In re Application of the County Collector ( 2006 )

THIRD DIVISION
July 19, 2006
No. 1-05-2115
In re APPLICATION OF THE COUNTY COLLECTOR ) Appeal from the
FOR JUDGMENT AND SALE AGAINST LANDS AND ) Circuit Court of
LOTS RETURNED DELINQUENT FOR ) Cook County
NONPAYMENT OF ANNUAL GENERAL REAL )
)
ESTATE TAXES FOR 1996, and Subsequent Years
)
)
(Phoenix Bond and Indemnity Company, )
)
Petitioner-Appellant, )
)
)
v. )
)
)
William Mattingly, Lawrence Sisk, Maria Pappas, )
Cook County Treasurer and ex Officio Cook County ) Honorable
Collector, and David D. Orr, Cook County Clerk, ) Robert W. Bertucci,
) Judge Presiding.
Respondents-Appellees). )
)
MODIFIED ON DENIAL OF REHEARING
JUSTICE KARNEZIS delivered the opinion of the court:
Petitioner, Phoenix Bond & Indemnity Company (Phoenix), appeals from an order
of the circuit court denying its petition to reinstate a vacated tax deed pursuant to
section 22-80 of the Property Tax Code (the Code) (35 ILCS 200/22-80 (West 2000)).
We affirm.
BACKGROUND
On January 23, 1998, the Cook County treasurer and Cook County clerk offered
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for sale a lien for delinquent 1996 taxes on the property identified as permanent index
number 27-08-406-045-0000, commonly known as 14726 Hollow Tree Road, in Orland
Park, Illinois. Phoenix purchased the lien on January 23, 1998, for a payment of
$3,028.60, with the period of redemption to expire January 5, 2001.
On January 5, 2001, prior to the expiration of the redemption period, the owner of
the property, William Mattingly, filed a voluntary petition for bankruptcy in the United
States Bankruptcy Court for the Northern District of Illinois, Eastern Division. As a result
of his filing in bankruptcy, the redemption period was extended 60 days from January 5,
2001. 11 U.S.C. ' 108(b) (2000). On March 6, 2001, Mattingly deposited the
appropriate funds, $18,368.24, with the county clerk=s office to redeem the taxes. That
amount included the amount of the 1996 taxes sold, subsequent taxes for 1997 and
1998, and penalties.
After Mattingly filed his bankruptcy petition, and before the expiration of the
extended redemption period, Phoenix made an application to the circuit court on
January 17, 2001, for an order directing the issuance of a tax deed. A hearing was held
on Phoenix=s application on February 22, 2001. On February 27, 2001, the circuit court,
unaware of the pending bankruptcy, ordered the county clerk to issue a tax deed for the
property to Phoenix.
Mattingly properly redeemed the taxes during the extended redemption period on
March 6, 2001. Thereafter, Phoenix learned of this redemption when the county clerk
refused to issue the tax deed as directed by the court on February 27, 2001.
Thereafter, on May 18, 2001, Phoenix filed a petition to expunge the redemption
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tendered by Mattingly and to compel the issuance of the tax deed. Attached to
Phoenix=s petition was a search of the bankruptcy records of the Northern District of
Illinois for the Western Division showing no record of Mattingly having filed a voluntary
petition for bankruptcy. Mattingly filed a response to Phoenix=s petition on June 19,
2001, wherein he included an affidavit from his counsel attesting to Mattingly=s pending
bankruptcy in the Eastern Division of the Northern District of Illinois and his attempts to
notify Phoenix of the bankruptcy proceedings. The county clerk filed a response to
Phoenix=s motion to expunge Mattingly=s redemption wherein it argued that the
redemption was proper and timely and the issuance of the tax deed was void ab initio
because Phoenix failed to obtain leave of the bankruptcy court prior to petitioning the
circuit court for the issuance of a tax deed. The court held a hearing on the motions on
September 20, 2001. At the hearing, the court stated that it would not have ordered the
tax deed to issue to Phoenix had it been aware of the bankruptcy proceedings.
Consequently, it denied Phoenix=s motion to set aside Mattingly=s redemption and
compel issuance of the tax deed.
Almost two years later, on June 24, 2003, Lawrence Sisk filed a motion to
intervene claiming to have a mortgage interest in the property. The circuit court granted
Sisk=s motion and on July 8, 2003, ordered its previous order of September 21, 2001, be
amended nunc pro tunc to correctly reflect the court=s intention to vacate the issuance of
the tax deed to Phoenix on February 21, 2001. The July 8, 2003, order indicated that
the September 20, 2001, order
Ais amended to provide that the tax deed order in favor of Phoenix Bond and
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Indemnity Company of February 27, 2001 is hereby vacated and in accord with
Section 22-80 of the Property Tax Code (35 ILCS 200/22-80) Phoenix is to be
paid the amount that is necessary to redeem from the tax sale plus subsequent
taxes and costs in accord with said section.@
The court further ordered that Phoenix=s application for a tax deed be dismissed, finding
no just reason to delay enforcement of the order or to prevent the filing of an appeal.
Phoenix filed a motion to amend the court=s July 8, 2003, order on August 5, 2003, but it
appears from the record that the court never ruled on that motion.
In January 2004, Phoenix petitioned the court pursuant to section 22-80 of the
Code (35 ILCS 200/22-80 (West 2000)), to reinstate the tax deed on the grounds that it
had not been tendered or paid those funds required by section 22-80. At a hearing on
the motion on March 30, 2004, the court stated again that it would never have entered
the February 27, 2001, order issuing the tax deed to Phoenix had it known that
Mattingly=s bankruptcy case was pending. On April 30, 2004, the court entered an
order denying Phoenix=s motion and ordering the county clerk to pay the redemption
funds deposited by Mattingly on March 6, 2001, to Phoenix. The court also ordered that
Mattingly was to pay to Phoenix within 90 days: (1) taxes for the first installment of 2000
previously paid by Phoenix in the amount of $2,143.75 plus interest of 1% per month
from January 20, 2001; (2) court reporter fees paid by Phoenix for the hearing on its
application for a tax deed in the amount of $75; and (3) $10 paid by Phoenix to the
county clerk for issuance of a tax deed, pursuant to section 22-80 of the Code. The
court again indicated that this was a final order and no just reason existed for delay in
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enforcement or in taking an appeal.
The county treasurer then filed a motion to modify the order of April 30, 2004, to
include language requiring Phoenix to surrender the original certificate of purchase to
the county clerk in exchange for the payment of redemption. Prior to the hearing on this
motion, Phoenix filed an appeal with this court (No. 1-04-1502). At the time, Phoenix
was apparently unaware of the motion filed by the county treasurer. After both parties
had filed their respective briefs with this court, Phoenix filed a motion to dismiss the
appeal, which was granted.
On May 27, 2005, the circuit court heard the Treasurer=s motion and ordered that
its previous order of April 30, 2004, be modified to include language requiring the
surrender of the certificate of purchase in exchange for the payment of redemption
funds. The court also ordered that the redemption funds be deposited with the Clerk of
the Circuit Court pending the outcome of any appeal from the May 27, 2005, order. It is
from this order that Phoenix now appeals.
ANALYSIS
Phoenix claims that the trial court erroneously denied its motion to reinstate the
tax deed where Mattingly did not reimburse Phoenix in accordance with section 22-80 of
the Property Tax Code (35 ILCS 200/22-80 (West 2000)).
Before we consider the merits of Phoenix=s claim, we must determine whether an
order of the circuit court compelling the county clerk to issue a tax deed is void when it
is entered in violation of federal bankruptcy law.
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Mattingly filed a voluntary petition for bankruptcy on January 5, 2001. Section
362(a)(1) of the Bankruptcy Code states:
Aa) Except as provided in subsection (b) of this section, a petition filed
under section 301, 302, or 303 of this title, or an application filed under section
5(a)(3) of the Securities Investor Protection Act of 1970, operates as a stay,
applicable to all entities of-
(1) the commencement or continuation, including the issuance or
employment of process, of a judicial, administrative, or other action or
proceeding against the debtor that was or could have been commenced before
the commencement of the case under this title, or to recover a claim against the
debtor that arose before the commencement of the case under this title;
(2) the enforcement, against the debtor or against property of the estate,
of a judgment obtained before the commencement of the case under this title;
(3) any act to obtain possession of property of the estate or of property from the
estate or to exercise control over property of the estate;
(4) any act to create, perfect, or enforce any lien against property of
the estate;
(5) any act to create, perfect, or enforce against property of the debtor
any lien to the extent that such lien secures a claim that arose before the
commencement of the case under this title;
(6) any act to collect, assess, or recover a claim against the debtor that
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arose before the commencement of the case under this title;
(7) the setoff of any debt owing to the debtor that arose before the
commencement of the case under this title against any claim against the debtor;
and
(8) the commencement or continuation of a proceeding before the United
States Tax Court concerning a corporate debtor's tax liability for a taxable period
the bankruptcy court may determine or concerning the tax liability of a debtor
who is an individual for a taxable period ending before the date of the order for
relief under this title. 11 U.S.C. ' 362(a) (2000).
The stay issued pursuant to section 362(a) takes effect immediately upon the
debtor filing his petition in bankruptcy, regardless of whether the other parties to the
stay, including a state court, are aware of the filing. Cohen v. Salata, 303 Ill. App. 3d
1060, 1064, 709 N.E.2d 668, 671 (1999); 3 Collier on Bankruptcy ' 362.00, at 362-115
(15th rev. ed. 1998). The stay lasts (1) with respect to acts against the property of the
estate, until the property is no longer part of the estate, or (2) with respect to any other
act, until the earliest of (a) the case being closed, (b) the case being dismissed, or (c) a
discharge being granted or denied, unless a party requests relief from the stay from the
bankruptcy court. 11 U.S.C. ' 362(c) (2000).
There is no dispute that Phoenix=s January 17, 2001, petition for a tax deed was
filed during the pendency of the stay and that Phoenix did not seek relief from the stay
in the bankruptcy court. Although it is not clear from the record under which subsection
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of section 362(a) Phoenix=s petition for a tax deed would be stayed, we are certain that
it would be stayed under subsection (a)(3), as acts Ato obtain possession of property of
the estate or of property from the estate or to exercise control over property of the
estate.@ 1 11 U.S.C. ' 362(a)(3) (2000). In In re Application of the County Treasurer &
Ex Officio County Collector of Cook County, 308 Ill. App. 3d 33, 41-43, 719 N.E.2d 143,
150 (1999), the court found that an attempt to obtain a tax deed after the period of
redemption expired, and the attempt to obtain the statutory penalty interest in addition to
the back taxes owed pursuant to section 253(c)(2) of the Property Tax Code (35 ILCS
205/253(c)(2) (West 1992)), were considered acts to obtain control over property of the
estate under section 362(a)(3).
This court has previously determined that the automatic stay imposed by section
362(a) (11 U.S.C. ' 362(a) (2000)) divests a state court of jurisdiction to adjudicate
claims against a debtor after the filing of a petition in bankruptcy. Little Texas, Inc. v.
Buchen, 319 Ill. App. 3d 78, 81, 744 N.E.2d 348, 351 (2001); In re Application of the
County Treasurer & Ex Officio County Collector of Cook County, 308 Ill. App. 3d at 41-
43, 719 N.E.2d at 150; Cohen, 303 Ill. App. 3d 1064, 709 N.E.2d at 671. Therefore,
because Phoenix failed to seek leave of the bankruptcy court for a tax deed during the
stay, the circuit court=s order issuing the tax deed was void ab initio. See Little Texas,
1
AProperty of the estate@ under section 541 of the Bankruptcy Code is
considered Aall legal or equitable interests of the debtor in property as of the
commencment of the case.@ 11 U.S.C. '541(a)(1) (1994).
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Inc., 319 Ill. App. 3d at 82, 744 N.E.2d at 81-82; Cohen, 303 Ill. App. 3d at 1065-66, 709
N.E.2d at 672.
The question remains: Is Phoenix now entitled to a tax deed because Mattingly
failed to reimburse Phoenix within 90 days as required by section 22-80 of the Property
Tax Code (35 ILCS 200/22-80(b) (West 2000)), when the initial tax deed order was
void? The short answer is no.
The relevant portion of section 22-80 of the Code states:
A(b) Except in those cases described in subsection (a) of this Section, and
unless the court on motion of the tax deed petitioner extends the redemption
period to a date not later than 3 years from the date of sale, any order of
court finding that an order directing the county clerk to issue a tax deed should
be vacated shall direct the party who successfully contested the entry of the
order to pay to the tax deed grantee or his or her successors and assigns (or, if
a tax deed has not yet issued, the holder of the certificate) within 90 days
after the date of the finding:
(1) the amount necessary to redeem the property from the sale as of the
last day of the period of redemption ***; and
(2) amounts in satisfaction of municipal liens paid by the tax purchaser or
his or her assignee, and the amounts specified in paragraphs (1) and (3) of
subsection (a) of this Section, to the extent the amounts are not included in
paragraph (1) of this subsection (b).
If the payment is not made within the 90-day period, the petition to vacate
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the order directing the county clerk to issue a tax deed shall be denied with
prejudice, and the order directing the county clerk to issue a tax deed shall
remain in full force and effect. No final order vacating any order directing the
county clerk to issue a tax deed shall be entered pursuant to this subsection (b)
until the payment has been made.@ 35 ILCS 200/22-80(b) (West 2000).
The Cook County treasurer and Cook County clerk contend that the terms of
section 22-80 of the Code do not create a right to a tax deed where a redemption was
timely tendered and an order directing the issuance of a tax deed was void. The county
treasurer and clerk argue that the language of section 22-80 addresses payments due
to a tax purchaser where a valid tax deed is entered and later vacated and where there
is no redemption tendered by the property owner. Phoenix claims that we should
disregard this argument because it is unsupported by any citation of authority.
Whether section 22-80 of the Code is applicable to the facts of this case is one of
first impression and the issue before us is one of statutory construction. The cardinal
rule of statutory construction is to ascertain and give effect to the legislature=s intent.
People v. Ward, 215 Ill. 2d 317, 324, 830 N.E.2d 556 (2005). The best evidence of the
legislature=s intent is the language of the statute itself, and when possible, a court
should interpret the language of the statute according to its plain and ordinary meaning.
In re D.F., 208 Ill. 2d 223, 229, 802 N.E.2d 800 (2003). In doing so, we do not
construe words and phrases in isolation; rather, we look at the language of the statute
as a whole. In re Detention of Lieberman, 201 Ill. 2d 300, 308, 776 N.E.2d 218 (2002).
The intent of the legislature can be discerned by considering the entire Act, its nature,
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its object and Athe consequences that would result from construing it one way or the
other.@ Fumarolo v. Chicago Board of Education, 142 Ill. 2d 54, 96, 566 N.E.2d 1283(1990). If the language of a statute produces absurd or unjust results not contemplated
by the legislature, we are not bound by the literal language of the statute. D.F., 208 Ill.
2d at 230, 802 N.E.2d at 800. We review issues of statutory construction de novo.
Ward, 215 Ill. 2d at 324, 830 N.E.2d 556.
Looking at the language of the statute as a whole, we agree with the county
treasurer and clerk that section 22-80 (b) applies to payments due to a tax purchaser
where a valid tax deed is initially entered. Section 22-80 (b) states that if an order
issuing a tax deed is vacated Athe party who successfully contested the entry of the
order@ shall make payments as directed by the statute within 90 days. 35 ILCS 200/22-
80(b) (West 2000). Section 22-45 of the Code specifies the procedures and the
grounds for contesting the issuance of a tax deed. According to section 22-45, a tax
deed is incontestable except by appeal from the order of the court or by a petition
pursuant to section 2-1401 of the Code of Civil Procedure (735 ILCS 5/2-1401 (West
2000)). 35 ILCS 200/22-45 (West 2000). Section 22-45 limits grounds for relief under
section 2-1401 to: (1) proof that taxes were paid prior to sale; (2) proof that the property
was tax exempt; (3) proof that the tax deed was procured by fraud or deception; and (4)
proof of insufficient notice to the property owner. 35 ILCS 200/22-45 (West 2000). As
the parties remarked in the record, this was not a situation in which a section 2-1401
petition would be appropriate.
In the case at bar, Mattingly did not contest the issuance of the tax deed. After
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receiving the order of the court issuing the tax deed in the instant case, Phoenix
presented it to the county clerk who marked the order void for redemption and returned
it to Phoenix. Thereafter, on May 18, 2001, Phoenix filed a motion with the circuit court
to set aside the redemption and compel the issuance of the tax deed. The court=s initial
order compelling the county clerk to issue the tax deed was void ab intio as it was
entered in violation of the automatic stay in bankruptcy court. Reading sections 22-80
and 22-45 together, we find that with respect to these particular facts, Mattingly would
not be considered a Aparty who successfully contested the entry of the [tax deed].@ 35
ILCS 200/22-80(b) (West 2000). In this case, there was not a Aparty who successfully
contested the entry of the order@ but, rather, a void order that never should have been
issued in the first instance.
Furthermore, section 22-80(b) requires that the Aparty who successfully
contested the entry of the [tax deed]@ to pay Athe amount necessary to redeem the
property from the sale as of the last day of the period of redemption.@ 35 ILCS 200/22-
80(b) (West 2000). This language suggests that this subsection is applicable to
instances where the tax deed was issued because the property owner did not redeem
the taxes. Here, Mattingly properly deposited the redemption funds with the Cook
County clerk on the last day of the redemption period as extended by section 108(b) of
the Bankruptcy Code (11 U.S.C. 108(b) (2000)).
In addition, section 22-80(b) grants relief to the party who initially was granted the
tax deed, or the holder of the certificate, if Athe party who successfully contested the
entry of the tax deed@ does not make the necessary payments within the 90-day period.
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AIf the payment is not made within the 90-day period, the petition to vacate the order
directing the county clerk to issue a tax deed shall be denied with prejudice, and the
order directing the county clerk to issue a tax deed shall remain in full force and effect.@
35 ILCS 200/22-80(b) (West 2000). This relief could never be granted in situations
present here, where the tax deed was void ab initio. The failure to make payments as
directed by the statute could never make a void order valid.
Similarly, not only was the court=s order void, it was entered in violation of section
22-40 of the Code (35 ILCS 200/22-40 (West 2000)). Section 22-40 of the Code
requires that for a tax deed to be granted, the redemption period must have expired
without the taxes having been redeemed. Here, as previously stated, Mattingly properly
deposited the redemption funds with the county clerk on the last day of the extended
redemption period. In addition, section 22-40 of the Code requires that the tax deed
petitioner comply Awith all the provisions of law entitling him or her to a deed.@ 35 ILCS
200/22-40(a) (West 2000). In this case Phoenix failed to comply with section 362(a) of
the Bankruptcy Code (11 U.S.C. 362(a) (2000)) by failing to request leave from the stay
granted to Mattingly as a result of the bankruptcy proceedings. Reading all of the
relevant subsections of the Code together, we find that the legislature did not intend
section 22-80(b) to apply to instances where the tax deed was entered in violation of
section 22-40 (35 ILCS 200/22-40 (West 2000)).
In sum, after reading section 22-80 and other relevant sections of the Code, we
find that the legislature did not intend section 22-80 to apply to cases such as this one,
where: (1) the order issuing the tax deed was void as it violated the automatic stay of
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the bankruptcy court; (2) the property owner deposited redemption funds within the
extended redemption period; and (3) the tax deed order was entered in violation of
section 22-40 of the Code. Accordingly, we affirm the order of the circuit court denying
Phoenix=s motion for reinstatement of the tax deed.
For the foregoing reasons, the judgment of the circuit court is affirmed but
remanded to the circuit court for further proceedings consistent with this opinion.
Affirmed and remanded.
HOFFMAN, P.J., and ERICKSON, J., concur.
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