because it was unsigned by Margaret, I do not agree t hat plaintiff should be permitted to bring yet another action against Thomas, when its predecesso r had previously sued Thomas regarding the property and was fu lly apprised of the relevant f acts at the time of the lawsuit. Again, res judicata bars actions that could have been resolved in the first . Indeed, the majority makes no explanation for why GMAC could not have raised this is sue at the time of the first proceeding. The majority merely states, without explanation, t hat the “posture of the action” was not one in which the issue could have been litigated. While th e issue was not presented to the trial court in the first proceeding, I see absolutely no reason why GMAC could not have challenged the defective deed i n its action against Thomas.

I further note that plaintiff was certainly not innocent as it relates to these proceedings. As described by the majority, plaintiff did not raise any issue regarding Thomas’s interest in its complaint. Only after defendant s, unpresented at the time, wer e in default did plaintiff attempt to raise this argument, and then proceeded to rely primarily on te chnical deficiencies rather than the merits of the res judicata issu e. Unfortunately, plaintiff tec hniques appear to have prevailed.

I would reverse in part and remand for further proceedings. A s I believe that plaintiff’s claims for breach of promissory note and foreclosure remain via ble as to Margaret, I would

remand to the trial court for d etermination of plaintiff’s avai lable remedies on remand, allowing the parties an opportunity to ad dress the viability of foreclos ure and partition given the unusual circumstances presented by the mo rtgage in that it only attache s to one of the property owners. Because my conclusion would require a determination of the exte nt of Thomas’s interest in the property before plaintiff’s remedy for Margaret’s nonpayment on the note could be determined, I

would also remand to the trial c ourt for that determination. F inally, I would instruct the trial court to clarify the default statuses of defendants.

/s/ Karen M. Fort Hood