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Pottstown School District v. Petro

Commonwealth Court of Pennsylvania

June 27, 2014

Pottstown School District
Kenneth J. Petro. Appeal of: Northeast Revenue Service, LLC

Argued: May 14, 2014.

John P. Rodgers, Wilkes Barre, for appellant.

Maureen M. McBride, West Chester, and Jeffrey C. Schwartz, Norristown, for appellee Pottstown School District.

BEFORE: HONORABLE DAN PELLEGRINI, President Judge, HONORABLE BONNIE BRIGANCE LEADBETTER, Judge, HONORABLE RENÉ E COHN JUBELIRER, Judge, HONORABLE ROBERT SIMPSON, Judge, HONORABLE MARY HANNAH LEAVITT, Judge, HONORABLE P. KEVIN BROBSON, Judge, HONORABLE PATRICIA A. McCULLOUGH, Judge. OPINION BY JUDGE McCULLOUGH. Judge Leadbetter joins in this opinion except as to itemization of counsel fees, as to which she concurs in the result only.



Northeast Revenue Service, LLC (Northeast), an agent for the Montgomery County Tax Claim Bureau, appeals from the September 5, 2013 order of the Court of Common Pleas of Montgomery County (trial court), denying Northeast's exceptions and confirming the Sheriff's proposed schedule of distribution of proceeds from a free and clear judicial sale conducted on January 30, 2013. We affirm.

The underlying facts of this case are not in dispute and were stipulated to by the parties before the trial court. Kenneth J. Petro was the record owner of property located at 1042 Park Drive, Pottstown, Montgomery County, Pennsylvania. On July 11, 2007, the Pottstown School District

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(School District) commenced an action pursuant to a writ of scire facias regarding delinquent 2006 taxes on the property. On November 1, 2011, the School District obtained a judgment against the property in the amount of $6,054.44. Pursuant to a writ of execution, the property was exposed to a public sale for the collection of delinquent real estate taxes on September 26, 2012. No third party bid the upset sale price of $57,804.59, which included Sheriff costs, taxes, and municipal claims. The trial court thereafter approved the sale of the property free and clear of all taxes, municipal claims, mortgages, and judgments, and the property was again exposed for sale on January 30, 2013. At this sale, the property was sold for a bid of $40,000.00.

Portnoff Law Associates, LTD (Portnoff), acting as the agent for the Borough of Pottstown (Borough) and the School District, submitted a claim for proceeds to the Sheriff in the amount of $52,598.04, representing delinquent real estate taxes and delinquent water, sewer, and trash fees for the property, plus attorney fees, court costs, and accrued interest from 2005 to 2013. The Borough had also submitted a separate claim in the amount of $1,349.76, representing outstanding utility charges. Northeast submitted a claim in the amount of $1,763.00, representing delinquent county and municipal taxes for 2011 and 2012.

On February 28, 2013, the Sheriff filed his proposed schedule of distribution of the sale proceeds. This schedule of distribution provided as follows:

1. $3,066.26

Payable to Sheriff of Montgomery County for costs

2. $1,398.12

Payable to Recorder of Deeds for Transfer Tax

3. $1,398.12

Payable to Recorder of Deeds for Transfer Tax

4. $949.30

Payable to Borough of Pottstown for Municipal Lien 2004-21361

5. $33,188.20

Payable to Portnoff Law Associates LTD for outstanding

School/Borough Liens

(Stipulation, Exhibit A, Reproduced Record (R.R.) at 83a.)[1]

On March 11, 2013, Northeast filed exceptions to the Sheriff's proposed distribution alleging that, by denying first priority to Northeast's property tax liens, the distribution violated section 2 of what is commonly referred to as the Municipal Claims and Tax Liens Act (MCTLA), Act of May 16, 1923, P.L. 207, as amended, 53 P.S. § 7103. This section declares lawfully imposed and assessed taxes " to be a first lien on . . . [real] property, together with all charges, expenses, and fees added thereto for failure to pay promptly" and provides that " such liens shall have priority to and be fully paid and satisfied out of the proceeds of any judicial sale of said property, before any other obligation, judgment, claim, lien, or estate. . . ." Id. Northeast also noted that section 1 of the MCTLA specifically declares all taxes imposed by " counties, institution districts, cities, boroughs, towns, townships, and school districts on real property" to be first liens on such property. 53 P.S. § 7102.

Portnoff filed an answer to the exceptions contending that, pursuant to section 31 of the MCTLA, 53 P.S. § 7281, the oldest tax liens, in this case its liens, had priority over Northeast's more recent tax liens. This section does state that " [o]n any such sale being made all tax claims

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shall be paid out of the proceeds thereof: first, the oldest tax having priority; and municipal claims shall be paid next, the oldest in point of lien having priority." 53 P.S. § 7281.

The trial court conducted a hearing with respect to Northeast's exceptions. At this hearing, Northeast argued that the remaining proceeds of the free and clear judicial sale should have been distributed proportionately in accordance with section 205(d) of the Real Estate Tax Sale Law (RETSL), Act of July 7, 1947, P.L. 1368, as amended, 72 P.S. § 5860.205(d). This section, which addresses the distribution of proceeds received from a tax sale under the RETSL, provides that any Commonwealth tax liens receive first priority and any remainder is distributed " to the respective taxing districts in proportion to the taxes due them." 72 P.S. § 5860.205(d).

By order dated September 5, 2013, the trial court denied Northeast's exceptions and confirmed the Sheriff's proposed schedule of distribution. However, the trial court modified the distribution by eliminating the $949.30 originally proposed as payable to the Borough for a municipal lien. Hence, the trial court directed that $5,862.50 be distributed to the Sheriff's office for the costs of the sale and the remaining $34,137.50 be distributed to Portnoff ...

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