[co-author: Brooke Ackerman*]
In Westconnaug Recovery Co., LLC v. U.S. Bank N.A, the Rhode Island Supreme Court has continued to rule against redemption and in favor of strict application of the Rhode Island's Tax Title Act. Specifically, an interested party must assert a statutory right to redemption under § 44-9-29 even if initially contesting the validity of tax title under § 44-9-31 in response to a foreclosure proceeding.
Westconnaug Recovery Co. (WRC) acquired property in a 2018 tax sale conducted by the City of Providence and filed a petition to foreclose all rights of redemption in a Superior Court filing after the statutory period of redemption expired. U.S. Bank filed a timely response to the petition to foreclose, challenging the validity of tax title on the grounds that the City did not provide proper notice of the tax sale. U.S. Bank also objected on the grounds that no outstanding taxes were owed on the property. U.S. Bank, however, did not include an offer to redeem in their answer to the petition. WRC filed a motion for entry of final decree arguing, in part, that U.S. Bank's failure to include an offer of redemption in their answer negated U.S. Bank's right to seek a court-ordered redemption. The Superior Court allowed U.S. Bank to amend its response to the petition to foreclose in order to include a redemption offer. The record of the tax sale refuted U.S. Bank's objection to the petition to foreclose. WRC filed a second Motion for Entry of Final Decree, which the Superior Court denied and instead entered a judgment setting the redemption amount with payment in full. The Superior Court also ordered WRC to execute and deliver the redemption deed to U.S. Bank within 14 days, WRC refused and was held in contempt for failure to honor the redemption. WRC appealed the redemption order, contempt order, and judgment.
The Rhode Island Supreme Court reversed the Superior Court's holdings based on a rigid application of the strict statutory framework governing tax sales. Despite U.S. Bank's timely response to the petition to foreclose, because U.S. Bank did not include a request for court-ordered redemption in the initial response, U.S. Bank had not complied with the statutory right of redemption. Moreover, the Supreme Court concluded that there was no good cause or reason to allow U.S. Bank to amend its timely filed answer to request redemption. Noting the truth of USB's argument, the majority acknowledged that Superior Court hearing justices have broad discretion to allow amended answers in tax title petitions, but that the clear and unforgiving language of court-approved redemption under § 44-9-29, which required an interested party "on or before the return day" to "offer to redeem upon terms as may be fixed by the court," trumped any discretion in this instance.
Hinshaw will continue to monitor developments in tax title lawsuits in Rhode Island and across the country.
*Brooke Ackerman contributed as an author of this post. Ackerman is a second-year law student at New England School of Law and worked as a summer associate for Hinshaw & Culbertson in the summer of 2023. She is not admitted to practice law.