Buyer prevails in tax sale dispute with mortgage holders

A financial group has secured a reversal in its favor from the Indiana Court of Appeals after its originally successful bid at a tax sale went south.

Troubles began for S&C Financial Group more than a year after it recorded the deed for an Indianapolis property sold in a tax sale. About 14 months later, Horizon Trust Company, acting as custodian for the benefit of mortgage holder Patricia McCabe IRA, filed a motion to intervene and to set aside the tax sale. After a second motion to set aside the sale was filed by Insider’s Cash LLC, the original owner of McCabe IRA’s mortgage, the Marion Circuit Court permitted the interventions, and the parties filed cross-motions for summary judgment.

The trial court eventually granted judgment for McCabe IRA and Insider’s and denied summary judgment to S&C, setting aside the tax deed. But in reversing the trial court, the Indiana Court of Appeals found that neither was entitled to notice of the tax sale.

“The trial court, here, without explanation, appeared to treat McCabe IRA and Insider’s as a single party, and the court reasoned that Insider’s was entitled to notice of the tax sale, Insider’s did not receive that notice, and, therefore, Insider’s was entitled to summary judgment. The trial court also granted summary judgment in favor of McCabe IRA, without making any findings that would support such a ruling,” Judge Elizabeth Tavitas wrote in the Monday reversal.

The appellate court noted that the pertinent question under Indiana Code § 6-1.1-23.9-3 was not whether a party appears to have an interest in a property but whether the party actually has a substantial property interest.

“Insider’s assigned its mortgage to McCabe IRA, and thus, ceased to maintain the required interest in the property. Insider’s was, therefore, not entitled to notice and, accordingly, its challenge to the tax deed must fail,” Tavitas wrote. “McCabe IRA’s challenge fails as well, but for a different reason; McCabe IRA failed to timely record its interest in the … property by recording the assignment of the mortgage it held. That interest was, therefore, not in the public record at the time notice of the tax sale was issued.”

Looking to the plain language of the statute to resolve the issues, the appellate court concluded McCabe IRA could not overcome the presumption that the tax sale and all of the steps leading up to the tax deed were proper. Likewise, given that McCabe IRA was neither the owner of record nor a person with a substantial, publicly recorded interest in the property, it found that McCabe IRA was not entitled to notice of the tax sale.

“Because we conclude that neither party was entitled to notice, we need not address the arguments with respect to timeliness of their challenges to the issuance of the tax deed,” the COA concluded in S&C Financial Group LLC v. Insider’s Cash LLC and Horizon Trust Company Custodian FBO Patricia McCabe IRA, 20A-TP-2193.