Northwest Savings v. Knapp, B. v. Travel Services

J-S42042-16
2016 Pa. Super. 218
NORTHWEST SAVINGS BANK IN THE SUPERIOR COURT OF
PENNSYLVANIA
v.
BARBARA A. KNAPP AND DENNIS E.
BEAVER
v.
TRAVEL SERVICES, INC. NOW BY
ASSIGNMENT EDGEWOOD
DEVELOPMENT LLC
Appellant No. 1871 WDA 2015
Appeal from the Order Entered October 27, 2015
in the Court of Common Pleas of Venango County Civil Division
at No(s): CIV 951-2014
BEFORE: SHOGAN, OTT, and FITZGERALD,* JJ.
OPINION BY FITZGERALD, J.: FILED SEPTEMBER 28, 2016
Appellant, Travel Services, Inc., now by assignment Edgewood
Development LLC, appeals from the order entered in the Venango County
Court of Common Pleas. The order denied Appellant’s exceptions to the
Proposed Schedule of Distribution submitted by the Venango County Sheriff
following a Sheriff’s sale of real property located in Oil City, Pennsylvania.
Appellant argues the trial court erred by holding that the Venango County
Sheriff’s procedure of adding realty transfer taxes to the winning bid at a
Sheriff’s sale does not violate 72 P.S. § 8104-C and 72 P.S. § 8107-D. We
hold that the Venango County Sheriff’s method of assessing realty transfer
*
Former Justice specially assigned to the Superior Court.
J-S42042-16
tax contravenes the clear and unambiguous language of these statutes.
Thus, we reverse the trial court and remand for further proceedings.
We summarize the factual and procedural history of this case as
gleaned from the certified record as follows. The underlying action in this
case was a mortgage foreclosure filed on August 20, 2014. Default
judgment was ultimately entered against Barbara A. Knapp and Dennis E.
Beaver in the amount of $103,718, plus costs and interest. The property at
issue was sold at a Sheriff’s sale on July 15, 2015.
Appellant, a third-party purchaser, won the property with a bid of
$41,300. The Sheriff assessed the value of the property at $150,440. The
Sheriff then added $3,430.04, representing 2% of the assessed value for
state transfer taxes and local transfer taxes, to the winning bid. Further, the
Sheriff added 2% for poundage;1 thus, Appellant owed a total of
$45,556.04.
Appellant acknowledges that prior to the sale, he was aware that both
poundage and taxes would be added to his bid based upon the Sheriff’s sale
information sheet:
WHAT IF I AM THE SUCCESSFUL PURCHASER OF THE
PROPERTY?
1
Poundage refers to a fee paid to a Sheriff based upon the “reasonable cost
of proceeding to foreclosure.” Kinder-Travel Inc. ex rel. Kid Country
Junction, Inc. v. Estill, 834 A.2d 1175, 1177 (Pa. Super. 2003) (citation
omitted); see 42 P.S. § 21107.
-2-
J-S42042-16
You will need to add an additional 2% to your final bid
amount for Sheriff Poundage, a fee collected by the
Sheriff’s Office. You will also be responsible for paying the
local & state transfer taxes. These are calculated from the
assessed value of the property.
Venango County Sheriff’s Office Sheriff Sale Information Real Estate.
Further, at the conclusion of the sale, Appellant was provided with a “Real
Estate Sale Calculation Sheet,” which separately listed the poundage and the
state and local transfer taxes as additions to the successful bid price.
Appellant paid the successful bid and poundage with one check for $42,126.
Appellant issued a separate check, which he indicated was under protest, for
$3,430.04 for the state and local taxes.
On July 15, 2015, the Sheriff filed a Notice of Proposed Schedule of
Distribution per Pa.R.C.P. 3136. Appellant filed timely exceptions
contending that the transfer taxes should have been deducted from—and not
added to—the winning bid of $41,300. After a hearing, the trial court denied
Appellant’s exceptions on October 27, 2015.
Appellant timely appealed on November 24, 2015, and complied with
the court’s order to file a Pa.R.A.P. 1925(b) statement of matters
complained of on appeal. The trial court issued an opinion on December 18,
2015, which held that the Sheriff’s tax collection procedure complied with
the law and that Appellant was aware of the procedure prior to participating
in the Sheriff’s sale. The trial court specifically discussed the only reported
-3-
J-S42042-16
case regarding the statutes at issue, Sciandro v. Harner, 11 Pa. D. & C.2d
294 (C.C.P. Bucks 1957).
In Sciandro, the Bucks County Court of Common Pleas held that the
nearly identical language of the statute there at issue,2 a predecessor to the
instant statutes, required that taxes be deducted from the winning bid
amount at a Sheriff’s sale, not subsequently added after the winning bid had
already been accepted. Id. at 295. In this case, the trial court attempted to
distinguish Sciandro by emphasizing that, in that case, the third party
purchaser might not have been aware of the tax liability whereas, here,
Appellant was informed, in writing, prior to placing a bid.
On appeal, Appellant raises the following issue:
Whether the trial court erred in dismissing the third party
purchaser’s exceptions to the sheriff’s schedule of
proposed distribution which required the third party
purchaser to pay the transfer taxes associated with the
sale in addition to the bid of the third party purchaser
when the proceeds of the sheriff sale were sufficient to
cover the cost of the realty transfer taxes?
Appellant’s Brief at 3-4.
2
The statute at issue in Sciandro was 72 P.S. § 3285.1 (repealed 1981):
“The tax herein imposed shall be paid, and have priority out of the proceeds
of any judicial sale of real estate before any other obligation, claim, lien,
judgment, estate or costs of the sale and of the writ upon which the sale is
made, and the sheriff, or other officer, conducting said sale, shall pay the
tax herein imposed out of the first moneys paid to him in connection
therewith.” Sciandro, 11 Pa. D. & C.2d at 295.
-4-
J-S42042-16
Appellant argues that 72 P.S. § 8104-C and 72 P.S. § 8107-D require
state and local transfer taxes to be collected from the successful bid amount
from any judicial sale, including a Sheriff’s sale. To this end, Appellant
contends that the term “proceeds” in the statutes refers solely to the bid
amount and not to the bid amount plus poundage and realty transfer taxes,
as asserted by Appellee, Northwest Savings Bank, and Participant, Venango
County Sheriff’s Department. Appellant acknowledges that he was aware of
the Sheriff’s policy regarding the addition of taxes at the end of the bidding
process, but avers that such knowledge is not dispositive because the policy
at issue contravenes Pennsylvania statutes. We agree with Appellant and
conclude that the Sheriff’s method of collecting realty transfer tax violates
Pennsylvania law.
We begin by noting that “[w]here exceptions to the distribution of the
proceeds of a foreclosure sale are filed, a court will hear and determine them
according to law and equity.” Farmers Trust Co. v. Bomberger, 523 A.2d
790, 792 (Pa. Super. 1987) (citations omitted). However, “[b]ecause
statutory interpretation is a question of law, our standard of review is de
novo, and our scope of review is plenary.” Lenau v. Co-eXprise, Inc., 102
A.3d 423, 436 (Pa. Super. 2014) (citation omitted), appeal denied, 113 A.3d
280 (Pa. 2015).
-5-
J-S42042-16
At issue in this case are 72 P.S. § 8104-C and 72 P.S § 8107-D, which
respectively address state and local realty transfer tax. Section 8104-C
states:
§ 8104-C. Proceeds of judicial sale
The tax herein imposed shall be fully paid, and have
priority out of the proceeds of any judicial sale of real
estate before any other obligation, claim, lien, judgment,
estate or costs of the sale and of the writ upon which the
sale is made, and the sheriff, or other officer, conducting
said sale, shall pay the tax herein imposed out of the first
moneys paid to him in connection therewith. If the
proceeds of the sale are insufficient to pay the entire tax
herein imposed, the purchaser shall be liable for the
remaining tax.
72 P.S. § 8104-C (emphasis added).
Section 8107-D contains substantially similar language:
§ 8107-D. Proceeds of judicial sale
The tax imposed under this article shall be fully paid and
have priority out of the proceeds of any judicial sale of
real estate before any other obligation, claim, lien,
judgment, estate or costs of the sale and of the writ upon
which the sale is made. The sheriff or other officer
conducting the sale shall pay the tax imposed under this
article out of the first moneys paid to the sheriff or officer
in connection therewith. If the proceeds of the sale are
insufficient to pay the entire tax imposed under this article,
the purchaser shall be liable for the remaining tax.
72 P.S. § 8107-D (emphasis added).
When interpreting statutes:
we are required to follow the rules of statutory
construction, which direct that every statute shall be
construed, if possible, to give effect to all of its provisions
and that when the words of a statute are clear and free
-6-
J-S42042-16
from all ambiguity, the letter of it is not to be disregarded
under the pretext of pursuing its spirit.
Hearst Television, Inc. v. Norris, 54 A.3d 23, 31 (Pa. 2012) (quotation
marks and citations omitted); see 1 Pa.C.S. § 1921(a)-(b). It is only
“[w]hen the words of the statute are not explicit,” that the intention of the
General Assembly may be considered. 1 Pa.C.S. § 1921(c). The General
Assembly intends for the entire statute to be certain and effective, and not
for any particular words to constitute “mere surplusage.” Fish v. Twp. of
Lower Merion, 128 A.3d 764, 769 (Pa. 2015); see 1 Pa.C.S. § 1922(2);
accord Pottstown Sch. Dist. v. Petro, 94 A.3d 1102, 1107 (Pa. Commw.
2014) (en banc) (holding that the term “priority” must be effectuated when
interpreting the Municipal Claims and Tax Liens Act (“MCTLA”)).3
It is well-settled that “[t]axing statutes generally should receive a
construction which favors the taxpayer.” Speck v. Philips, 51 A.2d 399,
402 (Pa. Super. 1947) (citations omitted). Accordingly, “any doubt or
ambiguity in the interpretation of their terms must, therefore, be resolved in
favor of the taxpayer.” Tech One Assocs. v. Bd. of Prop. Assessment,
53 A.3d 685, 696 (Pa. 2012); see 1 Pa.C.S. § 1928.
We add that this Court has held that a judicial sale includes a Sheriff’s
sale: “A judicial sale is defined . . . as a sale under the judgment, order, or
3
Although a decision of the Commonwealth Court is not binding upon this
Court, it can be considered as persuasive authority. Holland v. Marcy, 817
A.2d 1082, 1083 n.1 (Pa. Super. 2002) (en banc).
-7-
J-S42042-16
decree of the court; a sale under judicial authority, by an officer legally
authorized for the purpose, such as a sheriff’s sale, an administrator’s
sale, etc.” City of Uniontown v. McGibbons, 174 A. 912, 915 (Pa. Super.
1934) (quotation marks omitted and emphasis added).
Instantly, we address whether the Venango County Sheriff erred by
adding the state and local realty transfer taxes assessed under both 72 P.S.
§ 8104-C and 72 P.S. § 8107-D to the winning bid after a Sheriff’s sale.4
The specific language at issue initially requires: “The tax herein imposed
shall be fully paid, and have priority out of the proceeds of any judicial
sale of real estate before any other obligation . . . .” 72 P.S. § 8104-C
(emphasis added). Appellees argue that the term “proceeds” could refer to
either the winning bid amount only or that amount plus taxes and poundage.
While the term “proceeds” is not defined by the statute, Black’s Law
Dictionary provides that proceeds are, “[s]omething received upon selling,
exchanging, collecting, or otherwise disposing of collateral.” Black’s Law
Dictionary 1242 (8th ed. 2004). This definition alone, however, is not
dispositive. Even if we conclude that the term “proceeds” is ambiguous,
interpreting the statute as a whole in a manner giving effect to all its
provisions, as required, is illuminating. See Fish, 128 A.3d at 769.
Specifically, in order to effectuate the preceding term “priority,” the word
4
We discuss 72 P.S. § 8104-C and 72 P.S. § 8107-D together because the
statutory language of each statute is fundamentally identical.
-8-
J-S42042-16
“proceeds” must be understood to mean solely the winning bid amount. If
the term “proceeds” is construed to mean the winning bid plus taxes and
poundage, then the taxes would not need to be prioritized as the first to be
paid, thereby relegating the term “priority” to impermissible “surplusage.”
See id.
For example, in Pottstown Sch. Dist., the Commonwealth Court
construed the Municipal Claims and Tax Liens Act (“MCTLA”) as follows:
The first paragraph of section 31 of the MCTLA, the
controlling statute herein, specifically directs that “the
oldest tax” shall have priority when distributing the
proceeds of a tax sale, followed by any municipal claims,
again with the oldest lien having priority. Thus, this
section addresses both the type or class of a claim (tax
claim versus municipal claim) and the order of payment
within the class (oldest paid first). The second paragraph
of section 31 . . . simply requires the proceeds of a free
and clear judicial sale to be distributed “in accordance with
the priority of such claims.” This priority is clearly set
forth in the first paragraph of section 31. It would be
illogical to conclude . . . that the priority language of this
paragraph is only applicable to upset sales, and not free
and clear judicial sales. Indeed, there is no need to
prioritize distribution of the proceeds of an upset sale, as
such a sale includes the payment/satisfaction of all
outstanding taxes, municipal claims, and liens.
Pottstown Sch. Dist., 94 A.3d at 1107. Likewise, in the instant case, the
statutory language specifying the “priority” of the realty transfer tax is only
applicable in a “free and clear” Sheriff’s sale in which there is no separate
collection of the tax. See id. If the tax is separately added to the winning
bid, then—similar to an upset sale—it would be unnecessary to prioritize the
collection of the tax ahead of other obligations. Hence, the statutory term
-9-
J-S42042-16
“priority” would constitute mere “surplusage.” See Fish, 128 A.3d at 769.
Accordingly, in order to effectuate all of the words for each statute, we
conclude that the term “proceeds” refers to the winning bid amount only,
and thus, the collection of the realty transfer tax has priority before any
other obligation. See id.
The plain language of the last sentence of each statute—“If the
proceeds of the sale are insufficient to pay the entire tax . . . , the purchaser
shall be liable for the remaining tax”—also supports our holding. If the term
“proceeds” is construed as the winning bid plus taxes and poundage, then
the dependent clause is impermissible surplusage because the term
“proceeds” would always include the total amount of owed taxes. See id.
Therefore, in order to effectuate the plain meaning of the last sentence of
each statute, we hold the word “proceeds” refers to the winning bid amount
pledged at a Sheriff’s sale only, and if the bid amount is insufficient to pay
the taxes assessed, than the purchaser is liable for the difference. See 1
Pa.C.S. § 1921(a); Hearst Television, 54 A.3d at 31. The dependent
clause is necessary to address the possibility that the “proceeds” could be
insufficient to pay the tax burden. See 1 Pa.C.S. § 1921(a); Hearst
Television, 54 A.3d at 31. Accordingly, we conclude that the plain
language of the statutes, read in full, requires that the state and local taxes
imposed be paid from the winning bid at a Sheriff’s sale. The amount of
- 10 -
J-S42042-16
state and local taxes shall not be added to the winning bid, as was
improperly done in this case.
Our construction also benefits the taxpayer. See 1 Pa.C.S. § 1928;
Tech One Assocs., 53 A.3d at 696; Speck, 51 A.2d at 402. The taxpayer
is still liable for the entire tax amount but is not required to add the realty
transfer tax to a successful bid if the competitive bidding process yields
sufficient funds to satisfy the tax obligation set forth under the statutes.
Moreover, we find the trial court’s attempt to distinguish Sciandro
unavailing. The trial court determined that the dispositive factor in
Sciandro was that taxpayer’s apparent lack of prior knowledge regarding
the tax obligation to be assessed after a judicial sale. Trial Ct. Op.,
12/18/15, at 2; see Sciandro, 11 Pa. D. & C.2d at 295. Conversely, the
trial court differentiated the instant case by finding that Appellant’s prior
written knowledge of his statutory tax obligation rendered the Sheriff’s
method of separate tax collection lawful. Trial Ct. Op. at 2. We hold that
Appellant’s prior knowledge was of no moment because the statutes at issue
require that the imposed taxes be deducted from the amount of the winning
bid and not added to the winning bid, unless the winning bid amount is
insufficient to pay the taxes. Accordingly, having discerned an error of law,
see Lenau, 102 A.3d at 436; Farmers Trust, 523 A.2d at 792, we reverse
the trial court’s order denying Appellant’s exceptions to the Venango County
- 11 -
J-S42042-16
Sheriff’s procedure of adding realty transfer taxes to a winning bid at a
Sheriff’s sale.
Order reversed. Panel jurisdiction relinquished.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 9/28/2016
- 12 -