In re: Bryan Pazdzierz, Debtor.
First American Title Insurance Company, Appellee/Cross-Appellant. Bryan Pazdzierz, Appellant/Cross-Appellee,
Argued: January 18, 2013
Appeal from the United States District Court for the Eastern District of Michigan at Detroit. No. 2:11-cv-10016, David M. Lawson, District Judge.
Shawn R. Cioffi, SHEEHAN & ASSOCIATES, PLC, Rochester Hills, Michigan, for Appellant/Cross-Appellee.
Phillip J. Neuman, NADIS & NEUMAN, P.C., Farmington Hills, Michigan, for Appellee/Cross-Appellant.
Kenneth A. Koluch, SHEEHAN & ASSOCIATES, PLC, Rochester Hills, Michigan, for Appellant/Cross-Appellee.
Phillip J. Neuman, Sarah Heisler Gidley, NADIS & NEUMAN, P.C., Farmington Hills, Michigan, for Appellee/Cross-Appellant.
Before: BOGGS and WHITE, Circuit Judges, and McCALLA, District Judge. [*]
HELENE N. WHITE, Circuit Judge.
In this bankruptcy proceeding, Bryan Pazdzierz ("Pazdzierz") appeals the district court's determination that Michigan assignment law does not bar First American Title Insurance Company ("First American") from asserting that Pazdzierz's debt is non-dischargeable under 11 U.S.C. § 523(a)(2)(B). First American cross-appeals the district court's determination that its subrogation rights derived from its payment under a title insurance policy do not provide an alternative ground to assert non-dischargeability. We AFFIRM the district court's decision on the assignment issue, find it unnecessary to reach the subrogation issue, and REMAND to the bankruptcy court for proceedings consistent with this opinion.
The parties do not dispute the bankruptcy court's findings of fact:
In July of 2007, defendant debtor Bryan Pazdzierz entered into a business relationship with Randy Saylor whereby defendant performed security work at a nightclub owned or controlled by Saylor. Defendant also did work for American Business Consulting, Inc., ABCI, an entity owned or controlled by Saylor. Defendant's work for ABCI included scouting for commercial properties, including car washes and reporting to Saylor about potential acquisitions.
In the fall of 2007, defendant personally applied for and obtained loans totaling $1, 018, 350 to purchase four car washes in southeastern Michigan. . . . The defendant doesn't dispute that he took out these loans.
The loan closings were conducted by Patriot Title Agency, LLC, a former agent of plaintiff, First American Title Insurance Company, and a company owned or controlled by Saylor. Patriot issued title commitments on each property to the original lenders. The title commitments were underwritten by plaintiff Patriot also arranged for plaintiff to issue closing protection letters, CPLs, to the original lenders. These letters indemnified the lenders and their assigns from certain specific losses, including losses arising out of fraud or dishonesty of the issuing agent-that is Patriot-handling their funds or documents in connection with the closing. Immediately after the loans were closed, the notes and mortgages were assigned to Bayview Financial, LLC.
At some point, defendant defaulted on his repayment obligations. Bayview Financial, assignee of the lender's notes, discovered that defendant did not hold title to any of the properties securing the notes. Bayview filed claims with plaintiff, ...