Folse v. Rollyson

895 S.E.2d 244

Jay FOLSE, Petitioner Below, Petitioner,

v.G. Russell ROLLYSON, Jr. and John McCuskey, Jr., Respondents Below, Respondents.

No. 22-ICA-243

West Virginia Intermediate Court of Appeals.

Submitted: September 6, 2023

Filed: November 16, 2023

Appeal from the Circuit Court of Marshall County, Honorable Jeffrey Cramer, Judge, No. 22-P-30(C)

Robert W. Bright, Esq., Middleport, Ohio, Counsel for Petitioner

David P. Cook, Jr., Esq., MacCorkle Lavender, PLLC, Charleston, West Virginia, Counsel for the Respondents

SCARR, Judge:

Petitioner, Mr. Jay Folse, appeals the October 13, 2022, "Order Granting Respondents’ Motion to Dismiss" entered by the Circuit Court of Marshall County dismissing his petition pursuant to West Virginia Code § 11A-3-60. Mr. Folse’s petition sought to compel G. Russell Rollyson, Jr., the Deputy Commissioner of Delinquent and Non-entered Lands ("Deputy Commissioner"), an agent of John McCuskey, Jr., the West Virginia State Auditor ("State Auditor") to issue a tax deed for a property encumbered by a tax lien Mr. Folse had purchased. In that order, the circuit court concluded that, despite the existing tax lien and sale thereof, the owner Mr. Stanley Lahew validly conveyed his property interest in Lot 37 to the City of Cameron ("City"). The circuit court also held that the City’s status as a municipal government extinguished the tax lien Mr. Folse purchased through the doctrine of merger. On appeal, Mr. Folse argues that the circuit court erred in finding that Lot 37’s tax lien merged into its title because the property and the tax lien were held by different entities, and that the Deputy Commissioner was without authority to determine whether Lot 37 was tax-exempt.¹

For the reasons discussed below, this Court reverses the October 13, 2022, "Order Granting Respondents’ Motion to Dismiss" entered by the Circuit Court of Marshall County and remands with instructions to enter an order consistent with this opinion.

I. FACTUAL AND PROCEDURAL BACKGROUND

At a tax sale on October 29, 2021, Mr. Jay Folse purchased a delinquent tax lien on a piece of property known as LOT 37 Crawford ADD, CAMERON CORP district ("Lot 37"), located in the City of Cameron, in Marshall County. As required, Mr. Folse paid $50 towards the tax lien, which was approximately $892. By a letter dated November 1, 2022, the Deputy Commissioner informed Mr. Folse that his purchase had been approved by the State Auditor and described the next steps he would have to take in order to secure issuance of the tax deed pursuant to West Virginia Code § 11A-3-52 (2020). As part of these steps, Mr. Folse had to submit a list of the names and addresses of the parties to whom the State Auditor was to have the Deputy Commissioner send a notice to redeem Lot 37. The deadline for Mr. Folse to submit this information to the State Auditor was December 16, 2021.

Mr. Folse complied with the notice requirements and the Deputy Commissioner successfully served the delinquent property owner, Stanley D. Lahew, with a notice to redeem Lot 37 on January 31, 2022. The notice indicated that Mr. Lahew had until March 23, 2022, to redeem the property. After that date, the Deputy Commissioner could issue Mr. Folse a tax deed for Lot 37 upon his request and payment of the balance of Lot 37’s tax lien and associated costs. Mr. Lahew failed to redeem Lot 37 by March 23, 2022. By letter dated April 6, 2022, the Deputy Commissioner notified Mr. Folse that Mr. Lahew had been properly served and enough time had passed, allowing Mr. Folse to acquire the tax deed to Lot 37 upon his request and the required payment. The letter to Mr. Folse also included an invoice for the costs to prepare and issue the tax deed and pay the remainder of Lot 37’s tax lien. The letter stated in bolded text "I am not permitted to execute a deed before April 6, 2022, or after July 21, 2022." No deadlines besides that window of time between April 6 and July 21 were provided in the letter. The letter finished by re-iterating the July 21, 2022, deadline, once again in bolded text.

However, on May 17, 2022, prior to Mr. Folse’s payment or the tax deed’s issuance, the Deputy Commissioner received a facsimile transmission from the City reflecting that Mr. Lahew had executed a quitclaim deed on that same day, transferring his interest in Lot 37 to the City. By a letter dated May 24, 2022, the Deputy Commissioner informed Mr. Folse that his purchase of Lot 37s tax lien was being set aside, and that his purchase money was being refunded due to the City’s ownership of Lot 37. It must be noted that the transfer of Mr. Lahew’s interest to the City occurred after Mr. Folse’s rights to request the tax deed and pay Lot 37’s tax lien had accrued, and the setting aside of the purchase was 58 days before the July 21, 2022, deadline for Mr. Folse’s payment and deed request.²

Mr. Folse disputed the validity of Lot 37’s conveyance to the City with its counsel and the State Auditor’s office. On July 5, 2022, Mr. Folse, self-represented, filed the underlying petition against the Deputy Commissioner and the State Auditor ("Respondents"), asking the circuit court to compel the issuance of a tax deed for Lot 37 pursuant to West Virginia Code § 11A-3-60. Mr. Folse argued that the quitclaim deed conveying Mr. Lahew’s interest had no bearing on his purchase, and that he was still entitled to a deed for the property notwithstanding its transfer to the City. Mr. Folse also sought costs and fees of the proceeding, damages, and a jury trial.

In response, Respondents filed a motion to dismiss the petition pursuant to Rule 12(b)(6) of the West Virginia Rules of Civil Procedure, for failure to state a claim upon which relief can be granted. In their motion, Respondents argued that Mr. Folse’s relief was limited to the express language of West Virginia Code § 11A-3-60 and must be based on the Deputy Commissioner’s refusal to perform certain enumerated functions, such as issue a tax deed, and there was not a refusal to issue a tax deed here because Lot 37’s tax lien was extinguished by the City’s acquisition. Respondents argued Lot 37’s tax lien was extinguished based on the doctrine of merger, which establishes that when property is acquired by the state in its sovereign capacity, it becomes absolved from any liability for unpaid taxes previously assessed against it at the time of its acquisition. In support, Respondents cited EB Dorev Holdings Inc. v. W. Va. Dep’t of Admin., 236 W. Va. 627, 630-632, 760 S.E.2d 875, 878-880 (2014), which applied merger to absolve tax liens against properties acquired by a state agency, the West Virginia Department of Administration, Real Estate Division.

Based upon its review of the record, the circuit court entered an order on October 13, 2022, granting Respondents’ motion to dismiss with prejudice. The circuit court found that the Deputy Commissioner had not refused to perform any required statutory duty under § 11A-3-60, and that pursuant to the statute, "if upon review of such application, the [circuit court] is of the opinion that the [p]etitioner is not entitled to the deed requested, the [p]etition shall be dismissed." W. Va. Code § 11A-3-60. The circuit court also found that because there had been no refusal on the part of the Deputy Commissioner, Mr. Folse was not entitled to costs of the proceeding, that no additional "damages" were contemplated by W. Va. Code § 11A-3-60, Mr. Folse did not have a right to a jury trial, nor to conduct discovery, and that no additional remedies or claims can exist outside of the language of § 11A-3-60.

On the merits, the circuit court concluded that the tax lien on Lot 37 was extinguished by merger into the property’s title when the City acquired the property. The circuit court reasoned that the merger doctrine had been recognized in West Virginia, and noted that in other jurisdictions, tax liens are extinguished when property is acquired by a state or its political subdivisions, and applied that rule to Lot 37’s tax lien. Of final note, the circuit court found that the real dispute regarding title to the property, if any, is between Mr. Folse and the City, not Respondents. This appeal followed.

II. STANDARD OF REVIEW

[1] The Supreme Court of Appeals of West Virginia has held that "[w]here the issue on an appeal from the circuit court is clearly a question of law or involving an interpretation of a statute, we apply a de novo standard of review." Young v. State, 241 W. Va. 489, 491, 826 S.E.2d 346, 348 (2019). When reviewing a circuit court’s order granting a motion to dismiss, this Court applies a de novo standard of review. Savarese v. Allstate Ins. Co., 223 W. Va. 119, 123, 672 S.E.2d 255, 259 (2008).

III. DISCUSSION

West Virginia’s tax lien system serves as a carrot-and-stick to encourage the important public policy of speedy and efficient payment and collection of property taxes. W. Va. Code Ann. § 11A-3-1. The stick in this statutory scheme is aimed at tax-delinquent property owners, and the carrot is the opportunity for a purchaser to acquire property cheaply by purchasing the tax lien and paying the taxes.

A brief synopsis of the tax lien process is needed to understand the case before us.³ Unpaid property taxes become a lien on the property, and these tax liens can be sold, providing the State with another avenue to receive the taxes owed on the property. W. Va. Code Ann. §§ 11A-1-2, UA-2-10. Property tax delinquencies are examined and certified by the county sheriff, the county commission, and finally the State Auditor. Id. at §§ UA-2-14, 11A-3-8. It is only after the State Auditor’s certification that a property encumbered by a tax lien can be sold at auction. Id. at §§ 11A-3-42, 11A-3-45. Anytime throughout this process, the taxes assessed against the property may be paid, redeeming it. Id. at 11A-3-47. The owner, lienholder, or "any other person entitled to pay the taxes" of the property has the right to redeem. Id.

After a tax lien on a...