Opinion
366142
06-20-2024
In re PETITION OF EMMET TREASURER FOR FORECLOSURE. v. GEORGIA LITZNER, Claimant-Appellee, COUNTY EMMET COUNTY TREASURER, Petitioner-Appellee, And DEPARTMENT OF HEALTH AND HUMAN SERVICES, Appellant.
UNPUBLISHED
Emmet Circuit Court LC No. 19-106520-CH
Before: CAMERON, P.J., and N. P. HOOD and YOUNG, JJ.
PER CURIAM
This appeal arises from the foreclosure of a property ("the property") for tax delinquency by petitioner, the Emmet County Treasurer. Appellant, the Michigan Department of Health and Human Services (DHHS) appeals the Emmet Circuit Court's April 27, 2023 order disbursing the remaining proceeds of the tax foreclosure sale to claimant, Georgia Litzner, the sole devisee named under the will of the deceased Dona Lee Bouford-Hiar, the last surviving joint owner of the property.
DHHS seeks reversal of the disbursement order and a remand of the case to the circuit court for removal to probate court or, in the alternative, to wait for the conclusion of probate proceedings regarding Bouford-Hiar's will and use those results to determine the relative priority and value of the interest of each claimant in the foreclosed property before issuing an order for payment of remaining proceeds to Litzner. We affirm the circuit court's order because DHHS, having failed to intervene as a proper party in the trial court, lacks standing to bring this appeal and the substantive issues are moot.
I. FACTUAL BACKGROUND
This case has come before this Court on appeal before, when Litzner appealed the circuit court's denial of her motion for disbursement of remaining proceeds from the tax foreclosure sale of the property. A factual reiteration of the case from this Court's opinion in the prior appeal is provided for context:
The real property at issue was owned by [] Bouford-Hiar, who died on December 13, 2019. Bouford-Hiar's will devised her real and personal property to Litzner, her niece. At some point before Bouford-Hiar's death, the property was forfeited to the Emmet County Treasurer for failure to pay property taxes. On February 13, 2020, a judgment of foreclosure was entered on the property. The judgment of foreclosure became effective on March 31, 2020. See MCL 211.78g(2) ("[A]bsolute title to the property . . . will vest in the foreclosing governmental unit on the March 31 immediately succeeding the entry of a judgment foreclosing ....").
On July 17, 2020, the Michigan Supreme Court issued its opinion in Rafaeli, LLC v Oakland Co, 505 Mich. 429; 952 N.W.2d 434 (2020). Prior to that decision, the foreclosing governmental unit was entitled to retain all the funds from the foreclosure sale even when the proceeds greatly exceeded the amount of the delinquent taxes. However, in Rafaeli, the Supreme Court held that a governmental unit's retention of surplus proceeds under the General Property Tax Act (GPTA), MCL 211.1a et seq., constitutes an unconstitutional taking against the former property owner. Id. at 437.
In response to Rafaeli, the Legislature passed amendments to the GPTA to provide a mechanism for persons to obtain surplus proceeds after a tax-foreclosure sale. Proctor v Saginaw Co Bd of Comm'rs, [340 Mich.App. 1, 9; 985 N.W.2d 193 (2022), app held in abeyance __ Mich. __; 1 NW3d 250 (2024)]. Relevant to this appeal, MCL 211.78t outlines how a former property owner or other claimant may claim an interest in the remaining proceeds following a sale of foreclosed property. "Claimant" is defined as "a person with a legal interest in property immediately before the effectiveness of a judgment of foreclosure of the property under [MCL 211.78k] who seeks pursuant to this section recognition of its interest in any remaining proceeds associated with the property." MCL 211.78t(12)(a). The statute makes no reference to circumstances that may arise if the property owner has died prior to the foreclosure or sale.
On October 2, 2020, the Emmet County Treasurer sold the property at an auction for $281,250. According to Litzner, there was a surplus or remaining proceeds of $260,487.50. On May 14, 2021, Litzner moved in the foreclosure case for a disbursement of the remaining proceeds pursuant to MCL 211.78t. Litzner asserted that she had a legal interest in the property before the foreclosure became effective because she was the sole devisee of Bouford-Hiar's will and Bouford-Hiar was the last surviving joint owner of the property.
After filing an appearance, DHHS submitted a response to Litzner's motion explaining that it was seeking to recoup under the [Michigan] Medicaid estaterecovery program [(MMERP)] expenses paid to Bouford-Hiar and that its claim was over $800,000. DHHS argued that resolution of Bouford-Hiar's will must be made through probate administration and that its claim for Medicaid reimbursement must be paid before any distributions of lower priority are made from the remaining proceeds, including distributions to will beneficiaries or devisees. The Emmet County Treasurer also filed a response asking the circuit court to determine the amount of remaining proceeds and the rightful claimants.
A motion hearing was held on August 10, 2021, at which the circuit court heard argument from Litzner, the Emmet County Treasurer and DHHS. At the conclusion of the hearing, the circuit court decided to stay the proceedings and allow DHHS an opportunity to "file their probate case." In October 2021, the probate court entered an order granting DHHS's petition for formal proceedings and admitting Bouford-Hiar's will to probate. The probate court also appointed a county public administrator as personal representative.
On November 12, 2021, the circuit court sua sponte issued an opinion and order denying Litzner's motion for disbursement and dismissing pending discovery motions. The court determined that Litzner was not a "claimant" as defined by MCL 211.78t(12)(a) because she did not have a legal interest in the property prior to the foreclosure becoming effective. The court reasoned that a will only confers a legal interest in property via a probate proceeding and that in this case probate proceedings were not initiated until October 2021, well after the foreclosure became effective. [In re Petition of Emmet Co Treasurer for Foreclosure (In Re Emmet Co), __ Mich.App. __, __; __ NW3d __ (2023); slip op at 2-3; also attached in LCF beginning on page 48.]
In her prior appeal, Litzner argued the circuit court erred in dismissing her claim for excess proceeds from the foreclosure sale and holding that she did not have a sufficient legal interest in the property to be considered a "claimant" under MCL 211.78t(12)(a). In re Emmet Co, __ Mich.App. at __; slip op at 3. This Court agreed with Litzner, concluding she had legal interest in the property after Bouford-Hiar's death even though the will had not been probated because interest in real property vests in a decedent's devisees at the time of the decedent's death, not at the time the will is probated. Id. at __; slip op at 5. Because Bouford-Hiar died in December 2019, Litzner's interest in the property vested in December 2019, and before the judgment of foreclosure became effective on March 31, 2020. "Litzner therefore had an interest in the property following Bouford-Hiar's death that is recognized by law, i.e., she had a 'legal interest.'" Id. at __; slip op 5.
MCL 211.78t provides different procedures for foreclosed properties sold before and after July 17, 2020. Because the subject property in this case was sold after July 17, 2020, MCL 211.78t(2) applies, and states in pertinent part:
(2) For foreclosed property transferred or sold under section 78m after July 17, 2020, by the July 1 immediately following the effective date of the foreclosure of the property, a claimant seeking remaining proceeds for the property must notify the foreclosing governmental unit using a form prescribed by the department of treasury....[Emphasis added.]
The case was remanded to the circuit court to allow Litzner to make her claim for the remaining proceeds because she was considered a "claimant" under MCL 211.78t(12)(a). This Court directed the circuit court on remand to "hold a hearing and 'determine the relative priority and value of the interest of each claimant in the foreclosed property immediately before the foreclosure was effective' before issuing an order for payment of the remaining proceeds. MCL 211.78t(9)." In re Emmet Co, __ Mich.App. at __; slip op at 6.
On remand, the circuit court, as directed, held a hearing on March 15, 2023 to address the validity of Litzner's claim for proceeds from the tax foreclosure sale under MCL 211.78t(9). At the hearing, Litzner presented several documents to the court to establish her interest in the property, and thereby, her qualification as a claimant. These documents included: (1) the quit claim deed conveying the property to Bouford-Hiar; (2) Bouford-Hiar's death certificate; (3) death certificates of Bouford-Hiar's relatives to prove she was last to die; (4) the Register's Statement issued in the Emmet County Probate Court admitting Bouford-Hiar's will to probate in October 2021; and (5) Bouford-Hiar's will. Litzner argued she was the only claimant in this matter because neither DHHS nor the personal representative of Bouford-Hiar's estate, James T. Ramer, had brought a motion or petition in the circuit court asserting a claim to the tax foreclosure sale proceeds. Litzner contended that even if DHHS or Ramer decided to assert claims, the claims would be untimely because all claims had to have been filed by May 15, 2021, the deadline proscribed by MCL 211.78t(4). Litzner requested the circuit court order the payment of the proceeds to her with a charging lien on the proceeds for payment of attorney fees.
DHHS argued that in order for Litzner's claim for proceeds to be effective, she must prove the transfer of the property, which would require a declaration by a register's order of informal probate or by a court's adjudication of probate that the will is valid. DHHS also contended that even if the transfer was proven, Litzner's interest would still automatically be subject to the costs and expenses of creditors in a probate administration under the Estates and Protected Individuals Code (EPIC), MCL 700.1101 et seq., which is why DHHS did not independently assert a claim for the proceeds. DHHS explained further the reason it did not assert a claim for the proceeds in the circuit court was because it has a mandatory, statutory requirement to file its MMERP claim in the estate, where the MMERP claim had priority over Litzner's claim. According to DHHS, only the probate court could determine the relative priority and interest of each claimant to the tax foreclosure sale proceeds, and Litzner's claim should be referred to the probate court for probate settlement of the estate. DHHS asked the circuit court to distribute the funds to Ramer to allow for the matter to be handled in probate court.
In response to these arguments, the circuit court clarified the limited determination this Court directed it to make under MCL 211.78t(9): "to determine the relative priority and value of the interest of each claimant in the foreclosed property immediately before the foreclosure was effective before issuing an order for the payment of the remaining proceeds." In re Emmet Co; __ Mich.App. at __; slip op at 6. The circuit court ultimately agreed with Litzner, finding that because she was the only claimant to the excess proceeds, they should be distributed to her.
On April 27, 2023, the circuit court entered an order requiring the Emmet County Treasurer to disburse the entire amount of the remaining proceeds from the tax foreclosure sale, $255,487.43, to Litzner, subject to her attorney's charging lien, by a check made payable to Litzner and her attorney Mark Hullman. The order directed the Emmet County Treasurer not to disburse the proceeds until 22 days elapsed from the entry of the order to allow for DHHS and Ramer to assert any claims. This was the final order that closed the case before the circuit court. DHHS now appeals the order.
The property was sold by the Emmet County Treasurer at a public auction for $281,250. The Emmet County Treasurer received a 5% sale cost recovery fee as required under MCL 211.78t(9) in the amount of $14,062.50, which left $255,487.43 in remaining proceeds to Litzner.
On June 6, 2023, the circuit court granted DHHS's motion to stay the execution of the order and to stay proceedings pending this appeal.
II. ANALYSIS
"[W]e review de novo whether the circuit court properly interpreted and applied the relevant statutes." Wiesner v Washtenaw Co Community Mental Health, 340 Mich.App. 572, 580; 986 N.W.2d 629 (2022) (citations omitted). "The primary goal of judicial interpretation of statutes is to ascertain and give effect to the Legislature's intent." Id. "Whether a party has legal standing to assert a claim [is] a question of law that we review de novo." Heltzel v Heltzel, 248 Mich.App. 1, 28; 638 N.W.2d 123 (2001).
DHHS argues Bouford-Hiar's will must first be probated, and the priority of claimants must be determined, before the circuit court can order the distribution of remaining proceeds from the tax foreclosure sale to Litzner. However, we must first consider whether DHHS has standing to appeal the circuit court's final order, considering it was never a party to the case in the circuit court and only filed an appearance and responses to Litzner's motions. This is because "the standing inquiry focuses on whether a litigant 'is a proper party to request adjudication of a particular issue and not whether the issue itself is justiciable.'" Lansing Schools Educ Ass'n v Lansing Bd of Educ, 487 Mich. 349, 355; 792 N.W.2d 686 (2010).
This Court has jurisdiction of an appeal of right filed by an aggrieved party from a ons and by filing its own motions objecting to Litzner's proposed order and to stay proceedings pending appeal. DHHS's pecuniary interest was also affected by the circuit court's order distributing the remaining proceeds to Litzner and is at least "aggrieved," even if not a party. However, DHHS never filed more than an appearance in the circuit court and never intervened. Therefore, it lacks standing to appeal. See League of Women Voters of Michigan v Secretary of State, 506 Mich. 561, 579; 957 N.W.2d 731 (2020) (stating that an aggrieved party "upon intervening, has standing to appeal").
DHHS and the circuit court were aware of this discrepancy because Litzner explicitly stated in the pleadings that DHHS never intervened under MCR 2.209. We will not adjudicate DHHS's appeal on the merits where DHHS was aware it needed to intervene but seemingly took advantage of the circuit court's oversight in continuing to treat it as a party.
MCR 2.209(A)(3) states a person has a right to intervene in an action by application when they are claiming an interest relating to the property or transaction which is the subject of the action, and the disposition of the action may impede that person's ability to protect their interest.
DHHS's position in this case is similar to other cases where DHHS lacked standing. In Zalewski v Zalewski, 342 Mich.App. 429, 438-439; 995 N.W.2d 553 (2022), DHHS was aggrieved financially by a divorce court's order, but was not a proper party to the divorce action. This Court held DHHS could not challenge the merits of the order as an aggrieved party because it never moved to intervene in the trial court. Similarly, in Burton-Harris v Wayne Co Clerk, 508 Mich. 985; 966 N.W.2d 349 (2021) (Burton-Harris II), our Supreme Court vacated this Court's opinion in Burton-Harris v Wayne Co Clerk, 337 Mich.App. 215; 976 N.W.2d 30 (2021) (Burton-Harris I), because the appellant in this Court was denied intervention in the trial court and did not move to intervene in this Court. Burton-Harris II, 508 Mich. at 985. The Supreme Court explained in Burton-Harris II that the appellant "was never a party in this case, and thus could not seek appellate review of the trial court's denial of the plaintiff's" requested relief. Id. "Accordingly, the Court of Appeals should not have considered those issues because the only issue properly before this Court in [the appellant's] appeal was the denial of his motion to intervene in the trial court proceedings." Id., (internal quotation marks omitted).
III. CONCLUSION
Because DHHS did not intervene as a party in the trial court, or in this Court, and therefore lacks standing to appeal, we affirm the circuit court's order distributing the excess proceeds of the tax foreclosure sale to Litzner.
Thomas C. Cameron, Noah P. Hood, Adrienne N. Young.