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United States Court of Appeals,
Fifth Circuit.
No. 93-7243.
DONNA INDEPENDENT SCHOOL DISTRICT and Hidalgo County, Plaintiffs-
Appellants,
v.
Guillermina G. BALLI, Etc., et al., Defendants,
Guillermina G. BALLI, Individually, Etc., and FDIC, as Receiver
for Hidalgo County Bank & Trust Co., Defendants/Cross-Defendants-
Appellees,
v.
CITY OF DONNA, Defendant/Cross-Claimant-Appellant.
May 24, 1994.
Appeal from the United States District Court for the Southern
District of Texas.
Before POLITZ, Chief Judge, KING and GARWOOD, Circuit Judges.
POLITZ, Chief Judge:
Three Texas taxing units, the City of Donna, the Donna
Independent School District, and Hidalgo County, appeal a judgment
prohibiting their foreclosure on property tax liens without
preserving liens held by the Federal Deposit Insurance Corporation
in its capacity as receiver for certain failed financial
institutions. We affirm.
Background
The underlying facts would have involved a routine effort by
local taxing units to collect delinquent ad valorum real estate
taxes but for one development--the financial institutions holding
deed of trust liens on the properties became insolvent and the FDIC
1

was appointed receiver. The affected realty consists of 110 lots
owned by Reynaldo Balli and his family, all but one of which were
mortgaged to Hidalgo County Bank & Trust Company, with the
remaining lot being mortgaged to The First National Bank of
Weslaco. The taxing units brought a foreclosure action against the
Ballis and named the FDIC in its capacity as receiver for the
banks. The FDIC removed to federal court which entered summary
judgment for the taxing units but decreed that foreclosure on the
tax liens would be subject to the FDIC's deed of trust liens. The
taxing units timely appealed.
Analysis
The taxing units contend that the FDIC's liens are
subordinate to the tax liens and are thus extinguished in a tax
sale. The FDIC agrees that the tax liens have priority but
maintains that 12 U.S.C. § 1825(b)1 preserves its liens. We
recently addressed that issue in Matagorda County v. Law,2 holding
that the local taxing authorities may not foreclose on property
subject to an FDIC lien without the FDIC's consent. That precedent
governs.
Alternatively, the taxing units maintain that the operation
of section 1825(b)(2) works a compensable taking under the fifth
112 U.S.C. § 1825(b)(2) provides:
No property of the Corporation shall be subject to
levy, attachment, garnishment, foreclosure or sale
without the consent of the Corporation, nor shall any
involuntary lien attach to the property of the
corporation [emphasis added].
219 F.3d 215 (5th Cir.1994).
2

amendment. That is a closer question. Recognizing in Matagorda
County that the statute delayed the collection of delinquent taxes,
we did not find a problem of constitutional dimension in the length
of the delay presented therein. We noted, however, that
"[u]nmitigated delay, coupled with diminishment of distinct
investment-backed expectations, may, at some point, infringe on the
entire "bundle' of rights enjoyed by the [taxing units] to the
point that a compensable taking occurs."3
The delay in Matagorda County was 27 months; the FDIC
acquired its liens in August of 1990 and the judgment decreeing the
tax liens was entered on November 10, 1992. We characterized that
period as "approaching" the maximum permissible without being a
taking.4 The delay in the instant case is significantly longer.
The FDIC acquired the First National Bank of Weslaco lien on
February 20, 1987 and the Hidalgo County Bank & Trust lien on July
27, 1989. Judgment decreeing the tax liens was entered herein on
April 1, 1993.
We would likely find a taking herein but for a critical
distinction between the facts of this case and those in Matagorda
County. There, the adjudged value of the property was $333,660 and
the outstanding balance on the notes underlying the FDIC lien was
$891,000 plus interest. "As a practical matter," we found that the
taxing units could not sell the property with the FDIC lien in
place. Here, by contrast, the value of the property is $529,578
319 F.3d at 225.
419 F.3d at 225 n. 11.
3

and the outstanding balance on the Balli notes is $196,689.73 plus
interest.5 Unlike Matagorda County, the survival of the FDIC liens
does not prevent a tax sale. The causal connection between the
delay and the statutory protection accorded the FDIC's liens is
significantly attenuated. We perceive no taking cognizable under
the fifth amendment in this factual scenario.
AFFIRMED.

5The taxing units place the value at $333,660 and the
delinquent taxes at $154,039. From these figures, they argue
that preservation of the FDIC liens precludes a tax sale because
there is no equity in the property. The Final Judgment, however,
indicates value of $529,578 for Lots 1-109 and 117, the tracts at
issue herein, and delinquent taxes of $73,488.83 plus interest.
There is sufficient equity to permit a tax sale.
4