Here's one for the regulatory takings mavens, because it has just about every conceivable issue: ripeness, res judicata (yes, arugment was that the complaint was filed both too early and too late), Rooker-Feldman, the Tax Injunction Act, and an analysis of whether the property owner's complaint stated a claim for relief under the Takings Clause.
At issue in Coleman v, District of Columbia, No. 13-1456 (D. D.C. Sep. 30, 2014) was the District's statutory provision which allowed it to place a lien on properties whose owners do not pay their full property tax bill, and then sell the property at auction if the lien is not satisfied. So far so good - this scheme isn't that much different from similar provisions in virtually every state. The problem with DC's system is that "the law permits the taking of not only the amount of delinquent taxes, plus any costs, fees, and interest, but also the entirety of the original owner's equity in the property." Slip op. at 6 (footnote omitted).
So the guardian of Benjamin Coleman, a 76-year old veteran who suffered from severe dementia and therefore did not pay a $133 property tax bill for his home, was not too pleased when the District auctioned off the home to satisfy the lien, and then kept the difference between the amounts owed ($133 plus penalties, interest, and fees, a total of about $5,500) and the home's fair market value of $200,000. After a DC court foreclosure suit, Coleman's home was auctioned to a third party who eventually sold it for $71,000.
Coleman's complaint alleged that the District's tax-sale statute violates the Takings Clause by "taking a homeowner's surplus equity and transferring it to a private party without just compensation or public purpose." Slip op. at 9. The District sought dismissal for the panoply of reasons referenced above. The court rejected each of the District's procedural arguments:
- The Tax Injunction Act only prohibits courts from enjoining or restraining an assessment of taxes, and the complaint was not seeking to do so, only impose liability for the taking of Coleman's surplus equity.
- The District also asserted the takings claim was not ripe under Williamson County because Coleman had not sought compensation via the DC courts. The court held, however, that the DC courts have not expressly recognized inverse condemnation as a cause of action. See slip op. at 24 ("The possibility that a court could fashion such an action is not sufficient to render Mr. Coleman's claim unripe.").
- As for Rooker-Feldman (the doctrine which prohibits federal district courts from hearing cases which in effect seek appellate review of a state court judgment) the court held it did not apply. Yes, by attacking the foreclosure judgment, Coleman was, in some sense, seeking federal court review of the DC court's decision. But his federal complaint wasn't seeking to overturn the DC court's foreclosure judgment, and only asserted that the DC statute which prohibited a homeowner from recovering the excess equity is a taking.
- As we noted above, the District also asserted the claim was brought too late, in that Coleman could have raised and litigated the takings claim in the foreclosure suit in DC court. The federal court rejected the argument because Coleman's takings claim was only a "permissible" claim in DC court, and since he wasn't required to bring it there, he was not precluded from doing so in a subsequent lawsuit.
Finally, the court rejected the District's motion to dismiss for failure to state a claim. The issue boiled down to whether the U.S. Supreme Court had foreclosed the takings argument in earlier cases which may or may not have raised the same issue as Coleman presented. The district court concluded that the Supreme Court had not and thus concluded "if the tax-sale statute does not provide a right to the surplus and the statute provides no avenue for recovery of any surplus ... [and a] property interest in equity could conceivably be created by some other legal source," then "failure to provide an avenue for recovery of the surplus would appear" to be a taking. Slip op. at 46.
The court held that Coleman had a property interest in the surplus equity because the District had failed to rebut Coleman's claims in its briefs, which failed to argue the issue at all. "Accordingly, the Court must assume that Mr. Coleman established the existence of an independent property interest in the equity in his home, as well as the remaining elements of a Fifth Amendment Takings Clause claim." Slip op. at 48.
Coleman v. District of Columbia, No. 13-1456 (D. D.C. Sep. 30, 2014)
