Alana Harrison v. Montgomery Cnty., Ohio ( 2021 )

RECOMMENDED FOR PUBLICATION
Pursuant to Sixth Circuit I.O.P. 32.1(b)
File Name: 21a0103p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
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ALANA HARRISON, individually and on behalf of all
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others similarly situated,
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Plaintiff-Appellant, > No. 20-4051
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v. │
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MONTGOMERY COUNTY, OHIO, │
Defendant-Appellee. │
┘
Appeal from the United States District Court
for the Southern District of Ohio at Dayton.
No. 3:19-cv-00288—Thomas M. Rose, District Judge.
Argued: April 29, 2021
Decided and Filed: May 11, 2021
Before: SUTTON, Chief Judge, SUHRHEINRICH and SILER, Circuit Judges.
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COUNSEL
ARGUED: Emily White, DANN LAW, Cleveland, Ohio, for Appellant. Stephen W. Funk,
ROETZEL & ANDRESS, LPA, Akron, Ohio, for Appellee. Christina M. Martin, PACIFIC
LEGAL FOUNDATION, Palm Beach Gardens, Florida, Michael J. Hendershot, OFFICE OF
THE OHIO ATTORNEY GENERAL, Columbus, Ohio, for Amici Curiae. ON BRIEF: Emily
White, Marc E. Dann, DANN LAW, Cleveland, Ohio, Thomas A. Zimmerman, Jr.,
ZIMMERMAN LAW OFFICES, P.C., Chicago, Illinois, Andrew M. Engel, ANDREW M.
ENGEL CO., LPA, Dayton, Ohio, for Appellant. Stephen W. Funk, Emily K. Anglewicz,
ROETZEL & ANDRESS, LPA, Akron, Ohio, Anne M. Jagielski, MONTGOMERY COUNTY,
OHIO, Dayton, Ohio, for Appellee. Christina M. Martin, PACIFIC LEGAL FOUNDATION,
Palm Beach Gardens, Florida, Benjamin M. Flowers, Michael J. Hendershot, OFFICE OF THE
OHIO ATTORNEY GENERAL, Columbus, Ohio, for Amici Curiae.
No. 20-4051 Harrison v. Montgomery Cnty., Ohio Page 2
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OPINION
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SUTTON, Chief Judge. When an Ohio county forecloses on a tax-delinquent property, it
ordinarily sells the property at an auction, keeps enough of the proceeds to cover the outstanding
taxes, and returns any leftover funds to the owner. To stem a tide of vacant homes and to
transfer ownership of them more efficiently, Ohio enabled its municipalities to take another route
when it comes to abandoned tax-delinquent property. Instead of selling the property and
collecting the taxes owed, counties may surrender their tax interest and transfer the property with
clear title to land banks. The land banks may revitalize the abandoned property, sell it to a
private buyer, or demolish the home to pave the way for new neighborhoods. No auction occurs
when counties choose the land bank route, and any surplus equity held by the original owner
vanishes.
Alana Harrison inherited a partial interest in her mother’s home in Dayton. Due to a
nearly $20,000 property tax delinquency, Montgomery County’s treasurer started foreclosure
proceedings in 2017. The County Board of Revision handled the foreclosure and transferred the
home to the County’s land bank. The home had an estimated fair market value of $22,600 at the
time of the transfer, roughly $3,000 more than the property taxes owed. Harrison never received
the surplus equity because the statute offers no way to pay it.
Harrison filed an action against Montgomery County under the Takings Clause of the
Fifth (and Fourteenth) Amendment of the United States Constitution. On top of seeking relief
for herself, she also sought relief on behalf of a purported class of similarly situated landowners.
The County moved to dismiss her claim, arguing that claim preclusion barred Harrison’s lawsuit
because she could have raised a federal takings claim at several points during the foreclosure
process. The district court agreed. In view of the intricate issues presented and the potential
invalidity of an Ohio law, we solicited the participation of the Ohio Attorney General, whose
office helpfully filed an amicus brief and participated in the oral argument in support of the
County. We now reverse.
No. 20-4051 Harrison v. Montgomery Cnty., Ohio Page 3
I.
A.
Ohio empowers county treasurers to bring foreclosure actions against tax-delinquent
properties. See O.R.C. § 323.25. The county treasurer may “enforce the lien for the taxes” on
the delinquent land “in the same way mortgage liens are enforced”: by filing a lawsuit. Id.
A judicial foreclosure proceeding typically follows, after which the county sells the land at a
public auction, the proceeds of which cover the tax delinquency. Id. § 323.73. If the sale
produces leftover proceeds, the county “shall pay such excess to the owner” upon demand. Id.
§ 5721.20. In this way, Ohio protects the county’s interest in collecting property taxes and the
owner’s interest in keeping any surplus equity.
In 2008, Ohio law introduced a new option for handling property taxes owed on
abandoned land, defined as “delinquent lands or delinquent vacant lands . . . that are
unoccupied.” Id. § 323.65. Instead of using “judicial foreclosure proceedings,” Ohio enables “a
county board of revision” to “foreclose the state’s lien for real estate taxes upon abandoned
land.” Id. § 323.66. The state law then authorizes counties to transfer the land to authorized land
banks rather than dispose of the property at auctions. Id. § 323.78.
This innovation allows counties to embark on land revitalization efforts more efficiently.
If the county treasurer invokes this approach and if there is a willing land bank, the process
allows the county to transfer the abandoned land directly to the land bank. Id. § 323.78(B).
With the transfer, the land becomes “free and clear of all impositions and any other liens on the
property, which shall be deemed forever satisfied and discharged.” Id. The State does not
collect any tax delinquency, and the fair market value of the land becomes irrelevant, as it makes
no difference whether the tax impositions and costs of the action “exceed the fair market value of
the parcel.” Id.
State law offers some protections for the owners of abandoned land. The Board must
provide notice to landowners, id. § 323.66, and the county must run a title search “for the
purpose of identifying . . . persons hav[ing] a legal or equitable ownership interest,” id.
§ 323.68(A)(1). Once notified of the action, owners may transfer a case from the Board to a
No. 20-4051 Harrison v. Montgomery Cnty., Ohio Page 4
“court of common pleas or to a municipal court with jurisdiction” to handle any state or federal
challenges to the foreclosure. Id. §§ 323.691(A)(1); 323.70(B). By paying all outstanding taxes,
owners also may terminate the proceeding before the Board and get their land back. Id.
§ 323.72.
After the Board’s decision, homeowners have other options. They have 28 days after the
decision to pay the outstanding tax delinquency and recover the land. Id. § 323.65(J). They also
may “file an appeal in the court of common pleas,” Ohio’s trial court of general jurisdiction. Id.
§ 323.79. In addition to “issues raised or adjudicated in the proceedings before the county board
of revision,” the owners may surface “other issues that are raised for the first time on appeal and
that are pertinent to the abandoned land.” Id.
The one option the landowner does not have under the statute is to obtain any excess
equity in the property after it goes to the land bank. The Ohio statute offers no way to capture
that property interest.
B.
In 2017, Montgomery County’s treasurer filed a foreclosure action in the County’s Board
of Revision against two parcels of land located in Dayton that were in arrears and titled to Alana
Harrison’s deceased mother. Harrison held a one-half interest in the property. Harrison
answered the complaint, saying she was “new to this” and wanted “to save my mom[’]s home.”
R.17-4 at 1.
The Board foreclosed the property. It found the two parcels to be abandoned and directed
that the property be transferred to the land bank after the 28-day redemption period. The Board
found that the tax impositions totaled $19,664 and that the property’s fair market value equaled
$22,600, meaning Harrison retained a surplus equity interest just shy of $3,000. As for the costs
of the foreclosure action, the Board ordered that the “Clerk of Courts shall pay from the
Transferee’s deposited funds” $1,883 for court costs, $125 for a sheriff’s fee, $1 to the county
auditor, and $36 for a county recorder fee. R.17-5 at 3. That is a total of $2,045, leaving roughly
$891 from the net surplus. The statute directs that these costs be paid by the county treasurer at
his or her “discretion” and “in whole or in part from the delinquent tax and assessment collection
No. 20-4051 Harrison v. Montgomery Cnty., Ohio Page 5
funds” or by the “community development organization.” O.R.C. § 323.75(B)(2). Harrison did
not appeal this administrative decision in state court. Nor did she file a writ of mandamus to
compel the County to condemn her property and pay compensation, the route Ohio offers to
property owners to bring state law takings claims. See State ex rel. Shemo v. Mayfield Heights,
765 N.E.2d 345, 350 (Ohio 2002) (“Mandamus is the appropriate action to compel public
authorities to institute appropriation proceedings where an involuntary taking of private property
is alleged.”); see also Knick v. Twp. of Scott, 139 S. Ct. 2162, 2168 (2019) (noting that all States,
“besides Ohio,” permit property owners to bring “a state inverse condemnation action,” instead
of a mandamus action, to handle an uncompensated taking of property).
She instead filed this action in federal court, alleging that the County violated the federal
and state takings clauses by extinguishing her surplus equity interest without providing just
compensation. According to her complaint, the County since 2011 “has commenced nearly
3,200 delinquent tax foreclosure cases” before the Board of Revision. R.15 at 6. And “in
virtually every case . . . the real property was transferred directly to the Land Bank or an electing
subdivision.” Id. In 85% of the cases, Harrison alleges, the fair market value of the seized
property exceeded the taxes owed.
Montgomery County filed a motion to dismiss the case for failure to state a claim. The
district court granted the motion on claim-preclusion grounds because Harrison could have
appealed the Board’s decision and brought her takings claim before the court of common pleas.
II.
Ohio claim preclusion law. Through the full faith and credit statute, 28 U.S.C. § 1738,
Congress has established that, in a federal court action like this one, a “state-court judgment”
receives “the same preclusive effect” that it would receive under state law. Migra v. Warren City
Sch. Dist. Bd. of Educ., 465 U.S. 75, 81 (1984). Under Ohio law, “a valid, final judgment
rendered upon the merits bars all subsequent actions based upon any claim arising out of” the
same “transaction or occurrence.” Grava v. Parkman Twp., 653 N.E.2d 226, 229 (Ohio 1995).
Claim preclusion under Ohio law requires (1) a prior decision and (2) a second action between
the same parties (3) that involves claims that were or could have been litigated, and (4) that arise
No. 20-4051 Harrison v. Montgomery Cnty., Ohio Page 6
out of the same “transaction or occurrence” as the first lawsuit. Hapgood v. City of Warren,
127 F.3d 490, 493 (6th Cir. 1997).
This case turns on the third requirement, that a plaintiff may not bring a claim that “could
have been litigated in the previous suit.” O’Nesti v. DeBartolo Realty Corp., 862 N.E.2d 803,
806 (Ohio 2007). Some boundaries and easements give contour to this requirement. It is
“predicated on the assumption” that the litigant does not face “barriers” to presenting the full
claim to the prior court in a single action. Restatement (Second) of Judgments § 26 cmt. c (Am.
Law Inst. 1982); Grava, 653 N.E.2d at 229 (following the modern Restatement approach).
When impediments exist or when the opportunity to raise the federal claim had not yet arisen in
the prior state court action, “it is unfair to preclude” a litigant from bringing another action that
raises “phases of the claim” that he “was disabled from presenting in the first” action.
Restatement § 26 cmt. c; see Ohio Kentucky Oil Corp. v. Nolfi, 5 N.E.3d 683, 690 (Ohio Ct.
App. 2013).
Federal takings law. One complication with applying Ohio claim preclusion law to the
County’s foreclosure action against Harrison is that federal takings law changed during the
operative period. Under the prior regime, the Supreme Court imposed two ripeness requirements
before a takings claim could proceed in federal court. First: There must be a “final decision” to
take property. Williamson Cnty. Reg’l Planning Comm’n v. Hamilton Bank of Johnson City,
473 U.S. 172, 186 (1985). Second: The plaintiff must “seek compensation” in state court. Id. at
194. The Court eventually made clear that “parties should not be permitted to relitigate issues
that have been resolved” by state courts, including takings claims. San Remo Hotel, L.P. v. City
and Cnty. of San Francisco, 545 U.S. 323, 336–38 (2005). Taken together, San Remo and
Williamson County closed the door on bringing federal takings claims in federal district courts.
After plaintiffs sought compensation for any taking in state courts (as Williamson County
required), they faced claim preclusion problems once the state court litigation ended (as San
Remo required).
Under this regime, the County would have had a powerful claim preclusion argument
against Harrison. Her federal takings claim would have become ripe only after the Board
decided to foreclose on her property interest and she sought compensation through the
No. 20-4051 Harrison v. Montgomery Cnty., Ohio Page 7
procedures Ohio offered. She might have tried to argue that “no adequate state procedures
existed” to challenge the State’s taking, but those types of arguments usually hit a wall. See,
e.g., Wayside Church v. Van Buren Cnty., 847 F.3d 812, 818 (6th Cir. 2017). That would have
left us bound to give claim-preclusive effect to whatever decision the state process produced.
Under the old regime, any decision by Harrison not to seek relief in the state courts would have
doomed her federal claim.
But a recent decision uprooted that process. Knick v. Township of Scott dispensed with
the requirement that a federal takings plaintiff must first exhaust all state remedies before
seeking relief in federal court. 139 S. Ct. at 2167–68. Because such state decisions later became
claim preclusive in federal court under San Remo, Knick realized that the system created a
“Catch-22” for takings claimants. Id. at 2167. They “cannot go to federal court without going to
state court first,” but if they lose in state court, their “claim will be barred in federal court.” Id.;
see San Remo, 545 U.S. at 338. To fix the problem, Knick eliminated Williamson County’s
second requirement, that takings plaintiffs must first seek compensation in state court. Knick,
139 S. Ct. at 2170. But it left in place the requirement that there must be a “final decision” to
take property, id. at 2169, meaning that it is “known to a reasonable degree of certainty” what
will happen to the property, Palazzolo v. Rhode Island, 533 U.S. 606, 620 (2001). The upshot?
A property owner today may bring a § 1983 federal takings claim in federal court “as soon as
their property has been taken.” Knick, 139 S. Ct. at 2170.
Application of Ohio claim preclusion law to Harrison’s federal takings claim. Knick
permits this action, and Ohio claim preclusion law does not bar it. Harrison may seek recourse
in federal court for this alleged taking under at least two ways of thinking about it.
1. One explanation turns on the way a federal takings claim now works after Knick. The
County agrees that, if it applied the land bank foreclosure statute to a piece of property today, the
property owner could file a § 1983 action in federal court under the Takings Clause after the
Board transferred the property to a land bank. In view of Knick, the property owner no longer
would need to invoke any potential state procedures for receiving compensation for the taking.
She could go directly to federal court at that point.
No. 20-4051 Harrison v. Montgomery Cnty., Ohio Page 8
As it happens, that is just what occurred here. Harrison did not invoke the state
procedures for challenging the Board’s decision to transfer her property to a land bank. She did
nothing. Nothing, that is, until the U.S. Supreme Court decided Knick roughly 10 months later.
With that change in law in place, she filed this federal action three months later. That delay, it is
true, might implicate a statute of limitations defense. But the County did not raise that defense,
perhaps in view of the shifting legal landscape. Until Knick came down in June of 2019,
Harrison had no federal court leg to stand on. All in all, what seems to be the County’s view of
when a future federal takings claim would be ripe for filing in federal court applies to today’s
claim.
2. Another explanation for this outcome turns on the State’s (and County’s) view of
when Harrison could have filed her federal takings claim earlier in the state court proceedings in
this case. As they see it, Harrison had two early opportunities to invoke a federal takings defense
in response to the County’s foreclosure action—first when the County filed its foreclosure
complaint against the property, second when the action went to the Board and state law gave her
an option to remove the case to the state court of common pleas. At either step, they point out,
Harrison could have inserted a federal takings defense, and her failure to do so then bars her
efforts to do so now under Ohio claim preclusion law.
But this argument runs into a claim preclusion imperative, that litigants do not face
“barriers” to presenting their claims in the first action. Restatement § 26(c) cmt. c. Whether
under Williamson County or Knick, her federal takings claim was not ripe until the Board’s final
decision to transfer the property to the land bank. Only when the Board transferred the property
to the land bank did Harrison have a “ripe” takings claim because, before then, the County had
not reached a “final decision” to seize title to her land, a feature of Williamson County that
remains in place after Knick. See Williamson Cnty., 473 U.S. at 186; Knick, 139 S. Ct. at 2169.
Until that moment, in other words, Harrison could not seek relief in federal court under § 1983,
no matter what the state procedures permitted.
The County’s view that Harrison had to file a federal takings defense in response to the
complaint or immediately seek relief in the court of common pleas might have worked in some
settings under the Williamson County/San Remo approach. But Knick recasts that story. Were it
No. 20-4051 Harrison v. Montgomery Cnty., Ohio Page 9
true that claim preclusion bars Harrison’s federal takings claim because she could have raised it
at the outset of the state foreclosure action, that would create an end run around Knick. It would
mean that the one time a property owner could raise a federal takings claim in federal court—
only after a “final decision”—would be too late, and claim preclusion would apply all the same.
That is the same kind of “preclusion trap” that Knick tried to eliminate. 139 S. Ct. at 2174.
For like reasons, Harrison had no obligation to invoke the federal takings clause before
the Board of Revision to stop title transfer in the first place. In the State’s view, she should have
answered the foreclosure complaint by arguing that the takings clause barred transferring title to
the property. But, again, this approach shortchanges the reality that Williamson County’s first
requirement—that there be a “final decision” effecting a taking—remains in place after Knick.
The taking, so far as federal law is concerned, happened when the Board adjudicated the
foreclosure of Harrison’s property through the land bank process, not before.
Besides, how could Harrison have known to bring a takings-based defense in the first
place? The Board did not find that her home’s value outstripped the total delinquent taxes until
it decided the foreclosure action. The final decision came a year after the County treasurer
brought proceedings and nearly ten months after Harrison answered the complaint. Consider,
too, that in the foreclosure complaint, the County Treasurer asked that the property “be sold
according to law” or that it be “conveyed to a township.” R.17-2 at 7. As the County concedes,
its complaint did not establish that Harrison’s property would be transferred to a land bank. See
Appellant’s Br. at 7. Had the County sold the property at a public auction, Ohio law would have
permitted Harrison to recover any surplus. See O.R.C. § 5721.20. Until it became clear the State
would seize Harrison’s surplus equity by transferring title—a decision reached only when the
Board adjudicated the foreclosure—no taking occurred. See Williamson Cnty., 473 U.S. at 186.
Harrison is not the first property owner to face this problem in the States of our circuit.
In Wayside Church v. Van Buren County, a pre-Knick decision, we held that the failure to
exhaust state remedies barred a takings claim to recover surplus equity after a Michigan tax
foreclosure sale. 847 F.3d at 822. The County sold the property for $206,000 to satisfy a
$16,750 tax delinquency and refused to refund the surplus. Id. at 815. “In some legal precincts
that sort of behavior is called theft.” Id. at 823 (Kethledge, J., dissenting). The now-defunct
No. 20-4051 Harrison v. Montgomery Cnty., Ohio Page 10
state exhaustion requirement might have barred relief in Wayside. But it poses no barrier after
Knick.
The County’s other arguments do not alter this conclusion. Moore v. Hiram Township,
for one, does not advance its position. 988 F.3d 353 (6th Cir. 2021). It held that federal
constitutional claims may be raised on appeal of an administrative decision in Ohio’s court of
common pleas. But whether Harrison could have raised her takings claim on appeal is a far cry
from insisting she had to. Moore appealed the State’s administrative decision, arguing that it
violated his federal constitutional rights. See id. at 356. Our decision as a result holds only that,
if a plaintiff chooses to pursue an administrative appeal, claim preclusion may bar a later attempt
to seek the same relief. But because Harrison did not pursue an administrative appeal, that sets
her case apart. While “Moore’s current constitutional challenges were in fact litigated in his first
suit,” id. at 361, Harrison’s were not.
Nor does Carroll v. City of Cleveland, a pre-Knick case, point the other way. 522 F.
App’x 299 (6th Cir. 2013). It addressed federal constitutional claims brought against the City of
Cleveland for the imposition of traffic fines. Id. at 301. The plaintiffs paid the fines “rather than
contesting their citations through the appellate process that the ordinance provided.” Id. Ohio
claim preclusion law, we held, barred their claims. Id. at 303–05. “Although the
administrative-hearing officer, under Ohio law, does not have the authority to
resolve . . . constitutional claims,” we noted, “the court of common pleas certainly could, on
review of the administrative decision.” Id. at 305. But Carroll came down before Knick
eliminated the state-exhaustion requirement for takings claims. Unpublished decisions of our
court do not bind us, all the more so when they conflict with intervening precedents of the
Supreme Court. See Michael v. Ghee, 498 F.3d 372, 381 & n.4 (6th Cir. 2007).
Tax Injunction Act. The Tax Injunction Act provides that district courts “shall not enjoin,
suspend or restrain the assessment, levy or collection of any tax under State law where a plain,
speedy and efficient remedy may be had” in state court. 28 U.S.C. § 1341. By its terms, the Act
bars only challenges to the “assessment, levy or collection” of taxes. Id. at 105 n.7.
“‘[C]ollection’ is the act of obtaining payment of taxes due.” Direct Mktg. Ass’n v. Brohl, 575
U.S. 1, 10 (2015) (quotation omitted).
No. 20-4051 Harrison v. Montgomery Cnty., Ohio Page 11
Harrison does not challenge Ohio’s “collection” of delinquent taxes. 28 U.S.C. § 1341.
She does not seek to halt foreclosures of tax-delinquent property or even to get her home back.
Harrison challenges only Ohio’s seizure of surplus equity, an amount in excess of taxes owed.
Because Ohio’s seizure and extinguishment of surplus equity is not an “act of obtaining payment
of taxes due,” Brohl, 575 U.S. at 10, the Act does not bar Harrison’s claims.
Freed v. Thomas all but settles the issue. 976 F.3d 729 (6th Cir. 2020). It considered
whether the Tax Injunction Act barred claims brought by a Michigan plaintiff after the state
seized surplus proceeds from the sale of his foreclosed property. See id. at 732. Because Freed
did not “seek to anticipatorily restrain collection of a state tax” and instead brought claims
stemming from the State’s “post-collection actions, specifically Michigan’s refusal to refund the
excess proceeds,” the Act did not apply. Id. at 735. Today’s case is further afield from the Act’s
coverage. Whereas Michigan collected taxes following a foreclosure sale in Freed, Montgomery
County did not even collect the taxes owed by Harrison because it transferred clear title to her
property to a land bank.
Comity. Just as the Tax Injunction Act bars claims for injunctive and declaratory relief,
comity principles restrain plaintiffs from “asserting § 1983 actions against the validity of state
tax systems in federal courts.” Fair Assessment in Real Estate Ass’n v. McNary, 454 U.S. 100,
116 (1981). But just as the Act does not bar Harrison’s claims, neither do these comity
principles compel abstention. See Freed, 976 F.3d at 737. As we have said, “takings suits in
federal courts to recover excess equity as a result of state tax foreclosure sales do not violate the
principle of judicial federalism.” Id. Harrison’s suit is a close analog. Because she challenges
only Ohio’s extinguishment of her surplus equity—not its foreclosure of tax-delinquent
property—her use of § 1983 does not run afoul of comity principles.
That leaves the merits of Harrison’s federal takings claim, which implicates debates
going back to the founding. On the one hand, in the words of Justice Chase, Harrison’s
argument rests on the venerable proposition that “a law that takes property from A. and gives it
to B . . . is against all reason and justice.” Calder v. Bull, 3 U.S. 386, 388 (1798). “If, on the
other hand,” in the words of Justice Iredell, “the Legislature . . . shall pass a law, within the
general scope of their constitutional power, the Court cannot pronounce it to be void, merely
No. 20-4051 Harrison v. Montgomery Cnty., Ohio Page 12
because it is, in their judgment, contrary to the principles of natural justice. The ideas of natural
justice are regulated by no fixed standard: the ablest and the purest men have differed upon the
subject; and all that the Court could properly say, in such an event, would be, that the Legislature
(possessed of an equal right of opinion) had passed an act which, in the opinion of the judges,
was inconsistent with the abstract principles of natural justice.” Id. at 399. As a court that
specializes in sequels, not premiers, we think it prudent to allow the district court to consider the
merits of this claim in the first instance. In doing so, it may wish to solicit historical evidence
about the meaning of a taking in 1791 and 1868 with respect to this kind of government action.
Should either party appeal the district court’s ruling, this panel stands ready to handle the appeal
promptly.
For these reasons, we reverse and remand the case to the district court to consider
Harrison’s takings claim in the first instance.