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Court erred in concluding vested title severed by tax sales

June 4, 2015

The Indiana Court of Appeals ordered judgment entered in favor of two families on their claim for adverse possession over a disputed tract of land in Pulaski County. The judges found the trial court erred when it found two tax sales involving the disputed property divested the adverse holders of their title to the real property.

Tom Bonnell acquired a .75-acre tract of land in 2012 that was purchased in a 2011 tax sale by the Pulaski County Board of Commissioners. This land was between an old farm fence and the eastern border of parcels 3-11 in a subdivision.  Ruby A. Cotner, Douglas Wayne Cotner, Arthur J. Johnson, Jimmy J. Johnson, and Jerry L. Johnson (referred to collectively as the Cotners by the court) held title to parcels 8 and 9 and believed their land ran to the farm fence. Prior to the Cotners owning their land, the owners in 1968 built an outbuilding that lay in part on the .75-acre land. In 2010, the Cotners built an extension on the building, extending it about 22 feet past their eastern border.

When Bonnell acquired the land, the Cotners refused his offer to divide the land to allow each parcel to extend to the farm fence. The Cotners sued and claimed they held title by adverse possession to the land from their parcels’ eastern borders to the farm fence. Bonnell counterclaimed for ejectment.

The trial court ruled in favor of Bonnell, finding that although the Cotners demonstrated actual possession, use and control of the 35-foot strip that lies contiguous and adjacent to Cotners’ parcels, the fact that the land in question went up for sale in two tax sales defeats their claim of any good faith reasonable belief.

The judge did grant a prescriptive easement to the Cotners for the land on which the outbuilding sits.

In Tom Bonnell v. Ruby A. Cotner, Douglas Wayne Cotner, Arthur J. Johnson, Jimmy J. Johnson, and Jerry L. Johnson, 66A03-1410-PL-372, the judges only addressed the Cotners’ claim: whether adverse holders of real property can be divested of their title by a subsequent tax sale of the property when the adverse holders’ title is premised on a reasonable and good faith – although mistaken – belief that they are paying the property taxes on the property.  This is an issue of first impression.

“Under the trial court’s interpretation of Indiana law, vested adverse holders may become divested of their property for failing to pay taxes despite reasonably believing in good faith that they are paying the appropriate taxes due. This conclusion is contrary to the adverse possession tax statute’s specific and explicit exception that adverse possession may occur in these circumstances. Accordingly, the trial court erred as a matter of law when it concluded that the Cotners’ vested title was ‘severed’ by the 1993 and 2011 tax sales,” Judge Edward Najam wrote.

“As the Cotners’ title, which, again, had vested in 1978, was never severed, neither the Board nor Bonnell took title to the disputed area from those tax sales. Hence, we reverse the trial court’s judgment and remand with instructions for the court to enter judgment for the Cotners on their claim for adverse possession over the disputed area.”

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