Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

In re $55

Court of Appeals of Michigan

May 9, 2017

In re $55, 336.17 SURPLUS FUNDS.
v.
PNC BANK, NA, Appellee. ROBERT E. PARKER, Personal Representative of the ESTATE OF KATHRYN KROTH, Appellant,

         Livingston Circuit Court LC No. 15-028738-CH

          Before: Gadola, P.J., and Jansen and Saad, JJ.

          PER CURIAM.

         Appellant, Robert E. Parker, as personal representative for the estate of decedent Kathryn Kroth, appeals as of right an order granting appellee, PNC Bank, NA ("PNC") the surplus funds remaining after a foreclosure sale of decedent's property. We affirm.

         In this case of first impression, we are called upon to interpret and apply the language of MCL 600.3252, a subsection of Chapter 32 of the Revised Judicature Act of 1961 ("RJA"), MCL 600.3201 et seq., which governs the distribution of surplus funds after a mortgage foreclosure by advertisement.

         The facts of this case are not in dispute. In March, 2003, decedent and her husband, Thomas Kroth, granted National City Mortgage Services Co. a mortgage on real property located in Brighton, Michigan ("the property"). In February, 2008, the Kroths executed a second mortgage on the property in favor of National City Bank. After a series of mergers, PNC came to hold both mortgages as successor-in-interest. Thomas predeceased Kathryn by nine months and Kathryn died in December, 2014. Following default, PNC initiated foreclosure of the property under the first mortgage by advertisement proceedings. The property was purchased at a September 2, 2015 sheriff's sale by a third party for an amount sufficient to satisfy the first mortgage and create a surplus of $55, 336.17.

         A month after the sale, PNC filed a verified claim for the surplus proceeds in the circuit court as holder of the junior mortgage, still worth $119, 538.40, and the surplus amounts were thereafter deposited with the court pursuant to MCL 600.3252, which provides:

If after any sale of real estate, made as herein prescribed, there shall remain in the hands of the officer or other person making the sale, any surplus money after satisfying the mortgage on which the real estate was sold, and payment of the costs and expenses of the foreclosure and sale, the surplus shall be paid over by the officer or other person on demand, to the mortgagor, his legal representatives or assigns, unless at the time of the sale, or before the surplus shall be so paid over, some claimant or claimants, shall file with the person so making the sale, a claim or claims, in writing, duly verified by the oath of the claimant, his agent, or attorney, that the claimant has a subsequent mortgage or lien encumbering the real estate, or some part thereof, and stating the amount thereof unpaid, setting forth the facts and nature of the same, in which case the person so making the sale, shall forthwith upon receiving the claim, pay the surplus to, and file the written claim with the clerk of the circuit court of the county in which the sale is so made; and thereupon any person or persons interested in the surplus, may apply to the court for an order to take proofs of the facts and circumstances contained in the claim or claims so filed. Thereafter, the court shall summon the claimant or claimants, party, or parties interested in the surplus, to appear before him at a time and place to be by him named, and attend the taking of the proof, and the claimant or claimants or party interested who shall appear may examine witnesses and produce such proof as they or either of them may see fit, and the court shall thereupon make an order in the premises directing the disposition of the surplus moneys or payment thereof in accordance with the rights of the claimant or claimants or persons interested.

         In December, 2015, appellant filed a notice of claim in the circuit court for the surplus proceeds as a person interested. PNC subsequently moved for disbursement of the surplus proceeds in its favor and appellant objected. Appellant argued that nothing in MCL 600.3252 established a senior interest in PNC as a junior mortgagee. To the contrary, appellant suggested that PNC's junior lien had been extinguished upon foreclosure of the first mortgage, rendering PNC "just a creditor" without a remaining security interest in the property. Appellant asked the circuit court to distribute the surplus proceeds in accordance with the Estates and Protected Individuals Code ("EPIC"), MCL 700.1101 et seq. At a March 1, 2016 hearing on PNC's motion, the circuit court considered the language of MCL 600.3252, concluding that the statute's explicit mention of subsequent mortgagees directly contradicted appellant's claim that PNC was not entitled to priority because PNC's interests as junior mortgagee had been extinguished, and instead indicated intent to prioritize the claims of junior mortgagees over the original mortgagor. The circuit court ordered the release of surplus proceeds to PNC.

         Appellant takes issue with the trial court's interpretation of MCL 600.3252, arguing that PNC was not entitled to priority under MCL 600.3252 because its security interest in the property as junior mortgagee was extinguished on the date of the foreclosure sale. Further, appellant suggests that neither the statute itself nor relevant case law explicitly guides the trial court in its determination of priority and asks this court to consider the question of priority as a matter of first impression. We agree that this is a matter of first impression, but find that the circuit court correctly interpreted MCL 600.3252 as prioritizing the interest of a junior mortgagee over a mortgagor.

         This Court reviews do novo questions of statutory interpretation. Rock v Crocker, 499 Mich. 247, 260; 884 N.W.2d 227 (2016). Our primary goal in statutory interpretation is to reasonably infer the legislative intent as evidenced by the statutory language. Krohn v HomeOwners Ins Co, 490 Mich. 145, 157; 802 N.W.2d 281 (2011). "If the language of a statute is clear and unambiguous, the statute must be enforced as written and no further judicial construction is permitted." Whitman v City of Burton, 493 Mich. 303, 311; 831 N.W.2d 223 (2013). "[I]f the intent of the Legislature is not clear, courts must interpret statutes in a way that gives effect to every word, phrase, and clause in a statute and 'avoid an interpretation that would render any part of the statute surplusage or nugatory.' " Haynes v Village of Beulah, 308 Mich.App. 465, 468; 865 N.W.2d 923 (2014) (citation omitted). "Words and phrases used in a statute should be read in context with the entire act and assigned such meanings as to harmonize with the act as a whole." City of Rockford v 63rd Dist Court, 286 Mich.App. 624, 627; 781 N.W.2d 145 (2009) (quotation marks and citation omitted). Further, "[s]tatutes that relate to the same subject or that share a common purpose are in pari materia and must be read together as one law, even if they contain no reference to one another and were enacted on different dates." Walters v Leech, 279 Mich.App. 707, 709-710; 761 N.W.2d 143 (2008).

         MCL 600.3252 is a part of a chapter of the Revised Judicature Act titled "Foreclosure of Mortgage by Advertisement, " and should be read in the context of the entire chapter. A mortgage is "[a] conveyance of an interest in real estate to secure the performance of an obligation, " In re Van Duzer, 390 Mich. 571, 577; 213 N.W.2d 167 (1973), typically a debt. The very purpose of mortgage foreclosure is to ensure that the mortgagor's debt, secured by a mortgage to a mortgagee, is satisfied. MCL 600.3252 applies when, after a foreclosure on one mortgage results in a surplus, a claimant specifically declares "a subsequent mortgage or lien encumbering the real estate, or some part thereof." MCL 600.3252 sets forth a general rule for distribution of the surplus amounts from the sale of foreclosed property, an exception to the general rule, and a process for resolution of circumstances after the exception is invoked. Under the plain language of the statute, all surplus proceeds must be paid on demand to "the mortgagor, his legal representatives or assigns, " unless another claimant makes a claim of, specifically, "a subsequent mortgage or lien encumbering the real estate." MCL 600.3252; see Schwartz v Irons, 4 Mich.App. 628, 632; 145 N.W.2d 357 (1966). The Legislature unmistakably limited application of the surplus statute to situations wherein a junior mortgagee or lienholder held an interest in the foreclosed property at the time of the foreclosure. Once such a claimant has filed a claim with the person conducting the foreclosure sale, typically the sheriff, the person who conducted the sale is required to deposit the surplus proceeds with the clerk of the court pending resolution of conflicting claims. MCL 600.3252. Then, "any person or persons interested in the surplus, may apply to the court for an order to take proofs of the facts and circumstances contained in the claim or claims so filed." MCL 600.3252. The circuit court is tasked with examining the proofs and entering an order distributing the surplus funds in accordance with the rights of the claimants and interested persons. MCL 600.3252.

         Appellant argues that PNC was no longer a subsequent mortgagee when it filed its claim pursuant to MCL 600.3252, because its security interest in the property was extinguished by the foreclosure of the senior mortgage, and PNC was therefore precluded from claiming priority under MCL 600.3252. Appellant is correct that, in Michigan, the foreclosure of a senior mortgage extinguishes the lien of a junior mortgagee where the junior mortgagee does not exercise its right to redeem. Advanta Nat'l Bank v McClarty, 257 Mich.App. 113, 125; 667 N.W.2d 880 (2003). When property is not redeemed, "all right, title, and interest in the property vest[s]" in the purchaser. Trademark Props of Mich, LLC v Fed Nat'l Mtg Ass'n, 308 Mich.App. 132, 139; 863 N.W.2d 344 (2014). However, after the sale of property, there is a statutory time period during which a junior mortgagee, amongst others, has a right to redeem the property. Consequently, PNC argues that its security interest in the property was not extinguished until the expiration of the redemption period. While there is some support for PNC's argument in this regard, [1] we find it unnecessary to resolve the issue here. Regardless of whether PNC's security interest in the property as junior mortgagee persisted until the expiration of the statutory redemption period, PNC retained a right to claim a priority interest in the surplus funds over the mortgagor as a subsequent mortgagee or lienholder at the time of the foreclosure sale pursuant to the explicit language of MCL 600.3252.

         "Courts should not abandon common sense when construing a statute." Diallo v LaRochelle, 310 Mich.App. 411, 418; 817 N.W.2d 724 (2015). To accept appellant's argument would be to render nugatory all of MCL 600.3252, which provides for nothing other than an avenue for junior mortgagees and lienholders to claim an interest in surplus funds following a foreclosure sale. If the priority interest of all junior mortgagees and lienholders to the surplus proceeds was extinguished at the time of the foreclosure sale, along with their security interests in the property itself, there would be no claimants to support the application of MCL 600.3252. It is clear that the surplus statute "was intended to apply for the protection of subsequent mortgage claimants or lienholders, " Schwartz, 4 Mich.App. at 632, granting them a limited interest in foreclosure sale surplus proceeds superior to the mortgagor after a senior mortgage is satisfied. Granting subsequent mortgagees and lienholders a priority interest in foreclosure sale surplus proceeds is not inconsistent with the extinguishment of their security interests in the real property itself. Additionally, while not explicitly citing MCL 600.3252, this Court has stated that a junior mortgagee is entitled to claim the surplus after the foreclosure of a senior mortgage. See e.g., Bank of America, NA v First American Title Ins Co, 499 Mich. 74, 91; 878 N.W.2d 816 (2016), quoting Smith v General Mortg Corp, 402 Mich. 125, 128-129; 261 N.W.2d 710 (1978) ("No one disputes that the mortgagee is entitled to recover only his debt. Any surplus value belongs to others, namely, the mortgagor or subsequent lienors."); Citizens State Bank v Nakash, 287 Mich.App. 289, 295; 788 N.W.2d 839 (2010) ("[D]efendant's bid on the foreclosed property was in excess of his recoverable interest, entitling plaintiff, as a junior mortgagee, ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.