Opinion ID: 2263122
Heading Depth: 2
Heading Rank: 1

Heading: Tax Sales

Text: In order to sell property at a tax sale, the City must comply with a number of requirements, the first of which is that the owner must owe taxes on the property. [12] Kaylor v. Wilson, 260 Md. 707, 273 A.2d 185 (1971); Bugg v. State Roads Comm'n, 250 Md. 459, 243 A.2d 511 (1968); Mullen v. Brydon, 117 Md. 554, 83 A. 1025 (1912). The City must notify all other taxing agencies that a tax sale will be held. T.P. § 14-810. Thirty days prior to the first advertisement for the tax sale, notice must be mailed to the owner. T.P. § 14-812. The notice must state the name of the person, the amount of taxes due, and include a standard statutory notice. Id. Then, the City must advertise the tax sale once a week for four successive weeks in one newspaper of general publication. T.P. § 14-813. Once all of these steps have been completed the sale may proceed pursuant to T.P. § 14-817. All these requirements were met in the case at bar. At the center of this case lies our interpretation of T.P. § 14-817 and whether the City may sell the delinquent property for an amount less than that owed in taxes, interest and expenses. The process of statutory interpretation always begins `with an analysis of the language of the statute.' Sweeney v. Sav. First Mortgage, L.L.C., 388 Md. 319, 326, 879 A.2d 1037, 1041 (2005) (quoting Holland v. Big River Minerals Corp., 181 F.3d 597, 603 (4th Cir.1999), cert. denied, 528 U.S. 1117, 120 S.Ct. 936, 145 L.Ed.2d 814 (2000)). The Court must determine whether the plain language of the statute is clear and unambiguous. Id.; Davis v. Slater, 383 Md. 599, 604-05, 861 A.2d 78, 81 (2004). The statute is ambiguous when there appear to be two or more reasonable alternative interpretations of its language. Stanley v. State, 390 Md. 175, 887 A.2d 1078 (2005); Greco v. State, 347 Md. 423, 429, 701 A.2d 419, 421 (1997). If the language is ambiguous, we must look beyond the statute itself and into the legislative history for guidance as to the intent of [the Legislature] in passing the statute. Sweeney, 388 Md. at 327, 879 A.2d at 1041; Davis, 383 Md. at 605, 861 A.2d at 81. As Judge Battaglia stated for the Court: [T]he goal of our examination is always to discern the legislative purpose, the ends to be accomplished, or the evils to be remedied by [the] particular provision. ... Davis, 383 Md. at 605, 861 A.2d at 81. The version of this section in effect at the time of the tax sales provides in pertinent part: [13]  § 14-817. Sale at public auction. . . . (b) Sales price. (1) Except as provided in subsection (c) of this section, property may not be sold for a sum less than the total amount of all taxes on the property that are certified to the collector under § 14-810 of this subtitle, together with interest and penalties on the taxes and the expenses incurred in making the sale, and the lien for the taxes, interest, penalties, and expenses passes to the purchaser. . . . (c) Baltimore City. [ [14] ](1) In Baltimore City, abandoned property consisting of either a vacant lot or improved property cited as vacant and unfit for habitation on a housing or building violation notice may be sold for a sum less than the total amount of: (i) all taxes on the property that are certified to the collector under § 14-810 of this subtitle; (ii) interest and penalties on the taxes; and (iii) expenses incurred in making the sale. . . . (3) The person responsible for the taxes prior to the sale shall remain liable to the collector for the difference between the amount received in the tax sale under this section and the taxes, interest, penalties, and expenses remaining after the sale. . . . (5) In a proceeding to foreclose the right of redemption under this subtitle, the complaint shall request a judgment for the city in the amount of the balance. . . . (7) The Mayor and City Council may institute a separate action to collect the balance at any time within 7 years after the tax sale if the plaintiff is a private purchaser. (Some emphasis added.) [15] In appellant's view, the City does not have the authority to sell the properties for an amount less than that owed, unless it properly cites them as vacant or abandoned. Our interpretation of the statute, in light of the legislative intent supporting the enactment of subsection (c), does not yield such a result. Before proceeding further we address an initial misinterpretation of the statute by appellant. During oral argument counsel for appellant contended that § 14-817(c) was not part of the general tax sale statute but a specific section dealing with a specific type of sale, and that as a result, any sale to be conducted in that manner was subject to the citation requirements of § 14-817(c). Appellant's counsel relied specifically on the headings of the subsection as they appeared in the appendix to his own brief, which read: TAX-PROPERTY ARTICLE § 14-817 § 14-817(c). Sale at public auction (c) Baltimore City. (1) In Baltimore City ... (Emphasis added.) The title  Sale at public auction,  inserted after the section number 14-817(c) in appellant's appendix to its brief, does not exist. By affixing the language Sale at public auction to § 14-817(c) in its appendix and then arguing that the section required a special tax sale, relying in part on that title improperly inserted in appellant's appendix, appellant has created a misleading inference. In the statute itself, section 14-817(c) has no title. Subsequently, the codifiers added Baltimore City. Appellant added to the copy of the statute in its appendix the words  Sale at public auction  and then at oral argument stated: But the sale itself is different than the regular tax sale. A regular tax sale is held a certain times of the year. This was a special tax sale held specially pursuant to the specific statute that allows a special tax sale. And that statute says that you can't include properties in an special tax sale unless it's an abandoned property that is either a vacant lot or an improved property that is unfit for habitation and has been cited as such on a violation notice. . . . 817(c) deals specifically, only with Baltimore City. . . . 817(c) (1) in Baltimore City, abandoned property consisting of either a vacant lot or improved property cited as vacant and unfit for habitation on a housing or building violation notice may be sold for a sum less ... . . . If I may respectfully disagree on this point, if you look at the heading for 817(c) it is not a continuation of the general tax statute. It says sale at public auction, and it is talking about a specific kind of auction. It is not part of the general tax sale, 817 the heading of that section says: `sale at public auction, Baltimore City,' and it talks specifically about a sale by Baltimore City for these properties. This is not just a continuation of the general tax sale, this is a specific section dealing with a specific auction for a specific municipality, under specific circumstances. . . . [Y]es there were taxes due, but 817(c) is a specific section, for a specific municipality, for specific properties. And in this case the City did not comply with this in any manner whatsoever. ... [Emphasis added.] There is only one type of tax sale governed by section 14-817, of which part (c) is only a subsection, not a separate tax sale provision. As we have stated, the language relied upon by appellant in support of its argument does not exist. To the extent appellant's argument relies on that erroneously inserted title, the argument fails. The statute does not require a special tax sale (at one point, however, the Deputy Mayor of Baltimore testified before a legislative committee during a subsequent modification hearing that the law has embodied the basic concept of a separate sale. ... Letter from Jeanne D. Hitchcock, Deputy Mayor, Baltimore City, to Members of the House Ways and Means Committee (Mar. 28, 2000)). The Mayor and City Council of Baltimore may have adopted a practice of separate sales, but the practice is not embodied in the statute at issue. As stated, section headings and subheadings are usually added by the codifiers as an aid for the interpretation of the statutes. Unless those headings are part of the body of the statute, however, they do not have the force of law as they were never approved by the legislative body. While titles, headings and subheadings can shed light on legislative intent, normally they will only do so when they are part of the process of enacting the statute by the Legislature. See Stouffer v. Pearson, 390 Md. 36, 46, 887 A.2d 623, 629 (2005); Davis, 383 Md. at 605, 861 A.2d at 81. And, as noted, the title language relied on by appellant does not exist in the statute, or in the codification of the statute. Section 14-817(c) provides that, in Baltimore City, a vacant lot or improved property cited as vacant ... may be sold for a sum less than the total amount [owed]. ... This section can reasonably be interpreted in two different ways. As appellant contends, under one of such interpretations, the City would be barred from conducting any tax sale at all if the properties are abandoned or vacant and it fails to adequately cite the properties. A second interpretation, one noted by the trial court, which we are adopting, is that the City is allowed to conduct the sale under its general tax sale process, but its failure to properly cite the properties prohibits the City from collecting the difference between the purchase price and the amount owed in taxes from the person who owned the property prior to the tax sale, that is to say there could be no deficiency judgment. In order to resolve this apparent ambiguity, we first look at the statutory framework under which § 14-817 was enacted. In 1942, the Research Division of the Maryland Legislative Council wrote a report entitled Tax Sales in Maryland, Research Report No 14. In the report, the Council determined that the lack of uniformity in the procedures involving tax sales created great confusion and uncertainty with regards to the rights of the tax sale purchasers. Due to that uncertainty, purchasers were not eager to buy property at tax sales and title insurance companies were refusing to guarantee titles of tax sale property. As a result, the Council concluded that the tax sale procedures should be simplified and standardized. A year later, the Legislature enacted Chapter 761 of the Acts of 1943, which provided: 81. SALE AT PUBLIC AUCTION. The sale shall be held on the day and at the place stated in the notice by advertising. The sale shall be held in the County in which the land to be sold is located. If the sale cannot be completed on such day, the Collector shall continue the same from day to day until all property included in the sale is sold. All sales shall be at public auction to the highest bidder, in fee or leasehold, as the case may be. No property shall be sold for a sum less than the total amount of all State and County taxes due thereon, and such other taxes as have been certified to the Collector under the provisions of Section 74 hereof, together with interest and penalties thereon and the expenses incurred in making the sale, and the lien for the same shall pass to the purchaser. (Emphasis added.) The law was codified as Maryland Code (1951), Article 81, § 79, and later as Maryland Code (1957), Article 81, § 80 without any substantive modifications. Then, in 1985, the General Assembly enacted the Tax-Property article, adopting § 79 to be codified as § 14-817, without any changes relevant to this case. Chapter 8 of the Acts of 1985. Almost fifty years after the initial passage of the statute, the City of Baltimore found itself at an impasse because of the provision emphasized above that properties could not be sold for less than the amount of delinquent taxes. There were a significant number of properties whose values were far less than the amount owed in taxes. Purchasers would not buy the properties for the amount of taxes owed, and the City was not allowed to sell them for a lesser amount. Accordingly, the delinquent property owners just kept owning and operating the properties without paying taxes. Each year the tax arrearage increased and made it even more difficult to sell the properties at tax sales. This created more abandoned properties and less habitable properties. If the owners improved the properties, they could possibly appreciate in value to the point at which they could be sold at tax sale. So, apparently, they were not being improved. As a result, House Bill 1251 was introduced in 1992 creating an exception for Baltimore City from the requirement that the properties be sold at no less than the amount owed in taxes, interest and expenses. This was the purpose of the legislation. In support of the bill, Robert W. Hearn, the Commissioner of the Department of Housing and Community Development for Baltimore City, testified before the House Ways and Means Committee on March 4, 1992. He provided the following description of the situation: The kind of damage that an abandoned house inflicts on its neighborhood is well known. There is nothing that contributes so swiftly or substantially to neighborhood decline as an abandoned house, whether it's boarded up or left wide open to passersby. An abandoned house guarantees a drop in area property values, and consequently, a drop in the City's tax base. It collects trash and harbors rats; it attracts criminalsvandals and arsonists and drug dealers and other people engaged in dangerous and detrimental activity. The vacant property thus precipitates and contributes to a spiralling decline in the quality of urban life throughout the neighborhood. The rate of abandonment is increasing while the resources available to us for mounting any kind of effective resistance are shrinking. It is absolutely imperative, therefore, that we develop new approaches aimed at removing government obstacles and facilitating private rehabilitations. House Bill 1251 represents just such an approach by amending provisions in the tax sale process. Ironically, the tax sale processwhich should be providing a routine mechanism for moving abandoned property into the hands of rehabbershas become a major obstacle. As abandoned properties continue to deteriorate, the City must periodically respond to neighborhood requests for help in regard to the numerous crises that inevitably arise. For instance, we bait for rats, or replace window boards torn off by vandals, or remove the truckloads of garbage and trash that accumulate in the yard. The expenses of each intervention are posted as a lien against the property. These liens are equivalent to taxes. Therefore, when the property comes up next for tax sale, a private purchaser must pay all of these maintenance and repair costs in addition to the amount of the assessed tax. Because an abandoned property is worth very little to begin with, these tax liens can quickly outstrip its value. When this happens, of course, there will be no private purchaser at the tax sale. With no new responsible owner, the property continues to deteriorate and continues to accumulate additional emergency repair liens until it is again returned to a tax sale to repeat the process. In Baltimore City, tax sale certificates on this kind of vacant property expire in a year. When there has been no private purchaser within one year, or no foreclosure, the property simply goes into the next year's sale. House Bill 1251 restores the tax sale as a valuable tool for both tax collection and property acquisition by would-be rehabbers. It lets the City do what any private mortgage holder can do in a foreclosure salethat is, sell off the property for its market value and then get a judgment for the deficiency. By providing for a deficiency judgment, the bill discourages abandonment. Currenty [sic] owners will know that they cannot so easily walk away and expect the city to pick up the tab. And by providing for a market-value transfer, the bill will facilitate many title transfers that are now out of the question. The approach taken by this bill is a breakthrough in our long battle against abandoned property. We ask you to support House Bill 1251 in order to turn the tax sale into part of the solution instead of what is nowa large part of the problem. (Emphasis added.) Subsequently, the Department of Fiscal services issued a fiscal note on the bill which stated: While this bill would allow the tax sale of property for less than the total amount of the debts against the property, the bill also provides that any shortfall resulting from the sale of the property for less than the debts against the property would remain a liability of the owner in the amount of the shortfall. Any shortfall resulting from the sale of the property for less than the debts against the property could still be collected via the owner of the property. Consequently, the City should neither gain nor lose under this bill, only, collect monies owed to it sooner than would be realized under the normal collection process. Another fiscal summary also sheds light on the fact that the legislature's main concern was to allow the City to dispose of the vacant properties contributing to the decline of some of its neighborhoods at less than the amount of taxes owed. That summary provided: The City may be able to collect some monies faster by the process allowed by this bill. Also, some properties are `unsellable' at the rate needed to pay of all debtsbeing able to sell at a lower price might allow the City to collect a portion of these debts that would otherwise be unreachable.  (Emphasis added.) Such language demonstrates that the Legislature was fully aware that the City might never be able to find tax sale purchasers, or to collect the taxes owed on certain properties, under the then-existing statutory scheme. Another important clue in ascertaining that it was the Legislature's intent that the primary purpose of the bill was to permit the City to sell properties for less than the taxes due can be gathered from the Floor Report of the Senate Budget and Taxation Committee, which expressly provided that [t]his bill authorizes Baltimore City to sell certain abandoned property at a tax sale for less than the sum [owed]. ... The floor report does not make any mention as to limits on the application of this section. It further provided, moreover, that [t]he only impact upon City revenues under this Act would be the expedited collection of certain monies owed the City. The bill passed on a 40 to zero vote in the Senate and on a 126 to zero vote in the House of Delegates, and was enacted in Chapter 603 of the Acts of 1992. The stated purpose of the law in the enacted statute states: FOR the purpose of authorizing certain abandoned property in Baltimore City to be sold for a sum less than a certain amount otherwise due for tax sales; specifying that certain persons responsible for certain taxes prior to the tax sale of certain properties remain liable for certain unpaid taxes and other amounts; requiring certain persons to pay certain unpaid taxes in order to redeem certain property ; requiring complaints in certain proceedings to foreclose redemption rights to make a certain request; limiting the effect of certain judgments; requiring certain orders in certain proceedings to foreclose redemption rights to include a certain judgment; and generally relating to tax sales of abandoned property in Baltimore City. Chapter 603 of the Acts of 1992 (some emphasis added). The new statute also amended §§ 14-828, 14-835, and 14-844 to the extent that they relate to properties sold under § 14-817 for an amount less than the taxes owed. In 1998, the Legislature rewrote § 14-817, leaving subsection (c) unaltered. Chapter 326 of the Acts of 1998. The new sections spelled out the conduct of the tax sale under subsection (a) and the purchase price under subsection (b). Then, in the Acts of 2000, the Legislature enacted Chapter 408 in which it added subsection (c)(7) stating that [t]he Mayor and City Council may institute a separate action to collect the balance at any time within 7 years after the tax sale if the plaintiff is a private purchaser [as opposed to a governmental or charitable entity]. (emphasis added). This section gave the City authority to pursue a separate action against the original owner (as opposed to a judgment in the redemption action), showing once again that the Legislature intended to give the City the ability to solve the problem. [16] If appellant's contention is that abandoned and vacant properties cannot be sold unless cited as such were to prevail, such properties, absent such citation, could not be sold at all irrespective of the existence of delinquent taxes. Abandoned or vacant properties would be afforded more, not less, protection than unabandoned, occupied properties. That certainly was not the intention of the Legislature. The only reasonable interpretation, that made by the trial court, is that the citation provisions are linked only to the ability of the City to seek judgments for deficiencies as against the delinquent taxpayers. Otherwise, so long as taxes are overdue, and not paid prior to the judgment of foreclosure, such properties may be sold, albeit that the City may not seek deficiency judgments absent the citations. It is clear, therefore, that the Legislature did not intend to restrict the City's ability to dispose of these types of properties at tax sales. On the contrary, the statute was specifically enacted to allow such sales. It is in this context that we now turn to the question of the Circuit Court's jurisdiction to issue a judgment foreclosing appellant's right of redemption.