Price v. Kosmalski (Opinion)
Annotate this CaseThis case involved the issue of the priority of competing liens between a court-appointed receiver and the holder of a first-recorded mortgage on real property located in DeWitt, Michigan. The receiver, Thomas Woods, sought to recover receivership expenses before the holder of the first-recorded mortgage, Dart Bank, satisfied its mortgage interest. In affirming the circuit court's order placing a first-priority lien on the property in the amount of the receiver's expenses, the Court of Appeals relied, in part, on the Supreme Court's decisions in "Bailey v Bailey" and "Fisk v Fisk" and its own decision in "Attica Hydraulic Exchange v Seslar," to hold that because Dart did not object to and benefited from the receivership, it "may be held responsible for the receivership expenses." The Supreme Court granted Dart's application for leave to appeal to determine whether the common-law rule that receivership expenses are entitled to first priority is controlling, notwithstanding that the holder of a prior recorded mortgage is statutorily entitled to priority under MCL 600.3236, and whether a mortgagee must explicitly consent to the receivership before the mortgagee may be required to pay the associated costs. Upon review, the Supreme Court declined to extend the common-law rule to the facts of this case. Rather, the Court held that MCL 600.3236 controlled and, by its plain language, requires that any liens preexisting the mortgage that is the subject of the foreclosure remain in the same order of priority as they existed at the time of the mortgage's execution. The Court also held that a mortgagee that forecloses consistently with MCL 600.3236 may waive its statutory right of priority and, if that occurs, the receiver may be entitled to compensation before the mortgagee, but only if the mortgagee's waiver is explicitly and unequivocally given. Because the Court of Appeals in this case failed to recognize the applicability of MCL 600.3236 and erroneously extended the holdings in "Bailey" and "Fisk" to support its conclusion that even in the absence of affirmative consent, Dart could nevertheless be required to pay the receiver's costs and fees, the Supreme Court reversed the appellate court's judgment and remanded the case to the circuit court for entry of an order releasing the escrow funds in favor of Dart.
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