Devisee can Claim Tax Sale Excess

By Doug Chalgian on March 14, 2023

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In Re Petition of Emmet County Treasurer for Foreclosure is a published decision.  [Click on the name to read the case.]

Dona owned a house that went into foreclosure while she was alive. The property was sold at a tax sale after her death.  At the tax sale, the property sold for substantially more than the back-taxes owed.

Dona’s Will left her entire estate to Georgia.

The issue in this case is whether Georgia, as devisee of a yet-to-be probated will, had standing to claim the excess.

A New Right

The obligation of the taxing entity to disgorge the excess from the sale of property sold for back taxes is a new development.  It did not exist in Michigan prior to 2020 Michigan Supreme Court case:  Rafaeli, LLC v Oakland Co, 505 Mich 429; 952 NW2d 434 (2020).  In light of the Rafaeli decision, the Michigan legislature created a statutory process by which a party with the appropriate “legal interest” could pursue recovery of the excess funds.

So, this case involves the interpretation of these new laws, and specifically whether these laws allow a devisee of a will that has yet to be admitted to probate to prosecute a claim for excess sale proceeds when the tax sale occurred after the property owner had died. As the Court of Appeals notes: “The statute makes no reference to circumstances that may arise if the property owner has died prior to the foreclosure or sale.”

The Decision

The trial court ruled that Georgia’s legal interest was insufficient to qualify as a claimant under the statute and therefore the excess funds remained with the taxing authority.  The COA reversed, holding that Georgia had standing to file the claim.

All for Naught?

Joining Georgia in the appeal is the Michigan Department of Health and Human Services, which seeks to enforce an estate recovery claim against Dona, and to get paid out of the excess tax sale proceeds when and if those funds ever hit Dona’s probate estate.  The amount of the estate recovery claim exceeds the amount of the excess, creating the very real possibility that Georgia may have won the battled but lost the war.  As the COA notes: “… this appeal does not concern who is entitled to the remaining proceeds.”



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mm By: Doug Chalgian
Doug Chalgian

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