Opinion
No. 2756 C.D. 2003.
Argued: June 7, 2004.
Filed: July 23, 2004.
BEFORE: COLINS, President Judge; FRIEDMAN, Judge; MIRARCHI, JR., Senior Judge.
David A. Krulac and Diane E. Krulac, husband and wife, (Krulacs) and Cumberland County Tax Claim Bureau (Bureau) (together, Appellants) appeal from the December 1, 2003, order of the Court of Common Pleas of Cumberland County (trial court) granting the petition of Parkton Enterprises, Inc. (Parkton) to set aside the Tax Upset Sale of property located at 705 Erford Road, Camp Hill, Pennsylvania (Property) and quieting title in Parkton. We affirm.
The parties stipulated to the following facts. On January 31, 2001, Eastern Savings Bank FSB (Eastern) obtained a default judgment in a mortgage foreclosure action against Orlando Torres, Jr. and Anailda Malave (Torres and Malave), then owners of the Property. In addition to their failure to make mortgage payments on the Property, Torres and Malave failed to make payments into escrow for unpaid real estate taxes for the 2000 tax year. Because of the insufficient funds in the escrow account, Eastern did not pay the real estate taxes on the Property, and the Bureau acquired a lien against the Property for the unpaid real estate taxes.
Eastern filed an affidavit with the sheriff pursuant to Pa. R.C.P. No. 3129.1, and a Sheriff's Sale of the Property was scheduled for June 5, 2002. Eastern had actual knowledge of the Bureau's lien on the Property and served the Bureau with notice of Sheriff's Sale pursuant to Pa. R.C.P. No. 3129.2. Also, in June 2002, the Bureau scheduled the Tax Upset Sale for the unpaid real estate taxes for September 26, 2002. All public and personal notices of the Tax Upset Sale were properly advertised and served upon Torres and Malave in accordance with the notice requirements of the Real Estate Tax Law (Law).
Pa. R.C.P. No. 3129.1 provides, in relevant part, that no sale of real property shall be held until the plaintiff files an affidavit with the sheriff setting forth the names and addresses of: (1) the owner or reputed owner of the property and of the defendant in the judgment; (2) every other person who has any record lien on that property; (3) every other person who has any record interest in the property that may be affected by the sale; and (4) every other person with any interest in the property that is not of record but may be affected by the sale and of which the plaintiff has knowledge. Pa. R.C.P. No. 3129.1(a)-(b). Pa R.C.P. No. 3129.2 requires, in relevant part, that all persons named in the affidavit be served with written notice of the Sheriff's Sale. Pa. R.C.P. No. 3129.2(c)(1)(i)(B).
Act of July 7, 1947, P.L. 1368, as amended, 72 P. S. § 5860.101-58 60.803.
The Sheriff's Sale subsequently was rescheduled and held on September 4, 2002, during which Parkton Enterprises, Inc. (Parkton) purchased the Property for a bid of one dollar. The Sheriff's schedule of distribution listed a priority claim for unpaid taxes for 2000 and 2001 owed to the Bureau in the amount of $2,806.42. On September 18, 2002, an assignment of mortgage from Eastern to Parkton was recorded in the Cumberland County Misc. Book 690, page 1425. On September 25, 2002, a Sheriff's deed conveying title of the Property to Parkton was recorded in the Cumberland County deed book.
Here, the Property was sold in a cost only bid, meaning that Parkton's bid covered only the Sheriff's costs, charges and expenses incident to the execution of the sale. Pa. R.C.P. No. 3138(a). In such situations, the Sheriff is not required to request additional funds from the bidder to cover any additional liens against the Property. Pa. R.C.P. No. 3136(a). Thus, after the Sheriff's Sale was conducted, the Bureau still retained its lien against the Property.
One day later, when the Bureau held its Tax Upset Sale for the unpaid 2000 real estate taxes, Krulacs purchased the Property for a bid of $5,682.26. Neither Eastern nor Parkton was served with prior notice of the Tax Upset Sale. On October 4, 2002, the trial court affirmed the Bureau's petition to confirm the tax sale nisi, and, on October 10, 2002, the Bureau attempted to serve post sale notice by mail upon Parkton pursuant to section 607 of the Law. 72 P. S. § 5860.607. Parkton never received that notice, and, on October 28, 2002, Parkton paid real estate taxes on the Property for the 2002 tax year. Torres and Malave continued in possession of the Property after the September 4, 2002, Sheriff's Sale, and, on November 12, 2002, Parkton filed a Complaint in Ejectment against Torres and Malave.
Krulacs paid the Bureau $7,268.74 to obtain a deed for the Property.
The record does not indicate how the Bureau learned that Parkton was the record owner of the Property at the time of sale. The return receipt card was detached from the envelope and was signed, but the envelope containing the notice was returned to the Bureau. The record does not indicate who signed the return receipt card. We further note, however, that even if Parkton had received the post sale notice, the Bureau incorrectly stated that the Tax Upset Sale was to occur on October 26, 2002, when, in fact, the sale had been held on September 26, 2002.
On December 2, 2002, a deed conveying title to Krulacs was recorded in the Cumberland County deed book. On December 17, 2002, Krulacs filed a Petition to Intervene in the Ejectment Action filed by Parkton against Torres and Malave and, for the first time, advised Parkton of the September 26, 2002, Tax Upset Sale. Krulacs also filed an Action in Quiet Title against Parkton. The Bureau did not serve Parkton with formal post sale notice until December 17, 2003, one year and three months after the Tax Upset Sale.
After a determination that Torres and Malave had vacated the Property, Krulacs and Parkton assumed joint possession of the Property pending resolution of the quiet title action. On March 12, 2003, Parkton filed a Petition To Set Aside the Tax Sale, Nunc Pro Tunc, which was consolidated with Krulacs' quiet title action. Following a hearing on the petitions, the trial court granted Parkton's petition to set aside the Tax Upset Sale and quieted title in Parkton, reasoning that the additional notice requirements of section 607.1(a) of the Law, added by the Act of July 3, 1986, P.L. 351, 72 P. S. § 5860.607a(a), applied and were not met by the Bureau.
Appellants appeal to this court, arguing that the Bureau adhered to the notice provisions in the Law because it properly identified Torres and Malave as the record owners of the Property before the Tax Upset Sale and served them with notice thirty days prior to the sale, as required by section 602 of the Law, 72 P. S. § 5860.602. Appellants assert that, in this case, they should not be required to provide new, separate statutory notice to Parkton, which acquired record ownership of the Property after proper service had been made to Torres and Malave. Appellants caution that by setting aside the Tax Upset Sale, we invite record owners of property to avoid a tax upset sale by transferring record ownership after proper statutory notice has been served, thus requiring the Bureau to perform numerous title searches, even up to the date of sale.
Our scope of review in tax sale cases is limited to determining whether the trial court abused its discretion, clearly erred as a matter of law, or rendered a decision unsupported by the evidence. Michener v. Montgomery County Tax Claim Bureau, 671 A.2d 285 (Pa.Cmwlth. 1996).
In a tax sale case, the taxing agency has the burden of proving compliance with the notice provisions of the Law. In re Tax Sale of Real Property Situated in Jefferson Township, 828 A.2d 475 (Pa.Cmwlth.), appeal granted, 576 Pa. 728, 841 A.2d 534 (2003). A presumption of regularity attaches to tax sales; however, a property owner can overcome this presumption whenever he or she states a prima facie challenge to the sale based on the agency's non-compliance with statutory tax sale requirements. In re 1999 Upset Sale of Real Estate, 811 A.2d 85 (Pa.Cmwlth. 2002). Strict compliance with the notice provisions is essential to prevent the deprivation of property without due process; thus, if any method of notice is defective, the tax sale is void. Wells Fargo Bank of Minnesota, NA v. Tax Claim Bureau of Monroe County, 817 A.2d 1196 (Pa.Cmwlth. 2003).
Section 602 of the Law requires that where property is to be exposed to a tax upset sale, the Bureau must provide three separate methods of notification at least thirty days prior to sale: (1) published notice to the owners and to all persons having liens, judgments or municipal or other claims against the property; (2) notification of the sale to each owner by certified mail, return receipt requested; and (3) posting notice of the sale on the property at least ten days prior to the sale. 72 P. S. § 5860.602 .
We agree with Appellants that due process does not require the taxing bureau to perform the equivalent of a title search or to make decisions to quiet title. Jefferson. A taxing bureau's duty to investigate such matters is confined to determining the owners of record and then to use ordinary common sense business practices to ascertain proper addresses where notice of the tax sale may be given. Farro v. Tax Claim Bureau of Monroe County, 704 A.2d 1137 (Pa.Cmwlth. 1997), appeal denied, 555 Pa. 722, 724 A.2d 936 (1998). A taxing agency, however, must be cognizant of any unique facts or circumstances that may impact on its attempt to locate the owner of such property. Krawec v. Carbon County Tax Claim Bureau, 842 A.2d 520 (Pa.Cmwlth. 2004). This case presents such facts.
There is no dispute that the Bureau properly served notice upon Torres and Malave, then record owners of the Property, at least thirty days in advance of the Tax Upset Sale and that Torres and Malave received this notice. However, the record also indicates that, following the Tax Upset Sale, the Bureau became aware that Parkton was the record owner of the Property at the time of sale, and, accordingly, the Bureau attempted to provide post sale notice to Parkton as required by section 607a.1 of the Law. The post sale notice, however, was returned to the Bureau unopened, clearly indicating that Parkton never received the notice. Section 607.1(a) of the Law, 72 P. S. § 5860.607a(a), speaks to such unusual circumstances, requiring additional notification efforts of a pending tax sale or a tax sale subject to court confirmation where mailed notification "is either returned without the required receipted personal signature of the addressee or under other circumstances raising a significant doubt as to the actual receipt of such notification by the named addressee or is not returned or acknowledged at all. . . ." 72 P. S. § 5860.607a(a) (emphasis added). Clearly, then, the Bureau was obligated to make additional efforts to notify Parkton of the Tax Upset Sale of its Property. In this regard, section 607.1(a) of the Law states, in part:
The Bureau must exercise additional notification efforts to notify an owner of record only when there is significant doubt that notice of the sale has been received. 72 P. S. § 5860.607a (a). Thus, to discover the Property's change in ownership following receipt of notice by Torres and Malave, the Bureau would have been required to make continuous inquiries into the record ownership of the Property. The Law does not impose this duty upon the Bureau. 72 P. S. § 5860.602; see also Jefferson. Moreover, while we agree with the trial court that knowledge of the scheduled June 2002 Sheriff's Sale should have put the Bureau on notice that the Property may have been sold prior to the September 26, 2002, Tax Upset Sale, we note that inquiry by the Bureau would not have led to the discovery of a new record owner where ownership changed only one day prior to the Tax Upset Sale.
The Law clearly provides protection for the record owner of property before and after a tax sale to ensure that a property owner is not deprived of property without due process. 72 P. S. § 5860.602, 72 P. S. § 5860.607. Section 607(a) of the Law states, in part:
It shall be the duty of the bureau, not later than sixty (60) days after a sale was held, to make a consolidated return to the court of common pleas of the county, wherein it shall set forth, (1) a brief description of each property exposed to sale, (2) the name of the owner in whose name it was assessed, (3) the name of the owner at the time of sale, and to whom notice by mail was given as provided by this act. . . . Within thirty (30) days of presentation of the consolidated return, if it shall appear to said court that such sale has been regularly conducted under the provisions of this act, the consolidated return and the sales so made shall be confirmed nisi. No consolidated return shall be made to the court until notice has been given to the owner under subsection (a.1) (1).
72 P. S. § 5860.607(a). This statutory scheme ensures that, in cases of a change in ownership prior to the Tax Upset Sale, the new record owner, upon receipt of post sale notice, has thirty days after the court has made a confirmation nisi of the consolidated return to file objections or exceptions with the trial court questioning the regularity or legality of the Bureau's proceedings with respect to the tax sale. 72 P. S. § 5860.607 (a.1) (1), (c), (d) and (e).
As stated, the Bureau's statutory duty does not require that it make continuous inquiry into a change of record ownership or perform the equivalent of a title search. Jefferson. However, the Law's notice requirements were crafted to ensure that a record owner of property is not deprived of his or her property without due process because the "purpose of a tax upset sale is not to "strip an owner of his property but rather to insure [sic] the tax on the property is collected." Murphy v. Monroe County Tax Claim Bureau, 784 A.2d 878, 883 (Pa.Cmwlth. 2001) (emphasis added).
The bureau's efforts shall include, but not necessarily be restricted to, a search of current telephone directories for the county and of the dockets and indices of the county tax assessment offices, recorder of deeds office and prothonotary's office, as well as contacts made to any apparent alternate address or telephone number which may have been written on or in the file pertinent to such property. When such reasonable efforts have been exhausted, regardless of whether or not the notification efforts have been successful, a notation shall be placed in the property file describing the efforts made and the results thereof, and the property may be rescheduled for sale or the sale may be confirmed. . . .
72 P. S. § 5860.607a(a). The record here is devoid of evidence that the Bureau made any of these additional efforts to notify Parkton that the Property had been sold, so that Parkton would have the opportunity to object to the sale. Where any method of notice is defective, the tax sale is void. Wells Fargo.
We have always favored the record owner's due process rights to retain his property over a purchaser's right to acquire such property, stating that "the risk that title status changed between the time the Bureau performed the search and the date of sale must be borne by [p]urchasers. . . . The rule of caveat emptor, i.e., let the buyer beware, applies to property sold at real estate tax sales." Plank v. Monroe County Tax Claim Bureau, 735 A.2d 178, 183 (Pa.Cmwlth.), appeal denied, 560 Pa. 753, 747 A.2d 373 (1999).
We hold that, because the Bureau failed to comply with the notice provisions of the Law, the trial court properly determined that Parkton was deprived of the Property without due process and set aside the Tax Upset Sale. Accordingly, we affirm the trial court's order granting Parkton's petition to set aside the Tax Upset Sale and quieting title in Parkton.
In doing so, we reject Appellants' contention that any individual or entity acquiring title to property after proper notice of a pending tax upset sale has been served on the then record owner is deemed to have implied actual knowledge of the tax sale as a matter of law. To impute the Law's statutory notice requirement to a new record owner without actual notice is to ignore the demand for strict compliance with the Law's notice provisions and the safeguards of due process. Here, although Parkton had actual knowledge of the delinquent taxes, it did not have actual knowledge of a pending tax sale. See In re Dauphin County Tax Bureau, 834 A.2d 1229 (Pa.Cmwlth. 2003) (stating that an owner's actual knowledge of delinquent taxes is not implied actual notice of a tax sale). See also, Wells Fargo (distinguishing between actual knowledge of delinquent taxes and actual knowledge of a pending tax sale). Thus, to the extent that Parkton failed to inquire into the status of the taxes on the Property after the Sheriff's Sale, the Law "impose[s] duties, not on owners, but on the agencies responsible for sales. . . ." Wells Fargo, 817 A.2d at 1200.
ORDER
AND NOW, this 23rd day of July, 2004, the order of the Court of Common Pleas of Cumberland County, dated December 1, 2003, is hereby affirmed.