In Atigarin v Bank of America, an unpublished Michigan Court of Appeals opinion, the Atagarins granted a mortgage on their home in Southfield, MI. They later filed a Chapter 7 case and received a discharge. Subseqent to the bankruptcy, they defaulted on the mortgage and the bank foreclosed. The bank bid a partial credit bid of $100,000, but a third party bidder ultimately paid over $140,000 for the property.
The Atigarins filed a claim with the sheriff claiming the excess over the opening bid was “surplus proceeds” under MCL 600.3252. The bank opposed the claim, arguing that the balance due on the mortgage was over $185,000, so the mortgage was not “satisfied” within the meaning of the statute and the surplus proceeds should be paid over to it. The trial court agreed and the Atigarins appealed.
The statute only applies to “any surplus money after satisfying the mortgage on which the real estate was sold . . . .” The court held that the underlying mortgage was not “satisfied” within the common meaning of the word when there remained a balance due on the mortgage after the sale. Thus, the proceeds over and above the amount of the bid were not “surplus” and were properly paid over to reduce the balance owed on the mortgage.