Real Property Notes Blog
Third Party Purchaser at Foreclosure Sale Not Entitled to Deficiency Judgment Against Owner of Property Who Redeemed
In SJT Properies LLC v Blaker, an unpublished Michigan Court of Appeals opinion, the original owner of the property granted a mortgage on the property. The mortgage was assigned several times; the final assignee, Bayview Loan Servicing, foreclosed the mortgage by advertisement. SJT Properties purchased at the foreclosure sale. The original owner quit claimed the property to Blaker after the sale. Blaker requested redemption figures from SJT, which claimed that Blaker was responsible not only for the amount needed to redeem from the sheriff’s sale but also for the alleged remaining amount needed to discharge the mortgagee. Rather than tendering to SJT, Blaker tendered to the register of deeds and obtained a redemption receipt from the register of deeds. SJT then sued Blaker claiming that Blaker was liable for the claimed deficiency between the amount of the sale price and the balance allegedly remaining due on the mortgage. Blaker filed a motion for summary disposition under MCR 2.116(C)(8) on the basis that the complaint failed to state a cause of action against him. The trial court granted the motion, and SJT appealed
The Michigan Court of Appeals affirmed. The mortgage and the underlying note were never assigned to SJT and thus it had no standing to attempt to collect any deficiency. Purchase at a foreclosure sale is not an assignment of the mortgage; indeed, foreclosure extinguishes the mortgage. Also, the sheriff’s deed became void when Blaker redeemed from the sale.
SJT also argued that the deficiency statute, MCL 600.3280. However, for that statute to apply, the mortgagee must take title to the property. SJT’s argument failed for two reasons: one, it was not the mortgagee, and two it never took title to the property because Blaker redeemed.
Units Which Reverted to General Common Elements Not Revived by Tax Sale; Units Need Not be Owned by a Developer to Revert to General Common Elements
In Wellesley Gardens Condo. Assn v Manek, an unpublished Michigan Court of Appeals decision, several units in the condominium unit reverted under the 2002 version of Section 167 of the Michigan Condominium Act and the condominium association obtained a judgment declaring that the units had become general common elements. The “owner” of the “units" failed to pay taxes on them, the county foreclosed, and the county sold the “units.”
Wellesley again filed suit seeking to quiet title against the purchasers. The county treasurer intervened. The trial court ruled in favor of the purchasers. Wellesley appealed.
The Michigan Court of Appeals reversed and remanded to the trial court to enter a judgment in Welles’ey’s favor. Relying on the Cove Creek opinion, discussed elsewhere in this blog, the appeals court held that the tax sales did not revive these units, which had become general common elements prior to the tax sale. Also, the decision in the prior lawsuit was res judicata as to the units involved in the prior lawsuit.
There were three units, not subject to the prior lawsuit, which were foreclosed and purchased by a separate entity. This entity argued that the 2002 version of Section 167 applied only to developers and because the entity was not a developer or successor developer, its units did not revert to general common elements. The appeals court held that the automatic reversion mandated by the 2002 version of Section 167 was not limited to developer-owned units; these units also became general common elements prior to the tax sale.
2016 Amendment to MI Condominium Act Not Given Retroactive Effect; Units Became General Common Elements
In Cove Creek Condo. Assn. v Vistal Land & Home Dev Co., a Michigan Court of Appeals opinion designated for publication, the condominium project was established in 1989, consisting of 31 units. Units 15 through 31 were built and sold; however, Unit 1 through 14 were designated as “need not be built” and were never constructed. In 2016, the condominium association filed suit against the present owner of units 1 through 14 asking the court to declare that the units had become general common elements under a version of Section 167 of the Michigan Condominium Act which was passed in 2002 and remained in effect until September 21, 2016, when a new version took effect. In essence, the old version provided that units designated as “need not be built” became general common elements and no longer buildable unless the developer either withdrew the land from the condominium project or amended the condominium documents to provide that the units “must be built.” The 2016 amendment no longer provided that units became units by the passage of time; instead, the association had to hold a vote and give notice to the developer, who then had 60 days to either change the designation to “must be built” or withdraw the land. The association contended that, because the time period under the 2002 version had already passed before the 2016 version became effective, the units had become general common elements and were no longer buildable.
The matter was hotly contested in the trial court, but ultimately the trial court ruled that the 2016 version did not apply retroactively and the units had become general common elements. The developer appealed, but the Michigan Court of Appeals affirmed. While the opinion contains a lengthy discussion of when statutes apply retroactively as well as due process and takings issues, the upshot of the decision is that the 2016 amendment with its additional requirements did not apply to units which had reverted to general common elements before the 2016 amendment took effect.