Hugh C. Wood, Esq.
Which entity is entitled to the excess funds from a tax sale? We shall know (with legal certainty) in a few
months.
The Georgia Supreme Court has accepted certiorari of a
Georgia Court of Appeals case that will settle or resolve which creditor (or the
owner) has the priority of claim to the “excess funds” that are generated from
a tax sale. [1]
In the most simplistic
terms the appeal concerns, who is entitled to the claim the excess funds? Is it the owner of the property who lost the
property at tax sale and/or the first mortgage holder entitled to the excess
proceeds? Or, is the redeeming creditor
(after the tax sale) first in line to claim the excess proceeds?
This confusing
question is set to be resolved (finally) by the supreme court. A long time ago, those of us who worked this
area of the law just assumed (perhaps inartfully) that the owner or the holder
of the first security deed on the property was first in line and entitled to
the excess proceeds. [2]
As this method of investing (buying tax sale property) continued
to mature (and accelerated after the real estate crash of 2008 - 2011) very real
disputes began to arise concerning which entity was entitled to claim the
excess proceeds that remained after a forced tax sale on the courthouse
steps. Did the owner have a priority claim
to the funds? Did the bank which held
the legal title (the first security deed) and to whom the owner was indebted
have a priority claim to the excess funds? Or,
in creditor redemption, did the redeeming creditor have both title to the
property and the first priority claim to the excess proceeds?
This continuing uncertainty to the ownership (by priority)
to the excess funds caused the Georgia General Assembly to enact the
Interpleader statute for this issue in 2006.
OCGA § 48-4-5. [3]
The outcome of this pending writ of certiorari [1] is going
to establish a bright line for priority of claims to excess funds. If the case on appeal is upheld, then the
date of the tax sale and priority established on the day of the tax sale
becomes “the date,” from which all claims are established. If the case on appeal is overturned, then
Wester, infra, and United Capital, infra, will be reinstated and a redeeming
creditor will have a priority claim to the excess funds.
Both sides have sound policy arguments on
appeal. [4] [5] While I
personally think the “super lien,” is somewhat harsh to the defaulted owner (because
it allows the loss of the property, the shortening of the potential one (1)
year right to redeem and the loss of the excess proceeds), the interpretations
of the statute by Wester [6] and United Capital [7] are both logical and sound. However, I welcome a supreme court decision
that will settle and resolve this muddy corpus of claims to excess funds in tax
redemption cases.
We will know in a few months whether the date of the tax
sale is “the” date by which practitioners are to calculate all priority claims
to excess funds. Or, we will learn whether we are to go
back to the Wester [6] and United Capital [7] methods of calculation.
Hugh Wood, Esq.
Wood & Meredith, LLP
3756 LaVista Road
Suite 250
Atlanta (Tucker), GA 30084
www.woodandmeredith.com
hwood@woodandmeredith.com
www.hughwood.blogspot.com
Phone: 404-633-4100
Fax: 404-633-0068
&&&&&&&&&&&&&&
Endnotes:
[1]
“Did the Court of Appeals err in its determination that a
redeeming creditor after a tax sale does not have a first priority claim on
excess tax funds? See Wester v. United Capital Financial of Atlanta, LLC, 282
Ga. App. 392 (638 SE2d 779) (2006) and United Capital Financial of Atlanta v.
American Investment Assoc., 302 Ga. App. 400 (691 SE2d 272) (2010).” Grant of
Cert on September 16, 2016 in DLT List, LLC et al. v. M7ven Supportive Housing &
Development Group, 335 Ga.App. 318, 779 S.E.2d 436 (2015).
[2]
[E]xcess funds shall be distributed by the superior court to
the intended parties, including the owner, as their interests appear and in the
order of priority in which their interests exist. OCGA §
48-4-5(b).
[3]
OCGA § 48-4-5. Payment of Excess [Interpleader]
(a) If there are any
excess funds after paying taxes, costs, and all expenses of a sale made by the
tax commissioner, tax collector, or sheriff, or other officer holding excess
funds, the officer selling the property shall give written notice of such
excess funds to the record owner of the property at the time of the tax sale
and to the record owner of each security deed affecting the property and to all
other parties having any recorded equity interest or claim in such property at
the time of the tax sale. Such notice shall be sent by first-class mail within
30 days after the tax sale. The notice shall contain a description of the land
sold, the date sold, the name and address of the tax sale purchaser, the total sale
price, and the amount of excess funds collected and held by the tax
commissioner, tax collector, sheriff, or other officer. The notice shall state
that the excess funds are available for distribution to the owner or owners as
their interests appear in the order of priority in which their interests exist.
(b) The tax
commissioner, tax collector, sheriff, or other officer may file, when deemed
necessary, an interpleader action in superior court for the payment of the
amount of such excess funds. Such excess funds shall be distributed by the
superior court to the intended parties, including the owner, as their interests
appear and in the order of priority in which their interests exist. The cost of
litigation of such an interpleader action, including reasonable attorney's
fees, shall be paid from the excess funds upon order of the court.
(c) After five years
have elapsed from the tax sale date, the tax commissioner, tax collector,
sheriff, or other officer holding excess funds shall pay over to the department
any excess unclaimed funds and for which no action or proceeding is pending in
a claim for payment. Once excess funds are placed in the possession of the
department, only a court order from an interpleader action filed in the county
where the tax sale occurred, by the claimant for the funds, shall serve as
justification for release of the funds.
[4]
Brief of Appellant. Design
Acquisition, LLC
[5]
Brief of Appellee. M7ven Supportive Housing & Development Group, Inc.
[6]
Wester v. United Capital Financial of Atlanta, LLC, 282 Ga.
App. 392, 638 S.E.2d 779 (2006).
[Copyright material removed]
Attorneys and Law Firms
**779 Thomas C. Sanders, for appellant.
**780 Mason B. Rountree, William T. Cable, Jr., Willie C.
Carouthers, Vinson, Talley, Richardson & Cable, for appellee.
Opinion
BLACKBURN, Presiding Judge.
*392 In this interpleader action to distribute excess funds
($73,275.15) received by the county from a tax sale of certain real property,
Thomas A. Wester as a judgment lienholder on the property appeals summary
judgment granted to a fellow lienholder (United Capital Financial of Atlanta,
LLC), who for $97,200 had redeemed the property from the tax sale. Wester
argues that because his judgment lien on the property was prior in time to the
judgment lien of United Capital, he should be entitled to the excess funds
before any are distributed to United Capital. We hold that as the redeemer of
the property, United Capital is entitled to the excess funds to the extent of
its redemption payment before any other entity or interest. Accordingly, we
affirm summary judgment in favor of United Capital.
Summary judgment is only proper when there is no genuine
issue of material fact and the movant is entitled to judgment as a matter of
law.1 A de novo standard of review applies to an appeal from a grant of summary
judgment, and we view the evidence, and all reasonable conclusions and
inferences drawn from it, in the light most favorable to the nonmovant.
Matjoulis v. Integon Gen. Ins. Corp.2
The undisputed facts show that in February 2000 in Paulding
County Superior Court, Wester obtained a judgment against a Paulding County
real property owner and had a writ of fi. fa. in the amount of $59,508.95
entered on the county general execution docket. Another creditor of the property
owner obtained a judgment in May 2000 (a subsequent term of court) and had a
writ of fi. fa. in the amount of $5,135.53 entered on the county general
execution docket at that time. This later judgment and fi. fa. were
subsequently assigned to United Capital.
To collect past due taxes, the Paulding County tax
commissioner sold the real property at a tax sale in February 2005 for $81,000
to a tax sale purchaser. United Capital paid $97,200 to the tax sale purchaser
to redeem the property, resulting in the tax sale purchaser conveying the
property back to the property owner in a properly recorded quitclaim deed.
After satisfying the tax debt, the tax commissioner had $73,275.15 left over
from the tax sale, which the tax commissioner interpleaded into Paulding County
Superior Court, *393 naming the property owner, Wester, and United Capital as
defendants. Wester and United Capital both moved for summary judgment.3 Denying
Wester's motion, the court granted United Capital summary judgment and ordered
that the funds in the court registry be paid to United Capital, giving rise to
this appeal.
OCGA § 48-4-5 governs the distribution of excess funds from
a tax sale. Subsection (b) provides that the tax commissioner may file an
interpleader action in superior court for the payment of the amount of such
excess funds and instructs that “[s]uch excess funds shall be distributed by
the superior court to the intended parties, including the owner, as their
interests appear and in the order of priority in which their interests exist.”
If the only interests of Wester and United Capital were as judgment
lienholders, then the timing of the obtaining and recording of those liens
would be dispositive in determining their relative rights to the funds. Cf.
NationsBank, N.A. v. Gibbons4 (“the relative position of judgment liens is
determined by seniority; an older Georgia judgment has priority over a newer
judgment”).
But United Capital's primary interest in this matter is its
status as the redeemer of the property. OCGA § 48-4-43 provides: When property has been redeemed, the effect
of the redemption shall be to put the **781 title conveyed by the tax sale back
into the defendant in fi. fa., subject to all liens existing at the time of the
tax sale. If the redemption has been made by any creditor of the defendant or
by any person having any interest in the property, the amount expended by the
creditor or person interested shall constitute a first lien on the property
and, if the quitclaim deed provided for in Code Section 48-4-44 is recorded as
required by law, shall be repaid prior to any other claims upon the property.
Thus, in its status as redeemer of the property, United
Capital has a first lien on the property in the amount of the $97,200 it paid
to redeem the property (which lien is in addition to its more subordinate
judgment lien for $5,135.53), which first lien “shall be repaid prior to any
other claims upon the property.” Id. As stated by the Supreme Court of Georgia
in Nat. Tax Funding v. Harpagon Co.,5 “[i]f a creditor of the original taxpayer
redeems the property, the amount paid by the *394 redeeming creditor becomes a
first lien on the property. The redeeming creditor then has first priority to
repayment-a ‘super-lien’ for the redemption price.” Wester's assertion that
United Capital is only entitled to priority on the real property per se and not
on the excess funds is without foundation. United Capital's right to repayment,
whether from the excess tax sale funds or from any foreclosure it may pursue on
the property, takes priority over any other claims on the property.
Accordingly, the trial court properly held that United
Capital's interest as the redeeming creditor took priority over Wester's and
the property owner's interests and that therefore United Capital should be
granted summary judgment. Because the amount of United Capital's interest
exceeded the amount held in the registry of the court, the trial court
correctly ordered that the entire amount be paid to United Capital.
Judgment affirmed.
MIKELL and ADAMS, JJ., concur.
All Citations
282 Ga.App. 392, 638 S.E.2d 779, 06 FCDR 3399
Footnotes
1OCGA § 9-11-56(c).
2Matjoulis v. Integon Gen. Ins. Corp., 226 Ga.App. 459(1),
486 S.E.2d 684 (1997).
3Due to a bankruptcy consent order with the property owner
arising out of the property owner's bankruptcy, Wester asked that the first
$21,200 be paid to the property owner as an exempt asset and that Wester
receive the remainder.
4NationsBank, N.A. v. Gibbons, 226 Ga.App. 610, 611, 487
S.E.2d 417 (1997).
5Nat. Tax Funding v. Harpagon Co., 277 Ga. 41, 42(1), 586
S.E.2d 235 (2003).
[7]
United Capital Financial of Atlanta v. American Investment
Assoc., 302 Ga. App. 400, 691 S.E.2d 272 (2010).
[copyright material removed]
Attorneys and Law Firms
**273 Richard C. Bellows, for appellant.
Michael A. Petersen, for appellee.
Opinion
DOYLE, Judge.
*400 United Capital Financial of Atlanta, LLC, and American
Investment Associates, Inc., asserted competing claims to the excess funds from
the tax sale of certain property belonging to David W. Fletcher. Following a
bench trial, the trial court awarded the excess funds to American Investment.
United Capital appeals, and we reverse because United Capital, as the creditor
who redeemed Fletcher's property from the purchaser at the tax sale, held a
first priority lien *401 against the property.
The record shows that Keith Echols, in his capacity as tax
commissioner for Hall County, filed a complaint for interpleader against
Fletcher, Consolidated Lien Services, LLC, United Capital, and others alleging
that certain property belonging to Fletcher had been sold on October 2, 2007,
for the purpose of paying Hall County and State of Georgia property taxes for
the year 2006. According to the complaint, the property was sold to
Consolidated Lien for $21,100, leaving an excess of $20,495.61 after payment of
overdue taxes, penalties, interest, and costs of sale. The complaint further
showed that United Capital redeemed the property from Consolidated Lien for the
redemption amount of $25,320, and that Consolidated Lien then conveyed the
property back to Fletcher through a quitclaim deed.
United Capital and American Investment each filed a claim
for the excess funds. In light of the conflicting claims to the funds, the tax
commissioner paid the excess funds into the registry of the court and prayed
that the court order the defendants to interplead the action. Following a bench
trial, the trial court awarded the excess funds to American Investment, and
United Capital appeals.
“In a bench trial[,] the court sits as the trier of fact[,]
and his findings shall not be set aside unless clearly erroneous.... However,
the court's judgment in a non-jury trial will be reversed where it is apparent
that it rests on erroneous reasoning or on an **274 erroneous legal theory.”1
United Capital did not file a transcript of the trial. “[A]bsent a transcript,
we must presume that the trial court's findings of fact are correct.”2
As applicable to this appeal, the trial court found that United Capital ... became a creditor of ...
Fletcher via an assignment of a debt for $71.00 from Dynamic Recovery Services,
a collection agency, on the day of the tax sale. United Capital ... had never
obtained a judgment or a lien for this debt by the time it redeemed the
property.
Further, Defendant American Investment ... obtained a
judgment against ... Fletcher on March 12, 1992 for $6,669.87 plus interest,
and Writ of Fi. Fa. was issued on July 14, 1992. The *402 amount due pursuant
to this judgment as of October 2, 2007, the date of the tax sale, was
$29,000.23.
1. After a tax sale, if there are any excess funds after
paying taxes, costs, and expenses of the sale, the tax commissioner is
authorized to file an interpleader action in superior court for payment of such
excess funds, which “shall be distributed by the superior court to the intended
parties, including the owner, as their interests appear and in the order of
priority in which their interests exist.”3 The trial court awarded the excess funds
to American Investment in this case because its judgment was first in time and
because United Capital failed to establish a first lien under OCGA § 48–4–43.
United Capital contends that the trial court erroneously construed other
statutes to deny it the first priority lien established by OCGA § 48–4–43,
contrary to controlling authority legislative intent, and principles of equity.
We agree that the trial court misapplied OCGA § 48–4–43.
OCGA §§ 48–4–40 through 48–4–48 address the redemption of
property sold for taxes. Pursuant to OCGA § 48–4–40, if property is sold under
an execution issued for the collection of state and certain local taxes, “the
defendant in fi. fa. or any person having any right, title, or interest in or
lien upon such property may redeem the property from the sale....” “If the
property is redeemed, the tax sale is essentially rescinded and a quitclaim
deed is executed by the tax sale purchaser back to the owner of the property at
the time of levy and sale.”4 OCGA § 48–4–43 provides that if the redemption has
been made by “any creditor of the defendant or by any person having any
interest in the property,” then the amount expended by the creditor or
interested person constitutes a first lien on the property, and “shall be
repaid prior to any other claims upon the property,” so long as the quitclaim
deed to the defendant in fi. fa. is recorded as required by law.5
We have previously analyzed the first or “super-lien”6
established by OCGA § 48–4–43 in the context of competing claims to excess
funds from a tax sale. In Wester v. United Capital Financial of Atlanta7 we
concluded that, notwithstanding the general rule that the timing of the
obtaining and recording of judgment liens is *403 dispositive in determining
competing lienholders' rights,8 the appellee's status as the redeemer of the
property afforded it a first priority lien in the amount it paid to redeem the
property.9 Accordingly, we found that the trial court correctly directed that
the excess funds held in the registry of the court be paid to the **275
redeeming creditor.10 United Capital argues that Wester controls here.
Unlike the appellee in Wester, United Capital was not a
lienholder with respect to the property at the time of the redemption, nor did
the trial court find it had any other interest in the property. The trial court
found United Capital's lack of a lien or interest in the property controlled
for purposes of OCGA § 48–4–43, concluding that “the statutory scheme seems to
be that a judgment[ ] or lienholder may redeem the property to create a
super-lien, not that merely any creditor of the taxpayer may redeem the
property to create a super-lien,” and that United Capital, as a creditor
without a lien, had not otherwise satisfied the condition of OCGA § 48–4–41
contemplating a sale of the property after redemption under a judgment in favor
of the creditor.
“Laws of this state governing the right to redeem are to be
construed liberally and most favorably to persons allowed by the statute to
redeem.”11 Under OCGA § 48–4–43, the first priority lien for the redemption
price arises as to “any creditor of the defendant [in fi. fa.]” who redeems the
property. The trial court found as a matter of fact that United Capital was
Fletcher's creditor. “Well-established principles of statutory construction
require that the literal meaning of the words of a statute must be followed
unless the result is an absurdity, contradiction, or such an inconvenience that
it is clear that the legislature must have intended something else.”12 It follows
that, based on a literal interpretation of the statute, United Capital had a
first lien for the amounts expended for the redemption.
There are some apparent inconsistencies in the statutory
scheme, but we conclude that none requires a reinterpretation of the literal
language of OCGA § 48–4–43. Notably, OCGA § 48–4–40 suggests that the only
persons who may redeem property sold in a tax sale include “the defendant in
fi. fa. or any person having any right, title, or interest in or lien upon such
property,” which would appear to exclude a creditor without a lien, right,
title, or interest in the property from exercising a right of redemption.
Nevertheless, and *404 pretermitting whether it was required to do so, the
purchaser at the tax sale permitted United Capital to redeem the property,
which the purchaser quitclaimed back to Fletcher. By virtue of OCGA § 48–4–41,
which contemplates the redemption of a creditor without a lien, and OCGA §
48–4–43, which governs the effect of a redemption, including that by “any
creditor,” the law necessarily allowed United Capital to redeem the property.
As between OCGA §§ 48–4–41 and 48–4–43, OCGA § 48–4–41
provides that “[i]f the property is redeemed by a creditor of the defendant in
fi. fa. who has no lien,” the creditor has a claim against the property for the
amounts advanced to redeem the property if “[t]here is any sale of the property
after the redemption under a judgment in favor of the creditor.” OCGA § 48–4–41
does not address, however, the priority of this claim and whether it
constitutes a separate lien, which are matters addressed by OCGA § 48–4–43.
There is not such an absurdity, contradiction, or inconvenience in the
application of OCGA § 48–4–43, as written, to require us to interpret “any
creditor” to mean other than what it says. It follows that the effect of the
redemption was to return title to the property to Fletcher, subject to all
liens existing at the time of the tax sale,13 but that United Capital had a
first priority lien for the amounts it expended to redeem the property. Under
Wester, the first priority of United Capital's lien entitled it, as the
redeeming creditor, to priority over American **276 Investment in the
distribution of the excess funds to the extent of the redemption price.14
2. American Investment contends that the trial court erred
in holding that United Capital became Fletcher's creditor via an assignment of
a debt from Dynamic Recovery Services. But American Investment did not assert
its claim of error through a cross-appeal. Further, its claim is not supported
by reference to the record, but by the argument that United Capital failed to
present certain evidence at trial, notwithstanding the lack of a transcript
before this court.15 Viewing American Investment's claim as material to the
claims of error asserted by United Capital, and thus reviewable notwithstanding
the lack of a cross-appeal,16 American Investment *405 nevertheless does not
present any basis for this court to find that the trial court erred in its
finding that United Capital was Fletcher's creditor.
Judgment reversed.
BLACKBURN, P.J., and ADAMS, J., concur.
All Citations
302 Ga.App. 400, 691 S.E.2d 272, 10 FCDR 480
Footnotes
1(Citation and punctuation omitted.) CRS Sirrine v. Dravo
Corp., 213 Ga.App. 710, 721(4), 445 S.E.2d 782 (1994).
2State of Ga. v. Davis, 292 Ga.App. 387, 389, 665 S.E.2d 350
(2008). The lack of a transcript is not fatal to the appeal because at issue
are questions of law. Vance v. Vance, 246 Ga. 456, 459(4), 271 S.E.2d 853
(1980).
3OCGA § 48–4–5.
4Nat. Tax Funding v. Harpagon Co., 277 Ga. 41, 42(1), 586
S.E.2d 235 (2003).
5OCGA §§ 48–4–43; 48–4–44. The trial court found that in
this case the quitclaim deed was recorded as required by law.
6Nat. Tax Funding, 277 Ga. at 42(1), 586 S.E.2d 235.
7282 Ga.App. 392, 638 S.E.2d 779 (2006).
8See OCGA § 48–4–5.
9Wester, 282 Ga.App. at 393, 638 S.E.2d 779.
10Id. at 394, 638 S.E.2d 779.
11Dixon v. Conway, 262 Ga. 709, 710, 425 S.E.2d 651 (1993).
12(Citation and punctuation omitted.) Effingham County Bd.
of Tax Assessors v. Samwilka, Inc., 278 Ga.App. 521, 522, 629 S.E.2d 501
(2006).
13See OCGA § 48–4–43 (“When property has been redeemed, the
effect of the redemption shall be to put the title conveyed by the tax sale
back into the defendant in fi. fa., subject to all liens existing at the time
of the tax sale.”).
14See Wester, 282 Ga.App. at 393–394, 638 S.E.2d 779.
15See Davis, 292 Ga.App. at 389, 665 S.E.2d 350 (trial
court's findings of fact presumed correct in absence of a transcript).
16See Brady v. Elevator Specialists, 287 Ga.App. 304, 306,
653 S.E.2d 59 (2007) (“[A] ruling that becomes material to an enumeration of
error urged by an appellant may be considered by the appellate court without
the necessity of a cross-appeal.”) (punctuation omitted).
END
