Harrison v. Montgomery Cnty.

• Decision Date: 11 May 2021
• Docket Number: No. 20-4051,20-4051
• Citation: 997 F.3d 643
• Parties: Alana HARRISON, individually and on behalf of all others similarly situated, Plaintiff-Appellant, v. MONTGOMERY COUNTY, OHIO, Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

997 F.3d 643

Alana HARRISON, individually and on behalf of all others similarly situated, Plaintiff-Appellant,

v.MONTGOMERY COUNTY, OHIO, Defendant-Appellee.

No. 20-4051

United States Court of Appeals, Sixth Circuit.

Argued: April 29, 2021

Decided and Filed: May 11, 2021

Rehearing En Banc Denied June 10, 2021

ARGUED: Emily White, DANN LAW, Cleveland, Ohio, for Appellant. Stephen W. Funk, ROETZEL & ANDRESS, LPA, Akron, Ohio, for Appellee. Christina M. Martin, PACIFIC LEGAL FOUNDATION, Palm Beach Gardens, Florida, Michael J. Hendershot, OFFICE OF THE OHIO ATTORNEY GENERAL, Columbus, Ohio, for Amici Curiae. ON BRIEF: Emily White, Marc E. Dann, DANN LAW, Cleveland, Ohio, Thomas A. Zimmerman, Jr., ZIMMERMAN LAW OFFICES, P.C., Chicago, Illinois, Andrew M. Engel, ANDREW M. ENGEL CO., LPA, Dayton, Ohio, for Appellant. Stephen W. Funk, Emily K. Anglewicz, ROETZEL & ANDRESS, LPA, Akron, Ohio, Anne M. Jagielski, MONTGOMERY COUNTY, OHIO, Dayton, Ohio, for Appellee. Christina M. Martin, PACIFIC LEGAL FOUNDATION, Palm Beach Gardens, Florida, Benjamin M. Flowers, Michael J. Hendershot, OFFICE OF THE OHIO ATTORNEY GENERAL, Columbus, Ohio, for Amici Curiae.

Before: SUTTON, Chief Judge, SUHRHEINRICH and SILER, Circuit Judges.

SUTTON, Chief Judge.

When an Ohio county forecloses on a tax-delinquent property, it ordinarily sells the property at an auction, keeps enough of the proceeds to cover the outstanding taxes, and returns any leftover funds to the owner. To stem a tide of vacant homes and to transfer ownership of them more efficiently, Ohio enabled its municipalities to take another route when it comes to abandoned tax-delinquent property. Instead of selling the property and collecting the taxes owed, counties may surrender their tax interest and transfer the property with clear title to land banks. The land banks may revitalize the abandoned property, sell it to a private buyer, or demolish the home to pave the way for new neighborhoods. No auction occurs when counties choose the land bank route, and any surplus equity held by the original owner vanishes.

Alana Harrison inherited a partial interest in her mother's home in Dayton. Due to a nearly $20,000 property tax delinquency, Montgomery County's treasurer started foreclosure proceedings in 2017. The County Board of Revision handled the foreclosure and transferred the home to the County's land bank. The home had an estimated fair market value of $22,600 at the time of the transfer, roughly $3,000 more than the property taxes owed. Harrison never received the surplus equity because the statute offers no way to pay it.

Harrison filed an action against Montgomery County under the Takings Clause of the Fifth (and Fourteenth) Amendment of the United States Constitution. On top of seeking relief for herself, she also sought relief on behalf of a purported class of similarly situated landowners. The County moved to dismiss her claim, arguing that claim preclusion barred Harrison's lawsuit because she could have raised a federal takings claim at several points during the foreclosure process. The district court agreed. In view of the intricate issues presented and the potential invalidity of an Ohio law, we solicited the participation of the Ohio Attorney General, whose office helpfully filed an amicus brief and participated in the oral argument in support of the County. We now reverse.

I.

A.

Ohio empowers county treasurers to bring foreclosure actions against tax-delinquent properties. See O.R.C. § 323.25. The county treasurer may "enforce the lien for the taxes" on the delinquent land "in the same way mortgage liens are enforced": by filing a lawsuit. Id. A judicial foreclosure proceeding typically follows, after which the county sells the land at a public auction, the proceeds of which cover the tax delinquency. Id. § 323.73. If the sale produces leftover proceeds, the county "shall pay such excess to the owner" upon demand. Id. § 5721.20. In this way, Ohio protects the county's interest in collecting property taxes and the owner's interest in keeping any surplus equity.

In 2008, Ohio law introduced a new option for handling property taxes owed on abandoned land, defined as "delinquent lands or delinquent vacant lands ... that are unoccupied." Id. § 323.65. Instead of using "judicial foreclosure proceedings," Ohio enables "a county board of revision" to "foreclose the state's lien for real estate taxes upon abandoned land." Id. § 323.66. The state law then authorizes counties to transfer the land to authorized land banks rather than dispose of the property at auctions. Id. § 323.78.

This innovation allows counties to embark on land revitalization efforts more efficiently. If the county treasurer invokes this approach and if there is a willing land bank, the process allows the county to transfer the abandoned land directly to the land bank. Id. § 323.78(B). With the transfer, the land becomes "free and clear of all impositions and any other liens on the property, which shall be deemed forever satisfied and discharged." Id. The State does not collect any tax delinquency, and the fair market value of the land becomes irrelevant, as it makes no difference whether the tax impositions and costs of the action "exceed the fair market value of the parcel." Id.

State law offers some protections for the owners of abandoned land. The Board must provide notice to landowners, id. § 323.66, and the county must run a title search "for the purpose of identifying ... persons hav[ing] a legal or equitable ownership interest," id. § 323.68(A)(1). Once notified of the action, owners may transfer a case from the Board to a "court of common pleas or to a municipal court with jurisdiction" to handle any state or federal challenges to the foreclosure. Id. §§ 323.691(A)(1); 323.70(B). By paying all outstanding taxes, owners also may terminate the proceeding before the Board and get their land back. Id. § 323.72.

After the Board's decision, homeowners have other options. They have 28 days after the decision to pay the outstanding tax delinquency and recover the land. Id. § 323.65(J). They also may "file an appeal in the court of common pleas," Ohio's trial court of general jurisdiction. Id. § 323.79. In addition to "issues raised or adjudicated in the proceedings before the county board of revision," the owners may surface "other issues that are raised for the first time on appeal and that are pertinent to the abandoned land." Id.

The one option the landowner does not have under the statute is to obtain any excess equity in the property after it goes to the land bank. The Ohio statute offers no way to capture that property interest.

B.

In 2017, Montgomery County's treasurer filed a foreclosure action in the County's Board of Revision against two parcels of land located in Dayton that were in arrears and titled to Alana Harrison's deceased mother. Harrison held a one-half interest in the property. Harrison answered the complaint, saying she was "new to this" and wanted "to save my mom[’]s home." R.17-4 at 1.

The Board foreclosed the property. It found the two parcels to be abandoned and directed that the property be transferred to the land bank after the 28-day redemption period. The Board found that the tax impositions totaled $19,664 and that the property's fair market value equaled $22,600, meaning Harrison retained a surplus equity interest just shy of $3,000. As for the costs of the foreclosure action, the Board ordered that the "Clerk of Courts shall pay from the Transferee's deposited funds" $1,883 for court costs, $125 for a sheriff's fee, $1 to the county auditor, and $36 for a county recorder fee. R.17-5 at 3. That is a total of $2,045, leaving roughly $891 from the net surplus. The statute directs that these costs be paid by the county treasurer at his or her "discretion" and "in whole or in part from the delinquent tax and assessment collection funds" or by the "community development organization." O.R.C. § 323.75(B)(2). Harrison did not appeal this administrative decision in state court. Nor did she file a writ of mandamus to compel the County to condemn her property and pay compensation, the route Ohio offers to property owners to bring state law takings claims. See State ex rel. Shemo v. Mayfield Heights , 95 Ohio St.3d 59, 765 N.E.2d 345, 350 (2002) ("Mandamus is the appropriate action to compel public authorities to institute appropriation proceedings where an involuntary taking of private property is alleged."); see also Knick v. Twp. of Scott , ––– U.S. ––––, 139 S. Ct. 2162, 2168, 204 L.Ed.2d 558 (2019) (noting that all States, "besides Ohio," permit property owners to bring "a state inverse condemnation action," instead of a mandamus action, to handle an uncompensated taking of property).

She instead filed this action in federal court, alleging that the County violated the federal and state takings clauses by extinguishing her surplus equity interest without providing just compensation. According to her complaint, the County since 2011 "has commenced nearly 3,200 delinquent tax foreclosure cases" before the Board of Revision. R.15 at 6. And "in virtually every case ... the real property was transferred directly to the Land Bank or an electing subdivision." Id. In 85% of the cases, Harrison alleges, the fair market value of the seized property exceeded the taxes owed.

Montgomery County filed a motion to dismiss the case for failure to state a claim. The district court granted the motion on claim-preclusion grounds because Harrison could have appealed the Board's decision and brought her takings claim before the court of common pleas.

II.

Ohio claim preclusion law . Through the full faith and credit statute, 28 U.S.C. § 1738, Congress has established that, in a federal court action like this one, a "state-court judgment" receives "the same preclusive effect" that it would receive under state law. Migra v. Warren City Sch. Dist. Bd. of Educ. , 465 U.S. 75, 81, 104 S.Ct. 892, 79 L.Ed.2d 56 (1984). Under...