Should management fees be taken from evicted tenant's deposit?

[Jason L.]

I evicted a tenant back in June through my property manager. The tenant was in default on 2.5 months of rent (about $1700 total), but also left the house with over $3000 in damages. The tenant had a $650 security deposit, which I had assumed would come back to me to cover some of the damages. However, my PM took their normal 10% fee and is claiming that the SD is being used to cover the unpaid rent instead. 

Are they correct that the security deposit of the evicted tenant covers unpaid rent before incremental damage to the house? I'm not looking to cause a stir either way (I'm in over $6k on this eviction after the legal fees, so what's another $65  :P ), but I am curious if there is a legal order for how the deposit gets applied post-eviction?