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Woman’s lien takes priority in property sold at tax sale

May 12, 2015

The Indiana Court of Appeals determined Tuesday that a woman who obtained a judgment lien in 2006 against a co-owner of a property later sold in a tax sale has priority over other claims for the tax sale surplus and that she made a timely claim for the surplus.

James Shallenbarger Jr. and Phillip Miller owned property in Mishawaka as joint tenants with the rights of survivorship. In 2007, the property was sold at a tax sale for $25,000 and generated approximately $20,000 in surplus.

Cavallino Financial LLC in 2008 tried to claim the full amount of the surplus as limited power of attorney of Shallenbarger. Regatta Capital LTD, the mortgage lender on the property, also tried to claim the surplus in 2009. Shallenbarger also sought his half of the surplus, but the county auditor refused to release the surplus and told the parties that a court must determine ownership of the funds.

In 2010, Cavallino again filed a petition for release of surplus. In 2013 Mary Ellen Stump, who obtained the judgment lien in 2006 against Shallenbarger, filed a motion to intervene, claiming “first and prior judgment lien” on the share of Shallenbarger’s tax sale surplus. She was allowed to intervene, but the trial court denied her petition to release the tax sale surplus.  

“Cavallino filed its petition for a disposition of the tax sale surplus within the three-year time period after receipt of the money, as envisioned by the statute. Despite the longevity of the claim and the parties’ inactivity in the proceedings, a legal determination on its validity is still pending and the cause was never disposed of or dismissed by the trial court,” Judge Patricia Riley wrote. “Because the proceedings are still ongoing, Stump could intervene and request a release of the tax sale surplus. Even though the Auditor had the opportunity to object to her intervention, he failed to do so and the trial court approved her motion. Therefore, we conclude that Cavallino’s claim was timely asserted, and Stump properly intervened in these pending proceedings.”

The judges also concluded that Stump’s lien on the tax sale surplus takes priority over Cavallino’s and Regatta’s interest.

Because Shallenbarger and Miller created a joint tenancy relationship in the property and there is no evidence that they expressed an interest that the tax sale surplus be held in any other way than as joint tenants, the COA remanded for the trial court to determine the extent, if any, of Shallenbarger’s interest in the tax sale surplus.

The case is Mary Ellen Stump v. St. Joseph County Treasurer, St. Joseph County Auditor, Cavallino Financial, LLC, Donald Wertheimer, James H. Shallenbarger, Jr., and Phillip Miller, 71A04-1407-MI-327.

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