Real Property

Issues: Whether the defendant-Green Tree's mortgage had priority over the plaintiff-condo association's lien; Statutory interpretation; Federal Nat'l Mtg. Ass'n v. Lagoons Forest Condo Ass'n; MCL 559.208(1) of Michigan's Condominium Act (MCL 559.101 et seq.); Meaning of the phrase "first mortgage of record"; Coventry Parkhomes Condo Ass'n v. Federal Nat'l Mtg. Ass'n; Michigan's race-notice scheme; MCL 565.29; Wexford Parkhomes Condo Ass'n v. Katzman (Unpub.); Karbel v. Comerica Bank

Court: Michigan Court of Appeals (Unpublished)

Case Name: New Center Commons Condo. Ass'n v. Espino

e-Journal Number: 57477

Judge(s): Per Curiam – Donofrio, Gleicher, and M.J. Kelly

 

Holding that the defendant-Green Tree's mortgage was not the "first mortgage of record," the court reversed and remanded for entry of summary disposition in favor of the plaintiff-condo association on the issue of whether its lien had priority over the Green Tree mortgage. The case arose out of a foreclosure action filed by plaintiff in order to recover unpaid condo assessments by defendant-Espino. Espino executed a mortgage for $35,000 in favor of defendant-Quicken Loans for purchase of a condo unit (the Green Tree mortgage). Espino executed another mortgage for $13,000 in favor of National City Bank (the PNC mortgage). The PNC mortgage was recorded first. On appeal, plaintiff argued that the trial court erred in determining that the Green Tree mortgage had priority over the PNC mortgage, making plaintiff's lien subordinate to the Green Tree mortgage. The court agreed. The trial court failed to apply the court's definition of "first mortgage of record" in Coventry. The Coventry court, while "acknowledging that Michigan's race-notice scheme generally governs priority disputes, determined that with respect to a condominium association's lien, only a race scheme applies when determining which mortgage is a 'first mortgage of record.'" Applying the court's definition resulted in the PNC mortgage being the "first mortgage of record" because it was recorded before the Green Tree mortgage. Thus, because plaintiff's lien had "super-priority over all other mortgages except for the first mortgage of record, it had priority over the Green Tree mortgage, and the trial court erred in ruling otherwise." The court agreed with the trial court that the Coventry court's definition of "first mortgage of record," which omitted any reference to notice, "should be viewed cautiously because the issue of notice was not germane, given that there was only one mortgage at issue" in that case. However, even if the concept of notice was added to the definition (as the trial court thought appropriate), the trial court "still arrived at the wrong conclusion." Regardless of what definition was used, it "erred in concluding that the Green Tree was the 'first mortgage of record.' The PNC mortgage was recorded first," and "there was no evidence that the PNC Bank had knowledge of the Green Tree mortgage when PNC Bank executed its mortgage."

 

Full Text Opinion

This summary also appears under Contracts

 

Issues: Whether the plaintiff-condo association (the Association) had the authority to file this suit; Effect of the Association's violation of its bylaws; The Michigan Condominium Act (MCA)(MCL 559.101 et seq.); MCL 559.153; MCL 559.206(a); Allied Supermarkets, Inc. v. Grocer's Dairy Co.; "Ordinary and plain meaning"; DeFrain v. State Farm Mut. Auto. Ins. Co.; "Unambiguous contracts"; Rory v. Continental Ins. Co.; Wayne Cnty. v. Wayne Cnty. Ret. Comm'n; Northline Excavating, Inc. v. Livingston Cnty.; Whether the bylaw provision conflicted with the Michigan Nonprofit Corporation Act (MCL 450.2101 et seq.); MCL 450.2261; Whether the litigation preapproval provision conflicted with the MCA; Claim that requiring approval before filing suit to enforce condo restrictions violates the general principles of the MCA; Freedom to contract "to uncommon or unusual terms"; Wilkie v. Auto-Owners Ins. Co.; Bylaws giving condo owners the power to limit an association's authority to file suit; River Plaza Homeowner's Ass'n v. Healey (IL App.); Claim the prelitigation-approval provision would deny the Association "the right to even defend itself in any litigation brought by anyone for any purpose"; Claim that the court should reverse the trial court's order denying its motion to set aside the dismissal; MCR 7.208(A); Lemmen v. Lemmen

Court: Michigan Court of Appeals (Unpublished)

Case Name: Tuscany Grove Ass'n v. Gasperoni

e-Journal Number: 57475

Judge(s): Per Curiam – Donofrio, Gleicher, and M.J. Kelly

 

Holding that the trial court correctly determined that the plaintiff-Association lacked the authority to file the current suit where the Association violated its bylaws by filing suit without a vote by 66-2/3% of the owners to spend their association fees in this manner, the court made no judgment on the merits of the Association's underlying claims, but affirmed the trial court's dismissal of the complaint. It noted that if the Association wants to file suit against defendant-Gasperoni (for violating the Association's bylaws), "it must gather supporting votes in the manner outlined in the bylaws and then bring a new action." Under the plain language of the bylaws, the Association "shall not have authority . . . to incur any expense or legal fees with respect to any litigation without the prior approval, by affirmative vote, of not less than 66-23% of all Co-Owners in value and in number." The bylaws are a contract binding the Association as well as the condo owners and the Association did not follow their mandate. The plain language of the bylaws denied the Association "the authority to sue on the condo owners' behalf unless it obtains the approval of two-thirds of the owners before any litigation-related expense is incurred." It excepted from the limitation litigation "to enforce collection of delinquent assessments." The exclusion implied that "all other litigation is subject to this preapproval provision." Since the Association failed to comply with this contractual prerequisite to filing suit, it did not have the authority to act. Thus, the trial court properly dismissed the complaint, and acted within its discretion in denying the Association's motions for reconsideration. Even when the Association "begrudgingly sought the necessary votes to file suit, it did not do so in conformance with the Bylaws. Article VIII of the Bylaws provides that votes are to be held at owner meetings." Pursuant to Article IX, § 8, "in lieu of a meeting, the Association may circulate ballots to the owners for a vote. The ballots must contain certain information: (a) the number of votes necessary to reach a quorum, (b) the percentage of approval necessary to pass the action, and (c) the deadline for the ballots." The ballot in this case contained none of this information. Thus, "even this belated attempt" fell short. The court rejected the Association's challenges to the litigation preapproval provision "on sundry grounds in an attempt to excuse its noncompliance." The provision "is part of the Bylaws, is plain and unambiguous, and binds it as well as the condo owners."

 

Full Text Opinion
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