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In re Application of County Treasurer

December 18, 1998

IN RE APPLICATION OF THE COUNTY TREASURER AND EX OFFICIO COUNTY COLLECTOR FOR ORDER OF JUDGMENT AND SALE AGAINST REAL ESTATE RETURNED DELINQUENT FOR THE NONPAYMENT OF GENERAL TAXES FOR THE YEAR 1994 FIRST FINANCIAL FUNDING CORPORATION, PETITIONER-APPELLANT,
v.
EDWARD J. ROSEWELL, COOK COUNTY TREASURER AND EX OFFICIO COUNTY COLLECTOR OF COOK COUNTY, RESPONDENT-APPELLEE.



Appeal from the Circuit Court of Cook County. Honorable Michael J. Murphy, Judge Presiding. No. VTS-970179

The opinion of the court was delivered by: Justice Theis:

On April 29, 1996, First Financial Funding Corporation (First Financial) purchased the lien of the 1994 delinquent real estate taxes against a parcel of real estate at the annual Cook County tax sale. First Financial later filed a petition to declare the sale to be in error pursuant to the provisions of section 21-310 of the Property Tax Code (the Code) (35 ILCS 200/21-310 (West 1996)) because the property was owned by Northwestern University and was not subject to taxation. In addition, First Financial sought reimbursement with interest as - provided by section 21-315(a) of the Property Tax Code. 35 ILCS 200/21-315(a) (West 1996).

The trial court granted the petition for a sale in error, but declined to award First Financial interest pursuant to section 21- 315(b)(iv) of the Code. 35 ILCS 200/21-315(b)(iv) (West 1996). In so doing, the trial court relied upon its construction of the term "actual knowledge" as used in section 21-315(b)(iv), which precludes an award of interest where the tax purchaser has "actual knowledge" of the grounds for the sale in error prior to the tax sale. 35 ILCS 200/21-315(b)(iv) (West 1996). In denying First Financial interest, the trial court concluded that the failure to perform either a physical inspection of the property or a title inspection on the property "will not be excused where it can be shown that a reasonable inspection would have disclosed the grounds on which the sale in error is declared to be erroneous." First Financial filed a petition for reconsideration, which the trial court denied. On appeal, First Financial maintains that the trial court misconstrued the meaning of the phrase "actual knowledge" as used in section 21-315(b)(iv) and, as a result, erroneously determined that First Financial was not entitled to interest. We reverse.

First Financial is a corporation solely engaged in the business of purchasing delinquent real estate taxes. At the time of the annual tax sale at issue, First Financial had been engaged in this business for approximately 6½ years. On April 29, 1996, First Financial purchased the lien of delinquent 1994 real estate taxes on the property identified by permanent index number 17-10-204-007 (the property or the garage) for $701,527.24. That property is a parking garage on Ontario Street between Fairbanks and McClurg Court in Chicago in the vicinity of Northwestern University Hospital.

After the tax sale, First Financial's attorney conducted a title search, which revealed that the property was owned by Northwestern University. Northwestern University was granted a charter exemption by private law enacted by the General Assembly in 1855, excluding its property from taxation regardless of use. Consequently, First Financial filed a petition to vacate the sale, asking for an award of interest as provided by section 21-315(a) of the Code.

After the hearing on the petition to vacate the sale, which resulted in the denial of interest, First Financial filed a motion to reconsider. In support of that motion, First Financial offered the affidavit of Marshall Atlas, an officer and authorized agent of First Financial, in which Atlas stated that, based on his physical inspection of the property prior to the sale, he found no indication that the property was owned by Northwestern University or that the property was not subject to taxation. Atlas further stated that before the tax sale he had no knowledge of any kind as to the property's ownership or tax- exempt status, nor was he aware of any fact that should have alerted him to make further inquiry as to the property's ownership or tax-exempt status. In its response to the motion, the collector disclosed that a sign on the property bore the name of Northwestern University. So informed, First Financial requested leave to reopen its proofs, and the trial court heard testimony from Atlas regarding the sign.

Atlas testified that, prior to purchasing the tax lien on the property, he inspected the property by driving south and north on Fairbanks Court at its intersection with Ontario Street, without driving down Ontario. During his inspection of the property, Atlas did not stop his car and only viewed the property from his car as he drove. Atlas later learned that the garage's location is approximately 150 feet east of the intersection of Fairbanks Court and Ontario Street, facing Ontario Street.

Placing his actions in context, Atlas explained that First Financial was the successful bidder on approximately 500 real estate parcels during the tax sale at which it purchased the garage. First Financial bid on at least 50% of the total number of parcels purchased at that tax sale by all buyers, or approximately 14,000 parcels. Atlas physically inspected 75% of the parcels First Financial bid on during the tax sale. Atlas testified that he physically inspects a property prior to a tax sale in order to determine the property's type, location, value and condition.

Atlas also testified that in further preparation for the sale he obtained a computerized report from the Cook County treasurer's office containing information on the property. The report listed the property's assessed valuation and indicated that taxes on the property for the two years prior to the tax sale, the years 1992 and 1993, had been paid. The report also showed no assessee of record. Atlas further testified that he did not know at the time of the April 1996 tax sale that the property was owned by Northwestern University, that Northwestern University possessed a charter exemption, or the significance of a charter exemption. However, Atlas acknowledged that he had read the statute governing sales in error.

Atlas said that he conducted a second inspection of the garage and photographed the sign, which he described as being located on an interior wall of the parking garage and as measuring approximately two feet by two feet in diameter. Though Atlas denied having seen the sign during his initial inspection of the property prior to the tax sale, he acknowledged that, at that time, he only viewed the garage from the vantage point of his car on Fairbanks, not Ontario Street. However, Atlas contended that he would not have seen the sign even if he had viewed the garage from Ontario Street because trees and the sign's inconspicuous location obscured it.

The photographs, which are a part of the record on appeal, indicate that the sign, located on an interior wall of the parking garage, reads: "Northwestern University Lot `D.'" Additional signage depicted in the photographs identifies the parking garage as a commercial enterprise. According to Atlas, the parking garage bore no indication of its connection with Northwestern University other than the signage he located, described, and photographed during his second inspection of the property. Claiming that he failed to see the sign during his initial inspection, Atlas testified that he did not know whether the sign identifying the parking garage as Northwestern University Parking Lot D was present when he initially inspected the property. However, Atlas admitted that, at the time, he did know that Northwestern Memorial Hospital is located in the vicinity of the parking garage.

Section 21-315(a) of the Property Tax Code provides that interest shall be paid in those instances referenced under section 21- 310 of the Code. 35 ILCS 200/21-315(a) (West 1996). The ground for granting a sale in error in this case, the fact that the property is not subject to taxation, is one of those instances. Section 21-315(b) of the Code denies interest on refunds of the purchase price under four circumstances, one of which is "where the court determines that the tax purchaser had actual knowledge prior to the sale of the grounds on which the sale is declared to be erroneous." 35 ILCS 200/21-315(b)(iv) (West 1996).

On appeal, First Financial maintains the trial court misconstrued the meaning of the phrase "actual knowledge" and, as a result, erroneously determined that First Financial was not entitled to interest. First Financial suggests that the phrase "actual knowledge" contemplates deliberate and purposeful conduct on the part of the tax purchaser. First Financial also contends that the trial court failed to make the necessary findings of fact predicate to a determination of actual knowledge on the part of First Financial.

The collector counters that the definition of "actual knowledge" First Financial proffers is unworkable, is contrary to the plain language of the statute, and is contrary to public policy. The collector emphasizes the trial court's role in making a determination of actual knowledge based upon the facts presented. The collector further argues that, rather than judicially imposing a duty of inspection upon prospective tax purchasers, the trial court merely stated the ...


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