Court Opinion

ID: 824284
Source: CourtListenerOpinion
Date Created: 2013-03-01 19:35:02.286143+00
Date Added: 2024-06-11T09:58:17.982792
License: Public Domain

Michigan Supreme Court
                                                                        Lansing, Michigan
                                            Chief Justice:          Justices:

Opinion                                     Robert P. Young, Jr. Michael F. Cavanagh
                                                                 Marilyn Kelly
                                                                 Stephen J. Markman
                                                                 Diane M. Hathaway
                                                                 Mary Beth Kelly
                                                                 Brian K. Zahra

                                                             FILED JULY 30, 2012

                           STATE OF MICHIGAN

                                SUPREME COURT

 In re RECEIVERSHIP OF 11910 SOUTH
 FRANCIS ROAD.

 NASTASSIA PRICE and ERIN DUFFY-
 PRICE, Personal Representatives of the
 Estate of DARRYL HOUSTON PRICE,

             Plaintiffs,

 v                                                   No. 143123

 LORI JEAN KOSMALSKI and TRADE
 DEVELOPMENT COMPANY, a/k/a
 TRADE WORLD CORPORATION, INC.,

             Defendants,

 and

 Estate of RUDAFORD R. STERRETT, JR.,

             Defendant-Appellee,

 and

 THOMAS WOODS, Receiver,

             Appellee,
and

DART BANK,

               Intervening Defendant-
               Appellant.

BEFORE THE ENTIRE BENCH

MARY BETH KELLY, J.
         This case involves 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, seeks to recover receivership expenses

before the holder of the first-recorded mortgage, Dart Bank, satisfies 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 this

Court’s decisions in Bailey v Bailey1 and Fisk v Fisk2 and its own decision in Attica

Hydraulic Exchange v Seslar,3 to hold that because Dart did not object to and benefited

from the receivership, it therefore “may be held responsible for the receivership

expenses.”4 We 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,

1
    Bailey v Bailey, 262 Mich. 215; 247 N.W. 160 (1933).
2
    Fisk v Fisk, 333 Mich. 513; 53 NW2d 356 (1952).
3
    Attica Hydraulic Exch v Seslar, 264 Mich. App. 577; 691 NW2d 802 (2004).
4
 In re Receivership of 11910 South Francis Road (Price v Kosmalski), 292 Mich. App.
294, 299; 806 NW2d 750 (2011).

                                              2
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 those sums associated

therewith.

       Before Michigan became a state, English courts developed the general rule that a

receiver is entitled to be paid for his or her services on a first-priority basis. In 1846,

Michigan revised and consolidated its statutes. Included within the revised statutes was

1846 RS, ch 130, § 10, which provided that the purchaser of a sheriff’s deed following a

foreclosure by advertisement holds the same title that the mortgagor had at the time the

mortgage was executed and that only prior subsisting liens affected the purchaser’s

interest. In all material respects, the statute has remained unchanged since 1846 and

currently exists as MCL 600.3236. Following adoption of the pertinent foreclosure-by-

advertisement statute in 1846, this Court applied the English common-law rule in

situations not involving foreclosure by advertisement. So far as we can discern, the

common-law rule has never been applied in Michigan to divest the purchaser of a

sheriff’s deed of the purchaser’s statutory right of priority.

       This case requires us to determine whether this general common-law rule

permitting the court to give priority to a receiver should be extended to the foreclosure-

by-advertisement context even though application of that rule would contradict the

priorities established by a statute that has been in existence since 1846.

       We decline to extend the common-law rule to the situation before us. Rather, we

hold that MCL 600.3236 controls 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

                                               3
priority as they existed at the time of the mortgage’s execution. Assuming a receiver’s

lien postdates the mortgage subject to foreclosure under MCL 600.3236, as the receiver’s

lien does here, it is clear that the receiver’s interest under the lien will be subordinated to

the interests of the purchaser and any prior lienholders. Further, it is clear from our

caselaw that a mortgagee may waive its right of first-priority satisfaction of its lien.

Thus, we also hold 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, we reverse the judgment of the Court of

Appeals and remand this case to the circuit court for entry of an order releasing the

escrow funds in favor of Dart.

                       I. FACTS AND PROCEDURAL HISTORY

       The real property involved in this action was previously owned by Rudaford

Sterrett, Jr., and secured by a single mortgage held by Dart, which was duly recorded on

August 8, 2003. Upon Sterrett’s death in April 2007, the real property was bequeathed to

Lori Jean Kosmalski.      At that time, the property was valued at $350,000, and the

mortgage balance was less than $170,000.

       In September 2007, Nastassia Price and Erin Duffy-Price instituted an action

against Kosmalski to collect a judgment in an unrelated lawsuit. When they learned that

                                              4
Kosmalski had inherited the real property from Sterret, they moved for the appointment

of a receiver to seize and sell the real property in order to satisfy all or part of the

judgment against Kosmalski. Dart was not provided notice of Price and Duffy-Price’s

motion for receivership.

       In April 2008, the circuit court granted Price and Duffy-Price’s request for

receivership and appointed Thomas Woods as receiver.5 One week later, the circuit court

entered an amended stipulated order of appointment, which authorized the receiver to

take immediate possession of the property and keep, manage, operate, and preserve it

until further order of the circuit court. The powers and duties conferred on the receiver

incident to his appointment included the authority to expend the property’s equity or

borrow funds for the repair, maintenance, and operation of the property necessary to

preserve the property and make it saleable. Because the property was uninhabitable, the

receiver borrowed approximately $20,000 to finance substantial repairs. These repairs

included cleaning the home and its grounds, repairing the heating and air conditioning

systems, installing an alarm system, repairing the water system and pool area, and

installing a fence.

       Approximately one month before the receiver’s appointment, Kosmalski had

defaulted on the mortgage, and Dart initiated foreclosure proceedings by advertisement in

5
  On April 18, 2008, Dart’s former counsel, Jon Jenkins, acknowledged by facsimile his
receipt of the circuit court’s April 10, 2008, receivership order. However, in an affidavit
dated May 20, 2009, Jenkins asserted that it was not until after initiation of the
foreclosure process that Dart learned of the receivership order.

                                            5
mid-April 2008.6 At the June 5, 2008, sheriff’s sale, Dart—the sole bidder—purchased

the property for $169,312.50, which was the balance due on its mortgage, and obtained a

sheriff’s deed to the property subject to a one-year redemption period.7 On May 18,

2009, the receiver moved to void the sale, arguing that Dart had violated the court’s

receivership order, which prohibited any interference with the receiver’s possession and

management of the property. Dart subsequently intervened in opposition to this motion,

asserting that Dart had validly initiated foreclosure proceedings and that, during the

pendency of the redemption period, it had not interfered with the receiver’s possession of

the property. The circuit court denied the receiver’s motion but extended the redemption

period until August 25, 2009, to allow the receiver additional time to sell the property.

When the receiver was unable to sell the property within the extended redemption period,

Dart received title to the property effective August 26, 2009.

       In October 2009, the receiver filed a motion seeking to hold Dart liable for

payment of the costs and fees incurred in the administration of the receivership. The

receiver claimed $41,874.57 in total expenses, which reflected the costs incurred in

repairing, maintaining, and attempting to sell the property, fees for his professional

services, and costs for attorney fees incurred as a result of the receiver’s motions to

enforce the receivership order. At the motion hearing, the receiver argued that because

Dart had acquiesced in the receivership and the receiver’s expenditures, he was entitled to

6
  In a letter dated May 27, 2008, the receiver acknowledged that he was aware of Dart’s
foreclosure action and indicated that he did not intend to interfere with the process.
7
 The property was reappraised on June 6, 2009. At that time, the value of the property
had fallen to $245,000.

                                             6
reimbursement of his costs and fees from Dart. Dart responded that it could not be

charged with the receiver’s costs and fees when it had not consented to those surcharges.

         The circuit court accepted the receiver’s argument and entered an order on

November 5, 2009, approving the receiver’s final report and granting the receiver a lien

on the net proceeds from the sale of the property in the amount of $41,874.57, which was

given priority over Dart’s preexisting mortgage. The lien order further required that the

receiver relinquish possession of the property to Dart and discharged the receiver and

canceled his bond.8

         Dart appealed as of right the circuit court’s order granting the receiver a first-

priority lien over the property, arguing that a receiver is not entitled to any greater rights

than the original owner would have had and, therefore, the receiver took title to the

property subject to Dart’s preexisting mortgage. The Court of Appeals affirmed and,

citing Bailey,9 Fisk,10 and Attica,11 held that Dart could be held responsible for the

receivership expenses.12 Under its interpretation of these cases, the Court of Appeals

concluded that even without explicitly consenting to the receiver’s appointment, Dart

8
  Dart raised for the first time in its application for leave to appeal in this Court the
applicability of MCR 2.622(D), which confers on the circuit court the discretion to direct
the party who sought the appointment of the receiver to pay the receivership expenses.
Thus, the circuit court did not consider the relevance of the court rule when it granted
relief in favor of the receiver.
9
    Bailey, 262 Mich. 215.
10
     Fisk, 333 Mich. 513.
11
     Attica, 264 Mich. App. 577.
12
     In re Receivership, 292 Mich. App. 294.

                                              7
could nevertheless be required to pay the receiver’s costs and fees because it benefited

from the receivership.13

          We granted leave to appeal to consider, in relevant part, “whether the statutory

right of first priority belonging to the holder of the recorded mortgage, MCL 600.3236,

overrides the common-law rule that a receiver’s costs and fees are entitled to first

priority” and “whether a mortgagee must affirmatively consent to the appointment of a

receiver to be required to pay the receiver’s costs and fees . . . .”14

                                II. STANDARD OF REVIEW

          Whether the circuit court had the authority to order the holder of a first-recorded

mortgage to pay for the expenses of a receivership to which it did not explicitly consent is

a question of law that this Court reviews de novo.15 Questions of statutory interpretation

are also reviewed de novo.16 A circuit court’s factual findings are reviewed for clear

error, and its legal conclusions are reviewed de novo.17

                                       III. ANALYSIS

          Dart asserts that it has a statutory right to first priority under MCL 600.3236 and

that its mortgage interest cannot be made subordinate to subsequently incurred

13
     Id. at 299.
14
  In re Price Estate (Price v Kosmalski), 490 Mich. 902 (2011). Because these issues are
dispositive to the resolution of this appeal, it is unnecessary to address the third issue in
our order granting leave.
15
     Attica, 264 Mich App at 588.
16
     People v Osantowski, 481 Mich. 103, 107; 748 NW2d 799 (2008).
17
     Hendee v Putnam Twp, 486 Mich. 556, 566; 786 NW2d 521 (2010).

                                               8
receivership expenses. The receiver, on the other hand, argues that a common-law rule

grants a receiver’s expenses first priority, despite the existence of any preexisting liens on

the property. Resolution of this dispute first requires an understanding of the common-

law principles that have developed on the issue of the priority of payment of receivers’

liens.

                                A. THE COMMON LAW

         It is well established that our common law is descended from England,18 and,

consequently, the law of receiverships in Michigan is generally adopted from English

common law. As far back as 1759, the English Court of Chancery recognized that the

“master is to allow [a receiver] a reasonable salary for his care and pains therein.”19 In

the event that a competing property interest existed, as in the present case, the English

Court of Chancery and the Court of Common Pleas consistently held that a receiver was

entitled to this “reasonable salary” for the receiver’s services and expenditures on a first-

priority basis regardless of which party ultimately prevailed or was held liable to pay for

the receiver’s services and expenditures.20

18
     In re Lamphere, 61 Mich. 105, 108; 27 N.W. 882 (1886).
19
     Carlisle v Lord Berkley, 27 Eng Rep 390; Ambler’s Rep 599 (Ch, 1759).
20
  See Malcolm v O’Callaghan, 40 Eng Rep 844; 3 Myl & Cr 52; SC 1 Jur (OS) 838 (Ch,
1837) (holding that a receiver is entitled to have out of the funds collected or realized by
him his costs and fees properly incurred in the discharge of his duties as receiver);
Morison v Morison, 4 Myl & Cr 215 (Ch, 1838) (in a suit to administer a West Indian
estate, a court-appointed consignee was held entitled to repayment out of the corpus of
the estate his costs and fees, which were to be given priority over competing claims in the
suit); Gilbert v Dyneley, 133 Eng Rep 1038; 3 Man & G 12; SC 3 Scott, NR 364; 5 Jur
843 (1841) (holding that the receiver was entitled to deduct from the moneys received by
him the reasonable costs and fees he incurred in the administration of the receivership

                                              9
         We noted this common-law rule in In re Dissolution of Henry Smith Floral Co21

when we held that “the compensation of the receiver and his counsel are part of court

administrative costs and entitled to priority over receiver’s certificates constitut[ing] a

first lien on [the] assets.”22 The Court reasoned:

                The compensation of a receiver and his attorneys is out of funds or
         property in custodia legis, and no lien, authorized by the court, on the funds
         or property has priority of such court administrative costs. The lien,
         granted holders of the receiver’s certificates, was not superior to such
         administrative costs. Administrative costs are not at all of the nature of a
         lien, and a first lien on assets has no priority of such court costs and
         expenses.[23]

         One year later in Detroit Trust Co v Detroit City Service Co,24 we likewise applied

this general common-law rule when we held that the receivers were entitled to deduct

their fees and expenses from profits earned in the operation of the business held in

receivership, proceeds from the sale of the equity of redemption, and proceeds from the

sale of unmortgaged property before those funds were distributed as dividends to

before applying those, in whole or in part, in satisfaction of the outstanding mortgage
interest).
21
  In re Dissolution of Henry Smith Floral Co, 260 Mich. 299, 301-302, 306; 244 N.W. 480
(1932).
22
     Id. at 302-303.
23
     Id. at 302 (emphasis added).
24
     Detroit Trust Co v Detroit City Serv Co, 262 Mich. 14, 51-53; 247 N.W. 76 (1933).

                                              10
creditors.25 And later, in In re Rite-Way Tool & Mfg Co,26 wherein this Court addressed

whether the liquidation proceeds of personal property held in receivership should be

applied toward property taxes assessed on the receivership property before satisfying the

preexisting mortgage indebtedness, this Court similarly held that receiver’s costs were

entitled to first priority. We stated:

                [T]he receiver should first apply funds received from liquidation of
         the receivership assets (including the chattel mortgaged property) in
         payment of the costs of administration of the receivership, including taxes
         herein involved, and the fees of the receiver and his attorney as fixed by the
         court; and thereafter in the following order apply receivership funds in his
         hands in payment of (2) the chattel mortgages; (3) claims of general
         creditors; and (4) the balance of such funds, if any, to the partners.[27]

         Henry Smith, Detroit Trust Co, and Rite-Way Tool, therefore, applied the

common-law rule that the receiver invokes here: that a receiver’s unpaid fees and

compensation, which are in the nature of “administrative costs,” may be paid from the

property or funds held in receivership before those funds are made available to prior

creditors. None of those cases, however, involved foreclosure by advertisement. And

while the pertinence of the common-law rule seems apparent, the Court of Appeals erred

by failing to recognize that a provision of the foreclosure-by-advertisement statute, MCL

25
   See id. at 51 (directing the trial court to “estimate[] and deduct[] . . . the further
expenses of the receivership . . . that must be paid from such profits before they become
available for dividend purposes”) (emphasis added), and id. at 52 (“In determining the
amount of the dividends to be paid, a fair sum should be estimated and deducted for fees
of the receiver, attorneys, and for all other lawful charges.”) (emphasis added).
26
     In re Rite-Way Tool & Mfg Co, 333 Mich. 551; 53 NW2d 373 (1952).
27
     Id. at 558-559 (emphasis added).

                                              11
600.3236, is directly applicable to this matter and that no Michigan case has applied the

common-law rule in this context.28

                          B. STATUTORY RIGHT OF PRIORITY

           Notwithstanding the receiver’s contrary assertion, the plain language of MCL

600.3236 creates a statutory right of priority.29 When interpreting a statute, our primary

goal is to ascertain and give effect to the Legislature’s intent.30 The best indicator of that

intent is the language used.31 When construing statutory language, we must read the

statute as a whole and in its grammatical context, giving each and every word its plain

and ordinary meaning unless otherwise defined.32 If statutory language is clear and

28
   The issue whether the rule from these cases continues to apply outside of the context
presented in this case is not before us, and we leave resolution of that question for
another day. Further, we do not speculate whether, absent the statute, the receiver in this
case would have been entitled to superior priority over Dart as the mortgagee because,
assuming that the general common-law rule would have applied in those circumstances, it
is not ascertainable from what source the receiver’s compensation would have been
payable given the function of MCR 2.622(D). See note 8 of this opinion.
29
   The first version of this statute was enacted in 1844 and subsequently included in the
1846 revision and consolidation of the statutes, nearly 10 years after Michigan became a
state. See 1846 RS, ch 130, § 10 and 1844 PA 40, § 6 (establishing that the purchaser of
a sheriff’s deed acquires the interest held by the mortgagor at the time the mortgage was
executed). The provision underwent several minor amendments and was included in
subsequent compilations before it was reenacted in 1961 as MCL 600.3236 (effective
January 1, 1963), in the Revised Judicature Act (RJA), MCL 600.101 et seq. In all
material respects, however, the statute has remained unchanged since 1846.
30
     Wickens v Oakwood Healthcare Sys, 465 Mich. 53, 60; 631 NW2d 686 (2001).
31
     Id.
32
  MCL 8.3a; Veenstra v Washtenaw Country Club, 466 Mich. 155, 160; 645 NW2d 643
(2002).

                                             12
unambiguous, then judicial construction is neither required nor permitted, and the statute

must be applied as written.33

         MCL 600.3236 describes the legal effect of a sheriff’s deed obtained at a

foreclosure sale upon the expiration of the applicable redemption period.34 The statute

provides in full:

                Unless the premises described in such deed shall be redeemed within
         the time limited for such redemption as hereinafter provided, such deed
         shall thereupon become operative, and shall vest in the grantee therein
         named, his heirs or assigns, all the right, title, and interest which the
         mortgagor had at the time of the execution of the mortgage, or at any time
         thereafter, except as to any parcel or parcels which may have been
         redeemed and canceled, as hereinafter provided; and the record thereof
         shall thereafter, for all purposes be deemed a valid record of said deed
         without being re-recorded, but no person having any valid subsisting lien
         upon the mortgaged premises, or any part thereof, created before the lien
         of such mortgage took effect, shall be prejudiced by any such sale, nor shall
         his rights or interests be in any way affected thereby.[35]

         The first clause under this provision describes the legal effect and operation of a

deed upon the mortgagor’s failure to exercise its statutory right of redemption following

foreclosure. The first clause of MCL 600.3236 makes plain that if property is not

redeemed within the applicable statutory window, then the deed becomes “operative,”

33
     Sun Valley Foods Co v Ward, 460 Mich. 230, 236; 596 NW2d 119 (1999).
34
  If a mortgagor defaults on a mortgage containing a power of sale, like Dart’s mortgage
here, the property may be foreclosed on and sold at a sheriff’s sale. See MCL 600.3201
through 600.3224. Upon that sale, the purchaser acquires a sheriff’s deed, which only
becomes effective if the mortgagor does not exercise his or her right of redemption within
the applicable statutory window.       See MCL 600.3228; MCL 600.3232; MCL
600.3240(1).
35
     Emphasis added.

                                              13
vesting in the grantee “all the right, title, and interest which the mortgagor had at the time

of the execution of the mortgage . . . .” This clause refers to those rights that existed at

the time that the mortgage subject to foreclosure was executed.            The grantee thus

succeeds to the same rights—no greater and no fewer—as those held by the mortgagor

when the mortgage was executed.         By logical implication, this first clause renders

absolute the mortgagee’s title to the property it purchased in a foreclosure proceeding,

extinguishing any “right, title, and interest” created subsequent to the creation of the

mortgage being foreclosed upon, which includes liens created after the execution of the

mortgage.36

       The last clause of MCL 600.3236, which is central to the legal question in this

case, makes plain, however, that any interests preexisting the execution of the subject

mortgage will not be prejudiced by a foreclosure sale.           Specifically, the pertinent

language of this clause provides that “no person having any valid subsisting lien upon the

36
   At oral argument, the receiver argued that the pertinent statutory language in this first
clause is the phrase “or at any time thereafter,” which, according to the receiver, allows a
court to subordinate a senior mortgage to a junior lien. Specifically, the receiver asserts
that because Sterrett “has incurred a liability by virtue of the appointment of a receiver,
and that affected his immediate title and therefore that’s the same title that the bank has
inherited.” That interpretation cannot be reconciled with the plain text of MCL 600.3236.
The phrase “or at any time thereafter” clearly refers to the mortgagor’s positive title in
the property. Thus, the phrase “or at any time thereafter” cannot be interpreted to mean
that a subsequently imposed lien takes priority over the mortgagee’s interest because that
would nullify MCL 600.3236. Indeed, if the receiver’s interpretation were accurate, then
the last phrase of MCL 600.3236, which establishes the principle that only liens imposed
before execution of the mortgage at issue are not prejudiced by foreclosure, would be
contradictory. Further, the receiver’s interpretation poses a practical dilemma to the
extent that Sterrett’s interest could never have been subject to the receivership lien given
that he died 2½ years before its imposition.

                                             14
mortgaged premises . . . created before the lien of such mortgage took effect, shall be

prejudiced by any such sale, nor shall his rights or interests be in any way affected

thereby.” Although the statute does not define “valid subsisting lien,” the next phrase

qualifies that term to mean a lien “created before . . . such mortgage took effect . . . .”37

The provision then mandates that such liens “shall” not be “prejudiced” or “in any way

affected” by the foreclosure sale.       The clear import of this language is that those

lienholders whose interests preexisted the mortgage’s execution will have the exact same

rights following foreclosure as those previously held at the time the mortgage was

executed. It follows that the order of priority at the time of the mortgage’s execution

must be maintained after a foreclosure sale.38

37
   According to its plain language, MCL 600.3236 necessarily limits a “valid subsisting
lien” to one that was created before the mortgage took effect because “subsist” means “to
have existence[.]” Webster’s Third New International Dictionary, Unabridged Edition
(1965). To allow a lien that did not exist at the time the mortgage was executed to
prejudice the purchaser’s title would result in judicial subrogation, wherein the party with
the statutory right of priority is displaced by the party favored by the court. When the
Legislature has prescribed the order of priority, our courts may not vary it by resort to
equity. Cf. Stokes v Millen Roofing Co, 466 Mich. 660, 673; 649 NW2d 371 (2002)
(holding that an unlicensed builder could not “have equitable relief because any such
relief would allow equity to be used to defeat the statutory ban on an unlicensed
contractor seeking compensation for residential construction”). This is particularly so
here, given that this Court has provided a means to ensure that a receiver’s expenses are
paid by the party seeking to establish a receivership. See MCR 2.622(D).
38
   Michigan is a recording-priority jurisdiction and, thus, a recorded mortgage lien is held
superior to any lien subsequently recorded. This rule, generally referred to as “first in
time, first in right,” is subject to several statutory exceptions that grant certain liens first
priority no matter their time of creation. See MCL 324.20138(2) (environmental
remediation costs), MCL 211.40 (real estate taxes), and MCL 570.1119(3) (construction
liens). However, there is no statutory exception for receivership expenses.

                                              15
       When read as a whole, then, MCL 600.3236 requires that any interests in property

created after the mortgage subject to foreclosure was executed will be extinguished upon

expiration of the redemption period after a sheriff’s sale; however, any interests

preexisting the mortgage’s execution will not be affected by “any such sale,” and the

grantee under a sheriff’s deed will take the property subject to those preexisting interests.

Accordingly, we hold that MCL 600.3236, by its plain language, requires that after a

sheriff’s sale and expiration of the redemption period, any lien preexisting the mortgage

that was the subject of the foreclosure sale remains in the same order of priority as at the

time of that mortgage’s execution.

       Because Dart foreclosed on the property by advertisement, MCL 600.3236

applies, and its application makes clear that Dart’s first-recorded mortgage has first

priority, given that no other liens existed when the mortgage was executed. By operation

of MCL 600.3236, any liens created after the execution of Dart’s mortgage in 2003,

which includes the receiver’s lien created by order of the circuit court in 2009, could not

prejudice Dart’s priority interest.39 The receiver argues, however, that the common-law

39
   This statutory priority rule is actually in accord with Michigan common-law priority
rules established in related areas of law involving judicially created receiverships. Cf.
Gray v Lincoln Housing Trust, 229 Mich. 441; 201 N.W. 489 (1924), in which a receiver
was appointed to manage the affairs of the failing trust, which held as an asset the
plaintiff’s mortgage. When the trust breached a related agreement with the plaintiff, the
plaintiff filed suit against the trust to cancel the mortgage, and the receiver, who had been
appointed after the plaintiff initiated suit, intervened to recover his compensation. The
Court ruled in favor of the plaintiff, reasoning that “‘the relative rank of claims and the
standing of liens remain unaffected by the receivership.’” Id. at 447, quoting 23 Ruling
Case Law, § 118, p 108. The Court further stated:

              We think it must be taken as the settled law in this jurisdiction that
       the receiver does not take title as a bona fide purchaser but takes the assets

                                             16
rule controls and grants his lien first priority over Dart’s preexisting mortgage. We

disagree with the receiver’s argument because, while the general common-law rule

pertaining to receivership priority has certainly been recognized throughout our

jurisprudence, the caselaw on which the receiver relies demonstrates that this rule has not

been applied in the foreclosure-by-advertisement context. Indeed, we are aware of no

Michigan case that imposed the common-law rule as adopted from England so as to

divest the purchaser of a sheriff’s deed of his or her statutory right of priority pursuant to

MCL 600.3236. To apply the common-law rule despite the imperative of the plain

statutory language, providing the holder of a prior recorded mortgage with a right of

priority over all subsequently created interests in the property, would impermissibly shift

a receivership lien that is created subsequent to the time at which the mortgage subject to

       subject to the equities existing between the parties. His title and right can
       be no greater than the one for whose assets he is receiver and in whose
       shoes he stands. [Gray, 229 Mich at 446.]

The rule articulated in Gray has been relied on in other cases. See Uhl v Wexford Co,
275 Mich. 712, 715; 267 N.W. 775 (1936) (holding that a validly appointed receiver takes
the assets of the property subject to those interests that existed between the parties at the
time of his or her appointment); Franklin Co v Buhl Land Co, 264 Mich. 531, 535; 250
N.W. 299 (1933) (holding that because the plaintiff’s receiver was appointed after the
commencement of the suit, the defendant’s setoff of its judgment against the plaintiff did
not lead to a preference over other creditors because a receiver takes the assets subject to
equities existing between the parties at the time of his or her appointment); and Stram v
Jackson, 248 Mich. 171, 176; 226 N.W. 888 (1929) (holding that the purchaser of
mortgaged property stands in the shoes of the mortgagor and can urge no defense to the
mortgage not open to mortgagor); see also Rickman v Rickman, 180 Mich. 224, 248, 250;
146 N.W. 609 (1914) (holding that a plaintiff who brings suit before the filing of a bill of
dissolution of a firm acquired priority over other creditors, including the receiver, who
takes only the rights of the firm and is affected by all claims, liens, and equities which
would prevail against the firm).

                                             17
foreclosure took effect to the first-priority position. Because application of the common-

law rule would irreconcilably conflict with application of MCL 600.3236, we decline to

extend the common-law rule to circumstances like those presented here, in which MCL

600.3236 specifically controls the order of priority of preexisting competing liens,

including receivership liens, after a foreclosure by advertisement.40

                                      C. CONSENT

         Relying on Bailey41 and Fisk,42 the receiver, like the Court of Appeals,

nevertheless insists that he is entitled to prior satisfaction of his costs and fees, even

without Dart’s explicit consent, on the basis that Dart acquiesced in the receivership.

However, the receiver’s assertion is wholly unsupported by our jurisprudence. In Bailey,

this Court held that when a mortgagee consents to the appointment of a receiver as well

as to the reordering of the priorities, the mortgagee may be charged with payment of the

receiver’s costs and fees. Likewise, in Fisk, the Court held that when a party agreed by

stipulation to the appointment of certain receivers, that party was precluded from

challenging payment of a receiver’s compensation. Thus, both Bailey and Fisk are

distinguishable from the facts of this case, given that it is undisputed that Dart did not

explicitly consent to either the appointment of a receiver or to the reordering of the

40
  See Pulver v Dundee Cement Co, 445 Mich. 68, 75 n 8; 515 NW2d 728 (1994) (holding
that if there “if there is a conflict between the common law and a statutory provision, the
common law must yield”).
41
     Bailey, 262 Mich. 215.
42
     Fisk, 333 Mich. 513.

                                            18
priorities.43   Certainly, a party can waive its statutory rights.44   No legal authority,

however, justifies the extension of the rule articulated in Bailey and Fisk to circumstances

like the present, in which the mortgagee failed to object to, or merely acquiesced in, the

receiver’s appointment, and the Court of Appeals erred by holding to the contrary.45

43
  Though Justice CAVANAGH does not disagree with our conclusion that Bailey and Fisk
are more akin to our waiver jurisprudence and do not create a common-law rule that
permits the mortgagee’s priority to be subordinated without the mortgagee’s explicit
consent to the receivership, he curiously extends the holdings in those cases to conclude
that acquiescence is sufficient to effect a waiver. However, the resolution reached in
Bailey and Fisk appears to have been prompted by the Court’s interest in preventing the
mortgagee from actually agreeing that the receiver incur costs only to subsequently deny
responsibility for payment of those costs. Again, as we note later in this opinion, all the
confusion about who should bear the cost of the receiver’s expenses is entirely avoided
by use of MCR 2.622(D), and we advise courts to consider using this court rule in the
future when the appointment of receivers is contemplated.
44
   “As defined by this Court, ‘waiver’ connotes an intentional abandonment of a known
right.” Roberts v Mecosta Co Gen Hosp, 466 Mich. 57, 64 n 4; 642 NW2d 663 (2002),
citing People v Carines, 460 Mich. 750, 762 n 7; 597 NW2d 130 (1999). Conversely, “a
‘forfeiture’ is the failure to assert a right in a timely fashion.” Roberts, 466 Mich at 69,
citing Carines.
45
   Our waiver jurisprudence generally does not recognize mere acquiescence as a means
to waive a known right. See Quality Prod & Concepts Co v Nagel Precision, Inc, 469
Mich. 362, 365; 666 NW2d 251 (2003) (holding that “[m]ere knowing silence generally
cannot constitute waiver”). Even Justice CAVANAGH’s creative interpretation of Bailey
and Fisk does not support this proposition. Justice CAVANAGH interprets Bailey as
supporting his assertion that “waiver may also occur by way of acquiescence.” Post at 2.
However, that “[t]he mortgagees dealt with the receiver promptly and in an effort to save
loss to themselves by keeping the hotel a going concern, and receivership was used in an
attempt to effect sale of the property” and that the mortgagees “availed themselves of any
possible advantage of the receivership” was not the Court’s pronouncement that
acquiescence is sufficient to constitute waiver, but simply a corollary of the Court’s
recognition that the “bill [of receivership costs] was filed by consent.” Bailey, 262 Mich
at 219 (emphasis added). Justice CAVANAGH’s reliance on Bailey for his acquiescence
argument is unsustainable. Justice CAVANAGH’s similar interpretation of Fisk is likewise
unsustainable for reasons we explain later in this opinion.

                                             19
         Nor is there any legal authority supporting the Court of Appeals’ conclusion that a

party merely benefiting from a receivership may be liable for the receiver’s costs and

fees. Neither Bailey nor Fisk supports that conclusion. In both Bailey and Fisk, it was

the fact that the parties had expressly consented to the receivership that justified the

Court’s reordering of the priorities and imposition of the receiver’s fees, respectively.

Further, the Court of Appeals’ reliance on Attica was misplaced because Attica

erroneously characterized Fisk as unequivocally holding “that the party who benefited

from the receivership is responsible for the receivership expenses . . . .”46 Rather, Fisk

held that the general rule is that a receiver’s fees should be taken from the property in the

receivership. In this case, however, in which the property is insufficient to satisfy the

mortgagee’s superior lien and the receiver’s fees, this general rule cannot be applied.

       Moreover, the additional caselaw cited by Justice CAVANAGH in support of his
contention that this Court has recognized waiver based on acquiescence is distinguishable
from the present matter. See Bloomfield Estates Improvement Ass’n, Inc v City of
Birmingham, 479 Mich. 206, 219, 223; 737 NW2d 670 (2007) (holding that a party is not
precluded from enforcing a deed restriction despite the party’s failure to contest a prior
violation as long as the prior violation was of a “less serious character” than the
subsequent one when a contrary rule would “create increasing chaos in the enforcement
of deed restrictions”); Sampeer v Boschma, 369 Mich. 261, 263, 266; 119 NW2d 607
(1963) (holding that the defendants had waived strict compliance with a procedural rule
requiring the court to file and serve on both parties a pretrial statement when defense
counsel had knowledge of the procedural irregularity and to which no objection was
made at the time); and Smith v First United Presbyterian Church, 333 Mich. 1, 11; 52
NW2d 568 (1952) (holding that by “vigilant[ly]” maintaining the single-residential
character of subdivision property in accordance with the general subdivision plan, the
purchaser “acquiesced in the general plan . . . and waived any right she or her grantees
would have to act outside of it”). Those same policy concerns, factual circumstances,
and affirmative conduct by the party deemed to have waived a known right are clearly
not at issue in the present matter. These cases, therefore, fail to demonstrate Dart’s
intentional relinquishment of its statutory right of first priority.
46
     Attica, 264 Mich App at 592.

                                             20
Indeed, the mere receipt of a benefit because of the receiver’s actions does not justify

disregarding MCL 600.3236. Rather, when MCL 600.3236 is applicable, a receiver’s

expenses will generally not be entitled to first priority; only when the mortgagee has

unequivocally waived this statutory right of first priority will the receiver be entitled to

prior satisfaction of his or her expenses consistently with the common-law rule. For

these reasons, it was improper for the Court of Appeals to rely on Bailey, Fisk, and Attica

as its bases for requiring Dart to pay the receiver’s costs and fees.47

                                    IV. APPLICATION

       Application of the statute to the facts of this case mandates that Dart, as the holder

of a first-recorded mortgage, be entitled to satisfaction of its mortgage interest from the

proceeds of the foreclosure sale on a first-priority basis. Dart’s first-recorded mortgage

took effect on August 8, 2003. Dart validly foreclosed on its mortgage, the property was

not redeemed within the extended redemption period, and Dart became the legal and

equitable titleholder of the real property under the sheriff’s deed on August 26, 2009.

47
   The receiver also relies on this Court’s decision in In re Petition of Chaffee, 262 Mich.
291; 247 N.W. 186 (1933), for the proposition that because Dart did not move for leave to
proceed independently of the receiver, it was precluded from interfering with the
receivership. Chaffee, however, is inapplicable because that case involved the validity of
a foreclosure sale, not the competing priority of a receiver’s lien and a preexisting
mortgage. Further, to the extent the receiver attempts to attack the validity of the
foreclosure proceedings, we note that Chafee is plainly distinguishable. In that case, we
affirmed a circuit court’s decision to void a foreclosure sale when the mortgagee
proceeded with foreclosure proceedings without the court’s permission. In this case, the
receiver indicated before the foreclosure sale that he did not intend to interfere with
Dart’s foreclosure. Moreover, when the receiver did move to void the foreclosure sale,
nearly a year after the sale had taken place, the circuit court merely extended the
redemption period. The receiver has not appealed that decision and, therefore, the
validity of the foreclosure proceeding is not before this Court.

                                              21
The receivership lien was subsequently created on November 5, 2009, by order of the

circuit court. Because a purchaser of a sheriff’s deed takes the property with only those

liens that existed at the time the mortgage took effect, and there was no receivership lien

when Dart’s mortgage took effect in 2003, Dart’s first-recorded mortgage has a statutory

right of priority under MCL 600.3236 over all other subsequent liens. Moreover, because

Dart did not explicitly waive its statutory right of priority, the rule articulated in Bailey

and Fisk is inapplicable and the receiver is precluded from recovering the receivership

expenses from Dart.

       Further, although the receiver’s lien in this case could not prejudice Dart’s priority

interest, we acknowledge the need for guidance with regard to priority and payment of

receivers’ liens.   Circuit courts appointing receivers should be cognizant of MCR

2.622(D), which permits a circuit court, “on application of the receiver,” to set the

compensation of the receiver, and to require the party requesting the receivership to bear

the costs associated with it. But regardless of whether a circuit court chooses to exercise

its discretion under the court rule, the circuit court, at the time it appoints a receiver,

should nevertheless make provision for the payment of receivership expenses and should

be aware of the order of priority of any competing interests and other relevant collateral

issues that could affect a receiver’s compensation. This is particularly important in the

context of foreclosure by advertisement, when, as in the present case, a receiver’s lien

may be extinguished by operation of MCL 600.3236. Not only did the circuit court in the

instant case fail to consider the effect of MCL 600.3236 on the receiver’s lien, it also

failed to consider the court rule. By application of MCR 2.622(D), the receiver might

nonetheless have received compensation for the expenses incurred in his administration

                                             22
of the receivership despite the order of priorities, potentially avoiding a situation like that

here. That is, had the circuit court exercised its discretion under the court rule, Price and

Duffy-Price, as the parties requesting the receivership, might have been liable for

payment of the receivership expenses out of their own funds and the receiver might not

have been deprived of any compensation.48

                                     V. CONCLUSION

       Because MCL 600.3236 operates to preserve the order of priority following

expiration of the applicable redemption period, it necessarily follows that the order of

priority for any liens preexisting the mortgage that is the subject of the foreclosure will

remain as it did at the time of the mortgage’s execution. Because this statutory provision

cannot be reconciled with the common-law rule and because the common-law rule has

never been applied to a foreclosure by advertisement under MCL 600.3236, we decline to

extend the common-law rule in this case and, consequently, the statute controls. We

48
   If, for example, there had been sufficient equity in the property to satisfy both Dart’s
preexisting mortgage interest and the receiver’s costs and fees, the proper order of
distribution of the proceeds following the sale of the DeWitt property would have first
required satisfaction of Dart’s prior recorded mortgage followed by payment of the
receiver’s costs and fees. Thus, when seeking payment, a receiver looks first to the
property itself. Fisk, 333 Mich at 516. If there are insufficient funds because, for
example, a creditor with a superior lien is owed more than what the property is worth,
then the receiver may petition the court pursuant to MCR 2.622(D) to order the party who
sought the appointment of the receiver to compensate the receiver for his or her costs and
fees.

                                              23
therefore reverse the judgment of the Court of Appeals imposing on Dart the costs of the

receivership and remand this case to the circuit court for entry of an order in Dart’s favor

consistent with this opinion.

                                                        Mary Beth Kelly
                                                        Robert P. Young, Jr.
                                                        Stephen J. Markman
                                                        Brian K. Zahra

                                            24
                             STATE OF MICHIGAN

                                SUPREME COURT

In re RECEIVERSHIP OF 11916 SOUTH
FRANCIS ROAD.

NASTASSIA PRICE and ERIN DUFFY-
PRICE, Personal Representatives of the
Estate of DARRYL HOUSTON PRICE,

            Plaintiffs,

v                                               No. 143123

LORI JEAN KOSMALSKI and TRADE
DEVELOPMENT COMPANY, a/k/a
TRADE WORLD CORPORATION, INC.,

            Defendants,

and

Estate of RUDAFORD R. STERRETT, JR.,

            Defendant-Appellee,

and

THOMAS WOODS, Receiver,

            Appellee,

and

DART BANK,

            Intervening Defendant-
            Appellant.

CAVANAGH, J. (dissenting).
       I respectfully dissent from the majority’s conclusion that a mortgagee only waives

its rights to superior priority under MCL 600.3236 if the mortgagee expressly consents to

a receivership or the reordering of priorities. Rather, I would hold that a mortgagee may

also waive its superior priority rights if the mortgagee acquiesces to and benefits from the

receivership.

       In support of its conclusion that a receiver may only obtain superior priority in

relation to a mortgagee “when the mortgagee has unequivocally waived this statutory

right of first priority [under MCL 600.3236],” the majority cites Bailey v Bailey, 262
Mich. 215; 247 N.W. 160 (1933), and Fisk v Fisk, 333 Mich. 513; 53 NW2d 356 (1952).

Ante at 21. However, in my view, Bailey and Fisk provide that a waiver may also occur

by way of acquiescence.1

       In Bailey, a receiver was appointed for a hotel, which was subject to a mortgage.

All parties involved sought to have the receiver operate the hotel during the summer of

1931, but the receiver refused unless the mortgagees consented to his borrowing money

and obtaining a first lien with priority over the mortgagees. The mortgagees agreed.

1
   Waiver by acquiescence is well known in a variety of legal situations. See, e.g.,
Bloomfield Estates Improvement Ass’n, Inc v City of Birmingham, 479 Mich. 206, 214;
737 NW2d 670 (2007) (stating that an unambiguous deed restriction is enforced as
written “unless the restriction . . . has been waived by acquiescence”) (emphasis added);
Sampeer v Boschma, 369 Mich. 261, 265; 119 NW2d 607 (1963) (“If the action of the
trial court was irregular, the irregularity was waived by making no objection until after
the verdict was rendered.”) (emphasis added; quotation marks and citation omitted); and
Smith v First United Presbyterian Church, 333 Mich. 1, 11; 52 NW2d 568 (1952)
(holding that when the purchaser of real property from a subdivider was vigilant in
maintaining the property in accordance with the general plan, the purchaser “acquiesced
in the general plan . . . and waived any right she or her grantees would have to act outside
of it”) (emphasis added).

                                             2
Subsequently, the real estate market collapsed, but the mortgagees did not seek to

foreclose and instead cooperated with the receiver in his efforts to sell the property. No

acceptable offers were received, however.

       In determining whether the receiver held priority over the mortgagees for his

costs, Bailey initially focused on the fact that the mortgagees consented to the receiver’s

superior priority:

              If the mortgagees had kept out of this matter, except perhaps in
       respect of contest of the receiver’s account, there might be force in their
       contention that they are liable for no part of the administration costs and
       expenses of the receivership. But, as stated, the bill was filed by consent.
       [Bailey, 262 Mich at 219 (emphasis added; citation omitted).]

However, this Court also stated that even if the mortgagees had not given prior, specific

consent to the receiver’s priority, their conduct would nevertheless have precluded them

from seeking to obtain priority over the receiver because “[t]he mortgagees dealt with the

receiver promptly and in an effort to save loss to themselves by keeping the hotel a going

concern, and receivership was used in an attempt to effect sale of the property.” Id.

Accordingly, because the mortgagees “availed themselves of any possible advantage of

the receivership, they will not be heard to say that the property in the hands of the

receiver is not chargeable with the receiver’s expense and administration costs, even

though it may result practically in a corresponding loss to them.”          Id. at 219-220

(emphasis added). This was so because “[a]dministration expenses are incurred on the

theory that they benefit the parties ultimately entitled to the property.” Id. at 220. Bailey

was also careful to limit the scope of its holding, explaining that a court may only allow a

                                             3
receiver’s expenses to displace prior liens when the expenses are required to preserve the

property and allow the property to become saleable. Id. at 221.

      Also, in Fisk this Court considered a situation in which the parties had agreed to

the appointment of receivers over the corporation at issue while the parties settled a

dispute regarding who owned the corporation. This Court held that, when the primary

purpose of a receivership is to preserve and protect the property involved in a

controversy, “it logically follows that he who ultimately establishes his right to the

property thus held is the one who benefits from the property having been protected and

preserved.” Fisk, 333 Mich at 516, citing Bailey, 262 Mich. 215. Fisk also noted that

both parties had agreed to the appointment of the receivers and, “by doing so, appellant in

effect waived any complaint he might otherwise make regarding the propriety or legality

of the appointment and its effect upon the question of who was to bear the receivership

expenses.” Fisk, 333 Mich at 516 (citation omitted).

      In my view, Bailey and Fisk indicate that although consent by the mortgagee is

one method by which a receiver may obtain superior priority, acquiescence by a

mortgagee is also sufficient to grant a receiver’s expenses priority over a preexisting

mortgage. Bailey and Fisk supported this conclusion by reasoning that the receivership is

intended to protect and preserve the property held by the receiver and because a

mortgagee or an eventual owner of the receivership property benefits from the receiver’s

expenditures, it is proper to impose those expenses on the party that benefits. See Bailey,

262 Mich at 219-220 (stating that because the mortgagees “availed themselves of any

possible advantage of the receivership, they will not be heard to say that the property in

the hands of the receiver is not chargeable with the receiver’s expense and administration

                                            4
costs, even though it may result practically in a corresponding loss to them”). Thus, in

my view, the majority incorrectly states that acquiescence by a mortgagee with

knowledge of the receivership is insufficient to provide the receiver superior priority. See

ante at 19 (claiming that this interpretation would require an “extension of the rule

articulated in Bailey and Fisk”), and ante at 18 (claiming that this interpretation is

“wholly unsupported by our jurisprudence”). Rather, Bailey specifically supports this

conclusion.

       Applying Bailey and Fisk to this case, I believe that, at a minimum, Dart Bank

acquiesced to the receivership. Specifically, Dart never objected to the receiver’s actions,

despite its knowledge of the receiver’s efforts. This Court has long recognized the

inherent authority of a court of equity to appoint a receiver under appropriate

circumstances, see McDonald, 351 Mich at 575-576, and Dart does not argue that the

receivership in this case was improper. Moreover, the Court of Appeals has held that

entities that are not parties to a receivership order but are nevertheless affected by the

receivership order need not be served with notice under MCR 2.105(D), particularly

when the affected entity receives actual notice of the order. In re Contempt of Cornbelt

Beef Corp, 164 Mich. App. 114, 120; 416 NW2d 696 (1987), citing Davis v Davis, 137
Mich. App. 291, 293; 358 NW2d 6 (1984), and Tuller v Wayne Circuit Judge, 243 Mich.
239, 243-245; 219 N.W. 939 (1928). Accordingly, Dart was not entitled to formal notice

of the receivership.

       Furthermore, although Dart was not a party to the receivership order entered on

April 10, 2008, and Dart initiated a foreclosure by advertisement on April 15, 2008—

before it was aware of the receivership—Dart admitted that it had received actual notice

                                             5
of the receivership only three days later, on April 18, 2008. Moreover, the majority’s

notation that “‘[m]ere knowing silence generally cannot constitute waiver,’” ante at 19 n

45, quoting Quality Prods & Concepts Co v Nagel Precision Inc, 469 Mich. 362, 365; 666

NW2d 251 (2003), is irrelevant because Dart did not merely stand mute when it learned

of the receivership. Rather, in a letter acknowledging the receivership, Dart’s attorney

stated that it “would be willing to work with [the receiver] . . . in terms of arranging for a

sale of the property so that this mortgage can be paid.”            Also, Dart’s subsequent

interaction with the receiver during the year between its acknowledgement of the

receivership and the sheriff’s sale substantiates Dart’s willingness to work with the

receiver. Additionally, during the October 14, 2009, hearing in the trial court, Dart’s

attorney admitted that Dart “acquiesced to the fact that there was a receiver out

there . . . .” The trial court, the receiver, and Dart agreed that the property was in terrible

condition and, although the expenses of repairing it were high, they were necessary in

this case.   Furthermore, the receiver provided reports documenting his expenditures

related to repairing the property in hopes of returning it to a saleable condition, and Dart

never acted to formally challenge any specific expenditure by the receiver related to the

property’s repair. Thus, in my view, Dart’s conduct was sufficient to establish that Dart

had knowledge of and acquiesced to the receivership. Accordingly, in my view, Dart

clearly engaged in “affirmative conduct” that was sufficient to show that Dart “waived a

known right,” ante at 20 n 45, just as did the parties in Bloomfield Estates Improvement

Ass’n, Inc v City of Birmingham, 479 Mich. 206, 214; 737 NW2d 670 (2007); Sampeer v

Boschma, 369 Mich. 261, 265; 119 NW2d 607 (1963); and Smith v First United

Presbyterian Church, 333 Mich. 1, 11; 52 NW2d 568 (1952).

                                              6
       Additionally, as mortgagee, Dart benefited from the receiver’s efforts to repair,

preserve, and protect the property because the repairs increased the property’s value.

Therefore, the receiver’s efforts improved Dart’s chances of recovering the full amount

of its mortgage when the receiver sold the property. The fact that the receiver was not

able to sell the property at a suitable price does not undercut this analysis because Bailey

held that the receiver’s costs take priority “even though it may result practically in a

corresponding loss to [the mortgagee].” Bailey, 262 Mich at 219-220. Accordingly, as

stated in Bailey, Dart should not “be heard to say that the property in the hands of the

receiver is not chargeable with the receiver’s expense” when the mortgagee “availed

[itself] of any possible advantage of the receivership . . . .” Id. at 219.2

2
  Bailey’s discussion of the importance of who receives the benefit of a receiver’s efforts
is consistent with this Court’s discussion of the issue in other opinions. For example, in
Holmes v Holmes, 265 Mich. 16, 18; 251 N.W. 360 (1933), this Court stated that imposing
responsibility for the receiver’s expenses on the receivership property is appropriate
when the receiver “performed valuable services” that “were beneficial” and the parties
had consented to the receiver’s appointment. Likewise, in Fisk, this Court stated that

       “[r]eceivers ordinarily have a right to compensation for their services and
       expenses, and such right is a strong equity, analogous to an obligation
       founded upon an implied contract, and is not dependent upon the mere
       arbitrary discretion of the court, if the appointment of the receiver was
       regular and his conduct has been free from exception. Such right of the
       receiver to compensation is a charge on the property or fund in
       receivership.” [Fisk, 333 Mich at 518 (citation omitted).]

See, also, Cohen v Cohen, 125 Mich. App. 206, 215; 335 NW2d 661 (1983) (upholding a
receiver’s fees because the fees were not “excessive” and were “reasonable in light of the
actions the receiver was required to take in order to protect the property”), and 65 Am Jur
2d, Receivers, § 220, p 777 (“The general rule is that the compensation of a receiver,
where the receivership proceedings are not sought by a mortgagee, is subordinate to the
lien of the mortgage, at least where the mortgagee receives no benefit therefrom.”)
(emphasis added).

                                               7
       Finally, as the ultimate owner of the property through the foreclosure process, Dart

also benefited from the receiver’s efforts to repair, preserve, and protect the property.

This aspect of the case falls under Fisk’s conclusion that when the primary purpose of a

receivership is to preserve and protect the property involved in a controversy, “it logically

follows that he who ultimately establishes his right to the property thus held is the one

who benefits from the property having been protected and preserved.” Fisk, 333 Mich at

516. Accordingly, because Dart, as the eventual owner of the property, benefited from

the receiver’s efforts to repair, preserve, and protect the property in that Dart received a

habitable, sellable property, I would require Dart to bear the cost of that benefit.

       Thus, I would affirm the judgment of the Court of Appeals because, in my view,

Dart waived its statutory right to superior priority under MCL 600.3236 because it had

knowledge of the receivership, acquiesced to the receivership, and benefited from the

receiver’s efforts to repair, preserve, and protect the property.

                                                          Michael F. Cavanagh
                                                          Marilyn Kelly
                                                          Diane M. Hathaway

                                              8