Bell v. BERKS COUNTY TAX CLAIM BUR.

• Decision Date: 23 September 2003
• Citation: 832 A.2d 587
• Parties: Rebecca L. BELL and Richard M. Bell, III, Appellants, v. BERKS COUNTY TAX CLAIM BUREAU.
• Court: Pennsylvania Commonwealth Court

832 A.2d 587

Rebecca L. BELL and Richard M. Bell, III, Appellants, v. BERKS COUNTY TAX CLAIM BUREAU.

Commonwealth Court of Pennsylvania.

Argued June 5, 2003.

Decided September 23, 2003.

Rebecca L. Bell, Pottstown, for appellants.

Jan D. Krafczek, Reading, for appellee.

BEFORE: PELLEGRINI, Judge, LEAVITT, Judge (P.), and KELLEY, Senior Judge.

OPINION BY Judge LEAVITT.

Rebecca L. Bell and Richard M. Bell, III (Bells) appeal the Order of the Court of Common Pleas of Berks County (trial court) that denied their tax appeal. In doing so, the trial court affirmed the decision of the Berks County Tax Claim Bureau (Bureau) to disallow the Bells' exceptions to a real estate tax that they claim had been discharged by the judicial sale at which they purchased the real estate in question.¹

The relevant facts are not in dispute. At a judicial tax sale² held on September 29, 2000, the Bells purchased a property at 40 Old River Road (Property) in Berks County for $5,370.04. One year earlier, September 28, 1999, the Property had been offered at an upset sale;³ however, no bid equal to or in excess of the upset price was made. The Bureau then petitioned for its sale at a judicial sale of the Property. On June 15, 2000, the trial court ordered the judicial sale of the Property, as well as many properties in Berks County, and it scheduled the sale for June 27, 2000. The properties were to be sold "free and clear of all taxes and municipal claims, mortgages, liens, charges and estates of whatever kind to the highest bidder."⁴ On June 21, 2000, the trial court vacated its order of June 15, 2000, and the scheduled judicial sale did not take place.

On August 21, 2000,⁵ the trial court entered an order continuing the judicial sale from June 27, 2000 to September 29, 2000. In the interim, on July 1, 2000, the 2000-2001 school taxes were levied against the Property. The trial court's order that the properties were to be sold free and clear of all liens contained the following condition:

Provided, however, this Order shall not divest the 2000 school taxes assessed against the properties.

R.R. 8a. The judicial sale was held on September 29, 2000, as scheduled, and the Bells purchased the Property.

On May 4, 2001, the Bells received a Notice of Return and Claim from the Bureau seeking payment of the 2000-2001 school taxes.⁶ The Bells filed exceptions to the school taxes for 2000, and, after an administrative hearing, the Bureau disallowed the Bells' exceptions. The Bells appealed to the trial court, which denied the appeal and affirmed the decision of the Bureau. This appeal followed.⁷

The Bells assert three claims in their appeal. First, they assert that the trial court did not have the power to order a school tax lien to survive a judicial tax sale. Second, in the alternative, the Bells assert that the trial court erred in failing to set aside the portion of the 2000 school taxes for that period of time that occurred prior to the transfer of ownership to the Bells, which took place on February 21, 2001. Third, the Bells assert the right to a jury trial on their appeal from the Bureau's determination.

The heart of the Bells' appeal is that the trial court's order allowing the tax lien to survive the judicial tax sale is invalid because it contradicts the express language of Section 612 of the Tax Sale Law, which requires that the property be sold "freed and cleared of all tax and municipal claims." 72 P.S. § 5860.612.⁸ The Bureau counters that the Bureau has the right to fix the "terms of such sale" under Section 612(b) of the Tax Sales Law, and, thus, the trial court may specify which liens are to be discharged in a judicial sale and which are not. Here, the trial court's order specifically provided that the Property would not be sold "free and clear" of the 2000 School Taxes, which gave the Bells full notice of this sale term. Further, the Bureau notes that the use of proceeds of a judicial sale of property are governed by Section 205 of the Tax Sale Law, 72 P.S. § 5860.205, which does not authorize their use for current taxes levied on property. Accordingly, the General Assembly intended a judicial sale to divest delinquent taxes but not future taxes.⁹

The Tax Sale Law provides that the sale of real estate at a judicial sale will satisfy "all taxes ... levied on property in this Commonwealth by any taxing district." Section 301 of the Tax Sale Law, 72 P.S. § 5860.301 (emphasis added). "Taxes" is defined to mean "all taxes, with added interest and penalties, levied by a taxing district upon real property." Section 102 of the Tax Sale Law, 72 P.S. § 5860.102 (emphasis added). The question is whether "all taxes levied"¹⁰ covers current taxes as well as delinquent taxes. To resolve this question, it is appropriate to review the Tax Sale Law in its entirety.

Unpaid real estate taxes are addressed initially by a public upset sale. The upset price includes all taxes and municipal claims against the property, including "taxes levied for the current year, whether or not returned, a record of which shall be furnished to the bureau by tax collectors, receivers of taxes and taxing districts."¹¹ Section 605 of the Tax Sale Law, 72 P.S. § 5860.605 (emphasis added). Title to property sold at an upset sale is conveyed to the winning bidder "subject to the lien of every recorded obligation, claim, lien, estate, mortgage, ground rent and Commonwealth tax lien not included in the upset price." Section 609 of the Tax Sale Law, 72 P.S. § 5860.609 (emphasis added). The goal of an upset sale is to realize a price sufficient to bring the tax obligations on the property fully current. In sum, the Tax Sale Law only permits a sale of property where a tax delinquency has occurred; however, once the sale is undertaken, the upset sale proceeds are used to pay both delinquent and current taxes. Otherwise, by the time the property is sold under the statutory procedures, the property would be encumbered by additional delinquent taxes.

Where the upset price is not bid, as occurred here, a bureau has several options. It may sell the property at a private sale "free and clear of all tax claims and tax judgments." Section 613(a) of the Tax Sale Law, 72 P.S. § 5860.613(a). In a private sale, a bureau "shall convey title to the purchaser free, clear and discharged of all tax claims and tax judgments, whether or not returned, filed or entered, as provided by this or any other act." Section 615 of the Tax Sale Law, 72 P.S. § 5860.615 (emphasis added). Alternatively, a bureau may elect to continue the upset sale to another date, amending the upset sale price as needed. Section 603 of the Tax Sale Law, 72 P.S. § 5860.603. Finally, the bureau has the option to petition the trial court for leave to sell the property at a judicial sale under Section 610 of the Tax Sale Law, 72 P.S. § 5860.610.

The first step in a judicial sale is the filing of a petition. The petition must include "the tax claim upon which the property was exposed for sale." Id. This is because the statute only permits the Bureau to sell property if a tax claim has become "absolute."¹² Section 601(1)(i) of the Tax Sale Law, 72 P.S. § 5860.601(1)(i). The petition must assert that the property has been exposed to public sale at the upset sale price, and that no bid at the upset sale price was made. The petition must be accompanied "with searches, showing the state of the record and the ownership of the property and all tax and municipal claims, liens, mortgages, ground rents, charges and estates" against the property because the property will be sold "freed and cleared of their respective tax and municipal claims, liens, mortgages, charges and estates, except separately taxed ground rents." Section 610 of the Tax Sale Law, 72 P.S. § 5860.610.

Next, the trial court must issue a rule upon all parties with an interest in the property, including owners, mortgage holders and lienholders. The rule directs these persons to appear and show cause why the property should not be sold "freed and cleared" of all claims. Section 610 of the Tax Sale Law, 72 P.S. § 5860.610. The court shall order the property sold at a judicial sale only if satisfied that service of the rule has been made and that the facts in the petition are true. Section 612 of the Tax Sale Law, 72 P.S. § 5860.612.

The Tax Sale Law's procedures for selling a property at either an upset sale or a judicial sale are detailed and precise. At an upset sale, all recorded obligations not included in the upset price survive the sale, but at a judicial sale no liens or claims survive the sale. The trial court devised a remedy that combined aspects of the upset sale and the judicial sale. It did so without the requisite legislative authority. There is simply no language in the Tax Sale Law that authorizes the trial court to exempt certain claims or taxes from the sweep of the mandate that property sold at a judicial sale is sold "freed and cleared of all tax and municipal claims...." Section 612(a) of the Tax Sale Law, 72 P.S. § 5860.612(a).

The Bureau's assertion that the Legislature intended only to divest delinquent taxes, not current taxes, fails to account for the statutory provisions that specifically allow for the recovery of the amount due on current taxes in an upset sale. By contrast, the provisions in the Tax Sale Law relating to judicial sale do not categorize the taxes extinguished by the tax sale, whether delinquent or current. Indeed, it does not assign different treatment for private liens, which are also extinguished.

The Bureau's reliance on "terms of such sale" used in Section 612(b) of the Tax Sale Law is also unavailing. Section 612(b) prescribes the details for advertisement of a judicial sale and requires that the public advertisement "include the purpose, the time, the place, and the terms of such sale with a reference to the prior advertisement." 72 P.S. § 5860.612(b). This language cannot be construed to contradict...