This tax sale case has an interesting twist

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The alleged successful purchaser seeks to void the sale!

I’ve always believed our courts will happily void any tax sale on the flimsiest of technicalities, but apparently not when the purported tax sale buyer is the party seeking to get out of the purchase.

Alterna Tax Asset Group, LLC v. York County* is a Court of Appeals case from July dealing with a 2014 tax sale. Alterna claims it was the successful bidder at the sale and sought to void the sale and cancel its ownership relying on §12-61-20 of the South Carolina Code, which reads, in part:

“Any…person…(that) has purchased at or acquired through a tax sale and obtained title to any real or personal property, may bring an action in the court of common pleas of such county for the purpose of barring all other claims thereto.”

The complaint alleged that the title to the property was clouded because of York County’s failure to provide proper notice. The complaint set up four causes of action: (1) declaratory judgment; (2) injunctive relief, (3) quiet title, and (4) unjust enrichment.

The Master consulted the County’s records and took judicial notice that Alterna was neither the purchaser of the property at the tax sale, nor the owner currently listed on the deed. The Master ruled Alterna was not a real party in interest and lacked standing. The Master also ruled that the quoted code section does not create a valid cause of action to void a tax sale.

Alterna appealed claiming the Master erred in taking judicial notice of the public records. The Court of Appeals termed this use of judicial notice “problematic” but decided the appeal on what it called a more fundamental issue:  whether, as the alleged tax sale purchaser, Alterna may seek to rescind its successful purchase based on the facts in this case.

Since the purpose of the code section is to clear tax titles, the Court held that Alterna states to viable cause of action when it seeks to defeat rather than defend its title.

The Court accepted for the purposes of this appeal from a 12(b)(6) motion Alterna’s allegation that it purchased the property at the tax sale and concluded that no valid causes of action for declaratory judgment or injunctive relief existed.

The Court then stated that the remaining questions whether a winning bidder at a tax sale may use the quiet title doctrine or claim of unjust enrichment to defeat rather affirm the bidder’s title, are novel questions in South Carolina. The Court held that the complaint does not allege a proper cause of action for quiet title because there is no existing adverse claim. Neither the County nor anyone else was challenging Alterna’s tax title, so the claim is “imaginary or speculative”.

The unjust enrichment cause of action, which claimed the county was enriched by picketing the tax sale proceeds yet delivering a clouded title, collides, according to the Court, with South Carolina Code §12-51-160, which establishes as a matter of law the presumption that a tax deed is prima facie evidence of good title.

The Court further noted that Alterna’s alleged cloud on the title, that York County’s notification was defective, was a matter of public record visible to Alterna before the sale.

Finally, the Court held that Alterna’s claim was not a justiciable controversy. Alterna claimed its title was hopelessly clouded and would someday be snatched away by someone with a superior claim. The court resisted the request to “tame paper tigers or pass upon issues not subject to a genuine, concrete dispute.”

This is a very interesting case! I’ll keep you posed of future developments.

*South Carolina Court of Appeals Opinion 5836, July 14, 2021

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