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In re Application of Ward, No. 2-98-1656

2nd District, 26 January 2000

PRESIDING JUSTICE BOWMAN delivered the opinion of the court:

Jeff Diedrich, on behalf of the Homeowners in Kishwaukee Valley Estates Unit 1 (homeowners), appeals from a circuit court order that denied the homeowners' motion to dismiss a tax deed. The tax deed in question was issued to petitioner, Choice Properties, Inc. (Choice Properties). The homeowners contend that the trial court erred in denying their motion to dismiss the tax deed (1) because petitioner failed to notify or make a diligent effort to notify them of the tax deed proceedings, and (2) because the property that was the subject of the tax deed was exempt from taxation. We reverse.

The property that is the subject of the tax deed (the property) is a parcel of land consisting of approximately eight acres in a residential subdivision known as Kishwaukee Valley Estates Unit 1. Diedrich is 1 of 11 homeowners who own lots in the subdivision.

On November 14, 1994, petitioner purchased the tax certificate on the property at a tax sale for the delinquent 1993 taxes. On February 4, 1997, petitioner filed a timely petition for a tax deed on the property. On the same date, petitioner also filed a take notice describing the proceedings. Petitioner requested that the take notice be served on Paul Thompson, who was the tax assessee for the property and on the trustee of a land trust that was the record owner of the property. Petitioner also caused notice of the tax deed proceedings to be published for three days in February 1997, to the same parties and unknown owners or other interested parties. The period of redemption expired on May 31, 1997, without redemption.

On June 20, 1997, the trial court conducted a hearing on the petition for a tax deed. At the hearing, Thaddeus M. Bond, Jr., who described himself as the attorney for and one of the principal shareholders of Choice Properties, testified that petitioner ordered a title search on the property before filing its petition for a tax deed. Bond testified that the title search showed that there were two parties with an interest in the property. These parties were Paul Thompson, the assessee, and Charles H. Kaye, who held the property under a land trust. Bond testified that petitioner served or attempted to serve all parties in interest and notified the same parties and unknown owners or interested parties by publication. The court subsequently directed the county clerk to issue a tax deed for the property to petitioner and a tax deed was issued. The tax deed was recorded on December 16, 1997.

On December 8, 1997, Diedrich filed a motion on behalf of the homeowners to dismiss the tax deed pursuant to section 2--1401 of the Code of Civil Procedure (735 ILCS 5/2--1401 (West 1998)). The motion asserted (1) that, because a recorded plat had dedicated the property as a park for the benefit of the homeowners, the property was not subject to taxation and was therefore taxed and sold in error, and (2) that petitioner did not name the homeowners as parties or make a diligent effort to serve them even though the statutes governing tax deed proceedings required petitioner to notify them.

On December 19, 1997, the McHenry County treasurer, William W. Lefew, through an assistant State's Attorney, filed a response to the motion to dismiss the tax deed. The response included the following admissions and allegations: the tax assessor over assessed the property for the tax period in question because the property qualified for an assessment of $1; had the supervisor of assessments been aware of the overassessment prior to the tax sale, a certificate of error would have been issued; if Lefew had known of the erroneous assessment prior to the issuing of the petition for a tax deed, he would have petitioned the court to declare a sale in error; Lefew had no objections to the court vacating the tax deed and the tax sale; and, if that was done, Lefew would make an appropriate refund to the tax buyer.

On August 18, 1998, petitioner filed its response to the motion to dismiss the tax deed. Among the attachments to petitioner's response were copies of a plat of the subdivision and a related declaration of covenants that had both been recorded in 1974. On the plat, written across the subject property in large block letters was the word "PARK." Also on the plat, beneath the word "PARK," was written "for benefit of Homeowners of the Sub. See a declaration of covenants filed as a part of this plat under a separate document."

Paragraph (c) of the declaration of covenants that was referenced in the plat stated, in relevant part, that the property designated on the plat as "PARK" was to be conveyed to a homeowners' association and that each owner of a lot in the subdivision would be a member of the association. The association was to be incorporated within 12 months. Each lot owner was to have one vote in the association for each lot owned. The association, as agent for the lot owners under an irrevocable agency coupled with an interest, was to hold legal title to the property which was described as a common area and park.

Petitioner argued in its response to the motion to dismiss the tax deed that the homeowners were not entitled to notice of the tax deed proceedings because the association had never been incorporated and title to the property therefore had never been transferred to the association. Petitioner also argued that the property was not tax exempt.

On November 23, 1998, the trial court entered an order that denied the homeowners' motion to dismiss the tax deed. Diedrich's timely notice of appeal on behalf of the homeowners followed.

On appeal, the homeowners contend that the denial of their motion to dismiss the tax deed must be reversed because (1) petitioner failed to notify them of the tax proceedings even though they were entitled to notice both as occupants of the property and as parties interested in the property; and (2) because the property was tax exempt.

The homeowners filed their motion to dismiss the tax deed pursuant to section 2--1401 of the Code of Civil Procedure (735 ILCS 5/2--1401 (West 1998)). The grounds for contesting a tax deed pursuant to section 2--1401 are limited to those specified by section 22--45 of the Property Tax Code (Code) (35 ILCS 200/22--45 (West 1998)). Section 22--45 provides, in pertinent part, that the grounds for relief under section 2--1401 are limited to:

"(2) proof that the property was exempt from taxation; [or]

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(4) proof by a person or party holding a recorded ownership or other recorded interest in the property that he or she was not named as a party in the publication notice as set forth in Section 22--20, and that the tax purchaser or his or her assignee did not make a diligent inquiry and effort to serve that person or party with the notices required by Sections 22--10 through 22--30." 35 ILCS 200/22--45 (West 1998).

We first address the homeowners' contention that the tax deed must be dismissed because the property was exempt from taxation. The homeowners posit that county officials admit that the property was assessed in error in 1993 and was entitled to an assessment of $1 per year under section 10--35 of the Code (35 ILCS 200/10--35 (West 1998)). Without citing any relevant authority, the homeowners next assert that an assessment of $1 per year is tantamount to a "use exemption" from taxation. The homeowners then reason that such an exemption is sufficient to bring the property within the limited grounds for contesting a tax deed under section 22--45(2) of the Code (35 ILCS 200/22--45(2) (West 1998)).

We disagree. The Illinois Constitution provides:

"The General Assembly by law may exempt from taxation only the property of the State, units of local government and school districts and property used exclusively for agricultural and horticultural societies, and for school, religious, cemetery and charitable purposes." Ill. Const. 1970, art. IX,