Russell mortgaged his property to First United Security Bank. He defaulted on his loan, and also did not pay his real estate taxes. On May 25, 2010, the property was sold for unpaid taxes, resulting in $32,305.12 in surplus funds. On July 8, 2010, the bank assigned its mortgage to its wholly owned subsidiary, Paty Holdings. I'll just call Paty "the Bank" in this blog, making it easier to read. The Bank foreclosed, bidding in the property for the outstanding debt, $2,381,790. Sometime before the end of 2010, the Bank notified the Probate Judge that it wanted to redeem the property. The Probate Judge quoted a redemption amount which did not include a credit for the surplus funds. The Bank claimed it was entitled to the surplus funds, because it was the owner of the property at the time of the attempted redemption. Russell claimed he was entitled to the surplus funds because he was the owner at the time of the tax sale. Everybody went to court to fight over the money, and Russell won. The trial court said that "owner" in the redemption statutes meant the owner at the time of the tax sale. The Bank appealed, basically arguing the result was unfair. On November 30, 2012, the Alabama Court of Civil Appeals decided the case of First United Security Bank and Paty Holdings, LLC v. Hardy McCollum, Probate Judge of Tuscaloosa County. The court held that Russell was entitled to the money. Things might have been different if the Bank foreclosed BEFORE the tax sale, but they did not. Too bad! "Fair" had nothing to do with it. Why should you are about this decision? Because, what if Russell quit-claimed the property to you, either before or after the tax sale or the foreclosure sale, for a nominal amount? Check with your lawyer, but I think YOU would be the one entitled to get the surplus funds. What kind of additional investing could you do with a $32,000 pot of money?
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