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Sorrell v. Estate of Carlton

Supreme Court of Texas

May 3, 2019

Michael Joe Sorrell and Sorrell Family, Ltd Partners, Petitioners,
Estate of Benjamin Hardy Carlton, III, Respondent

          Argued September 12, 2018

          On Petition for Review from the Court of Appeals for the Fourteenth District of Texas


          Nathan L. Hecht Chief Justice.

          Justice Busby did not participate in the decision.

         By statute, an owner may redeem real property purchased at a tax sale by paying certain amounts within a prescribed period of time after the purchaser's deed is recorded.[1] The issue here is whether an owner's tender of substantially all the required money before the deadline can comply with the statute. We hold that it can and that the trial court did not abuse its discretion in concluding that the owner's tender satisfied the statute here. We affirm the judgment of the court of appeals.[2]


         Benjamin Hardy Carlton, III owned a three-acre tract of land in Brazoria County. When Hardy fell sick and became unable to pay his bills, his mother-in-law, Darlene Barton, urged her daughter Karen to quit her job and care for him while Barton paid the couple's living expenses. Several taxing authorities obtained a judgment against Hardy in early 2011. He died not long afterward, and Karen was appointed administrator of his Estate. The Estate's only asset was the property, which was sold to enforce the judgment at a sheriff's sale in February 2012. Though the property was valued at $271, 000 on the tax rolls, Michael Joe Sorrell and Sorrell Family, Ltd Partners ("Sorrell") successfully bid $68, 000 for it. Sorrell recorded his deed on February 29.

         Section 34.21 of the Tax Code provides for the redemption of real property sold at a tax sale in various circumstances. In the Estate's situation, Subsection (e) requires the presale owner to pay "the amount the purchaser bid for the property, the amount of the deed recording fee, and the amount paid by the purchaser as taxes, penalties, interest, and costs on the property, plus a redemption premium of 25 percent of the aggregate total".[3] The statute provides that "the owner's right of redemption may be exercised not later than the 180th day following the date on which the purchaser's . . . deed is filed for record".[4] A redeemer can usually determine from public records the bid amount, recording fee, and taxes, interest, and penalties paid by the purchaser, but would have no way of knowing what other costs had been incurred without asking the purchaser. The redeemer has the right to request an itemization. There is no deadline for the request, but the purchaser has ten days after receipt to respond, by mail if he chooses.[5] The expenses must be reasonable.[6]

         The Estate's deadline to redeem the home was August 27, 2012. On July 31, the Estate's attorney wrote to Sorrell, giving "formal notice that [Karen] Carlton will be redeeming" the home. "As required by law", the attorney wrote, "my client will be tendering you the amount of money paid plus the 25% redemption funds. . . . I will be sending you a proposed redemption deed and the funds in the not so distant future and certainly before the deadline."

         But on August 10, Karen died tragically and unexpectedly. Though Barton was, as she testified, "pretty emotionally upset", she managed to be appointed successor Estate representative on August 21, six days before the statutory redemption deadline. That same day the Estate's attorney sent Sorrell a letter with a proposed redemption deed and two checks: one for $85, 000, representing Sorrell's $68, 000 bid plus 25%, and another for the $28 deed recording fee. The letter stated:

This money and the Deed are delivered to you in TRUST. Please do not negotiate the checks until such time as the Deed has been executed by all Parties and the Deed is on its way back to my Office. . . .
If you have any questions or any issues, please contact me immediate[ly]. The Redemption amount does include the 25% redemption fee over and above the amount paid for this tract of property at the Tax Sale.
As required by law my client is tendering you the amount of money paid plus the 25% redemption funds and your filing fees. If there are any more claimed expenses, please notify me immediately and such funds will be paid, upon review.

         Ten days later-four days after the deadline for redemption-Sorrell's attorney responded that Sorrell had "paid $70, 500.00 for the land[, ] . . . $8, 694.49 in taxes, and $682.00 in insurance", so that "[t]he proper redemption amount would have been at least $99, 845.61." The attorney returned the Estate's checks. In fact, Barton was correct that Sorrell had paid only $68, 000 (Sorrell mistakenly included $2, 500 it had paid for another tract). Sorrell had paid the taxes a few weeks earlier, and Barton could have determined the amount from the county tax assessor-collector by the time she notified Sorrell of her intention to redeem the property. Calculating the 25% premium on the total, the correct redemption amount was $96, 720.61-$11, 692.61 more than the Estate had paid. The Estate had timely paid as much of the redemption amount as Barton knew about- approximately 88% of the total due-and offered to pay the rest.

         The Estate sued Sorrell seeking a declaration of redemption.[7] After a bench trial, the court concluded that the Estate had "effectively exercised the right of redemption" by "ma[king] substantial compliance and tender[ing] full compensation within the redemption period." The court directed the Estate to deposit the redemption funds into the court registry to be paid to Sorrell, and the Estate complied.

         A divided court of appeals affirmed.[8] The majority reasoned that because courts have long held that "the applicable statutory provisions [must be construed] broadly in favor of redemption", substantial compliance is all the law requires.[9] "Substantial compliance", the majority continued, "is determined on a case by case basis, depending in part on the size of the amount paid timely, the size of the amount left unpaid by the [deadline], and the promptness of the late payment."[10] While the Estate's underpayment was not small or insignificant under the doctrine of de minimis non curat lex, the majority acknowledged, [11] the Estate had promised, within the redemption period, to pay any other amounts due.[12] Under the circumstances, the majority concluded, the evidence was sufficient to support the trial court's judgment.[13] The dissent argued that even if substantial compliance with Section 34.21 were sufficient, an issue the dissent would not have decided, there could be no substantial compliance absent an unconditional tender of the full redemption amount by the 180-day deadline.[14]

         We granted Sorrell's petition for review.[15]


         Sorrell argues that substantial compliance is not sufficient for redemption under Section 34.21, and even if it were, the Estate did not substantially comply with the statutory requirements.


         For decades, the lower courts have held that substantial compliance with statutory requirements is sufficient for redemption.[16] We have never decided the issue. We have held, just last Term, in BankDirect Capital Finance, LLC v. Plasma Fab, LLC, that substantial compliance is insufficient to comply with an Insurance Code provision requiring an insurance premium finance company to give ten days' notice before canceling a policy.[17] Sorrell argues that BankDirect, decided after the court of appeals' decision in the present case, is dispositive. We disagree.

         At issue in BankDirect was Section 651.161(b) of the Insurance Code, which states:

The insurance premium finance company must mail to the insured a written notice that the company will cancel the insurance contract because of the insured's default in payment unless the default is cured at or before the time stated in the notice. The stated time may not be earlier than the 10th day after the date the notice is mailed.[18]

         The notice BankDirect sent to its insured stated a cancellation date that was nine days after the notice was mailed.[19] On the 15th day after mailing, and after a fire had destroyed the insured's property, the insured tendered to BankDirect the overdue premiums to cure its default, but the policy was not reinstated.[20] In the litigation that followed, BankDirect argued that its cancellation notice substantially complied with Section 651.161(b).[21] We held that "absent statutory language to the contrary, a statutorily imposed time period does not allow for substantial compliance."[22]

         But that statute and Section 34.21 are very different. Section 651.161(b) is short, straightforward, and clearly focused on the deadline stated in the notice of default. Section 34.21 is exceedingly complex, and reading the provision as a whole, one cannot say that it is singularly focused on the redemption deadlines stated in it.[23]

         Subsection (a) applies to "real property sold at a tax sale to a purchaser other than a taxing unit" that is "the residence homestead of the owner", "designated for agricultural use", or "a mineral interest".[24] The owner may redeem the property within two years of the date that the purchaser's deed is filed by paying the bid amount; the deed recording fee; taxes, penalties, interest, and costs; plus a redemption premium that varies depending on when it is paid: "25 percent of the aggregate total if the property is redeemed during the first year of the redemption period or 50 percent . . . if the property is redeemed during the second year".[25]

         Subsection (b) applies to the same categories of property, but when the property is "bid off to a taxing unit . . . and has not been resold".[26] The owner still has two years from the date the deed is filed to redeem the property, but the redemption amount is calculated by different formulas ...

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