Subrogation and Tax Liens

A friend asked me last week, can a person record a lien against real property if they have paid the past due taxes?

There might be many reasons that a person would pay the taxes of another. A mother might pay them for the benefit of her daughter. An heir might pay the past due taxes to avoid losing a home before probate completes. An adverse possessor might pay the tax debts to perfect their title. The rights of each of these people differ concerning getting repaid.

The Law on Tax Liens and Subrogation

Only California May Record a Tax Lien

State tax liens need not be recorded to be valid. (Gov. Code, § 7172, subd. (a).) Once recorded, they are valid only for ten years. (Gov. Code, § 7172, subd. (b).)  The lien may be extended by recording the lien again within the ten years. (Gov. Code, § 7172, subd. (c).) Thus, any lien that is recorded and more than ten years old is no longer valid because it has not been lawfully extended. Only a government agency may record a “state tax lien” against real property. (Gov. Code, § 7171, subd. (a).)

Subrogation Permits People to Step Into the State’s Shoes As a Creditor

Civil Code section 2903 gives “every person having an interest in property” the ability to subrogate the debtor by redeeming the lien during the redemption period. However, the subrogation law does not protect those who interject themselves where they had no prior interest or obligation in paying the debt. (Treat v. Craig (1901) 135 Cal. 91, 93; Estate of Kemmerrer (1952) 114 Cal.App.2d 810, 813; Miller & Lux, Inc. v. Sparkman (1932) 128 Cal.App. 449, 453.)

The law distinguishes those who have an interest and those who are “mere volunteers.” (Treat v. Craig, supra, 135 Cal. 91, 93; Estate of Kemmerrer, supra, 114 Cal.App.2d 810, 813; Miller & Lux, Inc. v. Sparkman, supra, 128 Cal.App. 449, 453.) Mere volunteers do not receive the benefit of subrogation. (Estate of Kemmerrer, supra, 114 Cal.App.2d 810, 813.)

The doctrine of subrogation, extended far beyond the limitations of the early civil law, has been held available to those who, not acting voluntarily, pay the debt of another which in equity and good conscience should have been discharged by him, to those who pay in the performance of a legal duty imposed by contract or rules of law, to those who pay for the purpose of protecting their own rights or interests, and to those whose payment is favored by public policy.

(Fresno Inv. Co. v. Brandon (1926) 79 Cal.App. 387, 389, emphasis added.)

A person compelled “by reason of legal liability” to pay another person’s obligation is not a volunteer, and that person is entitled to recover the money spent. (Miller & Lux, Inc. v. Sparkman, supra, 128 Cal.App. 449, 453.)

Mistake Provides No Protection

The law also provides no protection to those who have mistaken beliefs about their legal obligation. McMillan v. O’Brien (1934) 219 Cal. 775, 780, stated: “One paying taxes under a mistaken belief in his own ownership is a volunteer.” In McMillan, real property owners agree to a lot line adjustment between them that transfers 9 1/4 inches of property and causes the legal descriptions on title to differ from reality. The tax assessor did not change the assessments and continued to tax the transferor for the 9 1/4 inches of land for decades. New owners, who had no idea of the transfer, paid taxes as they were billed, and they were not entitled to reimbursement when they later discovered that they did not own the disputed 9 1/4 inches of land.

Applying the Law

Considering the persons given as examples above, only one is entitled to reimbursement under the law.

Absent some other detail, a mother does not generally have a legal obligation to pay the debts of her children. By paying her daughter’s taxes without legal obligation, she does so out of the kindness of her heart and is “merely a volunteer.”

The adverse possessor pays taxes because they hope to secure rights to real property. Although the adverse possessor hopes to have a future interest, the adverse possession does not have any interest until the statutory timeline completes. Before the end of the fifth year, the adverse possessor can walk away from the property without any loss. Similarly, before the end of the fifth year, the owner can eject the adverse possessor by law, and the adverse possessor loses nothing in the eyes of the law. Thus, until the fifth year, any payment toward the taxes is self-serving and not by legal obligation. The adverse possessor is merely a volunteer. The law, as it applies to mistakes, also applies to adverse possessors who wrongfully but actually believe themselves to be the holders of a good title.

Under Estate of Kemmerrer, supra, 114 Cal.App.2d 810, a potential heir to an estate has an interest in the estate’s property. If the property of the estate is lost before probate completion, nothing is left to inherit. Similarly, some expenses, like funeral expenses, are due before probate opens. The people who pay those expenses should not be without recourse to recover their expenses; it goes against public policy. Thus, the heir who pays real property taxes to avoid late fees, depletion, or a tax sale, is not merely a volunteer and is entitled to recover from the estate.

Do You Have Questions

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