Finally - Judicial Relief for Tax Sale Purchasers!
After the United States Supreme Court decision of Mennonite Bd. of Missions v. Adams, 462 U.S. 791 (1983) and its Louisiana progeny, the Louisiana tax sale jurisprudence has called into question the validity of some confirmed tax titles and has undoubtedly invoked caution into title attorneys and tax sale investors across Louisiana. A recent decision of the Louisiana First Circuit Court of Appeal in Smitko v. Gulf South Shrimp, Inc., 77 So. 3d 1012 (La. Ct. App. 1st Cir. October 19, 2011) may make title attorneys and tax sale investors rest a little easier as it limits certain arguments employed by tax debtors and/or mortgage holders to invalidate a tax sale. Judge James E. Kuhn wrote the majority opinion of the Court which strengthens a tax sale purchaser’s rights once the time limitation for a tax debtor and/or a lienholder to file a suit to annul the tax sale has lapsed. The Court held the tax debtor and the mortgagee’s failure to properly file an action to annul or a reconventional demand within the Louisiana constitutional time limitation foreclosed the Court’s ability to adjudicate the merits of the tax debtor and the mortgage holder’s claim that the tax sale was an absolute nullity. Id. at 1020.
Importantly, the Court went on to, among other things, strike down the arguments of the tax debtor and the mortgagee who attempted to nullify the tax sale on the basis that another lienholder was deprived of its constitutional right to notice of the tax sale. The Court held the tax debtor and the mortgagee did not have standing to attack the tax sale on the basis that “notice was not provided to other persons or entities.” Id. at 1024.
The Smitko decision may be employed as a shield to thwart off an attack of a tax sale by a tax debtor and/or a mortgage holder who attempt to assert a tax sale should be nullified because notice was not provided to another lienholder. This potential defense is crucial to tax sale purchasers because there is a split among the circuit courts of appeal as to whether a mortgagee is entitled to notice of delinquency on due process grounds. This defense may prevent the invalidation of a tax sale where an unnoticed mortgagee does not itself assert lack of notice or is not a party in the confirmation suit and/or the annulment action.
The Louisiana Supreme Court granted Writs of Certiorari and/or Review in the Smitko case on February 17, 2012 and will hold oral argument on May 7, 2012 at 2pm. Time will tell as to whether the Supreme Court affirms the First Circuit Court of Appeal and limits obstacles that tax sale purchasers must overcome in tax sale confirmation suits and/or annulment actions.
Wesley M. Plaisance is a Partner in the New Orleans office of Breazeale, Sachse & Wilson LLP (www.bswllp.com) where he heads the Tax Sale and Quiet Title Litigation group and practices other commercial litigation with a focus on real estate related litigation. Wesley M. Plaisance regularly handles tax sale litigation matters across Louisiana including without limitation in the City of New Orleans (Orleans Parish), East Baton Rouge Parish, St. Tammany Parish (including Covington, Mandeville and Slidell), Jefferson Parish, Lafayette Parish, Livingston Parish, Plaquemines Parish and Lafourche Parish. Mr. Plaisance represents tax sale purchasers in suits to confirm tax sale title(s) and ownership with and/or without cancellation of mortgages and other encumbrances and in partition proceedings commenced after a tax sale purchaser confirms only a fractional ownership interest.
Mr. Plaisance has also represented and represents tax debtors, landowners, mortgage holders including banks and other interested parties in actions to annul and/or nullify tax sales. Mr. Plaisance additionally handles complex commercial litigation matters arising out of large investment funds created to purchase tax sale certificates and/or tax deeds in Louisiana, Georgia, Indiana and Florida.