Leveraged Land v. Hodges (4/7/11)

This may be a specialized case but some of our readers have probably played the tax lien game. And, judging by our hits, many of them expected us to blog Young v. Beck and so, for those who tuned in for that and were disappointed, we offer this special bonus blog, free of charge.

Leveraged tried to foreclose a tax lien on Hodges’ property. It took default judgment but Hodges, after a lot of litigation, set it aside and redeemed.  Leveraged then sued Hodges again, alleging some sort of impropriety in the redemption; the court granted Hodges summary judgment, which was affirmed on appeal.

But at some point Hodges sought to quiet title in Cain, his successor in interest. The trial court granted that but ordered him to pay Leveraged some attorney’s fees under the statute (42-18206)  that requires those who redeem out from under a foreclosure suit to pay the forecloser’s costs and reasonable fees.  Leveraged wanted $153,000. The court awarded only $1500, without explaining why.

It probably bought Hodges’ argument that Leveraged was entitled only to fees for taking the default judgment, not for fees to oppose redemption. Leveraged argued that it was entitled to all fees.

The Court of Appeals held that Leveraged could get fees for opposing redemption until it became obvious that Hodges had a right to redeem. Beyond that point its claim – even if not technically frivolous – was no longer “reasonable and meritorious” and so it was no longer entitled to fees. In other words, a reasonable amount charged in aid of a non-frivolous claim can be an “unreasonable” fee beyond the point at which a court decides, after the fact, that the party should have foreseen the outcome. A dissent correctly reacted politely but strongly against that, apparently (it isn’t entirely clear) concluding that fees aren’t allowed after the filing of a certificate of intent to redeem.

The Supreme Court finds yet another way, holding that the statute allows only those fees incurred before the Treasurer issues the Certificate of Redemption. This avoids the Court of Appeals’ problematic formulation without encouraging redemption battles by making the redeemer pay for them.

The court seems mostly concerned, though, to deny that the statute allows fees to a “loser.” It tells us that trying to foreclose isn’t legally incorrect and in the event of redemption the statute requires reimbursement of costs and fees, so nothing is “‘lost’ [except] the opportunity to own the property.” But that opportunity is what the litigants are fighting about, that’s why the litigation exists. This sort of strained legalism is unfortunate.

And the court goes further, finding no “sound policy reason to award fees for a losing argument” and then suggesting that construing a statute to allow that is “absurd.” But that has been allowed in certain situations under probate statutes. Does the court mean to disapprove of those or is it simply oblivious of them? And what about the law that says that if you win the case I have to pay you for having made and lost a hopeless motion for summary judgment?

The court remands for an award of fees consistent with its opinion. But near the end it says “We expressly decline to adopt either party’s position that any fees incurred after Hodges manifested his intent to redeem by filing an affidavit [of intent to redeem] were presumptively reasonable or unreasonable.” What does that mean? That the trial court can find such fees presumptively reasonable or unreasonable? But that would be inconsistent with the holding. Perhaps the court simply wants to avoid stepping on the trial court’s toes in deciding fees, in which case it should have left out the word “presumptively” – or, better yet, the whole sentence.


(link to opinion)