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Mooring Tax Asset Group, L.L.C. v. James

Supreme Court of Louisiana

December 9, 2014

MOORING TAX ASSET GROUP, L.L.C.
v.
RODERICK A. JAMES AND THE UNITED STATES DEPARTMENT OF TREASURY-INTERNAL REVENUE SERVICE

ON WRIT OF CERTIORARI TO THE COURT OF APPEAL, FOURTH CIRCUIT, PARISH OF ORLEANS.

For Applicant: Scott Joseph Sonnier, BEIRNE, MAYNARD, & PARSONS.

For Respondent: Elwood Francis Xavier Cahill, Jr., James Michael Garner, John Thomas Balhoff, II, SHER GARNER CAHILL RICHTER KLEIN & HILBERT, LLC.

OPINION

Page 1144

[2014-0109 La. 1] JOHNSON, Chief Justice.

In this case, the tax sale of a property was declared absolutely null due to the failure of the taxing authority to issue sufficient pre-sale notice and advertisement of the tax sale. We granted this writ application to determine whether the lower courts erred in ordering cancellation of the tax sale deed without ordering the subsequent third party purchaser of the property to reimburse the taxes paid and costs incurred by the tax sale purchaser. In so doing, we must consider whether a tax sale purchaser is entitled to reimbursement of costs when a tax sale is declared absolutely

Page 1145

null; and, if so, who is responsible for such reimbursement. For the reasons explained herein, we hold that the tax sale purchaser is entitled to reimbursement of its costs prior to cancellation of the tax sale deed. We also hold it is the current owner of the property who is responsible for payment of these costs. Thus, we reverse the rulings of the lower courts and remand the matter to the trial court for further proceedings.

FACTS AND PROCEDURAL HISTORY

This case arises out of the tax sale of residential property located at 7047 Lake Willow Drive in New Orleans, Louisiana. On September 22, 1997, Charles and Connie Brown purchased this property pursuant to a " Cash Sale of Property." The [2014-0109 La. 2] sale was recorded in the Orleans Parish Conveyance Records on September 27, 1997. After the Browns became delinquent on their property taxes, the property was sold at a tax sale on November 8, 2004, to Mooring Tax Asset Group. The tax collector executed a tax deed that purportedly conveyed the property to Mooring on December 21, 2004. This deed was recorded in the Orleans Parish conveyance records on April 26, 2005.

Presumably unaware of the tax sale, the Browns sold the property to NARA, L.L.C. pursuant to a " Cash Sale" on April 17, 2007. The sale was recorded in the Orleans Parish Conveyance Records on April 23, 2007. NARA subsequently sold the property to Roderick A. James, the defendant in this suit, on June 9, 2008. This sale was recorded in the Orleans Parish Conveyance Records on June 18, 2008.

On May 21, 2010, Mooring filed a " Petition to Quiet Title," seeking to terminate Mr. James' interest in the property for failure to redeem the property from the 2004 tax deed recorded in April of 2005. On June 14, 2010, Mr. James filed exceptions and an answer to the petition, as well as a reconventional demand against the City of New Orleans, asserting that the tax sale should be nullified on several bases, including insufficient pre-sale notice and advertisement. Mr. James then filed a motion for summary judgment asserting these two bases for nullity.

The trial court granted Mr. James' motion, finding the 2004 tax sale and the 2004 tax deed were absolute nullities due to lack of sufficient pre-sale notice and for lack of sufficient pre-sale advertisement. Following the ruling, Mooring contended the declaration of nullity should be preliminary, rather than a final judgment, until it was paid costs that are allowed pursuant to La. R.S. 47:2291. Mr. James asserted this statute could not be applied retroactively to this case, and was only applicable to tax sales that occurred after January 1, 2009. However, because Louisiana Constitution [2014-0109 La. 3] article VII, § 25(C) allows for the delay of the effects of a tax sale nullification until certain costs are paid to the tax sale purchaser, the trial court issued a judgment allowing Mooring to submit proof of costs and Mr. James to contest costs. Mooring filed an " Affidavit of Proof of Costs Pursuant to La. R.S. 47:2221(B)(3)" asserting total costs of $37,495.95 due Mooring pursuant to La. Const. art. VII, § 25(C), which included taxes paid, interest and costs. Mr. James then submitted a " Motion to Contest Costs," contending Mooring had not made a true claim for costs, and even if it had, taxes, interest, costs and penalties are not recoverable by a tax sale purchaser when the tax sale is an absolute nullity. Alternatively, Mr. James asserted that if these taxes, costs and penalties are recoverable, they are not recoverable from a third-party purchaser who had no interest in the property at the time of the tax sale.

Page 1146

The trial court granted Mr. James' motion to contest costs, finding that because the tax sale and tax deed were absolute nullities, Mooring was not owed or entitled to be reimbursed for taxes, costs, interest, or penalties. The court ordered the cancellation of the 2004 tax sale deed, which gave immediate effect to the declaration of nullity. Mooring appealed.

The majority of the court of appeal affirmed.[1] The court first rejected Mooring's argument that the trial court erred when it failed to set an amount due pursuant to La. R.S. 47:2291. The court of appeal found that statute was part of a legislative overhaul of tax sale statutes that became effective on January 1, 2009, and these changes were substantive in nature and thus applied prospectively only. The court also held that La. Const. art. VII, § 25(C) did not compel Mr. James, as a thirdparty purchaser, to reimburse Mooring before the annulment of the tax sale could be given effect. In so holding, the court distinguished its earlier decision in Brookewood [2014-0109 La. 4] Investments Co. v. Sixty-Three Twenty-Four Chef Menteur Highway, LLC, wherein it had held that the tax purchaser's right of redemption was solely against the tax debtor or record owner of the property.[2] The court reasoned the facts in Brookewood are distinguishable and its holding did not require Mr. James, who was neither the record property owner nor the tax debtor at the time of the 2004 tax sale, to reimburse Mooring any costs. The court noted that in Brookewood, and cases cited therein, the record property owner's liability resulted only from his status as the tax debtor. The court explained that Mr. James' status as a subsequent purchaser and the current property owner does not meet the ...


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