August, 1964 -- Homeowner acquires property
August, 2001 -- Homeowner mortgages property; mortgagee records deed of trust against property
Sometime between August, 2001 and February, 2004 -- the property taxes become deliquent
March 17, 2004 -- Property sold at tax sale to Storie
April 7, 2004 -- Chancery Court enters order confirming sale to Storie
October, 2004 -- Mortgagee forecloses on deed of trust
January, 2005 -- Property conveyed to Marshes by Trustee's Deed for $26,000
March 15, 2005 -- Trustee's Deed recorded by Marshes
April 8, 2005 -- Statutory redemption period ends
July 11, 2005 -- Clerk & Master's Deed recorded by Storie
Sometime thereafter -- The Marshes find out that Storie is claiming ownership of the property
July, 2007 -- The Marshes sue Storie and the mortgagee
The Marshes' claims against the mortgagee were based on the theory that, because the property had been sold at a tax sale prior to the mortgagee's foreclosure, the mortgagee had no interest in the property that could have been sold; thus, the Marshes were "flim-flammed" when they paid the mortagee $26,000 for the property. In January, 2011, the Chancery Court granted summary judgment in favor of the mortgagee, dismissed all claims against the mortgagee and certified the judgment in favor of the mortgagee as final pursuant to Rule 54.02. The Marshes appealed the dismissal of the mortgagee; the Marses' claims against Storie are still pending in the Chancery Court.
The Court of Appeals affirmed, holding that the mortgagee conveyed its right of redemption to the Marshes; thus, the Marshes were not "flim-flammed" and actually received value for their $26,000. The Court of Appeals noted that the Trustee's Deed clearly stated that the sale was subject to, among other things, current or delinquent property taxes and tax liens. The Court of Appeals further noted that the Marshes had notice that certain 2002 and 2003 property taxes were delinquent.
The Marsh opinion is full of great stuff for those who care about tax sales, mortgages and foreclosures.
First, the Court of Appeals determined that the tax sale and confirmation left the mortgagee with only the right of redemption to convey. The lesson to be learned - a tax sale and confirmation cuts off all rights of the prior mortgagee other than the right of redemption.
Second, the Court of Appeals relied heavily on the language in the Trustee's Deed that it was subject to current or delinquent property taxes and tax liens. The lesson to be learned - put similar language in your Trustee's Deeds.
Third, the Court of Appeals held that the mortgagee did not have to exercise its right of redemption and was free to sell it to another. The lesson to be learned - it's good to be a bank.
Fourth, the Court of Appeals implied that the Marshes had a duty to investigate after they received a title commitment noting the delinquent property taxes and were subsequently informed that the taxes had been paid. The lesson to be learned - the sudden payment of long-delinquent property taxes on a foreclosed property is a good indication that a tax sale has occurred and that the purchaser is buying a right of redemption rather than title to the property.
Fifth, the Court of Appeals upheld a prior decision that a right of redemption may be conveyed subsequent to a tax sale. That's good news for folks who purchase rights of redemption.
Finally, the most interesting thing about the case is that it has been pending for almost 5 years, and has gone through one appeal, all over $26,000.
This blog is not intended to create an attorney/client relationship or provide legal advice. Please contact the author if you have any questions or comments regarding the subject matter.