Coleman v. Dist. of Columbia
| Decision Date | 30 September 2014 |
| Docket Number | Civil Action No. 13–1456 EGS |
| Citation | 70 F.Supp.3d 58 |
| Court | U.S. District Court — District of Columbia |
| Parties | Benjamin Coleman, through his Conservator, Robert Bunn, Plaintiff, v. District of Columbia, Defendant. |
William A. Isaacson, Boies, Schiller & Flexner LLP, Washington, DC, for Plaintiff.
Edward Paul Henneberry, Jr., Office of the Attorney General for DC, Washington, DC, for Defendant.
In the District of Columbia, as in many other jurisdictions, a homeowner who fails to pay property taxes runs a great risk. A delinquent property-tax bill becomes a lien, held by the District, on the homeowner's property. Continued failure to pay the delinquent tax bill creates the risk that the District will sell the property to satisfy the taxes. This practice of engaging in “tax sales” has long been recognized as a generally valid exercise of the government's power to collect taxes.
The devil, however, is in the details. In D.C., the tax-sale process begins with the sale at auction of a tax lien on the property to a third party. The homeowner may satisfy that lien by paying his delinquent tax bill, but the purchaser of the lien is able to add on top of that bill various costs, including attorney's fees. In Mr. Coleman's case, that caused what began as a $133.88 tax bill to become a total of over $5,000, all of which needed to be paid before the lien would be satisfied.
Once the lien is sold to the third party, a six-month waiting period begins, during which the homeowner may redeem his home by paying the taxes, along with any penalties, costs, and interest that are owed. If the entire bill is not paid upon expiration of the waiting period, the tax-lien purchaser may initiate proceedings in the Superior Court of the District of Columbia to foreclose. The Superior Court is empowered to enter a judgment vesting a fee simple title in the property in the tax-lien purchaser. In this way, a small sum paid to purchase the lien becomes full title to a property worth hundreds of thousands of dollars (in this case, approximately $200,000). The key detail in this case is that D.C. law provides that any surplus equity the homeowner has in his home is irrevocably lost, no matter how small the tax bill nor how valuable the equity.
Mr. Coleman brings a limited challenge to this law. He does not seek to regain his home, does not dispute that the District may use tax sales to satisfy delinquent property taxes, and agrees with the District that he owed $133.88 in property taxes, plus penalties, costs, and interest. Mr. Coleman's claim is against the District's taking of the entire equity in his home. The District, he asserts, has provided him no compensation for the loss of that equity, even though its value far exceeds the taxes, penalties, costs, and interest he owed.
Mr. Coleman claims that such a practice is forbidden by the Takings Clause of the Fifth Amendment to the United States Constitution. Accordingly, he filed suit seeking an award of “just compensation,” as well as a declaration from this Court that the District's statute is unconstitutional. The District has moved to dismiss Mr. Coleman's Complaint, arguing that this Court lacks jurisdiction for multiple reasons and that, in any event, Supreme Court precedent holds that the District's actions do not violate the Takings Clause. The Court has considered the District's motion, the response and reply thereto, as well as the applicable law and the entire record in this case. The Court also held a hearing on the motion to dismiss on September 26, 2014. The Court finds that it has jurisdiction over Mr. Coleman's claims and accordingly rejects all of the District's jurisdictional arguments. The Court also rejects the District's argument that prior Supreme Court precedent has foreclosed Mr. Coleman's claim under the Takings Clause. Accordingly, the Court DENIES the District's motion.
The District of Columbia's laws governing the procedure for collecting delinquent property taxes are codified in Chapter 13A of title 47 of the D.C. Code. See Revised Real Property Tax Sales, D.C. Code § 47–1330, et seq. On the day that a tax–defined as “unpaid real property tax ... including penalties, interest, and costs,” id. § 47–1330(2) –becomes delinquent, the D.C. Code declares that it “shall automatically become a lien on the real property.” Id. § 47–1331(a). The Code further directs the District to “sell all real property on which the tax is in arrears unless otherwise provided by law.” Id. § 47–1332(a).
Such tax sales follow a procedure set out elsewhere in the statute. “At least 30 days before” any such sale is to be advertised, “the Mayor shall mail to the person who last appears as owner of the real property on the tax roll ... a notice of delinquency.” Id. § 47–1341(a). Once thirty days have passed “from the mailing of the notice of delinquency,” the District must advertise that the property “will be sold at public auction because of taxes.” Id. § 47–1342(a). At this public sale, the District must sell the property “in its entirety,” id. § 47–1343, “to the purchaser who makes the highest bid.” Id. § 47–1346(a)(2). Sales are not to be conducted “for less than the amount of the taxes,” however. Id. § 47–1346(c).
The purchaser receives “a certificate of sale,” which describes the property and the sale, and indicates “[t]he amount of taxes for which the real property was offered for sale.” Id. § 47–1348(a). The six months following the date of sale are a redemption period, during which the purchaser may not foreclose the original owner's right to redeem the property. Id. § 47–1370(a). The original owner may redeem by paying to the District “the amount paid by the purchaser ... exclusive of surplus with interest thereon,” as well as “other taxes, interest, and penalties paid by a purchaser,” and “expenses for which the purchaser is entitled to reimbursement.” Id. § 47–1361(a). Interest on this amount is calculated at an annual rate of 18%. Id. §§ 47–1334, 47–1361, 47–1377. If the original owner makes sufficient payments to the District, the purchaser of the certificate of sale “shall receive a refund of the payment” with interest. Id. § 47–1354(b).
Once the six-month redemption period has passed, “a purchaser may file a complaint to foreclose the right of redemption of the real property.” Id. § 47–1370(a). This action must be filed within one year of the date of sale of the lien, or the certificate of sale becomes void. See id. § 47–1355(a)(1). Even if such an action is pending, the original owner “may redeem the real property at any time until the foreclosure of the right of redemption is final.” Id. § 47–1360. In adjudicating an action to foreclose the right of redemption, the Superior Court may “[v]est title in fee simple in the purchaser.” Id. § 47–1370(b)(2). The purchaser of the tax-sale certificate must bring the action against the original owner of the property and the District of Columbia, as well as any entity with a particular interest in the property. See id. § 47–1371(b)(1). The law permits the Superior Court to issue a final judgment “foreclosing the right of redemption,” which bars the original owner from redeeming the property and vests in the purchaser a deed in fee simple. See id. § 47–1382(a). In doing so, the law permits the taking of not only the amount of delinquent taxes, plus any costs, fees, and interest, but also the entirety of the original owner's equity in the property.1
Benjamin Coleman is a 76–year-old veteran. Compl., ECF No. 1 ¶ 26. At all times relevant to this case, he “suffered from severe dementia,” id. ¶ 27, and this action is brought on Mr. Coleman's behalf by Robert Bunn, his guardian who was appointed by the Superior Court “to manage Mr. Coleman's legal and financial affairs.” Id. ¶ 15.
In 2006, Mr. Coleman failed to pay a $133.88 property tax bill on his home. Id. ¶ 28. The District placed a tax lien on Mr. Coleman's home and added $183.47 in penalties to his preexisting tax obligation. Id. ¶ 29. The lien—of $317.35—was offered for sale at a public auction in July 2007, when it was sold to Embassy Tax Services, LLC (“Embassy”). Id. ¶ 30.
Embassy filed an action to foreclose Mr. Coleman's right of redemption on February 28, 2008.Id. ¶ 33. It demanded $4,999 in addition to the lien amount of $317.35 from Mr. Coleman. Id. ¶ 34. The additional amount was for “court costs, attorney's fees, expenses incurred for personal service of process, expenses incurred for service of process by publication and fees for the title search.” Id. Embassy filed the action against Mr. Coleman, as well as the District, although the District “did not file any specific claims or defenses.” Id. ¶ 35.
On September 24, 2008, Mr. Coleman's son sent a handwritten letter to the Superior Court indicating “that he had recently moved back into town and had discovered that his father was ‘living alone and had not kept to his medicine.’ ” Id. ¶ 37. Mr. Coleman's son “offered to ‘get most of the payments in on Oct. 3, 2008.’ ” Id. The Superior Court ultimately held a status hearing on March 11, 2009, after which it gave Mr. Coleman until May 27, 2009 to complete his payments. Id. ¶¶ 38–39.
On May 26, 2009, Mr. Coleman's son sent another letter to the Superior Court, noting “that his father had ‘been under the weather,’ but that his father had paid all of the owed taxes.” Id. ¶ 40. Mr. Coleman's son also “offered for his father to make monthly payments of $850 beginning June 1, 2009” to satisfy the additional obligations to Embassy. Id. When no one appeared for Mr. Coleman at the May 27, 2009 status hearing, the Court tried, unsuccessfully, to contact his son. See id. ¶ 41. The Court then adopted the proposed payment schedule, stayed the deadline for Mr. Coleman to redeem his property, and directed Mr. Coleman and his son to appear for a June 24, 2009 hearing. Id. That...
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