Argued Jan. 31, 2013.
[Copyrighted Material Omitted]
Malik J. Tuma, Baltimore, MD, for appellant/cross-appellee.
James C. McKay, Jr., Senior Assistant Attorney General, with whom Irvin B. Nathan, Attorney General for the District of Columbia, Todd S. Kim, Solicitor General, and Donna M. Murasky, Deputy Solicitor General, were on the brief, for appellee/cross-appellant.
Vanessa A. Buchko filed a brief on behalf of Legal Counsel for the Elderly as amicus curiae in support of appellee.
Before BLACKBURNE-RIGSBY and McLEESE, Associate Judges, and STEADMAN, Senior Judge.
McLEESE, Associate Judge:
If an owner of real property in the District of Columbia fails to pay property taxes, the District may sell the property, in order to satisfy the unpaid tax obligation. In some cases, the purchaser at the tax sale ultimately obtains title to the property. In other cases, the delinquent property owner redeems the property, by paying delinquent taxes, interest, and certain expenses incurred by the tax-sale purchaser. The interest owed by the delinquent taxpayer continues to accrue until the date of redemption, at a rate of 1.5% per month. If a property is redeemed, the District thereafter must make a refund in the appropriate amount to the tax-sale purchaser.
In these cases, Aeon Financial LLC purchased the properties at issue at tax sales. The delinquent tax sale purchasers subsequently made payments in order to redeem the properties, and the District determined that each of the properties had in fact been redeemed as of particular dates. Aeon contended, however, that the delinquent property owners had not made payments in the amount necessary to redeem the properties, and that the properties therefore had not yet been redeemed. Thus, according to Aeon, delinquent taxpayers would have to pay additional amounts of interest in order to redeem the properties, which in turn would increase the amount of the refund to which Aeon would be entitled if the properties ultimately were properly redeemed.
Aeon appeals from several trial-court orders that (a) concluded that the properties at issue had been properly redeemed by the delinquent property owners and (b) calculated the amounts of the redemption refunds due to Aeon. Aeon reiterates its position that the properties have not yet been properly redeemed and that the trial court thus incorrectly calculated the refund amounts. The District cross-appeals, arguing that the Superior Court erred in ordering the District to pay refunds to Aeon before Aeon dismissed its actions to foreclose redemption.
We first address a number of threshold issues, including whether we have jurisdiction over the appeals. On the merits, we ultimately conclude that a property is redeemed when, at the same time: (a) the District concludes in good faith, whether correctly or incorrectly, that all amounts levied by it have been paid; and (b) the tax-sale purchasers' reimbursable expenses have been paid. Because it is not clear that the trial court utilized this approach in determining the dates of redemption and refund amounts in these cases, we remand for further proceedings. In the cross-appeals, we hold that the District is not required to pay Aeon refunds until Aeon dismisses its actions to foreclose redemption.
Before addressing the parties' claims, we describe the pertinent statutes and regulations governing tax sales in the District of Columbia.
When an owner of real property in the District is delinquent in making property-tax payments, the District may sell the property at a public auction called a tax sale. D.C.Code § 47-1330 et seq. (2012 Repl.). Properties offered at a tax sale
are generally sold for no less than the amount of unpaid taxes due (including penalties, interest, and costs), and bidders may add " surplus" amounts to their bid to purchase a property. D.C.Code §§ 47-1346(c), -1330. Upon full payment of the bid amount, the District issues a certificate of sale to the tax-sale purchaser, documenting the sale of the property. D.C.Code §§ 47-1347, -1348.
The delinquent property owner may seek to redeem the property at any time until the right of redemption is foreclosed. D.C.Code § 47-1360. In order to redeem a property, the delinquent property owner must pay certain amounts, including the amount paid by the tax-sale purchaser at the tax sale (exclusive of any surplus), subsequent taxes due, interest, and certain expenses of the tax-sale purchaser. D.C.Code §§ 47-1361(a), -1377. See also D.C.Code §§ 47-1334, -1348(b). The delinquent property owner generally must make that payment to the District, although certain expenses may be paid directly to the tax-sale purchaser if the tax-sale purchaser provides a release acknowledging payment of the expenses owed. D.C.Code § 47-1361(a)(6). After the amounts specified by D.C.Code § 47-1361(a) have been paid, the District notifies the tax-sale purchaser that the property has been redeemed. D.C.Code § 47-1361(d). Once the District gives this notice, the tax-sale purchaser " shall surrender the certificate of sale and shall receive from [the District] the amount to which the [tax-sale] purchaser is entitled." Id.
If a delinquent property owner has not redeemed the property within six months of the tax sale, the tax-sale purchaser may file an action seeking to foreclose the right of redemption. D.C.Code § 47-1370(a). The delinquent property owner can redeem the property while such an action is pending. D.C.Code § 47-1370(d). If a dispute arises about the proper redemption amount, the Superior Court can determine the proper amount. D.C.Code § 47-1362(a). Once a dispute regarding redemption arises, the District may not accept a redemption payment unless the Superior Court issues an order setting a redemption amount and that order is filed with the Mayor. D.C.Code § 47-1362(c); see also 9 DCMR § 316.5(f) (2013).
When finally resolving a suit to foreclose the right of redemption, the trial court may (1) bar the right of redemption; (2) vest title in fee simple in the tax-sale purchaser; or (3) set aside the sale and determine the redemption amount. D.C.Code § 47-1370(b). In the absence of fraud by the tax-sale purchaser, the trial court may set aside a tax sale only if the property is redeemed. D.C.Code § 47-1380(b). If the court sets aside the sale on grounds other than fraud by the tax-sale purchaser, the District is required to pay the tax-sale purchaser the redemption amount. D.C.Code § 47-1380(a), (c). The District has the authority to cancel a tax sale, but if it exercises that authority, it must pay the tax-sale purchaser the redemption amount. D.C.Code § 47-1366.
Because the redemption amount includes interest, the redemption amount will necessarily depend on the date of redemption. See D.C.Code § 47-1361(a); 9 DCMR § 316.6(d) (statutory interest runs until date of redemption). The D.C.Code does not specifically define the date of redemption, although as previously indicated, it does list certain payments as prerequisites to redemption. See, e.g., D.C.Code § 47-1361(a), (d). The regulations define the date of redemption as the " earlier of the date payment of all taxes, assessments, penalties, interest, fees and costs has been posted to the applicable billing system, or the date owner provides [the Office of Tax and Revenue] with copies of the certified
check and paid bank, or applicable agency, receipts confirming payment in full of all taxes, assessments, fees and costs." 9 DCMR § 316.12(g). The regulations further provide that, once an action to foreclose redemption has been filed, a property will qualify for redemption only if the delinquent property owner " pay[s] in full ... [a]ll taxes, assessments, fees, costs and expenses levied by a Taxing Agency," as well as certain other expenses of the tax-sale purchaser. 9 DCMR § 316.5(a). In addition, if a dispute about the redemption amount arises after an action to foreclose redemption has been filed, the " property shall not be redeemed until the amount appearing on an order of the court is satisfied in full." 9 DCMR § 316.5(f).
If a delinquent property owner redeems the property, the District is required to notify the tax-sale purchaser. D.C.Code § 47-1361(d). The tax-sale purchaser must surrender the certificate of sale, and the District then must pay the tax-sale purchaser the " amount to which the purchaser is entitled." Id. This required payment is called a redemption refund, and its amount is specified by statute and regulation. D.C.Code § 47-1380(c); 9 DCMR §§ 316.3, 316.6(c). The redemption refund includes the amount paid at the tax sale, including any surplus; interest on the amount of the tax delinquency; and certain other expenses of the tax-sale purchaser. Id. The interest on the delinquent taxes accrues at the rate of 1.5% per month and continues to accrue until the date of redemption but not thereafter. 9 DCMR § 316.6(c), (d). If a tax-sale purchaser seeks a redemption refund after filing an action to foreclose redemption, the tax-sale purchaser must provide the District with a copy of the " praecipe that dismisses the foreclosure action and/or [a] copy of the Certificate of Cancellation that cancels the Certificate of Sale." 9 DCMR § 316.6(a)(2). This requirement is a " prerequisite[ ]" for collecting a redemption refund. 9 DCMR § 316.6.
In 2008 and 2009, Aeon purchased the " Broadwater," " Wasef," and " Culbertson" properties, in addition to hundreds of other properties, at the District's real-property tax sales. After the expiration of the required six-month waiting period, Aeon filed complaints to foreclose the right of redemption for many of the unredeemed properties, including the Broadwater, Wasef, and Culbertson properties. In many of the cases, Aeon and the District disputed both whether the properties had been redeemed and how to calculate the redemption refunds.
The Superior Court organized the cases into several groups, each with a representative " lead" case. Aeon Financial v. Broadwater (CA-1487-09) was the lead case for a group of 20 cases, Aeon Financial v. Wasef (CA-1472-09) was the lead case for a group of 134 cases, and Aeon Financial v. Culbertson (CA-3938-10) was the lead case for a group of 35 cases. All of the cases were assigned to a magistrate judge.
While Broadwater, Wasef, and Culbertson were pending, the Superior Court resolved several general questions critical to the determination of redemption dates and the calculation of redemption refunds, in Aeon Financial v. Haynes, et al. (CA-1920-10). A magistrate judge made the initial ruling in Haynes, and a reviewing Superior Court judge (Duncan-Peters, J.) later affirmed that ruling. See generally D.C.Code § 11-1732(k) (2012 Repl.) (providing that certain magistrate-judge orders are subject to review by Superior Court judge). The reviewing court in Haynes concluded that the District had been committing three errors in determining
the amount of interest for purposes of calculating redemption amounts. First, the District should have been charging delinquent property owners interest for the month in which the tax sale occurred. Second, the District should have been calculating interest each month based on the tax-sale purchase price (less any surplus), not on the amount of unpaid tax in a given month. Third, the District should have been treating interest as continuing to accrue until all payments essential to redemption had been made, whereas the District had been stopping the accrual of interest before certain expenses were paid.
The reviewing court then addressed the implications of these errors for whether, and if so when, the District should have treated the properties as redeemed. On that point, the reviewing court concluded that Aeon could not " undo redemption" based on errors that the District made in calculating and collecting taxes. Moreover, although Aeon was entitled to a refund in the proper amount, the reviewing court concluded that the District could permissibly make a refund payment that was greater than the redemption payment that the delinquent property owner made.
The reviewing court also stated a test for determining the date of redemption: a property is redeemed on the date that (a) taxes, as assessed by the District, reached a zero balance; and (b) all other payments required for redemption have been made. Finally, the reviewing court directed the magistrate judge to determine the proper refund amount on a case-by-case basis.
The magistrate judge subsequently applied the framework adopted in Haynes to the Broadwater, Wasef, and Culbertson properties, setting dates of redemption and calculating the refunds due to Aeon. In each case, the magistrate judge: (1) ordered the District to pay Aeon the refund within thirty days; (2) ordered Aeon to file a praecipe with the court acknowledging receipt of this payment; and (3) stated that the court would dismiss the foreclosure action when Aeon filed this praecipe. Both parties sought review in the Superior Court.
The District challenged the requirement that it pay refunds to Aeon before Aeon dismissed its actions to foreclose redemption, and Aeon challenged the determination that the properties had been redeemed (thus terminating the accrual of additional interest in Aeon's favor) and the resulting calculation of the amounts to be refunded to Aeon. The reviewing court affirmed the magistrate judge's orders in each case, except that the reviewing court dismissed as untimely Aeon's motion for review in Wasef. These consolidated appeals and cross-appeals followed.
We begin by addressing five threshold issues. First, we conclude that we have jurisdiction over the appeals. Second, we affirm the reviewing court's order dismissing as untimely Aeon's motion for review in Wasef. Third, we hold that Aeon has standing to raise all but one of its arguments. Fourth, we hold that the doctrine of caveat emptor does not preclude Aeon from asserting its rights to obtain a refund in the amount required by statute. Fifth, we decide that the resolution of these cases will not draw into question the title of the delinquent property owners to the
properties at issue and will not impose additional monetary liabilities on the ...