In In re Claim for Surplus Funds, a published Michigan Court of Appeals opinion, the mortgagee foreclosed when the owner defaulted under a mortgage. At the time of sale, there was a balance of $51,915.75 owed on the mortgage. The mortgagee submitted an opening bid for $20,300; the successful bid was for $50,000. The owner and the mortgagee both made claim for the excess funds over the amount of the opening bid.
The owner argued that the mortgage was “satisfied” by the foreclosure sale because a mortgage is extinguished by operation of law on a foreclosure sale. The court, applying the ordinary meaning of the words “satisfy” and “surplus” in the statute, held that a mortgage is “satisfied” only if the entire underlying debt is paid in full. Because there underlying debt was more than the amount of the final bid, the debt was not satisfied and the mortgagee was entitled to the surplus proceeds.
This published opinion reaches the same conclusion as a prior, unpublished opinion discussed on this blog.