Donaldson/guin files suit on behalf of Jefferson County Tax Payers

Donaldson & Guin has filed suit against Jefferson County, Alabama challenging the county’s practice of allowing “overbids” when property is auctioned for delinquent property taxes.  In addition to seeking to end the practice, the suit seeks interest that the county has earned on the excess funds held by the county.

The News article reported:

Another suit against the county, the tax collector and the county treasurer was filed Wednesday on behalf of a company, MNP Holdings LLC. It seeks class-action status to represent residents and businesses that already have redeemed property sold by the county that resulted in overbids.

The suit said that even when the county does pay back excess, the county retains the interest earned by the excess.

"I think this is a practice that needs to be changed," said David Donaldson, an attorney for MNP Holdings.

View this article at the Birmingham News or read below:

 

Jeffco to return millions for land

People whose property was sold for taxes eligible
Saturday, February 10, 2007
Val Walton - News Staff Writer

The Jefferson County tax collector has agreed to return millions of dollars to people whose property - auctioned to pay county ad valorem taxes - brought more than the amount owed to the county.

Hundreds of people whose property was sold by the county from 1992 to 2005 are eligible for county paybacks, according to court documents.

Lawyers in the case have asked U.S. District Judge David Proctor to approve the preliminary settlement. Proctor is to issue a written order later.

The county has a pool of $32.5 million from which to make payments, documents show.

In the 1990s, Jefferson County's delinquent tax sales started drawing out-of-state investors who paid thousands of dollars above the actual amount of tax owed. This was the case especially on property in affluent suburban areas of the county.

The high bids came even though investors knew they would have to wait three years to give the original owners time to redeem their property. The settlement is only for owners who have not redeemed their property.

A settlement administrator will be appointed by the court to determine how funds will be paid to people who make up the settlement class. The excess has been held in trust by the county at a bank, earning interest. Any payment is limited to the excess bid on the person's property, said Jefferson County attorney Charlie Wagner.

"The county is clearly not required to pay any additional money," Wagner said.

Efforts to reach lawyers for the residents who filed suit were unsuccessful.

The proposed settlement stems from a 2005 lawsuit in Birmingham's federal court that named the county, county tax collector J.T. Smallwood and county treasurer Barry Stephenson as defendants.

The suit claimed the defendants were "engaging in improper practices" relating to notices given before tax sales, and in the methods in which the county conducted the tax sales.

The suit contended the defendants for years accepted the excess but failed to notify the property owners of the practice before the sale, and failed to notify the owners that the excess funds were available.

The county denies any wrongdoing in agreeing to the settlement, according to documents.

Another suit against the county, the tax collector and the county treasurer was filed Wednesday on behalf of a company, MNP Holdings LLC. It seeks class-action status to represent residents and businesses that already have redeemed property sold by the county that resulted in overbids.

The suit said that even when the county does pay back excess, the county retains the interest earned by the excess.

"I think this is a practice that needs to be changed," said David Donaldson, an attorney for MNP Holdings.

Among taxpayers named in the 2005 lawsuit are Raymond Winston and Claude H. Estes III, who owned property that was sold by the tax collector on May 15, 2001. The suit said the purchaser paid $6,000 in excess above taxes, penalties, interest and costs of $801.97 owed in taxes by Winston and Estes, who did not know the property had been sold.

In 2005, Winston and Estes learned their property had been sold for taxes and began efforts to redeem it.

Mark Seay, another plaintiff, owned property for which a purchaser paid $23,500 in excess, the suit said. Seay's property was sold in May 2004, the suit said.

Court records show that as a part of the settlement the county would, among other things, in the future provide notice that any property sale could produce money in excess of the taxes and costs owed.

Court records show that in May 2005, the Jefferson County tax collector sold about 3,500 properties. About 2,500 of them were sold to private buyers, fetching about $30 million more than what was owed for taxes, interests and costs. The remaining 1,000 properties were sold to the state for the amount of taxes and costs due because no one bid on the properties.

E-mail: vwalton@bhamnews.com