In Stonehenge Condominium Assn. v Bank of New York Mellon Trust Co., an unpublished Michigan Court of Appeals opinion, Stonehenge recorded a lien for nonpayment of assessments against the co-owner. At the time of recording, there were two mortgages against the property; BNY Mellon held the second mortgage. The co-owner gave the association a quit claim deed in lieu of foreclosure of the association’s lien.
BNY Mellon subsequently foreclosed its mortgage. BNY Mellon was the successful purchaser. The first mortgagee then began foreclosure. BNY Mellon paid the balance due and the first mortgage was discharged. Stonehenge tendered sums to redeem from BNY Mellon’s foreclosure on the last day six months from the sale. BNY Mellon refused the tender, because it had shortened the redemption period through abandonment. Stonehenge filed suit to quiet title. BNY Mellon filed a counterclaim for quiet title, for slander of title, and for unjust enrichment. Upon motions for summary disposition, the court dismissed Stonehenge’s claim, quieted title in favor of BNY, and awarded BNY damages for slander of title and unjust enrichment.
Stonehenge argued that acceptance of the deed from the co-owner did not operate as a merger with its lien. The court held otherwise, because once Stonehenge had title, the lien for nonpayment of assessments had already served its purpose; there was no reason not to apply the doctrine of merger. Also, Stonehenge had not manifested any objective signs that it did not consider title to have merged.
BNY Mellon’s claim for slander of title arose because the association failed to discharge its lien after acceptance of the deed. Stonehenge argued that slander of title cannot be based upon a lien valid when recorded. The court held that failure to discharge an invalid lien can be the basis of slander of title. The court also held that BNY Mellon demonstrated malice to satisfy a claim of slander of title; the association’s attempt to redeem from BNY Mellon’s foreclosure sale demonstrated that it knew its lien was invalid.
Finally, the court awarded BNY Mellon damages for rent received by the association subsequent to the expiration of the redemption period under a theory of unjust enrichment.
The case was a complete victory for the mortgage company and should serve as a cautionary tale for condominium associations.