Daily Development for Friday, April 4, 2003
by: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC
School of Law
Of Counsel: Blackwell Sanders
Peper Martin
Kansas City, Missouri
dirt@umkc.edu
CONSTITUTIONAL LAW; DUE PROCESS; NOTICE; TAX
FORECLOSURES: New York Court of Appeals upholds
tax
foreclosure where mailed notice was
returned and county did not check
"ordinary
sources" for alternative addresses.
Mosssafa v. Kleiman, 2003 WL 443797 (N.Y. 2/25/03)
As most real estate lawyers know, constitutional due process
requires
notice and opportunity for a hearing
before government can take away
property, even
when the governmental action is a tax foreclosure.
Although there hasn't been a lot of judicial discussion of what
constitutes
a proper opportunity for a hearing
in the tax foreclosure context, there
has been
some important law on the question of notice. In the noted
U.S.
Supreme Court decision in Mennonite Board
of Missionaries, 462 U.S.
791 (1983), the Court
ruled that the Mullane standard of constitutional
notice applied - "notice reasonably calculated, under the all
circumstances, to apprise . . . ."
Here, when the property owner acquired the property, she
registered an
address with the County.
The property owner later changed her address.
She claimed that she notified the County of the address change, but
could
not produce the letter (not surprisingly)
and in fact the County did not
change her
address on its records. The County continued to send the
bills to the address on its records, and indeed, in every
year from 1983-
1998, property owner paid the
taxes, except in 1996. Several of the
letters by which the property owner paid her taxes had the correct
address
as the return address, and the checks
had the correct address.
In 1996, there was no tax payment. This occasioned the
County, in its
1998 tax bill, to put on the
bill a warning that back taxes had not been
paid and that there was a risk of a foreclosure if payment was not
made.
The 1998 taxes were paid, but there was
no payment of the delinquent
1996
taxes.
The County initiated a tax foreclosure. The applicable
law required
notice of the foreclosure to be
sent to owners whose property interest was
a
matter of public record at the time of the delinquent taxes and
"whose
name and address are reasonably
ascertainable from the public record,
including
the records in the office of the surrogate of the county." The
County sent notice to the same address it had been using
all along - that
shown on its tax rolls.
This time the post office returned the notice with
the notation: "not deliverable as addressed unable to
forward."
The County made no further search and obtained a default
judgment of
foreclosure. A purchaser bid
$8000 at the auction, far in excess of the
$605.44 tax delinquency, and the County retained the surplus.
The
statutory redemption period ran, and
thereafter the purchaser at the tax
foreclosure
sale sought to quiet title, leading to this action.
Property owner (or, more accurately at this point, former
property owner)
argued that when the County
received back the returned letter indicating
that notice had not been effected, it had an obligation to take
ordinary
steps to ascertain her correct
address, such as to look in the telephone
book
or the internet.
The New York Court of Appeals disagreed. Although it
acknowledged
that, by statute, the County had a
duty to look at more than the tax rolls,
it
stated that the property owner had not demonstrated that it would
have
found her address in public records in the
surrogate's office. It rejected
her claim
that the letters and checks by which she had paid earlier bills
provided notice to the County, since there was no
requirement or
expectation that the County
would use these for notice address
verification
and, indeed, the County did not keep them.
The Court's critical ruling, of course, was on the question
of whether the
County had a duty to go beyond
the surrogate's office. It rejected such a
proposition:
"As an initial matter, we reject
the view that the enforcing
officer's obligation is always satisfied by
sending the notice to the
address listed in the tax role, even where the
notice is returned as
undeliverable. In such cases, the enforcing officer is in no
different position than if an
initial examination of the roll had
yielded no address. Generally, when the
notice is returned as
undeliverable, the tax district should conduct a reasonable search
of the public record. . . . A
reasonable search of the public record,
however, does not necessarily require searching
the Internet,
voting
records, motor vehicle records, the telephone book or
similar resource."
The court does not explain why it reach the somewhat
surprising
conclusion that there is no duty
even to look for the address in other
readily
available public records not in the Surrogate's Office. It
admits
that the County cannot rely upon the
notice of default that it appears
likely that
property owner did receive. This is not notice of foreclosure.
Nevertheless, the court points to this notice, together
with the fact that
other notices sent to the
address in the record, both before and after the
1996 default notice, apparently did reach property owner, since
she
regularly paid taxes billed to that
address. The owner's carelessness in
not
changing the record address, despite the fact that she in fact
received
many letters sent to the wrong
address, was a factor the court took into
consideration:
"While to an owner who has not
abandoned his or her property,
learning of its foreclosure is distressing -
particularly when the
tax due constituted a minuscule percentage of the market value of
the property - the owner's
interest must be balanced against the
State's interest in collecting delinquent taxes,
taking into account
the status and conduct of the owner in determining whether
notice was
reasonable." (emphasis added)
Later, the court expanded on this notion:
"When th conduct of a party does
not excuse the collecting
officer from providing notice to those whose
contact information
is
reasonably ascertainable, it is nevertheless relevant in
determining whether the party's
contact information was
reasonably ascertainable."
Comment: The Editor admits to being a person of
tender sensibilities,
but the Editor is shocked
by this result. The editor understands that there
is an argument for "mass due process" here. Public agencies can't
be
required to be overly punctilious at
taxpayer's expense. "Reasonable" is
good
enough. Therefore, it may be admitted that the County need not
have checked outside of the public records. There are
many phone books
these days and they are
changed frequently, and if we required phone
book checking, we'd have to decide which phone book was
sufficient.
Further, the County need not be
required to have an Internet adept on its
foreclosure staff. But why is it all that great a burden to at
least check
the voting records or other records
that contained address at which public
agencies
regularly had been able to reach the property owner?
The court qualifies its outcome, of course, by stressing the
special
circumstances here - that there was
evidence that other mail got through,
perhaps
putting into doubt the bona fides of property owner's claim that
the foreclosure notice didn't in fact reach her. But
the blanket statement
that there is no
requirement to go beyond the limited records available in
one public office when a potentially ruinous tax
foreclosure is at hand
establishes precedent
that difficult to distinguish away. It seems to the
Editor that the court has overreached here. Tax
foreclosures aren't so
numerous that a little
more caution isn't in order when the potential
consequences of an unnoticed foreclosure are so severe.
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