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Alterna Tax Asset Group, LLC v. York County

United States District Court, D. South Carolina, Rock Hill Division

January 11, 2018

Alterna Tax Asset Group, LLC, Plaintiff,
v.
York County; York County Treasurer; York County Delinquent Tax Collector; Robert Clay Sparrow; Mickey Crowe; Fort Mill Holdings, LLC; and David Baucom, Defendants.

          ORDER AND OPINION

          MARGARET B. SEYMOUR SENIOR UNITED STATES DISTRICT JUDGE.

         On April 7, 2017, Plaintiff Alterna Tax Asset Group, LLC filed a complaint pursuant to diversity jurisdiction under § 28 U.S.C. § 1332, seeking to vacate a tax sale on certain property in York County, South Carolina. This matter is before the court on motion to dismiss filed by Defendants Robert Clay Sparrow (“Sparrow”) and Mickey Crowe (“Crowe”) on May 24, 2017; motion to dismiss filed by Defendants Fort Mill Holdings, LLC (“Fort Mill”) and David Baucom (“Baucom”) on May 25, 2017; and motion to dismiss filed by Defendants York County, York County Treasurer, and York County Delinquent Tax Collector (together, the “York County Defendants”) on May 30, 2017. Plaintiff filed a consolidated response in opposition to Defendants motions to dismiss on June 21, 2017.

         FACTS

         Certain real property in York County, South Carolina (the “Property”), was conveyed by Sparrow and Crowe to Fort Mill on December 1, 2011, for a purchase price of $907, 300. Baucom was guarantor on a note securing the Property, which was owner-financed by Sparrow and Crowe. It appears that Fort Mill ceased making payments to Sparrow and Crowe in or around June 2012. As a result, Sparrow and Crowe commenced foreclosure proceedings. On October 1, 2014, Crowe assigned all interest in the Property to Sparrow. Sparrow, Fort Mill, and Baucom entered into mediation and settled the foreclosure matter. On March 29, 2016, the Honorable S. Jackson Kimball entered a judgment against Fort Mill and Baucom in accordance with the terms of the settlement agreement.

         It further appears that Fort Mill failed to pay taxes on the Property for tax year 2014. As a result, the York County Treasurer issued an execution notice. In due course, the York County Delinquent Tax Collector issued a notice of levy as well as a notice of final redemption to Fort Mill. Fort Mill and Baucom agreed that any overage remaining from a tax sale after payment of the past due taxes would be paid to Sparrow and applied toward the amount due on the judgment. Plaintiff subsequently was deeded the Property after a public sale for a purchase price of $610, 000. The within action was filed before any overage on the tax sale could be forwarded to Sparrow.

         Plaintiff contends that the procedures followed by the York County Defendants did not comply with the statutory mandates of S.C. Code Ann. §§ 12-51-40(c) and -40(b), so that the tax sale is null and void. Specifically, Plaintiff asserts that (1) the York County Treasurer issued a facially defective “Execution Notice for Delinquent Property Taxes” to the York County Delinquent Tax Collector for the 2014 real property taxes owed on the Property (ECF No. 1, ¶ 16); (2) the Execution Notice was mailed to Fort Mill was returned improperly signed by Baucom rather than the registered agent for Fort Mill (Id. ¶¶ 17-22); (3) the York County Delinquent Tax Collector issued a facially defective “Notice of Levy” to Fort Mill (Id. ¶¶ 23-25); (4) the York County Delinquent Tax Collector mailed to Fort Mill a facially defective “Notice of Final Redemption for Property Sold at Delinquent Tax Sale (Id. ¶ 27), which Notice was sent to an improper address and returned by the United States Post Office as undeliverable as addressed (Id. ¶ 33-34).

         Plaintiff contends the monies it paid for the winning bid should be returned to it in light of the defective nature of the delinquent tax sale. Plaintiff seeks (1) to quiet title under S.C. Code Ann. § 12-61-10 by vacating the tax sale (First Cause of Action); (2) a declaratory judgment that the tax sale is null and void (Second Cause of Action); (3) injunctive relief prohibiting Defendants from transferring the purchase price of $610, 000 to any entity other than Plaintiff (Third Cause of Action); and (4) declaratory relief requiring Defendants to disgorge the monies paid by Plaintiff to obtain a tax deed to the Property (Fourth Cause of Action).

         APPLICABLE LAW

         A. Procedure for Collection of Property Taxes.

         S.C. Code Ann. § 12-51-40 provides:

After the county treasurer issues his execution against a defaulting taxpayer in his jurisdiction, as provided in Section 12-45-180, signed by him or his agent in his official capacity, directed to the officer authorized to collect delinquent taxes, assessments, penalties, and costs, requiring him to levy the execution by distress and sale of the defaulting taxpayer's estate, real or personal, or both, or property transferred by the defaulting taxpayer, the value of which generated all or part of the tax, to satisfy the taxes, assessments, penalties, and costs, the officer to which the execution is directed shall:
(a) On April first or as soon after that as practicable, mail a notice of delinquent property taxes, penalties, assessments, and costs to the defaulting taxpayer and to a grantee of record of the property, whose value generated all or part of the tax. The notice must be mailed to the best address available, which is either the address shown on the deed conveying the property to him, the property address, or other corrected or forwarding address of which the officer authorized to collect delinquent taxes, penalties, and costs has actual knowledge. The notice must specify that if the taxes, penalties, assessments, and costs are not paid, the property must be advertised and sold to satisfy the delinquency.
(b) If the taxes remain unpaid after thirty days from the date of mailing of the delinquent notice, or as soon thereafter as practicable, take exclusive possession of the property necessary to satisfy the payment of the taxes, assessments, penalties, and costs. In the case of real property, exclusive possession is taken by mailing a notice of delinquent property taxes, assessments, penalties, and costs to the defaulting taxpayer and any grantee of record of the property at the address shown on the tax receipt or to an address of which the officer has actual knowledge, by “certified mail, return receipt requested-restricted delivery” pursuant to the United States Postal Service “Domestic Mail Manual Section S912”. If the addressee is an entity instead of an individual, the notice must be mailed to its last known post office address by certified mail, return receipt requested, as described in Section S912. In the case of personal property, exclusive possession is taken by mailing the notice of delinquent property taxes, assessments, penalties, and costs to the person at the address shown on the tax receipt or to an address of which the officer has actual knowledge. All delinquent notices shall specify that if the taxes, assessments, penalties, and costs are not paid before a subsequent sales date, the property must be duly advertised and sold for delinquent property taxes, assessments, penalties, and costs. The return receipt of the “certified mail” notice is equivalent to “levying by distress”.
(c) If the “certified mail” notice has been returned, take exclusive physical possession of the property against which the taxes, assessments, penalties, and costs were assessed by posting a notice at one or more conspicuous places on the premises, in the case of real estate, reading: “Seized by person officially charged with the collection of delinquent taxes of (name of political subdivision) to be sold for delinquent taxes”, the posting of the notice is equivalent to levying by distress, seizing, and taking exclusive possession of it, or by taking exclusive possession of personalty. In the case of personal property, the person officially charged with the collection of delinquent taxes is not required to move the personal property from where situated at the time of seizure and further, the personal property may not be moved after seized by anyone under penalty of conversion unless ...

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