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Navigating Alabama Tax Sale Redemptions: Proving Entitlement to Mesne Profits
Thursday, December 14, 2023

In a recent opinion by the Alabama Supreme Court in Smith v. Cameron (SC-2023-0495)(1), the court issued an opinion affirming a trial court’s refusal to award mesne profits to a tax deed holder following the trial court’s order voiding the tax sale. Because mesne profits may be a big driver of redemption value, the Supreme Court’s opinion may have important implications for future tax sale redemptions.

Background: The Tax Sale and Legal Proceedings

Jeremy Smith paid $179.10 to acquire a tax certificate in May 2019 for Devilin Cameron and Andrea Graham's property in Talladega County following their failure to pay property taxes. Seven months later, Smith sued to eject Cameron and Graham, asserting his right to immediate possession.

Cameron and Graham responded by filing a motion, asking the court to determine the necessary amount to redeem the property under Ala. Code § 40-10-83. Smith concurrently sold his interest in the property by executing a quitclaim deed to Bryan Green. This transaction prompted Cameron and Graham to move for a restraining order, informing the court of the transaction.

The Trial Court's Ruling: Redemption and Costs

The trial court conducted a hearing, gathering evidence from both parties on the redemption issue. On November 22, 2022, the court delivered a judgment. It declared the sale to Green to be void and granted Cameron and Graham the right to redeem the property by paying Smith a total of $676.64. The court arrived at this figure by following guidelines outlined in the redemption statute Ala. Code § 40-10-83. This sum included the tax sale purchase price, property taxes paid by Smith for 2019–21, accrued interest, and a fee to the Talladega Probate Court. Importantly, the Court’s order did not include any award of mesne profits.

Smith's Appeal: Mesne Profits and Quitclaim Deed Challenge

On appeal, Smith made two main arguments:

  1. He contested the trial court's decision not to award him mesne profits on his ejectment claim; and
  2. He challenged the part of the judgment invalidating the quitclaim deed.

Smith argued that he was entitled to mesne profits stemming from May 2019 to November 2022, despite the court’s rulings on redemption and ejectment. Smith argued that Ala. Code § 6-6-280 entitled him to the receipt of mesne profits. The Court, however, found Smith's evidence to be lacking credibility. The Court noted that Smith had never been to the property or visited the neighborhood in which it was located. He conceded that his estimation of the fair rental value was considered speculative, primarily relying on assumptions rather than concrete facts. Evidence showed that the property had been previously condemned as a public nuisance. Furthermore, Cameron and Graham testified that they did not live on the property and stated that it was primarily used for storage. The court held that by all accounts, the property appeared to be uninhabitable and noted that this undercut Smith’s assertions that he could have obtained rent payments during the months he had a right to the property.

Smith's second argument questioned the trial court's decision to invalidate the quitclaim deed. However, since he failed to cite any legal authority whatsoever to support his claim, the court affirmed the judgment on this issue.

Understanding the Verdict

Because the Court affirmed the trial court's decision, Smith could not collect mesne profits, which would have been a large part of the redemption value for the property. This ruling was based on Smith’s failure to substantiate his claim for mesne profits, and the shortcomings of his challenge to the quitclaim deed. For investors, this opinion highlights the importance of presenting credible evidence to substantiate the property’s rental value and entitlement to mesne profits. Rather than relying on speculation, relevant evidence about the property’s habitability, neighborhood, and rental value is key to substantiating a claim for mesne profits. Investors may even consider presenting expert opinion testimony on those amounts in order to recover mesne profits in ejectment actions.

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