MILLINOCKET, Maine — J.P. Morgan-Chase Bank is suing the town and two home buyers for allegedly failing to follow proper procedures during the sale of a tax-acquired house two years ago.
The town’s attorney, Dean Beaupain, denied the allegation this week. He said Millinocket’s procedures were sound and that the town has filed a motion seeking to be dropped from the civil complaint, which is pending in Penobscot County Superior Court.
Filed by attorney John A. Turcotte of Portland on Aug. 10, the four-page complaint states that the town sold the property at 216 Bowdoin St. to co-defendants Wilfredo Rodriguez, who lives in Township 4 Indian Purchase, and Barbara A. Young of Boca Raton, Florida, via a municipal release deed on or about Sept. 19, 2013. The property previously was owned by James and Elise Stewart, according to the complaint.
Two months before the sale, according to the lawsuit, a Maine Superior Court judge had conveyed the property to J.P. Morgan-Chase after the Delaware-based bank acquired a mortgage owed by the Stewarts and foreclosed on it. According to the judgment of foreclosure dated Aug. 19, 2013, included in the lawsuit documents, the Stewarts had 90 days to pay what they owed or the bank would be entitled to sell the property.
The lawsuit alleges the town failed to notify J.P. Morgan-Chase of its intent to sell the property; therefore, the sale to Rodriguez and Young was invalid. A message sent to the bank’s attorney asking when J.P. Morgan-Chase first learned the town had claimed ownership of the property was not immediately returned Friday.
“As the town failed to comply with the Maine law, its tax foreclosure action was void, and it possessed no title to convey to Rodriguez and Young,” the lawsuit states. “Rodriguez and Young therefore possess no ownership rights in the property.”
The lawsuit asks the court to invalidate the sale to Rodriguez and Young, establish clear title to the property and seeks court costs and unspecified damages.
The town, Beaupain said, performed legally when it assumed ownership of the property and sold it to Rodriguez and Young for $6,200. The sale, he said, was valid, and the buyer, not the town, had the legal responsibility to determine whether the title was encumbered with liens such as the bank’s.
“In general, when a town sells a tax-acquired property, they sell it with a release deed. They make no representation or guarantee of title. It is incumbent on the person who buys the property to make sure that it has a clear title, not the town,” Beaupain said Wednesday.
The town notified the original mortgage holder of its pending actions several times before J.P. Morgan-Chase bought the loan, Beaupain said. Under state law, property owners have 18 months to pay overdue taxes or lose their property to a municipality once the municipality files a tax lien. A court document in the lawsuit states the town had filed three liens on the property, beginning in April 2011.
The town took possession of the property in fall 2013, Town Manager John Davis said.
Davis expressed regret that Rodriguez bought the home before discovering the J.P. Morgan-Chase lien. Rodriguez — Davis did not mention Young — apparently invested in the property substantially, he said.
Attorneys representing Rodriguez and the bank did not return several telephone messages seeking comment. Attempts to reach Rodriguez were unsuccessful, and Young declined to comment when contacted in Florida.
Millinocket has acquired and sold dozens of properties in recent years because of its struggling economy, raising the possibility that the current legal action may not be the last. The economy went into a nosedive when the town’s largest single employer, a paper mill, closed in 2008, taking about 175 jobs with it.
The town had assumed ownership of about 97 properties through the tax foreclosure process since 2012, according to numbers compiled in March. Millinocket had 4,466 residents and 2,155 homes in 2014, according to suburbanstats.org, which uses Census data to track residential and population trends in the U.S.
Beaupain estimated that, including acquisitions since March, the town has sold more than 100 tax-acquired properties. Sales began when Peggy Daigle, who was town manager at the time, made them a priority to help offset a cash-flow shortage that threatened the town’s credit rating in 2013.
The lawsuit is the first to contest any aspect of a town tax-acquired property sale, Beaupain said. The lawsuit and the town’s motion to be dismissed from the claim are pending. No hearing dates have been set.
The town filed 252 tax liens, mostly on residential properties, in July as part of efforts to collect more than $300,000 in overdue property taxes.
Town Council members discussed during their meeting on Thursday changes to the town’s tax-acquired property policy. The new stipulations include offering properties to abutting neighbors first, with an eye toward collecting overdue taxes and sewer bills. The neighbors, Davis said, will be sent a letter outlining procedures for properties they wish to buy.