Disabled New Bedford retiree's lawsuit over home taken for taxes settled for $85,000

NEW BEDFORD — An $85,000 settlement was reached in the case of a 67-year-old disabled New Bedford retiree who lost her home and more than $200,000 in equity over a less than $10,000 property tax debt.

The lawsuit was initially filed in Bristol County Superior Court in March and was moved to U.S. District Court in May due to federal constitutional arguments.

Deborah Foss was represented by the libertarian Pacific Legal Foundation, a national non-profit “that defends Americans’ liberties when threatened by government overreach and abuse,” according to its website.

The lawsuit named Tallage Davis LLC and the city of New Bedford as defendants and sought damages, restitution, and attorneys’ fees. Tallage Davis is a real estate investment company headquartered in Boston.

According to the Pacific Legal Foundation, Tallage offered a $65,000 settlement initially that would have prohibited Foss from commenting on the case, publicly or privately.

But she rejected the deal. According to the PLF, Tallage had argued that she had accepted the provision and agreed to the $65,000 settlement, but the court wouldn't enforce that settlement agreement.

The $85,000 settlement doesn't include the prohibition against comment, according to the PLF.

Tallage disputes that account. According to Tallage attorney Daniel Hill, PLF’s attorneys agreed to “hash out” the details of a confidentiality provision on June 10, but a week later told Tallage’s attorneys that Foss decided that $65,000 was not enough money.

The city of New Bedford is not responsible for any payment to the plaintiff.

According to a press release released by the city Thursday, Sept. 1,  "The court made its Aug. 12 dismissal 'with prejudice,' meaning the ruling is final and the plaintiff cannot re-file the case against the city in the future."

According to the lawsuit, Foss bought the property at 17-19 Valentine St. in 2015.

Foss was living on a fixed income of less than $1,000 per month and formerly worked in a coffee company’s shipping and receiving department, according to the lawsuit. She suffers from chronic lymphocytic leukemia, COPD, and neuropathy, according to the PLF.

She spent her life savings and an inheritance from her mother in 2015 to buy the property for $168,500, where she lived with her wife and twin sister, according to the lawsuit.

Foss was unable to pay her property taxes in 2016 due to medical and financial problems, and the city initiated a tax taking for $3,748 in December 2016.

On June 4, 2018, the city assigned tax title, a type of lien, to Tallage for an amount that had grown to $9,626.19, including $1,361.76 in accrued interest, according to the lawsuit.

By in effect selling the lien, the city gave Tallage Davis the authority under the state tax statute to collect 16% interest on the debt and foreclose on the property, according to the lawsuit.

It also gave Tallage the authority to confiscate all equity in the property if Foss failed to pay the tax debt prior to the foreclosure of the right of redemption.

Nine days after purchasing the lien, Tallage filed a complaint in Land Court against Foss to foreclose, according to the lawsuit.

Nine months later the Land Court mailed a notice of the foreclosure proceeding via certified mail to the address, which Foss didn’t receive, according to the lawsuit. The certified mail was returned as unclaimed.

She was served with a notice by a deputy sheriff two months later in May 2019. Within a month, Foss responded to the Land Court on her own, “asking the court to give her an opportunity to save her property and her life savings in her home,” according to the lawsuit.

She asked the court to establish a payment plan and give her six to 12 months to sell her home, pay her debt, and save her equity. She told the court she couldn’t pay the debt without selling her property.

Tallage motioned to strike the response because she wasn’t an attorney authorized to practice law, according to the lawsuit. The Land Court granted the motion in July 2019, and informed Foss she would have to hire an attorney.

She didn’t have the money to hire an attorney, and wasn’t able to obtain one through legal aid, according to the lawsuit. Foss also didn’t know her rights or whether she could sell the property without the court’s permission. Foss was informed in the notice of foreclosure she needed to pay $24,394.81 to Tallage Davis to keep her home. That total included taxes and interest levied after Tallage had purchased the lien, according to the lawsuit.

The lawsuit maintains that Foss should only have been required to pay the $9,626.19 she had owed the city, interest on that amount, and attorney’s fees.

The Land Court entered a default judgment in September 2019, granting absolute title to Tallage Davis. The property, which was assessed at $241,600 in 2022, was taken by Tallage Davis for an amount that had grown to approximately $30,000, including interest and attorney’s fees.

According to the lawsuit, Tallage didn’t inform Foss of the foreclosure until more than a year after the judgment, “depriving her of a reasonable opportunity to seek equitable relief in the Land Court …”

Tallage started eviction proceedings in March 2021, and she was forced to leave in February, “making her homeless in the middle of Massachusetts winter,” said PLF attorney Joshua Polk during a March 29 press conference.

Tallage then sold the property for $242,000, pocketing $232,373.81 more than it paid for the lien.

Foss was forced to live in her car following the eviction, according to the lawsuit.

Hill stated that the characterization by the Pacific Legal Foundation, "a California-based political organization," of the "facts leading up to the settlement are grossly misleading, and in some cases, plain wrong."

He stated in a release, "Ms. Foss was not 'thrown out of her home.' Rather, she agreed to vacate the property, which had already been foreclosed on over a year prior, in a stipulation filed in Housing Court in exchange for a monetary payment."

He added, "Unpaid taxes from 2017-2021 exceeded $26,000. Ms. Foss never attempted to pay off this debt, despite numerous collection attempts made by the City and Tallage, and the opportunities provided by the Land Court. The amount of 'equity' that was left in the property after foreclosure is nowhere near what PLF would imply. PLF does not account for all of the subsequent taxes, interest and costs incurred by Tallage in the Land Court case and the subsequent environmental clean-up (for which Ms. Foss would have been legally obligated)."

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According to Hill, before Foss moved out, a fire department inspection of the house revealed a serious oil spill in the basement, which Tallage paid $80,000 to remediate.

Hill stated, "Municipalities across the Commonwealth rely on property owners to pay their taxes in order to fund our schools and other municipal services like fire and police protection. In 2017, New Bedford recorded a 'tax taking' against the Valentine Street property. The tax lien was originally for unpaid taxes in 2016, but taxes for every subsequent year went unpaid as well. The owner of this property was Deborah Foss, who held the property in a real estate trust. From the date she bought the property in 2015, Ms. Foss had not paid a single real estate tax bill."

The settlement release issued Thursday by the city states, "The litigation stemmed from tax lien sales, in which a city sells the right to collect tax liens to a third party. Under Massachusetts law, many cities use tax lien sales as an alternate means to collect delinquent taxes and steward public funds without having to employ internal legal staff devoted to pursuing tax liens in Land Court. 

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"In 2015, delinquent property taxes owed to the city totaled more than $22.6 million, an amount equal to nearly 6 percent of the city’s budget. To help alleviate that burden, the city, in accordance with Mass. General Laws chapter 60, section 52, initiated a bulk tax lien sale. The winning bidder was Tallage LLC, now known as Tallage Davis.

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"The city’s delinquent tax burden had been cut in half, to $11.3 million, following the last tax lien sale, in May 2019.

"Over the past decade, the city has taken significant additional steps to address delinquent taxes, including amending its tax repayment ordinance in 2012. The amended ordinance has enabled delinquent taxpayers to enter into repayment agreements of up to five years and receive 50-percent interest forgiveness, after paying 25 percent of the outstanding balance as an initial deposit and while continuing to make current-year payments.

"The city’s Office of the Treasurer-Collector continues to make the collection of delinquent taxes a priority and encourages taxpayers to enter repayment agreements. As always, the city’s preference is to service delinquent taxpayers by offering repayment agreements and managing delinquencies in-house."

According to the Pacific Legal Foundation, Massachusetts communities have the same power under state law to collect tax debts but approach collection differently.

Some communities don’t sell tax liens and rarely foreclose, “preferring to wait for homes with tax debts to be sold in a market transaction. These municipalities then collect the tax debt and interest owed from the sale proceeds, and the original owner (or the owner’s heir) receives the balance of the home’s equity,” according to a PLF study.

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While the foreclosure process followed in Foss’ case is legal in Massachusetts, it’s the PLF’s stance that it violates the U.S. and Massachusetts constitutions. That’s because government doesn’t have the right to take someone’s home and equity beyond what’s owed. Homeowners have a right to just compensation and freedom from excessive fines.

According to the PLF study, Massachusetts is one of a dozen states that allow this practice. The PLF says it will continue to defend people against what it considers an unconstitutional practice.

House Bill 3053 was filed in the Massachusetts Legislature in 2021, and would require tax lien holders to auction foreclosed property to the highest bidder, and then follow traditional mortgage foreclosures by applying the proceeds to the tax debt and other liens first, then paying what’s left to the original homeowners.

This article originally appeared on Standard-Times: New Bedford retiree's lawsuit over tax-taken home settled for $85,000