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

Digitally signed by
Reporter of Decisions
Illinois Official Reports Reason: I attest to the
accuracy and
integrity of this
document
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
-2-
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.
-3-
¶ 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
-4-
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
-5-
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).
-6-
¶ 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.
-7-