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Ah, those men and women on the Supreme Court. You have to love them or spend time crying. Currently, the administrators of the villages, towns, counties and cities that have the power to foreclose real property titles because of the owner’s failure to pay real estate taxes (hereinafter, “taxing authorities”) and the attorneys who represent them (usually county attorneys) are awash in tears because, once again, a Supreme Court decision will influence how they conduct tax foreclosures. More importantly, adding angst to their tears, the Court’s decision may affect the validity of tax foreclosures conducted in the past and which the taxing authorities and county attorneys thought were behind them. One can just hear the can opener approaching the can of worms. For taxing authorities, which are charged with keeping the public till full and also with maintaining equity and fairness for all taxpayers, tax takings are an expensive, dangerous but necessary part of their existence. For title underwriters, who have to pay the claim if the taxing authority gets the taking wrong and a court sets aside an insured conveyance, titles coming out of tax takings are “extra-hazardous risks” which “require[] careful and painstaking considerations.” James M. Pedowitz, “Tax Title � Would You Insure One?” New York State Bar Journal, November 1977, Vol. 49, No. 7, p. 550. Also, for a more recent full discussion of tax titles, see John E. Blyth, Esq., “Tax Titles,” Chapter 12 in Pedowitz, Real Estate Titles, 3rd. ed. (2001). Currently, under certain very exacting strictures, tax title may be insurable. To the title underwriter, the requirements come down to notice, notice, and notice. What notice of the taxing and of the rights of redemption did the taxing authority give to the fee owner and to the lender whose mortgage is secured by the property? In this instance, the matter at hand is Jones v. Flowers, 126 S.Ct. 1708 (2006), which comes out of Arkansas. On April 26, 2006, the United States Supreme Court ruled in Jones v. Flowers that when the state of Arkansas sold Mr. Jones’ real property for his failure to pay taxes, Arkansas violated his due process rights because the only notice of the sale which the state provided to Mr. Jones was by certified mail which was returned to the state as unclaimed by Mr. Jones. Chief Justice Roberts wrote, “We hold that when notice of a tax sale is returned unclaimed, the State must take additional reasonable steps to attempt to provide notice to the property owner before selling the property, if it is practicable to do so.” Op. cit. at Section I. This decision is keeping county attorneys wide awake at night wondering if their jurisdictions’ tax sales will survive show-cause orders issued by courts on behalf of disgruntled citizens who lost their property because they did not receive constitutionally sufficient notice of an impending tax sale. Even though the county attorneys can tell us about the Jones v. Flowers nightmare that is keeping them awake at night, we need to be a little Freudian, lay them on the couch and subject them to analysis to find out the true source of their angst. In other words, before we can understand the psychic impact of Jones v. Flowers, we have to delve into our cultural, i.e., historical past. Fortunately, we do not have too much ground to cover. Like all psychological “issues,” the problems began right here at home, a long, long time ago, with Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306 (1950). In January 1946, the Central Hanover Bank and Trust Company of New York petitioned the Surrogate’s Court for settlement of a common trust account. The account contained 113 separate trusts. The only notice of the settlement provided by the bank to the trust beneficiaries was by publication, which did not name the beneficiaries. The Surrogate’s Court appointed Kenneth Mullane as special guardian and attorney for “known or unknown” beneficiaries who did not appear but who had an interest in the trust income. Mullane objected to the notice, arguing that notice by publication was inadequate to afford due process to the beneficiaries. The Surrogate’s Court, the Appellate Division and the Court of Appeals all overruled Mullane’s objection. The U.S. Supreme Court accepted certiorari and reversed. As to those beneficiaries whose interests or whereabouts could not with due diligence be ascertained, the Supreme Court held that the notice was constitutionally sufficient. However, as to known beneficiaries with known addresses, mere notice by publication did not satisfy the requirements of due process. Justice Jackson, writing for the Court, held that due process required the government to provide “notice reasonably calculated, under all circumstances to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections.” Op. cit. at 314. The Court deemed notice by publication in small type in the back pages of a local newspaper constitutionally inadequate because the bank had another method by which it could easily reach the beneficiaries whose name and addresses were known to it, i.e., the U.S. mail. After the requisite griping � “Are they out of their minds?” “What world do they live in?” and “How do they expect us to do this?” � county attorneys and the taxing authorities adjusted and started mailing notice of tax takings to the affected property owners. Although there were some minor hiccups everyone was fat, dumb and happy and all was right with the world. Then came Mennonite Board of Missions v. Adams, 462 U.S. 791 (1983). In 1973, Alfred Jean Moore purchased property located in Elkhart, Indiana from the Mennonite Board of Missions. Moore gave a purchase money mortgage back to the Board of Missions. The mortgage required that Moore pay the real property taxes assessed against the property. By 1977, Moore had stopped making the real property tax payments. The property went into tax delinquency and the county initiated proceedings to sell Moore’s property for nonpayment of taxes. Pursuant to Indiana law, the county posted the property, published an announcement of the tax sale and mailed notice to Moore by certified mail. The county, however, did not give any notice to the Mennonite Board, the lender/mortgagee. Moore continued to make mortgage payments, but failed to redeem the property from the tax lien. The Board did not learn of the tax delinquency until August 1979, but by then it was too late because the redemption period had expired. The county eventually sold the property to Richard Adams. Adams brought a quiet title action to perfect his deed. The Board answered that it did not receive constitutionally adequate notice of the sale and as a result, it had been deprived of due process. The trial court and the Indiana Supreme Court ruled against the Board. In what was beginning to look like a familiar tale of woe for county attorneys and taxing authorities everywhere, the Supreme Court granted certiorari and reversed. Justice Thurgood Marshall, writing for the Court’s majority, invoked Mullane and quoting Justice Jackson from Mullane, held that due process required that the state must provide “notice reasonably calculated, under all circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections.” Op. cit. at 795. Then, he found that a mortgagee possesses a “substantial property interest that is significantly affected by a tax sale.” Op. cit. at 797. From that point, it was forgone that Justice Marshall would conclude that “Since a mortgagee clearly has a legally protected property interest, he is entitled to notice reasonably calculated to apprise him of a pending tax sale.” Op. cit. at 798. And now, the holding: “When the mortgagee is identified in a mortgage that is publicly recorded, constructive notice by publication must be supplemented by notice mailed to the mortgagee’s last known available address or by personal service.” Op. cit. at 798. In effect, after Mennonite, due process required that county attorneys and taxing authorities provide notice by mail of tax takings both to the property owners and to the owner’s mortgagee. To add to the rapidly increasing angst to county attorneys and taxing authorities everywhere, lower courts began to begat progeny of Mennonite by holding that contract vendees ( Harris v. Gaul, 572 F. Supp 1554 (N.D. Ohio 1983)) and judgment creditors ( Verba v. Ohio Casualty Insurance Co., 851 F.2d 811 (6th Cir. 1988)) were also deserving of notice by mail. Readers of Supreme Court tea leaves knew that it would only be a matter of time before the type of mail notice became an issue: regular, certified or someplace in the middle? And now we come to Jones v. Flowers. Gary Jones purchased property in Little Rock, Arkansas in 1967. In 1993, he and his wife separated and he vacated the property. However, Mrs. Jones continued to live in the property and Mr. Jones continued to make the mortgage payments. His lender made the real property tax payments. Mr. Jones paid off the mortgage in 1997 and his lender ceased making the property tax payments. The property subsequently went into delinquency. In 2000, the state of Arkansas sent a certified letter to Mr. Jones at the property address notifying Mr. Jones of the delinquency and of his right of redemption. The letter was returned unclaimed. Two years later, the state published notice of a public sale of Mr. Jones’s property in a local newspaper. Several months later, the State negotiated a private sale of the property to Mrs. Flowers. Once again, the state sent notice to Mr. Jones by certified mail, this time informing him that the property would be sold to Mrs. Flowers if he failed to redeem the taxes. That letter was returned unclaimed as well. The state sold the property to Mrs. Flowers, who immediately served an unlawful detainer (eviction) notice at the property. The notice was served on Mr. Jones’s daughter, who contacted him and notified him of the tax sale. Mr. Jones filed suit against Mrs. Flowers and the state to set aside the tax sale. He alleged that the state failed to provide him with due process notice of the tax sale and of the subsequent conveyance of the property to Mrs. Flowers. The trial court and the Arkansas Supreme Court both ruled in favor of Mrs. Flowers and the state. On certiorari, the U.S. Supreme Court reversed, holding that “The Courts of Appeals and State Supreme Courts [with the obvious exception of Arkansas] . . . have decided that when the government learns its attempt at notice has failed, due process requires the government to do something more before real property may be sold in a tax sale.” Although the Court said that it was not the Court’s responsibility to prescribe the form of service that the government should adopt, the Court did make two helpful suggestions. First, once the postal service returned the certified letter unclaimed, the state of Arkansas could have resent the notice by regular mail. The Court reasoned that a property owner was less likely to receive notice by certified mail since the property owner had to be at home to receive the mail or to have the time to go to the post office to pick-up the letter, whereas a letter sent by regular mail would be in the mailbox waiting for the homeowner. Second, the state could have posted a copy of the notice on the front door of the property. The homeowner (and the curious neighbors) would certainly see a legal notice posted on the front door. However, the Court specifically found that due process did not require the state to search the phone book or other governmental records such as the income tax rolls to find Mr. Jones’s new address. Beginning with Mullane, the Supreme Court has consistently moved the bar higher and higher, which taxing authorities must clear to meet the due process rights of the taxpaying citizenry. As a result of Mullane, taxing authorities had to cease relying upon notice by publication and to instead actually mail notice of a taking to the affected taxpayer, or better put, nontaxpayer. With Mennonite, the Supreme Court raised the bar further by requiring taxing authorities to give notice of a tax taking to lenders and possibly to the other nontaxpayer’s lienors as well. Now, just as the taxing authorities were getting used to providing notice by certified mail to the tax-payer and notice by regular mail to the lender, with Jones v. Flowers, the Court has told taxing authorities that that practice is insufficient. Instead, they must provide notice by regular mail and, just to be safe, post a copy of the notice at or on the property as well. The taxing authorities may get depressed, but their faithful servants the county attorneys head straight into major angst and psychosis when they consider the implications of the Supreme Court rulings. We all learned in law school that there is no statute of limitations for a due process violation. Therefore, a person who has lost his or her real property though a tax taking procedure that the courts later determined to be unconstitutional may, at some much later date, bring a show-cause order against the authority and successfully have the tax taking voided with the accompanying effect of having title divested from the person who bought the property from the taxing authority (or that person’s successors). Of course, the nontaxpayer may be required to pay the original unpaid taxes and to reimburse the person who paid the subsequent taxes in order to avoid unjust enrichment, but that is of little comfort to the person who just lost their home. It is of even less comfort to the title insurer who now must pay what is quite likely a substantial claim to the person who acquired the title from the taxing authority and who now just lost the title. The result is that the taxing authority’s ability to sell properties whose title they have taken for a person’s failure to pay real estate taxes has become much more difficult and problematical because of, at best, the title underwriter’s extreme reluctance, and at worst, their downright refusal to insure such conveyance. Taxing authorities and county attorneys should not be at all surprised to find that the grease provided by title underwriters, which permitted the wheels of tax foreclosure commerce to move forward, has turned to sand. For taxing authorities, county attorneys and title underwriters, tax takings have over time become more complicated, more unruly, more risky, less certain, less predictable, less final and fraught with disconcerting dangers and the possibility of unforeseen and total reversals. In short, just like life in the 21st century. Bagwell is vice-president and eastern divisional counsel of United General Title Insurance Company in White Plains.

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