            IN THE COMMONWEALTH COURT OF PENNSYLVANIA


In Re: Balaji Investments, LLC,                :
and Savana Properties, LLC,                    : No. 2294 C.D. 2015
                                               : Argued: June 6, 2016
                              Appellants       :


BEFORE:        HONORABLE RENÉE COHN JUBELIRER, Judge
               HONORABLE MICHAEL H. WOJCIK, Judge
               HONORABLE JAMES GARDNER COLINS, Senior Judge


OPINION BY JUDGE WOJCIK                            FILED: October 6, 2016

               Balaji Investments, LLC and Savana Properties, LLC (collectively,
Purchasers) appeal from the orders of the Court of Common Pleas of Lackawanna
County (trial court) that denied and dismissed their motions to strike tax liability
and directed them to satisfy delinquent real estate taxes, which accrued between
the date of purchasing properties at upset tax sales and conveyance of the deeds.
Purchasers contend the trial court erred or abused its discretion by dismissing their
motions because they should not be liable for any taxes accruing on the properties
before the deeds were conveyed. Upon review, we affirm.

                                       I. Background
               Purchasers are limited liability companies that purchase real estate in
Lackawanna County through tax sales conducted by the Lackawanna County Tax
Claim Bureau (Bureau) pursuant to the Real Estate Tax Sale Law (Tax Sale Law).1
In 2015, in connection with nine properties purchased at the Lackawanna County’s
2011 and 2012 upset tax sales, Purchasers filed separate motions to strike tax

      1
          Act of July 7, 1947, P.L. 1368, as amended, 72 P.S. §§5860.101-5860-803.
liability owed on those properties. Specifically, Purchasers asserted that they
should not be responsible for any taxes accruing on properties until after the deed
is conveyed, particularly where title is not conveyed in the same year as the tax
sale. They claimed that it is patently unfair to burden them with taxes when they
have no control, occupation, ownership or title to the property. The amount of
accrued tax liability on the nine properties for tax years 2012 and 2013 is
approximately $34,500.
             The Bureau opposed the motions arguing a property sold at upset sale
is never exempt from taxation; Purchasers are liable for taxes as vested equitable
owners; and, the very purpose of the upset tax sale process is to produce steady tax
revenue.
             Upon consideration of the parties’ briefs and argument on the issue,
the trial court denied and dismissed Purchasers’ motions in separate orders. The
trial court explained that, as successful tax sale bidders, Purchasers are not exempt
from real estate taxes in the tax years following the year of the upset tax sale. The
purpose of an upset tax sale is to satisfy a property’s tax obligation and bring
revenue to the taxing authority. At the upset tax sales, Purchasers obtained a
vested equitable ownership in the properties. An equitable ownership interest is
subject to taxation. At the Purchasers’ request, and the Bureau’s concurrence, the
trial court consolidated the cases for purposes of appeal. Purchasers then appealed
to this Court.




                                         2
                                  II. Issues & Contentions
               In this appeal,2 Purchasers contend the trial court erred or abused its
discretion by dismissing their motions to strike tax liability. Purchasers make a
novel argument that they should not have to pay any property taxes accruing
between the close of an upset tax sale and delivery of the deed.
               Purchasers do not assert that they are exempt from taxation. Rather,
they claim property taxes should not accrue against them until title is conveyed.
According to Purchasers, the burden of taxation must follow possession, which is
not obtained until the legal title is conveyed or litigation resolved, whichever is
later. Purchasers’ “equitable ownership” only gives them standing to defend the
purchase, but no other rights attendant to property ownership, such as control or
use of the property. Thus, they advance that any taxes accruing between the date
of the upset sale and the date of title conveyance must be abated. Purchasers
present three scenarios highlighting why they should be relieved of their tax
burden.
               First, Purchasers maintain that the Bureau routinely provides deeds in
the tax year after the sale, which instantly creates a tax liability before the title is
transferred to the tax sale purchaser. Upset sales generally take place the last week
in September. Even when there is no contest to the validity of the sale, the Bureau
may not issue the deed until the following year. Yet, purchasers are liable for taxes
for the entire next tax year, even though they do not have legal title for the entire


       2
         Our review in tax sale cases is limited to determining whether the trial court abused its
discretion, erred as a matter of law, or rendered a decision not supported by substantial evidence.
In re Consolidated Reports and Returns by Tax Claim Bureau of Northumberland County of
Properties, 132 A.3d 637, 643 n.12 (Pa. Cmwlth.) (en banc), appeal denied, 141 A.3d 482 (Pa.
2016).


                                                3
year. In certain instances, the Bureau backdates the deed to the date of the upset
sale to avoid the issue entirely.
             Second, when a petition to set aside the sale or objections or
exceptions to the confirmation are filed, it may take years before title is conveyed
to the successful bidder. If the upset sale is ultimately set aside, title is never
conveyed.     Notwithstanding pending litigation, and the uncertainty of title
conveyance, the Bureau demands payment for all accruing taxes until title is
conveyed.
             And third, Purchasers assert that they should not have to escrow
“delinquent” property taxes with the Bureau until litigation resolves on the
potential they may be legal owners of the property sometime in the future.
Escrowing taxes with the Bureau does not eliminate accruing penalties and interest
owed to the taxing authorities because the Bureau does not distribute the escrowed
funds to the taxing authorities. Instead, the Bureau maintains the funds until
litigation resolves because the Bureau is responsible for the return of funds should
the sale be set aside.
             Purchasers point out that, with judicial and private tax sales, all taxes
are abated through the date of delivery of the deed. They argue the same should
apply to properties purchased at upset tax sales, particularly because the timing of
the deed conveyance is under the exclusive control of the Bureau. To conclude
otherwise, unfairly burdens successful bidders with tax liability without benefits of
ownership and could dissuade bidders from participating in upset sales.
             In opposition, the Bureau counters that the trial court properly denied
Purchasers’ motions and compelled them to satisfy the real estate taxes on their
investment properties.      The Bureau maintains Purchasers obtained a vested


                                          4
equitable ownership at the upset sale, and that the transfer of the property occurs
on the date of sale, rather than the date the deed is recorded.         An equitable
ownership interest in real estate is subject to taxation. According to the Bureau,
there is no statutory basis for the abatement of taxes sought by Purchasers. Unlike
in a judicial sale or private sale, properties sold in an upset sale are not sold free
and clear of all liens and claims pursuant to the Tax Sale Law.
             Moreover, the Bureau advances that the goal of an upset tax sale is to
realize a price sufficient to satisfy a property’s outstanding tax obligation and
maintain a continuous stream of tax revenue for the taxing authority. The purpose
is to ensure the collection of taxes, not to create a risk-free investment opportunity
for real estate speculators. The Bureau argues tax-paying property owners should
not have to endure decreased services or increased millage rates to account for a
judicial exemption for the sake of speculators who have already benefited by
purchasing properties far below market value.

                                  III. Discussion
                                 A. Types of Sales
             We begin our discussion by examining the different types of tax sales.
A tax claim bureau may sell property for delinquent taxes by upset tax sale,
judicial sale or private sale. Sections 605, 610, and 613 of the Tax Sale Law,
72 P.S. §§5860.605, 5860.610, 5860.613. Each type of sale has its own specific
rules controlled by separate sections of the Tax Sale Law. Getson v. Somerset
County Tax Claim Bureau, 696 A.2d 903, 905 (Pa. Cmwlth.), appeal denied, 717
A.2d 535 (Pa. 1997).




                                          5
                                   Upset Tax Sale
             First, and central to this appeal, is an upset tax sale. A property listed
at an upset tax sale is offered for sale at a minimum price, known as the “upset
price.” 72 P.S. §5860.605. The upset price is the sum of: “all accrued taxes
including taxes levied for the current year, whether or not returned,” and tax liens
and claims. Id. However, it is not sold free and clear of all liens and claims. See
Section 609 of the Tax Sale Law, 72 P.S. §5860.609. Rather, it remains “subject to
the lien of every recorded obligation, claim, lien, estate, mortgage, ground rent and
Commonwealth tax lien not included in upset price.” Id. (emphasis added). It is
only divested of tax liens and claims, which are or could have been included in the
upset price. Id.; 72 P.S. §5860.605. Thus, taxes accruing after the upset sale are
not included in the upset price. See 72 P.S. §§5860.605, 5860.609.
             Within 60 days of the sale of a property at an upset sale, the taxing
bureau must file confirmation of return with the trial court. Section 607(a) of the
Tax Sale Law, 72 P.S. §5860.607(a). If no one files objections or exceptions to the
confirmation of return of sale, or if objections or exceptions are filed, but
ultimately overruled, the court will enter a decree confirming the sale absolutely.
Section 607(c), (d) of the Tax Sale Law, 72 P.S. §5860.607(c), (d). Once the sale
is confirmed absolutely, and the purchaser pays the full price of its bid, the tax
claim bureau prepares and delivers the deed to the property to the purchaser.
Section 607(g) of the Tax Sale Law, 72 P.S. §5860.607(g).              An upset sale
confirmed absolutely passes “good and valid title to the purchaser, free from any
liens or encumbrances whatsoever, except such liens as are hereafter specifically
saved, and in all respects valid and effective as if acquired by a sheriff’s deed.” Id.




                                          6
(emphasis added). Liens specifically saved are those not included in the upset
price. 72 P.S. §5860.609.
             A valid, unsuccessful upset sale is a condition precedent to the
bureau’s ability to engage in a judicial sale or private sale. 72 P.S. §§5860.610;
5860.613. In other words, the bureau can only pursue alternative methods to sell a
property if the property listed for an upset sale is not sold, i.e., no one bid an
amount equal or greater to the upset price. 72 P.S. §§5860.610, 5860.613.


                                     Judicial Sale
             Unlike an upset sale, with a judicial sale, a property is sold free and
clear of all tax and municipal claims. 72 P.S. §5860.610. But before a property
can be auctioned at a judicial sale, the tax claim bureau must satisfy all the
requirements of a free and clear sale. Id.; Sections 611 and 612 of the Tax Sale
Law, 72 P.S. §§5860.611, 5860.612. The bureau must petition the trial court for
permission to sell the property at a judicial sale setting forth that the bureau
conducted an upset sale but was unable to obtain a sufficient bid.
72 P.S. §5860.610. In addition to the petition, the bureau must present searches,
showing the state of the record and the ownership of the property and all tax and
municipal claims, liens, mortgages, ground rents, charges and estates against the
same. Id. Provided the bureau satisfies these requirements, the court will issue a
rule to show cause why the property should not be sold free and clear of all claims
and liabilities. Id. If, after hearing, “the court is satisfied” that service of the rule
has been made upon all parties named therein, in the manner specified, and that all
facts stated in the petition are true, “it shall order and decree” that said property




                                           7
may be sold at judicial sale. 72 P.S. §5860.612(a). Once the purchaser pays the
purchase price, the bureau shall make and deliver the deed. Id.

                                     Private Sale
             In addition to judicial sales, the bureau may sell tax delinquent
properties at private sales. 72 P.S. §5860.613. As with a judicial sale, a valid,
unsuccessful upset sale is a condition precedent to the bureau’s ability to engage in
a private sale. The bureau must provide notice of the sale and price to each taxing
district and to each owner of the property. Id. The bureau must also provide
notice of the sale to the public by publication. Id.
             Similar to judicial sales, properties sold by private sale are “sold free
and clear of all tax claims and judgments.” 72 P.S. §5860.613. Once the price for
a private sale is finally approved or confirmed, and the payment is received, the
bureau shall issue a deed in fee simple to the purchaser. Section 615 of the Tax
Sale Law, 72 P.S. § 5860.615. “Each such deed shall be in the name of the bureau,
as trustee grantor and shall be executed . . .” and “shall convey title to the
purchaser free, clear and discharged of all tax claims and tax judgments . . . .” Id.


                                   B. Tax Burden
             Purchasers assert that, just as taxes are abated through the date of
delivery of the deed in judicial and private tax sales, the same should apply to
properties purchased at upset tax sales.         However, they overlook the key
distinctions among the types of sales and the role of the court in the sale process.
             A tax claim bureau is authorized to conduct an upset tax sale pursuant
to its authority under the Tax Sale Law. Section 601 of the Tax Sale Law,



                                           8
72 P.S. § 5860.601. The bureau needs judicial authorization to convey title but not
to conduct the sale. Id.; 72 P.S. §5860.609.
              Once the upset sale is held, even when the upset price is not bid, legal
title passes to the tax claim bureau by operation of law. 72 P.S. §5860.607(g);
Commonwealth v. Sprock, 795 A.2d 1100, 1103 (Pa. Cmwlth. 2002).3 The bureau
becomes the trustee. 72 P.S. §5860.607(g); Fulton v. Bedford County Tax Claim
Bureau, 942 A.2d 240, 243 n.5 (Pa. Cmwlth. 2008); Sprock, 795 A.2d at 1103.
The record owner’s right of redemption is extinguished. Section 501(c) of the Tax
Sale Law, 72 P.S. §5860.501(c); see 72 P.S. §5860.607(g); Sprock, 795 A.2d at
1103. As trustee, the tax claim bureau “may convey title to the successful bidder at
the upset sale if the price is met, or it may, alternatively, convey title at a later
judicial sale” or private sale. Sprock, 795 A.2d at 1103.
              Although the tax claim bureau becomes trustee of the property after
an upset sale, it may not immediately convey title to the purchaser because the Tax
Sale Law requires judicial approval to convey the deed. Section 608 of the Tax
Sale Law, 72 P.S. §5860.608. Conversely, with judicial sales and private sales,
judicial approval occurs prior to the sale not after.             See 72 P.S. §§5860.612,
5860.613.        Judicial    sales    require       judicial   authorization   to    proceed.
72 P.S. §5860.612; see Murphy v. Monroe County Tax Claim Bureau, 784 A.2d
878, 881 (Pa. Cmwlth. 2001) (judicial sale must be based upon an order or decree
directing the sale). Private sales allow judicial confirmation or disapproval of the
sale prior to the sale. 72 P.S. §5860.613. Consequently, judicial assent is not


       3
        We note divestiture of ownership following exposure of a property to an upset sale does
not occur when the notice provisions of the Tax Sale Law are shown to be defective. Rivera v.
Carbon County Tax Claim Bureau, 857 A.2d 208, 216 (Pa. Cmwlth. 2004).


                                                9
required after a judicial sale or private sale for the bureau to convey the deed. See
72 P.S. §§5860.612, 5860.615. In other words, the bureau’s ability to convey title
to the properties sold through judicial or private sales was perfected prior to the
sale. Thus, once a judicial sale or private sale concludes, title may pass from the
tax claim bureau, as trustee, to the purchaser, without delay. See, e.g., Fulton, 942
A.2d at 243 (tax claim bureau conveyed title a month after selling property at a
judicial sale).
               As Purchasers correctly note, taxes may accrue pending confirmation
of an upset sale. Where upset sales are challenged, it may take years before title is
conveyed to the successful bidder, if at all. Purchasers claim that they should not
have to bear tax liability during this period of uncertainty because they do not have
control, occupation, ownership or legal title to the property.
               Until an upset sale is confirmed absolutely, the bureau cannot convey
legal title to the property, and all the rights associated therewith, to the successful
bidder. 72 P.S. §5860.608; see In re Rouse, 48 B.R. 236, 240 (Bankr. E.D. Pa.
1985) (“[l]egal title to the property does not pass to the purchaser until
acknowledgment and delivery of the sheriff's deed.”). In fact, the successful bidder
is not even a party if objections or exceptions to an upset sale are filed.4 In re 2005
Sale of Real Estate by Clinton County Tax Claim Bureau Delinquent Taxes, 915
A.2d 719, 723 (Pa. Cmwlth. 2007); see Fulton, 942 A.2d at 243 (successful bidder
at an upset sale must petition to intervene).




       4
         Conversely, a successful purchaser at a judicial sale, as the legal owner of the property,
is an indispensable party in an action to set aside a sale. Fulton, 942 A.2d at 243. The same
would hold true for private sale purchasers. See 72 P.S. §5860.615.


                                                10
             However, while upset sale purchasers may not immediately possess
legal title, they do have an equitable interest in the property. Pivirotto v. City of
Pittsburgh, 528 A.2d 125 (Pa. 1987). A “purchaser at a tax sale obtains vested
equitable ownership at the fall of the auctioneer's hammer.” In re Golden, 190
B.R. 52, 58 (Bankr. W.D. Pa. 1995); accord Butler v. Lomas & Nettleton Co., 862
F.2d 1015, 1019 (3d Cir. 1988); In re Rouse, 48 B.R. at 240.               “[B]arring
redemption by the record owner during the statutory period, the successful bidder
at the tax sale is entitled to compel conveyance by treasurer deed, and thus, he is
the equitable owner.” Pivirotto, 528 A.2d at 128; see Pennsylvania Company for
Insurances on Lives and Granting Annuities, to Use of Jefferson Medical College
of Philadelphia v. Broad Street Hospital, 47 A.2d 281, 283 (Pa. 1946) (“When the
sheriff accepted the bid, the purchaser acquired a right to a deed on complying with
the terms of sale and assumed the obligation of complying with those terms.”).
             Our Supreme Court has held “an equitable interest in real estate is
subject to taxation.”    Appeal of Baltimore & O. R. R., 175 A.2d 841, 844
(Pa. 1961). “The right of the taxing authority to collect unpaid taxes . . . may be
exercised against the real or beneficial owner.” Id. If a sale is later set aside, the
successful purchaser at the sale is entitled to a refund of any amount it paid to the
bureau, with interest. In re Upset Sale of Properties Against Which Delinquent
1981 Taxes Were Returned to Tax Claim Unit On or About First Monday of May,
1982 (SKIBO Properties), 560 A.2d 1388, 1389 (Pa. 1989); see also In re Judicial
Sale, Tax Claim Bureau of Northampton County, Easton, 720 A.2d 818, 822
(Pa. Cmwlth. 1998) (purchaser does not need to intervene to protect right to a
refund).




                                         11
             Notwithstanding, Purchasers assert that their equitable interest should
not be subject to taxation. They maintain that the taxing authorities should abate
any taxes accruing after an upset sale and before title is conveyed. Purchasers’
argument is unavailing as there is no statutory or case law authority for abatement
of property tax liability for properties sold at upset sales. The General Assembly
clearly intended for judicial and private sales to be sold free and clear of all liens
and claims, but it did not include similar language for upset sales. Compare 72
P.S. §5860.612 (authorizing sale of property at a judicial sale sold “freed and
cleared” of all tax claims) and 72 P.S. §5860.613 (authorizing sale of property at a
private sale sold “free and clear of all tax claims and tax judgments”) with 72
P.S. §5860.605 (authorizing sale of property at upset sale sold “subject to” all liens
“not included in upset price”). We are constrained from rewriting a legislative
enactment.
             Moreover, “[t]he goal of an upset tax sale is to realize a price
sufficient to bring the tax obligation on the property fully current.” Bell v. Berks
County Tax Claim Bureau, 832 A.2d 587, 592 (Pa. Cmwlth. 2003). With upset tax
sales, the upset price satisfies a property’s “delinquent and current taxes.” Id.
             But, with judicial sales or private sales, the tax claim bureau may
agree to a price that does not fully satisfy the outstanding tax claims and liens. See
72 P.S. §§5860.612, 5860.613. For this reason, taxing bodies must have notice and
an opportunity to object if the price is not sufficient to satisfy their tax obligation.
See 72 P.S. §§5860.610, 5860.613; see County of Schuylkill, Reilly Township v.
Ryon, 598 A.2d 1075, 1077 (Pa. Cmwlth. 1991), appeal denied, 598 A.2d 1075
(Pa. 1992) (the purpose behind the notice provision of Section 613 of the Tax Sale
Law is to allow a taxing authority to protect its financial interest.). There is no


                                          12
process by which taxing authorities can agree to waive or abate tax liability in
connection with an upset sale. See 72 P.S. §§5860.601-5860.609.


                                  IV. Conclusion
            In conclusion, absent legal authority in support of Purchasers’
abatement claims, and in light of the purpose of the upset sale to make the tax
obligation fully current, Purchasers, as the equitable owners of the property at the
close of the upset sale, are responsible for any taxes accruing on the properties
after the upset sale. For these reasons, we conclude the trial court properly denied
Purchasers’ motions and compelled them to satisfy the real estate taxes on their
investment properties.
            Accordingly, we affirm the trial court’s orders.




                                      MICHAEL H. WOJCIK, Judge




                                        13
         IN THE COMMONWEALTH COURT OF PENNSYLVANIA

In Re: Balaji Investments, LLC,        :
and Savana Properties, LLC,            : No. 2294 C.D. 2015
                                       :
                        Appellants     :


                                  ORDER


            AND NOW, this 6th day of October, 2016, the orders of the Court of
Common Pleas of Lackawanna County, at docket numbers 14 CV 5774 and 11 CV
6348, dated October 14, 2015, are AFFIRMED.




                                     __________________________________
                                     MICHAEL H. WOJCIK, Judge
