In Re: Balaji Investments, LLC, and Savana Properties, LLC
148 A.3d 507
| Pa. Commw. Ct. | 2016Background
- Balaji Investments, LLC and Savana Properties, LLC purchased nine parcels at Lackawanna County upset tax sales (2011–2012) and were later assessed roughly $34,500 in real estate taxes for tax years 2012–2013 that accrued after the upset sales but before deeds were conveyed.
- Purchasers filed motions in Lackawanna County seeking abatement/striking of taxes accruing between the upset sale date and delivery of the deed, arguing equitable purchase did not confer control or legal title and therefore taxes should not run against them until title was conveyed.
- The Lackawanna County Tax Claim Bureau opposed, asserting (1) purchasers obtain vested equitable ownership at the fall of the hammer and (2) equitable ownership is taxable; upset sales are intended to make tax obligations current and do not convey property free and clear of all liens.
- The trial court denied the purchasers’ motions, holding that upset-sale purchasers, as equitable owners, are liable for taxes accruing after the upset sale and before conveyance; purchasers appealed.
- The Commonwealth Court affirmed, reasoning (a) upset sales differ from judicial/private sales (which are sold free and clear and whose transfers are judicially authorized prior to sale), (b) equitable ownership arising at the auction is taxable, and (c) the Tax Sale Law contains no statutory basis to abate taxes between upset sale and deed delivery.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a purchaser at an upset tax sale is liable for taxes accruing after the sale but before deed delivery | Purchasers: taxes should not accrue until legal title is conveyed; equitable interest does not carry full ownership rights so taxes should be abated | Bureau: purchaser acquires vested equitable ownership at sale, which is subject to taxation; upset sales are intended to satisfy tax obligations | Held: Purchasers liable for taxes accruing after upset sale; equitable ownership is taxable and no statutory abatement exists |
| Whether upset sales should be treated like judicial/private sales for tax-abatement purposes | Purchasers: upset-sale buyers should get same abatement through deed delivery as judicial/private sales | Bureau: statutory scheme treats upset, judicial, and private sales differently; upset sales are not sold free and clear and require different timing for judicial approval | Held: Upset sales are distinct; judicial/private sales have prior judicial approval and different statutory treatment, so abatement rule for those sales does not apply to upset sales |
Key Cases Cited
- Getson v. Somerset County Tax Claim Bureau, 696 A.2d 903 (Pa. Cmwlth.) (distinguishing sale types and statutory controls under the Tax Sale Law)
- Pivirotto v. City of Pittsburgh, 528 A.2d 125 (Pa. 1987) (purchaser at tax sale obtains vested equitable ownership at auction)
- Appeal of Baltimore & O. R. R., 175 A.2d 841 (Pa. 1961) (an equitable interest in real estate is subject to taxation)
- Commonwealth v. Sprock, 795 A.2d 1100 (Pa. Cmwlth.) (tax claim bureau becomes trustee after upset sale and may convey title later)
- Fulton v. Bedford County Tax Claim Bureau, 942 A.2d 240 (Pa. Cmwlth.) (consequence of upset/judicial sales and purchaser rights)
- Bell v. Berks County Tax Claim Bureau, 832 A.2d 587 (Pa. Cmwlth.) (goal of upset sale is to realize price to make tax obligation current)
- In re Upset Sale (SKIBO Properties), 560 A.2d 1388 (Pa. 1989) (refund entitlement if sale later set aside)
- Butler v. Lomas & Nettleton Co., 862 F.2d 1015 (3d Cir.) (equitable ownership and right to deed upon compliance)
- County of Schuylkill, Reilly Township v. Ryon, 598 A.2d 1075 (Pa. Cmwlth.) (notice provisions protect taxing authorities' interests)