Tax Titles

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Tax Titles

 

 A party claiming title through a tax deed probably does not have marketable title in Alabama. See Louis H. Anders,  The Sale of Real Property for Taxes by a Probate Court Proceeding, 17 Ala.L.Rev. 60 (1964).  A tax deed, however, gives color of title, even if the tax deed is void, and possession under that color of title constitutes adverse possession. Odom v. Averett, 27 So.2d 479 (Ala. 1946); Moorer v. Macon, 134 So. 2d 181 (Ala. 1961)  

 Color of title is a “writing which, in appearance, purports to transmit title, or the right of possession, but, which, in reality, does not.” Van Meter v. Grice, 380 So.2d 274, 280 (Ala. 1980)        The validity of the tax sale and the tax deed depends upon many factors. See Louis H. Anders, supra.  For example, under the current tax sale act, which dates back to the Code of 1886, the  Probate Court is empowered by statute to order the sale of land for the payment of delinquent ad valorem taxes only when the  tax collector reports to the court that he or she “was unable to collect the taxes assessed against the land, or any mineral, timber or water right or special right, or easement therein, or the owner thereof, without a sale of the land.”  Ala. Code § 40-10-1 (1975); Pollak v. Milam, 67 So. 381 (Ala. 1914)   If the report by the tax collector does not specifically recite the magic words, it is deficient and will fail to give the Probate Court jurisdiction to order a tax sale, thereby invalidating any sale under the deficient report of the tax collector.  For example, in the case of Pollak v. Milam, the tax collector reported that the taxes on the land were “delinquent, due, and unpaid” instead of reporting that “he was unable to collect the taxes assessed against such land or the owner thereof, without a sale of such land,” as required by the statute then in force.  The Alabama Supreme Court held that the  probate court lacked jurisdiction and that the decree ordering the sale was therefore void. Id.        

 Another example of a deficient tax sale would involve a sale of land for unpaid ad valorem taxes erroneously assessed in the name of  someone who held no interest in the lands. Odom v. Averett.   This scenario is not to be confused with an assessment to “ owner unknown,” which has its own set of statutory pre-requisites.  Ala. Code § 40-10-5 (1975).  Some of the other deficiencies that will invalidate a tax sale include the failure to satisfy and to recite all the prerequisites necessary to give the Probate Court jurisdiction to order the tax sale and issue the tax deed, the failure to give proper notice of the delinquency, and the failure to give proper notice of the tax sale. See Louis H. Anders, supra.

 Disputes over tax sales and tax titles have resulted in a vast number of opinions by the Alabama Supreme Court.  For example, the LEXIS query “tax sale” or “tax title” produces in excess of 590 case citations.

 Unless relieved by statute, the party claiming under the tax sale bears the  burden of sustaining the regularity and validity of a tax sale. Thomas v. Rogers, 53 So. 2d 736 (Ala. 1951)  For example, Section 40-10-30 provides that the recitals of a tax deed issued by a Probate Judge to a tax deed purchaser are prima facie evidence of the regularity of the proceedings and the recitations contained in that deed.  Ala. Code § 40-10-30 (1975)  This presumption does not apply to tax deeds from the State of Alabama. Moorer v. Macon, 134 So. 2d 181 (Ala. 1961); Bell v. Williams, 54 So. 2d 852  (Ala. 1951).

         Many of the contests over tax sales that reach the Alabama Supreme Court involve Section 40-10-82 of the Code of Alabama (1975), which is known as the “Short Statute” of limitations. Section § 40-10-82 provides as follows:

No action for the recovery of real estate sold for the payment of taxes shall lie unless the same is brought within three years from the date when the purchaser became entitled to demand a deed therefor; but if the owner of such real estate was, at the time of such sale, under the age of 19 years or insane, he, his heirs or legal representatives shall be allowed one year after such disability is removed to bring an action for the recovery thereof; but this section shall not apply to any action brought by the state, nor to cases in which the owner of the real estate sold had paid the taxes, for the payment of which such real estate was sold prior to such sale, nor shall they apply to cases in which the real estate sold was not, at the time of the assessment or of the sale, subject to taxation.

 

 The Short Statute applies to equitable actions, such as bills to quiet title, and to legal actions such as ejectment. Odom v. Averett   It applies to tax sale purchases from the State of Alabama and to tax sale purchases from the tax collector. Id.   In order for the Short Statute to apply, however, there must be evidence that the land in issue was sold for the payment of taxes. Moorer v. Macon

 Since there is no presumption under Section 40-10-30 that recitals in a tax deed from the State are prima facie evidence of the regularity of a tax sale from the State, a person claiming under a deed from the State must come forward with evidence of the tax sale.  Failing that proof, one claiming under a tax deed from the State cannot sustain a claim under the Short Statute. Id.

 The Short Statute begins to run when the tax sale purchaser becomes entitled to demand a tax deed and after the tax sale purchaser goes into actual possession of the land. Odom v. Averett; Ala. Code § 40-10-82 (1975).  The tax sale purchaser becomes entitled to demand a tax deed three years after the tax sale. Ala. Code § 40-10-29 (1975).  Therefore, the earliest that the Short Statute will begin to run is three years after the tax sale.

 The tax sale purchaser is entitled to “quiet title” relief only after being in exclusive, adverse possession for the statutory three-year period.  Reese v. Robinson, 523 So.2d 398 (Ala. 1988)  On the other hand, the Short Statute can bar the tax purchaser if the delinquent tax assessing owner stays in possession for three years after the date that the tax purchaser is entitled to a deed. Id.

               The Short Statute expressly does not apply when:

 

(i) The owner is a minor or insane; or

 

(ii) The owner had actually previously paid the taxes for which the land was sold; or

 

(iii) The land sold was not at the time of assessment or sale subject to taxation; or

 

(iv) The State brings the action.

 

Ala. Code § 40-10-82 (1975).

 There are at least two ways to redeem property sold for taxes.  (Other possible redemption methods are not addressed in this work.)  The first redemption method involves redemption; under the three-year period allowed by  Section 40-10-120 of the Code of Alabama (1975), which provides:

Real estate which hereafter may be sold for taxes and purchased by the state may be redeemed at any time before the title passes out of the state or, if purchased by any other purchaser, may be redeemed at any time within three years from the date of the sale by the owner, his heirs, or personal representatives, or by any mortgagee or purchaser of such lands, or any part thereof, or by any person having an interest therein, or in any part thereof, legal or equitable, in severalty or as tenant in common, including a judgment creditor or other creditor having a lien thereon, or on any part thereof; and an infant or insane person entitled to redeem at any time before the expiration of three years from the sale may redeem at any time within one year after the removal of his disability; and such redemption may be of any part of the lands so sold, which includes the whole of the interest of the redemptioner. If the mortgage or other instrument creating a lien under which a party seeks to redeem is duly recorded at the time of said tax sale, the said party shall, in addition to the time herein specified, have the right to redeem said real estate sold, or any portion thereof covered by his mortgage or lien, at any time within one year from the date of written notice from the purchaser of his purchase of said lands at tax sale served upon such party, and notice served upon either the original mortgagees or lienholders or their transferee of record, or their heirs, personal representatives, or assigns shall be sufficient notice.  Although Section 40-10-120 states that the three year redemption period is from the date of the sale, decisions by the Alabama Supreme Court measure the three year redemption period from the issuance of the tax deed.  Van Meter v. Grice, 380 So.2d 274 (Ala. 1980)  The court considers the issuance of the tax deed to be “the final, consummating act of sale.”

 

Id. at 278.

 The Section 40-10-120 redemption is available to tax debtors without regard to whether the tax debtor is in possession of the property.   The other type of redemption is available to the tax debtor who remains in possession after the tax sale and even after the issuance of the tax deed.  This right of redemption arises under Section 40-10-83 of the Code of Alabama (1975), which provides:

§ 40-10-83. Lien Judgment for Plaintiff.  When the action is against the person for whom the taxes were assessed or the owner of the land at the time of the sale, his or her heir, devisee, vendee or mortgagee, the court shall, on motion of the defendant made at any time before the trial of the action, ascertain (I) the amount paid by the purchaser at the sale and of the taxes subsequently paid by the purchaser, together with 12 percent per annum thereon; (ii) with respect to property located within an urban renewal or urban redevelopment project area designated pursuant to Chapters 2 or 3 of Title 24, all insurance premiums paid or owed by the purchaser for casualty loss coverage on insurable structures and the value of all permanent improvements made by the purchaser determined in accordance with Section 40-10-122 together with 12 percent per annum thereon; (iii) with respect to any property which contains a residential structure at the time of the sale regardless of its location, all insurance premiums paid or owed by the purchaser for casualty loss coverage on the residential structure and the value of all preservation improvements made by the purchaser determined in accordance with Section 40-10-122, together with 12 percent per annum thereon; and (iv) a reasonable attorney’s fee for the plaintiff's attorney for bringing the action. Upon such determination the court shall enter judgment for the amount so ascertained in favor of the plaintiff against the defendant, and the judgment shall be a lien on the land sued for. Upon the payment into court of the amount of the judgment and costs, the court shall enter judgment for the defendant for the land, and all title and interest in the land shall by such judgment be divested out of the owner of the tax deed.

 

 The Alabama Supreme Court holds that Section 40-10-83 gives the owner of land sold for taxes (or his heirs, vendees, devisees or mortgagees) the right to redeem it without limit of time, provided that the tax-debtor owner has sufficient possession of the land as required for redemption under Section  40-10-83. Tensaw Land and Timber Co. v. Rivers, 15 So.2d 411 (Ala. 1943); Tanner v. Cates, 142 So. 2d 688.        The cases construing Section 40-10-83 use the phrase “without limit of time,” but the redemption right under Section  40-10-83 is subject to the twenty-year rule of repose. Schwab v. Nonidez, 161 So.2d 592 (Ala. 1964).  The Alabama Supreme Court holds:

As a matter of public policy, and for the repose of society, it has long been the settled policy of this state, as of others, that antiquated demands will not be considered by the courts, and that, without regard to any statute of limitations, there must be a time beyond which human transactions will not be inquired into.  It is settled that, after a period of 20 years, without any payment, settlement, or other recognition of liability, mortgages and liens will be presumed to have been paid, settlements will be presumed to have been made by administrators, trustees, agents, and other persons occupying fiduciary positions.

 

Schwab v. Nonidez, 161 So.2d at 594.

 In order to assert the right of redemption under Section 40-10-83, the tax debtor owner must  assert the type of possession over the property that meets the prerequisite burden established by the Alabama Supreme Court.  In order to qualify for redemption under Section 40-10-83, the tax debtor “must have such possession as will require some nature of suit by the purchaser at tax sale to recover it of him.” Tensaw Land & Timber Co. v. Rivers, 15 So.2d 411, 413 (Ala. 1943).  The tax debtor’s possession of the property does not need to “be such peaceable possession as will justify a statutory bill to quiet title.” Id.  It can be only a “scrambling possession.” Id.   If the land is wholly unimproved in a wild state and is not occupied either by the tax deed grantee or the tax debtor, constructive possession follows the record title. Id.  Further, “in the absence of any actual, visible, continuous possession of the land by the purchaser under a tax sale, the constructive possession should be regarded as in the owner of the right of redemption so as to preserve it under section [40-10-83], if he previously had the actual possession which was not thus interrupted.” Id. at 414.

       In order to extinguish the right of redemption under Section 40-10-83, the tax sale purchaser must exert possession of the same character that would constitute adverse possession. Tensaw Land, at 414: “We think that the right of redemption here involved is not cut off by the possession of the tax purchaser unless it is of the same character as would be sufficient to comply with the law of adverse possession.”        Section 40-10-132 of the Code of Alabama (1975) obligates the Land Commissioner to maintain a book listing all tax sale lands bid in by the State.  The statute also provides when and how the State may sell those lands.

Copyright 2011 by Edward G, Hawkins. All rights reserved.