Daily Development for Thursday, November 6, 2008
by: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Husch Blackwell Sanders
Kansas City, Missouri

TAX SALE; REDEMPTION; FORECLOSURE:  Corporation claiming title to property by the right of redemption under a 1982 tax deed purchased in 2006 constituted good faith purchaser for value without notice of interest of individual purchaser of property pursuant to a 1990 tax deed when there was no record evidence that all proper steps to foreclosure of those rights had been completed by the individual purchaser.  Individual owner, in any event,  did not establish satisfaction of all requirements of foreclosure of prior redemption rights.  Individual purchaser’s  occasional clean up and mowing of property and payment of public authorities for more clean up and demolition of buildings did not establish actual possession of the property under four year adverse possession statute available in such cases.   

Washington v. McKibbon Hotel Group, Inc., 284 Ga. 262, 664 S.E.2d. 201 (Ga. 2008). 

This is one of those cases where everything is fine and fits together until you read the dissent, and then you wonder whether both parties can possibly be talking about the same case.

Kearse, the owner of certain property, .082 acres, suffered a tax foreclosure, and Layton purchased at the tax foreclosure sale in 1982.  Two years later, Layton suffered a tax foreclosure, and Shedrick acquired the property at a tax foreclosure sale in 1984.  Six years later, Shedrick suffered a tax foreclosure sale, and Washington bought at this tax foreclosure sale, in 1990.

Georgia law recognizes a statutory right of redemption in the foreclosed landowner at a tax foreclosure, and like many jurisdictions, places the onus of terminating the right of redemption upon the foreclosure sale purchaser, who must institute a procedure to terminate the statutory redemption right.  In the alternative, the tax sale purchaser is given an abbreviated four year statute of limitations in which to acquire good title against the foreclosed owner through adverse possession.

Washington apparently intended to cut off the foreclosed owner’s right of redemption, and apparently did have a sheriff post a notice on the abandoned shack that stood on the property, which was the last known address of the prior occupant.  Washington also published notice.  Washington had no knowledge of the location of any of the prior owners of the property, although it is unlikely Washington was aware that he should have notified any of them.   What else, if anything, Washington was supposed to do, but allegedly didn’t do, we don’t know.  The dissent and the majority seem at odds as to the adequacy of Washington’s acts.  But Georgia law also provides that notices required by the redemption cutoff statute “may be filed . . . and recorded . . . .”  According to the dissenter, “[t]his statutory provision does not mandate that the completion of the foreclosure process be documented on the county real estate records.”
In any event, as we’ll see, Washington’s failure to record proved problematic.

In 2006, Mkibbon, the owner of adjacent hotel property, acquired the 22 year old redemption right of Layton (remember that he preceded in title Shedrick, who bought at the foreclosure sale of Layton’s title.) 

The trial court held that Mkibbon’s redemption rights were valid and could be exercised against Washington because they had not been cut off.  The court deemed it irrelevant whether Washington in fact complied with the notice requirements of the cutoff statute, because the trial court held that “since the documentary record is silent as to any actions taken by [Washington]” in regard to cutting off redemption, Mkibbon “stands in the position of a good-faith purchaser for value without notice.”

The court then perforce had to turn to Washington’s alternative claim that he cut off any redemption rights by adverse possession during the period since 1990.  Only four years of adverse possession is required by Georgia’s statute on cutting off redemption.  Washington had paid taxes every years since 1990, but the court deemed that as inconsequential, because the paying of taxes does not involve a possessory act.  Washington also cut the grass and  brush and cleaned up the property generally two or three times a year.  The local county tore down the old shack on the property and cleaned up the property itself from time to time.  The trial court did not deem this activity  to be an act of possession by Washington, but the county wasn’t shy about demanding that Washington pay for its services in this regard, which, according to the dissent, he did.

The Georgia Supreme Court affirmed the trial court, subject, as noted, to a stinging dissent from Justice Benham, which, obviously, the editor finds convincing.

Comment 1: As the dissent notes, there are two conflicting public policies here. 

There is the policy of protecting landowners from the consequences of a relatively harsh procedure of collecting taxes through foreclosure sale - thus a generous right to redeem.  This right was so generous that it was available for purchase 22 years after it arose.  Wow!!

There is also the policy on insuring finality for foreclosure sale purchasers to clear the title to the property and keep the property in the market - thus the short adverse possession statute.  In fact, as the dissent notes, only about fifty years ago the Georgia General Assembly provided that title to tax foreclosed property ripened into good title after a passage of time, without reference to whether adverse possession had occurred, but this provision was later amended. 

Comment 2:  The editor definitely is puzzled about the “permissive language” argument by the dissent.  Sounds right.  But are all recording acts provisions written in a similarly permissive way?  Recording is never a condition of validity.  Thus, the court’s treatment of the cutoff of redemption here may be consistent with other recording act results.

Nevertheless, the editor would expect to find more specificity about buyers being able to rely upon failure to record notices cutting off redemption rights before the editor would conclude that the Georgia legislators truly intended that result.  The Georgia court appears to be writing on a blank slate here.  The cases it cites aren’t really on point.  As indicated, the editor finds the dissent compelling based upon this record.  What a maverick!!!

Readers are encouraged to respond to or criticize this posting.

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