Rule 3.403 Sale of Premises and Division of Proceeds as Substitute for Partition

(A) Order of Sale.

(1) If a party has a dower interest or life estate in all or a part of the premises at the time of the order for sale, the court shall determine whether, under all the circumstances and with regard for the interests of all the parties, that interest should be excepted from the sale or be sold with the premises. If the court orders that the sale include that party's interest, the sale conveys that interest.

(2) In the order of sale the court shall designate:

(a) which premises are to be sold;

(b) whether the premises are to be sold in separate parcels or together;

(c) whether there is a minimum price at which the premises may be sold;

(d) the terms of credit to be allowed and the security to be required; and

(e) how much of the proceeds will be invested, as required by this rule, for the benefit of unknown owners, infants, parties outside Michigan, and parties who have dower interests or life estates.

(B) Specific Procedures and Requirements of Sale.

(1) The person appointed by the court to conduct the sale shall give notice of the sale, including the terms. Notice must be given in the same manner as required by MCL 600.6052.

(2) Neither the person conducting the sale nor anyone acting in his or her behalf may directly or indirectly purchase or be interested in the purchase of the premises sold. The conservator of a minor or legally incapacitated individual may not purchase or be interested in the purchase of lands that are the subject of the proceedings, except for the benefit of the ward. Sales made contrary to this provision are voidable, except as provided by MCL 700.5421.

(3) The part of the price for which credit is allowed must be secured at interest by a mortgage of the premises sold, a note of the purchaser, and other security the court prescribes.

(a) The person conducting the sale may take separate mortgages and other securities in the name of the clerk of the court and the clerk's successors for the shares of the purchase money the court directs to be invested, and in the name of a known owner, 18 years of age or older, who desires to have his or her share so invested.

(b) When the sale is confirmed, the person conducting the sale must deliver the mortgages and other securities to the clerk of the court, or to the known owners whose shares are invested.

(4) After completing the sale, the person conducting the sale shall file a report with the court, stating

(a) the name of each purchaser,

(b) a description of the parcels of land sold to each purchaser, and

(c) the price paid for each parcel.

A copy of the report must be sent to each party who has appeared in the action.

(5) If the court confirms the sale, it shall enter an order authorizing and directing the person conducting the sale to execute conveyances pursuant to the sale.

(6) Conveyances executed according to these rules shall be recorded in the county where the land is located. These conveyances are a bar against

(a) all interested persons who were made parties to the proceedings;

(b) all unknown parties who were ordered to appear and answer by proper publication or personal service of notice;

(c) all persons claiming through parties listed in subrules (B)(6)(a) and (b);

(d) all persons who have specific liens on an undivided share or interest in the premises, if they were made parties to the proceedings.

(7) If the court confirms the sale, and the successful bidder fails to purchase under the terms of the sale, the court may order that the premises be resold at that bidder's risk. That bidder is liable to pay the amount of his or her bid minus the amount received on resale.

(C) Costs and Expenses of the Proceeding. The person conducting the sale shall deduct the costs and expenses of the proceeding, including the plaintiff's reasonable attorney fees as determined by the court, from the proceeds of the sale and pay them to the plaintiff or the plaintiff's attorney.

(D) Distribution of Proceeds of Sale.

(1) When premises that include a dower interest or life estate are sold, the owner of the dower interest or life estate shall be compensated as provided in this subrule.

(a) Unless the owner consents to the alternative compensation provided in subrule (D)(1)(b), the court shall order that the following amount be invested in interest-bearing accounts insured by an agency of the United States government, with the interest paid annually for life to the owner of the dower interest or life estate:

(i) in the case of a dower interest, one-third of the proceeds of the sale of the premises or of the undivided share of the premises on which the claim of dower existed, after deduction of the owner's share of the expenses of the proceeding;

(ii) in the case of a life estate, the entire proceeds of the sale of the premises, or undivided share of the premises in which the life estate existed, after deduction of the proportion of the owner's share of the expenses of the proceeding.

If the owner of the dower interest or life estate is unknown, the court shall order the protection of the person's rights in the same manner, as far as possible, as if he or she were known and had appeared.

(b) If, before the person conducting the sale files the report of sale, the owner of the dower interest or life estate consents, the court shall direct that the owner be paid an amount that, on the principles of law applicable to annuities, is reasonable compensation for the interest or estate. To be effective the consent must be by a written instrument witnessed and acknowledged in the manner required to make a deed eligible for recording.

(2) If there are encumbrances on the estate or interest in the premises of a party to the proceeding, the person conducting the sale must pay to the clerk the portion of the proceeds attributable to the sale of that estate or interest, after deducting the share of the costs, charges, and expenses for which it is liable. The party who owned that estate or interest may apply to the court for payment of his or her claim out of these proceeds. The application must be accompanied by

(a) an affidavit stating the amount due on each encumbrance and the name and address of the owner of each encumbrance, as far as known; and

(b) proof by affidavit that notice was served on each owner of an encumbrance, in the manner prescribed in MCR 2.107.

The court shall hear the proofs, determine the rights of the parties, and direct who must pay the costs of the trial.

After ascertaining the amount of existing encumbrances, the court shall order the distribution of the money held by the clerk among the creditors having encumbrances, according to their priority. When paying an encumbrance the clerk must procure satisfaction of the encumbrance, acknowledged in the form required by law, and must record the satisfaction of the encumbrance. The clerk may pay the expenses of these services out of the portion of the money in court that belongs to the party by whom the encumbrance was payable.

The proceedings under this subrule to ascertain and settle the amounts of encumbrances do not affect other parties to the proceedings for partition and do not delay the payment to a party whose estate in the premises is not subject to an encumbrance or the investing of the money for the benefit of such a person.

(3) The proceeds of a sale, after deducting the costs, must be divided among the parties whose rights and interests have been sold, in proportion to their respective rights in the premises.

(a) The shares of the parties who are 18 years of age or older must be paid to them or to their legal representatives (or brought into court for their use) by the person conducting the sale.

(b) The court may direct that the share of a minor or a legally incapacitated individual be paid to his or her conservator or be invested in interest-bearing accounts insured by an agency of the United States government in the name and for the benefit of the minor or legally incapacitated individual.

(c) If a party whose interest has been sold is absent from the state and has no legal representative in the state or is not known or named in the proceedings, the court shall direct that his or her share be invested in interest-bearing accounts insured by the United States government for the party's benefit until claimed.

(4) The court may require that before receiving a share of the proceeds of a sale a party give a note to secure refund of the share, with interest, if the party is later found not entitled to it.

(5) When the court directs that security be given or investments be made, or the person conducting the sale takes security on the sale of real estate, the bonds, notes, and investments must be taken in the name of the clerk of the court and the clerk's successors in office, unless provision is made to take them in the name of a known owner.

The clerk must hold them and deliver them to his or her successor, and must receive the interest and principal as they become due and apply or reinvest them, as the court directs. The clerk shall annually give to the court a written, sworn account of the money received and the disposition of it.

A security, bond, note, mortgage, or other evidence of the investment may not be discharged, transferred, or impaired by an act of the clerk without the order of the court. A person interested in an investment, with the leave of the court, may prosecute it in the name of the existing clerk, and an action is not abated by the death, removal from office, or resignation of the clerk to whom the instruments were executed or the clerk's successors.