>
>
>Daily Development for Thursday, July 10, 2008
>by: Patrick A. Randolph, Jr.
>Elmer F. Pierson Professor of Law
>UMKC School of Law
>Of Counsel: Husch Blackwell Sanders
>Kansas City, Missouri
>dirt@umkc.edu
>
>CONSTITUTIONAL LAW;  DUE PROCESS; NOTICE; TAX FORECLOSURE: Constitutional due process requires the state to exercise "reasonable diligence" in attempting to notify deficient taxpayers before selling their real property in order to collect compensation for back taxes.

>
>Gates v. State of N.M. Taxation & Revenue Dep't, 143 N.M. 446, 176 P.3d 1178 (2008)
>
>Plaintiff Ollie Gates ("Plaintiff"), a lifelong  resident of Kansas City, Missouri, owned dozens of pieces of property in the Kansas City, metropolitan area, including a chain of barbeque restaurants. In 1977, he purchased a parcel of rural land located in Torrance County, New Mexico ("Property"). In 1996, Plaintiff leased the Property to Joe and Mary Jane Chavez (the "Chavezes") for the purpose of livestock grazing, but the Chavezes never recorded the lease. They did, however, contact the electric cooperative to set up electrical service on the Property.

>
>Taxes on the property went upaid and, in August 2002, Defendants Ray and Joyce Halderman ("Defendants") purchased the Property from the New Mexico Taxation and Revenue Department ("TRD") in a tax sale.

>
>Plaintiff's primary mailing address in Missouri changed in May 1997; but he failed to inform Torrance County officials of his new address. From 1998 to 2002, the Torrance County Treasurer mailed property tax bills to Plaintiff's pre-May 1997 mailing address. During this time period, the bills were marked as "forwarding order expired" and returned by the postal service. Plaintiff did not pay any property taxes for the Property during this time period.

>
>In July 2001, Plaintiff's account was listed as a delinquent property tax account and in early 2002, a TRD employee was assigned the task of locating Plaintiff in order to collect the back taxes.

>
>The TRD employee attempted to locate Plaintiff by looking in the Torrance County property records to no avail. Then the TRD employee attempted to physically access the Property to either personally notify Plaintiff or to provide him with a notice by placing a "red tag" warning of the tax deficiency in a conspicuous place. However, because the TRD employee encountered a locked gate that denied access to the Property, and because he was unsure whether the gate belonged to Plaintiff, he opted not to affix the "red tag." Soon thereafter, the TRD employee learned that Defendants owned a home on the land adjacent to the Property, so he contacted them by telephone and asked whether they knew the Plaintiff. Because Defendants did not know the Plaintiff or how to reach him, the TRD employee called telephone operators in New Mexico and Missouri. The operators in New Mexico had no record of Plaintiff and the operators in Missouri informed the TRD employee that there were unpublished Missour

i telephone numbers under Plaintiff's name. The TRD employee also attempted to locate Plaintiff by entering Plaintiff's name into two Internet databases that provide published telephone and address listings of people living in the United States. These databases did not provide the TRD employee with any useful information. While the TRD employee had used a different free Internet search engine to locate deficient taxpayers in the past when it was absolutely necessary, he could not recall whether he conducted such a search in this case.

>
>At the end of July 2002, the TRD employee mailed a certified letter to the pre-May 1997 address warning Plaintiff that his property would be sold at a public auction in order to pay his tax debts, but Plaintiff never received the letter. TRD then advertised the sale of Property in a regional newspaper in a final attempt to notify Plaintiff of the impending auction.

>
>The auction took place about a month later and Defendants made the winning bid of $22,000. Plaintiff did not receive actual notice of the sale of Property until the Chavezes informed him that Defendants had purchased it at the tax sale.

>
>Plaintiff filed a civil complaint against Defendants. One of the issues was whether Plaintiff had received adequate notice before the Property was sold at auction. The district court concluded that the notice was constitutionally inadequate and the New Mexico Court of Appeals affirmed.

>
>The general rule is that "constitutional due process requires the state to exercise 'reasonable diligence' in attempting to notify deficient taxpayers before selling their real property in order to collect compensation for back taxes." Id. 17 (citing Patrick v. Rice, 112 N.M. 285, 289, 814 P.2d 463, 467 (Ct. App. 1991)); see also Jones v. Flowers, 126 S. Ct. 1708, 1713 (2006). "In determining whether specific efforts are 'reasonably diligent,' the inquiry becomes 'whether the identity and location of a party entitled to notice [is] reasonably ascertainable.'" Id. 17 (quoting Patrick v. Rice, 112 N.M. 285, 289, 814 P.2d 463, 467 (Ct. App. 1991)).

>
>The Court of Appeals concluded that Plaintiff's contact information was reasonably ascertainable and the TRD was not reasonably diligent in attempting to contact him before auctioning the Property to pay for his delinquent taxes.

>
>Comment 1: This case cites and purports to follow Jones v. Flowers, a recent U.S. Supreme Court decision reported as the DD for 4/27/06.  This case does not indicate that it is relying independently upon an interpretation of the U.S. Constitution.  The other case it relies upon, however, Patrick v. Rice, does state that it is applying both the New Mexico and U.S. Constitution Due Process clauses.  The distinction is important because Patrick preceded Rice by fifteen years.  It is not a bit clear that Patrick states the current view of the U.S. Supreme court on the question of what constitutes the notice responsibility of property tax agencies.  It is clear that the view of the Court is that if the agency gets back notice that the certified letter wasn’t sent, and it hasn’t sent a regular mail letter, it must do something.  But it may be, as the DD indicates, that nothing more than sending a regular mail letter, with hopes it will be forwarded, is required.

>
>Note that, in this case, such a letter may in fact have been forwarded to Mr. Gates.  But the New Mexico court seems to be of the view that more than this simple expedient was necessary.  And to the extent it does suggest this, the New Mexico court may be requiring more under the New Mexico Constitution than the U.S. Supreme Court requires as minimum Due Process.

>
>Comment 2: For a more lax approach in a state court decision, favoring a less diligent taxing authority, see:  Mosssafa v. Kleiman, 100 N.Y.2d 1, 789 N.E.2d 607, 759 N.Y.S.2d 429 (N.Y. 2003) (The DIRT DD for 4/4/03) (New York Court of Appeals upholds tax foreclosure

>where mailed notice was returned and county did not check "ordinary sources" for alternative addresses.)
>
>Comment 3: Obviously someone on the court has been to Kansas City and knows that Ollie Gates indeed is a very well known personage and that his restaurants are spread throughout the metroplex, and for good reason.  Kansas City barbecue is one of the city’s finest features, and Gate’s is certainly near the top of the barbecue purveyors (the editor is cautious not to get in an argument as to which really is the best - a discussion that can get very involved in this town.)

>
>Items reported here and in the ABA publications
>are for general information purposes only and
>should not be relied upon in the course of
>representation or in the forming of decisions in
>legal matters.  The same is true of all
>commentary provided by contributors to the DIRT
>list.  Accuracy of data and opinions expressed
>are the sole responsibility of the DIRT editor
>and are in no sense the publication of the ABA.
>
>Parties posting messages to DIRT are posting to a
>source that is readily accessible by members of
>the general public, and should take that fact
>into account in evaluating confidentiality
>issues.
>
>ABOUT DIRT:
>
>DIRT is an internet discussion group for serious
>real estate professionals. Message volume varies,
>but commonly runs 5 to 15 messages per work day.
>
>Daily Developments are posted every work day.  To
>subscribe, send the message
>
>subscribe Dirt [your name]
>
>to
>
>listserv@listserv.umkc.edu
>
>To cancel your subscription, send the message
>signoff DIRT to the address:
>
>listserv@listserv.umkc.edu
>
>for information on other commands, send the message
>Help to the listserv address.
>
>DIRT has an alternate, more extensive coverage that includes not only
>commercial and general real estate matters but also focuses specifically upon
>residential real estate matters.  Because real estate brokers generally find
>this service more valuable, it is named “BrokerDIRT.”  But residential
>specialist attorneys, title insurers, lenders and others interested in the
>residential market will want to subscribe to this alternative list.  If you
>subscribe to BrokerDIRT, it is not necessary also to subscribe to DIRT, as
>BrokerDIRT carries all DIRT traffic in addition to the residential discussions.
>
>To subscribe to BrokerDIRT, send the message
>
>subscribe BrokerDIRT [your name]
>
>to
>
>listserv@listserv.umkc.edu
>
>To cancel your subscription to BrokerDIRT, send the message
>signoff BrokerDIRT to the address:
>
>listserv@listserv.umkc.edu
>
>DIRT is a service of the American Bar Association
>Section on Real Property, Probate & Trust Law and
>the University of Missouri, Kansas City, School
>of Law.  Daily Developments are copyrighted by
>Patrick A. Randolph, Jr., Professor of Law, UMKC
>School of Law, but Professor Randolph grants
>permission for copying or distribution of Daily
>Developments for educational purposes, including
>professional continuing education, provided that
>no charge is imposed for such distribution and
>that appropriate credit is given to Professor
>Randolph, DIRT, and its sponsors.
>
>DIRT has a WebPage at:
>https://e2k.exchange.umkc.edu/exchweb/bin/redir.asp?URL=http://cctr.umkc.edu/dept/dirt/