Justices say state auditor billed nonprofit correctly

By Steve Korris | Mar 17, 2011



CHARLESTON – Owners of Woodlands Retirement Community in Huntington must pay $457,386.79 for a certificate showing they redeemed their properties for more than $6 million in taxes and interest, the Supreme Court of Appeals has decided.

Four Justices ruled March 10 that State Auditor Glen Gainer correctly billed nonprofit Foster Foundation at a 7.5 percent rate that state law imposes on redemption certificates.

The owners argued they needed no certificate because their properties remained in suspense with the Cabell County sheriff.

They claimed no one certified the property to Gainer, but Justice Robin Davis wrote that their construction of state law would produce absurd results.

"Property that has been suspended from sale, such as the Foundation's property herein, could never be redeemed because, according to the Foundation, the statute does not provide redemption guidelines therefore," she wrote. "Neither could a property owner redeem his or her property before the issuance of a tax deed because such a redemption is not contemplated by West Virginia Code."

Justice Menis Ketchum dissented, writing that the state reneged on an agreement not to force a sheriff's sale until a court determined whether to exempt the foundation from taxes.

"The foundation kept its promise," Ketchum wrote. "Evidently, the maxim that 'a deal is a deal' does not apply when you are dealing with the State of West Virginia."

State law exempted Foster Foundation from real estate taxes until 1998, when changes in the law caused the Cabell County assessor to assess tax on the property.

Instead of paying, the foundation executed an agreement with the sheriff, the assessor, and the state tax commissioner, suspending a sheriff's sale pending a court ruling on assessment.

In 2005, Circuit Judge David Pancake required the foundation to pay taxes.

The property landed on a list of sold, suspended or redeemed properties that the county clerk transmitted to Gainer.

In 2006, the foundation redeemed all its properties by paying Gainer $4,303,399.97 for eight years of taxes, $1,794,148.03 in interest, $942.50 in publication fees, and the certification fee.

The foundation filed for recovery of the interest and the fees at the Court of Claims, but the Court of Claims rejected the claim.

On appeal, the foundation dropped its plea for relief from the interest and the publication fees.

Davis disposed of the plea for relief from the certification fee.

"It goes without saying that if the foundation had paid its taxes or redeemed its property while it was held by the sheriff, no certification fees would have attached," she wrote. "Likewise, if the foundation earlier had redeemed its property from the Auditor, its certification fees would have been lower because the amount of delinquent taxes and accrued interest upon which such fees were based would have been less."

She wrote that Gainer properly carried out statutory duties and that the ultimate disposition of the property was achieved as contemplated by the statutes.

Ketchum disagreed that Gainer was required, or even entitled, to charge the fee.

He wrote that a pretrial agreement was meant to preclude the property from being conveyed to Auditor or from being part of a sheriff's sale.

"Our law does not allow the State Auditor to charge a certification fee unless the property was part of a sheriff's sale and the property was thereafter certified to the Auditor as having been 'sold or unsold' at the tax sale," he wrote. "Even if our law clearly provided that the certification fee was proper, I would bar the fee on the grounds of equity.

"It was clearly the intent of the parties that the foundation's property not be sold during the pendency of the suit and that the foundation, if unsuccessful, would pay the tax due, plus interest," he wrote.

Gainer's general counsel, Lisa Hopkins, represented him, along with assistant general counsel Danae DeMasi.

Ray Ratliff represented the Court of Claims for the West Virginia Senate, Mark McOwen represented it for the House of Delegates, and John Homburg represented it for the joint committee on government and financer.

Audy Perry, Daniel Konrad, and Charles Bellomy, all of Huddleston Bolen in Huntington, represented Foster Foundation.

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