In re Lehigh Cnty. Tax Claim Bureau Upset Sale of September 19, 2018

263 A.3d 714

IN RE: LEHIGH COUNTY TAX CLAIM BUREAU UPSET SALE OF SEPTEMBER 19, 2018

Appeal of: Marek Tchorzewski and Anthony Malinowski

No. 169 C.D. 2020

Commonwealth Court of Pennsylvania.

Submitted on Briefs February 19, 2021

Decided September 20, 2021

Daniel P. Lyons, Stroudsburg, for Appellants.

Keith W. Strohl and Justin L. Schell, Slatington, for Appellee Robert Ryan Berkheiser a/k/a R. Ryan Berkheiser a/k/a Ryan R. Berkheiser.

BEFORE: HONORABLE MARY HANNAH LEAVITT, Judge, HONORABLE PATRICIA A. McCULLOUGH, Judge, HONORABLE J. ANDREW CROMPTON, Judge

OPINION BY JUDGE LEAVITT

Marek Tchorzewski and Anthony Malinowski (Purchasers) appeal an order of the Court of Common Pleas of Lehigh County (trial court) setting aside the tax sale of property owned by Robert Ryan Berkheiser (Owner). Purchasers were the successful bidders on the sale of Owner's property but did not participate in the proceeding on Owner's objection petition, which Owner filed pursuant to the Real Estate Tax Sale Law (Tax Sale Law).¹ Purchasers contend that they were indispensable parties to that proceeding and should have been named or joined as respondents in Owner's objection petition. Concluding that Purchasers were not indispensable parties to the proceeding to set aside the tax sale of Owner's property, we affirm the trial court.²

On September 19, 2019, the Lehigh County Tax Claim Bureau (Tax Claim Bureau) conducted an upset tax sale of properties that included a property at 6691 Church Road in Heidelberg Township (Property), where Owner resided. Thereafter, the Tax Claim Bureau filed a consolidated petition for a decree nisi to confirm all the September 19, 2019, upset tax sales.³ On November 22, 2019, Owner filed objections to the sale of his Property, alleging that the Tax Claim Bureau did not strictly comply with the notice requirements of the Tax Sale Law and requesting that the sale of his Property be set aside. On the same day, the trial court issued a rule upon the Tax Claim Bureau to show cause why Owner's objections to the tax sale should not be sustained.

On January 13, 2020, the trial court held a hearing on Owner's objections, at which both the Tax Claim Bureau and Owner appeared with counsel. The Tax Claim Bureau's counsel made the following representations to the trial court:

Your Honor, we had the opportunity to meet before the hearing today to discuss this matter and the Tax Claim Bureau learned that [Owner] in this case, at the time he was served by the Sheriff, was undergoing medical treatment .... And, Your Honor, I have no doubt, I have no reason to doubt what was offered based upon my conversations with additional family members who are here in the courtroom as well and are prepared to testify ... to the medical condition of [Owner].

Having said that, Your Honor, we did reach an agreement whereby the tax sale would be set aside and the taxes would be paid within 20 days based upon the understanding that --

* * *

--the testimony is going to show that although [Owner] was at the home and physically present, he did not understand what he was receiving from the Sheriff at that time.

Considering the circumstances and considering the fact that [Owner] or [Owner's] family is willing to pay the taxes and that he's continuing to undergo medical treatment, I have no reason to take this man's home. And the circumstances are that this is a family farm that has been subdivided ... and this [P]roperty is part of the family farm.

I have not had any, received any communications from the [successful bidders]. This is an upset sale, so there are questions.

I would also like to note for the record that although we have personal service, we do not have any other service [as] the mailings were all returned .

Notes of Testimony, 1/13/2020, at 2-4 (N.T. __) (emphasis added); Reproduced Record at 17a-19a (R.R. __). Counsel for Owner stated that he had "nothing" to add as "[t]his is really what [his] client is seeking, just being able to pay the back taxes[.]" N.T. 4; R.R. 19a. That same day, the trial court entered an order setting aside the tax sale based "upon agreement of counsel." Trial Court Order, 1/13/2020; R.R. 23a.

On February 12, 2020, Purchasers appealed the trial court's order to this Court. In their notice of appeal, Purchasers complained that they had not been named in, or served with, Owner's objection petition, and, further, both were required because they were "indispensable parties to this action." Notice of Appeal, 2/12/2020. In its PA. R.A.P. 1925(a) opinion, the trial court explained that it set aside the tax sale of Owner's Property on the basis of the agreement of the parties that was presented in open court. Further, the Tax Claim Bureau, by its counsel, acknowledged that it could not prove compliance with the notice requirements of the Tax Sale Law. With respect to Purchasers’ assertion that they were indispensable parties, the trial court explained as follows:

The Commonwealth Court has held that the filing of exceptions overcomes the presumption of regularity in the tax sale and, thus, the burden is on the [Tax Claim] Bureau to demonstrate strict compliance with the notice provisions of the Tax Sale Law . Although these challenges are often defended by both the [Tax Claim] Bureau and the purchaser, the purchaser must seek to intervene in order to participate. The ... Tax Sale Law does not make successful bidders, whose purchases have not been confirmed, parties to objection proceedings as a matter of course.

PA. R.A.P. 1925(a) Opinion, 3/17/2020, at 1-2 (citation omitted) (emphasis added); R.R. 24a-25a.

In their appeal to this Court,⁴ Purchasers raise one issue. They contend that they were indispensable parties to Owner's challenge to the tax sale of his Property. As such, Owner should have named Purchasers in his objection petition so they could participate in the hearing thereon. Owner responds that the trial court's order should be affirmed because successful bidders are not, as a matter of course, parties to proceedings to set aside a tax sale. Successful bidders must petition to intervene if they wish to participate in these proceedings.

We begin with a review of the statutory procedures for the conduct of an upset tax sale. Section 602 of the Tax Sale Law requires the tax claim bureau to provide three separate types of notice in advance of an upset tax sale: (1) publication at least 30 days prior to the sale; (2) direct notification to each owner by certified mail at least 30 days prior to the sale; and (3) posting of the property at least 10 days prior to the sale. 72 P.S. § 5860.602.⁵ If the property listed for upset sale is occupied by the owner, Section 601(a)(3) of the Tax Sale Law also requires the tax claim bureau to effect personal service on the owner by a sheriff. 72 P.S. § 5860.601(a)(3).⁶ The above-listed notifications give the owner of the property exposed to an upset tax sale the opportunity to take steps to prevent the involuntary sale of his property by, for example, paying the delinquent taxes owed thereon or entering an agreement with the tax claim bureau for their payment.

After a tax sale, the tax claim bureau must give the owner notice of the tax sale of the owner's property and of the opportunity to challenge that sale.⁷ Section 607(a.1)(1) provides:

Notice shall be given by the bureau within thirty (30) days of the actual sale to each owner by United States certified mail, restricted delivery, return receipt requested, postage prepaid, to each owner at his last known post office address as determined in [S]ection 602(e)(2) that the property was sold and that the owner may file objections or exceptions with the court relating to the regularity and procedures followed during the sale no later than thirty (30) days after the court has made a confirmation nisi of the consolidated return.

72 P.S. § 5860.607(a.1)(1) (emphasis added). The Tax Sale Law does not require the tax claim bureau to copy the successful bidder on the notice sent to each owner pursuant to Section 607(a.1)(1).

Section 607 of the Tax Sale Law next addresses the procedure for challenging an upset tax sale. Section 607(b) states that an "owner or lien creditor" may file objections. 72 P.S. § 5860.607(b). Section 607(d) addresses the scope of these objections:

Any objections or exceptions to such a sale may question the regularity or legality of the proceedings of the bureau in respect to such sale, but may not raise the legality of the taxes on which the sale was held, of the return by the tax collector to the bureau or of the claim entered. In case any objections or exceptions are filed they shall be disposed of according to the practice of the court. If the same are overruled or set aside, a decree of absolute confirmation shall be entered by the court.

72 P.S. § 5860.607(d) (emphasis added). Stated otherwise, an objection challenges the "regularity or legality of the proceedings" of the tax claim bureau, which is the only respondent that must be named in the owner's petition.

The case law construing these provisions of the Tax Sale Law has established several relevant principles. First, the Tax Sale Law was intended to assist in the collection of taxes, not to deprive delinquent taxpayers of their property or to create investment opportunities for members of the public. Sampson v. Tax Claim Bureau of Chester County , 151 A.3d 1163, 1167 (Pa. Cmwlth. 2016). Second, because due process is implicated in the government's involuntary sale of a citizen's real property, the tax claim bureau bears the burden of proving strict compliance with each and every notice provision in the Tax Sale Law. Rice v. Compro Distributing, Inc. , 901 A.2d 570, 575 (Pa. Cmwlth. 2006). This includes a reasonable effort to locate the owner where notices sent by certified and first-class mail are returned to the tax claim bureau. Maya v. County of Erie Tax Claim Bureau , 59 A.3d 50, 55 (Pa. Cmwlth. 2013). Third, the Tax Sale Law does not require or entitle a...