The Town of Plymouth filed with this Court on January 11, 1980 a petition in each of the above-numbered cases to foreclose the taxpayer's equity of redemption relating to a parcel of real estate on Summer Street. The foreclosure is opposed by the present owner of the real estate, Arnold Bloom, Trustee of The Summer Realty Trust, who admits liability for the 1977 and 1978 real estate taxes but claims that the premises were exempt from taxation for the years 1979 and 1980 for the reasons which hereafter will appear.
The facts in each case are similar and except as noted hereafter are not in dispute. Prior owners of the real estate in both cases were Whitney G. Walsh and Marguerite M. Walsh who had mortgaged the premises to Meeting House Hill Cooperative Bank by mortgage dated January 18, 1973 and recorded with Plymouth Deeds, Book 3855, Page 508. Said bank foreclosed its mortgage by entry and exercise of its power of sale on August 11, 1978, and the respondent was the purchaser at the foreclosure sales. The properties, however, were subject to federal tax liens, notice of which had been recorded after the mortgage but prior to the foreclosure sales. The deed to the respondent recited that notice had been given to the Internal Revenue Service at the time and in the manner necessary effectively to remove the lien. In fact that proved not to be the case, and by letter dated December 1, 1978 the District Director informed the respondent that a determination had been made to exercise the right of redemption granted to the United States of America pursuant to the provisions of I.R.C. Section 7425(d)(1). A prolonged period of negotiations ensued between the respondent and the federal government at the end of which the respondent paid the United States $12,432.55, and the federal government released its right of redemption and also released the premises in question from the tax liens. The release is dated July 14, 1980 and was recorded on July 22, 1980 with said Deeds, Book 4853, Page 285.
However, when it exercised the right of redemption in 1977, the Internal Revenue Service did not record either in said Registry or at the Federal District Court a certificate of redemption.The Code provides that a certificate of redemption is to be filed by the United States in either the appropriate Registry of Deeds or in the United States District Court after the right of redemption is exercised. Such certificate "shall, when recorded, transfer to the United States all the rights, title, and interest in and to such property acquired by the person from whom the United States redeems such property by virtue of the sale of such property." 26 U.S.C. 7425(d)(3)(c). [Note 1] This subsection therefore would suggest that title to the property was never perfected in the United States, and it is for this reason that the respondent cannot prevail.
The respondent admits that he owes the 1977 and 1978 real estate taxes and will pay them, but he argues that the federal government was in possession of the property during the entire 1979 calendar year and on January 1, 1980, the assessment date, and that therefore the assessment to him of taxes for those two years was invalid. He rests his case on the doctrine of McCulloch v. Maryland, 4 Wheat. 316 (1819) which held that state governments were unable to tax the means employed by the federal government to execute its constitutional powers. This principle naturally is recognized by the General Court, and in General Laws c. 59 §5. First is found this exemption: "Property owned by the United States so far as the taxation of such property is constitutionally prohibited, excepting property which the Congress of the United States has permitted to be subject to local taxation." See Squantum Gardens, Inc. v. Assessors of Quincy, 335 Mass. 440 , 444-45 1957). These provisions do not control the present proceedings, however, since absent the recording of the certificate of redemption title did not pass to the United States. This Court can only speculate as to the reasons for the delay in recording the certificate of redemption which would have been notice to the world of a change in ownership. There may have been litigation between the government and the present respondent; obviously there were negotiations between the two. Ultimately, the respondent paid the Internal Revenue Service much less for the release than the face amounts of the liens. In any event until the recording of the certificate of redemption it would appear, and this seems to be a matter of first impression in this context in Massachusetts, the Plymouth assessors were correct in assessing the premises to the record owner, the present respondent, in accordance with the dictates of G. L. c. 59 §11. If they knew that the United States had exercised its right of redemption (and there is no evidence that they did), the assessors were free to assess the taxes to one whose interest was not of record but of whose ownership they had knowledge. See Boston v. Quincy Market Cold Storage and Warehouse, 312 Mass. 638 (1942). They were not required, however, to go beyond the records.
The decision reached in this case may seem harsh, for as the respondent points out, it was not within his control to require the Internal Revenue Service to record the certificate of redemption. However, it was within his control to file with the Plymouth assessors an application for abatement (or a petition for statutory exemption) to present the same arguments administratively which he has made here. Rather the respondent failed to exhaust his administrative remedies. It is not as though he were an uninformed taxpayer; the respondent is a member of the bar with broad real estate experience. As an attorney, he must have known that he had an obligation to follow the dictates of G. L. c. 59 §59 to secure an abatement or statutory exemption. While there is no direct evidence in the record as to the owner assessed on January 1, 1979 and 1980, the strong inference is that it was the respondent, the owner of record, and he does not contend otherwise.
The respondent has not argued that his plight falls within the doctrine of Norwood v. Norwood Civic Association, 340 Mass. 518 (1960) in which it was held that to avoid circuity of action a taxpayer might assert as a defense in a proceeding to foreclose an equity of redemption the facts which would support an action under G. L. c. 60 §98. It appears probable that such a tax must be wholly void to justify the taxpayer in avoiding the administrative route. Second Church in Dorchester v. Boston, 343 Mass. 477 (1962); Sears, Roebuck Co. v. Somerville, 363 Mass. 756 (1973); City of Boston v. Second Realty Corporation, Mass. App. Ct. (1980). [Note 2] If the United States had filed the certificate of redemption as mandated by 26 U.S.C. 7425(d)(3) and title had passed of record to it, then it may be that the respondent would have a good defense to the Town's petitions, but that is not our case. On the facts which appear in this record it was incumbent on the respondent to follow the administrative procedures, and he did not do so.
Accordingly, I find and rule that the respondent is entitled to redeem in Tax Lien Case No. 58605 upon the payment to the Town of Plymouth within forty-five days of the date of this decision taxes in the amount of $1,141.37 together with interest thereon, demand and costs, including said Court costs of $88.50. There is a like right to redeem in Tax Lien Case No. 58606 upon the payment to said Town of taxes in the amount of $8,359.12 together with interest thereon, demand and costs including Land Court costs of $88.50.
The taxes in dispute amount in Case No. 58605 for 1979 to $471.36 and for 1980 to $223.69. In Case No. 58606 they are $1,500.09 for 1979 and $882.32 for 1980. It would appear from the amounts found to be due the Town for 1980 that the second half of taxes for fiscal 1980, due May 1, 1981, are not included in the above figures; by now they may have been added to the tax title account, and in such event the above figures should be adjusted accordingly.
[Note 1] The subsection reads in full as follows:
(d) Redemption by United States.
(1) Right to redeem. In the case of a sale of real property to which subsection (b)applies to satisfy a lien prior to that of the United States, the Secretary may redeem such property within the period of 120 days from the date of such sale or the period allowable for redemption under local law, whichever is longer.
(2) Amount to be paid. In any case in which the United States redeems real property pursuant to paragraph (1), the amount to be paid for such property shall be the amount prescribed by subsection (d) of section 2410 of title 28 of the United States Code [28 USCS §2410(d)].
(3) Certificate of redemption.
(A) In General. In any case in which real property is redeemed by the United States pursuant to this subsection, the Secretary shall apply to the officer designated by local law, if any, for the documents necessary to evidence the fact of redemption and to record title to such property in the name of the United States. If no such officer is designated by local law or if such officer fails to issue such documents, the Secretary shall execute a certificate of redemption therefor.
(B) Filing. The Secretary shall, without delay, cause such documents or certificate to be duly recorded in the proper registry of deeds. If the State in which the real property redeemed by the United States is situated has not by law designated an office in which such certificate may be recorded, the Secretary shall file such certificate in the office of the clerk of the United States district court for the judicial district in which such property is situated.
(C) Effect. A certificate of redemption executed by the Secretary shall constitute prima facie evidence of the regularity of such redemption and shall, when recorded, transfer to the United States all the rights, title, and interest in and to such property acquired by the person from whom the United States redeems such property by virtue of the sale of such property.
[Note 2] Mass. App. Ct. Adv. Sh. (1980) 369.