Doctrine of Merger Applied to Prevent Mortgagee from Avoiding Payment of Condominium Assessments

For the second time, the Michigan Court of Appeals has held that a mortgagee who accepts a deed to a condominium unit subject to its mortgage is barred by the doctrine of merger from later foreclosing that mortgage in an attempt to avoid payment of condominium assessments.  

In FNMA v Hsiung, an unpublished court of appeals opinion, a condominium association foreclosed its lien, resulting in a sheriff’s deed in favor of the association.  For reasons not made clear by the opinion, the mortgagee of the unit acquired the association’s interest by quit claim deed.  Two years later, when the mortgagee had not paid assessments, the association recorded a new lien and began a new foreclosure.  The mortgagee then began foreclosure of its mortgage.  The mortgagee then sued the association seeking a detemination of whether who had the superior title.

Although the trial court ruled in favor of the mortgagee, the court of appeals reversed, holding that, by virtue of accepting the quit claim deed from the association without an express reservation of its mortgage from merger, the mortgage merged with the fee title and the mortgagee became obliged to pay assessments.  Because of the merger, it had no mortgage to later foreclose.

© Steve Sowell 2017