Court Opinion

ID: 2753335
Source: CourtListenerOpinion
Date Created: 2014-11-19 23:04:14.778621+00
Date Added: 2024-06-11T10:20:40.784719
License: Public Domain

STATE OF MICHIGAN

                             COURT OF APPEALS

TRADEMARK PROPERTIES OF MICHIGAN,                                 FOR PUBLICATION
L.L.C.,                                                           November 18, 2014
                                                                  9:10 a.m.
              Plaintiff-Appellant,

v                                                                 No. 313296
                                                                  Oakland Circuit Court
FEDERAL NATIONAL MORTGAGE                                         LC No. 2011-122474-CH
ASSOCIATION, MORTGAGE ELECTRONIC
REGISTRATION SYSTEMS, INC., and BANK
OF AMERICA,

              Defendants-Appellees.

Before: HOEKSTRA, P.J., and WILDER and FORT HOOD, JJ.

WILDER, J.

       In this action to quiet title to a condominium unit, plaintiff, Trademark Properties of
Michigan, L.L.C., appeals as of right an order granting summary disposition in favor of
defendants, Federal National Mortgage Association (“Fannie Mae”), Mortgage Electronic
Registration Systems, Inc. (“MERS”), and Bank of America (“BOA”). We reverse.

                                               I

        On August 16, 2003, Earl F. Strickfaden obtained a mortgage loan from GMAC
Mortgage Corporation. MERS was the mortgagee under the security instrument (the “MERS
mortgage”). The lender’s interest was subsequently transferred to MERS. Strickfaden defaulted
on his obligation. The MERS mortgage was foreclosed by advertisement and Fannie Mae
purchased the property at a sheriff’s sale on May 11, 2010. The sheriff’s deed was recorded with
the register of deeds on May 20, 2010. It is undisputed that the property was never redeemed.
The MERS mortgage was extinguished.1

1
  A second mortgage was held by Standard Federal Bank, N.A. and its successors. That
mortgage was foreclosed by advertisement and BOA purchased that interest on May 25, 2010.
See Advanta Nat’l Bank v McClarty, 257 Mich App 113, 124; 667 NW2d 880 (2003) (“[A]

                                              -1-
        On December 6, 2010, the association where the condominium unit was located, Manor
Homes of Troy Association (MHTA), filed a notice of lien for non-payment of condominium
assessments. The lien was not satisfied and MHTA foreclosed by advertisement. On February
15, 2011, plaintiff purchased the property at a sheriff’s sale for $6,761.45, and then recorded the
sheriff’s deed with the register of deeds on February 22, 2011. The last day to redeem the
property was August 15, 2011.

        On August 9, 2011, before the redemption period for the MHTA foreclosure expired, an
attorney for GMAC Mortgage Corporation, the lender for the MERS mortgage, recorded an
affidavit purporting to expunge the May 11, 2010 sheriff’s sale to Fannie Mae. The affiant
averred that, by virtue of this Court’s decision in an unrelated case, Residential Funding Co, LLC
v Saurman, 292 Mich App 321; 807 NW2d 412 (2011), the May 11, 2010 sheriff’s deed was
void ab initio, thereby leaving the MERS mortgage in full force and effect. 2

        Plaintiff thereafter filed this action to quiet title to the property, alleging that the MERS
affidavit could not effectively revive the previously extinguished MERS mortgage and thereby
invalidate plaintiff’s interest in the property. The parties filed cross-motions for summary
disposition. On October 31, 2012, the trial court denied plaintiff’s motion and granted summary
disposition in favor of defendants pursuant to MCR 2.116(C)(10). The trial court reasoned that,
by filing the affidavit prior to the redemption period for the MHTA foreclosure, the MERS
foreclosure was expunged and MERS’s interest was superior to plaintiff’s interest. The trial
court also ruled that plaintiff failed to establish it was a bona fide purchaser, reasoning that
plaintiff had notice because the affidavit was filed before the redemption period ended and
plaintiff failed to pay sufficient value. Plaintiff appealed from this order.

                                                  II

                                                  A

        As an initial matter, plaintiff contends that defendants lack standing to assert an interest
in the property. We disagree. Whether a party has standing presents a question of law that this
Court reviews de novo. Manuel v Gill, 481 Mich 637, 642-643; 753 NW2d 48 (2008). “The
purpose of the standing doctrine is to assess whether a litigant’s interest in the issue is sufficient
to ‘ensure sincere and vigorous advocacy.’ ” Lansing Sch Ed Ass’n v Lansing Bd of Ed, 487
Mich 349, 355; 792 NW2d 686 (2010), quoting Detroit Fire Fighters Ass’n v Detroit, 449 Mich
629, 633; 537 NW2d 436 (1995). That is, the objective of the standing requirements is “to insure
that only those who have a substantial interest will be allowed to come into court to complain.”
White Lake Improvement Ass’n v City of Whitehall, 22 Mich App 262, 273; 177 NW2d 473
(1970). When a party’s standing is challenged in a case, the question is whether that person is a
proper party to request adjudication of the issue, not whether the issue is justiciable. Lansing
Sch, 487 Mich at 355; White Lake Improvement Ass’n, 22 Mich App at 273 n 13. “Standing in

purchaser at a foreclosure sale of a second mortgage takes the property subject to the first
mortgage . . . .”).
2
  At the time the affidavit was recorded, this Court’s decision in Residential Funding was
binding law, but subsequently, our Supreme Court reversed that decision. 490 Mich 909 (2011).

                                                 -2-
no way depends on the merits of the case.” Rogan v Morton, 167 Mich App 483, 486; 423
NW2d 237 (1988); see also Lansing Sch, 487 Mich at 357. When a cause of action exists under
law or where the Legislature expressly confers standing, those circumstances are sufficient to
establish standing. Id.

        In Lansing Sch, 487 Mich at 372, our Supreme Court delineated the following approach
to determine whether a litigant has standing:

       We hold that Michigan standing jurisprudence should be restored to a limited,
       prudential doctrine that is consistent with Michigan’s longstanding historical
       approach to standing. Under this approach, a litigant has standing whenever there
       is a legal cause of action. Further, whenever a litigant meets the requirements of
       MCR 2.605, it is sufficient to establish standing to seek a declaratory judgment.
       Where a cause of action is not provided at law, then a court should, in its
       discretion, determine whether a litigant has standing. A litigant may have
       standing in this context if the litigant has a special injury or right, or substantial
       interest, that will be detrimentally affected in a manner different from the
       citizenry at large or if the statutory scheme implies that the Legislature intended
       to confer standing on the litigant. [Footnotes omitted.]

        MCL 600.2932(1) reflects the Legislature’s intent to confer standing on individuals
claiming an interest in real property. The statute authorizes “suits to determine competing
parties’ respective interests in land.” Republic Bank v Modular One LLC, 232 Mich App 444,
448; 591 NW2d 335 (1998), overruled in part on other grounds in Stokes v Millen Roofing Co,
466 Mich 660; 649 NW2d 371 (2002). This litigation involves an action to quiet title filed by
plaintiff because the parties dispute their respective interests in the condominium unit. Plaintiff’s
assertion that defendants cannot establish a superior interest in the property is premised on the
merits of the litigation. Whether a party can succeed on the merits of the substantive claim is not
the appropriate inquiry when reviewing standing. Lansing Sch, 487 Mich at 357, 359.
Accordingly, we reject plaintiff’s argument regarding standing.

                                                 B

       Plaintiff maintains its claim to the property was superior to any claim of defendants, and
contends that the trial court erred by ruling the MERS affidavit expunged the prior sheriff’s sale
to Fannie Mae and revived the previously extinguished MERS mortgage. . We agree.

       Questions of law, actions to quiet title in equity, as well as decisions to grant or deny
summary disposition, are reviewed de novo. Ter Beek v City of Wyoming, 495 Mich 1, 8; 846
NW2d 531 (2014); Book-Gilbert v Greenleaf, 302 Mich App 538, 542; 840 NW2d 743 (2013);
Beach v Lima Twp, 489 Mich 99, 106; 802 NW2d 1 (2011). Summary disposition is proper
pursuant to MCR 2.116(C)(10) when “there is no genuine issue as to any material fact, and the
moving party is entitled to judgment as a matter of law.” “[T]he plaintiff in a quiet-title action
has the initial burden of establishing a prima facie case of title, [but] summary disposition in
favor of the defendant is properly entered if the plaintiff fails to carry this burden.” Special Prop
VI, LLC v Woodruff, 273 Mich App 586, 590; 730 NW2d 753 (2007) (citations omitted).

                                                -3-
         Foreclosure of a mortgage containing a power of sale is permissible by advertisement
provided the proceedings are instituted in accordance with the statute. See Masella v Bisson, 359
Mich 512, 515; 102 NW2d 468 (1960). “A foreclosure of a mortgage extinguishes it . . . and the
purchaser becomes the owner of an equitable interest in the mortgaged premises which ripens
into a legal title if not defeated by redemption as provided by law.” Dunitz v Woodford
Apartments Co, 236 Mich 45, 49-50; 209 NW 809 (1926); see also Senters Ottawa Savings
Bank, FSB, 443 Mich 45, 50; 503 NW2d 639 (1993) and MCL 600.3236. “Statutory
foreclosures should not be set aside without some very good reasons therefor.” Markoff v
Tournier, 229 Mich 571, 575; 201 NW 888 (1925). A “strong case of fraud,” irregularity, or
“some peculiar exigency” is required to set aside a statutory foreclosure sale. Kubicki v Mtg
Electronic Registration Sys, 292 Mich App 287, 289; 807 NW2d 433 (2011) (citations and
quotations marks omitted).

       It is undisputed that the MERS mortgage was foreclosed by advertisement, that Fannie
Mae purchased the property at a foreclosure sale and received a sheriff’s deed for the property,
and that the property was never redeemed. The foreclosure extinguished the MERS mortgage
and, because the property was not redeemed, all rights, title, and interest in the property vested in
Fannie Mae. Dunitz, 236 Mich at 49-50; MCL 600.3236. Afterward, plaintiff purchased and
recorded Fannie Mae’s interest in the property. Months later, in an affidavit recorded pursuant
MCL 565.451a, MERS claimed the foreclosure by advertisement of its mortgage interest was
void ab initio following Saurman. MCL 565.451a provides:

       An affidavit stating facts relating to any of the following matters which may
       affect the title to real property in this state made by any person having knowledge
       of the facts or by any person competent to testify concerning such facts in open
       court, may be recorded in the office of the register of deeds of the county where
       the real property is situated:

       (a) Birth, age, sex, marital status, death, name, residence, identity, capacity,
       relationship, family history, heirship, homestead status and service in the armed
       forced of parties named in deeds, wills, mortgages and other instruments affecting
       real property;

       (b) Knowledge of the happening of any condition or event which may terminate
       an estate or interest in real property;

       (c) Knowledge of surveyors duly registered under the laws of this state with
       respect to the existence and location of monuments and physical boundaries, such
       as fences, streams, roads and rights of way of real property;

       (d) Knowledge of such registered surveyors reconciling conflicting and
       ambiguous descriptions in conveyances with descriptions in a regular chain of
       title;

       (e) Knowledge of facts incident to possession or the actual, open, notorious and
       adverse possession of real property; or

                                                -4-
       (f) Knowledge of the purchaser, or in the case of a corporation, of its president,
       vice president, secretary or other duly authorized representative acting in a
       fiduciary or representative capacity, of real property sold upon foreclosure or
       conveyed in lieu of foreclosure of a trust mortgage or deed of trust securing an
       issue of bonds or other evidences of indebtedness, or of any mortgage, land
       contract or other security instrument held by a fiduciary or other representative, as
       to the authority of such purchaser to purchase the real property and as to the terms
       and conditions upon which the real property is to be held and disposed of.

MERS claims that the mere filing of an affidavit by a mortgagee attesting that a foreclosure sale
was void ab initio establishes the mortgagee’s interest in the foreclosed property. But we need
not decide the effect of the filing of an affidavit where a foreclosure sale was void ab initio
because, here, the foreclosure sale was not void.3

        Again, in attesting that the foreclosure sale was void ab initio, MERS’s affidavit relied on
this Court’s decision in Saurman, 292 Mich App 321. In Saurman, the defendants purchased and
obtained financing for their respective properties from a financial institution. The mortgage
instrument did not designated MERS as the mortgagee. Id. at 325-326. This Court held that
MERS, as a mortgagee and not a noteholder, had no “interest in the indebtedness secured by the
mortgage” under the foreclosure by advertisement requirements in MCL 600.3204(1)(d), and
therefore MERS could not exercise the contractual right to foreclose by advertisement. Id. at
329-332. Because MERS lacked the ability to comply with the statutory requirements for
foreclosure by advertisement, the foreclosure proceedings were void ab initio. Id. at 342. This
Court’s decision in Saurman was short-lived. Just as in Saurman, MERS was a mortgagee here
and would have had no interest in the indebtedness under this Court’s decision in that case. On
November 16, 2011, however, our Supreme Court reversed this Court’s Saurman decision and
held that MERS’s ownership of a security lien on the properties constituted an interest in the
indebtedness that authorized it to foreclose by advertisement. Saurman, 490 Mich 909.

         Even if the filing of the affidavit regarding Saurman had some effect on the interest in the
property here, plaintiff promptly filed the quiet title action to challenge that affidavit. “[T]he
purpose of an action to quiet title is to determine the existing title to property by removing any
cloud therefrom.” Ingle v Musgrave, 159 Mich App 356, 365; 406 NW2d 492 (1987). When the
trial court resolved cross-motions for summary disposition, plaintiff presented a prima facie case
of title based on the MHTA foreclosure and its purchase at the sheriff’s sale for $6,761.45. The
sole basis for MERS’s assertion of a continued mortgage interest in the property—that the

3
  The recent case, Connolly v Deutsche Bank Nat’l Trust Co, unpublished opinion of the Sixth
Circuit Court, issued September 9, 2014 (Docket No. 13–2522), is not binding on this Court,
Abela v Gen Motors Co, 469 Mich 603, 607; 677 NW2d 325 (2004). Moreover, unlike this case
where the foreclosure sale was not void despite the subsequently-filed affidavit that provided
otherwise, Connolly involved a sheriff’s sale that was inadvertently held, a mortgage that
continued to encumber the property, and an affidavit that accurately provided notice of that
continued encumbrance to interested persons.

                                                -5-
MERS foreclosure sale was void ab initio under this Court’s decision in Saurman—was no
longer sustainable because our Supreme Court had reversed that decision nearly a year before. A
trial court, like this Court, is bound by the doctrine of stare decisis to follow the decisions of our
Supreme Court. Tenneco Inc v Amerisure Mut Ins Co, 281 Mich App 429, 447; 761 NW2d 846
(2008). Our Supreme Court’s decision in Saurman compelled the trial court to conclude that
there was no question of fact that the MERS mortgage was extinguished and plaintiff had the
superior interest in the property.4 Thus, the trial court erred in ruling that the MERS affidavit was
effective in reviving the MERS mortgage, and in ruling that plaintiff’s interest in the property
was subordinate to the revived mortgage interest.

                                                  C

        We reject Fannie Mae’s alternative argument for affirmance of summary disposition in its
favor that the foreclosure by advertisement proceeding commenced by MHTA to foreclose on its
lien for unpaid condominium assessments was invalid because MHTA did not provide notice of
the lien in accordance with MCL 559.208(3)(c), or because MHTA did not properly calculate the
amount of the lien. MCL 559.208 governs foreclosure of condominium assessment liens and
provides, in relevant part:

              (3) A foreclosure proceeding may not be commenced without recordation
       and service of notice of lien in accordance with the following:

                                                ***

               (c) The notice of lien shall be recorded in the office of register of deeds in
       the county in which the condominium project is located and shall be served upon
       the delinquent co-owner by first-class mail, postage prepaid, addressed to the last
       known address of the co-owner at least 10 days in advance of commencement of
       the foreclosure proceeding. [Emphasis added.]

        Although Fannie Mae asserts that it did not receive “actual notice” of the MHTA lien, the
statute does not require a showing of actual notice, but instead provides that notice must be sent
by first-class mail “to the last known address of the co-owner at least 10 days in advance of

4
  We note that resolution of the parties’ competing property interests does not depend on
plaintiff’s status as a bona fide purchaser for value. Under this statute, a party’s status as a bona
fide purchaser for value is relevant only when there has been a previously unrecorded
conveyance. MCL 565.29. None of the alleged property interests at issue in this case were
unrecorded. Further, to the extent that MERS asserts a superior interest in the property pursuant
to its affidavit, that affidavit was recorded after plaintiff recorded its sheriff’s deed. Because
plaintiff’s sheriff’s deed was recorded first, and because a party’s status as a bona fide purchaser
for value is relevant only where there has been a prior unrecorded conveyance, an examination of
the parties’ competing property interests does not depend on plaintiff’s status as a bona fide
purchaser for value. As such, we decline to address Fannie Mae’s argument that, because
plaintiff allegedly did not pay “adequate value” for the property, it is not a bona fide purchaser.

                                                 -6-
commencement of the foreclosure proceeding.” The MHTA complied with this requirement by
sending notice of the lien to the address listed in the sheriff’s deed that was issued to Fannie
Mae. Smith v Cliffs on the Bay Condo Ass’n, 463 Mich 420, 429; 617 NW2d 536 (2000).5

        Fannie Mae’s contention that the amount of the lien was improperly calculated is based
on its position that it could not be held responsible for any condominium assessments that arose
after it was issued the sheriff’s deed, but before the redemption period expired. Given this
Court’s recent decision rejecting the same argument in Wells Fargo Bank v Country Place
Condo Ass’n, 304 Mich App 582, 590-592; 848 NW2d 425 (2014) (holding that a purchaser at a
foreclosure sale is liable for assessments arising after issuance of the sheriff’s deed), this claim of
error fails.

          In light of our decision, it is unnecessary to address plaintiff’s remaining issues on
appeal.

          Reversed. Plaintiff, as the prevailing party on appeal, may tax costs pursuant to MCR
7.219.

                                                               /s/ Kurtis T. Wilder
                                                               /s/ Joel P. Hoekstra
                                                               /s/ Karen M. Fort Hood

5
  We note that our Supreme Court’s decision in Smith was partially abrogated by the United
States Supreme Court’s decision in Jones v Flowers, 547 US 220, 225; 126 S Ct 1708; 164 L Ed
2d 415 (2006), which held that in order to satisfy constitutional due process requirements, “when
mailed notice of a tax sale is returned unclaimed, the State must take additional reasonable steps
to attempt to provide notice to the property owner before selling his property, if it is practicable
to do so.” But unlike Smith and Jones, the present case does not involve state action in a
foreclosure by a governmental entity. Thus, it is questionable whether the same due process
concerns apply. Regardless, the guiding principle of Jones is “that notice must be ‘reasonably
calculated’ to apprise interested parties of the action and to provide them an opportunity to be
heard.” Sidun v Wayne Co Treasurer, 481 Mich 503, 515; 751 NW2d 453 (2008). Here, the
MHTA sent the notice of lien to the address that Fannie Mae listed in its sheriff’s deed, and there
is no evidence that the MHTA had knowledge of any facts suggesting that this notice was not
reasonably calculated to reach Fannie Mae. Accordingly, defendants failed to establish a
question of fact regarding the MHTA’s compliance with the statutory notice requirement.

                                                 -7-