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Tax sale purchasers lose as COA tangles over statutory interpretation

June 12, 2017

Likening people who buy property at tax sales to gamblers, an Indiana Court of Appeals panel split over how much due diligence the tax sale statute requires of purchasers but still found the buyers of a cell tower property in Bloomington did not do enough.

The subject of the dispute is a piece of property on West Vernal Pike in Bloomington which was purchased in 1988 by Bloomington Cellular Services Inc. From there, the property came under the ownership of Westel-Indianapolis Co., then became home to a 228-foot tall cellular tower before being leased to Crown Castle South LLC in 1999.

David and Vickie Jenner then purchased the land at a tax sale in 2014. Documents tracing the changing ownership and lease agreements were not all placed in the chain of title for the property so Crown Castle was not aware of the sale until after the Jenners obtained the tax deed in November 2015.  

After intervening in the Jenners’ tax-sale proceedings, Crown Castle asked the Monroe Circuit Court to set aside the tax deed as void. Crown conceded that finding the proper documents in the Monroe County Recorder’s office would have been difficult without knowing to search specifically for either “Westal” or “Crown.” Still, the company argued the sign posted on the property, identifying Crown Castle, would have alerted the Jenners to its possible interests.

The Court of Appeals affirmed the trial court’s finding for Crown in David L. Jenner and Vickie Jenner v. Bloomington Cellular Services, Inc. and Crown Castle South LLC, 53A05-1606-MI-1415.  

Judge L. Mark Bailey, who wrote the majority opinion, pointed to the tax sale statutes, 6-1.1-25-4.5 and -4.6, and noted the Legislature required that a party seeking a tax deed must give notice to any person who has a substantial property interest of public record. He dismissed the Jenners’ argument that such an interpretation would necessitate that purchasers search every document in a county recorder’s office.

“…a tax-sale purchase is a gamble, and, given the ante i.e. the low purchase price at a tax sale – often just pennies on the dollar relative to the fair market value of a subject property – the Legislature balanced the tax-sale purchaser’s investment against the risk of a forfeiture by the existing interest holders,” Bailey wrote. “The Legislature thus intended to impose a greater burden upon tax-sale purchasers, thereby safeguarding to a significant degree existing property owners’ rights to their land.”

Chief Judge Nancy Vaidik concurred with the result but dissented with Bailey’s interpretation of the statutes. She did not read the law as mandating the purchasers to search every document but to undertake reasonable diligence, performing all available index and electronic searches.

However, she affirmed the trial court’s ruling since a reasonable search would have included a visit to the property where the Jenners would have seen the posted sign. Then sifting through the databases for “Crown Castle,” they would have found the lease and license.

Judge Margret Robb dissented with the result. She agreed with Bailey that the sign on the property did not put the Jenners on notice of Crown Castle’s interest. However, she disagreed with Bailey’s strict interpretation of the statutes, echoing Vaidik that such a reading would impose on tax sale purchasers the impossible task of searching every record.

“… I do not necessarily disagree that tax sale purchasers are taking a risk,” Robb wrote. “But according to Judge Bailey’s interpretation of the statute, tax sale purchasers are taking an even bigger risk than a gambler walking into a casino. In a casino, the rules are the same at every table for any given game. In this ‘game,’ however, the rules are different depending on the county in which the property is located. Thus, tax sale purchasers are not taking a gamble that they followed the tax sale statutes correctly; they are taking a gamble that they can follow the statutes.”
 

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