Opinion
No. 486 C.D. 2014
12-08-2014
In Re: Sale of Vacant Land (186.57 Acres) on Power House Road, Bell Township, Clearfield County, Pennsylvania Appeal of: Clover Ridge Lodge, Inc.
BEFORE: HONORABLE BONNIE BRIGANCE LEADBETTER, Judge HONORABLE PATRICIA A. McCULLOUGH, Judge HONORABLE JAMES GARDNER COLINS, Senior Judge OPINION NOT REPORTED MEMORANDUM OPINION BY JUDGE LEADBETTER
Appellant, Clover Ridge Lodge, Inc., appeals from the order of the Court of Common Pleas of Clearfield County overruling its exceptions and objections to tax sale and refusing to set aside the tax sale of 186.57 acres (the Property) located on Power House Road, Bell Township, Pennsylvania. The Property consists of unimproved land, which was owned by Michael Comisac until September 10, 2012. Comisac failed to pay the local taxes on the Property for the tax years 2010 and 2011. Consequently, the Clearfield County Tax Claim Bureau listed the Property for upset tax sale scheduled for September 14, 2012. The Bureau complied with all of the notice requirements provided for in the Real Estate Tax Sale Law (Tax Sale Law) prior to selling the Property at tax sale to Robert Bailey for the upset price of $5,655.99. Nonetheless, for the reasons stated below, we reverse.
Act of July 7, 1947, P.L. 1368, as amended, 72 P.S. §§ 5860.101 - 5860.803.
Clover Ridge, a non-profit corporation, is a sportsmen's club that operates a hunting camp on land adjacent to the Property. Kurt Hunsberger is the president of Clover Ridge. During 2012, Comisac was experiencing financial difficulties and approached Hunsberger about buying the Property. Comisac and Clover Ridge signed an agreement of sale on August 22, 2012, which provided for a purchase price of $90,000 cash and settlement on or before September 10, 2012. Approximately one week to ten days prior to the settlement, Hunsberger became suspicious regarding Comisac's repeated demands for a quick settlement. Hunsberger discovered that the Property was listed for tax sale on September 14 by reviewing the tax sale list on Clearfield County's website. On August 27 and again on September 7, Comisac contacted the Bureau and notified an employee that he had a buyer for his property and that the taxes owed would be paid following closing. Comisac testified that the Bureau employee told him that it was unlikely that the Property would be sold at the tax sale because it was subject to a mortgage.
Michael Klein, an employee of Maple Settlement Services, conducted the settlement on the Property on Monday, September 10, at which Comisac and Hunsberger were present. Comisac delivered the deed to the Property to Hunsberger. The HUD-1 settlement statement reflected that the following amounts were put in escrow to pay the taxes on the property: $3,982.26 for the 2010 and 2011 real estate taxes, $1,676.10 for 2012 real estate taxes and $5000 for any additional unknown amounts. Klein escrowed the extra $5000 because Maple Settlement Services had contacted the Bell Township tax collector for the exact amounts owed and had been informed that the tax collector was on vacation until the following week and a tax certification could be obtained when the tax collector returned. Klein immediately sent a check by overnight mail to First Commonwealth Bank to pay off the approximately $19,000 balance on the mortgage on the Property, which resulted in the mortgage lien being removed.
Klein is employed, part-time, by Maple as a licensed closing agent. Klein is also a licensed attorney in Pennsylvania.
Klein did not immediately record the deed with the county recorder. Maple Settlement Services employs a part-time employee whose job is to record deeds. The employee works on Tuesday and Friday. Klein was unable to take the deed to Maple Settlement Service on Tuesday, September 11 and intended to take the deed in for filing on Friday, September 14. Klein also continued to hold the file because he intended to contact the Bell Township tax collector to obtain a tax certification showing the exact amount of taxes owed upon the tax collector's return from vacation.
On September 13, at approximately 6 p.m., a member of Clover Ridge contacted Hunsberger to inform him that the Property was still listed for tax sale. Since it was after business hours, Hunsberger did not try to contact the Bureau. Shortly before 9 a.m. on September 14, Hunsberger called Ellen Foley, an owner of Maple, to inform her that the property was listed for tax sale that day. Foley immediately attempted to contact the Bureau. The first two times she called, her calls were received by a voicemail system. The third time Foley called, she spoke with Heather Swatsworth of the Clearfield County Tax Assessment Office. Foley informed Swatsworth that Clover Ridge had purchased the Property, funds were available that day to pay the taxes owed and that Clover Ridge would like the Property removed from the sale list. Swatsworth informed Foley that no employees were available in the Bureau's office because everyone was at the tax sale. Swatsworth further stated that she would inform her supervisor, Jennifer Wooster, about the change in ownership when Wooster returned from the tax sale. At 10:07 a.m., Foley emailed Swatsworth the HUD-1 settlement statement and the deed conveying the Property to Clover Ridge. Foley heard nothing further from the Bureau or Swatsworth regarding the tax sale. During the course of the day Hunsberger and Klein also contacted the Bureau and spoke to Swatsworth and Wooster.
The Bureau and the Tax Assessment Office are separate offices located in adjoining suites, which are both overseen by Jennifer Wooster, the director of both entities. Reproduced Record (R.R.) at 449a. The offices share the same phone number, but each has its own extension.
On the morning of September 14, Clover Ridge's title insurance company, Chicago Title Insurance Company, engaged Eric Cummings, a local attorney, to determine the status of the Property. At 11:30 a.m., Cummings spoke with Swatsworth, who informed him that she was aware of the change in ownership of the Property and that she was awaiting the return of her supervisor. Cummings spoke with Swatsworth again after lunch and she stated that Wooster was attempting to contact the county solicitor, who was out of the office on vacation. Around 2 p.m., Cummings walked over to the Bureau and spoke with Wooster, who informed him that the Property had been sold for the upset price, but that the buyer had not yet paid for the property. Cummings requested that Wooster remove the property from the sale list, but she refused to do so stating that it was the Bureau's policy to proceed with the sale of a property where taxes had not been paid by 4 p.m. on the day prior to the scheduled sale. Reproduced Record (R.R.) at 705a. Subsequently, Bailey paid the upset sale price before the close of business.
Maple sent a check by overnight mail for Clover Ridge's deed to the Clearfield County Recorder on September 14 along with three checks for payment of the transfer taxes and a recording fee. The Clearfield County Recorder did not record the deed immediately because Maple had not included a $10 check payable to the tax assessor's officer. The deed was eventually recorded on September 24, 2012. On September 25, Maple sent a check by overnight mail to the Bureau for the unpaid taxes. The Bureau returned the check to Maple.
Since taking ownership of the Property, Clover Ridge has been billed for real estate taxes and has paid these bills in full. R.R. at 48a. Hunsberger testified that the Bell Township tax collector told him that the taxes that Clover Ridge has paid on the Property were applied to the real estate taxes that were in arrears, dating back to 2010. Id. at 49a-50a. The Property has not been deeded to Bailey.
Clover Ridge filed exceptions and objections to the upset tax sale asserting that the sale of the Property violated its due process rights. Subsequently, Clover Ridge filed amended exceptions and objections asserting that the sale of the Property violated Section 603 of the Tax Sale Law, 72 P.S. § 5860.603, and its due process rights under the United States Constitution and the Pennsylvania Constitution.
Common pleas overruled Clover Ridge's amended exceptions and objections and refused to set aside the tax sale. Common pleas rejected Clover Ridge's argument that the Bureau was required to provide it with 30 days' notice of the tax sale pursuant to Section 602 of the Tax Sale Law, 72 P.S. § 5860.602, because Clover Ridge was not an owner entitled to notice as defined by Section 102 of the Tax Sale Law, 72 P.S. § 5860.102. Common pleas also concluded that the Bureau made reasonable efforts to ascertain the identity and location of the owner of the Property, satisfying due process requirements. Common pleas stated that the Bureau did not have any reason to believe that anyone other than Comisac was the record owner because no one informed the Bureau prior to the tax sale that the Property had a new owner. Finally, common pleas held that once the Bureau fulfilled the requirements of the Tax Sale Law, all due process requirements had been fulfilled. This appeal followed.
Clover Ridge argues that common pleas erred as a matter of law in concluding that the Bureau was required to serve notice only upon Comisac. Clover Ridge asserts that due process requires that a reasonable effort be made to provide actual notice to a property owner who has a legally protected property interest. Tracy v. Chester Cnty., Tax Claim Bureau, 489 A.2d 1334, 1338 (Pa. 1985). Clover Ridge contends that common pleas erred by concluding that the Bureau did not have reason to believe that the property had changed hands prior to the actual sale of the Property. Appellees argue, inter alia, that Clover Ridge was not an "owner" that the Bureau was required to notify, that the Bureau exercised reasonable efforts to notify the owner of the Property, and it did not have any knowledge of Clover Ridge's interest in the Property.
The primary question that this Court must answer is what form or level of due process is owed to an unrecorded property owner prior to the sale of a property at an upset tax sale.
There can be no deprivation of property without notice and an opportunity to be heard. Mullane v. Cent. Hanover Bank & Trust Co., 339 U.S. 306 (1950). "Interests in real property [are] entitled to the most rigorous [due process] protections." Sklar v. Harleysville Ins. Co., 587 A.2d 1386, 1388 (Pa. 1991). A taxing authority's strict compliance with the tax sale law does not necessarily satisfy the demands of due process. Geier v. Tax Claim Bureau of Schuylkill Cnty., 588 A.2d 480, 483 (Pa. 1991); Battisti v. Tax Claim Bureau of Beaver Cnty., 76 A.3d 111, 116 (Pa. Cmwlth. 2013). The Tax Sale Law places the duty to comply with the requirements of due process upon the tax claim bureau not the property owners. Husak v. Fayette Cnty. Tax Claim Bureau, 61 A.3d 302, 312 (Pa. Cmwlth. 2013).
Section 602(e) and Section 607a of the Tax Sale Law, 72 P.S. § 5860.607a, are intended to protect the due process rights of property owners. Section 602(e) requires that prior to a tax sale the tax claim bureau notify an owner, as defined by the Tax Sale Law, via certified mail, restricted delivery, return receipt requested. If the tax claim bureau does not receive a receipt from each owner, then at least 10 days prior to the sale the tax claim bureau must mail a second notice at the owner's last known address known to the tax collector and county assessor. Section 607a requires the tax claim bureau to make additional efforts to locate a property owner when there is evidence that the notices sent under Section 602(e) have not been received by the intended recipient. Neither section contemplates that a property may change hands within 30 days of a scheduled sale, as happened in this case. If the tax claim bureau is required only to follow the procedures laid out in these sections to satisfy the mandates of due process, then property owners who acquire their interests within the 30 days of a tax sale are impermissibly left without any due process protection.
Added by the Act of July 3, 1986, P.L. 351.
Our holdings in Parkton Enterprises, Inc. v. Krulac, 865 A.2d 295, 298 (Pa. Cmwlth. 2005) and Citimortgage, Inc. v. KDR Investments, LLP, 954 A.2d 755 (Pa. Cmwlth. 2008) are instructive. In Parkton, a buyer purchased a property at sheriff's sale on September 4, 2002, and recorded the deed on September 25, 2002. An upset tax sale was held on September 26, 2002 and the property was sold to pay back taxes. This court set aside the tax sale because the tax claim bureau failed to make a reasonable effort to discover the identity of the new property owner, when it knew that the property had been scheduled for a sheriff's sale to be conducted prior to the upset tax sale. Parkton, 865 A.2d at 299.
In Citimortgage, Tina Neely owned a property on which Citimortgage had a first mortgage lien. When Neely became delinquent on her mortgage payments Citimortgage instituted foreclosure proceedings, which led to Citimortgage purchasing the property at sheriff's sale on July 13, 2006. On July 17, 2006, the Dauphin County Tax Claim Bureau sent a notice of tax sale addressed to "Neely Tina," but the notice was returned to the tax claim bureau as unclaimed. Citimortgage's deed to the property was recorded on July 27, 2006. On September 6, 2006, the tax claim bureau sent a second notice of tax sale addressed to Citimortgage. The tax claim bureau sold the property at the upset tax sale on September 12. Citimortgage filed objections and exceptions which the trial court sustained on the basis that the first notice sent to "Neely Tina" was defective, and accordingly subsequent notices were void. This Court affirmed on different grounds. The Court stated that it was required to determine whether the tax claim bureau had satisfied its statutory duty to provide notice to Citimortgage, which was the "owner" divested of its property when the tax sale occurred. Id. at 759. The Court opined that the statute requires that the one who owns the property on the day of the sale receive the certified mail 30 days in advance. Id. The Court held:
A property that changes owners one day before a scheduled tax sale must be delisted in order to give the
new owner at least 30 days advance notice, by certified mail, of the impending tax sale.Citimortgage, 954 A.2d at 760.
In sum, a property may not be sold at a tax sale unless the one who owns the property on the day of the sale is given notice by certified mail of an impending tax sale at least 30 days prior to the sale. The Bureau must be able to produce evidence that it gave this notice to the one who owns the property on the day of the tax sale. If the Bureau cannot produce this proof, the tax sale is invalid. Because the Bureau did not send notice to Citimortgage by certified mail, 30 days before its property was sold, the trial court correctly set aside the tax sale.
Although Sections 602(e) and Section 607a do not address the transfer of property within 30 days of a tax sale, Section 208 of the Tax Sale Law provides the Bureau with broad authority for "the management and disposition of property in accordance with the provisions of this act." 72 P.S. § 5860.208. The Bureau does recognize that circumstances may have changed since notice was last given. Wooster testified that the Bureau generated the tax sale list on September 13 after the close of business. R.R. at 457a. She testified that information on the tax sale list such as the owner and amount due is updated from the tax assessor's office daily. R.R. 459a-460a. The records of the tax assessor's office for deed transfers are also updated on a daily basis from the recorder's office. R.R. at 460a. Wooster testified that properties may be struck from the list for the following reasons:
Incorrect assessments. I'm just going to go down through here and see. We may not have gotten proper notification to the purported owner. We have --- members of my staff, after the list has been generated, will go down through the list and take the work that they have been --- the research that they have been working with. And if we have a concern with a tax claim that does not seem to be
appropriate to go to that year's sale, we will pull it. And these ones that have been deleted in that manner are ones that were not exposed to sale for one reason or another.R.R. at 467a. She also testified that she makes the final decision whether a property is exposed to tax sale. Id.
Comisac contacted the Bureau on August 27 and September 7 to inform it that he had a buyer for the Property and that money had been set aside to pay the back taxes. These two contacts put the Bureau on notice that there was at the very least a potential that the Property was going to change hands. Wooster's testimony shows that such information should have been part of the Bureau's file. Based on the information provided by Comisac, the Bureau could have flagged the property. Once the Bureau was on notice, the constraints of due process required that it act prudently to safeguard the rights of the property owner.
Even if Comisac had not contacted the Bureau prior to the tax sale, the Bureau was notified of the change in ownership of the Property prior to the "actual sale." Section 102 of the Tax Sale Law defines "actual sale" as "payment of the full amount of money agreed to be paid as the sale price by the successful bidder or purchaser at upset sale under sections 605 through 609." 72 P.S. § 5860.102. The Bureau was the presumed trustee of the Property the moment it concluded the upset sale. Commonwealth v. Sprock, 795 A.2d 1100, 1103 (Pa. Cmwlth. 2002) (stating that when a property is struck down, legal title to a tax delinquent property passes to the tax claim bureau, as trustee, as long as the statutory requirements have been met). The "actual sale" of the property to Bailey did not occur until he paid the full upset price. Wooster was aware of the change in ownership of the Property prior to the "actual sale" of the Property and as trustee should have refused to accept payment of the upset sale price based on the lack of notice to Clover Ridge.
Under Pennsylvania law, Clover Ridge was the legal owner of the Property at the time of the tax sale because title to property passes upon delivery of the deed and recording of a deed is not essential to establish its validity. Upper Tulpehocken Twp. v. Berks Cnty. Bd. of Assessment Appeals, 842 A.2d 1041, 1044-45 (Pa. Cmwlth. 2004). Further, based upon the verbal notification provided to the Bureau, Clover Ridge was the "reputed owner" under the Section 102 of Tax Sale Law. Thus, as demonstrated by Parkton and Citimortgage, the requirements of due process necessitate that prior to selling the Property the Bureau, which was put on notice regarding the change in ownership, was obligated to provide the owner of the Property, Clover Ridge, with 30 days' notice of the tax sale.
Section 102 Tax Sale Law, 72 P.S. § 5860.102, defines "owner" as:
[T]he person in whose name the property is last registered, if registered according to law, or, if not registered according to law, the person whose name last appears as an owner of record on any deed or instrument of conveyance recorded in the county office designated for recording and in all other cases means any person in open, peaceable and notorious possession of the property, as apparent owner or owners thereof, or the reputed owner or owners thereof, in the neighborhood of such property ....
For the foregoing reasons, we reverse.
/s/_________
BONNIE BRIGANCE LEADBETTER,
Judge ORDER
AND NOW, this 8th day of December, 2014, the order of the Court of Common Pleas of Clearfield County is hereby REVERSED.
/s/_________
BONNIE BRIGANCE LEADBETTER,
Judge