Property Tax – Actual posting of tax sale notice on property was “suspect” as applied to “un-improved, bare land” under the “unique” circumstances of the case.

In Marion County Auditor v. Sawmill Creek, Cause No. 49S02-1106-CV-364 (Ind.,  March 21, 2012), see http://1.usa.gov/GGOVfV, the Court reversed a trial court’s order setting aside a tax sale deed on grounds that the Auditor’s efforts to notify the taxpayer (Sawmill) fell short of constitutional due process standards.  Sawmill acquired the unimproved land in 2001, but the owner of record’s name was mistakenly recorded under a different name of a non-existent company.  Sawmill moved its operations in 2003 to a new address, but the county’s records were not updated to reflect the new billing address.  Tax bills went to the former address, tax bills became delinquent, and the Auditor set the property for tax sale in 2005.  The Auditor mailed the appropriate pre-sale notice to Sawmill, but it was returned “NOT DELIVERABLE AS ADDRESSED, UNABLE TO FORWARD.”  The Auditor also published the list of properties for sell (a) in the newspaper; (b) on the Auditor’s website; and (c) on a list posted outside of the Marion County Clerk’s office.  After the property was sold to McCord in October 2005, the Auditor engaged a title company to research the chain of title. Because the owner of record was non-existent, the search proved futile. Subsequent notices to the owner of record and to the previous owner were unsuccessful, and a tax deed was issued to McCord, who listed the property for sale and placed “For Sale” signs on the property.  It was this final act that eventually alerted Sawmill to the tax sale.

The Auditor followed all statutory notice requirements, but Sawmill argued that the Auditor’s notice efforts violated the constitutional due process requirements called for by the United State Supreme Court in Jones v. Flowers, 547 U.S. 220, 225 126 S. Ct. 1708, 1713 (2006), where the Supreme Court held that notice issued to an Arkansas homeowner was insufficient and that the State must take “additional reasonable steps to attempt to provide notice to the property owner before selling his property, if it is practicable to do so.”  Slip. op. at 5.  One such reasonable step, the Court in Flowers noted, could have been posting notice on the front door of the house. 547 U.S. at 234-35, 126 S.Ct. at 1718-19. 

Sawmill filed a motion to set aside the tax deed, and the trial court concluded that the Auditor’s notice was “constitutionally deficient, so that the issuance of the Tax Deed to McCord violated due process.” Slip op. at 4.  The trial court believed that the Auditor could have taken “additional reasonable steps,” including in particular the posting of notice on the property. See id. 

Considering all of the “unique circumstances of this case,” the Indiana Supreme Court concluded that the posting of notice for a tax sale on the property itself was neither a reasonable nor a practicable step for the County Auditor.  Slip op. at 11.  The Court cataloged the unique circumstances of this “fact-intensive process that requires consideration of every relevant fact”:

The Auditor was presented with a situation in which the Property was unimproved, bare land, and the owner could not be found. The notices mailed to the address provided by Sawmill were returned with no information as to a new forwarding address. And a search of the chain of title, the records of the Indiana Secretary of State, and the phonebook could not locate a new or alternative address. In fact, the search returned no results, other than the Property, for the [non-existent company]. . . . Concluding that Saw Creek may have existed in name only for the purpose of holding the Property for [the prior owner], the Auditor then sent notice to [the prior owner] as well as continuing the attempt to send notice to Sawmill.  

 Slip op. at 10.  The majority opined (Justice Rucker dissented) that the actual posting of notice on this “unimproved, bare land” would be a “suspect form of notice.”  Slip op. at 11.  This was not residential property, where a “tenant has a continuing interest in maintaining possession of the property for his use and occupancy.” Slip op. at 11 (citing Greene v. Lindsey, 456 U.S. 444, 452, 102 S. Ct. 1874, 1879 (1982)).  The “Auditor rightly distinguished the circumstances of this case” from those involving a homeowner in Flowers. Slip op. at 11.  That posting of the “For Sale” signs actually did lead to Sawmill receiving notice was irrelevant, as “the evaluation of the constitutionality of notice is done considering the facts known at the time the attempt at notice is made” – ex ante rather than post hoc. Slip op. at 11-12 n.11.  Finally, the Court found that posting notice on 1,800 properties (the number of tax sale notices returned to the Auditor in 2005) was a significant, cost prohibitive burden, and the Court would not place the Auditor with such an “untenable position.” Slip op. at 12.

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