Lawsuit against collection firm raises questions on tax judgments

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Tax Judgement

A law firm that for decades has represented governments across the state in collecting delinquent taxes is accused of improperly “robo-signing” hundreds of legal documents over the last several years, calling into question the legitimacy of millions of dollars in tax enforcement actions.

A lawsuit filed in state district court in Dallas by title company TinStar alleges that since 2015 Linebarger Goggan Blair & Sampson has, without proper authority, notarized documents attesting to property boundaries. The properties in question are those on which owners have been sued for unpaid taxes. TinStar alleges that at least 10 Linebarger employees forged the notarizations in several hundred cases, using the state license of a TinStar notary.

In each case, TinStar had been hired to perform a chore that is routine to property tax collection. Once an owner was determined to be in arrears, Linebarger filed a lawsuit. TinStar would then go through property records to make sure the correct owner was being sued and to find any lien holders who needed to be alerted of the action. Verifying property boundaries, via a notarized document, is a required part of the task. TinStar was paid $350 per property.

TinStar claims that in numerous cases, agents at Linebarger either forged a notarization by TinStar co-owner Sandra Daus, or used another notary to verify the information compiled by TinStar.

TinStar is seeking damages for what it says are unpaid fees.

Linebarger denies improperly notarizing the crucial affidavits, and it claims protection from the lawsuits because it was acting as part of a governmental agency.

In a statement, Linebarger said the lawsuit “is entirely without merit. … This lawsuit is an attempt to intimidate the firm into acting against the interests of its clients. We reject that and will continue to honor our commitments to our client Dallas County … .”

At particular issue regarding the remote notarizations is advice allegedly given to Daus by Linebarger production manager Kevin Franks. He died in 2017.

“[Franks] began demanding, due to the volume of work, that TinStar and Sandra Daus move more quickly in verifying the affidavits,” the suit alleges. “Franks advised Sandra it was acceptable for Sandra to remotely notarize and forward the affidavits to Linebarger.” That process is now legal, but it wasn’t allowed until 2018.

Additionally, on numerous occasions, TinStar alleges, Linebarger executed the affidavits by electronically attaching Daus’ signature to the affidavits and then adding the notary stamp.

“They also ended up having a facsimile stamp of Sandra Daus’ name made and they then notarized it in her name,” TinStar attorney Michael Pezzulli told The Texas Monitor.

TinStar contends the lawsuit threatens Linebarger’s livelihood

“Linebarger was and is terrified that if their conduct comes to light, Linebarger may lose the millions of dollars annually that it generates from the Dallas taxing entities and, perhaps even worse, have to repurchase the properties it foreclosed upon for the taxing entities,” the lawsuit says.

The practice TinStar describes is similar to “robo-signing,” which became well known following the 2008 housing crisis, during which mortgage companies and banks fired off thousands of foreclosure notices without reading them to verify that the information was correct. Thirteen banks agreed to pay back $9.3 billion to 3.8 million borrowers as a result.

A measure permitting remote notarizing for real estate transactions was passed in 2017 by state lawmakers, effective in July 2018, as a move to make business more efficient. The bill allows notaries to witness documents and affidavits via video, rather than having the signer appear in person. Mortgage lenders and title companies backed the measure, which was opposed by the American Association of Notaries.

The case implies that somewhere along the line, Dallas County’s tax collections process developed a hitch.

If you are using a notarization to prove the property in question is the right one, Pezzulli said, and that process is flawed, “how do you know you foreclosed on the right property?”

In cases where the tax was assessed and paid, a judge could have the county go back and reevaluate the transaction to make sure it was valid, he said. “But what about when properties have been sold off? You’ve already evicted the person from their home.”

Dallas County Judge Clay Jenkins and Dallas County Tax Assessor John Ames did not respond to emails seeking comment.

Beyond denying that it did anything wrong, Linebarger has filed a motion to seal the case records and close courtroom proceedings, citing business privacy concerns. Texas Monitor has filed an objection to the motion to seal, asking the judge to keep the case files and the hearings open to the public.

The next hearing in the case is scheduled for April 19.

Linebarger files over 2,000 lawsuits a year in Dallas County and has been the collector of delinquent accounts for the county since the 1980s. The county has boasted that the firm is responsible for a collection rate of 98.5 percent.

The firm has 46 offices across the country, and performs collections for hundreds of municipalities.  In Texas, 115 counties use Linebarger to collect overdue property taxes.

Steve Miller can be reached at [email protected].

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