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COA: Property purchaser not 3rd party beneficiary in tax sale contracts

October 26, 2018

The Indiana Court of Appeals affirmed summary judgment to a government tax sale organizer after finding a real estate purchaser was not a third-party beneficiary of contracts made between the organizer and the county.

M Jewell, LLC purchased real estate at a tax sale in Grant County for $5,508.98 in September 2010. The property had previously been owned by Farmers Mutual Insurance Company of Grant & Blackford Counties, who had failed to update its mailing address with the Grant County auditor or treasurer, resulting in accumulated delinquent property taxes.

Farmers Mutual’s real estate was placed on a list of properties to be sold at the tax sale, and SRI Incorporated sent the notices, but because of the erroneous address in the records, the notices were returned unclaimed. Neither SRI nor the auditor’s office made any further attempt to notify Farmers Mutual of the tax sale or to locate a more accurate address.

In December 2011, M Jewell obtained the tax deed for the property. Meanwhile, the Indiana Court of Appeals granted Farmers Mutual’s petition to set aside the tax deed after it motioned for leave to pay funds for the delinquent property taxes and interest it accumulated.

The appellate court found the statutory notices sent to Farmers Mutual were not in substantial compliance and the tax deed was void when the Grant County auditor and SRI failed to perform statutorily required additional research for an accurate address. M Jewell was ultimately reimbursed $6,997.50 as the statutory refund payment for the real estate.

Then in September 2014, M Jewell filed a complaint against the Grant County auditor, treasurer, two Grant County commissioners and SRI, alleging Grant County was negligent in conducting the tax sale and M Jewell had been damaged. M Jewell also contended that as the purchaser of real estate in a tax sale, it was a third-party beneficiary of Grant County’s contracts with SRI.

The trial court ultimately granted SRI’s motion for summary judgment, which the appellate court affirmed in, M Jewell, LLC v. Roger Bainbridge, in his capacity as Grant County Auditor; et al.,18A-MI-36.

Relying on an agreement between Grant County and SRI, M Jewell contended the agreement’s indemnity language indicated both parties recognized the possibility of third-party liability. But the appellate court found M Jewell was not a third-party beneficiary to the agreements made between Grant County and SRI.

“To qualify as a third-party beneficiary, M Jewell was required to demonstrate that Grant County and SRI intended to protect tax sale purchasers under the agreement,” Judge Elizabeth Tavitas wrote. “It is not enough that the performance of the contract would be of an incidental benefit to tax sale purchasers.”

The appellate court added that the language cited by M Jewell “merely indicates an intention that the parties indemnify each other” and that the language did not indicate an intention to benefit tax purchasers under the agreements.

“None of the Agreements—the SMA, the Addendum, or the Workplan— indicate an intent to benefit tax sale purchasers directly or indirectly,” Tavitas continued. “…Even if M Jewell was a third-party beneficiary, M Jewell has received the statutory compensation to which it is entitled.”

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