Sunday, August 28, 2016

Redemption: Tax-Sale Style

Burgess v. Lamoille Housing Partnership, 2016 VT 31

By Elizabeth Kruska

Immediate, up-front disclaimer: I do not do real estate law. To the extent this case has to do with real estate, deeds, and other things to do with land, I’m a touch out of my element. I’m good with the legal part. I might as well be trying to explain the infield fly rule; I get baseball, but the infield fly rule does not adhere to my brain.

Given that disclaimer, here are the facts, basically. Mr. Burgess’s parents bought some property via the Lamoille Housing Partnership (LHP). The land had a house, which they owned, but ownership of the house was severed from the land itself. The Burgesses got a leasehold interest in the land for development for 99 years and had terms and conditions to follow, including that they had to pay the taxes on the whole property.

They later disputed paying taxes and ended up delinquent. They went to court, and the court determined that they did have to pay the taxes and that they did not own the underlying land. There was a tax sale, and the Burgesses’ son, Matthew, went to bid on the land. He was outbid at the sale. The sale was subject to redemption, meaning if the Burgesses paid off their tax debt within a certain period of time, they would not lose the property.

Matthew got in touch with Attorney Green, who was representing the town, and may have had a conversation with her about how to redeem the property. He wrote a letter and enclosed a check for the delinquent amount of tax ($1373). The letter was recorded in the land records and the Burgesses were allowed to keep living in their house.

A year later, Matthew filed suit against the Town of Morristown, the town clerk, LHP, and Attorney Green seeking a declaratory judgment and equitable relief, and alleging negligent misrepresentation, breach of contract, and promissory estoppel. He alleged that he was entitled to a tax collector’s deed one year and one day following the tax sale, and that he believed he would get this based on representations from Attorney Green the year before.

The trial court denied all this except for the count of negligent misrepresentation and also with respect to the Town having immunity.

A year after that (this started in 2012 and now we’re up to 2015), the Town filed a renewed motion to dismiss, which was granted. The judge determined that the Town had not waived its municipal immunity, and that Matthew didn’t state sufficient facts to prove that the town clerk was somehow independently liable. Attorney Green filed a motion for summary judgment, which was granted. At that point, the court entered a final judgment on everything.

Matthew appeals, making several arguments. SCOV affirms the trial court on everything.

First, he makes an unjust enrichment argument. Ever play Monopoly and draw the Community Chest card that says “bank error in your favor: collect $200”? That is exactly the perfect example of unjust enrichment. It’s an equitable doctrine that looks at not whether someone gets a benefit, but whether the person getting the benefit can retain that benefit with a safe conscience. I once paid for a $7 movie ticket with a $10 bill but got change for a $20. My reaction was to give back the extra change and say something like, “Oops, you gave me too much.” That’s because my conscience knows that I’m unjustly enriched by getting a movie ticket for free plus a few bucks in change.

SCOV says that Matthew’s argument that LHP was unjustly enriched isn’t like that. The Burgesses were required to pay their taxes. When the property was sold at tax sale, Matthew redeemed the property by paying the taxes owed. LHP continued to hold title to the land, as it had done all along. The redemption was done to maintain the status quo, not to give an unconscionable benefit to LHP, so SCOV dismisses this. SCOV also points out that this argument had never been previously raised, so it wasn’t properly preserved for appeal.

Matthew also challenges the immunity issue. He argues that the Town and the clerk were necessary parties in the declaratory judgment action in order for him to get the tax collector’s deed he sought. SCOV disagrees. For starters, Matthew was not entitled to a tax collector’s deed. Someone only gets that if they are the purchaser of a property at a tax sale. So here, the high bidder on the Burgess property at the tax sale was Winston Jennison Investments. But the sale was subject to redemption, meaning if the Burgesses paid off their tax debt in the time allowed, the property would not be sold. If the redemption hadn’t happened, it would then be Winston Jennison Investments who would be entitled to the tax collector’s deed.

Since there really wasn’t anything the town clerk was authorized to do, there really isn’t a way the town clerk could be a party to the action alleged.

Matthew also sought monetary damages against the Town and town clerk. He sought $50,000 in the alternative to the equitable remedy of the tax collector’s deed. SCOV says no to this amount in a footnote, as the only amount of money that came out of Matthew’s pocket was the payment of $1373 in back taxes.

The trial court had previously concluded that the Town was immune from suit, unless it had somehow waived its immunity. The trial court stated a statute that provides that a municipality waives its immunity to the extent it is covered by an insurance policy. The trial court allowed for discovery on this matter.

After additional work was done on the case, the trial court concluded that actually there was immunity. Even though the town had insurance, it didn’t cover this particular kind of claim, and furthermore, simply having intermunicipal insurance—by law—did not constitute a waiver. There was some documentation about this, but no real discovery was done. Matthew made some assertions, but the trial court found there was not enough supporting documentation to back up the claims. Since courts can’t make findings based on mere allegations, this got dismissed. SCOV affirms this.

SCOV indicates that the Town’s liability hinged on representations made by Attorney Green. The trial court said that she had no liability to Matthew, and SCOV affirms that.

Now SCOV gets to the issue of negligent misrepresentation. This is an actual tort, and Vermont follows the Second Restatement on Torts with respect to this. This happens when a representation is made, and someone relies on that representation. However, the representation turns out to be false, but the truth of that representation is not known to the person who relied on it.

So, I guess, in theory here, if the facts were that Matthew paid the redemption and Attorney Green said, “Next year I’ll give you a tax collector’s deed, because you’re entitled to that,” that could be close to negligent misrepresentation. But, the problem here is that, in fact, Matthew either knew or should have known this was not how this works. He admitted during discovery that he was knowledgeable about tax sales, and had even worked as a paralegal for some time. It cannot be said that Matthew relied on a representation he did not know or should not have known was not true.

The trial court granted a motion for summary judgment on the negligent misrepresentation claim. Matthew argued that it couldn’t do that, since a prior judge had denied her motion to dismiss. SCOV bats this away and says that a denial of a motion to dismiss is not akin to preventing a motion for summary judgment, and that there is case law on this.

The trial court also suggested that perhaps what Matthew had was a professional malpractice claim against Attorney Green rather than a civil suit against the Town. Even if she made the statement he alleges regarding the tax collector’s deed, SCOV finds that Matthew can’t have justifiably relied on that representation.

So, SCOV fully affirms the trial court.

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