17 Surplus Funds. Robert E. Parker v. PNC Bank, N.A. (In re Re)

• Decision Date: 09 May 2017
• Docket Number: No. 331880,331880
• Citation: 902 N.W.2d 422,319 Mich.App. 501
• Parties: IN RE $55,336.17 SURPLUS FUNDS. Robert E. Parker, Personal Representative of the Estate of Kathryn Kroth, Appellant, v. PNC Bank, N.A., Appellee.
• Court: Court of Appeal of Michigan — District of US

319 Mich.App. 501
902 N.W.2d 422

IN RE $55,336.17 SURPLUS FUNDS.

Robert E. Parker, Personal Representative of the Estate of Kathryn Kroth, Appellant,
v.
PNC Bank, N.A., Appellee.

No. 331880

Court of Appeals of Michigan.

Submitted May 3, 2017, at Lansing
Decided May 9, 2017, 9:05 a.m.

Parker and Parker (by Robert E. Parker ) for appellant.

Trott Law, PC (by Matthew D. Levine ), for appellee.

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

Per Curiam.

319 Mich.App. 504

Appellant, Robert E. Parker, as personal representative of the estate of decedent Kathryn Kroth, appeals as of right an order granting appellee, PNC Bank, N.A. (PNC) the surplus funds remaining after the 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 (alternatively, the surplus statute), a subsection of Chapter 32 of the Revised Judicature Act (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 Company 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.

902 N.W.2d 425

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

319 Mich.App. 505

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

319 Mich.App. 506

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 and concluded 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. Rather, the circuit court reasoned that the statute's mention of subsequent mortgagees 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

902 N.W.2d 426

suggests that neither the statute itself nor relevant caselaw 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 conclude that the circuit court correctly interpreted MCL 600.3252 as prioritizing the interest of a junior mortgagee over a mortgagor.

This Court reviews de novo questions of statutory interpretation.

319 Mich.App. 507

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. Home–Owners Ins. Co. , 490 Mich. 145, 156, 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 RJA 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," State Bar Grievance Administrator v. 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

319 Mich.App. 508

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. Oakland Co. Sheriff , 4 Mich.App. 628, 632, 145 N.W.2d 357 (1966). The Legislature unmistakably limited application of the surplus statute to situations in which 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,...