Tax News

CCH (cch.taxgroup.com) reports:

  In an action that arose after a parcel of residential property was foreclosed for failure to pay Michigan property taxes, the court held that a bank's mortgage interest in the property was foreclosed upon without due process because notice of the pending foreclosure proceedings was not mailed to the bank's trust beneficiary at its last known address. Although the bank's interest was not recorded until after the certificate of foreclosure was filed, the bank's trust beneficiary, which retained a properly recorded interest in the property when it became the beneficial holder of the mortgage, was entitled to notice. Because the bank's beneficiary was entitled to notice, the bank was entitled to bring suit on behalf of its beneficiary.

  The court did not agree with the argument that due process was satisfied because the forfeiture certificate was recorded before the mortgage was assigned from the trust beneficiary to the bank. Although a recorded interest in property takes priority over subsequent owners and encumbrances, it did not follow that recording a certificate of forfeiture was reasonably calculated to apprise the interested parties of the pending foreclosure. Rather, the onus was on the foreclosing governmental unit to provide notice. A party that records an instrument at the register of deeds is not required to determine whether anything has been filed regarding foreclosure. The court noted that had the bank received notice of the proceedings at the address recorded with the register of deeds, due process would have been satisfied.

First National Bank of Chicago v. Department of Treasury , Michigan Court of Appeals, No. 272431, September 9, 2008, ¶401-385

  Other References:

  Explanations at ¶89-176