Swinka Realty Invs., LLC v. Lackawanna Cnty. Tax Claim Bureau

SWINKA REALTY INVESTMENTS, LLC, Plaintiff, v. LACKAWANNA COUNTY TAX CLAIM BUREAU andLACKAWANNA COUNTY, Defendants.

3:13-CV-00764

UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF PENNSYLVANIA

July 1, 2016

(JUDGE MARIANI)

MEMORANDUM OPINION

Presently before the Court are the parties' cross-motions for summary judgment. For the reasons set forth below, the Court will grant Defendants' motion in its entirety.

I. INTRODUCTION AND PROCEDURAL HISTORY

On February 25, 2013, Plaintiff Swinka Realty Investments, LLC ("Swinka") filed a Complaint against the Defendants Lackawanna County Tax Claim Bureau (the "Tax Claim Bureau") and Lackawanna County (the "County") in the Lackawanna County Court of Common Pleas. Plaintiff, a bidder at an Upset Tax Sale, alleges that the actions of the Tax Claim Bureau in setting aside the sale constituted a breach of contract, violated various provisions of the Fourteenth Amendment, and entitled it to relief under Pennsylvania's eminent domain code. (Doc. 1). Plaintiff also sought mandamus relief in the form of an order directing the Tax Claim Bureau to deliver it a deed for the property Plaintiff alleges it is entitled to as a result of the Upset Tax Sale.

Defendants removed the action to this Court and subsequently moved to partially dismiss the Complaint. (Doc. 3). On October 15, 2013, the Court granted Defendants' motion to dismiss and granted Swinka leave to amend. Swinka then timely filed an Amended Complaint on December 2, 2013. (Doc. 23).¹ Thereafter, Defendants moved to partially dismiss the Amended Complaint. (Doc. 25). The Court referred the matter to the Honorable Magistrate Judge Carlson who issued a report and recommendation, recommending that this Court grant in part and deny in part Defendants' motion. (Doc. 31). Specifically, Magistrate Judge Carlson found that Plaintiff's substantive due process claim, (Count III), and its claim requesting the appointment of a Board of Viewers under Section 504 of the Pennsylvania Eminent Domain Code should be dismissed with prejudice (Count IV). (Id. at 9-15). The Court adopted Magistrate Judge Carlson's report and recommendation in its entirety. (Doc. 32).

On March 9, 2015, Defendants moved for summary judgment, (Doc. 38), and on April 8, 2015, Plaintiff cross-moved for summary judgment. (Doc. 41). The matter has been fully briefed and ripe for disposition.

II. STATEMENT OF FACTS

A. The Parties

Swinka is a Pennsylvania Limited Liability Company formed on or about May 2008 and is solely owned by its President Kimberley Poplawski. (Doc. 38-1, at ¶¶ 1-2); (Doc. 41, at 4); (Doc. 45-1, at 7). Plaintiff has no employees and is in the business of buying, selling, and leasing investment properties. (Doc. 38-1, at ¶¶ 3-4); (Doc. 39-1, at 5). Mark Gawron, Ms. Poplawski's boyfriend for the past fifteen years, solely operates and manages Plaintiff Swinka. (Doc. 38-1, at ¶ 5); (Doc. 45-1, at 6). Ms. Poplawski neither manages nor controls Swinka and is not involved in Swinka's day-to-day operations, testifying that her role as sole owner and President of Swinka is to "just sit back and let Mark do all the work." (Doc. 38-1, at ¶ 6); (Doc. 39-1, at 5). At all relevant times, Mark Gawron acted as the authorized agent of Plaintiff Swinka. (Doc. 39-1, at ¶ 7).

Defendant Lackawanna County Tax Claim Bureau is an agency located within the County of Lackawanna charged with collecting delinquent real estate taxes, as well as holding and conducting Upset, Private, and Judicial Tax Claim Sales. (Doc. 23, at ¶ 5). Defendant Lackawanna County is a Third Class County clothed with Eminent Domain powers with its principal place of business in Scranton, Pennsylvania. (Doc. 38-1, at ¶ 128); (Doc. 33, at ¶ 128). Tax Claim Bureau Deputy Director Ronald Koldjeski ("Koldjeski") runs the Bureau and is an agent of Defendant Lackawanna County, which has delegated its taxcollection responsibilities to the Tax Claim Bureau. (Doc. 38-1, at ¶ 8); (Doc. 23, at ¶ 126); (Doc. 33, at¶ 126).

B. Pennsylvania Real Estate Tax Sale Law

Before describing the relevant factual background, it is necessary to cover the statutory scheme at issue in this action. Under Pennsylvania law, "[a]n upset tax sale may be conducted when a property owner is delinquent in paying taxes." 777 L.L.P. v. Luzerne Cnty. Tax Claim Bureau, 111 A.3d 292, 296 (Pa. Cmwlth. 2015) (citing 72 P.S. § 5860.601). The Pennsylvania Real Estate Tax Sale Law, 72 P.S. §§ 5860.101 et seq., provides that "after a claim has been made for unpaid taxes, and the property owner has failed to contest the claim, the Bureau may sell the property at a tax sale, after giving the notice required by the act." Carignan v. Tax Claim Bureau of Cumberland Cnty., Civil No. 1:CV-10-1792, 2010 WL 5135893, at *1 (M.D. Pa. Dec. 10, 2010). Courts in Pennsylvania have repeatedly recognized that "[t]he purpose of the Real Estate Tax Sale Law is to ensure the collection of taxes, not to deprive citizens of their property or to create investment opportunities for those who attend tax sales." In re Consolidated Return of Tax Claim Bureau of Cnty. of Beaver From August 16, 2011 Upset Sale For Delinquent Taxes, 105 A.3d 76, 81 (Pa. Cmwlth. 2014); accord Cruder v. Westmoreland Cnty. Tax Claim Bureau, 861 A.2d 411, 415 (Pa. Cmwlth. 2004) (citing Stanford-Gale v. Tax Claim Bureau of Susquehanna Cnty., 816 A.2d 1214, 1216 (Pa. Cmwlth. 2003).

Because the primary purpose of the statute is to collect taxes, and not to deprive an owner of his property, the relevant statutory scheme sets forth various mechanisms whereby a delinquent taxpayer may remove his or her property from an Upset Tax Sale. In particular, Section 603 of the Real Estate Tax Sale Law, which applies to the redemption of property "prior to and during an upset sale," In re Tax Sale Pursuant to Real Estate Tax Sale Law of 1947, 8 A.3d 358, 365 (Pa. Cmwlth. 2010), provides:

Any owner or lien creditor of the owner may, at the option of the bureau, prior to the actual sale, (1) cause the property to be removed from the sale by payment in full of taxes which have become absolute and of all charges and interest due on these taxes to the time of payment, or (2) enter into an agreement, in writing, with the bureau to stay the sale of the property upon the payment of twenty-five per centum (25%) of the amount due on all tax claims and tax judgments filed or entered against such property and the interest and costs on the taxes returned to date, as provided by this act, and agreeing therein to pay the balance of said claims and judgments and the interest and costs thereon in not more than three (3) instalments all within one (1) year of the date of said agreement, the agreement to specify the dates on or before which each instalment shall be paid, and the amount of each instalment. So long as said agreement is being fully complied with by the taxpayer, the sale of the property covered by the agreement shall be stayed. But in case of default in such agreement by the owner or lien creditor, the bureau, after written notice of such default given by United States mail, postage prepaid, to the owner or lien creditor at the address stated in the agreement, shall apply all payments made against the oldest delinquent taxes and costs, then against the more recent. If sufficient payment has been made to discharge all the taxes and claims which would have caused the property to be put up for sale, the property may not be sold. If sufficient payment has not been received to discharge these taxes and claims, the bureau shall proceed with the sale of such property in the manner herein provided either at the next scheduled upset sale or at a special upset sale, either of which is to be held at least ninety (90) days after such default. If a party to an instalment agreement defaults on the agreement, the bureau shall not enter into a new instalment agreement with that person within three (3) years of the default.

72 P.S. § 5860.603 (emphasis added).²

"A taxpayer who follows the Section 603 procedure, including an installment plan, may remove a property from sale; however, this does not mean that the taxing authorities cannot agree to another payment plan." In re Public Sale of Properties, 841 A.2d 619, 624 (Pa. Cmwlth. 2004) (citing 72 P.S. § 5860.208) (emphasis added). That is so because "[s]ection 208 of the Real Estate Tax Sale Law gives a tax claim bureau broad authority for 'the management and disposition of property in accordance with the provisions of this act' in meeting its obligations to collect taxes." Id. at 622 (Pa. Cmwlth. 2004) (quoting 72 P.S. § 5860.208). This includes the ability to remove a property from a tax sale when to do so will "advance the collection of delinquent taxes." Id.

Following an Upset Tax Sale, the Tax Claim Bureau "must make a 'consolidated return to the court of common pleas.'" Carignan, 2010 WL 5135893, at *1 (quoting 72 P.S. § 5860.607(a)). The consolidated return, among other things, "reports on the successful sales of any property." Id. "If the sales were made in accordance with the act, the consolidated return and the sales so made shall be confirmed nisi by the common pleas court." Id. (citations omitted). Any person wishing to contest the sale "has thirty days after the confirmation to file exceptions with the court." Id. Specifically: the statute provides that:

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 legalityof the taxes on which the sale was held, or 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). "If no such objections or exceptions are timely filed, a decree of absolute confirmation shall be...