State Dept. of Revenue v. Price-Williams

• Citation: 594 So.2d 48
• Decision Date: 17 January 1992
• Docket Number: PRICE-WILLIAMS and E
• Parties: STATE of Alabama DEPARTMENT OF REVENUE v. Thorntonlizabeth L. Price-Williams. 1900722.
• Court: Alabama Supreme Court

Page 48

594 So.2d 48

STATE of Alabama DEPARTMENT OF REVENUE v. Thornton PRICE-WILLIAMS and Elizabeth L. Price-Williams.

1900722.

Supreme Court of Alabama.

Jan. 17, 1992.

James H. Evans, Atty. Gen., Ron Bowden, Chief Counsel, and John J. Breckenridge, Asst. Counsel, Dept. of Revenue, and Asst. Attys. Gen., for appellant.

Mark J. Everest of Collins, Galloway & Smith, Mobile, for appellees.

MADDOX, Justice.

This case involves a dispute between the Alabama Department of Revenue ("Department") and owners of land over the rights of those owners to redeem the property against the Department, which had bought the property at a sale for delinquent taxes.

The issues raised are 1) whether the trial court incorrectly applied Ala.Code 1975 § 40-10-83, to the redemption of property sold for the failure to pay "income" taxes; 2) whether the trial court lacked in rem and personal jurisdiction to order redemption under Ala.Code 1975, § 40-10-83, against the Department, because of the State's immunity from suit; 3) whether the owners who sought redemption were the proper parties to obtain redemption under § 40-10-83; and 4) whether the Department was paid an adequate amount for redemption under § 40-10-83.

On January 4, 1977, Thornton Price-Williams and Elizabeth L. Price-Williams, the appellees, purchased lots 714 and 715 from Murdock C. Stephens and Carmen M. Stephens for $85,000 and received a warranty deed. However, the Price-Williamses did not record the deed until January 9, 1980.

On June 14, 1979, the Department recorded a certificate of lien for taxes, claiming that the Stephenses owed the Department $3,705.27 for income taxes due from 1976. On September 19, 1979, a final assessment of income tax for 1976 was entered against the Stephenses in the amount of $3,705.27.

On August 18, 1980, the Department issued a writ of execution against all property belonging to the Stephenses. On October 27, 1980, lots 714 and 715 were sold at a sheriff's sale, at public auction, and the Department bought the property.

The Price-Williamses filed suit to quiet title and to remove the cloud on their title resulting from the tax liens and the sheriff's deed. The trial court declared that the title to the land was free and clear of all claims, interests, liens, or encumbrances of the Department, voided the deed under which the Department claimed title, and removed the cloud from the Price-Williamses' title to the lots. The trial court's findings of fact included, inter alia, a finding that the Price-Williamses were purchasers in the "usual course of trade" and that the Stephenses retained no interest in the property after the January 4, 1977, conveyance to the Price-Williamses. The trial court concluded that the Department did not obtain a lien against the lots because the Price-Williamses were prior purchasers in the "usual course of trade" within the meaning of § 40-1-2, and that the Department was not a "judgment creditor" so as to be able to take advantage of Ala.Code 1975, § 35-4-90, which provides:

"(a) All conveyances of real property, deeds, mortgages, deeds of trust or instruments in the nature of mortgages to secure any debts are inoperative and void as to purchasers for a valuable consideration, mortgagees and judgment creditors without notice, unless the same have been recorded before the accrual of the right of such purchasers, mortgagees or judgment creditors.

"(b) Subsection (a) of the section includes absolute conveyances of real property defeasible by a defeasance or other instrument, in which case such defeasance or instrument must be recorded, according to its character, within the time limited in subsection (a) of this section or it is void as to purchasers for a valuable consideration, mortgagees and judgment creditors of the original grantee without notice."

The trial court made no finding whether the Department had notice of the Price-Williamses' interest in the lots.

The Department appealed that judgment, and this Court reversed and remanded, Department of Revenue v. Price-Williams, 545 So.2d 7 (Ala.1989), and ordered the trial court to determine whether the Department had actual and/or constructive notice of the unrecorded deed within the meaning of § 35-4-90, so as to make it a "judgment creditor with notice." A judgment lien creditor with notice is not protected against an unrecorded deed, while a judgment creditor without notice is protected. Department of Revenue, 545 So.2d at 9. The Price-Williamses, as holders of an unrecorded deed, had the burden of proving that the Department had notice of the unrecorded deed. Id.

On remand, the trial court found that the Department did not have notice of the unrecorded deed at the time the final assessment was entered, and that the Department was a judgment lien creditor under the provisions of Ala.Code 1975, § 35-4-90(a). Nevertheless, in order to "best serve equity," the trial court allowed the Price-Williamses, under § 40-10-83, to redeem the lots from the Department upon payment of the final assessment and interest. This section provides that an owner in possession of property can redeem. It states:

"When the action is against the person against whom the taxes were assessed or the owner of the land at the time of the sale, his heir, devisee, vendee or mortgagee, the court shall, on motion of the defendant made at any time before the trial of the action, ascertain the amount paid by the purchaser at the sale and of the taxes subsequently paid by the purchaser, together with six percent per annum thereon, and a reasonable attorney's fee for the plaintiff's attorney for bringing the action, and shall enter judgment for the amount so ascertained in favor of the plaintiff against the defendant, and the judgment shall be a lien on the land sued for. Upon payment into the court of the amount of the judgment and costs, the court shall enter judgment for the defendant for the land, and all title and interest in the land shall by such judgment be divested out of the owner of the tax deed."

Ala.Code 1975, § 40-10-83.

The Department again appeals. We affirm.

I.

The Department argues that the trial court erred when it applied § 40-10-83 to the redemption of property sold for the failure to pay "income" taxes, contending that the statute is limited to the redemption of property sold for the failure to pay "ad valorem" taxes. While the Department argues that Chapter 10 of Title 40 deals exclusively with "ad valorem" taxes, this Court has not found anything to convince us that § 40-10-83 is so limited. If we limited the application of § 40-10-83 to property sold for the nonpayment of ad valorem taxes only, as the State urges us to do, at least two principles of law applicable to the right of redemption would have to be discarded: (1) that legislation authorizing an owner to redeem where the State is the purchaser should be liberally construed in favor of the right to redeem, and (2) that statutes authorizing former owners to redeem property bought in by the State for nonpayment of taxes should be liberally construed so as to foster the return of land to the tax rolls of the State.

In its order, the trial court stated:

"Equity is best served by allowing Thornton Price-Williams and Elizabeth Price-Williams to redeem for the amount of the first lien. The Department of Revenue is made whole for the amount of taxes outstanding that it properly filed liens for. It would be inequitable as well as unlawful under the provisions of Section 40-10-83, Code of Alabama, 1975, to deny the Price-Williams the right to redeem."

It is well settled in this court that a proceeding under § 40-10-83 (former Ala.Code 1940, § 296, Title 51), "is a straight bill to enforce a redemption in equity." Bobo v. Edwards Realty Co., 250 Ala. 344, 345, 34 So.2d 165, 166-67 (1947). See Tensaw Land & Timber Co. v. Rivers, 244 Ala. 657, 15 So.2d 411 (1943) (emphasis added).

"The requisite averments of possession essential to invite equitable relief by the several stated remedies are, of course, not the same. The court in many cases has pointed out the allegational requirements in statutory bills to quiet title and to remove clouds on titles, but we find no decision indicating the character of possession to be alleged in a bill such as the instant one seeking direct relief under the section.

"The trend of our decisions seems to have been rested on the theory that to enforce a redemption in equity under the Code section the owner, taxpayer or other statutory designee must have remained in some sort of actual or constructive possession of the land since the tax sale....

"The character of the redemptioner's possession necessary to such equitable relief is not prescribed in the statute...."

Bobo, 250 Ala. at 346, 34 So.2d at 167.

The underlying principle in a court of equity is that "nothing will be permitted within its jurisdiction which is unconscionable." Humphrey v. Humphrey, 254 Ala. 395, 48 So.2d 424, 427 (1950). Allowing the Department to keep the Price-Williams property, worth at least $85,000, for the nonpayment of $3,740.28, would be inequitable, and the trial court did not abuse its discretion in so finding. Both parties in this case were made whole upon payment to the Department of the delinquent taxes and upon the return of title to the Price-Williamses. Therefore, this Court finds that the equitable redemption statute, § 40-10-83, is applicable to the redemption of property sold for the nonpayment of any type of tax and is not limited to the redemption of property sold for the nonpayment of ad valorem taxes only.

II.

The Department argues that the trial court lacked both in rem and personal jurisdiction to allow redemption against it because the Department, as an agency of the State, is immune from suit under the doctrine of sovereign immunity. See Ala. Const., 1901, art. I, § 14. We find this argument to be without merit. Sovereign immunity is an affirmative defense. See ...