In an opinion released on August 21 in Massenberg v. Clarendon County Treasurer (Op. No. 28234), the South Carolina Supreme Court invalidated the tax sale of real property in Clarendon County based on the delinquent taxpayer’s argument that the notice posted on his property as a part of the pre-sale notice process was not posted in a “conspicuous place.” The posting issue is likely to be raised in other cases and could impact investors’ tax-lien portfolios in the future.[1]

Background

The dispute arose from a 2017 tax sale of the delinquent taxpayer’s 2.54-acre undeveloped property in rural Clarendon County. Because mailed notice of the 2017 tax sale had been returned undeliverable, the Tax Collector hired a third-party company to post notice of the tax sale on the delinquent taxpayer’s property under S.C. Code Ann. § 12-51-40(c). The Tax Collector gave the company no guidance on how or where to post notice on the property, even failing to ask that it be posted “at one or more conspicuous places on the premises” as required by state law.

As shown on this map entered as an exhibit at the non-jury trial, the company posted the notice on a tree located on the property. That tree fronted an infrequently traveled dirt road located on the property’s northeastern boundary. Whether that that tree, or the notice posted on it, could be seen from the dirt road was questionable. The posting company provided no information for why the location was chosen, or why the company had not posted the notice on the portion of the property fronting the two-laned paved road to the western side of the property.

The delinquent taxpayer’s uncle testified at trial that he lived near the property and the dirt road where the property was posted had fewer than ten cars on it per day. He also testified that although he used the dirt road at least three times per day, he did not see the posted notice.

Despite the posting and other notices sent to the delinquent taxpayer, the taxes remained unpaid, and the property was sold to the highest bidder. After the tax deed was issued, the delinquent taxpayer sued to set aside the tax sale. The Master in Equity rejected his challenge, and the Court of Appeals affirmed in an unpublished opinion in 2022.

The Court’s Ruling

The Supreme Court reversed the Court of Appeals, invalidating the tax sale. The Court held that while the question of whether a notice is conspicuous is “context dependent,” the record confirmed that the notice in this case failed to comply with state law:

“Here, the Notice of Levy—a single printer sized sheet of paper—was posted to a tree facing the significantly less-traveled dirt road. The tree is indistinguishable from the surrounding woods, the sides of the dirt road were crowded by unmaintained foliage and shrubbery that restricted a passerby's ability to see the posting at an angle, and nothing was done to draw attention to the area where the notice was posted—or to the notice itself.”

The Court explained, however, that while there may “be more than one conspicuous place on a parcel of property, and among those places some will be more conspicuous than others,” the tax collector need not post the notice in “the most conspicuous place”—the law requires the posting merely be in a place that was “conspicuous.” The Court explained that the decision of where to post is a “judgment call,” but that the tax collector in this case exercised no judgment about the posting at all. This fact was “critical” to the Court’s reasoning. The Court emphasized that tax collector gave the posting company no advance directives and then failed to review the posting after it was done to ensure compliance with Section 12-51-40(c). Thus, the Court invalidated the tax sale.

The Concurring Opinion

While the result was unanimous, the Chief Justice and Justice James wrote a concurring opinion to express their disagreement with two parts of the opinion. First, they disagreed that Section 12-51-40(c) required the company posting notice to take a comparative approach when selecting the location of the posting. That is, the concurring opinion took issue with the majority opinion’s suggestion that the posting company must have compared potential posting locations on the property to identify a conspicuous location as it relates to each property. Second, they disagreed that the statute requires the tax collector to exercise any judgment but agreed that the notice was not placed in a conspicuous place. 

Thus, this concurring opinion may leave for another day whether the exercise of discretion by the tax collector in where to post notice or the comparison of potential posting locations may insulate a tax sale from collateral challenge.

Impact on Your Tax-Lien Portfolio

The Court’s opinion highlights an important risks tax sale bidders must factor into their bids at tax sales and that property owners facing the forced sale of their property must consider. 

Under state law, tax collectors must strictly comply with the statutory tax-sale notice requirements where those requirements are intended to protect the delinquent taxpayer. Yet the tax-sale bidder has no control over the process used by the tax collector in providing the required statutory notices. As this challenge to the tax sale shows, there are a variety of ways a delinquent taxpayer may challenge the way notice was mailed, posted, or published as a means of attacking the validity of the tax sale. In almost all occasions, the tax collector’s actions (or inactions) are outside of the tax-sale bidder’s control. Because the posting occurs before the tax sale, there would nothing the tax-sale bidder could have done to correct the deficient posting. For that reason, tax-sale bidders must account for this risk when bidding on properties at tax sale, and properly analyze this risk when litigation challenging the tax sale is filed. 

[1] See our related client alert about an unrelated unpublished opinion from the Court of Appeals discussing the conspicuous posting requirement as it related to a Lexington County Tax Sale here.