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Patricia Paruch, Kemp Klein Law Firm
Receiver vs. Lender: Priority in Foreclosure by Advertisement
By Glen Zatz, Comerica Bank
In a case of first impression, the Supreme Court held in In re Receivership of 11910 S. Francis Rd. (Mich No 143123, July 30, 2012) that the general common-law rule giving a receiver first priority for his services should not be applied against a purchaser (e.g. the lender) at a foreclosure by advertisement sale in contravention of the statutory right of priority granted pursuant to MCL 600.3236. In this case, third parties holding a judgment against the owner requested a receiver. The lender/first mortgage holder did not receive notice of the receivership hearing and found out about the appointment three days after it began foreclosure proceedings. However, during the foreclosure proceedings and the redemption period, the lender was aware that the receiver spent money to repair and maintain the property. The Court nonetheless held that MCL 600.3236, by its plain language, gave priority to the lender.
The Court recognized that the lender could have waived its statutory right to priority. But the lender’s mere acquiescence was not enough to constitute waiver. Nor was it enough to waive the statutory priority that the lender knowingly received the increased value of the property through the receiver’s actions. Rather, the Court required “unequivocal waiver” evidenced by explicit consent.
The Court chastised the trial court for not applying MCR 2.622(D), which permits a circuit court, “on application of the receiver,” to set the receiver’s compensation and to require that the party requesting the receivership bear the receiver’s costs.
Practice pointer: If you are representing a receiver, be sure that the lender has expressly consented to the receivership, or that the court has ordered payment of the receiver’s expenses under MCR 2.622(D).
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October 11, 2012
November 1, 2012
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Abandoned Foreclosed Property—Purchaser Doesn’t Stand in Mortgagee’s Shoes
By Jeshua T. Lauka, David & Wierenga, PC
In Leggio v. Huffer, (Mich App No 301821, July 3, 2012, unpublished) the Michigan Court of Appeals clarified who can accelerate the redemption period when abandoned property has been foreclosed.
In Leggio, CitiMortgage foreclosed on its mortgage after the homeowner defaulted. At the sheriff’s sale, the property was sold to defendant. The recorded sheriff’s deed specified a 6 month redemption period.
The purchaser, noticing the property appeared abandoned, then advised his agent to take action to shorten the redemption period. MCL 600.3241a permits the acceleration of the redemption period to 30 days if a “mortgagee” takes certain actions, including inspecting the premises, posting a notice of abandonment, and mailing a certified copy of the notice to the mortgagor.
The agent posted a notice of presumptive abandonment on the property and apparently mailed a copy to homeowner’s last known address. The agent also recorded an affidavit of abandonment to shorten the redemption period to 30 days from the date of the sheriff’s sale.
Homeowner then filed suit against purchaser and his agent, claiming that the affidavit of abandonment was void because neither defendant was the “mortgagee.” The purchaser and agent argued that a purchaser at a sheriff’s sale “stands in the shoes of the mortgagee” and has the same rights as the mortgagee under MCL 600.3241a.
The Court applied the plain language of the statute, holding that under MCL 600.3241a only the mortgagee may accelerate the redemption period for abandoned property.
Application: counsel representing purchasers of foreclosed property must advise that MCL 600.3241a only applies to mortgagees. Non-mortgagee purchasers are left to simply wait out the redemption period or, alternatively, negotiate with the property owners for a waiver of their redemption interests.