A mortgage holder has the right to redeem
(take back) real property that is the subject of a real estate tax foreclosure
when the owner does not pay taxes on the land, according to the recent decision
of the Ohio Supreme Court in In re Foreclosure of Liens for Delinquent Land
Taxes v. Parcels of Land Encumbered with Delinquent Tax Liens, Slip
Opinion No. 2014-Ohio-3656).
The facts of this case are relatively straight forward. In June,
2003, Brandi and Troy Wagner executed a promissory note and mortgage in favor
of Vanderbilt Mortgage and Finance to finance their purchase of a mobile home
and land in Coshocton County. The Wagners failed to pay taxes on their
property, so the county treasurer initiated a tax foreclosure proceeding for
delinquent taxes (in the amount of $825.84). Because the Wagners did not
respond to the foreclosure complaint, the
trial court granted the treasurer’s motion for default judgment and ordered the sheriff to sell the
property.
Although not explained in the
record, the sheriff held two sales of the property; one at which Vanderbilt
purchased the mobile home. At the other sale, James Matchett purchased the property
with a winning bid of $15,100 and then deeded the property to Alan and Janette
Donaker. Before either sale of the
land was confirmed, however, Vanderbilt filed a notice to redeem the property and
a motion to vacate the prior sales and foreclosure.
The trial court granted
Vanderbilt’s motion, thereby vacating and setting aside the sale and entry of
foreclosure. The trial court determined that Vanderbilt (a mortgage holder with
a recorded interest in the property) was a “person entitled to redeem” under Ohio
Revised Code Section (“R.C.”) 5721.25.
The Donakers and the Coshocton
County Treasurer then appealed the trial court’s decision to the Fifth District
Court of Appeals. The court of appeals held that Vanderbilt was not entitled to
redeem the property, and reversed the judgment of the trial court.
Vanderbilt then appealed to the
Ohio Supreme Court which characterized the issue
before the court as whether or
not Vanderbilt, as a mortgage holder, qualifies as “any person entitled to redeem the land” under R.C. 5721.25.
Pursuant to the second paragraph
of R.C. 5721.25: “any person entitled to redeem the land (emphasis added) may do so by tendering to the county
treasurer an amount sufficient, as determined by the court, to pay the taxes,
assessments, penalties, interest, and charges then due and unpaid, and the
costs incurred in any proceeding instituted against such land under Chapter 323
or this chapter of the Revised Code, and by demonstrating that the property is
in compliance with all applicable zoning regulations, land use restrictions,
and building, health, and safety codes.”
Appellee Alan Donaker contended
that the only reasonable interpretation of the statute is one that precluded
anyone but the property owner from being a “person entitled to redeem” under R.C. 5721.25 and that broadly
interpreting the phrase “any person” would thwart the intent of sheriff’s sales
by allowing mortgage holders to sit and do nothing until after the sheriff’s
sale.
Vanderbilt contended that when
read in conjunction with R.C. 5721.181, which provides the form of notice
required for tax foreclosure proceedings—the phrase “any person entitled to redeem the land” under R.C. 5721.25 includes
“any owner, or lienholder of, or other
person with an interest in the property” because those exact words are
utilized in R.C. 5721.181.
The Supreme Court of Ohio agreed
with Vanderbilt, reasoning that when statutes are clear and unambiguous, they
must apply the statutes as written. The court cited previous cases holding that:
(1) the court must “give effect to the
words used, refraining from inserting or deleting words,” and (2) that the
meaning of “any” [in a statute] is “every” or “all.”
The court also backed up its
decision by contrasting R.C. Chapter 2329 (which governs judicial foreclosure
proceedings such as mortgage foreclosure) with the language governing tax
foreclosures in R.C. 5721.25. In R.C. 2329.33, the Ohio General Assembly
specifically limited the right of redemption to “the debtor.” But in R.C. 5721.25, the legislature instead utilized
broader language by granting the right of redemption in a tax foreclosure
proceeding to “any person entitled to
redeem.”
Acknowledging that their decision
might be interpreted as unfair to property owners,
the court justified its holding
by concluding that “any perceived
inequity caused by our holding to purchasers or property owners like the
Wagners must be balanced against the rights of others with competing interests,
including those of a mortgagee, or lienholder, to protect its interest in the
property where a mortgagor, or property owner, has fallen
delinquent in tax payments.”
What’s the moral of this story?
Pay your taxes…at least before your county files a foreclosure action and your
lender redeems your property.
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