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HBI, L.L.C. v. Barnette
Citation: 305 Neb. 457Docket: S-19-147
Court: Nebraska Supreme Court; April 10, 2020; Nebraska; State Supreme Court
Original Court Document: View Document
1. Constitutional questions regarding statutes and their interpretation are legal issues. 2. Tax sale procedures rely on the laws active when the tax sale certificate was issued. 3. Under Neb. Rev. Stat. 77-1801, properties with overdue taxes by the first Monday of March may be sold, granting the purchaser a lien represented by a tax certificate. 4. Property owners can redeem their property post-issuance of a tax certificate by paying the listed amount, any subsequent taxes, and interest. 5. If a property is not redeemed within three years of tax certificate issuance, the holder may obtain a deed through either the tax deed method or judicial foreclosure. 6. A tax deed, which transfers property ownership, can be issued by the county treasurer following proper notification. 7. Judicial foreclosure requires the tax certificate holder to initiate foreclosure proceedings in the district court for the property's county. 8. Plaintiffs may dismiss actions without prejudice before final case submission, provided no counterclaims are made, per Neb. Rev. Stat. 25-601 and 25-602. 9. The distinctions made in Neun v. Ewing regarding tax certificates do not negate the right to voluntary dismissal under the specified statutes. 10. If the titled owner cannot be located, the purchaser may publish notice in a local or nearby Nebraska newspaper, as permitted by Neb. Rev. Stat. 77-1834. 11. The term "found" in Neb. Rev. Stat. 77-1834 means the owner is serviceable; notice by publication is allowed if certified mail fails, given compliance with Neb. Rev. Stat. 77-1832. 12. Misidentification of a purchaser on a tax deed does not invalidate it, as long as it meets statutory requirements; reformation may be required instead. 13. Neb. Rev. Stat. 77-1831 does not mandate that the applicant for a tax deed be named on the deed. 14. Statutes are presumed constitutional, with doubts resolved in favor of their validity; the burden of proof lies with challengers. 15. A statute can only be declared void if its unconstitutionality is clearly demonstrated. Service of notice for a tax sale is mandated by Neb. Rev. Stat. 77-1832 (Reissue 2009) to be sent to the address listed for the property tax statement, which is intended to effectively notify the property owner. If the record owner cannot be served at that address, publication notice under Neb. Rev. Stat. 77-1834 (Reissue 2009) is permissible. The Nebraska Supreme Court affirmed the district court's decision in an appeal regarding a quiet title action following the issuance of a tax deed. Appellant Walter D. Barnette contended that the notice for the treasurer’s deed application was flawed and that the notice requirements were unconstitutional under due process. The background reveals that on March 5, 2013, Pontian Land Holdings LLC acquired a tax sale certificate for Barnette's property due to unpaid taxes. After the required three-year waiting period, Pontian filed for a treasurer’s tax deed, sending notice to Barnette’s address, which was in Pottawattamie County, Iowa. Despite the notice being sent via certified mail, it was returned as "unclaimed" after multiple delivery attempts. Pontian then published notice in a local newspaper for three weeks. The treasurer subsequently issued a tax deed to Pontian on August 29, 2016. Pontian sought to quiet title, while Barnette counterclaimed for the same. Barnette's legal maneuvers included motions for summary judgment, all of which were denied as premature. His counterclaim challenged the adequacy of the notice and the constitutionality of the associated statutory requirements. Barnette contends that the notice by publication in Sarpy County violated his due process rights because Pontian was aware of his residence in Pottawattamie County, Iowa. On January 15, 2019, the district court granted HBI’s amended motion for summary judgment and denied Barnette’s third motion for summary judgment, concluding that Barnette received adequate notice as per Nebraska law, which did not infringe on his due process rights under either the U.S. or Nebraska Constitutions. Barnette is appealing this decision and has assigned several errors, including: (1) the claim that Pontian's initial foreclosure election precluded the tax deed process; (2) the compliance of the notice with Nebraska statutes; (3) the assertion that the Nebraska tax sale statutory framework violates constitutional protections; (4) the finding that his due process rights were not violated; and (5) the failure to quiet title in his favor. Barnette argues that Pontian's tax deed claim was invalid due to its prior election for judicial foreclosure, referencing relevant statutory provisions and precedent from Neun v. Ewing. The court in Neun held that once a judicial foreclosure begins, only the specific redemption procedure outlined in Nebraska law is applicable, establishing that the two processes for obtaining a deed from a tax sale certificate are distinct. Consequently, once the election to pursue judicial foreclosure is made, both parties' rights must adhere to that choice. The Nebraska Supreme Court clarified that the procedures for recovering unpaid real estate taxes, while aimed at the same goal, are distinct and not interchangeable. Barnette contended that Pontian could not apply for a tax deed after filing a foreclosure action, referencing Neun v. Ewing. However, the court distinguished Neun, emphasizing that Barnette's interpretation conflicted with the plaintiff's statutory right to voluntarily dismiss an action under Neb. Rev. Stat. 25-601 and 25-602, which allows dismissal without prejudice before the case is finalized, provided no counterclaim or setoff has been filed. In this case, Pontian's foreclosure action was dismissed before issuance of a summons, allowing him to pursue a tax deed. Additionally, Barnette argued that Pontian failed to provide adequate notice since he knew Barnette resided in Iowa. According to Neb. Rev. Stat. 77-1831, a tax sale purchaser must give notice to the property owner at least three months before applying for a tax deed. The statute required certified mail notice, with publication as a secondary option if the owner could not be located. The court referenced Wisner v. Vandelay Investments, which established that a tax certificate holder could proceed with publication after an unclaimed certified mail notice, reinforcing that the holder had met notice requirements. The court interpreted "found" in Neb. Rev. Stat. 77-1834 as meaning "able to be served," allowing a tax certificate holder to notify the property owner by publication if certified mail to the owner's last known address failed. The court noted that a contrary interpretation could enable delinquent property owners to evade notification and judicial foreclosure. In this case, Pontian mailed notice to Barnette's address, where Barnette had lived for four years, but the notice was returned as "unclaimed." Pontian then published the notice in Sarpy County, complying with statutory requirements. The court found that Barnette did not rebut the presumption of sufficient notice. Barnette's second argument claimed the notice was defective for listing Guardian instead of Pontian as the applicant for the deed. However, HBI contended this misidentification was immaterial to the notice's sufficiency. The court affirmed that Pontian's notice contained all required information and accurately identified Pontian as the property purchaser. Citing prior case law, the court maintained that misidentification on a tax deed does not invalidate it but may only require correction. Thus, the mention of Guardian did not render the notice defective. In his third and fourth assignments of error, Barnette challenged the constitutionality of Nebraska's tax sale notice requirements on due process grounds. Barnette claims that his due process rights were infringed when Pontian published a notice in Sarpy County, despite Barnette's residence in Pottawattamie County, Iowa. The district court ruled that Pontian met statutory notice requirements prior to applying for a tax deed and that these procedures did not violate Barnette's rights. 1. **Presumption of Constitutionality**: Statutes are presumed constitutional, and challenges to their validity must be clearly established to be declared void. 2. **Notice Requirement**: The government must provide notice that is reasonably calculated to inform interested parties of actions affecting their property, allowing them an opportunity to respond. The U.S. Supreme Court in Mullane v. Central Hanover Tr. Co. emphasized that notice methods must be assessed at the time of sending, particularly when the recipient's address is known. 3. **Jones v. Flowers**: Barnette references this case, where the Supreme Court ruled that insufficient measures were taken to notify a property owner of a tax sale, violating due process. The case involved a property owner who had moved, and notices sent to his old address were returned as unclaimed. The Court acknowledged that while Arkansas’s notification statutes might generally meet due process standards, the specific circumstances of the case necessitated additional notification efforts due to the critical nature of potentially losing one’s home. The Court reversed a lower court ruling, stating that mere reliance on mailed notices was inadequate under the circumstances. Barnette has not demonstrated that Nebraska's statutory notice requirements, specifically Neb. Rev. Stat. 77-1832 and 77-1834, are unconstitutional. Section 77-1832 permits notice via certified mail to the address where the property tax statement is sent. If certified mail fails, Section 77-1834 allows for notice by publication, contingent on proof of compliance with 77-1832. This framework ensures that notice is reasonably calculated to reach property owners, particularly when they reside at the address to which the tax statement was mailed but cannot be served directly. Barnette's due process rights were also not violated in the issuance of the tax deed. The U.S. Supreme Court's decision in Dusenbery established that sending certified mail to known addresses is an adequate notice method. The adequacy of notice is assessed based on the method employed rather than the outcome, and the specifics of the recipient's situation are critical. Although Pontian's notice attempt was insufficient, it was nonetheless adequate under Dusenbery and Mullane due to Pontian's actual knowledge of Barnette’s address. The court maintained that this knowledge is vital in evaluating notice adequacy, concluding that Pontian's actions were reasonably calculated to inform Barnette of the tax deed application. The dissent's interpretation, suggesting a new requirement for additional notice attempts following unclaimed mail, was rejected, reaffirming the established standards of Dusenbery and Mullane. The "new wrinkle" in Jones examines whether the government's awareness of failed notice impacts the reasonableness of its notification methods. The Court referred to earlier cases, Robinson v. Hanrahan and Covey v. Town of Somers, to illustrate that mere compliance with statutory notice requirements is insufficient when the government knows the recipient cannot be reached. In Robinson, the State’s notice was deemed inadequate because it was aware the owner was incarcerated and could not access the notice. Similarly, in Covey, notice was insufficient because the State knew the property owner was incompetent and lacked a guardian. In Jones, the Court did not establish a strict test for when additional notice attempts are necessary but highlighted that the return of the owner's letter as unclaimed constituted "new information" that must be considered when determining the adequacy of notice. This new information indicated that the owner may have either moved or failed to retrieve the letter. The Court suggested that reasonable follow-up steps should be taken based on this new information. The Court also emphasized the importance of balancing interests in due process, referencing Mathews v. Eldridge, which outlines three factors: the private interest affected, the risk of erroneous deprivation through current procedures, and the government's interests and burdens involved in additional procedural requirements. In Jones, the Court underscored the significant stakes involved for the property owner, who was at risk of losing their home, and insisted that the State should make greater efforts to ensure adequate notice when the initial notice was returned unclaimed. An individual intending to notify a property owner of potential foreclosure should take additional actions if a notice letter is returned unclaimed, as more reasonable efforts could be made. The burden lies with Barnette to prove entitlement to the same procedural safeguards as in Jones, yet there is no evidence presented regarding the government's burden, and Barnette's property is merely a vacant lot. The Court in Jones suggested reasonable notice methods, including sending regular mail, posting notice on the property, or addressing mail to "occupant," given that Arkansas law required personal service if certified mail was unclaimed and the property was occupied. The Court rejected the notion that the government should search for the owner's new address, deeming it an excessive burden. It emphasized that notice must be effective, and if a method fails to inform, additional reasonable steps are necessary, provided they are practicable. In this case, despite the certified letter being unclaimed, Pontian's actions to notify Barnette complied with legal requirements and included multiple delivery attempts and subsequent publication notices, distinguishing this case from Jones due to differing facts and circumstances. Several states have determined that no further action is needed when a notice sent to a property owner's last known address is returned as unclaimed, particularly if the owner does not provide evidence of being unavailable to receive the notice. The North Carolina Court of Appeals upheld that a notice sent to an owner’s last known address met due process standards despite being returned unclaimed. The Supreme Court of New York's Appellate Division concurred, asserting that if mailings to the correct address are returned unclaimed, the absence of evidence showing the owner's unavailability does not affect the validity of the notice. Similarly, the Pennsylvania Court of Common Pleas ruled that a notice returned as 'refused' or 'unclaimed' is adequate if the address is valid. In Mikhaylov v. U.S., the U.S. District Court for the Eastern District of New York stated that written notice sent to known addresses, alongside published notices, generally meets the Mullane standard, with exceptions for cases where the government has knowledge that the notice will not reach the intended recipient or that the recipient may not comprehend it. In the case of Barnette, the notice was sent to a known and correct address, and the property in question was not Barnette's home. The court noted that Barnette had continuously resided at his home in Iowa during the tax sale process and had received tax notices for the property. The return of the notice indicated either Barnette was not home or was avoiding service. The dissenting opinion referenced two cases, but those involved property owners who claimed they had not received actual notice of impending actions, contrasting with Barnette's situation. In Schlereth v. Hardy, the court determined that the property owner, Barnette, failed to establish that the issuance of a tax deed was unconstitutional due to inadequate notice. The court noted that Barnette did not receive a certified letter from the postal worker and failed to retrieve a letter whose content was unknown to her. Barnette's burden was to prove that the notice was not reasonably calculated to inform him of Pontian’s intent to apply for a tax deed, which he did not accomplish. His counsel acknowledged the absence of evidence regarding why he did not accept the letter and did not claim unawareness of the attempts at service or lack of knowledge about Pontian's intentions. The court contrasted Barnette's situation with that of a property owner in Jones, who learned of proceedings only after their property was sold. The court upheld that sending notice to Barnette's actual residence demonstrated Pontian's desire to inform him, meeting constitutional requirements for notice as established in Jones. Although the dissent argued that sending notice by regular mail would have been a minimal burden, the court stated that Pontian was not obligated to take such additional steps. Citing a New York case, the court emphasized that the burden lies with Barnette to demonstrate that additional reasonable steps would yield his new address. Ultimately, the court concluded that further steps were not constitutionally required unless they were practicable. The concept of "practicable" was defined as feasible and effective, and the court referenced a Seventh Circuit ruling stating that constitutional notice does not require success in delivering notice, as individuals cannot evade responsibility by neglecting to open or acknowledge notices. Barnette did not demonstrate a lack of awareness regarding delivery attempts of a notice concerning tax deed application, nor did he claim unavailability to receive the letter. The dissent references Neb. Rev. Stat. 25-520.01, which mandates mailing a copy of published notices to parties with known addresses. However, this requirement is absent in the context of Neb. Rev. Stat. 77-1834, and its lack does not compromise the constitutionality of the notice provided. Pontian's notice was sufficiently aimed at informing Barnette of the intent to apply for a tax deed, and it complied with the statutory requirements under Neb. Rev. Stat. 77-1832 and 77-1834, which only necessitate publication within Sarpy County. Barnette's challenges regarding defective notice and service, as well as claims that the statutory time limit for obtaining a deed had lapsed, were deemed meritless. The court affirmed the judgment, confirming that Pontian met statutory notice requirements, which are constitutionally adequate to inform property owners of tax deed applications. Justice Cassel concurred, suggesting the Legislature consider amending statutes to include additional mailing requirements for published notices. In dissent, Justice Papik argued that the notice provided by Pontian was constitutionally inadequate based on the precedent set by Jones v. Flowers, asserting that the majority's interpretation of the case was flawed. In Jones, a property owner faced tax delinquency notices sent to an outdated address, with subsequent notices returned unclaimed. The U.S. Supreme Court, led by Chief Justice Roberts, acknowledged that while due process does not mandate actual notice before property seizure, notice is constitutionally adequate if it is reasonably calculated to reach the owner. However, the Court identified a critical issue: when the government learns prior to the property seizure that its notice attempt failed, it must take additional reasonable steps to ensure the property owner is informed. The Court concluded that follow-up measures, such as resending notice via regular mail or posting it at the property, are necessary to enhance the chance of actual notice. The opinion asserted that merely publishing a notice in a newspaper is insufficient. In the current case, the notice sent to Barnette was similarly returned unclaimed, indicating that the state must undertake further reasonable actions to notify the property owner before proceeding with a sale. The examination of whether adequate follow-up measures were taken revealed that no additional efforts were made, aligning the case with the precedent set in Jones. The Court emphasized that taking additional reasonable steps would enhance the likelihood of the property owner receiving actual notice, irrespective of whether the owner had moved or simply did not collect the certified mail. It noted that Pontian could have mailed the published notice to interested parties concurrently with the publication, as per Nebraska’s customary practice. Although Nebraska law does not mandate mailing in this specific context, sending the notice by regular mail would have been a minimal effort for Pontian, potentially preventing claims of constitutionally inadequate notice as established in Jones v. Flowers. The majority opinion contends that the notice sent via certified mail, which was returned unclaimed, sufficed under due process, arguing that Jones did not apply here due to the nature of the property involved and the assumption that additional notification efforts would likely fail. However, the dissent disagrees, asserting that the significance of government property takings transcends whether the property is a house or a vacant lot, emphasizing that the failure to take reasonable steps after the certified mail was unclaimed resulted in inadequate notice. The dissent further critiques the majority's interpretation of Jones, highlighting that the Supreme Court's focus on the gravity of property takings is broader than merely distinguishing between types of property. The Court granted certiorari to assess whether the government must take additional reasonable steps to notify a property owner when mailed notice of a tax sale is returned undelivered. This issue arises from a conflict among various Circuits and State Supreme Courts regarding the Due Process Clause’s requirements for notification in such scenarios. The Court's holding established that if mailed notice of a tax sale is returned unclaimed, the State is obligated to take further reasonable actions to notify the property owner before proceeding with the sale, provided it is feasible to do so. A dissenting view expressed concerns about the implications of the majority's conclusions, particularly regarding the distinction between property owners who reside at the property and those who do not. The dissent highlighted that the property owner in the original case (Jones) did not live at the property, suggesting that the interest in the property might not be as vital compared to other scenarios, such as business or farmland ownership. The dissent also questioned the majority's view that the case's principles are inapplicable when the certified mail was sent to the owner's residence, arguing that the knowledge of unclaimed notice necessitates the State's consideration of further action, regardless of the reasons behind the unclaimed mail. Ultimately, the dissent emphasized that the focus should remain on the failure of notification rather than the circumstances surrounding it. Jones v. Flowers emphasizes that the failure to retrieve certified mail does not equate to receiving constitutionally adequate notice. The case acknowledges two scenarios when certified mail is marked as unclaimed: the recipient may still reside at the address but failed to retrieve the mail, or they may have moved. The Court suggests that additional attempts to provide notice—such as resending the notice via regular mail or posting it at the residence—are necessary to ensure actual notice is given, addressing both situations. The excerpt critiques the majority's interpretation, arguing that it incorrectly limits the inquiry to whether the initial certified mail attempt was "desirous of actually informing" the recipient, neglecting the requirement for further action when the mail goes unclaimed. The majority's dismissal of the need for additional steps is contested, as the possibility of effective notice in such cases should not be disregarded based on the unlikelihood of success. Furthermore, the author expresses skepticism toward other cases cited by the majority, arguing they do not adequately address the relevant issues. In St. Regis of Onslow County v. Johnson, the North Carolina Court of Appeals dismissed a property owner's claim that additional notification steps were necessary after a notice was returned unclaimed. The court's conclusion was based on the fact that the notice was deemed sufficient because it was sent before the property sale, thus negating the need for further action. The majority opinion also referenced a Pennsylvania trial court case, Masergy Communications, which stated that notices sent to a valid address are sufficient, even if returned unclaimed. However, this court relied on precedents predating Jones and did not substantively engage with Jones's principles. Moreover, in Mikhaylov v. U.S., the court addressed due process in the context of property seizure. Although the government sent notice to the last known address, the property owner, having moved, argued for actual notice. The court disagreed without discussing Jones, and the majority misinterpreted two quotes from this case to support their argument, despite the intervening text clarifying that the court was outlining exceptions to the rule that certified mail suffices for due process. The majority also cited Temple Bnai Shalom and Mac Naughton as supporting their interpretation of Jones; however, both cases refused to apply Jones due to specific circumstances regarding the unclaimed certified mail and the ineffectiveness of further notification efforts in those instances. The author expresses disagreement with the majority's interpretation of the legal precedent set in Jones. They reference the Missouri Supreme Court case Schlereth v. Hardy, which ruled that merely sending certified mail to a delinquent taxpayer's residence, even if the taxpayer was notified of the delivery attempt, did not satisfy due process after the mail was returned unclaimed. The court emphasized that additional reasonable measures were necessary, as stated in Jones. Similarly, in VanHorn v. Florida, a federal district court reiterated that the government must take further steps to ensure service, noting that the possibility exists that the taxpayer might ignore the certified mail. The author counters the majority’s claim that they are creating a new rule from Jones, arguing that the Jones Court did not entirely disavow establishing new rules, but simply clarified it was not a departure from prior cases. The author asserts that state courts are bound to follow U.S. Supreme Court decisions regarding constitutional interpretation, maintaining that the majority opinion fails to adhere to this principle, leading the author to dissent.