Case Name: SMELA v. SMELA
Court: Michigan Court of Appeals
Jurisdiction: Michigan
Decision Date: 1985-04-01
Citations: 141 Mich. App. 602
Docket Number: Docket No. 68466
Parties: SMELA v SMELA
Judges: Before: Cynar, P.J., and M. J. Kelly and R. L. Evans, JJ.
Reporter: Michigan appeals reports; cases decided in the Michigan Court of Appeals.
Volume: 141
Pages: 602–609

Head Matter:
SMELA v SMELA
Docket No. 68466.
Submitted October 3, 1984, at Lansing. —
Decided April 1, 1985.
Plaintiff, Carol Ann Smela, brought an action in the Genesee Circuit Court against defendant, Stanley J. Smela, for divorce. Plaintiffs parents, Frank and Madge Szczepanski, brought a third-party action against plaintiff and defendant, alleging that they had made a $30,000 loan to the Smelas for the purpose of purchasing the marital home. No party objected to the jurisdiction of the court to decide the issue, but defendant alleged that the money was a gift, not a loan, and that any alleged oral contract to repay violated the statute of frauds. The court, Donald R. Freeman, J., granted judgment for third-party plaintiffs and a lien on the marital home. The parties then agreed to a property settlement which was incorporated into a judgment of divorce. Defendant appealed. The Court of Appeals remanded for a determination of who was to pay the third-party judgment which was against both plaintiff and defendant. The trial court held that plaintiff was to pay the judgment and hold defendant harmless, provided the Court of Appeals affirmed the third-party judgment. Held:
A circuit court has no jurisdiction in a divorce proceeding to adjudicate the rights of any party other than the husband and wife except where a third party has conspired with one spouse to defraud the other spouse out of property rights. A circuit court has no power to order the conveyance of property or interests in property to third parties in a divorce proceeding. Since defendant contested at trial and continued to contest on appeal his liability to the Szczepanskis for recovery of money damages, the third-party judgment cannot be affirmed on the ground that the trial court has authority to accept whatever property settlement the parties reach by stipulation.
Vacated in part and remanded for reconsideration of the property settlement provisions of the divorce decree.
Cynar, P.J., dissented. He would find that the trial court’s findings of fact were not clearly erroneous and that the trial court reached the right result. He would urge the Supreme Court to reconsider the question of the extent of the trial court’s jurisdiction to decide the rights of third parties in divorce cases.
References for Points in Headnotes
[1] 24 Am Jur 2d, Divorce and Separation § 270.
[2] 73 Am Jur 2d, Statute of Frauds §§ 397-399.
Opinion of the Court
1. Divorce — Courts — Jurisdiction.
A circuit court has no jurisdiction in a divorce proceeding to adjudicate the rights of any party other than the husband and wife except where a third party has conspired with one spouse to defraud the other spouse out of his or her property rights; a circuit court has no power to order the conveyance of property or interests in property to third parties in a divorce proceeding.
Dissent by Cynar, P.J.
2. Frauds, Statute of — Equity — Partial Performance — Contracts.
Equity will regard a contract which is otherwise subject to the statute of frauds as removed from the operation of the statute where one party, in reliance upon the contract, has performed his obligations thereunder so that it would be a fraud upon him to allow the other party to repudiate the contract by interposing the statute.
Ronald H. Ring, for plaintiff.
Samuel A. Ragnone, for third-party plaintiffs Frank and Madge Szczepanski.
Roger W. Kittendorf, for defendant.
Before: Cynar, P.J., and M. J. Kelly and R. L. Evans, JJ.
Recorder’s Court judge, sitting on the Court of Appeals by assignment.

Opinion:
Per Curiam.
Third-party defendant appellant appeals as of right from a divorce judgment entered November 22, 1982. Appellant challenges (1) the property settlement disposition of the marital home, and (2) a $30,000 ancillary judgment in favor of third-party plaintiffs Frank and Madge Szczepanski.
Carol and Stanley Smela were married on September 2, 1967. Carol Smela filed for divorce on October 30, 1979, and on July 31, 1981, Frank and Madge Szczepanski, Carol's parents, filed a third-party complaint in the divorce proceeding seeking a judgment against the Smelas in the amount of $30,000. At the hearing, Carol Smela and the Szczepanskis testified that, in 1975 and in 1976, the Szczepanskis had loaned the Smelas $30,000 to enable the Smelas to purchase their marital home in Genesee County. While the funds were loaned without execution of any written document evidencing the debt, the witnesses testified that the parties had agreed that the loan would bear 6% interest and that payments would be made in the amount of $180 per month. Carol Smela subsequently executed a promissory note and a second mortgage acknowledging the loan. Defendant, however, testified that he understood the money to be a gift because, when he initially attempted to begin the monthly payments, Mr. Szczepanski had informed him that he should consider the money a gift. Defendant refused to sign a promissory note five years after receiving the first installment on the loan.
The trial court first decided the merits of the third-party complaint, finding that the money was a loan and not a gift and finding both Carol and Stanley Smela liable. Following a trial on the divorce action, the court awarded plaintiff the marital home encumbered by a $16,460.50 lien in favor of the defendant. The value of defendant's interest in the home was its market value reduced by the amount of the balance owed on the mortgage (which Carol Smela was to assume and pay) and by the $30,000 judgment in favor of the Szczepanskis, the net divided in half.
While neither party challenged the jurisdiction of the trial court to adjudicate the claim of the Szczepanskis, we find that question so basic as to be dispositive.
The circuit court has no jurisdiction in a divorce proceeding to adjudicate the rights of any party other than the husband and wife. Michigan divorce statutes do not permit the courts to order conveyance of property or interests in property to third parties. The only exception is where a third party has conspired with a husband or a wife to defraud the other spouse out of his or her property rights. Yedinak v Yedinak, 383 Mich 409; 175 NW2d 706 (1970); Hoffman v Hoffman, 125 Mich App 488; 336 NW2d 34 (1983); Krueger v Krueger, 88 Mich App 722; 278 NW2d 514 (1979), lv den 406 Mich 1003 (1979); Sabourin v Sabourin, 67 Mich App 100, 104-105; 240 NW2d 284 (1976).
Moreover, while defendant never challenged the right of the Szczepanskis to join the divorce proceedings, defendant contested at trial and continues to contest on appeal his liability to the Szczepanskis for recovery of money damages. Thus, the third-party judgment cannot be affirmed on the ground that the trial court has authority to accept whatever property settlement the parties reach by stipulation. Kasper v Metropolitan Life Ins Co, 412 Mich 232; 313 NW2d 904 (1981).
We vacate the $30,000 third-party judgment against Carol and Stanley Smela. (The Szczepanskis may initiate some independent action to recover their loan and defendant may test his statute of frauds defense in a proper case.) This case is remanded to the trial court for reconsideration of the property settlement provisions of the divorce decree. We find no showing of prejudice or bias requiring the disqualification of the trial judge in this case. People v Lobsinger, 64 Mich App 284; 235 NW2d 761 (1975), lv den 395 Mich 802 (1975).
Vacated in part and remanded.