Opinion ID: 4017222
Heading Depth: 3
Heading Rank: 3

Heading: Title-washing

Text: An offshoot of the Act of 1815, and the Act of 1804 which it supplemented, is the concept of “title-washing.” Section 5 of the Act of 1804 provided: [S]ales of unseated land, for taxes that are now due . . . shall be in law and equity valid and effectual, to all intents and purposes, to vest in the purchaser or purchasers of lands sold as aforesaid, all the estate and interest therein, that the real owner or owners thereof had at the time of such sale, although the land may not have been taxed or sold in the name of the real owner.” This Court explained that “a tax sale extinguishes all previous titles,” Reinboth v. The Zerb Run Improvement Co., 29 Pa. 139, 145 (Pa. 1858), and excludes “all other claimants to the land of a prior date.” Caul v. Spring, 2 Watts 390, 396 (Pa. 1834). In Powell v. Lantzy, 34 A. 450 (Pa. 1896), this Court explained the rationale underlying title-washing, although it did not use the term. The Court addressed a tract of unseated land which had been assessed and taxed as an undivided piece of property in 1882 and 1883. Despite the pending delinquent taxes, the owner of the property sold the surface rights and reserved the coal and mineral rights in 1883. In 1884, a tax sale purported to encompass the entire property based upon the 1882 and 1883 pre-division assessment and taxation. In the case, the individual who had purchased the surface rights from the owner in 1883 then purchased the entire property via the 1884 tax sale, thus gaining the subsurface rights. The Court in Powell questioned whether there was an equitable reason for forbidding the surface owner from purchasing the entire property at tax sale. This Court recognized that, as to unseated land where the tax was imposed on the land and therefore not the landowner’s personal responsibility, nothing prevented “the holder of a [J-8-2016] - 15 defective title from purchasing a better one at a tax sale.” Id. at 548 (quoting Coxe v. Gibson, 27 Pa. 160 (Pa. 1856)). As relevant to the case at bar, the court explained the duty, or lack thereof, of landowners to pay taxes: “The whole was subject to a claim for taxes which existed before they acquired title, and which neither [the surface nor the subsurface owner] was under any obligation to the state to pay. If either [the surface or subsurface owner] had paid it, he could not have recovered of the other his proportionate share.” Id. at 549. Moreover, it opined that there was no way to apportion the tax. “Any moral obligation to agree and jointly pay the tax, each contributing his just share, rested equally upon the owners of the different parts; but there was no legal duty on either to do this. It was their separate, not their joint, interests which were in peril.” Id. at 550. The Court thus affirmed the purchase of the entire tract by means of a tax sale based upon the taxes assessed and unpaid on the property prior to the division. See also Hutchinson v. Kline, 49 A. 312 (Pa. 1901). In Proctor v. Sagamore Big Game Club, the federal courts addressed a tax sale of unseated land in the late 1800s for purposes of land transactions in the 1950s, which mirrors the timeframe of the case at bar. Proctor, 166 F. Supp. at 470, aff’d, 265 F.2d at 200-01. In 1893, Thomas Proctor (Proctor) purchased an unseated property from the then-owner at a time when the prior year’s taxes had not been paid. After purchasing the property, Proctor apparently did not pay the delinquent 1892 taxes. Accordingly, the property was subjected to a tax sale in 1894 and was purchased in fee simple by G.W. Childs (Childs). Months later, Proctor, despite the tax sale, purported to sell the property to Elk Tanning Company but reserve the mineral interests to himself. Childs, [J-8-2016] - 16 who was also president of Elk Tanning Company, later assigned his interest in the mineral rights from the tax sale to the company. 10 Proctor, 265 F.2d at 200. In the 1950s, Proctor’s heir attempted to invalidate the tax sale to Childs by claiming that the deed from the tax sale had not been property acknowledged or that there were fraudulent aspects of Childs’ dealings with his company. After rejecting the claim that the deed was not properly acknowledged, the court observed that the tax sale had divested the prior owner of the ability to sell the property and reserve any mineral rights as all the owner’s rights had been extinguished via the tax sale. Proctor, 166 F. Supp. at 470, aff’d, 265 F.2d at 200-01. Moreover, the court held, that “[w]hen there is no separate assessment of the minerals, a purchase of the whole by the owner of the surface divests the title of the owner of the minerals.” Proctor, 166 F. Supp. at 475. As in the case at bar, it appears that the property had been divided into separate mineral and surfaces estates, but had nonetheless been sold as a united whole property for the failure to pay taxes on the property, which was assessed as a unit. See also Powell, 34 A. at 451. Accordingly, courts interpreting Pennsylvania law have a long history of accepting the concept of a tax sale reuniting severed estates of unseated property and perfecting previously defective titles. D. Reporting Duties of Owners vs. County Commissioners under the Act of 1806 10 As an interesting historical note, the parties involved in this transaction were also involved in other similar transactions covering a substantial portion of several counties in a purported attempt to consolidate bark lands into the United States Leather Company, arguably with the land owners reserving mineral rights. Proctor, 265 F.2d at 201-02. Proctor and Childs were both tannery owners. Id. [J-8-2016] - 17 Factually, the issues in this case turn on whether the taxes assessed and not paid in 1935 were assessed on the Eleanor Siddons Warrant as a whole or merely upon the surface estate. In addressing this issue, many of the arguments in this case have focused on whether the Kellers had a duty to report the 1899 subdivision of the estate into surface and mineral estates to the Centre County Commissioners, which would have triggered a separate assessment and taxation of the Keller’s mineral estate (or no taxation if it had no value). This question requires our review of the Act of 1806, as well as its predecessor, the Act of 1804. In regard to unseated property, the Act of 1804 initially required the deputy surveyors to report to the commissioners regarding all the lands surveyed in the county with a list including the acreage and the surnames on the original warrant, e.g. the Eleanor Siddons Warrant. Act of 1804, § 1. The commissioners, in turn, were required to keep a book listing each tract with the acreage and the name of the original owner. Id. The Legislature enacted the Act of 1806 to provide that “it shall be the duty of every holder of unseated lands” to provide the county commissioners with a signed statement describing the tract of land and “the name of the person or persons to whom the original title from the commonwealth passed, and the nature, number, and date of such original title.” Act of 1806 Section 1. To address future transfers, the Act provided: [I]t shall be the duty of every person hereafter becoming a holder of unseated land, by gift, grant, or other conveyance to furnish a like statement, together with the date of the conveyance to such holder, and the name of the grantor, with in one year, from and after such conveyance. Id., set forth in substantial part at 72 P.S. § 5020-409. The penalty for failing to provide this information was “four times the amount of tax to which such tract or tracts of land [J-8-2016] - 18 would have been otherwise liable.” Id. Notably, the penalty was purely for failure to report and did not address the penalty for failure to pay the tax, which is at issue in the case at bar. The Acts did not impose any duty on the county commissioners to obtain information regarding the unseated land or to search through deed books to discover whether lands had changed hands. See Stoetzel v. Jackson, 105 Pa. 562, 567 (Pa. 1884). Instead, the obligation was initially on the surveyors to return the surveys and then on the original and subsequent owners to inform the commissioners of the land owned to allow the commissioners to impose an appropriate tax. In Heft v. Gephart, 65 Pa. 510, 516 (Pa. 1870), this Court opined that the tax system treated unseated lands “entirely in reference to the original warrants when not otherwise directed by the owners.” The courts of Pennsylvania have considered the consequences of tax sales of unseated lands in connection with an owner’s duty to report under the Acts of 1806 and 1815. We will review several of these cases. In a case specifically considering the ability to tax a subsurface estate, this Court emphasized the distinction between the right of owners to sever and the taxing authorities assessment of taxes: “The authority to tax and the manner of its exercise has nothing to do with the right of the owner either to hold his tract of land entire or to sever it by the grant of different estates therein.” Rockwell, 77 A. at 666. In reaffirming that unseated, as well as seated, landholders could sever their subsurface estates, we recognized that the method for assessing taxes on unseated estates differed from that of seated estates based upon “the difficulties of ascertaining the owners, and other like considerations.” Id. In Williston, this Court faulted an owner’s failure to report to the County Commissioners an error in the tax assessment of his property, which resulted in his [J-8-2016] - 19 paying taxes for several years upon only a third of the acreage of the warrant he owned. After the landowner failed to pay taxes and a tax sale occurred, this Court concluded that the tax sale covered the acres identified in the original warrant despite the significantly smaller acreage listed on the assessment, because the assessment was based on land as “identified by the number of the warrant, the name of the warrantee and the name of the owner from whom [the current landowner] had purchased.” Williston, 9 Pa. at 39. The number of acres in the assessment, which the owner failed to correct, was merely a descriptive term. Accordingly, the Court concluded that the details in the warrant controlled, absent correction by the owner. In McCoy v. Michew, 7 Watts & Serg. 386, 1844 WL 5025 (Pa. 1844), this Court recognized that the commissioners were not responsible for determining land ownership for purpose of taxation and instead that the burden was on the landowners pursuant to the legislative enactments culminating in the Act of 1815. In that case, this Court addressed the contested ownership of a tract of land that apparently was covered by different warrants. The Court faulted the owner who had failed to report or pay tax on the land for thirty years, and then sought to establish ownership when the land had appreciated in value, long after the statutory redemption period. The Court noted, “If there be hardship, it is one which can easily be avoided by performing the duty which the law imposes upon [the owner], to return the land and pay his taxes.” Id. at 391, 1844 WL 5025, at . In Hutchinson v. Kline, this Court affirmed per curiam a decision of the Elk County Court of Common Pleas. While this Court did not provide binding analysis, the trial court’s opinion gives insight into the judiciary’s view of tax law at that time in a case [J-8-2016] - 20 analogous to the case at bar. 11 In Hutchinson, as in this case, unseated land had been divided into a surface and subsurface estate by deed, but there was no indication that the surface and subsurface had been assessed separately, prior to a tax sale of the lands for delinquent taxes on the entire property. The trial court opined that it was the duty of the holder of unseated lands under the Act of 1806 to give notice of the severance to the commissioners or the assessors. Hutchinson, 49 A. 312 (citing Williston, 9 Pa. 38). The court observed that assessors would treat unseated lands “entirely in reference to the original warrants, when not otherwise directed by the owners.” Id. The court additionally noted that that it was not “the business of the assessor to inquire what is the nature of the owner’s title.” Id. (citing Stoetzel, 105 Pa. 567). After noting that the subsurface owners had neither paid tax nor reported their ownership interest as set forth in the Act of 1806, the court opined, “[t]he record of the deed creating a separate estate in the minerals would not be notice to the assessor or the commissioners, as they were not bound to search or examine the records.” Id. Accordingly, under caselaw applying the Act of 1806, the failure to report a severance of unseated land could result not only in a four-fold statutory penalty, but also had the practical effect of having the property assessed and taxed as a whole, given that the assessors were not required to determine the sometimes elusive current ownership.