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Justices: Homes subject to tax sale from delinquent sewer fees

December 4, 2014

The Indiana Supreme Court issued two cases dealing with the same issue Thursday: whether a tax sale could be used to collect unpaid sewer bills. The justices ruled it could and reversed judgment in favor of the homeowners.

In both cases, In Re: The Carroll County 2013 Tax Sale: Twin Lakes Regional Sewer District v. Richard C. Ray and Patricia A. Alford, et al., 08S04-1402-MI-97, and In Re: The Carroll County 2012 Tax Sale: Twin Lakes Regional Sewer District v. Steven E. Hruska, Virginia Hanna, et al., 08S02-1402-MI-78, the trial court granted landowners’ requests to remove their properties from the list of properties subject to tax sale. The landowners were delinquent in paying fees and penalties owed to the Twin Lakes Regional Sewer District, and the sewer district perfected liens against the properties. The Carroll County treasurer and auditor ordered the properties sold at a tax sale to satisfy the unpaid bills.

The central issue in this case is the interpretation of the last sentence of the lien foreclosure prohibition clause in I.C. 13-26-14-4: “A lien under this chapter that is the only lien on a property may not be foreclosed.” Another issue is whether that clause applies to prohibit a tax sale when the sewer bill lien is the only lien on a property, as is the case in these two matters.

The sewer district argued that clause doesn’t apply to tax sales; the landowners say the plain meaning of “foreclosed” applies broadly to encompass both a traditional real estate foreclosure as well as a tax sale.

Four sections of I.C. 36-9-23 explain how a municipality may collect unpaid and delinquent sewer bills. And while those sections expressly authorize the county treasurer to collect assessed sewer fees in the manner of collecting delinquent property taxes, which includes resort to a tax sale, these sections do not define sewer fee collection liens as “tax liens” or refer to a “tax sale” as a “lien foreclosure,” Justice Brent Dickson wrote in Ray.

“We conclude that a tax sale does not fall within the regional sewer district lien foreclosure prohibition,” he wrote. “We recognize the landowners' earnest opposition to their property being subject to regional sewer district fees and their belief that the legislature's enactment of the lien foreclosure prohibition clause provided them with immunity in the absence of other liens. We must be guided, however, by the language enacted and thus find that, while it precludes the foreclosure of assessed regional sewer district fee liens when such liens are the only liens on a property, this preclusion does not extend to collection of such fees and charges by tax sale.”

The cases are remanded for further proceedings.
 

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