Judges: Robert L. Shevin, Attorney General Prepared by: Staff
Filed Date: 9/21/1977
Status: Precedential
Modified Date: 7/5/2016
QUESTIONS:
1. In the event that a surplus from a tax deed sale exists after ad valorem tax and special assessment liens are first satisfied, and assuming no private liens exist, should the clerk distribute said surplus to satisfy in full, or if the surplus is insufficient, on a pro rata basis, all liens of varying priorities held by any government unit including, for example, Internal Revenue Service liens, State of Florida liens for sales tax, intangible tax, Workmen's Compensation, county welfare liens, etc.?
2. In the event that said surplus exists and both public and private liens are of record, what is the clerk's duty as to distribution of said surplus; for example, assuming three liens in the following order of priority exist, i.e., an Internal Revenue Service lien, a mortgage, and a county welfare lien, and the federal and private lien in the absence of a tax deed sale would have priority over the county welfare lien, should the clerk satisfy the federal lien and not the others; or, assuming sufficient funds exist, should the clerk satisfy all three in order that the county lien will be satisfied?
3. In the event that said surplus exists and only private liens are of record, what is the clerk's duty as to distribution of said surplus?
SUMMARY:
Section 197.291(2), F. S., requires the clerk of circuit court to distribute the excess proceeds from a tax deed sale to satisfy any liens of record held by governmental units against the property. In the event that such proceeds are insufficient to satisfy all such liens in full, the clerk is directed to disburse the surplus proceeds to the governmental units pro rata in full satisfaction of the liens. Any remaining balance of undistributed funds is to be retained for the benefit of the legal titleholder.
Application of this statute in certain circumstances involving perfected federal tax liens, state liens for sales or intangible taxes, workmen's compensation liens, county welfare liens, and perfected private mortgage and other liens may encounter constitutional difficulty, however, because compliance with its mandate could alter the lawfully established and the normal priority of liens and extinguish a lienholder's or property owner's rights in or to the surplus proceeds of the tax deed sale. Such application and distribution of such proceeds may operate to divest or impair constitutionally protected contractual and lien or property rights in violation of the Due Process and Contract Clauses of the Florida and United States Constitutions, in the absence of statutory notice that such rights may be so divested or impaired by operation of the distribution scheme prescribed by the statute. To the extent that such distribution displaced or impaired a federally held lien, the statute would appear to be violative of the Supremacy Clause of the United States Constitution.
The Attorney General cannot declare a statute unconstitutional or advise any officer to disregard a legislative direction or mandate. On the contrary, the statute is presumed to be constitutional and must be given effect until judicially declared invalid. In the event that the clerk of circuit court has reasonable doubts as to the statute's validity or its application in the foregoing circumstances or his duties thereunder, he has standing to bring an appropriate judicial proceeding for declaratory relief against the property owner and the holders of perfected and recorded liens to determine its validity and his duties thereunder.
Section 197.291(2), F. S., as amended by s. 4 of Ch.
If the property is purchased for an amount in excess of the statutory bid of the certificate holder, the excess shall be paid over and disbursed by the clerk. The clerk shall distribute the excess to the governmental units for the payment of any lien of record held by a governmental unit against the property. In the event the excess is not sufficient to pay all of such liens in full, the governmental units shall be paid the excess pro rata in full satisfaction of the lien. If, after all liens of record of the governmental units upon the property are paid in full, there remains a balance of undistributed funds, the balance of the purchase price shall be retained by the clerk for the benefit of the person who on the day of the sale was the legal titleholder of record. . . .
The Department of Revenue has promulgated an administrative rule construing and implementing s. 197.291(2), F. S., the material part of which, for the purposes of this opinion, was not affected by the amendatory provisions of s. 4 of Ch.
If the property is purchased for an amount in excess of the statutory (opening) bid the excess shall be distributed to governmental units for the payment of any lien of record held by a governmental unit against the property. If the excess is not sufficient to pay all of such liens in full, then the governmental units shall be paid the excess on a pro rata basis in full satisfaction of the liens.
If, after all liens for general taxes are paid in full, there remains a balance of undistributed funds, the clerk shall retain said funds for the person who on the day of the sale was the legal titleholder of record.
The quoted portion of the rule essentially tracks the language of s. 197.291(2), but then departs from the ordinary meaning of that language by limiting the scope of disbursement to `all liens for general taxes.' Compare the language of the statute requiring disbursement to satisfy `any lien of record held by a governmental unit.'
A proper response to your questions must begin with some observations about lien priorities under the law and the constitutional protection given to lienholders. A lien is a species of property protected by the due process clauses of the United States and Florida Constitutions. See Amendment
Florida has by statute made all ad valorem taxes first liens, superior to all other liens, on any property against which the taxes have been assessed, which continue in force from January 1 of the year the taxes were levied until discharged by payment as provided in Ch. 197, F. S., or until barred by Ch. 95, F. S. See
ss.
I note, parenthetically, that the intangible tax and sales tax liens mentioned in your first question are accorded a priority based on their chronological order of perfection and recordation.See ss.
In the first place, such a distribution would operate to destroy any rights of private or public lienholders of record in or to the excess proceeds of a tax deed sale, which rights might otherwise take priority. Although Florida courts appear not to have addressed the question, a number of other jurisdictions protect a private lienholder's rights to a tax sale surplus. 72 Am. Jur.2dState and Local Taxation s. 911 (1954); 85 C.J.S. Taxation s. 817(b) (1974). These other jurisdictions include `lien' states, where the lienor receives no title or estate in the mortgaged property. See 59 C.J.S. Mortgages s. 1(b)(1), n. 15 (1949). Florida is a `lien' state, Section 679.02, F. S.; Georgia Casualty Co. v. O'Donnell,
Moreover, strict compliance with the statutory mandate would destroy the normal priority inter se of liens held by the governmental units. The statute requires that such liens be satisfied pro rata rather than in their normal order of priority whenever the excess proceeds fail to cover the full amount of such liens. To that extent liens for special assessments and various other public liens prior in time will be partially subordinated to subsequent nonproperty tax public liens.
Finally, although the statute commands that recorded public liens held by a governmental unit against the affected property be satisfied, there is no requirement that such public liens be choate. Inchoate public liens (e.g., contingent liens and liens not fixed in amount) might thus be elevated to parity with choate public liens and be given superiority over choate private liens. The statutory distribution may therefore offend the general rule that choate liens are superior in dignity to inchoate liens. Cf. United States v. Security Trust and Savings Bank of San Diego,
The holders of liens which are in effect wholly or partially subordinated by the clerk's distribution of the surplus proceeds stand to lose their security interests entirely. The effect of a tax deed sale is to extinguish existing interests in or liens upon the property (with exceptions not relevant here), so that the purchaser may acquire an independent and unencumbered title. Section 197.271, F. S. See Stuart v. Stephanus,
It has been held that a state legislature may, by statute, alter prospectively the priority of liens arising under state law so as to give priority to a public charge. See Provident Inst. For Savings v. Mayor and Alderman of Jersey City,
Wholly apart from the foregoing discussion, your questions raise the additional problem of how s. 197.291(2), F. S., applies to afederal tax lien. Liens arising under federal law are governed by federal law and may not be subordinated or displaced by a state statute. See United States v. Equitable Life Assur. Soc.,
This federal statute does not, however, permit a federal tax lien to be wholly or partially subordinated to any lien not permit a federal tax lien to be wholly or partially subordinated to any lien not enumerated in the federal statute or liens not given the requisite priority by state law or to subsequent state liens for sales or intangible taxes, workmen's compensation, or county welfare payments or services. It certainly does not permit a perfected federal tax lien to be wholly or partially subordinated to an inchoate lien arising under state law. United States v. Security Trust and Savings Bank of San Diego, supra. Finally, the federal courts have held that, in the event property subject to a federal tax lien is sold for ad valorem taxes, the federal tax lien is converted to a right in or to the surplus proceeds of the tax sale, superior to the rights of the previous record owner (who, incidentally, was not the party liable for the federal tax). Moyer v. Mathas,
The foregoing observations and authorities lead me to the conclusion that the application of s. 197.291(2), F. S., in the circumstances aforesaid, may impair constitutionally protected contract and lien or property rights and contravene the Supremacy Clause of the United States Constitution. The statute is presumed to be constitutional, however, and must be complied with until such time as it is judicially declared invalid. Evans v. Hillsborough County,
The clerk of circuit court will have to follow the requirements of s. 197.291(2), F. S., in disbursing the excess proceeds of a tax deed sale unless he has reasonable doubts as to its validity in the circumstances specified in the questions posed herein. In that event, however, he has standing to institute legal proceedings to determine the validity of the statute and his duties thereunder. State ex rel. Harrell v. Cone,
Prepared by: Staff
United States v. Bernard E. Roessling, Etc. , 280 F.2d 933 ( 1960 )
martin-h-moyer-v-jess-mathas-clerk-of-the-circuit-court-of-volusia , 458 F.2d 431 ( 1972 )
Ga. Casualty Co. v. O'Donnell , 109 Fla. 290 ( 1933 )
Seaboard All-Fla. Ry. Co. v. Levitt, Et Vir. , 105 Fla. 600 ( 1932 )
Torreyson v. Dutton , 138 Fla. 873 ( 1939 )
City of Sanford v. McClelland , 121 Fla. 253 ( 1935 )
Hoffman v. Semet , 316 So. 2d 649 ( 1975 )
United States v. First Federal Savings & Loan Ass'n , 155 So. 2d 192 ( 1963 )
Glisson v. Hancock , 132 Fla. 321 ( 1938 )
Stuart v. Stephanus , 94 Fla. 1087 ( 1927 )
Torreyson v. Dutton , 137 Fla. 683 ( 1939 )
State, Ex Rel. v. Hale , 129 Fla. 588 ( 1937 )
City of Lake Worth v. McLeod , 112 Fla. 843 ( 1933 )
Moyer v. Mathas , 332 F. Supp. 357 ( 1971 )
Provident Institution for Sav. v. Mayor of Jersey City , 5 S. Ct. 612 ( 1885 )
United States v. Security Trust & Savings Bank , 71 S. Ct. 111 ( 1950 )
United States v. Equitable Life Assurance Soc. of United ... , 86 S. Ct. 1561 ( 1966 )