Background
In October 2014, Can IV lent nearly $54 million to Packard Square LLC, a real estate development company, to finance a luxury retail and residential project in Ann Arbor, Michigan. Craig Schubiner, as principal of Packard Square, signed a guaranty contract securing the loan. After construction delays, Can IV sued Packard Square in October 2016 seeking foreclosure and receiver appointment. Packard Square filed for bankruptcy (later dismissed), and in September 2018, the trial court granted Can IV summary disposition on its foreclosure claim. The property sold to Can IV for a $75 million credit bid at a November 2018 foreclosure sale.
Can IV subsequently sued Schubiner directly for breach of the guaranty contract on July 30, 2018. In December 2019, the trial court granted summary disposition to Can IV and entered judgment against Schubiner for $13,992,936.05, plus attorney fees and costs. A January 2020 court order enjoined Schubiner from transferring assets outside the normal course of business pending judgment satisfaction.
The same month, Schubiner transferred two residential properties (the Aspen and Linden properties in Birmingham, Michigan) from his personal name to 305 Associates LLC, an entity where he served as manager and the owners were three irrevocable trusts benefiting him and family members. The transfer coincided with a $1.5 million refinance secured by Schubiner personally, which paid off preexisting liens on the properties. Can IV challenged the transfer as fraudulent under the Uniform Voidable Transactions Act (UVTA) and sought to void it; Schubiner also filed a separate action seeking relief from the guaranty judgment.
The Court’s Holding
The Michigan Court of Appeals affirmed both the trial court’s finding of fraudulent transfer and dismissal of Schubiner’s relief-from-judgment claim. On the fraudulent transfer issue (Docket 377133), the appellate court upheld the trial court’s determination that Schubiner violated the UVTA. The court found Schubiner was insolvent at the time of the transfer based on three elements: he owed approximately $600,000 to existing creditors, the refinancing caused him to take on an additional $1.5 million in personal debt that previously was the responsibility of 305 Associates, and the $14 million guaranty judgment constituted debt under the UVTA. Critically, the court rejected Schubiner’s argument that he was simply the guarantor on prior debt, holding that the obligation to pay the $1.5 million shifted entirely from 305 to Schubiner with no equivalent value received in return.
On Schubiner’s relief-from-judgment claim (Docket 371134), the Court of Appeals affirmed summary disposition in favor of Can IV. The court found that Schubiner failed to preserve his arguments by raising them only in a motion for reconsideration rather than in his initial pleadings. Additionally, the court held that res judicata and collateral estoppel barred Schubiner from relitigating the priority of the receiver loan and the deficiency calculation, which had been decided in prior proceedings. The court further determined the trial court did not abuse its discretion in denying Schubiner’s motion for reconsideration based on “newly discovered” deposition testimony, since he could have presented such evidence at the summary disposition stage.
Key Takeaways
- Under the UVTA, a transfer is fraudulent if the debtor was insolvent or became insolvent as a result of the transfer, received no reasonably equivalent value, and the creditor’s claim arose before the transfer—all three elements must be satisfied.
- Insolvency analysis must account for all debt the debtor personally incurs as a result of the transfer, not merely property value changes or net-worth comparisons on paper.
- Guaranty obligations and judgment debts are liabilities counted toward insolvency; a debtor cannot avoid insolvency findings by characterizing prior obligations as guaranties.
- Issues not raised in timely motions or initial pleadings cannot be preserved for appellate review through later reconsideration motions or newly discovered evidence.
Why It Matters
This decision provides Michigan creditors with significant guidance on pursuing fraudulent transfer claims under the UVTA against debtors who use entity transfers to shield assets from judgment enforcement. The court’s holding that refinancing transactions shifting debt from an LLC to the individual owner constitutes a fraudulent transfer absent reasonably equivalent value underscores that mere liquidity or rate improvements do not satisfy the UVTA’s requirement of equivalent value exchange. Practitioners advising clients on post-judgment asset protection strategies should note that personal assumption of entity-level debt to facilitate asset transfers will likely trigger scrutiny under the UVTA, particularly when coupled with an injunction against asset transfers.
The opinion also reinforces Michigan’s strict procedural requirements for relief from judgment claims: litigants cannot bootstrap new arguments through motions for reconsideration or discover evidence after summary disposition and expect appellate rescue. The decision confirms that res judicata operates to foreclose relitigation of issues already addressed in prior appellate decisions, preventing repeated judicial review of settled disputes in multi-phase litigation.