United States District Court, D. Columbia.
BENJAMIN COLEMAN, through his Conservator, ROBERT BUNN, Plaintiff,
DISTRICT OF COLUMBIA, Defendant
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For Benjamin Coleman, Plaintiff: William A. Isaacson, BOIES, SCHILLER & FLEXNER LLP, Washington , DC.
For District of Columbia, Defendant: Edward Paul Henneberry, Jr., LEAD ATTORNEY, OFFICE OF THE ATTORNEY GENERAL FOR DC, Washington, DC.
Emmet G. Sullivan, United States District Judge.
In the District of Columbia, as in many other jurisdictions, a homeowner who fails to pay property taxes runs a great risk. A delinquent property-tax bill becomes a lien, held by the District, on the homeowner's property. Continued failure to pay the delinquent tax bill creates the risk that the District will sell the property to satisfy the taxes. This practice of engaging in " tax sales" has long been recognized as a generally valid exercise of the government's power to collect taxes.
The devil, however, is in the details. In D.C., the tax-sale process begins with the sale at auction of a tax lien on the property to a third party. The homeowner may satisfy that lien by paying his delinquent tax bill, but the purchaser of the lien is able to add on top of that bill various costs, including attorney's fees. In Mr. Coleman's case, that caused what began as a $133.88 tax bill to become a total of over $5,000, all of which needed to be paid before the lien would be satisfied.
Once the lien is sold to the third party, a six-month waiting period begins, during which the homeowner may redeem his home by paying the taxes, along with any penalties, costs, and interest that are owed. If the entire bill is not paid upon expiration of the waiting period, the tax-lien purchaser may initiate proceedings in the Superior Court of the District of Columbia to foreclose. The Superior Court is empowered to enter a judgment vesting a fee simple title in the property in the tax-lien purchaser. In this way, a small sum paid to purchase the lien becomes full title to a property worth hundreds of thousands of dollars (in this case, approximately $200,000). The key detail in this case is that D.C. law provides that any surplus equity the homeowner has in his home is irrevocably lost, no matter how small the tax bill nor how valuable the equity.
Mr. Coleman brings a limited challenge to this law. He does not seek to regain his home, does not dispute that the District may use tax sales to satisfy delinquent property taxes, and agrees with the District
that he owed $133.88 in property taxes, plus penalties, costs, and interest. Mr. Coleman's claim is against the District's taking of the entire equity in his home. The District, he asserts, has provided him no compensation for the loss of that equity, even though its value far exceeds the taxes, penalties, costs, and interest he owed.
Mr. Coleman claims that such a practice is forbidden by the Takings Clause of the Fifth Amendment to the United States Constitution. Accordingly, he filed suit seeking an award of " just compensation," as well as a declaration from this Court that the District's statute is unconstitutional. The District has moved to dismiss Mr. Coleman's Complaint, arguing that this Court lacks jurisdiction for multiple reasons and that, in any event, Supreme Court precedent holds that the District's actions do not violate the Takings Clause. The Court has considered the District's motion, the response and reply thereto, as well as the applicable law and the entire record in this case. The Court also held a hearing on the motion to dismiss on September 26, 2014. The Court finds that it has jurisdiction over Mr. Coleman's claims and accordingly rejects all of the District's jurisdictional arguments. The Court also rejects the District's argument that prior Supreme Court precedent has foreclosed Mr. Coleman's claim under the Takings Clause. Accordingly, the Court DENIES the District's motion.
A. Statutory Background
The District of Columbia's laws governing the procedure for collecting delinquent property taxes are codified in Chapter 13A of title 47 of the D.C. Code. See Revised Real Property Tax Sales, D.C. Code § 47-1330, et seq. On the day that a tax-- defined as " unpaid real property tax . . . including penalties, interest, and costs," id. § 47-1330(2)--becomes delinquent, the D.C. Code declares that it " shall automatically become a lien on the real property." Id. § 47-1331(a). The Code further directs the District to " sell all real property on which the tax is in arrears unless otherwise provided by law." Id. § 47-1332(a).
Such tax sales follow a procedure set out elsewhere in the statute. " At least 30 days before" any such sale is to be advertised, " the Mayor shall mail to the person who last appears as owner of the real property on the tax roll . . . a notice of delinquency." Id. § 47-1341(a). Once thirty days have passed " from the mailing of the notice of delinquency," the District must advertise that the property " will be sold at public auction because of taxes." Id. § 47-1342(a). At this public sale, the District must sell the property " in its entirety," id. § 47-1343, " to the purchaser who makes the highest bid." Id. § 47-1346(a)(2). Sales are not to be conducted " for less than the amount of the taxes," however. Id. § 47-1346(c).
The purchaser receives " a certificate of sale," which describes the property and the sale, and indicates " [t]he amount of taxes for which the real property was offered for sale." Id. § 47-1348(a). The six months following the date of sale are a redemption period, during which the purchaser may not foreclose the original owner's right to redeem the property. Id. § 47-1370(a). The original owner may redeem by paying to the District " the amount paid by the purchaser . . . exclusive of surplus with interest thereon," as well as " other taxes, interest, and penalties paid by a purchaser," and " expenses for which the purchaser is entitled to reimbursement." Id. § 47-1361(a). ...