Court: Trust paid too little

The Jackson County Land Trust could find itself in the odd position of having to pay more for some properties that practically nobody else wants, following a court decision on Tuesday.

The Missouri Court of Appeals Western District upheld a circuit court judge’s ruling that the land trust paid too little for a house in central Kansas City that had failed to sell at a foreclosure sale.

The decision appears to be first that holds land trusts — statutorily created buyers of last resort for first class counties and the city of St. Louis — to the same standards as private purchasers. Previous cases have struck down sales in which the private buyers paid less than 10 percent of the value of the property.

The appeals court didn’t specifically set a 10 percent guideline, but it affirmed that state law “gave the circuit court the authority to do what it did.”

The ruling, Judge James Welsh wrote, “merely means that the consideration is inadequate, that the circuit court disapproves the sale, and that the process for the foreclosure sale starts anew.” Judges Gary Witt and Alok Ahuja concurred.

According to court documents, the county sought foreclosure of the house at 4520 Wabash Ave. in 2007, after its owner failed to pay taxes for two years. The sale was to take place in August 2008, but its owner, Robert J. Fikes, paid $240 of the back taxes in an effort to redeem the property.

After he stopped paying, the county again sought a foreclosure sale in 2009. But no one bid on the house, so it went to the land trust.

The land trust bought the property for $1,870.61, which was the amount of the delinquent tax judgment, interest, costs and publication fees. (In reality, no money changes hands; the county simply writes off the tax loss.)

Fikes, represented by James Jenkins, a lawyer at Legal Aid of Western Missouri’s foreclosure prevention unit, challenged the sale in court. The circuit court ruled last year that the amount paid by the land trust was “so grossly inadequate as to amount in itself to conclusive and decisive evidence of fraud.” Fikes said his property was worth about $20,000.

The house is in a neighborhood dotted with vacant lots, where boarded up houses sit side-by-side with neatly kept homes. The house at 4520 Wabash was dilapidated and trash-strewn but apparently habitable. A sign on the mailbox identified its occupant as “R Fikes.” No one answered the door on Tuesday.

According to his brief, Fikes is disabled and fell behind on paying the taxes after his girlfriend’s death from cancer and his son’s heart transplant.

“The County confiscated a disabled man’s home for a small sum in back taxes and sold it for 9% of what it was worth,” his lawyer wrote in a brief.

In court briefs, Abbe M. Feitelberg, of the Jackson County Counselor’s Office, said Fikes’ hardships, “while not unmoving, have no bearing on this matter.” She also argued that the value of the property was “wholly irrelevant,” as state statute doesn’t give land trusts any authority to bid more than what is owed in taxes and costs. The land trust didn’t offer its own valuation of the land.

Allowing the court to overturn the sale, Feitelberg wrote, “would result in disaffirming every sale to Land Trust where a property owner, even one who by his own admission is incapable of paying the taxes due and owing, retains their property, leaving the taxes still unpaid and giving no effect to the existence of Land Trust.”

Feitelberg did not return a call seeking comment. Michael B. Hunter, an attorney for the land trust, also could not be reached for comment.

(In a quirk of Jackson County politics, the judge who threw out the tax sale, Stephen Nixon, subsequently became the county’s head lawyer, putting his office in the position of arguing against his own ruling.)

In an interview, Jenkins downplayed the impact of the decision. He said most tax sales are uncontested and involve properties that are unoccupied.

“This land trust collection law has been in effect since 1943 and it’s been largely unchanged since that time, and this has never come up before,” he said. “This is not something where we’re going to have people squatting in houses and not paying taxes.”

Nonetheless, the case in not unique. Jenkins said he has another case pending with similar facts based on the 2010 tax sale. He speculated that, in the current housing market, even some extremely cheap properties aren’t attractive to private buyers.

Jenkins also noted that, if Fikes continues not to pay the taxes, the amount owed will eventually exceed 10 percent of the value, which would presumably convince a judge to confirm the sale.

The case is In the Matter of Foreclosure of Liens for Delinquent Land Taxes by Action in REM: Manager of Revenue of Jackson County v. Robert J. Fikes, WD73011.