Heartwood 88, Inc. v. Montgomery County

• Decision Date: 14 April 2004
• Docket Number: No. 02489,02489
• Citation: 156 Md. App. 333,846 A.2d 1096
• Parties: HEARTWOOD 88, INC. v. MONTGOMERY COUNTY, Maryland, et al.
• Court: Court of Special Appeals of Maryland

846 A.2d 1096

156 Md. App. 333

HEARTWOOD 88, INC. v. MONTGOMERY COUNTY, Maryland, et al.

No. 02489, Sept. Term, 2002.

Court of Special Appeals of Maryland.

April 14, 2004.

K. Donald Proctor, Towson, for Appellant.

Scott R. Foncannon (Charles W. Thompson, Jr., County Atty., Karen L. Federman, Principal Counsel for Appeals, on the brief), Rockville, for Appellee.

Panel: HOLLANDER, ADKINS, JOHN J. BISHOP, JR., (Retired, specially assigned), JJ. HOLLANDER, Judge.

This appeal requires us to construe the "Tax Sale" statute, codified in Title 14, Subtitle 8 of the Tax-Property Article ("T.P.") of the Maryland Code (1985, 2001 Repl.Vol.). The case involves a dispute between Heartwood 88, Inc. ("Heartwood"), appellant, and Montgomery County (the "County"), appellee, with regard to a tax sale of real property conducted by the County, at which it mistakenly sold 331 properties to Heartwood for which the owners were not then delinquent in payment of their real property taxes. Upon discovery of the errors, the County refunded the purchase monies to Heartwood for all of the sales, along with interest at the rate of 8%. Nevertheless, Heartwood claimed that it was entitled to interest at the "redemption rate" of 20%, amounting to $208,648.17, because that is the rate that would have applied if the sales had been valid and the owners had redeemed their properties. Appellant also sought to recover statutory attorney's fees of $400 for each of the 331 properties, totaling $132,400, along with other expenses. The Circuit Court for Montgomery County rejected Heartwood's claims and ordered Heartwood to return the County's interest payment.

Heartwood poses two questions for our consideration:

I. Did the circuit court err in refusing to award Heartwood interest at the 20% redemption rate plus statutory attorney's fees and other expenses incurred?

II. Did the circuit court err in concluding that interest paid to Heartwood by Montgomery County was paid without legal authority and that the County was therefore entitled to judgment?

For the reasons discussed below, we shall affirm in part, reverse in part, and remand for further proceedings.

FACTUAL SUMMARY¹

In May 2000, the County advertised its annual sale of parcels of real property located in the County, for which the payment of property taxes was delinquent. The County's notice of sale stated:

The tax sale is open to the public. Prospective bidders should investigate the properties. There is no warranty, expressed or implied, that a property has a marketable title or that it contains the area of land which it is said to contain; therefore, the purchaser assumes all risks in that regard. Purchasers will receive a certificate of sale as required by law.

In the event a tax sale is subsequently invalidated, the tax sale purchaser, upon the surrender of the Tax Sale Certificate, will receive a refund of the amount paid at tax sale, including interest calculated at 8%. The County will pay no expenses associated with the sale or invalidation. The list of delinquent taxpayers shown below may include taxpayers who paid their taxes since the list was submitted to the newspaper for publication, and does not necessarily mean that their taxes are still delinquent.

* * *

During the advertising period, May 18th through June 8th [of 2000], properties will be removed from groups [of properties for sale] predicated on payments received from taxpayers. Therefore, the final newspaper advertisement on June 8th will list groups with fewer properties then were originally advertised.

* * *

Pursuant to 1999 tax sale legislation, the County must establish a high-bid premium for all properties sold in groups and/or by a sealed bid process. This high-bid premium is 20% of the amount by which the bid exceeds 40% of the properties' full cash value. The high-bid premium is payable at the same time the successful bidder pays the tax sale amount.

The County will refund the high-bid premium, without interest, to the holder of the tax sale certificate on redemption of the property or to the plaintiff in an action to foreclose the right of redemption on delivery of a tax sale deed for the property for which the high-bid premium was paid. The high-bid premium is not refundable after the time required (under Section 14-833) for the filing of an action to foreclose the right of redemption, if there has been no redemption and if an action to foreclose the right of redemption has not been filed within that time.

(Emphasis added).

Appellant participated in the tax sale, which was held on June 12, 2000. At that time, the County sold approximately 1,900 properties in twenty-four groups. The sale of the properties was organized by group to insure the sale of all properties, including those that were regarded as less desirable. Appellant was the high bidder for twenty of the groups, consisting of 1,385 individual properties.

Accordingly, on June 13, 2000, Heartwood paid the County the sum of $6,868,442.56. Of that sum, $3,934,555.09 represented the amount due for taxes, interest, and penalties. The remaining sum of $2,933,887.47 constituted a statutory, interest-free "high-bid premium."² Appellant's purchases were evidenced by a "Certificate Of Tax Sale," which the County tendered to appellant for all 1,385 properties. Each tax sale certificate provided, in pertinent part: "Upon redemption, the holder of this certificate will be refunded the sums paid on account of the bid price together with ... interest and penalty ... The interest and penalty will be computed at the rate of 8% and 12% per annum respectively from the date of the tax sale to the date of redemption, together with all other amounts specified by Section 14-813, Annotated Code of Maryland...."

The County concedes that it "mistakenly offered [331] properties at the tax sale even though the taxes had been paid." According to Glenn Wyman, then Chief of the Treasury Division for the County's Department of Finance, it was Heartwood that first discovered that the County had sold properties for which the owners were not in arrears. Over a period of months, beginning in December 2000 and continuing through October 2001, the County verified that, as of the time of the tax sale on June 12, 2000, the delinquent taxes and other charges had already been paid by the owners of the 331 properties inadvertently sold by the County at the tax sale.

Accordingly, about ten months after the tax sale, in April 2001, the County refunded the sum of $1,276,522.42 to Heartwood, representing reimbursement for the purchase price for the 331 properties. The County also paid Heartwood interest in the amount of $83,621.22, calculated at the rate of 8%, consistent with the County's tax sale notice. In addition, the County refunded the high bid premium that Heartwood had paid, in the amount of $890,537.39, but without interest.³

Heartwood was not satisfied with the interest payment at the 8% rate. It claimed that, because the sale of 331 properties was void, it was entitled to interest at the County's redemption rate of 20%, amounting to $208,648.17, pursuant to T.P. § 14-848 and other statutory provisions. Therefore, Heartwood sought an additional $125,026.95 from the County. Further, appellant claimed it was entitled to statutory attorneys' fees of $400 for each of the 331 properties, totaling $132,400, plus expenses of $2475, pursuant to T.P. § 14-843.

On December 6, 2001, after the County refused to pay the additional sums claimed by Heartwood, appellant instituted suit in the Circuit Court for Montgomery County. Styled as a "Complaint For Declaratory Judgment And For Judgment That Tax Sales Were Void," appellant sued the County and Timothy Firestine, Collector of Taxes and Director of Finance for the County.⁴ In its suit, appellant asked the court to declare void the sales of the 331 properties; to order the County to pay interest at the redemption rate of 20%; and to require the County to pay attorneys' fees of $400 per property, along with costs. The County filed a counterclaim and request for declaratory judgment, seeking to recover the 8% interest that it had previously paid to Heartwood.

Following a hearing in October 2002 on the parties' cross-motions for summary judgment, the circuit court issued a written "Opinion and Order" on December 18, 2002, in which it granted judgment in favor of the County and Firestine. Noting that the parties "agree that the sale of the 331 properties in question was void at the time of the tax sale ...", the court ruled that Heartwood was not entitled to the requested relief of interest on the refund at the redemption rate of 20%, statutory attorneys' fees, and expenses. The court said: "Simply put, in order for [Heartwood] to recover interest at the redemption rate, there must be a redemption of the property by the owner." In its view, "[t]here was no redemption with regard to the 331 properties at issue ... because the sale was void from its inception," and thus the properties were "never subject to redemption." As "there was no sale for the court to void," the court determined that T.P. §§ 14-848 and 14-843 had no application here.

Moreover, the court determined that appellant was obligated to reimburse the County in the amount of $83,621.22, representing the 8% interest that the County had previously paid to appellant. The court reasoned that the tax collector "did not have the authority to pay 8% interest because no statute applied to the void tax sale," and such payment "was in violation of law." While acknowledging "a clear representation" that the County would pay interest at 8% for an invalid sale, and noting that "the three elements of equitable estoppel would appear to be met," the court nonetheless pointed out that the doctrine of equitable estoppel "has limited application against municipalities."

The court concluded that "[t]he doctrine of equitable estoppel does not prevent the County from [obtaining]...