Tallage Lincoln, LLC v. Williams

• Decision Date: 19 August 2020
• Docket Number: SJC-12847
• Citation: 485 Mass. 449,151 N.E.3d 344
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court
• Parties: TALLAGE LINCOLN, LLC v. Jessye L. WILLIAMS & others.

485 Mass. 449

151 N.E.3d 344

TALLAGE LINCOLN, LLC

v.Jessye L. WILLIAMS & others.¹

SJC-12847

Supreme Judicial Court of Massachusetts, Suffolk..

Argued January 7, 2020

Decided August 19, 2020

Daniel C. Hill (John D. Finnegan, Boston, also present) for the plaintiff.

Marc R. Deshaies for the defendants.

Present: Gants, C.J., Lenk, Gaziano, Lowy, Budd, & Cypher, JJ.

GANTS, C.J.

In 2011, Jessye Williams, Jessie Williams, III, and George Wortham (owners) failed to pay the real estate taxes on their New Bedford home. As a result, the city of New Bedford (city) took tax title to the property in November 2011, pursuant to G. L. c. 60, §§ 53 - 54. The owners subsequently did not pay their real estate taxes in 2012, 2013, 2014, and 2015, and each year, these taxes were added to the amount due in the city's tax title account. In May 2016, Tallage Lincoln, LLC (Tallage), a for-profit entity in the business of acquiring tax titles from municipalities, was the successful bidder at a tax title auction conducted by the city, and the city assigned Tallage its tax title to the property. Later in 2016, Tallage initiated proceedings to foreclose (i.e., terminate) the owners' right to redeem the property. The owners filed a timely answer to the petition, exercising their right of redemption. In 2018, Tallage asked the Land Court to find the redemption amount that the owners would need to pay to avoid losing their home. Tallage requested that the redemption amount include the real estate taxes owed to the city at the time that Tallage was assigned the tax title account in 2016; the real estate taxes that Tallage itself had paid on the property in 2016, 2017, and 2018; the statutory interest rate of sixteen percent per year on the unpaid real estate taxes and the taxes paid by Tallage; and Tallage's legal fees. A Land Court judge rejected Tallage's requested finding, ruling that the statutory scheme set forth in G. L. c. 60, § 52, did not permit assignees of tax title accounts, such as Tallage, to include their own subsequent tax payments in the amount required for redemption. The judge noted that if the owner paid the redemption amount, § 52 assignees could seek to recover those payments through a lien on the property. Tallage appealed from the decision, and we transferred the appeal to this court on our own motion. For the reasons that follow, we affirm the judge's decision.

Statutory background. Before we discuss the matter presently before the court, we provide some context given the archaic and arcane process of tax lien foreclosure.² Because (1) private homeowners are rarely represented in tax lien foreclosure proceedings, (2) this body of law is difficult to understand even for experienced attorneys, and (3) the complexity and opacity of this process can, and sometimes does, result in catastrophic consequences for homeowners, we include a full discussion of the tax lien foreclosure process in an Appendix to this opinion. However, we briefly summarize (and simplify) it here to the extent necessary to understand what happened in this case.

When a taxpayer fails to pay his or her real estate taxes, the statutory scheme provides municipal tax collectors with two primary ways to collect the taxes: by conducting a tax sale, see G. L. c. 60, §§ 43 - 45, or by executing a tax taking, see G. L. c. 60, § 53. If a municipality conducts a tax sale, it issues a "collector's deed" to the third-party purchaser, granting that party the rights to collect the delinquent taxes from the delinquent taxpayer and to foreclose the delinquent taxpayer's right of redemption in the Land Court. G. L. c. 60, § 45. Tax sales used to be the predominant method of collecting real estate taxes, see P. Nichols, Taxation in Massachusetts 358-359 (3d ed. 1938), but they have fallen out of use, except in a few municipalities, and have largely been replaced by tax takings, see Massachusetts Collectors and Treasurers Association, Collector's Manual, at 44, 55 (rev. 2017), https://www.masscta.com/sites/g/files/vyhlif3441/f/uploads/collectors_manual.pdf [https://perma.cc/R8DQ-TPMR].

When a tax collector conducts a tax taking, as happened in this case, the municipality obtains "tax title" to the property, which is best understood as legal ownership of the property subject to the owner's right of redemption. G. L. c. 60, § 53. Following the taking, the municipality must create a "tax title account," to which it can "certify" (i.e., add) subsequent missed tax payments, as well as any fees, charges, and interest accrued, without having to conduct another taking. G. L. c. 60, §§ 50, 61. Interest accrues at fourteen percent annually from the time that the taxes become delinquent until the taking, G. L. c. 59, § 57, and increases to sixteen percent annually after the taking, G. L. c. 60, § 62. If the delinquent taxpayer does not "redeem" the property (i.e., pay the balance of the tax title account) within six months of the taking, the municipality can petition the Land Court to foreclose the taxpayer's right of redemption. G. L. c. 60, § 65. Alternatively, if the municipality does not wish to proceed against the taxpayer itself, it can assign the tax title to a private party. See G. L. c. 60, § 2C (bulk sale of tax receivables and liens); G. L. c. 60, § 52 (tax title auction). The private party can then take further action on the tax title account itself, including petitioning the Land Court to foreclose the taxpayer's right of redemption after the statutory six-month redemption period has run. G. L. c. 60, § 65.

Once the petition to foreclose has been filed, the Land Court notifies the taxpayer and advises him or her of the right to redeem the property and the requirement to appear and answer the petition by a certain date. G. L. c. 60, § 65. If the taxpayer fails to file a timely response to the petition, the municipality or assigned private party may immediately move the court to enter a judgment of foreclosure of the right of redemption. G. L. c. 60, § 67. If the taxpayer answers and appears, the municipality or private party files a request for a finding by the Land Court regarding the amount of money that the taxpayer must pay in order to redeem the property. G. L. c. 60, § 68. This redemption amount includes the amount of taxes certified to the tax title account, as well as any interest, costs, and fees. Id. In addition, costs and fees associated with the foreclosure action, including legal fees, are chargeable to the taxpayer. G. L. c. 60, § 65. The Land Court also sets a deadline for redemption. G. L. c. 60, § 68.

If the taxpayer does not timely respond to the petition or fails to redeem the property according to the terms fixed by the Land Court, the court may enter judgment foreclosing the right of redemption. Upon entry of such judgment, the municipality or private party assignee takes absolute title to the property. G. L. c. 60, § 69. Known as "strict foreclosure," this process is different in several important ways from a foreclosure by power of sale, which is how mortgage foreclosures generally proceed. See G. L. c. 244, § 11.

With a mortgage foreclosure, when a borrower fails to make mortgage payments, the lender must provide proper notice to the borrower and, if the borrower fails to pay the amount needed to discharge the mortgage, the lender may sell the property at auction to the highest bidder. See G. L. c. 244, §§ 14, 17B ; G. L. c. 183, § 21. If the property is sold for more than is owed on the mortgage, the lender retains the amount owed (including interest, penalties, and any costs associated with foreclosure) and pays any surplus back to the borrower; the borrower thereby keeps any equity in the home.³ G. L. c. 244, § 36.

Strict foreclosure, by contrast, does not involve any type of sale; rather, the foreclosure judgment extinguishes the taxpayer's remaining interest in the property -- the right of redemption -- and converts the municipality's or third party's tax title into absolute title. G. L. c. 60, § 64. In addition, the foreclosing party takes title free and clear of all encumbrances, including mortgages and other liens. Id. See Gaunt v. Arzoomanian, 313 Mass. 38, 40, 46 N.E.2d 520 (1943) (mortgagees lose their security interest in land following foreclosure decree). Consequently, after a strict foreclosure, the taxpayer loses any equity he or she has accrued in the property, no matter how small the amount of taxes due or how large the amount of equity.⁴ See Tallage LLC vs. Meaney, Mass. Land Ct., No. 11 TL 143094, 2015 WL 4207424 (June 26, 2015) (failure of taxpayers to pay municipal water and sewer bills amounting to $492.51 resulted in foreclosure on property with fair market value of $270,000).

Although G. L. c. 60, § 69, states that entry of the foreclosure judgment "shall forever bar all rights of redemption," the taxpayer may move to vacate the judgment if he or she pays the redemption amount, plus interest, within one year. G. L. c. 60, § 69A. After one year, the judgment is final and can be vacated only upon a showing of a denial of due process. See North Reading v. Welch, 46 Mass. App. Ct. 818, 819-820, 711 N.E.2d 603 (1999).

Factual background. The owners are the record title holders of a single-family home in New Bedford. In fiscal year 2011, the owners failed to pay their $2,775.64 real estate tax bill. In November 2011, pursuant to G. L. c. 60, §§ 53 - 54, the city's tax collector took tax title to the home and created a tax title account for the delinquent balance of $2,957.16, which included the unpaid taxes, the fourteen percent statutory interest that had accrued up until the date of the taking, and the fees and fines associated with the taking. Following the taking, interest began to accrue at sixteen percent per year. See G. L. c. 60, § 62. The owners did not exercise their right of redemption following the taking and additionally failed to pay their real estate taxes in 2012, 2013, 2014, and 2015. Each year, the unpaid...