HomeMy WebLinkAbout02-4847 & 02-5973 CivilPARKTON ENTERPRISES, INC.,:
PETITIONER
IN THE COURT OF COMMON PLEAS
OF CUMBERLAND COUNTY,
P E N N SYLVAN IA
DAVID A. KRULAC and 02-4847 CIVIL TERM
DIANE E. KRULAC, husband and: PETITION TO SET ASIDE TAX SALE
wife, and CUMBERLAND COUNTY
TAX CLAIM BUREAU,
RESPONDENTS
DAVID A. KRULAC and
DIANE E. KRULAC, husband
and wife,
PLAINTIFFS
IN THE COURT OF COMMON PLEAS
OF CUMBERLAND COUNTY,
P E N N SYLVAN IA
PARKTON ENTERPRISES, INC.,: 02-5973 CIVIL TERM
DEFENDANT QUIET TITLE
V.
ORLANDO TORRES, JR. and
ANAILDA MALAVE,
DEFENDANTS
IN RE: PETITION TO SET ASIDE TAX SALE AND ACTION TO QUIET TITLE
OPINION AND ORDER OF COURT
Bayley, J., October 15, 2003:--
On January 31, 2001, Eastern Savings Bank FSB obtained a default judgment
in mortgage foreclosure against Orlando Torres, Jr. and Anailda Malave, on a property
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at 705 Erford Road, East Pennsboro Township, Cumberland County.1 In addition to not
making required payments on the mortgage, the mortgagees were in default for failing
to make required payments into escrow with Eastern of 2000 real estate taxes. In
January, 2001, the unpaid 2000 real estate taxes were turned over by the East
Pennsboro Tax Collector to the Cumberland County Tax Claim Bureau. A sheriff's sale
of 705 Erford Road on the mortgage foreclosure was scheduled for June $, 2002, but
postponed because Torres and Malave filed for bankruptcy in the Middle District of
Pennsylvania. Eastern had actual knowledge of the existence of the lien of the Tax
Claim Bureau for unpaid 2000 real estate taxes, and a Pa.R.C.P. 3129.2 notice was
served on the Tax Claim Bureau prior to June 5, 2002.: The bankruptcy proceedings
were dismissed on July 30, 2002. The sheriff's sale was rescheduled for September
4, 2002. The property was sold that date to the first mortgagee and executing creditor
1 Torres and Malave purchased the property by a deed dated and recorded on
December 29, 1998.
: Rule 3129.2(a) provides, inter alia, that notice of the sale of real property by the
sheriff shall be given "to all persons whose names and addresses are set forth in the
affidavit required by Rule 3129.1 .... "Those persons, set forth in Rule 3129.1,
include:
(1) the owner or reputed owner of the real property and of the defendant in the
judgment; and
(2) every other person who has any record lien on that property; and
(3) every other person who has any record interest in that property which may
be affected by the sale; and
(4) every other person who has any interest in that property not of record which
may be affected by the sale and of which the plaintiff has knowledge.
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for $1.00.3 The sheriff's schedule of distribution listed a priority claim for unpaid taxes
owed to the Cumberland County Tax Claim Bureau. Torres and Malave continued in
possession of the property after the sheriff's sale. On September 18, 2002, an
assignment of the mortgage dated August 1, 2002 from Eastern to Parkton
Enterprises, Inc. was recorded. On September 25, 2002, a sheriff's deed to Parkton
dated September 24, 2002, was recorded. The deed sets forth:
The same having been sold by me to the said grantee on the__4th day of
September Anno Domini Two Thousand and Two (2002) after due
advertisement according to law, under and by Virtue of a Writ of
Execution issued on the 20th day of February Anno Domini 2002 out of
the Court of Common Pleas of Cumberland County, Pennsylvania, as of
Civil Term, Two Thousand (2000) Number 4692, at the suit of Eastern
Savinq Bank, FSB a.qainst Orlando Torres, Jr. and Anailda Malave.
On September 26, 2002, the Cumberland County Tax Claim Bureau conducted
an upset sale of 705 Er'ford Road for unpaid 2000 real estate taxes. David A. Krulac
and Diane E. Krulac purchased the property for $5,682.20, an amount that was
sufficient to pay the taxes due.4 Torres and Malave were still in possession of the
property when it was sold by the Tax Claim Bureau. The Bureau did not notify either
Parkton or Eastern of the sale. It attempted to serve a post-sale notice by certified mail
3 Writ No. 2000-4692 Civil, Eastern Savings Bank FSB v. Orlando Torres, Jr. and
Anailda Malave. The real debt of the defaulted mortgage was $83,323.89.
4 With all costs the Krulacs paid the Tax Bureau $7,268.74.
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on Parkton that was not received. On November 12, 2002, Parkton filed a complaint
against Torres and Malave to eject them from 705 Erford Road. A deed dated and
recorded on December 2, 2002, conveyed title from the Tax Claim Bureau to the
Krulacs. Parkton did not learn of the upset sale until December 17, 2002, when the
Krulacs filed a compliant against it to quiet title to 705 Erford Road, and a petition to
intervene in Parkton's ejectment action against Torres and Malave. On March 12,
2003, Parkton filed a petition to set aside the upset sale nunc pro tunc. That petition
and the action to quiet title were consolidated for disposition. Torres and Malave have
now vacated 705 Erford Road. Their interest in the property has been divested, and
they have not appeared in the action to quiet title. The contesting parties agree that
Parkton, having not been served with a post-sale notice, and having first been notified
of the upset sale on December 17, 2002, shall be allowed to proceed nunc pro tunc on
its petition to set the sale aside.
ISSUES
Until September 25, 2002, the day before the upset sale on September 26, the
recorded owners by deed of 705 Erford Road were Orlando Torres, Jr. and Anailda
Malave. Parkton, as the recorded owner of the property on the date of the upset sale to
the Krulacs, maintains that the sale must be set aside because it did not receive notice
before it was conducted. All pre-sale notices were in proper form and were properly
advertised and served on Torres and Malave within the time limits required by the Real
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Estate Tax Sale Law, 72 P.S. Section 5860.101 et seq. The last notices were the
sheriff's service upon Torres and Malave and the posting of the property on August 16,
2002. The Real Estate Tax Sale Law requires that the Tax Claim Bureau provide three
separate notices for an upset sale: (1) publication at least thirty days prior to the sale;
(2) certified/first class mail at least thirty days prior to the date of sale to each owner;
and (3) posting of the property at least ten days prior to sale. 72 P.S. § 5860.602.
Also, there must be personal service at least ten days prior to the date of the actual
sale where properties are "owner occupied." Section 5860.102 defines an "owner" as:
the person in whose name the property is last registered, if registered
according to law, or, if not registered according to law, the person whose
name last appears as an owner of record on any deed or instrument
of conveyance recorded in the county office designed for
recording .... 5
The Tax Claim Bureau sets forth in its brief:
[d]enies that Parkton had any right to any notice and asserts that the
notice requirements of the Real Estate Tax Sale Law were properly
executed.
The Tax Claim Bureau cannot be required to serve an individual or entity
which is not an owner of record at the time of Notice and indeed cannot
be known to the Tax Claim Bureau.
To hold otherwise would permit parties to thwart the sale of their property
by a "last minute" conveyance of their property. Such a rule would
Cumberland County does not have a registry system.
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threaten the real estate tax collection process, and thus be contrary to
public policy.
The Krulacs in their brief:
[c]ontend that the definition of owner as set forth in Section 102 of the
Real Estate Tax Sale Law, 72 P.S. 5860.102 contemplates the owner of
record at the time the required three forms of notice are properly given in
accordance with the Stature. To hold otherwise would be to allow the
parties to thwart the ability of the Tax Claim Bureau to conduct a valid
upset sale by making last minute transfers of title to the property after the
Notices are properly provided to the Record Owner. The Tax Claim
Bureau can be effectively prevented from ever selling the property for
unpaid real estate taxes if such last minutes transfers were held to
invalidate the prior Notices.
CASE LAW
In Mennonite Board of Missions v. Adams, 462 U.S. 791, 103 S.Ct. 2706, 77
L.Ed.2d 180 (1983), a tax sale case, the Supreme Court of the United States concluded
that:
[p]ublication and posting are unlikely to reach those who, although they
have an interest in the property, do not make special efforts to keep
abreast of such notices .... Notice by mail or other means as certain
to insure actual notice is a minimum constitutional precondition to a
proceeding that will adversely affect the liberty or property interest
of any party, whether unlettered or well versed in commercial
practice, if its name and address are reasonably ascertainable.
(Emphasis added.)
In Wells Fargo Bank of Minnesota N.A.v. Tax Claim Bureau of Monroe
County, 817 A.2d 1196 (Pa. Commw. 2003), the facts were:
On October 26, 1993, Catherine A. Colarco took title to property
located at 1296 Winding Way, Tobyhanna, Pennsylvania .... On
February 5, 1999, Colarco executed a mortgage on the property to
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Ameriquest Mortgage Company, which later assigned it to Wells Fargo.
On March 3, 2000, Wells Fargo filed a complaint in mortgage foreclosure
against Colarco for default under the terms of the mortgage. A default
order in favor of Wells Fargo was entered in the foreclosure action on
May 11, 2000. In order to satisfy the judgment against Colarco, a United
States Marshal's sale was held on May 17, 2001. Wells Fargo
purchased the property at the sale. On July 13, 2001, the United
States Marshal executed a deed in favor of Wells Fargo. The deed
was recorded in the Office for the Recording of Deeds of Monroe County
on July 24, 2001.
Colarco had failed to make payments of real estate taxes on the
property for the year 1999. On July 11, 2001, the Monroe County Tax
Claim Bureau (Bureau) sent Colarco notice that the property would
be sold at a tax sale to be held on September 28, 2001. Colarco
executed a return receipt for the certified mail. Notice of the tax sale was
published in the Monroe Legal Reporter and the Pocono Record on
August 17, 2001. The property was also posted with a notice of sale on
August 1, 2001. On September 28, 2001, the Bureau sold the
property to the Gardner Family Trust, Steven Gladstone, and Robert E.
Plank, Jr., (collectively, Appellees). On October 5, 2001, the Bureau sent
notice to Wells Fargo that the property had been sold at an upset tax
sale. This notice is the first notification to Wells Fargo that is reflected in
the Bureau's file.
There was no express actual notice or implied actual notice to the property
owner, Wells Fargo, prior to a tax sale. The Commonwealth Court reversed an order of
a trial court that upheld the sale because the published notices and the posting of the
property identified Catherine Colarco as the owner when in fact Wells Fargo was the
recorded owner at the time the notices were published and the property was posted.
The Tax Claim Bureau and the purchasers suggested that Wells Fargo failed to act in a
reasonable manner by not investigating the status of the taxes on the property prior to
its purchase at the United States Marshal's sale. The Court, citing Clawson Appeal,
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39 Pa. Commw. 492 (1979), stated that any alleged failure on the part of Wells Fargo is
irrelevant in the determination of whether the Bureau complied with its statutory
obligations because:
The [Law], however, impose[s] duties, not on owners, but on the
agencies responsible for sales; and such of those duties as relate
to the giving of notice to owners of impending sales of their
properties must be strictly complied with. Grace Building Co. v.
Clouse, 5 Pa. Cmwlth. 110, 289 A.2d 525 (1972). Hence, the
inquiry is not to be focused on the neglect of the owner, which is
often present in some degree but on whether the activities of the
Bureau comply with the requirements of the statute.
In Gladstone v. Federal National Mortgage Association, 819 A.2d 171 (Pa.
Commw. 2003), Mellon Mortgage Company obtained a judgment in mortgage
foreclosure against Julio and Wendy Echeverria on September 29, 1999. On June 22,
2000, FNMA purchased the property at a United States Marshal's sale. A deed was
recorded in Monroe County on August 16, 2000. The Echeverrias failed to pay real
estate taxes on the property in 1998. The Tax Claim Bureau sent all pre-sale notices
and posted the property when the Echeverrias were the record owners. On September
22, 2000, Gladstone purchased the property at tax sale. By a notice dated September
27, 2000, the Bureau notified FNMA that the property had been sold at an upset sale.
FNMA filed a petition to set aside the tax sale and Gladstone filed an action to quiet
title. The trial court concluded that the Bureau's duty to inform the owner of record was
satisfied once all required pre-sale notices were delivered. It rejected FNMA's
contention that the Bureau had an obligation to continually check the recording indices
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of Monroe County prior to conducting the sale. The Court granted Gladstone's motion
for summary judgment on the action to quiet title and dismissed FNMA's petition to set
aside the tax sale. On appeal the Commonwealth Court reversed. The record showed
that Chase Manhattan Mortgage Corporation serviced the mortgage loan to the
Echeverrias in 2000. On March 31, 2000, Chase paid the tax collector that year's
county and township taxes. On September 14, 2000, Chase paid the tax collector the
2000 school taxes. The Commonwealth Court concluded:
[C]hase made a payment for county and township taxes for a tax
year subsequent to the delinquency. The township tax collector,
using common sense business practices, should have advised
Chase that, despite that payment, a tax delinquency remained on the
property. The township tax collector, in accordance with Section 605 of
the Law, was required to furnish to the Bureau a record of the amount of
all accrued taxes. This record would have reflected that county and
township taxes were paid for the property for a year subsequent to the
delinquency. The Bureau, having knowledge that taxes were paid for
a subsequent year, should have made an inquiry of the township tax
collector to determine whether there was a commercial entity
assuming responsibility for taxes on the property. Because the
Bureau failed to make this inquiry, we conclude that the Bureau did
not use common sense business practices to determine the parties
to whom notice should be given. Accordingly, we will reverse the order
of the trial court. (Emphasis added.)
In In re: Tax Claim Bureau, German Township, 64 Pa. Commw. 374 (1982),
the Fayette County Tax Claim Bureau, on October 12, 1972, sold two tracts listed in the
tax sale notice as owned or reputed to be owned by Mt. Sterling Fuel Company.
Subsequently, the Bureau determined that on August 26, 1970, the two tracts together
with another tract had been previously sold to George A. Solomon and George
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Teslovich. Solomon and Teslovich were not the registered owners of the two tracts at
the time of the sale and there was nothing to indicate that they were in possession of
the vacant property or that they were the reputed owners in the neighborhood. The trial
court declared the tax sale invalid because Solomon and Teslovich did not receive
required pre-sale notices. The record showed that the first tract in the 1970
conveyance was properly assessed in 1971 in the names of the new owners but
The Commonwealth Court
through oversight the second and third tract were not.
stated:
While it is not incumbent upon the Bureau to make an exhaustive
search of current landowners, knowledge of the tax collector or of
the county assessment office is chargeable to the Bureau. Here, the
assessment office did reflect a change in ownership as to one tract in the
conveyance..., a fact which should have alerted the Bureau to look at
the ownership of the subject tracts. Thus, it appears that the Bureau
made a mistake which it only recently discovered and now
attempting to rectify. We hold that the Bureau's notices to [Mt. Sterling
Fuel Company] do not satisfy the notice requirement of the Act.
(Emphasis added.)
In Sabbeth v. Tax Claim Bureau of Fulton County, 714 A.2d 514 (Pa. Commw.
1998), the Commonwealth Court stated that if all pre-sale statutory notice requirements
have not been met a tax sale is valid only if the owners received actual notice of the
sale. See also, Donofrio v. Northampton County Tax Claim Bureau, 811 A.2d 1120
(Pa. Commw. 2002). The Court stated in Sabbeth "[t]hat the definition of actual notice
encompasses both expressed actual notice and implied actual notice...," and quoting
Black's Law Dictionary stated:
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The term "actual notice," however, is generally given a wider meaning as
embracing two classes, express and implied; the former includes all
knowledge of a degree above that which depends upon collateral
inference, or which imposes upon the party the further duty of inquiry; the
latter imputes knowledge to the party because he is shown to be
conscious of having the means of knowledge. In this sense actual notice
is such notice as is positively proved to have been given to a party
directly and personally, or such as he is presumed to have received
personally because the evidence within his knowledge was sufficient to
put him upon inquiry.
DISCUSSION
In the case sub judice, the timeline is:
January 31, 2001
Default judgment by Eastern against mortgagors Torres and
Malave.
June 5, 2002
Original sheriff's sale date.
August 1, 2002
Assignment of mortgage from Eastern to Parkton.
September 4, 2002
Sheriff's sale to first mortgagee and executing creditor.
September 18, 2002
Recording of assignment of mortgage from Eastern to
Parkton.
September 24, 2002
Sheriff's deed to Parkton.
September 25, 2002
Recording of sheriff's deed to Parkton.
September 26, 2002
Upset tax sale to Krulacs.
December 2, 2002
Recording of deed from Tax Claim Bureau to Krulacs.
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The sheriff's sale extinguished the lien on 705 Erford Road of Eastern's
mortgage that was assigned to Parkton, but it did not extinguish the priority tax lien?
Parkton became the owner of the property as a result of the sheriff's sale. Had any
competitive bidding occurred at the sale, the proceeds received in excess of the
sheriff's costs would have been applied to the priority tax claim of the Tax Claim
Bureau. On the cost only bid, the sheriff did not pay any money to the Tax Claim
Bureau and did not request funds from the bidder to pay the tax claim.
The facts here are distinguishable from those in Wells Fargo. Parkton, unlike
Wells Fargo, was not the recorded owner of 705 Erford Road at any time when the
notices, publication and posting were made within the time frames required in the Real
Estate Tax Law. Unlike the facts in German Township, here there was no oversight in
the assessment office that was chargeable to the Tax Claim Bureau. As to the law
regarding knowledge of the property owner set forth in Sabbeth and Donofrio,
although Parkton had knowledge of taxes owed to the Tax Claim Bureau as listed on
the sheriff's schedule of distribution, it had no express actual knowledge of the tax sale
on September 26, 2002, which was the day after its deed from the sheriff was recorded.
It is inexplicable that Parkton, in purchasing 705 Erford Road at the sheriff sale
6 72 P.S. 5860.301; 53 P.S. 7102-7103. In contrast, properties sold at an upset sale
are conveyed "subject to the lien of every recorded obligation, claim, lien, estate,
mortgage, ground rent and Commonwealth tax lien not included in the upset price with
which said property may have or shall become charged or for which it may become
liable." 72 P.S. § 5860.609.
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following Eastern's unrecorded assignment to it of the defaulted mortgage, made no
inquiry concerning the status of the taxes owed to the Tax Claim Bureau.
Notwithstanding, having knowledge that taxes were owed and overdue does not equate
into implied actual notice of the tax sale scheduled for September 26, 2002.
The facts here are analogous to those in Gladstone. In Gladstone, a
commercial mortgagor paid the mortgagee's taxes in a year subsequent to the year that
there were unpaid taxes for which the property was sold. That triggered a responsibility
on the Tax Claim Bureau to use common sense business practices to determine the
parties to whom notice should be given. In the present case, no taxes for any
intervening year were paid to the East Pennsboro tax collector. However, the Tax
Claim Bureau was served with a Rule 3129.2 notice of the sheriff's sale scheduled for
June 5, 2002. The Bureau did not check to determine if the property was sold by the
sheriff before the upset sale to the Krulacs on September 26, 2002. The duty is on the
Tax Claim Bureau to give notice of impending sales to owners. Clawson Appeal,
supra. Publication and posting alone is not constitutionally sufficient if the name and
address of the owner is reasonably ascertainable. Mennonite Board of Missions,
supra. Parkton's address in Hunt Valley, Maryland, was certainly ascertainable in the
sheriff's records. In the present case, even though Torres and Malave still occupied
the property, and were the recorded owners until September 26, 2002, it was
incumbent on the Tax Claim Bureau, having received notice of a pending sheriff sale
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for June 5, 2002, to use common sense business practices to make inquiry of the
sheriff to determine if 705 Erford Road was sold prior to the upset sale on September
26, 2002. A check would have disclosed that the sale scheduled for June 5th, was
continued to September 4th, and that the property was sold on September 4th, which
was 22 days before the upset sale. Although the Tax Claim Bureau served all of the
notices on the record owner within the time frames required by the Real Estate Tax
Law, the Bureau was constitutionally required to give notice to any new owner if
reasonably ascertainable, which Parkton was. Accordingly, we will (1) grant Parkton's
petition to set aside the tax sale, (2) quiet title to the premises, and (3) order the
Cumberland County Tax Claim Bureau to refund $7,268.74 to the Krulacs.
ORDER OF COURT
AND NOW, this day of October, 2003, IT IS ORDERED:
(1) The petition of Parkton Enterprises, Inc., to proceed nunc pro tunc to set
aside an upset tax sale, IS GRANTED.
(2) The upset tax sale on September 26, 2002, at which the Cumberland County
Tax Claim Bureau sold 705 Erford Road, East Pennsboro Township, Cumberland
County, Pennsylvania, to David A. Krulac and Diane E. Krulac, IS SET ASIDE.
(3) Title to 705 Erford Road, East Pennsboro Township, Cumberland County,
Pennsylvania, Cumberland County Tax Parcel No. 09-16-1050-166, IS QUIETED in
Parkton Enterprises, Inc., under a deed from the Sheriff of Cumberland County dated
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September 24, 2002, and recorded September 25, 2002, in Cumberland County Deed
Book 253, Page 3573. David A. Krulac and Diane E. Krulac, husband and wife, are
forever barred from asserting any claim or interest in or to any portion of the premises
inconsistent with the ownership of Parkton Enterprises, Inc.
(4) The Cumberland County Tax Claim Bureau shall refund the sum of
$7,268.74 to the Krulacs within thirty (30) days of any date this order shall become final
and the Tax Claim Bureau receives payment from Parkton Enterprises, Inc., of all
taxes, costs, and interest for calendar years 2000 and 2001.
(5) A copy of this order and opinion may be recorded in the office of the
Recorder of Deeds of Cumberland County upon payment of the applicable fee.
By the Court,
Edgar B. Bayley, J.
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Kimberly A. DeWitt, Esquire
Scott A. Dietterick, Esquire
For Parkton Enterprises, Inc.
Dale F. Shughart, Jr., Esquire
For David A. Krulac and Diane E. Krulac
Stephen D. Tiley, Esquire
For Cumberland County Tax Claim Bureau
:sal
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PARKTON ENTERPRISES, INC.,:
PETITIONER
IN THE COURT OF COMMON PLEAS
OF CUMBERLAND COUNTY,
P E N N SYLVAN IA
DAVID A. KRULAC and 02-4847 CIVIL TERM
DIANE E. KRULAC, husband and: PETITION TO SET ASIDE TAX SALE
wife, and CUMBERLAND COUNTY
TAX CLAIM BUREAU,
RESPONDENTS
DAVID A. KRULAC and
DIANE E. KRULAC, husband
and wife,
PLAINTIFFS
IN THE COURT OF COMMON PLEAS
OF CUMBERLAND COUNTY,
P E N N SYLVAN IA
PARKTON ENTERPRISES, INC.,: 02-5973 CIVIL TERM
DEFENDANT QUIET TITLE
V.
ORLANDO TORRES, JR. and
ANAILDA MALAVE,
DEFENDANTS
IN RE: PETITION TO SET ASIDE TAX SALE AND ACTION TO QUIET TITLE
ORDER OF COURT
AND NOW, this
day of October, 2003, IT IS ORDERED:
(1) The petition of Parkton Enterprises, Inc., to proceed nunc pro tunc to set
aside an upset tax sale, IS GRANTED.
(2) The upset tax sale on September 26, 2002, at which the Cumberland County
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Tax Claim Bureau sold 705 Erford Road, East Pennsboro Township, Cumberland
County, Pennsylvania, to David A. Krulac and Diane E. Krulac, IS SET ASIDE.
(3) Title to 705 Erford Road, East Pennsboro Township, Cumberland County,
Pennsylvania, Cumberland County Tax Parcel No. 09-16-1050-166, IS QUIETED in
Parkton Enterprises, Inc., under a deed from the Sheriff of Cumberland County dated
September 24, 2002, and recorded September 25, 2002, in Cumberland County Deed
Book 253, Page 3573. David A. Krulac and Diane E. Krulac, husband and wife, are
forever barred from asserting any claim or interest in or to any portion of the premises
inconsistent with the ownership of Parkton Enterprises, Inc.
(4) The Cumberland County Tax Claim Bureau shall refund the sum of
$7,268.74 to the Krulacs within thirty (30) days of any date this order shall become final
and the Tax Claim Bureau receives payment from Parkton Enterprises, Inc., of all
taxes, costs, and interest for calendar years 2000 and 2001.
(5) A copy of this order and opinion may be recorded in the office of the
Recorder of Deeds of Cumberland County upon payment of the applicable fee.
By the Court,
Edgar B. Bayley, J.
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Kimberly A. DeWitt, Esquire
Scott A. Dietterick, Esquire
For Parkton Enterprises, Inc.
Dale F. Shughart, Jr., Esquire
For David A. Krulac and Diane E. Krulac
Stephen D. Tiley, Esquire
For Cumberland County Tax Claim Bureau
:sal