Gongwer News Service
Several local courts in a consolidated home foreclosure proceeds case, dealing with excess funds from recent auctions, must determine if property owners were given sufficient notice of the process to receive excess funds when their homes were sold, the Michigan Court of Appeals ruled last Friday in a unanimous decision.
In a published opinion released last Friday written by Judge Stephen Borrello, joined by Judge Michael Kelly and Judge Michelle Rick, the panel In Re Petition Of Kent County Treasurer For Foreclosure (COA Docket Nos. 363463; 363766; 363808; 364114) affirmed in part rulings from the Cass, Kalamazoo, Kent and Oceana circuit courts, reversed in part other portions and remanded the case for further proceedings.
The cases came to the lower courts and the Court of Appeals following the Supreme Court's 2020 ruling in Rafaeli LLC v. Oakland County, which held former owners of properties sold at tax foreclosure sales for more than what was owed in delinquent real-property taxes, interest, penalties and fees had "a cognizable, vested property right to the surplus proceeds resulting from the tax-foreclosure sale of their properties." The high court held that the right continued to exist after fees and outstanding taxes were collected via simple title to the properties vested with the foreclosing local government.
The unit's retention and transfer of those proceeds into the county general fund amounted to taking a former homeowner's properties under Article X Section 2 of the Constitution, and the former owners were entitled to just compensation.
The consolidated cases before the appellate panel In Re Petition Of Kent County Treasurer For Foreclosure dealt with claims for the distribution of proceeds remaining from those tax-foreclosed sales following the repayment of delinquent property taxes, interest, penalties and fees – collectively billed as the total outstanding tax debt. The circuit courts either denied motions to disburse or award remaining proceeds in various tax foreclosure sales.
Upon appeal, Borrello wrote that following Rafaeli, the Legislature created a statutory framework in response that empowered former property owners to assert their rights effectively.
The framework, Borrello said, serves as the sole legal avenue for claiming surplus proceeds in a way that aligns with the county's new constitutional requirements.
Due process is upheld in these cases, Borrello said, when the petitions comply with the statutory process, which enables counties to also defend their constitutional right to hold excess proceeds through safeguards outlined in the act.
"Crucially, we assert that it is both statutorily and constitutionally obligatory for (local governments) to provide timely notice regarding the rights of individuals with an interest in a property upon the issuance of a foreclosure judgment," Borello wrote. "This notice is vital for ensuring that former property owners can successfully pursue any remaining proceeds as set forth in MCL 211.78t."
If the courts determine that the governments gave those making claims timely notice, then they would have legally been provided due process, the opinion stated.
The panel did not reach the merits of the overall complaint and did not side with the former property owners nor the local governments in question.
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