Court Opinion

ID: 4186538
Source: CourtListenerOpinion
Date Created: 2017-07-14 22:09:10.809296+00
Date Added: 2024-06-11T14:39:54.780011
License: Public Domain

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                                      Appellate Court                            Date: 2017.07.12
                                                                                 10:28:06 -05'00'

             In re Application of the County Treasurer & ex officio County Collector,
                                     2017 IL App (4th) 160707

Appellate Court           In re APPLICATION OF THE COUNTY TREASURER AND
Caption                   ex officio COUNTY COLLECTOR OF JERSEY COUNTY (Dealers
                          Service, Inc., Petitioner-Appellant, v. Kari L. Ray; Hunter, LLC;
                          Hunter Contracting and Development, Inc.; David J. Ray; and Maag
                          Law Firm, LLC, Respondents-Appellees).

District & No.            Fourth District
                          Docket No. 4-16-0707

Filed                     June 13, 2017

Decision Under            Appeal from the Circuit Court of Jersey County, No. 16-TX-1; the
Review                    Hon. Eric S. Pistorius, Judge, presiding.

Judgment                  Affirmed.

Counsel on                Van-Lear P. Eckert, of Law Office of Van-Lear P. Eckert, PC, of
Appeal                    Belleville, and Mark C. Goldenberg, of Goldenberg Heller Antognoli
                          & Rowland, P.C., of Edwardsville, for appellant.

                          Phillip H. Hamilton, of Farrell, Hamilton & Julian, P.C., of Godfrey,
                          for appellee Kari L. Ray.

                          Thomas G. Maag, of Maag Law Firm, LLC, of Wood River, for other
                          appellees.
     Panel                     JUSTICE HARRIS delivered the judgment of the court, with opinion.
                               Justices Steigmann and Knecht concurred in the judgment and
                               opinion.

                                                OPINION

¶1         Petitioner, Dealers Service, Inc., appeals the trial court’s dismissal of its petition for the
       issuance of a tax deed. It argues the court erred in finding it was ineligible to obtain a tax deed
       due to interests it held in the property. We affirm.

¶2                                           I. BACKGROUND
¶3         In January 2016, Dealers Service filed a petition for tax deed with respect to three parcels
       of real estate in Jersey County. It alleged that, in November 2013, an entity named Sabre
       Investments (Sabre) purchased the 2012 delinquent real estate taxes for the property at an
       annual tax sale and was issued two certificates of purchase. In April 2015, Sabre assigned its
       interest in the certificates of purchase to Dealers Service “for the consideration of $10 each.”
       Dealers Service further alleged it had sent notice to the occupants, owners, and interested
       parties, but the property at issue had not yet been redeemed. The redemption period was set to
       expire on May 4, 2016. Dealers Service asked the trial court to find that it fully complied with
       the procedures necessary for the issuance of a tax deed and that, in the event redemption did
       not occur, the court enter an order finding it was entitled to receive title to the property in fee
       simple.
¶4         Thereafter, two motions to dismiss Dealers Service’s petition were filed by parties with
       interests in the property (collectively referred to as respondents). In April 2016, Kari L. Ray
       filed a combined motion to dismiss the petition for tax deed pursuant to section 2-619.1 of the
       Code of Civil Procedure (Code) (735 ILCS 5/2-619.1 (West 2014)). She claimed a marital
       interest in the property at issue “by virtue of a divorce she filed,” which was consolidated with
       a foreclosure action (case No. 15-CH-29) involving the property “and a lis pendens filed
       against the property.” Relevant to this appeal, Kari argued that equity prohibited Dealers
       Service, as a lienholder on the property at issue, from obtaining a tax deed to the property. To
       support her argument, she cited In re Application of Boone County Collector, 131 Ill. App. 3d
939, 943, 476 N.E.2d 800, 803 (1985) (hereinafter Candlewick), wherein the Second District
       held “a lienor may not obtain a tax deed and thereby cut off the interest of other lienors or
       mortgagees.” Kari asserted Dealers Service was a lienholder and mortgagee of the property
       and alleged it had “filed a [c]omplaint for [f]oreclosure against the same property” in the Jersey
       County circuit court (case No. 15-CH-29).
¶5         In May 2016, the second motion to dismiss Dealers Service’s petition was filed by Hunter,
       LLC; Hunter Contracting and Development, Inc.; David J. Ray; and the Maag Law Firm. They
       asserted dismissal was appropriate pursuant to section 2-619 of the Code (735 ILCS 5/2-619
       (West 2014)) on the same basis alleged by Kari.
¶6         In response to the motions to dismiss, Dealers Service acknowledged that it had a mortgage
       against the property dated March 4, 2013, and recorded on April 2, 2013; a lien against the
       property by virtue of an assignment of judgment lien dated May 18, 2015, and recorded on

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       May 21, 2015; and “a lien against the property by virtue of purchasing the interest of Citizens
       Community Bank against the property under a [m]ortgage dated [and recorded on] April 23,
       2009.” (Neither party alleged, nor does the record reflect, the date on which Dealers Service
       obtained Citizens Community Bank’s interest in the property). However, it argued Candlewick
       was inapplicable to the underlying proceedings because it was brought under a statute that was
       no longer in effect. Specifically, it noted the Revenue Act of 1939 (Revenue Act) (Ill. Rev.
       Stat. 1983, ch. 120, ¶ 482 et seq.) in effect at the time Candlewick was decided, was repealed
       and recodified as the Property Tax Code (Tax Code) (35 ILCS 200/1-1 et seq. (West 1994)).
       Pub. Act 88-455 (eff. Jan. 1, 1994). Dealers Service maintained that current provisions of the
       Tax Code—addressing annual tax sale procedures (35 ILCS 200/21-190 to 21-255 (West
       2014))—were silent as to “an interested party’s ineligibility to bid on delinquent taxes.”
¶7         Dealers Service also maintained that because it held no interest in the property on January
       1, 2012, the first year the taxes on the property at issue were delinquent, it was “not restricted
       from buying [the delinquent] taxes on the *** property or [p]etitioning [the circuit court] for a
       [t]ax [d]eed.” It argued that “whether one is an interested party is measured by whether their
       interest attached on January 1 of the first year for which the delinquent taxes were sold.” To
       support its argument, Dealers Service cited In re Application for Tax Deed, 269 Ill. App. 3d
477, 481, 646 N.E.2d 621, 623 (1995) (hereinafter Bailey), for the proposition that “the party
       who owned the property as of January 1 of any given year is the owner for purposes of
       taxation.”
¶8         In September 2016, the trial court entered a written order granting the motions to dismiss
       Dealers Service’s petition for a tax deed. The court relied on Candlewick, noting “Illinois
       continued to rely upon” the proposition set forth in that case after 1994, when the Revenue Act
       was repealed and recodified under the Tax Code. See Goldberg v. Michael, 328 Ill. App. 3d
593, 600, 766 N.E.2d 246, 252 (2002) (“it is against public policy for [a lienholder] to purchase
       a tax certificate, as it cuts off claims of other lienholders” (citing Candlewick, 131 Ill. App. 3d
       at 941)).
¶9         This appeal followed.

¶ 10                                            II. ANALYSIS
¶ 11        On appeal, Dealers Service argues the trial court erred in granting respondents’ motions to
       dismiss its petition for a tax deed. It agrees it had interests in the property as a mortgagee and
       lienholder. However, like it did before the trial court, Dealers Service maintains that because
       its interests in the property did not exist until after January 1, 2012, “the year for which the
       delinquent taxes were sold,” it was neither prohibited from purchasing the delinquent taxes nor
       obtaining tax deeds on the property.
¶ 12        “A motion to dismiss under section 2-619 admits the sufficiency of the complaint, but
       asserts affirmative matter that defeats the claim.” Leetaru v. Board of Trustees of the
       University of Illinois, 2015 IL 117485, ¶ 40, 32 N.E.3d 583. Specifically, section 2-619(a)(9)
       provides for dismissal when the claim “is barred by other affirmative matter avoiding the legal
       effect of or defeating the claim.” 735 ILCS 5/2-619(a)(9) (West 2014). “In ruling on the
       motion, the circuit court must interpret all pleadings and supporting documents in the light
       most favorable to the nonmoving party.” Richter v. Prairie Farms Dairy, Inc., 2016 IL
119518, ¶ 18, 53 N.E.3d 1. Whether dismissal is appropriate under section 2-619 is subject to
       de novo review. Id.

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¶ 13        Here, we find no error in the trial court’s dismissal of Dealers Service’s petition for a tax
       deed. In Candlewick, 131 Ill. App. 3d at 940, 476 N.E.2d at 801, the Second District addressed
       “whether a lienholder, because of its interest in the property, is precluded from obtaining a tax
       deed to the property.” There, following a tax sale, a homeowner’s association filed petitions for
       tax deeds as the holder of tax purchase certificates on two lots. Id. at 941, 476 N.E.2d at 802.
       The trial court denied the petitions because the homeowner’s association “was a [lienholder] of
       record on the date of the tax sale,” and it held the association’s “tax purchases were actually tax
       payments.” Id. The homeowner’s association appealed. Id.
¶ 14        Ultimately, the Second District affirmed the trial court’s denial of the petitions for tax
       deeds, finding the homeowner’s association’s interest in the property prohibited it from taking
       title to the property. Id. at 943, 476 N.E.2d at 803. In so holding, the court stated several Illinois
       cases “held that an owner or mortgagee, because of its interest in the property and their
       obligation to pay the taxes on it, may not purchase the property at a tax sale and thereby cut off
       the interest in the property of the other party.” Id. at 941, 476 N.E.2d at 802. It also found the
       great weight of authority in the United States provided the same with respect to a lienor. Id.
       The court stated as follows:
                     “The rationale for this rule is that equity regards the land as a common fund for the
                 payment of all liens and mortgages and it would be inequitable and a fraud for one
                 lienor to acquire title to the land by a tax sale and use it to destroy the claim of another
                 lienor or mortgagee. The lienor is authorized to redeem from the tax sale, and equity
                 will not allow him to acquire the title for an inconsiderable sum when he was
                 authorized to remove the trifling incumbrance by redemption. Equity will relieve
                 against such oppression and teach the grasping creditor moderation in his demands, and
                 that he cannot destroy others to build up his own fortunes.” Id. (citing Koch v. Kiron
                 State Bank, 297 N.W. 450 (Iowa 1941)).
       The court further noted as follows:
                 “ ‘The law of tax sales is designed to give strangers to the property a speedy method of
                 acquiring merchantable title to the property so the property can get back into the stream
                 of commerce so that future taxes can be collected. [Citation.] It is not designed to be a
                 method by which a party with a pretax sale interest in the property can forego the
                 payment of the taxes, allow the property to be sold for taxes, and then acquire it for a
                 minimal cost so that party can raise its previous interest above all other previous
                 interests.’ ” (Emphasis added.) Id. at 943, 476 N.E.2d at 803 (quoting Vulcan Materials
                 Co. v. Bee Construction Co., 101 Ill. App. 3d 30, 38, 427 N.E.2d 797, 803 (1981), rev’d
                 on other grounds, 96 Ill. 2d 159, 449 N.E.2d 812 (1983)).
¶ 15        The Second District noted that the homeowner’s association argued relevant statutory
       provisions indicated a legislative intent that only the owner of property was prohibited from
       purchasing at a tax sale. Id. However, the court rejected this argument, finding it could not be
       said that an owner of property was the only party responsible for delinquent taxes. Id. at 944,
       476 N.E.2d at 804. It held a lienholder or mortgagee had the right to pay or redeem the taxes
       and, thus, was also responsible for the payment of delinquent taxes “if it wishe[d] to protect its
       interest in the property.” Id. at 944-45, 476 N.E.2d at 804.
¶ 16        Here, the underlying tax deed proceedings present a similar situation as described in
       Candlewick. Dealers Service admittedly held a pretax sale interest in the property at issue.
       Specifically, the record shows it had an interest in the property through a mortgage dated

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       March 4, 2013, and recorded on April 2, 2013, while the tax sale through which the delinquent
       2012 taxes were sold did not occur until November 2013. Despite its pretax sale interest,
       Dealers Service elected not to make a payment of taxes on the property to protect its interest,
       allowed the property to be sold for taxes, acquired the tax certificates on the property for a
       minimal sum ($10 each), and attempted to obtain tax deeds, thereby raising its previous
       interest above all other previous interests.
¶ 17        On appeal, Dealers Service does not dispute that the equitable principle set forth in
       Candlewick would generally apply to the underlying tax deed proceedings. Rather, it argues
       Candlewick is inapplicable to the specific facts presented since its own interest in the property
       was not present on January 1, 2012, “the first year for which the delinquent taxes were sold.”
       To support its contention, Dealers Service relies on Bailey, 269 Ill. App. 3d at 481, 646 N.E.2d
       at 623, wherein the Fifth District held that “the party who owned the property as of January 1
       of any given year is the owner for purposes of taxation.” Dealers Service maintains
       Candlewick does not address the issue of timing, i.e., the question of when a mortgagee or
       lienor becomes an interested party for purposes of a tax deed proceeding, and that Bailey is the
       only case to address the issue.
¶ 18        We disagree with Dealers Service’s contention on appeal. First, Candlewick does address
       timing, as its discussion indicates that a mortgagee’s or lienholder’s pretax sale interest in
       property is what prohibits it from obtaining a tax deed. Candlewick, 131 Ill. App. 3d at 943,
476 N.E.2d at 803. Second, we find Bailey does not address the precise issues presented by this
       appeal and is not relevant to its disposition.
¶ 19        In Bailey, Hall was the owner of a parcel of land that was subdivided into four lots. Bailey,
269 Ill. App. 3d at 478-79, 646 N.E.2d at 622. In April 1990, Hall sold lot 4 to Bailey, and the
       parties agreed that lot 4 constituted 38% of the total tax bill. Id. at 479, 646 N.E.2d at 622.
       “Hall was to pay the 1990 taxes due and payable in 1991, and Bailey was to reimburse Hall for
       38% of the entire 1990 tax bill.” Id. Hall, however, failed to pay the taxes associated with all
       four lots, which had all been included in the same tax bill, and they were sold at a delinquent
       tax sale, with a tax sale certificate being issued to Pier Company. Id. Fearing the loss of lot 4,
       Bailey purchased the tax sale certificate from Pier Company and notified Hall that he would
       file a petition for a tax deed on lots 1, 2, and 3 if the taxes were not redeemed. Id. Hall did not
       redeem, and Bailey filed a petition for a tax deed. Id. Hall filed an objection to the petition and
       later redeemed the property. Id. The trial court entered judgment in Bailey’s favor, ordering
       Hall, as the redeeming party, to pay Bailey reasonable expenses and attorney fees. Id. at 480,
       646 N.E.2d at 622-23. In so holding, it found Bailey held no “ ‘ownership interest’ ” in the
       property relative to the payment of the 1990 taxes. Id. at 479, 646 N.E.2d at 622.
¶ 20        Hall appealed, arguing the tax-fraud statute prohibited the purchase of a tax-sale certificate
       by Bailey due to Bailey having an interest in the property. Id. at 478, 646 N.E.2d at 622. In
       resolving the matter on appeal, the Fifth District stated the “crux of the case” stemmed “from
       the question of ownership of lot 4.” Id. at 480, 646 N.E.2d at 623. It noted Hall argued “the
       important time of ownership [was] at the purchase of the tax-sale certificate by Bailey,” while
       Bailey argued “the significant time of ownership [was] January 1 in the year when delinquent
       taxes were the impetus for the tax sale.” Id. The court sided with Bailey, finding Hall was the
       owner of all four lots for purposes of the taxes owed in 1990. Id. at 481, 646 N.E.2d at 623.
¶ 21        In reaching its decision, the Fifth District noted that under the Revenue Act (the
       predecessor to the Tax Code), “ ‘[t]he owner of real property on January 1 in any given year

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       shall be liable for the taxes of that year.’ ” Id. (quoting 35 ILCS 205/27a (West 1992)). Further,
       it set forth the definitions of “ownership interest” and “nonownership interest” in the Revenue
       Act (which are nearly identical to definitions contained within the current version of the Tax
       Code (35 ILCS 200/21-285 (West 2014))), stating as follows:
                “Nonownership interest is defined as:
                         ‘any interest in real property other than a contingent interest and other than an
                     ownership interest as defined in this Section, including without limitation a
                     mortgage, equitable mortgage or other interest in the nature of a mortgage,
                     leasehold, easement or lien.’ [Citation.]
                Petitioner’s interest, if any, is not a nonownership interest, but an ownership interest.
                Ownership interest is defined as:
                         ‘any title or other interest in real property, including without limitation any
                     beneficial interest in a land trust, the holder of which is considered to be the owner
                     of such real property for purposes of taxation under Section 27a of [the Revenue]
                     Act.’ [Citation.]” Bailey, 269 Ill. App. 3d at 480-81, 646 N.E.2d at 623 (quoting 35
                     ILCS 205/235d(a)(1), (a)(2) (West 1992)).
¶ 22        The Fifth District also rejected an argument by Hall that Bailey committed fraud under the
       Revenue Act by acquiring a tax sale certificate while having an interest in the property. Id. at
       481, 646 N.E.2d at 623. It stated “[i]ntent [was] an important factor when claiming fraud,” and
       although “Bailey knew he had purchased the tax-deed certificate and that he had an ownership
       interest in lot 4,” there was “nothing in the record that would indicate that his intent was to
       defraud either the County *** or Hall.” Id. at 481, 646 N.E.2d at 623-24.
¶ 23        Here, we find Bailey inapplicable to the current case, as it specifically addressed only the
       timing related to ownership interests and a property owner’s liability to pay taxes. We note the
       Tax Code contains similar language to the portions of the Revenue Act cited in Bailey. In
       particular, section 9-175 of the Tax Code (35 ILCS 200/9-175 (West 2014)) provides that
       “[t]he owner of property on January 1 in any year shall be liable for the taxes of that year.”
       However, neither the Tax Code nor Bailey speak to the issue presented by this case regarding
       when an interest in property obtained through a mortgage or lien, i.e., a nonownership interest,
       must be obtained to preclude the mortgagee or lienholder from being granted a tax deed to the
       property. Thus, we find the holding in Bailey is simply not dispositive to the outcome of this
       case and it does not warrant reversal of the trial court’s decision.
¶ 24        To further support its contention as to timing, Dealers Service cites section 21-275 of the
       Tax Code (35 ILCS 200/21-275 (West 2014)), which addresses the requirements for an
       application for a certificate of purchase in the context of a scavenger sale. At a scavenger sale,
       property may be sold for “less than the full amount of taxes, special taxes, special assessments,
       interest, penalties and costs for which judgment has been entered” on the property. 35 ILCS
       200/21-260 (West 2014). To purchase property at a scavenger sale, the potential buyer must
       complete an “application for certificate of purchase,” affirming he or she “has not bid upon or
       applied to purchase any property at the sale for a person who is the party or agent of the party
       who owns the property or is responsible for the payment of the delinquent taxes.” 35 ILCS
       200/21-265(a)(1) (West 2014).

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¶ 25       Dealers Service notes that section 21-275 of the scavenger sale provisions contains a
       sample form for an application for a certificate of purchase and that the form sets forth the
       following language:
                    “3. Neither I (we) nor any person or firm identified in the registration submitted to
                the Treasurer of . . . . . . . . . . County was an owner or agent of an owner, mortgagee or
                agent of a mortgagee, lienholder or agent of a lienholder, holder of beneficial interest or
                agent of a holder of a beneficial interest in or of any property identified on the
                schedule(s) attached to this application on January 1st of any years for which taxes
                were delinquent at the time of my (our) bid(s) described in the schedule(s).” (Emphasis
                added.) 35 ILCS 200/21-275 (West 2014).
       It argues that, although the underlying proceedings involved an annual tax sale rather than a
       scavenger sale, the aforementioned statutory language relative to scavenger sales indicates that
       the legislature intended January 1 of the year for which taxes are delinquent to be the relevant
       time at which to determine whether an individual or entity has any interest—ownership or
       nonownership—in property.
¶ 26       Again, we disagree. Although section 21-275 contains the paragraph and language referred
       to by Dealers Service, it also states as follows:
                    “4. Neither I (we) nor any person or firm identified in the registration submitted to
                the Treasurer of . . . . . . . . . . County was an owner or agent of an owner, mortgagee or
                agent of a mortgagee, lienholder or agent of a lienholder, holder of a beneficial interest
                or agent of a holder of a beneficial interest in or of the property identified on the
                schedule(s) attached to this application at the time of the bid(s) described in the
                schedule.” (Emphasis added.) Id.
       This additional language in the sample form does not contain the same “January 1” language
       and indicates that the date of a tax sale is also an appropriate time for determining whether an
       interest in property exists. Therefore, we decline to interpret the statutory language as Dealers
       Service suggests.
¶ 27       Here, we find the equitable principle set forth in Candlewick applies to the facts presented
       in this case and the trial court committed no error in granting respondents’ motions to dismiss.

¶ 28                                      III. CONCLUSION
¶ 29      For the reasons stated, we affirm the trial court’s judgment.

¶ 30      Affirmed.

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