City of Philadelphia v. F.A. Realty Investors Corp. ( 2015 )

IN THE COMMONWEALTH COURT OF PENNSYLVANIA
City of Philadelphia :
:
v. :
:
F.A. Realty Investors Corp., : No. 1580 C.D. 2014
Appellant : Submitted: July 17, 2015
BEFORE: HONORABLE DAN PELLEGRINI, President Judge
HONORABLE MARY HANNAH LEAVITT, Judge
HONORABLE ANNE E. COVEY, Judge
OPINION BY
JUDGE COVEY FILED: December 30, 2015
F.A. Realty Investors Corp. (F.A. Realty) appeals from the Philadelphia
County Common Pleas Court’s (trial court) July 31, 2014 order denying its Petition to
Strike and/or Open Default Judgment or Vacate Assessment of Damages Order and
Decree Ordering that the Property be Sold at Sheriff’s Sale (Petition to Strike). There
are three issues before this Court: (1) whether F.A. Realty was properly served; (2)
whether the Petition to Strike should have been granted based upon the City of
Philadelphia’s (City) failure to issue and serve F.A. Realty a writ of scire facias; and,
(3) whether the trial court’s May 7, 2014 order should have been set aside pursuant to
the act commonly known as the Municipal Claims and Tax Liens Act1 (Act). After
review, we vacate and remand for further proceedings.
On January 29, 2014, the City filed a petition to sell the property located
at 5800 North 17th Street, Philadelphia, Pennsylvania (Property) free of all liens and
encumbrances (Petition) alleging that F.A. Realty failed to pay property taxes for the
Property between 1997 and 2012, that liens were entered for all outstanding real
1
Act of May 16, 1923, P.L. 207, as amended, 53 P.S. §§ 7101-7505.
estate taxes, and that the City filed its claims for $27,379.73 in unpaid taxes against
the Property. A tax information certificate identifying F.A. Realty as the Property’s
record owner, and listing two mortgage lien holders, was attached to the Petition.
The City did not attach to the Petition any documentation of a docketed tax lien. On
February 19, 2014, the trial court issued a rule returnable on May 7, 2014. The City’s
affidavits of service represent that the City served the Petition on F.A. Realty by
posting it at the Property on April 2, 2014, and by regular and certified mail on April
11, 2014 to four separate mailing addresses: 7000 Woodbine Avenue, Philadelphia;
5800 North 17th Street, Philadelphia; 1650 Roselyn Street, Apt. 105, Philadelphia;
and P.O. Box 3802, Philadelphia. The affidavits of service were docketed with the
trial court on May 5, 2014.
On May 2, 2014, F.A. Realty’s founder and president Steve Frempong
(Frempong) filed a petition to intervene (Petition to Intervene), alleging that he “is a
co-signer and obligor of a loan secured by” the Property. Petition to Intervene at ¶ 2.
The Petition to Intervene listed Frempong’s address as that of the Property.
The City and Frempong attended the May 7, 2014 hearing. The City
opposed Frempong’s Petition to Intervene and also objected to Frempong’s
representation of F.A. Realty. The trial court sustained both objections because
Frempong did not have a recorded property interest in the Property, and he was not a
licensed attorney. No evidence was presented at the hearing. By May 7, 2014 order,
the trial court granted the City’s Petition, thereby permitting the City to sell the
Property.
On June 6, 2014, F.A. Realty filed its Petition to Strike with the trial
court, asserting that the May 7, 2014 order should be stricken because the City had
not properly served the Petition on F.A. Realty, and F.A. Realty was challenging the
underlying tax assessments before the City’s Tax Review Board and Board of
Revision of Taxes.
2
By July 31, 2014 order (docketed August 1, 2014), the trial court denied
the Petition to Strike. On August 8, 2014, F.A. Realty filed a motion for
reconsideration which the trial court denied on August 12, 2014. On September 2,
2014, F.A. Realty appealed from the denial of its Petition to Strike to this Court.2
F.A. Realty first argues that the trial court’s determination that F.A.
Realty was properly served is not supported by substantial evidence, and is not in
accordance with the requirements of the Act. It specifically contends that the City
was required, pursuant to Sections 17 and 18 of the Act,3 to file a writ of scire facias
before filing its Petition and adhere to the service requirements for such writs.
Recently, this Court decided City of Philadelphia v. Robinson, 123 A.3d
791 (Pa. Cmwlth. 2015). In Robinson, the City sought an order that a delinquent
taxpayer’s property should be sold. As in the instant case:
[T]he City filed a petition for a rule to show cause why the
[p]roperty should not be sold free and clear of all liens and
encumbrances (Sale Petition). In the Sale Petition, the City
asserted that it had obtained tax liens for delinquent taxes
and related costs including penalties [and] interest . . . on
the [p]roperty. The City included in its filing a proposed
rule returnable order with blanks for a signature of the [trial
court]’s administrative judge, a date for a hearing on the
rule returnable, and a date for the issuance of the order.
Id. at 792. The Robinson Court reviewed the law pertaining to municipal tax sales,
explaining:
Under Section 31.2 of the Act,[FN]3 53 P.S. § 7283, when the
City files a tax or municipal claim in accordance with the
Act, it has the power to file a petition in the court where it
has filed its tax claim, i.e., the [trial court], requesting the
court to ‘grant a rule upon [the interested] parties . . . to
2
“Our review of a trial court’s order in a tax sale matter is limited to considering whether
the trial court erred as a matter of law, rendered a decision that is supported by evidence, or abused
its discretion.” City of Phila. v. Robinson, 123 A.3d 791, 794 n.2 (Pa. Cmwlth. 2015).
3
53 P.S. §§ 7185, 7186.
3
appear and show cause why [the court]’ should not issue a
decree ‘that the [p]roperty be sold, freed and cleared of their
respective claims, mortgages, ground rents, charges and
estates.’[FN]4
The Act contains two provisions that describe the
requirements for service of petitions to sell property free
and clear. First, Section 31.2 of the Act provides the court
with the power to order such property to be sold at a
sheriff’s sale ‘[i]f upon hearing, the court is satisfied that
service had been made of the rule upon the parties
respondent[, i.e., parties with an ownership interest in the
property,] in the manner provided in this [A]ct for the
service of writs of scire facias to obtain judgments upon tax
and municipal claims.’ (Emphasis added.) Section 18 of
the Act, 53 P.S. § 7186, specifically addresses service of
writs of scire facias for the purpose of obtaining judgments
and requires personal service. Section 39.2 of the Act,[FN]5
53 P.S. § 7193.2, however, specifically addresses the
manner of service of a sale petition and rule to show cause,
providing, in pertinent part, that the City post a sale petition
and rule in the most prominent location on the property and
serve the petition and rule upon the registered owner by first
class mail.
In City of Philadelphia v. Manu, 76 A.3d 601(Pa.Cmwlth.2013), the Court identified the conflict of these
two provisions. While the Court was not required to
address the conflict, it noted that the timing of the adoption
of Section 39.2 of the Act after Section 18 of the Act
indicated that the General Assembly intended for service
under Section 39.2 to apply. Moreover, after we decided
Manu, this Court issued its decision in City of Philadelphia
v. F.A. Investors Corp., 95 A.3d 377 (Pa.Cmwlth.2014),
where we applied Section 39.2 of the Act in addressing a
claim that the City had failed to serve parties who had an
interest in the property at issue in that case. F.A. Investors,
95 A.3d at 382.
We agree with the Court’s application of the later-enacted
service provision contained in Section 39.2 of the Act.
Under that provision, service is accomplished by (1) posting
a petition for a rule to show cause (the Sale Petition in this
case) and the rule to show cause issued by the court in
response to the petition (the ‘rule returnable order’ as
4
captioned by the trial court, scheduling the hearing) and (2)
mailing the petition and rule to the owner by first class mail
to the address the owner registered under Section 39.1(a) of
the Act.[FN]6
[FN]3
Added by the Act of March 15, 1956, P.L.
(1955) 1274, as amended.
[FN]4
The Act does not require the City to obtain a
formal judgment based upon tax claims it has filed.
Section 3(b) of the Act, 53 P.S. § 7106(b), provides
generally that ‘any . . . tax claim or tax lien,
including interest, penalty and costs, imposed by a
city of the first class, shall be a judgment only
against the said property when the lien has been
docketed by the prothonotary.’ ‘The docketing of
the lien shall be given the effect of a judgment
against the said property only with respect to which
the claim is filed as a lien.’ Id. . . .
[FN]5
Added by Section 4 of the Act of December
14, 1992, P.L. 859, as amended, 53 P.S. § 7193.1.
[FN]6
Added by the Act of December 14, 1992, P.L.
859.
Id. at 795-96.4
Thus, based on this Court’s holdings in Robinson and Manu, we reject
F.A. Realty’s contention that the City was required to file and serve a writ of scire
4
The United States Bankruptcy Court in In re Blaylock, 394 B.R. 359 (Bankr. E.D. Pa.
2008) acknowledged the seemingly contradictory provisions, stating:
[T]he Legislature appears to have indirectly amended [Section] 7283
[of the Act] insofar as that provision, on its face, incorporates the
service requirements for writs of scire facias found in [Section] 7186
[of the Act]. Section [39.2 of the Act, 53 P.S. §] 7193.2 . . . , enacted
in 1992, provides specifically for the manner of service of a rule to
show cause under [Section] 7283 [of the Act].
Id. at 370 (footnote omitted). See also First Union Nat’l Bank v. F.A. Realty Investors Corp., 812
A.2d 719 (Pa. Super. 2002).
5
facias in accordance with Section 18 of the Act, and hold that the City was required
to comply with Section 39.2 of the Act.
F.A. Realty further argues that “[b]efore granting a petition for sale, the
[trial] court must make ‘an independent inquiry’ regarding the [C]ity’s strict
compliance with the service requirement [and] . . . the [t]rial [c]ourt failed to [do so].”
F.A. Realty’s Br. at 15 (quoting In re Blaylock, 394 B.R. 359, 371 (Bankr. E.D. Pa.
2008)). Section 39.2(a) requires the City to “file an affidavit of service with the court
prior to seeking a decree ordering the sale of the premises.” 53 P.S. § 7193.2(a). The
trial court’s certified record includes the City’s Petition, attached to which is an
affidavit of service representing that the Petition was posted at the property on April
2, 2014, and an affidavit of service certifying that the Petition and Rule Returnable
was served on F.A. Realty and other interested parties by regular and certified mail
on April 11, 2014. Thus, the trial court’s certified record shows that the City satisfied
the Act’s service requirements. Notably, Section 39.2(b) of the Act provides in
pertinent part: “Notwithstanding any other requirement set forth in this [A]ct or any
other law to the contrary, the notice required by subsection (a) of this section shall
constitute the only notice required before a court may enter a decree ordering a tax
sale.” 53 P.S. § 7193.2(b). The documents in the certified record evidence that the
City complied with “the only notice required before a court may enter a decree
ordering a tax sale.” 53 P.S. § 7193.2(b). Further, since Frempong appeared at the
hearing, “we may presume that [F.A. Realty] received notice and was not prejudiced
by the form of service.” Robinson, 123 A.3d at 796. Thus, we agree with the trial
court that that F.A. Realty was properly served in accordance with the Act.
F.A. Realty further maintains that a hearing was required to confirm that
the averments set forth in the Petition were accurate.
6
This Court explained in Manu:
The purpose of sheriff’s sales under the [Act] . . . is not to
strip the owner of his or her property but to collect
municipal claims. Strict compliance with the service
requirement protects the procedural due process rights of all
interested parties to notice and an opportunity to be heard
and also guards against deprivation of property without
substantive due process of law. The collection of claims
may not be implemented without due process of law
guaranteed by the United States and Pennsylvania
Constitutions. Similarly, the requirement that the court
hold a hearing to determine the accuracy of the facts in
the City’s petition is an important due process
safeguard.
Id. at 606 (citations omitted; emphasis added).
In the instant matter, the trial court acknowledged in its opinion that
Section 31.2(a) of the Act5 requires that
a hearing . . . be held in the Court of Common Pleas, at
which the presiding judge must determine whether the tax
petition has been properly served, by the claimant, upon all
parties known to have an interest in the affected property,
as well as whether the factual averments contained in
the petition itself are true. The burden is placed upon
the claimant to show that they [sic] have satisfied the
[Act’s] requirements.
Trial Ct. Op. at 5 (citation and footnote omitted; emphasis added); see also Manu, 76
A.3d at 605. Here, although a hearing was held on May 7, 2014, the entire
proceeding consisted of the following exchange:
COURT CRIER: State your name.
THE WITNESS: Steve, Frempong; S-T-E-V-E, F-R-E-M-P-O-N-G.
---
[City’s Attorney]: Initially, I would just say that Mr.
Frempong [(THE WITNESS)] he is not an attorney. This
5
53 P.S. § 7283.
7
case and this property is in the name of [F.A. Realty]. He
does not have standing to represent.
THE COURT: Are you an attorney?
THE WITNESS: No Your Honor.
THE COURT: I will sustain that objection and sign the
order, sir. You do not have any legal right to represent.
This is in the name of the corporation.
THE WITNESS: Your Honor, I have a petition to intervene.
I have already filed.
THE COURT: I’m signing this petition in the meantime.
You’re not a proper party to handle this case.
THE WITNESS: Your Honor –
THE COURT: This petition to intervene[,] it will get
resolved right now. You’re not a party to handle this.
(Hearing concluded.)
May 7, 2014 Hearing Transcript.
It is clear from the transcript that the trial court did not perform its
required function of verifying the facts alleged in the Petition necessary to permit the
court to order the tax sale. Similar to the hearing in Manu, “no evidence was
presented to establish the truth of the facts in the City’s petition.” Id. at 605. Even
though the trial court correctly found that Frempong could not appear on behalf of
F.A. Realty,6 the trial court opinion did not discuss what record evidence, if any, it
relied on to conclude that the Petition’s factual averments were true.
6
This Court is also concerned that the trial court refused to permit Frempong an opportunity
at the hearing to provide support for his Petition to Intervene. Because Frempong is not an attorney,
he was appropriately precluded from representing F.A. Realty. See In re Tax Claim Bureau of
Westmoreland Cnty., 84 A.3d 337 (Pa. Cmwlth. 2013). However, the trial court improperly
prevented Frempong from representing himself as an individual seeking to intervene in the matter.
Notwithstanding, because Frempong’s Petition to Intervene is not before this Court, we do not
address it.
8
Here, as in Robinson,
there does not appear to be any record evidence adduced
during a hearing that supports the trial court’s decision.
Indeed, we find it curious, if not troubling, that the City
would proceed under the Act to sell real property without
attaching to its petition or introducing at hearing evidence
of a docketed tax lien(s) on the property in question. The
trial court’s factual findings, such as they are, appear
instead to be based on a City-generated accounting of what
the City contended are the amounts of delinquent taxes and
related charges owed with respect to the [p]roperty. This
document, however, was neither offered by the City nor
admitted into the record by the trial court as evidence in
support of the City’s Sale Petition.
Id. at 798.7
For all of the above reasons, we vacate the trial court’s July 31, 2014
order denying F.A. Realty’s Petition to Strike, vacate the trial court’s May 7, 2014
order granting the City’s Petition, and remand this matter to the trial court for further
proceedings to determine the truth of the facts alleged in the Petition necessary to
permit the court to order the tax sale.
___________________________
ANNE E. COVEY, Judge
7
Although the Robinson Court affirmed the trial court’s decision, it did so because the pro
se appellant had not raised the relevant issues. Notably, in Robinson, this Court stated, “[i]n another
appeal, however, perhaps one where the property owner is able to afford and secure counsel, a
similar record might not hold up on appeal.” Id. at 798. This is that appeal.
9
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
City of Philadelphia :
:
v. :
:
F.A. Realty Investors Corp., : No. 1580 C.D. 2014
Appellant :
ORDER
AND NOW, this 30th day of December, 2015, the Philadelphia County
Common Pleas Court’s (trial court) July 31, 2014 and May 7, 2014 orders are vacated
and the matter is remanded for further proceedings to determine the truth of the facts
alleged in the City of Philadelphia’s petition to sell the property located at 5800 North
17th Street, Philadelphia, Pennsylvania, necessary to permit the trial court to order
the tax sale.
Jurisdiction is relinquished.
___________________________
ANNE E. COVEY, Judge