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Adopt a resolution accepting claims for excess proceeds from tax-defaulted property sales and authorizing distribution of excess proceeds from the sales
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Published Notice Required? Yes ___ No _X_
Public Hearing Required? Yes ___ No _X_
DEPARTMENTAL RECOMMENDATION:
The Office of County Counsel recommends that the Board adopt a resolution accepting claims for excess proceeds from tax-defaulted property sales and authorizing distribution of excess proceeds from the sales.
SUMMARY
Pursuant to Board of Supervisors’ Resolution No.2022-212 and 2023-23, on February 8-9, 2023, March 28-29, 2023, and May 9-11, 2023, the Solano County Treasurer/Tax Collector/County Clerk (“Tax Collector”) conducted a public auction of tax-defaulted properties on the internet. After the properties were sold, the delinquent taxes, interest, penalties and statutory administrative costs were paid from the proceeds. The remaining sums are deemed excess proceeds. The Tax Collector is entitled to make a claim for the actual costs related to the distribution of excess proceeds and pursuant to the Revenue and Taxation Code, all other persons with an interest in the properties have one year in which to file a claim for excess proceeds from the sale. The former owner of a property can make a claim for any residual amount, after the Tax Collector has been paid its costs and all creditors with valid claims have been paid.
Twenty-three (23) parcels were sold at the auctions. The Tax Collector received proceeds in excess of the sums owed the Tax Collector on three (3) of the parcels sold and received claims for excess proceeds on all three. The requested action authorizes distribution of the excess proceeds funds according to statutory priority and the resolution.
FINANCIAL IMPACT:
The County received a portion of its delinquent taxes, penalties, interest, statutory administrative costs for twenty (20) parcels sold at the auctions and there were not any remaining sums or “excess proceeds” after said costs were paid.
The remaining three (3) parcels were sold for a total of $3,521,300, of which the County received $1,967,945.32 to cover all of its delinquent taxes, penalties, interest, and statutory administrative costs in the following amounts by parcel:
APN 0109-270-100: $1,742,679.79
APN 0141-010-090: $219,539.07
APN 0075-091-350: $5,726.46
Additionally, the Tax Collector made a claim for reimbursement of actual costs from the distribution of excess proceeds on the three (3) parcels listed above. The Tax Collector received all its requested costs, totaling $5,439.12. This is unanticipated revenue that will be recorded in its FY2024/25 budget.
The County would be entitled to claim the residual amount totaling $1,553,354.68 for the three (3) parcels, if claims were not made, or an invalid claim was made. [Rev. & Tax. Code, § 4674; First Corporation, Inc. v. County of Santa Clara (1983) 146 Cal.App.3d 841.] However, valid claims were made for all three parcels with proceeds in excess of the sums owed. Therefore, the County will not receive any excess proceeds from the sale of said properties. As a result, it is recommended the Board adopt a resolution accepting claims for the excess proceeds and authorizing distributions of the excess proceeds from the sales.
DISCUSSION:
Revenue and Taxation Code sections 3692 and 3692.2 authorize the Tax Collector to sell tax-defaulted property on the internet. The disposition of the proceeds from the sales is prescribed in sections 4671-4676. As part of this statutory distribution scheme, section 4675 concerns distribution of excess proceeds.
Section 4675 allows any party of interest in the property to file with the county a claim for excess proceeds at any time prior to the expiration of one year following the recordation of the tax collector’s deed to the purchaser. Upon the expiration of the one year, the excess proceeds may be distributed to claimants on order of the board of supervisors to the parties of interest in the order of priority set forth in the section. The statute further provides in pertinent part:
“… [P]arties of interest and their order of priority are:
a. First, lienholders of record prior to the recordation of the tax deed to the purchaser in order of their priority.
b. Second, any person with title of record to all or any portion of the property prior to the recordation of the tax deed to the purchaser.”
In determining priority, lienholder claimants have priority over title of record claimants. As between lienholders, the venerable common law principle of first in time, first in right governs priority, based on the recording date of the lien.
Finally, unless otherwise expressly provided under law, no statutory authority provides for the payment of interest on excess proceeds from the sale of tax-defaulted property. Accordingly, any person awarded excess proceeds is only entitled to receive interest calculated through the date of sale.
A total of twenty-three (23) parcels were sold at the auctions conducted on February 8-9, 2023, March 28-29, 2023, and on May 9-11, 2023. The Tax Collector received proceeds in excess of the sums owed the Tax Collector on three (3) of the parcels sold and received claims for excess proceeds on all three.
The parcels and claims are as follows:
1. APN 0109-270-100
The excess proceeds amount to $907,920.21. Several interested parties submitted individual claims for the excess proceeds on the parcel. Additionally, Peter J. Becker Jr. of Mesa Asset Management, attorney for Windemere Capital, submitted a claim on behalf of all interested parties. Mr. Becker submitted numerous documents in support of his claim, including but not limited to, the Trustee’s Deed Upon Sale recorded August 2, 2011; Quitclaim Deed; Loan Servicing Agreement and Power of Attorney for nearly every investor; and correspondence dated March 3, 2024, in which Mr. Becker represents that he will ensure all owners receive their share of the excess proceeds. Based on the foregoing, the excess proceeds are recommended to be distributed to Peter J. Becker Jr. and Mesa Asset Management, who will then distribute all owners of interest their share of the excess proceeds. After the Tax Collector recovers its administrative costs on the parcel in the amount of $2,996.39, Peter J. Becker Jr. is entitled to the residual amount of $904,923.82, to be distributed accordingly.
2. APN 0141-010-090
The excess proceeds amount to $570,760.93. Several interested parties submitted individual claims for the excess proceeds on the parcel. Additionally, Peter J. Becker Jr. of Mesa Asset Management, attorney for Windemere Capital submitted a claim on behalf of all interested parties. Mr. Becker submitted numerous documents in support of his claim, including but not limited to, the Trustee’s Deed Upon Sale recorded September 7, 2011; Quitclaim Deed; Loan Servicing Agreement and Power of Attorney for nearly every investor; and correspondence dated March 3, 2024, in which Mr. Becker represents that he will ensure all owners receive their share of the excess proceeds. Based on the foregoing, the excess proceeds are recommended to be distributed to Peter J. Becker Jr. and Mesa Asset Management, who will then distribute all owners of interest their share of the excess proceeds. After the Tax Collector recovers its administrative costs on the parcel in the amount of $1,820.67, Peter J. Becker Jr. is entitled to the residual amount of $568,940.26, to be distributed accordingly.
3. APN 0075-091-350
The excess proceeds amount to $74,673.54. The Tax Collector incurred $622.06 in administrative costs on the parcel. Global Discoveries submitted a timely claim for the residual amount on behalf of Rani Elder, based on a Quitclaim Deed, recorded April 8, 1997, which quitclaims the property to Daryl Hinton and a Court Order directing Mr. Hinton’s entire estate to be distributed to Rani Elder. The Tax Collector has a right to collect its administrative costs on the parcel in the amount of $622.06 and Rani Elder is entitled to the residual amount of $74,051.48.
ALTERNATIVES:
The Board could request further information on this matter.
OTHER AGENCY INVOLVEMENT:
The Tax Collector and the Auditor-Controller were actively involved in receiving the claims and assisting with the determination of distribution.
CAO RECOMMENDATION:
APPROVE DEPARTMENTAL RECOMMENDATION