2nd Mortgagee’s Claim to Surplus Proceeds Has Priority Over Claim by Mortgagor’s Estate

In a published opinion, the Michigan Court of Appeals has decided for the first time that, when there are surplus proceeds from a sheriff’s sale on foreclosure of a mortgage by advertisement, upon competing claims made by a junior lienholder of the property and by the mortgagor (or here, the mortgagor’s estate), the surplus proceeds are paid first to junior lien holders in order of thier priority and the balance, if any, to the mortgagor.  In re $55336.17 Surplus Funds (Parker v PNC Bank).

The statute does not explicitly state how competing claims are resolve; however, reading the statute as a whole, the court ruled that it was apparent that junior lien holders were to be paid out of any surplus proceeds.  The court rejected the estate’s argument that the lien holders were extinguished by the senior mortgage foreclosure and thus became general creditos.  The court also rejected the argument that such lien holders needed to make a claim against the estate in accordance with the Estates and Protected Individuals Code.

© Steve Sowell 2018