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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:
It is recommended 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. 2018-25, on May 8, 9 and 10, 2018, 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.
Six (6) parcels were sold at the auction. The Tax Collector received proceeds in excess of the sums owed the Tax Collector on four (4) of the parcels sold and received claims for excess proceeds on all four (4) of the parcels. The requested action authorizes distribution of the excess proceeds funds according to statutory priority and the resolution.
FINANCIAL IMPACT:
The County received all of its taxes, penalties, interest and statutory administrative costs for five (5) of the six (6) properties sold at the auction, in the amount of $268,018.77. APN 0056-214-070 was $9,734.25 short of covering all taxes, penalties, interest and statutory administrative costs. Moreover, although the proceeds from the sale of APN 0052-031-330 were able to cover all delinquent taxes, penalties, interest and statutory administrative costs, there were no remaining sums or “excess proceeds” after said costs were paid.
The Tax Collector’s administrative costs total $1,974.24 in connection with the four parcels with excess proceeds after being sold at the May 8-10 Public Auction. Three (3) out of the four (4) defaulted properties resulted in complete reimbursement to the County. However, the excess proceeds resulting from the sale of APN 0090-170-040 total $185.72 while the Administrative Costs total $437.42. Therefore, the Tax Collector was only able to recoup $185.72 from the sale of APN 0090-170-040, which is $251.70 short of the requested reimbursement for Tax Collector administrative costs. Consequently, the net actual reimbursement to the County for the Tax Collector’s administrative costs totals $1,722.54 and is unanticipated revenue that will be recorded in its FY2019/20 budget.
DISCUSSION:
Revenue and Taxation Code (RTC) 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 RTC sections 4671-4676. As part of this statutory distribution scheme, section 4675 concerns distribution of excess proceeds.
Any party of interest in the property may 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 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.
The parcels and claims are as follows:
1. APN 0071-143-100
The excess proceeds amount to $79,994.51. Dong Yoo, with the City of Vallejo, Code Enforcement, submitted a timely claim totaling $15,468.00, based on five recorded liens. Jed Byerly Managing Member Global Discoveries Ltd. submitted a timely claim for the residual amount, on behalf of Kathleen Stevens. Ms. Stevens submitted a declaration assigning her right to the excess proceeds to Jed Byerly Managing Member Global Discoveries, Ltd. After the Tax Collector recovers its administrative costs on the parcel in the amount of $501.57, the City of Vallejo, Code Enforcement will receive $15,468.00 and Jed Byerly Managing Member Global Discoveries Ltd., is entitled to the residual in the amount of $64,024.94.
2. APN 0074-133-040
The excess proceeds amount to $36,611.17. Chanyce Wilson filed a timely claim for the residual amount. However, subsequent to submitting this claim, a claim was filed by Jed Byerly Managing Member Global Discoveries Ltd., on behalf of Chanyce Wilson. This claim was accompanied with all required paper work, including a declaration signed by Ms. Wilson assigning her right to the excess proceeds to Global Discoveries, Ltd. Consequently, the claim for residual proceeds was appropriately assigned and thus the residual funds shall be distributed to Jed Byerly Managing Member Global Discoveries Ltd. After the Tax Collector recovers its administrative costs on the parcel in the amount of $373.21, Jed Byerly Managing Member Global Discoveries Ltd., is entitled to the residual in the amount of $36,237.96 on behalf of Chanyce Wilson.
3. APN 0090-170-040
The excess proceeds amount to $185.72. The Tax Collector incurred $437.42 in administrative costs on the parcel. However, there are not enough excess proceeds to pay the Tax Collector in full. Instead, the Tax Collector will receive the entire excess proceeds amount totaling $185.72. Virginia Ferrari filed a timely claim for excess proceeds. It is not clear whether the claim is filed as a lienholder’s claim or residual claim, as it does not have the required paperwork to support either claim. Regardless, as explained above, after the Tax Collector recovers $185.72, a portion of its costs, there are no residual funds to distribute.
4. APN 0182-272-090
The excess proceeds amount to $33,089.83. The Tax Collector incurred $662.04 in administrative costs on the parcel. The Summit at Hiddenbrooke Owners Association submitted a timely claim totaling $2,637.48 based on a recorded lien. Additionally, there were a total of six (6) valid claims for the residual amount supported by a deed of trust dividing title as follows: (1) Fred Barry Cohen as to an undivided 8.403% interest; (2) Russell & Kathy Woods as to an undivided 8.403% interest; (3) Jeff & Susan Choquette, Trustees of the Choquette Living Trust as to an undivided 12.605% interest; (4) Danny O’Looney as to an undivided 13.025% interest; (5) James and Diana Buttler as to an undivided 15.126% interest; and (6) Leonard Werbin & Nancy Bennett Werbin as to an undivided 42.438% interest. On November 27, 2018, Kelly A. Mills of Cochran Investment Company, Inc. submitted a claim form which included an assignment of rights by Jeff & Susan Choquette, Trustees of the Choquette Living Trust. This assignment met all the statutory requirements necessary for assigning said rights. Then, on April 8, 2019 Susan Choquette submitted an additional claim with a cover letter to the Solano County Treasurer-Tax Collector, expressing her desire to have the Cochran claim denied and to “follow through with Capital Finance”. However, this assignment has no legal effect as it fails to satisfy several of the factors required for an assignment. Consequently, the residual excess proceeds totaling $29,790.31, shall be disbursed as follows:
Fred Barry Cohen $2,503.28
Russell & Kathy Woods $2,503.28
Cochran Investment Company on behalf of Jeff & Susan Choquette $3,755.07
Danny O’Looney $3,880.19
James & Diana Buttler $4,506.08
Leonard Werbin & Nancy Bennett Werbin $12,642.41
Claimants have been notified of the determinations and the date, time and location of this hearing.
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