WASHINGTON (CN) - A federal judge refused to dismissed claims filed by a veteran suffering from dementia who lost his house because a third party swooped in and turned his $133 tax bill into a $5,000 tab that included the company's attorney's fees and court costs.
Benjamin Coleman, through his conservator Robert Bunn, sued the District of Columbia over a section of tax law that allows the city to take the entire equity of his former home over a relatively small tax bill.
"Mr. Coleman claims that such a practice is forbidden by the takings clause of the Fifth Amendment to the United States Constitution," states U.S. District Judge Emmet Sullivan. "Accordingly, he filed suit seeking an award of 'just compensation,' as well as a declaration from this Court that the District's statute is unconstitutional."
The 48-page ruling maps out the controversial layers of a Washington tax sale, a process in which tax liens filed by the city are bought by third parties that then bill the homeowners hefty fees for court costs and attorneys - exponentially growing a homeowner's debt while shrinking their ability to retain their house.
"Once the lien is sold to the third party, a six-month waiting period begins, during which the homeowner may redeem his home by paying the taxes, along with any penalties, costs, and interest that are owed," according to the ruling. "If the entire bill is not paid upon expiration of the waiting period, the tax-lien purchaser may initiate proceedings in the Superior Court of the District of Columbia to foreclose. The Superior Court is empowered to enter a judgment vesting a fee simple title in the property in the tax-lien purchaser."
The ruling adds: "In this way, a small sum paid to purchase the lien becomes full title to a property worth hundreds of thousands of dollars (in this case, approximately $200,000). The key detail in this case is that D.C. law provides that any surplus equity the homeowner has in his home is irrevocably lost, no matter house small the tax bill nor how valuable the equity."
Through his conservator, Coleman says he suffers from dementia and owed $133.88 in back taxes. Once the third party bought his lien and billed him $5,000 in costs and fees, the city allowed the entirety of his home equity to be taken by foreclosure.
Ruling that the District never addressed Coleman's takings argument under the Fifth Amendment and instead largely relied on jurisdictional claims, the judge denied the city's motion to dismiss. "Accordingly, the Court must assume that Mr. Coleman established the existence of an independent property interest in the equity in his home, as well as the remaining elements of a Fifth Amendment Takings Clause claim," the judge ruled.
Subscribe to Closing Arguments
Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.