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Tax nonpayment sales and the mentally ill - does the system work? Do recent cases indicate that Illinois should change its laws to further protect mentally ill property owners?

Mary Lowe, an elderly, mentally ill woman, lost her home on Chicago's south side for nonpayment of $347.61 in property taxes and fees for the year 1991. Does her story, the subject of opinions issued by the Illinois Supreme Court in 2005 and again on April 19, 2007, indicate that Illinois should change its laws to put into place extra protections for mentally ill property owners, or does a careful examination of the facts show that the system for addressing nonpayment of property taxes works?

In two opinions, one in 1995 and another on April 19, 2007, the court upheld the statutory procedure. The more recent case is In re Application of the County Collector, 2007 WL 1149964 Ill Sup Ct). (See Illinois Law Update at page 292).

Mary Lowe's case

The Property Tax Code, 35 ILCS 200/1-1 et seq, specifies how real property may ultimately be sold if the taxes aren't paid. The procedure, which the court described in its opinions, typically consumes years. In the case before the court, Lowe's nonpayment of property taxes for 1991 resulted in a tax sale in 1993. A tax deed was not issued until 1996.

As the supreme court detailed, throughout the tax sale process, the code requires an abundance of notices to the property owner and affords the owner an extended period of time in which to pay the back taxes and penalties to redeem the property. only upon a showing of a failure to redeem on the part of the owner of record and proof of strict compliance with the service requirements for all of the required notices will a court order the issuance of a tax deed.

Lowe's taxes became delinquent in calendar year 1992. The county collector then began the process set forth in the code to sell the property. At the final hearing at which the circuit court ordered the issuance of a tax deed, the tax buyer provided evidence that it had not only conducted a tract search for the property, but also checked city and suburban phone directories and voter registration records in an attempt to develop addresses for Lowe and any other record owners.

Additionally, it had served notices upon the law firm that prepared Lowe's 1993 quitclaim deed and the property's mortgagee, a bank. Its agent, moreover, had visited the property, inspected it, ascertained that it appeared uninhabited, and spoken to neighbors. The returns of service of the statutorily required notices were marked, variously, "house vacant per neighbors, "Moved," "house vacant per neighbors," "Undelivered," "return to sender," "Deceased" as to Austin, and, as to Lowe and "occupant," "Person is Hospitalized."

Finding that the tax buyer had complied with the code's notice provisions and had satisfied its statutory duty of diligent inquiry in attempting to locate the property owners, and because no redemption had been made, the circuit court directed the county clerk to issue the tax buyer a tax deed to the property.

The following year, two of Lowe's sons filed a petition for "restoration of Property ownership," stating that Lowe had been in and out of various mental facilities for 30 years, including for most of calendar year 1996. They asked that the court reinstate Lowe's full rights of ownership in the property.

The circuit court appointed the public guardian to represent Lowe. A hearing was held on the public guardian's amended petition to set aside the tax deed. The circuit court denied the petition. The appellate court affirmed, and the supreme court granted the public guardian's petition for leave to appeal. In October 2005, the court affirmed the circuit and appellate courts. In re Application of the County Collector, 217 Ill 2d 1, 838 NE2d 907 (2005).

The court reconsiders, reaches same conclusion

The United States Supreme Court granted the public guardian's petition for writ of certiorari, vacated the judgment, and remanded it to the Illinois Supreme Court for further consideration in light of Jones v Flowers, 547 US 220 (2006).

In Jones, the Supreme Court held that "the State [of Arkansas] "must take additional reasonable steps to attempt to provide notice to the property owner before selling his property, if it is practicable to do so," when mailed notice of a tax sale was returned unclaimed.

In its newly issued opinion, the court distinguished the matter from Jones, noting, among other things, that the notice provided under Illinois's statute is "far more comprehensive" than that required by the Arkansas statute that was at issue in Jones." County Collector, 2007 WL 1149964, *9. The court then noted the absence of evidence or findings as to Lowe's competency in 1993, when the tax sale occurred, and, further, noted that Lowe was given proper notice of the tax sale and her right to redeem the property. Jones, then, did not require reversal, said the court.

The court then considered and rejected the public guardian's arguments that, as a matter of due process, the tax buyer should have inspected the returned envelopes and took reasonable steps in response to any information that it discovered as a result. The court found "the steps taken by [the tax buyer] exceeded those suggested by the Jones Court as reasonable," County Collector, 2007 WL 1149964, *11, and satisfied the code's requirement of diligent inquiry under sec. 22-15 as well as the constitutional requirement of due process.

The court rejected the argument that, had the tax buyer followed up on the notation "Person is hospitalized," it would have discovered where Lowe was hospitalized and that Lowe was mentally incompetent, noting that no hospital would have been permitted, under the Mental health and Developmental Disabilities Confidentiality Act, to disclose to the tax purchaser that Lowe was there. The court reaffirmed its prior disposition of the case and affirmed the appellate court's judgment.

Chicago lawyer Mark Heyrman of the Mandel Legal Aid Clinic, who authored the amicus brief supporting the public guardian, on behalf of the clinic's Mental Health Project and the Mental health Association in Illinois, acknowledges the hospital's duty of confidentiality. But, he observes, the hospital "could say, 'If she is here, we'll pass the information on to her and make sure she gets it.'" In fact, Heyrman says he's had experience in getting information to patients in mental health facilities in just that manner.

Decatur attorney John Barr authored the amicus brief for the other side--the Illinois Tax Purchasers Association, supporting the tax buyer and subsequent transferee. Barr comments that a tax sale is "a melancholy event," but disagrees that the process is flawed.

Lowe's heirs are not without recourse, Barr points out, noting, as did the court in its 2005 opinion, that the Property Tax Code's indemnity provisions under sec 21-295 et seq were designed to compensate property owners such as Lowe for the loss of their property due to no fault of their own: "The indemnity provisions were enacted by the legislature in 1970 in recognition of the fact that taxes may go unpaid, and property may be lost to a tax deed, because of circumstances such as mental or physical disability that are beyond the property owner's control." County Collector, 217 Ill 2d at 28, 838 NE2d at 922.

Says Barr, "The Internal revenue Service has thousands of employees to collect federal income taxes. Illinois has none to collect state property taxes because the system is so efficient. here, the supreme court undertook a very serious, local, and informed study of how the tax sale process works and correctly found that it provides owners with due process."

Editor's note: as ths issue of the IBJ went to press, the supreme court granted the Cook County Public Guardian's motion for stay of mandate pending the filing of a petition for writ of certiorari in the United States Supreme Court.
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Title Annotation:Illinois
Author:Gunnarsson, Helen W.
Publication:Illinois Bar Journal
Date:Jun 1, 2007
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