Stiff v. Equivest Financial, LLC, 062620 ALSC, 1181051

Docket Nº1181051
Opinion JudgeMITCHELL, JUSTICE
Party NameMark Stiff v. Equivest Financial, LLC
Judge PanelParker, C.J., and Bolin and Stewart, JJ., concur Sellers, J., concurs in the result. Shaw, Wise, Bryan, and Mendheim, JJ., dissent. BRYAN, Justice (dissenting). Shaw, Wise, and Mendheim, JJ., concur.
Case DateJune 26, 2020
CourtSupreme Court of Alabama

Mark Stiff

v.

Equivest Financial, LLC

No. 1181051

Supreme Court of Alabama

June 26, 2020

Appeal from Jefferson Circuit Court (CV-18-900776)

MITCHELL, JUSTICE

Mark Stiff's property was sold at a tax sale that took place inside the Bessemer courthouse instead of "in front of the door of the courthouse" as required by § 40-10-15, Ala. Code 1975. He argues that the sale is void because of that irregularity. We agree and therefore reverse the circuit court's judgment refusing to set aside the tax sale.

Facts and Procedural History

Mark Stiff and his brother, Jim Stiff, fell behind on the property taxes for their mother Doris Stiff's house in Hoover in 2012. At that time, they were caring for Doris around the clock at Mark's house because the family could no longer afford to pay for her treatment at a nursing home. Doris died in January 2013, and her sons inherited her property. They were unable to pay the delinquent taxes.

On May 21, 2013, Equivest Financial, LLC ("Equivest"), purchased Doris's house for delinquent taxes. After the tax sale, Mark and Jim continued to possess the property, which they rented to tenants. Equivest became entitled to a tax deed three years after the sale, as provided in § 40-10-29, Ala. Code 1975. That deed was issued in March 2017.

On February 23, 2018, Equivest sued Mark and Jim, as well as other defendants who were later dismissed, for ejectment and to quiet title to the property. On April 18, 2018, Mark counterclaimed, seeking judicial redemption of the property and a judgment declaring that the tax sale was void. Jim filed an answer and a counterclaim seeking the same remedies on August 7, 2018.

The parties proceeded to a two-day bench trial held on June 4 and July 1, 2019. During the trial, Mark's primary strategy was to show that he did not receive from Jefferson County proper notice of the tax delinquency and sale. But in the course of Mark's cross-examination of a witness from the tax collector's office, it was discovered that the tax sale was held in a probate courtroom at the Bessemer courthouse, not in front of the door of the courthouse as required by statute. No evidence was presented contradicting this testimony. At the conclusion of the trial, the trial court directed the parties to submit posttrial briefs. In his posttrial brief, Mark argued that the tax sale was void based on several theories of defective notice and because the sale was not held in front of the door of the courthouse.

On August 13, 2019, the trial court ruled that the tax sale was valid and that Mark and Jim had the right to redeem the property for $87, 419.84. Mark appealed.

Standard of Review

Mark makes two arguments on appeal. First, he argues that the trial court erred when it failed to enforce the requirement in § 40-10-15 that a tax sale "be made in front of the door of the courthouse." And second, he argues that Equivest failed to prove that he received notice as required by § 40-10-4, Ala. Code 1975.

We review the sale-location issue de novo. The parties agree that the tax sale was held in a probate courtroom at the Bessemer courthouse, not in front of the courthouse door. They disagree about the legal implications of that fact. When an appeal focuses on the application of the law to undisputed facts, we apply a de novo standard of review. Carter v. City of Haleyville, 669 So.2d 812, 815 (Ala. 1995).

Because we reverse the judgment of the trial court based on its failure to enforce the requirement of § 40-10-15 that the sale be held "in front of the door of the courthouse," we pretermit discussion of Mark's notice-based argument.

Analysis

Title 40, Chapter 10, Ala. Code 1975 ("the tax-sale statutes"), govern the sale of real property for unpaid taxes. A tax sale is void unless there is evidence of compliance with all the requirements of the tax-sale statutes. State ex rel. Gallion v. Graham, 273 Ala. 634, 636-37, 143 So.2d 810, 812 (1962). At times, this Court has insisted on "strict" compliance with the statutory requirements. See, e.g., Gunter v. Townsend, 202 Ala. 160, 167, 79 So. 644, 651 (1918) ("Tax sales, unless made in strict compliance with such statutory requirements, are held void."). At other times, we have said that "substantial" compliance with the tax-sale statutes is sufficient. See, e.g.,

Laney v. Proctor, 236 Ala. 318, 319, 182 So. 37, 38 (1938) ("[T]he burden is upon the party claiming under a tax title to show the necessary and substantial compliance with all statutory requirements ...."). Sometimes, we have spoken as if there is no difference between "strict" and "substantial" compliance. See, e.g., Drennen v. White, 191 Ala. 274, 277, 68 So. 41, 42 (1915) ("'In the sale of land for taxes, great strictness is required. To divest an individual of his property against his consent, every substantial requirement of the law must be complied with.'" (quoting Dane v. Glennon, 72 Ala. 160, 163 (1882)). Assuming, but not deciding, that a showing of "substantial" compliance with the tax-sale statutes is all that is required to prove a valid tax sale, we conclude the sale here nonetheless falls short.

In determining what constitutes "substantial compliance" with a statute, our intermediate appellate courts have said:

"'"Substantial compliance" with a statute means actual compliance in respect to the substance essential to every reasonable objective of the statute. ... It means that a court should determine whether the statute has been followed sufficiently so as to carry out the intent for which it was adopted. ...'

"Smith v. State, 364 So.2d 1, 9 (Ala.Crim.App.1978)."

C.Z. v. B.G., 278 So.3d 1273, 1280-81 (Ala. Civ. App. 2018). In another context, this Court has said that "'[s]ubstantial compliance' may be defined as 'actual compliance in respect to substance essential to every reasonable objective,' of a decree giving effect to equitable principles." Pittman v.

Pittman, 419 So.2d 1376, 1379 (Ala. 1982) (quoting Application of Santore, 28 Wash.App. 319, 327, 623 P.2d 702, 707 (1981)). An examination of the text of the tax-sale statutes makes their objectives clear.

The tax-sale statutes include detailed instructions on the manner in which a tax sale must be held:

"Such sales [of land for taxes] shall be made in front of the door of the courthouse of the county at public outcry, to the highest bidder for cash, between the hours of 10:00 A.M. and 4:00 P.M., and shall continue from day to day until all the real estate embraced in the decree has been sold."

§ 40-10-15. Jefferson County ignored one of those requirements -- the location of the tax sale -- with no apparent excuse. Despite that, Equivest argues "that the holding of the tax sale indoors rather than outdoors [in front of] the courthouse substantially complies with the requirements of Section 40-10-15." Equivest's brief at 15. This is essentially an argument that the statute's sale-location requirement is a minor technicality that is not essential to the objectives of the tax-sale statutes. We disagree -- the sale-location requirement plays an important role, and a county may not disregard it for convenience.

The efficient collection of property taxes and the stability of local government revenues depend, in part, on the availability of the tax sale as an enforcement mechanism. For that reason, this Court has observed that "the purchasing of tax-sale property is, in itself, a laudable practice, one to be encouraged, rather than discouraged." Ross v. Rosen-Rager, 67 So.3d 29, 44 (Ala. 2010). But we also know that a tax sale can be the result of a personal tragedy. That is the case here. The Stiff family fell behind on their property taxes while Mark and Jim were personally caring for their ailing mother, and the tax sale took place shortly after her death. When Mark was put on the witness stand and asked why he thought the tax sale was void, he responded: "I just don't think it's fair. ... I just don't think it's right to take advantage of people when they are in their worst situation."

The tax-sale statutes attempt to balance the public necessity of tax collection with the moral imperative that the State treat people like Mark fairly. The tax-sale statutes also reflect the pragmatic consideration that tax sales can be a reliable method of tax collection only if the public views the practice as just. The most obvious way that the tax-sale statutes ensure that tax sales are fair is by providing multiple layers of protection to delinquent taxpayers. Among other protections, the tax-sale statutes require: specific forms of notice at several points, §§ 40-10-4, -5, and -12, Ala. Code 1975; a mechanism by which clouded title can be restored following an erroneous sale, § 40-10-31, Ala. Code 1975; and the opportunity for redemption of land sold for unpaid taxes, § 40-10-120 et seq., Ala. Code 1975. The tax-sale statutes also protect the rights of tax-sale purchasers, giving them some security in the event a tax sale is eventually declared void. § 40-10-76, Ala. Code 1975. In addition, the tax-sale statutes protect the public interest through several provisions designed to promote transparency and good government. Among these are the prohibition on county officers having an interest in a tax sale, § 40-10-24, Ala. Code 1975, and the requirement that a tax sale be held in front of the courthouse in full view of the public, § 40-10-15.

The facts of this case show why a practice of holding a tax sale somewhere more private than in front of the door of the courthouse could create an appearance of unfairness and undermine public acceptance of tax sales as a just way to enforce the law. Equivest's witnesses at trial testified that Equivest is a subsidiary of a Michigan-based bank, that...

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