In Trustlink Equities, LLC v St. Clair County Sheriff Sale Surplus, an unpublished Michigan Court of Appeals opinion, Trustlink obtained a quitclaim deed and an assignment of their right to surplus proceeds from the property owner the day before a sheriff’s sale in foreclosure of the first mortgage on the property. Trustlink bid on the property; the bid was an overbid, resulting in over $77,000 in surplus proceeds over the balance needed to pay the first mortgage. Trustlink received a deed to the property. On the day after sale, Trustlink filed a document entitled a “claim” seeking payment of the surplus proceeds. Seven days later, a second mortgagee filed a competing “claim” for the surplus proceeds. After hearing, the trial court awarded the surplus proceeds to the second mortgagee. Trustlink then appealed.
The court first had to decide whether Trustlink’s document was a “demand” or a “claim” under the statute, MCL 600.3252. A mortgagor may file a “demand,” while junior mortgagees or lien holders may file a “claim.” The court ultimately found that, despite its title, Trustlink’s document was in fact a demand under the statute. However, the court found that, once the competing claim had been filed, the court was correct in deciding between the competing claims to the surplus and awarding the surplus to the second mortgagee.
The court noted that, had the sheriff paid over the surplus to Trustlink prior to the junior mortgagee’s demand, the junior mortgagee likely would have been without a remedy. Much like discussed previously, it is important to act quickly when there are surplus foreclosure proceeds.