Senters v. Ottawa Sav. Bank, FSB

• Decision Date: 14 July 1993
• Docket Number: No. 14,Docket No. 94637,14
• Citation: 503 N.W.2d 639,443 Mich. 45
• Parties: Michele SENTERS, Plaintiff-Appellant, v. OTTAWA SAVINGS BANK, FSB, Defendant-Appellee. Calendar
• Court: Michigan Supreme Court

Page 639

503 N.W.2d 639

443 Mich. 45

Michele SENTERS, Plaintiff-Appellant, v. OTTAWA SAVINGS BANK, FSB, Defendant-Appellee.

Docket No. 94637.

Calendar No. 14.

Supreme Court of Michigan.

Argued May 5, 1993.

Decided July 14, 1993.

Sherman H. Cone, Kentwood, MI, (P-12104) for plaintiff-appellant.

Varnum, Riddering, Schmidt & Howlett by Thomas A. Hoffman, Grand Rapids, MI, for defendant-appellee.

RILEY, Justice.

In the present case, plaintiff seeks the discharge of a mortgage as well as damages for slander of title. Defendant was the holder of the real estate mortgage that defendant foreclosed by advertisement. Defendant asserts a claim against the property in the amount it paid to redeem the property from a construction lien foreclosure sale. We find that plaintiff has complied with the clear language of the redemption statute and that defendant is not entitled to a lien on the property in the amount it paid to redeem the property from a prior foreclosure sale. The decision of the Court of Appeals is reversed.

I

This case was presented to the trial court on a stipulation of facts. In May 1984, a mortgage on the premises was executed between Paul and Yvonne Farmwald and Lambrecht & Company. This mortgage was subsequently assigned to defendant. In February 1988, Cross Pointe, Inc., the successors in interest to the Farmwald property, conveyed a less-than-fee interest to plaintiff pursuant to a land contract. Plaintiff paid $22,500 for the property, with $52,000 owing on the land contract. ¹

Judgments of foreclosure were entered pursuant to several construction lien lawsuits begun in 1984 and 1985. These construction liens were incurred by the Farmwalds. On June 8, 1989, the premises were sold at a construction lien foreclosure sale for $13,500 to Rand Development. The redemption period from the construction lien foreclosure sale was four months.

On August 24, 1989, the premises were sold at a foreclosure sale by advertisement of the mortgage held by defendant. Defendant was the highest bidder, paying $52,286.59. The redemption period from the mortgage foreclosure sale was six months.

On October 6, 1989, two days before the expiration of the redemption period from the construction lien foreclosure sale, defendant redeemed the premises, paying $14,037.05. ² On December 5, 1989, defendant filed an affidavit of interest in real property indicating that redemption from the mortgage foreclosure sale would require payment of the bid price plus interest, as well as the amount paid to redeem the property from the construction lien foreclosure sale.

On February 23, 1990, a day before the expiration of the redemption period, plaintiff delivered to defendant two certified checks totaling $54,896.45. This amount represented the price bid by defendant at the foreclosure sale plus interest. Plaintiff maintained, and presently argues, that pursuant to M.C.L. § 600.3240; M.S.A. § 27A.3240, ³ in order to redeem the property from the mortgage foreclosure sale, she is required to pay the sum bid at the foreclosure sale plus interest and any taxes and insurance premiums paid by the sale purchaser. Plaintiff argues that she is not obligated to pay the amount expended by defendant to redeem the premises from the construction lien foreclosure sale.

The trial court granted summary disposition in favor of defendant. Finding that M.C.L. § 600.3240; M.S.A. § 27A.3240 does not address whether the payment of prior existing liens merges into a mortgagee's claim, the court applied the "underlying doctrine of redemption which has existed in the law for many centuries." It concluded that the doctrine of redemption required payment by plaintiff. In the alternative, the court held that defendant was entitled to an equitable lien to recover the amount paid to preserve the property.

Although rejecting the argument that defendant is entitled to recover on the basis of redemption from a mortgage sale by advertisement, the Court of Appeals held that defendant was entitled to an equitable lien. ⁴ By extinguishing the construction liens, defendant preserved plaintiff's interest in the property and increased the value of the premises. Hence, the Court concluded that it would be inequitable not to require plaintiff to compensate defendant for the amount expended to redeem the property from the construction lien foreclosure sale. We granted leave to appeal. ⁵

II

We agree with the decision of the Court of Appeals that plaintiff has complied with the statutory requirements and therefore has properly redeemed the property from defendant's foreclosure sale. Foreclosure sales by advertisement are defined and regulated by statute. ⁶ Once the mortgagee elects to foreclose a mortgage by this method, the statute governs the prerequisites of the sale, notice of foreclosure and publication, mechanisms of the sale, and redemption. ⁷ Upon a foreclosure sale, the mortgage debt is considered paid and the mortgage lien discharged. Wood v. Button, 205 Mich. 692, 701, 172 N.W. 422 (1919). If the mortgagee purchases the property at the sale, it stands in the position of an ordinary purchaser and obtains an ownership interest in the land, subject to the mortgagor's opportunity of redemption. Doyle v. Howard, 16 Mich. 261, 265 (1867). In order to redeem the property from the mortgage foreclosure sale by advertisement under the plain meaning of M.C.L. § 600.3240; M.S.A. § 27A.3240, plaintiff must pay the bid price plus interest, and any amount for taxes and insurance that the purchaser has properly filed with the register of deeds.

Several early decisions of this Court strictly construed the redemption statute, ⁸ precluding deviation from its terms despite equitable considerations. In Cameron v. Adams, 31 Mich. 426, 428 (1875), the Court declined to extend the redemption period despite the fact that defendant had paid part of the redemption amount and a serious illness had prevented him from conducting his personal business during the redemption period.

"Where a valid legislative act has determined the conditions on which rights shall vest or be forfeited, and there has been no fraud in conducting the legal measures, no court can interpose conditions or qualifications in violation of the statute.... This principle has not been open to controversy, and is familiar and elementary." ⁹

This Court has also refused to allow the addition of attorney fees to the amount necessary to redeem from a foreclosure sale, although those attorney fees were paid pursuant to the mortgage agreement as part of the foreclosure sale bid.

"As the law now stands it cannot be regarded as authorizing as a condition precedent to redemption any other exaction in the way of fees or compensation than such as the statute specifies, and stipulations in advance for gross allowances are not consistent with public policy." Vosburgh v. Lay, 45 Mich. 455, 457, 8 N.W. 91 (1881).

The mortgagee-purchaser at a foreclosure sale by advertisement in Walton v. Hollywood, 47 Mich. 385, 388, 11 N.W. 209 (1882), was not allowed to revive the mortgage lien on the property as security for payment of sums expended by the mortgagee for taxes and insurance during the redemption period. Once the mortgagor paid the amount required by statute, redemption was considered accomplished despite these intervening payments by the foreclosure sale purchaser to preserve the property. ¹⁰ The Court reasoned that after the sale, the rights of the parties are fixed by statute rather than controlled by the mortgage. ¹¹

In Wood, supra, 205 Mich. at 703, 172 N.W. 422, the plaintiff was denied a lien in trust upon the land in the amount paid for taxes after the foreclosure sale by advertisement.

"[T]he case presented is not one to be determined upon some notion of general equities. The parties have a right to stand upon the law.... The right to redeem from a foreclosure at law is a legal right, is created by statute, and can neither be enlarged nor abridged by courts. A redemption is complete when one having the right to redeem pays in proper time, to a proper person,--

" 'the sum which was bid ... with interest....' "

Once redemption is completed pursuant to statute, "[t]he power of sale contained in the mortgage is exhausted, the mortgage debt is paid, the mortgage lien discharged, the sheriff's deed canceled, and the mortgagee and the bidder at the sale have no further interest in the property." Id. ¹²

Upon foreclosure by advertisement in the present case, the rights of the parties were controlled by statute. Before the redemption period expired, plaintiff tendered to defendant the amount required under M.C.L. § 600.3240; § M.S.A. § 27A.3240 to redeem from a foreclosure sale by advertisement. The plaintiff therefore has legal title to the property free of defendant's mortgage lien. We now turn to the issue whether an equitable lien may be imposed in favor of defendant so that defendant might recover the amount it paid to redeem the property from the construction lien foreclosure sale.

III

In the absence of a written contract, an equitable lien will be established only where, through the relations of the parties, there is a clear intent to use an identifiable piece of property as security for a debt. See Schrot v. Garnett, 370 Mich. 161, 121 N.W.2d 722 (1963). ¹³ In Kelly v. Kelly, 54 Mich. 30, 19 N.W. 580 (1884), the son of a land owner sought to impose an equitable lien on his father's property in the amount paid by the son to satisfy certain debts on the land. The Court dismissed the complaint, finding insufficient evidence to support the son's assertion that he paid the creditors pursuant to an agreement with his father. In the absence of a written contract, "from the relations of the parties, equity will declare a lien out of considerations of right and justice, based upon those maxims which lie at the foundation of equity jurisprudence." Id. at 47, 19 N.W. 580. The Court in Cheff v. Haan, 269 Mich. 593, 598, ...