Opinion ID: 2046112
Heading Depth: 1
Heading Rank: 3

Heading: Statutory Relief

Text: The public guardian's petition to set aside the tax deed issued to Apex is a collateral attack upon the circuit court's tax deed order, brought under section 2-1401 of the Code of Civil Procedure (735 ILCS 5/2-1401 (West 1994)). Collateral attacks upon tax deed orders implicate two competing public policies. On the one hand, [t]he forced sale of a home is a grave and melancholy event ( Smith v. D.R.G., Inc., 63 Ill.2d 31, 39, 344 N.E.2d 468 (1976)) that can have severe consequences for the delinquent taxpayer. Allowing a collateral attack upon the tax deed order provides the delinquent taxpayer with an opportunity, in addition to the direct appeal, to ensure that the order was properly obtained. On the other hand, the availability of a collateral challenge to the tax deed order tends to undermine the finality and, hence, the marketability of the tax deed. This point is significant because tax purchasers participate in the tax sale system in order to obtain marketable titles. See Village of Dolton v. First National Bank of Blue Island, 12 Ill.2d 435, 440, 147 N.E.2d 62 (1957) (Our whole system of judicial sales is based upon the public's willingness to accept titles thereby created). If tax purchasers do not participate in tax sales, then delinquent taxpayers lose the incentive to pay their real estate taxes and tax revenues fall. See Cherin v. The R. & C. Co., 11 Ill.2d 447, 451-53, 143 N.E.2d 235 (1957); G. Turano, Equitable Relief, Collateral Attack and the Illinois Tax Deed, 51 Chi.-Kent L.Rev. 725, 725-26 (1975); D. Karlen & R. Slutzky, A Guide to Tax Deed and Indemnity Fund Proceedings, in Real Estate Taxation § 11.37, at 11-75 (Ill. Inst. for Cont. Legal Educ.2005) (Participation by tax purchasers is essential to the tax collection process because tax purchasers represent a threat to property owners that will induce them to make timely payments). Over the past several decades, the balance between the competing policies of ensuring the propriety of tax deed orders by permitting collateral challenges to such orders, and preserving the marketability of tax deeds, has been struck in different ways. In 1951, the legislature substantially revised the Revenue Act of 1939 (Ill. Rev.Stat.1951, ch. 120, par. 482 et seq. ), the predecessor statute to the Property Tax Code. As this court has frequently noted, these revisions were undertaken, in large part, to improve the marketability and validity of tax titles in order to reduce real estate tax delinquencies. See, e.g., In re Application of the County Treasurer, 92 Ill.2d 400, 406, 65 Ill.Dec. 905, 442 N.E.2d 216 (1982) (observing that, before 1951, tax deeds amounted to little more than a cloud on the title of the delinquent owner); L. Dotson, Note, 40 Chi.-Kent L.Rev. 155, 157-58 (1963). Prior to the 1951 revisions, the decision as to whether the statutory requirements for obtaining a tax deed had been met, including whether notice requirements had been satisfied, was made administratively, by the county clerk. The 1951 revisions altered this practice and made the issuance of the tax deed a judicial decision, made by the county court upon petition. Ill.Rev.Stat.1951, ch. 120, par. 747; In re Application of the County Treasurer, 214 Ill.2d 253, 262, 291 Ill.Dec. 758, 824 N.E.2d 614 (2005); Cherin, 11 Ill.2d at 451-53, 143 N.E.2d 235. Section 266 of the Revenue Act was also amended to provide that the tax deed order would be incontestable except by direct appeal. Ill.Rev.Stat.1951, ch. 120, par. 747; Cherin, 11 Ill.2d at 453, 143 N.E.2d 235. No provision in the Revenue Act allowed for collateral challenges to the tax deed order. Further, section 266 was amended to state that it was to be liberally construed so that tax deeds herein provided for shall convey merchantable title. Ill.Rev.Stat. 1951, ch. 120, par. 747. Seven years after the 1951 revisions to the Revenue Act, in Southmoor Bank & Trust Co. v. Willis, 15 Ill.2d 388, 155 N.E.2d 308 (1958), this court addressed the delicate problem of construing section 266 of the Revenue Act, which, as noted, did not permit collateral attacks upon tax deed orders, with section 72 of the Civil Practice Act (Ill.Rev.Stat.1957, ch. 110, par. 72), the statutory predecessor to section 2-1401. Southmoor Bank, 15 Ill.2d at 394, 155 N.E.2d 308. Examining the two statutes, this court observed that section 72 established a uniform procedure for obtaining relief from all final orders, judgments and decrees within its purview. Southmoor Bank, 15 Ill.2d at 394-95, 155 N.E.2d 308. Reasoning that section 72 and section 266 of the Revenue Act were in pari materia, we concluded that the legislature desired to render tax titles incontestable except by direct appeal, subject to the provisions of section 72 of the Civil Practice Act. Southmoor Bank, 15 Ill.2d at 394, 155 N.E.2d 308. The court further noted, however, that unless a lack of jurisdiction affirmatively appeared on the record, the prior finding of the county court of compliance with all the provisions of law entitling petitioner to a tax deed could not    be disputed in [the section 72] proceeding. Southmoor Bank, 15 Ill.2d at 396, 155 N.E.2d 308. In Remer v. Interstate Bond Co., 21 Ill.2d 504, 173 N.E.2d 425 (1961), this court again observed that a county court's findings that the statutory prerequisites to issuing a tax deed had been complied with could not be challenged collaterally, unless a lack of jurisdiction appeared on the face of the record. Remer, 21 Ill.2d at 510, 173 N.E.2d 425. However, this court also stated that allegations of fraud could be raised in a collateral attack upon the tax deed order. We reasoned that such allegations fit within the requirements of section 72 and that elementary principles of law require that relief be granted where proceedings regular in form are tainted with fraud and coercion. Remer, 21 Ill.2d at 514, 173 N.E.2d 425. Thereafter, in Urban v. Lois, Inc., 29 Ill.2d 542, 194 N.E.2d 294 (1963), we reiterated this rule, stating: It has been well established in taxdeed proceedings that section 72 cannot be used as a vehicle to relitigate any issue already passed on by the trial court, in the absence of fraud. Urban, 29 Ill.2d at 548, 194 N.E.2d 294. In so holding, we explained why the scope of collateral attack upon the tax deed order was a limited one: If we were to hold otherwise, we would abrogate the efficacy of the 1951 amendments to the Revenue Act, and would defeat the desired conclusiveness of the county court's order for the issuance of a tax deed. The consequent effect upon the merchantability of tax titles would place the annual sale in the same status as existed before the 1951 amendments and which the legislature intended to change. Urban, 29 Ill.2d at 549, 194 N.E.2d 294. In 1967, the legislature amended section 266 of the Revenue Act to state that relief from an order granting a tax deed could be had under section 72 of the Civil Practice Act, thereby expressly confirming this court's holding to that effect in Southmoor Bank. See Ill.Rev.Stat.1967, ch. 120, par. 747. In 1982, in In re Application of the County Treasurer, 92 Ill.2d 400, 408, 65 Ill.Dec. 905, 442 N.E.2d 216 (1982), this court again addressed the scope of collateral relief available in tax deed cases. After reviewing the relevant case law, as well as various revisions that had been made to the Revenue Act by the General Assembly, we concluded that the legislature intended to protect tax deed orders from collateral attack on questions relating to notice. County Treasurer, 92 Ill.2d at 408, 65 Ill. Dec. 905, 442 N.E.2d 216. Accordingly, we chose to adhere to our previous holdings that section 72 relief in tax-deed cases is limited to those cases where fraud is proved or the judgment is void. County Treasurer, 92 Ill.2d at 408, 65 Ill.Dec. 905, 442 N.E.2d 216. During the 1990s, the legislature twice addressed the issue of collateral challenges to tax deed orders. In amendments to section 266 of the Revenue Act that were adopted in 1990, the General Assembly codified the holdings of decisions such as County Treasurer and Urban with respect to the grounds for relief that are available in a collateral attack upon a tax deed order. See 86th Ill. Gen. Assem., Senate Proceedings, May 10, 1990, at 62 (statements of Senator Lechowicz). In addition, the legislature created a new, statutory ground for collateral relief that is available in certain circumstances where the tax deed order was effectuated pursuant to a negligent or willful error made by an employee of the county clerk or county collector. Ill.Rev.Stat.1991, ch. 120, par. 747. Also, the 1990 amendments added language to section 266 which states that the grounds for relief that are available in a collateral attack upon a tax deed order shall be limited to those enumerated in the statute. See Ill.Rev.Stat.1991, ch. 120, par. 747. In 1993, the General Assembly created an additional statutory ground for collateral relief from a tax deed order. Generally stated, this ground may be invoked by a person or party with a recorded interest in the tax deed property who was not served with notice in any manner whatsoever. See 35 ILCS 200/22-45(4) (West 1994). The amendments enacted by the General Assembly in 1990 and 1993 are currently found in section 22-45 of the Property Tax Code (35 ILCS 200/22-45 (West 1994)). Section 22-45 expresses the balance struck by the legislature between the public policies of allowing collateral relief from tax deed orders and preserving the marketability of tax deeds. Section 22-45 provides: Tax deeds issued under Section 22-35 [3] are incontestable except by appeal from the order of the court directing the county clerk to issue the tax deed. However, relief from such order may be had under Section 2-1401 of the Code of Civil Procedure in the same manner and to the same extent as may be had under that Section with respect to final orders and judgments in other proceedings. The grounds for relief under Section 2-1401 shall be limited to: (1) proof that the taxes were paid prior to sale; (2) proof that the property was exempt from taxation; (3) proof by clear and convincing evidence that the tax deed had been procured by fraud or deception by the tax purchaser or his or her assignee; or (4) proof by a person or party holding a recorded ownership or other recorded interest in the property that he or she was not named as a party in the publication notice as set forth in Section 22-20, and that the tax purchaser or his or her assignee did not make a diligent inquiry and effort to serve that person or party with the notices required by Sections 22-10 through 22-30. In cases of the sale of homestead property in counties with 3,000,000 or more inhabitants, a tax deed may also be voided by the court upon petition, filed not more than 3 months after an order for tax deed was entered, if the court finds that the property was owner occupied on the expiration date of the period of redemption and that the order for deed was effectuated pursuant to a negligent or willful error made by an employee of the county clerk or county collector during the period of redemption from the sale that was reasonably relied upon to the detriment of any person having a redeemable interest. 35 ILCS 200/22-45 (West 1994). In the case at bar, the public guardian argues that the tax deed issued to Apex should be set aside because there is clear and convincing evidence that the tax deed order was procured by fraud or deception. 35 ILCS 200/22-45(3) (West 1994). The public guardian notes that, at the hearing on Apex's petition for issuance of a tax deed order, Apex's attorney represented to the circuit court that it had strictly complied with the Property Tax Code's notice provisions, that it had been unable to ascertain Mary Lowe's whereabouts despite having conducted a diligent search, and that there were no minors, incompetents, or estates that appear to have an interest in the property. The public guardian contends that in view of Apex's willful ignorance with respect to the notations on the undelivered envelopes these representations constitute fraud or deception under section 22-45 and, therefore, that the tax deed issued to Apex should be set aside. In the context of tax deed proceedings, fraud is defined as `a wrongful intentan act calculated to deceive.' County Treasurer, 92 Ill.2d at 405, 65 Ill.Dec. 905, 442 N.E.2d 216, quoting Dahlke v. Hawthorne, Lane & Co., 36 Ill.2d 241, 245, 222 N.E.2d 465 (1966); see also Smith v. D.R.G., Inc., 63 Ill.2d 31, 37, 344 N.E.2d 468 (1976); Exline v. Weldon, 57 Ill.2d 105, 110, 311 N.E.2d 102 (1974); Zeve v. Levy, 37 Ill.2d 404, 409, 226 N.E.2d 620 (1967). This level of wrongdoing has not been established here. The envelopes with Jewel Hightower's notations on them were returned by the post office to their sender, the Cook County sheriff. The sheriff submitted the envelopes to the clerk of the circuit court, who then placed the envelopes in the court file which, by statute, the clerk is required to maintain in tax deed cases. See, e.g., 35 ILCS 200/22-20, 22-25 (West 1994). There was nothing unusual or unexpected about the fact that the envelopes were returned, undelivered. Both an agent from Apex and a deputy sheriff from the Cook County sheriff's office had visited the property, found it vacant, and been told by neighbors that the occupants of the home had moved. Further, the notations on the envelopes addressed to Mary Lowe and occupant, though legible, cannot reasonably be called prominent. The notations have a line drawn through them and they are partially obscured by the circuit court clerk's filing stamps and the post office's returned to sender stamps. More important, there is no evidence that Apex attempted to conceal the notations or alter the envelopes in any way. To the contrary, the envelopes were submitted into evidence by Apex along with the other portions of the record, and the circuit court explicitly relied upon them in rendering its decision to enter the tax deed order. On this record, the most that can be said with respect to Apex's actions is that Apex simply failed to discover the notations on the envelopes. However, as this court has frequently noted, the failure to uncover a particular fact during the search for a delinquent taxpayer does not, by itself, establish fraud. Dahlke, 36 Ill.2d at 246, 222 N.E.2d 465; Exline, 57 Ill.2d at 110, 311 N.E.2d 102 (even if a more persistent effort could have been made in the conduct of the search and inquiry [for the delinquent taxpayer], this is not proof of fraud unless there exists evidence of wrongful intent or a deceptive design); Zeve, 37 Ill.2d at 409, 226 N.E.2d 620; see also County Treasurer, 92 Ill.2d at 407-09, 65 Ill.Dec. 905, 442 N.E.2d 216 (error in service which was at most negligence did not constitute fraud). Moreover, the fact that the envelopes were submitted into evidence and relied upon by the circuit court is a strong indication that there was no deceptive or fraudulent act on the part of Apex. See In re Application of County Treasurer & ex officio County Collector, 267 Ill.App.3d 993, 998-99, 204 Ill.Dec. 840, 642 N.E.2d 741 (1994) (no deceptive act takes place when all relevant information is openly presented to the court); In re Application for Judgment & Sale by the County Treasurer & Ex Officio County Collector, 276 Ill.App.3d 1084, 1090, 213 Ill.Dec. 541, 659 N.E.2d 457 (1995) (same); In re Application of County Treasurer & Ex-Officio County Collector, 20 Ill.App.3d 291, 298, 314 N.E.2d 300 (1974) (same). The record in this case does not show, by clear and convincing evidence, a wrongful intent or an act calculated to deceive. Dahlke, 36 Ill.2d at 245, 222 N.E.2d 465. Accordingly, we affirm the circuit court's judgment that the tax deed order was not obtained by fraud or deception. Citing to In re Application of County Collector for Judgment & Order of Sale Against Lands & Lots Returned Delinquent for Nonpayment of General Taxes for the Year 1982 & Prior Years, 202 Ill.App.3d 405, 147 Ill.Dec. 666, 559 N.E.2d 1006 (1990), the public guardian also argues that, even if Apex's actions were not fraudulent, this court should invoke its equitable powers to void the tax deed order and return the property at issue to Mary Lowe's estate. The public guardian argues that Mary Lowe lost her home through no fault of her own, and emphasizes that Judge Staniec, in the affidavit which he submitted to the circuit court, stated that he would not have issued the tax deed order if he had known that Lowe was hospitalized in 1995 and 1996. According to the public guardian, it would be unjust not to allow Lowe's estate to recover the property and, therefore, under principles of equity, the tax deed should be set aside. In County Collector, a tract search prepared from a title company's own tract indices, rather than official public records, failed to disclose a properly recorded mortgage. Relying on the results of the tract search, and not knowing that the results were inaccurate, the circuit court issued a tax deed order. County Collector, 202 Ill.App.3d at 408-09, 147 Ill.Dec. 666, 559 N.E.2d 1006. Thereafter, the holder of the properly recorded mortgage filed a section 2-1401 petition, seeking to have the tax deed set aside. Because the tax deed order had not been obtained by fraud, the circuit court declined to vacate it. However, the circuit court stated that it would not have issued the tax deed order had it known of the recorded interest and expressed the opinion that, were equity to apply, the tax deed should be set aside. County Collector, 202 Ill.App.3d at 409-10, 147 Ill.Dec. 666, 559 N.E.2d 1006. On appeal, the appellate court reversed. Citing to In re Application of County Treasurer & Ex Officio County Collector of Cook County, Illinois, for Judgment & Order of Sale Against Real Estate Rendered Delinquent for the Nonpayment of 1980 Taxes, 185 Ill.App.3d 789, 134 Ill.Dec. 218, 542 N.E.2d 397 (1989), and In re Application of the County Treasurer & Ex Officio County Collector, 171 Ill.App.3d 644, 121 Ill.Dec. 545, 525 N.E.2d 852 (1987), two cases in which tax deeds were set aside because of errors committed by the county clerk, the appellate court concluded that not all circumstances under which tax deeds should be set aside fit within the framework of fraud. The appellate court held that equitable principles may be relied upon by the courts under section 2-1401 to afford relief for parties who, through no fault of their own (and through no fraud by any party), stand to lose property in which they have a considerable interest. County Collector, 202 Ill. App.3d at 414-15, 147 Ill.Dec. 666, 559 N.E.2d 1006. The appellate court observed that the case before it was one in which `no attempt was made to serve the interested party by any means' ( County Collector, 202 Ill.App.3d at 413, 147 Ill.Dec. 666, 559 N.E.2d 1006), and that it would be unjust to let the tax deed stand. Accordingly, the appellate court vacated the tax deed order. County Collector, 202 Ill. App.3d at 416-17, 147 Ill.Dec. 666, 559 N.E.2d 1006. County Collector, and the appellate decisions it relied upon, are not helpful to the public guardian in the case at bar because those cases were decided prior to the passage of the 1990 amendments to section 266 of the Revenue Act. At the time County Collector was decided, section 266 stated that relief from tax deed orders could be had under section 2-1401 in the same manner, upon the same grounds and to the same extent as may be had under that Section with respect to final orders, and judgments in other proceedings. Ill. Rev.Stat.1989, ch. 120, par. 747. The scope of collateral challenges to tax deed orders was thus a matter of judicial decision as to what constituted appropriate grounds for relief under section 2-1401. See, e.g., County Collector, 202 Ill.App.3d at 410, 147 Ill.Dec. 666, 559 N.E.2d 1006. After the passage of the 1990 amendments, this was no longer the case. The 1990 amendments added language, currently found in section 22-45 of the Property Tax Code, which states that [t]he grounds for relief under Section 2-1401 shall be limited to those enumerated in the statute. 35 ILCS 200/22-45 (West 1994). General, equitable principles is not one of the grounds for relief listed in section 22-45. Further, we note that the result reached by County Collector, i.e., that a party with a recorded interest in property who receives no section 22-10 notice whatsoever may seek relief under section 2-1401, has been codified by the General Assembly in section 22-45(4) (35 ILCS 200/22-45(4) (West 1994)). In addition, clerical error has been added as a basis for redemption. See 35 ILCS 200/22-45 (West 1996). However, while the General Assembly has enacted these specific grounds for relief, it has not enacted the broader holding, found in County Collector, that general, equitable principles are a basis for relief in all collateral challenges to tax deed orders brought under section 2-1401. At present, section 22-45 does not contain, as a ground for relief, a general equity provision. See In re Application of the County Treasurer & Ex Officio County Collector, 304 Ill.App.3d 502, 505, 238 Ill. Dec. 109, 710 N.E.2d 906 (1999); In re McKeever, 132 B.R. 996, 1015 (Bankr. N.D.Ill.1991); D. Karlen & R. Slutzky, A Guide to Tax Deed and Indemnity Fund Proceedings, in Real Estate Taxation § 11.31, at 11-63 (Ill. Inst. for Cont. Legal Educ.2005). Accordingly, we may not consider the public guardian's argument that the tax deed at issue in this case should be set aside, under section 2-1401, based on equitable principles. This is not to say, however, that the General Assembly is unconcerned about achieving equity in cases such as this, or that Mary Lowe's estate has no statutory remedy. As the circuit court below noted, an alternative form of relief is available to Lowe's estate under the indemnity provisions of the Property Tax Code. See 35 ILCS 200/21-295 et seq. (West 1994). The indemnity provisions were enacted by the legislature in 1970 in recognition of the fact that taxes may go unpaid, and property may be lost to a tax deed, because of circumstances such as mental or physical disability that are beyond the property owner's control. See G. Turano, Equitable Relief, Collateral Attack and the Illinois Tax Deed, 51 Chi-Kent L.Rev. 725, 733 (1974). The provisions create an indemnity fund, from which, pursuant to section 21-305 (35 ILCS 200/21-305 (West 1994)), the former property owner may seek a monetary award for the loss of property. At the time relevant here, section 21-305 provided: (a) Any owner of property sold under any provision of this Code, who without fault or negligence of his or her own sustains loss or damage by reason of the issuance of a tax deed under Sections 22-40 or 21-445 and who is barred or in any way precluded from bringing an action for the recovery of the property or any owner of property containing 4 or less dwelling units who resided thereon the last day of the period of redemption who, in the opinion of the Court which issued the tax deed order, is equitably entitled to just compensation, has the right to indemnity for the loss or damage sustained. Indemnity shall be limited to the fair cash value of the property as of the date that the tax deed was issued, less any mortgages or liens thereon. [4]    The Court shall liberally construe this Section to provide compensation wherever in the discretion of the Court the equities warrant such action. 35 ILCS 200/21-305 (West 1994). Section 21-305 is well suited to achieve equity in this case. Mary Lowe is deceased. Moreover, although the record does not indicate when any member of Lowe's family last resided in her former home, at a minimum, it would have been sometime before Lowe's hospitalization in 1995. Thus, in this case, the importance of the property at issue is not as a place of residence to Mary Lowe or her family, but as the primary asset in Lowe's estate. The indemnity fund can fully compensate Lowe's estate for the monetary value of the property. Further, John Herndon has indicated that, if the tax deed is set aside and the property returned to Lowe's estate, he will pursue an action against the estate to recover the $20,000 worth of improvements he made to the home. Even if such action proves unsuccessful, the estate would bear the cost of defending against the action. Using the indemnity provisions can give the estate the full value of the property without having to withstand the time and expense of any legal action brought by Herndon. The General Assembly enacted the indemnity provisions to address situations such as that presented in the case at bar. The record indicates that the public guardian has filed a petition for indemnification on behalf of Mary Lowe and that the petition remains pending in the circuit court. After issuing its ruling in this case, the circuit court strongly urged the public guardian to continue the indemnification action on behalf of Mary Lowe's estate. We do so as well.