Mooring Tax Asset Grp., L.L.C. v. James
| Decision Date | 09 December 2014 |
| Docket Number | No. 2014–C–0109.,2014–C–0109. |
| Citation | 156 So.3d 1143 |
| Parties | MOORING TAX ASSET GROUP, L.L.C. v. Roderick A. JAMES and the United States Department of Treasury–Internal Revenue Service. |
| Court | Louisiana Supreme Court |
Beirne, Maynard, & Parsons, Scott Joseph Sonnier, New Orleans, LA, for Applicant.
Sher Garner Cahill Richter Klein & Hilbert, LLC, Elwood FrancisXavier Cahill, Jr., James Michael Garner, John Thomas Balhoff, II, New Orleans, LA, for Respondent.
In this case, the tax sale of a property was declared absolutely due to the failure of the taxing authority to issue sufficient pre-sale notice and advertisement of the tax sale. We granted this writ application to determine whether the lower courts erred in ordering cancellation of the tax sale deed without ordering the subsequent third party purchaser of the property to reimburse the taxes paid and costs incurred by the tax sale purchaser. In so doing, we must consider whether a tax sale purchaser is entitled to reimbursement of costs when a tax sale is declared absolutely ; and, if so, who is responsible for such reimbursement. For the reasons explained herein, we hold that the tax sale purchaser is entitled to reimbursement of its costs prior to cancellation of the tax sale deed. We also hold it is the current owner of the property who is responsible for payment of these costs. Thus, we reverse the rulings of the lower courts and remand the matter to the trial court for further proceedings.
This case arises out of the tax sale of residential property located at 7047 Lake Willow Drive in New Orleans, Louisiana. On September 22, 1997, Charles and Connie Brown purchased this property pursuant to a “Cash Sale of Property.” The sale was recorded in the Orleans Parish Conveyance Records on September 27, 1997. After the Browns became delinquent on their property taxes, the property was sold at a tax sale on November 8, 2004, to Mooring Tax Asset Group. The tax collector executed a tax deed that purportedly conveyed the property to Mooring on December 21, 2004. This deed was recorded in the Orleans Parish conveyance records on April 26, 2005.
Presumably unaware of the tax sale, the Browns sold the property to NARA, L.L.C. pursuant to a “Cash Sale” on April 17, 2007. The sale was recorded in the Orleans Parish Conveyance Records on April 23, 2007. NARA subsequently sold the property to Roderick A. James, the defendant in this suit, on June 9, 2008. This sale was recorded in the Orleans Parish Conveyance Records on June 18, 2008.
On May 21, 2010, Mooring filed a “Petition to Quiet Title,” seeking to terminate Mr. James' interest in the property for failure to redeem the property from the 2004 tax deed recorded in April of 2005. On June 14, 2010, Mr. James filed exceptions and an answer to the petition, as well as a reconventional demand against the City of New Orleans, asserting that the tax sale should be ified on several bases, including insufficient pre-sale notice and advertisement. Mr. James then filed a motion for summary judgment asserting these two bases for ity.
The trial court granted Mr. James' motion, finding the 2004 tax sale and the 2004 tax deed were absolute ities due to lack of sufficient pre-sale notice and for lack of sufficient pre-sale advertisement. Following the ruling, Mooring contended the declaration of ity should be preliminary, rather than a final judgment, until it was paid costs that are allowed pursuant to La. R.S. 47:2291. Mr. James asserted this statute could not be applied retroactively to this case, and was only applicable to tax sales that occurred after January 1, 2009. However, because Louisiana Constitution article VII, § 25 (C) allows for the delay of the effects of a tax sale ification until certain costs are paid to the tax sale purchaser, the trial court issued a judgment allowing Mooring to submit proof of costs and Mr. James to contest costs. Mooring filed an “Affidavit of Proof of Costs Pursuant to La. R.S. 47:2221(B)(3) ” asserting total costs of $37,495.95 due Mooring pursuant to La. Const. art. VII, § 25 (C), which included taxes paid, interest and costs. Mr. James then submitted a “Motion to Contest Costs,” contending Mooring had not made a true claim for costs, and even if it had, taxes, interest, costs and penalties are not recoverable by a tax sale purchaser when the tax sale is an absolute ity. Alternatively, Mr. James asserted that if these taxes, costs and penalties are recoverable, they are not recoverable from a third-party purchaser who had no interest in the property at the time of the tax sale.
The trial court granted Mr. James' motion to contest costs, finding that because the tax sale and tax deed were absolute ities, Mooring was not owed or entitled to be reimbursed for taxes, costs, interest, or penalties. The court ordered the cancellation of the 2004 tax sale deed, which gave immediate effect to the declaration of ity. Mooring appealed.
The majority of the court of appeal affirmed.1 The court first rejected Mooring's argument that the trial court erred when it failed to set an amount due pursuant to La. R.S. 47:2291. The court of appeal found that statute was part of a legislative overhaul of tax sale statutes that became effective on January 1, 2009, and these changes were substantive in nature and thus applied prospectively only. The court also held that La. Const. art. VII, § 25 (C) did not compel Mr. James, as a third-party purchaser, to reimburse Mooring before the annulment of the tax sale could be given effect. In so holding, the court distinguished its earlier decision in BrookewoodInvestments Co. v. Sixty–Three Twenty–Four Chef Menteur Highway, LLC , wherein it had held that the tax purchaser's right of redemption was solely against the tax debtor or record owner of the property.2 The court reasoned the facts in Brookewood are distinguishable and its holding did not require Mr. James, who was neither the record property owner nor the tax debtor at the time of the 2004 tax sale, to reimburse Mooring any costs. The court noted that in Brookewood , and cases cited therein, the record property owner's liability resulted only from his status as the tax debtor. The court explained that Mr. James' status as a subsequent purchaser and the current property owner does not meet the purpose of the statutes that delay the effect of an aned tax sale until the tax debtor reimburses the tax purchaser all statutory expenditures owed, which “is to ensure that the tax debtor does not unjustly get the benefit of ification, i.e. property ownership with a clear title, by avoiding his tax obligations.”3 The court explained:
Mr. James was not the record owner of the property and had no obligation to pay taxes on the property at the time of the 2004 Tax Sale. Mr. James made no warranties to Mooring to induce it to purchase the property. He did not warrant the title to the property nor the return of the purchase price. Although Mooring suggests that Mr. James benefitted because it paid the property's outstanding tax liability, a tax sale, absent special legislation, is generally subject to the rule of caveat emptor where the purchaser assumes the risks of all legalities and irregularities in the proceedings.4
One judge concurred, finding that absent a showing of bad faith or knowledge of the tax sale, a third-party purchaser, such as Mr. James, has no liability to a tax sale purchaser for its costs and that the tax sale purchaser's claim for its costs is against the original property owner. Two members of the panel dissented, finding the trial court erred in issuing a final judgment of ity, and ordering the cancellation of the 2004 tax sale deed from the conveyance records because La. Const. art. VII § 25 (C) provides that the judgment of ity cannot be effective until the tax purchaser is paid.
Mooring filed a writ application in this court, which we granted.5
The sale of property for nonpayment of taxes is an action that affects a property right protected by the Fourteenth Amendment.6 In Mennonite Board of Missions v. Adams , the United States Supreme Court held that a party possessing a substantial property interest that is significantly affected by a tax sale is entitled to notice reasonably calculated to apprise him of the pending tax sale.7 Since Mennonite , we have consistently held that the failure to give this required notice is a violation of due process and the resulting tax sale is and void in its entirety.8 In this case, it is undisputed that the Browns did not receive constitutionally sufficient notice and thus the tax sale was properly declared absolutely .
In addition to providing general authority for the sale of property to collect delinquent property taxes,9 the Louisiana Constitution also provides for the annulment of a tax sale. Specifically, Article VII, § 25(C) states:
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