Original Author: Hemsley, Sid
Date of Material: 03/01/2007
Liens on property
Tax collection--Delinquent taxes
Reviewed Date: 07/27/2021
MTAS was asked whether the city or county can refuse to accept tax payments or payments on delinquent property taxes, if liens it has against the property are not paid at the same time.
FROM: Sid Hemsley, Senior Law Consultant
DATE: March 1, 2007
RE: Collection of Liens Authorized by Tenn. Code Ann. §§ 13-21-101 et seq. And 6- 54-113.
1. Can a city or the county refuse to accept tax payments if liens it has against the property under Tenn. Code Ann. § 13-21-101 et seq., and 6-54-113, are not paid at the same time?
In my opinion, the answer is no. Tenn. Code Ann. § 13-21-103(6) says:
...The costs [the city’s costs arising under Tenn. Code Ann. § 13- 21-103] shall be collected by the municipal tax collector or county trustee at the same time and in the same manner as property taxes are collected. If the owner fails to pay the costs, they may be collected at the same time and in the same manner as delinquent property taxes are collected and shall be subject to the same penalty and interest as delinquent property taxes....
An identical provision is found in Tenn. Code Ann. § 6-54-113.
There is nothing in Tenn. Code Ann. §§ 13-21-103(6) and 6-54-113 that reflects an intent of the General Assembly that if a person comes in to pay his property taxes, the property tax collector can tell the person, “You must pay the lien for costs with your property taxes, or I will not accept the property taxes.” In fact, Tenn. Code Ann. § 67-5-1801(b) speaks about the right of the county trustee to refuse to accept current property taxes when delinquent property taxes are owed: “A trustee is authorized to adopt a policy of not accepting current county real property taxes due when delinquent real property taxes are owing....” Apparently the trustee is notrequired to adopt such a policy. Even if he were, nothing in that statute authorizes him to refuse to accept property taxes if costs under Tenn. Code Ann. §§ 13-21-101 et seq. and 6-54- 113 are not paid.
Tenn. Code Ann. §§ 67-1-701–702, 67-5-1801, and 67-5-2005, authorize municipalities to collect their own property taxes (if authorized by their charters). Nothing in those statutes addresses the mechanics of how property taxes, let alone costs arising from Tenn. Code Ann. §§ 13-21-101 and 6-54-113, are collected. Arguably, a municipality’s private act charter could require that costs owed under the Tenn. Code Ann. §§ 13-21-101 et seq. and 6-54-113 be paid at the same time as municipal property taxes are paid, and that property tax payment would not be accepted without payment of those costs.
However, it occurs to me that any such policy might hurt more than help some municipalities. A property owner might pay his property taxes but would refuse to pay the lien costs, in which case the city would get neither payment, perhaps for a long time, perhaps never.
2. Can the city and/or the county refuse payments on delinquent property taxes if the liens the city has against the property are not paid at the same time?
Counties collect delinquent taxes for themselves and for cities under Tenn. Code Ann. §§ 67-5-2005 et seq. Nowhere in that statutory scheme does it expressly say that county tax collectors can accept partial payments of delinquent taxes, but that is the strong implication of those statutes. In Salts v. Salts, 190 S.W.2d 188 (1945), the Tennessee Court of Appeals (certiorari denied by Tenn. Supreme Court, October 6, 1945), said:
....Partial payment of the tax does not release the lien or relieve the property for the balance of the tax due. After a partial payment and the failure to pay the balance it is the duty of proper officers to enforce collection of the balance in the same manner as if no partial payment had been made.... [At 189]
Tennessee Attorney General’s Opinion 86-130 also opines that there are no provisions in the law governing the collection of delinquent property taxes for the payments of partial payments, and that even the chancery court has no authority to authorize the payment of delinquent taxes in installments.
Tenn. Code Ann. § 13-21-103(6) provides that:
The amount of the cost of such repairs, alterations or improvements, or vacating and closing, or removal by demolition by the public officer [under the Slum Clearance Ordinance] shall be assessed against the owner of the property, and shall upon the filing of the notice with the office of the register of deeds of the county in which the property lies, be a lien on the property in favor of the municipality, second only to liens of the state, county and municipality for taxes, any lien of the municipality for special assessments, and any valid lien, right or interest in such property duly recorded or duly perfected by filing, prior to the filing of such notice. These costs shall be collected by the municipal tax collector or county trustee at the same time and in the same manner as property taxes are collected. If the owner fails to pay the costs they may be collected at the same time and in the same manner as delinquent property taxes are collected and shall be subject to the same penalty and interest as delinquent property taxes.... [Emphasis is mine.]
That statute creates a good argument that because delinquent property taxes must be paid in full to avoid the sale of the property, the same thing is true of costs arising under Tenn. Code Ann. §§ 13-21-103(6) and 6-54-113.
There is a conflict between the “shall” in the first sentence, and the “may” in the second sentence, of the two sentences emphasized above. In the first sentence, “These costs shall be collected...at the same time and in the same manner as property taxes are collected.” In the second sentence “If the owner fails to pay the costs they may be collected at the same time and in the same manner as delinquent property taxes are collected....” However, sometimes the word “may” in a statute is construed to mean “shall.” In Austin v. State, 796 S.W.2d 449 (Tenn. 1990), it is said that:
When construing statutory language, the fundamental rule is to follow legislative intent, which is reflected in the entire code section. Williams v. N.W. Ry. Co., 129 Tenn. 690, 688, 68 S.W. 160 (1914). The Williams Court held, “[T]he word ‘may’ will not be construed to mean ‘shall,’ where such a construction would tend to defeat the objects and purposes of the legislation, although
‘may’ will be construed to mean ‘shall,’ if such a construction is necessary to uphold and effectuate the purposes of the act. 129 Tenn. At 689, 168 S.W. 160.... [At 456.]
It appears to me that if “may” is interpreted to make it permissive in the second emphasized sentence, the purpose of the “shall” in the first emphasized sentence is totally defeated. If the costs arising under the Slum Clearance Ordinance “shall” be collected in the same manner as property taxes, but they only “may” be collected in the same way delinquentproperty taxes are collected, Tenn. Code Ann. § 13-21-103 is rendered meaningless, there being no way under Tenn. Code Ann. 67-5-2001 et seq. to compel property owners to pay such costs along with property taxes that are not delinquent.
Cites are authorized to collect their own delinquent property taxes under:
- The provisions of their charters for the collection of delinquent property taxes;
- Under Tenn. Code Ann. § 6-55-201 et seq.,
- By ordinance under Tenn. Code Ann. § 67-5-2005(d).
If a city collects its own delinquent taxes under the provisions of its charter, Tenn. Code Ann. § 13-21-103(6) appears to authorize the city’s tax collector to require the property owner to pay the costs arising under Tenn. Code Ann. §§ 13-21-103(6) and 6-54-113 at the same time. The city could even amend its charter to insert such a provision.
If a municipality collects its delinquent property taxes under Tenn. Code Ann. § 6-55-201 et seq., it likewise appears able to rely on Tenn. Code Ann. §§ 13-21-103(6) and 6-54-113 to require that property owners pay costs arising under those statutes at the same time they pay their delinquent property taxes.
A municipality collecting its delinquent property taxes by ordinance under Tenn. Code. Ann. § 67-5-2005(d) could, presumably put a provision in the ordinance requiring property owners to pay costs arising under Tenn. Code Ann. §§ 13-21-103(6) and 6-54-113 with their delinquent property taxes.
There is a serious problem with the lien for costs if the property in question is sold for delinquent taxes and for those costs, no matter whether the city or the county sells the property: While property tax liens are superior to all other liens, the liens for costs arising under Tenn. Code Ann. §§ 13-21-103(6) and 6-54-113, those statutes both say that the lien for costs is “second only to the liens of the state, county and municipality for taxes, any lien of the municipality for special assessments, and any valid lien, right or interest in such property duly recorded or dely perfected by filing, prior to the filing of such notice.” But the “second[ary]” status of those liens, then, is misleading; in reality, they are at the bottom of the list of prior liens.
3. What is the process for the city to collect as a debt the costs arising under Tenn. Code Ann. §§ 13-21-103(6) and 6-54-113, and any limitations involved?
Tenn. Code Ann. §§ 13-21-103(6) and 6-54-113 both provide that “ ... the municipality may collect the costs assessed against the owner though an action filed in any court of competent jurisdiction.” The city can join some or all of the property owners owing such costs in one suit.
Both sessions courts and circuit courts have jurisdiction over debt cases. The upper limit on the jurisdiction of sessions courts is $25,000; the jurisdiction of the circuit court is any debt over $50, presumably with no upper limits. As a practical matter, most debt actions are filed in courts of general sessions. Debt cases there are easy to file and present to the court, even by non-attorneys, and debt judgments are relatively easy and quick to obtain, assuming that the debtor can be quickly found. My “guesstimate” is that in such cases a judgment for debt can be obtained through the sessions courts in most jurisdictions in two months or less. However, frequentlythere are difficulties with serving the debtor with process. Needless to say, that problem is particularly difficult with respect to debtors who live outside the state, or even in other jurisdictions within the state
The problem with the collection of judgment of debt in a large number of cases, no matter where they are filed, is that they cannot be collected. Where the debtor can be found and served, technically a judgement against him can be satisfied through the seizure and sale of the property belonging to him, or through the garnishment of the debtor’s wages. Either remedy has serious limitations:
- The debtor is often “execution proof;” that is, at the time collection of the judgment for the debt is undertaken, the debtor has no property (or no property that can be found) for the court to seize in order to satisfy the debt. The sale of real property for debt is extremely difficult because such sales, as with property tax sales, probably requires notice to all the persons who have interest in the property.
- Even where there is such property, it is often already leveraged, the consequence of which is that the creditors whose liens are superior to the city’s liens are first in line to get paid. [Also see the analysis of question 2 in which is discussed the inferiority of the cost liens under Tenn. Code Anno. §§ 13-21-103(6) and 6-54-113 with respect to other liens.]
- Municipalities are not exempt from court costs; they are required to pay them on their court actions the same as is any other plaintiff. The same thing is true of cost bonds. The amount of costs in each case will vary with the “paperwork” involved in the case. The cost bond the plaintiff must file with the court when the debt suit is filed is presently $102.00 in Knox County Sessions Court, which is a rough indicator of what the total court costs will be in “ordinary” debt actions there.
A multitude of cases stand for the proposition that court costs must be authorized by statute, and that the General Assembly has broad power in that area. [See in particular Mooneys v. State, 10 Tenn. 578 (1831); Railroad v. Boswell, 58 S.W. 117 (Tenn. 1900); McHenderson v. Anderson County, 59 S.W. 1016 (Tenn. 1900); State ex rel. Vance v. Dixie Portland Cement Co., 267 S.W. 595 (Tenn. 1924); Person v. Fletcher, 582 S.W.2d 765 (Tenn. Ct. App. 1979).] It is said in Wilson v. Wilson, 134 Tenn. 697, 706, 185 S.W. 718 (Tenn. 1916), that:
The matter of costs is essentially statutory. 11 Cyc. 24; 7 R.C.L., P. 789; Mooneys v. State. 10 Tenn. (2 Yerg.) 578. There is no constitutional restriction on the power of the legislature, and that body may provide for the taxation of costs of litigation in such manner as it may deem proper. [Emphasis is mine.]
Presumably, the same rule applies to cost bonds.
Tenn. Code Ann. § 20-12-120, provides that, “No leading process shall issue from any court without security being given by the party at whose instance the action is brought, for the successful prosecution of the party’s action....” In City of Memphis v. Fisher, 68 Tenn. 189 (Tenn. 1877), the Court held that an 1875 private act exempting Memphis from a general law giving a bond for costs “in suits either at law or in equity in any of the State courts, without giving bond for costs, and also to prosecute appeals, writs of error, attachments, injunctions, etc., without giving security for costs” violated Article XI, Section 8, of the Tennessee Constitution. That provision then and now requires the General Assembly to act by general legislation.
That case does not point to the general statute governing costs bonds with which the private act conflicted. However, that general statute must have derived from Acts 1787, Ch. 19, § 1 , which appeared in Code 1858, section 3187, and subsequent editions of the code. That general statute provided that:
No leading process shall issue from any court without security by the party at whom instance the action is brought, for the successful prosecution of his action, and, in case of failure, for the payment of all costs and damages which may be awarded against him, unless in cases and instances specially excepted. [Code 1858, section 3187, Modified.]
That Act and statute precisely tracks present Tenn. Code Ann. § 20-12-120. For that reason, City of Memphis v. Fisher is apparently still good law (although it has not been cited in a single subsequent case), and supports the proposition that even cities must pay cost bonds in civil cases.