Stuart v. American Sec. Bank

• Decision Date: 03 July 1985
• Docket Number: No. 84-156.,84-156.
• Citation: 494 A.2d 1333
• Parties: James A. STUART, Appellant, v. AMERICAN SECURITY BANK and National Permanent Federal Savings & Loan Association, Appellees.
• Court: D.C. Court of Appeals

494 A.2d 1333

James A. STUART, Appellant, v. AMERICAN SECURITY BANK and National Permanent Federal Savings & Loan Association, Appellees.

No. 84-156.

District of Columbia Court of Appeals.

Submitted February 4, 1985.

Decided July 3, 1985.

James A. Stuart, pro se.

Maurice J. Montaldi, Washington, D.C., for appellees.

Before NEBEKER, MACK and ROGERS, Associate Judges.

ROGERS, Associate Judge:

Appellant appeals the dismissal of his suit for specific performance of a contract to sell real property. He contends principally that the trial court erred in holding that because appellees publicly advertised that "[a]djustment of taxes and water rents made as of a date of [foreclosure] sale," they were not required, under D.C. Code § 5-513 (1981), to convey the property free of special assessments. We affirm.

I

This appeal is before us on an approved statement of proceedings and evidence. D.C.App.R. 10(j). Appellant alleged in the complaint that he had purchased the lot located at 2630 Adams Mill Road, N.W. at a foreclosure sale on May 3, 1982, which was conducted by appellee American Security Bank as trustee for the noteholder, appellee National Permanent Federal. The property was advertised in December 1981 for foreclosure sale by public auction, which was held on January 7, 1982. Appellant bid between $250,000 and $270,000 and a Mr. Kaiser bid $278,500. When Mr. Kaiser failed to comply with the terms of the sale, the property was readvertised. The terms of sale as set forth in the advertisement for the May 3, 1982 auction provided:

Adjustment of taxes and water rents made as of date of sale. All conveyancing, recording, recordation tax, etc. at cost of purchaser. Terms of sale to be complied with within thirty days from date of sale, otherwise Trustee reserves the right to forfeit deposit. . . .

Appellant was the only bidder at the May 3, 1982 public auction; he bid $40,000. Following the auction, appellant posted the required $10,000 deposit and proceeded to the Office of Recorder of Deeds to check on taxes and to conduct a title search of the property. He discovered that numerous Certificates of Delinquent Costs for Correction of Wrongful Conditions on the property, D.C.Code § 5-513, were pending. When he contacted appellees, he was advised that appellees would not adjust the assessments at the closing on the sale. Appellant thereupon asserted that appellees owed him $125,000 in tax adjustments for the assessments, and that he was willing to set off the balance of the purchase against that amount.

By letter of May 25, 1982, appellee American Security Bank advised the title insurance company that appellant was prepared to settle and would contact it to arrange a settlement date before June 2, 1982, when the offer of sale expired; the bank requested that a trustee's deed be prepared. Appellant testified that this letter was not a promise to him that the property would be conveyed free and clear of the special assessment liens, and that when he contacted an employee of the title company, Mr. Rosenthal, to arrange a settlement date, he was advised a title insurance policy would not be issued insuring against the special assessments unless they were paid at the time of settlement. Mr. Rosenthal testified that he did not recall arranging a settlement date with appellant, and that it was not within his authority as title officer to do so; the title company would first have to issue a binder for a title insurance policy and none had been requested. Meanwhile, the thirty days within which the sale was to be completed had expired. Appellant never attended settlement on the property or tendered any money to the closing agent, District Realty Title Insurance Company.

Evidence was also offered that appellant lives near the property at issue and was generally familiar with it. He owns five other pieces of real property for investment purposes, one of which he acquired through a foreclosure sale. He also has participated in foreclosure auctions for approximately ten years, at the rate of three or four sales a year, and often attends without any plan for financing or otherwise funding the purchase price if he is the highest bidder, being willing to forfeit his deposit, if financing is unavailable. Although appellant read the advertisement of sale on or about April 25, 1982, he made no effort to obtain financing for the property before the May 3, 1982 auction and was willing to forfeit his deposit; he did the same thing when he bid on the property at the first auction. Nor had he made a title search or any check of the outstanding taxes on the property prior to May 3, 1982.

The trial court held that special assessments in the form of Certificates of Delinquent Costs for Correction of Wrongful Conditions, D.C.Code § 5-513 (1981),¹ were neither water rents nor taxes within the meaning of the disputed advertisement of sale; the court held that the term "taxes" in § 5-513 was intended only to characterize the manner and method of collecting the special assessment and was not dispositive of their status for the purposes of adjusting, such assessments between parties to a foreclosure sale. The court opined that the most obvious meaning to attribute to "[a]djustment of taxes" when used in an advertisement for a foreclosure sale "is ordinary real estate taxes that are assessed against real property and provide the primary source of funding for local governments." The court concluded, "Because all real property is subject to general real estate taxes, it is reasonable to assume that real property sold at a foreclosure sale will be subject to such taxes, and that a public notice that taxes will be adjusted as of the date of sale binds the seller to adjust such taxes." The court contrasted ordinary real, estate taxes and special assessments, the latter being against a particular parcel of property "for a special service rendered to that parcel by the government — in this case the District of Columbia's delivery of fuel oil and repair of conditions which had led to Housing Code violations." (emphasis in original). The court further concluded, "There is no basis upon which to presume that either a seller or a buyer of real estate would construe such assessments as `taxes' to be `adjusted.'"

In reaching its decision, the trial court credited the testimony of Mr. Rosenthal, a title officer since 1969 and a title abstractor prior to that time, concerning liens for the correction of wrongful condition assessments. Mr. Rosenthal testified that customarily liens resulting from such assessments are not treated as real estate taxes in connection with settlement adjustments, but rather as prior liens in the nature of mechanics' liens which a purchaser takes "subject to" or satisfies. Mr. Rosenthal explained that ordinarily real estate taxes are not title matters of record, while the special assessment liens are of record which are identified separately on a title report and therefore are afforded different treatment. Of the many trustee's deeds which he has prepared, none contained any warranty of title, but were in the nature of a quit-claim deed whereby the grantor conveyed only that title which he may have had in real property.

II

Courts have long recognized a broad and clear distinction between special assessments and general taxes.² In District of Columbia v. Sisters of the Visitation, supra pra note 2, 15 App.D.C. at 306, the court held that "assessments" cannot be regarded as a mere synonym for "taxes," noting that its view was based on the common usage in the District of Columbia as well as congressional legislation enacted for the District of Columbia. The court construed "taxes" as referred to "all those regular impositions or burdens laid by government upon property and persons for the purpose of raising revenue for its general needs," in contrast to "special assessments," which, "means the cost or expense of some particular local improvement . . . that shall have been authorized by the legislature and declared and established as a special benefit to the adjacent premises of a private owner, . . . as the term is most commonly used in modern legislation." Id. at 306.³ (See Illinois Central Railroad Co. v. Decatur, supra, 147 U.S. at 197-98, 13 S.Ct. at 294 (distinguishing "special taxes" and "general assessments"); Evans v. Ockershausen, supra, 69 App.D.C. at 298, 100 F.2d at 708).

Appellant contends, however, that the plain language of D.C.Code § 5-513 is dispositive of the status of a special assessment as a tax. He also relies on various "Special Assessment/Tax Ledgers" which are maintained by the District Government, and notes that the case chiefly relied upon by the trial court, Illinois Central Railroad Co. v. City of Decatur, supra, provides that both general taxes and special assessments are properly called taxes. Therefore, he argues, since special assessments are taxes under § 5-513, they are taxes that a prospective purchaser can reasonably expect to be included in a foreclosure advertisement that: "Adjustment of taxes . . . made as of the date of sale."⁴ He distinguishes cases which distinguish between general taxes and special assessments on the ground that such distinctions are irrelevant in the context of a foreclosure sale because an advertisement promising "Adjustment of taxes . . . made as of date of sale" tells the reader, not about the kind of tax, but whether if unpaid, the "hapless bidder at the foreclosure sale" can lose his title. Finally, he asserts this has been the way in which prospective purchasers have traditionally looked at the term "adjustment of taxes."

Assessments made by the District Government pursuant to § 5-513 are clearly designed to maintain a particular property and to reimburse the District Government for expenditures in maintaining the property; they are not for the purpose of raising revenue. Words in a statute are to be construed according to "their ordinary sense and with...