Opinion
No. 1965 C.D. 2013
04-08-2014
Damar Real Estate, Inc., Appellant v. U.S. Bank, N.A. as Trustee for the Bondholders, and not in its individual capacity, and City of Philadelphia
BEFORE: HONORABLE RENÉE COHN JUBELIRER, Judge HONORABLE PATRICIA A. McCULLOUGH, Judge HONORABLE JAMES GARDNER COLINS, Senior Judge
OPINION NOT REPORTED
MEMORANDUM OPINION BY JUDGE COHN JUBELIRER
Damar Real Estate, Inc. (Damar) appeals from an Order of the Court of Common Pleas of Philadelphia County (trial court) denying Damar's Motion for Post-Trial Relief (Motion) and entering judgment in favor of U.S. Bank, N.A. as Trustee for the Bondholders (U.S. Bank), and the City of Philadelphia (City) on Damar's action under the Declaratory Judgments Act (Act). Damar purchased a parcel of property at a sheriff's sale pursuant to the Act commonly known as the Municipal Claims and Tax Liens Act (MCTLA), and the deed Damar received contained an inaccurate metes and bounds description. Damar sought a declaration that the sale discharged any municipal claims, liens, mortgages, charges, and estates on the additional property described in the metes and bounds description pursuant to Section 31.2 of the MCTLA. Damar argues on appeal that the sheriff's sale extinguished any municipal claims or liens on the additional property included in the metes and bounds description and, in the alternative, the trial court erred by failing to declare the sheriff's sale void ab initio. Discerning no error, we affirm.
42 Pa. C.S. §§ 7531 - 7541.
Act of May 16, 1923, P.L. 207, as amended 53 P.S. §§ 7101 - 7505.
Added by Section 1 of the Act of March 15, 1956, P.L. (1955) 1274, as amended, 53 P.S. § 7283.
On September 11, 2003, U.S. Bank's predecessor in interest filed a Petition for Rule to Show Cause Why Property Should Not Be Sold Free and Clear of all Liens and Encumbrances (Petition) to collect delinquent taxes for 1993 through 1996 on a parcel of property located at 13431 Damar Drive in the City, BRT No. 885074304 (the Property) from the Property's then-owner Expressway Industrial Park, Inc. (Expressway). Expressway was a corporation owned entirely by the father of Damar's President, John Capponi. The Petition properly listed only the Property's address, and BRT number, and listed the size of the Property as 89,230.5 square feet. Exhibit A to the Petition, a print-out of unpaid taxes, listed the unpaid taxes for the Property only. (Trial Ct. Op. at 2-3.)
BRT numbers are identifying numbers formerly assigned to parcels of property by the City for purposes of taxation. (Hr'g Tr. at 96, R.R. at 158a.) BRT numbers are now referred to as OPA numbers. (Hr'g Tr. at 118, R.R. at 180a.)
According to the Petition, the City and the School District of Philadelphia sold a portfolio of delinquent tax liens, that included the lien on the Property, to the Philadelphia Authority for Industrial Development (PAID), "a public instrumentality of the Commonwealth of Pennsylvania," and thereafter took the position of subordinate note holders. (Petition ¶ 1, S.R.R. at 3b.) In the course of issuing bonds backed by this portfolio, PAID sold the portfolio to U.S. Bank's predecessor in interest, Wachovia Bank, N.A., f/k/a First Union National Bank (Wachovia), empowering Wachovia to "recover such delinquent taxes through lawful means." (Petition ¶ 1, S.R.R. at 3b.) See Section 33 of the MCTLA, 53 P.S. § 7147 (providing that municipal tax liens may be assigned to third parties which will then enjoy the same rights "to enforce and collect the assigned tax or municipal claim" as the assigning authority).
Exhibit B to the Petition was a Tax Information Certificate (Certificate) for the Property. The Certificate's description of the Property was erroneous, containing a metes and bounds description encompassing approximately 250,000 square feet. This description encompassed five additional properties (Additional Lots). The error went unnoticed and the trial court entered judgment (the Decree) ordering a judicial sale of the Property free and clear of all liens, but including the erroneous metes and bounds description. Notice of the proceeding was sent to all parties with an interest in the Property, but not necessarily to parties with interests in the Additional Lots. (Trial Ct. Op. at 4-6.)
Section 31.2 of the MCTLA provides that a petition for judicial sale of a property must include "searches or a title insurance policy, showing the state of the record and the ownership of the property, and of all tax and municipal claims, mortgages, ground rents, or other charges on, or estates in, the land." 53 P.S. § 7283.
The trial court described the Additional Lots as follows:
Lot 5 had an address of 13411 Damar Drive and a BRT number of 885074302;(Trial Ct. Op. at 3-4.) The Additional Lots and the Property were originally part of a larger lot that was subdivided sometime after 1966. (Hr'g Tr. at 110-11, R.R. at 172a-73a.) Notably, the original subdivision plot map designated the Property as Lot 7; however, in preparing the description of the Property for the Certificate the firm of Linebarger, Goggan, Blair & Sampson, LLP, unaware of the original lot designations, designated the Property as "Lot 1." (Trial Ct. Op. at 5.)
Lot 6 had an address of 13421 Damar Drive and a BRT number of 885074303;
. . . .
Lot 10 had an address of 13461 Damar Drive and a BRT number of 885074305;
Lot 11 had an address of 13471 Damar Drive and a BRT number of 885074306; and
Lot 12 had an address of 13481 Damar Drive and a BRT number of 885074307.
The Property was offered at a sheriff's sale on May 27, 2004. Damar purchased the Property for $205,000.00. The City received $19,090.58 of the proceeds in satisfaction of the delinquent real estate taxes on the Property and an additional $1,664.25 was distributed to the City for current real estate taxes due on the Property. The City received no proceeds in satisfaction of delinquent real estate taxes on the Additional Lots. The firm of Linebarger, Goggan, Blair & Sampson, LLP (the Linebarger Firm) received $16,660.95 as payment for tax collection services. Damar received $159,661.91 in satisfaction of a mortgage executed by Expressway in favor of Damar against all land and equipment owned by Expressway. Damar paid real estate transfer tax on the Property only. The deed and deed poll filed after the sheriff's sale contained an inaccurate metes and bounds description for the Property identical to the description in the Certificate. (Trial Ct. Op. at 6-8.)
A deed poll is "[a] deed made by and binding on only one party, or on two or more parties having similar interests." Black's Law Dictionary 476 (9th ed. 2009). A deed poll is a conveyance "in the nature of a quit-claim and release, without a warranty." Hallett v. Collins, 51 U.S. 174, 184 (1850).
Approximately two years after the sheriff's sale, on September 6, 2006, counsel for Damar notified the Linebarger Firm that the deed conveying the Property contained an inaccurate metes and bounds description that included excess property. Neither the Linebarger Firm nor the City responded. On June 20, 2008, Damar filed a quiet title action against Expressway seeking a declaration that Damar was the legal owner of the Additional Lots. The City, U.S. Bank, and the Linebarger Firm were not parties to the quiet title action. Damar and Expressway entered into a settlement agreement under which Damar was declared the owner of the Additional Lots as of February 7, 2005, the date of the deed poll issued by the sheriff following the sale. (Trial Ct. Op. at 7-8.)
The City and U.S. Bank continued to seek delinquent real estate taxes on the Additional Lots. In response, Damar filed the present declaratory judgment action seeking a declaration that no taxes are owed on the Additional Lots. The trial court held a non-jury trial on November 30, 2012 at which Damar presented the testimony of Capponi and David Plante, a civil engineer. The City and U.S. Bank presented the testimony of a real property evaluator for the City's Office of Property Assessment, William Hinkle, the Office Manager of the Linebarger Firm, Linda Scott, and the City's Director of Real Estate, Rick Tyer. Capponi testified regarding Damar's purchase of the Property at the sheriff's sale and his understanding of what property Damar acquired as a result of that sale. Plante testified regarding the property described by the metes and bounds description in the deed and deed poll. Hinkle testified that the City uses BRT numbers as the basis for keeping records for and assessing taxes on properties in the City. Scott testified regarding the Linebarger Firm's preparation of the Certificate. Tyer testified regarding the distribution of the proceeds from the sheriff's sale. (Trial Ct. Op. at 3-4, 6-9, 20.)
Damar also sought a declaration that the sheriff's sale extinguished any municipal claims or liens on the Property and argues on appeal that the trial court erred in not issuing such a declaratory order. However, as the trial court noted in its Opinion, Damar failed to show that the City has sought to collect real estate taxes on the Property pre-dating the sheriff's sale. (Trial Ct. Op. at 13-14.) Similarly, Damar does not bring any such evidence to this Court's attention in its appeal. Therefore, we do not disturb the trial court's holding in this respect.
On December 7, 2012, the trial court entered an order denying declaratory judgment. Damar filed the Motion requesting that the trial court vacate its order and enter judgment in Damar's favor or grant a new trial. The trial court held oral argument on the Motion on February 13, 2013. After argument, that same date, the trial court denied Damar's Motion and entered judgment in favor of the City and U.S. Bank. Damar appealed, arguing that: (1) the trial court erred as a matter of law because, where a metes and bounds description in a deed conflicts with a street address or lot designation, the metes and bounds description controls; and (2) that the trial court's judgment was against the weight of the evidence.
Damar initially filed its appeal of the trial court's Order in the Superior Court. By Order dated November 20, 2013, the Superior Court transferred Damar's appeal to this Court.
The trial court issued an opinion in support of its Order, holding that the sheriff's sale did not extinguish municipal claims or liens on the Additional Lots because the statutory requirements under the MCTLA to sell the Additional Lots had not been satisfied and that the sheriff did not, therefore, have the authority to sell the Additional Lots free and clear. (Trial Ct. Op. at 14-15.) The trial court rejected Damar's arguments that its holding was against the weight of the evidence. (Trial Ct. Op. at 19.) In doing so, the trial court noted that it did not find Capponi's testimony that he thought he was purchasing a single lot composed of the Property and the Additional Lots credible because Damar already owned a separate lot located within this supposed parcel. (Trial Ct. Op. at 20.) Instead, the trial court accepted the testimony of Tyer and Scott, which it held established that the sale resolved the delinquent taxes with respect to the Property only. (Trial Ct. Op. at 20-21.) Thus, the trial court determined that the record supported its denial of a declaration that the sheriff's sale of the Property extinguished any municipal claims and liens on the Additional Lots. (Trial Ct. Op. at 22.)
Damar's appeal is now before this Court. In support of this appeal, Damar argues that the sheriff's sale extinguished any municipal claims or liens on the Additional Lots and, in the alternative, the trial court erred by failing to declare the sheriff's sale void ab initio.
This Court's "scope of review of the denial of post-trial motions is limited to determining whether the trial court abused its discretion or committed an error of law." Hunter v. City of Philadelphia, 80 A.3d 533, 536 n.7 (Pa. Cmwlth. 2013). "'An appellate court may not substitute its judgment for that of the trial court if the determination of the trial court is supported by competent evidence.'" Pirillo v. Vanco, 74 A.3d 366, 368 n.5 (Pa. Cmwlth. 2013) (quoting Vernon Township Volunteer Fire Department, Inc. v. Connor, 579 Pa. 364, 374, 855 A.2d 873, 879 (2004)). "In a case where the issues are questions of law, the standard of review is de novo and the scope of review is plenary." Id.
We first address Damar's argument that the trial court erred in holding that the sheriff's sale did not extinguish any municipal claims or liens on the Additional Lots. In order for a judicial sale to be valid, the provisions of the MCTLA must be strictly complied with. City of Philadelphia v. Manu, 76 A.3d 601, 604 (Pa. Cmwlth. 2013) (citing In re Somerset County Tax Sale of Real Estate in the Name of Tub Mill Farms, Inc., 14 A.3d 180, 183 (Pa. Cmwlth. 2010)). Section 31.2(a) of the MCTLA requires that, in a city of the first class, such as the City, the taxing authority must file a petition to sell a property that sets forth the facts showing the taxing authority's right to sell the property. 53 P.S. § 7283(a). In this case, the Petition sets forth only facts showing that the City had the right to seek a judicial sale of the Property. (Exhibit A to the Petition, S.R.R. at 7b (listing delinquent taxes only for the Property, as identified by address and BRT number).) Thus, the Petition asserted no right to sell the Additional Lots.
Section 31.2(a) provides in full:
(a) In addition to the remedies prescribed in sections 28, 31 and 31.1 of this act, in cities of the first class, whenever a claimant has filed its tax or municipal claim in accordance with the requirements of this act, it may file its petition in the court in which the proceeding is pending, setting forth the facts necessary to show the right to sell, together with searches or a title insurance policy, showing the state of record and the ownership of the property, and of all tax and municipal claims, mortgages, ground rents or other charges on, or estates in, the land, as shown by the official records of the city or county, or the political subdivision in which the real estate is situate, and thereupon the court shall grant a rule upon all parties thus shown to be interested, to appear and show cause why a decree should not be made that the property be sold, freed and cleared of their respective claims, mortgages, ground rents, charges and estates. If upon a hearing, the court is satisfied that service had been made of the rule upon the parties respondent in the manner provided in this act for the service of writs of scire facias to obtain judgments upon tax and municipal claims, and that contemporaneously with the service of the rule on the parties respondent notice of the rule has been published by the claimant in at least one newspaper of general circulation in the county, and in a legal periodical published therein, if any, and that the facts stated in the petition be true, it shall order and decree that the property be sold at a subsequent sheriff's sale at a time to be fixed thereafter by the claimant, clear of all claims, liens, mortgages, ground rents, charges and estates, to the highest bidder at such sale and after payment of the tax or municipal lien the balance of the proceeds realized therefrom, shall be distributed in accordance with the priority of the remaining claims, liens, mortgages, ground rents, charges and estates, and the purchaser at such sale shall take and forever thereafter have, an absolute title to the property sold, free and discharged of all tax and municipal claims, liens, mortgages, ground rents, charges and estates of whatsoever kind, subject only to the right of redemption as provided by law. The date of the sale shall be advertised in at least one newspaper of general circulation in the county and in the legal periodical published therein.53 P.S. § 7283(a).
Moreover, the Pennsylvania Supreme Court has held that, absent authorizing legislation, multiple tax parcels may not be sold as a single property at a sheriff's sale, stating:
[p]roperty separately assessed must necessarily be separately sold at tax sales for the tax lien on one property is not a lien on the other even if the ownership be the same. . . . To permit a combination of separately assessed parcels of real estate even though contiguous at the whim of the tax collector would present many practical difficulties.Boulton v. Starck, 369 Pa. 45, 49, 85 A.2d 17, 19 (1951). Here, there is no dispute that the Additional Lots were each individually assessed separately from the Property. At the time of the sheriff's sale, there was no legislation authorizing the sale of multiple properties at a single judicial sale. In Boulton, the Supreme Court also held that:
". . . no tax sale of land is valid unless both the assessment and the conveyance . . . contain sufficient descriptions to identify and disclose the property taxed and sold . . . . It is not necessary that the descriptions be by metes and bounds, but the land must be so identified that the owner, the collector, and the public can determine what property is being assessed or sold."Id. at 51, 85 A.2d at 20 (quoting Hunter v. McKlveen, 361 Pa. 479, 482, 65 A.2d 366, 367 (1949)) (citations omitted); accord Bannard v. New York State Natural Gas Corp., 448 Pa. 239, 246-47, 293 A.2d 41, 46 (1972) (citing Hunter). Here, the description of the property to be sold at the sheriff's sale was ambiguous because the metes and bounds description conflicted with the identifying address and BRT number. Due to this ambiguity, the descriptions were not adequate to disclose to the buyer, the owner, or the public what land was subject to sale. (See, e.g., Hr'g Tr. at 73-75, R.R. at 135a-37a (testimony of Capponi that prior to the sheriff's sale he believed only one lot was for sale and did not look at the metes and bounds description).)
Section 31.3 of the MCTLA, added by Section 2 of the Act of November 29, 2004, P.L. 1299, 53 P.S. § 7283a, effective January 28, 2005, now authorizes such sales, but this provision was not in effect at the time of the sheriff's sale in this case. --------
In support of its argument that the sheriff's sale extinguished the municipal tax liens on the Additional Lots, Damar cites cases for the principle that the metes and bounds description in a conveyance is controlling as to the property conveyed even where the conveyance contains a contradictory description by lot number or street address. See Fedor v. American Home Mortgage Services, Inc. (In re Fedor), Nos. 5-08-bk-52485, 5-08-ap-50176, 2009 WL 1173047, at *5 (Bankr. M.D. Pa. Apr. 9, 2009) ("'for purposes of identifying a particular piece of real estate, an accurate metes and bounds description 'trumps' a street address also recited in a mortgage'") (quoting In re Wagner, 353 B.R. 106, 119 (Bankr. W.D. Pa. 2006)); Green v. Schrack, 16 Pa. Super. 26 (1901) (holding that where a deed did not refer to any city plot but instead contained only a metes and bounds description, that description controlled as to the land conveyed). These cases, however, do not involve the legal effect of a judicial tax sale and, thus, are not controlling in this case where conflicting descriptions of the property to be sold at the tax sale created numerous procedural defects under the MCTLA.
Because the Petition did not set forth the City's right to sell the Additional Lots and the description of the Property to be sold was conflicting, the sheriff lacked the authority to sell the Additional Lots; thus, the sheriff's sale was invalid as to the Additional Lots. Therefore, the trial court did not err in denying Damar's Motion.
Next, we address Damar's argument that, if the sheriff's sale was invalid, the trial court should have issued a declaration that the sale was void ab initio rather than only denying Damar's request for a declaration that the sheriff's sale extinguished any municipal tax liens on the Additional Lots. The trial court did not err in not granting such relief to Damar because Damar explicitly stated during the hearing that it was not seeking such relief:
[Counsel for Damar]: . . . . And in all honesty, Your Honor, we considered the possibility that this suit may result in a rescission of the Sheriff's Sale and put everybody back where they were. I don't think
on a practical level, although that may be the unavoidable legal consequence, we recognize that's in the realm of possibility, but on a practical level nobody wants that.(Hr'g Tr. at 161-62, R.R. at 223a-24a.) Because no party was seeking an affirmative declaration that the sheriff's sale was void ab initio, the trial court did not err in simply denying Damar's Motion and making no such declaration.
The Court: Why not?
[Counsel for Damar]: Because there is too much water under that bridge, very simply. There are -
The Court: But isn't that my only remedy?
[Counsel for Damar]: No. . . .
Accordingly, for the foregoing reasons, we affirm the trial court's Order.
/s/ _________
RENÉE COHN JUBELIRER, Judge ORDER
NOW, April 8, 2014, the Order of the Court of Common Pleas of Philadelphia County entered February 13, 2013 in the above-captioned matter is hereby AFFIRMED.
/s/ _________
RENÉE COHN JUBELIRER, Judge