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June 27, 1969


Before Kiley, Circuit Judge, and Perry and Decker, District Judges.

The opinion of the court was delivered by: Per Curiam:

Plaintiffs Louis and Doretta Balthazar challenge the constitutionality of the Illinois statutes which authorize real property tax deeds.*fn1 Although the General Assembly has recently made minor changes in the legislation, the general statutory scheme has remained unaltered since 1872. Defendants include alleged systematic purchasers of delinquent property and the state judicial officers who are responsible for administering the statutes.

A three-judge district court was convened pursuant to 28 U.S.C. § 2284.*fn2 Asking that the complaint be dismissed, defendants maintain that plaintiffs fail to state a cause of action.*fn3

The annual Illinois sale of tax delinquent real estate is commenced by the County Collector's publication of the tax delinquent list which specifies when application for a judgment of sale will be made to the Circuit Court. On that date, the Circuit Court sets a time for filing objections. If no objections are submitted, the Court then enters a judgment of sale. At least five days prior to the actual sale, the County Collector notifies each delinquent tax debtor by mail of the date on which the sale will begin. The real estate is then offered to the public by parcels. Bidding is restricted to the amount of overdue taxes and interest. The successful competitor is the bidder who permits the owner to redeem for the least penalty (interest) which cannot exceed 12% for each six months or fraction thereof during the two year redemption period.

Rather than receiving title to the land, the tax buyer obtains a certificate of purchase.*fn4 Within not more than five nor less than three months before the redemption period expires, the tax purchaser may file a petition in the Circuit Court requesting a tax deed. The tax purchaser must also serve notice of the filing and of the expiration date for redemption on the owner by mail. If the owner fails to redeem within the two years, the tax buyer may obtain a tax deed from the County Clerk. 1967 Ill.Rev.Stat. Ch. 120 ¶¶ 706, 711, 726, 729, 744, 747 & 749.

Rather than attempting to purchase real estate, bidders normally seek the penalty-interest. During the redemption period, the interest may total as much as 48% of the bid price. Since the owner can redeem by merely paying the delinquent taxes and interest, valuable land is routinely redeemed. In the rare case when an owner fails to redeem, however, the purchaser may obtain the property for a fraction of its market value, thus gaining as a windfall all "surplus value" which exceeds the land's tax and interest liabilities.

The Balthazars claim that when their property was sold at a tax sale, they were deprived of the due process of law,*fn5 as guaranteed by the Fourteenth Amendment.*fn6 Plaintiffs assert that tax delinquent real property cannot be sold by the state to a private purchaser at a tax sale unless there is a provision for unrestricted public bidding based on the real estate's value.*fn7 The Illinois statutes, in contrast, limit the bidding to the total of the overdue taxes, interest, and penalties.

The purpose of a public sale, however, is to provide landowners with an opportunity to protect their real estate investment, even though their taxes may be in arrears. So long as owners have this opportunity, state legislation meets the due process requirements of the Fourteenth Amendment.*fn8 Thus, the Supreme Court recently held that states only need to give property owners adequate notice of their delinquency and of the foreclosure proceedings, explaining that:

  "What the City of New York has done is to foreclose
  real property for charges four years delinquent and,
  in the absence of timely action to redeem or to
  recover any surplus, retain the property or the
  entire proceeds of its sale. We hold that nothing in
  the Federal Constitution prevents this where the
  record shows adequate steps were taken to notify the
  owners of the charges due and the foreclosure

Nelson v. New York City, 352 U.S. 103, 110, 77 S.Ct. 195, 199, 1 L.Ed.2d 171 (1956).*fn10

The Illinois redemption period permits delinquent landowners to protect their investments because at any time during the two years they may convey the property to a purchaser, subject to the outstanding certificate of purchase. Since potential buyers may then redeem, the sellers can negotiate a purchase price which includes the surplus value. In fact, the challenged statutes favor those landowners who are likely to be in arrears, either because they are poor or because they lack ready cash. Two years afford property owners ample opportunity to raise enough money to redeem or to canvass prospective buyers for the highest possible purchase price. In contrast, at a forced judicial sale, real estate is often sold for substantially less than its apparent market value.

Furthermore, the Illinois statutes are supported by the General Assembly's unassailable purpose to collect in an efficient manner all overdue real estate taxes. The bidding restrictions which are peculiar to Illinois and five other states*fn11 similarly promote a legitimate legislative goal — to facilitate redemption by delinquent taxpayers. If the competitors at the tax sale bid on the property's market value, a landowner would have to raise as much money as the highest bid in order to redeem. Moreover, the existing bidding system tends to depress the penalty-interest rate, thus protecting delinquent taxpayers from excessive charges.

In their complaint, the plaintiffs also ask this Court to invalidate a private agreement executed by the Balthazars in favor of one of the defendants. While there may be ancillary federal jurisdiction to determine the issue, we decline to exercise that jurisdiction since the plaintiffs' primary grievance fails to state a cause of action. Similarly, we do not decide any questions that plaintiffs may wish to raise concerning the procedural aspects of the Illinois tax deed statutes. If they so desire, the plaintiffs may present the procedural issues and the private agreement to the state courts for possible relief.

In conclusion, the Illinois tax delinquency statutes allow all real estate owners to recover the surplus value of their land. During the two year period of redemption, the owners can simply sell the property to a private purchaser subject to the tax certificate. The Illinois legislation is constitutional since delinquent landowners, including the ...

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