Lohr v. Saratoga Partners, L.P.

• Decision Date: 01 October 2020
• Docket Number: No. 67 MAP 2019,67 MAP 2019
• Citation: 238 A.3d 1198
• Parties: Fred LOHR and Jolene K. Fouse, Appellants v. SARATOGA PARTNERS, L.P. and Huntingdon County Tax Claim Bureau, Appellees
• Court: Pennsylvania Supreme Court

238 A.3d 1198

Fred LOHR and Jolene K. Fouse, Appellants

v.SARATOGA PARTNERS, L.P. and Huntingdon County Tax Claim Bureau, Appellees

No. 67 MAP 2019

Supreme Court of Pennsylvania.

Argued: May 21, 2020

Decided: October 1, 2020

Daniel George Vitek, Esq., Community Justice Project, for Amicus Curiae Community Justice Project.

Gregory Alan Jackson, Esq., 504 Law, P.C., for Appellant.

Justin Kirk Houser, Esq., Coploff, Ryan, Welch & Houser, for Appellee Saratoga Partners, L.P.

Peter McManamon, Esq., for Appellee Huntingdon County Tax Claim Bureau.

SAYLOR, C.J., BAER, TODD, DONOHUE, DOUGHERTY, WECHT, MUNDY, JJ.

OPINION

JUSTICE BAER

We granted discretionary review to consider whether the availability of a taxpayer remedy under the Municipal Claims and Tax Liens Act ("MCTLA"), 53 P.S. §§ 7101 - 7505, but not the Real Estate Tax Sale Law ("RETSL"), 72 P.S. §§ 5860.101 - 5860.803, violates the equal protection provisions of the United States and Pennsylvania Constitutions. Relevantly, and absent exceptions described infra , the MCTLA permits delinquent taxpayers in the first and second class counties of Philadelphia and Allegheny to redeem property sold at an upset tax sale by paying the delinquent taxes and other costs within nine months of the sale, while the RETSL, which governs upset tax sales in second class A through eighth class counties, explicitly excludes post-sale redemption.¹ After review, we conclude that the General Assembly's decision to omit the right of post-sale redemption from the RETSL is constitutional because it is rationally related to a legitimate state interest as discussed below. Accordingly, we affirm the order of the Commonwealth Court upholding the denial of the delinquent taxpayers’ petition to redeem in this case involving a tax sale governed by the RETSL.

Appellants, Fred L. and Jolene K. Fouse ("the Fouses") owned two parcels of land in Lincoln Township, Huntingdon County, identified by Tax Identification Numbers 24-08-02 and 24-08-01.1 ("the Property"), which they utilized as their primary residence from the time they acquired the two parcels in 1976 and 1987, respectively. Eventually, the Fouses fell behind in the payment of their taxes on the Property, owing a total of $16,747.50 for 2014 and 2015, according to the Huntingdon County Tax Claim Bureau ("Tax Claim Bureau").² As mandated by the RETSL, the Tax Claim Bureau scheduled an upset tax sale for September 2016 and provided the requisite notice and publication. At the tax sale, appellees, Saratoga Partners, L.P. ("Saratoga"), submitted the highest bid of $27,795.45.

Three months later, in December 2016, the Fouses filed a "petition to redeem property sold at tax sale" ("Petition to Redeem"), even though Huntington County, as a sixth class county, is governed by the RETSL, which, as set forth infra , prohibits post-sale redemption.³ Instead, the Fouses asserted, inter alia , a right to redeem under Section 7293 of the MCTLA by paying the amount paid by Saratoga at the tax sale.⁴ The Fouses asserted that they deposited funds in escrow to cover the relevant taxes and costs. The trial court issued a rule to show cause why the relief should not be granted, ordered briefing, and scheduled a hearing on the matter.

In their brief in support of the Petition to Redeem, the Fouses acknowledged that the MCTLA applies to first and second class counties, which include Philadelphia and Allegheny, while the RETSL generally governs all other counties, including Huntingdon.⁵ The Fouses emphasized that the MCTLA provides delinquent property owners a post-sale right of redemption if delinquent taxes and costs are paid within nine months of the upset sale, while the RETSL explicitly instructs that "[t]here shall be no redemption of any property after the actual sale thereof." 72 P.S. § 5860.501(c).

The Fouses argued that the absence of a right of redemption provision in the RETSL, in contrast to the existence of the right in the MCTLA, results in citizens of second class A through eighth class counties being treated less favorably than citizens of first and second class counties, in violation of the equal protection provisions of the United States and Pennsylvania Constitutions.⁶ The Fouses additionally asserted that property rights are fundamental rights subject to strict scrutiny, which requires any statutory classification to be narrowly tailored to support a compelling government interest.

In addressing the state interest prong, the Fouses recognized that this Court has held that the purpose of tax sale laws is "not to strip the taxpayer of his property but to ensure the collection of taxes." Brief in Support of Petition to Redeem at 9 (unnumbered) (quoting Tracy v. County of Chester, Tax Claim Bureau , 507 Pa. 288, 489 A.2d 1334, 1339 (1985) ). The Fouses argued that the state interest in collecting taxes is served by the redemption provision because it allows for property owners to pay the taxes and all costs incurred. They maintained that the absence of the redemption provision does not advance the purpose of tax collection but instead divests the property owner of their rights, such that it is not narrowly tailored to tax collection, as required for strict scrutiny.⁷

The Tax Claim Bureau responded, emphasizing that both the MCTLA and the RETSL contain provisions that allow delinquent taxpayers to remedy an upset tax sale. The MCTLA, as stated, allows property owners to redeem the property within nine months of a tax sale, upon payment of the taxes and costs. The RETSL, however, provides a pre-sale remedy by which property owners can stay the sale of their property by paying twenty-five percent of the delinquent taxes prior to the date set for the upset sale and agreeing to an installment plan to pay the remaining taxes within the next twelve months. Brief in Opposition to Petition to Redeem at 4 (unnumbered) (referencing 72 P.S. § 5860.603 of the RETSL).⁸ Thus, they emphasized that both acts allow for taxpayers to regain their property by paying the delinquent taxes within a year of the scheduled tax sale.

Saratoga additionally filed a brief in the trial court in support of denying the Fouses’ Petition to Redeem. It rejected the Fouses claim to a right of redemption, as it viewed redemption to be merely ‘‘an equity" provided by the statute. Saratoga Brief in Opposition to Petition to Redeem at 6-7 n.3. Thus, it argued that, in the absence of the derogation of a fundamental right, rational basis, rather than strict scrutiny, should be applied to the Fouses’ equal protection challenge.

Saratoga emphasized that the Pennsylvania Constitution explicitly allows for classifications based on county size in Article III, Section 20.⁹ Saratoga highlighted that this Court has found variations in taxation between territorial divisions, such as between Pittsburgh and Philadelphia, to be constitutional under the Uniformity Clause, so long as there is uniformity within the territorial division, citing Moore v. School Dist. of Pittsburgh , 338 Pa. 466, 13 A.2d 29, 32 (1940).

In October 2017, the trial court denied the Petition to Redeem. After the Fouses filed a notice of appeal, the court authored an opinion in support of its order.¹⁰ The trial court recognized that the distinction between the MCTLA and the RETSL resulted in property owners in some areas, including Philadelphia, having a right to redeem their properties within nine months of an upset tax sale, while those in less populated counties, such as the Fouses in Huntingdon County, do not have that opportunity. The court, however, concluded that the distinction withstood constitutional scrutiny.

In so doing, the court applied the rational basis test, which requires that the statute promote a legitimate state interest and that the classification be "reasonably related to accomplishing that articulated state interest." Tr. Ct. Op. at 5 (citing Curtis v. Kline , 542 Pa. 249, 666 A.2d 265, 269 (1995) ). The trial court looked first to the state's interest in enacting the RETSL without a redemption provision. It recognized the "dominant purposes of the [RETSL] were to provide speedier and more efficient procedures for enforcing tax liens and to improve the quality of titles obtained at a tax sale," which, in turn, promoted the state's interest in tax collection. Tr. Ct. Op. at 5 (quoting Povlow v. Brown , 12 Pa.Cmwlth. 303, 315 A.2d 375, 377 (1974) ).

Agreeing with the court in Povlow , the trial court observed that "redemption would have the effect of making titles less attractive" and likely result in lower bids, which might be insufficient to satisfy the taxes due. Id . at 6 (quoting Povlow , 315 A.2d at 377 n.4 ) (alterations in original removed). The court additionally opined that the classification of taxpayers subject to the MCTLA rather than the RETSL was "addressed by Article III, Section 20, of the Pennsylvania Constitution [,] which specifically permits classification by population." Id. Given the presumption in favor of constitutionality, the trial court concluded that the lack of a redemption provision in the RETSL did not violate taxpayers’ right to equal protection under the federal or state constitutions.

On appeal to the Commonwealth Court, the Fouses asserted that the trial court erred in applying rational basis scrutiny to their constitutional challenge. In a published decision of a divided three-judge panel, the Commonwealth Court affirmed the trial court's order denying the Fouses’ Petition to Redeem. Fouse v. Saratoga Partners , L.P. , 204 A.3d 1028 (Pa. Cmwlth. 2019). The court viewed the Fouses’ claim as focused on their equal protection rights secured by the Pennsylvania Constitution, specifically Article I, Sections 1 and 26,¹¹ rather than the federal Equal Protection Clause. It opined, however, that the provisions were coextensive.¹² Id. at 1033 n.9.

The Commonwealth Court first considered the applicable level of constitutional scrutiny. The court viewed "the Fouses’ asserted right to...