Michigan Court Rules That Mortgage Foreclosure Statute Applies to Foreclosure of Condominium Liens

In Batth Investments, LLC v Miciura, unpublished per curiam opinion of the Court of Appeals, issued April 29, 2021 (Docket No. 352642), the Michigan Court of Appeals held that the codified requirements for mortgage foreclosures by advertisement, set forth in Chapter 32 of the Revised Judicature Act (the “Act”), MCL 600.3201 through 600.3285, apply to the foreclosure of a condominium lien.

FACTUAL BACKGROUND

In Batth Investments, LLC v Miciura, Angela Barney (“Barney”) owned a condominium unit in Detroit, but failed to pay various condominium dues. As a result, a foreclosure action arose out of Barney’s condominium assessment lien. On April 26, 2018, Barney’s condominium was sold at a sheriff’s sale to Stan and Michael Miciura (the “Miciuras”). From the date of sale, Barney had a six-month redemption period, which was set to expire on October 26, 2018.

However, on June 4, 2018, the Miciuras sought to evict Barney from the condominium, as she had failed to provide an interior inspection of the property, as required under the mortgage foreclosure statute. The district court entered a default judgment against Barney on June 13, 2018.

On October 5, 2018, Barney moved to set aside the default judgment against her, arguing that her redemption period did not end until October 26, 2018. That same day, Barney quitclaimed the property to Batth Investments, LLC (“Batth Investments”), and the quitclaim deed was recorded on October 24, 2018. A few weeks after this event, the district court denied Barney’s motion to set aside the default judgment, citing MCL 600.3238(10) for the proposition that Barney’s “redemption rights were extinguished and title to the subject property vested” with the Miciuras.

Subsequently, Batth Investments sued to quiet title in circuit court, asserting that Barney’s redemption period was still running on October 24, 2018, when Barney quitclaimed the property to Batth Investments, entitling Bath Investments to an order confirming its title to the condominium. The Miciuras responded by filing two dispositive motions, arguing that the quiet title action was a collateral attack upon the district court’s default judgment against Barney; that the default judgment indeed extinguished Barney’s redemption rights, automatically vesting title in the Miciuras; and that when Barney’s redemptions rights were cut off by the default judgment entered against her, Barney had no interest in the condominium to convey by quitclaim deed. These motions were denied, and Batth Investments filed its own dispositive motion, asserting that its redemption rights flowed from the provisions of the Condominium Act.

 Citing MCL 559.208(2), Batth Investments argued that although the Condominium Act required condominium liens to be foreclosed “in the same manner” as mortgage foreclosures, the  Condominium Act provision that referenced the requirements governing mortgage foreclosures also included a rigid six-month statutory redemption period, such that the provisions of MCL 600.3238(10) did not apply to the foreclosure of a condominium lien. The circuit court granted summary disposition in favor of Batth Investments, and the Miciuras appealed.

MCL 559.208 INCORPORATES THE PROCEDURAL REQUIREMENTS CONTAINED IN MCL 600.3201

Reviewing the trial court’s decision de novo, the Court concluded that the circuit court erred in granting summary disposition in favor of Batth Investments, stating: “in MCL 559.208(2) demonstrates an unambiguous intent to incorporate the procedural requirements of MCL 600.3201 et seq. into foreclosures of condominium liens.” In addition to this consideration of legislative intent, the Court cited the Supreme Court’s order in Matteson v Stonehenge Condo Ass’n, 469 Mich 941; 670 NW2d 669 (2003), observing that the prior version of the Condominium Act provision “was silent regarding a specific period of redemption”. The Court also presumed that as MCL 600.3238 was recently enacted, the Legislature was aware of the Condominium Act provision that unambiguously stated that condominium liens are to be foreclosed “in the same manner” as mortgage foreclosures, and intended for the mortgage foreclosure provisions to also govern condominium lien foreclosures. Finally, the Court distinguished the six month redemption period in MCL 559.208(2) from the right of redemption set forth in the mortgage foreclosure statute, explaining that “the former is not coextensive with the latter. The right of redemption is a broad concept, and it encompasses not just the period within which the redemption can take place, but also under what circumstances the right exists, how the right is enforced, and how the right is extinguished.”

COLLATERAL ATTACK WAS IMPERMISSIBLE

AND REDEMPTION RIGHTS WERE EXTINGUISHED

The Court of Appeals clarified:

Because the Condominium Act has broadly adopted the laws related to mortgage foreclosures with the stated exceptions of (1) the payment of certain ‘reasonable interest, expenses, costs, and attorney fees,’ and (2) the length of the redemption period, MCL 559.208(2), we conclude that the Legislature intended that MCL 600.3238 applies to condominium foreclosures to the extent consistent with these exceptions. We further conclude that the provisions of MCL 600.3238(10) involving the extinguishment of the right of redemption are fully consistent with the two exceptions in MCL 559.208(2), and therefore, MCL 600.3238(10) applies here.

Id. at 5.

The Court went on to note that when the district court entered its default judgment for possession against Barney, her redemption rights were cut off automatically by operation of MCL 600.3238, and title vested to the Miciuras. As the district court had jurisdiction to enter the default judgment, the default judgment should have been challenged by direct appeal in that case, and not by filing a quiet title complaint in the circuit court. Batth Investments’ suit for quiet title was separate, and therefore, an impermissible collateral attack on the final decision entered in district court by default judgment.

CONCLUSION

The statutory language of the Condominium Act, MCL 559.101 et seq., incorporates by reference the directive to proceed under the foreclosure by advertisement method set forth in MCL 600.3201 through 600.3285, which governs foreclosures of a mortgage by advertisement. The requirements of MCL 600.3201 through 600.3285 apply to all condominium lien foreclosures with the stated exceptions of (1) the payment of certain reasonable interest, expenses, costs, and attorney fees, and (2) the length of the redemption period. The statutory time period for redemption of a condominium lien, however, is nevertheless dictated by the general principle of a right of redemption, which, under MCL 600.3238(10), is extinguished when a judgment of possession is entered in favor of a purchaser who is unreasonably refused inspection of the foreclosed property, as was the case in Batth Investments.

Michigan is among the few states that permit foreclosure by advertisement. Although the foreclosure by advertisement method is a more truncated process than foreclosure by judicial action, certain prerequisites are defined and regulated, such that utilizing the foreclosure by advertisement method, in the case of a mortgage foreclosure or a condominium lien foreclosure, requires following all codified requirements enacted in the mortgage foreclosure statute, incorporated by reference in the Condominium Act.

Crystal Chow is an attorney with Hirzel Law, PLC. Her practice focuses on community association law and real estate litigation. She received a B.A. from Calvin College, a M.IPIS from Carleton University, and a J.D. cum laude from Michigan State University College of Law. After graduation, Crystal clerked for the Honorable David J. Newblatt of the Genesee Circuit Court. She is a member of the Real Property Law Section of the State Bar of Michigan, the Real Estate Law Section of the Illinois State Bar Association, and the Association of Defense Trial Counsel. Crystal may be reached at (248) 478-1800 or cchow@hirzellaw.com.  

Share Post
Written by
No comments

Sorry, the comment form is closed at this time.

%d bloggers like this: