Client Alert: Tax Sale Challenge in PA Oil and Gas Rights Case is Time-Barred, Court Affirms

Pittsburgh Office, 09/03/2015

On Sept. 1, 2015, the Pennsylvania Commonwealth Court affirmed a decision of the Westmoreland County Common Pleas Court that held a challenge to a 1990 upset tax sale was barred by both the statute of limitations and the doctrine of laches due to the passage of time and the public notice provided by recording the tax sale deed.

Appellants filed suit in 2013 claiming that they were the heirs of Lewis and Lucinda Thompson, and that the Thompsons reserved the oil and gas rights underlying a 267-acre parcel in 1902.  The heirs alleged that they were unaware of their interest in the parcel and that they were provided no notice of the 1990 upset tax sale.  They challenged the tax sale on numerous grounds, including improper notice and return pursuant to 72 P.S. § 5860.308; failure to advertise (72 P.S. § 5860.602(a)); failure to post the property (72 P.S. § 5860.602(e)(3)); failure to provide statutory notice (72 P.S. § 5860.602(e)(1), (2)); and failure to make reasonable efforts to locate the heirs (72 P.S. § 5860.607a).  The heirs additionally argued that the Westmoreland County Tax Claim Bureau (and/or its successors-in-interest) bore the burden of proving the validity of every element of the sale.  Dolphin Services Corporation v. Montgomery County Tax Claim Bureau, 557 A.2d 38 (1989).

The appellee, an oil and gas company that acquired the oil and gas rights to the parcel subsequent to the tax sale, argued that the Tax Claim Bureau complied with the statutory requirements and that the heirs’ claims were barred by the six-year statute of limitations applicable to tax sales pursuant to 42 Pa. C.S. § 5527(b) and by the doctrine of laches.  The trial court granted the oil and gas company’s motion for summary judgment on both the statute of limitations and the doctrine of laches.

In affirming the trial court’s opinion, the Commonwealth Court held that the heirs had constructive notice of the tax sale upon the recordation of the tax sale deed. See Weik v. Estate of Brown, 794 A.2d 907 (Pa. Super. 2002); Poffenberg v. Goldstein, 776 A.2d 1037 (Pa. Cmwlth. 2001). Thus the heirs should have known of the tax sale as early as 1990, and the court held that “[t]he passage of time and/or Appellant’s constructive notice bars them from challenging any potential defects in the Tax Sale.”  The court also held that the heirs failed to prove insufficient notice.

The court further held that the heirs’ failure to assert their challenge for 23 years was a failure to exercise due diligence that resulted in prejudice to the appellee.  As a result, the heirs’ claims were barred by the doctrine of laches. The court noted the particular challenges that face an entity defending a tax sale challenge following the passage of a significant amount of time (e.g., deceased witnesses, lost records, etc.) In affirming the trial court’s decision, the court specifically noted that “[a]llowing prior owners of tax sale properties to bring challenges to old tax sales would wreak havoc on Pennsylvania’s property system.”

The Pennsylvania Litigation Practice Group is available to answer your questions and counsel you on defending challenges to upset tax sales.  Please contact Kevin L. Colosimo, Managing Partner, William T. Fahey III, Partner, or Nicholas J. Koch, Senior Associate, at (724) 746-6644.

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