Krieger v. USDT Properties/Mutual of Omaha Bank

Citations: 199 So. 3d 1194; 2015 La.App. 1 Cir. 1563; 2016 La. App. LEXIS 1580; 2016 WL 4430041Docket: No. 2015 CA 1563

Court: Louisiana Court of Appeal; August 22, 2016; Louisiana; State Appellate Court

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U.S. Assets, the defendant/appellant, challenges a trial court ruling that awarded damages to plaintiffs Charles W. Krieger and Suzanne Mayfield Krieger. U.S. Assets acquired property at a tax sale on August 5, 2009, which was incorrectly assessed in the name of KLG Development, Inc. (KLG). KLG had transferred its interest in the property to the Kriegers through a dation en paiement on December 28, 1993, and the Kriegers had consistently paid the property's ad valorem taxes since that transfer. The Sheriff incorrectly notified KLG of a tax delinquency at an incorrect address, and the Kriegers never received such notice.

On December 12, 2012, U.S. Assets informed the Kriegers that the property had been sold due to unpaid taxes, indicating that their interest would be terminated without legal action. Mrs. Krieger subsequently contacted U.S. Assets’ counsel, who stated that the property would be relinquished if the Kriegers paid the outstanding taxes and fees. The Kriegers' counsel later asserted that U.S. Assets' tax sale was invalid, citing the prior transfer and proper tax payments. U.S. Assets contended that its tax sale certificate was valid under Louisiana law, placing the burden of proof on the Kriegers to challenge it. 

Following this, the Kriegers filed a petition to annul the tax sale and sought to remain in possession of the property, also claiming unfair trade practices against U.S. Assets. U.S. Assets responded with a demand to quiet the tax title and filed a notice of lis pendens. While the annulment action was pending, the Kriegers appealed to the Louisiana Tax Commission (LTC), which ultimately declared the tax sale null and void on June 24, 2015, due to erroneous dual assessment and ordered it canceled from public records.

On August 14, 2014, U.S. Assets requested a voluntary dismissal of its reconventional demand to quiet tax title, which was granted on August 18, 2014. Subsequently, on September 25, 2014, the Kriegers filed a motion to set their case for trial. In their October 29, 2014 pre-trial order, they acknowledged the mootness of their demand to annul the tax sale due to a prior decision but sought recognition of their right to possess the property, along with reasonable damages, attorney’s fees, and costs under La. R.S. 51:1409(A) and La. C.C.P. art. 3662(A)(3). The trial commenced on January 29, 2015, in the absence of U.S. Assets’ counsel, who had indicated no opposition to the proceedings. The trial on damages and attorney’s fees was conducted, with the court later finding U.S. Assets in violation of the Louisiana Unfair Trade Practices Act (LUTPA). The court awarded the Kriegers $8,069.85 in attorney’s fees and costs, declared the August 5, 2009 tax sale an absolute nullity, and mandated the cancellation of relevant court records.

U.S. Assets filed a motion for a new trial, while the Kriegers sought sanctions, claiming the motion was made in violation of La. C.C.P. art. 863. After a hearing, the trial court denied both motions but modified its previous judgment, stating the tax sale was a relative nullity instead of an absolute one. U.S. Assets appealed, contesting the LUTPA violation and the attorney's fees awarded. The Kriegers answered the appeal, arguing the damages awarded were insufficient, the denial of sanctions was erroneous, and they sought additional damages for a frivolous appeal. LUTPA prohibits unfair trade practices, allowing individuals who suffer losses due to violations to seek actual damages and attorney's fees. The determination of LUTPA violations is case-specific, requiring proof that the conduct in question is fundamentally against public policy and morally objectionable.

The Louisiana Supreme Court clarified the narrow scope of the Louisiana Unfair Trade Practices Act (LUTPA), which only prohibits fraud and misrepresentation, not mere negligence or unethical conduct that does not violate established public policy. LUTPA aims to protect consumers and promote competition, paralleling the Federal Trade Commission Act. In the case at hand, the trial court found U.S. Assets violated LUTPA for several reasons, including sending an inaccurate letter to the Kriegers and threatening them regarding their property. However, upon review, the Supreme Court determined that U.S. Assets properly acquired the property through a tax sale, which is prima facie evidence of validity, shifting the burden to the Kriegers to prove otherwise. The court emphasized that Louisiana public policy favors the validity of tax sales and that U.S. Assets was not required to investigate the tax deed's validity based on the Kriegers' counsel's information. Ultimately, the Supreme Court found that the trial court erred in its conclusions regarding both the violation of LUTPA and the inaccuracy of the December 12, 2012 letter.

Louisiana Revised Statute 47:2157(A)(1) allows a tax sale purchaser to notify interested parties that they have six months to challenge the tax sale in court after the redemptive period expires. U.S. Assets sent a notice to the Kriegers on December 12, 2012, indicating their interest in the property would be terminated if they did not file a lawsuit within six months. The notice advised them to consult an attorney. The court found the notice accurate, despite Mrs. Krieger's claims of having paid the taxes and her attempts to negotiate with U.S. Assets. Counsel for U.S. Assets informed her that merely paying back taxes was insufficient and outlined a settlement amount. The trial court's finding that counsel was "threatening" was disputed, as the communication was characterized as blunt but not coercive. U.S. Assets' settlement offer was presented as an alternative to litigation, not as a misleading tactic. U.S. Assets voluntarily dismissed its action to quiet title upon learning that the tax sale was deemed null due to an erroneous assessment, indicating it relinquished any claim to the property. The court's contrary finding was deemed erroneous. According to La. C.C.P. art. 3753, a notice of lis pendens must be canceled upon request if the relevant judgment is canceled or the proceeding dismissed.

U.S. Assets or the Kriegers could have requested cancellation of the lis pendens notice after the LTC's decision. Although U.S. Assets' counsel may have acted unethically by not canceling the notice following the voluntary dismissal of the tax title claim, this does not constitute a violation of LUTPA, which aims to protect against severe fraudulent business practices rather than mandate ethical attorney conduct. The trial court's conclusion that U.S. Assets violated LUTPA lacks support, as the company acted within legal boundaries by notifying the Kriegers based on a valid tax sale certificate. The Kriegers were required to annul the tax sale to reclaim their property, and U.S. Assets' actions were aimed at preserving its legal rights. The court's finding against U.S. Assets and the subsequent award of damages to the Kriegers were reversed. U.S. Assets acquired the property at a 2009 tax sale and merged with USDT Properties, which complicates the ownership history involving Charles and Suzanne Krieger. The LTC’s later declaration of the tax sale's nullity due to dual assessments does not retroactively invalidate the notice sent by U.S. Assets. Evidence presented by the Kriegers regarding U.S. Assets' knowledge of the property’s assessment issues was not admitted during the trial, making it irrelevant for the current review.

The Kriegers argue on appeal that the notice regarding their property was inadequate as it lacked a physical address, in violation of La. R.S. 47:2157(A)(2). However, this issue was not raised in the trial court. Even if the notice's lack of an address is considered, it does not constitute a violation of the Louisiana Unfair Trade Practices Act (LUTPA) since there is no evidence indicating that this omission is immoral, unethical, or significantly harmful. Furthermore, Mrs. Krieger's request to pay back taxes to reclaim the property is essentially an attempt to redeem it, which Louisiana law (R.S. 47:2156) prohibits after the redemptive period has expired. The redemptive period had indeed expired by the time the notice was sent, making the only legal options for the Kriegers to seek a review of the tax sale with the Louisiana Tax Commission (LTC) or to initiate a nullity action in district court. Thus, the counsel's remark that it was "too late" to redeem the property was legally accurate, despite Mrs. Krieger's negative reaction to the reality. The appellate court concludes that the trial court did not err in finding no violation of LUTPA by U.S. Assets, rendering the Kriegers' appeal meritless.