In re Upset Tax Sale, September 13, 2006

• Decision Date: 24 July 2009
• Docket Number: No. 2078 C.D. 2007.,2078 C.D. 2007.
• Citation: 976 A.2d 1271
• Parties: In re UPSET TAX SALE, SEPTEMBER 13, 2006. 1333 Elson Road Chester Township Tax Parcel No. 07-00-00294-31, Appeal of Patrick T. Carney.
• Court: Pennsylvania Commonwealth Court

976 A.2d 1271

In re UPSET TAX SALE, SEPTEMBER 13, 20061333 Elson Road Chester Township Tax Parcel No. 07-00-00294-31, Appeal of Patrick T. Carney.

No. 2078 C.D. 2007.

Commonwealth Court of Pennsylvania.

Argued June 11, 2009.

Decided July 24, 2009.

July 24, 2009.

Michael P. Dignazio, Media, for appellant.

David R. Urbany, Philadelphia, for appellee.

BEFORE: PELLEGRINI, Judge, and BUTLER, Judge, and FRIEDMAN, Senior Judge.

OPINION BY Senior Judge FRIEDMAN.

Patrick T. Carney appeals from the September 24, 2007, order of the Court of Common Pleas of Delaware County(trial court) denying Carney's petition to set aside the September 13, 2006, upset tax sale of the premises located at 1333 Ellison Road, Delaware County, Pennsylvania (Property).We reverse.

In 2004, Russell J. Jones owned the Property with a mortgage guaranteed and/or insured by the United States Veterans Administration.Because real estate taxes on the Property were unpaid for the tax year 2004, the Property became the subject of an upset tax sale pursuant to section 601 of the Pennsylvania Tax Sale Law¹(Law), 72 P.S. § 5860.601.On April 2, 2005, the Delaware County Tax Claim Bureau(Tax Claim Bureau) sent a Notice of Return and Claim to Jones; however, the Notice of Return and Claim was returned to the Tax Claim Bureau as unclaimed and was subsequently posted at the Property by the Delaware County Sheriff's Department.(R.R.at 25-30.)

Thereafter, the Secretary of Veterans Affairs (V.A.) foreclosed on Jones' mortgage, and by Sheriff's deed recorded on December 22, 2005, the V.A. became the record owner of the Property.(R.R.at 18, 42-46.)As required by section 602(e)(1) of the Law, 72 P.S. § 5860.602(e)(1), the Tax Claim Bureau mailed notice of the upset tax sale to the V.A. at the address set forth in the December 22, 2005, deed via certified mail, return receipt requested.Receipt of this notice was signed for by Larry Nicholson at the stated address.(R.R.at 49-50.)In addition, notice of the upset tax sale was properly published and posted by the Tax Claim Bureau pursuant to section 602(a) of the Law, 72 P.S. § 5860.602(a).(R.R.at 32-40.)

After all statutorily required notices had been given, the Tax Claim Bureau conducted the upset tax sale of the Property on September 13, 2006, at which Arthur F. Urbany, the authorized General Partner for Allied Property Brokerage (Purchaser), was the successful bidder.On or about October 16, 2006, the Tax Claim Bureau sent post-sale notice of the September 13, 2006, upset tax sale to the V.A. by certified mail, return receipt requested, as required by section607(a.1) of the Law, 72 P.S. § 5860.607(a.1); again, Larry Nicholson signed the certified mail return receipt card.(R.R.at 52-53.)The V.A. did not file objections to the September 13, 2006, upset tax sale.

By deed recorded on December 28, 2006, the V.A. transferred the Property from the V.A. to Carney.(R.R.at 18-23.)On March 7, 2007, after learning of the upset tax sale, Carney filed a Petition Raising Objections and Exceptions to Upset Tax Sale (Petition), seeking to invalidate the sale of the Property owned by the V.A. as violative of the privileges and immunity clause of the U.S. Constitution.(R.R.at 3-5.)The case was submitted to the trial court on stipulated facts, and Carney and Purchaser filed memoranda of law in support of their respective positions.By order dated September 24, 2007, the trial court denied Carney's Petition.

Carney appealed, and the trial court directed him to file a concise Statement of Matters Complained of on Appeal pursuant to Pa. R.A.P.1925(b).Carney did so, raising the issue of sovereign immunity.Specifically, Carney argued that the trial court erred in denying his Petition because an upset tax sale pursuant to section 601 of the Law is a non-judicial means of foreclosing upon a delinquent tax lien, and, pursuant to 28 U.S.C. §§ 2410(a) and (c), the United States consents to be sued, i.e., waives sovereign immunity, only when such action is accomplished through a judicial sale.²(R.R.at 69.)

28 U.S.C. §§ 2410(a) and (c), (emphasis added), provide, in relevant part, as follows:

(a) ...[F]or the protection of the United States, the United States may be named a party in any civil action or suit in any district court, or in any State court having jurisdiction of the subject matter—

...

(2) to foreclose a mortgage or other lien upon,

...

real or personal property on which the United States has or claims a mortgage or other lien.

...

(c) A judgment or decree in such action or suit shall have the same effect respecting the discharge of the property from the mortgage or other lien held by the United States as may be provided with respect to such matters by the local law of the place where the court is situated.However, an action to foreclose a mortgage or other lien, naming the United States as a party under this section, must seek judicial sale....Where a sale of real estate is made to satisfy a lien prior to that of the United States, the United States shall have one year from the date of sale within which to redeem, except that ... in any case in which, under the provisions of ... subsection (d) of section 3720 of title 38 of the United States Code, the right to redeem does not arise, there shall be no right of redemption.

The trial court addressed the issue raised by Carney in a December 31, 2008, decision supporting its prior order.The trial court first recognized that the provisions of 38 U.S.C. § 3720 contain a waiver of sovereign immunity arising out of Chapter 37 of the Veteran's Benefits section of the United States Code.³The trial court then explained that it dismissed Carney's Petition based upon the language in 38 U.S.C. § 3720(a)(6).⁴(Carney's briefat 18-21.)38 U.S.C. § 3720 provides, in relevant part, as follows:

(a)Notwithstanding the provisions of any other law, with respect to matters arising by reason of this chapter, the Secretary may—

(1) sue and be sued in the Secretary's official capacity in any court of competent jurisdiction ...

...

(5) purchase at any sale, public or private, upon such terms and for such prices as the Secretary determines to be reasonable, and take title to, property, real, personal or mixed; and similarly sell, at public or private sale, exchange, assign, convey, or otherwise dispose of any such property; and

(6) complete, administer, operate, obtain and pay for insurance on, and maintain, renovate, repair, modernize, lease, or otherwise deal with any property acquired or held pursuant to this chapter.The acquisition of any such property shall not deprive any State or political subdivision thereof of its civil or criminal jurisdiction of, on, or over such property (including power to tax) or impair the rights under the State or local law of any persons on such property.

...

(d) The right to redeem provided for by section 2410(c) of title 28 shall not arise in any case in which the subordinate lien or interest of the United States derives from a guaranteed or insured loan.

38 U.S.C. § 3720(a), (d).(Emphasis added.)Carney now appeals to this court.⁵

Carney argues that the language of 38 U.S.C. § 3720(a)(6) does not constitute the consent of Congress necessary to expose real property owned by the United States of America or its instrumentality to an upset tax sale pursuant to section 601 of the Law.⁶

Under the doctrine of sovereign immunity, the United States cannot be sued without its consent, and a proceeding against property in which a federal agency has an interest is a suit against the United States and cannot be maintained without its consent.United States v. Alabama,313 U.S. 274, 61 S.Ct. 1011, 85 L.Ed. 1327(1941);United States v. Dansby,509 F.Supp. 188(N.D.Ohio1981).

Carney concedes that 38 U.S.C. § 3720(a)(6) constitutes a waiver of sovereign immunity from state and local taxation on property owned by the V.A.However, Carney maintains that, under 28 U.S.C. §§ 2410(a) and (c), the United States has waived sovereign immunity to actions foreclosing upon delinquent tax liens on property titled to the V.A. only where the state or local law seeks a judicial sale of the property.Because an upset tax sale under section 601 of the Law is not a judicial sale, Carney maintains that the upset tax sale of the Property was void ab initio.

Purchaser concedes that an upset tax sale is not a judicial sale.However, Purchaser counters that the United States waives its sovereign immunity to proceedings foreclosing upon delinquent tax liens, not only where there is a judicial sale, but also where Congress has enacted a federal statute expressly permitting such sales.Alabama.⁷According to Purchaser (and the trial court), this is precisely what Congress did in enacting 38 U.S.C. § 3720(a)(6).We disagree.

In support of his position, Carney cites United States v. County of Richland,500 F.Supp. 312(D.S.C.1980).In Richland, the Federal National Mortgage Association foreclosed upon real estate, and title to the property was transferred to the Secretary of Housing and Urban Development (HUD).⁸Thereafter, the Treasurer of Richland County levied on the real estate and advertised it for sale to satisfy delinquent real estate taxes assessed prior to HUD coming into title.The property was bought at the tax sale, and a deed was delivered to the purchaser, who then conveyed the property to another party.The United States brought a quiet title action seeking a declaration that the tax deed was void.The district court set forth the issue as follows:

Does the purchase of real estate, or the acquisition of an interest therein, by an agency of the United States of America as assignee of a mortgage or the purchaser at a foreclosure sale, bar a political subdivision of the State of South Carolina(Richland County) from levying upon and selling such real estate to satisfy a debt for delinquent real property taxes which became due...