Fees in Venango County Sheriff's sale levied improperly, Superior Court says

By Nicholas Malfitano | Oct 3, 2016

HARRISBURG, Pa. -- The Superior Court of Pennsylvania has overturned a trial court ruling that denied a defendant’s exceptions to the Proposed Schedule of Distribution submitted by the Venango County Sheriff in a mortgage foreclosure action following a sheriff’s sale of real property located in Oil City.

Judges Jacqueline O. Shogan, Paula Francisco Ott and James J. Fitzgerald III ruled Sept. 28 to approve the appeal brought forward by Travel Services Inc. against Northwest Savings Bank, Barbara A. Knapp and Dennis E. Beaver in the matter.

“Appellant argues the trial court erred by holding that the Venango County Sheriff’s procedure of adding realty transfer taxes to the winning bid at a Sheriff’s sale does not violate 72 P.S. Section 8104-C and 72 P.S. Section 8107-D,” Fitzgerald wrote. “We hold that the Venango County Sheriff’s method of assessing realty transfer tax contravenes the clear and unambiguous language of these statutes. Thus, we reverse the trial court and remand for further proceedings.”

Fitzgerald outlined the underlying matter in the case was a mortgage foreclosure filed on Aug. 20, 2014.

“Default judgment was ultimately entered against Barbara A. Knapp and Dennis E. Beaver in the amount of $103,718, plus costs and interest. The property at issue was sold at a Sheriff’s sale on July 15, 2015,” the judge wrote.

“Defendant, a third-party purchaser, won the property with a bid of $41,300. The Sheriff assessed the value of the property at $150,440. The Sheriff then added $3,430.04, representing two percent of the assessed value for state transfer taxes and local transfer taxes, to the winning bid. Further, the Sheriff added two percent for poundage; thus, defendant owed a total of $45,556.04.”

According to case records, Travel Services acknowledged these extra fees would be levied.

“Defendant was provided with a ‘Real Estate Sale Calculation Sheet,’ which separately listed the poundage and the state and local transfer taxes as additions to the successful bid price. Defendant paid the successful bid and poundage with one check for $42,126. Defendant issued a separate check, which he indicated was under protest, for $3,430.04 for the state and local taxes,” Fitzgerald wrote.

Fitzgerald said the sheriff filed a Notice of Proposed Schedule of Distribution per Pa.R.C.P. 3136 on July 15, 2015, while the defendant filed timely exceptions contending the transfer taxes should have been deducted from (not added to) the winning bid of $41,300. After a hearing, the trial court denied the defendant’s exceptions on Oct. 27, 2015.

“Defendant timely appealed on Nov. 24, 2015, and complied with the court’s order to file a Pa.R.A.P. 1925(b) statement of matters complained of on appeal. The trial court issued an opinion on Dec. 18, 2015, which held that the Sheriff’s tax collection procedure complied with the law and that defendant was aware of the procedure prior to participating in the Sheriff’s sale. The trial court specifically discussed the only reported regarding the statutes at issue,” the judge wrote.

In the appeal, Travel Services Inc. argued 72 P.S. Section 8104-C and 72 P.S. Section 8107-D require state and local transfer taxes to be collected from the successful bid amount from any judicial sale, including a sheriff’s sale.

To that end, Travel Services contends the term “proceeds” in the statutes refers only to the bid amount, and not to the bid amount plus poundage and realty transfer taxes, as asserted by Northwest Savings Bank and Venango County Sheriff’s Department.

“Defendant acknowledges that he was aware of the Sheriff’s policy regarding the addition of taxes at the end of the bidding process, but avers that such knowledge is not dispositive because the policy at issue contravenes Pennsylvania statutes. We agree with defendant and conclude that the Sheriff’s method of collecting realty transfer tax violates Pennsylvania law,” Fitzgerald wrote.

Section 8104-C and Section 8107-D made reference to “priority out of the proceeds.”

“Defendants argue that the term ‘proceeds’ could refer to either the winning bid amount only or that amount plus taxes and poundage. While the term ‘proceeds’ is not defined by the statute, Black’s Law Dictionary provides that proceeds are, “something received upon selling, exchanging, collecting, or otherwise disposing of collateral,” Fitzgerald wrote. “This definition alone, however, is not dispositive.”

The judge said the “plain language” present in the statutes supported the Superior Court’s view.

“The amount of state and local taxes shall not be added to the winning bid, as was improperly done in this case,” Fitzgerald wrote. “Accordingly, having discerned an error of law, we reverse the trial court’s order denying defendant’s exceptions to the Venango County Sheriff’s procedure of adding realty transfer taxes to a winning bid at a Sheriff’s sale.”

Superior Court of Pennsylvania case 1871 WDA 2015

Venango County Court of Common Pleas CIV 951-2014

From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nickpennrecord@gmail.com.

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