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[the law at issue] was enunciated in a time when men drove a cart and horse and life proceeded more slowly, but they are difficult to apply to an era where messages can be sent at the speed of light and goods can be purchased by the push of a button. Although it is frequently feasible to pour new wine into old bottles, here, the old rule – albeit still valid – simply cannot keep up with the modern advances in technology.
In light of Indiana’s sparse and outdated case law, I would urge our legislature and Supreme Court, if the opportunity arises, to look beyond the man and cart method . . . and instead usher Indiana into the technological realities of the 21st century by formulating tools appropriate to handle the complexities of the internet’s realm.
We have written in the past on the topic of the need for logistics and transport companies to utilize provisions of the UCC to limit their exposure to liability. Follow this link to an article which demonstrates the type of disastrous liabilities that can hit a company that is improperly prepared.
As the “logistics” industry has boomed, many small businesses have tried to expand their businesses from just transportation to warehousing and even fulfillment, without having thought through the ramifications of their newly offered services. Conversely, some warehousing companies have begun to offer transportation services either directly or as “brokers”. These enterprises need to pay close attention to limiting their damages for providing services which they may not have extensive experience providing. The UCC provides helpful provisions which can allow parties to specifically limit damages (to a per pound amount, or other measure). Often clients think of provisions like this, buried in a contract, as “boilerplate” language. However, most “boilerplate” is in contracts for very specific reasons and can prevent some very unpleasant ramifications when a problem occurs. Service providers can substantially reduce their risk by taking advantage of these damage limitation provisions and then manage risks more economically with insurance or reinsurance. The days of a handshake deal are over and operators who do not want to incur the cost of hiring an attorney to draft a good contract are incurring the risk of financial disaster.
In Indiana, parties generally have one year following a tax sale to redeem the property before the tax sale purchaser will take title to the property. Nevertheless, to redeem requires the redeemer to pay a premium of 10% plus interest to the tax sale purchaser, so property owners and creditors have a significant incentive to prevent the property from being sold at tax sale.
Although each county sets the date for its own tax sale, all Indiana tax sales occur each fall. Pursuant to Indiana Code §6-1.1-24-5, properties may be set for tax sale if both installments from the previous year have not been paid (in the case of vacated properties, only one installment from the previous year must be unpaid). For example, properties are eligible for the Fall 2014 tax sale if the property owner failed to pay the taxes due in the Spring and Fall of 2013.
The County certifies the list of properties to be sold at tax sale anytime between January 1 and July 5. Most counties certify their list of properties on or around July 1. Pursuant to Indiana Code §6-1.1-24-2(a), once a property has been certified for tax sale, all delinquent property taxes owed through the date of certification must be paid in order to have the property removed from the tax sale.
Therefore, if a party wants to keep a property from being certified for tax sale, that party must ensure that it has paid the Spring tax installment from the previous year before the County certifies the list of properties (or if the property is vacant, the Spring and Fall installments from the previous year). Once a property has been certified, however, the amount that must be paid to have the property removed from the tax sale increases to include not only the Spring taxes from the previous year, but also the Fall taxes from the previous year and, assuming that the certification did not occur until after Spring taxes were due for the current year, those taxes as well. As an example, for 2014 tax sales, the property will not be certified if the Spring 2013 taxes were paid prior to the date of certification. However, to have the property removed from the tax sale list between the date of certification and the tax sale date, Spring 2013, Fall 2013, and Spring 2014 (assuming certification occurs after May 15, 2014) all must be paid. While these are all amounts owed that would need to be paid at some point, waiting until after the certification date will significantly increase the amount that must be paid now to avoid the tax sale.
The Seventh Circuit Court of Appeals ruled in early 2014 that an Illinois tax sale purchaser was bound by the taxpayer’s Chapter 13 bankruptcy plan even though he was not listed as a creditor. The Illinois tax sale process is similar to that in Indiana in that the tax sale is noticed, a tax certificate is issued following sale and a redemption period is provided to the taxpayer following sale in which the property may be “redeemed” from the tax sale by paying the redemption amount to the taxing authority.
In In Re Lamont (No. 13-1187, Jan. 7, 2014), the taxpayers filed a Chapter 13 bankruptcy during the redemption period and confirmed a plan which provided for payments to the taxing authority through their plan. Notice was not provided to the tax sale purchaser. The tax sale purchaser learned of the bankruptcy when he sought to have a tax deed issued by the county and the county court refused because of the pending bankruptcy. The Seventh Circuit held that as long as the taxpayers complied with their plan, the tax sale purchaser could not enforce his sale rights. The tax sale purchaser’s option was to seek reimbursement from the taxing authority (who was receiving payments from the taxpayer through the bankruptcy trustee).
Although this is the result one would expect, bankruptcy plans frequently do not provide for payment of the same interest rate that is required under state law. Is the taxing authority obligated to pay the statutory interest to the tax sale purchaser required under the state redemption requirements in this situation even when it is not recovering that amount under the debtor’s plan? As the Seventh Circuit put it, “. . . that problem is for the courts or legislature of Illinois.”
One other point of interest is that the Seventh Circuit found that the redemption period was not tolled by the bankruptcy. As a result, if the debtors/taxpayers failed to obtain plan confirmation prior to expiration of the redemption period (or, perhaps defaulted in their plan payments later?), their rights in the property would be lost.