Malmloff v. Kerr ( 2007 )

Docket No. 103719.
IN THE
SUPREME COURT
OF
THE STATE OF ILLINOIS
CHRIS MALMLOFF, Appellant, v. LOUISE KERR, Rock Island
County Treasurer, as Trustee of the Rock Island County Property Tax
Deed Indemnity Fund, Appellee.
Opinion filed October 4, 2007.
JUSTICE FITZGERALD delivered the judgment of the court,
with opinion.
Chief Justice Thomas and Justices Freeman, Kilbride, Garman,
Karmeier, and Burke concurred in the judgment and opinion.
OPINION
Chris Malmloff lost his home because he failed to pay his property
taxes. He then filed a petition under section 21–305 of the Property
Tax Code (35 ILCS 200/21–305 (West 2004)) against the Rock
Island County treasurer, seeking an award from the county’s tax deed
indemnity fund. The trial court granted the county treasurer’s motion
for summary judgment, finding that Malmloff was not equitably
entitled to recover from the fund. The appellate court affirmed. 367
Ill. App. 3d 760. For the reasons that follow, we also affirm.
BACKGROUND
In 1994, Malmloff purchased a single-family residence in Moline
from his mother for $20,000 cash after she had inherited it from his
grandfather. Between 1994 and 2000, Malmloff never personally paid
taxes on this property. The 1994 property taxes were paid, but not by
Malmloff. The 1995 property taxes were not paid, and the property
was sold at a tax sale. The property was then redeemed by Jeff
Mahieu, Malmloff’s partner in a rental properties business. The 1996
property taxes were not paid when they were due, but were paid later
by Mahieu. The 1997 property taxes were not paid, and the property
again was sold at a tax sale. The property was later redeemed. The
1998 property taxes were not paid, and the property was sold for a
third time at a tax sale, to Dennis Ballinger. The property was not
redeemed.
In August 2002, Ballinger filed a petition to obtain a tax deed for
the property. After the redemption period expired, Ballinger requested
an order directing the Rock Island County clerk to issue a tax deed.
In an affidavit Ballinger attested that he “caused the Sheriff of said
county to serve written notice upon [Malmloff] by handing the same
to and leaving the same with him *** personally.” Ballinger further
attested that he published notice in the Rock Island newspaper and
sent notice twice to Malmloff by “certified mail, return receipt
requested.” Ballinger’s statements were partially untrue. Notice was
sent by certified mail to Malmloff on two occasions, but those letters
were returned as unclaimed. On September 23, 2002, a Rock Island
County deputy sheriff attempted personal service, but could not locate
Malmloff, and the deputy sheriff checked a box on a form, stating,
“No one will answer door, been there 2 times.” In January 2003, the
trial court granted Ballinger’s request, finding that he had complied
with all statutory and constitutional requirements, and ordered the
Rock Island County clerk to issue a tax deed to Ballinger.
On May 6, 2003, Malmloff filed a petition under section 2–1401
of the Code of Civil Procedure (735 ILCS 5/2–1401 (West 2004)),
asking the court to vacate its tax deed order. Malmloff charged that
Ballinger’s statement in his petition regarding personal service was
fraudulent. The trial court observed that there were two equally
plausible inferences to be drawn from Ballinger’s statement: it was
made fraudulently, or it was made “sloppily, very sloppily or
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negligently.” The trial court concluded that Malmloff failed to show
by clear and convincing evidence that Ballinger had acted fraudulently
and directed a verdict in Ballinger’s favor. The appellate court
affirmed. Like the trial court, the appellate court concluded that
Malmloff failed to present clear and convincing evidence that Ballinger
had procured the tax deed through fraud: “Although Ballinger was
obviously negligent in attesting to personal service when none was
had, his other actions belie an attempt to engage in a pattern of
deception.” No. 3–03–0856 (unpublished order under Supreme Court
Rule 23). This court denied Malmloff’s petition for leave to appeal.
See In re Application of the County Collector, 211 Ill. 2d 577 (2004)
(table).
In November 2004, Malmloff filed a petition under section 21–305
of the Property Tax Code (35 ILCS 200/21–305 (West 2004)),
seeking approximately $54,895.52 from the Rock Island County tax
deed indemnity fund.1 Malmloff claimed that he never received notice
of the tax sale, nor of Ballinger’s petition for a tax deed. According to
Malmloff, if he had notice “that someone was petitioning for a tax
deed to his home,” he “would have been willing and able to redeem
said taxes and would have done so.” Because his home was taken
without proper notice, argued Malmloff, he was equitably entitled to
compensation from the fund.
In his discovery deposition, Malmloff testified that he was a high
school graduate with “at least average to above average” intelligence.
He was one credit hour short of an associate’s degree in electronics
from Blackhawk College, and he had completed a one-year course in
auto body tech from Scott Community College. He was a commercial
and residential electrician by trade, as well as a 15-year member of the
electrician’s union, and he earned $18 to $19 per hour. He had also
been a partner in a rental property business with Mahieu: Malmloff
collected the rent and performed the labor; Mahieu handled the
paperwork.
In the mid-1990s, Malmloff received an approximately $50,000
workers’ compensation settlement from an employer. He used
$20,000 to buy the property from his mother and the remaining
1
Malmloff later reduced this amount to approximately $46,000.
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$30,000 to buy, among other things, a boat. Malmloff understood that
he would have to pay taxes on the property when he purchased it from
his mother. According to Malmloff, Mahieu paid the taxes for 1996
and 1997 in return for Malmloff’s interest in their business: “When
Jeff bought me out, he took that money and paid the[ ] taxes for me.”
Malmloff acknowledged that he “might have” received tax bills from
the county, but did not check his mail very frequently–only “every
two, three weeks.” He stated that he had found certified mail
notification forms in his mailbox after the date on the forms indicating
the mail would be returned to its sender. Though this concerned him,
Malmloff “didn’t look into it that far.”
Malmloff was not very diligent in seeing that his property taxes
were paid; they remained a low priority for him. “I didn’t think it
needed to be done right now,” he testified, adding, “I had money, but
I just didn’t pay them.” Though he stated that he paid his other bills,
and filed timely federal and state income tax returns, he agreed that he
failed to make any real effort to pay his property taxes.
The parties filed cross-motions for summary judgment. The trial
court granted summary judgment to the county treasurer, finding that
Malmloff was not equitably entitled to compensation. He appealed,
and the appellate court affirmed. 367 Ill. App. 3d 760. The court
noted that Malmloff was physically, mentally, and financially able to
pay his property taxes. 367 Ill. App. 3d at 767. He was familiar with
the tax process, and even the process for redeeming property sold for
delinquent taxes. 367 Ill. App. 3d at 767-68. The court further held
that the alleged lack of proper notice did not justify a different result:
“[Malmloff] chose a pattern of behavior and conduct which made
notice difficult or impossible to effectuate. [Malmloff’s] own conduct
indicated a lack of due care and diligence.” 367 Ill. App. 3d at 768.
We allowed Malmloff’s petition for leave to appeal. 210 Ill. 2d R.
315(a).
ANALYSIS
The sole issue presented in this case is whether Malmloff was
equitably entitled to indemnity under section 21–305(a)(1). This court
reviews de novo an order granting summary judgment. Northern
Illinois Emergency Physicians v. Landau, Omahana & Kopka, Ltd.,
216 Ill. 2d 294, 305 (2005). We turn to the statute.
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In order to alleviate the harsh consequences that follow tax sale
proceedings, the legislature created the tax deed indemnity fund. See
Hedrick v. Bathon, 319 Ill. App. 3d 599, 604 (2001). Section 21–305
governs payments from this fund and provides in part:
“(a) Any owner of property sold under any provision of
this Code who sustains loss or damage by reason of the
issuance of a tax deed under Section 21–445 or 22–40 and
who is barred or is in any way precluded from bringing an
action for the recovery of the property shall have the right to
indemnity for the loss or damage sustained, limited as follows:
(1) An owner who resided on property that contained
4 or less dwelling units on the last day of the period of
redemption and who is equitably entitled to compensation
for the loss or damage sustained has the right to
indemnity. An equitable indemnity award shall be limited
to the fair cash value of the property as of the date the tax
deed was issued less any mortgages or liens on the
property, and the award will not exceed $99,000. The
Court shall liberally construe this equitable entitlement
standard to provide compensation wherever, in the
discretion of the Court, the equities warrant the action.
An owner of a property that contained 4 or less
dwelling units who requests an award in excess of $99,000
must prove that the loss of his or her property was not
attributable to his or her own fault or negligence before an
award in excess of $99,000 will be granted.” 35 ILCS
200/21–305 (West 2004).
Under section 21–305(a)(1), a person like Malmloff seeking less
than $99,000 must show that he resided on the property on the last
day of the redemption period, that the property contained less than
five dwelling units, and that he is equitably entitled to indemnity. A
person seeking more than $99,000 must show that the loss of the
property was not attributable to his own fault or negligence. Malmloff
argues in his petition for leave to appeal that the appellate court erred
because it based its decision on his fault or negligence.2 According to
2
Malmloff departs from this issue in his appellant’s brief, arguing instead
that it was inequitable to take his home without notice.
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Malmloff, he was not required to prove that he lost his property
through no fault or negligence of his own; he was only required to
prove that he is equitably entitled to indemnity.
The appellate court noted a purported split in the appellate
districts on this issue. 367 Ill. App. 3d at 765-66. According to the
appellate court, the First District has held that the trial court must
decide the equitable entitlement issue “without regard to fault” (see
Prince v. Rosewell, 319 Ill. App. 3d 1082, 1086 (2001); Kirk v.
Rosewell, 225 Ill. App. 3d 326, 330 (1992)), while other appellate
court districts have held that the trial court may consider the conduct
of the person seeking indemnity (see Hedrick, 319 Ill. App. 3d at
604). But as the appellate court correctly observed, these approaches
have not led to inconsistent results. 367 Ill. App. 3d at 766-67.
Indeed, the difference in these lines of cases is largely semantic. The
First District understands that a person’s conduct may be considered
(see, e.g., Prince, 319 Ill. App. 3d at 1086-87), while other districts
understand that a person’s “fault or negligence would not per se be a
bar *** to indemnity” (see In re Application of Kane County
Treasurer, 135 Ill. App. 3d 796, 806 (1985)). That is, a person who
lost property after a tax sale has a right to indemnification “ ‘even
though the tax sale took place as a result of the [person’s] fault or
negligence, if the court concludes that the real estate owner is
nevertheless equitably entitled to just compensation.’ ” (Emphases in
original.) Hedrick, 319 Ill. App. 3d at 605, quoting In re Application
of Cook County Collector, 174 Ill. App. 3d 981, 984 (1988).
In short, when a person seeks less than $99,000, the trial court’s
focus under section 21–305(a)(1) rests on equity alone. The appellate
court in In re Application of Kane County Treasurer referred to the
Black’s Law Dictionary definition of equity: “ ‘In its broadest and
most general signification, [equity] denotes the spirit and the habit of
fairness, justness, and right dealing which would regulate the
intercourse of men with men,–the rule of doing to all others as we
desire them to do to us; or, as it is expressed by Justinian, “to live
honestly, to harm nobody, to render to every man his due.” ’ ” Kane
County Treasurer, 135 Ill. App. 3d at 806-07, quoting Black’s Law
Dictionary 634 (4th ed. 1951); accord Hedrick, 319 Ill. App. 3d at
608; see also Black’s Law Dictionary 579 (8th ed. 2004) (defining
“equity” as “[f]airness; impartiality”); Holman v. Gill, 107 Ill. 467,
477 (1883) (noting equity “looks mainly to the real justice and merits
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of a cause”). Indeed, such a broad concept of fairness can be applied
in a given case only if a broad range of circumstances are considered.
In the context of section 21–305(a)(1), those circumstances include
the mental, physical, and financial status of the person seeking
indemnity; the person’s comprehension of property taxes and the duty
to pay them; the person’s diligence and credibility; and the size of the
county’s fund. See In re Application of the County Collector, 343 Ill.
App. 3d 363, 369 (2003); Hedrick, 319 Ill. App. 3d at 608. We
emphasize that each case must be decided on its own facts. Garcia v.
Rosewell, 43 Ill. App. 3d 512, 517 (1976). To the extent that Prince
and Kirk can be read to state that fault or negligence are impermissible
considerations in the equitable balance, they are inconsistent with the
language of section 21–305(a)(1) and are overruled.
Here, Malmloff had no physical, mental, or financial problems that
prevented him from paying his property taxes. He worked as an
electrician, and performed labor in his partnership with Mathieu. In his
own estimation, he has average to above-average intelligence. He
graduated from high school, attended some college-level training
programs, and remains one credit hour short of a college degree.
Malmloff was capable of remembering his other financial obligations,
notably filing timely federal and state income tax returns, and he was
financially able to pay his property taxes. He earned approximately
$18 per hour as an electrician. After purchasing the property from his
mother, Malmloff had approximately $30,000 left from his workers’
compensation settlement. Further, he agreed that he could have taken
out a loan to pay his taxes.
Malmloff understood that he had to pay property taxes when he
bought the property from his mother. He even entered into an
agreement under which Mahieu would pay two years of property
taxes in exchange for Malmloff’s interest in their partnership. He
stated that he had received property tax bills from the county, and he
knew the consequences if he failed to pay his property taxes because
his property had been sold at tax sales–and redeemed–twice before
Ballinger bought it.
Malmloff simply was not diligent in paying his taxes. Though he
contends that it is inequitable to take his home because he did not
receive notice of Ballinger’s tax deed petition, he essentially attempts
to raise, under the guise of equitable entitlement, an issue decided
against him in an earlier case. But the doctrine of collateral estoppel
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bars relitigation of an issue previously decided. See People v. Tenner,
206 Ill. 2d 381, 396 (2002). More importantly, instead of whether
equity prevents taking Malmloff’s home without notice, the issue is
whether equity requires paying Malmloff from the indemnity fund.
Notice, or its lack, of a petition for a tax deed is surely relevant in
gauging a person’s diligence–and, thus, in deciding the ultimate issue
of equitable entitlement–but it is not determinative. The appellate
court was correct in observing that Malmloff “chose a pattern of
behavior and conduct which made notice difficult or impossible to
effectuate.” 367 Ill. App. 3d at 768. Further, Malmloff failed to
retrieve certified mail from the post office and, despite some concerns
when it was returned to its sender, cavalierly declined to inquire
further. As a whole, Malmloff’s conduct “at the least could be
described as insidiously naive and, at the most, fiscally irresponsible.”
Kane County Collector, 135 Ill. App. 3d at 810.
Finally, in response to a request to admit, the Rock Island County
treasurer stated that “since the creation of the Indemnity Fund, the
Rock Island County Treasurer has collected in excess of $600,000.00
under authority of the Indemnity Fund Act. However, the fund
currently has a balance of only $9,500.00.” That is, the fund’s balance
is less than the amount Malmloff seeks.
The legislature left the balancing of the equities to the trial court’s
discretion (see 35 ILCS 200/21–305(a)(1) (West 2004)), and we
cannot say the trial court abused that discretion in deciding that
Malmloff is not equitably entitled to compensation from the fund.
CONCLUSION
For the reasons that we have stated, the judgment of the appellate
court is affirmed.
Affirmed.
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