Opinion:Rushmore Loan Management Services v. Solorio, 2022 OK CIV APP 33
Subject matter:Foreclosure Procedure
Date Decided:September 5, 2022
Trial Court:District Court of Oklahoma County; Judge Timmons
Route to this Court:Rushmore appealed a June 7, 2021 order granting Timothy Solorio’s motion for disbursement of surplus funds.
Facts:In 2004, Paul Solorio executed a promissory note to First Mortgage Co., LLC in the sum of $24,500.00, encumbering real property located in Oklahoma County. Borrower died in 2009. A Notice to Creditors was issued and no claim was filed in relation to the real property. In the decree of distribution of Paul Solorio’s estate, the real property encumbered by First Mortgage’s mortgage was distributed to borrower’s daughter and son, Timothy (Solorio). Daughter executed a quitclaim conveying her interest to Solorio.

Stratford Place Condominium Owners’ Association (COA) filed suit on July 10, 2018 against Solorio, First Mortgage, and any other occupants of the condo, seeking to foreclose an assessment lien. After defendants failed to answer or appear in court, COA was granted default judgment. The court found that COA’s assessment lien was a valid first lien upon the real property, and that First Mortgage was in default and was forever barred, foreclosed, and enjoined from asserting any right, title, interest, estate, lien or right of redemption in and to the real property. In a Sheriff’s sale, the property was sold for $32,000, then $10,222.84 was disbursed to COA in full satisfaction of its assessment lien. After expenses were paid, the balance of $21,477.16 was deposited with the Court Clerk of Oklahoma County in February 2019.

On September 20, 2019, Rushmore entered an appearance and filed Notice of Claim of Funds, and requested disbursement of the surplus funds. Rushmore asserted it was assigned the mortgage on March 6, 2019 and that it was entitled to enforce the note and mortgage, the note was in default, and the balance due under the note exceeded the surplus funds deposited with the Court Clerk. On March 5, 2021, Solorio filed a motion for distribution of funds, and requested that the court distribute the surplus funds to him. The trial court entered an order disbursing funds to Solorio.
Standard of Review:Foreclosure proceedings are equitable in nature. The trial court’s judgment in an equity case will be affirmed on appeal “unless it is found to be against the clear weight of the evidence or is contrary to law or established principles in equity.” Abboud v. Abboud, 2000 OK CIV APP 116, ¶ 4.
Analysis:Relying on Resolution Trust Corp. v. Sudderth, 1993 OK CIV APP 53, ¶ 9, where it was held that a defendant’s failure to plead or defend against a petition wherein foreclosure of a mortgage and sale of the property does not alone constitute a waiver by defendant of any claim to surplus funds. The Court determined that the guiding rule to determine who is entitled to surplus funds is that all encumbrances on mortgaged premises inferior to the mortgage or lien on which the sale is based must be paid in order of time in which they respectively became liens. Russell v. Freeman, 1949 OK 257, ¶ 17. Case law from Oklahoma and other jurisdictions on this matter generally held that holders of other liens or mortgages, upon which the foreclosure was not based, have been entitled to surplus funds.
Thus, the Court disagreed with Solorio’s claim that Rushmore had no standing to pursue the surplus funds. Because Oklahoma law dictates that an assignee acquires all rights to which the assignor was entitled at the time of the assignment. Redcorn, Jr. v. Knox, 2014 OK CIV APP 109, ¶ 47. The assignment was properly filed on March 26, 2019, and Rushmore was entitled to claim an interest in the surplus funds. The Court also determined that Solorio’s argument that Rushmore’s claim is against Borrower and not him, was incorrect because under the laws of succession, mortgages follow real property passing by succession or will. 46 O.S.2011 § 5. His interest was in the real property which was subject to the existing mortgage.

Solorio’s other argument that Rushmore failed to serve him proper Notice of Claim to Funds under 12 O.S.2011, § 2005(A)(1), which required that pleadings asserting new or additional claims be served upon other parties entitled to service. The Court refuted that argument because Rushmore’s claim was not new, and that Rushmore had acquired First Mortgage’s rights to the surplus funds.
Outcome:Reversed and remanded with directions to the trial court to hold an evidentiary hearing to determine the rights of Rushmore, Solorio, or other claimants to the surplus funds.
Vote:3-0. Fischer, C.J., Barnes, P.J., and Hixon, J. (author) concur.
Other: N/A