Judge spanks the tax man

Fulton County property owners won a small victory in court recently when a federal judge stepped in to stop the acquisition of land by the purchaser of a tax lien.

The case began when a 1996 property tax payment on a parcel of land Aetna Life Insurance Co. currently owns was credited to the wrong tax year and the wrong piece of property by Fulton County Tax Commissioner Arthur Ferdinand’s office. That created a situation in which it appeared that Aetna hadn’t paid taxes for 1996.

The county then filed a lien against the property, and a private company, Vesta Holdings Inc., purchased the lien. As in all such cases, Vesta then had an option: charge interest on the lien — 1 percent per month — or sell the tax deed to the highest bidder. And on April 6, 1999, a Vesta-related outfit called Heartwood 11 bought the tax deed for about $3,000. A year elapsed, and as allowed under Georgia law, Heartwood went to court to bar Aetna from recovering the property.

For many normal homeowners, this would be the end of the story, and they would be facing the loss of their house. In this case, however, Vesta and Fulton County were confronted by a deep pockets company, and surprisingly, Aetna’s actions stand to help regular people caught in the same trap.

The verdict of U.S. District Judge Julie E. Carnes concludes that if the tax commissioner makes a mistake in recording the debt payment, then the whole lien process is null and void.

That might seem like a no-brainer, but it isn’t.

In this case, “Vesta and Heartwood argued that even if the tax sale was incorrect, because the taxes were paid, that the property transfer was still valid, and the property owner should simply have a lawsuit for damages against the tax commissioner,” says Emory Law School professor Frank Alexander, who worked for Aetna’s law firm, Powell, Goldstein, Frazer & Murphy on this case.

Carnes didn’t agree. The “huge blunder” by Fulton County set the case in motion, she wrote, so the court held void, from the very beginning, the entire tax proceedings.

Vesta has filed notice to appeal the decision.??