Attorney for Appellant Attorney for Appellee
Edward R. Hall David Paul Allen
Merrillville, Indiana Hammond, Indiana
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__
In the
Indiana Supreme Court
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No. 45S03-0306-CV-00282
Lake County Auditor,
Appellant (Defendant below),
v.
Lonnie Burks,
Appellee (Plaintiff below).
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Appeal from the Lake Superior Court, No. 45D05-0004-CP-0258
The Honorable James Richards, Judge
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On Petition To Transfer from the Indiana Court of Appeals, No. 45A03-0203-
CV-78
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February 4, 2004
Boehm, Justice.
The Lake County Auditor sold the home where Lonnie Burks lived to
satisfy delinquent taxes on the property. The property brought a price
greater than the delinquency and Burks sued for the surplus. Burks was not
the record owner. Rather, she was intestate heir and a beneficiary of the
unprobated will of the deceased record owner. We hold that a person is not
required to be the “record owner” of the property to claim the surplus from
a tax sale if he or she can establish ownership of the property sold.
Factual and Procedural Background
From the time she was nine months old, Lonnie Burks lived with and
was raised by her great-aunt Ruth Johnson and Ruth’s husband Robert. In
1952, at age nine, she moved to a house in East Chicago, Indiana. She
lived in the house with the Johnsons and Ruth’s sister and brother-in-law,
Ruby and Prince Tharpe, until she married in 1964 at the age of twenty-one.
The exact chain of title to the property is murky. However, neither party
disputes Robert Johnson’s status as the record owner of the property and
both refer to him as the record owner.[1] We accept that assumption.
Robert Johnson died in 1971 and Ruth died in 1978. Ruth’s sister, Ruby
Tharpe, died in 1985. By that time her husband had moved to a nursing home
and is now deceased. In 1986, Burks returned to live in the house. Mr.
Johnson’s will, executed in 1960, purported to leave the property to Burks
and Ruby Tharpe. Though the will mentioned Robert’s children, it made no
provision for their benefit and they are all deceased with no known heirs.
The will was never probated.
After returning to the house in 1986, Burks paid several delinquent
utility bills and put the power and water accounts for the house in her
name. She also made tax payments, including some delinquent taxes.
Several of the tax payments were by checks drawn on her account, but the
name listed on the tax assessment rolls remained “Bob Johnson et. al.”
Burks made both tax and utility payments until 1997, when she was unable to
continue paying the taxes. The County Auditor sold the property for the
resulting tax delinquency to Ironwood Acceptance Company on September 23,
1998. The sale generated proceeds in excess of the delinquency, but the
record does not indicate the precise amount of the surplus. Burks lived in
the house until she moved out after receiving notice that the house had
been sold.
On April 12, 2000, Burks filed a complaint in Lake Superior Court for
a declaratory judgment that she was the owner of the property on the date
of the tax sale and therefore entitled to the surplus. The trial court
ruled that as the “only surviving heir of the record owner” of the
property, Burks was entitled to the surplus. The Court of Appeals
reversed, holding that under Indiana Code section 6-1.1-24-7 (2002), only
the “owner of record” of property sold in a tax sale may file a claim for
the surplus. Because Burks did not record the deed, she was precluded from
claiming the surplus. This Court granted transfer.
Burks’ Right to the Surplus
The Lake County Auditor argues that Burks has no right to the
surplus. The County Auditor bases this argument on the fact that Burks
does not fall within the terms of the statute permitting administrative
refund of the surplus from a tax sale. The County Auditor’s argument
proceeds from the assumption that Burks’ substantive right to the surplus
is governed solely by Indiana Code section 6-1.1-24-7(b). This argument is
based solely on the Auditor’s interpretation of the statute and therefore
presents a question of law which we review de novo.
At all times relevant to this case, the tax-sale statute provided that
any amounts from a tax sale are to be applied first to taxes, assessments,
penalties, costs, other delinquent property taxes, and any balance is to be
placed in a “tax sale surplus fund.” Ind. Code § 6-1.1-24-7(a) (1998).
Pursuant to Indiana Code section 6-1.1-24-7(b):
The:
1) owner of record of the real property at the time the tax deed is
issued who is divested of ownership by the issuance of a tax
deed; or
2) tax sale purchaser or purchaser’s assignee, upon redemption of
the tract or item of real property;
3) person with a substantial property interest of public record, as
defined in section 1.9 of this chapter and as evidenced by the
issuance of a tax deed to a tax sale purchaser, in a county:
A) having a population of more than two hundred thousand
(200,000) but less than four hundred thousand
(400,000)
B) having a consolidated city; or
C) in which the county auditor and the county treasurer
have an agreement under I.C. 6-1.1-25-4.7;
may file a verified claim for money which is deposited in the tax sale
surplus fund. If the claim is approved by the county auditor and the
county treasurer, the county auditor shall issue a warrant to the
claimant for the amount due.
Ind. Code § 6-1.1-24-7. The statute was amended in 2001 to remove
subsection (b)(3). 2001 Ind. Acts 139, Sec. 6.
The Court of Appeals agreed with the County Auditor that this statute
unambiguously provides that only the “owner of record” or tax-sale
purchaser or his assignee is entitled to a tax surplus. Because Burks was
not the record owner of the property, she was not entitled to the surplus.
That holding conflicted with the Court of Appeals’ holding in Brewer v. EMC
Mortgage Corp., 743 N.E.2d 322 (Ind. Ct. App. 2001) trans. denied. In
Brewer, a different panel of the Court of Appeals read former subsection
(b)(3) as providing one route, but not the only route, to recover a
surplus. It viewed subsection (b)(3) as allowing those with a “substantial
property interest of record” in the counties identified in the statute
(which excluded Lake County, population 484,000) to submit a claim to the
county auditor and obtain the surplus of a tax sale without having to
resort to court. Id. at 326. The court reasoned that the statute’s use of
the word “may” rendered it permissive, not mandatory. As a result,
subsection (b)(3) merely provided taxpayers in some counties with an
administrative alternative to the remedy of a lawsuit that remained
available in all counties.[2] Id.
We agree with Brewer and think its rationale applies equally to
subsections (b)(1) and (b)(2). The statute does not purport to provide an
exhaustive list of persons who may claim a tax-sale surplus. Rather, it
merely provides an administrative procedure for the record owner to recover
the surplus if it is clear who that is. The statute does not in effect
cause an escheat to the County by denying those with an interest in
property the right to claim the surplus. An unrecorded interest may be the
product of inattention, as it appears to have been here, or it could be
simple administrative delay, in, for example, probating an estate or
recording a deed. We conclude that Burks’s lack of record title did not
preclude her claim.
The United States Supreme Court pointed out long ago that, “to
withhold the surplus from the owner would be to violate the Fifth Amendment
to the Constitution and to deprive him of his property without due process
of law, to take his property for public use without just compensation.”
United States v. Lawton, 110 U.S. 146, 150 (1884). We need not conclude
whether failure to record an interest can constitutionally foreclose an
owner’s right to the surplus because we do not read the Indiana statute as
attempting to do that. If the administrative remedy were the only means to
recover a surplus, the statute would produce severe unfairness for those
who in fact have an interest in the property, albeit unrecorded, and would
give the county a windfall. The statute does not by its terms produce this
result, and we see no reason to read it in.
Under our reading of Indiana Code section 6-1.1-24-7, anyone whose
interest is of record may pursue the less expensive and quicker
administrative remedy, but others must pursue their claims to a tax surplus
in a trial court. This result makes sense because those listed in the
statute, the “owner of record,” the “tax sale purchaser or the purchaser’s
assignee,” or “person with a substantial property interest of public
record” are usually readily identifiable and there may be no dispute as to
the proper claimant. Those who, like Burks, think they have a claim, but
are not in these preferred categories must take that claim to a trial court
where the right of others potentially interested in the surplus can be
fully considered. Such a claim may require resolution of factual issues or
complex questions of law. A trial court is therefore better suited to
resolve this than a county auditor. Accordingly, we read the
administrative remedy as elective but not exclusive. Therefore, Burks was
entitled to pursue her claim for the surplus in trial court as she did.
We also conclude that Burks established her right to the surplus. The
trial court found that Burks was Johnson’s “only surviving heir.” An
“heir” is “a person who, under the laws of intestacy, is entitled to
receive an intestate decedent’s property.” Black’s Law Dictionary 726 (7th
ed. 1999). As an intestate heir or as the only surviving residual legatee
under Johnson’s will, Burks succeeded to at least a part of Johnson’s
interest in the property. She thus has established a property right, and
withholding the surplus would deprive her of that right. The trial court
entered a general judgment without special findings and conclusions, so we
are to affirm if it is sustainable on any legal theory. Porter v. Bankers
Trust Co. of Cal., 773 N.E.2d 901, 903-04 (Ind. Ct. App. 2002). Lake
County does not dispute Burks’ status as an heir or argue that anyone other
than Burks has a claim to the surplus. Rather the County asserts, “there
is no real evidence that Burks is a legitimate heir.” Burks points to
Johnson’s will purporting to leave the house to her and the fact that Ruth
and Robert Johnson have no other known heirs. The parties agree that Robert
Johnson was the owner. Robert died in 1971 and the document identified as
his will was never probated. Even if Ruth Johnson became the owner as a
tenant by the entirety or otherwise after Robert died, the property would
still have been owned by Burks immediately before the sale because Burks
was also Ruth’s sole surviving heir. We find no reason to overturn the
trial court’s conclusion that Burks is the only person entitled to the
surplus.
Conclusion
The judgment of the trial court is affirmed.
Shepard, C.J., and Dickson, Sullivan, and Rucker, JJ., concur.
-----------------------
[1] The tax bills for the years 1986 to 1995 were made out to “Bob Johnson
et al.” The trial court, in conjunction with its request for briefs on
Burks’s claim to the surplus, asked the County Auditor to provide the last
recorded deed. The County Auditor provided only a quitclaim deed that
reflected the sale of the property from the tax-sale purchaser to a third
party. In her brief in the trial court, Burks asserted that all names
discovered in a title search in preparation for this suit were joined as
defendants and have either filed a disclaimer or failed to appear. Other
defendants include Burks’s sons, Carl and Darnell Adams, Ruth Johnson’s
sister Ruby Tharpe, Bank One National Association, and Robert and Ruth
Johnson. Based on this, it is unclear exactly who was the record owner of
the property or whether Robert owned the home alone or Robert and Ruth
Johnson owned the house in a joint tenancy, tenancy by the entirety or
tenancy in common. Although the chain of title through various
intestatcies may be labyrinthian, ultimately Burks appears to be the only
survivor who has any claim to the house. At any rate, the trial court so
found.
[2] The court took the view that it would violate the Indiana
Constitution’s Privileges and Immunities Clause to provide a substantive
right to the tax-sale surplus to individuals in the designated counties,
but preclude that right from those similarly situated in other counties.
Id. at 325-26 (citing Collins v. Day, 644 N.E.2d 72 (Ind. 1994)). This
issue is mooted by the repeal of subsection (b)(3).