Insurance Payout, Bank Holding Check, Property to Sheriff's Sale
I am second-position mortgage holder on a commercial (non-residential in any way) property in Allegheny County, Pennsylvania. Building owner has defaulted on both me and the first-position mortgage, and the business inside the building has closed (same owner as the building). First-position mortgagee, a local bank, has initiated foreclosure and the property is scheduled for sheriff's sale. I am prepared to bid at sheriff's sale all the way up to my amount plus the first-position amount.
Several years prior, there was a leak in the roof. Building owner and insurance company fought over the value of the claim. It was finally settled just this past October (2018) and a check was cut payable to both the owner of the building and the primary mortgagee, the bank. The timing of this was just prior to the business shutting down. Owner signs the check and gives it to the bank. The bank had not initiated foreclosure proceedings, but held on to the check. The bank has since initiated foreclosure proceedings, but the roof has not been repaired and they still have the check. The amount that they have shown for their balance at sheriff's sale does not reflect the amount of the insurance check. What is the disposition of this check? Is it supposed to be cashed by the bank and applied to the loan? Would the winning bidder at sale have any claim to this check?