Alaska Court Reshapes Foreclosure Surplus, Elevates Child Support Liens Over Creditors

In 2018, The Sayer Law Group, P.C., acting as trustee, carried out a nonjudicial foreclosure under the Wells Fargo deed of trust. The sale brought in $168,000. After Wells Fargo was paid off, there was a surplus of $34,590.31.

The trustee notified junior interest holders, including Alaska USA, CSSD and Troy Lewis, that surplus funds would be paid out in order of priority. Alaska USA submitted a claim for $38,783.68. CSSD claimed $22,186.56, reflecting an increased child support balance. Troy Lewis claimed any remaining surplus.

Sayer Law initially indicated that Alaska USA would receive the entire surplus, noting that the credit union held “the first recorded Judgment Lien.” CSSD objected. It sent a letter stating that it was asserting its lien against the surplus funds and that, under AS 25.27.230(d), those funds had to be distributed to CSSD first unless the lien was waived or released. The next day, CSSD issued a child support withholding order directing Sayer Law to deliver $25,428.20.

The trustee then paid enough of the surplus to satisfy CSSD’s child support lien and sent the remaining $9,162.11 to Alaska USA. The credit union rejected the check and sued, arguing that lien priority rules meant its earlier judgment lien should be paid before CSSD’s later-recorded lien.

The Alaska Supreme Court addressed the withholding order and the lien separately. It held that the withholding order under AS 25.27.250 did not apply here because such orders only reach property “due, owing, or belonging” to the child support obligor. At the time CSSD issued its order, the surplus was insufficient to satisfy both Alaska USA’s and CSSD’s liens, so no portion of the surplus was due, owing, or belonging to Troy Lewis. The withholding order therefore had no effect on the surplus.

https://www.mpamag.com/us/mortgage-industry/industry-trends/alaska-court-reshapes-foreclosure-surplus-elevates-child-support-liens-over-creditors/558610