This case is a dispute over whether Howard County (“the County”), the appellant, is obligated to pay interest on money it refunded to Heartwood 88, LLC (“Heartwood”), the appellee, a tax sale purchaser of property for which not only were no taxes owed, none ever should have been assessed. We are called upon to decide whether, when an action to foreclose a right of redemption in a property is pending in circuit court, and the local government that held the tax sale then learns that the unpaid taxes for which the property was sold at tax sale never were assessable, the tax collector can declare the tax sale void, under the contractual terms of the tax sale, or whether only the court, pursuant to section 14-848 of the Tax-Property Article, can declare the tax sale void. We hold that the tax collector can declare the tax sale void.
On July 20, 1999, the property at issue (“Property”) was conveyed by recorded covenants from Elkhorn Associates, LLLP (“Elkhorn”), to the Allen & Shariff Condominium (“A & S”). The Property is part of the general common elements (actually, the parking lot) of the A & S condominium regime. Once conveyed as such, the Property no longer was an independently taxable parcel of land.
The covenants conveying the Property properly were recorded in the Land Records of Howard County. The Maryland State Department of Assessments and Taxation (“SDAT”) misinterpreted the covenants and a recorded plat of the condominium, however, and continued to assess taxes against the Property, in error. When the taxes were not paid for two years, the Property was included in the County’s annual tax sale, on June 6, 2001. All bidders at that tax sale signed written “Terms of the 2001 Tax Sale” issued by the County’s Department of Finance. One of the terms of the tax sale stated:
D. VOIDED SALE. Whenever a tax sale on a property is voided, for any reason, the Purchaser will be notified and advised not to pursue any further foreclosure action or to incur additional expenses. Reimbursement will be limited to the amount paid at the sale unless otherwise required by law.
(Emphasis added.)
Heartwood purchased the Property, and five others, at the June 6, 2001 tax sale.
Heartwood never obtained service over Elkhorn in the action to foreclose right of redemption. For most of the pendency of the action, it did not have service over Howard County. It eventually served the title owners of the other five properties. Ultimately, they redeemed their rights in their properties and were dismissed from the suit.
Sometime in late May 2006, more than three years after Heartwood filed the action to foreclose right of redemption in the Property, the SDAT realized its error. Charles Watson of the SDAT contacted Linda Watts, the County’s Director of Finance, and told her he had learned from a representative of A & S that the Property was part of the general common elements of the condominium and had been so since July 20, 1999. From that date forward, the SDAT should not have assessed any taxes against the Property. The SDAT planned to correct its error by consolidating the Property with the parent tax account for the condominium regime and reducing the taxes attributable to the Property to zero, retroactive to July 20, 1999. In fact, that corrective measure was taken on June 1, 2006.
On May 81, 2006, a few days after Mr. Watson contacted Ms. Watts, Heartwood’s lawyer received a letter from a third-party title company informing him that the State and County had “reduced the taxable assessment (and real estate taxes) [for the Property] to zero for the years 2000-2006” and that Ms. Watts had confirmed that the County was going to refund the tax sale payment to Heartwood, as the tax sale purchaser.
Heartwood’s lawyer contacted Ms. Watts the next day complaining that, with the action to foreclose right of redemption in the Property pending in circuit court, the County had no power to invalidate the tax sale. Only the circuit court had the
interest at the rate provided in the certificate of tax sale, together with all taxes that [had] accrue[d] after the date of sale, which were paid by the holder of the certificate of sale or the predecessor of the holder of the certificate of sale, and all expenses incurred in accordance with this subtitle.
TP § 14-848. The certificate of tax sale bore an interest rate of 18%.
Lawyers for the County countered that, notwithstanding the pendency of the foreclosure of right of redemption action, the “Terms of the 2001 Tax Sale” gave the County the right as a matter of contract to declare the tax sale void, so long as doing so was not contrary to law, which it was not. The County merely was exercising that contractual right. Under the “Terms of the 2001 Tax Sale,” Heartwood was entitled to a refund of the purchase price paid for the Property, without interest or expenses.
On June 5, 2006, in the foreclosure action, Heartwood filed a “Line,” requesting the re-issuance of a summons for Elkhorn, Howard County, and certain other defendants that had not been served. Soon thereafter, the County was served. A week later, Heartwood filed a motion, under TP section 14-848, to declare the tax sale void. The County filed an opposition to Heartwood’s motion and a motion to dismiss. Heartwood filed a reply memorandum. The court heard argument of counsel on the matter. On January 24, 2007, it issued a Memorandum Opinión granting Heartwood’s motion, setting aside the tax sale as void, and ordering the County to pay Heartwood in accordance with TP section 14-848.
The County noted this timely appeal.
Did the circuit court err as a matter of law in ruling that the tax sale was invalid and that Heartwood is entitled to reimbursement as provided in TP section 14-848?
For the following reasons, we shall reverse the judgment of the circuit court and remand the case with instructions to enter an order dismissing the action to foreclose right of redemption.
DISCUSSION
The material first-level facts are not in dispute. The issue decided by the circuit court, and pursued by the County on appeal, is purely legal. Accordingly, we decide it de novo. Hall v. Univ. of Md. Med. Sys. Corp.,
A tax sale under Title 14, Subtitle 8, Part III of the Tax-Property Code (“the Tax Sale Statute”) is a tax collection mechanism for local governments. Sckeve v. Shudder, Inc.,
The outcome of the case at bar turns on the application vel non of TP section 14-848, entitled “Judgment declaring sale void.” The relevant language in that section provides:
If the judgment of the court [in a foreclosure of right of redemption action] declares the sale void and sets it aside, the collector shall repay the holder of the certificate of sale the amount paid to the collector on account of the purchase price of the property sold, with interest at the rate provided in the certificate of tax sale, together with all taxes that accrue after the date of sale, ... which were paid by the holder of the certificate of sale or the predecessor ..., and all expenses properly incurred in accordance with this subtitle____ The collector shall proceed to a new sale of the property under this subtitle and shall include in the new sale all taxes that were included in the void sale, and all unpaid taxes that accrued after the date of the sale declared void.
On appeal, the County argues as it did below that the facts in this case did not trigger application of TP section 14-848. Rather, they triggered the County’s contractual right, separate from and not inconsistent with the Tax Sale Statute, and established by the “Terms of the 2001 Tax Sale,” to void the sale and refund the sum paid by the tax sale purchaser. If the County is correct, it has no obligation to pay 18% interest or expenses on the purchase money refunded to Heartwood.
The court in its memorandum opinion and the County in its brief rely upon this Court’s decision in Heartwood 88, Inc. v. Montgomery County,
The tax sale purchaser protested, demanding payment of the “redemption rate” of interest, i.e., the rate that would have applied had the sale been valid and had the title owners then redeemed their properties. Under TP section 14-820(b), the “redemption rate” is either 6% or a percentage adopted by the county in which the property is located. At that time, Montgomery County’s “redemption rate” was 20%, comprised of 8% interest and a 12% penalty. The tax sale purchaser also demanded payment of expenses and counsel fees under TP section 14-843. When Montgomery County refused to pay either, the tax sale purchaser brought a declaratory judgment action seeking to have the sale declared void, pursuant to TP section 14-848.
The circuit court ruled that the tax sale of the 331 properties was void at its inception, and so there was no tax sale to declare
An appeal was taken to this Court. Noting that there was no dispute that the tax sales were invalid, as no taxes were owed when the properties were sold for taxes, we observed that, for a circuit court to declare a tax sale void under TP section 14-848, there must be a pending action to foreclose right of redemption and the defendant must have answered raising the invalidity of the taxes or of the proceedings, so as to rebut the presumption of regularity in the tax sale established by TP section 14-842.
We return to the case at bar. In its Memorandum Opinion, the circuit court reasoned as follows. Here, unlike in Montgomery, the error underlying the tax sale was discovered after the tax sale purchaser already had filed an action to foreclose the title owner’s right of redemption. Because, under TP section 14-834, the circuit court has jurisdiction to grant “complete relief’ in an action to foreclose the right of redemption in a property, and also because TP section 14-851 states that “[a]ny tax sales made or instituted after December 31, 1943, shall be made only in accordance with” TP sections 14-801 through 14-854, only it (the court) had the power to declare the tax sale invalid. Therefore, the County could not itself invalidate the sale, under the “Terms of the 2001 Tax Sale.” And the court’s power to declare the sale invalid is governed by TP section 14-848, under which Heartwood, upon such a declaration, is entitled to interest on the refunded purchase money as
The County contends that the Montgomery case is controlling but dictates a result contrary to that reached by the circuit court. It argues that Montgomery stands for the proposition that, for the court to declare a tax sale void under TP section 14-848, there must be a right to redeem the property that is the subject of the tax sale. Here, because no taxes ever were owed, as no taxes ever should have been assessed, the tax sale was void at its inception (as was the case in Montgomery), and therefore there is no right of redemption. When no right of redemption exists, an action to foreclose right of redemption cannot be pursued; and TP section 14-848 only applies in such an action. It makes no difference that, in this case, the suit to foreclose already had been filed when the SDAT discovered its error, while in Montgomery, the error was discovered before any such action was filed. In both situations, there is no right of redemption to foreclose. Filing an action to foreclose a right of redemption cannot create a right of redemption that no longer exists, or never existed to begin with.
Our starting point in deciding whether TP section 14-848 applies to the novel circumstances of this case is the statutory language itself. In Scheve, supra,
In construing a legislative enactment the fundamental judicial task is to determine and effectuate the legislature’s intent, and indeed the very language of the statute serves as the primary source of the legislature’s intent. See, e.g., Revis v. Maryland Auto. Ins. Fund,322 Md. 683 , 686,589 A.2d 483 , 484 (1991); Privette v. State,320 Md. 738 , 744,580 A.2d 188 , 191 (1990). To accomplish this task, “the words of the statute are to be given their ordinary and natural import....” Revis,322 Md. at 686 ,589 A.2d at 484 . In addition, the language of the statute must be considered along with the statute’s stated policy that its provisions “shall be liberally construed as remedial legislation to encourage the foreclosure of rights of redemption ... and for the decreeing of marketable titles to property sold by the collector.” § 14-832.
TP section 14-848 (quoted in relevant part above) prescribes what happens when, in an action to foreclose right of redemption in property sold for taxes, the circuit court declares the tax sale void and sets it aside. In mandatory terms, it dictates that, upon entry of such a judgment, the tax collector: 1) shall repay the tax certificate holder, as further specified; 2) is entitled to be refunded the amount of any claims paid to other taxing agencies; and 3) “shall proceed to a new sale of the property under this subtitle and shall include in the new sale all taxes that were included in the void sale, and all unpaid taxes that accrued after the date of the sale declared void.”
For a new tax sale of the same property to be conducted by the tax collector, there must be properly assessed unpaid taxes on the property. If taxes improperly were assessed against the property, so none are owed, or if taxes properly were assessed and were paid, so none are owed, the property is not subject to sale for taxes. By its plain language, therefore, TP section 14-848 cannot cover a tax sale that is void from its inception due to an error in assessing any tax to begin with or due to there not being any tax arrearage for which to sell the property. It only can cover a tax sale that was procedurally invalid or erroneous but correctable.
We did not hold in Montgomery, however, that when, after a suit to foreclose right of redemption in property sold at tax sale has been filed, it is discovered that the tax sale in fact was void at its inception, TP section 14-848 necessarily applies and is the sole mechanism for declaring the tax sale void. As we have explained, TP section 14-848 by its plain language cannot cover a tax sale that is void at its inception. Its language contemplates a procedural or correctable error in the sale, not a sale that, for substantive reasons, never should have taken place to begin with.
In its memorandum below, Heartwood argued that a local government cannot contravene the Tax Sale Statute by enacting ordinances or rules that substantively or procedurally affect property tax sales in its jurisdiction. That is a legally sound observation, see Queen v. Agger,
In the case at bar, as soon as the County was served, it filed a motion to dismiss the tax sale foreclosure action against it and Elkhorn, alleging that the SDAT erroneously assessed taxes on the Property and, in fact, when the Property was sold for taxes on June 6, 2001, no taxes were owed.
JUDGMENT REVERSED. CASE REMANDED TO THE CIRCUIT COURT FOR HOWARD COUNTY WITH INSTRUCTIONS TO GRANT HOWARD COUNTY’S MOTION TO DISMISS. COSTS TO BE PAID BY THE AP-PELLEE.
Notes
. The Property is described in the certificate of tax sale as follows:
IMPSLOT C-5 .6420A
DEEPAGE DRIVE
VIL OWEN BROWN S 2 AR 2
Liber 4463/Folio 0591
. Heartwood did not file a brief in this Court or participate in the appeal in any way.
. That, section states:
In any proceeding to foreclose the right of redemption, it is not necessary to plead or prove the various steps, procedure and notices for the assessment and imposition of the taxes for which the property was sold or the proceedings taken by the collector to sell the property. The validity of the procedure is conclusively presumed unless a defendant in the proceeding shall, by answer, set up as a defense the invalidity of the taxes or the invalidity of the proceedings to sell or the invalidity of the sale. A defendant alleging any jurisdictional defect or invalidity in the taxes or in the proceeding to sell, or in the sale, must particularly specify in the answer the jurisdictional defect or invalidity and must affirmatively establish the defense.
. We also observed that, even if TP section 14-848 were applicable, the tax sale purchaser was incorrect in its assertion that, under that section, it was entitled to the Montgomery County "redemption rate” in interest. Pursuant to TP section 14-848, the most the tax sale purchaser could have been entitled to was interest as provided in the tax sale certificate, and that interest was 8% (which already had been paid), not interest and penalties totaling 20%.
. As explained above, TP section 14-842, entitled "Validity of taxes and sale presumed unless attacked in answer,” provides that, in an action brought under the Tax Sale Statute, the validity of the procedure of the sale is "conclusively presumed unless a defendant in the proceeding shall, by answer, set up as a defense the invalidity of the taxes or the invalidity of the proceedings to see or the invalidity of the sale.” Howard County was not served in this case until immediately before Heartwood filed its motion to declare tax sale void under TP section 14-848. Upon being served, it filed a motion to dismiss that alleged the undisputed fact that the SDAT had improperly assessed taxes against the Property when none were assessable. By raising that defense in its motion to dismiss, the County substantially complied with the requirements of TP section 14-842.